Canadian Banks and Global Competitiveness 9780773564435

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Canadian Banks and Global Competitiveness

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Canadian Banks and Global Competitiveness J A M E S L. D A R R O C H

McGill-Queen's University Press Montreal & Kingston • London • Buffalo

McGill-Queen's University Press 1994 ISBN 0-7735-1138-5 Legal deposit first quarter 1994 Bibliotheque nationale du Quebec

@ Printed in Canada on acid-free paper

This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada. Publication has also been supported by the Canada Council through its block grant program.

Canadian Cataloguing in Publication Data Darroch, James L. (James Lionel), 1951Canadian banks and global competitiveness Includes bibliographical references and index. ISBN 0-7735-1138-5

i. Royal Bank of Canada. 2. Canadian Imperial Bank of Commerce. 3. Bank of Montreal. 4. Bank of Nova Scotia. 5. Banks and banking, Canadian, i. Title. HG2704.D37 1994 332.iVo97i C93-O9O544-X

Typeset in Times 10/12 by Caractera production graphique inc., Quebec City

For my parents, Jim and Bernice, my wife, Brenda, and our son, Daniel

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Contents

Tables and Figures

ix

Acknowledgments

xiii

1 The Strategies of Canadian Multinational Banks 3 2 The Bank of Montreal

29

3 The Bank of Nova Scotia

80

4 The Royal Bank of Canada

121

5 The Canadian Imperial Bank of Commerce 168 6 Financial Performance and Strategic Change 211 7 Changing Markets, Changing Strategies 248 Appendix One

