Royal Bank of Canada opened earnings season for the Big Six on Thursday with a profit beat as the lender's core domestic banking business offset weakness in its capital markets unit.
RBC said its fiscal first-quarter net income rose six per cent year-over-year to almost $4.1 billion. On an adjusted basis, the bank earned $2.87 per share. Analysts, on average, were expecting a per-share profit of $2.72. Revenue rose to $13.07 billion, beating the average estimate of $12.43 billion.
“[RBC] managed to still exceed consensus expectations on the back of higher than anticipated revenue growth. From our standpoint, the results were quite clean and set the bank up for a solid run for the remainder of the year as anticipated rate increases should fuel further revenue growth, offsetting any potential easing in volumes,” wrote Barclays Capital Analyst John Aiken in a report to clients.
Profit from personal and commercial banking climbed 10 per cent to $1.97 billion. Credit quality deteriorated sequentially in the unit, as RBC set aside $129 million in provisions for loan losses. In the preceding quarter, RBC released $208 million from its provisions.
In its Canadian banking business, RBC reported continued growth in its mortgage book, with the average balance rising to $338.2 billion from $329.5 billion in the fourth quarter.
The bank's capital markets unit reported a three per cent drop in profit as net income slipped to $1.03 billion; that's despite a record performance from its corporate and investment banking operations, where revenue rose to $1.39 billion from $1.11 billion a year earlier.
Heading into the quarter, analysts had cautioned that the underwhelming trading activity posted by big U.S. banks in their most recent reporting season could be a harbinger for RBC. And, indeed, the bank's global markets business saw revenue drop to $1.5 billion from $1.63 billion a year earlier. In a release, RBC pinned that on lower fixed income trading revenue in the U.S. and Europe.
"RBC's first quarter performance reflects the significant momentum we continue to build while facing change and uncertainty in the current operating environment," said RBC President and Chief Executive Officer Dave McKay in a release.
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