TORONTO, Dec. 4, 2024 /CNW/ - Royal Bank of Canada¹¹ (TSX: RY) (NYSE: RY) today reported net income of $16.2 billion for the year ended October 31, 2024, up $1.6 billion or 11% from the prior year. Diluted EPS was $11.25, up 9% over the prior year reflecting growth across each of our business segments. The inclusion of HSBC Bank Canada (HSBC Canada) results¹² increased net income by $453 million. Adjusted net income⁷ and adjusted diluted EPS⁷ of $17.4 billion and $12.09 were up 10% and 8%, respectively, from the prior year. 

Our consolidated results include higher provisions on impaired loans, largely in Commercial Banking and Personal Banking. The PCL on impaired loans ratio¹³ was 28 bps, up 7 bps from the prior year. 

Pre-provision, pre-tax earnings⁷ of $23.1 billion were up 12% from last year. The inclusion of HSBC Canada results increased pre-provision, pre-tax earnings⁷ by $995 million. Excluding HSBC Canada results, pre-provision, pre-tax earnings⁷ increased 7% from last year, 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 reflecting market appreciation and net sales, and higher Corporate & Investment Banking revenue in Capital Markets, also contributed to the increase. These factors were partially offset by higher expenses driven by higher variable compensation on improved results and continued investments across our businesses.

Our capital position remained robust with a CET1 ratio⁶ of 13.2% supporting solid volume growth. In addition, this year we returned $8.1 billion to our shareholders through common dividends and share buybacks. Today, we declared a quarterly dividend of $1.48 per share reflecting an increase of $0.06 or 4%.

"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. 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."

– Dave McKay, President and Chief Executive Officer of Royal Bank of Canada

2024 Full-Year Business Segment Performance

• 9% earnings growth in Personal Banking. The inclusion of HSBC Canada results increased net income by $133 million. Excluding HSBC Canada results, net income increased $370 million or 7%, 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. Higher non-interest income, including higher distribution fees driven by higher average mutual fund balances, higher service charges, mainly reflecting higher client activity, and the prior year impact of HST on payment card clearing services also contributed to the increase. These factors were partially offset by higher PCL and higher non-interest expenses.
• 9% earnings growth in Commercial Banking. The inclusion of HSBC Canada results increased net income by $219 million. Excluding HSBC Canada results, net income increased $17 million or 1%, as growth in total revenue more than offset higher PCL and non-interest expenses. Commercial Banking achieved strong volume growth (9% in deposits and 13% in loans and acceptances) across most products due to our continued focus on growing our strategic client segments along with our ongoing sales enablement.
• 27% earnings growth in Wealth Management, primarily due to higher fee-based client assets reflecting market appreciation and net sales, which also drove higher variable compensation. Higher transactional revenue and lower PCL also contributed to the increase. Adjusted net income¹⁴ increased $552 million or 19%, as the prior year included the impact of the specified item relating to impairment losses on our interest in an associated company. Net new assets under administration in Canadian Wealth Management and U.S. Wealth Management (including City National Bank ("City National")) were $11 billion and $9 billion, respectively, reflecting the strength of our business driven by the quality of our advice, the breadth of our investment and holistic wealth planning solutions and clients' trust in our brand. Net flows for Global Asset Management assets under management were robust at $26 billion mainly due to favourable market conditions and the expectation of reduced interest rates versus net redemptions in the prior year.
• 33% earnings growth in Insurance, mainly due to higher insurance investment result, largely attributable to lower capital funding costs and favourable investment-related experience as we repositioned our portfolio for the transition to IFRS 17. Higher insurance service result, primarily due to business growth across the majority of our products, also contributed to the increase. The results in the prior period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.
• 10% earnings growth in Capital Markets, 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 U.S. and Europe, we continued to advance our advisory capabilities and grew our market share across investment banking products which underpinned strong performance. Trading activity, supported by strong client flow, remained robust during the year as the credit trading environment was mostly constructive while rates and foreign exchange trading saw a slight normalization compared to 2023 on lower market volatility. These factors were partially offset by higher taxes reflecting favourable tax adjustments in the prior year and higher compensation on increased results.

