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 Q2 2020 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$1.5 Billion
Down 54% YoY
|
Diluted
EPS1
$1.00
Down 55% YoY
|
Total
PCL2
$2.8 Billion Total PCL ratio on loans
up 139 bps3 QoQ
|
ROE4
7.3% Down from 17.5% last
year
|
CET1 Ratio
11.7% Well above regulatory
requirements
|
TORONTO, May 27, 2020 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported net
income of $1,481 million for the
quarter ended April 30, 2020, down
$1,749 million or 54% from the prior
year. Diluted EPS was $1.00,
down 55% over the same period. The unprecedented challenges brought
on by the COVID-19 pandemic led to increased provision for credit
losses of $2,830 million, up
$2,404 million from last year. The
increased provisions unfavourably impacted results in Personal
& Commercial Banking, Capital Markets and Wealth
Management. These factors were partially offset by higher
earnings in Investor & Treasury Services and Insurance.
Compared to last quarter, net income was down $2,028 million with lower results in Personal
& Commercial Banking, Capital Markets and Wealth Management.
Earnings in Insurance were relatively flat compared to the prior
quarter. These factors were partially offset by higher results in
Investor & Treasury Services.
The total PCL ratio on loans was 165 bps, up 139 bps from last
quarter as we prudently increased reserves due to the impact of the
COVID-19 pandemic. The PCL ratio on impaired loans of 37 bps
increased 16 bps from last quarter, due to higher PCL on impaired
loans mainly in Capital Markets. Our capital position remained
robust, with a Common Equity Tier 1 (CET1) ratio of 11.7%. We also
had a strong average Liquidity Coverage Ratio (LCR) of 130%.
"My sincere thanks to all those on the frontlines who
are combatting the virus with courage and compassion, and to the
RBCers who are living our Purpose with extraordinary dedication to
help our clients manage during these uncertain times," said
Dave McKay, RBC President and Chief
Executive Officer. "We entered this period of heightened
macroeconomic uncertainty from a position of strategic and
financial strength. Our scale, diversified business mix, technology
investments and talented employees define our leading client
franchises. Our strong capital and liquidity position, and
disciplined risk management, have enabled us to remain resilient
and focused on delivering long-term value for our clients,
shareholders and communities."
|
|
|
|
|
Q2 2020
Compares to
Q2 2019
|
•
|
Net income of $1,481
million
|
↓
|
54%
|
•
|
Diluted EPS of
$1.00
|
↓
|
55%
|
•
|
ROE of
7.3%
|
↓
|
1,020 bps
|
•
|
CET1 ratio of
11.7%
|
↓
|
10 bps
|
Q2 2020
Compares to
Q1 2020
|
•
|
Net income of $1,481
million
|
↓
|
58%
|
•
|
Diluted EPS of
$1.00
|
↓
|
58%
|
•
|
ROE of
7.3%
|
↓
|
1,030 bps
|
•
|
CET1 ratio of
11.7%
|
↓
|
30 bps
|
YTD 2020
Compares to
YTD 2019
|
•
|
Net income of $4,990
million
|
↓
|
22%
|
•
|
Diluted EPS of
$3.40
|
↓
|
22%
|
•
|
ROE of
12.5%
|
↓
|
460 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 $532 million
decreased $1,017 million or 66% from
a year ago, primarily attributable to higher PCL on performing
assets mainly driven by the impact of the COVID-19 pandemic, and
lower spreads reflecting competitive pricing pressures, lower
interest rates and changes in product mix. Lower card service
revenue in Canadian Banking due to a significant decrease in
purchase volumes also contributed to the decrease. These factors
were partially offset by solid average volume growth of 7% in loans
and 11% in deposits in Canadian Banking.
Compared to last quarter, net income decreased $1,154 million or 68%, reflecting higher PCL on
performing assets mainly due to the impact of the COVID-19
pandemic. Lower card service revenue as a result of a significant
decrease in purchase volumes, two less days in the quarter and
lower spreads also contributed to the decrease. These factors were
partially offset by average volume growth of 2% in Canadian
Banking.
Wealth Management
Net income of $424 million
decreased $161 million or 28% from a
year ago, primarily attributable to higher PCL on performing assets
mainly driven by the impact of the COVID-19 pandemic and higher
staff and technology-related costs. The impact of market volatility
during the current quarter resulted in unfavourable changes in the
fair value of seed capital investments, interest rate derivatives
and the net impact of our U.S. share-based compensation plans, also
contributed to the decrease. These factors were partially offset by
an increase in revenue from higher average fee-based client assets,
net of associated variable compensation costs.
Compared to last quarter, net income decreased $199 million or 32%, largely due to higher
PCL on performing assets mainly driven by the impact of the
COVID-19 pandemic. The impact of market volatility in the current
quarter resulted in unfavourable changes in our average fee-based
client assets, the fair value of interest rate derivatives from
widening credit spreads, and the fair value of seed capital
investments, also contributed to the decrease. Net interest income
was relatively flat as average volume growth was offset by the
impact of lower interest rates. These factors were partially offset
by lower variable compensation commensurate with the decline in
commissionable revenue.
