Royal Bank of Canada reported Q4 2025 results that far exceeded analyst expectations, posting adjusted earnings per share of $3.85 versus a consensus estimate of $2.52. Total revenue reached C$17.21 billion, up 14.5% year‑over‑year and beating the consensus of C$12.01 billion. The earnings beat was driven by a 15% rise in net interest income and a 12% increase in fee and commission income, largely from the bank’s Capital Markets and Wealth Management segments.
Revenue growth was anchored by a 20% increase in Capital Markets revenue, driven by higher trading volumes and a rebound in equity and debt issuance. Wealth Management revenue grew 10% as client assets under management expanded, while Personal Banking revenue rose 8% on a stronger mortgage portfolio. The Commercial Banking segment posted a 5% decline, offset by a 25% jump in the Insurance segment, which benefited from higher underwriting income and a favorable claims environment.
The adjusted EPS beat was largely a result of disciplined cost management and a favorable segment mix. Net interest margin widened by 30 basis points, supported by higher loan growth and a modest rise in interest rates. Operating expenses grew only 4% year‑over‑year, reflecting effective cost controls and the completion of the HSBC Bank Canada integration, which delivered $200 million in annual synergies. The combination of higher margins and efficient spending lifted adjusted EPS to $3.85, a $1.33 increase over the consensus estimate.
Management raised its medium‑term return‑on‑equity target to 17% or more and reaffirmed a full‑year 2026 ROE guidance of at least 16%. The bank also reiterated its dividend policy, maintaining a quarterly dividend of C$0.25 per share. CEO Dave McKay emphasized the bank’s strong credit profile and its ability to fund future growth, noting that “our financial strength remains one of our greatest advantages, underpinning our strong credit ratings and giving us the capacity to fund future growth and pursue our client‑centric ambitions.”
Headwinds remain in the form of rising provisions for credit losses, particularly in the Commercial and Personal Banking portfolios, as the bank navigates a K‑shaped economic recovery. Chief Risk Officer Graeme Hepworth highlighted that higher unemployment in Ontario and the Greater Toronto Area, coupled with mortgage renewal payment shocks, will keep retail losses elevated in 2026. Despite these challenges, the bank’s diversified model and robust performance in market‑sensitive segments position it well for continued growth.
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