# Royal Bank of Canada (RY) — Narrative, third quarter of fiscal 2026 (quarter ended July 31, 2026) Royal Bank of Canada reports in Canadian dollars under IFRS. Every money amount below has been converted to US dollars. Flows (income, revenue, expenses, per-share amounts) use the period-average US-dollar value of the Canadian dollar that RBC reports for that period, and balances use RBC's reported period-end rate. Amounts tied to a single transaction date, or to a period for which RBC reports no rate, use Federal Reserve daily CAD/USD rates. A percentage change printed next to an amount is the change in US-dollar terms. Where the bank's own Canadian-dollar percentage is also given, it is labelled as such. Ratios (ROE, CET1, NIM, basis-point credit ratios) do not depend on currency. RBC's fiscal year ends October 31, so the third quarter of fiscal 2026 covers May 1 to July 31, 2026. --- ## Business *Source: FY2025 annual report on Form 40-F, accession 0001193125-25-305927 — Annual Information Form (Exhibit 1) and Financial Review / Management's Discussion and Analysis (Exhibit 2).* Royal Bank of Canada (RBC) is Canada's largest bank. It serves more than 19 million clients in Canada, the U.S. and 27 other countries. It earns money in two main ways. The first is the spread between what it earns on loans and securities and what it pays on deposits: net interest income was $23.50 billion of total fiscal 2025 revenue of $47.42 billion. The second is fee and market income ($23.93 billion of non-interest income), led by investment management and custodial fees ($7.58 billion) and mutual fund revenue ($3.62 billion), plus trading, underwriting and advisory fees, service charges, card revenue and insurance results. At October 31, 2025 RBC had total assets of $1.66 trillion, net loans of $743.25 billion, deposits of $1.08 trillion, assets under management of $1.12 trillion and assets under administration of $3.99 trillion. It had 96,628 full-time-equivalent employees and 1,263 bank branches. RBC reports five business segments plus Corporate Support. Their fiscal 2025 net income adds up to the consolidated $14.50 billion: - **Personal Banking** ($5.06 billion of net income): financial products and services for retail clients in Canada, the Caribbean and the U.S. Personal Banking – Canada serves about 15 million clients and ranks first in market share across all key retail products (personal lending including mortgages, core deposits and GICs, credit cards, long-term mutual funds). It has the country's largest branch network and the most ATMs. Caribbean & U.S. Banking serves targeted markets. - **Commercial Banking** ($2.15 billion): lending, deposits, payments, cash management and advisory services for Canadian businesses, including subsidiaries of multinationals. - **Wealth Management** ($3.05 billion): serves affluent, high-net-worth and ultra-high-net-worth clients worldwide through Canadian Wealth Management, U.S. Wealth Management (including City National Bank), Global Asset Management, International Wealth Management and Investor Services. It also runs a self-directed investing service in Canada. - **Insurance** ($589.54 million): life, health, wealth solutions, property and casualty, travel and group benefits in Canada, plus longevity reinsurance and reinsurance for creditor products, where it competes in the global reinsurance market. - **Capital Markets** ($3.84 billion): advisory and origination, sales and trading, lending and financing, and transaction banking for corporate, institutional, sponsor and government clients. It operates from 55 offices in 16 countries. RBC describes this business as a market leader in Canada that competes with large global investment banks in North America. - **Corporate Support** (net loss of $189.39 million): Technology & Operations, functional groups (finance, HR, risk, audit) and Corporate Treasury. Recent transactions explain the current shape of the business. The acquisition of HSBC Bank Canada closed on March 28, 2024. Its results are consolidated into Personal Banking, Commercial Banking, Wealth Management and Capital Markets, and fiscal 2025 included five more months of them than fiscal 2024. In 2023 RBC sold its RBC Investor Services operations in Europe, Jersey and the U.K. to CACEIS (the asset-servicing group of Crédit Agricole and Banco Santander). Effective the fourth quarter of 2024, the former Personal & Commercial Banking segment was split into today's