Canada’s biggest bank has cut about one per cent of its workforce since the start of May and is planning to cut up to two per cent more this quarter, RBC revealed in its quarterly earnings on Thursday.
The Royal Bank of Canada, the most valuable company listed on the Toronto Stock Exchange, revealed quarterly results on Thursday that showed profits increased by $295 million to $3.9 billion, as just about all divisions of the bank’s multifaceted business showed growth.
The strong financial results came against the backdrop of the job cuts, as the bank revealed it has trimmed jobs and is planning more.
The bank all but telegraphed its intentions to trim staff earlier this summer, as CEO Dave McKay told analysts in May that it had over-hired in recent months.
“Honestly, we overshot — we overshot by thousands of people,” McKay said last quarter.
During three months from the start of May until the end of July, RBC said it trimmed about one per cent of its workforce. “We expect to further reduce [staffing] by approximately one-to-two per cent next quarter,” the bank said.
The bank finished the quarter with 93,753 full-time equivalent staff. That’s down by 645 people from 94,398 as of the end of April.
Paul Gulberg, an analyst with Bloomberg Intelligence who covers the big banks, says it’s not just the head count that added expenses for the bank, but compensation for those employees inching higher, too.
“It’s a lot of wage inflation is what’s hurting them, not necessarily just the amount of people,” he told CBC News in an interview Thursday. “Now the economy is slowing quite a bit faster than many anticipated, so they need to adjust.”
Expenses and bad loans increase
Overall, the bank took in just over $14.4 billion in revenue during the quarter, an increase of almost 20 per cent from just over $12 billion for the same period last year.
But costs increased by even more. The bank’s expenses came in at just over $7.8 billion for the quarter. That’s up by almost a quarter from $6.3 billion a year ago.
While profits increased at the bank’s core personal and commercial lending business, in its insurance unit and its capital markets arm, they shrank somewhat at the wealth management business.
The bank also set aside more money to cover loans that might go bad, a closely watched bank metric known as “provisions for credit losses.”
The bank set aside $616 million to cover such loans during the quarter. That’s up from $340 million a year ago.