Analyst Note| Eric Compton, CFA |
Wide-moat-rated Royal Bank of Canada reported solid fiscal third-quarter earnings. Adjusted earnings per share were CAD 3, solid year-over-year growth compared with CAD 2.23 in the same period a year ago and higher than last quarter’s CAD 2.79. Provisioning continues to be a major driver of improved earnings, coming in at a net benefit of CAD 540 million this quarter, a multiyear low and materially lower than the CAD 2.8 billion charge the bank took in the second quarter of 2020. This aligns with our view that the Canadian banks will be fine from a credit perspective and that better results should be the norm going forward. We still expect the return of fee growth and much lower provisions to drive solid earnings growth for the rest of the year, while the lack of a boost from lower provisioning should make for tougher comparisons for the Canadian banks in 2022.