All amounts are in
Canadian dollars and are based on financial statements presented in
compliance with International Accounting Standard 34 Interim
Financial Reporting, unless otherwise noted. Our Q2 2021 Report
to Shareholders and Supplementary Financial Information are
available at: http://www.rbc.com/investorrelations.
|
Net Income
$4.0 Billion
Up $2.5 Billion YoY
|
Diluted
EPS1
$2.76
Up from $1.00 in Q2
2020
|
PCL2
$(96) Million
PCL on loans ratio down
12 bps3 QoQ
|
ROE4
19.4%
Up from 7.3% last year
|
CET1
Ratio
12.8%
Well above regulatory
requirements
|
TORONTO, May 27, 2021 /CNW/ - Royal Bank of Canada (TSX: RY) (NYSE: RY) today
reported net income of $4.0 billion
for the quarter ended April 30, 2021,
up $2.5 billion from the prior year.
Diluted EPS was $2.76, up
significantly over the same period. Our results this quarter
included releases of provisions on performing loans of $260 million compared to elevated provisions on
performing loans of $2.1 billion in
the prior year.
Pre-provision, pre-tax earnings5 of $5.1 billion were up 11% from a year ago, mainly
reflecting constructive markets and strong volume growth, partially
offset by the impact of low interest rates, and higher expenses
largely due to higher variable compensation on improved results and
higher stock-based compensation. Personal & Commercial
Banking and Capital Markets generated solid earnings growth, with
Capital Markets reporting record earnings this quarter. Higher
results in Wealth Management and Insurance also contributed to the
increase. These factors were partially offset by lower results in
Investor & Treasury Services.
Compared to last quarter, net income was up $168 million with higher results in Personal
& Commercial Banking, Wealth Management and Capital Markets.
These results were partially offset by lower earnings in Insurance
and Investor & Treasury Services.
The PCL on loans ratio of (5) bps was down 12 bps from last
quarter primarily due to lower provisions in Personal &
Commercial Banking and Capital Markets, partially offset by higher
recoveries in Wealth Management in the prior quarter. The PCL on
impaired loans ratio of 11 bps decreased 2 bps from last
quarter.
Our capital position remained robust, with a Common Equity Tier
1 (CET1) ratio of 12.8% supporting strong client-driven volume
growth and $1.5 billion in common
share dividends paid. We also had a strong average Liquidity
Coverage Ratio (LCR) of 133%.
"I'm tremendously
proud of how our employees continue to demonstrate resilience, and
bring our Purpose to life to deliver for our clients, communities
and shareholders. The strong momentum we've achieved in the first
half of 2021 reflects our focused strategy to deliver exceptional
experiences and create more value for clients. RBC brings this to
life through the combination of our powerful scale, strong market
share growth, prudent risk management, and significant multi-year
investments in talent and technology. While there is reason for
optimism as recovery continues to take hold, we know the pandemic's
path forward still poses challenges. We remain firmly committed to
helping our clients thrive and communities prosper, and to being an
enabler of a more inclusive and sustainable future."
– Dave McKay, RBC President and Chief Executive
Officer
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|
|
|
|
|
|
Q2 2021
Compared to
Q2 2020
|
•
|
Net income of $4,015
million
|
|
↑
|
171%
|
•
|
Diluted EPS of
$2.76
|
|
↑
|
176%
|
•
|
ROE of
19.4%
|
|
↑
|
1,210 bps
|
•
|
CET1 ratio of
12.8%
|
|
↑
|
110 bps
|
Q2 2021
Compared to
Q1 2021
|
•
|
Net income of $4,015
million
|
|
↑
|
4%
|
•
|
Diluted EPS of
$2.76
|
|
↑
|
4%
|
•
|
ROE of
19.4%
|
|
↑
|
80 bps
|
•
|
CET1 ratio of
12.8%
|
|
↑
|
30
bps
|
YTD 2021
Compared to
YTD 2020
|
•
|
Net income of $7,862
million
|
|
↑
|
58%
|
•
|
Diluted EPS of
$5.42
|
|
↑
|
59%
|
•
|
ROE of
19.0%
|
|
↑
|
650 bps
|
|
1 Earnings per share
(EPS).
|
2 Provision for
credit losses (PCL).
|
3 Basis points
(bps).
|
4 Return on equity
(ROE). This measure does not have a standardized meaning under
GAAP. For further information, refer to the Key Performance and
non-GAAP measures section on page 3 of this Earnings
Release.
|
5 Pre-provision,
pre-tax earnings is calculated as income before income taxes (Q2
2021: $5,186 million; Q2 2020: $1,738 million) plus PCL (Q2 2021:
-$96 million; Q2 2020: $2,830 million). This is a non-GAAP measure.
