(February 23) – Royal Bank of Canada is reporting record financial results for the first quarter ended January 31, results it attributes largely to growth in its wealth management business, now branded Royal Investment Services.
The firm, reporting in accordance with U.S. GAAP, recorded quarterly net income of $515 million, up 17% from Q1 1999. Fully-diluted earnings per share came in at $1.57, up 24% year over year. Return on equity is up to 18.4%, its highest level since Q2 1998, and well ahead of the 16% reported a year ago. Corporate and investment banking (the wholesale side now operating as RBC Dominion Securities) generated record ROE of 23%.
Overall revenue grew 10%, faster than company targets, spurred by 23% growth in Royal Investment. Earnings growth in the retail investment business was 80% in the quarter, pushing its bottom-line contribution from 15% last year to 22% this year.
Although RBC’s market share in mutual funds declined during the period from 8.6% to 8.3% (among financial institutions), the investment division recorded a 970 basis point improvement in its cost-to-revenue ratio. Total assets under administration were up 19% from a year ago to $1.0 trillion, and assets under management rose 12% to $86 billion.
RBC achieved one of its valuation targets, namely it performed in the first quartile of the TSE Banks and Trusts Index based on its price-to-book ratio. However, its price-to-earnings ratio was only second-quartile. RBC chair and CEO John Cleghorn says the firm will return to first-quartile status through “strong financial performance, growth in key businesses and geographic markets, and a serious commitment to providing the best quality service to our customers.”
Cleghorn sees those objectives being achieved by investing in e-commerce and the Internet, wealth management, insurance and selected elements of wholesale and retail banking.
– IE Staff