He’ll never want to admit it, but Royal Bank of Canada RY-T chief executive Dave McKay can thank Prime Minister Justin Trudeau, at least in part, for landing Canada’s most coveted bank deal in decades.
Like many of his industry peers, Mr. McKay has been frustrated with Ottawa for slapping an additional, permanent tax on bank and life insurance company profits in the most recent federal budget, something Ottawa has attributed to clawing back some of the financial relief it provided during the COVID-19 pandemic.
While the federal government can taketh away, it can also provide, and seven months later, another pandemic financial policy has proven to be quite helpful to RBC – even if the assistance is unintended.
Because there was so much economic uncertainty when Canada entered its first COVID-19 lockdowns in March, 2020, the federal government and the country’s banking regulator wanted banks to preserve cash as a buffer against any shocks. To enforce this, they prevented the lenders from hiking their dividends, something they often did annually.
There was no way to know it then, but Canada’s banks kept churning out profits, even through multiple lockdowns. That meant all the cash they would have normally put toward dividend hikes piled up on their balance sheets.
RBC wasn’t the only lender that saw its coffers swell, but because it is Canada’s largest bank by profit, it was able to hoard large amounts each quarter. Ultimately, that money was deployed to win the HSBC Canada auction, in the form of a $13.5-billion, all-cash bid.
At the same time, HSBC Canada’s parent, London-based HSBC Holdings PLC, must have seen all that money piling up. So, even though HSBC’s global management team had long said it was committed to Canada, if there was any time to sell, this was it. All that excess cash gave HSBC a greater chance of selling for top dollar – and, crucially, an exit before any potential recession.
The second element of RBC’s winning strategy, and arguably the most important, is an internal one, and it is rooted in something so often overlooked in business: discipline.
Ever since Mr. McKay acquired California-based City National Corp., which specializes in banking for high-net-worth clients, for US$5.4-billion in 2015, just five months into his tenure, there have been endless questions from investors and analysts about what RBC would do next. Often, they centred on growth in the United States.
Mr. McKay has been batting these away for years, suggesting RBC isn’t all that interested in establishing a large retail banking footprint in the U.S. Doing so requires scale, which means it would take one or two large deals to make an impact. To his mind, it just isn’t worth it, considering where RBC is starting from, and because retail banking isn’t as profitable in the U.S. as it is in Canada.
But the questions kept coming, especially as the Big Six banks started accumulated gobs of cash during the pandemic. Then two of RBC’s Canadian rivals, Toronto-Dominion Bank and Bank of Montreal, splurged on deals of their own. Late last year, BMO bought California-based Bank of the West for $17.1-billion, the largest U.S. deal in Canadian banking history, and early this year TD bought First Horizon for US$13.4-billion.
Standing pat is incredibly tough when rivals are writing big cheques. The fear of missing out is real, and investors tend to be myopic, too, so they have a habit of rewarding short-term revenue growth.
RBC, though, never wavered. “Patience is really important,” Mr. McKay said on a conference call with reporters Tuesday.
Royal Bank wasn’t necessarily waiting for this precise opportunity. “We didn’t know [the HSBC Canada sale] was going to happen, or the timing,” he said. But sometimes executives get lucky. And having all that excess capital allowed RBC to splurge on what Mr. McKay called a “more sure-footed transaction” relative to rivals’ deals.
He didn’t go into specifics, but based on its financials, Bank of the West is a fixer-upper for BMO. It is also based in a state where BMO has almost no footprint. First Horizon, meanwhile, may not have even been TD CEO’s first choice for its most recent U.S. retail banking deal, after TD was reported to be in the auction for Bank of the West just a few months prior. HSBC, by contrast, is a very profitable bank, with a 14-per-cent return on equity over the past 12 months, rather healthy by global standards.
What RBC will have to prove now is that it hasn’t overpaid. Just because it had the cash to burn doesn’t mean it needs to use it all.
The bank’s executives are stressing that after making some adjustments, it’s paying about nine times HSBC Canada’s forward earnings, which is below the long-term average trading multiple for Canadian lenders. However, bank deals are also priced off of a multiple of the target’s book value, and at 2.5 times HSBC Canada’s, RBC is paying a healthy premium.
That isn’t necessarily a bad thing. In fact, during Mr. McKay’s tenure, it’s become a bit of a standard. When RBC bought City National, it paid 2.6 times book value, and at the time, almost everyone on Bay Street wondered if the bank overpaid. All those fears have subsided over the past seven years.
