Q3 2025 Royal Bank of Canada Earnings Call
Turning over to a same Enron senior Vice President Investor Relations. Please go ahead Sir.
Thank you and good morning, everyone speaking today will be Dave Mckay, President and Chief Executive Officer, Catherine Gibson, Chief Financial Officer, and Graeme Hepworth Chief risk Officer.
Also joining us today for your question Erika Nielsen Group head personal banking, Sean I'm out of LG group had commercial banking, Neil Mclaughlin group head wealth management, Derek Neltner group head capital markets and Jennifer public over group had insurance.
Speaker #1: This conference is being recorded. Cette conférence est enregistrée.
Speaker #2: All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to RBC's 2025 third-quarter results conference call. Please be advised that this call is being recorded.
Asim Imran: All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the RBC's 2025 third quarter results conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Asim Imran, Senior Vice President, Investor Relations. Please go ahead, sir.
As noted on slide two our comments may contain forward looking statements, which involve assumptions and have inherent risks and uncertainties actual results could differ materially.
Speaker #2: I would now like to turn the meeting over to Asim Imran, Senior Vice President, Investor Relations. Please go ahead, sir.
I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance.
Speaker #3: Thank you, and good morning, everyone. Speaking today will be David McKay, President and Chief Executive Officer; Katherine Gibson, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer.
David McKay: Thank you, and good morning, everyone. Speaking today will be David McKay, President and Chief Executive Officer; Katherine Gibson, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your question: Erica Nielsen, Group Head, Personal Banking; Shawna Maragowji, Group Head, Commercial Banking; Neil McLaughlin, Group Head, Wealth Management; Derek Nelner, Group Head, Capital Markets; and Jennifer Poblakover, Group Head, Insurance. As noted on slide two, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. To give everyone a chance to ask questions, we ask that you limit your questions and that it re-queue. With that, I'll turn it over to Dave. Thank you, Asim.
To give everyone a chance to ask questions. We ask that you limit your questions and then re queue with that I'll turn it over to Dave.
Speaker #3: Also joining us today for your questions: Erica Nielsen, Group Head, Personal Banking. Shonamata Gauchi, Group Head, Commercial Banking. Neil McLaughlin, Group Head, Wealth Management.
Thank you Austin good morning, everyone and thank you for joining US today, we reported record third quarter earnings of $5 4 billion up 21% or over $900 million from last year. These results are there.
Speaker #3: Derek Nelner, Group Head, Capital Markets, and Jennifer Publikover, Group Head, Insurance. As noted on slide two, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties.
These outstanding results underpinned, our strong return on equity of over 17% for the quarter.
For over 16% year to date supported by a robust capital ratio of 13, 2% we.
Speaker #3: Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis, and considers both to be useful in assessing underlying business performance.
We are gaining momentum towards meeting our medium term investor day targets and are confident in continuing to achieve an Roe.
But at least 16% in fiscal 2026 and beyond.
Speaker #3: To give everyone a chance to ask questions, we ask that you limit your questions and then re-queue. With that, I'll turn it over to Dave.
This quarter's strong earnings added 77 basis points of gross capital generation truly showcasing the underlying earnings power of the bank, including realizing our targeted annualized cost synergies related to the acquisition of HSBC Bank of Canada.
Speaker #4: Thank you. Awesome. Good morning, everyone, and thank you for joining us. Today, we reported record third-quarter earnings of $5.4 billion, up 21 percent, or over $900 million from last year.
David McKay: Good morning, everyone, and thank you for joining us. Today, we reported record third-quarter earnings of $5.4 billion, up 21%, or over $900 million from last year. These results, or these outstanding results, underpin a strong return on equity of over 17% for the quarter, or over 16% year to date, supported by a robust capital ratio of 13.2%. We are gaining momentum towards meeting our medium-term investor day targets and are confident in continuing to achieve an ROE of at least 16% in fiscal 2026 and beyond. This quarter's strong earnings added 77 basis points of gross capital generation, truly showcasing the underlying earnings power of the bank, including realizing our targeted annualized cost synergies related to the acquisition of HSBC Bank Canada.
Our diversified business model is built to drive strong risk adjusted returns, which in turn supports both our clients and the return of capital to shareholders, including increased share buybacks this quarter.
Speaker #4: These results are the outstanding results underpinned by a strong return on equity of over 17 percent for the quarter, or over 16 percent year to date, supported by a robust capital ratio of 13.2 percent.
Strong client driven and risk weighted asset growth supported revenue of $17 billion this quarter, including record revenue in capital markets and double digit growth in personal banking and wealth management.
Speaker #4: We are gaining momentum towards meeting our medium-term investor day targets, and our confidence in continuing to achieve an ROE of at least 16 percent in fiscal 2026 and beyond.
We achieved our results in an environment of record equity markets and cyclically low investment grade credit spreads, while seeing an increased flow of client deposits and market related client activity.
Speaker #4: This quarter's strong earnings added 77 basis points, a gross capital generation that truly showcases the underlying earnings power of the bank, including realizing our targeted annualized cost synergies related to the acquisition of HSBC Bank Canada.
However, the constructive environment for market related revenue continues to be tempered by geopolitical risks and the uncertainty around trade policy, particularly China's levy against Kansas Canola exports and the potential review.
Speaker #4: Our diversified business model is built to drive strong risk-adjusted returns, which in turn supports both our clients and the return of capital to shareholders, including increased share buybacks this quarter.
David McKay: Our diversified business model is built to drive strong risk-adjusted returns, which in turn supports both our clients and the return of capital to shareholders, including increased share buybacks this quarter. Strong client-driven risk-weighted asset growth supported revenue of $17 billion this quarter, including record revenue in capital markets and double-digit growth in personal banking and wealth management. We achieved our results in an environment of record equity markets and cyclically low investment-grade credit spreads while seeing an increased flow of client deposits and market-related client activity. However, the constructive environment for market-related revenue continues to be tempered by geopolitical risk and the uncertainty around trade policy, particularly China's levy against Canada's canola exports and the potential review or renegotiation of CUSMA.
Or renegotiation of cosma.
We continue to monitor the negotiations and we encourage policymakers on all sides to build on the foundational strengths of current trade agreements, which have provided significant benefits to all parties.
Speaker #4: Strong client-driven risk-weighted asset growth supported revenue of $17 billion this quarter, including record revenue in capital markets and double-digit growth in personal banking and wealth management.
Should current Kuzmina compliant goods largely maintained their qualified exemption to tariffs Canada's effective tariff rates should remain low and the economy should remain resilient.
Speaker #4: We achieved our results in an environment of record equity markets and cyclically low investment-grade credit spreads, while seeing an increased flow of client deposits and market-related client activity.
However, as trade tensions extend there may be persistent impacts, including declining consumer confidence lower corporate profit margins rising inflation and softening labor markets across both the U S.
Speaker #4: However, the constructive environment for market-related revenue continues to be tempered by geopolitical risks and the uncertainty around trade policy, particularly China's levy against Canada's canola exports and the potential review or renegotiation of QSMA.
And Canada was uncertain implications to monetary policy and capital flows.
Amidst this shifting landscape, we are operating from a position of strength our robust capital levels are reinforced by a strong allowance for credit loss of 74 basis points of loans, including elevated weightings toward downside scenarios.
Speaker #4: We continue to monitor the negotiations, and we encourage policymakers on all sides to build on the foundational strengths of current trade agreements, which have provided significant benefits to all parties.
David McKay: We continue to monitor the negotiations, and we encourage policymakers on all sides to build on the foundational strengths of current trade agreements, which have provided significant benefits to all parties. Should current CUSMA compliant goods largely maintain their qualified exemption to tariffs, Canada's effective tariff rate should remain low, and the economy should remain resilient. However, as trade tensions extend, there may be persistent impacts, including declining consumer confidence, lower corporate profit margins, rising inflation, and softening labor markets across both the US and Canada, with uncertain implications to monetary policy and capital flows. Amidst this shifting landscape, we are operating from a position of strength. Our robust capital levels are reinforced by a strong allowance for credit loss of 74 basis points of loans, including elevated weightings toward downside scenarios. We believe our well-underwritten portfolio is prudently provisioned.
We believe our well underwritten portfolio is prudently provisioned.
Speaker #4: Should current QSMA-compliant goods largely maintain their qualified exemption to tariffs, Canada's effective tariff rate should remain low, and the economy should remain resilient.
Their diversification of assets and revenue streams across client sectors geographies products and businesses.
<unk> mitigates the impact of heightened uncertainty and volatility.
Speaker #4: However, as trade tensions extend, there may be persistent impacts, including declining consumer confidence, lower corporate profit margins, rising inflation, and softening labor markets across both the U.S.
As the country's largest financial institution by market capitalization, we have an important role to play in helping support our clients build and even better Canada, while executing against our strategic priorities, we highlighted at our Investor day, both within and outside of Canada.
Speaker #4: And Canada, with uncertain implications for monetary policy and capital flows. Amidst the shifting landscape, we are operating from a position of strength. Our robust capital levels are reinforced by a strong allowance for credit loss of 74 basis points on loans, including elevated weightings toward downside scenarios.
We are accelerating our investments in strategic initiatives by seeding growth across our segments and geographies, including new product and cross border capabilities.
We're also improving and expanding our talent pool by hiring senior coverage and relationship talent and capital markets and client facing account managers in commercial banking.
Speaker #4: We believe our well-underwritten portfolio is prudently provisioned. The diversification of assets and revenue streams across client sectors, geographies, products, and businesses further mitigates the impact of heightened uncertainty and volatility.
David McKay: The diversification of assets and revenue streams across client sectors, geographies, products, and businesses further mitigates the impact of heightened uncertainty and volatility. As the country's largest financial institution by market capitalization, we have an important role to play in helping support our clients build an even better Canada while executing against the strategic priorities we highlighted at our Investor Day, both within and outside of Canada. We are accelerating our investments in strategic initiatives by seeding growth across our segments and geographies, including new product and cross-border capabilities. We are also improving and expanding our talent pool by hiring senior coverage and relationship talent in capital markets and client-facing account managers in commercial banking. In addition, we continue to attract experienced financial advisors in wealth management, especially in the United States, where we expect higher recurring revenue from this recruitment.
In addition, we continue to attract experienced financial advisors in wealth management.
Especially in the United States, where we expect higher recurring revenue from this recruitment.
Our ongoing investments in technology build upon our leading competitive advantage and artificial intelligence, including our proprietary Adam Foundation model and Lumina data platform.
Speaker #4: As the country's largest financial institution by market capitalization, we have an important role to play in helping support our clients build an even better Canada while executing against the strategic priorities we highlighted at our investor day, both within and outside of Canada.
These investments underpin the enterprise value, we expect to generate from AI over the medium term.
Speaker #4: We are accelerating our investments in strategic initiatives by seeding growth across our segments and geographies, including new product and cross-border capabilities. We are also improving and expanding our talent pool by hiring senior coverage and relationship talent in capital markets, as well as client-facing account managers in commercial banking.
Furthermore, our expansion into transaction banking continues to be on track with RBC clear receiving two awards at the recent digital bankers Global transaction banking Innovation Awards.
With this context I'll now speak to key trends, we're seeing across our businesses starting with personal banking.
Speaker #4: In addition, we continue to attract experienced financial advisors in wealth management, especially in the United States, where we expect higher recurring revenue from this recruitment.
And our Canadian business average deposits were up 2% from last year, including 7% growth in banking and savings accounts.
Speaker #4: Our ongoing investments in technology, built upon our leading competitive advantage and artificial intelligence, including our proprietary Adam Foundation model and Lumina data platform. These investments underpin the enterprise value we expect to generate from AI over the medium term.
We continue to focus on client acquisition, while also capturing the shifting money in motion given the evolving interest rate and market outlook.
David McKay: Our ongoing investments in technology build upon our leading competitive advantage in artificial intelligence, including our proprietary ADAM Foundation Model and Lumina Data Platform. These investments underpin the enterprise value we expect to generate from AI over the medium term. Furthermore, our expansion into transaction banking continues to be on track, with RBC Clear receiving two awards at the recent Digital Bankers Global Transaction Banking Innovation Awards. With this context, I will now speak to key trends we are seeing across our businesses, starting with personal banking. In our Canadian business, average deposits were up 2% from last year, including 7% growth in banking and savings accounts. We continue to focus on client acquisition while also capturing the shifting money in motion, given the evolving interest rate and market outlook. These core deposits provide a structural funding cost advantage.
These core deposits provide a structural funding cost advantage.
Average residential mortgages were up 3% year over year as we added $4 billion of average balances this quarter, while we have maintained discipline on both credit quality and pricing we are benefiting from higher switching volumes and an increase in mortgage retention rates.
Speaker #4: Furthermore, our expansion into transaction banking continues to be on track, with RBC Clear receiving two awards at their recent Digital Bankers Global Transaction Banking Innovation Awards.
While we see a pickup in housing starts the signs of price stabilization and buyer confidence returning.
Speaker #4: With this context, I will now speak to key trends we are seeing across our businesses, starting with personal banking. In our Canadian business, average deposits were up 2% from last year, including 7% growth in banking and savings accounts.
As affordability improves we continue to expect Canadian housing resale activity to be dampened by underperformance of Ontario, particularly in the greater Toronto area.
Speaker #4: We continue to focus on client acquisition while also capturing the shifting money in motion, given the evolving interest rate and market outlook. These core deposits provide a structural funding cost advantage.
In contrast credit card growth was solid at 7% this quarter driven by account acquisition higher revolve rates and increased client engagement.
Our proprietary RBC consumer spending tracker highlights that Canadian cardholder spending remained resilient, particularly in the retail and everyday categories.
Speaker #4: Average residential mortgages were up 3% year over year, as we added $4 billion of average balances this quarter. While we have maintained discipline on both credit quality and pricing, we are benefiting from higher switch-in volumes and an increase in mortgage retention rates.
David McKay: Average residential mortgages were up 3% year over year, as we added $4 billion of average balances this quarter. While we have maintained discipline on both credit quality and pricing, we are benefiting from higher switch-in volumes and an increase in mortgage retention rates. While we see a pickup in housing starts, the signs of price stabilization and buyer confidence returning as affordability improves, we continue to expect Canadian housing resale activity to be dampened by underperformance in Ontario, particularly in the Greater Toronto area. In contrast, credit card growth was solid at 7% this quarter, driven by account acquisition, higher revolve rates, and increased client engagement. Our proprietary RBC Consumer Spending Tracker highlights that Canadian cardholder spending remained resilient, particularly in the retail and everyday categories.
This quarter we.
Expanded our partnership with the Paterson food group into Western Canada, and launched the Westjet RBC World Elite Mastercard credit card for business clients.
Speaker #4: While we see a pickup in housing starts and signs of price stabilization, as well as buyer confidence returning as affordability improves, we continue to expect Canadian housing resale activity to be dampened by underperformance in Ontario, particularly in the Greater Toronto Area.
Turning to commercial banking average loan growth moderated to 6% year over year within the updated guidance, we provided last quarter.
Growth has been slower and more tire sensitive sectors, including manufacturing transportation and logistics, along with cyclical headwinds in commercial real estate.
Speaker #4: In contrast, credit card growth was solid at 7% this quarter, driven by account acquisition, higher revolve rates, and increased client engagement. Our proprietary RBC Consumer Spending Tracker highlights that Canadian cardholder spending remained resilient, particularly in their retail and everyday categories.
While our pipelines in building <unk>.
Pipelines are building in a competitive market clients continue to hold back their capital ended inventory spend we are well positioned to support our clients when they are ready.
Moving to wealth management, we reported double digit growth in assets under administration in both Canadian and U S wealth management to $935 billion and U S dollars 718 billion respectively.
Speaker #4: This quarter, we expanded our partnership with the Patterson Food Group into Western Canada and launched the WestJet RBC World Elite MasterCard credit card for business clients.
David McKay: This quarter, we expanded our partnership with the Paterson Food Group into Western Canada and launched the WestJet RBC World Elite MasterCard credit card for business clients. Turning to commercial banking, average loan growth moderated to 6% year over year within the updated guidance we provided last quarter. Growth has been slower in more tariff-sensitive sectors, including manufacturing, transportation, and logistics, along with cyclical headwinds in commercial real estate. While our pipelines are building in a competitive market, clients continue to hold back their capital and inventory spend. We are well-positioned to support our clients when they are ready. Moving to wealth management, we reported double-digit growth in assets under administration in both Canadian and US wealth management to $935 billion and US$718 billion, respectively.
Our global wealth management franchises benefited from market appreciation, while continuing to drive net new client assets, along with increased volumes in our U S lending solutions.
Speaker #4: Turning to commercial banking, average loan growth moderated to 6% year over year, within the updated guidance we provided last quarter. Growth has been slower, particularly in more tariff-sensitive sectors, including manufacturing, transportation, and logistics, along with cyclical headwinds in commercial real estate.
We also launched RBC premium savings in the U S. This year, a new non sweep high yield deposit product, which is seeing positive traction.
Speaker #4: While our pipelines are building in a competitive market, clients continue to hold back their capital and inventory spend. We are well-positioned to support our clients when they are ready.
Direct investing trading volumes were supported by strong market activity.
Assets under management in RBC Global asset management increased by 12% to a record 741 billion.
Speaker #4: Moving to Wealth Management, we reported double-digit growth in assets under administration in both Canadian and U.S. Wealth Management, to $935 billion and U.S.
Reflecting net sales into both long term institutional and retail mandates.
Like our wealth management businesses, we are seeing momentum in Canadian retail mutual fund net sales as our clients move back into markets across our broad set of strategies across fixed income balanced equity mandates.
Speaker #4: $718 billion, respectively. Our global wealth management franchises benefited from market appreciation while continuing to drive net new client assets, along with increased volumes in our U.S.
