Royal Bank of Canada (RY) reported that net income for its fiscal third quarter fell 17% year-
over-year to $3.58 billion due to greater loan loss provisions and a slowdown in capital markets
trading.
In releasing its fiscal Q3 results, Royal Bank blamed its poor performance on “challenging
market conditions” that required it to set aside $340 million to cover loans that could potentially
go bad and become non-performing.
Royal Bank reported earnings per share (EPS) of $2.55, which was below the $2.67 in per
share earnings expected by analysts on Bay Street.
The Toronto-headquartered financial institution said its earnings were hurt by a steep drop in
trading activity that was caused by ongoing turmoil in global stock markets.
Royal Bank also said the $340 million set aside for loan loss provisions occurred almost entirely
in its Canadian banking division. In the previous quarter, Royal Bank put aside $342 million to
cover bad loans.
However, the most recent loan loss provisions were down from $540 million that was set aside
for potential bad loans in the fiscal third quarter of last year.
In its earnings statement, Royal Bank said it continues to put money aside to cover bad loans
because of “unfavourable changes in our macroeconomic environment.”
Royal Bank’s stock is down 8% this year at $126.49 per share.
