CEO Spotlight: Insights from Dave McKay at #FutureFI2020

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At RBC Capital Market’s virtual Financial Institutions Conference on March 10th, in a session moderated by Derek Nelder, CEO and Group Head of RBC Capital Markets, Dave McKay, RBC’s President and Chief Executive Officer, shared his insights on the issues and trends that will shape the banking sector in 2020.

Market Volatility and COVID-19: a time to reassess priorities

The cautious and prudent measures taken to mitigate COVID-19 so far are appropriate. Still, they are having an economic impact, with the best-case scenario a short-term material hit, followed by a V-shaped or U-shaped recovery. The worst case is prolonged disruption with significant damage to the economy.

The recent reduction leaves the banking sector in an unprecedented low interest rate environment. Yet rate cuts alone are not sufficient to address the disruption to corporate and consumer cash flows – this will require global coordination on targeted, effective monetary and fiscal stimuli.

Negative interest rates would cause difficulties in the banking industry: it is difficult to maintain an investment profile in those conditions, and it is questionable whether they have been effective in the European experiment.

What does this mean for the Credit Cycle?

Before COVID-19, we were in the later stages of an economic cycle. But with low rates, strong employment, good cash flows, solid capital ratios and modest 2% growth, this was a position of strength, well-positioned for a downturn.

COVID-19 has accelerated the challenges faced by several sectors, particularly energy, transportation, entertainment and hospitality. We have policy levers to apply, but their deployment is an issue of duration and timing.

Technology and value creation

Advancements in technology provide an exciting, quantum change for the banking industry, presenting the opportunity to differentiate RBC’s strategy in terms of capabilities and services.

Three years ago, we embarked on a business and cultural transformation, redefined ourselves more broadly as a B2C and B2B services company. The immediate future is bionic: it’s about marrying technology with great human talent in unprecedented ways to meet customer needs. That combination is the secret sauce for value creation across the entire RBC business.

Evolution of the competitive landscape

Starting with the FAANGs, digital companies are expanding their value proposition into financial platforms. The strenuous regulatory environment and capital requirements prevent them from becoming ‘true’ banks, but they are targeting parts of our value chain, such as payments.

In redefining ourselves as a technology-driven B2C services company, RBC is ready to serve customers in the multi-channel, digital future. Scale is vital, and we use this to harness the power of AI machine learning and 5G, turning data into insight, knowledge and value – differentiating us in the banking landscape.

ESG

RBC is leading the discussion on achieving the right balance between economic growth, climate change and broader ESG.

We’re only as strong as the communities within which we operate, but can live our purpose while delivering differentiated shareholder value and total return.

The journey to a lower carbon economy must be taken in a measured way. We need a plan which recognizes that achieving ambitious change requires a stable economy as well as a stable energy price. Undermining the stability of energy undermines our ability to make this critical transition.

Published March 23, 2020

RBC Capital Markets LLC


COVID-19Credit CycleESGFinancial InstitutionsTechnology

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