RBC, City National off to friendly start ahead of $5.4-billion takeover

BARRIE MCKENNA

LOS ANGELES — The Globe and Mail

Published Monday, May. 25 2015, 4:18 PM EDT

Last updated Monday, May. 25 2015, 6:02 PM EDT

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Royal Bank of Canada won’t complete its $5.4-billion (U.S.) purchase of Los Angeles-based City National Bank for months, but the two banks are already getting a jump on doing business together.

City National chief executive officer Russell Goldsmith got a call earlier this month from a long-time customer who wanted speedy approval of a loan worth hundreds of millions of dollars to do an acquisition.

“The client knew it was an amount of money beyond what we would normally lend,” the 65-year-old Harvard-educated lawyer said in an interview.

“But he was familiar with RBC, knew about the merger and asked whether RBC could help get this done.”

Working closely with Blair Fleming, head of RBC’s U.S. capital markets unit, the two banks signed off on the loan within 72 hours.

“It’s typical of what we do,” explained Mr. Goldsmith, whose grandfather co-founded City National in 1954 and whose father, Bram, is chairman emeritus. “We have a relationship [with the client]. …We already had the financial information. So we could do what we needed to do. On top of it, having RBC Capital Markets come into it meant we could do it with greater scale.”

City National shareholders are slated to vote Wednesday on RBC’s takeover, and Mr. Goldsmith is confident the deal will get the go-ahead. “The combination is going to create a lot of value for the clients and shareholders of both banks,” he insisted during a wide-ranging interview – his first with Canadian media since the takeover announcement.

And yet City National, whose roots are in the Hollywood entertainment business, is a bank quite unlike buttoned-down RBC. It specializes in what Mr. Goldsmith calls “high-touch” banking. For significant clients – typically those with more than $5-million in assets – that can mean fast-tracking loans or delivering large amounts of cash, wherever and whenever customers need it.

City National is less of a retail bank than a bank for entrepreneurs and high-net-worth individuals, offering its clients in key U.S. cities a suite of services ranging from wealth management to private and commercial banking. The bank, which has assets of $32-billion (U.S.), is organized around a clutch of niche industries including entertainment, real estate, law firms, health care and high technology.

The bank cemented its reputation for uncommon customer care in 1963 when it opened its vaults on a weekend to get $240,000 (U.S.) in ransom cash so Frank Sinatra could free his son from kidnappers. It’s a story that most bank employees know and still recount five decades later – a powerful reminder of the bank’s “client-centric, responsive” nature, according to Mr. Goldsmith.

Building on City National’s Hollywood legacy, the two banks have plans to create the “premier entertainment bank in the English-speaking world,” with a presence in Toronto, Montreal, Vancouver and possibly in Britain, where RBC already operates, to go with its existing operations in key U.S. entertainment centres, Mr. Goldsmith said.

City National is often called the “bank of the stars” because of its high-profile clientele, including TV producer Jerry Bruckheimer and actor Michael J. Fox. Its entertainment business is also vertically integrated, covering bridge loans for movies and bankrolling Broadway productions.

As with the unidentified client who was able to go ahead with his acquisition, City National’s clients will soon have access to RBC’s substantial financial heft. In turn, existing RBC clients who want to bank in the U.S. cities where City National operates “will be able to do that,” said Mr. Goldsmith, who will head up the combined City National and RBC wealth management business in the U.S. and has agreed to stay on the job for at least three years after the takeover closes later this year.

“Often we see clients in our entertainment companies doing productions in Toronto or Vancouver,” Mr. Goldsmith said. “[Over the next three years] we will have figured out a way for them to pretty seamlessly do their banking with RBC in Canada.”

The merger is about marrying the two banks’ strengths, creating broader horizons for RBC’s U.S. operations, according to Mr. Goldsmith. He pointed out City National will be able to offer RBC’s 340,000 U.S. wealth-management clients traditional banking services, such as mortgages, credit cards and cash management.

“We’ll offer bank capabilities, selectively, to the client base in their wealth management business and capital markets business,” he said. “We’ve already had a few instances where we’ve done things together.”

City National has 75 branches and is a dominant presence in Southern California, with high-profile street-front locations across the region and its headquarters located in a prominent tower in downtown Los Angeles.

But during a recent visit to a branch in bustling West L.A., located on the ground floor of a 20-storey office tower, just one teller is on duty, talking to a single client. The rest of the large branch is unoccupied.

“It’s an access point,” Mr. Goldsmith explained. “People want to know that the bank is there. There is a psychological dimension, having your sign as a billboard.”

City National’s bankers are typically mobile, using the branches as an occasional base, a place for meetings and to open up new accounts. “Most of what happens in our bank happens upstairs,” Mr. Goldsmith said.

The bank is organized around industries to better serve clients, added Mr. Goldsmith, who worked as an entertainment lawyer and a movie executive before joining the bank.

“They are matched up with bankers who have expertise in their particular industry or business,” he said. “If you’re talking about a bridge loan for an apartment building, it’s not the first or second deal a banker has done. It’s the hundredth deal they’ve done.”

Monday, May 25, 2015