What’s become clear is that RBC is willing to pay up for quality. Some bankers chase cheap assets, and may get lucky and find a diamond in the rough. RBC, though, has tried that before, and it resulted in a disastrous acquisition of North Carolina-based Centura Banks Inc. in 2001. Unwinding the deal took a decade, and when RBC ultimately sold the division in 2012, it took a $1.5-billion charge in the process.
“We bought a franchise that had to be transformed and changed – it wasn’t the ‘Tier 1′ franchise,” Mr. McKay said about Centura in a 2015 interview with The Globe and Mail. “Our biggest [lesson] from that failed venture was that you have to buy the highest-quality franchise and build on it.” Sound familiar?
Shorten Your Job Search by Writing a Compelling Value Proposition Letter — Part 1
This is part one of a two-part series on writing a compelling value proposition letter.
There are many activities involved in job searching, such as networking, having an active result-oriented LinkedIn profile and resume, applying to jobs, interviewing, etc., to name a few. Aside from these job search activities, have you considered sending an unsolicited value proposition letter to potential employers?
What I am proposing is a networking technique that you should find comfortable. It is especially effective if you work in a niche industry (e.g., biofuels, pet insurance, medical tourism, hydroponic farming) where there are few players or if you possess a set of highly sought-after skills (e.g., cloud computing, network security, auditing, fluency in multiple languages).
A value proposition letter’s objective is to show how your skills and experience can solve, or at least be part of solving, an employer’s problem(s) (READ: pain points).
“Yes, in next week’s column.” (Answer to the question you are now asking yourself, “Will I be providing examples of a value proposition letter?”)
“Yes, actually, several.” (Answer to, ” Have you ever hired someone who sent you an unsolicited value proposition letter?“)
In order to write a value proposition letter that will resonate with your target companies, begin by doing some research while asking yourself, “What are some of the possible problems they are facing? How can I be of assistance in solving them?” For example, is it your belief that long delivery times are causing an e-commerce site you visited to lose customers to Amazon? As a supply chain analyst with 15 years of experience, how would you address this issue?
Writing a value proposition letter requires using your right brain, where your emotions, intuition, and creativity reside. This is not a fill-in-the-blanks exercise. It is essential that your letter appears human-written, something that is becoming increasingly rare with AI technology becoming more easily available. It is you, not AI technology, who is offering your skills, knowledge, and experience to help an employer address pain points they might be experiencing, according to your best guess.
Something to note; your “pain point guess” guess may point out something the company’s leadership team has never considered. In my above example, it is possible the company’s leadership team may not have thought their long delivery times discourage potential customers from purchasing their products. (Do they look at their cart abandonment rate?)
The most common pain points employers face today are:
- Keeping and expanding market share.
- Enhancing profitability.
- Increasing productivity and efficiency.
- Keeping up with and implementing technological advancements.
- Supply chain issues causing order fulfillment issues.
- Managing employee benefits and payroll costs.
- Recruiting and retaining qualified employees with the right mindset and attitude.
If you have the skills and experience (READ: a proven track record) to address any of the above-mentioned pain points, then most employers will view you as gold.
With all the talk about a recession on the horizon, how can your skills and experience help employers weather the predicted economic slump?
Once you have identified your targeted employer’s potential pain points, you can start crafting your value proposition letter to sell your skills and experience to address those pain points.
There are four elements to a pain letter.
- The employer’s pain point, which is either explicit or you believe exists.
- Persuasively describe how your skills and experience can address the employer’s pain point.
It is essential to show that you understand the company’s goals and values. For instance, not every company is concerned with increasing its market share. Some companies are more focused on becoming environmentally sustainable or being seen as socially conscious. With this understanding, you will be on point explaining, confidently, how your combination of skills, experience, and knowledge can help the company achieve its goals.
Also important is being specific! Use numbers to quantify your achievements and results. Your opinion has no place in a value proposition letter. Likewise, your opinion has no place in your job search. At all times, you need to provide a solid, undeniable reason why you would be a value add to an employer, not your opinions of yourself, which is what most job seekers do. Numbers, the language of business, helps employers see your impact in your previous roles.
TIP: Throughout your job search, you do not want employers struggling to figure out what value you can add to their organization, hence why they should hire you. Therefore, use quantitative numbers throughout your LinkedIn profile, resume, cover letter and when interviewing… and in your value proposition letter.
A compelling value proposition letter convincingly conveys to potential employers how you would be a value add to their company. In my next column, I will provide examples of a value proposition letter, as promised earlier. In the meantime, compile a list of employers you would like to work for (Why not go one step further and find the contact information of those most likely to make hiring decisions, such as managers, directors, and C-suite executives?), their possible pain points, and how your skills and experience can ease their pain.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to firstname.lastname@example.org.