two standalone segments, and RBC Direct Investing moved to Wealth Management. RBC's stated strategic goals are to be the undisputed leader in financial services in Canada; to be the preferred partner to institutional, corporate, commercial and high-net-worth clients in the U.S.; and to be a leading financial services partner in select global financial centres. In Canada it is a Schedule I bank under the Bank Act, supervised by the Office of the Superintendent of Financial Institutions (OSFI). As a domestic systemically important bank it is subject to Canada's bail-in regime. In the U.S. it is a foreign banking organization and financial holding company supervised by the Federal Reserve. Its U.S. operations are held through an intermediate holding company, RBC US Group Holdings LLC, and its U.S. banks City National Bank and RBC Bank (Georgia) are OCC-chartered national banks. --- ## Risk factors *Source: "Top and emerging risks" in the FY2025 Management's Discussion and Analysis (40-F Exhibit 2, accession 0001193125-25-305927), updated by the Q3 2026 Report to Shareholders (6-K Exhibit 99.2, accession 0001193125-26-369461).* RBC names the following as its top and emerging risks. Each sits alongside its principal risks: credit, market, liquidity and funding, insurance, operational, compliance, strategic and reputation risk. - **Business and economic conditions, and interest rates.** Results depend on growth, unemployment, borrowing and repayment behaviour, business investment and market activity in RBC's regions. They are also sensitive to rate moves and central-bank policy. RBC warns that a slowdown would cut loan demand and raise credit losses, and that high government debt could limit governments' ability to respond to a crisis. - **Canadian housing and household indebtedness.** RBC calls this risk heightened. High home prices, high household debt, cost-of-living pressure, a rising unemployment rate and uncertain immigration policy make key Canadian housing markets vulnerable to a shock. Falling prices would push loan-to-value ratios up and raise credit losses. - **Information technology, cyber and third-party risk.** RBC's size, its reliance on the internet and on outside providers, and nation-state threats against critical infrastructure expose it to cyberattacks, ransomware, data breaches and supply-chain compromise. Adopting cloud, AI and robotics adds to that exposure. - **Geopolitical uncertainty and trade.** U.S. policy uncertainty, tariffs, tensions between the U.S. and China (Canada's two largest trading partners), the Russia-Ukraine war and conflict in the Middle East can hit economies, markets and RBC's credit and market risks. The Q3 2026 report says the outlook now depends heavily on U.S. trade policy and on oil prices driven by the Middle East conflict. It notes new U.S. tariffs, imposed in August 2026, on about 5% of U.S. imports from Canada, on top of earlier lumber, steel, aluminum and auto tariffs. It also notes the U.S. administration's decision not to extend CUSMA beyond its current 2036 expiry. - **Digital disruption and innovation.** Technology companies, new entrants and digital assets, in particular stablecoins, challenge traditional banking models. AI and machine learning bring new strategic, operational, regulatory and reputational risks as well as opportunities. - **Privacy and data.** Mishandling personal information or data governance could lead to financial loss, litigation, regulatory penalties and loss of client trust. Regulators are also issuing guidance on the use of AI with personal data. - **Regulatory change.** New rules on operational resilience, data and AI, cyber security, capital, anti-money laundering and consumer protection keep raising compliance demands. Two developments were noted in fiscal 2026, and RBC says neither had a material impact. Canada enacted Bill C-12 on March 26, 2026, which raises anti-money-laundering penalties and enforcement scope. OSFI's revised liquidity guideline took effect May 1, 2026. - **Culture and conduct.** Regulators are focused on conduct, and failures could bring investigations, fines, remediation costs or restrictions on activities. - **Credit quality.** In fiscal 2025 impaired-loan provisions rose sharply. Gross impaired loans rose 48% in Canadian-dollar terms, led by Capital Markets, Commercial Banking and Personal Banking (where the increase was concentrated in Canadian residential mortgages). At July 31, 2026, gross impaired loans were $7.23 billion, or 0.91% of loans and acceptances, up from 0.83% at the end of fiscal 2025. - **Litigation.