In an interview last week with Canadas Business News Network (BNN), Royal Bank of Canada CEO Gordon Nixon said the firm is examining what our opportunities are with regard to Dexias likely selloff of its half of joint venture RBC Dexia.
It is the closest RBC has come to acknowledging that it may buy out Dexias half, but falls short of saying that a deal is in the works. Hopefully there could be opportunities in it for us, Nixon said in the BNN interview of Dexias restructuring plans.
Dexia is undergoing a government-sponsored restructuring plan that would see it shed its strongest assets, including its Turkish unit and its share in RBC Dexia, after the Belgian institution was left with a significant funding shortfall in the wake of the European sovereign debt crisis and tensions in the interbank market.
Dexia has not announced potential buyers or whether it is trying to sell its half of RBC Dexia to the other joint venture partner, but Luxembourg Finance Minister Luc Frieden announced in a press conference last month, presumably speaking with direct knowledge of the matter, that RBC intended to use its right of first option to buy out Dexias 50% share in RBC Dexia.
RBC Dexia has routinely said it is business as usual amidst Dexiasand greater Europeseconomic situation. Nixon said in the BNN interview that RBC Dexias credit rating is not a risk since, as a joint venture, it is given its own credit rating and is not subject to Dexia risk.
Nixon also said in the BNN interview that RBC is seeking acquisition opportunities in battered European markets, particularly in the wealth management sector. Absolutely were looking, he said in the interview. Were in a very strong financial position. We have very high levels of capital, and if there are opportunities that are consistent with our strategy, where the economics make sense, were certainly prepared to invest dollars, and the area that weve publically said would be of most interest would be wealth management.
A video of Nixons interview on BNN may be found here.
Nixons full response, when questioned about whether it plans to buy out Dexias share of RBC Dexia, was: We couldnt comment, we wouldnt comment, but youve had a minister of the crown in France, I guess it is, come out and say that Dexia is looking at all their assets. They specifically mentioned their Turkish bank, [and] the other half of RBC Dexia, and so theres no question that we have to examine what our opportunities are going forward, but clearly its an institution thatfirstly, RBC Dexia is totally ring fenced in terms of its credit position. Its not a risk, its a joint venture. So while they have equity embedded in it, its a joint venture, so its got its own credit rating and so forth. And in addition to that, because of the restructuring of Dexia Bank, youve now got an implicit government guarantee of support, so to some degree the pressure is there, but its not an immediate pressure, so well see how that industry unfolds and hopefully there could be opportunities in it for us.
(CG)