RBC Q4 net income up 15% to hit record annual profit

Royal Bank of Canada reported a 15% increase in fourth-quarter net income to $3.25 billion, surpassing analyst expectations to mark a new record annual profit of $12.4 billion.

The Toronto-based bank’s results for the three-month period ended Oct. 31 were driven by strong performances in its personal and commercial banking, capital markets, wealth management and insurance.

“Our diversified business and geographic mix delivered good revenue growth, while we prudently managed risk and delivered a premium return on equity,” Dave McKay, RBC president and CEO, said in a statement.

“Looking ahead, we remain focused on investing in our people and technology, and offering more personalized insights and connectivity to deliver more value for both our clients and shareholders.”

The bank’s profit for its fourth quarter amounted to $2.20 per diluted share, up from $1.88 per share a year ago.

On an adjusted cash basis, the bank says it earned $2.24 per share, up from $1.92 in the same period in 2017. Analysts on average had expected earnings per share of $2.12, according to Thomson Reuters Eikon.

During the quarter, the bank’s personal and commercial banking division delivered net income of $1.54 billion, up 10% from a year ago “largely reflecting improved deposit spreads from higher Canadian interest rates.” RBC also saw 5% average volume growth in Canadian banking, driven by growth in residential mortgages, commercial lending and deposit products.

The bank’s net income from its capital markets arm increased 14% to $666 million, largely due to a lower effective tax rate under U.S. President Donald Trump’s tax reforms.

RBC’s wealth management division saw a 13% increase in net income to $553 million despite industry headwinds as equity markets were hit in October. The gains were due to higher average fee-based client assets from inflows into long-term and liquidity products, the bank said Wednesday.

RBC’s insurance division reported a 20% year-over-year increase in net income to $318 million.

However, the bank’s investor and treasury services department’s net income of $155 million was relatively flat compared with a year ago.

Provisions for credit losses, or money set aside for bad loans during the quarter, was $353 million, up from $234 million during RBC’s fourth quarter in 2017.

For its full financial year, Canada’s biggest lender by market capitalization reported net income of $12.4 billion up roughly 8% from $11.5 billion in 2017.

That amounted to $8.36 diluted earnings per share on an annual basis, compared to $7.56 for the 2017 financial year.

During the 12-month period ended Oct. 31, RBC’s personal and commercial banking arm saw 5% growth to $6.03 billion.

Its wealth management division, which includes Los Angeles-based bank City National, was also a bright spot for the bank with 23% earnings growth to $2.27 billion for the 2018 financial year. The gain was again attributed to growth in average fee-based client assets “benefitting from our scale, talent and infrastructure advantage, including one of Canadian industry’s largest, most productive advisor bases,” the bank said in a release.

Its key measure of financial health, called the common equity tier 1 ratio (CET1), was 11.5%, up from 10.9% a year ago and 11.1% in the previous quarter.