Royal Bank, National Bank of Canada raise dividends, but miss earnings estimates

TORONTO, Dec 1 (Reuters) – Royal Bank of Canada (RY.TO) and National Bank of Canada (NA.TO) on Wednesday reported higher fourth-quarter profits and raised dividend payouts, but both banks’ earnings fell short of analysts’ estimates.

Royal Bank increased its quarterly dividend to C$1.20 a share, up from C$1.08, and National Bank said it would raise its dividend by 23% to 87 Canadian cents.

Both also announced share buybacks, with RBC saying it would repurchase up to 45 million common shares, representing about 3.2% of its outstanding shares. National Bank will buy back about 7 million shares, equivalent to about 2% of its outstanding shares.

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Adjusted earnings at Royal Bank, the country’s largest lender, climbed to C$2.71 a share, compared with C$2.27 a year earlier, but that was lower than analysts’ expectations of C$2.81.

Much of the improvement was driven by the release of about C$227 million ($178.14 million) of reserves the bank had set previously taken to cover bad loans. Excluding the impact of these provisions and taxes, Royal Bank’s earnings rose a more muted 4% from a year ago to C$4.76 billion.

“We do not believe that the results will be viewed as high quality,” Barclays Analyst John Aiken said in a note. “A dividend increase just in line with (Bank of Nova Scotia’s) yesterday may be viewed as disappointing. We would not be surprised to see pressure on RY’s shares today.” read more

Royal Bank’s Canadian banking business had loan growth of 9%, but while small business lending more than doubled from a year ago, other loans outside of mortgages pulled back.

Investors had been hoping for a recovery in lending, particularly in credit cards and commercial business that had been constrained both by lockdowns and high consumer savings during the pandemic. read more

At National Bank, the smallest of Canada’s Big Six banks, adjusted earnings rose 31% to C$2.21 a share, but that was lower than the C$2.24 analysts had expected. It released loan-loss reserves of C$41 million.

Excluding the impact of provisions and taxes, National Bank’s profit rose 8% from a year earlier.

The bank’s commercial loans rose 17.5% from a year ago, and credit cards grew almost 5%, compared with a 9.5% increase in home loans.

Both banks had a lacklustre performance in wealth management and capital markets earnings, which had helped to bolster results in previous quarters.

Both of these areas declined at Royal Bank from the prior quarter and year. National Bank’s wealth management earnings were flat from the previous quarter and capital markets slipped 8%.

In Canadian banking, margins fell at both banks, with Royal Bank’s down nine basis points from the previous quarter and National Bank’s declining five basis points.

Costs rose at both lenders, with Royal Bank posting non-interest expense growth of 8.7%, driven in part by a legal provision in its U.S. wealth management unit. National Bank had an increase of 10%. Both cited variable compensation as a factor in the higher costs.

($1 = 1.2743 Canadian dollars)

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Reporting by Nichola Saminather; Additional reporting by Mehnaz Yasmin and Sohini Podder;in Bengaluru; Editing by Louise Heavens, Chizu Nomiyama and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

source: reuters.com