Royal Bank of Canada says its emphasis on the United States in the past couple of years is paying off.
The Toronto company an-nounced Tuesday that American business units generated 28% of its revenues in its third quarter, against 21% a year earlier. At the beginning of 2001, the $240 billion-asset company's U.S. operations were bringing in 14% of its revenues.
President and chief executive Gordon M. Nixon said in a note to shareholders Tuesday, "Our recent U.S. acquisitions accounted for nearly half of the core earnings growth, demonstrating the considerable benefits of our U.S. expansion efforts." Those acquisitions generated profits of $41 million, compared with a $1.3 million loss in the third quarter of 2001.
The company cited the contributions of Centura Banks Inc., of Rocky Mount, N.C., which it bought in the third quarter a year ago, and the Boston brokerage Tucker Anthony Sutro, which it bought the quarter after that. It also credited the discontinuation of goodwill amortization on Jan. 1.
Profits over all rose 24%, to $459 million, at Royal in the three months that ended July 31. The comparison excludes one-time charges of $36 million and $57 million in the third quarter of 2001 for post-merger restructuring of U.S. retail operations some asset writedowns. Including those charges, net income rose 66%.
RBC's other U.S. acquisitions in the past two years have included the Dain Rauscher brokerage in Minneapolis; Liberty Insurance of Greenville, S.C.; Eagle Bancshares, near Atlanta; and the U.S. private banking assets of Barclays PLC. (The $149 million Eagle deal was completed July 22 of this year and the $90 million Barclays deal June 28.)
In a conference call with investors and analysts Tuesday, Mr. Nixon said that the company's expansion of its business mix and geographic reach has "reduced volatility and represents one of our main business strengths."
Royal said expenses fell 3% in the quarter, partly because of the large restructuring charge for U.S. retail operations a year ago. Without that charge, expenses were unchanged from a year earlier.
The company has begun to cut U.S. costs through payroll reductions and by consolidating some operations. It recently laid off personnel at Dain Rauscher and Tucker Anthony and finished transferring the data processing functions of its retail bank, RBC Centura, to its Toronto data centers.
