Royal Bank of Canada (RBC) reported net income attributable to common shareholders of $3.6 billion for its second quarter of fiscal 2023, which ended April 30.
This figure represents a decrease of 14 per cent or $604 million compared with the net earnings of $4.2 billion announced for Q2 2022.
“Our focused growth strategy, prudent risk and capital management, and diversified business mix exemplify our strength and stability amidst a complex macro environment,” says Dave McKay, President and CEO of RBC, in the press release issued on May 25.
In its report to shareholders, RBC analyses macroeconomic trends over the past two years. In the second half of 2022 and the first half of 2023, unfavourable changes in the credit quality and macroeconomic outlook have necessitated higher provisions for credit losses (PCL). PCL was still below pre-pandemic levels, but has been rising gradually over the past six months.
RBC maintains that the transaction with HSBC Canada, announced on November 29, is scheduled to close in the first calendar quarter of 2024. The purchase price for all HSBC Canada common shares is $13.5 billion.
For its Wealth Management segment, RBC reported net income attributable to shareholders of $727 million in the second quarter of 2023, compared with $737 million in Q2 2022.
For the insurance segment, net income available to common shareholders was $138 million in the last quarter, compared with $204 million in Q2 2022. According to RBC, this decrease of 32 per cent is mainly due to higher financing costs.
RBC’s insurance revenue totalled $1.34 billion in the second quarter of 2023, compared with $234 million in Q2 2022.
Revenue growth was driven entirely by the Canadian market, “mainly due to changes in the fair value of investments backing policy liabilities and business growth.” Group annuity sales declined.
The revenue growth was largely offset by insurance policyholder benefits, claims and acquisition expense (PBCAE). PBCAE slightly exceeded $1 billion in the second quarter, for a decrease of $1.19 billion compared with Q2 2022.
Premiums and deposits
Insurance premiums and deposits totalled $1.4 billion in the second quarter of 2023, down $39 million or 3 per cent on the same period last year.
Looking at the results in closer detail, premiums and deposits in the Canadian market were $794 million in the second quarter, down 4 per cent or $30 million from $824 million in Q2 2022.
Premiums and deposits on the international market were $625 million in the second quarter of 2023, compared with $634 million in Q2 2022. This represents a decrease of $9 million or 1 per cent.