ROYAL BANK OF CANADA REPORTS FOURTH QUARTER AND 2022 RESULTS

All amounts are in Canadian dollars and are based on our audited Annual and unaudited Interim Consolidated Financial Statements for the year and quarter ended October3 1, 2022 and related notes prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, unless otherwise noted. Our 2022 Annual Report (which includes our audited Annual Consolidated Financial Statements and accompanying Management's Discussion & Analysis), our 2022 Annual Information Form and our Supplementary Financial Information are available on our website at: http://www.rbc.com/investorrelations.

2022 Net Income
$15.8 Billion
Down 2% YoY

2022 Diluted EPS1

$11.06

Flat YoY

2022 PCL2

$484 Million

PCL on loans ratio up 16
bps
3 YoY

2022 ROE4

16.4%

Down 220 bps YoY

CET1 Ratio5

12.6%

Well above regulatory
requirements

Q4 2022 Net Income

$3.9 Billion

Flat YoY

Q4 2022 Diluted EPS

$2.74

Up 2% YoY

Q4 2022 PCL

$381 Million

PCL on loans ratio up 1
bp QoQ

Q4 2022 ROE

15.6%

Down 130 bps YoY

Leverage Ratio6

4.4%

Down 20 bps QoQ






TORONTO, Nov. 30, 2022 /CNW/ - Royal Bank of Canada7 (TSX: RY) (NYSE: RY) today reported net income of $15.8 billion for the year ended October 31, 2022, down $243 million or 2% from the prior year. Diluted EPS8of $11.06 remained unchanged from the prior year. Our consolidated results include total PCL of $484 million compared to $(753) million last year, primarily reflecting lower releases of provisions on performing loans in Personal & Commercial Banking and Capital Markets due to unfavourable changes in our macroeconomic outlook in the current year. Lower earnings in Capital Markets and Insurance were partly offset by higher results in Personal & Commercial Banking, Wealth Management and Investor & Treasury Services.

RBC Logo (CNW Group/Royal Bank of Canada)
RBC Logo (CNW Group/Royal Bank of Canada)

Pre-provision, pre-tax earnings8 of $20.6 billion were up 4% from a year ago, mainly reflecting higher net interest income driven by strong volume growth and higher spreads in Canadian Banking and Wealth Management. These factors were partially offset by lower revenue in Capital Markets, including the impact from loan underwriting markdowns in Q3 2022, largely driven by challenging market conditions. Results also reflected higher salaries, technology investments and discretionary costs to support strong client-driven growth.

The PCL on loans ratio of 6 bps increased 16 bps from the prior year. The PCL on impaired loans ratio was 10 bps, flat from the prior year.

Our capital position remained robust, with a Common Equity Tier 1 (CET1) ratio of 12.6% supporting strong client-driven organic growth. In addition, this year we returned $12.4 billion to our shareholders through common share buybacks and dividends. And today, we declared a quarterly dividend of $1.32 per share reflecting an increase of $0.04 or 3%.

"While market conditions continue to be tough, our 2022 results reflect a resilient bank that is well-positioned to pursue strategic growth and deliver long-term shareholder value. Our premium businesses, strong balance sheet, prudent risk management and diversified business model mean we can deliver advice and services that help our clients navigate all cycles. RBC colleagues remain focused on building more exceptional experiences for our clients and supporting sustainable and prosperous communities."

Dave McKay, RBC President and Chief Executive Officer

2022 Full-Year Business Segment Performance

  • 7% earnings growth in Personal & Commercial Banking, primarily attributable to higher net interest income, driven by average volume growth of 9% in both loans and deposits in Canadian Banking, and higher spreads. As a result of the rising interest rate environment (Bank of Canada raised the benchmark interest rate by 350 bps from March to October 2022), we saw higher spreads as compared to the prior year. Higher non-interest income, including higher foreign exchange revenue, card service revenue and service charges driven by increased client activity also contributed to the increase in earnings. These factors were partially offset by higher PCL, and higher staff and technology related costs. Our Canadian Banking franchise generated strong positive operating leverage of 3.8% while continuing to invest in digital initiatives to improve the client experience and deliver personalized advice.

