ROYAL BANK OF CANADA $53(Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion.
In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009.
The fiscal 2010 earnings figure includes a $116-million loss on the sale of one of the bank’s main holdings, U.S.-based Liberty Life Insurance Co. Without unusual items, such as the loss on Liberty Life, Royal would have earned $5.3 billion, up 9.9% from $4.9 billion a year earlier.
The bank continues to set aside less money to cover bad loans. Loan-loss provisions fell 45.5% in 2010, to $1.9 billion from $3.4 billion a year earlier. However, overall revenue fell 2.7%, to $28.3 billion from $29.1 billion. Lower revenue from its capitalmarkets division (down 15.0%) and international operations (down 13.7%) offset gains at Royal’s Canadian retail banking (up 6.7%), insurance (up 6.7%) and wealth management (up 2.6%) divisions.
Royal is using its rising earnings to expand overseas. Right now, it gets about a third of its revenue from outside Canada.
In December 2010, it paid $1.6 billion for U.K.-based BlueBay Asset Management plc, which manages bonds and other fixed-income securities for large institutional investors and wealthy individuals.
BlueBay’s strong reputation will help Royal expand its European wealth-management business. As well, Royal will be able to sell BlueBay’s services to its growing number of wealth-management clients in the U.S.
Royal will probably earn $4.28 a share in fiscal 2011. The stock trades at 12.4 times that estimate.
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