Royal Bank of Canada (TSX: RY) stands out as a compelling long-term investment, particularly for retirees and investors seeking stable returns. The bank's ability to upsell products to existing customers, such as moving matured GICs into balanced portfolios, drives consistent revenue growth. RBC's efficient operations, with a 35% efficiency ratio compared to the industry average of 45%, further enhance its profitability.
In fiscal Q3 2026, RBC reported a net income of $6 billion, up from $5.4 billion the previous year. Revenue increased by over 10% to $18.5 billion, while earnings per share rose 13% to $4.23. The bank added more than $80 billion in new loans, outperforming its peers. Additionally, RBC's return on equity improved from 15.5% in 2024 to over 18% in Q3 2026.
RBC is also investing heavily in artificial intelligence, aiming to generate $700 million to $1 billion in annual benefits by 2027. CEO David McKay emphasized that AI will drive significant shareholder returns by accelerating loan approvals and reducing mortgage sales costs. The bank has already captured $760 million in cost savings from its HSBC Canada deal, with more revenue gains expected.
Despite these strengths, RBC faces risks, including potential slowdowns in loan demand due to trade wars and lower mortgage growth amid slowing immigration. However, CFO Katherine Gibson noted that reserves for retail loan losses are at a 20-year high, providing a buffer against economic uncertainties. RBC's dividend payout ratio of 40% to 50% of earnings ensures consistent returns, with the annual dividend rising from $2 per share in 2009 to $7.04 in 2026.