  • 20% earnings growth in Wealth Management, mainly due to higher net interest income driven by average volume growth of 19% in loans and 11% in deposits largely in U.S. Wealth Management (including City National), and higher interest rates. Higher average fee-based client assets primarily reflecting net sales, as well as the impact of a legal provision taken in U.S. Wealth Management (including City National) in the prior year that was partially released in the first quarter of 2022, also contributed to the increase. These factors were partially offset by higher staff-related costs and variable compensation.

  • 4% lower earnings in Insurance, largely due to the impact of lower new longevity reinsurance contracts, partially offset by higher favourable investment-related experience.

  • 17% earnings growth in Investor & Treasury Services, mainly due to higher revenue from client deposits reflecting improved margins, partially offset by higher technology-related costs.

  • 30% lower earnings in Capital Markets, primarily driven by lower revenue in Corporate & Investment Banking, larger releases of provisions on performing assets in the prior year and lower revenue in Global Markets. Global investment banking fee pools were impacted by weakness in credit and equity markets beginning in the second fiscal quarter of 2022, resulting in an approximately 30% decline in global investment banking fee pools9 this fiscal year compared to record levels in fiscal 2021.

Q4 2022 Performance

Earnings of $3.9 billion remained relatively flat from a year ago, with diluted EPS growth of 2% over the same period. Our consolidated results reflect $381 million of provisions, primarily taken on loans in the current quarter, as compared to $(227) million in the prior year, due to releases of provisions on performing loans, primarily in Personal & Commercial Banking. Higher earnings in Wealth Management and Personal & Commercial Banking reflected higher interest rates and robust client-driven volume growth. Earnings in Insurance and Investor & Treasury Services were largely unchanged. These were offset by lower earnings in Capital Markets.

Pre-provision, pre-tax earnings[10] of $5.2 billion were up 10% from a year ago, mainly reflecting higher net interest income driven by higher spreads and strong volume growth in Canadian Banking and Wealth Management. This was partially offset by lower market-related revenue in Capital Markets and Wealth Management. Results were also impacted by higher staff-related costs, including higher salaries and variable compensation.

Earnings were up $305 million or 9% from last quarter due to higher earnings in Capital Markets, Personal & Commercial Banking, Insurance, and Wealth Management. These were partially offset lower earnings in Investor & Treasury Services. The PCL on loans ratio of 18 bps was up 1 bp from 17 bps last quarter. The PCL on impaired loans ratio of 12 bps was up 4 bps from last quarter.

Q4 2022

compared to

Q4 2021

  • Net income of $3,882 million

  • Diluted EPS of $2.74

  • ROE of 15.6%

  • CET1 ratio of 12.6%

→  0%

↑ 2%

↓ 130 bps

↓ 110 bps

Q4 2022

compared to

Q3 2022

  • Net income of $3,882 million

  • Diluted EPS of $2.74

  • ROE of 15.6%

  • CET1 ratio of 12.6%

9%

↑ 9%

↑ 100 bps

↓ 50 bps

 

Q4 2022 Business Segment Performance

Personal & Commercial Banking 

Net income of $2,139 million increased $106 million or 5% from a year ago, primarily attributable to higher net interest income reflecting higher spreads from higher interest rates and strong average volume growth of 10% in loans (including strong mortgage and business loan growth of 10% and 15%, respectively) and 9% in deposits in Canadian Banking. Higher non-interest income, including higher card service and foreign exchange revenue from increased client activity, also contributed to the increase. These factors were partially offset by higher PCL, higher staff and technology related costs, including digital initiatives, as well as higher marketing costs.

Compared to last quarter, net income increased $116 million or 6%, primarily due to higher net interest income reflecting higher spreads and volume growth. Lower PCL also contributed to the increase. These factors were partially offset by higher staff-related and marketing costs, as well as the timing of professional fees.

Wealth Management

Net income of $822 million increased $264 million or 47% from a year ago, primarily due to higher net interest income reflecting higher interest rates and average volume growth in loans and deposits, and the impact of a legal provision taken in U.S. Wealth Management (including City National) in the prior year. These factors were partially offset by lower fee-based revenues mainly driven by unfavourable market conditions.

