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. Effective November 1, 2017, we
adopted IFRS 9 Financial Instruments. Prior period amounts
are in accordance with IAS 39 Financial Instruments: Recognition
and Measurement. Our Q1 2018 Report to Shareholders and
Supplementary Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$3.0 Billion
Includes charge related to U.S.
Tax Reform(1) of $178 million
|
Diluted EPS
$2.01
Includes charge related to U.S.
Tax Reform(1) of $0.12
|
ROE
17.4%
Balanced
capital deployment
|
CET1 Ratio
11.0%
$920+ million of share
repurchases in Q1 2018
|
TORONTO, Feb. 23, 2018 /CNW/ - Royal Bank of
Canada (RY on TSX and NYSE) today
reported net income of $3,012 million
for the first quarter ended January 31,
2018, which includes the impact of the U.S. Tax
Reform(1) of $178 million,
or $0.12 per share, primarily related
to the write-down of net deferred tax assets. Net income was down
$15 million from a year ago and
diluted EPS(2) of $2.01
was up 2%. Excluding last year's specified item related to the gain
on sale of the U.S. operations of Moneris(3), net income
was up 7% and EPS was up 10% from a year ago.
Results in the quarter were driven by strong earnings in
Personal & Commercial Banking, Capital Markets, Wealth
Management, and Investor & Treasury Services. This quarter's
strong performance also reflects stable credit quality, with a
provision for credit losses (PCL) on impaired loans ratio of 23
basis points (bps) compared to 22 bps a year ago, and a total PCL
ratio of 24 bps this quarter.
Compared to last quarter, net income was up $175 million or 6%, mainly reflecting higher
earnings in Capital Markets, Personal & Commercial Banking,
Wealth Management and Investor & Treasury Services, partially
offset by lower earnings in Insurance and the write-down associated
with the U.S. Tax Reform(1).
"Strong client activity and volume growth across most businesses
drove our first quarter earnings of $3
billion while we absorbed the write-down related to the U.S.
Tax Reform. We invested in our businesses to support clients, and
repurchased over $920 million of
common shares. In addition, I am pleased to announce a 3% increase
to our quarterly dividend," said Dave
McKay, RBC President and Chief Executive Officer. "Our
strategy for sustainable growth is built on prudently managing
risks and effectively deploying capital for strong returns through
the cycle. We will continue to invest smartly and work hard to earn
the trust of our clients, employees and communities."
|
|
|
|
|
|
|
Q1 2018
compared to
Q1 2017
|
•
|
Net income of $3,012
million
|
→
|
0%
|
Excluding
specified item(3):
|
|
|
•
|
Diluted EPS of
$2.01
|
↑
|
2%
|
•
|
Net income of $3,012
million
|
↑
|
7%
|
•
|
ROE(4) of
17.4%
|
↓
|
60 bps
|
•
|
Diluted EPS of
$2.01
|
↑
|
10%
|
•
|
CET1(5)
ratio of 11.0%
|
→
|
0%
|
•
|
ROE of
17.4%
|
↑
|
70 bps
|
|
|
|
|
|
|
|
Q1 2018
compared to
Q4 2017
|
•
|
Net income of $3,012
million
|
↑
|
6%
|
|
|
|
•
|
Diluted EPS of
$2.01
|
↑
|
7%
|
|
|
|
•
|
ROE of
17.4%
|
↑
|
80 bps
|
|
|
|
•
|
CET1 ratio of
11.0%
|
↑
|
10 bps
|
|
|
|
Q1 2018 Business Segment
Performance
Personal & Commercial Banking
Net income of $1,521 million
decreased $71 million or 4% from last
year as the prior year included our share of the gain related to
the sale of the U.S. operations of Moneris of $212 million (before- and after-tax). Excluding
our share of the gain, net income increased $141 million or 10%(3), mainly due to
average volume growth of 6%, higher spreads, higher fee-based
revenue in Canadian Banking, and a gain related to the
reorganization of Interac this quarter. These factors were
partially offset by higher PCL and higher costs in support of
business growth in Canadian Banking. The prior year also included
an impairment related to properties held for sale in Caribbean
Banking.
