All amounts are in Canadian dollars and are based on financial
statements presented in compliance with International Accounting
Standard 34 Interim Financial Reporting, unless otherwise
noted. Our Q1 2021 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$3.8 Billion
Up 10% YoY
|
Diluted
EPS1
$2.66
Up 11% YoY
|
PCL2
$110 Million
PCL on loans ratio down
16 bps3 QoQ
|
ROE4
18.6%
Up 100 bps YoY
|
CET1 Ratio
12.5%
Well above regulatory
requiremens
|
TORONTO, Feb. 24, 2021 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $3,847 million for the
quarter ended January 31, 2021, up
$338 million or 10% from the prior
year, with strong diluted EPS growth of 11% over the same period.
Results across our businesses benefited from strong volume growth,
increased client activity and constructive markets, partially
offset by the impact of low interest rates and higher expenses
largely due to variable and stock-based compensation commensurate
with strong results. Record earnings in Capital Markets as well as
positive earnings growth in Personal & Commercial Banking,
Wealth Management and Insurance were partly offset by lower results
in Investor & Treasury Services.
Results this quarter also reflected lower provisions for credit
losses, with a PCL on loans ratio of 7 bps, largely resulting from
releases of provisions on performing loans. Lower provisions on
impaired loans also contributed to the decrease. Our reserves
continue to be prudent and reflective of the uncertainty related to
the COVID-19 pandemic, as demonstrated by our allowance for credit
losses (ACL) ratio of 85 bps.
Compared to last quarter, net income was up $601 million with higher results in Personal
& Commercial Banking, Capital Markets, Wealth Management, and
Investor & Treasury Services. These factors were partially
offset by lower results in Insurance.
Our capital position remained robust, with a Common Equity Tier
1 (CET1) ratio of 12.5% supporting strong volume growth and
$1.5 billion in common share
dividends paid. We also had a strong average Liquidity Coverage
Ratio (LCR) of
141%.
"Against the
uncertain macroeconomic backdrop due to the COVID-19 pandemic, we
entered 2021 with strong momentum across our businesses. This is a
reflection of the resiliency of our diversified business model,
prudent approach to risk management, significant technology
investments, and our colleagues' dedication to our clients and
communities. As global economies pivot to recovery, our scale,
robust capital and liquidity position, and data and technology
capabilities provide us with the foundation to continue prudently
investing for long-term growth and delivering sustainable value for
our clients, shareholders and communities."
– Dave McKay, RBC President and Chief Executive
Officer
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Q1 2021
Compared to
Q1 2020
|
•
|
Net income of $3,847
million
|
↑
|
10%
|
•
|
Diluted EPS of
$2.66
|
↑
|
11%
|
•
|
ROE of
18.6%
|
↑
|
100 bps
|
•
|
CET1 ratio of
12.5%
|
↑
|
50 bps
|
|
|
|
|
|
|
|
|
|
|
Q1 2021
Compared to
Q4 2020
|
•
|
Net income of $3,847
million
|
↑
|
19%
|
•
|
Diluted EPS of
$2.66
|
↑
|
19%
|
•
|
ROE of
18.6%
|
↑
|
260 bps
|
•
|
CET1 ratio of
12.5%
|
→
|
0 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 $1,793 million
increased $107 million or 6% from a
year ago, primarily attributable to continued strong average volume
growth of 12% (+19% in deposits and +6% in loans) in Canadian
Banking and lower PCL. These factors were partially offset by lower
spreads.
Compared to last quarter, net income increased $291 million or 19%, primarily due to lower PCL,
average volume growth of 2% in Canadian Banking, as well as higher
card service and foreign exchange revenue. The timing of
professional fees also contributed to the increase. These factors
were partially offset by higher staff-related costs.
Wealth Management
Net income of $649 million
increased $26 million or 4% from a
year ago, primarily due to average loan growth and higher average
fee-based client assets, reflecting market appreciation and net
sales, net of the associated variable compensation. Higher
performance fees driven by strong fund performance and lower PCL
also contributed to the increase. These factors were partially
offset by the impact of lower interest rates on loans and sweep
deposits, as well as higher staff-related costs.
Compared to last quarter, net income increased $103 million or 19%, primarily due to an increase
in earnings from higher average fee-based client assets, net of the
associated variable compensation, and lower PCL. Higher
transactional revenue and higher performance fees driven by strong
fund performance also contributed to the increase. These factors
were partially offset by higher staff-related costs.
Insurance
Net income of $201 million
increased $20 million or 11% from a
year ago, primarily due to improved claims experience and higher
favourable investment-related experience. These factors were
partially offset by the impact of lower new longevity reinsurance
contracts and lower international life volumes.
Compared to last quarter, net income decreased $53 million or 21%, primarily due to lower
favourable investment-related experience as well as new business
strain. Higher claims costs and lower benefits from favourable
reinsurance contract renegotiations also contributed to the
decrease. These factors were partially offset by unfavourable
annual actuarial assumption updates in the prior quarter.
Investor & Treasury Services
Net income of $123 million
decreased $20 million or 14% from a
year ago, mainly due to lower funding and liquidity revenue
reflecting the impact of a less favourable interest rate
environment in the current quarter and elevated enterprise
liquidity, partially offset by higher gains from the disposition of
securities. Lower client deposit revenue, largely driven by lower
interest rates, also contributed to the decrease.
