RBC posts 29% jump in fourth-quarter profit, hikes dividend

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Royal Bank of Canada reported strong fourth-quarter earnings on Wednesday.Maria Collins/The Globe and Mail

Royal Bank of Canada RY-T posted higher fourth-quarter profit that beat analysts’ estimates on a boost in capital markets and wealth management activity.

Profit at RBC jumped 29 per cent year-over-year to $5.4-billion, or $3.76 per share, in the three months ended Oct. 31.

Adjusted to exclude certain items, the bank said it earned $3.85 per share. That topped the $3.55 per share analysts expected, according to S&P Capital IQ.

“Looking to 2026, our financial strength remains one of our greatest advantages, underpinning our strong credit ratings and giving us the capacity to fund future growth and pursue our client-centric ambitions,” RBC chief executive officer Dave McKay said in a statement.

The bank raised its quarterly dividend by 10 cents to $1.64 per share.

RBC also raised its target on return on equity – an industry metric that measures profitability – to 17 per cent or more after surpassing the 16-per-cent goal the bank set at its investor day in March.

In a note to clients, Bank of Nova Scotia analyst Mike Rizvanovic said the target is “conservative with 2025 results only slightly below that level. We see upside to [RBC’s] share price on the back of these results.”

RBC was the second major Canadian bank to report earnings for the fiscal fourth quarter. National Bank of Canada NA-T also reported results on Wednesday.

On Tuesday, Bank of Nova Scotia BNS-T posted higher profits that beat analysts’ estimates. Toronto-Dominion Bank TD-T, Bank of Montreal BMO-T and Canadian Imperial Bank of Commerce CM-T will wrap up earnings week on Thursday.

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Total revenue climbed 14 per cent in the quarter to $17.2-billion. But expenses rose 4 per cent to $9.4-billion, which the bank said was driven by foreign exchange and higher market-driven share-based compensation.

Capital markets profit climbed 45 per cent to $1.4-billion, driven by higher revenue in global markets and corporate and investment banking, with equities trading and merger and acquisition activity climbing across all regions. The U.S. division contributes more than half of the business’ revenue.

The wealth management division generated $1.3-billion of profit, up 33 per cent on higher fee-based client assets and sales.

Profit from personal banking was $1.9-billion, surging 20 per cent from a year earlier, driven by higher net interest income reflecting higher spreads and volume growth in the Canadian business. Commercial banking net income rose 5 per cent to $810-million.

In the quarter, RBC set aside $1-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That included $984-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.

In the same quarter last year, RBC set aside $640-million in provisions.