RBC grows first-quarter profit by 24 per cent to $3.03 billion

The Royal Bank of Canada sign is seen at its former head office in downtown Toronto, Dec. 2, 2011. (Nathan Denette / THE CANADIAN PRESS)

TORONTO -- Royal Bank of Canada, the country's largest lender, reported stronger-than-expected first-quarter results Friday on the back of solid earnings from its Canadian banking, wealth management and capital markets businesses.

RBC (TSX:RY), the second of the five big banks to report quarterly earnings, had $3.03 billion of net income during the quarter, up 24 per cent from a year ago.

That amounted to $1.97 per diluted share, up 39 cents from the same quarter last year.

"Credit quality across our portfolios also improved, benefiting from stable economic conditions in Canada and higher oil prices," CEO David McKay said during a conference call to discuss the bank's results.

RBC reduced the amount of money it has set aside for bad loans to $294 million, down 18 per cent from the previous quarter thanks in part to recoveries in the oil and gas sector.

Total gross impaired loans came in at $3.56 billion, down $344 million from the fourth quarter of last year.

The Toronto-based bank shuffled its management ranks, moving Jennifer Tory, the sister of Toronto mayor John Tory, to the role of chief administrative officer.

For the past three years Tory has served as group head of personal and commercial banking at RBC, a role that will be taken over by Neil McLaughlin, currently the executive vice-president of business financial services.

The lender cautioned that it's keeping an eye on its portfolio of mortgage loans in Toronto and Vancouver, two markets that some economists have cautioned could be in a bubble.

"Given accelerated house price appreciation in both of these markets we continue to closely monitor this portfolio with extra due diligence for higher value mortgages," chief risk officer Mark Hughes told analysts.

"Overall, we remain comfortable with our residential mortgage portfolio given our clients' ability to repay and the strong underlying credit quality of this portfolio."

Barclays analyst John Aiken said RBC's results reflected some of the trends seen in CIBC's earnings on Thursday.

"Royal's first quarter benefited from stronger-than-anticipated credit quality, trading revenues and cost controls, which is quickly becoming the theme of the quarter," Aiken said in a note to clients.

CIBC (TSX:CM), Canada's fifth largest bank by market cap, also beat expectations, reporting net income of $1.41 billion as trading revenues rebounded and credit losses were better than anticipated.

Scotiabank (TSX:BNS) and the Bank of Montreal (TSX:BMO) will report on Tuesday, and TD Bank (TSX:TD) will wrap up the earnings parade on Thursday.

RBC said revenue for the three months ended Jan. 31 was $9.55 billion, up from $9.36 billion during the same period last year.

After adjustments the lender had $1.87 per share of earnings, higher than the $1.77 per share that analysts had expected, according to Thomson Reuters.

But shares of Royal Bank were down 80 cents, or 0.81 per cent, in morning trading to $97.46. The broader Canadian financial sector was also lower on Friday.

After stripping out the sale of the U.S. operations of Moneris, RBC said it earned $2.82 billion, up 15 per cent from a year ago.

RBC also boosted its dividend by four cents, or five per cent, to 87 cents per share, payable on May 24.