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, revenue grew 11%, and all-bank operating leverage was over 3% (2% on an adjusted basis). Return on equity was 17.2% and CET1 was 13.5%. On the financials, all-bank net interest income rose 6% year over year, all-bank net interest margin was up 3 basis points sequentially, reported noninterest expense was up 8% year over year, and adjusted expense growth was 9%. For the outlook, management continues to expect annual all-bank net interest income growth excluding trading in the mid-single-digit range, including over $250 million of lower PPA benefits, full-year all-bank expense growth in the mid-single-digit range, and positive all-bank operating leverage. It also expects portfolio mortgage spreads to be marginally higher by the end of 2026, while maintaining capital levels closer to the higher end of the targeted CET1 range and returning capital through dividends and buybacks.

Dave McKay framed the quarter as proof of RBC’s diversified model, emphasizing strong results across Capital Markets, Wealth, Personal Banking, and Commercial Banking. He sounded upbeat on Canadian economic resilience and said the bank sees meaningful medium-term opportunity from infrastructure, energy, critical minerals, and digital investment, even while acknowledging Section 232 tariff impacts and trade uncertainty. He also said RBC’s AI investments are already meaningful and should improve productivity, efficiency, and client service across the franchise.

Katherine Gibson highlighted that adjusted diluted EPS was $3.90, up 25% year over year, with 2% all-bank adjusted operating leverage. She noted the CET1 ratio was 13.5%, down 20 basis points sequentially, reflecting 75 basis points of internal capital generation partly offset by share repurchases of 7.4 million shares, or about $1.7 billion, plus dividend and RWA effects. She also pointed to all-bank net interest income up 6%, NIM up 3 basis points quarter over quarter, reported expense growth of 8% year over year, and maintained guidance for mid-single-digit NII and expense growth, positive operating leverage, and capital held toward the higher end of the target range.

Analysts pressed on whether macro risk could worsen over the next 6-12 months, and McKay said he sees short-term resilience in Canada but remains cautious about Section 232 impacts in Ontario and unresolved trade uncertainty. Graeme Hepworth said RBC increased downside scenario severity, but stable or improving credit indicators partly offset that, and he expects full-year 2026 provisions on impaired loans to remain within prior guidance. On net interest margin, management said all-bank NII guidance is a better guide than NIM, while Canadian Banking NIM should be largely stable in the back half, with mortgage roll-on, term-deposit migration, and hedge costs as key variables. Questions also focused on AI disruption risk; McKay argued RBC can build comparable tools, has scale and trust advantages, and expects AI to be a meaningful profit opportunity rather than a threat.