As the Royal Bank of Canada unveiled a first quarter profit of $1.5-billion, its chief executive said the country’s largest and most profitable bank may make a decision as early as the second half of the year on whether to pay out some of its growing pile of capital to shareholders.

Uncertainty around new capital requirements has been a major concern for Canada’s big banks, which are sitting on ever larger heaps of capital but unable to make a decision about what to do with it. Yield-starved Canadian investors are desperate for dividend hikes or even share buybacks.

Gord Nixon, Royal’s chief executive, said that uncertainty should end later this year when the new Basel rules are set to be unveiled.

“I think we’ll be in a much better position to review share buybacks and dividend increases at that point in time,” Mr. Nixon said on a conference call with analysts.

Not that the executive of Canada’s biggest company by market capitalization is eager to have the new rules handed down to him. He used the opportunity of the Royal’s annual meeting in Toronto on Wednesday to criticize some of the proposed new regulations at the Basel Committee on Banking Supervision, calling them “complex and onerous.”

“As these rules are tested, it will become evident, in my view, that many banks around the world cannot meet the standards without impairing their ability to lend money and contribute to economic growth,” he said in his speech to shareholders.

When G20 leaders got together in the middle of the financial meltdown there was broad agreement on how to fix the global banking system but more recently as markets returned to normal, the co-operation disappeared as players pursued their own interests.

“If the debate [over broader reform in the financial industry] is hijacked by one constituent, the long term impact on the functioning of global capital markets, and on society, could be punitive,” Mr. Nixon told shareholders. “Recent developments show how emerging regulations could create a host of unintended consequences, including smothering the sparks of a fledgling recovery.”

Mr. Nixon told reporters after the annual meeting that he believes the current Basel proposals will get softened but the final result will be tougher than the existing regime.

RBC’s first quarter net income of $1.5-billion, or $1 a share, was up 35% from last year as it benefitted from lower provisions for bad loans and strong performance from the capital markets business and was roughly in line with analyst expectations.

In the wake of sharply declining trading revenue at some Wall Street banks, many analysts had been expecting a similar drop at Canadian banks. That has not been the case.

Royal is the fourth of the Big Six to post results for the three-month period ended Jan 31, after Bank of Montreal, CIBC and National Bank.

RBC’s capital markets business was one of the highlights of the quarter, with net profit of $571-million, up $346-million amid lower provisions for bad loans and stronger trading revenue.

Total provisions for credit losses were $493-million, down $390-million from the previous quarter amid a strengthening economy.

The results come the same day that an international financial industry group warned of the danger of regulatory changes that go too far.

“Reforms will inevitably have an impact on both the supply of and the demand for credit, as well as prospects for raising capital,” said Jacques de Larosière,co-chair of the Institute of International Finance’s market monitoring group. “It is essential that in their deliberations on the nature and timing of new regulatory measures, policymakers remain mindful of the paramount need not to undermine the recovery of the banking sector and the wider global economy.”

jgreenwood@nationalpost.com