Royal Bank of Canada made a capital injection into City National Bank and said intercompany sales of debt securities will result in realized losses at the US unit.
(Bloomberg) — Royal Bank of Canada made a capital injection into City National Bank and said intercompany sales of debt securities will result in realized losses at the US unit.
The losses will show up in a regulatory report for the three months through September, but will be eliminated at the parent company level, the Toronto-based lender said in a statement Friday. City National reinvested most of the proceeds in new securities for its liquidity and investment portfolio, a move likely to benefit net interest margins, Royal Bank said.
The injection will boost City National’s liquidity and capital position and allow the US division to pay down higher-cost borrowing, Royal Bank said in the statement.
City National was swept up earlier this year in the US regional-bank turmoil, which hurt liquidity and net interest margins — the difference between what banks make from lending and what they pay for deposits — at banks across the country.
At City National, “everything went against us this quarter,” Royal Bank Chief Executive Officer Dave McKay said on a conference call with analysts last month. “This business is well below our expectations for this year.”
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