McKay: Key drivers of business, capital markets feel good

Royal Bank of Canada (RY) CEO Dave McKay highlighted key drivers of business growth and capital markets optimism during the 2026 RBC Canadian Bank CEO Conference. He emphasized a constructive operating environment, citing CAD 60 billion in defense spending and CAD 150 billion in infrastructure investments as catalysts for a more ambitious Canadian investment cycle. McKay noted resilience in the Canadian consumer, with redirected cash flow supporting services consumption and job stability, despite subdued housing market activity.

RBC's business segments showed strength, including high single-digit commercial lending growth, robust deposit expansion, and strong advisory and trading results amid heightened market volatility. McKay reiterated the bank's commitment to maintaining a 12.5%–13.5% common equity tier one (CET1) ratio, allocating excess capital above 13.5% to buybacks. He outlined a path to higher return on equity (ROE), balancing net interest income growth, non-interest income expansion, and efficiency improvements. Key contributors include mortgage margin recovery, U.S. platform performance (e.g., City National), and cost discipline from the HSBC integration.

McKay acknowledged risks, including credit challenges in sectors like steel and softwood lumber, cyber threats, and fiscal pressures from "Pillar Two" tax reforms. However, he stressed RBC's disciplined risk appetite and focus on "premium growth" with lower volatility. On M&A, McKay emphasized selectivity, prioritizing opportunities that accelerate ROE targets, particularly in wealth management. He underscored RBC's strategic flexibility, citing its U.S. deposit franchise and AI capabilities—where the bank employs over 100 PhDs—as competitive advantages.

The CEO concluded with confidence in RBC's ability to navigate macroeconomic uncertainties while capitalizing on structural growth opportunities in Canada and the U.S.