Royal Bank (TSX:RY) is the largest financial institution in Canada and the largest stock on the Toronto Stock Exchange (TSX) by overall market capitalization. Canada’s top bank has been a profit machine and a dependable behemoth for investors on the hunt for a consistent blend of capital growth and income.
Today, I want to explore how a $5,000 investment in Royal Bank stock would have progressed until the present day. Moreover, I want to examine whether this top bank stock is worth snatching up in the second half of July. Let’s jump in.
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How has Royal Bank stock performed over the past year?
Shares of Royal Bank have increased 3.4% month over month as of close on Tuesday, July 18. That has pushed the stock into positive territory so far in 2023. Moreover, shares of this bank stock have now climbed 5.1% year over year. Investors can see more of Royal Bank’s recent performance with the interactive price chart below.
Before we look at this bank’s performance since the summer of 2020, let’s look at its recent earnings.
Should investors be pleased with the top bank stock’s recent earnings?
This bank released its second-quarter (Q2) fiscal 2023 earnings on May 25. Royal Bank delivered adjusted net income of $3.8 billion, or $2.65 diluted earnings per share (EPS) — down 13% or 11%, respectively, compared to the previous year. Meanwhile, adjusted net income in the first half (H1) of fiscal 2023 fell 4% to $8.10 billion, while adjusted diluted EPS dipped 2% to $5.76.
Royal Bank’s Personal and Commercial Banking segment saw net income drop 14% year over year to $1.91 billion in Q2 2023. Higher provisions set aside for credit losses (PCL) contributed to the drop in earnings. However, the bank’s Canadian operations did post higher net interest income and solid volume growth of 8%. The rate-tightening environment will limit credit growth, but that should be offset by improved profit margins for the banking sector.
The Wealth Management segment reported net income of $742 million — down 8% compared to Q2 fiscal 2022. This was due to lower average fee-based client assets that were driven by turbulent market conditions. Wealth Management was also negatively impacted by higher PCL and professional fees and staff costs.
Capital Markets was the only segment to deliver net income growth of 10% to $939 million in Q2 2023. This growth was powered by a lower effective tax rate, higher revenue in Corporate and Investment Banking, and the impact of foreign exchange.
Here’s how your 2020 investment would have evolved to the present day…
The broader Canadian market was faced with major volatility in the spring of 2020 as the severity of the COVID-19 pandemic started to become apparent to investors. Royal Bank, which was trading at a high of $109.42 on February 21, 2020, sank to as low as $72 on March 23, 2020.
Royal Bank stock closed at $95.86 on July 17, 2020. At the time, we could have purchased 52 shares of Royal Bank for a total price of $4,984.72. Shares of Royal Bank closed at $129.66 on Tuesday, July 18. That means those same 52 shares would be worth $6,742.32 at the time of this writing.
Royal Bank: Is this bank stock worth buying right now?
Shares of Royal Bank stock currently possess a favourable price-to-earnings ratio of 12. Moreover, this bank stock last paid out a quarterly dividend of $1.35 per share. That represents a solid 4.1% yield. Royal Bank is a stock I’d feel good about holding for the long haul.