For further information, refer to the Key Performance and non-GAAP
measures section on page 3 of this Earnings Release.
|
Personal & Commercial Banking
Net income of $1,908 million
increased $1,376 million from a year
ago, primarily attributable to lower PCL. Pre-provision, pre-tax
earnings6 of $2,612
million were up 6% from a year ago, mainly reflecting strong
average volume growth of 11% (+16% in deposits and +6% in loans),
higher card service revenue, and higher mutual fund distribution
fees in Canadian Banking, partially offset by lower spreads.
Compared to last quarter, net income increased $115 million or 6%, primarily due to lower PCL
resulting from higher releases of provisions on performing loans in
the current quarter. Average volume growth of 1% in Canadian
Banking and lower staff-related costs also contributed to the
increase. These factors were partially offset by the impact of
three less days in the current
quarter.
________________________________
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6 Pre-provision,
pre-tax earnings is calculated as income before income taxes (Q2
2021: $2,577 million; Q2 2020: $747 million) plus PCL (Q2 2021: $35
million; Q2 2020: $1,706 million). This is a non-GAAP measure. For
further information, refer to the Key Performance and non-GAAP
measures section on page 3 of this Earnings Release.
|
Wealth Management
Net income of $691 million
increased $267 million or 63% from a
year ago, primarily due to average loan growth as well as higher
average fee-based client assets, reflecting market appreciation and
net sales, net of the associated variable compensation. Lower PCL
and higher transactional revenue also contributed to the increase.
These factors were partially offset by the impact of lower interest
rates.
Compared to last quarter, net income increased $42 million or 6%, largely attributable to higher
average fee-based client assets, net of the associated variable
compensation, lower staff-related costs and higher transactional
revenue. These factors were partially offset by unfavourable
changes in the fair value of seed capital investments.
Insurance
Net income of $187 million
increased $7 million or 4% from a
year ago, mainly due to lower claims costs and the favourable
impact of actuarial adjustments. These factors were partially
offset by the impact of realized investment gains in the prior year
and lower new longevity reinsurance contracts.
Compared to last quarter, net income decreased $14 million or 7%, largely due to lower new
longevity reinsurance contracts.
Investor & Treasury Services
Net income of $120 million
decreased $106 million or 47% from a
year ago, primarily due to lower funding and liquidity revenue as
the prior year benefitted from the impact of interest rate
movements and higher gains from the disposition of investment
securities. Lower client deposit revenue, largely driven by lower
interest rates, also contributed to the decrease.
Compared to last quarter, net income decreased $3 million or 2%, mainly driven by lower funding
and liquidity revenue as the prior quarter benefitted from money
market opportunities, partially offset by the impact of annual
regulatory costs in the prior quarter.
Capital Markets
Net income of $1,071 million
increased $966 million from a year
ago, primarily driven by lower PCL, as well as record revenue in
Investment Banking. These factors were partially offset by higher
taxes reflecting an increase in the proportion of earnings from
higher tax rate jurisdictions, and higher compensation on improved
results.
Compared to last quarter, net income remained relatively flat as
lower PCL and higher debt and equity origination across all regions
were offset by lower fixed income trading revenue across all
regions driven by reduced client activity, and higher taxes as the
prior quarter reflected favourable tax adjustments.
Capital, Liquidity and Credit Quality
Capital – As at April 30,
2021, our CET1 ratio was 12.8%, up 30 bps from last quarter,
mainly reflecting internal capital generation and the impact of
higher discount rates in determining our pension and other
post-employment benefit obligations, partially offset by
risk-weighted assets growth (excluding FX).
In Q3 2021, we expect to reflect model parameter updates to
increase the threshold for determining small business clients
subject to retail capital treatment, as permitted under regulatory
capital requirements, and to recalibrate probability of default
parameters for the remaining borrowers in our wholesale portfolio.
We expect the implementation of these parameter updates to increase
our CET1 ratio by approximately 70-80 bps in Q3 2021. This impact
will be partially offset by the increase in stressed Value-at-Risk
(SVaR) multipliers effective May 1,
2021, which is expected to decrease our CET1 ratio by
approximately 10-15 bps. Both of these estimates are subject to
change based on portfolio size or portfolio mix held.
