Expenses Continue to Climb for Royal Bank of Canada in First-Quarter Results

Wide-moat Royal Bank of Canada, or RBC, reported OK fiscal first-quarter earnings. Adjusted earnings per share were CAD 3.10, an increase of 8% year over year and 2% quarter over quarter. RBC recently acquired wealth manager Brewin Dolphin in September, which helped boost results. Results showed net interest income starting to stall out, a pattern we see across the industry, while expenses rose faster than expected, up 13% year over year excluding Brewin Dolphin. This is likely to be the highest expense growth rate we will see this quarter among the Canadian banks. Management is recommitting to reducing expense growth for the rest of the year, however, it seems that even with a slowdown in growth, expenses are set to exceed our previous expectations. This was similar in theme to last quarter, where expenses surprised to the upside. With inflation beginning to recede, we’re hoping these sorts of expense risks will also start to recede, but we aren’t completely out of the woods yet.