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 analyze their Tier 1 Capital, reproducing the prior format:
RY Capital Structure October, 2007 & July, 2008 |
||
4Q07 | 3Q08 | |
Total Tier 1 Capital | 23,383 | 24,150 |
Common Shareholders’ Equity | 95.2% | 111.6% |
Preferred Shares | 10.0% | 10.6% |
Innovative Tier 1 Capital Instruments | 14.9% | 15.3% |
Non-Controlling Interests in Subsidiaries | 0.1% | 1.5% |
Goodwill | -20.3% | -36.7% |
Miscellaneous | NA | -2.3% |
‘Miscellaneous’ includes ‘Substantial Investments’, ‘Securitization-related deductions’, ‘Expected loss in excess of allowance’ and ‘Other’ |
Next, the issuance capacity (from Part 3 of the introductory series):
RY Tier 1 Issuance Capacity October 2007 & July 2008 |
|||
4Q07 | 3Q08 | ||
Equity Capital | (A) | 17,545 | 17,892 |
Non-Equity Tier 1 Limit | (B=A/3), 4Q07 (B=0.428*A), 2Q08 |
5,848 | 7,658 |
Innovative Tier 1 Capital | (C) | 3,494 | 3,706 |
Preferred Limit | (D=B-C) | 2,354 | 3,952 |
Preferred Actual | (E) | 2,344 | 2,552 |
New Issuance Capacity | (F=D-E) | 10 | 1,400 |
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!
RY Risk-Weighted Asset Ratios October 2007 & July 2008 |
|||
Note | 2007 | 3Q08 | |
Equity Capital | A | 17,545 | 17,892 |
Risk-Weighted Assets | B | 247,635 | 254,189 |
Equity/RWA | C=A/B | 7.09% | 7.04% |
Tier 1 Ratio | D | 9.4% | 9.5% |
Capital Ratio | E | 11.5% | 11.7% |
Assets to Capital Multiple | F | 19.8x | 19.4x |
A is taken from the table “Issuance Capacity”, above B, D, E & F are taken from RY’s Supplementary Report C is my calculation. |
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) – even if we follow international practice and retain the EL/ALLL deductions, the ratio is 19.8x.
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.
[…] RY […]
[…] RY […]