Royal Bank of Canada RY-T posted a jump in first-quarter profit that beat analysts’ estimates on a boost from its takeover of HSBC Bank Canada and a surge in capital markets activity.
RBC’s net income climbed 43 per cent to $5.1-billion, or $3.54 per share, in the three months that ended Jan. 31.
Adjusted to exclude certain items, including transaction and integration costs related to the lender’s acquisition of HSBC Bank Canada, the bank said it earned $3.62 per share. That topped the $3.25 per share analysts expected, according to Refinitiv.
“In Q1, we delivered strong results and client-driven growth across our businesses, while prudently managing risk and making investments in technology and talent to position the bank for the future,” RBC chief executive officer Dave McKay said in a statement.
In the second quarter of last year, RBC closed its deal to takeover HSBC Bank Canada, which was Canada’s seventh-largest lender. This year’s first quarter results include a boost from the inclusion of HSBC, which increased net income by $214-million.
The bank kept its quarterly dividend unchanged at $1.48 per share.
RBC is the fifth major Canadian bank to report earnings for the fiscal first quarter. Bank of Nova Scotia, Bank of Montreal and National Bank of Canada reported earnings earlier in the week. Canadian Imperial Bank of Commerce and Toronto-Dominion Bank also release earnings Thursday.
In the quarter, RBC set aside $1.05-billion in provisions for credit losses – the funds banks reserve to cover loans that may default. That was higher than analysts anticipated, and included $985-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, RBC reserved $813-million in provisions.
Total revenue climbed 24 per cent in the quarter to $16.74-billion while expenses rose 11 per cent to $9.26-billion, which the bank said was driven in part by higher share-based compensation.
Profit from personal and commercial banking was $1.68-billion, up 24 per cent from a year earlier, driven by higher net interest income. Excluding the HSBC acquisition, net income jumped 17 per cent as net interest income rose as loan balances increased by 4 per cent year over year, and deposits grew 8 per cent.
Commercial banking new income rose 20 per cent to $777-million. Excluding the contribution of HSBC, profit rose 8 per cent, largely on higher net interest income as loans grew 10 per cent.
The wealth management division generated $980-million of profit, up 48 per cent, on higher fee-based client assets boosted by market volatility.
Capital markets profit climbed 24 per cent to $1.43-billion on higher activity in corporate and investment banking, as well as global markets.