RBC CEO David McKay, pictured at the bank's annual meeting in 2017, says Canada will need $1.8-trillion in capital investment to finance major projects.Frank Gunn/The Canadian Press
Royal Bank of Canada RY-T chief executive officer Dave McKay said the lender plans to deploy up to $1-billion in the coming years to bolster investments in Canadian companies as the country attempts to redraw trade routes.
To finance Canada’s major projects, the country will need $1.8-trillion in capital investment over the next decade, according to new research by the bank. That will require the private sector to step up, Ottawa to attract foreign investment, and companies to remain and grow in Canada, Mr. McKay said in an exclusive interview with The Globe and Mail.
“I see more interest in Canada than I’ve seen in two decades.” Mr. McKay said.
“Canada has a bright future, but it’s got to get things done. We have a reputation of not getting things done and it’s critical that we start to land some of these projects and quickly. Capital moves fast, and if it sees a better opportunity over there while it’s waiting for you, it’s not going to wait.”
At RBC’s annual meeting in Toronto on Thursday, the country’s biggest bank said it plans to launch a growth fund to help companies scale in Canada.
RBC did not provide further details ahead of the launch of the fund, but Mr. McKay said it will be similar to a venture capital fund alongside the direct equity investments that RBC already makes in Canadian companies.
Over the past decade, 70 per cent of growth capital for the tech sector has come from U.S. funds, according to Mr. McKay. While those investments help Canadian companies expand, it also increases the pressure on those businesses to relocate to the U.S.
RBC recently won a bid in competition with U.S. counterparts to invest in a Canadian health care company. The bank was the only Canadian investor at the table, and the company will remain in Canada, Mr. McKay said.
The bank plans to expand RBCx – its technology and innovation banking unit led by former OMERS Ventures managing partner Sid Paquette – from largely a banking and debt financing lending facility to include venture capital investments.
“It’s keeping Canadian entrepreneurs, their IP and the ecosystem in Canada, so we can have more BlackBerrys, more Shopifys and more growth companies across multiple sectors,” Mr. McKay said. “It’s a real problem and long-term prosperity is at risk if we don’t do it.”
RBC is also expanding its financing of emerging sectors deemed critical for economic growth. That includes infrastructure and finance capabilities – with a particular focus on partnerships in the North and with Indigenous groups – as well as defence companies and Canadian businesses looking to expand abroad.
As Canada ramps up its commitment to NATO, the private sector must play a role in supporting the defence sector and industries that support critical infrastructure, Mr. McKay said. The country will need to address defending the Arctic and building dual-purpose military, commercial and industrial capabilities.
Mr. McKay recently spoke with a premier about opportunities to export LNG, grain and agriculture from the Port of Churchill – Canada’s only deepwater Arctic port. Defence, infrastructure and resources development are inextricably linked as the country will need to build food export terminals and communities for military bases, as well as broker Indigenous partnerships and create access to new markets, he said.
“We’re looking at every one of these investments as a dual-purpose investment, and that requires public and private capital to co-exist to get a greater return on military industrial,” Mr. McKay said. “The Americans do it so well, and Canada has to do it similarly. There’s an economic return on both sides of the coin here.”
The lender expects to hire people in key roles to support the development of infrastructure and energy capabilities. This could include opening more bank branches or expanding its digital capabilities to certain regions, as well as hiring bankers in capital markets with expertise in these sectors.
As U.S. protectionism and the war in the Middle East disrupt global markets, Ottawa has been redrawing trade routes and exploring projects to support energy security
Canada has been keen on attracting investment from the Middle East, and Mr. Carney has visited the region in search of new trade deals.
Mr. McKay said that he still believes in the long-term potential of the region as a major exporter of capital and innovator in technology, AI and energy.
At the bank’s annual meeting, shareholders voted against proposals asking the bank to improve participation in annual meetings, adjust its compensation policy, diversify the skills of its board directors, and prepare a report on the use of AI in decision-making, among other recommendations.
Overall, about 53 per cent of eligible shares were cast in votes at the meeting.
“Across the globe, countries are building competitive advantages and diversifying their economies by making investments in infrastructure, streamlining regulations and finding new ways to attract capital,” Mr. McKay told shareholders.
“In a world defined by competition, Canada can’t rely on past advantages or legacy strengths alone.”