RBC net falls 18pc; misses con­sen­sus

The Pak Banker - - Front Page -

TORONTO: Royal Bank of Canada's (RY) third-quar­ter earn­ings dropped 18%, missing an­a­lysts' ex­pec­ta­tions for the fourth time in as many quar­ters, as trad­ing rev­enues plum­meted more than ex­pected. The stock dropped sharply.

Net in­come fell to C$1.28 bil­lion, or 84 Cana­dian cents a share, from C$1.56 bil­lion, or C$1.05, a year ear­lier, the bank said in a state­ment. Ex­clud­ing one-time items, the coun­try's largest bank by as­sets earned 87 Cana­dian cents a share, fall­ing well short of the C$1.02 mean es­ti­mate from an­a­lysts polled by Thom­son Reuters. Rev­enue fell 13% to C$6.83 bil­lion.

The bank's cap­i­tal-mar­kets busi­ness, par­tic­u­larly in Europe, where the sovereign­debt cri­sis prompted clients to re­treat to the side­lines, damped oth­er­wise strong earn­ings from its Cana­dian re­tail bank­ing busi­ness. An­a­lysts had ex­pected the coun­try's len­ders to be buf­feted by bad mar­kets, but the mag­ni­tude of the de­cline in Royal Bank's trad­ing was sur­pris­ing. "The re­sults were dis­ap­point­ing," says Richard Fewell, chief port­fo­lio man­ager at Hal­i­fax-based Sea­mark As­set Man­age­ment Ltd., which man­ages as­sets of C$2 bil­lion, in­clud­ing Royal Bank shares. "Their clients weren't trad­ing much in the quar­ter, and that's not in­con­sis­tent with what we've seen with the U.S. banks that re­ported their sec­ondquar­ter re­sults in July."

In Toronto Thurs­day, Royal Bank is down C$1.39, or 2.7%, to C$49.31 on about 4.2 mil­lion shares. The stock fell as low as C$48.85 in in­tra­day trad­ing. Royal Bank is the sec­ond of the big Cana­dian len­ders to miss con­sen­sus es­ti­mates be­cause of much weaker-than-ex­pected trad­ing rev­enues in a quar­ter marked by tight­en­ing fixed-in­come spreads and slump­ing eq­uity mar­kets. Ear­lier this week, Bank of Mon­treal also missed es­ti­mates, but posted a 20% in­crease in earn­ings. far it's a mixed quar­ter for the big six banks. Na­tional Bank of Canada (NA.T), the small­est by as­sets, beat the Street con­sen­sus, even though lower trad­ing rev­enue also crimped third-quar­ter profit.

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