This summer saw the announcement of Royal Bank of Canada’s strategic alliance with America Online whereby RBC took a 20 percent stake in AOL Canada for US$60 mn. The company, and its US subsidiaries Security First Network Bank and Bull & Bear Securities, also entered into an interactive marketing agreement for more than US$7.5 mn.
‘The news (released in late July) came as little surprise to the markets because we had been talking about strengthening and growing our electronic commerce business ever since the beginning of the year. However, a significant element of the Royal Bank’s strategy is to demonstrate our commitment and the alliance with AOL was proof of that strategic intent.
This is a critical initiative for us and my job was to help sell our strategy to the Street. I had to get across that for us this was a very positive move as we believe the whole electronic and internet banking field is new territory. It is not defined and the field is open for opportunities. We have a small internet bank called Security First Network in Atlanta, which has been rated the number one bank in the US for customer service and capabilities. We only have about 25,000 customers but through our agreement with AOL, we hope to capture more customers in internet banking. The goal is to increase our base to 100,000 by the end of next year.
However, people tend to have strong views one way or the other about the issue of e-commerce. Some investors and analysts think it is the only way forward while others remain more skeptical, questioning the returns and whether it is worth investors’ money.
In June, not long before the announcement about America Online, we held our annual investor day and discussed our strategy and the importance of e-commerce for our business. We invited people from Security First to explain internet banking in greater detail and to answer any questions.
We also felt that the AOL alliance was significant enough to warrant holding a teleconference and have key executives speak to the investment community and answer any questions. We worked with them beforehand, anticipating questions and preparing remarks. It was important to convey consistent messages that reinforced the views we had been putting forth throughout the year. Although some investors questioned our plans, others were very impressed. By and large the reviews were pretty favorable.
Webcast call
The summer of 1999 also saw another first for us – a webcast for our results. We had been thinking about doing this for a long time in order to provide equal and timely access to our quarterly results announcement. We wanted to give private investors, brokers, financial planners and potential shareholders the opportunity to receive the information at the same time as our institutional investors and analysts.
Historically, we have held a teleconference call for our earnings results where our top senior executives make a brief presentation and field questions from analysts and institutional investors. We allow key media to listen in but not ask any questions. There is a separate Q&A for the press because we believe the purpose of the conference call is to respond solely to investor and analyst concerns.
Before our third quarter results were issued, we teamed up with a company called Q1234, which provides technical expertise to Toronto Stock Exchange listed companies who want to organize a webcast. We also issued a press release a few weeks before our earnings announcement, informing the public of our plans and explaining exactly what investors had to do – they needed special software – in order to listen in. We were the first bank in Canada to have a webcast although others followed during the third quarter reporting season.
We had about a couple of hundred taking advantage of the webcast although there is a recorded version available on the internet so we are not sure of exactly how many people used the playback feature to listen to it later. However, over time, we expect more people to tune in.
From my perspective, the webcast is a new communication tool that levels the playing field. I confess that there was some trepidation on my part. I worried that it would not go as smoothly as planned but every time I spoke to the technical team working on it, they gave me a 200 percent assurance that it would work. Thankfully, they were right.’
