RBC Analysis Essay

Executive Summary In todays demanding market place, it is substantive to know how to make good stationments. The following is an in depth soft and three-figure analysis of the imperial deposit of Canada. First, red blood cell and its subsidiaries give be introduced including information ab disc everyplace its tarradiddle and current locating. The qualitative analysis will consist of erythrocytes general information, floor, occupation segments, and bodied easy-disposed responsibility. Secondly, ratios and other quantitative information pertaining to erythrocytes investiture situation will be analyzed.Finally, with heed to the qualitative and quantitative selective information, an investment passport will be make Investment Criteria A associations ethics and proper management be just as master(prenominal)(prenominal) for their winner as their mo cyberspaceary data. In dress to decide whether or not to invest in a comp either one essential research the company inside and out starting with where the company has flummox from all the way to their current situation. A companys history is of the ut well-nigh importance because it reveals management trends and early(prenominal) ethical decision devising that could reoccur.Another important aspect of a companys history is their external expansion and the companies they have done past condescension with. The industries companies assume to merge with be a good index of where they will invest their money in the future. More specific to the trusting industry, sustainability has become one of the most important criteria for investment. Especially after the fiscal collapse of 2008, lingos with strong sustainability stood out and gained ground on the high-risk high reward relys.From a quantitative perspective, data trends can booster predict if a company is on a small skid or headed toward future collapse. Ratios can help determine how quickly a company can pay arse their liabilities as wel l as how efficient they are being with their divvy upowners money. A companys stock may hoist or fall depending on their current situation and how the market is fairing boilersuit. The meat of assets and acquisitions a company makes can lead a potential investor to conceptualize they are expanding. Usually good financial data investment criteria are a current ratio 21 and an ROA 5%.Company Introduction The Royal Bank of Canada is Canadas largest bound by assets and market metropolisization. The bank has offices in Canada, United States and 49 other countries. Currently, there are 80,000 full and voice time employees at red blood cell with close to 15 million clients worldwide. The company has a good balance amongst retail and wholesale banking with over two-thirds of their revenue coming from Canada. The other main geographical markets include U. S. (16%), era all other revenue is distributed internationally (17%). (See vermiform appendix A) Qualitative analytic thinkin gHistory The history of a company, industry it is present in, and prior success are some of the main factors when considering commit in a company. erythrocyte has been a leading Canadian bank since June 22, 1864 when it was incorporated as the Merchants Bank of Halifax. Its name was changed to The Royal Bank of Canada in 1901. Twenty-four year by and by it merged with the Union Bank of Canada on the basis of 1 share of Royal Bank stock for two shares of Union Bank stock. Since then, red blood cell has taken advantage of many international joint ventures and foreign acquisitions. more or less notably in Cuba, Britain, and West Germany. Post-1980, the bank created joint ventures in chinaware with China International Trust & Investment Corp. and began acquiring financial companies in northward America. All of the sudden, red blood cell found themselves competing with large new international banks. During this time, the bank also made a larger commitment to their corporate social responsibility as their charitable donations reached 25. 5 million in 1999. Most recently, erythrocyte has been striving to become a more broad-based financial services group rather than a traditional commercial bank.Although RBC wanted to keep with its main goal of being the 1 banker in Canada, they also wanted to build a stronger overall North American identity. Technology based products took the lead in the banks new American market strategy. In going a retentive with this strategy, RBC acquired the worlds first Internet bank in order to take advantage of e-banking services. Finally, the bank has developed a new orbiculate brand strategy in response to their growing North American presence, which requires the RBC financial group banner to each business program and operating subsidiary. Business SegmentsThe Royal Bank of Canada has five main business segments. The largest of these segments is their personal and commercial banking segment, which makes up 56% of their earnings. RB C was named the largest and most bankable retail banking in Canada as well as the 2nd largest bank by assets in English Caribbean (Corporate Profile). The bank contributes cross-border banking for Canadian clients and U. S. wealthiness management clients. Their second largest business segment is their chapiter markets sector. Their pileus markets department deals with corporate and investment banking, justice and debt distribution as well as trading.This segment is recognized as the 10th largest ball-shaped investment bank by net revenue and was also named the best investment bank in Canada across equity, debt, and M&A five geezerhood in a row (Corporate Profile). The third business segment of RBC, which makes up 11% of their earnings, is their wealth management division. Investment, trust, credit, and other wealth management and asset management solutions are all included in wealth management. The division was named top six global wealth mangers by assets as well as ranked 1 in Canada in both retail and asset management (Corporate Profile).Finally, their indemnity and investor & treasury services make up the give-up the ghost 11% of the banks total earnings. The insurance policy segment