Royal Bank of Canada Profit Rises on Capital Markets

Royal Bank of Canada, the country’s largest lender by assets, said first-quarter profit rose 35 percent as earnings from investment banking more than doubled and provisions for bad loans declined.

Profit for the period ended Jan. 31 climbed to C$1.5 billion ($1.45 billion), or C$1 a share, from C$1.11 billion, or 78 cents, a year earlier, the Toronto-based bank said today in a statement. Revenue increased 3.8 percent to C$7.33 billion.

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Royal Bank is the fourth Canadian lender to report rising profit in the period after Canada’s economy emerged from its first recession since 1992. The company’s investment-banking earnings surged to C$571 million from C$225 million, and it set aside 37 percent less money for bad loans.

“It’s a solid declaration that the Canadian economy is doing well,” David Cockfield, who helps manage C$300 million at MacNicol & Associates Asset Management Inc. in Toronto, said in an interview before earnings were released. “As the banks go, so goes the Canadian economy.”

Royal Bank said it earned C$1.03 a share including amortization of intangibles, compared with the C$1.04-a-share average estimate of 12 analysts surveyed by Bloomberg News. Barclays Capital analyst John Aiken expected 99 cents by that measure.

Royal Bank rose 89 cents to C$58.24 yesterday on the Toronto Stock Exchange. The stock has risen 3.3 percent this year, compared with a 3 percent gain for the nine-member Standard & Poor’s/TSX Banks Index.

Bad Loans

Royal Bank set aside C$493 million for bad loans in the quarter, down from C$786 million a year earlier.

Consumer-banking profit in Canada rose 12 percent to C$777 million on higher mortgages, personal loans and deposits.

Losses in international consumer banking, which includes Raleigh, North Carolina-based RBC Bank, narrowed to C$57 million from C$100 million a year earlier. Royal Bank is reorganizing RBC Bank after taking a C$1 billion writedown on the business in April.

Earnings from the RBC Capital Markets investment bank rose on a surge in capital markets sales, trading and higher investment-banking fees from arranging stock sales and advising on takeovers. Trading revenue jumped 82 percent to C$1.14 billion, fueled by interest-rate contracts and bonds.

RBC Capital

RBC Capital Markets advised 18 companies on $26.3 billion of takeovers in Canada that closed in the quarter, more than four times the amount from a year earlier, according to Bloomberg data. The firm was the No. 1 underwriter in the period after managing $3.17 billion in stock sales.

Wealth management, which includes mutual-fund sales, rose 71 percent to C$219 million from a year earlier, and insurance climbed 5.4 percent to C$118 million.

Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada posted profit that topped analysts’ estimates. Yesterday, Bank of Montreal, the fourth-biggest Canadian bank, said profit almost tripled to C$657 million.

CIBC, the No. 5 bank, said Feb. 25 that profit rose more than fourfold to C$652 million. Montreal-based National Bank, the sixth-largest lender, said profit more than tripled to C$215 million.

Toronto-Dominion Bank, Canada’s second-largest lender, reports results tomorrow, followed by Bank of Nova Scotia on March 9.

(Royal Bank will hold a conference call to discuss first- quarter results at 7:30 a.m. Toronto time. Dial +1-888-789-9572 passcode 4503676 or +1-416-695-7806 for the call, or go to www.rbc.com/investorrelations/ir_events_presentations.html. The bank will also webcast its annual investors meeting at 9 a.m.)

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