All amounts are in Canadian dollars and are based on financial
statements prepared in compliance with International Accounting
Standard 34 Interim Financial Reporting, unless otherwise
noted. Our Q2 2019 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$3.2 Billion
Diversified earnings growth
|
Diluted
EPS1
$2.20
Solid 7% growth
YoY
|
ROE2
17.5%
Balanced capital
deployment
|
CET1 Ratio
11.8%
Strong capital ratio
|
TORONTO, May 23, 2019 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $3,230 million for the
quarter ended April 30, 2019, up
$170 million or 6% from the prior
year, with solid diluted EPS growth of 7%. Results reflected strong
earnings growth in Capital Markets, Personal & Commercial
Banking and Wealth Management. These were partially offset by lower
earnings in Investor & Treasury Services and Insurance. Results
this quarter also reflected continued investments in talent, and
digital and technology initiatives.
Compared to last quarter, net income was up $58 million with higher earnings in Capital
Markets, partially offset by lower earnings in Personal &
Commercial Banking, Wealth Management, Insurance, and Investor
& Treasury Services. Personal & Commercial Banking and
Wealth Management results were impacted by three less days in the
quarter.
Provisions for credit losses (PCL) on impaired loans ratio of 29
basis points (bps) was up 1 bp compared to last quarter due to
higher PCL on impaired loans on a couple of accounts in our
Canadian Banking commercial portfolio. This was partially offset by
lower PCL in Capital Markets, which included higher provisions in
the previous quarter related to one account in the utilities
sector. Our capital position remained strong, with a Common Equity
Tier 1 (CET1) ratio of 11.8%, up 40 bps from last quarter mainly
due to strong internal capital generation.
|
|
"Our consistent
earnings growth is a testament to the strength of our diversified
business model and our strategy to transform the bank to create
more value for clients. We continue to make strategic investments
to drive long-term growth for shareholders, guided by our clear
purpose of helping clients thrive and communities prosper."
– Dave McKay, RBC President and Chief Executive
Officer
|
|
|
|
Q2 2019
Compared to
Q2 2018
|
• Net income of $3,230
million
|
↑
|
6%
|
• Diluted
EPS1 of $2.20
|
↑
|
7%
|
•
ROE2 of 17.5%
|
↓
|
60 bps
|
• CET1 ratio of
11.8%
|
↑
|
90 bps
|
Q2 2019
Compared to
Q1 2019
|
• Net income of
$3,230 million
|
↑
|
2%
|
• Diluted
EPS1 of $2.20
|
↑
|
2%
|
• ROE2
of 17.5%
|
↑
|
80 bps
|
• CET1 ratio of
11.8%
|
↑
|
40 bps
|
YTD 2019
Compared to
YTD 2018
|
• Net income
of $6,402 million
|
↑
|
5%
|
• Diluted
EPS1 of $4.34
|
↑
|
7%
|
• ROE2
of 17.1%
|
↓
|
60 bps
|
____________________
|
1 Earnings
per share (EPS).
|
2 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.
|
Personal & Commercial Banking
Net income of $1,549 million
increased $90 million or 6% from last
year with average volume growth of 7%, including strong deposit
growth of 9%, and improved deposit spreads in Canadian Banking,
largely driven by higher interest rates. These factors were
partially offset by higher PCL related to a couple of Canadian
Banking commercial accounts, and an increase in technology-related
and marketing costs.
Net income decreased $22 million
or 1% from last quarter, reflecting three less days in the quarter,
higher PCL and an increase in marketing costs. These factors were
partially offset by lower staff-related costs and improved spreads
in Canadian Banking. The prior quarter also included a write-down
of deferred tax assets resulting from a change in the corporate tax
rate in Barbados.
Wealth Management
Net income of $585 million
increased $48 million or 9%,
primarily attributable to higher net interest income, mainly from
strong loan growth and higher spreads at City National Bank (CNB).
Higher fee-based revenue driven by an increase in average fee-based
client assets reflecting market appreciation in both North American
equity and bond markets and higher long-term net sales, also
contributed to the increase. These factors were partially offset by
increased costs in support of business growth, reflecting higher
staff-related costs which includes an increase in investment
advisors and higher variable compensation on improved results. The
current quarter also included higher PCL.
Compared to last quarter, net income decreased $12 million or 2%, primarily reflecting a
favourable accounting adjustment related to Canadian Wealth
Management in the prior period, and lower net interest income
reflecting lower spreads and three less days in the current
quarter. These factors were partially offset by higher transaction
volumes.
Insurance
Net income of $154 million
decreased $18 million or 10% from a
year ago, primarily reflecting lower favourable investment-related
experience and increased disability and life retrocession claims
costs, partially offset by favourable life retrocession contract
renegotiations and favourable actuarial adjustments related to the
universal life portfolio.
Compared to last quarter, net income decreased $12 million or 7%, mainly due to higher claims
costs in International Insurance, partially offset by favourable
actuarial adjustments related to the universal life
portfolio.
