Royal Bank zeroes in on closing branches as way to reduce costs

David Friend, The Canadian Press</span>
Published Wednesday, August 23, 2017 7:20AM EDT
Last Updated Wednesday, August 23, 2017 1:37PM EDT

TORONTO -- Royal Bank says its decision to close 25 branches mainly in city centres across Canada over the past year is having a minimal impact on clients, as it increasingly shifts toward digital services.

Neil McLaughlin, head of Canadian personal and commercial banking, says the move was aimed at reducing costs while responding to consumer's evolving banking habits.

"The core focus is thinning out (our) dense urban branch footprint where we're not really impacting the convenience for customers," he told analysts during the bank's third-quarter conference call on Wednesday.

"You may go from a two-minute drive to your branch to a three-minute drive."

It's part of a broader plan by the Toronto-based bank in June that included cutting 450 jobs and reinvesting those salaries into areas like data analytics and artificial intelligence.

RBC (TSX:RY) has rolled out new technologies designed to make it easier for customers to handle daily banking on their smartphones. It recently launched an option to pay bills using Siri, the voice assistant of Apple's iPhone.

Those efforts helped the bank reach a milestone in the quarter where the total number of mobile banking sessions eclipsed online banking visits. Mobile transactions rose 40 per cent over the past year, it said.

The bank boosted its quarterly dividend by five per cent to 91 cents per share, but reported net income of $2.8 billion -- a decrease of three per cent from last year when its bottom line was boosted by the sale of an insurance business.

Total revenue for the three months ended July 31 was $9.99 billion, down 2.6 per cent from a year ago.

Excluding one-time items, RBC's net income was up five per cent from the third quarter of fiscal 2016.

The profit amounted to $1.85 per share of net income under generally accepted reporting, or $1.89 per share on an adjusted cash basis.

Banking analyst John Aiken of Barclays Capital said in a note to clients that the dividend increase was twice as big as expected and overall performance was better than anticipated.

"Although we and the Street had been expecting a drop in RY's earnings after a strong second quarter, RY managed to exceed expectations on the back of impressive performances in its retail bank and wealth management platforms," Aiken wrote.

RBC is the first of Canada's six biggest banks to report third-quarter financial results this year. CIBC (TSX:CM) reports on Thursday with the others reporting next week.

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