Photographer: Ben Nelms/Bloomberg

RBC Profit Misses Estimates as Capital Markets Revenue Falls

  • Higher oil-and-gas provisions crimped results for lender
  • Royal Bank raises its quarterly dividend 2.5% to 81 cents

Royal Bank of Canada posted fiscal first-quarter profit that missed analysts’ estimates as earnings from insurance and capital markets fell and the lender set aside more money for soured energy loans. The bank raised its quarterly dividend 2.5 percent.

Net income for the period ended Jan. 31 fell 0.4 percent to C$2.45 billion ($1.77 billion), or C$1.58 a share, from C$2.46 billion, or C$1.65, a year earlier, the Toronto-based firm said Wednesday in a statement. Adjusted profit, which excludes some items, was C$1.64 a share, trailing the C$1.66 average estimate of 14 analysts surveyed by Bloomberg. Revenue fell 3 percent to C$9.36 billion.

Profit from its RBC Capital Markets business dropped 4 percent to C$570 million from a year earlier on lower trading revenue and investment-banking fees and higher provisions for energy companies. Insurance profit fell 29 percent to C$131 million, partly on higher claims costs, the bank said.

“Even though they have a well diversified business mix, the earnings are still slightly down due to lower levels of capital markets and higher levels of loan losses," Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier Inc., which manages about C$5 billion, including Royal Bank shares. “That’s still going to be a factor in the next couple of quarters."

City National

Personal and commercial banking had record profit of C$1.29 billion, and wealth management net income jumped 32 percent to C$303 million after adding contributions from the November purchase of Los Angeles-based City National Corp., Royal Bank’s largest-ever acquisition. The lender increased its quarterly dividend to 81 cents a share from 79 cents.

Royal Bank shares have fallen 6.1 percent this year, trailing the 4.4 percent decline of the eight-company Standard & Poor’s/TSX Composite Commercial Banks Index.

The lender set aside C$410 million for bad loans, up 52 percent from a year earlier. Impaired loans to oil and gas firms rose to C$310 million from C$156 million in the fourth quarter and C$5 million a year earlier.

Royal Bank is the third Canadian lender to post quarterly results. Bank of Montreal, Canada’s fourth-largest lender, and Montreal-based National Bank of Canada on Tuesday posted profit that topped analysts’ estimates. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce are scheduled to report Thursday, followed by Bank of Nova Scotia on March 1.

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