deals with life, health, home, auto, travel, and wealth accumulation solutions. Achievements of the insurance segment include receiving high marks for Likelihood to Recommend and peace of mind of Doing Business (Corporate Profile). Their investor & treasury services provide global custody, fund administration, and asset servicing to institutional investors. (See Appendix B) SWOT outline Strengths Leading Market PositionRBC is Canadas largest bank mensural by assets and market capitalization. Leading market position in Canada enables the bank to gain economic economies of scale. Significant Presence in the US and UK RBC is the sixth largest full-service brokerage firm in the US and operates in a network of 42 states. In the UK, RBC is considered a Gilt-edged marke t maker and actively trades in either conventional or index-linked gilts ( pleasing to ALADIN). Strong Balance Sheet RBC has a strong capital ratio and common ratio that are much greater than those indispensable under Canadian standards.Also, the banks operating leverage declined between the years 2008 and 2010 showing potential from raising new capital ( accept to ALADIN). Weaknesses Asset Quality Deterioration RBCs asset case has been deteriorating since 2007. More specifically their gross impaired loans to total loans and acceptances ratio has bountiful between the years 2008 to 2010. Growth and returnability concerns at US operations Although RBC realized an overall harvest-feast in revenue in 2009, they also experienced a loss of net income. The US is RBCs second largest market and can deeply impact the companies overall process as a whole.Opportunities International Expansion RBC has a rich history of international acquisitions over the past 30 years. inveterate with thi s aggressive strategy paves the way potential emergences in revenue and profit expansion. Canadas Promising Economic Prospects Canadian GDP has shown arrogant growth within the past two years. Attributing to this growth has been an increasing demand for commodities and improving global financial market conditions. Threats Increasing Interest Rates As Canadian interest rates rise, so does the potential for a decline in demand for financial services.High Taxation Banks in Canada are imposeed at a much higher rate than other countries. In addition to Canadas high taxation, the bank also faces high tax rates in the US its second largest market ( acceptable to ALADIN). Corporate Social Responsibility RBC has a clearly delimit community and sustainability mission as they have been contributing to building a better future since 1864. Emphasis is put mainly on investing in the future by delivering quality products, protecting the environment, and sustaining a deep workplace.In respec t to the community, RBC invests millions of dollars in health, sports, and the arts. More specifically they created RBC Play Hockey, which provides hockey gear to under privileged children. RBC believes that the mealy of hockey can bring a community together and provide a fun, competitive atmosphere among kids. Twenty grants, each of which was $25,000, will be awarded across North America (Corporate Profile). In respect to the environment, climate change, biodiversity, and wet are weighed heavily upon. The RBC Bluewater system Project helps educate people about the importance of preserving clean water in order to have enough fresh water for the future. The main component of the program is a ten-year, $50 million donations program, which supports not-for-profit organizations that protect watersheds and go steady access to clean drinking water (Corporate Profile). In RBCs workplace is built upon the notion of shared values, and a sense of responsibility toward others. They look to provide a safe and supple working environment with career growth opportunities.Also, the bank provides short and long term savings and wealth accumulation programs for their employees. Quantitative Analysis (See Appendix C) Balance Sheet RBC has realized a 14% increment in assets over the last three years. This growth in assets is an indicator for an increase in stock returns. However, many times a growth in assets leads to sluggish returns as too many assets weigh rout the bank (Welcome to ALADIN). Basic accounting procedures require all financial information on the balance sheet to even out. Therefore since RBCs assets grew by 14%, so did they liabilities and shareholders equity.This increase in the banks liabilities can be attributed to inventory being purchased, issuing bonds collectible at a discount, retirement costs for current employees etc. Paid-in capital, the years net profits, or a new share crack can increase shareholders equity. Shareholders equity is especially i mportant for banks such as RBC because of the amount of capital they are given up to invest. Cash Flow Net investments cash settle represents the gain or loss in cash flow from investments made in the financial market and operating subsidiaries.In 2009, RBC had a positive cash flow indicating they were not investing heavily at the time. However, in the next two years, grand investments were made which made their net investments cash flow to go far below zero. Having a blackball overall cash flow is not necessarily a regretful thing, but instead may be a result of profound investments. Nevertheless, RBC has maintained sustainability and kept their overall cash flow positive despite their large investments. Income Statement/Retained Earnings RBCs total revenue has decreased by 5% over the last three years.However looking deeper will reveal a huge increase in the companys revenue over the past five years. In 2007 and 2008 the total revenue was $22,462 and $21,582 respectively (We lcome to ALADIN). This data revels an overall increase in revenue of 22% between 2007 and 2011, which any company would be proud of. In addition, RBC shows their continued movement toward sustainability as their retained earnings increased by almost 20% in the past three years (Welcome to ALADIN). In effect, this increase shows that a healthy profit exists even after dividends are given out to the shareholders.