EPS of $3.85 beat estimates of $3.54; revenue of $17.2B beat estimates of $16.7B. Royal Bank of Canada's raised return on equity target of 17% or higher, above consensus, appears achievable given robust capital generation and improving cost efficiency. Nontrading net interest income may grow at a mid-single-digit rate, aided by a shift toward noninterest-bearing deposits. Despite a cautious outlook, RBC expects mid- to high-single-digit commercial-loan growth, while mortgage activity might not improve until 2027. The bank's positive operating leverage goal for fiscal 2026 (6% in 2025), including 1-2% in Canadian banking, will be underpinned by mid-single-digit expense growth and progress in artificial intelligence. Capital markets and wealth management are key drivers. Provisions are likely to stay elevated, with the 2026 impaired provision ratio expected near 2025's 37 bps. We would consider it a good quarter, and the outlook, considering the Canadian economy, better than expected. The stock gets a premium valuation for its size and safety, but we would not really see it as overpriced considering the dividend and growth potential.
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