Segment wise, Canadian Banking net income for the latest quarter surged 33%, while Wealth management net income for the quarter climbed 10%. Global Insurance net income declined 4%, while U.S. & International Banking net income fell 73%, primarily reflecting systemic deterioration in the U.S. housing market. Capital Markets net income for the latest quarter declined 38% due to write-downs related to U.S. sub-prime backed securities.
Fourth Quarter Results
For the fourth quarter, the company's net income increased 5% to C$1.32 billion from C$1.26 billion in the prior-year quarter. Earnings per share for the quarter also increased 5% to C$1.01 from C$0.96 in the year-ago quarter.
Net income for the latest quarter includes a gain of C$269 million after-tax, from the exchange of its membership interest in Visa Canada Association for shares of Visa Inc., an adjustment of C$79 million after-tax, to increase the company's credit card customer loyalty reward program liability and a charge of C$160 million after-tax on valuation write downs related to U.S. subprime residential mortgage-backed securities and collateralized debt obligations of asset-backed securities.
Revenues for the quarter grew 5% to C$5.62 billion from C$5.35 billion in the similar period of last year.
Net interest income for the quarter increased to C$1.83 billion from C$1.73 billion in the previous-year quarter. Non-interest income climbed to C$3.79 billion from $3.62 billion a year ago.
The company's non-interest expense for the quarter rose to C$3.09 billion from C$2.96 billion in the previous-year quarter.
Provision for credit losses were recorded at C$263 million, compared to provision for credit losses of C$159 million in the previous-year quarter, reflecting higher loss rates in personal and business banking as well as volume growth in the company's loan portfolio. Insurance policyholder benefits, claims and acquisition expense were C$637 million for the quarter compared to C$611 million in the year-ago period.
Net income from continuing operations increased to C$1.32 billion or C$1.01 per share from C$1.26 billion or C$0.96 per share in the prior-year period.
Return on common equity or ROE declined 90 basis points to 23.0% from 23.9% in the prior-year period. Net interest margin declined to 1.21% from 1.31% in the similar period of last year. The company's Tier 1 capital ratio declined to 9.4% from 9.6% a year ago.
Segment Results
Canadian Banking net income for the latest quarter surged 33% to C$899 million from C$675 million a year ago. The company recorded a gain of C$326 million pre-tax, or C$269 million after-tax, from the exchange of its membership interest in Visa Canada Association for shares of Visa Inc, and an adjustment of C$121 million pre-tax, or C$79 million after tax, to increase the company's credit card customer loyalty reward program liability, which was recorded against revenue. Excluding the Visa restructuring gain and the adjustment to loyalty reward liability, net income for the Canadian Banking segment increased 5% to C$709 million. Total revenue increased to C$3.45 billion from C$3.05 billion in the previous-year quarter.
Banking-related revenue increased to C$2.57 billion from C$2.19 billion in the prior-year quarter, as lending volume grew 11% and deposit balances increased 6%. Banking-related net income increased by 40% to C$797 million from C$569 million in the prior-year quarter due to strong volume growth across all business lines, particularly mortgages and personal deposits.
Global insurance net income declined 4% to C$102 million from C$106 million in the previous-year period, as business growth was offset by claims experience, which was less favorable than a year ago. Total revenue improved to C$887 million from C$863 million in the prior-year period.
Wealth management net income for the quarter climbed 10% from the prior-year quarter to C$180 million from C$164 million in the previous-year quarter. The company noted that appreciation of the Canadian dollar against the U.S. dollar reduced earnings by 4% compared to last year. Total revenue for the segment were recorded at C$986 million, compared to revenues of C$903 million a year ago.
U.S. & International Banking net income fell 73% to C$21 million from C$79 million in the previous-year quarter, primarily reflecting systemic deterioration in the U.S. housing market, which accelerated in the fourth quarter. The company noted that this led to higher provision for credit losses, which increased by C$67 million from the year-ago period. Revenue for the segment improved to C$455 million from C$429 million in the prior-year quarter. In RBC Dexia Investor Services, revenue climbed 20% to C$186 million from C$155 million in the prior-year period, aided by a growing client base and higher transactional business.
