The Royal Bank of Canada (TSX: RY) has surpassed analysts’ expectations for its fiscal second quarter, driven by robust gains in its capital-markets division and lower-than-anticipated provisions for potential loan losses. RBC reported adjusted earnings of $2.92 per share, exceeding the $2.76 average estimate from analysts surveyed by Bloomberg.
RBC’s net income rose by 7.3% to $3.95 billion from $3.68 billion last year. This growth was driven by higher revenues in corporate and investment banking, attributed to increased M&A activity, loan syndication, and equity and debt origination across multiple regions​.
Provisions for credit losses totaled $920 million, slightly below the $929 million forecasted by analysts. This performance is in contrast to the Bank of Montreal, which reported higher-than-expected provisions, causing its shares to drop. Similarly, the Bank of Nova Scotia and Toronto-Dominion Bank each reported loan-loss provisions exceeding $1 billion​​.
RBC’s $13.5-billion acquisition of HSBC Canada, completed on March 28, 2024, significantly impacted the quarter’s financials. This acquisition, the largest in RBC’s history, added to non-interest expenses, which rose by 12% to $8.31 billion, exceeding analysts’ expectations of $7.95 billion. The initial provision for credit losses on purchased performing financial assets was $200 million before tax​.
President and CEO Dave McKay emphasized the strategic importance of the HSBC acquisition, stating, “This quarter marked a pivotal milestone in RBC’s long-term growth story as we completed our acquisition of HSBC Bank Canada, welcoming thousands of colleagues and clients from across the country.”
The Common Equity Tier 1 (CET1) ratio was 12.8%, higher than the 12.5% projected following the HSBC deal. Reflecting its performance, RBC announced a 4-cent increase in its quarterly dividend, raising it to $1.42 per share​.
RBC declared a 4-cent increase in its quarterly common share dividend, bringing it to $1.42 per share. This dividend is payable on and after August 23, 2024, to shareholders of record at the close of business on July 25, 2024.
Moreover, RBC announced its intention to commence a normal course issuer bid, subject to regulatory approval, to repurchase up to 30 million common shares, representing approximately 2.12% of the bank’s outstanding common shares as of May 15, 2024. This repurchase program is set to begin on June 12, 2024, and will continue until June 11, 2025.
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