Royal Bank of CanadaFollow rbc.com

Sentiment Score: +5

Sentiment Change: -28

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Royal Bank of Canada Earnings - Analysis & Highlights for Q1 2025

Overview

PositivesNegativesOutlook

Corporate & Investment Banking was up 24% YoY, with the Investment Banking business benefiting from constructive market conditions and expanded scale across client and product verticals.
The company reported a return on equity of 16.8% on the foundation of a strong common equity Tier 1 ratio of 13.2%.
The company believes it is in a strong position to navigate the uncertainty given the strength of its capital, diversified funding, brand, and diversified business and geographic model.
The company has robust client dialogue and a strong client engagement, and remains well-positioned to support its clients and take advantage of market opportunities as policy uncertainty moderates.
The company continues to leverage its client value proposition and foundational distribution advantage across its physical and digital channels.

Q1 2025 Earnings Call

All-bank net interest margin, excluding trading revenue, was down 1 basis point from Q4 due to the impact of higher securities balances in Capital Markets.
PCL and impaired loans increased in Q1, but within expectations given the point of the economic cycle.
Commercial Banking loan growth may moderate in the near term as clients hold back plans and investments amidst the tariff-driven uncertainty.
City National generated US$60 million in adjusted earnings in Q1, impacted by US$31 million taken on performing loans related to the California wildfires.
The company had an outsized exposure at a time when it went into a more difficult scenario in restructuring.

Q1 2025 Earnings Call

The company expects positive operating leverage for the year.
The company expects business momentum to remain strong.
The company expects typical seasonal declines in pre-tax pre-provision earnings through the remainder of the year.
The company expects the Bank of Canada to continue to take a more dovish stance, which should help consumer sentiment and growth.
The company expects credit outcomes to be dependent on the magnitude of change in unemployment rates, the direction of magnitude of changes in interest rates, and commercial and residential real estate prices.

Q1 2025 Earnings Call

Q&A Highlights from Royal Bank of Canada Earnings Call Q1 2025

Analyst asked about the incremental provisions for the California wildfires and the progress made in operational improvement and profitability increases.
- The company continues to make good progress in its City National franchise, with a heavy lift on the overall re-platforming from various fronts. The company is focused on building momentum across a number of fronts, including volume growth, cross-selling, and launching new platforms to sell into the Wealth Management space. Commercial loan growth is muted due to the runoff, but the pipelines are building nicely, and the runoff is expected to slow as the company de-markets. The company feels good about the franchise and is confident about its progress.
Analyst asked about the commonality of Royal Bank of Canada having a CAD 1.5 billion hold on a single credit.
- Graeme Hepworth, Chief Credit Officer, acknowledged that this is an investment-grade utility and that the company typically has higher holds for such situations. However, this is beyond what he would consider a natural hold size for the company, and it is associated with a transactional situation. Derek Neldner, Chief Financial Officer, added that this client has been a longstanding client of the firm and that the company would typically support them through a revolver hold, but this exposure was outsized due to the client's deteriorating situation.
Analyst asked about how Royal Bank of Canada manages its business in the current environment, particularly with regard to the possibility of tariffs affecting both economies.
- David Ian McKay, CEO of Royal Bank of Canada, explained that the company is still helping its clients grow, but some clients are pulling back due to the uncertain economic situation. He noted that the company is balanced in its approach and will review its strategy if the situation deteriorates further. He also highlighted that there are still strong opportunities for growth across a number of areas.

Q1 2025 Earnings Call