Royal Bank of Canada (NYSE: RY – US$61.73) reported net income for the second quarter ended April 30 of C$2.573 billion equal to C$1.71 per share and above the C$1.64 analysts’ expected. This was up 7% from a year ago and reflected strong results in Wealth Management, which benefited from the inclusion of the City National Bank acquisition; record earnings in Personal & Commercial Banking; and higher earnings in Insurance. These factors were partially offset by lower results in Capital Markets and Investor & Treasury Services as compared to strong levels last year. RBC’s spring review of energy loans has so far resulted in a 15% to 20% reduction in credit for oil and gas clients. However, bad loans increased by C$583 million, or 19%, in the second quarter from the quarter before, largely due to a rise in credit to oil firms that had turned sour. The bank held its quarterly dividend steady at C$0.81 a share, which was raised in the first quarter, and announced a share buyback program. Royal Bank plans to repurchase up to 20 million of its common shares, or roughly 1.3% of its outstanding stock.
Shares of the largest bank in Canada measured by assets remains a solid long-term holding for the income minded, with decent total return potential and increasing annual dividend payouts. The high quality shares currently yield investors 4.2%.