RBC says customer acquisition drive is paying off amid stiff local competition
The head of Royal Bank of Canada says the lender is gaining ground in a customer-acquisition offensive it launched earlier this year.
RBC announced in June that it was aiming to add more than 2.5 million Canadian customers by 2023, and that it would use digital initiatives such as its app-building RBC Ventures unit to get there.
On Wednesday, RBC president and chief executive Dave McKay said they had acquired 300,000 new Canadian banking clients in 2018, in addition to recording 350,000 registered users for RBC Ventures.
“With the momentum we’ve built, I’m confident that we’ll achieve our client growth target of adding 2.5 million customers in 2023,” McKay added.
But RBC is not the only Canadian bank with an eye on growing its customer base in an already competitive market at home. Both Bank of Nova Scotia and Bank of Montreal have said they are each targeting one million new Canadian customers for their businesses over the next five years, potentially pitting the lenders against each other as they try to achieve their goals.
RBC also reported a record $12.4-billion profit Wednesday for the year ended Oct. 31, an eight-percent hike over the prior year. The Toronto-based bank noted that it still may have extra capital it could use to try to generate more growth.
RBC reported that its common equity tier one capital ratio, a measure of financial strength, was up 60 basis points year-over-year, to 11.5 per cent, thanks to internal capital generation and a few riskrelated tweaks. “We are well-positioned to continue funding growth opportunities and to return capital to our shareholders,” McKay said.
RBC’s chief financial officer, Rod Bolger, added that the bank had allowed the CET1 ratio to rise a bit in order to absorb the impact of some regulatory changes, which are anticipated to soak up around 10 to 15 basis points of capital.
Bolger said the bank’s CET1 ratio would stay slightly above its usual 10.5 to 11 per cent target range, “to provide us more flexibility in 2019 to leverage opportunities for growth across our businesses.”
That said, the bank’s focus appears to be on internal opportunities first, not necessarily acquisitions that may prove too pricey at the moment. “We’ve got a lot of opportunity to grow organically,” McKay told analysts on the call when asked about M&A.
For its fiscal year ended Oct. 31, RBC saw rapid growth from its wealth management business, as the unit had a 23-per-cent hike in its earnings compared to fiscal 2017, rising to nearly $2.3 billion. RBC said the jump was driven by a growing average amount of fee-based client assets, and an assist from higher U.S. interest rates and tax reform.
In personal and commercial banking, it said net income was up by five per cent, to $6 billion, aided by higher interest rates and creditcard purchase volumes.
The bank reported results for its fourth-quarter ended Oct. 31 as well, which saw earnings increase by 15 per cent to $3.25 billion, powered by the performances of a majority of the lender’s businesses, such as a 20-per-cent bump in year-over-year net income for its insurance unit, to $318 million.
RBC reported earnings per share of $2.20 for the quarter, up 17 per cent from a year ago, and managed to beat analyst expectations for the three-month period with adjusted earnings per share of $2.24.