Royal Bank of Canada Holding Its Own

Sep.29.08 | About: Royal Bank (RY)

Royal Bank of Canada (NYSE:RY) says it is holding steady in the wake of the continuing U.S. financial crisis, which is good enough for Desjardins Securities to maintain its buy rating after attending RBC's annual investor day last week.

“Management stated that it is satisfied with the minimal exposure Royal Bank has with banks in the news recently,” Desjardins analyst Michael Goldberg says in a report. As the bank did not make any material announcements, Mr. Goldberg maintains a target per-share prediction of $57.   

RBC also announced it has no plans for a large U.S. capital markets acquisition, but Mr. Goldberg notes the bank's capital markets segment does continue to make up between 20% and 30% of revenues.

In fact, RBC has become a beneficiary of desperate billion-dollar clients looking for a safe haven. “We are doing business with clients that historically we would have struggled to get into. They would have been solely the property of bulge-bracket firms,” co-chief executive of RBC Capital Markets Mark Standish told the Financial Post on Sunday.

“Management stated RBC Capital Markets has been a beneficiary of the recent 'flight to quality.'” Mr. Goldberg says.

Elsewhere, Mr. Goldberg notes that RBC's focus is on improving its operating leverage and reducing its expense/revenue ratio. As well, its U.S. and Caribbean retail segments are each contributing about C$50 million in earnings to Royal Bank.

RY today was down $1.76, or 3.57%, to $47.50.

All figures are US$ unless otherwise indicated.