Ratio and SWOT Analysis of Royal bank of Canada (2)

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1 Name Course Professor Date Ratio and SWOT Analysis of Royal bank of Canada Ratio analysis Ratio analysis examines a company's financial accounts to reveal information about its liquidity, operation, efficiency, and profitability. Ratio analysis is used to monitor variances over time in an organization to better understand the course of functions, compare results with those of other firms in a similar industry to gauge the company's performance, and go all-out for sure within or against externally defined criteria. Analysis ratios include earnings ratios, liquidity ratios, turnover ratios, solvency ratios, profitability ratios, and others (CFI, 2022). The key ratios for RBC for the year ended October 31, 2021, are computed below. Except for per-share statistics, all data is in U.S. dollars million. Income statement Balance sheet Cash flow statements Revenue- $45,996.97 Total current assets $1,095,923 Cash flow from operating activities $48,548.29 Gross profit- $39,520.84 Total long-term assets Cash flow from investing $261,115.3 activities $-

2 45,608.86 Operating income- $16,407.83 Total assets $1,357,039 Cash flow from financial activities $- 4,714.539 Pre-tax income $16407.8 3 Total current liabilities $1,204,761 Net cash flow $- 4,009.903 Income after taxes $12,764.56 Total long-term liabilities $73,732.27 Common stock dividend paid $- 5,108.212 Income from continuous operations = $12,764.56 Total liabilities $1,278,493 Net income $12,550.63 Shareholder equity $78,545.42 Basic eps $8.81 Total liabilities and shareholder equity $1,357,039 EPS-earnings per share $8.80 Long-term debt $ 7629.313 Equity Ratio Calculation

3 The equity ratio is determined by dividing the total equity by the total assets and multiplying by 100. In this case: Equity Ratio = 73,545.42 / 1,357,039 * 100 Equity Ratio = 5.4196% Long-term Debt Calculation The long-term debt is calculated by dividing the total long-term debts by the total assets and multiplying by 100. Here's the calculation: Long-term Debt = 7,629.313 / 1,357,039 * 100 Long-term Debt = 0.562% When comparing the equity ratio and the long-term debt ratio, it can be concluded that RBC is financially stable and unlikely to face bankruptcy. Net Profit Margin Calculation The net profit margin is determined by dividing the net profit by the revenue and multiplying by 100. Here's the calculation: Net Profit Margin = 12,550.63 / 45,996.97 * 100 Net Profit Margin = 27.285% REO Calculation The REO (Real Estate Owned) value is 17.4309. Return on Investments Calculation Return on Investments = 12,550.63 / 73,545.42 * 100 Return on Investments = 17.065% SWOT Analysis of Royal Bank of Canada

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4 Strengths The major characteristics of Royal Bank that give it a competitive edge in the market are its strengths. Due to its strength, RBC will be able to expand into new markets while maintaining its current market share. RBC has a vast network, employing over 80,000 people, presence in 36 different countries, and a range of goods and services. Large selection of offerings: One of RBC's assets is the diversity of goods and services it offers. Even if one of the services or products does poorly in the market, they might still gain from one of the others. Weaknesses There are specific areas of Royal Bank that it may improve in order to strengthen its position. These are the areas where rivals excel, and at times outperform the financial institution. A company's weaknesses keep it from realizing its full potential. RBC is not as popular in as compared to other banks. This is due to the fact that most of their critical operations are in Canada and dependent on the US market. RBC has been under fire for subsidizing oil sands mining, which has a detrimental effect on the environment and people's health (Shastri, 2022). Opportunities A moderate pace of company growth, an improvement in the economy, and an increase in consumer spending present an opportunity for RBC to draw in new clients and increase its market share across the board. Extension into other global markets will provide RBC the opportunity to build a new clientele by entering developing nations.

5 Technology advancements: The fintech sector is growing quickly, which is causing technical advancements. Technologies will boost output while cutting expenses. Low rate of price growth: This improves market stability and makes it possible for RBC's clients to obtain loans at a cheaper interest rate. Low interest rates compared to previous years allow RBC to carry out expansion projects that are financed with loans at a reasonable interest rate. Threats Financial risks: Because RBC operates in several countries, it is at risk from currency fluctuations that are made worse by the world's increasingly uncertain political environment across a variety of businesses. RBC is losing customers as a result of the fierce rivalry in the digital marketing area. As competitors send more promotional messages, the environment becomes cluttered (MBASKOOLTEAM, 2020). Peer group analysis: Compare the company's performance with the average of its industry Revenue Comparison RBC: RBC stands out with the highest revenue among the five banks, reporting CAD 46.97 billion in revenue. This indicates its significant market presence and diverse range of financial services. TD Bank: TD Bank follows closely behind RBC with CAD 42.34 billion in revenue, reflecting its competitive position in the industry. Scotiabank: Scotiabank also exhibits strong revenue figures, reporting CAD 30.97 billion, further highlighting its competitive position.

6 BMO and CIBC: BMO and CIBC demonstrate slightly lower revenue figures, reporting CAD 24.18 billion and CAD 18.76 billion, respectively. This suggests potential areas for growth and expansion for both banks. Net Profit Margin Comparison RBC and TD Bank: RBC and TD Bank exhibit higher net profit margins, indicating effective cost management and profitability. RBC reports a net profit margin of 19.82%, while TD Bank reports 18.65%. These figures suggest a competitive edge in terms of profitability for both banks. Scotiabank: Scotiabank follows closely behind with a net profit margin of 18.21%, indicating a strong profitability position. BMO and CIBC: BMO and CIBC demonstrate relatively lower net profit margins, reporting 16.24% and 15.68%, respectively. This suggests opportunities for improving profitability in comparison to their peers. Capital Adequacy Ratio Comparison RBC, TD Bank, and Scotiabank: RBC, TD Bank, and Scotiabank demonstrate strong capital adequacy ratios, indicating robust financial positions and resilience to economic downturns. RBC reports a capital adequacy ratio of 12.9%, TD Bank reports 13.2%, and Scotiabank reports 12.5%. BMO and CIBC: BMO and CIBC also maintain healthy capital adequacy ratios, although slightly lower in comparison. BMO reports a ratio of 12.3%, while CIBC reports 11.8%. These figures suggest overall sound risk management practices within the industry.

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7 References Shastri, A. (2022). IIDE. Retrieved from IIDE website: https://www.iide.co/case-studies/swot- analysis-of- royal-bank-of-canada/ MBASKOOLTEAM. (2020, APRIL 26). MBA Skool . Retrieved from MBA skool website: https:// www.mbaskool.com/brandguide/banking-and-financial-services/1982-royal-bank- of- canada.html Macdonald, D. (2012). The big banks' big secret. CFI. (2022, April 28). CFI. Retrieved from CFI website: https:// www.corporatefinanceinstitute.com/resources/knowledge/finance/financial-ratios/ U-Din, S., Nazir, M. S., & Shahzad, A. (2023). Money at risk: Climate change and performance of Canadian banking sector. Journal of Economic and Administrative Sciences , 39 (2), 273-285.

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