Having reached south of the border to acquire a major regional bank near the technology center of Research Triangle Park, N.C., Royal Bank of Canada says it hopes to exploit a technology-banking strategy proven in its Canadian markets.
Brent J. Keating and his colleagues at Toronto's Royal Bank began a niche marketing effort in 1985 aimed at technology companies, offering loans and cash management services and hoping for more business as companies grew.
Eight years later, they expanded the initiative nationwide, winning as clients some of Canada's biggest tech companies, such as software developer Corel, network equipment maker Newbridge Networks Corp., and telecommunications component maker JDS Uniphase Corp.
The company's June purchase of Centura Banks Inc. of Rocky Mount, N.C., now called RBC Centura Banks, gave it a foothold near Research Triangle Park. The $12 billion-asset retail and commercial banking company operates in the Carolinas and Virginia.
'When we looked at Centura, one of the factors was the fact that it would be a prime area to launch our Knowledge Based Industries initiative in the States,' Mr. Keating said in a recent interview.
Research Triangle Park and the area around it are home to key operations of some of the world's biggest names in technology, software, and life sciences -- from IBM Corp.'s personal computer division to the U.S. headquarters of the British pharmaceutical giant GlaxoSmithKline. The region also has become a breeding ground for start-ups, including software and Internet companies, which Mr. Keating sees as the next generation of corporate banking customers.
To be sure, RBC Centura is looking to grow in a sector that has seen a substantial downturn during the last several quarters since the implosion of the dot-com bubble. However, Mr. Keating is undeterred.
'While this is probably the most severe downturn in the sector, there have been others. We learned a lot over the past 15 years, and we've been able to manage through the ups and downs,' he said.
He described losses in Royal Bank's Canadian technology loan portfolio as 'minimal' and said the Knowledge Based Industries unit is among the most profitable, fastest-growing areas of the bank. However, he said he is glad that Royal Bank is only now getting started here. 'It's probably a good thing that we don't have a (U.S.) portfolio right now,' he said.
But Royal Bank is intent on making its mark in the United States. Since moving from Toronto to Raleigh, N.C., on Aug. 1, Mr. Keating has begun building his new U.S. organization. He has hired one person to work with him in Raleigh and is close to hiring bankers in two of the Southeast's other technology hot spots: Atlanta and the tech corridor in northern Virginia, outside Washington. And he foresees expansion to the Northeast next year, perhaps in conjunction with another bank acquisition in that region.
RBC Centura's new team of tech bankers will work alongside their counterparts at RBC Dain Rauscher Wessels, the Minneapolis investment bank that Royal Bank bought in January. Dain Rauscher is to work on any equity business that comes along. It is itself about to get bigger as it wraps up the acquisition of Boston brokerage Tucker Anthony Sutro this fall.
Using the model perfected north of the border, Mr. Keating's unit plans to use its debt underwriting capabilities to initiate relationships with U.S. tech firms. Beyond that, the parent hopes to supply other services as well, from cash management to global trade finance. The unit is to target information technology, including Internet, networking, and software firms; life sciences, including biotechnology, drug, and online health companies; and media and entertainment firms. Within these groups, RBC Centura is eyeing companies at all stages of growth, from start-ups to public companies. 'We like to refer to it as the 'life cycle' approach,' Mr. Keating said.
Though RBC Centura will be competing with banks like Silicon Valley Bancshares and Comerica's Imperial unit that have offices in the Research Triangle Park area, Michael Granger, an analyst at J.P. Morgan Securities Inc., said that Royal Bank's recent acquisitions here will stand the bank in good stead.
'We believe they will be able to leverage those acquisitions with the marketing and business profitability skills that have worked very well for the company in Canada,' he wrote in a recent research note.
But Mr. Keating said he already has scored his first coup, hiring technology loan specialist Chris Julich away from Imperial Bank's Raleigh office.
Even as Mr. Keating works on opening offices, he and Mr. Julich are off and running in Raleigh, with several million dollars of loans in the pipeline that are expected to close in the next two months, he said.
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