Royal Bank Of Canada (RY) AI Stock Analysis

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Royal Bank Of Canada

(TSX:RY)

Rating:81Outperform

Price Target:

C$199.00

▲(13.90%Upside)

Royal Bank of Canada holds a strong position driven by robust financial performance and strategic achievements. The fair valuation and attractive dividend yield add to its investment appeal. Technical indicators suggest a strong upward trend, but caution is warranted due to overbought signals. The bank's ability to navigate macroeconomic challenges reinforces the overall positive outlook.

Positive Factors

Dividends and Buybacks

Raised its quarterly dividend by approximately 4% to $1.54/share and announced a 35mm/~2% NCIB.

Loan Growth

Royal Bank of Canada put up a solid quarter with NIM benefitting from a favorable product mix while loan growth was supported by strength in commercial banking.

Wealth Management Performance

Wealth Management income was 10% higher year over year and bettered forecasts with higher client assets.

Negative Factors

Credit Loss Provisions

Commercial Banking and Capital Markets missed expectations due to higher Provisions for Credit Losses (PCLs).

Earnings Performance

Operating EPS of $3.12 missed consensus forecasts of $3.16 by 1% as the bank chose to not exclude non-recurring EPS drag from results.

Geopolitical Uncertainty

Geopolitical uncertainty has mired investment banking activity this year, contributing to a 7% year-over-year revenue decline in Q2 in C&IB.

Royal Bank Of Canada (RY) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$247.46B

Dividend Yield3.21%

Average Volume (3M)4.26M

Price to Earnings (P/E)13.9

Beta (1Y)0.88

Revenue Growth6.03%

EPS Growth15.60%

CountryCA

Employees94,624

SectorFinancial

Sector Strength79

IndustryBanks - Diversified

Share Statistics

EPS (TTM)3.12

Shares Outstanding1,410,276,700

10 Day Avg. Volume3,819,500

30 Day Avg. Volume4,263,885

Financial Highlights & Ratios

PEG Ratio0.00

Price to Book (P/B)1.64

Price to Sales (P/S)0.00

P/FCF Ratio9.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$193.88

Price Target Upside10.97% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering11

Royal Bank Of Canada Business Overview & Revenue Model

Company DescriptionRoyal Bank of Canada (RY) is one of the largest financial institutions in North America, offering a diverse range of financial services. Headquartered in Toronto, Canada, the bank provides personal and commercial banking, wealth management, insurance, investor services, and capital markets products and services on a global scale. It serves millions of clients through a network of branches, automated teller machines, and digital platforms, making it a pivotal player in the financial services sector.

How the Company Makes MoneyRoyal Bank of Canada generates revenue through various streams, primarily segmented into personal and commercial banking, wealth management, insurance, investor and treasury services, and capital markets. Personal and commercial banking remains a significant source of income, comprising fees from traditional banking services, loans, mortgages, and credit cards. The wealth management division contributes through advisory services, asset management, and brokerage fees. The insurance segment provides income through premiums from life, health, and property insurance products. Investor and treasury services generate revenue through custodial, fund administration, and transaction processing services. Capital markets division earns by facilitating trading, investment banking, and advisory services. The bank's earnings are also bolstered by its strategic partnerships and investments in technology to enhance digital banking capabilities and customer experience.

Royal Bank Of Canada Earnings Call Summary

Earnings Call Date:May 29, 2025

(Q2-2025)

% Change Since: -2.17%|

Next Earnings Date:Aug 27, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance and strategic achievements, such as robust revenue growth and a strong capital position. However, challenges were noted in the form of increased credit loss provisions and a volatile macroeconomic environment. Despite these lowlights, the overall sentiment remains optimistic due to the bank's strategic positioning and financial strength.

Q2-2025 Updates

Positive Updates

Strong Earnings Performance

Reported second quarter earnings of $4.4 billion with adjusted earnings of $4.5 billion, including $260 million from the acquisition of HSBC Bank Canada.

Revenue Growth

Revenue growth of 11% year-over-year was driven by strong volume growth in Personal and Commercial Banking, and robust fee-based revenue growth in Wealth Management.

Capital Position

Common equity tier 1 ratio of 13.2%, translating to excess capital of approximately $5 billion, and a $0.06 or 4% increase in quarterly dividend.

Wealth Management Success

Reported 11% growth in assets under administration in Canada and 9% in the U.S., with RBC Global Asset Management's assets under management increasing by 11%.

Capital Markets Performance

Pre-provision pre-tax earnings of $1.4 billion or a record $3.1 billion in the first half of the year, driven by strong Global Markets revenue.

Negative Updates

Allowance for Credit Losses

Allowance for credit loss ratio increased to 74 basis points due to a prudent reserve build amidst heightened economic uncertainty.

Volatile Macro Environment

Changes in U.S. and international trade policies have resulted in a volatile and uncertain operating environment, affecting client confidence and sentiment.

Impaired Loans Increase

Gross impaired loans of $8.9 billion increased by $1.1 billion from last quarter, primarily driven by Commercial Banking and Capital Markets.

Company Guidance

During the RBC's 2025 Second Quarter Results Conference Call, significant guidance was provided regarding the bank's financial performance and strategic direction. RBC reported second quarter earnings of $4.4 billion, with adjusted earnings of $4.5 billion, including $260 million from the acquisition of HSBC Bank Canada. The bank achieved pre-provision pre-tax earnings of nearly $7 billion, marking a 16% growth from the previous year. Revenue grew by 11% year-over-year, driven by strong volume growth in Personal and Commercial Banking and higher spreads in Personal Banking. RBC's common equity tier 1 ratio stood at 13.2%, translating to $5 billion of excess capital. Additionally, the bank announced a quarterly dividend increase of $0.06, or 4%, and plans to repurchase up to 35 million common shares. The allowance for credit loss ratio increased to 74 basis points due to a prudent reserve build amidst economic uncertainty. The bank's diversified business model, robust capital position, and focus on risk management were highlighted as strengths in navigating the uncertain macroeconomic environment.

