RBC Financial Group research and analysis Stock Markets Review
RBC Financial Group (RY) reported Q3/11 EPS cash loss of $0.09. RY restated its earnings this quarter to exclude the operations of its U.S. personal and commercial bank. RY had announced earlier in the quarter that it had reached an agreement to sell the U.S. bank to PNC Financial (see discussion below). Excluding the $1.7 billion loss on the U.S. bank and several other minor non-operational items, EPS from continuing operations was $1.06, a gain of 13% Y/Y. These adjusted earnings were $0.08 below our estimate and about $0.03 below that of consensus. Overall, it was another disappointing quarter as trading revenues continued to be very volatile, declining over 40% sequentially. Fixed income trading basically collapsed sequentially. The Tier 1 capital ratio decreased in the quarter to 13.2% from 13.6% last quarter, however, after the sale of the U.S. bank, the ratio should increase by about 130 bps. Adjusted ROE was 17.1%, down from 15.8% last quarter.
