Royal Bank Of Canada Q2 Earnings Call Highlights

Key Points

• Royal Bank of Canada delivered a strong second quarter with CAD 5.5 billion in earnings and CAD 5.6 billion adjusted earnings, marking what management called the bank’s second-highest quarterly performance on record. Return on equity was 17.2%, supported by 11% revenue growth and broad strength across businesses.
• Capital Markets and Wealth Management were key growth engines, with Capital Markets net income up 23% and Wealth Management net income up 28% year over year. RBC also highlighted record investment banking activity and major asset growth, including wealth assets above CAD 800 billion and Canadian wealth AUA above CAD 1 trillion.
• Management stayed cautious on credit and the macro outlook as impaired loans rose and the bank added severity to downside economic scenarios amid tariff and geopolitical uncertainty. Even so, RBC maintained its 2026 guidance and continued returning capital through a higher dividend and share buybacks.

Royal Bank Of Canada NYSE: RY reported fiscal second-quarter earnings of CAD 5.5 billion, with adjusted earnings of CAD 5.6 billion, as management highlighted strong results across capital markets, wealth management and Canadian banking businesses.

President and Chief Executive Officer Dave McKay said the quarter represented RBC’s “second highest quarterly performance on record.” He said pre-provision, pre-tax earnings rose 15% from a year earlier, supported by 11% revenue growth and all-bank operating leverage of more than 3%. The bank reported a return on equity of 17.2% and a Common Equity Tier 1 ratio of 13.5%.

“These results were underpinned by the strength of our diversified business model,” McKay said, citing a constructive environment for market-related businesses and scale in Canadian Personal Banking and Commercial Banking.

Capital Markets and Wealth Management Drive Results

RBC Capital Markets posted record net income, reflecting strength in both global markets and investment banking. McKay said global investment banking improved its last-12-month market share to more than 2%, with record fee-based revenue from merger and acquisition advisory activity, as well as debt and equity origination.

RBC cited several transactions during the quarter, including advising CPP Investments on its $4.2 billion acquisition of atNorth, acting as joint active bookrunner on Alphabet’s CAD 8.5 billion inaugural Maple senior unsecured notes offering, and serving as exclusive financial adviser to ARC Resources on a sale agreement with Shell valued at CAD 22 billion. In the U.S., RBC acted as joint lead bookrunner to Fervo Energy on its $2.2 billion IPO.

Katherine Gibson, RBC’s chief financial officer, said Capital Markets net income of CAD 1.5 billion increased 23% from a year earlier. Global markets revenue rose 16%, while corporate and investment banking revenue reached a record level, up 17% from last year. Investment banking revenue increased 27%.

Wealth Management net income rose 28% from a year earlier to CAD 1.2 billion. Gibson said the increase reflected higher fee-based client assets from market appreciation and net new asset growth. RBC Global Asset Management assets under management surpassed CAD 800 billion, while Canadian Wealth Management assets under administration exceeded CAD 1 trillion. McKay said the Canadian wealth business added CAD 10 billion in net new assets during the quarter, while U.S. Wealth Management added US $5 billion in net new assets.

Canadian Banking Shows Growth Despite Uncertainty

Personal Banking reported earnings of CAD 1.9 billion, with Canadian Personal Banking net income up 18% from a year earlier. Gibson said revenue growth of 6% benefited from RBC’s scale and client balances shifting among core banking accounts, term deposits and investment offerings. Net interest income rose 6%, while non-interest income increased 5%, supported by double-digit growth in mutual fund revenue.

Commercial Banking net income rose 43% to CAD 854 million, compared with a prior-year period that included elevated provisions for credit losses. Pre-provision, pre-tax earnings increased 5%, driven by higher net interest income, higher volumes, favorable deposit mix and higher margins. Loans were up 3% year over year and 1% sequentially amid tariff-related uncertainty.

McKay said Commercial Banking growth remained resilient despite structural demand headwinds, particularly in Ontario. He pointed to tariff uncertainty in trade-exposed sectors and moderating demand in commercial real estate, especially condo development. Still, he said RBC had delivered 12 consecutive quarters of market share gains in lending balances as of the prior quarter.

