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Royal Bank of Canada serves households, businesses and institutional investors, with Canada supplying most of its revenue and the United States its next-largest market. Personal and commercial banking, together with wealth management, generate most of its revenue. Customers use the bank to hold deposits, make payments and borrow for homes, personal needs or businesses. Client deposits are the main funding source for retail and commercial lending; the bank earns the difference between interest received on loans and other assets and interest paid on deposits and other funding.
Wealth Management, its largest individual revenue segment, manages investments and safeguards and administers assets that belong to clients, charging management and custody fees. RBC Capital Markets also contributes substantial revenue by helping companies and governments raise money and advising on deals, while providing financing and trading services to institutional clients. It earns fees, lending income and trading revenue. RBC Insurance is a much smaller business serving individuals and companies.
The business depends on lending and deposit volumes, the interest spread it retains, client asset values and financial-market activity. Its federally regulated institutions must maintain adequate capital and liquidity, and Canada’s Office of the Superintendent of Financial Institutions can require them to increase either.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
RBC’s Canadian lending, deposit margins and credit quality deserve watching alongside National Bank of Canada, an important rival missing from this list.
TD competes with RBC for Canadian households’ and businesses’ banking, investment and insurance spending, as well as wholesale banking business. TD’s Canadian mortgage demand and credit losses offer a comparison for the lending conditions RBC faces.
BMO competes with RBC for Canadian deposit, lending and investment clients, and for North American companies’ fundraising and advisory business. BMO’s Canadian loan and deposit growth helps put RBC’s banking growth in context.
CIBC faces the same Canadian loan-demand and credit-quality pressures as RBC while competing for retail and business banking, wealth and capital-markets clients. Its banking business with Canadian middle-market companies and entrepreneurs is a useful comparison for RBC’s commercial lending.
Scotiabank competes with RBC for Canadian banking and wealth clients, and for companies’ borrowing and fundraising business. Watch its Canadian banking interest margins and household borrowing for a comparison with RBC’s retail banking conditions.
Morgan Stanley competes with RBC to advise US wealth clients, trade securities for institutions and manage investments. Its wealth-client investment balances help gauge the market backdrop for RBC’s US wealth fees, which benefit from higher fee-based client assets.
JPMorgan Chase competes with RBC to lend to businesses, help companies raise money and manage investments for wealthy and institutional clients. Its corporate financing and securities-trading activity provide a comparison for demand at RBC Capital Markets.
Bank of America competes with RBC’s US operations for wealth and business-banking clients, and globally for companies’ financing and trading business. Its wealth-client balances are worth comparing with RBC’s US fee-based client assets, a driver of wealth revenue.
Goldman Sachs competes with RBC to help companies raise money, execute securities trades and manage clients’ investments. Goldman’s fees from advising companies and arranging share and debt sales offer a concrete comparison for RBC’s underwriting and advisory revenue.
Citi competes with RBC for corporate and institutional banking, securities trading, services that support securities holdings and transactions, and wealth clients. Its Markets revenue provides a comparison for RBC’s trading business, while Services revenue offers another view of client transaction activity.
Wells Fargo competes with RBC’s US wealth advisers and City National for affluent clients and their businesses, and with RBC Capital Markets to finance companies. Its US business credit quality is worth watching alongside the lending conditions facing City National’s entrepreneurs and business clients.
Barclays Investment Bank competes with RBC Capital Markets to finance corporate and institutional clients and handle their securities trades. Its activity in arranging securities sales and trading is the relevant comparison for RBC, rather than Barclays’ UK retail banking business.
HSBC remains a rival to RBC for international corporate banking and wealth clients, despite selling its Canadian banking business to RBC. HSBC’s wealth fees and corporate foreign-exchange business are the useful signals for the international client activity RBC also serves.
Housing Starts (Sep)
U.S. housing starts, permits and new-home sales track building activity and demand; for RBC, weaker activity can strain U.S. housing-related borrowers and raise credit risk on its lending.
Expected1.31MLast release1.275M
If it comes in above expectations
If the reading is above the 1.31M estimate, it is above the previous 1.275M. More starts, permits or sales point to firmer U.S. housing activity, which may support housing-related borrowers and reduce credit pressure on RBC’s lending; fewer point the other way.
If it comes in below expectations
Fewer starts, permits or sales point to weaker U.S. housing activity, which may strain housing-related borrowers and raise credit risk on RBC’s lending; more point the other way.
Barclays PLC earningsBCS
Barclays’ report will show activity in securities issuance and trading for corporate and institutional clients, a market shared with RBC Capital Markets.
Look at Barclays Investment Bank’s securities-arranging and trading activity. Stronger activity would indicate more corporate and institutional demand to raise money and trade securities, expanding the opportunity in the market RBC Capital Markets also serves; weaker activity would point to fewer opportunities there, but would not establish RBC’s own revenue.
Initial Jobless Claims (Oct/17)
U.S. initial jobless claims count new applications for unemployment benefits and track layoffs; for RBC, sustained job losses can weaken borrowers’ ability to repay loans and increase credit losses.