Royal Bank Of Canada Financial Statement Overview

Summary

Royal Bank of Canada exhibits a strong financial position with consistent revenue growth, high profitability margins, and robust cash flow generation. Despite moderate leverage, the bank maintains industry norms, and the return on equity is commendable. The bank's comprehensive financial health positions it well for future growth and stability, though careful management of leverage is essential to mitigate potential risks.

Income Statement

Very Positive

Royal Bank of Canada demonstrates strong financial performance with consistent revenue growth, evident from a TTM (Trailing-Twelve-Months) revenue increase to $60.45B from $57.49B in the previous year. The bank maintains robust profitability metrics, including a high gross profit margin of 100% and a solid net profit margin of approximately 29.4%. Although there was a slight decline in EBIT margin to 30.8% in TTM, the EBITDA margin remains healthy at 34.6%. These metrics indicate a highly efficient and profitable operation with well-managed expenses.

Balance Sheet

Very Positive

The balance sheet of Royal Bank of Canada is robust, showcasing a stable financial position with an equity ratio of 6.1%, reflecting a healthy level of equity relative to total assets. The debt-to-equity ratio stands at 3.7, indicating moderate leverage which is typical in the banking industry. The return on equity (ROE) is strong at 13.3%, suggesting effective use of equity capital to generate profits. The bank's balance sheet is solidly positioned, although the leverage could be a risk factor if not well-managed.

Cash Flow

Very Positive

The cash flow situation for Royal Bank of Canada is excellent, with a significant operating cash flow of $59.89B in TTM, highlighting strong cash-generating capabilities. The free cash flow growth rate is impressive at 175% year-over-year, demonstrating substantial improvement. The operating cash flow to net income ratio is favorable at 3.37, and the free cash flow to net income ratio is also strong at 3.23, indicating effective conversion of income into cash. This strong cash flow performance supports the bank's ability to invest in growth and manage debt obligations comfortably.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
60.45B	57.49B	53.66B	48.77B	49.54B	47.10B
	Gross Profit
60.45B	57.49B	56.26B	48.77B	49.54B	47.10B
	EBIT
24.70B	24.30B	27.18B	38.15B	20.62B	14.38B
	EBITDA
27.78B	27.28B	21.45B	22.63B	23.06B	16.92B
	Net Income Common Stockholders
17.78B	16.23B	14.86B	15.79B	16.04B	11.43B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
403.81B	167.13B	212.00B	240.60B	231.03B	297.64B
	Total Assets
2.19T	2.17T	2.00T	1.92T	1.71T	1.62T
	Total Debt
492.66B	474.20B	439.35B	425.18B	305.05B	9.87B
	Net Debt
373.54B	351.46B	306.28B	244.77B	111.56B	-148.03B
	Total Liabilities
2.06T	2.04T	1.89T	1.81T	1.61T	1.54T
	Stockholders Equity
133.17B	127.09B	117.66B	108.06B	98.67B	86.66B
Cash Flow		Free Cash Flow
57.41B	20.86B	23.35B	19.44B	58.86B	136.19B
	Operating Cash Flow
59.88B	23.14B	26.08B	21.94B	61.04B	138.82B
	Investing Cash Flow
-53.16B	-20.89B	-28.27B	-57.05B	-57.35B	-39.56B
	Financing Cash Flow
-35.97B	-8.15B	-9.83B	-2.19B	-5.93B	-7.75B

Royal Bank Of Canada Technical Analysis

Technical Analysis Sentiment

Positive

Last Price174.72

Price Trends

50DMA

167.19

Positive

100DMA

166.90

Positive

200DMA

167.12

Positive

Market Momentum

MACD

1.88

Positive

RSI

57.16

Neutral

STOCH

57.86

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:RY, the sentiment is Positive. The current price of 174.72 is below the 20-day moving average (MA) of 174.97, above the 50-day MA of 167.19, and above the 200-day MA of 167.12, indicating a neutral trend. The MACD of 1.88 indicates Positive momentum. The RSI at 57.16 is Neutral, neither overbought nor oversold. The STOCH value of 57.86 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:RY.

Royal Bank Of Canada Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RY	81 Outperform	$247.46B	13.94	14.17%	3.21%	6.03%	15.60%
TD	79 Outperform	$169.49B	10.02	14.27%	4.13%	13.12%	61.99%
NA	78 Outperform	$52.63B	12.69	13.42%	3.23%	17.13%	14.73%
CM	77 Outperform	C$87.52B	11.74	13.19%	4.14%	5.38%	21.68%
BMO	72 Outperform	$106.54B	13.69	9.88%	4.12%	6.98%	32.63%
BNS	71 Outperform	$92.15B	14.93	8.00%	5.47%	3.72%	-17.99%
Sector *	64 Neutral	$12.85B	9.81	7.79%	78.20%	12.23%	-7.93%

* Financial Sector Average

Performance Comparison

TSE:RY

Royal Bank Of Canada

174.72

36.26

26.19%

TSE:NA

National Bank of Canada

134.50

30.67

29.54%

TSE:BMO

Bank Of Montreal

147.29

36.69

33.17%

TSE:TD

Toronto Dominion Bank

95.98

25.19

35.58%

TSE:CM

Canadian Bank of Commerce

92.87

29.93

47.55%

TSE:BNS

Bank Of Nova Scotia

73.57

12.79

21.05%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.