We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Royal Bank of Canada Q2 Earnings and Revenues Up Y/Y
Read MoreHide Full Article
Royal Bank of Canada (RY - Free Report) reported second-quarter fiscal 2016 (ended Apr 30) net income of C$2.6 billion ($1.96 billion), up 3% from the prior-year quarter. Excluding one-time items in the prior-year quarter, net income was up 7%.
Elevated loans and deposits balances along with higher revenues reflected organic growth. However, a rise in non-interest expenses and provisions were a concern.
Performance in Detail
Total revenue was C$9.5 billion ($7.16 billion), up 8% on a year-over-year basis. Revenue was driven by higher net interest and non-interest income.
Net interest income came in at C$4.0 billion ($3.0 billion), up 11.1% from the prior-year quarter. Non-interest income was C$5.5 billion ($4.1 billion), up 3.8% year over year.
Non-interest expenses were C$4.9 billion ($3.7 billion), up 4.3% from the year-ago quarter. The rise was primarily due to an increase in almost all the components.
During the quarter, Personal & Commercial Banking, Wealth Management, Insurance and Canadian Banking segments’ net income reported a year-over-year rise of 8.1%, 42.4%, 43.9% and 4.2%, respectively. However, Investor & Treasury Services and Capital Markets segments’ net income reported a year-over-year decline of 12.6% and 6.7%, respectively. Notably, the Corporate Support segment reported net loss as compared with net income in the prior-year quarter.
As of Apr 30, 2016, Royal Bank of Canada’s total average loans and acceptances stood at C$524.2 billion ($418.2 billion), up 13.7% from the prior-year quarter. Moreover, deposits were C$741.5 billion ($591.5 billion), up 13.8% year over year. Total assets were C$1.15 trillion ($0.92 trillion), up 11.7% from the prior-year quarter.
Total provision for credit losses was C$460 million ($367 million) in the quarter, up 63.1% year over year, mainly due to higher provisions in Capital Markets, aided by elevated provisions in the oil and gas and utilities sectors. Moreover, provisions in Personal & Commercial Banking and Canadian Banking increased.
Capital Position
As of Apr 30, 2016, Royal Bank of Canada’s Tier 1 capital ratio came in at 11.9%, up 30 basis points from the prior-year quarter. Total capital ratio was 14%, up 50 basis points year over year.
The company’s estimated Basel III Common Equity Tier 1 (CET1) ratio stood at 10.3%, up 30 basis points year over year.
Our Viewpoint
We believe a consistent improvement in the top line and diversified product mix will help Royal Bank of Canada grow organically. Further, the export-driven economy of Canada is expected to benefit from the gradual recovery of the U.S. economy.
However, a persistent low interest rate environment and overall sluggishness in the economy, coupled with stringent regulatory reforms, keep us skeptical about the company’s sustainable growth over the long term.
Royal Bank of Canada currently has a Zacks Rank #2 (Buy).
Performance of Other Foreign Banks
Deutsche Bank AG (DB - Free Report) reported net income of €236 million ($260.3 million) in the first quarter of 2016, down 57.8% year over year. Income before income taxes came in at €579 million ($638.6 million), down 60.9% year over year. The quarterly results were impacted by lower revenues and higher provisions. However, the reduction in non-interest expenses was a positive factor.
The Royal Bank of Scotland Group plc reported first-quarter 2016 loss attributable to shareholders of £968 million ($1.4 billion) as compared with a loss of £459 million in the prior-year quarter. Results included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the U.K. Government.
UBS Group AG (UBS - Free Report) reported first-quarter 2016 net profit attributable to shareholders of CHF 707 million ($711.7 million), down 64.2% year over year. The results were impacted by a 53% year-over-year decrease in net trading income and 7% drop in net fee and commission income, partially offset by a 5% increase in net interest income.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Royal Bank of Canada Q2 Earnings and Revenues Up Y/Y
Royal Bank of Canada (RY - Free Report) reported second-quarter fiscal 2016 (ended Apr 30) net income of C$2.6 billion ($1.96 billion), up 3% from the prior-year quarter. Excluding one-time items in the prior-year quarter, net income was up 7%.
Elevated loans and deposits balances along with higher revenues reflected organic growth. However, a rise in non-interest expenses and provisions were a concern.
Performance in Detail
Total revenue was C$9.5 billion ($7.16 billion), up 8% on a year-over-year basis. Revenue was driven by higher net interest and non-interest income.
Net interest income came in at C$4.0 billion ($3.0 billion), up 11.1% from the prior-year quarter. Non-interest income was C$5.5 billion ($4.1 billion), up 3.8% year over year.
Non-interest expenses were C$4.9 billion ($3.7 billion), up 4.3% from the year-ago quarter. The rise was primarily due to an increase in almost all the components.
During the quarter, Personal & Commercial Banking, Wealth Management, Insurance and Canadian Banking segments’ net income reported a year-over-year rise of 8.1%, 42.4%, 43.9% and 4.2%, respectively. However, Investor & Treasury Services and Capital Markets segments’ net income reported a year-over-year decline of 12.6% and 6.7%, respectively. Notably, the Corporate Support segment reported net loss as compared with net income in the prior-year quarter.
As of Apr 30, 2016, Royal Bank of Canada’s total average loans and acceptances stood at C$524.2 billion ($418.2 billion), up 13.7% from the prior-year quarter. Moreover, deposits were C$741.5 billion ($591.5 billion), up 13.8% year over year. Total assets were C$1.15 trillion ($0.92 trillion), up 11.7% from the prior-year quarter.
Total provision for credit losses was C$460 million ($367 million) in the quarter, up 63.1% year over year, mainly due to higher provisions in Capital Markets, aided by elevated provisions in the oil and gas and utilities sectors. Moreover, provisions in Personal & Commercial Banking and Canadian Banking increased.
Capital Position
As of Apr 30, 2016, Royal Bank of Canada’s Tier 1 capital ratio came in at 11.9%, up 30 basis points from the prior-year quarter. Total capital ratio was 14%, up 50 basis points year over year.
The company’s estimated Basel III Common Equity Tier 1 (CET1) ratio stood at 10.3%, up 30 basis points year over year.
Our Viewpoint
We believe a consistent improvement in the top line and diversified product mix will help Royal Bank of Canada grow organically. Further, the export-driven economy of Canada is expected to benefit from the gradual recovery of the U.S. economy.
However, a persistent low interest rate environment and overall sluggishness in the economy, coupled with stringent regulatory reforms, keep us skeptical about the company’s sustainable growth over the long term.
Royal Bank of Canada currently has a Zacks Rank #2 (Buy).
Performance of Other Foreign Banks
Deutsche Bank AG (DB - Free Report) reported net income of €236 million ($260.3 million) in the first quarter of 2016, down 57.8% year over year. Income before income taxes came in at €579 million ($638.6 million), down 60.9% year over year. The quarterly results were impacted by lower revenues and higher provisions. However, the reduction in non-interest expenses was a positive factor.
The Royal Bank of Scotland Group plc reported first-quarter 2016 loss attributable to shareholders of £968 million ($1.4 billion) as compared with a loss of £459 million in the prior-year quarter. Results included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the U.K. Government.
UBS Group AG (UBS - Free Report) reported first-quarter 2016 net profit attributable to shareholders of CHF 707 million ($711.7 million), down 64.2% year over year. The results were impacted by a 53% year-over-year decrease in net trading income and 7% drop in net fee and commission income, partially offset by a 5% increase in net interest income.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>