(Reuters) - Royal Bank of Canada (RY.TO) on Wednesday reported an increase in third-quarter profit as its personal and commercial banking earnings grew, and its domestic business posted a surprise 8% gain, although that was partly offset by weakness in its capital markets division.
Canada’s largest lender by market share also said it would raise its quarterly dividend by 3% to C$1.05 per share.
Its shares rose 0.3% to C$99.64 in morning trade in Toronto, after climbing as much as 1.4% earlier.
“The Canadian lending business was much better than we had expected, with solid operating leverage of almost 2%, stable loan growth (both consumer and commercial), and much lower loan losses,” analysts at Credit Suisse wrote in a note. This “reflects RY’s advantageous position in the Canadian market.”
However, on a call following the results announcement, executives cautioned that rising geopolitical risks and trade tensions are leading to declines in global interest rates. Net interest margins could drop as much as four to five basis points over the next year, they said.
The Toronto-based bank reported net income of C$3.26 billion ($2.45 billion), or C$2.22 per share, in the three months ended July 31, up from C$3.11 billion, or C$2.10 per share, a year earlier. Analysts had expected C$3.32 billion, or C$2.31 per share.
Net income in its personal and commercial banking business rose 10% and wealth management saw profit growth of 11%.
Net income at Royal Bank’s capital markets business, which includes trading, investment banking and advisory, fell 6%, in part because of declines in equity trading and loan syndication revenue.
Total loan loss provisions rose 23% to C$425 million, driven by increased provisions in capital markets, wealth management and personal and commercial banking.
RBC is the first of Canada’s big banks to report third-quarter earnings. Smaller rival Canadian Imperial Bank of Commerce (CM.TO) is slated to report its quarterly results on Thursday.
Reporting by Nichola Saminather in Toronto and Bharath Manjesh in Bengaluru; Editing by Arun Koyyur and Steve Orlofsky