All amounts are in Canadian dollars and are based on financial statements presented in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Effective November 1, 2023, we adopted IFRS 17 Insurance Contracts (IFRS 17). Comparative amounts have been restated from those previously presented. Our Q3 2024 Report to Shareholders and Supplementary Financial Information are available at http://www.rbc.com/investorrelations and on https://www.sedarplus.com/.
Net income$4.5 BillionUp 16% YoY
Diluted EPS1$3.09Up 13% YoY
Total PCL2$659 MillionPCL on loans ratio3down 14 bps4 QoQ
ROE515.5%Up 60 bps YoY
CET1 ratio613.0%Above regulatory requirements
Adjusted net income7$4.7 BillionUp 18% YoY
Adjusted diluted EPS7$3.26Up 15% YoY
Total PCL8$659 MillionPCL on loans ratio9down 14 bps4 QoQ
Adjusted ROE716.4%Up 100 bps YoY
LCR10126%Down from 128% last quarter
TORONTO, Aug. 28, 2024 /CNW/ - Royal Bank of Canada11 (RY on TSX and NYSE) today reported net income of $4.5 billion for the quarter ended July 31, 2024, up $626 million or 16% from the prior year. Diluted EPS was $3.09, up 13% over the same period. Higher results in Personal & Commercial Banking, Capital Markets and Wealth Management were partially offset by lower results in Corporate Support and Insurance. The inclusion of HSBC Bank Canada (HSBC Canada) results12 increased net income by $239 million. Adjusted net income7 and adjusted diluted EPS7 of $4.7 billion and $3.26 were up 18% and 15%, respectively, from the prior year.
Results also reflected the impact of the specified item relating to HSBC Canada transaction and integration costs (Q3 2024: $160 million before-tax and $125 million after-tax; Q3 2023: $110 million before-tax and $84 million after-tax) and amortization of acquisition-related intangibles (Q3 2024: $154 million before-tax and $116 million after-tax; Q3 2023: $81 million before-tax and $61 million after-tax).
Pre-provision, pre-tax earnings7 of $6.0 billion were up $820 million or 16% from last year. The inclusion of HSBC Canada results increased pre-provision, pre-tax earnings7 by $412 million. Excluding HSBC Canada results, pre-provision, pre-tax earnings7 increased 8% from last year, mainly due to higher net interest income reflecting higher spreads and solid average volume growth in Canadian Banking. Higher fee-based revenue in Wealth Management reflecting market appreciation and net sales, as well as higher Corporate & Investment Banking revenue in Capital Markets, also contributed to the increase. These factors were partially offset by higher expenses driven by higher variable compensation on improved results and continued investments in our franchises.
Compared to last quarter, net income was up 14% reflecting higher results in Personal & Commercial Banking, Corporate Support and Wealth Management, partially offset by lower results in Capital Markets. Adjusted net income7 was up 13% over the same period. Pre-provision, pre-tax earnings7 were up 3% as higher revenue more than offset expense growth. The PCL on loans ratio of 27 bps decreased 14 bps from the prior quarter mainly reflecting the prior quarter's 9 bps impact of initial PCL on performing loans purchased in the HSBC Canada transaction. The PCL on impaired loans ratio13 was 26 bps, down 4 bps from the prior quarter.
Our capital position remained robust, with a CET1 ratio6 of 13.0%, up 20 bps from the prior quarter. On June 10, 2024, we announced that the Toronto Stock Exchange and the Office of the Superintendent of Financial Institutions had approved our normal course issuer bid to purchase, for cancellation, up to 30 million of our common shares. In Q3 2024, we repurchased 0.5 million shares for $73 million.
"Our Q3 results demonstrate that RBC continues to operate from a position of strategic and financial strength with solid revenue growth and momentum underpinned by a strong balance sheet, robust capital position and prudent risk management. 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 and deliver long-term value to clients, communities and shareholders."
– Dave McKay, President and Chief Executive Officer of Royal Bank of Canada
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1 Earnings per share (EPS).
2 Provision for credit losses (PCL).
3 PCL on loans ratio is calculated as PCL on loans as a percentage of average net loans and acceptances.
4 Basis points (bps).
5 Return on equity (ROE) is calculated as net income available to common shareholders divided by average common equity. For further information, refer to the Key performance and non-GAAP measures section on pages 4 to 5 of this Earnings Release.
6 This ratio is calculated by dividing Common Equity Tier 1 (CET1) by risk-weighted assets (RWA), in accordance with Office of the Superintendent of Financial Institutions' (OSFI) Basel III Capital Adequacy Requirements (CAR) guideline.