David McKay: Our global wealth management franchises benefited from market appreciation while continuing to drive net new client assets, along with increased volumes in our US lending solutions. We also launched RBC Premium Savings in the US this year, a new non-sweep high-yield deposit product, which is seeing positive traction. Direct investing trading volumes were supported by strong market activity. Assets under management in RBC Global Asset Management increased by 12% to a record $741 billion, reflecting net sales into both long-term institutional and retail mandates. Like our wealth management businesses, we are seeing momentum in Canadian retail mutual fund net sales as our clients move back into markets across our broad set of strategies across fixed income, balanced, and equity mandates. Now to capital markets, which reported record revenue of $3.8 billion, pre-provision pre-tax earnings of $1.7 billion, and net income of $1.3 billion this quarter.
Now to capital markets, which reported record revenue of $3 8 billion pre.
Speaker #4: Lending solutions. We also launched RBC Premium Savings in the U.S. this year, a new non-sweep high-yield deposit product, which is seeing positive traction. Direct investing trading volumes were supported by strong market activity.
Pre provision pretax earnings of $1 7 billion.
And net income of $1 $3 billion this quarter.
On a year to date basis capital markets generated close to $11 billion in revenue and approximately $4 billion in net income.
Speaker #4: Assets under management in RBC Global Asset Management increased by 12% to a record $741 billion, reflecting net sales into both long-term institutional and retail mandates.
These are truly exceptional results across our diversified franchise.
Global markets reported revenue of over $1 9 billion with strong results in our fixed businesses, reflecting strength in spreads and rates products, which are areas of traditional strength.
Speaker #4: Like our wealth management businesses, we are seeing momentum in Canadian retail mutual fund net sales as our clients move back into markets across our broad set of strategies, including fixed income, balanced, and equity mandates.
We also reported a strong performance in both cash equities and equity derivatives as we supported heightened client activity benefiting from an increasing investments in the franchise.
Speaker #4: Now, to capital markets, which reported record revenue of $3.8 billion, pre-provisioned pre-tax earnings of $1.7 billion, and net income of $1.3 billion this quarter.
Corporate investment banking generated revenue of over $1 7 billion benefiting from an increased number of larger M&A advisory mandates along with higher lending revenue in the U S and Europe, reflecting the strength of our global franchise.
Speaker #4: On a year-to-date basis, capital markets generated close to $11 billion in revenue and approximately $4 billion in net income. These are truly exceptional results across our diversified franchise.
David McKay: On a year-to-date basis, capital markets generated close to $11 billion in revenue and approximately $4 billion in net income. These are truly exceptional results across our diversified franchise. Global markets reported revenue of over $1.9 billion, with strong results in our fixed businesses, reflecting strength in spread and rates products, which are areas of traditional strength. We also reported a strong performance in both cash equities and equity derivatives, as we supported heightened client activity, benefiting from increasing investments in the franchise. Corporate investment banking generated revenue of over $1.7 billion, benefiting from an increased number of larger M&A advisory mandates, along with higher lending revenue in the US and Europe, reflecting the strength of our global franchise. Looking forward, we continue to maintain a high level of engagement with our clients in what we deem a constructive environment for capital markets.
Looking forward, we continue to maintain a high level of engagement with our clients and what we deem a constructive environment for capital markets.
Speaker #4: Global markets reported revenue of over $1.9 billion, with strong results in our fixed businesses, reflecting strength in spread and rates products, which are areas of traditional strength.
While the second half of the year is seasonally lower or slower than the first we are encouraged by the increased optimism and confidence amongst our corporate and sponsor clients and we expect higher levels of transactions and deal closures over the next 12 months.
Speaker #4: We also reported a strong performance in both cash equities and equity derivatives as we supported heightened client activity, benefiting from increasing investments in the franchise.
We also expect our global markets franchise to remain resilient resilient as we deepen our expertise across products.
Speaker #4: Corporate investment banking generated revenue of over $1.7 billion, benefiting from an increased number of larger M&A advisory mandates, along with higher lending revenue in the U.S.
Finally, I will comment on our broader U S region, which reported U S $635 million of net income this quarter.
City National Bank reported earnings of 100 U S $114 million or adjusted earnings of U S $139 million.
Speaker #4: and Europe, reflecting the strength of our global franchise. Looking forward, we continue to maintain a high level of engagement with our clients in what we deem a constructive environment for capital markets.
The geographic efficiency ratio improved six six percentage points year over year to 81, 5%, while theres still work to be done you are seeing early signs of success as we continue to build a more cohesive U S operating model.
Speaker #4: While the second half of the year is seasonally lower or slower than the first, we are encouraged by the increased optimism and confidence amongst our corporate and sponsor clients. We expect higher levels of transactions and deal closures over the next 12 months.
David McKay: While the second half of the year is seasonally lower or slower than the first, we are encouraged by the increased optimism and confidence amongst our corporate and sponsor clients, and we expect higher levels of transactions and deal closures over the next 12 months. We also expect our global markets franchise to remain resilient as we deepen our expertise across products. Finally, I will comment on our broader US region, which reported US$635 million of net income this quarter. City National Bank reported earnings of US$114 million, or adjusted earnings of US$139 million. The geographic efficiency ratio improved 6.6 percentage points year over year to 81.5%. While there's still work to be done, we are seeing early signs of success as we continue to build a more cohesive US operating model.
To close despite the uncertain environment, we are confident in our ability to generate a strong return on equity while continuing to deepen client relationships grow market share drive operating leverage and return capital to shareholders. The strategic vision, we articulated at our Investor day remains clear.
Speaker #4: We also expect our global markets franchise to remain resilient as we deepen our expertise across products. Finally, I will comment on our broader U.S.
Speaker #4: Region, which reported U.S. $635 million of net income this quarter, seeing National Bank reported earnings of U.S. $114 million, or adjusted earnings of U.S. $100 million.
And we are already seeing the outcomes unfolding, we strive to further extend our leadership across Canada, while scaling growth and unlocking new revenue streams in key markets and geographies, including the United States.
Speaker #4: $139 million. The geographic efficiency ratio improved 6.6 percentage points year over year to 81.5 percent. While there’s still work to be done, we are seeing early signs of success as we continue to build a more cohesive U.S.
Finally in the spirit of continued transparency and accountability, we will look to provide an update on how we are performing against our investor day financial targets. When we report our fourth quarter results later this year.
And with that Catherine over to you.
Speaker #4: Operating model. To close, despite the uncertain environment, we are confident in our ability to generate a strong return on equity while continuing to deepen client relationships, grow market share, drive operating leverage, and return capital to shareholders.
Thanks, Dave and good morning, everyone, starting with slide eight this quarter, we reported earnings per share of $3 75.
David McKay: To close, despite the uncertain environment, we are confident in our ability to generate a strong return on equity while continuing to deepen client relationships, grow market share, drive operating leverage, and return capital to shareholders. The strategic vision we articulated at our Investor Day remains clear, and we are already seeing the outcomes unfolding. We strive to further extend our leadership across Canada while scaling growth and unlocking new revenue streams in key markets and geographies, including the United States. Finally, in the spirit of continued transparency and accountability, we will look to provide an update on how we are performing against our Investor Day financial targets when we report our fourth quarter results later this year. And with that, Katherine, over to you.
Adjusted diluted earnings per share of $3 and 80%.
Speaker #4: The strategic vision we articulated at our Investor Day remains clear, and we are already seeing the outcomes unfolding. We strive to further extend our leadership across Canada while scaling growth and unlocking new revenue streams in key markets and geographies, including the United States.
18% from last year, driven by strong revenue momentum across our businesses and solid operating leverage including the realization of the $740 million in annualized cost synergies from the acquisition of HSBC Bank, Canada.
Speaker #4: Finally, in the spirit of continued transparency and accountability, we will look to provide an update on how we are performing against our investor day financial targets when we report our fourth quarter results later this year.
Turning to capital on slide nine we continued to demonstrate strong capital generation.
Our CET one ratio came in at 13, 2% in line with last quarter strong internal capital generation net of dividends with partly offset by the impact of an increase in risk weighted assets and our U S agency and sovereign exposures.
Speaker #4: And with that, Katherine, over to you.
Speaker #5: Thanks, Dave, and good morning, everyone. Starting with slide eight, this quarter we reported earnings per share of $3.75, and adjusted diluted earnings per share of $3.84.
Asim Imran: Thanks, Dave, and good morning, everyone. Starting with slide eight, this quarter, we reported earnings per share of $3.75, adjusted diluted earnings per share of $3.84, was up 18% from last year, driven by strong revenue momentum across our businesses and solid operating leverage, including the realization of the $740 million in annualized cost synergies from the acquisition of HSBC Bank Canada. Turning to capital on slide nine, we continue to demonstrate strong capital generation. Our CET1 ratio came in at 13.2%, in line with last quarter. Strong internal capital generation, net dividends, was partly offset by the impact of an increase in risk-weighted assets in our US agency and sovereign exposures, driven by a downgrade of US sovereign debt rating. Furthermore, changes to our credit risk parameters, which I called out last quarter, also had a modest negative impact to capital.
Even by a downgrade at U S sovereign debt rating.
Speaker #5: Was up 18 percent from last year, driven by strong revenue momentum across our businesses and solid operating leverage, including the realization of the $740 million in annualized cost synergies from the acquisition of HSBC Bank Canada.
Furthermore, changes to our credit risk parameters, which I called out last quarter also had a modest negative impact to capital.
We continue to deploy capital to drive organic growth, particularly in corporate lending and residential mortgages.
Well, it's increased loan underwriting commitment and capital markets.
Speaker #5: Turning to capital on slide nine, we continue to demonstrate strong capital generation. Our CET1 ratio came in at 13.2%, in line with last quarter.
Turning capital to our shareholders through share buybacks and dividends remains a key part of our deployment strategy.
This quarter, we repurchased five 4 million shares for 955 million in line with the level of purchased in aggregate over the last three quarters. Our total payout ratio was 56% year to date.
Speaker #5: Strong internal capital generation, net dividends, partly offset by the impact of an increase in risk-weighted assets in our U.S. agency and sovereign exposures.
Speaker #5: Driven by a downgrade of U.S. sovereign debt rating. Furthermore, changes to our credit risk parameters, which I called out last quarter, also had a modest negative impact on capital.
We will continue to be tactical with the level of share repurchases based on prevailing market conditions.
Moving to slide 10, our bank net interest income was up 14% year over year or up 12% excluding trading revenue.
Speaker #5: We continue to deploy capital to drive organic growth, particularly in corporate lending and residential mortgages, as well as increased loan underwriting commitments in capital markets.
Asim Imran: We continue to deploy capital to drive organic growth, particularly in corporate lending and residential mortgages, as well as increased loan underwriting commitments in capital markets. Returning capital to our shareholders through share buybacks and dividends remains a key part of our deployment strategy. This quarter, we repurchased 5.4 million shares for $955 million, in line with the level purchased in aggregate over the last three quarters. Our total payout ratio was 56% year to date. We will continue to be tactical with the level of share repurchases based on prevailing market conditions. Moving to slide 10, all bank net interest income was up 14% year over year, or up 12%, excluding trading revenue. All bank net interest margin, excluding trading revenue, was down five basis points from last quarter, mainly due to lower interest income on certain transactions in capital markets, which was offset in other non-interest incomes.
Our bank net interest margin, excluding trading revenue was down five basis points from last quarter, mainly due to lower interest income on certain transactions and capital markets, which was offset in other noninterest income.
Speaker #5: Returning capital to our shareholders through share buybacks and dividends remains a key part of our deployment strategy. This quarter, we repurchased 5.4 million shares for $955 million, in line with a level purchase in aggregate over the last three quarters.
We believe net interest margin is more of a relevant factor for our retail and commercial banking segment.
Canadian banking NIM was up two basis points from last quarter benefiting from a favorable product mix, including a shift towards demand deposits and personal banking, which were up one 5% from last quarter offsetting a 1% sequential decline in <unk>.
Speaker #5: Our total payout ratio was 56% year-to-date. We will continue to be tactical with the level of share repurchases, based on prevailing market conditions.
Speaker #5: Moving to slide ten, all bank net interest income was up 14% year over year, or up 12% excluding trading revenue. All bank net interest margin, excluding trading revenue, was down five basis points from last quarter.
We continue to benefit from tailwind related to our structural hedging tractor strategy and five year swap rates remain elevated relative to historical level.
Combination of the above two factors more than offset competitive pricing pressures and residential mortgages.
Speaker #5: Mainly due to lower interest income on certain transactions in capital markets, which was offset in other non-interest income. We believe net interest margin is a more relevant factor for our retail and commercial banking segments.
As a reminder, benefits to net interest income from the purchase price accounting accretion from the HSBC, Canada acquisition of $118 million. This quarter are expected to be largely run off by Q2 2026.
Asim Imran: We believe net interest margin is more of a relevant factor for our retail and commercial banking segment. Canadian banking NIM was up two basis points from last quarter, benefiting from a favorable product mix, including a shift towards demand deposits in personal banking, which were up 1.5% from last quarter, offsetting a 1% sequential decline in GICs. We continue to benefit from tailwinds related to our structural hedging tractor strategy, as five-year swap rates remain elevated relative to historical levels. The combination of the above two factors more than offset competitive pricing pressures in residential mortgages. As a reminder, benefits to net interest income from the purchase price accounting accretion from the HSBC Canada acquisition of $118 million this quarter are expected to be largely run off by Q2 2026.
Speaker #5: Canadian banking NIM was up 2 basis points from last quarter, benefiting from a favorable product mix, including a shift towards demand deposits in personal banking, which were up 1.5 percent from last quarter.
Looking forward, we now expect our 2025 all bank net interest income growth to be in the mid teens range, including benefits from a more favorable deposit mix.
Speaker #5: Offsetting a one percent sequential decline in GIC, we continue to benefit from tailwinds related to our structural hedging tractor strategy, as five-year swap rates remain elevated relative to historical levels.
Before moving on to expenses, one item I would like to point out is that the increase in other noninterest income includes impacts from hedges of our U S share based compensation plan.
Speaker #5: The combination of the above two factors more than offset competitive pricing pressures in residential mortgages. As a reminder, the benefits to net interest income from the purchase price accounting accretion from the HSBC Canada acquisition of $118 million this quarter are expected to be largely run off by Q2 2026.
Which is largely offset in noninterest expense as well as in net interest income as I noted above in my discussion on our bank.
Moving to slide 11 reported noninterest expense was up 7% and core noninterest expense was up 8% from last year.
Core expense growth this quarter reflects higher staff related costs, largely driven by variable compensation commensurate with strong revenue growth in both wealth management and capital markets as well as increased salaries and pensions and benefits.
Speaker #5: Looking forward, we now expect our 2025 all-bank net interest income growth to be in the mid-teens range, including benefits from a more favorable deposit mix.
Asim Imran: Looking forward, we now expect our 2025 all bank net interest income growth to be in the mid-teens range, including benefits from a more favorable deposit mix. Before moving on to expenses, one item I would like to point out is that the increase in other non-interest income includes impacts from hedges of our US share-based compensation plan, which is largely offset in non-interest expense, as well as in net interest income, as I noted above in my discussion on all bank NIM. Moving to slide 11, reported non-interest expense was up 7%, and core non-interest expense was up 8% from last year. Core expense growth this quarter reflects higher staff-related costs, largely driven by variable compensation. To measure it was strong revenue growth in both wealth management and capital markets, as well as increased salaries and pensions and benefits.
Speaker #5: Before moving on to expenses, one item I would like to point out is that the increase in other non-interest income includes impacts from hedges of our U.S.
Higher expenses also reflect investments in technology and operations as well as hiring in priority growth areas concur.
Speaker #5: share-based compensation plan, which is largely offset in non-interest expense, as well as in net interest income, as I noted above in my discussion on all bank NIM.
Concurrently we will continue operating with a disciplined expense management framework to prudently manage our cost base.
Going forward, we expect all bank core expense growth, which is based on reported 2020 for expenses to now be in the mid to high single digit range, largely reflecting higher variable compensation.
Speaker #5: Moving to slide 11, reported non-interest expense was up 7 percent, and core non-interest expense was up 8 percent from last year. Core expense growth this quarter reflects higher staff-related costs, largely driven by variable compensation.
That said, we expect strong all bank operating leverage for the year, which is a key management priority.
Speaker #5: To measure it with strong revenue growth in both wealth management and capital markets, as well as increased salaries and pensions and benefits. Higher expenses also reflect investments in technology and operations, as well as hiring in priority growth areas.
On taxes, the adjusted non <unk> effective tax rate was 21, 2% this quarter relatively in line with the first half of 2025.
Asim Imran: Higher expenses also reflect investments in technology and operations, as well as hiring in priority growth areas. Concurrently, we will continue operating with a disciplined expense management framework to prudently manage our cost base. Going forward, we expect all bank core expense growth, which is based on reported 2024 expenses, to now be in the mid to high single-digit range, largely reflecting higher variable compensation. That said, we expect strong all bank operating leverage for the year, which is a key management priority. On taxes, the adjusted non-TAB effective tax rate was 21.2% this quarter, relatively in line with the first half of 2025. Looking forward, we continue to expect the adjusted non-TAB effective tax rate to be in the 20% to 22% range. Turning to our Q3 segment results beginning on slide 12, personal banking reported results of over $1.9 billion.
Looking forward, we continue to expect the adjusted non-GAAP effective tax rate to be in the 20% to 22% range.
Speaker #5: Concurrently, we will continue operating with a disciplined expense management framework to prudently manage our cost base. Going forward, we expect all bank core expense growth, which is based on reported 2024 expenses, to now be in the mid- to high-single-digit range, largely reflecting higher variable compensation.
Turning to our Q3 segment results beginning on slide 12 personal banking reported results of over one 9 billion.
