RBC beats expectations on boost from capital markets income

financialpost.com:

Royal Bank of Canada beat analysts’ earnings estimates after reporting strong capital-markets performance and a tax adjustment in the company’s favour.

Corporate and investment banking revenue rose to the highest in almost two years in the fiscal fourth quarter, and the capital-markets unit’s net income climbed 36 per cent from a year earlier. Results were also helped by a $578 million boost related to deferred tax adjustments, the Toronto-based bank said in a statement Thursday. The lender earned $2.78 per share on an adjusted basis in the fiscal fourth quarter, topping the $2.62 average estimate of analysts in a Bloomberg survey.

Provisions for credit losses totalled $720 million, more than the $662.6 million analysts had expected.

Royal Bank’s U.S. subsidiary, City National Bank, reported an adjusted net loss of US$89 million in the three months through October. That followed a loss of US$12 million in the third quarter after its parent injected almost US$3 billion in capital this year into the Los Angeles-based bank, which has struggled with deposit outflows and a higher cost of funding.

Royal Bank is seeking new domestic growth through a landmark $13.5 billion deal to acquire HSBC Holdings Plc’s Canadian operations, a deal announced a year ago.

The transaction has won approval from the Competition Bureau, Canada’s antitrust authority, but is still awaiting the green light from Finance Minister Chrystia Freeland. Analysts generally expect the deal to ultimately receive approval, but it faces consumer and political opposition that could slow the process.