Royal Bank of Canada

The Royal Bank of Canada (RBC), headquartered in Toronto, Ontario, is the country's largest bank and one of its largest corporations overall. For the 2003 fiscal year, RBC reported net income of $3 billion on assets of $403 billion and stated that it had 60 812 employees. By comparison, its next closest competitor, the BANK OF NOVA SCOTIA, had revenues of $2.5 billion and assets worth $285.9 billion. The bank's activities are diversified and include life insurance and trading services.

History
In 1864 a group of Halifax merchants allied to form a private commercial bank and called it the Merchants Bank. Their motivation was to become involved in the financing of fishing and timber activities as well as in the growing trade activities between the East Coast of the North American continent and Europe, notably England. Following Confederation in 1867, the Merchants Bank obtained its federal charter on 22 June 1869 and, named the Merchants' Bank of Halifax, began to expand westward, first into other parts of Nova Scotia and then into neighbouring Prince Edward Island and New Brunswick. In 1882 the bank opened an agency (a type of franchise operation) in Bermuda to capture some of the booming trading activity between the Caribbean and Halifax. The agency's business was eventually sold to The Bank of Bermuda Ltd in 1889, marking the early end of the bank's attempts to expand its business through affiliated operations rather than through branches that it owned and operated outright.

Meanwhile, in 1887 the bank opened a branch office in Montréal, the country's financial centre at the time, signalling a reorientation in the bank's strategy from providing regional services to doing so on a national level. As the bank expanded throughout the decade that followed, its directors realized that the name needed to be changed to truly reflect the geographic reach and strategy of the institution and also in an effort to distinguish the bank's name from that of the Merchants Bank of Canada. So, in 1901 the bank adopted the name "The Royal Bank of Canada" ("The" was dropped from the legal name in 1990). It relocated its headquarters to Montréal in 1907.

Starting in 1910, the bank embarked on a major acquisition drive seeking to expand more rapidly than it could by expanding organically (from within). Domestically, it acquired the operations of the Union Bank of Halifax, Traders Bank of Canada, Québec Bank, the Union Bank of Canada, and the Northern Crown Bank. Through the acquisition of the Northern Crown Bank alone, RBC acquired 113 branches located primarily in Western Canada, thus truly manifesting its presence as a national bank. Indeed, it became Canada's largest bank in 1920 measured on the basis of assets, which amounted to $594.7 million at that time. On the international front, RBC expanded as well, returning to the Caribbean and venturing into South America. In 1925 the bank's international network was 121 branches strong.

Much like other banks, the Royal Bank was affected by the worldwide economic downturn during the 1920s and 1930s and reacted with branch closures and stricter lending practices. Its total assets shrank by some 10% in the period from 1930 to 1935, the number of branches declined until 1944 to a low of 652 worldwide, and the bank would wait until the 1970s before once again acquiring other operations to increase its business.

Following the end of World War II, the bank returned to sustained profitability and growth (expanding its branch network in South America and the Caribbean, for example), positioning it for a period of expansion that would see it eventually diversify into a number of other lines of business. In 1961 the Royal Bank became the first Canadian bank to install a computer, heralding a number of moves to automate and facilitate the business of banking. By June 1967 the bank had introduced Magnetic Ink Character Recognition for encoding and processing cheques, opened a computer centre in Montréal and was the first to make a transaction using a computer.

The year 1967 also brought a major revision to the Bank Act, the set of government regulations that governs the operation of banks in Canada. The changes removed a ceiling on the amount of interest that could be charged (6%), lowered the amount of reserves banks needed to keep, and made mortgages more freely available at local bank branches. In short, banks could respond better to the needs of their clients and the conditions in the market, thus finally being able to catch up to trust and mortgage companies, finance companies, and credit unions, which were not subject to the same restrictions.

In August of 1968, for example, the Royal Bank joined with three other banks to form Chargex Limited, a credit card business and the precursor to the VISA card in Canada (renamed in 1977), equipping card holders with $300 of credit.

In the 1970s, the bank returned to a strategy of expanding its operations by acquisition, making a number of acquisitions and forming joint ventures across the globe. Between 1969 and 1979, the bank's total, worldwide assets increased more than five-fold to $50.7 billion and its staff grew from 23 181 to 38 895 employees, an increase of almost 68 %. In Canada, the Royal Bank installed 14 so-called "Bankettes" in Toronto in 1970. These were the prototypes for the bank's network of banking machines, which was officially rolled out in 1980.