Focusing on personal banking, Canada net income was up 23% from last year as a strong operating leverage of 12, 5% with partly offset by higher provisions for credit losses.
Speaker #5: That said, we expect strong all-bank operating leverage for the year, which is a key management priority. On taxes, the adjusted non-TAT effective tax rate was 21.2% this quarter, relatively in line with the first half of 2025.
Personal banking deficiency ratio improved to 38, 7% this quarter underpinned by strong revenue and relatively flat expense growth, partly reflecting the benefits from realized cost synergies related to the acquisition of HSBC, Canada.
Speaker #5: Looking forward, we continue to expect the adjusted non-TAT effective tax rate to be in the 20% to 22% range. Turning to our Q3 segment results, beginning on slide 12, Personal Banking reported results of over $1.9 billion.
Higher revenues this quarter benefited from a 14% increase in net interest income and a 10% increase in noninterest income largely driven by higher mutual fund revenue.
Turning to slide 13, commercial banking net income of $836 million rose, 2% from a year ago.
Speaker #5: Focusing on personal banking in Canada, net income was up 23 percent from last year, with a strong operating leverage of 12.5 percent, partly offset by higher provisions for credit losses.
Asim Imran: Focusing on personal banking Canada, net income was up 23% from last year, as a strong operating leverage of 12.5% was partly offset by higher provisions for credit losses. Personal banking's efficiency ratio improved to 38.7% this quarter, underpinned by strong revenue and relatively flat expense growth, partly reflecting the benefits from realized cost synergies related to the acquisition of HSBC Canada. Higher revenues this quarter benefited from a 14% increase in net interest income and a 10% increase in non-interest income, largely driven by higher mutual fund revenue. Turning to slide 13, commercial banking net income of $836 million rose 2% from a year ago. Pre-provision pre-tax earnings were up 8% from last year, driven by a strong operating leverage of 4.8%, reflecting solid average volume growth and well-managed expenses, including the benefits of realized cost synergies related to the acquisition of HSBC Canada.
Pre provision pretax earnings were up 8% from last year, driven by strong operating leverage of four 8%, reflecting solid average volume growth and well managed expenses, including the benefits of realized cost synergies related to the acquisition of HSBC, Canada.
Speaker #5: Personal banking's efficiency ratio improved to 38.7% this quarter, underpinned by strong revenue and relatively flat expense growth. This improvement partly reflects the benefits from realized cost synergies related to the acquisition of HSBC Canada.
This was offset partly by lower credit fees, reflecting the cessation of VA based lending, which was offset in net interest income.
Speaker #5: Higher revenues this quarter benefited from a 14 percent increase in net interest income and a 10 percent increase in non-interest income, largely driven by higher mutual fund revenue.
Turning to wealth management on slide 14, net income of approximately $1 1 billion rose, 15% from a year ago noninterest income was up 13% from last year, reflecting strong growth in fee based client assets across our wealth and asset management businesses benefiting from market appreciation.
Speaker #5: Turning to slide 13, commercial banking net income of $836 million rose 2 percent from a year ago. Pre-provisioned pre-tax earnings were up 8 percent from last year, driven by a strong operating leverage of 4.8 percent, reflecting solid average volume growth and well-managed expenses, including the benefits of realized cost synergies.
<unk> and net new assets.
Net interest income was up 6% from last year, including higher results in Canadian wealth management, reflecting average volume growth in deposits and higher spreads.
Speaker #5: Related to the acquisition of HSBC Canada, this was offset partly by lower credit fees, reflecting the cessation of BA-based lending, which was offset in net interest income.
This was partly offset by headwinds in U S wealth management.
Asim Imran: This was offset partly by lower credit fees, reflecting the success station of BA-based lending, which was offset in net interest income. Turning to wealth management on slide 14, net income of approximately $1.1 billion rose 15% from a year ago. Non-interest income was up 13% from last year, reflecting strong growth in fee-based client assets across our wealth and asset management businesses, benefiting from market appreciation and net new assets. Net interest income was up 6% from last year, including higher results in Canadian wealth management, reflecting average value growth in deposits and higher spreads. This was partly offset by headwinds in US wealth management. Higher revenue this quarter was partly offset by higher variable compensation. To measure it with increased compensable revenue and investments, including technology and the recruitment of financial advisors.
Higher revenue this quarter was partly offset by higher variable compensation commensurate with increased compensable revenues and investments, including technology and the recruitment of financial advisers.
Speaker #5: Turning to wealth management on slide 14, net income of approximately $1.1 billion rose 15 percent from a year ago. Non-interest income was up 13 percent from last year, reflecting strong growth in fee-based client assets across our wealth and asset management businesses.
City National generated $139 million U S and adjusted earnings up 81% from last year and 58% from last quarter last year's results included an impairment loss on our interest in an associated company and the sale of a non core investment.
Speaker #5: Benefiting from market appreciation and net new assets, net interest income was up 6 percent from last year, including higher results in Canadian Wealth Management, reflecting average volume growth in deposits and higher spreads.
Turning to our capital markets results on Slide 15, net income of $1 3 billion increased 13% from last year, reflecting record revenues of $3 8 billion.
Speaker #5: This was partly offset by headwinds in U.S. wealth management. Higher revenue this quarter was partly offset by higher variable compensation. To measure it with increased compensable revenue and investments, including technology and the recruitment of financial advisors.
On a pre provision pre tax basis results were up 36% year over year to $1 7 billion.
Global markets revenue was up 37% year over year, reflecting higher fixed income trading benefiting in part due to narrowing spreads.
Speaker #5: Citi National generated $139 million in adjusted earnings, up 81 percent from last year and 58 percent from last quarter. Last year's results included an impairment loss on our interest in an associated company and the sale of a non-core investment.
Asim Imran: City National generated $139 million US in adjusted earnings, up 81% from last year and 58% from last quarter. Last year's results included an impairment loss on our interest in an associated company and the sale of a non-core investment. Turning to our capital markets results on slide 15, net income of $1.3 billion increased 13% from last year, reflecting record revenues of $3.8 billion. On a pre-provision pre-tax basis, results were up 36% year over year to $1.7 billion. Global markets revenue was up 37% year over year, reflecting higher fixed income trading, benefiting in part due to narrowing spreads. Results also benefited from our robust equity and FX trading performance. Corporate investment banking revenue was up 11% from last year. Investment banking revenue was up 11% from last year, reflecting higher debt and equity origination and M&A activity across most regions.
<unk> also benefited from a robust equity and FX trading performance.
Corporate and investment banking revenue was up 11% from last year.
Investment banking revenue was up 11% from last year, reflecting higher debt and equity origination.
Speaker #5: Turning to our capital markets results on slide 15, net income of $1.3 billion increased 13 percent from last year, reflecting record revenues of $3.8 billion.
M&A activity across most regions lend.
Lending in transaction banking revenue was also up 11%, reflecting higher lending revenue in the U S and Europe. This.
Speaker #5: On a pre-provisioned pre-tax basis, results were up 36 percent year over year to $1.7 billion. Global markets revenue was up 37 percent year over year, reflecting higher fixed income trading, benefiting in part due to narrowing spreads. Results also benefited from our robust equity and FX trading performance.
This is partly offset by lower municipal banking activity compared to a strong Q3 last year.
Higher revenue was partly offset by higher variable compensation investments in technology also contributed to higher expenses.
Turning to slide 16 insurance net income of $247 million was up 45% from last year.
Speaker #5: Corporate investment banking revenue was up 11% from last year, and investment banking revenue also increased by 11%, reflecting higher debt and equity originations, as well as M&A activity across most regions.
Driven by higher insurance service result from improved life insurance claims experience and higher insurance investment results, reflecting lower capital funding costs.
Looking ahead, we expect Q4 results to be negatively impacted primarily as a result of our annual actuarial assumption update.
Speaker #5: Lending and transaction banking revenue was also up 11 percent, reflecting higher lending revenue in the U.S. and Europe. This was partly offset by lower municipal banking activity compared to a strong Q3 last year.
Asim Imran: Lending and transaction banking revenue was also up 11%, reflecting higher lending revenue in the US and Europe. This was partly offset by lower municipal banking activity compared to a strong Q3 last year. Higher revenue was partly offset by higher variable compensation. Investments in technology also contributed to higher expenses. Turning to slide 16, insurance net income of $247 million was up 45% from last year, driven by higher insurance service results from improved life insurance claims experience and higher insurance investment results, reflecting lower capital funding costs. Looking ahead, we expect Q4 results to be negatively impacted, primarily as a result of our annual actuarial assumption updates. Lastly, results for corporate support in the quarter benefited from the elevated net impact of favorable markets in our US share-based compensation plan.
Lastly results for corporate support in the quarter benefited from the elevated net impact of favorable markets in our U S share based compensation plan.
Speaker #5: Higher revenue was partly offset by higher variable compensation; investments in technology also contributed to higher expenses. Turning to slide 16, insurance net income of $247 million was up 45 percent from last year, driven by higher insurance service results from improved life insurance claims experience and higher insurance investment results, reflecting lower capital funding costs.
As we look forward to the fourth quarter, we expect corporate support to generate a net loss at the lower end of our $100 million to $150 million range.
To conclude despite the market and macroeconomic uncertainty we generated record results. This quarter underpinning an ROE of 17, 3% with a CET one ratio of 13, 2%.
Our Q3 performance showcases the strength of our diversified business model and its ability to drive premium returns as highlighted at our Investor day and positions us well in the quarters ahead as we execute on those strategies.
Speaker #5: Looking ahead, we expect Q4 results to be negatively impacted, primarily as a result of our annual actuarial assumption updates. Lastly, results for corporate support in the quarter benefited from the elevated net impact of favorable markets in our U.S.
With that I'll turn it over to Graeme.
Speaker #5: share-based compensation plan. As we look forward to the fourth quarter, we expect corporate support to generate a net loss at the lower end of our $100 million to $150 million range.
Thank you Catherine and good morning, everyone.
Asim Imran: As we look forward to the fourth quarter, we expect corporate support to generate a net loss at the lower end of our $100 million to $150 million range. To conclude, despite the market and macroeconomic uncertainty, we generated record results this quarter, underpinning an ROE of 17.3%, with a CET1 ratio of 13.2%. Our Q3 performance showcases the strength of our diversified business model and its ability to drive premium returns, as highlighted at our Investor Day, and positions us well in the quarters ahead as we execute on those strategies. With that, I'll turn it over to Graeme.
Although ill discuss our allowances in the context of the current macroeconomic environment and the ongoing trade uncertainty.
Overall, the Canadian economy have shown greater resilience to the initially expected in both business and consumer confidence have rebounded from earlier lows.
Speaker #5: To conclude, despite the market and macroeconomic uncertainty, we generated record results this quarter, underpinning an ROE of 17.3 percent, with a CET1 ratio of 13.2 percent.
We began the quarter with signs of reduced trade tensions, but this was followed by renewable tariff threats and the escalation of sector and country specific tariffs.
There's the heightened uncertainty around trade policy stretches over an extended timeframe. This also increases the risk of shrinking appetite for business investments in Canada.
Speaker #5: Our Q3 performance showcases the strength of our diversified business model and its ability to drive premium returns. As highlighted at our Investor Day, it positions us well in the quarters ahead as we execute on those strategies.
Against this backdrop recall that last quarter, we increased our reserves to reflect the heightened uncertainty.
We've implemented a new trade related scenario, reflecting the potential for a severe north American recession, driven by escalating global trade war and rising geopolitical risks.
Speaker #5: With that, I'll turn it over to Graeme.
Given ongoing uncertainty this quarter, we have maintained our prudent posture and retained the elevated weightings toward downside scenarios in line with last quarter.
Speaker #6: Great, thank you, Katherine, and good morning, everyone. I'll now discuss our allowances in the context of the current macroeconomic environment and the ongoing trade uncertainty.
David McKay: Great. Thank you, Katherine, and good morning, everyone. I'll now discuss our allowances in the context of the current macroeconomic environment and the ongoing trade uncertainty. Overall, the Canadian economy has shown greater resilience than initially expected, and both business and consumer confidence have rebounded from earlier lows. We began the quarter with signs of reduced trade tensions, but this was followed by renewed tariff threats and the escalation of sector and country-specific tariffs. As the heightened uncertainty around trade policy stretches over an extended timeframe, this also increases the risk of shrinking appetite for business investment in Canada. Against this backdrop, recall that last quarter we increased our reserves to reflect the heightened uncertainty. We've implemented a new trade-related scenario, reflecting the potential for a severe North American recession, driven by an escalating global trade war and rising geopolitical risks.
Turning to slide 18, released a total of $28 million or one basis point of provisions on performing loans this quarter.
Speaker #6: Overall, the Canadian economy has shown greater resilience than initially expected, and both business and consumer confidence have rebounded from earlier lows. We began the quarter with signs of reduced trade tensions, but this was followed by renewed tariff threats and the escalation of sector- and country-specific tariffs.
Reflecting favorable changes were a macroeconomic forecast, partially offset by portfolio growth and unfavorable changes in portfolio composition.
Speaker #6: As the heightened uncertainty around trade policy stretches over an extended timeframe, this also increases the risk of shrinking appetite for business investment in Canada.
We saw quarter over quarter improvements to our base case, unemployment and GDP forecast with rising thing in fiscal stimulus contributing to the lifting of our outlook.
Speaker #6: Against this backdrop, recall that last quarter we increased our reserves to reflect the heightened uncertainty. We've implemented a new trade-related scenario, reflecting the potential for a severe North American recession driven by an escalating global trade war and rising geopolitical risks.
This translated to a minor release of allowances under performing loans in wealth management and capital markets offset by a small increase in provisions in personal banking.
City National drove the bulk of the release of allowances due to favorable credit quality improvements in the U S macroeconomic forecast.
Speaker #6: Given the ongoing uncertainty this quarter, we have maintained our prudent posture and retained the elevated weightings to our downside scenarios in line with last quarter.
David McKay: Given the ongoing uncertainty this quarter, we have maintained our prudent posture and retained the elevated weightings to our downside scenarios in line with last quarter. Turning to slide 18, we released a total of $28 million, or one basis point of provisions on performing loans this quarter, mainly reflecting favorable changes to our macroeconomic forecast, partially offset by portfolio growth and unfavorable changes in portfolio composition. We saw quarter-over-quarter improvements to our base case on employment and GDP forecasts, with rising Canadian fiscal stimulus contributing to the lifting of our outlook. This translated to a minor release of allowances on our performing loans and wealth management in capital markets, offset by a small increase in provisions in personal banking. City National drove the bulk of the release of allowances due to favorable credit quality and improvements in the US macroeconomic forecast.
Retail clients have shown resilience amidst this uncertain economic environment, largely manage through the impact of increasing mortgage payments, but overall, we are well reserved after building up allowances over the past three years, we will continue to prudently manage our allowances given the backdrop of ongoing uncertainty.
Speaker #6: Turning to slide 18, we released a total of 28 million, or one basis point, of provisions on performing loans this quarter. This mainly reflects favorable changes to our macroeconomic forecast, partially offset by portfolio growth and unfavorable changes in portfolio composition.
Moving to slide 19, gross impaired loans of $8 8 billion were down <unk> 2 billion or three basis points from last quarter, primarily driven by our wholesale portfolios, which saw lower new formations.
Speaker #6: We saw quarter-over-quarter improvements to our base case on employment and GDP forecasts, with rising Canadian fiscal stimulus contributing to the lifting of our outlook.
NGL reflects several accounts moving back to performing status and the resolution of the administrative issues outlined in the prior quarter.
Speaker #6: This translated to a minor release of allowances on our performing loans and wealth management and capital markets, offset by a small increase in provisions in personal banking.
<unk> remains elevated we are seeing a moderation in the pace of exposures moving onto our watch list that our wholesale portfolios are showing more balance with watering formations in capital markets positive trends in city national in a soft Canadian economy contributing to elevated impairments in the commercial portfolio.
Speaker #6: Citi National drove the bulk of the release of allowances due to favorable credit quality and improvements in the U.S. macroeconomic forecast. Retail clients have shown resilience amidst this uncertain economic environment and have largely managed through the impact of increasing mortgage payments.
David McKay: Retail clients have shown resilience amidst this uncertain economic environment and have largely managed through the impact of increasing mortgage payments. And overall, we are well-reserved after building up allowances over the past three years, and we will continue to prudently manage our allowances, given the backdrop of ongoing uncertainty. Moving to slide 19, gross impaired loans of $8.8 billion were down $0.2 billion, or three basis points from last quarter, primarily driven by our wholesale portfolios, which saw lower new formations. The decrease in GIL reflects several accounts moving back to performing status and the resolution of the administrative issues outlined in the prior quarter.
And capital markets, new formations decreased $453 million quarter over quarter.
Speaker #6: And overall, we are well-reserved after building up allowances over the past three years. We will continue to prudently manage our allowances given the backdrop of ongoing uncertainty.
Compared with this quarter were mainly driven by two accounts one in each of the financing products in telecom and media sectors.
Speaker #6: Moving to slide 19, gross impaired loans of $8.8 billion were down $0.2 billion, or three basis points, from last quarter. This decline was primarily driven by our wholesale portfolios, which saw lower new formations.
We also saw a couple of clients in the real estate and related and industrial product sectors returned to performing status, resulting in a net reduction to G. I L.
In commercial banking, new formations decreased $399 million quarter over quarter.
Speaker #6: The decrease in GIL reflects several accounts moving back to performing status and the resolution of the administrative issues outlined in the prior quarter. While GIL remained elevated, we are seeing a moderation in the pace of exposures moving onto our watchlist, and our wholesale portfolios are showing more balance, with moderating formations in capital markets, positive trends in Citi National, and a soft Canadian economy contributing to elevated impairments in the commercial portfolio.
