RBC tops profit estimates on higher interest and fees income
By Nivedita Balu and Manya Saini
(Reuters) -Royal Bank of Canada on Wednesday beat analysts' estimates for quarterly profit, as its wealth management and capital market divisions benefited from higher fee income while elevated interest rates helped the bank earn more from lending.
Still, Canada's biggest bank set aside more funds to cover bad loans, preparing for households to feel the squeeze from the Bank of Canada raising interest rates rapidly to fight inflation.
Money markets expect interest rates to fall in the second half of the year.
RBC CEO David McKay said the uncertainty around monetary policy points to 2024 being a «transitional year» for markets, also considering the effect of geopolitical tensions.
However, higher rates boosted RBC's net interest income by 2.1% year-on-year, while the capital markets unit benefited from fixed-income revenue.
National Bank analyst Gabriel Dechaine cited an «improved revenue generation environment.»
Adjusted profit came in at C$4.07 billion, or C$2.85 per share, for the three months ended Jan. 31, above analysts' expectations of C$2.80 per share, according to LSEG data.
Provisions for credit losses jumped 53% from a year ago to C$813 million.
On Tuesday, RBC's peers Bank of Montreal and Bank of Nova Scotia said they had built bad loan provisions and warned that growth would be muted until rates begin falling.
RBC shares were up 0.5% in Toronto, while National Bank of Canada (OTC:NTIOF) rose 3.5% following a profit beat.
READY FOR HSBC CANADA
RBC also flagged a 50% rise in integration costs from its C$13.5 billion purchase of HSBC's Canada unit, set to close next month.
Analysts have raised questions about the strength of RBC's balance sheet after the deal closes, after the
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