Royal Bank of Canada

This is our first report on the Royal Bank of Canada, one of the top 2 banks in the country. The company delivered strong results in the last quarter and managed an all-around beat. This quarter’s performance included significant capital markets revenue, led by excellent Global Markets results, as well as market share improvements in Investment Banking and origination operations across the sector. The expense growth increased by 17% from the prior year, driven by strategic investments in client-facing jobs and technology to improve RBC’s value proposition and infrastructure. Even though interest rates may have increased, they may stay higher for longer due to the limited economic and market activity caused by tight labor markets, other supply imbalances, and high inflation. Business loans also increased by almost 15% compared to last year. Utilization rates for revolving facilities are still below pre-pandemic levels, while term lending for capital investments has remained robust. Sectors like consumer services, manufacturing, and car finance are all experiencing broad-based development. Furthermore, their Global Wealth Management franchise established new benchmarks with $4.6 billion in sales. Canadian Wealth Management continues to be a very profitable venture, utilizing its size to produce pretax margins in the mid-to high-20s. We initiate coverage on the stock of the Royal Bank of Canada with a ‘Buy’ rating.