Insurance
Net income of $180 million
increased $26 million or 17% from a
year ago, mainly due to higher favourable investment-related
experience and new longevity reinsurance contracts, partially
offset by the impact of actuarial adjustments and lower benefits
from favourable reinsurance contract renegotiations.
Compared to last quarter, net income decreased $1 million or 1%, mainly due higher travel claims
costs, the impact of lower new longevity reinsurance contracts and
unfavourable actuarial adjustments. These factors were largely
offset by higher favourable investment-related experience.
Investor & Treasury
Services
Net income of $226 million
increased $75 million or 50% from a
year ago, primarily due to higher funding and liquidity
revenue.
Compared to last quarter, net income increased $83 million or 58%, primarily driven by higher
funding and liquidity revenue reflecting the impact of interest
rate movements in the current quarter and higher gains from the
disposition of securities, partially offset by higher funding costs
related to enterprise liquidity. Higher revenue from increased
client activity in our asset services business resulting from
elevated market volatility in the current quarter also contributed
to the increase.
Capital
Markets
Net income of $105 million
decreased $671 million or 86% from a
year ago, primarily due to higher PCL on performing assets
mainly driven by the impact of the COVID-19 pandemic and higher
provisions on impaired assets in a couple of sectors. Lower revenue
in Corporate and Investment Banking, mainly due to lower fixed
income trading revenue from loan underwriting markdowns, primarily
in the U.S. and Europe, driven by
widening credit spreads, also contributed to the decrease. These
factors were partially offset by higher revenue in Global Markets
and lower taxes due to an increase in the proportion of earnings
from lower tax rate jurisdictions.
Compared to last quarter, net income decreased $777 million or 88%, largely due to higher PCL on
performing assets mainly driven by the impact of the COVID-19
pandemic and higher provisions on impaired assets in a couple of
sectors. Lower fixed income trading revenue in Corporate and
Investment Banking primarily from loan underwriting markdowns in
the U.S. and Europe reflecting
widening credit spreads and lower M&A activity primarily in the
U.S., also contributed to the decrease. These factors were
partially offset by lower compensation on decreased revenue and
lower taxes due to an increase in the proportion of earnings from
lower tax rate jurisdictions. Net income was also impacted by
higher fixed income trading revenue in Global Markets in
Canada and Europe due to increased client activity,
partially offset by lower fixed income trading revenue in the
U.S.
Corporate
Support
Net income was $14 million in the
current quarter, largely due to asset/liability management
activities, partially offset by net unfavourable tax
adjustments.
Capital, Liquidity and Credit
Quality
Capital – As at April
30, 2020, CET1 ratio was 11.7%, down 30 bps from last
quarter, mainly reflecting higher risk weighted assets driven by
drawdowns on credit facilities, net credit downgrades and balance
sheet growth. The unfavourable impact of fair value other
comprehensive income adjustments also contributed to the decrease.
These factors were partially offset by internal capital generation
net of PCL including IFRS 9 capital modification, the impact
of higher discount rates in determining our pension and other
post-employment benefit obligations and the capital modifications
associated with the reduction in market risk. We distributed
$1.7 billion to our shareholders
through dividends and buybacks.
Liquidity – For the quarter ended
April 30, 2020, average LCR was 130%,
which translates into a surplus of approximately $66 billion, compared to 129% in the prior
quarter. The increase in the LCR surplus from the previous quarter
is primarily due to higher business and retail deposit growth
partially offset by higher corporate lending resulting from
drawdowns on credit facilities, as well as additional actions taken
to maintain our liquidity position.
Credit Quality – Total PCL was $2,830 million. PCL on loans of $2,734 million increased $2,293 million from the prior year, as we
increased reserves, primarily in Personal & Commercial Banking,
Capital Markets and Wealth Management, due to the impact of the
COVID-19 pandemic. The total PCL ratio on loans of 165 bps
increased 136 bps from the prior year. The PCL ratio on impaired
loans was 37 bps.
PCL on loans increased $2,313
million from the prior quarter, as we increased reserves,
primarily in Personal & Commercial Banking, Capital Markets and
Wealth Management due to the impact of the COVID-19 pandemic on
performing loans. Higher PCL on impaired loans, mainly in Capital
Markets, also contributed to the increase. The total PCL ratio on
loans increased 139 bps from last quarter.
The ratio of allowance for credit losses (ACL) on loans and
acceptances to total loans & acceptances increased to 84 bps,
up 31 bps from last year.
Digitally Enabled Relationship
Bank
90-day Active Mobile users increased 16% from a year ago to 4.8
million, resulting in a 38% increase in mobile sessions. Digital
adoption increased to 53.9%.
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 Q2 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 Q2 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 Q2 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 section of our Q2 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 Q2 2020 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for May 27, 2020 at 8:15 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 6995173#).
Please call between 8:05 a.m. and 8:10 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 May 27, 2020 until August
25, 2020 at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 8404209#).
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 84,000+ 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