Largest new formations in the quarterly to borrowers in the real estate related and agricultural sectors.
While new formations in the wholesale portfolio are playing out as anticipated. They are expected to remain at elevated levels through the first half of 2026, we expect to see more moderate outcomes as we work through the watch list and special order pipeline.
David McKay: While GIL remained elevated, we are seeing a moderation in the face of exposures moving onto our watchlist, and our wholesale portfolios are showing more balance, with moderating formations in capital markets, positive trends in City National, and a soft Canadian economy contributing to elevated impairments in the commercial portfolio. In capital markets, new formations decreased $453 million quarter-over-quarter. Impairments this quarter were mainly driven by two accounts, one in each of the financing products and telecom and media sectors. We also saw a couple of clients in the real estate and related and industrial products sectors return to performing status, resulting in a net reduction to GIL. In commercial banking, new formations decreased $399 million quarter-over-quarter. The largest new formations in the quarter relate to borrowers in the real estate-related and agriculture sectors.
So as the economy gains momentum through 2026, as a reminder, impairments and recognized losses of our wholesale portfolios are inherently more difficult to predict quarter over quarter and can be volatile.
Speaker #6: In capital markets, new formations decreased by $453 million quarter over quarter. Impairments this quarter were mainly driven by two accounts, one in each of the financing products, and telecom and media sectors.
Turning to slide 20, PCL on impaired loans of 36 basis points was up one basis points or $61 million quarter over quarter in line with our expectations in capital markets provisions were up $83 million driven by additional provisions taken on a previously impaired accounts and the other services sector, which is undergoing a challenging and complex workout process.
Speaker #6: We also saw a couple of clients in the real estate and related industrial product sectors return to performing status, resulting in a net reduction to GIL.
Speaker #6: In commercial banking, new formations decreased by $399 million quarter over quarter. The largest new formations in the quarter relate to borrowers in the real estate and agriculture sectors.
There was also a new impairment of the financing product sector.
Speaker #6: While new formations in the wholesale portfolio are playing out as they participated, they are expected to remain at elevated levels through the first half of 2026.
And our commercial banking portfolio provisions of $296 million were up $10 million led by provisions of the real estate related consumer discretion and transportation sectors.
David McKay: While new formations in the wholesale portfolio are playing out as they participated, they're expected to remain at elevated levels through the first half of 2026. We expect to see more moderate outcomes as we work through the watchlist and special loan pipelines as the economy gains momentum through 2026. As a reminder, impairments and recognized losses in our wholesale portfolios are inherently more difficult to predict quarter-over-quarter and can be volatile. Turning to slide 20, PCL on impaired loans of 36 basis points was up one basis point, or $61 million quarter-over-quarter, in line with our expectations. In capital markets, provisions were up $83 million, driven by additional provisions taken on a previously impaired account in the other services sector, which is undergoing a challenging and complex workout process. There was also a new impairment in the financing product sector.
Speaker #6: We expect to see more moderate outcomes as we work through the watchlist and special loans pipelines, and as the economy gains momentum through 2026.
Overall, the commercial portfolio continues to be impacted by softer economic conditions and consumer spending in Canada.
Speaker #6: As a reminder, impairments in recognized losses in our wholesale portfolios are inherently more difficult to predict quarter over quarter and can be volatile. Turning to slide 20, PCL and impaired loans of 36 basis points were up one basis point, or $61 million, quarter over quarter.
Elevated impaired provisions over the last 12 months, primarily reflects exposure to cyclical supply chain related sectors like automotive transportation and industrial products.
As well as consumer discretionary.
Real estate related sectors, which have all been impacted by the higher rate environment and post pandemic trends.
Speaker #6: In line with our expectations. In capital markets, provisions were up $83 million, driven by additional provisions taken on a previously impaired account in the other services sector, which is undergoing a challenging and complex workout process.
We continue to expect commercial PCL to remain elevated in the coming quarters, reflecting the weaker Canadian economic backdrop and ongoing trade uncertainties.
For the retail portfolio, we saw higher losses this quarter in line with expectations largely on the unsecured portfolios.
Speaker #6: There was also a new impairment in the financing product sector. In our commercial banking portfolio, provisions of $296 million, or $10 million higher, were led by provisions in the real estate-related, consumer discretionary, and transportation sectors.
David McKay: In our commercial banking portfolio, provisions of $296 million were up $10 million, led by provisions in the real estate-related, consumer discretion, and transportation sectors. Overall, the commercial portfolio continues to be impacted by softer economic conditions in consumer spending in Canada. Elevated impaired provisions over the last 12 months primarily reflect exposure to cyclical supply chain-related sectors like automotive, transportation, and industrial products, as well as consumer discretionary and real estate-related sectors, which have all been impacted by the high-rate environment and post-pandemic trends. We continue to expect commercial PCL to remain elevated in the coming quarters, reflecting the weaker Canadian economic backdrop and ongoing trade uncertainty. In the retail portfolio, we saw higher losses this quarter in line with expectations, largely in the unsecured portfolios. While delinquencies across retail products remain elevated above historical levels, we are beginning to see stabilizing trends in early delinquencies.
But delinquencies across retail products remain elevated above historical levels, we are beginning to see stabilizing trends, Italy and early delinquencies.
To conclude despite persistent uncertainty in the macroeconomic and policy environment, we remain confident in the overall quality the diversification and the resiliency of our portfolios.
Speaker #6: Overall, the commercial portfolio continues to be impacted by softer economic conditions and consumer spending in Canada. Elevated impaired provisions over the last 12 months primarily reflect exposure to cyclical supply chain-related sectors like automotive, transportation, and industrial products, as well as consumer discretionary and real estate-related sectors, which have all been impacted by the high-rate environment and post-pandemic trends.
Our robust provisioning framework are prudent allowances and additional monitoring allow us to access a wide range of potential outcomes and impacts of our portfolio.
We continue to expect PCL on impaired loans remain elevated for the next few quarters.
Similar overall range to what we've experienced over the first three quarters of the year potentially offset by releases in performing allowance is critical becomes improve.
Speaker #6: We continue to expect commercial PCL to remain elevated in the coming quarters, reflecting the weaker Canadian economic backdrop and ongoing trade uncertainty. In the retail portfolio, we saw higher losses this quarter in line with expectations, largely in the unsecured portfolios.
The likelihood and timing of direction of allowances and PCL will continue to be dependent on the extended duration of the tariffs potential fiscal support and stimulus measures along with the performance of labor markets interest rates and real estate prices.
Speaker #6: While delinquencies across retail products remain elevated above historical levels, we are beginning to see stabilizing trends in early delinquencies. To conclude, despite persistent uncertainty in the macroeconomic and policy environment, we remain confident in the overall quality, diversification, and resilience of our portfolios.
As always we continue to proactively manage risk through the cycle and we remain well capitalized within a broad range of macroeconomic and geopolitical outcomes.
David McKay: To conclude, despite persistent uncertainty in the macroeconomic and policy environments, we remain confident in the overall quality, the diversification, and the resilience of our portfolios. Our robust provisioning framework, our prudent allowances, and additional monitoring allow us to assess a wide range of potential outcomes and impacts to our portfolio. We continue to expect PCL on impaired loans to remain elevated for the next few quarters in a similar overall range to what we've experienced over the first three quarters of the year, potentially offset by releases and performing allowances as credit outcomes improve. The length of the timing and direction of allowances and PCL will continue to be dependent on the extent and duration of the tariffs, potential fiscal support and stimulus measures, along with the performance of labor markets, interest rates, and real estate prices.
And with that operator, let's open the lines for Q&A.
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Speaker #6: Our robust provisioning framework, our prudent allowances, and additional monitoring allow us to assess a wide range of potential outcomes and impacts to our portfolio.
Speaker #6: We continue to expect PCL and impaired loans to remain elevated for the next few quarters, in a similar overall range to what we've experienced over the first three quarters of the year.
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Speaker #6: Potentially offset by releases in performing allowances, as credit outcomes improve. The timing and direction of allowances in PCL will continue to be dependent on the extent and duration of the tariffs, potential fiscal support and stimulus measures, along with the performance of labor markets, interest rates, and real estate prices.
Our first question is from Ebrahim <unk> from Bank of America. Please go ahead.
Hey, good morning.
I guess, maybe a question for you Dave.
There's a lot of conversation just investor focus around where some of these <unk> heading and when we look at Royals performance. Today, you can look at the $17 seven ROE for this quarter 16, and a half year to date and I think you said.
Speaker #6: As always, we continue to proactively manage risk through the cycle, and we remain well-capitalized to withstand a broad range of macroeconomic and geopolitical outcomes.
David McKay: As always, we continue to proactively manage risk through the cycle, and we remain well-capitalized to withstand a broad range of macroeconomic and geopolitical outcomes. And with that, operator, let's open the lines for Q&A.
Speaker #6: And with that operator, let's open the lines for Q&A.
Speaker #2: Thank you. We will now take questions from the telephone lines. If you have a question, please press *1. You may cancel your question at any time by pressing *2.
Conference Operator: Thank you. We will now take questions from the telephone lines. If you have a question, please press star one. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Ibrahim Punawala from Bank of America. Please go ahead.
In your prepared remarks at least 16%.
Would love to you is that at least 16% in reality is more like at least 17% and two questions. There. One do you think the bank is over earning anywhere within the P&L or do you think there is upside and second give us a sense of your appetite to build capital premier versus just keeping it.
Speaker #2: Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience.
Speaker #2: Our first question is from Ibrahim Punawala from Bank of America. Please go ahead.
At least relatively neutral from a CET, one perspective, which obviously is helpful.
Speaker #7: Hey, good morning. I guess, maybe a question for you, Dave. There's a lot of conversation, just investor focus around where some of these ROEs are heading. When we look at Royal's performance today, we can see the 17.7% ROE for this quarter, 16.5% year-to-date, and I think you said in your prepared remarks at least 16 percent.
Ibrahim Punawala: Hey, good morning. I guess maybe a question for you, Dave. There's a lot of conversation just investor-focused around where some of these ROEs are heading. And when we look at Royal's performance today, we can look at the 17.7% ROE for this quarter, 16.5% year to date. And I think you said in your prepared remarks at least 16%. Would love to hear if that at least 16% in reality is more like at least 17%. And two questions there. One, do you think the bank is over-earning anywhere within the P&L, or do you think there's upside? And second, give us a sense of your appetite to build capital from here versus just keeping it at least relatively neutral from a CET1 perspective, which obviously is helpful to the ROE. Thank you.
Helpful to the Aro <unk>. Thank you.
Well thanks for that.
Follow up questions.
And try to work my way through them because they are all really important questions. So maybe I'll start with the earnings strength, because that kind of feeds into the narrative of our ROE expectations and the potential of the organization and I would say no I think we captured a disproportionate share of client flow this quarter across <unk>.
Speaker #7: Would love to hear if that at least 16 percent in reality is more like at least 17 percent. And two questions there: One, do you think the bank is over-earning anywhere within the P&L, or do you think there's upside?
All our businesses, whether it was in consumer banking commercial banking certainly capital markets. Our clients are active trading wealth management and positive inflows. So you look at where we did exceptionally well it's on a revenue line. Therefore, you look at the sustainable factors to that revenue line, while our deposit base is a huge strength, but it's well tractor that's.
Speaker #7: And second, give us a sense of your appetite to build capital from here versus just keeping it at least relatively neutral from a CET1 perspective, which obviously is, you know, helpful to the ROE.
Speaker #7: Thank you.
Stable. So we're looking at client flows and our advisory businesses that are also stable as well. So we do have strong expectations as I said in my speech to to continue to serve clients on the advisory side.
Speaker #6: Well, thanks for that mythful of questions. And I'll try to work my way through them because they're all really important questions. So, maybe I'll start with the earnings strength because that kind of feeds into the narrative of our ROE expectations and the potential of the organization.
David McKay: Well, thanks for that mythful of questions. I'll try to work my way through them because they're all really important questions. So maybe I'll start with the earnings strength because that kind of feeds into the narrative of our ROE expectations and the potential of the organization. And I would say, no, I think we captured a disproportionate share of client flow this quarter across all our businesses, whether it was in consumer banking, commercial banking, certainly capital markets. Our clients were active trading, wealth management, positive inflows. So you look at where we did exceptionally well was on the revenue line. Therefore, you look at the sustainable factors to that revenue line. Well, our deposit base is a huge strength, but it's well-tracked or that's stable. So we're looking at client flows in our advisory businesses that are also stable as well.
It remains to be seen where tariffs go as it affects confidence and the overall ability to invest in certain sectors. So some activity I think is still muted and the economy, particularly in commercial banking because of the tariff uncertainty affects the ability to raise capital. So I would overall say our results are based on <unk>.
Speaker #6: And I would say, no, I think we captured a disproportionate share of client flow this quarter across all our businesses. Whether it was in consumer banking, commercial banking, certainly capital markets, our clients are active—trading, wealth management, positive inflows.
Really strong client activity and our ability to capture a disproportionate share of client activity and we're seeing a very resilient economy and therefore, we remain confident in our ability to continue to serve and use our scale to disproportionately drive the bottom line our investors so with that we're feeling very good about.
Speaker #6: So, you look at where you know we did exceptionally well; it was on the revenue line. Therefore, you look at the sustainable factors to that revenue line. Well, our deposit base is a huge strength, but it's well-tracked or that's stable.
Speaker #6: So, we're looking at client flows and our advisory businesses, which are also stable. As well, we do have strong expectations, as I said in my speech, to continue to serve clients on the advisory side.
David McKay: So we do have strong expectations, as I said in my speech, to continue to serve clients on the advisory side. It remains to be seen where tariffs go as it affects confidence in the overall ability to invest in certain sectors. So some activity, I think, is still muted in the economy, particularly in commercial banking, because the tariff uncertainty affects the ability to raise capital. So I would overall say our results are based on really strong client activity and our ability to capture a disproportionate share of client activity. And we're seeing a very resilient economy. And therefore, we remain confident in our ability to continue to serve and use our scale to disproportionately drive the bottom line for our investors. So with that, we're feeling very good about the sustainability of what we're doing, notwithstanding some of the questions around insurance being a little volatile.
The sustainability of what we're doing.
Notwithstanding some of the questions around insurance being a little volatile and we expect to earn through some of those in other areas.
Speaker #6: You know, it remains to be seen where tariffs go, as it affects confidence in the overall ability to invest in certain sectors. So, you know, some activity, I think, is still muted in the economy, particularly in commercial banking, because the tariff uncertainty affects the ability to raise capital.
So with that that led us to a very strong ROA this quarter of 17.7% as you mentioned and we kind of reaffirmed our guidance around at least 16 plus percent.
This year and into next year and I think the only thing that's holding us back from sitting down and kind of reaffirming.
Speaker #6: So, I would overall say our results are based on really strong client activity and our ability to capture a disproportionate share of client activity. We're seeing a very resilient economy, and therefore we remain confident in our ability to continue to serve and use our scale to disproportionately drive the bottom line for our investors.
And updating guidance as our uncertainty around the tariff scenario right now and the impact on investments the impact on our clients and therefore, we do want to kind of watch a little bit as we go through Q4 to see how negotiations.
Speaker #6: So, with that, you know, we're feeling very good about, you know, the sustainability of what we're doing. You know, notwithstanding some of the questions around insurance being a little volatile and, you know, we expect to earn through some of those in other areas.
Kind of.
Unfolds, and we better understand the sectorial impacts and the overall impact to the Canadian economy, and our ability to diversify and as we do that as Katherine mentioned, we're going to sit down and kind of review of our overall expectations for 2026, and we will communicate that to you.
David McKay: And we expect to earn through some of those in other areas. So with that, then that led us to a very strong ROE this quarter of 17.7%, as you mentioned. And we kind of reaffirmed our guidance around at least 16% plus percent this year and into next year. I think the only thing that's holding us back from sitting down and kind of reaffirming and updating guidance is our uncertainty around the tariff scenario right now and the impact on investments, the impact on our clients. And therefore, we do want to kind of watch a little bit as we go through Q4 to see how negotiations kind of unfold and we better understand the sectoral impacts and the overall impact to the Canadian economy and our ability to diversify.
Speaker #6: So, with that, that led us to a very strong ROE this quarter of 17.7%. As you mentioned, and we kind of reaffirmed our guidance around at least 16% plus this year and into next year.
Our next call in Q4, so it give us a little bit of time to read the environment, but we feel very good about our results we feel good about resilience.
Speaker #6: I think the only thing that's holding us back from sitting down and kind of reaffirming and updating guidance is our uncertainty around the tariff scenario right now and the impact on investments, the impact on our clients. Therefore, we do want to kind of watch a little bit as we go through Q4.
I am talk of boats.
Youll credit kind of plateauing in.
The resilience of our customers again, and therefore, we feel really good going into Q4 and into 2026 and that reflects in the the overall confidence around meeting our investor targets and accelerating towards those investor targets. As you pointed out so I think hopefully that answers your question as far as then the significant capital build of 72.
Speaker #6: To see how negotiations kind of unfold and we better understand the sectoral impacts and the overall impact to the Canadian economy and our ability to diversify, and as we do that, as Katherine mentioned, we're going to sit down and kind of review our overall expectations for 2026 and we'll communicate that to you, at the next call in Q4.
Seven basis points this quarter and how do we deploy that I think we would let because we're able to earn.
David McKay: And as we do that, as Katherine mentioned, we're going to sit down and kind of review our overall expectations for 2026. And we'll communicate that to you at the next call in Q4. So give us a little bit of time to read the environment, but we feel very good about our results. We feel good about client resilience. You heard Graeme talk about kind of credit kind of plateauing and that's the resilience of our customers again. And therefore, we feel really good going into Q4 and into 2026. And that reflects in the overall confidence around meeting our investor targets and accelerating towards those investor targets, as you pointed out. So I think hopefully that answers your question.
