RBC reports spike in energy sector bad loans; shares fall

Wed Aug 26, 2015 4:21pm EDT
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By John Tilak

TORONTO (Reuters) - Royal Bank of Canada reported a spike in bad loans to the energy sector on Wednesday, highlighting the impact the oil-price correction is starting to have on Canadian banks and sending its shares down 2.4 percent before they recovered.

RBC's gross impaired loans for the oil-and-gas sector shot up to C$183 million, compared with C$5 million in the same period last year. They were C$46 million in the second quarter.

About 8 percent of the company's total gross impaired loans in the quarter came from the oil-and-gas industry. The oil-and-gas portfolio forms about 1.5 percent of RBC’s total loan book.

However, strength in personal and commercial banking helped the country's biggest lender top profit expectations. RBC also increased its quarterly dividend by 3 percent.

“In terms of our overall enterprise, the exposure is pretty manageable,” said Chief Financial Officer Janice Fukakusa, who noted that the lender was closely monitoring struggling clients.

RBC is working with energy companies to restructure loan facilities and stretch time frames, she said in an interview.

“It's really working within what's possible and not trying to be draconian about what's not possible.”

RBC shares recovered later in the session to close down 0.4 percent at C$72.10.   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