UPDATE 3-RBC profit tops expectations on domestic banking, capital markets

Thu May 28, 2015 4:18pm EDT
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(Adds comment from CFO, updates shares)

By John Tilak

TORONTO May 28 (Reuters) - Royal Bank of Canada, the country's top lender, posted a stronger-than-expected quarterly profit on Thursday, helped by growth in its domestic banking and capital markets divisions.

Net income in Royal's Canadian banking segment climbed 7 percent in the company's second quarter, supported by healthy fee-based revenue growth.

The capital markets division recorded a 23 percent earnings increase.

The shares of Canadian banks have struggled in recent months because of investor concerns that the banks might face the brunt of the oil price slump, a sluggish domestic economy and a potential housing market correction.

Shares of RBC, Canada's most valuable company, closed at C$80.05, up 0.1 percent.

Chief Financial Officer Janice Fukakusa said in an interview that while the bank had solid operating results, it was keeping a close watch on credit quality in Western Canada, where the economy has been hit by the sharp drop in oil prices.

"We haven't seen any credit weakness at all. We are of course vigilant and stress-test the results extensively," Fukakusa said. "We've had no defaults, no nonpayments of interest and no current covenant breaches."   Continued...