17, 7% return on a 13, 2% CET one ratio we have the ability to earn through that as some of the strongest banks in the world do like us and therefore I'm, okay, letting it creep up we will.
Speaker #6: So, give us a little bit of time to read the environment, but we feel very good about our results. We feel good about client resilience.
Speaker #6: We heard Graeme talk about, kind of, you know, credit kind of plateauing, and you know, that's the resilience of our customers. Again, we feel really good going into Q4 and into 2026, and that reflects in the overall confidence around meeting our investor targets and accelerating towards those investor targets, as you pointed out.
We'll continue to return capital to shareholders through share buybacks, we have that strong capital generation and dividend and dividend increases and therefore, we will manage that overall scenario with the ability to continue to invest in organic growth over time and potentially inorganic growth. If it makes sense for the shareholder and for the strategic franchise.
Speaker #6: So, I think hopefully that answers your question. As far as the significant capital build of 77 basis points this quarter and how we deploy that, I think we would let, because we're able to earn, you know, 17.7 percent return on a 13.2 percent CT1 ratio, we have the ability to earn through that as some of the strongest banks in the world do, like us, and therefore I'm okay letting it creep up.
So you'll see a bit of creep I think overtime.
David McKay: As far as then the significant capital build of 77 basis points this quarter and how do we deploy that, I think we would let, because we're able to earn a 17.7% return on a 13.2% CET1 ratio, we have the ability to earn through that as some of the strongest banks in the world do like us. And therefore, I'm OK letting it creep up. We will continue to return capital to shareholders through share buybacks. We have that strong capital generation and dividend increases. And therefore, we will manage that overall scenario with the ability to continue to invest in organic growth over time and potentially inorganic growth if it makes sense for the shareholder and for the strategic franchise. So you'll see a bit of creep, I think, over time. But we will continue to manage towards accelerating towards those overall ROE targets of 17% plus percent.
But we will continue to manage towards accelerating towards those overall ROE targets of 17 plus percent I think we have the financial power to do that with our capital return and our growth expectations for the business. So I hope that helps I hope. It gives you a context of how we feel about the underlying strength.
And therefore, how we're going to manage capital and how we're going to manage our oes helped.
Speaker #6: We will continue to return capital to shareholders through share buybacks. We have that strong capital generation and dividends, and dividend increases. Therefore, we will manage that overall scenario with the ability to continue to invest in organic growth over time and potentially inorganic growth if it makes sense for the shareholder.
Helpful. Thank you very much for the detailed response.
Thank you I'll.
Following question is from John Aiken from Jefferies. Please go ahead.
Good morning, I was hoping you would.
Building give us more of a detail on city National can you update us in terms of the progress and where we sit now and also what levers are still yet to be pulled in terms of future profitability expansion.
Speaker #6: And for the strategic franchise, you'll see a bit of creep, I think, over time. But we will continue to manage towards accelerating towards those overall ROE targets of 17% plus.
Yes, thanks for for that we're extremely happy with the progress we're making at city national as we signaled in over the last year in our Investor Day, we continue to progress well and our remediation of the platform and are building a platform than we do.
Speaker #6: And I think we have the financial power to do that, whether our capital return and our growth expectations for the business. So, I hope that helps.
David McKay: And I think we have the financial power to do that with our capital return and our growth expectations for the business. So I hope that helps. That gives you a context of how we feel about the underlying strength and therefore how we're going to manage capital and how we're going to manage ROEs.
Speaker #6: That gives you a context of how we feel about the underlying strength and, therefore, how we're going to manage capital and how we're going to manage ROEs.
We've allocated very significant financial resources to do that and which is embedded in the P&L, so, earning a $149 million with carrying that is really really impressive part of whats city nationals doing city National is now on its kind of front foot and recruiting.
Speaker #7: Yep. No, helpful. So, thank you very much for the detailed response.
Ibrahim Punawala: Yep. No, helpful. So thank you very much for the detailed response.
Speaker #2: Thank you. Our following question is from John Akin from Jefferies. Please go ahead.
Conference Operator: Thank you. Our following question is from John Akins from Jefferies. Please go ahead.
Speaker #8: Good morning. I was hoping you could provide us with a little bit of detail on Citibank. Can you update us on the progress of where we sit now and also let us know what levers are still yet to be pulled in terms of future profitability expansion?
John Aiken: Good morning. I was hoping that you'd be able to give us a little bit of detail on City National. Can you update us in terms of the progress of where we sit now and also what levers are still yet to be pulled in terms of future profitability expansion?
Commercial bankers recruiting private bankers, adding clients. So we feel very very good about some of the.
Potential to build the pipelines there and to see.
Good overall loan growth and deposit growth in the franchise going forward.
Speaker #6: Yeah, thanks for that. We're extremely happy with the progress we're making at Citi National, as we signaled over the last year in our Investor Day.
David McKay: Yeah, thanks for that. We're extremely happy with the progress we're making at City National. As we signaled over the last year on our Investor Day, we continue to progress well in our remediation of the platform and our building of the platform. And we've allocated very significant financial resources to do that, which is embedded in the P&L. So earning $149 million while carrying that is a really, really impressive part of what City National is doing. City National is now on its kind of front foot and recruiting commercial bankers, recruiting private bankers, adding clients. So we feel very, very good about some of the potential to build the pipelines there and to see good overall loan growth and deposit growth in the franchise going forward.
Have work to do on our re platforming through 2026, but we do expect to be able to bring expenses down.
Speaker #6: We continue to progress well with our remediation of the platform and our building of the platform. We have allocated very significant financial resources to do that, which is embedded in the P&L.
As we progressed through 2026, because there is certainly I think in 2025 were at their peak as far as building out our platform and in the strength of our second and third lines of defense. So overall, we feel good about our ability to continue to earn through and that.
Speaker #6: So, earning $149 million while carrying that is really, really impressive. Part of what Citi National is doing is that Citi National is now on its front foot, recruiting commercial bankers, recruiting private bankers, and adding clients. So, we feel very, very good about some of the potential to build the pipelines there and to see good overall loan growth and deposit growth in the franchise going forward.
That was a very strong quarter given some of the one offs, but we don't think it's going to back off too much from that and we will be able to replicate growth story for.
25 into 26 for city National.
Thanks, Dave just point of clarification, when you talk about expenses coming down in 2026, and further is that on an absolute basis or is that just incremental operating leverage.
Speaker #6: We have, you know, work to do on our replatforming through 2026, but we do expect to be able to bring expenses down as we progress through 2026 because there's certainly, I think, in 2025 we're at their peak as far as, you know, building out our platform and the strength of our second and third lines of defense.
David McKay: We have work to do on our re-platforming through 2026, but we do expect to be able to bring expenses down as we progress through 2026 because there's certainly, I think, in 2025, we're at their peak as far as building out our platform and the strength of our second and third lines of defense. So overall, we feel good about our ability to continue to earn through. And that was a very strong quarter given some of the one-offs, but we don't think it's going to back off too much from that. And we'll be able to replicate the growth story from '25 into '26 for City National.
So let me why don't I jump in to for city National were doing that on an absolute.
You heard us talk before about.
Costs related to remediation being fully loaded and what we're seeing is that those costs are already starting to come down and were expecting to see that to continue as we progress into 2026.
Speaker #6: So, overall we feel, you know, good about our ability to continue to earn through and, you know, that was a very strong quarter given some of the one-offs, but we don't think it's going to back off too much from that and we'll be able to, you know, replicate growth story from 25 into 26 for Citi National.
Okay got it thanks for the responses.
Thank you.
Following question is from Gabriel <unk> from National Bank Financial. Please go ahead, hey, good.
A quick one on the trading.
Speaker #8: Thanks, Dave. Just a point of clarification: when you talk about expenses coming down in 2026 and beyond, is that on an absolute basis, or is that just incremental operating leverage?
Result, which was quite strong this quarter I know client driven.
John Aiken: Thanks, Dave. Just a point of clarification. When you talk about expenses coming down in 2026 and further, is that on an absolute basis or is that just incremental operating leverage?
Often the factor here I'm, just wondering if any of the shift in.
Market dynamics.
Speaker #2: Do you want me? Why don't I jump?
Between Q2, and Q3 played a role in.
Asim Imran: Did you want me?
Speaker #6: Yep, go ahead.
Speaker #2: So, for Citi National, we're viewing that on an absolute basis. You all heard us talk before about, you know, the costs related to remediation being fully loaded, and what we're seeing is that those costs are already starting to come down. We're expecting to see that continue as we progress into 2026.
John Aiken: Yep, go ahead.
Asim Imran: Why don't I jump in? So for City National, we're viewing that on an absolute basis. You all heard us talk before about the costs related to remediation being fully loaded. And what we're seeing is that those costs are already starting to come down, and we're expecting to see that to continue as we progress into 2026.
Accounting sense, I know the high yield business or the leverage finance business.
Weak in Q2, and the marks must have been much more favorable in Q3.
Sure. Thanks for the question Gabe.
I wouldn't say there was anything particularly abnormal in terms of marks or anything.
Speaker #8: Fantastic. Thanks for the responses.
John Aiken: Fantastic. Thanks for the responses.
If you step back and you look at the results. We had very strong results. In fact that was up about 35% part of FIC is obviously the credit trading business, where we did see spreads tightened from the end of April through the end of July.
Speaker #2: Thank you. Our following question is from Gabriel Duchene from National Bank Financial. Please go ahead.
Conference Operator: Thank you. Our following question is from Gabriel Duchesne from National Bank Financial. Please go ahead.
Speaker #9: Hey, good morning. A quick one on the trading results, which were quite strong this quarter. I know, you know, client-driven is often the factor here.
Gabriel Dechaine: Hey, good morning. A quick one on the trading result, which was quite strong this quarter. I know client-driven is often the factor here. I'm just wondering if any of the shift in market dynamics between Q2 and Q3 played a role in an accounting sense. I know the high-yield business or the leveraged finance business was weak in Q2, and the marks must have been much more favorable in Q3.
Speaker #9: I'm just wondering if any of the shifts in, you know, market dynamics between Q2 and Q3 played a role in an accounting sense. I know the high-yield business or the leveraged finance business was, you know, weak in Q2, and the marks must have been much more favorable in Q3.
That might have been a five or 10%.
Positive benefit, but not overly material a lot of it was client driven.
Within FIC as well then we obviously have our repo business, our foreign exchange business that performed very well in our core rates business plus commodities. So we did see very good strength right across the broad array of products. It wasn't just.
Speaker #6: Sure. Thanks for the question, Gabe. I wouldn't say there was anything particularly abnormal in terms of marks or anything. You know, if you step back and look at the results, we had very strong results in FIC, which was up about 35%.
Graeme Hepworth: Sure. Thanks for the question, Gabe. I wouldn't say there was anything particularly abnormal in terms of marks or anything. If you step back and you look at the results, we had very strong results in FIC that was up about 35%. Part of FIC is obviously the credit trading business, where we did see spreads tighten from the end of April through the end of July. That might have been a 5% or 10% positive benefit, but not overly material. A lot of it was client-driven. Within FIC as well, then we obviously have our repo business, our foreign exchange business that performed very well, and our core rates business plus commodities. So we did see very good strength right across the broad array of products. It wasn't just driven by credit. Credit obviously did help us relative to Q2, but I would say it was modest overall.
Driven by credit credit, obviously, you did help us relative to Q2, but I would say it was modest.
Overall, and then on the equity side, where we've been strategically focused on making a lot of investments we feel we're making very good headway there.
Speaker #6: Part of FIC is obviously the credit trading business, where we did see spreads tighten from the end of April through the end of July.
<unk> had over a 40% revenue uplift year over year, obviously, a constructive environment, but we do feel that.
A number of the investments in strategic pivots, we've made in that business are bearing fruit and driving.
Speaker #6: You know, that might have been a 5% or 10% positive benefit, but not overly material. A lot of it was client-driven.
Outperformance in terms of market share capture.
Great.
Speaker #9: Mm-hmm.
And then.
Speaker #6: You know, within FIC as well, we obviously have our repo business, our foreign exchange business that performed very well, and our core rates business, plus commodities.
A question on the credit outlook I know Graham you gave a lot to chew on there and I'll definitely go over the transcript.
I just wanted to.
Kind of looking at a couple of things here one you.
Speaker #6: So, we did see very good strength right across the broad array of products. It wasn't just driven by credit; credit obviously did help us relative to Q2, but I would say it was modest overall.
Released some performing provision and I see.
There was a favorable change to your macro outlook.
Which reflects the sum of the.
Speaker #6: And then on the equity side, where we've been strategically focused on making a lot of investments, we feel we're making very good headway there.
Graeme Hepworth: And then on the equity side, where we've been strategically focused on making a lot of investments, we feel we're making very good headway there. We had over a 40% revenue uplift year over year. Obviously, a constructive environment, but we do feel that a number of the investments and strategic pivots we've made in that business are bearing fruit and driving outperformance in terms of market share capture.
Support programs that you're anticipating.
Ones that have been announced as well.
Speaker #6: We had over a 40% revenue uplift year over year. Obviously, a constructive environment, but we do feel that a number of the investments in strategic pivots we've made in that business are bearing fruit and driving outperformance in terms of market share capture.
Against the or and then.
Yeah.
Maybe some signs that maybe some signs that there is.
No deterioration in the <unk>.
The Canadian consumer we're seeing rising.
90 day delinquency rates on certain categories of unemployment is going up, especially in our major urban centers.
Speaker #9: All right, great. And then, you know, a question on the credit outlook. I know, Graeme, you gave a lot to chew on there, and I'll definitely go over the transcript. But I just want to, you know, kind of look at a couple of things here.
Gabriel Dechaine: Okay, great. And then a question on the credit outlook. I know, Graeme, you gave a lot to chew on there, and I'll definitely go over the transcript. But I just want to kind of look at a couple of things here. One, you released some performing provision, and I see there's a favorable change to your macro for outlook, which reflects some of the support programs that you're anticipating, ones that have been announced as well. And then maybe some signs that, well, not maybe, some signs that there is deterioration in the health of the Canadian consumer. We're seeing rising 90-day delinquency rates in certain categories, unemployment's going up, especially in our major urban centers. And I don't know if this is related, but some of your fastest growing categories in the Canadian business are HELOCs and credit cards.
I don't know if this is related but some of your fastest growing categories in the Canadian business or <unk>.
Speaker #9: One, you released some performing provision, and I see, you know, there's a favorable change to your macro outlook, which reflects some of the support programs that you're anticipating.
Credit cards I'm wondering if that's a sign of stress as well so no balance all of these factors are you still anticipating peak loan losses sometime in 2026 or are you getting more or less optimistic or how would you describe it.
Speaker #9: Ones that have been announced as well against, and then, you know, maybe some signs that—well, not maybe—some signs that there is, you know, deterioration in the health of the Canadian consumer. We're seeing rising 90-day delinquency rates in certain categories.
Thanks Gabe.
Yes, maybe just to kind of work through some of your.
Elements of the credit question.
Generally we characterize obviously, we're still at a very.
<unk> got elevated level or.
Part of the credit cycle and.
Shifting a little bit is I think we're moving into a period, we're seeing a little bit more stability as we look forward and I think thats true both on retail.
Speaker #9: Unemployment's going up, especially in our major urban centers. And I don't know if this is related, but some of your fastest-growing categories in the Canadian business are HELOCs and credit cards.
In wholesale I think for some time on the retail portfolio, we've been clear the fact that the unsecured products.
I have been the ones that we continue to drive our PCL upwards and that has been very much playing out through 2025.
Speaker #9: I'm wondering if that's a sign of stress as well. So, you know, balancing all these factors, are you still anticipating peak loan losses sometime in 2026, or are you getting more or less optimistic?
Gabriel Dechaine: I'm wondering if that's a sign of stress as well. So balance all these factors, are you still anticipating peak loan losses sometime in 2026, or are you getting more or less optimistic? How would you describe it?
But do we start to look at some of the trends and early delinquencies there.
That would sort of point to that were kind of getting closer to that range of being at peak levels. If you will in the mortgage side I would say in 'twenty, five and going into 'twenty six or is there still some headwinds there as we're very much at the heart of that that.
Speaker #9: how would you describe it?
Speaker #6: Yeah, thanks, Gabe. Yeah, maybe just to kind of work through some of your, you know, elements of the quote question. I mean, you know, generally we characterize, obviously we're still in a very elevated level or, you know, part of the credit cycle, and shifting a little bit as I think we're moving into a period where we're seeing a little bit more stability as we look forward.
David McKay: Yeah, thanks, Gabe. Yeah, maybe just to kind of work through some of your elements of the question. I mean, generally, we characterize, obviously, we're still in a very kind of elevated level or part of the credit cycle. And shifting a little bit, as I think we're moving into a period where we're seeing a little bit more stability as we look forward. And I think that's true both on retail and wholesale. I think for some time on the retail portfolio, we've been playing the fact that the unsecured products have been the ones that would continue to drive our PCL upwards. And that has been very much playing out through 2025.
That refinancing period that will put pressure on the mortgage portfolio, but so far that's playing out very much.
We expected and I think the again the portfolio is very resilient there in terms of both the quality of the client base as well as the very strong underwriting standards that have been in place.
And that part I would point to our write offs as just a good indicator of kind of the recoveries strength, we've had so far in that space.
Speaker #6: And I think that's true both on retail and wholesale. I think for some time on the retail portfolio, we've been pointing to the fact that the unsecured products have been the ones that would continue to drive our PCL upwards, and that has been very much playing out through 2025.
Wholesale.
We've seen elevated levels in wholesale in 2025.
With the ongoing uncertainty, we would expect that to continue to persist into 2026, particularly.
