Client Focused,
Future Ready
Royal Bank of Canada
Annual Report 2025
Who we are
Royal Bank of Canada is a global financial institution with a purpose-driven,
principles-led approach to delivering leading performance. Our success
comes from the 100,000+ employees who leverage their imaginations and
insights to bring our vision, values and strategy to life so we can help our
clients thrive and communities prosper. As Canada’s biggest bank and
one of the largest in the world, based on market capitalization, we
have a diversified business model with a focus on innovation and
providing exceptional experiences to our more than 19 million
clients in Canada, the U.S. and 27 other countries.
Table of contents
Why Invest
2
CEO Letter
4
Chair Letter
9
2025 Highlights
10
Management’s Discussion and Analysis
22
Enhanced Disclosure Task Force
136
Recommendations Index
Reports and Consolidated
137
Financial Statements
Ten-Year Statistical Review
242
Shareholder Information
243
19+ million
clients
100,000+
employees
29
countries
When we say ‘we’, ‘us’, ‘our’
or ‘the bank’ we mean
Royal Bank of Canada
or its subsidiaries
as applicable.
Helping clients thrive and
communities prosper
Our Purpose
Guided by
our Vision
to be among the world’s most trusted and successful financial
institutions, and driven by
our Purpose
, we aim to be:
In Canada: the
undisputed
leader
in financial services
Connect with us
We are guided by
our Values
:
In the United States: the preferred
partner to
institutional, corporate,
commercial and high-net-worth
clients
and their businesses
In select global financial centres:
a
leading financial services
partner
valued for our expertise
Accountability
Client First
Collaboration
Diversity & Inclusion
Integrity
For more information on how we are leading with Purpose in creating differentiated value for our clients, communities,
employees and shareholders, please visit RBC Stories.
x.com/@RBC
facebook.com/rbc
youtube.com/user/rbc
instagram.com/rbc
tiktok.com/@rbc
linkedin.com/company/rbc
Royal Bank of Canada Annual Report 2025
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1
Why invest
RBC
®
is driven by its vision, values and commitment to delivering long-term results.
Diversified business model and brand strength
with scale and market-leading franchises that
provide a full suite of products, advice and services for clients.
A holistic OneRBC approach
to creating client value by leveraging our bank’s scale.
Market leadership in Canada
with a goal of extending our lead by focusing on priority sectors
and deepening existing client relationships and attracting new ones.
Expanding our reach into the world’s largest fee pools
in Wealth Management, Capital Markets
and through the build-out of our Global Transaction Banking capabilities.
A track record of innovation
with significant data scale to create value for clients and enhance
productivity, targeting the generation of $700 million to $1 billion in incremental enterprise value
from Artificial Intelligence (AI) by 2027.
Strong governance, prudent risk management and deep expertise
across our Board and
executive team.
Robust balance sheet
and a strong capital base with a leading Canadian core deposit franchise
that serves as a stable source of funding.
Premium Return on Equity (ROE)
underpinned by revenue productivity and disciplined expense
management while continuing to invest in strategic opportunities.
Long-term shareholder value creation
through the return of capital, including dividends and
share buybacks, to shareholders as well as book value per share
1
growth.
1
Calculated as common equity divided by the number of common shares outstanding at the end of the period.
2
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Royal Bank of Canada Annual Report 2025
Why Invest
|
Client Focused, Future Ready
2
Refer to Glossary for definition on page 134.
3
Refer to Glossary for definition on page 133.
4
Common dividends and common shares purchased for cancellation as a percentage of net income available to common shareholders.
5
A medium-term (3-5 year) objective is considered to be achieved when the performance goal is met in either a 3- or 5- year period. These objectives assume a normal business
environment and our ability to achieve them in a period may be adversely affected by the macroeconomic backdrop and the cyclical nature of the credit cycle.
6
For fiscal 2026, we have revised our ROE financial objective to 17%+ to reflect improving revenue productivity and cost efficiencies driven by the execution of our strategic
initiatives.
7
Annualized TSR is calculated based on the TSX common share price appreciation plus reinvested dividend income. Source: Bloomberg, as at October 31, 2025. Please refer to
page 26.
8
Beginning in fiscal 2026, the achievement of top half total shareholder returns (TSR) will no longer be a medium-term objective. TSR performance relative to peers will continue to
be a part of our overall evaluation of shareholder outcomes and in our compensation programs. However, we believe the achievement of our financial performance objectives is a
better indication of our execution against strategic priorities.
9
Compound annual growth rate.
10 Excludes Corporate Support.
Financial performance metrics
Medium-Term Objectives
5
3-Year
5-Year
Diluted EPS growth of 7%+
8%
13%
ROE of 16%+
6
15.0%
16.0%
Strong capital ratio (CET1)
3
13.8%
13.5%
Dividend payout ratio of 40% -50%
48%
46%
Total shareholder return (TSR)
7, 8
3-Year
5-Year
RBC
22%
22%
Global peer average (excl. RBC)
26%
25%
Earnings
Net income (C$ billion)
Annualized
dividend
increase of:
7%
Five year
9
7%
Ten year
9
$16.2
2024
2025
$20.4
Revenue by business segment
10
(C$ billion)
$14.4
Capital
Markets
$22.4
Wealth
Management
$1.3
Insurance
$19.9
Personal
Banking
$8.6
Commercial
Banking
$11.3 billion of profits returned
to our common shareholders
through dividends and share
repurchases; total payout ratio
of 57%
4
$6.04
dividends declared per share
,
up 7.9% from 2024; dividend payout
ratio of 43%
16.3%
return on common equity
2
up from
14.4% in 2024
13.5%
robust common equity tier 1
(CET1) ratio
3
Prudent risk management
with
37 basis points of provision for
credit losses (PCL) on impaired
loans
$14.07
diluted earnings per
share
(EPS), up from $11.25 in
2024
Strong funding profile
100% ratio of loans to deposits in
Canadian Banking
Royal Bank of Canada Annual Report 2025
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3
Why Invest
|
Client Focused, Future Ready
A message from
Dave McKay,
President & CEO
Dear fellow shareholders,
In 2025, we advanced our position as one of the world’s
most trusted and successful financial institutions. Our
performance and strategic ambitions were a big part of
the story, but it’s the way we achieved our results that
continues to define our success.
RBC is a global team of 100,000+ colleagues who are
unified by our Purpose: to help clients thrive and
communities prosper. We strive to bring trusted advice
and real care to every interaction — from guiding clients
through major financial decisions and life moments, to
helping businesses and entrepreneurs bring new ideas
to life. I receive feedback from clients all the time, and so
much of it reinforces the important moments where our
people shape a client’s future for the better.
In a rapidly changing economy and more complex world,
we believe that combining personalized insights and
advice with global connectivity and scale is the foundation
for how RBC will continue to create long-term value for
our 19+ million clients. This was at the heart of our all-
bank Investor Day this year, where we shared our plan to
expand our global reach and capabilities and continue
to transform the bank to exceed expectations for clients
and shareholders.
Our relentless client focus is shaping everything we do —
from the way we’re expanding our global franchises to how
we’re deepening relationships and delivering value in new
ways. You’ll see that focus reflected in our 2025 results and
the momentum that is carrying us forward.
Our 2025 results
RBC is an all-weather bank, with the financial and strategic
strength to support our clients and deliver value to
shareholders through all economic cycles. This year, we
demonstrated that by delivering exceptional financial
results across our businesses during a year of significant
macroeconomic uncertainty and market volatility.
We generated earnings of $20.4 billion and a Return on
Equity of 16.3 per cent in 2025 as we continued to deepen
client relationships and build new ones across our market-
leading franchises.
Our share price increased by 22 per cent year-over-year,
and we returned $11.3 billion to our shareholders through
common dividends and share buybacks. I’m proud that
we’re delivering results that our shareholders have come
to expect, while maintaining strong governance and a
prudent approach to risk and cost management.
We entered the 2026 fiscal year as the 11
th
largest bank
globally and 6
th
largest in North America by market
In 2025, we advanced our
position as one of the world’s
most trusted and successful
financial institutions.
“
”
4
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Royal Bank of Canada Annual Report 2025
capitalization.
1
Our financial strength remains one of
our greatest advantages, underpinning our strong credit
ratings and giving us the capacity to fund future growth
and pursue big opportunities.
This comes together with our diversified business model
across segments and geographies, strong balance sheet,
technology and data scale, and a trusted brand that’s
number one in Canada and a top brand globally.
2
Importantly, we’re making progress on what we said
we’d do at our Investor Day: delivering premium returns
and creating more value for clients through insights and
trusted advice.
Accelerating our ambitions in 2026
and beyond
Looking ahead, we know expectations of RBC will continue
to be very high, and we need to work harder than ever to
achieve them.
To do that, we’re staying focused on tomorrow’s biggest
growth opportunities in Canada while scaling and
unlocking new revenue streams in key markets and
geographies, particularly the United States, the United
Kingdom and Europe. At the same time, we’re building new
capabilities in AI, payments and more to better support
our increasingly globally connected clients.
In our home market, 2025 challenged the Canadian
economy in fundamental ways. As a result, the country
is increasingly focused on building a better and more
prosperous future, leveraging Canada’s natural economic
strengths across sectors like energy, agriculture, critical
minerals, advanced manufacturing and technology. As
Canadian businesses look to diversify trade relationships,
advance major projects and bolster the Canadian
economy for the long-term, RBC is here to provide advice,
insight and support. This includes supporting our clients in
the transition to a low-carbon and resilient economy.
Extending our leadership position
in Canada
While we’re number one in market share in our home
market among the Big Five banks
3
across Personal
Banking, Commercial Banking, Wealth Management
and Capital Markets, there is still significant room for us
to deepen our existing client relationships, attract new
clients and create more value.
In
Personal Banking
, we’re focused on extending our
leadership position in Canada. Our market-leading
franchise is driven by our deep focus on providing
clients with unparalleled access, exceptional value and
personalized experiences, and that commitment continues
to earn important industry recognition.
This year, RBC was recognized with top honours in the
Ipsos 2025 Financial Service Excellence Awards for
outstanding client experience, and we were ranked highest
in Customer Satisfaction among the Big Five retail banks in
the J.D. Power Canada Retail Banking Satisfaction Study for
the 2
nd
consecutive year.
We also continued to expand our partnership and loyalty
offerings this year. We announced a long-term strategic
loyalty partnership with Canadian Tire Corporation and
an expanded partnership with Pattison Food Group.
1
As at October 31, 2025. Source: Bloomberg.
2
According to Kantar BrandZ’s 2025 Most Valuable Brands, RBC ranks #1 in Canada and is included in the list of Top 100 Global Brands.
3
RBC and Canadian peers (Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and The Toronto-Dominion Bank).
Royal Bank of Canada Annual Report 2025
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5
Beyond our home market, we’re
increasingly competing as a top
global bank with strong client
franchises at scale.
“
”
In addition, we announced a multi-year partnership
with Live Nation Canada for the redevelopment of RBC
Amphitheatre™ into a year-round venue as well as the
opportunity for Avion Rewards
®
members to use their
Avion
®
points to pay for tickets to any Live Nation Canada
show
4
starting in 2026.
Reciprocity remains a core part of the value proposition
we bring to clients, and Avion Rewards — Canada’s largest
bank-owned loyalty program — remains a significant point
of pride. With a market-leading travel value proposition
and an extensive roster of retail partners, Avion Rewards
was named International Loyalty Program of the Year
(Americas)
5
for the 3
rd
consecutive year.
RBC Insurance
®
, which serves close to 4.9 million clients,
was also recognized for the best digital insurance initiative,
best digital transformation program, and outstanding
customer relations and brand engagement initiative.
6
In
Commercial Banking
, we are number one in market
share for commercial loans and deposits
7
in Canada.
With our scale and expertise, RBC supports businesses
across a range of industries within the Canadian business
landscape. With the integration of HSBC Bank Canada,
we’re well-positioned as the bank of choice for commercial
clients with international needs and retail clients who
need global capabilities.
Going forward, we’re focused on further investing in digital
and AI, targeting priority segments and sectors to drive
premium growth, and differentiating through trade finance
and payments capabilities with international connectivity.
In
Wealth Management
, we have a leading holistic
Canadian wealth and asset management offering, with a
comprehensive suite of products and services across the
franchise. As the number one full-service wealth advisory
firm
8
and retail mutual fund company in Canada,
9
we’re
looking to replicate the strong success we’ve seen in our
Canadian business across our global wealth franchises,
including in the U.K., where we’re the 5
th
largest wealth
manager
10
as measured by assets under administration.
We are the number one Canadian bank-owned
Capital
Markets
firm
11
and the number one investment bank in
Canada,
12
with a leading market position in Canada across
products and services. In 2025, we successfully scaled
RBC Clear™ — our U.S. Transaction Banking platform —
onboarding new clients, growing deposits and earning
recognition as the Best Digital Banking Initiative at the
2025 Banking Tech Awards USA, as well as the 2025 Model
Celent Award for Reinventing Cash Management.
Expanding in key global markets and
segments
Beyond our home market, we’re increasingly competing as
a top global bank with strong client franchises at scale.
In the U.S., we are growing from a position of strength.
RBC Capital Markets
®
is the largest Canadian investment
bank in the U.S.,
12
while RBC runs the 6
th
largest full-service
wealth management advisory firm by assets under
administration
13
and manages a leading financial services
provider to the entertainment industry in City National
Bank – which remains a critical part of our U.S. ambitions
and growth story going forward.
Looking ahead, we’re focused on maximizing the
value we’re bringing to clients, and better integrating
our businesses across the U.S. to deliver a seamless
client experience based on the full strength of RBC.
We’ll do this through an increasingly integrated
technology platform, by driving efficiencies across
our businesses and by continuing to strengthen
our infrastructure and our governance model.
In the U.K. and Europe, there remains significant market
opportunity that we’re ready to tap into.
4
On Ticketmaster.ca or the Ticketmaster Canada App.
5
2025 International Loyalty Awards.
6
The Digital Banker Global Insurance Innovation Awards 2025.
7
Market share is calculated based on deposit balances excluding term deposits from the Office of the Superintendent of Financial Institutions (OSFI) (M4) and lending balances from the
Canadian Bankers Association (CBA), and is as at August 2025 and March 2025, respectively.
8
As measured by assets under administration based on industry information sourced from Investor Economics, as of June 2025.
9
Industry information sourced from the Securities and Investment Management Association (SIMA), as of September 2025.
10 Based on publicly available information for wealth management firms (excluding platform businesses) in the U.K., as of June 2025.
11
Based on externally disclosed capital markets revenue for Canadian peers (Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, The Toronto-Dominion Bank and
National Bank of Canada) for the last 12 months as of July 31, 2025.
12
Based on market share (fiscal 2025), Dealogic.
13
Based on publicly available information for full-service wealth advisory firms (excluding independent broker dealers) in the U.S. as of September 2025.
6
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Royal Bank of Canada Annual Report 2025
In Wealth Management, we’re well positioned in this
attractive and consolidating market, and the integration
of RBC Brewin Dolphin has added important and
complementary scale to our existing ultra-high-net-
worth and private trust businesses. After many years of
investment, we’re now ready to accelerate our growth —
focusing on clients and advisors.
In Capital Markets, we continue to build scale in the U.K.
and targeted areas in Europe. As external forces of change
continue to drive increased client needs across multiple
sectors, we are well positioned to deliver value for clients
across target segments and geographies.
Building new businesses and capabilities
RBC’s global growth ambitions are bigger and bolder than
ever, and to deliver on those ambitions we’re building new
businesses and capabilities to better serve our clients.
In 2025, we focused on unlocking a bold Global Transaction
Banking opportunity that presents a significant market
opportunity for RBC’s corporate and commercial
clients. This includes our capabilities across liquidity
management, payments, trade finance and ancillary
services. With the launch of RBC Clear and the successful
integration of HSBC Bank Canada, we’re focused on
integrating and scaling our platforms to build a truly
globally connected business, deepening our support for
clients in this significant revenue pool.
Across the globe, we’re witnessing the rapid progression of
AI and its transformational impact on human society, all of
which accelerated this past year.
At RBC, we know AI is a generational technology that
empowers us to reimagine what a bank can do, and
we’re increasingly focused on leveraging AI across our
businesses to enhance how our teams support our clients.
This spirit of innovation and our drive to stay ahead of
the curve is at the core of RBC’s strong performance
and significant momentum – and it’s why we’re moving
forward with a bold ambition to achieve up to $1 billion in
enterprise value generated from AI-driven benefits by 2027.
Since launching RBC Borealis™ in 2016, we have built an AI
foundation underpinned by data scale, exceptional talent,
a culture of innovation and world-class security, and we
continue to build momentum. Across the organization, AI
is empowering our people, helping uncover opportunities
to better serve and understand our clients and enabling
productivity gains that help our teams focus on
higher-impact work.
Royal Bank of Canada Annual Report 2025
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7
Our leadership
David McKay
President & Chief Executive Officer
Sean Amato-Gauci
Group Head, RBC Commercial Banking
Kelly Bradley
Chief Human Resources Officer
Maria Douvas
Chief Legal & Administrative Officer
Katherine Gibson
Chief Financial Officer
Graeme Hepworth
Chief Risk Officer
Neil McLaughlin
Group Head, RBC Wealth Management
Derek Neldner
CEO & Group Head, RBC Capital Markets
Erica Nielsen
Group Head, RBC Personal Banking
Jennifer Publicover
Group Head, RBC Insurance
Bruce Ross
Group Head, Technology & Operations
David McKay
President & CEO
Our decade-long investments in AI are reflected in our
leadership position. We’ve been recognized for four
straight years as the #1 ranked bank in Canada and
#3 ranked bank globally
14
in AI maturity based on the
annual Evident AI Index rankings – and we are confident
that our responsible approach to AI will play a greater role
in how we help clients thrive and communities prosper.
Thank you
I have never been prouder of Team RBC — for upholding
our Purpose, supporting our clients and communities and
bringing great ideas to life every day.
Across our industry and the diverse set of businesses and
geographies we support, the trend is clear: our clients are
navigating increasing complexity and volatility. In times of
uncertainty, we’re more focused than ever on tapping into
the full strength of RBC to deepen how we serve clients
and delivering exceptional advice, insights and value.
We’re a growing global bank with proud Canadian roots,
and our sights are set on our ambitions. I take great
confidence knowing RBC is not just reacting to change but
leading with a strong vision for what will help our clients
and communities succeed.
I’m also deeply grateful for the trust of our clients and the
confidence of our investors, which we are relentless in
earning and maintaining, as well as for the guidance and
oversight of our Board of Directors.
As always, our success begins and ends with our people —
our employees are truly the heartbeat of this organization.
We owe our continued success and momentum to their
hard work, dedication and commitment to our Purpose.
14 Out of 50 global financial institutions ranked in the Evident AI Index.
8
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Royal Bank of Canada Annual Report 2025
RBC’s impressive
performance this year
reflects its adaptability,
disciplined approach and
financial strength.
“
”
A message from
Jacynthe Côté,
Chair of the Board
Jacynthe Côté
Chair of the Board
In a year marked by global uncertainty, RBC’s strength and
resilience stood out once again.
Amid major shifts in global trade, geopolitics and
technology, the Board remained focused on reinforcing
RBC’s role as an anchor of stability and trust in a world
where both are in short supply.
RBC’s impressive performance this year reflects its
adaptability, disciplined approach and financial strength.
Even in a disrupted global environment, the bank continued
to grow the business and solidify its standing as a top global
financial institution. This strong foundation positions RBC to
effectively compete against its peers and pursue its global
growth ambitions.
Such success does not occur by accident. It is powered by
RBC’s extraordinary people who exemplify its Purpose,
culture of innovation and client-first mindset every day.
As Chair of the Board, I firmly believe that when talent is
nurtured, results follow. It is the Board’s duty to ensure
that RBC’s culture and leadership remain aligned with
its Purpose and its long-term ambitions. Throughout the
year, the Board oversaw succession planning, leadership
development and talent mobility to strengthen RBC’s
leadership pipeline, cultivating and empowering the leaders
of today and tomorrow. We were particularly proud that
the strong results in 2025 came on the heels of a number
of changes at the Group Executive level, highlighting the
strength of the bench.
As the management team shared at Investor Day, RBC’s
global growth ambitions are greater than ever. As the bank
looks to scale further, the Board is focused on supporting
responsible growth while maintaining RBC’s accountability
to clients, communities, shareholders, employees and
regulators.
AI continues to be a key area of the Board’s oversight.
While advancement in AI across society over the past year
has been rapid, RBC has been investing in and applying AI
capabilities for over a decade. Responsible governance in AI
is essential, and the Board supports the bank’s innovative
approach to using AI to better serve and understand clients
while magnifying the human potential of RBC’s employees.
For nearly a decade, I have learned and benefited from my
brilliant Board colleagues. It is a privilege to serve on the
Board at this critical time and to constructively engage with
management as we continue to grow as a purpose-driven
bank while putting the client at the forefront of all decisions.
Under the leadership of Dave McKay and his executive
team, the Board is confident in RBC’s ability to navigate
change and pursue its bold ambitions — while upholding the
trust and stability that clients and communities count on.
Royal Bank of Canada Annual Report 2025
|
9
Client focused
With over 150 years of creating value for our clients, we put
trust and relationships at the heart of everything we do.
Today, our aim is to bring the full strength of our bank
as OneRBC to our clients across every stage of their
financial journey.
Our client-focused culture, powered by our people and
technology, is designed to deliver long-term value through
trusted advice, data-driven insights and tailored solutions.
This commitment is reflected in industry recognition and the
momentum we have in expanding how we serve our clients.
10
|
Royal Bank of Canada Annual Report 2025
Clients
Leading franchises underpinned by the foundation of OneRBC
Personal Banking
~15 million clients in Canada
#1 ranking in market share for all key retail products
1
Commercial Banking
~1.4 million clients
#1 ranking in market share in commercial lending
and deposits
2
Capital Markets
22,900+ clients
#1 Canadian bank-owned capital markets firm
by revenue
3
#1 investment bank in Canada
4
based on market share
Wealth Management
6,200+ client-facing advisors
Largest full-service wealth advisory business in Canada,
5
6
th
largest full-service wealth advisory firm in the U.S.
6
and 5
th
largest wealth manager in the U.K.
7
as measured
by assets under administration (AUA)
8
Largest mutual fund company in Canada
9
as measured by
assets under management (AUM)
8
Insurance
~4.9 million clients
Largest Canadian bank-owned life insurance company
10
1
Market share is calculated using the most current data available from OSFI (M4), SIMA and CBA, and is as at August 2025 and June 2025. This is based on the following key product
categories: Personal Lending (including residential mortgages), Personal Core Deposits and Guaranteed Investment Certificates (GICs), Credit Cards and Long-term Mutual Funds.
2
Market share is calculated based on deposit balances excluding term deposits from OSFI (M4) and lending balances from CBA, and is as at August 2025 and March 2025, respectively.
3
Based on externally disclosed capital markets revenue for Canadian peers (Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, The Toronto-Dominion Bank
and National Bank of Canada) for the last 12 months as of July 31, 2025.
4
Fiscal 2025, Dealogic.
5
Industry information sourced from Investor Economics, as of June 2025.
6
Based on publicly available information for full-service wealth advisory firms (excluding independent broker dealers) in the U.S. as of September 2025.
7
Based on publicly available information for wealth management firms (excluding platform businesses) in the U.K. as of June 2025.
8
Refer to Glossary for definition on page 133.
9
Industry information sourced from SIMA, as of
September 2025.
10 Based on the most current total nine-month revenue for life insurance companies, as available from OSFI.
Royal Bank of Canada Annual Report 2025
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11
Clients
Ranked highest in customer
satisfaction
for the 2
nd
consecutive year in the J.D.
Power 2025 Canada Retail
Banking Satisfaction Study.
Top 10 Investment Bank
globally,
11
Best Investment
Bank
in Canada and
Best
Research Bank
in North
America.
12
RBC Global Asset
Management
®
was named
TopGun Investment Team
of the Year for the 10
th
time.
15
Recognized as the
Most
Valuable Canadian Brand
for the 7
th
consecutive year.
19
RBC Insurance was
recognized for the
Best
Digital
Insurance Initiative,
Best Digital Transformation
Program and
Outstanding
Customer Relations
& Brand
Engagement Initiative.
18
RBC Clear — our U.S.
Transaction Banking platform
— was named
Best Digital
Banking Initiative
at the 2025
Banking Tech Awards USA
and winner of the 2025 Model
Celent Award for
Reinventing
Cash Management
.
Winner of 10 Ipsos 2025
Financial Service Excellence
Awards
among the Big Five
banks, including four solo
wins in the categories:
Recommend to Friends or
Family (Net Promoter Score),
Financial Planning & Advice,
ATM Banking Excellence and
Online Banking Excellence.
Named
Best Private Bank
in Canada
16
and Outstanding
Private Bank — North America
and Global.
17
Avion Rewards was named
International Loyalty
Program of the Year
(Americas) for the 3
rd
consecutive year at the 2025
International Loyalty Awards.
Recognized for excellence
RBC Dominion Securities
®
ranked highest
among
Canadian bank-owned
investment brokerage
firms for the 19
th
consecutive year.
13
Best overall bank for
cash management
in Canada for the 4
th
consecutive year and the
leading trade finance
provider
in Canada for the
13
th
consecutive year.
14
11
Euromoney MarketMap 2025.
12 Euromoney Award for Excellence 2025.
13
Investment Executive Brokerage Report Card 2025.
14 Global Finance Magazine, 2025.
15 Brendan Wood International, since 2013.
16 The Banker Global Private Banking Awards 2025.
17
Private Banker International Global Wealth Awards 2025.
18
The Digital Banker Global Insurance Innovation Awards 2025.
19 Kantar BrandZ, since 2019.
12
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Royal Bank of Canada Annual Report 2025
Clients
Differentiated loyalty programs,
partnerships, advice and solutions that
create client value
Announced a long-term strategic loyalty partnership
between Avion Rewards and Canadian Tire
Corporation’s Triangle Rewards
‡
.
Launched two new credit cards and linked loyalty
partnership with Pattison Food Group — one of Western
Canada’s largest providers of food and health products
— and their More Rewards
‡
loyalty program, offering
clients the opportunity for exclusive savings.
Partnered with Visa
‡
, the official payment technology
partner for FI
FA World Cup 26
‡
, to offer eligible RBC Visa
cardholders a chance to win access to purchase select
tickets for FIFA World Cup 26.
Announced a multi-year partnership with Live Nation
Canada for the redevelopment of RBC Amphitheatre
in Toronto, formerly Budweiser Stage, into a
year-round venue.
Launched RBC Avion Concierge, a travel and lifestyle
provider for RBC Avion Visa Infinite Privilege
‡
for Private
Banking cardholders, to provide luxury travel, lifestyle
experiences and exclusive access to brands and
events globally.
Launched RBC’s inaugural Reconciliation Action Plan,
20
a strategic framework outlining the bank’s measurable,
long-term commitment to Indigenous reconciliation
in Canada.
20 A strategic framework outlining the bank’s measurable commitment towards reconciliation in Canada that prioritizes actions and investments across five key pathways — Economy, People,
Community, Environment and Leadership — to help drive inclusive economic growth, create positive social change and advance reconciliation.
21 Since 2017.
Driving innovation and growth
RBCx™ banks, builds and invests in the innovation
ecosystem, backed by RBC’s institutional strength.
Its portfolio companies include:
•
Ownr
®
, a digital solution designed to help
entrepreneurs register and incorporate their
businesses online, while automating legal and
compliance filings. Since its 2017 launch, Ownr has
registered 239,000+ Canadian businesses.
•
Mydoh
®
, RBC’s money management application
designed to help families raise money-smart youth,
which has reached 320,000+ Canadians since its
2021 launch.
Scaled RBC Clear, onboarding new clients and
growing deposits.
Connected 5.1+ million Canadians to a personalized plan
through MyAdvisor
®
, our digital advice platform.
21
RBC Direct Investing
®
became the first bank-owned
online brokerage in Canada to offer online international
trading in multiple foreign currencies, giving clients the
flexibility to trade on global exchanges.
Announced a multi-year agreement with the Major
League Soccer (MLS) club LA Galaxy, with City National
Bank serving as the official bank and wealth
management partner. The agreement expands RBC
Wealth Management
®
U.S.’s existing sponsorship of MLS
and our strategic focus on serving the needs of the
sports industry in the region.
Royal Bank of Canada Annual Report 2025
|
13
Clients
Technology and innovation at scale
Partnered with Cohere
‡
, a leader in security and privacy-
focused enterprise AI, to co-develop and securely deploy
North
‡
for Banking — an enterprise generative AI (GenAI)
solution optimized for financial services.
RBC Lumina™, our internal enterprise data and AI
platform, is built on a robust infrastructure that includes
one of the largest clusters of graphic processing units
(GPUs) among Canadian financial institutions. RBC
Lumina is designed to drive innovation at scale within a
responsible AI framework for financial services.
Announced a three-year membership in
FinTechAI@CSAIL, an initiative at the Massachusetts
Institute of Technology Computer Science and Artificial
Intelligence Laboratory (CSAIL), providing RBC with
access to talent and research across areas critical to the
future of financial services including machine learning.
1,200+ patents filed since 2019 with 635 related to AI,
highlighting our overall commitment to innovation.
ATOM™, RBC’s proprietary Asynchronous Temporal
Model, is securely trained using large-scale financial
datasets, enabling RBC to leverage unique insights and
develop innovative solutions. In 2025, ATOM was used
across 15 RBC products and processes, including:
•
Enhanced credit adjudication with ATOM’s advanced
modelling capabilities, enabling better assessment of
Personal Banking clients’ needs and ability to pay.
•
Improved our ability to provide personalized
recommendations featured in our Avion Redemption
newsletter, allowing us to streamline offerings to
our members.
NOMI Find & Save
®
, a tool that uses predictive
technology to understand personalized transaction
patterns, has helped our clients set aside $9.6+ billion in
savings since its 2017 launch.
~1.3 million clients have used NOMI
®
Forecast to track
their future cash flow since its 2021 launch.
We have a bold ambition to achieve $700 million to $1 billion in enterprise value
generated from AI-driven benefits by 2027.
RBC is preparing for a future where AI will play
a greater role in how we deliver advice and insights to our clients and enhance how we work.
With years of investment in AI, digital, cloud and cyber — including our research
institute RBC Borealis — RBC is well positioned to continue harnessing the power of
technology to create even more value for our clients.
Ranked
#1 in Canada
and
#3 globally
out of 50 global
financial institutions for AI maturity in the 2025 Evident
AI Index for the 4
th
consecutive year.
Technology and innovation
14
|
Royal Bank of Canada Annual Report 2025
Technology and Innovation
RBC’s
Responsible AI Principles
of privacy and security, accountability,
fairness and transparency and responsible disclosure guide our approach
to developing and deploying AI-powered solutions. Our robust risk
governance framework helps ensure that we consider, explore and build
GenAI tools safely.
1
Excludes City National Bank.
Exceptional AI talent and an AI-empowered
workforce
Every day, RBC technologists aim to turn ideas into reality
— from cybersecurity to AI and machine learning, digital
to software development, architecture to data science
and more.
1,100+ technologists hired in 2025 for a total of
5,300+ core technology roles,
1
including in cybersecurity,
machine learning, software engineering and
data science.
25,000+
employees have been onboarded to RBC Assist,
our in-house developed GenAI tool, to help improve
productivity and efficiency.
Deployed GenAI solutions in our Personal Banking
Advice Centre to support advisors with a number of
tasks, from faster access to knowledge and insights to
executing activities on their behalf, saving the advisor
time to focus on clients.
Security and responsible AI
Deployment of our AI models continues to support
our overall security infrastructure and how we protect
our clients.
Launched Genesis, an in-house built graph analytics
tool in 2025 that proactively identifies and contributes to
the timely mitigation of attempted financial crimes.
Expanded User Behaviour Analytics, an application
developed in-house that utilizes eight AI models and
eight risk indicators to enhance visibility and enable
timely management of a range of threats, such as
phishing emails.
Joined the Canadian Anti-Scam Coalition, the country’s
first unified cross-sector initiative to combat scams
targeting Canadian consumers.
Royal Bank of Canada Annual Report 2025
|
15
Technology and Innovation
1
Learning hours encompass the cumulative time devoted to various learning initiatives during fiscal 2025, including technical, business and compliance related training from our
Learning Management System, in addition to other web-based, instructor-led and informal learning hours. Excludes City National Bank as this subsidiary has not been integrated
onto our primary HR platform.
2
Excludes City National Bank as this subsidiary has not been integrated onto our primary HR platform.
3
Great Place to Work Institute.
4
LinkedIn.
5
MediaCorp Canada Inc.
RBC’s success starts with our people. Over 100,000
employees across 29 countries bring our
Purpose to life every day, helping clients thrive
and communities prosper. We are evolving from
a role-based to a skills-based organization,
providing employees with the tools, development
opportunities and career pathways to
align their skills with our clients’ and
our bank’s needs.
Investing in our employees
Awards and
recognition
Among Canada’s
Best Workplaces,
3
Top 25 Companies
4
and Top
100 Employers
5
in 2025.
Highest ranking
among the Big Five banks on
Forbes’ Canada
Best Employers 2025
list.
One of Canada’s
Best Workplaces for
Giving Back
and
Best Workplaces in
Financial Services & Insurance
.
3
Named one of
Canada’s Top Employers
for Young People
in 2025.
5
Developing talent, fostering growth
In 2025, we launched RBC Academies, a central resource
providing curated learning for foundational skills in
areas such as critical thinking, data and AI fluency.
RBC employees collectively invested 3.7+ million hours
1
in developing their technical and business skills.
RBC employees continued to grow their careers and
access opportunities across the bank, with 69% of
positions filled by internal candidates in 2025.
2
RBC hired 3,000+ students globally through internships,
co-ops and work-term placements, including university,
college and high school students.
16
|
Royal Bank of Canada Annual Report 2025
Employees
6
This amount is part of a commitment of $2 billion in community investments by 2035.
7
Inclusive of grants provided from October 1, 2024 to September 30, 2025.
8
These figures are for calendar year 2024.
9
Date range is for volunteer program year October 1, 2024 – September 30, 2025.
A culture of community impact
In 2025, the RBC Communities Together Fund supported 3,100+ volunteer
projects across 10 countries, engaging 7,600+ employees, mobilizing
$4.8+ million in grants
6
and tracking 45,000+ volunteer hours.
7
Through the RBC Celebration of Impact, where RBC employees track
and celebrate community engagement, employees donated $30+ million
supporting 12,000+ charities in 61 countries.
8
20,000+ RBC employees and Canadian retirees tracked 340,000+ volunteer
hours through our myCommunity platform.
9
In 2025, RBC Race for the Kids™ raised $13.6+ million for local youth
charities globally. Since its inception in 2009, the event has engaged
525,000+ participants, including employees as racers and volunteers,
and raised $118+ million in total.
Royal Bank of Canada Annual Report 2025
|
17
Employees
Helping communities prosper
At RBC, our Purpose of helping clients thrive and communities prosper is at the heart
of everything we do. Through global partnerships, sponsorships, employee initiatives
and community investments, we aim to invest in ideas that support a thriving future
and drive more inclusive opportunities for prosperity.
In 2025, we continued to make progress through various programs and actions,
including $209+ million in community investments made by RBC, RBC Foundation
®
and RBC Foundation USA.
1
1
Includes donations and community investments made by RBC, RBC Foundation or RBC Foundation USA, employee volunteer grants and gifts in kind, as well as contributions to non-profits
and non-registered charities. Figure also includes community investments featured on pages 19 and 21 of this report. This amount is part of a commitment of $2 billion in community investments
by 2035.
18
|
Royal Bank of Canada Annual Report 2025
Communities
Royal Bank of Canada Annual Report 2025
|
19
2
This expanded access has in part been made available through RBC’s adherence to recent enhancements to the voluntary Commitment on Low-Cost and No-Cost Accounts, which came into
effect on December 1, 2025.
3
Since October 2019 for McGill University, January 2022 for University of Guelph and May 2022 for Western University.
Through RBC Future Launch
®
, RBC and RBC Foundation
provided $54+ million in 2025, fulfilling the program’s
$500-million commitment by 2025. Since its inception
in 2017, this initiative has reached 9.2+ million Canadian
youth in communities we operate in through
960+ partner programs, helping set them up with the
skills needed for a thriving future.
RBC announced a $5 million commitment over five years
to Windmill Microlending, a national charity offering
career loans to skilled immigrants and refugees. The
support will focus on helping internationally trained
physicians secure Canadian credentials and restart
their healthcare careers.
RBC and RBC Foundation provided $11+ million to
post-secondary institutions in Canada for programs that
support job readiness and address labour market gaps
in sectors facing talent shortages.
RBC Foundation provided $3+ million to hospitals across
Canada to help upskill healthcare workers and support
their resiliency.
RBC Training Ground™, a national talent identification
and athlete funding program, hosted 20 events in eight
regions across Canada in 2025. Since its launch in 2016,
20,000+ athletes have participated, with alumni winning
14 Olympic medals for Canada to date.
Expanded access to no-cost banking accounts
2
for
Indigenous Peoples in Canada as well as anyone aged
24 and under, including non-students.
RBC, RBC Foundation and RBC Foundation USA
announced a $10-million commitment globally to
organizations addressing food insecurity.
My Money Matters
®
, RBC’s digital resource hub aimed at
helping Canadians navigate their personal relationships
with money, has been visited 7+ million times since its
2023 launch.
Since 2019, 398,000+ people have registered for free
online courses in financial literacy, entrepreneurship
and agriculture management.
3
These courses were
developed by professors from McGill University, Ivey
Business School at Western University and University of
Guelph with support from RBC.
Communities
Planet
Our goal is to be the bank of choice for the transition
1
to a low-carbon
2
and resilient
3
economy.
1
Refers to the economic, energy, technological and societal transformation that is required to achieve the significant greenhouse gas (GHG) emissions reductions necessary for a low-carbon or
net-zero world. This will impact all sectors, and is highly dependent on substantial GHG emissions reductions in high-emitting sectors.
2
Refers to an economy with minimal output of GHG emissions.
3
Refers to the capacity to anticipate, cope with, recover from or adapt to shock, disruption, stress or changing factors in the external environment. In the context of climate, this refers to the
resilience of the economy to the effects of climate change. In the context of communities, this refers to communities being resilient to a wide range of risks while maintaining an acceptable
level of functioning without compromising long-term prospects of sustainability development, peace and security, human rights and wellbeing for all.
20
|
Royal Bank of Canada Annual Report 2025
Planet
4
Renewable energy is defined as the construction, development, operation, acquisition, maintenance and connection of the following renewable energy generation sources: wind, solar,
geothermal with direct emissions of less than 100 g CO2e/kWh, waste biomass and renewable biofuels with life-cycle emissions less than 100 g CO2e/kWh sourced from sustainable agriculture
and forestry residues or from non-recyclable municipal solid waste, tidal and hydroelectricity. New hydroelectricity development projects >25 MW must have a power density of over 10 W/m2
or operate with lifecycle emissions below a threshold of 50 g CO2e/kWh (includes refurbishment of existing hydroelectricity facilities, provided the size of the dam or reservoir is not increased).
5
Mixed-energy entities have both low and high-carbon energy activities (and/or other unrelated activities). Renewable energy exposure is estimated based on the percentage of the RBC sector
industrial classification codes (SIC codes) we have assigned to the business operations of the mixed-energy entity that fall into the Renewables category. We assign SIC codes to entities in line
with RBC’s enterprise standards for the allocation of industry codes to clients using the following information, as appropriate and available: revenue, power generation by fuel source (i.e., MWh),
capacity and/or another available proxy. For example, if the SIC code allocation for a mixed-energy entity is 40% to Renewable energy, 40% of the loan is allocated to renewable energy.
6
Technology, products, services or actions that help mitigate or adapt to the impacts of climate change. Solutions include those that support GHG emissions reductions and/or the low-carbon
transition, but also those that support outcomes linked to society’s resilience to the physical impacts of climate change (e.g., adaptation of infrastructure, nature and/or biodiversity gains).
7
While our approach may evolve over time under this category of investment, we intend to prioritize allocating capital toward fund and direct investments that are intended to lead to GHG
emissions reductions in Canada and globally. Our investment commitments eligible to count towards this goal may also include support for climate solutions with anticipated outcomes linked
to biodiversity, nature and/or adaptation, among others. We aspire to achieve this goal by 2030; however, market conditions, among other factors – many of which are beyond our control
and the effects of which can be difficult to predict – could impact our ability to invest capital in fund and direct investments focused on climate solutions over this timeframe. For purposes of
tracking progress towards this goal, our eligible investment commitments made from 2022 onward are included.
Increased lending exposure to pure play renewable energy
4
entities and
estimated exposure to renewable energy through lending to mixed-energy
entities,
5
advancing towards our goal of tripling this lending by 2030 across
Capital Markets and Commercial Banking, relative to our 2023 baseline.
Enhanced
advisor training
on climate topics in
Commercial Banking
through a program developed
in collaboration with Green
Economy Canada to help
advisors support clients on
their transition and resilience
journeys.
Committed
$80+ million in fund and
direct investments
, totalling $248+ million
since 2022, to support the development and
scaling of climate solutions,
6
progressing towards
our goal of allocating $1 billion by 2030.
7
Supported
190+ community investment
partners
that are advancing climate mitigation
and/or nature-based solutions with $27+ million
in community investments through RBC,
RBC Foundation and RBC Foundation USA in
2025. This included $10 million towards RBC Tech
for Nature
®
, fulfilling RBC and RBC Foundation’s
$100 million commitment made in 2019.
Created a dedicated
Energy
Transition centre of
excellence
within Capital
Markets to support clients on
energy transition with advice
and capital.
Royal Bank of Canada Annual Report 2025
|
21
Planet
Management’s Discussion and Analysis
Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the fiscal
year ended October 31, 2025, compared to the preceding fiscal year. This MD&A should be read in conjunction with our 2025 Annual Consolidated
Financial Statements and related notes and is dated December 2, 2025. All amounts are in Canadian dollars, unless otherwise specified, and are based on
financial statements presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB), unless otherwise noted.
Additional information about us, including our 2025
Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on
the Canadian Securities Administrators’ website, SEDAR+, at sedarplus.com and on the EDGAR section of the United States (U.S.) Securities and
Exchange Commission’s (SEC) website at sec.gov.
Information contained in or otherwise accessible through the websites mentioned herein does not form part of this report. All references in this report to
websites are inactive textual references and are for your information only.
Table of contents
Caution regarding forward-looking
statements
22
Overview and outlook
23
Selected financial and other highlights
23
About Royal Bank of Canada
24
Vision and strategic goals
24
Economic, market and regulatory
review and outlook
24
Defining and measuring success
25
Financial performance
26
Overview
26
Impact of foreign currency translation
27
Total revenue
27
Provision for credit losses
28
Non-interest expense
29
Income and other taxes
30
Client assets
30
Business segment results
32
Results by business segment
32
How we measure and report our
business segments
32
Key performance and non-GAAP
measures
33
Personal Banking
35
Commercial Banking
40
Wealth Management
43
Insurance
50
Capital Markets
53
Corporate Support
59
Quarterly financial information
59
Fourth quarter performance
59
Quarterly results and trend analysis
60
Financial condition
61
Condensed balance sheets
61
Off-balance sheet arrangements
62
Risk management
65
Overview
65
Enterprise risk management
65
Top and emerging risks
69
Principal risks
72
Credit risk
72
Market risk
83
Liquidity and funding risk
88
Insurance risk
102
Operational risk
102
Compliance risk
105
Reputation risk
106
Strategic risk
106
Overview of other risks
107
Legal and regulatory environment risk
107
Government fiscal, monetary and
other policies
108
Tax risk and transparency
108
Environmental and social risk
109
Capital management
110
Accounting and control matters
121
Critical accounting policies and
estimates
121
Controls and procedures
124
Related party transactions
125
Supplementary information
125
Glossary
133
Enhanced Disclosure Task Force
recommendations index
136
Caution regarding forward-looking statements
From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions
of the
United States Private Securities Litigation Reform Act of 1995
and any applicable Canadian securities legislation. We may make forward-looking
statements in this 2025 Annual Report, in other filings with
Canadian regulators or the SEC, in other reports to shareholders, and in other communications. In
addition, our representatives may communicate forward-looking statements orally to
analysts, investors, the media and others. Forward-looking statements
in this document include, but are not limited to, statements relating to our financial performance objectives, priorities, vision
and strategic goals, the
economic, market, and regulatory review and outlook for Canadian, U.S., United Kingdom (U.K.), Euro area and global economies, the regulatory
environment in which we operate, the Strategic priorities and Outlook sections for each of our business segments, the risk environment including our credit
risk, market risk, liquidity and funding risk as well as the effectiveness of our risk monitoring, our climate- and sustainability-related beliefs, targets and goals
and related legal and regulatory developments, and include statements made by our President and Chief Executive Officer and other members of
management. The forward-looking statements contained in this document represent the views of management and are presented for the purpose of
assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended
on the dates presented, as well as our financial performance objectives, vision, strategic goals and priorities and anticipated financial performance, and
may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “suggest”, “seek”,
“foresee”, “forecast”, “schedule”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan”, “outlook”, “timeline” and “project” and
similar expressions of future or conditional verbs such as “will”, “may”, “might”, “should”, “could”, “can”, “would” or negative or grammatical variations
thereof.
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and
specific in nature, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate,
that our assumptions may not be correct, that our financial performance, environmental & social or other objectives, vision and strategic goals will not be
achieved, and that our actual results may differ materially from such predictions, forecasts, projections, expectations or conclusions.
We caution readers not to place undue reliance on our forward-looking statements as a number of risk factors could cause our actual results to differ
materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of
which can be difficult to predict – include, but are not limited to: business and economic conditions in the geographic regions in which we operate, Canadian
housing and household indebtedness, information technology, cyber and third-party risks, geopolitical uncertainty, environmental and social (E&S) risk,
digital disruption and innovation, privacy and data related risks, regulatory changes, culture and conduct risks, credit, market, liquidity and funding,
insurance, operational, compliance, reputation and strategic risks, other risks discussed in the risk sections of our 2025 Annual Report, including legal and
regulatory environment risk, the effects of changes in government fiscal, monetary and other policies and tax risk and transparency, risks associated with
escalating trade tensions, including protectionist trade policies such as the imposition of tariffs, risks associated with the adoption of emerging
technologies, such as cloud computing, artificial intelligence (AI), including generative AI (GenAI), and robotics, fraud risk and our ability to anticipate and
successfully manage risks arising from all of the foregoing factors. Additional factors that could cause actual results to differ materially from the
expectations in such forward-looking statements can be found in the risk sections of our 2025 Annual Report, as may be updated by subsequent quarterly
reports.
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our
forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other
uncertainties and potential events, as well as the inherent uncertainty of forward-looking statements. Material economic assumptions underlying the
forward-looking statements contained in this 2025 Annual Report are set out in the Economic, market and regulatory review and outlook section and for each
business segment under the Strategic priorities and Outlook headings, as such sections may be updated by subsequent quarterly reports. Any forward-
looking statements contained in this document represent the views of management only as of the date hereof, and except as required by law, we do not
undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.
Additional information about these and other factors can be found in the risk sections of this 2025 Annual Report, as may be updated by subsequent
quarterly reports.
22
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Overview and outlook
Selected financial and other highlights
(1)
Table 1
(Millions of Canadian dollars, except per share, number of and percentage amounts)
2025
2024
2025 vs. 2024
Increase (decrease)
Total revenue
$
66,605
$
57,344
$
9,261
16.1%
Provision for credit losses (PCL)
4,362
3,232
1,130
n.m.
Non-interest expense
36,592
34,250
2,342
6.8%
Income before income taxes
25,651
19,862
5,789
29.1%
Net income
$
20,369
$
16,240
$
4,129
25.4%
Net income – adjusted
(2), (3)
$
20,870
$
17,430
$
3,440
19.7%
Segments – net income
Personal Banking
$
7,105
$
5,921
$
1,184
20.0%
Commercial Banking
3,020
2,818
202
7.2%
Wealth Management
4,289
3,422
867
25.3%
Insurance
828
729
99
13.6%
Capital Markets
5,393
4,573
820
17.9%
Corporate Support
(266)
(1,223)
957
n.m.
Net income
$
20,369
$
16,240
$
4,129
25.4%
Selected information
Earnings per share (EPS) – basic
$
14.10
$
11.27
$
2.83
25.1%
– diluted
14.07
11.25
2.82
25.1%
– basic adjusted
(2), (3)
14.46
12.11
2.35
19.4%
– diluted adjusted
(2), (3)
14.43
12.09
2.34
19.4%
Return on common equity (ROE)
(3)
16.3%
14.4%
n.m.
190 bps
ROE – adjusted
(2), (3)
16.7%
15.5%
n.m.
120 bps
Average common equity
(4)
$
122,050
$
110,650
$
11,400
10.3%
Net interest margin (NIM) – on average earning assets, net
(3)
1.62%
1.54%
n.m.
8 bps
PCL on loans as a % of average net loans and acceptances
0.43%
0.35%
n.m.
8 bps
PCL on performing loans as a % of average net loans and acceptances
0.06%
0.07%
n.m.
(1) bps
PCL on impaired loans as a % of average net loans and acceptances
0.37%
0.28%
n.m.
9 bps
Gross impaired loans (GIL) as a % of loans and acceptances
0.83%
0.59%
n.m.
24 bps
Liquidity coverage ratio (LCR)
(3), (5)
127%
128%
n.m.
(100) bps
Net stable funding ratio (NSFR)
(3), (5)
112%
114%
n.m.
(200) bps
Capital, Leverage and Total loss absorbing capacity (TLAC) ratios
(3), (6)
Common Equity Tier 1 (CET1) ratio
13.5%
13.2%
n.m.
30 bps
Tier 1 capital ratio
15.1%
14.6%
n.m.
50 bps
Total capital ratio
16.8%
16.4%
n.m.
40 bps
Leverage ratio
4.4%
4.2%
n.m.
20 bps
TLAC ratio
31.5%
29.3%
n.m.
220 bps
TLAC leverage ratio
9.2%
8.4%
n.m.
80 bps
Selected balance sheet and other information
(7)
Total assets
$ 2,325,006
$ 2,171,582
$
153,424
7.1%
Securities, net of applicable allowance
561,788
439,918
121,870
27.7%
Loans, net of allowance for loan losses
1,042,422
981,380
61,042
6.2%
Derivative assets
177,206
150,612
26,594
17.7%
Deposits
1,515,616
1,409,531
106,085
7.5%
Common equity
127,417
118,058
9,359
7.9%
Total risk-weighted assets (RWA)
(3), (6)
730,225
672,282
57,943
8.6%
Assets under management (AUM)
(3)
1,573,800
1,342,300
231,500
17.2%
Assets under administration (AUA)
(3), (8)
5,599,000
4,965,500
633,500
12.8%
Common share information
Shares outstanding (000s) – average basic
1,409,072
1,411,903
(2,831)
(0.2)%
– average diluted
1,411,589
1,413,755
(2,166)
(0.2)%
– end of period
1,400,114
1,414,504
(14,390)
(1.0)%
Dividends declared per common share
$
6.04
$
5.60
$
0.44
7.9%
Dividend yield
(3)
3.4%
3.9%
n.m.
(50) bps
Dividend payout ratio
(3)
43%
50%
n.m.
(700) bps
Common share price (RY on TSX)
(9)
$
205.47
$
168.39
$
37.08
22.0%
Market capitalization (TSX)
(9)
287,681
238,188
49,493
20.8%
Business information
(number of)
Employees (full-time equivalent) (FTE)
96,628
94,838
1,790
1.9%
Bank branches
1,263
1,292
(29)
(2.2)%
Automated teller machines (ATMs)
4,183
4,367
(184)
(4.2)%
Period average US$ equivalent of C$1.00
(10)
$
0.712
$
0.736
$
(0.024)
(3.3)%
Period-end US$ equivalent of C$1.00
$
0.713
$
0.718
$
(0.005)
(0.7)%
(1)
On March 28, 2024, we completed the acquisition of HSBC Bank Canada (HSBC Canada transaction). HSBC Bank Canada (HSBC Canada) results have been consolidated
from the closing date, and are included in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets segments.
(2)
These are non-GAAP measures or ratios. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.
(3)
See Glossary for composition of these measures.
(4)
Average amounts are calculated using methods intended to approximate the average of the daily balances for the period.
(5)
The LCR and NSFR are calculated in accordance with the Office of the Superintendent of Financial Institutions’ (OSFI) Liquidity Adequacy Requirements (LAR) guideline.
LCR is the average for the three months ended for each respective period. For further details, refer to the Liquidity and funding risk section.
(6)
Capital ratios and RWA are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline, the Leverage ratio is calculated using OSFI’s Leverage Requirements
(LR) guideline, and both the TLAC and TLAC leverage ratios are calculated using OSFI’s TLAC guideline. Both the CAR guideline and LR guideline are based on the Basel III
framework. For further details, refer to the Capital management section.
(7)
Represents period-end spot balances.
(8)
AUA includes $15 billion and $5 billion (2024 – $15 billion and $6 billion) of securitized residential mortgages and credit card loans, respectively.
(9)
Based on TSX closing market price at period-end.
(10)
Average amounts are calculated using month-end spot rates for the period.
n.m. not meaningful
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
23
About Royal Bank of Canada
Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 100,000+ employees who leverage their imaginations and insights to bring our vision,
values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the
largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing
exceptional experiences to our more than 19 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
Our business segments are described below.
Personal
Banking
Provides a broad suite of financial products and services to retail clients in Canada, the Caribbean
and the U.S. Our commitment to building and maintaining deep and meaningful relationships with our
clients is underscored by the delivery of exceptional client experiences, the breadth of our product
suite, our depth of expertise and the features of our digital solutions.
Commercial
Banking
Serves the end-to-end needs of Canadian businesses, including subsidiaries of multi-nationals. We
deliver a full spectrum of services to the market, ranging from lending and deposits to payments, cash
management and advisory services. Our comprehensive coverage teams with specialization across
industries and products give us the scale to deliver holistic solutions to our clients.
Wealth
Management
Primarily serves affluent, high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients from our
offices in key financial centres across the globe. We offer a comprehensive suite of wealth,
investment, trust, banking, credit and other solutions to this client segment. We also provide a self-
directed investment service in Canada, as well as asset management products globally to
institutional and individual clients through our distribution channels and third-party distributors. We
offer asset services and investor services to financial institutions, asset managers and asset owners
in Canada.
Insurance
Offers a comprehensive suite of advice and solutions for individual and business clients including life,
health, wealth solutions, property & casualty, travel, group benefits, longevity reinsurance and
reinsurance solutions for creditor products. We provide tailored, client-led advice and solutions,
harnessing the power of technology and data and leveraging the strength and scale of the RBC
®
enterprise as our competitive advantage.
Capital Markets
Provides expertise in advisory & origination, sales & trading, lending & financing and transaction
banking to corporate, institutional, sponsor and government clients globally. We serve these clients
from 55 offices in 16 countries across North America, the U.K. & Europe, Australia, Asia and other
regions.
Vision and strategic goals
Our business strategies and actions are guided by our vision,
“To be among the world’s most trusted and successful financial
institutions.”
Our three strategic goals are:
•
In Canada, to be the undisputed leader in financial services;
•
In the U.S., to be the preferred partner to institutional, corporate, commercial and HNW clients and their businesses; and
•
In select global financial centres, to be a leading financial services partner valued for our expertise.
For our progress in 2025 against our business strategies and strategic goals, refer to the Business segment results section.
Economic, market and regulatory review and outlook – data as at December 2, 2025
The predictions and forecasts in this section are based on information and assumptions from sources we consider reliable. If
this information or these assumptions are not accurate, actual economic outcomes may differ materially from the outlook
presented in this section.
Economic and market review and outlook
Economic growth is expected to remain positive across most advanced economies, including Canada, the Euro area, the U.K.
and the U.S. The outlook remains dependent on the evolution of U.S. international trade policy. U.S. tariff rates have increased
since April 2025 for most U.S. trade partners and are expected to slow U.S. economic growth. Tariffs imposed on U.S. imports
from Canada remain low relative to other U.S. trade partners with most Canadian exports maintaining duty free access to the
U.S. market through an exemption from tariffs for products compliant with the Canada-United States-Mexico Agreement
(CUSMA). Our forecast assumes that tariffs will remain elevated but that the exemption from tariffs for most products compliant
with CUSMA will be maintained. We expect the U.S. Federal Reserve (Fed) to reduce interest rates modestly in calendar 2026 as
slowing economic growth and rising unemployment partially offset concerns about the upward impact of tariffs on inflation. We
expect the Bank of England (BoE) will reduce interest rates once more before the end of calendar 2025 but we do not expect
additional reductions from the Bank of Canada (BoC) or the European Central Bank (ECB).
24
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Canada
Canadian GDP is expected to increase 1.2% in calendar 2025 following a 2.0% increase in calendar 2024. GDP contracted in the
second calendar quarter of 2025, impacted by reduced foreign demand for Canadian exports after U.S. tariffs were imposed, but
increased in the third calendar quarter of 2025. GDP growth is expected to remain slow but positive in calendar 2026, supported
by anticipated larger government deficit spending and lower interest rates even as trade uncertainty is expected to curtail
business investment and population growth slows. We expect most Canadian exports to the U.S. will remain duty free under the
exemption from tariffs for products compliant with the CUSMA; however, sector-specific tariffs, including those on lumber, steel
and aluminum, copper, the non-U.S. share of Canadian auto exports to the U.S. and China’s tariffs on Canadian products
including canola, still apply and will continue to slow production and exports in some affected sectors. The unemployment rate
declined to 6.9% in October 2025 after rising to 7.1% in August and September 2025 but is up 0.3% from a year earlier. The
unemployment rate is expected to remain elevated but gradually decline in calendar 2026 as hiring demand is expected to
stabilize and anticipated increases in government deficit spending support growth in GDP. The end of the consumer carbon tax
on energy products in most provinces has lowered the Canadian headline inflation rate, but excluding those changes, core
inflation measures are trending closer to the top of the BoC’s 1% to 3% inflation target range. Canadian population growth is
expected to continue to slow in calendar 2026, reflecting reduced federal immigration and nonpermanent resident population
targets. The BoC has already cut the overnight rate by 275 basis points since June 2024 and we do not expect additional
reductions.
U.S.
U.S. GDP has continued to grow but is expected to slow to a 1.8% increase in calendar 2025 following a 2.8% increase in calendar
2024. Consumer spending has been robust but employment growth has stalled, impacted by rising trade uncertainty, reduced
immigration and slower hiring in the industrial sector as tariffs have increased. The U.S. federal government shutdown has
prevented the release of key official economic data reports, but available data is consistent with gradually softening U.S. labour
markets. Layoffs have remained low but hiring demand has continued to slow, indicated by declining job openings. The
unemployment rate has edged higher but remains low at 4.4% as of the last reported rate in September 2025. We expect further
modest increases in the unemployment rate into early calendar 2026. U.S. inflation growth remains above the Fed’s 2% target
and has started to pick up as tariffs increase businesses’ input costs and consumer prices with a lag. Slower job growth in the
U.S. prompted the Fed to restart interest rate reductions in September 2025. We expect an additional 50 basis points of
reductions to the target range for the federal funds rate by the end of the second calendar quarter of 2026. A significant
government budget deficit is expected to keep GDP growth positive in calendar 2026 and prevent a larger increase in the
unemployment rate.
Euro area and the U.K.
Euro area GDP is expected to rise by 1.3% in calendar 2025 following a 0.8% increase in calendar 2024. Unemployment rates
remain very low across countries in the Euro area. Inflation in the Euro area has also remained low. The ECB has cut the deposit
rate by 200 basis points since the beginning of June 2024 and we expect no further reductions in calendar years 2025 or 2026.
U.K. GDP is projected to rise by 1.5% in calendar 2025 after a 1.1% rise in calendar 2024. The unemployment rate in the U.K. has
increased but is expected to stabilize in calendar 2026. U.K. inflation has moderated, allowing the BOE to begin gradually
lowering interest rates. The Bank rate has been reduced by 125 basis points since July 2024 to 4.0%. We expect one more
reduction by the BoE by the end of the calendar 2025 and no further reductions in calendar 2026.
Financial markets
Government bond yields have edged lower in Canada and the U.S. since the summer as concerns about the tariff impact on
economies and labour markets outweighed concerns about inflation and allowed the BoC and the Fed to reduce interest rates.
Government bond yields have also declined in the U.K. but are little changed in the Euro area. Equity markets remain close to
record highs. Commodity prices, on average, remain below peak levels from 2022 but are still historically high. Metal prices have
increased more significantly over the last three months. Oil prices have been volatile but have generally trended lower and are
below levels a year ago.
Regulatory environment
We continue to monitor and prepare for regulatory developments and changes in a manner that seeks to ensure compliance
with new requirements, while mitigating adverse business or financial impacts. Such impacts could result from new or amended
laws or regulations and the expectations of those who enforce them. A high-level summary of the key regulatory changes that
have the potential to increase or decrease our costs and the complexity of our operations is included in the Legal and regulatory
environment risk section.
For a discussion on risk factors resulting from these and other developments which may affect our business and financial
results, refer to the risk sections of this 2025 Annual Report. For further details on our framework and activities to manage risks,
refer to the risk and Capital management sections of this 2025 Annual Report.
Defining and measuring success
Financial performance objectives are used to measure our performance and are used as goals as we execute against our
strategic priorities over the medium-term (3-5 years), which we believe reflects a longer-term view of strong and consistent
financial performance.
We review and revise these financial performance objectives as economic, market and regulatory environments change.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
25
The following table provides a summary of our 3-year and 5-year performance against our medium-term financial
performance objectives:
Financial performance compared to our medium-term objectives
Table 2
Medium-term objectives
(1), (2)
3-year
(3)
5-year
(3)
Diluted EPS growth of 7% +
8%
13%
ROE of 16% +
15.0%
16.0%
Strong capital ratio (CET1)
(4)
13.8%
13.5%
Dividend payout ratio 40% – 50%
48%
46%
(1)
A medium-term (3-5 year) objective is considered to be achieved when the performance goal is met in either a 3- or 5-year period. These objectives assume a normal
business environment and our ability to achieve them in a period may be adversely affected by the macroeconomic backdrop and the cyclical nature of the credit cycle.
(2)
Our financial performance reflects the impact of specified items and the amortization of acquisition related intangibles.
(3)
Diluted EPS growth is calculated using a Compound Annual Growth Rate (CAGR). ROE, CET1 and dividend payout ratio are calculated using an average.
(4)
The CET1 ratio is calculated using OSFI’s CAR guideline. For further details on the CET1 ratio, refer to the Capital management section.
Our 3-year and 5-year medium-term financial performance objectives relating to diluted EPS growth, strong capital ratios and
dividend payout ratio will remain unchanged in fiscal 2026. For fiscal 2026, we have revised our ROE financial objective to 17%+
to reflect improving revenue productivity and cost efficiencies driven by the execution of our strategic initiatives.
We compare our TSR to that of a global peer group approved by our Board of Directors (the Board). The global peer group for
fiscal 2025 consisted of the following 9 financial institutions:
•
Canadian financial institutions:
Bank of Montreal, Canadian Imperial Bank of Commerce, Manulife Financial Corporation,
National Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank.
•
U.S. banks:
JPMorgan Chase & Co. and Wells Fargo & Company.
•
International banks:
Westpac Banking Corporation.
Medium-term objectives – 3- and 5-year TSR vs. peer group average
Table 3
3-year TSR
(1)
5-year TSR
(1)
Royal Bank of Canada
22%
22%
Bottom half
Bottom half
Peer group average (excluding RBC)
26%
25%
(1)
The 3- and 5-year annualized TSR are calculated based on our common share price appreciation as per the TSX closing market price plus reinvested dividends for the
period October 31, 2022 to October 31, 2025 and October 31, 2020 to October 31, 2025.
Common share and dividend information
Table 4
For the year ended October 31
2025
2024
2023
2022
2021
Common share price (RY on TSX) – close, end of period
$ 205.47
$ 168.39
$ 110.76
$ 126.05
$ 128.82
Dividends paid per share
6.04
5.60
5.34
4.96
4.32
Increase (decrease) in share price
22.0%
52.0%
(12.1)%
(2.2)%
38.3%
Total shareholder return
26.2%
57.8%
(8.3)%
1.6%
43.8%
Beginning in fiscal 2026, the achievement of top half total shareholder returns (TSR) will no longer be a medium-term objective.
TSR performance relative to peers will continue to be a part of our overall evaluation of shareholder outcomes and in our
compensation programs. However, we believe the achievement of our financial performance objectives is a better indication of
our execution against strategic priorities.
Financial performance
Overview
2025 vs. 2024
Net income of $20,369 million was up $4,129 million or 25% from last year. Diluted EPS of $14.07 was up $2.82 or 25% and ROE of
16.3% was up 190 bps. Our CET1 ratio was 13.5%, up 30 bps from last year.
Adjusted net income of $20,870 million was up $3,440 million or 20%. Adjusted diluted EPS of $14.43 was up $2.34 or 19% and
adjusted ROE of 16.7% was up 120 bps.
Our earnings were up from last year, primarily driven by higher results across all of our business segments. Prior year
results also reflect higher HSBC Canada transaction and integration costs and the impact of management of closing capital
volatility related to the HSBC Canada transaction, both of which were treated as specified items and reported in Corporate
Support. Our earnings also reflect an increase due to the impact of foreign exchange translation.
For further details on our business segment results and CET1 ratio, refer to the Business segment results and Capital
management sections, respectively.
Adjusted results
Adjusted results exclude specified items and the after-tax impact of amortization of acquisition-related intangibles. Adjusted
results are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP
measures section.
26
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Impact of foreign currency translation
The following table reflects the estimated impact of foreign currency translation on key income statement items:
Table 5
(Millions of Canadian dollars, except per share amounts)
2025 vs. 2024
Increase (decrease):
Total revenue
$
1,022
PCL
33
Non-interest expense
592
Income taxes
43
Net income
354
Impact on EPS
Basic
$
0.25
Diluted
0.25
The relevant average exchange rates that impact our business are shown in the following table:
Table 6
(Average foreign currency equivalent of C$1.00) (1)
2025
2024
U.S. dollar
0.712
0.736
British pound
0.545
0.575
Euro
0.641
0.677
(1)
Average amounts are calculated using month-end spot rates for the period.
Total revenue
Table 7
(Millions of Canadian dollars, except percentage amounts)
2025
2024
Interest and dividend income
$
103,825
$
104,951
Interest expense
70,825
76,998
Net interest income
$
33,000
$
27,953
NIM
1.62%
1.54%
Insurance service result
$
867
$
777
Insurance investment result
284
294
Trading revenue
3,125
2,327
Investment management and custodial fees
10,647
9,325
Mutual fund revenue
5,084
4,437
Securities brokerage commissions
1,905
1,660
Service charges
2,425
2,294
Underwriting and other advisory fees
2,899
2,672
Foreign exchange revenue, other than trading
1,301
1,142
Card service revenue
1,333
1,273
Credit fees
1,670
1,592
Net gains on investment securities
120
170
Income (loss) from joint ventures and associates
73
(16)
Other
1,872
1,444
Non-interest income
$
33,605
$
29,391
Total revenue
$
66,605
$
57,344
2025 vs. 2024
Total revenue increased $9,261 million or 16% from last year, largely due to higher net interest income and investment
management and custodial fees. Higher trading revenue, mutual fund revenue, other revenue, securities brokerage commissions
and underwriting and other advisory fees also contributed to the increase. The impact of foreign exchange translation increased
revenue by $1,022 million.
Net interest income increased $5,047 million or 18%, mainly due to an increase in average deposits and loans and
acceptances in Personal Banking and Commercial Banking, which includes the impact of five additional months of HSBC Canada
results, and higher spreads in Personal Banking. Higher fixed income trading revenue across most regions in Capital Markets
and the impact of foreign exchange translation also contributed to the increase.
NIM was up 8 bps compared to last year, reflecting contributions from most of our business segments with Personal Banking
being the largest contributor, which was driven by favourable changes in product mix and the sustained impact of a higher
interest rate environment.
Trading revenue increased $798 million or 34%, largely due to higher equity trading revenue in Europe and the U.S. and
higher foreign exchange trading revenue across all regions.
Investment management and custodial fees increased $1,322 million or 14%, primarily due to higher fee-based client assets
reflecting market appreciation and net sales.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
27
Mutual fund revenue increased $647 million or 15%, primarily due to higher fee-based client assets reflecting market
appreciation and net sales in Wealth Management, as well as higher average mutual fund balances driving higher distribution
fees in Personal Banking.
Securities brokerage commissions increased $245 million or 15%, primarily driven by client activity in Wealth Management.
Underwriting and other advisory fees increased $227 million or 8%, largely due to higher debt and equity origination across
most regions.
Other revenue increased $428 million or 30%, largely attributable to the impact of economic hedges, as well as the impact of
management of closing capital volatility related to the HSBC Canada transaction last year, which was treated as a specified
item.
Additional trading information
Table 8
(Millions of Canadian dollars)
2025
2024
Net interest income
(1)
$
2,335
$
1,742
Non-interest income
3,125
2,327
Total trading revenue
$
5,460
$
4,069
Total trading revenue by product
Interest rate and credit
$
2,773
$
2,371
Equities
1,492
817
Foreign exchange and commodities
1,195
881
Total trading revenue
$
5,460
$
4,069
(1)
Reflects net interest income arising from trading-related positions, including assets and liabilities that are classified or
designated at fair value through profit or loss (FVTPL).
2025 vs. 2024
Total trading revenue of $5,460 million, which is comprised of trading-related revenue recorded in Net interest income and
Non-interest income, increased $1,391 million or 34% from last year, largely due to higher equity trading revenue across most
regions, as well as higher fixed income and foreign exchange trading revenue across all regions. The impact of foreign exchange
translation also contributed to the increase.
Provision for credit losses
(1)
Table 9
For the year ended
(Millions of Canadian dollars, except percentage amounts)
October 31
2025
October 31
2024
Personal Banking
$
359
$
399
Commercial Banking
314
260
Wealth Management
(8)
(119)
Capital Markets
(43)
86
Corporate Support and other
(2)
–
1
PCL on performing loans
622
627
Personal Banking
$
1,757
$
1,418
Commercial Banking
1,236
714
Wealth Management
128
148
Capital Markets
613
340
Corporate Support and other
–
–
PCL on impaired loans
(2)
3,734
2,620
PCL – Loans
4,356
3,247
PCL – Other
(3)
6
(15)
Total PCL
$
4,362
$
3,232
PCL on loans is comprised of:
Retail
$
436
$
414
Wholesale
186
213
PCL on performing loans
622
627
Retail
1,961
1,586
Wholesale
1,773
1,034
PCL on impaired loans
3,734
2,620
PCL – Loans
$
4,356
$
3,247
PCL on loans as a % of average net loans and acceptances
0.43%
0.35%
PCL on impaired loans as a % of average net loans and
acceptances
0.37%
0.28%
(1)
Information on loans represents loans, acceptances and commitments.
(2)
Includes PCL recorded in Corporate Support and Insurance.
(3)
PCL – Other includes amounts related to debt securities measured at fair value through other comprehensive income
(FVOCI) and amortized cost, accounts receivable, and financial and purchased guarantees.
28
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
2025 vs. 2024
Total PCL increased $1,130 million or 35% from last year, primarily due to higher provisions in Commercial Banking, Personal
Banking and Capital Markets.
PCL on performing loans decreased $5 million. The impact of the initial PCL on performing loans purchased in the HSBC
Canada transaction in the prior year, migration to impaired in Capital Markets and lower unfavourable changes in credit quality
were largely offset by unfavourable changes to our scenario weights, which include the impacts of trade disruptions (including
tariffs), and lower favourable changes to our macroeconomic forecast.
PCL on impaired loans increased $1,114 million or 43%, primarily due to higher provisions in Commercial Banking, Personal
Banking and Capital Markets.
Non-interest expense
Table 10
(Millions of Canadian dollars, except percentage amounts)
2025
2024
Salaries
$
9,426
$
8,878
Variable compensation
9,983
8,838
Benefits and retention compensation
2,711
2,408
Share-based compensation
1,002
959
Human resources
23,122
21,083
Equipment
2,790
2,537
Occupancy
1,679
1,805
Communications
1,497
1,369
Professional fees
2,177
2,525
Amortization of other intangibles
1,759
1,549
Other
3,568
3,382
Non-interest expense
$
36,592
$
34,250
Efficiency ratio
(1)
54.9%
59.7%
Efficiency ratio – adjusted
(1), (2)
54.0%
57.1%
(1)
See Glossary for composition of these measures.
(2)
This is a non-GAAP ratio. For further details, including a reconciliation, refer to the Key performance and non-GAAP
measures section.
2025 vs. 2024
Non-interest expense increased $2,342 million or 7% from last year, mainly due to higher staff costs and higher variable
compensation commensurate with increased results. The impact of foreign exchange translation, ongoing technology
investments and the impact of five additional months of HSBC Canada non-interest expenses also contributed to the increase.
These factors were partially offset by lower HSBC Canada transaction and integration costs, which is treated as a specified item,
and the realization of synergies related to the HSBC Canada transaction.
Our efficiency ratio of 54.9% decreased 480 bps. Our adjusted efficiency ratio of 54.0% decreased 310 bps.
Adjusted efficiency ratio is a non-GAAP ratio. For further details, including a reconciliation, refer to the Key performance and
non-GAAP measures section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
29
Income and other taxes
Table 11
(Millions of Canadian dollars, except percentage amounts)
2025
2024
Income taxes
$
5,282
$
3,622
Other taxes
Value added and sales taxes
724
680
Payroll taxes
1,183
1,060
Capital taxes
36
47
Property taxes
160
155
Insurance premium taxes
47
45
Business taxes
99
61
2,249
2,048
Total income and other taxes
$
7,531
$
5,670
Income before income taxes
$
25,651
$
19,862
Effective income tax rate
20.6%
18.2%
Effective total tax rate
(1)
27.0%
25.9%
Adjusted results
(2), (3)
Income taxes – adjusted
$
5,436
$
3,984
Income before income taxes – adjusted
26,306
21,414
Effective income tax rate – adjusted
20.7%
18.6%
(1)
Total income and other taxes as a percentage of income before income taxes and other taxes.
(2)
These are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and
non-GAAP measures section.
(3)
See Glossary for composition of these measures.
2025 vs. 2024
Income tax expense increased $1,660 million or 46% from last year, primarily due to higher income before income taxes.
Adjusted income tax expense increased $1,452 million or 36%.
The effective income tax rate of 20.6% increased 240 bps, primarily due to the impact of changes in earnings mix and Pillar Two
legislation, which became effective for us beginning November 1, 2024. The adjusted effective income tax rate of 20.7% increased 210
bps. For further details on Pillar Two legislation, refer to Note 21 of our 2025 Annual Consolidated Financial Statements.
Other taxes increased $201 million or 10% from last year, primarily due to higher payroll taxes driven by higher staff-related
costs and higher value added and sales taxes commensurate with increased purchase activity.
Adjusted income tax expense, adjusted income before income taxes and adjusted effective income tax rate are non-GAAP
measures or ratios. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.
Client assets
Assets under administration
AUA are assets administered by us which are beneficially owned by our clients. We provide services that are administrative in
nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record keeping.
Underlying investment strategies within AUA are determined by our clients and generally do not impact the administrative fees
that we receive. Administrative fees can be impacted by factors such as asset valuation level changes from market movements,
types of services administered, transaction volumes, geography and client relationship pricing based on volumes or multiple
services.
Our Wealth Management business is the primary business segment that has AUA with approximately 94% of total AUA,
mainly in the Investor Services line of business with approximately 53% of AUA, as at October 31, 2025. The Personal Banking
business has approximately 5% of total AUA.
2025 vs. 2024
AUA increased $634 billion or 13% from last year, primarily due to market appreciation.
30
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
The following table summarizes AUA by geography and asset class:
AUA by geographic mix and asset class
Table 12
(Millions of Canadian dollars)
2025
2024
Canada
(1)
Money market
$
42,400
$
32,800
Fixed income
823,800
784,600
Equity
968,800
701,800
Multi-asset and other
1,554,300
1,458,300
Total Canada
3,389,300
2,977,500
U.S.
(1)
Money market
35,300
36,600
Fixed income
144,500
144,600
Equity
387,200
335,900
Multi-asset and other
515,700
432,900
Total U.S.
1,082,700
950,000
Other International
(1)
Money market
25,400
19,200
Fixed income
152,000
130,800
Equity
507,300
425,600
Multi-asset and other
442,300
462,400
Total International
1,127,000
1,038,000
Total AUA
$
5,599,000
$
4,965,500
(1)
Geographic information is based on the location from where our clients are serviced.
Assets under management
AUM are assets managed by us which are beneficially owned by our clients. Management fees are paid by the investment funds
and other clients for the investment capabilities of an investment manager and can also cover administrative services.
Management fees may be calculated daily, monthly or quarterly as a percentage of the AUM, depending on the distribution
channel, product and investment strategies. In general, equity strategies carry a higher fee rate than fixed income or money
market strategies. Fees are also impacted by asset mix and relationship pricing for clients using multiple services. Higher risk
assets generally produce higher fees, while clients using multiple services can take advantage of synergies which reduce the
fees they are charged. Certain funds may have performance fee arrangements where fees are recorded when certain
benchmarks or performance targets are achieved. These factors could lead to differences in fees earned by product and
therefore net return by asset class may vary despite similar average AUM. Our Wealth Management segment is the primary
business segment that has AUM with approximately 99% of total AUM as at October 31, 2025.
2025 vs. 2024
AUM increased $232 billion or 17% from last year, primarily due to market appreciation and net sales.
The following table presents the change in AUM for the year ended October 31, 2025:
Client assets – AUM
Table 13
2025
2024
(Millions of Canadian dollars)
Money market
Fixed income
Equity
Multi-asset
and other
Total
Total
AUM, beginning balance
(1)
$
62,800
$
281,300
$ 183,900
$ 814,300
$ 1,342,300
$ 1,067,500
Institutional inflows
233,900
57,000
12,400
9,100
312,400
318,400
Institutional outflows
(218,800)
(51,400)
(12,900)
(5,000)
(288,100)
(295,500)
Personal flows, net
1,800
5,000
4,200
24,700
35,700
19,800
Total net flows
16,900
10,600
3,700
28,800
60,000
42,700
Market impact
800
17,900
30,200
112,300
161,200
201,900
Acquisition/dispositions
–
–
–
–
–
20,600
Foreign exchange
500
2,600
200
7,000
10,300
9,600
Total market, acquisition/dispositions
and foreign exchange impact
1,300
20,500
30,400
119,300
171,500
232,100
AUM, balance at end of year
$
81,000
$
312,400
$ 218,000
$ 962,400
$ 1,573,800
$ 1,342,300
(1)
The amounts in the respective categories have been revised from those previously presented.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
31
Business segment results
Results by business segments
Table 14
2025
2024
(Millions of Canadian dollars,
except percentage amounts)
Personal
Banking
(1)
Commercial
Banking
(1)
Wealth
Management
(1)
Insurance
Capital
Markets
(1), (2)
Corporate
Support
(2)
Total
Total
Net interest income
$
14,496
$
7,268
$
5,459
$
–
$
4,789
$
988
$
33,000
$
27,953
Non-interest income
5,358
1,294
16,919
1,321
9,637
(924)
33,605
29,391
Total revenue
19,854
8,562
22,378
1,321
14,426
64
66,605
57,344
PCL
2,105
1,550
120
–
587
–
4,362
3,232
Non-interest expense
8,001
2,833
16,769
315
7,966
708
36,592
34,250
Income before income
taxes
9,748
4,179
5,489
1,006
5,873
(644)
25,651
19,862
Income taxes
2,643
1,159
1,200
178
480
(378)
5,282
3,622
Net income
$
7,105
$
3,020
$
4,289
$
828
$
5,393
$
(266)
$
20,369
$
16,240
ROE
(3)
24.9%
14.9%
16.6%
40.7%
13.7%
n.m.
16.3%
14.4%
Average assets
$ 563,500
$ 192,200
$
188,400
$ 31,000
$ 1,326,300
$
97,000
$ 2,398,400
$ 2,108,500
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, and are included in our Personal
Banking, Commercial Banking, Wealth Management and Capital Markets segments.
(2)
Net interest income, non-interest income, total revenue, income before income taxes and income taxes are presented in Capital Markets on a taxable equivalent basis
(teb). The teb adjustment is eliminated in the Corporate Support segment. For a further discussion, refer to the How we measure and report our business segments
section.
(3)
For further details, refer to the Key performance and non-GAAP measures section.
n.m. not meaningful
How we measure and report our business segments
Our management reporting framework is intended to measure the performance of each business segment as if it were a stand-
alone business and reflects the way that the business segment is managed. This approach is intended to ensure that our
business segments’ results include all applicable revenue and expenses associated with the conduct of their business and
depicts how management views those results.
Key methodologies
The following outlines the key methodologies and assumptions used in our management reporting framework. These are
periodically reviewed by management to ensure they remain valid.
Expense and tax allocation
To ensure that our business segments’ results include expenses associated with the conduct of their business, we allocate costs
incurred or services provided by Technology & Operations and Functions, which are directly undertaken or provided on the
business segments’ behalf. For other costs not directly attributable to our business segments, including overhead costs and
other indirect expenses, we use our management reporting framework for allocating these costs to each business segment in a
manner that is intended to reflect the underlying benefits.
Capital attribution
Our management reporting framework also determines the attribution of capital to our business segments in a manner that is
intended to consistently measure and align economic costs with the underlying benefits and risks associated with the activities
of each business segment. The amount of capital assigned to each business segment is referred to as attributed capital.
Unattributed capital and associated amounts are reported in Corporate Support. Our attributed capital methodology includes
the allocation of leverage to our business segments to further align our allocation processes with evolving regulatory capital
requirements. Effective the first quarter of 2025, we increased our capital attribution rates to our business segments to better
align with our internal targets, which reduced the amount of unattributed capital retained in Corporate Support. For Insurance,
the allocation of capital remained unchanged in fiscal 2025 and continued to be based on fully diversified economic capital. For
further information, refer to the Capital management section.
Funds transfer pricing
Funds transfer pricing refers to the pricing of intra-company borrowing or lending for management reporting purposes. We
employ a funds transfer pricing process to enable risk-adjusted management reporting of segment results. This process
determines the costs and revenue for intra-company borrowing and lending of funds after taking into consideration our interest
rate risk and liquidity risk management objectives, as well as applicable regulatory requirements.
Provisions for credit losses
PCL is recorded to recognize expected credit losses on all financial assets, except for financial assets classified or designated as
FVTPL and equity securities designated as FVOCI, which are not subject to impairment assessment. For details on our
accounting policy on Allowance for credit losses (ACL), refer to Note 2 of our 2025 Annual Consolidated Financial Statements.
PCL is included in the results of each business segment to fully reflect the appropriate expenses related to the conduct of
each business segment.
32
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
In addition to the key methodologies described above, the following components of our management reporting framework also
impact how our business segments are managed and reported:
•
Wealth Management results include disclosure in U.S. dollars, primarily for U.S. Wealth Management (including City
National Bank (“City National”)) as we review and manage the results of this business largely in this currency.
•
Capital Markets results are reported on a teb basis, which grosses up total revenue from certain tax-advantaged sources
(U.S. tax credit business and Canadian taxable corporate dividends received on or before December 31, 2023) to their
effective taxable equivalent value with a corresponding offset recorded in income taxes. We record the elimination of the
teb adjustments in Corporate Support. We believe these adjustments are useful and reflect how Capital Markets manages
its business, since it enhances the comparability of revenue and related ratios across taxable revenue and our principal
tax-advantaged sources of revenue. The use of teb adjustments and measures may not be comparable to similar GAAP
measures or similarly adjusted amounts disclosed by other financial institutions.
•
Corporate Support results include all enterprise level activities that are undertaken for the benefit of the organization that
are not allocated to our five business segments, such as certain liquidity and cash management activities, including
amounts associated with unattributed capital, and consolidation adjustments, including the elimination of the teb gross-up
amounts. In addition, we record gains (losses) on economic hedges of our U.S. Wealth Management (including City
National) share-based compensation plans, which are reflected in revenue, and related variability in share-based
compensation expense driven by changes in the fair value of liabilities relating to these plans in Corporate Support as we
believe this presentation more closely aligns with how we view business performance and manage the underlying risks.
Key performance and non-GAAP measures
Performance measures
We measure and evaluate the performance of our consolidated operations and each business segment using a number of
financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning
under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other
financial institutions.
Return on common equity
We use ROE, at both the consolidated and business segment levels, as a measure of return on total capital invested in our
business. Management views the business segment ROE measure as a useful measure for supporting investment and resource
allocation decisions because it adjusts for certain items that may affect comparability between business segments and certain
competitors.
Our consolidated ROE calculation is based on net income available to common shareholders divided by total average
common equity for the period. Business segment ROE calculations are based on net income available to common shareholders
divided by average attributed capital for the period. For each segment, with the exception of Insurance, average attributed
capital includes the capital and leverage required to underpin various risks as described in the Capital management section and
amounts invested in goodwill and intangibles and other regulatory deductions. For Insurance, the allocation of capital remained
unchanged in fiscal 2025 and continued to be based on fully diversified economic capital.
The attribution of capital involves the use of assumptions, judgments and methodologies that are regularly reviewed and
revised by management as deemed necessary. Changes to such assumptions, judgments and methodologies can have a
material effect on the business segment ROE information that we report. Other companies that disclose information on similar
attributions and related return measures may use different assumptions, judgments and methodologies.
The following table provides a summary of our ROE calculations:
Calculation of ROE
Table 15
2025
2024
(Millions of Canadian dollars,
except percentage amounts)
Personal
Banking
(3)
Commercial
Banking
(3)
Wealth
Management
(3)
Insurance
Capital
Markets
(3)
Corporate
Support
Total
Total
Net income available to
common shareholders
$
6,985
$
2,940
$
4,187
$
820
$
5,244
$
(308)
$
19,868
$
15,908
Total average common
equity
(1), (2)
28,100
19,650
25,200
2,000
38,350
8,750
122,050
110,650
ROE
24.9%
14.9%
16.6%
40.7%
13.7%
n.m.
16.3%
14.4%
(1)
Total average common equity represents rounded figures.
(2)
The amounts for the segments are referred to as attributed capital.
(3)
Effective the first quarter of 2025, we increased our capital attribution rates. For further details, refer to the How we measure and report our business segments section.
n.m. not meaningful
Non-GAAP measures
Non-GAAP measures and ratios do not have a standardized meaning under GAAP and may not be comparable to similar
measures disclosed by other financial institutions.
The following discussion describes the non-GAAP measures and ratios we use in evaluating our operating results.
Adjusted results and ratios
We believe that adjusted results are more reflective of our ongoing operating results and provide readers with a better
understanding of management’s perspective on performance. Specified items discussed below can lead to variability that could
obscure trends in underlying business performance and the amortization of acquisition-related intangibles can differ widely
between organizations. Excluding the impact of specified items and amortization of acquisition-related intangibles may enhance
comparability of our financial performance and enable readers to better assess trends in our underlying businesses.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
33
Our results for all reported periods were adjusted for the following specified item:
•
HSBC Canada transaction and integration costs. Effective the third quarter of 2025, we no longer treated HSBC Canada
transaction and integration costs as a specified item. Integration activities have been completed.
Our results for the prior year were also adjusted for the following specified item:
•
Management of closing capital volatility related to the HSBC Canada transaction.
Adjusted ratios, including adjusted EPS (basic and diluted), adjusted ROE and adjusted efficiency ratio, which are derived from
adjusted results, are useful to readers because they may enhance comparability in assessing profitability on a per-share basis,
how efficiently profits are generated from average common equity and how efficiently costs are managed relative to revenues.
Adjusted results and ratios can also help inform and support strategic choices and capital allocation decisions.
Consolidated results, reported and adjusted
The following table provides a reconciliation of our reported results to our adjusted results and illustrates the calculation of
adjusted measures presented. The adjusted results and ratios presented below are non-GAAP measures or ratios.
Table 16
(Millions of Canadian dollars, except per share, number of and percentage amounts)
2025
2024
Total revenue
$
66,605
$
57,344
PCL
4,362
3,232
Non-interest expense
36,592
34,250
Income before income taxes
25,651
19,862
Income taxes
5,282
3,622
Net income
$
20,369
$
16,240
Net income available to common shareholders
$
19,868
$
15,908
Average number of common shares (thousands)
1,409,072
1,411,903
Basic earnings per share (in dollars)
$
14.10
$
11.27
Average number of diluted common shares (thousands)
1,411,589
1,413,755
Diluted earnings per share (in dollars)
$
14.07
$
11.25
ROE
16.3%
14.4%
Effective income tax rate
20.6%
18.2%
Total adjusting items impacting net income (before-tax)
$
655
$
1,552
Specified item: HSBC Canada transaction and integration costs
(1), (2)
43
960
Specified item: Management of closing capital volatility related to the HSBC Canada
transaction
(1)
–
131
Amortization of acquisition-related intangibles
(3)
612
461
Total income taxes for adjusting items impacting net income
$
154
$
362
Specified item: HSBC Canada transaction and integration costs
(1)
13
201
Specified item: Management of closing capital volatility related to the HSBC Canada
transaction
(1)
–
36
Amortization of acquisition-related intangibles
(3)
141
125
Adjusted results
Income before income taxes – adjusted
$
26,306
$
21,414
Income taxes – adjusted
5,436
3,984
Net income – adjusted
20,870
17,430
Net income available to common shareholders – adjusted
(4)
20,369
17,098
Average number of common shares (thousands)
1,409,072
1,411,903
Basic earnings per share (in dollars) – adjusted
$
14.46
$
12.11
Average number of diluted common shares (thousands)
1,411,589
1,413,755
Diluted earnings per share (in dollars) – adjusted
$
14.43
$
12.09
ROE – adjusted
16.7%
15.5%
Effective income tax rate – adjusted
20.7%
18.6%
Adjusted efficiency ratio
Total revenue
$
66,605
$
57,344
Add specified item: Management of closing capital volatility related to the HSBC Canada
transaction (before-tax)
(1)
–
131
Total revenue – adjusted
(4)
$
66,605
$
57,475
Non-interest expense
$
36,592
$
34,250
Less specified item: HSBC Canada transaction and integration costs (before-tax)
(1)
43
960
Less: Amortization of acquisition-related intangibles (before-tax)
(3)
612
461
Non-interest expense – adjusted
(4)
$
35,937
$
32,829
Efficiency ratio
54.9%
59.7%
Efficiency ratio – adjusted
54.0%
57.1%
(1)
These amounts have been recognized in Corporate Support.
(2)
As at October 31, 2025, the cumulative HSBC Canada transaction and integration costs (before-tax) incurred were $1.4 billion. Effective the third quarter of 2025, we no
longer treated HSBC Canada transaction and integration costs as a specified item. Integration activities have been completed.
(3)
Represents the impact of amortization of acquisition-related intangibles (excluding amortization of software), and any goodwill impairment.
(4)
See Glossary for composition of these measures.
34
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Personal Banking
Personal Banking provides a broad suite of financial products and services to retail clients for their day-to-day banking,
investing and financing needs. We are focused on building deep and meaningful relationships with our clients, underscored by
the delivery of exceptional client experiences, the breadth of our product suite, our depth of expertise and the features of our
digital solutions.
~15 million
#1
32,335
Number of Personal Banking –
Canada clients
Ranking in market share for all key
retail products
1
Employees (FTE)
2
Revenue by Business Lines
We operate through two businesses – Personal Banking – Canada and
Caribbean & U.S. Banking. Personal Banking – Canada serves our home market
in Canada. We have the largest branch network, the most ATMs and one of the
largest mobile sales forces across Canada, along with market-leading digital
capabilities. In Caribbean & U.S. Banking, we offer a broad range of financial
products and services in targeted markets.
In Canada, we compete with other Schedule 1 banks, independent trust
companies, foreign banks, credit unions, caisses populaires and auto financing
companies, as well as emerging entrants to the financial services industry.
In the Caribbean, our competition includes banks, emerging digital banks, trust
companies and investment management companies serving retail and
corporate clients, as well as public institutions. In the U.S., we compete
primarily with other Canadian banking institutions that have U.S. operations.
94%
Personal Banking - Canada
6% Caribbean & U.S. Banking
Total revenue
$19.9 billion
2025 Operating environment
›
Amidst a lower inflationary environment, the BoC overnight interest rate has decreased significantly through a series of
interest rate cuts since June 2024. This has been accompanied by a shift in deposit mix towards demand deposits, which has
contributed to our continued increase in NIM throughout fiscal 2025.
›
Residential real estate markets continued to be impacted by softening demand throughout 2025, driven by the imposition of
tariffs from the U.S. administration as well as general macroeconomic uncertainty. Despite slower mortgage volume growth,
mortgage originations were up from the prior year.
›
In an environment where a higher cost of living and economic uncertainty continue to weigh on consumer spending,
consumers are displaying cautious spending habits. Despite these financial pressures, overall credit card purchase volumes
continued to grow from the prior year.
›
We recorded growth in non-term deposit products, reflecting a shift in client preference away from term deposit products, as
BoC interest rates have decreased. We also maintained our number one market share position in Personal Core Deposits and
Guaranteed Investments Certificates (GICs).
›
Favourable equity market conditions throughout the majority of fiscal 2025 and client sales activity have driven higher
average mutual fund balances.
›
The credit environment was impacted by rising unemployment rates, slowing economic growth and the impacts of trade
disruptions, resulting in higher provisions on impaired and performing loans.
›
We continued to focus on investments in staff along with ongoing investments in technology, including in AI and digital
transformation.
›
The Caribbean region’s economy continued to expand at a healthy pace in 2025, with the inflation rate in the region remaining
low as the impacts of higher import costs fueled by tariffs are yet to have a downstream impact on consumers. Our Caribbean
Banking business benefitted from strong volume growth in both loans and deposits as we continued to invest in growing the
franchise.
›
The U.S. Banking business benefitted from continued loan and deposit growth and the sustained level of higher U.S. interest
rates, despite uncertainty associated with U.S. trade policy and a decline in Canadian travel to the U.S.
1
Market share is calculated using the most current data available from OSFI (M4), the Securities and Investment Management Association (SIMA) and the Canadian
Bankers Association (CBA), and is as at August 2025 and June 2025. This is based on the following key product categories: Personal Lending (including residential
mortgages), Personal Core Deposits and GICs, Credit Cards and Long-term Mutual Funds.
2
Includes FTE for all shared services across Personal Banking and Commercial Banking, for which the related non-interest expenses are allocated to both Personal
Banking and Commercial Banking.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
35
Strategic priorities
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Enhance client value proposition
by providing exceptional value
and reciprocity
Received the highest ranking in customer satisfaction
for a second consecutive year in the J.D. Power 2025
Canada Retail Banking Satisfaction Study
Avion Rewards
®
was recognized for a third consecutive
year as the International Loyalty Program of the Year
(Americas) at the 2025 International Loyalty Awards.
The award recognizes the highest level of excellence
and innovation in loyalty programs on a global scale.
Avion Rewards also won top honors at the 2025
Loyalty360 Awards, recognizing the program’s creative
campaigns and data analytics innovations
Announced several strategic partnerships and
enhancements to expand our loyalty and credit card
offerings. These include a linked loyalty partnership
with Canadian Tire Corporation that links eligible RBC
cards and Triangle Rewards
‡
for clients to earn three
times Canadian Tire money, two new co-branded credit
cards and a linked loyalty partnership with Pattison
Food Group to offer exclusive everyday savings to
clients and allow them to earn more rewards on grocery
purchases. We also launched enhancements that
enabled WestJet
‡
RBC World Elite Mastercard and
WestJet RBC Mastercard
‡
cardholders to earn WestJet
points faster on everyday purchases and enjoy
expanded travel benefits and insurance options.
Additionally, we partnered with Visa
‡
to offer eligible
RBC Visa Cardholders a chance to win access to
purchase select tickets for FIFA World Cup 26
‡
Introduced credit at account opening under the RBC
Newcomer Advantage
®
program and continued to
engage HSBC Canada clients through proactive
marketing initiatives
Expanded access to no-cost banking accounts
1
for
Indigenous Peoples in Canada as well as anyone aged
24 and under, including non-students
Continue to build a suite of best-in-class value
propositions, digital experiences and ventures to
accelerate client acquisition and engage Canadians
earlier, more often and in more compelling ways
Focus on engaging key high-growth client segments
with superior advice and empower our advisors to build
new and deeper relationships to drive industry-leading
volume growth
Continue to support retail clients in achieving their
climate-related value propositions, including building
upon our existing portfolio of products, services and
advice
Continue to support the financial wellbeing of
Canadians through dedicated products, services and
advice
Optimize channels by servicing
clients through unparalleled
access and convenience
Won 10 Ipsos 2025 Financial Service Excellence Awards
among the Big 5 banks, including four solo wins in
“Recommend to Friends or Family (Net Promoter
Score)”, “Financial Planning & Advice”, “ATM Banking
Excellence” and “Online Banking Excellence”
Enabled clients to open GICs or Registered Savings
products through their mobile devices. Clients can now
open, purchase and set-up pre-authorized
contributions for Tax-free Savings Accounts and
Registered Retirement Savings Plans through their
mobile devices
Launched an easier and faster mortgage renewal
process for clients through a new streamlined, self-
serve option in the RBC Mobile app. Eligible clients can
now seamlessly and securely renew their RBC mortgage
from wherever is most convenient for them
Increased advisor sales power by digitizing
low-complexity tasks, leveraging alternate channels for
simpler servicing and expanding our remote sales
centres
Continue to deliver leading digital capabilities and
functionality through our mobile app
Continue to reimagine our branch network to meet the
evolving needs of our clients
Deliver anytime, anywhere solutions to our clients
across all channels
Upskill our expert advisor network to deliver more
personalized insights and address complex advice
needs
Leverage AI and hyper-
personalization to create
personalized client experiences,
improve efficiency and manage
risk
Scaled our proprietary AI foundation model for
financial services, ATOM
™
(Asynchronous Temporal
Model), which enables the bank to leverage unique
insights and develop innovative solutions within a
responsible AI framework that meets regulatory
requirements. ATOM has enhanced our credit
adjudication capabilities, enabling better assessment
of client needs and ability to pay. In addition, it has
enhanced our ability to provide personalized
recommendations, which are applied in our Avion
®
Redemption Newsletter, allowing us to streamline
offerings to our members
Deployed GenAI solutions in our Advice Centre to
support advisors with a number of tasks, from faster
access to knowledge and insights to executing
activities on their behalf, saving the advisor time to
focus on clients
Further scale ATOM in-market to hyper-personalize
client interactions across all client touchpoints,
leveraging offers across RBC’s product shelf and
insights on client behaviours and anticipating servicing
needs to create substantially deeper relationships with
existing RBC clients
Deploy agentic capabilities through our enterprise
GenAI platform to enable more automation across
workflows and enable AI to surface unique insights
from our data assets
1
This expanded access has in part been made available through RBC’s adherence to recent enhancements to voluntary Commitment on Low-Cost and No-Cost Accounts,
which came into effect on December 1, 2025.
36
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Attract, grow and retain future-
ready talent
Empowered teams to deliver against our strategy by
transforming our Personal Banking organizational
structure to align teams against our biggest growth
opportunities
Supported development of talent through targeted
employee moves to new and/or expanded roles to
develop in-demand skills and build key capabilities for
the future
Continued leadership development through various
enterprise and business segment programs, including
leadership summits, strategy seminars and people
manager enablement programs such as webinars,
workshops and learning programs
Further strengthened our culture of inclusion and
belonging by engaging employee participation in key
global enterprise events and Employee Resource
Groups
Build critical future skills through targeted
development experiences for leaders and employees
aligned to our bold ambitions
Inspire and enable teams to achieve ambitious
outcomes and high-performance
Develop and coach leaders to champion transformation
and growth and foster a client-focused culture
Empower our leaders and employees through AI to
reimagine what’s possible and accelerate innovation
In the Caribbean
Progressed and accelerated key initiatives including
data transformation, product innovation and
streamlining regulatory compliance by digitizing our
processes, expanding products and prioritizing
resources to modernize and simplify our business and
deliver an enhanced client and employee experience
Continue to deepen our focus in growth segments,
while maintaining momentum in operational excellence
by accelerating digital and process modernization and
further aligning our business model to deliver
differentiated value for clients and employees
In the U.S.
Continued to enable new client onboarding and cross-
border banking through deeper integration with
Canadian franchise product, channel and marketing
strategies
Continued to develop digital capabilities and
automation to enhance scalability, further integrate our
products, simplify processes and improve the client
experience
Further align with Canadian value proposition, product
strategies and channel experiences to drive new client
acquisition and anchor existing relationships
Continue the transformation of sales and service
channels to improve productivity and streamline client
acquisition and servicing processes
Outlook
For fiscal 2026, the macroeconomic outlook remains uncertain as markets and market participants navigate the impact of
geopolitical activity, including tariffs. Canadian labour markets have softened as tariff hikes from the U.S. administration have
led to job losses, particularly in the heavily trade-exposed North American industrial sector. U.S. trade policy remains a
significant source of uncertainty. Most Canadian exports to the U.S. have remained duty free under an exemption from tariffs on
products compliant with the CUSMA free trade agreement, which is expected to begin a formal review process in July 2026. GDP
growth is expected to remain slow but positive in 2026, supported by stabilizing domestic labour demand, resilient consumer
spending, planned increases in federal and provincial government spending and the lagged impact of the 2025 BoC interest rate
cuts. Home resales are expected to recover gradually in 2026 as lower interest rates and, in some markets, lower prices
stimulate buyer demand. The unemployment rate is expected to remain elevated but gradually decline in calendar 2026 as hiring
demand stabilizes. We do not expect further reductions in the BoC’s overnight rate in calendar 2026. We expect the continued
benefit of our structural hedges to reduce volatility in NIM from short-term rate movements.
In the U.S., GDP growth is also expected to remain slow but positive in 2026, with the negative impact of tariffs on growth in
the U.S. industrial sector expected to be offset by high levels of government spending and Federal Reserve interest rate cuts.
In the Caribbean region, GDP growth is expected to remain modest but positive in 2026, supported by historically high global
commodity prices as well as continued growth in key sources of tourism demand in the region including the Euro Area, the U.K.,
the U.S. and Canada.
We will continue to pursue industry-leading growth and will seek to deepen client relationships to meet the evolving needs
of our clients.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and
outlook section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
37
Personal Banking
(1)
Table 17
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
2025
2024
Net interest income
$
14,496
$
12,438
Non-interest income
5,358
4,904
Total revenue
19,854
17,342
PCL on performing assets
358
392
PCL on impaired assets
1,747
1,410
PCL
2,105
1,802
Non-interest expense
8,001
7,485
Income before income taxes
9,748
8,055
Net income
$
7,105
$
5,921
Revenue by business
Personal Banking – Canada
$
18,593
$
16,206
Caribbean & U.S. Banking
1,261
1,136
Key ratios
ROE
24.9%
24.8%
NIM
2.66%
2.43%
Efficiency ratio
40.3%
43.2%
Operating leverage
(2)
7.6%
2.2%
Selected balance sheet information
Average total assets
$
563,500
$
528,200
Average total earning assets, net
545,900
512,300
Average loans and acceptances, net
535,600
502,700
Average deposits
437,800
404,600
Other information
AUA
(3), (4)
$
288,500
$
255,400
Average AUA
267,400
235,500
AUM
(4)
6,100
6,400
Number of employees (FTE)
(5)
32,335
38,642
Credit information
PCL on impaired loans as a % of average net loans and acceptances
0.33%
0.28%
Other selected information – Personal Banking – Canada
Net income
$
6,717
$
5,550
NIM
2.58%
2.35%
Efficiency ratio
38.8%
41.6%
Operating leverage
7.5%
2.3%
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances
and ratios for all reported periods.
(2)
See Glossary for composition of this measure.
(3)
AUA includes securitized residential mortgages and credit card loans as at October 31, 2025 of $15 billion and $5 billion, respectively (October 31, 2024 – $15 billion and
$6 billion).
(4)
Represents year-end spot balances.
(5)
Includes FTE for all shared services across Personal Banking and Commercial Banking, for which the related non-interest expenses are allocated to both Personal
Banking and Commercial Banking. Effective the fourth quarter of 2025, approximately 5,500 FTE who were previously shared services and are now dedicated to
Commercial Banking were transferred from Personal Banking to Commercial Banking. As a result, FTE from the prior period may not be fully comparable.
Financial performance
2025 vs. 2024
Net income increased $1,184 million or 20% from last year, primarily driven by higher net interest income reflecting higher
spreads and average volume growth of 7% in Personal Banking – Canada. Higher non-interest income also contributed to the
increase. These factors were partially offset by higher non-interest expenses. Net income for the current year includes the
impact of five additional months of HSBC Canada results.
Total revenue increased $2,512 million or 14%, primarily due to higher net interest income reflecting higher spreads and an
increase of 8% in average deposits and 6% in average loans in Personal Banking – Canada, which includes the impact of five
additional months of HSBC Canada results. Higher average mutual fund balances driving higher distribution fees also
contributed to the increase.
NIM was up 23 bps, mainly due to favourable changes in product mix and the sustained impact of a higher interest rate
environment.
PCL increased $303 million or 17%, primarily due to higher provisions on impaired loans in our Canadian credit cards and
personal portfolios. This was partially offset by lower provisions on performing loans, primarily driven by lower unfavourable
changes in credit quality, partially offset by unfavourable changes to our scenario weights.
Non-interest expense increased $516 million or 7%, primarily due to higher staff-related costs, including severance, the
impact of five additional months of HSBC Canada non-interest expenses and ongoing technology investments, net of realized
synergies related to the HSBC Canada transaction.
Average loans and acceptances increased 7%, primarily driven by growth in residential mortgages and the impact of five
additional months of HSBC Canada balances.
Average deposits increased 8%, primarily reflecting an increase in demand and term deposits. The impact of five additional
months of HSBC Canada balances also contributed to the increase.
38
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Business line review
Personal Banking – Canada
Personal Banking – Canada offers a full range of products focused on meeting the needs of our individual Canadian clients at
every stage of their lives through a wide range of financing and investment products and services. This includes home equity
financing, personal lending, chequing and savings accounts, private banking, indirect lending (including auto financing), mutual
funds, GICs, credit cards, and payment products and solutions.
We rank #1 in market share for all key Personal Banking products in Canada, supported by the largest retail banking network
in Canada, with 1,159 branches and 3,869 ATMs.
Financial performance
Total revenue increased $2,387 million or 15% compared to last year, primarily due to higher net interest income reflecting higher
spreads and an increase of 8% in average deposits and 6% in average loans, which includes the impact of five additional months
of HSBC Canada results. Higher average mutual fund balances driving higher distribution fees also contributed to the increase.
Average residential mortgages increased 7%, primarily reflecting an increase in mortgage originations and the impact of
five additional months of HSBC Canada balances.
Average deposits increased 8%, primarily reflecting an increase in demand and term deposits. The impact of five additional
months of HSBC Canada balances also contributed to the increase.
Selected highlights
(1)
Table 18
(Millions of Canadian dollars, except number of)
2025
2024
Total revenue
$
18,593
$
16,206
Other information
Average residential mortgages
414,100
388,500
Average other loans and acceptances, net
82,600
78,300
Average deposits
413,600
382,300
Average credit card balances
25,200
23,400
Credit card purchase volumes
196,600
185,000
Branch mutual fund balances
(2)
257,400
223,600
Average branch mutual fund balances
235,600
204,000
Number as at October 31:
Branches
(3)
1,159
1,189
ATMs
(3)
3,869
4,042
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada
results have been consolidated from the closing date, which impacted results
for all reported periods.
(2)
Represents year-end spot balances.
(3)
Branches and ATMs are shared across Personal Banking and Commercial
Banking.
0
100,000
50,000
150,000
200,000
250,000
300,000
Other loans and
acceptances, net
Residential mortgages
Deposits
Average residential mortgages, loans and deposits
(Millions of Canadian dollars)
2025
2024
450,000
400,000
350,000
Caribbean & U.S. Banking
Our Caribbean Banking business provides personal and commercial banking to a range of clients, including individuals, small
businesses, general commercial entities, regional and multi-national corporations, and governments, supported by an extensive
branch, ATM, online and mobile banking network.
Our U.S. Banking business serves the needs of Canadian retail and small business clients providing personalized, digitally-
enabled cross-border banking solutions enabling a cross-border lifestyle in all 50 states across the U.S.
Financial performance
Total revenue increased $125 million or 11% from last year, mainly due to higher net interest income reflecting average volume
growth in loans and deposits. The impact of foreign currency translation and higher card service revenue also contributed to the
increase.
Average loans and acceptances increased 10% and average deposits increased 9%, primarily due to increased client activity
and the impact of foreign exchange translation.
Selected highlights
Table 19
(Millions of Canadian dollars,
except number of and percentage amounts)
2025
2024
Total revenue
$
1,261
$
1,136
Other information
NIM
4.20%
4.26%
Average loans and acceptances, net
13,700
12,500
Average deposits
24,200
22,300
AUA
(1)
11,500
11,000
Average AUA
11,200
10,700
AUM
(1)
6,100
5,700
Average AUM
5,800
5,600
Number as at October 31:
Branches
38
38
ATMs
247
259
(1)
Represents year-end spot balances.
2024
Loans and acceptances, net
Deposits
Average loans and deposits
(Millions of Canadian dollars)
0
10,000
12,500
15,000
17,500
5,000
7,500
2,500
20,000
2025
25,000
22,500
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
39
Commercial Banking
Commercial Banking serves the end-to-end needs of Canadian businesses, including subsidiaries of multi-nationals. We deliver a
full spectrum of services to the market, ranging from lending and deposits to payments, cash management and advisory services.
Our comprehensive coverage teams with specialization across industries and products give us the scale to deliver holistic
solutions to our clients.
~ 1.4 million
#1
> 3,500
Number of Commercial Banking
clients
Ranking in market share in
commercial lending and deposits
1
Client-facing advisors and
specialists
Revenue by Product
We are a market-leading, full-service commercial bank that meets the needs
of Canadian businesses, including subsidiaries of multi-nationals.
In Canada, we compete with other Schedule 1 banks, foreign banks, credit
unions, specialized financing companies, as well as emerging non-traditional
entrants to the financial services industry.
For small businesses, we offer convenience through 1,159 branches in Canada
and comprehensive digital solutions supported by experienced advisors. For
commercial clients, we provide customized banking advice through our
network of industry-specialized relationship managers and product
specialists. Our corporate clients benefit from tailored product solutions and
premium high-touch services via a broad team of specialists and market-
leading capabilities.
59%
Deposits and Cash Management
41% Lending
Total revenue
$8.6 billion
2025 Operating environment
›
In 2025, trade uncertainty negatively impacted the economy, eroding business confidence and reducing capital investment. As
a result, businesses delayed long-term strategic investments, leading to decreased business investment and weaker
employment. This cautious business environment led to a slowdown in lending growth.
›
Following the BoC’s monetary policy easing since June 2024, clients shifted towards demand deposits with a preference for
liquidity during this time of economic uncertainty. This led to a mix shift in our portfolio, with funds flowing from term products
towards demand deposits.
›
Despite unfavourable business sentiment and increased competition, our diversified Commercial Banking business achieved
volume growth across all major product lines and client segments.
›
The credit environment was impacted by rising unemployment rates, slowing economic growth and the impacts of trade
disruptions, resulting in higher provisions on impaired and performing loans.
1
Market share is calculated based on deposit balances excluding term deposits from OSFI (M4) and lending balances from CBA, and is as at August 2025 and March 2025,
respectively.
