Friday, February 17, 2006

RBC Centura Results Remain Stable

BMO Nesbitt Burns, 17 February 2006

Centura (Royal Bank’s U.S. regional banking operation) this morning posted its results to the FDIC website for the quarter ending December 2005. These results are included in the current fiscal first quarter for RY.

Broadly speaking, the results are slightly better than we expected, with the entire variation being lower than forecast loan losses. Specifically, the business made US$29mm in the quarter versus a run rate of about $21 mm in the first three quarters of the year. These results are not entirely transferable to RY as there are other non-deposit taking entities where there is no visibility. This is a small business (total RY earnings this quarter will be over $1 billion), but since the U.S. has been in problem in the past, investors do focus on the operating trends at Centura. Together with the strong domestic P&C and Wealth operations, we believe this result supports our view that Canadian banks will have a strong quarter in the upcoming weeks.