Speaker #6: But at least start to look at some of the trends and early delinquencies there. You know, that would start to point to that we're, you know, kind of getting closer to that range of being at peak levels, if you will.
David McKay: But as we start to look at some of the trends on early delinquencies there, that would start to point to that we're kind of getting closer to that range of being at peak levels, if you will. In the mortgage side, I would say in '25 and going into '26, there's still some headwinds there, as we're very much at the heart of that refinancing period that will put pressure on the mortgage portfolio. But so far, that's playing out very much as we expected. And I think, again, the portfolio is very resilient there in terms of both the quality of the client base as well as the very strong government writing standards that have been in place. On that point, I would point to our write-offs as just a good indicator of kind of the recovery strength we've had so far in that space.
Particularly around our commercial portfolio and the softness in Canada, and the impact of that uncertainty in Canada.
Speaker #6: I mean, the mortgage side, I would say in 25 and going into 26, there's, there's still some headwinds there as we're very much at the heart of that, that refinancing period that will put pressure on, on the mortgage portfolio, but so far that's playing out very much, as we expected and I think the, again, the portfolio is very resilient there in terms of both the quality of the client base as well as the, the very strong underwriting standards that have, that have been in place.
But it is that we're balanced as I noted city national in the U S side of the portfolio showing a little more strength right now.
Capital markets I think has had some specific issues that I don't expect would repeat as we look forward.
And so overall I think wholesale again will continue to be elevated, but I don't see anything pushing it kind of increasing trends. There. So you put all that together I think it's a bit more of a balanced story than kind of the kind of increasing levels, we've seen through 2025.
Speaker #6: You know, on that point, I would point to our write-offs as just a good indicator of the recoveries strength we've had so far in that space.
We'll get a bit more specific in our outlook in Q4, and 2026, but just wanted to provide a bit of sense of that trajectory that.
Speaker #6: Wholesale, and we've seen elevated levels in wholesale in 2025. you know, with the, the ongoing uncertainty, we would expect that to continue to persist into 2026.
David McKay: Wholesale, we've seen elevated levels in wholesale in 2025. With the ongoing uncertainty, we would expect that to continue to persist into 2026, particularly around our commercial portfolio and then the softness in Canada and the impact of that uncertainty in Canada. But it is a bit more balanced, as I noted. City National on the US side of the portfolio is showing a little more strength right now. Capital markets, I think, have had some more specific issues that I don't expect would repeat as we look forward. And so overall, I think wholesale, again, will continue to be elevated, but I don't necessarily see anything pointing at kind of increasing trends there. So you put it all together, I think it's just a bit more of a balanced story than kind of the kind of increasing levels we've seen through 2025.
Again, the difficult part of the credit cycle, we're in but I think kind of the acceleration of slowing down at this point.
Speaker #6: Particularly around our commercial portfolio and the softness in Canada, and the impact of that uncertainty in Canada. But it is a bit more balanced, as I noted; you know, Citi National and the U.S. side of the portfolio showing a little more strength right now.
So no major shift up or down from what you were.
Seeing in Q2, I know theres, a lot more going on in Q, but sounds source.
Sort of stable.
Speaker #6: capital markets I think have had some, you know, more specific issues that I, that I don't expect would repeat as we look forward. and, you know, so overall I think wholesale again will continue to be elevated, but I don't necessarily see anything pointing at, at kind of increasing trends there.
Q2 to Q3 again Q2, we were coming off that was really kind of the actions we took with our performing reserves alone.
And that was really reflecting you know coming off the back of Liberation day, and really that kind of acute increase in that political and policy uncertainty that we really felt we needed to up our reserves against that possibility right and so that was really the scenario. We've put in we really weighted more against that uncertainty.
Speaker #6: So, we put that all together. I think it's just a bit more of a balanced story than the increasing levels we've seen through 2025.
Speaker #6: And, you know, we'll get a bit more specific in our outlook in Q4 2026, but just trying to provide a bit of sense for that trajectory that, you know, again, a difficult part of the credit cycle we're in, but I think kind of that acceleration is slowing down at this point.
David McKay: And we'll get a bit more, I guess, specific in our look in Q4 or on 2026. But just trying to provide a bit of sense for that trajectory that, again, a difficult part of the credit cycle we're in, but I think kind of that acceleration is slowing down at this point.
As this plays out as Dave called out as we get more clarity on kind of whats happening on kind acousma trade negotiations that will either give us the opportunity to at least some of that back.
Negotiation comes out favorably or were.
Speaker #9: So, no major shift, up or down, from what you were seeing in Q2. I know there's a lot more going on in Q2, but I was sort of thinking it's just sort of stable.
Gabriel Dechaine: So no major shift up or down from what you were seeing in Q2. I know there's a lot more going on in Q2, but it sounds sort of, you just sort of stable.
Operating from a position of strength that we've got good reserves in place.
Those would be more negative if you will so that was really what we were reacting to in Q2 as opposed to something we were seeing specifically at that point in time in our portfolio.
Speaker #6: Q2 to Q3, again, Q2 we were coming off, you know, that was really kind of the actions we took with our performing reserves and allowance as well.
David McKay: Q2 to Q3, again, Q2, we were coming off, you know, that was really kind of the actions we took with our performing reserves and allowances. And that was really reflecting, you know, coming off the back of Liberation Day and really that kind of acute increase in that political and policy uncertainty that we really felt we needed to up our reserves against that possibility. Right? And so that was really that new scenario we put in. We really weighted more against that uncertainty.
Great. Thanks.
Yeah.
Thank you.
Speaker #9: Yep.
Speaker #6: And that was really
Following question is from Sohrab <unk> from BMO capital markets. Please go ahead.
Speaker #6: Reflecting on coming off the back of Liberation Day and really that kind of acute increase in that political and policy uncertainty, we felt we needed to up our reserves against that possibility, right?
Okay. Thank you Dave I just.
Alright, maybe.
Speaker #6: And so that was really that new scenario we put in. We really waited more against that uncertainty. You know, as this plays out, it is, as Dave called out, we get more clarity on kind of what's happening on kind of Kuzma trade negotiations.
I mean.
Obviously, you feel good about the quarter I think the commentary you suggested.
David McKay: You know, as this plays out, and as Dave called out, as we get more clarity on kind of what's happening on kind of Kuzma trade negotiations, that will either give us the opportunity to release some of that back if that negotiation comes out favorably or we're operating from a position of strength that we've got good reserves in place if that proves to be more negative, if you will. So that was really what we were reacting to in Q2 as opposed to something we were seeing specifically at that point in time in our own portfolio.
You may made.
It made us believe any way that you feel good about meeting the targets I think you ask.
Speaker #6: That will either give us the opportunity to release some of that back if, if that, you know, negotiation comes out favorably or we're, you know, from operating from a position of strength that we've got good reserves in place if that, that proves to be more negative, if you will.
Actually inadvertently slipped up and called it a 17% plus ROE as opposed to the 16%.
I think you are feeling really good about that and.
Speaker #6: So, that was really a, you know, what we were reacting to in Q2 as opposed to something we were seeing specifically at that point in time in our own portfolio.
Ram is talking about.
Certainly the uncertainties for sure, but probably a little bit less so quarter over quarter, and I guess, what I'm trying to figure out here is.
Speaker #9: Okay, great. Thanks.
Gabriel Dechaine: Okay, great. Thanks.
Speaker #2: Thank you. Our following question is from Saurabh Movahedi from BMO Capital Markets. Please go ahead.
Conference Operator: Thank you. Our following question is from Saurabh Movahedi from BMO Capital Markets. Please go ahead.
Is the uncertainty.
Enough to outweigh.
It feel good.
Speaker #10: Okay, thank you. Dave, I just thought I'd maybe go to you. I mean, obviously you feel good about the quarter. I think the commentary you suggested made us believe, anyway, that you feel good about meeting the targets.
Ibrahim Punawala: Okay, thank you. Dave, I just thought I'd maybe go to you. I mean, obviously, you feel good about the quarter. I think the commentary you suggested made us believe anyway that you feel good about meeting the targets. I think you actually inadvertently slipped up and called it a 17% plus ROE as opposed to the 16%. So I think you're feeling really good about that. And Graeme is talking about certainly the uncertainties for sure, but probably a little bit less so quarter over quarter.
And in organic opportunity presented itself or.
Are you feeling good enough about the fundamentals of the franchise.
Notwithstanding some of the uncertainties.
And we're all kind of talking about you would be willing to be opportunistic.
Speaker #10: I think you actually inadvertently slipped up and called it a 17 percent plus ROE as opposed to the 16 percent. So I think you're feeling really good about that.
Inorganic opportunity situations.
Yes. Thank you for that question I Hope you did pick up on Tom and feeling very good about our results and the.
Speaker #10: And, you know, Graeme is talking about certainly the uncertainties for sure, but probably a little bit less so quarter over quarter. And I guess what I'm trying to kind of figure out here is, is the uncertainty enough to outweigh the feel-good?
The strength of those results and the sustainability of the results because they are based on client activity and our ability to take a disproportionate share of what our clients are doing.
Ibrahim Punawala: And I guess what I'm trying to kind of figure out here is, is the uncertainty enough to outweigh the feel-good if an inorganic opportunity presented itself, or are you feeling good enough about the fundamentals of the franchise that, you know, notwithstanding some of the uncertainties that we're all kind of talking about, you would be willing to be opportunistic in an inorganic situation?
Going forward, obviously requires our clients to be healthy and active.
And we're seeing that resilience, we always do put out that caution that things can change and there is still a big uncertainty around kuzmina tariff negotiations that I think holds.
Speaker #10: If, and if an organic opportunity presented itself, or are you feeling good enough about the fundamentals of the franchise that, you know, notwithstanding some of the uncertainties that we're all kind of talking about, you would be willing to be opportunistic in an inorganic situation?
Investors in hold.
Commercial.
Clients from investing capital and therefore make us a little bit cautious about nailing down certain commitments on both the future right now so we're going to take a quarter to look at that and at 17, 7% was for this quarter, but we have really strong flows to two to.
Speaker #6: Yeah, thank you for that question. I mean, I hope you did pick up my tone on feeling very good about our results and the strength of those results and the sustainability of the results because they're based on client activity and our ability to take a disproportionate share of what our clients are doing.
David McKay: Yeah, thank you for that question. I mean, I hope you did pick up my tone on feeling very good about our results and the strength of those results and the sustainability of the results because they're based on client activity and our ability to take a disproportionate share of what our clients are doing. And anything going forward, obviously, requires our clients to be healthy and active. And we're seeing that resilience. We always do put out that caution that things can change. And there's still that big uncertainty around Kuzma and tariff negotiations that kind of, I think, hold investors and hold commercial clients from investing capital and therefore make us a little bit cautious about nailing down certain commitments about the future right now. So we're going to take a quarter to look at that.
To support that 16 plus percent as we talked about and we'll see how quickly we grow and accelerate through our investor day targets over the coming quarters. So you just stay with us on that and we'll get to that over over the next two or three months as we continue.
Speaker #6: And, you know, anything going forward obviously requires our clients to be healthy and active and, and, we're seeing that resilience. We always do put out that caution that things can change and there's still that, you know, big uncertainty around Kuzma and tariff negotiations that kind of I think hold, hold investors and hold, and, you know, commercial, clients from investing capital and therefore make us a little bit cautious about nailing down certain commitments, about the future right now.
To build the franchise so I think.
That's certainly helps when it comes to how do you continue to grow we've got a lot of great or inorganic growth opportunities that you saw in my investments, whether its RBC clear and the global global transaction banking business. We continue to hire in every part of our our client facing business from private banking to wealth management capital markets U S Canada.
Speaker #6: So we're going to take a quarter to look at that. You know, that 17.7 percent was for this quarter, but we have, you know, really strong, flows to, to, to support that 16 plus percent as we talked about and we'll see how we quickly we grow and accelerate through our investor day targets over the coming quarter.
Europe.
In particular, and therefore, we are on our front foot as far as continuing to grow the franchise organically with new products and expanded capacity and expanded geographic capacity with city national as well expanding into the southeast very successfully already.
David McKay: That 17.7% was for this quarter, but we have really strong flows to support that 16% plus percent as we talked about. And we'll see how quickly we grow and accelerate through our Investor Day targets over the coming quarter. So just stay with us on that. And we'll get to that over the next two or three months as we continue to build the franchise. So I think that's certainly how. So when it comes to how do you continue to grow, we got a lot of great inorganic growth opportunities that you saw in my advancements, whether it's RBC Clear and the global transaction banking business. We continue to hire in every part of our client-facing business, from private banking to wealth management to capital markets, US, Canada, Europe, in particular.
Speaker #6: So just stay with us on that, and we'll get to that over the next two or three months as we continue to build the franchise.
With that though however, we continue to think about what inorganic opportunities would look like as any company should do and we have base basically the same kind of objectives as I've articulated over the last five years of where we want to grow we want to grow our wealth franchise, particularly in the United States, but also.
Speaker #6: So I think, you know, that's certainly how—when it comes to how do you continue to grow? We got a lot of great inorganic growth opportunities that you saw in my investments, whether it's RBC Clear and the global transaction banking business.
Speaker #6: We continue to hire in every part of our client-facing business, from private banking to wealth management to capital markets: U.S., Canada, and Europe in particular. Therefore, we’re on our front foot as far as continuing to grow the franchise organically.
Potentially in Europe, as we did with Brewin Dolphin and we will continue to look at opportunities, but we have a very high bar on dilution and accretion to the shareholder because because of organic capabilities I think what youre seeing sorghum and the real strength of our results. This year in this quarter.
David McKay: And therefore, we are on our front foot as far as continuing to grow the franchise organically with new product and expanded capacity and expanded geographic capacity with City National as well, expanding into the Southeast very successfully already. With that, though, however, we continue to think about what inorganic opportunities would look like, as any company should do. And we have basically the same kind of objectives as I'd articulated over the last five years of where we want to grow. We want to grow our wealth franchise, particularly in the United States, but also potentially in Europe, as we did with Brew and Dolphin. And we'll continue to look at opportunities. But we have a very high bar on dilution and accretion to the shareholder because of organic capabilities.
Speaker #6: With new product offerings and expanding capacity, as well as geographic expansion with Citi National, we are successfully entering the Southeast. With that, however, we continue to think about what inorganic opportunities would look like, as any company should do.
How distracting and how complicated it is to do M&A and it takes the entire management team to land and HSBC and it takes you away from kind of full focus and attention on your current business and now Youre seeing the RBC management team fully focused on the franchise in front of us in growing our franchise and these are the results. So when you look at any.
Speaker #6: And we have basically the same kind of objectives as I'd articulated over the last five years of where we want to grow. We want to grow our wealth franchise, particularly in the United States, but also potentially in Europe as we did with Brewin Dolphin, and we'll continue to look at opportunities. But we have a very high bar on dilution and accretion to the shareholder because of organic capabilities. I think what you're seeing, Saurabh, in the real strength of our results this year and this quarter is, you know, how distracting and how complicated it is to do M&A.
Acquisition and the time it takes from your management team to integrate that you got to put it against.
Results. This team can put together when it focuses organically and I always look at that trade off.
Does this justify taking attention away from the great momentum we have in building out our inorganic capabilities, having said that there are opportunities that could present themselves that I think are very accretive to you as an investor.
David McKay: I think what you're seeing, Saurabh, and the real strength of our results this year in this quarter is how distracting and how complicated it is to do M&A. It takes the entire management team to land an HSBC, and it takes you away from kind of full focus and attention on your current business. And now you're seeing the RBC management team fully focused on the franchise in front of us and growing the franchise. And these are the results. So when you look at any acquisition and the time it takes from your management team to integrate that, you've got to put it against the results that this team can put together when it forecasts organically. And I always look at that trade-off to say, does this justify taking attention away from the great momentum we have in building out our inorganic capabilities?
And two our strategic franchise, particularly in the wealth area, but only if it comes at a price and a set of terms that allows us to do both and Thats. What we loved the boats are HSBC acquisition, we didn't lose the momentum in our core business. While we made this very complex significant integration and we would look to make sure.
Speaker #6: And it takes the entire management team to land an HSBC, and it takes you away from kind of full focus and attention on your current business.
Speaker #6: And now you're seeing the RBC management team fully focused on the franchise in front of us and growing the franchise, and these are the results.
Speaker #6: So when you look at any acquisition and the time it takes from your management team to integrate that, you've got to put it against three different results that this team can put together when it focuses organically.
That was a set of conditions as well and any other organic so we have the capital we have some strategic needs to grow.
Speaker #6: And I always look at that trade-off: to say, does this justify taking attention away from the great momentum we have in building out our inorganic capabilities?
<unk> and commercial bank in the United States and in Europe, and we'll continue to do.
To think about it and to be prepared to act if it makes sense.
Speaker #6: Having said that, there are opportunities that could present themselves that I think are very accretive to you as an investor and to our strategic franchise, particularly in the wealth area, but only if it comes at a price and on terms that allows us to do both.
David McKay: Having said that, there are opportunities that could present themselves that I think are very accretive to you as an investor and to our strategic franchise, particularly in the wealth area, but only if it comes at a price and it's at a term that allows us to do both. And that's what we loved about our HSBC acquisition. We didn't lose the momentum in our core business while we made this very complex, significant integration. And we would look to make sure that that was a set of conditions as well in any other organic. So we have the capital. We have some strategic needs to grow wealth.And
Very helpful. Thank you.
Thank you our.
Our following question is from Mario Mendonca from TD Securities. Please go ahead.
Good morning, <expletive> let me stick with you.
$3.84. This quarter, if you annualize that youre getting to a number of well above what the street's forecasting for 2026. So I think I don't think you would want us to annualize. This number so what I'm asking is if you could do do my job for me to this morning.
