RBC U.S. wealth pulls in $5.12B after advisor hires
RBC’s U.S. wealth unit reported $5.12 billion in net new assets in Q2, about $2 billion from recruited advisors, and assets under administration of $798.4 billion.
Royal Bank of Canada’s U.S. wealth division recorded $5.12 billion in net new assets in its fiscal second quarter, covering February through April. About $2 billion of the inflows were linked to advisors recruited from other firms. The bank reported U.S. assets under administration of $798.4 billion and the net new assets number as CA$7.1 billion.
On a call with analysts, the bank said the $5.12 billion figure represents client flows rather than market-driven gains. RBC recently revised how it calculates net new assets to include reinvested interest and dividends, less client outflows, fees, commissions and taxes.
CEO David McKay said the advisor hires helped raise U.S. assets under administration 16% from a year earlier. He also pointed to growth in lending: the unit’s credit and loan balances rose 16% year over year, and loans arranged through City National, the Los Angeles bank RBC acquired in 2015, increased 9%.
Revenue for the U.S. wealth business rose nearly 10% year over year to $1.89 billion for the quarter. RBC attributed the revenue increase to higher net interest income driven by wider spreads and higher average loan volumes.
Across all of RBC’s wealth businesses in the U.S., Canada and internationally, assets under administration rose 17% year over year to just over CA$5.5 trillion. Assets under management increased 20% to CA$1.6 trillion. Total wealth revenue grew 10% to nearly CA$6 billion and net income was up 28% to almost CA$1.2 billion.
Total advisor headcount increased just over 1% year over year to 6,276; the bank does not disclose a U.S.-only advisor count.
Chief Risk Officer Graeme Hepworth said net income for the wealth unit fell slightly from the prior quarter after the bank increased provisions for loans at risk of nonpayment. The business recorded CA$224 million in impaired loans, concentrated in City National and linked to exposures in utilities, real estate, other services and the consumer mortgage portfolio. “This quarter, we’ve identified a small subset of high-risk clients, most of which were subject deferral programs, that we have now moved into impaired status,” Hepworth said.
The quarter combined higher client inflows tied to recruiting and loan growth with increased provisions for impaired loans.
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