Royal Bank Lifts Dividend With Jump in Quarterly Earnings — Update

By Robb M. Stewart

Royal Bank of Canada bumped up its dividend and a key target for earnings after logging record net income in the final quarter of its fiscal year.

The bank, Canada's largest by market value and one of the biggest in North America by assets, beat earnings and revenue expectations for the quarter thanks to strong growth in capital-markets and wealth-management activity. That was despite the bank setting more aside to cover the risk of loans that could default and the lingering economic uncertainty that has followed the Trump administration's tariffs.

Royal Bank said Wednesday its quarterly dividend will be raised 6.5%. It also revised its goal for return on equity over the medium term to hit 17% or more, from the 16%-plus target previously set. ROE is a gauge of profitability and of how efficiently those profits are generated.

The Toronto-based bank recorded fourth-quarter net income of 5.43 billion Canadian dollars ($3.89 billion), or C$3.76 a share, up from C$4.22 billion, or C$2.91 a share, a year earlier. Excluding certain items, adjusted per-share earnings came in at C$3.85 for the three months to Oct. 31, beating the C$3.55 forecast of analysts polled by FactSet.

Total revenue increased 14% to C$17.21 billion from C$15.07 billion last year, and against the C$16.8 billion analysts expected. That helped underpin a return on equity for the quarter of 16.8%, versus 14.3% a year earlier.

"I would say our ROE has already differentiated itself significantly from our peers," Chief Executive Dave McKay said.

The Canadian banks that have turned in quarterly results so far this earnings season have notched stronger-than-anticipated earnings growth even as credit-loss provisions have risen amid continued worries about the potential fallout from the changes in U.S. trade policy and President Trump's shifting tariffs on imports.

"I would think you can also detect a little bit of conservatism from us," McKay said.

"We still haven't seen the economy normalize yet," he said, adding that there remained uncertainty as Canada and Mexico each look to renegotiate the existing North America trade pact with Washington. "There are some significant uncertainties that could affect the economy going forward that we just want to see play out a little bit longer."

Canada's economy has been hit hard by the trade dispute with the U.S., with unemployment still elevated after investors and businesses held back on investments and were reluctant to hire. Royal Bank said it for now expects credit quality to be largely flat, with little sign there will be a significant acceleration in mortgage or commercial activity.

Royal Bank's provision for credit losses increased C$167 million year over year to C$1.01 billion, and was up $126 million on the prior quarter.

The bank declared a quarterly dividend of C$1.64 a share, up C$0.10.

The same day, National Bank of Canada said it would boost its quarterly dividend by 5.1% after fourth-quarter earnings were buoyed by a 26% rise in revenue over last year thanks to growth in personal and commercial loans and deposits. National Bank of Canada, the smallest of the country's six largest lenders, also benefited from the C$5.3 billion takeover of Canadian Western Bank earlier in 2025, which significantly expanded its footprint in Alberta and British Columbia from what had largely been a focus on Quebec.

For the fiscal year, Royal Bank said adjusted earnings in its wealth-management operations increased 25%, mainly due to a rise in fee-based client assets thanks to higher sales and buoyant markets. Capital markets-related earnings were up 18% thanks to elevated market volatility during the first half of 2025 that supported trading flows.

Personal-banking earnings grew 20%, driven by higher net interest income, while commercial-banking earnings were up about 7% with increases in average loans and acceptances and in deposits, the bank said.

The bank's closely watched common-equity Tier 1 ratio widened to 13.5% in the latest quarter, from 13.2% the quarter before and a year earlier. That remains well above the minimum 11.5% of risk-weighted assets required by Canada's banking regulator.

Royal Bank said it considers itself to have surplus capital with a CET1 ratio in excess of 12.5%. It said that if the ratio reached anything above 13.5%, it would consider accelerated share buybacks or investment in internal growth opportunities.

The bank's shares rose Wednesday, outpacing a modest advance by the broader market in Toronto, climbing 1.3% to widen their gain in 2025 to 26%.

Write to Robb M. Stewart at robb.stewart@wsj.com

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December 03, 2025 13:28 ET (18:28 GMT)