Royal Bank of Canada says in better shape than peers

TORONTO, April 29 (Reuters) - Deposit margins in the banking industry are compressing "rapidly" but Royal Bank of Canada (RY.TO: Quote, Profile, Research) can handle this pressure better than most of its rivals, the bank's new head of Canadian banking said on Tuesday.

"We are in a better position to balance the funding challenges relative to most peers, as we have excellent access to wholesale funding and are growing deposits at the same time," said David McKay, who took on the top job at RBC's Canadian banking segment earlier this month.

The domestic banking unit contributes more than 50 percent of RBC's revenue and earnings.

The Canadian consumer is in good shape, RBC is making customer gains in key categories and there is little indication of slowing growth, even in mortgages, McKay said at an investor briefing in Toronto.

"You've got people working, you've got low interest rates, and the relative affordability of housing is good," McKay said.

"We see potentially some small geographic shocks...but we've got a balanced distribution, we don't rely on any one region."

The Canadian and U.S. housing markets are like "night and day," McKay said, with much more conservative mortgage loan-to-value ratios in Canada, in addition to structural differences.

"I do not lose any sleep about our home equity business whatsoever," McKay said.

The bank had C$124 billion of Canadian residential mortgages on its books at the end of January, up from C$108 billion a year earlier.