Royal Bank of Canada expects to record a goodwill impairment charge of approximately US$850 million for the second quarter ending April 30, the bank said Thursday evening.

While the charge will reduce second quarter reported earnings by approximately US$850 million, it is a non-cash item and an accounting adjustment, and will not affect the bank’s ongoing operations, or Tier 1 and Total capital ratios, the bank said.

During the first quarter of fiscal 2009, the bank conducted the first of a two-step goodwill testing process and determined that the goodwill assigned to its International Banking reporting unit may be impaired.

The bank says it has now completed the second step of the testing process and has determined that the International Banking unit goodwill is impaired, resulting in the expected charge to second quarter earnings.

“This expected charge reflects the impact of prolonged challenging economic conditions that have affected our International Banking reporting unit; in particular declines in the U.S. housing market, the deterioration in the overall U.S. economic environment and the decline in the market value of U.S. banks,” the bank said in a release.

RBC will release its second quarter results on May 29.

IE