Income · Stocks to Consider and Updates

Royal Bank Beats Street Estimates

Income portfolio candidate Royal Bank of Canada (NYSE: RY – $73.96) reported a 15% increase in net income to C$3.25 billion ($2.45 billion) during the quarter. Results included a 10% rise in net income from the Retail Banking segment to C$1.54 billion, benefiting from improved margins and growth in residential mortgages, commercial lending and deposits. RBC reported a 13% increase in net income at its Wealth Management business to C$553 billion, reflecting higher average fees from clients. The bank’s Investment Banking business increased net income by 14% from a year ago to C$666 million, driven by beneficial U.S. tax reforms and higher trading revenue arising from market volatility. Net income from the Insurance segment rose 20% from a year ago to C$318 million. On a per share bases, earnings were C$2.20 up from C$1.88 in the same period a year ago and topping the estimate of C$2.12 from analysts. For the period, total revenue of C$10.67 billion was up from C$10.52 billion in the same period a year ago, but shy of the Street projection of C$11.1 billion.

       Looking ahead, the country’s largest bank expects loan growth to moderate next year from double-digit growth seen this year. However, Street estimates are for RY to earn $9.02 per share compared to fiscal 2018’s $8.58. The company is also looking at various acquisition opportunities in the U.S. similar to its November 2015 purchase of California’s City National Bank. Returning capital to shareholders continues to be one of management’s priorities with dividend increases and additional share buybacks. The stock ought to draw the attention of income-minded investors with a conservative stance, as the high-quality shares yield 4.2% at current levels.

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