National Bank, RBC see their profits rise

Both institutions setting aside more to cover bad loans

Royal Bank of Canada joined its peers this quarter in setting more money aside for potentially bad loans, but the bank is also working to position itself to capture the substantial sums of money lying in wait for when economic trends shift.

Royal Bank’s chief risk officer Graeme Hepworth said the economic outlook is improving overall.

“The market continues to gain confidence that interest rates have peaked to the current cycle, and the probability of a hard landing of the economy is decreasing,” Hepworth told a conference call with investors to discuss the bank’s latest results on Wednesday.

The bank’s provisions for credit losses totalled $813 million for its first quarter, up from $532 million a year earlier, as pockets of concern rose.

Commercial real estate, especially U.S. offices, has been a big area of worry, while consumer strain in Canada has also been growing in areas like credit cards and auto loans, and in mortgages to a much lesser extent.

But the bank is operating from a cautious perspective and the provisions don’t mean it will lose money on the loans necessarily.

In other bank results, Montrealbased National Bank of Canada reported a first-quarter profit of $922 million, up from $876 million a year earlier, as its revenue rose across its business.

The bank said Wednesday the profit amounted to $2.59 per diluted share for the quarter ended Jan. 31, up from $2.47 per diluted share a year earlier.

Revenue for the quarter totalled $2.71 billion, up from $2.56 billion in the same quarter last year.

National Bank’s provisions for credit losses totalled $120 million, up from $86 million a year earlier.

RBC reported a first-quarter profit of $3.58 billion, up from $3.13 billion a year earlier, on revenue of $13.49 billion.

On an adjusted basis, the bank says it earned $2.85 per diluted share in its most recent quarter, down from an adjusted profit of $3.04 per diluted share in the same quarter last year.

RBC’s forecast that a recession would hit last summer came and went, and the Canadian economy is still managing growth.

Statistics Canada’s preliminary estimate put GDP growth at 1.2 per cent annualized in the fourth quarter, with a final read set to be released Thursday.