RBC planning to reduce workforce as CEO McKay vows to limit expenses

Royal Bank of Canada said it plans to cut as much as two per cent of its full-time staff in the coming quarter after a surge in expenses weighed on third-quarter results.

Expenses climbed 23 per cent to $7.86 billion for the fiscal third quarter, compared with the $7.31 billion average of analyst estimates compiled by Bloomberg. Royal Bank ended the quarter with 93,753 employees after it shed about 645 jobs in the period.

“We remain focused on executing on our cost reduction strategy while leveraging our strong balance sheet and diversified business model to support our growth,” Chief Executive Officer Dave McKay said in a statement Thursday.

RBC and its rivals have turned to trimming their workforces as a way to cut costs while central-bank activity around the world boosts interest expenses and crimps margins industry-wide.

Royal Bank’s wealth-management division bore the brunt of the job cuts in the second quarter, according to filings. The unit’s headcount plummeted by almost 1,300 in the quarter, countering a 667-person increase in the firm’s capital-markets division.

A jump in earnings from the firm’s traders and investment bankers helped boost firmwide net income 8.2 per cent to $3.87 billion for the three months through July, and per-share earnings beat estimates. Net income from the firm’s capital-markets division soared 57 per cent to $938 million, topping the $805 million average of analysts’ estimates.

Trading desks in recent weeks have benefited from an increase in client activity as investors wrestle with the impacts of rising interest rates globally. Investment bankers, too, are seeing a pickup in deals compared with the doldrums of a year ago.

At Royal Bank, revenue from the firm’s trading of interest-rate and credit products helped counter continued weakness in equities, foreign-exchange and commodities trading.

Canada’s largest bank has been on a dealmaking spree. Earlier this year, the Toronto-based firm announced it would acquire HSBC Holdings Plc’s Canadian unit for $13.5 billion to extend its lead in domestic retail banking. Royal Bank has warned the acquisitions would boost costs in the coming quarters.

The company’s shares have slumped 5.5 per cent this year through Wednesday, more than the 4.5 per cent decline for the S&P/TSX Commercial Banks Index.

 

This article was reported by BNNBlommberg.ca