25 May 2012

RBC Q2 2012 Earnings

Scotia Capital, 25 May 2012

• RY cash operating earnings from continuing operations were solid at $1.17 per share, in line with expectations.

• Cash operating earnings increased 5% YOY driven by strong wholesale banking, up 10% YOY, and resilient Canadian retail, up 7% excluding the prior year's gain related to the sale of Visa shares.

• Operating ROE: 19.0%, RRWA: 2.50%, CET1: 8.3% (IFRS phase in).


• Strong wholesale banking earnings were driven by solid investment banking and trading revenue. Fixed income trading revenue was solid with equity particularly strong.

• Canadian Banking earnings were resilient with loan growth of 7% YOY, while NIM declined 3 bps sequentially to 2.72%.


• Our 2012E and 2013E EPS estimates remain unchanged at $4.90 and $5.30 respectively. Our share price target remains unchanged at $68.

• We maintain our 1-Sector Outperform rating based on above industry group profitability and capital, as well as substantial earnings