{"id":2725,"date":"2008-08-28T12:55:34","date_gmt":"2008-08-28T16:55:34","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2725"},"modified":"2008-08-28T12:55:34","modified_gmt":"2008-08-28T16:55:34","slug":"ry-capitalization-3q08","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2725","title":{"rendered":"RY Capitalization: 3Q08"},"content":{"rendered":"

RY has released<\/a> its Third Quarter 2008 Report<\/a> and Supplementary Package<\/a>, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!<\/p>\n

Step One is to analyze their Tier 1 Capital, reproducing the prior format<\/a>:<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
RY Capital Structure
\nOctober, 2007
\n& July, 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n3Q08<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n23,383<\/td>\n24,150<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n95.2%<\/td>\n111.6%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n10.0%<\/td>\n10.6%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n14.9%<\/td>\n15.3%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n0.1%<\/td>\n1.5%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-20.3%<\/td>\n-36.7%<\/td>\n<\/tr>\n
Miscellaneous<\/td>\nNA<\/td>\n-2.3%<\/td>\n<\/tr>\n
‘Miscellaneous’ includes ‘Substantial Investments’, ‘Securitization-related deductions’, ‘Expected loss in excess of allowance’ and ‘Other’<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Next, the issuance capacity (from Part 3 of the introductory series<\/a>):<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
RY
\nTier 1 Issuance Capacity
\nOctober 2007
\n& July 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n3Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n17,545<\/td>\n17,892<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\n(B=A\/3), 4Q07
(B=0.428*A), 2Q08<\/td>\n		5,848<\/td>\n7,658<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n3,494<\/td>\n3,706<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n2,354<\/td>\n3,952<\/td>\n<\/tr>\n
Preferred Actual<\/td>\n(E)<\/td>\n2,344<\/td>\n2,552<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(F=D-E)<\/td>\n10<\/td>\n1,400<\/td>\n<\/tr>\n
Items A, C & E are taken from the table
\n“Regulatory Capital”
\nof the supplementary information;
\nNote that Item A includes everything except preferred shares and innovative capital instruments<\/em>

\nItem B is as per OSFI Guidelines; the limit was recently increased<\/a>.
Items D & F are my calculations<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

and the all important Risk-Weighted Asset Ratios!<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
RY
\nRisk-Weighted Asset Ratios
\nOctober 2007
\n& July 2008<\/td>\n<\/tr>\n
 <\/td>\nNote<\/td>\n2007<\/td>\n3Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n17,545<\/td>\n17,892<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n247,635<\/td>\n254,189<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n7.09%<\/td>\n7.04%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n9.4% <\/td>\n9.5% <\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n11.5%<\/td>\n11.7%<\/td>\n<\/tr>\n
Assets to Capital Multiple<\/td>\nF<\/td>\n19.8x<\/td>\n19.4x<\/td>\n<\/tr>\n
A is taken from the table “Issuance Capacity”, above
\nB, D, E & F are taken from RY’s Supplementary Report
\nC is my calculation.<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

It’s good to see that RY has reduced its Assets-to-Capital multiple to within normal bounds (this has not always been the case<\/a>) – even if we follow international practice<\/a> and retain the EL\/ALLL deductions, the ratio is 19.8x.<\/p>\n

We see from the supplementary data that the average credit risk weight of their assets has increased from 23% in 2Q08 to 25% in 3Q08, which ties in with the minimal change in their capital ratios. This, in turn, is due to a decline in their “Trading-Related” exposure, in which “Repo-Style Transactions”, with a risk-weight of 2%, has declined to total exposure of $151-billion from $168-billion.<\/p>\n","protected":false},"excerpt":{"rendered":"

RY has released its Third 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 …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-2725","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2725","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2725"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2725\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2725"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}