Compared to last quarter, net income increased $45 million or 6%, mainly due to higher net interest income largely reflecting higher interest rates. This factor was partially offset by lower average fee-based client assets, largely driven by unfavourable market conditions.

Insurance

Net income of $268 million remained relatively flat, largely reflecting the impact of offsetting items between revenue and PBCAE (policyholder benefits, claims and acquisition expense). PBCAE also included the impact of favourable annual actuarial assumption updates.

Compared to last quarter, net income increased $82 million or 44%, mainly due to favourable annual actuarial assumption updates.

Investor & Treasury Services

Net income of $110 million remained relatively flat as the impact of higher revenue reflecting improved margins mainly driven by higher interest rates from client deposits, was largely offset by lower funding and liquidity revenue and lower revenue from our asset services business.

Compared to last quarter, net income decreased $54 million or 33%, mainly driven by lower funding and liquidity revenue, including the impact of a funding cost adjustment.

Capital Markets

Net income of $617 million decreased $303 million or 33% from a year ago, primarily due to the timing of true-ups related to our variable compensation plans. Lower revenue in Corporate & Investment Banking reflecting lower debt and equity origination as well as lower loan syndication revenue and higher PCL, also contributed to the decrease. These factors were partially offset by a lower effective tax rate reflecting changes in the earnings mix as well as higher fixed income trading revenue in Global Markets.

Compared to last quarter, net income increased $138 million or 29%, mainly due to higher fixed income trading revenue as the prior quarter included the impact from loan underwriting markdowns, primarily in the U.S., largely driven by challenging market conditions. This factor was partially offset by higher compensation on increased results and the timing of true-ups related to our variable compensation plans.

Capital, Liquidity and Credit Quality

Capital – As at October 31, 2022, our CET1 ratio was 12.6%, down 110 bps from last year, mainly reflecting risk-weighted asset growth (excluding FX), share repurchases, the impact of our Brewin Dolphin acquisition, and the unfavourable impact of fair value other comprehensive income adjustments. These factors were partially offset by net internal capital generation, favourable net credit migration and model updates.

Liquidity – For the quarter ended October 31, 2022, the average liquidity coverage ratio (LCR) was 125%, which translates into a surplus of approximately $73 billion, compared to 123% and a surplus of approximately $66 billion in the prior quarter. LCR has increased compared to last quarter as loan growth was more than offset by an increase in volume and change in mix of client deposits, as well as by issuances of term funding.

The Net Stable Funding Ratio (NSFR) as at October 31, 2022 was 112%, which translates into a surplus of approximately $95 billion, compared to 113% and a surplus of approximately $100 billion in the prior quarter. NSFR remained relatively flat compared to last quarter as growth in loans and securities was offset by issuance of term funding and increases in client deposits.

Credit Quality

Q4 2022 vs. Q4 2021

Total PCL was $381 million compared to $(227) million last year, reflecting provisions taken on performing loans and higher provisions on impaired loans in the current quarter, as compared to releases of provisions on performing loans in the prior year, primarily in Personal & Commercial Banking. The PCL on loans ratio of 18 bps compared to (12) bps last year increased 30 bps.

PCL on performing loans was $126 million compared to $(355) million last year, primarily attributable to releases of provisions in the prior year driven by improvements in our macroeconomic and credit quality outlook, as compared to provisions taken in the current quarter in our Canadian Banking portfolios mainly reflecting unfavourable changes in our macroeconomic and credit quality outlook.

PCL on impaired loans increased $117 million, primarily due to higher provisions in Personal & Commercial Banking, largely in our Canadian Banking portfolios.

Q4 2022 vs. Q3 2022

Total PCL was $381 million and increased $41 million or 12% from last quarter, largely due to higher provisions on loans in Wealth Management and Capital Markets, partially offset by lower provisions on loans in Personal & Commercial Banking. The PCL on loans ratio increased 1 bp.

PCL on performing loans decreased $51 million or 29%, primarily due to lower provisions in Personal & Commercial Banking, largely in our Caribbean Banking portfolios, mainly reflecting the recovery from the COVID-19 pandemic and model updates. This was partially offset by higher provisions in U.S. Wealth Management (including City National), mainly reflecting unfavourable changes in our credit outlook.

