The six major Canadian banks have been an integral part of core holdings in several North American investors’ portfolios. Going by multiple EPS reports, banks in general have shown consistent growth, providing safe dividends over time.
Despite being consistently undervalued, I think these are some of the best stocks to buy right now. Now rallying alongside other large-cap Canadian banks, Royal Bank of Canada (TSX:RY)(NYSE:RY) is yet another turnaround play investors should consider right now.
Royal Bank’s numbers are loud and resounding
Royal Bank churned out $3.85 billion in the first fiscal quarter ending January 31, 2021, compared to $3.51 billion last year. Analysts estimated a profit of $2.28 per share, but RY surpassed predictions and bagged a profit of $2.69 per share on an adjusted basis.
Its overall profit jumped 10% in this quarter, backed by a breakthrough performance in its capital markets division. Profits from equity trading activity in this division in the U.S. soared 21% to clock another record $1.07 billion. Royal Bank also reaped benefits from a drop in loan-loss provisions, which fell to $110 million from $427 million in the previous quarter.
RY’s personal and commercial banking operations contributed a massive share to the profit results, as its net income rose 6% YoY to $1.79 billion. The Canadian residential mortgage book also maintained an average balance of $305.1 billion in the first fiscal quarter of 2021 compared to $293 billion in the previous one. Hence, in my opinion, RY stock serves as a superb addition to any long-term investor’s portfolio, especially now.
Time to be bullish on Royal Bank today, before it’s too late
Analysts anticipated massive loan losses for banks during the global financial contraction in 2020. However, given the amount of stimulus pumped into the market, loan losses were not as bad as the investors predicted. Moreover, I think the Big Six banks were conservative with their provisioning estimates for credit losses.
Once these provisions are removed, I think RY will be the first to recover among its peers. This is primarily due to its superlative international growth, backed by a 16% global contribution to its revenues in FY2020. Hence, as far as I’m concerned, Royal Bank is one of the most stable stocks investors can take a bite of. International market exposure will help them recover significantly faster, which means this top TSX stock won’t remain cut-rate for too long.
Royal Bank of Canada boasts of a diversified business across several channels, like P&C banking, capital markets, wealth management, and insurance. A massive chunk of its revenues is Canada based. However, its growing international exposure provides it with the potential to outperform broader markets in the long term.
Like today's top pick? You'll definitely like these other growth-packed picks here at the Motley Fool:
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Chris MacDonald has no position in any of the stocks mentioned.