The rise of RBC Capital Markets

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.

Link: http://www.businessinsider.com/who-will-win-wall-s...

Anonymous Monkey, Upload Your Resume - Land a Job

Members that upload a resume get 2.3x the number of interview invites through the Talent Oasis. Learn more.

Comments (50)

Dec 20, 2017

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.

    • 3
Learn More

7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Dec 21, 2017

Thanks for the reply. Could you elaborate more on what you mean by "financial sponsor activity" part, and why would that make them not so "BB". how are the BBs different than them?

Dec 21, 2017

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.

    • 8
    • 3
Dec 22, 2017

I see. So the point is RBC gets the advisory deals mostly because they are the financial sponsors of such deal, and also because they charge low for those financing. Regardless, do you see RBC IB advisory making the prestige of a BB anytime soon / in the future?

    • 2
Best Response
Dec 27, 2017

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:

  1. 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.
  2. 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.
  3. 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.
    • 17
    • 4
Dec 27, 2017

Mostly agree with you here - like I said, PE sponsored deals are not necessarily a bad thing, just as a whole, some people do see them as less prestigious, and as a result, even though RBC is top 10 in fees, they're not seen as a traditional BB (yet).

I'm not gonna go back and forth about the overall "prestige" of RBC because it's a great bank, competitive to get into, and they do great work. The only thing I'm really gonna disagree with you on though is that people do care about how "prestigious" a deal is - this is Investment Banking we're talking about. Theres a reason MF PE and HF recruit more aggressively out of GS/MS/JPM than RBC - GS/MS/JPM are the most prestigious because theyre on the most prestigious deals and have the most prestigious name - plain and simple.

    • 4
    • 4
Jan 3, 2018

This guy is 100% correct.

I'd like to add one thing to his list and one unrelated.

This former is that it's not 'really' full cycle, because when you are a debt holder you can;'t advise on RX and receive those fees. (but, most BB's don't, for that reason, so still on point with the thread.)

The latter as that the guys came out of f*cking nowhere on O&G M&A... Well, now that I am typing it out, they probably got a vast majority - nearly all of the Canadian O&G unhealthy business work (or at least as much as they could handle). Canada is pretty protectionist when it comes to that kind of thing (and rightly so!) ie., recaps, consolidating M&A... and to the point above I don't know if Canada has the same regulations/competitive landscape for FRG work, they may have gotten some of that as well.

Point is their home country's primary industry got totally wiped out by the Muslims and the Communists (OPEC). Good thing there are always ((bankers)) around to profit on the nation's loss.

    • 2
    • 1
Jan 3, 2018

Great point on all the O&G work. I also want to second ThrowAway above though, as I don't necessarily agree with NotER - prestige matters a ton to people on this site. The fact that we can disagree on who is and isn't BB means that qualification is dependent on subjective opinions. Despite potentially making a little more money at one shop, there's a ballpark 85% attrition rate in A2s, and for those in the 85% who wanted megafunds, I'd bet 99% of them would rather be at GS/MS than RBC. Not saying that's fair but headhunters do have their preferences.

    • 1
Jan 3, 2018

You guys do realize that the primary purpose of an investment bank is not to provide exit-ops for its second year analysts, right? They could care less what a bunch of twerps on WallStreetOasis think about prestige (no offense to all on here and myself included).

    • 1
    • 1
Jan 4, 2018

Yes obviously we realize that.... the initial question posed was about prestige and whether RBC is considered a BB - which is what I aimed to answer. As I said, I think RBC is a wonderful bank with a very bright future, but I think you would be extremely naive to think that the "RBC" name is as prestigious as the top BB (GS/MS/JPM). If you were to tell someone not involved in finance/minimally involved that you landed an internship, would they be more impressed if you said "Barclays" or "Citi" versus "RBC". I think the answer is clear.

I understand that "providing exit ops" or second year analyst is not a primary concern of a bank, but when trying to objectively measure a banks prestige or exclusivity, it's a completely valid metric to reference.

    • 3
Jan 4, 2018

Really don't want to waste anymore time on this but just wanted to point out one thing since you keep mentioning it....JPM...they basically do the exact same "unprestigious" activities that you're describing for RBC. Yup, they're on a bunch of credit facilities, DCM, ECM etc.

Furthermore, MS and GS still do a decent bit of ECM and DCM work. They similarly help to finance deals. So not even those examples make sense for your argument. If you want to make your case, none of your example prestigious names fit what you're describing which is more like Moelis, Evercore....Just some food for thought.

    • 1
Jan 4, 2018

Look up 2017 closing M&A league tables and lmk who you see in the top 3 and who isn't in top 10 that's relevant to this thread.

