Royal Bank of Canada RY shares have performed strongly over the past quarter, rising 21.1 percent, as compared to the 6.5 percent rise in the S&P 500.
Argus’ Stephen Biggar initiated coverage of the company with a Buy rating and price target of $69.
Robust Performance
The company reported its adjusted earnings for 2Q on May 26 at $1.66, marginally below the year-ago levels but beating the consensus.
Biggar mentioned the results reflected “strong earnings in Wealth Management, record earnings in Personal & Commercial Banking and higher earnings in Insurance. The late 2015 acquisition of City National has provided a strong platform to expand the company’s high net worth franchise.”
Royal Bank of Canada intends to expand the City National business over several states. The business is already well positioned in the fastest growing net worth areas of New York, Chicago, San Francisco and Washington D.C.
Growth And Expansion
“While other Canadian banks have exposure to U.S. wealth and financial markets, RBC has focused on the highest margin areas of wealth management, capital markets and high net worth, rather than traditional banking, where Canada accounts for the vast majority of loans and net income,” Biggar explained.
Canada accounts for about 62 percent of the company’s revenues, while the United States accounts for 21 percent and the other international markets for 17 percent.
Biggar believes expansion and diversification outside Canada would continue to be the primary growth driver for the company.
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