It’s another record year for Royal Bank of Canada (RBC) with profit increasing by 8% year-on-year to C$9bn. RBC met or exceeded all of its key financial performance objectives with a return on equity of 19%, while holding higher capital, and increased its dividend 12%. Douglas Blakey writes
At the heart of the bank’s success the retail-dominated Canadian Banking unit reported yet another set of record earnings, up 7% from last year thanks to solid volume growth, strong fee-based revenue, and market share gains across nearly all of its businesses.
Highlights included double-digit growth in mutual fund revenue and 6% growth in deposits, including 12% growth in core checking balances.
Distribution highlights included new products and services, specifically for mobile channels, including RBC’s app for business owners, which has seen 20% growth in subscribers each month since it launched.
Elsewhere within the group, RBC’s wealth management unit also posted record earnings, topping C$1bn for the first time and up 22% year-on-year while Capital Markets – another record – reported earnings exceeding C$2bn.
All in all, none too shabby in an era of ever-increasing regulatory burdens, low interest rates and a slowdown in consumer demand for increased credit.
Looking ahead, there remains good reason to be optimistic that RBC can continue to outperform its peers in its domestic retail heartland.
In particular, RBC’s proven ability to deepen customer relationships by cross-selling more effectively than its rivals.
In addition, with investment and savings products forecast to grow up to three times faster than credit over the next decade, RBC will benefit from having the most comprehensive financial planning platform, largest mutual fund provider and the largest full service wealth management business in its local market.
Investors who value RBC’s dividend strategy (it has not missed a dividend since first paying out in 1870 and did not cut its dividend during the financial crash) can rest pretty easy; its current quarterly payout is 50% higher than it was in fiscal 2007-2008.