Investor & Treasury Services
Net income of $151 million
decreased $61 million or 29%,
primarily due to lower funding and liquidity revenue, and lower
revenue from our asset services business due to lower client
activity.
Compared to last quarter, net income decreased $10 million or 6%, primarily due to lower funding
and liquidity revenue, as the prior quarter benefitted from the
impact of favourable money market opportunities. This was partially
offset by the impact of annual regulatory costs incurred in the
prior period and lower technology costs.
Capital Markets
Net income of $776 million
increased $111 million or 17%,
primarily due to higher revenue in Global Markets across fixed
income trading, equity trading in North
America and debt origination, mainly reflecting improved
market conditions and increased client activity. Earnings also
benefitted from a lower effective tax rate largely reflecting
changes in earnings mix. These factors were partially offset by
higher compensation on improved results. Corporate and Investment
Banking revenue was flat.
Compared to last quarter, net income increased $123 million or 19% due to improved market
conditions and increased client activity. The increase was
primarily driven by higher debt origination in most regions, lower
PCL and higher fixed income trading and equity origination, largely
in North America. These factors
were partially offset by lower equity trading primarily in the
U.S., higher compensation on improved results and lower foreign
exchange trading largely in Canada.
Corporate Support
Net income was $15 million in the
current quarter, largely due to asset/liability management
activities, partially offset by net unfavourable tax adjustments.
Net income was $24 million in the
prior quarter, largely reflecting net favourable tax adjustments.
Net income was $15 million in the
prior year, largely due to asset/liability management
activities.
Capital and Credit Quality
Capital – As at April
30, 2019, Basel III CET1 ratio was 11.8%, up 40 bps from
last quarter largely driven by strong internal capital generation.
Growth in risk-weighted assets (RWA) was muted as organic
client-driven loan growth in Personal & Commercial Banking and
U.S. Wealth Management (including CNB), and higher derivatives were
offset by a reduction in market risk RWA.
This quarter, we returned over $1.4
billion of our $3.2 billion in
earnings to our shareholders through common share dividends and
buybacks.
Credit Quality – Total PCL of $426
million includes PCL on loans of $441
million, which increased $163
million or 59% from the prior year, mainly due to higher
provisions in Personal & Commercial Banking, Wealth Management
and Capital Markets. Total PCL ratio on loans of 29 bps increased 9
bps from the prior year. PCL ratio on impaired loans was 29
bps.
PCL on loans decreased $75 million
or 15% from the prior quarter, mainly due to lower provisions in
Capital Markets, partially offset by higher provisions in Personal
& Commercial Banking. Total PCL ratio on loans improved 5
bps from last quarter.
Other Highlights
Digitally Enabled Relationship Bank – 90-day
Active Mobile users increased 17% from a year ago to 4.1 million,
resulting in a 25% increase in mobile sessions. Digital adoption
increased to 52% as we continued our digital transformation
journey.
RBC launched NOMI Budgets, a new solution available through the
RBC Mobile app, this quarter. NOMI Budgets uses artificial
intelligence to proactively analyze a client's spending history,
recommend an appropriate budget and send timely updates to help
keep them on track in a seamless and convenient way.
Purpose & Sustainability – Royal Bank of
Canada issued a EUR500 million 5-year Green Bond offering. While
RBC is a leading underwriter of Green Bonds with best-in-class
execution capabilities across multiple currencies and geographies,
this was the first issuance of a Green Bond by Royal Bank of
Canada. The money raised will fund
a portfolio of new and existing assets primarily in the categories
of renewable energy and green buildings.
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 and ROE. ROE does not have a
standardized meaning under GAAP. We use ROE as a measure of return
on total capital invested in our business.
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 2019 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. Forward-looking statements in this document
include, but are not limited to, statements relating to our
financial performance objectives, vision and strategic goals, and
include our President and Chief Executive Officer's statements. 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, strategic, reputation, legal and regulatory
environment, competitive and systemic risks and other risks
discussed in the risks sections of our 2018 Annual Report and the
Risk management section of our Q2 2019 Report to Shareholders;
including global uncertainty, Canadian housing and household
indebtedness, information technology and cyber risk, regulatory
changes, digital disruption and innovation, data and third party
related risks, climate change, 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 environmental and social risk.
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 2018 Annual Report, as
updated by the Economic, market and regulatory review and outlook
section of our Q2 2019 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 of our 2018 Annual Report and the Risk
management section of our Q2 2019 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 2019 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for May 23, 2019 at 8:00 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 5230861#).
Please call between 7:50 a.m. and 7:55 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 23, 2019 until August
20, 2019 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 3961958#)
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 84,000+ employees who 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 more than 16 million clients in Canada, the U.S. and 34 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-sustainability.
Trademarks used in this earnings release include the LION &
GLOBE Symbol, ROYAL BANK OF CANADA, RBC and NOMI 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.
SOURCE Royal Bank of Canada