24 July 2019: It is seven years since RBC paid around USD1bn to unwind itself from the investor services joint venture with Dexia that it struck in 2005. Business schools could probably put together a very entertaining case study about the RBC Dexia deal, and the many teachable moments that it yielded. For us, however, suffice it to say that USD1bn was a bargain – exiting the JV was worth every penny.
At the time, one of the few losers appeared to be José Placido, CEO of RBC Dexia, who was to leave the bank early in 2013. Placido withdrew from the industry to regroup and travel before returning to the fray with BNP Paribas in 2014, in what turned out to be a great deal for both parties.
One of Placido’s problems at RBC was that he did not share the strategic vision of his new boss, Harry Samuel, who was drafted in to run the newly formed Investor & Treasury Services business unit. Placido felt that RBC needed to grow assets through acquisitions, whilst Samuel wanted to nail down the Dexia unwinding before considering further expansion through M&A. In fact, during Samuel’s time in charge, the only deal he did was to sell its Spanish investor services business.
There was at least one thing both men did agree on, however: the need to keep the business relevant. In terms of AuC/A, RBC has never been a top 10 player. In fact, the value of client assets has hardly moved between 2012 (USD2.9trn) and 2018 (USD3.1trn). And yet, RBC is a trusted and strategic provider to some of the world’s most demanding managers – how so? How has RBC managed to stay relevant in a market where some USD100trn of assets are controlled by just four players?
Focus. It really is as simple as that. RBC has focused on the things that matter: service excellence, subject matter expertise, fintech, cross-sell. The payoff has been impressive, and that’s no coincidence. RBC doesn’t want to lead or beat the market in low-value products like custody and administration, areas where it is quite happy to leave the others to slug it out. Instead, it is carving out more profitable niches in middle office, transfer agency, data management, and private capital. It has assembled a very strong management team – at all levels – to implement the strategy. When it brought in Francis Jackson from J.P. Morgan in 2015 as global head of client coverage, RBC wasn’t just getting an industry veteran with numerous battle scars and an impeccable sales record: it was getting a different perspective, and an opportunity to raise its standards to the level of a big three provider.
The model is not unique. BBH, which is slightly larger than RBC in terms of AuC/A, adopted the blue ocean strategy many years ago, and regularly drafts in talent from bigger providers (with alumni from Chase, State Street and Citi, inter alia). It, too, has an intense focus on higher-value services and long-term client relationships, and has leveraged its independence as a key selling point, especially in sensitive areas like ETF product development.
That will be Harry Samuel’s legacy: he has made the investor services business look like a specialist trust bank, despite having all the muscle of one of the world’s largest banks behind it. When he needed to, he used those corporate resources to broaden and deepen the product set (e.g. private capital financing), as well as upgrading the O&T infrastructure. He achieved a rare balancing act, creating an environment that allowed the business to fail fast and move ahead at the same pace as many start-up fintechs.
There is still a long to-do list, and there is further transformation to come. But competitors respect RBC, not just because of its longstanding reputation for client service excellence, but also because it has a clear, consistent strategy and a record of execution. Pound for pound, it has one of the best and brightest management teams in the business, and it continues to attract first-class talent from larger players. RBC has a good story to tell, and it’s not finished yet.