Liquidity – For the quarter ended April 30, 2021, the average LCR was 133%, which
translates into a surplus of approximately $89.6 billion, compared to 141% and a surplus of
approximately $104.3 billion in the
prior quarter. Average LCR decreased from the prior quarter
primarily due to lower funding levels as the bank continues to
optimize its liquidity position.
Net Stable Funding Ratio (NSFR) as at April 30, 2021 was 118%, which translates into a
surplus of approximately $119.0
billion, compared to 118% and a surplus of approximately
$122.2 billion in the prior quarter.
NSFR has remained stable over the quarter as lower wholesale
funding was largely offset by continued growth in client
deposits.
Credit Quality
Q2 2021 vs. Q2
2020
Total PCL was $(96)
million. PCL on loans of $(83)
million decreased $2,817
million from a year ago, primarily due to lower provisions
in Personal & Commercial Banking, Capital Markets and Wealth
Management. The PCL on loans ratio was (5) bps. The PCL
on impaired loans ratio was 11 bps.
PCL on performing loans was $(260)
million compared to $2,121
million in the prior year, as the prior year reflected
elevated provisions due to the impact of the onset of the COVID-19
pandemic as compared to releases in the current quarter. While
uncertainty over the impact of the COVID-19 pandemic remains, the
releases were driven by improvements in our macroeconomic and
credit quality outlook.
PCL on impaired loans of $177
million decreased $436
million, mainly due to recoveries in Capital Markets in the
current quarter as compared to provisions taken in the prior year.
Lower provisions in Personal & Commercial Banking and Wealth
Management also contributed to the decrease.
Q2 2021 vs. Q1 2021
PCL on loans of
$(83) million decreased $204 million from last quarter, primarily due to
lower provisions in Personal & Commercial Banking and Capital
Markets, partially offset by higher recoveries in Wealth Management
in the prior quarter. The PCL on loans ratio of (5) bps decreased
12 bps.
PCL on performing loans of $(260)
million decreased $163
million, primarily reflecting higher releases of provisions
in Personal & Commercial Banking and Capital Markets. While
uncertainty over the impact of the COVID-19 pandemic remains, the
releases were driven by improvements in our macroeconomic and
credit quality outlook.
PCL on impaired loans of $177
million decreased $41 million,
primarily due to recoveries in Capital Markets as compared to
provisions in the last quarter and lower provisions in Personal
& Commercial Banking, partially offset by recoveries in Wealth
Management in the prior quarter.
ACL
The ratio of ACL on loans and acceptances
to total loans and acceptances was 79 bps, down 6 bps from last
quarter and 5 bps from last year.
Digitally Enabled
Relationship Bank
Digital usage continued to grow with 90-day Active Mobile users
increasing 9% from a year ago to 5.3 million, and mobile sessions
up 22% from a year ago to 111.6 million. Digital adoption increased
to 56.8%, and self-serve transactions increased 150 bps from last
year to 93.5%.
Key Performance and Non-GAAP Measures
We measure and evaluate the performance of our consolidated
operations and each business segment using a number of financial
metrics, such as net income, ROE and non-GAAP measures, including
pre-provision, pre-tax earnings. ROE and pre-provision, pre-tax
earnings do not have any standardized meanings under GAAP. We use
ROE as a measure of return on total capital invested in our
business. We believe that certain non-GAAP measures are more
reflective of our ongoing operating results and provide readers
with a better understanding of management's perspective on our
performance.
Additional information about ROE and other key performance and
non-GAAP measures can be found under the Key performance and
non-GAAP measures section of our Q2 2021 Report to
Shareholders.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking
statements within the meaning of certain securities laws, including
the "safe harbour" provisions of the United States Private
Securities Litigation Reform Act of 1995 and any applicable
Canadian securities legislation. We may make forward-looking
statements in this Earnings Release, in other filings with Canadian
regulators or the SEC, in other reports to shareholders, and in
other communications, including statements by our President and
Chief Executive Officer. Forward-looking statements in this
document include, but are not limited to, statements relating to
our financial performance objectives, vision and strategic goals,
expectations regarding our CET1 ratio, and the potential continued
impacts of the coronavirus (COVID-19) pandemic on our business
operations, and financial results, condition and objectives and on
the global economy and financial market conditions. The
forward-looking information contained in this Earnings Release is
presented for the purpose of assisting the holders of our
securities and financial analysts in understanding our financial
position and results of operations as at and for the periods ended
on the dates presented, as well as our financial performance
objectives, vision and strategic goals, and may not be appropriate
for other purposes. Forward-looking statements are typically
identified by words such as "believe", "expect", "foresee",
"forecast", "anticipate", "intend", "estimate", "goal", "plan" and
"project" and similar expressions of future or conditional verbs
such as "will", "may", "should", "could" or "would".