40
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Strategic priorities
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Invest in digital and AI to drive
productivity and efficiency
Continued to invest in digitizing our business to drive
more convenience, efficiency and speed for our clients
Modernized our transaction banking platform RBC
Edge
TM
to better support clients’ increasingly complex
cash management needs
Continue to create a digitized and AI-enabled credit
experience for clients, including our modernized credit
platform and auto-adjudication capabilities
Further develop self-serve digital onboarding for our
clients, refining the experience in virtual accounts
management and liquidity management
Target segments and sectors to
drive premium growth
Realigned coverage teams to better match capabilities
with client needs to provide more effective support for
large commercial and corporate clients
Generated market growth in Indigenous Banking,
supported by the expansion of our team serving these
communities, cross-enterprise collaboration and active
engagement with Indigenous communities
Enhanced advisor training on climate topics through a
program developed in collaboration with Green
Economy Canada to help advisors support clients on
their transition and resilience journeys
Extended our leadership position in the small business
and core commercial banking segments through client
acquisition strategies and new value propositions
Develop and execute strategies for key growth sectors
Continue to deploy new tailored servicing model for
large commercial and corporate clients aimed at
driving simplicity and efficiency
Continue to execute on refined coverage model and
transition teams to a singular platform
Engage with clients to understand their plans for the
climate transition and where RBC can assist Canadian
businesses in achieving their growth and sustainability
goals
Differentiate through trade and
payments capabilities with
international connectivity
Recognized by Global Finance Magazine as the best
overall bank for cash management in Canada for the
fourth consecutive year and the leading trade finance
provider in Canada for the thirteenth consecutive year
Completed integration of HSBC Canada with minimal
client attrition
Unified transaction banking coverage group, bringing
together expertise from multiple teams within treasury
and trade solutions and product support to streamline
client experience and drive business growth
Built out global payments solutions, such as trade
finance and foreign exchange in conjunction with
Capital Markets
Established greater collaboration with City National to
support the U.S. banking needs of Canadian
commercial and corporate clients resulting in a
significant increase in cross-border activity
Developed key capabilities within RBC Edge for cross-
border cash management that are critical for our north-
south transaction banking strategy
Roll out dedicated support model tailored for the needs
of transaction banking clients with specialized
expertise
Continue to invest in best-in-class North American
liquidity solutions that enable clients to optimize
working capital on both sides of the border
Continue to invest in cross-border capabilities including
our RBC Edge platform in conjunction with RBC Clear
TM
Attract, grow and retain future-
ready talent
Empowered teams to deliver against our strategy by
transforming our Commercial Banking organizational
structure to align teams against our biggest growth
opportunities
Supported development of talent through targeted
employee moves to new and/or expanded roles to
develop in-demand skills and build key capabilities for
the future
Continued leadership development through various
enterprise and business segment programs, including
leadership summits, strategy seminars and people
manager enablement programs such as webinars,
workshops and learning programs
Further strengthened our culture of inclusion and
belonging by engaging employee participation in key
global enterprise events and Employee Resource
Groups
Build critical future skills through targeted
development experiences for leaders and employees
aligned to our bold ambitions
Inspire and enable teams to achieve ambitious
outcomes and high-performance
Develop and coach leaders to champion transformation
and growth and foster a client-focused culture
Empower our leaders and employees through AI to
reimagine what’s possible and accelerate innovation
Outlook
For fiscal 2026, the macroeconomic outlook remains uncertain as markets and market participants navigate the impact of geopolitical
activity, including tariffs. Tariffs imposed by the U.S. administration have slowed economic growth, particularly in the heavily trade-
exposed North American industrial sector. The outlook for Canadian economic growth remains highly contingent on the unpredictable
U.S. trade policy. However, an exemption from additional tariffs on most Canadian exports compliant with the CUSMA free trade
agreement and increased government spending are expected to support modest but positive growth in the Canadian economy in
calendar 2026. We do not expect further reductions in the BoC’s overnight rate following the reduction in October before the end of
calendar 2025. We do not expect further reductions in calendar 2026 with government spending providing the main source of policy
response to targeted sectors negatively impacted by tariffs.
With a well-diversified portfolio and market-leading solutions, we are well-positioned to support clients through all stages of the
economic cycle. Improvements in business sentiment and anticipated government programs are expected to provide relief for
economically sensitive sectors and support growth. However, ongoing trade uncertainty remains a headwind that could negatively
impact growth. Our investments in transaction banking, client coverage and servicing allow us to meet the evolving needs of our clients
and pursue industry-leading, durable growth.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook
section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
41
Commercial Banking
(1)
Table 20
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
2025
2024
Net interest income
$
7,268
$
6,061
Non-interest income
1,294
1,321
Total revenue
8,562
7,382
PCL on performing assets
314
261
PCL on impaired assets
1,236
714
PCL
1,550
975
Non-interest expense
2,833
2,512
Income before income taxes
4,179
3,895
Net income
$
3,020
$
2,818
Key ratios
ROE
14.9%
18.5%
NIM
3.89%
4.06%
Efficiency ratio
33.1%
34.0%
Operating leverage
3.2%
5.2%
Selected balance sheet information
Average total assets
$
192,200
$
165,400
Average total earning assets, net
186,800
149,400
Average loans and acceptances, net
186,800
161,600
Average deposits
308,700
281,800
Other information
Number of employees (FTE)
(2)
7,012
1,290
Credit information
PCL on impaired loans as a % of average net loans and acceptances
0.66%
0.44%
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances
and ratios for all reported periods.
(2)
Excludes FTE for all shared services across Personal Banking and Commercial Banking, for which the related non-interest expenses are allocated to both Personal
Banking and Commercial Banking. Effective the fourth quarter of 2025, approximately 5,500 FTE who were previously shared services and are now dedicated to
Commercial Banking were transferred from Personal Banking to Commercial Banking. As a result, FTE from the prior period may not be fully comparable.
Financial performance
2025 vs. 2024
Net income increased $202 million or 7% from last year, as growth in total revenue was partially offset by higher PCL and non-
interest expense. Net income for the current year includes the impact of five additional months of HSBC Canada results.
Total revenue increased $1,180 million or 16%, primarily due to higher net interest income, reflecting an increase of 16% in
average loans and acceptances and 10% in average deposits, which includes the impact of five additional months of HSBC
Canada results. The increase in net interest income also includes the impact of the cessation of Bankers’ Acceptance-based
lending, which was largely offset in credit fees within non-interest income.
PCL increased $575 million or 59%, primarily due to higher provisions on impaired loans across most sectors. Higher
provisions on performing loans also contributed to the increase, primarily driven by unfavourable changes to our scenario
weights, credit quality and macroeconomic forecast, partially offset by the impact of the initial PCL on performing loans
purchased in the HSBC Canada transaction in the prior year.
Non-interest expense increased $321 million or 13%, primarily due to higher staff-related costs, the impact of five additional
months of HSBC Canada non-interest expenses and ongoing technology investments, net of realized synergies related to the
HSBC Canada transaction.
Average loans and acceptances, and average deposits increased 16% and 10%, respectively, primarily driven by growth
across all client segments and the impact of five additional months of HSBC Canada balances.
42
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Wealth Management
Wealth Management primarily serves affluent, high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients from our offices
in key financial centres across the globe. We offer a comprehensive suite of wealth, investment, trust, banking, credit and other
solutions to this client segment. We also provide a self-directed investment service in Canada, as well as asset management
products globally to institutional and individual clients through our distribution channels and third-party distributors. We offer
asset services and investor services to financial institutions, asset managers and asset owners in Canada.
$22.4 billion
> 6,200
~ 75%
Total revenue
Client-facing advisors
GAM AUM outperforming the benchmark
on a 5-year basis
1
Assets under Administration
(AUA)
Total AUA
$5,285 billion
42% Personal
57% Institutional
1% Mutual Funds
Assets under Management
(AUM)
Total AUM
$1,564 billion
51% Personal
25%
Mutual Funds
24% Institutional
Our lines of business include Canadian Wealth
Management, U.S. Wealth Management
(including City National), Global Asset
Management (GAM), International Wealth
Management and Investor Services.
•
Canadian Wealth Management includes a full-
service wealth advisory business serving HNW
and UHNW clients, as well as a leading self-
directed investment service in Canada. The full-
service wealth advisory business is the largest
in Canada, as measured by AUA.
•
U.S. Wealth Management (including City
National) encompasses our private client
group (PCG), clearing and custody (C&C)
businesses and City National. PCG is a full-
service wealth advisory firm in the U.S., C&C
provides a wide array of clearing and execution
services for independent broker dealers and
registered investment advisors. City National is
a U.S.-based relationship bank serving the
entertainment industry, mid-market
businesses, HNW and UHNW individuals and
other clients who value personalized banking
relationships.
•
GAM is the largest retail mutual fund company
in Canada as measured by AUM, as well as a
leading institutional asset manager.
•
International Wealth Management serves
affluent, HNW and UHNW clients, primarily
through key financial centres in the U.K.,
Ireland, the Channel Islands and Asia.
•
Investor Services delivers asset servicing
solutions to Canadian asset managers, asset
owners, insurance companies and private
wealth advisors. Investor Services also
provides sub-custody services to global
financial institutions and brokers.
2025 Operating environment
›
Earnings in the current fiscal year benefitted from strong growth in client assets, primarily driven by favourable market
conditions and positive net flows.
›
Our wealth advisory businesses continued to realize net positive flows of fee-based client assets reflecting the strength of our
business driven by the quality of our advice, the breadth of our investment and holistic wealth planning solutions and clients’
trust in our brand. Within our asset management businesses, we captured increased share in Canadian retail mutual fund
sales as the sector returned to positive net flows.
›
We continued to invest in our people and technology to maintain our competitive advantage and increase efficiencies in an
environment characterized by market volatility, changing client preferences and stringent regulatory expectations.
›
The credit environment reflected better-than-expected U.S. economic growth, tempered by elevated U.S. interest rates,
resulting in lower provisions on impaired loans.
1
The percentage of assets in funds beating the benchmark represents performance of RBC GAM Canadian retail mutual funds, excluding index funds. Past performance is no
guarantee of future results. Benchmarks used are total return indices. Performance is based on gross-of-fee returns using data available from SIMA as of October 2025.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
43
Strategic priorities
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
In Canada, be the premier service
provider for HNW and UHNW clients,
and build on our leading position
serving self-directed investors
Further extended our position as an industry leader in
our full-service private wealth business
Continued to focus on holistic wealth planning, including
advisor training on intergenerational and business
wealth transfer
Continued to offer RBC Premier Banking solutions to our
clients to deepen banking relationships with Wealth
Management clients
Focused on the business owner client segment by
running business owner planning to deepen
collaboration and provide solutions to address financial
needs across business segments including Personal
Banking and Commercial Banking
Continued to enhance digital and data capabilities,
modernize infrastructure and invest in personalized
client experiences to boost client satisfaction and
advisor productivity
Focused on providing unique product capabilities that
are becoming increasingly important to our HNW and
UHNW client base, such as private alternative investment
products
Introduced commission-free ETF trading in RBC Direct
Investing
™
to strengthen our value proposition with
early-stage investors, and launched our Royal Distinction
program that provides dedicated support and exclusive
benefits to our HNW clients
Build on our existing entrepreneurial and diverse culture
and reward system that retains, attracts and motivates
top wealth management talent in Canada
Deliver a differentiated client experience through
enriched advisor-client interactions and seamless digital
experiences
Focus on strategic partnership opportunities that
support clients on healthy aging, philanthropic and
personal goals
Deepen client relationships by leveraging the combined
strengths across other business segments (Personal
Banking and Commercial Banking) with a focus on the
business owner client segment
Continue to invest in digital solutions to streamline and
improve efficiency and advisor productivity, including
emerging AI capabilities in partnership with RBC Borealis
™
Continue to win early-stage investors in RBC Direct
Investing through our low-cost acquisition funnel and
launch new products and services for the audience,
while simultaneously streamlining the transition of our
mass affluent and HNW investors into full-service
advice relationships
Full capabilities to serve U.S. clients
and deliver strong performance
through the cycle
Continued to invest in key areas needed to drive growth
in the U.S. market, including expanding our banking and
lending solutions with the introduction of RBC Premium
Savings, enhancements to the digital platform with
AI-powered insights and record high financial advisor
recruitment
At City National, we focused on enhancing our risk
management capabilities across the three lines of
defence for sustainable, organic growth in the future.
City National also continued to refine its business mix,
exit non-core segments and deepen client relationships
through new product capabilities
Continue to deliver an exceptional client experience for
targeted HNW and UHNW segments by deepening client
relationships with the expansion of our banking and
lending and wealth planning solutions and continuing the
recruitment of highly productive advisors
Increase investments in technology and leverage the
combined strengths within U.S. Wealth Management
(including City National) and Capital Markets to deepen
client relationships
At City National, we will continue to focus on enhancing
our risk management capabilities across the three lines
of defence, as well as improving profitability, stability
and scalability
In select global financial centres,
become the most trusted regional
private bank
Continued to deliver on growth initiatives, bringing the
full strength and breadth of RBC to our clients
Focused on delivering a differentiated client experience
by leveraging our global capabilities
Continued to leverage RBC Brewin Dolphin to support our
position as a top five largest wealth manager in the U.K.
Achieved growth and continued momentum in Asia
through the addition of experienced client-facing
advisors and net new assets
Continue to focus on growing market share in target
markets
Continue to leverage our global strengths to better serve
clients and deepen relationships, taking advantage of
our expanded product suite and distribution channels
Continue to deliver an exceptional client experience and
increase business effectiveness and talent capabilities
Continue to enhance client value proposition and
consolidation of position in the U.K. local market
In Asia, continue to focus on achieving scale by growing
the business through the hiring of experienced client-
facing advisors and leveraging our global capabilities
In asset management, be a leading,
diversified asset manager focused on
retail clients in Canada and wealth
platforms and institutional clients
globally
Maintained #1 market share in Canadian mutual fund
AUM
RBC
®
iShares strategic alliance maintained #1 market
share in Canadian ETFs
Completed the integration of RBC Indigo Asset
Management Inc., formerly HSBC Asset Management
Canada, into GAM
Continue to focus on delivering exceptional investment
performance and valued insights with client experience
at the centre of all that we do
Continue to expand our investment capabilities,
including alternative investment solutions, to meet
evolving client needs in our target distribution regions
Become Canada’s undisputed leader
in investment servicing by focusing
on our clients and employees,
investing for today and tomorrow and
leveraging OneRBC
Launched Ignite 2027, our strategy dedicated to our
Canadian Investor Services business with a focus on
client and employee experience, and significant
investment in technology and people
Continue with Ignite 2027 focused on client-centred
investments to deliver world-class solutions at scale that
help clients achieve their growth and efficiency
aspirations
Attract, grow and retain future-ready
talent
Empowered teams to deliver against our strategy by
transforming our Wealth Management organizational
structure to align teams against our biggest growth
opportunities
Supported development of talent through targeted
employee moves to new and/or expanded roles to
develop in-demand skills and build key capabilities for
the future
Continued leadership development through various
enterprise and business segment programs, including
leadership summits, strategy seminars and people
manager enablement programs such as webinars,
workshops and learning programs
Further strengthened our culture of inclusion and
belonging by engaging employee participation in key
global enterprise events and Employee Resource Groups
Build critical future skills through targeted development
experiences for leaders and employees aligned to our
bold ambitions
Inspire and enable teams to achieve ambitious outcomes
and high-performance
Develop and coach leaders to champion transformation
and growth and foster a client-focused culture
Empower our leaders and employees through AI to
reimagine what’s possible and accelerate innovation
44
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Outlook
For fiscal 2026, the macroeconomic outlook remains uncertain, with markets and clients navigating the impact of trade policy
developments, including tariff developments and anticipated changes to trade agreements. Although the most severe tariff scenarios
earlier in calendar 2025 have not materialized, sluggish growth is still expected over the coming quarters as businesses and households
adapt. In the U.S., inflation is likely to be slightly higher than normal for a period due to increased import tariffs, but is not expected to
reach the levels seen during the 2022 inflation shock. In contrast, Canadian inflation is expected to be relatively stable due to the
significant withdrawal of retaliatory tariffs.
Despite this evolving landscape, we are well-positioned to deliver sustainable growth by leveraging our diversified business
model, global capabilities and scale. As businesses and households adjust to the new trade realities, we anticipate a period of
slow economic growth, which may present opportunities for strategic investment and wealth planning.
Our strategy is focused on delivering a differentiated client experience through holistic, goals-based advice, enhanced by
digital and AI capabilities that improve advisor productivity and personalization. We are also deepening client relationships by
addressing the growing demand for integrated banking, wealth planning and alternative investment solutions. To support these
efforts, we will continue to invest in our people and technology, while further enhancing our operational resilience, risk
management and compliance capabilities. Prioritizing these areas will enable us to continue to meet the heightened
expectations of our clients and regulators and to deliver long-term value for our stakeholders.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and
outlook section.
Wealth Management
(1)
Table 21
(Millions of Canadian dollars, except number of, percentage amounts and as otherwise noted)
2025
2024
Net interest income
$
5,459
$
4,979
Non-interest income
16,919
14,647
Total revenue
22,378
19,626
PCL on performing assets
(8)
(119)
PCL on impaired assets
128
148
PCL
120
29
Non-interest expense
16,769
15,312
Income before income taxes
5,489
4,285
Net income
$
4,289
$
3,422
Revenue by business
Canadian Wealth Management
$
6,959
$
5,777
U.S. Wealth Management (including City National)
9,857
8,906
U.S. Wealth Management (including City National) (US$ millions)
7,023
6,550
Global Asset Management
3,368
2,948
International Wealth Management
1,406
1,295
Investor Services
788
700
Key ratios
ROE
16.6%
14.4%
NIM
3.33%
3.26%
Pre-tax margin
(2)
24.5%
21.8%
Selected balance sheet information
Average total assets
$
188,400
$
176,200
Average total earning assets, net
163,700
152,500
Average loans and acceptances, net
123,200
114,600
Average deposits
173,600
163,400
Other information
AUA
(3), (4)
$
5,284,800
$
4,685,900
AUM
(3)
1,563,900
1,332,500
Average AUA
4,920,400
4,384,200
Average AUM
1,428,500
1,218,900
PCL on impaired loans as a % of average net loans and acceptances
0.10%
0.13%
Number of employees (FTE)
26,374
25,672
Number of advisors
(5)
6,229
6,116
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
2025 vs. 2024
Increase (decrease):
Total revenue
$
445
PCL
9
Non-interest expense
358
Net income
61
Percentage change in average U.S. dollar equivalent of C$1.00
(3)%
Percentage change in average British pound equivalent of C$1.00
(5)%
Percentage change in average Euro equivalent of C$1.00
(5)%
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances
and ratios for all reported periods.
(2)
Pre-tax margin is defined as income before income taxes divided by total revenue.
(3)
Represents year-end spot balances.
(4)
In addition to Canadian Wealth Management, U.S. Wealth Management (including City National), International Wealth Management and Investor Services, AUA includes
$8,000 million (2024 – $7,400 million) related to GAM.
(5)
Represents client-facing advisors across all our Wealth Management businesses.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
45
Client assets – AUA
Table 22
(Millions of Canadian dollars)
2025
2024
AUA, beginning balance
(1)
$
2,004,500
$
1,621,600
Asset inflows
504,000
474,000
Asset outflows
(486,200)
(458,800)
Total net flows
(1)
17,800
15,200
Market impact
267,800
341,700
Acquisitions/dispositions
–
21,400
Foreign exchange/other
16,600
4,600
Total market, acquisition/dispositions and foreign exchange/other impact
(1)
284,400
367,700
AUA, balance at end of year
(1)
2,306,700
2,004,500
Investor Services, balance at end of year
2,978,100
2,681,400
Total AUA
$
5,284,800
$
4,685,900
(1)
Includes AUA from the following lines of business: Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and
International Wealth Management.
AUA by geographic mix and asset class
Table 23
(Millions of Canadian dollars)
2025
2024
Canada
(1), (2)
Money market
$
36,600
$
28,400
Fixed income
55,600
61,500
Equity
258,900
248,400
Multi-asset and other
640,200
510,300
Total Canada
991,300
848,600
U.S.
(1), (2)
Money market
35,100
36,300
Fixed income
144,500
144,600
Equity
387,200
335,900
Multi-asset and other
496,600
413,200
Total U.S.
1,063,400
930,000
Other International
(1), (2)
Money market
25,400
19,200
Fixed income
25,400
13,200
Equity
106,700
56,800
Multi-asset and other
94,500
136,700
Total International
252,000
225,900
AUA, balance at end of year
(2)
2,306,700
2,004,500
Investor Services, balance at end of year
2,978,100
2,681,400
Total AUA
$
5,284,800
$
4,685,900
(1)
Geographic information is based on the location from where our clients are served.
(2)
Includes AUA from the following lines of business: Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and
International Wealth Management.
Client assets – AUM
Table 24
2025
2024
(Millions of Canadian dollars)
Money
market
Fixed
income
Equity
Multi-asset
and other
Total
Total
AUM, beginning balance
(1)
$
62,700
$ 278,500
$ 181,600
$ 809,700
$ 1,332,500
$ 1,058,900
Institutional inflows
233,900
56,900
12,400
8,500
311,700
317,900
Institutional outflows
(218,800)
(51,400)
(12,800)
(4,600)
(287,600)
(295,100)
Personal flows, net
1,800
5,000
4,200
24,700
35,700
19,800
Total net flows
16,900
10,500
3,800
28,600
59,800
42,600
Market impact
800
17,700
30,000
112,100
160,600
201,000
Acquisition/dispositions
–
–
–
–
–
20,600
Foreign exchange and other
500
2,600
900
7,000
11,000
9,400
Total market, acquisition/dispositions and
foreign exchange impact
1,300
20,300
30,900
119,100
171,600
231,000
AUM, balance at end of year
$
80,900
$ 309,300
$ 216,300
$ 957,400
$ 1,563,900
$ 1,332,500
(1)
The amounts in the respective categories have been revised from those previously presented.
46
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Financial performance
2025 vs. 2024
Net income increased $867 million or 25% from last year, mainly due to higher fee-based client assets reflecting market
appreciation and net sales, which also drove higher variable compensation. Higher transactional revenue also contributed to
the increase.
Total revenue increased $2,752 million or 14%, largely due to higher fee-based client assets reflecting market appreciation
and net sales and the impact of foreign exchange translation. Higher transactional revenue driven by client activity as well as
higher net interest income reflecting average volume growth in loans and deposits and higher spreads also contributed to the
increase.
PCL increased $91 million, primarily due to lower releases of provisions on performing loans in U.S. Wealth Management
(including City National), largely driven by unfavourable changes to our scenario weights, and lower favourable changes to our
macroeconomic forecast.
Non-interest expense increased $1,457 million or 10%, largely due to higher variable compensation commensurate with
increased results, higher staff costs and the impact of foreign exchange translation. These factors were partially offset by the
cost of the Federal Deposit Insurance Corporation (FDIC) special assessment last year.
AUA increased $599 billion or 13%, primarily due to market appreciation.
AUM increased $231 billion or 17%, primarily due to market appreciation and net sales.
Business line review
Canadian Wealth Management
Canadian Wealth Management includes our full-service wealth advisory business as well as our self-directed investment service
in Canada. Our full-service wealth advisory business is the largest in Canada as measured by AUA, with approximately 2,000
investment advisors providing comprehensive financial solutions with a focus on the HNW and UHNW client segments including
business owners. We provide discretionary investment management and estate and trust services to our clients through over
140 investment counsellors and over 120 trust professionals across Canada.
We compete with domestic banks and trust companies, investment counselling firms, bank-owned full-service brokerages
and boutique brokerages, mutual fund companies and global private banks. In Canada, bank-owned wealth managers continue
to be the major players for the HNW and UHNW client segments. RBC Direct Investing represents our self-directed investment
brokerage service in Canada. Our business is the second-largest brokerage in Canada, as measured by AUA, with approximately
$228 billion of AUA and serves 1.3 million clients. RBC Direct Investing serves a diverse base of clients, from early-stage investors,
mass affluent and HNW individuals using our scalable digital direct-to-consumer business. RBC Direct Investing provides a wide
range of products for clients to grow their wealth, including multi-currency accounts and access to trading in the Canadian, U.S.
and international markets.
Financial performance
Revenue increased $1,182 million or 20% from last year, largely due to higher fee-based client assets reflecting market
appreciation and net sales, as well as higher net interest income reflecting average volume growth in deposits and higher
spreads. Higher transactional revenue driven by client activity also contributed to the increase.
Selected highlights
(1)
Table 25
(Millions of Canadian dollars)
2025
2024
Total revenue
$
6,959
$
5,777
Other information
Average loans and
acceptances, net
7,300
6,500
Average deposits
31,100
25,000
AUA
(2)
998,700
855,800
AUM
(2)
290,600
240,500
Average AUA
979,900
791,100
Average AUM
284,400
218,600
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada
results have been consolidated from the closing date, which impacted results,
balances and ratios for all reported periods.
(2)
Represents year-end spot balances.
AUA
AUM
Average AUA and AUM
(Millions of Canadian dollars)
2025
2024
0
200,000
100,000
300,000
400,000
1,000,000
900,000
800,000
700,000
600,000
500,000
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
47
U.S. Wealth Management (including City National)
U.S. Wealth Management (including City National) encompasses PCG and our C&C businesses and City National. PCG is a full-
service wealth advisory firm in the U.S. with over 2,200 financial advisors. Our C&C business delivers clearing and execution
services for small to mid-sized independent broker-dealers and registered investment advisors. City National provides a robust
offering of financial solutions to entrepreneurs, professionals, affluent individuals, their businesses and families, and other
clients who value personalized banking relationships. City National offers a broad range of lending, deposit, cash management,
equipment financing, wealth management and other products and services. City National specializes in strategic solutions for
unique industry needs, including in the fields of entertainment, sports, real estate, food and beverage, healthcare, technology,
legal, nonprofit and property management. Our competitors include other broker-dealers, commercial banks and other financial
institutions that service HNW and UHNW individuals, entrepreneurs and their businesses.
Financial performance
Revenue increased $951 million or 11% from last year. In U.S. dollars, revenue increased $473 million or 7%, largely due to higher
fee-based client assets reflecting market appreciation and net sales.
NIM was down 17 bps, mainly driven by changes in our cash sweep deposit program that resulted in largely offsetting
impacts between net interest income and non-interest income.
Selected highlights
Table 26
(Millions of Canadian dollars,
except as otherwise noted)
2025
2024
Total revenue
$
9,857
$
8,906
Other information
(Millions of U.S. dollars)
Total revenue
7,023
6,550
NIM
2.54%
2.71%
Average earning assets, net
104,500
100,600
Average loans, guarantees and
letters of credit, net
78,400
75,500
Average deposits
80,700
84,100
AUA
(1)
758,600
668,100
AUM
(1)
257,500
220,200
Average AUA
747,200
629,100
Average AUM
252,800
206,300
(1)
Represents year-end spot balances.
2025
2024
AUA
AUM
Average AUA and AUM
(Millions of U.S. dollars)
0
200,000
100,000
300,000
400,000
800,000
700,000
600,000
500,000
Global Asset Management
GAM provides global investment management services and solutions for individual and institutional investors in Canada, the
U.K., the U.S., Europe and Asia. We provide a broad range of investment management services through mutual, pooled and
private funds, fee-based accounts and separately managed portfolios. We distribute our investment solutions through a broad
network of bank branches, our self-directed and full-service wealth advisory businesses, independent third-party advisors and
private banks and directly to individual clients. We also provide investment solutions directly to institutional clients, including
pension plans, insurance companies, corporations, endowments and foundations.
We are the largest retail fund company in Canada measured by AUM, as well as a leading institutional asset manager. We
face competition in Canada from banks, insurance companies and asset management organizations. The Canadian fund
management industry is large and mature but remains a relatively fragmented industry.
In the U.S., our asset management business offers investment management solutions and services, primarily to institutional
investors and wealth management platforms including RBC Wealth Management
®
, and competes with independent asset
management firms, as well as those that are part of national and international banks and insurance companies.
Internationally, through our global capabilities distributed under the RBC BlueBay Asset Management brand, we offer
investment management solutions for institutions and, through private banks including RBC Wealth Management, to HNW and
UHNW investors. We face competition from asset managers that are owned by international banks, as well as national and
regional asset managers in the geographies where we serve clients.
Financial performance
Revenue increased $420 million or 14% from last year, largely due to higher fee-based client assets reflecting market
appreciation and net sales.
48
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Selected highlights
(1)
Table 27
(Millions of Canadian dollars)
2025
2024
Total revenue
$
3,368
$
2,948
Other information
Canadian net long-term mutual
fund sales (redemptions)
(2)
9,609
1,935
Canadian net money market
mutual fund sales
(redemptions)
(2)
2,891
1,334
AUM
(3)
793,700
680,300
Average AUM
776,500
619,900
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada
results have been consolidated from the closing date, which impacted results,
balances and ratios for all reported periods.
(2)
As reported to the Investment Funds Institute of Canada. Includes all
prospectus-based mutual funds across our Canadian GAM businesses.
(3)
Represents year-end spot balances.
0
2025
2024
Average AUM
(Millions of Canadian dollars)
100,000
200,000
300,000
500,000
400,000
600,000
800,000
700,000
International Wealth Management
International Wealth Management includes operations in the U.K., Ireland, the Channel Islands and Asia. We provide customized
and integrated wealth management solutions to affluent, HNW, UHNW and corporate clients in key financial centres.
Competitors to our International Wealth Management business include global wealth managers, traditional private banks and
domestic wealth managers.
Financial performance
Revenue increased $111 million or 9% from last year, largely due to the impact of foreign exchange translation.
Selected highlights
Table 28
(Millions of Canadian dollars)
2025
2024
Total revenue
$
1,406
$
1,295
Other information
Average loans, guarantees
and letters of credit, net
4,700
4,500
Average deposits
14,700
11,500
AUA
(1)
236,600
211,300
AUM
(1)
118,700
105,000
Average AUA
214,000
201,100
Average AUM
103,600
99,800
(1)
Represents year-end spot balances.
0
50,000
100,000
250,000
200,000
150,000
2025
2024
AUA
AUM
Average AUA and AUM
(Millions of Canadian dollars)
Investor Services
Investor Services delivers asset servicing solutions to Canadian asset managers, asset owners, insurance companies and
private wealth advisors, and provides sub-custody services for global financial institutions and brokers. Our product and service
offering includes custody services covering 102 markets, fund administration, accounting for insurance, pension and
institutional clients, shareholder services, pension benefit services, performance measurement and market services (including
foreign exchange, securities finance and liquidity and cash management services). Competitors to our business include
domestic and international custodians with Canadian-based entities and operations.
Financial performance
Revenue increased $88 million or 13% from last year, primarily due to higher net interest income reflecting higher spreads and
average volume growth in deposits, as well as higher transactional revenue largely driven by client activity.
Selected highlights
Table 29
(Millions of Canadian dollars)
2025
2024
Total revenue
$
788
$
700
Other information
Average deposits
13,200
11,600
AUA
(1)
2,978,100
2,681,400
Average AUA
2,932,500
2,529,400
(1)
Represents year-end spot balances.
0
4,000,000
3,000,000
2025
2024
Average AUA
(Millions of Canadian dollars)
2,000,000
1,000,000
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
49
Insurance
RBC Insurance
®
provides insurance advice and protection to approximately 4.9 million clients. We provide tailored, client-led
advice and solutions, harnessing the power of technology and data and leveraging the strength and scale of the RBC enterprise.
$1.3 billion
~ 4.9 million
2,853
Total revenue
Number of clients
Employees (FTE)
Premiums and Deposits
Total premiums
and deposits
$7 billion
49% Annuity
40% Life and Health
9%
Segregated Fund Deposits
2%
Property and Casualty
RBC Insurance is the largest Canadian bank-owned life insurance company on a
total revenue basis.
1
We offer a comprehensive suite of advice and solutions for individual and
business clients, including life, health, wealth solutions, travel, group benefits
and reinsurance. We provide property & casualty insurance through a
distribution agreement with Aviva Canada. We also offer longevity reinsurance,
as well as reinsurance solutions for creditor life, disability and critical illness.
Our products and services are distributed through multiple channels, including
our proprietary sales force, digital platforms, and a network of independent
brokers and partners.
In Canada, many of our competitors specialize in life and health, wealth, or
property and casualty products. In our International Insurance business, we
compete in the global reinsurance market.
2025 Operating environment
›
Ongoing geopolitical uncertainty created headwinds for the Canadian economy, worsening affordability pressures on
Canadians, weighing on consumer confidence and challenging new business growth. Amidst this macroeconomic backdrop,
RBC Insurance delivered steady growth in total premiums and deposits, supported by the strength of our overall insurance
product portfolio.
›
Within individual insurance, term insurance remained a key driver of growth, supported by product enhancements and
improved pricing and underwriting. We sustained leading creditor insurance market share in a challenging environment,
achieving sales growth in home and loan protection products. We also maintained our market leadership position in disability
income insurance.
›
Driven by strong market growth in investment protection and retirement income products, we expanded our wealth offerings
with product and pricing enhancements to better serve our clients.
›
The trend of companies transferring pension risk management to specialists continued. Consequently, our Canadian group
annuity business delivered prudent growth driven by disciplined pricing within our risk tolerance.
›
With Canadian group sponsors placing greater emphasis on the need for more flexible and accessible group benefits
solutions, we strengthened our group benefits offering through digital advancements and improved product features, further
elevating the client experience.
›
Despite the travel market having been affected by changing travel patterns and softer spending, we experienced steady
growth in our travel business. Through embedded travel coverage we offer with RBC credit cards, we continue to offer our
clients new options and expanded benefits.
1
Based on the most current total nine-month revenue for life insurance companies, as available from OSFI.
50
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Strategic priorities
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Deliver a market-leading client experience
Awarded A+ ratings by Fundata Canada for our
three Guaranteed Investment Funds, recognizing
their consistent outstanding risk adjusted
performance, a distinction earned by fewer than
2% of Canadian investment fund products
Ranked #1 for broker relationship management
capabilities and underwriting case coordinator
service in the 2025 NMG Consulting Canadian
individual life insurance study, reflecting strong
frontline engagement and service excellence
Repositioned our third-party sales force to expand
solution set for clients
Drive profitable business growth by continuing the
journey to become a client-led organization
underpinned by superior advice and solutions
Drive deep client relationships through
distribution excellence, including channel growth
and by supporting our agents and partners with
high quality tools and unique value propositions
Lead in digital, data and technology
Awarded three global insurance innovation
awards from The Digital Banker, including Best
Digital Insurance Initiative, Best Digital
Transformation Program, and Outstanding
Customer Relations & Brand Engagement
Initiative, recognizing our leadership in digital
innovation
Launched a redesigned public website, resulting in
a 17% increase in overall traffic and positioning us
well to quickly implement future enhancements
Drove 50%+ YoY increase in digital releases,
reflecting the impact of ongoing investments in
digital, data, technology and process
improvements
Create innovative client experiences, leveraging
data and analytics to proactively anticipate future
insurance needs
Harness the power of RBC and the RBC Brand to
grow our Insurance business – OneRBC
approach
Maintained leadership position in creditor
products as measured by total insured lending
balance
1
Featured creditor products in RBC’s home equity
finance spring campaign for the first time,
introducing important protection at a critical life
moment thereby deepening client engagement
Deepened our partnership with Wealth
Management to deliver insurance solutions,
supporting clients’ financial planning needs and
driving growth in term and disability insurance
solutions
Leveraged enterprise AI capabilities,
infrastructure and the RBC Borealis platform to
build and scale AI capabilities within RBC
Insurance
Harness the power of being a bank-owned insurer
by tapping into enterprise capabilities,
relationships, channels, best practices and the
RBC brand to maximize enterprise opportunities
Drive operational excellence through
automation and streamlined processes
Achieved a 35%+ reduction in critical illness
decision cycle time, elevating the overall client
experience
Enabled point-of-sale decisioning through the
deployment of an innovative underwriting rules
engine, with 39% of eligible term life cases now
being decisioned instantly, improving speed and
client experience
Launched our first fully-automated and integrated
GenAI solution, enhancing claims fraud detection
and driving greater operational efficiency
Reimagine our processes through automation,
advanced capabilities and resilient operations to
position us for scale and to deliver an enhanced
client experience
Attract, develop and retain future-ready talent
Empowered teams to deliver against our strategy
by transforming our Insurance organizational
structure to align teams against our biggest
growth opportunities
Supported development of talent through targeted
employee moves to new and/or expanded roles to
develop in-demand skills and build key
capabilities for the future
Continued leadership development through
various enterprise and business segment
programs, including leadership summits, strategy
seminars and people manager enablement
programs such as webinars, workshops and
learning programs
Further strengthened our culture of inclusion and
belonging by engaging employee participation in
key global enterprise events and Employee
Resource Groups
Build critical future skills through targeted
development experiences for leaders and
employees aligned to our bold ambitions
Inspire and enable teams to achieve ambitious
outcomes and high-performance
Develop and coach leaders to champion
transformation and growth and foster a client-
focused culture
Empower our leaders and employees through AI to
reimagine what’s possible and accelerate
innovation
1
Total insured lending balance calculated from latest available supplementary financial reports
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
51
Outlook
The insurance industry is expected to continue evolving in response to macro trends, particularly demographic changes and
technological advancements, which are influencing client preferences and expectations. These trends have created
opportunities for us to provide Canadians with a range of life, health, wealth transfer and retirement solutions, supported by
industry-leading advice. Through both proprietary and third-party channels, we remain committed to investing in product
innovation and operational enhancements that will enable us to deliver industry-leading solutions to advisors, institutions and
consumers. By leveraging data and digital technologies, we will continue to seek to deliver exceptional customer experiences,
maintain our leadership position in core segments and expand into new markets. Ultimately, RBC Insurance will continue to
harness the strength and scale of RBC to help Canadians protect what matters most to them.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and
outlook section.
Insurance
Table 30
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
2025
2024
Non-interest income
Insurance service result
$
867
$
777
Insurance investment result
284
294
Other income
170
153
Total revenue
1,321
1,224
PCL
–
2
Non-interest expense
315
285
Income before income taxes
1,006
937
Net income
$
828
$
729
Key ratios
ROE
40.7%
35.3%
Selected balance sheet information
Average total assets
$
31,000
$
26,400
Other information
Premiums and deposits
(1), (2)
$
7,016
$
6,136
Net insurance contract liabilities
(3)
23,746
21,643
Contractual service margin (CSM)
(4)
1,802
2,137
Number of employees (FTE)
2,853
2,788
(1)
Premiums and deposits include premiums on risk-based individual and group insurance and annuity products as well as segregated fund deposits, consistent with
insurance industry practices.
(2)
Comparative amounts have been revised from those previously presented.
(3)
Includes insurance contract liabilities net of insurance contract assets.
(4)
Represents the CSM of insurance contract assets and liabilities net of reinsurance contract held assets and liabilities. For insurance contracts, the CSM represents the
unearned profit (net inflows) for providing insurance coverage. For reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance.
The CSM is not applicable to contracts measured using the premium allocation approach.
Financial performance
2025 vs. 2024
Net income increased $99 million or 14% from last year, primarily due to higher insurance service result driven by improved
claims experience in longevity reinsurance and life retrocession products. This was partially offset by the impact of
unfavourable annual actuarial assumption updates driven by life retrocession products. Lower taxes reflecting changes in
earnings mix also contributed to the increase.
Total revenue increased $97 million or 8%, primarily due to higher insurance service result, as noted above.
Non-interest expense increased $30 million or 11%, primarily due to higher staff-related costs, including severance.
52
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Capital Markets
RBC Capital Markets
®
is a premier global investment bank providing expertise in advisory & origination, sales & trading,
lending & financing and transaction banking to corporate, institutional, sponsor and government clients globally. Our
professionals provide clients with the advice, products and services their businesses need from 55 offices in 16 countries. Our
presence extends across North America, the U.K. & Europe, Australia, Asia and other regions.
> 22,900
#1
7,648
Number of clients
Canadian bank-owned capital
markets firm by revenue
1
Employees (FTE)
Revenue by Geography
Total revenue
$14.4 billion
49% U.S.
28% Canada
18% U.K. & Europe
5% Australia, Asia and
other regions
We operate two main business lines: Corporate & Investment Banking and
Global Markets.
In North America, we offer a full suite of products and services, including equity
and debt origination and distribution, advisory services, sales & trading and
transaction banking. In Canada, we are a market leader with a strategic
presence in all lines of capital markets businesses. In the U.S., where our
competitors include large global investment banks, we have a full industry
sector coverage and investment banking product range, as well as capabilities
in credit, secured lending, municipal finance, fixed income, currencies &
commodities and equities.
Outside North America, we have a targeted strategic presence in the U.K. &
Europe, Australia, Asia and other markets aligned to our global expertise. In the
U.K. & Europe, we offer a diversified set of capabilities in key industry sectors of
focus. In Australia and Asia, we compete with global and regional investment
banks in targeted areas aligned to our global expertise, including fixed income
distribution and currencies trading, secured financing, as well as corporate &
investment banking.
2025 Operating environment
›
The fiscal 2025 macroeconomic environment was characterized by modest global growth, declining interest rates and lower
inflation, alongside an increase in geopolitical uncertainty. These macro conditions supported a growing industry wallet
across most of our core businesses.
›
Investment banking fee pool growth slowed in the first half of 2025 amidst macroeconomic uncertainty and market volatility;
however, the fee pools increased in the second half of 2025. Against this backdrop, we continued to expand our client
coverage, which contributed to revenue growth.
›
Overall financial market activity was driven by elevated market volatility in the first half of 2025, which supported robust
client-driven trading flows, notably from equities, foreign exchange and interest rate trading. The second half of 2025 saw a
reduction in market volatility, which supported a recovery in credit trading, partly offset by slower growth in equities trading
volumes.
›
The credit environment reflected better-than-expected economic growth in the U.S., tempered by elevated U.S. interest rates,
while other economies experienced slowing growth and the impacts of trade disruptions. We saw higher provisions on
impaired loans driven by a few accounts in the other services and financing products sectors.
›
The Pillar Two legislation, which includes a 15% global minimum corporate tax, resulted in an increase in tax expenses.
1
Source: Based on externally disclosed capital markets revenue for Canadian peers (Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce,
The Toronto-Dominion Bank and National Bank of Canada) for the last twelve months as of July 31, 2025
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
53
Strategic priorities
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Build new and deepen client relationships
Expanded client coverage through our holistic
global coverage model. A notable client example is
our role as exclusive financial advisor to Advent
International on the US$6.3 billion take-private of
Nuvei and joint lead arranger on a US$3.2 billion
related financing
Awards include Best Investment Bank in Canada
(Euromoney), Top 10 Investment Bank globally
(Euromoney) and Best Bank for Research in North
America (Euromoney)
Grow corporate relationships with expanded
sector coverage
Leverage sponsors franchise including capturing
more private capital opportunities
Increase coverage of bank, insurance and hedge
fund clients
Strengthen and expand our capabilities
Expanded our U.S. Transaction Banking platform,
RBC Clear, onboarding new clients and growing
deposits
Awards include 2025 Model Celent Bank winner for
Reinventing Cash Management by Celent Model
Bank and 2025 Best Digital Banking Initiative –
RBC Clear awarded by Banking Tech Awards USA
Expanded capabilities and market presence
across equity derivatives, risk solutions,
structured products and commodities
Created a dedicated Energy Transition centre of
excellence within Investment Banking to support
clients on energy transition with advice and
capital. A notable client example is our role as
exclusive financial advisor to Canada Growth
Fund and Building Ontario Fund on $2 billion and
$1 billion equity investments in the world-leading
Ontario Power Generation Small Modular
Reactors project
Accelerated growth in Equity Capital Markets
(ECM) capabilities, with a notable client example
highlighted through our role as joint lead
manager, bookrunner and underwriter on
Goodman Group’s AU$4 billion institutional
placement
Grow Mergers & Acquisitions (M&A) and ECM
capabilities, in partnership with coverage
Expand foreign exchange (FX) and commodities
products and capabilities
Expand equity financing and derivatives
opportunities
Scale U.S. transaction banking solutions with
further domestic payment automation and launch
of FX capabilities
Deliver complete solutions as OneRBC
Grew structured products solutions targeted to
Wealth Management clients
Progressed the enterprise FX program across RBC
platforms to coordinate capabilities and grow
offerings
Deliver global transaction banking capabilities to
clients, in partnership with Commercial Banking
and City National
Partner with Commercial Banking and Personal
Banking to drive enterprise FX offerings
Connect Capital Markets clients with the best of
RBC capabilities across Wealth Management and
Global Asset Management products
Leverage digital, data and AI
Established an AI and digital centre of excellence
Scaled Aiden
®
, RBC Capital Markets’ AI solution,
to all RBC Capital Markets employees
Accelerate execution of agentic AI with bespoke
applications tailored to user needs
Generate differentiated insights with thought
leadership, leveraging alternative data and client
analytics
Modernize trading platform across rates, FX and
risk solutions
Simplify, scale and modernize our foundation
Delivered across large scale platform
modernization and execution capability projects
Leveraged digital and AI to streamline the end-to-
end technology ecosystem and provide an
improved client and employee experience
Further simplified our estate of applications while
ensuring security and soundness
Automate operations to deliver improved
end-to-end digital client journeys and drive
efficiencies from scale
Simplify and streamline technology and
operational infrastructures while amplifying
controls and risk management
Continue momentum in productivity and efficiency
program
Dynamically allocate resources for
maximum impact
Continued to invest in key areas of technology,
with a focus on client facing applications (e.g.,
RBC Clear) and operational efficiencies
Supported clients with financial resources and
tailored advice
Sustain technology investment, focused on
change the bank initiatives
Prioritize financial resource allocation to the
highest priority client opportunities
54
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
OUR STRATEGY
PROGRESS IN 2025
PRIORITIES IN 2026
Attract, grow and retain future-ready talent
Empowered teams to deliver against our strategy
by transforming our Capital Markets
organizational structure to align teams against
our biggest growth opportunities
Supported development of talent through targeted
employee moves to new and/or expanded roles to
develop in-demand skills and build key
capabilities for the future
Continued leadership development through
various enterprise and business segment
programs, including leadership summits, strategy
seminars and people manager enablement
programs such as webinars, workshops and
learning programs
Accelerated hiring to strengthen our leadership
capabilities in alignment with our global business
strategy
Further strengthened our culture of inclusion and
belonging by engaging employee participation in
key global enterprise events and Employee
Resource Groups
Build critical future skills through targeted
development experiences for leaders and
employees aligned to our bold ambitions
Inspire and enable teams to achieve ambitious
outcomes and high-performance
Develop and coach leaders to champion
transformation and growth and foster a client-
focused culture
Empower our leaders and employees through AI to
reimagine what’s possible and accelerate
innovation
Outlook
For fiscal 2026, the macroeconomic environment remains uncertain as financial markets and market participants navigate the
impact of continued geopolitical uncertainty including the impacts from tariffs and trade. The outlook is expected to continue to
be volatile, with limited further interest rate cuts, low growth and uneven unemployment. We expect strong momentum in global
investment banking fee pools through fiscal 2026, as well as stable global markets industry revenue, which is expected to
moderate from fiscal 2025. Amidst these market dynamics, we have a diversified business model which is well-positioned to
capture market share across our businesses. In Investment Banking, we will remain focused on key industry sectors as we
intensify investments in talent and technology. In Global Markets, our focus remains on accelerating cross-selling activities,
further deploying electronic and digital capabilities and building on our established risk management practices. In Corporate
Banking, we seek to maintain a disciplined growth approach underpinned by established credit risk management practices to
deepen relationships with lending clients and drive growth in our non-lending businesses. Across our businesses, our strategy
remains client-centric while seeking to optimize use of our financial resources, including growth objectives for our U.S.
Transaction Banking franchise. We believe our diversified business model positions us well to navigate the macroeconomic
environment.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and
outlook section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
55
Capital Markets
(1)
Table 31
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
2025
2024
Net interest income
(2)
$
4,789
$
3,183
Non-interest income
(2)
9,637
8,829
Total revenue
(2)
14,426
12,012
PCL on performing assets
(29)
84
PCL on impaired assets
616
340
PCL
587
424
Non-interest expense
7,966
7,016
Income before income taxes
5,873
4,572
Net income
$
5,393
$
4,573
Revenue by business
Corporate & Investment Banking
(3)
$
6,877
$
6,213
Global Markets
7,538
5,879
Other
(3)
11
(80)
Key ratios
ROE
13.7%
14.2%
Selected balance sheet information
Average total assets
$
1,326,300
$
1,134,300
Average trading securities
206,800
183,400
Average loans and acceptances, net
163,500
148,200
Average deposits
389,900
296,400
Other information
Number of employees (FTE)
7,648
7,424
Credit information
PCL on impaired loans as a % of average net loans and acceptances
0.38%
0.23%
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
2025 vs. 2024
Increase (decrease):
Total revenue
$
490
PCL
23
Non-interest expense
211
Net income
225
Percentage change in average U.S. dollar equivalent of C$1.00
(3)%
Percentage change in average British pound equivalent of C$1.00
(5)%
Percentage change in average Euro equivalent of C$1.00
(5)%
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances
and ratios for all reported periods.
(2)
The teb adjustment for 2025 was $151 million (2024 – $294 million). For further discussion, refer to the How we measure and report our business segments section.
(3)
Comparative amounts have been revised from those previously presented.
2025
2024
Revenue by region
(Millions of Canadian dollars)
0
3,000
1,500
4,500
15,000
13,500
12,000
10,500
6,000
7,500
9,000
U.S.
U.K. & Europe
Canada
Australia, Asia & other regions
56
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Financial performance
2025 vs. 2024
Net income increased $820 million or 18% from last year, primarily due to higher revenue in Global Markets and Corporate &
Investment Banking. The impact of foreign exchange translation also contributed to the increase. These factors were partially
offset by higher compensation on increased results and higher taxes reflecting the impact of Pillar Two legislation and changes
in earnings mix, net of favourable tax adjustments.
Total revenue increased $2,414 million or 20%, largely due to the impact of foreign exchange translation, higher equity
trading revenue across most regions, higher fixed income and foreign exchange trading revenue across all regions and higher
lending revenue across most regions. Higher revenue in treasury services and higher debt and equity origination across most
regions also contributed to the increase.
PCL increased $163 million or 38%, primarily due to higher provisions on impaired loans in a few sectors, including the other
services and financing products sectors, partially offset by lower provisions in the real estate and related sector. The current
year also reflects releases of provisions on performing loans, as compared to provisions taken last year, mainly due to one
account in the other services sector that migrated from performing to impaired in the current year and favourable changes to
our macroeconomic forecast, partially offset by unfavourable changes in credit quality.
Non-interest expense increased $950 million or 14%, mainly due to higher compensation on increased results, the impact of
foreign exchange translation and ongoing technology investments.
Business line review
Corporate & Investment Banking
Corporate & Investment Banking comprises our corporate lending, municipal finance, loan syndication, debt and equity
origination, M&A advisory services and transaction banking services. For debt and equity origination, revenue is allocated
between Corporate & Investment Banking and Global Markets based on the contribution of each group in accordance with an
established agreement.
Financial performance
Corporate & Investment Banking revenue of $6,877 million increased $664 million or 11% from last year.
Investment banking revenue increased $282 million or 10%, primarily due to higher loan syndication activity across most
regions, the impact of loan underwriting markdowns in the prior year and the impact of foreign exchange translation.
Lending and transaction banking revenue increased $382 million or 11%, largely due to average volume growth and the
impact of foreign exchange translation.
Selected highlights
Table 32
(Millions of Canadian dollars)
2025
2024
Total revenue
(1), (2)
$
6,877
$
6,213
Breakdown of total revenue
(1)
Investment banking
3,027
2,745
Lending and transaction
banking
(2), (3)
3,850
3,468
Other information
Average assets
143,000
129,000
Average loans and acceptances, net
134,000
121,000
(1)
The teb adjustment for the year ended October 31, 2025 was $152 million
(October 31, 2024 – $265 million). For further discussion, refer to the How we
measure and report our business segments section.
(2)
Comparative amounts have been revised from those previously presented.
(3)
Effective the second quarter of 2025, we renamed the “Lending and other”
business to “Lending and transaction banking”. The change had no impact to
how the business is managed or prior period comparatives.
0
1,000
8,000
7,000
5,000
2,000
3,000
4,000
2025
2024
Investment banking
Lending and transaction
bankin
g
Breakdown of total revenue
(Millions of Canadian dollars)
6,000
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
57
Global Markets
Global Markets comprises our sales and trading businesses including fixed income, foreign exchange, commodities and equities,
as well as our repo and secured financing products.
Financial performance
Global Markets revenue of $7,538 million increased $1,659 million or 28% from last year.
Revenue in our Fixed income, currencies and commodities business increased $846 million or 19%, primarily due to the
impact of foreign exchange translation, as well as higher fixed income and foreign exchange trading revenue across all regions.
Revenue in our Equities business increased $813 million or 53%, largely due to higher equity trading revenue across most regions.
Selected highlights
Table 33
(Millions of Canadian dollars)
2025
2024
Total revenue
(1)
$
7,538
$
5,879
Breakdown of total revenue
(1)
Fixed income, currencies and
commodities
(2)
5,200
4,354
Equities
(2)
2,338
1,525
Other information
Average assets
1,163,000
995,000
(1)
The teb adjustment for the year ended October 31, 2025 was $(1) million
(October 31, 2024 – $29 million). For further discussion, refer to the How we
measure and report our business segments section.
(2)
Effective the second quarter of 2025, we reorganized our revenue reporting
hierarchy to collapse our Treasury services and funding business into our
Fixed income, currencies and commodities and Equities businesses.
Comparative amounts have been revised from those previously presented to
conform to this new basis of presentation.
0
1,000
2,000
8,000
7,000
6,000
5,000
3,000
4,000
2025
2024
Equities
Fixed income, currencies
and commodities
Breakdown of total revenue
(Millions of Canadian dollars)
Other
Other includes residual funding and capital costs, as well as bank-owned life insurance (BOLI) derivative contracts.
Financial performance
Other revenue improved $91 million, mainly reflecting lower residual funding and capital costs.
58
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Corporate Support
Corporate Support consists of Technology & Operations, which provides the technological and operational foundation required
to effectively deliver products and services to our clients, Functions, which includes our finance, human resources, risk
management, internal audit and other functional groups, as well as our Corporate Treasury function. Reported results for
Corporate Support mainly reflect enterprise level activities which are not allocated to business segments. For further details,
refer to the How we measure and report our business segments section.
Corporate Support
Table 34
(Millions of Canadian dollars)
2025
2024
Net interest income (loss)
(1)
$
988
$
1,292
Non-interest income (loss)
(1), (2)
(924)
(1,534)
Total revenue
(1), (2)
64
(242)
Non-interest expense
(2)
708
1,640
Income (loss) before income taxes
(1)
(644)
(1,882)
Income taxes (recoveries)
(1)
(378)
(659)
Net income (loss)
$
(266)
$
(1,223)
(1)
Teb adjusted.
(2)
Revenue for the year ended October 31, 2025, included gains of $405 million (October 31, 2024 – gains of $499 million) on economic hedges of our U.S. Wealth Management
(including City National) share-based compensation plans, and non-interest expense included $391 million (October 31, 2024 – $473 million) of share-based compensation
expense driven by changes in the fair value of liabilities relating to our U.S. Wealth Management (including City National) share-based compensation plans.
Due to the nature of activities and consolidation adjustments reported in this segment, we believe that a comparative period
analysis is not relevant.
Total revenue and income taxes (recoveries) in Corporate Support include the deduction of the teb adjustment related to
gross-up of income from the U.S. tax credit business and income from Canadian taxable corporate dividends received on or
before December 31, 2023 that are recorded in Capital Markets.
The teb amount for the year ended October 31, 2025 was $151 million and was $294 million last year.
The following identifies the material items, other than the teb impacts noted previously, affecting the reported results in each year.
2025
Net loss was $266 million, primarily due to residual unallocated costs, including severance, partially offset by asset/liability
management activities.
2024
Net loss was $1,223 million, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of
$759 million, which was a specified item. Unallocated costs also contributed to the net loss.
For further details on specified items, refer to the Key performance and non-GAAP measures section.
Quarterly financial information
Fourth quarter performance
Q4 2025 vs. Q4 2024
Fourth quarter net income of $5,434 million was up $1,212 million or 29%. Diluted EPS of $3.76 was up $0.85 or 29% and ROE of
16.8% was up 250 bps. Our CET1 ratio of 13.5% was up 30 bps from a year ago. Our earnings were up primarily due to higher
earnings in Capital Markets, Wealth Management, Personal Banking and Commercial Banking, partially offset by lower earnings
in Insurance. Prior period results included HSBC Canada transaction and integration costs, which was treated as a specified
item and reported in Corporate Support.
Total revenue increased $2,135 million or 14%. The impact of foreign exchange translation increased revenue by $162 million.
Net interest income increased $974 million or 13%, mainly due to average volume growth in Personal Banking and
Commercial Banking, as well as higher spreads largely in Personal Banking. Higher fixed income trading revenue across all
regions in Capital Markets also contributed to the increase.
Non-interest income increased $1,161 million or 16%, mainly due to higher fee-based client assets reflecting market
appreciation and net sales in Wealth Management, changes in the fair value of the hedges related to our U.S. share-based
compensation plans, which was largely offset in non-interest expense, as well as the impact of economic hedges. Higher equity
trading revenue across most regions and higher M&A activity across all regions, both in Capital Markets, also contributed to the
increase.
Total PCL of $1,007 million increased $167 million or 20%, primarily due to higher provisions in Commercial Banking, Capital
Markets and Personal Banking. The PCL on loans ratio of 39 bps increased 4 bps. The PCL on impaired loans ratio of 38 bps
increased 12 bps.
Non-interest expense increased $355 million or 4%, primarily due to higher variable compensation commensurate with
increased results, higher staff costs and changes in the fair value of our U.S. share-based compensation plans, which was largely
offset in non-interest income. Ongoing technology investments and the impact of foreign exchange translation also contributed
to the increase. These factors were partially offset by HSBC Canada transaction and integration costs in the prior year, which
was treated as a specified item.
Income tax expense increased $401 million or 40%, primarily due to higher income before income taxes. The effective
income tax rate of 20.4% increased 140 bps from last year, primarily due to the impact of changes in earnings mix and Pillar Two
legislation, which became effective for us beginning November 1, 2024, partially offset by the net impact of tax adjustments.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
59
Q4 2025 vs. Q3 2025
Net income of $5,434 million was relatively flat compared to last quarter. Higher net interest income, largely reflecting higher
spreads and volume growth across most segments, was offset by higher non-interest expense, including ongoing investments in
technology and higher marketing expenses associated with new client acquisition campaigns, and higher PCL on both impaired
and performing loans.
Quarterly results and trend analysis
Our quarterly results are impacted by a number of trends and recurring factors, which include seasonality of certain businesses,
general economic and market conditions, and fluctuations in the Canadian dollar relative to other currencies. The following
table summarizes our results for the last eight quarters (the period):
Quarterly results
(1)
Table 35
2025
2024
(Millions of Canadian dollars,
except per share and percentage amounts)
Q4
(2)
Q3
(2)
Q2
(2)
Q1
(2)
Q4
(2)
Q3
(2)
Q2
(2)
Q1
Personal Banking
$ 5,178
$
5,060
$
4,805
$
4,811
$
4,658
$
4,490
$
4,163
$
4,031
Commercial Banking
2,221
2,152
2,062
2,127
2,077
2,036
1,656
1,613
Wealth Management
5,900
5,513
5,397
5,568
5,186
4,964
4,789
4,687
Insurance
209
368
338
406
278
285
298
363
Capital Markets
(3)
3,611
3,758
3,301
3,756
2,903
3,004
3,154
2,951
Corporate Support
(3)
90
134
(231)
71
(28)
(148)
94
(160)
Total revenue
17,209
16,985
15,672
16,739
15,074
14,631
14,154
13,485
PCL
1,007
881
1,424
1,050
840
659
920
813
Non-interest expense
9,374
9,232
8,730
9,256
9,019
8,599
8,308
8,324
Income before income taxes
6,828
6,872
5,518
6,433
5,215
5,373
4,926
4,348
Income taxes
1,394
1,458
1,128
1,302
993
887
976
766
Net income
$ 5,434
$
5,414
$
4,390
$
5,131
$
4,222
$
4,486
$
3,950
$
3,582
EPS – basic
$
3.77
$
3.76
$
3.03
$
3.54
$
2.92
$
3.09
$
2.75
$
2.50
– diluted
3.76
3.75
3.02
3.54
2.91
3.09
2.74
2.50
Effective income tax rate
20.4%
21.2%
20.4%
20.2%
19.0%
16.5%
19.8%
17.6%
Period average US$ equivalent
of C$1.00
$ 0.720
$
0.728
$
0.704
$
0.699
$
0.733
$
0.730
$
0.734
$
0.745
(1)
Fluctuations in the Canadian dollar relative to other foreign currencies have affected our consolidated results over the period.
(2)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, and are included in our Personal
Banking, Commercial Banking, Wealth Management and Capital Markets segments.
(3)
Teb adjusted. For further discussion, refer to the How we measure and report our business segments section.
Seasonality
Seasonal factors may impact our results in certain quarters. The first quarter has historically been stronger for our Capital
Markets businesses. The second quarter has fewer days than the other quarters, which generally results in a decrease in net
interest income and certain expense items. The third and fourth quarters include the summer months, which generally results in
lower client activity and may negatively impact the results of our Capital Markets trading business.
Trend analysis
Earnings over the period have been impacted by the factors noted below.
Personal Banking revenue has benefitted from volume growth in loans and deposits over the period. NIM has been
favourably impacted by changes in product mix and the sustained impact of a higher interest rate environment. HSBC Canada
revenue has been included since the transaction closed on March 28, 2024.
Commercial Banking revenue has benefitted from volume growth in loans and deposits over the period. HSBC Canada
revenue has been included since the transaction closed on March 28, 2024.
Wealth Management revenue has generally benefitted from growth in fee-based client assets, which is influenced by market
conditions.
Insurance revenue reflects investment-related and insurance experience. New business gains are deferred through CSM and
new business losses are reflected through insurance service result.
Capital Markets revenue is influenced, to a large extent, by market conditions that impact client activity. Investment
banking fee pools saw increasing activity through most of 2024. However, fee pool growth started to slow in the first half of 2025
amidst macroeconomic uncertainty and market volatility, before showing signs of recovery in the second half of 2025. Sales &
trading activity carried strong momentum in 2024 and macroeconomic uncertainty has continued to keep client volumes robust
across the sales & trading business through 2025.
PCL comprises provisions taken on performing assets and provisions taken on impaired assets. PCL on performing assets
fluctuated over the period as it is impacted by changes in credit quality, macroeconomic conditions, which drive our forecasts
and influence our scenario weights, and exposures. Provisions on performing assets over the period have generally been
reflective of unfavourable changes in credit quality. Throughout the period, we have generally seen improvements to our
macroeconomic forecast, with the exception of the second quarter of 2025, where we saw unfavourable changes, driven by the
impacts of trade disruptions (including tariffs). The second quarter of 2024 included initial PCL on performing loans purchased
in the HSBC Canada transaction. PCL on impaired assets has generally trended upwards over the period.
60
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Non-interest expense has been impacted by fluctuations in variable compensation over the period, commensurate with
fluctuations in revenue and earnings. Changes in the fair value of our U.S. share-based compensation plans, which are largely
offset in revenue, have also contributed to fluctuations over the period and are impacted by market conditions. While we
continue to focus on efficiency management activities, expenses over the period also reflect investments in staff and
technology. Expenses also included HSBC Canada transaction and integration costs before the third quarter of 2025. HSBC
Canada non-interest expenses have been included since the transaction closed on March 28, 2024.
Our effective income tax rate has been impacted by varying levels of tax adjustments and changes in earnings mix.
Beginning in the first quarter of 2025, our effective income tax rate reflects the impact of Pillar Two legislation, which became
effective for us beginning November 1, 2024.
Financial condition
Condensed balance sheets
Table 36
As at October 31 (Millions of Canadian dollars)
2025
2024
Assets
Cash and due from banks
$
37,024
$
56,723
Interest-bearing deposits with banks
50,364
66,020
Securities, net of applicable allowance
(1)
561,788
439,918
Assets purchased under reverse repurchase agreements and securities borrowed
309,683
350,803
Loans
Retail
652,344
626,978
Wholesale
397,171
360,439
Allowance for loan losses
(7,093)
(6,037)
Other – Derivatives
177,206
150,612
– Other
146,519
126,126
Total assets
$
2,325,006
$ 2,171,582
Liabilities
Deposits
$
1,515,616
$ 1,409,531
Other – Derivatives
183,953
163,763
– Other
472,325
457,550
Subordinated debentures
13,961
13,546
Total liabilities
2,185,855
2,044,390
Equity attributable to shareholders
139,092
127,089
Non-controlling interests
59
103
Total equity
139,151
127,192
Total liabilities and equity
$
2,325,006
$ 2,171,582
(1)
Securities are comprised of trading and investment securities.
2025 vs. 2024
Total assets increased $153 billion or 7% from October 31, 2024, net of foreign exchange translation of $48 billion.
Cash and due from banks decreased $20 billion or 35%, primarily due to lower deposits with central banks reflecting short-
term liquidity and cash management activities.
Interest-bearing deposits with banks decreased $16 billion or 24%, primarily due to lower deposits with central banks
reflecting short-term liquidity and cash management activities.
Securities, net of applicable allowance, increased $122 billion or 28%, primarily due to higher government debt securities
reflecting liquidity and cash management activities and favourable market opportunities.
Assets purchased under reverse repurchase agreements (reverse repos) and securities borrowed decreased $41 billion or
12%, primarily due to decreased client financing activity.
Loans (net of Allowance for loan losses) increased $61 billion or 6%, primarily due to volume growth in wholesale loans and
residential mortgages.
Derivative assets increased $27 billion or 18%, net of foreign exchange translation, primarily attributable to higher fair
values on equity and foreign exchange contracts, partially offset by lower fair values on interest rate contracts.
Other assets increased $20 billion or 16%, largely due to higher cash collateral, commodity trading assets and precious
metals reflecting market conditions and client activity.
Total liabilities increased $141 billion or 7%, net of foreign exchange translation of $48 billion.
Deposits increased $106 billion or 8%, mainly due to higher demand deposits driven by client activity and higher business
and government term deposits driven by liquidity and cash management activities as well as client activity.
Derivative liabilities increased $20 billion or 12%, net of foreign exchange translation, mainly attributable to higher fair
values on equity contracts, partially offset by lower fair values on interest rate contracts.
Other liabilities increased $15 billion or 3%, mainly due to higher obligations related to securities sold short, commodity
liabilities and cash collateral due to client activity and higher short-term borrowings of subsidiaries, partially offset by lower
obligations related to repurchase agreements (repos).
Total equity increased $12 billion or 9%, mainly reflecting earnings, net of dividends.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
61
Off-balance sheet arrangements
In the normal course of business, we engage in a variety of financial transactions that, for accounting purposes, are not
recorded on our Consolidated Balance Sheets. Off-balance sheet transactions are generally undertaken for risk, capital and
funding management purposes which benefit us and our clients. These include transactions with structured entities and may
also include the purchase or issuance of guarantees. These transactions give rise to, among other risks, varying degrees of
market, credit, liquidity and funding risk, which are discussed in the Risk management section.
We use structured entities to securitize our financial assets as well as assist our clients in securitizing their financial assets.
These entities are not operating entities, typically have no employees, and may or may not be recorded on our Consolidated
Balance Sheets.
In the normal course of business, we engage in a variety of financial transactions that may qualify for derecognition. We
apply the derecognition rules to determine whether we have transferred substantially all the risks and rewards or control
associated with the financial assets to a third party. If the transaction meets specific criteria, it may qualify for full or partial
derecognition from our Consolidated Balance Sheets.
Securitizations of our financial assets
We periodically securitize our credit card receivables and residential and commercial mortgage loans primarily to diversify our
funding sources, enhance our liquidity position and for capital purposes. We also securitize residential and commercial
mortgage loans as part of our sales and trading activities.
We securitize our credit card receivables, on a revolving basis, through a consolidated structured entity. We securitize
single and multiple-family residential mortgages through the National Housing Act Mortgage-Backed Securities (NHA MBS)
program. The majority of our securitization activities are recorded on our Consolidated Balance Sheets as we do not meet the
derecognition criteria. During 2025, we derecognized $1,332 million (October 31, 2024 – $122 million) of mortgages securitized
through the NHA MBS program. For further details, refer to Note 7 and Note 8 of our 2025 Annual Consolidated Financial
Statements.
We also periodically securitize commercial mortgage loans by selling them in collateral pools, which meet certain
diversification, leverage and debt coverage criteria, to structured entities, one of which is sponsored by us. Securitized
commercial mortgage loans are derecognized from our Consolidated Balance Sheets as we have transferred substantially all of
the risks and rewards of ownership of the securitized assets. During the year ended October 31, 2025, we securitized $685 million
of commercial mortgages (October 31, 2024 – $nil). Our continuing involvement with the transferred assets includes servicing
certain of the underlying commercial mortgages sold. As at October 31, 2025, there was $2 billion of commercial mortgages
outstanding that we continue to service related to these securitization activities (October 31, 2024 – $1 billion).
Involvement with unconsolidated structured entities
In the normal course of business, we engage in a variety of financial transactions with structured entities to support our
customers’ financing and investing needs, including securitization of our clients’ financial assets, creation of investment
products, and other types of structured financing.
We have the ability to use credit mitigation tools such as third-party guarantees, credit default swaps, and collateral to
mitigate risks assumed through securitization and re-securitization exposures. The process in place to monitor the credit quality
of our securitization and re-securitization exposures involves, among other things, reviewing the performance data of the
underlying assets. We affirm our ratings each quarter and formally confirm or assign a new rating at least annually. For further
details on our activities to manage risks, refer to the Risk management section.
Below is a description of our activities with respect to certain significant unconsolidated structured entities. For a complete
discussion of our interests in consolidated and unconsolidated structured entities, refer to Note 8 of our 2025 Annual
Consolidated Financial Statements.
62
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Multi-seller conduits
We administer multi-seller conduits which are used primarily for the securitization of our clients’ financial assets. Our clients
primarily use our multi-seller conduits to diversify their financing sources and to reduce funding costs by leveraging the value of
high-quality collateral. The conduits offer us a favourable revenue stream and risk-adjusted return.
We provide services such as transaction structuring, administration, backstop liquidity facilities and credit enhancements to
the multi-seller conduits. Revenue for all such services amounted to $383 million during the year (October 31, 2024 – $437 million).
Our total commitment to the conduits in the form of backstop liquidity and credit enhancement facilities is shown below.
The total committed amount of these facilities exceeds the total amount of the maximum assets that may have to be purchased
by the conduits under the purchase agreements. As a result, the maximum exposure to loss attributable to our backstop liquidity
and credit enhancement facilities is less than the total committed amounts of these facilities.
Liquidity and credit enhancement facilities
Table 37
2025
2024
As at October 31 (Millions of Canadian dollars)
Notional of
committed
amounts
(1)
Allocable
notional
amounts
Maximum
exposure
to loss
(2)
Notional of
committed
amounts
(1)
Allocable
notional
amounts
Maximum
exposure
to loss
(2)
Backstop liquidity facilities
$ 64,359
$ 60,433
$ 60,642
$
56,511
$
53,011
$ 53,247
Credit enhancement facilities
(3)
3,926
3,926
3,926
3,500
3,500
3,500
Total
$ 68,285
$ 64,359
$ 64,568
$
60,011
$
56,511
$ 56,747
(1)
Based on total committed financing limit.
(2)
Not presented in the table above are derivative assets with a fair value of $23 million (October 31, 2024 – $32 million) which are a component of our total maximum
exposure to loss from our interests in the multi-seller conduits. Refer to Note 8 of our 2025 Annual Consolidated Financial Statements for more details.
(3)
Includes $32 million (October 31, 2024 – $18 million) of financial standby letters of credit.
As at October 31, 2025, the notional amount of backstop liquidity facilities we provide increased $8 billion or 14% from last year,
primarily due to an increase in outstanding securitized assets of the multi-seller conduits. The notional amount of credit
enhancement facilities we provide increased $426 million or 12% from last year, primarily due to an increase in the amount
required by the conduits.
Maximum exposure to loss by asset type
Table 38
2025
2024
As at October 31 (Millions of dollars)
US$
C$
Total C$
US$
C$
Total C$
Outstanding securitized assets
Auto and truck loans and leases
$ 15,316
$
5,407
$ 26,877
$
12,882
$
4,478
$
22,409
Consumer loans
5,179
–
7,260
4,931
–
6,864
Credit cards
2,601
510
4,156
3,180
510
4,937
Dealer floor plan receivables
1,312
683
2,523
1,063
683
2,163
Equipment receivables
1,282
786
2,583
1,639
236
2,517
Fleet finance receivables
2,906
159
4,233
2,227
255
3,355
Commercial loans
449
592
1,221
701
592
1,567
Residential mortgages
–
3,570
3,570
–
2,295
2,295
Student loans
2,678
143
3,896
1,789
142
2,632
Trade receivables
3,335
–
4,676
3,132
–
4,359
Transportation finance
2,469
112
3,573
2,512
153
3,649
Total
$ 37,527
$ 11,962
$ 64,568
$
34,056
$
9,344
$
56,747
Canadian equivalent
$ 52,605
$ 11,962
$ 64,568
$
47,403
$
9,344
$
56,747
Our overall exposure increased $8 billion or 14% compared to last year, primarily due to an increase in the outstanding
securitized assets of the multi-seller conduits. All of the multi-seller conduits transactions were internally rated A- or above. All
transactions funded by the unconsolidated multi-seller conduits are internally rated using a rating system as outlined in the
internal ratings map in the credit risk section.
Multiple independent debt rating agencies review all of the transactions in the multi-seller conduits. Transactions financed
in the U.S. multi-seller conduits are reviewed by Moody’s Investors Service (Moody’s‡), Standard & Poor’s (S&P‡) and Fitch
Ratings (Fitch‡). Transactions in two of the Canadian multi-seller conduits are reviewed by DBRS Morningstar (DBRS‡) and
Moody’s while one of the Canadian multi-seller conduits is also reviewed by S&P. Each applicable rating agency also reviews
ongoing transaction performance on a monthly basis and may publish reports detailing portfolio and program information
related to the conduits.
As at October 31, 2025, the total asset-backed commercial paper (ABCP) issued by the conduits amounted to $43 billion, an
increase of $6 billion or 16% from last year, primarily due to higher client usage. The rating agencies that rate the ABCP rated
100% (October 31, 2024 – 100%) of the total amount issued within the top ratings category.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
63
Structured finance
We provide liquidity and/or credit facilities to certain municipal bond tender option bond trusts in which we have an interest but
do not consolidate because the residual certificates issued by the tender option bond trusts are held by third parties. As at
October 31, 2025, our maximum exposure to loss from these unconsolidated municipal bond tender option bond trusts was
$5 billion (October 31, 2024 – $4 billion).
We provide senior warehouse financing to unaffiliated structured entities that are established by third parties to acquire
loans and issue term collateralized loan obligations (CLO). Subordinated financing is provided during the warehouse phase by
either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorbs
losses prior to ourselves as the senior lender. A portion of the proceeds from the sale of the term CLO is used to fully repay the
senior warehouse financing that we provide. As at October 31, 2025, our maximum exposure to loss associated with the
outstanding senior warehouse financing facilities was $1,319 million (October 31, 2024 – $704 million). The increase in our
maximum exposure to loss from last year was driven by the addition of new financing facilities partially offset by the repayment
of existing financing facilities.
We provide senior financing to unaffiliated structured entities that are established by third parties to acquire loans.
Subordinated financing is provided by either the collateral manager or third-party investors. Subordinated financing serves as
the first loss tranche which absorb losses prior to ourselves as the senior lender. These facilities tend to be longer in term than
the CLO warehouse facilities and benefit from credit enhancement designed to cover a multiple of historical losses. As at
October 31, 2025, our maximum exposure to loss associated with the outstanding senior financing facilities was $14 billion
(October 31, 2024 – $8 billion). The increase in our maximum exposure to loss from last year was driven by the addition of new
financing facilities partially offset by the repayment of existing financing facilities.
Non-RBC managed investment funds
We invest in hedge funds primarily to provide clients with desired exposures to reference funds. As we make investments in the
reference funds, exposures to the funds are simultaneously transferred to clients through derivative transactions. Our maximum
exposure to loss in the reference funds is limited to our investments in the funds. As at October 31, 2025, our maximum exposure
to loss was $3 billion (October 31, 2024 – $3 billion), largely flat from last year.
We also provide liquidity facilities to certain third-party investment funds. The funds issue unsecured variable-rate
preferred shares and invest in portfolios of tax-exempt bonds. As at October 31, 2025, our maximum exposure to loss on these
funds was $954 million (October 31, 2024 – $948 million), largely flat from last year.
Third-party securitization vehicles
We hold interests in certain unconsolidated third-party securitization vehicles, which are structured entities. We, as well as
other financial institutions, are obligated to provide funding to these entities up to our maximum commitment level and are
exposed to credit losses on the underlying assets after various credit enhancements. As at October 31, 2025, our maximum
exposure to loss in these entities was $26 billion (October 31, 2024 – $21 billion). The increase in our maximum exposure to loss
compared to last year reflects an increase in client activity with third-party securitization vehicles. Interest and non-interest
income earned in respect of these investments was $878 million (October 31, 2024 – $698 million).
Other
Other unconsolidated structured entities include managed investment funds, alternative asset entities, arrangements to pass
credit risk to third parties, credit investment products and tax credit funds. Refer to Note 8 of our 2025 Annual Consolidated
Financial Statements for more details regarding our other unconsolidated structured entities.
Guarantees, retail and commercial commitments
We provide our clients with guarantees and commitments that expose us to liquidity and funding risks. Our maximum potential
amount of future payments in relation to our commitments and guarantee products as at October 31, 2025 amounted to
$630 billion compared to $551 billion last year. The increase compared to last year was primarily driven by growth in other
commitments to extend credit and sponsored member guarantees. Refer to Liquidity and funding risk section and Note 23 of our
2025 Annual Consolidated Financial Statements for details regarding our guarantees and commitments.
64
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Risk management
We are in the business of managing the risks inherent to the financial services industry as we aim to create maximum value for
our shareholders, clients, employees and communities. The ability to manage risk is a core competency of the bank and is
supported by our risk-aware culture and risk management approach. Our view of risks is dynamic and reflects the pace of
change in the financial services industry and in the markets where we operate or have clients and counterparties.
Overview
Our risk management principles set an overall tone for balancing risk-reward trade-offs with the intention of ensuring the long-
term viability of our organization.
These risk management principles also are integral to allowing RBC to preserve and reinforce
our strong risk-aware culture and maintain a consistently ethical approach to conducting business.
Risk management principles
•
Assess the impact of risks arising from choosing and executing a strategy while effectively balancing risk and reward to
enable sustainable growth.
•
Collectively share the responsibility for risk management.
•
Undertake only risks we understand and make thoughtful and future-focused risk decisions, taking environmental and
social considerations into account.
•
Always uphold our Purpose and vision, and consistently abide by our values and Code of Conduct as well as applicable
laws, regulations and regulatory expectations to maintain our reputation and the trust of our clients, colleagues and
communities.
•
Maintain a healthy and robust control environment to protect our stakeholders.
•
Use judgment and common sense.
•
Always be operationally prepared and financially resilient for a potential crisis.
The dynamic nature of the financial services industry, and technological innovation, necessitate that our processes, tools and
practices are continuously improving and responding to the changing landscape and emerging risks. We seek to accomplish this
through an effective and evolving risk management approach. Our approach to managing risks is organized around the risk
management lifecycle, including defining and enabling, identifying and assessing, managing and mitigating, aggregating and
reporting, as well as the governance of the significant risks faced by the organization. The boundaries of the Board-approved
risk appetite seek to ensure that risk-taking activities and exposures are aligned with the overall risk posture of the bank. We
seek to ensure that our business activities and transactions provide an appropriate balance of return for the risks assumed and
the costs incurred. Our organizational design and governance processes are structured with the intent of maintaining the
independence of the second line of defence, performed primarily by Group Risk Management (GRM) and Regulatory Compliance,
and are intended to contribute to an effective control environment across RBC.
Principal Risks
We define risk as the potential vulnerabilities in the short-, medium- or long-term that may impact our financial results, financial
and operational resilience, reputation, business model or strategy. Risk can be realized through losses or an undesirable
outcome with respect to volatility of earnings in relation to expected earnings, capital adequacy or liquidity. Our Principal Risks
reflect the key risks that most significantly affect the achievement of our strategic objectives and include credit, market,
liquidity, insurance, operational, compliance, reputation and strategic risks. The classification of our Principal Risks provides a
common language and foundation for the broader risk taxonomy and enables a disciplined identification and assessment of
risks. There are certain activities that we undertake that will give rise to several risks. There are also certain risks that are
transverse (e.g., compliance, climate and conduct risks) that can impact or manifest in other risk types.
Enterprise risk management
Under the oversight of the Board and senior management, the Enterprise Risk Management Framework (ERMF) provides an
overview of our enterprise-wide programs for managing risk, including identifying, assessing, measuring, controlling, monitoring
and reporting on the significant risks that face the organization.
Risk governance
We seek to manage risk effectively and strategically, and to ensure that risk appetite, business strategies and risk-taking
activities are aligned across the enterprise. We have an effective and well-established risk governance framework in place that
seeks to ensure risks impacting our businesses are identified, appropriately categorized, assessed, managed and, where
applicable, communicated to the Board in a timely manner. This framework is maintained in alignment with the expectations of
OSFI, the Basel Committee on Banking Supervision’s (BCBS) corporate governance principles and the requirements and
expectations of other regulators in the jurisdictions in which we conduct business. The Board oversees the implementation of
our risk management framework, while employees at all levels of the organization are responsible for managing the day-to-day
risks that arise in the context of their mandates. As illustrated below, we use the three lines of defence governance model that
helps to enforce a clear segregation of duties so that risks are appropriately and adequately managed throughout the enterprise
to achieve our strategic objectives.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
65
FIRST LINE OF DEFENCE
RISK OWNERS
RISK OWNERS
SECOND LINE OF DEFENCE
RISK OVERSIGHT
RISK OVERSIGHT
THIRD LINE OF DEFENCE
INDEPENDENT ASSURANCE
INDEPENDENT ASSURANCE
AUDIT COMMITTEE
RISK COMMITTEE
BOARD OF DIRECTORS
GOVERNANCE COMMITTEE
HUMAN RESOURCES COMMITTEE
THE GROUP EXECUTIVE AND GROUP RISK COMMITTEE AND SENIOR MANAGEMENT COMMITTEES
All employees across our businesses
and functional areas are responsible
for ensuring risk controls are in place
Accountable for:
Identification;
Assessment;
Mitigation and management;
Monitoring; and
Reporting of risks against approved
policies and appetite
Establishes risk management practices, policies
and provides risk guidance
Oversees and challenges the effectiveness of
First Line risk management practices
Monitors and independently reports on the
level of risk against established risk appetite
Internal Audit
Independent assurance to management
and the Board on the effectiveness of risk
management practices of the
First Line and Second Line of Defence
The CRO, the CCO and the CAMLO have direct
access to the Risk Committee
While the following functional units perform First
Line activities where Risk Management provides
independent oversight and challenge, they also
provide advice and support across all three lines
of defence: CFO Group, Human Resources and
the Chief Legal and Administrative Officer
(CLAO) Group
The
Board
approves our Code of Conduct and closely collaborates with management to set the tone from above and promote a strong governance culture
that influences RBC at every level and across all our global businesses. The Board also approves our risk appetite, provides oversight and carries out its
risk management mandate primarily through its committees:
The
Risk Committee
assists the Board in overseeing our risk management by seeking to ensure that policies, processes and procedures, as well as the
appropriate organizational structure, budget and resources are in place to manage RBC’s significant and emerging risks. The Risk Committee oversees
the risk management function, annually assesses its effectiveness and periodically reviews the results of independent assessments. Its oversight activities
include evaluation of the risk management function’s success against its key priorities, and the mandates of the Chief Risk Officer (CRO), the Chief Compliance
Officer (CCO) and the Chief Anti-Money Laundering Officer (CAMLO). It also oversees and assesses the effectiveness of our Regulatory Compliance and
Financial Crimes (including anti-money laundering and anti-terrorist financing, global economic sanctions, anti-bribery and anti-corruption) functions.
The
Audit Committee
assists the Board in its oversight of the integrity of our financial statements and other disclosure documents, including sustainability
reporting; the qualifications, performance, and independence of our external auditors; and the performance of our Internal Audit function and our internal
controls. In addition, it oversees the Chief Financial Officer (CFO) Group and Internal Audit functions, having regard to their independence from the
businesses whose activities they review. It annually assesses the effectiveness of the CFO Group and Internal Audit functions, and it reviews and approves
their respective organizational structure, budget, resources and charter, as well as the mandates of the CFO and the Chief Audit Executive.
The
Governance Committee
recommends to the Board individuals for Board member election or re-election and oversees the process for evaluating Board,
committee and director effectiveness. Moreover, the Governance Committee serves at the conduct review committee and oversees the management of
culture and conduct. Additional responsibilities include (i) developing and recommending governance frameworks, principles and policies to the Board;
(ii) overseeing and coordinating matters, including sustainability matters, at the Board and its committees; (iii) monitoring developments in corporate
governance and adapting best practices to the bank’s needs and circumstances; and (iv) reviewing shareholder proposals and recommending responses
to the Board.
The
Human Resources Committee
assists the Board in its oversight of compensation policies and major compensation programs, compensation risk
management and the compensation for the CEO and other members of the Group Executive (GE). It also oversees management succession plans for key
senior leadership roles, key talent management and human resources strategies and practices, and pension plans of the Bank and participating subsidiaries.
Actively shapes enterprise risk appetite and recommends it for Board approval.
Visibly supports and communicates enterprise risk appetite, seeking to ensure that sufficient resources and expertise are in place to help
provide effective oversight of adherence to the enterprise risk appetite.
Seeks to ensure principles, policies, authorities, resources, responsibilities and reporting are in place to support the control infrastructure
necessary for an effective enterprise-wide risk management program.
Oversees culture and conduct strategy and key activities.
Provides appropriate and timely information to the Board and its Committees with regard to the identification, measurement and
management of the significant risks to which we are exposed across all of our legal entities, businesses and operations globally.
Specifically, the Compensation Risk Management Oversight Committee (CRMOC) oversees the design of major compensation programs in an
effort to ensure alignment with sound risk management principles, and that risks that may not be fully captured in our current financial
performance are appropriately considered in variable compensation payouts, including our enterprise risk profile relative to risk appetite.
The CRMOC has responsibility for ensuring our compensation programs align with the Financial Stability Board (FSB) Principles for Sound
Compensation Practices and Implementation Standards and other applicable guidance and best practices.
66
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Risk appetite
Effective risk management helps protect us from unacceptable
losses or undesirable outcomes with respect to our earnings
volatility, concentration, capital adequacy or other Principal
Risks while supporting and enabling our overall business
strategy. It requires the clear articulation of our risk appetite,
which is the amount and type of risk that we are able and willing
to accept in the pursuit of our business objectives. Risk appetite
reflects our self-imposed upper bound to risk-taking, set at
levels inside of regulatory limits and constraints, and influences
our risk management philosophy, Code of Conduct, business
practices and resource allocation. It provides clear boundaries
and sets an overall tone for balancing risk-reward trade-offs
intended to ensure the long-term viability of the organization.
Our risk appetite is integrated into our strategic, financial
and capital planning processes, as well as ongoing business
decision-making processes, and is reviewed and approved
annually by the Board.
Our Enterprise Risk Appetite Framework (ERAF) outlines the
foundational aspects of our approach to risk appetite,
articulates our quantitative and qualitative risk appetite
statements and their supporting measures and associated
constraints, which can be applied at the enterprise, business
segment, business unit and legal entity level, and describes our
requirements and expectations to embed effective risk appetite
practices throughout the organization.
Risk Capacity
Risk Limits &
Management Delegated
Authorities
Risk Appetite &
Board Delegated Authorities
Risk Profile
Risk Posture
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Risk appetite statements
Quantitative statements
Qualitative statements
•
Manage earnings volatility and exposure to future
losses under normal and stressed conditions.
•
Avoid excessive concentrations of risk.
•
Ensure capital adequacy and sound management of
liquidity and funding risk.
•
Ensure sound management of operational and
regulatory compliance risk.
•
Maintain strong credit ratings and a risk profile in the
top half of our peer group.
•
Always uphold our Purpose and vision and
consistently abide by our values and Code of
Conduct to maintain our reputation and the trust of
our clients, colleagues and communities.
•
Undertake only risks we understand. Make thoughtful
and future-focused risk decisions, taking
environmental and social considerations into
account.
•
Assess the impact of the risks arising from choosing
and executing a strategy while effectively balancing
risk and reward to enable sustainable growth.
•
Maintain a healthy and robust control environment
to protect our stakeholders.
•
Always be operationally prepared and financially
resilient for a potential crisis.
The allocation of our risk appetite and Board-delegated authorities across the bank is supported by the establishment of
management-delegated authorities and/or risk limits. These delegated authorities or risk limits represent the maximum level of
risk permitted for a line of business, entity, portfolio, individual or group and are used to govern ongoing operations. Risk
posture, the anticipated shift in risk profile as a result of changes in objectives, strategies and external factors, is used to
provide insights on key areas that may require management attention to better enable strategies to be executed successfully
within our risk appetite.
Risk measurement
Quantifying risk is a key component of our enterprise-wide risk and capital management processes. Risk measurement and
planning processes are integrated across the enterprise, especially with regard to forward-looking projections and analyses,
including but not limited to, stress testing, recovery and resolution planning and credit provisioning.
Certain risks, such as credit, market, liquidity and insurance risks, can be more easily quantified than others such as
operational, strategic, compliance or related reputational risks. For the risks that are more difficult to quantify, greater
emphasis is placed on qualitative risk factors and assessment of activities to gauge the overall level of risk. In addition,
judgmental risk measures and techniques such as stress testing, and scenario and sensitivity analyses can be used to assess
and measure risks, and we are continually evolving our risk measures and techniques to manage our risks. Our primary methods
for measuring risk include:
•
Quantifying expected loss: losses that are statistically expected to occur as a result of conducting business in a given time
period;
•
Quantifying unexpected loss: an estimate of the deviation of actual earnings from expected earnings, over a specified time
horizon;
•
Stress testing evaluates, from a forward-looking perspective, the potential effects of a set of specified changes in risk
factors, corresponding to exceptional but plausible adverse economic and financial market events. RBC’s stress testing
programs are performed at different levels of the organization (enterprise-wide, subsidiary-level and risk-level) to allow
relevant risk profiles and concentrations to be reflected in scenario design, analysis and decision-making; and
•
Back-testing: the realized values are compared to the parameter estimates that are currently used in an effort to ensure the
parameters remain appropriate for regulatory and economic capital calculations.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
67
Stress testing
Stress testing is an important component of our risk management framework. Stress testing results are used for:
•
Assessing the viability of long-term business plans and strategies;
•
Monitoring our risk profile relative to our risk appetite in terms of earnings and capital at risk;
•
Setting risk limits;
•
Identifying key risks to, and potential shifts in, our capital and liquidity levels, as well as our financial position;
•
Enhancing our understanding of available mitigating actions in response to potential adverse events; and
•
Assessing the adequacy of our capital and liquidity levels.
The enterprise-wide stress tests evaluate key balance sheet, income statement, leverage, capital and liquidity impacts arising
from risk exposures and changes in earnings across a range of scenarios and severities over a multi-year horizon. Generally, the
stress testing scenarios evaluate global recessions, equity market changes, elevated debt levels, changes in interest rates, real
estate price corrections, and shocks to credit spreads and commodity markets, among other factors. During our fiscal 2025
stress testing exercises, we addressed several top and emerging risks including but not limited to the increase in trade and tariff
uncertainties, geopolitical tensions, changing interest rates, currency shocks, cyber threats and climate risks with a focus on the
impacts of these risks on revenue, losses, net income, liquidity and capital projections.
Separately, ongoing stress testing and scenario analyses within specific risk types are performed, such as market risk
(including Interest Rate Risk in the Banking Book (IRRBB)), liquidity risk, retail and wholesale credit risk, operational risk and
insurance risk, which supplement and support our enterprise-wide analyses. Results from these risk-specific programs are used
in a variety of decision-making processes including risk limit setting, portfolio composition evaluation, risk appetite articulation
and business strategy implementation.
In addition to ongoing enterprise-wide and risk-specific stress testing, we use ad hoc and reverse stress testing to deepen
our knowledge of the risks we face. Ad hoc stress tests are one-off analyses used to investigate developing market conditions or
to stress a particular portfolio in greater depth. Reverse stress tests aim to reverse-engineer scenarios that might lead to a
particular severe outcome, such as bank non-viability, and are used in resolution & recovery planning and to improve our
understanding of risk/return boundaries.
In addition to internal stress tests, we participate in regulatory stress testing exercises, on a periodic basis, across several
jurisdictions.
Risk control
Our enterprise-wide risk management approach is supported by a comprehensive set of risk controls that are defined in our
ERMF. The ERMF serves as the foundation for our approach to risk management and promotes RBC’s risk management
principles, approach and governance. It further sets the expectations for the development and communication of policies, the
establishment of risk appetite, delegated risk approval authorities and risk limits. Enterprise-wide control programs are an
important risk control mechanism that seek to establish sufficient risk diversification and risk/return optimization.
The ERMF, the ERAF and the Enterprise Culture and Conduct Risks Framework (ECCRF) together with risk-specific
frameworks supported by risk-specific policies act as RBC’s governance structure and manage RBC’s Principal Risks and related
risks across the organization.
Enterprise Risk Management
Framework
Enterprise Risk Appetite
Framework
Enterprise Culture and
Conduct Risks
Framework
RBC Unit/Entity (Segment or Region-specific) Policy Documents and Addendums, where applicable
The approval hierarchy for risk frameworks and policy documents:
Board of Directors or Board Committees
Generally, by RBC Unit/Entity Governance Committee, Entity Board, or Business or Functional Unit management/committees.
Group Risk Management approval is required if there are significant risk implications.
Enterprise Risk Policy Document Architecture
Credit Risk
Management
Framework
Market Risk
Management
Framework
Regulatory
Compliance
Management
Framework
Information
Technology
Risk
Management
Framework
Operational
Risk
Management
Framework
Liquidity
Risk
Management
Framework
Insurance
Risk
Management
Framework
Reputation
Risk
Management
Framework
Capital
Management
Framework
Information
Management
Risk
Framework
Financial
Crimes
Risk
Management
Framework
Senior Management Committees
(e.g., Policy Review Committee, Operational Risk Committee, Asset and Liability Committee) for most enterprise
policies. Board or Board Committee approval is required in some instances (e.g., RBC Code of Conduct, Dividend Policy)
Enterprise-Wide Policy Documents
Risk appetite, risk approval authorities and risk limits
The enterprise risk appetite is supported by risk approval authorities delegated by the Board to the President & Chief Executive
Officer (CEO), the CRO and/or the CFO of RBC, providing thresholds for escalation to the Risk Committee of the Board for
awareness and/or approval. To facilitate day-to-day business operations, the CRO (or delegate) may delegate risk approval
authorities or establish risk limits to other risk areas of the Bank including, but not limited to subsidiaries and branches. These
represent the maximum level of risk permitted for an entity, branch, line of business, portfolio, individual or other groups.
68
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Risk review and approval processes
Initial and subsequent risk review and approval processes for products, services, initiatives and projects provide an important
enterprise-wide risk management mechanism. They are established based on the nature, size and complexity of the risk, and
include a formal review and approval by an individual, group or committee that is independent from the originator. The review
and approval requirements of risks related to projects and initiatives or new products and services are set out in enterprise-
level risk policy documents.
Risk monitoring and reporting
Enterprise and business segment level risk monitoring and internal reporting are critical components of our enterprise risk
management program and support the ability of senior management and the Board to effectively perform their risk management
and oversight responsibilities. The ongoing monitoring of our risk profile, and the organization’s risk exposure against our risk
appetite, enables proactive risk management and oversight. It seeks to ensure that our businesses operate within established
and approved risk appetite; detect areas where business activity or growth may be constrained in the future; identify situations
where risk-taking may be overly conservative or aggressive; enable senior management to assess the impact of stress and
unanticipated events; and inform the development and implementation of risk mitigation strategies to operate within risk
appetite. At each meeting of the Risk Committee of the Board, the CRO provides a risk update that has been reviewed by senior
management, and which includes, among others, top and emerging risks, industry trends or other notable items. On a quarterly
basis, we provide our Enterprise Risk Report to senior management and the Risk Committee of the Board which includes, among
others, top and emerging risks, risk profile relative to our risk appetite, portfolio quality metrics and a range of risks we face
along with an analysis of the related issues, key trends and, when required, management actions. On an annual basis, we
provide a benchmarking review to the Board which compares our performance to peers across a variety of risk metrics and
includes a composite risk scorecard which provides an objective measure of our ranking relative to the peer group. In addition
to our regular risk monitoring, other risk-specific presentations are provided to, and discussed with, senior management and the
Board on top and emerging risks or changes in our risk profile. In addition, we publish external reports on risk matters to comply
with regulatory requirements.
Internal risk controls management
The monitoring, assessing and testing of internal controls is an important part of our risk management approach to evaluate
how effective the controls are in reducing the risks they are designed to mitigate. Our risk control governance structure is
outlined in the Enterprise Operational Risk Management Framework and supporting policies which establish a consistent,
principles-based approach to the identification of risk and the development and management of internal controls to mitigate
risks. They also define minimum roles and responsibilities across the three lines of defence that are applicable across all of
RBC’s Principal Risks and sub-risks.
Issue management is a risk management capability that facilitates the identification, rationalization and management of an
unacceptable risk exposure due to an internal control absence or failure in either design or operation. Our enterprise issue
management program has a standardized set of parameters for issue management, including a universal definition of issues,
sources, scope, taxonomies and severity of ratings of issues. Our approach to the issue management program is tailored to
individual issue sources across the three lines of defence and to specific needs of each business segment and functional unit,
including local governance processes, roles and responsibilities and regulatory expectations.
Escalation of risks and events
We actively monitor and manage risks inherent to our activities and consequently maintain processes and controls to manage
those activities. However, risk events may arise due to control failures or circumstances beyond our established processes and/
or controls, leading to elevated or unmitigated risks. Timely escalation of risks or events allows for appropriate awareness and
action (where required) by senior management, relevant committees and the Board, thereby mitigating or minimizing potential
impacts. All three lines of defence have processes in place that are intended to enable effective communication and escalation
of risks and events.
Top and emerging risks
An important component of our risk management approach is to seek to ensure that top and emerging risks, as they evolve, are
identified, managed and incorporated into our existing risk management assessment, measurement, monitoring and escalation
processes and are addressed in our risk frameworks and policies. These practices are intended to ensure a forward-looking risk
assessment is maintained by management in the course of business development and as part of the execution of ongoing risk
oversight responsibilities. Top and emerging risks are discussed by senior management and the Board on a regular basis.
We have developed supplementary internal guidance to support enterprise-wide identification and assessment of all
material risks, including those that are not readily apparent. Top and emerging risks encompass those that could materially
impact our financial results, financial and operational resilience, reputation, business model or strategy, as well as those that
may materially impact us as the risks evolve. The following represents our top and emerging risks:
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
69
Top & emerging risks
Description
Business and economic
conditions
Our financial results are affected to varying degrees by the general business and economic conditions in
the geographic regions in which we operate. These conditions may include factors such as: economic
growth or contraction trends, consumer saving and spending habits; consumer and corporate borrowing
and repayment patterns; unemployment rates; the differing economic trajectories among nations across
the globe; global tensions and geopolitical uncertainty and conflicts; the level of business investment
and overall business sentiment; trade policy developments; the emergence of a new pandemic outbreak
or other health crisis; the level of government spending, including developments relating to tariffs and
trade agreements, as well as fiscal and monetary policy; the level of activity and volatility of the
financial markets; disruptions to energy and other commodity markets; competitiveness; supply chain
challenges and labour shortages; the evolution of inflationary pressures; and possible stagflation or
deflation. Moreover, interest rate changes and actions taken by central banks to manage inflation,
deflation or the broader economy have implications for us. Our financial results are sensitive to changes
in interest rates, as described in the Government fiscal, monetary and other policies section.
For example, certain sectors, economies and markets have been adversely impacted by uncertainty
generated by geopolitical shocks, such as protectionist trade policy developments, which continue to
evolve. In addition, governments may face increasing fiscal challenges due to high debt-loads, ongoing
deficits, higher spending pressures, and changing demographic and immigration trends. These fiscal
challenges may limit future crisis response tools for governments and lead to higher taxes, spending
cuts and adverse economic, market, credit and/or liquidity impacts. Moreover, monetary policy
uncertainty, due to central bank challenges through a period of potential trade- or supply-related
inflationary pressures, could increase economic, credit and market risks.
A slowdown in economic growth or an economic downturn could adversely impact employment rates
and household incomes, consumer spending, housing prices, corporate earnings and business
investment, all of which could adversely affect our business, including, but not limited to, the demand for
our loan and other products, and result in lower earnings and higher credit losses.
There are also emerging risks related to technological developments and wealth and income inequality,
as well as the broader implications of changing demographics and immigration, which could impact the
labour market, productivity, the housing market, inflation, demand and consumer trends, and potentially
have widespread societal and government policy implications.
Canadian housing and
household indebtedness
Canadian housing and household indebtedness risks remain heightened given the current uncertain
economic environment and affordability challenges. Risks around the ability of Canadian households to
meet debt obligations could escalate if interest rates rise materially, if there is a resurgence in inflation
or if the job market deteriorates significantly amidst economic and other geopolitical uncertainty,
potentially resulting in, among other things, higher credit losses or reduced housing market activity.
Moreover, elevated interest rates, slowing economic growth or an economic downturn could further
adversely impact housing market activity and housing prices, which could push loan-to-value (LTV)
ratios higher and further increase credit losses in impacted regions.
While interest rates have started to decline, Canadian real estate activity generally remains soft, with
some markets showing signs of recovery. Challenging affordability conditions and an increase in
condominium supply and construction costs may have an adverse impact on future real estate
investment and demand. The combination of multiple challenges, including but not limited to elevated
home prices, high debt levels, an increasingly high cost of living, a rising unemployment rate and
government policy uncertainty (e.g., immigration policy), may make key Canadian housing markets
particularly vulnerable to a potential economic shock or financial instability.
Information technology,
cyber and third-party risks
Information technology (IT) risk, cyber risk and third-party risk remain top risks, not only for the financial
services sector, but for other industries worldwide. Geopolitical tensions have increased the risk of nation
state actors attacking critical infrastructure, including banks and critical third parties. We continue to be
subject to the heightened inherent risk of cyberattacks, data breaches, cyber extortion and similar
compromises, due to: (i) the size, scale and global nature of our operations; (ii) our heavy reliance on the
internet to conduct day-to-day business activities; (iii) our intricate technological infrastructure; and
(iv) our reliance on third-party service providers. Our potential exposure to these risks increases as we
continue to partner with third-party service providers and adopt new business models and technologies
(e.g., cloud computing, software-as-a-service (SAAS), GenAI and machine learning). Threat actors
gravitate towards vulnerabilities in an ecosystem, and the weakest link in the supply chain can be a
supplier or third-party service provider that may not have sufficiently robust controls. Other key drivers of
third-party risk include global economic pressures related to inflation, and concentration of suppliers and
fourth parties (i.e., suppliers of our third-party providers) within the broader supply chain. Third-party
providers critical to our operations are actively monitored for impacts on their ability to deliver services
to us, including impacts resulting from fourth parties.
Ransomware threats continue to grow in sophistication and ransomware is being used to launch major
supply chain attacks. Resulting implications could include business interruptions, client service
disruptions, financial loss, theft of intellectual property and confidential information, litigation, enhanced
regulatory attention and penalties, as well as reputational damage. Furthermore, the adoption of
emerging technologies, such as cloud computing; AI, including GenAI; and robotics, call for continued
focus and investment to manage risks effectively. For more details on how we are managing these risks,
refer to the Operational risk section.
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Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Top & emerging risks
Description
Geopolitical uncertainty
Elevated geopolitical risks and tensions, particularly from global fragmentation, U.S. policy uncertainty,
and recent and future trade-related developments, could continue to impact economies, markets and
our financial and non-financial risks.
Tensions remain elevated between China and the U.S. and its allies over issues, including trade,
technology, human rights, Taiwan, Hong Kong and Macau. Moreover, these trade tensions produce
additional vulnerabilities to the Canadian economy given the country’s trading relationships with the
U.S. and China, Canada’s two largest trading partners. Tensions between China and its neighbours over
territorial claims, and the prospect of even closer relations between China, Russia, Iran and North Korea,
add further global and economic uncertainty. Additionally, continued weakening in the Chinese economy
could negatively impact global economic growth.
The Russia-Ukraine conflict has continued to produce turmoil in the geopolitical landscape, with ongoing
impacts to the global economy and markets. Despite recent diplomatic efforts, the duration and path of
the conflict remains uncertain and could continue to exacerbate global tensions, energy and other
commodity shortages, supply chain disruptions, inflationary pressures, weakening sentiment and growth
prospects, market volatility, cyberattacks and the proliferation of sanctions and trade measures. In
particular, European countries continue to face uncertainty given their potential exposure to the conflict
and to U.S. foreign policy changes, including through the countries’ military and trade relationships with
impacted regions.
Geopolitical tensions in the Middle East and other regions could also add to economic and market
uncertainties. For example, ongoing tensions related to Iran’s nuclear program or those between Israel
and Iran and its proxies could broaden or escalate. This could destabilize global security, markets and
economic growth, along with key commodity markets. In addition, an uncertain geopolitical or economic
environment could lead to increases in polarization, social unrest or terrorism, each of which could have
direct or indirect impacts to the bank.
More broadly, the future of global trade remains uncertain, as countries look to decrease reliance on the
global supply chain and nations with differing values. Increased global polarization; protectionist measures,
including protectionist trade policies, the imposition of tariffs and the re-negotiation of trade agreements;
and economic nationalism could reshape global alliances and financial systems as the supply of critical
goods of economic and national importance (e.g., energy, critical minerals, semiconductors) remains one of
the top priorities of governments. Furthermore, a volatile geopolitical environment could generate an
increase in espionage and foreign interference activities that indirectly or directly impact the financial
services sector. We will continue to monitor these developments and others and will assess the implications
they have on us.
Environmental and social
(E&S) risk
We, like other organizations, are subject to regulatory requirements and stakeholder expectations to
address E&S risks.
E&S risks are unique and transverse in nature and may impact our Principal Risks in different ways and
to varying degrees, including but not limited to strategic, operational, credit and compliance risks.
For details on how we are managing E&S risk, refer to the Overview of other risks – Environmental and
social risk section and the Legal and regulatory environment risk section.
Digital disruption
and innovation
As the demand for digital banking services grows, the need to meet the rapidly evolving needs of clients
and compete with traditional and non-traditional competitors has increased our strategic and
reputation risks. Additional risks continue to emerge as demographic trends, evolving client
expectations, the increased power to analyze data and the emergence of disruptors are creating
competitive pressures across a number of sectors. Moreover, established technology companies, new
competitors, digital assets and other products and regulatory changes continue to foster new business
models that could challenge traditional banks and financial products. The regulatory landscape of
digital assets, in particular as it relates to stablecoins, has evolved materially in the past year across
multiple jurisdictions. RBC is closely monitoring and assessing emerging risks associated with wider
adoption of stablecoins by the market and the related regulatory requirements. Finally, while the
adoption of new technologies, such as AI (including GenAI) and machine learning, presents
opportunities for us, it is resulting or could result in new and complex strategic, operational, regulatory,
compliance and related reputational risks that would need to be managed effectively. RBC has
established risk and governance processes to provide oversight and support in the implementation of AI
use cases throughout the organization.
Privacy and data
related risks
The protection and responsible use of Personal Information (PI) are critical to maintaining our clients’
trust. PI is information entrusted to RBC that identifies an individual or can be reasonably used to
identify an individual and can relate to current, former and prospective clients, employees and
contractors. In addition, the management and governance of our data also remains a top risk given the
high value attributed to our data for the insights it can generate for clients and communities. Resulting
implications from failing to manage data and privacy risks could include financial loss, theft of
intellectual property and/or confidential information, litigation, enhanced regulatory attention and
penalties, reputational damage and damaged client and employee trust. With the proliferation of AI,
privacy regulators globally have begun issuing guidance around ensuring appropriate use of AI when
processing personal information, in addition to guardrails around transparency and ensuring the rights
of the individual are respected in the context of AI systems. Adherence to these guidelines and
guardrails and trusted integration into existing privacy programs continues to be a focal area for RBC.
For details on how we are managing these risks, refer to the Operational risk section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
71
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Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Top & emerging risks
Description
Regulatory changes
The ongoing introduction of new or revised regulations requires enhanced focus across the organization
on meeting additional or modified regulatory requirements and expectations across the multiple
jurisdictions in which we operate. Regulatory reforms that have been implemented or are being
implemented across multiple jurisdictions, such as in areas of digital and operational resilience, data
and technology reforms, including AI, cyber security, capital, anti-money laundering and consumer
protection continue to impact our operations and strategies. For more details, refer to the Overview of
other risks – Legal and regulatory environment risk section.
Culture and conduct risks
Our Purpose, vision, values and risk management principles define RBC’s culture. We demonstrate our
culture through our conduct – the behaviours, decisions and actions or inactions of the organization and
our employees. Culture and conduct risks are considered top risks for the financial services industry due
to the impact that our choices, behaviours and overall risk governance can have on outcomes for our
clients, shareholders and other stakeholders. We embed client considerations into our decision-making
processes and continue to focus on the fair treatment of clients which also aligns with regulatory
direction. We seek to be responsive to evolving employee needs while expecting employees to always
act with integrity.
Regulators continue to focus on conduct risks, and heightened expectations generally from regulators
could lead to investigations, remediation requirements, higher compliance costs and enforcement
actions and fines, and potential criminal prosecutions or imposition of sanctions, which may involve
prohibitions or restrictions on some of our activities. While we take steps to continue to strengthen our
conduct practices and prevent and detect risk outcomes that are not in keeping with our responsibilities
to our stakeholders, such outcomes may not always be prevented or detected. Additionally, RBC
continues to focus efforts on enhancing and fostering a strong risk culture. A strong risk culture
reinforces risk-aware mindsets, competencies and behaviours by promoting responsible risk-taking
decisions across the bank. For more details, refer to the Culture and conduct risk section.
our disclosures on credit, market and liquidity and funding risks in accordance with IFRS 7
, Financial Instruments: Disclosures
,
and include discussion on how we measure our risks and the objectives, policies and methodologies for managing these
risks. Therefore, these shaded text and marked tables represent an integral part of our 2025 Annual Consolidated Financial
Principal Risks
obligations on a timely basis and may arise directly from the risk of default of a primary obligor (e.g., issuer, debtor,
counterparty, borrower or policyholder), indirectly from a secondary obligor (e.g., guarantor or reinsurer), and/or through
off-balance sheet exposures, contingent credit risk, associated credit risk and/or transactional risk exposures. Credit risk
includes counterparty credit risk arising from both trading and non-trading activities. Exposure to credit risk occurs any time
The responsibility for managing credit risk is shared broadly across the organization following the three lines of defence
governance model. The allocation of the Board approved credit risk appetite is supported by the establishment of risk
approval authorities and risk limits, delegated by the Board to the President & CEO and CRO. Credit transactions in excess of
these authorities must be approved by the Risk Committee of the Board. To facilitate day-to-day business activities, the CRO
has been empowered to further delegate credit risk approval authorities to individuals within GRM, the business segments
and functional units, as deemed necessary.
•
Ensuring credit quality is not compromised for growth;
•
Managing credit risks in transactions, relationships and portfolios;
•
Avoiding excessive concentrations in correlated credit risks;
•
Using our credit risk rating and scoring systems or other approved credit risk assessment or rating methodologies,
policies and tools;
•
Pricing appropriately for the credit risk taken;
•
Detecting and preventing inappropriate credit risk through effective systems and controls;
•
Applying consistent credit risk exposure measurements;
•
Ongoing credit risk monitoring and administration;
•
Transferring credit risk to third parties where appropriate through approved credit risk mitigation techniques (e.g., sale,
hedging, insurance, securitization); and
•
Avoiding activities that are inconsistent with our values, Code of Conduct or policies.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
73
The Enterprise Credit Risk Management Framework (ECRMF) provides an overview of our approach to the management of
credit risk including principles, methodologies, systems, roles and responsibilities, reports and controls. Additional
supporting policies exist that are designed to provide further clarification of roles and responsibilities, acceptable practices,
limits and key controls within the enterprise.
Credit risk measurement
We quantify credit risk at both the individual obligor and portfolio levels to manage expected credit losses and minimize
unexpected losses to limit earnings volatility and ensure we are adequately capitalized.
We employ a variety of risk measurement methodologies to measure and quantify credit risk for our wholesale and retail
credit portfolios. The wholesale portfolio comprises businesses, sovereigns, public sector entities, banks and other financial
institutions, as well as certain HNW individuals. The retail portfolio comprises residential mortgages, personal loans, credit
cards and small business loans. Our credit risk rating systems are designed to assess and quantify the risk inherent in credit
activities in an accurate and consistent manner. The resulting ratings and scores are then used for both client and
transaction-level risk decision-making and as key inputs for our risk pricing, measurement and capital calculations.