Q4 2024 Performance

Net income and diluted EPS of $4.2 billion and $2.91 were up 7% and 5%, respectively, from a year ago. Higher results in Wealth Management, Personal Banking, Commercial Banking and Insurance were partially offset by lower results in Corporate Support. Results in Capital Markets were relatively flat. The inclusion of HSBC Canada results increased net income by $265 million. The PCL on loans ratio of 35 bps was relatively flat year over year. Results also reflect a higher effective tax rate, as results in the prior year included the favourable impact of the specified item relating to certain deferred tax adjustments of $578 million. Adjusted net income¹⁴ and adjusted diluted EPS¹⁴ of $4.4 billion and $3.07 were up 18% and 16%, respectively, compared to the prior year.

Pre-provision, pre-tax earnings¹⁴ of $6.1 billion were up 31% from a year ago. The inclusion of HSBC Canada results increased pre-provision, pre-tax earnings¹⁴ by $437 million. Excluding HSBC Canada results, pre-provision, pre-tax earnings¹⁴ increased 21% from last year, mainly due to higher average fee-based client assets in Wealth Management and higher revenue in Capital Markets including record lending revenue. Higher net interest income in our Personal Banking and Commercial Banking franchises reflecting solid client-driven growth in volumes and higher spreads also contributed to the increase. These factors were partially offset by higher staff-related costs, including higher variable compensation and salaries.

Compared to last quarter, net income was down $264 million or 6% reflecting lower results in Capital Markets, Commercial Banking and Corporate Support, partially offset by higher results in Wealth Management. Adjusted net income¹⁴ was down 6% over the same period. Results this quarter reflected higher provisions for credit losses, with a PCL on loans ratio of 35 bps, up 8 bps from the prior quarter.

Our business segment performance below reflects the new basis of segment presentation effective the fourth quarter of 2024. For further information, refer to our 2024 Annual Report.

Q4 2024 Business and Reporting Segment Performance

Personal Banking 

Net income of $1,579 million increased $213 million or 16% from a year ago. The inclusion of HSBC Canada results increased net income by $86 million. Excluding HSBC Canada results, net income increased $127 million or 9%, 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. Higher non-interest income also contributed to the increase. These factors were partially offset by higher PCL and higher non-interest expenses.

Compared to last quarter, net income decreased $7 million, as higher net interest income reflecting higher spreads and average volume growth of 1% in Personal Banking – Canada was more than offset by higher PCL reflecting higher provisions on performing loans, largely driven by unfavourable changes in credit quality and higher non-interest expenses.

Commercial Banking 

Net income of $774 million increased $106 million or 16% from a year ago. The inclusion of HSBC Canada results increased net income by $139 million. Excluding HSBC Canada results, net income decreased $33 million or 5%, as growth in total revenue was more than offset by higher PCL and higher non-interest expenses.

Compared to last quarter, net income decreased $43 million or 5%, as growth in total revenue was more than offset by higher PCL.

Wealth Management

Net income of $969 million increased $697 million from a year ago, mainly due to higher fee-based client assets reflecting market appreciation and net sales, which also drove higher variable compensation. The prior year reflected the impact of the specified item relating to impairment losses on our interest in an associated company, as well as legal provisions. Lower PCL also contributed to the increase. Adjusted net income16 increased $520 million.

Compared to last quarter, net income increased $20 million or 2%, primarily due to higher fee-based client assets reflecting market appreciation and net sales, which also drove higher variable compensation.

Insurance

Net income of $162 million increased $65 million or 67% from last year, mainly due to higher insurance service result, primarily driven by business growth across the majority of our products, partially offset by less favourable claims experience primarily in disability products. The results in the prior period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.

