Royal Bank of Canada 2Q Profit Slides as Provisions for Credit Losses Mount

By Adriano Marchese

Royal Bank of Canada on Thursday reported better-than-expected revenue in its fiscal second-quarter but a decline in profit after booking a larger provision for credit losses.

For the period ended April 30, the Canadian financial institution reported a 14% decline in net income to 3.65 billion Canadian dollars ($2.69 billion), or C$2.58 a share, compared with C$4.25 billion, or C$2.96 a share in the prior-year period.

Adjusted earnings fell to C$2.65 a share from C$2.99 a year ago. According to FactSet, analysts were expecting a decline, but not as sharp, forecasting a fall to C$2.79 a share.

Total revenue rose to C$13.52 billion from C$11.22 billion, beating analyst forecasts for the period, which had pegged the figure at C$12.86 billion.

RBC's main segments mostly saw decreases in the quarter, while its capital markets segment posted a 10% increase in net income to C$939 million. It cites higher revenue in corporate and investment banking and a lower effective tax rate.

Total provision on credit losses was C$600 million, compared with an allowance of C$342 million a year ago. For the swing, RBC largely blames unfavorable changes in its credit quality and the challenged macroeconomic outlook.

Common equity tier 1 ratio, which is used to measure the company's core capital equity against its risky assets like mortgages and loans, was 13.7%, which represents a rise of 100 basis points from last quarter.

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

May 25, 2023 06:52 ET (10:52 GMT)

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