National Bank Financial Downgrades Royal Bank of Canada (RY) Stock, Reduces PT

On May 30, National Bank Financial downgraded Royal Bank of Canada (NYSE:RY)’s stock from “Outperform” to “Sector Perform,” reducing its price target to C$177.00 from the prior target of C$179.00. This revision follows the Royal Bank of Canada (NYSE:RY)’s Q2 2025 results, which didn’t meet expectations as a result of increased Provision for Credit Losses (PCLs) and a softer performance in its Capital Markets segment compared to expectations.

An exterior view of a modern banking building, showcasing its financial stability and reach.

In the Capital Markets segment, its net income of $1,202 million decreased $60 million or 5% YoY, with growth in total revenue and the impact of foreign exchange translation being more than mitigated by increased non-interest expenses and higher taxes.

Royal Bank of Canada (NYSE:RY)’s consolidated results exhibit an increase in total PCL of $504 million from a year ago, which includes a $324 million increase in PCL on performing loans. The PCL on loans ratio of 58 bps rose by 17 bps from the prior year.

This was primarily because of unfavourable changes to its macroeconomic forecast and scenario weights, demonstrating the impacts of trade disruptions (including tariffs). Notably, Royal Bank of Canada (NYSE:RY)’s commentary hinted at a challenging environment for credit and growth, issues that are relevant across the sector.

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Disclosure: None.