    • 1
Apr 13, 2018

They do a lot of sponsor deals, and a lot of leveraged lending, because it was the fastest and easiest way for them to establish a foothold in the US. However, they are also representing a lot of middle market strategics. Basically their model is to let the "bulge brackets" fight over the high-risk, high-reward, name brand clients and focus more on flow business which is moving a bit down market where the competition is less fierce and where they can establish themselves. Their sponsor activity has been a huge part of their business, but as they invest in and build out coverage groups, and bring on MD's with sponsor and corporate relationships, they've been slowly diversifying. Expect the sponsor portion of their business to decline as a percentage as this ramps up.

If you define bb by fees then I'd consider them a bulge. If you define them as advising top strategics then I don't think they are and don't think they're interested in it right now. However in a few years once the bank has been further built out I won't be surprised to see them competitive on plenty of leading deals in the market. They're already seeing that with some of their groups (e.g. Healthcare).

    • 1
Dec 21, 2017

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.

    • 2
    • 3
Dec 22, 2017

IMO, 2-3 years might be a stretch. 5-10 years? Probably.

    • 1
Dec 22, 2017

Yea since the new BBs post 2008, only RBC has really consistently made it into the top 9-10. and they are also one of those banks who claimed the rank without devouring a previous BB or major IB firm.

    • 1
Jan 3, 2018

Nope - it was a one shot pop for failing Canadian O&G work....

Maybe when oil prices reach inflation adjusted $100/bbl again (by that time it will likely be more like $200, if it ever happens) and a bunch of mudslimes and communists (read: Subhumans) get together to tank world commodity prices in an act of economic warfare against the US (which hilariously only made us more profitable while it bankrupted one of the colluding nations, and plunged the remaining countries into political chaos) and our Northern Neighbors are the only real casualty.. THEN they will be top 10.

    • 1
Jan 5, 2018

LOL at subhumans (almost) literally throwing monkeyshit.

Learn More

7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Dec 22, 2017

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.

    • 3
Dec 22, 2017

Yea what I was really asking is whether RBC is considered prestigious like BBs in finance so that RBC bankers get the same kind of exit opps, recognitions, prestiges... etc

    • 1
Dec 22, 2017

Of the factors you mentioned, exit opps is the only really tangible one. Recognition and prestige only really matter in this context to the extent that it helps with exit opps. On the whole, people from "better" banks tend get "better" exits. That being said there will be plenty of opportunities to recruit for similar, if not the same, positions. You'd just have to just impress them that much more to overcome the branding difference.

    • 1
Dec 22, 2017

Thanks a lot for the input.

Dec 22, 2017

Fig team is killer, specific to banks/depos their top 4

    • 1
Jan 8, 2018

deleted

    • 5
Dec 25, 2017

Thanks a lot for the input. It's very insightful. I'm not getting offer from RBC, I'm just curious about the IB industry. Since banks with large balance sheet can win IB business through financial sponsoring, can you tell from your experience which banks are usually on top for strategic mandates?

Dec 25, 2017

As posters mentioned above, financial sponsor business isn't necessary bad - but if you want to work at a shop that does just strategic mandates, you would want to look at a boutique that doesn't have a balance sheet at all / doesn't offer DCM/Lev Fin services, ie Houlihan Lokey, Evercore, lazard, Rothschilds, etc..

    • 1
    • 1
Dec 27, 2017

Canadian checking in here. RBC is technically a BB in Canada at least.

    • 2
Dec 27, 2017

Yeah definitely lad, very strong in Canada/UK. Less than BB in US

Nicest haircut than Bateman

    • 1
Dec 30, 2017

Maybe not now, but definitely one of the banks that I see being one in the next 5 years - along with Wells Fargo Securities

    • 2
    • 2
Jan 2, 2018

"Skate where the puck is going."

There's a reason GS is trying to take deposits (w/out revealing they are - gotta protect that brand!), and its b/c the balance sheet is a real competitive advantage (it is a bank after all). As an investor I'm long/strong on the RBCs, Wells, JPMs (#1) and tepid at best on the GS/boutiques. You can't monopolize knowledge, so its unclear to me that advantages in 'advisory' are long-term sustainable (in fact, that's why we now have all these EBs competing with what used to be an oligopoly of GS/MS). The ability to save someone a few mil on financing = real competitive advantage

    • 2
Jan 3, 2018

RBC's energy group is BB caliber. I would consider the bank to be a second tier BB.

"Anything less than the best is a felony"

    • 1
Jan 3, 2018

Power & Utilities group also seems to be pretty high up there

Jan 5, 2018

Definitely. It's group by group within that firm. They have a massive balance sheet that will continue to open doors for them in other industries, too. Solid bank, just isn't universally in the lead left conversation yet.

"Anything less than the best is a felony"

Jan 5, 2018

What does a rising bbc have to do with Finance?

Jan 5, 2018

PE bro here. Was at BB and now large international fund ($13bn). RBC very mm - but that's not meant to be an insult. Just truth.

