The strategy: The Royal Bank of Canada (RBC) plans to grow its US banking operations by acquiring highly sought-after wealth management firms, per Private Banker International. According to CEO Dave McKay, the bank wants advisers who can attract new clients as well as firms that bring in sweep deposits, which will strengthen RBC’s funding base.

The details: The goal is to support global clients, especially companies expanding into Asian markets, with services like treasury management and lending. As part of this strategy, RBC is evaluating acquisitions of various sizes  but has not yet disclosed any targets.

Firms with a healthy supply of sweep deposits could prove especially attractive to the big Canadian bank due to their revenue potential—especially as economic uncertainty and competitive interest rates push up costs of other deposits.

Our take: There’s a trend of foreign banks and fintechs considering acquisitions to bolster their US presence. But RBC’s acquisition is targeted for growth, while most of the others are looking for US banking licenses.

With this strategy, RBC intends to build, scale, and deepen client relationships quickly, leveraging existing capital strength. With its balance sheet, once it identifies the correct targets, it will make formidable offers that will be tough to outbid. 

But because the US wealth market is very competitive, RBC must prioritize building its US brand recognition to bolster its chance of post-acquisition success.