All amounts are in Canadian dollars and are based on financial
statements presented in compliance with International Accounting
Standard 34 Interim Financial Reporting, unless otherwise
noted. Our Q2 2022 Report to Shareholders and Supplementary
Financial Information are available at:
http://www.rbc.com/investorrelations.
Net Income
$4.3
Billion
Up 6% YoY
|
Diluted EPS1
$2.96
Up 7% YoY
|
PCL2
$(342)
Million
PCL on loans ratio3
down 23 bps4 QoQ
|
ROE5
18.4%
Down 100 bps YoY
|
CET1 Ratio6
13.2%
Robust capital levels,
up
40 bps YoY
|
TORONTO, May 26, 2022
/CNW/ - Royal Bank of Canada (TSX:
RY) (NYSE: TSX) today reported net income of $4.3 billion for the quarter ended April 30, 2022, up $238
million or 6% from the prior year, with strong diluted EPS
growth of 7% over the same period. Our results this quarter
included releases of provisions on performing loans of $504 million, higher than the $260 million of provisions released last year,
mainly driven by reduced uncertainty relating to the COVID-19
pandemic which was partially tempered by increased downside risks,
including rising inflation and interest rates. Net income also
benefitted from net favourable tax adjustments in the current
quarter. Personal & Commercial Banking, Wealth Management and
Insurance saw strong earnings growth. Investor & Treasury
Services results were largely unchanged from last year, and Capital
Markets results were down from record second quarter earnings last
year.
Pre-provision, pre-tax earnings7 of $5.0 billion were down $124 million or 2% from a year ago, mainly
reflecting lower Capital Markets revenue compared to elevated
levels last year, lower spreads, and higher salaries, technology
investments and discretionary costs to support strong client-driven
growth. Changes in the fair value of hedges related to our U.S.
share-based compensation plans also impacted revenue. These factors
were partially offset by strong growth in volumes and fee-based
client assets, and lower variable and share-based compensation.
Compared to last quarter, net income was up $158 million or 4% with higher results in
Personal & Commercial Banking, Corporate Support, Insurance and
Investor & Treasury Services, partially offset by lower results
in Capital Markets and Wealth Management.
The PCL on loans ratio of (18) bps was down 23 bps from last
quarter, primarily due to releases of provisions in Personal &
Commercial Banking in the current quarter as compared to provisions
taken in the prior quarter. The PCL on impaired loans ratio of 9
bps was unchanged from last quarter.
Our capital position remained robust, with a Common Equity Tier
1 (CET1) ratio of 13.2% while supporting strong client-driven
organic growth. In addition, this quarter we returned $3.6 billion to our shareholders through common
share buybacks and dividends. And today, we declared a quarterly
dividend of $1.28 per share
reflecting an increase of $0.08 or
7%. We also had a strong average Liquidity Coverage Ratio (LCR) of
121%.
"The resilience of our diversified business model, prudent
risk and capital management, and strategic investments in talent
and technology continued to define our performance in the second
quarter. We remain well-positioned for future growth, and to
deliver differentiated long-term value for our clients, employees
and shareholders. At a time when geopolitical tensions,
inflationary pressures and global supply chain issues are creating
an uncertain macroeconomic backdrop, I'm proud of how RBC employees
continue to drive positive change in our communities and deliver
trusted advice and insights for those we serve. We will continue to
leverage our scale and financial strength, and the powerful
combination of our people and culture, to play a leading role in
shaping a thoughtful transition to net zero and an inclusive
post-pandemic future."
– Dave McKay, RBC President
and Chief Executive Officer
Q2 2022
Compared to
Q2 2021
|
•
Net income of $4,253 million
•
Diluted EPS of $2.96
•
ROE of 18.4%
•
CET1 ratio of 13.2%
|
⇑ 6%
⇑ 7%
⇓ 100
bps
⇑ 40
bps
|
|
Q2 2022
Compared to
Q1 2022
|
•
Net income of $4,253 million
• Diluted EPS of
$2.96
• ROE of
18.4%
• CET1 ratio of
13.2%
|
⇑ 4%
⇑ 4%
⇑ 110
bps
⇓ 30
bps
|
|
YTD 2022
Compared to
YTD 2021
|
• Net income of
$8,348 million
• Diluted EPS of
$5.80
• ROE of
17.9%
|
⇑ 6%
⇑ 7%
⇓ 110
bps
|
|
|
1 Earnings per share
(EPS).
|
2 Provision for credit
losses (PCL).
|
3 PCL on loans
ratio is calculated as PCL on loans as a percentage of average net
loans and acceptances.
