Royal Bank of Canada’s acquisition of European asset manager, BlueBay Asset Management plc, is a strategic fit, although it will mean a capital hit, analysts say.

DBRS says that there are no credit rating implications for the deal, and that the transaction is consistent with RBC’s (TSX:RY) stated strategy of growing its wealth management businesses geographically.

“The acquisition accelerates the bank’s growth in Europe, as BBAY is one of Europe’s largest independent managers of fixed income debt funds and products, with US$40 billion in assets under management,” DBRS says adding that “there are potential cross-selling opportunities to enhance revenue synergies, including investment opportunities to clients of RBC and BBAY.”

RBC is paying approximately $1.56 billion in cash for the firm. The transaction is not expected to have a material impact on earnings per share in the near term, but does reduce RBC’s Tier 1 capital ratio by approximately 55 basis points immediately following the close of the acquisition, which was 12.9% at the end of the third quarter, DBRS adds.

UBS Securities Canada Inc. says that it views, “the acquisition positively, notwithstanding a relatively high price, adding that while the price seems high, it “is consistent with strong growth and recent acquisitions. It also provides greater growth and diversification, while complementing [RBC’s] other products.”

“The key risks are preserving management and growth,” UBS says. And, it notes that, “Long-term growth is expected due to ageing demographics and growth in high net worth clients, particularly in emerging markets. There also appears potential for expanded global distribution.”

IE