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Royal Bank of Canada (RY) Stock Down 1% as Q2 Earnings Fall
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Shares of Royal Bank of Canada (RY - Free Report) have lost almost 1% on the NYSE since the release of its second-quarter fiscal 2023 (ended Apr 30) results last week. Adjusted net income of C$3.76 billion ($2.78 billion) declined 13% from the prior-year quarter.
Results were adversely impacted by a rise in provisions amid a worsening economic backdrop. Higher expenses also acted as a headwind. However, an increase in revenues and solid loans and deposit balances were tailwinds.
Revenues & Expenses Rise
Total revenues were C$12.52 billion ($9.24 billion), jumping 20.5% year over year.
Net interest income came in at C$6.1 billion ($4.5 billion), growing 15.6%. Non-interest income was C$7.42 billion ($5.48 billion), which surged 24.8%.
Non-interest expenses were C$7.94 billion ($5.86 billion), up 16.5%.
The company’s provision for credit losses was C$600 million ($442.9 million) in the quarter against negative provisions in the year-ago quarter. This was largely due to unfavorable changes in the overall macroeconomic outlook.
As of Apr 30, 2023, Royal Bank of Canada’s net loans came in at C$831.2 billion ($613.3 billion), up almost 1% from the prior quarter. Deposits totaled C$1.21 trillion ($0.89 trillion), up marginally. Total assets were C$1.94 trillion ($1.43 trillion), up slightly.
Capital Ratios Improve
As of Apr 30, 2023, Royal Bank of Canada’s Tier 1 capital ratio came in at 14.9%, up from the prior-year quarter’s 14.4%. Total capital ratio was 16.8%, up from 16%.
The company’s Common Equity Tier 1 ratio came in at 13.7%, up from 13.2% in the prior-year quarter.
Our View
Improvement in loan balances, rising rates and a diversified product mix will keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the worsening economic outlook and weak capital markets remain major near-term concerns.
Royal Bank Of Canada Price, Consensus and EPS Surprise
Bank of Montreal’s (BMO - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93 declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
Toronto-Dominion Bank’s (TD - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$3.75 billion ($2.77 billion) increased 1% from the prior-year quarter.
The company recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, TD’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.
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Royal Bank of Canada (RY) Stock Down 1% as Q2 Earnings Fall
Shares of Royal Bank of Canada (RY - Free Report) have lost almost 1% on the NYSE since the release of its second-quarter fiscal 2023 (ended Apr 30) results last week. Adjusted net income of C$3.76 billion ($2.78 billion) declined 13% from the prior-year quarter.
Results were adversely impacted by a rise in provisions amid a worsening economic backdrop. Higher expenses also acted as a headwind. However, an increase in revenues and solid loans and deposit balances were tailwinds.
Revenues & Expenses Rise
Total revenues were C$12.52 billion ($9.24 billion), jumping 20.5% year over year.
Net interest income came in at C$6.1 billion ($4.5 billion), growing 15.6%. Non-interest income was C$7.42 billion ($5.48 billion), which surged 24.8%.
Non-interest expenses were C$7.94 billion ($5.86 billion), up 16.5%.
The company’s provision for credit losses was C$600 million ($442.9 million) in the quarter against negative provisions in the year-ago quarter. This was largely due to unfavorable changes in the overall macroeconomic outlook.
As of Apr 30, 2023, Royal Bank of Canada’s net loans came in at C$831.2 billion ($613.3 billion), up almost 1% from the prior quarter. Deposits totaled C$1.21 trillion ($0.89 trillion), up marginally. Total assets were C$1.94 trillion ($1.43 trillion), up slightly.
Capital Ratios Improve
As of Apr 30, 2023, Royal Bank of Canada’s Tier 1 capital ratio came in at 14.9%, up from the prior-year quarter’s 14.4%. Total capital ratio was 16.8%, up from 16%.
The company’s Common Equity Tier 1 ratio came in at 13.7%, up from 13.2% in the prior-year quarter.
Our View
Improvement in loan balances, rising rates and a diversified product mix will keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the worsening economic outlook and weak capital markets remain major near-term concerns.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Canadian Banks
Bank of Montreal’s (BMO - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93 declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
Toronto-Dominion Bank’s (TD - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$3.75 billion ($2.77 billion) increased 1% from the prior-year quarter.
The company recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, TD’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.