Measurement of economic and regulatory capital
Economic capital, which is our internal quantification of risks in terms of capital needed to ensure solvency, is also used for
limit setting. It is also used for internal capital adequacy and allocation of capital to the Insurance segment. Our
methodology for allocating capital to our business segments, other than Insurance, is based on regulatory requirements. For
further details, refer to the Capital management section.
In measuring credit risk to determine regulatory capital, two principal approaches are available: the Internal Ratings
Based (IRB) Approach and the Standardized Approach as per OSFI’s CAR guideline. The IRB Approach allows both a full
model-based approach referred to as the Advanced Internal Ratings Based (A-IRB) Approach and a more supervisory-based
approach known as the Foundation Internal Ratings Based (F-IRB) Approach.
The Standardized Approach applies primarily to Wealth Management, including our City National wholesale portfolio,
our Caribbean banking operations and certain non-mortgage retail portfolios acquired through the HSBC Canada transaction,
and is based on risk weights prescribed by OSFI that are used to calculate RWA for credit risk exposure.
The A-IRB Approach, which applies to most of our retail and wholesale credit risk exposures (excluding F-IRB exposures
discussed below), utilizes three key parameters which form the basis of our credit risk measures for both regulatory and
economic capital:
•
Probability of default (PD): An estimated percentage that represents the likelihood of default within a given time period
of an obligor for a specific rating grade or for a particular pool of exposure.
•
Exposure at default (EAD): An amount expected to be owed by an obligor at the time of default.
•
Loss given default (LGD): An estimated percentage of EAD that is not expected to be recovered during the collections and
recovery process following a default.
These parameters are determined based primarily on historical experience from internal credit risk rating systems
PD is estimated based on a long-run average of default rates for a specific rating grade or for a particular pool of
exposure. The PD assigned to a default grade(s) or pools, consistent with the definition of default, is 100%.
factors such as the current utilization of approved limit. As with LGD, rates are estimated to reflect an economic downturn,
with added conservatism to reflect data and statistical uncertainties identified in the modelling process.
Each credit facility is assigned an estimated LGD rate that is largely driven by factors that impact the extent of losses
anticipated in the event the obligor defaults. These factors mainly include seniority of debt, collateral and the industry sector
in which the obligor operates. Estimated LGD rates draw primarily on internal loss experiences. Where we have limited
internal loss data, we also refer to appropriate external data to supplement the estimation process. LGD rates are estimated
to reflect conditions that might be expected to prevail in a period of an economic downturn, with additional conservatism
added to reflect data limitations and statistical uncertainties identified in the estimation process.
Estimates of PD, EAD and LGD are reviewed on an annual basis and updates are then validated by an independent
validation team within the bank. In addition, quarterly monitoring and back-testing is performed by the estimation team.
These ratings and risk measurements are used to determine our expected losses as well as economic and regulatory capital,
setting of risk limits, portfolio management and product pricing.
The F-IRB Approach is a prescribed regulatory approach that must be used to determine RWA related to our exposures to all
banks and large corporates defined as having total consolidated revenues in excess of $750 million annually. The F-IRB Approach
uses the same PD parameter as the A-IRB Approach but requires the use of supervisory-prescribed EAD and LGD parameters.
Financial and regulatory measurement distinctions
Expected loss models are used for both regulatory capital (Basel) and accounting (IFRS) purposes. Under both models,
expected losses are calculated as the product of PD, EAD and LGD. However, there are certain key differences under current
Basel and IFRS reporting frameworks which could lead to significantly different expected loss estimates, including:
•
Basel PDs are based on long-run averages over an entire economic cycle. IFRS PDs are based on current conditions,
adjusted for estimates of future conditions that will impact PD under probability-weighted macroeconomic scenarios.
•
Basel PDs consider the probability of default over the next 12 months. IFRS PDs consider the probability of default over
the next 12 months only for instruments in stage 1. Expected credit losses for instruments in stage 2 are calculated using
lifetime PDs.
•
Basel LGDs are based on severe but plausible downturn economic conditions. IFRS LGDs are based on current conditions,
adjusted for estimates of future conditions that will impact LGD under probability-weighted macroeconomic scenarios.
For further details, refer to the Critical accounting policies and estimates section.
74
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Gross credit risk exposure
Gross credit risk is categorized as i) lending-related and other credit risk or ii) trading-related credit risk, and is calculated
based on the Basel III framework. Under this method, EAD for all lending-related and other credit transactions and trading-
related repo-style transactions is calculated before taking into account any collateral and is inclusive of an estimate of
potential future changes to that credit exposure. EAD for derivatives is calculated inclusive of collateral in accordance with
regulatory guidelines.
Lending-related and other credit risk includes:
•
Loans and acceptances outstanding, undrawn commitments, and other exposures, including contingent liabilities such
as letters of credit and guarantees, debt securities carried at FVOCI or amortized cost and deposits with financial
institutions. Undrawn commitments represent an estimate of the contractual amount that may be drawn upon at the
time of default of an obligor.
Trading-related credit risk includes:
•
Repo-style transactions, which include repurchase and reverse repurchase agreements and securities lending and
borrowing transactions. For repo-style transactions, gross exposure represents the amount at which securities were
initially financed, before taking collateral into account.
•
Derivative amounts which represent the credit equivalent amount, as defined by OSFI as the replacement cost plus an
add-on amount for potential future credit exposure, scaled by a regulatory factor. For further details on replacement cost
and credit equivalent amounts, refer to Note 9 of our 2025 Annual Consolidated Financial Statements.
Credit risk assessment
Wholesale credit risk
The wholesale credit risk rating system is designed to measure the credit risk inherent in our wholesale credit activities.
Each obligor is assigned a borrower risk rating (BRR), reflecting an assessment of the credit quality of the obligor. Each
BRR has a PD calibrated against it. The BRR differentiates the riskiness of an obligor and represents our evaluation of the
obligor’s ability and willingness to meet its contractual obligations on time over a three-year time horizon. The determination
and assignment of BRRs is based on the evaluation of the obligor’s business and financial risks through fundamental credit
analysis, as well as data-driven modelling. The determination of the PD associated with each BRR relies primarily on internal
default history since 2006. PD estimates are designed to be a long-run average of our experience across the economic cycle
in accordance with regulatory guidelines.
Our rating system is designed to stratify obligors into 22 grades. The following table aligns the relative rankings of our
22-grade internal risk ratings with the external ratings used by S&P and Moody’s.
Internal ratings map* | Table 39 | |||||
PD Bands | ||||||
Ratings | Business and Bank | Sovereign | BRR | S&P | Moody’s | Description |
1 | 0.0000% – 0.0500% | 0.0000% – 0.0150% | 1+ | AAA | Aaa | |
2 | 0.0000% – 0.0500% | 0.0151% – 0.0250% | 1H | AA+ | Aa1 | |
3 | 0.0000% – 0.0500% | 0.0251% – 0.0350% | 1M | AA | Aa2 | |
4 | 0.0000% – 0.0500% | 0.0351% – 0.0450% | 1L | AA- | Aa3 | |
5 | 0.0000% – 0.0550% | 0.0451% – 0.0550% | 2+H | A+ | A1 | |
Investment Grade | ||||||
6 | 0.0551% – 0.0650% | 2+M | A | A2 | ||
7 | 0.0651% – 0.0750% | 2+L | A- | A3 | ||
8 | 0.0751% – 0.0850% | 2H | BBB+ | Baa1 | ||
9 | 0.0851% – 0.1030% | 2M | BBB | Baa2 | ||
10 | 0.1031% – 0.1775% | 2L | BBB- | Baa3 | ||
11 | 0.1776% – 0.3470% | 2-H | BB+ | Ba1 | ||
12 | 0.3471% – 0.6460% | 2-M | BB | Ba2 | ||
13 | 0.6461% – 1.0620% | 2-L | BB- | Ba3 | ||
14 | 1.0621% – 1.5520% | 3+H | B+ | B1 | ||
15 | 1.5521% – 2.2165% | 3+M | B | B2 | Non-investment | |
16 | 2.2166% – 4.5070% | 3+L | B- | B3 | Grade | |
17 | 4.5071% – 7.1660% | 3H | CCC+ | Caa1 | ||
18 | 7.1661% – 13.1760% | 3M | CCC | Caa2 | ||
19 | 13.1761% – 24.9670% | 3L | CCC- | Caa3 | ||
20 | 24.9671% – 99.9990% | 4 | CC | Ca | ||
21 | 100% | 5 | D | C | ||
22 | 100% | 6 | D | C | Impaired | |
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
Counterparty credit risk
Counterparty credit risk is the risk that a party with whom we have entered into a financial or non-financial contract will fail to
fulfill its contractual agreement and default on its obligation. It incorporates not only the contract’s current value, but also
considers how that value can move as market conditions change. Counterparty credit risk usually arises from trading-related
derivatives and repo-style transactions. Derivative transactions include forwards, futures, swaps and options, and can have
underlying references that are either financial (e.g., interest rate, foreign exchange, credit or equity) or non-financial (e.g.,
commodities). For further details on our derivative instruments and credit risk mitigation, refer to Note 9 of our 2025 Annual
Consolidated Financial Statements.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
75
Trading counterparty credit activities are undertaken in a manner consistent with the relevant requirements under
enterprise Credit, Market and Model risk management frameworks and with approval in accordance with the appropriate
delegated authorities.
The primary risk mitigation techniques for trading counterparty credit risk are close-out netting and collateralization.
Close-out netting considers the net value of contractual obligations between counterparties in a default situation, thereby
reducing overall credit exposure. Collateralization is when a counterparty pledges certain assets as collateral, which serves to
mitigate credit exposure and losses in case of a default by the counterparty. The policies that we maintain in relation to the
recognition of risk mitigation from these techniques incorporate such considerations as:
•
The use of standardized agreements such as the International Swaps and Derivatives Association Master Agreement and
Credit Support Annex;
•
Generally restricting eligible collateral to high-quality liquid assets, primarily cash and highly-rated government securities,
subject to appropriate haircuts; and
•
The use of initial margin and variation margin arrangements in accordance with regulatory requirements and internal risk
standards.
Similarly, for securities finance and repurchase trading activity we mitigate counterparty credit risk via the use of
standardized securities finance agreements, and by taking collateral generally in the form of eligible liquid securities.
We also mitigate counterparty credit risk through the use of central counterparties (CCPs). These highly-regulated entities
intermediate trades between participating bilateral counterparties and mitigate credit risk through the use of initial and
variation margin and the ability to net offsetting trades amongst participants. The specific structure and capitalization, including
contingent capital arrangements, of individual CCPs are analyzed as part of assigning an internal counterparty credit risk rating
and determining appropriate counterparty credit risk limits.
Wrong-way risk
Wrong-way risk is the risk that exposure to a counterparty is adversely correlated with the credit quality of that counterparty.
There are two types of wrong-way risk:
•
Specific wrong-way risk, which exists when our exposure to a particular counterparty is positively correlated with the PD of
the counterparty due to the nature of our transactions with them (e.g., loans collateralized by shares or debt issued by the
counterparty or a related party). Specific wrong-way risk trades are permitted only on an exception basis and when
explicitly pre-approved by GRM. Factors considered in reviewing such trades include the counterparty’s credit quality and
collateral practices, the underlying exposure of the transaction and the existence of credit mitigation.
•
General wrong-way risk, which exists when our exposure to a particular counterparty is positively correlated with the PD of
the counterparty due to general macroeconomic or market factors. General wrong-way risk can arise in various
circumstances, depending on the transaction, collateral type, and the nature of the counterparty. We monitor general
wrong-way risk using a variety of metrics including but not limited to correlation analysis between relevant macroeconomic
or market factors and counterparty credit risk exposure.
Credit scoring is the primary risk rating system for assessing obligor and transaction risk for retail exposures. Scoring models
use internal and external data to assess and score borrowers, predict future performance and manage limits for existing
loans and collection activities. Credit scores are one of the factors employed in the acquisition of new clients and
management of existing clients. The credit score of the borrower is used to assess credit risk for each independent
acquisition or account management action, leading to an automated decision or guidance for an adjudicator. Credit scoring
improves credit decision quality, adjudication timeframes and consistency in the credit decision process and facilitates risk-
based pricing. We seek to continuously improve our credit scoring and analytic capabilities by exploring client behavioural
data and advanced analytical techniques to make sound credit decisions.
To arrive at a retail risk rating, borrower scores are categorized and associated with PDs for further grouping into risk
rating categories. The following table maps PD bands to various summarized risk levels for retail exposures:
Internal ratings map* | Table 40 |
PD bands | Description |
0.050% – 3.965% | Low risk |
3.966% – 7.428% | Medium risk |
7.429% – 99.99% | High risk |
100% | Impaired/Default |
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
Credit risk mitigation
use of collateral.
Structuring of transactions
Specific credit policies and procedures set out the requirements for structuring transactions. Risk mitigants include the use of
guarantees, collateral, seniority, LTV requirements and covenants. Product-specific guidelines set out appropriate product
structuring as well as client and guarantor criteria.
Collateral
When we advance credit, we often require obligors to pledge collateral as security. Risk mitigation provided by collateral
depends on the amount, type and quality of collateral taken. Specific requirements relating to valuation and administration
of collateral are set out in our credit risk management policies.
76
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
The types of collateral we use to secure credit or trading facilities within the bank vary. For example, our securities
financing and collateralized over-the-counter (OTC) derivatives activities are primarily secured by cash and highly-rated,
liquid government and agency securities. Wholesale lending to corporate clients is often secured by pledges of the assets of
the borrower, including accounts receivable, inventory, equipment and commercial real estate. In Personal Banking,
Commercial Banking and Wealth Management, collateral typically consists of a pledge over a real estate property, or a
portfolio of debt securities and equities trading on a recognized exchange.
To manage our exposure effectively, we follow a comprehensive approach that combines property valuation, active
portfolio management and oversight.
•
We employ a risk-based approach to property valuation. Property valuation methods include automated valuation
•
We continue to actively manage our mortgage portfolio and perform stress testing, based on a combination of increasing
unemployment, rising interest rates and a downturn in real estate markets.
•
We seek to be in compliance with regulatory requirements that govern residential mortgage underwriting practices,
including LTV parameters and property valuation requirements.
held during the period.
Credit risk approval
The Board, GE, GRC and other senior management committees work together to ensure the ECRMF and supporting policies,
processes and procedures exist to manage credit risk and approve related credit risk limits. Reports are provided to the
Board, the GRC, and senior executives to keep them informed of our risk profile, including significant credit risk issues, shifts
in exposures and trending information, to ensure appropriate and timely actions can be taken where necessary. Our
enterprise-wide credit risk policies set out the minimum requirements for the prudent management of credit risk in a variety
of borrower, transactional and portfolio management contexts.
Transaction approval
Credit transactions are governed by our Enterprise Policy on Risk Limits and Risk Approval Authorities that captures the
authorities and risk limits delegated to management as well as the Enterprise Policy on Credit Requirements and Rules, which
outlines the minimum requirements for managing credit risk at the individual client relationship, transaction and portfolio
levels. The Enterprise Policy on Credit Requirements and Rules is further supported by business and/or product-specific
policies and guidelines as appropriate. Where a transaction exceeds senior management’s authorities, the approval of the
Risk Committee of the Board is required.
Product approval
RBC’s proposals for credit products and services follow our Enterprise Client, Product and Suitability Risk Policy and are
comprehensively reviewed and approved under a product risk assessment process and are subject to product and suitability
risk approval authorities which increase as the level of risk increases. New and amended products must be reviewed relative
to all risk drivers, including credit risk. All existing products must be reviewed on a regular basis following a risk-based
assessment approach.
Credit risk limits
The allocation of risk appetite and Board delegated authorities are supported by the establishment of risk limits which take
both regulatory constraints and internal risk management judgment into account. Risk limits are established at the following
levels: single name; regional, country and industrial sector (notional and economic capital); regulatory large exposure;
product and portfolio; and underwriting and distribution. These limits apply across all businesses, portfolios, transactions
and products.
We actively manage credit exposures and limits to ensure alignment with our risk appetite, to maintain our target
business mix and to ensure that there is no undue concentration risk.
Concentration risk is defined as the risk arising from an overexposure in particular industry sectors, countries, or credit
products within the portfolio, reflecting the potential for credit deterioration and default to be relatively highly correlated.
Credit concentration limits are reviewed on a regular basis after considering business, economic, financial and regulatory
Credit risk administration
Loan forbearance
In our overall management of borrower relationships, economic, legal or other reasons may necessitate forbearance to certain
clients with respect to the original terms and conditions of their loans. We have specialized groups and formalized policies that
direct the management of high risk, delinquent or defaulted borrowers. We strive to identify borrowers in financial difficulty
early and modify their loan terms to minimize losses and assist clients in need. A forbearance agreement may be entered into
with the borrower where we will forbear from enforcing on security in exchange for concessions made by the borrower and/or
additional security provided by the borrower. Examples of concessions to borrowers may include rate reductions, payment
deferrals, term extensions, covenant relief, extensions of matured facilities, amendments or restructuring of agreements, or
relaxation of covenants, as applicable. The goal of a forbearance is to enhance our position in exchange for providing the
borrower additional time to meet the terms and obligations of the loan agreement. For such loans, the appropriate remediation
techniques are based on the specific borrower’s situation, our policy and the client’s willingness and capacity to meet the new
or modified loan terms.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
77
Credit risk exposure by portfolio, sector and geography
The following table presents our credit risk exposures under the Basel regulatory defined classes and reflects EAD. The
classification of our sectors aligns with our view of credit risk by industry.
Credit risk exposure by portfolio, sector and geography
Table 41
As at
October 31
2025
October 31
2024
Credit risk
(1), (2)
Counterparty credit risk
(5)
Credit risk (1), (2)
Counterparty credit risk (5)
On-balance
sheet amount
Off-balance sheet
amount
(3)
Repo-style
transactions
Total
exposure
On-balance
sheet amount
Off-balance sheet
amount (3)
Repo-style
transactions
Total
exposure
(Millions of Canadian dollars)
Undrawn
Other
(4)
Derivatives
Undrawn
Other (4)
Derivatives
Retail
Residential secured
(6)
$
514,623
$
132,502
$
–
$
–
$
–
$
647,125
$
498,014
$ 124,743
$
–
$
–
$
–
$
622,757
Qualifying revolving
(7)
36,407
104,369
–
–
–
140,776
33,571
95,776
–
–
–
129,347
Other retail
57,003
22,522
164
–
–
79,689
53,257
21,530
162
–
–
74,949
Total retail
$
608,033
$ 259,393
$
164
$
–
$
–
$
867,590
$
584,842
$ 242,049
$
162
$
–
$
–
$
827,053
Wholesale
Agriculture
$
14,181
$
3,344
$
86
$
–
$
263
$
17,874
$
13,257
$
3,241
$
77
$
–
$
210
$
16,785
Automotive
14,188
9,602
677
–
1,053
25,520
14,424
9,605
639
–
1,454
26,122
Banking
96,268
3,674
1,797
97,585
32,577
231,901
87,601
3,187
2,967
91,791
32,949
218,495
Consumer discretionary
28,435
11,544
893
–
1,779
42,651
24,516
11,719
918
–
1,242
38,395
Consumer staples
11,355
10,393
957
–
2,299
25,004
10,094
8,631
795
–
1,907
21,427
Oil and gas
6,377
8,671
1,520
–
2,312
18,880
6,365
8,688
2,002
–
2,052
19,107
Financial services
62,170
29,087
4,508
78,257
33,739
207,761
51,313
23,405
4,103
73,020
29,958
181,799
Financing products
3,938
1,180
2,134
1,339
1,713
10,304
3,945
1,235
2,388
604
1,684
9,856
Forest products
2,499
1,524
373
–
76
4,472
2,225
1,589
387
–
84
4,285
Governments
330,943
8,762
2,251
18,150
10,031
370,137
283,893
7,891
2,149
13,334
7,933
315,200
Industrial products
15,966
12,871
1,121
–
922
30,880
15,526
12,463
940
–
1,052
29,981
Information technology
6,308
9,360
230
–
845
16,743
6,353
7,892
251
42
976
15,514
Investments
32,124
7,769
794
19
344
41,050
30,015
7,151
786
103
99
38,154
Mining and metals
2,795
4,004
1,848
–
520
9,167
2,821
3,950
1,684
–
427
8,882
Public works and
infrastructure
2,786
2,499
1,513
–
341
7,139
2,871
2,329
1,383
–
300
6,883
Real estate and related
123,801
24,890
2,289
169
1,478
152,627
115,332
26,197
2,209
83
1,115
144,936
Other services
37,857
17,367
3,293
–
1,621
60,138
35,980
15,870
3,461
–
1,236
56,547
Telecommunication and
media
9,123
6,837
151
–
2,674
18,785
7,814
7,210
159
–
2,874
18,057
Transportation
9,594
7,608
2,042
–
2,450
21,694
10,517
7,235
1,533
–
2,470
21,755
Utilities
14,281
23,822
6,302
–
5,845
50,250
14,652
21,110
5,993
–
5,451
47,206
Other sectors
7,632
1,526
1,467
276
31,090
41,991
11,119
2,578
1,887
227
24,520
40,331
Total wholesale
$
832,621
$ 206,334
$ 36,246
$ 195,795
$ 133,972
$ 1,404,968
$
750,633
$ 193,176
$
36,711
$ 179,204
$ 119,993
$ 1,279,717
Total exposure
(1)
$ 1,440,654
$ 465,727
$ 36,410
$ 195,795
$ 133,972
$ 2,272,558
$ 1,335,475
$ 435,225
$
36,873
$ 179,204
$ 119,993
$ 2,106,770
By geography
(8)
Canada
$
883,575
$
335,487
$
15,107
$
76,722
$
61,861
$
1,372,752
$
845,343
$ 320,434
$
15,533
$
72,852
$
51,427
$ 1,305,589
U.S.
421,280
96,502
16,939
60,424
25,020
620,165
360,803
84,633
15,277
56,415
22,201
539,329
Europe
58,568
24,150
2,141
40,398
31,158
156,415
55,936
21,879
3,432
31,987
31,555
144,789
Other International
77,231
9,588
2,223
18,251
15,933
123,226
73,393
8,279
2,631
17,950
14,810
117,063
Total exposure
(1)
$ 1,440,654
$ 465,727
$ 36,410
$ 195,795
$ 133,972
$ 2,272,558
$ 1,335,475
$ 435,225
$
36,873
$ 179,204
$ 119,993
$ 2,106,770
(1)
Excludes securitization, banking book equities and other assets not subject to the standardized or IRB approach.
(2)
EAD for standardized exposures are reported net of allowance for impaired assets and EAD for IRB exposures are reported gross of all ACL and partial write-offs as per
regulatory definitions.
(3)
EAD for undrawn credit commitments and other off-balance sheet amounts are reported after the application of credit conversion factors.
(4)
Includes other off-balance sheet exposures such as letters of credit and guarantees.
(5)
Counterparty credit risk EAD reflects exposure amounts after netting. Collateral is included in EAD for repo-style transactions to the extent allowed by regulatory
guidelines. Exchange traded derivatives are included in Other sectors.
(6)
Includes residential mortgages and home equity lines of credit.
(7)
Includes credit cards, unsecured lines of credit and overdraft protection products.
(8)
Geographic profile is based on country of residence of the borrower.
2025 vs. 2024
Total credit risk exposure increased $166 billion or 8% from last year, primarily due to an increase in securities, higher
counterparty credit risk exposures and volume growth in loans and undrawn commitments.
Net International wholesale exposure by region, asset type and client type
(1), (2)
Table 42
As at
October 31
2025
October 31
2024
Asset type
Client type
(Millions of Canadian dollars)
Loans
Outstanding
Securities
(3)
Repo-style
transactions
Derivatives
Financials
Sovereign
Corporate
Total
Total
Europe (excluding U.K.)
$ 18,894
$ 25,402
$
8,612
$
3,307
$ 31,708
$
7,757
$ 16,750
$
56,215
$
52,307
U.K.
14,302
22,914
5,789
2,363
18,939
14,219
12,210
45,368
36,311
Caribbean
6,712
10,877
3,230
1,970
9,747
4,763
8,279
22,789
22,612
Asia-Pacific
7,502
31,708
5,295
1,646
20,670
20,543
4,938
46,151
43,874
Other
(4)
3,095
1,605
3,273
141
2,844
1,915
3,355
8,114
8,022
Net International
exposure
(5)
$ 50,505
$ 92,506
$
26,199
$
9,427
$ 83,908
$ 49,197
$ 45,532
$ 178,637
$ 163,126
(1)
Geographic profile is based on country of risk, which reflects our assessment of the geographic risk associated with a given exposure. Typically, this is the residence of
the borrower.
(2)
Exposures are calculated on a fair value basis and net of collateral, which includes $467 billion against repo-style transactions (October 31, 2024 – $459 billion) and
$20 billion against derivatives (October 31, 2024 – $16 billion).
(3)
Securities include $26 billion of trading securities (October 31, 2024 – $14 billion), $24 billion of deposits (October 31, 2024 – $29 billion), and $43 billion of investment
securities (October 31, 2024 – $44 billion).
(4)
Includes exposures in the Middle East, Africa and Latin America.
(5)
Excludes $7,643 million (October 31, 2024 – $6,950 million) of exposures to supranational agencies.
78
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Residential mortgages and home equity lines of credit (insured vs. uninsured)
(1)
Residential mortgages and home equity lines of credit are secured by residential properties. The following table presents a
breakdown by geographic region.
Residential mortgages and home equity lines of credit
Table 43
As at October 31, 2025
(Millions of Canadian dollars,
except percentage amounts)
Residential mortgages
Home equity
lines of credit
(2)
Insured
(3)
Uninsured
Total
Total
Region
(4)
Canada
Atlantic provinces
$
9,143
42%
$
12,883
58%
$
22,026
$
1,745
Quebec
11,504
24
35,859
76
47,363
3,537
Ontario
30,857
13
198,588
87
229,445
18,623
Alberta
17,888
40
26,517
60
44,405
4,646
Saskatchewan and
Manitoba
8,299
39
12,813
61
21,112
1,728
B.C. and territories
12,041
13
77,954
87
89,995
8,384
Total Canada
(5)
89,732
20
364,614
80
454,346
38,663
U.S.
–
–
35,673
100
35,673
2,227
Other International
–
–
3,394
100
3,394
1,387
Total International
–
–
39,067
100
39,067
3,614
Total
$ 89,732
18%
$ 403,681
82%
$ 493,413
$ 42,277
As at October 31, 2024
(Millions of Canadian dollars,
except percentage amounts)
Residential mortgages
Home equity
lines of credit
(2)
Insured
(3)
Uninsured
Total
Total
Region
(4)
Canada
Atlantic provinces
$
8,692
43%
$
11,688
57%
$
20,380
$
1,704
Quebec
11,781
25
35,129
75
46,910
3,346
Ontario
32,011
14
189,638
86
221,649
18,173
Alberta
18,804
43
24,459
57
43,263
4,448
Saskatchewan and
Manitoba
8,549
41
12,258
59
20,807
1,718
B.C. and territories
12,607
14
75,575
86
88,182
8,061
Total Canada
(5)
92,444
21
348,747
79
441,191
37,450
U.S.
–
–
33,092
100
33,092
2,144
Other International
–
–
3,261
100
3,261
1,421
Total International
–
–
36,353
100
36,353
3,565
Total
$ 92,444
19%
$ 385,100
81%
$ 477,544
$ 41,015
(1)
Disclosure is provided in accordance with the requirements of OSFI’s Guideline B-20 (Residential Mortgage Underwriting Practices and
Procedures).
(2)
Includes $42,260 million and $17 million of uninsured and insured home equity lines of credit, respectively (October 31, 2024 –
$40,998 million and $17 million, respectively), reported within the personal loan category. The amounts in the U.S. and Other
International include term loans collateralized by residential properties.
(3)
Insured residential mortgages are mortgages whereby our exposure to default is mitigated by insurance through the Canadian
Mortgage and Housing Corporation or other private mortgage default insurers.
(4)
Region is based upon the address of the property mortgaged. The Atlantic provinces comprise Newfoundland and Labrador, Prince
Edward Island, Nova Scotia and New Brunswick; B.C. and territories comprise British Columbia, Nunavut, Northwest Territories and
Yukon.
(5)
Total consolidated residential mortgages in Canada of $454 billion (October 31, 2024 – $441 billion) includes $12 billion
(October 31, 2024 – $12 billion) of mortgages with commercial clients in Commercial Banking, of which $9 billion (October 31, 2024 –
$9 billion) are insured mortgages, and $17 billion (October 31, 2024 – $18 billion) of residential mortgages in Capital Markets, of which
$17 billion (October 31, 2024 – $18 billion) are held for securitization purposes. All of the residential mortgages held for securitization
purposes are insured (October 31, 2024 – all insured).
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
79
Residential mortgages portfolio by amortization period
(1)
The following table provides a summary of the percentage of residential mortgages that fall within the remaining amortization
periods based upon current customer payment amounts, which incorporate payments larger than the minimum contractual
amount and/or higher frequency of payments.
Residential mortgages portfolio by amortization period
Table 44
As at
October 31
2025
October 31
2024
Canada
(2)
U.S. and other
International
Total
Canada
(2)
U.S. and other
International
Total
Amortization period
≤
25 years
76%
38%
73%
62%
31%
60%
> 25 years
≤
30 years
24
62
27
28
69
30
> 30 years
≤
35 years
–
–
–
10
–
10
Total
100%
100%
100%
100%
100%
100%
(1)
Disclosure is provided in accordance with the requirements of OSFI’s Guideline B-20 (Residential Mortgage Underwriting Practices and
Procedures).
(2)
Our policy is to originate mortgages with amortization periods of 30 years or less. Amortization periods greater than 30 years reflect the
impact of increases in interest rates on our variable rate mortgage portfolios. For these loans, the amortization period resets to the
original amortization schedule upon renewal. We do not originate mortgage products with a structure that would result in negative
amortization, as payments on variable rate mortgages automatically increase to ensure accrued interest is covered.
Average loan-to-value (LTV) ratios
(1)
The following table provides a summary of our average LTV ratios for newly originated and acquired uninsured residential
mortgages and RBC Homeline Plan
®
products by geographic region, as well as the respective LTV ratios for our total Personal
Banking – Canada residential mortgage portfolio outstanding.
Average LTV ratios
Table 45
For the year ended
October 31
2025
October 31
2024
Uninsured
Uninsured
Residential
mortgages
(2)
RBC Homeline
Plan products
(3)
Residential
mortgages
(2)
RBC Homeline
Plan products
(3)
Average of newly originated and
acquired for the period, by
region
(4)
Atlantic provinces
70%
70%
68%
68%
Quebec
70
70
64
67
Ontario
70
65
63
60
Alberta
72
70
66
67
Saskatchewan and Manitoba
72
73
69
70
B.C. and territories
67
63
51
60
U.S.
72
n.m.
72
n.m.
Other International
71
n.m.
70
n.m.
Average of newly originated and
acquired for the period
(5), (6), (7)
70%
67%
60%
61%
Total Personal Banking – Canada
residential mortgages
portfolio
(8)
60%
49%
56%
47%
(1)
Disclosure is provided in accordance with the requirements of OSFI’s Guideline B-20 (Residential Mortgage Underwriting Practices and
Procedures).
(2)
Residential mortgages exclude residential mortgages within the RBC Homeline Plan products.
(3)
RBC Homeline Plan products comprise both residential mortgages and home equity lines of credit.
(4)
Region is based upon the address of the property mortgaged. The Atlantic provinces comprise Newfoundland and Labrador, Prince
Edward Island, Nova Scotia and New Brunswick; B.C. and territories comprise British Columbia, Nunavut, Northwest Territories and
Yukon.
(5)
The average LTV ratios for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan products are
calculated on a weighted basis by mortgage amounts at origination.
(6)
For newly originated mortgages and RBC Homeline Plan products, LTV is calculated based on the total facility amount for the residential
mortgage and RBC Homeline Plan product divided by the value of the related residential property.
(7)
The year ended October 31, 2024 includes the impact of the HSBC Canada portfolio acquired in the second quarter of 2024. Excluding the
acquired HSBC Canada portfolio, the average of newly originated and acquired residential mortgages and RBC Homeline Plan products
for the year ended October 31, 2024 was 70% and 65%, respectively.
(8)
Weighted by mortgage balances and adjusted for property values based on the Teranet – National Bank
House Price Index
‡.
n.m.
not meaningful
80
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Credit quality performance
The following credit quality performance tables and analysis provide information on loans, which represents loans, acceptances
and commitments, and other financial assets.
Gross impaired loans (GIL)
Table 46
As at and for the year ended
(Millions of Canadian dollars, except percentage amounts)
October 31
2025
October 31
2024
Personal Banking
(1)
$
2,091
$
1,652
Commercial Banking
(1)
3,362
2,372
Wealth Management
609
508
Capital Markets
2,620
1,335
Total GIL
$
8,682
$
5,867
Impaired loans, beginning balance
$
5,867
$
3,704
Classified as impaired during the period (new impaired)
(1)
9,687
6,272
Net repayments
(1)
(1,381)
(848)
Amounts written off
(3,326)
(2,521)
Other
(2)
(2,165)
(740)
Impaired loans, balance at end of period
$
8,682
$
5,867
GIL as a % of related loans and acceptances
Total GIL as a % of related loans and acceptances
0.83%
0.59%
Personal Banking
(1)
0.38%
0.31%
Personal Banking – Canada
0.34%
0.26%
Commercial Banking
(1)
1.74%
1.29%
Wealth Management
0.47%
0.42%
Capital Markets
1.52%
0.88%
(1)
Certain GIL movements for Personal Banking – Canada and Commercial Banking are generally allocated to new
impaired, as Net repayments and certain Other movements are not reasonably determinable.
(2)
Includes return to performing status during the period, recoveries of loans and advances previously written off, sold,
amounts related to foreclosed properties held as investment properties and interests in joint ventures for certain
co-lending arrangements, foreign exchange translation and other movements.
2025 vs. 2024
Total GIL increased $2,815 million or 48% from last year, primarily due to higher impaired loans in Capital Markets, Commercial
Banking and Personal Banking.
GIL in Personal Banking increased $439 million or 27%, primarily due to higher impaired loans in our Canadian residential
mortgages portfolio.
GIL in Commercial Banking increased $990 million or 42%, mainly due to higher impaired loans across most sectors,
including the real estate and related and agriculture sectors.
GIL in Wealth Management increased $101 million or 20%, mainly due to higher impaired loans in a few sectors, including the
telecommunication and media sector, and in our retail portfolios.
GIL in Capital Markets increased $1,285 million or 96%, primarily due to one account in the other services sector.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
81
Allowance for credit losses
Table 47
As at
(Millions of Canadian dollars)
October 31
2025
October 31
2024
Personal Banking
$
3,739
$
3,273
Commercial Banking
2,300
1,626
Wealth Management
496
466
Capital Markets
923
986
Corporate Support and other
1
1
ACL on loans
7,459
6,352
ACL on other financial assets
(1)
11
12
Total ACL
$
7,470
$
6,364
ACL on loans is comprised of:
Retail
$
3,454
$
3,011
Wholesale
2,019
1,825
ACL on performing loans
$
5,473
$
4,836
ACL on impaired loans
1,986
1,516
(1)
ACL on other financial assets mainly represents allowances on debt securities measured at FVOCI and amortized cost,
accounts receivable and financial guarantees.
2025 vs. 2024
Total ACL increased $1,106 million or 17% from last year, largely due to higher ACL on performing loans, primarily driven by
unfavourable changes in credit quality and scenario weights, which include the impacts of trade disruptions. Higher ACL on
impaired loans, primarily in Commercial Banking and Personal Banking, also contributed to the increase.
For further details, refer to Note 5 of our 2025 Annual Consolidated Financial Statements.
82
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
83
due to changes in market-determined variables such as interest rates, credit spreads, equity prices, commodity prices, foreign
The measures of financial condition impacted by market risk include the following:
1.
Positions whose revaluation gains and losses are reported in revenue, which includes:
a)
Changes in the fair value of instruments classified or designated as FVTPL, and
b)
Hedge ineffectiveness.
2.
CET1 capital, which includes:
a)
All of the above, plus
b)
Changes in the fair value of FVOCI securities where revaluation gains and losses are reported as OCI,
c)
Changes in the Canadian dollar value of investments in foreign subsidiaries, net of hedges, due to foreign exchange
translation, and
d)
Changes in the fair value of employee benefit plan deficits.
3.
CET1 ratio, which includes:
a)
All of the above, plus
b)
Changes in RWA resulting from changes in traded market risk factors, and
c)
Changes in the Canadian dollar value of RWA due to foreign exchange translation.
4.
The economic value of the Bank, which includes:
a)
Points 1 and 2 above, plus
b)
Changes in the economic value of other non-trading positions, net interest income and fee based income, as a
result of changes in market risk factors.
1
As an element of the ERAF, the Board approves our overall market risk appetite. The Market and Counterparty Credit Risk
function within GRM is responsible for creating and managing the controls and governance procedures that are designed to
ensure that risk taken is consistent with risk appetite constraints set by the Board. These controls include limits on
probabilistic measures of potential loss such as Value-at-Risk and stress tests as defined below:
Value-at-Risk (VaR)
is a statistical measure of potential loss for a financial portfolio computed at a given level of confidence
and over a defined holding period. We measure VaR at the 99th percentile confidence level for price movements over a
one-day holding period using historic simulation of the last two years of equally weighted historic market data. These
calculations are updated daily with current risk positions, with the exception of certain less material positions that are not
actively traded which are updated on at least a monthly basis.
Trading VaR captures potential loss for our trading portfolio
that excludes the impacts of non-trading FVTPL positions such as loan underwriting commitments. Total VaR captures
potential loss for all positions classified as FVTPL.
VaR is a statistical estimate based on historical market data and should be interpreted with knowledge of its limitations,
which include the following:
•
VaR will not be predictive of future losses if the realized market movements differ significantly from the historical
periods used to compute it.
•
VaR projects potential losses over a one-day holding period and does not project potential losses for risk positions held
over longer time periods.
•
VaR is measured using positions at close of business and does not include the impact of trading and hedging activity
over the course of a day.
We validate our VaR measures through a variety of means – including subjecting the models to vetting and validation by a
group of independent model developers and by back-testing the VaR against daily marked-to-market revenue to identify and
examine events in which actual outcomes in trading revenue exceed the VaR projections.
Stress tests
– Our market risk stress testing program is used to identify and control risk due to large changes in market
prices and rates. We conduct stress testing daily on positions that are marked-to-market. The stress tests simulate both
historical and hypothetical events which are severe and long-term in duration. Historical scenarios are taken from actual
market events and range in duration up to 90 days. Examples include the COVID-19 Pandemic of 2020, Global Financial Crisis
of 2008 and the Taper Tantrum of 2013. Hypothetical scenarios are designed to be forward-looking at potential future market
stresses and are designed to be severe but plausible. We are constantly evaluating and refining these scenarios as market
conditions change. Stress results are calculated assuming an instantaneous revaluation of our positions with no
1
Trading portfolios are comprised of trading instruments in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline. Trading involves market-making,
positioning and arbitrage activities conducted primarily within our Global Markets business in the Capital Markets segment.
84
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
These measures are computed on all positions that are FVTPL for financial reporting purposes, with the exception of those in a
designated hedging relationship and those in RBC Insurance.
Market risk measures – FVTPL positions
Market risk measures* | Table 48 | |||||||
| October 31, 2025 | October 31, 2024 | |||||||
| For the year ended | For the year ended | |||||||
(Millions of Canadian dollars) | As at | Average | High | Low | As at | Average | High | Low |
Equity | $ 17 | $ 16 | $ 30 | $ 11 | $ 23 | $ 14 | $ 26 | $ 6 |
Foreign exchange | 5 | 4 | 13 | 2 | 6 | 5 | 10 | 2 |
Commodities | 8 | 7 | 11 | 3 | 11 | 6 | 11 | 4 |
Interest rate (1) | 33 | 23 | 33 | 17 | 23 | 30 | 44 | 19 |
Credit specific (2) | 5 | 7 | 10 | 5 | 8 | 8 | 9 | 7 |
Diversification (3) | (38) | (32) | n.m. | n.m. | (37) | (34) | n.m. | n.m. |
Trading VaR | $ 30 | $ 25 | $ 35 | $ 18 | $ 34 | $ 29 | $ 41 | $ 20 |
Total VaR | $ 40 | $ 36 | $ 56 | $ 22 | $ 34 | $ 70 | $ 138 | $ 26 |
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
(1)
General credit spread risk and funding spread risk associated with uncollateralized derivatives are included under interest rate VaR.
(2)
Credit specific risk captures issuer-specific credit spread volatility.
(3)
Trading VaR is less than the sum of the individual risk factor VaR results due to risk factor diversification.
n.m.
not meaningful
2025 vs. 2024
Average Trading VaR of $25 million decreased $4 million from last year, primarily driven by exposure changes in our fixed income
portfolio, partially offset by exposure changes in our equity portfolio.
Average total VaR of $36 million decreased $34 million, primarily driven by the impact of management of closing capital
volatility related to the HSBC Canada transaction last year.
The following chart displays a bar graph of our daily trading revenue and a line graph of our daily market risk Trading VaR. We
incurred no net trading losses in 2025.
Trading revenue
(teb), (1)
and Trading VaR
(Millions of Canadian dollars)
Nov 1, 2024
Jan 31, 2025
Apr 30, 2025
July 31, 2025
Oct 31, 2025
50
60
30
40
10
20
-20
-30
-10
0
-40
Tradin
g
Revenue
(teb) (1)
Trading VaR
(1)
Trading revenue (teb) in the chart above excludes the impact of loan underwriting commitments.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
85
The following chart displays the distribution of daily trading revenue in 2025 and 2024 with no net trading losses in both years.
The largest reported trading revenue was $50 million with an average daily revenue of $21 million.
Frequency in Number of Days
Daily net trading revenue (C$ millions)
2025
2024
0
10
20
30
40
50
60
70
80
90
Trading revenue for the year ended October
31, 2025
(teb), (1)
(teb), (1)
(1)
Trading revenue (teb) amounts in the chart above exclude the impact of loan underwriting commitments and structured entities.
Market risk measures for assets and liabilities of RBC Insurance
We offer a range of insurance products to clients and hold investments to meet future obligations to policyholders. The
investments which support actuarial liabilities are predominantly fixed income assets measured at FVTPL. Consequently,
changes in the fair values of these assets are largely offset by changes in the discount rates used in the measurement of
insurance and reinsurance contract assets and liabilities, and the impacts of both are reflected in Insurance investment
result in the Consolidated Statements of Income. As at October 31, 2025, we held assets in support of $22 billion of insurance
contract liabilities net of insurance contract assets and reinsurance contracts held balances (October 31, 2024 – $20 billion).
2
IRRBB arises primarily from traditional customer-originated banking products such as deposits and loans, and includes
related hedges and interest rate risk from securities held for liquidity and cash management purposes. Factors contributing
to IRRBB include mismatches between asset and liability repricing dates, relative changes in asset and liability rates in
response to market rate scenarios, and other product features affecting the expected timing of cash flows, such as options to
pre-pay loans or redeem term deposits prior to contractual maturity. IRRBB sensitivities are regularly measured and
reported, and subject to limits and controls with independent oversight from GRM.
The Board approves the risk appetite for IRRBB, and the Asset Liability Committee (ALCO) and GRM provide ongoing
governance through IRRBB risk policies, limits, operating standards and other controls. IRRBB reports are reviewed regularly
by GRM, ALCO, the GRC, the Risk Committee of the Board and the Board.
IRRBB measurement
To monitor and control IRRBB, we assess two primary metrics, Net Interest Income (NII) risk and Economic Value of Equity
(EVE) risk, under a range of market shocks, scenarios and time horizons. Market scenarios include currency-specific parallel
and non-parallel yield curve changes, interest rate volatility shocks and interest rate scenarios prescribed by regulators.
In measuring NII risk, detailed banking book balance sheets and income statements are dynamically simulated to estimate
the impact of market stress scenarios on projected NII. Assets, liabilities and off-balance sheet positions are simulated over
various time horizons. The simulations incorporate maturities, renewals and new originations along with prepayment and
redemption behaviour. Product pricing and volumes are forecasted based on past experience to determine response
expectations under a given market shock scenario. EVE risk captures the market value sensitivity to changes in rates. In
measuring EVE risk, deterministic (single-scenario) and stochastic (multiple-scenario) valuation techniques are applied to spot
position data. NII and EVE risks are measured for a range of market risk stress scenarios which include extreme but plausible
changes in market rates and volatilities. IRRBB measures assume continuation of existing hedge strategies.
Management of NII and EVE risk is complementary and supports our efforts to generate a sustainable high-quality NII
stream. NII and EVE risks for specific units are measured daily, weekly or monthly depending on materiality, complexity and
hedge strategy.
A number of assumptions affecting cash flows, product re-pricing and the administration of rates underlie the models used
to measure NII and EVE risk. The key assumptions pertain to the projected funding date of mortgage rate commitments, fixed-
rate loan prepayment behaviour, term deposit redemption behaviour, and the term and rate profile of non-maturity deposits.
All assumptions are derived empirically based on historical client behaviour and product pricing with consideration of possible
forward-looking changes. All models and assumptions used to measure IRRBB are subject to independent oversight by GRM.
Market risk measures – IRRBB Sensitivities
The following table shows the potential before-tax impact of an immediate and sustained 100 bps increase or decrease in
interest rates on projected EVE and 12-month NII, assuming no subsequent hedging. Interest rate risk measures are based on
current on and off-balance sheet positions which can change over time in response to business activity and management
2
IRRBB positions include the impact of derivatives in hedge accounting relationships, FVOCI securities used for interest rate risk management and economic hedges.
86
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Market risk – IRRBB measures* | Table 49 | |||||||||
October 31 | October 31 | |||||||||
2025 | 2024 | |||||||||
EVE risk | NII risk (1) | |||||||||
Canadian | U.S. dollar | Canadian | U.S. dollar | |||||||
dollar | and other | dollar | and other | |||||||
(Millions of Canadian dollars) | impact (2) | impact (2) | Total | impact (2) | impact (2) | Total | EVE risk | NII risk (1) | ||
Before-tax impact of: | ||||||||||
100 bps increase in rates | $ (2,228) | $ (420) | $ (2,648) | $ 105 | $ 92 | $ 197 | $ (2,076) | $ 400 | ||
100 bps decrease in rates | 2,037 | (105) | 1,932 | (210) | (163) | (373) | 1,663 | (502) | ||
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
(1)
Represents the 12-month NII exposure to an instantaneous and sustained shift in interest rates.
(2)
Effective the third quarter of 2025, EVE and NII risk for currencies other than the Canadian and U.S. dollar are presented within the U.S. dollar and other impact category.
Previously, the impact of other currencies was presented in the Canadian dollar impact category.
As at October 31, 2025, an immediate and sustained -100 bps shock would have had a negative impact to our NII of $373 million,
down from $502 million last year, and an immediate and sustained +100 bps shock would have had a negative impact to our EVE
of $2,648 million, up from $2,076 million last year. The change in NII sensitivity reflects a change in product mix and the change in
EVE sensitivity can be attributed to net growth in fixed rate assets including growth in book capital. During 2025, NII and EVE
risks remained within approved limits.
Market risk measures for other material non-trading portfolios
Investment securities carried at FVOCI
Investment securities carried at FVOCI are primarily debt securities. We hold debt securities primarily as investments, as well as
to manage liquidity risk and hedge interest rate risk in our banking book balance sheet. While debt securities held by RBC
Insurance are managed separately, all other debt securities carried at FVOCI are included in our IRRBB measures.
For further details on the investment securities carried at FVOCI, refer to Notes 2 and 4 of our 2025 Annual Consolidated
Financial Statements.
Foreign exchange rate risk is the potential adverse impact on earnings and economic value due to changes in foreign
currency rates. Our revenue, expenses and income denominated in currencies other than the Canadian dollar are subject to
fluctuations as a result of changes in the value of the average Canadian dollar relative to the average value of those
currencies. Our most significant exposure is to the U.S. dollar, due to our operations in the U.S. and other activities conducted
in U.S. dollars. Our other significant exposure is to the British pound due to our activities conducted internationally in this
currency. A strengthening or weakening of the Canadian dollar compared to the U.S. dollar and British pound could reduce or
increase, as applicable, the translated value of our foreign currency denominated revenue, expenses and earnings and could
have a significant effect on the results of our operations. We are also exposed to foreign exchange rate risk arising from our
investments in foreign operations. For unhedged equity investments, when the Canadian dollar appreciates against other
currencies, the unrealized translation losses on net foreign investments decreases our shareholders’ equity through the
other components of equity and decreases the translated value of the RWA of the foreign currency-denominated asset. The
reverse is true when the Canadian dollar depreciates against other currencies. Consequently, we consider these impacts in
Derivatives related to non-trading activity
Derivatives are also used to hedge market risk exposure unrelated to our trading activity. Hedge accounting is elected where
applicable. These derivatives are included in our IRRBB measures and other internal non-trading market risk measures. We use
interest rate swaps to manage our IRRBB, funding and investment activities. Interest rate swaps are also used to hedge changes
in the fair value of certain fixed-rate instruments. We also use foreign exchange derivatives to manage our exposure to equity
investments in subsidiaries that are denominated in foreign currencies, particularly the U.S. dollar and British Pound.
For further details on the application of hedge accounting and the use of derivatives for hedging activities, refer to Notes 2 and 9
of our 2025 Annual Consolidated Financial Statements.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
87
Linkage of market risk to selected balance sheet items
The following tables provide the linkages between selected balance sheet items with positions included in our trading market
risk and non-trading market risk disclosures, which illustrates how we manage market risk for our assets and liabilities through
different risk measures:
Linkage of market risk to selected balance sheet items
Table 50
As at October 31, 2025
Market risk measure
(Millions of Canadian dollars)
Balance sheet
amount
Traded risk
(1)
Non-traded
risk
(2)
Non-traded risk
primary risk sensitivity
Assets subject to market risk
Cash and due from banks
$
37,024
$
–
$
37,024
Interest rate
Interest-bearing deposits with banks
50,364
6
50,358
Interest rate
Securities
Trading
219,067
188,249
30,818
Interest rate, credit spread
Investment, net of applicable allowance
342,721
–
342,721
Interest rate, credit spread, equity
Assets purchased under reverse repurchase
agreements and securities borrowed
309,683
251,147
58,536
Interest rate
Loans
Retail
652,344
2
652,342
Interest rate
Wholesale
397,171
3,271
393,900
Interest rate
Allowance for loan losses
(7,093)
–
(7,093)
Interest rate
Other
Derivatives
177,206
171,721
5,485
Interest rate, foreign exchange
Other assets
138,647
62,521
76,126
Interest rate
Assets not subject to market risk
(3)
7,872
Total assets
$
2,325,006
$
676,917
$
1,640,217
Liabilities subject to market risk
Deposits
$
1,515,616
$
74,278
$
1,441,338
Interest rate
Other
Obligations related to securities sold short
49,891
49,428
463
Obligations related to assets sold under
repurchase agreements and securities
loaned
289,516
252,956
36,560
Interest rate
Derivatives
183,953
180,047
3,906
Interest rate, foreign exchange
Other liabilities
108,398
49,489
58,909
Interest rate
Subordinated debentures
13,961
–
13,961
Interest rate
Liabilities not subject to market risk
(4)
24,520
Total liabilities
$
2,185,855
$
606,198
$
1,555,137
Total equity
139,151
Total liabilities and equity
$
2,325,006
(1)
Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading
portfolios. Market risk measures of VaR and stress tests are used as risk controls for traded risk.
(2)
Non-traded risk includes positions used in the management of IRRBB and other non-trading portfolios. Other material non-trading portfolios include positions from RBC
Insurance and investment securities, net of applicable allowance, not included in IRRBB.
(3)
Assets not subject to market risk primarily include insurance-related assets.
(4)
Liabilities not subject to market risk primarily include insurance contract liabilities.
88
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
As at October 31, 2024
Market risk measure
(Millions of Canadian dollars)
Balance sheet
amount
Traded risk
(1)
Non-traded
risk
(2)
Non-traded risk
primary risk sensitivity
Assets subject to market risk
Cash and due from banks
$
56,723
$
–
$
56,723
Interest rate
Interest-bearing deposits with banks
66,020
3
66,017
Interest rate
Securities
Trading
183,300
161,031
22,269
Interest rate, credit spread
Investment, net of applicable allowance
256,618
–
256,618
Interest rate, credit spread, equity
Assets purchased under reverse repurchase
agreements and securities borrowed
350,803
299,032
51,771
Interest rate
Loans
Retail
626,978
–
626,978
Interest rate
Wholesale
360,439
3,152
357,287
Interest rate
Allowance for loan losses
(6,037)
–
(6,037)
Interest rate
Other
Derivatives
150,612
147,017
3,595
Interest rate, foreign exchange
Other assets
115,133
47,936
67,197
Interest rate
Assets not subject to market risk
(3)
10,993
Total assets
$
2,171,582
$
658,171
$
1,502,418
Liabilities subject to market risk
Deposits
$
1,409,531
$
63,706
$
1,345,825
Interest rate
Other
Obligations related to securities sold short
35,286
34,985
301
Obligations related to assets sold under
repurchase agreements and securities
loaned
305,321
280,386
24,935
Interest rate
Derivatives
163,763
157,587
6,176
Interest rate, foreign exchange
Other liabilities
94,666
39,802
54,864
Interest rate
Subordinated debentures
13,546
–
13,546
Interest rate
Liabilities not subject to market risk
(4)
22,277
Total liabilities
$
2,044,390
$
576,466
$
1,445,647
Total equity
127,192
Total liabilities and equity
$
2,171,582
(1)
Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading
portfolios. Market risk measures of VaR and stress tests are used as risk controls for traded risk.
(2)
Non-traded risk includes positions used in the management of IRRBB and other non-trading portfolios. Other material non-trading portfolios include positions from RBC
Insurance and investment securities, net of applicable allowance, not included in IRRBB.
(3)
Assets not subject to market risk primarily include insurance-related assets.
(4)
Liabilities not subject to market risk primarily include insurance contract liabilities.
timely and cost-effective manner to meet our commitments. Liquidity risk arises from mismatches in the timing and value of
on-balance sheet and off-balance sheet cash flows.
Governance of liquidity risk
Our liquidity risk management activities are conducted in accordance with internal frameworks and policies, including the
Enterprise Risk Management Framework (ERMF), the Enterprise Risk Appetite Framework (ERAF), the Enterprise Liquidity Risk
Management Framework (LRMF), the Enterprise Liquidity Risk Policy and the Enterprise Pledging Policy. Collectively, our
frameworks and policies establish liquidity and funding management requirements appropriate for the execution of our
strategy and ensuring liquidity risk remains within our risk appetite.
Liquidity risk objectives, policies and risk appetite are reviewed regularly, and updated to reflect changes in industry
practice and relevant regulatory guidance. Enterprise policies are supported by subsidiary, operational, desk and product-
level policies and standards that specify risk control elements, such as parameters, methodologies, limits and authorities
governing the measurement and management of liquidity. Management practices, parameters, models and methodologies
are also subject to regular review, and are updated to reflect market conditions and business mix. Stress testing is employed
to assess the robustness of the control framework and inform liquidity contingency plans.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
89
Responsibilities for liquidity risk oversight and management
The Board, the Risk Committee of the Board, the Group Risk committee (GRC), the Asset Liability Committee (ALCO) and the
Policy Review Committee (PRC) are accountable for the identification, assessment, control, monitoring and oversight of
liquidity risk. The GRC, PRC and/or the ALCO review liquidity reporting and policies prior to review by the Board or its
committees.
•
The Board, the Risk Committee of the Board, the GRC and the ALCO regularly review information on our consolidated
liquidity position;
•
The PRC approves the Liquidity Risk Policy, which establishes minimum risk control elements in accordance with the
Board-approved risk appetite and the LRMF, and the Pledging Policy, which outlines the requirements and authorities for
the management of our pledging activities;
•
The ALCO annually approves the Enterprise Liquidity Contingency Plan (ELCP) and provides strategic direction and
oversight to Corporate Treasury, other functions, and business segments on the management of liquidity and funding.
In addition to our committee oversight framework, liquidity risk management activities are subject to the three lines of
defence governance model. Corporate Treasury, the first line of defence for the management of liquidity risk, is subject to
independent second line challenge and oversight by GRM. RBC Internal Audit is the third line of defence. The three lines of
defence are independent of the business whose activities generate liquidity risks.
Liquidity risk mitigation strategies and techniques
Our liquidity management policies and practices are designed to ensure the soundness of our liquidity position. Our liquidity
profile is structured to ensure that we have sufficient liquidity to satisfy current and prospective commitments in both normal
and stressed conditions. For this purpose, we employ the following liquidity risk mitigation strategies and techniques:
•
Maintaining a sufficient buffer of cash, central bank reserves and unencumbered marketable securities, supported by a
demonstrated capacity to monetize these securities during stress;
•
Access to a broad range of funding sources, including a stable base of core client deposits and a diversified wholesale
funding mix;
•
Access to central bank funding facilities in Canada and the U.S., and select other jurisdictions in which we operate;
•
Timely and granular risk measurement and reporting to control and monitor liquidity sources and uses, and inform
liquidity risk management decisions;
•
A comprehensive program for liquidity stress testing and crisis management;
•
Governance of pledging activity through limits and designated liquid asset buffers to address potential increased pledging
activity;
•
Achieving an appropriate balance between the level of exposure allowed under our risk appetite and the cost of risk
mitigation;
•
Transparent liquidity transfer pricing and cost allocation mechanisms to align risk management with business strategies;
and
•
A three-lines-of-defence governance model providing effective oversight and challenge of liquidity risk strategies, metrics,
assumptions and controls.
Our dedicated liquid asset portfolios are managed and controlled in accordance with internal policies and are subject to
minimum asset quality and other relevant requirements (e.g., term to maturity, diversification and eligibility for central bank
advances). These securities, along with other unencumbered liquid assets held for trading or other activities, contribute to
our liquidity reserve, as reflected in the liquidity disclosures below.
Risk tolerance
Our liquidity risk appetite is reviewed at a minimum annually by ALCO, GRC and the Risk Committee of the Board before it is
recommended for approval to the Board. Risk appetite, a key element of our enterprise risk management framework, is
defined as the amount and type of risk that RBC is able and willing to take in pursuit of its business objectives.
Risk measurement and internal liquidity reporting
We maintain robust liquidity risk measurement capabilities to support timely and frequent reporting of information for the
management of our liquidity position and oversight of risk. This reporting, which includes internal and regulatory metrics, is
used to monitor adherence with our risk appetite and limits, and position relative to regulatory minimums. Regulatory metrics
used to manage and control liquidity risk include OSFI’s Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and
Net Cumulative Cash Flow (NCCF). The specificity with which we measure and manage liquidity allows us to make ongoing
informed assessments of the demands and mobility of liquidity, considering currency requirements, access to foreign
exchange markets and commitments, and expectations under local regulations.
Internal assessments of liquidity risk include application of scenario-specific assumptions against our assets and
liabilities, and various off-balance sheet commitments and obligations to project cash flows over varying time horizons and
degrees of stress. For example, certain government bonds could be quickly and easily converted to cash without significant
loss of value. In contrast, lower-rated securities may not be deemed appropriate sources of liquidity in times of stress, or may
incur higher potential monetization costs. While relationship-based deposits contractually can be withdrawn immediately, in
practice, these balances can be relatively stable sources of funding depending on several factors, such as the nature of the
client and their intended use. Assumptions and methodologies informing our assessment of liquidity risk are periodically
reviewed and validated to ensure alignment with our operating environment, expected economic and market conditions,
rating agency preferences, regulatory requirements and generally accepted industry practices.
90
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
To manage liquidity risk within our liquidity risk appetite, we set limits on various metrics over a range of time horizons,
jurisdictions and currencies. We also consider various levels of stress conditions in our development of appropriate
contingency, recovery and resolution plans. Our liquidity risk measurement and control activities cover multiple areas:
Structural (longer-term) liquidity risk
We use both internal and regulatory metrics to manage and control the structural alignment between long-term illiquid
assets, the availability of core relationship deposits and longer-term funding. Conversely, we aim to align the use of shorter-
term wholesale funding with assets of equivalent liquidity-generating potential.
Tactical (shorter-term) liquidity risk
To address potential immediate cash flow risks during periods of stress, we use short-term net cash flow limits to control risk
at the unit, subsidiary and currency levels, as applicable. Net cash flow positions are determined by applying internally-
derived risk assumptions and parameters to known and anticipated cash flows for all material unencumbered assets,
liabilities and off-balance sheet activities. Additional product-level controls and limits are employed to manage
concentration risk and perceived market capacity limitations for more sensitive liquidity sources and uses. We also control
tactical liquidity by adhering to relevant regulatory standards, such as LCR.
Stress testing
Our comprehensive stress testing program informs internal assessments of the sufficiency of liquid assets and whether they
are adequately pre-positioned and accessible to meet stressed liquidity needs. Our stress tests, which include elements of
scenario and sensitivity analyses, measure our prospective exposure to systemic and RBC-specific events over periods of
time. Different degrees of severity are considered for each type of crisis with some scenarios reflecting multiple downgrades
to our credit ratings.
Contingency liquidity risk management and funding plans
Contingency liquidity risk planning assesses the impact of sudden stress on our liquidity risk position and identifies a range
of potential mitigating actions and plans. Corporate Treasury maintains the Enterprise Liquidity Contingency Plan (ELCP) and
regional liquidity contingency plans (LCPs) that identify potential sources of stress and guide our responses to liquidity
crises. Potential sources of stress are calibrated based on relevant historical experience and resulting contingent funding
needs, including those from draws on committed credit and liquidity lines, demands for increased collateral and deposit
run-offs. The ELCP also identifies alternative liquidity sources and considerations for their use.
Additionally, under the leadership of Corporate Treasury, enterprise and regional Liquidity Crisis Teams (LCTs) each
meet regularly to assess our liquidity status, review and approve the LCPs and during times of stress, provide linkages to the
front line and other functions to support effective and coordinated crisis management and oversight. Enterprise and local
LCTs include members from key business segments, GRM, Finance, Operations and Communications. The liquidity status
assessment and monitoring process informs management, the Board and regulatory agencies of our assessment of internal
Liquidity reserve and asset encumbrance
The following tables provide summaries of our liquidity reserve and asset encumbrance. To varying degrees, unencumbered
assets represent a ready source of funding. Unencumbered assets are the difference between total and encumbered assets from
both on- and off-balance sheet sources. Encumbered assets include: (i) bank-owned liquid assets that are either pledged as
collateral (e.g., repo financing and derivative pledging) or not freely available due to regulatory or internal policy requirements
(e.g., earmarked to satisfy mandatory reserve or regional capital adequacy requirements and to maintain continuous access to
payment and settlement systems); (ii) securities received as collateral from securities financing and derivative transactions
which have either been re-hypothecated where permissible (e.g., to obtain financing through repos or to cover securities sold
short) or have no liquidity value since re-hypothecation is prohibited; and (iii) illiquid assets that have been securitized and sold
into the market or that have been pledged as collateral in support of structured term funding vehicles. Encumbered assets are
not considered a source of liquidity.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
91
Liquidity reserve
Our liquidity reserve consists only of available unencumbered liquid assets. Although unused wholesale funding capacity could
be another potential source of liquidity, it is excluded in the determination of the liquidity reserve.
Liquidity reserve
Table 51
As at October 31, 2025
(Millions of Canadian dollars)
Bank-owned
liquid assets
Securities
received as
collateral from
securities
financing and
derivative
transactions
Total liquid
assets
Encumbered
liquid assets
Unencumbered
liquid assets
Cash and deposits with banks
$
87,388
$
–
$
87,388
$
3,195
$
84,193
Securities issued or guaranteed by sovereigns, central
banks or multilateral development banks
(1)
436,725
352,312
789,037
434,060
354,977
Other securities
179,279
156,840
336,119
207,703
128,416
Other liquid assets
(2)
50,082
–
50,082
40,974
9,108
Total liquid assets
$
753,474
$
509,152
$1,262,626
$
685,932
$
576,694
As at October 31, 2024
(Millions of Canadian dollars)
Bank-owned
liquid assets
Securities
received as
collateral
from securities
financing and
derivative
transactions
Total liquid
assets
Encumbered
liquid assets
Unencumbered
liquid assets
Cash and deposits with banks
$
122,743
$
–
$
122,743
$
3,269
$
119,474
Securities issued or guaranteed by sovereigns, central
banks or multilateral development banks
(1)
323,826
385,479
709,305
426,552
282,753
Other securities
165,875
126,205
292,080
163,635
128,445
Other liquid assets
(2)
37,601
–
37,601
31,583
6,018
Total liquid assets
$
650,045
$
511,684
$ 1,161,729
$
625,039
$
536,690
As at
(Millions of Canadian dollars)
October 31
2025
October 31
2024
Royal Bank of Canada
$
279,012
$
243,915
Foreign branches
77,977
69,723
Subsidiaries
219,705
223,052
Total unencumbered liquid assets
$
576,694
$
536,690
(1)
Includes liquid securities issued by provincial governments and U.S. government-sponsored entities working under U.S. Federal government’s conservatorship
(e.g., Federal National Mortgage Association and Federal Home Loan Mortgage Corporation).
(2)
Encumbered liquid assets amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.
The liquidity reserve is typically most affected by routine flows of retail and commercial client banking activities, where liquid
asset portfolios reflect changes in deposit and loan balances, as well as business strategies and client flows related to the
activities in Capital Markets. Corporate Treasury also affects liquidity reserves through the management of funding issuances,
which could result in timing differences between when debt is issued and funds are deployed into business activities.
2025 vs. 2024
Total unencumbered liquid assets increased $40 billion or 7% from last year, primarily due to an increase in securities reflecting
growth in deposits and funding, partially offset by a decrease in cash and deposits with banks.
92
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Asset encumbrance
The table below provides a summary of our on- and off-balance sheet amounts for cash, securities and other assets,
distinguishing between those that are encumbered, and those available for sale or use as collateral in secured funding
transactions. Other assets, such as mortgages and credit card receivables, can also be monetized, albeit over longer timeframes
than those required for marketable securities. As at October 31, 2025, our unencumbered assets available as collateral
comprised 24% of total assets (October 31, 2024 – 25%).
Asset encumbrance
Table 52
As at October 31, 2025
Total Assets
Encumbered
Unencumbered
(Millions of Canadian dollars)
Bank-owned
assets
Securities
received as
collateral from
securities
financing and
derivative
transactions
Total
Pledged as
collateral
Other
(1)
Available as
collateral
(2)
Other
(3)
Cash and deposits with banks
$
87,388
$
–
$
87,388
$
–
$
3,195
$
84,193
$
–
Securities
(4)
575,466
573,672
1,149,138
670,404
33,437
441,458
3,839
Loans, net of allowance for loan losses
Mortgage securities
54,607
–
54,607
26,714
–
27,893
–
Mortgage loans
438,012
–
438,012
64,928
–
41,010
332,074
Other loans
549,803
–
549,803
5,244
–
26,496
518,063
Derivatives
177,206
–
177,206
–
–
–
177,206
Others
(5)
146,519
–
146,519
40,974
–
9,108
96,437
Total
$ 2,029,001
$
573,672
$ 2,602,673
$ 808,264
$
36,632
$
630,158
$
1,127,619
As at October 31, 2024
Total Assets
Encumbered
Unencumbered
(Millions of Canadian dollars)
Bank-owned
assets
Securities
received as
collateral from
securities
financing and
derivative
transactions
Total
Pledged as
collateral
Other (1)
Available as
collateral (2)
Other (3)
Cash and deposits with banks
$
122,743
$
–
$
122,743
$
–
$
3,269
$
119,474
$
–
Securities
(4)
450,719
571,869
1,022,588
614,654
31,156
373,206
3,572
Loans, net of allowance for loan losses
(6)
Mortgage securities
57,450
–
57,450
27,927
–
29,523
–
Mortgage loans
419,522
–
419,522
71,307
–
40,851
307,364
Other loans
504,408
–
504,408
6,343
–
25,250
472,815
Derivatives
150,612
–
150,612
–
–
–
150,612
Others
(5)
126,126
–
126,126
31,583
–
6,018
88,525
Total
$
1,831,580
$
571,869
$
2,403,449
$
751,814
$
34,425
$
594,322
$
1,022,888
(1)
Includes assets restricted from use to generate secured funding due to legal or other constraints.
(2)
Represents assets that are immediately available for use as collateral, including NHA MBS, our unencumbered mortgage loans that qualify as eligible collateral at FHLB,
as well as loans that qualify as eligible collateral for discount window facility available to us and lodged at the FRBNY.
(3)
Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but would not be considered immediately available.
(4)
Includes bank-owned liquid assets and securities received as collateral from off-balance sheet securities financing, derivative transactions and margin lending. Includes
$33 billion (October 31, 2024 – $31 billion) of collateral received through reverse repurchase transactions that cannot be rehypothecated in its current legal form.
(5)
The Pledged as collateral amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.
(6)
Effective the first quarter of 2025, mortgage securities, mortgage loans and other loans are presented net of allowance for loan losses. Comparative amounts have been
revised from those previously presented to conform to this presentation.
2025 vs. 2024
Total unencumbered assets available as collateral increased $36 billion or 6% from last year, primarily due to an increase in
securities reflecting growth in deposits and funding, partially offset by a decrease in cash and deposits with banks.
Funding
Maintaining a diversified funding base is a key strategy for managing our liquidity risk profile.
Core funding, comprising capital, longer-term wholesale liabilities and a diversified pool of personal as well as the stable
portion of our commercial and institutional deposits, is the foundation of our structural liquidity position.
Wholesale funding activities are well-diversified by geography, investor segment, instrument, currency, structure and
maturity. We maintain an ongoing presence in different funding markets, which allows us to continuously monitor market
developments and trends, identify opportunities and risks and take appropriate and timely actions.
We continuously evaluate opportunities to expand into new markets and untapped investor segments since
diversification expands our wholesale funding flexibility, minimizes funding concentration and dependency and generally
reduces financing costs.
We regularly assess our funding concentration and have implemented limits on certain funding sources to support
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
93
Deposit and funding profile
As at October 31, 2025, relationship-based deposits, which are the primary source of funding for retail and commercial lending,
were $1,009 billion or 54% of our total funding (October 31, 2024 – $977 billion or 55%). The remaining portion is comprised of
short- and long-term wholesale funding.
Funding for highly liquid assets consists primarily of short-term wholesale funding that reflects the monetization period of
those assets. Long-term wholesale funding is used mostly to fund less liquid wholesale assets and to support liquid asset
buffers.
Senior long-term debt issued by the bank on or after September 23, 2018, that has an original term greater than 400 days
and is marketable, subject to certain exceptions, is subject to the Canadian Bank Recapitalization (Bail-in) regime. Under the
Bail-in regime, in circumstances when the Superintendent of Financial Institutions has determined that a bank may no longer be
viable, the Governor in Council may, upon a recommendation of the Minister of Finance that he or she is of the opinion that it is
in the public interest to do so, grant an order directing the Canada Deposit Insurance Corporation (CDIC) to convert all or a
portion of certain shares and liabilities of that bank into common shares. As at October 31, 2025, the notional value of issued and
outstanding long-term debt subject to conversion under the Bail-in regime was $127 billion (October 31, 2024 – $111 billion).
For further details on our wholesale funding, refer to the Composition of wholesale funding tables below.
Long-term debt issuance
During 2025, we continued to experience favourable unsecured wholesale funding access and pricing. We issued, either directly
or through our subsidiaries, unsecured long-term funding of $51 billion in various currencies and markets.
liability management purposes. Our total secured long-term funding includes outstanding MBS sold, covered bonds that are
For further details, refer to the Off-balance sheet arrangements section.
Long-term funding sources* (1) | Table 53 | |
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Unsecured long-term funding | $ 169,621 | $ 150,682 |
Secured long-term funding | 76,550 | 83,353 |
Subordinated debentures | 13,941 | 13,714 |
$ 260,112 | $ 247,749 | |
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
(1)
Based on original term to maturity greater than 1 year.
The following table summarizes our registered programs and their authorized limits by geography.
Programs by geography
Table 54
Canada
U.S.
Europe/Asia
•
Canadian Shelf Program – $25 billion
•
U.S. Shelf Program – US$75 billion
•
European Debt Issuance Program – US$75 billion
•
Global Covered Bond Program –
€
75 billion
As presented in the following charts, our current long-term debt profile is well-diversified by both currency and product.
Euro
21%
Canadian dollar
24%
U.S. dollar
45%
Other
10%
Long-term debt
(1)
– funding mix by currency of issuance
Covered bonds
21%
Unsecured
funding
66%
MBS/CMB (2)
6%
Cards
securitization
2%
Subordinated
debentures
5%
Long-term debt
(1)
– funding mix by product
(1)
Includes unsecured and secured long-term funding and subordinated
debentures with an original term to maturity greater than 1 year
(1)
Includes unsecured and secured long-term funding and subordinated
debentures with an original term to maturity greater than 1 year
(2)
Mortgage-backed securities and Canada Mortgage Bonds
The following table shows the composition of our wholesale funding based on remaining term to maturity:
Composition of wholesale funding
(1)
Table 55
As at October 31, 2025
(Millions of Canadian dollars)
Less than
1 month
1 to 3
months
3 to 6
months
6 to 12
months
Less than
1 year
sub-total
1 year to
2 years
2 years and
greater
Total
Deposits from banks
(2)
$
3,255
$
311
$
243
$
1,014
$
4,823
$
–
$
–
$
4,823
Certificates of deposit and commercial paper
(3)
15,877
20,614
38,985
38,595
114,071
–
–
114,071
Asset-backed commercial paper
(4)
4,989
5,324
8,027
1,680
20,020
–
–
20,020
Senior unsecured medium-term notes
(5)
2,412
4,858
8,257
22,164
37,691
29,161
63,988
130,840
Senior unsecured structured notes
(6)
5,050
1,841
2,581
2,986
12,458
3,243
13,430
29,131
Mortgage securitization
–
509
200
1,202
1,911
2,479
12,249
16,639
Covered bonds/asset-backed securities
(7)
–
3,257
3,233
13,136
19,626
20,277
20,010
59,913
Subordinated liabilities
–
2,103
–
–
2,103
–
11,838
13,941
Other
(8)
11
60
2,876
90
3,037
256
23,181
26,474
Total
$ 31,594
$ 38,877
$ 64,402
$
80,867 $
215,740
$ 55,416
$ 144,696
$ 415,852
Of which:
– Secured
$
4,989
$
9,106
$ 14,264
$ 16,018
$
44,377
$ 22,756
$
36,883
$ 104,016
– Unsecured
26,605
29,771
50,138
64,849
171,363
32,660
107,813
311,836
As at October 31, 2024
(Millions of Canadian dollars)
Less than
1 month
1 to 3
months
3 to 6
months
6 to 12
months
Less than
1 year
sub-total
1 year to
2 years
2 years and
greater
Total
Deposits from banks
(2)
$
7,248
$
118
$
120
$
1,025
$
8,511
$
–
$
–
$
8,511
Certificates of deposit and commercial paper
(3)
8,377
10,413
16,882
37,702
73,374
139
–
73,513
Asset-backed commercial paper
(4)
4,140
3,951
7,167
2,286
17,544
–
–
17,544
Senior unsecured medium-term notes
(5)
5,436
7,786
7,253
12,750
33,225
20,453
57,351
111,029
Senior unsecured structured notes
(6), (9)
1,354
1,698
3,638
3,404
10,094
4,414
13,125
27,633
Mortgage securitization
41
509
1,296
946
2,792
2,143
11,949
16,884
Covered bonds/asset-backed securities
(7)
–
2,243
1,514
7,451
11,208
19,017
36,245
66,470
Subordinated liabilities
–
–
–
–
–
2,088
11,626
13,714
Other
(8), (10)
–
116
108
64
288
160
20,671
21,119
Total
$
26,596
$
26,834
$
37,978
$
65,628
$
157,036
$
48,414
$
150,967
$
356,417
Of which:
– Secured
(10)
$
4,180
$
6,788
$
9,977
$
10,683
$
31,628
$
21,160
$
53,266
$
106,054
– Unsecured
(9), (10)
22,416
20,046
28,001
54,945
125,408
27,254
97,701
250,363
(1)
Excludes repos.
(2)
Excludes deposits associated with services we provide to banks (e.g., custody, cash management).
(3)
Includes bearer deposit notes (unsecured).
(4)
Only includes consolidated liabilities, including our collateralized commercial paper program.
(5)
Includes deposit notes and floating rate notes (unsecured).
(6)
Includes notes where the payout is tied to movements in foreign exchange, commodities and equities.
(7)
Includes covered bonds collateralized with residential mortgages and securities backed by credit card receivables.
(8)
Includes tender option bonds (secured) of $4,581 million (October 31, 2024 – $5,157 million), other long-term structured deposits (unsecured) of $18,851 million
(October 31, 2024 – $15,770 million), FHLB advances (secured) of $2,804 million (October 31, 2024 – $nil) and wholesale guaranteed interest certificates of $238 million
(October 31, 2024 – $192 million).
(9)
Effective the first quarter of 2025, we updated the scope of senior unsecured structured notes to better reflect the distribution channel used to issue these notes.
Comparative amounts have been revised from those previously presented to conform to this presentation.
(10)
Comparative amounts have been revised from those previously presented.
94
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Credit ratings
Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective
basis are largely dependent on maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies
reflect their views and methodologies. Ratings are subject to change, based on a number of factors including, but not limited to,
our financial strength, competitive position, liquidity and other factors not completely within our control.
The following table presents our major credit ratings:
Credit ratings
(1)
Table 56
As at December 2, 2025
Short-term debt
Legacy senior long-term debt
(2)
Senior long-term debt
(3)
Outlook
Moody’s
(4)
P-1
Aa1
A1
stable
Standard & Poor’s
(5)
A-1+
AA-
A
stable
Fitch Ratings
(6)
F1+
AA
AA-
stable
DBRS
(7)
R-1 (high)
AA (high)
AA
stable
(1)
Credit ratings are not recommendations to purchase, sell or hold a financial obligation in as much as they do not comment on market price or suitability
for a particular investor. Ratings are determined by the rating agencies based on criteria established from time to time by them, and are subject to
revision or withdrawal at any time by the rating organization.
(2)
Includes senior long-term debt issued prior to September 23, 2018 and senior long-term debt issued on or after September 23, 2018 which is excluded
from the Bail-in regime.
(3)
Includes senior long-term debt issued on or after September 23, 2018 which is subject to conversion under the Bail-in regime.
(4)
On October 9, 2025, Moody’s announced completion of a periodic review of our ratings. There were no changes to our ratings.
(5)
On June 25, 2024, Standard & Poor’s affirmed our ratings with a stable outlook.
(6)
On June 3, 2025, Fitch Ratings affirmed our ratings with a stable outlook.
(7)
On May 9, 2025, DBRS affirmed our ratings with a stable outlook.
Additional contractual obligations for rating downgrades
We are required to deliver collateral to certain counterparties in the event of a downgrade from our current credit rating. The
following table shows the additional collateral obligations required at the reporting date in the event of a one-, two- or three-
notch downgrade. These additional collateral obligations are incremental requirements for each successive downgrade and do
not represent the cumulative impact of multiple downgrades. The amounts reported change periodically due to several factors,
including the transfer of trading activity to centrally cleared financial market infrastructures and exchanges, the expiration of
transactions with downgrade triggers, the imposition of internal limitations on new agreements to exclude downgrade triggers,
as well as normal course mark-to-market. There is no outstanding senior debt issued in the market that contains rating triggers
that would lead to early prepayment of principal.
Additional contractual obligations for rating downgrades
Table 57
As at
October 31
2025
October 31
2024
(Millions of Canadian dollars)
One-notch
downgrade
Two-notch
downgrade
Three-notch
downgrade
One-notch
downgrade
Two-notch
downgrade
Three-notch
downgrade
Contractual derivatives funding or margin requirements
$
275
$
137
$
209
$
232
$
100
$
199
Other contractual funding or margin requirements
(1)
41
55
188
41
63
16
(1)
Includes GICs issued by our municipal markets business out of New York.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
95
Liquidity Coverage Ratio (LCR)
The LCR is a Basel III metric that measures the sufficiency of high-quality liquid assets (HQLA) available to meet liquidity needs
over a 30-day period in an acute stress scenario. The BCBS and OSFI regulatory minimum coverage level for LCR is 100%.
OSFI requires Canadian banks to disclose the LCR using the standard Basel disclosure template and calculated using the
average of daily LCR positions during the quarter.
Liquidity coverage ratio common disclosure template
(1)
Table 58
For the three months ended
October 31
2025
(Millions of Canadian dollars, except percentage amounts)
Total unweighted
value (average)
(2)
Total weighted
value (average)
High-quality liquid assets
Total high-quality liquid assets (HQLA)
$
458,576
Cash outflows
Retail deposits and deposits from small business customers, of which:
$
414,423
$
38,905
Stable deposits
(3)
135,160
4,055
Less stable deposits
279,263
34,850
Unsecured wholesale funding, of which:
527,534
246,338
Operational deposits (all counterparties) and deposits in networks of cooperative
banks
(4)
185,037
43,435
Non-operational deposits
317,728
178,134
Unsecured debt
24,769
24,769
Secured wholesale funding
51,152
Additional requirements, of which:
445,456
94,078
Outflows related to derivative exposures and other collateral requirements
89,493
24,955
Outflows related to loss of funding on debt products
12,465
12,465
Credit and liquidity facilities
343,498
56,658
Other contractual funding obligations
(5)
22,841
22,841
Other contingent funding obligations
(6)
918,796
15,617
Total cash outflows
$
468,931
Cash inflows
Secured lending (e.g., reverse repos)
$
405,984
$
72,484
Inflows from fully performing exposures
23,609
10,168
Other cash inflows
24,760
24,760
Total cash inflows
$
107,412
Total adjusted
value
Total HQLA
$
458,576
Total net cash outflows
361,519
Liquidity coverage ratio
127%
July 31
2025
(Millions of Canadian dollars, except percentage amounts)
Total adjusted
value
Total HQLA
$
462,083
Total net cash outflows
358,716
Liquidity coverage ratio
129%
(1)
The LCR is calculated in accordance with OSFI’s LAR guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS. The LCR for the quarter ended
October 31, 2025 is calculated as an average of 63 daily positions.
(2)
With the exception of other contingent funding obligations, unweighted inflow and outflow amounts are items maturing or callable in 30 days or less. Other contingent
funding obligations also include debt securities with remaining maturity greater than 30 days.
(3)
As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank
has an established relationship with the client making the withdrawal unlikely.
(4)
Operational deposits from customers other than retail and small and medium-sized enterprises, are deposits which clients need to keep with the bank in order to
facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
(5)
Other contractual funding obligations primarily include outflows from unsettled securities trades and outflows from obligations related to securities sold short.
(6)
Other contingent funding obligations include outflows related to other off-balance sheet facilities that carry low LCR runoff factors (0% – 5%).
96
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
We manage our LCR position within a target range that reflects our liquidity risk tolerance, business mix, asset composition and
funding capabilities. The range is subject to periodic review, considering changes to internal requirements and external
developments.
We maintain HQLA in major currencies with dependable market depth and breadth. Our liquidity management practices are
designed to ensure that the levels of HQLA are actively managed to meet target LCR objectives. Our Level 1 assets, as calculated
according to OSFI LAR and the BCBS LCR requirements, represent 87% of total HQLA. These assets consist of cash, placements
with central banks and highly rated securities issued or guaranteed by governments, central banks and supranational entities.
LCR captures cash flows from on- and off-balance sheet activities that are either expected or could potentially occur within
30 days in an acute stress scenario. Cash outflows result from the application of withdrawal and non-renewal factors to demand
and term deposits, differentiated by client type (wholesale, retail and small- and medium-sized enterprises). Cash outflows also
arise from business activities that create contingent funding and collateral requirements, such as repo funding, derivatives,
short sales of securities and the extension of credit and liquidity commitments to clients. Cash inflows arise primarily from
maturing secured loans, interbank loans and non-HQLA securities.
LCR does not reflect any market funding capacity that we believe would be available in a stress situation. All maturing
wholesale debt is assigned 100% outflow in the LCR calculation.
Q4 2025 vs. Q3 2025
The average LCR for the quarter ended October 31, 2025 was 127%, which translates into a surplus of approximately $97 billion,
compared to 129% and a surplus of approximately $103 billion in the prior quarter. Average LCR decreased from the prior
quarter, primarily due to loan growth and changes in securities mix. These factors were partially offset by growth in deposits and
funding.
Net Stable Funding Ratio (NSFR)
NSFR is a Basel III metric that measures the sufficiency of available stable funding relative to the amount of required stable
funding. The BCBS and OSFI regulatory minimum coverage level for NSFR is 100%.
Available stable funding is defined as the portion of capital and liabilities expected to be reliable over the one-year time
horizon considered by the NSFR. Required stable funding is a function of the liquidity characteristics and residual maturities of
various bank assets and off-balance sheet exposures.
OSFI requires Canadian D-SIBs to disclose the NSFR using the standard Basel disclosure template. Amounts presented in
this disclosure template are determined in accordance with the requirements of OSFI’s LAR guideline and are not necessarily
aligned with the classification requirements prescribed under IFRS.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
97
Net Stable Funding Ratio common disclosure template
(1)
Table 59
As at October 31, 2025
Unweighted value by residual maturity
(2)
Weighted value
(Millions of Canadian dollars, except percentage amounts)
No maturity
< 6 months
6 months to
< 1 year
≥
1 year
Available Stable Funding (ASF) Item
Capital:
$ 140,356
$
–
$
–
$
12,006
$
152,362
Regulatory Capital
140,356
–
–
12,006
152,362
Other Capital Instruments
–
–
–
–
–
Retail deposits and deposits from small business customers:
350,015
127,044
57,491
68,303
550,273
Stable deposits
(3)
106,148
54,260
28,305
29,640
208,918
Less stable deposits
243,867
72,784
29,186
38,663
341,355
Wholesale funding:
403,214
437,990
98,516
170,704
437,157
Operational deposits
(4)
194,308
–
–
–
97,154
Other wholesale funding
208,906
437,990
98,516
170,704
340,003
Liabilities with matching interdependent assets
(5)
–
1,644
2,191
21,993
–
Other liabilities:
61,160
306,298
22,909
NSFR derivative liabilities
58,238
All other liabilities and equity not included in the above
categories
61,160
224,884
532
22,644
22,909
Total ASF
$ 1,162,701
Required Stable Funding (RSF) Item
Total NSFR high-quality liquid assets (HQLA)
$
46,235
Deposits held at other financial institutions for operational
purposes
–
2,041
–
–
1,020
Performing loans and securities:
315,100
298,690
153,486
543,646
826,048
Performing loans to financial institutions secured by Level 1
HQLA
71
89,523
19,004
13
14,739
Performing loans to financial institutions secured by
non-Level 1 HQLA and unsecured performing loans to
financial institutions
10,158
102,048
23,946
30,734
63,748
Performing loans to non-financial corporate clients, loans to
retail and small business customers, and loans to
sovereigns, central banks and PSEs, of which:
205,779
56,029
39,956
178,150
372,669
With a risk weight of less than or equal to 35% under the
Basel II standardized approach for credit risk
–
–
–
11,122
7,229
Performing residential mortgages, of which:
41,373
47,988
67,366
309,202
301,295
With a risk weight of less than or equal to 35% under the
Basel II standardized approach for credit risk
36,581
47,937
67,312
302,107
291,138
Securities that are not in default and do not qualify as HQLA,
including exchange-traded equities
57,719
3,102
3,214
25,547
73,597
Assets with matching interdependent liabilities
(5)
–
1,644
2,191
21,993
–
Other assets:
9,202
446,594
124,399
Physical traded commodities, including gold
9,108
7,742
Assets posted as initial margin for derivative contracts and
contributions to default funds of CCPs
31,704
26,948
NSFR derivative assets
58,310
72
NSFR derivative liabilities before deduction of variation
margin posted
105,160
5,258
All other assets not included in the above categories
94
176,044
216
75,160
84,379
Off-balance sheet items
1,008,453
38,292
Total RSF
$ 1,035,994
Net Stable Funding Ratio (%)
112%
As at July 31, 2025
(Millions of Canadian dollars, except percentage amounts)
Weighted
value
Total ASF
$ 1,135,007
Total RSF
997,710
Net Stable Funding Ratio (%)
114%
(1)
The NSFR is calculated in accordance with OSFI’s Liquidity Adequacy Requirements (LAR) guideline, which, in turn, reflects liquidity-related requirements issued by the
BCBS.
(2)
Totals for the following rows encompass the residual maturity categories of less than 6 months, 6 months to less than 1 year, and greater than or equal to 1 year in
accordance with the requirements of the common disclosure template prescribed by OSFI: Other liabilities, NSFR derivative liabilities, Other assets, Assets posted as
initial margin for derivative contracts and contributions to default funds of CCPs, NSFR derivative assets, NSFR derivative liabilities before deduction of variation margin
posted, and Off-balance sheet items.
(3)
As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank
has an established relationship with the client making the withdrawal unlikely.
(4)
Operational deposits from customers other than retail and small and medium-sized enterprises, are deposits which clients need to keep with the bank in order to
facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
(5)
Interdependent assets and liabilities represent National Housing Act Mortgage-Backed Securities (NHA MBS) liabilities, including liabilities arising from transactions
involving the Canada Mortgage Bond program and their corresponding encumbered mortgages.
98
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Available stable funding is comprised primarily of a diversified pool of personal and commercial deposits, capital and long-term
wholesale liabilities. Required stable funding is driven mainly by the bank’s mortgage and loan portfolio, secured loans to
financial institutions and to a lesser extent by other less liquid assets. NSFR does not reflect any unused market funding
capacity that we believe would be available.
Volume and composition of available stable funding is actively managed to optimize our structural funding position and
meet NSFR objectives. Our NSFR is managed in accordance with our comprehensive LRMF.
Q4 2025 vs. Q3 2025
The NSFR as at October 31, 2025 was 112%, which translates into a surplus of approximately $127 billion, compared to 114% and a
surplus of approximately $137 billion in the prior quarter. NSFR decreased from the previous quarter, primarily due to higher
required stable funding on securities and securities financing transactions and loan growth. These factors were partially offset
by growth in deposits and funding.
Contractual maturities of financial assets, financial liabilities and off-balance sheet items
The following tables provide remaining contractual maturity profiles of all our assets, liabilities and off-balance sheet items at
their carrying value (e.g., amortized cost or fair value) and maturity profiles of assets and liabilities of insurance contracts and
reinsurance contracts held at their carrying value based on the estimated timing of when the settlement of the amounts are
expected to occur at the balance sheet date. Off-balance sheet items are allocated based on the expiry date of the contract.
Details of contractual maturities and commitments to extend funds are a source of information for the management of
liquidity risk. Among other purposes, these details form a basis for modelling a behavioural balance sheet with effective
maturities to calculate liquidity risk measures. For further details, refer to the Risk measurement and internal liquidity reporting
section.
Contractual maturities of financial assets, financial liabilities and off-balance sheet items
Table 60
As at October 31, 2025
(Millions of Canadian dollars)
Less than
1 month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 year
to 2 years
2 years
to 5 years
5 years
and
greater
With no
specific
maturity
Total
Assets
Cash and deposits with banks
$
84,814
$
17
$
–
$
–
$
6
$
–
$
–
$
–
$
2,551
$
87,388
Securities
Trading
(1)
100,479
905
1,362
1,395
849
220
455
14,329
99,073
219,067
Investment, net of applicable allowance
4,740
8,258
17,570
12,021
20,806
82,377
85,610
109,883
1,456
342,721
Assets purchased under reverse repurchase
agreements and securities borrowed
(2)
138,208
57,226
45,999
20,873
22,499
51
–
–
24,827
309,683
Loans, net of applicable allowance
22,203
34,947
49,746
66,956
55,741
297,199
302,691
83,739
129,200
1,042,422
Other
Derivatives
13,116
26,962
15,562
10,433
7,553
19,937
36,149
47,494
–
177,206
Other financial assets
52,621
5,568
2,636
769
766
452
148
4,582
5,327
72,869
Total financial assets
416,181
133,883
132,875
112,447
108,220
400,236
425,053
260,027
262,434
2,251,356
Other non-financial assets
4,137
2,055
2,568
364
1,436
2,661
4,479
6,413
49,537
73,650
Total assets
$ 420,318
$ 135,938
$ 135,443
$ 112,811
$ 109,656
$ 402,897
$ 429,532
$ 266,440
$ 311,971
$ 2,325,006
Liabilities and equity
Deposits
(3)
Unsecured borrowing
$ 106,190
$
80,883
$ 105,974
$
83,764
$
71,428
$
61,413
$
91,338
$
54,701
$ 750,271
$ 1,405,962
Secured borrowing
5,217
7,526
9,546
2,938
2,949
6,814
12,108
9,099
–
56,197
Covered bonds
–
3,259
3,214
5,088
6,416
19,323
11,929
4,228
–
53,457
Other
Obligations related to securities sold short
43,223
1,234
834
2,593
1,357
650
–
–
–
49,891
Obligations related to assets sold under
repurchase agreements and securities
loaned
(2)
166,329
71,225
16,610
6,446
4,214
1,672
–
–
23,020
289,516
Derivatives
13,292
28,955
17,532
11,248
8,664
20,821
36,809
46,632
–
183,953
Other financial liabilities
46,292
3,296
5,329
1,406
1,449
929
2,105
21,337
2,418
84,561
Subordinated debentures
–
2,091
–
–
–
–
–
11,870
–
13,961
Total financial liabilities
380,543
198,469
159,039
113,483
96,477
111,622
154,289
147,867
775,709
2,137,498
Other non-financial liabilities
1,426
6,513
435
239
223
2,261
1,860
23,506
11,894
48,357
Equity
–
–
–
–
–
–
–
–
139,151
139,151
Total liabilities and equity
$ 381,969
$ 204,982
$ 159,474
$ 113,722
$
96,700
$ 113,883
$ 156,149
$ 171,373
$ 926,754
$ 2,325,006
Off-balance sheet items
Financial guarantees
$
1,125
$
2,829
$
4,578
$
4,545
$
4,543
$
2,562
$
6,055
$
2,662
$
29
$
28,928
Commitments to extend credit
5,744
10,299
17,664
18,365
22,554
70,723
239,678
30,846
4,050
419,923
Other credit-related commitments
82,651
1,751
2,287
3,360
2,673
880
715
125
86,828
181,270
Other commitments
6
10
17
17
18
63
162
213
687
1,193
Total off-balance sheet items
$
89,526
$
14,889
$
24,546
$
26,287
$
29,788
$
74,228
$ 246,610
$
33,846
$
91,594
$
631,314
(1)
With the exception of debt securities within the Insurance segment, trading debt securities classified as FVTPL have been included in the less than 1 month category as
there is no expectation to hold these assets to their contractual maturity.
(2)
Open reverse repo and repo contracts, which have no set maturity date and are typically short-term, have been included in the with no specific maturity category.
(3)
A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core
base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
99
As at October 31, 2024
(Millions of Canadian dollars)
Less than
1 month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 year
to 2 years
2 years
to 5 years
5 years
and
greater
With no
specific
maturity
Total
Assets
Cash and deposits with banks
$ 120,584
$
6
$
–
$
–
$
–
$
–
$
–
$
–
$
2,153
$
122,743
Securities
Trading
(1)
80,203
148
380
22
34
229
707
11,903
89,674
183,300
Investment, net of applicable allowance
5,974
7,588
6,782
12,445
9,746
51,674
67,730
93,451
1,228
256,618
Assets purchased under reverse repurchase
agreements and securities borrowed
(2)
170,052
65,837
57,921
15,720
20,727
181
–
–
20,365
350,803
Loans, net of applicable allowance
(3)
24,706
32,131
45,916
52,362
50,303
287,726
288,213
79,641
120,382
981,380
Other
Derivatives
13,657
19,365
9,293
6,548
5,797
17,376
31,389
47,187
–
150,612
Other financial assets
42,601
4,575
2,168
423
671
175
743
1,829
4,229
57,414
Total financial assets
457,777
129,650
122,460
87,520
87,278
357,361
388,782
234,011
238,031
2,102,870
Other non-financial assets
11,393
2,158
1,450
259
233
1,941
3,122
9,501
38,655
68,712
Total assets
$ 469,170
$ 131,808
$ 123,910
$
87,779
$
87,511
$ 359,302
$
391,904
$
243,512
$
276,686
$
2,171,582
Liabilities and equity
Deposits
(4)
Unsecured borrowing
$ 122,083
$
72,933
$
83,574
$
84,252
$
77,207
$
55,196
$
85,458
$
44,264
$
668,975
$
1,293,942
Secured borrowing
4,437
6,000
9,513
3,939
1,956
7,447
14,969
9,050
–
57,311
Covered bonds
–
2,245
1,498
4,019
2,230
17,134
27,207
3,945
–
58,278
Other
Obligations related to securities sold short
35,286
–
–
–
–
–
–
–
–
35,286
Obligations related to assets sold under
repurchase agreements and securities
loaned
(2)
221,377
38,828
14,726
7,586
2
466
–
–
22,336
305,321
Derivatives
13,153
23,372
12,176
11,160
8,025
18,305
32,865
44,707
–
163,763
Other financial liabilities
40,944
3,334
2,917
2,060
2,024
1,073
2,404
16,788
1,293
72,837
Subordinated debentures
–
–
–
–
–
2,025
–
11,521
–
13,546
Total financial liabilities
437,280
146,712
124,404
113,016
91,444
101,646
162,903
130,275
692,604
2,000,284
Other non-financial liabilities
1,501
5,769
452
231
198
1,664
1,821
21,425
11,045
44,106
Equity
–
–
–
–
–
–
–
–
127,192
127,192
Total liabilities and equity
$ 438,781
$ 152,481
$ 124,856
$ 113,247
$
91,642
$ 103,310
$
164,724
$
151,700
$
830,841
$
2,171,582
Off-balance sheet items
Financial guarantees
$
917
$
2,929
$
4,485
$
3,818
$
4,368
$
1,563
$
7,140
$
1,977
$
25
$
27,222
Commitments to extend credit
7,317
9,060
15,891
17,305
20,109
63,200
217,555
25,580
2,950
378,967
Other credit-related commitments
51,645
1,600
2,360
2,927
2,534
460
1,299
113
81,379
144,317
Other commitments
7
12
19
20
19
70
179
260
926
1,512
Total off-balance sheet items
$
59,886
$
13,601
$
22,755
$
24,070
$
27,030
$
65,293
$
226,173
$
27,930
$
85,280
$
552,018
(1)
With the exception of debt securities within the Insurance segment, trading debt securities classified as FVTPL have been included in the less than 1 month category as
there is no expectation to hold these assets to their contractual maturity.
(2)
Open reverse repo and repo contracts, which have no set maturity date and are typically short-term, have been included in the with no specific maturity category.
(3)
Comparative amounts have been revised from those previously presented.
(4)
A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core
base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.
100
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
The following tables provide remaining contractual maturity analysis of our financial liabilities and off-balance sheet items.
Disclosed amounts are the contractual undiscounted amounts due at payment dates of all financial liabilities (e.g., par value
or amount payable upon maturity). The amounts do not reconcile directly with those in our consolidated balance sheets as
the table incorporates only undiscounted amounts due at payment dates and do not recognize premiums, discounts,
expectations of early redemptions or mark-to-market adjustments recognized in the instruments’ carrying values as at the
balance sheet date. Financial liabilities are based upon the earliest period in which they are required to be paid. For
off-balance sheet items, the undiscounted amounts potentially payable under financial guarantees and commitments to
extend credit are classified based on the earliest date they can be called.
Contractual maturities of financial liabilities and off-balance sheet items – undiscounted basis* | Table 61 | |||||
| As at October 31, 2025 | ||||||
On | Within | 1 year | 2 years | 5 years | ||
(Millions of Canadian dollars) | demand | 1 year | to 2 years | to 5 years | and greater | Total |
Financial liabilities | ||||||
Deposits (1) | $ 673,197 | $ 572,391 | $ 87,107 | $ 114,183 | $ 72,916 | $ 1,519,794 |
Other | ||||||
Obligations related to securities sold short | – | 49,241 | 650 | – | – | 49,891 |
Obligations related to assets sold under | ||||||
repurchase agreements and securities loaned | 23,020 | 264,838 | 1,672 | – | – | 289,530 |
Other liabilities | 1,842 | 57,701 | 1,010 | 2,503 | 21,082 | 84,138 |
Lease liabilities | – | 694 | 799 | 1,947 | 1,877 | 5,317 |
Subordinated debentures | – | 2,091 | – | – | 11,880 | 13,971 |
698,059 | 946,956 | 91,238 | 118,633 | 107,755 | 1,962,641 | |
Off-balance sheet items | ||||||
Financial guarantees (2) | $ 26,806 | $ 1,772 | $ 240 | $ 110 | $ – | $ 28,928 |
Other commitments (3) | – | 68 | 63 | 162 | 213 | 506 |
Commitments to extend credit (2) | 4,206 | 134,908 | 61,746 | 207,249 | 11,814 | 419,923 |
31,012 | 136,748 | 62,049 | 207,521 | 12,027 | 449,357 | |
Total financial liabilities and off-balance sheet | ||||||
items | $ 729,071 | $ 1,083,704 | $ 153,287 | $ 326,154 | $ 119,782 | $ 2,411,998 |
| As at October 31, 2024 | ||||||
On | Within | 1 year | 2 years | 5 years | ||
(Millions of Canadian dollars) | demand | 1 year | to 2 years | to 5 years | and greater | Total |
Financial liabilities | ||||||
Deposits (1) | $ 585,524 | $ 560,583 | $ 79,909 | $ 127,421 | $ 58,193 | $ 1,411,630 |
Other | ||||||
Obligations related to securities sold short | – | 35,326 | – | – | – | 35,326 |
Obligations related to assets sold under | ||||||
repurchase agreements and securities loaned | 22,336 | 282,478 | 466 | – | – | 305,280 |
Other liabilities | 563 | 51,216 | 382 | 742 | 15,011 | 67,914 |
Lease liabilities | – | 709 | 631 | 1,566 | 1,767 | 4,673 |
Subordinated debentures | – | – | 2,026 | – | 11,530 | 13,556 |
608,423 | 930,312 | 83,414 | 129,729 | 86,501 | 1,838,379 | |
Off-balance sheet items | ||||||
Financial guarantees (2) | $ 25,553 | $ 1,485 | $ 10 | $ 174 | $ – | $ 27,222 |
Other commitments (3) | – | 77 | 70 | 179 | 260 | 586 |
Commitments to extend credit (2) | 3,081 | 121,652 | 54,443 | 190,073 | 9,718 | 378,967 |
28,634 | 123,214 | 54,523 | 190,426 | 9,978 | 406,775 | |
Total financial liabilities and off-balance sheet | ||||||
items | $ 637,057 | $ 1,053,526 | $ 137,937 | $ 320,155 | $ 96,479 | $ 2,245,154 |
*
This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
(1)
A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core
base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile.
(2)
We believe that it is highly unlikely that all or substantially all of these guarantees and commitments will be drawn or settled within one year, and contracts may expire
without being drawn or settled. The management of the liquidity risk associated with potential extensions of funds is outlined in the preceding Risk measurement and
internal liquidity reporting section.
(3)
Includes commitments related to short-term and low-dollar value leases, leases not yet commenced, and lease payments related to non-recoverable tax.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
101
Insurance risk
Insurance risk refers to the potential financial loss that may arise where the amount, timing and/or frequency of benefit and/or
premium payments under insurance and reinsurance contracts are different than expected. Insurance risk is distinct from those
risks covered by other parts of our risk management framework (e.g., credit, market and operational risk) where those risks are
ancillary to, or accompany, the risk transfer. Our main insurance sub-risks are: morbidity, mortality, longevity, policyholder
behaviour (lapse) and travel risk. In addition, we are subject to expense risk, which is the exposure to the variability in future
expenses that are expected to be incurred in servicing insurance contracts.
Our Insurance Risk Management Framework provides an overview of our processes and tools for identifying, assessing,
managing, mitigating and reporting on the insurance risks that face the organization. These are also supported by our robust
three lines of defence governance structure, which is consistent with our ERMF.
Operational risk
Operational risk is the risk of loss or harm resulting from people, inadequate or failed internal processes, controls and systems
or from external events. Operational risk is inherent in all our activities and third-party activities and failure to manage
operational risk can result in direct or indirect financial loss, reputational impact or regulatory scrutiny and proceedings in the
various jurisdictions where we operate.
Our management of operational risk follows the three lines of defence governance model, encompassing the organizational
roles and responsibilities for a coordinated enterprise-wide approach. For further details on the structure and organization of
our operational risk management and control function, refer to the Risk management – Enterprise risk management section.
Operational risk framework
We have an Enterprise Operational Risk Framework which sets out the processes to identify, assess, monitor, measure, report
and communicate on operational risk. The processes are established through the following:
•
Risk identification and assessment tools, including the collection and analysis of risk event data, help risk owners
understand and proactively manage operational risk exposures. Risk assessments are intended to ensure alignment
between risk exposures and efforts to manage them. Management uses outputs of these tools to make informed risk
decisions.
•
Risk monitoring tools alert management to changes in the operational risk profile. When paired with escalation and
monitoring triggers, risk monitoring tools can identify risk trends, warn management of risk levels that approach or exceed
defined limits, as well as prompt actions and mitigation plans to be undertaken.
•
Risk capital measurement is designed to provide credible estimation of potential risk exposure, including surfacing risk
vulnerabilities, and informs strategic and capital planning decisions, which are ultimately intended to ensure that the bank
is sufficiently resilient to withstand operational risk losses both in normal times and under stress situations.
•
Risk reporting and communication processes seek to ensure that relevant operational risk information is made available to
management in a timely manner to support risk-informed business decisions.
Conclusions from our operational risk programs enable learning based on what has occurred, insights into whether it could
happen elsewhere in the organization, and what controls we need to amend or implement. These conclusions support the
articulation of our operational risk appetite and are used to inform the overall level of operational risk exposure which thereby
defines our operational risk profile. This profile includes significant operational risk exposures, potential new and emerging
exposures and trends, and overall conclusions on the control environment and risk outlook.
We consider the potential risks and rewards of our decisions to strike a balance between accepting potential losses versus
incurring costs of mitigation, the expression of which is in the form of our operational risk appetite. Our operational risk appetite
is established at the Board level and cascaded throughout each of our business segments. We proactively identify and
investigate corporate insurance opportunities to mitigate and reduce potential future impacts of operational risk.
Management reports have been implemented at various levels to support proactive management of operational risk and
transparency of risk exposures. These reports are provided to senior management on a regular basis and provide detail on the
main drivers of the risk status and trend for each of our business segments and the bank overall. In addition, changes to the
operational risk profile that are not aligned to our business strategy or operational risk appetite are identified and discussed at
the Operational Risk Committee (comprised of executives across the business and risk management) and presented to the
Group Risk Committee (GRC) and the Risk Committee of the Board.
Our operations expose us to many different operational risks, which may adversely affect our businesses and financial
results. The following list is not exhaustive, as other factors could also adversely affect our results.
102
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Operational risk
Management strategy
Information technology
and cybersecurity risk
Information technology risk is the risk associated with the use, ownership, operation and adoption
of information systems that can result in business interruptions, client service disruptions and loss
of confidential information causing financial loss, reputational damage and regulatory fines and
penalties. We maintain a risk driven program to address the risks following our operational risk
framework supported by a global team of technology risk management experts.
Cybersecurity risk is the risk to the business associated with cyberattacks initiated to disrupt or
disable our operations or to expose or damage data. We have a dedicated team of technology and
cybersecurity professionals that manage a comprehensive program that seeks to protect the
organization against breaches and other incidents by ensuring appropriate security and
operational controls are in place. We continue to strengthen our cyber-control framework and to
improve our resilience and cybersecurity capabilities including through 24-hour monitoring, cyber
intelligence analysis of internal and external threats and alerting of potentially suspicious
security events and incidents. Throughout the year, we continued to invest in our cybersecurity
program. In addition, scenario-based testing, assessments and simulations were conducted to
test our resiliency strategy.
Information management
and privacy risk
Information management risk is the risk of failing to manage information appropriately through
its lifecycle due to inadequate processes, controls and technology resulting in legal and
regulatory consequences, reputational damage and/or financial loss. We continue to invest in the
Enterprise Chief Data Office (CDO) and functional and regional data management and data
governance units to promote awareness of and effectively manage information management risk.
Managing information management risk is fundamental to become a data-driven organization
that uses data effectively and efficiently to improve client experience and decision-making.
Privacy risk is defined as the risk of improper creation or collection, use, disclosure, retention or
destruction of PI, including the failure to safeguard PI against unauthorized access. PI is
information entrusted to RBC that identifies an individual or can be reasonably used to identity an
individual. PI can relate to current, former and prospective clients, employees and contractors.
The collection, use and sharing of data, as well as the management and governance of data, are
increasingly important as we continue to invest in digital solutions and innovation, as well as
expanding our business activities, which is also reflected through regulatory developments
relating to data privacy. GRM partners with cross-functional teams to develop and implement
enterprise-wide standards and practices that describe how data is obtained, used, protected,
managed and governed.
Financial crimes risk
Financial crimes risk is the risk that our products, services and delivery channels are misused to
facilitate the laundering of proceeds of crime, financing of terrorist activity, bribery, corruption
and other activities that may violate applicable economic sanctions. We maintain an enterprise-
wide program designed to deter, detect and report suspected money laundering and terrorist
financing or suspicious activities across our organization, while seeking to ensure compliance
with the laws and regulations of the various jurisdictions in which we operate. Our Enterprise
Financial Crimes program is dedicated to the continuous development and maintenance of robust
policies, guidelines, training, risk-assessment tools and models to enable our employees to
manage evolving money laundering and terrorist financing risks, economic sanctions and
regulatory expectations. The Enterprise Financial Crimes program is regularly evaluated in an
effort to ensure it remains current and aligned with industry standards, best practices and all
applicable laws, regulations and guidance. Risks of non-compliance can include enforcement
actions (which may involve substantial fines or limitations on our business activities), criminal
prosecutions and reputational damage.
Third-party risk
Third-party risk is a risk that arises if and when there is a failure to effectively manage third
parties which may expose us to service disruptions, regulatory action, financial loss, litigation or
reputational damage. We have a risk-based, enterprise-wide program designed to provide
oversight for third-party relationships, ensure compliance with global regulatory expectations and
enable effective responses to events that can cause service disruptions, financial loss or various
other risks that could impact us. Our approach to third-party risk mitigation is outlined in policies
and standards that establish the requirements for identifying and managing risks throughout the
engagement with a third-party (including risks resultant from supplier concentration and through
fourth parties across the supply chain). Third-party providers critical to our operations are
actively monitored for their ability to deliver services to us, including impacts resultant from
suppliers of our third-party providers (i.e., fourth parties).
Business continuity risk
Business continuity risk is the risk of being unable to maintain, continue or restore essential
business operations during and/or after an event that prevents us from conducting business in the
normal course. Exposure to disruptive operational events interrupts the continuity of our business
operations and could negatively impact our financial results, reputation, client outcomes and/or
result in harm to our employees. These operational events could result from the impact of severe
weather, outbreak of a pandemic or other health crisis, failed processes, technology failures or
cyber threats. Our risk-based enterprise-wide business continuity management program
considers multiple scenarios to address the consequences of a disruption and its effects on the
availability of our people, processes, facilities, technology and third-party arrangements. Our
approach to, and requirements for, business continuity management are outlined in policies and
standards embedded across the organization and the related risks are regularly measured,
monitored, reported and integrated into our operational risk management and control framework.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
103
Operational risk
Management strategy
Fraud risk
Fraud risk is the risk of intentional unauthorized activities designed to obtain benefits from RBC or
assets under our care, or from using RBC products. Fraud may be perpetrated by external parties
(external fraud) or by individuals inside the organization (internal fraud). It typically results in
financial loss, reputational damage or other harm to victims and involves intent to deceive for
improper or illegal gain. Examples include theft of cash or assets and unauthorized transactions.
To manage fraud risk effectively, we employ a comprehensive, multi-layered approach that
includes prevention, detection and response strategies. This approach is supported by policies
and procedures that clearly outline the responsibilities and expectations for all employees.
Additionally, we implement robust technical controls, such as advanced fraud detection software,
and internal business controls, including regular audits and compliance checks. These measures
are designed to work together to provide a strong defense against fraud, to protect both the
organization and our clients.
Model risk
Models are applications of theoretical, empirical, judgmental assumptions and/or statistical techniques, including AI and
machine learning methods, which process input data to generate results and present a useful and meaningful output to inform
business units and control functions across RBC. Models support valuation of financial products and positions; identification,
measurement and management of risk; stress testing and capital adequacy; business decision-making; financial and regulatory
reporting; operational efficiencies; and public disclosure. Model risk is the risk of adverse financial, operational or reputational
consequences arising from the misspecification or misuse of models at any stage throughout a model’s lifecycle.
