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RBC, National Bank shares hit record highs on strong earnings

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TORONTO – Shares of Royal Bank of Canada and National Bank hit all-time highs on Wednesday as the two banks reported earnings that topped expectations.

Both banks reported notable revenue growth despite the economic headwinds that helped push profits higher, while RBC also reported much lower-than-expected loan loss provisions.

RBC reported a third-quarter profit of $4.49 billion, up from $3.86 billion a year earlier, boosted in part also by $239 million from the HSBC Canada acquisition it completed in March.

“While there’s a higher degree of geopolitical uncertainty and volatility, our diversified businesses are well positioned for the macro driven shifts in the operating environment,” chief executive Dave McKay said on an earnings call Wednesday.

He said the bank is doing well enough that it expects to increase share buybacks in the coming quarters.

On an adjusted basis, RBC says it earned $3.26 per diluted share, up from an adjusted profit of $2.83 per diluted share a year ago.

Earnings were well above the average of $2.97 per share that analysts had expected, according to LSEG Data & Analytics.

The beat helped push up RBC’s share price by a little over three per cent to more than $161 in early afternoon trading on the Toronto Stock Exchange, up more than 30 per cent from a year ago. That gave the company a market capitalization of close to $221 billion.

RBC’s revenue totalled $14.63 billion, up from $12.98 billion a year ago, while the bank’s provision for credit losses for the quarter amounted to $659 million, up from $616 million in the same quarter last year.

While the bank set aside more money in total, the proportion of loans under provision fell 0.02 percentage points from last year and 0.14 percentage points from the previous quarter.

The 0.27 per cent of loans the bank is concerned about was well below the 0.38 per cent expected by analysts, helping lead to the strong earnings beat.

“Credit was a standout for Royal, with provisions coming in well below expectations,” said Jeffries analyst John Aiken in a note.

The credit performance is in sharp contrast to some other banks that have reported so far, such as BMO, where worsening provisions weighed heavily on results.

RBC chief risk officer Graeme Hepworth did, however, caution that the bank is still seeing borrower stress with more expected ahead. The better performance in the quarter was more related to wholesale, both in capital markets and its City National segments, compared with previous quarters.

“I wouldn’t read that into a definitive indication that we’ve now turned the corner … the trends in retail are still negative,” he said.

He said the bank is seeing rising stress across almost all products and expects it to continue into 2025 as unemployment rises and more consumers renew their mortgages at higher rates.

“We still see a consumer who faces a lot of headwinds with the current rate environment … those are all factors that leave us still quite cautious through the end of this year and going into next year.”

National Bank also warned that there is still uncertainty ahead while reporting a third-quarter profit of $1.03 billion, up from $830 million a year ago.

Revenue for the quarter totalled $3.00 billion, up from $2.49 billion in the same quarter last year.

On an adjusted basis, National Bank says it earned $2.68 per diluted share in its most recent quarter, up from an adjusted profit of $2.18 in the same quarter last year.

The average analyst estimate had been for an adjusted profit of $2.49 per share, according to LSEG Data & Analytics.

“These results reflect our diversified earnings mix and solid credit profile,” said National Bank chief executive Laurent Ferreira on an earnings call Wednesday.

The results had provisions in line with expectations while the National Bank outperformed across a broad base, said Scotiabank analyst Meny Grauman in a note.

“Although NA comes into this quarter (and it has for a while now) vulnerable to missteps given that it continues to trade at a sizable premium to the group, once again it has been able to clear this (high) bar.”

The beat pushed National Bank’s share price up over five per cent to over $126 as of early afternoon trading, marking a more than 27 per cent gain from a year earlier.

The bank did warn that it expects rising unemployment to lead to higher delinquencies and impaired provisions ahead, but that the effects are softened by its focus on the steadier Quebec economy and its prudent approach to capital.

McKay also emphasized that while the bank is prepared, there is still the potential for economic turbulence ahead.

“We are in a position to absorb this volatility and continue to perform strongly going forward … but we want to make sure you’re cognizant of we haven’t landed this plane.”

