December 3, 2014 / 11:19 AM / 3 years ago

Canada's RBC reports higher profit, but capital markets weigh

Shareholders leave the Royal Bank of Canada's (RBC) Annual General Meeting in Calgary, Alberta February 28, 2013.Mike Sturk

TORONTO (Reuters) - Royal Bank of Canada (RY.TO) reported a higher quarterly profit on Wednesday as gains at its main personal and commercial banking and wealth management businesses offset weakness at its capital markets arm.

RBC, Canada's largest bank, said net income rose to C$2.3 billion ($2.02 billion), or C$1.57 a share, in the fourth quarter ended on Oct. 31 from C$2.1 billion, or C$1.39 a share, a year earlier.

Excluding the amortization of intangible assets, earnings were C$1.59 a share.

Analysts on average had expected an adjusted profit of C$1.58 a share, according to Thomson Reuters I/B/E/S.

"They were basically in line," said Edward Jones financial services analyst Tom Lewandowski, who rates the stock a "hold."

The results provided some relief for investors the day after Bank of Montreal (BMO.TO) reported lower-than-expected earnings on weakness at its capital markets arm.

That profit miss had weighed on RBC shares because both banks have large capital markets divisions.

RBC shares were down 2 Canadian cents at C$81.40 in afternoon trading in Toronto.

RBC said on Nov. 21 it was shutting down its international client wealth management business in the Caribbean.

Chief Executive Officer David McKay said on a conference call that the remaining Caribbean operation was improving and management believed it will return to profitability next year.

RBC said personal and commercial banking net income rose 8 percent to C$1.15 billion during the quarter. Wealth management net income rose 41 percent to C$285 million.

But net income at the capital markets arm fell 14 percent to C$402 million.

That business suffered because of lower revenue and costs from exiting some proprietary trading strategies as it complied with the U.S. "Volcker rule," which prohibits banks from making speculative bets with their own money.

Chief Financial Officer Janice Fukakusa said the bank had wanted to complete most of the exit by Oct. 31.

"While we're still looking at some of the activities, by and large, we think that we're done," she told Reuters, adding the bank was in the process of redeploying that capital to other businesses.

Editing by Chizu Nomiyama, Jeffrey Benkoe and Lisa Von Ahn

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