Credit Suisse 02:19 PM EDT, 08/25/2022 (MT Newswires) -- Royal Bank reported core cash EPS of $2.55 in Q3/F22, which missed the Street estimate of $2.66 and Credit Suisse at $2.71. Relative to CS estimates, the miss was driven by lower revenue, which was partially offset by lower expenses, as PCLs were largely in line. The pre-tax pre-provision earnings growth was down 1% Q/Q and down 3% Y/Y. The bank reported core ROE of 14.6% this quarter, which was down 380bps over the quarter. The CET1 ratio of 13.1% was down 10bps sequentially. The bank left its dividend unchanged at C$1.28/share.
"We view RY's Q3 results as mixed, as continued strength in the bank's core Canadian Banking franchise (strong margin expansion in particular and expectation for more ahead) was somewhat overshadowed by higher-than-expected markdowns in the Capital Markets segment that dragged down revenue and PTPP earnings growth." CS notes that RY also made a slight negative revision to its expense guidance for the year, which suggests that investments could remain relatively high in the near term. However, "we continue to believe that the bank's diversified mix of business and capital strength (with RY remaining comfortable operating at a higher capital ratio) should serve well, especially as we face continued uncertainties and a potential slowdown in growth ahead."
CS is trimming core cash EPS for F2022E by 1% to $11.21 from $11.35 previously. F2023E forecast also cut by 1% to $11.78 (was $11.90)
Lowering target price to $143 ($144 previously). Maintain Outperform.
Price: 125.62, Change: +2.42, Percent Change: +1.96