Royal Bank of Canada(RY) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record third-quarter earnings of $5.4 billion, up 21% or over $900 million from last year, with a return on equity (ROE) of over 17% for the quarter and over 16% year to date [4][20] - The capital ratio stood at 13.2%, with strong internal capital generation net of dividends [20][22] - Adjusted diluted earnings per share increased by 18% from last year to $3.84, driven by strong revenue momentum [20][22] Business Line Data and Key Metrics Changes - Personal Banking net income rose 23% year over year, with a 14% increase in net interest income and a 10% increase in non-interest income [28] - Commercial Banking net income increased by 2% from a year ago, with pre-provision pre-tax earnings up 8% [29] - Wealth Management net income rose 15% from last year, with non-interest income up 13% [30] - Capital Markets reported record revenue of $3.8 billion, with net income of $1.3 billion, reflecting a 13% increase from last year [14][31] Market Data and Key Metrics Changes - Average deposits in Canadian Personal Banking were up 2% year over year, with a 7% growth in banking and savings accounts [9] - Average residential mortgages increased by 3% year over year, while credit card growth was solid at 7% [10] - The U.S. region reported net income of $635 million, with City National Bank earnings of $139 million, reflecting a 81% increase from last year [18][31] Company Strategy and Development Direction - The company is focused on accelerating investments in strategic initiatives, including new product capabilities and expanding talent pools [8] - There is an emphasis on enhancing technology capabilities, particularly in artificial intelligence, to drive enterprise value [8] - The strategic vision articulated at the Investor Day remains clear, with a focus on extending leadership in Canada and unlocking new revenue streams in key markets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating strong returns despite geopolitical risks and trade policy uncertainties, particularly regarding tariffs [6][19] - The company is monitoring trade negotiations and their potential impacts on consumer confidence and corporate profit margins [6][7] - There is optimism about the resilience of the Canadian economy and the ability to maintain strong client relationships [36][44] Other Important Information - The company achieved $740 million in annualized cost synergies from the acquisition of HSBC Bank Canada [20] - The CET1 ratio remained stable at 13.2%, with a total payout ratio of 56% year to date [20][22] - The company expects to provide updates on performance against Investor Day financial targets in the fourth quarter [19] Q&A Session Summary Question: ROE Expectations - The management indicated that the current ROE of 17.7% is sustainable, with expectations to maintain at least 16% in the future, but uncertainties around tariffs may affect future guidance [47][51] Question: City National Progress - Management expressed satisfaction with City National's progress, highlighting recruitment efforts and expected loan and deposit growth [58][60] Question: Trading Results - Strong trading results were attributed to client-driven activity, with no significant abnormal accounting impacts noted [66][68] Question: Credit Outlook - Management indicated a balanced outlook for credit, with expectations of peak loan losses around 2026, while noting resilience in the retail portfolio [70][74] Question: Inorganic Growth Opportunities - The company remains open to inorganic growth opportunities but emphasizes the importance of maintaining focus on organic growth and the current business momentum [85][88]