Royal Bank of Canada Reports Record Results
Royal Bank of Canada (NYSE: RY – US$63.45), the country’s largest bank by assets, said revenue and profit rose in its third quarter. Toronto-based RBC said results were driven by earnings increases in its wealth management, capital markets and personal & commercial banking divisions, but were partially offset by declines in insurance and in the investor & treasury services segments. Wealth management net income rose largely from last year’s acquisition of Los Angeles-based City National Corp. The capital markets division increased its earnings by 9% to C$635 million from the second quarter amid gains in revenue from trading fixed-income products. In all for the quarter, RY’s net profit rose to C$2.89 billion, and adjusted per share earnings of C$1.72. This compares to adjusted net income of C$1.66 a share, a year ago. Revenue rose 16.2% to C$10.26 billion. Analysts had expected C$1.71 in adjusted earnings per share on revenue of C$9.35 billion. RBC said that it set aside less money in the quarter to cover impaired loans stemming from the low energy prices. That figure was C$318 million, down from C$460 in the prior quarter and up from C$270 million last year. The bank also increased its quarterly dividend by 2 Canadian cents to C$0.83 per share.
Conservative income-oriented investors should continue to like what they see here as the shares reached a 52-week high on the news. Royal Bank offers an attractive level of dividend income yielding 5.2%, which is well covered by profits. Earnings growth, which should top C$6.74 per share this year and possibly C$7.08 in fiscal 2017, are expected to move higher, albeit at a slow and steady rate, through late decade. Further hikes in the payout should also continue over the next several years and the shares can remain a holding in a well-diversified income account.