271

Appendix Two 277 Notes

281

Bibliography Index

325

307

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Tables and Figures

TABLES

i.i

North America's 10 Largest Banks in 1991 4

i. 2

Revenue and Expenses as a Percentage of Average Assets 10

4. i

The Growing Branch Network in 1918 127

5.1

CIBC Branch Network, 1901 and 1911

6. i

North America's Largest and Best Banks in 1992 212

6.2

The World's Largest and Best Banks in 1992 212

180

FIGURES

1. i

Financial Services "Products" and Their Interrelationships 12

2. i

Bank of Montreal Asset and Capital Growth 66

2.2

Employee and Branch Growth

2.3

Location of Assets

2.4

Asset Portfolio 70

2.5

Deposit Portfolio 71

69

68

x

Tables and Figures

2.6A

Analysis of ROA 73

2.6s

Analysis of ROA 74

2.7

Other Income 75

2.8

Non-Interest Expense

2.9

Stock-Price Performance 78

3. i

Bank of Nova Scotia Asset and Capital Growth 108

3.2

Employee and Branch Growth

3.3

Location of Assets

3.4

Asset Portfolio

3.5

Deposit Portfolio

3.6A

Analysis of ROA 114

3.63

Analysis of ROA 115

3.7

Other Income

3.8

Non-Interest Expense

3.9

Stock-Price Performance

4. i

Royal Bank of Canada Asset and Capital Growth 151

4.2

Employee and Branch Growth

4.3

Location of Assets

4.4A

Asset Portfolio: 1982-88

155

4.43

Asset Portfolio: 1983-91

156

4.5A

Deposit Portfolio: 1982-88

157

4.58

Deposit Portfolio: 1983-91

158

4.6A

Analysis of ROA 159

4.6fi

Analysis of ROA 160

4-7A

Other Income: 1982-88

162

4.76

Other Income: 1983-91

163

4.8

Non-Interest Expense

76

109

110

in 112

116 117 119

152

153

164

xi

Tables and Figures

4.9

Stock-Price Performance

165

5.1

CIBC Asset and Capital Growth

198

5.2

Employee and Branch Growth

199

5.3

Location of Assets

5.4

Asset Portfolio

5.5

Deposit Portfolio

5.6A

Analysis of ROA 204

5.6s

Analysis of ROA 205

5.7

Other Income

5.8

Non-Interest Expense

5.9

Stock-Price Performance

6.1

Interest and Foreign Exchange Rates

6.2

Asset Growth

6.3A

Capital as a Percentage of Total Assets 218

6.3B

BIS Capital Ratios

6.4

Branch Growth

6.5

Employee Growth

6.6

ABM Growth

6.7

North American Assets as a Percentage of Assets 225

6.8

Canadian Assets as a Percentage of Assets 227

6.9

u.s. Assets as a Percentage of Assets

6.10

Latin American Assets as a Percentage of Assets 230

6.11

European Assets as a Percentage of Assets 231

6.12

Asian Assets as a Percentage of Assets 232

6.13

Return on Assets

200

202 203

207 208 209 212

212

219

221 222

224

235

228

xii

Tables and Figures

6.14

Net Interest Margins 236

6.15

Loan Losses

6.i6A Other Income

238 240

6.i6B Other Income as a Percentage of Total Revenues 241 6.17

Productivity 243

6.i8A High Price as a Percentage of Book Value 244 6. iSB Low Price as a Percentage of Book Value 245

Acknowledgments

Throughout the course of researching and writing this book, I have had the support of many current and former colleagues and friends at the Faculty of Administrative Studies, York University and the School of Business and Economics, Wilfrid Laurier University. Support from my doctoral committee at York, LA. Litvak, D.J. Horvath, and D.E. Brewer kept this work on track at the beginning. My subsequent work with Al Litvak has been both an academic and personal joy that few experience. Thanks, Al. I owe a great debt to Robert D. Cuff for his careful reading and insightful comments over the years. Duncan McDowall was generous in his assistance in clarifying aspects of the Royal. Discussions with Nahum Biger and Richard Wright, McGill University, also helped me to advance my thinking on banking. Especially important were frequent and lively lunch meetings with Dawson Brewer and Sy Friedland which forced me to focus on the flows rather than the stocks. I regret that Sy's untimely death cut short our discussions. Some other York colleagues merit mention. My understanding of the role of information technologies has been greatly advanced by both my current colleague, Ron McClean, and former colleagues, Larry Dickson and Tim Warner. For opening my eyes to the world of entrepreneurship and small business, my thanks go to Rein Peterson. Senior executives in financial services firms, public policy makers, regulators, lawyers, and industry consultants were extremely generous with their time. Space precludes listing all the executives in Toronto and New York who generously gave their time to help me with my research. Their lively insights made this a very enjoyable research project.

xiv Acknowledgments

The librarians at York, the University of Toronto and the Central Reference Library of Toronto made the research task far easier. Without such dedicated people, research would be far more difficult, if not impossible. Helpful comments and support from the people at McGill-Queen's - Don Akenson, Roger Martin, Joan McGilvray, and Philip Cercone have helped me to stay the course. Last but far from least, I benefited from a conscientious and talented copy editor, Victoria Grant, and from my indexer, Kathy Sutherland Huard. Research is not possible without financial support. Support from the Social Sciences and Humanities Research Council during my doctoral years and more recently for my work with LA. Litvak made this book possible. I would also like to thank the Aid to Scholarly Publication Programme of the Social Science Federation of Canada and the Social Sciences and Humanities Research Council, not only for the grant which made publication possible, but for finding reviewers who helped me to improve my manuscript. I am especially indebted to an anonymous reviewer I fondly refer to as "A." Support from the Ontario Centre for Research International Business under director of research Alan M. Rugman was of great assistance in furthering and broadening my work on the activities of the banks in the 19805. Support from friends and family kept me (relatively) sane and happy. My years at York have been gladdened by many friends especially Lynn Beard, Hugues Roy, Louise Clarke, and Betsy Duran. Lastly, I have benefited from the support of my extended family.

