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 Q3 2020 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net
Income $3.2
Billion Down 2%
YoY
|
Diluted
EPS1
$2.20
Down 1%
YoY
|
Total
PCL2
$675
Million
Total PCL ratio
on loans
down 125
bps3 QoQ
|
ROE4
15.7%
Down 100 bps
YoY
|
CET1
Ratio
12.0%
Well above
regulatory
requirements
|
TORONTO, Aug. 26, 2020 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $3,201 million for the
quarter ended July 31, 2020, down
$62 million or 2% from the prior
year. Diluted EPS was $2.20, down 1%
over the same period. Our results reflect record earnings in
Capital Markets as well as solid earnings in Insurance. However,
these results were offset by lower earnings in Personal &
Commercial Banking, Wealth Management and Investor & Treasury
Services, largely due to the impact of lower interest rates.
Compared to last quarter, net income was up $1,720 million with higher results in Capital
Markets, Personal & Commercial Banking and Wealth Management,
including lower provisions (total PCL was down $2,155 million from last quarter) as the impact
of the onset of the COVID-19 pandemic on provisions was reflected
in the prior quarter. Higher results in Insurance also contributed
to the increase. These factors were partially offset by lower
results in Investor & Treasury Services.
The total PCL ratio on loans was 40 bps, down 125 bps from last
quarter. The PCL ratio on impaired loans of 23 bps decreased 14 bps
from last quarter, largely reflecting lower provisions in Capital
Markets and Personal & Commercial Banking. Our capital position
remained robust, with a Common Equity Tier 1 (CET1) ratio of 12.0%,
up 30 bps from last quarter. We also had a strong average Liquidity
Coverage Ratio (LCR) of 154%.
"We continue to navigate these uncertain times from a
position of strength and stability. Our robust capital and
liquidity position, diversified business model, prudent approach to
risk management, and technology capabilities provide the foundation
to enable our people to continue supporting clients, providing
advice and creating more value today and over the long-term,"
said Dave McKay, RBC President
and Chief Executive Officer. "RBC has a proud history of
helping our clients thrive and communities prosper. Since the onset
of the COVID-19 pandemic, RBCers have shown their unwavering
commitment to delivering on our Purpose by enabling the
re-emergence of our economies and supporting our clients with
empathy and dedication."
|
|
|
|
|
Q3
2020
|
•
|
Net income of $3,201
million
|
↓
|
2%
|
Compared
to
|
•
|
Diluted EPS of
$2.20
|
↓
|
1%
|
Q3
2019
|
•
|
ROE of
15.7%
|
↓
|
100
bps
|
|
•
|
CET1 ratio of
12.0%
|
↑
|
10
bps
|
Q3
2020
|
•
|
Net income of $3,201
million
|
↑
|
116%
|
Compared
to
|
•
|
Diluted EPS of
$2.20
|
↑
|
120%
|
Q2
2020
|
•
|
ROE of
15.7%
|
↑
|
840
bps
|
|
•
|
CET1 ratio of
12.0%
|
↑
|
30
bps
|
YTD
2020
|
•
|
Net income of $8,191
million
|
↓
|
15%
|
Compared
to
|
•
|
Diluted EPS of
$5.60
|
↓
|
15%
|
YTD
2019
|
•
|
ROE of
13.6%
|
↓
|
340
bps
|
|
1 Earnings per share
(EPS).
|
2 Provision for
credit losses (PCL).
|
3 Basis points
(bps).
|
4 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 $1,367 million
decreased $297 million or 18% from a
year ago, primarily attributable to lower spreads largely
reflecting lower interest rates, and higher PCL. These factors were
partially offset by average volume growth of 5% in loans and 18% in
deposits in Canadian Banking.
Compared to last quarter, net income increased $835 million or 157%, primarily due to lower PCL
as the prior quarter reflected the impact of the onset of the
COVID-19 pandemic. Two more days in the current quarter and solid
average volume growth of 4% in Canadian Banking also contributed to
the increase. These factors were partially offset by lower
spreads.
Wealth Management
Net income of $562 million
decreased $77 million or 12% from a
year ago, largely due to a decline in net interest income as
average volume growth was more than offset by the impact of lower
interest rates. Higher PCL also contributed to the decrease. These
factors were partially offset by higher average fee-based client
assets and an increase in transaction and other revenue.
Compared to last quarter, net income increased $138 million or 33%, primarily from the reversal
of unfavourable changes in the fair value of interest rate
derivatives, seed capital investments and the net impact of our
U.S. share-based compensation plans driven by the improvement of
market conditions in the current quarter. Lower staff-related costs
also contributed to the increase. These factors were partially
offset by lower client transactional activity, including the impact
of elevated market volatility on volumes in the prior quarter. Net
interest income also declined as the benefit from average volume
growth was more than offset by the impact of lower interest
rates.
Insurance
Net income of $216 million
increased $12 million or 6% from a
year ago, mainly due to higher favourable investment-related
experience and improved claims experience. These factors were
partially offset by the impact of longevity reinsurance contracts
in the prior year.
Compared to last quarter, net income increased
$36 million or 20%, primarily due to
improved travel and disability claims experience in the current
quarter and higher favourable investment-related experience. These
factors were partially offset by the impact of longevity
reinsurance contracts in the prior quarter.
