Royal Bank Of Canada's Writes-downs Reach $1.28 Billion

Toronto, Canada (AHN) - The Royal Bank of Canada announced Wednesday it would write down $855 million in bad debts covering the months February and March.

The bank had previously written off $430 million for the first quarter of fiscal 2008, bringing its total writedowns to $1.28 billion.

The new writedown was the second largest made by a domestic bank since the credit crunch started in 2007. But investors were not so affected by the announcement that the bank's shares even gained by 2.53 percent on the Toronto Stock Exchange or rose by $1.23 to close at $49.85.

Gordon Nixon, president and chief executive of the Royal Bank of Canada, in statement quoted by the Toronto Star said, "We are not happy about taking any writedowns and certainly do not take them lightly... That said, these writedowns are manageable and our risk profile continues to remain within our risk appetite. This is due to our disciplined risk management, our strong balance sheet and our business diversity."

With the U.S. subprime mortgage mess and the tightening credit squeeze affecting many large banks, Andre-Philippe Hardy, analyst of the RBC Dominion Securities, forecast only two Canadian banks among the six largest banks would have an increase in its total returns, including dividends, within the next 12 months. These are the Royal Bank of Canada and the Toronto-Dominion Bank.

Hardy, quoted by the Globe and Mail, said the Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank Financial would likely have total returns ranging from 1 to 5 percent.