DBRS Comments on RBC’s BlueBay Asset Management Acquisition

DBRS has reviewed today’s announcement by the Royal Bank of Canada (RBC or the Bank) that it will acquire 100% of the outstanding shares of London-based BlueBay Asset Management plc (BBAY). There are no rating implications.

The transaction is consistent with RBC’s stated strategy of growing its wealth management businesses geographically. DBRS views RBC Wealth Management, a segment of RBC, to be a key component of the Bank’s growth strategy.

The acquisition accelerates the Bank’s growth in Europe, as BBAY is one of Europe’s largest independent managers of fixed income debt funds and products, with USD $40 billion in assets under management. Currently, RBC Wealth Management has $250 billion in assets under management. Additionally, there are potential cross-selling opportunities to enhance revenue synergies, including investment opportunities to clients of RBC and BBAY.

RBC is paying approximately $1.56 billion in cash for BBAY. The transaction is not expected to have a material impact on earnings per share in the near term, but does reduces RBC’s Tier 1 capital ratio by approximately 55 basis points immediately following the close of the acquisition, which was 12.9% at the end of Q3 2010. The deal is subject to shareholder and regulatory approvals and is expected to close at the end of December 2010.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are the Global Methodology for Rating Banks and Banking Organizations (January 14, 2010), Rating Bank Preferred Shares and Equivalent Hybrids (June 29, 2009), and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments (February 11, 2009), which can be found on our website, www.dbrs.com, under Methodologies.

The source of information used for this rating includes Royal Bank of Canada.