This report by The Canadian Press was first published Aug. 28, 2024.

Companies in this story: (TSX:RY; TSX:NA)

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Teen smoking and other tobacco use drop to lowest level in 25 years, CDC reports

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NEW YORK (AP) — Teen smoking hit an all-time low in the U.S. this year, part of a big drop in the youth use of tobacco overall, the government reported Thursday.

There was a 20% drop in the estimated number of middle and high school students who recently used at least one tobacco product, including cigarettes, electronic cigarettes, nicotine pouches and hookahs. The number went from 2.8 million last year to 2.25 million this year — the lowest since the Centers for Disease Control and Prevention’s key survey began in 1999.

“Reaching a 25-year low for youth tobacco product use is an extraordinary milestone for public health,” said Deirdre Lawrence Kittner, director of CDC’s Office on Smoking and Health, in a statement. However, “our mission is far from complete.”

A previously reported drop in vaping largely explains the overall decline in tobacco use from 10% to about 8% of students, health officials said.

The youth e-cigarette rate fell to under 6% this year, down from 7.7% last year — the lowest at any point in the last decade. E-cigarettes are the most commonly used tobacco products among teens, followed by nicotine pouches.

Use of other products has been dropping, too.

Twenty-five years ago, nearly 30% of high school students smoked. This year, it was just 1.7%, down from the 1.9%. That one-year decline is so small it is not considered statistically significant, but marks the lowest since the survey began 25 years ago. The middle school rate also is at its lowest mark.

Recent use of hookahs also dropped, from 1.1% to 0.7%.

The results come from an annual CDC survey, which included nearly 30,000 middle and high school students at 283 schools. The response rate this year was about 33%.

Officials attribute the declines to a number of measures, ranging from price increases and public health education campaigns to age restrictions and more aggressive enforcement against retailers and manufacturers selling products to kids.

Among high school students, use of any tobacco product dropped to 10%, from nearly 13% and e-cigarette use dipped under 8%, from 10%. But there was no change reported for middle school students, who less commonly vape or smoke or use other products,

Current use of tobacco fell among girls and Hispanic students, but rose among American Indian or Alaska Native students. And current use of nicotine pouches increased among white kids.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

The Canadian Press. All rights reserved.

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Alabama man arrested in SEC social media account hack that led the price of bitcoin to spike

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WASHINGTON (AP) — An Alabama man was arrested Thursday for his alleged role in the January hack of a U.S. Securities and Exchange Commission social media account that led the price of bitcoin to spike, the Justice Department said.

Eric Council Jr., 25, of Athens, is accused of helping to break into the SEC’s account on X, formerly known as Twitter, allowing the hackers to prematurely announce the approval of long-awaited bitcoin exchange-traded funds.

The price of bitcoin briefly spiked more than $1,000 after the post claimed “The SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges.”

But soon after the initial post appeared, SEC Chairman Gary Gensler said on his personal account that the SEC’s account was compromised. “The SEC has not approved the listing and trading of spot bitcoin exchange-traded products,” Gensler wrote, calling the post unauthorized without providing further explanation.

Authorities say Council carried out what’s known as a “SIM swap,” using a fake ID to impersonate someone with access to the SEC’s X account and convince a cellphone store to give him a SIM card linked to the person’s phone. Council was able to take over the person’s cellphone number and get access codes to the SEC’s X account, which he shared with others who broke into the account and sent the post, the Justice Department says.

Prosecutors say after Council returned the iPhone he used for the SIM swap, his online searches included: “What are the signs that you are under investigation by law enforcement or the FBI even if you have not been contacted by them.”

An email seeking comment was sent Thursday to an attorney for Council, who is charged in Washington’s federal court with conspiracy to commit aggravated identity theft and access device fraud.

The price of bitcoin swung from about $46,730 to just below $48,000 after the unauthorized post hit on Jan. 9 and then dropped to around $45,200 after the SEC’s denial. The SEC officially approved the first exchange-traded funds that hold bitcoin the following day.

