Record wealth and capital markets fees earn a premium return, but near 16 times next year earnings the shares leave no room for a credit wobble. I initiate with a hold.
Key points
- C$6.0 billion net income in fiscal Q3 2026 came from wealth, capital markets and commercial banking as personal banking slipped.
- 13.5% core capital ratio in fiscal Q3 2026, a top quality safety buffer, sits at the top of the 12.5% to 13.5% range.
- C$4.0 billion returned in fiscal Q3 2026 through dividends of C$2.4 billion and buybacks of C$1.6 billion.
The call
The market is about right on this bank. At $191.22 the shares trade near 16 times next year earnings. That price needs steady fee growth and stable credit to hold.
Record quarter caps steady climb in net income ($ billions)Source: SEC XBRL facts and RBC Q3 2026 release Aug 27, 2026; forecasts are mine. As of Oct 8, 2026.
I expect slower gains from here. I see C$17.40 in earnings per share for fiscal 2027 on mid single digit loan and fee growth. At a fair 15.5 times earnings, a standard bank price yardstick, that supports my target.
Valuation
| Driver | Estimate |
|---|
| Fiscal 2027 earnings per share | C$17.40 a share |
| Fair multiple | 15.5 times |
| Value in Canada | C$269.68 a share |
| Currency on Oct 7 2026 | US$0.70 per C$1 |
| 12 month target in New York | $189.15 a share |
| Large Canadian banks often trade near 15 times earnings. Profit near 18% on shareholder money in fiscal Q3 2026 supports a small premium. Downside to 14 times earnings is larger than upside to 17 times, so a hold fits. | |
Target hinges on multiple paid for bank earnings ($)Source: my estimates from Aug 27, 2026 filing; FX C$1=US$0.7014. As of Oct 8, 2026.
Risks
- Credit losses jump if tariffs hit borrowers in fiscal 2027, which you would see in rising impaired loans each quarter.
- Fee income stalls if markets fall in fiscal 2027, which you would see in lower client assets each month.
- Loan profit margins compress on deposit competition in fiscal 2027, which you would see in lower net interest margin each quarter.
What would change my mind
I would turn positive if loan and fee growth drove sustained double digit earnings growth in fiscal 2027 without higher credit losses.