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Royal Bank of Canada reported higher earnings Thursday as it said many underlying economic indicators remain strong despite the heightened risk of a recession.

“We’re trying to present a balanced view of the economy right now and that we’re mid-cycle,” said chief executive Dave McKay on an earnings call.

He said, however, that Russia’s invasion of Ukraine has added complexity to challenges like supply chain disruptions, and shortages in energy, labour and housing that are contributing to inflation and flashing potential late-cycle signals.

Central banks have to hit demand “really hard” to contain inflation, said McKay, making it difficult to predict how higher rates and inflation will impact demand and the lack of goods and services to meet that demand.

“From that perspective, markets are struggling to predict how we land the economy, do we land it with a slight recession? And our message today is, it could go either way, it’s 50/50.”

Strong underlying tenants in the economy, such as liquidity and full employment, should however act as good shock absorbers to that uncertainty, he said.

For now the bank is still seeing a boost from lower pandemic-related worries as it reported a $342-million reversal of provisions for credit losses, compared with a reversal of $96 million in the same quarter last year.

The outlook came as the bank reported revenues of $11.22 billion for the second quarter, down 3% from a year ago, while its net income of $4.25 billion was up 6% from a year earlier.

Revenues were down largely in its capital markets division from the unfavourable market conditions.

“This was partly offset by strong client-driven volume growth in Canadian banking and City National [Bank], and solid wealth management client activity,” McKay said.

On an adjusted basis, RBC said it earned $2.99 per diluted share, up from an adjusted profit of $2.79 per diluted share a year ago.

Analysts on average had expected an adjusted profit of $2.67 per share, according to estimates compiled by financial markets data firm Refinitiv.

RBC said its personal and commercial banking business earned $2.23 billion, up from a profit of $1.91 billion in the same quarter last year, helped by lower provisions for credit losses, while its Canadian banking business also benefited from higher net interest income.

The bank’s wealth management business earned $750 million, up from $683 million a year ago, while its insurance arm earned $206 million, up from a profit of $187 million in the same quarter last year.

Nadine Ahn, chief financial officer with RBC, said during the earnings call that the company’s Canadian wealth management and U.S. wealth management divisions, as well as RBC Global Asset Management (RBC GAM), reported higher fee-based client assets “primarily reflecting net sales.”

“This was partially offset by lower transactional revenue, mainly driven by reduced client activity as investor sentiment turned cautious,” she said.

Ahn noted how RBC GAM generated long-term net asset sales of $9 billion this quarter, especially in balanced and equities mandates. “Outflows were largely driven by clients rethinking their fixed-income strategies,” she said.

RBC said its capital markets business earned $795 million, down from a profit of $1.07 billion a year ago, mainly due to lower global markets revenue largely resulting from lower fixed income and equity trading revenue primarily in the U.S.

The bank’s investor and treasury services arm earned $121 million compared with a profit of $120 million a year ago.