UPDATE 1-RBC says bad loans rose 19 percent in second quarter

Thu May 26, 2016 6:33am EDT
 
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(Adds comment from chief executive)

TORONTO May 26 (Reuters) - Royal Bank of Canada (RBC) said on Thursday bad loans increased by C$583 million ($450 million), or 19 percent, in the second quarter from the quarter before, largely due to a rise in credit to oil firms that had turned sour.

Canada's biggest banks are seeing an increase in energy clients struggling to pay back loans following a sharp decline in the price of oil. Bank of Montreal said on Wednesday it had set aside more funds to cover losses.

Despite the warning, RBC reported a 7 percent increase in second-quarter profit from the same quarter a year earlier, which it said reflected strength across its businesses.

Canada's biggest bank by market value said net income excluding one-off items for the second quarter to April 30 was C$2.6 billion, or C$1.66 per share, compared with C$2.4 billion, or C$1.61 per share, a year earlier.

Analysts on average had expected earnings of C$1.64 per share, according to Thomson Reuters I/B/E/S.

"RBC continues to be well positioned going forward given the strength of our diversified business model, our prudent risk management and our ability to effectively manage costs," said Chief Executive Dave McKay

($1 = 1.2962 Canadian dollars) (Reporting by Matt Scuffham; Editing by Jason Neely and Mark Potter)