Compared to last quarter, net income decreased $8 million or 5%, primarily due to lower insurance service result reflecting the impact of adjustments relating to deferred acquisition expenses and unfavourable annual actuarial assumption updates in the current quarter. These factors were partially offset by higher insurance investment result, primarily attributable to favourable investment-related experience.

Capital Markets

Net income of $985 million remained relatively flat from a year ago, as record fourth quarter revenue in Global Markets and Corporate & Investment Banking was more than offset by higher taxes reflecting favourable tax adjustments in the prior year and the impact of legal provisions in the current period.

Compared to last quarter, net income decreased $187 million or 16%, mainly due to the impact of legal provisions in the current period, lower fixed income trading in Europe and Canada, as well as the impact of elevated municipal banking activity in the prior quarter. These factors were partially offset by lower taxes reflecting changes in earnings mix.

Corporate Support

Net loss was $247 million in the current quarter, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $134 million, which is treated as a specified item. Residual and unallocated costs also contributed to the net loss.

Net loss was $208 million in the prior quarter, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $125 million, which is treated as a specified item. Unallocated costs also contributed to the net loss.

Net income was $549 million in the prior year, primarily due to a specified item relating to certain deferred tax adjustments of $578 million, and a favourable impact from tax-related items. These factors were partially offset by the after-tax impact of the HSBC Canada transaction and integration costs of $167 million, which is treated as a specified item.

Capital, Liquidity and Credit Quality

Capital – As at October 31, 2024, our CET1 ratio17 was 13.2%, down 130 bps from last year, primarily reflecting the impact of the HSBC Canada transaction and RWA growth (excluding FX), partially offset by net internal capital generation and share issuances under the dividend reinvestment plan (DRIP).

Liquidity – For the quarter ended October 31, 2024, the average LCR¹⁸ was 128%, which translates into a surplus of approximately $86 billion, compared to 126% and a surplus of approximately $81 billion in the prior quarter. Average LCR¹⁸ moderately increased compared to the prior quarter mainly due to an increase in retail and wholesale deposits, largely offset by a decline due to securities and securities financing transactions.

NSFR¹⁹ as at October 31, 2024 was 114%, which translates into a surplus of approximately $137 billion, compared to 114% and a surplus of approximately $136 billion in the prior quarter. NSFR¹⁹ remained relatively stable from the previous quarter as the increase in deposits and stable funding was offset by higher funding requirements for securities, securities financing transactions and loans.

Credit Quality

Q4 2024 vs. Q4 2023 

Total PCL increased $120 million or 17% from a year ago, mainly reflecting higher provisions in Commercial Banking and Personal Banking, partially offset by releases of provisions in the current quarter in Wealth Management as compared to provisions taken in the prior year and lower provisions in Capital Markets. The PCL on loans ratio increased 1 bp.

PCL on performing loans increased $14 million or 7%, mainly due to unfavourable changes in credit quality, partially offset by favourable changes to our macroeconomic forecast.

PCL on impaired loans increased $101 million or 19%, mainly due to higher provisions in Commercial Banking and Personal Banking, partially offset by lower provisions in Capital Markets and Wealth Management.

Q4 2024 vs. Q3 2024

Total PCL increased $181 million or 27% from last quarter, mainly reflecting higher provisions in Personal Banking and Commercial Banking. The PCL on loans ratio of 35 bps increased 8 bps. The PCL on impaired loans ratio of 26 bps remained unchanged.

PCL on performing loans increased $166 million, largely due to unfavourable changes in credit quality, partially offset by favourable changes to our macroeconomic forecast. Favourable changes to our scenario weights last quarter also contributed to the increase. 

PCL on impaired loans increased $17 million or 3%, mainly due to higher provisions in Commercial Banking, partially offset by lower provisions in Capital Markets.