Model risk governance and oversight
The model risk governance and oversight structure spans all stages of the model’s life cycle, and is founded on principles of
shared responsibility across the three lines of defence. The Enterprise Model Risk Policy sets out the requirements for managing
model risk across RBC, and compliance with the policy is monitored and reported on regularly to senior management and
periodically to the Risk Committee of the Board.
The model risk management lifecycle
Model risk is managed across all key stages of a model’s life cycle, with emphasis on: (i) maintaining a complete inventory of
models used across RBC; (ii) developing and comprehensively documenting all models; (iii) independently challenging the
efficacy of models through validation; (iv) model implementation, use and ongoing performance monitoring; and (v) periodic
re-validation of models to confirm they remain fit for purpose.
Model validation is a critical stage of a model’s life cycle, in which models are independently and comprehensively
evaluated for intended uses. This lifecycle activity is carried out by our enterprise model risk management function, a team of
modelling professionals organizationally independent from the model owners, developers and users. The independent
validation of a model seeks to ensure conceptual soundness and fitness for use, and to highlight model limitations and
uncertainties, which should reduce the risks associated with model use.
Following approval, models are subject to ongoing performance monitoring and periodic re-validation. As needed, models
are retired or replaced with more suitable models, which are also subject to the model risk management lifecycle.
Culture and conduct risk
Our culture is defined by our Purpose, vision, values and risk management principles with behaviours upheld through our Code
of Conduct. Our values set the foundation of our culture and are rooted in our respect for and our commitments to our clients,
communities and other stakeholders, and each other. Culture risk refers to the misalignment between our stated desired culture
and our actual culture as exemplified through leader actions, employee behaviours or organizational systems that may prevent
us from achieving our objectives.
Conduct is the manifestation of culture through the behaviours, judgment, decisions, actions and inactions of the
organization, our employees and third-party service providers operating on our behalf. Conduct risk is the risk that outcomes
are not in keeping with our responsibilities to our stakeholders, including clients, employees, financial markets and regulators,
suppliers, communities, our reputation and shareholders. This risk is managed through embedding conduct considerations into
business decision-making processes, enhancing existing business practices and control processes, and monitoring to avoid and
address poor outcomes for stakeholders. The desired outcomes from effective culture and conduct practices align with our
Purpose and values and support our risk appetite statements.
Risk culture is a subset of our overall culture that influences how, individually and collectively, we take and manage risks.
Our risk culture helps us identify and understand risks, openly discuss risks and act on the organization’s current and perceived
future risks. Our risk culture practices are grounded in our risk management and human resource practices and protocols. When
combined with the elements of effective leadership and values, these practices provide a base from which the resulting risk
culture and conduct outcomes can be assessed and monitored, and practices can be sustained and/or further enhanced.
Our Board-approved Enterprise Culture and Conduct Risks Framework provides organizational direction and describes our
approach to related topics applicable to all risk categories such as fair outcomes for clients and other stakeholders, and our
culture, including accountability and risk culture, conduct risk, sales conduct, client practices and misconduct.
104
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
On a regular basis, management communicates behavioural expectations to our employees with an emphasis on culture,
conduct and values. Our leadership model also supports and encourages effective challenge between the businesses and
control functions. These behavioural expectations are supported by tools and resources which are designed to help employees
live our values, report misconduct and raise concerns, including those that might have ethical implications. We are committed to
fostering an environment where employees feel safe to speak up without retaliation. Employees have the ability to report
matters through a global anonymous Conduct Hotline. In addition, our Code of Conduct outlines an employee’s responsibility to
be truthful, respect others and comply with laws, regulations and our policies. Anyone who breaches or fails to report an actual
or possible breach of the Code of Conduct is subject to corrective or disciplinary action. This can range from reprimands and
impacts on performance ratings and compensation, to termination of employment relationships with the organization. As well,
Internal Audit conducts select behavioural science reviews to better understand and enhance employee attitudes and
behaviours as they relate to risk management.
Organizational Direction
articulated through:
Purpose
Values
Code of Conduct
Risk Appetite
Risk Management Principles
Outcomes for
Stakeholders:
Clients
Employees
Financial Markets
Regulators
Our Reputation
Shareholders
Individual &
Collective Conduct
Exhibited through:
Behaviours
Judgment
Decisions
Actions
Drives actual
Apply lessons learned
Sets expected
Influences
Shapes
Factors
Influential to Managing
Culture and Conduct Risks
Accountability
Tone from Above
Speaking Up
Incentives
Risk Culture
(Awareness)
Operational risk capital
Requirements for operational risk capital are determined in accordance with OSFI’s CAR guidelines using the Basel III
Standardized Approach (SA) for operational risk. The SA methodology is a formula-based calculation where a Business Indicator
Component (BIC) is multiplied by an Internal Loss Multiplier (ILM) to determine operational risk capital. The BIC is a financial
statement-based proxy for operational risk that reflects a three-year average of specified components of net income multiplied
by a set of supervisory provided coefficients. The ILM is a scaling factor that is based on our 10-year historical operational loss
average relative to the BIC. Operational risk losses are recorded in our operational risk management system, and robust
processes exist to support high quality internal loss data. For further details on operational risk capital, refer to the Capital
management section.
Operational risk loss events
As at October 31, 2025, our operational risk losses remain within our risk appetite. For further details on our contingencies,
including litigation, refer to Notes 23 and 24 of our 2025 Annual Consolidated Financial Statements.
Compliance risk
Compliance risk is the risk of potential non-conformance with laws, rules, regulations and prescribed practices in any
jurisdiction in which we operate. Issues regarding compliance with laws and regulations can arise in a number of areas in large
complex financial institutions, such as RBC, and are often the result of inadequate or failed internal processes, controls, people
or systems. We currently are, and may be at any given time, subject to legal and regulatory proceedings and subject to
governmental and regulatory examinations, investigations and other inquiries.
Laws and regulations are in place to protect the financial and other interests of our clients, shareholders and the public. As
a large-scale global financial institution, we are subject to numerous laws and extensive and evolving regulation by
governmental agencies, supervisory authorities and self-regulatory organizations in Canada, the U.S., the U.K., Europe and other
jurisdictions in which we operate. Such regulation continues to become increasingly extensive and complex. In addition,
regulatory scrutiny and expectations in Canada, the U.S., the U.K., Europe and other jurisdictions for large financial institutions
with respect to, among other things, governance, risk management practices and controls, and conduct, as well as the
enforcement of regulatory compliance matters, has intensified. Failure to comply with these regulatory requirements and
expectations or to resolve any identified deficiencies could result in increased regulatory oversight and restrictions. Resolution
of such matters can also result in the payment of substantial penalties, agreements with respect to future operation of our
business, actions with respect to relevant personnel, admission of wrongdoing, and guilty pleas with respect to criminal charges,
which in turn may result in us being prohibited from conducting certain types of business absent regulatory relief, receipt of
which cannot be assured.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
105
Regulatory compliance risk includes the regulatory risks associated with financial crimes (which include, but are not limited
to, money laundering, terrorist financing, bribery, corruption and violations of economic sanctions), privacy, market conduct,
consumer protection and business conduct, as well as prudential and other generally applicable non-financial requirements.
Specific compliance policies, procedures and supporting frameworks have been developed to seek to manage regulatory
compliance risk.
Our Regulatory Compliance Management Framework outlines how we manage and mitigate the regulatory compliance risks
associated with failing to comply with, or adapt to, current and changing laws, regulations and expectations in the jurisdictions
in which we operate.
Operating in a complex regulatory environment and intense regulatory enforcement environment, we are and have been
subject to a variety of legal proceedings, including civil claims and lawsuits, criminal charges, regulatory scrutiny, examinations
and proceedings, investigations, audits and requests for information by various governmental regulatory agencies and law
enforcement authorities in various jurisdictions, and we anticipate that our ongoing business activities will give rise to such
matters in the future. The global scope of our operations also means that a single issue may give rise to overlapping regulatory
investigations, regulatory proceedings, or civil litigation claims and/or criminal prosecutions in different jurisdictions. RBC can
be subject to such proceedings due to alleged violations of law or, if determined by regulators, allegedly inadequate policies,
procedures, controls or remediation of deficiencies. Changes to laws, including tax laws, regulations or regulatory policies, as
well as the changes in how they are interpreted, implemented or enforced, could adversely affect us, for example, by lowering
barriers to entry in the businesses in which we operate, increasing our costs of compliance, or limiting our activities and ability
to execute our strategic plans. In addition, the severity of the remedies sought in legal and regulatory proceedings to which RBC
is subject have increased. Further, there is no assurance that we always will be, or be deemed to be, in compliance with laws,
regulations or regulatory policies or expectations. Accordingly, it is possible that we could receive a judicial or regulatory
enforcement judgment or decision that results in significant fines, damages, penalties, and other costs or injunctions, criminal
convictions, or loss of licenses or registrations that would damage our reputation and negatively impact our earnings and ability
to conduct some of our businesses. We may also be subject to litigation arising in the ordinary course of our business and the
adverse resolution of any litigation could have a significant adverse effect on our results or could give rise to significant related
reputational damage, which in turn could impact our future business prospects.
Reputation risk
Reputation risk is the risk of an adverse impact on stakeholders’ perception of RBC due to i) perceived or actual misalignment
between stakeholder perceptions of RBC and the actions or inactions of the bank, its employees or individuals or groups
affiliated with RBC, ii) negative or shifting public sentiment on existing, evolving or emerging industry or global issues, or
iii) negative outcomes relating to any risk inherent to the financial services industry, including ineffective management of these
risks, or situations beyond our control such as external events or systemic risks. A strong and trustworthy reputation will
generally strengthen our market position, reduce our cost of capital, increase shareholder value, attract and retain top talent
and help us weather a crisis. Conversely, damage to our reputation can result in reduced share price and market capitalization,
loss of strategic flexibility, inability to enter or expand into markets, loss of client loyalty and business, or regulatory fines and
penalties. The sources of reputation risk are widespread. Reputation risk is a transverse risk which can manifest as an outcome
of other risk types including but not limited to credit, regulatory, legal, operational and E&S risks. We can also experience
reputation risk from a failure to maintain an effective control environment, exhibit good conduct and maintain appropriate
cultural practices.
Managing our reputation risk is an integral part of our organizational culture and our overall enterprise risk management
approach, as well as a priority for employees and our Board. Our Board-approved Enterprise Reputation Risk Management
Framework provides an overview of our approach to identify, assess, manage, monitor and report on reputation risk. This
framework outlines governance authorities, roles and responsibilities, and controls and mechanisms to manage our reputation
risk, including our culture of integrity, compliance with our Code of Conduct and operating within our risk appetite.
Our governance of reputation risk aims to be holistic and provides an integrated view of potential reputation issues across
the organization. This governance structure is designed to support the understanding of ownership and accountability for
reputation risk across the enterprise, both proactive and reactive reputation risk decisions are escalated to senior management
for review and evaluation, and reporting on reputation risk is comprehensive and integrated.
Strategic risk
Strategic risk is the risk to earnings, capital or liquidity arising from adverse business decisions, improper implementation of
strategic initiatives or inadequate responses to changes in the external operating environment by the bank or a particular
business unit. To safeguard against unacceptable losses or unintended outcomes, we integrate risk management practices into
our strategic, financial and capital planning processes. This integration facilitates informed dialogue during strategic decision
making and serves as a foundational element of our planning cycle.
Accountability for the selection and execution of business strategies resides with the heads of each business segment. The
governance of strategic risk is the responsibility of these leaders and their operating committees, in conjunction with the
Enterprise Strategy & Transformation group, the GE and the Board. The Enterprise Strategy & Transformation group supports
the management of strategic risk through the strategic planning process, articulated within our Enterprise Strategic Planning
Policy. This is designed to ensure alignment across strategic, financial, capital and risk planning domains.
Our annual business portfolio review and project approval request processes serve as key mechanisms for identifying and
mitigating strategic risk. These processes aim to ensure that proposed initiatives, lines of business and overarching enterprise
strategies remain consistent with our defined risk appetite and posture. GRM oversees strategic risk by conducting independent
oversight and review and challenge of these processes, establishing enterprise risk frameworks, and independently monitoring
and reporting risk levels relative to risk appetite measures, consistent with the three lines of defence governance model.
For details on the key strategic priorities for our business segments, refer to the Business segment results section.
106
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Overview of other risks
In addition to the risks described in the risk sections, there are other risk factors, described below, which may affect our
businesses and financial results. The following discussion is not exhaustive as other factors could also adversely affect our
results.
Legal and regulatory environment risk
Legal and regulatory environment risk is the risk that new or modified laws and regulations, and the interpretation or
application of laws and regulations, will negatively impact the way in which we operate, both in Canada and in the other
jurisdictions in which we conduct business. The full impact of some of these changes on our business will not be known until
final rules are implemented and market practices have developed in response. We continue to respond to these and other
developments and are working to minimize any potential adverse business or economic impact. The following provides a high-
level summary of some of the key regulatory changes that have potential to increase or decrease our costs, impact our
profitability and increase the complexity of our operations.
Global uncertainty
In October 2025, the International Monetary Fund (IMF) projected global growth of 3.2% for 2025, up 0.2% from its July forecast,
reflecting an improvement due to easing of trade tensions, which were tempered as a result of trade deals and resets. The IMF
projected global growth for calendar 2026 to be 3.1%. The overall global economic outlook remains fragile and tilted to the
downside, driven by:
•
Failure to reach trade agreements and reliance on ad-hoc bilateral deals, which could lead to a shift away from global
economic integration, negatively impact productivity and further hurt growth prospects, especially for emerging markets
and developing economies;
•
Substantive projected fiscal deficits across major economies, which could lead to upward pressure on long-term interest
rates, financial market instability and/or deceleration in growth, along with their associated impact on consumer and
business confidence;
•
Diverging monetary policies in response to inflationary pressures, which could drive asset repricing, impact foreign
exchange rates and capital flows and heighten financial market volatility;
•
Shifting global policy priorities, including ongoing uncertainty around U.S. trade, foreign relations, defense and immigration
policies, which could disrupt global alliances and heighten economic, market and other risks, and intensifying political
pressures on policy institutions and policymaking, which could weaken policy credibility, reduce investor confidence and
heighten macroeconomic vulnerabilities;
•
Elevated asset valuations, including in technology and AI-linked sectors which could drive abrupt market corrections,
dampen investment, tighten financial conditions and weaken business and consumer confidence;
•
An aging demographic in advanced economies, as well as changing immigration policies, which could have an associated
long-term impact on labour supply, economic productivity and government fiscal capacity;
•
Ongoing conflicts including those between Russia and Ukraine, in the Middle East and Asia, and rising tensions between
China and Taiwan, together with increased polarization and social unrest; and
•
Extreme weather-related events.
Our diversified business model, as well as our product and geographic diversification, continue to help mitigate the risks posed
by global uncertainty.
Sustainability-related legal and regulatory activity
Applicable sustainability-related laws, regulations, policies, frameworks, methodologies and guidance continue to evolve in
inconsistent ways across the regions in which we operate. As such, new or heightened requirements could result in increased
regulatory, compliance or other costs or higher capital requirements, and may subject us to different and potentially conflicting
policies and requirements in the various jurisdictions in which we operate. We continue to monitor the development of
applicable laws, regulations, policies, frameworks, methodologies and guidance in this area, including but not limited to the
evolution of sustainability disclosure requirements and climate risk management requirements for financial institutions.
In Canada, OSFI’s Guideline B-15
Climate Risk Management,
issued in March 2023, sets expectations for managing and
disclosing climate-related risks. Subsequent updates in 2024 and 2025 aligned disclosure expectations with IFRS S2
Climate-
related Disclosures
issued by the International Sustainability Standards Board (ISSB) and extended certain implementation
timelines to fiscal 2028 and 2029. We expect to meet upcoming disclosure phases and continue to monitor further developments.
In the U.S., scrutiny of financial institutions relating to environmental and/or social matters, including climate, continues to
be heightened at both the federal and state levels, including through statutes, regulations and litigation. As environmental and
social issues remain heavily politicized, statutes or regulations in certain states may be interpreted to prohibit governmental
entities, such as public pension funds and issuers of municipal bonds, from doing business with certain financial institutions,
and political pressure may be placed upon governmental entities to not do business with certain financial institutions, based on
the financial institutions’ perceived positions on certain environmental and/or social matters. We continue to monitor
developments in this area and assess their impacts on our businesses.
In Europe, the European Union’s Corporate Sustainability Reporting Directive (CSRD) requires reporting under the European
Sustainability Reporting Standards (ESRS). The ESRS, which were adopted by the European Commission in July 2023, set out the
requirements for companies to report on sustainability-related impacts, opportunities and risks. We anticipate that we will be
subject to reporting obligations under the CSRD from fiscal 2029 at the consolidated level, and are currently assessing the
impact of these requirements.
We continue to monitor the development of applicable anti-greenwashing laws and regulations as well as climate-related
litigation and regulatory enforcement actions related to greenwashing, including amendments to the Competition Act (Canada)
which came into force on June 20, 2024, and which introduced new anti-greenwashing provisions. These provisions are in addition
to the pre-existing provisions of the Competition Act (Canada) that prohibit the making of claims that are materially false or
misleading. “Greenwashing” generally refers to the practice of conveying false or misleading information about an organization’s
products or services or operations to suggest that the organization is doing more to protect the environment than it is.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
107
Model risk management
On September 11, 2025, OSFI released its final Guideline E-23 – Model Risk Management, which sets out expectations for
managing risks associated with traditional models as well as emerging technologies such as artificial intelligence and machine
learning.
This guideline will be effective May 1, 2027. We have assessed the requirements and do not anticipate any issues in
complying with the requirements by the effective date.
For further details on regulatory capital and related requirements, refer to the Risk management and Capital management
sections of this 2025 Annual Report.
Government fiscal, monetary and other policies
Our financial results are also sensitive to changes in interest rates. The Federal Reserve is expected to cut interest rates further
in calendar 2026 after reducing interest rates less than other global central banks since 2024, while additional interest rate cuts
from the Bank of Canada are not expected. Lower interest rates generally lead to spread compression across many of our
businesses, resulting in an unfavourable impact on NIM, but can also promote economic stimulation and drive higher volumes
for our business than otherwise would have occurred. Higher interest rates may be a potential benefit to our NIM but may
adversely impact household balance sheets by causing credit deterioration, hence negatively impacting our financial results. If
elevated interest rates are coupled with persistent inflation, this could increase market volatility, reduce asset values and
adversely impact household and corporate balance sheets. This could lead to credit deterioration and impact our financial
results, particularly in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets businesses.
Our businesses and earnings are affected by monetary policies that are adopted by the BoC, the Fed in the U.S., the ECB in
the European Union (EU), the BoE in the U.K. and monetary authorities in other jurisdictions in which we operate. In addition,
our businesses and earnings may be affected by the fiscal, trade-related and other policies of the governments of Canada, the
U.S., the U.K., Europe and such other jurisdictions. Those policies may include protectionist trade policies and the imposition of
tariffs, as well as increased deficit spending intended to support economic growth. Such policies can have positive or adverse
affects on our clients and counterparties in Canada, the U.S. and internationally, which may decrease or increase the risk of
default by such clients and counterparties.
Tax risk and transparency
Tax risk refers to the risk of loss related to unexpected tax liabilities. The tax laws and systems that are applicable to us are
complex and wide-ranging. As a result, we seek to ensure that any decisions or actions related to tax always reflect our
assessment of the long-term costs and risks involved, including their impact on our reputation and our relationship with clients,
shareholders and regulators.
Our approach to taxation is grounded in principles which are reflected in our Code of Conduct, governed by our Enterprise
Tax Risk Management Policy and incorporates the fundamentals of our risk drivers. Oversight of our tax policy and the
management of tax risk is the responsibility of the GE, the CFO and the Senior Vice President, Taxation. We discuss our tax
strategy with the Audit Committee annually and provide updates on our tax position on a regular basis.
Our tax strategy is designed to provide transparency and support our business strategy, and is aligned with our corporate
vision and values. We seek to maximize shareholder value by structuring our businesses in a tax-efficient manner while
considering reputation risk by being in compliance with all laws and regulations. Our policy requires that we:
•
Act with integrity and in a straightforward, open and honest manner in all tax matters;
•
Ensure tax strategy is aligned with our business strategy supporting only bona fide transactions with a business
purpose and economic substance;
•
Ensure all intercompany transactions are conducted in accordance with applicable transfer pricing requirements;
•
Ensure our full compliance and full disclosure to tax authorities of our statutory obligations; and
•
Endeavour to work with the tax authorities to build positive long-term relationships and where disputes occur, address
them constructively.
With respect to assessing the needs of our clients, we consider a number of factors including the purpose of the transactions.
We seek to ensure that we only support bona fide client transactions with a business purpose and economic substance. Should
we become aware of client transactions that are aimed at evading their tax obligations, we will not proceed with the
transactions.
We operate in 29 countries worldwide. Our activities in these countries are subject to both Canadian and international tax
legislation and other regulations, and are fully disclosed to the relevant tax authorities. The Taxation group and GRM both
regularly review the activities of all entities in an effort to ensure compliance with tax requirements and other regulations.
Given that we operate globally, complex tax legislation and accounting principles have resulted in differing legal
interpretations by the respective tax authorities we deal with and ourselves, and we are at risk of tax authorities disagreeing
with prior positions we have taken for tax purposes. When this occurs, we are committed to an open and transparent dialogue
with the tax authorities to facilitate a quick assessment and prompt resolution of the issues where possible. Failure to
adequately manage tax risk and resolve issues with tax authorities in a satisfactory manner could adversely impact our results,
potentially to a material extent in a particular period, and/or significantly impact our reputation.
108
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Tax contribution
In 2025, total income and other tax expense, including income taxes in the Consolidated Statements of Comprehensive Income
and Changes in Equity, to various levels of governments globally totalled $7 billion (2024 – $5 billion). In Canada, total income
and other tax expense for the year ended October 31, 2025 to various levels of government totalled $5 billion (2024 – $4 billion).
Payroll taxes
Income taxes
Value added and
sales taxes
Capital taxes
Property taxes
Insurance premium taxes
Business taxes
0
2,000
1,000
7,000
6,000
5,000
4,000
3,000
2025
2024
Income and other tax expense – by category
(Millions of Canadian dollars)
8,000
0
2,000
1,000
7,000
6,000
5,000
4,000
3,000
Other International
U.S.
Canada
2025
2024
Income and other tax expense – by geography
(Millions of Canadian dollars)
8,000
For further details on income and other tax expense, refer to the Financial performance section.
Environmental and social risk
Environmental and social (E&S) risk is the risk of negative impacts in the short-, medium- or long-term on our financial results,
financial and operational resilience, reputation, business model or strategy resulting from E&S risk factors which can arise from
RBC, a client or a third-party. Because different stakeholders and communities may have divergent views on E&S issues, any
actual or perceived action or inaction by us in the management of an E&S issue may be perceived negatively by at least some
stakeholders and, as a result, may increase our E&S risk.
E&S risk factors include, but are not limited to, climate change, site contamination, waste management, land and resource
use, biodiversity, water quality and availability, environmental regulation, human rights (including, but not limited to, Indigenous
Peoples’ rights) and community engagement.
E&S risks are unique and transverse in nature and may impact our Principal Risks in different ways and to varying degrees,
including but not limited to strategic, operational, credit and compliance risks. See the Climate-related risk section below for
additional information specific to climate-related risk.
Governance
The Board and its Committees provide oversight of the bank’s strategic approach to sustainability matters, including climate
change, with specific subject-matter expertise, groups and functions responsible for relevant programs, products, policies and
performance rooted within business segments and functions across the bank. Committees of the Board have oversight of E&S
risks that are specific to their respective responsibilities, including the Governance Committee, which provides oversight and
coordination over sustainability matters, and the Risk Committee, which oversees significant and emerging risks to the bank,
including E&S risks. For further details on risk governance, refer to the Enterprise risk management – Risk governance section.
Roles and responsibilities related to E&S risk management are governed by the ERMF and the three lines of defence
governance model. Business segments and functional areas are responsible for incorporating E&S risk management
requirements within their own operations, while GRM is responsible for defining E&S risk management requirements, including
establishing policies, and performing effective oversight in relation to E&S risk.
Risk management
We seek to integrate E&S risk considerations into our risk management approach. We manage E&S risk by leveraging existing
policies and processes which govern our Principal Risks. Our Enterprise Policy on Environmental and Social Risk (E&S Risk
Policy)
1
supports these policies and processes by outlining our principles for E&S risk management and setting out standards for
how E&S risks arising from our activities are identified, assessed, measured, managed, mitigated, monitored and reported.
We continue to evolve our approach to E&S risk by leveraging existing risk management capabilities, and building new
capabilities where required, including for purposes of incorporating regulatory guidance, industry best practices and improved
data analytics to identify, assess, measure, manage, monitor and report on potential E&S impacts on clients, portfolios and our
operations. We recognize that the integration and maturity of our E&S risk management capabilities will continue to evolve, and
that achieving a mature level of E&S risk management will be iterative and take time.
1
The E&S Risk Policy is not inclusive of the activities of, and assets under management by, RBC Global Asset Management
®
(RBC GAM). RBC GAM has developed its own
policy with respect to these matters. RBC GAM includes, but is not limited to, the following wholly owned indirect subsidiaries of the Bank: RBC Global Asset Management
Inc. (including Phillips, Hager & North Investment Management), RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset
Management (Asia) Limited.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
109
Climate-related risk
We define climate-related risk as the potential negative impacts of climate change on our financial results, financial and
operational resilience, reputation, business model or strategy. Climate-related risk is categorized into transition risk and
physical risk. Transition risk is defined as the risks related to the process of adjustment towards a low-carbon economy. These
risks can emerge from current or future government policies, legislation, and regulation to limit carbon emissions as well as
technological advancements, and changes in market and customer sentiment towards a low-carbon economy. Physical risk is
defined to include the risks from the increasing severity and frequency of climate-related extremes and events (i.e., acute
physical risks), longer-term gradual shifts of the climate (i.e., chronic physical risks) and indirect effects of climate change, such
as public health implications (e.g., morbidity and mortality impacts).
We continue to make progress in our climate-related risk management capabilities by integrating climate-related risk
considerations into our existing risk management practices. Climate scenario analysis helps to inform future strategic planning,
evolve risk management strategies, and meet regulatory and stakeholder expectations. To help ensure that the bank is
adequately capitalized against unexpected events resulting from climate change, we assess the impact of climate-related risks
across multiple Principal Risks in our existing Enterprise-Wide Stress Testing program.
Human rights and codes of conduct
We continue to integrate our commitment to respect human rights into operational policies and procedures across the
organization, and we disclose the operationalization of this commitment in our various human rights related disclosures, such
as our Approach to Human Rights – which includes our Human Rights Position Statement and outlines our commitment to
respect human rights as set out in the United Nations Guiding Principles on Business and Human Rights. In addition, RBC’s
Statement Regarding Modern Slavery describes the policies and processes that are in place across our enterprise to help
prevent and reduce the risk that modern slavery is used in our operations and supply chain.
Our Code of Conduct establishes standards of desired behaviour for how we work together in a respectful, transparent and
fair environment. In addition, our Supplier Code of Conduct sets our expectations of suppliers to, among other things, abide by
relevant employment, labour, non-discrimination and human rights legislation and standards, and to respect human rights.
Voluntary commitments
We have made sustainability-related commitments that form part of our broader approach to managing E&S risks and
opportunities.
We may be exposed to legal, regulatory or reputational impacts for making or not fully meeting our sustainability-related
commitments, goals and targets either as a result of our own actions or due to external factors, which could cause our actual
results to differ materially from our expectations expressed in such objectives. More specifically, our ability to achieve our
sustainability-related commitments, goals and targets will depend on the collective efforts and actions across a wide range of
stakeholders outside of our control, and there can be no assurance that they will be achieved
2
.
In addition, our sustainability-related commitments, goals and targets are aspirational and may need to be changed, or
recalibrated in response to these external factors or as data improves and as climate science, transition pathways and market
practices regarding standards, methodologies, metrics and measurements evolve, which may result in us withdrawing from or
modifying our membership in certain frameworks, principles and initiatives.
Legal and regulatory developments
Applicable environmental and social-related laws, regulations, policies, frameworks, methodologies and guidance continue to
evolve. As such, new or heightened requirements could result in increased regulatory, compliance or other costs or higher
capital requirements, and may subject us to different and potentially conflicting requirements in the various jurisdictions in
which we operate. As regulatory requirements evolve, we will continue to monitor such developments and update our risk
management practices and disclosures as necessary. See the Legal and regulatory environment risk section for further details.
Capital management
We actively manage our capital to maintain strong capital ratios and high ratings while providing strong returns to our
shareholders. In addition to the regulatory requirements, we consider the expectations of credit rating agencies, depositors and
shareholders, as well as our business plans, stress tests, peer comparisons and our internal capital ratio targets. Our goal is to
optimize our capital usage and structure, and to provide support for our business segments and clients. We also aim to generate
optimal returns for our shareholders, while protecting depositors and creditors.
Capital management framework
Our capital management framework establishes policies and processes for defining, measuring, raising and investing all forms
of capital in a coordinated and consistent manner. It sets our overall approach to capital management, including guiding
principles and roles and responsibilities relating to capital adequacy and transactions, dividends, solo capital, and management
of RWA, leverage ratio exposures, TLAC capital and TLAC leverage ratios. We manage and monitor capital from several
perspectives, including regulatory capital, solo capital and TLAC.
2
For example, external factors that could cause our actual results to differ materially from such expectations include the availability, reliability, quality and verifiability of
climate data; the adoption of new and the evolution of existing climate-related standards, protocols and methodologies; the failure of clients, customers or other third
parties to implement or complete their transactions or their climate-related projects, programs and initiatives, or to do so when expected; the compliance of various
third parties with our policies and procedures and their commitment to us; the actions, policies and engagement of various stakeholders; technological advancements;
the evolution of markets and consumer behaviour, including the evolution and liquidity of the carbon markets; the status of adoption and implementation of
decarbonization efforts and climate policies around the world; the challenges of balancing emission reduction targets with an orderly, just and inclusive transition;
geopolitical factors that impact global energy needs; the legal and regulatory environment; and compliance considerations.
110
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Our capital planning process is dynamic and involves various teams including Finance, Corporate Treasury, GRM,
Economics and our businesses, and covers internal capital ratio targets, potential capital transactions as well as projected
dividend payouts and share repurchases. This process considers our business operating plans, enterprise-wide stress testing
and Internal Capital Adequacy Assessment Process (ICAAP), regulatory capital changes and supervisory requirements,
accounting changes, internal capital requirements, rating agency metrics and solo capital.
Our capital plan is established on an annual basis and is aligned with the management actions included in the annual
business operating plan, which includes forecast growth in assets and earnings, taking into account our business strategies, the
projected market and economic environment, and peer positioning. This includes incorporating potential capital transactions
based on our projected internal capital generation, business forecasts, market conditions and other developments, such as
accounting and regulatory changes that may impact capital requirements. All of the components in the capital plan are
monitored throughout the year and are revised as deemed appropriate.
Total capital requirements
Capital available and target
capital ratios
Capital impacts of
stress scenarios
Enterprise-wide
Stress Testing
ICAAP
Capital Plan and
Business
Operating Plan
Capital impacts of stress scenarios
Our enterprise-wide stress testing and annual ICAAP processes provide key inputs for capital planning, including setting
internal capital ratio targets. The stress scenarios are evaluated across the organization, and results are integrated to develop
an enterprise-wide view of financial impacts and capital requirements, which in turn facilitate the planning of mitigating actions
to absorb adverse events. ICAAP assesses capital adequacy and requirements covering all material risks, with a cushion for
plausible contingencies. In accordance with OSFI guidelines, major components of our ICAAP process include comprehensive
risk assessment, stress testing, capital assessment and planning, Board and senior management oversight, monitoring and
reporting and internal control review.
Our internal capital targets are established to maintain robust capital positions in excess of OSFI’s Basel III regulatory
targets. The results of our enterprise-wide stress testing and ICAAP processes are incorporated into the OSFI Capital Buffers,
Domestic Systemically Important Banks (D-SIB)/Globally Systemically Important Banks (G-SIB) surcharge, and Domestic
Stability Buffer (DSB), with a view to ensure that the bank has adequate capital to underpin risks and absorb losses under all
plausible stress scenarios given our risk profile and appetite. In addition, we include a discretionary cushion on top of OSFI’s
regulatory targets to reflect our risk appetite, our forecasts of potential negative downturns and to maintain our capital strength
for forthcoming regulatory and accounting changes, peer comparatives, rating agencies sensitivities, potential future
acquisitions and regulatory solo capital requirements.
The Board is responsible for the ultimate oversight of capital management, including the annual review and approval of the
capital plan. ALCO and GE share responsibility for capital management and receive regular reports detailing our compliance
with approved limits and guidelines. The Audit and Risk Committees jointly approve the ICAAP.
Basel III
Our consolidated regulatory capital requirements are determined by OSFI’s Capital Adequacy Requirements (CAR) guidelines,
which are based on the minimum Basel III capital ratio requirements adopted by the BCBS.
Under Basel III, banks select from two main approaches, the Standardized Approach (SA) or the IRB Approach, to calculate
their minimum regulatory capital required to support credit, market and operational risks. We apply the IRB approach to credit
risk to determine minimum regulatory capital requirements for the majority of our portfolios. Certain credit risk portfolios are
subject to the SA, primarily in Wealth Management, including our City National wholesale portfolio, our Caribbean Banking
operations and certain non-mortgage retail portfolios. For consolidated regulatory reporting of market risk capital and
operational risk capital, we use the revised SA based on OSFI requirements.
All federally regulated banks with a Basel III leverage ratio total exposure exceeding
€
200 billion at their financial year-end
are required, at a minimum, to publicly disclose in the first quarter following their year-end, the thirteen indicators used in the
annual G-SIB assessment methodology, with the goal of enhancing the transparency of the relative scale of banks’ potential
global systemic importance and data quality. The FSB publishes an updated list of G-SIBs annually. On November 27, 2025, we
were re-designated as a G-SIB by the FSB. This designation requires us to maintain a higher loss absorbency requirement
(common equity as a percentage of RWA) of 1% consistent with the D-SIB requirement. In addition to the Basel III targets, OSFI
established a Domestic Stability Buffer (DSB) applicable to all Canadian D-SIBs to further ensure the financial stability of the
Canadian financial system. The current OSFI requirement for the DSB is set at 3.5% of total RWA as reaffirmed by OSFI on
June 26, 2025.
Under OSFI’s TLAC guideline, D-SIBs are required to maintain a risk-based TLAC ratio, which builds on the risk-based capital
ratios described in the CAR guideline, and a TLAC leverage ratio, which builds on the leverage ratio described in OSFI’s LR
guideline. The TLAC requirement is intended to address the sufficiency of a D-SIB’s loss absorbing capacity in supporting its
recapitalization in the event of its failure. TLAC is defined as the aggregate of Tier 1 capital, Tier 2 capital and external TLAC
instruments, which allow conversion in whole or in part into common shares under the CDIC Act and meet all of the eligibility
criteria under the TLAC guideline.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
111
The following table provides a summary of OSFI’s current regulatory target ratios under Basel III and Pillar 2 requirements. We
are in compliance with all current capital, leverage and TLAC requirements imposed by OSFI:
Basel III – OSFI regulatory targets
Table 62
Basel III
capital,
leverage and TLAC
ratios
OSFI regulatory target requirements
for large banks under Basel III
Domestic
Stability
Buffer
(3)
Minimum
including
Capital
Buffers,
D-SIB/G-SIB
surcharge and
Domestic
Stability
Buffer as at
October 31,
2025
(4)
RBC capital,
leverage
and TLAC
ratios
as at
October 31,
2025
Minimum
Capital
Buffers
Minimum
including
Capital
Buffers
D-SIB/G-SIB
surcharge
(1)
Minimum
including
Capital
Buffers and
D-SIB/G-SIB
surcharge
(1), (2)
Common Equity Tier 1
4.5%
2.6%
7.1%
1.0%
8.1%
3.5%
11.6%
13.5%
Tier 1 capital
6.0%
2.6%
8.6%
1.0%
9.6%
3.5%
13.1%
15.1%
Total capital
8.0%
2.6%
10.6%
1.0%
11.6%
3.5%
15.1%
16.8%
Leverage ratio
3.0%
n.a.
3.0%
0.5%
3.5%
n.a.
3.5%
4.4%
TLAC ratio
21.6%
n.a.
21.6%
n.a.
21.6%
3.5%
25.1%
31.5%
TLAC leverage ratio
7.25%
n.a.
7.25%
n.a.
7.25%
n.a.
7.25%
9.2%
(1)
A capital surcharge, equal to the higher of our D-SIB surcharge and the BCBS’s G-SIB surcharge, is applicable to risk-weighted capital. For leverage ratio, only 50% of our
D-SIB surcharge for capital is the required surcharge.
(2)
The capital buffers include the capital conservation buffer of 2.5% and the countercyclical capital buffer (CCyB) as prescribed by OSFI. The CCyB, calculated in
accordance with OSFI’s CAR guidelines, was 0.06% as at October 31, 2025 (October 31, 2024 – 0.08%).
(3)
The DSB can range from 0% to 4% of total RWA and is currently set at 3.5%.
(4)
Minimum target requirements reflect CCyB requirements as at October 31, 2025 which are subject to change based on exposures held at the reporting date.
n.a.
not applicable
Regulatory capital, TLAC available, RWA, capital and TLAC ratios
Under Basel III, capital consists of CET1, Additional Tier 1, Tier 2 capital and external TLAC instruments.
CET1 capital comprises the highest quality of capital. Regulatory adjustments under Basel III include full deductions of
certain items and additional capital components that are subject to threshold deductions as prescribed in the CAR guidelines.
Tier 1 capital comprises predominantly CET1 and Additional Tier 1 items including non-cumulative preferred shares and
limited recourse capital notes (LRCNs) that meet certain criteria. Tier 2 capital includes subordinated debentures that meet
certain criteria, certain loan loss allowances and non-controlling interests in subsidiaries’ Tier 2 instruments. Total capital is
defined as the sum of Tier 1 and Tier 2 capital. Preferred shares, LRCNs, and subordinated debentures issued after January 1, 2013
require Non-viability contingent capital (NVCC) features to be included in regulatory capital. NVCC requirements ensure that
non-common regulatory capital instruments bear losses before banks seek government funding.
TLAC available is defined as the sum of Total capital and external TLAC instruments. External TLAC instruments comprise
predominantly senior bail-in debt, which includes eligible senior unsecured debt with an original term to maturity of greater than
400 days and remaining term to maturity of greater than 365 days.
Capital ratios are calculated by dividing CET1, Tier 1, Total capital and TLAC available by total RWA.
112
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
The following chart provides a summary of the major components of CET1, Additional Tier 1, Tier 2 capital and external TLAC
instruments.
Common Equity
Tier 1 (CET1)
Additional Tier 1 Capital
Tier 2 Capital
External TLAC
Instruments
+
+
+
Tier 1 Capital
TLAC Available
Total Capital
Deductions
Non-significant investments in
Tier 1 instruments of financial
institutions
(2)
Significant investments in
other financial institutions’
and insurance subsidiaries’
Tier 1 instruments
Preferred shares
Limited recourse capital notes
Non-controlling interests in
subsidiaries’ Tier 1 instruments
Subordinated debentures less
amortization
Senior bail-in debt
Amortized portion of
subordinated debentures
Investments in own TLAC
instruments
Certain loan loss allowances
Non-controlling interests in
subsidiaries’ Tier 2 instruments
Non-significant investments in
Tier 2 and TLAC instruments
of financial institutions
(2)
Significant investments in
other financial institutions’
and insurance subsidiaries’
Tier 2 and TLAC instruments
Goodwill and other intangibles
Deferred tax assets on loss
carryforwards
Defined benefit pension fund
assets
Non-significant investments
in CET1 instruments of financial
institutions
(2)
Shortfall of provisions to
expected losses
Prudential valuation
adjustments
Prepaid portfolio insurance
assets
Non-payment and non-delivery
of trades
Equity investment in funds
subject to the fall-back
approach
Threshold
Deductions
(1)
Higher quality
capital
Lower quality
capital
Significant investments in
Insurance subsidiaries and
CET1 instruments in other
financial institutions
Mortgage servicing rights
Deferred tax assets relating
to temporary differences
Common shares
Retained earnings
Other components of equity
Non-controlling interests in
subsidiaries’ CET1 instruments
Net Contractual Service
Margin under IFRS 17
(1)
First level: The amount by which each of the items exceeds a 10% threshold of CET1 capital (after all deductions but before threshold deductions) will be
deducted from CET1 capital. Second level: The aggregate amount of the three items not deducted from the first level above and in excess of 15% of CET1 capital
after regulatory adjustments will be deducted from capital, and the remaining balance not deducted will be risk-weighted at 250%.
(2)
Non-significant investments are subject to certain CAR criteria that drive the amount eligible for deduction.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
113
The following tables provide details on our regulatory capital, TLAC available, RWA, and on ratios for capital, leverage and TLAC.
Our capital position remains strong and our capital, leverage and TLAC ratios remain well above OSFI regulatory targets:
Regulatory capital, TLAC available, RWA and capital, leverage and TLAC ratios
Table 63
As at
(Millions of Canadian dollars, except percentage amounts)
October 31
2025
October 31
2024
Capital
(1)
CET1 capital
$
98,748
$
88,936
Tier 1 capital
110,393
97,952
Total capital
122,399
110,487
Risk-weighted assets (RWA) used in calculation of capital ratios
(1)
Credit risk
$
590,306
$
548,809
Market risk
41,506
33,930
Operational risk
98,413
89,543
Total RWA
$
730,225
$
672,282
Capital ratios and Leverage ratio
(1)
CET1 ratio
13.5%
13.2%
Tier 1 capital ratio
15.1%
14.6%
Total capital ratio
16.8%
16.4%
Leverage ratio
4.4%
4.2%
Leverage ratio exposure
$ 2,491,090
$ 2,344,228
TLAC available and ratios
(2)
TLAC available
$
230,385
$
196,659
TLAC ratio
31.5%
29.3%
TLAC leverage ratio
9.2%
8.4%
(1)
Capital, RWA, and capital ratios are calculated using OSFI’s CAR guideline and the Leverage ratio is calculated using OSFI’s LR guideline.
Both the CAR guideline and LR guideline are based on the Basel III framework.
(2)
TLAC available and TLAC ratios are calculated using OSFI’s TLAC guideline. The TLAC standard is applied at the resolution entity level
which for us is deemed to be Royal Bank of Canada and its subsidiaries. A resolution entity and its subsidiaries are collectively called a
resolution group. The TLAC ratio and TLAC leverage ratio are calculated using TLAC available as a percentage of total RWA and leverage
exposure, respectively.
Regulatory capital and TLAC available
Table 64
As at
(Millions of Canadian dollars)
October 31
2025
October 31
2024
CET1 capital: instruments and reserves and regulatory adjustments
Directly issued qualifying common share capital (and equivalent for
non-joint stock companies) plus related stock surplus
$
21,085
$
21,243
Retained earnings
96,606
88,317
Contractual service margins regulatory adjustment
1,279
1,526
Accumulated other comprehensive income (and other reserves)
9,726
8,498
Common share capital issued by subsidiaries and held by third parties
(amount allowed in group CET1)
14
11
Regulatory adjustments applied to CET1 under Basel III
(29,962)
(30,659)
Common Equity Tier 1 capital (CET1)
$
98,748
$
88,936
Additional Tier 1 capital: instruments and regulatory adjustments
Directly issued qualifying Additional Tier 1 instruments plus related stock
surplus
$
11,643
$
9,014
Additional Tier 1 instruments issued by subsidiaries and held by third
parties (amount allowed in group AT1)
2
2
Additional Tier 1 capital (AT1)
$
11,645
$
9,016
Tier 1 capital (T1 = CET1 + AT1)
$
110,393
$
97,952
Tier 2 capital: instruments and provisions and regulatory adjustments
Directly issued qualifying Tier 2 instruments plus related stock surplus
$
11,404
$
11,412
Tier 2 instruments issued by subsidiaries and held by third parties
(amount allowed in group Tier 2)
4
3
Collective allowance
598
1,120
Tier 2 capital (T2)
$
12,006
$
12,535
Total capital (T1 + T2)
$
122,399
$
110,487
External TLAC: instruments and regulatory adjustments
External TLAC instruments
$
108,492
$
85,008
Amortized portion of T2 instruments where remaining maturity > 1 year
–
1,670
Regulatory adjustments applied to TLAC under Basel III
(506)
(506)
TLAC available (Total capital + External TLAC)
$
230,385
$
196,659
114
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
2025 vs. 2024
11 bps
Net credit
migration
Risk
parameter
changes
(8) bps
(10) bps
(22) bps
(41) bps
(68) bps
U.S rating
downgrade
(2) bps
Other
Share
repurchases
RWA growth
(3)
Fair value
OCI
adjustments
Continuity of CET1 ratio (
Basel III
)
(134) bps
Dividends
(2)
303 bps
Net income
(2)
October 31,
2024
(1)
13.5%
13.2%
October 31,
2025
(1)
(1)
Represents rounded figures.
(2)
Represents net internal capital generation of $11.4 billion or 169 bps consisting of Net income available to shareholders less common and preferred share
dividends and distributions on other equity instruments.
(3)
Excludes the impact of foreign exchange translation (included in Other), net credit migration, U.S. rating downgrade and risk parameter changes.
Our CET1 ratio was 13.5%, up 30 bps from last year, primarily reflecting net internal capital generation and favourable impact of
fair value OCI adjustments, partially offset by higher RWA and share repurchases.
Our Tier 1 capital ratio of 15.1% was up 50 bps, reflecting net issuance of Additional Tier 1 instruments as well as the factors
noted under the CET1 ratio.
Our Total capital ratio of 16.8% was up 40 bps, primarily reflecting the factors noted above under the Tier 1 capital ratio.
Our Leverage ratio of 4.4% was up 20 bps, primarily due to net internal capital generation and net issuance of Additional Tier 1
instruments, partially offset by growth in leverage exposures and share repurchases.
Total leverage exposures increased by $147 billion, driven by growth in securities, loans and undrawn commitments,
partially offset by lower repo-style transactions and due from banks.
Our TLAC ratio of 31.5% was up 220 bps, mainly reflecting a favourable impact from a net increase in eligible external TLAC
instruments, net internal capital generation and net issuance of Additional Tier 1 instruments. These factors were partially offset
by higher RWA.
Our TLAC leverage ratio of 9.2% was up 80 bps, reflecting a favourable impact from a net increase in eligible external TLAC
instruments.
External TLAC instruments include long-term debt subject to conversion under the Bail-in regime. For further details, refer to
Deposit and funding profile in the Liquidity and funding risk section.
Basel III RWA
OSFI requires banks to meet minimum risk-based capital requirements for exposures to credit risk, operational risk, and where
they have significant trading activity, market risk. RWA is calculated for each of these risk types and added together to
determine total RWA. In addition, a minimum capital floor requirement must be maintained as prescribed under OSFI’s CAR
guidelines which is currently set to 67.5% of RWA as calculated under current Basel III standardized credit risk, market and
operational risk approaches as defined in the CAR guidelines. If the capital requirement is less than the required threshold, a
floor adjustment to RWA must be applied to the reported RWA as prescribed by OSFI’s CAR guidelines.
On February 12, 2025, OSFI announced an indefinite delay to increases in the capital floor factor prescribed in its CAR
guideline and maintained the current 67.5% of RWA (as calculated using only the SA for credit, market and operational risk).
OSFI committed to providing at least two years notice to affected banks prior to resuming increases in the capital floor.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
115
Total capital risk-weighted assets
Table 65
2025
2024
Average
of risk-
weights
(2)
Risk-weighted assets All-in Basis
As at October 31 (Millions of Canadian dollars,
except percentage amounts)
Exposure
(1)
Standardized
approach
Advanced
approach
(A-IRB)
Foundation
approach
(F-IRB)
Other
Total
Total
Credit risk
Lending-related and other
Residential mortgages
$
647,159
9%
$
4,282
$
54,138
$
–
$
–
$
58,420
$
51,928
Other retail (personal, credit
cards and small business
treated as retail)
220,490
32%
5,401
64,729
–
–
70,130
62,679
Business (corporate,
commercial, medium-sized
enterprises and non-bank
financial institutions)
585,507
50%
64,610
129,972
96,927
–
291,509
282,595
Sovereign (government)
422,984
4%
2,151
15,046
–
–
17,197
14,116
Bank
59,287
43%
12,659
–
12,640
–
25,299
19,231
Total lending-related and other
$ 1,935,427
24%
$
89,103
$ 263,885
$ 109,567
$
–
$ 462,555
$
430,549
Trading-related
Repo-style transactions
$ 1,424,011
1%
$
156
$
369
$
8,720
$
80
$
9,325
$
8,528
Derivatives – including CVA
162,136
24%
636
2,269
15,279
20,784
38,968
36,704
Total trading-related
$ 1,586,147
3%
$
792
$
2,638
$
23,999
$
20,864
$
48,293
$
45,232
Total lending-related and other
and trading-related
$ 3,521,574
15%
$
89,895
$ 266,523
$ 133,566
$
20,864
$ 510,848
$
475,781
Bank book equities
7,481
198%
14,828
–
–
–
14,828
12,079
Securitization exposures
93,423
17%
9,594
6,704
–
–
16,298
15,181
Other assets
37,770
128%
n.a.
n.a.
n.a.
48,332
48,332
45,768
Total credit risk
$ 3,660,248
16%
$ 114,317
$ 273,227
$ 133,566
$
69,196
$ 590,306
$
548,809
Market risk
Interest rate
$
4,673
$
4,673
$
1,956
Equity
3,964
3,964
3,656
Foreign exchange
2,698
2,698
2,787
Commodities
1,136
1,136
1,787
Credit
10,671
10,671
8,374
Default risk charge
13,162
13,162
10,898
Other
(3)
5,202
5,202
4,472
Total market risk
$
41,506
$
41,506
$
33,930
Operational risk
$
98,413
$
98,413
$
89,543
Total risk-weighted assets
$ 3,660,248
$ 254,236
$ 273,227
$ 133,566
$
69,196
$ 730,225
$
672,282
(1)
Total exposure represents exposure at default (EAD) which is the expected gross exposure upon the default of an obligor. This amount excludes any allowance against
impaired loans or partial write-offs and does not reflect the impact of credit risk mitigation.
(2)
Represents the average of counterparty risk weights within a particular category.
(3)
Represents the market risk RWA for the residual risk add-on charge under the standardized approach and the capital surcharge for movements between the trading book
and banking book.
n.a.
not applicable
2025 vs. 2024
Total RWA was up $58 billion from last year, mainly due to business growth, net credit migration, the impact of a U.S. rating
downgrade and foreign exchange translation. Business growth primarily reflects higher retail and corporate lending, as well as
operational risk from higher revenues and trading-related activities. In our CET1 ratio, the impact of foreign exchange translation
on RWA is largely mitigated with economic hedges.
116
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Selected capital management activity
Selected capital management activity
Table 66
For the year ended October 31, 2025
(Millions of Canadian dollars, except number of shares)
Issuance or
redemption date
Number of
shares
(000s)
Amount
Tier 1 capital
Common shares activity
Issued in connection with share-based
compensation plans
(1)
796
$
77
Purchased for cancellation
(2)
(15,241)
(227)
Issuance of LRCNs Series 5
(2), (3), (4)
November 1, 2024
1,000
1,396
Redemption of preferred shares, Series BD
(2), (3)
May 24, 2025
(24,000)
(600)
Issuance of LRCNs Series 6
(2), (3), (4)
June 11, 2025
1,250
1,708
Issuance of LRCNs Series 7
(2), (3), (4)
September 23, 2025
1,350
1,869
Redemption of LRCNs Series 1
(2), (3), (4)
October 24, 2025
(1,750)
(1,750)
Tier 2 capital
Redemption of December 23, 2029 subordinated
debentures
(3), (5)
December 23, 2024
$ (1,500)
Issuance of February 4, 2035 subordinated
debentures
(3), (5)
January 29, 2025
1,500
Redemption of June 30, 2030 subordinated
debentures
(3), (5)
June 30, 2025
(1,250)
Issuance of July 3, 2035 subordinated
debentures
(3), (5)
July 3, 2025
1,250
Issuance of July 17, 2035 subordinated
debentures
(3), (5)
July 17, 2025
241
(1)
Amounts include cash received for stock options exercised during the period and fair value adjustments to stock options.
(2)
For further details, refer to Note 19 of our 2025 Annual Consolidated Financial Statements.
(3)
Non-Viability Contingent Capital (NVCC) instruments.
(4)
For the LRCNs, the number of shares represents the number of notes issued.
(5)
For further details, refer to Note 18 of our 2025 Annual Consolidated Financial Statements.
On June 10, 2024, we announced a normal course issuer bid (NCIB) to purchase up to 30 million of our common shares. This NCIB
was completed on June 11, 2025, with 8,957 thousand common shares repurchased and cancelled at a total cost of approximately
$1,510 million.
On June 10, 2025, we announced an NCIB to purchase up to 35 million of our common shares, commencing on June 12, 2025
and continuing until June 11, 2026, or such earlier date as we complete the repurchase of all shares permitted under the bid.
Since the inception of this NCIB, the total number of common shares repurchased and cancelled was approximately
7,171 thousand, at a cost of approximately $1,398 million.
In 2025, the total number of common shares repurchased and cancelled under our NCIB programs was approximately
15 million. The total cost of the shares repurchased was $2,768 million.
We determine the amount and timing of purchases under the NCIB, subject to prior consultation with OSFI. Purchases may
be made through the TSX, the NYSE and other designated exchanges and alternative Canadian trading systems. The price paid
for repurchased shares is the prevailing market price at the time of acquisition.
On November 1, 2024, we issued US$1,000 million of LRCN Series 5 at a price of US$1,000 per note. The LRCN Series 5 bear interest
at a fixed rate of 6.35% per annum until November 24, 2034. Thereafter, the interest rate on the LRCN Series 5 will reset every five
years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.257% until their maturity on November 24, 2084.
On December 23, 2024, we redeemed all $1,500 million of our outstanding NVCC 2.88% subordinated debentures due
December 23, 2029 for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.
On January 29, 2025, we issued $1,500 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of
4.279% per annum until February 4, 2030, and at the Daily Compounded Canadian Overnight Repo Rate Average (CORRA) plus
1.45% thereafter until their maturity on February 4, 2035.
On May 24, 2025, we redeemed all 24 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred
Shares Series BD at a price of $25 per share.
On June 11, 2025, we issued US$1,250 million of LRCN Series 6 at a price of US$1,000 per note. The LRCN Series 6 bear interest
at a fixed rate of 6.75% per annum until August 24, 2030. Thereafter, the interest rate on the LRCN Series 6 will reset every five
years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.815% until their maturity on August 24, 2085.
On June 30, 2025, we redeemed all $1,250 million of our outstanding NVCC 2.088% subordinated debentures due June 30, 2030
for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.
On July 3, 2025, we issued $1,250 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of
4.214% per annum until July 3, 2030, and at the Daily Compounded CORRA plus 1.51% thereafter until their maturity on July 3, 2035.
On July 17, 2025, we issued ¥26,000 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of
1.963% per annum until July 17, 2030, and at the 5-Year Tokyo Overnight Average Rate mid-swap rate plus 1.02% thereafter until
their maturity on July 17, 2035.
On September 23, 2025, we issued US$1,350 million of LRCN Series 7 at a price of US$1,000 per note. The LRCN Series 7 bear
interest at a fixed rate of 6.50% per annum until November 24, 2035. Thereafter, the interest rate on the LRCN Series 7 will reset
every five years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.462% until their maturity on
November 24, 2085.
On October 24, 2025, we redeemed all $1,750 million of our issued and outstanding Non-Cumulative 5-Year Fixed Rate Reset
First Preferred Shares Series BQ (Series BQ) at a price of $1,000 per share. As a result of the redemption of the Series BQ, we
automatically redeemed all $1,750 million of our outstanding NVCC 4.50% LRCN Series 1 on the same date, for 100% of their
principal amount plus accrued interest to, but excluding, the redemption date.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
117
On October 24, 2025, we announced our intention to redeem all 6 million of our issued and outstanding Non-Cumulative
Fixed Rate First Preferred Shares Series BH and all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First
Preferred Shares Series BI, at a price of $25 per share, which will occur on December 8, 2025.
On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First
Preferred Shares Series BF at a price of $25 per share.
Dividends
Our common share dividend policy reflects our earnings outlook, payout ratio objective and the need to maintain adequate
levels of capital to support business plans. In 2025, our dividend payout ratio was 43%. Common share dividends paid during the
year were $9 billion.
Selected share data
(1)
Table 67
2025
2024
(Millions of Canadian dollars, except number of shares
and as otherwise noted)
Number of
shares
(000s)
Amount
Dividends
declared
per share
Number of
shares (000s)
Amount
Dividends
declared
per share
Common shares issued
1,400,635
$ 20,863
$
6.04
1,415,080
$ 21,013
$
5.60
Treasury shares – common shares
(2)
(521)
(110)
(576)
(61)
Common shares outstanding
1,400,114
$ 20,753
1,414,504
$ 20,952
Stock options and awards
Outstanding
7,490
7,375
Exercisable
3,522
3,212
Available for grant
16,381
2,291
First preferred shares issued
Non-cumulative Series BD
(3), (4), (5)
–
–
0.80
24,000
600
0.80
Non-cumulative Series BF
(3), (4), (6)
12,000
300
0.75
12,000
300
0.75
Non-cumulative Series BH
(4), (7)
6,000
150
1.23
6,000
150
1.23
Non-cumulative Series BI
(4), (7)
6,000
150
1.23
6,000
150
1.23
Non-cumulative Series BO
(3), (4)
14,000
350
1.47
14,000
350
1.40
Non-cumulative Series BT
(3), (4), (6)
750
750
4.20%
750
750
4.20%
Non-cumulative Series BU
(3), (4), (6)
750
750
7.408%
750
750
7.408%
Non-cumulative Series BW
(3), (4), (6)
600
600
6.698%
600
600
6.698%
Other equity instruments issued
LRCNs Series 1
(3), (4), (8), (9), (10)
–
–
4.50%
1,750
1,750
4.50%
LRCNs Series 2
(3), (4), (8), (9), (11)
1,250
1,250
4.00%
1,250
1,250
4.00%
LRCNs Series 3
(3), (4), (8), (9), (11)
1,000
1,000
3.65%
1,000
1,000
3.65%
LRCNs Series 4
(3), (4), (8), (9), (11)
1,000
1,370
7.50%
1,000
1,370
7.50%
LRCNs Series 5
(3), (4), (8), (9), (11)
1,000
1,396
6.35%
–
–
–
LRCNs Series 6
(3), (4), (8), (9), (11)
1,250
1,708
6.75%
–
–
–
LRCNs Series 7
(3), (4), (8), (9), (11)
1,350
1,869
6.50%
–
–
–
Preferred shares and other equity instruments
issued
46,950
$ 11,643
69,100
$
9,020
Treasury instruments – preferred shares and other
equity instruments
(2)
35
32
13
11
Preferred shares and other equity instruments
outstanding
46,985
$ 11,675
69,113
$
9,031
Dividends on common shares
$
8,502
$
7,916
Dividends on preferred shares and distributions on
other equity instruments
(12)
494
322
(1)
For further details, refer to Note 19 of our 2025 Annual Consolidated Financial Statements.
(2)
Positive amounts represent a short position and negative amounts represent a long position.
(3)
Dividend rate will reset every five years.
(4)
NVCC instruments.
(5)
On May 24, 2025, we redeemed all 24 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BD at a price of $25 per share.
(6)
On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF at a price of
$25 per share.
(7)
On October 24, 2025, we announced our intention to redeem all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BH and
all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BI, at a price of $25 per share.
(8)
The dividends declared per share represent the per annum dividend rate applicable to the shares issued as at the reporting date.
(9)
For LRCN Series, the number of shares represent the number of notes issued and the dividends declared per share represent the annual interest rate percentage
applicable to the notes issued as at the reporting date.
(10)
In connection with the redemption of LRCN Series 1, on October 24, 2025, we redeemed all $1,750 million of our issued and outstanding Non-Cumulative 5-Year Fixed Rate
Reset First Preferred Shares Series BQ.
(11)
In connection with the issuance of LRCN Series 2, on November 2, 2020, we issued $1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series
BR (Series BR); in connection with the issuance of LRCN Series 3, on June 8, 2021, we issued $1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred
Shares Series BS (Series BS); in connection with the issuance of LRCN Series 4 on April 24, 2024, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset
First Preferred Shares Series BV (Series BV); in connection with the issuance of LRCN Series 5 on November 1, 2024, we issued US$1,000 million of Non-Cumulative 5-Year
Fixed Rate Reset First Preferred Shares Series BX (Series BX); in connection with the issuance of LRCN Series 6 on June 11, 2025, we issued US$1,250 million of Non-
Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BY (Series BY) ); and in connection with the issuance of LRCN Series 7 on September 23, 2025, we issued
US$1,350 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BZ (Series BZ). The Series BR and BS preferred shares were issued at a price of
$1,000 per share and the Series BV, BX, BY and BZ preferred shares were issued at a price of US$1,000 per share. The Series BR, BS, BV, BX, BY and BZ preferred shares
were issued to a consolidated trust to be held as trust assets in connection with the LRCN series. For further details, refer to Note 19 of our 2025 Annual Consolidated
Financial Statements.
(12)
Excludes distributions to non-controlling interests.
As at November 28, 2025, the number of outstanding common shares was 1,400,211,987, net of treasury shares held of 278,225, and
the number of stock options and awards was 7,458,856.
118
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
NVCC provisions require the conversion of the capital instrument into a variable number of common shares in the event
that OSFI deems a bank to be non-viable or a federal or provincial government in Canada publicly announces that a bank has
accepted or agreed to accept a capital injection. If a NVCC trigger event were to occur, our NVCC capital instruments as at
October 31, 2025, which were the preferred shares Series BF, BH, BI, BO, BT, BU, BW, LRCN Series 2, LRCN Series 3, LRCN Series 4,
LRCN Series 5, LRCN Series 6, LRCN Series 7 and subordinated debentures due on January 27, 2026, January 28, 2033,
November 3, 2031, May 3, 2032, February 1, 2033, April 3, 2034, August 8, 2034, February 4, 2035, July 3, 2035 and July 17, 2035,
would be converted into common shares pursuant to an automatic conversion formula with a conversion price based on the
greater of: (i) a contractual floor price of $5.00 (subject to adjustment in certain circumstances), and (ii) the current market
price of our common shares at the time of the trigger event (10-day volume weighted average). Based on a floor price of $5.00
and including an estimate for accrued dividends and interest, these NVCC capital instruments would convert into a maximum of
approximately 7 billion common shares, in aggregate, which would represent a dilution impact of 82.4% based on the number of
common shares outstanding as at October 31, 2025.
Attributed capital
Our methodology for allocating capital to our business segments is based on the Basel III regulatory capital requirements, with
the exception of Insurance. Our attributed capital methodology incorporates leverage requirements to allocate capital to our
business segments. Effective the first quarter of 2025, we increased our capital attribution rates to our business segments. Our
Insurance platform continued to allocate capital based on fully diversified economic capital in fiscal 2025. Effective the first
quarter of 2026, we plan to update our methodology for allocating capital to Insurance to more closely align with legal entity
capital requirements. Risk-based capital attribution provides a uniform base for performance measurement among business
segments, which compares to our overall corporate return objective and facilitates management decisions in resource
allocation in conjunction with other factors.
The calculation and attribution of capital involves a number of assumptions and judgments by management which are
monitored to ensure that the regulatory capital framework remains comprehensive and consistent. The models are
benchmarked to leading industry practices via participation in surveys, reviews of methodologies and ongoing interaction with
external risk management industry professionals.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
119
For additional information on the risks highlighted below, refer to the Risk management section.
Royal Bank of
Canada
Attributed capital
(1)
Credit
47%
Market
4
Operational
8
Leverage
ratio
exposure
16
Goodwill
and other
intangibles
21
Other
(2)
4
Personal Banking
RWA (C$ millions)
(1)
Credit
$127,791
Market
284
Operational
32,357
$160,433
RWA
(C$ millions)
(1)
Credit
$125,299
Market
11
Operational
11,895
$137,205
RWA
(C$ millions)
(1)
Credit
$98,277
Market
659
Operational
32,596
$131,532
RWA
(C$ millions)
(1), (3)
Credit
$15,894
Market
0
Operational
0
$15,894
RWA
(C$ millions)
(1)
Credit
$208,877
Market
39,965
Operational
21,279
$270,121
Commercial
Banking
Insurance
Capital Markets
Wealth
Management
Attributed capital
(1)
Credit
42
%
Market
0
Operational
11
Leverage
ratio
exposure
15
Goodwill
and other
intangibles
28
Other
(2)
4
Attributed capital
(1)
Credit
61%
Market
0
Operational
6
Leverage
ratio
exposure
8
Goodwill
and other
intangibles
23
Other
(2)
2
Attributed capital
(1)
Credit
38%
Market
0
Operational
12
Leverage
ratio
exposure
5
Goodwill
and other
intangibles
39
Other
(2)
6
Attributed capital
(1)
Based on Economic
Capital:
Other
(2)
100%
Attributed capital
(1)
Credit
51%
Market
10
Operational
5
Leverage
ratio
exposure
26
Goodwill
and other
intangibles
6
Other
(2)
2
RWA (C$ millions)
(1)
Credit
$590,306
Market
41,506
Operational
98,413
$730,225
Leverage
ratio
exposure
(C$ million)
(1)
$2,491,090
(1)
RWA and Leverage ratio exposure amount represents period-end spot balances. Attributed Capital represents average balances.
(2)
Other includes (a) non-Insurance segments: equity required to underpin Basel III regulatory capital deductions other than Goodwill and other intangibles and
(b) Insurance segment: equity required to underpin risks associated with the business.
(3)
Insurance RWA represents our investments in the insurance subsidiaries capitalized at the regulatory prescribed rate as required under the OSFI CAR guideline.
Other considerations affecting capital
Capital treatment for equity investments in other entities is determined by a combination of accounting and regulatory
guidelines based on the size or nature of the investment. Three broad approaches apply as follows:
•
Consolidation: entities which we control are consolidated on our Consolidated Balance Sheets.
•
Deduction: certain holdings are deducted from our regulatory capital. These include all unconsolidated “substantial
investments”, as defined by the
Bank Act
(Canada) in the capital of financial institutions, as well as all investments in
insurance subsidiaries and certain equity investments in funds.
•
Risk-weighting: equity investments that are not deducted from capital are risk-weighted at a prescribed rate for
determination of capital charges.
Regulatory capital approach for securitization exposures
Our securitization regulatory capital approach reflects Chapter 6 of OSFI’s CAR guidelines. For our securitization exposures, we
use an internal assessment approach (IAA) for exposures related to our ABCP business, and as per regulatory guidelines for
other securitization exposures we use a combination of approaches including an external ratings-based approach, an IRB
approach and a standardized approach.
While our IAA rating methodologies are based in large part on criteria that are published by External Credit Assessment
Institutions (ECAIs) such as S&P and therefore are similar to the methodologies used by these institutions, they are not
identical. Our ratings process includes a comparison of the available credit enhancement in a securitization structure to a
stressed level of projected losses. The stress level used is determined by the desired risk profile of the transaction. As a result,
we stress the cash flows of a given transaction at a higher level in order to achieve a higher rating. Conversely, transactions that
only pass lower stress levels achieve lower ratings.
120
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Many of the other securitization exposures (non-ABCP) carry external ratings and we use the external ratings-based
approach, otherwise will follow the SA, for determining the proper capital allocation for these positions. We periodically
compare our own ratings to ECAIs ratings to ensure that the ratings provided by ECAIs are reasonable.
GRM is responsible for providing risk assessments for capital purposes in respect of all our banking book exposures. GRM is
independent of the business originating the securitization exposures and performs its own analysis, sometimes in conjunction
with but always independent of the applicable business. GRM has developed asset class specific criteria guidelines which
provide the rating methodologies for each asset class. The guidelines are reviewed periodically and are subject to the ratings
replication process mandated by Pillar I of the Basel rules.
Regulatory developments
Revisions to the CAR guidelines
On September 11, 2025, OSFI released a revised CAR guideline. The revised guideline introduces a new requirement for applying
PD and LGD floors for U.S. government sponsored entities, maintaining current income producing real estate identification rules
and providing an 18-month delay for combined loan products parameter changes sought by OSFI. Credit valuation adjustment
(CVA) and standardized approach for measuring counterparty credit risk adjustments exempt client-cleared derivatives and
allow exclusions for certain collateral. Market risk updates reduce default risk charge risk weights for certain sovereign
exposures and eligible multilateral development banks to 0%, with further guideline reviews of IRB coverage requirements, risk
weights and exemptions pending. The CAR guideline was effective for us on November 1, 2025, and the impact is not expected to
be material.
Accounting and control matters
Critical accounting policies and estimates
Application of critical accounting policies, judgments, estimates and assumptions
Our material accounting policies are described in Note 2 of our 2025 Annual Consolidated Financial Statements. Certain of these
policies and related estimates are recognized as critical because they require us to make particularly subjective or complex
judgments about matters that are inherently uncertain and significantly different amounts could be reported under different
conditions or using different assumptions. Our critical accounting judgments, estimates and assumptions relate to the fair value
of financial instruments, allowance for credit losses (ACL), goodwill and other intangible assets, employee benefits,
consolidation of structured entities, derecognition of financial assets, application of the effective interest method, provisions,
insurance and reinsurance contracts, and income taxes. Our critical accounting policies and estimates have been reviewed and
approved by our Audit Committee, in consultation with management, as part of their review and approval of our material
accounting policies, judgments, estimates and assumptions.
Fair value of financial instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. We determine fair value by incorporating factors
that market participants would consider in setting a price, including commonly accepted valuation approaches.
We give priority to third-party pricing services and valuation techniques with the highest and most consistent accuracy. The level
of accuracy is determined over time by comparing third-party price values to traders’ or system values, other pricing service values
and, when available, actual trade data. Other valuation techniques are used when a price or quote is not available. Some valuation
processes use models to determine fair value. We have a systematic and consistent approach to control the use of models.
In determining fair value, a hierarchy is used which prioritizes the inputs to valuation techniques. The fair value hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). Determination of fair value based on this hierarchy requires the use of observable market data
whenever available. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the
ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets or liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not active, and model inputs that are either observable,
or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 inputs include one
or more inputs that are unobservable and significant to the fair value of the asset or liability. Unobservable inputs are used to
measure fair value to the extent that observable inputs are not available at the measurement date. The availability of inputs for
valuation may affect the selection of valuation techniques. The classification of a financial instrument in the fair value hierarchy for
disclosure purposes is based upon the lowest level of input that is significant to the measurement of fair value.
Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing
other relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation
and interpolation techniques. For more complex or illiquid instruments, significant judgment is required in the determination of the
model used, the selection of model inputs, and in some cases, the application of valuation adjustments to the model value or quoted
price for inactively traded financial instruments. The selection of model inputs may be subjective and the inputs may be
unobservable. Unobservable inputs are inherently uncertain as there is little or no market data available from which to determine the
level at which the transaction would occur under normal business circumstances. Appropriate parameter uncertainty and market risk
valuation adjustments for such inputs and other model risk valuation adjustments are assessed in all such instances.
Valuation adjustments may be subjective as they require significant judgment in the input selection, such as implied PD and
recovery rate, and are intended to arrive at a fair value that is determined based on assumptions that market participants would
use in pricing the financial instrument. The ultimate realized price for a transaction may differ from its recorded fair value
estimated using management judgment.
For further information on the fair value of financial instruments, refer to Notes 2 and 3 of our 2025 Annual Consolidated
Financial Statements.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
121
Allowance for credit losses
An ACL is established for all financial assets, except for financial assets classified or designated as FVTPL and equity securities
designated as FVOCI, which are not subject to impairment assessment. Assets subject to impairment assessment include loans,
debt securities, interest-bearing deposits with banks, accounts and accrued interest receivable, and finance and operating lease
receivables. Off-balance sheet items subject to impairment assessment include financial guarantees and undrawn loan
commitments.
We measure the ACL on each balance sheet date according to a three-stage expected credit loss impairment model:
•
Performing financial assets
•
Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant
increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses
expected to result from defaults occurring over the 12 months following the reporting date.
•
Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss
allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset.
•
Impaired financial assets
•
Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit
losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying
amount of the asset, net of the loss allowance, rather than on its gross carrying amount.
The ACL is a discounted probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant
time horizon. For loan commitments, credit loss estimates consider the portion of the commitment that is expected to be drawn
over the relevant time period. For financial guarantees, credit loss estimates are based on the expected payments required
under the guarantee contract. For finance lease receivables, credit loss estimates are based on cash flows consistent with the
cash flows used in measuring the lease receivable.
The ACL represents an unbiased estimate of expected credit losses on our financial assets as at the balance sheet date.
Judgment is required in making assumptions and estimations when calculating the ACL, including movements between the three
stages, the inclusion of forward-looking information and the application of expert credit judgment. The underlying assumptions
and estimates may result in changes to the provisions from period to period that significantly affect our results of operations.
For further information on ACL, refer to Notes 2, 4 and 5 of our 2025 Annual Consolidated Financial Statements.
Goodwill and other intangible assets
We allocate goodwill to groups of cash-generating units (CGU). Goodwill is not amortized and is tested for impairment on an
annual basis, or more frequently if there are objective indications of impairment. We test for impairment by comparing the
recoverable amount of a CGU with its carrying amount.
We estimate the value in use and fair value less costs of disposal of our CGUs primarily using a discounted cash flow
method which incorporates each CGU’s internal forecasts of revenues and expenses. Significant management judgment is
applied in the determination of expected future cash flows (uncertainty in timing and amount), discount rates (based on
CGU-specific risks) and terminal growth rates. CGU-specific risks include country risk, business/operational risk, geographic risk
(including political risk, devaluation risk and government regulation), currency risk and price risk (including product pricing risk
and inflation). If the future cash flows and other assumptions in future periods deviate significantly from the current amounts
used in our impairment testing, the value of our goodwill could become impaired.
We assess for indicators of impairment of our other intangible assets at each reporting period. If there is an indication that
an asset may be impaired, an impairment test is performed by comparing the carrying amount of the intangible asset to its
recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the
recoverable amount of the CGU to which the asset belongs. Significant judgment is applied in estimating the useful lives and
recoverable amounts of our intangible assets and assessing whether certain events or circumstances constitute objective
evidence of impairment.
For further details, refer to Notes 2 and 11 of our 2025 Annual Consolidated Financial Statements.
Employee benefits
We sponsor a number of benefit programs for eligible employees, including registered pension plans, supplemental pension
plans, health, dental, disability and life insurance plans.
The calculation of defined benefit expenses and obligations depends on various assumptions such as discount rates,
healthcare cost trend rates, projected salary increases, retirement age, and mortality and termination rates. Discount rates are
determined using a yield curve based on spot rates from high quality corporate bonds. All other assumptions are determined by
us and are reviewed by the actuaries. Actual experience that differs from the actuarial assumptions will affect the amounts of
benefit obligations and remeasurements that we recognize. The weighted average assumptions used and the sensitivity of key
assumptions are presented in Note 16 of our 2025 Annual Consolidated Financial Statements.
Consolidation of structured entities
Subsidiaries are those entities, including structured entities, over which we have control. We control an entity when we are
exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns
through our power over the investee. We have power over an entity when we have existing rights that give us the current ability
to direct the activities that most significantly affect the entity’s returns (relevant activities). Power may be determined on the
basis of voting rights or, in the case of structured entities, other contractual arrangements.
We are not deemed to control an entity when we exercise power over an entity as the agent of a third party or parties. In
determining whether we are acting as an agent, we consider the overall relationship between us, the investee and other parties
to the arrangement with respect to the following factors: (i) the scope of our decision-making power; (ii) the rights held by other
parties; (iii) the remuneration to which we are entitled; and (iv) our exposure to variability of returns.
122
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
The determination of control is based on the current facts and circumstances and is continuously assessed. In some
circumstances, different factors and conditions may indicate that various parties control an entity depending on whether those
factors and conditions are assessed in isolation or in totality. Significant judgment is applied in determining whether we control
an entity, specifically, assessing whether we have substantive decision-making rights over the relevant activities and whether
we are exercising our power as a principal or an agent.
We consolidate all subsidiaries from the date we obtain control, and cease consolidation when an entity is no longer
controlled by us. Our consolidation conclusions affect the classification and amount of assets, liabilities, revenues and
expenses reported in our Consolidated Financial Statements.
For further details, refer to Note 8 of our 2025 Annual Consolidated Financial Statements.
Derecognition of financial assets
We periodically enter into transactions in which we transfer financial assets such as loans or MBS to structured entities or trusts
that issue securities to investors. We derecognize the assets when our contractual rights to the cash flows from the assets have
expired; when we retain the rights to receive the cash flows of the assets but assume an obligation to pay those cash flows to a
third party subject to certain pass-through requirements; or when we transfer our contractual rights to receive the cash flows
and substantially all of the risks and rewards of the assets have been transferred. When we retain substantially all of the risks
and rewards of the transferred assets, the transferred assets are not derecognized from our Consolidated Balance Sheets and
are accounted for as secured financing transactions. When we neither retain nor transfer substantially all risks and rewards of
ownership of the assets, we derecognize the assets if control over the assets is relinquished. If we retain control over the
transferred assets, we continue to recognize the transferred assets to the extent of our continuing involvement. Management
judgment is applied in determining whether we have transferred or retained substantially all risk and rewards of ownership of
the transferred financial asset.
The majority of assets transferred under repurchase agreements, securities lending agreements, to our mortgage fund and
in our Canadian residential mortgage securitization transactions do not qualify for derecognition. As a result, we continue to
record the associated transferred assets on our Consolidated Balance Sheets and no gains or losses are recognized for those
securitization activities. Otherwise, a gain or loss is recognized on securitization by comparing the carrying amount of the
transferred asset with its fair value at the date of the transfer. For further information on derecognition of financial assets, refer
to Notes 2 and 7 of our 2025 Annual Consolidated Financial Statements.
Application of the effective interest method
Interest income and interest expense are generally recognized for all interest-bearing financial instruments using the effective
interest method. The effective interest rate is the rate that discounts estimated future cash flows over the expected life of the
financial asset or liability to the net carrying amount upon initial recognition. Significant judgment is applied in determining the
effective interest rate due to uncertainty in the timing and amounts of future cash flows.
Provisions
Provisions are liabilities of uncertain timing or amount and are recognized when we have a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation. Provisions are measured as the best estimate of the
consideration required to settle the present obligation at the reporting date. Significant judgment is required in determining
whether a present obligation exists and in estimating the probability, timing and amount of any outflows. We record provisions
related to litigation, asset retirement obligations and other items.
The forward-looking nature of these estimates requires us to use a significant amount of judgment in projecting the timing
and amount of future cash flows. We record our provisions on the basis of all available information at the end of the reporting
period and make adjustments on a quarterly basis to reflect current expectations. Should actual results differ from our
expectations, we may incur expenses in excess of the provisions recognized.
Insurance and reinsurance contracts
For insurance and reinsurance contracts measured using the general measurement method or variable fee approach, the
carrying amount of a group of contracts is measured as the sum of the fulfilment cash flows and CSM. The fulfilment cash flows
consist of the present value of future cash flows and a risk adjustment for non-financial risk, discounted using the current rates
as at the reporting date determined using the discount rate methodologies below. The estimates of future cash flows consider
probability-weighted scenarios and include all future cash flows that are within the contract boundary. The risk adjustment for
non-financial risk is estimated using the margin approach and represents the compensation that we require for bearing the
uncertainty about the amount and timing of cash flows that arise from non-financial risk as the insurance contract is fulfilled.
The measurement of the group of contracts requires the use of judgment in setting methodologies and assumptions for
morbidity, mortality, longevity, policy lapses and other policyholder behaviour, discount rates, policy dividends, and directly
attributable expenses, including acquisition expenses allocated using a systematic and rational method. Changes to the
underlying assumptions and estimates may have a significant effect on Non-interest income – Insurance service result and
Insurance investment result.
Discount rates used reflect the time value of money and are based on the characteristics of the insurance and reinsurance
contracts. Cash flows that vary based on the returns on underlying items are discounted at rates reflecting that variability. For
cash flows that do not vary based on the returns on underlying items, we predominantly apply the top-down approach in
determining discount rates. Under this approach, the discount rates for the observable periods are determined using yield
curves implied from a reference portfolio of assets adjusted to eliminate factors (market and credit risk of the financial assets)
that are not relevant to the insurance contracts. For unobservable periods, the discount rates are interpolated using the last
observable point and the ultimate discount rate that is composed of a risk-free rate and illiquidity premium. For a selected
portfolio, the bottom-up approach is applied in determining the discount rate, which uses a risk-free rate plus an illiquidity
premium to reflect the characteristics of the contracts. Management judgment is required in estimating the market and credit
risk factors and illiquidity premiums in determining the discount rates.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
123
For insurance contracts, the CSM represents the unearned profit (net inflows) for providing insurance coverage. For
reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. The CSM for insurance and
reinsurance contacts are released into income based on coverage units, which represent the quantity of service (insurance
coverage as well as investment-return and investment-related services) provided by a group of contracts and are determined by
considering the quantity of benefits provided under each contract and the expected coverage duration.
Refer to Note 2 of our 2025 Annual Consolidated Financial Statements for further information.
Income taxes
We are subject to income tax laws in various jurisdictions where we operate, and the complex tax laws are potentially subject to
different interpretations by us and the relevant taxation authority. Management judgment is applied in interpreting the relevant
tax laws, in assessing the probability of acceptance of our tax positions by the relevant tax authorities and in estimating the
expected timing and amount of the provision for current and deferred income taxes. A deferred tax asset or liability is
determined for each temporary difference based on the tax rates that are expected to be in effect in the period that the asset is
realized or the liability is settled, except for earnings related to our subsidiaries, branches, associates and interests in joint
ventures where the temporary differences will not reverse in the foreseeable future and we have the ability to control the timing
of reversal.
On a quarterly basis, we review whether it is probable that the benefits associated with our deferred tax assets will be
realized, using both positive and negative evidence. Refer to Note 21 of our 2025 Annual Consolidated Financial Statements for
further information.
Future changes in accounting policy and disclosure
Amendments to the Classification and Measurement of Financial Instruments
In May 2024, the IASB issued
Amendments to the Classification and Measurement of Financial Instruments
which amends IFRS 9
Financial Instruments
and IFRS 7
Financial Instruments: Disclosures
(the Amendments). The Amendments clarify the recognition
and derecognition of financial instruments and introduce an accounting policy option for financial liabilities settled through
electronic payment systems. The Amendments also clarify classification guidance for financial assets with contingent features
not directly related to changes in basic lending risks and introduce additional related disclosure requirements for financial
instruments with such contingent features. The Amendments will be effective for us on November 1, 2026 and will be applied
retrospectively with no restatement of comparative periods required. To manage the implementation of the Amendments, we
established a program to assess the impact on systems, processes and financial reporting. We continue to assess the impact of
adopting the Amendments on our Consolidated Financial Statements.
IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18)
In April 2024, the IASB issued IFRS 18, which sets out requirements for the presentation and disclosure of information in the
financial statements. IFRS 18 will replace IAS 1
Presentation of Financial Statements
and accompanies limited amendments to
other standards which will be effective upon the adoption of the new standard. The standard introduces new defined subtotals
to be presented in the Consolidated Statements of Income, disclosure of management-defined performance measures and
requirements for aggregation and disaggregation of information. This standard will be effective for us on November 1, 2027 and
will be applied retrospectively with restatement of comparative periods. To manage the transition to IFRS 18, we established a
program to assess the impact on systems, processes and financial reporting required for adoption. We continue to assess the
impact of adopting this standard on our Consolidated Financial Statements.
Controls and procedures
Disclosure controls and procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in reports filed or submitted under Canadian and U.S. securities laws is recorded, processed, summarized and reported
within the time periods specified under those laws and include controls and procedures that are designed to ensure that
information is accumulated and communicated to management, including the President and Chief Executive Officer, and the
Chief Financial Officer, to allow timely decisions regarding required disclosure.
As of October 31, 2025, management evaluated, under the supervision of and with the participation of the President and
Chief Executive Officer and the Chief Financial Officer, the effectiveness of our disclosure controls and procedures as defined
under rules adopted by the Canadian securities regulatory authorities and the U.S. SEC. Based on that evaluation, the President
and Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective
as of October 31, 2025.
Internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with IFRS. However, because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements on a timely basis. See Management’s Report
on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm.
There were no changes in our internal control over financial reporting during the year ended October 31, 2025 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
124
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Related party transactions
In the ordinary course of business, we provide normal banking services and operational services, and enter into other
transactions with associated and other related corporations, including our joint venture entities, on terms similar to those
offered to non-related parties. We grant loans to directors, officers and other employees at rates normally accorded to preferred
clients. In addition, we offer deferred share and other plans to non-employee directors, executives and certain other key
employees. For further information, refer to Notes 12 and 25 of our 2025 Annual Consolidated Financial Statements.
Supplementary information
Selected annual information
Table 68
(Millions of Canadian dollars, except per share amounts)
2025
2024
2023
Total revenue
$
66,605
$
57,344
$
51,464
Net income attributable to:
Shareholders
20,362
16,230
14,605
Non-controlling interest
7
10
7
$
20,369
$
16,240
$
14,612
Basic earnings per share
$
14.10
$
11.27
$
10.33
Diluted earnings per share
14.07
11.25
10.32
Dividends declared per common shares
6.04
5.60
5.34
Total assets
$ 2,325,006
$ 2,171,582
$ 2,006,531
Deposits
1,515,616
1,409,531
1,231,687
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
125
Net interest income on average assets and liabilities
Table 69
Average balances
Interest
Average rate
(Millions of Canadian dollars, except for percentage amounts)
2025
2024
2025
2024
2025
2024
Assets
Deposits with other banks
Canada
$
19,134
$
13,170
$
905
$
1,468
4.73%
11.15%
U.S.
88,197
74,409
3,782
3,906
4.29
5.25
Other International
8,568
7,527
674
748
7.87
9.94
115,899
95,106
5,361
6,122
4.63
6.44
Securities
Trading
203,740
176,632
8,126
7,927
3.99
4.49
Investment, net of applicable allowance
303,673
226,256
11,929
9,741
3.93
4.31
507,413
402,888
20,055
17,668
3.95
4.39
Asset purchased under reverse repurchase agreements and securities
borrowed
407,516
396,552
22,367
27,121
5.49
6.84
Loans
(1)
Canada
Retail
575,950
541,468
29,989
29,663
5.21
5.48
Wholesale
197,115
165,911
13,697
12,295
6.95
7.41
773,065
707,379
43,686
41,958
5.65
5.93
U.S.
174,680
159,046
7,971
8,362
4.56
5.26
Other International
61,370
51,263
4,385
3,720
7.15
7.26
1,009,115
917,688
56,042
54,040
5.55
5.89
Total interest-earning assets
2,039,943
1,812,234
103,825
104,951
5.09
5.79
Non-interest-bearing deposits with other banks
56,823
60,220
–
–
–
–
Other assets
301,656
236,003
–
–
–
–
Total assets
$ 2,398,422
$ 2,108,457
$ 103,825
$ 104,951
4.33%
4.98%
Liabilities and shareholders’ equity
Deposits
(2)
Canada
$
995,471
$
892,275
$
33,883
$
36,999
3.40%
4.15%
U.S.
180,477
155,928
6,326
6,377
3.51
4.09
Other International
116,666
83,069
4,608
3,880
3.95
4.67
1,292,614
1,131,272
44,817
47,256
3.47
4.18
Obligations related to securities sold short
47,454
35,826
2,988
2,766
6.30
7.72
Obligations related to assets sold under repurchase agreements and
securities loaned
400,611
374,099
21,820
25,479
5.45
6.81
Subordinated debentures
13,540
12,641
637
775
4.70
6.13
Other interest-bearing liabilities
25,853
25,166
563
722
2.18
2.87
Total interest-bearing liabilities
1,780,072
1,579,004
70,825
76,998
3.98
4.88
Non-interest-bearing deposits
203,498
185,758
–
–
–
–
Other liabilities
281,918
224,480
–
–
–
–
Total liabilities
$ 2,265,488
$ 1,989,242
$
70,825
$
76,998
3.13%
3.87%
Equity
$
132,934
$
119,215
n.a.
n.a.
n.a.
n.a.
Total liabilities and shareholders’ equity
$ 2,398,422
$ 2,108,457
$
70,825
$
76,998
2.95%
3.65%
Net interest income and margin
$ 2,398,422
$ 2,108,457
$
33,000
$
27,953
1.38%
1.33%
Net interest income and margin (average earning assets, net)
(3)
Canada
$ 1,209,193
$ 1,088,773
$
26,416
$
22,281
2.18%
2.05%
U.S.
584,814
526,059
5,092
4,268
0.87
0.81
Other International
245,936
197,401
1,492
1,404
0.61
0.71
Total
$ 2,039,943
$ 1,812,233
$
33,000
$
27,953
1.62%
1.54%
(1)
Interest income includes loan fees of $1,212 million (2024 – $1,165 million; 2023 – $1,149 million).
(2)
Deposits include personal chequing and savings deposits with average balances of $277 billion (2024 – $254 billion; 2023 – $250 billion), interest expense of $2,610 million
(2024 – $3,580 million; 2023 – $2,840 million) and average rates of 0.94% (2024 – 1.41%; 2023 – 1.14%). Deposits also include term deposits with average balances of
$790 billion (2024 – $701 billion; 2023 – $624 billion), interest expense of $31,680 million (2024 – $31,520 million; 2023 – $24,260 million) and average rates of 4.00%
(2024 – 4.50%; 2023 – 3.89%).
(3)
Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities.
n.a.
not applicable
126
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Change in net interest income
Table 70
2025 vs. 2024
2024 vs. 2023
Increase (decrease) due to
changes in
Increase (decrease) due to
changes in
(Millions of Canadian dollars)
Average
volume
(1)
Average
rate
(1)
Net change
Average
volume (1)
Average
rate (1)
Net change
Assets
Deposits with other banks
Canada
(2)
$
665
$
(1,228)
$
(563)
$
(55)
$
(175)
$
(230)
U.S.
(2)
724
(847)
(123)
(641)
583
(58)
Other international
(2)
103
(177)
(74)
(609)
166
(443)
Securities
Trading
1,217
(1,018)
199
1,056
(594)
462
Investment, net of applicable allowance
3,333
(1,145)
2,188
1,802
892
2,694
Asset purchased under reverse repurchase
agreements and securities borrowed
750
(5,504)
(4,754)
770
4,187
4,957
Loans
Canada
(2)
Retail
(2)
1,889
(1,563)
326
1,853
3,948
5,801
Wholesale
(2)
2,312
(910)
1,402
3,392
25
3,417
U.S.
(2)
822
(1,213)
(391)
26
1,445
1,471
Other international
(2)
733
(68)
665
36
(148)
(112)
Total interest income
$
12,548
$ (13,673)
$
(1,125)
$
7,630
$
10,329
$
17,959
Liabilities
Deposits
Canada
(2)
4,279
(7,394)
(3,115)
4,374
4,997
9,371
U.S.
(2)
1,004
(1,055)
(51)
73
921
994
Other international
(2)
1,569
(841)
728
(415)
626
211
Obligations related to securities sold short
898
(676)
222
(43)
(124)
(167)
Obligations related to assets sold under
repurchase agreements and securities loaned
1,806
(5,465)
(3,659)
1,265
3,781
5,046
Subordinated debentures
55
(193)
(138)
97
12
109
Other interest-bearing liabilities
20
(179)
(159)
(381)
(48)
(429)
Total interest expense
$
9,631
$ (15,803)
$
(6,172)
$
4,970
$
10,165
$
15,135
Net interest income
$
2,917
$
2,130
$
5,047
$
2,660
$
164
$
2,824
(1)
Volume/rate variance is allocated on the percentage relationships of changes in balances and changes in rates to the total net change in net interest income.
(2)
Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities.
Loans and acceptances by geography
Table 71
As at October 31 (Millions of Canadian dollars)
2025
2024
Canada
(1)
Residential mortgages
$
454,346
$
441,191
Personal
90,842
86,977
Credit cards
25,836
24,619
Small business
16,797
15,531
Retail
587,821
568,318
Wholesale
194,504
189,413
$
782,325
$
757,731
U.S.
(1)
Retail
57,309
51,893
Wholesale
143,441
119,231
200,750
171,124
Other International
(1)
Retail
7,214
6,767
Wholesale
59,245
51,830
66,459
58,597
Total loans and acceptances
$ 1,049,534
$
987,452
Total allowance for credit losses
(7,093)
(6,037)
Total loans and acceptances, net of allowance for credit losses
$ 1,042,441
$
981,415
(1)
Geographic information is based on residence of borrower.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
127
Loans and acceptances by portfolio and sector
Table 72
As at October 31 (Millions of Canadian dollars)
2025
2024
Residential mortgages
$
493,413
$
477,544
Personal
115,345
108,338
Credit cards
26,789
25,565
Small business
16,797
15,531
Retail
$
652,344
$
626,978
Agriculture
13,958
13,065
Automotive
14,155
14,386
Banking
9,397
8,829
Consumer discretionary
27,132
23,670
Consumer staples
11,193
9,885
Oil and gas
6,352
6,362
Financial services
47,894
40,997
Financing products
27,826
18,161
Forest products
2,452
2,200
Governments
5,716
5,816
Industrial products
15,743
15,347
Information technology
5,875
5,788
Investments
23,842
21,454
Mining and metals
2,715
2,757
Public works and infrastructure
3,246
3,325
Real estate and related
111,132
102,885
Other services
34,096
31,758
Telecommunication and media
9,065
7,745
Transportation
10,440
10,450
Utilities
14,219
14,484
Other sectors
742
1,110
Wholesale
$
397,190
$
360,474
Total loans and acceptances
$ 1,049,534
$
987,452
Total allowance for credit losses
(7,093)
(6,037)
Total loans and acceptances, net of allowance for credit losses
$ 1,042,441
$
981,415
128
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Gross impaired loans by portfolio and geography
Table 73
As at October 31 (Millions of Canadian dollars, except for percentage amounts)
2025
2024
Residential mortgages
$
1,681
$
1,233
Personal
437
408
Small business
411
321
Retail
2,529
1,962
Agriculture
$
283
$
127
Automotive
157
263
Banking
30
54
Consumer discretionary
555
401
Consumer staples
115
138
Oil and gas
28
9
Financial services
213
120
Financing products
324
228
Forest products
82
147
Governments
31
12
Industrial products
271
235
Information technology
106
74
Investments
63
82
Mining and metals
21
3
Public works and infrastructure
38
11
Real estate and related
1,759
1,404
Other services
1,588
263
Telecommunication and media
117
105
Transportation
303
172
Utilities
23
30
Other sectors
46
27
Wholesale
(1)
6,153
3,905
Total GIL
(2)
$
8,682
$
5,867
Canada
(3)
Residential mortgages
$
1,435
$
1,007
Personal
383
354
Small business
411
321
Retail
2,229
1,682
Agriculture
282
126
Automotive
155
238
Banking
30
54
Consumer discretionary
423
298
Consumer staples
42
67
Oil and gas
28
9
Financial services
19
24
Financing products
193
228
Forest products
82
147
Governments
31
10
Industrial products
231
137
Information technology
53
38
Investments
26
21
Mining and metals
21
3
Public works and infrastructure
32
6
Real estate and related
1,101
750
Other services
191
140
Telecommunication and media
19
15
Transportation
282
139
Utilities
23
–
Other sectors
1
1
Wholesale
3,265
2,451
Total
$
5,494
$
4,133
U.S.
(3)
Retail
$
172
$
125
Wholesale
1,096
1,165
Total
$
1,268
$
1,290
Other International
(3)
Retail
$
128
$
155
Wholesale
1,792
289
Total
$
1,920
$
444
Total GIL
$
8,682
$
5,867
Allowance on impaired loans
(1,986)
(1,516)
Net impaired loans
$
6,696
$
4,351
GIL as a % of loans and acceptances
Residential mortgages
0.34%
0.26%
Personal
0.38%
0.38%
Small business
2.45%
2.07%
Retail
0.39%
0.31%
Wholesale
1.55%
1.08%
Total
0.83%
0.59%
Allowance on impaired loans as a % of GIL
22.88%
25.85%
(1)
Includes $195 million of purchased or originated credit-impaired loans (October 31, 2024 – $109 million).
(2)
Past due loans greater than 90 days not included in impaired loans were $330 million in 2025 (2024 – $267 million). For further details, refer to Note 5 of our 2025 Annual
Consolidated Financial Statements.
(3)
Geographic information is based on residence of borrower.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
129
Provision for credit losses by portfolio and geography
Table 74
For the year ended October 31 (Millions of Canadian dollars, except for percentage amounts)
2025
2024
Residential mortgages
$
141
$
86
Personal
821
680
Credit cards
828
670
Small business
171
150
Retail
1,961
1,586
Agriculture
$
43
$
24
Automotive
121
115
Banking
4
33
Consumer discretionary
299
97
Consumer staples
62
59
Oil and gas
6
(51)
Financial services
47
19
Financing products
110
40
Forest products
60
48
Governments
(7)
2
Industrial products
74
68
Information technology
35
21
Investments
23
3
Mining and metals
14
(1)
Public works and infrastructure
8
(6)
Real estate and related
230
403
Other services
427
40
Telecommunication and media
80
42
Transportation
117
63
Utilities
1
3
Other sectors
19
12
Wholesale
1,773
1,034
Total PCL on impaired loans
$
3,734
$
2,620
Canada
(1)
Residential mortgages
$
152
$
96
Personal
805
672
Credit cards
803
653
Small business
171
150
Retail
1,931
1,571
Agriculture
41
24
Automotive
121
114
Banking
4
36
Consumer discretionary
259
86
Consumer staples
13
33
Oil and gas
7
(4)
Financial services
5
11
Financing products
21
40
Forest products
60
48
Governments
(6)
2
Industrial products
82
61
Information technology
17
18
Investments
21
1
Mining and metals
14
(1)
Public works and infrastructure
8
(6)
Real estate and related
177
116
Other services
112
32
Telecommunication and media
8
8
Transportation
110
44
Utilities
4
–
Other sectors
8
–
Wholesale
1,086
663
Total
$
3,017
$
2,234
U.S.
(1)
Retail
$
52
$
33
Wholesale
225
366
Total
$
277
$
399
Other International
(1)
Retail
$
(22)
$
(19)
Wholesale
462
6
Total
$
440
$
(13)
Total PCL on impaired loans
$
3,734
$
2,620
Total PCL on performing loans
622
627
Total PCL on other financial assets
6
(15)
Total PCL
$
4,362
$
3,232
PCL on loans as a % of average net loans and acceptances
0.43%
0.35%
PCL on impaired loans as a % of average net loans and acceptances
(1)
0.37%
0.28%
(1)
Geographic information is based on residence of borrower.
130
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Allowance on loans by portfolio and geography
(1)
Table 75
As at and for the year ended October 31 (Millions of Canadian dollars, except percentage amounts)
2025
2024
Allowance against impaired loans
Canada
(2)
Residential mortgages
$
255
$
163
Personal
205
185
Small business
138
105
Retail
$
598
$
453
Agriculture
$
29
$
26
Automotive
141
104
Banking
18
34
Consumer discretionary
154
54
Consumer staples
40
40
Oil and gas
7
1
Financial services
14
11
Financing products
56
39
Forest products
16
45
Governments
–
1
Industrial products
77
57
Information technology
15
15
Investments
24
7
Mining and metals
14
1
Public works and infrastructure
12
5
Real estate and related
172
127
Other services
92
26
Telecommunication and media
7
6
Transportation
30
44
Utilities
4
–
Other sectors
15
–
Wholesale
$
937
$
643
Total
$
1,535
$
1,096
U.S.
(2)
Retail
$
23
$
19
Wholesale
160
237
Total
$
183
$
256
Other International
(2)
Retail
$
65
$
76
Wholesale
203
88
Total
$
268
$
164
Total allowance on impaired loans
$
1,986
$
1,516
Allowance on performing loans
Residential mortgages
$
480
$
341
Personal
1,406
1,272
Credit cards
1,356
1,232
Small business
212
166
Retail
$
3,454
$
3,011
Wholesale
$
2,019
$
1,825
Total allowance on performing loans
$
5,473
$
4,836
Total allowance on loans
$
7,459
$
6,352
Key ratios
Allowance on loans as a % of loans and acceptances
0.71%
0.64%
Net write-offs as a % of average net loans and acceptances
0.28%
0.22%
(1)
Includes loans, acceptances and commitments.
(2)
Geographic information is based on residence of borrower.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
131
Credit quality information by Canadian province
(1)
Table 76
As at and for the year ended October 31 (Millions of Canadian dollars)
2025
2024
Loans and acceptances
Atlantic provinces
(2)
$
37,937
$
35,501
Quebec
88,665
86,426
Ontario
378,521
369,949
Alberta
87,758
82,860
Other Prairie provinces
(3)
40,467
38,766
B.C. and territories
(4)
148,977
144,229
Total loans and acceptances in Canada
$
782,325
$
757,731
Gross impaired loans
Atlantic provinces
(2)
$
135
$
148
Quebec
691
366
Ontario
2,753
2,219
Alberta
706
666
Other Prairie provinces
(3)
282
181
B.C. and territories
(4)
927
553
Total GIL in Canada
$
5,494
$
4,133
PCL on impaired loans
Atlantic provinces
(2)
$
47
$
46
Quebec
270
168
Ontario
2,040
1,510
Alberta
274
217
Other Prairie provinces
(3)
121
80
B.C. and territories
(4)
265
213
Total PCL on impaired loans in Canada
$
3,017
$
2,234
(1)
Geographic information is based on residence of borrower.
(2)
Comprises Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick.
(3)
Comprises Manitoba and Saskatchewan.
(4)
Comprises British Columbia, Nunavut, Northwest Territories and Yukon.
132
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Glossary
Adjusted results
For further details, including a reconciliation,
refer to the Key performance and non-GAAP
measures section.
•
Adjusted effective income tax rate
–
calculated as effective income tax rate
excluding the impact of specified items
and amortization of acquisition-related
intangibles.
•
Adjusted income before income taxes
–
calculated as income before income
taxes excluding the impact of specified
items and amortization of acquisition-
related intangibles.
•
Adjusted income taxes
– calculated as
income taxes excluding the impact of
specified items and amortization of
acquisition-related intangibles.
•
Adjusted net income
– calculated as net
income excluding the impact of specified
items and amortization of acquisition-
related intangibles.
•
Adjusted net income available to
common shareholders
– calculated as net
income available to common
shareholders excluding the impact of
specified items and amortization of
acquisition-related intangibles.
•
Adjusted non-interest expense
–
calculated as non-interest expense
excluding the impact of specified items
and amortization of acquisition-related
intangibles.
•
Adjusted total revenue
– calculated as
total revenue excluding the impact of
specified items.
Acceptances
A bill of exchange or negotiable instrument
drawn by the borrower for payment at
maturity and accepted by a bank. The
acceptance constitutes a guarantee of
payment by the bank and can be traded in the
money market. The bank earns a “stamping
fee” for providing this guarantee.
Allowance for credit losses (ACL)
The amount deemed adequate by
management to absorb expected credit losses
as at the balance sheet date. The allowance is
established for all financial assets subject to
impairment assessment, including certain
loans, debt securities, financial guarantees,
and undrawn loan commitments. The
allowance is changed by the amount of
provision for credit losses recorded, which is
charged to income, and decreased by the
amount of write-offs net of recoveries in the
period.
ACL on loans ratio
ACL on loans ratio is calculated as ACL on
loans as a percentage of total loans and
acceptances.
Asset-backed securities (ABS)
Securities created through the securitization
of a pool of assets, for example auto loans or
credit card loans.
Assets under administration (AUA)
Assets administered by us, which are
beneficially owned by clients, unless otherwise
noted. Services provided in respect of assets
under administration are of an administrative
nature, including safekeeping, collecting
investment income, settling purchase and sale
transactions, and record keeping.
Assets under management (AUM)
Assets managed by us, which are beneficially
owned by clients, unless otherwise noted.
Services provided in respect of assets under
management include the selection of
investments and the provision of investment
advice. We have assets under management
that are also administered by us and included
in assets under administration.
Attributed capital
Attributed capital to our business segments is
based on the Basel III regulatory capital and
leverage requirements other than for our
insurance segment for which we attribute
capital based only on economic capital.
Auction rate securities (ARS)
Debt securities whose interest rates are
regularly reset through an auction process.
Average earning assets, net
Average earning assets include interest-
bearing deposits with other banks, securities,
net of applicable allowance, assets purchased
under reverse repurchase agreements and
securities borrowed, loans, net of allowance,
cash collateral and margin deposits. Insurance
assets, and all other assets not specified are
excluded. The averages are based on the daily
balances for the period.
Basis point (bp)
One one-hundredth of a percentage point
(.01%).
Collateral
Assets pledged as security for a loan or other
obligation. Collateral can take many forms,
such as cash, highly rated securities, property,
inventory, equipment and receivables.
Collateralized debt obligation (CDO)
Securities with multiple tranches that are
issued by structured entities and
collateralized by debt obligations including
bonds and loans. Each tranche offers a varying
degree of risk and return so as to meet
investor demand.
Commitments to extend credit
Unutilized amount of credit facilities available
to clients either in the form of loans,
acceptances and other on-balance sheet
financing, or through off-balance sheet
products such as guarantees and letters of
credit.
Common Equity Tier 1 (CET1) capital
A regulatory Basel III capital measure
comprised mainly of common shareholders’
equity less regulatory deductions and
adjustments for goodwill and intangibles,
defined benefit pension fund assets, shortfall
in allowances and other specified items. The
CET1 capital is calculated in accordance with
OSFI’s CAR guideline. For more details, refer to
the Capital management section.
Common Equity Tier 1 capital ratio
A risk-based capital measure calculated as
CET1 capital divided by risk-weighted assets.
The CET1 ratio is calculated in accordance
with OSFI’s CAR guideline.
Contractual service margin (CSM)
For insurance contracts, the CSM represents
the unearned profit (net inflows) for providing
insurance coverage. For reinsurance contracts
held, the CSM represents the net cost or net
gain of purchasing reinsurance.
Covered bonds
Full recourse on-balance sheet obligations
issued by banks and credit institutions that
are fully collateralized by assets over which
investors enjoy a priority claim in the event of
an issuer’s insolvency.
Credit default swaps (CDS)
A derivative contract that provides the
purchaser with a one-time payment should the
referenced entity/entities default (or a similar
triggering event occur).
Derivative
A contract with the following characteristics:
(a) its value changes in response to the
change in an underlying (e.g., price of a
financial instrument, index or financial rate);
(b) it requires no initial net investment or an
initial net investment that is smaller than for
contracts with similar responses to changes in
market factors; and (c) it is settled at a future
date. Examples of derivatives include swaps,
options, forward rate agreements and futures.
Dividend payout ratio
Common dividends as a percentage of net
income available to common shareholders.
Dividend yield
Dividends per common share divided by the
average of the high and low share price in the
relevant period.
Earnings per share (EPS), basic
Calculated as net income available to common
shareholders divided by the average number
of shares outstanding. Adjusted EPS, basic is
calculated in the same manner, using adjusted
net income available to common
shareholders.
Earnings per share (EPS), diluted
Calculated as net income available to common
shareholders divided by the average number
of shares outstanding adjusted for the dilutive
effects of stock options and other convertible
securities. Adjusted EPS, diluted is calculated
in the same manner, using adjusted net
income available to common shareholders.
Efficiency ratio
Non-interest expense as a percentage of total
revenue. Adjusted efficiency ratio is calculated
in the same manner, using adjusted
non-interest expense and adjusted total
revenue.
Expected credit losses
The difference between the contractual cash
flows due to us in accordance with the
relevant contractual terms and the cash flows
that we expect to receive, discounted to the
balance sheet date.
Fair value
Fair value of a financial instrument is the price
that would be received to sell an asset or paid
to transfer a liability in an orderly transaction
between market participants at the
measurement date.
Funding valuation adjustment
Funding valuation adjustments are calculated
to incorporate cost and benefit of funding in
the valuation of uncollateralized and under-
collateralized OTC derivatives. Future expected
cash flows of these derivatives are discounted
to reflect the cost and benefit of funding the
derivatives by using a funding curve, implied
volatilities and correlations as inputs.
Guarantees and standby letters of credit
These primarily represent irrevocable
assurances that a bank will make payments in
the event that its client cannot meet its
financial obligations to third parties. Certain
other guarantees, such as bid and performance
bonds, represent non-financial undertakings.
Hedge
A risk management technique used to mitigate
exposure from market, interest rate or foreign
currency exchange risk arising from normal
banking operations. The elimination or
reduction of such exposure is accomplished by
establishing offsetting positions. For example,
assets denominated in foreign currencies can
be offset with liabilities in the same currencies
or through the use of foreign exchange hedging
instruments such as futures, options or foreign
exchange contracts.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
133
Hedge funds
A type of investment fund, marketed to
accredited high net worth investors, that is
subject to limited regulation and restrictions
on its investments compared to retail mutual
funds, and that often utilize aggressive
strategies such as selling short, leverage,
program trading, swaps, arbitrage and
derivatives.
High-quality liquid assets (HQLA)
HQLA are cash or assets that can be converted
into cash quickly through sales (or by being
pledged as collateral) with no significant loss
of value.
Impaired loans
Loans are classified as impaired when there
has been a deterioration of credit quality to the
extent that management no longer has
reasonable assurance of timely collection of
the full amount of principal and interest in
accordance with the contractual terms of the
loan agreement. Credit card balances are not
classified as impaired as they are directly
written off after payments are 180 days past
due.
Insurance contracts
Contracts under which we accept significant
insurance risk from a policyholder by agreeing
to compensate the policyholder if a specified
uncertain future event adversely affects the
policyholder. Insurance contracts also include
reinsurance contracts issued by us to
compensate another company for claims
arising from underlying insurance contracts
issued by that other company.
Insurance investment result
Calculated as Net investment income from the
Insurance segment, Insurance finance income
(expense) from insurance contracts and
Reinsurance finance income (expense) from
reinsurance contracts held. Net investment
income primarily comprises interest and
dividend income and net gains (losses) on
financial instruments and derivatives relating
to the Insurance segment. Insurance and
reinsurance finance income (expense)
represents the net effect of and changes in the
time value of money and financial risks on
insurance contracts and reinsurance contracts
held, respectively.
Insurance service result
Calculated as Insurance revenue less
Insurance service expense from insurance
contracts and Net income (expense) from
reinsurance contracts held. Insurance revenue
represents the revenue recognized in the
period as we provide insurance services for the
groups of insurance contracts. Insurance
service expense represents the costs incurred
in providing insurance services in the period,
which includes incurred claims and other
directly attributable expenses, allocation of
acquisition costs, changes relating to past or
current services and changes in loss
components of onerous groups of contracts.
Net income (expense) from reinsurance
contracts held represents the amounts
recovered from the reinsurers less the
allocation of premiums paid on reinsurance
contracts held.
International Financial Reporting Standards
(IFRS)
IFRS are principles-based standards,
interpretations and the framework adopted by
the International Accounting Standards Board.
Leverage ratio
A Basel III regulatory measure, the ratio divides
Tier 1 capital by the leverage exposure
measure. The leverage ratio is a non-risk based
measure and is calculated in accordance with
OSFI’s LR guideline.
Leverage ratio exposure
The leverage ratio exposure is calculated in
accordance with OSFI’s LR guideline and is
defined as the sum of total assets plus
off-balance sheet items after certain
adjustments.
Liquidity Coverage Ratio (LCR)
The LCR is a Basel III standard that aims to
ensure that an institution has an adequate
stock of unencumbered HQLA that consists of
cash or assets that can be converted into cash
at little or no loss of value in private markets,
to meet its liquidity needs for a 30 calendar day
liquidity stress scenario. The LCR is calculated
in accordance with OSFI’s LAR guideline.
Loan-to-value (LTV) ratio
Calculated based on the total facility amount
for the residential mortgage and RBC Homeline
Plan product divided by the value of the related
residential property.
Master netting agreement
An agreement between us and a counterparty
designed to reduce the credit risk of multiple
derivative transactions through the creation of
a legal right of offset of exposure in the event
of a default.
