RY has released its Second 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 & April, 2008 |
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| 4Q07 | 2Q08 | |
| Total Tier 1 Capital | 23,383 | 23,708 |
| Common Shareholders’ Equity | 95.2% | 99.8% |
| Preferred Shares | 10.0% | 10.8% |
| Innovative Tier 1 Capital Instruments | 14.9% | 15.3% |
| Non-Controlling Interests in Subsidiaries | 0.1% | 0.1% |
| Goodwill | -20.3% | -26.0% |
Next, the issuance capacity (from Part 3 of the introductory series):
| RY Tier 1 Issuance Capacity October 2007 & April 2008 |
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| 4Q07 | 2Q08 | ||
| Equity Capital | (A) | 17,545 | 17,527 |
| Non-Equity Tier 1 Limit | (B=A/3), 4Q07 (B=0.428*A), 2Q08 |
5,848 | 7,502 |
| Innovative Tier 1 Capital | (C) | 3,494 | 3,626 |
| Preferred Limit | (D=B-C) | 2,354 | 3,876 |
| Preferred Actual | (E) | 2,344 | 2,555 |
| New Issuance Capacity | (F=D-E) | 10 | 1,321 |
| 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 |
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and the all important Risk-Weighted Asset Ratios!
| RY Risk-Weighted Asset Ratios October 2007 & April 2008 |
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| Note | 2007 | 2Q08 | |
| Equity Capital | A | 17,545 | 17,527 |
| Risk-Weighted Assets | B | 247,635 | 249,242 |
| Equity/RWA | C=A/B | 7.09% | 7.03% |
| Tier 1 Ratio | D | 9.4% | 9.5% |
| Capital Ratio | E | 11.5% | 11.5% |
| Assets to Capital Multiple | F | 19.8x | 20.1x |
| A is taken from the table “Issuance Capacity”, above B, D, E & F are taken from RY’s Supplementary Report C is my calculation. |
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I am pleased to see that RY has commenced disclosing their Assets-to-Capital multiple – the undisclosed-but-high figure for 1Q08 made me very curious! They note that “Effective Q2/08, the OSFI amended the treatment of the general allowance in the calculation of Basel II Asset-to-capital multiple. Comparative ratios have not been revised.”
This amendment is available in an Advisory dated April 2008 … which I will now have to puzzle over.
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