RBC Q1 profit beats analysts estimates
Royal Bank of Canada RY-T -0.83% decrease reported first-quarter profit that beat analysts’ estimates even as the lender set aside more loan loss reserves and recorded higher expenses.
RBC earned $3.6-billion, or $2.50 per share, in the three months that ended Jan. 31. That compared with $3.2-billion, or $2.29 per share, in the same quarter last year.
Adjusted to exclude certain items, including transaction and integration costs related to its proposed takeover of HSBC Bank Canada, the bank said it earned $2.85 per share, down 6 per cent from the same quarter last year. That edged out the $2.80 per share analysts expected, according to Refinitiv.
“Underpinned by our balance sheet strength, prudent approach to risk management and diversified business model, we delivered solid, client-driven volume growth and a continued focus on expense control,” RBC chief executive officer Dave McKay said in a statement. “As we look towards the completion of our planned HSBC Canada acquisition, we remain focused on being a trusted advisor to clients through the delivery of new and differentiated banking experiences.”
The bank kept its quarterly dividend unchanged at $1.38 per share.
RBC is the third major Canadian bank to report earnings for the fiscal first quarter. National Bank of Canada is also releasing results on Wednesday. Bank of Nova Scotia and Bank of Montreal reported financial results Tuesday. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week on Thursday.
RBC’s pending takeover of British-based banking giant HSBC’s Canadain unit received approval from the Finance Minister in December, and is expected to close at the end of the first calendar quarter.
In the quarter, RBC set aside $813-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $133-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, RBC had set aside $532-million in provisions.
Total revenue rose 1 per cent in the quarter to $13.5-billion on slimmer net interest margins – the difference between what banks earn on loans and pay on deposits. Expenses increased 10 per cent to $8.3-billion, in part driven by costs related to its HSBC Canada deal and higher salaries and benefits, partly offset by a staff reduction announced last year.
Profit from personal and commercial banking was $1.97-billion, down 4 per cent from a year earlier, mostly due to higher loan loss provisions and expenses.
The wealth management division generated $606-million of profit, down 27 per cent largely due to costs from an industry-wide special assessment by the U.S. Federal Deposit Insurance Corporation, as well as investments in its Los Angeles-based bank, City National.
Capital markets profit fell 7 per cent to $1.15-billion, driven by lower revenue in global markets and higher provisions.
This article was reported by The Globe and Mail
