On an adjusted basis, RBC earned C$3.10 per share for the quarter ended Jan. 31, ahead of analysts' average estimate of C$2.93 per share, according to Refinitiv IBES data. National Bank's adjusted profit of C$2.56 per share also handily beat expectations of C$2.37 per share. Earlier, RBC's peers CIBC and Bank of Montreal also beat estimates, while Scotiabank fell short. ($1 = 1.3589 Canadian dollars) <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Canada's biggest lenders build rainy-day funds ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Niket Nishant, Jaiveer Shekhawat and Nivedita Balu in Bengaluru; editing by Shailesh Kuber and Uttaresh Venkateshwaran)
(Adds comments from National Bank conference call)
By Niket Nishant
March 1 (Reuters) - Royal Bank of Canada (RBC) said on Wednesday it expected a softer landing for the economy,
but the country's largest lender reiterated its forecast of a
moderate recession this year after setting aside bigger
provisions for potential bad loans.
The views come against the backdrop of the Bank of Canada
hiking its key interest rate to a 15-year high in January to
rein in inflation, with tighter monetary policies fueling
economic turbulence.
The Canadian central bank had also said in January it would
hold off on further increases as long as prices eased as
expected.
Still, as economic uncertainty persists, banks are building
provisions in case of delays or defaults in loan repayments by
borrowers who have already been squeezed by high inflation since
last year.
RBC's provisions for bad loans jumped five-fold to C$532
million ($391.49 million), while National Bank set aside C$86
million provisions, compared with a release of C$2 million last
year.
"While central banks have successfully reigned in peak core
inflation, strong services demand, labor shortages and reopening
of China's economy still present a challenge to getting firm
control within stated target ranges," RBC's Chief Executive
Officer Dave McKay said.
National Bank of Canada Chief Risk Officer William
Bonnell said inflation, geopolitical risks and interest rate
changes were contributing to a "less certain outlook".
Earlier on Wednesday, RBC and National Bank of Canada reported first-quarter profits ahead of expectations, as
demand for loans ticked up.
Profit at RBC's capital market segment also jumped 9% to
C$1.22 billion, boosted by a surge in fixed income trading
activity, which cushioned the hit from lower revenues from
corporate and investment banking.
Shares of RBC were down nearly 4% at C$133.34 while National
Bank shares were up 2.6% at C$102.62.
"While underlying results (for RBC) were solid, we are
concerned that it may not be enough to offset concerns on the
outlook for further deterioration in credit," Barclays analyst
John Aiken said in a note.
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