Feb 2012 Financial News

RBC rakes in $134 million profit

Feb 23, 2012

RBC Royal Bank, formerly known locally as RBTT, has declared an earned net income after tax of $134 million for its fiscal year which ended on October 31, 2011.

But that rather diminished level of profits has not fazed Chairman Suresh Sookoo, who is happy at the successful rebranding to “RBC Royal Bank” and the continued “upgrades to our processes and service delivery to better serve our markets.”

In the comparative period in the previous year, net income after tax was $711 million, but as Sookoo, explained in a statement, that period stretched over 19 months as the bank sought to change its year end to October 31, in alignment with its parent company Toronto-based Royal Bank of Canada.

Sookoo disclosed in his statement that his bank realised growth in its balance sheet, with loans and advances to customers increasing by $624 million or an increase of seven percent. At the same time customers’ deposits grew by $1.1 billion also an increase of seven percent.

He explained in his statement that the increase in deposits was consistent with the systemic high levels of liquidity observed in the local market. However, higher levels of commercial loan impairments were reflected in higher credit losses for the current year.

“The current low interest rate environment was reflected in lower net interest income with some margin compression,” stated Sookoo, but he sees the bank as “well poised to continue to grow and distinguish itself as the financial service provider of choice with an asset base of $21 billion and a capital base of $2 billion, providing a stable and secure home for our clients to place their business.”

On another company in the Group, Sookoo reported that RBC Financial (Caribbean) Limited continued to demonstrate profitability and growth with net income for the year being $333 million.

During the year under review, the Group’s asset base increased from $74 billion to $86 billion driven by the acquisitions of RBC branches in the Bahamas and the Turks and Caicos operations, as well as Finance Corporation of Bahamas, a 75 percent owned mortgage company. The Group’s investment portfolio declined because of transference of offshore deposits and the related investments to other branches of RBC which are not part of the Group.

“The Group’s 2011 performance, excluding the effect of the acquisitions, was affected by global and regional economic conditions which resulted in lower net interest income as well as above average impairment losses on loans, although in the case of the latter, this has improved from 2010 levels,” stated Sookoo.

As Chief Executive Officer of the Group, Sookoo stated, “The group continues to invest heavily in its technology, processes and people, resulting in an increase in its non-interest expenses. These investments are expected to have longer term benefits commencing in 2013 and beyond.”

Meanwhile RBC Investment Management Caribbean has declared after tax profits of $175 million, which Chairman Byron Clarke described as “a very strong performance, compared to the last audited financial statements.”

Since converting to a floating Net Asset Value (NAV) rate on January 04, 2010, the Income Fund annualised rate of return to October 31, 2011 was 5.11 percent for the Roytrin US dollar Income Fund, while the TT dollar Income Fund was 6.28 percent.

In November 2009, the RBC Financial (Caribbean) Limited Group announced its intention to change the method of selling and redeeming the units of its two Roytrin Income Funds from a fixed NAV of ($25) to a floating NAV computed on a daily basis, in an effort to bring it in line with international best practice and allowing for greater transparency to investors.

Clarke revealed in his statement that at the reporting date the asset based stood at $126.9 million, with shareholders’ equity of $114.9 million, while the company’s assets under management stood at more than$17 billion, which Clarke described as “a testament to investors showing continued confidence in the company’s management capabilities.”

Reporting for the same period the RBC Merchant Bank Caribbean Limited showed significant improvement with an after tax profit of $56.3 million, according to its chairman Bruce Sim. He said the company focus was on advisory services and capital market activities.

Since the group has a strong capital base, it is well positioned to take advantage of growth opportunities in the future. “Consistent with its focussed strategy, the company has sold down its holdings in corporate loans and advances and related derivative investments. These sales have reduced the total assets from $5.2 billion to $3.5, wrote Sim.


Source:
By Vernon Khelawan
Newsday
Thursday February 23, 2012

http://www.newsday.co.tt/businessday/0,155744.html