Canadian banks want bigger piece of U.S. wealth management

Big banks north of the border are on a campaign to woo affluent U.S. customers, bulking up on wealth management assets amid economic worries at home.

During quarterly earnings calls this week, two Canadian banking giants — Royal Bank of Canada and Canadian Imperial Bank of Commerce — outlined plans to expand their U.S. wealth divisions and turn up the heat on their stateside peers.

Over the past year, RBC has added 450 employees in the U.S. and expanded in cities such as Washington, Minneapolis and New York, even as it has cut personnel in its Toronto headquarters.

Meanwhile, the U.S. wealth management unit at CIBC, also based in Toronto, received a jolt in June with its acquisition of Private Bancorp in Chicago. Assets under administration jumped more than 40% to $46.8 billion thanks to the deal.

Assets will rise further once CIBC completes its acquisition of Geneva Advisors, a private wealth management firm also based in Chicago. The Geneva deal was announced in July.

“I might add that three and a half years ago we had zero in U.S. wealth management assets, and today we have close to $50 billion,” Victor Dodig, CIBC’s president and CEO, said during the company’s quarterly earnings call Thursday.

In the coming month, CIBC plans to rebrand its U.S. division. In addition to scooping up Private and Geneva in Chicago, CIBC operates Atlantic Trust, a wealth advisory firm in Atlanta.

“Having our entire team operating under the CIBC brand is exciting, and it’s an important way of building our presence in the U.S. market as we go forward,” Dodig said.

Catering to high-net-worth clients, of course, has been a key focus of the U.S. dealmaking by Canadian banks in recent years.

When RBC in 2015 acquired Los Angeles-based City National — the so-called bank to the stars — it gained access to a rich-and-famous clientele. RBC also operates an investment advisory business in Minneapolis.

Revenue from U.S. wealth management drove the company’s strong quarterly results, rising 16% to $954 million. Assets under administration, meanwhile, rose 11% to $330.5 billion for the period that ended July 31.

About two-thirds of the 450 employees that RBC has added at City National branches have been back-office workers as the City National unit prepares to handle the additional regulatory costs associated with crossing $50 billion in assets; it was at $46.2 billion at midyear.

Down the road, though, the RBC plans to bring more client-facing employees in its U.S. branches.

“You’ll see more of that front-office growth going forward, as we continue to see growth in the existing footprint,” Dave McKay, president and CEO, said during RBC’s earnings call Wednesday. “The success of our franchise model growing at multiples of what the industry is doing encourages us,” he said, noting that City National is just getting a “toehold” in the New York market.

Strong revenue growth in the U.S. also lifted CIBC’s earnings, largely due to the company’s acquisition of Private, which closed on June 23.

U.S. wealth management revenue rose 50% to $80 million. Total U.S. revenue — including from commercial banking — more all more than doubled to $239 million.

During the CIBC call, executives said they plan to take a pause from dealmaking for the time being, as they focus on integrating and rebranding their U.S. business lines.

CIBC was forced this year to increase its takeover offer for Private, after the Chicago company’s stock soared in the wake of the November elections. CIBC initially offered to pay $3.8 billion in cash and stock for the company, but later boosted the price about 30% to win shareholder approval.

“Inorganic activity is largely going to be on hold for the interim period, as we galvanize around the assets that we’ve invested in,” Dodig said Thursday.