ROYAL BANK OF CANADA $48 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $62.4 billion; SI Rating: Above average) is Canada’s largest bank, with total assets of $627.5 billion.
Royal is taking advantage of the slowing U.S. economy to expand its operations there. It recently agreed to pay an undisclosed sum for Houston-based Richardson Barr & Co., which advises oil and natural gas companies on acquisitions and divestitures. This purchase should help expand Royal’s earnings, as rising energy prices have spurred strong interest in privately held landholdings by exploration companies.
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The bank has also completed its purchase of Washington D.C. -based investment firm Ferris, Baker Watts, Inc. for an undisclosed sum. The firm has 42 offices in eight states, and will strengthen Royal wealth management operations in the U.S.
In its second fiscal quarter ended April 30, 2008, Royal wrote down $430 million worth of U.S. subprime loans. It has about $2 billion in remaining subprime exposure. However, that’s just 3% of its market cap.
Strong growth at its Canadian retail banking operations should push up Royal’s fiscal 2008 earnings to $4.45 a share. The stock trades at 10.8 times that figure. The $2.00 dividend yields 4.2%.
Royal Bank stocks are a buy.
