Royal Bank of Canada's profit soared to new heights in the third quarter as the bank reported record earnings of $2.3-billion.
It is the second time this year that RBC has posted a profit of more then $2-billion.
RBC's net income amounted to $1.52 per share, handily beating analyst expectations of $1.37.
While the quarterly profit is a rise of just 3 per cent from the same period in 2012, last year's earnings were very strong. Taking a longer-term view, the bank's profits for the first three quarters of 2013 climbed 12 per cent from the same time frame last year.
RBC raised its quarterly dividend Thursday by 4 cents to 67 cents, a 6-per-cent jump. While the hike was widely expected, chief executive officer Gord Nixon said on a conference call that such a substantial raise "reflects the confidence we have in our ability to continue to generate solid earnings growth and successfully execute on our disciplined growth strategy by leveraging our strengths, scale and strong capital position."
Both personal and commercial bank and wealth management reported record earnings this quarter.
RBC's personal and commercial banking profit of $1.18-billion came in 7-per-cent higher than the previous year, and after adjusting for a mortgage prepayment in the same quarter in 2012, the earnings jumped 17 per cent.
However, part of that growth comes from RBC's acquisition of Ally Canada. The bank was also aided by an 18-per-cent drop in loan loss provisions, a non-cash benefit.
Wealth management's profit jumped to $236-million, as RBC benefited from stronger fund sales and higher account values, which boosted its fee-based earnings.
Both capital markets and insurance suffered last quarter. Weaker investment banking activity and tough fixed-income markets brought capital markets' profit down by 10 per cent from 2012, and the insurance unit took a hit on claims from flood damage in Alberta and the Greater Toronto Area.
Despite fears of a Canadian banking slowdown because of high household debt levels, RBC posted a quarterly profit of more than $2-billion in the first quarter, and coming close to that again in the second.
While the bank earns just over half of its revenues from Canadian retail and commercial banking, where loan growth is slowing, it has substantial wealth management and capital markets arms in the U.S. and Europe. That can help offset weakness in the Canadian lending environment.
RBC's investment bank has hired bankers and analysts from major U.S. rivals, giving the lender more clout in that market, and has been diversifying its wealth management business with acquisitions that include London-based BlueBay Asset Mangement in 2010.
However, such diversity can also expose the banks to more risks. RBC posted healthy fixed-income profits in the second quarter, though Mark Standish, co-CEO of the capital markets arm, said Europe's results dragged on the unit. "We basically didn't make any money" in Europe, he said on a conference call.
Just over a month later, RBC closed its European government bond trading desk.
While RBC is pleased with its organic growth, the bank is still open to acquisitions – namely in wealth management. However, Mr. Nixon said RBC will be "extremely disciplined" on this front because it is hard to make new deals meet the double-digit return thresholds that RBC currently realizes across the bank.