** The main proceeding is in France. The French conviction of RBC's Bahamas trust subsidiary for complicity in estate-tax fraud is now final. It leaves that subsidiary jointly and severally liable, together with another convicted party, for allegedly unpaid inheritance taxes, penalties and interest in an amount still to be set by the French tax courts. RBC's Qualified Professional Asset Manager status in U.S. pension-plan business depends on a Department of Labor exemption that runs to March 4, 2030. Other matters: in February 2025 RBC and RBC Europe Limited settled the U.K. Competition and Markets Authority's gilts investigation for $42.89 million, and a certified Ontario class action over vacation and holiday pay for Canadian Wealth Management advisors and staff is pending. --- ## Management's discussion — fiscal 2025 (year ended October 31, 2025) *Source: FY2025 Management's Discussion and Analysis (40-F Exhibit 2, accession 0001193125-25-305927).* Fiscal 2025 was a strong year. Net income was $14.50 billion, up 21.3% (up 25% in Canadian dollars). Diluted EPS was $10.02, up 21.0%, and ROE was 16.3%, up 190 basis points. Adjusted net income, which excludes specified items and the amortization of acquisition-related intangibles, was $14.86 billion. On the same basis, adjusted diluted EPS was $10.27 and adjusted ROE 16.7%. Every segment earned more. The prior year also carried HSBC Canada transaction and integration costs and the cost of managing closing-capital volatility on that deal. A weaker Canadian dollar added to reported earnings. - **Revenue** of $47.42 billion rose 12.4%. Net interest income of $23.50 billion rose 14.2%, driven by higher average deposits and loans in Personal and Commercial Banking (including five more months of HSBC Canada) and wider Personal Banking spreads. Net interest margin rose to 1.62% from 1.54%, mainly from Personal Banking's product mix and the lasting effect of higher rates. Fee income grew on market appreciation and net sales in wealth. Total trading revenue of $3.89 billion rose 29.8%, on higher equity trading in Europe and the U.S. and higher foreign-exchange and fixed-income trading. - **Credit costs** rose. The provision for credit losses was $3.11 billion, up 30.6%, and provisions on impaired loans were $2.66 billion, up 37.9%, mainly in Commercial Banking, Personal Banking and Capital Markets. The PCL-on-loans ratio rose to 43 basis points from 35. Provisions on performing loans were roughly flat. The prior year had included an initial provision on the performing loans acquired with HSBC Canada, and this year that absence was largely offset by less favourable scenario weights reflecting trade disruptions, including tariffs. - **Expenses** of $26.05 billion rose 3.4%, driven by staff costs, variable compensation, technology and five more months of HSBC Canada expenses. Lower integration costs and realized HSBC synergies partly offset the increase. The efficiency ratio improved to 54.9% from 59.7%. - **Tax.** The effective tax rate rose to 20.6% from 18.2%, reflecting earnings mix and the Pillar Two global minimum tax, effective for RBC from November 1, 2024. By segment: - **Personal Banking** earned $5.06 billion, up 16.1%, on wider spreads and 7% average volume growth in Personal Banking – Canada, partly offset by higher expenses. - **Commercial Banking** earned $2.15 billion, up 3.7%. Revenue grew on a 16% rise in average loans and acceptances and a 10% rise in average deposits (both in Canadian-dollar terms and including HSBC Canada). Higher provisions and expenses offset much of that growth. - **Wealth Management** earned $3.05 billion, up 21.2%, on higher fee-based client assets and transactional revenue. - **Insurance** earned $589.54 million, up 9.9%, on better claims experience in longevity reinsurance and life retrocession, partly offset by unfavourable annual actuarial assumption updates. - **Capital Markets** earned $3.84 billion, up 14.1%, on Global Markets and Corporate & Investment Banking revenue. Higher compensation and higher taxes (Pillar Two and earnings mix) partly offset the gains. Capital and shareholder returns were strong. The CET1 ratio ended the year at 13.5%, up 30 basis points, with a liquidity coverage ratio of 127% and a net stable funding ratio of 112%. Dividends declared were $4.30 per share, up 