Net interest income
The difference between what is earned on
assets such as loans and securities and what is
paid on liabilities such as deposits and
subordinated debentures.
Net interest margin (NIM) on average
earning assets, net
Calculated as net interest income divided by
average earning assets, net.
Net Stable Funding Ratio (NSFR)
The NSFR is a Basel III standard that requires
institutions to maintain a stable funding profile
defined as available amount of stable funding
(ASF) in relation to the composition of their
assets and off-balance sheet activities defined
as required amount of stable funding (RSF).
The ratio should be at least equal to 100% on
an ongoing basis. The NSFR is calculated in
accordance with OSFI’s LAR guideline.
Normal course issuer bid (NCIB)
A program for the repurchase of our own
shares for cancellation through a stock
exchange that is subject to the various rules of
the relevant stock exchange and securities
commission.
Notional amount
The contract amount used as a reference point
to calculate payments for derivatives.
Off-balance sheet financial instruments
A variety of arrangements offered to clients,
which include credit derivatives, written put
options, backstop liquidity facilities, stable
value products, financial standby letters of
credit, performance guarantees, credit
enhancements, mortgage loans sold with
recourse, commitments to extend credit,
securities lending, documentary and
commercial letters of credit, sponsor member
guarantees, securities lending indemnifications
and indemnifications.
Office of the Superintendent of Financial
Institutions Canada (OSFI)
The primary regulator of federally chartered
financial institutions and federally
administered pension plans in Canada. OSFI’s
mission is to safeguard policyholders,
depositors and pension plan members from
undue loss.
Operating leverage
The difference between our revenue growth
rate and non-interest expense growth rate.
Options
A contract or a provision of a contract that
gives one party (the option holder) the right,
but not the obligation, to perform a specified
transaction with another party (the option
issuer or option writer) according to specified
terms.
Provision for credit losses (PCL)
The amount charged to income necessary to
bring the allowance for credit losses to a level
determined appropriate by management. This
includes provisions on performing and
impaired financial assets.
PCL on loans ratio
PCL on loans ratio is calculated using PCL on
loans as a percentage of average net loans and
acceptances.
PCL on impaired loans ratio
PCL on impaired loans ratio is calculated as
PCL on impaired loans as a percentage of
average net loans and acceptances.
PCL on performing loans ratio
PCL on performing loans ratio is calculated as
PCL on performing loans as a percentage of
average net loans and acceptances.
RBC Homeline Plan products
This is comprised of residential mortgages and
secured personal loans whereby the borrower
pledges real estate as collateral.
Reinsurance contracts held
Contracts under which we transfer significant
insurance risk to a reinsurer that compensates
us for claims relating to underlying insurance
contracts issued by us and are accounted for
separately from the underlying insurance
contracts to which they relate.
Repurchase agreements
These involve the sale of securities for cash
and the simultaneous repurchase of the
securities for value at a later date. These
transactions normally do not constitute
economic sales and therefore are treated as
collateralized financing transactions.
Return on common equity (ROE)
Net income available to common shareholders,
expressed as a percentage of average common
equity. ROE is based on actual balances of
average common equity before rounding.
Adjusted ROE is calculated in the same
manner, using adjusted net income available to
common shareholders.
Reverse repurchase agreements
These involve the purchase of securities for
cash and the simultaneous sale of the
securities for value at a later date. These
transactions normally do not constitute
economic sales and therefore are treated as
collateralized financing transactions.
Risk-weighted assets (RWA)
Assets adjusted by a regulatory risk-weight
factor to reflect the riskiness of on- and
off-balance sheet exposures. Certain assets are
not risk-weighted, but deducted from capital.
The calculation is defined by OSFI’s CAR
guideline. For more details, refer to the Capital
management section.
Securities lending
Transactions in which the owner of securities
agrees to lend it under the terms of a
prearranged contract to a borrower for a fee.
Collateral for the loan consists of either high
quality securities or cash and collateral value
must be at least equal to the market value of
the loaned securities. Borrowers pay a
negotiated fee for loans collateralized by
securities, whereas for cash collateral lenders
pay borrowers interest at a negotiated rate and
reinvest the cash collateral to earn a return. An
intermediary such as a bank often acts as
agent lender for the owner of the security in
return for a share of the revenue earned by the
owner from lending securities. Most often,
agent lenders indemnify the owner against the
risk of the borrower’s failure to redeliver the
loaned securities – counterparty credit risk if a
borrower defaults and market risk if the value
of the non-cash collateral declines. The agent
lender does not indemnify against the
investment risk of re-investing cash collateral
which is borne by the owner.
134
Royal Bank of Canada: Annual Report 2025
Management’s Discussion and Analysis
Securities sold short
A transaction in which the seller sells securities
and then borrows the securities in order to
deliver them to the purchaser upon settlement.
At a later date, the seller buys identical
securities in the market to replace the
borrowed securities.
Securitization
The process by which various financial assets
are packaged into newly issued securities
backed by these assets.
Standardized Approach (SA) for credit risk
Risk weights prescribed by OSFI are used to
calculate RWA for the credit risk exposures.
Credit assessments by OSFI-recognized
external credit rating agencies of Standard &
Poor’s Financial Services LLP; Moody’s Investor
Service, Inc.; Fitch Ratings, Inc.; Kroll Bond
Rating Agency, Inc. (KBRA
‡
); and DBRS Limited
are used to risk-weight our Sovereign,
Corporate and Bank exposures based on the
CAR guideline issued by OSFI.
Structured entities
A structured entity is an entity in which voting
or similar rights are not the dominant factor in
deciding who controls the entity, such as when
the activities that significantly affect the
entity’s returns are directed by means of
contractual arrangements. Structured entities
often have restricted activities, narrow and
well defined objectives, insufficient equity to
finance their activities, and financing in the
form of multiple contractually-linked
instruments.
Taxable equivalent basis (teb)
Income from certain specified tax advantaged
sources (U.S. tax credit business as well as
eligible Canadian taxable corporate dividends
received on or before December 31, 2023) is
increased to a level that would make it
comparable to income from taxable sources.
There is an offsetting adjustment in the tax
provision, thereby generating the same
after-tax net income.
Tier 1 capital and Tier 1 capital ratio
Tier 1 capital comprises predominantly of CET1
capital, with additional Tier 1 items such as
preferred shares, limited recourse capital
notes and non-controlling interests in
subsidiaries Tier 1 instruments. The Tier 1
capital ratio is calculated in accordance with
OSFI’s CAR guideline by dividing Tier 1 capital
by risk-weighted assets.
Tier 2 capital
Tier 2 capital consists mainly of subordinated
debentures that meet certain criteria, certain
loan loss allowances and non-controlling
interests in subsidiaries’ Tier 2 instruments.
Total loss absorbing capacity (TLAC)
The aggregate of Tier 1 capital, Tier 2 capital
and external TLAC instruments which allow
conversion in whole or in part into common
shares under the Canada Deposit Insurance
Corporation Act and meet all of the eligibility
criteria under OSFI’s TLAC guideline.
TLAC ratio
The risk-based TLAC ratio is defined as TLAC
divided by total risk-weighted assets. The TLAC
ratio is calculated in accordance with OSFI’s
TLAC guideline.
TLAC leverage ratio
The TLAC leverage ratio is defined as TLAC
divided by the leverage ratio exposure. The
TLAC leverage ratio is calculated in accordance
with OSFI’s TLAC guideline.
Total capital and total capital ratio
Total capital is defined as the total of Tier 1 and
Tier 2 capital. The total capital ratio is
calculated in accordance with OSFI’s CAR
guideline by dividing total capital by risk-
weighted assets.
Tranche
A security class created whereby the risks and
returns associated with a pool of assets are
packaged into several classes of securities
offering different risk and return profiles from
those of the underlying asset pool. Tranches
are typically rated by ratings agencies, and
reflect both the credit quality of underlying
collateral as well as the level of protection
based on the tranches’ relative subordination.
Unattributed capital
Unattributed capital represents common
equity in excess of common equity attributed
to our business segments and is reported in the
Corporate Support segment.
Value-at-Risk (VaR)
A generally accepted risk-measurement
concept that uses statistical models based on
historical information to estimate within a
given level of confidence the maximum loss in
market value we would experience in our
financial portfolio from an adverse one-day
movement in market rates and prices.
Management’s Discussion and Analysis
Royal Bank of Canada: Annual Report 2025
135
Enhanced Disclosure Task Force recommendations index
We aim to present transparent, high-quality risk disclosures by providing disclosures in this 2025 Annual Report and
Supplementary Financial Information package (SFI), and Pillar 3 Report, in accordance with recommendations from the FSB’s
Enhanced Disclosure Task Force (EDTF). Information within the SFI and Pillar 3 Report is not and should not be considered
incorporated by reference into this 2025 Annual Report.
The following index summarizes our disclosure by EDTF recommendation:
Location of disclosure
Type of Risk
Recommendation
Disclosure
Annual Report page
SFI page
General
1
Table of contents for EDTF risk disclosure
136
1
2
Define risk terminology and measures
65-69, 133-135
–
3
Top and emerging risks
69-72
–
4
New regulatory ratios
110-116
–
Risk governance,
risk management
and business
model
5
Risk management organization
65-69
–
6
Risk culture
65-69
–
7
Risk in the context of our business activities
120
–
8
Stress testing
68, 83
–
Capital adequacy
and risk-weighted
assets (RWA)
9
Minimum Basel III capital ratios and
Domestic systemically important bank
surcharge
110-116
–
10
Composition of capital and reconciliation
of the accounting balance sheet to the
regulatory balance sheet
–
*
11
Flow statement of the movements in
regulatory capital
–
19
12
Capital strategic planning
110-116
–
13
RWA by business segments
–
20
14
Analysis of capital requirement, and related
measurement model information
72-76
*
15
RWA credit risk and related risk
measurements
–
*
16
Movement of RWA by risk type
–
20
17
Basel back-testing
67, 72-74
31
Liquidity
18
Quantitative and qualitative analysis of our
liquidity reserve
90-91, 96-97
–
Funding
19
Encumbered and unencumbered assets by
balance sheet category, and contractual
obligations for rating downgrades
92, 95
–
20
Maturity analysis of consolidated total
assets, liabilities and off-balance sheet
commitments analyzed by remaining
contractual maturity at the balance sheet
date
99-100
–
21
Sources of funding and funding strategy
92-94
–
Market risk
22
Relationship between the market risk
measures for trading and non-trading
portfolios and the balance sheet
87-88
–
23
Decomposition of market risk factors
83-88
–
24
Market risk validation and back-testing
83
–
25
Primary risk management techniques
beyond reported risk measures and
parameters
83-86
–
Credit risk
26
Bank’s credit risk profile
72-82, 180-187
21-31*
Quantitative summary of aggregate credit
risk exposures that reconciles to the
balance sheet
127-132
*
27
Policies for identifying impaired loans
74-76, 122, 153-155
–
28
Reconciliation of the opening and closing
balances of impaired loans and
impairment allowances during the year
–
23, 28
29
Quantification of gross notional exposure
for OTC derivatives or exchange-traded
derivatives
77
32
30
Credit risk mitigation, including collateral
held for all sources of credit risk
75-76
*
Other
31
Other risk types
102-110
–
32
Publicly known risk events
107-108, 230-231
–
*
These disclosure requirements are satisfied or partially satisfied by disclosures provided in our Pillar 3 Report for the quarter ended October 31, 2025 and for the year
ended October 31, 2024.
136
Royal Bank of Canada: Annual Report 2025
Index for Enhanced Disclosure Task Force recommendations
REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS
Reports
138
Management’s Responsibility for Financial Reporting
138
Management’s Report on Internal Control over
Financial Reporting
139
Independent Auditor’s Report
142
Report of Independent Registered Public Accounting
Firm (PCAOB ID 271)
Consolidated Financial Statements
144
Consolidated Balance Sheets
145
Consolidated Statements of Income
146
Consolidated Statements of Comprehensive Income
147
Consolidated Statements of Changes in Equity
148
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
149
Note 1
General information
149
Note 2
Summary of significant accounting
policies, estimates and judgments
163
Note 3
Fair value of financial instruments
176
Note 4
Securities
180
Note 5
Loans and allowance for credit losses
187
Note 6
Significant acquisition
188
Note 7
Derecognition of financial assets
189
Note 8
Structured entities
193
Note 9
Derivative financial instruments and
hedging activities
205
Note 10
Premises and equipment
206
Note 11
Goodwill and other intangible assets
208
Note 12
Joint ventures and associated companies
208
Note 13
Other assets
209
Note 14
Deposits
210
Note 15
Insurance and reinsurance
214
Note 16
Employee benefits – Pension and other
post-employment benefits
219
Note 17
Other liabilities
219
Note 18
Subordinated debentures
220
Note 19
Equity
223
Note 20
Share-based compensation
225
Note 21
Income taxes
227
Note 22
Earnings per share
228
Note 23
Guarantees, commitments, pledged
assets and contingencies
230
Note 24
Legal and regulatory matters
231
Note 25
Related party transactions
232
Note 26
Results by business segment
235
Note 27
Nature and extent of risks arising from
financial instruments
236
Note 28
Capital management
237
Note 29
Offsetting financial assets and financial
liabilities
238
Note 30
Recovery and settlement of on-balance
sheet assets and liabilities
239
Note 31
Parent company information
241
Note 32
Principal subsidiaries
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
137
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of Royal Bank of Canada were prepared by management, which is
responsible for the integrity and fairness of the information presented, including the many amounts that must of necessity be
based on estimates and judgments. These consolidated financial statements were prepared in accordance with the
Bank Act
(Canada) and International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial
information appearing throughout our Management’s Discussion and Analysis is consistent with these consolidated financial
statements.
Our internal controls are designed to provide reasonable assurance that transactions are authorized, assets are
safeguarded and proper records are maintained. These controls include quality standards in hiring and training of employees,
policies and procedures manuals, a corporate code of conduct and accountability for performance within appropriate and well-
defined areas of responsibility.
The system of internal controls is further supported by a compliance function, which is designed to ensure that we and our
employees comply with securities legislation and conflict of interest rules, and by an internal audit staff, which conducts
periodic audits of all aspects of our operations.
The Board of Directors oversees management’s responsibilities for financial reporting through an Audit Committee, which is
composed entirely of independent directors. This Committee reviews our consolidated financial statements and recommends
them to the Board for approval. Other key responsibilities of the Audit Committee include reviewing our existing internal control
procedures and planned revisions to those procedures, and advising the directors on auditing matters and financial reporting
issues. Our Chief Compliance Officer and Chief Internal Auditor have full and unrestricted access to the Audit Committee.
The Office of the Superintendent of Financial Institutions Canada (OSFI) examines and inquires into our business and
affairs as deemed necessary to determine whether the provisions of the
Bank Act
are being complied with, and that we are in
sound financial condition. In carrying out its mandate, OSFI strives to protect the rights and interests of our depositors and
creditors.
PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm appointed by our shareholders upon the
recommendation of the Audit Committee and Board, has performed an independent audit of the consolidated financial
statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States) as stated in their Independent Auditor’s Report and Report of Independent
Registered Public Accounting Firm, respectively. The auditors have full and unrestricted access to the Audit Committee to
discuss their audit and related findings.
David I. McKay
President and Chief Executive Officer
Katherine Gibson
Chief Financial Officer
Toronto, December 2, 2025
Management’s Report on Internal Control over Financial Reporting
Management of Royal Bank of Canada is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the President and Chief
Executive Officer and Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board. It includes those policies and procedures that:
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions related to and
dispositions of our assets;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and our receipts and expenditures are made only in accordance
with authorizations of our management and directors; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on our financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely
basis. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and
Chief Financial Officer, the effectiveness of our internal control over financial reporting as of October 31, 2025, based on the
criteria set forth in
Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that evaluation, management concluded that, as of October 31, 2025, internal control over
financial reporting was effective based on the criteria established in the
Internal Control – Integrated Framework (2013).
The effectiveness of our internal control over financial reporting as of October 31, 2025, has been audited by
PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, as stated in their Report of Independent
Registered Public Accounting Firm, which appears herein.
David I. McKay
President and Chief Executive Officer
Katherine Gibson
Chief Financial Officer
Toronto, December 2, 2025
138
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Independent Auditor’s Report
To the Shareholders and Board of Directors of Royal Bank of Canada
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position
of Royal Bank of Canada and its subsidiaries (together, the Bank) as of October 31, 2025 and 2024, and its financial performance
and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Bank’s consolidated financial statements comprise:
•
the consolidated balance sheets as of October 31, 2025 and 2024;
•
the consolidated statements of income for the years then ended;
•
the consolidated statements of comprehensive income for the years then ended;
•
the consolidated statements of changes in equity for the years then ended;
•
the consolidated statements of cash flows for the years then ended; and
•
the notes to the consolidated financial statements, comprising material accounting policy information and other
explanatory information.
Certain required disclosures have been presented elsewhere in the Management’s Discussion and Analysis, rather than in the
notes to the consolidated financial statements. These disclosures are cross-referenced from the consolidated financial
statements and are identified as audited.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of the consolidated financial statements
section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Bank in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the year ended October 31, 2025. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Allowance for Credit Losses on Loans Categorized as Stage 1
and Stage 2 (Stage 1 and Stage 2 ACL)
Refer to Note 2 – Summary of material accounting policies,
estimates and judgments and Note 5 – Loans and allowance for
credit losses to the consolidated financial statements.
The Bank’s allowance for credit losses on loans was
$7,459 million as of October 31, 2025 and represents
management’s estimate of expected credit losses on loans as of
the balance sheet date, of which a significant portion relates to
loans categorized as Stage 1 and Stage 2. Performing loans are
categorized as Stage 1 from initial recognition to the date on
which the loan has experienced a significant increase in credit
risk relative to its initial recognition. Performing loans transfer
into Stage 2 following a significant increase in credit risk
relative to the initial recognition. Loans are categorized as
Stage 3 when considered to be credit-impaired. As disclosed by
management, the measurement of expected credit losses on
loans is a complex calculation that involves a significant
number of interrelated inputs and assumptions such as
borrower risk ratings, forward-looking macroeconomic
conditions, scenario design and the weight assigned to each
scenario. The probability of default, loss given default and
exposure at default inputs are modelled based on the
macroeconomic variables that are most closely correlated with
credit losses.
Management’s estimation of expected credit losses on loans
categorized as Stage 1 and Stage 2 considers five distinct future
Our approach to addressing the matter included the
following procedures, among others:
•
Testing the effectiveness of controls relating to the
estimation of the Stage 1 and Stage 2 ACL, including
controls over:
O
The probability of default, loss given default and
exposure at default models.
O
The design of future macroeconomic scenarios, the
forecasting of certain macroeconomic variables, and
the probability-weighting of these scenarios.
O
The assignment of borrower risk ratings.
O
The completeness and accuracy of certain data
inputs underlying the Stage 1 and Stage 2 ACL
calculation.
•
Testing management’s process for estimating the Stage 1
and Stage 2 ACL, which consisted of:
O
Testing the completeness and accuracy of certain
underlying data used in the estimation of the Stage 1
and Stage 2 ACL.
O
Using professionals with specialized skill and
knowledge to assist in evaluating:
•
The appropriateness of the probability of
default, loss given default and exposure at
default models used in the estimation of the
Stage 1 and Stage 2 ACL.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
139
Key audit matter
How our audit addressed the key audit matter
macroeconomic scenarios, each of which includes a forecast of
relevant macroeconomic variables, designed to capture a wide
range of possible outcomes and which are probability-weighted
according to management’s expectation of the relative
likelihood of the range of outcomes that each scenario
represents at the reporting date. Significant management
judgment is required in making assumptions and estimations
when calculating the Stage 1 and Stage 2 ACL.
We considered this a key audit matter due to:
•
The significant judgment required by management when
estimating the Stage 1 and Stage 2 ACL.
•
A high degree of auditor judgment and subjectivity in
performing procedures related to management’s
assumptions for:
O
Designing future macroeconomic scenarios.
O
Forecasting certain macroeconomic variables.
O
Probability-weighting scenarios.
O
Assigning borrower risk ratings.
•
The significant audit effort necessary to evaluate audit
evidence as the estimation of the Stage 1 and Stage 2 ACL is a
complex calculation that involves a large volume of data,
interrelated inputs and assumptions, some of which are
model-based.
•
The audit effort involved the use of professionals with
specialized skill and knowledge.
•
The reasonableness of significant inputs and
assumptions used in the estimation of the
Stage 1 and Stage 2 ACL related to:
•
The design of future macroeconomic
scenarios.
•
Certain forecasted macroeconomic
variables.
•
The probability-weights assigned to these
scenarios.
•
The assignment of borrower risk ratings
for samples of loans.
Uncertain Tax Positions
Refer to Note 2 – Summary of material accounting policies,
estimates and judgments and Note 21 – Income taxes to the
consolidated financial statements.
The Bank is subject to income tax laws in various jurisdictions
where it operates and the complex tax laws are potentially
subject to different interpretations by management and the
relevant taxation authorities. As disclosed by management,
significant judgment is required in the interpretation of the
relevant tax laws, and in assessing the probability of
acceptance of the Bank’s tax positions to determine tax
provisions, which includes management’s estimate of uncertain
tax positions that are under audit or appeal by the relevant
taxation authorities. Management performs a review on a
quarterly basis to incorporate its assessment based on
information available, but additional liability and income tax
expense could result based on the acceptance of the Bank’s tax
positions by the relevant taxation authorities. In some cases,
the Bank has received reassessments denying the tax
deductibility of dividends from certain transactions including
those with Tax Indifferent Investors.
We considered this a key audit matter due to:
•
The significant judgment required by management, including
a high degree of estimation uncertainty, when:
O
Interpreting the relevant tax laws.
O
Assessing the probability of acceptance of the Bank’s
tax positions, which includes management’s estimate of
uncertain tax positions that are under audit or appeal
by the relevant taxation authorities.
•
A high degree of auditor judgment and subjectivity in
evaluating the uncertain tax positions.
•
The audit effort involved the use of professionals with
specialized skill and knowledge.
Our approach to addressing the matter included the
following procedures, among others:
•
Testing the effectiveness of controls relating to the
evaluation of uncertain tax positions and the impact on tax
provisions.
•
Testing management’s process for (i) assessing the
probability of acceptance of the Bank’s tax positions; and
(ii) estimating provisions relating to uncertain tax
positions, if applicable, which reflects management’s
estimate of uncertain tax positions that are under audit or
appeal by the relevant taxation authorities. This
consisted of:
O
Reviewing correspondence with relevant taxation
authorities.
O
Evaluating the appropriateness of the methods
used.
O
Testing the completeness and accuracy of
underlying data used in the estimate.
O
Making inquiries of the Bank’s internal and external
legal counsel.
O
Evaluating, with the assistance of professionals with
specialized skill and knowledge:
•
Application of relevant tax laws.
•
The reasonableness of management’s
assessment of whether it is probable that the
relevant taxation authorities will accept the
Bank’s tax positions.
•
Evidence used by management.
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion and
Analysis and the information, other than the consolidated financial statements and our auditor’s report thereon, included in the
annual report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
140
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business units within the Bank as a basis for forming an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Lona Mathis.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
December 2, 2025
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
141
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Royal Bank of Canada
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Royal Bank of Canada and its subsidiaries (together, the
Bank) as of October 31, 2025 and 2024, and the related consolidated statements of income, comprehensive income, changes in
equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial
statements). We also have audited the Bank’s internal control over financial reporting as of October 31, 2025, based on criteria
established in
Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Bank as of October 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in
our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of
October 31, 2025, based on criteria established in
Internal Control – Integrated Framework
(2013) issued by the COSO.
Basis for Opinions
The Bank’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on
the Bank’s consolidated financial statements and on the Bank’s internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Bank in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. An entity’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the entity’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses on Loans Categorized as Stage 1 and Stage 2 (Stage 1 and Stage 2 ACL)
As described in Notes 2 and 5 to the consolidated financial statements, the Bank’s allowance for credit losses on loans was
$7,459 million as of October 31, 2025 and represents management’s estimate of expected credit losses on loans as of the balance
sheet date, of which a significant portion relates to loans categorized as Stage 1 and Stage 2. Performing loans are categorized
as Stage 1 from initial recognition to the date on which the loan has experienced a significant increase in credit risk relative to
its initial recognition. Performing loans transfer into Stage 2 following a significant increase in credit risk relative to the initial
recognition. Loans are categorized as Stage 3 when considered to be credit-impaired. As disclosed by management, the
142
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
measurement of expected credit losses on loans is a complex calculation that involves a significant number of interrelated
inputs and assumptions such as borrower risk ratings, forward-looking macroeconomic conditions, scenario design and the
weight assigned to each scenario. The probability of default, loss given default and exposure at default inputs are modelled
based on the macroeconomic variables that are most closely correlated with credit losses. Management’s estimation of
expected credit losses on loans categorized as Stage 1 and Stage 2 considers five distinct future macroeconomic scenarios, each
of which includes a forecast of relevant macroeconomic variables, designed to capture a wide range of possible outcomes and
which are probability-weighted according to management’s expectation of the relative likelihood of the range of outcomes that
each scenario represents at the reporting date. Significant management judgment is required in making assumptions and
estimations when calculating the Stage 1 and Stage 2 ACL.
The principal considerations for our determination that performing procedures relating to the Stage 1 and Stage 2 ACL is a
critical audit matter are (i) the significant judgment required by management when estimating the Stage 1 and Stage 2 ACL; (ii) a
high degree of auditor judgment and subjectivity in performing procedures related to management’s assumptions for
(a) designing future macroeconomic scenarios, (b) forecasting certain macroeconomic variables, (c) probability-weighting
scenarios, and (d) assigning borrower risk ratings; (iii) the significant audit effort necessary to evaluate audit evidence as the
estimation of the Stage 1 and Stage 2 ACL is a complex calculation that involves a large volume of data, interrelated inputs and
assumptions, some of which are model-based; and (iv) the audit effort involved the use of professionals with specialized skill
and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
estimation of the Stage 1 and Stage 2 ACL, including controls over (i) the probability of default, loss given default and exposure
at default models; (ii) the design of future macroeconomic scenarios, the forecasting of certain macroeconomic variables, and
the probability-weighting of these scenarios; (iii) the assignment of borrower risk ratings; and (iv) the completeness and
accuracy of certain data inputs underlying the Stage 1 and Stage 2 ACL calculation. These procedures also included, among
others, testing management’s process for estimating the Stage 1 and Stage 2 ACL. This consisted of (i) testing the completeness
and accuracy of certain underlying data used in the estimation of the Stage 1 and Stage 2 ACL; and (ii) with the assistance of
professionals with specialized skill and knowledge, evaluating (a) the appropriateness of the probability of default, loss given
default and exposure at default models used in the estimation of the Stage 1 and Stage 2 ACL, and (b) the reasonableness of
significant inputs and assumptions used in the estimation of the Stage 1 and Stage 2 ACL related to (1) the design of future
macroeconomic scenarios, (2) certain forecasted macroeconomic variables, (3) the probability-weights assigned to these
scenarios, and (4) the assignment of borrower risk ratings for samples of loans.
Uncertain Tax Positions
As described in Note 2 to the consolidated financial statements, the Bank is subject to income tax laws in various jurisdictions
where it operates and the complex tax laws are potentially subject to different interpretations by management and the relevant
taxation authorities. As disclosed by management, significant judgment is required in the interpretation of the relevant tax laws,
and in assessing the probability of acceptance of the Bank’s tax positions to determine tax provisions, which includes
management’s estimate of uncertain tax positions that are under audit or appeal by the relevant taxation authorities.
Management performs a review on a quarterly basis to incorporate its assessment based on information available, but
additional liability and income tax expense could result based on the acceptance of the Bank’s tax positions by the relevant
taxation authorities. In some cases, as described in Note 21 to the consolidated financial statements, the Bank has received
reassessments denying the tax deductibility of dividends from certain transactions including those with Tax Indifferent
Investors.
The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical
audit matter are (i) the significant judgment required by management, including a high degree of estimation uncertainty, when
(a) interpreting the relevant tax laws, and (b) assessing the probability of acceptance of the Bank’s tax positions, which includes
management’s estimate of uncertain tax positions that are under audit or appeal by the relevant taxation authorities; (ii) a high
degree of auditor judgment and subjectivity in evaluating the uncertain tax positions; and (iii) the audit effort involved the use of
professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
evaluation of uncertain tax positions and the impact on tax provisions. These procedures also included, among others, testing
management’s process for (i) assessing the probability of acceptance of the Bank’s tax positions; and (ii) estimating provisions
relating to uncertain tax positions, if applicable, which reflects management’s estimate of uncertain tax positions that are under
audit or appeal by the relevant taxation authorities. This consisted of (i) reviewing correspondence with relevant taxation
authorities; (ii) evaluating the appropriateness of the methods used; (iii) testing the completeness and accuracy of underlying
data used in the estimate; (iv) making inquiries of the Bank’s internal and external legal counsel; and (v) evaluating, with the
assistance of professionals with specialized skill and knowledge, the application of relevant tax laws, the reasonableness of
management’s assessment of whether it is probable that the relevant taxation authorities will accept the Bank’s tax positions,
and evidence used by management.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
December 2, 2025
We have served as the Bank’s auditor since 2016.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
143
Consolidated Balance Sheets
As at
(Millions of Canadian dollars)
October 31
2025
October 31
2024
Assets
Cash and due from banks
$
$
Interest-bearing deposits with banks
Securities
(Note 4)
Trading
Investment, net of applicable allowance
Assets purchased under reverse repurchase agreements and securities borrowed
Loans
(Note 5)
Retail
Wholesale
Allowance for loan losses
(Note 5)
(7,093 )
(6,037 )
Other
Derivatives
(Note 9)
Premises and equipment
(Note 10)
Goodwill
(Note 11)
Other intangibles
(Note 11)
Other assets
(Note 13)
Total assets
$
$
Liabilities and equity
Deposits
(Note 14)
Personal
$
$
Business and government
Bank
Other
Obligations related to securities sold short
Obligations related to assets sold under repurchase agreements and securities loaned
Derivatives
(Note 9)
Insurance contract liabilities
(Note 15)
Other liabilities
(Note 17)
Subordinated debentures
(Note 18)
Total liabilities
Equity attributable to shareholders
Preferred shares and other equity instruments
(Note 19)
Common shares
(Note 19)
Retained earnings
Other components of equity
Non-controlling interests
Total equity
Total liabilities and equity
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
David I. McKay
Cynthia Devine
President and Chief Executive Officer
Director
144
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Consolidated Statements of Income
For the year ended
(Millions of Canadian dollars, except per share amounts)
October 31
2025
October 31
2024
Interest and dividend income
(Note 3)
Loans
$
$
Securities
Assets purchased under reverse repurchase agreements and securities borrowed
Deposits and other
Interest expense
(Note 3)
Deposits and other
Other liabilities
Subordinated debentures
Net interest income
Non-interest income
Insurance service result
(Note 15)
Insurance investment result
(Note 15)
Trading revenue
Investment management and custodial fees
Mutual fund revenue
Securities brokerage commissions
Service charges
Underwriting and other advisory fees
Foreign exchange revenue, other than trading
Card service revenue
Credit fees
Net gains on investment securities
Income (loss) from joint ventures and associates
(Note 12)
(16 )
Other
Total revenue
Provision for credit losses
(Notes 4 and 5)
Non-interest expense
Human resources
(Notes 16 and 20)
Equipment
Occupancy
Communications
Professional fees
Amortization of other intangibles
(Note 11)
Other
Income before income taxes
Income taxes
(Note 21)
Net income
$
$
Net income attributable to:
Shareholders
$
$
Non-controlling interests
$
$
Basic earnings per share
(in dollars) (Note 22)
$
$
Diluted earnings per share
(in dollars) (Note 22)
Dividends per common share
(in dollars)
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
145
Consolidated Statements of Comprehensive Income
For the year ended
(Millions of Canadian dollars)
October 31
2025
October 31
2024
Net income
$
$
Other comprehensive income (loss), net of taxes
(Note 21)
Items that will be reclassified subsequently to income:
Net change in unrealized gains (losses) on debt securities and loans at fair value through
other comprehensive income
Net unrealized gains (losses) on debt securities and loans at fair value through other
comprehensive income
Provision for credit losses recognized in income
(5 )
(1 )
Reclassification of net losses (gains) on debt securities and loans at fair value through other
comprehensive income to income
(121 )
(140 )
Foreign currency translation adjustments
Unrealized foreign currency translation gains (losses)
Net foreign currency translation gains (losses) from hedging activities
(315 )
(514 )
Reclassification of losses (gains) on foreign currency translation to income
(25 )
Reclassification of losses (gains) on net investment hedging activities to income
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income
(669 )
(827 )
(489 )
Items that will not be reclassified subsequently to income:
Remeasurement gains (losses) on employee benefit plans
(Note 16)
Net gains (losses) from fair value changes due to credit risk on financial liabilities
designated at fair value through profit or loss
(894 )
(1,041 )
Net gains (losses) on equity securities designated at fair value through other
comprehensive income
(456 )
(393 )
Total other comprehensive income (loss), net of taxes
Total comprehensive income (loss)
$
$
Total comprehensive income attributable to:
Shareholders
$
$
Non-controlling interests
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
146
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Consolidated Statements of Changes in Equity
For the year ended October 31, 2025
Other components of equity
(Millions of Canadian dollars)
Preferred
shares and
other equity
instruments
Common
shares
Treasury –
preferred
shares and
other equity
instruments
Treasury –
common
shares
Retained
earnings
FVOCI
securities
and loans
Foreign
currency
translation
Cash flow
hedges
Total other
components
of equity
Equity
attributable to
shareholders
Non-controlling
interests
Total
equity
Balance at beginning of period
$
$ 21,013
$
$
(61 )
$ 88,608
$
(897 )
$
$
$
$
$
$ 127,192
Changes in equity
Issues of share capital and other equity instruments
(28 )
Common shares purchased for cancellation
(227 )
(2,541 )
(2,768 )
(2,768 )
Redemption of preferred shares and other equity instruments
(2,350 )
(2,350 )
(2,350 )
Sales of treasury shares and other equity instruments
Purchases of treasury shares and other equity instruments
(4,916 )
(5,811 )
(10,727 )
(10,727 )
Share-based compensation awards
Dividends on common shares
(8,502 )
(8,502 )
(8,502 )
Dividends on preferred shares and distributions on other
equity instruments
(494 )
(494 )
(52 )
(546 )
Other
(40 )
(40 )
(40 )
Net income
Total other comprehensive income (loss), net of taxes
(456 )
Balance at end of period
$
$ 20,863
$
$
(110 )
$ 96,938
$
(265 )
$
$
$
$
$
$ 139,151
For the year ended October 31, 2024
Other components of equity
(Millions of Canadian dollars)
Preferred
shares and
other equity
instruments
Common
shares
Treasury –
preferred
shares and
other equity
instruments
Treasury –
common
shares
Retained
earnings
FVOCI
securities
and loans
Foreign
currency
translation
Cash flow
hedges
Total other
components
of equity
Equity
attributable to
shareholders
Non-controlling
interests
Total
equity
Balance at beginning of period
$
$
$
(9 )
$
(231 )
$
$
(1,860 )
$
$
$
$
$
$
Changes in equity
Issues of share capital and other equity instruments
(18 )
Common shares purchased for cancellation
(13 )
(127 )
(140 )
(140 )
Redemption of preferred shares and other equity instruments
(1,023 )
(1,021 )
(1,021 )
Sales of treasury shares and other equity instruments
Purchases of treasury shares and other equity instruments
(1,225 )
(5,302 )
(6,527 )
(6,527 )
Share-based compensation awards
Dividends on common shares
(7,916 )
(7,916 )
(7,916 )
Dividends on preferred shares and distributions on other
equity instruments
(322 )
(322 )
(6 )
(328 )
Other
Net income
Total other comprehensive income (loss), net of taxes
(393 )
(489 )
Balance at end of period
$
$
$
$
(61 )
$
$
(897 )
$
$
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
147
Consolidated Statements of Cash Flows
For the year ended
(Millions of Canadian dollars)
October 31
2025
October 31
2024
Cash flows from operating activities
Net income
$
$
Adjustments for non-cash items and others
Provision for credit losses
Depreciation
Deferred income taxes
(216 )
(1,529 )
Amortization and impairment of other intangibles
(Income) loss from joint ventures and associates
(73 )
Losses (gains) on investment securities
(132 )
(170 )
Losses (gains) on disposition of business
Adjustments for net changes in operating assets and liabilities
Insurance contract liabilities
Net change in accrued interest receivable and payable
(1,880 )
Current income taxes
(936 )
Derivative assets
(26,594 )
(4,797 )
Derivative liabilities
Trading securities
(35,767 )
Loans
(62,098 )
(55,007 )
Assets purchased under reverse repurchase agreements and securities borrowed
(10,168 )
Obligations related to assets sold under repurchase agreements and securities loaned
(15,805 )
(35,581 )
Obligations related to securities sold short
Deposits
Brokers and dealers receivable and payable
(107 )
(304 )
Other
(13,078 )
(16,429 )
Net cash from (used in) operating activities
Cash flows from investing activities
Change in interest-bearing deposits with banks
Proceeds from sales and maturities of investment securities
Purchases of investment securities
(314,421 )
(193,307 )
Net acquisitions of premises and equipment and other intangibles
(2,243 )
(2,280 )
Net proceeds from (cash transferred for) dispositions
Cash used in acquisitions, net of cash acquired
(12,716 )
Net cash from (used in) investing activities
(68,569 )
(20,887 )
Cash flows from financing activities
Issuance of subordinated debentures
Repayment of subordinated debentures
(2,750 )
(1,500 )
Issue of common shares, net of issuance costs
Common shares purchased for cancellation
(2,768 )
(140 )
Issue of preferred shares and other equity instruments, net of issuance costs
Redemption of preferred shares and other equity instruments
(2,350 )
(1,021 )
Sales of treasury shares and other equity instruments
Purchases of treasury shares and other equity instruments
(10,727 )
(6,527 )
Dividends paid on shares and distributions paid on other equity instruments
(8,800 )
(6,637 )
Dividends/distributions paid to non-controlling interests
(39 )
(6 )
Change in short-term borrowings of subsidiaries
(4,507 )
Repayment of lease liabilities
(788 )
(636 )
Net cash from (used in) financing activities
(6,711 )
(8,146 )
Effect of exchange rate changes on cash and due from banks
Net change in cash and due from banks
(19,699 )
(5,266 )
Cash and due from banks at beginning of period
(1)
Cash and due from banks at end of period
(1)
$
$
Cash flows from operating activities include:
Amount of interest paid
$
$
Amount of interest received
Amount of dividends received
Amount of income taxes paid
(1)
We are required to maintain balances due to regulatory requirements or contractual restrictions from central banks, other regulatory authorities, and other
counterparties. The total balances were $3 billion as at October 31, 2025 (October 31, 2024 – $2 billion; October 31, 2023 – $3 billion).
The accompanying notes are an integral part of these Consolidated Financial Statements.
148
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
149
General information
Commercial Banking, Wealth Management, Insurance and Capital Markets products and services on a global basis. Refer to
The parent bank, Royal Bank of Canada Schedule I Bank under the
Bank Act
office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada. Our common shares are listed on the Toronto Stock Exchange
and New York Stock Exchange with the ticker symbol RY.
in Canadian dollars. Tabular information is stated in millions of dollars, except as noted. These Consolidated Financial
Statements also comply with Subsection 308 of the
Bank Act
(Canada), which states that, except as otherwise specified by the
Office of the Superintendent of Financial Institutions Canada (OSFI), our Consolidated Financial Statements are to be prepared
in accordance with IFRS. The accounting policies outlined in Note 2 have been consistently applied to all periods presented.
Summary of material accounting policies, estimates and judgments
requirements prescribed by OSFI, are summarized below. These accounting policies conform, in all material respects, to IFRS.
In preparing our Consolidated Financial Statements, management is required to make subjective estimates and assumptions
that affect the reported amount of assets, liabilities, net income and related disclosures. Estimates made by management are
based on historical experience and other assumptions that are believed to be reasonable. Key sources of estimation uncertainty
include: determination of fair value of financial instruments, allowance for credit losses, insurance and reinsurance contracts,
pensions and other post-employment benefits, income taxes, goodwill and other intangible assets, and provisions. Accordingly,
actual results may differ from these and other estimates thereby impacting our future Consolidated Financial Statements. Refer
Significant judgments
In preparation of these Consolidated Financial Statements, management is required to make significant judgments that affect
the carrying amounts of certain assets and liabilities, and the reported amounts of revenues and expenses recorded during the
period. Significant judgments have been made in the following areas and discussed as noted in the Consolidated Financial
Statements:
Consolidation of structured entities | Note 2 | Goodwill and other intangibles | Note 2 |
Note 8 | Note 11 | ||
Fair value of financial instruments | Note 2 | Application of the effective interest method | Note 2 |
Note 3 | |||
Allowance for credit losses | Note 2 | Derecognition of financial assets | Note 2 |
Note 4 | Note 7 | ||
Note 5 | |||
Insurance and reinsurance contracts | Note 2 | Income taxes | Note 2 |
Note 15 | Note 21 | ||
Employee benefits | Note 2 | Provisions | Note 2 |
Note 16 | Note 23 | ||
Note 24 |
Our Consolidated Financial Statements include the assets and liabilities and results of operations of the parent company, Royal
Bank of Canada, and its subsidiaries including certain structured entities, after elimination of intercompany transactions,
balances, revenues and expenses.
Consolidation
exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns
through our power over the investee. We have power over an entity when we have existing rights that give us the current ability
to direct the activities that most significantly affect the entity’s returns (relevant activities). Power may be determined on the
basis of voting rights or, in the case of structured entities, other contractual arrangements.
We are not deemed to control an entity when we exercise power over an entity as the agent of a third-party or parties. In
determining whether we are acting as an agent, we consider the overall relationship between us, the investee and other parties
to the arrangement with respect to the following factors: (i) the scope of our decision-making power; (ii) the rights held by other
parties; (iii) the remuneration to which we are entitled; and (iv) our exposure to variability of returns.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
150
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The determination of control is based on the current facts and circumstances and is continuously assessed. In some
circumstances, different factors and conditions may indicate that various parties control an entity depending on whether those
factors and conditions are assessed in isolation or in totality. Significant judgment is applied in determining whether we control
an entity, specifically, assessing whether we have substantive decision-making rights over the relevant activities and whether
we are exercising our power as a principal or an agent.
We consolidate all subsidiaries from the date we obtain control and cease consolidation when an entity is no longer
controlled by us. Our consolidation conclusions affect the classification and amount of assets, liabilities, revenues and
expenses reported in our Consolidated Financial Statements.
component of equity which is distinct from equity attributable to our shareholders. The net income attributable to
Our investments in associated corporations and limited partnerships over which we have significant influence are accounted for
using the equity method. The equity method is also applied to our interests in joint ventures over which we have joint control.
Under the equity method of accounting, investments are initially recorded at cost, and the carrying amount is increased or
decreased to recognize our share of the investee’s net profit or loss, including our proportionate share of the investee’s Other
Financial assets are measured at initial recognition at fair value, and are classified and subsequently measured at fair value
through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost based on our business
model for managing the financial instruments and the contractual cash flow characteristics of the instrument.
Debt instruments are measured at amortized cost if both of the following conditions are met and the asset is not designated
as FVTPL: (a) the asset is held within a business model that is Held-to-Collect (HTC) as described below, and (b) the contractual
terms of the instrument give rise to cash flows that are solely payments of principal and interest on the principal amount
outstanding (SPPI).
Debt instruments are measured at FVOCI if both of the following conditions are met and the asset is not designated as
FVTPL: (a) the asset is held within a business model that is Held-to-Collect-and-Sell (HTC&S) as described below, and (b) the
contractual terms of the instrument give rise, on specified dates, to cash flows that are SPPI.
All other debt instruments are measured at FVTPL.
Equity instruments are measured at FVTPL, unless the asset is not held for trading purposes and we make an irrevocable
election to designate the asset as FVOCI. This election is made on an instrument-by-instrument basis.
Business model assessment
We determine our business models at the level that best reflects how we manage portfolios of financial assets to achieve our
business objectives. Judgment is used in determining our business models, which is supported by relevant, objective evidence
including:
•
How the economic activities of our businesses generate benefits, for example through trading revenue, enhancing
yields or hedging funding or other costs and how such economic activities are evaluated and reported to key
management personnel;
•
The significant risks affecting the performance of our businesses, for example, market risk, credit risk, or other risks as
described in the Risk Management section of the MD&A, and the activities undertaken to manage those risks;
•
Historical and future expectations of sales of the loans or securities portfolios managed as part of a business model;
and
•
The compensation structures for managers of our businesses, to the extent that these are directly linked to the
economic performance of the business model.
Our business models fall into three categories, which are indicative of the key strategies used to generate returns:
•
HTC: The objective of this business model is to hold loans and securities to collect contractual principal and interest
cash flows. Sales are incidental to this objective and are expected to be insignificant or infrequent.
•
HTC&S: Both collecting contractual cash flows and sales are integral to achieving the objective of the business model.
•
Other fair value business models: These business models are neither HTC nor HTC&S, and primarily represent business
models where assets are held-for-trading or managed on a fair value basis.
SPPI assessment
Instruments held within a HTC or HTC&S business model are assessed to evaluate if their contractual cash flows are comprised
of solely payments of principal and interest. SPPI payments are those which would typically be expected from basic lending
arrangements. Principal amounts include par repayments from lending and financing arrangements, and interest primarily
relates to basic lending returns, including compensation for credit risk and the time value of money associated with the principal
amount outstanding over a period of time. Interest can also include other basic lending risks and costs (for example, liquidity
risk, servicing or administrative costs) associated with holding the financial asset for a period of time, and a profit margin.
Where the contractual terms introduce exposure to risk or variability of cash flows that are inconsistent with a basic lending
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
151
Trading securities include all securities that are classified as FVTPL by nature and securities designated as FVTPL. Obligations to
deliver trading securities sold but not yet purchased are recorded as liabilities and carried at fair value. Realized and unrealized
gains and losses on these securities are generally recorded in Non-interest income – Trading revenue or Non-interest income –
Other except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment
result. Dividends and interest income accruing on Trading securities are recorded in Interest and dividend income except for
amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. Interest
and dividends accrued on securities sold short are recorded in Interest expense.
Investment securities include all securities classified as FVOCI and amortized cost. All investment securities are initially
recorded at fair value and subsequently measured according to the respective classification.
Investment securities carried at amortized cost are measured using the effective interest method, and are presented net of
any allowance for credit losses, calculated in accordance with our policy for Allowance for credit losses, as described below.
Interest income, including the amortization of premiums and discounts on securities measured at amortized cost are recorded
in Interest and dividend income. Impairment gains or losses recognized on amortized cost securities are recorded in Provision
for credit losses (PCL). When a debt instrument measured at amortized cost is sold, the difference between the sale proceeds
and the amortized cost of the security at the time of the sale is recorded as Net gains on investment securities in Non-interest
income.
Debt securities carried at FVOCI are measured at fair value with unrealized gains and losses arising from changes in fair
value included in Other components of equity. Impairment gains and losses are included in PCL and correspondingly reduce the
accumulated changes in fair value included in Other components of equity. When a debt instrument measured at FVOCI is sold,
the cumulative gain or loss is reclassified from Other components of equity to Non-interest income – Net gains on investment
securities, or Non-interest income – Insurance investment result if relating to the Insurance segment.
Equity securities carried at FVOCI are measured at fair value. Unrealized gains and losses arising from changes in fair value
are recorded in Other components of equity and not subsequently reclassified to profit or loss when realized. Dividends from
FVOCI equity securities are recognized in Interest and dividend income except for amounts relating to the Insurance segment,
which are recorded in Non-interest income – Insurance investment result.
We account for all of our securities using settlement date accounting and changes in fair value between the trade date and
settlement date are reflected in income for securities measured at FVTPL, and changes in the fair value of securities measured
at FVOCI between the trade and settlement dates are recorded in OCI except for changes in foreign exchange rates on debt
A financial instrument with a reliably measurable fair value can be designated as FVTPL (the fair value option) on its initial
recognition even if the financial instrument was not acquired or incurred principally for the purpose of selling or repurchasing.
The fair value option can be used for financial assets if it eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities, or recognizing related gains and losses on a
different basis (an accounting mismatch). The fair value option can be elected for financial liabilities if: (i) the election
eliminates an accounting mismatch; (ii) the financial liability is part of a portfolio that is managed on a fair value basis, in
accordance with a documented risk management or investment strategy; or (iii) there is an embedded derivative in the financial
or non-financial host contract and the derivative is not closely related to the host contract. These instruments cannot be
reclassified out of the FVTPL category while they are held or issued.
Financial assets designated as FVTPL are recorded at fair value and any unrealized gain or loss arising due to changes in
fair value is included in Non-interest income – Trading revenue or Non-interest income – Other, depending on our business
purpose for holding the financial asset.
Financial liabilities designated as FVTPL are recorded at fair value and fair value changes attributable to changes in our
own credit risk are recorded in OCI. Own credit risk amounts recognized in OCI will not be reclassified subsequently to net
income. The remaining fair value changes not attributable to changes in our own credit risk are recorded in Non-interest
income – Trading revenue or Non-interest income – Other, depending on our business purpose for holding the financial liability,
except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result.
Upon initial recognition, if we determine that presenting the effects of own credit risk changes in OCI would create or enlarge an
accounting mismatch in net income, the full fair value change in our debt designated as FVTPL is recognized in net income. To
make that determination, we assess whether we expect that the effects of changes in the liability’s credit risk will be offset in
profit or loss by a change in the fair value of another financial instrument measured at FVTPL. Such an expectation is based on
an economic relationship between the characteristics of the liability and the characteristics of the other financial instrument.
The determination is made at initial recognition and is not reassessed. To determine the fair value adjustments on our debt
instruments designated as FVTPL, we calculate the present value of the instruments based on the contractual cash flows over
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. We determine fair value by incorporating factors
that market participants would consider in setting a price, including commonly accepted valuation approaches.
The Board of Directors provides oversight on valuation of financial instruments, primarily through the Audit Committee and
Risk Committee. The Audit Committee reviews the presentation and disclosure of financial instruments that are measured at fair
value, while the Risk Committee assesses the adequacy of governance structures and control processes for the valuation of
these instruments.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
152
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
We have established policies, procedures and controls for valuation methodologies and techniques to ensure that fair value
is reasonably estimated. Major valuation processes and controls include, but are not limited to, profit and loss decomposition,
independent price verification (IPV) and model validation standards. These control processes are managed by either Finance or
Group Risk Management and are independent of the relevant businesses and their trading functions. Profit and loss
decomposition is a process to explain the fair value changes of certain positions and is performed daily for trading portfolios. All
fair value instruments are subject to IPV, a process whereby trading function valuations are verified against external market
prices and other relevant market data. Market data sources include traded prices, brokers and price vendors. We give priority to
those third-party pricing services and prices having the highest and most consistent accuracy. The level of accuracy is
determined over time by comparing third-party price values to traders’ or system values, other pricing service values and, when
available, actual trade data. Quoted prices for identical instruments from pricing services or brokers are generally not adjusted
unless there are issues such as stale prices. If multiple quotes for identical instruments are received, fair value is based on an
average of the prices received or the quote from the most reliable vendor, after the outlier prices that fall outside of the pricing
range are removed. Other valuation techniques are used when a price or quote is not available. Some valuation processes use
models to determine fair value. We have a systematic and consistent approach to control the use of models. Valuation models
are approved for use within our model risk management framework. The framework addresses, among other things, model
development standards, validation processes and procedures and approval authorities. Model validation ensures that a model
is suitable for its intended use and sets parameters for its use. All models are revalidated regularly by qualified personnel who
are independent of the model design and development. Annually, our model risk profile is reported to the Board of Directors.
IFRS 13
Fair Value Measurement
permits an exception, through an accounting policy choice, to measure the fair value of a
portfolio of financial instruments on a net open risk position basis when certain criteria are met. We have elected to use this
policy choice to determine the fair value of certain portfolios of financial instruments, primarily derivatives, based on a net
exposure to market or credit risk.
We record valuation adjustments to appropriately reflect counterparty credit quality of our derivative portfolio, differences
between the actual counterparty collateral discount curve and standard overnight index swap (OIS) discounting for
collateralized derivatives, funding valuation adjustments (FVA) for uncollateralized and under-collateralized over-the-counter
(OTC) derivatives, unrealized gains or losses at inception of the transaction, bid-offer spreads, unobservable parameters and
model limitations. These adjustments may be subjective as they require significant judgment in the input selection, such as
implied probability of default (PD) and recovery rate, and are intended to arrive at a fair value that is determined based on
assumptions that market participants would use in pricing the financial instrument. The ultimate realized price for a transaction
may differ from its fair recorded value previously estimated using management judgment.
Valuation adjustments are recorded for the credit risk of our derivative portfolios in order to arrive at their fair values.
Credit valuation adjustments (CVA) take into account our counterparties’ creditworthiness, the current and potential future
mark-to-market of transactions and the effects of credit mitigants such as master netting and collateral agreements. CVA
amounts are derived from estimates of exposure at default (EAD), PD, recovery rates on a counterparty basis and market and
credit factor correlations. EAD is the value of expected derivative assets and liabilities at the time of default, estimated through
modelling using underlying risk factors. PD is implied from the market prices for credit protection and the credit ratings of the
counterparty. When market data is unavailable, it is estimated by incorporating assumptions and adjustments that market
participants would use for determining fair value using these inputs. Correlation is the statistical measure of how credit and
market factors may move in relation to one another. Correlation is estimated using historical data. CVA is calculated daily and
changes are recorded in Non-interest income – Trading revenue.
FVA is also calculated to incorporate the cost and benefit of funding in the valuation of uncollateralized and under-
collateralized OTC derivatives. Future expected cash flows of these derivatives are discounted to reflect the cost and benefit of
funding the derivatives by using a funding curve, implied volatilities and correlations as inputs.
Where required, a valuation adjustment is made to reflect the unrealized gain or loss at inception of a financial instrument
contract where the fair value of that financial instrument is not obtained from a quoted market price or cannot be evidenced by
other observable market transactions based on a valuation technique incorporating observable market data.
A bid-offer valuation adjustment is required when a financial instrument is valued at the mid-market price, instead of the bid
or offer price for asset or liability positions, respectively. The valuation adjustment takes into account the spread from the
mid-market price to either the bid or offer price.
Some valuation models require parameter calibration from such factors as market observable option prices. The calibration
of parameters may be sensitive to factors such as the choice of instruments or optimization methodology. A valuation
adjustment is also estimated to mitigate the uncertainties of parameter calibration and model limitations.
In determining fair value, a hierarchy is used which prioritizes the inputs to valuation techniques. The fair value hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). Determination of fair value based on this hierarchy requires the use of observable
market data whenever available. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities
that we have the ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model inputs that
are either observable, or can be corroborated by observable market data for substantially the full term of the assets or
liabilities. Level 3 inputs include one or more inputs that are unobservable and significant to the fair value of the asset or
liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available at the
measurement date. The availability of inputs for valuation may affect the selection of valuation techniques. The classification of
a financial instrument in the fair value hierarchy for disclosure purposes is based upon the lowest level of input that is
significant to the measurement of fair value.
Where observable prices or inputs are not available, management judgment is required to determine fair values by
assessing other relevant sources of information such as historical data, proxy information from similar transactions, and
through extrapolation and interpolation techniques. For more complex or illiquid instruments, significant judgment is required in
the determination of the model used, the selection of model inputs, and in some cases, the application of valuation adjustments
to the model value or quoted price for inactively traded financial instruments. The selection of model inputs may be subjective
and the inputs may be unobservable. Unobservable inputs are inherently uncertain as there is little or no market data available
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
153
from which to determine the level at which the transaction would occur under normal business circumstances. Appropriate
parameter uncertainty and market risk valuation adjustments for such inputs and other model risk valuation adjustments are
Loans are debt instruments recognized initially at fair value and are subsequently measured in accordance with the
Classification of financial assets policy provided above. The majority of our loans are carried at amortized cost using the
effective interest method, which represents the gross carrying amount less allowance for credit losses.
Interest on loans is recognized using the effective interest method and recorded in Interest income except for amounts
relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment. The estimated future
cash flows used in this calculation include those determined by the contractual term of the asset and all fees that are
considered to be integral to the effective interest rate. Also included in this amount are transaction costs and all other premiums
or discounts. Fees that relate to activities such as originating, restructuring or renegotiating loans are deferred and recognized
as Interest income over the expected term of such loans using the effective interest method. Where there is a reasonable
expectation that a loan will be originated, commitment and standby fees are also recognized as interest income over the
expected term of the resulting loans using the effective interest method. Otherwise, such fees are recorded as other liabilities
and amortized into Non-interest income over the commitment or standby period. Future prepayment fees on mortgage loans are
not included as part of the effective interest rate at origination. If prepayment fees are received on a renewal of a mortgage loan
before maturity, the fee is included as part of the effective interest rate, and if not renewed, the prepayment fee is recognized in
interest income at the prepayment date.
For loans carried at amortized cost or FVOCI, impairment losses are recognized at each balance sheet date in accordance
An allowance for credit losses (ACL) is established for all financial assets, except for financial assets classified or designated as
FVTPL and equity securities designated as FVOCI, which are not subject to impairment assessment. Assets subject to impairment
assessment include loans, debt securities, interest-bearing deposits with banks, accounts and accrued interest receivable, and
finance and operating lease receivables. ACL on loans measured at amortized cost is presented in Allowance for loan losses.
ACL on debt securities measured at FVOCI is presented in Other components of equity. Other financial assets carried at
amortized cost are presented net of ACL on our Consolidated Balance Sheets.
Off-balance sheet items subject to impairment assessment include financial guarantees and undrawn loan commitments.
ACL on off-balance sheet items is separately calculated and included in Other Liabilities – Provisions.
We measure the ACL on each balance sheet date according to a three-stage expected credit loss impairment model:
•
Performing financial assets
•
Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant
increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses
expected to result from defaults occurring over the 12 months following the reporting date.
•
Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss
allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset.
•
Impaired financial assets
•
Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit
losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying
amount of the asset, net of the loss allowance, rather than on its gross carrying amount.
The ACL is a discounted probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant
time horizon. For loan commitments, credit loss estimates consider the portion of the commitment that is expected to be drawn
over the relevant time period. For financial guarantees, credit loss estimates are based on the expected payments required
under the guarantee contract. For finance lease receivables, credit loss estimates are based on cash flows consistent with the
cash flows used in measuring the lease receivable.
Increases or decreases in the required ACL attributable to model changes and new originations, sales or maturities, and
changes in risk, parameters and exposures due to changes in loss expectations or stage transfers are recorded in PCL. Write-offs
and recoveries of amounts previously written off are recorded against ACL.
The ACL represents an unbiased estimate of expected credit losses on our financial assets as at the balance sheet date.
Judgment is required in making assumptions and estimations when calculating the ACL, including movements between the three
stages, the inclusion of forward-looking information and the application of expert credit judgment. The underlying assumptions
and estimates may result in changes to the provisions from period to period that significantly affect our results of operations.
Measurement of expected credit losses
Expected credit losses are based on a range of possible outcomes and consider all available reasonable and supportable
information, including internal and external ratings, historical credit loss experience and expectations about future cash flows.
The measurement of expected credit losses is based primarily on the product of the instrument’s PD, loss given default (LGD),
and EAD discounted to the reporting date. The main difference between Stage 1 and Stage 2 expected credit losses for
performing financial assets is the respective calculation horizon. Stage 1 estimates project PD, LGD and EAD over a maximum
period of 12 months while Stage 2 estimates project PD, LGD and EAD over the remaining lifetime of the instrument.
An expected credit loss estimate is produced for each individual exposure. Relevant parameters are modelled on a
collective basis using portfolio segmentation that allows for appropriate incorporation of forward-looking information. To
reflect other characteristics that are not already considered through modelling, expert credit judgment is exercised in
determining the final expected credit losses.
For a small percentage of our portfolios which lack detailed historical information and/or loss experience, we apply
simplified measurement approaches that may differ from what is described above. These approaches have been designed to
maximize the available information that is reliable and supportable for each portfolio and may be collective in nature.
Expected credit losses are discounted to the reporting period date using the effective interest rate.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
154
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Expected life
For instruments in Stage 2 or Stage 3, loss allowances reflect expected credit losses over the expected remaining lifetime of the
instrument. For most instruments, the expected life is limited to the remaining contractual life.
An exemption is provided for certain instruments with the following characteristics: (a) the instrument includes both a loan
and undrawn commitment component; (b) we have the contractual ability to demand repayment and cancel the undrawn
commitment; and (c) our exposure to credit losses is not limited to the contractual notice period. For products in scope of this
exemption, the expected life may exceed the remaining contractual life and is the period over which our exposure to credit
losses is not mitigated by our normal credit risk management actions. This period varies by product and risk category and is
estimated based on our historical experience with similar exposures and consideration of credit risk management actions taken
as part of our regular credit review cycle. Products in scope of this exemption include credit cards, overdraft balances and
certain revolving lines of credit. Judgment is required in determining the instruments in scope for this exemption and estimating
the appropriate remaining life based on our historical experience and credit risk mitigation practices.
Assessment of significant increase in credit risk
The assessment of significant increase in credit risk requires significant judgment. Movements between Stage 1 and Stage 2 are
based on whether an instrument’s credit risk as at the reporting date has increased significantly relative to the date it was
initially recognized. For the purposes of this assessment, credit risk is based on an instrument’s lifetime PD, not the losses we
expect to incur. The assessment is generally performed at the instrument level.
Our assessment of significant increases in credit risk is performed at least quarterly based on three factors. If any of the
following factors indicates that a significant increase in credit risk has occurred, the instrument is moved from Stage 1 to Stage 2:
(1)
We have established thresholds for significant increases in credit risk based on both a percentage and absolute change
in lifetime PD relative to initial recognition. For our wholesale portfolio, a decrease in the borrower’s risk rating is also
required to determine that credit risk has increased significantly.
(2)
Additional qualitative reviews may be performed, as necessary, to assess the staging results, which may lead to
adjustments to better reflect the positions whose credit risk has increased significantly. These reviews are completed
at both the individual borrower levels and the portfolio level and may result in an instrument, a portfolio or a portion of
a portfolio moving from Stage 1 to Stage 2.
(3)
Instruments which are 30 days past due are generally considered to have experienced a significant increase in credit
risk, even if our other metrics do not indicate that a significant increase in credit risk has occurred.
The thresholds for movement between Stage 1 and Stage 2 are symmetrical. After a financial asset has transferred to Stage 2, if
its credit risk is no longer considered to have significantly increased relative to its initial recognition, the financial asset will
move back to Stage 1.
For certain instruments with low credit risk as at the reporting date, it is presumed that credit risk has not increased
significantly relative to initial recognition. Credit risk is considered to be low if the instrument has a low risk of default, and the
borrower has the ability to fulfill their contractual obligations both in the near term and in the longer term, including periods of
adverse changes in the economic or business environment. Certain interest-bearing deposits with banks, assets purchased
under reverse repurchase agreements, insurance policy loans, and liquidity facilities extended to our multi-seller conduits have
been identified as having low credit risk.
Use of forward-looking information
The measurement of expected credit losses for each stage and the assessment of significant increase in credit risk considers
information about past events and current conditions as well as reasonable and supportable projections of future events and
economic conditions. The estimation and application of forward-looking information requires significant judgment.
The PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on the
macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the
relevant portfolio. Each macroeconomic scenario used in our expected credit loss calculation includes a projection of all
relevant macroeconomic variables used in our models for a five-year period, subsequently reverting to long-run averages.
Macroeconomic variables used in our expected credit loss models include, but are not limited to, unemployment rates, gross
domestic product growth rates, equity return indices, commodity prices and Canadian housing prices. Depending on their usage
in the models, macroeconomic variables may be projected at a country, province/state or more granular level.
Our estimation of expected credit losses in Stage 1 and Stage 2 is a discounted probability-weighted estimate that considers
a minimum of three future macroeconomic scenarios. Our base case scenario is based on macroeconomic forecasts published
by our internal economics group. The published forecasts are developed from models based on historical macroeconomic data,
derived from public sources and financial markets. Upside and downside scenarios vary relative to our base case scenario
based on reasonably possible alternative macroeconomic conditions. Additional and more severe downside scenarios are
designed to capture a broader range of potential credit losses in certain sectors. Scenario design, including the identification of
additional downside scenarios, occurs at least on an annual basis and more frequently if conditions warrant.
Scenarios are designed to capture a wide range of possible outcomes and weighted according to our best estimate of the
relative likelihood of the range of outcomes that each scenario represents. Scenario weights take into account historical
frequency, current trends, and forward-looking conditions and are updated on a quarterly basis. All scenarios considered are
applied to all portfolios subject to expected credit losses with the same probabilities.
Our assessment of significant increases in credit risk is based on changes in probability-weighted forward-looking lifetime
PDs as at the reporting date, using the same macroeconomic scenarios as the calculation of expected credit losses.
Definition of default
The definition of default used in the measurement of expected credit losses is consistent with the definition of default used for
our internal credit risk management purposes. Our definition of default may differ across products and consider both
quantitative and qualitative factors, such as the terms of financial covenants and days past due. For retail and wholesale
borrowers, except as detailed below, default occurs when the borrower is more than 90 days past due on any material obligation
to us, and/or we consider the borrower unlikely to make their payments in full without recourse action on our part, such as
taking formal possession of any collateral held. For certain credit card balances, default occurs when payments are 180 days
Consolidated Financial Statements
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155
past due. For these balances, the use of a period in excess of 90 days past due is reasonable and supported by observable data
on write-off and recovery rates experienced on historical credit card portfolios. The definition of default used is applied
consistently from period to period and to all financial instruments, unless it can be demonstrated that circumstances have
changed such that another definition of default is more appropriate.
Credit-impaired financial assets (Stage 3)
Financial assets are assessed for credit-impairment at each balance sheet date and more frequently when circumstances
warrant further assessment. Evidence of credit-impairment may include indications that the borrower is experiencing significant
financial difficulty, probability of bankruptcy or other financial reorganization, as well as a measurable decrease in the
estimated future cash flows evidenced by the adverse changes in the payments status of the borrower or economic conditions
that correlate with defaults.
An asset that is in Stage 3 will move back to Stage 2 when, as at the reporting date, it is no longer
considered to be credit-impaired. The asset will transfer back to Stage 1 when its credit risk at the reporting date is no longer
considered to have increased significantly from initial recognition, which could occur during the same reporting period as the
transfer from Stage 3 to Stage 2.
When a financial asset has been identified as credit-impaired, expected credit losses are measured as the difference
between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the instrument’s
original effective interest rate. For impaired financial assets with drawn and undrawn components, expected credit losses also
reflect any credit losses related to the portion of the loan commitment that is expected to be drawn down over the remaining life
of the instrument.
When a financial asset is credit-impaired, interest ceases to be recognized on the regular accrual basis, which accrues
income based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original effective
interest rate to the amortized cost of the asset, which is the gross carrying amount less the related ACL.
ACL for credit-impaired loans in Stage 3 are established at the borrower level, where losses related to impaired loans are
identified on individually significant loans, or collectively assessed and determined through the use of portfolio-based rates,
without reference to particular loans.
Individually assessed loans (Stage 3)
When individually significant loans are identified as impaired, we reduce the carrying value of the loans to their estimated
realizable value by recording an individually assessed ACL to cover identified credit losses. The individually assessed ACL
reflects the expected amount of principal and interest calculated under the terms of the original loan agreement that will not be
recovered, and the impact of time delays in collecting principal and/or interest (time value of money). The estimated realizable
value for each individually significant loan is the present value of expected future cash flows discounted using the original
effective interest rate for each loan. When the amounts and timing of future cash flows cannot be estimated with reasonable
reliability, the estimated realizable amount may be determined using observable market prices for comparable loans, the fair
value of collateral underlying the loans, and other reasonable and supported methods based on management judgment.
Individually-assessed allowances are established in consideration of a range of possible outcomes, which may include
macroeconomic or non-macroeconomic scenarios, to the extent relevant to the circumstances of the specific borrower being
assessed. Assumptions used in estimating expected future cash flows reflect current and expected future economic conditions
and are generally consistent with those used in Stage 1 and Stage 2 measurement.
Significant judgment is required in assessing evidence of credit-impairment and estimation of the amount and timing of
future cash flows when determining expected credit losses. Changes in the amount expected to be recovered would have a
direct impact on PCL and may result in a change in the ACL.
Collectively assessed loans (Stage 3)
Loans that are collectively assessed are grouped on the basis of similar risk characteristics, taking into account loan type,
industry, geographic location, collateral type, past due status and other relevant factors.
The collectively-assessed ACL reflects: (i) the expected amount of principal and interest calculated under the terms of the
original loan agreement that will not be recovered, and (ii) the impact of time delays in collecting principal and/or interest (time
value of money).
The expected principal and interest collection is estimated on a portfolio basis and references historical loss experience of
comparable portfolios with similar credit risk characteristics, adjusted for the current environment and expected future
conditions. A portfolio specific coverage ratio is applied against the impaired loan balance in determining the collectively-
assessed ACL. The time value of money component is calculated by using the discount factors applied to groups of loans sharing
common characteristics. The discount factors represent the expected recovery pattern of the comparable group of loans, and
reflect the historical experience of these groups adjusted for current and expected future economic conditions and/or industry
factors. Significant judgment is required in assessing evidence of credit-impairment and estimation of the amount and timing of
future cash flows when determining expected credit losses. Changes in the amount expected to be recovered would have a
direct impact on PCL and may result in a change in the ACL.
Write-off of loans
Loans and the related ACL are written off, either partially or in full, when there is no realistic prospect of recovery. Where loans
are secured, they are generally written off after receipt of any proceeds from the realization of collateral. In circumstances
where the net realizable value of any collateral has been determined and there is no reasonable expectation of further recovery,
write off may be earlier. For credit cards, the balances and related ACL are generally written off when payment is 180 days past
due. Personal loans are generally written off at 150 days past due.
Modifications
The original terms of a financial asset may be renegotiated or otherwise modified, resulting in changes to the contractual terms
of the financial asset that affect the contractual cash flows. The treatment of such modifications is primarily based on the
process undertaken to execute the renegotiation and the nature and extent of the expected changes. In the normal course of
business, modifications which are performed for credit reasons, primarily related to troubled debt restructurings, are generally
treated as modifications of the original financial asset. Modifications which are performed for other than credit reasons are
generally considered to be an expiry of the original cash flows; accordingly, such renegotiations are treated as a derecognition
of the original financial asset and recognition of a new financial asset.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
156
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
If a modification of terms does not result in derecognition of the financial asset, the carrying amount of the financial asset
is recalculated as the present value of the renegotiated or modified contractual cash flows, discounted at the original effective
interest rate and a gain or loss is recognized. The financial asset continues to be subject to the same assessments for significant
increase in credit risk relative to initial recognition and credit-impairment, as described above. A modified financial asset will
transfer out of Stage 3 if the conditions that led to it being identified as credit-impaired are no longer present and relate
objectively to an event occurring after the original credit-impairment was recognized. A modified financial asset will transfer out
of Stage 2 when it no longer satisfies the relative thresholds set to identify significant increases in credit risk, which are based
on changes in its lifetime PD, days past due and other qualitative considerations. The financial asset continues to be monitored
for significant increases in credit risk and credit-impairment.
If a modification of terms results in derecognition of the original financial asset and recognition of the new financial asset,
the new financial asset will generally be recorded in Stage 1, unless it is determined to be credit-impaired at the time of the
renegotiation. For the purposes of assessing for significant increases in credit risk, the date of initial recognition for the new
When derivatives are embedded in other financial instruments or host contracts, such combinations are known as hybrid
instruments. If the host contract is a financial asset within the scope of IFRS 9
Financial Instruments
(IFRS 9), the classification
and measurement criteria are applied to the entire hybrid instrument as described in the Classification of financial assets
section of Note 2. If the host contract is a financial liability or an asset that is not within the scope of IFRS 9, embedded
derivatives are separately recognized if the economic characteristics and risks of the embedded derivative are not clearly and
closely related to the host contract, unless an election has been made to elect the fair value option, as described above. The
host contract is accounted for in accordance with the relevant standards. Embedded derivatives are presented on a combined
basis with the host contracts.
All derivative instruments are recorded on our Consolidated Balance Sheets at fair value, inclusive of valuation
adjustments. When derivatives are used in trading activities, the realized and unrealized gains and losses on these derivatives
are recognized in Non-interest income – Trading revenue. When derivatives are used to manage our own exposures, we
determine for each derivative whether hedge accounting can be applied, as discussed in the Hedge accounting section below.
For derivatives used to manage our own exposures where we do not apply hedge accounting, the realized and unrealized gains
Financial assets are derecognized from our Consolidated Balance Sheets when our contractual rights to the cash flows from the
assets have expired, when we retain the rights to receive the cash flows of the assets but assume an obligation to pay those
cash flows to a third-party subject to certain pass-through requirements or when we transfer our contractual rights to receive
the cash flows and substantially all of the risks and rewards of the assets have been transferred. When we retain substantially
all of the risks and rewards of the transferred assets, the transferred assets are not derecognized from our Consolidated
Balance Sheets and are accounted for as secured financing transactions. When we neither retain nor transfer substantially all
risks and rewards of ownership of the assets, we derecognize the assets if control over the assets is relinquished. If we retain
control over the transferred assets, we continue to recognize the transferred assets to the extent of our continuing involvement.
Management judgment is applied in determining whether the contractual rights to the cash flows from the transferred
assets have expired or whether we retain the rights to receive cash flows on the assets but assume an obligation to pay for
those cash flows. We derecognize transferred financial assets if we transfer substantially all the risks and rewards of the
ownership in the assets. When assessing whether we have transferred substantially all of the risk and rewards of the transferred
assets, management considers our exposure before and after the transfer with the variability in the amount and timing of the
net cash flows of the transferred assets. In transfers in which we retain the servicing rights, management has applied judgment
in assessing the benefits of servicing against market expectations. When the benefits of servicing are greater than fair value, a
servicing asset is recognized in Other assets in our Consolidated Balance Sheets. When the benefits of servicing are less than
fair value, a servicing liability is recognized in Other liabilities in our Consolidated Balance Sheets.
Derecognition of financial liabilities
We derecognize a financial liability from our Consolidated Balance Sheets when our obligation specified in the contract expires,
or is discharged or cancelled. We recognize the difference between the carrying amount of a financial liability transferred and
Interest is recognized in Interest income and Interest expense in the Consolidated Statements of Income for all interest-bearing
financial instruments except for amounts relating to the Insurance segment, which are recorded in Non-interest income –
Insurance investment result. The effective interest rate is the rate that discounts estimated future cash flows over the expected
life of the financial asset or liability to the net carrying amount upon initial recognition. Significant judgment is applied in
Dividend income is recognized when the right to receive payment is established and is recorded in Interest and dividend income
except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result.
This is the ex-dividend date for listed equity securities, and usually the date when shareholders have approved the dividend for
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157
Transaction costs are expensed as incurred for financial instruments classified or designated as FVTPL. For other financial
instruments, transaction costs are capitalized on initial recognition. For financial assets and financial liabilities measured at
amortized cost and debt financial assets measured at FVOCI, capitalized transaction costs are amortized through net income
Financial assets and financial liabilities are offset on the Consolidated Balance Sheets when there exists both a legally
enforceable right to offset the recognized amounts and an intention to settle on a net basis, or realize the asset and settle the
We purchase securities under agreements to resell (reverse repurchase agreements) and take possession of these securities.
We monitor the market value of the securities purchased and additional collateral is obtained when appropriate. We have the
right to liquidate the collateral held in the event of counterparty default. Reverse repurchase agreements are treated as
collateralized lending transactions. We also sell securities under agreements to repurchase (repurchase agreements), which are
treated as collateralized borrowing transactions. The securities received under reverse repurchase agreements and securities
delivered under repurchase agreements are not recognized on, or derecognized from, our Consolidated Balance Sheets,
respectively, unless the risks and rewards of ownership are obtained or relinquished.
Reverse repurchase agreements and repurchase agreements are carried on our Consolidated Balance Sheets at the
amounts at which the securities were initially acquired or sold, except when they are classified or designated as FVTPL and are
recorded at fair value. Interest earned on reverse repurchase agreements is included in Interest income, and interest incurred
on repurchase agreements is included in Interest expense in our Consolidated Statements of Income while changes in fair value
for reverse repurchase agreements and repurchase agreements classified or designated as FVTPL are included in Trading
revenue or Other in Non-interest income except for amounts relating to the Insurance segment, which are recorded in
We have elected to continue to apply the hedge accounting principles under IAS 39 instead of those under IFRS 9.
We use derivatives and non-derivatives in our hedging strategies to manage our exposure to interest rate, currency, credit
and other market risks. Our hedging strategies include the use of fair value hedges, cash flow hedges and net investment
hedges. Derivatives used in hedging relationships are recorded in Other Assets – Derivatives or Other Liabilities – Derivatives on
our Consolidated Balance Sheets. Foreign currency-denominated liabilities used in net investment hedging relationships are
recorded in Deposits – Business and Government and Subordinated debentures on our Consolidated Balance Sheets. We assess,
both at the inception of the hedge and on an ongoing basis, whether the hedging instruments are ‘highly effective’ in offsetting
changes in the fair value or cash flows of the hedged items. A hedge is regarded as highly effective only if the following criteria
are met: (i) at inception of the hedge and throughout its life, the hedge is expected to be highly effective in achieving offsetting
changes in fair value or cash flows attributable to the hedged risk, and (ii) actual results of the hedge are within a
pre-determined range. We perform effectiveness testing to demonstrate that the relationship has been and is expected to be
effective over the remaining term of the hedge. In the case of hedging a forecast transaction, the transaction must have a high
probability of occurring and must present an exposure to variations in cash flows that could ultimately affect the reported net
profit or loss. Hedge accounting is discontinued when it is determined that the hedging instrument is no longer effective as a
hedge, the hedging instrument or hedged item is terminated or sold, or the forecast transaction is no longer deemed highly
probable. Refer to Note 9 for the fair value of derivatives and non-derivative instruments categorized by their hedging
Fair value hedges
In a fair value hedging relationship, the carrying value of the hedged item is adjusted for changes in fair value attributable to the
hedged risk and recognized in Non-interest income – Other. Changes in fair value of the hedged item, to the extent that the
hedging relationship is effective, are offset by changes in the fair value of the hedging derivative, which are also recognized in
Non-interest income – Other. When hedge accounting is discontinued, the carrying value of the hedged item is no longer
adjusted and the cumulative fair value adjustments to the carrying value of the hedged items are amortized to Non-interest
income – Other over the expected remaining life of the hedged items.
We predominantly use interest rate swaps to hedge our exposure to changes in a fixed interest rate instrument’s fair value
caused by changes in interest rates.
Cash flow hedges
In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging derivative, net of taxes, is
recognized in OCI and reclassified to profit or loss as the associated hedged forecast transaction occurs, while the ineffective
portion is recognized in Non-interest income – Other. When hedge accounting is discontinued, the cumulative amounts
previously recognized in OCI are reclassified to Net interest income during the periods when the variability in the cash flows of
the hedged item affects Net interest income. Unrealized gains and losses on derivatives are reclassified immediately to
Non-interest income – Other when the hedged item is sold or terminated early, or when the forecast transaction is no longer
expected to occur.
We predominantly use interest rate swaps to hedge the variability in cash flows related to a variable-rate asset or liability.
Net investment hedges
In hedging our foreign currency exposure to a net investment in a foreign operation, the effective portion of foreign exchange
gains and losses on the hedging instruments, net of applicable taxes, is recognized in OCI and the ineffective portion is
recognized in Non-interest income – Other. The amounts, or a portion thereof, previously recognized in Other components of
equity are recognized in Net income on the disposal, or partial disposal, of the foreign operation.
We use foreign exchange contracts and foreign currency-denominated liabilities to manage our foreign currency exposures
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
158
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Financial guarantee contracts are contracts that contingently require us to make specified payments (in cash, other assets, our
own shares or provision of services) to reimburse the holder for a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument. Liabilities are recognized on our
Consolidated Balance Sheets at the inception of a guarantee for the fair value of the obligation undertaken in issuing the
guarantee. Financial guarantees are subsequently remeasured at the higher of (i) the amount of expected credit losses and
(ii) the amount initially recognized less, when appropriate, the cumulative amount of income recognized.
If the financial guarantee contract meets the definition of a derivative, it is measured at fair value at each balance sheet
Contracts under which we accept significant insurance risk from a policyholder by agreeing to compensate the policyholder if a
specified uncertain future event adversely affects the policyholder are insurance contracts, which includes reinsurance
contracts issued. Contracts under which we transfer significant insurance risk to a reinsurer that compensates us for claims
relating to underlying insurance contracts issued by us are reinsurance contracts held, and are accounted for separately from
the underlying insurance contracts to which they relate. Embedded derivatives, investment components and promises to
provide non-insurance services are separated from the insurance or reinsurance contract provided specific criteria are met.
Insurance and reinsurance contracts are aggregated into portfolios that are subject to similar risks and are managed together,
and then divided into groups based on the period of issuance and expected profitability. Groups are separately recognized and
measured using one of three measurement models depending on the characteristics of the contracts:
•
For insurance contracts with direct participating features (applicable primarily to our segregated fund insurance
contracts), the variable fee approach (VFA) is applied.
•
For insurance contracts and reinsurance contracts held with a short duration of one year or less (applicable primarily
to our creditor reinsurance contracts issued, group life and health insurance contracts and travel insurance contracts),
the premium allocation approach (PAA) is applied.
•
The general measurement method (GMM) is applied to all remaining contracts.
Under the GMM and VFA, the carrying amount of a group of insurance or reinsurance contracts is measured as the sum of the
fulfilment cash flows and the contractual service margin (CSM). The carrying amount is also the sum of the liability for remaining
coverage and the liability for incurred claims. The liability for remaining coverage comprises the fulfilment cash flows that relate
to services that will be provided under the contracts in future periods and any remaining CSM at that date. The liability for
incurred claims includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims
that have been incurred but not yet reported. The fulfilment cash flows consist of the present value of future cash flows and a risk
adjustment for non-financial risk, discounted using the current rates as at the reporting date determined using the discount rate
methodology disclosed in Note 15. The estimates of future cash flows consider probability-weighted scenarios and include all
future cash flows that are within the contract boundary. The risk adjustment for non-financial risk represents the compensation
that we require for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the
insurance contract is fulfilled and is estimated using the margin approach disclosed in Note 15. The measurement of the groups of
contracts requires the use of judgment in setting methodologies and assumptions for morbidity, mortality, longevity, policy lapses
and other policyholder behaviour, policy dividends and directly attributable expenses, including acquisition costs allocated using
a systematic and rational method. Changes to the underlying assumptions and estimates may have a significant effect on
Non-interest income – Insurance service result and Insurance investment result. Subsequent changes in fulfilment cash flows
related to future services adjust the CSM, unless the group is onerous in which case such changes are recognized in Non-interest
income – Insurance service result along with changes related to past or current services.
For insurance contracts, the CSM represents the unearned profit (net inflows) for providing insurance coverage. For
reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. The CSM for insurance and
reinsurance contacts are released into income based on coverage units, which represent the quantity of service (insurance
coverage as well as investment-return and investment-related services) provided by a group of contracts and are determined by
considering the quantity of benefits provided under each contract and the expected coverage duration. Under the GMM, the
CSM is adjusted for interest accretion using the discount rates that were locked-in at initial recognition of the groups or the
discount rates that were locked-in at the transition date for groups where the fair value approach was applied. Under the VFA,
the CSM is adjusted for changes in the amount of our share of the fair value of the underlying items, while the changes to the fair
value of the underlying items, reflecting changes in the obligation to pay the policyholder, are recognized in Non-interest
income – Insurance investment result.
Under the PAA, the liability for remaining coverage for each group is measured as the premiums received less insurance
revenue recognized for services provided, while the liability for incurred claims is measured as the fulfillment cash flows for
incurred claims.
Losses from the recognition of onerous groups of insurance contracts, regardless of the measurement model applied, are
recognized in Non-interest income – Insurance service result immediately. Any losses recognized relating to future service can
be reversed in subsequent periods if the group of contracts is no longer onerous.
The insurance and reinsurance contract balances are remeasured at the end of each reporting period. We have elected to
update the accounting estimates made in the previous interim period when remeasuring the insurance and reinsurance
contracts in subsequent interim and annual reporting periods.
An insurance or reinsurance contract is derecognized when it is extinguished or modified such that the modification results
in a change in the measurement model, a substantially different contract boundary or a change in the scope of the applicable
standard for measuring a component of the contract.
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Royal Bank of Canada: Annual Report 2025
159
Insurance service result comprises Insurance revenue less Insurance service expense and Net income (expense) from
reinsurance contracts held.
•
Insurance revenue is recognized as we provide insurance contract services under the groups of insurance contracts.
For contracts measured using the PAA, the insurance revenue is generally recognized based on allocating expected
premium receipts over the passage of time. For contracts measured using the GMM and VFA, insurance revenue
represents the amount of consideration we expect to be entitled to in exchange for services in the period, which
includes expected claims and expenses directly attributable to fulfilling insurance contracts (excluding any investment
components), release of the risk adjustment for the period, CSM amortization to reflect services provided in the period,
an allocation of premiums that relates to recovering insurance acquisition expenses and experience adjustments for
premium receipts relating to current or past services.
•
Insurance service expense arising from insurance contracts includes incurred claims and other directly attributable
expenses in the current period (excluding investment components), amortization and impairment losses relating to
insurance acquisition cash flows where applicable, changes relating to past or current services and changes in loss
components of onerous groups of contracts.
•
Net income (expense) from reinsurance contracts held represents the amounts recovered from the reinsurers less the
allocation of premiums paid on reinsurance contracts held.
Insurance investment result comprises Net investment income, Net insurance finance income (expense) and Net
reinsurance finance income (expense) from reinsurance contracts held.
•
Net investment income primarily comprises interest and dividend income and net gains (losses) on financial
instruments, including segregated fund assets, and derivatives relating to the Insurance segment. Financial assets
supporting the Insurance segment are primarily measured at FVTPL and FVOCI.
•
Insurance and reinsurance finance income (expense) represents the net effect of and changes in the time value of
money (including the time value of money relating to risk adjustment on non-financial risks) and financial risks on
Our defined benefit pension expense, which is included in Non-interest expense – Human resources, consists of the cost of
employee pension benefits for the current year’s service, net interest on the net defined benefit liability (asset), past service
cost and gains or losses on settlement. Remeasurements of the net defined benefit obligation, which comprise actuarial gains
and losses and return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are
recognized immediately in OCI in the period in which they occur. Actuarial gains and losses comprise experience adjustments
(the effects of differences between the previous actuarial assumptions and what has actually occurred), as well as the effects of
changes in actuarial assumptions. Amounts recognized in OCI will not be reclassified subsequently to net income. Past service
cost is the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment and is
charged immediately to income.
For each defined benefit pension plan, we recognize the present value of our defined benefit obligations less the fair value
of the plan assets as a defined benefit liability reported in Other liabilities on our Consolidated Balance Sheets. For plans where
there is a net defined benefit asset, the amount is reported as an asset in Other assets on our Consolidated Balance sheets.
The calculation of defined benefit expenses and obligations requires significant judgment as the recognition is dependent
on discount rates and various actuarial assumptions such as healthcare cost trend rates, projected salary increases, retirement
age and mortality and termination rates. Due to the long-term nature of these plans, such estimates and assumptions are
subject to inherent risks and uncertainties. For our pension and other post-employment benefit plans, the discount rate is
determined by reference to market yields on high quality corporate bonds. Since the discount rate is based on currently
available yields, and involves management’s assessment of market liquidity, it is only a proxy for future yields. Actuarial
assumptions, set in accordance with current practices in the respective countries of our plans, may differ from actual
experience as country specific statistics are only estimates of future employee behaviour. These assumptions are determined by
management and are reviewed by actuaries at least annually. Changes to any of the above assumptions may affect the amounts
of benefits obligations, expenses and remeasurements that we recognize.
Our contributions to defined contribution pension plans are expensed when employees have rendered services in exchange
We offer share-based compensation plans to certain key employees and to our non-employee directors.
To account for stock options granted to employees, compensation expense is recognized over the applicable vesting period
with a corresponding increase in equity. Fair value is determined by using option valuation models, which take into account the
exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the
life of the option and other relevant factors. When the options are exercised, the exercise price proceeds together with the
amount initially recorded in equity are credited to common shares. Our other share-based compensation plans include
performance deferred share plans and deferred share unit plans for key employees (the Plans). The obligations for the Plans are
accrued over their vesting periods. The Plans are generally settled in cash.
For cash-settled awards, our accrued obligations are adjusted to their fair value at each balance sheet date. For share-
settled awards, our expected obligations recognized in equity are based on the fair value of our common shares at the date of
grant. Changes in our obligations, net of related hedges, are recorded as Non-interest expense – Human resources in our
Consolidated Statements of Income with a corresponding increase in Other liabilities for cash-settled awards and in Retained
earnings for share-settled awards. Compensation expense is recognized in the year the awards are earned by plan participants
based on the vesting schedule of the relevant plans, net of estimated forfeitures.
The compensation cost attributable to options and awards granted to employees who are eligible to retire or will become
eligible to retire during the vesting period, is recognized immediately if the employee is eligible to retire on the grant date or
over the period between the grant date and the date the employee becomes eligible to retire.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
160
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Income tax comprises current tax and deferred tax and is recognized in our Consolidated Statements of Income except to the
extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current income tax payable on profits is recognized as an expense based on the applicable tax laws in each jurisdiction in
the period in which profits arise, calculated using tax rates enacted or substantively enacted by the balance sheet date.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for accounting and
tax purposes. A deferred income tax asset or liability is determined for each temporary difference, except for earnings related to
our subsidiaries, branches, associates and interests in joint ventures where the temporary differences will not reverse in the
foreseeable future and we have the ability to control the timing of reversal. Deferred tax assets and liabilities are determined
based on the tax rates that are expected to be in effect in the period that the asset is realized or the liability is settled, based on
tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Current tax assets and
liabilities are offset when they are levied by the same taxation authority on either the same taxable entity or different taxable
entities within the same tax reporting group (which intends to settle on a net basis), and when there is a legal right to offset.
Deferred tax assets and liabilities are offset when the same conditions are satisfied. Our Consolidated Statements of Income
include items that are non-taxable or non-deductible for income tax purposes and, accordingly, this causes the income tax
provision to be different from what it would be if based on statutory rates.
assets and Other liabilities. On a quarterly basis, we review our deferred income tax assets to determine whether it is probable
that the benefits associated with these assets will be realized; this review involves evaluating both positive and negative
We are subject to income tax laws in various jurisdictions where we operate, and the complex tax laws are potentially
subject to different interpretations by us and the relevant taxation authorities. Significant judgment is required in the
interpretation of the relevant tax laws and in assessing the probability of acceptance of our tax positions to determine our tax
provision, which includes our best estimate of uncertain tax positions that are under audit or appeal by the relevant tax
authorities. We perform a review on a quarterly basis to incorporate our best assessment based on information available, but
additional liability and income tax expense could result based on the acceptance of our tax positions by the relevant tax
authorities.
The determination of our deferred tax asset or liability also requires significant management judgment as the recognition is
dependent on our projection of future taxable profits and tax rates that are expected to be in effect in the period the asset is
realized or the liability is settled. Any changes in our projection will result in changes in deferred tax assets or liabilities on our
Consolidated Balance Sheets, and also deferred tax expense on our Consolidated Statements of Income. We have applied the
exception in IAS 12
Income Taxes
from recognizing and disclosing Pillar Two deferred tax assets and liabilities. Refer to Note 21
All business combinations are accounted for using the acquisition method. Non-controlling interests, if any, are recognized at
their proportionate share of the fair value of identifiable assets and liabilities, unless otherwise indicated. Identifiable intangible
assets are recognized separately from goodwill and included in Other intangibles. Goodwill represents the excess of the price
Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing, which is
undertaken at the lowest level at which goodwill is monitored for internal management purposes. Impairment testing is
performed annually as at August 1, or more frequently if there are objective indicators of impairment, by comparing the
recoverable amount of a cash-generating unit (CGU) with its carrying amount. The recoverable amount of a CGU is the higher of
its value in use (VIU) and its fair value less costs of disposal (FVLCD). The fair value of a CGU is estimated using valuation
techniques such as a discounted cash flow method, adjusted to reflect the considerations of a prospective third-party buyer.
External evidence such as binding sale agreements or recent transactions for similar businesses within the same industry is
considered to the extent that it is available.
Significant judgment is involved in estimating the model inputs used to determine the recoverable amount of our CGUs, in
particular future cash flows, discount rates and terminal growth rates, due to the uncertainty in the timing and amount of cash
flows and the forward-looking nature of these inputs. Future cash flows are based on financial plans agreed by management
which are estimated based on forecast results, business initiatives, planned capital investments and returns to shareholders.
Discount rates are based on the bank-wide cost of capital, adjusted for CGU-specific risks and currency exposure as reflected by
differences in expected inflation. Bank-wide cost of capital is based on the Capital Asset Pricing Model, the Dividend Growth
Model and peer analysis. CGU-specific risks include country risk, business/operational risk, geographic risk (including political
risk, devaluation risk and government regulation), currency risk and price risk (including product pricing risk and inflation).
Terminal growth rates are based on the long-term steady state growth expectations in the countries within which the CGU
operates. If the future cash flows and other assumptions in future periods deviate significantly from the current amounts used in
our impairment testing, the value of our goodwill could become impaired, with any such impairment loss recognized in
Non-interest expense.
The carrying amount of a CGU includes the carrying amount of assets, liabilities and goodwill allocated to the CGU. If the
recoverable amount is less than the carrying value, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU and then to the other non-financial assets of the CGU proportionately based on the carrying
amount of each asset. Any impairment loss is charged to income in the period in which the impairment is identified. Goodwill is
stated at cost less accumulated impairment losses. Subsequent reversals of goodwill impairment are prohibited.
Upon disposal of a portion of a CGU, the carrying amount of goodwill related to the portion of the CGU sold is included in
the determination of gains or losses on disposal. The carrying amount is determined based on the relative fair value of the
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
161
Intangible assets represent identifiable non-monetary assets and are acquired either separately or through a business
combination, or generated internally. Intangible assets acquired through a business combination are recognized separately from
goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably. The
cost of a separately acquired intangible asset includes its purchase price and directly attributable costs of preparing the asset for
its intended use. In respect of internally generated intangible assets, cost includes all directly attributable costs necessary to
create, produce and prepare the asset to be capable of operating in the manner intended by management. Research and
development costs that are not eligible for capitalization are expensed. After initial recognition, an intangible asset is carried at
its cost less any accumulated amortization and accumulated impairment losses, if any. Intangible assets with a finite-life are
amortized on a straight-line basis over their estimated useful lives as follows: computer software – 3 to 10 years; and customer list
and relationships – 7 to 20 years. Intangible assets with indefinite useful lives represent mutual fund management contracts.
Intangible assets are assessed for indicators of impairment at each reporting period. If there is an indication that an
intangible asset may be impaired, an impairment test is performed by comparing the carrying amount of the intangible asset to
its recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the
recoverable amount of the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is less than its
carrying amount, the carrying amount of the intangible asset is written down to its recoverable amount as an impairment loss.
An impairment loss recognized previously is reversed if there is a change in the estimates used to determine the
recoverable amount of the asset (or CGU) since the last impairment loss was recognized. If an impairment loss is subsequently
reversed, the carrying amount of the asset (or CGU) is revised to the lower of its recoverable amount and the carrying amount
that would have been determined (net of amortization) had there been no prior impairment.
Due to the subjective nature of these estimates, significant judgment is required in determining the useful lives and
recoverable amounts of our intangible assets, and assessing whether certain events or circumstances constitute objective
evidence of impairment. Estimates of the recoverable amounts of our intangible assets rely on certain key inputs, including
future cash flows and discount rates. Future cash flows are based on sales projections and allocated costs which are estimated
based on forecast results and business initiatives. Discount rates are based on the bank-wide cost of capital, adjusted for asset-
Translation of foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates prevailing at the
balance sheet date. Foreign exchange gains and losses resulting from the translation and settlement of these items are
recognized in Non-interest income in the Consolidated Statements of Income.
Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars at historical
rates.
Assets and liabilities of our foreign operations with functional currencies other than Canadian dollars are translated into
Canadian dollars at rates prevailing at the balance sheet date, and income and expenses of these foreign operations are
translated at average rates of exchange for the reporting period.
Unrealized gains or losses arising as a result of the translation of our foreign operations along with the effective portion of
related hedges are reported in Other components of equity. Upon disposal or partial disposal of a foreign operation, an
Premises and equipment includes land, buildings, leasehold improvements, computer equipment, furniture, fixtures and other
equipment, and are stated at cost less accumulated depreciation, except for land which is not depreciated, and accumulated
impairment losses. Cost comprises the purchase price, any costs directly attributable to bringing the asset to the location and
condition necessary for its intended use, and the initial estimate of any disposal costs. Depreciation is recorded principally on a
straight–line basis over the estimated useful lives of the assets, which are 25 to 50 years for buildings, 3 to 10 years for computer
equipment, and 5 to 10 years for furniture, fixtures and other equipment. The amortization period for leasehold improvements is
the lesser of the useful life of the leasehold improvements or the lease term plus the first renewal period, if reasonably assured
of renewal. Depreciation methods, useful lives, and residual values are reassessed at each reporting period and adjusted as
Premises and equipment are assessed for indicators of impairment at each reporting period. If there is an indication that an
asset may be impaired, an impairment test is performed by comparing the asset’s carrying amount to its recoverable amount.
After the recognition of impairment, the depreciation charge is adjusted in future periods to reflect the asset’s revised
carrying amount. If an impairment is later reversed, the carrying amount of the asset is revised to the lower of the asset’s
recoverable amount and the carrying amount that would have been determined (net of depreciation) had there been no prior
impairment loss. The depreciation charge in future periods is adjusted to reflect the revised carrying amount.
At inception of a contract, we assess whether a contract is or contains a lease. A contract is, or contains, a lease if the contract
conveys the right to obtain substantially all of the economic benefits from, and direct the use of, an identified asset for a period
of time in return for consideration.
When we are the lessee in a lease arrangement, we initially record a right-of-use asset and corresponding lease liability,
except for short-term leases and leases of low-value assets. Short-term leases are leases with a lease term of 12 months or less.
Low-value assets are unspecialized, common, technologically unsophisticated, widely available and widely used
non-infrastructure assets. For short-term leases and leases of low-value assets, we record the lease payments as an operating
expense on a straight-line basis over the lease term.
Where we are reasonably certain to exercise extension and termination options, they are included in the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted at our incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the
effective interest method, recorded in Interest expense.
(continued)
Note 2
Summary of material accounting policies, estimates and judgments
162
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The right-of-use asset is initially measured based on the initial amount of the lease liability, adjusted for lease payments
made on or before the commencement date, initial direct costs incurred, and an estimate of costs to dismantle, remove, or
restore the asset, less any lease incentives received. Costs related to dismantling and removing leasehold improvements are
capitalized as part of the leasehold improvement asset (rather than the right-of-use asset of the lease) when the leasehold
improvements are separately capitalized.
The right-of-use asset is depreciated to the earlier of the lease term and the useful life, unless ownership will transfer to
RBC or we are reasonably certain to exercise a purchase option, in which case the useful life of the right-of-use asset is used. We
determine whether a right-of-use asset is impaired and account for any identified impairment loss as described in the premises
Provisions are liabilities of uncertain timing or amount and are recognized when we have a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation. Provisions are measured as the best estimate of the
consideration required to settle the present obligation at the reporting date. Significant judgment is required in determining
whether a present obligation exists and in estimating the probability, timing and amount of any outflows. We record provisions
related to litigation, asset retirement obligations and other items.
We are required to estimate the results of ongoing legal proceedings, and expenses to be incurred to dispose of capital
assets. The forward-looking nature of these estimates requires us to use a significant amount of judgment in projecting the
timing and amount of future cash flows. We record our provisions on the basis of all available information at the end of the
reporting period and make adjustments on a quarterly basis to reflect current expectations. It may not be possible to predict the
resolution of these matters or the timing of their ultimate resolution. Should actual results differ from our expectations, we may
incur expenses in excess of the provisions recognized. Where appropriate, we apply judgment in limiting the extent of our
provisions-related disclosures as not to prejudice our positions in matters of dispute.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third-party,
Commissions and fees primarily relate to Investment management and custodial fees, Mutual fund revenue, Securities
brokerage commissions, Services charges, Underwriting and other advisory fees, Card service revenue and Credit fees, and are
recognized based on the applicable service contracts with clients.
Investment management and custodial fees and Mutual fund revenue are generally calculated as a percentage of daily,
monthly or period-end net asset values (NAV) based on the terms of the contract with clients and are received monthly,
quarterly, semiannually or annually, depending on the terms of the contract. Investment management and custodial fees are
generally derived from assets under management (AUM) when our clients solicit the investment capabilities of an investment
manager or from assets under administration (AUA) where the investment strategy is directed by the client or a designated
third-party manager. Mutual fund revenue is generally derived from the daily NAV of the mutual funds. Investment management
and custodial fees and Mutual fund revenue are recognized over time when the service is provided to the client, provided that it
is highly probable that a significant reversal in the amount of revenue recognized will not occur.
Commissions earned on Securities brokerage services and Service charges that are related to the provision of specific
transaction-type services are recognized when the service is fulfilled. Where services are provided over time, revenue is
recognized as the services are provided.
Underwriting and other advisory fees primarily relate to underwriting of new issuances of debt or equity and various
advisory services. Underwriting fees are generally expressed as a percentage of the funds raised through issuance and are
recognized when the service has been completed. Advisory fees vary depending on the scope and type of engagement and can
be fixed in nature or contingent on a future event. Advisory fees are recognized over the period in which the service is provided
and are recognized only to the extent that it is highly probable that a significant reversal in the amount of revenue will not occur.
Card service revenue primarily includes interchange revenue and annual card fees. Interchange revenue is calculated as a
fixed percentage of the transaction amount and recognized when the card transaction is settled. Annual card fees are fixed fees
and are recognized over a 12-month period.
Credit fees are primarily earned for arranging syndicated loans and making credit available on undrawn facilities. The
timing of the recognition of credit fees varies based on the nature of the services provided.
When service fees and other costs are incurred in relation to commissions and fees earned, we record these costs on a
gross basis in either Non-interest expense – Other or Non-interest expense – Human resources based on our assessment of
whether we have primary responsibility to fulfill the contract with the client and have discretion in establishing the price for the
Earnings per share is computed by dividing Net income available to common shareholders by the weighted average number of
common shares outstanding for the period. Net income available to common shareholders is determined after deducting dividend
entitlements of preferred shareholders and distributions on other equity instruments, any gains (losses) on redemption of preferred
shares and other equity instruments net of related income taxes and the net income attributable to non-controlling interests.
Diluted earnings per share reflects the potential dilution that could occur if additional common shares are assumed to be
issued under securities or contracts that entitle their holders to obtain common shares in the future, to the extent such
entitlement is not subject to unresolved contingencies. For contracts that may be settled in cash or in common shares at our
option, diluted earnings per share is calculated based on the assumption that such contracts will be settled in shares. Income
and expenses associated with these types of contracts are excluded from the Net income available to common shareholders,
and the additional number of shares that would be issued is included in the diluted earnings per share calculation. For stock
options whose exercise price is less than the average market price of our common shares, using the treasury stock method, they
are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
163
period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in
We classify a financial instrument that we issue as a financial asset, financial liability or an equity instrument in accordance
with the substance of the contractual arrangement.
Our common shares held by us are classified as treasury shares in equity and accounted for at weighted average cost. Upon
the sale of treasury shares, the difference between the sale proceeds and the cost of the shares is recognized in Retained
earnings. Financial instruments issued by us are classified as equity instruments when there is no contractual obligation to
transfer cash or other financial assets. Incremental costs directly attributable to the issue of equity instruments are included in
equity as a deduction from the proceeds, net of tax. Financial instruments that will be settled by a variable number of our
common shares upon their conversion by the holders as well as the related accrued distributions are classified as liabilities on
our Consolidated Balance Sheets. Dividends and yield distributions on these instruments are classified as Interest expense in
our Consolidated Statements of Income. For compound instruments comprised of both liability and equity components, the
In May 2024, the IASB issued
Amendments to the Classification and Measurement of Financial Instruments
which amends IFRS 9
Financial Instruments
and IFRS 7
Financial Instruments: Disclosures
(the Amendments). The Amendments clarify the recognition
and derecognition of financial instruments and introduce an accounting policy option for financial liabilities settled through
electronic payment systems. The Amendments also clarify classification guidance for financial assets with contingent features
not directly related to changes in basic lending risks and introduce additional related disclosure requirements for financial
instruments with such contingent features. The Amendments will be effective for us on November 1, 2026 and will be applied
retrospectively with no restatement of comparative periods required. To manage the implementation of the Amendments, we
established a program to assess the impact on systems, processes and financial reporting. We continue to assess the impact of
adopting the Amendments on our Consolidated Financial Statements.
IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18)
In April 2024, the IASB issued IFRS 18, which sets out requirements for the presentation and disclosure of information in the
financial statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements and accompanies limited amendments to
other standards which will be effective upon the adoption of the new standard. The standard introduces new defined subtotals
to be presented in the Consolidated Statements of Income, disclosure of management-defined performance measures and
requirements for aggregation and disaggregation of information. This standard will be effective for us on November 1, 2027 and
will be applied retrospectively with restatement of comparative periods. To manage the transition to IFRS 18, we established a
program to assess the impact on systems, processes and financial reporting required for adoption. We continue to assess the
Fair value of financial instruments
Carrying value and fair value of financial instruments
The following tables provide a comparison of the carrying and fair values for each classification of financial instruments.
Embedded derivatives are presented on a combined basis with the host contracts in the Consolidated Balance Sheets. For
measurement purposes, they are carried at fair value when conditions requiring separation are met.
As at October 31, 2025 | ||||||||
Carrying value and fair value | Carrying value | Fair value | ||||||
Financial | Financial | Financial | Financial | Financial | Financial | |||
instruments | instruments | instruments | instruments | instruments | instruments | Total | ||
classified as | designated as | classified as | designated as | measured at | measured at | carrying | Total | |
(Millions of Canadian dollars) | FVTPL | FVTPL | FVOCI | FVOCI | amortized cost | amortized cost | amount | fair value |
Financial assets | ||||||||
Interest-bearing deposits with banks | $ – | $ 40,455 | $ – | $ – | $ 9,909 | $ 9,909 | $ 50,364 | $ 50,364 |
Securities | ||||||||
Trading | 212,878 | 6,189 | – | – | – | – | 219,067 | 219,067 |
Investment, net of applicable allowance | – | – | 240,299 | 1,496 | 100,926 | 98,728 | 342,721 | 340,523 |
212,878 | 6,189 | 240,299 | 1,496 | 100,926 | 98,728 | 561,788 | 559,590 | |
Assets purchased under reverse repurchase | ||||||||
agreements and securities borrowed | 226,213 | – | – | – | 83,470 | 83,470 | 309,683 | 309,683 |
Loans, net of applicable allowance | ||||||||
Retail | 1,128 | – | 442 | – | 646,832 | 648,413 | 648,402 | 649,983 |
Wholesale | 9,724 | – | 690 | – | 383,606 | 382,551 | 394,020 | 392,965 |
10,852 | – | 1,132 | – | 1,030,438 | 1,030,964 | 1,042,422 | 1,042,948 | |
Other | ||||||||
Derivatives | 177,206 | – | – | – | – | – | 177,206 | 177,206 |
Other assets (1) | 14,382 | – | – | – | 58,487 | 58,487 | 72,869 | 72,869 |
Financial liabilities | ||||||||
Deposits | ||||||||
Personal | $ 942 | $ 41,302 | $ 487,496 | $ 488,644 | $ 529,740 | $ 530,888 | ||
Business and government (2) | 313 | 168,690 | 777,311 | 779,130 | 946,314 | 948,133 | ||
Bank (3) | – | 2,908 | 36,654 | 36,657 | 39,562 | 39,565 | ||
1,255 | 212,900 | 1,301,461 | 1,304,431 | 1,515,616 | 1,518,586 | |||
Other | ||||||||
Obligations related to securities sold short | 49,891 | – | – | – | 49,891 | 49,891 | ||
Obligations related to assets sold under | ||||||||
repurchase agreements and securities | ||||||||
loaned | – | 242,916 | 46,600 | 46,600 | 289,516 | 289,516 | ||
Derivatives | 183,953 | – | – | – | 183,953 | 183,953 | ||
Other liabilities (4) | – | 21,688 | 58,287 | 58,293 | 79,975 | 79,981 | ||
Subordinated debentures | – | 232 | 13,729 | 13,887 | 13,961 | 14,119 | ||
(continued)
Note 3
Fair value of financial instruments
164
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
As at October 31, 2024 | ||||||||
Carrying value and fair value | Carrying value | Fair value | ||||||
Financial | Financial | Financial | Financial | Financial | Financial | |||
instruments | instruments | instruments | instruments | instruments | instruments | Total | ||
classified as | designated as | classified as | designated as | measured at | measured at | carrying | Total | |
(Millions of Canadian dollars) | FVTPL | FVTPL | FVOCI | FVOCI | amortized cost | amortized cost | amount | fair value |
Financial assets | ||||||||
Interest-bearing deposits with banks | $ – | $ 53,996 | $ – | $ – | $ 12,024 | $ 12,024 | $ 66,020 | $ 66,020 |
Securities | ||||||||
Trading | 182,346 | 954 | – | – | – | – | 183,300 | 183,300 |
Investment, net of applicable allowance | – | – | 155,118 | 1,242 | 100,258 | 96,336 | 256,618 | 252,696 |
182,346 | 954 | 155,118 | 1,242 | 100,258 | 96,336 | 439,918 | 435,996 | |
Assets purchased under reverse repurchase | ||||||||
agreements and securities borrowed | 284,311 | – | – | – | 66,492 | 66,492 | 350,803 | 350,803 |
Loans, net of applicable allowance | ||||||||
Retail | 915 | – | 580 | – | 622,098 | 619,320 | 623,593 | 620,815 |
Wholesale | 6,177 | 2,030 | 1,003 | – | 348,577 | 345,561 | 357,787 | 354,771 |
7,092 | 2,030 | 1,583 | – | 970,675 | 964,881 | 981,380 | 975,586 | |
Other | ||||||||
Derivatives | 150,612 | – | – | – | – | – | 150,612 | 150,612 |
Other assets (1) | 11,770 | – | – | – | 50,093 | 50,093 | 61,863 | 61,863 |
Financial liabilities | ||||||||
Deposits | ||||||||
Personal | $ 508 | $ 33,799 | $ 487,832 | $ 490,170 | $ 522,139 | $ 524,477 | ||
Business and government (2) | 191 | 156,238 | 683,241 | 684,748 | 839,670 | 841,177 | ||
Bank (3) | – | 10,530 | 37,192 | 37,183 | 47,722 | 47,713 | ||
699 | 200,567 | 1,208,265 | 1,212,101 | 1,409,531 | 1,413,367 | |||
Other | ||||||||
Obligations related to securities sold short | 35,286 | – | – | – | 35,286 | 35,286 | ||
Obligations related to assets sold under | ||||||||
repurchase agreements and securities | ||||||||
loaned | – | 270,663 | 34,658 | 34,658 | 305,321 | 305,321 | ||
Derivatives | 163,763 | – | – | – | 163,763 | 163,763 | ||
Other liabilities (4) | (1,407) | – | 69,597 | 69,850 | 68,190 | 68,443 | ||
Subordinated debentures | – | – | 13,546 | 13,602 | 13,546 | 13,602 | ||
(1)
Includes financial instruments recognized in Other assets.
(2)
Business and government deposits include deposits from regulated deposit-taking institutions other than banks.
(3)
Bank deposits refer to deposits from regulated banks and central banks.
(4)
Includes financial instruments recognized in Other liabilities.
For our financial assets designated as FVTPL, we measure the change in fair value attributable to changes in credit risk as the
difference between the total change in the fair value of the instrument during the period and the change in fair value calculated
using the appropriate risk-free yield curves. For the year ended October 31, 2025, the change in fair value during the period
attributable to changes in credit risk for positions still held was a loss of $1 million and the cumulative change in fair value
attributable to changes in credit risk for positions still held was a loss of $5 million. For the year ended October 31, 2024, the
change in fair value during the period attributable to changes in credit risk for positions still held was a gain of $45 million and
the cumulative change in fair value attributable to changes in credit risk for positions still held was a loss of $9 million. As at
October 31, 2025, the extent to which credit derivatives or similar instruments mitigate the maximum exposure to credit risk was
$1,035 million (October 31, 2024 – $954 million).
