Banking & Finance

RBC Files to Raise Up to $25 Billion in Debt Offering, Growing the Capital Base

Seeing a U.S., Canadian or European bank file to raise cash in a debt offering is generally nothing unusual. But when a bank files for a debt offering this large, it stands out a bit like a wart on a nose. The Royal Bank of Canada (NYSE: RY) has just filed to raise up to $25 billion in a debt offering.

Today’s SEC filing is for senior debt securities and subordinated debt securities. Its “use of proceeds” section states that the capital will be added to its general funds and is to be used for general banking purposes and to enlarge its capital base. What investors need to consider here about the size of this amount of capital is that it rivals the largest bank TARP bailout funds received by any one too big to fail bank (see below).

Big banks tend to have an idea of when interest rates are good or bad for borrowing, and it would seem as though the giant Canadian bank has decided it better get the cheap capital while it can. As we have noted, the 10-year Treasury note has seen its yield rise more than one full percentage point in just over 60 days now. We might even wonder if this is new capital for a new line of business, or even for an acquisition.

RBC shares closed down 0.4% at $58.23 on Wednesday and its 52-week trading range is $49.19 to $64.08. The bank also pays a dividend yield to US investors of close to 4.2%. Yahoo! Finance counts its current market cap at $84.1 billion.

FULL RBC F-3 FILING

Here is a snippet from our May 10, 2013 TARP Scorecard:

The Capital Purchase Program was the largest of the TARP programs, paying out $250.46 billion to 707 financial institutions. The total amount repaid so far comes to $270.81 billion. Bank of America Corp. (NYSE: BAC) took TARP funds of $45 billion and fully repaid the funds in early 2010. Citigroup Inc. (NYSE: C) and Wells Fargo & Co. (NYSE: WFC) paid back TARP loans of $20 billion and $25 billion, respectively, in early 2010 as well. J.P. Morgan Chase & Co. (NYSE: JPM) repaid $25 billion in the summer of 2009, and Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS) repaid $10 billion each at the same time.

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