(Toronto) Royal Bank of Canada reported a rise in third-quarter profit, handily beating analysts’ expectations. It reported only a modest increase in funds set aside for potentially bad loans, while revenue climbed.
The bank on Wednesday reported third-quarter profits of $4.49 billion, up from $3.86 billion a year earlier.
RBC noted that the inclusion of HSBC Canada’s results boosted its net profit by $259 million for the quarter.
On an adjusted basis, RBC earned $3.26 per share, up from adjusted earnings of $2.83 per share a year ago.
Analysts on average had expected adjusted earnings of $2.97 per share, according to LSEG Data & Analytics.
“While there is a greater degree of geopolitical uncertainty and volatility, our diversified businesses are well positioned for macroeconomic changes in the operating environment,” President and CEO Dave McKay said on an earnings call Wednesday.
Revenue totaled $14.63 billion, up from $12.98 billion a year ago, while the provision for credit losses was $659 million, up from $616 million in the same quarter last year.
Although the bank set aside more money overall, the proportion of loans subject to provisions fell by 0.02 percentage points from last year and by 0.14 percentage points from the previous quarter.
The bank’s 0.27% loan-to-value ratio is well below the 0.38% analysts expected, which helped boost profits.
“Credit was a strong point for RBC, with provisions coming in well below expectations,” Jeffries analyst John Aiken said in a note.
The credit performance contrasts sharply with other banks that have reported results so far, such as BMO, where a worsening provision situation weighed heavily on results.
RBC didn’t just do well on credit, however, it also saw interest income rise in its retail banking division and wealth management profits improve on revenue growth.
RBC said its personal and commercial banking business generated $2.49 billion, up from $2.13 billion in the same quarter last year.
The bank’s wealth management arm generated $862 million, up from $663 million a year earlier, while its insurance business recorded $170 million, down from $215 million in the same quarter last year.
RBC’s capital markets business generated $1.17 billion in its latest quarter, up from $949 million a year ago.
The bank’s business support group lost $208 million in the quarter, compared with a loss of $101 million in the same quarter last year.
The financial institution said its net income was $3.09 per share for the quarter ended July 31, compared with a profit of $2.73 per share in the same quarter last year.