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The Royal Bank of Canada exceeded profit expectations in the fourth quarter due to a surge in earnings from its trading and investment banking operations that helped mitigate the impact of COVID-19 on the lender’s other branches.
The bank’s total net income increased 1% year-over-year to $ 3.25 billion in the three months ended October 31. On an adjusted basis, RBC said Wednesday that it earned $ 2.27 per share. Analysts, on average, had expected $ 2.04 in profit per share. For the year, RBC’s net profit fell 11% to $ 11.44 billion.
The main performance in the quarter was RBC’s capital markets division, where profit rose 44% to $ 840 million. In a statement, RBC attributed the growth to favorable market conditions and an increase in debt and equity offerings that strengthened its investment banking team.
Credit quality also improved for RBC in the quarter, as the bank set aside $ 427 million for loans that may fail, compared to $ 675 million in the previous quarter and $ 499 million in provisions the previous year.
RBC’s major personal and commercial banking (Non-Life) operations saw profit drop 7% to $ 1.5 billion for the quarter. Similar to banks reporting on Tuesday, RBC noted the impact of lower interest rates as central banks attempted to cushion the economic blow of the pandemic by easing borrowing costs. Higher technology costs also weighed on RBC’s Non-Life earnings over the period.
Profit from wealth management declined 25% year-on-year, mainly due to a substantial gain from the sale of assets that boosted the division a year earlier.
“Looking ahead, although it is difficult to predict how next year will unfold, RBC has the strength, stability and operational resilience to tackle a variety of scenarios and to continue to create long-term sustainable value,” said Dave McKay. RBC CEO a release.
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