RBC Beats Estimates as Provisions Help Lift Profit 2.2%

Royal Bank of Canada, the country’s second-largest lender by assets, beat analysts’ estimates after posting a 2.2 percent increase in profit that was helped by lower provisions and credit recoveries. The company raised its dividend 6 percent.

Net income for the fiscal first quarter ended Jan. 31 climbed to C$2.09 billion ($1.89 billion), or C$1.38 a share, from C$2.05 billion, or C$1.34, a year earlier, the Toronto-based lender said today in a statement. Adjusted profit, which excludes some items, was C$1.47 a share, compared with the C$1.45 average estimate of nine analysts surveyed by Bloomberg.

Royal Bank benefited from a 16 percent drop in credit provisions, helped largely by recoveries in its RBC Capital Markets investment-banking unit and from setting aside less for bad loans in the Caribbean. The firm’s consumer-lending earnings were pared by a C$60 million loss from last month’s agreement to sell its Jamaican banking operations, and C$32 million in restructuring costs for its Caribbean business.

“Although we cannot characterize this as a true stand-out quarter, the solid earnings beat and lift to the dividend should be enough to garner some investor enthusiasm today,” John Aiken, an analyst with Barclays Plc in Toronto, said in a note to investors.

P&C Banking

Royal Bank lost 61 cents, or 0.8 percent, to C$72.09 at 4:01 p.m. in Toronto. The shares have climbed 14 percent in the past year, outpacing the 12 percent advance of the six-company Standard & Poor’s/TSX Commercial Banks Index.

The lender raised its quarterly payout 4 cents a share to 71 cents.

Royal Bank set aside C$292 million for bad loans, down from C$349 million a year earlier, according to the statement. Revenue rose 7.6 percent to C$8.45 billion.

Profit from personal and commercial banking dropped 3 percent to C$1.07 billion as the Caribbean costs offset additional contributions from last year’s takeover of Ally Financial Inc.’s Canadian auto-finance and deposit business, the bank said. Insurance also fell, declining 4.3 percent to C$157 million on higher disability and weather-related claims.

Investor and treasury services, which include the global custodial business, posted profit of C$106 million, up 34 percent from a year earlier, while wealth-management earnings rose 2.6 percent to C$235 million.

‘Good Thing’

“It’s all more of the same and that’s a good thing,” said Barry Schwartz, who helps manage about C$600 million for Baskin Financial Services Inc. “No surprises is what we want.”

RBC Capital Markets’ profit increased 9.3 percent to C$505 million, fueled by fewer provisions, a lower tax rate and favorable foreign exchange, the bank said. Still, trading revenue slipped and underwriting and advisory fees fell 14 percent to C$401 million from a year earlier.

“We had a solid start to the year,” Chief Executive Officer Gordon Nixon said in a conference call after results were released. “Our results reflect continued strength in Canadian banking and higher earnings in capital markets, investor and treasury services and wealth management.”

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