All amounts are in Canadian dollars and are based on financial
statements prepared in compliance with International Accounting
Standard 34 Interim Financial Reporting, unless otherwise
noted. Our Q1 2020 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$3.5 Billion
Record earnings
|
Diluted
EPS1
$2.40
Strong 12% growth
YoY
|
ROE2
17.6%
Balanced capital
deployment
|
CET1 Ratio
12.0%
Robust capital levels
|
TORONTO, Feb. 21, 2020 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $3,509 million for the
quarter ended January 31, 2020, up
$337 million or 11% from the prior
year, with strong diluted EPS growth of 12%. Results were driven by
record earnings in Capital Markets, as well as by strong earnings
growth in Personal & Commercial Banking reflecting continued
robust volume growth in our Canadian Banking franchise. Solid
earnings growth in Wealth Management and Insurance also contributed
to the increase. These factors were partially offset by lower
results in Investor & Treasury Services.
Compared to last quarter, net income was up $303 million with higher results in Capital
Markets, Investor & Treasury Services, Personal &
Commercial Banking, and Corporate Support. These factors were
partially offset by lower earnings in Wealth Management and
Insurance. Q4 2019 results included a gain on the sale of the
private debt business of BlueBay ($134
million after-tax) in Wealth Management, which was largely
offset by higher severance and related costs ($83 million after-tax) associated with the
repositioning of our Investor & Treasury Services business, as
well as by an unfavourable accounting adjustment ($41 million after-tax) in Corporate Support.
Results this quarter also reflect lower provisions for credit
losses (PCL), with a total PCL on loans ratio of 26 basis points
(bps). PCL on impaired loans ratio of 21 bps improved 6 bps from
last quarter, due to lower provisions on impaired loans in Personal
& Commercial Banking and Wealth Management. Our capital
position remained robust, with a Common Equity Tier 1 (CET1) ratio
of 12.0%. In addition, today we announced an increase to our
quarterly dividend of $0.03 or 3% to
$1.08 per share.
"We had a strong
start to the year with earnings growth of 11% year-over-year. These
results reflect the underlying strength of our diversified business
mix, our focused strategy, and our colleagues' unwavering
commitment to creating more value for clients as we position the
bank for the future. In addition to delivering record earnings this
quarter, we are pleased to increase our quarterly dividend by three
per cent. Against the uncertain macroeconomic backdrop, we remain
focused on prudently managing our risks, leveraging our scale and
competitive position, and balancing our investments in technology
and talent for long-term, sustainable growth."
– Dave McKay, RBC President and Chief Executive
Officer
|
|
|
|
|
|
Q1
2020
|
•
|
Net income of $3,509
million
|
↑
|
11%
|
Compared
to
|
•
|
Diluted
EPS1 of $2.40
|
↑
|
12%
|
Q1
2019
|
•
|
ROE2 of
17.6%
|
↑
|
90 bps
|
|
•
|
CET1 ratio of
12.0%
|
↑
|
60 bps
|
Q1
2020
|
•
|
Net income of $3,509
million
|
↑
|
9%
|
Compared
to
|
•
|
Diluted
EPS1 of $2.40
|
↑
|
10%
|
Q4
2019
|
•
|
ROE2 of
17.6%
|
↑
|
140 bps
|
|
•
|
CET1 ratio of
12.0%
|
↓
|
10 bps
|
|
|
|
|
|
1
|
Earnings per share
(EPS).
|
2
|
Return on Equity
(ROE). This measure does not have a standardized meaning under
GAAP. For further information, refer to the Key Performance and
non-GAAP measures section on page 3 of this Earnings
Release.
|
Personal & Commercial Banking
Net income of $1,686 million
increased $115 million or 7% from
last year, mainly due to average loan growth of 7%, reflecting
strong growth in residential mortgages, and strong average deposit
growth of 9% in Canadian Banking. Higher mutual fund distribution
fees, reflecting higher balances driven by strong market
appreciation and net sales, also contributed to the increase. These
factors were partially offset by lower spreads, mainly due to the
impact of competitive pricing pressures and changes in product mix.
Net income was also impacted by an increase in technology and
related costs, including digital initiatives for both our personal
and business banking clients, as well as higher staff-related
costs. The prior year also included a write-down of deferred tax
assets resulting from a change in the corporate tax rate in
Barbados.
