Analyst Note| Eric Compton, CFA |
Wide-moat-rated Royal Bank of Canada reported excellent fiscal first-quarter earnings. Adjusted earnings per share were CAD 2.69, soundly beating FactSet consensus of CAD 1.79. This represented year-over-year EPS growth of 10%, primarily driven by fee growth of 4% and a material decline in provisioning. Provisioning was back to its lowest level in years as RBC released nearly CAD 100 million in reserves on performing loans. These results align with our view that the Canadian banks will be fine and that better results should be returning in 2021. So far, results have been even better than expected. We are increasing our fair value estimate to CAD 116/$92 per share from CAD 112/$86. As the pandemic has further played out and we are more confident in vaccine distribution and economic resilience, we are also lowering our uncertainty rating back to medium from high.