RBC wealth management profit jumps 42%

RBC reported higher quarterly net income of $430 million for its wealth management division, up $127 million, or 42%, in Q1 from the same period a year ago, when net income was $303 million.

For Q1 ended January 31, 2017, RBC said in a release the growth “largely reflects higher net interest income on volume growth, and higher earnings due to growth in average fee-based client assets and increased transaction revenue. These factors were partially offset by higher costs in support of business growth.”

In a report to shareholders, RBC said it had $584.1 billion in assets under management as of January 31, compared to $561.5 billion a year ago—an increase of $22.6 billion in AUM. In an earnings slideshow, the bank says that, as of December 2016, RBC Global Asset Management continues to be first in Canadian market share.

“The mix of our broker channel revenues in Canada seems be more fee-based than transaction-based, while the U.S. is more transaction-based,” Douglas McGregor, CEO of RBC Capital Markets, said on a conference call with analysts.

CIBC, which reported results Thursday, had AUM of $186,547 million as of January 31, 2017, versus $169,389 a year earlier.

Read: CIBC wealth management profit gains 12%

Branch banking

A focus for RBC going forward is technology and clients’ adoption of digital services. In the slideshow, RBC notes that it has been opening “new, smaller and technology-enabled branches” in place of traditional branches.

As a result, the bank’s Canadian branch count was down 1% year over year. As of January 31, there were 1,415 branches versus 1,430 a year earlier. There were also 921 fewer full-time employees over that period (75,459 in Q1 2017 versus 76,380 in Q1 2016).

RBC adds it doesn’t plan to abandon traditional service models, saying in the slideshow, “Branches are a key component of how we serve our clients, complementing increased self-service transactions through digital channels.”

Jennifer Tory, group head of personal and commercial banking, says the 1% drop in traditional bank branches will likely continue (Tory will assume the role of chief administrative officer as of May 1, 2017, as Neil McLaughlin, currently executive vice-president of business financial services takes her role).

Tory said on the conference call the bank will continue to invest in technology to improve efficiency and the client experience, but RBC doesn’t want to “get ahead of our clients,” even as 70% of its basic transactions have moved to digital channels. “Our clients still value their relationships, particularly when it comes to advice and complex financial products,” she said.

She added: “We want to leverage the best of digital, including how we use data to reach our clients and then have them come and find someone to provide advice on their financial needs.”

Dave McKay, CEO, said the bank plans to release more info about how clients will connect with advisors via an online advice platform, noting RBC is becoming “a digitally-enabled relationship bank.”

Overall earnings

RBC reported overall net income of $3 billion for the quarter, up $580 million or 24% from a year ago. Profits benefited from the sale of the U.S. operations of Moneris Solutions Corporation.

RBC also reported a 5%, or 4 cent, increase to its quarterly dividend to 87 cents per share. Its stock opened at $98.65 but was at $97.22 as of 11:09am EST.

The bank’s insurance unit saw net income of $134 million, up $3 million or 2% from a year ago. In the release, RBC highlighted a “favourable claims experience, mainly in International Insurance,” though that was “largely offset by lower earnings from new U.K. annuity contracts and the impact from the sale of our home and auto insurance manufacturing business.”