Royal Bank of Canada earnings beat expectations

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Royal Bank of Canada third-quarter earnings came in above analysts’ expectations, powered by its personal and commercial banking, capital markets and wealth management divisions.

The Toronto-based bank reported net income of 4.49 billion Canadian dollars, or CA$3.09 a share, in the three months ended July 31, up from CA$3.86 billion, or CA$2.73 a share, in the year-ago period. Analysts polled by S&P Capital IQ were expecting CA$2.80 a share.

Adjusted earnings were CA$3.26 a share, beating analysts’ average expectations of CA$2.95 a share.

Most of RBC’s business segments posted higher net income, with the exceptions of insurance, where earnings fell 21% from a year ago due to a decline in investment results, and corporate support, which posted a loss due to the CA$125 million after-tax impact of the HSBC Canada acquisition early this year.

Provisions for credit losses rose 7% from a year ago to CA$659 million, a smaller rise than either Bank of Nova Scotia or BMO Financial Group posted for the same period.

Revenue rose about 13% to CA$14.63 billion, above the analysts’ average forecast of CA$14.37 billion.

“Combined with our recently announced changes to the executive leadership team and business segments, RBC is better positioned than ever to accelerate our next phase of growth,” President and CEO Dave McKay said.

In July, the CA$2.08 billion-asset bank shuffled its executives, giving new roles to five top executives, and said it would split personal and commercial banking into two business segments.

RBC is confident it can turn around City National, but not right away

RBC has also been trying to engineer a turnaround of its Los Angeles-based banking subsidiary, City National Bank, which lost $285 million over a six-month period last year amid higher deposit costs, larger provisions for credit losses and unrealized securities losses.

RBC executives have vowed to cut City National’s costs substantially. In May, CEO Dave McKay raised the possibility that the Canadian bank might sell off “non-core” part of City National, and he established an 18-month timeline for achieving a return on assets at City National that is comparable to those of peer banks.