Source: The Canadian Press

Royal Bank (TSX:RY) has posted a $1.3-billion profit in the second quarter, a vast improvement over the loss of a year earlier but below analyst expectations, as the stronger loonie pecked away at results from its international divisions.

Canada’s biggest bank by assets said Thursday that the results were worth 88 cents per share.

That compared to a $50-million loss, or seven cents a share reported a year ago when it recorded a $1-billion impairment of goodwill.

Cash earnings per share was 96 cents per share, below analyst expectations of $1.08 according to Thomson Reuters.

Revenue was $6.97 billion, up $200 million from the second quarter of 2009 but about $100 million below analyst estimates compiled.

Royal said the strength of the Canadian dollar had a negative impact on both its profit and revenue, especially in capital markets and wealth management which both operate with other currencies.

Overall revenue took a $534 million hit from the beefed up loonie, while profits were negatively affected to the tune of $82 million.

However, chief executive officer Gord Nixon told analysts on a conference call that the bank wouldn’t waver from its current strategy.

“We’re very comfortable with our mix of business and the relative proportionate contribution of our capital markets businesses,” he said, adding that the bank hopes to expand the presence of its wealth management division.

“We think that we can consistently generate high quality earnings in this side of the business, so we’re not going to back away from continuing to invest in (wealth management) and diversifying our trading business.”

Royal’s Canadian retail banking division reported a 27% increase in profits to $736 million, an uptick of $155 million.

Its U.S. retail operations did not fare as well, posting a $27-million loss, compared to a $1.1 billion loss a year earlier, which was mainly comprised of a $1 billion impairment charge.

Capital markets reported a 20% increase in net income to $502 million, partly impacted by lower trading revenues and a $76-million negative impact from the stronger Canadian dollar.

The wealth management division reported that net income dropped 29% to $90 million.

Nixon said that Royal sees opportunities to boost its presence in numerous areas, including the international market and even domestic banking, which he said “everyone assumes is sort of that mature, steady market.”

“We think there are ways that we can invest capital in these businesses either through business growth or acquisition that will allow us to continue to build on our platform,” he said.