Canadian Banks and Global Competitiveness

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CHAPTER ONE

The Strategies of Canadian Multinational Banks

In the increasingly global competitive environment, there has been considerable concern for the competitiveness of Canadian industries. The financial services industry, however, is one that can be said to have competed successfully in international markets.1 Four Canadian banks, the Royal Bank of Canada, the Canadian Imperial Bank of Commerce (CIBC), the Bank of Montreal, and the Bank of Nova Scotia (Scotiabank) rank among the 10 largest in North America, as can be seen in table I. i. Even more importantly, this table shows that these four are recognized by industry insiders to be among the best in both North America and the world. The non-ranking of some familiar American money-centre banks further calls attention to the sound management of the large national Canadian banks. The status of the major Canadian banks in international capital markets may be surprising to some, since it is disproportionate to the size of Canadian financial markets.2 However, the international orientation of the major banks from their foundation served to offset many of the limitations imposed by the Canadian market.3 The competitive strategies that produced these rankings are the subject of this book. The study examines the lengthy history of each bank from the time that it was founded until the passage of the 1992 omnibus financial services legislation to see how its strategies have unfolded in changing environments.4 Consideration of this temporal expanse allows us to see the long-term effects of both strategic decisions and public policy that have strongly influenced strategic thinking in this regulated industry.5 Three of the four banks emerged as industry leaders by the 19205: the Bank of Montreal, the CIBC, and the Royal.6 Scotiabank followed a different strategic route, which was characterized by the bank's historians as "non-establishment."7

4 Canadian Banks and Global Competitiveness Table 1.1 North America's 10 Largest Banks in 1991 Bank

Assets $Mil (U.S.)'

Euromoney 100 Best Ranking2

Citicorp Chemical Banking Royal Bank of Canada BankAmerica NationsBank J.P. Morgan & Co.

216.9 138.9 116.9 115.5 110.3 108.7 108.1 98.2 88.1 81.1

Not Ranked Not Ranked 12 39 81 2 34 Not Ranked 33 71

CIBC

Chase Manhattan Bank of Montreal Scotiabank

Source: 1. Farnsworth, "Canada's Mighty Banks on a March South." 2. Euromoney, "The World's 100 Best Banks: Horses for Courses.'

At least three of the banks that survived and became industry leaders were international from their origins and compelled other domestic rivals to compete on that basis. But, why was this capacity so valued in the market place? To answer this question, we must identify the goals that guided the banks' strategies. In so doing, we must also recognize that it is important to look beyond profit and growth motives. In this regulated industry, the government has always been an important stakeholder whose interests must be considered if the banks' strategic goals are to be understood. The Canadian banking industry has a number of important distinguishing features. Canada has regulated its financial institutions in a specific manner. Regulation was designed to ensure service that would be appropriate for a large trading country with a fragmented population in need of capital inflows to develop its natural resource based economy.8 As a result, the Canadian banks were from their origin involved with the financing of trade - that was their raison d'etre. In order to provide this service, they had no choice but to adopt an international focus and to develop the skills demanded of a multinational bank (MNB). This required the early establishment of operations in New York, London, and often Boston. In this context, the position of Canada as a natural intermediator between Great Britain and the United States should be recognized. The majority of scholars of the MNB have focused on the experience of banks from countries with economic structures that are different from Canada. It would be foolish to attempt to refute the position

5

Strategies of Canadian Multinational Banks

that the primary motivation for internationalization of banks was to follow clients, given the fact that this hypothesis is strongly supported by the experience of British and u.s. banks.9 However, the hypothesis can perhaps be qualified if tested by a study of the relationship between the activities of both multinational enterprises (MNES) and MNBS in international markets. The above raises the question: why are Canadian banks different? The answer can be developed by considering the follower hypothesis in a different light: foreign direct investment (FDI) in banking followed FDI in other sectors. If this is extended, then it would seem logical to assume that MNBS will develop during the eras when countries are net exporters of capital, or at least when there are significant capital outflows. Japan is the current major example of this reality. Yet, as we shall see, a major role of Canadian banks has been to facilitate the inflow of capital. Various national policies would seem to have been created to encourage foreign firms to establish operations behind Canadian tariff barriers. The success of this measure may be seen in the number of foreign controlled firms in Canada. But it also makes us question under what conditions significant capital inflows will result in the international expansion of a host country's banks. The point is not to refute the follower hypothesis, but rather to see what light is shed upon it by the very different experience of the Canadian banks. In this vein, we can well ask why the banks of Great Britain and the United States did not follow their clients into the Canadian market. While there may be many reasons related to profitability or economics, the role of government regulation in encouraging a concentrated and Canadian-owned industry has been critical.10 It is also important to realize that the influx of foreign firms expanded the market segment of MNES for the Canadian banks. This suggests that an analysis of the strategies developed by the banks must take into account the role assigned to the banks by public policy. The continuing role of government has always played a critical role in determining the environment in which banks compete. Banking has always been seen as a strategic sector by Canadian governments, and government regulation, sometimes at an informal level, has created barriers to entry that have resulted in one of the most concentrated banking systems in the world.11 Six clear policy objectives in legislation governing banking can be discerned. 1 The financial sector should be stable, that is provide a safe haven to depositors and investors in order to encourage the inward flow of capital. 2 Federally regulated chartered banks should be among the dominant financial institutions in Canada.

