(November 21 – 12:40 ET) – Royal Bank of Canada is reporting that profit increased 22% for year ended October 31, driven by the growth of its Wealth Management division.

Net income for the year came in at $2.2 billion, or $2.3 billion on a cash basis, up 22% from a year ago. Fully diluted earnings per share were $3.40, up 29%.

Return on common equity came in at 19.3%, up from 16.1%. Revenues grew by 14%, while expenses were up just 9%.

For the fourth quarter alone, net income was $568 million, up 19% from a year ago and up 1% from the third quarter. Return on equity in the quarter was 19.2%.

The bank attributes the profit improvement to strong earnings growth in the Personal & Commercial Financial Services, Wealth Management and Corporate & Investment Banking segments.

John Cleghorn, chairman and CEO said, “Our shareholders benefited from a 56% total return on their Royal Bank shareholdings this fiscal year. This reflects excellent revenue growth, complemented by tremendous results from our cost reduction initiatives. We now command the highest valuation among the six largest Canadian banks and are aiming to build on this position, through strong financial performance and focused execution of our strategic plan.”

Royal Bank has begun reporting the economic profit of its businesses, too. Economic profit measures each business segment’s cash operating earnings after providing for the cost of capital committed to the segment. Economic profit in 2000 was $717 million. The biggest contribution, $427 million, came from Personal & Commercial Financial Services, followed by Wealth Management with $312 million, Corporate & Investment Banking added $194 million, and $81 million came from Transaction Processing.

In the Personal & Commercial Financial Services business full year net income increased 26% from 1999. Revenues rose 9%, while expenses were unchanged. Return on equity increased to 21.3% from 20.1%.

In Wealth Management, net income increased 52% from 1999 and accounted for 19% of the bank’s total earnings, up from 15% last year. The Private Client Division and Global Private Banking accounted for approximately two-thirds of the higher net income. The firm says that this reflects stronger capital markets this year and the benefits of recent acquisitions in Global Private Banking. Wealth Management’s revenue growth of 28% far exceeded expense increases of 19%. Return on equity was 47.8%.

Corporate & Investment Banking saw its net income increase 32%, and Return on equity improved to 20.8%. The bank’s total provision for credit losses was scaled back to $690 million, from $760 million at year end last year.

Royal Bank has increased its quarterly dividend by 3¢ to 33¢, payable on February 23, 2001. This is the fourth time in two years that the bank has raised its common share dividend.

The bank also announced the appointment of Charlotte Otto to its board of directors. Otto is global external relations officer of The Proctor and Gamle Co., headquartered in Cincinnati, Ohio.
-IE Staff