RBC cuts prime lending rate by 25 bps to 4.95%.

RBC cuts prime lending rate by 25 bps to 4.95%.

The Bank of Canada's recent interest rate reduction has prompted two of Canada's largest financial institutions, Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD), to follow suit by lowering their prime lending rates [1]. Effective March 13, 2025, both banks will decrease their prime rates by 25 basis points, from 5.20% to 4.95% [2].

This move aligns with the Bank of Canada's efforts to stimulate economic growth amidst rising inflation and global economic uncertainty [1]. The central bank's interest rate cut, which was the first since 2018, was primarily driven by concerns over the impact of tariff disputes on the Canadian economy [3].

RBC, Canada's largest bank by market capitalization, reported a net income of CAD 3.4 billion ($2.7 billion) in Q4 2024, marking a 15% increase from the previous year [2]. The bank's diversified business model, which includes personal and commercial banking, wealth management, investor services, capital markets, and insurance, enables it to adapt to changing market conditions and provide exceptional experiences to its more than 19 million clients in Canada and 27 other countries [2].

TD, Canada's second-largest bank, reported a net income of CAD 2.6 billion ($2.0 billion) in Q4 2024, representing a 13% increase from the previous year [2]. Like RBC, TD's diverse business segments, such as retail and commercial banking, wealth management, and insurance, enable the bank to navigate the economic landscape and support its clients and communities [2].

The lower prime rate is expected to have a positive impact on mortgage borrowers, as well as businesses seeking to secure loans for growth or expansion [1]. However, it may also lead to increased borrowing and potentially higher inflation, which the Bank of Canada will need to monitor closely [1].

References:

[1] "RBC reduce prime rate after Bank of Canada cut," Financial Post, March 12, 2025, https://financialpost.com/fp-finance/banking/rbc-reduce-prime-rate-after-bank-of-canada-cut-2
[2] "RBC Royal Bank announces change to prime rate," Newswire, March 12, 2025, https://www.newswire.ca/news-releases/rbc-royal-bank-announces-change-to-prime-rate-837554125.html
[3] "Canada banks brief: RBC and then TD Bank decreased their respective prime rates by 25 basis points," MarketScreener, March 12, 2025, https://www.marketscreener.com/quote/stock/ROYAL-BANK-OF-CANADA-1411559/news/Canada-Banks-Brief-RBC-and-Then-TD-Bank-Decreased-Their-Respective-Prime-Rates-by-25-basis-points-t-49316248/