NASSAU, BAHAMAS — RBC Finco saw a nearly 48 percent drop in net income for 2023, which, according to the BISX-listed mortgage lender’s chairman, was primarily driven by lower releases of provisions for credit losses compared to the prior year.
Chris Ronald noted to shareholders in the mortgage lender’s 2023 annual report that for the fiscal year ended October 31, 2023, RBC FINCO recorded $21.1 million in net income, representing a 47.4 percent decrease compared to net income recorded in FY2022. This decrease in net income was mostly driven by lower releases of provisions for credit losses compared to the prior year and, to a lesser extent, a decrease in revenues.
“This past year also saw a 2.2 percent decrease in our loans and advances to customers, amounting to $608.8 million. This reduction is primarily attributed to challenges faced in credit origination and the write-off of non-performing loans,” said Ronald, noting that the lender’s strategic efforts to address this decline have made a positive impact.
“A key focus has been to empower our Relationship Managers to actively build their portfolios through targeted acquisition activities with developers and realtors. Additionally, we have hosted client advice events and leveraged our network of contacts to generate new business opportunities. As a result of these initiatives, the declining trend in our loan portfolio has shown signs of stabilization. While there is still work to be done, we are optimistic about the progress made thus far and remain committed to further strengthening our loan portfolio in FY2024,” he noted, adding that notwithstanding the growth and non-performing loans challenges, the bank continues to maintain a strong capital position.
According to FINCO’s annual report, net interest income, which is comprised of interest earned on loans, mortgages, and investment securities, less interest paid on deposits from customers and other financial institutions, decreased by nine percent compared to fiscal year 2022. Lower loan volumes ,in addition to lower yields on mortgages ,are the major factors affecting the bank’s core revenue. The lender’s release of provision for credit losses was $1.8 million, representing a decline of 89.5 percent from the previous year’s release of $16.9 million. “This decrease is mostly driven by the significant releases of provisions in the previous year which had been built up in response to the expected economic effect of the Covid-19 pandemic.
Loans and advances to customers were $608.8 million, a decrease of 2.2 percent from $622.2 million reported in 2022. This decrease continues to be a result of the bank’s challenge with credit origination and non-performing loans, which were written off during the year.
