Royal Bank of Canada (TSX:RY) has slowly but surely been climbing back to 52-week highs once more. And it’s causing investors to wonder whether it’s still alright to consider the stock? In short: yes.
Today, let’s go over the best reasons to consider Royal Bank stock on the TSX today. Further, let’s explore what investors have in store for 2024 and beyond.
Royal Bank stock remains the largest of the Big Six Banks, providing investors with safe and steady income since 1864! In that time, it’s seen its fair share of recessions, depressions, and now even a pandemic. And it’s come out the other side.
Part of this strategy is the expansion into the wealth and commercial management sector, a highly lucrative branch that’s seen much success. Further, investments into emerging markets have also provided strong returns.
Yet even more recently, analysts have been eyeing what’s now become official. That’s the purchase of HSBC, something the Big Six Banks have been drooling over for decades. So let’s get into that next.
In December, Ottawa approved the acquisition of HSBC by Royal Bank, creating a huge growth opportunity for investors in the very near future. The $13.5-billion takeover of the company, based out of Britain, would add an additional 4,000 employees, and around 780,000 clients.
Part of the deal came with a few strings, such as providing $7 billion in financing for affordable housing across Canada, building 25,000 homes. Yet it seems a small price to pay for a bank combination of this scale, which hasn’t happened in over 20 years, with HSBC holding the position of seventh-largest bank in the country.
What’s more, 40% of HSBC customers are considered “affluent,” mainly living in Vancouver and Toronto. This is perfect for the bank known for the management of high-income earners. It also provides the ability to expand on a more international scale, with higher-income newcomers to Canada included as well.
The thing is, Royal Bank stock still remains valuable. This comes after the stock continued to see difficulties during this economic downturn. The stock put aside $720 million in provisions for credit losses during its most recent quarter. This was higher than anticipated, and almost double last year’s provisions.
Revenue rose by 4% to $13 billion, but expenses also went up by 13% year over year. Yet overall, the stock beat out analyst estimates, with a surge from capital markets earnings. The stock therefore remained stable, which is notable compared to other banks that saw quite a large amount of losses.
So with the HSBC deal now gone through, now really is an excellent time to consider this stock. Royal Bank stock currently trades at 12.8 times earnings, with a 4.1% dividend yield as of writing. Further, shares are up 2.5% in the last year, nearing 52-week highs of $140 per share. Yet with all-time highs around $145, that could leave investors with a potential upside of 7% as of writing. So grab that dividend and gain returns while the value still exists!