{"id":5665,"date":"2009-02-27T14:35:24","date_gmt":"2009-02-27T18:35:24","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=5665"},"modified":"2009-02-27T14:35:24","modified_gmt":"2009-02-27T18:35:24","slug":"ry-capitalization-1q09","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=5665","title":{"rendered":"RY Capitalization: 1Q09"},"content":{"rendered":"

RY has released<\/a> its Fourth Quarter 2008 Earnings<\/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, 2008
\n& January, 2009<\/td>\n<\/tr>\n
 <\/td>\n4Q08<\/td>\n1Q09<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n25,173<\/td>\n28,901<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n115.0%<\/td>\n108.0%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n10.6%<\/td>\n13.2%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n15.4%<\/td>\n14.3%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n1.4%<\/td>\n1.2%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-39.6%<\/td>\n-34.4%<\/td>\n<\/tr>\n
Miscellaneous<\/td>\n-2.7%<\/td>\n-2.4%<\/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 2008
\n& January 2009<\/td>\n<\/tr>\n
 <\/td>\n4Q08<\/td>\n1Q09<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n18,637<\/td>\n20,949<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\nB=0.666*A<\/td>\n12,425<\/td>\n13,952<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n3,879<\/td>\n4,141<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n8,546<\/td>\n9,811<\/td>\n<\/tr>\n
Preferred Actual<\/td>\n(E)<\/td>\n2,657<\/td>\n3,811<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(F=D-E)<\/td>\n5,889<\/td>\n6,000<\/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 2008
\n& January 2009<\/td>\n<\/tr>\n
 <\/td>\nNote<\/td>\n4Q08<\/td>\n1Q09<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n18,637<\/td>\n20,949<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n278,579<\/td>\n273,561<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n6.69%<\/td>\n7.66%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n9.0% <\/td>\n10.6%<\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n11.1%<\/td>\n12.5%<\/td>\n<\/tr>\n
Assets to Capital Multiple<\/td>\nF<\/td>\n20.1x<\/td>\n17.5x<\/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

Derivatives exposure, which was an issue last quarter as their long-term FX contracts grossed up the balance sheet, declined in notional terms but the risk-weighting increased to leave the risk-weighted exposure flat on the quarter. The notional decline was due to a reduction in short-term exposures; values for terms extending beyond one year were flat. It is possible – though not discussed! – that Royal is using its counterparty strength to go after the more profitable long-term business. Additionally, there appears (page 37 of the supplementary PDF) to be a shift from Foreign Exchange to Interest Rate derivatives.<\/p>\n

It was a good solid quarter with nothing particularly exciting happening … just the way we like it! Very nice to see the delevering indicated by the Assets to Capital Multiple and improved Preferred Share subordination shown by the the Equity\/RWA ratio.<\/p>\n","protected":false},"excerpt":{"rendered":"

RY has released its Fourth Quarter 2008 Earnings 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-5665","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5665","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=5665"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5665\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5665"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5665"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5665"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}