Filed Pursuant to Rule 425 of the Securities Act of 1933
Filer: Royal Bank of Canada
Subject company: Centura Banks, Inc.
Centura Banks, Inc. Exchange Act File Number: 001-10646
ROYAL BANK OF CANADA (RY)
TO ACQUIRE
CENTURA BANKS, INC. (CBC)
EXPANDING RETAIL
BANKING IN HIGHER
GROWTH MARKETS
HIGHLIGHTS FOR THE
INVESTMENT COMMUNITY
JANUARY 26, 2001
CAUTION CONCERNING FORWARD
LOOKING STATEMENTS
================================================================================
THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE FOUND IN VARIOUS PLACES THROUGHOUT THIS PRESENTATION AND INCLUDE,
WITHOUT LIMITATION, STATEMENTS CONCERNING THE FINANCIAL CONDITIONS, RESULTS OF
OPERATIONS AND BUSINESSES OF ROYAL BANK OF CANADA AND CENTURA BANKS, INC. AND,
ASSUMING CONSUMMATION OF THE ACQUISITION, A COMBINED ROYAL BANK AND CENTURA, AS
WELL AS THE EXPECTED TIMING AND BENEFITS OF THE ACQUISITION. WHILE THESE
FORWARD-LOOKING STATEMENTS REPRESENT OUR JUDGEMENTS AND FUTURE EXPECTATIONS
CONCERNING THE DEVELOPMENT OF OUR BUSINESS AND THE TIMING AND BENEFITS OF THE
ACQUISITION, A NUMBER OF RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS COULD
CAUSE ACTUAL DEVELOPMENTS AND RESULTS TO DIFFER MATERIALLY FROM OUR
EXPECTATIONS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THOSE LISTED IN
ROYAL BANK'S 2000 ANNUAL REPORT, CENTURA'S 1999 ANNUAL REPORT AND ROYAL BANK'S
AND CENTURA'S OTHER PAST AND FUTURE FILING WITH THE US SECURITIES AND EXCHANGE
COMMISSION, AS WELL AS THE FAILURE OF THE CENTURA SHAREHOLDERS TO APPROVE THE
TRANSACTION; THE RISK THAT THE ROYAL BANK AND CENTURA BUSINESSES WILL NOT BE
SUCCESSFULLY INTEGRATED; THE INABILITY TO OBTAIN, OR MEET CONDITIONS IMPOSED
FOR, GOVERNMENTAL APPROVALS FOR THE TRANSACTION; THE RISK THAT ANTICIPATED
SYNERGIES WILL NOT BE OBTAINED OR NOT OBTAINED WITHIN THE TIME ANTICIPATED; AND
OTHER KEY FACTORS, WHICH INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN NORTH
AMERICAN AND/OR GLOBAL ECONOMIC CONDITIONS INCLUDING FLUCTUATIONS IN CURRENCIES,
INTEREST RATES, SECURITIES MARKET AND INFLATION, REGULATORY DEVELOPMENTS,
TECHNOLOGICAL CHANGES, AND THE EFFECTS OF COMPETITION IN THE GEOGRAPHIC AND
BUSINESS AREAS WHERE ROYAL BANK AND CENTURA OPERATE.
ROYAL BANK CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS NOT
EXHAUSTIVE; WHEN RELYING ON FORWARD LOOKING STATEMENTS TO MAKE DECISIONS WITH
RESPECT TO ROYAL BANK, INVESTORS AND OTHERS SHOULD CAREFULLY CONSIDER THE
FOREGOING FACTORS AND OTHER UNCERTAINTIES AND EVENTS.
