On Thursday, Argus maintained a Buy rating on Royal Bank of Canada (NYSE: RY) and increased its price target to $120 from $115, following the bank's fiscal second-quarter results for 2024. The firm anticipates improved loan growth for the fiscal year 2024 as interest rates are expected to decline, along with better capital markets revenues and the realization of cost savings initiatives.
Royal Bank of Canada, known for its significant presence in personal and commercial banking, capital markets, and wealth management, has demonstrated a strong track record of organic growth and strategic acquisitions. The recent completion of the HSBC Bank Canada purchase in March 2024, which was initially agreed upon in November 2022, has notably expanded RBC's assets and customer base.
The acquisition, valued at C$13.5 billion in cash, brought RBC an additional C$134 billion in assets and 130 branches, enhancing the bank's loan portfolio and deposit relationships by approximately $75 billion. This strategic move is expected to contribute a 6% increase to the bank's earnings for the fiscal year 2024, after accounting for expense synergies estimated at 55% of HSBC Canada's expense base.
Argus views the acquisition favorably, highlighting its potential to bolster Royal Bank of Canada's leading position in the Canadian retail market and enhance its services to high-net-worth individuals. The firm's revised price target reflects confidence in the bank's growth trajectory and the anticipated benefits from its recent expansion efforts.
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