RY Capitalization : 2Q08

RY has released its Second Quarter 2008 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!

Step One is to analyze their Tier 1 Capital, reproducing the prior format:

RY Capital Structure
October, 2007
& April, 2008
  4Q07 2Q08
Total Tier 1 Capital 23,383 23,708
Common Shareholders’ Equity 95.2% 99.8%
Preferred Shares 10.0% 10.8%
Innovative Tier 1 Capital Instruments 14.9% 15.3%
Non-Controlling Interests in Subsidiaries 0.1% 0.1%
Goodwill -20.3% -26.0%

Next, the issuance capacity (from Part 3 of the introductory series):

Tier 1 Issuance Capacity
October 2007
& April 2008
  4Q07 2Q08
Equity Capital (A) 17,545 17,527
Non-Equity Tier 1 Limit (B=A/3), 4Q07
(B=0.428*A), 2Q08
5,848 7,502
Innovative Tier 1 Capital (C) 3,494 3,626
Preferred Limit (D=B-C) 2,354 3,876
Preferred Actual (E) 2,344 2,555
New Issuance Capacity (F=D-E) 10 1,321
Items A, C & E are taken from the table
“Regulatory Capital”
of the supplementary information;
Note that Item A includes everything except preferred shares and innovative capital instruments

Item B is as per OSFI Guidelines; the limit was recently increased.
Items D & F are my calculations

and the all important Risk-Weighted Asset Ratios!

Risk-Weighted Asset Ratios
October 2007
& April 2008
  Note 2007 2Q08
Equity Capital A 17,545 17,527
Risk-Weighted Assets B 247,635 249,242
Equity/RWA C=A/B 7.09% 7.03%
Tier 1 Ratio D 9.4% 9.5%
Capital Ratio E 11.5% 11.5%
Assets to Capital Multiple F 19.8x 20.1x
A is taken from the table “Issuance Capacity”, above
B, D, E & F are taken from RY’s Supplementary Report
C is my calculation.

I am pleased to see that RY has commenced disclosing their Assets-to-Capital multiple – the undisclosed-but-high figure for 1Q08 made me very curious! They note that “Effective Q2/08, the OSFI amended the treatment of the general allowance in the calculation of Basel II Asset-to-capital multiple. Comparative ratios have not been revised.”

This amendment is available in an Advisory dated April 2008 … which I will now have to puzzle over.

3 Responses to “RY Capitalization : 2Q08”

  1. […] reviewing the RY Capitalization: 2Q08 I found the following note in their Supplementary Package: Effective Q2/08, the OSFI amended the […]

  2. […] why should I care? Well … let’s have a look at Bank Capital for 2Q08 and drill down to RY Capitalization: 2Q08. Look at that. 15% of their capital is in the form of Innovative Tier 1 […]

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