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RBC hikes dividend after dealmaking division proves its worth again – Financial Post

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The Royal Bank of Canada on Friday said higher trading revenue and a pick-up in dealmaking activity helped produce record profit for its first quarter, getting the latest earnings season for the country’s largest lenders off to a strong start.

Toronto-based RBC reported net income of $3.5 billion for the three months ended Jan. 31, an increase of 11 per cent over a year earlier. Adjusted earnings per share were $2.44 for the quarter, up 11 per cent year-over-year and above analysts’ expectations.

Overall revenue rose 11 per cent year-over-year at the bank, to $12.8 billion. The amount of money RBC had to set aside for bad loans also declined for the quarter, with provisions for credit losses falling to $419 million for the three months ended Jan. 31, down from $499 million in the previous quarter and from $514 million a year earlier.

RBC, Canada’s biggest bank, said its results were due in part to strong showings from its investment bank and its retail unit. A note from National Bank Financial analyst Gabriel Dechaine called RBC’s results a “good old fashioned ‘trading and credit beat.’”

“The first quarter of 2020 saw more favourable market conditions and increased client activity resulting in higher fixed income trading revenue and M&A activity,” the bank said in its latest results.

RBC’s capital-markets business saw net income increase 35 per cent from a year earlier, to $882 million, which the lender said was mostly because of the higher trading revenue and M&A activity, the latter helping to increase advisory fees. The unit saw a dip in its provisions for credit losses as well.

In personal and commercial banking, RBC reported net income of almost $1.7 billion, an increase of seven per cent over the same quarter a year earlier. The lender said this reflected “strong growth in residential mortgages” and average deposit growth of nine per cent in Canadian banking.

RBC, the first of the Big Six banks to report this earnings season, also announced a three-cent increase to its quarterly dividend, raising it to $1.08 per share.

“Against the uncertain macroeconomic backdrop, we remain focused on prudently managing our risks, leveraging our scale and competitive position, and balancing our investments in technology and talent for long-term, sustainable growth,” said Dave McKay, RBC’s president and CEO, in a press release.

Adjusted earnings per share were $2.44 for the quarter, up 11 per cent year-over-year and above the $2.30 that was expected, on average, by analysts.

Financial Post

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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