Profit rose 43 per cent at Royal Bank of Canada in the fourth quarter, as a strong performance at its Canadian operations helped offset a tough quarter in capital markets.
Canada’s largest bank made $1.6-billion, or 1.07 a share, compared to profit of $1.12-billion, or 74 cents a share, during the same quarter a year ago.
Revenue was $6.8-billion, up marginally from a year ago. Royal Bank made $1.11 a share excluding one-time items, which beat analysts’ expectations of about 96 cents per share.
Profit from continuing operations was $1.63-billion, an increase of 19 per cent over last year. Continuing operations do not include the U.S. retail bank and Liberty Life Insurance business RBC sold off this year.
The increased quarterly profit was “driven primarily by record earnings in Canadian Banking,” RBC chief executive officer Gord Nixon said in a statement.
The Canadian operations made $904-million in the quarter, up 18 per cent from a year ago as the bank reported volume growth in home equity loans, boosted its business deposits and set aside less money to cover bad loans.
However, RBC’s capital markets division reported a 25-per-cent drop in profit, down $95-million to $278-million. The drop was driven by “significantly lower” fixed income trading revenue and smaller trading volumes due to market uncertainty, including economic upheaval in Europe. Revenue in capital markets fell 18 per cent $1.22-billion.
“Deepening concerns over the weakening global economy and European sovereign debt issues resulted in high levels of client uncertainty, which negatively impacted fixed income trading primarily in the U.S. and Europe,” the bank said in a statement.
RBC’s wealth management business made $189-million in the quarter, up 8 per cent from last year, but was also hurt by lower transaction volumes.
RBC’s insurance business made $196-million, an increase of 58 per cent, due to higher sales in most of its products and lower claims in its auto and disability products.
The bank’s international division made $12-million, compared to a loss of $7-million a year ago, due to lower loan loss provisions at its Caribbean banking operations.
RBC is the third lender to beat Bay Street’s estimates this week, after Toronto-Dominion Bank and Canadian Imperial Bank of Commerce opened fourth-quarter earnings season with better-than-expected profits on Thursday.