Analyst Note| Eric Compton, CFA |
Wide-moat-rated Royal Bank of Canada reported solid fiscal second-quarter earnings. Adjusted earnings per share were CAD 2.79, representing solid year-over-year growth when compared with adjusted EPS of CAD 1.03 in the same period a year ago. Provisioning was the major swing factor, coming in at a net benefit of CAD 96 million this quarter compared with a cost of CAD 2.8 billion in the second quarter of 2020. This aligns with our view that the Canadian banks will be fine and that better results should be the norm in 2021. 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 will make for tougher comps for the Canadian banks in 2022. Fee income was particularly good during the second quarter, as RBC's wealth, trading, and capital markets all drove solid growth. With non-interest income coming in better than we expected, we've increased our fair value estimate for the firm to CAD 127/USD 105 per share from CAD 116/USD 92.