Speaker #6: And that's what we loved about our HSBC acquisition. We didn't lose the momentum in our core business while we made this very complex, significant integration. We would look to make sure that those conditions were the same in any other organic.
Tell me what you think royal over earned this quarter, but is there is there some way you can help us.
Speaker #6: So we have the capital, and we have, you know, some strategic needs to grow wealth and commercial banking in the United States and in Europe.
I don't suspect you want us to annualize this quarter you don't they don't want to set yourself up that way. So help me think through how much you over.
Conference Operator: commercial bank in the United States and in Europe, and we'll continue to think about it and to be prepared to act if it makes sense.
Speaker #6: And we'll continue to think about it and be prepared to act if it makes sense.
Yeah.
Amir.
Catherine start on that.
Speaker #10: Very, very helpful. Thank you.
And then I will jump in at the end, but Katherine why don't you take a swing at that and then I'll follow up.
David Brown: Very helpful. Thank you.
Speaker #2: Thank you. Our following question is from Mario Mendonca from TD Securities. Please go ahead.
Asim Imran: Thank you. Our following question is from Mario Mendonca from TD Securities. Please go ahead.
Mario I like the question.
The way I would come at it I would actually anchor you back to the guidance that we provided to give you that.
Speaker #11: Good morning, Dave. Can we stick with you? $3.84 this quarter—if you annualize that, you're getting to a number well above what the Street is forecasting for 2026.
David McKay: Good morning, Dave. Can we stick with you? $3.84 this quarter, if you annualize that, you're getting to a number well above what the Street's forecasting for 2026. So I think, I don't think you would want us to annualize this number. So what I'm asking is if you could do my job for me to this morning and tell me what you think Royal over-earned this quarter. Like, is there some way you can help us think? Because I don't suspect you want us to annualize this quarter. You don't want to set yourself up that way. So help me think through how much you over-earned.
I guess the trend line as we go into the last quarter of the year as I take you back to the key components of what drives our results. So if I start with our our net interest income the full year guidance I increase this quarter until we are targeting.
Speaker #11: So I think, I don't think you would want us to annualize this number. So what I'm asking is if you could do my job for me this morning.
Speaker #11: And tell me, what do you think Royal over-earned this quarter? Is there some way you can help us think? Because I don't suspect you want us to annualize this quarter.
Mid teen growth and for that that is continuing with that.
Speaker #11: You don't, we don't want to set yourself up that way. So help me think through how much you over-earned.
The volume the resilience that David's talking to you on the volume to no change to the guidance that we provided for mortgage volume, we're seeing a moderate growth on the commercial side or seen.
Speaker #2: So Mario.
Conference Operator: I'm going to let Katherine start on that, and then I'll jump in at the end. But Katherine, why don't you take a swing at that, and then I'll follow up?
Mid to high for the second half of the year for capital markets, We're continuing down the path.
Conference Operator: Good morning, Mario. I like the question. The way I would come at it, I would actually anchor you back to the guidance that we've provided to give you, you know, that, I guess, trend line as we go into the last quarter of the year. And so I take you back to the key components of what drives our results. So if I start with our net interest income, the full-year guidance, I increased this quarter. And so we are targeting, you know, a mid-team growth for that. That is continuing with the volume, the resilience that Dave was talking to on the volume. So no change to the guidance that we've provided for mortgage volume. We're seeing moderate growth on the commercial side. We're seeing, you know, mid to high for the second half of the year.
<unk> growth on that front on other income, we don't give specific guidance, but it would take you back to <unk>.
Comments were.
<unk> seen some seasonality in the fourth quarter for capital markets, but we are also seeing optimism.
From our sponsors from our corporate clients on the insurance fund really strong quarter, but Q4, we do I'll call. It seasonality in Q2 update our annual actuarial assumptions there.
Q E updated our guidance there to say mid to high and really were at that high end because of the variable comp were.
<unk> continued growth on a commensurate kind of on a commercial revenue taxes no change still in the range of 20% to 22% and then you've heard Graham with his comments on the overall PCL and the last item that is a significant item, but it can move is our corporate support and we're looking for.
Conference Operator: For capital markets, we're continuing down the path of the mid-growth on that front. On other income, we don't give specific guidance, but I would take you back to Dave's comments where we do see seasonality in the fourth quarter for capital markets, but we are also seeing optimism from our sponsors, from our corporate clients. On the insurance front, really strong quarter. But Q4, we do, I'll call it seasonality as we do update our annual actuarial assumptions there. If I take us to NIE, we updated our guidance there to say mid to high. And really, we're at that high end because of the variable comp, where you know the expected continued growth on our commensurable revenue. Taxes, no change, still in the range of 20 to 22%. And then you've heard Graeme with his comments on the overall PCL.
In Q4 to be towards the lower end of the range, putting that all together we're expecting.
Positive strong offline pointing to the fourth quarter.
So I hope you take away from that I guess, I am giving you still a little bit of work on that scenario, but I hope you can step away from that and arrive at a view for the fourth quarter.
My best.
On this assumption review and insurance can you give us.
Order of magnitude because there's something meaningful you've mentioned a couple of times, so I suspect that matters.
Hi, it's Jennifer.
So as far as just I guess prior contact on insurance for a second.
Conference Operator: And the last item that is not a significant item, but it can move is the corporate support. And we're looking for that in Q4 to be towards the lower end of the range. Putting that all together, we're expecting, you know, still positive, strong uplift going into the fourth quarter. So I hope you take away from that. I guess I'm giving you still a little bit of work on that front, Mario, but I hope you can step away from that and, you know, arrive at a view for the fourth quarter.
As you heard at Investor Day, we are looking to.
You know mid single digits in terms of overall, earning capacity year over year. So we're still guiding to that for the year. We have had some lumpy lumpiness in.
In Q1, we had a significant recapture client driven.
That is not.
It is not something that we would expect us to obtain.
On the.
The actuarial assumptions, we're still working through them.
David McKay: I'll do my best. Quick on this assumption review in insurance. Can you give us an order of magnitude? Like, is this something meaningful? You've mentioned a couple of times, so I suspect it matters.
That book of business that we're continuing to run off.
And we actually recaptured a couple of those treaties in Q2 to reduce that volatility.
Ibrahim Punawala: Hi, it's Jennifer. So as far as this, I guess, broader context on insurance for a second, as you heard in Investor Day, we are looking to, you know, mid-single digits in terms of overall earning capacity year over year. So we're still guiding to that for the year. We have had some lumpiness. In Q1, we had a significant recapture, client-driven, that is not something that we would expect us to gain. On the actuarial assumptions, we're still working through them. We do have a book of business that we're continuing to run off. And we actually recaptured a couple of those treaties in Q2 to reduce that volatility. But it's going to be actually in line with what we've had in previous years on this book of business. So it's not a significant adjustment, but there will be, we will expect Q4 to be lower.
But it is going to be actually in line with what we've had in previous years on this book of business. So it's not so.
So not a significant adjustment that there will be we will expect Q4 to be lower.
Alright, if I could.
Let me just finish up with Graham.
We on these calls we often listen to what you say and we try to parse your words and you sound as others have suggested more comfortable today than you did in Q2.
Your peers. However, several of them are sending less comfortable.
Im referring specifically now to the retail book.
And have you think about your write offs in retail.
I think it's something worth looking at I believe it's page.
Page 25 or something of your supplement so the write offs and retail continue to move higher, but youre, suggesting that thats starting to stabilize.
Your peers several of them referred to that.
The pig in the Python analogy in describing how things would continue to deteriorate.
David McKay: All right. And if I could, let me just finish up with Graeme. On these calls, we often listen to what you say, and we try to parse your words, and you sound, as others have suggested, more comfortable today than you did in Q2. Your peers, however, several of them are sounding less comfortable. And I'm referring specifically now to the retail book. And I have you think about your write-offs in retail. I think it's something worth looking at. I believe it's page, maybe it's page 25 or something of your supplement. So the write-offs in retail continue to move higher, but you're suggesting that that's starting to stabilize. Your peers, several of them referred to some, that they've used the pig in the python analogy in describing how things would continue to deteriorate right until 2026.
Right until 2026.
I'm trying to figure out if there's a difference between Royals book of personal loans cards lines of credit at all that sort of thing.
It's different from some of the other peers that are giving us taken the Python analogy does it matter that royal's business mix and exposure is to the more affluent versus say the mass affluent somebody the other banks does that matter and have you ever seen periods, where that difference has appeared in royal's results.
Thanks Barry.
I'm not sure how to respond to the pick of the peso in Colombia, but credit terminology, we use here but.
I wouldn't say a lot has changed quarter over quarter I think we've just progress closer to kind of that end state.
And.
Just maybe picking up where Dave used earlier I know everyone's always interested in when we're going to see kind of the peak played with the credit cycle.
David McKay: So I'm trying to figure out if there's a difference between Royal's book of personal loans, cards, lines of credit, auto, that sort of thing. If it's different from some of the other peers that are giving us the pig in the python analogy, does it matter that Royal's business mix and exposure is to the more affluent versus, say, the mass affluent and some of the other banks? Does that matter? And have you ever seen periods where that difference has appeared in Royal's results?
We would try to guide to a little bit as we're kind of in that range now and we would expect to persist in that range now and so it's not going to be some.
Singular magical quarter, where we hit that peak and then instantly. It comes down quick off of that where we are in a difficult part of the credit cycle, that's going to persist into 2026, but we're probably in that range right now when we look at our retail franchise. We absolutely do have a very strong client base there and that has always produce I think very strong results for us from a credit perspective.
David McKay: Thanks, Mario. I might try to respond to the pig in the python comment, not credit terminology we use here. But you know, again, I wouldn't say a lot's changed quarter over quarter. I think we've just progressed closer to kind of that end state. And you know, I just maybe pick on a word Dave used earlier. I know everyone's always interested in when we're going to see kind of that peak of the credit cycle. You know, I think what we would try to guide to a little bit is we're kind of in that range now, and we would expect to persist in that range now. And so it's not going to be some, you know, singular magical quarter where we hit that peak and then instantly it comes down quick off of that.
Look at products like our cards business for example in kind of the.
The nature of that product set the nature of who we attract as a bank.
That product has always been a very very strong performer for us.
From a PCL perspective.
On an absolute and a relative basis and so.
We glean a lot from that from data and insights as well and how that feeds our overall risk programs.
That is often a good leading indicator for us. It is what it is driving the PCL as we go up but we certainly are looking at trends around products like that as we go forward and so.
David McKay: We're just, we are in a difficult part of the credit cycle, and that's going to persist into 2026. But we're probably in that range right now. You know, when we look at our retail franchise, we absolutely do have a very strong client base there. And that has always produced, I think, very strong results for us from a credit perspective. You know, I would look at and point at products like our cards business, for example, and kind of the, you know, the nature of that product set, the nature of who we attract as a bank means that that product has always been a very, very strong performer for us from a PCL perspective, both on an absolute and a relative basis. And so, you know, we glean a lot from that from data and insights as well and how that feeds our overall risk programs.
As I said, we're seeing more stability, there and that helps kind of Clinton guide us as we think.
It may play out in 2026 I.
I would say likewise as we've been going through the cycle, we have been taking actions to help kind of manage the front book.
Come in we've been taking actions to kind of get to clients earlier and I'm sure. We can create the best outcomes possible and again likewise in many of these products for Australia, we will start to see some of the benefits of those to offset kind of the ongoing headwinds of weakness in the Canadian economy stupid.
From a PCL perspective, both on an absolute and a relative basis and so.
We glean a lot from that from data and insights as well and how that feeds our overall risk programs, but.
So you put all that together given the quality of the client base I think that good underwriting standards I think.
David McKay: But, you know, that is often a good leading indicator for us. It is the one that drives the PCL as we go up. But we're certainly looking at trends around products like that as we go forward. And so, you know, as I said, we're seeing more stability there, and that helps kind of point and guide us as we think about what may play out in 2026. I would say likewise, you know, as we've been going through this cycle, we've been taking actions to help kind of manage, you know, the front book. And as flows come in, we've been taking actions to kind of get to clients earlier and ensure we kind of create the best outcomes possible.
But it's that is often a good leading indicator for us. It is what it is it drives the P. C. L. A as we go up but we certainly are looking at trends around products like that as we go forward and so you know as I said, we're seeing more stability, there and that helps kind of plate and guide us as we think about what may play out in 2026.
Very high discipline, we have around our credit processes and retail.
It's all kind of what kind of place to how we're thinking about the book now and how that May play out in 2026.
Thank you.
Thank you.
Mike.
Yeah.
Yeah.
Likewise, you know as we've been going through this cycle, we've been taking actions to help kind of manage the front book and as flows come in we've been taking actions to kind of get to clients earlier and I'm sure. We can create the best outcomes possible and again likewise in many of these products for straight it will start to see some of the benefits of those to offset kind of the.
Good morning.
A couple of quick questions I wanted to start with Erika on slide six.
My eyes the chart on the top left quadrant.
David McKay: And again, likewise, in many of these products, we'll start to see some of the benefits of those to offset kind of the ongoing headwinds of weakness in the Canadian economy. To put all that together, again, the quality of that client base, I think the good underwriting standards, I think the very high discipline we have around our credit processes in retail, that's all kind of what kind of points to, you know, how we're thinking about the book now and how that might play out in 2026.
So it's that recent outperformance in discretionary and travel spend on the card.
The headwinds of a weakness in the Canadian economy. So.
Just trying to get my head wrapped around that just in light of tariff risk.
So you put all that together given the quality of that client base I think it's a good underwriting standards are very high discipline, we have around our credit processes and retail.
Employment market not looking as robust as it has been it had been prior to the tariffs.
Dynamic coming into play what's driving that is this just largely unit gains in gaining market share or I'm not sure what I'm missing here is it inflation, but what do you think is driving that.
All kind of what kind of place to you know how we're thinking about the book now and how that May play out in the 'twenty 'twenty six.
David Brown: Thank you.
Thank you.
Asim Imran: Thank you. Following question is from Mike Rizwanowicz.
Thank you.
Mike.
Yes. Thanks for the question, Mike a couple of things I would say it is cards portfolio for us has been.
Yeah.
Yeah.
John Aiken: Good evening. I have a couple of quick questions. I wanted to start with Erica. On slide six, what caught my eye is the chart on the top left quadrant. so it's that recent outperformance in discretionary and travel spend on the cards. just trying to get my head wrapped around it, just in light of tariff risk and, you know, the unemployment market not looking as as robust as it has been, as it had been prior to the tariffs, dynamic coming into play. What's driving that? Is this just largely unit gains as in gaining market share or I'm not sure what I'm missing here. Is it inflation? But what do you think is driving that?
Good morning.
A couple of quick questions I wanted to start with Erika on slide six Oh My eyes. The chart on the top left quadrant.
Well from a growth perspective in terms of balanced formations.
The spend that we're seeing on cards with.
So it's that recent outperformance in discretionary and travel spend on the cards I'm just trying to get my head wrapped around that just in light of tariff risk in the unemployment market not looking as robust as it has been as it had been prior to the tariffs.
Clients as grant just alluded to.
That we feel.
Very comfortable with and so when we dissect what youre seeing on the top left of that chart.
That is the core.
<unk> client.
Dynamic coming into play.
Who has been performing well from a loss perspective.
Whats driving that is this just largely unit gains in gaining market share or I'm not sure what I'm missing here is it inflation, but what would what do you think is driving that.
<unk> increased confidence in.
As a consumer and their willingness to spend.
And so we've seen those green shoots across the portfolio from the Canadian consumer over this quarter.
Gabriel Dechaine: Yeah, thanks for the question, Mike. A couple of things I would say. You know, the cards portfolio for us has been performing well from a growth perspective in terms of balance formations and the spend that we're seeing on cards with clients, as Graeme just alluded to, that we feel very comfortable with. And so when we dissect what you're seeing on the top left of that chart, that is the, you know, core RBC client who has been performing well from a loss perspective, demonstrating increased confidence as a consumer in their willingness to spend. And so we've seen those green shoots across the portfolio from the Canadian consumer over this quarter. And so, you know, that's what we see on that trend. The other side I would say is that we have taken a lot of action.
Yeah. Thanks for the question, Mike a couple of things I would say is the cards portfolio for us has been.
And so.
That's what we see on that trend. The other side I would say is that we have taken a lot of action we talked.
Well from a growth perspective in terms of balance formations and the spend that we're seeing on card.
Okay.
Some of the work that we've done from an AI and modeling perspective, and and Dave alluded to it in his remarks related to the <unk> model and what we're seeing we are seeing our ability to.
Clients as Graham just alluded to.
That we feel are very.
Very comfortable with and so when we dissect what you're seeing on the top left of that chart and that is the you know core RBC clients are who has been performing well from a loss perspective are demonstrating increased confidence and as a consumer and their willingness.
Deeper penetrated into our client base for those.
Clients.
Demonstrate results for us in our cards portfolio and Youre seeing that in the aggregate balance growth, we're seeing and we're seeing that in the end.
Purchase volume that we're seeing on our cards and so that.
I think it's reflective of the strength of the portfolio as well as the as well as the consumer becoming more confident.
To spend.
So we've seen those green shoots across the portfolio from the Canadian consumer over this quarter.
So you know that's what we see on that trend. The other side I would say is that we have taken a lot of action we talked.
Okay. Thank you I think for most of the next question.
Gabriel Dechaine: We talked on Investor Day about some of the work that we've done from an AI and modeling perspective. And Dave alluded to it in his remarks related to the Atom model and what we're seeing. We are seeing our ability to deeper penetrate into our client base for those clients demonstrate results for us in our cards portfolio. And you're seeing that in the aggregate balance growth we're seeing, and we're seeing that in the purchase volumes that we're seeing on our cards. And so that, I think, is just reflective of the strength of the portfolio as well as the consumer becoming more confident.
