By Nivedita Balu, Arasu Kannagi Basil
(Reuters) -Royal Bank of Canada, the country’s top bank by market value, reported fourth-quarter profit above analyst expectations helped by its acquisition of HSBC’s domestic business this year and strength at its wealth management division.
National Bank, the smallest of Canada’s six large banks which together control over 90% of the domestic market, also reported earnings above estimates helped by a rise in income at its wealth management arm.
The wealth management business has been a big focus for Canadian banks as more high-net-worth clients and others are increasingly opting for services and advice to secure their financial future.
RBC’s wealth management division, which includes U.S. subsidiary City National, was a bright spot with net income rising more than threefold to C$969 million and recording a recovery loan loss provisions of C$25 million, largely helped by higher fees and as it recovers from impaired losses from a year ago.
At National Bank, the unit’s adjusted earnings rose 17% to C$219 million also benefiting from higher fees and a rise in stock markets.
The $10 billion acquisition of HSBC’s Canadian operation helped RBC grow its retail business, adding about 780,000 clients to its retail and commercial business and expanding its mortgage and corporate loan books.
Jefferies analyst John Aiken noted that RBC’s “bigger than anticipated” quarterly dividend increase of 6 Canadian cents, or a 4% increase to C$1.48 per share, signaled its confidence in the integration of HSBC Canada.
RBC also rejigged its leadership earlier this year and made changes to its business segments as the lender positions itself for the next phase of growth while absorbing HSBC’s domestic operations.
Still, RBC set aside more funds than expected for possible souring loans in the fourth quarter, highlighting the strain on consumers who are struggling to pay their mortgages and credit card bills despite a series of central bank rate cuts.
Provision for credit losses came in at C$840 million ($597.27 million) in the three months ended October 31, compared with C$720 million a year ago. Analysts had forecast C$831.7 million, according to LSEG data.
The bank’s adjusted net income rose 17.7% to C$4.44 billion. On a per share basis, RBC earned C$3.07, 6 Canadian cents higher than the analysts’ average estimate.
National Bank reported adjusted earnings of C$2.58 per share, a cent more than expectations.
($1 = 1.4064 Canadian dollars)