Investor & Treasury Services
Net income of $76 million
decreased $42 million or 36% from a
year ago, mainly due to lower funding and liquidity revenue,
partially offset by improved results in our asset services
business.
Compared to last quarter, net income decreased $150 million or 66%, primarily driven by lower
funding and liquidity revenue as the prior quarter benefitted from
the impact of interest rate movements, as well as lower gains from
the disposition of securities.
Capital Markets
Net income of $949 million
increased $296 million or 45% from a
year ago, mainly driven by higher fixed income trading revenue
across all regions, primarily due to tightening credit spreads,
increased client activity in rates and repo products, and the
reversal of loan underwriting markdowns. Higher equity trading
revenue, primarily in the U.S., reflecting favourable market
conditions and increased client activity also contributed to the
increase. These factors were partially offset by higher
compensation on improved results and higher taxes mainly due to an
increase in the proportion of earnings from higher tax rate
jurisdictions.
Compared to last quarter, net income increased $844 million, largely due to lower PCL as the
prior quarter reflected the impact of the onset of the COVID-19
pandemic. Higher fixed income trading revenue primarily from the
reversal of loan underwriting markdowns in the U.S. and
Europe driven by the improvement
in market conditions compared to the prior quarter, as well as
higher equity trading revenue across all regions, also contributed
to the increase. These factors were partially offset by higher
taxes due to an increase in the proportion of earnings from higher
tax rate jurisdictions and higher compensation on improved
results.
Corporate Support
Net income was $31 million in the
current quarter, primarily due to asset/liability management
activities, partially offset by net unfavourable tax adjustments
and residual unallocated costs. Net income was $14 million in the prior quarter, largely due to
asset/liability management activities, partially offset by net
unfavourable tax adjustments. Net loss was $15 million in the prior year, mainly due to net
unfavourable tax adjustments, largely offset by asset/liability
management activities.
Capital, Liquidity and Credit Quality
Capital – As at July 31,
2020, our CET1 ratio was 12.0%, up 30 bps from last quarter,
mainly reflecting internal capital generation, lower risk-weighted
assets (RWA) mainly driven by credit risk due to the pay down of
credit facilities by clients, and the favourable impact of fair
value other comprehensive income adjustments. These factors were
partially offset by higher market risk RWA, as well as the impact
of lower discount rates in determining our pension and other
post-employment benefit obligations. Market risk RWA increased as
the impact of heightened market volatility in Q2 2020 was only
reflected in VaR for the latter part of the prior quarter, while Q3
2020 reflects the impact on VaR throughout the entire quarter, as
well as reflecting the change in the historical SVaR period. We
distributed $1.5 billion in common
share dividends in Q3 2020.
Liquidity – For the quarter ended
July 31, 2020, average LCR was 154%,
which translates into a surplus of approximately $127 billion, compared to 130% in the prior
quarter. Average LCR increased from the previous quarter as the
drivers of improvement of our liquidity position in the latter part
of Q2 2020 continued to have an impact on average LCR throughout
the current quarter. The increase in the LCR is primarily due to
continuing growth of business and retail deposits as well as pay
downs of credit facilities by clients.
Credit Quality – Total PCL was $675 million. PCL on loans of $678 million increased $249 million from the prior year, primarily in
Personal and Commercial Banking, Wealth Management and Capital
Markets, due to the evolving impact of the COVID-19 pandemic. The
total PCL on loans ratio of 40 bps increased 13 bps from the prior
year. The PCL on impaired loans ratio was 23 bps.
PCL on loans decreased $2,056
million from last quarter, primarily in Personal &
Commercial Banking, Capital Markets and Wealth Management, as the
prior quarter reflected the impact of the onset of the COVID-19
pandemic. Lower PCL on impaired loans, primarily in Capital
Markets, also contributed to the decrease. The total PCL on loans
ratio decreased 125 bps from last quarter.
The ratio of allowance for credit losses (ACL) on loans and
acceptances to total loans & acceptances increased to 89 bps,
up 5 bps from last quarter and 37 bps from last year.
Digitally Enabled Relationship Bank
90-day Active Mobile users increased 14% from a year ago to 4.9
million, resulting in a 24% increase in mobile sessions. Digital
adoption increased to 53.8%.
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 Q3 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, including statements by our President and
Chief Executive Officer. Forward-looking statements in this
document include, but are not limited to, statements relating to
our financial performance objectives, vision and strategic goals,
and the potential continued impacts of the coronavirus (COVID-19)
pandemic on our business operations, financial results and
financial condition and on the global economy and financial market
conditions. 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 and Significant developments: COVID-19 sections of
our Q3 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, environmental and social risk and the emergence of
widespread health emergencies or public health crises such as
pandemics and epidemics, including the COVID-19 pandemic and its
impact on the global economy and financial market conditions and
our business operations, financial results and financial
condition.
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
and Significant developments: COVID-19 sections of our Q3 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 and Significant developments: COVID-19 sections of our
Q3 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 Q3 2020 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our quarterly conference call is scheduled for August 26, 2020 at 8:00
a.m. (EDT) and will feature a presentation about our third
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 3889659#).
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. (EDT) from August 26, 2020 until December 1, 2020 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 1346405#).
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 86,000+ 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