6 Canadian Banks and Global Competitiveness

3 The industry should be Canadian controlled. 4 The industry should be able to facilitate trade. 5 An infrastructure should be developed to assist government financing. 6 An extensive system should provide services to the entire populace. If these observations are correct, then government policy has promoted orderly markets to ensure a stable system. A stable system protects depositors. Public policy has been a major determinant of opportunities, both domestically and internationally.12 The tremendous role of such regulation on the competitive environment cannot be ignored. However, the manner in which specific aspects of a competitive environment ruled by government regulation could create competitive advantages merits reflection.13 Regulation was not only a straight-jacket, but a creator of opportunities that led to the development of institutions with specific skills. In turn, these skills have allowed the major Canadian banks to prosper. COMPETITIVE FORCES GENERIC

AND

STRATEGIES

Prior to a specific analysis of what constitutes strategic management of a bank, it is important to develop a framework for analysing the competitive forces in banking. The well-known model of competitive forces developed by Michael E. Porter has been employed in this study since it has the merit of facilitating a relatively simple, yet quite powerful analysis of industry structure.14 The pressures exerted by buyers, suppliers, substitute products, potential entrants, and rivalry within the industry determine the overall profitability of the industry. In Porter's world, relative bargaining power is the major determinant of who benefits from market transactions. The stronger the power of these forces, the lower the profitability of the industry. The weaker the pressures they exert, the higher the level of profitability and the incentive for others to enter this attractive industry. Essentially, firms can compete in an industry only in two ways. The first is to be the low cost producer in the industry, the second is to be a differentiated producer.15 The low cost producer's cost structure ensures above average profitability at any price in the industry, while the differentiated producer offers a product whose unique qualities provide protection from price competition. Consequently, the firm is able to charge higher prices that compensate for its typically higher cost structure and generally lower market share. The goal is to find a position that protects the firm from the

7

Strategies of Canadian Multinational Banks

competitive forces that drive economic profits to zero in perfectly competitive markets.16 There can be only one low cost producer, but there are a number of differentiated positions possible. While the above may seem simple, it is far from simplistic. The problem facing any firm is to build sustainable competitive advantage. Successful firms, and even not so successful ones, are known for performing certain functions or delivering certain services. Virtually all firms have distinctive competencies. However, not all distinctive competencies are equally valued in the market place. Consequently not all strategies of differentiation are successful. The challenge for any firm is to develop those distinctive competencies that are valued because these are the foundation of its competitive advantage. With this in mind, we must examine how banks seek to develop distinctive competencies to support their strategy. The dynamic nature of the challenge must also be recognized. Since strategies and components of strategies are copiable, constant attention to market positioning is imperative. An important issue to determine is whether the two generic strategies are mutually exclusive. Given the logic of Porter's framework, if a company could combine differentiation with the low cost position, the result would be outstanding financial performance. This may have been the case with IBM in the personal computer (PC) market at one time, or American Express Travel Related Services Division of American Express in the 19805, or with most companies who are rated "excellent" in the popular business press.17 The considerable variations among these lists from time to time may attest to the difficulty of sustaining the combination of the two positions. In the financial services industry, the relationship between the broad product line that can be bundled into a differentiated position and scope economies that underlie this information-based, technology-driven industry makes this an especially important issue. The fundamental economics of the industry and shifting industry definition and market segmentation further complicate analysis. Before the Porter framework can be applied to an industry, however, the industry must be defined. The financial services industry is a knowledge-based industry whose purpose is intermediation and the provision of advisory and other services. The business of banking is to match savers to borrowers and to provide other financial services. These intermediaries market three very different types of products: loans (assets), deposits (liabilities), and fee-based services. The definition of any industry is a critical and complicated issue. It is especially complicated in the case of financial services because of the broad range of options facing savers and borrowers, who may

