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 Q3 2021 Report
to Shareholders and Supplementary Financial Information are
available at: http://www.rbc.com/investorrelations.
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Net Income
$4.3 Billion
Up 34% YoY
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Diluted
EPS1
$2.97
Up 35% YoY
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PCL2
$(540) Million
PCL on loans ratio down
23 bps3 QoQ
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ROE4
19.6%
Up from 15.7% last year
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CET1 Ratio
13.6%
Well above regulatory
requirements
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TORONTO, Aug. 25, 2021 /CNW/ - Royal Bank of Canada (TSX: RY) (NYSE: RY) today reported net
income of $4.3 billion for the
quarter ended July 31, 2021, up
$1.1 billion or 34% from the prior
year. Diluted EPS was $2.97, up 35%
over the same period. Our results this quarter included releases of
provisions on performing loans of $638
million mainly driven by improvements in our credit quality
and macroeconomic outlook as compared to provisions of $280 million taken in the prior year due to the
evolving impact of the COVID-19 pandemic. Earnings in Personal
& Commercial Banking, Capital Markets and Wealth Management
were up from last year, largely due to the favourable impact of
lower provisions. Higher results in Insurance and Investor &
Treasury Services also contributed to the increase.
Pre-provision, pre-tax earnings5 of $5.0 billion were up 6% from a year ago, mainly
reflecting strong client-driven growth in volumes and fee-based
assets, constructive markets, record investment banking revenue and
well-controlled discretionary expenses, partially offset by the
impact of low interest rates, lower trading revenue and higher
variable compensation on improved results.
Compared to last quarter, net income was up $281 million with higher results in Personal
& Commercial Banking, Capital Markets, Wealth Management, and
Insurance. These results were partially offset by lower earnings in
Investor & Treasury Services.
The PCL on loans ratio of (28) bps was down 23 bps from last
quarter primarily due to lower provisions in Personal &
Commercial Banking and Capital Markets. The PCL on impaired loans
ratio of 8 bps decreased 3 bps from last quarter.
Our capital position remained robust, with a Common Equity Tier
1 (CET1) ratio of 13.6% supporting strong client-driven volume
growth and $1.5 billion in common
share dividends paid.
"Guided by our
Purpose, RBC continued to deliver on our commitment of providing
long-term, sustainable value to our clients, communities and
shareholders. Our diversified businesses and disciplined approach
to risk and cost management underpinned our results, supported by
the significant investments we've made in technology and talent to
fuel our momentum and deliver differentiated value to those we
serve. We remain cautiously optimistic about the macroeconomic
outlook and focused on supporting clients and communities through
the ongoing recovery."
– Dave McKay, RBC President and Chief Executive
Officer
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Q3 2021
Compared to
Q3 2020
|
•
|
Net income of $4,296
million
|
|
↑
|
34%
|
•
|
Diluted EPS of
$2.97
|
|
↑
|
35%
|
•
|
ROE of
19.6%
|
|
↑
|
390 bps
|
•
|
CET1 ratio of
13.6%
|
|
↑
|
160 bps
|
Q3 2021
Compared to
Q2 2021
|
•
|
Net income of $4,296
million
|
|
↑
|
7%
|
•
|
Diluted EPS of
$2.97
|
|
↑
|
8%
|
•
|
ROE of
19.6%
|
|
↑
|
20 bps
|
•
|
CET1 ratio of
13.6%
|
|
↑
|
80
bps
|
YTD 2021
Compared to
YTD 2020
|
•
|
Net income of $12,158
million
|
|
↑
|
48%
|
•
|
Diluted EPS of
$8.39
|
|
↑
|
50%
|
•
|
ROE of
19.2%
|
|
↑
|
560 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
generally accepted accounting principles (GAAP). For further
information, refer to the Key Performance and Non-GAAP measures
section on page 3 of this Earnings Release.
