Royal Bank CEO Gord Nixon to retire next August

Royal Bank of Canada president and CEO Gordon Nixon announced Thursday that he will retire on Aug. 1, 2014 after 13 years as head of Canada's largest bank.

Bank's assets quadrupled under Nixon's leadership

Gordon Nixon explains why it’s time to go and why banking is thriving in Canada 8:28

Royal Bank will bid its longtime CEO farewell next summer as Canada's largest bank charts the path for its future amid a prolonged period of record-low interest rates.

Chief executive officer Gord Nixon intends to retire effective Aug. 1, 2014, after 13 years as president and chief executive, the bank said Thursday while reporting its fourth-quarter profit was up 11 per cent from a year ago.

"I'm very proud of what we have accomplished but feel it is a great time to look to the future and build for the longer term," Nixon told analysts on the bank's conference call.

"When we presented our five-year strategy to the board this summer it was clear to me that someone else should take the lead as they would ultimately have the accountability for its performance."

Internal replacement

RBC said Nixon will be replaced by Dave McKay, the group head of personal and commercial banking. As part of a transition plan, McKay will be appointed president at the bank's annual meeting on Feb. 26, 2014 and then officially takeover as chief executive on Aug. 1, 2014.

Nixon is the third chief executive at a big Canadian bank to announce his departure this year.

Scotiabank's Rick Waugh retired from the chief executive job last month, while TD Bank chief executive Ed Clark announced plans to step down on Nov. 1, 2014.

Nixon, 56, said he had thought "long and hard" about succession plans at the bank, where he has held the top job for 13 years.

"I could have stayed another year or two longer than August. I think I would be more in the role, rather than being the right person for the role.  Dave McKay’s now 50. You want him to have a good 10 year run – if it lasts that long who knows?" he said in an interview with CBC's Lang & O'Leary Exchange.

Royal Bank's fourth quarter results were buoyed by its capital markets division, while other areas of the bank faced significant pressure, including its insurance operations and wealth management division.

“I think one of the interesting things about the Canadian banks these days is we all have different strategies and I think that’s a good thing," Nixon told CBC.

"From RBC’s perspective, we’ve built this diversified bank that has five businesses – all of those businesses are performing well and I think that diversification effect is a real value to the shareholder."

Profit higher

Royal Bank said net income rose to $2.12 billion, equal to $1.40 per share in the quarter ended Oct. 31, and an increase from $1.91 billion or $1.25 per share a year ago.

The results beat analyst expectations with cash earnings per share coming in at $1.42, four cents higher than the average analyst estimate compiled by Thomson Reuters.

RBC's main Canadian banking arm reported $1.08 billion of net income, an increase of five per cent or $47 million from a year ago.

The bank's capital markets division was one of the best performing divisions, with net income rising 15 per cent to $472 million from $410 million.

"While regulatory changes and prolonged low interest rates certainly have posed and will pose challenges, we also see great opportunities that are aligned with our view of global trends and build on our strengths," Nixon said.

"We're committed to delivering the right strategy, business mix, culture and people to drive continued growth and take advantage of these opportunities."

However, Royal Bank faced turbulence in some of its other key divisions.

Barclays analyst John Aiken said it "initially looks like a pretty good quarter but ... as we chip away at the results, they begin to lose some of their lustre."

In a note to investors, he pointed to both the wealth management and retail banking divisions as performing weaker than he expected.

In wealth management, net income was relatively flat at $205 million from $207 million a year ago.

Profits at RBC Insurance were sharply lower, falling 45 per cent, as the bank took a pre-announced charge of $160 million tied to changes in how the federal government taxes individual life insurance policies.

For the full year, Royal Bank reported net income grew 12 per cent to $8.43 billion from $7.54 billion in fiscal 2012. Diluted earnings per share was $5.54, up 61 cents from $4.93 per share.

Return on equity for 2013 was 19.4 per cent, up from 19.3 per cent last year.

With files from CBC News


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