RBC follows US banks in trading declines

Bloomberg

The debt-trading malaise that hurt US lenders last quarter has extended north of the border, though Royal Bank of Canada’s equities traders helped soften the blow.
The lender saw a 12 percent drop in trading revenue from fixed income, currencies and commodities in the three months through January, advancing the trend that affected US banks including JPMorgan Chase & Co. and Citigroup Inc. at the end of 2018. The decline was countered by a 47 percent surge in equities trading. Investment banking fees at Royal Bank’s RBC Capital Markets division were down 36 percent, contributing to lower earnings in that business.
Royal Bank, first of Can-ada’s largest lenders to post fiscal first-quarter results, showed the impacts of the slump in markets that ended 2018 and signs of eroding credit conditions. Still, earnings matched analysts’ expectations as home-lending grew.
“The diversity of our franchise really showed through in a quarter that had significant volatility, particularly in December,” CEO Dave McKay said on an earnings call. “Underlying all that is significant client momentum, market-share gains and great core activity that we’re able to earn through.”
The Toronto-based bank set aside C$514 million ($389 million) in provisions for credit losses in the quarter, up 54 percent from a year earlier and higher than the C$362 million analysts had expected. That was mainly due to an impaired loan with a US shopping-mall owner, and a soured loan from a US West Coast utility the bank didn’t identify, according to Chief Financial Officer Rod Bolger. Royal Bank is one of the lenders to PG&E Corp., the California utility owner that filed for bankruptcy protection, according to data compiled by Bloomberg.
“Credit quality remains quite strong,” Bolger said in a phone interview. “Even if there was a higher PCL, we are growing market share, we are deepening relationships and, even in uneven economic times, RBC is well-positioned to grow.”