RBC wealth profits plummet despite advisor, AUM growth

RBC's overall profits rose last quarter, but its wealth management business stumbled.

The Canadian financial services giant revealed its latest numbers in a call with investors on Thursday. From August through October 2023 — which RBC refers to as the year's fourth quarter — the firm's net income reached $4.13 billion, up 6.4% from Q4 last year (all figures are in Canadian dollars, unless otherwise noted).

But RBC Wealth Management was a different story. That division's net income was $215 million, a 73.8% drop from the same quarter last year.

In the conference call, CEO Dave McKay acknowledged this decline but partly attributed it to a problem outside Canada's borders. In 2015, RBC bought the California-based City National Bank, which has struggled in the wake of the U.S. regional banking crisis and required shoring up in recent months. 

"Wealth Management earnings were down 74% from last year, largely reflecting the impact of $380 million of impairments and legal provisions in U.S. Wealth Management, including City National," McKay said. 

In September, RBC revealed that it had made a "capital injection" into City National, though it did not disclose the amount.

"We thought we'd have a record year in City National this year, and everything got turned upside down," McKay said at a conference at the time.

In other ways, RBC Wealth Management expanded. Its advisor headcount was up to 6,169 in the fourth quarter, 11 more than it had at this time in 2022. And its assets under management rose to $1.07 trillion, a 6.8% increase from last year.

"We believe the underlying performance of our Wealth Management advisory and Asset Management business was solid," McKay said during Thursday's call.

READ MORE: RBC makes biggest hire ever with $5.5 billion team from UBS

In recent years, RBC has moved aggressively to expand its wealth management business in the U.S. In 2023 alone, the firm recruited a $1.1 billion advisory team in Columbus, Ohio, a $1 billion team in Newport Beach, California, and a $5.5 billion team in Atlanta — RBC's biggest hire ever.

Whether that expansion will lead RBC Wealth Management back into the black next year, overcoming the headaches caused by City National and other issues, remains to be seen. On Thursday, McKay remained optimistic.

"We are well positioned entering into fiscal 2024," he said. "Our balance sheet remains strong."

For more details on how RBC performed in the fourth quarter of 2023, scroll through the cardshow below. To see how the firm did last quarter, click here. And for its Q4 results in 2022, click here.