RBC lifts profit, helped by wealth management strength

Royal Bank of Canada on Wednesday reported a rise in third-quarter profit, helped by double-digit growth at its wealth management business which offset a weaker showing in its capital markets unit.

Net income at Canada`s biggest lender, excluding one-off items such as a gain on the sale of its home and auto insurance business last year, increased to C$2.8 billion ($2.2 billion) for the quarter to June 30, 5 percent higher than a year earlier.

Earnings per share reached C$1.89 compared with an average analyst forecast of C$1.87, according to Thomson Reuters I/B/E/S data. A year earlier, RBC posted an EPS of C$1.72.

The bank has beaten market expectations in every quarter so far this year.

RBC shares rose 1.4 percent to $93.27.

Canadian banks are expected to benefit from rising interest rates, but their shares have slowed their advance on concerns the housing market was vulnerable to a sudden fall.

Canadian authorities have introduced a number of measures over the past 18 months to curtail rampant increases in home prices, including foreign buyers` taxes in Toronto and Vancouver.

Top Canadian bankers have been supportive of the policies, preferring a "soft landing" where prices stabilize gradually instead of a "hard landing" where they fall quickly.

"We are encouraged by the existing measures and the effect they`ve had in creating a more sustainable (housing) marketplace," RBC Chief Executive Dave McKay told analysts on a conference call.

McKay said he supported further proposals by Canada`s banking regulator including tougher tests on riskier mortgages.

Chief Financial Officer Rod Bolger said in an interview the planned new rules should help achieve a stabilization in home prices.

"It will reduce the risk of a hard landing," he said.

In the third quarter, net income including one-time items rose by 6 percent to C$1.4 billion at RBC`s retail business. At its wealth management unit, it increased by 25 percent to C$486 million, helped by robust earnings at City National, a U.S.-based bank which the bank acquired last November.

RBC said net income from its capital markets business, including one-off items, fell 4 percent to C$611 million. The bank reported a decline in fixed-income trading activity, reflecting less volatility in that market.

It announced a 5 percent increase in its quarterly dividend to C$0.91 per share, above the average analyst forecast of C$0.89, according to Thomson Reuters I/B/E/S data.

($1 = 1.2571 Canadian dollars)

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