RBC was founded in 1864 and is headquartered in Toronto, Ontario, Canada. It operates as a diversified financial services company, offering a wide range of personal and commercial banking, wealth management, insurance, and investment services.
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Introduction to Canadian Banking
The Canadian banking industry is one of the most important industries in Canada, with several banks being among its largest and most profitable companies. The industry is dominated by a small number of large banks, with the six largest combining for 90% of the market share. The five largest banks in Canada are Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD Bank), Bank of Nova Scotia (Scotiabank), Bank of Montreal, and Canadian Imperial Bank of Commerce. These banks have sufficient assets to rank among the top 10 U.S. banks, making it much easier to regulate banks and ensure compliance among a few key players.
The Canadian banking system has been considered to be one of the safest and soundest banking systems in the world. In fact, a survey conducted by the World Economic Forum called the Global Competitiveness Report of twelve-thousand corporate executives in 2008 concluded that Canada has the best banking system in the world, receiving a score of 6.8 out of a possible seven. The Bank of Canada, established in 1935, was also an important milestone in banking and monetary governance. The Bank of Canada provides banking and financial statistics, including the Bank of Canada’s assets and liabilities, credit and monetary aggregates, chartered banks data, and selected financial market statistics.
Royal Bank of Canada
According to the RBC’s Quaterly Report we understand the current situation of RBC.
Royal Bank of Canada (RY) has a diversified revenue stream across various segments, with Personal & Commercial Banking and Wealth Management being the largest revenue segments. In the fiscal Q1 2023 document, RY reported strong growth in net interest income in both Canadian and Wealth Management, offsetting the impact of unfavorable markets on fee-based advisory revenues and transactional revenues. RY is also looking to expand its relationships with RBC Brewin Dolphin clients by offering core private banking, lending, and payments products and services. Additionally, RY has a strong balance sheet, with a CET1 ratio of 12.7% and a low-cost Canadian deposit base. Despite higher PCL this quarter, PCL on impaired loans remained well below historical averages, given strong employment and consumer balance sheets. Overall, RY appears to have a solid financial statement and investment strategy.
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And while Investment Banking revenues were down 39% from very strong results last year, they outperformed global fee pools, which were down 55%. Consequently, RBC Capital Markets ranked seventh in Global League Tables this quarter, moving up 1 spot to 9 looking at the last 12 months. Looking to the future, RBC continues to focus on diversifying revenue streams across higher ROE advisory and origination activities. They’ve been actively hiring managing directors across industry verticals and geographies while also expanding our client coverage. These have been factors in their move-up in global league tables. With that said, an uncertain macro and geopolitical backdrop, volatility across asset classes and higher financing costs remain the biggest challenges to M&A activity.
A further 130,000 clients were added this quarter on top of the 400,000 clients added throughout fiscal 2022. They continue to benefit from a number of strategic partnerships with partners such as ICICI Bank Canada while also leveraging investments made in their distribution network, including digital channels. Nearly 60% of credit cards and almost 40% of core check accounts are now open digitally. Their success is underpinned by a clear focus on doing what is right for the client. It’s why they do not have a minimum balance requirement on our core checking account.