Striving to be “conservatively capitalized,” Royal Bank of Canada announced on Monday that it is issuing 56.75 million common shares.

The bank has entered an agreement with a syndicate of underwriters for the sale of the shares at $35.25 per share, for total gross proceeds of $2 billion. The offering is expected to close on Dec. 22.

RBC also granted the underwriters an option to purchase another 8,512,500 common shares within 30 days after the closing. If the options are exercised in full, the maximum gross proceeds raised under the offering will be $2.3 billion.

The purpose of the issue is to further supplement RBC’s capital position and provide flexibility to continue investing in its existing businesses. The shares will qualify as Tier 1 capital and net proceeds will be used for general business purposes, RBC said.

“Our capital position is strong and well above regulatory levels,” said Gord Nixon, RBC’s president and CEO. “However, the world has changed and we want to be conservatively capitalized.”

He added that the issuance would support continued growth for RBC. “We are able to deploy capital within our existing businesses at extremely attractive rates of return and we believe this issuance will enhance our ability to grow our businesses and serve our clients going forward.”

The announcement follows $525 million in preferred shares that were issued by RBC earlier this fiscal quarter. As of Oct. 31, the bank’s Tier 1 capital ratio was 9%, and on a pro forma basis, adjusting for the issues of both preferred shares and common shares, the bank expects its Tier 1 capital ratio to be approximately 9.9%, or 10.1% if the over-allotment option is exercised in full.

The common shares will be issued by way of short form prospectus to be filed with securities regulatory authorities in each province and territory of Canada.

Royal Bank shares closed Monday up $1.10, or 3.02%, at $37.50.

IE