Royal Bank of Canada (RY), Canada’s second-largest bank, beat profit estimates in its second quarter, driven by the release of provisions for credit losses.
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Revenue totaled C$12.8 billion in the third quarter, down from C$12.9 billion in the prior-year quarter. Analysts expected revenue of C$12.21 billion. (See RY stock charts on TipRanks)
Net income came in at C$4.3 billion (C$2.97 per diluted share) for Q3 2021, up 34% from Q3 2020 net income. On an adjusted basis, the Canadian bank earned C$3 per share. Analysts expected RBC to report an adjusted EPS of C$2.69 in the three months ended July 31.
One of the main reasons for the increased profit is that RBC released C$540 million in credit loss reserves during the quarter. These funds had previously been set aside to cover loans that were likely to default.
Profit from Personal & Commercial Banking amounted to C$2.11 billion in the quarter, up 55% from a year ago. Wealth Management profit increased 31% to C$738 million, while Capital Markets profit rose 19% to C$1.13 billion, thanks to record Corporate and Investment Banking revenue.
Royal Bank of Canada president and CEO Dave McKay said, “Guided by our Purpose, RBC continued to deliver on our commitment of providing long-term, sustainable value to our clients, communities and shareholders. Our diversified businesses and disciplined approach to risk and cost management underpinned our results, supported by the significant investments we’ve made in technology and talent to fuel our momentum and deliver differentiated value to those we serve.
“We remain cautiously optimistic about the macroeconomic outlook and focused on supporting clients and communities through the ongoing recovery.”
On August 25, Canaccord Genuity analyst Scott Chan maintained a Buy rating on RY and set a price target of C$140. This implies 4.7% upside potential.
The rest of the Street is cautiously optimistic on RY, with a Moderate Buy consensus rating, based on five Buys and two Holds. The average Royal Bank of Canada price target of C$139.28 implies 4.1% upside potential to current levels.
TipRanks’ Smart Score
RY scores a 7 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are likely to be in line with the overall market.
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