7 These are non-GAAP measures. For further information, including a reconciliation, refer to the Key performance and non-GAAP measures section on pages 4 to 5 of this Earnings Release.
8 Allowance for credit losses (ACL).
9 ACL on loans ratio is calculated as ACL on loans as a percentage of total loans and acceptances.
10 The liquidity coverage ratio (LCR) is calculated in accordance with OSFI's Liquidity Adequacy Requirements (LAR) guideline. For further details, refer to the Liquidity and funding risk section of our Q3 2024 Report to Shareholders.
11 When we say "we", "us", "our", "the bank" or "RBC", we mean Royal Bank of Canada and its subsidiaries, as applicable.
12 On March 28, 2024, we completed the acquisition of HSBC Canada (HSBC Canada transaction). HSBC Canada results reflect revenue, PCL, non-interest expenses and income taxes associated with the acquired operations and clients, which include the acquired assets, assumed liabilities and employees with the exception of assets and liabilities relating to treasury and liquidity management activities. For further details, refer to the Key corporate events section of our Q3 2024 Report to Shareholders.
13 PCL on impaired loans ratio is calculated as PCL on impaired loans as a percentage of average net loans and acceptances.
Q3 2024
Reported:
Adjusted15:
Compared to
• Net income of $4,486 million
↑ 16%
• Net income of $4,727 million
↑ 18%
Q3 2023
• Diluted EPS of $3.09
↑ 13%
• Diluted EPS of $3.26
↑ 15%
• ROE of 15.5%
↑ 60 bps
• ROE of 16.4%
↑ 100 bps
• CET1 ratio14 of 13.0%
↓ 110 bps
Q3 2024
• Net income of $4,486 million
↑ 14%
• Net income of $4,727 million
↑ 13%
Compared to
• Diluted EPS of $3.09
↑ 13%
• Diluted EPS of $3.26
↑ 12%
Q2 2024
• ROE of 15.5%
↑ 100 bps
• ROE of 16.4%
↑ 90 bps
• CET1 ratio14 of 13.0%
↑ 20 bps
YTD 2024
• Net income of $12,018 million
↑ 13%
• Net income of $12,991 million
↑ 8%
Compared to
• Diluted EPS of $8.34
↑ 10%
• Diluted EPS of $9.03
↑ 6%
YTD 2023
• ROE of 14.4%
↑ 30 bps
• ROE of 15.6%
↓ 40 bps
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14 This ratio is calculated by dividing CET1 by RWA, in accordance with OSFI's Basel III CAR guideline.
15 These are non-GAAP measures. For further information, including a reconciliation, refer to the Key performance and non-GAAP measures section on pages 4 to 5 of this Earnings Release.
Net income of $2,490 million increased $356 million or 17% from a year ago. The inclusion of HSBC Canada results increased net income by $198 million. Excluding HSBC Canada results, net income increased $158 million or 7%, primarily driven by higher net interest income reflecting higher spreads and average volume growth of 10% in deposits and 6% in loans in Canadian Banking, partially offset by higher PCL.
Compared to last quarter, net income increased $439 million or 21%. The inclusion of HSBC Canada results increased net income by $259 million, as the current quarter includes a full quarter of net income and the prior quarter reflected the initial PCL on the performing loans purchased in the HSBC Canada transaction. Excluding HSBC Canada results, net income increased $180 million or 9%, primarily driven by higher net interest income reflecting average volume growth of 2% in Canadian Banking, the impact of two more days in the current quarter and higher spreads in Canadian Banking. These factors were partially offset by higher staff-related costs.
Net income of $862 million increased $199 million or 30% from a year ago, mainly due to higher fee-based client assets reflecting market appreciation and net sales, which also drove higher variable compensation. Higher transactional revenue and lower PCL also contributed to the increase. The prior year also included the gain on the sale of RBC Investor Services operations.
Compared to last quarter, net income increased $93 million or 12%, primarily due to higher fee-based client assets reflecting market appreciation, which also drove higher variable compensation.
Net income of $170 million decreased $45 million or 21% from a year ago, largely due to lower insurance investment result from lower favourable investment-related experience, partially offset by lower capital funding costs. This was partially offset by higher insurance service result, largely attributable to improved claims experience in life retrocession and business growth across the majority of our products. The results in the prior period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.
Compared to last quarter, net income decreased $7 million or 4%, largely due to lower insurance investment result from lower favourable investment-related experience. This factor was largely offset by higher insurance service result, mainly due to business growth across the majority of our products.