Compared to last quarter, Personal & Commercial Banking net
income increased $117 million or 8%,
largely reflecting higher fee-based revenue, a gain related to the
reorganization of Interac this quarter, average volume growth of 1%
and higher spreads. Seasonally lower marketing costs also
contributed to the increase. These factors were partially offset by
higher PCL.
|
|
|
|
|
|
|
|
|
(1)
|
In December 2017, the
U.S. H.R. 1 (U.S. Tax Reform) was passed into law.
|
(2)
|
Earnings per share
(EPS).
|
(3)
|
The specified item
reflects our share of a gain in Q1 2017 related to the sale of the
U.S. operations of Moneris Solutions Corporation (Moneris) to
Vantiv, Inc., which was $212 million (before- and after-tax).
Results and measures excluding the specified item are non-GAAP
measures. For further information, including a reconciliation,
refer to the Non-GAAP Measures section on page 3 of this Earnings
Release.
|
(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 of our Q1 2018 Report to
Shareholders.
|
(5)
|
Common Equity Tier 1
(CET1) ratio.
|
Wealth Management
Net income of $597 million
increased $167 million or 39% from a
year ago, largely reflecting higher average fee-based assets, an
increase in net interest income, and a lower effective tax rate
reflecting benefits from the U.S. Tax Reform. These factors were
partially offset by higher variable compensation on improved
results, increased costs in support of business growth, and the
impact of foreign exchange translation.
Compared to last quarter, net income increased $106 million or 22%, primarily reflecting higher
average fee-based assets, a lower effective tax rate reflecting
benefits from the U.S. Tax Reform, and increased transaction
volumes. A favourable accounting adjustment related to City
National Bank and higher net interest income also contributed to
the increase. These factors were partially offset by increased
costs in support of business growth and higher variable
compensation on improved results.
Insurance
Net income of $127 million
decreased $7 million or 5% from a
year ago, primarily reflecting favourable updates in the prior year
related to premium and mortality experience, and higher claims
volumes in International Insurance. These factors were partially
offset by higher investment-related gains and the impact of a new
longevity reinsurance contract.
Compared to last quarter, net income decreased $138 million or 52% driven by favourable annual
actuarial assumption updates in the prior quarter, and higher
claims volumes.
Investor & Treasury Services
Net income of $219 million
increased $5 million or 2% from a
year ago, primarily due to growth in client deposits, increased
revenue from our asset services business, the impact of foreign
exchange translation, as well as higher funding and liquidity
earnings. These factors were largely offset by higher investment in
technology initiatives.
Compared to last quarter, net income increased $63 million or 40%, primarily due to higher
funding and liquidity earnings and increased revenue from our asset
services business.
Capital Markets
Net income of $748 million
increased $86 million or 13% from a
year ago, primarily due to a lower effective tax rate including the
benefits from the U.S. Tax Reform and higher results in Corporate
and Investment Banking and Global Markets. These factors were
partially offset by increased costs due to higher variable
compensation on improved results, litigation recoveries reducing
costs in the prior year, higher regulatory spend and the impact of
foreign exchange translation.
Compared to last quarter, net income increased $164 million or 28%, primarily due to higher
results in Global Markets and a lower effective tax rate reflecting
the benefits from the U.S. Tax Reform. These factors were partially
offset by higher PCL and softer results in Municipal Banking.
Corporate Support
Net loss was $200 million in the
current quarter, largely due to the impact of the U.S. Tax Reform
of $178 million which was primarily
related to the write-down of net deferred tax assets. Net loss in
the prior quarter was $63 million,
largely reflecting net unfavourable tax adjustments, severance and
related charges, and charges associated with our real estate
portfolio. Net loss was $5 million in
the prior year, largely reflecting asset/liability management
activities.
Other Highlights
Capital – As at January 31,
2018, our CET1 ratio was 11.0%, up 10 bps from last quarter,
mainly reflecting internal capital generation and a lower
regulatory floor, partially offset by higher risk-weighted assets
due to business growth and share repurchases.
