Solid Fiscal Fourth-Quarter Results for Royal Bank of Canada; Focus on Future Revenue Growth

Wide-moat rated Royal Bank of Canada reported solid fiscal fourth-quarter earnings. Adjusted earnings per share were CAD 2.71, coming in slightly below Factset consensus estimates for CAD 2.81. It was a small miss, and given that loan loss reserves are still moving around, we wouldn’t read into it too much. In fact, we were generally encouraged by results and management’s commentary on the call. Net interest income was relatively stagnant quarter over quarter, however, we expect this to change in 2022 as rate hikes in Canada and the U.S. are very likely to play out, and we also expect some decent loan growth in 2022. Further, management admitted that it only included two rate hikes from Canada and zero hikes from the U.S. in its own internal projections, which we think should be easy to beat. We expect we’ll start to lap 2020’s NII level in 2022 given this setup.