Royal Bank of Canada Q4 earnings beat as higher interest rate lifts margins

Supported by double-digit income growth in key business segments, Royal Bank of Canada (RY) Wednesday reported stronger than expected fourth-quarter profit, which is 17% higher compared to last year.

On a per-share basis, earnings of the financial services company advanced 17% to C$2.20 during the quarter, exceeding analysts’ forecast. Net income was C$3.25 billion, up 15% compared to last year. Driving the bottom-line growth, income from the retail banking segment rose 10% aided by strong margin growth, higher deposits and an increase in residential and commercial lending.

Wealth management and capital markets segments recorded 13% and 14% growth respectively. The insurance division’s profit climbed 20%, while investor treasury services remained broadly flat. The overall performance benefitted from the back-to-back interest rate hikes over the last year and the resultant improvement in deposit spreads.

Driving the bottom-line growth, income from the retail banking segment rose 10% higher deposits and an increase in residential and commercial lending

Net revenues moved up 1.2% to C$10.67 billion in the fourth quarter. There was an 8% growth in net interest income to C$4.73 billion. The bank’s common equity tier-1 ratio, a measure of its overall performance, was 11.5% at the end of October, up 60 basis points compared to last year. Return on common equity increased by 100 basis points to 17.6%.

“Looking ahead, we remain focused on investing in our people and technology, and offering more personalized insights and connectivity to deliver more value for both our clients and shareholders,” said RBC CEO Dave McKay.

Royal Bank of Canada Q3 profit jumps 11%

Canadian banks have been witnessing a marked improvement in margin growth in recent times, owing mainly to the higher interest rates. The central bank raised the benchmark interest rate as many as five times in the past twelve months.

Royal Bank of Canada shares closed the last trading session higher. The stock lost about 15% since the beginning of the year.

 

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