Looks like a bit of an overreaction but that's to be expected in these volatile markets. GLTA
Shares of Royal Bank of Canada were lower on Wednesday after it posted a decline in first-quarter profit, as the lender set aside higher provisions to brace for potential loan defaults amid a challenging macro environment.
Canada’s biggest lender reported overall net income of $3.2-billion, or $2.29 a share, for the quarter ended Jan. 31, compared with $4.1-billion, or $2.84 a share, a year ago.
On an adjusted basis, RBC earned $3.10 per share for the quarter ended Jan. 31, ahead of analysts’ average estimate of $2.93 per share, according to Refinitiv IBES dat
Provisions for bad loans came in at $532-million for the quarter, up from $105-million a year ago, mainly reflecting higher provisions in Personal & Commercial Banking.
Earnings from Royal Bank’s personal and commercial banking unit rose 8 per cent and wealth management profit was up 3 per cent from a year ago, driven by higher interest rates.
Canada’s central bank in January forecasted that the economy would stall and could tip into recession during the first three quarters of this year.
RBC’s rivals – CIBC (CM-T) and Bank of Montreal (BMO-T) – have reported a decline in quarterly profits as they build buffer for loss provisions amid challenging economic conditions.
In a research note, Credit Suisse analyst Joo Ho Kim said: “RY’s Q1 results beat both the Street and our estimates, as strong performance from Capital Markets more than offset higher expenses (which does have a number of moving parts in it), and softer net interest margins. On expenses, the bank reported 17 per cent year-over-year growth, which was 3 per cent higher than what we expected, and even on an adjusted basis, expense growth of 11 per cent still seemed relatively high. The other area that we focus on is net interest margins, which was somewhat softer than what we expected as well (up just 1bp at the all-bank), as a good outcome from Canadian P&C was offset by weaker-than-expected performance from Wealth Management (CNB margins were down 5bps Q/Q). We saw the bank trod on that gradual path of normalization in terms of credit (similar to its peers this quarter), and the capital ratio remained solid (albeit lower than our estimate).”