* Canada's largest bank declines comment
* RBC has been expanding wealth management operations
* Retail bank network is in southeastern United States
(Updates share price and adds context. In U.S. dollars unless
By Paritosh Bansal and Pav Jordan
NEW YORK/TORONTO, April 7 Royal Bank of Canada
(RY.TO) is looking to sell its struggling U.S. consumer banking
business after failing for years to wring profits from the
operations acquired nearly a decade ago.
A source familiar with the situation said on Thursday that
Canada's largest bank has retained JPMorgan Chase & Co (JPM.N)
to advise it on the sale process, but did not provide further
details. The source declined to be named because the sale
process is private.
RBC has expanded its wealth management and wholesale
banking presence internationally, with emphasis on high growth
markets like Asia, but the retail bank network in the
southeastern United States has weighed on earnings for years.
For a factbox on RBC's U.S. unit [ID:nN07174690]
Shares of the bank closed 0.02 percent higher at C$60.29 on
the Toronto Stock Exchange on Thursday, even as shares among
Canada's other five major banks retreated, suggesting the news
might be helping to support the stock.
Royal Bank spokeswoman Katherine Gay told Reuters by email
that the bank was not commenting on the issue. JPMorgan also
declined to comment.
Royal Bank Chief Executive Gord Nixon said in January the
bank was unsure whether it would eventually add to its U.S.
retail banking business, or retreat from it.
ADD OR RETREAT?
RBC's U.S. retail bank has lost money for 10 straight
quarters and has generally been a drag on earnings since RBC
purchased North Carolina-based Centura Bank in 2001 for $2.2
billion ($3.5 billion Canadian at the time).
The unit was hit hard by the U.S. real estate collapse and
waves of foreclosures.
"We would anticipate that should the deal go through,
(RBC's) international segment would be immediately much more
profitable, supporting the bank's overall profitability
metrics," Barclays Capital analyst John Aiken said in a
"This stems from the pressure that its U.S. retail banking
has faced, being located in the U.S. Southeast, one of the
harder hit areas in the real estate declines experienced by the
U.S. over the past few years."
Deal advisers say there is new energy in the U.S. banking
market after three years of gloom, with healthy banks once
again stepping up to snap up rivals and chase revenue growth in
the lukewarm economy.
Some analysts said Royal Bank might be better served by
expanding its operations. Other Canadian banks have seen fit to
bulk up on U.S. retail banking in the wake of the recession.
There were two major U.S. deals announced in December by
Royal Bank's Canadian competitors and both were acquisitions
rather than divestitures.
Bank of Montreal [BMO.TO] agreed to buy U.S. lender
Marshall & Ilsley Corp MI.N for $4.1 billion, offering a 34
percent premium, and Toronto-Dominion Bank (TD.TO) agreed to
buy Chrysler Financial for $6.3 billion, making it one of North
America's biggest bank-owned auto lenders.
TD Bank first entered the U.S. market in 2005 and now has a
network of about 1,300 branches. It also owns about 46 percent
of online broker TD Ameritrade (AMTD.O).
Potential buyers for the RBC unit, rebranded RBC Bank in
2008, would likely need to be banks with growth ambitions in
the same geographical area spanning six states in the U.S.
Southeast. RBC, however, may be challenged to get the price it
wants given the performance of the assets.
Earlier this month RBC reported a record profit in the
first quarter, earning C$1.84 billion ($1.92 billion), or
C$1.24 a share, up from C$1.5 billion, or C$1.00 a share, a
(Editing by Jeffrey Hodgson and Peter Galloway)