RBC profit tops expectations, lifted by capital markets arm

Wed Feb 25, 2015 12:03pm EST
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By Jeffrey Hodgson

TORONTO (Reuters) - Royal Bank of Canada (RY.TO: Quote), the country's top lender, posted a better-than-expected quarterly profit on Wednesday, driven by significant gains in its personal and commercial banking and capital markets businesses.

The results boosted its stock and, combined with stronger-than-expected earnings from National Bank of Canada (NA.TO: Quote), improved sentiment toward Canadian banks in general. Investors had sold off the sector on Tuesday after Bank of Montreal (BMO.TO: Quote) reported weaker-than-expected results.

RBC, which also hiked its dividend, said net income at its capital markets business rose 18 percent to C$594 million ($477.84 million) as the impact of last year's surprise oil price drop became clearer to traders.

"There was a shock on the oil prices, but then the impact it had on other markets was a little more measured, in that once people digested the information, it sort of went back to normal spreads," Chief Financial Officer Janice Fukakusa told Reuters. "That's sort of good volatility."

RBC shares rose almost 3 percent to C$77.25 in Toronto, while National shares gained 2 percent to C$47.92.

RBC's net income rose to C$2.46 billion, or C$1.65 a share, in its first quarter, ended Jan. 31, from C$2.09 billion, or C$1.38 a share, a year earlier.

The bank said its cash diluted earnings per share were C$1.67. Analysts, on average, had expected C$1.58, according to Thomson Reuters I/B/E/S.

"The net result is that (Royal) still handily beat consensus, which is still a positive against BMO’s results," Barclays Capital analyst John Aiken said in a note to clients.   Continued...

A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015. REUTERS/Mark Blinch