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Royal Bank of Canada (RY) Q1 Earnings Fall on Higher Provisions
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Royal Bank of Canada’s (RY - Free Report) fiscal first-quarter and 2024 (ended Jan 31) adjusted net income of C$4.06 billion ($3.01 billion) decreased 5% from the prior-year quarter.
Results were adversely impacted by higher expenses and provisions. However, a rise in revenues and solid capital ratios acted as undermining factors.
Revenues Improve, Expenses Rise
Total revenues were C$13.49 billion ($9.99 billion), up almost 1% year over year.
Net interest income (NII) was C$6.33 billion ($4.69 billion), growing 2.1% from the prior-year quarter. Non-interest income was C$7.15 billion ($5.29 billion), relatively stable.
Non-interest expenses were C$8.32 billion ($6.16 billion), up 9.7% year over year.
The company’s provision for credit losses was C$813 million ($601.83 million), up 52.8%.
As of Jan 31, 2024, Royal Bank of Canada’s total loans were C$863.62 billion ($643.8 billion), marginally up from the prior quarter. Deposits totaled C$1.24 trillion ($0.9 trillion), up almost 1%. Total assets were C$1.97 trillion ($1.5 trillion), down 1.6%.
Capital Ratios Improve
As of Jan 31, 2023, Royal Bank of Canada’s Tier 1 capital ratio was 16.3%, up from the prior-year quarter’s 13.9%. Total capital ratio was 18.1%, up from 15.7%.
The company’s Common Equity Tier 1 ratio was 14.9%, up from 12.7% in the prior-year quarter.
Our View
Solid loan balances, higher rates and a diversified product mix will likely keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the uncertain economic outlook are major near-term concerns.
Royal Bank Of Canada Price, Consensus and EPS Surprise
Bank of Montreal’s (BMO - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$2.56 declined 16.3% year over year.
A significant rise in provision for credit losses, along with higher adjusted expenses, primarily hurt the results. However, increases in NII and non-interest income acted as tailwinds for BMO.
HSBC Holdings (HSBC - Free Report) reported a fourth-quarter 2023 pre-tax profit of $1 billion, down substantially from $5.1 billion in the prior-year quarter. The reported quarter included a $2 billion impairment charge relating to the planned sale of its retail banking operations in France and an impairment charge of $3 billion relating to its investment in China’s Bank of Communications Co., Limited.
Results reflected lower expenses driven by cost savings efforts. However, a decline in revenues and higher stable expected credit losses and other credit impairment charges acted as headwinds for HSBC.
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Royal Bank of Canada (RY) Q1 Earnings Fall on Higher Provisions
Royal Bank of Canada’s (RY - Free Report) fiscal first-quarter and 2024 (ended Jan 31) adjusted net income of C$4.06 billion ($3.01 billion) decreased 5% from the prior-year quarter.
Results were adversely impacted by higher expenses and provisions. However, a rise in revenues and solid capital ratios acted as undermining factors.
Revenues Improve, Expenses Rise
Total revenues were C$13.49 billion ($9.99 billion), up almost 1% year over year.
Net interest income (NII) was C$6.33 billion ($4.69 billion), growing 2.1% from the prior-year quarter. Non-interest income was C$7.15 billion ($5.29 billion), relatively stable.
Non-interest expenses were C$8.32 billion ($6.16 billion), up 9.7% year over year.
The company’s provision for credit losses was C$813 million ($601.83 million), up 52.8%.
As of Jan 31, 2024, Royal Bank of Canada’s total loans were C$863.62 billion ($643.8 billion), marginally up from the prior quarter. Deposits totaled C$1.24 trillion ($0.9 trillion), up almost 1%. Total assets were C$1.97 trillion ($1.5 trillion), down 1.6%.
Capital Ratios Improve
As of Jan 31, 2023, Royal Bank of Canada’s Tier 1 capital ratio was 16.3%, up from the prior-year quarter’s 13.9%. Total capital ratio was 18.1%, up from 15.7%.
The company’s Common Equity Tier 1 ratio was 14.9%, up from 12.7% in the prior-year quarter.
Our View
Solid loan balances, higher rates and a diversified product mix will likely keep driving Royal Bank of Canada’s organic growth. However, higher provisions on the uncertain economic outlook are 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 Foreign Banks
Bank of Montreal’s (BMO - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$2.56 declined 16.3% year over year.
A significant rise in provision for credit losses, along with higher adjusted expenses, primarily hurt the results. However, increases in NII and non-interest income acted as tailwinds for BMO.
HSBC Holdings (HSBC - Free Report) reported a fourth-quarter 2023 pre-tax profit of $1 billion, down substantially from $5.1 billion in the prior-year quarter. The reported quarter included a $2 billion impairment charge relating to the planned sale of its retail banking operations in France and an impairment charge of $3 billion relating to its investment in China’s Bank of Communications Co., Limited.
Results reflected lower expenses driven by cost savings efforts. However, a decline in revenues and higher stable expected credit losses and other credit impairment charges acted as headwinds for HSBC.