RBC shuts European government bond business

IFR 1994 27 July to 2 August 2013
2 min read
Alex Chambers

Royal Bank of Canada has shut down its European government bond trading business, reversing an expansion into the sector which started three years ago.

“We review our businesses regularly and make changes to optimise them as needed. This tactical adjustment in our product offering is consistent with our strategy of being active in the markets in which we add the most value to our clients,” the bank said in a prepared statement.

RBC started building up a portfolio of European primary dealerships in 2010. But last Wednesday morning, the five traders on the desk were informed the bank was pulling back from the market, according to several sources.

“The European business is a central part of our platform and of our strategy globally. We see this as an opportunity to refocus our efforts and invest in areas of core strength within the region,” RBC said.

Josep Santacana was the head of the unit, and it is unclear how he will be affected by the move. He could not be reached for comment, and the bank declined to comment on individuals.

RBC’s expansion three years ago also included a major push into the debt capital markets, especially in the high volume sovereign, supranational and agency sector. For a primary dealer, being active in trading government bonds is widely seen as being essential to winning syndicated sovereign bond mandates.

A spokesperson for RBC was keen to stress it remained committed to Europe and is still a primary dealer in Canada, the US, the UK, and the equivalent of a primary dealer in Australia. There is no suggestion that it is pulling out of DCM or the SSA business, where it has hired several veterans.

RBC’s move follows the decision of UBS to shut much of its sovereign, supranational and agencies business late last year. The Swiss bank chose to do so because the business was too capital-intensive, a decision which reignited the debate over whether the public sector business is sustainable.

Shareholders leave the Royal Bank of Canada's (RBC) Annual General Meeting in Calgary, Alberta