All You Need to Know About Book Translation
If you’re considering translating a book or other written material into another language, it’s important to understand the process behind successful book translation. To translate books is not as simple as switching out words from one language to another; instead, the nuances of tone and meaning must be carefully captured in both languages for the full effect of the original work to be preserved.
What Is a Literary Translator?
A literary translator is a professional translator who has studied the particular language and culture of the source material, as well as the target language. This specialized training helps them to accurately capture both the meaning and spirit of the original work in their translations. They must also be able to read complex texts quickly and recognize subtle nuances in language that may not be immediately obvious.
What Does Book Translation Involve?
The process of book translation starts with a thorough review and analysis of the source material. The translator must identify key concepts, understand the context, and recognize any potential ambiguities in order to provide an accurate translation. It is also important for the translator to have a deep understanding of the target language, including idioms and cultural references.
Once the source text is analyzed, the translator begins translating it into the target language in a way that preserves both meaning and tone of the original work. This process can be time consuming and difficult, as the translator must ensure accuracy while conveying subtle nuances. After completing their translation, the translator then proofreads and edits it to ensure accuracy before delivering the finished product.
What Are the Benefits of Book Translation?
Book translation has many benefits, both for authors and readers. Translating books can help widen an author’s reach, allowing them to connect with a larger audience around the world. Translations can also help readers access texts they would otherwise be unable to, as not all languages have the same wealth of published material.
Book translation can also be an important tool in preserving and sharing cultural heritage. Translating books from one language to another helps keep traditions alive while providing a new audience with access to knowledge and ideas they may not have been able to experience otherwise.
Reason to Hire a Professional Literary Translator
When translating a text, accuracy is paramount. When you hire an experienced professional literary translator, you can rest assured that your text will be translated accurately and with an attention to detail that cannot be achieved by machine translation or even less experienced human translators.
Professional literary translators are familiar with the nuances of language and how certain words, phrases, and expressions can be interpreted differently depending on the context. They will craft each sentence precisely to ensure the intended meaning is accurately conveyed.
Hiring a professional literary translator helps you save time and energy when translating complex texts. Professional translators specialize in executing projects quickly and efficiently, so they are more likely to provide you with a completed draft sooner than if you were to attempt it yourself.
Moreover, they are well-versed in the tools of their trade, so they will be able to quickly identify any potential errors or discrepancies that may arise during the process. This helps to ensure that your project meets deadlines and is delivered on time and of the highest quality.
Preserve the Original Intention and Meaning of the Text
One of the most important benefits of hiring a professional literary translator is that they can preserve your text’s original intention and meaning. Professional translators have an in-depth knowledge of both languages, so they can craft each sentence with precision to preserve the authenticity of your text.
By considering the cultural, linguistic, and literary differences between both languages, they can accurately convey the intended meaning while ensuring that it is relevant and appropriate for its intended audience. This ensures that the translated version of your text preserves its original message and intent.
When you hire a professional literary translator, you can rest assured that the finished product will be of the highest quality. Professional translators are highly trained and have years of experience in the industry, so they know how to deliver high-quality translations that meet your expectations.
In addition, they usually employ a range of quality control measures to guarantee the accuracy, so you can be sure that the translated version of your text is free from mistakes and inconsistencies. This guarantees that the finished product is up to your standards and conveys the intended meaning accurately.
Although hiring a professional literary translator can be expensive, you can save money in the long run. Professional translators offer competitive rates and flexible payment options that make it easier to budget for your project. In addition, their experience and expertise mean they are likely to complete projects faster than if you were to attempt it yourself, so you can save on time and labor costs.
Cater to a Variety of Genres
Professional literary translators are versed in a variety of literary genres, including novels, short stories, plays, and poems. This means that they can accurately translate texts from one language to another no matter what genre it is written in.
This expertise enables them to adjust their translation style according to the book’s genre they are working with, ensuring that the translation is accurate and appropriate for its intended audience. This is especially important when it comes to taking into account subtle differences in language use between different genres.
Book translation can be a great way for authors and publishers to expand their reach while also providing readers with access to knowledge and ideas worldwide. When finding the right translator for your project, be sure to hire a professional who is experienced in their field and understands the industry standards for quality control. With the right translator, your book will be accurately translated and ready to reach a new audience.
With that said, hiring a professional literary translator is an important step toward book translation success and can make all the difference in how your project turns out. By following these tips, you’ll be able to find the right translator for your project and ensure that it is completed accurately and efficiently.
Kevin Carmichael: High interest rates bringing balance after years of housing overspending
Statistics Canada on Jan. 31 said gross domestic product increased 0.1 per cent in November from the previous month, evidence the economy was approaching stall speed at year-end, just as the Bank of Canada predicted it would be.