8

Canadian Banks and Global Competitiveness

not require the services of an intermediary at all but may go instead directly to the market.18 The commodity nature of "money" must be recognized. This is as true for a company that has the alternative of issuing its own bonds or of obtaining a bank loan, or for a home owner who may choose to borrow funds from a myriad of sources, including family, friends, or RRSPS. Disintermediation, that is raising funds directly rather than through intermediaries, serves to cap profits in the industry. Economists can argue that there is a problem of substitutes in all industries, but the degree of similarity among financial products blurs industry boundaries to a greater degree than in other industries. In fact, as we shall see, "disintermediation" was a major challenge facing all banks in the 19805 and is still a threat in the 19905. The importance of substitutes is not limited to the commercial banking sector. An example from retail banking can further demonstrate the importance of "substitutes" not only for theoretical purposes, but for the managerial practice of competitor analysis. In the 19808, American Express was earning considerable profits from their Travel and Entertainment cards. Banks chose to contest this market with credit cards - a very close substitute from the customer's perspective. However, Travel and Entertainment cards are not the same as bank credit cards such as VISA or MasterCard because the two cards generate revenues in different ways. American Express is reliant upon fees, while banks primarily seek to earn interest income, as the name "credit" card suggests. Competitor analysis driven by customer benefit must understand how these two compete for space in the wallet and for transaction use by customers. Predicting competitive moves must commence from an understanding of how these cards make money in different ways. For example, American Express has taken to emphasizing the sound financial management practices promoted by their card and the interest costs associated with bank cards. Bank credit cards, on the other hand, make efforts to attract a greater number of merchants by offering more attractive prices or services, since the revenue stream from merchants is only one source of revenues for banks. The focus on customers is essential for bridging the dynamic linkage between industry and competitor analysis.19 Fortunately, there is an alternative route to industry definition: government regulation. The Bank Act both created a protected sphere and limited the product scope of the federally chartered banks. Consequently, the competitors in the industry can be defined as those holding a charter. Trust companies, which are provincially or federally chartered, did not compete with chartered banks for corporate

9

Strategies of Canadian Multinational Banks

loans,20 yet the trust companies were competitors in some product markets, such as deposits and mortgages. The banking, trust, securities, and insurance industries - the four pillars of the Canadian financial system - were separated and identified historically through their initial core business. For the chartered banks, this meant originally business loans that were primarily short term, and trade financing. However, growth through diversification into related businesses led to competition among rivals from these different industries. Because the charter allowed banks to compete in essentially different businesses, we are forced to analyse banks as multiservice (product) firms competing against multiple rivals from different sectors.21 In Porter's terms, we see how "substitutes" serve to act as a cap on profits, but we should also be aware how regulation affects the distinction between "substitute" and "potential entrant." From a competitor analysis point of view, attractive profits in a product market serve as an incentive for competitors who are formally barred from the market to engineer a close substitute. Financial engineering can make a mockery of formal barriers. However, at the industry level of the blocked entrant, there is still an incentive to end the barriers in order that firms can compete in the most efficient manner possible.22 A SIMPLE

