Setting the tone

Royal Bank reports third-quarter profit up from year ago, raises dividend

Royal Bank of Canada set the tone for the latest round of big bank earnings with a dividend hike as it reported a record $3.1 billion in net income for its third quarter, up 11 per cent from a year ago.

The bank’s results, which beat analyst expectations, were driven by earnings growth in its wealth management, capital markets and personal and commercial banking divisions.

Royal Bank chief executive Dave McKay said the bank delivered record earnings with “strong results in our largest businesses.”

“We maintained our focus on risk management and expense control; at the same time, we continue to invest in long-term sustainable growth, including in the United States,” McKay said in a statement Wednesday.

The bank said it will now pay a quarterly dividend of 98 cents per share, up from 94 cents per share.

The Toronto-based lender’s diluted earnings per share for the three-month period ended July 31 was $2.10, up 14 per cent from $1.85 per diluted share a year ago.

On an adjusted basis, RBC’s diluted cash earnings per share for its third quarter was $2.14, compared with the $2.11 earnings per share on average expected by analysts, according to Thomson Reuters Eikon.

“Royal kicked off earnings season with higher than forecast earnings and a dividend increase that was twice as much as expected,” said John Aiken, an analyst with Barclays in Toronto.

The bank demonstrated strong cost containment, and “impressive” results in both domestic retail and U.S. wealth management, including a strong contribution from Los Angelesbased City National, Aiken said in a note to clients. RBC acquired City National in 2015.

RBC’s personal and commercial banking arm earned $1.51 billion in the quarter, up $111 million or eight per cent from the previous year, “mainly reflecting improved deposit spreads resulting from higher Canadian interest rates.”