The Canadian Press. All rights reserved.

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Tech firms remove social media accounts of a Russian drone factory after an AP investigation

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Google, Meta and TikTok have removed social media accounts belonging to an industrial plant in Russia’s Tatarstan region aimed at recruiting young foreign women to make drones for Moscow’s war in Ukraine.

Posts on YouTube, Facebook, Instagram and TikTok were taken down following an investigation by The Associated Press published Oct. 10 that detailed working conditions in the drone factory in the Alabuga Special Economic Zone, which is under U.S. and British sanctions.

Videos and other posts on the social media platforms promised the young women, who are largely from Africa, a free plane ticket to Russia and a salary of more than $500 a month following their recruitment via the program called “Alabuga Start.”

But instead of a work-study program in areas like hospitality and catering, some of them said they learned only arriving in the Tatarstan region that they would be toiling in a factory to make weapons of war, assembling thousands of Iranian-designed attack drones to be launched into Ukraine.

In interviews with AP, some of the women who worked in the complex complained of long hours under constant surveillance, of broken promises about wages and areas of study, and of working with caustic chemicals that left their skin pockmarked and itching. AP did not identify them by name or nationality out of concern for their safety.

The tech companies also removed accounts for Alabuga Polytechnic, a vocational boarding school for Russians aged 16-18 and Central Asians aged 18-22 that bills its graduates as experts in drone production.

The accounts collectively had at least 158,344 followers while one page on TikTok had more than a million likes.

In a statement, YouTube said its parent company Google is committed to sanctions and trade compliance and “after review and consistent with our policies, we terminated channels associated with Alabuga Special Economic Zone.”

Meta said it removed accounts on Facebook and Instagram that “violate our policies.” The company said it was committed to complying with sanctions laws and said it recognized that human exploitation is a serious problem which required a multifaceted approach, including at Meta.

It said it had teams dedicated to anti-trafficking efforts and aimed to remove those seeking to abuse its platforms.

TikTok said it removed videos and accounts which violated its community guidelines, which state it does not allow content that is used for the recruitment of victims, coordination of their transport, and their exploitation using force, fraud, coercion, or deception.

The women aged 18-22 were recruited to fill an urgent labor shortage in wartime Russia. They are from places like Uganda, Rwanda, Kenya, South Sudan, Sierra Leone and Nigeria, as well as the South Asian country of Sri Lanka. The drive also is expanding to elsewhere in Asia as well as Latin America.

Accounts affiliated to Alabuga with tens of thousands of followers are still accessible on Telegram, which did not reply to a request for comment. The plant’s management also did not respond to AP.

The Alabuga Start recruiting drive used a robust social media campaign of slickly edited videos with upbeat music that show African women smiling while cleaning floors, wearing hard hats while directing cranes, and donning protective equipment to apply paint or chemicals.

Videos also showed them enjoying Tatarstan’s cultural sites or playing sports. None of the videos made it clear the women would be working in a drone manufacturing complex.

Online, Alabuga promoted visits to the industrial area by foreign dignitaries, including some from Brazil, Sri Lanka and Burkina Faso.

In a since-deleted Instagram post, a Turkish diplomat who visited the plant had compared Alabuga Polytechnic to colleges in Turkey and pronounced it “much more developed and high-tech.”

According to Russian investigative outlets Protokol and Razvorot, some pupils at Alabuga Polytechnic are as young as 15 and have complained of poor working conditions.

Videos previously on the platforms showed the vocational school students in team-building exercises such as “military-patriotic” paintball matches and recreating historic Soviet battles while wearing camouflage.

Last month, Alabuga Start said on Telegram its “audience has grown significantly!”

That could be due to its hiring of influencers, who promoted the site on TikTok and Instagram as an easy way for young women to make money after leaving school.

TikTok removed two videos promoting Alabuga after publication of the AP investigation.

Experts told AP that about 90% of the women recruited via the Alabuga Start program work in drone manufacturing.

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