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Royal Bank of Canada (RY) Stock Up 1% as Q3 Earnings Improve

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Shares of Royal Bank of Canada (RY - Free Report) gained almost 1% on the NYSE in response to third-quarter fiscal 2021 (ended Jul 31) results. The company reported adjusted net income of C$4.28 billion ($3.48 billion), up 34.6% from the prior-year quarter’s figure.

Negative provisions, and higher loans and deposit balances supported the results. Higher expenses and fall in revenues were on the downside.

On a year-over-year basis, Wealth Management, Personal & Commercial Banking, Canadian Banking and Insurance reported growth of 31.3%, 54.6%, 52.2% and 8.3%, respectively, in net income. Net income in the Investor & Treasury Services grew 15.8%, and the same at Capital Markets was up 19%. On the other hand, Corporate Support recorded net loss during the quarter.

Revenues Down, Expenses Rise

Total revenues came in at C$12.76 billion ($10.38 billion), down 1.3% on a year-over-year basis.

Net interest income came in at C$5.05 billion ($4.11 billion), down 1.7%. Non-interest income was C$7.7 billion ($6.27 billion), down almost 1%.

Non-interest expenses were C$6.42 billion ($5.22 billion), up marginally from the year-ago quarter.

The company recorded a negative provision to credit losses of C$540 million ($439.4 million) in the quarter against provisions in year-ago quarter. This primarily resulted from reduction in provisions in Personal & Commercial Banking, Capital Markets and Wealth Management.

As of Jul 31, 2021, Royal Bank of Canada’s net loans came in at C$698 billion ($559.2 billion), up 3.6% from the prior quarter. Deposits totaled C$1.08 trillion ($0.87 trillion), up 5% sequentially. Total assets were C$1.69 trillion ($1.35 trillion), up 4.8%.

Solid Capital Ratios

As of Jul 31, 2021, Royal Bank of Canada’s Tier 1 capital ratio came in at 15%, up from the prior-year quarter’s 13.3%. Total capital ratio was 16.7%, up from 15.3%.

The company’s estimated Common Equity Tier 1 (CET1) ratio came in at 13.6%, up from 12% in the prior-year quarter.

Our View

We believe improvement in loan balances and a diversified product mix will keep driving Royal Bank of Canada’s organic growth. However, lower interest rates remain a major concern.

Royal Bank Of Canada Price, Consensus and EPS Surprise

Royal Bank Of Canada Price, Consensus and EPS Surprise

Royal Bank Of Canada price-consensus-eps-surprise-chart | Royal Bank Of Canada Quote

Royal Bank of Canada currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Competitive Landscape

Bank of Montreal’s (BMO - Free Report) third-quarter fiscal 2021 (ended Jul 31) adjusted net income of C$2.29 billion ($1.86 billion) increased 82% year over year.

Barclays (BCS - Free Report) reported second-quarter 2021 net income attributable to ordinary equity holders of £2.11 billion ($2.95 billion), up significantly from the prior-year quarter.

Deutsche Bank’s (DB - Free Report) second-quarter 2021 net income of €828 million ($997.5million) increased substantially from the year-ago quarter’s €66 million. Also, the German lender reported profit before taxes of €1.17 billion ($1.4 billion) compared with the year-ago quarter’s €158 million.

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