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TABLE OF CONTENTS
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o Transaction Summary
o Strategic Rationale
o Financial Impact
o Low Execution Risk
o Appendix
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TRANSACTION SUMMARY
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o EXCHANGE RATIO - 1.684 RY shares for each CBC share
o PURCHASE PRICE
- PER SHARE - US$57.85 (as of 01/25/01)
- AGGREGATE - Approximately US$2.3 billion (fully diluted)
o TRANSACTION STRUCTURE - 100% stock exchange (tax-free)
- Purchase accounting, with goodwill of US$1.4
billion, to be amortized over 20 years
- 19.9% lock-up with break-up fee
o EXPECTED CLOSING - RY's fiscal quarter ending July 31, 2001
o DUE DILIGENCE - Credit, financial, operational completed
o REQUIRED APPROVALS - US and Canadian regulatory approvals
- Centura shareholders
o BOARD AND MANAGEMENT - Cecil Sewell appointed to RY Board
- Significant roles for CBC management
o US RETAIL BANKING - Rocky Mount, NC
HEADQUARTERS
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TRANSACTION SUMMARY
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STRATEGIC RATIONALE
o Consistent with stated US expansion strategy
o Leverages RY's retail banking expertise through an integrated
US platform
o Provides strong foothold in attractive higher growth Southeastern
US markets
o Further diversifies RY's revenue and earnings base
FINANCIAL IMPACT
o Cash EPS expected to be accretive by Fiscal Year 2 (2002)
o RY maintains EPS growth objective of 10-15% for 2001
o Superior performance measures maintained
o Maintains strong capital ratios
LOW EXECUTION RISK
o Conservative synergy assumptions
o Consistent operating philosophies and cultures
o Manageable transaction size - approximately 10% of RY's market
capitalization
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STRATEGIC RATIONALE
OVERVIEW OF CENTURA
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o Centura provides RY a banking platform with an attractive geographic and
demographic profile
Overview Key Data
- ------------------------------------ --------------------------------------
o 14th largest bank by deposits o US$11.5 billion in assets
in the Southeastern US with o US$7.7 billion in deposits
operations in NC, VA and SC o 241 branches
o Attractive demographic profile - 213 traditional
- Higher growth markets - 28 in-store
- High percentage of high net o 254 ATMs
worth households o US$3.5 billion assets under
- Significant urban market management & assets under
presence administration
o Full suite of financial services o 650,000 customers
- Retail and commercial banking
- Wealth management
- Insurance
- ------------------------------------ --------------------------------------
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STRATEGIC RATIONALE
CONSOLIDATE US RETAIL BANKING BUSINESS
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- -- Integrate Security First Network Bank and Prism into RBC Centura
- -- Consolidate & centralize key administrative functions (treasury, risk
management, marketing & sales, etc.)
- -- Integrate back offices
- -- Implement integrated branding
- -- Provides a platform for follow-on acquisitions permitting future large
in-market synergies
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STRATEGIC RATIONALE
ENCHANCE CENTURA'S FRANCHISE AND LEVERAGE RY STRENGTHS
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RY Strengths Tactics
- ----------------------------------- --------------------------------------------------
o Investment and financial advisory -- o Introduce Account Manager Investment
capabilities roles in selective markets
o Introduce new deposit and investment
products
o Fee based revenue -- o Increased sale of selected fee based products -- Platform for Enchanced
o Cross-sell Liberty and Prism products Revenue Growth(1)
o Focus on small business lending -- o Enhance Small Business Credit Delivery
with Canadian model
o Life cycle product capabilities -- o Import RY's KBI lending expertise
for Knowledge Based Industries o Leverage RB Ventures and RBC Dain
(KBI) Rauscher capabilities
<FN>
* No revenue synergies included in financial projections
</FN>
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STRATEGIC RATIONALE
DEMONSTRATED CROSS-SELL CAPABILITY
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o RY has demonstrated cross-sell capability in Canada:
Penetration of
customer base
--------------
- Credit Cards 47%
- Creditor insurance on mortgages 67%
- Mutual funds 13%
o Growth in number of most profitable customers over the past
2 years: 13.5%
- Increase in average profitability across
this segment over past 2 years 13.5%
- Increase in average number of services
held by this segment over past 2 years 13.3%
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STRATEGIC RATIONALE