MODEL OF

BANKING

In order to explore the dimensions of strategic bank management, let us build a simple model where we hypothetically consider each bank as a completely stand-alone, self-sufficient unit. In Canada, banking needs would be met by a number of different banks, each serving distinct regions with no capital movement allowed between regions.23 That is, all financial transactions affecting each area would take place within that region. In practice, this corresponds loosely to the linkage between geographic boundaries and regulatory boundaries. The first question that must be considered in this conceptual exercise is how banks make money as intermediaries. We can frame an answer by examining the sample income statement for the Royal Bank of Canada expressed as a percentage return on assets shown in table 1.2. The major source of bank income is "net interest income," which is the "spread" between the rate paid to depositors and that charged to borrowers. A profitable spread is created and maintained through the matching of loans (assets) and deposits (liabilities). Success depends upon the successful marketing of both types of "products." In general, in this conservative industry assets and liabilities will be matched in terms of maturity and other risks will be

io Canadian Banks and Global Competitiveness Table 1.2 Revenue and Expenses as a Percentage of Average Assets The Royal Bank of Canada, 1991 Net interest income Provision for loan losses

3.09% (-47)

Other income

2.62 1.35

Non-interest expenses Income taxes and minority interests Return on assets

3.97 (2.77) 1.20 (.44) .76

constrained at manageable levels. That is, prudential management dictates that assets and liabilities should be roughly matched in terms of sensitivity to movements in interest or foreign exchange rates. However, the value of a deposit is constant at 100 per cent of face value, while the value of a loan can vary with market conditions related to factors such as credit worthiness, as real estate and energy loans have shown. Dynamic repricing on one side of the balance sheet is an important source of both firm and industry volatility, as well as of regulatory concern. As should be apparent, depending upon the attitude to interest rate risk, "mismatching" according to expectations of market movements can generate superior profits and risks.24 In the trade, this is known as "gap management."25 Consequently, the net interest income of two banks is the result of management skill, both in terms of marketing appropriate products and managing in different interest rate environments. Given different positions vis-a-vis gap, the net interest income of two banks should not be directly compared without a consideration of sensitivity to interest rates.26 Acceptance of higher levels of credit risk would also raise interest revenues. In environments where the riskiness of the loan portfolio does not raise interest costs, as when deposits are insured by an independent agency such as the Canadian Deposit Insurance Corporation (CDIC), the net interest income from the riskier portfolio should be higher.27 Holding the level of risk as a constant, profits are maximized by increasing the volume of financial flows. Flows can be generated within one broad sector (e.g., businesses) by targeting mature firms generating positive cash flows and young growing firms in need of

11

Strategies of Canadian Multinational Banks

cash. The bank also matches firms with different cash flow cycles, such as manufacturers of snow skis and those of water skis because clients generally need deposit or cash management service in connection with their credit services. Another scenario is where the bank develops dual specialization in the corporate and household sectors.28 Two different units within the bank would each develop the skills and services needed to service its target segment. If the corporate sector is a net borrower and the household a net lender, then there should be a financial flow captured by the two units. Expansion is limited only by the amount of funds to be recycled. Market segmentation is critical for growth because it serves to maximize financial flows within the region. It is this drive, which is typically for asset volume, that leads regulators to impose restrictions on growth, such as those on the amount of capital needed to support the assets.29 In the case of small local banks, a variety of different interest rates across Canada would be found, even if one parent bank owned several regional banks.30 This would be so because each regional unit would need to balance its own portfolio. The role of additional financial services, or non-interest income, is essential for an understanding of banking strategy. These services may be peripheral ones that are designed to enhance the primary activities of deposit taking and lending, or they may represent profitable growth vectors on their own. One such category is direct financial instruments such as bonds, which are substitutes for indirect financial instruments such as bank loans. Companies can avoid the costs of using intermediaries such as banks by employing investment bankers to take them directly to markets.31 The relationship between direct and indirect financial instruments therefore has a direct bearing on the relative profitability of investment banks versus commercial banks. In order to understand the strategic actions taken by banks, it is also necessary to consider the specific types of parties that banks are trying to intermediate between and the role of additional services in marketing to these groups. Changing market conditions in the 19808, which decreased the profitability of commercial banks, increased the desire of commercial banks to enter the field of direct financial instruments.32 This has been called the movement from "financial intermediation" to "market intermediation." Focus upon capital adequacy to support credit products further served to enhance the attractiveness of fee-based products. Figure i. i illustrates how a bank's strategy and its market scope can be conceptualized by considering three broad ranges of "products" and their inter-relationships:33

