Royal Bank of Canada will probably miss its 2015 target of C$2 billion ($2 billion) in annual earnings from asset management because of low interest rates, executive George Lewis said.
Canada’s biggest bank by assets had forecast profit at the unit to more than double, with gains from internal growth, acquisitions and “normalized” interest rates, according to Lewis, RBC’s group head of wealth management.
“Between 40 and 50 percent of that is through a normal level of interest rates, which we’re not seeing and has arguably been pushed out by at least one or two years,” Lewis, 52, said today in an interview after an Economic Club of Canada event in Toronto. “It’s safe to say that that would apply to the overall goal as well.”
The Bank of Canada has kept its overnight interest rate at 1 percent for more than two years, and economists don’t expect an increase in rates until at least the second half of 2013.
Royal Bank’s profit goal is more than double the C$811 million it earned from the business in the fiscal year ended Oct. 31 2011, according to financial statements. The Toronto- based lender had C$556 million in profit from wealth management for the first three quarters of 2012, down 12 percent from the year earlier.
Royal Bank’s wealth-management unit has more than C$562 billion of assets under administration and more than C$324 billion under management.