ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.7; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $800.4 billion of assets.
The bank has come under fire recently over allegations that it colluded with other global banks to manipulate the benchmark London Interbank Offered Rate (LIBOR). Banks around the world base their own lending rates on LIBOR. Royal has denied these charges.
Royal also continues to cut its exposure to the PIIGS countries. As of April 30, 2012, it held $1.2 billion of loans and securities from these nations. That’s down from $1.4 billion on October 31, 2011.
Meanwhile, the bank’s earnings rose 4.9% in its fiscal 2012 second quarter, which ended April 30, 2012, to $1.8 billion, or $1.15 a share. A year earlier, it earned $1.7 billion, or $1.10 a share. Revenue rose 1.4%, to $6.9 billion from $6.8 billion.
Loan-loss provisions rose 27.5%, to $348 million from $273 million. That’s mainly because businesses in Canada and the Caribbean are falling behind on their payments.
Royal should earn $4.80 a share in fiscal 2012. The stock trades at 11.0 times that estimate. The $2.28 dividend yields 4.3%.
Royal Bank is a buy.