|
4 Basis points
(bps).
|
5 Return on equity
(ROE). For further information, refer to the Key performance and
non-GAAP measures section on page 3 of this Earnings
Release.
|
6 This ratio is
calculated by dividing Common Equity Tier 1 (CET1) by risk-weighted
assets, in accordance with OSFI's Basel III Capital Adequacy
Requirements guideline.
|
7 Pre-provision,
pre-tax earnings is calculated as income (Q2 2022: $4,253 million;
Q2 2021: $4,015 million) before income taxes (Q2 2022: $1,055
million; Q2 2021: $1,171 million) and PCL (Q2 2022: $(342) million;
Q2 2021: $(96) million). This is a non-GAAP measure. For further
information, refer to the Key performance and non-GAAP measures
section on page 3 of this Earnings Release.
|
Personal & Commercial Banking
Net income of $2,234 million
increased $326 million or 17% from a
year ago, primarily attributable to lower PCL. Higher net interest
income in Canadian Banking reflecting volume growth of 10% in
average deposits and 9% in average loans (including strong business
volume and residential mortgage growth benefitting from housing
activity) that more than offset the impact of lower spreads also
contributed to the increase.
Compared to last quarter, net income increased $260 million or 13%, primarily attributable to
lower PCL, largely driven by higher releases of provisions on
performing loans in the current quarter reflecting reduced
uncertainty relating to the COVID-19 pandemic, partially tempered
by increased downside risks. Lower staff-related costs also
contributed to the increase. Net interest income remained
relatively flat as higher spreads, reflecting the rising interest
rate environment, and average volume growth of 1% more than
offset the impact of three less days in the current quarter. These
factors were partially offset by the impact of realized gains from
commercial mortgage securitization activities in the prior quarter
and lower average mutual fund balances, driving lower distribution
fees.
Wealth Management
Net income of $750 million
increased $67 million or 10% from a
year ago, primarily due to higher average fee-based client assets
reflecting net sales and market appreciation. Higher net interest
income driven by average volume growth also contributed to the
increase. These factors were partially offset by higher variable
compensation, higher staff-related costs, as well as lower
transactional revenue.
Compared to last quarter, net income decreased $45 million or 6%, mainly reflecting the impact
of a partial release of a legal provision in U.S. Wealth Management
(including City National) in the prior quarter. Lower average
fee-based client assets largely reflecting unfavourable market
conditions, as well as a decline in transactional revenue also
contributed to the decrease. These factors were partially offset by
gains on the sale of certain non-core affiliates, as well as higher
net interest income reflecting the rising interest rate
environment.
Insurance
Net income of $206 million
increased $19 million or 10% from a
year ago, primarily due to higher favourable investment-related
experience.
Compared to last quarter, net income increased $9 million or 5%, primarily due to improved
claims experience. This was partially offset by the impact of
changes in new business mix, including lower new longevity
reinsurance contracts.
Investor & Treasury Services
Net income of $121 million
remained relatively flat as higher client deposit revenue was
offset by higher technology-related costs, a favourable sales tax
adjustment in the prior year and higher legal costs.
Compared to last quarter, net income increased $3 million or 3%, mainly driven by higher client
deposit revenue reflecting improved client deposit margins. The
impact of annual regulatory costs in the prior quarter and lower
taxes also contributed to the increase. These factors were largely
offset by lower funding and liquidity revenue reflecting a benefit
from money market opportunities in the prior quarter.
Capital Markets
Net income of $795 million
decreased $276 million or 26% from a
year ago, mainly due to lower Global Markets revenue largely
resulting from lower fixed income and equity trading revenue
primarily in the U.S. Higher PCL and lower revenue in Corporate and
Investment Banking also contributed to the decrease. These factors
were partially offset by lower compensation on decreased
results.
Compared to last quarter, net income decreased $235 million or 23%, mainly due to lower
fixed income and equity trading revenue across most regions as the
prior quarter benefitted from stronger client activity. Lower
equity and debt origination across most regions, as well as lower
M&A and loan syndication activity largely in the U.S., also
contributed to the decrease. These factors were partially offset by
lower compensation on decreased results.
Capital, Liquidity and Credit Quality
Capital – As at April 30,
2022, our CET1 ratio was 13.2%, down 30 bps from last
quarter, mainly reflecting risk-weighted asset growth (excluding
FX), share repurchases and the unfavourable impact of fair value
other comprehensive income adjustments, partially offset by net
internal capital generation.
