(Adds executive comments, share price move, board appointment)
By Euan Rocha
TORONTO Aug 22 Royal Bank of Canada on
Friday reported a bigger-than-expected increase in quarterly
earnings, driven by strong results from its wealth management
and capital markets divisions.
Canada's largest bank also boosted its quarterly dividend,
as widely expected, by roughly 6 percent to 75 Canadian cents a
Shares in the bank hit a lifetime high of C$82.15 early on
Friday before easing 1.2 percent to C$80.67 on a negative day on
the Toronto Stock Exchange.
"Overall the results are better than what we expected," said
Morningstar analyst Dan Werner, noting executives on its
conference call "tried to temper the analyst community a little
bit in terms of expectations."
RBC reported net income of C$2.38 billion ($2.17 billion),
or C$1.59 a share, for the third quarter ended July 31, compared
with C$2.29 billion, or C$1.51 a share, a year earlier.
The increase came despite a slight drop in profit from RBC's
core personal and commercial banking business after the sale of
its Jamaica operations.
When RBC announced the sale to Sagicor Group Jamaica Ltd
in January, it said it expected to lose about C$60
million from the transaction, partly due to a goodwill
Excluding charges from the Jamaica sale and other one-time
items, the company reported earnings of C$1.64 a share, topping
the analysts' average estimate of C$1.56, according to Thomson
"While we are decidedly positive on the results, naysayers
will question the sustainability of the trading revenues and
insurance earnings," Barclays analyst John Aiken said in a note.
RBC, which named former Rio Tinto Alcan head Jacynthe Côté
to its board on Friday, is the first Canadian bank to announce
its third-quarter results. Toronto-Dominion Bank, Bank
of Nova Scotia, Bank of Montreal and National
Bank of Canada are set to report next week.
CAPITAL MARKETS SOAR
Aiken said RBC's capital markets unit generated a stand-out
performance which will be difficult for its peers to emulate.
The bank said net income from that unit rose 66 percent to a
record C$641 million due to increased trading activity, along
with strong growth in lending and loan syndication.
Capital markets accounted for 27 percent of RBC's earnings
in the period, prompting questions about whether it would
consider unshackling the unit it has in some ways constrained.
The bank has in the past said it plans to keep its earnings
from the typically volatile capital markets segment at or under
25 percent to avoid analyst concerns about earnings volatility.
On Friday, McKay stressed the 25-percent figure was more a
guideline than a cap and said it would not hamstring the bank's
ambitions or the growth of the division.
"We look at opportunities to grow in all of our businesses
and we remain confident that we can continue to grow capital
markets and still remain within our longer-term strategic
guidelines," he said.
(1 U.S. dollar = 1.0952 Canadian dollar)
(Reporting by Euan Rocha; Editing by Lisa Von Ahn and James