RBC always sought relevance – but the market moved against it, despite its best efforts.
I was about to board a train on the Paris Metro when I received a call from Harry Samuel, then the head of RBC Investor & Treasury Services. He wanted to let me know that the business was withdrawing from Spain, selling to Banco Inversis.
At the time – 2016 – it didn’t seem like a big deal. RBC had made no progress in the country, and it needed to concentrate its resources on its core European strengths – Ireland, Luxembourg and, to a lesser extent, France and UK. Harry Samuel was considered to be a high-flyer, being groomed for higher things – and, critically, he had the ear of senior management.
In retrospect, however, this could be seen as the beginning of the end. Nothing was quite as it seemed. After RBC had paid around USD1bn to buy out its JV partner, Dexia, in 2012, it took over a franchise that Canadian senior management didn’t fully understand (they would have struggled to find Luxembourg on a map). But, in José Placido, the leader of investor services at the time, they had a highly effective director who understood the international markets – and, as importantly, placed an enormous value on his senior management team. Placido surrounded himself with serious talent: it was a team that some might say was unparalleled in the industry, despite the modest size of the book.
Placido wanted to grow the business through M&A. Samuel regarded the Dexia deal as the only M&A play it needed. Samuel won the argument, and Placido left (and is now deservedly holding down a major job at BNP Paribas). But trouble was brewing, and Samuel either didn’t see it, or didn’t know how to deal with it.
In 2001, Royal Trust (owned by RBC) had bought the custody and administration business of Perpetual Fund Services in Australia. At the time, RBC saw Australia as ripe for consolidation – and considered the Perpetual deal to be a platform for major expansion in the country. It didn’t turn out that way. From the start, there were problems that required a huge amount of senior management attention. As it turned out, RBC never gained any traction from the acquisition, eventually handing over the Australian business to Citi in 2019 after a disastrous, failed IT conversion.
At the same time, RBC was losing clients from its key franchises. In Luxembourg, it was hit hard by the departures of HSBC, Robeco, Candriam and, most recently, Aviva Investors – whilst one of its marquee Canadian clients, British Columbia, moved to Northern Trust. The market suggests that its keystone client in Ireland, Mediolanum, may also be leaving.
Good people started to leave. Highly rated Sébastien Danloy, who had run the Luxembourg operation as CEO of RBC IS Bank SA, moved to HSBC in 2019, where he is now global head of investor services. The private capital business, one of its shining lights, has seen a major turnover of staff, with Dave Scanlan, who previously ran the business from Ireland, joining J.P. Morgan earlier this year. Padraig Kenny, head of the investor services business in Ireland, also left earlier in 2022.
At the same time, RBC was neglecting its home market. Despite an attempt to revive its franchise in Canada with the 2016 hiring of David Linds, a senior CIBC Mellon executive who left in 2021, it never made up lost ground. CIBC Mellon wasted no time in filling the void, becoming the leading provider of both global and local custody services.
All of this fell into the lap of Francis Jackson. Jackson had joined from J.P. Morgan in 2015 as global head of client coverage. He had made his name at Chase, Bankers Trust and Citi, and his hiring was a significant coup. He made an immediate impression, sharpening the strategic focus and importing lessons that he’d learnt from previous assignments. He brought in some trusted managers to run coverage, stepping on some toes in the process.
When Harry Samuel left in 2019, Jackson had become the obvious choice as successor. He wasted no time in “moving the heavy rocks” – a new global custody platform (SCUBA), a new private assets platform, the withdrawal from Australia and Asia Pacific, the ground-breaking Network 2.0 project, inter alia – clearing the way for a focus on new business acquisition and a concentration on raising revenue, rather than simply lowering costs.
There was one thing, however, that Jackson could not deliver. Since Placido had been in charge, the watchword had been “relevance”. How did RBC remain relevant to its clients, and prospects? As its core franchises declined, it was increasingly difficult to answer that question. Other providers offered a more holistic solution for clients that had started to wonder why they should be dealing with a Canadian bank with a limited international footprint.
All of which is why, today, RBC I&TS has effectively given up the fight to remain relevant. It will become an important footnote in the annals of the investor services industry. It has employed some of the finest managers the business has seen, many of whom have gone on to greater success. The ones who are left should find it easy to redeploy elsewhere – they are a smart bunch, who made the best of the hand they were dealt. Few will want to go to CACEIS, although some will have no option.
Without the Dexia book, it is entirely possible that RBC would have given up that fight many years ago. It is a bonus for the industry that it didn’t: RBC kept its larger competitors on their toes (much as BBH has done) and was a genuine innovator – something that, unfortunately, cannot be said about CACEIS. It’s a bad day for the industry.