    • 1
Jan 8, 2018

Nobody will care about this, but RBCCM Public Finance had a great year - moved into the Top 5 (with BAML, Citi, JPM, and MS) and was one of three firms to increase volume over 2016 levels.

    • 2
Jan 8, 2018

Anyone know how comp compares at the senior analyst / junior associate level? Is it basically on par with the Barc, BAML, lower BB set?

Jan 11, 2018

Comp at the junior level at BBs and top MMs (RBC, Jefferies) is basically identical. A friend at RBC got $150k all in at the end of his first year.

EBs tend to pay a little ($15-20k) more in bonuses and have slightly higher base salaries ($5-10k).

    • 2
Apr 13, 2018

RBC is stubbed, how did they get 150k?

Apr 11, 2018

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.

    • 5
Apr 12, 2018

How does having a high ranking tech equity research analyst help their M&A team win deals? Genuine question - not sure how the two complement each other

Apr 12, 2018

High ranking sell-side ER analysts translate to more influence in their published research reports and are better regarded by institutional investors. As such, sell side ER analysts' reports carry more weight and have heavier influence on stock prices than say a medicore ER analyst. If a bank is gunning for a client, the sell-side ER analyst will try and publish more favorable reports, updates and recommendations to make the client happy (equals positive stock price influence) to help encourage the client using the same bank for IB purposes. It's all about the relationship

Apr 12, 2018

The spirit of what you are saying is true, but of course rules are in place to eliminate that obvious conflict of interest. Analysts do not and cannot work with bankers for this reason. That said, most analysts tend to be optimistic about the stories of their companies in general, partly because all companies and most investors like talking about good news because good news means stocks go up (think corporate access). But analysts are not trying to win deals -- case law prevents that. Analysts are independent animals, free to say and think whatever he or she wants even when the firm's own bankers disagree. Top analysts are brands in themselves once they build what is effectively a fanbase.

You have to remind yourself that equity research is the infotainment business. You're the talking head pundit of your sector, if you're good. This means institutional investors listen to you and care what you think. So, company A thinking about an IPO wants YOU on the deal because they want YOU to understand their story so that YOU can get behind it (assuming you agree with the upside case) and so YOU can take them on a road show with the biggest clients (CREF, Fidelity, etc). Again, in this part of the biz, the company will not care about your firm -- they care about their stock price. The deal execution will get done-- it's a formality/rubber stamp process at least in a straight up IPO.

    • 2
Apr 12, 2018

Agree mostly with what you're saying, but that more applies to the perspective of a bank and being a senior banker. PE recruiting is so early these days that 1st year analysts don't even have any closed deal experience by the time it kicks off and the headhunters look at the prestige of the bank and the group. Sure, maybe the RBC TMT banker might have worked on more high profile deals but on a pure exit opp basis, every PE firm and headhunter would be much more focused on GS TMT.

As an aside, not sure if you were using the group as an example, but if you like tech and you're an undergrad, it would be a no-brainer to work for GS TMT instead, over RBC...

Apr 12, 2018

What you are saying is fair. We have to draw a line between undergrads/people with <3 years experience and more senior or mid junior level people or higher. For example, again sample size of 1 here, in my experience and level/niche, if you are talking to a headhunter then you could be "doing it wrong." You want to get to a point in your career where people who matter know who you are. So if someone at a better shop (i.e. works better deals or has broader reach) had a key contributor leave, then they try to poach you, and you leave for better comp/future upside if it makes sense. Just kill it everyday and opportunities will come to you. This is annoying for a younger person to hear, and is irrelevant to an undergrad or very green upstart. To those folks, they think that it is the prestige that will allow them to get to that level in the first place. That's true for average performers, not necessarily true for future developing rock stars. So to that end, I agree, and acknowledge that there are very distinct groups of people in this business depending on specialty and age.

    • 2
Apr 12, 2018

I just re-read your comment and have a follow-on thought. You mention that the PE recruiting process is so early now and that young candidates haven't the solid experience yet to really speak to. Let that sink in for a moment.... then why is anyone, let alone a PE shop, looking to hire somebody with no valuable experience? You are saying that these kids have no experience... and that hiring managers know this... yet they seek to hire them anyway. Forget the name rec or "prestige" stuff for a moment. Am I misinterpreting? What assets/skills/upside is a PE shop buying when it hires a person who worked at Goldman or JPM for only 11 or 13 months? Versus the same individual from Wells, RBC, or SunTrust even?

    • 2
Apr 12, 2018

I'm pretty sure it's 99% signaling. Goldman signals a safer bet than those at MM banks.

Apr 13, 2018

1-Click to Unlock All Comments - 100% FREE

Why do I need to be signed in?
WSO is a knowledge-sharing community that depends on everyone being able to pitch in when they know something.
+ Bonus: 6 Free Financial Modeling Lessons with 1-Click Signup ($199 value)
    • 1
Apr 13, 2018
Apr 13, 2018