RBC trading rebound helps make up for sluggish retail banking

BLOOMBERG

Royal Bank of Canada (RBC) reported a surge in its trading businesses that helped fiscal first-quarter earnings top analysts’ estimates.
Revenue from RBC Capital Markets — the largest capital-markets division among Canada’s banks — rose 4.3% to C$3.12 billion ($2.3 billion) in the three months through January, Royal Bank said. That beat analysts’ C$2.35 billion average estimate. National Bank of Canada — which generates the highest proportion of its revenue from capital markets among Canada’s six largest banks — reported similarly strong trading results.
Bond markets have seesawed in recent months amid debates about whether central banks’ rate hikes are nearing an end and concerns that those tightening campaigns may cause a recession. That’s boosted trading revenue for Canada’s big banks, countering sluggish performance from some of their retail arms.
Royal Bank’s net interest margin, excluding its trading business and insurance assets, expanded to 1.85%, up only 1 basis point from the fourth quarter, showing that it’s not benefiting as much from rising interest rates as in previous quarters.
Loans continued to grow, but at a slower pace, with the increase in Royal Bank’s Canadian mortgage book — its largest loan category — slowing to 1.1% quarter over quarter, from 2.3% in the prior three months.