Royal Bank of Canada Q1 FY2026 earnings call

• Record earnings of $5.8 billion and adjusted earnings of $5.9 billion, pre-provision pre-tax earnings nearly $8.5 billion (+14% from last year). - Record revenue nearly $18 billion, 5% operating leverage. - Wealth management and capital markets had record revenue and pre-provision pre-tax earnings. - Personal and commercial banking had record results with growth in money balances, higher margins, and operating leverage despite housing and trade policy challenges. - Return on assets increased to nearly 90 basis points, bought back over 4 million shares for approximately $1 billion. - Focus on compounding long-term shareholder value, evaluating opportunities to optimize shareholder value, enhancing client-driven profitable growth, maintaining disciplined risk appetite. - Organic RWA growth this quarter greater than quarterly average of last three years. - Aligning transaction banking with City National's commercial loan book, launching GoSmart for self-directed investors, expanding RBC Echelon for ultra-high net worth U.S. clients.

Personal banking: Record results of approx. $2 billion this quarter. Canada net income up 18% from last year, operating leverage 9%, revenue growth 9%, net interest income up 10%, loan growth 4%, deposit growth flat. Commercial banking: Record net income $863 million, up 11% from last year, pre-provision pre-tax earnings up 5%, deposits up 5% year-over-year or 2% sequentially, loan growth moderated to 4% year-over-year or 1% sequentially. Wealth management: Net income $1.3 billion, up 32% from last year, record revenue, non-interest income up 11% due to fee-based client assets and net new assets, net interest income up 4%. Capital markets: Net income $1.5 billion, up 3% from last year, record revenue $4 billion, pre-provision pre-tax earnings $1.9 billion, global markets revenue $2.2 billion record, corporate investment banking benefited from higher debt/equity origination, M&A, and lending revenue. Insurance: Net income $213 million, down 22% from last year, return on equity 24.9%.

• Annual all-bank net interest income growth (excluding trading) in mid-single-digit range. - Non-interest income to benefit from robust client activity in market-related businesses. - All bank expense growth in mid-single-digit range. - Adjusted non-TEB effective tax rate to move towards higher end of 21%-23% range. - Corporate support segment losses to trend closer to lower end of $100 million-$150 million per quarter. - Modest 10 basis points negative impact to CT1 ratio next quarter due to retail capital parameters change.

• Uncertainty from US trade policy, KUSMA joint review, and geopolitical tensions. - Trade disruption scenario captured in IFRS 9 framework, reflecting risk of higher tariffs and severe North American recession. - Elevated allowances retained for downside scenarios. - Provisions on performing loans $28 million (1 basis point), PCL on impaired loans 40 basis points up 2 basis points, with higher provisions in capital markets and personal banking partially offset by lower in commercial banking.

Q: Abraham Poonawalla asked about Royal's advantages in capital markets due to scale.

A: Derek responded about global footprint, diversification, scale allowing sustainable results, cross-border platform, ability to invest consistently without stretching risk.

Q: John Aiken asked about City National's provisions outlook.

A: Catherine and Dave noted strong earnings, clean credit book, loan/deposit growth, well on track to meet investor day targets.

Q: Gabriel Deschain asked about Canadian banking NIM impact from HSBC accretion runoff.

A: Catherine explained PPA rolling off, ~4 basis points impact, positive momentum from tractor strategy, deposit mix shift, mutual fund flows, but competitive pressure remains.

Q: Paul Holden asked about PCL guidance and Canadian consumer risk.

A: Graham said soft growth in Canada persists, elevated credit losses, near-term headwinds like increasing mortgage payments, trade/tariff uncertainty impacting consumer side, particularly in Ontario.

Q: Saurabh Mulvahedi asked about ROE outlook for capital markets growth.

A: Derek said they expect to deploy capital across portfolio to continue moving ROE higher, balance between ROE and growth, RWA footprint of capital markets remains stable, no dramatic change in credit book volatility.

Q: Mario Mendonca asked about buybacks and US banking transactions.

A: Dave said tempered buyback activity in Q1 due to market volatility, confident in stomach for US banking transactions if business case with synergies and competitive pricing exists.

Q: Abraham Punawalla followed up on Canadian banking margin outlook.

A: Erica and Sean talked about competitive deposit pricing, GIC market competition, client rotation to mutual funds, commercial side product mix shift from term to demand deposits, clients being more liquid.