By Robb M. Stewart
Royal Bank of Canada plans to launch a growth fund that will invest up to almost US$725 million in Canadian companies, tapping into the country's efforts to develop defense, energy and other key sectors as part of a pivot away from dependence on the massive U.S. market.
Canada's biggest bank by market value, and one of the largest in North America by assets, will form and invest in a fund that will make direct equity investments in Canadian businesses, President and Chief Executive Dave McKay told shareholders Thursday.
It is an initiative that aims to accelerate economic growth and provide a source of funding in Canada for entrepreneurs that McKay said feel they need foreign capital to build at home, which often means leaving their home market.
"We're planning to bring more of our lending, underwriting and advisory services to help close Canada's funding gap and support the major projects that will build the country's future," McKay said in prepared remarks at the lender's 157th annual shareholders meeting.
McKay said the ambition is to deploy up to 1 billion Canadian dollars, the equivalent of US$722 million, over the coming years to help companies build and scale in Canada.
Alongside providing capital, the bank also is hiring in key roles and expanding customer offerings in segments of national importance, the CEO said. That includes building out Royal Bank's defense sector practice, expanding infrastructure and project finance capabilities, and a focus on Canada's Far North and indigenous partnerships, he said.
Research by the Toronto-based bank shows that Canada needs C$1.8 trillion in capital investment over the next decade to meet its economic potential and finance major projects at home. The majority of that must come from the private sector, McKay said. "Government simply cannot, and should not, fund it alone," he said in his speech.
Prime Minister Mark Carney came to power last year with a goal of reducing U.S. dependency by accelerating domestic infrastructure, expanding energy exports, and building new trade partnerships in Asia and elsewhere. This push is a response to President Trump's tariffs and threats, which have roiled businesses and strained the economy.
Among the federal government's aims is to double the level of exports to non-U.S. markets within a decade, while cutting red tape and helping speed up the building of big oil and gas, mining and other projects. The county recently hit the North Atlantic Treaty Organization's 2% of gross domestic product defense-spending target, and the government plans to join NATO allies in growing that to 5%.
McKay, who joined Royal Bank in 1983 as a co-op student in computer programming before moving into its retail banking arm, described it as a once-in-a-generation moment for Canada. Global investors are signaling their view of Canada as a stable and reliable partner in a volatile world, and foreign direct investment is flowing into the country at levels not seen in almost two decades, he said. At the same time, he said countries around the globe are also diversifying their economies by making investments in infrastructure, streamlining regulations and finding new ways to attract capital.
To succeed, he said Canada needs to make deliberate long-term choices and investments and can't rely on past advantages or legacy strengths alone.
Royal Bank generated about C$20.4 billion in earnings in the last fiscal year, with a return on equity of 16.3%. Underlying earnings rose 13% year-over-year in the first quarter of the new year and its return on equity expanded to 17.6%.
McKay said the bank's wealth-management businesses have increased assets under management to record levels, while the capital markets segment has seen strong revenue growth in global markets and investment banking. In the U.S., the lender's transaction banking-platform has brought on 180 clients and US$23 billion in deposits since launching in 2024 and is on track to reach a US$50 billion medium-term target, he said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
04-09-26 1018ET