Financial liabilities designated as fair value through profit or loss
For our financial liabilities designated as FVTPL, we take into account changes in our own credit spread and the expected
duration of the instrument to measure the change in fair value attributable to changes in credit risk.
As at or for the year ended October 31, 2025 (1) | |||||
Contractual maturity | Difference between carrying value and contractual | Changes in fair value attributable to changes in credit risk included in OCI for positions still held | |||
(Millions of Canadian dollars) | amount (2) | Carrying value | maturity amount | During the period | Cumulative (3) |
Term deposits | |||||
Personal | $ 40,965 | $ 41,302 | $ 337 | $ 72 | $ 229 |
Business and government (4) | 174,268 | 168,690 | (5,578) | 744 | 926 |
Bank (5) | 2,903 | 2,908 | 5 | – | – |
218,136 | 212,900 | (5,236) | 816 | 1,155 | |
Other | |||||
Obligations related to assets sold under | |||||
repurchase agreements and securities | |||||
loaned | 242,931 | 242,916 | (15) | – | – |
Other liabilities | 26,925 | 21,688 | (5,237) | 401 | 401 |
Subordinated debentures | 236 | 232 | (4) | – | – |
$ 488,228 | $ 477,736 | $ (10,492) | $ 1,217 | $ 1,556 | |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
165
As at or for the year ended October 31, 2024 (1) | |||||
Contractual maturity | Difference between carrying value and contractual | Changes in fair value attributable to changes in credit risk included in OCI for positions still held | |||
(Millions of Canadian dollars) | amount (2) | Carrying value | maturity amount | During the period | Cumulative (3) |
Term deposits | |||||
Personal | $ 33,552 | $ 33,799 | $ 247 | $ 221 | $ 163 |
Business and government (4) | 162,648 | 156,238 | (6,410) | 1,204 | 177 |
Bank (5) | 10,520 | 10,530 | 10 | – | – |
206,720 | 200,567 | (6,153) | 1,425 | 340 | |
Other | |||||
Obligations related to assets sold under | |||||
repurchase agreements and securities | |||||
loaned | 270,625 | 270,663 | 38 | – | – |
Other liabilities | – | – | – | – | – |
Subordinated debentures | – | – | – | – | – |
$ 477,345 | $ 471,230 | $ (6,115) | $ 1,425 | $ 340 | |
(1)
$5 million in changes in fair value attributable to changes in credit risk were recognized in income for the year ended October 31, 2025, and $17 million in cumulative
changes in credit risk were included in income for positions still held life-to-date (October 31, 2024 – $1 million and $9 million, respectively).
(2)
Reflects the contractual undiscounted amounts due at payment dates for these financial instruments. These amounts do not reconcile directly with their associated
carrying values as these amounts incorporate only undiscounted amounts due at payment dates and do not recognize premiums, discounts, expectations of early
redemptions or mark-to-market adjustments that are recognized in the instruments’ carrying values as at the balance sheet date.
(3)
The cumulative change is measured from the initial designation of the liabilities as FVTPL. For the year ended October 31, 2025, $19 million of fair value gains previously
included in OCI relate to financial liabilities derecognized during the year (October 31, 2024 – $15 million of fair value gains).
(4)
Business and government term deposits include amounts from regulated deposit-taking institutions other than regulated banks.
(5)
Bank term deposits refer to amounts from regulated banks and central banks.
Net gains (losses) from financial instruments classified and designated as fair value through profit or loss
Financial instruments classified as FVTPL, which includes mainly trading securities, derivatives, trading liabilities, and financial
assets and liabilities designated as FVTPL are measured at fair value with realized and unrealized gains and losses recognized
in Non-interest income.
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Net gains (losses) (1) | ||
Classified as fair value through profit or loss (2) | $ 6,689 | $ 8,996 |
Designated as fair value through profit or loss (3) | (2,547) | (5,847) |
$ 4,142 | $ 3,149 | |
By product line (1) | ||
Interest rate and credit (4) | $ 2,556 | $ 2,580 |
Equities | 764 | 389 |
Foreign exchange and commodities | 822 | 180 |
$ 4,142 | $ 3,149 | |
(1)
Excludes net gains from financial instruments classified as FVTPL of $395 million (October 31, 2024 – net gains of $2,251 million for financial instruments classified or
designated as FVTPL) presented in Insurance investment result in the Consolidated Statements of Income.
(2)
Excludes derivatives designated in a hedging relationship. Refer to Note 9 for net gains (losses) on these derivatives.
(3)
For the year ended October 31, 2025, $2,555 million of net fair value losses on financial liabilities designated as FVTPL, other than those attributable to changes in our own
credit risk, were included in Non-interest income (October 31, 2024 – losses of $5,838 million).
(4)
Interest and dividend income arising from financial assets and financial liabilities and the associated costs of funding are
reported in Net interest income.
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Interest and dividend income (1), (2) | ||
Financial instruments measured at fair value through profit or loss | $ 30,502 | $ 35,550 |
Financial instruments measured at fair value through other comprehensive income | 8,778 | 7,109 |
Financial instruments measured at amortized cost | 64,545 | 62,292 |
103,825 | 104,951 | |
Interest expense (1) | ||
Financial instruments measured at fair value through profit or loss | $ 30,642 | $ 34,150 |
Financial instruments measured at amortized cost | 40,183 | 42,848 |
70,825 | 76,998 | |
Net interest income | $ 33,000 | $ 27,953 |
(1)
Excludes interest and dividend income for the year end October 31, 2025 of $1,244 million (October 31, 2024 – $958 million) and interest expense of $226 million
(October 31, 2024 – $120 million) presented in Insurance investment result in the Consolidated Statements of Income.
(2)
Includes dividend income for the year ended October 31, 2025 of $3,803 million (October 31, 2024 – $3,319 million), which is presented in Interest and dividend income in
(continued)
Note 3
Fair value of financial instruments
166
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Fee income arising from financial instruments
For the year ended October 31, 2025, we earned $6,803 million in fees from banking services (October 31, 2024 – $6,347 million).
For the year ended October 31, 2025, we also earned $19,850 million in fees from investment management, trust, custodial,
underwriting, brokerage and other similar fiduciary services to retail and institutional clients (October 31, 2024 – $17,467 million).
These fees are included in Non-interest income.
| As at | |||||||||||
| October 31, 2025 | October 31, 2024 | ||||||||||
| Fair value | Fair value | ||||||||||
measurements using | measurements using | ||||||||||
| Netting | Netting | ||||||||||
(Millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | adjustments | Fair value | Level 1 | Level 2 | Level 3 | adjustments | Fair value | |
Financial assets | |||||||||||
Interest-bearing deposits with banks | $ – | $ 40,455 | $ – | $ | $ 40,455 | $ – | $ 53,996 | $ – | $ | $ 53,996 | |
Securities | |||||||||||
Trading | |||||||||||
Debt issued or guaranteed by: | |||||||||||
Canadian government | |||||||||||
Federal | 17,707 | 2,864 | – | 20,571 | 11,611 | 2,173 | – | 13,784 | |||
Provincial and municipal | – | 16,891 | – | 16,891 | – | 16,588 | – | 16,588 | |||
U.S. federal, state, municipal and agencies (1) | 435 | 40,322 | – | 40,757 | 1,852 | 29,136 | – | 30,988 | |||
Other OECD government (2) | 7,152 | 7,265 | – | 14,417 | 2,481 | 2,153 | – | 4,634 | |||
Mortgage-backed securities | – | 74 | – | 74 | – | 3 | – | 3 | |||
Asset-backed securities | – | 1,295 | – | 1,295 | – | 1,434 | – | 1,434 | |||
Corporate debt and other debt | – | 25,957 | 32 | 25,989 | – | 26,195 | – | 26,195 | |||
Equities | 93,397 | 2,813 | 2,863 | 99,073 | 84,814 | 2,316 | 2,544 | 89,674 | |||
118,691 | 97,481 | 2,895 | 219,067 | 100,758 | 79,998 | 2,544 | 183,300 | ||||
Investment | |||||||||||
Debt issued or guaranteed by: | |||||||||||
Canadian government | |||||||||||
Federal | 30,110 | 9,756 | – | 39,866 | 4,623 | 8,546 | – | 13,169 | |||
Provincial and municipal | – | 11,318 | – | 11,318 | – | 7,554 | – | 7,554 | |||
U.S. federal, state, municipal and agencies (1) | 196 | 130,495 | – | 130,691 | 42 | 80,224 | – | 80,266 | |||
Other OECD government (2) | 1,600 | 10,333 | – | 11,933 | 2,370 | 7,786 | – | 10,156 | |||
Mortgage-backed securities | – | 2,645 | 29 | 2,674 | – | 2,603 | 31 | 2,634 | |||
Asset-backed securities | – | 10,139 | – | 10,139 | – | 9,357 | – | 9,357 | |||
Corporate debt and other debt | – | 33,544 | 134 | 33,678 | – | 31,839 | 143 | 31,982 | |||
Equities | 547 | 367 | 582 | 1,496 | 432 | 304 | 506 | 1,242 | |||
32,453 | 208,597 | 745 | 241,795 | 7,467 | 148,213 | 680 | 156,360 | ||||
Assets purchased under reverse repurchase agreements and | |||||||||||
securities borrowed | – | 226,213 | – | 226,213 | – | 284,311 | – | 284,311 | |||
Loans | – | 10,710 | 1,274 | 11,984 | – | 8,924 | 1,781 | 10,705 | |||
Other | |||||||||||
Derivatives | |||||||||||
Interest rate contracts | – | 25,871 | 293 | 26,164 | – | 27,719 | 354 | 28,073 | |||
Foreign exchange contracts | – | 100,604 | 102 | 100,706 | – | 98,480 | 3 | 98,483 | |||
Credit derivatives | – | 350 | 2 | 352 | – | 273 | – | 273 | |||
Other contracts | 11,478 | 41,543 | 110 | 53,131 | 2,553 | 23,830 | 21 | 26,404 | |||
Valuation adjustments | – | (1,035) | (45) | (1,080) | – | (1,067) | 14 | (1,053) | |||
Total gross derivatives | 11,478 | 167,333 | 462 | 179,273 | 2,553 | 149,235 | 392 | 152,180 | |||
Netting adjustments | (2,067) | (2,067) | (1,568) | (1,568) | |||||||
Total derivatives | 177,206 | 150,612 | |||||||||
Other assets | 6,108 | 8,270 | 4 | 14,382 | 5,291 | 6,472 | 7 | 11,770 | |||
$ 168,730 | $ 759,059 | $ 5,380 | $ (2,067) | $ 931,102 | $116,069 | $731,149 | $ 5,404 | $ (1,568) | $ 851,054 | ||
Financial liabilities | |||||||||||
Deposits | |||||||||||
Personal | $ – | $ 41,943 | $ 301 | $ | $ 42,244 | $ – | $ 33,829 | $ 478 | $ | $ 34,307 | |
Business and government | – | 169,003 | – | 169,003 | – | 156,429 | – | 156,429 | |||
Bank | – | 2,908 | – | 2,908 | – | 10,530 | – | 10,530 | |||
Other | |||||||||||
Obligations related to securities sold short | 18,678 | 31,213 | – | 49,891 | 15,172 | 20,114 | – | 35,286 | |||
Obligations related to assets sold under repurchase agreements and | |||||||||||
securities loaned | – | 242,916 | – | 242,916 | – | 270,663 | – | 270,663 | |||
Derivatives | |||||||||||
Interest rate contracts | – | 20,679 | 901 | 21,580 | – | 24,852 | 847 | 25,699 | |||
Foreign exchange contracts | – | 95,045 | 46 | 95,091 | – | 93,164 | 54 | 93,218 | |||
Credit derivatives | – | 262 | – | 262 | – | 218 | – | 218 | |||
Other contracts | 12,657 | 56,287 | 366 | 69,310 | 3,212 | 42,961 | 324 | 46,497 | |||
Valuation adjustments | – | (257) | 34 | (223) | – | (297) | (4) | (301) | |||
Total gross derivatives | 12,657 | 172,016 | 1,347 | 186,020 | 3,212 | 160,898 | 1,221 | 165,331 | |||
Netting adjustments | (2,067) | (2,067) | (1,568) | (1,568) | |||||||
Total derivatives | 183,953 | 163,763 | |||||||||
Other liabilities | – | 21,688 | – | 21,688 | 287 | (1,694) | – | (1,407) | |||
Subordinated debentures | – | 232 | – | 232 | – | – | – | – | |||
$ 31,335 | $ 681,919 | $ 1,648 | $ (2,067) | $ 712,835 | $ 18,671 | $650,769 | $ 1,699 | $ (1,568) | $ 669,571 | ||
(1)
United States (U.S.).
(2)
Organisation for Economic Co-operation and Development (OECD).
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
167
Fair values of our significant assets and liabilities measured on a recurring basis are determined and classified in the fair value
hierarchy table using the following valuation techniques and inputs.
Interest-bearing deposits with banks
The majority of our Interest-bearing deposits with banks are designated as FVTPL. These FVTPL deposits are composed of short-
dated deposits placed with banks, and are included in Interest-bearing deposits with banks in the fair value hierarchy table. The
fair values of these instruments are determined using the discounted cash flow method. The inputs to the valuation models
include interest rate swap curves and credit spreads, where applicable. They are classified as Level 2 instruments in the
hierarchy as the inputs are observable.
Government bonds (Canadian, U.S. and other OECD governments)
Government bonds are included in Canadian government debt, U.S. federal, state, municipal and agencies debt, Other OECD
government debt and Obligations related to securities sold short in the fair value hierarchy table. The fair values of government
issued or guaranteed debt securities in active markets are determined by reference to recent transaction prices, broker quotes,
or third-party vendor prices and are classified as Level 1 in the hierarchy. The fair values of securities that are not traded in
active markets are based on either security prices, or valuation techniques using implied yields and risk spreads derived from
prices of actively traded and similar government securities. Securities with observable prices or rate inputs as compared to
transaction prices, dealer quotes or vendor prices are classified as Level 2 in the hierarchy. Securities where inputs are
unobservable are classified as Level 3 in the hierarchy.
Corporate and U.S. municipal bonds
The fair values of corporate and U.S. municipal bonds, which are included in Corporate debt and other debt, U.S. federal, state,
municipal and agencies debt and Obligations related to securities sold short in the fair value hierarchy table, are determined
using either recently executed transaction prices, broker quotes, pricing services, or in certain instances, the discounted cash
flow method using rate inputs such as benchmark yields (Canadian Overnight Repo Rate Average (CORRA), Secured Overnight
Financing Rate (SOFR) and other similar reference rates) and risk spreads of comparable securities. Securities with observable
prices or rate inputs are classified as Level 2 in the hierarchy. Securities where inputs are unobservable are classified as Level 3
in the hierarchy.
Asset-backed securities (ABS) and Mortgage-backed securities (MBS)
ABS and MBS are included in Asset-backed securities, Mortgage-backed securities, Canadian government debt, U.S. federal,
state, municipal and agencies debt, and Obligations related to securities sold short in the fair value hierarchy table. Inputs for
valuation of ABS and MBS are, when available, traded prices, dealer or lead manager quotes, broker quotes and vendor prices of
the identical securities. When prices of the identical securities are not readily available, we use industry standard models with
inputs such as discount margins, yields, default, prepayment and LGD that are implied from transaction prices, dealer quotes or
vendor prices of comparable instruments. Where security prices and inputs are observable, ABS and MBS are classified as
Level 2 in the hierarchy. Otherwise, they are classified as Level 3 in the hierarchy.
Equities
Equities consist of listed and unlisted common shares, private equities, mutual funds and hedge funds with certain redemption
restrictions and are included in equities and obligations for securities sold short. The fair values of common shares are based on
quoted prices in active markets, where available, and are classified as Level 1 in the hierarchy. Where quoted prices in active
markets are not readily available, fair value is determined based on quoted market prices for similar securities or through
valuation techniques, such as multiples of earnings and the discounted cash flow method with forecasted cash flows and
discount rate as inputs. Private equities are classified as Level 3 in the hierarchy as their inputs are not observable. Hedge funds
are valued using Net Asset Values (NAV). If we can redeem a hedge fund at NAV prior to the next quarter end, the fund is
classified as Level 2 in the hierarchy. Otherwise, it is classified as Level 3 in the hierarchy.
Loans
Loans include base metal loans, corporate loans and asset-backed financing loans. Fair values are determined based on market
prices, if available, or discounted cash flow method using the following inputs: market interest rates, base metal commodity
prices, market based spreads of assets with similar credit ratings and terms to maturity, LGD, expected default frequency
implied from credit derivative prices, if available, and relevant pricing information such as contractual rate, origination and
maturity dates, redemption price, coupon payment frequency and day count convention. Loans with market prices or observable
inputs are classified as Level 2 in the hierarchy and loans with unobservable inputs that have significant impacts on the fair
values are classified as Level 3 in the hierarchy.
Derivatives
The fair values of exchange-traded derivatives, such as interest rate and equity options and futures, are based on quoted market
prices and are typically classified as Level 1 in the hierarchy. OTC derivatives primarily consist of interest rate contracts, foreign
exchange contracts, commodity derivatives, equity derivatives and credit derivatives. The exchange-traded or OTC interest rate,
foreign exchange and commodity and equity derivatives are included in Interest rate contracts, Foreign exchange contracts and
Other contracts, respectively, in the fair value hierarchy table. The fair values of OTC derivatives are determined using valuation
models when quoted market prices or third-party consensus pricing information are not available. The valuation models, such
as discounted cash flow method or Black-Scholes option model, incorporate observable or unobservable inputs for interest and
foreign exchange rates, equity and commodity prices (including indices), credit spreads, corresponding market volatility levels,
and other market-based pricing factors. Other adjustments to fair value include bid-offer, CVA, FVA, OIS, parameter and model
uncertainties, and unrealized gain or loss at inception of a transaction. A derivative instrument is classified as Level 2 in the
hierarchy if observable market inputs are available or the unobservable inputs are not significant to the fair value. Otherwise, it
is classified as Level 3 in the hierarchy.
(continued)
Note 3
Fair value of financial instruments
168
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Securities borrowed or purchased under resale agreements and securities loaned or sold under repurchase agreements
In the fair value hierarchy table, these instruments are included in Assets purchased under reverse repurchase agreements and
securities borrowed, and Obligations related to assets sold under repurchase agreements and securities loaned. The fair values
of these contracts are determined using valuation techniques such as the discounted cash flow method using interest rate
curves as inputs. They are classified as Level 2 instruments in the hierarchy as the inputs are observable.
Deposits
A majority of our deposits are measured at amortized cost but certain deposits are designated as FVTPL. These FVTPL deposits
include deposits taken from clients, issuances of certificates of deposits and promissory notes, and interest rate and equity
linked notes. The fair values of these instruments are determined using the discounted cash flow method and derivative option
valuation models. The inputs to the valuation models include benchmark yield curves, credit spreads, interest rates, equity and
interest rate volatility, dividends and correlation, where applicable. They are classified as Level 2 or 3 instruments in the
hierarchy, depending on the significance of the unobservable credit spreads, volatility, dividend and correlation rates.
Other liabilities
Other liabilities primarily consist of financial liabilities related to commodities such as gas and precious metals, which are
designated as FVTPL. The fair values of these liabilities are calculated by the discounted cash flow method using applicable
inputs such as market interest rates, our funding spreads, commodity forward prices and spot prices. These commodity-related
financial liabilities are classified as Level 2 instruments in the hierarchy as the inputs are observable.
The following table presents fair values of our significant Level 3 financial instruments, valuation techniques used to determine
their fair values, ranges and weighted averages of unobservable inputs.
As at October 31, 2025 (Millions of Canadian dollars, except for prices, percentages and ratios) | ||||||||
| Fair value | Range of input values (1), (2) | |||||||
Weighted | ||||||||
Significant | average / | |||||||
Reporting line in the fair value | Valuation | unobservable | Inputs | |||||
Products | hierarchy table | Assets | Liabilities | techniques | inputs (3) | Low | High | distribution |
Corporate debt and related | Corporate debt and other debt | $ – | Price-based | Prices | $ 61.56 | $ 225.00 | $ 88.89 | |
derivatives | Loans | 1,274 | Discounted cash flows | Credit spread | 1.27% | 11.23% | 6.25% | |
Derivative liabilities | $ – | Credit enhancement | 11.36% | 15.15% | 12.63% | |||
Government debt and | Corporate debt and other debt | 166 | Discounted cash flows | Yields | 3.93% | 9.00% | 6.44% | |
municipal bonds | ||||||||
Private equities, hedge fund | Equities | 3,445 | Market comparable | EV/EBITDA multiples | 4.39X | 16.40X | 7.14X | |
investments and related | Derivative liabilities | – | Discounted cash flows | EV/Rev multiples | 0.91X | 6.36X | 2.45X | |
equity derivatives | Price-based | P/E multiples | 6.27X | 25.20X | 10.34X | |||
Liquidity discounts (4) | 10.00% | 40.00% | 10.29% | |||||
Discount rate | 8.50% | 8.50% | 8.50% | |||||
NAV / prices (5) | n.a. | n.a. | n.a. | |||||
Interest rate derivatives and | Derivative assets | 293 | Discounted cash flows | Interest rates | 2.60% | 4.63% | Even | |
interest-rate-linked | Derivative liabilities | 901 | Option pricing model | CPI swap rates | 1.98% | 2.08% | Even | |
structured notes (6), (7) | IR-IR correlations | 46.50% | 94.30% | Even | ||||
FX-IR correlations | (48.50)% | 81.90% | Even | |||||
FX-FX correlations | (80.10)% | 77.70% | Even | |||||
Equity derivatives and | Derivative assets | 110 | Discounted cash flows | Dividend yields | 0.00% | 8.55% | Lower | |
equity-linked structured | Deposits | 301 | Option pricing model | EQ correlations | 6.30% | 95.85% | Middle | |
notes (6), (7) | Derivative liabilities | 324 | EQ-FX correlations | (77.11)% | 50.38% | Middle | ||
EQ volatilities | 6.00% | 146.87% | Lower | |||||
Other (8) | Derivative assets | 59 | ||||||
Other assets | 4 | |||||||
Mortgage-backed securities | 29 | |||||||
Derivative liabilities | 122 | |||||||
Total | $ 5,380 | $ 1,648 | ||||||
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
169
As at October 31, 2024 (Millions of Canadian dollars, except for prices, percentages and ratios) | ||||||||
| Fair value | Range of input values (1), (2) | |||||||
Weighted | ||||||||
Significant | average / | |||||||
Reporting line in the fair value | Valuation | unobservable | Inputs | |||||
Products | hierarchy table | Assets | Liabilities | techniques | inputs (3) | Low | High | distribution |
Corporate debt and related | Corporate debt and other debt | $ – | Price-based | Prices | $ 64.67 | $ 116.25 | $ 92.07 | |
derivatives | Loans | 1,781 | Discounted cash flows | Credit spread | 1.45% | 10.90% | 6.17% | |
Derivative liabilities | $ 2 | Credit enhancement | 11.70% | 15.60% | 13.00% | |||
Government debt and | Corporate debt and other debt | 143 | Discounted cash flows | Yields | 6.54% | 9.55% | 7.54% | |
municipal bonds | ||||||||
Private equities, hedge fund | Equities | 3,050 | Market comparable | EV/EBITDA multiples | 3.20X | 17.20X | 7.94X | |
investments and related | Derivative liabilities | – | Discounted cash flows | EV/Rev multiples | 0.70X | 5.72X | 2.59X | |
equity derivatives | Price-based | P/E multiples | 7.30X | 22.60X | 11.27X | |||
Liquidity discounts (4) | 10.00% | 40.00% | 10.40% | |||||
Discount rate | 8.50% | 8.50% | 8.50% | |||||
NAV / prices (5) | n.a. | n.a. | n.a. | |||||
Interest rate derivatives and | Derivative assets | 355 | Discounted cash flows | Interest rates | 1.89% | 4.59% | Even | |
interest-rate-linked | Derivative liabilities | 900 | Option pricing model | CPI swap rates | 1.84% | 1.96% | Even | |
structured notes (6), (7) | IR-IR correlations | 48.00% | 86.00% | Even | ||||
FX-IR correlations | (76.00)% | 66.00% | Even | |||||
FX-FX correlations | (74.00)% | 61.00% | Even | |||||
Equity derivatives and | Derivative assets | 21 | Discounted cash flows | Dividend yields | 0.00% | 10.60% | Lower | |
equity-linked structured | Deposits | 478 | Option pricing model | EQ correlations | 6.30% | 95.85% | Middle | |
notes (6), (7) | Derivative liabilities | 283 | EQ-FX correlations | (77.11)% | 50.38% | Middle | ||
EQ volatilities | 6.00% | 146.87% | Lower | |||||
Other (8) | Derivative assets | 16 | ||||||
Other assets | 7 | |||||||
Mortgage-backed securities | 31 | |||||||
Derivative liabilities | 36 | |||||||
Total | $ 5,404 | $ 1,699 | ||||||
(1)
The low and high input values represent the actual highest and lowest level inputs used to value a group of financial instruments in a particular product category. These
input ranges do not reflect the level of input uncertainty, but are affected by the different underlying instruments within the product category. The input ranges will
therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date. Where provided, the weighted average
of the input values is calculated based on the relative fair values of the instruments within the product category. The weighted averages for derivatives are not presented
in the table as they would not provide a comparable metric; instead, distribution of significant unobservable inputs within the range for each product category is
indicated in the table.
(2)
Price-based inputs are significant for certain debt securities and are based on external benchmarks, comparable proxy instruments or pre-quarter-end trade data. For
these instruments, the price input is expressed in dollars for each $100 par value. For example, with an input price of $105, an instrument is valued at a premium over its
par value.
(3)
Enterprise Value (EV); Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA); Price / Earnings (P/E); Revenue (Rev); Consumer Price Index (CPI);
Interest Rate (IR); Foreign Exchange (FX); Equity (EQ)
(4)
Fair value of securities with liquidity discount inputs totalled $624 million (October 31, 2024 – $541 million).
(5)
NAV of a hedge fund is total fair value of assets less liabilities divided by the number of fund units. Private equities are valued based on NAV or valuation techniques. The
range for NAV per unit or price per share has not been disclosed for the hedge funds or private equities due to the dispersion of prices given the diverse nature of the
investments.
(6)
The level of aggregation and diversity within each derivative instrument category may result in certain ranges of inputs being wide and inputs being unevenly distributed
across the range. In the table, we indicated whether the majority of the inputs are concentrated toward the upper, middle, or lower end of the range, or evenly distributed
throughout the range.
(7)
The structured notes contain embedded equity or interest rate derivatives with unobservable inputs that are similar to those of the equity or interest rate derivatives.
(8)
Other primarily includes certain insignificant instruments such as auction rate securities, commodity derivatives, foreign exchange derivatives, contingent
considerations, bank-owned life insurance and retractable shares.
n.a.
not applicable
Sensitivity to unobservable inputs and interrelationships between unobservable inputs
Yield, credit spreads/discount margins
A financial instrument’s yield is the interest rate used to discount future cash flows in a valuation model. An increase in the yield,
in isolation, would result in a decrease in a fair value measurement and vice versa. A credit spread/discount margin is the
difference between a debt instrument’s yield and a benchmark instrument’s yield. Benchmark instruments have high credit
quality ratings, similar maturities and are often government bonds. The credit spread/discount margin therefore represents the
discount rate used to determine the present value of future cash flows of an asset to reflect the market return required for
uncertainty in the estimated cash flows. The credit spread/discount margin for an instrument forms part of the yield used in a
discounted cash flow method.
Funding spread
Funding spreads are credit spreads specific to funding or deposit rates. A decrease in funding spreads, on its own, will increase
the fair value of our liabilities, and vice versa.
Default rates
A default rate is the rate at which borrowers fail to make scheduled loan payments. A decrease in the default rate will typically
increase the fair value of the loan, and vice versa. This effect will be significantly more pronounced for a non-government
guaranteed loan than a government guaranteed loan.
(continued)
Note 3
Fair value of financial instruments
170
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
A prepayment rate is the rate at which a loan will be repaid in advance of its expected amortization schedule. Prepayments
change the future cash flows of a loan. An increase in the prepayment rate in isolation will result in an increase in fair value
when the loan interest rate is lower than the current reinvestment rate, and a decrease in the prepayment rate in isolation will
result in a decrease in fair value when the loan interest rate is lower than the current reinvestment rate. Prepayment rates are
Recovery and LGD
A recovery rate is an estimation of the amount that can be collected in a loan default scenario. The recovery rate is the
recovered amount divided by the loan balance due, expressed as a percentage. The inverse concept of recovery is LGD. LGD is
an estimation of the loan amount not collected when a loan defaults. The LGD is the loss amount divided by the loan balance
due, expressed as a percentage. Generally, an increase in the recovery rate or a decrease in the LGD will increase the loan fair
value, and vice versa.
Volatility rates
Volatility measures the potential variability of future prices and is often measured as the standard deviation of price
movements. Volatility is an input to option pricing models used to value derivatives and issued structured notes. Volatility is
used in valuing equity, interest rate, commodity and foreign exchange options. A higher volatility rate means that the underlying
price or rate movements are more likely to occur. Higher volatility rates may increase or decrease an option’s fair value
depending on the option’s terms. The determination of volatility rates is dependent on various factors, including but not limited
to, the underlying’s market price, the strike price and maturity.
Dividend yields
A dividend yield is the underlying equity’s expected dividends expressed as an annual percentage of its price. Dividend yield is
used as an input for forward equity price and option models. Higher dividend yields will decrease the forward price, and vice
versa. A higher dividend yield will increase or decrease an option’s value, depending on the option’s terms.
Correlation rates
Correlation is the linear relationship between the movements in two different variables. Correlation is an input to the valuation
of derivative contracts and issued structured notes when an instrument’s payout is determined by correlated variables. When
variables are positively correlated, an increase in one variable will result in an increase in the other variable. When variables
are negatively correlated, an increase in one variable will result in a decrease in the other variable. The referenced variables
can be within a single asset class or market (equity, interest rate, commodities, credit and foreign exchange) or between
variables in different asset classes (equity to foreign exchange, or interest rate to foreign exchange). Changes in correlation will
either increase or decrease a financial instrument’s fair value depending on the terms of the instrument.
Interest rates
An interest rate is the percentage amount charged on a principal or notional amount. Increasing interest rates will decrease the
discounted cash flow value of a financial instrument, and vice versa.
Consumer Price Index swap rates
A CPI swap rate is expressed as a percentage of an increase in the average price of a basket of consumer goods and services,
such as transportation, food and medical care. An increase in the CPI swap rate will cause inflation swap payments to be larger,
and vice versa.
EV/EBITDA multiples, P/E multiples, EV/Rev multiples, and liquidity discounts
Private equity valuation inputs include EV/EBITDA multiples, P/E multiples and EV/Rev multiples. These are used to calculate
either enterprise value or share value of a company based on a multiple of earnings or revenue estimates. Higher multiples
equate to higher fair values for all multiple types, and vice versa. A liquidity discount may be applied when few or no
transactions exist to support the valuations.
Credit Enhancement
Credit enhancement is an input to the valuation of securitized transactions and is the amount of loan loss protection for a
senior tranche. Credit enhancement is expressed as a percentage of the transaction sizes. An increase in credit enhancement
will cause the credit spread to decrease and the tranche fair value to increase, and vice versa.
Interrelationships between unobservable inputs
Unobservable inputs, including the above discount margin, default rate, prepayment rate, and recovery and LGD, may not be
independent of each other. For example, the discount margin can be affected by a change in default rate, prepayment rate, or
recovery and LGD. Discount margins will generally decrease when default rates decline or when recovery rates increase.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
171
| For the year ended October 31, 2025 | ||||||||||
Gains | Gains | Gains | ||||||||
Fair value | (losses) | (losses) | Settlement | Transfers | Transfers | Fair value | (losses) included | |||
at beginning | included in | included | Purchases | (sales) and | into | out of | at end of | in earnings for | ||
(Millions of Canadian dollars) | of period | earnings | in OCI (1) | (issuances) | other (2) | Level 3 | Level 3 | period | positions still held | |
Assets | ||||||||||
Securities | ||||||||||
Trading | ||||||||||
Debt issued or guaranteed by: | ||||||||||
Corporate debt and other debt | $ – | $ – | $ – | $ 3 | $ (3) | $ 83 | $ (51) | $ 32 | $ – | |
Equities | 2,544 | (188) | 9 | 732 | (233) | 7 | (8) | 2,863 | (87) | |
2,544 | (188) | 9 | 735 | (236) | 90 | (59) | 2,895 | (87) | ||
Investment | ||||||||||
Mortgage-backed securities | 31 | 2 | (2) | – | (2) | – | – | 29 | 2 | |
Corporate debt and other debt | 143 | 6 | 9 | – | (24) | – | – | 134 | 6 | |
Equities | 506 | 21 | 48 | 32 | (25) | – | – | 582 | 21 | |
680 | 29 | 55 | 32 | (51) | – | – | 745 | 29 | ||
Loans | 1,781 | 66 | – | 248 | (817) | 10 | (14) | 1,274 | (3) | |
Other | ||||||||||
Net derivative balances (3) | ||||||||||
Interest rate contracts | (493) | (103) | 3 | 24 | (29) | (11) | 1 | (608) | (116) | |
Foreign exchange contracts | (51) | (4) | 2 | 4 | (1) | 100 | 6 | 56 | 3 | |
Credit derivatives | – | – | – | 2 | – | – | – | 2 | – | |
Other contracts | (303) | 5 | (1) | (127) | 19 | (360) | 511 | (256) | (35) | |
Valuation adjustments | 18 | – | – | (33) | (64) | – | – | (79) | – | |
Other assets | 7 | – | – | – | (3) | – | – | 4 | – | |
$ 4,183 | $ (195) | $ 68 | $ 885 | $ (1,182) | $ (171) | $ 445 | $ 4,033 | $ (209) | ||
Liabilities | ||||||||||
Deposits | $ (478) | $ (79) | $ (2) | $ (674) | $ 156 | $ (274) | $ 1,050 | $ (301) | $ 16 | |
$ (478) | $ (79) | $ (2) | $ (674) | $ 156 | $ (274) | $ 1,050 | $ (301) | $ 16 | ||
| For the year ended October 31, 2024 | |||||||||
Gains | Gains | Gains | |||||||
Fair value | (losses) | (losses) | Settlement | Transfers | Transfers | Fair value | (losses) included | ||
at beginning | included in | included | Purchases | (sales) and | into | out of | at end of | in earnings for | |
(Millions of Canadian dollars) | of period | earnings | in OCI (1) | (issuances) | other (2) | Level 3 | Level 3 | period | positions still held |
Assets | |||||||||
Securities | |||||||||
Trading | |||||||||
Corporate debt and other debt | $ – | $ – | $ – | $ – | $ – | $ – | $ – | $ – | $ – |
Equities | 2,266 | (195) | 5 | 577 | (88) | 1 | (22) | 2,544 | (128) |
2,266 | (195) | 5 | 577 | (88) | 1 | (22) | 2,544 | (128) | |
Investment | |||||||||
Mortgage-backed securities | 29 | – | 2 | – | – | – | – | 31 | n.s. |
Corporate debt and other debt | 149 | – | 11 | – | (17) | – | – | 143 | n.s. |
Equities | 466 | – | 35 | 6 | (3) | 2 | – | 506 | n.s. |
644 | – | 48 | 6 | (20) | 2 | – | 680 | n.s. | |
Loans | 1,859 | (25) | 37 | 513 | (445) | 70 | (228) | 1,781 | 63 |
Other | |||||||||
Net derivative balances (3) | |||||||||
Interest rate contracts | (662) | 46 | 1 | (47) | 145 | 30 | (6) | (493) | 51 |
Foreign exchange contracts | (49) | (15) | 7 | 14 | 3 | 3 | (14) | (51) | (9) |
Credit derivatives | – | – | – | – | – | – | – | – | – |
Other contracts | (438) | (139) | 2 | (106) | 8 | (330) | 700 | (303) | 31 |
Valuation adjustments | 3 | – | – | (4) | 19 | – | – | 18 | – |
Other assets | 11 | – | – | – | (4) | – | – | 7 | – |
$ 3,634 | $ (328) | $ 100 | $ 953 | $ (382) | $ (224) | $ 430 | $ 4,183 | $ 8 | |
Liabilities | |||||||||
Deposits | $ (383) | $ (119) | $ – | $ (583) | $ 165 | $ (120) | $ 562 | $ (478) | $ (40) |
$ (383) | $ (119) | $ – | $ (583) | $ 165 | $ (120) | $ 562 | $ (478) | $ (40) | |
(1)
These amounts include the foreign currency translation gains or losses arising on consolidation of foreign subsidiaries relating to the Level 3 instruments, where
applicable. The unrealized gains on Investment securities recognized in OCI were $35 million for the year ended October 31, 2025 (October 31, 2024 – gains of $38 million)
excluding the translation gains or losses arising on consolidation.
(2)
Other includes amortization of premiums or discounts recognized in net income.
(3)
Net derivatives as at October 31, 2025 included derivative assets of $462 million (October 31, 2024 – $392 million) and derivative liabilities of $1,347 million
(October 31, 2024 – $1,221 million).
n.s.
not significant
(continued)
Note 3
Fair value of financial instruments
172
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Transfers between fair value hierarchy levels for instruments carried at fair value on a recurring basis
Transfers between Level 1 and Level 2, and transfers into and out of Level 3 are assumed to occur at the end of the period. For an
asset or a liability that transfers into Level 3 during the period, the entire change in fair value for the period is excluded from the
Gains (losses) included in earnings for positions still held column of the above reconciliation, whereas for transfers out of
Level 3 during the period, the entire change in fair value for the period is included in the same column of the above
reconciliation.
Transfers between Level 1 and 2 are dependent on whether fair value is obtained on the basis of quoted market prices in active
markets (Level 1).
During the year ended October 31, 2025, transfers out of Level 1 to Level 2 included Trading U.S. federal, state, municipal and
agencies debt of $1,309 million. During the year ended October 31, 2024, transfers out of Level 1 to Level 2 included Investment
U.S. federal, state, municipal and agencies debt of $1,038 million and Trading U.S. federal, state, municipal and agencies debt of
$822 million.
During the years ended October 31, 2025 and October 31, 2024, there were no significant transfers out of Level 2 to Level 1.
Transfers between Level 2 and Level 3 are primarily due to either a change in the market observability for an input, or a change
in an unobservable input’s significance to a financial instrument’s fair value.
During the year ended October 31, 2025, transfers out of Level 2 to Level 3 included Other contracts and Deposits due to
changes in the significance of unobservable inputs and changes in the market observability of inputs. During the year ended
October 31, 2024, transfers out of Level 2 to Level 3 included Other contracts and Deposits due to changes in the significance of
unobservable inputs and changes in the market observability of inputs.
During the year ended October 31, 2025, transfers out of Level 3 to Level 2 included Deposits and Other contracts due to
changes in the significance of unobservable inputs and changes in the market observability of inputs. During the year ended
October 31, 2024, transfers out of Level 3 to Level 2 included Other contracts, Deposits and Loans due to changes in the
significance of unobservable inputs and changes in the market observability of inputs.
Positive and negative fair value movements of Level 3 financial instruments from using reasonably possible alternative
assumptions
A financial instrument is classified as Level 3 in the fair value hierarchy if one or more of its unobservable inputs may
significantly affect the measurement of its fair value. In preparing the financial statements, appropriate levels for these
unobservable input parameters are chosen so that they are consistent with prevailing market evidence or management
judgment. Due to the unobservable nature of the prices or rates, there may be uncertainty about the valuation of these Level 3
financial instruments.
The following table summarizes the impacts to fair values of Level 3 financial instruments using reasonably possible
alternative assumptions. This sensitivity disclosure is intended to illustrate the potential impact of the relative uncertainty in the
fair value of Level 3 financial instruments. In reporting the sensitivities below, we offset balances in instances where: (i) the
move in valuation factors cause an offsetting positive and negative fair value movement, (ii) both offsetting instruments are in
Level 3, and (iii) exposures are managed and reported on a net basis. With respect to overall sensitivity, it is unlikely in practice
that all reasonably possible alternative assumptions would simultaneously be realized.
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
Positive fair value | Negative fair value | Positive fair value | Negative fair value | |||
movement from | movement from | movement from | movement from | |||
using reasonably | using reasonably | using reasonably | using reasonably | |||
| Level 3 | possible | possible | Level 3 | possible | possible | |
(Millions of Canadian dollars) | fair value | alternatives | alternatives | fair value | alternatives | alternatives |
Securities | ||||||
Trading | ||||||
Corporate debt and other debt | $ 32 | $ 4 | $ (4) | $ – | $ – | $ – |
Equities | 2,863 | 24 | (23) | 2,544 | 50 | (46) |
Investment | ||||||
Mortgage-backed securities | 29 | 4 | (4) | 31 | 4 | (4) |
Corporate debt and other debt | 134 | 8 | (7) | 143 | 9 | (8) |
Equities | 582 | 53 | (52) | 506 | 45 | (44) |
Loans | 1,274 | 13 | (13) | 1,781 | 19 | (20) |
Derivatives | 462 | 11 | (10) | 392 | 5 | (4) |
Other assets | 4 | – | – | 7 | – | – |
$ 5,380 | $ 117 | $ (113) | $ 5,404 | $ 132 | $ (126) | |
Deposits | $ (301) | $ 3 | $ (3) | $ (478) | $ 15 | $ (15) |
Derivatives | (1,347) | 55 | (68) | (1,221) | 54 | (57) |
$ (1,648) | $ 58 | $ (71) | $ (1,699) | $ 69 | $ (72) | |
Sensitivity results
As at October 31, 2025, the effects of applying other reasonably possible alternative assumptions to the Level 3 asset positions
would be an increase of $117 million and a reduction of $113 million in fair value, of which $65 million and $63 million would be
recorded in Other components of equity, respectively. The effects of applying these assumptions to the Level 3 liability positions
would result in a decrease of $58 million and an increase of $71 million in fair value.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
173
Level 3 valuation inputs and approaches to developing reasonably possible alternative assumptions
The following is a summary of the unobservable inputs used in the valuation of the Level 3 instruments and our approaches to
developing reasonably possible alternative assumptions used to determine sensitivity.
Financial assets or | Sensitivity methodology |
liabilities | |
Asset-backed securities, | Sensitivities are determined based on adjusting, plus or minus one standard deviation, the |
corporate debt, government | bid-offer spreads or input prices if a sufficient number of prices are received, adjusting input |
debt, municipal bonds and | parameters such as credit spreads or using high and low vendor prices as reasonably possible |
loans | alternative assumptions. |
Private equities, hedge fund | Sensitivity of direct private equity investments is determined by (i) adjusting the discount rate |
investments and related | by 2% when the discounted cash flow method is used to determine fair value, (ii) adjusting the |
equity derivatives | price multiples based on the range of multiples of comparable companies when price-multiples- |
based models are used, or (iii) using an alternative valuation approach. The private equity fund, | |
hedge fund and related equity derivative NAVs are provided by the fund managers, and as a | |
result, there are no other reasonably possible alternative assumptions for these investments. | |
Interest rate derivatives | Sensitivities of interest rate and cross currency swaps are derived using plus or minus one |
standard deviation of the inputs, and an amount representing model and parameter uncertainty, | |
where applicable. | |
Equity derivatives | Sensitivity of the Level 3 position is determined by shifting the unobservable model inputs by |
plus or minus one standard deviation of the pricing service market data including volatility, | |
dividends or correlations, as applicable. | |
Bank funding and deposits | Sensitivities of deposits are calculated by shifting the funding curve by plus or minus certain |
basis points. | |
Structured notes | Sensitivities for interest-rate-linked and equity-linked structured notes are derived by adjusting |
inputs by plus or minus one standard deviation, and for other deposits, by estimating a | |
reasonable move in the funding curve by plus or minus certain basis points. |
(continued)
Note 3
Fair value of financial instruments
174
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
| As at October 31, 2025 | ||||||
Fair value | Fair value may not approximate carrying value | |||||
approximates | Fair value measurements using | Total | ||||
(Millions of Canadian dollars) | carrying value (1) | Level 1 | Level 2 | Level 3 | Total | fair value |
Interest-bearing deposits with banks | $ 9,909 | $ – | $ – | $ – | $ – | $ 9,909 |
Amortized cost securities (2) | – | 115 | 98,613 | – | 98,728 | 98,728 |
Assets purchased under reverse | ||||||
repurchase agreements and | ||||||
securities borrowed | 72,713 | – | 10,757 | – | 10,757 | 83,470 |
Loans | ||||||
Retail | 83,459 | – | 558,699 | 6,255 | 564,954 | 648,413 |
Wholesale | 8,135 | – | 365,890 | 8,526 | 374,416 | 382,551 |
91,594 | – | 924,589 | 14,781 | 939,370 | 1,030,964 | |
Other assets | 57,685 | – | 552 | 250 | 802 | 58,487 |
231,901 | 115 | 1,034,511 | 15,031 | 1,049,657 | 1,281,558 | |
Deposits | ||||||
Personal | 289,651 | – | 198,695 | 298 | 198,993 | 488,644 |
Business and government | 504,918 | – | 273,643 | 569 | 274,212 | 779,130 |
Bank | 23,643 | – | 13,000 | 14 | 13,014 | 36,657 |
818,212 | – | 485,338 | 881 | 486,219 | 1,304,431 | |
Obligations related to assets sold | ||||||
under repurchase agreements and | ||||||
securities loaned | 46,109 | – | 491 | – | 491 | 46,600 |
Other liabilities | 53,331 | – | 4,714 | 248 | 4,962 | 58,293 |
Subordinated debentures | – | – | 13,887 | – | 13,887 | 13,887 |
$ 917,652 | $ – | $ 504,430 | $ 1,129 | $ 505,559 | $ 1,423,211 | |
| As at October 31, 2024 | ||||||
Fair value | Fair value may not approximate carrying value | |||||
approximates | Fair value measurements using | Total | ||||
(Millions of Canadian dollars) | carrying value (1) | Level 1 | Level 2 | Level 3 | Total | fair value |
Interest-bearing deposits with banks | $ 12,024 | $ – | $ – | $ – | $ – | $ 12,024 |
Amortized cost securities (2) | – | 68 | 96,268 | – | 96,336 | 96,336 |
Assets purchased under reverse | ||||||
repurchase agreements and | ||||||
securities borrowed | 54,331 | – | 12,161 | – | 12,161 | 66,492 |
Loans | ||||||
Retail | 79,960 | – | 533,708 | 5,652 | 539,360 | 619,320 |
Wholesale | 16,022 | – | 321,684 | 7,855 | 329,539 | 345,561 |
95,982 | – | 855,392 | 13,507 | 868,899 | 964,881 | |
Other assets | 49,414 | – | 412 | 267 | 679 | 50,093 |
211,751 | 68 | 964,233 | 13,774 | 978,075 | 1,189,826 | |
Deposits | ||||||
Personal | 273,228 | – | 216,675 | 267 | 216,942 | 490,170 |
Business and government | 443,077 | – | 241,204 | 467 | 241,671 | 684,748 |
Bank | 23,942 | – | 13,241 | – | 13,241 | 37,183 |
740,247 | – | 471,120 | 734 | 471,854 | 1,212,101 | |
Obligations related to assets sold | ||||||
under repurchase agreements and | ||||||
securities loaned | 34,658 | – | – | – | – | 34,658 |
Other liabilities | 51,561 | – | 1,983 | 16,306 | 18,289 | 69,850 |
Subordinated debentures | – | – | 13,602 | – | 13,602 | 13,602 |
$ 826,466 | $ – | $ 486,705 | $ 17,040 | $ 503,745 | $ 1,330,211 | |
(1)
Certain financial instruments have not been assigned to a level as the carrying amount approximates their fair values.
(2)
Included in Securities – Investment, net of applicable allowance on the Consolidated Balance Sheets.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
175
Fair values of financial assets and liabilities carried at amortized cost and disclosed in the table above are determined using the
following valuation techniques and inputs.
Amortized cost securities
Fair values of government bonds, corporate bonds, and ABS are based on quoted prices if available for identical securities.
When prices of the identical securities are not readily available, we use industry standard models with inputs such as discount
margins, yields, default, prepayment and LGD that are implied from transaction prices, dealer quotes or vendor prices of
comparable instruments.
under repurchase agreements and securities loaned
Valuation methods used for the long-term instruments are described in the Fair value of assets and liabilities measured on a
recurring basis and classified using the fair value hierarchy section of this note. The carrying values of short-term instruments
Loans – Retail
Retail loans include residential mortgages, personal and small business loans and credit cards. For residential mortgages, and
personal and small business loans, we segregate the portfolio based on certain attributes such as product type, contractual
interest rate, term to maturity and credit scores, if applicable. Fair values of these loans are determined by the discounted cash
flow method using applicable inputs such as prevailing interest rates, contractual and posted client rates, client discounts,
credit spreads, default rates, prepayment rates, LGD and loan-to-value (LTV) ratios. Fair values of credit card receivables are
also calculated based on a discounted cash flow method with portfolio yields, write-offs and monthly payment rates as inputs.
The carrying values of short-term and variable rate loans generally approximate their fair values.
Loans – Wholesale
Where market prices are available, wholesale loans are valued based on market prices. Otherwise, fair value is determined by
the discounted cash flow method using the following inputs: market interest rates and market based spreads of assets with
similar credit ratings and terms to maturity, LGD, expected default frequency implied from credit default swap prices, if
available, and relevant pricing information such as contractual rate, origination and maturity dates, redemption price, coupon
payment frequency and date convention.
Deposits
Deposits are comprised of demand, notice, and term deposits which include senior deposit notes we have issued to provide us
with long-term funding. Fair values of term deposits are determined by one of several valuation techniques: (i) for term deposits
and similar instruments, we segregate the portfolio based on term to maturity. Fair values of these instruments are determined
by the discounted cash flow method using inputs such as client rates for new sales of the corresponding terms; and (ii) for
senior deposit notes, we use actual traded prices, vendor prices or the discounted cash flow method using a market interest rate
curve and our funding spreads as inputs. The carrying values of demand, notice, and short-term term deposits generally
approximate their fair values.
Other assets and Other liabilities
Other assets and Other liabilities include financial instruments relating to certain commodities. Fair values of these instruments
are calculated by the discounted cash flow method using applicable inputs such as market interest rates, counterparties’ credit
spreads, our funding spreads, commodity forward prices and spot prices.
Subordinated debentures
Fair values of Subordinated debentures are based on market prices, dealer quotes or vendor prices when available. Where
prices cannot be observed, fair value is determined using the discounted cash flow method, with applicable inputs such as
176
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Securities
Carrying value of securities
| As at October 31, 2025 | |||||||
| Term to maturity (1) | |||||||
With no | |||||||
Within | 3 months | 1 year to 5 | 5 years to | Over | specific | ||
(Millions of Canadian dollars) | 3 months | to 1 year | years | 10 years | 10 years | maturity | Total |
Trading (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | $ 5,832 | $ 7,418 | $ 7,068 | $ 5,529 | $ 11,615 | $ – | $ 37,462 |
U.S. federal, state, municipal | |||||||
and agencies | 2,883 | 1,906 | 20,494 | 4,981 | 10,493 | – | 40,757 |
Other OECD government | 3,976 | 4,445 | 3,064 | 1,207 | 1,725 | – | 14,417 |
Mortgage-backed securities | – | – | – | 1 | 73 | – | 74 |
Asset-backed securities | 138 | 118 | 348 | 415 | 276 | – | 1,295 |
Corporate debt and other debt (3) | 1,909 | 3,606 | 6,736 | 4,906 | 8,832 | – | 25,989 |
Equities | 99,073 | 99,073 | |||||
14,738 | 17,493 | 37,710 | 17,039 | 33,014 | 99,073 | 219,067 | |
Fair value through other | |||||||
comprehensive income (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | |||||||
Federal | |||||||
Amortized cost | 368 | 15,974 | 23,215 | 270 | – | – | 39,827 |
Fair value | 368 | 15,978 | 23,250 | 270 | – | – | 39,866 |
Yield (4) | 2.1% | 3.4% | 2.9% | 2.5% | – | – | 3.1% |
Provincial and municipal | |||||||
Amortized cost | – | 1,892 | 8,225 | 666 | 585 | – | 11,368 |
Fair value | – | 1,893 | 8,222 | 670 | 533 | – | 11,318 |
Yield (4) | – | 3.4% | 3.3% | 3.1% | 4.6% | – | 3.4% |
U.S. federal, state, municipal | |||||||
and agencies | |||||||
Amortized cost | 1,723 | 7,455 | 56,949 | 51,353 | 13,905 | – | 131,385 |
Fair value | 1,695 | 7,455 | 57,164 | 51,532 | 12,845 | – | 130,691 |
Yield (4) | 4.5% | 3.0% | 3.9% | 3.7% | 3.6% | – | 3.8% |
Other OECD government | |||||||
Amortized cost | 358 | 2,847 | 8,722 | 48 | – | – | 11,975 |
Fair value | 357 | 2,835 | 8,693 | 48 | – | – | 11,933 |
Yield (4) | 2.5% | 2.5% | 3.7% | 3.7% | – | – | 3.4% |
Mortgage-backed securities | |||||||
Amortized cost | – | – | 70 | 87 | 2,517 | – | 2,674 |
Fair value | – | – | 70 | 85 | 2,519 | – | 2,674 |
Yield (4) | – | – | 5.4% | 5.6% | 5.6% | – | 5.6% |
Asset-backed securities | |||||||
Amortized cost | – | – | 5 | 3,356 | 6,765 | – | 10,126 |
Fair value | – | – | 5 | 3,357 | 6,777 | – | 10,139 |
Yield (4) | – | – | 5.3% | 5.3% | 5.5% | – | 5.4% |
Corporate debt and other debt | |||||||
Amortized cost | 5,337 | 8,239 | 18,761 | 985 | 280 | – | 33,602 |
Fair value | 5,338 | 8,245 | 18,827 | 1,000 | 268 | – | 33,678 |
Yield (4) | 2.2% | 2.4% | 3.7% | 4.4% | 5.3% | – | 3.2% |
Equities | |||||||
Cost | 832 | 832 | |||||
Fair value (5) | 1,496 | 1,496 | |||||
Cost/Amortized cost | 7,786 | 36,407 | 115,947 | 56,765 | 24,052 | 832 | 241,789 |
Fair value | 7,758 | 36,406 | 116,231 | 56,962 | 22,942 | 1,496 | 241,795 |
Amortized cost (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | 1,302 | 3,188 | 19,544 | 5,355 | 36 | – | 29,425 |
Yield (4) | 1.4% | 1.9% | 3.1% | 2.6% | 3.8% | – | 2.8% |
U.S. federal, state, municipal | |||||||
and agencies | 2,095 | 4,607 | 18,716 | 4,778 | 19,366 | – | 49,562 |
Yield (4) | 3.1% | 3.9% | 3.0% | 3.4% | 2.9% | – | 3.1% |
Other OECD government | 795 | 2,096 | 4,367 | 137 | – | – | 7,395 |
Yield (4) | 2.6% | 2.7% | 3.8% | 4.1% | – | – | 3.4% |
Asset-backed securities | – | – | 21 | – | 126 | – | 147 |
Yield (4) | – | – | 4.7% | – | 5.4% | – | 5.3% |
Corporate debt and other debt | 1,019 | 4,099 | 9,102 | 162 | 15 | – | 14,397 |
Yield (4) | 3.2% | 3.1% | 3.6% | 3.7% | 4.8% | – | 3.4% |
Amortized cost, net of allowance | 5,211 | 13,990 | 51,750 | 10,432 | 19,543 | – | 100,926 |
Fair value | 5,210 | 14,011 | 52,093 | 10,051 | 17,363 | – | 98,728 |
Total carrying value of securities | $ 27,707 | $ 67,889 | $ 205,691 | $ 84,433 | $ 75,499 | $ 100,569 | $ 561,788 |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
177
| As at October 31, 2024 | |||||||
| Term to maturity (1) | |||||||
With no | |||||||
Within | 3 months | 1 year to 5 | 5 years to | Over | specific | ||
(Millions of Canadian dollars) | 3 months | to 1 year | years | 10 years | 10 years | maturity | Total |
Trading (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | $ 2,026 | $ 8,712 | $ 6,054 | $ 3,509 | $ 10,071 | $ – | $ 30,372 |
U.S. federal, state, municipal | |||||||
and agencies | 2,599 | 1,423 | 13,648 | 4,336 | 8,982 | – | 30,988 |
Other OECD government | 710 | 246 | 1,578 | 972 | 1,128 | – | 4,634 |
Mortgage-backed securities | – | – | – | – | 3 | – | 3 |
Asset-backed securities | 289 | 213 | 387 | 406 | 139 | – | 1,434 |
Corporate debt and other debt (3) | 2,030 | 3,178 | 8,170 | 4,200 | 8,617 | – | 26,195 |
Equities | 89,674 | 89,674 | |||||
7,654 | 13,772 | 29,837 | 13,423 | 28,940 | 89,674 | 183,300 | |
Fair value through other | |||||||
comprehensive income (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | |||||||
Federal | |||||||
Amortized cost | 2,068 | 2,810 | 7,893 | 394 | – | – | 13,165 |
Fair value | 2,068 | 2,803 | 7,904 | 394 | – | – | 13,169 |
Yield (4) | 3.2% | 2.4% | 2.9% | 2.9% | – | – | 2.9% |
Provincial and municipal | |||||||
Amortized cost | 154 | 2,768 | 3,827 | 334 | 480 | – | 7,563 |
Fair value | 154 | 2,767 | 3,833 | 333 | 467 | – | 7,554 |
Yield (4) | 3.6% | 2.2% | 3.3% | 2.7% | 4.3% | – | 3.0% |
U.S. federal, state, municipal | |||||||
and agencies | |||||||
Amortized cost | 1,154 | 1,198 | 30,773 | 33,906 | 14,601 | – | 81,632 |
Fair value | 1,182 | 1,196 | 30,797 | 33,831 | 13,260 | – | 80,266 |
Yield (4) | 5.6% | 2.1% | 3.1% | 3.9% | 3.3% | – | 3.5% |
Other OECD government | |||||||
Amortized cost | 300 | 1,510 | 8,389 | – | – | – | 10,199 |
Fair value | 300 | 1,511 | 8,345 | – | – | – | 10,156 |
Yield (4) | 1.2% | 3.6% | 3.5% | – | – | – | 3.4% |
Mortgage-backed securities | |||||||
Amortized cost | – | – | – | 58 | 2,588 | – | 2,646 |
Fair value | – | – | – | 56 | 2,578 | – | 2,634 |
Yield (4) | – | – | – | 6.1% | 5.9% | – | 5.9% |
Asset-backed securities | |||||||
Amortized cost | – | – | – | 4,258 | 5,085 | – | 9,343 |
Fair value | – | – | – | 4,263 | 5,094 | – | 9,357 |
Yield (4) | – | – | – | 6.2% | 6.4% | – | 6.3% |
Corporate debt and other debt | |||||||
Amortized cost | 7,028 | 2,703 | 20,830 | 991 | 380 | – | 31,932 |
Fair value | 7,027 | 2,707 | 20,858 | 1,010 | 380 | – | 31,982 |
Yield (4) | 3.2% | 3.8% | 4.0% | 5.0% | 5.3% | – | 3.9% |
Equities | |||||||
Cost | 728 | 728 | |||||
Fair value (5) | 1,242 | 1,242 | |||||
Cost/Amortized cost | 10,704 | 10,989 | 71,712 | 39,941 | 23,134 | 728 | 157,208 |
Fair value | 10,731 | 10,984 | 71,737 | 39,887 | 21,779 | 1,242 | 156,360 |
Amortized cost (2) | |||||||
Debt issued or guaranteed by: | |||||||
Canadian government | 216 | 7,516 | 17,571 | 6,160 | – | – | 31,463 |
Yield (4) | 2.4% | 1.7% | 3.0% | 2.0% | – | – | 2.4% |
U.S. federal, state, municipal | |||||||
and agencies | 2,029 | 5,659 | 13,197 | 4,882 | 20,221 | – | 45,988 |
Yield (4) | 2.5% | 3.6% | 3.4% | 3.2% | 2.6% | – | 3.0% |
Other OECD government | 61 | 1,133 | 5,169 | 202 | – | – | 6,565 |
Yield (4) | 0.9% | 2.3% | 3.2% | 3.3% | – | – | 3.0% |
Asset-backed securities | – | – | 2 | 32 | – | – | 34 |
Yield (4) | – | – | 0.3% | 5.6% | – | – | 5.2% |
Corporate debt and other debt | 526 | 3,677 | 11,724 | 259 | 22 | – | 16,208 |
Yield (4) | 2.9% | 3.1% | 3.6% | 3.5% | 5.3% | – | 3.5% |
Amortized cost, net of allowance | 2,832 | 17,985 | 47,663 | 11,535 | 20,243 | – | 100,258 |
Fair value | 2,826 | 17,855 | 47,481 | 10,701 | 17,473 | – | 96,336 |
Total carrying value of securities | $ 21,217 | $ 42,741 | $ 149,237 | $ 64,845 | $ 70,962 | $ 90,916 | $ 439,918 |
(1)
Actual maturities may differ from contractual maturities shown above as borrowers may have the right to extend or prepay obligations with or without penalties.
(2)
Trading securities and FVOCI securities are recorded at fair value. Amortized cost securities, included in Investment securities, are recorded at amortized cost and
presented net of allowance for credit losses.
(3)
Primarily composed of corporate debt, supra-national debt and commercial paper.
(4)
The weighted average yield is derived using the contractual interest rate and the carrying value at the end of the year for the respective securities.
(5)
Certain equity securities that are not held-for-trading purposes are designated as FVOCI.
(continued)
Note 4
Securities
178
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Unrealized gains and losses on securities at FVOCI
(1), (2)
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Cost/ | Gross | Gross | Cost/ | Gross | Gross | |||
Amortized | unrealized | unrealized | Amortized | unrealized | unrealized | |||
(Millions of Canadian dollars) | cost | gains | losses | Fair value | cost | gains | losses | Fair value |
Debt issued or guaranteed by: | ||||||||
Canadian government | ||||||||
Federal | $ 39,827 | $ 46 | $ (7) | $ 39,866 | $ 13,165 | $ 31 | $ (27) | $ 13,169 |
Provincial and municipal | 11,368 | 39 | (89) | 11,318 | 7,563 | 27 | (36) | 7,554 |
U.S. federal, state, municipal and | ||||||||
agencies | 131,385 | 622 | (1,316) | 130,691 | 81,632 | 333 | (1,699) | 80,266 |
Other OECD government | 11,975 | 14 | (56) | 11,933 | 10,199 | 6 | (49) | 10,156 |
Mortgage-backed securities | 2,674 | 7 | (7) | 2,674 | 2,646 | 3 | (15) | 2,634 |
Asset-backed securities | 10,126 | 15 | (2) | 10,139 | 9,343 | 17 | (3) | 9,357 |
Corporate debt and other debt | 33,602 | 122 | (46) | 33,678 | 31,932 | 101 | (51) | 31,982 |
Equities | 832 | 669 | (5) | 1,496 | 728 | 519 | (5) | 1,242 |
$ 241,789 | $ 1,534 | $ (1,528) | $ 241,795 | $ 157,208 | $ 1,037 | $ (1,885) | $ 156,360 | |
(1)
Excludes $100,926 million of held-to-collect securities as at October 31, 2025 that are carried at amortized cost, net of allowance for credit losses (October 31, 2024 –
$100,258 million).
(2)
Gross unrealized gains and losses includes $(40) million of allowance for credit losses on debt securities at FVOCI as at October 31, 2025 (October 31, 2024 – $(35) million)
recognized in income and Other components of equity.
The following tables reconcile the opening and closing allowance for debt securities at FVOCI and amortized cost by stage.
Reconciling items include the following:
•
Transfers between stages, which are presumed to occur before any corresponding remeasurement of the allowance.
•
Purchases, which reflect the allowance related to assets newly recognized during the period, including those assets that
were derecognized following a modification of terms.
•
Sales and maturities, which reflect the allowance related to assets derecognized during the period without a credit loss
being incurred, including those assets that were derecognized following a modification of terms.
•
Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions,
including changes in forward-looking macroeconomic conditions; partial repayments; changes in the measurement
following a transfer between stages; and unwinding of the time value discount due to the passage of time.
Allowance for credit losses – securities at FVOCI
(1)
| For the year ended | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Performing | Impaired | Performing | Impaired | |||||
(Millions of Canadian dollars) | Stage 1 | Stage 2 | Stage 3 (2) | Total | Stage 1 | Stage 2 | Stage 3 (2) | Total |
Balance at beginning of period | $ 6 | $ – | $ (41) | $ (35) | $ 4 | $ – | $ (37) | $ (33) |
Provision for credit losses | ||||||||
Transfers to stage 1 | – | – | – | – | – | – | – | – |
Transfers to stage 2 | – | – | – | – | – | – | – | – |
Transfers to stage 3 | – | – | – | – | – | – | – | – |
Purchases | 7 | – | – | 7 | 10 | – | – | 10 |
Sales and maturities | (4) | – | – | (4) | (4) | – | – | (4) |
Changes in risk, parameters and | ||||||||
exposures | (4) | – | (10) | (14) | (4) | – | (8) | (12) |
Exchange rate and other | – | – | 6 | 6 | – | – | 4 | 4 |
Balance at end of period | $ 5 | $ – | $ (45) | $ (40) | $ 6 | $ – | $ (41) | $ (35) |
(1)
Expected credit losses on debt securities at FVOCI are not separately recognized on the Consolidated Balance Sheets as the related securities are recorded at fair value.
The cumulative amount of credit losses recognized in income is presented in Other components of equity.
(2)
Reflects changes in the allowance for purchased credit-impaired securities.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
179
Allowance for credit losses – securities at amortized cost
| For the year ended | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Performing | Impaired | Performing | Impaired | |||||
(Millions of Canadian dollars) | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total |
Balance at beginning of period | $ 6 | $ 8 | $ – | $ 14 | $ 8 | $ 15 | $ – | $ 23 |
Provision for credit losses | ||||||||
Transfers to stage 1 | – | – | – | – | – | – | – | – |
Transfers to stage 2 | – | – | – | – | – | – | – | – |
Transfers to stage 3 | – | – | – | – | – | – | – | – |
Purchases | 7 | – | – | 7 | 7 | – | – | 7 |
Sales and maturities | – | – | – | – | (2) | – | – | (2) |
Changes in risk, parameters and | ||||||||
exposures | (6) | (2) | – | (8) | (8) | (6) | – | (14) |
Exchange rate and other | 1 | – | – | 1 | 1 | (1) | – | – |
Balance at end of period | $ 8 | $ 6 | $ – | $ 14 | $ 6 | $ 8 | $ – | $ 14 |
Credit risk exposure by internal risk rating
The following table presents the fair value of debt securities at FVOCI and gross carrying amount of securities at amortized cost.
Risk ratings are based on internal ratings used in the measurement of expected credit losses, as at the reporting date, as
outlined in the internal ratings maps in the Credit risk section of Management’s Discussion and Analysis.
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
| Performing | Impaired | Performing | Impaired | |||||
(Millions of Canadian dollars) | Stage 1 | Stage 2 | Stage 3 (1) | Total | Stage 1 | Stage 2 | Stage 3 (1) | Total |
Investment securities | ||||||||
Securities at FVOCI | ||||||||
Investment grade | $ 239,375 | $ – | $ – | $ 239,375 | $ 154,100 | $ – | $ – | $ 154,100 |
Non-investment grade | 786 | 4 | – | 790 | 875 | – | – | 875 |
Impaired | – | – | 134 | 134 | – | – | 143 | 143 |
240,161 | 4 | 134 | 240,299 | 154,975 | – | 143 | 155,118 | |
Items not subject to impairment (2) | 1,496 | 1,242 | ||||||
$ 241,795 | $ 156,360 | |||||||
Securities at amortized cost | ||||||||
Investment grade | $ 99,673 | $ – | $ – | $ 99,673 | $ 99,224 | $ – | $ – | $ 99,224 |
Non-investment grade | 1,098 | 169 | – | 1,267 | 856 | 192 | – | 1,048 |
100,771 | 169 | – | 100,940 | 100,080 | 192 | – | 100,272 | |
Allowance for credit losses | 8 | 6 | – | 14 | 6 | 8 | – | 14 |
$ 100,763 | $ 163 | $ – | $ 100,926 | $ 100,074 | $ 184 | $ – | $ 100,258 | |
(1)
Reflects $134 million of purchased credit-impaired securities (October 31, 2024 – $143 million).
(2)
180
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Loans and allowance for credit losses
Loans by geography and portfolio net of allowance
| As at October 31, 2025 | ||||||
United | Other | Allowance for | Total net | |||
(Millions of Canadian dollars) | Canada | States | International | Total | loan losses (1) | of allowance |
Retail (2) | ||||||
Residential mortgages | $ 454,346 | $ 35,673 | $ 3,394 | $ 493,413 | $ (794) | $ 492,619 |
Personal | 90,842 | 20,984 | 3,519 | 115,345 | (1,541) | 113,804 |
Credit cards (3) | 25,836 | 652 | 301 | 26,789 | (1,273) | 25,516 |
Small business (4) | 16,797 | – | – | 16,797 | (334) | 16,463 |
Wholesale (2), (5) | 194,487 | 143,439 | 59,245 | 397,171 | (3,151) | 394,020 |
Total loans | $ 782,308 | $ 200,748 | $ 66,459 | $ 1,049,515 | $ (7,093) | $ 1,042,422 |
Undrawn loan commitments – Retail | 311,332 | 9,434 | 4,913 | 325,679 | (197) | |
Undrawn loan commitments – Wholesale | 183,589 | 309,469 | 101,511 | 594,569 | (168) | |
| As at October 31, 2024 | ||||||
United | Other | Allowance for | Total net | |||
(Millions of Canadian dollars) | Canada | States | International | Total | loan losses (1) | of allowance |
Retail (2) | ||||||
Residential mortgages | $ 441,191 | $ 33,092 | $ 3,261 | $ 477,544 | $ (572) | $ 476,972 |
Personal | 86,977 | 18,148 | 3,213 | 108,338 | (1,389) | 106,949 |
Credit cards (3) | 24,619 | 653 | 293 | 25,565 | (1,164) | 24,401 |
Small business (4) | 15,531 | – | – | 15,531 | (258) | 15,273 |
Wholesale (2), (5) | 189,378 | 119,231 | 51,830 | 360,439 | (2,654) | 357,785 |
Total loans | $ 757,696 | $ 171,124 | $ 58,597 | $ 987,417 | $ (6,037) | $ 981,380 |
Undrawn loan commitments – Retail | 300,071 | 5,099 | 4,100 | 309,270 | (172) | |
Undrawn loan commitments – Wholesale | 180,687 | 264,309 | 88,787 | 533,783 | (139) | |
(1)
Excludes allowance for loans measured at FVOCI of $1 million (October 31, 2024 – $4 million).
(2)
Geographic information is based on residence of the borrower.
(3)
The credit cards business is managed as a single portfolio and includes both consumer and business cards.
(4)
Includes small business exposure managed on a pooled basis.
(5)
Includes small business exposure managed on an individual client basis.
Loans maturity and rate sensitivity
| As at October 31, 2025 | ||||||||
| Maturity term (1) | Rate sensitivity | |||||||
Under | 1 to 5 | Over 5 | Fixed | Non-rate- | ||||
(Millions of Canadian dollars) | 1 year (2) | years | years | Total | Floating | Rate | sensitive | Total |
Retail | $ 395,387 | $ 215,783 | $ 41,174 | $ 652,344 | $ 253,592 | $ 389,868 | $ 8,884 | $ 652,344 |
Wholesale | 338,854 | 43,992 | 14,325 | 397,171 | 84,295 | 309,440 | 3,436 | 397,171 |
Total loans | $ 734,241 | $ 259,775 | $ 55,499 | $ 1,049,515 | $ 337,887 | $ 699,308 | $ 12,320 | $ 1,049,515 |
Allowance for loan losses | (7,093) | (7,093) | ||||||
Total loans net of allowance for loan losses | $ 734,241 | $ 259,775 | $ 48,406 | $ 1,042,422 | $ 337,887 | $ 699,308 | $ 5,227 | $ 1,042,422 |
| As at October 31, 2024 | ||||||||
| Maturity term (1) | Rate sensitivity | |||||||
Under | 1 to 5 | Over 5 | Fixed | Non-rate- | ||||
(Millions of Canadian dollars) | 1 year (2) | years | years | Total | Floating | Rate | sensitive | Total |
Retail | $ 342,552 | $ 240,995 | $ 43,431 | $ 626,978 | $ 211,027 | $ 407,455 | $ 8,496 | $ 626,978 |
Wholesale | 302,024 | 44,977 | 13,438 | 360,439 | 80,385 | 277,599 | 2,455 | 360,439 |
Total loans | $ 644,576 | $ 285,972 | $ 56,869 | $ 987,417 | $ 291,412 | $ 685,054 | $ 10,951 | $ 987,417 |
Allowance for loan losses | (6,037) | (6,037) | ||||||
Total loans net of allowance for loan losses | $ 644,576 | $ 285,972 | $ 50,832 | $ 981,380 | $ 291,412 | $ 685,054 | $ 4,914 | $ 981,380 |
(1)
Generally, based on the earlier of contractual repricing or maturity date.
(2)
Includes variable rate loans that can be repriced at the clients’ discretion without penalty.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
181
Allowance for credit losses
| For the year ended | ||||||||||
| October 31, 2025 | October 31, 2024 | |||||||||
Balance at | Provision | Exchange | Balance | Balance at | Provision | Exchange | Balance | |||
beginning | for credit | Net | rate and | at end | beginning | for credit | Net | rate and | at end | |
(Millions of Canadian dollars) | of period | losses | write-offs (1) | other | of period | of period | losses | write-offs (1) | other | of period |
Retail | ||||||||||
Residential mortgages | $ 572 | $ 280 | $ (9) | $ (49) | $ 794 | $ 481 | $ 114 | $ (10) | $ (13) | $ 572 |
Personal | 1,482 | 956 | (779) | (20) | 1,639 | 1,228 | 877 | (616) | (7) | 1,482 |
Credit cards | 1,233 | 952 | (829) | – | 1,356 | 1,069 | 831 | (669) | 2 | 1,233 |
Small business | 272 | 209 | (104) | (26) | 351 | 194 | 178 | (84) | (16) | 272 |
Wholesale | 2,793 | 1,959 | (1,163) | (270) | 3,319 | 2,326 | 1,297 | (700) | (130) | 2,793 |
Customers’ liability under | ||||||||||
acceptances | – | – | – | – | – | 50 | (50) | – | – | – |
$ 6,352 | $ 4,356 | $ (2,884) | $ (365) | $ 7,459 | $ 5,348 | $ 3,247 | $ (2,079) | $ (164) | $ 6,352 | |
Presented as: | ||||||||||
Allowance for loan losses | $ 6,037 | $ 7,093 | $ 5,004 | $ 6,037 | ||||||
Other liabilities – Provisions | 311 | 365 | 288 | 311 | ||||||
Other assets – Other | – | – | 50 | – | ||||||
Other components of equity | 4 | 1 | 6 | 4 | ||||||
(1)
Loans written-off are generally subject to continued collection efforts for a period of time following write-off. The contractual amount outstanding on loans written-off
during the year ended October 31, 2025 that are no longer subject to enforcement activity was $285 million (October 31, 2024 – $359 million).
The following table reconciles the opening and closing allowance for each major product of loans and commitments as
determined by our modelled, scenario-weighted allowance and the application of expert credit judgment as applicable.
Reconciling items include the following:
•
Model changes, as applicable, which generally comprise the impact of significant changes to the quantitative models used
to estimate expected credit losses and any staging impacts that may arise.
•
Transfers between stages, which are presumed to occur before any corresponding remeasurements of the allowance.
•
Originations, which reflect the allowance related to assets newly recognized during the period, including those assets that
were derecognized following a modification of terms.
•
Maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being
incurred, including those assets that were derecognized following a modification of terms.
•
Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions,
including changes in forward-looking macroeconomic conditions; partial repayments and additional draws on existing
facilities; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to
the passage of time in Stage 1 and Stage 2.
(continued)
Note 5
Loans and allowance for credit losses
182
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Allowance for credit losses – Retail and wholesale loans
| For the year ended | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Performing | Impaired | Performing | Impaired | |||||
(Millions of Canadian dollars) | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total |
Residential mortgages | ||||||||
Balance at beginning of period | $ 215 | $ 126 | $ 231 | $ 572 | $ 223 | $ 90 | $ 168 | $ 481 |
Provision for credit losses | ||||||||
Transfers to stage 1 | 157 | (153) | (4) | – | 99 | (97) | (2) | – |
Transfers to stage 2 | (41) | 49 | (8) | – | (23) | 36 | (13) | – |
Transfers to stage 3 | (7) | (45) | 52 | – | (5) | (42) | 47 | – |
Originations | 100 | – | – | 100 | 94 | – | – | 94 |
Maturities | (25) | (29) | – | (54) | (19) | (17) | – | (36) |
Changes in risk, parameters and | ||||||||
exposures | (123) | 256 | 101 | 234 | (155) | 157 | 54 | 56 |
Write-offs | – | – | (20) | (20) | – | – | (23) | (23) |
Recoveries | – | – | 11 | 11 | – | – | 13 | 13 |
Exchange rate and other | – | – | (49) | (49) | 1 | (1) | (13) | (13) |
Balance at end of period | $ 276 | $ 204 | $ 314 | $ 794 | $ 215 | $ 126 | $ 231 | $ 572 |
Personal | ||||||||
Balance at beginning of period | $ 305 | $ 966 | $ 211 | $ 1,482 | $ 280 | $ 793 | $ 155 | $ 1,228 |
Provision for credit losses | ||||||||
Transfers to stage 1 | 594 | (593) | (1) | – | 537 | (537) | – | – |
Transfers to stage 2 | (96) | 100 | (4) | – | (75) | 78 | (3) | – |
Transfers to stage 3 | (4) | (163) | 167 | – | (3) | (130) | 133 | – |
Originations | 105 | – | – | 105 | 116 | – | – | 116 |
Maturities | (53) | (233) | (1) | (287) | (51) | (186) | – | (237) |
Changes in risk, parameters and | ||||||||
exposures | (562) | 1,040 | 660 | 1,138 | (499) | 947 | 550 | 998 |
Write-offs | – | – | (935) | (935) | – | – | (745) | (745) |
Recoveries | – | – | 156 | 156 | – | – | 129 | 129 |
Exchange rate and other | 2 | (2) | (20) | (20) | – | 1 | (8) | (7) |
Balance at end of period | $ 291 | $ 1,115 | $ 233 | $ 1,639 | $ 305 | $ 966 | $ 211 | $ 1,482 |
Credit cards | ||||||||
Balance at beginning of period | $ 207 $ | 1,026 $ | – | $ 1,233 | $ 203 | $ 866 | $ – | $ 1,069 |
Provision for credit losses | ||||||||
Transfers to stage 1 | 662 | (662) | – | – | 559 | (559) | – | – |
Transfers to stage 2 | (112) | 112 | – | – | (111) | 111 | – | – |
Transfers to stage 3 | (2) | (595) | 597 | – | (2) | (483) | 485 | – |
Originations | 14 | – | – | 14 | 25 | – | – | 25 |
Maturities | (4) | (56) | – | (60) | (5) | (48) | – | (53) |
Changes in risk, parameters and | ||||||||
exposures | (546) | 1,313 | 231 | 998 | (465) | 1,139 | 185 | 859 |
Write-offs | – | – | (1,010) | (1,010) | – | – | (892) | (892) |
Recoveries | – | – | 181 | 181 | – | – | 223 | 223 |
Exchange rate and other | (2) | 1 | 1 | – | 3 | – | (1) | 2 |
Balance at end of period | $ 217 $ | 1,139 $ | – | $ 1,356 | $ 207 | $ 1,026 | $ – | $ 1,233 |
Small business | ||||||||
Balance at beginning of period | $ 80 | $ 86 | $ 106 | $ 272 | $ 70 | $ 66 | $ 58 | $ 194 |
Provision for credit losses | ||||||||
Transfers to stage 1 | 54 | (54) | – | – | 35 | (35) | – | – |
Transfers to stage 2 | (23) | 23 | – | – | (20) | 20 | – | – |
Transfers to stage 3 | (1) | (14) | 15 | – | (1) | (10) | 11 | – |
Originations | 39 | – | – | 39 | 43 | – | – | 43 |
Maturities | (19) | (24) | – | (43) | (17) | (21) | – | (38) |
Changes in risk, parameters and | ||||||||
exposures | (41) | 98 | 156 | 213 | (31) | 65 | 139 | 173 |
Write-offs | – | – | (124) | (124) | – | – | (98) | (98) |
Recoveries | – | – | 20 | 20 | – | – | 14 | 14 |
Exchange rate and other | 6 | 2 | (34) | (26) | 1 | 1 | (18) | (16) |
Balance at end of period | $ 95 | $ 117 | $ 139 | $ 351 | $ 80 | $ 86 | $ 106 | $ 272 |
Wholesale | ||||||||
Balance at beginning of period | $ 787 | $ 1,038 | $ 968 | $ 2,793 | $ 774 | $ 785 | $ 767 | $ 2,326 |
Provision for credit losses | ||||||||
Transfers to stage 1 | 277 | (275) | (2) | – | 284 | (282) | (2) | – |
Transfers to stage 2 | (124) | 133 | (9) | – | (152) | 159 | (7) | – |
Transfers to stage 3 | (15) | (273) | 288 | – | (9) | (77) | 86 | – |
Originations | 755 | – | – | 755 | 737 | – | – | 737 |
Maturities | (543) | (418) | – | (961) | (438) | (379) | – | (817) |
Changes in risk, parameters and | ||||||||
exposures | (243) | 912 | 1,496 | 2,165 | (407) | 827 | 957 | 1,377 |
Write-offs | – | – | (1,237) | (1,237) | – | – | (763) | (763) |
Recoveries | – | – | 74 | 74 | – | – | 63 | 63 |
Exchange rate and other | 2 | 6 | (278) | (270) | (2) | 5 | (133) | (130) |
Balance at end of period | $ 896 | $ 1,123 | $ 1,300 | $ 3,319 | $ 787 | $ 1,038 | $ 968 | $ 2,793 |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
183
Key inputs and assumptions
The measurement of expected credit losses is a complex calculation that involves a significant number of interrelated inputs
and assumptions and the allowance is not sensitive to any one single factor. The key drivers of changes in expected credit
losses include the following:
•
Changes in the credit quality of the borrower or instrument, primarily reflected in changes in internal risk ratings;
•
Changes in forward-looking macroeconomic conditions, specifically the macroeconomic variables to which our models
are calibrated, which are those most closely correlated with credit losses in the relevant portfolio;
•
Changes in scenario design and the weight assigned to each scenario; and
•
Transfers between stages, which can be triggered by changes to any of the above inputs.
To reflect relevant risk factors not captured in our modelled results, we applied expert credit judgment in determining the
measurement of our weighted allowance for credit losses. The measurement of expected credit losses, including scenario design
and weightings, determining significant increases in credit risk since origination and application of expert credit judgment, is
overseen by a senior management committee that includes representation from Finance, Group Risk Management and
Economics.
Internal risk ratings
Internal risk ratings are assigned according to the risk management framework outlined under the headings Wholesale credit
risk and Retail credit risk of the Credit risk section of Management’s Discussion and Analysis. Changes in internal risk ratings are
primarily reflected in the PD parameters, which are estimated based on our historical loss experience at the relevant risk
segment or risk rating level, adjusted for forward-looking information.
Scenario design and weightings
Our estimation of expected credit losses in Stage 1 and Stage 2 considers five distinct future macroeconomic scenarios.
Scenarios are designed to capture a wide range of possible outcomes and are weighted according to our expectation of the
relative likelihood of the range of outcomes that each scenario represents at the reporting date. We weight each scenario to
take into account historical frequency, current trends, and forward-looking conditions which will change over time. Scenario
weightings take into consideration the extent to which the base case scenario includes both favourable and unfavourable
economic expectations, and upside and downside risks to the base scenario materializing in the future. The base case scenario
is based on forecasts of the expected rate, value, or yield for each relevant macroeconomic variable. The upside and downside
scenarios are set by adjusting our base projections to construct reasonably possible scenarios and weightings that are more
optimistic and pessimistic, respectively, than the base case. Two additional downside scenarios capture the non-linear nature of
potential credit losses across our portfolios. When the economy is at or near equilibrium, the severity of the downside scenario
generally reflects an adverse event typical for a business cycle and both the non-linear downside scenarios reflect an outcome
that is materially more adverse than the downside scenario.
The impact of each of our five scenarios varies across our portfolios given the portfolios have different sensitivities to
movements in each macroeconomic variable.
The impact of weighting these multiple scenarios increased our ACL on performing loans, relative to our base scenario, by
$1,268 million as at October 31, 2025 (October 31, 2024 – $945 million).
Forward looking macroeconomic variables
The PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on the
macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the
relevant portfolio. Each macroeconomic scenario used in our expected credit loss calculation includes a projection of all
relevant macroeconomic variables used in our models for a five-year horizon, reverting to long-run averages generally within
the 2 to 5 year period. Depending on their usage in the models, macroeconomic variables are projected at a country, province/
state or more granular level. These include one or more of the variables described below, which differ by portfolio and region.
Our allowance for credit losses reflects our economic outlook as at October 31, 2025. Subsequent changes to this forecast and
related estimates will be reflected in our allowance for credit losses in future periods.
Our base scenario reflects the Canadian unemployment rate peaking in calendar Q4 2025, followed by gradual declines
beginning in early calendar 2026 and for the U.S. unemployment rate to rise, peaking in calendar Q1 2026, followed by a return to
equilibrium by calendar Q4 2026. The central bank policy rate in Canada is expected to remain unchanged until the end of
calendar 2026 and cuts are expected in the U.S. until the middle of calendar 2026.
Our downside scenarios include two additional and more severe downside scenarios designed for trade disruptions and the
real estate sector. During Q2 2025, in response to U.S. international trade policy, we designed a trade disruption scenario to
replace our energy sector scenario. Our downside scenarios reflect the possibility of moderate and escalating macroeconomic
shocks beginning in calendar Q1 2026 relative to our base scenario. In these scenarios, conditions are expected to deteriorate
from calendar Q4 2025 levels for up to 18 months, followed by a recovery for the remainder of the period. These scenarios
assume monetary policy responses that return the economy to a long-run, sustainable growth rate within the forecast period.
Our upside scenario reflects slightly stronger economic growth than the base scenario, without prompting a further
offsetting monetary policy response as compared to our base scenario, followed by a return to a long-run sustainable growth
rate within the forecast period.
We increased weight to our downside scenarios relative to October 31, 2024 to reflect the heightened economic uncertainty
related to U.S. international trade policy as compared to our base scenario.
(continued)
Note 5
Loans and allowance for credit losses
184
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The following provides additional detail about our calendar quarter forecasts for certain key macroeconomic variables used in
the models to estimate ACL:
•
Unemployment rates
– In our base forecast, we expect the Canadian unemployment rate to peak at 7.1% in calendar
Q4 2025, then returning to its long run equilibrium by calendar Q1 2028. The U.S. unemployment rate is expected to rise to
4.5% in calendar Q4 2025, peaking at 4.6% in calendar Q1 2026, then returning to its long run equilibrium level by calendar
Q4 2026.
4
5
6
7
8
11
9
Range of alternative scenarios (October 31, 2025)
Q4-2028
Q1-2029
Q2-2029
Q3-2029
Q4-2029
Q1-2030
Q2-2030
Q3-2030
Q4-2024
Q1-2025
Q2-2025
Q3-2025
Q4-2025
Q1-2026
Q2-2026
Q3-2026
Q4-2026
Q1-2027
Q2-2027
Q3-2027
Q4-2027
Q1-2028
Q2-2028
Q3-2028
Base scenario (October 31, 2025)
Base scenario (October 31, 2024)
%
Canada Unemployment Rate
(1)
(1)
Represents the average quarterly unemployment level over the calendar quarters presented.
10
2
4
3
6
5
7
9
8
Range of alternative scenarios (October 31, 2025)
Base scenario (October 31, 2024)
Base scenario (October 31, 2025)
%
U.S. Unemployment Rate
(1)
(1)
Represents the avera
g
e quarterly unemployment level over the calendar quarters presented.
Q4-2024
Q1-2025
Q2-2025
Q3-2025
Q4-2025
Q1-2026
Q2-2026
Q3-2026
Q4-2026
Q1-2027
Q2-2027
Q3-2027
Q4-2027
Q1-2028
Q2-2028
Q3-2028
Q4-2028
Q1-2029
Q2-2029
Q3-2029
Q4-2029
Q1-2030
Q2-2030
Q3-2030
•
Gross Domestic Product (GDP)
– In our base forecast, we expect both Canadian and U.S. GDP to continuously grow in
calendar Q4 2025 and thereafter. GDP in calendar Q4 2026 is expected to be 1.8% above Q4 2025 levels in Canada, and 1.5%
above Q4 2025 levels in the U.S.
2.2
2.3
2.4
2.5
2.6
2.8
2.7
Range of alternative scenarios (October 31, 2025)
Base scenario (October 31, 2025)
Base scenario (October 31, 2024)
Trillions of Canadian dollars
Canada Real GDP
(1)
(1)
Represents the seasonally adjusted annual rate indexed to 2017 Canadian dollars over the calendar
quarters presented.
Q4-2024
Q1-2025
Q2-2025
Q3-2025
Q4-2025
Q1-2026
Q2-2026
Q3-2026
Q4-2026
Q1-2027
Q2-2027
Q3-2027
Q4-2027
Q1-2028
Q2-2028
Q3-2028
Q4-2028
Q1-2029
Q2-2029
Q3-2029
Q4-2029
Q1-2030
Q2-2030
Q3-2030
21.0
25.0
24.0
23.0
22.0
28.0
27.0
26.0
Range of alternative scenarios (October 31, 2025)
Base scenario (October 31, 2025)
Base scenario (October 31, 2024)
(1)
Represents the seasonally adjusted annual rate indexed to 2017 U.S. dollars over the calendar
quarters presented.
Q4-2024
Q1-2025
Q2-2025
Q3-2025
Q4-2025
Q1-2026
Q2-2026
Q3-2026
Q4-2026
Q1-2027
Q2-2027
Q3-2027
Q4-2027
Q1-2028
Q2-2028
Q3-2028
Q4-2028
Q1-2029
Q2-2029
Q3-2029
Q4-2029
Q1-2030
Q2-2030
Q3-2030
Trillions of U.S. dollars
U.S. Real GDP
(1)
•
Canadian housing price index
– In our base forecast, we expect housing prices to increase by 0.3% over the next 12 months
from calendar Q4 2025, with a compound annual growth rate of 3.4% for the following 2 to 5 years. The range of annual
housing price growth (contraction) in our alternative real estate downside and upside scenarios is (29.2)% to 10.9% over the
next 12 months and 4.2% to 9.6% for the following 2 to 5 years. As at October 31, 2024, our base forecast included housing
price growth of 0.7% from calendar Q4 2024 for the next 12 months and housing price growth of 3.0% for the following 2 to
5 years.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
185
The primary variables driving credit losses in our retail portfolios are Canadian unemployment rates, the Canadian housing
price index and Canadian GDP. The Canadian overnight interest rate also impacts our retail portfolios. Our wholesale portfolios
are affected by all of the variables discussed above; however, the specific variables differ by sector. Other variables also impact
our wholesale portfolios including, but not limited to, Canadian and U.S. 10 year BBB corporate bond credit spreads, Canadian
and U.S. 10 year government bond yields, U.S. 10 year BBB corporate bond yield, Canadian consumer confidence index, Canadian
and U.S. commercial real estate price indices, U.S. housing price index, and natural gas prices (Henry Hub).
Increases in the following macroeconomic variables will generally correlate with higher expected credit losses: Canadian
and U.S. unemployment rates, Canadian overnight interest rates, Canadian and U.S. 10 year BBB corporate bond credit spreads,
Canadian and U.S. 10 year government bond yields, and U.S. 10 year BBB corporate bond yield.
Increases in the following macroeconomic variables will generally correlate with lower expected credit losses: Canadian
and U.S. housing price indices, Canadian and U.S. GDP, Canadian consumer confidence index, Canadian and U.S. commercial
real estate price indices and natural gas prices.
Transfers between stages
Transfers between Stage 1 and Stage 2 are based on the assessment of significant increases in credit risk relative to initial
recognition, as described in Note 2. The impact of moving from 12 months expected credit losses to lifetime expected credit
losses, or vice versa, varies by product and is dependent on the expected remaining life at the date of the transfer. Stage
transfers may result in significant fluctuations in expected credit losses.
The following table illustrates the impact of staging on our ACL by comparing our allowance if all performing loans were in
Stage 1 to the actual ACL recorded on these assets.
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
ACL – All performing | Impact of | Stage 1 and 2 | ACL – All performing | Impact of | Stage 1 and 2 | |
(Millions of Canadian dollars) | loans in Stage 1 | staging | ACL | loans in Stage 1 | staging | ACL |
Performing loans (1) | $ 3,775 | $ 1,698 | $ 5,473 | $ 3,313 | $ 1,523 | $ 4,836 |
(1)
Represents loans and commitments in Stage 1 and Stage 2.
(continued)
Note 5
Loans and allowance for credit losses
186
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Credit risk exposure by internal risk rating
The following table presents the gross carrying amount of loans measured at amortized cost, and the full contractual amount of
undrawn loan commitments subject to the impairment requirements of IFRS 9. Risk ratings are based on internal ratings used in
the measurement of expected credit losses as at the reporting date, as outlined in the internal ratings maps for Wholesale and
Retail facilities in the Credit risk section of Management’s Discussion and Analysis.
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
(Millions of Canadian dollars) | Stage 1 | Stage 2 | Stage 3 (1), (2) | Total | Stage 1 | Stage 2 | Stage 3 (1), (2) | Total |
Retail | ||||||||
Loans outstanding – Residential | ||||||||
mortgages | ||||||||
Low risk | $ 386,060 | $ 16,495 | $ – | $ 402,555 | $ 388,742 | $ 1,354 | $ – | $ 390,096 |
Medium risk | 20,622 | 2,571 | – | 23,193 | 18,419 | 4,479 | – | 22,898 |
High risk | 2,131 | 6,532 | – | 8,663 | 1,761 | 6,593 | – | 8,354 |
Not rated (3) | 54,253 | 1,940 | – | 56,193 | 52,569 | 1,479 | – | 54,048 |
Impaired | – | – | 1,681 | 1,681 | – | – | 1,233 | 1,233 |
463,066 | 27,538 | 1,681 | 492,285 | 461,491 | 13,905 | 1,233 | 476,629 | |
Items not subject to impairment (4) | 1,128 | 915 | ||||||
Total | $ 493,413 | $ 477,544 | ||||||
Loans outstanding – Personal | ||||||||
Low risk | $ 87,536 | $ 2,712 | $ – | $ 90,248 | $ 82,904 | $ 1,680 | $ – | $ 84,584 |
Medium risk | 4,035 | 3,768 | – | 7,803 | 5,525 | 3,063 | – | 8,588 |
High risk | 601 | 2,583 | – | 3,184 | 592 | 2,365 | – | 2,957 |
Not rated (3) | 12,493 | 1,180 | – | 13,673 | 11,303 | 498 | – | 11,801 |
Impaired | – | – | 437 | 437 | – | – | 408 | 408 |
Total | $ 104,665 | $ 10,243 | $ 437 | $ 115,345 | $ 100,324 | $ 7,606 | $ 408 | $ 108,338 |
Loans outstanding – Credit cards | ||||||||
Low risk | $ 18,279 | $ 161 | $ – | $ 18,440 | $ 17,363 | $ 177 | $ – | $ 17,540 |
Medium risk | 2,123 | 2,291 | – | 4,414 | 1,999 | 2,436 | – | 4,435 |
High risk | 70 | 2,423 | – | 2,493 | 75 | 2,289 | – | 2,364 |
Not rated (3) | 1,133 | 309 | – | 1,442 | 1,173 | 53 | – | 1,226 |
Total | $ 21,605 | $ 5,184 | $ – | $ 26,789 | $ 20,610 | $ 4,955 | $ – | $ 25,565 |
Loans outstanding – Small business | ||||||||
Low risk | $ 10,628 | $ 595 | $ – | $ 11,223 | $ 9,428 | $ 773 | $ – | $ 10,201 |
Medium risk | 2,550 | 924 | – | 3,474 | 2,740 | 962 | – | 3,702 |
High risk | 259 | 1,422 | – | 1,681 | 214 | 1,086 | – | 1,300 |
Not rated (3) | 8 | – | – | 8 | 7 | – | – | 7 |
Impaired | – | – | 411 | 411 | – | – | 321 | 321 |
Total | $ 13,445 | $ 2,941 | $ 411 | $ 16,797 | $ 12,389 | $ 2,821 | $ 321 | $ 15,531 |
Undrawn loan commitments – | ||||||||
Retail | ||||||||
Low risk | $ 293,300 | $ 3,700 | $ – | $ 297,000 | $ 284,036 | $ 592 | $ – | $ 284,628 |
Medium risk | 12,451 | 427 | – | 12,878 | 12,110 | 381 | – | 12,491 |
High risk | 805 | 758 | – | 1,563 | 746 | 602 | – | 1,348 |
Not rated (3) | 13,964 | 274 | – | 14,238 | 10,715 | 88 | – | 10,803 |
Total | $ 320,520 | $ 5,159 | $ – | $ 325,679 | $ 307,607 | $ 1,663 | $ – | $ 309,270 |
Wholesale – Loans outstanding | ||||||||
Investment grade | $ 130,322 | $ 2,117 | $ – | $ 132,439 | $ 116,549 | $ 1,471 | $ – | $ 118,020 |
Non-investment grade | 207,239 | 26,399 | – | 233,638 | 189,889 | 26,826 | – | 216,715 |
Not rated (3) | 14,714 | 503 | – | 15,217 | 12,871 | 721 | – | 13,592 |
Impaired | – | – | 6,153 | 6,153 | – | – | 3,905 | 3,905 |
352,275 | 29,019 | 6,153 | 387,447 | 319,309 | 29,018 | 3,905 | 352,232 | |
Items not subject to impairment (4) | 9,724 | 8,207 | ||||||
Total | $ 397,171 | $ 360,439 | ||||||
Undrawn loan commitments – | ||||||||
Wholesale | ||||||||
Investment grade | $ 393,167 | $ 1,593 | $ – | $ 394,760 | $ 345,236 | $ 516 | $ – | $ 345,752 |
Non-investment grade | 182,223 | 16,158 | – | 198,381 | 170,212 | 14,512 | – | 184,724 |
Not rated (3) | 1,407 | 21 | – | 1,428 | 3,290 | 17 | – | 3,307 |
Total | $ 576,797 | $ 17,772 | $ – | $ 594,569 | $ 518,738 | $ 15,045 | $ – | $ 533,783 |
(1)
As at October 31, 2025, 91% of credit-impaired loans were either fully or partially collateralized (October 31, 2024 – 88%). For details on the types of collateral held against
credit-impaired assets and our policies on collateral, refer to the Credit risk mitigation section of Management’s Discussion and Analysis.
(2)
Includes $195 million of purchased or originated credit-impaired loans (October 31, 2024 – $109 million).
(3)
In certain cases where an internal risk rating is not assigned, we use other approved credit risk assessments or rating methodologies, policies and tools to manage our
credit risk.
(4)
Items not subject to impairment are loans held at FVTPL.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
187
Loans past due but not impaired
(1), (2)
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
90 days | 90 days | |||||
(Millions of Canadian dollars) | 30 to 89 days | and greater | Total | 30 to 89 days | and greater | Total |
Retail | $ 2,634 | $ 323 | $ 2,957 | $ 2,542 | $ 263 | $ 2,805 |
Wholesale | 1,143 | 7 | 1,150 | 1,454 | 4 | 1,458 |
$ 3,777 | $ 330 | $ 4,107 | $ 3,996 | $ 267 | $ 4,263 | |
(1)
Excludes loans less than 30 days past due as they are not generally representative of the borrowers’ ability to meet their payment obligations.
(2)
Amounts presented may include loans past due as a result of administrative processes, such as mortgage loans on which payments are restrained pending payout due to
Significant acquisition
On March 28, 2024, we completed the acquisition of HSBC Bank Canada (HSBC Canada). The acquisition of HSBC Canada (the
HSBC Canada transaction) gave us the opportunity to enhance our existing businesses in line with our strategic goals and to
better position us to be the bank of choice for commercial clients with international needs, newcomers to Canada and globally
connected clients. HSBC Canada results have been consolidated from the closing date and included in our Personal Banking,
Commercial Banking, Wealth Management and Capital Markets segments.
Total consideration of $15.5 billion in cash included $13.5 billion for 100% of the common shares of HSBC Canada, $2.1 billion
for the preferred shares and subordinated debt held directly or indirectly by HSBC Holdings plc, $(0.5) billion for the settlement of
pre-existing relationships with HSBC Canada and $0.4 billion for an additional amount that accrued from August 30, 2023 to the
closing date. This additional amount was calculated based on the $13.5 billion all-cash purchase price for the common shares of
HSBC Canada and the Canadian Overnight Repo Rate Average. Relatedly, under a locked box mechanism, HSBC Canada’s
earnings from June 30, 2022 to the closing date accrued to RBC and were reflected in the acquired net assets on closing.
Our purchase price allocation assigned $108.1 billion to assets and $99.1 billion to liabilities on the acquisition date. Goodwill
of $6.5 billion reflected the expected expense synergies from our Personal Banking, Commercial Banking, Wealth Management
and Capital Markets operations, expected growth of the platforms, and the ability to cross-sell products between segments.
Goodwill is not deductible for tax purposes.
The following table presents the estimated fair value of the assets acquired and liabilities assumed as at the acquisition date.
(Millions of Canadian dollars, except percentage amounts) | |
Percentage of shares acquired | 100% |
Purchase consideration | $ 15,488 |
Fair value of identifiable assets acquired | |
Cash and due from banks | $ 2,772 |
Securities | |
Trading | 1,110 |
Investment | 21,305 |
Loans (1) | |
Retail (2) | 35,351 |
Wholesale | 39,282 |
Derivatives | 3,365 |
Intangible assets (3) | 2,342 |
Other (4) | 2,570 |
Total fair value of identifiable assets acquired | $ 108,097 |
Fair value of identifiable liabilities assumed | |
Deposits | |
Personal | $ 42,037 |
Business and government (2) | 44,211 |
Obligations related to assets sold under repurchase agreements and securities loaned | 5,664 |
Derivatives | 3,541 |
Other (5) | 3,692 |
Total fair value of identifiable liabilities assumed | $ 99,145 |
Fair value of identifiable net assets acquired | $ 8,952 |
Goodwill | 6,536 |
Total purchase consideration | $ 15,488 |
(1)
The fair value of loans reflects estimates of incurred and expected future credit losses as at the acquisition date and interest rate premiums or discounts relative to
prevailing market rates. As at March 28, 2024, the gross contractual value of the loans was $75,752 million. The estimate of contractual cash flows not expected to be
collected was $575 million, of which $135 million related to purchased credit-impaired loans.
(2)
Loans – Retail includes $1.7 billion of Canadian residential mortgages sold with recourse to a mutual fund that do not qualify for derecognition, and Deposits – Business
and government includes $1.7 billion of the related secured borrowing liability.
(3)
Intangible assets include $1,972 million of core deposit intangibles and $111 million of customer relationships, which are amortized on a straight-line basis over estimated
useful lives of 7 years, and $259 million of mutual fund management contracts with indefinite useful lives.
(4)
Includes Assets purchased under reverse repurchase agreements and securities borrowed and Other assets.
(5)
Includes Obligations related to securities sold short and Other liabilities.
(continued)
Note 6
Significant acquisition
188
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
For the period from March 28, 2024 to October 31, 2024, the HSBC Canada transaction contributed revenue of $1,716 million and
net income of $453 million to RBC’s consolidated results. The net income of $453 million included initial PCL on purchased
performing financial assets of $200 million ($145 million after-tax).
Assuming we acquired HSBC Canada on November 1, 2023, using the same fair value estimates and not reflecting any
potential synergies, we estimated that RBC’s consolidated revenue and net income for the year ended October 31, 2024 would
have been $58.6 billion and $16.6 billion, respectively.
RBC’s consolidated results included transaction and integration costs of $960 million for the year ended October 31, 2024,
Derecognition of financial assets
We enter into transactions in which we transfer financial assets such as loans or securities to structured entities or other third
parties. The majority of assets transferred under repurchase agreements, securities lending agreements, and in our Canadian
residential mortgage securitization transactions do not qualify for derecognition as we continue to be exposed to substantially
all of the risks and rewards of the transferred assets, such as prepayment, credit, price, interest rate and foreign exchange risks.
Transferred financial assets not derecognized
Securitization of Canadian residential mortgage loans
We periodically securitize insured single and multi-family Canadian residential mortgage loans through the creation of MBS
pools under the National Housing Act MBS (NHA MBS) program. All loans securitized under the NHA MBS program are required
to be insured by the Canadian Mortgage and Housing Corporation (CMHC) or a third-party insurer. We require the borrower to
pay for mortgage insurance when the loan amount is greater than 80% of the original appraised value of the property (LTV
ratio). For residential mortgage loans securitized under this program with LTV ratios less than 80%, we are required to insure the
mortgages at our own expense. Under the NHA MBS program, we are responsible for making all payments due on our issued
MBS, regardless of whether we collect the necessary funds from the mortgagor or the insurer. When a borrower defaults on a
mortgage, we submit a claim to the insurer if the amount recovered from the collection or foreclosure process is lower than the
sum of the principal balance, accrued interest and collection costs on the outstanding loan. The insurance claim process is
managed by the insurance provider in accordance with the insurer’s policies and covers the entire unpaid loan balance plus
generally up to 12 months of interest, selling costs and other eligible expenses.
We sell the NHA MBS pools primarily to Canada Housing Trust (CHT), a government-sponsored structured entity under the
Canada Mortgage Bond (CMB) program. The entity periodically issues CMBs, which are guaranteed by the government, and sells
them to third-party investors. Proceeds of the CMB issuances are used by the entity to purchase the NHA MBS pools from eligible
NHA MBS issuers who participate in the issuance of a particular CMB series. Our continuing involvement includes servicing the
underlying residential mortgage loans we have securitized, either ourselves or through a third-party servicer. We also act as
counterparty in interest rate swap agreements where we pay the entity the interest due to CMB investors and receive the
interest on the underlying MBS and reinvested assets. As part of the swaps, we are also required to maintain a principal
reinvestment account for principal payments received on the underlying mortgage loans to meet the repayment obligation upon
maturity of the CMB. We reinvest the collected principal payments in permitted investments as outlined in the swap agreements.
We have determined that certain of the NHA MBS program loans transferred to CHT do not qualify for derecognition as we
have not transferred substantially all of the risks and rewards of ownership. As a result, these transferred MBS continue to be
classified as residential mortgage loans and recognized on our Consolidated Balance Sheets. The cash received for these
transferred MBS is treated as a secured borrowing and a corresponding liability is recorded in Deposits – Business and
government on our Consolidated Balance Sheets.
We have determined that certain of the NHA MBS program loan transfers qualify for derecognition as we have transferred
substantially all of the risks and rewards of ownership. During the year ended October 31, 2025, we transferred $1,332 million
(October 31, 2024 – $122 million) of NHA MBS program loans that qualified for derecognition.
Canadian residential mortgages sold with recourse
The RBC Indigo Mortgage Fund was closed effective April 17, 2025. Prior to its closure, we periodically transferred conventional
uninsured mortgages into this fund in accordance with its investment parameters. We have determined that these mortgages,
which were sold with recourse, did not qualify for derecognition. As a result, these transferred mortgages were classified as
residential mortgage loans and recognized on our Consolidated Balance Sheets. The cash received for these transferred
mortgages was treated as a secured borrowing and a corresponding liability was recorded in Deposits – Business and
government on our Consolidated Balance Sheets. We also provided a liquidity arrangement whereby we would either
repurchase or facilitate the sale of mortgages to third parties if deemed necessary to satisfy liquidity requirements of the fund.
Securities sold under repurchase agreements and securities loaned
We also enter into transactions such as repurchase agreements and securities lending agreements where we transfer assets
under agreements to repurchase them at a future date and retain substantially all of the risks and rewards associated with the
assets. These transferred assets remain on our Consolidated Balance Sheets and are accounted for as collateralized borrowing
transactions.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
189
The following table provides information on the carrying amount and fair value of the transferred assets that did not qualify for
derecognition, and their associated liabilities.
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Canadian | Securities | Canadian | Securities | |||||
residential | sold under | residential | sold under | |||||
mortgage | repurchase | Securities | mortgage | repurchase | Securities | |||
(Millions of Canadian dollars) | loans (1), (2) | agreements (3) | loaned (3) | Total | loans (1), (2) | agreements (3) | loaned (3) | Total |
Carrying amount of transferred | ||||||||
assets that do not qualify for | ||||||||
derecognition | $ 28,604 | $ 276,163 | $ 13,353 | $ 318,120 | $ 33,101 | $ 291,543 | $ 13,778 | $ 338,422 |
Carrying amount of associated | ||||||||
liabilities | 27,900 | 276,163 | 13,353 | 317,416 | 31,522 | 291,543 | 13,778 | 336,843 |
Fair value of transferred assets | $ 28,137 | $ 276,163 | $ 13,353 | $ 317,653 | $ 31,760 | $ 291,543 | $ 13,778 | $ 337,081 |
Fair value of associated | ||||||||
liabilities | 28,275 | 276,163 | 13,353 | 317,791 | 31,445 | 291,543 | 13,778 | 336,766 |
Fair value of net position | $ (138) | $ – | $ – | $ (138) | $ 315 | $ – | $ – | $ 315 |
(1)
Includes Canadian residential mortgage loans transferred primarily to Canada Housing Trust at the initial securitization and other permitted investments used for
funding requirements after the initial securitization, as well as Canadian residential mortgages transferred into the RBC Indigo Mortgage Fund.
(2)
CMB investors have legal recourse only to the transferred assets, and do not have recourse to our general assets.
(3)
Structured entities
In the normal course of business, we engage in a variety of financial transactions with structured entities to support our
financing and investing needs as well as those of our clients. A structured entity is an entity in which voting or similar rights are
not the dominant factor in deciding control. Structured entities are generally created to achieve a narrow and well defined
objective with restrictions around their ongoing activities. We consolidate a structured entity when we control the entity in
accordance with our accounting policy as described in Note 2. In other cases, we may sponsor or have an interest in such an
entity but may not consolidate it.
Consolidated structured entities
We consolidate the following structured entities, whose assets and liabilities are recorded on our Consolidated Balance Sheets.
Third-party investors in these structured entities generally have recourse only to the assets of the related entity and do not have
recourse to our general assets unless we breach our contractual obligations to those entities. In the ordinary course of
business, the assets of each consolidated structured entity can generally only be used to settle the obligations of that entity.
Multi-seller conduits
We generally do not maintain ownership in the multi-seller conduits that we administer and generally do not have rights to, or
control of, their assets. However, we issue asset-backed commercial paper (ABCP) through a multi-seller conduit that does not
have an expected loss investor with substantive power to direct the significant operating activities of the conduit. This conduit is
consolidated because we have exposure to variability of returns from performance in the multi-seller arrangements through
providing transaction-specific and program-wide liquidity, credit and loan facilities to the conduit and have decision-making
power over the relevant activities. As of October 31, 2025, $2,340 million of financial assets held by the conduit were included in
Loans (October 31, 2024 – $1,718 million) and $ 1,613 million of ABCP issued by the conduit was included in Deposits
(October 31, 2024 – $1,600 million) on our Consolidated Balance Sheets.
Credit card securitization vehicle
We securitize a portion of our credit card receivables through a structured entity on a revolving basis. The entity purchases
co-ownership interests in a pool of credit card receivables and issues senior and subordinated term notes collateralized by that
co-ownership interest in the underlying pool of credit card receivables. Investors who purchase the term notes have recourse
only to that co-ownership interest in the underlying pool of credit card receivables.
We continue to service the credit card receivables and perform an administrative role for the entity. We also retain risk in
the underlying pool of credit card receivables through our retained interest in the transferred assets, the cash reserve balance
we fund from time to time, and also through certain senior or subordinated notes which we may retain. Additionally, we may own
some senior or subordinated notes as investments or for market-making activities and we act as counterparty to interest rate
and cross currency swap agreements which hedge the entity’s interest rate and currency risk exposures.
