The Canadian banks highlight acquisitions and resilience despite economic headwinds and credit risks
RBC and National Bank reported solid fourth-quarter results despite challenges from a slowing Canadian economy, according to BNN Bloomberg.
Both banks highlighted significant developments, including acquisitions and rising provisions for credit losses.
RBC, Canada’s largest company, reported a profit of $4.22bn for the fourth quarter and $16.2bn for the year.
Quarterly profits rose 7 percent compared to the same period last year, supported by the acquisition of HSBC Canada. Adjusted quarterly profits climbed 18 percent.
The bank’s quarterly revenue reached $15.07bn, up from $12.69bn a year earlier, while earnings per diluted share increased to $2.91 from $2.76.
On an adjusted basis, RBC reported earnings of $3.07 per diluted share, exceeding the previous year’s $2.65 and surpassing analyst estimates of $3.01, as per LSEG Data & Analytics.
Chief executive Dave McKay noted that economic headwinds, including rising unemployment and lower immigration, have pressured borrowers and loan growth.
However, strong earnings from wealth and asset management divisions helped offset these challenges. “On the credit side, we are cautious but optimistic,” McKay said.
He acknowledged uncertainty about economic recovery, saying, “We’re just a little uncertain as to how we’re going to land this thing, whether it’s in the first half or second half of the year, or early into ’26.”
RBC increased its provisions for bad loans by 17 percent year-over-year to $840m, mostly in personal and commercial banking.
Chief risk officer Graeme Hepworth stated, “While this trend is encouraging, we don’t expect losses to remain this low.”
He projected that credit losses could peak in the second half of 2024 due to rising unemployment and economic softening.
RBC’s performance by segment included:
- Personal banking profits rose to $1.58bn from $1.37bn.
- Commercial banking profits increased to $774m from $668m.
- Wealth management profits surged to $969m from $272m.
- Insurance profits grew to $162m from $97m.
The capital markets division earned $985m, slightly down from $987m, while the corporate segment posted a $247m loss, primarily due to HSBC Canada transaction costs, compared to a $549m profit a year ago.
Despite economic uncertainty, RBC announced a 4 percent dividend increase but scaled back share buybacks due to market volatility.
“We have been cautious in buying back stock this quarter given the higher degree of volatility around election outcomes and monetary policy going forward,” McKay said.
National Bank earned $955m in the fourth quarter, up from $751m a year ago. Revenue grew to $2.94bn from $2.56bn, while provisions for credit losses rose to $162m from $115m.
Earnings per diluted share climbed to $2.66 from $2.09, with adjusted earnings rising to $2.58 per share, up from $2.39. Analyst estimates for adjusted earnings were $2.57, according to LSEG Data & Analytics.
National Bank CEO Laurent Ferreira highlighted the transformative potential of its $5bn acquisition of Canadian Western Bank (CWB).
The deal, which has progressed with Competition Bureau approval and public consultations, still requires approvals from Canada’s banking regulator and finance minister.
“Our proposed acquisition of Canadian Western Bank will be a key pillar in our domestic growth in 2025,” Ferreira said, adding, “We look forward to bringing together two strong teams and highly complementary platforms to accelerate our growth.”
National Bank increased its quarterly dividend to $1.14 per share from $1.10. Segment performance included:
- Personal and commercial banking profits rose to $327m from $271m.
- Wealth management profits increased to $219m from $155m.
- Financial markets profits grew to $306m from $284m.
- US specialty finance and international business profits climbed to $157m from $145m.
The bank’s ‘other’ segment reported a $54m loss, improving from a $104m loss in the same quarter last year.
Jefferies analyst John Aiken noted that National Bank’s results exceeded expectations due to a lower tax rate, though credit impairments were widespread across manufacturing, agriculture, financial services, and real estate.
Both banks highlighted challenges ahead, with RBC’s Hepworth noting that credit outcomes will depend on unemployment rates, interest rate changes, and real estate prices. National Bank remains optimistic about its acquisition of CWB as a driver of future growth.
