Royal Bank of Canada (TSX:RY) beat analyst estimates in the third quarter, powered by strength in capital markets and wealth management, extending a trend seen across Canada’s largest lenders this earnings season.
RBC reported third-quarter profit of $6.02 billion, up from $5.41 billion a year earlier, with gains also coming from commercial banking.
Profit amounted to $4.23 per diluted share for the quarter ended July 31, up from $3.75 a year earlier. On an adjusted basis, the bank earned $4.28 per diluted share, compared with $3.84 in the same quarter last year.
Analysts had expected a profit of $4.08 per share and $18.14 billion in revenue, according to LSEG Data & Analytics.
Revenue for the quarter came in at $18.54 billion, up from $16.99 billion a year earlier.
Provision for credit losses totalled $1 billion, up from $881 million a year earlier.
Jefferies analysts said the results reinforce their view that RBC’s diversified business mix is a key driver of its premium return on equity, and that favourable conditions for wealth management should continue to support the bank’s growth and valuation.
The brokerage noted RBC’s ROE rebounded from a second-quarter slowdown, helped by strong capital markets revenue and some credit allowance releases, widening its lead over peers to 18.1% against a group average of 16%. Jefferies also pointed to domestic loan growth that outpaced the peer average.
While cautioning that investors should not fully pay up for the capital markets contribution, Jefferies said the quarter demonstrated the broader strength of RBC’s platform across segments. The brokerage added that Canadian bank valuations remain close to stretched territory, and that earnings will need to grow into current multiples, but called RBC’s results a compelling case relative to its peers.
Shares were down 1.9% in Toronto and 1.8% in New York.