FOOTHOLD IN ATTRACTIVE MARKETS
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o Opportunity to grow customer base in higher growth states & MSAs
CENTURA BRANCH FOOTPRINT
- ------------------------
[GRAPHIC SHOWING CENTURA BRANCH FOOTPRINT]
MARKET SHARE ANALYSIS
- ---------------------
Projected
Market Household
Rank Deposits Share Growth
---- -------- ------ ---------
(US$MM)
Key MSAs:
- ---------
Raleigh-Durham-
Chapel Hill 4 $1,339 11.5% 9.7%
Rocky Mount 1 703 47.8 6.8
Greensboro-
Winston-salem-
High Point 9 531 2.8 7.1
Charlotte-Gastonia-
Centura Hill 8 464 1.3 8.4
States:
- -------
North Carolina 5 $7,134 7.0 7.8
Virginia - 385 0.5 6.0
South Carolina - 102 0.3 5.5
Source: SNL Securities - projected household growth from 1999 to 2004
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STRATEGIC RATIONALE
HIGHER GROWTH MARKETS
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o CBC'S Underlying footprint exhibits superior demographics
Projected growth in
Projected growth in # Projected poopulation median household
of households growth income
- --------------------- ---------------------- ---------------------
5.2% 7.2% 7.7% 4.2% 6.1% 7.0% 10.8% 11.4% 13.6%
US Southeast CBC US Southeast CBC US Southeast CBC
Source: SNL Securities - projected household growth from 1999 to 2004
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STRATEGIC RATIONALE
FURTHER DIVERSIFIES RY'S EARNINGS
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RY cash net income contribution - 2000
--------------------------------------
RY reported RY reported + CBC (1)
----------------------- -----------------------
Canadian International Canadian International
71% 29% 64% 36%
* Excludes nonrecurring items for CBC
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FINANCIAL IMPACT
CASH ACCRETIVE USING CONSERVATIVE ASSUMPTIONS
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o ACCRETIVE TO CASH EPS(1)
- Cash EPS: Accretive in 2002. Dilution under 1% in 2001
- GAAP EPS: Dilution of approximately 2% in fiscal 2001
- RY'S EPS growth objective of 10-15% for 2001 remains unchanged
o IDENTIFIABLE AND ACHIEVABLE COST SAVINGS
- US$70 million or 14% of RY'S pro forma US retail banking expenses
- Conversative integration timetable:
15% in FY'01 -> 75% in FY'02 -> 100% in FY'03
o RESTRUCTURING CHARGE OF US$75 MILLION (US$47 MILLION AFTER-TAX) TO BE
EXPENSED IN 2001(2)
o NO REVENUE ENHANCEMENTS NOR FUTURE SYNERGIES FROM POTENTIAL MANAGEABLE
ACQUISITIONS ARE INCLUDED IN THE FINANCIAL IMPACT ALTHOUGH POTENTIAL IS
SIGNIFICANT
* Assumes repurchase of 20% of the shares issued in the transaction
in fiscal 2001 (subject to approval of OSFI - the Canadian regulator,
and the Toronto Stock Exchange)
* Relates to severance, relocation, systems integration, lease
breakage costs, etc.
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FINANCIAL IMPACT
MAINTAINS STRONG CAPITAL POSITION(1)
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As of 10/31/00
Tangible common equity/
Tier 1 capital ratio Total capital ratio risk-adjusted assets
- --------------------- ---------------------- -------------------------
8.0% 7.9% 11.3% 11.3% 6.0% 5.7%
Pro forma, Pro forma Pro forma, Pro forma Pro forma, Pro forma
excluding including excluding including excluding including
CBC CBC CBC CBC CBC CBC
* Pro forma numbers for all acquisitions, capital issuances and anticipated
capital adjustments
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FINANCIAL IMPACT
OPPORTUNITY TO IMPROVE CENTURA'S FINANCIAL PERFORMANCE
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FISCAL 2000
Net interest margin(1) Fee income ratio (2) Return on equity(2)
- ---------------------- ----------------------- ----------------------
2.14% 4.14% 2.26% 56% 28% 54% 19.3% 15.1% 18.9%
RY CBC RY + RY CBC RY + RY CBC RY +
CBC CBC CBC
* Net interest income as a percentage of average earning assets
* Excluding non-recurring items
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FINANCIAL IMPACT
STRONG CREDIT QUALITY
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Q4/2000
Nonperforming Net charge- Allowance/
assets/assets offs/average loans nonperforming loans
- --------------------- --------------------- -----------------------
0.57% 0.47% 0.57% 0.49% 0.33% 0.48% 111.5% 215.1% 114.4%
RY CBC RY + RY CBC RY + RY CBC RY +
CBC CBC CBC
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LOW EXECUTION RISK
CONSISTENT OPERATING PHILOSOPHIES AND CULTURES
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Common focus on:
o Creating a tailored customer experience
o Customer relationship management (CRM) philosophy
o Superior customer service
o Effective capital management and economic value
o Disciplined credit culture
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LOW EXECUTION RISK
CBC HAS STABLE ASSET QUALITY RATIOS
