Acquiring HSBC Canada proves profitable for Canada's biggest bank
Royal Bank of Canada (RBC) closed its 2024 fiscal year with solid growth, reporting a net income of $16.2 billion, up 11% from the prior year.
In the fourth quarter, RBC reported net income of $4.2 billion, up 7% from the same period last year. Adjusted net income rose 18% to $4.4 billion. However, compared to the prior quarter, net income fell 6%, driven by increased credit provisions and a decline in capital markets revenue.
Its acquisition of HSBC Bank Canada, completed earlier this year, contributed $453 million to RBC’s net income and bolstered pre-tax earnings by nearly $1 billion. HSBC also added $265 million to Q4 net income, contributing to pre-provision, pre-tax earnings of $437 million in the quarter.
RBC faced rising provisions for credit losses (PCL) as higher interest rates put pressure on borrowers. PCL on loans rose 17% year over year to $1.03 billion in the fourth quarter, with the personal and commercial banking segments accounting for much of the increase.
Read more: Canadian banks brace for economic headwinds in Q4 earnings
The PCL ratio on loans climbed to 35 basis points (bps) in Q4, up from 28 bps a year earlier, reflecting heightened caution in an uncertain economic environment.
The bank’s provision for impaired loans rose to 28 bps, a 7-bps increase from the prior year, while overall credit costs are expected to remain elevated through the first half of 2025.
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