ROYAL BANK OF CANADA $71 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $99.4 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s second-largest bank, with $860.8 billion of assets.
Royal recently agreed to sell its 13 branches and related operations in Jamaica. The country’s struggling economy has hurt these branches’ profits in the past few years, so selling them frees up cash for Royal to invest in its more promising Caribbean business. The bank will record a one-time loss of $60 million on the deal.
Meanwhile, Royal earned $8.4 billion in its 2013 fiscal year, which ended October 31, 2013. That’s up 11.1% from $7.6 billion in 2012. Earnings per share rose 12.4%, to $5.54 from $4.93, on fewer shares outstanding.
Overall revenue gained 3.7%, to $30.9 billion from $29.8 billion. Revenue at Royal’s retail banking division (which supplies 42% of the total) rose 4.6%. That’s partly due to the bank’s $3.7-billion purchase of Ally Financial’s Canadian operations in February 2013. This business mainly provides car loans through over 1,600 dealerships. Higher loan demand and credit card transactions also added to the gain.
Revenue from Royal’s securities trading division (21% of the total) rose 6.3%, thanks to higher business loan demand and more corporate stock and bond issues.
Royal’s wealth management division (18%) saw its revenue rise 13.5%, as increasing stock prices pushed up the value of its assets under administration. However, investment losses cut insurance revenue (13%) by 19.8%. Revenue at the investor and treasury services division (6%) jumped 36.2%. That’s mainly because Royal purchased 50% of a joint venture that it didn’t already own.
The bank set aside $1.2 billion to cover bad loans in fiscal 2013, down 4.8% from $1.3 billion in 2012.
Thanks to its improving outlook, Royal has raised its dividend twice in the past year. The current annual rate of $2.68 a share yields 3.8%. The stock trades at 12.1 times Royal’s projected fiscal 2014 earnings of $5.89 a share.
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