RBC Powers Up Dividend as Markets Boost Earnings

Updated on
  • Wealth management and capital markets lead profit increase
  • Royal Bank earnings helped by sale of U.S. payments business

RBC Raises Dividend After Profit Tops Analysts' Estimates

Royal Bank of Canada, the country’s largest lender by assets, raised its dividend after posting first-quarter profit that beat analysts’ expectations, led by higher wealth-management earnings and a surge in trading revenue.

Net income for the period ended Jan. 31 rose 24 percent to C$3.03 billion ($2.31 billion), or C$1.97 a share, from C$2.45 billion, or C$1.58, a year earlier, the Toronto-based bank said Friday in a statement. Profit excluding some items was C$1.87 a share, compared with the C$1.76 average estimate of 14 analysts surveyed by Bloomberg. The bank increased its quarterly payout by 4.8 percent to 87 cents a share.

“It was a pretty good quarter overall,” Jim Shanahan, an analyst with Edward Jones & Co., said in a telephone interview. “Wealth management is a positive, especially given the lack of loan growth, and it seems like an appropriate time in the cycle to be pivoting toward that business.”

Royal Bank continues to benefit from its 2015 takeover of City National, with contributions from the Los Angeles-based “bank to the stars” helping fuel a 42 percent increase in wealth-management earnings. Chief Executive Officer David McKay has focused on expanding private wealth and commercial banking in the U.S., where the economy is outperforming Canada.

Royal Bank shares fell 1.1 percent to C$97.19 at 9:44 a.m. in Toronto, matching the decline of the eight-company S&P/TSX Commercial Banks Index.

Total revenue rose 2 percent to C$9.55 billion, missing analysts’ C$9.7 billion estimate. The lender set aside C$294 million for bad loans, down 28 percent from a year earlier when an energy slump fueled a rise in soured oil-and-gas debt.

Sale Gain

RBC’s earnings were helped by a C$212 million gain from the November sale of a U.S. payments business jointly owned with Bank of Montreal. Excluding the gain, overall adjusted earnings rose 15 percent, according to the statement.

Personal and commercial banking climbed 23 percent to C$1.59 billion, bolstered by selling the payments business. Excluding the gain, profit rose 7 percent to C$1.38 billion, Royal Bank said. Wealth-management profit jumped 42 percent to C$430 million on a rise in fee-based client assets and transaction revenue. Earnings from RBC Capital Markets climbed 16 percent to C$662 million as trading revenue and investment-banking fees rose and provisions for soured loans declined.

Royal Bank said separately that Jennifer Tory, group head of personal and commercial banking, will become chief administrative officer and assume responsibility for brand and communications. Neil McLaughlin, executive vice president of business financial services, will take on Tory’s role on May 1.

Royal Bank is the second Canadian lender to report quarterly results following Canadian Imperial Bank of Commerce, which posted profit Thursday that beat estimates and raised its dividend. The country’s other banks are scheduled to report results next week.

(Updates with share price in fifth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE