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 prepared in accordance with IAS 39 Financial Instruments:
Recognition and Measurement. Our Q2 2018 Report to Shareholders
and Supplementary Financial Information are available at:
rbc.com/investorrelations.
Net
Income
$3.1
Billion Strong
earnings growth
of 9% YoY
|
Diluted
EPS
$2.06 Double-digit growth
of 11%
YoY
|
ROE
18.1%
Balanced capital deployment
for premium ROE
|
CET1
Ratio 10.9% $224 million of
share repurchases
in Q2 2018
|
TORONTO, May 24, 2018 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $3,060 million for the
second quarter ended April 30, 2018,
up $251 million or 9% from the prior
year with double-digit diluted EPS(1) growth of 11%.
Results reflect strong earnings growth in Wealth Management,
Personal & Commercial Banking, and Investor & Treasury
Services, and solid earnings in Insurance. Capital Markets
performance was stable amidst less favourable market conditions.
Strong credit quality also contributed to results, with provision
for credit losses (PCL) on impaired loans ratio of 22 basis points
(bps) reflecting a benign credit environment.
Compared to last quarter, net income was up $48 million or 2%, though market-related revenue
moderated from strong first quarter levels. Continued margin
expansion and strong loan growth on both sides of the border helped
to offset the impact of a less favourable market environment and
fewer days in the current quarter. The prior quarter also included
the write-down of net deferred tax assets related to the U.S. Tax
Reform(2).
"We maintained
good momentum in the second quarter, delivering earnings of $3.1
billion. Our businesses executed on client-focused growth
strategies while continuing to demonstrate strong risk management.
As we transform the bank to create more value for our clients,
we're proud to once again be ranked highest in overall customer
satisfaction by J.D. Power."
– Dave McKay, RBC
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2018
Compared to
Q2 2017
|
|
•
|
Net income of $3,060
million
|
|
↑
|
9%
|
|
|
|
|
|
•
|
Diluted EPS of
$2.06
|
|
↑
|
11%
|
|
|
|
|
|
•
|
ROE(3) of
18.1%
|
|
↑
|
90 bps
|
|
|
|
|
|
•
|
CET1(4)
ratio of 10.9%
|
|
↑
|
30 bps
|
|
|
|
|
Q2
2018 Compared to
Q1 2018
|
|
•
|
Net income of $3,060
million
|
|
↑
|
2%
|
|
|
|
|
|
•
|
Diluted EPS of
$2.06
|
|
↑
|
2%
|
|
|
|
|
|
•
|
ROE of
18.1%
|
|
↑
|
70 bps
|
|
|
|
|
|
•
|
CET1 ratio of
10.9%
|
|
↓
|
10 bps
|
|
|
|
|
YTD
2018 Compared
to YTD 2017
|
|
|
|
|
|
|
|
Excluding
specified item(5):
|
|
|
|
•
|
Net income of $6,072
million
|
|
↑
|
4%
|
•
|
Net income of $6,072
million
|
↑
|
8%
|
|
•
|
Diluted EPS of
$4.07
|
|
↑
|
7%
|
•
|
Diluted EPS of
$4.07
|
↑
|
11%
|
|
•
|
ROE of
17.7%
|
|
→
|
0 bps
|
•
|
ROE of
17.7%
|
↑
|
70 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Earnings per share
(EPS).
|
(2)
|
In December 2017, the
U.S. H.R. 1 (U.S. Tax Reform) was passed into law.
|
(3)
|
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 Q2 2018 Report to
Shareholders.
|
(4)
|
Common Equity Tier 1
(CET1) ratio.
|
(5)
|
Results and measures
excluding our share of a gain in Q1 2017 related to the sale by the
U.S. operations of Moneris Solutions Corporation (Moneris) to
Vantiv, Inc., which was $212 million (before- and after-tax) are
non-GAAP measures. For further information, including a
reconciliation, refer to the non-GAAP section on page 3 of this
Earnings Release.
|
Q2 2018 Business Segment
Performance
Personal & Commercial Banking
Net income of $1,459 million
increased $99 million or 7% from last
year, mainly reflecting improved spreads on higher interest rates
and average volume growth of 5%. Operating leverage was positive
even as we continue to invest in people and marketing initiatives
in support of business growth, and make investments to improve our
clients' online and mobile experience.
Compared to last quarter, Personal & Commercial Banking net
income decreased $62 million or 4%,
reflecting three fewer days in the quarter, partially offset by
higher spreads in Canadian Banking. The prior quarter also included
a gain related to the reorganization of Interac.
Wealth Management
Net income of $537 million
increased $106 million or 25% from a
year ago, largely reflecting higher earnings on increased fee-based
assets, an increase in net interest income on higher interest rates
and volume growth, and a lower effective tax rate reflecting
benefits from the U.S. Tax Reform. Operating leverage was strong,
even with higher costs to support business growth and higher
regulatory costs in the U.S.
