Royal Bank of Canada shares surge 5% after robust earnings report 📈

Royal Bank of Canada (RY.US) delivered a strong third quarter, comfortably beating analyst expectations and posting record earnings across all of its major business lines. Shares of the leading Canadian bank surge more than 5% today, reaching all-time-high and outperforming almost all US and Canadian financial sector. 

Q3 2025 Earnings

• Net income: $5.4 billion, up 21% from $4.5 billion in Q3 2024.

• Reported EPS: $3.75 versus $3.09 a year earlier.

• Adjusted EPS: $3.84, topping analyst estimates of $3.32 and well above $3.12 in Q2.

• Revenue: $16.99 billion, compared with $14.63 billion a year ago.

• Provision for credit losses (PCLs): $881 million, higher than $659 million last year but below analyst expectations of $1 billion; also down sharply from $1.4 billion in Q2.

• Segment performance:

  • Personal Banking net income: $1.9 billion (+22% y/y)

  • Commercial Banking: $836 million (+2% y/y)

  • Wealth Management: $1.1 billion (+15% y/y)

  • Capital Markets: $1.3 billion (+13% y/y)

  • Insurance: $247 million (+45% y/y)

• Return on Equity (ROE): 17.3% reported; 17.7% adjusted.

• Efficiency ratio: 54.4% reported; 53.5% adjusted, reflecting strong cost control.

Business segments breakdown

• Personal Banking

  • Net income up 22% year-over-year; PPPT also up 22%.

  • Revenue rose 13%, driven by 14% growth in net interest income and a 24 bps increase in net interest margin to 2.61%.

  • Average volume growth of 3% with flat expenses year-over-year.

  • Efficiency ratio improved to 37.2%.

• Commercial Banking

  • Net income and adjusted net income both up 2% year-over-year; PPPT rose 8%.

  • Revenue grew 6%, supported by an 8% rise in net interest income.

  • Expenses rose only 1% year-over-year, yielding an efficiency ratio of 32.4%.

• Wealth Management

  • Net income up 15% year-over-year; revenue up 11%.

  • Canadian Wealth Management revenue up 15%; Global Asset Management up 14%; U.S. Wealth Management up 7%.

• Capital Markets

  • Net income up 13% year-over-year; PPPT surged 36%.

  • Revenue grew 25%, with Corporate & Investment Banking up 11% and Global Markets up 37%.

  • A strong rebound compared with the cautious tone on investment banking in Q2.

• U.S. Region

  • Net income rose 21% year-over-year.

  • Efficiency ratio improved to 81.5%, down 6.6 percentage points year-over-year.

Capital and Credit Management

• CET1 capital ratio steady at 13.2%.

• Repurchased 5.4 million shares worth $955 million in Q3.

• Credit quality remained stable:

  • PCL on impaired loans relatively flat.

  • PCL ratio at 35 bps (up 8 bps y/y, down 23 bps q/q).

  • Allowance for credit losses rose by $161 million.

  • Gross impaired loans fell by $188 million q/q; new impaired loan formations trended lower.

• Digital adoption: over 10 million active digital users and 190 million sessions in Q3, supporting both efficiency gains and customer experience.

• Management expects continued net interest income growth in the high single to low double digits and solid loan growth in commercial banking in the second half of 2025.

• Record Q3 results demonstrate the strength of RBC’s diversified model, resilience in a challenging macroeconomic environment, and ability to deliver strong shareholder returns while maintaining prudent risk management.

RY.US shares (D1)

Source: xStation5