4.3% (up 7.9% in Canadian dollars), a 43% payout ratio. Against its medium-term objectives, RBC reported five-year diluted EPS growth of 13% against a target of 7% or more, average ROE of 16.0% against 16% or more, an average CET1 ratio of 13.5%, and an average payout of 46% against a 40%–50% range. For fiscal 2026 it raised the ROE objective to 17% or more and dropped top-half total shareholder return as an objective. Fourth-quarter 2025 net income was $3.91 billion, which RBC described as relatively flat with the third quarter. In December 2025 RBC expected slow but positive Canadian growth in 2026, no further Bank of Canada cuts, and modest Federal Reserve easing. It also expected its structural hedges to dampen margin volatility from short-term rate moves. --- ## Current quarter — third quarter of fiscal 2026 (three months ended July 31, 2026) *Source: 6-K filed August 27, 2026, accession 0001193125-26-369461 — Third Quarter 2026 Earnings Release (Exhibit 99.1) and Q3 2026 Report to Shareholders, with interim MD&A and condensed financial statements (Exhibit 99.2).* RBC reported record third-quarter net income of $4.30 billion, up 9.1% from a year earlier (up 11% in Canadian dollars). In Canadian-dollar terms it was also up 9% from the second quarter. Diluted EPS was $3.02, up 10.6% (up 13% in Canadian dollars). ROE was 17.9%, compared with 17.3% a year earlier and 17.2% last quarter. Adjusted net income was $4.36 billion, adjusted diluted EPS $3.06 and adjusted ROE 18.1%. Wealth Management, Capital Markets and Commercial Banking drove the increase. Pre-provision, pre-tax earnings, a non-GAAP measure, were a record $6.25 billion, up 10.7%. The quarter had three more days than the second quarter, which RBC cites as a driver of higher sequential net interest income. - **Revenue** of $13.24 billion rose 7.0%. Investment management and custodial fees of $2.22 billion rose 15.7% on market appreciation and net sales. Net interest income of $6.24 billion rose 2.7% on average volume growth in Personal Banking, Commercial Banking and Wealth Management. Trading revenue booked in non-interest income was $686.87 million, up 37.7%, on equity trading in all regions. Underwriting and other advisory fees of $730.42 million rose 18.0% on equity and debt origination and M&A. Net interest margin fell to 1.49% from 1.61%, mainly because of growth in trading assets in Capital Markets. - **Credit.** The provision for credit losses was $714 million, up 11.3%, mainly in Capital Markets and Personal Banking, partly offset by Commercial Banking. The PCL-on-loans ratio was 36 basis points, up 1 basis point both year over year and quarter over quarter. The PCL on impaired loans ratio was 35 basis points. Gross impaired loans rose 4% from the prior quarter in Canadian-dollar terms. The rise came from higher impaired loans in Capital Markets (largely real estate and related) and Wealth Management, partly offset by lower impaired loans in Commercial Banking. Total allowances were $5.55 billion. - **Expenses** of $6.99 billion rose 4.0%, mainly on variable compensation tied to higher revenue, plus staff costs and technology investment. The efficiency ratio improved 160 basis points to 52.8%. The effective tax rate rose 110 basis points to 22.3% on earnings mix. By segment: - **Personal Banking** earned $1.37 billion, down 2.7% (down 1% in Canadian dollars). Net interest income rose on 2% volume growth and wider spreads, net of lower accretion of HSBC Canada fair-value adjustments. Higher staff, technology and client-acquisition costs, lower service charges (partly from regulatory changes) and higher provisions on Canadian credit cards and personal loans more than offset that. Segment ROE was 24.5%. - **Commercial Banking** earned $668.30 million, up 9.8%, on 9% average deposit growth, 4% average loan growth and lower provisions on impaired loans (consumer discretionary and transportation sectors). ROE was 18.6%. - **Wealth Management** earned $1.03 billion, up 29.0%, as market appreciation and net sales lifted fee-based client assets. Assets under management in the segment reached $1.21 trillion. U.S. Wealth Management (including City National) revenue was $1,956 million as reported in US dollars, up 13%. ROE was 21.5%. - **Insurance** earned $140.66 million, down 21.8%. The prior-year quarter benefited from favourable longevity reinsurance adjustments and recaptures, and claims experience was less favourable this quarter. - **Capital