Royal Bank of Canada announced it would issue C$2.3 billion of common shares in order to increase capital. Falling asset prices have led to a decrease in RBC's capital ratio. As of end of FY 2008, RBC tier-1 ratio was 9.0%, the lowest amongst its peers. By issuing shares, RBC increases equity and improves its tier-1. Canada requires banks to maintain at least 7.0%.
Trading losses, write-downs, and provisions for future losses (mainly from US operations) caused RBC's profit to fall 15% yoy. Offsetting some of these losses were gains from the Enron litigation. They had set aside more money than they actually paid out.
Like most financials, RBC sold off as concerns over liquidity and increasing defaults weighed on the markets. Canadian operations account for roughly 70% of RBC's revenue and the US contributes 18%. Downturn in housing prices and rising unemployment spell trouble for RBC's loan book.
