Royal Bank of Canada (NYSE: RY – $80.93), the country’s largest bank by assets, reported net income of C$3.012 billion for the first quarter, which includes a negative impact of the U.S. Tax Reform of C$178 million. Excluding special items, income was up 7% from a year ago and earnings per share was up 14% to US$2.13 and fourteen cents above Street estimates. Results in the quarter were driven by strong earnings in Personal & Commercial Banking (10% adjusted increase in net profit); Capital Markets (up 13%), Wealth Management (up 39%) and Investor & Treasury Services (up 2%). The bank’s small insurance business showed a 5% decline from last year’s first period. This quarter’s strong performance also reflected stable credit quality for outstanding loans. The Board of Directors went on to approve a 30 million share stock buyback plan, equal to about 2.1% of the outstanding shares.
I like several aspects of RBC’s franchise, including its leading positions in personal/ commercial banking, capital markets and wealth management. The company also has a strong record of organic growth and well-timed acquisitions, including its 2015 purchase of Southern California’s City National Bank. The shares are trading at about 10 times full-year 2018 earnings and with its recently increased quarterly dividend of US$0.94 yielding 4.6%, the shares are a worthwhile, long-term income holding.