Credit Quality – Total PCL of $334
million increased $40 million
or 14% from a year ago, mainly due to higher provisions in Personal
& Commercial Banking which were partially offset by lower
provisions in Wealth Management and Capital Markets. PCL on loans
also reflects the adoption of IFRS 9 on November 1, 2017. The PCL ratio on loans of 24
bps increased by 2 bps.
Compared to last quarter, PCL increased $100 million or 43%, mainly due to higher
provisions in Capital Markets and Personal & Commercial
Banking. PCL on loans also reflects the adoption of IFRS 9, as
noted above. The PCL ratio on loans increased 7 bps.
Non-GAAP Measures
Results and measures excluding the specified item outlined below
are non-GAAP measures:
- For the three months ended January 31,
2017, our share of a gain related to the sale by our payment
processing joint venture Moneris of its U.S. operations to Vantiv,
Inc., which was $212 million (before-
and after-tax) and recorded in Personal & Commercial
Banking.
Given the nature and purpose of our management reporting
framework, we use and report certain non-GAAP financial measures,
which are not defined, do not have a standardized meaning under
GAAP, and may not be comparable with similar information disclosed
by other financial institutions. We believe that excluding these
specified items from our results is more reflective of our ongoing
operating results, will provide readers with a better understanding
of management's perspective on our performance, and will enhance
the comparability of our comparative periods. For further
information, refer to the Key performance and non-GAAP measures
section of our Q1 2018 Report to Shareholders.
|
Net Income,
excluding specified item
|
|
For the three months
ended January 31, 2017
|
(Millions of Canadian
dollars, except per share and percentage amounts)
|
Reported
|
Gain related to
the
sale by Moneris(1)
|
Adjusted
|
Net income
|
$3,027
|
($212)
|
$2,815
|
Basic earnings per
share
|
$1.98
|
($0.14)
|
$1.84
|
Diluted earnings per
share
|
$1.97
|
($0.14)
|
$1.83
|
ROE
|
18.0%
|
|
16.7%
|
|
Personal
& Commercial Banking net income, excluding specified
item
|
|
For the three months
ended January 31, 2017
|
(Millions of Canadian
dollars)
|
Reported
|
Gain related to
the
sale by Moneris(1)
|
Adjusted
|
Net income
|
$1,592
|
($212)
|
$1,380
|
(1)
Includes foreign currency translation.
|
|
|
|
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
filings with Canadian regulators or the U.S. Securities and
Exchange Commission (SEC), in reports to shareholders and in other
communications. Forward-looking statements include, but are not
limited to, statements relating to our financial performance
objectives, vision and strategic goals, and include 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,
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 risks sections of our 2017 Annual Report and the
Risk management section of our Q1 2018 Report to Shareholder;
including global uncertainty and volatility, elevated Canadian
housing prices and household indebtedness, information technology
and cyber risk, including the risk of cyber-attacks or other
information security events at or impacting our service providers
or other third parties with whom we interact, regulatory change,
technological innovation and non-traditional competitors, global
environmental policy and climate change, changes in consumer
behaviour, the end of quantitative easing, 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 2017 Annual Report, as
updated by the Economic, market and regulatory review and outlook
section of our Q1 2018 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 risks sections of our 2017 Annual Report and the Risk
management section of our Q1 2018 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 2018 Report to Shareholders on our website
at rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for Friday, February 23, 2018 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:
www.rbc.com/investorrelations/ir_events_presentations.html or by
telephone (416-340-2217, 866-696-5910, passcode 9222187#). Please
call between 7:50 a.m. and 7:55 a.m.
(EST).
Management's comments on results will be posted on RBC's website
shortly following the call. A recording will be available by
5:00 p.m. (EST) from Friday, February 23, 2018 until May 23, 2018 at
rbc.com/investorrelations/quarterly-financial-statements.html or by
telephone (905-694-9451 or 800-408-3053, passcode 8783009#).
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 81,000+ 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 16 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
http://www.rbc.com/community-sustainability/.
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