Royal Bank of Canada (RY) Q2 2023 Earnings Call Transcript

For the period ending April 30, 2023

May 25, 2023 8:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Good morning, ladies and gentlemen. Welcome to RBC's Conference Call for the Second Quarter 2023 Financial Results. Please be advised that this call is being recorded.

I would like to turn the meeting over to Asim Imran, Head of Investor Relations. Please go ahead, Mr. Imran.

Asim Imran

Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer; Nadine Ahn, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your questions, Neil McLaughlin, Group Head, Personal and Commercial Banking; Doug Guzman, Group Head, Wealth Management and Insurance; and Derek Neldner, Group Head, Capital Markets.

As noted on Slide 1, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. To give everyone a chance to ask questions, we ask that you limit your questions and then requeue.

With that, I'll turn it over to Dave.

Dave McKay

Thanks, Asim. Good morning, everyone, and thank you for joining us. Today, we reported second quarter earnings of $3.6 billion or adjusted earnings of $3.8 billion. Pre-provision pretax earnings of $5 billion were up 1% from last year. We also announced a $0.03 or 2% increase in our quarterly dividend as part of our cadence of twice-a-year increases in commitment to returning capital to our shareholders. Net interest income was up 16% from last year, benefiting from solid client-driven growth in Canadian Banking, and wealth management as well as higher interest rates.

Capital Markets had yet another strong quarter, reporting over $1.1 billion in pre-provision pretax earnings despite a challenging environment for global investment banking fee pools. The revenue contribution was equally split between Global Markets and Corporate Investment Banking, reflecting the segment's well-diversified business model. Our all bank performance this quarter reflected the strength and diversity of our leading client franchises and strong balance sheet; however, shifting client deposit preferences, expenses and provisions for credit losses point to an increased cost of doing business.

Before I provide context on our key growth strategies and the expense trajectory, I will speak to what remains a complex environment. Markets are facing structurally different circumstances following the end of an era of low inflation, low interest rates and increased globalization. This is in addition to absorbing game-changing challenges from technology and decarbonization as well as more near-term risks, including implications from U.S. debt ceiling negotiations. While recent stresses in the U.S. regional banking sector appear to have eased, the follow will likely include more liquidity and capital regulations and a subsequent tightening of lending capacity.