Canada’s banking sector is making a comeback after earnings were hit hard by the pandemic. And one of the Dividend Kings — Royal Bank of Canada (TSX:RY)(NYSE:RY) — showed strong Q2 performance compared to the same quarter last year. Moreover, this bank is seeing significant growth in its personal and commercial banking, wealth management, and capital markets.
Here is a brief overview of why RBC should remain atop long-term investor’s watch lists right now.
Earnings on the rise
RBC’s latest quarterly results were pretty darn good.
The company reported unworldly net income growth. The mega-cap bank brought in $4 billion this past quarter, representing a 171% increase over the $1.5 billion booked during this same quarter a year earlier.
Indeed, the majority of this growth has to do with loan-loss provisions being removed since Q2 of last year. Like its banking peers, Royal Bank was forced to incur massive loan-loss provisions during this same quarter a year prior. With these $2.8 billion in loan losses officially off the books, RBC’s bottom-line numbers shined through this past quarter.
Additionally, RBC’s adjusted earnings per share came in at $2.79. This handily beat consensus analyst estimates of $2.51 for this quarter. Growth in all of the company’s core businesses was strong, and the outlook for these businesses looks brighter than at any point during this past year.
Among the businesses to highlight, RBC’s capital markets division brought in net income of $1.1 billion this past quarter. This represented massive growth from last year’s $105 million result, tied to loan-loss provisions.
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These improved numbers and the removal of loan-loss provisions from RBC’s books is a solid indicator for long-term investors. Indeed, RBC has been mired by these potential losses over the past year. With the pandemic seemingly behind the company, investors can now focus on what the future holds.
Indeed, the outlook among most investors is bullish right now. There’s reason to believe economic activity will once again pick up steam. For world-class banks like RBC, this macroeconomic news matters more than for most companies.
RBC provides investors with a healthy revenue stream in addition to excellent capital appreciation prospects. Indeed, the company’s 3.4% dividend is what I view as icing on the cake for long-term investors. Given the fact that Royal Bank is swelling with cash, and its liquidity ratios remain strong, I expect dividend hikes to take place as soon as Canada’s banking regulator allows for RBC to do so.
Long-term investors seeking growth and stability simply can’t go wrong with RBC. It’s one of the best mega-cap names in Canada, or the world, for that matter.
Like this top pick in the banking sector? Here are a few other high-growth options to consider right now:
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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.