(Bloomberg News) Royal Bank of Canada may spend as much as C$1 billion ($1.06 billion) to buy asset managers outside Canada as the country's largest lender seeks to triple profit from wealth management in the next four years.
"We would be interested in small and medium-sized acquisitions that could bolster our U.K., European and Asia equity capabilities," said George Lewis, group head of wealth management, in a July 22 interview in Toronto.
Royal Bank set an annual profit goal of C$2 billion from wealth management by 2015, or three times more than the C$669 million it earned from the business in the fiscal year ended Oct. 31, Lewis said.
About 30 percent of that growth is based on financial markets delivering a 6 percent average annual return over the period and "normalized" interest rates, Lewis, 51, said.
"To the extent that the market environment is not as favorable in the near term, perhaps that will provide some acquisition opportunities to bolster our growth," Lewis said.
Royal Bank has been expanding its wealth-management unit through acquisitions in the past four years, including its C$1.52 billion takeover of London-based BlueBay Asset Management Plc in December. The purchase of BlueBay, a money manager that specializes in fixed-income funds, added $40 billion in assets under management to Royal Bank's business.
The BlueBay acquisition, along with Royal Bank's C$1.33 billion takeover of Vancouver-based Phillips, Hager & North Investment Management Ltd. in 2008, is expected to drive "significant growth" toward the five-year goal, Lewis said.
Consumer Lending
Canadian banks have been building up their wealth- management operations to help counter an expected slowdown in consumer lending in Canada, as debt-laden borrowers curb spending amid concerns that interest rates will rise.
Royal Bank reorganized its wealth-management business in November, moving from three geographic areas to four -- Canada, the U.S., U.K. and emerging markets -- to serve wealthy clients in international markets.