$2.7 Billion Profit Made By Royal Bank Of Canada Beats Expectations

On Wednesday, the Royal Bank of Canada declared its third-quarter results which thrashed market anticipations, with funds reserved to cover bad loans falling due to higher oil prices.

Similar to other Canadian lenders, RBC saw a rise in bad loans to oil and gas companies as a result of falling energy prices, with crude prices declining to a 13-year low of $25 a barrel in January.

Despite this, during the latest quarter, average oil prices regained its balance by about 30 percent, granting relief to energy companies that were laboring to repay debt.

RBC claimed that its provisions for credit losses had decreased to an equivalent of 0.24 percent of its total loans during the quarter, down 12 basis points, mostly because of lowered provisions in the oil and gas sector.

Contributing to defeating analysts’ forecasts was the strong performance from the bank’s wealth management and capital markets businesses.

Also announced by the bank was its increase in quarterly dividends from two cents to 83 cents per share.

With the exclusion of one-off items, the net income was $2.7 billion or $1.72 per share, as compared to $1.66 the year before.

According to Thomson Reuters I/B/E/S, average expected earnings were placed at $1.70.

The bank’s wealth management division’s net income increased by 36 percent to $388 million, profiting from the support of Los Angeles-based City National, which was acquired by RBC for $5 billion last year.

Recognized as Los Angeles’ “bank to the stars” due to its relation to the movie industry and celebrities, City National grants RBC a chance to access high net-worth clients in the United States.

The bank’s capital markets division stated a net income of $635 million, up 17 percent from the previous year, assisted by an increase in foreign exchange movements.