Expected200.0KLast release199.0K
If it comes in above expectations
If the reading is above the 200.0K estimate, it is above the previous 199.0K. More new claims indicate rising layoffs and may weaken U.S. borrowers’ ability to repay RBC loans, increasing credit-loss risk; fewer claims may ease that pressure.
If it comes in below expectations
Fewer new claims indicate fewer layoffs and may support U.S. borrowers’ ability to repay RBC loans, easing credit-loss pressure; more claims may increase that pressure.
HSBC Holdings PLC earningsHSBC
HSBC’s report will show activity among international wealth and corporate clients, offering a read on some of the cross-border clients RBC also serves.
Read HSBC’s wealth-management fee income alongside its corporate foreign-exchange activity. Strength in both would indicate busier fee-generating wealth business and corporate cross-border transactions, a supportive signal for RBC’s related client businesses; weakness in both would suggest slower activity, but HSBC’s results cannot substitute for RBC’s own.
Fed Interest Rate Decision
The Fed’s policy rate is the benchmark that influences borrowing costs and deposit rates; for RBC, those rates affect what borrowers pay on retail and commercial loans and what the bank pays depositors, shaping credit losses and net interest income.
Expected4.0%Last release4.0%
If it comes in above expectations
A higher-than-expected policy rate could lift payments on borrowers’ repricing loans and increase credit losses, while RBC’s net interest income would depend on whether loan rates rise more than its deposit costs.
If it comes in below expectations
A lower-than-expected policy rate could ease payments for borrowers with repricing loans and reduce credit-loss pressure, while RBC’s net interest income would depend on whether loan rates fall more than its deposit costs.
JOLTs Job Openings (Sep)
U.S. job openings measure employers’ demand for workers; for RBC, a weakening labor market can make borrowers less able to repay retail and business loans, raising credit-loss risk.
Expected7.0MLast release7.079M
If it comes in above expectations
More openings indicate stronger U.S. hiring demand and may support borrowers’ ability to repay RBC loans; fewer openings may signal rising employment-related credit risk.
If it comes in below expectations
If the reading is below the 7.0M estimate, it is below the previous 7.079M. Fewer openings indicate weaker U.S. hiring demand and may signal pressure on borrowers’ ability to repay RBC loans, raising employment-related credit risk; more openings may ease that pressure.
Non Farm Payrolls (Oct)
The U.S. payrolls report counts jobs added or lost and tracks employment and income; for RBC, weaker employment can strain U.S. borrowers’ loan repayments and weigh on demand from its U.S. clients.
More jobs added suggest U.S. employment and income are holding up, which may support loan repayment and client demand; fewer jobs may signal pressure on RBC borrowers and weaker demand from U.S. clients.
Bank of Montreal earningsBMO
BMO’s report will show Canadian customers’ loan and deposit growth, providing a market comparison for RBC’s Canadian banking business.
Look at loan and deposit growth in BMO’s Canadian business. Growth in both would suggest Canadian customers’ borrowing and saving demand is holding up, a stronger demand signal for RBC’s domestic business; slower growth would point to a tougher market for expanding bank business, but would not directly establish changes in RBC’s balances.
Royal Bank of Canada earningsThis company
RBC’s report will show whether its lending and deposit business turns margins and client balances into profit while absorbing credit losses and operating costs.
Read net interest income and margin alongside loan and deposit balances in Personal and Commercial Banking, then weigh them against credit-loss provisions and expenses. Stronger income and balances with a steady margin, without provisions and costs absorbing the gain, would show the businesses turning client activity into profit; weaker balances or margins, or faster-growing provisions and costs, would show that contribution under pressure.
Canadian Imperial Bank of Commerce earningsCM
CIBC’s report will show borrowing demand and repayment pressure among Canadian middle-market companies and entrepreneurs, a comparison for RBC Commercial Banking.
Read CIBC’s Canadian middle-market lending growth alongside credit losses. Growing loans with contained losses would suggest demand is holding up without a marked rise in repayment strain, a positive signal for the similar businesses RBC serves; slower lending or rising losses would point to weaker demand or greater pressure on borrowers.
Morgan Stanley earningsMS
Morgan Stanley’s report will show changes in US wealth clients’ investment assets, a market comparison for the fee-based assets in RBC’s US wealth business.
Look at changes in Morgan Stanley’s wealth-client investment assets, noting whether growth comes from market appreciation or net client inflows. Rising balances would indicate a larger base of assets that can generate fees, a supportive market signal for RBC’s US wealth business; falling balances would point to a weaker backdrop for fee-based assets, but would not establish flows at RBC.
Wells Fargo & Co. earningsWFC
Wells Fargo’s report will show the credit condition of US business borrowers, a comparison for the companies served by RBC’s City National.
Look for rising credit losses on Wells Fargo’s business loans. Higher losses would signal increasing repayment strain among US business borrowers and warrant attention to the entrepreneurs and companies served by RBC’s City National; contained losses would offer less evidence of broadening business-credit stress, but the banks have different customer mixes, so one bank’s result is not the other’s performance.
