Royal Bank of Canada

RBC reported earnings of $5.5 billion and adjusted earnings of $5.6 billion, its second-highest quarterly performance on record. Diluted EPS was $3.85 and adjusted diluted EPS was $3.90, up 25% from last year. Pre-provision pretax earnings rose 15% year over year on 11% revenue growth, and all-bank operating leverage was over 3% on Dave McKay’s remarks, while Katherine Gibson said adjusted operating leverage was 2%. ROE was 17.2% and CET1 was 13.5%. Segment highlights included Personal Banking net income of $1.9 billion, Commercial Banking $854 million, Wealth Management $1.2 billion, and Capital Markets $1.5 billion in record net income. For 2026, management expects all-bank net interest income growth excluding trading to remain in the mid-single-digit range, including over $250 million of lower PPA benefits, and full-year expense growth to remain in the mid-single-digit range with positive operating leverage. Management also said it intends to keep capital levels toward the higher end of its targeted CET1 range while returning capital through dividends and buybacks.

Dave McKay emphasized that RBC’s diversified model is working across businesses and geographies, with strong client flows, healthy pipelines, and meaningful opportunities in Canada, the U.S., and Europe. He sounded constructive on the Canadian economy, citing resilience in consumer spending and GDP, while acknowledging Section 232 and trade-related uncertainty are still creating weakness in some sectors. He also leaned hard into AI as a major strategic opportunity, saying RBC intends to fully meet its $1 billion enterprise value target over the next 18 months and that the bank can compete effectively against fintech disruption because of scale, trust, brand, and security.

Katherine Gibson focused on the quarter’s financial mechanics: adjusted EPS of $3.90 was up 25% year over year, all-bank net interest income rose 6%, net interest margin was up 3 basis points sequentially, and adjusted expense growth was 9%. She cited $84 million of legal provisions in corporate support, a 22.5% adjusted non-TEB tax rate, and 7.4 million shares repurchased for about $1.7 billion, with CET1 down 20 basis points quarter over quarter to 13.5%. Looking ahead, she reiterated mid-single-digit NII growth excluding trading, mid-single-digit expense growth, positive operating leverage, and a preference to keep capital closer to the higher end of the CET1 target range in the current environment.

Analysts pressed on whether macro and trade risks could worsen over the next 6-12 months, and McKay said he sees near-term resilience in Canada but remains cautious about Section 232 impacts, while staying optimistic that CUSMA negotiations can still end constructively. Questions also focused on AI disruption risk; McKay argued RBC can build the same tools as competitors, has scale and trust advantages, and expects AI to meaningfully boost productivity and client service. Credit questions centered on rising gross impaired loans and low performing-loan builds; Graeme Hepworth said tougher downside scenarios added about $80 million of potential Stage 1 and 2 provision pressure, but stronger credit-quality trends offset that, while NIM questions were answered with guidance for stable Canadian Banking NIM in the back half of the year, subject to competition and hedge costs.