RBC Dexia's optimism
Monkey fingers, toe-jam football, joo joo eyeballs and walrus gumboots not unsurprisingly failed to put in an appearance, but when Royal Bank of Canada’ s Global Services, its securities services operation and Luxembourg-based Dexia BIL announced last summer that they were to come together to form a new joint venture, at least one line from the Beatles classic rang true: “I know you, you know me.”
After all, despite regular denials, the two camps had been thrashing out the details of a potential link-up at least two years. Of course, the long-term prospects of any marriage - let alone one brings together North American and continental European business models and cultures - only stand to be enhanced by a prolonged courtship.
And that pre-nuptial due diligence seems to have paid off, with a number of new mandates already announced – though, as Rob Wright, managing director of RBC Dexia Investor Services in London is quick to point out, it been less than a dozen weeks since the expected regulatory approvals were granted and the deal closed. “Those wins are clearly testament that clients remain keen to do business with us, but it is nonetheless still early days, so things needs to be kept in perspective,” he says.
The deal saw the creation of a new entity – RBC Dexia Investor Services – headquartered in London and boasting some $1.8trn (e1.5trn) under custody, making it one of the top 10 global custodians by worldwide assets. With a local presence in 15 markets on four continents, it offers custody, investment administration and transfer agency solutions as well as asset optimisation services for the back, middle and front offices of investment managers globally.
Bringing the two organisations together made a lot of sense. The cultural fit seemed good, both companies having majored on delivering high quality client service, while their proven relationship management skills boded well for the always tricky integration process that lay ahead. As a global custodian RBC was arguably somewhat lightweight in terms of market coverage and had a number of important gaps its armoury, not least transfer agency and distribution support.
These are now plugged, and Dexia also brought to the table valuable expertise in the ever more critical area of hedge fund administration. In addition to a foothold in Belgium and, even more importantly, Luxembourg, Dexia had operational centres in both Hong Kong and Singapore, which alongside RBC’s existing Australian operation - the fruit of its 2001 acquisition of Perpetual Fund Services - gives the merged RBC Dexia a solid presence in the three key Asia-Pacific markets. Needless to say, given that today the custody business is more of a scale play than ever, Dexia’s $500bn in client assets did not go amiss either.
With the deal closed, the integration process is now well and truly under way. On the operations side numerous working groups have been set up wherein representatives from the different parts of the merged business are examining what best practices can be shared and where there is scope for improvements.
“We are looking at areas from data management through to the collection and distribution of pricing sources, even how we can best manage SWIFT functionality across the organisation,” says Wright.
The positive response the merger garnered from clients and the wider market is mirrored inside the new company, adds Wright: “Our staff, whether they came from RBC or Dexia, are embracing the fact that this is a new world for us all and that there may well be better ways to do things going forward - they are very enthused, and have embarked on this adventure with a real sense of optimism.”
The goal is to migrate to a common technology platform to better provide multi-jurisdictional services to clients. “We want to have global applications running in as many of our locations as possible, and to that end work is now underway examining everything from transfer agency to fund administration to custody,” says Wright. “Indeed, we remain committed to continued expansion of our transfer agency capabilities across multiple jurisdictions in Asia-Pacific.”
Other steps include the integration of alternatives and traditional long-only business on a unified platform. “Many of our competitors are using multiple platforms, so that puts us in a strong position when it comes to capitalising on the current upsurge of interest among managers in alternative instruments,” Wright adds. “In fact, that has already proved a distinct advantage for us in recent weeks. So all in all, we are feeling very optimistic about the future.”