Last Update 05 Nov 25
Analysts have recently increased their average price target for Royal Bank of Canada to C$218, reflecting expectations for continued earnings growth and stronger profitability metrics.
Analyst Commentary
Recent research from the street reflects a wide range of analyst opinion on Royal Bank of Canada, with several making notable adjustments to price targets and ratings. The following takeaways summarize the current sentiment from both bullish and bearish perspectives.
Bullish Takeaways- Bullish analysts continue to raise price targets, highlighting expectations for strong earnings growth and ongoing improvements in profitability metrics.
- Several recent upgrades point to robust third-quarter results and a positive outlook on growth and profitability, which is driving increased confidence in the stock’s future performance.
- Some price target revisions have cited above-consensus earnings, signaling that the bank is outperforming expectations at a fundamental level.
- Despite a range of views, there is consensus among bullish analysts that the Canadian banking sector, including Royal Bank of Canada, is well positioned to beat conservative estimates going forward.
- Bearish analysts have cited current valuation metrics, suggesting the stock’s implied return relative to recent price targets may be limited after recent earnings-driven rallies.
- Some downgrades focus on the outlook for the Canadian banking sector as a whole, warning that potential headwinds such as tariffs and upcoming mortgage renewals could impact growth momentum.
- While profitability is expected to remain strong, there are concerns that upside could be constrained by these macroeconomic factors and cautious outlooks beyond the current fiscal year.
What's in the News
- Royal Bank of Canada (RBC) and Bank of Montreal (BMO) have placed their Canadian payments joint venture, Moneris, up for sale. The business is potentially valued as high as $2 billion (Reuters).
- EQT AB is considering a U.S. initial public offering for waste management business Reworld. RBC, Goldman Sachs, and JPMorgan are advising on a possible listing that could raise at least $1 billion (Bloomberg).
- RBC announced its intention, pending regulatory approval, to redeem all outstanding Non-Viability Contingent Capital (NVCC) Non-Cumulative First Preferred Shares, Series BH and BI, on December 8, 2025, totaling $300 million in capital.
- RBC is emerging as the leading candidate to acquire UK wealth manager Evelyn Partners, valued at up to £2.5 billion, after integrating Brewin Dolphin in a previous acquisition.
- RBC has launched a no monthly fee bank account for Indigenous Peoples in Canada as part of its inaugural Reconciliation Action Plan, in partnership with Indigenous consultants and community stakeholders.
Valuation Changes
- Discount Rate: decreased from 7.28% to 7.12%, reflecting slightly lower perceived risk.
- Revenue Growth: increased marginally from 4.43% to 4.47%, indicating a modest improvement in forward revenue expectations.
- Net Profit Margin: edged up from 29.88% to 29.97%, showing a slight rise in projected profitability.
- Future P/E: declined from 17.47x to 17.32x, which suggests a minor reduction in the stock’s forward valuation multiple.
- Fair Value Estimate: remained unchanged at CA$211.07, which indicates stability in the intrinsic value assessment.
Key Takeaways
- Strategic advancements in AI, digitalization, and cost management are boosting customer engagement, efficiency, and long-term profitability across RBC's core businesses.
- Expansion in wealth management and successful U.S. growth, enhanced by acquisitions, is diversifying revenue streams and fueling sustainable, higher-margin income.
- Macroeconomic and sector-specific pressures, elevated credit losses, and rising operational costs threaten to dampen revenue growth, compress margins, and expose slow underlying core growth.
Catalysts
About Royal Bank of Canada- Operates as a diversified financial service company worldwide.
- Strategic investments in AI and digitalization-such as the ATOM Foundation and Lumina platform, expanded use of data analytics, and digital banking product launches-are driving cost efficiencies, deeper customer engagement, and higher transaction volumes, which should support future revenue and net margin growth.
- Growing demand for wealth management and retirement solutions, evidenced by double-digit growth in assets under administration across Canadian and U.S. Wealth Management, positions RBC to benefit from global wealth accumulation and the aging population, fueling long-term, higher-margin, recurring fee income streams and AUM growth.
- Ongoing successful expansion into the U.S. (particularly through City National and recruiter-driven growth in wealth management advisors), coupled with realized and expected cost synergies following the HSBC Canada acquisition, should diversify and stabilize RBC's revenue base and improve operating leverage.
- The strong capital position (CET1 ratio of 13.2%) enables persistent share buybacks and dividend growth, which underpins long-term EPS and ROE growth for shareholders.
- Industry-leading efficiency gains-stemming from disciplined cost management, digital channel adoption, and large-scale integration synergies-are improving operating leverage and driving higher profitability metrics, positioning RBC to capitalize as industry consolidation and digital transformation accelerate.
Royal Bank of Canada Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Royal Bank of Canada's revenue will grow by 4.4% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 31.0% today to 29.9% in 3 years time.
- Analysts expect earnings to reach CA$20.5 billion (and earnings per share of CA$15.02) by about September 2028, up from CA$18.7 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.2x on those 2028 earnings, up from 15.1x today. This future PE is greater than the current PE for the CA Banks industry at 14.7x.
- Analysts expect the number of shares outstanding to decline by 0.67% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.22%, as per the Simply Wall St company report.
Royal Bank of Canada Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Persistent macroeconomic and geopolitical uncertainties, particularly ongoing trade tensions, potential renegotiation of CUSMA, and the risk of extended or new tariffs, could dampen consumer and business confidence, slow economic growth in key markets (especially Canada), and negatively impact RBC's revenue growth and loan demand.
- Elevated provisions for credit losses (PCL) and persistent credit cycle challenges, especially within commercial banking and retail portfolios, are expected to remain through 2026; continued softness in the Canadian economy and rising delinquencies in unsecured lending products could result in higher net loan losses, directly impacting net margins and overall earnings.
- Ongoing exposure to real estate and sector-specific risks, e.g., commercial real estate and Canadian mortgages, could leave RBC vulnerable to impairments and credit deterioration if housing market corrections or industry-specific downturns materialize, thereby reducing net interest income and increasing credit-related expenses.
- The winding down of exceptional, nonrecurring revenue drivers (such as HSBC Canada acquisition synergies and purchase price accounting accretion) by 2026 may reduce tailwinds supporting recent strong net earnings, potentially exposing the bank's underlying slower core growth and compressing profitability metrics like ROE and EPS.
- Rising operational costs, including investment in talent, technology (notably in AI and U.S. platform remediation), and higher variable compensation, paired with industry-wide pressures for digital transformation, may constrain operating leverage and offset revenue growth, limiting improvements in net margins and diluting future earnings growth if not managed carefully.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of CA$207.929 for Royal Bank of Canada based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$227.0, and the most bearish reporting a price target of just CA$169.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$68.6 billion, earnings will come to CA$20.5 billion, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 7.2%.
- Given the current share price of CA$200.97, the analyst price target of CA$207.93 is 3.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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