Royal Bank Of Canada (RY) AI Stock Analysis

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Royal Bank Of Canada

(TSX:RY)

81Outperform

Royal Bank of Canada demonstrates solid financial performance with consistent revenue and profit growth. Strong earnings results and successful integration of HSBC Canada boost confidence, although increased credit provisions and potential geopolitical risks need monitoring. The stock's fair valuation and attractive dividend yield further support a positive outlook, despite some technical indicators suggesting caution.

Positive Factors

Market Position

The bank is expanding industry-leading market share in Canada and increasing its global market penetration.

Strategic Investments

Application of Artificial Intelligence was highlighted as a key strategic advantage for each of Royal's operating segments.

Negative Factors

Credit Losses

Provisions for credit losses were higher than expected, reflecting higher impaired provisions across all segments.

Economic Risks

There is potential risk of near-term earnings downside in a worsening tariff and macroeconomic scenario.

Royal Bank Of Canada (RY) vs. S&P 500 (SPY)

Market Cap

$222.16B

Dividend Yield3.58%

Average Volume (3M)4.29M

Price to Earnings (P/E)12.8

Beta (1Y)0.89

Revenue Growth11.51%

EPS Growth14.79%

CountryCA

Employees94,624

SectorFinancial

Sector Strength81

IndustryBanks - Diversified

Share Statistics

EPS (TTM)12.30

Shares Outstanding1,412,531,500

10 Day Avg. Volume5,847,117

30 Day Avg. Volume4,287,936

Financial Highlights & Ratios

PEG Ratio0.86

Price to Book (P/B)N/A

Price to Sales (P/S)4.07

Price to Cash Flow (P/CF)3.40

P/FCF Ratio1.70

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$185.20

Price Target Upside15.78% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering12

Royal Bank Of Canada Business Overview & Revenue Model

Company DescriptionRoyal Bank of Canada (RY), commonly referred to as RBC, is one of Canada's largest financial institutions and a global player in the banking and financial services industry. Founded in 1864, RBC operates across multiple sectors including personal and commercial banking, wealth management, insurance, investor services, and capital markets. The bank serves more than 17 million clients worldwide, offering a wide range of financial products and services tailored to meet the needs of individuals, businesses, and institutional clients.

How the Company Makes MoneyRoyal Bank of Canada generates revenue through several key streams. The primary source of income is net interest income, which is earned from the difference between the interest received on loans and mortgages and the interest paid on deposits. Additionally, RBC earns significant revenue from non-interest income sources such as fees and commissions from wealth management services, investment banking, and capital markets activities. The company also generates income from insurance premiums and related services. RBC's diverse business model is supported by strategic partnerships and a broad geographic presence, enabling it to leverage market opportunities and drive sustained growth. Furthermore, the bank invests in digital transformation and innovation to enhance customer experience and operational efficiency, contributing to its revenue generation.

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. The bank's leverage is moderate but within industry norms, and the return on equity is commendable.

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
18.60B	24.30B	27.18B	38.15B	20.62B	14.38B
	EBITDA
20.91B	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
92.02B	167.13B	212.00B	240.60B	231.03B	297.64B
	Total Assets
726.19B	2.17T	2.00T	1.92T	1.71T	1.62T
	Total Debt
8.35B	474.20B	439.35B	425.18B	305.05B	9.87B
	Net Debt
-14.24B	351.46B	306.28B	244.77B	111.56B	-148.03B
	Total Liabilities
684.98B	2.04T	1.89T	1.81T	1.61T	1.54T
	Stockholders Equity
38.95B	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

Neutral

Last Price159.96

Price Trends

50DMA

164.83

Negative

100DMA

169.23

Negative

200DMA

164.00

Negative

Market Momentum

MACD

-2.17

Positive

RSI

47.84

Neutral

STOCH

39.98

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:RY, the sentiment is Neutral. The current price of 159.96 is below the 20-day moving average (MA) of 161.21, below the 50-day MA of 164.83, and below the 200-day MA of 164.00, indicating a bearish trend. The MACD of -2.17 indicates Positive momentum. The RSI at 47.84 is Neutral, neither overbought nor oversold. The STOCH value of 39.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:RY.