Liquidity – For the quarter ended April 30, 2022, the average LCR was 121%, which
translates into a surplus of approximately $64 billion, compared to 124% and a surplus of
approximately $70 billion in the
prior quarter. LCR has moderately declined compared to the prior
quarter mainly reflecting growth in retail and wholesale loans that
was largely offset by increases in client deposits and issuance of
term funding.
The Net Stable Funding Ratio (NSFR) as at April 30, 2022 was 113%, which translates into a
surplus of approximately $97 billion,
compared to 113% and a surplus of approximately $98 billion in the prior quarter. NSFR remained
flat compared to the prior quarter as growth in retail and
wholesale loans was offset by increases in client deposits,
issuance of term funding as well as changes in the composition of
our securities portfolios.
Credit Quality
Q2 2022 vs. Q2 2021
Total PCL of $(342) million
decreased $246 million from a year
ago. PCL on loans of $(330) million
decreased $247 million, largely due
to releases of provisions in Personal & Commercial Banking in
the current quarter as compared to provisions taken in the prior
year. This was partially offset by lower releases of provisions in
Capital Markets. The PCL on loans ratio of (18) bps decreased 13
bps. The PCL on impaired loans ratio of 9 bps decreased 2 bps.
PCL on performing loans of $(504)
million decreased $244
million, primarily due to higher releases of provisions in
Personal & Commercial Banking. Reduced uncertainty relating to
the COVID-19 pandemic drove a higher release, partially tempered by
increased downside risks including rising inflation and interest
rates. This was partially offset by lower releases of provisions in
Capital Markets.
PCL on impaired loans of $174
million decreased $3 million
or 2%. Lower provisions in Personal & Commercial Banking were
offset by provisions in the current year as compared to recoveries
in the prior year in Capital Markets.
Q2 2022 vs. Q1 2022
Total PCL decreased
$447 million from last quarter. PCL
on loans was $(330) million as
compared to $100 million last
quarter, primarily due to releases of provisions in Personal &
Commercial Banking in the current quarter as compared to provisions
taken in the prior quarter. The PCL on loans ratio decreased 23
bps. The PCL on impaired loans ratio remained flat.
PCL on performing loans decreased $424
million, primarily reflecting higher releases of provisions
in the current quarter in Personal & Commercial Banking.
Reduced uncertainty relating to the COVID-19 pandemic drove a
higher release, partially tempered by increased downside risks
including rising inflation and interest rates.
PCL on impaired loans decreased $6
million or 3%, primarily due to lower provisions in Personal
& Commercial Banking, partially offset by provisions taken in
the current quarter as compared to recoveries in the prior quarter
in Capital Markets.
Key performance and non-GAAP measures
We measure and evaluate the performance of our consolidated
operations and each business segment using a number of financial
metrics, such as net income, ROE and non-GAAP measures, including
pre-provision, pre-tax earnings. Certain financial metrics,
including ROE and pre-provision, pre-tax earnings do not have any
standardized meanings under GAAP and may not be comparable to
similar measures disclosed by other financial institutions. We use
ROE, at both the consolidated and business segment levels, as a
measure of return on total capital invested in our business. We use
pre-provision, pre-tax earnings to assess our ability to generate
sustained earnings growth outside of credit losses, which are
impacted by the cyclical nature of the credit cycle. We believe
that certain non-GAAP measures are more reflective of our ongoing
operating results and provide readers with a better understanding
of management's perspective on our performance.
Additional information about ROE and other key performance and
non-GAAP measures can be found under the Key performance and
non-GAAP measures section of our Q2 2022 Report to
Shareholders.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking
statements within the meaning of certain securities laws, including
the "safe harbour" provisions of the United States Private
Securities Litigation Reform Act of 1995 and any applicable
Canadian securities legislation. We may make forward-looking
statements in this Earnings Release, in other filings with Canadian
regulators or the SEC, in other reports to shareholders, and in
other communications, including statements by our President and
Chief Executive Officer. Forward-looking statements in this
document include, but are not limited to, statements relating to
our financial performance objectives, vision and strategic goals.
The forward-looking information contained in this Earnings Release
is presented for the purpose of assisting the holders of our
securities and financial analysts in understanding our financial
position and results of operations as at and for the periods ended
on the dates presented, as well as our financial performance
objectives, vision and strategic goals, and may not be appropriate
for other purposes. Forward-looking statements are typically
identified by words such as "believe", "expect", "foresee",
"forecast", "anticipate", "intend", "estimate", "goal", "plan" and
"project" and similar expressions of future or conditional verbs
such as "will", "may", "should", "could" or "would".
