08/26/2015 08:26 EDT | Updated 08/26/2016 05:59 EDT

Fee Hikes Help RBC To Record-High Canadian Earnings

The headquarters of RBC Bank, the U.S. unit of Royal Bank of Canada, stand in Raleigh, North Carolina, U.S., on Thursday, Dec. 17, 2009. Royal Bank of Canada's international banking unit, which includes RBC Bank, had a loss of C$125 million in the fourth quarter. Photographer: Jim R. Bounds/Bloomberg via Getty Images

TORONTO — Royal Bank of Canada will be raising its dividend to shareholders following a third-quarter profit of $2.475 billion that included record-high earnings from its Canadian banking arm.

RBC's profit for the three months ended July 31 was up four per cent from a year ago and amounted to $1.66 per share of net income.

On an adjusted basis, its cash earnings were $1.68 cents per share — one cent above analyst estimates.

The bank says its quarterly dividend will be increased by three per cent to 79 cents per share, up two cents per share.

About half of RBC's total profit was from personal and commercial banking, including $1.239 billion from its Canadian operations — a record for Royal.

RBC says the increased profit from its core Canadian operations was driven by added business volume and a 10 per cent increase in fee-based revenue.

Royal was the second of Canada's big banks to report third-quarter results this week. Bank of Montreal (TSX:BMO) also beat analyst estimates as its net income rose six per cent from last year to $1.19 billion.

Analysts have been watching the banks closely to see how they are being affected by a dramatic plunge in the price of oil, which affects the overall Canadian economy, but some say it will be awhile before the banks' results will show the impact.

As with Bank of Montreal, RBC said it benefited in the May to July quarter from operating in different geographic areas and offering a variety of financial services.

“We delivered a solid quarter, with earnings of over $2.4 billion, reflecting underlying strength across our businesses and strong execution in a challenging environment," RBC president and chief executive Dave McKay said in a statement. 

In personal and commercial banking, RBC had record net income of $1.281 billion, up $143 million or 13 per cent from last year, when the bank recorded a loss from the sale of its Jamaican operations. Excluding the impact of RBC Jamaica, the profit would have been up $103 million or nine per cent from last year.

Some of the bank's other divisions didn't do as well as last year.

RBC Capital Markets had $545 million of net income, down 15 per cent or $96 million from last year's record high. The bank says RBC Capital experienced lower trading activity and lower equity origination.

In addition, a lower profit at RBC's insurance business offset most of a year-over-year gain at its treasury services arm and wealth management had net income of $285 million — little changed from last year.

The bank says the insurance results — with net income falling $41 million or 19 per cent to $173 million — were affected by a change in Canadian tax legislation and higher net claims costs in part of its business.

Its investor and treasury operations, which increased net income by $57 million or 52 per cent to $167 million, benefited from a number of factors including higher earnings from foreign exchange and custodial fees.

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