Royal Bank of Canada Stumbles Despite $4.4B Haul—Traders Yawn, Stock Drops 3.5%

Another quarter, another mountain of cash—$4.4 billion, to be exact. But shareholders shrugged as RY.TO slid 3.5%. Guess even printing money gets boring when Wall Street expected you to print *slightly more* money.

Profits up, stock down—classic finance logic. Maybe they should’ve thrown in a buzzword-heavy ‘blockchain transformation’ to keep the suits happy.

TLDR

• RBC stock fell 3.49% to $172.37 on May 29 despite posting $4.4B in Q2 profit, driven by rising credit loss provisions.
• Strong gains in Personal Banking and Wealth Management offset weak Capital Markets results in RBC’s Q2 2025 earnings.
• Provisions for credit losses surged 36% quarter-over-quarter to $1.42B, raising investor concerns about asset quality.
• HSBC Canada added $258M to RBC’s net income, while adjusted EPS rose 7% to $3.12.
• RBC raised its dividend to $1.54 and launched a 35M share buyback, but credit risks weighed on market sentiment.

Royal Bank of Canada shares fell 3.49% to $172.37 on May 29 despite reporting a quarterly profit of $4.4 billion. The stock experienced a sharp drop after the market opened, followed by sustained downward pressure throughout the session. Investors reacted to rising provisions for credit losses and lower quarter-on-quarter earnings across several segments.

Strong Q2 Earnings Fueled by Personal Banking and Wealth Management

Royal Bank of Canada posted net income of $4.4 billion in Q2 2025, up 11% from the previous year. This growth was driven by solid performance in Personal Banking, Wealth Management, and Insurance, partially offset by weaker Capital Markets results. Diluted earnings per share ROSE 10% year-over-year to $3.02, while adjusted EPS increased 7% to $3.12.

Royal Bank of Canada, $RY, Q2-25. Results:

📊 Adj. EPS: ~$2.26 (CAD$3.13) 🔴
💰 Revenue: ~$11.5B (CAD$15.7B) 🟢
🔎 HSBC Canada integration boosted earnings while macroeconomic headwinds led to a sharp rise in loan loss provisions. pic.twitter.com/nLMbk77Nor

— EarningsTime (@Earnings_Time) May 29, 2025

HSBC Canada’s acquisition added $258 million to net income and contributed positively to pre-tax earnings. Pre-provision, pre-tax earnings rose 19% to $6.9 billion, with strong volume growth and improved spreads in Core banking segments. Adjusted figures indicated an 8% rise in adjusted net income and a 15% increase in PPPT excluding HSBC contributions.

Additionally, improved fee-based revenue and higher net interest income supported earnings. However, rising staff costs and technology investments pressured expenses. Moreover, Capital Markets experienced lower revenues, especially in M&A and fixed income trading, contributing to weaker overall segment results.

Provisions for Credit Losses Weigh on Market Sentiment

Despite strong earnings, provisions for credit losses (PCL) surged by $504 million from a year ago, totaling $1.42 billion. The PCL on loans ratio increased 17 basis points year-over-year to 58 basis points. Higher provisions were recorded in Commercial Banking and Personal Banking due to economic uncertainty and forecast revisions.

The PCL on performing loans alone rose by $324 million, reflecting a more cautious macroeconomic outlook. Meanwhile, impaired loan provisions increased by $180 million year-over-year, primarily from Commercial Banking. This raised investor concerns about asset quality, contributing to the stock’s decline.

Compared to the previous quarter, total PCL rose 36% or $374 million. The PCL on impaired loans decreased, yet the increase in performing loan provisions signaled rising risk sensitivity. These developments dampened investor confidence, despite the bank’s otherwise positive results.

Capital and Liquidity Remain Solid as Share Buybacks Begin

The bank maintained a strong capital base, ending the quarter with a Common Equity Tier 1 (CET1) ratio of 13.2%. Liquidity also remained robust, with an average Liquidity Coverage Ratio of 131%, reflecting a $107 billion surplus. The Net Stable Funding Ratio rose to 116%, supported by increased deposits and lower funding needs.

The bank announced a dividend increase to $1.54 per share and plans to repurchase up to 35 million common shares. These actions aim to reward shareholders and optimize capital deployment. Still, investors appeared cautious due to credit risk exposure and mixed performance in Capital Markets.

Overall, Royal Bank of Canada’s earnings highlighted its resilient business model and growth potential. Yet, higher provisions and quarterly declines in some segments raised short-term uncertainties. The stock’s drop underscored market sensitivity to risk despite strong fundamentals.