ROYAL BANK OF CANADA $79 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $110.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s second-largest bank, with $895.9 billion of assets.
Royal recently completed the sale of its moneylosing Jamaican operations, which included 13 branches. The bank will record a one-time loss of $97 million on the deal, up from its earlier estimate of a $60-million loss.
Meanwhile, Royal earned $2.2 billion in the quarter ended April 30, 2014, up 15.3% from $1.9 billion a year ago. Per-share earnings rose 17.6%, to $1.47 from $1.25, on fewer shares outstanding.
Overall revenue gained 7.2%, to $8.3 billion from $7.7 billion. Revenue at Royal’s retail banking division (which supplied 40% of the total) gained 5.1%, thanks to stronger loan demand in Canada. The lower Canadian dollar also improved the results of its U.S. and Caribbean operations.
Revenue from securities trading (22%) jumped 19.8% on higher trading volumes. This business also benefited from increased merger and acquisition activity in the U.S. and Asia.
The bank’s wealth management division (19%) saw its revenue rise 15.5%, mainly because increasing stock prices pushed up the value of its assets under administration.
Insurance revenue (13%) fell 9.7%, due to losses on the division’s investment portfolio. The investor and treasury services business’s revenue (6%) rose 5.3%, mainly due to the positive impact of foreign exchange rates.
The bank’s loan-loss provisions fell 15.0% in the latest quarter, to $244 million from $287 million.
The stock trades at 13.2 times the bank’s likely 2014 earnings of $5.98 a share. The $2.84 dividend yields 3.6%.
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