Southeastern U.S. Fears Fallout from RBC Bank Sale

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Up until very recently, the U.S. retail banking operations of Toronto-based Royal Bank of Canada were struggling, but still hiring. Now, it's hard to tell where way the Raleigh, North Carolina-based unit and its workforce might be headed, particularly given speculation over an impending sale.

Raleigh, N.C.-based RBC Bank, a wholly owned RBC subsidiary, operates some 430 full service branches in six southeastern states-North Carolina, South Carolina, Virginia, Georgia, Alabama and Florida. As of late last year the bank had 5,000 employees across the Southeastern United States, and called itself one of the top five banks in North Carolina.

After repeated losses and unprofitable loans, it was reported early this year that a rebound could be occuring, given the company's hiring profile.

During the fourth quarter, RBC Bank began slowly increasing headcount again, adding 96 workers across its six-state business region.

Some of the hires were made to beef up mortgage lending, the bank said. This in stark contrast to the seven quarters prior to Sept. 30, 2010 when RBC Bank shed more than 900 employees.

Since then, however, Bloomberg reported that Winston-Salem, North Carolina-based lender BB&T Corp. and PNC Financial Services Group -owner of the sixth-largest U.S. bank by deposits-are among lenders that have shown interest in buying RBC Bank, according to two individuals in the know.

An RBC spokesperson noted that "It is important to make the distinction that RBC Bank is RBC's US retail banking operation," and is unrelated to RBC Capital Markets or RBC Wealth Management in the US. On the institutional side, the firm has continued to make substantial investment and hirings for its investment bank operation in New York, for instance.

And at the tail end of May, at least, RBC Bank was still posting jobs for retail positions including a Head of Mortgage Credit and a Credit Review Manager in Raleigh.

Still, the parent company isn't saying much. Royal Bank CEO Gordon Nixon told investors in January he was unsure if the company would be a buyer or seller of U.S. banking assets, adding that "In the short term, our priority is to get the U.S. bank performing at a more normalized level." Furing an analyst conference call on May 27, Nixon said much the same thing, maintainting that "Although I will not comment on speculation with respect to RBC Bank, we do remain focused on turning around these operations, and we are making good progress."

Locals are worried. "A sale of RBC Bank would hurt in the Triangle"- the area anchored by North Carolina State University, Duke University, University of North Carolina at Chapel Hill, and cities of Raleigh, Durham, and Chapel Hill- the local News & Observer stated, adding that the bank employs about 500 people in the region and has raised its profile in recent years by putting its name on Raleigh's sports arena and a downtown skyscraper.

Overall for the latest quarter, Royal Bank reported net income of $1.54 billion, up about 13 percent from a year earlier. The increase was spurred largely by gains in its core Canadian banking business, wealth management and insurance.Less encouraging were results for RBC Bank, which has created losses for its parent's international banking business since the financial crisis hit.

RBC's international bank unit reported a net loss of $23.5 million during the quarter ended April 30, following a $27.6 million loss a year earlier. Nevertheless, RBC CEO Jim Westlake has said he expects RBC to report a profit later this year. "The business in commercial still remains fairly flat," he said on the May 27 conference call, but :We're seeing a little more strength in the consumer side right now, which is a good sign," Westlake said.

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