Canada’s biggest bank fires CFO over undisclosed ‘close personal relationship’ with colleague – National Post Achi-News

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The sudden departure of Royal Bank of Canada’s chief financial officer comes at a “critical time” for the lender as it tries to absorb the biggest acquisition in its history, a leading Wall Street analyst said.

Canada’s largest bank fired CFO Nadine Ahn on Friday, saying she violated its code of conduct by having an undisclosed “intimate personal relationship” with a colleague who received favorable treatment, including promotion and salary increases.

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The news landed barely a week after the Royal Bank closed its C$13.5 billion ($9.9 billion) purchase of Canadian HSBC Holdings Plc’s assets, including its portfolio of commercial loans, mortgages and more than 100 branches. In addition to the “ambitious integration” of those two entities, Royal Bank has been trying to rein in costs and improve risk controls at its City National subsidiary in Los Angeles, said Jefferies Financial analyst John Aiken.

“Given the importance of the CFO’s role in managing operational efficiency, we believe there will be even greater investor focus on HSBC’s integration and improvements in City National’s operations,” Aiken said in a note to clients issued on Sunday.

“We maintain that the following months are a critical period for the bank and losing a key member of the senior executive team at this time is a significant loss, regardless of the pedigree of her successor.”

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Royal Bank said it dismissed Ahn and the other employee, who was not named, after an internal review and an investigation by outside legal counsel.

Other market watchers said the departure could damage Royal Bank’s reputation but was unlikely to drag the lender down in a big way. The shares closed down 0.6% on Monday at C$139.95 in Toronto, better than the 0.3% gain for the S&P/TSX Composite Commercial Banks index.

“It sounds like a messy exit and certainly not something investors would be happy about – suddenly losing your CFO is never a good thing,” said Mike Rizvanovic, an analyst with Keefe Bruyette & Woods, stating that he was surprised by the level of detail the bank shared in its press release about the reasons for Ahn’s departure.

There should be no major disruption in the bank’s day-to-day operations, but employee morale could be damaged, he said, adding that Ahn was respected as a woman in finance in a very high role. She was named CFO in 2021.

“I think it’s a bit of a blow to Royal’s reputation in terms of the management team,” said Rizvanovic, who has an outperform rating on the bank’s shares. “But it’s not like my opinion of Royal has changed significantly.”

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The CFO’s departure is a surprise and a “completely unnecessary blemish” for Royal Bank, said Dan Rohinton, portfolio manager at iA Global Asset Management Inc. But the bank still has a strong business with a diverse earnings stream, he said. “In the grand scheme of banking, this barely registers.”

Katherine Gibson is filling in as interim CFO, and there are a number of internal candidates who could succeed Ahn, Rohinton said.

While CFOs are sometimes considered candidates to become chief executive officer, Rohinton said he did not have a “strong opinion” on whether Ahn was in the running to replace current CEO Dave McKay.

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