Royal Bank of Canada RY-T is parting ways with its chief administrative and strategy officer and rejigging its executive team, a shake-up that will broaden the role of its chief legal officer.
Christoph Knoess, RBC’s CAO, is leaving after four years, according to an internal memo obtained Wednesday by The Globe and Mail. Maria Douvas, the bank’s chief legal officer, will add CAO role to her portfolio. Mr. Knoess and Ms. Douvas are both based in New York.
RBC is at a critical juncture in two of its key growth businesses. The lender is acquiring HSBC Bank Canada later this month, the largest-ever Canadian deal in domestic banking, and will need to trim costs as it brings over a large team of employees. At the same time, RBC is overhauling its strategy in the U.S. to address headwinds in its Los Angeles-based City National Bank.
RBC plans cost cutting to turn around struggling City National Bank
Mr. Knoess, a former McKinsey consultant in digital, technology and organizational agility, joined RBC in 2019 and was brought in improve productivity and efficiency. As an outsider, he was thought to be capable of implementing tough transformation measures, including cutting costs, and incorporating strategies he helped develop for other financial institutions.
Based in the U.S., Mr. Knoess also helped to shape the growth strategy for City National. Lately, however, City National has faced headwinds and needed a capital injection from the parent bank.
In January, the U.S. Office of the Comptroller of the Currency imposed a US$65-million fine on City National after the regulator found weaknesses in many of the bank’s internal controls and risk-management processes.
RBC is working on overhauling its strategy in the U.S. – an initiative that is being led by head of capital markets Derek Neldner. The lender is planning to streamline its operations and boost cross-selling between its capital markets business, its wealth management unit and its City National subsidiary.
Mr. Knoess also took leadership of RBC’s climate strategy over the past year, which includes a framework on how the lender assesses clients’ transition plans.
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Ms. Douvas is taking on Mr. Knoess’s administrative functions, overseeing enterprise strategy, procurement, corporate real estate, climate and the chief data office. By adding those responsibilities to her role, she will have an integrated view across the bank to support strategic counsel and risk management.
Since she took on the role of chief legal officer in 2021, Ms. Douvas has taken on expanded mandates, including compliance and government affairs.
In the memo, chief executive officer Dave McKay described Ms. Douvas as a “true enterprise leader” who sets “ambitious goals, debating with passion and combining her exceptional depth of knowledge with an admirable ability to simplify the complex.”
Ms. Douvas joined RBC in 2016. Previously, she was a partner at New York-based law firm Paul Hasting, and before that was also a federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York.
RBC declined a request for comment.
In the memo, RBC said that it will look for more opportunities to “simplify” the bank. The executive team will be shuffling the remaining portfolios that were overseen by Mr. Knoess to other leaders in the bank.
RBC and its peers have been cutting costs and reducing its work force to manage rising expenses.
To secure Ottawa’s approval to buy HSBC Canada, RBC had to agree to several conditions that limit where it can trim expenses. The bank agreed to retain certain jobs at HSBC for up to two years, open a global banking hub in Vancouver, maintain a minimum number of HSBC branches and finance affordable-housing projects.
In the bank’s earnings for the first quarter ended Jan. 31, it updated its financial expectations for the deal. RBC anticipates pretax acquisition and integration costs of about $1.5-billion, up from $1-billion when it announced the deal in late 2022.
But RBC estimates the deal will boost its earnings per share by 6 per cent in 2024. It also expects to save money by trimming 55 per cent of HSBC Canada’s costs, or about $740-million annually, within two years, largely by combining operations and technology functions.
Tim Kiladze
Stefanie Marotta