Markets** earned $1.10 billion, up 14.0%. Corporate & Investment Banking revenue rose 16% and Global Markets revenue 11% (both in Canadian-dollar terms), on origination, M&A and equity trading. Higher impaired-loan provisions (real estate and industrial products) and technology spending partly offset the gains. - **Corporate Support** posted a net loss of $12.85 million, mainly residual unallocated costs. For the nine months to July 31, 2026, net income was $12.52 billion, up 18.1%. Diluted EPS was $8.75, up 19.5%, and ROE was 17.5%, compared with 16.1% a year earlier. The provision for credit losses fell 8.9% to $2.17 billion. Most of the decline was in provisions on performing loans: the prior-year period had carried higher provisions for the impacts of trade disruptions, including tariffs. Starting in the first quarter of 2026, RBC allocates capital to Insurance in closer line with legal-entity capital requirements. RBC flags this change alongside Insurance's segment ROE, which was 22.1% this quarter against 47.9% a year earlier. **Capital, liquidity and funding.** The CET1 ratio was 13.5%, unchanged from the prior quarter, as internal capital generation was absorbed by risk-weighted-asset growth and buybacks. RBC returned $2.89 billion to shareholders in the quarter: $1.14 billion of share buybacks and $1.74 billion of common dividends. The quarterly dividend declared was $1.26 per share. The average liquidity coverage ratio was 125%, a surplus of about $69.87 billion, and the net stable funding ratio was 112%. At July 31, 2026 total assets were $1.78 trillion, net loans $790.52 billion and deposits $1.17 trillion. The fiscal 2026 capital actions so far: - **Share buybacks.** In the first nine months RBC repurchased and cancelled about 17.2 million shares for $3.06 billion. Its previous issuer bid ended on June 11, 2026, after about 20.4 million shares had been bought back under it for about $3.19 billion, and a successor bid is now in place. - **Redemptions.** RBC redeemed its First Preferred Shares Series BF (12 million shares) on November 24, 2025 and Series BH and BI (6 million shares each) on December 8, 2025. On January 24, 2026 it redeemed Series BR, which automatically retired $910.68 million of 4.00% Limited Recourse Capital Notes Series 2. - **New subordinated debt.** On April 29, 2026 RBC issued $1.28 billion of NVCC subordinated debentures at 4.14% fixed until May 5, 2031, floating thereafter to maturity in 2036. **Outlook as of August 26, 2026.** RBC expects the Federal Reserve, the Bank of Canada (at 2.25%) and the Bank of England to hold rates through the rest of calendar 2026, and the ECB to raise once more. Its forecast assumes no significant further change in U.S. tariff policy. Canadian GDP is estimated to have grown 3.4% annualized in the second calendar quarter after a 0.1% contraction in the first. Canadian unemployment fell to 6.4% in July 2026, and RBC expects it to keep easing gradually. It does not expect the August 2026 U.S. tariffs, or Canada's retaliatory measures, to significantly change the growth backdrop, though they add pressure on targeted sectors. Oil prices have come off their April–May 2026 peak but remain elevated and volatile. --- ## Subsequent events *Source: Note 15 "Subsequent events" and "Key corporate events" in the Q3 2026 Report to Shareholders (6-K accession 0001193125-26-369461), and RBC's August 10, 2026 press release (6-K accession 0001214659-26-009856, Exhibit 99.1).* - **Sale of Moneris.** On August 10, 2026, RBC and BMO Financial Group agreed to sell their jointly owned Canadian payments and commerce-solutions provider, Moneris Solutions Corporation, to Francisco Partners for cash consideration of approximately $1.44 billion. RBC's share is 50%. Moneris was accounted for as a joint venture and will be classified as held for sale in the fourth quarter of fiscal 2026. The deal is expected to close by the end of the first quarter of fiscal 2027, subject to customary conditions including regulatory approvals. RBC expects a gain on closing of approximately $341.06 million after tax ($402.10 million pre-tax), based on current estimates and subject to change. RBC says it will treat the gain as an adjusting item and expects a marginally positive effect on its CET1 ratio. When the deal closes, RBC and BMO will enter new exclusive, long-term customer referral arrangements with Moneris. The quarterly report discloses no other subsequent events.