Royal Bank Of Canada Consolidates Lead In Canadian Forex Market

BANKS

TORONTO--Royal Bank of Canada (RBC) has consolidated its position as the top Canadian forex provider, according to Q3 results published last month.

RBC reports foreign exchange trading revenues of CAD75 million ($50 million) for the three months ended July 31, showing a slight rise on 1998's Q3 result of CAD74 million ($49 million).

However, RBC's result was 10 per cent down on the figure reported at the end of Q2 1999 of CAD83 million ($57 million).

David Gibbins, global head of FX at RBC in Toronto, cited slow emerging markets activity, and reduced trading in Asia as the main reasons for the downturn. The Canadian fiscal year starts November 1, so the third quarter runs from May through July.

"Issues surrounding the Federal Open Markets Committee meeting and the Fed looking likely to move on the interest rate front, also worked against us in Q3," adds Gibbins.

On a more positive note, he says that strong results in the North American and European regions, as well as increased activity in the FX options market helped partially offset the decline. He also identifies growing revenues from the bank's Internet FX dealing service.

"The markets have slowed down in August, but overall the business is in good shape", Gibbins says.

Bank of Montreal also posted a slight rise in Q3 FX trading revenue. The bank witnessed a 3 per cent increase in the third quarter to CAD30 million ($20 million), placing it in second place, as the largest forex player behind RBC in the third quarter.

Meanwhile, Canadian Imperial Bank of Commerce (CIBC) reports a rise in total FX revenue (including trading and other FX income) for the period to CAD76 million ($50 million), up from CAD65 million ($43 million) in Q3 1998.

According to Mike Horrocks, global head of FX at CIBC, "a rise in commodity prices, particularly in mining and petroleum, which saw good corporate deal flow," helped improve profits year-on-year. "The bank had a strong quarter in corporate sales," he adds.

However, FX trading, which excludes income from the retail branch network, remained at just CAD7 million ($4.6 million) for Q3, showing little change from 1998's figure, despite the bank's decision to withdraw from its FX operations in Asia (FXW, March 29).

As part of the restructuring at CIBC, Horrocks recently moved to take up a position as head of treasury. CIBC's two treasury divisions--CIBC World Markets and the treasury division of parent bank CIBC -- have recently merged, and Horrocks will now head up the combined operation, with Steve McGirr as head of the debt capital markets group. Horrocks will report to Wayne Fox, vice-chairman of the bank, while McGirr reports to David Kassie, who heads CIBC World Markets.

Horrocks is less than optimistic about the impact of the euro on the FX business. "It has been disappointing," he says. "There has been a lack of interest and we are seeing less volume than dollar/mark trading."

Toronto Dominion Bank (TD), meanwhile, reported an increase of 21 per cent year-on-year for income from foreign exchange portfolios.

TD's year-on-year increase comes after the bank downsized its FX trading activity in London in June (FXW, June 7). The bank exited London-based spot and options trading in the Canadian, Australian and New Zealand dollars. Trading in these currencies was redistributed and is now handled from TD's operations in Toronto and Sydney.

"Year-to-date, we are looking good although we saw a volatility slowdown in the Q3 results," comments Martine Irman, managing director and head of global FX and money markets.

"Our integrated G7 spot and interest rate trading desk has increased by 44 per cent year-to-date," adds Cliff Feehan, managing director of global FX and money markets. Irman is upbeat about the outlook for TD's FX operations and expects a continuation of the growth seen year-to-date.

Conversions were made using a rate of CAD1.5065 against the US dollar for July 31, 1999, CAD1.4560 for April 30, 99 and CAD1.5125 for July 31, 1998.

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