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Royal Bank of Canada (RY) Q3 Earnings Improve Y/Y, Costs Rise
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Royal Bank of Canada’s (RY - Free Report) third-quarter fiscal 2019 (ended Jul 31, 2019) net income was C$3.3 billion ($2.5 billion), up 5% from the prior-year quarter.
The bank witnessed higher revenues and strong capital position in the quarter. Notably, growth in loans and deposit balances were positives. However, rise in expenses and higher provisions adversely impacted results to some extent.
Furthermore, on a year-over-year basis, Personal & Commercial Banking, Wealth Management, Insurance, and Canadian Banking reported rise of 10%, 11%, 29% and 8%, respectively, in quarterly net income. Nevertheless, net income in Investor & Treasury Services and Capital Markets declined 24% and 6%, respectively. The Corporate Support segment reported net loss against net income reported in the prior-year quarter.
Revenues Improve, Expenses & Provisions Rise
Total revenues were C$11.5 billion ($8.7 billion) in the May-July quarter, up 5% on a year-over-year basis. Revenues were driven by higher net interest income as well as non-interest income.
Net interest income was C$5 billion ($3.8 billion), up 10% from the prior-year quarter. Non-interest income was C$6.5 billion ($4.9 billion), up 1% year over year.
Non-interest expenses were C$6 billion ($4.5 billion), up 2% from the year-ago quarter. The upswing primarily resulted from rise in almost all the components, except for professional fees and other expenses.
As of Jul 31, 2019, Royal Bank of Canada’s total loans were C$615.5 billion ($466.4 billion), up 9% from the prior-year quarter. Additionally, deposits totaled C$881.2 billion ($667.8 billion), up 6% year over year. Total assets were C$1.41 trillion ($1.07 trillion), up 9% from the year-earlier quarter.
Total provision for credit losses was C$425 million ($240.7 million) in the quarter, up 23% year over year mainly due to elevated provisions in Personal & Commercial Banking, Wealth Management, and Capital Markets.
Strong Capital Position
As of Jul 31, 2019, Royal Bank of Canada’s Tier 1 capital ratio was 13%, up from the prior-year quarter’s 12.3%. Total capital ratio was 15%, up from 14.1% reported in the year-earlier quarter.
The company’s estimated Common Equity Tier 1 (CET1) ratio was 11.9%, up 80 basis points from the prior-year quarter.
Dividend Update
Concurrently, the company announced a quarterly dividend of $1.05 per share, marking a 3% hike from the prior payout. The dividend will be paid on Nov 22 to shareholders of record as of Oct 24.
Our Viewpoint
We believe that continued improvement in loan balances and diversified product mix will drive Royal Bank of Canada’s organic growth. However, stringent regulatory reforms and escalating expenses keep us skeptical about the company’s sustainable growth over the long term.
Royal Bank Of Canada Price, Consensus and EPS Surprise
Deutsche Bank (DB - Free Report) reported second-quarter 2019 net loss of €3.15 billion ($3.54 billion) against net income of €401 million in the year-ago quarter. Also, the German lender incurred loss before taxes of €946 million ($1.06 billion).
UBS Group AG (UBS - Free Report) reported second-quarter 2019 net profit attributable to shareholders of $1.39 billion, up nearly 1% from the prior-year quarter. Notably, the company’s performance reflects lower expenses. Also, results were supported by rise in net fee and commission income (up 1% year over year), partially offset by lower net interest income (down 15%).
HSBC Holdings (HSBC - Free Report) recorded second-quarter 2019 pre-tax profit of $6.2 billion, up 4% year over year. The increase was due to rise in revenues.
It’s Illegal in 42 States, But Investors Will Make Billions Legally
In addition to the companies you read about above, today you get details on the newly-legalized industry that’s tapping into a “habit” that Americans spend an estimated $150 billion on every year.
That’s twice as much as they spend on marijuana, legally or otherwise.
Zacks special report revealing how investors can profit from this new opportunity. As more states legalize this activity, the industry could expand by as much as 15X. Zacks’ has just released a Special Report revealing 5 top stocks to watch in this space.
