Royal Bank of Canada Stock Gains as Higher Revenues Aid Q3 Earnings

Shares of Royal Bank of Canada RY gained 2.4% since the release of its third-quarter fiscal 2024 (ended July 31) results. Adjusted net income of C$4.73 billion ($3.45 billion) grew 18% from the prior-year quarter.

Results reflected the impacts of the specified item relating to the HSBC Canada deal and integration costs, and the amortization of acquisition-related intangibles. RY’s quarterly results were aided by higher revenues, and growth in loans and deposit balances. However, an increase in expenses and provisions were headwinds.

RY’s Revenues Improve & Expenses Rise

Total revenues were C$14.63 billion ($10.68 billion), up 13% year over year.

Net interest income (NII) was C$7.33 billion ($5.35 billion), growing 17% from the prior-year quarter. Non-interest income was C$7.30 billion ($5.33 billion), up 9% year over year.

Non-interest expenses were C$8.60 billion ($6.28 billion), up 11% from the prior-year quarter.

The company’s provision for credit losses was C$659 million ($481.2 million), up 7% year over year.

RY Reports Strong Balance Sheet Position

As of July 31, 2024, Royal Bank of Canada’s total loans were C$977.6 billion ($707 billion), up 1% from the prior quarter. Deposits totaled C$1.36 trillion ($0.98 trillion), rising 3% sequentially. Total assets were C$2.08 trillion ($1.50 trillion), up 2% from the previous quarter.

Royal Bank of Canada’s Capital Ratios Worsened

As of July 31, 2024, the company’s Tier 1 capital ratio was 14.5%, down from the prior-year quarter’s 15.4%. Total capital ratio was 16.3%, falling from 17.3% in the prior-year quarter.

The Common Equity Tier 1 ratio was 13%, down from 14.1% in the prior-year quarter.

Our View for RY Stock

Solid loan balances, high rates and a diversified product mix will likely keep driving Royal Bank of Canada’s financials. However, higher provisions on the tough economic outlook remain a near-term concern.

Currently, Royal Bank of Canada carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

Bank of Montreal’s BMO third-quarter fiscal 2024 (ended July 31) adjusted earnings per share of C$2.64 declined 10.2% year over year.

A significant jump in provision for credit losses and lower NII primarily hurt BMO’s results. However, an increase in non-interest income, higher loans and deposit balances, and lower expenses acted as tailwinds.

Toronto-Dominion Bank TD reported a third-quarter fiscal 2024 (ended July 31) net loss (GAAP basis) of C$181 million ($132.2 million) against net income of $2.88 billion in the prior-year quarter.

The loss resulted from provisions for the penalties related to investigations concerning its anti-money laundering practices by the U.S. regulators.

Huge increases in provision for credit losses and expenses acted as undermining factors for TD. Nevertheless, growth in NII and non-interest income, and higher loan balance lent much-needed support to TD’s quarterly performance.

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