But this should not be confused with a true financial emergency. “This is nothing compared with Dome Petroleum, or LDC [lesser-developed country—a huge crisis for banks in the early 1980s] debt, or even the real estate collapse of the early 1990s,” Healy says. “The Royal has been on top for a long time, but there’s no winning strategy that works all the time. It’s Royal’s turn to take its lumps, but these lumps are more psychic than real.” After years of observation, Healy concludes that roughing up an otherwise healthy bank stock is what stockbrokers do when they lack better sport. In fact, every bank except Bank of Nova Scotia has been the target of similar treatment in recent years. Toronto-Dominion got whacked over technology lending, CIBC because of its involvement in the Enron and Global Crossing scandals, Bank of Montreal simply for being Bank of Montreal—“and they’ve all come roaring back,” Healy says. “Royal will, too.”

Money manager Ira Gluskin goes even further. RBC’s golden towers may have temporarily lost their lustre, but “the earnings are terrific, the stock is trading near an all-time high, and we’re acting like the Royal Bank is Stelco,” he says. “These are such mild problems in the world of business it’s a joke.” Why the great sense of drama? “People follow the Royal Bank like they follow the Red Sox and the Yankees,” Gluskin says. “Everybody has an opinion about the World Series. And everybody has an opinion about what Gord Nixon’s doing at Royal Bank.”

The worst thing that Nixon’s critics say about him is that they were shocked when he was named CEO, and that, for a go-to guy renowned for his athletic talents and leadership abilities, he’s taken an extraordinarily long time to pick up and run with the ball.

In particular, financial services analysts complain that while the domestic businesses all continue to perform well, Nixon’s RBC has neglected the U.S. assets. “Centura is a bit of a flashpoint,” says CIBC’s Broad, “but I think you can look at the entire U.S. platform.” The bank spent $8.4 billion to buy, capitalize and merge U.S. assets; at the height of their profitability in 2003, Broad says, those operations contributed $371 million. This year that number looks likely to drop by half. “You don’t need to be a financial specialist, you just do the math.”

Nixon rejects that assessment. “I wish we had moved sooner with respect to the U.S.,” he says. Yet he says that in his view, the problems stem from how RBC operates as an organization—and the solution lies, not in some quick fix in North Carolina, but in changing RBC’s approach to every penny in what, as of July 31, was a $450-billion financial empire operating in more than 30 countries.

To understand what he’s doing, Nixon says, you have to start back in 2001. When he took over as CEO, “we had just made some fairly significant acquisitions, including the U.S. mortgage business, Centura, Liberty Insurance and Dain Rauscher,” the last being the Minneapolis-based full-service investment brokerage that RBC purchased in 2000, and that includes Tucker Anthony Sutro of Boston, which RBC Dain Rauscher absorbed six months later. Today, they tend to be lumped together—“the U.S. operations”—as if they’re a stand-alone entity. But that, Nixon explains, was never the case: under Cleghorn, the Royal Bank operated as five separate business divisions—personal and commercial banking; wealth management; capital markets; insurance; and global services—each with its own U.S. expansion strategy. Recalls Chuck Winograd, vice-chairman, RBC Capital Markets: “We each bought different businesses, sometimes in very different locations.” Cleghorn, notoriously cautious when it came to acquisitions, challenged each division to seek out and scoop up the best U.S. operations he thought they could afford. Cleghorn’s target: a 15 percent return on each of these investments within three years of purchase; what’s more, they were supposed to account for 25 percent of RBC’s total annual profit by 2002.

When Cleghorn handed the bank over to Nixon in August 2001, the prevailing view, both internal and external, was that the U.S. acquisition program was safely on track. Nixon figured that his biggest task would be getting all these different fiefdoms to start working together—getting one’s children to share toys is a snap compared with asking bankers to share customers—while at the same time eliminating what he, as an energetic young investment banker, had always personally found the biggest impediment to business: bureaucracy.

RBC is riddled with what managers call “the functions,” a term used to describe everything from treasury and legal to IT and ombudsperson services. Not only did head office have senior executives in charge of each function, but also the five operating divisions had their own personnel performing many of these tasks. Getting everybody to understand and approve anything innovative required dozens of phone calls and weeks of meetings. “The duplication drove Gord crazy,” says Winograd.

Nixon is a born deal-maker, his colleagues say, but that’s not why he’s CEO. Rather, he rose through the ranks because of his genuine interest in organizational issues. He’s the person who managed to get RBC’s most fractious and internally competitive departments—the Royal Bank’s corporate lenders and Dominion Securities’ investment bankers—to put down their weapons and start working together. In the mid-1990s, both were losing ground to the New York investment banks setting up shop in Toronto. People familiar with the inner workings of the Royal say that in terms of difficulty, Nixon’s assignment ranked right up there with Cleghorn’s attempt to push through a merger with BMO without giving advance warning to then-Finance Minister Paul Martin.

The difference was that unlike Cleghorn, Nixon succeeded, emerging from the two-year process with a single operating unit that could design and sell integrated debt-equity financing packages—and with next to no loss of major clients and little loss of talent. How Nixon managed to pull this off was “a question of personality,” Fell says. “Gord’s a leader. People like working with him. He’s good and he’s bright but there’s not an arrogant bone in his body.”

Having worked this miracle, Nixon now wants to do it again, except on a considerably larger scale. His vision is not so much of the mythical financial supermarket but of a financial department store offering everything from self-serve discount, to over-the-counter products and advice, to haute couture. Royal Bank employees should be able, if desired, to come up with innovative packages containing all three, or anything else the bank has to offer.