Royal Bank of Canada has reported net income of CAD$1,561 million for the third quarter ended July 31, 2009, up 24% from a year ago. Earnings were driven by strong results from capital markets and in Canadian banking, wealth management and insurance. Market environment-related losses continued to subside reflecting improving capital market conditions.
The company’s Q3, 2009 results compared to Q3, 2008 were: net income of CAD$1,561 million (up from CAD$1,262 million); diluted earnings per share (EPS) of CAD$1.05 (up from CAD$.92); return on common equity (ROE) of 19.5% (unchanged); tier 1 capital ratio of 12.9%.
Canadian Banking net income was CAD$669 million, down CAD$40 million from last year due to higher provision for credit losses (PCL) and spread compression reflecting sharply lower interest rates. Compared to last quarter, earnings were up CAD$88 million primarily reflecting seasonal factors, continued volume growth and higher mutual fund distribution fees due to capital appreciation.
Wealth management net income was CAD$168 million, down CAD$18 million from last year mainly due to the impact of the market decline. Compared to the prior quarter, net income was up CAD$42 million due to higher transaction volumes and fee-based client assets reflecting an improvement in capital market conditions.
Insurance net income was CAD$167 million, up CAD$30 million over last year reflecting growth in all businesses and lower funding charges. Net income was up CAD$54 million from last quarter due to favourable actuarial adjustments reflecting management actions and assumption changes, favourable claims experience, business growth and the impact of a new UK Reinsurance annuity arrangement.
International banking net loss of CAD$95 million compares to a net loss of CAD$16 million last year and a net loss of CAD$1,126 million last quarter. The change from last year is due to higher PCL, largely in US banking and reduced revenue at RBC Dexia IS. The change from last quarter is due to a goodwill impairment charge of CAD$1 billion (US$838 million) taken in the second quarter of 2009 and lower PCL in US banking this quarter.
Capital Markets net income was CAD$562 million, up CAD$293 million from a year ago due to stronger trading revenue particularly in the UK, US and Canadian fixed income and money markets, and US-based equity businesses. Lower market environment related losses also contributed to the increase. Compared to last quarter, net income was up CAD$142 million primarily due to higher trading revenue, particularly in US-based equity and fixed income businesses and lower market environment-related losses.
Gordon Nixon, president and CEO, RBC, said: “Our record results this quarter reflect the strength of our franchise, and our ability to take advantage of opportunities and drive efficiencies. We are building on our strong competitive positions and successfully executing against our long term strategy. Our performance this quarter demonstrates the competitive advantage of our diverse business mix.”
