RBC earnings grow on wealth and loan growth; Flags Mortgage Slowdown | Investment News


TORONTO (Reuters) – Royal Bank of Canada launched first-quarter results for Canadian lenders with a stronger-than-expected 6% rise in adjusted profit, driven by wealth management and loan growth.

RBC executives expect mortgage growth to slow to high numbers by the end of the year, and low to medium numbers by the end of 2023, as the central bank prepares to raise interest rates as early as next week. Mortgages rose about 11% in the first quarter and outpaced business loans and credit card balances.

However, Royal Bank is expected to benefit from rate hikes, with a 25 basis point rise in short-term rates, which will translate into more than C$175 million ($136 million) in additional revenue over 12 months. , the leaders said.

Analysts and investors had expected a somewhat softer first quarter for Canada’s big banks, after several periods of better-than-expected results, due in part to higher spending expectations and declines in financial market earnings.

Canada’s largest lender by market capitalization reported adjusted earnings of C$2.87 per share, up from C$2.69 a year earlier, versus analysts’ estimates of C$2.73 per share. action.

Earnings growth was also driven by capital markets earnings, which beat expectations, although unit earnings fell from a year ago, lower securities trading revenue at fixed income offsetting the record performance of corporate and investment banks.

“Results were quite strong and set the bank up for a good run for the rest of the year, as planned rate increases should fuel further revenue growth, offsetting any potential volume declines,” the statement wrote. Barclays analyst John Aiken in a note.

RBC shares fell 2% to C$137.60 in early trading in Toronto, compared with a 1.5% decline in the benchmark Toronto equity index. Markets around the world were rocked by Russia’s invasion of Ukraine.

Royal Bank’s non-interest expense was little changed from a year and a quarter ago, but costs excluding variable compensation are expected to grow at the upper end of the low-single-digit range projected by the bank, executives said on a call with analysts.

Profits for Royal Bank’s personal and commercial banking unit rose 10% year-on-year and wealth management profits jumped 24%, helped by higher lending volumes in Canada and the increase in assets and release of provisions in the latter’s US unit.

The positive numbers offset an 11 basis point year-over-year decline in net interest margins and a 3% decline in profits at its capital markets unit, which had posted record profits a year earlier. earlier.

($1 = 1.2838 Canadian dollars)

(Reporting by Nichola Saminather in Toronto and Manya Saini in BengaluruEditing by Krishna Chandra Eluri, David Goodman, Susan Fenton and Jonathan Oatis)

Copyright 2022 Thomson Reuters.


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