12 Canadian Banks and Global Competitiveness D-Deposits (Liability Products)

s-Servz'ces (F-Fee Products)

L-Loans ( Asset Products)

D, «-»• S-D|*

S-F,

L, 233^ and development of client base 90, 258 Nikko Securities 194 non-interest expenses: B of M 72, 77, 242; Scotiabank 113, 242; Royal 161, 242; CIBC 201, 206 North West Company 32 Northern Bank 127 Northland Bank 249

Index

Ontario Bank 42, 173 Organization of Petroleum Exporting Countries (OPEC)14-15, 249 Oriental Bank (India and China) 38 Orion 136, 140, 141-2, 149, 260 Ostry, Sylvia 63, 79 Paterson, R.C. 144 Pearson, Lester 257 Pease, E.L. 123, 124, 126, 255; resignation 128 Pemberton Securities Inc. 145 People's Bank of Halifax 42 PerCor Financial Consultants 64 Personal Security Program (PSP) 89 Plummer, J.H. 174, 176 PNC Financial Corporation 148 Porter, Michael E. 6, 7, 9, 22-5

Private Investment Corporation for Asia 184 Quebec, Province of and B of M 40; Scotiabank 100-1; and Royal Bank 123, 255 Quebec Bank 32, 127 Randall, Harry 91, 93, 95 RBC Gilts 149 Ream, Norman R 125 Regan, M.J. 144 Republic Bank of New York 19

retail banking: B of M and Canadian 67; Scotiabank 101-2, 107; Royal 1445; CIBC 191, 192, 201 Return on Assets (ROA) 247; B of M 67, 72, 234; Scotiabank 113, compared with B of M 120; Royal 9, 161; CIBC 206 Reuber, Grant 56, 61, 79 Richardson. H.A. 87, 88, 255 Richardson, John 30 Richmond, James 126 Ritchie C.E. 93, 95, 97, 106, 118, 237; trip to Far East 99; and Quebec market 100; retirement 120 Ronald, T. Iain 191 Ros, Enrique 125 Rose, John 171 Ross, James 42 Royal Bank Investor Trading Co. 145 Royal Trust Co. 42, 154 Royal Bank of Canada 9; founded as Merchants Bank 122, chartered 123; decision to go public 122-3, 253; domestic agencies 123, 124, 125, 146; foreign agencies 123, 124; domestic operations 123, 125, 126, 127, 132; international operations 123-4, I2 6, 127-8, 136, 139-40, 145, 148, 149; rationalization 143; Canadian branch network 123, 124, 127, 128, 220; and Chase

333 Manhattan Bank 124; and La Banque Jacques Cartier 124; organizational change 124, 1278, 134-6, 137, I39-I, 144, 147-8, 261; rationalization 149; name change to Royal Bank 124, 255; as government agent in Havana 125; acquisitions 124-8, 149; Montreal as head office 126, 255; and Globe Realty 126; personnel/ employees 125, and wwi 126, and wwn 130, women 130, 149; and London County Westminster and Parrs Bank Ltd. 128; role of branch system 132; and Cuban revolution 135; orientation to Toronto 135; and Bank of America (Brazil) 136; and Orion 136, 140, 141-2, 149, 260; and automated banking machines (ABMS) 136, 146, 150, 223; and technology 136-7, 141, 146-7, 148-9; RSVP program 138; Bill 101 138; and Royal Bank of Canada (London) 140; investment banking 1412; importance of Toronto 141, 258, 261; retail banking 144-5; and Dominion Securities, Pemberton Securities Inc., and Neil Mantha 145; Royal Bank Investor Trading Co.

