At four of Canada's five big banks, which all reported third-quarter earnings this week, the global markets teams made up for weak investment banking results.
But Royal Bank of Canada, which reported its highest quarterly profit ever at $2.2-billion on Thursday, found a way not only to benefit from its bond trading desk, but also to deliver significant fee gains in areas like mergers and acquisitions.
It's an impressive feat made all the more remarkable by the fact that RBC's business in both debt-beleaguered Europe and the sluggish U.S. were responsible for a lot of those gains. It seems RBC's international initiatives are paying off.
Of the two other firms that reported alongside RBC today, Toronto-Dominion Bank attributed the 39 per cent revenue increase of its wholesale banking business over last quarter to more client activity and tighter credit spreads.
It also benefited from gains on positions that were thought to be impaired last quarter. But advisory fees lagged, and TD blamed this on fewer deals closing during the third quarter. TD also noted that this lack of deals is an industry problem.
Certainly, bankers at Canadian Imperial Bank of Commerce would agree.
The firm's corporate and investment banking division saw a $9-million decline in revenue. This was caused in large part by fewer equity issuances and less advisory revenue. The revenue gains in corporate credit products and the bank's real estate finance business in the U.S. just couldn't make up the difference.
At both Bank of Montreal and Bank of Nova Scotia, which reported on Tuesday, M&A and underwriting fees were a drag on performance yet again.
But at RBC, corporate and investment banking revenue rose by 17 per cent. In the rocky markets of Europe, as well as in the U.S., lending and loan syndication contributed to overall profits. So did M&A activity when compared to the third quarter of 2011. Quarter over quarter, RBC said that M&A activity "more than offset lower equity trading and equity origination results."