Bank sees growth in second quarter, but continues trend of major lenders stashing aside money for potential loan losses
Royal Bank of Canada saw its earnings rise in the second quarter, driven by a boost from its record-breaking acquisition of HSBC’s Canadian business and steady growth in wealth management — even as the country’s biggest bank set aside sharply more cash to prepare for potential loan losses.
The HSBC deal, completed earlier this year, delivered an immediate lift to RBC’s bottom line. The bank added $258 million in net income from the newly acquired operations in the three months ending April 30, as it moved to deepen its already dominant position in the domestic market. At $13.5 billion, the acquisition stands as the largest in RBC’s history.
“We saw the strength of our diversified business model reflected across our largest segments in Q2, underpinned by our robust capital position, balance sheet strength and prudent, through-the-cycle approach to risk management,” chief executive Dave McKay said in a statement.
RBC posted adjusted earnings of\$3.12 per share, or $4.53 billion in total profit, compared with $2.92 per share, or $4.2 billion, a year earlier. The performance was buoyed in part by a solid 11% gain in its wealth management unit, where rising client assets translated into stronger fee income.
Banking giants continue to put aside more funds for potentially souring loans
RBC’s provision for credit losses — the amount it sets aside to cover potentially bad loans — climbed to $1.42 billion, up from $920 million a year earlier. The sharp increase mirrors a broader trend among Canadian banks, which are bracing for possible credit deterioration as households and businesses navigate high interest rates and growing economic pressure.
Loan loss reserves have emerged as one of the defining themes of this earnings season. Bank of Montreal, which reported results earlier this week, beat analyst forecasts on the back of strong net interest income, but also increased its credit-loss provisions to over $1 billion.
Scotiabank also saw earnings miss expectations, citing heavier-than-anticipated provisions as consumers and businesses face greater financial strain. In contrast, National Bank of Canada surprised on the upside, as its financial markets division flourished amid volatility and higher trading volumes — though it too has been building its credit cushions.
A mixed picture for the Big Six
Taken together, the second-quarter reports from Canada’s major lenders so far point to a sector on guard. Economic risks — including the lingering effects of US tariffs, shifting trade policy, and domestic rate sensitivity — are driving a more cautious approach even as some business lines, such as wealth and capital markets, remain robust.
The addition of HSBC Canada has helped RBC strengthen its scale and competitiveness in the face of that uncertainty. But its rising credit costs suggest that even the country’s most powerful financial institutions are preparing for a more fragile environment — one where asset quality and consumer resilience may come under increasing pressure.
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