RBC posts record Q4 profit but CEO raises concerns about uneven economic recovery

Royal Bank of Canada Wealth Management (RBC) signage is pictured in Ottawa. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO — Royal Bank of Canada handily beat analyst expectations as it reported record fourth-quarter results that showed rising profits across most divisions.

Canada’s most valuable bank, and company, reported a profit of $5.43 billion in the quarter ending Oct. 31, up from a profit of $4.22 billion a year ago.

Profits for the year totalled $20.4 billion, up 25 per cent from last year, as it saw growth across most of the bank and benefited from its takeover of HSBC Canada.

The results helped lead RBC to increase its quarterly dividend to $1.64 per share, up from $1.54 per share.

The bank sees continued strength ahead, raising its return-on-equity target to more than 17 per cent, up from more than 16 per cent, which itself was already ahead of other banks.

RBC’s results and outlook come despite continued trade and economic uncertainty, but chief executive Dave McKay expressed cautious optimism on the wider picture.

“While the operating environment remains fluid and complex, and there is a lot of hard work yet to be done by governments and the private sector, I am cautiously optimistic on the outlook for Canada,” he said on an earnings call with analysts Wednesday.

McKay noted that overall Canada’s effective tariff rate remains low and has done little to impact exports to the U.S., while the ongoing shift to a service-oriented economy should also offset some trade-related headwinds.

He did, however, express concern with the split economic recovery, which is leading to increased inequality.

“The impact of the K-shaped economy is increasingly polarizing, with more affluent consumers investing disposable income and growing markets, while less affluent consumers struggle with affordability.”

The trend can be seen in RBC’s own results, with its capital markets and wealth management divisions driving much of the earnings beat.

Meanwhile, many borrowers continue to struggle, with the bank increasing its provisions for potentially bad loans in the quarter to $1.01 billion, up from $840 million a year ago.

Chief risk officer Graeme Hepworth said the overall Canadian economy has demonstrated strong resilience this past year with household spending strong, but the bank has maintained a prudent approach to provisions given trade issues are largely unresolved and pockets of concern remain.

“Rising unemployment in Ontario and the Greater Toronto Area, coupled with higher payments at mortgage renewal, have contributed to rising consumer impairments in these regions,” said Hepworth.

“We expect retail losses to remain elevated in 2026 as we work through the lag effect of higher unemployment, consumer insolvencies, and ongoing payment shocks for mortgage renewals in Canada.”

The areas of concern did little to hold back overall results, with adjusted earnings of $3.85 per diluted share in the quarter, up from an adjusted profit of $3.07 per diluted share in the same quarter last year.

Analysts on average had expected an adjusted profit of $3.53 per share, according to estimates compiled by LSEG Data & Analytics.

Scotiabank analyst Mike Rizvanovic said that while credit losses were elevated, they remained manageable as other areas like capital markets and wealth shined.

“A strong quarter overall for (Royal Bank) at first look, driven by outsized growth in the top line that benefited once again from solid gains in market-sensitive businesses, which comfortably offset a modest miss across other business lines,” he said in a note.

Revenue totalled $17.21 billion, up from $15.07 billion in the same quarter last year.

RBC’s wealth management arm earned $1.28 billion, up from $969 million a year ago, while the bank’s capital markets business earned $1.43 billion, up from $985 million in the same quarter last year.

Personal banking earned $1.89 billion in the bank’s latest quarter, up from $1.58 billion a year ago. Commercial banking operations earned $810 million, up from $774 million.

RBC’s insurance business earned $98 million, down from $162 million a year ago.

McKay said that going forward, the bank is looking both to push more into artificial intelligence and more international markets.

The bank already has 30,000 employees using generative AI, and the benefits of the technology was one of the reasons RBC boosted its ROE expectations, he said.

McKay said the bank is also looking at deploying capital into new markets, such as the Middle East potentially, using the strength of RBC’s wealth management and capital markets, with the benefits of its expansion in Asia having already been “incredibly significant” he said.

“I’m very excited about building a global business that can compete.”

This report by The Canadian Press was first published Dec. 3, 2025.

Ian Bicks, The Canadian Press