Royal Bank of Canada said Chief Executive Officer Gordon Nixon will retire next year as the nation's largest lender reported fiscal fourth-quarter profit that beat analysts' estimates on gains in investment banking and consumer lending.

Nixon, 56, will step down as CEO on Aug. 1 after 13 years leading the Toronto-based bank, the firm said today in a statement. He'll be replaced by David McKay, 50, head of personal and commercial banking.

"It's a bit of a surprise, I think he's done a great job," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier Inc. in Toronto, which manages about C$4.7 billion ($4.1 billion) including bank shares. "I don't think anyone can complain about what he's done there in terms making the bank No. 1 or No. 2 in retail, and No. 1 by a long shot in capital markets."

Nixon is the third CEO among Canada's six largest banks this year to retire or announce plans to do so. Bank of Nova Scotia's Richard Waugh, 65, stepped down as the top executive on Nov. 1 and Toronto-Dominion (TD) Bank's Ed Clark, 66, said in April that he'll retire in November 2014.

"I think the time is right for a transition," Nixon said on a conference call with investors to discuss quarterly earnings. "I'm very proud of what we accomplished, but feel it is a great time to look to the future and build for the longer term."

Highest Paid

Since Nixon took over on Aug. 1, 2001, Royal Bank's stock has returned an average of 12 percent a year including dividends. That compares with an average of 7.1 percent for Canada's benchmark Standard & Poor's/TSX Composite index and 9.4 percent for the S&P/TSX Financials Index. The shares have gained 20 percent this year including dividends, matching the advance of the 46-company financial index.

Nixon, the highest paid Canadian bank CEO, led the company to record profit of C$8.43 billion for the fiscal year ended Oct. 31, up 12 percent from a year earlier.

"Gord has had a remarkable career at RBC, and during his 13 years as CEO, earnings and market share have increased significantly," David O'Brien, the bank's non-executive chairman, said in the statement.

Nixon, the longest-reigning CEO among Canada's six biggest lenders, said in January that he didn't plan to be head of Royal Bank into his mid 60s, adding that his retirement wasn't "imminent."

Standish Leaving

Mark Standish, 52, the New York-based co-group head of RBC Capital Markets, will leave the firm next year, according to the statement. His Toronto-based co-head, Doug McGregor, 57, will assume responsibility for the investment-banking unit immediately, the firm said.

Royal Bank awarded Nixon C$12.6 million in salary, stock and bonuses for fiscal 2012, a 25 percent increase over the previous year and more than his counterparts at JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.

Nixon, a Montreal native, began his career in 1979 at Dominion Securities, where he worked in global markets and later investment banking. Nixon moved to Tokyo in 1986 to take over operations in Japan, and a year later Dominion Securities was bought by Royal Bank. Nixon returned to Toronto in 1989 as managing director of investment banking.

In 1995, Nixon became head of global investment banking and later was named CEO of RBC Capital Markets. He was appointed president of Royal Bank on April 1, 2001, and CEO four months later.

Profit Climbs

During Nixon's tenure as CEO, Royal Bank failed to make inroads in U.S. consumer banking after building on its $2.16 billion purchase of Centura Banks in 2001 with a string of acquisitions. Royal Bank sold its money-losing North Carolina-based RBC Bank and credit-card assets in March 2012 to PNC Financial Services Group Inc. for $3.62 billion.

In a separate statement, Royal Bank said today that fourth-quarter profit rose 11 percent to C$2.12 billion ($1.99 billion), or C$1.40 a share, from C$1.91 billion, or C$1.25, a year earlier. Adjusted profit, which excludes some items, was C$1.42 a share, the bank said, beating the C$1.39 average estimate of 11 analysts surveyed by Bloomberg.

Royal Bank's February takeover of Ally Financial Inc. (ALLY)'s Canadian auto-finance and deposit business added to a 4.5 percent boost in earnings for personal and commercial banking. Earnings from the bank's RBC Capital Markets unit rose 15 percent on growth in corporate and investment banking, the lender said.

TD Misses

Toronto-Dominion, Canada's second-largest lender, posted fourth-quarter profit that missed analysts' estimates. Net income rose 1.3 percent to C$1.62 billion, or C$1.68 a share, from C$1.6 billion, or C$1.66, a year earlier, the Toronto-based bank said today in a statement. The lender said it earned C$1.90 a share after excluding some items, missing the C$1.99 average estimate of 11 analysts surveyed by Bloomberg.

Earnings were lifted by improvements in Canadian personal and commercial banking and gains in wealth management after adding contributions from its C$674 million takeover in March of New York money-manager Epoch Holding Corp. The bank also announced a one-for-one stock dividend, which is effectively a two-for-one split of the common shares.

"We had good results across all of our retail businesses," Chief Financial Officer Colleen Johnston, 55, said in a telephone interview. "We had very strong retail earnings, they were up 19 percent on a year-over-year basis, but our wholesale numbers declined and we had some large security gains in the same quarter last year."

CIBC Slips

Canadian Imperial Bank of Commerce, the country's fifth-biggest lender, said quarterly profit slipped 1.9 percent on costs to reorganize its Caribbean banking business and introduce a new credit card.

Net income in the period ended Oct. 31 fell to C$836 million, or C$2.05 a share, from C$852 million, or C$2.02, a year earlier, the Toronto-based bank said today in a statement. Adjusted earnings, which exclude some items, were C$2.22 a share, beating the C$2.15 average estimate of 14 analysts surveyed by Bloomberg News.

The bank incurred a C$39 million restructuring cost tied to its FirstCaribbean International Bank unit, and a C$35 million impairment tied to a U.S. leveraged-finance portfolio that it is exiting. CIBC also had C$24 million in costs tied to marketing a new credit card and its Aeroplan-branded card sale to Toronto-Dominion Bank.

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