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 12 months earlier. Gross impaired loans within the mortgage ebook adopted an identical development, hitting 29 bps, up from 19 bps a 12 months in the past.
Talking on the financial institution’s earnings name, Chief Threat Officer Graeme Hepworth dismissed strategies that the deterioration was linked to RBC‘s latest acquisition of HSBC Canada’s mortgage portfolio. “The consumer base we absorbed from HSBC may be very prime quality and really skews increased 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 increased borrowing prices—significantly the Better Toronto Space (GTA).
“We’re seeing impairments as extra shoppers are going through challenges on this increased price surroundings,” Hepworth instructed analysts, including that it’s simply sure markets which are “extra challenged” by the upper cost surroundings. “This might be the GTAs of the world which are actually driving our impairments today.”
In accordance with RBC’s investor presentation, the 90-day delinquency price within the Better Toronto Space now sits at 0.39%, considerably increased than the 0.23% seen within the Better Vancouver Space and 0.30% nationally.
Nonetheless, Hepworth pressured 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 nearly 60% is underneath 65%.
Maintaining an in depth eye on condos and business
Past residential lending, RBC can also be awaiting indicators of weak spot in different areas of its actual property portfolio, together with the high-rise condominium phase and business actual property.
“Whereas we’re seeing extra balanced circumstances within the Canadian housing market with bettering affordability and rising stock ranges, we’re monitoring the chance of additional slowdown within the condominium phase and sure areas more durable hit by financial weak spot,” Hepworth stated.
He added that the financial institution has constructed increased loan-loss allowances in areas the place it sees elevated danger. As for the condominium developer phase—part of the market that’s been underneath stress from slowing presales—RBC’s publicity stays comparatively small.
“For context, our publicity to high-rise condominium builders represents solely about 1% of complete loans and acceptances,” Hepworth stated. “This portfolio has a really robust credit score profile, reflecting our deal with top-tier builders and conservative underwriting, together with minimal presales backed by deposits and adequate liquidity assist.”
On the business aspect, gross impaired loans climbed by $1.1 billion in Q2 to $8.9 billion, largely attributable to weak spot in U.S. workplace markets and the insolvency of a significant Canadian retailer. That latter case additionally impacted associated business actual property exposures.
Hepworth famous that a few of the improve 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%)
| Q2 2024 | Q1 2025 | Q2 2025 | |
|---|---|---|---|
| Residential mortgage portfolio | $401B | $410B | $412B |
| HELOC portfolio | $37B | $37B | $38B |
| Share of mortgage portfolio uninsured | 78% | 79% | 80% |
| Avg. loan-to-value (LTV) of uninsured ebook | 71% | 70% | 68% |
| Portfolio combine: proportion with variable charges | 29% | 28% | 33% |
| Common remaining amortization | 24 yrs | 19 yrs | 18 yrs |
| 90+ days late (mortgage portfolio) | 0.20% | 0.29% | 0.30% |
| Gross impaired loans (mortgage portfolio) | 0.18% | 0.27% | 0.29% |
| Canadian banking internet curiosity margin (NIM) | 2.71% | 2.87% | 2.92% |
| Provisions for credit score losses | $920M | $1.05B | $1.4B |
| CET1 Ratio | 12.8% | 13.2% | 13.2% |
Convention Name
President and CEO Dave McKay offered updates on the next subjects:
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 elements 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 gadgets 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 steady method.”
On the mortgage portfolio progress:
- “Residential mortgage progress was largely supported by stronger consumer renewals, increased origination volumes pushed by robust mortgage swap in exercise, partly offset by increased paydowns. We anticipate 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 12 months.”
Updates on the HSBC Canada integration:
- “We’re persevering with to deliver 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 companies settlement. As we exit Q2, the execution of price synergy initiatives is basically full and we’re more and more assured of attaining our focused annualized price synergies by subsequent quarter.”
Supply: RBC Q2 convention name
Observe: 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: Might 30, 2025
