RBC expects $850M US Q2 goodwill charge

Royal Bank three-month TSX trading

The Royal Bank of Canada said Thursday that it expects to write down $850 million US of goodwill when it releases its report for the second quarter, ending April 30.

The bank said that the charge is based on the weak U.S. economy, "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."

It didn't say which precisely which operations the goodwill is linked with, but said they report through the bank's international banking unit.

Goodwill is the difference between the value of a purchased asset, and the price the buyer paid. It's carried on the buyer's balance sheet as an asset, but is often written down if the asset performs more poorly than expected.

The Royal said it began looking at goodwill during the first quarter.

The charge will cut profit but will not cost the bank cash, and will not affect the bank's capital ratios, it said.

Royal shares closed up $1.22 at $42.35 in TSX trading.