Saturday, January 31, 2009

Dividend Stock Review: Royal Bank of Canada (RY)

OK, so I bought another bank stock. I guess I can't help myself but I recently purchased shares of Royal Bank of Canada (RY). Thanks to the large drop in the prices of financials, that sector of my portfolio is now very small and I can beef it up with another bank. I looked for one of the more conservative banks that has not had problems with bad CMO's on the books. Here is a run down on the bank.

Royal Bank of Canada is Canada's largest bank by both assets and market capitalization. The company has four business segments: Canadian Banking, Wealth Management, U.S. and International Banking, and Capital Markets.

Canadian Banking provides about 55% of total revenues through its personal banking, business financial services, cards and payment solutions, and insurance businesses. RY has the largest retail banking network in Canada, with over 1,100 branches and 3,900 automated banking machines.

Wealth Management is about 17% of total revenues and is largely comprised of RBC Dain Rauscher, the wealth management arm of RY in the U.S., which ranks seventh for full-service securities firm in the U.S. The wealth management group has a network of over 3,300 financial consultants. With C$13.1 billion mutual fund assets under management, RY is the largest mutual fund provider among Canadian banks. RY's focus in wealth management is on high net worth clients with more than C$1 million in investable assets.

U.S. and International Banking is around 8% of revenues and offers personal and business banking and retail brokerage services in the U.S., banking in the Caribbean, and private baking services internationally. RY's U.S. banking arm, RBC Centura, ranks among the top 15 in deposit market share in the southeastern U.S., and has a network of 350 branches and 395 ATMs.

RBC Capital Markets, 19% of revenue provides corporate and investment banking, sales and trading, and research to corporations and public sector and institutional clients in North America and select global markets. The segment consists of two main businesses, Global Markets and Global Investment Banking and Equity Markets, and has a 50% ownership in RBC Dexia Investor Services.

RY's central corporate strategy revolves around its "Client First" approach, which focuses on enhancing client satisfaction and loyalty. The company seeks to be the leader in financial service in Canada and to leverage its distribution capabilities across business lines. In the U.S., RY is focusing on its primary advisor strategy and on delivering a broader suite of wealth management products at RBC Dain Rauscher.

The company is combining its capital markets and wealth management operational activities to create an integrated investment bank. RY has recently taken steps to accelerate its expansion through both new branch openings and acquisitions. Outside North America, the global private banking business is increasing scale through target acquisitions, and building additional distribution capabilities.

The company is also interested in building on its strong position in Caribbean banking, expanding opportunistically in China where it sees competitive advantages.

Over the past five years, RY's return on equity rose from 15.0% to 24.6% in 2007 and currently 23.0%.

S&P has a BUY rating for the stock and a 12 Month Target Price of $33.00

Disclosure: The Div Guy owns shares of RY at the time of this post.

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1 comment:

  1. RY is at 53.00 per share. Right?

    ReplyDelete

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