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The beleaguered Los Angeles-based subsidiary of Royal Bank of Canada is showing early signs of a comeback.
City National Bank posted net income of $66 million between August and October, its strongest performance in six quarters.
While the bottom-line results were still below the bank’s average quarterly earnings between 2019 and 2022, before the bottom fell out last year, RBC CEO Dave McKay told analysts that there are opportunities to make City National more efficient.
The Canadian parent has been seeking to integrate the U.S. unit more deeply into the broader company, and it’s also been investing in the bank’s compliance capabilities. The company said in a report to shareholders that it will continue to focus on enhancing its risk management and compliance functions.
“We have to certainly build a better operational infrastructure. We’re well on our way to doing that,” McKay said Wednesday. “We’ve peaked in our expenses there.”
Meanwhile, analysts at Jefferies said the outlook for additional contributions from CIty National bodes well for RBC’s earnings growth next year.
RBC, which acquired City National in 2015, is trying to engineer a turnaround after
City National was hurt not only by higher deposit costs and large unrealized losses on securities, but also by
Overall, RBC posted net income of 4.22 billion Canadian dollars ($3 billion) in the fourth quarter, up from CA$3.94 billion in the year-ago period. Per share, earnings were CA$2.91, up from CA$2.76 a year ago. The results beat analysts’ expectations of earnings of CA$2.81 per share, according to S&P Capital IQ.
The bank said most of its units posted higher earnings, but lower results in its corporate support division weighed on the final number, while results in capital markets were relatively flat. The inclusion of HSBC Canada results boosted net income by CA$265 million, RBC said.
RBC’s revenue rose to CA$15.07 billion from CA$12.69 billion.
Provisions for credit losses rose 17% from a year ago to CA$120 million, mainly reflecting higher set-asides in commercial and personal banking. RBC said the provisions were “partially offset by releases of provisions in the current quarter in Wealth Management as compared to provisions taken in the prior year and lower provisions in Capital Markets.”
The Common Equity Tier 1 ratio was 13.2%, down from 14.5% a year ago but still above regulatory requirements, RBC said.