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5
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Pre-provision,
pre-tax earnings is calculated as income (Q3 2021: $4,296 million;
Q3 2020: $3,201 million) before income taxes (Q3 2021: $1,276
million; Q3 2020: $879 million) and PCL (Q3 2021: -$540 million; Q3
2020: $675 million). This is a Non-GAAP measure. 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 $2,113 million
increased $746 million or 55% from a
year ago, primarily attributable to lower PCL. Pre-provision,
pre-tax earnings6 of $2,653
million were up 12% from a year ago, mainly reflecting
strong average volume growth of 9% (+10% in deposits and +8% in
loans) in Canadian Banking and higher average balances driving
higher mutual fund distribution fees, partially offset by lower
spreads. Also, we generated positive operating leverage of
6.3% while continuing to invest in the business.
Compared to last quarter, net income increased $205 million or 11%, primarily due to lower PCL.
The impact of three additional days in the current quarter and
average volume growth of 2% in Canadian Banking also contributed to
the increase. These factors were partially offset by lower spreads
and higher staff-related costs.
______________
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6
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Pre-provision,
pre-tax earnings is calculated as income (Q3 2021: $2,113 million;
Q3 2020: $1,367 million) before income taxes (Q3 2021: $719
million; Q3 2020: $469 million) and PCL (Q3 2021: -$179 million; Q3
2020: $527 million). This is a Non-GAAP measure. For further
information, refer to the Key Performance and Non-GAAP measures
section on page 3 of this Earnings Release.
|
Wealth Management
Net income of $738 million
increased $176 million or 31% from a
year ago, mainly due to higher average fee-based client assets
reflecting market appreciation and net sales. Average volume growth
and lower PCL also contributed to the increase. These factors were
partially offset by higher variable compensation as well as the
impact of lower spreads.
Compared to last quarter, net income increased $47 million or 7%, mainly due to higher average
fee-based client assets reflecting market appreciation and net
sales, and average volume growth. These factors were partially
offset by higher variable compensation, lower transactional revenue
mainly driven by client activity, and lower spreads.
Insurance
Net income of $234 million
increased $18 million or 8% from a
year ago, primarily due to the impact of new longevity reinsurance
contracts, lower claims costs and the favourable impact of
actuarial adjustments. These factors were partially offset by the
impact of realized investment gains in the prior year.
Compared to last quarter, net income increased $47 million or 25%, primarily due to higher new
longevity reinsurance contracts.
Investor & Treasury Services
Net income of $88 million
increased $12 million or 16% from a
year ago, primarily driven by higher funding and liquidity revenue
as the prior year reflected unfavourable impacts from interest rate
movements and a heightened impact from elevated enterprise
liquidity. This was partially offset by lower client deposit
revenue largely driven by margin compression, and higher
technology-related costs.
Compared to last quarter, net income decreased $32 million or 27%, mainly driven by lower
funding and liquidity revenue reflecting lower gains from the
disposition of investment securities, higher technology-related
costs, and a favourable sales tax adjustment in the prior
quarter.
Capital Markets
Net income of $1,129 million
increased $180 million or 19% from a
year ago, primarily driven by lower PCL and record Corporate and
Investment Banking revenue. These factors were partially offset by
lower revenue in Global Markets as the prior year benefitted from
elevated client activity.
Compared to last quarter, net income increased $58 million or 5% mainly due to lower PCL and
lower compensation on decreased revenue. These factors were
partially offset by lower equity and fixed income trading revenue
across most regions driven by reduced client activity.
Capital, Liquidity and Credit Quality
Capital – As at July 31,
2021, our CET1 ratio was 13.6%, up 80 bps from last quarter,
primarily due to a decrease in risk-weighted assets (RWA)
reflecting the impact of model parameter updates, as well as
internal capital generation, partially offset by increases in RWA
largely driven by business growth.
RWA decreased by $12.6 billion,
mainly driven by the impact of model parameter updates to increase
the threshold for determining small business clients subject to
retail capital treatment, as permitted under regulatory capital
requirements, and to recalibrate probability of default parameters
for the remaining borrowers in our wholesale portfolio. These
factors were partially offset by business growth primarily in
wholesale lending, including loan underwriting commitments,
residential mortgages and personal lending, and an increase in
stressed value-at-risk multipliers reflecting the unwinding of
temporary measures introduced by the Office of the Superintendent
of Financial Institutions in response to the COVID-19 pandemic.
