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Royal Bank Of Canada Pulls Out Of Caribbean Wealth Market

TORONTO, Ontario, CMC – The Royal Bank of Canada (RBC) has decided to exit its wealth management business in the Caribbean, resulting in hundreds of layoffs, the Canadian Broadcasting Corporation (CBC) has reported.

It said that the Caribbean move, which follows the sale of its Jamaican operations earlier this year at a loss, will affect international wealth management teams in Toronto, Montreal and the United States, and result in an undetermined number of job losses.

“While, regrettably, there will be some job losses, it would be premature at this stage to estimate the number of employees that will be impacted, as we are currently considering a number of strategic options for these businesses,” said RBC spokeswoman, Claire Holland, in a statement.

She said these efforts will help the bank focus on serving high net worth and ultra-high net worth clients in key areas for expansion, including Canada, the US, the British Isles and Asia.

Craig Fehr, an analyst with Edward Jones in St. Louis, Missouri, said RBC’s action may be another sign that Canadian banks are cutting their losses in the region and cleaning house.

“What we’re seeing is the banks are doing a thorough evaluation of their business mix and figuring out what makes sense long term and what is probably best left in the hands of someone else,” he said.

The move by RBC follows a similar one announced earlier this month by Scotiabank, which is planning to cut 1,500 jobs – about two-thirds of them in Canada.

While none of its domestic branches is slated for closure, Scotiabank said its international banking arm will shut 120 of its foreign branches, including some in Mexico and the Caribbean region.

CBC said that Canadian Imperial Bank of Commerce (CIBC), which has maintained a presence in the Caribbean since the 1920s, said in September that it planned to focus on managing expenses amid challenges in the region.

Fehr said Canadian banks are taking the prudent step of reorganizing their businesses, as the sector prepares for lower profitability.

“I think we’re moving into the next phase of the economic cycle — particularly domestically — where Canadian consumers will probably demand less of personal loans and certainly mortgages,” he said.

CBC said the banks may also be reorganizing ahead of the likely possibility of higher interest rates coming from the Bank of Canada sometime in 2015.

It said the central bank’s key short-term interest rate has been at one percent since September 2010, making it relatively inexpensive for bank customers to borrow money to make major purchases such as real estate and vehicles.

Like several other major Canadian banks, CBC said RBC is undergoing a change in upper management after the retirement of its long-time chief executive.

RBC’s pullout from the Caribbean international wealth management business follows this year’s sale of its Jamaican banking division, at a loss.

Despite that, the bank had a profit of nearly CAN$2.4 billion (One Canadian dollar=US$0.89 cents) in the quarter ended July 31, including a record CAN$285 million at wealth management, up 22 percent from a year earlier. The bank’s fourth-quarter and fiscal 2014 annual results will be issued December 3.

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