Canadian Reporting Season Shows RBC Still Ahead, Others Close Gap

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TORONTO --Royal Bank of Canada (RBC) is again the top Canadian forex bank, according to the latest year end results. The Canadian fiscal year starts November 1.

RBC reports foreign exchange trading revenues of CAD290 million ($197 million) for the year ended October 31, 1999, showing a rise of 9 per cent on 1998’s FX trading revenue of CAD 267 million ($173 million).

The fourth quarter result of CAD55 million ($37 million), however, was down 27 per cent on the figure reported at the end of Q3 1999, of CAD75 million ($50 million).

"We’ve had an extremely good year, in spite of a difficult fourth quarter," says David Gibbins, global head of FX at RBC in Toronto. "The extreme volatility surrounding the yen that affected the market in late September/early October was the main culprit.

"It has been a strong year for us in Europe and North America," he says. "Our innovative internet solution, FX Direct, has been embraced by many of our clients and is developing critical mass and operating efficiency."

RBC has had an eventful year, which started with the Canadian government blocking its merger tie-up with the Bank of Montreal. Royal Bank Financial Group (RBC’s parent) also announced recently that it plans to cut 6,000 jobs over the next two years, in a bid to cut costs.

In June, Gibbins’ co-head of global FX, David Barnett, and Martin Klingsick, regional head of trading, retired after 25 years each with the bank in London.

Richard Pilosof, took on Barnett’s role as head of global markets for Europe and Asia, while Bradley Leek, formerly head of global FX sales at Bankers Trust in New York, was recently hired as head of FX sales for Europe and Asia as part of an FX management re-jig in London.

"We have revamped our FX business since David’s departure, integrated it and made it more global," Gibbins says. "We have set up an FX operating committee with representatives in Asia, North America and Europe, who talk on a weekly basis."

Gibbins is upbeat about RBC’s prospects for the coming year: "We are looking forward to a buoyant year," he says. "I’m pleased with the set-up for 2000. We have our Y2K certification and we are restructuring business around the internet and FX Direct."

Toronto Dominion Bank (TD), meanwhile, reports FX trading income of CAD145 million ($99 million), a 29 per cent increase from 1998’s full year figure of CAD112 ($73 million).

"We have seen positive results this year through consistency in our integrated approach to business," says Martine Irman, managing director and head of global FX and money markets in Toronto. "We have seen healthy increases in dollar bloc trading and on our integrated G7 spot and interest rate trading desk.

"With the introduction of the euro we saw strong results in Q1, and these results remained consistent through the rest of the year with beneficial flows from dollar bloc channels," says Irman. "Although, essentially, the new currency involved a repositioning by large market players."

This June, TD began restructuring its FX trading activity in London, relocating spot and options trading in the Canadian, Australian and New Zealand dollars in the City. TD’s operations in Toronto and Sydney handle these currencies. Andrew Harrison heads up the Sydney operation.

"There has been a fair bit of restructuring of our FX business this year," says Irman. "Our strong FX result reinforces those changes, and we expect to see further growth into next year."

Like RBC, TD also had merger plans blocked by the Canadian authorities.

The bank had planned a tie-up with the Canadian Imperial Bank of Commerce, but the move was halted amid government concerns that the mergers would have reportedly created "excessive concentration in domestic banking".

However, according to TD Securities, the blocking of the mergers had no effect on the bank’s performance.

The Bank of Nova Scotia does not provide a pure FX trading figure, but it reports combined income from trading FX, derivatives and so-called "others" of CAD224 million ($152 million), a 51 per cent increase from 1998’s full year figure of CAD148 million ($96 million).

"This year has been a record in FX for us," says Barry Wainstein, global head of FX at Bank of Nova Scotia.

A spokesman for the Bank of Montreal (BMo), says that BMo no longer breaks out an FX trading figure, after it pulled out of the London forex market and cut its foreign exchange operations in Singapore this year.

BMO subsequently concentrated its trading operations in a 24-hour centre in its existing offices in Chicago.

BMo reports total trading revenue, which includes FX, of CAD295 million ($201 million) for the year ending October 31, 1999 -- a substantial increase on the previous year’s result.

The FX trading revenue component of the trading result was, however, "a small percentage", says the spokesman.

Conversions to US dollars were made using the following closing rates: October 30, 1998 (last trading day of Canadian fiscal year 1998) CAD1.5420, October 29, 1999 (last trading day of Canadian fiscal year 1999) CAD1.4700, July 31, 1999: CAD1.5065

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