Compared to last quarter, net income increased $68 million or 4%, mainly due to lower PCL and
higher card service revenue.
Wealth Management
Net income of $623 million
increased $26 million or 4% from a
year ago, primarily due to an increase in average fee-based client
assets reflecting market appreciation, largely due to strong North
American equity markets, and net sales as our clients continued to
trust us with more of their business. Higher transaction volumes
also contributed to the increase. These factors were partially
offset by higher variable compensation commensurate with revenue
growth, as well as higher technology and staff-related costs. The
prior year was also impacted by a favourable accounting adjustment
of $28 million related to Canadian
Wealth Management.
Compared to last quarter, net income decreased $106 million or 15%, mainly due to the gain on
sale of the private debt business of BlueBay ($134 million after-tax) in the prior
quarter.
Insurance
Net income of $181 million
increased $15 million or 9% from a
year ago, mainly due to new longevity reinsurance contracts,
partially offset by the lower impact from reinsurance contract
renegotiations.
Compared to last quarter, net income decreased $101 million or 36%, primarily due to the impact
of lower favourable investment-related experience, new longevity
reinsurance contracts and reinsurance contract renegotiations.
Investor & Treasury Services
Net income of $143 million
decreased $18 million or 11% from a
year ago, primarily due to lower client deposit margins and lower
revenue from our asset services business.
Compared to last quarter, net income increased $98 million, primarily due to severance and
related costs associated with the repositioning of the business in
the prior
quarter.
Capital Markets
Net income of $882 million
increased $229 million or 35% from a
year ago, primarily due to higher fixed income trading revenue
across all regions, with particular strength in corporate bond and
interest rate trading. Higher M&A activity, primarily in
North America, and higher debt
origination, largely in the U.S., also contributed to the increase.
In addition, PCL was lower as the prior year was impacted by a
provision on impaired loans in one utilities account. These factors
were partially offset by higher compensation on improved results
and a higher effective tax rate, largely reflecting changes in
earnings
mix.
Compared to last quarter, net income increased $298 million or 51%, primarily due to higher
revenue in Global Markets and Corporate and Investment Banking.
These factors were partially offset by higher compensation on
improved results and a higher effective tax rate, largely
reflecting changes in earnings
mix.
Capital and Credit Quality
Capital – As at January 31, 2020, Basel III CET1 ratio was 12.0%,
down 10 bps from last quarter, mainly reflecting higher
risk-weighted assets, share repurchases, the impact of lower
discount rates in determining our pension and other post-employment
benefit obligations, and the net impact of regulatory and model
updates, partially offset by internal capital generation. We
distributed $2.2 billion, or over
60%, of our quarterly earnings to our shareholders through
dividends and buybacks.
Credit Quality – Total PCL was $419 million. PCL on loans of $421 million decreased $95
million or 18% from the prior year, primarily due to lower
provisions in Capital Markets and Wealth Management. The total PCL
on loans ratio of 26 bps improved 8 bps from the prior year. The
PCL on impaired loans ratio was 21 bps.
PCL on loans decreased $84 million
or 17% from the prior quarter, and the total PCL on loans ratio
improved 6 bps from last quarter. The PCL on impaired loans ratio
improved 6 bps, due to lower provisions on impaired loans in
Personal & Commercial Banking, mainly in our Canadian Banking
commercial portfolios, and Wealth Management.
Digitally Enabled Relationship Bank
90-day Active Mobile users increased 15% from a year ago to
4.6 million, resulting in a 22% increase in mobile sessions.
Digital adoption increased to 52.5%.
Key Performance and Non-GAAP Measures
We measure and evaluate the performance of our consolidated
operations and each business segment using a number of financial
metrics, such as net income and ROE. ROE does not have a
standardized meaning under GAAP. We use ROE as a measure of return
on total capital invested in our business.
