Three of most senior executives leaving after bank performs poorly over past year
By SINCLAIR STEWART
Friday, September 10, 2004 – Page B1
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Royal Bank of Canada has poached Barbara Stymiest from the Toronto Stock Exchange and parted ways with three of its most senior executives as part of a massive shakeup of its front office and an overhaul of its organizational structure.
The moves are part of a radical effort to strip away excess layers of personnel, streamline the bank’s operations, and turn it into a more nimble institution. Gordon Nixon, RBC’s CEO, came to view the bank’s current structure as too bloated and unwieldy for the relatively small size of the Canadian market, and expects these new initiatives will provide it with several millions of dollars in cost-savings.
The country’s largest bank, which has performed poorly over the past year amid persistent problems with its U.S. operations, yesterday announced the simultaneous retirements of three vice-chairmen: chief financial officer Peter Currie, retail banking boss Jim Rager, and chief risk officer Suzanne Labarge.
Ms. Stymiest, who has served as chief executive officer of TSX Group Inc. for five years and presided over its transformation into a publicly traded company, will join RBC in November in the newly minted role of chief operating officer, where she will be in charge of strategic development.
As part of the unprecedented makeover, RBC has reshuffled its corporate structure into four business units, divided mainly along geographic lines: a Canadian consumer division, a U.S. consumer division, an international investment banking division, and an operations and technology division.
“Gord Nixon wanted to put his stamp on the organization,” said David Moorcroft, a spokesman for the bank. “He inherited the structure, he inherited the management team, and he’s been running the [bank] for three years. Now he wants to put his structure in place, he wants to put his management team in place, to ensure the organization remains . . . an industry leader. It’s no secret about what the challenges have been, particularly in the U.S.”
RBC was once regarded as the bank that couldn’t miss, a powerful financial institution that easily outstripped its peers in both size and earnings potential. But in the past year, that consistency has evaporated. The bank has been plagued by problems with its U.S. operations, from glitches in its mortgage business to weaker-than-expected results from its RBC Centura retail outfit. RBC has spent more than $8-billion on acquisitions in the United States in the past four years, yet these businesses combined for a loss of $20-million in the first quarter of 2004.
Mr. Nixon said last month the bank is determined to improve its sagging U.S. fortunes, and insisted it was making progress with its efforts.
But impatient analysts are beginning to question the bank’s strategy south of the border, while investors have soured on the stock. RBC’s shares, which closed yesterday at $59.80, have dropped nearly 4 per cent since the beginning of this year, and have gained a measly 23 cents in the past 12 months — easily the worst performing of the Big Six Canadian banks.
The depressed stock price has also severely limited RBC’s ability to outbid its rivals in the event the federal government allows bank mergers.
Last May, after an internal survey of senior management, Mr. Nixon realized he had to take action to refocus the bank and improve its structure.
He has been working on the restructuring effort for the past six weeks, and personally recruited Ms. Stymiest during a meeting at the TSX head offices a few weeks ago.
Mr. Nixon scheduled the visit on the pretext of discussing the relationship between RBC and the exchange, and then asked Ms. Stymiest if she would join the bank as COO.
Ms. Stymiest, 48, said she was “very excited” about the prospect of working with Mr. Nixon and assuming a new set of challenges.
“It’s certainly with mixed emotions that I leave this organization,” she said in an interview yesterday evening. “It has been the best five years of my career.”
Ms. Stymiest is a former executive vice-president and chief financial officer at what is now investment bank BMO Nesbitt Burns, which she left in 1999 to join the exchange.
She resigned late yesterday after a 20-minute emergency meeting with the TSX’s board of directors. A variety of RBC’s corporate functions, including risk management and finance reporting, will now report to her.
Jim Westlake, who formerly headed RBC’s insurance division, will now be responsible for the bank’s Canadian consumer business, which includes retail banking, investments, and insurance.
Peter Armenio, the head of the bank’s wealth management division, will become head of the U.S. consumer division, and Chuck Winograd will remain in charge of RBC’s global investment bank.
Bankwatch 