Canada's largest bank, and one of the world's top ten largest financial institutions, Royal Bank of Canada (TSX:RY)(NYSE:RY), has recently announced the impacts of the potential tax overhaul in the U.S. market. On Tuesday, RBC's CEO Dave McKay announced a write-down of approximately US$150 million due to a reduction in the company's deferred tax asset, meaning lower losses and lower realized benefits near-term, but greater earnings growth for investors long term. As of the time of writing, shares of RBC were up 0.4% on the news.
While a US$150 million write down may not seem like good news, and it's not, the fact that said write down is expected to be accompanied by earnings growth which could be in the US$200 million per year range has investors excited about the future prospects of RBC, and in particular, the company's operations in the U.S. market. RBC has maintained a strong global presence, and being a leader in developing its brand in the U.S. and around the world has brought with it increased exposure to policies in the U.S., both good and bad.
Other large Canadian banks have announced the expected impacts of the U.S. tax overhaul as well, with the general story line much the same.
As a cautious long-term investor, I like the implications of this tax policy for companies like RBC in the long-term, and would suggest defensive investors consider a financial institution like RBC over smaller, higher growth regional options in Canada.
Invest wisely, my friends.
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