Royal Bank of Canada
) reported fiscal first-quarter 2013 net income from continuing
operations of C$2.1 billion ($2.1 billion), beating the year-ago
earnings of C$1.9 billion ($1.9 billion). This reflects a
year-over-year increase of 11%.
Results reflect a rise in revenue, aided by higher net interest
and non-interest income. Yet, the deteriorating credit quality
and elevated non-interest expenses were the headwinds.
Performance in Detail
Total revenues in the quarter reached C$7.9 billion ($7.8
billion), rising 4% from C$7.6 billion ($7.5 billion) reported in
the comparable prior-year period. Revenue growth was mainly due
to higher interest as well as non-interest income.
Net interest income came in at C$3.3 billion ($3.3 billion), up
6.7% from C$3.0 billion ($3.0 billion) reported in the comparable
prior-year period. Non-interest income stood at C$4.6 billion
($4.6 billion), almost in line with the year-ago quarter's level.
For the quarter, non-interest expenses were recorded at C$2.1
billion ($2.1 billion), up 11.4% from C$1.9 billion ($1.9
billion) recorded in the prior-year quarter. The increase was
marked mainly by higher human resources, occupancy and equipment
Total provision for credit losses stood at C$349 million ($347
million) in the quarter, up 31% from the year-ago quarter,
primarily due to provisions on a couple of accounts in the
wholesale portfolio, partly offset by lower write-offs related to
the credit card portfolio.
As of Jan 31, 2012, Royal Bank of Canada reported total loans of
C$382.9 billion ($383.7 billion), up 8% from the prior year.
Moreover, deposits climbed to C$514.6 billion ($515.7 billion) up
5% as of Jan 31, 2012. Total assets were C$837.6 billion ($839.5
billion), up 3% as of Jan 31, 2012.
As of Jan 31, 2013, Royal Bank of Canada's Tier 1 capital ratio
came in at 11.5%, down 70 basis points (bps) from the prior-year
quarter. Total capital ratio was 14.3%, down 2 bps year over
The company's estimated pro-forma Basel III common equity Tier
1 ratio was about 9.3%, up 90 basis points compared with 8.4%
last quarter, reflecting the delayed regulatory implementation of
the credit valuation adjustment (CVA) capital requirements and
strong internal capital generation.
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Concurrent with the earnings release, the company's board of
directors approved an increase in quarterly dividend of 5%, to 63
cents per share. The increased dividend will be paid on and after
May 24, 2013, to shareholders of record at the close of business
on Apr 25, 2013.
Going forward, we expect Royal Bank of Canada's strong business
model, diversified product mix and sturdy capital position to
boost its bottom line. However, a persistent low interest rate
environment, weak economic recovery and stringent regulatory
requirements will remain a drag on its financials.
Royal Bank of Canada currently carries a Zacks Rank #3 (Hold).
Foreign banks that are performing well include
Bank of China Limited
Banco do Brasil S.A.
Credit Suisse Group
). Bank of China carries a Zacks Rank #1 (Strong Buy), while the
other 2 stocks carry a Zacks Rank #2 (Buy).