(Bloomberg) -- Royal Bank of Canada, the country’s second-largest lender by assets, said quarterly profit rose 11% on gains in Canadian banking and wealth management.

Net income for the fiscal quarter ended Oct. 31 climbed to C$2.33 billion ($2.05 billion), or C$1.57 a share, from C$2.1 billion, or C$1.39, a year earlier, the Toronto-based bank said today in a statement. Adjusted profit, which excludes some items, was C$1.59 a share, matching the average estimate of 13 analysts surveyed by Bloomberg.

Royal Bank posted higher profit across all its key divisions except for capital markets and benefited from record earnings in Canadian banking. The lender’s RBC Capital Markets unit suffered the same fate as Bank of Montreal’s in the period, with profit falling on plunging fixed-income trading. This marks the first full quarter under Chief Executive Officer David McKay, who took over Aug. 1 when Gordon Nixon retired.

“We delivered another strong quarter of earnings growth, demonstrating the strength of our retail businesses and capital position, as well as our continued focus on efficiency management activities,” McKay, 51, said.

Royal Bank gained 14% this year, outpacing the 12% advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index. By comparison, the KBW Index of 24 U.S. lenders has advanced 4.7%.

Revenue rose 5.8% to C$8.38 billion from a year earlier, Royal Bank said. The lender set aside C$345 million for bad loans, up from C$334 million a year earlier.


Profit from personal and commercial banking climbed 7.6% to C$1.15 billion from a year earlier on record Canadian banking earnings helped in part by fee-based revenue growth, the company said.

Royal Bank’s capital markets unit posted a 14% decline in profit to C$402 million on lower trading revenue and costs tied to exiting some proprietary trading strategies to comply with regulations, the bank said. Total trading revenue plunged 43% to C$371 million, led down by a 70% drop in trading of interest rate and credit securities. Underwriting and advisory fees rose 8.6% to C$428 million.

Wealth management profit increased 41% to C$285 million from a year ago as fee-based client assets rose, while insurance more than doubled to C$256 million. Royal Bank said last month it’s exiting wealth management in the Caribbean and reviewing its private-banking and wealth operations in Switzerland.


RBC “managed to earn through a significant increase in provisions related to its Caribbean operations and weak capital markets,” John Aiken, a Barclays analyst, said today in a note to clients. “We would expect some relative outperformance against the group today as a relief rally, however, this highlights the relatively weaker results of BMO.”

Investor and treasury services, which includes Royal Bank’s global custodial business, rose 24% to C$113 million.

For the fiscal year, Royal Bank said annual profit increased 7.9% to a record C$9 billion, or C$6 a share, up from C$8.34 billion, or C$5.49, in 2013.

Royal Bank posted record results in each of its business segments for the year, McKay said, and looking ahead the bank remains “well-positioned” even as it anticipates “industry headwinds to persist.”

Bank of Montreal yesterday posted fourth-quarter profit that missed analysts’ estimates after capital markets earnings plunged to its lowest level in three years. Toronto-Dominion Bank, Canada’s largest lender, and No. 5-ranked Canadian Imperial Bank of Commerce report results tomorrow, followed by Bank of Nova Scotia and Montreal-based National Bank of Canada on Dec. 5.

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