RBC to record a gain on Visa Inc. restructuring
Royal Bank of Canada (RY on TSX and NYSE) today announced it expects to record a gain in its Canadian Banking segment in the fourth quarter ended October 31, 2007 of approximately $325 million pre-tax ($270 million after-tax). This gain relates to the Visa Inc. restructuring and the exchange of RBC’s membership interest in Visa Canada Association for shares of Visa Inc., as previously announced on October 3, 2007. The amount of the gain is based on an independent valuation of RBC’s shares in Visa Inc. In addition, RBC expects to record a charge of approximately $120 million pre-tax ($80 million after-tax) relating to an increase in our credit card customer loyalty reward program liability. This reflects higher redemption rate assumptions, consistent with our strategy of encouraging clients to more fully use the Visa points they accumulate by providing them with a broader range of redemption options.
RBC also expects to record a charge in its Capital Markets segment in the fourth quarter associated with the valuation of subprime collateralized debt obligations (CDOs) and subprime residential mortgage-backed securities (RMBS) of approximately $360 million pre-tax ($160 million after-tax and reflecting compensation adjustments).
RBC expects its fourth quarter earnings to be only modestly affected by these items due to largely offsetting impacts.
RBC is in the process of preparing its fourth quarter results and the information provided above is based on current estimates and is subject to change. RBC will release its fourth quarter and fiscal 2007 results on November 30, 2007.
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