Canada's best investment bank 2019: RBC Capital Markets
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Canada's best investment bank 2019: RBC Capital Markets

Awards for Excellence 2019

Canada’s investment banking franchises have had a challenging environment to deal with in 2018 and 2019. But RBC Capital Markets has weathered the situation well and is Canada’s best investment bank.

Market activity has been down, including in the energy sector, which typically accounts for about a third of Canadian investment banking business. This is not a reflection of commodity prices – oil, for example, has improved – but rather regulatory and other challenges, such as delays in getting pipelines built.

At the same time, the trend towards more global allocation approaches on the investor side has meant that Canadian stories have had to fight harder to be compelling.

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Derek Neldner

But RBC has continued its journey from a Canadian regional capital markets business to one that is increasingly global. For the period under review, RBC’s investment bank revenues rose 4% to C$8.5 billion ($6.5 billion), more than double its closest rival in that area. And Derek Neldner, who has been global head of investment banking since last year, is pushing the unit to emulate how its clients are dealing with the wider world.

“We are making sure that we are facing our clients from a global perspective,” says Neldner.

That cuts across industry groups. The bank has appointed global heads in key sectors, like mining and technology, but has also reorganized asset classes on global lines, appointing new global co-heads of equities, for example.

The moves are a natural development of what has always been the differentiator for RBC versus its Canadian peers – its access to global markets. On the M&A side there was no better example than the sole adviser mandate in late 2018 for Kraft Heinz, which was selling its Canadian cheese business to Parmalat of Italy in a C$1.6 billion deal.

“We were acting for a US company selling a Canadian business to a European buyer – our platform brings unique expertise to execute a transaction like this,” says Neldner.

In debt capital markets, the bank continues to top the rankings for Canadian deals as well as for taking Canadian borrowers into the foreign currency debt markets.

Examples of the latter include a hybrid deal for Enbridge in the US, where RBC was the only Canadian firm to sit alongside US banks on the transaction. The flipside has been just as busy, with the bank continuing to lead the maple market, including deals for Heathrow Airport, Bank of America and Wells Fargo.

The scope of the bank’s asset-class expertise also sets it apart. A deal for First Capital Realty, which was to monetize a stake held by Gazit, involved a public offering of about $550 million of instalment receipts and included a concurrent buyback by First Capital of part of the block, for which RBC provided a bridge loan.

Sustainability has been a focus during the awards period, with the bank forming a dedicated sustainable finance group in its capital markets franchise in January. Developing that further will be a priority for the year ahead.

For Neldner, despite tricky markets, the intention is to pursue growth. “We are continuing to hire across the platform, in line with the theme of the globalization of the business,” he says.

The bank has formed a convergence group that spends its time looking at cross-sector convergence, such as the impact of technology on consumer or industrial businesses.

Coupling that with its cross-border reach will put RBC Capital Markets in an even stronger position to fight off its rivals.

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