Additional information about ROE and other Key Performance and
non-GAAP measures can be found under the Key Performance and
non-GAAP measures section of our Q1 2020 Report to
Shareholders.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking
statements within the meaning of certain securities laws, including
the "safe harbour" provisions of the United States Private
Securities Litigation Reform Act of 1995 and any applicable
Canadian securities legislation. We may make forward-looking
statements in this Earnings Release, in other filings with Canadian
regulators or the SEC, in other reports to shareholders, and in
other communications. Forward-looking statements in this document
include, but are not limited to, statements relating to our
financial performance objectives, vision and strategic goals, the
Economic, market, and regulatory review and outlook for Canadian,
U.S., European and global economies, the regulatory environment in
which we operate, and the risk environment including our liquidity
and funding risk, and includes our President and Chief Executive
Officer's statements. The forward-looking information contained in
this Earnings Release is presented for the purpose of assisting the
holders of our securities and financial analysts in understanding
our financial position and results of operations as at and for the
periods ended on the dates presented, as well as our financial
performance objectives, vision and strategic goals, and may not be
appropriate for other purposes. Forward-looking statements are
typically identified by words such as "believe", "expect",
"foresee", "forecast", "anticipate", "intend", "estimate", "goal",
"plan" and "project" and similar expressions of future or
conditional verbs such as "will", "may", "should", "could" or
"would".
By their very nature, forward-looking statements require us to
make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
will not prove to be accurate, that our assumptions may not be
correct and that our financial performance objectives, vision and
strategic goals will not be achieved. We caution readers not to
place undue reliance on these statements as a number of risk
factors could cause our actual results to differ materially from
the expectations expressed in such forward-looking statements.
These factors – many of which are beyond our control and the
effects of which can be difficult to predict – include: credit,
market, liquidity and funding, insurance, operational, regulatory
compliance, strategic, reputation, legal and regulatory
environment, competitive and systemic risks and other risks
discussed in the risk sections of our 2019 Annual Report and the
Risk management section of our Q1 2020 Report to Shareholders;
including information technology and cyber risk, privacy, data and
third party related risks, geopolitical uncertainty, Canadian
housing and household indebtedness, regulatory changes, digital
disruption and innovation, climate change, the business and
economic conditions in the geographic regions in which we operate,
the effects of changes in government fiscal, monetary and other
policies, tax risk and transparency, and environmental and social
risk.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. When relying on our forward-looking statements to make
decisions with respect to us, investors and others should carefully
consider the foregoing factors and other uncertainties and
potential events. Material economic assumptions underlying the
forward-looking statements contained in this Earnings Release are
set out in the Economic, market and regulatory review and outlook
section and for each business segment under the Strategic
priorities and Outlook headings in our 2019 Annual Report, as
updated by the Economic, market and regulatory review and outlook
section of our Q1 2020 Report to Shareholders. Except as required
by law, we do not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to
time by us or on our behalf.
Additional information about these and other factors can be
found in the risk sections of our 2019 Annual Report and the Risk
management section of our Q1 2020 Report to Shareholders.
Information contained in or otherwise accessible through the
websites mentioned does not form part of this Earnings Release. All
references in this Earnings Release to websites are inactive
textual references and are for your information only
ACCESS TO QUARTERLY RESULTS MATERIALS
Interested
investors, the media and others may review this quarterly Earnings
Release, quarterly results slides, supplementary financial
information and our Q1 2020 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for February 21, 2020 at 8:00
a.m. (EST) and will feature a presentation about our first
quarter results by RBC executives. It will be followed by a
question and answer period with analysts.
Interested parties can access the call live on a listen-only
basis at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (416-340-2217, 866-696-5910, passcode 7752881#).
Please call between 7:50 a.m. and 7:55 a.m.
(EST).
Management's comments on results will be posted on our website
shortly following the call. A recording will be available by
5:00 p.m. (EST) from February 21, 2020 until May 26, 2020 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 5219292#).
ABOUT RBC
Royal Bank of Canada is a global financial institution with
a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 85,000+ employees who bring
our vision, values and strategy to life so we can help our clients
thrive and communities prosper. As Canada's biggest bank, and one of the largest
in the world based on market capitalization, we have a diversified
business model with a focus on innovation and providing exceptional
experiences to our 17 million clients in Canada, the U.S. and 34 other countries. Learn
more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at
rbc.com/community-social-impact.
Trademarks used in this earnings release include the LION &
GLOBE Symbol, ROYAL BANK OF CANADA
and RBC which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or by its subsidiaries under
license. All other trademarks mentioned in this earnings release,
which are not the property of Royal Bank of Canada, are owned by their respective
holders.
SOURCE Royal Bank of Canada