RBC Wealth Management saw its net income spike in the second quarter driven largely by inflows of client assets.
Royal Bank of Canada's U.S. wealth management subsidiary reported $176 million in net income for the quarter ending on April 30. That was up a full 25% from the same period a year ago.
Driving RBC Wealth Management's increased revenues were strong inflows of clients assets. RBC Wealth Management saw its assets under management increase by 15% year over year to $200 billion. Its assets under administration, which include assets held for safekeeping and for drawing investment income from, were up 12% to $611 billion.
Royal Bank of Canada CEO David McKay said that was a record for the firm. RBC Wealth Management has benefited from net inflows of $15 billion in assets under administration in the past two years, in part driven by
"One of our ongoing key strategic objectives for our Wealth Management businesses is to attract and retain top performing financial advisors," McKay said in a call with analysts.
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All told, Royal Bank of Canada reported its net income rose by 7.3% year over year to $3.95 billion in Canadian dollars. One Canadian dollar is now worth roughly 75 cents in U.S. currency.
Weighing heavily on the Toronto-based bank's results was its purchase on March 28 of HSBC Holding's Canadian assets for $13.5 billion Canadian. Partly because of that transaction — the largest in Royal Bank of Canada's history — its costs rose by 12% year over year.
For more on the second quarter results, scroll down.
Advisor headcount
The Royal Bank of Canada reported having 6,128 advisors in its wealth management businesses in the U.S., Canada and overseas at the end of the second quarter. That was down slightly from 6,246 in the same period a year ago.
Revenue and expenses
RBC Wealth Management saw its revenue rise by 10% year over year to $1.62 billion. Net income from its Royal Bank of Canada's City National Bank — a Los Angeles bank bought in 2015 — rose by a whopping 92% to $48 million.
Offsetting the wealth management unit's total revenue were $1.4 billion in expenses, a figure up 9% year over year. That was driven by higher compensation costs — primarily greater commission payouts — as well as costs related to City National Bank.
Overall wealth management
The Royal Bank of Canada saw its net income from all of its wealth management business rise by 7% year over year to $769 million in Canadian dollars. Its assets under management for all those units were up by 13% year over year to $1.2 billion Canadian.
Remark
Speaking to analysts on a call Thursday, Neil McLaughlin — RBC group head of personal and commercial banking — fielded a question about retaining clients from the recently bought portions of HSBC in Canada. McLaughlin said the deal has brought new opportunities for the firm's wealth business, which is overseen by Doug Guzman.
"We've already seen some great referrals as we look at … a high income, affluent customer base that hasn't had the leading wealth management platform that Doug's team leads," McLaughlin said.
