Canada's largest bank beats analyst forecasts for Q3, lifted by wealth and capital markets gains
Royal Bank of Canada (RBC) posted a third-quarter profit of $6.0 billion for the quarter ended July 31, up 11% from the same period a year earlier, as wealth management and capital markets delivered their strongest contributions in years and commercial banking returned to double-digit growth.
Revenue for the quarter reached $18.54 billion, up from $16.99 billion a year ago and ahead of the $18.14 billion analyst consensus compiled by LSEG Data & Analytics.
On a diluted per-share basis, RBC earned $4.23, up 13% year-over-year. Adjusted earnings of $4.28 per diluted share also topped the $4.08 analyst estimate.
"Across the globe, Team RBC continues to raise the bar to deliver exceptional, record results," said Dave McKay, President and Chief Executive Officer of Royal Bank of Canada.
"Our third quarter earnings showcase the strength of our diversified business and our robust balance sheet."
Wealth management and capital markets lead the charge
Wealth Management posted net income of $1,442 million, up $346 million or 32% from a year ago. It's driven by higher fee-based client assets reflecting market appreciation and net sales, as well as higher net interest income from volume growth in deposits and loans.
Capital Markets net income reached $1,544 million, up $216 million or 16% year-over-year, driven by stronger equity and debt origination, higher mergers and acquisitions activity across most regions, and higher equity trading revenue globally.
Together, these two segments accounted for the bulk of the quarter's earnings momentum.
Commercial Banking also returned to form, with net income of $936 million — up $100 million or 12% from a year ago — driven by average deposit volume growth of 9% and loan volume growth of 4%, alongside lower provisions for credit losses.
That rebound is notable for brokers, given commercial lending's sensitivity to Canada's trade and rate environment over the past several quarters.
Credit losses rise as mortgage renewals weigh on outlook
The bank's total provision for credit losses (PCL) reached $1.0 billion in the quarter, up $119 million or 14% from the same period last year, driven by higher provisions in capital markets and personal banking.
The PCL on impaired loans ratio stood at 35 basis points, down 1 basis point from a year ago.
Personal Banking net income of $1,923 million was slightly lower, down $15 million or 1% from a year ago. Higher volume growth and spreads were offset by increased non-interest expenses, including staff costs and technology investment, and higher PCL.
RBC's capital position remained solid, with a Common Equity Tier 1 (CET1) ratio of 13.5% at July 31, with $4.0 billion returned to shareholders during the quarter, including $1.6 billion in share buybacks and $2.4 billion in common share dividends.
RBC joined CIBC and Toronto-Dominion Bank in releasing third-quarter results Thursday, rounding out Canada's Big Six earnings season after National Bank, Bank of Montreal, and Scotiabank reported earlier in the week.
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