RBC beats earnings expectations as it posts record $12.4B yearly profit,
Helped by U.S. tax reforms, 15 per cent jump in net income beats expectations
Royal Bank of Canada’s latest quarterly earnings beat expectations with a 15 per cent jump in net income, helped by rising interest rates and U.S. tax reforms, to cap off a year where the lender generated a record annual profit of $12.4 billion.
The Toronto-based bank delivered net income during the three-month period ended Oct. 31of $3.25 billion, driven by strong performances in its personal and commercial banking, capital markets, wealth management and insurance.
“While increased protectionism and geopolitical risks created market uncertainty throughout the year, our results did benefit from rising interest rates, GDP growth, a benign credit environment and U.S. tax reform,” Dave McKay, RBC president and CEO, said on a conference call Wednesday.
“We took advantage of the strong macroeconomic environment to add over 1,000 frontline staff in Canada and the U.S. and to invest in technol- ogy to strengthen our leading position.”
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 latest quarter, the bank’s personal and commercial banking division delivered net income of $1.54 billion, up 10 per cent from a year ago “largely reflecting improved deposit spreads from higher Canadian interest rates.”
RBC also saw 5 per cent 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 per cent to $666 million, largely due to a lower effective tax rate under U.S. Presi- dent Donald Trump’s tax reforms.
RBC’s wealth management division saw a13 per cent increase in net income to $553 million, while RBC’s insurance division reported a 20 per cent yearover-year increase in net income to $318 million.
RBC is the second of its peers to report its earnings for the financial fourth quarter and 2018 year.
The Bank of Nova Scotia on Tuesday reported a 10 per cent jump in quarterly net income to $2.27 billion, falling just short of analyst expectations.
On an annual basis, Scotiabank saw an 5.8 per cent annual jump in net income to $8.72 billion.
Scotiabank said it was selling its banking operations in nine Caribbean markets.