Index

Schindele, Henry 229 145; Royal Bank InvestSchull and Gibson 80, 84, ment Management 145; International Trustee 95, ioi Scotia Plan Loans 89 145; Marcil Trust Co. Scotia Securities 105 145; electronic retail Scotiabank. See Bank of banking networks 146; Nova Scotia and PNC Financial CorScotiaCustody 104 poration 148; and GM ScotiaMcLeod 102 148-9; RBC Gilts 148; ScotiaNote 104 and Kitcat and Aitken ScotiaService 102 149; Employee Share Ownership Program 149; Smith, Donald A. (Lord Strathcona and Mount and public issues 150; Royal) 41, 42 and Royal Trust 154; asset growth 150; capital Smithers, Charles 38 growth 150; service Smithers, C.F. 41 SNAP 149 delivery units 150; Spencer Hall 98 employee growth 150, Canadian operations Spinney, George W. 46 150; asset portfolio 154; Springer, J.A. 124 net income 154, 161; net Standard Trust 249 interest income 154; ROA Statistics Canada 239 161, 247; non-interest Steck, Brian J. 63 expenses 161; stockStephen, George (Baron price performance 161; Mount Stephen) 40, 41 and Lafferty Business Stewart, James 183 Research 166; Eurostock-price performance: money ranking 211; B of M 77, 246; Royal credit rating 237; pro161, 246; TD 246; CIBC ductivity 242; perfor206, 246 mance 234, book value Stone, Henry B. 30 246 Styles, R.G.P. (Geoff) 140, Royal Bank of Canada 144, 147 (London) 140 Sumitomo 211 Royal Bank Investment Sun Life Assurrance 64 Management 145 Sydenham, Lord 34, 35 RSVP program 138 Taylor, Allan R. 140, 141, Samuel Montagu and Com143, 144, 150, 167 pany of London 90, 99 Taylor, Paul 147 San Francisco 43, 95, 148 technology 26; and B of M Sanders, John 147 49, 50-1, 53, 55, 57; Sanwa 211 and Scotiabank 94-5,

334 97, 103-4; and the Royal 136-7, 141, 1467, 148-9; CIBC 181, 185, 191, 192, 195-6 Tokyo: and B of M 49; and Scotiabank 92, 105, 258; and the Royal 148; and CIBC 192 Toronto: and B of M 35, 262; and Scotiabank 86, 254; and Royal Bank 125, 135, 141 Toronto Dominion 211, 239; and Central Guaranty 220; Japanese strategy 229, 233; and performance 234; credit rating 237; service fees 242; productivity 242; book value 246; ROA 247 Torrance, David 40 Torrance, Thomas 30 Touchie, G.J. 91 Towers, Graham F. 128, 129 Traders Bank 126 Treasury Group B of M 55, 57,58

Index

Triarch 184 Union Bank of Australia i?4 Union Bank of Halifax 126, 128 Unit System of Work 87 United Gas Pipe Line Company 58 United Dominions Corporation 184 Utting, Robert A. 140

Vancouver 175, 179, 192 Vanier, Pauline 52 Visa 147 Voorhees, S.H. 123, 127 Wads worth, J. Page R. 185, 186 Walker, C.L. 135 Walker, Byron Edmund 173, 174, 178, 181, 255 Warren, Jack 79 Webster, C.G. 91 Wedd, S. M. 183 White, T.H. 127

Whitley, T.R. 125, 126 wholesale banking 139 William McMaster and Nephews 170 Williams-Taylor, Sir Fredrick 42, 44 Wilson, Morris W. 128, 130, 131, 257 Winnipeg 54, 84, 174, 254, 255 Winnipeg Agreement (1972) 185, 260 Women: and B of M 52, 63; and the Royal 130; and CIBC 174 Wood Gundy 193, 194, 201, 210 World War I 43, 126, 130, 179 World War II 46, 130 World Wildlife 150 Wyatt, Hal E. 140 Yorkshire Guarantee and Securities Corporation 125 Younker, H.R. 96