This Classic Hot Stock Has Been Rallying For Decades!

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In Canada, one thing that remains common among investors is the reliance on bank stocks. For beginners or professionals, bank stocks often remain the popular choice.

The COVID-19 pandemic impacted several sectors and businesses struggled to sustain themselves throughout 2020. However, the banking industry's collective response to the pandemic was notable. Despite the uncertain conditions, the banks were able to manage their operations smoothly, and the stocks managed to recover as well.

According to a Deloitte report, it was the banks that played a major role in stabilizing the economy and enabled the government to transmit relief programs and government stimulus in countries like Canada, Japan, the United States and several European countries.

The consequences for the banking sector were not as severe as it was during the global financial crisis of 2008. Apart from the initial financial fallout, the pandemic helped reshape the banking industry, prompting innovations and digitization to beat market volatility and regain the lost momentum.

The Canadian banks have always remained a popular choice for growth and income, and this hasn't changed. Despite tough market conditions, there was one bank stock that grew about 33 per cent in a year and 10.8 per cent year-to-date (YTD).

In this article, we are talking about the Royal Bank of Canada (TSX:RY), the largest bank in the country and a popular choice of people over the decades. 

Things you need to know about the RBC

Founded in 1864, in Halifax, the Royal Bank of Canada is one of the largest banks in the world based on market capitalization. It has been serving customers for over 150 years and currently it serves at least 17 million clients in North America and over 30 different countries.

It provides diverse financial services like personal and commercial banking, wealth management and insurance among other services. For the third consecutive year, RBC was named as the 'North American Retail Bank of the Year' by Retail Banker International. 

Royal Bank of Canada Stock Watch

Priced at C$ 115.87 apiece at market close on March 31, the stock has grown by about 7 per cent in a month and 23.9 per cent in six months.

Royal Bank of Canada’s period returns

The current price is a little lower than its 52-week high of C$ 117.97, down by 1.7 per cent. In comparison to its 52-week low of C$ 80.51, it is up by 43.9 per cent.

The bank’s stock grew 10.7 per cent year-to-date. It has a market cap of over C$ 165 billion and holds a price-to-book ratio of 1.991. It also offers a 14.28 per cent return on equity and 0.73 per cent returns on assets.

It offers a quarterly dividend of C$ 1.08 and has a yield of 3.728 per cent. In the last three years, the bank witnessed dividend growth at the rate of 5.95 per cent and 6.73 per cent in five years. 

A look at the financials

In the latest financial results of Q1 2021, the bank reported the net income as C$ 3.8 billion, an increase of 10 per cent from the prior year. For the same period, the diluted earnings per share (EPS) were C$ 2.66, up by 11 per cent year-over-year (YoY).

Due to the strong volume growth, the bank's several businesses were benefited. The lower provisions for credit losses (PCL) were reflected in this quarter too. The PCL was C$ 110 million, a ratio down by 16 basis points (bps) quarter-over-quarter.

The company achieved total revenue of C$ 12,943 million, an increase of 0.83 per cent YoY. The lender’s total assets worth increased to C$ 1.6 trillion, an increase of 13.2 per cent YoY. 

How’s the banking industry looking?

According to a report by Moody's Investors Service, the overall outlook for Canadian banks in 2021 is stable. The prestigious rating agency in its report mentioned that due to strong credit strength, the Canadian banks will be able to sail through uncertain times.

Moody’s explained in its report that the loan loss provisions had increased to alarming levels in the second and third quarter of 2020 but strong market capitalization and liquidity acted as protection agents to save the banks from massive losses.

Another agency, Fitch Ratings mentioned its report that the banks have withstood the financial fallout caused by the coronavirus pandemic.

Given this scenario, stocks of Royal Bank of Canada is likely to continue holding investors’ attention in near to long-term future.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view.