We consolidate the structured entity because we have decision-making power over the timing and size of future issuances
and other relevant activities which were predetermined by us at inception. We also obtain significant funding benefits and are
exposed to variability from the performance of the underlying credit card receivables through our retained interest. As at
October 31, 2025, $5 billion of notes issued by our credit card securitization vehicle were included in Deposits on our
Consolidated Balance Sheets (October 31, 2024 – $6 billion).
We established a funding vehicle that provides loans to us and finances those loans by issuing commercial paper to third-party
investors. The structured entity’s commercial paper carries an equivalent credit rating to RBC because we are obligated to
advance funds to the entity in the event there are insufficient funds from other sources to settle maturing commercial paper. We
pledge collateral to secure the loans and are exposed to the market and credit risks of the pledged securities.
(continued)
Note 8
Structured entities
190
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
We consolidate the structured entity because we have decision-making power over the relevant activities, are the sole
borrower from the structure, and are exposed to a majority of the residual ownership risks through the credit support provided.
As at October 31, 2025, $20 billion of commercial paper issued by the vehicle was included in Deposits on our Consolidated
Covered bonds
We periodically transfer mortgages to RBC Covered Bond Guarantor Limited Partnership (the Guarantor LP) to support funding
activities and asset coverage requirements under our covered bonds program. The Guarantor LP was created to guarantee
interest and principal payments under the covered bond program. The covered bonds guaranteed by the Guarantor LP are
direct, unsecured and unconditional obligations of RBC; therefore, investors have a claim against the Bank which will continue if
the covered bonds are not paid by the Bank and the mortgage assets in the Guarantor LP are insufficient to satisfy the
obligations owing on the covered bonds. We act as general partner, limited partner, swap counterparty, lender and liquidity
provider to the Guarantor LP, servicer for the underlying mortgages as well as the registered issuer of the covered bonds.
We consolidate the Guarantor LP as we have the decision-making power over the relevant activities through our role as
general partner and are exposed to variability from the performance of the underlying mortgages. As at October 31, 2025, the
total amount of mortgages transferred and outstanding was $86 billion (October 31, 2024 – $107 billion) and $53 billion of
covered bonds were recorded as Deposits on our Consolidated Balance Sheets (October 31, 2024 – $58 billion).
Structured finance
We sell taxable and tax-exempt municipal bonds into Tender Option Bond (TOB) trusts, which consist of a bond that is credit
enhanced by us and purchased by a TOB trust. The TOB trust finances the purchase from us by issuing interest-bearing
certificates to short-term investors and a residual certificate that is purchased by us. We are the remarketing agent for the
interest-bearing certificates and provide a liquidity facility to the short-term investors which requires us to purchase any
certificates tendered but not successfully remarketed. We credit enhance the bond purchased by the TOB trust with a letter of
credit under which we are required to extend funding if there are any losses on the underlying bonds. We earn interest on the
residual certificate and receive market-based fees for acting as remarketing agent and providing the liquidity facility and letter
of credit.
We consolidate the TOB trust when we are the holder of the residual certificate as we have decision-making power over the
relevant activities, including the selection of the underlying municipal bonds and the ability to terminate the trust, and are
exposed to variability from the performance of the underlying municipal bonds. As at October 31, 2025, $5 billion of municipal
bonds were included in Securities related to consolidated TOB trusts (October 31, 2024 – $5 billion) and a corresponding
$5 billion of interest-bearing certificates were included in Deposits on our Consolidated Balance Sheets (October 31, 2024 –
$5 billion).
We establish structured entities to acquire loans for the purposes of issuing term collateralized loan obligation (CLO)
transactions and act as collateral manager. During the warehouse phase, we provide subordinated financing and, for certain
term CLO transactions, act as the arranger and placement agent, and may provide senior warehouse financing. Proceeds from
the sale of the term CLO are used to repay our warehouse financing. During the term CLO phase, we continue to provide
subordinated financing, which serves as the first loss tranche that absorbs losses prior to the senior tranches, and may also
directly invest in the other tranches.
We consolidate these CLO structures as we have decision-making power over the relevant activities of the entity, which
include the initial selection and subsequent management of the underlying debt portfolio, and when our interests, including
direct investment plus collateral management fees, indicate that we are acting as a principal. As at October 31, 2025, $317 million
of Cash and due from banks and $1,770 million of Loans related to consolidated CLO structures (October 31, 2024 – $194 million
and $2,030 million, respectively) and $1,900 million of Deposits representing the subordinated and senior tranches held by third
parties (October 31, 2024 – $1,143 million) were recorded on our Consolidated Balance Sheets.
RBC managed investment funds
We are sponsors and investment managers of mutual and pooled funds, which give us the ability to direct the investment
decisions of the funds. We consolidate those mutual and pooled funds in which our interests, which include direct investment in
seed capital plus management or performance fees, indicate that we are acting as a principal. As at October 31, 2025,
$1,004 million of assets in the consolidated funds, primarily relating to Trading securities (October 31, 2024 – $799 million) and
$362 million of Other liabilities representing the fund units held by third parties (October 31, 2024 – $377 million) were recorded
on our Consolidated Balance Sheets.
Unconsolidated structured entities
We have interests in certain structured entities that we do not consolidate but have recorded assets and liabilities on our
Consolidated Balance Sheets related to our transactions and involvement with these entities.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
191
The following table presents the assets and liabilities recorded on our Consolidated Balance Sheets and our maximum
exposure to loss related to our interests in unconsolidated structured entities. It also presents the size of each category of
unconsolidated structured entity, as measured by the total assets of the entities in which we have an interest. The total assets
as presented for each category do not necessarily represent the assets we have either rights or recourse to.
| As at October 31, 2025 | ||||||
Non-RBC | ||||||
managed | Third-party | |||||
Multi-seller | Structured | investment | securitization | |||
(Millions of Canadian dollars) | conduits (1) | finance | funds | vehicles | Other | Total |
On-balance sheet assets | ||||||
Securities | $ 3 | $ – | $ 2,753 | $ – | $ 1,187 | $ 3,943 |
Loans | 209 | 12,386 | – | 16,673 | 2,161 | 31,429 |
Derivatives | 23 | – | – | – | 217 | 240 |
Other assets | – | – | – | – | 747 | 747 |
$ 235 | $ 12,386 | $ 2,753 | $ 16,673 | $ 4,312 | $ 36,359 | |
On-balance sheet liabilities | ||||||
Deposits | $ – | $ – | $ – | $ – | $ 5 | $ 5 |
Derivatives | 281 | – | 3 | – | 22 | 306 |
Other liabilities | – | – | – | – | – | – |
$ 281 | $ – | $ 3 | $ – | $ 27 | $ 311 | |
Maximum exposure to loss (2) | $ 64,591 | $ 19,672 | $ 3,710 | $ 26,094 | $ 7,796 | $ 121,863 |
Total assets of unconsolidated structured entities | $ 63,306 | $ 54,840 | $ 515,340 | $ 161,430 | $ 961,750 | $ 1,756,666 |
| As at October 31, 2024 | ||||||
Non-RBC | ||||||
managed | Third-party | |||||
Multi-seller | Structured | investment | securitization | |||
(Millions of Canadian dollars) | conduits (1) | finance | funds | vehicles | Other | Total |
On-balance sheet assets | ||||||
Securities | $ 1 | $ – | $ 2,541 | $ – | $ 1,384 | $ 3,926 |
Loans | 236 | 6,688 | – | 12,788 | 1,805 | 21,517 |
Derivatives | 32 | – | – | – | 98 | 130 |
Other assets | – | – | – | – | 455 | 455 |
$ 269 | $ 6,688 | $ 2,541 | $ 12,788 | $ 3,742 | $ 26,028 | |
On-balance sheet liabilities | ||||||
Deposits | $ – | $ – | $ – | $ – | $ 167 | $ 167 |
Derivatives | 115 | – | 3 | – | 4 | 122 |
Other liabilities | – | – | – | – | 7 | 7 |
$ 115 | $ – | $ 3 | $ – | $ 178 | $ 296 | |
Maximum exposure to loss (2) | $ 56,779 | $ 12,963 | $ 3,487 | $ 21,195 | $ 6,248 | $ 100,672 |
Total assets of unconsolidated structured entities | $ 55,639 | $ 45,315 | $ 459,976 | $ 119,766 | $ 798,228 | $ 1,478,924 |
(1)
Total assets of unconsolidated structured entities represent the maximum assets that may have to be purchased by the conduits under purchase commitments
outstanding. Of the purchase commitments outstanding, the conduits have purchased financial assets totalling $43 billion as at October 31, 2025 (October 31, 2024 –
$37 billion).
(2)
The maximum exposure to loss resulting from our interests in these entities consists mostly of investments, loans, fair value of derivatives, liquidity and credit
enhancement facilities. The maximum exposure to loss of the multi-seller conduits is higher than the on-balance sheet assets primarily because of the notional amounts
of the backstop liquidity and credit enhancement facilities. Refer to Note 23 for further details.
Below is a description of our involvement with each significant category of unconsolidated structured entity.
Multi-seller conduits
We administer multi-seller ABCP conduit programs. Multi-seller conduits primarily purchase financial assets from clients and
finance those purchases by issuing ABCP.
In certain multi-seller conduit arrangements, we do not maintain any ownership of the multi-seller conduits that we
administer and have no rights to, or control of, its assets. As the administrative agent, we earn a residual fee for providing
services such as coordinating funding activities, transaction structuring, documentation, execution and monitoring. The ABCP
issued by each multi-seller conduit is in the conduit’s own name with recourse to the financial assets owned by the multi-seller
conduit, and is non-recourse to us except through our participation in liquidity and/or credit enhancement facilities.
We provide transaction-specific and program-wide liquidity facilities to the multi-seller conduits. In addition, we provide
program-wide credit enhancement to the multi-seller conduits which obligate us to purchase assets or advance funds in the
event the multi-seller conduit does not otherwise have funds from other sources, such as from the liquidity facilities, to settle
maturing ABCP. In some cases, we or another third-party may provide transaction-specific credit enhancement which can take
various forms. We receive market-based fees for providing these liquidity and credit facilities.
For certain transactions, we act as counterparty to various hedging contracts to facilitate our clients’ securitization of fixed
rate and/or foreign currency denominated assets through the conduits. These may take the form of forward contracts, interest
rate swaps or cross currency swaps. These derivatives expose us to foreign exchange and interest rate risks that are centrally
managed by our foreign exchange trading and swap desks, respectively, and credit risk on the underlying assets that is
mitigated by the credit enhancement described below.
(continued)
Note 8
Structured entities
192
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Each transaction is structured with transaction-specific first loss protection provided by the third-party seller. This
enhancement can take various forms, including but not limited to overcollateralization, excess spread, subordinated classes of
financial assets, guarantees or letters of credit. The amount of this enhancement varies but is generally designed to cover a
multiple of historical losses.
An unrelated third-party (expected loss investor) absorbs losses, up to a maximum contractual amount, that may occur in
the future on the assets in the multi-seller conduits before the multi-seller conduits’ debt holders and us. In return for assuming
this multi-seller conduit first-loss position, each multi-seller conduit pays the expected loss investor a return commensurate
with its risk position. The expected loss investor has substantive power to direct the majority of the activities which significantly
impact the conduit’s economic performance, including initial selection and approval of the asset purchase commitments and
liquidity facilities, approval of renewal and amendment of these transactions and facilities, sale or transfer of assets, ongoing
monitoring of asset performance, mitigation of losses, and management of the ABCP liabilities.
We do not consolidate these multi-seller conduits as we do not control the conduits as noted above.
Structured finance
We participate in certain municipal bond TOB structures that we do not consolidate. These structures are similar to those
consolidated municipal bond TOB structures described above; however, the residual certificates are held by third parties. We
provide liquidity facilities for the benefit of floating-rate certificate holders which may be drawn if certificates are tendered but
not able to be remarketed. For a portion of these trusts, we also provide a letter of credit for the underlying bonds held in the
trust. We do not have decision-making power over the relevant activities of the structures; therefore, we do not consolidate
these structures.
We provide senior warehouse financing to unaffiliated structured entities that are established by third parties to acquire
loans for the purposes of issuing a term CLO transaction. Subordinated financing is provided during the warehouse phase by
either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorbs
losses prior to ourselves as the senior lender. We act as the arranger and placement agent for the term CLO transaction.
Proceeds from the sale of the term CLO are used to repay our senior warehouse financing, at which point we have no further
involvement with the transaction. We do not consolidate these CLO structures as we do not have decision-making power over
the relevant activities of the entity, which include the initial selection and subsequent management of the underlying debt
portfolio.
We provide senior financing to unaffiliated structured entities that are established by third parties to acquire loans.
Subordinated financing is provided by either the collateral manager or third-party investors. Subordinated financing serves as
the first loss tranche which absorbs losses prior to ourselves as the senior lender. These facilities tend to be longer in term than
the CLO warehouse facilities and benefit from credit enhancement generally designed to cover a multiple of historical losses.
We may also invest in the senior-most tranches issued by third-party structured entities. We do not consolidate these structures
as we do not have decision-making power over the relevant activities of the entity, which include the initial selection and
subsequent management of the underlying debt portfolio.
Non-RBC managed investment funds
We enter into fee-based equity derivative transactions with third parties including mutual funds, unit investment trusts and
other investment funds. These transactions provide their investors with the desired exposure to reference funds, and we
economically hedge our exposure to these derivatives by investing in those reference funds. We also act as custodian for
several funds. We do not consolidate those reference funds that are managed by third parties as we do not have power to direct
their investing activities.
We provide liquidity facilities to certain third-party investment funds. The funds issue unsecured variable-rate preferred
shares and invest in portfolios of tax-exempt municipal bonds. Undrawn liquidity commitments expose us to the liquidity risk of
the preferred shares and drawn commitments expose us to the credit risk of the underlying municipal bonds. We do not
consolidate these third-party managed funds as we do not have power to direct their investing activities.
Third-party securitization vehicles
We hold interests in securitization vehicles that provide funding to certain third parties on whose behalf the entities were
created. The activities of these entities are limited to the purchase and sale of specified financial assets from the sponsor. We,
as well as other financial institutions, are obligated to provide funding up to our maximum commitment level and are exposed to
credit losses on the underlying assets after various credit enhancements. Enhancements can take various forms, including but
not limited to overcollateralization, excess spread, subordinated classes of financial assets, guarantees or letters of credit. The
amount of this enhancement varies but is generally designed to cover a multiple of historical losses. We do not consolidate
these entities as we do not have decision-making power over the relevant activities, including the entities’ investing and
financing activities.
Other
Other unconsolidated structured entities include managed investment funds, alternative asset entities, arrangements to pass
credit risk to third parties, credit investment products and tax credit funds.
We are sponsors and investment managers of mutual funds, pooled funds and alternative asset entities, which gives us the
ability to direct the investment decisions of these entities. We do not consolidate these entities if we only exercise our
decision-making power as an agent on behalf of other unit holders.
We use structured entities to generally transform credit derivatives into cash instruments, to distribute credit risk and to
create customized credit products to meet investors’ specific requirements. We enter into derivative contracts, including credit
derivatives, to purchase protection from these entities (credit protection) and convert various risk factors such as yield,
currency or credit risk of underlying assets to meet the needs of the investors. We act as sole arranger and swap provider for
certain entities and, in some cases, fulfill other administrative functions for the entities. We do not consolidate these credit
investment product entities as we do not have decision-making power over the relevant activities, which include selection of the
collateral and reference portfolio, and are not exposed to a majority of the benefits or risks of the entities.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
193
We created certain funds to pass through tax credits received from underlying low-income housing, historic rehabilitation
real estate projects to third parties, new market tax credits or renewable energy tax credits to third parties (tax credit funds). We
are sponsors of the tax credit funds as a result of our responsibility to manage the funds, arrange the financing, and perform the
administrative duties of these tax credit funds. We do not consolidate the tax credit funds as the third-party investors in these
funds have the decision-making power to select the underlying investments and are exposed to the majority of the residual
ownership and tax risks of the funds.
We also purchase passive interests in renewable energy tax credit entities created and controlled by third parties. We do
not consolidate these third-party funds as we do not have decision-making power over the relevant activities and our
investments are managed as part of larger portfolios which are held for trading purposes.
Other interests in unconsolidated structured entities
In the normal course of business, we buy and sell passive interests in certain third-party structured entities, including mutual
funds, exchange traded funds, and government-sponsored ABS vehicles. Our investments in these entities are managed as part
of larger portfolios which are held for trading, liquidity or hedging purposes. We did not create or sponsor these entities and do
not have any decision-making power over their ongoing activities. Our maximum exposure to loss is limited to our on-balance
sheet investments in these entities, which are not included in the table above. As at October 31, 2025 and 2024, our investments
in these entities were included in Trading and Investment securities on our Consolidated Balance Sheets. Refer to Note 3 and
Note 4 for further details on our Trading and Investment securities.
Sponsored entities
We are a sponsor of certain structured entities in which we have interests but do not consolidate. In determining whether we are
a sponsor of a structured entity, we consider both qualitative and quantitative factors, including the purpose and nature of the
entity, our initial and continuing involvement and whether we hold subordinated interests in the entity. We are considered to be
the sponsor of certain credit investment products, tax credit entities, RBC managed mutual funds and a commercial mortgage
securitization vehicle. During the year ended October 31, 2025, we transferred commercial mortgages with a carrying amount of
$685 million (October 31, 2024 – $nil) to a sponsored securitization vehicle in which we did not have any interests as at the end of
Derivative financial instruments and hedging activities
Derivative instruments are categorized as either financial or non-financial derivatives. Financial derivatives are financial
contracts whose value is derived from an underlying interest rate, foreign exchange rate, credit risk, and equity or equity index.
Non-financial derivatives are contracts whose value is derived from a precious metal, commodity instrument or index. The
notional amount of derivatives represents the contract amount used as a reference point to calculate payments.
Financial derivatives
Forwards and futures
Forward contracts are non-standardized agreements that are transacted between counterparties in the OTC market, whereas
futures are standardized contracts with respect to amounts and settlement dates, and are traded on regular futures exchanges.
Examples of forwards and futures are described below.
Interest rate forwards (forward rate agreements) and futures are contractual obligations to buy or sell an interest-rate
sensitive financial instrument on a predetermined future date at a specified price.
Foreign exchange forwards and futures are contractual obligations to exchange one currency for another at a specified
price for settlement at a predetermined future date.
Equity forwards and futures are contractual obligations to buy or sell at a fixed value (the specified price) of an equity
index, a basket of stocks or a single stock at a predetermined future date.
Swaps
Swaps are OTC contracts in which two counterparties exchange a series of cash flows based on agreed upon rates applied to a
notional amount. Examples of swap agreements are described below.
Interest rate swaps are agreements where two counterparties exchange a series of payments based on different interest
rates applied to a notional amount in a single currency. Certain interest rate swaps are transacted and settled through clearing
houses which act as central counterparties. Cross currency swaps involve the exchange of fixed payments in one currency for
the receipt of fixed payments in another currency. Cross currency interest rate swaps involve the exchange of both interest and
notional amounts in two different currencies.
Equity swaps are contracts in which one counterparty agrees to pay or receive from the other cash flows based on changes
in the value of an equity index, a basket of stocks or a single stock.
Options
Options are contractual agreements under which the seller (writer) grants the purchaser the right, but not the obligation, either
to buy (call option) or sell (put option) a security, exchange rate, interest rate, or other financial instrument or commodity at a
specified price, at or by a predetermined future date. The seller (writer) of an option can also settle the contract by paying the
cash settlement value of the purchaser’s right. The seller (writer) receives a premium from the purchaser for this right. The
various option agreements that we enter into include but are not limited to interest rate options, foreign currency options,
equity options and index options.
(continued)
Note 9
Derivative financial instruments and hedging activities
194
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Credit derivatives
Credit derivatives are OTC contracts that transfer credit risk related to an underlying financial instrument (referenced asset)
from one counterparty to another. Certain credit default swaps are transacted and settled through clearing houses which act as
central counterparties. Credit derivatives include credit default swaps, credit default baskets and total return swaps with debt
securities as the underlying asset(s).
Credit default swaps provide protection against the decline in the value of the referenced asset as a result of specified
credit events such as default or bankruptcy. They are similar in structure to an option, whereby the purchaser pays a premium to
the seller of the credit default swap in return for payment contingent on a credit event affecting the referenced asset.
Credit default baskets are similar to credit default swaps except that the underlying referenced financial instrument is a
group of assets instead of a single asset.
Total return swaps are contracts where one counterparty agrees to pay or receive from the other cash amounts based on
changes in the value of a referenced asset or group of assets, including any returns such as interest earned on these assets, in
exchange for amounts that are based on prevailing market funding rates.
Other derivative products
Other derivative products include stable value derivatives.
Non-financial derivatives
Other contracts also include non-financial derivative products such as precious metal and commodity derivative contracts in
both the OTC and exchange markets.
Most of our derivative transactions relate to client-driven sales and trading activities, and associated market risk hedging. Sales
activities include the structuring and marketing of derivative products to clients, enabling them to modify or reduce risks.
Trading involves market-making, positioning and arbitrage activities. Market-making involves quoting bid and offer prices to
other market participants with the intention of generating revenue based on spread and volume. Positioning involves the active
management of derivative transactions with the expectation of profiting from favourable movements in prices, rates, or indices.
Derivatives issued for other-than-trading purposes
We also use derivatives for purposes other than trading, primarily for hedging, in conjunction with the management of interest
rate, credit, equity and foreign exchange risk related to our funding, lending, investment activities and asset/liability
management.
Interest rate swaps are used to manage our exposure to interest rate risk by modifying the repricing or maturity
characteristics of existing and/or forecasted assets and liabilities, including funding and investment activities. Purchased
options are used to hedge redeemable deposits and other options embedded in consumer products. We manage our exposure to
foreign currency risk with cross currency swaps and foreign exchange forward contracts. We predominantly use credit
derivatives to manage our credit exposures. We mitigate industry sector concentrations and single-name exposures related to
our credit portfolio by purchasing credit derivatives to transfer credit risk to third parties.
Certain derivatives and cash instruments are specifically designated and qualify for hedge accounting. We also enter into
derivative transactions to economically hedge certain exposures that do not otherwise qualify for hedge accounting, or where
hedge accounting is not considered economically feasible to implement.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
195
Notional amount of derivatives by term to maturity (absolute amounts)
(1)
| As at October 31, 2025 | ||||||
| Term to maturity | ||||||
Within | 1 through | Over | Other than | |||
(Millions of Canadian dollars) | 1 year | 5 years | 5 years | Total | Trading | Trading |
Over-the-counter contracts | ||||||
Interest rate contracts | ||||||
Forward rate agreements | $ 1,920,284 | $ 1,292,557 | $ 11,515 | $ 3,224,356 | $ 3,224,356 | $ – |
Swaps | 7,198,664 | 9,391,086 | 6,401,414 | 22,991,164 | 21,509,530 | 1,481,634 |
Options purchased | 553,914 | 431,667 | 189,250 | 1,174,831 | 1,174,715 | 116 |
Options written | 493,070 | 445,756 | 207,892 | 1,146,718 | 1,146,491 | 227 |
Foreign exchange contracts | ||||||
Forward contracts | 3,184,117 | 151,308 | 9,319 | 3,344,744 | 3,192,939 | 151,805 |
Cross currency swaps | 22,869 | 121,493 | 101,765 | 246,127 | 238,380 | 7,747 |
Cross currency interest rate swaps | 1,575,261 | 2,557,260 | 1,395,392 | 5,527,913 | 5,452,212 | 75,701 |
Options purchased | 656,329 | 118,521 | 1,734 | 776,584 | 776,175 | 409 |
Options written | 667,756 | 107,799 | 1,163 | 776,718 | 776,716 | 2 |
Credit derivatives (2) | 11,069 | 267,007 | 145,178 | 423,254 | 422,213 | 1,041 |
Other contracts (3) | 572,876 | 213,935 | 26,947 | 813,758 | 796,157 | 17,601 |
Exchange-traded contracts | ||||||
Interest rate contracts | ||||||
Futures – long positions | 263,750 | 155,590 | 2,614 | 421,954 | 421,954 | – |
Futures – short positions | 660,032 | 159,865 | 2,739 | 822,636 | 822,333 | 303 |
Options purchased | 47,629 | 5,684 | – | 53,313 | 53,313 | – |
Options written | 65,477 | 10,429 | – | 75,906 | 75,906 | – |
Foreign exchange contracts | ||||||
Futures – long positions | 15 | – | – | 15 | 15 | – |
Other contracts | 714,199 | 190,536 | 28,799 | 933,534 | 933,534 | – |
$ 18,607,311 | $ 15,620,493 | $ 8,525,721 | $ 42,753,525 | $ 41,016,939 | $ 1,736,586 | |
| As at October 31, 2024 | ||||||
| Term to maturity | ||||||
Within | 1 through | Over | Other than | |||
(Millions of Canadian dollars) | 1 year | 5 years | 5 years | Total | Trading | Trading |
Over-the-counter contracts | ||||||
Interest rate contracts | ||||||
Forward rate agreements | $ 1,097,367 | $ 672,436 | $ 7,017 | $ 1,776,820 | $ 1,776,820 | $ – |
Swaps | 6,181,369 | 8,714,891 | 5,597,447 | 20,493,707 | 19,291,405 | 1,202,302 |
Options purchased | 206,649 | 407,730 | 155,843 | 770,222 | 770,181 | 41 |
Options written | 217,379 | 384,448 | 179,408 | 781,235 | 781,113 | 122 |
Foreign exchange contracts | ||||||
Forward contracts | 2,939,019 | 136,442 | 7,465 | 3,082,926 | 2,966,914 | 116,012 |
Cross currency swaps | 23,204 | 108,912 | 75,843 | 207,959 | 199,481 | 8,478 |
Cross currency interest rate swaps | 1,298,173 | 2,544,878 | 1,380,858 | 5,223,909 | 5,168,677 | 55,232 |
Options purchased | 475,980 | 75,804 | 2,015 | 553,799 | 553,799 | – |
Options written | 488,878 | 66,828 | 983 | 556,689 | 556,689 | – |
Credit derivatives (2) | 4,055 | 135,505 | 118,732 | 258,292 | 257,333 | 959 |
Other contracts (3) | 389,424 | 149,475 | 10,122 | 549,021 | 538,604 | 10,417 |
Exchange-traded contracts | ||||||
Interest rate contracts | ||||||
Futures – long positions | 93,985 | 45,015 | 56 | 139,056 | 139,056 | – |
Futures – short positions | 114,425 | 64,759 | 301 | 179,485 | 179,244 | 241 |
Options purchased | 7,075 | 991 | – | 8,066 | 8,066 | – |
Options written | 2,262 | 14 | – | 2,276 | 2,276 | – |
Foreign exchange contracts | ||||||
Futures – long positions | 1 | – | – | 1 | 1 | – |
Other contracts | 367,023 | 68,132 | 2,574 | 437,729 | 437,729 | – |
$ 13,906,268 | $ 13,576,260 | $ 7,538,664 | $ 35,021,192 | $ 33,627,388 | $ 1,393,804 | |
(1)
The derivative notional amounts are determined using the standardized approach for measuring counterparty credit risk (SA-CCR) in accordance with the Capital
Adequacy Requirements (CAR).
(2)
Credit derivatives with a notional value of $1 billion (October 31, 2024 – $1 billion) are economic hedges. Trading credit derivatives comprise protection purchased of
$218 billion (October 31, 2024 – $135 billion) and protection sold of $204 billion (October 31, 2024 – $122 billion).
(3)
Other contracts exclude loan underwriting commitments of $8 billion (October 31, 2024 – $3 billion), which are not classified as derivatives under CAR guidelines.
(continued)
Note 9
Derivative financial instruments and hedging activities
196
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Fair value of derivative instruments
(1)
| As at | ||||
October 31, 2025 | October 31, 2024 | |||
(Millions of Canadian dollars) | Positive | Negative | Positive | Negative |
Held or issued for trading purposes | ||||
Interest rate contracts | ||||
Forward rate agreements | $ 112 | $ 153 | $ 147 | $ 68 |
Swaps | 20,887 | 15,644 | 21,155 | 16,482 |
Options purchased | 4,872 | – | 5,556 | – |
Options written | – | 5,330 | – | 6,049 |
25,871 | 21,127 | 26,858 | 22,599 | |
Foreign exchange contracts | ||||
Forward contracts | 27,599 | 22,562 | 26,339 | 23,758 |
Cross currency swaps | 9,202 | 5,545 | 7,316 | 4,912 |
Cross currency interest rate swaps | 55,475 | 61,017 | 60,105 | 59,733 |
Options purchased | 3,382 | – | 2,407 | – |
Options written | – | 2,577 | – | 1,800 |
95,658 | 91,701 | 96,167 | 90,203 | |
Credit derivatives | 349 | 258 | 270 | 216 |
Other contracts | 52,988 | 69,249 | 26,325 | 46,420 |
174,866 | 182,335 | 149,620 | 159,438 | |
Held or issued for other-than-trading purposes | ||||
Interest rate contracts | ||||
Swaps | 293 | 453 | 1,215 | 3,100 |
293 | 453 | 1,215 | 3,100 | |
Foreign exchange contracts | ||||
Forward contracts | 2,311 | 1,929 | 1,235 | 682 |
Cross currency swaps | 482 | 73 | 207 | 46 |
Cross currency interest rate swaps | 2,255 | 1,388 | 874 | 2,287 |
5,048 | 3,390 | 2,316 | 3,015 | |
Credit derivatives | 3 | 4 | 3 | 2 |
Other contracts | 143 | 61 | 79 | 77 |
5,487 | 3,908 | 3,613 | 6,194 | |
Total gross fair values before: | 180,353 | 186,243 | 153,233 | 165,632 |
Valuation adjustments determined on a pooled basis | (1,080) | (223) | (1,053) | (301) |
Impact of netting agreements that qualify for balance sheet offset | (2,067) | (2,067) | (1,568) | (1,568) |
$ 177,206 | $ 183,953 | $ 150,612 | $ 163,763 | |
(1)
The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central
counterparties.
Fair value of derivative instruments by term to maturity
(1)
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Less than | 1 through | Over | Less than | 1 through | Over | |||
(Millions of Canadian dollars) | 1 year | 5 years | 5 years | Total | 1 year | 5 years | 5 years | Total |
Derivative assets | $ 73,626 | 56,086 | 47,494 | $ 177,206 | $ 54,660 | 48,765 | 47,187 | $ 150,612 |
Derivative liabilities | 79,691 | 57,630 | 46,632 | 183,953 | 67,886 | 51,170 | 44,707 | 163,763 |
(1)
The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central
counterparties.
Derivative-related credit risk
Credit risk from derivative transactions is generated by the potential for the counterparty to default on its contractual
obligations when one or more transactions have a positive market value to us. Therefore, derivative-related credit risk is
represented by the positive fair value of the financial instrument and is normally a small fraction of the contract’s notional
amount.
We subject our derivative transactions to the same credit approval, limit and monitoring standards that we use for
managing other transactions that create credit exposure. This includes evaluating the creditworthiness of counterparties, and
managing the size, diversification and maturity structure of the portfolio. Credit utilization for all products is compared with
established limits on a continual basis and is subject to a standard exception reporting process. We use a single internal rating
system for all credit risk exposure, as outlined in the internal ratings maps in the Credit risk section of Management’s Discussion
and Analysis.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
197
Offsetting is a technique that can reduce credit exposure from derivatives and is generally facilitated through the use of
master netting agreements and achieved when specific criteria are met in accordance with our accounting policy in Note 2. A
master netting agreement provides for a single net settlement of all financial instruments covered by the agreement in the event
of default. However, credit risk is reduced only to the extent that our financial obligations to the same counterparty can be set
off against obligations of the counterparty to us. We maximize the use of master netting agreements to reduce derivative-
related credit exposure. Our overall exposure to credit risk that is reduced through master netting agreements may change
substantially following the reporting date as the exposure is affected by each transaction subject to the agreement as well as by
changes in underlying market factors. Measurement of our credit exposure arising out of derivative transactions is reduced to
reflect the effects of netting in cases where the enforceability of that netting is supported by appropriate legal analysis as
documented in our trading credit risk policies.
The use of collateral is another significant credit mitigation technique for managing derivative-related counterparty credit
risk. Mark-to-market provisions in our agreements with some counterparties, typically in the form of a Credit Support Annex,
provide us with the right to request that the counterparty collateralize the current market value of its derivatives positions when
the value exceeds a specified threshold amount.
Replacement cost and credit equivalent amounts are determined using SA-CCR in accordance with the OSFI CAR guidelines.
The replacement cost represents the total fair value of all outstanding contracts in a gain position after factoring in the master
netting agreements and applicable margins. The credit equivalent amount is defined as the replacement cost plus an additional
amount for potential future credit exposure, scaled by a regulatory factor. The risk-weighted equivalent is determined by
applying appropriate risk weights to the credit equivalent amount, including those risk weights reflective of model approval
under the internal ratings-based approach.
Derivative-related credit risk
(1)
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
Credit | Credit | |||||
Replacement | equivalent | Risk-weighted | Replacement | equivalent | Risk-weighted | |
(Millions of Canadian dollars) | cost | amount | equivalent (2) | cost | amount | equivalent (2) |
Over-the-counter contracts | ||||||
Interest rate contracts | ||||||
Forward rate agreements | $ 43 | $ 700 | $ 136 | $ 8 | $ 231 | $ 43 |
Swaps | 7,674 | 20,723 | 3,045 | 6,926 | 17,760 | 2,747 |
Options purchased | 90 | 752 | 147 | 317 | 859 | 135 |
Options written | 62 | 474 | 137 | 49 | 398 | 104 |
Foreign exchange contracts | ||||||
Forward contracts | 7,412 | 35,560 | 6,425 | 8,077 | 33,908 | 6,693 |
Swaps | 3,432 | 21,172 | 2,730 | 3,915 | 21,709 | 2,703 |
Options purchased | 871 | 2,614 | 665 | 877 | 2,315 | 587 |
Options written | 136 | 611 | 128 | 117 | 476 | 98 |
Credit derivatives | 838 | 2,614 | 132 | 608 | 2,336 | 191 |
Other contracts | 1,446 | 24,385 | 4,915 | 1,773 | 20,981 | 4,756 |
Exchange-traded contracts | 12,034 | 24,367 | 508 | 10,084 | 19,023 | 380 |
$ 34,038 | $ 133,972 | $ 18,968 | $ 32,751 | $ 119,996 | $ 18,437 | |
(1)
The amounts presented are net of master netting agreements in accordance with CAR guidelines.
(2)
The risk-weighted balances are calculated in accordance with CAR guidelines and exclude CVA of $20 billion (October 31, 2024 – $18 billion).
Replacement cost of derivative instruments by risk rating and by counterparty type
| As at October 31, 2025 | |||||||||
| Risk rating (1) | Counterparty type (2) | ||||||||
OECD | |||||||||
(Millions of Canadian dollars) | AAA, AA | A | BBB | BB or lower | Total | Banks | governments | Other | Total |
Gross positive fair values | $ 28,649 | $ 85,952 | $ 28,251 | $ 37,501 | $ 180,353 | $ 75,797 | $ 44,072 | $ 60,484 | $ 180,353 |
Impact of master netting agreements and | |||||||||
applicable margins | 15,681 | 76,267 | 21,738 | 32,629 | 146,315 | 74,434 | 43,386 | 28,495 | 146,315 |
Replacement cost (after netting agreements) | $ 12,968 | $ 9,685 | $ 6,513 | $ 4,872 | $ 34,038 | $ 1,363 | $ 686 | $ 31,989 | $ 34,038 |
| As at October 31, 2024 | |||||||||
| Risk rating (1) | Counterparty type (2) | ||||||||
OECD | |||||||||
(Millions of Canadian dollars) | AAA, AA | A | BBB | BB or lower | Total | Banks | governments | Other | Total |
Gross positive fair values | $ 31,561 | $ 77,933 | $ 25,206 | $ 18,533 | $ 153,233 | $ 75,119 | $ 24,655 | $ 53,459 | $ 153,233 |
Impact of master netting agreements and | |||||||||
applicable margins | 18,644 | 67,995 | 19,046 | 14,797 | 120,482 | 73,763 | 24,289 | 22,430 | 120,482 |
Replacement cost (after netting agreements) | $ 12,917 | $ 9,938 | $ 6,160 | $ 3,736 | $ 32,751 | $ 1,356 | $ 366 | $ 31,029 | $ 32,751 |
(1)
Our internal risk ratings of AAA, AA, A and BBB represent investment grade ratings and ratings of BB or lower represent non-investment grade ratings, as outlined in the
internal ratings maps in the Credit risk section of Management’s Discussion and Analysis.
(2)
Counterparty type is defined in accordance with CAR guidelines.
(continued)
Note 9
Derivative financial instruments and hedging activities
198
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Derivatives in hedging relationships
We apply hedge accounting to minimize volatility in earnings and capital caused by changes in interest rates or foreign
exchange rates. Interest rate and currency fluctuations will either cause assets and liabilities to appreciate or depreciate in
market value or cause variability in forecasted cash flows. When a hedging relationship is effective, gains, losses, revenue and
expenses of the hedging instrument will offset the gains, losses, revenue and expenses of the hedged item. Refer to Note 2 for
our policies on hedge accounting including presentation of hedge effectiveness and ineffectiveness amounts.
We assess and measure the effectiveness of a hedging relationship based on the change in the fair value or cash flows of
the derivative hedging instrument relative to the change in the fair value or cash flows of the hedged item attributable to the
hedged risk. When cash instruments are designated as hedges of foreign exchange risks, only changes in their value due to
foreign exchange risk are included in the assessment and measurement of hedge effectiveness. Potential sources of
ineffectiveness can be attributed to differences between hedging instruments and hedged items:
•
Mismatches in the terms of hedged items and hedging instruments, for example the frequency and timing of when
interest rates are reset and frequency of payment.
•
Difference in the discounting factors between the hedged item and the hedging instrument, taking into consideration
the different reset frequency of the hedged item and hedging instrument.
•
Hedging derivatives with a non-zero fair value at inception date of the hedging relationship, resulting in mismatch in
terms with the hedged item.
Below is a description of our risk management strategy for each risk exposure that we decide to hedge:
Interest rate risk
We use interest rate contracts to manage our exposure to interest rate risk by modifying the repricing characteristics of existing
and/or forecasted assets and liabilities, including funding and investment activities. The swaps are designated in either a fair
value hedge or a cash flow hedge.
For fair value hedges, we use interest rate contracts to manage the fair value movements of our fixed rate instruments due
to changes in benchmark interest. The interest rate swaps are entered into on a one-to-one basis to manage the benchmark
interest rate risk, and its terms are critically matched to the specified fixed rate instruments.
We also use interest rate swaps in fair value hedges to manage interest rate risk from residential mortgage assets and
funding liabilities. Our exposure from this portfolio changes with the origination of new loans, repayments of existing loans and
sale of securitized mortgages. Accordingly, we have adopted dynamic hedging for that portfolio, in which the hedge relationship
is rebalanced on a more frequent basis, such as on a bi-weekly or on a monthly basis.
For cash flow hedges, we use interest rate contracts to manage the exposure to cash flow variability of our variable rate
instruments as a result of changes in benchmark interest rates. Whilst some of the interest rate swaps are entered into on a one-
to-one basis to manage a specific exposure, other interest rate swaps may be entered into for managing interest rate risks of a
portfolio of assets and liabilities.
We manage our exposure to foreign currency risk with cross currency swaps in a cash flow hedge, and foreign exchange forward
contracts in a net investment hedge. Certain cash instruments may also be designated in a net investment hedge, where
applicable.
For cash flow hedges, we use cross currency swaps and forward contracts to manage the cash flow variability arising from
fluctuations in foreign exchange rates on our issued foreign denominated fixed rate liabilities and highly probable forecasted
transactions. The maturity profile and repayment terms of these swaps are matched to those of our foreign denominated
exposures to limit our cash flow volatility from changes in foreign exchange rates.
For net investment hedges, we use a combination of foreign exchange forwards and cash instruments, such as foreign
denominated deposit liabilities, to manage our foreign exchange risk arising from our investments in foreign operations. Our
most significant exposures include USD, GBP and Euro. When hedging net investments in foreign operations using foreign
exchange forwards, only the undiscounted spot element of the foreign exchange forward is designated as the hedging
instrument. Accordingly, changes in the fair value of the hedging instrument as a result of changes in forward rates and the
effects of discounting are not included in the hedging effectiveness assessment. Foreign operations are only hedged to the
extent of the principal of the foreign denominated deposit liabilities or notional amount of the derivative; we generally do not
Equity price risk
We use total return swaps in cash flow hedges to mitigate the cash flow variability of the expected payment associated with our
cash settled share-based compensation plan for certain key employees by exchanging interest payments for indexed RBC share
price change and dividend returns.
Credit risk
We predominantly use credit derivatives to economically hedge our credit exposures. We mitigate industry sector
concentrations and single-name exposures related to our credit portfolio by purchasing credit derivatives to transfer credit risk
to third parties.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
199
Derivative instruments designated in hedging relationships
(1)
The following table presents the fair values of the derivative instruments and the principal amounts of the non-derivative
liabilities, categorized by their hedging relationships, as well as derivatives that are not designated in hedging relationships.
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Designated as hedging instruments | Designated as hedging instruments | |||||||
| in hedging relationships | in hedging relationships | |||||||
Not designated | Not designated | |||||||
Fair | Cash | Net | in a hedging | Fair | Cash | Net | in a hedging | |
(Millions of Canadian dollars) | value | flow | investment | relationship | value | flow | investment | relationship |
Assets | ||||||||
Derivative instruments | $ 22 | $ 538 | $ 21 | $ 176,625 | $ 18 | $ 298 | $ 4 | $ 150,292 |
Liabilities | ||||||||
Derivative instruments | 5 | 73 | 120 | 183,755 | 59 | 27 | 433 | 163,244 |
Non-derivative instruments | – | – | 45,106 | n.a. | – | – | 37,833 | n.a. |
(1)
The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central
counterparties.
n.a.
not applicable
The following tables provide the remaining term to maturity analysis of the notional amounts and the weighted average rates of
the hedging instruments and their carrying amounts by types of hedging relationships:
Fair value hedges
| As at October 31, 2025 | ||||||
| Notional amounts | Carrying amount (1) | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Interest rate risk | ||||||
Interest rate contracts | ||||||
Hedge of fixed rate assets | $ 30,131 | $ 112,640 | $ 52,846 | $ 195,617 | $ 17 | $ 5 |
Hedge of fixed rate liabilities | 31,934 | 67,365 | 13,277 | 112,576 | 5 | – |
Weighted average fixed interest rate | ||||||
Hedge of fixed rate assets | 2.9% | 3.4% | 3.6% | 3.4% | ||
Hedge of fixed rate liabilities | 2.3% | 3.3% | 2.9% | 3.0% | ||
| As at October 31, 2024 | ||||||
| Notional amounts | Carrying amount (1) | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Interest rate risk | ||||||
Interest rate contracts | ||||||
Hedge of fixed rate assets | $ 11,396 | $ 68,563 | $ 38,343 | $ 118,302 | $ 10 | $ 55 |
Hedge of fixed rate liabilities | 32,496 | 71,668 | 17,267 | 121,431 | 8 | 4 |
Weighted average fixed interest rate | ||||||
Hedge of fixed rate assets | 3.8% | 3.8% | 3.5% | 3.7% | ||
Hedge of fixed rate liabilities | 2.9% | 2.8% | 3.1% | 2.8% | ||
(1)
The carrying amount reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central
counterparties.
(continued)
Note 9
Derivative financial instruments and hedging activities
200
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Cash flow hedges
| As at October 31, 2025 | ||||||
| Notional amounts | Carrying amount (1) | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Interest rate risk | ||||||
Interest rate contracts | ||||||
Hedge of variable rate assets | $ 95,516 | $ 136,952 | $ 9,274 | $ 241,742 | $ – | $ – |
Hedge of variable rate liabilities | 47,782 | 73,620 | 31,296 | 152,698 | – | – |
Weighted average fixed interest rate | ||||||
Hedge of variable rate assets | 3.1% | 3.2% | 3.4% | 3.2% | ||
Hedge of variable rate liabilities | 4.0% | 3.1% | 2.9% | 3.3% | ||
Foreign exchange risk | ||||||
Cross currency swaps | ||||||
Hedge of fixed rate assets | $ 183 | $ 1,000 | $ – | $ 1,183 | $ – | $ 73 |
Hedge of fixed rate liabilities | 1,212 | 3,233 | – | 4,445 | 482 | – |
Weighted average CAD-EUR exchange rate | 1.49 | 1.41 | n.a. | 1.43 | ||
Weighted average CAD-USD exchange rate | 1.34 | 1.34 | n.a. | 1.34 | ||
| As at October 31, 2024 | ||||||
| Notional amounts | Carrying amount (1) | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Interest rate risk | ||||||
Interest rate contracts | ||||||
Hedge of variable rate assets | $ 91,698 | $ 133,684 | $ 6,831 | $ 232,213 | $ – | $ – |
Hedge of variable rate liabilities | 46,390 | 101,339 | 33,845 | 181,574 | – | – |
Weighted average fixed interest rate | ||||||
Hedge of variable rate assets | 4.1% | 3.5% | 3.5% | 3.7% | ||
Hedge of variable rate liabilities | 4.1% | 3.6% | 2.9% | 3.6% | ||
Foreign exchange risk | ||||||
Cross currency swaps | ||||||
Hedge of fixed rate assets | $ – | $ 936 | $ – | $ 936 | $ 9 | $ 21 |
Hedge of fixed rate liabilities | – | 4,163 | – | 4,163 | 198 | 6 |
Weighted average CAD-EUR exchange rate | n.a. | 1.43 | n.a. | 1.43 | ||
Weighted average CAD-USD exchange rate | n.a. | 1.34 | n.a. | 1.34 | ||
(1)
The carrying amount reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central
counterparties.
n.a.
not applicable
Net investment hedges
| As at October 31, 2025 | ||||||
| Notional/Principal | Carrying amount | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Foreign exchange risk | ||||||
Foreign currency liabilities | $ 12,069 | $ 29,973 | $ 3,290 | $ 45,332 | n.a. | $ 45,106 |
Weighted average CAD-USD exchange rate | 1.31 | 1.38 | 1.34 | 1.36 | ||
Weighted average CAD-EUR exchange rate | n.a. | n.a. | n.a. | n.a. | ||
Weighted average CAD-GBP exchange rate | n.a. | 1.78 | n.a. | 1.78 | ||
Forward contracts | $ 11,388 | $ – | $ – | $ 11,388 | $ 21 | $ 120 |
Weighted average CAD-USD exchange rate | 1.39 | n.a. | n.a. | 1.39 | ||
Weighted average CAD-EUR exchange rate | 1.62 | n.a. | n.a. | 1.62 | ||
Weighted average CAD-GBP exchange rate | 1.86 | n.a. | n.a. | 1.86 | ||
| As at October 31, 2024 | ||||||
| Notional/Principal | Carrying amount | |||||
Within | 1 through | Over | ||||
(Millions of Canadian dollars, except average rates) | 1 year | 5 years | 5 years | Total | Assets | Liabilities |
Foreign exchange risk | ||||||
Foreign currency liabilities | $ 4,540 | $ 27,649 | $ 6,505 | $ 38,694 | n.a. | $ 37,833 |
Weighted average CAD-USD exchange rate | 1.33 | 1.34 | 1.34 | 1.34 | ||
Weighted average CAD-EUR exchange rate | n.a. | n.a. | n.a. | n.a. | ||
Weighted average CAD-GBP exchange rate | 1.71 | 1.76 | n.a. | 1.73 | ||
Forward contracts | $ 19,926 | $ – | $ – | $ 19,926 | $ 4 | $ 433 |
Weighted average CAD-USD exchange rate | 1.36 | n.a. | n.a. | 1.36 | ||
Weighted average CAD-EUR exchange rate | 1.50 | n.a. | n.a. | 1.50 | ||
Weighted average CAD-GBP exchange rate | 1.79 | n.a. | n.a. | 1.79 | ||
n.a.
not applicable
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
201
The following tables present the details of the hedged items categorized by their hedging relationships:
Fair value hedges – Assets and liabilities designated as hedged items
| As at and for the year ended October 31, 2025 | ||||||
Accumulated amount of fair | ||||||
value adjustments on the | ||||||
hedged item included in the | ||||||
Carrying amount | carrying amount | |||||
Changes in fair | ||||||
values used for | ||||||
calculating hedge | ||||||
(Millions of Canadian dollars) | Assets | Liabilities | Assets | Liabilities | Consolidated Balance Sheet items: | ineffectiveness |
Interest rate risk | ||||||
Fixed rate assets (1) | Securities – Investment, net of | |||||
applicable allowance; Loans – Retail; | ||||||
$ 192,744 | $ – | $ 1,027 | $ – | Loans – Wholesale | $ 1,698 | |
Fixed rate liabilities (1) | Deposits – Personal; | |||||
Deposits – Business and government; | ||||||
Subordinated debentures; | ||||||
– | 109,255 | – | (499) | Deposits – Bank | (1,812) | |
| As at and for the year ended October 31, 2024 | ||||||
Accumulated amount of fair | ||||||
value adjustments on the | ||||||
hedged item included in the | ||||||
Carrying amount | carrying amount | |||||
Changes in fair | ||||||
values used for | ||||||
calculating hedge | ||||||
(Millions of Canadian dollars) | Assets | Liabilities | Assets | Liabilities | Consolidated Balance Sheet items: | ineffectiveness |
Interest rate risk | ||||||
Fixed rate assets (1) | Securities – Investment, net of | |||||
applicable allowance; Loans – Retail; | ||||||
$ 114,354 | $ – | $ (666) | $ – | Loans – Wholesale | $ 2,702 | |
Fixed rate liabilities (1) | Deposits – Personal; | |||||
Deposits – Business and government; | ||||||
Subordinated debentures; | ||||||
– | 118,116 | – | (2,312) | Deposits – Bank | (3,963) | |
(1)
As at October 31, 2025, the accumulated amount of fair value hedge adjustments remaining on our Consolidated Balance Sheets for hedged items that have ceased to be
adjusted for hedging gains and losses is a loss of $78 million for fixed rate assets and a gain of $9 million for fixed rate liabilities (October 31, 2024 – loss of $238 million
and gain of $118 million, respectively).
(continued)
Note 9
Derivative financial instruments and hedging activities
202
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Cash flow and net investment hedges – Assets and liabilities designated as hedged items
As at and for the year ended October 31, 2025 | ||||
| Changes in fair | Cash flow hedge/foreign | |||
values used for | currency translation reserve | |||
calculating hedge | Continuing | Discontinued | ||
(Millions of Canadian dollars) | Consolidated Balance Sheet items: | ineffectiveness | hedges | hedges |
Cash flow hedges | ||||
Interest rate risk | ||||
Variable rate assets | Securities – Investment, net of | |||
applicable allowance; Loans – Retail; | ||||
Loans – Wholesale; | $ (1,561) | $ 2,934 | $ (481) | |
Interest bearing deposits with banks; | ||||
Assets purchased under reverse | ||||
repurchase agreements and securities borrowed | ||||
Variable rate liabilities | Deposits – Business and government; | 976 | (1,643) | 2,520 |
Deposits – Personal; | ||||
Obligations related to assets sold under | ||||
repurchase agreements and securities loaned | ||||
Foreign exchange risk | ||||
Fixed rate assets | Securities – Investment, net of | |||
applicable allowance | 56 | 13 | – | |
Fixed rate liabilities | Deposits – Business and government | (305) | (51) | – |
Net investment hedges | ||||
Foreign exchange risk | ||||
Foreign subsidiaries | n.a. | 433 | (8,514) | (306) |
As at and for the year ended October 31, 2024 | ||||
| Changes in fair | Cash flow hedge/foreign | |||
values used for | currency translation reserve | |||
calculating hedge | Continuing | Discontinued | ||
(Millions of Canadian dollars) | Consolidated Balance Sheet items: | ineffectiveness | hedges | hedges |
Cash flow hedges | ||||
Interest rate risk | ||||
Variable rate assets | Securities – Investment, net of | $ (4,415) | $ 2,645 | $ (2,216) |
applicable allowance; Loans – Retail; | ||||
Loans – Wholesale; | ||||
Interest bearing deposits with banks; | ||||
Assets purchased under reverse | ||||
repurchase agreements and securities borrowed | ||||
Variable rate liabilities | Deposits – Business and government; | 4,437 | (1,801) | 4,557 |
Deposits – Personal; | ||||
Obligations related to assets sold under | ||||
repurchase agreements and securities loaned | ||||
Foreign exchange risk | ||||
Fixed rate assets | Securities – Investment, net of | |||
applicable allowance | 7 | 13 | – | |
Fixed rate liabilities | Deposits – Business and government | (106) | (52) | – |
Net investment hedges | ||||
Foreign exchange risk | ||||
Foreign subsidiaries | n.a. | 710 | (8,005) | (382) |
n.a.
not applicable
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
203
Effectiveness of designated hedging relationships
| For the year ended October 31, 2025 | ||||
Hedge | ||||
Change in fair value | ineffectiveness | Changes in the value of | Amount reclassified | |
of hedging | recognized in | the hedging instrument | from hedge reserves | |
(Millions of Canadian dollars) | instrument | income (1) | recognized in OCI | to income |
Fair value hedges | ||||
Interest rate risk | ||||
Interest rate contracts – fixed rate assets | $ (1,773) | $ (75) | n.a. | n.a. |
Interest rate contracts – fixed rate liabilities | 1,808 | (4) | n.a. | n.a. |
Cash flow hedges | ||||
Interest rate risk | ||||
Interest rate contracts – variable rate assets | 1,543 | (13) | $ 1,604 | $ (344) |
Interest rate contracts – variable rate liabilities | (941) | 17 | (974) | 828 |
Foreign exchange risk | ||||
Cross currency swap – fixed rate assets | (56) | – | (50) | (50) |
Cross currency swap – fixed rate liabilities | 305 | – | 246 | 246 |
Net investment hedges | ||||
Foreign exchange risk | ||||
Foreign currency liabilities | (92) | – | (92) | – |
Forward contracts | (341) | – | (341) | – |
| For the year ended October 31, 2024 | ||||
Hedge | ||||
Change in fair value | ineffectiveness | Changes in the value of | Amount reclassified | |
of hedging | recognized in | the hedging instrument | from hedge reserves | |
(Millions of Canadian dollars) | instrument | income (1) | recognized in OCI | to income |
Fair value hedges | ||||
Interest rate risk | ||||
Interest rate contracts – fixed rate assets | $ (2,761) | $ (59) | n.a. | n.a. |
Interest rate contracts – fixed rate liabilities | 3,961 | (2) | n.a. | n.a. |
Cash flow hedges | ||||
Interest rate risk | ||||
Interest rate contracts – variable rate assets | 4,416 | 15 | $ 2,559 | $ (3,195) |
Interest rate contracts – variable rate liabilities | (4,325) | (19) | (2,600) | 3,872 |
Foreign exchange risk | ||||
Cross currency swap – fixed rate assets | (6) | – | 1 | (12) |
Cross currency swap – fixed rate liabilities | 107 | 2 | 70 | 122 |
Net investment hedges | ||||
Foreign exchange risk | ||||
Foreign currency liabilities | (455) | – | (455) | – |
Forward contracts | (255) | – | (254) | (1) |
(1)
Hedge ineffectiveness recognized in income included losses of $105 million that are excluded from the assessment of hedge effectiveness and are offset by economic
hedges (October 31, 2024 – losses of $50 million).
n.a.
not applicable
(continued)
Note 9
Derivative financial instruments and hedging activities
204
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Reconciliation of components of equity
The following table provides a reconciliation by risk category of each component of equity and an analysis of other
comprehensive income relating to hedge accounting:
For the year ended October 31, 2025 | For the year ended October 31, 2024 | |||
Cash flow hedge | Foreign currency | Cash flow hedge | Foreign currency | |
(Millions of Canadian dollars) | reserve | translation reserve | reserve | translation reserve |
Balance at the beginning of the year | $ 2,267 | $ 7,128 | $ 2,756 | $ 6,612 |
Cash flow hedges | ||||
Effective portion of changes in fair value: | ||||
Interest rate risk | 630 | (40) | ||
Foreign exchange risk | 196 | 71 | ||
Equity price risk | 243 | 413 | ||
Net amount reclassified to profit or loss: | ||||
Ongoing hedges: | ||||
Interest rate risk | (81) | 134 | ||
Foreign exchange risk | (196) | (110) | ||
Equity price risk | (245) | (350) | ||
De-designated hedges: | ||||
Interest rate risk | (403) | (811) | ||
Hedges of net investment in foreign operations | ||||
Foreign exchange denominated debt | (92) | (455) | ||
Forward foreign exchange contracts | (341) | (254) | ||
Foreign currency translation differences for foreign | ||||
operations | 826 | 1,018 | ||
Reclassification of losses (gains) on foreign currency | ||||
translation to income | (25) | – | ||
Reclassification of losses (gains) on net investment | ||||
hedging activities to income | – | 1 | ||
Tax on movements on reserves during the period | (33) | 117 | 204 | 206 |
Balance at the end of the year | $ 2,378 | $ 7,613 | $ 2,267 | $ 7,128 |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
205
Premises and equipment
| For the year ended October 31, 2025 | |||||||||
| Owned by the Bank (1) | Right-of-use lease assets | ||||||||
Furniture, | |||||||||
fixtures | |||||||||
Computer | and other | Leasehold | Work in | ||||||
(Millions of Canadian dollars) | Land | Buildings | equipment | equipment | improvements | process | Buildings | Equipment | Total (2) |
Cost | |||||||||
Balance at beginning of period | $ 244 | $ 1,325 | $ 1,411 | $ 900 | $ 3,169 | $ 129 | $ 6,432 | $ 319 | $ 13,929 |
Additions | – | 11 | 45 | 11 | 48 | 641 | 518 | 159 | 1,433 |
Acquisition through business | |||||||||
combination | – | – | – | – | – | – | – | – | – |
Transfers from work in process | – | 26 | 317 | 61 | 166 | (570) | – | – | – |
Disposals | – | (16) | (290) | (74) | (288) | – | (61) | (36) | (765) |
Foreign exchange translation | – | 5 | 7 | 3 | 15 | 1 | 42 | – | 73 |
Other | (90) | (56) | 2 | (38) | (37) | – | 52 | – | (167) |
Balance at end of period | $ 154 | $ 1,295 | $ 1,492 | $ 863 | $ 3,073 | $ 201 | $ 6,983 | $ 442 | $ 14,503 |
Accumulated depreciation | |||||||||
Balance at beginning of period | $ – | $ 694 | $ 834 | $ 554 | $ 2,072 | $ – | $ 2,685 | $ 238 | $ 7,077 |
Depreciation | – | 53 | 260 | 81 | 231 | – | 581 | 80 | 1,286 |
Disposals | – | (19) | (289) | (68) | (287) | – | (19) | (32) | (714) |
Foreign exchange translation | – | 2 | 5 | 2 | 7 | – | 14 | – | 30 |
Other | – | 9 | 12 | (31) | 15 | – | – | – | 5 |
Balance at end of period | $ – | $ 739 | $ 822 | $ 538 | $ 2,038 | $ – | $ 3,261 | $ 286 | $ 7,684 |
Net carrying amount at end of | |||||||||
period | $ 154 | $ 556 | $ 670 | $ 325 | $ 1,035 | $ 201 | $ 3,722 | $ 156 | $ 6,819 |
| For the year ended October 31, 2024 | |||||||||
| Owned by the Bank (1) | Right-of-use lease assets | ||||||||
Furniture, | |||||||||
fixtures | |||||||||
Computer | and other | Leasehold | Work in | ||||||
(Millions of Canadian dollars) | Land | Buildings | equipment | equipment | improvements | process | Buildings | Equipment | Total (2) |
Cost | |||||||||
Balance at beginning of period | $ 140 | $ 1,251 | $ 1,283 | $ 835 | $ 3,007 | $ 108 | $ 5,893 | $ 317 | $ 12,834 |
Additions | 103 | 77 | 21 | 11 | 50 | 522 | 526 | 2 | 1,312 |
Acquisition through business | |||||||||
combination | – | – | – | 13 | 59 | – | 226 | – | 298 |
Transfers from work in process | – | 5 | 240 | 132 | 102 | (479) | – | – | – |
Disposals | – | (6) | (140) | (82) | (29) | – | (165) | – | (422) |
Foreign exchange translation | 1 | 2 | 10 | 3 | 19 | – | 61 | – | 96 |
Other | – | (4) | (3) | (12) | (39) | (22) | (109) | – | (189) |
Balance at end of period | $ 244 | $ 1,325 | $ 1,411 | $ 900 | $ 3,169 | $ 129 | $ 6,432 | $ 319 | $ 13,929 |
Accumulated depreciation | |||||||||
Balance at beginning of period | $ – | $ 646 | $ 723 | $ 550 | $ 1,863 | $ – | $ 2,149 | $ 154 | $ 6,085 |
Depreciation | – | 59 | 249 | 73 | 279 | – | 620 | 84 | 1,364 |
Disposals | – | (6) | (140) | (82) | (25) | – | (54) | – | (307) |
Foreign exchange translation | – | 1 | 8 | 2 | 7 | – | 21 | – | 39 |
Other | – | (6) | (6) | 11 | (52) | – | (51) | – | (104) |
Balance at end of period | $ – | $ 694 | $ 834 | $ 554 | $ 2,072 | $ – | $ 2,685 | $ 238 | $ 7,077 |
Net carrying amount at end of | |||||||||
period | $ 244 | $ 631 | $ 577 | $ 346 | $ 1,097 | $ 129 | $ 3,747 | $ 81 | $ 6,852 |
(1)
As at October 31, 2025, we had total contractual commitments of $160 million to purchase premises and equipment (October 31, 2024 – $137 million).
(2)
Includes investment properties with a cost of $34 million (October 31, 2024 – $186 million) which are subject to operating leases and carried at cost less accumulated
amortization. The fair value, determined by a combination of internal investment professionals and external independent property appraisers with the relevant
professional qualifications and experience, is $34 million (October 31, 2024 – $188 million).
Total lease payments for the year ended October 31, 2025 were $1,668 million, of which $778 million or 47% relates to variable
payments and $890 million or 53% relates to fixed payments. Total lease payments for the year ended October 31, 2024 were
$1,440 million
,
of which $708 million or 49% relates to variable payments and $732 million or 51% relates to fixed payments.
Total variable lease payments not included in the measurement of lease liabilities were $726 million for the year ended
206
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Goodwill and other intangible assets
| For the year ended October 31, 2025 | |||||||||||
U.S. Wealth | |||||||||||
Personal | Canadian | Management | International | ||||||||
(Millions of | Banking – | Caribbean | Commercial | Wealth | Global Asset | (including | Wealth | Investor | Capital | ||
Canadian dollars) | Canada | Banking | Banking | Management | Management | City National) | Management | Services | Insurance | Markets | Total |
Balance at beginning | |||||||||||
of period | $ 4,994 | $ 1,798 | $ 3,815 | $ 877 | $ 2,164 | $ 3,091 | $ 1,198 | $ 29 | $ 112 | $ 1,208 | $ 19,286 |
Acquisitions | – | – | – | – | – | – | – | – | – | – | – |
Currency translations | |||||||||||
and other | (25) | 21 | (25) | 6 | 79 | 22 | 34 | – | – | 7 | 119 |
Balance at end | |||||||||||
of period | $ 4,969 | $ 1,819 | $ 3,790 | $ 883 | $ 2,243 | $ 3,113 | $ 1,232 | $ 29 | $ 112 | $ 1,215 | $ 19,405 |
| For the year ended October 31, 2024 | |||||||||||
U.S. Wealth | |||||||||||
Personal | Canadian | Management | International | ||||||||
(Millions of | Banking – | Caribbean | Commercial | Wealth | Global Asset | (including | Wealth | Investor | Capital | ||
Canadian dollars) | Canada | Banking | Banking | Management | Management | City National) | Management | Services | Insurance | Markets | Total |
Balance at beginning | |||||||||||
of period | $ 1,851 | $ 1,791 | $ 793 | $ 593 | $ 2,016 | $ 3,080 | $ 1,124 | $ 29 | $ 112 | $ 1,205 | $ 12,594 |
Acquisitions | 3,159 | – | 3,022 | 283 | 72 | – | – | – | – | – | 6,536 |
Currency translations | |||||||||||
and other | (16) | 7 | – | 1 | 76 | 11 | 74 | – | – | 3 | 156 |
Balance at end | |||||||||||
of period | $ 4,994 | $ 1,798 | $ 3,815 | $ 877 | $ 2,164 | $ 3,091 | $ 1,198 | $ 29 | $ 112 | $ 1,208 | $ 19,286 |
We perform our annual impairment test by comparing the carrying amount of each CGU to its recoverable amount. The
recoverable amount of a CGU is represented by its VIU, except in circumstances where the carrying amount of a CGU exceeds its
VIU. In such cases, the greater of the CGU’s FVLCD and its VIU is the recoverable amount. Our annual impairment test is
performed as at August 1.
In our 2025 and 2024 annual impairment tests, the recoverable amount of our Caribbean Banking CGU was based on its
FVLCD and the recoverable amounts of all other CGUs tested were based on their VIU.
Value in use
We calculate VIU using a five-year discounted cash flow method, with the exception of our International Wealth Management
CGU where cash flow projections covering a seven-year period were used, which more closely aligns with the strategic growth
plan resulting from the acquisition of RBC Brewin Dolphin. Future cash flows are based on financial plans agreed by
management, estimated based on forecast results, business initiatives, capital required to support future cash flows and returns
to shareholders. Key drivers of future cash flows include net interest margins and average interest-earning assets. The values
assigned to these drivers over the forecast period are based on past experience, external and internal economic forecasts, and
management’s expectations of the impact of economic conditions on our financial results. Beyond the initial cash flow
projection period, cash flows are assumed to increase at a constant rate using a nominal long-term growth rate (terminal growth
rate). Terminal growth rates are based on the long-term steady state growth expectations in the countries within which the CGU
operates. The discount rates used to determine the present value of each CGU’s projected future cash flows are based on the
bank-wide cost of capital, adjusted for the risks to which each CGU is exposed. CGU-specific risks include: country risk, business/
operational risk, geographic risk (including political risk, devaluation risk, and government regulation), currency risk, and price
risk (including product pricing risk and inflation).
The estimation of VIU involves significant judgment in the determination of inputs to the discounted cash flow model and is
most sensitive to changes in future cash flows, discount rates and terminal growth rates applied to cash flows beyond the
forecast period. The sensitivity of the VIU to key inputs and assumptions used was tested by recalculating the recoverable amount
using reasonably possible changes to those parameters. As at August 1, 2025, no reasonably possible change in an individual key
input or assumption, as described, would result in a CGU’s carrying amount exceeding its recoverable amount based on VIU.
The terminal growth rates and pre-tax discount rates used in our discounted cash flow models are summarized below.
| As at | ||||
August 1, 2025 | August 1, 2024 | |||
Terminal | Terminal | |||
Discount | growth | Discount | growth | |
rate (1) | rate | rate (1) | rate | |
Group of cash generating units | ||||
Personal Banking – Canada | 10.8% | 3.0% | 11.7% | 3.0% |
Caribbean Banking | 12.9 | 3.5 | 13.7 | 3.5 |
Commercial Banking | 11.5 | 3.0 | 11.7 | 3.0 |
Canadian Wealth Management | 11.8 | 3.0 | 12.5 | 3.0 |
Global Asset Management | 11.8 | 3.0 | 12.4 | 3.0 |
U.S. Wealth Management (including City National) | 12.4 | 3.0 | 12.6 | 3.0 |
International Wealth Management | 12.1 | 3.0 | 12.3 | 3.0 |
Investor Services | 11.9 | 3.0 | 12.5 | 3.0 |
Insurance | 11.5 | 3.0 | 12.5 | 3.0 |
Capital Markets | 13.0 | 3.0 | 12.7 | 3.0 |
(1)
Pre-tax discount rates are determined implicitly based on post-tax discount rates.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
207
Fair value less costs of disposal – Caribbean Banking
We calculated FVLCD using a discounted cash flow method that projects future cash flows over a 5-year period. Cash flows are
based on management forecasts, adjusted to approximate the considerations of a prospective third-party buyer. Cash flows
beyond the initial 5-year period are assumed to increase at a constant rate using a nominal long-term growth rate. Future cash
flows, terminal growth rates, and discount rates are based on the same factors noted above. This fair value measurement is
categorized as level 3 in the fair value hierarchy as certain significant inputs are not observable.
The estimation of FVLCD involves significant judgment in the determination of inputs to the discounted cash flow model and
is most sensitive to changes in future cash flows, discount rates and terminal growth rates applied to cash flows beyond the
forecast period. The sensitivity of the FVLCD to key inputs and assumptions was tested by recalculating the recoverable amount
using reasonably possible changes to those parameters. As at August 1, 2025, no reasonably possible change in an individual key
| For the year ended October 31, 2025 | ||||||
Internally | Core | Customer | ||||
generated | Other | deposit | list and | In process | ||
(Millions of Canadian dollars) | software | software | intangibles | relationships (1) | software | Total |
Gross carrying amount | ||||||
Balance at beginning of period | $ 5,574 | $ 1,074 | $ 3,637 | $ 2,941 | $ 1,357 | $ 14,583 |
Additions | 175 | 12 | – | – | 1,165 | 1,352 |
Acquisition through business combination | – | – | – | – | – | – |
Transfers | 844 | 83 | – | – | (927) | – |
Dispositions | (585) | (43) | – | – | (2) | (630) |
Impairment losses | (37) | (1) | – | – | (10) | (48) |
Currency translations | 19 | 11 | 11 | 52 | 8 | 101 |
Other changes | 111 | (42) | – | (13) | (89) | (33) |
Balance at end of period | $ 6,101 | $ 1,094 | $ 3,648 | $ 2,980 | $ 1,502 | $ 15,325 |
Accumulated amortization | ||||||
Balance at beginning of period | $ (3,387) | $ (729) | $ (1,663) | $ (1,006) | $ – | $ (6,785) |
Amortization charge for the year | (1,068) | (79) | (448) | (164) | – | (1,759) |
Dispositions | 591 | 42 | – | – | – | 633 |
Impairment losses | 13 | 1 | – | – | – | 14 |
Currency translations | (13) | (8) | (10) | (11) | – | (42) |
Other changes | 23 | (28) | – | 21 | – | 16 |
Balance at end of period | $ (3,841) | $ (801) | $ (2,121) | $ (1,160) | $ – | $ (7,923) |
Net balance at end of period | $ 2,260 | $ 293 | $ 1,527 | $ 1,820 | $ 1,502 | $ 7,402 |
| For the year ended October 31, 2024 | ||||||
Internally | Core | Customer | ||||
generated | Other | deposit | list and | In process | ||
(Millions of Canadian dollars) | software | software | intangibles | relationships (1) | software | Total |
Gross carrying amount | ||||||
Balance at beginning of period | $ 5,595 | $ 1,097 | $ 1,658 | $ 2,456 | $ 1,527 | $ 12,333 |
Additions | 31 | 4 | – | 9 | 1,090 | 1,134 |
Acquisition through business combination | – | – | 1,972 | 370 | – | 2,342 |
Transfers | 1,204 | 42 | – | – | (1,246) | – |
Dispositions | (1,204) | (67) | – | (9) | (1) | (1,281) |
Impairment losses | (37) | (18) | – | – | (30) | (85) |
Currency translations | 32 | 17 | 7 | 115 | 3 | 174 |
Other changes | (47) | (1) | – | – | 14 | (34) |
Balance at end of period | $ 5,574 | $ 1,074 | $ 3,637 | $ 2,941 | $ 1,357 | $ 14,583 |
Accumulated amortization | ||||||
Balance at beginning of period | $ (3,596) | $ (658) | $ (1,330) | $ (846) | $ – | $ (6,430) |
Amortization charge for the year | (986) | (102) | (325) | (136) | – | (1,549) |
Dispositions | 1,204 | 66 | – | 7 | – | 1,277 |
Impairment losses | 12 | 5 | – | – | – | 17 |
Currency translations | (21) | (7) | (8) | (31) | – | (67) |
Other changes | – | (33) | – | – | – | (33) |
Balance at end of period | $ (3,387) | $ (729) | $ (1,663) | $ (1,006) | $ – | $ (6,785) |
Net balance at end of period | $ 2,187 | $ 345 | $ 1,974 | $ 1,935 | $ 1,357 | $ 7,798 |
(1)
Includes $259 million (October 31, 2024 – $259 million) of mutual fund management contracts with indefinite useful lives in the Global Asset Management CGU acquired in
208
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Joint ventures and associated companies
We do not have any joint ventures or associated companies that are individually material to our financial results. The following
table summarizes the carrying value of our interests in joint ventures and associated companies accounted for under the equity
method as well as our share of the income of those entities.
Joint ventures | Associated companies | |||
| As at and for the year ended | ||||
October 31 | October 31 | October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 | 2025 | 2024 |
Carrying amount | $ 572 | $ 542 | $ 257 | $ 293 |
Share of: | ||||
Net income (1) | $ 82 | $ 64 | $ 1 | $ (41) |
(1)
Excludes impairment losses recognized on our interests in joint ventures and associated companies. During the year ended October 31, 2025, we recognized impairment
losses of $10 million in Non-interest income – Income (loss) from joint ventures and associates with respect to our interest in an associated company in our Wealth
Other assets
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Accounts receivable and prepaids | $ 5,027 | $ 4,389 |
Accrued interest receivable | 8,342 | 7,904 |
Cash collateral | 27,418 | 20,475 |
Commodity trading assets (1) | 14,475 | 9,834 |
Deferred income tax asset | 4,486 | 4,328 |
Employee benefit assets | 4,012 | 3,630 |
Insurance-related assets | ||
Insurance contract assets | 581 | 588 |
Reinsurance contracts held assets | 1,774 | 1,758 |
Segregated fund net assets | 3,810 | 3,378 |
Collateral loans and other | 554 | 517 |
Investments in joint ventures and associates | 829 | 835 |
Margin deposits | 13,556 | 11,108 |
Precious metals (1) | 9,108 | 6,018 |
Receivable from brokers, dealers and clients | 4,667 | 3,343 |
Taxes receivable | 8,696 | 7,418 |
Other | 5,558 | 6,667 |
$ 112,893 | $ 92,190 | |
(1)
Amounts include financial assets disclosed in Note 3 and non-financial assets. Non-financial assets primarily consist of commodities measured at fair value less cost to
sell. The fair values are determined by applying valuation techniques using commodity futures’ prices and are classified as Level 2 in our fair value hierarchy as the
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
209
Deposits
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
(Millions of Canadian dollars) | Demand (1) | Notice (2) | Term (3) | Total | Demand (1) | Notice (2) | Term (3) | Total |
Personal | $ 228,282 | $ 56,988 | $ 244,470 | $ 529,740 | $ 205,714 | $ 62,845 | $ 253,580 | $ 522,139 |
Business and government | 431,239 | 20,274 | 494,801 | 946,314 | 369,943 | 20,157 | 449,570 | 839,670 |
Bank | 13,488 | – | 26,074 | 39,562 | 9,675 | 641 | 37,406 | 47,722 |
$ 673,009 | $ 77,262 | $ 765,345 | $ 1,515,616 | $ 585,332 | $ 83,643 | $ 740,556 | $ 1,409,531 | |
Non-interest-bearing (4) | ||||||||
Canada | $ 158,771 | $ 9,469 | $ 292 | $ 168,532 | $ 144,712 | $ 7,164 | $ 203 | $ 152,079 |
United States | 38,009 | – | – | 38,009 | 38,520 | – | – | 38,520 |
Europe (5) | 5 | – | – | 5 | 11 | – | – | 11 |
Other International | 8,133 | – | – | 8,133 | 7,758 | – | – | 7,758 |
Interest-bearing (4) | ||||||||
Canada | 392,120 | 16,417 | 591,636 | 1,000,173 | 355,221 | 14,468 | 594,066 | 963,755 |
United States | 63,745 | 50,497 | 73,147 | 187,389 | 28,389 | 61,087 | 75,933 | 165,409 |
Europe (5) | 6,354 | 742 | 76,972 | 84,068 | 5,013 | 851 | 53,295 | 59,159 |
Other International | 5,872 | 137 | 23,298 | 29,307 | 5,708 | 73 | 17,059 | 22,840 |
$ 673,009 | $ 77,262 | $ 765,345 | $ 1,515,616 | $ 585,332 | $ 83,643 | $ 740,556 | $ 1,409,531 | |
(1)
Demand deposits are deposits for which we do not have the right to require notice of withdrawal, which include both savings and chequing accounts.
(2)
Notice deposits are deposits for which we can legally require notice of withdrawal. These deposits are primarily savings accounts.
(3)
Term deposits are deposits payable on a fixed date, and include term deposits, guaranteed investment certificates and similar instruments.
(4)
The geographical splits of the deposits are based on the point of origin of the deposits and where the revenue is recognized. As at October 31, 2025, deposits
denominated in U.S. dollars, British pounds, Euro and other foreign currencies were $570 billion, $42 billion, $76 billion and $36 billion, respectively (October 31, 2024 –
$511 billion, $34 billion, $53 billion and $29 billion, respectively).
(5)
Europe includes the United Kingdom and the Channel Islands.
Contractual maturities of term deposits
(1)
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Within 1 year: | ||
less than 3 months | $ 203,075 | $ 207,698 |
3 to 6 months | 118,734 | 94,585 |
6 to 12 months | 172,583 | 173,603 |
1 to 2 years | 87,550 | 79,777 |
2 to 3 years | 58,170 | 61,175 |
3 to 4 years | 33,158 | 45,767 |
4 to 5 years | 24,047 | 20,692 |
Over 5 years | 68,028 | 57,259 |
$ 765,345 | $ 740,556 | |
(1)
The aggregate amount of term deposits in denominations of one hundred thousand dollars or more is $704 billion (October 31, 2024 – $670 billion).
Average deposit balances and average rates of interest
| For the year ended | ||||
October 31, 2025 | October 31, 2024 | |||
Average | Average | Average | Average | |
(Millions of Canadian dollars, except for percentage amounts) | balances | rates | balances | rates |
Canada | $ 1,155,147 | 2.93% | $ 1,035,064 | 3.57% |
United States | 215,460 | 2.94 | 191,257 | 3.33 |
Europe | 85,570 | 4.24 | 58,693 | 5.26 |
Other International | 39,935 | 2.45 | 32,016 | 2.48 |
$ 1,496,112 | 3.00% | $ 1,317,030 | 3.59% | |
210
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Insurance and reinsurance
Our insurance contracts issued include life, health, travel, annuity and segregated fund insurance products provided to
individuals and businesses across Canada. Outside Canada, we have reinsurance and retrocession contracts issued with
respect to longevity reinsurance, life retrocession and reinsurance for creditor life, disability and critical illness. Reinsurance
contracts issued are presented within insurance contract balances on the Consolidated Balance Sheets.
In the normal course of business, we also enter into reinsurance contracts held to reinsure risks to other insurance and
reinsurance companies in order to lower our risk profile, limit loss exposure to large risks, and provide additional capacity for
future growth. The reinsurance contracts held do not relieve our obligations from the direct insurance contracts issued. We
evaluate the financial condition of the reinsurers and monitor our concentrations of credit risks to minimize our exposure to
losses from reinsurer insolvency. The carrying amounts of reinsurance contract held assets as disclosed in Note 13 represents
our maximum exposure to credit risk at the reporting date.
The insurance and reinsurance contracts are presented on a portfolio basis such that portfolios of contracts that are in an
asset position are presented separately from those that are in a liability position.
Insurance service and insurance investment results
The following table provides the composition of Insurance service result and Insurance investment result for insurance
contracts issued and reinsurance contracts held.
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Insurance revenue | ||
Amounts recognized for contracts using the GMM and VFA: | ||
Relating to changes in liabilities for remaining coverage: | ||
Expected incurred claims and other insurance services expenses | $ 3,131 | $ 2,970 |
Release of risk adjustment for non-financial risk and other | 214 | 191 |
CSM recognized for services provided | 324 | 255 |
Recovery of insurance acquisition cash flows | 98 | 81 |
3,767 | 3,497 | |
Amounts recognized for contracts using the PAA | 1,615 | 1,576 |
5,382 | 5,073 | |
Insurance service expense (1) | ||
Incurred claims and other expenses | (3,978) | (3,901) |
Losses on onerous contracts and reversals of such losses (future service) | (313) | (246) |
Adjustments to liability for incurred claims (past service) | (64) | (2) |
Amortization of insurance acquisition cash flows | (98) | (81) |
(4,453) | (4,230) | |
Net income (expense) from reinsurance contracts held | (62) | (66) |
Insurance service result | $ 867 | $ 777 |
Net investment income (2) | $ 1,453 | $ 3,259 |
Insurance finance income (expense) | ||
Interest accreted (3) | (791) | (783) |
Effect of changes in discount rates and other financial assumptions (3), (4) | 35 | (1,509) |
Changes in fair value of underlying items for contracts using the VFA | (467) | (746) |
Other | 3 | (93) |
(1,220) | (3,131) | |
Reinsurance finance income (expense) | 51 | 166 |
Insurance investment result | $ 284 | $ 294 |
Insurance service and insurance investment results | $ 1,151 | $ 1,071 |
(1)
Includes Insurance service expense of $977 million (October 31, 2024 – $948 million) relating to insurance contracts measured using the PAA.
(2)
Refer to Note 3 for amounts of interest, dividend and net gains (losses) from FVTPL financial instruments relating to the Insurance segment.
(3)
Comparative amounts have been revised from those previously presented.
(4)
Includes the effect of changes in fulfillment cash flows at current rates when the corresponding effect through CSM is at locked-in rates.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
211
The following table shows the changes in net liabilities for insurance contracts for remaining coverage and incurred claims for
short duration insurance contracts measured using the PAA and long duration insurance contracts measured using the GMM
and VFA.
As at or for the year ended | ||||||
October 31, 2025 | October 31, 2024 | |||||
Liabilities for | Liabilities for | Liabilities for | Liabilities | |||
remaining | incurred | remaining | for incurred | |||
(Millions of Canadian dollars) | coverage (1) | claims (2) | Total | coverage (1) | claims (2) | Total |
Balance at beginning of period: | ||||||
Insurance contract assets | $ 1,805 | $ (1,217) | $ 588 | $ 1,531 | $ (850) | $ 681 |
Insurance contract liabilities | (20,866) | (1,365) | (22,231) | (17,858) | (1,168) | (19,026) |
Net insurance contract liabilities | $ (19,061) | $ (2,582) | $ (21,643) | $ (16,327) | $ (2,018) | $ (18,345) |
Insurance revenue | $ 5,382 | $ – | $ 5,382 | $ 5,073 | $ – | $ 5,073 |
Insurance service expense | (405) | (4,048) | (4,453) | (358) | (3,872) | (4,230) |
Insurance finance income (expense) | (1,193) | (27) | (1,220) | (2,974) | (157) | (3,131) |
Investment components | 708 | (708) | – | 705 | (705) | – |
Cash flows: | ||||||
Premiums received | (6,911) | – | (6,911) | (5,940) | – | (5,940) |
Claims and other insurance service | ||||||
expenses paid | – | 4,650 | 4,650 | – | 4,388 | 4,388 |
Insurance acquisition cash flows | ||||||
and other | 498 | – | 498 | 417 | – | 417 |
Total cash flows | $ (6,413) | $ 4,650 | $ (1,763) | $ (5,523) | $ 4,388 | $ (1,135) |
Other movements | (911) | 862 | (49) | 343 | (218) | 125 |
Balance at end of period: | ||||||
Insurance contract assets | $ 1,189 | $ (608) | $ 581 | $ 1,805 | $ (1,217) | $ 588 |
Insurance contract liabilities | (23,082) | (1,245) | (24,327) | (20,866) | (1,365) | (22,231) |
Net insurance contract liabilities | $ (21,893) | $ (1,853) | $ (23,746) | $ (19,061) | $ (2,582) | $ (21,643) |
(1)
The ending liabilities for remaining coverage include loss component amounts of $702 million (October 31, 2024 – $366 million).
(2)
Insurance contracts by measurement components using the GMM or VFA
The following table shows the changes in the measurement components of net liabilities for insurance contracts measured using
the GMM and VFA by estimates of present value of future cash flows, risk adjustment for non-financial risk and CSM.
| As at or for the year ended | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Estimates of | Risk | Estimates of | Risk | |||||
present value | adjustment | present value | adjustment | |||||
of future | for non- | of future | for non- | |||||
(Millions of Canadian dollars) | cash flows | financial risk | CSM (1) | Total | cash flows | financial risk | CSM (1) | Total |
Balance at beginning of | ||||||||
period: | ||||||||
Insurance contract assets | $ 1,824 | $ (568) | $ (719) | $ 537 | $ 1,591 | $ (544) | $ (565) | $ 482 |
Insurance contract | ||||||||
liabilities | (17,275) | (1,986) | (2,072) | (21,333) | (14,079) | (1,759) | (2,195) | (18,033) |
Net insurance contract | ||||||||
liabilities | $ (15,451) | $ (2,554) | $ (2,791) | $ (20,796) | $ (12,488) | $ (2,303) | $ (2,760) | $ (17,551) |
Insurance service result | $ (169) | $ 25 | $ 435 | $ 291 | $ 33 | $ 13 | $ 176 | $ 222 |
Insurance finance expense | ||||||||
(income) | (1,076) | 16 | (134) | (1,194) | (2,504) | (324) | (128) | (2,956) |
Cash flows: | ||||||||
Premiums received | (5,255) | – | – | (5,255) | (4,443) | – | – | (4,443) |
Claims and other | ||||||||
insurance service | ||||||||
expenses paid | 3,633 | – | – | 3,633 | 3,487 | – | – | 3,487 |
Insurance acquisition | ||||||||
cash flows and other | 498 | – | – | 498 | 373 | – | – | 373 |
Total cash flows | $ (1,124) | $ – | $ – | $ (1,124) | $ (583) | $ – | $ – | $ (583) |
Other movements | (13) | (54) | 14 | (53) | 91 | 60 | (79) | 72 |
Balance at end of period: | ||||||||
Insurance contract assets | $ 1,665 | $ (498) | $ (643) | $ 524 | $ 1,824 | $ (568) | $ (719) | $ 537 |
Insurance contract | ||||||||
liabilities (2) | (19,498) | (2,069) | (1,833) | (23,400) | (17,275) | (1,986) | (2,072) | (21,333) |
Net insurance contract | ||||||||
liabilities | $ (17,833) | $ (2,567) | $ (2,476) | $ (22,876) | $ (15,451) | $ (2,554) | $ (2,791) | $ (20,796) |
(1)
The ending balance for CSM includes $2.4 billion (October 31, 2024 – $2.6 billion) relating to groups of insurance contracts initially recognized at transition date using the
fair value approach. For the year ended October 31, 2025, CSM from contracts initially recognized was $86 million (October 31, 2024 – $89 million).
(2)
Includes segregated fund insurance contract liabilities of $3,877 million (October 31, 2024 – $3,375 million) measured using the VFA. The fair value of the underlying items
for segregated fund insurance contracts amount to $3,810 million (October 31, 2024 – $3,378 million), which are substantially investments in mutual funds.
(continued)
Note 15
Insurance and reinsurance
212
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Expected recognition of contractual service margin
The following table presents the expected timing of CSM amortization into Non-interest income – Insurance service result
applicable for insurance contracts issued and reinsurance contracts held measured using the GMM and VFA.
| As at | ||||||||||
| October 31, 2025 | October 31, 2024 | |||||||||
(Millions of Canadian | Within 1 | 1 to 5 | 5 to 10 | Within 1 | 1 to 5 | 5 to 10 | ||||
dollars) | year | year | years | Thereafter | Total | year | year | years | Thereafter | Total |
Insurance contracts | ||||||||||
issued | $ (222) | $ (814) | $ (634) | $ (806) | $ (2,476) | $ (243) | $ (894) | $ (705) | $ (949) | $ (2,791) |
Reinsurance | ||||||||||
contracts held | 68 | 213 | 167 | 226 | 674 | 66 | 208 | 163 | 217 | 654 |
Total | $ (154) | $ (601) | $ (467) | $ (580) | $ (1,802) | $ (177) | $ (686) | $ (542) | $ (732) | $ (2,137) |
Insurance risk is the risk of loss due to actual experience emerging differently than that we assumed at the time of underwriting.
Our main insurance risks include morbidity, mortality, longevity, policyholder behaviour (lapse) and travel risk. We developed
an insurance risk management framework that is designed to identify, assess, manage, mitigate and report the insurance risks
associated with our insurance businesses. In addition, we are subject to expense risk, which is the exposure to the variability in
future expenses that are expected to be incurred in servicing insurance contracts. Our insurance risks are managed through the
implementation of robust policies and controls over product design, pricing, underwriting and claim adjudication as well as
reinsurance arrangements. Regular reviews are conducted on valuation models, experience studies for key actuarial
We are exposed to market risk, which is the risk that the carrying value or future cash flows of insurance and reinsurance
contract balances or financial assets fluctuate because of changes or volatility in market prices. Market risk includes equity,
interest rate and spread, foreign currency and inflation risks. Our exposure to market risk is managed through our asset/liability
Methods and assumptions
The measurement of insurance and reinsurance contract balances requires various estimates and assumptions. The following
summarizes the significant estimates and assumptions used which should be read in conjunction with the accounting policies
for insurance and reinsurance contracts disclosed in Note 2.
Estimates of future cash flows
The significant non-financial assumptions used to determine the estimates of future cash flows for insurance and reinsurance
contract balances are as follows:
•
Mortality, longevity and morbidity
– Mortality estimates for life insurance contracts are based on standard industry insured
mortality tables, adjusted where appropriate to reflect our own experience. Longevity estimates for annuity insurance
contracts are developed based on industry longevity experience for pensioners, adjusted where appropriate to reflect our
own experience. Morbidity assumptions are made with respect to the rates of claim incidence and claim termination for
health insurance contracts and are based on a combination of industry and our own experience.
•
Policyholder behaviour
– Under certain policies, the policyholder has a contractual right to change benefits and premiums,
as well as convert policies to permanent forms of insurance. All policyholders have the right to terminate their policies
through lapse. Lapses represent the termination of policies due to non-payment of premiums. Lapse assumptions are
primarily based on our recent experience adjusted for emerging industry experience where applicable.
•
Expense
– Directly attributable future expense and directly attributable acquisition expense assumptions are derived from
internal cost studies and established allocation methodologies, with inflation as a financial assumption reflected in the
estimate of future expenses.
Discount rates
Discount rates used to present value future cash flows reflect the time value of money, currency of the cash flows, and the
characteristics of the insurance and reinsurance contracts. Cash flows that vary based on the returns on underlying items are
discounted at rates reflecting that variability. For cash flows that do not vary based on the returns on underlying items, we
predominantly apply the top-down approach in determining the discount rates. Under this approach, the discount rates for the
observable periods are determined using yield curves implied from a reference portfolio of assets adjusted to eliminate factors
(credit and market risk of the financial assets) that are not relevant to the insurance contracts. For unobservable periods, the
discount rates are interpolated using the last observable point and the ultimate discount rate, composed of a risk-free rate and
illiquidity premium. For a selected portfolio, the bottom-up approach is applied in determining the discount rate, which uses a
risk-free rate plus an illiquidity premium to reflect the characteristics of the contracts. Management judgment is required in
estimating the market and credit risk factors and illiquidity premiums in determining the discount rates.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
213
The following table provides the current discount yields relating to the Canadian dollar that are primarily used to present
value cash flows that do not vary based on returns on underlying items for insurance and reinsurance contracts.
5 year | 10 year | 20 year | 30 year | Ultimate | |
October 31, 2025 | 4.3% | 6.0% | 7.3% | 5.1% | 4.1% |
October 31, 2024 | 4.2% | 5.6% | 6.0% | 4.2% | 4.1% |
Risk adjustment
The risk adjustment for non-financial risk represents the compensation that we require for bearing the uncertainty about the
amount and timing of cash flows that arises from non-financial risks as we fulfil the insurance contracts. Non-financial risks are
insurance risks such as mortality, morbidity, and other risks such as lapse and expense. We used a margin approach to set the
risk adjustment by applying a margin to non-financial assumptions and discounting the resulting margin cash flows at the same
discount rates used to present value future cash flows. The risk adjustment for insurance and reinsurance contracts
corresponds to a confidence level of approximately 85% overall as at October 31, 2025 (October 31, 2024 – 85%). The confidence
level represents the probability that the variability in the actual cash flows will be lower than our risk adjustment for
non-financial risk.
The following table demonstrates the effects on net income, total equity and balance sheet CSM of reasonably possible changes
in key market and non-financial assumptions in the measurement of our insurance contracts on a net of reinsurance contracts
held basis, which do not differ materially from the sensitivities on a gross basis. The impact of changing non-financial
assumptions is primarily absorbed in the CSM recorded on the Consolidated Balance Sheets, unless contracts are onerous in
which case the effects are reflected in net income. The effects on net income reflect the impact of changes to market
assumptions and the impact of changes to the CSM that is released to income for the year. The percentage change in each
variable is applied to a range of existing actuarial modelling assumptions to derive the possible impact on net income and total
equity, as well as CSM recorded on the Consolidated Balance Sheets. The analyses are performed where a single assumption is
changed while holding other assumptions constant, which is unlikely to occur in practice. Combining the effects presented in the
table may not reflect the total actual effects of changing multiple assumptions at the same time. Actual results can differ
materially from these estimates.
| As at and for the year ended | ||||
October 31, 2025 | October 31, 2024 | |||
Increase | Increase | |||
(decrease) to | Increase | (decrease) to | Increase | |
net income and | (decrease) to | net income and | (decrease) to | |
(Millions of Canadian dollars) | total equity | CSM | total equity | CSM |
Market variables: | ||||
1% increase in market interest rates (1) | $ (10) | $ – | $ 3 | $ – |
1% decrease in market interest rates (1) | 5 | – | (2) | – |
10% increase in equity market values (2) | 2 | 14 | – | 16 |
10% decrease in equity market values (2) | (2) | (16) | – | (18) |
Non-financial variables: | ||||
2% adverse change in life mortality rates | (32) | (17) | (45) | (17) |
2% adverse change in annuitant mortality rates | (12) | (147) | (1) | (151) |
5% adverse change in morbidity rates | (61) | (187) | (57) | (179) |
10% adverse change in lapse rates | (21) | (360) | (16) | (334) |
5% increase in expenses | (6) | (53) | (5) | (52) |
(1)
Interest rate sensitivities assume a parallel shift of 100 basis points across the entire yield curves as at the reporting date with no change to the ultimate risk-free rate.
The impacts are net of the changes in fair value of financial assets held in respect of insurance activities.
(2)
Equity market value sensitivities assume a 10% change across all equity markets as at the reporting date reflecting the changes in fair value of the underlying financial
214
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Employee benefits – Pension and other post-employment benefits
Plan characteristics
We sponsor a number of programs that provide pension and post-employment benefits to eligible employees. The majority of
beneficiaries of the pension plans are located in Canada and other beneficiaries of the pension plans are primarily located in
the U.S., the U.K. and the Caribbean. The pension arrangements including investment, plan benefits and funding decisions are
governed by local pension committees or trustees, who are legally segregated from the Bank, or management. Significant plan
changes require the approval of the Board of Directors.
Our defined benefit pension plans provide pension benefits based on years of service, contributions and average earnings
at retirement. Our primary defined benefit pension plans are closed to new members. New employees are generally eligible to
join defined contribution pension plans. The specific features of these plans vary by location. We also provide supplemental
non-registered (non-qualified) pension plans for certain executives and senior management that are typically unfunded or
partially funded.
Our defined contribution pension plans provide pension benefits based on accumulated employee and Bank contributions.
The Bank contributions are based on a percentage of an employee’s annual earnings and a portion of the Bank contribution may
be dependent on the amount being contributed by the employee and their years of service.
Our primary other post-employment benefit plans provide health, dental, disability and life insurance coverage and cover a
number of current and retired employees who are mainly located in Canada. These plans are unfunded unless required by
legislation.
We measure our benefit obligations and pension assets as at October 31 each year. All plans are valued using the projected
unit-credit method. We fund our registered defined benefit pension plans in accordance with actuarially determined amounts
required to satisfy employee benefit obligations under current pension regulations. For our principal pension plan, the most
recent funding actuarial valuation was completed on January 1, 2025, and the next valuation is required no later than
January 1, 2028.
For the year ended October 31, 2025, total contributions to our pension plans (defined benefit and defined contribution
plans) and other post-employment benefit plans were $593 million and $95 million (October 31, 2024 – $455 million and
$91 million), respectively. For 2026, total contributions to our pension plans and other post-employment benefit plans are
expected to be $651 million and $98 million, respectively.
Risks
By their design, the defined benefit pension and other post-employment benefit plans expose the Bank to various risks such as
investment performance, reductions in discount rates used to value the obligations, increased longevity of plan members, future
inflation levels impacting future salary increases as well as future increases in healthcare costs. These risks will reduce over
time due to the membership closure of our primary defined benefit pension plans and migration to defined contribution pension
plans.
The following table presents the financial position related to all of our material pension and other post-employment benefit
plans worldwide, including executive retirement arrangements.
As at | ||||
October 31, 2025 | October 31, 2024 | |||
Other post- | Other post- | |||
Defined benefit | employment | Defined benefit | employment | |
(Millions of Canadian dollars) | pension plans | benefit plans | pension plans | benefit plans |
Canada | ||||
Fair value of plan assets | $ 17,212 | $ – | $ 16,421 | $ – |
Present value of defined benefit obligation | 13,558 | 1,610 | 13,142 | 1,563 |
Net surplus (deficit) | $ 3,654 | $ (1,610) | $ 3,279 | $ (1,563) |
International | ||||
Fair value of plan assets | $ 745 | $ – | $ 741 | $ – |
Present value of defined benefit obligation | 650 | 73 | 638 | 76 |
Net surplus (deficit) | $ 95 | $ (73) | $ 103 | $ (76) |
Total | ||||
Fair value of plan assets | $ 17,957 | $ – | $ 17,162 | $ – |
Present value of defined benefit obligation | 14,208 | 1,683 | 13,780 | 1,639 |
Total net surplus (deficit) | $ 3,749 | $ (1,683) | $ 3,382 | $ (1,639) |
Effect of asset ceiling | (20) | – | (37) | – |
Total net surplus (deficit), net of effect of asset ceiling | $ 3,729 | $ (1,683) | $ 3,345 | $ (1,639) |
Amounts recognized in our Consolidated Balance | ||||
Sheets | ||||
Employee benefit assets | $ 4,012 | $ – | $ 3,630 | $ – |
Employee benefit liabilities | (283) | (1,683) | (285) | (1,639) |
Total net surplus (deficit), net of effect of asset ceiling | $ 3,729 | $ (1,683) | $ 3,345 | $ (1,639) |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
215
The following table presents an analysis of the movement in the financial position related to all of our material pension and
other post-employment benefit plans worldwide, including executive retirement arrangements.
| As at or for the year ended | ||||
October 31, 2025 | October 31, 2024 | |||
Other post- | Other post- | |||
Defined benefit | employment | Defined benefit | employment | |
(Millions of Canadian dollars) | pension plans (1) | benefit plans | pension plans (1) | benefit plans |
Fair value of plan assets at beginning of period | $ 17,162 | $ – | $ 14,368 | $ – |
Interest income | 812 | – | 818 | – |
Remeasurements | ||||
Return on plan assets (excluding interest income) | 631 | – | 1,991 | – |
Change in foreign currency exchange rate | 18 | – | 46 | – |
Contributions – Employer | 31 | 95 | 29 | 91 |
Contributions – Plan participant | 41 | 27 | 42 | 24 |
Payments | (716) | (122) | (675) | (115) |
Business combinations/Disposals | – | – | 561 | – |
Other | (22) | – | (18) | – |
Fair value of plan assets at end of period | $ 17,957 | $ – | $ 17,162 | $ – |
Benefit obligation at beginning of period | $ 13,780 | $ 1,639 | $ 11,727 | $ 1,417 |
Current service costs | 210 | 34 | 188 | 34 |
Past service costs | 49 | – | – | (6) |
Interest expense | 648 | 76 | 668 | 81 |
Remeasurements | ||||
Actuarial losses (gains) from demographic | ||||
assumptions | 7 | 15 | (167) | (60) |
Actuarial losses (gains) from financial | ||||
assumptions | 142 | 8 | 1,337 | 132 |
Actuarial losses (gains) from experience | ||||
adjustments | 28 | 5 | 2 | 8 |
Change in foreign currency exchange rate | 19 | 1 | 37 | 3 |
Contributions – Plan participant | 41 | 27 | 42 | 24 |
Payments | (716) | (122) | (675) | (115) |
Business combinations/Disposals | – | – | 621 | 121 |
Benefit obligation at end of period | $ 14,208 | $ 1,683 | $ 13,780 | $ 1,639 |
Unfunded obligation | $ 84 | $ 1,683 | $ 83 | $ 1,639 |
Wholly or partly funded obligation | 14,124 | – | 13,697 | – |
Total benefit obligation | $ 14,208 | $ 1,683 | $ 13,780 | $ 1,639 |
(1)
For pension plans with funding deficits, the benefit obligations and fair value of plan assets as at October 31, 2025 were $890 million and $607 million, respectively
(October 31, 2024 – $929 million and $665 million, respectively).
Pension and other post-employment benefit expense
The following table presents the composition of our pension and other post-employment benefit expense related to our material
pension and other post-employment benefit plans worldwide.
| For the year ended | ||||
Other post-employment | ||||
Pension plans | benefit plans | |||
October 31 | October 31 | October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 | 2025 | 2024 |
Current service costs | $ 210 | $ 188 | $ 34 | $ 34 |
Past service costs | 49 | – | – | (6) |
Net interest expense (income) | (164) | (150) | 76 | 81 |
Remeasurements of other long-term benefits | – | – | 10 | 3 |
Administrative expense | 22 | 18 | – | – |
Defined benefit pension expense | $ 117 | $ 56 | $ 120 | $ 112 |
Defined contribution pension expense | 562 | 426 | – | – |
$ 679 | $ 482 | $ 120 | $ 112 | |
Service costs for the year ended October 31, 2025 totalled $257 million (October 31, 2024 – $186 million) for pension plans in
Canada and $2 million (October 31, 2024 – $2 million) for International plans. Net interest expense (income) for the year ended
October 31, 2025 totalled $(158) million (October 31, 2024 – $(145) million) for pension plans in Canada and $(6) million
(October 31, 2024 – $(5) million) for International plans.
(continued)
Note 16
Employee benefits – Pension and other post-employment benefits
216
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Pension and other post-employment benefit remeasurements
The following table presents the composition of our remeasurements recorded in OCI related to our material pension and other
post-employment benefit plans worldwide.
| For the year ended | ||||
Defined benefit pension | Other post-employment | |||
plans | benefit plans | |||
October 31 | October 31 | October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 | 2025 | 2024 |
Actuarial (gains) losses: | ||||
Changes in demographic assumptions | $ 7 | $ (167) | $ 14 | $ (50) |
Changes in financial assumptions | 142 | 1,337 | 6 | 122 |
Experience adjustments | 28 | 2 | (2) | 5 |
Return on plan assets (excluding interest based on discount rate) | (631) | (1,991) | – | – |
Change in asset ceiling (excluding interest income) | (17) | (4) | – | – |
$ (471) | $ (823) | $ 18 | $ 77 | |
Remeasurements recorded in OCI for the year ended October 31, 2025 were gains of $491 million (October 31, 2024 – gains of
$818 million) for pension plans in Canada and losses of $20 million (October 31, 2024 – gains of $5 million) for International
plans.
Investment policy and strategies
Defined benefit pension plan assets are invested prudently in order to meet our longer-term pension obligations. The pension
plan’s investment strategy is to hold a diversified mix of investments by asset class and geographic location in order to reduce
investment-specific risk to the funded status while maximizing the expected returns to meet pension obligations. Investment of
the plan’s assets follows an asset/liability framework as investment is conducted with careful consideration of the pension
obligation’s sensitivity to interest rates and credit spreads which are key risk factors impacting the obligation’s value. Factors
taken into consideration in developing our asset mix include but are not limited to the following:
•
the nature of the underlying benefit obligations, including the duration and term profile of the liabilities;
•
the member demographics, including expectations for normal retirements, terminations, and deaths;
•
the financial position of the pension plans;
•
the diversification benefits obtained by the inclusion of multiple asset classes; and
•
expected asset returns, including asset and liability correlations, along with liquidity requirements of the plan.
To implement our asset mix policy, we may invest in debt securities, equity securities and alternative investments. Our holdings
in certain investments, including common shares, debt securities rated lower than BBB and residential and commercial
mortgages, cannot exceed a defined percentage of the market value of our defined benefit pension plan assets. We may use
derivative instruments as either a synthetic investment to more efficiently replicate the performance of an underlying security,
or as a hedge against financial risks within the plan. To manage our credit risk exposure, where derivative instruments are not
centrally cleared, counterparties are required to meet minimum credit ratings and enter into collateral agreements.
Our defined benefit pension plan assets are primarily comprised of debt and equity securities and alternative investments.
Our equity securities generally have unadjusted quoted market prices in an active market (Level 1) and our debt securities
generally have quoted market prices for similar assets in an active market (Level 2). Alternative investments and other includes
cash, hedge funds, and private fund investments including infrastructure equity, real estate, private debt and private equity. In
the case of private fund investments, no quoted market prices are usually available (Level 2 or Level 3). These fund assets are
either valued by an independent valuator or priced using observable market inputs.
During the year ended October 31, 2025, the management of defined benefit pension investments focused on increased
allocation to risk reducing investments and strategies, while improving diversification and striving to maintain expected
investment return. An allocation to debt securities is being used to reduce asset/liability duration mismatch and hence
variability of the plan’s funded status due to interest rate movement. Longer maturity debt securities, given their price
sensitivity to movements in interest rates, are considered to be a good economic hedge to risk associated with the plan’s
liabilities, which are discounted using predominantly long maturity bond interest rates as inputs.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
217
Asset allocation of defined benefit pension plans
(1), (2)
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
Percentage | Quoted | Percentage | Quoted | |||
of total | in active | of total | in active | |||
(Millions of Canadian dollars, except percentages) | Fair value | plan assets | market (3) | Fair value | plan assets | market (3) |
Equity securities | ||||||
Domestic | $ 1,198 | 7% | 100% | $ 926 | 5% | 100% |
Foreign | 3,227 | 18 | 100 | 2,306 | 13 | 100 |
Debt securities | ||||||
Domestic government bonds (4) | 5,312 | 30 | – | 5,608 | 33 | – |
Foreign government bonds | 84 | – | – | 145 | 1 | – |
Corporate and other bonds | 3,489 | 19 | – | 3,788 | 22 | – |
Alternative investments and other | 4,647 | 26 | 7 | 4,389 | 26 | 8 |
$ 17,957 | 100% | 26% | $ 17,162 | 100% | 21% | |
(1)
The asset allocation is based on the underlying investments held directly and indirectly through the funds as this is how we manage our investment policy and strategies.
(2)
Represents the total plan assets held in our Canadian and International pension plans.
(3)
If our assessment of whether or not an asset was quoted in an active market was based on direct investments, 30% of our total plan assets would be classified as quoted
in an active market (October 31, 2024 – 25%).
(4)
Amounts are net of securities sold under repurchase agreements.
As at October 31, 2025, the plan assets include 0.4 million (October 31, 2024 – 0.4 million) of our common shares with a fair
value of $83 million (October 31, 2024 – $66 million) and $60 million (October 31, 2024 – $74 million) of our debt securities. For the
year ended October 31, 2025, dividends received on our common shares held in the plan assets were $2 million (October 31, 2024 –
$2 million).
Maturity profile
The following table presents the maturity profile of our defined benefit pension plan obligation.
| As at October 31, 2025 | |||
(Millions of Canadian dollars, except participants and years) | Canada | International | Total |
Number of plan participants | 68,421 | 5,851 | 74,272 |
Actual benefit payments 2025 | $ 680 | $ 36 | $ 716 |
Benefits expected to be paid 2026 | 740 | 37 | 777 |
Benefits expected to be paid 2027 | 767 | 36 | 803 |
Benefits expected to be paid 2028 | 789 | 35 | 824 |
Benefits expected to be paid 2029 | 807 | 37 | 844 |
Benefits expected to be paid 2030 | 827 | 39 | 866 |
Benefits expected to be paid 2031-2035 | 4,348 | 200 | 4,548 |
Weighted average duration of defined benefit payments | 13.0 years | 13.2 years | 13.0 years |
Significant assumptions
Our methodologies to determine significant assumptions used in calculating the defined benefit pension and other post-
employment benefit expense are as follows:
Discount rate
For the Canadian pension and other post-employment benefit plans, all future expected benefit payments at each measurement
date are discounted at spot rates from a derived Canadian AA corporate bond yield curve. The derived curve is based on actual
short and mid-maturity corporate AA rates and extrapolated longer term rates. The extrapolated corporate AA rates are derived
from observed corporate A, corporate AA and provincial AA yields. For the International pension and other post-employment
benefit plans, all future expected benefit payments at each measurement date are discounted at spot rates from a local AA
corporate bond yield curve. Spot rates beyond 30 years are set to equal the 30-year spot rate. The discount rate is the equivalent
single rate that produces the same discounted value as that determined using the entire discount curve. This valuation
methodology does not rely on assumptions regarding reinvestment returns.
Rate of increase in future compensation
The assumptions for increases in future compensation are developed separately for each plan, where relevant. Each
assumption is set based on the price inflation assumption and compensation policies in each market, as well as relevant local
statutory and plan-specific requirements.
Healthcare cost trend rates
Healthcare cost calculations are based on both short and long-term trend assumptions established using the plan’s recent
experience as well as market expectations.
(continued)
Note 16
Employee benefits – Pension and other post-employment benefits
218
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Weighted average assumptions to determine benefit obligation
| As at | ||||
Defined benefit pension | Other post-employment | |||
plans | benefit plans | |||
October 31 | October 31 | October 31 | October 31 | |
2025 | 2024 | 2025 | 2024 | |
Discount rate | 4.7% | 4.8% | 4.9% | 4.9% |
Rate of increase in future compensation | 3.0% | 3.0% | n.a. | n.a. |
Healthcare cost trend rates (1) | ||||
– Medical | n.a. | n.a. | 3.5% | 3.5% |
– Dental | n.a. | n.a. | 3.5% | 3.5% |
(1)
For our other post-employment benefit plans, the assumed trend rates used to measure the expected benefit costs of the defined benefit obligations are also the
ultimate trend rates.
n.a.
not applicable
Mortality assumptions
Mortality assumptions are significant in measuring our obligations under the defined benefit pension plans. These assumptions
have been set based on country specific statistics. Future longevity improvements have been considered and included where
appropriate. The following table summarizes the mortality assumptions used for material plans.
| As at | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
Life expectancy at 65 for a member currently at | Life expectancy at 65 for a member currently at | |||||||
Age 65 | Age 45 | Age 65 | Age 45 | |||||
(In years) | Male | Female | Male | Female | Male | Female | Male | Female |
Country | ||||||||
Canada | 23.3 | 24.4 | 24.3 | 25.4 | 23.2 | 24.4 | 24.2 | 25.3 |
United Kingdom | 22.3 | 24.5 | 23.6 | 25.8 | 22.1 | 24.4 | 23.4 | 25.7 |
Sensitivity analysis
Assumptions adopted can have a significant effect on the value of the obligations for defined benefit pension and other post-
employment benefit plans and are based on historical experience and market inputs. The increase (decrease) in obligation in
the following table has been determined for key assumptions assuming all other assumptions are held constant. In practice, this
is unlikely to occur, as changes in some of the assumptions may be correlated. The following table presents the sensitivity
analysis of key assumptions for 2025.
