Royal Bank of Canada reports net income of C$16.2bn for the year ended 31 October 2024, up 11% from the prior year. The inclusion of HSBC Canada increases net income by C$453m. Adjusted net income is ahead by 10% year-on-year.
Less positive metrics include higher provisions on impaired loans, largely in commercial banking and personal banking. Specifically, the PCL on impaired loans ratio was 28 basis points, up 7 bps from the prior year.
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The forecast-beating numbers are however partially offset by higher expenses. There are driven by higher variable compensation on improved results and continued investments across the businesses.
Excluding HSBC Canada results, pre-provision, pre-tax earnings increase 7% from last year. This is mainly due to higher net interest income reflecting solid average volume growth and higher spreads in both personal banking and commercial banking.
Higher fee-based revenue in wealth management reflects market appreciation and net sales. Higher Corporate & Investment Banking revenue in Capital Markets, also contributes to the increase. The bank’s capital position remains robust with a CET1 ratio of 13.2% supporting solid volume growth.
Dividend +4%, share price +32% YTD
In addition, this year RBC returned C$8.1bn to its shareholders through common dividends and share buybacks. RBC declares a quarterly dividend of C$1.48 per share, up by 4%. The RBC share price is ahead by 32% for the year to date.
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By GlobalData“In 2024, RBC relentlessly pursued our ambition to stay ahead of evolving client expectations and create unparalleled value. As our results exemplify, our premium franchises delivered diversified revenue growth, underpinned by a strong balance sheet and prudent risk management. One of our year’s defining moments was the acquisition of HSBC Bank Canada, which marked a pivotal milestone in our client driven growth story and strengthened our position as a competitive global financial institution,” said CEO Dave McKay.
“We also elevated a new generation of leaders across the bank to continue delivering trusted advice and experiences to rival the best in any industry. As we enter 2025 from a position of strength, I’m fully confident in Team RBC’s ability to continue going above-and-beyond to support those we serve, each and every day,” added McKay.
RBC FY 2024 personal banking highlights
Earnings rise by 9% y-o-y in personal banking. The inclusion of HSBC Canada results increases net income by C$133m. Excluding HSBC Canada, net income increases C$370m million or 7%. This is primarily driven by higher net interest income reflecting higher spreads and average volume growth of 9% in deposits and 4% in loans in personal banking – Canada.
RBC also reports higher non-interest income. This includes higher distribution fees driven by higher average mutual fund balances and higher service charges. The numbers mainly reflect higher client activity. The prior year impact of HST on payment card clearing services also contribute to the increase. These factors are partially offset by higher PCL and higher non-interest expenses.
RBC FY 2024 Commercial Banking highlights
The business unit also posts 9% earnings growth. The inclusion of HSBC Canada results increases net income by C$219m. Excluding HSBC Canada results, net income increases by 1%. Commercial Banking posts strong volume growth (9% in deposits and 13% in loans and acceptances) across most products. RBC says this is due to its continued focus on growing its strategic client segments along with its ongoing sales enablement. ▪
RBC FY 2024 Wealth management highlights
Wealth management earnings are ahead by 27% y-o-y. This is primarily due to higher fee-based client assets reflecting market appreciation and net sales. On the other hand, this also drives higher variable compensation. Higher transactional revenue and lower PCL also contribute to the increase. Adjusted net income increases by 19%.Net new assets under administration in Canadian Wealth Management and US Wealth Management, including City National were C$11bn and C$9bn. Net flows for Global Asset Management assets under management are robust at C$26bn. This is mainly due to favourable market conditions and the expectation of reduced interest rates versus net redemptions in the prior year.
Other RBC FY 2024 highlights
The bank’s insurance unit posts earnings growth of 33%. This is mainly due to higher insurance investment results, largely attributable to lower capital funding costs and favourable investment-related experience as RBC repositions its portfolio for the transition to IFRS 17.
Capital Markets reports earnings growth of 10%. This is mainly due to higher revenue in Corporate & Investment Banking and lower PCL. In addition to the benefit of a recovering industry-wide fee pool, particularly in the US and Europe, RBC continued to advance its advisory capabilities and grew its market share across investment banking products.
RBC HSBC Canada acquisition: Expense synergies ahead of schedule
RBC reports that it is on track to deliver C$740m of targeted cost synergies. The bank realised C$224m of expense synergies in F2024, equating to 30% of its stated target. This is ahead of its goal of realising 25% of targeted synergies in F2024. On an annualised basis, run-rate savings of C$416m equates to around 55% of its stated target. RBC expects shared services, functions and IT cost synergies to be largely realised in Year 1 (March, 2025). It also expects distribution, product support and other direct cost synergies to be largely realised in fiscal 2025.
RBC FY2024 channel highlights
RBC ends fiscal 2024 with 9.85 million active digital users in Canada, ahead by 9% y-o-y. The bank’s digital personal adoption rate rises by 80 basis points to 62.8%. Active mobile banking users rise by 14% y-o-y to 7.8 million. The bank’s Canada-based branch network rises by a net 46 outlets to 1,189 reflecting the inclusion of HSBC Canada branches.
