What’s Next for Royal Bank of Canada?

RBC sells Jamaican division at a $60 million loss.

| More on:

On January 29, Royal Bank of Canada (TSX:RY)(NYSE:RY) conceded defeat in the island nation of Jamaica. RBC announced that it would be selling RBC Jamaica and subsidiary RBTT Securities to competitor Sagicor Group for $97 million. The deal includes 13 branches, 42 ATMs and 550 staff members, as well as $56 billion in assets, 8,000 loans and 120,000 clients.

The expansion into Jamaica was difficult for RBC, which only achieved a 9% loan market share. To compare, NCB Jamaica and Scotiabank (TSX: BNS)(NYSE: BNS) make up a combined loan market share of 75%.

This sale comes with a high price tag for RBC, which is expected to take a loss of $60 million for its Jamaican endeavors. The losses are mainly attributed to “an estimated write down for the proportionate share of RBC Jamaica goodwill and other intangibles”. There is also the undisclosed costs it incurred restructuring the newly acquired company.

RBC originally purchased RBTT Financial Group in 2008 at a price of US$2.2 billion; this expansion was supposed to complement its existing presence in the Caribbean.

The future for RBC in the Caribbean

Despite the set-back RBC has stated that it remains committed to the Caribbean, where it has over 100 years of history, and won’t be “cutting and running any time soon”. Its focus will shift to countries with better market share in place — that is, countries that are less affected by drops in tourism and are more resource-based.

Before this sell-off, RBC had 1 million clients and 116 branches spread over 19 countries and territories in the Caribbean. While the company claims that it has “no plans for further divestitures”, there have been minor layoffs in Barbados, Bahamas and Trinidad and Tobago.

Foolish bottom line

For a region that still has not fully recovered from the 2008 crash, RBC may just be the first of many to experience pain in the Caribbean. Even CIBC (TSX:CM)(NYSE:CM) announced that it would be restructuring operations across the 17 islands it operates in, looking for a 10% reduction in staff.

In the long run, this retreat by RBC could be an opportunity to strengthen its remaining Caribbean assets, and offset the $60 million that went up in smoke in Jamaica.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway does not own any shares in the companies mentioned.

More on Investing

Gold bars
Metals and Mining Stocks

Here’s a Precious Metals Stock With Less Risk

Wheaton is well positioned to form a small part of a much

Read more »

Natural gas prices are rising, making energy companies a good investment.
Energy Stocks

Bonterra Energy Stock Has Doubled: Is There More Upside in 2022?

It's been one of the best-performing TSX small-cap energy stocks in 2022, yet shares are cheap today.

Read more »

Early retirement handwritten in a note
Stocks for Beginners

How This Stock Market Selloff Can Help You Retire Early

The ongoing market crash can massively enhance your potential long-term profits to let you plan your early retirement.

Read more »

Question marks in a pile
Tech Stocks

Should You Finally Buy BlackBerry (TSX:BB)?

Is it time to finally buy BlackBerry?

Read more »

Community homes
Dividend Stocks

Canada’s House Prices Cool: 1 REIT to Buy the Dip

Canada’s house prices are cooling. Should you be concerned about falling house prices or use the dip to buy a…

Read more »

grow dividends
Tech Stocks

3 Top TSX Growth Stocks to Buy for Less Than $10

These high-growth TSX stocks are trading less than $10 and have strong potential to beat the broader markets in the…

Read more »

Top view of mixed race business team sitting at the table at loft office and working. Woman manager brings the document
Bank Stocks

Top 2 Stocks for Beginners in 2022

Bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) are top picks for 2022.

Read more »

protect, safe, trust
Dividend Stocks

Market Selloff: 2 Safe-Haven Dividend Stocks to Limit Your Losses

Instead of worrying about the ongoing market selloff, investors should act now and add some safe dividend stocks to their…

Read more »