Capital Markets net income for the latest quarter declined 38% to C$186 million from C$300 million a year ago, due to a charge of C$357 million pre-tax, or C$160 million after-tax and reflecting compensation adjustments, of valuation write downs related to U.S. subprime residential mortgage-backed securities or RMBS and collateralized debt obligations of asset-backed securities or CDOs of ABS. In addition, appreciation of the Canadian dollar against the U.S dollar and British pound reduced earnings by C$28 million from a year ago. Total revenue for the segment declined to C$819 million from C$1.01 billion in the prior-year period.
The company stated that it does not originate U.S. subprime loans and has C$216 million of net exposure to U.S. subprime collateralized debt obligations of asset-backed securities. In addition, the company said it has C$388 million of exposure to U.S. subprime residential mortgage-backed securities, which are classified as available-for-sale and which it intends to hold until maturity. Combined, these amounts represent less than 0.1% of its total assets, the company said. Fiscal year 2007 Results
For the full year, the company's net income increased 16% to C$5.49 billion from C$4.73 billion in the previous year. Earnings per share for the year climbed 17% to C$4.19 from C$3.59 in the prior year.
Net loss from discontinued operations in the prior year was C$29 million.
Total revenue for the year increased 9% to C$22.46 billion from C$20.64 billion a year ago.
Outlook
For fiscal year 2008, Royal Bank of Canada forecast earnings per share growth in a range of 7-10%, with return on common equity of greater than 20%.
Further, the company expects its ANB acquisition to close in early 2008 and the RBTT acquisition to close in the middle of the year. The company also anticipates its provision for credit loss ratio to trend upward toward historical averages.
Quarterly Dividend
The company declared a quarterly common share dividend of C$0.50 per share, payable on February 28, 2008, to common shareholders of record on January 24, 2008.
Redemption of Debentures
Separately, Royal Bank of Canada announced its intention to redeem all outstanding 6.10% subordinated debentures due January 22, 2013, for 100% of their principal amount plus accrued interest to the redemption date. The company noted that the redemption will occur on January 22, 2008 and is subject to OSFI approval. Currently, there is C$500 million principal amount of 6.10% debentures outstanding.
Peer Performance
Among the company's peers, Toronto-Dominion Bank (TD, TD.TO) reported a 43% increase in net income for the fourth quarter, driven by strong growth in its Canadian Personal and Commercial Banking segment as well as the U.S. Personal and Commercial Banking segment. The company's net income for the fourth quarter rose to C$1.09 billion or C$1.50 per share from C$762 million or C$1.04 per share a year ago. Adjusted net income for the quarter increased to C$1.02 billion or C$1.40 per share from C$875 million or C$1.20 per share in the similar period of last year. Total revenues for the quarter were recorded at C$3.55 billion, up from C$3.32 billion in the previous-year quarter.
Toronto-based Bank of Nova Scotia (BNS, BNS.TO) is scheduled to report its financial for the fourth quarter on December 6, 2007. For the third quarter, the company reported a 10% increase in earnings to $1.02 billion or $1.03 per share from $0.93 billion or $0.94 per share in the prior-year quarter. The company's total revenue increased 11% to $3.30 billion from $2.99 billion in the same quarter of last year. Net interest income improved 5% to $1.91 billion from $1.82 billion in the year-ago quarter.
Stock Movements
On the NYSE, RY is currently trading at US$53.19, down US$0.62 or 1.15% on a volume of 272,400 shares. In the 52-week period, the stock has been trading in a range of US$44.80-US$59.29.
On the Toronto stock exchange, RY.TO is currently trading at C$53.16, down C$0.51 or 0.95% on a volume of 1.97 million shares. In the 52-week period, the stock has been trading in a range of C$48.55-C$61.08.
For comments and feedback: contact editorial@rttnews.com Copyright(c) 2007 RealTimeTraders.com, Inc. All Rights Reserved
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
|
|
