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Morningstar | Royal Bank of Canada Remains One of the Country's Premier Banking Franchises

Royal Bank of Canada is one of the two largest banks in Canada by assets and one of six that collectively hold roughly 90% of the nation's banking deposits. The bank derives two thirds of its revenue from Canada, with the rest spread primarily across the United States and the Caribbean. It has done an admirable job of expanding its nonbank lines of business, running efficient banking operations, and generating some of the best returns for shareholders in the industry. With over CAD 5 trillion of assets under administration and over CAD 650 billion of assets under management, strong global capital markets operations, and a dominant share of domestic banking operations, it should remain one of the dominant Canadian banks for years to come.We expect Royal Bank of Canada to remain a steady player in its retail and commercial Canadian banking operations. It also remains a major player in global capital markets, experiencing tremendous growth over the past several years. We expect this segment to continue to be a strong contributor to net income, although growth should taper off and earnings may be more volatile under poorer market conditions. The wealth-management segment also earns strong returns on equity, and large inflows have led to a top market position. RBC remains a top asset manager and gatherer in Canada, and is also experiencing outsize growth from the former City National, where cross-selling and client integration efforts have gone well. The banks’ distribution networks are arguably the most dominant in Canada, and Royal Bank of Canada has dominated even among the banks, as shown by having the largest amount of assets under management in Canada.We like RBC's growth strategy in the U.S. through City National, focusing on wealth and commercial clients. We believe this is a much more focused strategy than its previous attempts at growth in the U.S. and it should pay dividends. While there is some room for margin expansion in Canada, expansion outside Canada should generally limit return on equity expansion in the longer term.