Royal Bank of Canada (NYSE: RY – $70.05), Canada’s largest bank, reported financial results for its fiscal second period, with earnings and revenue that topped analysts’ expectations. For the quarter ended April 30, Royal Bank posted adjusted earnings of US$1.90 per share, compared with the prior-year period’s US$1.71. Analysts were expecting earnings of US$1.81 per share. Revenue also topped views at C$10.31 billion, up 8% from a year ago vs. consensus expectations of C$9.45 billion. Revenue from Personal and Commercial Banking operations rose 5%, as growth in Canadian banking more than offset declines in its U.S. and Caribbean business. Investor and Treasury Services net income was up 39% from a year ago and Wealth Management scored a 12% gain. The company’s Capital Markets sector rose 15%, offset by a 6% decline in the Insurance business. Assets under management at the bank increased 12%. The Board of Directors also declared a quarterly dividend of $C0.87 per shares, which was increased during the first quarter. The shares currently yield 3.72% at current quotations.
The stock breached another record high in February, before retreating some. It appears the price move can be traced partly to Royal’s good start in the new fiscal year. The company has produced a positive trend in earnings per share over the past five quarters and while recent estimates for the company have been raised by analysts, RY has posted better than expected results. Based on operating earnings, the company is undervalued when compared to other financial institutions. The high-quality shares can continue to be held in a well-diversified income account.