Compared to last quarter, net income decreased $60 million or 10%, reflecting lower transaction
and performance fee revenue and a net change in the fair value of
our U.S. share-based compensation plan. A favourable accounting
adjustment related to City National in the prior period also
contributed to the decrease. These factors were partially offset by
lower PCL and higher net interest income due to higher interest
rates and volume growth.
Insurance
Net income of $172 million
increased $6 million or 4% from a
year ago, primarily reflecting favourable investment-related
experience, partially offset by higher claims volumes in life
retrocession and disability portfolios.
Compared to last quarter, net income increased $45 million or 35%, reflecting favourable
investment-related experience and lower disability claims
volumes.
Investor & Treasury Services
Net income of $212 million
increased $19 million or 10% from a
year ago, primarily due to higher revenue from our asset services
business including custody, improved margins and growth in client
deposits. These factors were partially offset by lower funding and
liquidity revenue and higher investment in client-focused
technology initiatives.
Compared to last quarter, net income decreased $7 million or 3%, primarily due to decreased
funding and liquidity revenue including lower gains from the
disposition of certain securities compared to the prior quarter.
These factors were partially offset by increased revenue from our
asset services business including custody, driven by higher client
activity and market volatility, and improved
margins.
Capital Markets
Net income of $665 million was
relatively flat from a year ago. A lower effective tax rate
reflecting the benefits from the U.S. Tax Reform and changes in
earnings mix were offset by lower revenue in Global Markets and
Corporate and Investment Banking amidst less favourable market
conditions.
Compared to last quarter, net income decreased $83 million or 11%, primarily due to lower equity
originations mainly in North
America reflecting lower market activity, and decreased
fixed income trading revenue. Lower equity trading revenue in the
U.S. also contributed to the decrease. These factors were partially
offset by higher European Investment Banking revenue, lower
variable compensation on decreased results, lower PCL, and higher
municipal banking activity.
Corporate Support
Net income was $15 million in the
current quarter, largely due to asset/liability management
activities. Net loss was $200 million
in the prior 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 was $9 million in the prior
year, as asset/liability management activities were more than
offset by higher legal and severance costs.
Other Highlights
Capital – As at April 30,
2018, Basel III CET1 ratio was 10.9%, down 10 bps from last
quarter, largely reflecting higher risk-weighted assets due to
business growth, an update to our retail lending risk parameters,
partially offset by internal capital generation.
Credit Quality – Total PCL of $274
million includes PCL on loans of $278
million, which decreased $24
million or 8% from the prior year, mainly due to lower
provisions in Wealth Management and Capital Markets, partially
offset by higher provisions in Personal & Commercial Banking.
PCL ratio on loans of 20 bps improved 3 bps. PCL ratio on impaired
loans (Stage 3 PCL) was 22 bps.
Compared to last quarter, PCL on loans decreased $56 million or 17%, mainly due to lower
provisions in Capital Markets and Wealth Management. PCL ratio on
loans improved 4 bps.
Non-GAAP Measures
Results and measures excluding the specified item outlined below
are non-GAAP measures:
- For the six months ended April 30,
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 Q2 2018 Report to Shareholders.
|
Net Income,
excluding specified item
|
|
For the six months
ended April 30, 2017
|
(Millions of Canadian
dollars, except per share and percentage amounts)
|
Reported
|
Gain related to
the
sale by Moneris(1)
|
Adjusted
|
Net income
|
$
|
5,836
|
$
|
(212)
|
$
|
5,624
|
Basic earnings per
share
|
$
|
3.84
|
$
|
(0.14)
|
$
|
3.70
|
Diluted earnings per
share
|
$
|
3.82
|
$
|
(0.14)
|
$
|
3.68
|
ROE
|
17.7%
|
|
17.0%
|
|
Personal
& Commercial Banking net income, excluding specified
item
|
|
For the six months
ended April 30, 2017
|
(Millions of Canadian
dollars)
|
Reported
|
Gain related to
the
sale by Moneris(1)
|
Adjusted
|
Net income
|
$
2,952
|
$
(212)
|
$
2,740
|
(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 in this document
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, 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 risks sections of our 2017 Annual Report and the
Risk management section of our Q2 2018 Report to Shareholders;
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 Overview and outlook section and for each business
segment under the Strategic priorities and Outlook headings in our
2017 Annual Report, as updated by the Overview and outlook section
of our Q2 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 risk sections of our 2017 Annual Report and the Risk
management section of our Q2 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 Q2 2018 Report to Shareholders on our website
at rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for Thursday, May 24, 2018 at 8:00 a.m. (EDT) and will feature a presentation
about our second 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 1545866#). Please
call between 7:50 a.m. and 7:55 a.m.
(EDT).
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. (EDT) from Thursday, May 24, 2018 until August 21, 2018 at
rbc.com/investorrelations/quarterly-financial-statements.html or by
telephone (905-694-9451 or 800-408-3053, passcode 9227794#).
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 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