During the question-and-answer session, Sean Amato-Gauci, group head of Commercial Banking, said pipelines were “really strong” and that the bank was seeing growth in sectors less affected by tariffs, including agriculture, public sector, services, healthcare and seniors housing.

Credit Outlook Remains Cautious

Graeme Hepworth, chief risk officer, said North American economies remain resilient but face soft underlying conditions, geopolitical risks and trade uncertainty. He said RBC’s base case for Canadian GDP growth and unemployment was little changed from the prior quarter, but the bank added modest severity to downside macroeconomic scenarios and continued to apply elevated weightings to those downside cases.

RBC recorded CAD 18 million in provisions on performing loans during the quarter. Gross impaired loans rose by CAD 623 million from the prior quarter to CAD 9.8 billion, primarily driven by Capital Markets and Wealth Management. In Capital Markets, impaired loans increased across sectors including real estate, forest products and consumer discretionary. In Wealth Management, the increase was largely in City National Bank, including names in utilities, real estate and other services sectors, as well as consumer mortgages.

Provisions for credit losses on impaired loans totaled CAD 899 million, or 34 basis points, down CAD 169 million from the prior quarter. Hepworth said RBC continues to have a cautious credit outlook, even as internal credit indicators have generally been stable or improving.

“Despite heightened uncertainty, we remain confident in the overall quality, diversification, and resilience in our portfolios,” Hepworth said.

Capital Returns and AI Initiatives in Focus

RBC increased its quarterly dividend by CAD 0.12 from the prior quarter, which McKay said represented a 14% year-over-year increase. The bank also repurchased 7.4 million shares for approximately CAD 1.7 billion during the quarter. RBC announced its intention, subject to approvals, to begin a normal course issuer bid to repurchase for cancellation up to 45 million common shares.

McKay said buybacks remain an important method of returning capital to shareholders, adding that RBC believes the intrinsic value of its shares remains above current valuations. Gibson said the bank intends to keep capital levels closer to the higher end of its targeted CET1 range given the uncertain environment, while continuing to return capital through dividends and buybacks.

Management also emphasized RBC’s artificial intelligence initiatives. McKay said the bank has developed more than 200 AI models and remains committed to generating CAD 700 million to CAD 1 billion in enterprise value from AI. He said AI has contributed to more than 24 million lines of code and more than 120,000 code reviews, while also being used in client service, advisor support and Commercial Banking workflows.

Asked by Bank of America analyst Ebrahim Poonawala about disruption risks from fintechs and AI, McKay said RBC is “fully capable” of building similar tools and argued that trust, brand, scale and regulatory strength remain important advantages for banks.

Management Maintains 2026 Outlook

Gibson said RBC continues to expect annual all-bank net interest income growth, excluding trading, in the mid-single-digit range, including more than CAD 250 million of lower purchase price accounting benefits related to the HSBC Canada acquisition. The bank also maintained guidance for full-year all-bank expense growth in the mid-single-digit range.

McKay said the Canadian economy remains resilient, with annualized GDP growth tracking at 1.7% in the first quarter of 2026, though uncertainty remains tied to CUSMA negotiations and the conflict in the Middle East. He said he was optimistic about medium-term opportunities in energy, critical minerals, infrastructure and defense-related projects in Canada.

“The resilience in the short term, the meaningful opportunities in the long term,” McKay said during the Q&A, summarizing his view of the Canadian macro backdrop.

About Royal Bank Of Canada NYSE: RY

Royal Bank of Canada NYSE: RY is a diversified financial services company and one of Canada's largest banks. Founded in 1864 in Halifax, Nova Scotia, the firm is now headquartered in Toronto, Ontario. It provides a broad range of banking and financial services to individuals, businesses, and institutional clients through a network of branches, digital platforms and international offices.

RBC operates across several principal business segments including personal and commercial banking, wealth management, insurance, investor and treasury services, capital markets, and global asset management.

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