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Royal Bank Of Canada (TSE:RY)
:RY

Royal Bank Of Canada (RY) AI Stock Analysis

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Royal Bank Of Canada

(NYSE:RY)

Rating:78Outperform
Price Target:
C$206.00
▲(14.20%Upside)
Royal Bank of Canada's strong financial performance and positive earnings call sentiment are the primary drivers of the stock's score. The bank's solid profitability, robust revenue growth, and strategic initiatives position it well, despite challenges from increased credit loss provisions and economic uncertainties. The stock's reasonable valuation and attractive dividend yield further enhance its investment appeal.
Positive Factors
Dividend and Share Buyback
Raised its quarterly dividend by approximately 4% to $1.54/share and announced a 35mm/~2% NCIB.
Earnings Guidance
Management maintained its guidance for high single to low double-digit NII, which should help the bank surpass its 7% earnings guidance for the year.
Wealth Management
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 Miss
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.
Investment Banking Revenue
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)

Royal Bank Of Canada Business Overview & Revenue Model

Company DescriptionRoyal Bank of Canada operates as a diversified financial service company worldwide. The company's Personal & Commercial Banking segment offers checking and savings accounts, home equity financing, personal lending, private banking, indirect lending, including auto financing, mutual funds and self-directed brokerage accounts, guaranteed investment certificates, credit cards, and payment products and solutions; and lending, leasing, deposit, investment, foreign exchange, cash management, auto dealer financing, trade products, and services to small and medium-sized commercial businesses. This segment offers financial products and services through branches, automated teller machines, and mobile sales network. Its Wealth Management segment provides a suite of advice-based solutions and strategies to high net worth and ultra-high net worth individuals, and institutional clients. The company's Insurance segment offers life, health, home, auto, travel, wealth, annuities, and reinsurance advice and solutions; and business insurance services to individual, business, and group clients through its advice centers, RBC insurance stores, and mobile advisors; digital, mobile, and social platforms; independent brokers; and travel partners. Its Investor & Treasury Services segment provides asset servicing, custody, payments, and treasury services to financial and other investors; and fund and investment administration, shareholder, private capital, performance measurement and compliance monitoring, distribution, transaction banking, cash and liquidity management, foreign exchange, and global securities finance services. The company's Capital Markets segment offers corporate and investment banking, as well as equity and debt origination, distribution, advisory services, sale, and trading services for corporations, institutional investors, asset managers, private equity firms, and governments. The company was founded in 1864 and is headquartered in Toronto, Canada.
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: 1.00%|
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
88
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
83
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
90
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.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue97.55B57.49B53.66B48.77B49.54B47.10B
Gross Profit59.65B57.49B56.26B48.77B49.54B47.10B
EBITDA27.32B27.28B21.45B22.63B23.06B16.92B
Net Income18.22B16.23B14.86B15.79B16.04B11.43B
Balance Sheet
Total Assets2.24T2.17T2.00T1.92T1.71T1.62T
Cash, Cash Equivalents and Short-Term Investments410.65B167.13B212.00B240.60B231.03B297.64B
Total Debt781.27B474.20B439.35B425.18B305.05B9.87B
Total Liabilities2.11T2.04T1.89T1.81T1.61T1.54T
Stockholders Equity132.45B127.09B117.66B108.06B98.67B86.66B
Cash Flow
Free Cash Flow62.34B20.86B23.35B19.44B58.86B136.19B
Operating Cash Flow64.90B23.14B26.08B21.94B61.04B138.82B
Investing Cash Flow-130.57B-20.89B-28.27B-57.05B-57.35B-39.56B
Financing Cash Flow50.33B-8.15B-9.83B-2.19B-5.93B-7.75B

Royal Bank Of Canada Technical Analysis

Technical Analysis Sentiment
Positive
Last Price180.39
Price Trends
50DMA
173.66
Positive
100DMA
167.86
Positive
200DMA
168.62
Positive
Market Momentum
MACD
1.87
Negative
RSI
67.78
Neutral
STOCH
81.24
Negative
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 180.39 is above the 20-day moving average (MA) of 176.64, above the 50-day MA of 173.66, and above the 200-day MA of 168.62, indicating a bullish trend. The MACD of 1.87 indicates Negative momentum. The RSI at 67.78 is Neutral, neither overbought nor oversold. The STOCH value of 81.24 is Negative, 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 (73)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSCM
83
Outperform
C$91.62B12.2813.19%3.96%5.38%21.68%
TSTD
79
Outperform
$177.39B10.4914.27%4.14%13.12%61.99%
TSRY
78
Outperform
C$254.40B14.3314.17%4.49%6.03%15.60%
TSNA
78
Outperform
$54.92B13.2213.42%3.37%17.13%14.73%
73
Outperform
€28.72B11.2717.20%3.96%9.17%28.21%
TSBMO
72
Outperform
$111.35B14.319.88%5.67%6.98%32.63%
TSBNS
71
Outperform
$93.43B15.148.00%5.86%3.72%-17.99%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:RY
Royal Bank Of Canada
181.29
35.64
24.47%
TSE:NA
National Bank of Canada
141.27
31.84
29.10%
TSE:BMO
Bank Of Montreal
154.75
44.01
39.74%
TSE:TD
Toronto Dominion Bank
101.44
28.30
38.69%
TSE:CM
Canadian Bank of Commerce
99.56
35.63
55.74%
TSE:BNS
Bank Of Nova Scotia
75.02
15.54
26.13%
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.Date of analysis: Jul 09, 2025