By their very nature, forward-looking statements require us to
make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
will not prove to be accurate, that our assumptions may not be
correct and that our financial performance objectives, vision and
strategic goals will not be achieved. We caution readers not to
place undue reliance on these statements as a number of risk
factors could cause our actual results to differ materially from
the expectations expressed in such forward-looking statements.
These factors – many of which are beyond our control and the
effects of which can be difficult to predict – include: credit,
market, liquidity and funding, insurance, operational, regulatory
compliance (which could lead to us being subject to various legal
and regulatory proceedings, the potential outcome of which could
include regulatory restrictions, penalties and fines), strategic,
reputation, competitive, legal and regulatory environment, and
systemic risks and other risks discussed in the risk sections and
Impact of COVID-19 pandemic section of our annual report for the
fiscal year ended October 31, 2021
(the 2021 Annual Report) and the Risk management section of our Q2
2022 Report to Shareholders; including business and economic
conditions in the geographic regions in which we operate,
information technology and cyber risks, environmental and social
risk (including climate change), digital disruption and innovation,
Canadian housing and household indebtedness, geopolitical
uncertainty, privacy, data and third party related risks,
regulatory changes, culture and conduct, the effects of changes in
government fiscal, monetary and other policies, tax risk and
transparency, and the emergence of widespread health emergencies or
public health crises such as pandemics and epidemics, including the
COVID-19 pandemic and its impact on the global economy, financial
market conditions and our business operations, and financial
results, condition and objectives. In addition, as we work to
advance our climate goals, external factors outside of RBC's
reasonable control may act as constraints on their achievement,
including varying decarbonization efforts across economies, the
need for thoughtful climate policies around the world, more and
better data, reasonably supported methodologies, and technological
advancements, the evolution of consumer behavior, the challenges of
balancing interim emissions goals with an orderly and just
transition, and other significant considerations such as legal and
regulatory obligations.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. When relying on our forward-looking statements to make
decisions with respect to us, investors and others should carefully
consider the foregoing factors and other uncertainties and
potential events. Material economic assumptions underlying the
forward-looking statements contained in this Earnings Release are
set out in the Economic, market and regulatory review and outlook
section and for each business segment under the Strategic
priorities and Outlook sections in our 2021 Annual Report, as
updated by the Economic, market and regulatory review and outlook
section of our Q2 2022 Report to Shareholders. Except as required
by law, we do not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to
time by us or on our behalf.
Additional information about these and other factors can be
found in the risk sections and Impact of COVID-19 pandemic section
of our 2021 Annual Report and the Risk management section of our Q2
2022 Report to Shareholders. Information contained in or otherwise
accessible through the websites mentioned does not form part of
this Earnings Release. All references in this Earnings Release to
websites are inactive textual references and are for your
information only.
ACCESS TO QUARTERLY RESULTS MATERIALS
Interested
investors, the media and others may review this quarterly Earnings
Release, quarterly results slides, supplementary financial
information and our Q2 2022 Report to Shareholders at
rbc.com/investorrelations.
Quarterly conference call and webcast presentation
Our
quarterly conference call is scheduled for May 26, 2022 at 8:30 a.m.
(EST) and will feature a presentation about our second
quarter results by RBC executives. It will be followed by a
question and answer period with analysts. Interested parties can
access the call live on a listen-only basis at
rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (416-340-2217, 866-696-5910, passcode 1408176#).
Please call between 8:20 a.m. and 8:25 a.m.
(EST).
Management's comments on results will be posted on our website
shortly following the call. A recording will be available by
5:00 p.m. (EST) from May 26, 2022 until August
23, 2022
at rbc.com/investorrelations/quarterly-financial-statements.html or
by telephone (905-694-9451 or 800-408-3053, passcode 7934665#).
ABOUT RBC
Royal Bank of Canada is a
global financial institution with a purpose-driven, principles-led
approach to delivering leading performance. Our success comes from
the 89,000+ employees who leverage their imaginations and insights
to bring our vision, values and strategy to life so we can help our
clients thrive and communities prosper. As Canada's biggest bank and one of the largest
in the world, based on market capitalization, we have a diversified
business model with a focus on innovation and providing exceptional
experiences to our 17 million clients in Canada, the U.S. and 27 other countries. Learn
more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at rbc.com/community-social-impact.
Trademarks used in this earnings release include the LION &
GLOBE Symbol, ROYAL BANK OF CANADA
and RBC which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or by its subsidiaries under
license. All other trademarks mentioned in this earnings release,
which are not the property of Royal Bank of Canada, are owned by their respective
holders.
SOURCE RBC