Big banks beat Q4 profit expectations, lift dividends and grow capital markets and wealth earnings, even as credit provisions climb and economic risks persist
Canada’s biggest banks just tested their “fully valued” labels – and, for now, capital markets and wealth earnings are still doing the heavy lifting.
Royal Bank of Canada and National Bank of Canada both beat fourth-quarter profit expectations on the back of strong market-sensitive businesses and higher dividends, even as credit costs rose and management warned about a more polarized “K‑shaped” economy.
RBC: record earnings, higher ROE, rising credit risk
Royal Bank reported record Q4 profit of $5.43bn for the quarter ended Oct. 31, up from $4.22bn a year earlier, while full-year profit rose 25 percent to $20.4bn, according to BNN Bloomberg.
Adjusted earnings came in at $3.85 per diluted share, ahead of both last year’s $3.07 and the $3.53 average analyst estimate compiled by LSEG Data & Analytics.
Wealth management earned $1.28bn, up from $969m, and capital markets profit climbed to $1.43bn from $985m, supported by strong market conditions.
Personal and commercial banking also grew, while insurance earnings fell to $98m from $162m.
RBC raised its quarterly dividend to $1.64 per share from $1.54 and lifted its return-on-equity target to more than 17 percent from more than 16 percent, BNN Bloomberg reported.
Chief executive Dave McKay said he is “cautiously optimistic on the outlook for Canada,” citing a low effective tariff rate and the shift toward a more service‑oriented economy.
However, he warned that “the K‑shaped economy is increasingly polarizing,” with affluent households investing more while less affluent consumers struggle with affordability.
At the same time, provisions for credit losses rose to $1.01bn from $840m a year earlier.
Chief risk officer Graeme Hepworth pointed to rising unemployment in Ontario and the Greater Toronto Area and higher payments at mortgage renewal as drivers of higher consumer impairments.
He said RBC expects retail losses to “remain elevated in 2026” as unemployment, insolvencies and payment shocks on mortgage renewals work through the system, according to BNN Bloomberg.
McKay said RBC is leaning further into artificial intelligence and global growth.
He noted that 30,000 employees already use generative AI and cited its benefits as one reason for the higher ROE target.
He also said the bank is looking at deploying capital in new markets such as the Middle East, building on what he described as “incredibly significant” gains from its expansion in Asia.
National Bank: earnings beat plus M&A‑driven growth
National Bank reported Q4 profit of $1.06bn, up from $955m a year earlier, with revenue increasing to $3.70bn from $2.94bn, according to BNN Bloomberg.
Adjusted earnings rose to $2.82 per diluted share from $2.58 and beat the $2.62 consensus tracked by LSEG Data & Analytics. National increased its quarterly dividend by six cents to $1.24 per share.
Capital markets profit rose to $432m from $306m, and wealth management earnings grew to $258m from $219m.
Personal and commercial banking dipped to $319m from $327m, reflecting acquisition-related costs. Provisions for credit losses increased to $244m from $162m.
National is also in the middle of a major expansion.
The bank closed its acquisition of Canadian Western Bank in February and set a three-year target of $200m to $250m in revenue synergies, according to BNN Bloomberg.
Chief executive Laurent Ferreira said the deal “marked a historic milestone for the bank” and that cost and funding synergies are being realized “at an accelerated pace,” with the bank expecting to hit its target more than a year early.
National has moved about 65,000 clients onto its platform, rebranded all Canadian Western branches and relocated senior capital markets staff to Western Canada to support growth.
The bank is now adding Laurentian Bank’s retail and small business segments after Laurentian opted to split up and sell itself.
The portfolio National is buying includes about $12.3bn in loans and deposits, which it is effectively acquiring at zero cost apart from the capital it must hold against the assets, BNN Bloomberg reported.
Ferreira called the deal “a natural fit given our strong presence in Quebec, enabling us to serve even more local customers and communities,” and said National intends to “grow and deploy capital to help fuel Canada’s economy.”
How pros are reading the banks
Commenting on the results, Diana Avigdor, vice-president, portfolio manager and head of trading at Barometer Capital Management, said Canadian banks remain well capitalized, highly concentrated and positioned for steady operating leverage and stable earnings, according to BNN Bloomberg.
She described Royal Bank’s quarter as “excellent” and highlighted its 8.1 percent operating leverage as “massive,” while noting that dividend yields naturally look lower as share prices rise.
On National Bank, she said the lender is “now digesting two acquisitions” — Canadian Western Bank and Laurentian’s retail and small business units — and described the Laurentian deal as “a nice little tuck-in,” suggesting a lower‑than‑hoped dividend increase is “forgivable” given the integration work and expected synergies.
Avigdor said her firm is holding about 20 percent cash heading into year‑end, citing seasonal volatility and weakening internal breadth indicators over the past two months, and added that they will redeploy cash if market breadth improves.
On the broader AI theme, she said she does not believe markets are in a “big blow-up” and argued that AI’s “tentacles,” including productivity gains that can offset inflation, could help extend the cycle.
She noted that if Nvidia delivers on its guidance, it trades at about 28 times forward earnings, BNN Bloomberg reported.