PCL on impaired loans increased $84 million or 49%, largely due to higher provisions in Personal & Commercial Banking in our Canadian Banking portfolios, partially offset by lower provisions in our Caribbean Banking portfolios. Provisions taken in Capital Markets in the current quarter, mainly in the other services sector, as compared to recoveries last quarter, also contributed to the increase.

Selected financial and other highlights



As at or for the three months ended


For the year ended


October 31 


July 31 


October 31 


October 31 


October 31 


(Millions of Canadian dollars, except per share, number of and percentage amounts)


2022



2022



2021



2022



2021



Total revenue

$

12,567


$

12,132


$

12,376


$

48,985


$

49,693



Provision for credit losses (PCL)


381



340



(227)



484



(753)



Insurance policyholder benefits, claims and acquisition expense (PBCAE)


116



850



1,032



1,783



3,891



Non-interest expense


7,209



6,386



6,583



26,609



25,924



Income before income taxes


4,861



4,556



4,988



20,109



20,631


Net income

$

3,882


$

3,577


$

3,892


$

15,807


$

16,050


Segments - net income

















Personal & Commercial Banking

$

2,139


$

2,023


$

2,033


$

8,370


$

7,847



Wealth Management


822



777



558



3,144



2,626



Insurance


268



186



267



857



889



Investor & Treasury Services


110



164



109



513



440



Capital Markets 


617



479



920



2,921



4,187



Corporate Support


(74)



(52)



5



2



61


Net income

$

3,882


$

3,577


$

3,892


$

15,807


$

16,050


Selected information

















Earnings per share (EPS) - basic

$

2.75


$

2.52


$

2.68


$

11.08


$

11.08



                                          - diluted


2.74



2.51



2.68



11.06



11.06



Return on common equity (ROE) (1)


15.6 %



14.6 %



16.9 %



16.4 %



18.6 %



Average common equity (1)

$

97,150


$

95,750


$

89,500


$

94,700


$

84,850



Net interest margin (NIM) - on average earning assets, net (2)


1.56 %



1.52 %



1.43 %



1.48 %



1.48 %



PCL on loans as a % of average net loans and acceptances


0.18 %



0.17 %



(0.12) %



0.06 %



(0.10) %



PCL on performing loans as a % of average net loans and acceptances


0.06 %



0.09 %



(0.19) %



(0.04) %



(0.20) %



PCL on impaired loans as a % of average net loans and acceptances


0.12 %



0.08 %



0.07 %



0.10 %



0.10 %



Gross impaired loans (GIL) as a % of loans and acceptances


0.26 %



0.25 %



0.31 %



0.26 %



0.31 %



Liquidity coverage ratio (LCR) (3)


125 %



123 %



123 %



125 %



123 %



Net stable funding ratio (NSFR) (3)


112 %



113 %



116 %



112 %



116 %


Capital ratios and Leverage ratio (4)

















Common Equity Tier 1 (CET1) ratio


12.6 %



13.1 %



13.7 %



12.6 %



13.7 %



Tier 1 capital ratio


13.8 %



14.3 %



14.9 %



13.8 %



14.9 %



Total capital ratio


15.4 %



15.9 %



16.7 %



15.4 %



16.7 %



Leverage ratio


4.4 %



4.6 %



4.9 %



4.4 %



4.9 %



TLAC ratio (5)


26.4 %



27.6 %



n.a. 



26.4 %



n.a. 



TLAC leverage ratio (5)


8.5 %



8.8 %



n.a. 



8.5 %



n.a. 


Selected balance sheet and other information (6)

















Total assets

$

1,917,219


$

1,842,092


$

1,706,323


$

1,917,219


$

1,706,323



Securities, net of applicable allowance


318,223



298,795



284,724



318,223



284,724



Loans, net of allowance for loan losses


819,965



796,314



717,575



819,965



717,575



Derivative related assets


154,439



122,058



95,541



154,439



95,541



Deposits


1,208,814



1,178,604



1,100,831



1,208,814



1,100,831



Common equity


100,746



96,570



91,983



100,746



91,983



Total risk-weighted assets


609,879



589,050



552,541



609,879



552,541



Assets under management (AUM) (2)


999,700



937,700