RBC Capital Markets made it in top 9 IB revenue in 2017, above UBS and below the rest of the BBs.
Can any of you experienced professionals tell whether RBC is now considered a BB in the financial world? I know they also made it into the top 30 systematically big banks this year, the "too big to fail" list. But that's probably more of the commercial banking side.
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Yes they broke top 10 in the overall league table for revenues... no I would not consider them a BB.
It is my understanding that roughly 65-75% of their deals are sourced by financial sponsor activity. Very much like Wells Fargo or pre-recession CS, they completely lead with their balance sheet. I know in particular there are a couple of specific MF sponsors they have great relationships with. As such, on the coverage side, their energy, healthcare, and tech are probably the closest to "BB-groups" due to a concentration of sponsor activity taking place in these industries (as well as the capital intensive nature of energy... I'm sure you would find generous revolvers attached to any corporate deal they did)
On the product side, they are actively trying to build out their M&A and ECM practices to varying degrees of success.
What I mean by "financial sponsor activity" is that a large portion of RBC's "deals" are really them representing PE firms in LBOs. That's not necessarily a bad thing or even the entire reason why they're not a BB firm, it's just that a lot of people see these deals as less prestigious. This is because in representing a PE fund in an LBO, instead of a normal M&A deal where corporations are essentially paying the bank for its advice "advisory services", almost everyone at a PE fund is an ex-banker and understands the intricacies of taking over a company. Rather, the PE fund is paying the bank to figure out the financing side (both the best strategy: ie bank debt vs high yield, and the execution: ie underwriting and finding placement of the debt at mezzanine / credit funds, banks, etc..) Additionally, as you could imagine, in exchange for these "advising fees" that the PE funds need to pay banks to arrange financing, the bank will offer up some very low cost loans/revolvers to the PE fund to keep their cost of capital low and everyone happy.... essentially why you usually see banks with huge balance sheets (CS, Wells Fargo, RBC, JPM to some extent) dominate this space.
Would disagree here on three points. The most important being that you don't report how much prestige you earned on your income statement every quarter:
In 95% of M&A deals, you are not offering actual advice, but are simply helping to affect a transaction. Unless you're dealing with a small cap company, chances are that the management team knows their industry about a 100 times better than your MD.
Money is green. Who cares how "prestigious" the deal is? You earn a fee from advisory, plus a fee from the debt issuance, plus a fee from the credit facility. Sure, maybe you cut them a small deal on the debt issuance, but that's still more fees earned than just the advisory fee itself. Screw prestige - money is green.
You have to think about this full cycle. Now, that you're on that lax credit facility, you keep earning a small fee plus the company has to keep you happy, meaning more DCM, ECM (i.e. PE sponsor who may IPO down the road), derivatives trading, and M&A work in the future. Again, that equals more cash in the bank from fees. Mr. Prestigious on the other hand has to keep his fingers crossed that they'll do another M&A deal sometime soon and will use his bank.
RBC Still Trying to Break Top 10 (Originally Posted: 04/30/2012)
Interesting article from the WSJ on RBC's foray into IBD. A friend of mine will be interning there this summer and said they have been making a very big recruiting push at MBA business schools">M7 b-schools lately. Despite a lot of effort, a favorable balance sheet compared to US peers, and an upswing in deal activity in sectors they target (mining, energy) RBC still seems unable to shake the "also-ran" label.
An excerpt: TORONTO—Five years ago, Royal Bank of Canada began a major push into investment banking, just as its biggest American and European rivals were heading into a financial crisis that would lay them low.
RBC, which emerged from the crisis relatively unscathed and well capitalized, was poised to quickly push its way into the industry's top ranks. Today, the bank is hovering at the edges of that elite group, but its efforts have come at a high cost and produced volatile earnings.
In addition, many of RBC's gains have come from business in its home turf of Canada.
All that has some analysts and investors questioning whether RBC's big bet on investment banking has been worth it.
Full article: http://online.wsj.com/article/SB100014240527023039906045773705321627888…
In the next 2-3 years, I think that RBC will be undeniably considered a BB. Even right now, a lot of people think RBC is currently a BB, depending on who you ask. Their M&A in certain groups like healthcare and technology are already competing with EBs like Evercore for mandates, and they're only going to get stronger.
Don't read too much into the BB designation; frankly many people consider RBC a BB already. What matters more is the relative perception of the bank, and more importantly, of the specific group (driven by deal flow, exit opps, etc). Subjectively, RBC on the whole might be considered a mid/lower tier BB, but that doesn't really matter on a practical basis. Group specific attributes and what kind of experience you can get are the most important. So If you're asking from the perspective of whether or not it's a bank "worth joining" or one that will open doors for you, I'd say yes.
For what it's worth, being heavy on sponsor deals isn't necessarily a bad thing, and your mileage will vary from an experience perspective based on the type of mandate and the particular sponsor you're working with. The best sponsor deals are ones where you have a truly dual advisory and a financing mandate (ie. not just a tack-on an advisory credit). True, banks are likely adding less incremental value given the expertise of PE firms, but you'll still run a lot of the typical LBO analyses.
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Canadian checking in here. RBC is technically a BB in Canada at least.
I struggle to understand why the firm you work for, all else equal, matters to the person considering hiring you in this industry. Obviously I do understand that if you want to leave finance and work for, say, Disney or Facebook or PepsiCo, then its probably easier to get a job at those companies if you have Goldman on your resume versus RBC. This is because you cannot dumb down your experience nearly enough to make sense to those companies. But they have heard of Goldman and likely associate it with prestige and will assume on name alone that you are smart and competent and probably have a solid network. This is simple name recognition stuff. But if you’re jumping within finance, then the person thinking of hiring you is going to want someone with the right relevant financial experience - be it banking, research, trading. And they want to know what specific deals you were on and how you contributed and made the firm money.
A previous commenter noted that people on this website care about prestige. For a college kid trying to get the best career start, sure, and that makes sense. Beyond that, firms are not prestigious... if anything deals and relationships are prestigious. I know that RBC has the #1 or #2 internet analyst on the street. As a result they are on every deal and know everyone in tech. If you like tech, would you rather work at Goldman or RBC? It’s a no brainer you want to work at RBC in this example.
For example, say you have a scenario in which two tech bankers are gunning for the same tech PE job. One is at Goldman and one is at RBC. If the RBC banker worked lead on several more high profile deals than the Goldman banker, then RBC guy is probably getting the job. It’s all about your track record of making money for your shop, and who you know. Totally irrelevant what bank you are working for when it comes to finding new opportunities within this business.