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RBC hikes dividend after dealmaking division proves its worth again

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RBC hikes dividend after dealmaking division proves its worth again

The Royal Bank of Canada on Friday said higher trading revenue and a pick-up in dealmaking activity helped produce record profit for its first quarter, getting the latest earnings season for the country’s largest lenders off to a strong start.

Toronto-based RBC reported net income of $3.5 billion for the three months ended Jan. 31, an increase of 11 per cent over a year earlier. Adjusted earnings per share were $2.44 for the quarter, up 11 per cent year-over-year and above analysts’ expectations.

Overall revenue rose 11 per cent year-over-year at the bank, to $12.8 billion. The amount of money RBC had to set aside for bad loans also declined for the quarter, with provisions for credit losses falling to $419 million for the three months ended Jan. 31, down from $499 million in the previous quarter and from $514 million a year earlier.

RBC, Canada’s biggest bank, said its results were due in part to strong showings from its investment bank and its retail unit. A note from National Bank Financial analyst Gabriel Dechaine called RBC’s results a “good old fashioned ‘trading and credit beat.’”

“The first quarter of 2020 saw more favourable market conditions and increased client activity resulting in higher fixed income trading revenue and M&A activity,” the bank said in its latest results.

RBC’s capital-markets business saw net income increase 35 per cent from a year earlier, to $882 million, which the lender said was mostly because of the higher trading revenue and M&A activity, the latter helping to increase advisory fees. The unit saw a dip in its provisions for credit losses as well.

In personal and commercial banking, RBC reported net income of almost $1.7 billion, an increase of seven per cent over the same quarter a year earlier. The lender said this reflected “strong growth in residential mortgages” and average deposit growth of nine per cent in Canadian banking.

RBC, the first of the Big Six banks to report this earnings season, also announced a three-cent increase to its quarterly dividend, raising it to $1.08 per share.

“Against the uncertain macroeconomic backdrop, we remain focused on prudently managing our risks, leveraging our scale and competitive position, and balancing our investments in technology and talent for long-term, sustainable growth,” said Dave McKay, RBC’s president and CEO, in a press release.

Adjusted earnings per share were $2.44 for the quarter, up 11 per cent year-over-year and above the $2.30 that was expected, on average, by analysts.

Financial Post

• Email: gzochodne@nationalpost.com | Twitter: GeoffZochodne

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