In its second-quarter earnings report, the financial institution posted an increase in residential mortgage delinquencies, with 90-day past-due charges climbing to 30 foundation factors, up from 28 bps in Q1 and simply 19 bps a yr earlier. Gross impaired loans within the mortgage ebook adopted the same pattern, hitting 29 bps, up from 19 bps a yr in the past.

Talking on the financial institution’s earnings name, Chief Danger Officer Graeme Hepworth dismissed solutions that the deterioration was linked to RBC‘s latest acquisition of HSBC Canada’s mortgage portfolio. “The consumer base we absorbed from HSBC could be very top quality and really skews larger than the remainder of our shopper ebook,” he stated.

As an alternative, he pointed to rising pressure amongst current shoppers in areas extra uncovered to the cost shock from larger borrowing prices—notably the Larger Toronto Space (GTA).

“We’re seeing impairments as extra shoppers are going through challenges on this larger fee atmosphere,” Hepworth instructed analysts, including that it’s simply sure markets which might be “extra challenged” by the upper cost atmosphere. “This could be the GTAs of the world which might be actually driving our impairments as of late.”

In response to RBC’s investor presentation, the 90-day delinquency fee within the Larger Toronto Space now sits at 0.39%, considerably larger than the 0.23% seen within the Larger Vancouver Space and 0.30% nationally.

Nonetheless, Hepworth confused that total borrower high quality stays robust, with comparatively few loans ending in write-offs. Almost two-thirds of RBC’s mortgage shoppers have credit score scores above 785, and most have a wholesome fairness cushion. Simply 7% of the mortgage ebook has a mixed loan-to-value above 80%, whereas virtually 60% is below 65%.

Conserving an in depth eye on condos and business

Past residential lending, RBC can also be awaiting indicators of weak point in different areas of its actual property portfolio, together with the high-rise rental phase and business actual property.

“Whereas we’re seeing extra balanced situations within the Canadian housing market with bettering affordability and rising stock ranges, we’re monitoring the chance of additional slowdown within the rental phase and sure areas tougher hit by financial weak point,” Hepworth stated.

He added that the financial institution has constructed larger loan-loss allowances in areas the place it sees elevated threat. As for the rental developer phase—part of the market that’s been below stress from slowing presales—RBC’s publicity stays comparatively small.

“For context, our publicity to high-rise rental builders represents solely about 1% of complete loans and acceptances,” Hepworth stated. “This portfolio has a really robust credit score profile, reflecting our concentrate on top-tier builders and conservative underwriting, together with minimal presales backed by deposits and adequate liquidity help.”

On the business aspect, gross impaired loans climbed by $1.1 billion in Q2 to $8.9 billion, largely as a result of weak point in U.S. workplace markets and the insolvency of a serious Canadian retailer. That latter case additionally impacted associated business actual property exposures.

Hepworth famous that a few of the enhance in impairments was additionally tied to administrative points which have since been resolved.

RBC earnings highlights

Q2 internet earnings (adjusted): $4.5 billion (+8% Y/Y)
Earnings per share: $3.12 (+7%)

Convention Name

President and CEO Dave McKay offered updates on the next matters:

On the financial outlook:

• “Though we aren’t projecting a recession in both Canada or the U.S., the prevailing uncertainty is dampening confidence, sentiment and consumer exercise in sure components of the North American economic system, together with housing. North American customers have remained resilient. They’re persevering with to spend, albeit much less on discretionary objects and financial savings are rising.”

On deposit progress:

• “Common deposits elevated 13% year-over-year or 8% excluding the acquisition of HSBC Canada, led by outsized progress in our decrease price core banking and financial savings merchandise…We proceed to develop our core deposit franchises throughout our segments, together with in Canadian Banking, whereas the loan-to-deposit ratio improved to 97%, serving to fund mortgage progress in an environment friendly and secure method.”

On the mortgage portfolio progress:

• “Residential mortgage progress was largely supported by stronger consumer renewals, larger origination volumes pushed by robust mortgage change in exercise, partly offset by larger paydowns. We count on housing resell exercise and mortgage progress to stay contained within the close to time period because the uncertainty round tariffs outweighs decrease debt servicing prices from decrease rates of interest. Amidst ongoing intense competitors, we’ll preserve the disciplined mortgage progress technique we articulated over the previous yr.”

Updates on the HSBC Canada integration:

• “We’re persevering with to carry new capabilities to market as we’ve now accomplished the migration of the most important and most complicated business shoppers acquired by way of the acquisition of HSBC Canada pursuant to the transition providers settlement. As we exit Q2, the execution of price synergy initiatives is essentially full and we’re more and more assured of attaining our focused annualized price synergies by subsequent quarter.”

Supply: RBC Q2 conference call

Be aware: Transcripts are offered as-is from the businesses and/or third-party sources, and their accuracy can’t be 100% assured.

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Final modified: Could 30, 2025