Royal Bank Earnings Top Expectations Despite Jump in Credit-Loss Reserves
By Robb M. Stewart
Royal Bank of Canada logged stronger-than-expected first-quarter earnings with a drop in taxes, which more than offset a jump in credit-loss provisions and weaker income across much of its business
The bank, the country's largest by market value, recorded net income of 3.58 billion Canadian dollars ($2.65 billion), or C$2.50 a share, for the three months to Jan. 31, up from C$3.13 billion, or C$2.23, a year earlier. The year-ago quarter included the C$1.05 billion impact of the federal government's Canada Recovery Dividend on the country's big banks.
On an adjusted basis, per-share earnings came in at C$2.85, ahead of the C$2.79 mean estimate of analysts polled by FactSet.
Total revenue was up 6.3% to C$13.49 billion, just missing the C$13.45 billion expected by the market.
The performance came as Canada's biggest banks faced a number of continuing headwinds, including high interest rates that have weighed on consumer and business spending and lifted borrowing costs and sluggish economic growth. Unemployment has also been ticking higher over the last year, though the country continues to add jobs, albeit at a pace that lags population growth.
Royal Bank's quarter was dented by a sharp rise in its credit-loss reserve, which increased 53% year-over-year to C$813 million, compared with a C$725 million provision for credit losses expected by analysts.
The rise reflected higher provisions in personal and commercial banking and Royal Bank's capital markets arm, partially offset by lower provisions in wealth management, it said. Royal Bank's credit-loss provision on impaired loans increased by C$328 million, which it said was due to increases in its Canadian banking portfolios and in capital markets, mainly for real estate and related activity.
The bank said its earnings before provisions and tax were down on a year earlier, thanks mainly to higher expenses and lower capital markets revenue with lower trading activity. Income for the quarter was lower for the bank's personal and commercial banking division, wealth management operation and its capital markets business, but was up in its insurance business.
The bank said it capital position remained strong, with a common equity tier 1 ratio of 14.9%, ahead of the regulatory requirement.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
February 28, 2024 06:39 ET (11:39 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.-
These Stocks Are (Still) Powering the Bull Market
-
5 Undervalued Energy Stocks to Play the AI Data Center Demand Boom
-
After Earnings, Is Lowe’s Stock a Buy, Sell, or Fairly Valued?
-
5 Stocks With the Largest Fair Value Estimate Cuts After Q1 Earnings
-
10 Stocks With the Largest Fair Value Estimate Increases After Q1 Earnings
-
Markets Brief: Inflation Back in the Spotlight
-
AI Is Booming, but Consumer Spending Is Slowing. Which Will Prevail in the Stock Market?
-
What’s Happening In the Markets This Week
-
3 Dividend Stocks for June 2024
-
After Earnings, Is Alibaba Stock a Buy, Sell, or Fairly Valued?
-
MongoDB Earnings: Slashing Valuation as Execution and Macro to Blame for Lower Guidance
-
Marvell Earnings: We Raise Our Medium-Term AI Forecast and Bring Our Valuation Up to $75
-
Zscaler Earnings: Impressive Traction in Emerging Products Drives Sales Growth for the Quarter
-
Dell Earnings: Raising Valuation on Strong AI, but the Stock Remains Severely Overvalued
-
After Earnings, Is Nvidia Stock a Buy, Sell, or Fairly Valued?
-
The 10 Best Companies to Invest in Now