NEW YORK (TheStreet) -- Shares of Royal Bank of Canada (RY) are down -1.25% to $73.72 after it was reported that the bank is facing a conundrum about one of its fastest growing businesses: when to apply the brakes, the Wall Street Journal reports.
The bank's capital markets business, after pushing for years to become a global player, threatens to become a victim of its own success, the Journal said.
Earnings from capital markets, which the company today said contributed about 27% to its overall profit, are coming up against a self-imposed limit that is key to the risk control on which Canada's banks built their recent reputation.
TheStreet Ratings team rates ROYAL BANK OF CANADA as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROYAL BANK OF CANADA (RY) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- ROYAL BANK OF CANADA has improved earnings per share by 17.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, ROYAL BANK OF CANADA increased its bottom line by earning $5.51 versus $4.96 in the prior year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Banks industry average. The net income increased by 15.4% when compared to the same quarter one year prior, going from $1,885.00 million to $2,175.00 million.
- You can view the full analysis from the report here: RY Ratings Report