Royal Bank of Canada said Thursday that profits at RBC Centura of Rocky Mount, N.C., fell 15%, to $50 million, during the quarter that ended April 30 because of losses stemming from mortgage origination fraud.
But Royal Bank and Toronto-Dominion Bank both reported Thursday that overall profits rose on higher fees from stock underwriting and trading.
Royal Bank said net income for the quarter climbed 12%, to $570 million, or 84 cents a share. Toronto-Dominion’s net income was $373 million, or 54 cents a share, compared with a loss a year earlier. The two are Canada’s biggest lenders.
It was the 11th straight quarter of rising profit for Royal Bank, but its shares had their biggest drop in a month after it reported the loss at RBC Centura, its U.S. consumer bank. At 1:20 p.m. the shares were down 2% on the Toronto Stock Exchange.
Royal Bank said a $12.4 million loss at RBC Centura was caused by a $13 million operating loss at the mortgage unit on “certain mortgage loans that are believed to have been fraudulently originated in 2001 and 2002.”
Its chief executive, Gordon Nixon, pledged last quarter to turn around the mortgage unit, whose problems led to the first overall loss in three years for RBC Centura. The North Carolina unit’s revenue fell 21%, to $197 million.
Royal Bank has spent about $6 billion on U.S. expansion since 2001, including the purchases of Dain Rauscher Corp. and Centura Banks Inc. In 1998 the Canadian federal government blocked two proposed mergers among the country’s biggest banks.
Separately, the company said it had been subpoenaed by the Securities and Exchange Commission over the September resignation of its auditor, PricewaterhouseCoopers. Royal Bank said it is responding to the subpoena.
Toronto-Dominion’s investment bank, TD Securities, had a profit of $122 million. A year earlier it posted a loss of $75 million.
Wealth management, which includes income from its New York-based TD Waterhouse online brokerage, had profit of $77 million, compared with a year-earlier loss of $218 million.
TD Waterhouse said stock trading rose 62%, to 126,000 transactions a day, in the quarter.