o Centura has approximately US$100 million in syndicated loans - approximately
1% of total loan portfolio
Annual net charge-offs(1) Annual nonperforming assets
- -------------------------------- -----------------------------------
[GRAPHIC SHOWING ANNUAL NET CHARGE-OFFS
AND NONPERFORMING ASSETS]
(1) Charge-offs have been relatively low excluding the Pluma charge in 1999
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LOW EXECUTION RISK
STRONG COMBINED MANAGEMENT
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o New management roles already determined
- Cecil Sewell (Centura's Chairman & CEO) to become non-executive
Chairman of RBC Centura and to join RY board
- Kel Landis (President of Centura) to become CEO, RBC Centura
o Incentive and retention plans in place to ensure successful transaction
o Structure ensures effective leverage of RY/CBC franchise strengths and
successful integration
o Both management teams have extensive acquisition and integration experience
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APPENDIX
CBC FACTS
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o Closing price (01/25/01) US$44 11/16
o Shares outstanding (12/31/01) 39.4 Million
o Market cap (01/25/01) US$1,765 million
o Stock symbol CBC
o Stock exchange NYSE
o Headquarters Rocky Mount, North Carolina
o Founded 1899
o Employees (full time equivalent) 3,600
o Total offices 240+
o Website www.centura.com
o SEC filings (including
presentation at the Schroder
Salomon Smith Barney conference
on January 23, 2001) http://ir.ccbn.com/ir.zhtml?t=CBC&s=800
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APPENDIX
CBC FINANCIAL HIGHLIGHTS(1)
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(US$ millions, except for % and 1996-
per share data) 2000
1996 1997 1998 1999 2000 CAGR
---- ---- ---- ---- ---- ----
Net interest income (taxable
equivalent basis) $333 $366 $404 $431 $430 6.6%
Non-interest income $108 $128 $158 $171 $146 7.9%
Non-interest expenses $288 $302 $344 $352 $379 7.1%
Net income(2) $ 84 $108 $125 $136 $135 12.7%
Earnings per share (diluted)(2) $2.14 $2.74 $3.10 $3.37 $3.37 12.0%
Return on average equity(2) $13.4% 15.5% 15.6% 15.7% 15.1% N/A
Book value per share $17.08 $18.97 $21.17 $21.77 $24.26 9.2%
Gross Loans $5,518 $6,279 $7,056 $7,442 $7,672 8.6%
Total Deposits $6,506 $7,328 $7,702 $7,897 $7,707 4.3%
Assets $8,499 $9,757 $10,919 $11,387 $11,482 7.8%
Total shareholders' equity $652 $735 $839 $860 $956 10.0%
<FN>
(1) Historical financial highlights reflect the accounting for the pooling of
interestes of the Triangle acquisition which closed in CBC's Q1/00
(2) Excluding nonrecurring items of US$35.8 million after-tax in 2000, US$5.5
million after-tax in 1999, US$2.9 million after-tax in 1998 and US$1.7
million after-tax in 1997
</FN>
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APPENDIX
RY: CANADA'S LARGEST & MOST PROFITABLE FINANCIAL INSTITUTION
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o Market capitalization of US$21.1 billion (01/25/01)
o #1 retail/commercial financial services company in Canada with:
- 10 million individual and business customers
- Assets of US$89 billion / deposits of US$67 billion
- #1 market share in Canada for residential mortgages, and business
financing and deposits
- Client centric approach and leading data mining & sales
techniques
- Largest bank-owned insurance operation
o #1 wealth management organization in Canada
o #1 rated investment bank in Canada (Reuters 2000 survey), consistently
top-ranked equity & debt underwriter in Canada, and Canadian leader
in M&A (#1 advisor in Canada and #15 globally in 2000)
o Largest processing bank in Canada
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APPENDIX
RY FINANCIAL HIGHLIGHTS
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2000 FINANCIAL HIGHLIGHTS(1)
(US$ millions, except for EPS)
o Gross revenue $8,128
o Net income after-tax $1,497
o Earnings per share (diluted) $2.31
o Return on common equity 19.3%
o Loans $113,794
o Assets $199,399
BUSINESS SEGMENTS
Description NIAT ROE
----------- ---- ---
Personal & Commercial Financial Services $826 21.3%
Wealth Management $280 47.8%
Corporate & Investment Banking $340 20.8%
Transaction Processing $91 32.2%
(1) Cdn. $1.00 = US$ 0.678 for 12 months ended 10/31/00 and Cdn. $1.00 = US$
0.6563 at 10/31/00
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APPENDIX
REQUIRED APPROVALS
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o In Canada:
o Approval of Minister of Finance, Canada
o Approval from the Office of the Superintendent of Financial Institutions
(OSFI) for issuance of RY shares
o In the US:
o Formal approval of the Federal Reserve
o Filing and effectiveness of a SEC registration statement
o CBC shareholder approval
o Other standard approvals
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