Liquidity – For the quarter ended July 31, 2021, the average Liquidity Coverage
Ratio (LCR) was 125%, which translates into a surplus of
approximately $69.2 billion, compared
to 133% and a surplus of approximately $89.6
billion in the prior quarter. Average LCR decreased from the
prior quarter primarily due to growth in retail and wholesale
loans, partially offset by continued growth in client deposits.
The Net Stable Funding Ratio (NSFR) as at July 31, 2021 was 116%, which translates into a
surplus of approximately $110.4
billion, compared to 118% and a surplus of approximately
$119.0 billion in the prior quarter.
NSFR decreased from the prior quarter primarily due to growth in
retail and wholesale loans and an increase in on-balance sheet
securities, partially offset by continued growth in client
deposits.
Credit Quality
Q3 2021 vs. Q3
2020
Total PCL was $(540)
million. PCL on loans of $(492)
million decreased $1,170
million from a year ago, due to lower provisions in Personal
& Commercial Banking, Capital Markets and Wealth Management.
The PCL on loans ratio of (28) bps decreased 68 bps. The PCL on
impaired loans ratio of 8 bps decreased 15 bps.
PCL on performing loans was $(638)
million, compared to $280
million in the prior year, reflecting releases of provisions
in Personal & Commercial Banking, Capital Markets and Wealth
Management in the current quarter mainly driven by improvements in
our credit quality and macroeconomic outlook as compared to
provisions taken in the prior year due to the evolving impact of
the COVID-19 pandemic.
PCL on impaired loans of $146
million decreased $252
million, mainly due to lower provisions in Personal &
Commercial Banking. Provisions taken in Capital Markets and Wealth
Management in the prior year as compared to recoveries in the
current quarter also contributed to the decrease.
Q3 2021 vs. Q2 2021
PCL on loans of
$(492) million decreased $409 million from last quarter, primarily due to
lower provisions in Personal & Commercial Banking and Capital
Markets. The PCL on loans ratio decreased 23 bps. The PCL on
impaired loans ratio decreased 3 bps.
PCL on performing loans of $(638)
million decreased $378
million, primarily reflecting higher releases of provisions
in Capital Markets and Personal & Commercial Banking mainly
driven by continued improvements in our credit quality and
macroeconomic outlook.
PCL on impaired loans of $146
million decreased $31 million,
primarily due to lower provisions in Personal & Commercial
Banking, partially offset by lower recoveries in Capital Markets as
compared to the prior quarter.
Allowance for credit losses
(ACL)
ACL on loans of $4,867 million decreased 12% from last quarter
and 20% from recent peak levels in Q4/2020. The ratio of ACL on
loans and acceptances to total loans and acceptances was 67 bps,
down 12 bps from last quarter and down 22 bps from recent peak
levels in Q4/2020.
Digitally Enabled Relationship Bank
Digital usage continued to grow with 90-day Active Mobile users
increasing 10% from a year ago to 5.4 million, and mobile sessions
up 27% from a year ago to 111.6 million. Digital adoption increased
to 56.4%, and self-serve transactions decreased 100 bps from last
year but remained high at 93.5%.
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, ROE and Non-GAAP measures, including
pre-provision, pre-tax earnings. ROE and pre-provision, pre-tax
earnings do not have any standardized meanings under GAAP. We use
ROE as a measure of return on total capital invested in our
business. We use pre-provision, pre-tax earnings to assess our
ability to generate sustained earnings growth outside of credit
losses, which are impacted by the cyclical nature of a credit
cycle. We believe that certain Non-GAAP measures are more
reflective of our ongoing operating results and provide readers
with a better understanding of management's perspective on our
performance.
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 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 Q3 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, 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 Q3 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 Q3 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 Q3 2021 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for August 25, 2021 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 7285593#).
Please call between 7:50 a.m. and 7:55 a.m.
(EDT).
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 25, 2021 until November 30, 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 88,000+ 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 27 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.
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SOURCE Royal Bank of Canada