How Stronger Earnings and Capital Returns At Royal Bank of Canada (TSX:RY) Has Changed Its Investment Story

• Royal Bank of Canada recently reported full-year 2025 results showing higher net interest income of C$33,000 million and net income of C$20,362 million, alongside capital actions including preferred share and AT1 note redemptions and new fixed-income offerings.
• The combination of stronger profitability, an improved CET1 ratio of 13.5%, and ongoing capital returns through buybacks and dividends underscores management’s focus on balance-sheet strength and shareholder distributions.
• With robust full-year earnings and a higher dividend now disclosed, we’ll assess how this affects Royal Bank of Canada’s investment narrative.

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Royal Bank of Canada Investment Narrative Recap

To own Royal Bank of Canada, you need to believe its diversified banking and wealth businesses can keep converting a strong capital base into resilient earnings and reliable dividends, even as credit costs stay elevated. The latest full year results, with higher net interest income, net income of C$20,362 million and a CET1 ratio of 13.5%, support that view, while credit quality and provisions remain the most immediate risk to watch. These announcements do not materially change that risk balance in the near term.

Among the recent moves, the planned redemption of C$1.25 billion in NVCC preferred shares and related AT1 notes in January 2026 stands out, as it directly relates to RBC’s capital mix and future flexibility for dividends and buybacks. Paired with the higher quarterly dividend of C$1.64 per share and active share repurchases, it shows how current capital strength can intersect with the key catalyst of ongoing shareholder returns.

Yet even with strong capital and higher dividends, investors should be aware that rising provisions for credit losses could still...

Read the full narrative on Royal Bank of Canada (it's free!)

Royal Bank of Canada's narrative projects CA$68.6 billion revenue and CA$20.5 billion earnings by 2028. This requires 4.4% yearly revenue growth and a CA$1.8 billion earnings increase from CA$18.7 billion today.

Uncover how Royal Bank of Canada's forecasts yield a CA$228.60 fair value, in line with its current price.

Exploring Other Perspectives

Eight members of the Simply Wall St Community currently see fair value for RBC between C$185 and C$307.56, underlining how far apart individual views can be. As you weigh those opinions, remember that elevated provisions for credit losses and credit cycle pressures could influence how the bank’s strong recent earnings translate into future performance, so it is worth comparing several alternative viewpoints before deciding where you stand.

Explore 8 other fair value estimates on Royal Bank of Canada - why the stock might be worth as much as 34% more than the current price!

Build Your Own Royal Bank of Canada Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Royal Bank of Canada research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Royal Bank of Canada research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Royal Bank of Canada's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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