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Royal Bank of Canada posts record profit and raises dividend

Royal Bank of Canada (RY.TO), the country’s second- largest lender by assets, said earnings climbed 17 percent to a record on domestic lending and investment banking, surpassing analysts’ estimates. National Bank of Canada also posted profit that topped estimates.

Royal Bank’s net income for the fiscal first quarter ended Jan. 31 rose to $2.46 billion ($1.97 billion US), or $1.65 a share, from $2.09 billion, or $1.38, a year earlier, the Toronto-based bank said Wednesday in a statement. Adjusted profit, which excludes some items, was $1.67 a share, beating the $1.58 average estimate of 14 analysts surveyed by Bloomberg.

“Royal posted exceptionally strong results today, which should be well rewarded,” John Aiken, an analyst with Barclays Plc, said in a note to clients. “It is hard to argue that there was any surprising weakness in the underlying results.”

The company raised its dividend 2.7 percent to 77 cents a share. Royal Bank posted record profit in personal and commercial banking, and had higher earnings from its investment banking and insurance businesses. Restructuring costs hampered earnings in wealth management, a business Royal Bank is expanding with a $5.4 billion agreement last month to buy Los Angeles-based City National Corp.

Royal Bank shares have fallen 6.5 percent this year, more than the 5.3 percent decline by the eight-company Standard & Poor’s/TSX Banks Index.

NAVIGATING HEADWINDS

“We are confident that our diversified business model, with our strong risk and cost management capabilities, positions us well to navigate macroeconomic headwinds in Canada,” Chief Executive Officer David McKay, 51, said in the statement.

Revenue rose 14 percent to $9.64 billion from a year earlier, Royal Bank said. The lender set aside $270 million for bad loans, down from $292 million a year earlier.

Personal and commercial banking profit rose 17 percent to $1.26 billion, with Canadian lending increasing 7 percent. Banking operations in the U.S. and Caribbean, which underwent a reorganization in the past two years, added $35 million of profit, the company said.

Capital markets earnings surged 18 percent to $594 million on higher trading revenue and investment-banking fees from advising on takeovers. Underwriting and advisory fees rose 11 percent to $445 million, while total trading revenue jumped 19 percent to $880 million, led by equities.

WEALTH FALLS

Wealth-management profit fell 2.1 percent to $230 million, after recording $27 million in restructuring costs for its U.S. and international operations, while insurance earnings rose 18 percent to $185 million. Royal Bank said in November it’s exiting Caribbean wealth management, closing some international advisory and private-banking groups in Canada and the U.S., and reviewing its Swiss operations. Investor and treasury services, which includes Royal Bank’s global custodial business, gained 34 percent to a record $142 million.

National Bank, the country’s sixth-largest lender, said it posted a 2.5 percent increase in profit, led by higher earnings in its financial-markets unit. Net income for the Montreal-based lender was $415 million, or $1.16 a share, up from $405 million, or $1.15, a year earlier. Adjusted earnings were $1.14 a share, beating the $1.12-a-share estimate of 12 analysts.

Bank of Montreal, the No. 4 lender in Canada, posted a 5.7 percent profit decline on Tuesday, missing estimates.

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