With economic storm clouds gathering, Canada’s bank regulator is considering stricter capital requirements that some analysts say have the potential to force Royal Bank of Canada, the nation’s biggest lender, to sell equity.
The banks, which make up the largest sector weighting on the S&P/TSX Composite Index, have dropped 4.6% this year, compared with the 4.3% advance in the broader market as concerns rise about a downturn in the country’s housing market and as quarterly results were largely a disappointment.
Some analysts see a scenario in which RBC may need to issue additional equity in order to meet that threshold because it is also seeking to close its C$13.5-billion acquisition of HSBC Canada.“If they raise it by 50 basis points in December and the banks have a couple weeks to get there, then it’s a problem,” National Bank analyst Gabriel Dechaine said by phone. “Royal becomes pretty tight against that minimum.
RBC Chief Financial Officer Nadine Ahn said on an earnings call in late August that the bank expects to keep its ratio above the 12% threshold following the closure of its HSBC Canada deal early next year.
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