Royal Bank of Canada reported a 15 per cent increase in fourth-quarter net income to $3.25 billion, surpassing analyst expectations to mark a new record annual profit of $12.4 billion. File photo by THE CANADIAN PRESS

Royal Bank Q4 net income up 15 per cent to hit record $12.4B net income for 2017

TORONTO — Royal Bank of Canada reported a 15 per cent increase in fourth-quarter net income to $3.25 billion, surpassing analyst expectations to mark a new record annual profit of $12.4 billion.

The Toronto-based bank’s results for the three-month period ended Oct. 31 were driven by strong performances in its personal and commercial banking, capital markets, wealth management and insurance.

“Our diversified business and geographic mix delivered good revenue growth, while we prudently managed risk and delivered a premium return on equity,” Dave McKay, RBC president and CEO, said in a statement.

“Looking ahead, we remain focused on investing in our people and technology, and offering more personalized insights and connectivity to deliver more value for both our clients and shareholders.”

The bank’s profit for its fourth quarter amounted to $2.20 per diluted share, up from $1.88 per share a year ago.

On an adjusted cash basis, the bank says it earned $2.24 per share, up from $1.92 in the same period in 2017. Analysts on average had expected earnings per share of $2.12, according to Thomson Reuters Eikon.

During the quarter, the bank’s personal and commercial banking division delivered net income of $1.54 billion, up 10 per cent from a year ago “largely reflecting improved deposit spreads from higher Canadian interest rates.” RBC also saw five per cent average volume growth in Canadian banking, driven by growth in residential mortgages, commercial lending and deposit products.

The bank’s net income from its capital markets arm increased 14 per cent to $666 million, largely due to a lower effective tax rate after under U.S. President Donald Trump’s tax reforms.

RBC’s wealth management division saw a 13 per cent increase in net income to $553 million, while RBC’s insurance division reported a 20 per cent year-over-year increase in net income to $318 million.

However, the bank’s investor and treasury services department’s net income of $155 million was relatively flat compared with a year ago.

Provisions for credit losses, or money set aside for bad loans during the quarter, was $353 million, up from $234 million during RBC’s fourth quarter in 2017.

For its full financial year, Canada’s biggest lender by market capitalization reported net income of $12.4 billion up roughly eight per cent from $11.5 billion in 2017.

That amounted to $8.36 diluted earnings per share on an annual basis, compared to $7.56 for the 2017 financial year.

During the 12 month period ended Oct. 31, RBC’s personal and commercial banking arm saw five per cent growth to $6.03 billion. Its wealth management division, which includes Los Angeles-based bank City National, was also a bright spot for the bank with 23 per cent earnings growth to $2.27 billion for the 2018 financial year.

Its key measure of financial health, called the common equity tier 1 ratio (CET1), was 11.5 per cent, up from 10.9 a year ago and 11.1 in the previous quarter.

Companies in this story: (TSX:RY)

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