RBC's U.S. wealth revives fortunes in strong fourth quarter

RBC's U.S. wealth management business saw its revenue rise by 25% in its latest quarter as it shook off burdens tied to regional bank failures more than a year ago.

RBC Wealth Management, Royal Bank of Canada's U.S. wealth unit, reported $1.7 billion in revenue in its August-to-October period, which it calls its fourth quarter. That was up from $1.37 billion in the same period a year ago.

RBC Wealth Management's net income was also up substantially, coming in at $179 million for the fourth quarter. The unit had registered a net income loss of $202 million in the same period last year.

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Firm executives then placed blame for that shortfall on $380 million in legal costs and impairments related to RBC's purchase of City National Bank in 2015. City National, which maintains an independent brand, was one of many regional banks that required capital infusions after Silicon Valley Bank and other financial institutions failed in spring 2023, giving rise to fears of a faltering system.

RBC's latest quarterly earnings showed, though, that City National's fortunes have largely revived. It alone contributed just over a quarter of RBC Wealth Management's $179 million net income haul for the quarter.

Asset flows

Also helping the bottom line was a larger amount of assets in fee-generating accounts, driven both by appreciating markets and greater sales of mutual funds and similar products. That combined with higher revenues from transactions on behalf of clients.

Those fees were generated in part from $220 billion in assets under management, a number up 24% year over year. The U.S. wealth management unit's assets under administration, which include assets held for safekeeping and for drawing investment income from, were up 23% to $668 billion. RBC Wealth's assets under administration benefited from nearly $5.7 billion in net inflows. 

'Milestone' quarter for wealth

Altogether, Royal Bank of Canada's wealth management businesses — including those in the U.S., Canada and elsewhere — reported revenue of $5.2 billion in Canadian dollars, up 20% year over year. That generated CA$969 million in net income, up from CA$215 million a year ago.

In a call with analysts on Wednesday, RBC CEO David McKay called the quarter a "milestone" for the firm's global wealth business, noting that for the first time it had hit CA$2 trillion in assets under administration.

"In wealth management, assets under administration increased 26%, or nearly [CA]$180 billion from last year," he said.

Advisor headcount

The firm reported having 6,116 advisors in all of its wealth management businesses. That was down just slightly from 6,169 a year ago. McKay said on the call with analysts that RBC recruited roughly 100 advisors over the course of the year.

Wealth management contributed about a fifth of the Royal Bank of Canada's total net income for the quarter, according to a slideshow from the firm. Royal Bank's other business lines include personal and commercial banking and insurance.

All told, Royal Bank reported C$4.22 billion in net income (up 7%) on CA$15.1 billion in revenue (up 19%) for the fourth quarter.