December 3, 2010 / 11:41 AM / in 8 years

UPDATE 2-Canada's RBC profit slips on trading, costs

* Q4 adj EPS C$0.84 vs est C$1.00

* Trading income falls, costs higher, C$ weighs

* Bank takes C$116 mln loss on insurance unit sale

TORONTO, Dec 3 (Reuters) - Royal Bank of Canada (RY.TO) said on Friday its fourth-quarter profit slid 8 percent, missing analysts’ estimates, as trading fees fell and expenses rose, more than offsetting stronger domestic retail banking income.

Royal, Canada’s largest lender, earned C$1.1 billion ($1.1 billion), or 74 Canadian cents a share, in the quarter ended Oct. 31, down from a year-before profit of C$1.2 billion, or 82 Canadian cents a share.

Excluding a C$116 million accounting loss on the previously-announced sale of Liberty Life Insurance, the bank earned 84 Canadian cents per share, missing analysts’ estimates of a profit of C$1.00 a share.

As has been the trend with other Canadian banks reporting this quarter, trading fees suffered from comparisons to the final quarter of 2009, when recovering markets boosted activity. Higher costs and the strong Canadian dollar, which hurts foreign-denominated revenue, also weighed on results.

On Thursday, rivals Toronto-Dominion Bank (TD.TO) and Canadian Imperial Bank of Commerce (CM.TO) both reported weaker profits on the back of a slump in trading and higher costs.

Insurance income eased and losses at RBC’s troubled international banking unit deepened.

Those factors offset a jump in income from the bank’s core retail bank, a small rise in wealth management income, and the impact of stronger credit quality, as the bank was able to cut the amount of funds set aside to cover bad loans to C$432 million from C$883 million.

Return on equity fell to 12.3 percent from 14.7 percent.

The bank’s Tier 1 capital ratio was flat at 13 percent.

RBC elected not to raise its quarterly dividend, maintaining the payout at 50 Canadian cents a share.

National Bank of Canada (NA.TO) became the first Canadian bank to resume dividend hikes in the wake of the financial crisis earlier this week, and analysts have said RBC is a good bet to hike its payout early next year.

However, the bank has shown it is willing to put its capital to work, agreeing in October to buy British fund manager BlueBay Asset Management BBAY.L for about US$1.5 billion.

The bank’s shares, which have underperformed its peers with a 1.2 percent decline so far this year, closed at C$55.72 on the Toronto Stock Exchange on Thursday. ($1=$1.00 Canadian) (Reporting by Cameron French; Editing by Derek Caney)

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