Q4 2024 vs. Q4 2023

Net income increased $213 million or 16% from a year ago. The inclusion of HSBC Canada results increased net income by $86 million. Excluding HSBC Canada results, net income increased $127 million or 9%, primarily driven by higher net interest income reflecting higher spreads and average volume growth of 6% in Personal Banking - Canada. Higher non-interest income also contributed to the increase. These factors were partially offset by higher PCL and higher non-interest expenses. 

Total revenue increased $649 million or 16%, of which $274 million reflects the inclusion of HSBC Canada revenue. The remaining increase of $375 million or 9% was primarily due to higher net interest income, reflecting higher spreads and average volume growth of 9% in deposits and 4% in loans in Personal Banking - Canada. Higher average mutual fund balances driving higher distribution fees also contributed to the increase.

NIM was up 14 bps, mainly due to changes in product mix and the impact of the higher interest rate environment. The inclusion of HSBC Canada also contributed to the increase reflecting the accretion of fair value adjustments. These factors were partially offset by competitive pricing pressures.

PCL increased $109 million or 29%, mainly due to higher provisions on impaired loans largely in our Canadian personal and credit cards portfolios, resulting in an increase of 2 bps in the PCL on impaired loans ratio. Higher provisions on performing loans, mainly driven by unfavourable changes to our macroeconomic forecast, also contributed to the increase.

Non-interest expense increased $252 million or 14%, of which $154 million reflects the inclusion of HSBC Canada non-interest expense. The remaining increase of $98 million or 6% was primarily due to ongoing technology investments, increased operating expenses and staff-related costs, lease exit costs in the current quarter and higher marketing costs, largely associated with new client acquisition campaigns, and higher professional fees.

Q4 2024 vs. Q3 2024

Net income decreased $7 million from last quarter, as higher net interest income reflecting higher spreads and average volume growth of 1% in Personal Banking – Canada was more than offset by higher PCL reflecting higher provisions on performing loans, largely driven by unfavourable changes in credit quality and higher non-interest expenses, reflecting increased operating expenses.

NIM was up 4 bps, mainly due to changes in product mix and the impact of the higher long-term interest rate environment.  

Q4 2024 vs. Q4 2023

Net income increased $106 million or 16% from a year ago. The inclusion of HSBC Canada results increased net income by $139 million. Excluding HSBC Canada results, net income decreased $33 million or 5%, as growth in total revenue was more than offset by higher PCL and higher non-interest expenses.

Total revenue increased $512 million or 33%, of which $381 million reflects the inclusion of HSBC Canada revenue. The remaining increase of $131 million or 8% was primarily due to higher net interest income reflecting average volume growth of 8% in deposits and 12% in loans and acceptances, including the impact of the cessation of Bankers' Acceptance-based lending, which was largely offset in non-interest income, and higher spreads. These factors were partially offset by lower non-interest income, primarily in credit fees reflecting the impact of the cessation of Bankers' Acceptance-based lending, which was largely offset in net interest income as noted above.

PCL increased $221 million, mainly due to higher provisions on impaired loans in a few sectors, including the automotive and industrial products sectors, resulting in an increase of 33 bps in the PCL on impaired loans ratio. Higher provisions on performing loans, mainly driven by unfavourable changes in credit quality, also contributed to the increase.

Non-interest expense increased $151 million or 27%, of which $118 million reflects the inclusion of HSBC Canada non-interest expense. The remaining increase of $33 million or 6% was primarily attributable to higher staff-related costs.

Q4 2024 vs. Q3 2024

Net income decreased $43 million or 5% from last quarter, as growth in total revenue was more than offset by higher PCL. Total revenue included higher net interest income, reflecting the impact of the cessation of Bankers' Acceptance-based lending and continued volume growth across all client segments, partially offset by lower non-interest income, primarily in credit fees as noted above. Higher PCL reflected higher provisions on impaired loans in a few sectors, including the automotive and industrial products sectors, partially offset by lower provisions in the real estate and related sector.