Royal Bank Of Canada Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RY	81 Outperform	$222.16B	12.78	14.39%	3.58%	11.51%	14.79%
TD	76 Outperform	$141.98B	17.17	7.68%	4.97%	11.78%	-25.44%
CM	75 Outperform	$75.86B	10.44	13.23%	4.60%	10.79%	18.20%
BMO	71 Outperform	$93.30B	12.05	10.01%	4.88%	10.57%	50.35%
BNS	68 Neutral	$79.68B	12.63	8.34%	6.57%	3.72%	-17.99%
NA	64 Neutral	$44.46B	10.35	15.64%	3.91%	17.13%	14.73%
Sector *	63 Neutral	$12.75B	9.36	8.64%	84.32%	13.82%	-3.89%

* Financial Sector Average

Performance Comparison

TSE:RY

Royal Bank Of Canada

160.80

32.43

25.26%

TSE:NA

National Bank of Canada

114.53

7.78

7.28%

TSE:BMO

Bank Of Montreal

129.44

9.40

7.83%

TSE:TD

Toronto Dominion Bank

83.56

9.91

13.45%

TSE:CM

Canadian Bank of Commerce

81.50

19.53

31.52%

TSE:BNS

Bank Of Nova Scotia

65.53

5.25

8.71%

Royal Bank Of Canada Earnings Call Summary

Earnings Call Date: Feb 27, 2025 | % Change Since: -6.69% | Next Earnings Date: May 29, 2025

Earnings Call Sentiment Positive

RBC reported a strong start to fiscal 2025 with record earnings and growth driven by successful integration of HSBC Canada and robust performance across divisions. However, increased credit provisions, challenges in Commercial Banking, and geopolitical risks pose concerns.

Highlights

Record-Breaking Revenue and Growth

RBC reported first quarter earnings of $5.1 billion, with adjusted earnings of $5.3 billion, up 29% year-over-year. The return on equity was recorded at 16.8% with strong common equity tier 1 ratio of 13.2%. Net interest income increased by 26% this quarter.

Successful Integration of HSBC Canada

The acquisition of HSBC Canada contributed $267 million to adjusted earnings. RBC has achieved 70% of the targeted $740 million cost synergies, with an annualized run rate savings of over $500 million.

Strong Performance in Capital Markets

Capital Markets reported record pre-provision pre-tax earnings of $1.7 billion, with Global Markets revenue exceeding $2 billion. Corporate Investment Banking was up 24% from last year.

Wealth Management Achievements

Wealth Management revenue surpassed $5.5 billion, generating nearly $1 billion in net income. Assets under management increased 23% year-over-year, surpassing $700 billion for the first time.

Positive Operating Leverage

RBC generated operating leverage of 13% or 8% on an adjusted basis. The bank reported robust adjusted all-bank operating leverage of 7.7%.

Lowlights

Increased Credit Provisions

Impaired loans increased, driven by a significant account in the Capital Markets portfolio. Provisions on impaired loans rose to 39 basis points, with a $1.5 billion new formation in Capital Markets.

Challenges in Commercial Banking

Commercial Banking loan growth may moderate due to clients delaying investments amidst tariff-driven uncertainty. The HSBC Canada portfolio is driving a disproportionate share of Commercial Banking PCL on impaired loans.

Impact of California Wildfires

RBC's provision for the California wildfires amounted to $45 million, impacting City National's performance.

Potential Tariff and Geopolitical Risks

Uncertainty around trade policy and geopolitics may moderate client activity, with risks of recessionary conditions if broad and sustained tariffs are imposed.

Company Guidance

During RBC's 2025 first-quarter earnings call, the company reported record earnings of $5.1 billion, with adjusted earnings of $5.3 billion, representing a 29% year-over-year increase. The return on equity stood at 16.8%, supported by a strong common equity tier 1 ratio of 13.2%. The bank achieved a gross internal capital generation of 76 basis points, contributing to a 13% growth in book value. Net interest income rose by 26%, driven by robust deposit growth in Personal Banking and loan growth in Commercial Banking, while fee-based revenue also saw significant growth across various segments. The acquisition of HSBC Canada significantly contributed to the results, with expected cost synergies of $740 million by early 2026. Operating leverage was reported at 13%, or 8% on an adjusted basis. Despite an increase in provisions for credit losses and impaired loans, RBC maintained its PCL guidance for the year. The bank anticipates ongoing economic uncertainty due to potential tariff impacts but remains confident in navigating these challenges given its diversified business model and strong capital position.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.