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During the three months ended April 30, the capital markets arm of RBC reported a 15-per-cent jump in earnings to $668-million, while revenue for the group climbed 6 per cent to $2.1-billion.Brent Lewin/Bloomberg

Record-breaking fees from underwriting and advising on deals powered a sharp bump in profit at RBC Dominion Securities Inc. during the second quarter, offsetting lacklustre results in trading that have been widespread in the sector.

This tale splitting the two sides of the house at Royal Bank of Canada was echoed this week at the capital markets arms of Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, which also reported results Thursday, as well as at Bank of Montreal, which disclosed earnings on Wednesday.

During the three months ended April 30, the capital markets arm of RBC reported a 15-per-cent jump in earnings to $668-million, while revenue for the group climbed 6 per cent to $2.1-billion. Revenue from underwriting and advisory was a bright spot, surging 26 per cent to $590-million.

Recently, the bank has been gaining market share in investment banking across the United States and Britain. It has seen robust activity in both loan syndications and in its dealings with private-equity clients, Doug McGregor, group head of capital markets at RBC, said in an earnings call with analysts.

"The sponsors have been very, very active in the U.S., and our market share and our position with those clients continues to improve," Mr. McGregor said. "It's picking up momentum. Our brand is getting better. Our retention of people is good, and it feels pretty good."

However, the weak spot for the bank-owned dealer came in trading revenue, which fell to $898-million from $925-million during the same period last year. RBC said revenue from fixed-income trading was weaker in Canada and across Europe, as volatility in the market waned.

Muted trading activity weighed on the capital markets results of the four big Canadian banks that reported second-quarter earnings this week.

CIBC said its capital markets arm saw a $23-million, or 3-per-cent, dip in revenue from a year ago to $733-million. Revenue in the global-markets segment, specifically, fell 13 per cent to $407-million from a year ago, primarily because of lower revenue from interest rate and foreign exchange trading.

"All our business is client-flow driven," Kevin Glass, chief financial officer at CIBC, said in an interview. "With the lower volatility, there was just less client activity. Rates, commodities, FX – all of those trading businesses were down somewhat."

On the other hand, corporate and investment banking revenue at CIBC rose 10 per cent to $326-million, driven by higher investment portfolio gains in merchant banking, as well as higher revenue from U.S. real estate finance. These results were partially offset by lower equity underwriting activity, the bank said.

Not to be outdone, TD said earnings for its wholesale banking unit, which includes capital markets and corporate lending, increased 13 per cent to $248-million. Fees from underwriting and advisory work climbed to $147-million from $138-million.

Like the other big bank-owned dealers, TD saw its trading revenue dip to $425-million from $429-million, with pronounced weakness in fixed income. Equities trading, however, surged to $204-million from $94-million on higher client volumes.

TD also saw expenses rise in its investment banking division during the quarter as it beefed up its footprint in the United States, where it has been adding bankers in investment banking and debt capital markets and building out its electronic trading platform.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 4:00pm EDT.

SymbolName% changeLast
CM-N
Canadian Imperial Bank of Commerce
+0.73%49.6
CM-T
Canadian Imperial Bank of Commerce
+0.72%67.17
RY-T
Royal Bank of Canada
-0.22%134.34
RY-N
Royal Bank of Canada
-0.07%99.27
BMO-T
Bank of Montreal
+0.05%127.17
BMO-N
Bank of Montreal
+0.07%93.92
TD-T
Toronto-Dominion Bank
-1.4%80.23
TD-N
Toronto Dominion Bank
-1.33%59.26

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