Author: Don Obrien

Royal Bank of Canada beats profit expectations on surge in investment banking revenue

RBC saw strong growth across its banking, wealth management and capital markets units

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Royal Bank of Canada benefited from a continued strong performance in its capital-markets business.

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Net income in the division rose 19 per cent to $1.13 billion in the fiscal third quarter, helped by record corporate and investment-banking revenue, according to a statement Wednesday. Overall profit topped analysts’ estimates.

The Toronto-based bank’s RBC Capital Markets benefited from a boom in trading as the pandemic roiled markets early last year and kept that momentum going by advising on a flood of equity- and debt-financing transactions for companies seeking to stockpile cash. More recently, Royal Bank’s dealmakers have capitalized on a boom in acquisitions spurred by cheap financing for buyers and high valuations that have proven enticing for sellers.

Royal Bank, along with many of its Canadian and U.S. peers, has benefited in recent quarters from vaccination campaigns that have allowed for economic reopenings and headed off a wave of defaults. That has allowed them to set aside less money to absorb loan losses or even reverse some of their earlier set asides. In the three months through July, Royal Bank released $540 million.

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But while the losses haven’t materialized, growth had been slow to rebound as consumers and companies, flush with cash from government stimulus programs, avoid taking on new debt. But with much of Canada’s economy starting to reopen in June and July, Royal Bank was able to boost lending in its domestic business.

Average net loans and acceptances in its Canadian banking division rose 7.9 per cent from a year earlier to $500.4 billion.

Royal Bank’s shares have advanced 26 per cent this year, in line with the gain for the S&P/TSX Commercial Banks Index.

Also in the results for the three months through July:

Net income rose 34 per cent to $4.3 billion, or $2.97 a share.Excluding some items, profit was $3 a share. Analysts estimated $2.72, on average.

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Oliver Bolt

Oliver Bolt

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