Starting in 1986, several changes to the framework of the Canadian financial markets erased the clear delineation between the so-called "four pillars" of the Canadian financial services landscape - banks, trust companies, insurance companies, and investment dealers - permitting cross-ownership in a less regulated environment. The Royal Bank responded by acquiring Dominion Securities, Voyageur Insurance Company, and Royal Trust in the years between 1988 and 1993, quickly growing to become the universal financial services group it is today.

In 1998 Royal Bank agreed to merge with the BANK OF MONTRÉAL but the move was rejected by the federal government following a year-long evaluation of the proposed transaction. A subsequent moratorium on bank mergers remains in effect with the government planning to formally set out the terms and conditions under which a merger could occur.

Operations
The Royal Bank of Canada operates under the adopted brand name of "Royal Bank Financial Group" (RBC) and is the largest Canadian bank by any measure. In its 2003 results, RBC reported 60 812 employees and total assets of $403 billion, generating some $24.8 billion in revenues for the year. In recent years, the bank has increased its share of revenues coming from the US to 27 % in 2003, up from 7% in 2000. The bank's operations, which included 4401 bank machines and 2085 outlets, are organized around five divisions: banking (51 % of 2003 net income of $3 billion), insurance (8 %), investments (14 %), capital markets (16 %), and global services (6 %).

RBC Banking is the core of the bank's operations. Serving some 11.5 million clients, it provides banking services, a range of credit card products, financial advice services, and lends to mortgage clients.

RBC Insurance boasts some 5 million clients worldwide and offers insurance products covering life, health, travel, home, and other areas.

RBC Investments addresses the wealth management needs of individuals. Services include brokerage services, investment counselling, and financial planning.

RBC Capital Markets provides financial services for corporate clients such as investment banking, equity and debt financing, and treasury management services. In the US, RBC focuses on the lower tier of the S&P 500 index (an index of widely held stocks taken to be representative of market performance) and companies with a potential to join it.

RBC Global Services is a provider of transaction processing services. Operating in a technology-driven and competitive industry, this division offers solutions for investment administration, correspondent banking, cash management, payments, and trade finance.

Community Work
The Royal Bank has a long-standing history of supporting a variety of causes focusing on education, health care, social services, and civic causes through its RBC Foundation and amateur athletics and the arts by means of sponsorships. In 2003 the foundation made contributions totalling more than $37 million.

The bank is an active supporter of employee volunteer involvement and contributions. Canadian employees have raised $7.2 million for the United Way, and since 1999 the Royal Bank has contributed more than $2.6 million on behalf of employees who volunteered a minimum of 40 hours a year at a registered charity.

Since 1947, RBC has been an active (and the longest) supporter of Canada's Olympic Team. Olympic and other amateur sports efforts are supported through sponsorships, awareness campaigns, fundraising campaigns and tournaments.

See also BANKING.

Author SASHA YUSUFALI

Links to Other Sites
Glossary: Financial Industry
This glossary provides definitions for terms widely used in the financial industry. From the Financial Consumer Agency of Canada.

Canadian Bankers Association
The website for Canadian Bankers Association. Features a list of domestic and international banks operating in Canada, timeline of the banking industry, useful consumer information, a glossary, and related resources. CBA is the main representative body for banks in Canada and is the country’s oldest industry association.

RBC Financial Group
The website for the RBC Financial Group, a diversified financial services company. Offers information about products and services, investor relations, the RBC Financial Group Charitable Foundation and other company operations.

TMX Group
The online home of TMX Group, which owns and operates the Toronto Stock Exchange and the TSX Venture Exchange. For real-time and historical market data, sector profiles, and financial information about listed companies, click on listed company directory on left side of page or enter stock symbol in the search box.

Personal Investing
The lastest news on Canadian equity markets, personal investment plans, and more. From thestar.com.

Bank of Canada
The official website for the Bank of Canada. A great information source about monetary policy, the role of the Bank, the history of money, security features in Canadian bank notes, and much more. Check out the fact sheets, online glossary, and educational resources.

System for Electronic Document Analysis and Retrieval
Search the SEDAR online database for disclosure documents of Canadian public companies and mutual funds. From the Canadian Securities Administrators.

Office of the Superintendent of Financial Institutions
The website for OSFI, the primary regulator of banks and other federally incorporated financial institutions in Canada. Check out "About OSFI" for background information about this independent agency of the Government of Canada.