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Royal Bank of Canada shares target cut, outperform on financial results

EditorNatashya Angelica
Published 12/05/2024, 10:42 AM
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On Thursday, BMO Capital Markets adjusted its outlook on shares of Royal Bank of Canada (NYSE:RY), reducing the stock's price target to $193 from $195 while reaffirming an Outperform rating. This change comes after the bank reported its quarterly financial results. The stock, currently trading at $127.01, sits near its 52-week high after delivering an impressive 28.78% year-to-date return.

Royal Bank of Canada's adjusted diluted earnings per share (EPS) of $3.07 surpassed the estimates set by BMO Capital and the consensus, which were $2.98 and $3.01, respectively.

The outperformance was attributed to the Wealth and Capital Markets segments, which benefited from increased client activity and favorable market conditions in the Wealth sector, along with stronger trading and advisory revenues in Capital Markets. According to InvestingPro, the bank maintains a solid market position with a $179.83B market capitalization and trades at a P/E ratio of 15.8.

However, the bank's Personal Banking and Commercial Banking divisions did not meet expectations. The underperformance in these areas was due to higher provisions for credit losses (PCLs) and reduced operating leverage. Despite these challenges, the bank's Common Equity Tier 1 (CET1) ratio remained robust at 13.2%.

In addition to the financial results, the bank announced a dividend hike of approximately 4%, raising the payout to $1.48 per share, maintaining its impressive 52-year streak of consecutive dividend payments with a current yield of 3.27%.

BMO Capital's decision to maintain an Outperform rating indicates a positive outlook on the bank's stock, although the price target has been slightly adjusted in response to the revised estimates. InvestingPro subscribers have access to 10+ additional insights about Royal Bank of Canada's financial health and growth prospects through the comprehensive Pro Research Report.

In other recent news, the Royal Bank of Canada (RBC) has shown a significant increase in its fourth-quarter profit, largely attributed to a robust performance in its wealth management sector. The bank's profit from this division saw a substantial rise, reaching C$969 million, primarily fueled by an uptick in fee income. RBC's adjusted net income rose to C$4.44 billion, reflecting an increase from the previous year.

The bank recently completed the acquisition of HSBC Canada for C$13.5 billion, expanding RBC's loan portfolio by over C$70 billion. This strategic move has been followed by a reorganization of RBC's leadership and business segments, setting the stage for continued expansion.

Barclays (LON:BARC) upgraded RBC's stock rating from Equal Weight to Overweight and increased the price target due to the bank's strong performance and promising outlook. However, TD Securities downgraded RBC's stock from Buy to Hold, citing valuation concerns and the anticipation of an investor shift towards lower-performing banks.

Erste Group raised RBC's stock from a Hold to a Buy rating, highlighting strong financial indicators such as its return on equity at 14.2%. These recent developments underscore RBC's strong performance and strategic growth in key sectors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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