Royal Bank of Canada reports net income of C$14.9bn for the year to end October, down 6% y-o-y. . This reflects an increase in total PCL of $2.0bn from a year ago. RBC adjusted net income of C$16.1bn for the fiscal is up slightly from the prior year.  The results beat analyst forecasts, boosted by corporate and investment banking revenue hitting a two year in the fourth quarter.

Pre-provision, pre-tax earnings of C$20.9bn are up 2% from last year. This mainly reflects higher net interest income driven by higher spreads and strong volume growth in Canadian Banking and higher loan growth in Wealth Management. Higher revenue in Capital Markets reflects higher revenue in Corporate & Investment Banking. Global Markets also contributes to the increase. These factors are partially offset by higher staff-related expenses (including severance) and professional fees. Ongoing technology investments and higher discretionary costs to support strong client-driven growth also contributes to higher expenses.

Dave McKay, CEO, RBC, said: “Our overall performance in 2023 exemplifies our standing as an all-weather bank. Our strong balance sheet, prudent risk management and diversified business model continue to underpin our ability to deliver differentiated client experiences and advice across all our businesses. As we enter 2024, RBC will work to provide the best client value as efficiently as possible, sharpening our focus to ensure our people and investments are aligned to build the bank of the future.”

RBC FY 2023 Personal & Commercial Banking highlights

The Personal & Commercial Banking unit reports earnings of C$$2.1bn, down 1%. Canadian Banking pre-provision pretax earnings are up 4% year-over-year. Canadian Banking net interest income is up 6% from last year due to higher spreads and solid volume growth of 7%. Noninterest income is up 2% year-over-year as higher client activity contributed to increased service revenue and credit fees.

The business unit benefits from average volume growth of 8% in deposits (with significant growth in term deposit products reflecting client preference for higher yields) and 7% in loans (with strong double-digit loan growth in business lending and credit cards) in Canadian Banking.

Approximately 650,000 net new clients were added in Canadian Banking in 2023, up more than 60% from last year.

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Wealth Management

24% lower earnings in Wealth Management are mainly attributable to higher staff costs and professional fees. This largely reflects continued investments in the operational infrastructure of City National. Adjusted net income is down by 19%. On the other hand, City National reports average loan growth of 12%.

23% earnings growth in Capital Markets is mainly due to lower taxes reflecting changes in earnings mix, higher revenue and market share gains.

RBC channel highlights

RBC ends fiscal 2023 with 1,247 branches, down a net 24 outlets in the past year. Active digital users rise by 7% to 9.02 million. The digital personal adoption rate is up by 130 basis points to 62.0%. Active mobile users rise by 12% y-o-y to 6.87 million. Mobile sessions rise by 19% y-o-y to 154 million.

RBC announced a $0.03 or 2% increase in its quarterly dividend, continuing its policy of increasing dividends every other quarter.

In an analyst call, McKay added: “We met all our medium-term objectives while investing to further strengthen our core businesses.

We ended the year with a strong CET1 ratio of 14.5%, nearly 200 basis points higher than last year. Furthermore, we generated an ROE of 14% this year. Or 16% when we consider the capital we are holding ahead of closing the proposed acquisition of HSBC Canada. We remain confident in our ability to continue meeting our medium-term objectives, including delivering a premium ROE of over 16%.”

RBC newcomer strategy

He reported record new RBC account acquisition this year. This includes RBC’s newcomer strategy, an important client acquisition funnel. Its partnership with ICICI Bank Canada attracted 30,000 new clients this year.

“These clients come with new deposits which provide a stable source of funding. They are also an important factor in clients consolidating their relationship with RBC at a rate that is 50% higher than average. We also remain focused on the proposed acquisition of HSBC Canada and are well positioned to meet these clients’ needs including through multicurrency accounts and trade finance.”

HSBC Canada deal update

On the deal process, McKay said: “We certainly feel very good about the overall process, and we have to respect the overall process in all steps. We have a strong approval from the Competition Bureau who recognises that there remains a very strong competition in the Canadian marketplace and in all the markets where HSBC operated. This provides enormous benefit to Canadians as far as increased taxes, increased dividends in the country is very significant. So we’re waiting for approval and we have to respect that process. But we feel good about the transaction.”