RBC net falls 18pc; misses consensus
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.