Compared to last quarter, net income increased $32 million or 35%, mainly due to higher funding
and liquidity revenue driven by money market opportunities in the
current quarter, and higher revenue from our asset services
business from increased client activity.
Capital Markets
Record net income of $1,067
million increased $185 million
or 21% from a year ago, mainly due to higher revenue, largely
driven by higher equity trading primarily in the U.S. reflecting
increased client activity, partially offset by lower, albeit strong
M&A revenue, which was the second highest following the
historical high in Q1 2020. Lower PCL also contributed to the
increase. These factors were partially offset by higher taxes
largely reflecting changes in earnings mix.
Compared to last quarter, net income increased $227 million or 27%, largely driven by higher
revenue, mainly reflecting higher fixed income trading and higher
M&A activity across most regions. Lower PCL also contributed to
the increase. These factors were partially offset by higher
compensation on improved results.
Capital, Liquidity and Credit Quality
Capital – As at January 31, 2021, CET1 ratio was 12.5%, unchanged
from last quarter, benefiting from internal capital generation, the
favourable impact of fair value other comprehensive income
adjustments and the favourable impact from asset returns in
determining our pension obligations. These factors were offset by
higher risk-weighted assets driven by strong organic growth and the
impact of a lower capital modification related to the reduction of
the exclusion rate applicable to eligible Stage 1 and Stage 2
allowances from 70% to 50%, as well as a release of provisions on
performing loans in the current
quarter.
Liquidity – For the quarter ended
January 31, 2021, the average LCR was
141%, which translates into a surplus of approximately $104 billion, compared to 145% and a surplus of
approximately $112 billion in the
prior quarter. LCR levels remained relatively consistent with Q4
2020 as loan growth was largely offset by a continued increase in
client deposits.
For the quarter ended January 31,
2021, the Net Stable Funding Ratio (NSFR) was 118%. Our NSFR
is currently elevated, largely driven by client deposit inflows
resulting from industry-wide impacts of the pandemic and
corresponding central bank actions.
Credit Quality
Q1 2021 vs. Q1
2020
Total PCL was $110
million. PCL on loans of $121
million decreased $300 million
from the prior year, due to lower provisions in Personal and
Commercial Banking, Capital Markets and Wealth Management. The PCL
on loans ratio of 7 bps decreased 19 bps. The PCL on impaired loans
ratio was 13 bps.
PCL on performing loans was $(97)
million compared to $83
million in the prior year, primarily reflecting releases of
provisions in Personal & Commercial Banking and Capital
Markets. While uncertainty over the impact of the COVID-19 pandemic
remains, the releases were largely due to improvements in our
credit quality outlook in the current quarter.
PCL on impaired loans of $218
million decreased $120 million
from the prior year due to lower provisions in Personal &
Commercial Banking and Capital Markets, and recoveries in Wealth
Management.
Q1 2021 vs. Q4 2020
PCL on loans decreased
$277 million from last quarter,
primarily due to lower provisions in Personal & Commercial
Banking, Wealth Management and Capital Markets. The PCL on loans
ratio decreased 16 bps.
PCL on performing loans was $(97)
million, compared to $147
million in the prior quarter, largely reflecting releases of
provisions in the current quarter in Personal & Commercial
Banking as compared to provisions in Personal & Commercial
Banking and Wealth Management in the prior quarter.
PCL on impaired loans decreased $33
million from last quarter, reflecting lower provisions in
Capital Markets and recoveries in Wealth Management, partially
offset by higher provisions in Personal & Commercial
Banking.
ACL
The ratio of ACL on loans and acceptances
to total loans and acceptances was 85 bps, down 4 bps from last
quarter and up 32 bps from last year.
Digitally Enabled Relationship Bank
Digital usage continued to grow with 90-day Active Mobile users
increasing 12% from a year ago to 5.2 million, and mobile sessions
up 40% from a year ago to over 100 million for the first time.
Digital adoption increased to 56.0%, and self-serve transactions
increased 500 bps from last year to 93.8%.
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 Q1 2021 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, and financial results,
condition and objectives 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 (which could lead to us being subject to various legal
and regulatory proceedings, the potential outcome of which could
include regulatory restrictions, penalties and fines), strategic,
reputation, legal and regulatory environment, competitive and
systemic risks and other risks discussed in the risk sections and
Significant developments: COVID-19 section of our annual report for
the fiscal year ended October 31,
2020 (the 2020 Annual Report) and the Risk management and
Impact of COVID-19 pandemic sections of our Q1 2021 Report to
Shareholders; including business and economic conditions,
information technology and cyber risks, Canadian housing and
household indebtedness, geopolitical uncertainty, privacy, data and
third party related risks, regulatory changes, environmental and
social risk (including climate change), and digital disruption and
innovation, culture and conduct, 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, and financial results,
condition and objectives.
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 2020 Annual Report, as
updated by the Economic, market and regulatory review and outlook
and Impact of COVID-19 pandemic sections of our Q1 2021 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 and Significant developments: COVID-19
section of our 2020 Annual Report and the Risk management and
Impact of COVID-19 pandemic sections of our Q1 2021 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 2021 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for February 24, 2021 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 9794830#).
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 24, 2021 until May 26, 2021 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 8026879#).
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
leverage their imaginations and insights to 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