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Royal Bank of Canada (RY) Q3 Earnings Improve Y/Y, Costs Rise
Royal Bank of Canada’s (RY - Free Report) third-quarter fiscal 2019 (ended Jul 31, 2019) net income was C$3.3 billion ($2.5 billion), up 5% from the prior-year quarter.
The bank witnessed higher revenues and strong capital position in the quarter. Notably, growth in loans and deposit balances were positives. However, rise in expenses and higher provisions adversely impacted results to some extent.
Furthermore, on a year-over-year basis, Personal & Commercial Banking, Wealth Management, Insurance, and Canadian Banking reported rise of 10%, 11%, 29% and 8%, respectively, in quarterly net income. Nevertheless, net income in Investor & Treasury Services and Capital Markets declined 24% and 6%, respectively. The Corporate Support segment reported net loss against net income reported in the prior-year quarter.
Revenues Improve, Expenses & Provisions Rise
Total revenues were C$11.5 billion ($8.7 billion) in the May-July quarter, up 5% on a year-over-year basis. Revenues were driven by higher net interest income as well as non-interest income.
Net interest income was C$5 billion ($3.8 billion), up 10% from the prior-year quarter. Non-interest income was C$6.5 billion ($4.9 billion), up 1% year over year.
Non-interest expenses were C$6 billion ($4.5 billion), up 2% from the year-ago quarter. The upswing primarily resulted from rise in almost all the components, except for professional fees and other expenses.
As of Jul 31, 2019, Royal Bank of Canada’s total loans were C$615.5 billion ($466.4 billion), up 9% from the prior-year quarter. Additionally, deposits totaled C$881.2 billion ($667.8 billion), up 6% year over year. Total assets were C$1.41 trillion ($1.07 trillion), up 9% from the year-earlier quarter.
Total provision for credit losses was C$425 million ($240.7 million) in the quarter, up 23% year over year mainly due to elevated provisions in Personal & Commercial Banking, Wealth Management, and Capital Markets.
Strong Capital Position
As of Jul 31, 2019, Royal Bank of Canada’s Tier 1 capital ratio was 13%, up from the prior-year quarter’s 12.3%. Total capital ratio was 15%, up from 14.1% reported in the year-earlier quarter.
The company’s estimated Common Equity Tier 1 (CET1) ratio was 11.9%, up 80 basis points from the prior-year quarter.
Dividend Update
Concurrently, the company announced a quarterly dividend of $1.05 per share, marking a 3% hike from the prior payout. The dividend will be paid on Nov 22 to shareholders of record as of Oct 24.
Our Viewpoint
We believe that continued improvement in loan balances and diversified product mix will drive Royal Bank of Canada’s organic growth. However, stringent regulatory reforms and escalating expenses keep us skeptical about the company’s sustainable growth over the long term.
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 has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
Deutsche Bank (DB - Free Report) reported second-quarter 2019 net loss of €3.15 billion ($3.54 billion) against net income of €401 million in the year-ago quarter. Also, the German lender incurred loss before taxes of €946 million ($1.06 billion).
UBS Group AG (UBS - Free Report) reported second-quarter 2019 net profit attributable to shareholders of $1.39 billion, up nearly 1% from the prior-year quarter. Notably, the company’s performance reflects lower expenses. Also, results were supported by rise in net fee and commission income (up 1% year over year), partially offset by lower net interest income (down 15%).
HSBC Holdings (HSBC - Free Report) recorded second-quarter 2019 pre-tax profit of $6.2 billion, up 4% year over year. The increase was due to rise in revenues.
It’s Illegal in 42 States, But Investors Will Make Billions Legally
In addition to the companies you read about above, today you get details on the newly-legalized industry that’s tapping into a “habit” that Americans spend an estimated $150 billion on every year.
That’s twice as much as they spend on marijuana, legally or otherwise.
Zacks special report revealing how investors can profit from this new opportunity. As more states legalize this activity, the industry could expand by as much as 15X. Zacks’ has just released a Special Report revealing 5 top stocks to watch in this space.
See these 5 “sin stocks” now>>