Royal Bank of Canada continued its multipronged approach to U.S. expansion with its announcement Thursday of a deal to buy the Washington brokerage Ferris, Baker Watts Inc., while it is close to buying Alabama National BanCorp. of Birmingham to bolster retail banking operations.
After taking a lengthy break from making major acquisitions in the United States, the $605 billion-asset Royal Bank re-emerged as an aggressive acquirer in 2006 and has been expanding its Southeastern banking network while assembling a multiregional business in capital markets and investment banking.
Ferris, Baker Watts would be rolled into RBC Dain Rauscher Inc. in mid-2008.
John Taft, RBC Dain Rauscher's president and chief executive, said in an interview that buying Ferris, Baker Watts would further his company's goal of building a national investment advisory and wealth management business in the United States.
He said it would create a seventh region for his unit, in the Middle Atlantic, which Ferris, Baker Watts would handle. It also would contribute 900 employees and about $18.5 billion of assets under administration.
"This was a very compelling geographic fit," he said. "It gives us a much stronger presence in a market we want to be in, particularly around Baltimore and Washington."
Royal Bank did not say how much it would pay.
Last year Royal Bank expanded RBC Dain Rauscher's operations in the Northeast by buying J.B. Hanauer & Co. of Parsippany, N.J.
In terms of banking, the Toronto company has focused exclusively on the Southeast.
Its Raleigh unit, the $25.5 billion-asset RBC Centura Banks Inc., has grown in the past 18 months by purchasing Flag Financial Corp. in Atlanta and 39 Alabama branches from Regions Financial Corp. RBC Centura also has obtained all the approvals necessary to buy Alabama National.
Royal Bank plans to shorten the name of its banking unit in April to RBC Bank. Scott Custer, the unit's chairman and chief executive, has cited the name change as a sign of the parent's long-term commitment to its expansion strategy.
"It reinforces Royal Bank's commitment to the U.S. and the Southeast," he said in an interview last month. "They view the banking business in the U.S. as an important way to grow."
Mr. Custer has said the banking unit is unlikely to pursue additional acquisitions for at least another six months, or at least until "it is comfortable with how things are going" with Alabama National. The banking arm has "a very full plate" with that integration and with addressing deteriorating credit quality, particularly in its residential development loan portfolio.
Another key area of focus for Royal Bank in the United States has been capital markets.
Since 2006 it has bought Carlin Financial Group in New York, Daniels & Associates LP in Denver, and Seasongood & Mayer LLC in Cincinnati.
The company also expanded its trust business in 2006 by acquiring American Guaranty and Trust of Montpelier, Vt.
Bradley Smith, an analyst at Sun Life Financial Inc.'s Blackmont Capital Inc., said he has been pleased that Royal Bank of Canada is taking a "thoughtful and gradual" approach to U.S. expansion.
"Not to say they won't do something on a grander scale, but for now they're doing it in incremental, bite-sized chunks," he said. "They have a core foundation in Centura, and they are wrapping around that a well-diversified wealth management base. This is a multiyear buildout for them."
