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 e book adopted an analogous development, hitting 29 bps, up from 19 bps a 12 months in the past.
Talking on the financial institution’s earnings name, Chief Danger Officer Graeme Hepworth dismissed options 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 prime quality and truly skews increased than the remainder of our client e book,” he stated.
As an alternative, he pointed to rising pressure amongst current purchasers in areas extra uncovered to the fee shock from increased borrowing prices—significantly the Higher Toronto Space (GTA).
“We’re seeing impairments as extra purchasers are going through challenges on this increased charge surroundings,” Hepworth advised analysts, including that it’s simply sure markets which might be “extra challenged” by the upper fee surroundings. “This may be the GTAs of the world which might be actually driving our impairments today.”
In keeping with RBC’s investor presentation, the 90-day delinquency charge within the Higher Toronto Space now sits at 0.39%, considerably increased than the 0.23% seen within the Higher Vancouver Space and 0.30% nationally.
Nonetheless, Hepworth harassed that general borrower high quality stays sturdy, with comparatively few loans ending in write-offs. Almost two-thirds of RBC’s mortgage purchasers have credit score scores above 785, and most have a wholesome fairness cushion. Simply 7% of the mortgage e book has a mixed loan-to-value above 80%, whereas nearly 60% is beneath 65%.
Conserving a detailed eye on condos and industrial
Past residential lending, RBC can also be anticipating indicators of weak point in different areas of its actual property portfolio, together with the high-rise rental section and industrial actual property.
“Whereas we’re seeing extra balanced situations within the Canadian housing market with enhancing affordability and rising stock ranges, we’re monitoring the danger of additional slowdown within the rental section and sure areas more durable hit by financial weak point,” Hepworth stated.
He added that the financial institution has constructed increased loan-loss allowances in areas the place it sees elevated threat. As for the rental developer section—part of the market that’s been beneath strain 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 sturdy credit score profile, reflecting our concentrate on top-tier builders and conservative underwriting, together with minimal presales backed by deposits and enough liquidity assist.”
On the industrial 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 industrial 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 web 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 e book | 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 web 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 supplied 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 components of the North American economic system, together with housing. North American shoppers 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, increased origination volumes pushed by sturdy 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 are going to keep the disciplined mortgage progress technique we articulated over the previous 12 months.”
Updates on the HSBC Canada integration:
- “We’re persevering with to convey new capabilities to market as we’ve now accomplished the migration of the most important and most complicated industrial purchasers acquired via 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
Notice: Transcripts are supplied 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