Today about some of the work that we've done from an AI and modeling perspective, and and Dave alluded to it in his remarks related to the model and what we're seeing we are seeing our ability to deeper penetrate into our client base for those clients.
Thank you.
Sorry, our next question is from Paul Holden from CIBC. Please go ahead.
Thank you thanks for taking my question.
Sean So trying to really figure out the outlook for commercial lending and let me frame it if I can.
Dave made some comments around commercial customers a little bit more cautious I think Graham has suggested something similar in terms of fee.
Demonstrate results for us in our cards portfolio and you're seeing that in the aggregate balanced growth, we're seeing and we're seeing that in the in the purchase volume that we're seeing on our cards and so that I think is just reflective of the strength of the portfolio as well as the as long as the consumer becoming more confident.
Credit outlook for commercial but then at the same time.
The.
Corporate clients a more positive outlook and then also when I look at your actual loan growth, it's pretty good including a small business. So just trying to figure out what is kind of the right care.
Conference Operator: Okay. Thank you. I think we'll move to the next question.
Okay. Thank you I think for most of next question.
Care or robust growth sort of lukewarm growth potential.
Asim Imran: Thank you. Sorry. Our next question is from Paul Holden from CIBC. Please go ahead.
Thank you.
Sorry, our next question is from Paul Holden from CIBC. Please go ahead.
For something like it got better.
Particularly if we get.
David McKay: Thank you. Thanks for taking my question. It's for Sean. So trying to really figure out the outlook for commercial lending. And let me frame it quickly if I can. Like, I think Dave made some comments around commercial customers a little bit more cautious. I think Graeme has suggested something similar in terms of the sort of credit outlook for commercial. But then at the same time, for I think the corporate clients, a more positive outlook. And then also when I look at your actual loan growth, it's pretty good, including in small business. So just trying to figure out what is kind of the right outlook here, robust growth, sort of lukewarm growth, or is the potential for something to get better, particularly if we get a final trade negotiation with the US done?
Final trade negotiation with the with the U S. Dod.
Thank you. Thanks for taking my question, it's for Sean So I'm trying to really figure out the outlook for commercial lending and let me frame. It if I can.
Yes, thanks for the question Paul.
Let me just maybe add some context of Q3 and I will give some guidance on Q4, so to your point our sequential growth in Q2 Q3 was one 2%. So in line with the guidance from last quarter of a one to one 5%.
I think Dave made some comments around commercial customer is a little bit more cautious I think Graham has suggested something similar in terms of fee.
I would look for commercial but then at the same time.
Just for context, so thats.
Quite a bit lower than throw it on a rolling four quarter basis, we were averaging about $1 seven 2% growth.
So I think the.
Corporate clients a more positive outlook and then also when I look at your actual loan growth, it's pretty good including a small business. So just trying to figure out what is kind of the right care or robust growth sort of lukewarm growth or is the potential.
At this point, we're maintaining our guidance into into Q4 of about 1% to one 5% with potential to be at the upper end of that range.
As you mentioned view, it's sort of a Q1 Q2 levels of uncertainty.
For something they get better.
You forget to pay a final trade negotiation with the with the U S. Dod.
And I'd say historically low business sentiment.
Definitely drove a significant reduction in sort of the conversion onto the balance sheet from our pipelines.
Graeme Hepworth: Yes, thanks for the question, Paul. Let me just maybe add some context of Q3, and I'll give some guidance on Q4. So to your point, our sequential growth in Q3 was 1.2%. So in line with the guidance from last quarter of 1 to 1.5%. Just for context, so that's quite a bit lower than sort of on a rolling four-quarter basis, we were averaging about 1.7% to 2% growth. At this point, we're maintaining our guidance into Q4 of about 1 to 1.5% with potential to be at the upper end of that range. As you mentioned, so the Q1, Q2 levels of uncertainty and I'd say historically low business sentiment definitely drove a significant reduction in sort of the conversion onto the balance sheet from our pipelines. But I'd say relative to four to six months ago, uncertainty has definitely improved. The business sentiment has definitely improved.
Yes, thanks for the question Paul.
Just maybe some context of Q3 and I will give some guidance on the Q4, so to your point our sequential growth in Q2 Q3 was one 2%. So in line with the guidance from last quarter of a one to one 5%.
But I would say relative to four to six months ago uncertainty is definitely improved.
<unk>.
Sentiment has definitely improved.
But those pipeline conversions haven't really activated yet to let's say previous levels. So that's partially why we are maintaining our guidance into this into the back half of the year.
Just for context, so that's.
Quite a bit lower than throw it on a rolling four quarter basis, we were averaging about one 7% to 2% growth at this point, we're maintaining our guidance into into Q4 of about one to one 5% with potential to be at the upper end of that range.
I'd say, we're also encouraged by the the narrative around fiscal stimuli stimulus.
As you mentioned view, it's sort of a Q1 Q2 levels of uncertainty and I'd say historically low business sentiment.
As you know action Hasnt really sort of driven the activity yet in the marketplace.
The other <unk>.
Factors, maybe I'd guide you to with respect to our portfolio.
Definitely drove a significant reduction in sort of the conversion onto the balance sheet from our pipelines.
And why we continue to support our confidence in our Investor day targets obviously.
But I'd say relative to four to six months ago, uncertainties definitely improved.
We benefit from having the largest most diversified portfolio as you mentioned from small business to large corporates.
Business sentiment that business sentiment is definitely improved.
Across every segment segment sector and geography.
Graeme Hepworth: But those pipeline conversions haven't really activated yet to, I'd say, previous levels. So that's partially why we're maintaining our guidance into the back half of the year. I'd say we're also encouraged by the narrative around fiscal stimulus. But as you know, action hasn't really sort of driven the activity yet in the marketplace. But the other factors maybe I'd guide you to with respect to our portfolio and why we continue to support our confidence in our Investor Day targets. Obviously, we benefit from having the largest, most diversified portfolio, as you mentioned, from small business to large corporates across every segment, segment, sector, and geography. And we are looking to extend our leadership position in all of those sectors. We will see the increased contribution from the HSBC portfolio as well.
But those are pipeline conversions haven't really activated yet to let's say previous levels. So that's partially why we are maintaining our guidance into this into the back half of the year.
And we are looking to extend our leadership position in all of those sectors.
We will see the increased contribution from the HSBC portfolio as well those pipelines remain quite robust.
I'd say, we're also encouraged by the you know the.
Similar to the broader RBC portfolio, and I'd say similar to the broader commercial industry.
The narrative around fiscal stimulus stimulus, but as you know action hasn't really sort of driven the activity yet in the marketplace, but the other factor.
Uncertainties, what's driven the pause in some of the investment activity.
And so that's those are highway would think about it we slower than recent growth.
Factors, maybe I'd guide you to with respect to our portfolio and why we continue to support our confidence in our Investor day targets obviously.
Outlook remains consistent with Q3 with some sort of green shoots that could drive that to two hydro levels in the midterm.
We benefit from having the largest most diversified portfolio as you mentioned from small business to large corporates.
Got it that's helpful. Thanks, Sean and I'll leave it there in the interest of time. Thanks, One final question.
Across every segment segment sector and geography.
Question.
And we are looking to extend our leadership position in all of those sectors.
Thank you.
Last question is from Matthew <unk> from Canaccord Genuity. Please go ahead. Thanks.
We will see the increased contribution from the HSBC portfolio as well those pipelines remain quite robust, but you know similar to the broader RBC portfolio and I'd say similar to the broader commercial industry kind of uncertainties, what's driven the pause in some of the investment activity.
Hey, Thanks, so much for squeezing me in maybe Medicaid business, both personal and commercial you're delivering really substantial improvements in efficiency.
Graeme Hepworth: Those pipelines remain quite robust, but you know, similar to the broader RBC portfolio, and I'd say similar to the broader commercial industry, kind of that uncertainty is what's driven the pause in some of the investment activity. And so those are how I would think about it. You know, we slower than recent growth. Outlook remains consistent with Q3 with some sort of green shoots that could drive that to higher growth levels in the midterm.
I know you Paulo, Hsbc's synergies, but are there any other items you can talk about that contributing that cost suppression.
And so that's the those are highway would think about it we slower than recent growth.
Yes, so maybe on the personal bank as it relates to.
As it relates to the efficiency ratio I think.
<unk> outlook remains consistent with Q3 with some sort of green shoots that could drive that to two hydro levels in the midterm.
The team has done a very good job of just general expense management control you saw that reflected in the results that we have there. So in addition to the HSBC synergies we're seeing.
David McKay: All right. That's helpful. Thanks, Sean. And I'll leave it there in the interest of time. Thanks.
That's helpful. Thanks, Sean and I'll leave it there in the interest of time.
Good cost.
Conference Operator: We have one final question.
One final question.
Cost discipline as we think about balancing both the growth that's necessary in the platform and driving that growth in the spend that we need to drive that growth, but as well as making sure that we are.
Asim Imran: Thank you. Our last question is from Matthew Lee from Canaccord Genuity. Please go ahead.
Thank you.
Last question is from Matthew Li from Canaccord Genuity. Please go ahead.
Matthew Lee: Hey, thanks so much for squeezing me in. Maybe in the Canadian business, both personal and commercial, you delivered really substantial improvements in efficiency. I know you follow HSBC synergies, but are there any other items you can talk about that contributed to that cost depression?
Thanks, So much for squeezing me in maybe indicating business, both personal and commercial you're delivering really substantial improvements in efficiency.
Disciplined in our cost.
And obviously the revenue line perspective, we've seen strong revenue growth in the franchise and as Dave alluded to that's really on the back of.
I know you Paulo H S. P C synergies, but are there any other items you can talk about that can ship in that cost of crushing.
How we're supporting our clients, both a strong acquisition and client growth from that side as well as the consolidation of their business at RPC, which is playing off on both sides of the balance sheet, both in our deposit franchise and our lending franchise.
Gabriel Dechaine: Yeah, so maybe on the personal bank as it relates to the efficiency ratio, I think the team has done a very good job of just general expense management control. You saw that reflected in the results that we have there. So in addition to the HSBC synergies, we're seeing, you know, good cost discipline as we think about balancing both the growth that's necessary in the platform and driving that growth and the spend that we need to drive that growth, but as well as making sure that we are disciplined in our costs. And obviously, at the revenue line perspective, we've seen strong revenue growth in the franchise.
Yeah, So maybe on the personal bank as it relates to.
As it relates to the efficiency ratio I think the team has done a very good job of just general expense management control you saw that reflected in the results that we have there. So in addition to the HSBC synergies, we're seeing them you know good cost.
And quickly on the commercial side.
Consistent with the enterprise into Catherine's comments, we did achieve 100% of the HSBC cost synergies. This quarter. We also have some tailwind from the PPA, which will start to roll off into next year.
Cost discipline as we think about balancing both the growth that's necessary in the platform and driving that growth in the spend that we need to drive that growth, but as well as making sure that we are.
Disciplined in our cost.
And obviously on the revenue line perspective, we've seen a strong revenue growth in the franchise and as Dave alluded to that's really on the back of of.
But given the size of the platform we have.
<unk> points very strong cost discipline within the business, while continuing to invest in product platform and coverage to drive growth going forward. Both on the volume side and the revenue side. So we're pretty confident in sort of maintaining this level of efficiency ratio based on those factors.
Gabriel Dechaine: And as Dave alluded to, that's really on the back of how we're supporting our clients, both strong acquisition and client growth from that side, as well as the consolidation of their business at RBC, which is playing off on both sides of the balance sheet, both in our deposit franchise and our lending franchise.
How we're supporting our clients, both a strong acquisition and client growth from that side as well as the consolidation of their business that RBC, which is it is playing off on both sides of the balance sheet, both in our deposit franchise and our lending franchise.
Alright, thanks, guys.
This is Dave So let me let me try to bring this home and I appreciate all your comments and trying to understand how to project. These.
Graeme Hepworth: And quickly on the commercial side, too, consistent with the enterprise and to Katherine's comments, we did achieve 100% of the HSBC cost synergies this quarter. We also have some tailwind from the PPA, which will start to roll off into next year. But given the size of the platform, you know, we have, similar to Erica's points, very strong cost discipline within the business while continuing to invest in products, platform, and coverage to drive growth going forward, both on the volume side and the revenue side. So we're pretty confident in sort of maintaining this level of efficiency ratio based on those factors.
And quickly on the commercial side.
Two consistent with the enterprise into Catherine's comments, we did achieve a 100% of the HSBC cost synergies. This quarter. We also had some tailwind from the PPA, which will start to roll off into next year.
Pending results going forward.
Incentive to that we are very proud of what we achieved I think you've gotten a lot of good feedback on where we think the results are very sustainable across wealth capital markets commercial banking consumer banking, where they are.
But given the size of the platform, we have a symbol to Erik because points very strong cost discipline within the business, while continuing to invest in product platform and <unk>.
They might be a little bit spiky life insurance and some of the changes that might come in Q4, and therefore, let.
Let me try to help you kind of kind of forecast. This I would say given the significant difference between what we achieved a $5 5 billion versus where consensus was I would expect as we look at these all of these factors going forward and all again all conditional on.
To drive growth going forward, both on the volume side and the revenue side. So.
Confident in sort of maintaining this level of efficiency ratio based on those factors.
Matthew Lee: All right. That's great. Thanks, guys.
Alright, Thanks, guys. Yeah. So this is Dave So let me let me try to bring this home and I. Appreciate all your comments and trying to understand how to project. These outstanding results going forward and I'm sensitive to that we are very proud of what we achieved I think you've gotten a lot of good feedback on where we think results.
Conference Operator: Yeah, so this is Dave. So let me try to bring this home. And I appreciate all your comments and trying to understand how to project these outstanding results going forward. And I'm sensitive to that. We are very proud of what we achieved. I think you've gotten a lot of good feedback on where we think results are very sustainable across wealth, capital markets, commercial banking, consumer banking, where you know they might be a little bit spiky, like insurance and some of the changes that might come in Q4. And therefore, let me try to help you kind of kind of forecast this.
Clients continue to transact and no material falloff in and our client sentiment and ability to continue to business I would expect that we can produce results in the next quarter that are closer to what we achieved than where consensus was so if you look at the difference between the two I think we can were slightly better than.
Are very sustainable across wealth capital markets commercial banking consumer banking, where.
At the halfway point and.
They might be a little bit spiky like insurance and some of the changes that might come in Q4 and therefore.
We use that as kind of a rough guide on on where we think we can come out and it all dependent on where clients and retire go in and how the world evolves, but I think we're closer to what being able to continue to.
Let me try to help you kind of kind of forecast. This I would say you know given the significant difference between what we achieved at $5 5 billion versus where consensus was I would expect as we look at these all of these factors going forward and all again all conditional on.
Conference Operator: I would say, you know, given the significant difference between what we achieved at 5.5 billion versus where consensus was, I would expect as we look at all these factors going forward and all, again, all conditional on, you know, clients continuing to transact and no material falloff in our clients' sentiment and ability to continue to do business, I would expect we can produce results in the next quarter that are closer to what we achieved than where consensus was. So if you look at the difference between the two, I think we're slightly better than the halfway point. And, you know, use that as kind of a rough guide on where we think we can come out. And it all depends on where clients and where tariffs go and how the world evolves.
What we did then where you thought we were.
I hope that helps I think it shows the enormous strength of the franchise and ability to earn five 5 billion at 17, 7% Roe.
Clients continue to transact and no material falloff in and our clients are sentiment and ability to continue to business I would expect we can produce results in the next quarter that are closer to what we achieved say than where consensus was so if you look at the difference between the two I think we can were slightly better than.
The strength of all our businesses and investments we've made in.
We're going to continue to build on this going forward is we've got a couple of businesses that can do better as you pointed out and therefore are investments that we continue to make what we will see further growth.
We'll keep moving forward. So thank you for your questions. Thank you for your time and look forward to seeing you at our year end with a further update thanks.
At the halfway point and.
I use that as kind of a rough guide on on where we think we can come out and it all dependent on where clients and retire or go in and and how the world evolves, but I think we're closer to what being able to continue to do what.
Thank you.
That's all the time, we have for question I would now like to turn the meeting.
Conference Operator: But I think we're closer to what being able to continue to achieve what we did than where you thought we were. I hope that helps. I think it shows the enormous strength of the franchise and ability to earn 5.5 billion at a 17.7% ROE and the strength of all our businesses and investments we've made. And we're going to continue to build on this going forward as we've got a couple of businesses that can do better, as you pointed out. And therefore, our investments that we continue to make will see further growth and will keep moving forward. So thank you for your questions. Thank you for your time. Look forward to seeing you at year-end with a further update. Thanks.
Back over to Mr. Mackay.
What we did then where you thought we were.
No.
That'd be a tomorrow and thank you perfect. Thank you. The conference has now ended.
I hope that helps I think it shows the enormous strength of the franchise and our ability to earn five 5 billion at a 17, 7% of our OE and the strength of all our businesses and investments we've made in <unk>.
Disconnect your lines at this time and we thank you for your participation.
We're going to continue to build on this going forward is we've got a couple of businesses that can do better as you pointed out and therefore are investments that we continue to make what we will see further growth and.
We'll keep moving forward. So thank you for your questions. Thank you for your time look forward to seeing you at our year end with a further uptick.
Okay.
Asim Imran: Thank you. That's all the time we had for questions. I would now like to turn the meeting back over to Mr. McKay.
Thank you.
That's all the time, we have for question I would now like to turn the meeting.
Back over to Mr. Mackay.
Conference Operator: Nope. That'd be it from our end. Thank you.
No.
That'd be a tomorrow and thank you perfect. Thank you. The conference has now ended.
Asim Imran: Perfect. Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
Disconnect your lines at this time and we thank you for your participation.