July 20, 2018

Royal Bank (RY)

Royal Bank (RY) is Canada’s largest (measured in terms of market capitalization and assets) and most well-known bank. It is the only Canadian Bank  to be part of the top 35 largest bank in the world (by assets). It has grown steadily over recent decades to become one of the premier banks in the entire world.  As a Canadian bank it was not as exposed to the toxic debt, and over-leveraging that the huge USA banks were, and consequently they have come out of the recent economic downturn in relatively good financial shape.  Some industry elite even refer to Royal Bank as “The Goldman Sachs of Canada,” and while this might be overstating things by quite a lot (their business models are quite different), it does convey the level of prestige that the Royal Bank of Canada (RY) is receiving around the world.  RBC employs about 79,000 employees around the world who serve over 18 million clients in Canada, the USA, and internationally in 56 other countries.

 

rbcThe story of RBC starts back in the early 1870s and was originally named the Merhcants’ Bank of Halifax.  It was later renamed the Royal Bank of Canada in 1901.  RBC (RY) has risen with the rise of Canada and has been noted for its ability to execute bold strategies.  The company has a simple vision of, “Always earning the right to be our clients’ first choice.”  The bank is also one of North America’s most diversified banks with branches in personal and commercial banking, wealth management services, insurance, corporate and investment banking.  The company’s strategic goals are to continue to be the undisputed leader of financial services in Canada, to be a leading global provider of capital markets and wealth management solutions, and finally, in targeted markets, to be a leading provider of select financial services complementary to our core strengths.  I like this clear, concise notion of where the company is coming from and where it is going to.

 

 

 

RBC (RY) has recently been adding to growing umbrella of operations.  For its Canadian base they have installed a currency exchange platform for stock traders who wish to own American stocks inside their tax-advantaged retirement accounts.  They have also recently come out with their own line of exchange traded funds (ETFs) in order to compete with their Canadian banking brethren.  Internationally, they have been recognized Scorpio Partnership (a specialist consultancy) as the 6th greatest wealth management company in the world.  As other corporations have pulled out of the USA investors market, RBC continues to expand its wealth management operations there, even as they sold their American retail banking properties.  RBC has been hit by their exposition to the US market and Dexia Partnership in 2011. However, they are sitting on a solid balance sheet and are well positioned for the upcoming years.

RBC management has made a lot of smart decisions in the past decade and their growth has been substantial as a result.  If you have extremely low risk tolerance then the recent downgrade from AAA to AA by Moody’s due to increased exposure to securities might be of note to you, but I believe now is the time to be getting into securities around the world.  Its Price-to-Earnings ratio is around 14, which is higher than some of the other Canadian banks, but its yield of 4.50%, dividend-raising history, and strong global positioning, make RBC stand out amongst its peers for me.

 TSE RY

RY Dividend Metrics

Ticker Name Dividend Yield Payout Ratio DEBT_TO_MKT_CAP Dividend Growth 5 years Dividend Growth 1 years
RY Royal Bank of Canada 4.50% 57.26% 1.23 8.91% 0.00%

 

 

 

 

Trackbacks

  1. […] banks, and then everyone else.  These banks used to be called, “The Big 5,” which included the Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal, and the Bank of Nova […]

  2. […] in the long run, but it is definitely a bold attempt to keep up with its competitors such as Royal Bank of Canada (RY) and Toronto-Dominion Bank […]

  3. […] the Canadian banks as if they were all the same, there are some differences.  TD and Royal Bank (RY) are decisively bigger than the Bank of Nova Scotia (BNS), the Bank of Montreal (BMO), the National […]

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