RBC Beats Estimates as a Surge in Bond Trading Boosts Revenue

Royal Bank of Canada’s capital-markets division — the largest among the country’s banks — gave it a boost last quarter as its trading business rebounded.

(Bloomberg) — Royal Bank of Canada’s capital-markets division — the largest among the country’s banks — gave it a boost last quarter as its trading business rebounded.   

Revenue from RBC Capital Markets rose 4.3% to C$3.12 billion ($2.3 billion) in the three months through January, the Toronto-based bank said Wednesday. That beat analysts’ C$2.35 billion average estimate. Overall profit for the fiscal first quarter also topped projections.

Royal Bank has a major capital-markets presence in both its home market and the US, as well as significant operations outside North America. That helped results last quarter as a surge in bond trading boosted global-markets revenue 17%.

“With the rate-hiking cycle coming to an end, other sources of revenue growth will grow in importance again,” Paul Holden, an analyst at Canadian Imperial Bank of Commerce, said in a research note before the results were released. “With a large wealth-management business, and well-sized capital-markets business, Royal Bank should still be positioned for strong revenue growth as market conditions change.” 

Royal Bank is looking to extend its lead in Canada’s retail-banking industry with the C$13.5 billion takeover of HSBC Holdings Plc’s unit in the country. The deal, struck in November, would give Royal Bank an additional 130 branches and C$134 billion in assets while strengthening its dealings with companies and wealthy individuals. 

Royal Bank shares have risen 8.8% this year, compared with a 6.5% gain for the S&P/TSX Commercial Banks Index.

Also in the results:

  • Net income fell 22% to C$3.21 billion, or C$2.29 a share.
  • Excluding some items, profit was C$3.10 a share. Analysts estimated C$2.96.
  • The bank set aside C$532 million in provisions for credit losses. Analysts estimated C$511.2 million.

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