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Royal Bank Of Canada (TSE:RY)
:RY
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Royal Bank Of Canada
(NYSE:RY)
Rating:78Outperform
Price Target:―
Positive Factors
Acquisition Impact
Royal Bank's anticipated increase in profitability is the dual benefit of incremental synergies from the HSBC Canada acquisition and improvement in profitability at City National.
Market Position
The bank is expanding industry-leading market share in Canada and increasing its global market penetration.
Strategic Advantages
Application of Artificial Intelligence was highlighted as a key strategic advantage for each of Royal's operating segments.
Negative Factors
Credit Loss Provisions
Provisions for credit losses were higher than expected, reflecting higher impaired provisions across all segments.
Financial Challenges
Positive PTPP efforts somewhat offset by higher tax and nominal PCLs, with a reduction associated with Tax, PCLs, and Other.
Macroeconomic Risks
There is potential risk of near-term earnings downside in a worsening tariff and macroeconomic scenario.
Royal Bank Of Canada (RY) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$248.72B
Dividend Yield3.24%
Average Volume (3M)5.72M
Price to Earnings (P/E)14.3
Beta (1Y)0.89
Revenue Growth11.51%
EPS Growth14.79%
CountryCA
Employees94,624
SectorFinancial
Sector Strength82
IndustryBanks - Diversified
Share Statistics
EPS (TTM)3.62
Shares Outstanding1,412,531,500
10 Day Avg. Volume4,115,532
30 Day Avg. Volume5,716,166
Financial Highlights & Ratios
PEG Ratio1.44
Price to Book (P/B)1.78
Price to Sales (P/S)0.00
P/FCF Ratio4.12
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$185.18Price Target Upside5.17% 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 Financial Statement Overview
Summary
Royal Bank of Canada demonstrates strong financial performance with consistent revenue growth, high profitability margins, and robust cash flow generation. The balance sheet shows a stable financial position with moderate leverage typical for the banking industry. The overall financial health is very strong, though careful management of leverage is important.Income Statement
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.88
Very Positive
Balance Sheet
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.83
Very Positive
Cash Flow
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.90
Very Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| 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
Positive
176.08
Price Trends
163.56
Positive
166.22
Positive
165.35
Positive
Market Momentum
3.62
Negative
72.06
Negative
79.08
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 176.08 is above the 20-day moving average (MA) of 169.36, above the 50-day MA of 163.56, and above the 200-day MA of 165.35, indicating a bullish trend. The MACD of 3.62 indicates Negative momentum. The RSI at 72.06 is Negative, neither overbought nor oversold. The STOCH value of 79.08 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 |
|---|---|---|---|---|---|---|---|
79 Outperform | $162.75B | 9.63 | 14.27% | 4.39% | 13.12% | 61.99% | |
79 Outperform | $87.96B | 12.11 | 13.23% | 3.93% | 10.79% | 18.20% | |
78 Outperform | C$248.72B | 14.31 | 14.39% | 3.24% | 11.51% | 14.79% | |
78 Outperform | $50.53B | 11.76 | 15.64% | 3.42% | 17.13% | 14.73% | |
71 Outperform | $103.97B | 13.42 | 10.01% | 4.33% | 10.57% | 50.35% | |
71 Outperform | C$89.29B | 14.15 | 8.34% | 5.83% | 3.72% | -17.99% | |
64 Neutral | $12.67B | 9.74 | 7.58% | 17015.08% | 12.21% | -6.96% |
* Financial Sector Average
Performance Comparison
TSE:RY
Royal Bank Of Canada
176.08
37.72
27.26%
TSE:NA
National Bank of Canada
129.13
20.26
18.60%
TSE:BMO
Bank Of Montreal
142.67
17.71
14.18%
TSE:TD
Toronto Dominion Bank
92.91
20.96
29.13%
TSE:CM
Canadian Bank of Commerce
93.57
30.39
48.11%
TSE:BNS
Bank Of Nova Scotia
71.69
10.51
17.17%
Royal Bank Of Canada Earnings Call Summary
Earnings Call Date:Feb 27, 2025
(Q1-2025)
| % Change Since: 3.66%|
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.Q1-2025 Updates
Positive Updates
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%.
Negative Updates
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.