Royal Bank of Canada’s Q1 earnings top estimates

Royal Bank of Canada (RY) reported better-than-expected revenue and earnings for the first quarter of 2019. Total revenue of CAD11.5 billion was up 6% from the same period last year.

Net income available to common shareholders rose 5% year-over-year to CAD3.09 billion and diluted EPS grew 7% to CAD2.15. Adjusted EPS was CAD2.19.

Net interest income grew 9% to CAD4.8 billion while non-interest income rose 6% to CAD6.7 billion. Return on equity dropped 70 basis points to 16.7% while common equity Tier 1 ratio rose 40 basis points to 11.4%.

The quarterly results were helped by underlying earnings growth in segments like Personal & Commercial Banking and Insurance while other divisions like Wealth Management and Capital Markets were negatively impacted by tough market conditions. The results also included investments in technology initiatives and higher provisions for credit losses.

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Profits in Personal & Commercial Banking grew 3% year-over-year, driven by strong client-driven volume growth and higher deposit spreads from higher Canadian interest rates. Net income in Insurance jumped 31%, helped by favorable life retrocession contract renegotiations and lower claims costs.

In Wealth Management, profits remained flat. In the Investor & Treasury Services and Capital Markets segments, profits declined 26% and 13% respectively, due to factors such as lower funding and liquidity revenue, higher costs, and lower revenue due to challenging market conditions and lower issuance activity.

Royal Bank of Canada shares closed the last trading session lower. The stock has gained over 13% thus far this year.

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