Royal Bank of Canada is paying for an accelerated push into digital and mobile banking by cutting jobs and reducing its branch banking footprint.
Canada's largest bank by revenue recorded severance costs of 120 million Canadian dollars (about US$95.6 million) during its fiscal third-quarter, as it cut head office jobs. The bank announced in June it would cut 450 positions, primarily from its Toronto head office.
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The bank had planned on making the cuts over the next two years, but decided to move more quickly to help pay for higher spending on digital technology, artificial intelligence and cybersecurity, Chief Financial Officer Rod Bolger said in an interview.
"If we hadn't seen the severance, we would have an uptick to the cost base," he said.
RBC has been cutting workers and shrinking the square footage of its branches as it shifts its business to emphasize advisory services and mobile banking, he said.
The rise in severance costs helped push noninterest expense up 7% from the year before, along with higher salaries and as the company also spent more on marketing and public relations.
RBC's fiscal third-quarter profit topped expectations amid growth in its wealth-management business, even as unfavorable market conditions caused revenue to slide.
Total assets under management grew 5% from the year before, driven by growth in the wealth-management business.
RBC also announced a 5% increase in its quarterly dividend, the second time it has raised the payout by 5% this year.
The Toronto-based bank posted a quarterly profit of C$2.8 billion, or C$1.85 a share, relatively unchanged from a year before but slightly more than analysts polled by Thomson Reuters expected. Revenue, meanwhile, slipped 3% to C$9.99 billion from C$10.26 billion.
Net income from RBC's wealth-management segment jumped 25%, mainly due to larger asset balances and higher interest rates. RBC's net interest income inched up 3% while fee-based income dropped 7%.
Chief Executive Dave McKay said in a new release announcing the results that the bank has been investing in digital capabilities and key markets to drive growth. Still, RBC has had to contend with a slowing Canadian real-estate market and lagging auto sales.
Mr. McKay said in a conference call with analysts that he supported recent moves by Canadian officials to cool housing markets in Toronto and Vancouver. He said officials may need to do more in Toronto if prices rebound after recent softness, but said he was encouraged by the "healthy moderation" he had seen in markets.
The bank had a loan-loss provision of C$2.24 billion in the quarter, up from C$2.18 billion a year earlier.
The bank raised its quarterly dividend to C$0.91 from C$0.87.
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(END) Dow Jones Newswires
August 23, 2017 18:05 ET (22:05 GMT)