Royal Bank of Canada (RY) shares slipped a bit on Tuesday, even though the bank posted a record profit and beat expectations in its latest quarter. Sometimes the market just wants more, I guess.
The Toronto-based lender reported adjusted earnings of $3.07 per share, comfortably ahead of the $2.89 analysts were looking for. Revenue came in at $13.282 billion, also topping the $12.9 billion forecast.
Digging into the Canadian-dollar numbers, net income hit 6.02 billion Canadian dollars, up 11% from a year ago. Diluted earnings rose 13% to 4.23 Canadian dollars per share. Adjusted net income was up 10% to 6.1 billion Canadian dollars, with adjusted diluted earnings climbing 11% to 4.28 Canadian dollars per share.
Total revenue grew 9.1% to 18.54 billion Canadian dollars, and the adjusted return on equity improved to 18.1% from 17.7% a year earlier. Not too shabby.
Wealth and Capital Markets Lead the Way
The big drivers were wealth management and capital markets. Wealth management profit surged 32% to 1.44 billion Canadian dollars, helped by market gains and net sales boosting fee-based client assets. Capital markets profit rose 16% to 1.54 billion Canadian dollars, thanks to stronger debt and equity underwriting, plus higher M&A activity and equity trading revenue.
Commercial banking also had a good quarter, with profit up 12% to 936 million Canadian dollars, benefiting from loan and deposit growth and lower credit-loss provisions. But personal banking was a bit of a laggard, with profit dipping 1% to 1.92 billion Canadian dollars, as higher expenses and credit-loss provisions offset growth in net interest income.
Credit Costs Creep Up
Total provisions for credit losses increased 14% to 1 billion Canadian dollars, and the provision ratio on loans edged up 1 basis point to 36 basis points. Not a huge jump, but worth watching.
Royal Bank ended the quarter with a common equity Tier 1 ratio of 13.5%, which is solidly above regulatory requirements. The bank returned 4 billion Canadian dollars to shareholders, including 1.6 billion in share repurchases and 2.4 billion in common dividends.
The board also declared a quarterly common dividend of 1.76 Canadian dollars per share, payable on or after Nov. 24 to shareholders of record on Oct. 26. That's a nice little reward for sticking around.
As for the stock, Royal Bank of Canada shares were down 1.11% at $201.87 at the time of publication on Tuesday, according to market data. So, a slight dip despite the good news. Sometimes the market just wants more, I guess.
