Royal Bank and National Bank reported stronger-than-expected quarterly earnings, driven by capital markets strength, solid domestic banking performance and disciplined capital management. Both lenders also increased dividends as profitability continued to improve.
BNN Bloomberg spoke with Diana Avigdor, vice-president, portfolio manager and head of trading at Barometer Capital Management, who said Canadian banks remain well capitalized, highly concentrated and positioned to benefit from steady operating leverage and stable earnings.
Key Takeaways
- Royal Bank posted strong beats across profit and revenue, supported by capital markets strength and operating leverage above eight per cent.
- National Bank delivered solid results while integrating recent acquisitions, with dividend growth slightly below market expectations.
- Canada’s concentrated banking system continues to support profitability through scale, regulation and capital discipline.
- Major lenders remain well positioned with ample capital for dividends, buybacks and earnings stability following years of recession fears.
- Seasonal volatility is expected into year-end, prompting elevated cash positions, while longer-term trends support productivity-driven growth themes.
Read the full transcript below:
ANDREW: Shares in Royal Bank are moving up after the company beat profit expectations in its latest quarter and also lifted its dividend. Let’s get more on those results from Diana Avigdor, a VP, portfolio manager and head of trading at Barometer Capital. Thank you very much indeed for joining us, Diana.
DIANA: Good morning, Andy. Thanks for having me.
ANDREW: Anything important with these Royal Bank numbers? Anything strike you as significant?
DIANA: It was excellent. First of all, on all metrics, as expected, our premier bank in their capital markets and wealth management did really, really well. Capital markets is an obvious one. You just have to look at the TSX chart to see how capital markets have done this year. And as Canada is trading at 52-week highs most days — not today — Canada has done very well, as have a lot of global markets this year. Relative to the U.S., we’ve done much better. So capital markets, the international component, has done very well.
But what struck me as particularly great with Royal was their operating leverage of 8.1 per cent. You recall what that is — it’s how a change in revenue flows to the bottom line, a direct profitability metric. At 8.1 per cent, that is massive. Yes, they increased dividends. Generally speaking, these banks — our Canadian banks — are well capitalized, so they’re going to continue returning money and buybacks to their clients.
ANDREW: What about that low yield on Royal Bank, though? It’s only three per cent, and now I know they are increasing it, but compare it to, say, Canadian Natural Resources. I know it’s a special case — they have a rich dividend policy — but they’re at a five per cent yield.
DIANA: I know, it’s true. They only started. They are oil companies, actually, when you think about where oil is. We own Imperial Oil, for example. You know, these companies are now throwing off really good cash flow and they’re very, very disciplined relative to, say, where they were five to 10 years ago. And that is the theme on the oil companies.
And I would just say with Royal Bank or any other Canadian managers: just look at their charts. As they go higher and higher, their yield is calculated as lower and lower. Both Royal and National increased their dividends — maybe not by as much as you would like — but I think with a CET1 ratio of 13 per cent, I think what you’re going to see, if they beat that, is more increased stock buybacks and continued stability in increasing their dividend mass as well.
ANDREW: What about National Bank? They, of course, are now digesting two acquisitions — Laurentian’s retail and business operations, and of course Canadian Western Bank.
DIANA: Indeed, indeed. So their numbers were great too. Their dividend increase, by the way, is probably lower than the market expected — would have liked to see more. I kind of understand it and forgive it. They are trying and working to increase their presence, whether it’s with Canadian Western Bank, where there are synergies but maybe it’s a little more nuanced. We’ll see on their call at 11 what they say.
And, you know, the Laurentian Bank portion of the small business portfolio and retail — that’s a nice little tuck-in. You know, that should probably work, but it’s a little more forgivable, as we’re going to give them the time ramp required to integrate and synthesize all these moving parts.
ANDREW: In the market right now, how are you playing it, Diana? Are you overweight cash, for example?
DIANA: Yes, yes, we are. So there are fewer than 20 trading days into year-end. If you’re a short-term trader, I think we’re going to see increased volatility, as is normal during this time of year. We’ve had a great year. Clients have had a great year. Everybody is in PNL protection mode, making sure the volatility doesn’t sink its teeth into your returns.
And come another week and a half or two, liquidity is going to dry up, which makes the add-to-touch price movements a little more jumpy. So we are at around 20 per cent cash. Our internal breadth indicators have started deteriorating — about two months ago, perhaps. The volatility — I mean, last week the market rebounded after a pretty nasty week before. Basically, if you just look at indices and you didn’t look at the two-week move, you would have said nothing happened. But a lot of stocks travelled a lot of percentages in order to show the flatness.
So we’ll see. If things get better, breadth gets better, we’ll put money to work. But right now, we have quite a lot of dry powder. And, you know, it hasn’t really hurt us, but it did decrease the volatility in the portfolios for our clients, which is probably desired.
ANDREW: There are fears, of course, that America is in the biggest bubble ever when it comes to this AI investment. Hundreds of billions of dollars have been talked about. Not all the money has been spent and may never be. But is there a risk this could just make 1999–2000 look like a mere bagatelle and we’re going to be in a much bigger blowout here?
DIANA: You know, Andy, I don’t feel like we’re in a big blow-up. I do think that things are — there are a lot of moving parts. Yes, the hyperscalers and their capex spending is now a theme. But if I step back — and really step back — this AI story has a lot of tentacles. You know, you look at employment, you look at companies benefiting, you’re looking at productivity increases, you’re looking at perhaps a rebuilding of the labour force. I mean, it is going to affect employment in some ways, replace.
So I do think there are a lot of tentacles to this story, and one of the major ones is productivity, which offsets inflation. And so we can go on into the cycle a lot. You know, Nvidia reported a few weeks ago, and if they deliver on what they guided, they’re only trading 28 times forward earnings. So we’ll see.
ANDREW: I know, it’s fascinating times, Diana. We better jump. Thank you very much indeed.
DIANA: Thanks, Andy.
ANDREW: Diana Avigdor of Barometer Capital Management.
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This BNN Bloomberg summary and transcript of the Dec. 3, 2025 interview with Diana Avigdor are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
