Royal Bank of Canada Lifts Dividend After Record Q4 2025 Profit Surge on Capital Markets and Wealth Strength

Royal Bank of Canada (RBC) has capped a blockbuster fiscal 2025 with record fourth‑quarter results, a higher dividend and a more ambitious profitability target for 2026, underscoring how fee‑driven businesses like capital markets and wealth management are powering Canada’s largest bank even as credit conditions tighten. ^[1]

Headline numbers: a record quarter and year

RBC’s fourth quarter for the period ended October 31, 2025 delivered: ^[2]

Net income of C$5.43 billion, up 29% from C$4.22 billion a year earlier.
Diluted earnings per share (EPS) of C$3.76, versus C$2.91 in Q4 2024.
Adjusted EPS of C$3.85, beating analyst expectations of about C$3.53 by roughly 9%.
Total revenue of C$17.21 billion, a 14% year‑over‑year increase.
Provisions for credit losses (PCL) of about C$1.0 billion, up 20% from last year as the bank builds buffers against a softening economy.

For the full fiscal year 2025, RBC reported: ^[3]

Net income of C$20.4 billion, up 25% year‑over‑year.
Diluted EPS of C$14.07, also up 25%.
Return on equity (ROE) of 16.3%, compared with 14.4% in 2024.
Common equity tier 1 (CET1) capital ratio of 13.5%, comfortably above regulatory requirements.

The results reflect broad‑based growth across personal and commercial banking, wealth management and capital markets, partially offset by weaker insurance earnings. ^[4]

Dividend hike and a more ambitious ROE target

The news grabbing the most attention for income investors: RBC raised its quarterly common share dividend by C$0.10, or 6%, to C$1.64 per share. ^[5]

The board’s decision comes after RBC returned C$11.3 billion to shareholders over the past year through dividends and share buybacks, while still maintaining that 13.5% CET1 capital ratio. ^[6]

Alongside the higher payout, the bank updated its performance ambitions, raising its fiscal 2026 ROE objective to 17% or more, up from the current 16.3% level. Management said the new target reflects confidence in revenue growth, cost efficiencies and the benefits of recent strategic moves such as the acquisition of HSBC Bank Canada and growth of its U.S. operations. ^[7]

For investors, that combination of a richer dividend and higher targeted profitability sets a bullish tone for the next three years, even if the macro backdrop remains choppy.

Capital markets and wealth management lead the earnings beat

The core story of this quarter is how RBC’s fee‑based businesses did the heavy lifting.

Capital markets: trading, deals and lending fire on all cylinders

RBC’s capital markets division posted a 45% jump in net income year‑over‑year, powered by: ^[8]

Higher fixed‑income trading revenue across all major regions.
Stronger equity trading in most geographies.
A surge in global M&A activity, boosting advisory fees.
Higher lending revenue to corporate clients.

Total capital markets revenue climbed about 24% compared with Q4 2024, with both Global Markets and Corporate & Investment Banking contributing meaningfully. ^[9]

In an environment where traditional loan growth is constrained by slower economies and cautious consumers, this business mix – more trading, advisory and underwriting – is exactly what analysts had hoped would support bank earnings. A Reuters preview earlier in the week highlighted that capital markets and wealth operations were expected to offset still‑elevated credit costs across Canada’s big six banks; RBC’s results delivered precisely that. ^[10]

Wealth management: riding markets and client inflows

RBC’s global wealth management arm also posted a standout quarter. Net income climbed roughly 33% from a year ago, as: ^[11]

Rising equity markets and client inflows lifted fee‑based client assets.
Higher average loan and deposit balances, along with better spreads, boosted net interest income.
Transactional revenues and favourable tax adjustments added further momentum.

The strength mirrors what’s being seen across other Canadian banks, where wealth and asset‑management platforms are increasingly important profit engines. But with one of the largest advisor forces in the country and growing high‑net‑worth franchises in the U.S. and U.K., RBC remains a scale leader in this space. ^[12]

Personal and commercial banking: solid growth, higher credit costs

While the headlines belong to capital markets and wealth, the bread‑and‑butter businesses of personal and commercial banking also delivered healthy – if more modest – growth.

Personal banking

In the personal banking segment, net income rose about 20% year‑over‑year in Q4. Revenue grew 11%, driven largely by: ^[13]

Higher net interest income from stronger spreads and modest volume growth in loans and deposits.
Higher mutual fund distribution fees due to larger average balances.

Net interest margin (NIM) improved by 21 basis points to 2.70%, reflecting both the still‑supportive rate environment and favourable product mix. However, provisions for credit losses increased 7%, mainly on impaired loans in Canadian portfolios, as unemployment edges higher and some borrowers feel pressure from past rate hikes. ^[14]

Commercial banking

Commercial banking also reported 7% full‑year earnings growth, powered by double‑digit increases in average loans and deposits. Rising unemployment, slower growth and trade disruptions meant higher provisions for both performing and impaired loans, but these were more than offset by revenue expansion. ^[15]

Together, personal and commercial banking underscore that credit quality is normalizing after years of historically low losses, but not yet deteriorating in a way that would overwhelm revenue growth.