By their very nature, forward-looking statements require us to
make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
will not prove to be accurate, that our assumptions may not be
correct and that our financial performance objectives, vision and
strategic goals will not be achieved. We caution readers not to
place undue reliance on these statements as a number of risk
factors could cause our actual results to differ materially from
the expectations expressed in such forward-looking statements.
These factors – many of which are beyond our control and the
effects of which can be difficult to predict – include: credit,
market, liquidity and funding, insurance, operational, regulatory
compliance (which could lead to us being subject to various legal
and regulatory proceedings, the potential outcome of which could
include regulatory restrictions, penalties and fines), strategic,
reputation, legal and regulatory environment, competitive and
systemic risks and other risks discussed in the risk sections and
Significant developments: COVID-19 section of our annual report for
the fiscal year ended October 31,
2020 (the 2020 Annual Report) and the Risk management and
Impact of COVID-19 pandemic sections of our Q2 2021 Report to
Shareholders; including business and economic conditions,
information technology and cyber risks, Canadian housing and
household indebtedness, geopolitical uncertainty, privacy, data and
third party related risks, regulatory changes, environmental and
social risk (including climate change), and digital disruption and
innovation, culture and conduct, the business and economic
conditions in the geographic regions in which we operate, the
effects of changes in government fiscal, monetary and other
policies, tax risk and transparency, and the emergence of
widespread health emergencies or public health crises such as
pandemics and epidemics, including the COVID-19 pandemic and its
impact on the global economy and financial market conditions and
our business operations, and financial results, condition and
objectives.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. When relying on our forward-looking statements to make
decisions with respect to us, investors and others should carefully
consider the foregoing factors and other uncertainties and
potential events. Material economic assumptions underlying the
forward-looking statements contained in this Earnings Release are
set out in the Economic, market and regulatory review and outlook
section and for each business segment under the Strategic
priorities and Outlook headings in our 2020 Annual Report, as
updated by the Economic, market and regulatory review and outlook
and Impact of COVID-19 pandemic sections of our Q2 2021 Report to
Shareholders. Except as required by law, we do not undertake to
update any forward-looking statement, whether written or oral, that
may be made from time to time by us or on our
behalf.
Additional information about these and other factors can be
found in the risk sections and Significant developments: COVID-19
section of our 2020 Annual Report and the Risk management and
Impact of COVID-19 pandemic sections of our Q2 2021 Report to
Shareholders.
Information contained in or otherwise accessible through the
websites mentioned does not form part of this Earnings Release. All
references in this Earnings Release to websites are inactive
textual references and are for your information only.
ACCESS TO QUARTERLY RESULTS MATERIALS
Interested
investors, the media and others may review this quarterly Earnings
Release, quarterly results slides, supplementary financial
information and our Q2 2021 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for May 27, 2021 at 8:30 a.m.
(EST) and will feature a presentation about our second
quarter results by RBC executives. It will be followed by a
question and answer period with analysts. Interested parties can
access the call live on a listen-only basis at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (416-340-2217, 866-696-5910, passcode 4691510#).
Please call between 8:20 a.m. and 8:25 a.m.
(EST).
Management's comments on results will be posted on our website
shortly following the call. A recording will be available by
5:00 p.m. (EST) from May 27, 2021 until August
24, 2021 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 8026879#).
ABOUT RBC
Royal Bank of Canada is a global financial institution with
a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 86,000+ employees who
leverage their imaginations and insights to bring our vision,
values and strategy to life so we can help our clients thrive and
communities prosper. As Canada's
biggest bank, and one of the largest in the world based on market
capitalization, we have a diversified business model with a focus
on innovation and providing exceptional experiences to our 17
million clients in Canada, the
U.S. and 27 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at rbc.com/community-social-impact.
Trademarks used in
this earnings release include the LION & GLOBE Symbol, ROYAL
BANK OF CANADA and RBC which are trademarks of Royal Bank of Canada
used by Royal Bank of Canada and/or by its subsidiaries under
license. All other trademarks mentioned in this earnings release,
which are not the property of Royal Bank of Canada, are owned by
their respective holders.
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SOURCE Royal Bank of Canada