Royal Bank of Canada on Friday reported a bigger-than-expected increase in quarterly earnings, driven by strong results from its wealth management and capital markets divisions.
Canada's largest bank, as widely expected, also boosted its quarterly dividend by about 6 percent to 75 Canadian cents a share.
"We view this as an exceptionally strong quarter with very little to poke holes in, on our first cut," Barclays analyst John Aiken said in a note on Friday. "While we are decidedly positive on the results, naysayers will question the sustainability of the trading revenues and insurance earnings."
Aiken, however, does not expect this to be an overhang on the stock, and he sees RBC shares reacting "quite favorably" when trading begins on Friday.
RBC reported net income of C$2.38 billion ($2.17 billion), or C$1.59 a share, for the third quarter ended July 31, compared with C$2.29 billion, or C$1.51 a share, a year earlier.
The increase came despite a slight drop in profit from RBC's core personal and commercial banking business because of the sale of its operations in Jamaica.
In January, RBC announced it had agreed to sell its Jamaican banking operations to Sagicor Group Jamaica Ltd. It said at the time that it expected to lose about C$60 million from the transaction, partly due to a goodwill writedown.
Excluding charges from the sale of the Jamaica operations and other one-time items, the company reported earnings of C$1.64 a share, topping the analysts' average estimate of C$1.56, according to Thomson Reuters I/B/E/S.
RBC is the first Canadian bank to announce its third-quarter results. Rivals Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal and National Bank of Canada are all set to report results next week.
Aiken noted that RBC's capital markets unit generated a stand-out performance, which is most likely to be difficult for the bank's peers to emulate.
The bank said net income from its capital markets unit was a record C$641 million, up some 66 percent from a year earlier, due to an increase in trading activity, along with strong growth in lending and loan syndication.
RBC said its wealth management net income rose 22 percent to a record C$285 million in the quarter.