Shares of Royal Bank of Canada (RY - Free Report) gained 1.6% on the NYSE following the release of its third-quarter fiscal 2023 (ended Jul 31) results. Adjusted net income of C$4.02 billion ($3.01 billion) increased 10.9% from the prior-year quarter.
Results were aided by an improvement in revenues. However, higher expenses and provisions were the undermining factors. In the reported quarter, the company’s capital ratios improved.
Revenues Improve, Expenses Rise
Total revenues were C$14.49 billion ($10.86 billion), up 19.4% year over year.
Net interest income (NII) was C$6.29 billion ($4.71 billion), growing 6.7% from the prior-year quarter. Non-interest income was C$8.20 billion ($6.14 billion), which rose 31.4% year over year.
Non-interest expenses were C$7.86 billion ($5.89 billion), up 23.1% year over year.
The company’s provision for credit losses was C$616 million ($461.6 million), up 81.2% from the year-ago quarter.
As of Jul 31, 2023, Royal Bank of Canada’s total loans were C$840.21 billion ($635.94 billion), up marginally from the prior quarter. Deposits totaled C$1.22 trillion ($0.92 trillion), up marginally sequentially. Total assets were C$1.96 trillion ($1.48 trillion), up almost 1%.
Capital Ratios Improve
As of Jul 31, 2023, Royal Bank of Canada’s Tier 1 capital ratio was 15.4%, up from the prior-year quarter’s 14.3%. Total capital ratio was 17.3%, up from 15.9%.
The company’s Common Equity Tier 1 ratio was 14.1%, up from 13.1% in the prior-year quarter.
Our View
Improvement in loan balances, rising rates and a diversified product mix will likely keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the worsening economic outlook is a major near-term concern.
Royal Bank of Canada currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of U.S. Banks
Bank OZK’s (OZK - Free Report) second-quarter 2023 (ended Jun 30) earnings per share of $1.47 missed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a rise of 33.6% from the year-earlier quarter.
Results were positively impacted by an improvement in NII, driven by higher rates and loan balances. However, rising expenses and a rise in provision for credit losses on a challenging economic backdrop were concerning for OZK.
BankUnited, Inc.’s (BKU - Free Report) second-quarter 2023 earnings per share of 78 cents missed the Zacks Consensus Estimate of 79 cents by a penny. The bottom line declined 4.9% from the prior-year quarter.
BKU’s results were adversely impacted by an increase in operating expenses, lower deposit and loan balance, and a decline in NII. However, higher non-interest income and lower provision for credit losses acted as tailwinds.
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Shares of Royal Bank of Canada (RY - Free Report) gained 1.6% on the NYSE following the release of its third-quarter fiscal 2023 (ended Jul 31) results. Adjusted net income of C$4.02 billion ($3.01 billion) increased 10.9% from the prior-year quarter.
Results were aided by an improvement in revenues. However, higher expenses and provisions were the undermining factors. In the reported quarter, the company’s capital ratios improved.
Revenues Improve, Expenses Rise
Total revenues were C$14.49 billion ($10.86 billion), up 19.4% year over year.
Net interest income (NII) was C$6.29 billion ($4.71 billion), growing 6.7% from the prior-year quarter. Non-interest income was C$8.20 billion ($6.14 billion), which rose 31.4% year over year.
Non-interest expenses were C$7.86 billion ($5.89 billion), up 23.1% year over year.
The company’s provision for credit losses was C$616 million ($461.6 million), up 81.2% from the year-ago quarter.
As of Jul 31, 2023, Royal Bank of Canada’s total loans were C$840.21 billion ($635.94 billion), up marginally from the prior quarter. Deposits totaled C$1.22 trillion ($0.92 trillion), up marginally sequentially. Total assets were C$1.96 trillion ($1.48 trillion), up almost 1%.
Capital Ratios Improve
As of Jul 31, 2023, Royal Bank of Canada’s Tier 1 capital ratio was 15.4%, up from the prior-year quarter’s 14.3%. Total capital ratio was 17.3%, up from 15.9%.
The company’s Common Equity Tier 1 ratio was 14.1%, up from 13.1% in the prior-year quarter.
Our View
Improvement in loan balances, rising rates and a diversified product mix will likely keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the worsening economic outlook is a major near-term concern.
Royal Bank of Canada currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of U.S. Banks
Bank OZK’s (OZK - Free Report) second-quarter 2023 (ended Jun 30) earnings per share of $1.47 missed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a rise of 33.6% from the year-earlier quarter.
Results were positively impacted by an improvement in NII, driven by higher rates and loan balances. However, rising expenses and a rise in provision for credit losses on a challenging economic backdrop were concerning for OZK.
BankUnited, Inc.’s (BKU - Free Report) second-quarter 2023 earnings per share of 78 cents missed the Zacks Consensus Estimate of 79 cents by a penny. The bottom line declined 4.9% from the prior-year quarter.
BKU’s results were adversely impacted by an increase in operating expenses, lower deposit and loan balance, and a decline in NII. However, higher non-interest income and lower provision for credit losses acted as tailwinds.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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