Good Start to Year for Revenue for Royal Bank of Canada; Rate Hikes on Their Way

Wide-moat rated Royal Bank of Canada reported solid fiscal first-quarter earnings. Adjusted earnings per share were CAD 2.87, coming in above the Factset consensus estimate for CAD 2.70. The bank’s results were strong across the board, producing a return on equity of 17%, with net interest income up 5% year over year, fees up 12% (after adjustments), and expenses only up 1%. This led to 7% growth in diluted EPS year over year. Expense expectations are still for something close to 4% growth for the year, which is what we have penciled in. We also have additional net interest income growth in our projections, driven by rate hikes throughout the year. Fees are coming in a bit stronger than we may have foreseen, but given generally how close the rest of the results are with our projections, we do not plan any material changes to our fair value estimate of CAD 141/USD 110.