RBC Quarterly Profit Rises 26% as Takeovers Lift Results

Royal Bank of Canada, the country’s largest lender by assets, said second-quarter profit rose 26 percent as acquisitions fueled returns.

Net income for the period ended April 30 climbed to C$1.94 billion ($1.88 billion), or C$1.27 a share, from C$1.53 billion, or 99 cents, a year earlier, the Toronto-based bank said today in a statement. Revenue rose 12 percent to C$7.77 billion.

The C$3.7 billion purchase of Ally Financial Inc. (ALLY)’s auto-finance and deposit business, which was completed Feb. 1, helped lift earnings from Canadian consumer lending. The lender also benefited after buying out its partner in their RBC Dexia Investor Services venture in July.

“We grew earnings this quarter in each of our segments compared to last year, driven by the strength and diversification of our business,” Chief Executive Officer Gordon Nixon, 56, said in the statement.

Profit excluding some items was C$1.31 a share, the bank said, missing the C$1.32 average estimate of 12 analysts surveyed by Bloomberg.

Royal Bank set aside C$288 million for bad loans, down 17 percent from a year earlier.

Personal and commercial banking profit rose 12 percent to C$1.06 billion from a year earlier, helped by lower provisions for bad loans and C$12 million of earnings from the Ally acquisition.

Photographer: Reynard Li/Bloomberg

Royal Bank of Canada signage is displayed outside of an office in Toronto, Ontario. Close

Royal Bank of Canada signage is displayed outside of an office in Toronto, Ontario.

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Photographer: Reynard Li/Bloomberg

Royal Bank of Canada signage is displayed outside of an office in Toronto, Ontario.

Dexia Deal

Investor and treasury services posted profit of C$67 million, compared with a year-earlier loss of C$121 million tied to costs from the RBC Dexia deal. Royal Bank gained control of the global custodian after buying a 50 percent stake from partner Banque Internationale a Luxembourg SA last year for about C$1.1 billion.

Insurance earnings rose 9.9 percent to C$166 million and wealth-management profit increased 6.1 percent to C$225 million. RBC Capital Markets, the firm’s investment-banking unit, reported profit of C$386 million, up 4 percent from a year earlier, lifted by higher underwriting and advisory fees.

Trading revenue across the bank fell 26 percent to C$566 million from a year earlier, the company said.

Royal Bank, the best performer among Canada’s eight-largest lenders this year, fell 0.2 percent to C$63.98 yesterday in Toronto. The shares have gained 6.9 percent this year, outperforming the 3 percent advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index.

Canadian Imperial Bank of Commerce, the fifth-biggest bank, earlier posted profit that rose 8 percent to C$876 million, or C$2.12 a share, to beat analysts’ estimates. The Toronto-based bank also raised its quarterly dividend 2 percent to 96 cents.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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