Insurance: the lone weak spot

The only major drag on quarterly performance came from the insurance division, where net income fell about 40% versus the prior year. The decline was driven mainly by unfavourable actuarial assumption updates related to life retrocession products and an adjustment tied to reinsurance contract recaptures, which reduced insurance service result. ^[16]

Management noted that non‑interest expense in insurance was relatively flat, suggesting the pressure is primarily from one‑off actuarial items rather than ongoing business weakness.

Credit trends: more provisions, still “manageable”

Across the bank, total PCL rose to C$1.01 billion in Q4, up 20% from a year ago and 14% from the prior quarter. The PCL on loans ratio increased to 39 basis points, with the PCL on impaired loans moving up to 38 bps. Most of the increase came from higher provisions in personal, commercial and capital markets portfolios. ^[17]

Even so, analysts largely viewed the trend as manageable. One major Canadian brokerage described the quarter as “strong overall,” noting that while credit losses were slightly elevated, they remained within expected ranges given the macro backdrop. ^[18]

On the earnings call, RBC’s chief risk officer reportedly cautioned that retail loan losses are likely to stay elevated into 2026, citing the lagged impact of higher unemployment, more consumer insolvencies and mortgage payment shocks as fixed‑rate borrowers renew at higher rates. ^[19]

Strategy update: HSBC Canada integration and U.S. expansion

The 2025 fiscal year was RBC’s first full period with HSBC Bank Canada largely integrated. The acquisition, which closed in March 2024, is now fully embedded across personal banking, commercial banking, wealth management and capital markets. Its contribution helped drive both volume growth and fee income in 2025, and management highlighted “five additional months” of HSBC Canada’s earnings in this year’s numbers. ^[20]

Outside Canada, the bank continues to lean into its U.S. growth strategy, particularly through: ^[21]

Capital markets operations serving institutional and corporate clients.
Wealth management and private banking platforms.
City National Bank, which expands RBC’s retail and commercial presence in key U.S. markets.

This international diversification is one reason RBC feels comfortable targeting higher ROE and mid‑single‑digit net income growth in 2026, despite a softer Canadian housing market.

2026 outlook: cautious optimism, moderate growth

Guidance and commentary from management and analysts paint a picture of cautious optimism: ^[22]

RBC’s CEO has said the bank remains confident in the resilience of North American consumers and expects the Canadian economy to hold up reasonably well, even as trade tensions and CUSMA renegotiations loom.
The CFO expects bank‑wide net income to grow in the mid‑single‑digit range in fiscal 2026, with positive operating leverage – including 1–2% operating leverage in Canadian banking – and low‑ to mid‑single‑digit mortgage growth as the housing market stabilizes.
The bank’s three‑year diluted EPS growth target stands at 8%, reflecting both organic and acquisition‑driven opportunities.

At the same time, leadership continues to flag risks: persistently high valuations for Canadian bank stocks, potential shocks from the private‑credit ecosystem and the lagging effects of higher rates on retail borrowers. ^[23]

Market reaction and valuation

Investors have so far welcomed the earnings beat and dividend hike. In early trading on the day of the announcement, RBC shares jumped close to 5% in U.S. premarket trading, pushing the stock near its 52‑week high. ^[24]

Analyst sentiment remains broadly constructive:

A range of brokerages rate the shares “outperform,” “moderate buy” or “strong buy.” ^[25]
However, valuation multiples such as price‑to‑earnings and price‑to‑book are near the upper end of their 10‑year ranges, suggesting less room for error if earnings growth falters. ^[26]

For dividend investors, the new C$1.64 quarterly dividend puts RBC firmly in the camp of premium Canadian income stocks, and the payout is backed by robust capital levels and consistent profitability. ^[27]

What it means for investors

For long‑term shareholders and prospective investors, RBC’s December 3, 2025 announcements boil down to a few key takeaways:

Earnings power is broad‑based and increasingly fee‑driven. Capital markets and wealth management are doing more of the heavy lifting, which can be volatile quarter‑to‑quarter but less balance‑sheet‑intensive over time.
Capital remains strong even after rewarding shareholders. A double‑digit CET1 ratio, higher dividend and ongoing buybacks leave room for continued strategic investments.
Credit normalization, not crisis. Provisions are rising from very low levels, but management and analysts alike still describe them as manageable rather than alarming.
2026 will test the growth story. With valuations already rich and targets for ROE and EPS now higher, RBC must execute on its cost‑control, integration and cross‑border growth strategies to justify the premium.