Net income of $1,172 million increased $223 million or 23% from a year ago, primarily driven by higher revenue in Corporate & Investment Banking, primarily due to higher municipal banking activity, higher loan syndication activity in the U.S., higher debt origination in North America and the impact of foreign exchange translation. Lower PCL also contributed to the increase. These factors were partially offset by higher taxes reflecting changes in earnings mix and higher compensation on increased results.
Compared to last quarter, net income decreased $90 million or 7% from record levels, mainly due to lower M&A activity in the U.S., partially offset by lower PCL on impaired loans in a few sectors.
Net loss was $208 million for the current quarter, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $125 million, which is treated as a specified item. Unallocated costs also contributed to the net loss.
Net loss was $309 million in the prior quarter, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $282 million, partially offset by the after-tax impact of management of closing capital volatility related to the HSBC Canada transaction of $112 million, both of which are treated as specified items. Unallocated costs also contributed to the net loss.
Net loss was $101 million in the prior year, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $84 million, which is treated as a specified item.
Capital – As at July 31, 2024, our CET1 ratio16 was 13.0%, up 20 bps from last quarter, mainly reflecting net internal capital generation, partially offset by RWA growth (excluding FX).
Liquidity – For the quarter ended July 31, 2024, the average LCR17 was 126%, which translates into a surplus of approximately $81 billion, compared to 128% and a surplus of approximately $83 billion in the prior quarter. Average LCR17 remained relatively stable from the prior quarter reflecting loan growth and an increase in on-balance sheet securities, largely offset by growth in retail deposits.
The Net Stable Funding Ratio18 (NSFR) as at July 31, 2024 was 114%, which translates into a surplus of approximately $136 billion, compared to 111% and a surplus of approximately $105 billion in the prior quarter. NSFR increased compared to the previous quarter, mainly due to higher available stable funding driven by an increase in the weighted value of retail deposits and wholesale funding.
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16 This ratio is calculated by dividing CET1 by RWA, in accordance with OSFI's Basel III CAR guideline.
17 The LCR is calculated in accordance with OSFI's LAR guideline. For further details, refer to the Liquidity and funding risk section of our Q3 2024 Report to Shareholders.
18 The NSFR is calculated in accordance with OSFI's LAR guideline. For further details, refer to the Liquidity and funding risk section of our Q3 2024 Report to Shareholders.
Credit Quality
Q3 2024 vs. Q3 2023
Total PCL of $659 million increased $43 million or 7% from a year ago, mainly reflecting higher provisions in Personal & Commercial Banking, partially offset by lower provisions in Capital Markets and Wealth Management. The PCL on loans ratio of 27 bps decreased 2 bps. The PCL on impaired loans ratio of 26 bps increased 3 bps.
PCL on performing loans of $42 million decreased $78 million or 65%, mainly due to favourable changes to our scenario weights, partially offset by unfavourable changes to our macroeconomic forecast and credit quality.
PCL on impaired loans of $623 million increased $124 million or 25%, mainly due to higher provisions in our Canadian Banking portfolios, partially offset by lower provisions in Capital Markets.
Q3 2024 vs. Q2 2024
Total PCL decreased $261 million or 28% from last quarter, primarily reflecting lower provisions in Personal & Commercial Banking and Capital Markets. The PCL on loans ratio decreased 14 bps. The PCL on impaired loans ratio decreased 4 bps.
PCL on performing loans decreased $202 million or 83%, mainly reflecting higher provisions in the prior quarter driven by the initial PCL on performing loans purchased in the HSBC Canada transaction.
PCL on impaired loans decreased $49 million or 7%, mainly due to lower provisions in Capital Markets and Wealth Management, partially offset by higher provisions in our Canadian Banking commercial portfolio in a few sectors, including the real estate and related sector.
Performance measures
We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions.
Non-GAAP measures
We believe that certain non-GAAP measures (including non-GAAP ratios) are more reflective of our ongoing operating results and provide readers with a better understanding of management's perspective on our performance. These measures enhance the comparability of our financial performance for the three and nine months ended July 31, 2024 with the corresponding periods in the prior year and the three months ended April 30, 2024. Non-GAAP measures do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.
The following discussion describes the non-GAAP measures we use in evaluating our operating results.
Pre-provision, pre-tax earnings
We use pre-provision, pre-tax earnings to assess our ability to generate sustained earnings growth outside of credit losses, which are impacted by the cyclical ...