Increase (decrease) | ||
in obligation | ||
Other post- | ||
Defined benefit | employment | |
(Millions of Canadian dollars) | pension plans | benefit plans |
Discount rate | ||
Impact of 100 bps increase in discount rate | $ (1,597) | $ (182) |
Impact of 100 bps decrease in discount rate | 1,967 | 224 |
Rate of increase in future compensation | ||
Impact of 50 bps increase in rate of increase in future compensation | 24 | – |
Impact of 50 bps decrease in rate of increase in future compensation | (25) | – |
Mortality rate | ||
Impact of an increase in longevity by one additional year | 380 | 23 |
Healthcare cost trend rate | ||
Impact of 100 bps increase in healthcare cost trend rate | n.a. | 51 |
Impact of 100 bps decrease in healthcare cost trend rate | n.a. | (43) |
n.a.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
219
Other liabilities
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Accounts payable and accrued expenses | $ 1,663 | $ 1,475 |
Accrued interest payable | 11,784 | 13,226 |
Cash collateral | 22,133 | 19,582 |
Commodity liabilities | 17,692 | 13,996 |
Deferred income | 4,277 | 4,149 |
Deferred income taxes | 484 | 542 |
Dividends payable | 2,306 | 2,123 |
Employee benefit liabilities | 1,966 | 1,924 |
Lease liabilities | 4,586 | 4,673 |
Negotiable instruments | 1,609 | 1,702 |
Payable to brokers, dealers and clients | 9,487 | 8,270 |
Payroll and related compensation | 13,574 | 11,781 |
Precious metals liabilities | 3,196 | 743 |
Provisions | 782 | 793 |
Short-term borrowings of subsidiaries | 2,804 | – |
Taxes payable | 2,852 | 2,398 |
Other | 7,396 | 7,335 |
$ 108,591 | $ 94,712 | |
Subordinated debentures
The debentures are unsecured obligations and are subordinated in right of payment to the claims of depositors and certain
other creditors. The amounts presented below are net of our own holdings in these debentures, and include the impact of fair
value hedges used for managing interest rate risk.
(Millions of Canadian dollars, except percentage and foreign currency) | As at | |||||
Denominated in | ||||||
Earliest par value | Interest | foreign currency | October 31 | October 31 | ||
Maturity | redemption date | rate | (millions) | 2025 | 2024 | |
January 27, 2026 (1) | 4.65% | US$ | 1,500 | $ 2,091 | $ 2,026 | |
December 23, 2029 (1) , (2) | December 23, 2024 | 2.88% | – | 1,495 | ||
June 30, 2030 (1), (3) | June 30, 2025 | 2.088% | – | 1,219 | ||
November 3, 2031 (1) | November 3, 2026 | 2.14% (4) | 1,628 | 1,708 | ||
May 3, 2032 (1) | May 3, 2027 | 2.94% (5) | 984 | 955 | ||
January 28, 2033 (1) | January 28, 2028 | 1.67% (6) | 967 | 935 | ||
February 1, 2033 (1) | February 1, 2028 | 5.01% (7) | 1,520 | 1,461 | ||
April 3, 2034 (1) | April 3, 2029 | 5.096% (8) | 2,038 | 2,020 | ||
August 8, 2034 (1) | August 8, 2029 | 4.829% (9) | 1,273 | 1,263 | ||
February 4, 2035 (1) | February 4, 2030 | 4.279% (10) | 1,512 | – | ||
July 3, 2035 (1) | July 3, 2030 | 4.214% (11) | 1,250 | – | ||
July 17, 2035 (1) | July 17, 2030 | 1.963% (12) | ¥ | 26,000 | 232 | – |
October 1, 2083 | Any interest payment date | (13) | 224 | 224 | ||
November 1, 2083 | Any interest payment date | (14) | 9 | 9 | ||
June 29, 2085 | Any interest payment date | (15) | US$ | 174 | 243 | 241 |
$ 13,971 | $ 13,556 | |||||
Deferred financing costs | (10) | (10) | ||||
$ 13,961 | $ 13,546 | |||||
(1)
The notes include non-viability contingent capital (NVCC) provisions, necessary for the notes to qualify as Tier 2 regulatory capital under Basel III. NVCC provisions
require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial
government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is convertible into common
shares pursuant to an automatic conversion formula with a multiplier of 1.5 and a conversion price based on the greater of: (i) a floor price of $5.00 (subject to
adjustment in certain circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading price of our common
shares on the Toronto Stock Exchange. The number of shares issued is determined by multiplying the par value of the note (including accrued and unpaid interest on
such note) by the multiplier and then dividing the total by the conversion price.
(2)
On December 23, 2024, we redeemed all $1,500 million of our outstanding 2.88% subordinated debentures due December 23, 2029 for 100% of their principal amount plus
interest accrued to, but excluding, the redemption date.
(3)
On June 30, 2025, we redeemed all $1,250 million of our outstanding 2.088% subordinated debentures due June 30, 2030 for 100% of their principal amount plus interest
accrued to, but excluding, the redemption date.
(4)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.93% above the Daily Compounded CORRA.
(5)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.08% above the Daily Compounded CORRA.
(6)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.87% above the Daily Compounded CORRA.
(7)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 2.12% above the Daily Compounded CORRA.
(8)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.56% above the Daily Compounded CORRA.
(9)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.55% above the Daily Compounded CORRA.
(10)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.45% above the Daily Compounded CORRA.
(11)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.51% above the Daily Compounded CORRA.
(12)
Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.02% above the 5-Year Tokyo Overnight Average Rate mid-swap rate.
(13)
Interest at a rate of 0.50% plus the average of mid-market quotations for Government of Canada Treasury Bills maturing in or about 30 days from the date of quotation.
(14)
Interest at a rate of 0.75% plus the average of mid-market quotations for Government of Canada Treasury Bills maturing in or about 30 days from the date of quotation.
(15)
Interest at a rate of 0.44911% plus compounded SOFR. In the event of a reduction of the annual dividend we declare on our common shares, the interest payable on the
debentures is reduced pro rata to the dividend reduction and the interest reduction is payable with the proceeds from the sale of newly issued common shares.
(continued)
Note 18
Subordinated debentures
220
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
All redemptions, cancellations and exchanges of subordinated debentures are subject to the consent and approval of OSFI.
Maturity schedule
The aggregate maturities of subordinated debentures, based on the maturity dates under the terms of issue, are as follows:
As at | |
October 31 | |
(Millions of Canadian dollars) | 2025 |
Within 1 year | $ 2,091 |
1 to 5 years | – |
5 to 10 years | 11,404 |
Thereafter | 476 |
$ 13,971 |
Equity
Authorized share capital
Preferred – An unlimited number of First Preferred Shares and Second Preferred Shares without nominal or par value, issuable in
series; provided that the maximum aggregate consideration for all First Preferred Shares outstanding at any time may not
exceed $30 billion, and for all Second Preferred Shares that may be issued may not exceed $5 billion.
Common – An unlimited number of shares without nominal or par value may be issued.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
221
Outstanding share capital
The following table details our common and preferred shares and other equity instruments outstanding.
| As at and for the year ended | ||||||
| October 31, 2025 | October 31, 2024 | |||||
Number of | Dividends | Number of | Dividends | |||
(Millions of Canadian dollars, except the number | shares | declared | shares | declared | ||
of shares and as otherwise noted) | (thousands) | Amount | per share | (thousands) | Amount | per share |
Common shares issued | ||||||
Balance at beginning of period | 1,415,080 | $ 21,013 | 1,402,373 | $ 19,398 | ||
Issued in connection with share-based | ||||||
compensation plans (1) | 796 | 77 | 1,746 | 168 | ||
Issued in connection with dividend | ||||||
reinvestment plan | – | – | 11,850 | 1,460 | ||
Purchased for cancellation (2) | (15,241) | (227) | (889) | (13) | ||
Balance at end of period | 1,400,635 | $ | $ | 1,415,080 | $ | $ |
Treasury – common shares | ||||||
Balance at beginning of period (3) | (576) | $ (61) | (1,862) | $ (231) | ||
Purchases | (41,204) | (5,811) | (43,995) | (5,302) | ||
Sales | 41,259 | 5,762 | 45,281 | 5,472 | ||
Balance at end of period (3) | (521) | $ (110) | (576) | $ (61) | ||
Common shares outstanding | 1,400,114 | $ 20,753 | 1,414,504 | $ 20,952 | ||
Preferred shares and other equity | ||||||
instruments issued | ||||||
First preferred (4) | ||||||
Non-cumulative, fixed rate | ||||||
Series BH | 6,000 | $ 150 | $ 1.23 | 6,000 | $ 150 | $ 1.23 |
Series BI | 6,000 | 150 | 1.23 | 6,000 | 150 | 1.23 |
Non-cumulative, 5-Year Rate Reset | ||||||
Series BD (5) | – | – | 0.80 | 24,000 | 600 | 0.80 |
Series BF (6) | 12,000 | 300 | 0.75 | 12,000 | 300 | 0.75 |
Series BO | 14,000 | 350 | 1.47 | 14,000 | 350 | 1.40 |
Series BT (7) | 750 | 750 | 4.20% | 750 | 750 | 4.20% |
Series BU (7) | 750 | 750 | 7.408% | 750 | 750 | 7.408% |
Series BW (7) | 600 | 600 | 6.698% | 600 | 600 | 6.698% |
Other equity instruments | ||||||
Limited recourse capital notes (LRCNs) | ||||||
Series 1 (8) | – | – | 4.50% | 1,750 | 1,750 | 4.50% |
Series 2 (9), (10) | 1,250 | 1,250 | 4.00% | 1,250 | 1,250 | 4.00% |
Series 3 (9), (10) | 1,000 | 1,000 | 3.65% | 1,000 | 1,000 | 3.65% |
Series 4 (9), (10) | 1,000 | 1,370 | 7.50% | 1,000 | 1,370 | 7.50% |
Series 5 (9), (10) | 1,000 | 1,396 | 6.35% | – | – | – |
Series 6 (9), (10) | 1,250 | 1,708 | 6.75% | – | – | – |
Series 7 (9), (10) | 1,350 | 1,869 | 6.50% | – | – | – |
46,950 | $ 11,643 | 69,100 | $ 9,020 | |||
Treasury – preferred shares and other equity | ||||||
instruments | ||||||
Balance at beginning of period (3) | 13 | $ 11 | (9) | $ (9) | ||
Purchases | (4,431) | (4,916) | (1,921) | (1,225) | ||
Sales | 4,453 | 4,937 | 1,943 | 1,245 | ||
Balance at end of period (3) | 35 | $ 32 | 13 | $ 11 | ||
Preferred shares and other equity | ||||||
instruments outstanding | 46,985 | $ 11,675 | 69,113 | $ 9,031 | ||
(1)
Includes fair value adjustments to stock options of $5 million (October 31, 2024 – $10 million).
(2)
Our previous NCIB to purchase up to 30 million of our common shares ended June 11, 2025. On June 10, 2025, we announced a new NCIB to purchase up to 35 million of our
common shares, commencing on June 12, 2025, and continuing until June 11, 2026, or such earlier date as we complete the repurchase of all shares permitted under the
bid. During the year ended October 31, 2025, under the NCIB programs we purchased for cancellation common shares at a total fair value of $2,768 million (average cost
of $181.59 per share), with a book value of $227 million (book value of $14.88 per share). During the year ended October 31, 2024, under the previous NCIB we purchased
for cancellation common shares at a total fair value of $140 million (average cost of $157.74 per share), with a book value of $13 million (book value of $14.83 per share).
(3)
Positive amounts represent a short position and negative amounts represent a long position.
(4)
First Preferred Shares were issued at $25 per share with the exception of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BT (Series BT),
Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BU (Series BU) and Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BW
(Series BW) which were issued at $1,000 per share.
(5)
On May 24, 2025, we redeemed all 24 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BD at a redemption price of
$25.00 per share.
(6)
On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF at a redemption price of
$25.00 per share.
(7)
The dividends declared per share represent the per annum dividend rate applicable to the shares issued as at the reporting date.
(8)
On October 24, 2025, we redeemed all 1.75 million of our issued and outstanding Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BQ at a redemption price of
$1,000 per share. As a result of the redemption of the Series BQ Shares, we automatically redeemed all $1.75 billion outstanding Series 1 LRCN on the same date for 100% of their
principal amount plus accrued interest to, but excluding, the redemption date.
(9)
LRCN Series 2 and 3 were issued at a $1,000 per note. LRCN Series 4, 5, 6 and 7 were issued at US$1,000 per note. The number of shares represent the number of notes issued and
the dividends declared per share represent the annual interest rate percentage applicable to the notes issued as at the reporting date.
(10)
In connection with the issuance of LRCN Series 2, we issued $1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BR (Series BR); in
connection with the issuance of LRCN Series 3, we issued $1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BS (Series BS); in
connection with the issuance of LRCN Series 4, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BV (Series BV); in
connection with the issuance of LRCN Series 5, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BX (Series BX); in
connection with the issuance of LRCN Series 6, we issued US$1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BY (Series BY); in
connection with the issuance of LRCN Series 7, we issued US$1,350 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BZ (Series BZ). The
Series BR and BS preferred shares were issued at a price of $1,000 per share and the Series BV, BX, BY and BZ preferred shares were issued at a price of US$1,000 per
share. These preferred shares were issued to a consolidated trust to be held as trust assets in connection with each respective LRCN Series.
(continued)
Note 19
Equity
222
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Significant terms and conditions of preferred shares and other equity instruments
Current | Earliest | |||||
Current | dividend | redemption | Redemption | |||
As at October 31, 2025 | annual yield | Premium | per share (1) | date (2) | Issue date | price (2), (3) |
Preferred shares | ||||||
First preferred | ||||||
Non-cumulative, fixed rate | ||||||
Series BH (4) | 4.90% | $ 0.30625 | November 24, 2020 | June 5, 2015 | $ 25.00 | |
Series BI (4) | 4.90% | 0.30625 | November 24, 2020 | July 22, 2015 | 25.00 | |
Non-cumulative, 5-Year Rate | ||||||
Reset (5) | ||||||
Series BF (4) | 3.00% | 2.62% | 0.1875 | November 24, 2020 | March 13, 2015 | 25.00 |
Series BO (4) | 5.885% | 2.38% | 0.3678125 | February 24, 2024 | November 2, 2018 | 25.00 |
Series BT (4) | 4.20% | 2.71% | 21.00 | January 24, 2027 | November 5, 2021 | 1,000.00 |
Series BU (4) | 7.408% | 3.90% | 37.04 | January 25, 2029 | January 25, 2024 | 1,000.00 |
Series BW (4) | 6.698% | 3.40% | 33.49 | October 24, 2029 | July 24, 2024 | 1,000.00 |
Other equity instruments | ||||||
Limited recourse capital | ||||||
notes (6) | ||||||
Series 2 (7) | 4.00% | 3.617% | n.a. | January 24, 2026 | November 2, 2020 | 1,000.00 |
Series 3 (8) | 3.65% | 2.665% | n.a. | October 24, 2026 | June 8, 2021 | 1,000.00 |
Series 4 (9) | 7.50% | 2.887% | n.a. | May 2, 2029 | April 24, 2024 | US$1,000.00 |
Series 5 (10) | 6.35% | 2.257% | n.a. | November 24, 2034 | November 1, 2024 | US$1,000.00 |
Series 6 (11) | 6.75% | 2.815% | n.a. | August 24, 2030 | June 11, 2025 | US$1,000.00 |
Series 7 (12) | 6.50% | 2.462% | n.a. | November 24, 2035 | September 23, 2025 | US$1,000.00 |
(1)
With the exception of Series BT, BU and BW, non-cumulative preferential dividends of each Series are payable quarterly, as and when declared by the Board of Directors,
on or about the 24th day of February, May, August and November. In the case of Series BT, BU and BW, non-cumulative preferential dividends are payable semi-annually,
as and when declared by the Board of Directors.
(2)
Subject to the consent of OSFI and the requirements of the
Bank Act
(Canada), we may, on or after the dates specified above, redeem First Preferred Shares. In the case
of Series BF and BO, these may be redeemed for cash at a price per share of $25 if redeemed on the earliest redemption date and on the same date every fifth year
thereafter. In the case of Series BH and BI, these may be redeemed for cash at a price per share of $26 if redeemed during the 12 months commencing on the earliest
redemption date and decreasing by $0.25 each 12-month period thereafter to a price per share of $25 if redeemed four years from the earliest redemption date or
thereafter. In the case of Series BT and BW, these may be redeemed for cash at a price of $1,000 if redeemed during the earliest redemption period of January 24, 2027 to
February 24, 2027 and October 24, 2029 to November 24, 2029, respectively, and during the same redemption period every fifth year thereafter. In the case of Series BU,
these may be redeemed for cash at a price of $1,000 if redeemed during the earliest redemption period from January 25, 2029 to February 24, 2029 and during the period
from January 24 to and including February 24 every fifth year thereafter.
(3)
Subject to the consent of OSFI and the requirements of the
Bank Act
(Canada), we may purchase the First Preferred Shares of each Series for cancellation at the lowest
price or prices at which, in the opinion of the Board of Directors, such shares are obtainable.
(4)
The preferred shares include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of
the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial government in Canada publicly
announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each preferred share is convertible into common shares pursuant to an
automatic conversion formula with a multiplier of 1 and with a conversion price based on the greater of: (i) a floor price of $5 (subject to adjustment in certain
circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock
Exchange. The number of shares issued is determined by dividing the preferred share value by the conversion price.
(5)
The dividend rate will reset on the earliest redemption date or on the last day of the redemption period, as applicable, and every fifth year thereafter at a rate equal to
the 5-Year Government of Canada bond yield plus the premium indicated. The holders of Series BF and BO shares have the option to convert their shares into
non-cumulative floating rate First Preferred Shares subject to certain conditions on the earliest redemption date and every fifth year thereafter at a rate equal to the
three-month Government of Canada Treasury Bill rate plus the premium indicated.
(6)
The current annual yield on each LRCN Series represents the annual interest rate applicable to the notes issued as at the reporting date. The payments of interest and
principal in cash on the LRCN Series are made at our discretion, and non-payment of interest and principal in cash does not constitute an event of default. In the event of
(i) non-payment of interest on any interest payment date, (ii) non-payment of the redemption price in case of a redemption of a LRCN Series, (iii) non-payment of
principal at the maturity of a LRCN Series, or (iv) an event of default on a LRCN Series, holders of such LRCN Series will have recourse only to the assets (Trust Assets)
held by a third-party trustee in a consolidated trust in respect of such LRCN Series and each such noteholder will be entitled to receive its pro rata share of the Trust
Assets. In such an event, the delivery of the Trust Assets for each LRCN Series will represent the full and complete extinguishment of our obligations under the related
LRCN Series. The LRCNs include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion
of the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial government in Canada publicly
announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is automatically redeemed and the redemption price will be
satisfied by the delivery of Trust Assets, which will consist of common shares pursuant to an automatic conversion of the series of preferred shares that were issued
concurrently with the related LRCN Series. Each series of preferred shares include an automatic conversion formula with a conversion price based on the greater of: (i) a
floor price of $5 (subject to adjustment in certain circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading
price of our common shares on the Toronto Stock Exchange. The number of common shares issued in respect of each series of preferred shares will be determined by
dividing the preferred share value ($1,000 plus declared and unpaid dividends) by the conversion price. The number of common shares delivered to each noteholder will
be based on such noteholder’s pro rata interest in the Trust Assets. Subject to the consent of OSFI, we may purchase LRCNs for cancellation at such price or prices and
upon such terms and conditions as we in our absolute discretion may determine, subject to any applicable law restricting the purchase of notes.
(7)
LRCN Series 2 bear interest at a fixed rate of 4.0% per annum until February 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year
Government of Canada Yield plus 3.617% until maturity on February 24, 2081. The interest is paid semi-annually on or about the 24th day of February and August. LRCN
Series 2 is redeemable during the period from January 24 to and including February 24, commencing in 2026 and every fifth year thereafter to the extent we redeem
Series BR pursuant to their terms and subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
(8)
LRCN Series 3 bear interest at a fixed rate of 3.65% per annum until November 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year
Government of Canada Yield plus 2.665% until maturity on November 24, 2081. The interest is paid semi-annually on or about the 24th day of May and November. LRCN
Series 3 is redeemable during the period from October 24 to and including November 24, commencing in 2026 and every fifth year thereafter to the extent we redeem
Series BS pursuant to their terms and subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
(9)
LRCN Series 4 bear interest at a fixed rate of 7.5% per annum until May 2, 2029, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S. Treasury
Rate plus 2.887% until maturity on May 2, 2084. The interest is paid quarterly on or about the 2nd day of February, May, August and November. LRCN Series 4 is
redeemable on May 2, 2029 and on each 2nd day of February, May, August and November thereafter to the extent we redeem Series BV pursuant to their terms and
subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
(10)
LRCN Series 5 bear interest at a fixed rate of 6.35% per annum until November 24, 2034, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S.
Treasury Rate plus 2.257% until maturity on November 24, 2084. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN
Series 5 is redeemable on November 24, 2034 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BX pursuant to
their terms and subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
(11)
LRCN Series 6 bear interest at a fixed rate of 6.75% per annum until August 24, 2030, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S.
Treasury Rate plus 2.815% until maturity on August 24, 2085. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN
Series 6 is redeemable on August 24, 2030 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BY pursuant to their
terms and subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
(12)
LRCN Series 7 bear interest at a fixed rate of 6.50% per annum until November 24, 2035, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S.
Treasury Rate plus 2.462% until maturity on November 24, 2085. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN
Series 7 is redeemable on November 24, 2035 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BZ pursuant to
their terms and subject to the consent of OSFI and requirements of the
Bank Act
(Canada).
n.a.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
223
Restrictions on the payment of dividends
We are prohibited by the
Bank Act
(Canada) from declaring any dividends on our preferred or common shares when we are, or
would be placed as a result of the declaration, in contravention of the capital adequacy and liquidity regulations or any
regulatory directives issued under the Act. We may not pay dividends on our common shares at any time unless all dividends to
which preferred shareholders are then entitled have been declared and paid or set apart for payment. Currently, these
limitations do not restrict the payment of dividends on our preferred or common shares.
Dividend reinvestment plan
Our dividend reinvestment plan (DRIP) provides common and preferred shareholders with a means to receive additional
common shares rather than cash dividends. The plan is only open to shareholders residing in Canada or the U.S. The
requirements of our DRIP are satisfied through either open market share purchases or shares issued from treasury. During the
year ended October 31, 2025 and the third and fourth quarters of the year ended October 31, 2024, the requirements of our DRIP
were satisfied through open market share purchases. During the first and second quarters of the year ended October 31, 2024,
Shares available for future issuances
As at October 31, 2025, 14.8 million common shares are available for future issue relating to our DRIP and potential exercise of
stock options and awards outstanding. In addition, we may issue up to 38.9 million common shares from treasury under the RBC
Share-based compensation
Stock option plans
We have stock option plans for certain key employees. Under the plans, options are periodically granted to purchase common
shares. The exercise price for the majority of the grants is determined as the higher of the volume-weighted average of the
trading prices per board lot (100 shares) of our common shares on the Toronto Stock Exchange (i) on the day preceding the day
of grant; and (ii) the five consecutive trading days immediately preceding the day of grant. The exercise price for the remaining
grants is the closing market share price of our common shares on the New York Stock Exchange on the date of grant. All options
vest over a four-year period, and are exercisable for a period not exceeding 10 years from the grant date.
The compensation expense recorded for the year ended October 31, 2025, in respect of the stock option plans was $18 million
(October 31, 2024 – $16 million). The compensation expense related to non-vested options was $9 million at October 31, 2025
(October 31, 2024 – $9 million), to be recognized over the weighted average period of 2.0 years (October 31, 2024 – 2.0 years).
Analysis of the movement in the number and weighted average exercise price of options is set out below.
A summary of our stock option activity and related information
| For the year ended | ||||
| October 31, 2025 | October 31, 2024 | |||
Number of | Weighted | Number of | Weighted | |
options | average | options | average | |
(Canadian dollars per share except option amounts) | (thousands) | exercise price (1) | (thousands) | exercise price (1) |
Outstanding at beginning of period | 7,375 | $ 113.00 | 7,767 | $ 106.01 |
Granted | 916 | 177.97 | 1,666 | 125.37 |
Exercised (2), (3) | (796) | 90.31 | (1,720) | 91.03 |
Forfeited | (5) | 114.04 | (338) | 124.64 |
Outstanding at end of period | 7,490 | $ 123.37 | 7,375 | $ 113.00 |
Exercisable at end of period | 3,522 | $ 105.02 | 3,212 | $ 97.02 |
(1)
The weighted average exercise prices reflect the conversion of foreign currency-denominated options at the exchange rates as of October 31, 2025 and October 31, 2024.
For foreign currency-denominated options exercised during the year, the weighted average exercise prices are translated using exchange rates as at the settlement date.
(2)
Cash received for options exercised during the year was $72 million (October 31, 2024 – $157 million) and the weighted average share price at the date of exercise was
$179.45 (October 31, 2024 – $144.69).
(3)
New shares were issued for all stock options exercised in 2025 and 2024.
Options outstanding as at October 31, 2025 by range of exercise price
| Options outstanding | Options exercisable | ||||
Weighted | |||||
average | |||||
Number | Weighted | remaining | Number | Weighted | |
(Canadian dollars per share except | outstanding | average | contractual | exercisable | average |
option amounts and years) | (thousands) | exercise price (1) | life (years) | (thousands) | exercise price (1) |
$74.39 – $96.55 | 1,031 | $ 93.27 | 2.04 | 1,031 | $ 93.27 |
$102.33 – $104.70 | 1,067 | 103.95 | 3.46 | 1,067 | 103.95 |
$106.00 – $106.00 | 930 | 106.00 | 5.12 | 930 | 106.00 |
$125.37 – $129.99 | 2,579 | 127.21 | 7.32 | 494 | 129.99 |
$131.64 – $177.97 | 1,883 | 154.17 | 8.10 | – | – |
7,490 | $ 123.37 | 5.97 | 3,522 | $ 105.02 | |
(1)
The weighted average exercise prices reflect the conversion of foreign currency-denominated options at the exchange rate as of October 31, 2025.
(continued)
Note 20
Share-based compensation
224
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The weighted average fair value of options granted during the year ended October 31, 2025 was estimated at $20.45
(October 31, 2024 – $13.60). This was determined by applying the Black-Scholes model on the date of grant, taking into account
the specific terms and conditions under which the options are granted, such as the vesting period and expected share price
volatility estimated by considering the historic average share price volatility over a historical period corresponding to the
expected option life. The following table summarizes the assumptions used to determine the fair value of options granted.
Weighted average assumptions
For the year ended | ||
October 31 | October 31 | |
(Canadian dollars per share except percentages and years) | 2025 | 2024 |
Share price at grant date | $ 177.97 | $ 128.62 |
Risk-free interest rate | 3.00% | 3.29% |
Expected dividend yield | 3.85% | 4.20% |
Expected share price volatility | 17% | 16% |
Expected life of option | 6 Years | 6 Years |
Employee savings and share ownership plans
We offer many employees an opportunity to own our common shares through savings and share ownership plans. Under these
plans, the employees can generally contribute between 1% and 10% of their annual salary or benefit base for commission-based
employees. For each contribution between 1% and 6%, we will generally match 50% of the employee contributions in our
common shares. For the RBC Dominion Securities Savings
®
Plan, our maximum annual contribution is $4,500 per employee. For
the RBC U.K. Share Incentive Plan, our maximum annual contribution is £1,500 per employee. For the year ended October 31,
2025, we contributed $164 million (October 31, 2024 – $154 million) under the terms of these plans towards the purchase of our
common shares. As at October 31, 2025 an aggregate of 34 million common shares were held under these plans (October 31, 2024
– 35 million common shares).
Deferred share and other plans
We offer deferred share unit plans to executives, certain key employees and non-employee directors of the Bank. Under these
plans, participants may choose to receive all or a percentage of their annual variable short-term incentive bonus, commission,
or directors’ fee in the form of deferred share units (DSUs). The participants must elect to participate in the plan prior to the
beginning of the year. DSUs earn dividend equivalents in the form of additional DSUs at the same rate as dividends on common
shares. The participant is not allowed to convert the DSUs until retirement or termination of employment/directorship. The cash
value of the DSUs is equivalent to the market value of common shares when conversion takes place.
We offer unit awards for certain key employees within Capital Markets. The bonus is invested as RBC share units and a
specified percentage vests on a specified number of anniversary dates each year. Each vested amount is paid in cash and is
based on the original number of share units granted plus accumulated dividends, valued using the average closing price of
RBC common shares during the five trading days immediately preceding the vesting date.
We offer performance deferred share award plans to certain key employees, all of which vest at the end of three years.
Upon vesting, the award is generally paid in cash and is based on the original number of RBC share units granted plus
accumulated dividends, valued using the average closing price of RBC common shares during the five trading days immediately
preceding the vesting date. A portion of the award under certain plans may be increased or decreased up to 25%, depending on
our total shareholder return compared to a defined peer group of global financial institutions.
We maintain non-qualified deferred compensation plans for certain key employees in the U.S. These plans allow eligible
employees to defer a portion of their annual income and a variety of productivity and recruitment bonuses and allocate the
deferrals among specified fund choices, including a RBC Share Account fund that tracks the value of our common shares.
The following table presents the units granted under the deferred share and other plans for the year.
Units granted under deferred share and other plans
| For the year ended | ||||
October 31, 2025 | October 31, 2024 | |||
Weighted | Weighted | |||
Units | average | Units | average | |
granted | fair value | granted | fair value | |
(Units and per unit amounts) | (thousands) | per unit | (thousands) | per unit |
Deferred share unit plans | 438 | $ 176.00 | 550 | $ 134.64 |
Capital Markets compensation plan unit awards | 3,147 | 203.17 | 3,053 | 167.79 |
Performance deferred share award plans | 2,202 | 178.57 | 2,848 | 123.83 |
Deferred compensation plans | 85 | 172.35 | 86 | 132.99 |
Other share-based plans | 886 | 177.42 | 1,108 | 129.38 |
6,758 | $ 189.63 | 7,645 | $ 143.07 | |
Our liabilities for the awards granted under the deferred share and other plans are measured at fair value, determined based on
the quoted market price of our common shares and specified fund choices as applicable. Annually, our obligation is increased
by additional units earned by plan participants, and is reduced by forfeitures, cancellations, and the settlement of vested units.
In addition, our obligation is impacted by fluctuations in the market price of our common shares and specified fund units. For
performance deferred share award plans, the estimated outcome of meeting the performance conditions also impacts our
obligation.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
225
The following tables present the units that have been earned by the participants, our obligations for these earned units
under the deferred share and other plans, and the related compensation expenses (recoveries) recognized for the year.
Obligations under deferred share and other plans
| As at | ||||
October 31, 2025 | October 31, 2024 | |||
Units | Carrying | Units | Carrying | |
(Millions of Canadian dollars except units) | (thousands) | amount | (thousands) | amount |
Deferred share unit plans | 6,324 | $ 1,299 | 6,243 | $ 1,051 |
Capital Markets compensation plan unit awards | 8,762 | 1,788 | 9,593 | 1,603 |
Performance deferred share award plans | 6,170 | 1,267 | 6,068 | 1,022 |
Deferred compensation plans (1) | 1,972 | 405 | 2,109 | 355 |
Other share-based plans | 2,258 | 434 | 2,394 | 363 |
25,486 | $ 5,193 | 26,407 | $ 4,394 | |
(1)
Excludes obligations not determined based on the quoted market price of our common shares.
Compensation expenses recognized under deferred share and other plans
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Deferred share unit plans | $ 292 | $ 395 |
Capital Markets compensation plan unit awards | 519 | 643 |
Performance deferred share award plans | 645 | 685 |
Deferred compensation plans | 645 | 797 |
Other share-based plans | 237 | 276 |
$ 2,338 | $ 2,796 | |
Income taxes
Components of tax expense
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Income taxes (recoveries) in Consolidated Statements of Income | ||
Current tax | ||
Tax expense for current year | $ 5,534 | $ 4,829 |
Adjustments for prior years | 106 | 298 |
Recoveries arising from previously unrecognized tax loss, tax credit or temporary difference of a | ||
prior period | (4) | (4) |
5,636 | 5,123 | |
Deferred tax | ||
Origination and reversal of temporary difference | (118) | (1,118) |
Adjustments for prior years | (235) | (383) |
Recoveries arising from previously unrecognized tax loss, tax credit or temporary difference of a | ||
prior period, net | (1) | – |
(354) | (1,501) | |
5,282 | 3,622 | |
Income taxes (recoveries) in Consolidated Statements of Comprehensive Income and Changes | ||
in Equity | ||
Other comprehensive income | ||
Net unrealized gains (losses) on debt securities and loans at fair value through other | ||
comprehensive income | 219 | 302 |
Provision for credit losses recognized in income | (1) | (3) |
Reclassification of net losses (gains) on debt securities and loans at fair value through other | ||
comprehensive income to income | (39) | (39) |
Unrealized foreign currency translation gains (losses) | 1 | (11) |
Net foreign currency translation gains (losses) from hedging activities | (118) | (195) |
Reclassification of losses (gains) on net investment hedging activities to income | – | – |
Net gains (losses) on derivatives designated as cash flow hedges | 287 | 105 |
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income | (255) | (309) |
Remeasurement gains (losses) on employee benefit plans | 124 | 202 |
Net gains (losses) from fair value change due to credit risk on financial liabilities designated at | ||
fair value through profit or loss | (342) | (399) |
Net gains (losses) on equity securities designated at fair value through other comprehensive income | 39 | 43 |
Share-based compensation awards | (36) | (12) |
Distributions on other equity instruments and issuance costs | (134) | (69) |
(255) | (385) | |
Total income taxes | $ 5,027 | $ 3,237 |
(continued)
Note 21
Income taxes
226
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The following is an analysis of the differences between the income tax expense reflected in the Consolidated Statements of
Income and the amounts calculated at the Canadian statutory tax rate.
Reconciliation to statutory tax rate
| For the year ended | ||||
(Millions of Canadian dollars, except for percentage amounts) | October 31, 2025 | October 31, 2024 | ||
Income taxes at Canadian statutory tax rate | $ 7,105 | 27.7% | $ 5,502 | 27.7% |
Increase (decrease) in income taxes resulting from: | ||||
Lower average tax rate applicable to subsidiaries (1) | (1,810) | (7.1) | (1,971) | (9.9) |
Tax-exempt income from securities | (34) | (0.1) | (52) | (0.3) |
Other | 21 | 0.1 | 143 | 0.7 |
Income taxes in Consolidated Statements of Income / effective tax rate | $ 5,282 | 20.6% | $ 3,622 | 18.2% |
(1)
Includes Pillar Two current tax expense. The Organisation for Economic Co-operation and Development’s two-pillar plan to combat tax base erosion and profit sharing
includes a 15% global minimum corporate tax on certain multinational enterprises (Pillar Two). Pillar Two legislation in certain countries in which RBC operates became
effective for us beginning November 1, 2024, including under the Global Minimum Tax Act in Canada. Pillar Two current tax expense includes both domestic top up taxes
payable in foreign jurisdictions and income taxes payable in Canada under the Income Inclusion Rule. Pillar Two current tax expense increased RBC’s effective tax rate by
approximately 1.4% for the year ended October 31, 2025 (October 31, 2024 – not applicable).
The effective income tax rate of 20.6% increased 240 bps, primarily due to higher income in higher tax rate jurisdictions and the
impact of Pillar Two legislation.
Deferred tax assets and liabilities result from tax loss and tax credit carryforwards and temporary differences between the tax
basis of assets and liabilities and their carrying amounts on our Consolidated Balance Sheets.
| As at and for the year ended October 31, 2025 | ||||||
Net asset | Change | Change | Exchange | Net asset | ||
beginning of | through | through | rate | Acquisitions/ | end of | |
(Millions of Canadian dollars) | period | equity | profit or loss | differences | disposals | period |
Net deferred tax asset/(liability) | ||||||
Allowance for credit losses | $ 1,394 | $ – | $ 150 | $ 2 | $ – | $ 1,546 |
Deferred compensation | 2,167 | 36 | 243 | 34 | – | 2,480 |
Business realignment charges | 43 | – | 22 | 1 | – | 66 |
Tax loss and tax credit carryforwards | 331 | – | 20 | 2 | – | 353 |
Deferred (income) expense | 1,318 | 8 | (433) | 7 | – | 900 |
Financial instruments measured at fair value | ||||||
through other comprehensive income | (158) | (93) | 9 | 15 | – | (227) |
Premises and equipment and intangibles | (1,476) | – | 182 | (26) | – | (1,320) |
Pension and post-employment related | (463) | (127) | 33 | (1) | – | (558) |
Other | 630 | 2 | 128 | 2 | – | 762 |
$ 3,786 | $ (174) | $ 354 | $ 36 | $ – | $ 4,002 | |
Comprising | ||||||
Deferred tax assets | $ 4,328 | $ 4,486 | ||||
Deferred tax liabilities | (542) | (484) | ||||
$ 3,786 | $ 4,002 | |||||
| As at and for the year ended October 31, 2024 | ||||||
Net asset | Change | Change | Exchange | Net asset | ||
beginning of | through | through | rate | Acquisitions/ | end of | |
(Millions of Canadian dollars) | period | equity profit or loss | differences | disposals | period | |
Net deferred tax asset/(liability) | ||||||
Allowance for credit losses | $ 1,174 | $ 4 | $ 217 | $ (1) | $ – | $ 1,394 |
Deferred compensation | 1,522 | 12 | 614 | 19 | – | 2,167 |
Business realignment charges | 23 | – | 16 | – | 4 | 43 |
Tax loss and tax credit carryforwards | 261 | – | 71 | (1) | – | 331 |
Deferred (income) expense | 651 | 4 | 641 | 2 | 20 | 1,318 |
Financial instruments measured at fair value | ||||||
through other comprehensive income | (321) | 164 | (1) | – | – | (158) |
Premises and equipment and intangibles | (967) | – | 136 | (22) | (623) | (1,476) |
Pension and post-employment related | (333) | (206) | 20 | (1) | 57 | (463) |
Other | 680 | – | (213) | – | 163 | 630 |
$ 2,690 | $ (22) | $1,501 | $ (4) | $(379) | $ 3,786 | |
Comprising | ||||||
Deferred tax assets | $ 3,116 | $ 4,328 | ||||
Deferred tax liabilities | (426) | (542) | ||||
$ 2,690 | $ 3,786 | |||||
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
227
The tax loss and tax credit carryforwards amount of deferred tax assets primarily relates to losses and tax credits in our
Canadian, U.S., and Caribbean operations. Deferred tax assets of $353 million were recognized at October 31, 2025
(October 31, 2024 – $331 million) in respect of tax losses and tax credits incurred in current or preceding years for which
recognition is dependent on the projection of future taxable profits. Management’s forecasts support the assumption that it is
probable that the results of future operations will generate sufficient taxable income to utilize the deferred tax assets. The
forecasts rely on continued liquidity and capital support to our business operations, including tax planning strategies
implemented in relation to such support.
As at October 31, 2025, unused tax losses and tax credits of $408 million and $18 million (October 31, 2024 – $412 million and
$18 million) available to be offset against potential tax adjustments or future taxable income were not recognized as deferred
tax assets. There are no unused tax losses that will expire within one year (October 31, 2024 – $nil), or in two to four years
(October 31, 2024 – $nil) and there are $408 million of unused tax losses that will expire after four years (October 31, 2024 –
$412 million). There are no tax credits that will expire in one year (October 31, 2024 – $nil), or in two to four years
(October 31, 2024 – $nil) and there are $18 million that will expire after four years (October 31, 2024 – $18 million).
The amount of temporary differences associated with investments in subsidiaries, branches and associates and interests in
joint ventures for which deferred tax liabilities have not been recognized in the parent bank is $37 billion as at October 31, 2025
(October 31, 2024 – $30 billion).
Tax examinations and assessments
During the year, we received a reassessment from the Canada Revenue Agency (CRA) in respect of the 2020 taxation year, which
suggested that Royal Bank of Canada owes additional taxes of approximately $411 million as the CRA denied the deductibility of
certain dividends. The reassessment received is consistent with the reassessments received for taxation years 2012 to 2019 of
approximately $2,133 million of additional income taxes and the reassessments received for taxation years 2009 to 2011 of
approximately $434 million of additional income taxes and interest in respect of the same matter. These amounts represent the
maximum additional taxes owing for those years.
Legislative amendments introduced in the 2015 Canadian Federal Budget resulted in disallowed deduction of dividends from
transactions with Taxable Canadian Corporations including those hedged with Tax Indifferent Investors, namely pension funds
and non-resident entities with prospective application effective May 1, 2017. The dividends to which the reassessments relate
include both dividends in transactions similar to those which are the target of the 2015 legislative amendments and dividends
which are unrelated to the legislative amendments.
It is possible that the CRA will reassess us for significant additional income tax for subsequent years on the same basis. In
Earnings per share
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars, except share and per share amounts) | 2025 | 2024 |
Basic earnings per share | ||
Net income | $ 20,369 | $ 16,240 |
Dividends on preferred shares and distributions on other equity instruments | (494) | (322) |
Net income attributable to non-controlling interests | (7) | (10) |
Net income available to common shareholders | $ 19,868 | $ 15,908 |
Weighted average number of common shares (in thousands) | 1,409,072 | 1,411,903 |
Basic earnings per share (in dollars) | $ 14.10 | $ 11.27 |
Diluted earnings per share | ||
Net income available to common shareholders | $ 19,868 | $ 15,908 |
Weighted average number of common shares (in thousands) | 1,409,072 | 1,411,903 |
Stock options (1) | 2,517 | 1,833 |
Issuable under other share-based compensation plans | – | 19 |
Average number of diluted common shares (in thousands) | 1,411,589 | 1,413,755 |
Diluted earnings per share (in dollars) | $ 14.07 | $ 11.25 |
(1)
The dilutive effect of stock options was calculated using the treasury stock method. When the exercise price of options outstanding is greater than the average market
price of our common shares, the options are excluded from the calculation of diluted earnings per share. For the years ended October 31, 2025 and October 31, 2024, no
228
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Guarantees, commitments, pledged assets and contingencies
Guarantees and commitments
We use guarantees and other off-balance sheet credit instruments to meet the financing needs of our clients.
The table below summarizes our maximum exposure to credit losses related to our guarantees and commitments provided
to third parties. The maximum exposure to credit risk relating to a guarantee is the maximum risk of loss if there was a total
default by the guaranteed parties, without consideration of possible recoveries under recourse provisions, insurance policies or
from collateral held or pledged. The maximum exposure to credit risk relating to a commitment to extend credit is the full
amount of the commitment. In both cases, the maximum risk exposure is significantly greater than the amount recognized as a
liability in our Consolidated Balance Sheets.
Maximum exposure | ||
to credit losses | ||
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Financial guarantees | ||
Financial standby letters of credit | $ 28,928 | $ 27,222 |
Commitments to extend credit | ||
Backstop liquidity facilities | 60,520 | 53,090 |
Credit enhancements | 3,895 | 3,482 |
Documentary and commercial letters of credit | 295 | 559 |
Other commitments to extend credit | 355,213 | 321,836 |
Other credit-related commitments | ||
Securities lending indemnifications | 86,782 | 81,347 |
Performance guarantees | 12,691 | 12,283 |
Sponsored member guarantees | 81,681 | 50,241 |
Other | 116 | 446 |
Our credit review process, our policy for requiring collateral security, and the types of collateral security held are generally the
same for guarantees and commitments as for loans. Our clients generally have the right to request settlement of, or draw on,
our guarantees and commitments within one year. However, certain guarantees can only be drawn if specified conditions are
met. These conditions, along with collateral requirements, are described below. We believe that it is highly unlikely that all or
substantially all of the guarantees and commitments will be drawn or settled within one year, and contracts may expire without
being drawn or settled.
Financial guarantees
Financial standby letters of credit
Financial standby letters of credit represent irrevocable assurances that we will make payments in the event that a client cannot
meet its payment obligations to the third-party. For certain guarantees, the guaranteed party can request payment from us even
though the client has not defaulted on its obligations. These guarantees generally have a term of five to seven years.
Our policy for requiring collateral security with respect to these instruments and the types of collateral security held is
generally the same as for loans. When collateral security is taken, it is determined on an account-by-account basis according to
the risk of the borrower and the specifics of the transaction. Collateral security may include cash, securities and other assets
pledged.
Commitments to extend credit
Backstop liquidity facilities
Backstop liquidity facilities are provided to ABCP conduit programs administered by us and third parties as an alternative
source of financing in the event that such programs are unable to access commercial paper markets, or in limited
circumstances, when predetermined performance measures of the financial assets acquired or financed by these programs are
not met. The average remaining term of these liquidity facilities is approximately four years. We also provide backstop liquidity
facilities to certain third-party and RBC-sponsored commercial mortgage securitization vehicles. The average remaining term of
these liquidity facilities is approximately five years.
The terms of the backstop liquidity facilities do not require us to advance money to these programs in the event of
bankruptcy or insolvency and generally do not require us to purchase non-performing or defaulted assets.
Credit enhancements
We provide partial credit enhancement to multi-seller ABCP programs administered by us to protect commercial paper investors
in the event that the collections on the underlying assets together with the transaction-specific credit enhancements or the
liquidity facilities prove to be insufficient to pay for maturing commercial paper. Each of the asset pools is structured to achieve
a high investment grade credit profile through credit enhancements required to be provided by the third-party sellers related to
each transaction. The average remaining term of the credit facilities provided by RBC is approximately three years.
Documentary and commercial letters of credit
Documentary and commercial letters of credit, which are written undertakings by us on behalf of a client authorizing a third-
party to draw drafts on us up to a stipulated amount under specific terms and conditions, where some are collateralized based
on the underlying agreement with the client and others are collateralized by cash deposits or other assets of the client.
Other commitments to extend credit
Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, reverse
repurchase agreements or letters of credit where we do not have the ability to unilaterally withdraw the credit extended to the
borrower.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
229
Other credit-related commitments
Securities lending indemnifications
In securities lending transactions, we act as an agent for the owner of a security, who agrees to lend the security to a borrower
for a fee, under the terms of a pre-arranged contract. The borrower must fully collateralize the security loaned at all times. As
part of this custodial business, an indemnification may be provided to securities lending customers to ensure that the fair value
of securities loaned will be returned in the event that the borrower fails to return the borrowed securities and the collateral held
is insufficient to cover the fair value of those securities. These indemnifications normally terminate without being drawn upon.
The term of these indemnifications varies, as the securities loaned are recallable on demand. Collateral held for our securities
lending transactions typically includes cash, securities that are issued or guaranteed by the Canadian government, U.S.
government or other OECD countries or high quality debt or equity instruments.
Performance guarantees
Performance guarantees represent irrevocable assurances that we will make payments to third-party beneficiaries in the event
that a client fails to perform under a specified non-financial contractual obligation. Such obligations typically include works and
service contracts, performance bonds, and warranties related to international trade. The term of these guarantees can range up
to three to seven years.
Our policy for requiring collateral security with respect to these instruments and the types of collateral security held is
generally the same as for loans. When collateral security is taken, it is determined on an account-by-account basis according to
the risk of the borrower and the specifics of the transaction. Collateral security may include cash, securities and other assets
pledged.
Sponsored member guarantees
For certain overnight repurchase and reverse repurchase transactions, we act as a sponsoring member to eligible clients to
clear transactions through the Fixed Income Clearing Corporation (FICC). We also provide a guarantee to FICC for the prompt
and full payment and performance of our sponsored member clients’ respective obligations under the FICC rules. The
guarantees are fully collateralized by cash and securities issued or guaranteed by the U.S. government.
Indemnifications
In the normal course of our operations, we provide indemnifications which are often standard contractual terms to
counterparties in transactions such as purchase and sale contracts, fiduciary, agency, licensing, custodial and service
agreements, clearing system arrangements, participation as a member of exchanges, director/officer contracts and leasing
transactions. These indemnification agreements may require us to compensate the counterparties for costs incurred as a result
of changes in laws and regulations (including tax legislation) or as a result of litigation claims or statutory sanctions that may be
suffered by the counterparty as a consequence of the transaction. The terms of these indemnification agreements vary based on
the contract. The nature of the indemnification agreements prevents us from making a reasonable estimate of the maximum
potential amount we could be required to pay to counterparties. Historically, we have not made any significant payments under
such indemnifications.
Uncommitted amounts
Uncommitted amounts represent undrawn credit facilities for which we have the ability to unilaterally withdraw the credit
extended to the borrower at any time. These include both retail and commercial commitments. As at October 31, 2025, the total
balance of uncommitted amounts was $496 billion (October 31, 2024 – $470 billion).
Other commitments
We invest in private companies, directly or through third-party investment funds, including venture capital funds, private equity
funds, Small Business Investment Companies, real estate funds and Low Income Housing Tax Credit funds. These funds are
generally structured as closed-end limited partnerships wherein we hold a limited partner interest. For the year ended
October 31, 2025, we have unfunded commitments of $1,664 million (October 31, 2024 – $1,922 million) representing the aggregate
amount of cash we are obligated to contribute as capital to these partnerships under the terms of the relevant contracts.
In the ordinary course of business, we pledge assets and enter into collateral agreements with terms and conditions that are
customary to our regular lending, borrowing and trading activities that require us to pledge assets or provide collateral. The
following are examples of our general terms and conditions on pledged assets and collateral:
•
The risks and rewards of the pledged assets reside with the pledgor.
•
The pledged asset is returned to the pledgor when the necessary conditions have been satisfied.
•
The right of the pledgee to sell or re-pledge the asset is dependent on the specific agreement under which the collateral
is pledged.
•
If there is no default, the pledgee must return the comparable asset to the pledgor upon satisfaction of the obligation.
(continued)
Note 23
Guarantees, commitments, pledged assets and contingencies
230
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
The following table summarizes our pledged assets and collateral, and the activities to which they relate:
Assets pledged against liabilities and collateral assets held or re-pledged
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Sources of pledged assets and collateral | ||
Bank assets | ||
Loans | $ 96,886 | $ 105,577 |
Securities | 139,671 | 105,061 |
Other assets | 40,974 | 31,583 |
277,531 | 242,221 | |
Client assets (1) | ||
Collateral received and available for sale or re-pledging | 539,344 | 539,630 |
Less: not sold or re-pledged | (8,611) | (30,767) |
530,733 | 508,863 | |
$ 808,264 | $ 751,084 | |
Uses of pledged assets and collateral | ||
Securities borrowing and lending | $ 238,301 | $ 198,887 |
Obligations related to securities sold short | 56,382 | 46,088 |
Obligations related to securities loaned or sold under repurchase agreements | 292,335 | 305,788 |
Securitization | 36,797 | 39,769 |
Covered bonds | 64,926 | 71,307 |
Derivative transactions | 73,686 | 50,100 |
Foreign governments and central banks | 11,510 | 8,469 |
Clearing systems, payment systems and depositories | 12,194 | 11,261 |
Other | 22,133 | 19,415 |
$ 808,264 | $ 751,084 | |
(1)
Legal and regulatory matters
We are a large global institution that is subject to many different complex legal and regulatory requirements that continue to
evolve. We are and have been subject to a variety of legal proceedings, including civil claims and lawsuits, regulatory
examinations, investigations, audits and requests for information by various governmental regulatory agencies and law
enforcement authorities in various jurisdictions. Some of these matters may involve novel legal theories and interpretations and
may be advanced under criminal as well as civil statutes, and some proceedings could result in the imposition of civil, regulatory
enforcement or criminal penalties. We review the status of all proceedings on an ongoing basis and will exercise judgment in
resolving them in such manner as we believe to be in our best interest. In many proceedings, it is inherently difficult to
determine whether any loss is probable or to reliably estimate the amount of any loss. This is an area of significant judgment
and uncertainty and the extent of our financial and other exposure to these proceedings after taking into account current
provisions could be material to our results of operations in any particular period though we do not believe that the ultimate
resolution of any such matter will have a material effect on our consolidated financial condition. The following is a description
of our significant legal proceedings. Based on the facts currently known, except as may otherwise be noted, it is not possible at
this time for us to predict the ultimate outcome of these proceedings or the timing of their resolution.
Royal Bank of Canada Trust Company (Bahamas) Limited proceedings
On April 13, 2015, a French investigating judge notified Royal Bank of Canada Trust Company (Bahamas) Limited (RBC Bahamas)
of the issuance of an
ordonnance de renvoi
referring RBC Bahamas and other unrelated persons to the French
tribunal
correctionnel
to face the charge of complicity in estate tax fraud relating to actions taken relating to a trust for which RBC
Bahamas serves as trustee. RBC Bahamas contested the charge in the French court. On January 12, 2017, the French court
acquitted all parties including RBC Bahamas and on June 29, 2018, the French appellate court affirmed the acquittals. The
acquittals were appealed and on January 6, 2021, the French Supreme Court issued a judgment reversing the decision of the
French Court of Appeal and sent the case back to the French Court of Appeal for rehearing. The retrial before the Court of Appeal
commenced on September 18, 2023 and on March 5, 2024, the Court of Appeal rendered a judgment of conviction (the
Conviction) against RBC Bahamas and the other parties. RBC Bahamas was ordered by the Court of Appeal to pay a fine of
€
5,000 in connection with the Conviction. In addition, the Court of Appeal ordered that certain of those convicted of complicity in
the matter, including RBC Bahamas, are jointly liable for the allegedly unpaid inheritance taxes owing, plus penalties and
interest (such aggregate amount will be determined in separate proceedings before the tax courts, to which RBC Bahamas is not
a party). RBC Bahamas believes that its actions did not violate French law and has appealed the Conviction to the French
Supreme Court. Under French law, upon the filing of an appeal by RBC Bahamas, the Conviction, as well as its effects (fine and
joint liability) were stayed pending the outcome of the appeal. The French Supreme Court has scheduled the hearing for the
appeal for December 10, 2025.
On October 28, 2016, Royal Bank of Canada was granted an exemption by the U.S. Department of Labor (DOL) that allows
Royal Bank of Canada and its current and future affiliates to continue to qualify for the Qualified Professional Asset Manager
(QPAM) exemption under the Employee Retirement Income Security Act despite any potential conviction of RBC Bahamas in the
French proceeding for a temporary one-year period from the date of conviction. On December 11, 2023, the DOL published a
technical correction to the prior one-year exemption reflecting the fact that the pending French Court of Appeal’s decision would
be rendered by an appellate court, and not the district court. As a result of the Conviction, the temporary one-year period
commenced on March 5, 2024.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
231
On January 17, 2025, the DOL proposed exemptive relief to allow Royal Bank of Canada to continue to qualify for the QPAM
exemption under the Employee Retirement Income Security Act from March 5, 2025 through March 4, 2030. On March 5, 2025, the
DOL granted an extension of the original relief granted to Royal Bank of Canada in 2016 until the earlier of September 4, 2025 or
the effective date of a final agency action in connection with the proposed exemption published on January 17, 2025. The DOL
granted the exemptive relief it proposed on January 17, 2025, with immaterial amendments, with effect from August 12, 2025
through March 4, 2030. Royal Bank of Canada anticipates seeking further exemptive relief from the DOL prior to the expiration of
the existing relief in the future to the extent deemed necessary or advisable. No assurances can be provided that such relief, if
requested, would be forthcoming.
RBC Bahamas continues to review the trustee’s and the trust’s legal obligations, including liabilities and potential liabilities
under applicable tax and other laws.
U.K. Competition and Markets Authority investigation
In November 2018, the U.K. Competition and Markets Authority (CMA) started an investigation of Royal Bank of Canada and RBC
Europe Limited relating to alleged anti-competitive conduct between 2009 and 2013, involving U.K. government bonds and
related derivatives. In May 2023, the CMA issued a statement of objections to Royal Bank of Canada and RBC Europe Limited,
and certain other financial institutions. Royal Bank of Canada and RBC Europe Limited contested the CMA’s case. In February
2025, Royal Bank of Canada and RBC Europe Limited entered into a settlement with the CMA and agreed to make payment of
£34.2 million in full and final resolution of the matter.
In June 2023, RBC Europe Limited and RBC Capital Markets, LLC, among other financial institutions, were named as
defendants in a putative class action filed in the U.S. by plaintiffs alleging anti-competitive conduct in the U.K. government bonds
market. In September 2023, the defendants filed a motion to dismiss the complaint which motion was granted, without prejudice,
in September 2024. Subsequently, on October 31, 2024, RBC Europe Limited, RBC Capital Markets, LLC and certain of the other
defendants executed an agreement to dismiss the action, with prejudice, against those defendants. In March 2025, the court
preliminarily approved the settlement agreement. The settlement agreement, which entails dismissal of the case as to the settling
defendants for an immaterial amount, remains subject to final court approval.
Vacation pay class action
On December 29, 2022, the Ontario Superior Court of Justice certified a class in an action against RBC Dominion Securities
Limited and RBC Dominion Securities Inc. (together, RBC DS). The action commenced in July 2020, asserting claims relating to
statutory vacation pay and public holiday pay for investment advisors, associates and assistants in our Canadian Wealth
Management business, with the exception of those employed in Alberta and British Columbia.
Other matters
We are a defendant in a number of other actions alleging that certain of our practices and actions were improper. The lawsuits
involve a variety of complex issues and the timing of their resolution is varied and uncertain. Management believes that we will
ultimately be successful in resolving these lawsuits, to the extent that we are able to assess them, without material financial
impact to the Bank. This is, however, an area of significant judgment and the potential liability resulting from these lawsuits
could be material to our results of operations in any particular period.
Various other legal proceedings are pending that challenge certain of our other practices or actions. While this is an area of
significant judgment and some matters are currently inestimable, we consider that the aggregate liability, to the extent that we
are able to assess it, resulting from these other proceedings will not be material to our consolidated financial position or results
Related party transactions
Related parties
Related parties include associated companies over which we have direct or indirect control or have significant influence and
post-employment benefit plans for the benefit of our employees. Related parties also include key management personnel (KMP),
the Board of Directors (Directors), close family members of KMP and Directors, and entities which are, directly or indirectly,
controlled by or jointly controlled by KMP, Directors or their close family members.
KMP are defined as those persons having authority and responsibility for planning, directing and controlling our activities, directly
or indirectly. They include the senior members of our organization called the Group Executive (GE). The GE is comprised of the
President and Chief Executive Officer (CEO), and the Chief Officers and Group Heads, who report directly to the CEO. The Directors
do not plan, direct or control the activities of the entity; they oversee the management of the business and provide stewardship.
Compensation of Key management personnel and Directors
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Salaries and other short-term employee benefits (1) | $ 35 | $ 31 |
Post-employment benefits (2) | 4 | 3 |
Share-based payments (3) | 70 | 67 |
$ 109 | $ 101 | |
(1)
Includes the portion of the annual variable short-term incentive bonus that certain executives elected to receive in the form of DSUs. Refer to Note 20 for further details.
Directors receive retainers but do not receive salaries and other short-term employee benefits.
(2)
Directors do not receive post-employment benefits.
(3)
The Bank offers share-based compensation plans to KMP and Directors. Refer to Note 20 for further details.
(continued)
Note 25
Related party transactions
232
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Transactions, arrangements and agreements involving Key management personnel, Directors and their close family
members
In the normal course of business, we provide certain banking services to KMP, Directors and their close family members. These
transactions were made on substantially the same terms, including interest rates and security, as for comparable transactions
with persons of a similar standing and did not involve more than the normal risk of repayment or present other unfavourable
features.
As at October 31, 2025, total loans to KMP, Directors and their close family members were $16 million (October 31, 2024 –
$16 million). We have no Stage 3 allowance or provision for credit losses relating to these loans as at and for the years ended
October 31, 2025 and October 31, 2024. No guarantees, pledges or commitments have been given to KMP, Directors or their close
Joint ventures and associates
In the normal course of business, we provide certain banking and financial services to our joint ventures and associates,
including loans, interest and non-interest bearing deposits. These transactions meet the definition of related party transactions
and were made on substantially the same terms as for comparable transactions with third parties.
As at October 31, 2025, loans to joint ventures and associates were $174 million (October 31, 2024 – $184 million) and
deposits from joint ventures and associates were $100 million (October 31, 2024 – $58 million). We have no Stage 3 allowance or
provision for credit losses relating to loans to joint ventures and associates as at and for the years ended October 31, 2025 and
October 31, 2024. $1 million of guarantees have been given to joint ventures and associates for the year ended October 31, 2025
(October 31, 2024 – $1 million).
Other transactions, arrangements or agreements involving joint ventures and associates
As at or for the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Commitments and other contingencies | $ 1,207 | $ 1,226 |
Other fees received for services rendered | 105 | 73 |
Other fees paid for services received | 121 | 119 |
Results by business segment
For management purposes, based on the products and services offered, we are organized into five business segments: Personal
Banking, Commercial Banking, Wealth Management, Insurance and Capital Markets.
Personal Banking provides a broad suite of financial products and services to retail clients for their day-to-day banking,
investing and financing needs through three geographies: Canada, the Caribbean and the U.S. In Canada, we provide a broad
suite of financial products and services through our large branch network, ATMs, and mobile sales network. In the Caribbean
and the U.S., we offer a broad range of financial products and services in targeted markets. Non-interest income in Personal
Banking mainly comprises Mutual fund revenue, Service charges and Card service revenue.
Commercial Banking offers a wide range of lending, deposit and transaction banking products and services to Canadian
companies and foreign businesses in Canada at every stage of their business lifecycle through digital solutions, customized
banking advice and services by experienced advisors, relationship managers and our broad team of specialists. Non-interest
income in Commercial Banking mainly comprises Service charges, Foreign exchange revenue, other than trading and Credit fees.
Wealth Management primarily serves high-net-worth and ultra-high-net-worth individual and institutional clients with a
comprehensive suite of advice-based solutions and investment strategies, as well as personalized banking relationships and
self-directed investment service through our lines of businesses in Canada, the U.S., the U.K., Europe and Asia, including
Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management, International
Wealth Management, and Investor Services. Non-interest income in Wealth Management mainly comprises Investment
management and custodial fees, Mutual fund revenue and Securities brokerage commissions.
Insurance has operations in Canada and globally providing a wide range of advice and solutions for individual and business
clients including life, health, wealth, property & casualty, travel, group benefits, annuities, and reinsurance. We offer our
products and services through a wide variety of channels, comprised of mobile advisors, advice centres, RBC Insurance
®
stores
and digital platforms, as well as through independent brokers and partners. We also operate in reinsurance and retrocession
markets globally offering life, critical illness, disability and longevity reinsurance products. Non-interest income in Insurance
primarily comprises Insurance service result and Insurance investment result.
Capital Markets provides expertise in advisory & origination, sales & trading, lending & financing and transaction banking to
corporate, institutional, sponsor and government clients globally in our two main business lines: Corporate & Investment
Banking and Global Markets. In North America, we offer a full suite of products and services which include equity and debt
origination and distribution, advisory services and sales & trading. Outside North America, we have a targeted strategic
presence in the U.K. & Europe, Australia, Asia and other markets aligned to our global expertise. In the U.K. & Europe, we offer a
diversified set of capabilities in key industry sectors of focus. In Australia and Asia, we compete with global and regional
investment banks in targeted areas aligned to our global expertise, including fixed income distribution and currencies trading,
secured financing, as well as corporate and investment banking. Non-interest income in Capital Markets mainly includes Trading
revenue, Underwriting and other advisory fees and Credit fees.
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
233
All other enterprise level activities that are not allocated to these five business segments, such as certain liquidity and cash
management activities, including amounts associated with unattributed capital, and consolidation adjustments, including the
elimination of the taxable equivalent basis (teb) gross-up amounts, are included in Corporate Support. Teb adjustments gross
up income from certain tax-advantaged sources (U.S. tax credit business and Canadian taxable corporate dividends received on
or before December 31, 2023) that are recorded in Capital Markets to their effective tax equivalent value with the corresponding
offset recorded in income taxes. Management believes that these teb adjustments are necessary for Capital Markets to reflect
how it is managed and enhances the comparability of revenue across our taxable and tax-advantaged sources. Our use of teb
adjustments may not be comparable to similarly adjusted amounts at other financial institutions. The teb adjustment for the
year ended October 31, 2025 was $151 million (October 31, 2024 – $294 million). Gains (losses) on economic hedges of our U.S.
Wealth Management (including City National) share-based compensation plans, which are reflected in revenue, and related
variability in share-based compensation expense driven by changes in the fair value of liabilities relating to these plans are also
included in Corporate Support as this presentation more closely aligns with how we view business performance and manage the
Management reporting framework
Our management reporting framework is intended to measure the performance of each business segment as if it were a stand-
alone business and reflects the way that the business segment is managed. This approach is intended to ensure that our
business segments’ results include all applicable revenue and expenses associated with the conduct of their business and
depicts how management views those results. We regularly monitor these segment results for the purpose of making decisions
about resource allocation and performance assessment.
The expenses in each business segment may include costs or services directly incurred or provided on their behalf at the
enterprise level. For other costs not directly attributable to one of our business segments, we use a management reporting
framework that uses assumptions and methodologies for allocating overhead costs and indirect expenses to our business
segments and that assists in the attribution of capital and the transfer pricing of funds to our business segments in a manner
that consistently measures and aligns the economic costs with the underlying benefits and risks of that specific business
segment. Activities and business conducted between our business segments are generally at market rates. All other enterprise
level activities that are not allocated to our five business segments are reported under Corporate Support.
Our assumptions and methodologies used in our management reporting framework are periodically reviewed by us to
ensure that they remain valid. The capital attribution methodologies involve a number of assumptions that are revised
periodically.
| As at or for the year ended October 31, 2025 | |||||||
Personal | Commercial | Wealth | Capital | Corporate | |||
(Millions of Canadian dollars) | Banking (1) | Banking (1) | Management (1) | Insurance | Markets (1), (2) | Support (2) | Total |
Net interest income (3) | $ 14,496 | $ 7,268 | $ 5,459 | $ – | $ 4,789 | $ 988 | $ 33,000 |
Non-interest income | 5,358 | 1,294 | 16,919 | 1,321 | 9,637 | (924) | 33,605 |
Total revenue | 19,854 | 8,562 | 22,378 | 1,321 | 14,426 | 64 | 66,605 |
Provision for credit losses | 2,105 | 1,550 | 120 | – | 587 | – | 4,362 |
Non-interest expense | 8,001 | 2,833 | 16,769 | 315 | 7,966 | 708 | 36,592 |
Net income (loss) before income taxes | 9,748 | 4,179 | 5,489 | 1,006 | 5,873 | (644) | 25,651 |
Income taxes (recoveries) | 2,643 | 1,159 | 1,200 | 178 | 480 | (378) | 5,282 |
Net income | $ 7,105 | $ 3,020 | $ 4,289 | $ 828 | $ 5,393 | $ (266) | $ 20,369 |
Non-interest expense includes: | |||||||
Depreciation and amortization | $ 1,085 | $ 105 | $ 1,237 | $ 46 | $ 570 | $ 2 | $ 3,045 |
Impairment of other intangibles | 9 | – | 22 | 1 | 2 | – | 34 |
Total assets | $574,456 | $196,254 | $ 196,129 | $32,405 | $ 1,223,853 | $101,909 | $2,325,006 |
Total assets include: | |||||||
Additions to premises and equipment and intangibles | $ 476 | $ 50 | $ 912 | $ 8 | $ 365 | $ 974 | $ 2,785 |
Total liabilities | $574,462 | $196,252 | $ 194,689 | $32,234 | $ 1,223,212 | $ (34,994) | $2,185,855 |
(continued)
Note 26
Results by business segment
234
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
| As at or for the year ended October 31, 2024 | |||||||
Personal | Commercial | Wealth | Capital | Corporate | |||
(Millions of Canadian dollars) | Banking (1) | Banking (1) | Management (1) | Insurance | Markets (1), (2) | Support (2) | Total |
Net interest income (3) | $ 12,438 | $ 6,061 | $ 4,979 | $ – | $ 3,183 | $ 1,292 | $ 27,953 |
Non-interest income | 4,904 | 1,321 | 14,647 | 1,224 | 8,829 | (1,534) | 29,391 |
Total revenue | 17,342 | 7,382 | 19,626 | 1,224 | 12,012 | (242) | 57,344 |
Provision for credit losses | 1,802 | 975 | 29 | 2 | 424 | – | 3,232 |
Non-interest expense | 7,485 | 2,512 | 15,312 | 285 | 7,016 | 1,640 | 34,250 |
Net income (loss) before income taxes | 8,055 | 3,895 | 4,285 | 937 | 4,572 | (1,882) | 19,862 |
Income taxes (recoveries) | 2,134 | 1,077 | 863 | 208 | (1) | (659) | 3,622 |
Net income | $ 5,921 | $ 2,818 | $ 3,422 | $ 729 | $ 4,573 | $ (1,223) | $ 16,240 |
Non-interest expense includes: | |||||||
Depreciation and amortization | $ 1,105 | $ 62 | $ 1,223 | $ 6 | $ 528 | $ (11) | $ 2,913 |
Impairment of other intangibles | 21 | – | 23 | 2 | 22 | – | 68 |
Total assets | $ 555,029 | $ 187,142 | $ 184,503 | $ 29,288 | $ 1,127,661 | $ 87,959 | $ 2,171,582 |
Total assets include: | |||||||
Additions to premises and equipment and intangibles | $ 2,274 | $ 740 | $ 887 | $ 11 | $ 494 | $ 680 | $ 5,086 |
Total liabilities | $ 554,970 | $ 187,135 | $ 183,055 | $ 29,158 | $ 1,127,564 | $ (37,492) | $ 2,044,390 |
(1)
On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, and are included in our Personal
Banking, Commercial Banking, Wealth Management and Capital Markets segments. For further details, refer to Note 6.
(2)
Taxable equivalent basis.
(3)
Interest revenue is reported net of interest expense as we rely primarily on net interest income as a performance measure.
For geographic reporting, our segments are grouped into Canada, the U.S. and Other International. Transactions are primarily
recorded in the location that best reflects the risk due to negative changes in economic conditions and prospects for growth due
to positive economic changes. This location frequently corresponds with the location of the legal entity through which the
business is conducted and the location of our clients. Transactions are recorded in the local currency and are subject to foreign
exchange rate fluctuations with respect to the movement in the Canadian dollar.
| As at or for the year ended | ||||||||
| October 31, 2025 | October 31, 2024 | |||||||
United | Other | United | Other | |||||
(Millions of Canadian dollars) | Canada | States | International | Total | Canada | States | International | Total |
Total revenue | $ 41,861 | $ 17,200 | $ 7,544 | $ 66,605 | $ 35,847 | $ 15,034 | $ 6,463 | $ 57,344 |
Net income | 14,537 | 3,804 | 2,028 | 20,369 | 11,266 | 2,880 | 2,094 | 16,240 |
Total assets | 1,278,626 | 681,125 | 365,255 | 2,325,006 | 1,205,561 | 615,747 | 350,274 | 2,171,582 |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
235
Nature and extent of risks arising from financial instruments
We are exposed to credit, market and liquidity and funding risks as a result of holding financial instruments. Our risk
measurement and objectives, policies and methodologies for managing these risks are disclosed in the shaded text along with
those tables specifically marked with an asterisk (*) in the Credit risk, Market risk and Liquidity and funding risk sections of
Management’s Discussion and Analysis. These shaded text and tables are an integral part of these Consolidated Financial
Statements.
Concentrations of credit risk exist if a number of our counterparties are engaged in similar activities, are located in the
same geographic region or have comparable economic characteristics such that their ability to meet contractual obligations
would be similarly affected by changes in economic, political or other conditions.
Concentrations of credit risk indicate the relative sensitivity of our performance to developments affecting a particular
industry or geographic location. The amounts of credit exposure associated with certain of our on- and off-balance sheet
financial instruments are summarized in the following tables.
| As at October 31, 2025 | |||||||||
(Millions of Canadian dollars, | United | Other | |||||||
except percentage amounts) | Canada | % | States | % | Europe | % | International | % | Total |
On-balance sheet assets other than | |||||||||
derivatives (1) | $ 895,328 | 66% | $ 315,466 | 23% | $ 92,304 | 7% | $ 56,119 | 4% | $ 1,359,217 |
Derivatives before master netting | |||||||||
agreements (2), (3) | 20,508 | 11% | 70,345 | 39% | 74,177 | 42% | 15,323 | 8% | 180,353 |
$ 915,836 | 59% | $ 385,811 | 25% | $ 166,481 | 11% | $ 71,442 | 5% | $ 1,539,570 | |
Off-balance sheet credit | |||||||||
instruments (4) | |||||||||
Committed and uncommitted (5) | $ 506,219 | 55% | $ 318,215 | 35% | $ 60,389 | 7% | $ 30,923 | 3% | $ 915,746 |
Other | 86,735 | 41% | 100,512 | 48% | 18,665 | 9% | 4,286 | 2% | 210,198 |
$ 592,954 | 53% | $ 418,727 | 37% | $ 79,054 | 7% | $ 35,209 | 3% | $ 1,125,944 | |
| As at October 31, 2024 | |||||||||
(Millions of Canadian dollars, | United | Other | |||||||
except percentage amounts) | Canada | % | States | % | Europe | % | International | % | Total |
On-balance sheet assets other than | |||||||||
derivatives (1) | $ 897,614 | 67% | $ 297,335 | 22% | $ 88,394 | 7% | $ 54,912 | 4% | $ 1,338,255 |
Derivatives before master netting | |||||||||
agreements (2), (3) | 21,555 | 14% | 47,204 | 31% | 71,198 | 46% | 13,276 | 9% | 153,233 |
$ 919,169 | 61% | $ 344,539 | 23% | $ 159,592 | 11% | $ 68,188 | 5% | $ 1,491,488 | |
Off-balance sheet credit | |||||||||
instruments (4) | |||||||||
Committed and uncommitted (5) | $ 487,142 | 57% | $ 282,907 | 34% | $ 51,516 | 6% | $ 27,615 | 3% | $ 849,180 |
Other | 82,910 | 48% | 67,322 | 39% | 18,162 | 11% | 3,145 | 2% | 171,539 |
$ 570,052 | 56% | $ 350,229 | 34% | $ 69,678 | 7% | $ 30,760 | 3% | $ 1,020,719 | |
(1)
Includes Assets purchased under reverse repurchase agreements and securities borrowed and Loans. The largest concentrations in Canada are Ontario at 54%
(October 31, 2024 – 57%), Alberta, Saskatchewan and Manitoba at 15% (October 31, 2024 – 13%), British Columbia and the territories at 17% (October 31, 2024 – 16%) and
Quebec at 10% (October 31, 2024 – 10%). No industry accounts for more than 20% (October 31, 2024 – 20%) of total on-balance sheet credit instruments, with the
exception of Banking, which accounted for 22% (October 31, 2024 – 24%), and Government, which accounted for 31% (October 31, 2024 – 28%). The classification of our
sectors aligns with our view of credit risk by industry.
(2)
A further breakdown of our derivative exposures by risk rating and counterparty type is provided in Note 9.
(3)
Excludes valuation adjustments determined on a pooled basis.
(4)
Balances presented are contractual amounts representing our maximum exposure to credit risk.
(5)
Represents our maximum exposure to credit risk. Retail and wholesale commitments respectively comprise 43% and 57% of our total commitments (October 31, 2024 –
40% and 60%). The largest concentrations in the wholesale portfolio relate to Financial services at 17% (October 31, 2024 – 14%), Real estate and related at 12%
(October 31, 2024 – 12%), Investments at 10% (October 31, 2024 – 10%), Utilities at 8% (October 31, 2024 – 10%), and Other services at 9% (October 31, 2024 – 7%). The
236
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Capital management
Regulatory capital and capital ratios
OSFI formally establishes risk-based capital and leverage minimums and Total Loss Absorbing Capacity (TLAC) ratios for
deposit-taking institutions in Canada. We are required to calculate our capital ratios using the Basel III framework. Under Basel
III, regulatory capital includes Common Equity Tier 1 (CET1), Tier 1 and Tier 2 capital. CET1 capital mainly consists of common
shares, retained earnings and other components of equity. Regulatory adjustments under Basel III include deductions of
goodwill and other intangibles, certain deferred tax assets, defined benefit pension fund assets, investments in banking,
financial and insurance entities, the shortfall of provisions to expected losses, prudential valuation adjustments, prepaid
portfolio insurance assets, non-payment and non-delivery of trades and equity investment in funds subject to the fall-back
approach. Tier 1 capital comprises predominantly CET1 and Additional Tier 1 items including non-cumulative preferred shares
and LRCNs that meet certain criteria. Tier 2 capital includes subordinated debentures that meet certain criteria, certain loan
loss allowances and non-controlling interests in subsidiaries’ Tier 2 instruments. Total capital is the sum of Tier 1 and Tier 2
capital. TLAC available is defined as the sum of Total capital and external TLAC instruments. External TLAC instruments
comprise predominantly senior bail-in debt, which includes eligible senior unsecured debt with an original term to maturity of
greater than 400 days and remaining term to maturity of greater than 365 days.
Regulatory capital ratios are calculated by dividing CET1, Tier 1, Total capital and TLAC available by risk-weighted assets.
The leverage ratio is calculated by dividing Tier 1 capital by an exposure measure. The exposure measure consists of total assets
(excluding items deducted from Tier 1 capital) and certain off-balance sheet items converted into credit exposure equivalents.
Adjustments are also made to derivatives and secured financing transactions to reflect credit and other risks. The TLAC leverage
ratio is calculated by dividing TLAC available by the leverage ratio exposure.
During 2025 and 2024, we complied with all applicable capital, leverage and TLAC requirements, including the domestic stability
buffer, imposed by OSFI.
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars, except percentage amounts) | 2025 | 2024 |
Capital (1) | ||
CET1 capital | $ 98,748 | $ 88,936 |
Tier 1 capital | 110,393 | 97,952 |
Total capital | 122,399 | 110,487 |
Risk-weighted assets (RWA) used in calculation of capital ratios (1) | ||
Credit risk | $ 590,306 | $ 548,809 |
Market risk | 41,506 | 33,930 |
Operational risk | 98,413 | 89,543 |
Total RWA | $ 730,225 | $ 672,282 |
Capital ratios and Leverage ratio (1) | ||
CET1 ratio | 13.5% | 13.2% |
Tier 1 capital ratio | 15.1% | 14.6% |
Total capital ratio | 16.8% | 16.4% |
Leverage ratio | 4.4% | 4.2% |
Leverage ratio exposure | $ 2,491,090 | $ 2,344,228 |
TLAC available and ratios (2) | ||
TLAC available | $ 230,385 | $ 196,659 |
TLAC ratio | 31.5% | 29.3% |
TLAC leverage ratio | 9.2% | 8.4% |
(1)
Capital, RWA and capital ratios are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline and the Leverage ratio is calculated using OSFI’s Leverage
Requirements (LR) guideline. Both the CAR guideline and LR guideline are based on the Basel III framework.
(2)
TLAC available and TLAC ratios are calculated using OSFI’s TLAC guideline. The TLAC standard is applied at the resolution entity level which for us is deemed to be Royal
Bank of Canada and its subsidiaries. A resolution entity and its subsidiaries are collectively called a resolution group. The TLAC ratio and TLAC leverage ratio are
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
237
Offsetting financial assets and financial liabilities
Offsetting within our Consolidated Balance Sheets may be achieved where financial assets and liabilities are subject to master
netting arrangements that provide the currently enforceable right of offset and where there is an intention to settle on a net
basis or realize the assets and settle the liabilities simultaneously. For derivative contracts and repurchase and reverse
repurchase arrangements, this is generally achieved when there is a market mechanism for settlement (e.g., central
counterparty exchange or clearing house) which provides daily net settlement of cash flows arising from these contracts. Margin
receivables and margin payables are generally offset as they settle simultaneously through a market settlement mechanism.
Amounts that do not qualify for offsetting include master netting arrangements that only permit outstanding transactions
with the same counterparty to be offset in an event of default or occurrence of other predetermined events. Such master netting
arrangements include the International Swaps and Derivatives Association Master Agreement or certain derivative exchange or
clearing counterparty agreements for derivative contracts, global master repurchase agreements and global master securities
lending agreements for repurchase, reverse repurchase and other similar secured lending and borrowing arrangements.
The amount of financial collateral received or pledged subject to master netting arrangements or similar agreements that
do not qualify for offsetting refers to the collateral received or pledged to cover the net exposure between counterparties by
enabling the collateral to be realized in an event of default or the occurrence of other predetermined events. Certain amounts of
collateral are restricted from being sold or re-pledged unless there is an event of default or the occurrence of other
predetermined events.
The following tables provide the financial instrument amounts that have been offset on the Consolidated Balance Sheets
and the amounts that do not qualify for offsetting but are subject to enforceable master netting arrangements or similar
agreements. The amounts presented are not intended to represent our actual exposure to credit risk.
Financial instruments subject to enforceable master netting arrangements or similar agreements
| As at October 31, 2025 | ||||||||
| Amounts subject to enforceable netting arrangements | ||||||||
| Related amounts not | ||||||||
offset on the Consolidated | ||||||||
| Balance Sheets (1) | ||||||||
Amounts not | Net amounts | |||||||
Gross amounts | Gross amounts | Net amounts | Impact of | subject to | presented | |||
of recognized | offset on the | presented in the | master | enforceable | on the | |||
financial | Consolidated | Consolidated | netting | Financial | netting | Consolidated | ||
(Millions of Canadian dollars) | instruments | Balance Sheets | Balance Sheets | agreements | collateral (2) | Net amounts | arrangements | Balance Sheets |
Financial assets | ||||||||
Assets purchased under reverse | ||||||||
repurchase agreements and | ||||||||
securities borrowed | $ 467,653 | $ 157,970 | $ 309,683 | $ 101 | $ 308,751 | $ 831 | $ – | $ 309,683 |
Derivative assets | 173,512 | 2,067 | 171,445 | 127,728 | 19,425 | 24,292 | 5,761 | 177,206 |
Other financial assets | 2,364 | 540 | 1,824 | 30 | 382 | 1,412 | – | 1,824 |
$ 643,529 | $ 160,577 | $ 482,952 | $ 127,859 | $ 328,558 | $ 26,535 | $ 5,761 | $ 488,713 | |
Financial liabilities | ||||||||
Obligations related to assets sold | ||||||||
under repurchase agreements | ||||||||
and securities loaned | $ 447,486 | $ 157,970 | $ 289,516 | $ 101 | $ 287,612 | $ 1,803 | $ – | $ 289,516 |
Derivative liabilities | 172,461 | 2,067 | 170,394 | 127,728 | 23,520 | 19,146 | 13,559 | 183,953 |
Other financial liabilities | 1,457 | 540 | 917 | 30 | – | 887 | – | 917 |
$ 621,404 | $ 160,577 | $ 460,827 | $ 127,859 | $ 311,132 | $ 21,836 | $ 13,559 | $ 474,386 | |
| As at October 31, 2024 | ||||||||
| Amounts subject to enforceable netting arrangements | ||||||||
Related amounts not | ||||||||
offset on the Consolidated | ||||||||
Balance Sheets (1) | ||||||||
Amounts not | Net amounts | |||||||
Gross amounts | Gross amounts | Net amounts | Impact of | subject to | presented | |||
of recognized | offset on the | presented in the | master | enforceable | on the | |||
financial | Consolidated | Consolidated | netting | Financial | netting | Consolidated | ||
(Millions of Canadian dollars) | instruments | Balance Sheets | Balance Sheets | agreements | collateral (2) | Net amounts | arrangements | Balance Sheets |
Financial assets | ||||||||
Assets purchased under reverse | ||||||||
repurchase agreements and | ||||||||
securities borrowed | $ 495,881 | $ 145,078 | $ 350,803 | $ 112 | $ 349,044 | $ 1,647 | $ – | $ 350,803 |
Derivative assets | 145,420 | 1,568 | 143,852 | 105,433 | 16,806 | 21,613 | 6,760 | 150,612 |
Other financial assets | 2,940 | 527 | 2,413 | 58 | 288 | 2,067 | – | 2,413 |
$ 644,241 | $ 147,173 | $ 497,068 | $ 105,603 | $ 366,138 | $ 25,327 | $ 6,760 | $ 503,828 | |
Financial liabilities | ||||||||
Obligations related to assets sold | ||||||||
under repurchase agreements | ||||||||
and securities loaned | $ 450,399 | $ 145,078 | $ 305,321 | $ 112 | $ 302,779 | $ 2,430 | $ – | $ 305,321 |
Derivative liabilities | 151,564 | 1,568 | 149,996 | 105,433 | 17,727 | 26,836 | 13,767 | 163,763 |
Other financial liabilities | 1,941 | 527 | 1,414 | 58 | – | 1,356 | – | 1,414 |
$ 603,904 | $ 147,173 | $ 456,731 | $ 105,603 | $ 320,506 | $ 30,622 | $ 13,767 | $ 470,498 | |
(1)
Financial collateral is reflected at fair value. The financial instrument amounts and financial collateral disclosed are limited to the net balance sheet exposure, and any
over-collateralization is excluded from the table.
(2)
Includes cash collateral of $16 billion (October 31, 2024 – $14 billion) and non-cash collateral of $312 billion (October 31, 2024 – $352 billion) received for financial assets
238
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Note 30
Recovery and settlement of on-balance sheet assets and liabilities
The table below presents an analysis of assets and liabilities recorded on our Consolidated Balance Sheets by amounts to be
recovered or settled within one year and after one year, as at the balance sheet date, based on contractual maturities and certain
other assumptions outlined in the footnotes below. As warranted, we manage the liquidity risk of various products based on
historical behavioural patterns that are often not aligned with contractual maturities. Amounts to be recovered or settled within one
year, as presented below, may not be reflective of our long-term view of the liquidity profile of certain balance sheet categories.
| As at | ||||||
| October 31, 2025 | October 31, 2024 | |||||
Within one | After one | Within one | After one | |||
(Millions of Canadian dollars) | year | year | Total | year | year | Total |
Assets | ||||||
Cash and due from banks (1) | $ 35,136 | $ 1,888 | $ 37,024 | $ 55,003 | $ 1,720 | $ 56,723 |
Interest-bearing deposits with | ||||||
banks | 50,364 | – | 50,364 | 66,020 | – | 66,020 |
Securities | ||||||
Trading (2) | 204,063 | 15,004 | 219,067 | 170,460 | 12,840 | 183,300 |
Investment, net of applicable | ||||||
allowance | 70,438 | 272,283 | 342,721 | 45,418 | 211,200 | 256,618 |
Assets purchased under reverse | ||||||
repurchase and securities | ||||||
borrowed | 309,632 | 51 | 309,683 | 350,622 | 181 | 350,803 |
Loans | ||||||
Retail | 200,928 | 451,416 | 652,344 | 174,761 | 452,217 | 626,978 |
Wholesale | 98,494 | 298,677 | 397,171 | 89,492 | 270,947 | 360,439 |
Allowance for loan losses | (7,093) | (6,037) | ||||
Other | ||||||
Derivatives (2) | 174,943 | 2,263 | 177,206 | 148,605 | 2,007 | 150,612 |
Premises and equipment | 109 | 6,710 | 6,819 | 156 | 6,696 | 6,852 |
Goodwill | – | 19,405 | 19,405 | – | 19,286 | 19,286 |
Other intangibles | – | 7,402 | 7,402 | – | 7,798 | 7,798 |
Other assets | 90,520 | 22,373 | 112,893 | 69,287 | 22,903 | 92,190 |
$ 1,234,627 | $ 1,097,472 | $ 2,325,006 | $ 1,169,824 | $ 1,007,795 | $ 2,171,582 | |
Liabilities | ||||||
Deposits (3) | $ 1,244,662 | $ 270,954 | $ 1,515,616 | $ 1,144,860 | $ 264,671 | $ 1,409,531 |
Other | ||||||
Obligations related to securities | ||||||
sold short | 49,241 | 650 | 49,891 | 32,824 | 2,462 | 35,286 |
Obligations related to assets sold | ||||||
under repurchase agreements | ||||||
and securities loaned | 287,844 | 1,672 | 289,516 | 304,855 | 466 | 305,321 |
Derivatives (2) | 182,415 | 1,538 | 183,953 | 158,622 | 5,141 | 163,763 |
Insurance contract liabilities (4) | 382 | 23,945 | 24,327 | 459 | 21,772 | 22,231 |
Other liabilities | 73,000 | 35,591 | 108,591 | 70,499 | 24,213 | 94,712 |
Subordinated debentures | 2,091 | 11,870 | 13,961 | – | 13,546 | 13,546 |
$ 1,839,635 | $ 346,220 | $ 2,185,855 | $ 1,712,119 | $ 332,271 | $ 2,044,390 | |
(1)
Cash and due from banks are assumed to be recovered within one year, except for cash balances not available for use by the Bank beyond one year.
(2)
Trading securities classified as FVTPL and trading derivatives are presented as within one year as this best represents in most instances the short-term nature of our
trading activities, except for debt securities relating to the Insurance segment which are presented based on contractual maturity. Trading securities designated as
FVTPL are generally presented based on contractual maturity. Non-trading derivatives are presented according to the recovery or settlement of the hedging transaction.
(3)
Demand deposits of $673 billion (October 31, 2024 – $585 billion) are presented as within one year due to their being repayable on demand or at short notice on a
contractual basis. In practice, these deposits relate to a broad range of individuals and customer-types which form a stable base for our operations and liquidity needs.
(4)
Insurance contract liabilities reflect the estimated timing of when settlement of those amounts are expected to occur. The amounts payable on demand relating to
policyholders’ cash and/or account values for insurance contract liabilities, including segregated fund insurance contract liabilities, is $8 billion (October 31, 2024 –
$8 billion).
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
239
Parent company information
The following table presents information regarding the legal entity of Royal Bank of Canada with its subsidiaries presented on
an equity accounted basis.
Condensed Balance Sheets
As at | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Assets | ||
Cash and due from banks | $ 24,132 | $ 40,944 |
Interest-bearing deposits with banks | 40,455 | 54,009 |
Securities | 311,972 | 233,376 |
Investments in bank subsidiaries and associated companies (1) | 67,055 | 57,926 |
Investments in other subsidiaries and associated companies | 122,842 | 117,362 |
Assets purchased under reverse repurchase agreements and securities borrowed | 155,843 | 174,131 |
Loans, net of allowance for loan losses | 887,465 | 839,424 |
Net balances due from bank subsidiaries (1) | – | 97 |
Other assets | 259,121 | 216,003 |
$ 1,868,885 | $ 1,733,272 | |
Liabilities and shareholders’ equity | ||
Deposits | $ 1,261,032 | $ 1,168,765 |
Net balances due to bank subsidiaries (1) | 16,320 | – |
Net balances due to other subsidiaries | 15,050 | 17,840 |
Other liabilities | 423,430 | 406,032 |
1,715,832 | 1,592,637 | |
Subordinated debentures | 13,961 | 13,546 |
Shareholders’ equity | 139,092 | 127,089 |
$ 1,868,885 | $ 1,733,272 | |
(1)
Bank refers primarily to regulated deposit-taking institutions and securities firms.
Condensed Statements of Income and Comprehensive Income
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Interest and dividend income (1) | $ 70,321 | $ 70,603 |
Interest expense | 53,966 | 57,094 |
Net interest income | 16,355 | 13,509 |
Non-interest income (2) | 8,916 | 5,080 |
Total revenue | 25,271 | 18,589 |
Provision for credit losses | 4,039 | 2,964 |
Non-interest expense | 14,234 | 13,543 |
Income before income taxes | 6,998 | 2,082 |
Income taxes | 2,526 | 1,031 |
Net income before equity in undistributed income of subsidiaries | 4,472 | 1,051 |
Equity in undistributed income of subsidiaries | 15,890 | 15,179 |
Net income | $ 20,362 | $ 16,230 |
Other comprehensive income (loss), net of taxes | 772 | 597 |
Total comprehensive income | $ 21,134 | $ 16,827 |
(1)
Includes dividend income from investments in subsidiaries and associated companies of $1 million (October 31, 2024 – $9 million).
(2)
Includes a nominal share of income (loss) from associated companies (October 31, 2024 – nominal).
(continued)
Note 31
Parent company information
240
Royal Bank of Canada: Annual Report 2025
Consolidated Financial Statements
Condensed Statements of Cash Flows
For the year ended | ||
October 31 | October 31 | |
(Millions of Canadian dollars) | 2025 | 2024 |
Cash flows from operating activities | ||
Net income | $ 20,362 | $ 16,230 |
Adjustments to determine net cash from operating activities: | ||
Change in undistributed earnings of subsidiaries | (15,890) | (15,179) |
Change in deposits | 92,267 | 77,327 |
Change in loans | (49,013) | (56,572) |
Change in trading securities | (26,471) | 3,162 |
Change in obligations related to assets sold under repurchase agreements and securities | ||
loaned | (26,361) | (2,860) |
Change in assets purchased under reverse repurchase agreements and securities borrowed | 18,288 | (24,203) |
Change in obligations related to securities sold short | 14,955 | (1,721) |
Other operating activities, net | (9,112) | (2,565) |
Net cash from (used in) operating activities | 19,025 | (6,381) |
Cash flows from investing activities | ||
Change in interest-bearing deposits with banks | 13,554 | 7,247 |
Proceeds from sales and maturities of investment securities | 150,541 | 167,772 |
Purchases of investment securities | (202,133) | (152,935) |
Net acquisitions of premises and equipment and other intangibles | (1,842) | (1,277) |
Cash used in an acquisition, net of cash acquired | – | (12,872) |
Change in cash invested in subsidiaries | (643) | 1,252 |
Change in net funding provided to subsidiaries | 13,627 | (166) |
Net cash from (used in) investing activities | (26,896) | 9,021 |
Cash flows from financing activities | ||
Issuance of subordinated debentures | 2,991 | 3,239 |
Repayment of subordinated debentures | (2,750) | (1,500) |
Issue of common shares, net of issuance costs | 72 | 159 |
Common shares purchased for cancellation | (2,768) | (140) |
Issue of preferred shares and other equity instruments, net of issuance costs | 4,945 | 2,702 |
Redemption of preferred shares and other equity instruments | (2,350) | (1,021) |
Dividends paid on shares and distributions paid on other equity instruments | (8,800) | (6,637) |
Repayment of lease liabilities | (281) | (268) |
Net cash from (used in) financing activities | (8,941) | (3,466) |
Net change in cash and due from banks | (16,812) | (826) |
Cash and due from banks at beginning of year | 40,944 | 41,770 |
Cash and due from banks at end of year | $ 24,132 | $ 40,944 |
Supplemental disclosure of cash flow information | ||
Amount of interest paid | $ 53,560 | $ 55,119 |
Amount of interest received | 65,880 | 67,857 |
Amount of dividends received | 3,388 | 2,869 |
Amount of income taxes paid | 2,599 | 504 |
Consolidated Financial Statements
Royal Bank of Canada: Annual Report 2025
241
Principal subsidiaries
(Millions of Canadian dollars) | As at October 31, 2025 | |
Carrying value of | ||
voting shares owned | ||
Principal subsidiaries (1) | Principal office address (2) | by the Bank (3) |
Royal Bank Holding Inc. | Toronto, Ontario, Canada | $ 103,027 |
RBC Direct Investing Inc. | Toronto, Ontario, Canada | |
RBC Insurance Holdings Inc. | Mississauga, Ontario, Canada | |
RBC Life Insurance Company | Mississauga, Ontario, Canada | |
Investment Holdings (Cayman) Limited | George Town, Grand Cayman, Cayman Islands | |
RBC (Cayman) Funding Ltd. | George Town, Grand Cayman, Cayman Islands | |
Capital Funding Alberta Limited | Calgary, Alberta, Canada | |
RBC Global Asset Management Inc. | Toronto, Ontario, Canada | |
RBC Investor Services Trust | Toronto, Ontario, Canada | |
RBC (Barbados) Trading Bank Corporation | St. James, Barbados | |
RBC US Group Holdings LLC (2) | Toronto, Ontario, Canada | 38,425 |
RBC USA Holdco Corporation | New York, New York, U.S. | |
RBC Capital Markets, LLC | New York, New York, U.S. | |
City National Bank | Los Angeles, California, U.S. | |
RBC Dominion Securities Limited | Toronto, Ontario, Canada | 19,306 |
RBC Dominion Securities Inc. | Toronto, Ontario, Canada | |
Royal Bank Mortgage Corporation | Toronto, Ontario, Canada | 7,420 |
RBC Europe Limited | London, England | 5,822 |
The Royal Trust Company | Montreal, Quebec, Canada | 1,782 |
Royal Trust Corporation of Canada | Toronto, Ontario, Canada | 785 |
(1)
The Bank directly or indirectly controls each subsidiary.
(2)
Each subsidiary is incorporated or organized under the laws of the state, province or country in which the principal office is situated, except for RBC US Group Holdings
LLC and RBC USA Holdco Corporation, which are incorporated under the laws of the State of Delaware, U.S.; RBC Capital Markets, LLC, which is organized under the laws
of the State of Minnesota, U.S.; and City National Bank, which is a national bank, chartered under the laws of the United States of America.
(3)
The carrying value of voting shares is stated as the Bank’s equity in such investments.
Certain of our subsidiaries, joint ventures and associates are subject to regulatory requirements of the jurisdictions in which
they operate. When these subsidiaries, joint ventures and associates are subject to such requirements, they may be restricted
from transferring to us our share of their assets in the form of cash dividends, loans or advances. As at October 31, 2025,
242
Royal Bank of Canada: Annual Report 2025
Ten-Year Statistical Review
Ten-Year Statistical Review
Condensed Balance Sheets
(Millions of Canadian dollars) (1) | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Assets | ||||||||||
Cash and due from banks | $ 37,024 | $ 56,723 | $ 61,989 | $ 72,397 | $ 113,846 | $ 118,888 | $ 26,310 | $ 30,209 | $ 28,407 | $ 14,929 |
Interest-bearing deposits with banks | 50,364 | 66,020 | 71,086 | 108,011 | 79,638 | 39,013 | 38,345 | 36,471 | 32,662 | 27,851 |
Securities, net of applicable allowance | 561,788 | 439,918 | 409,730 | 318,223 | 284,724 | 275,814 | 249,004 | 222,866 | 218,379 | 236,093 |
Assets purchased under reverse repurchase | ||||||||||
agreements and securities borrowed | 309,683 | 350,803 | 340,191 | 317,845 | 307,903 | 313,015 | 306,961 | 294,602 | 220,977 | 186,302 |
Loans, net of allowance | 1,042,422 | 981,380 | 852,773 | 819,965 | 717,575 | 660,992 | 618,856 | 576,818 | 542,617 | 521,604 |
Other | 323,725 | 276,738 | 270,762 | 280,778 | 202,637 | 216,826 | 189,459 | 173,768 | 169,811 | 193,479 |
Total assets | $2,325,006 | $2,171,582 | $2,006,531 | $1,917,219 | $1,706,323 | $1,624,548 | $1,428,935 | $1,334,734 | $1,212,853 | $1,180,258 |
Liabilities | ||||||||||
Deposits (2) | $1,515,616 | $1,409,531 | $1,231,687 | $1,208,814 | $1,100,831 | $1,011,885 | $ 886,005 | $ 836,197 | $ 789,036 | $ 757,589 |
Other (2) | 656,278 | 621,313 | 648,311 | 590,205 | 497,137 | 516,029 | 449,490 | 409,451 | 340,124 | 341,295 |
Subordinated debentures | 13,961 | 13,546 | 11,386 | 10,025 | 9,593 | 9,867 | 9,815 | 9,131 | 9,265 | 9,762 |
Total liabilities | $2,185,855 | $2,044,390 | $1,891,384 | $1,809,044 | $1,607,561 | $1,537,781 | $1,345,310 | $1,254,779 | $1,138,425 | $1,108,646 |
Equity attributable to shareholders | 139,092 | 127,089 | 115,048 | 108,064 | 98,667 | 86,664 | 83,523 | 79,861 | 73,829 | 71,017 |
Non-controlling interest | 59 | 103 | 99 | 111 | 95 | 103 | 102 | 94 | 599 | 595 |
Total equity | 139,151 | 127,192 | 115,147 | 108,175 | 98,762 | 86,767 | 83,625 | 79,955 | 74,428 | 71,612 |
Total liabilities and equity | $2,325,006 | $2,171,582 | $2,006,531 | $1,917,219 | $1,706,323 | $1,624,548 | $1,428,935 | $1,334,734 | $1,212,853 | $1,180,258 |
Condensed Income Statements | ||||||||||
(Millions of Canadian dollars) (1) | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Net interest income (2) | $ 33,000 | $ 27,953 | $ 25,129 | $ 22,717 | $ 20,002 | $ 20,835 | $ 19,749 | $ 17,952 | $ 16,926 | $ 16,531 |
Non-interest income (2) | 33,605 | 29,391 | 26,335 | 26,268 | 29,691 | 26,346 | 26,253 | 24,624 | 23,743 | 22,264 |
Total revenue | 66,605 | 57,344 | 51,464 | 48,985 | 49,693 | 47,181 | 46,002 | 42,576 | 40,669 | 38,795 |
Provision for credit losses | 4,362 | 3,232 | 2,468 | 484 | (753) | 4,351 | 1,864 | 1,307 | 1,150 | 1,546 |
Insurance policyholder benefits, claims and | ||||||||||
acquisition expense | n.a. | n.a. | n.a. | 1,783 | 3,891 | 3,683 | 4,085 | 2,676 | 3,053 | 3,424 |
Non-interest expense | 36,592 | 34,250 | 30,813 | 26,609 | 25,924 | 24,758 | 24,139 | 22,833 | 21,794 | 20,526 |
Net income | $ 20,369 | $ 16,240 | $ 14,612 | $ 15,807 | $ 16,050 | $ 11,437 | $ 12,871 | $ 12,431 | $ 11,469 | $ 10,458 |
Other Statistics – reported | ||||||||||
(Millions of Canadian dollars, except | ||||||||||
percentages and per share amounts) (1) | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
PROFITABILITY MEASURES | ||||||||||
Earnings per shares – basic | $ 14.10 | $ 11.27 | $ 10.33 | $ 11.08 | $ 11.08 | $ 7.84 | $ 8.78 | $ 8.39 | $ 7.59 | $ 6.80 |
– diluted | $ 14.07 | $ 11.25 | $ 10.32 | $ 11.06 | $ 11.06 | $ 7.82 | $ 8.75 | $ 8.36 | $ 7.56 | $ 6.78 |
Return on common equity (3) | 16.3% | 14.4% | 14.3% | 16.4% | 18.6% | 14.2% | 16.8% | 17.6% | 17.0% | 16.3% |
Return on risk-weighted assets | 2.84% | 2.52% | 2.44% | 2.68% | 2.90% | 2.10% | 2.52% | 2.55% | 2.49% | 2.34% |
Efficiency ratio | 54.9% | 59.7% | 59.9% | 54.3% | 52.2% | 52.5% | 52.5% | 53.6% | 53.6% | 52.9% |
KEY RATIOS | ||||||||||
PCL on impaired loans as a % of average | ||||||||||
net loans and acceptances (4) | 0.37% | 0.28% | 0.21% | 0.10% | 0.10% | 0.24% | 0.27% | 0.20% | 0.21% | 0.28% |
Net interest margin | ||||||||||
(average earning assets, net) (2), (4) | 1.62% | 1.54% | 1.50% | 1.48% | 1.48% | 1.55% | 1.61% | 1.64% | 1.69% | 1.70% |
SHARE INFORMATION | ||||||||||
Common shares outstanding (000s) – | ||||||||||
end of period | 1,400,114 | 1,414,504 | 1,400,511 | 1,382,911 | 1,424,525 | 1,422,473 | 1,430,096 | 1,438,794 | 1,452,535 | 1,484,235 |
Dividends declared per common share | $ 6.04 | $ 5.60 | $ 5.34 | $ 4.96 | $ 4.32 | $ 4.29 | $ 4.07 | $ 3.77 | $ 3.48 | $ 3.24 |
Dividend yield (5) | 3.4% | 3.9% | 4.3% | 3.7% | 3.8% | 4.7% | 4.1% | 3.7% | 3.8% | 4.3% |
Dividend payout ratio | 43% | 50% | 52% | 45% | 39% | 55% | 46% | 45% | 46% | 48% |
Book value per share (6) | $ 91.00 | $ 83.46 | $ 76.92 | $ 72.85 | $ 64.57 | $ 56.75 | $ 54.41 | $ 51.12 | $ 46.41 | $ 43.32 |
Common share price (RY on TSX) (7) | $ 205.47 | $ 168.39 | $ 110.76 | $ 126.05 | $ 128.82 | $ 93.16 | $ 106.24 | $ 95.92 | $ 100.87 | $ 83.80 |
Market capitalization (TSX) (7) | 287,681 | 238,188 | 155,121 | 174,316 | 183,507 | 132,518 | 151,933 | 138,009 | 146,554 | 124,476 |
Market price to book value | 2.26 | 2.02 | 1.44 | 1.73 | 2.00 | 1.64 | 1.95 | 1.88 | 2.17 | 1.93 |
CAPITAL MEASURES – CONSOLIDATED (8) | ||||||||||
Common Equity Tier 1 capital ratio | 13.5% | 13.2% | 14.5% | 12.6% | 13.7% | 12.5% | 12.1% | 11.5% | 10.9% | 10.8% |
Tier 1 capital ratio | 15.1% | 14.6% | 15.7% | 13.8% | 14.9% | 13.5% | 13.2% | 12.8% | 12.3% | 12.3% |
Total capital ratio | 16.8% | 16.4% | 17.6% | 15.4% | 16.7% | 15.5% | 15.2% | 14.6% | 14.2% | 14.4% |
Leverage ratio | 4.4% | 4.2% | 4.3% | 4.4% | 4.9% | 4.8% | 4.3% | 4.4% | 4.4% | 4.4% |
TLAC ratio | 31.5% | 29.3% | 31.0% | 26.4% | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
TLAC leverage ratio | 9.2% | 8.4% | 8.5% | 8.5% | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
(1)
On March 28, 2024, we completed the acquisition of HSBC Bank Canada (HSBC Canada). HSBC Canada results have been consolidated from the closing date. Effective
November 1, 2023, we adopted IFRS 17
Insurance Contracts
retrospectively and restated the results for the year ended October 31, 2023. Results from years prior to
November 1, 2022 are reported in accordance with IFRS 4
Insurance Contracts
. Effective November 1, 2019, we adopted IFRS 16
Leases
. Results from years prior to
November 1, 2019 are reported in accordance with IAS 17
Leases
. Effective November 1, 2018, we adopted IFRS 15
Revenue from Contracts with Customers
. Results from
years prior to November 1, 2018 are reported in accordance with IAS 18
Revenue
. Effective November 1, 2017, we adopted IFRS 9
Financial Instruments
(IFRS 9). Results
from years prior to November 1, 2017 are reported in accordance with IAS 39
Financial Instruments: Recognition and Measurement
(IAS 39).
(2)
Commencing the fourth quarter of 2019, the interest component and the accrued interest payable recorded on certain deposits carried at FVTPL previously presented in
trading revenue and deposits, respectively are presented in net interest income and other liabilities respectively. As at November 1, 2016, comparative amounts have
been reclassified to conform with this presentation.
(3)
This measure may not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed
by other financial institutions. For further details, refer to the Key performance and non-GAAP measures section of the MD&A.
(4)
Average amounts are calculated using methods intended to approximate the average of the daily balances for the period.
(5)
Defined as dividends per common share divided by the average of the high and low share price in the relevant period.
(6)
Calculated as common equity divided by the number of common shares outstanding at the end of the period.
(7)
Based on TSX closing market price at period-end.
(8)
Capital ratios are calculated using OSFI’s CAR guideline, the Leverage ratio is calculated using OSFI’s LR guideline and both the TLAC and TLAC leverage ratios are
calculated using OSFI’s TLAC guideline. The results for the year ended October 31, 2023 reflect our adoption of the revised CAR and LR guidelines as part of OSFI’s
implementation of the Basel III reforms. The results for the year ended October 31, 2024 reflect our adoption of the revised market risk and CVA frameworks. The results for
years ended prior to October 31, 2024 were not restated for the adoption of IFRS 17. For further details, refer to the Capital management section of the MD&A.
n.a.
not applicable
Shareholder Information
Corporate headquarters
Street address:
Royal Bank of Canada
200 Bay Street
Toronto, Ontario M5J 2J5
Canada
Tel: 1-888-212-5533
Mailing address:
P.O. Box 1
Royal Bank Plaza
Toronto, Ontario M5J 2J5
Canada
website: rbc.com
Transfer Agent and Registrar
Main Agent:
Computershare Trust Company of
Canada
320 Bay Street, 14th Floor
Toronto, Ontario M5H 4A6
Canada
Tel: 1-866-586-7635 (Canada and the
U.S.) or 514-982-7555
(International)
Fax: 1-888-453-0330 (Canada and
the U.S.) or 416-263-9394
(International)
website: www.investorcentre.com/rbc
email: rbc@computershare.com
Co-Transfer Agent (U.S.):
Computershare Trust
Company, N.A.
150 Royall Street, Suite 101
Canton, Massachusetts 02021
U.S.A.
Co-Transfer Agent (U.K.):
Computershare Investor
Services PLC
Securities Services – Registrars
P.O. Box 82, The Pavilions,
Bridgwater Road,
Bristol BS99 6ZZ
U.K.
Stock exchange listings
(Symbol: RY)
Common shares are listed on:
Canada – Toronto Stock
Exchange (TSX)
U.S. – New York Stock Exchange
(NYSE)
Preferred shares BH
1
, BI
1
and BO
are listed on the TSX.
Valuation day price
For Canadian income tax purposes,
Royal Bank of Canada’s common
stock was quoted at $29.52 per share
on the Valuation Day (December 22,
1971). This is equivalent to $7.38 per
share after adjusting for the
two-for-one stock split of March 1981
and the two-for-one stock split of
February 1990. The one-for-one stock
dividends in October 2000 and April
2006 did not affect the Valuation Day
amount for our common shares.
Shareholder contacts
For dividend information, change in
share registration or address, lost
stock certificates, tax forms, estate
transfers, direct registration or
dividend reinvestment, please
contact: Computershare Trust
Company of Canada
320 Bay Street, 14th Floor
Toronto, Ontario M5H 4A6 Canada
Tel: 1-866-586-7635 (Canada and the
U.S.) or 514-982-7555 (International)
Fax: 1-888-453-0330 (Canada and the
U.S.) or 416-263-9394 (International)
email: rbc@computershare.com
Financial analysts, portfolio
managers, institutional investors
For financial information inquiries,
please contact:
Investor Relations
Royal Bank of Canada
200 Bay Street
South Tower
Toronto, Ontario M5J 2J5
Canada
email: invesrel@rbc.com
or visit our website at
rbc.com/investorrelations
Direct deposit service
Shareholders in Canada and
the U.S. may have their
common share dividends
deposited directly to their
bank account by electronic
funds transfer. To arrange for
this service, please contact
our Transfer Agent and
Registrar, Computershare
Trust Company of Canada.
International shareholders
(other than holders in the
U.S. or Canada) may be able
to receive their dividend
and/or distribution payments
in the currency of their
choice. Computershare
offers an International
Currency Exchange service
that enables RBC’s
international shareholders to
receive their dividend and/or
distribution payments in the
currency of their choice.
Please refer to
investorcentre.com/rbc.
Eligible dividend designation
For purposes of the
Income Tax
Act
(Canada) and any
corresponding provincial and
territorial tax legislation, all
dividends (and deemed
dividends) paid by RBC to
Canadian residents on both its
common and preferred shares,
are designated as “eligible
dividends”, unless stated
otherwise.
Common share repurchases
We are engaged in a normal
course issuer bid (NCIB) which
allows us to repurchase for
cancellation up to 35 million
common shares during the
period spanning from June 12,
2025 to June 11, 2026, when the
bid expires or such earlier date
as we may complete the
purchases pursuant to our
notice of intention filed with the
TSX.
We determine the amount and
timing of the purchases under the
NCIB, subject to prior consultation
with the Office of the
Superintendent of Financial
Institutions Canada. For further
details, refer to the Capital
management section.
A copy of our notice of intention to
file a NCIB may be obtained,
without charge, by contacting our
Corporate Secretary at our
Toronto mailing address.
2026 Quarterly earnings release
dates
First quarter
February 26
Second quarter
May 28
Third quarter
August 27
Fourth quarter
December 3
2026 Annual Meeting
The Annual Meeting of Common
Shareholders will be held on
Thursday, April 9, 2026.
Dividend dates for 2025
Subject to approval by the Board of Directors
Record
dates
Payment
dates
Common and preferred shares
series BH
1
, BI
1
and BO
January 27
April 24
July 24
October 27
February 24
May 23
August 22
November 24
Preferred shares series BT
February 17
August 15
February 24
August 22
Preferred shares series BU
February 17
August 15
February 24
August 22
Preferred shares series BW
May 16
November 17
May 23
November 24
Governance
Summaries of the significant ways in which corporate governance
practices followed by RBC differ from corporate governance practices
required to be followed by U.S. domestic companies under the NYSE
listing standards are available on our website at rbc.com/governance.
1
On October 24, 2025, we announced our intention to redeem all of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BH and
Series BI. The final dividend for the Series BH and Series BI shares will be payable on the redemption date December 8, 2025, to shareholders of record at the
close of business on November 10, 2025.
Information contained in or otherwise accessible through the websites mentioned in this report to shareholders does not form a part of this report. All references
to websites are inactive textual references and are for your information only.
®
/
TM
Trademarks of Royal Bank of Canada. ‡ All other trademarks are the property of their respective owner(s).
Shareholder Information
Royal Bank of Canada: Annual Report 2025
243
rbc.com/ar2025
81104 (12/2025)