It was the weakest month-to-month increase since January 2022, and there’s little reason to anticipate a re-acceleration in December. Statistics Canada said preliminary data suggest GDP was unchanged last month, which implies the economy grew at an annual rate of 1.6 per cent in the fourth quarter, according to Bank of Montreal chief economist Douglas Porter.
That would be a slightly faster pace than the 1.3 per cent rate the Bank of Canada predicted in its latest economic outlook, but still considerably slower than the 2.9 per cent rate in the third quarter and the 3.2 per cent rate in the first quarter. The Bank of Canada’s interest rate increases — four percentage points between March and December with an additional quarter-point lift last week — are starting to bite.
“Growth has come to a crawl,” Charles St-Arnaud, chief economist at Alberta Central, said in a note to his clients.
Canada is coming off a long high of housing-led growth. It was fun for a while, especially for those who thought they had purchased a place to live only to discover they are now sitting on fortunes.
Population growth and limited supply were responsible for some of the demand that drove housing prices to rare heights over the past decade, but much of it was caused by ultra-low interest rates and a decision by households to pile up dangerous levels of debt. Now, interest rates are higher than some new homebuyers have ever seen, and the housing bubble is deflating.
One of the main causes of the decline in GDP in November was residential building construction, which dropped 1.8 per cent, the seventh decline in eight months and the biggest since unionized construction workers went on strike in May 2022.
Canada could have used two periods of ultra-low interest rates and extraordinary levels of fiscal stimulus to turn itself into a modern economy. And perhaps it took some steps in that direction, as some of that money will have sloshed into productive enterprises and provided backing for some talented entrepreneurs. But we mostly bought existing homes and condos, enriching the real estate industry, perhaps the economy’s least productive sector.
A notable moment in Canadian economic history occurred in December 2008. As the Great Recession gathered force, and central banks pushed borrowing costs to zero, the “real estate and rental and leasing” industry generated output equivalent to 11.7 per cent of GDP, surpassing the contribution from manufacturing for the first time, according to Statistics Canada data.
The country’s brokers, agents and landlords didn’t look back. Their share of GDP climbed to 14.8 per cent in April 2020, when many other industries were forced to shut down, and central banks had once again dropped interest rates to essentially zero to stave off deflation in the early days of the COVID-19 crisis. (Manufacturing’s share was 8.5 per cent.)
Bank of Canada governor Tiff Macklem told the House finance committee in November that he intends to conduct an analysis of how monetary policy was deployed during the pandemic. The central bank for the first time used quantitative easing (QE), an approach to stimulus that involves creating money to purchase financial assets.
Macklem was one of the most active users among the major central banks, and it’s fair to wonder whether he was too active, given the additional froth that was whipped up in housing markets. Shelter costs were an important contributor to the inflation surge that prompted the most aggressive series of interest rate increases in the Bank of Canada’s history.
Canada’s central bankers dislike taking responsibility for what happens at the micro level in the economy, saying their only job is to keep inflation at around two per cent. That’s true, but the problem with that dodge is that there is now sufficient real-world evidence to suggest the distortions created by zero interest rates should be considered against the desire to achieve a certain inflation target.
In some ways, last year wiped out more than a decade of such distortions. The benchmark interest rate is now back to where it was in 2008, before the Great Recession. And, perhaps as a result, economic gravity is reasserting itself.
Manufacturing will probably never be the economic engine it was a generation ago, but at 9.4 per cent of GDP, it’s still below its pre-pandemic level of around 10 per cent. There’s room to grow, although higher borrowing costs and an economic downturn will make that harder in the short term.
A more positive sign is that a couple of industries that will be key to future growth — and probably geared to structural changes in the economy rather than short-term interest rates — continue to claim a bigger share of the economy.
Companies that provide services related to information technology — think Montreal-based CGI Inc., which builds computer systems for companies and governments — now generate about 5.6 per cent of Canada’s GDP, which is more than oil and gas and the most since Statistics Canada started measuring the industry’s output in 2007, when the percentage was about 4.3 per cent.
At the higher end of what is very loosely described as the innovation economy, companies that provide professional, scientific and technical services generated output worth $136.8 billion in November, the equivalent of 6.6 per cent of Canada’s $2.1-trillion economy and a record.
Combined, IT services and professional and technical services now account for about 12 per cent of the economy. That’s getting close to real estate, which has dropped to 12.9 per cent, the lowest since February 2020, and nearing the 11.4 per cent recorded in early 2008. We’ve almost worked off the excesses of one crisis. There’s still some rebalancing to do.
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