RBC navigating ‘period of volatility’ for economy as Q2 profit up 25%

Royal Bank of Canada says it’s maintaining a cautious outlook on credit despite analysts praising its performance last quarter, which saw the bank cut funds set aside for bad loans.

It comes as the bank raised its quarterly dividend and reported its second-quarter profit rose 25% compared with a year earlier. RBC will now pay a quarterly dividend of $1.76 per share, an increase from $1.64 per share.

The increased payment to shareholders came as RBC says it earned $5.5 billion or $3.85 per diluted share for the quarter ended April 30, up from a profit of $4.4 billion or $3.02 per diluted share a year earlier.

Revenue totalled $17.5 billion for the quarter, up from $15.7 billion in the same quarter last year, while the bank’s provision for credit losses amounted to $912 million, down from $1.4 billion a year ago.

But RBC chief executive Dave McKay called the current economic environment a “period of volatility” and said the near-term outlook hinges on how upcoming negotiations on the North American free-trade agreement unfold as well as how long the Middle East conflict persists.

“Uncertainty remains elevated,” he said Thursday morning on a conference call with analysts.

“The outcome of these factors will have implications for client demand, supply chain stability and the direction of monetary policy.”

Graeme Hepworth, the bank’s chief risk officer, added that while North American economies continue to show resilience in the face of these challenges, they have clouded the bank’s forecasts.

“For the Canadian economy, we are seeing signs of stabilization and we expect to see continued modest economic growth. Sectors exposed to U.S. tariffs have experienced job losses, but those losses have not spread to the broader economy,” he said. 

“In terms of the external environment, headwinds from the conflict in the Middle East, U.S. tariffs, trade policy uncertainty and a shrinking population will likely keep economic risk elevated.”

On an adjusted basis, RBC says it earned $3.90 per diluted share in its latest quarter, up from an adjusted profit of $3.12 per diluted share in the same quarter last year.

Analysts on average had expected an adjusted profit of $3.78 per share, according to LSEG Data & Analytics.

National Bank analyst Gabriel Dechaine said RBC showed “solid credit performance,” with an impaired loss rate at the low end of the guidance range.

It was a “very good quarter overall” for the bank, added Scotiabank analyst Mike Rizvanovic. He said RBC’s credit performance was “much better than we, or the street had expected.”

“Most notable, in our view, was the strong performance reported in the Canadian lending business, both personal and commercial, and the bank not relying heavily on capital markets to drive the EPS beat,” Rizvanovic said in a note.

RBC said its personal banking unit earned $1.9 billion, up from $1.6 billion in the same quarter last year helped by higher net interest income and lower provisions for credit losses as well as higher fee-based client assets.

The bank’s commercial banking operations earned $854 million in the quarter, up from $597 million a year earlier.

RBC reported $1.2 billion of net income from its wealth management business, up 28% from $929 million in the same quarter last year. The increase was mainly attributed to higher fee-based client assets from market appreciation and net sales, higher spreads and a rise in net interest income from average volume growth in loans and deposits.

Canadian wealth management revenue increased 14% to $1.9 billion, mainly from higher fee-based client assets reflecting market appreciation and net sales, higher net interest income reflecting average volume growth in deposits and higher transactional revenue driven by client activity.

Meanwhile, RBC’s insurance business earned $218 million, up from $211 million a year ago. The was was primarily due to higher insurance investment result reflecting lower capital funding costs, partially offset by lower insurance service result.

The bank’s capital markets business earned $1.5 billion, up from $1.2 billion a year earlier. The increase mainly came from higher revenue in global markets and corporate and investment banking, partially offset by higher taxes.

As of Apr. 30, the bank had $5.9 trillion in assets under administration and $1.6 trillion in assets under management, up from $5 trillion and $1.4 trillion, respectively, at the same time in 2025.

With files from Staff