Royal Bank Of Canada (NYSE:RY) highlighted progress integrating HSBC Canada’s personal banking operations, trends in deposits and margins, and a shifting competitive and technology landscape during a discussion with Erica Nielsen, group head of RBC’s Personal Banking division.
HSBC Canada personal banking: customer quality, cost profile, and revenue synergies
Nielsen said RBC has been “really pleased” with the personal banking elements of the HSBC Canada acquisition, emphasizing both cost and revenue expectations. She said RBC “has met and is on pace to exceed the cost expectations” for the transaction and remains on track for CAD 300 million in revenue synergies previously committed. Nielsen added that “a lot of those revenue synergies are associated with the Personal Bank.”
Nielsen said RBC sees an opportunity to deepen relationships through cross-selling, but framed it as a process that occurs when customers have needs rather than an immediate synergy lever. She also pointed to new capabilities RBC built to support HSBC customers—such as foreign currency accounts and certain money movement features—saying those products were not previously in RBC’s lineup but are now in demand across RBC’s broader customer base and can be cross-sold.
Deposit trends: rotation from GICs to markets-based wealth channels
Addressing headline deposit growth that has appeared to stagnate or decline at times, Nielsen described multiple underlying dynamics, particularly around term deposits and GICs. She said some money moved into GICs during the post-COVID period both because of attractive rates and because consumers were uncomfortable with market volatility. In her view, some of those dollars would historically have been invested in markets.
As those GIC balances roll off, Nielsen said RBC is seeing “material increases” year over year flowing into markets-based channels, including Dominion Securities and Direct Investing. She characterized the trend as a “natural rotation” and said the underlying account-based deposit business continues to grow “in a material way,” even if total deposits appear flat due to the mix shift into wealth products.
Net interest margin and purchase price accounting headwinds
When asked about divergence in net interest margin (NIM) performance across banks, Nielsen said comparisons can be complicated because institutions track their books differently and that longer time horizons can be more informative. She said RBC saw “very healthy near top of the stack NIM expansion” through the rate increase cycle and added that over the last 12 months RBC’s NIM is “second best inside the marketplace.”
Nielsen also noted a headwind from rolling down purchase price accounting (PPA), describing it as a NIM drag and referencing a two-basis-point impact in the first quarter and four basis points expected in the next quarter. She said her intention is to “grow through that and maintain” performance.
Mortgage and HELOC dynamics: pricing intensity and consumer preference for certainty
Nielsen said RBC has long pointed to the “back half of 2026” as a period when mortgage dynamics may shift, reflecting that many mortgages booked during a more competitive period are now approaching maturity. She said there is potential for margin expansion because mortgages renewing were booked at “very thin spreads.” However, she cautioned that mortgage competition remains intense, particularly because the purchase market is not “healthy,” which increases switching activity and raises the importance of retention.
On home equity lines of credit (HELOCs) versus mortgages, Nielsen said RBC is not changing how it sells different mortgage products and does not push one product “more on sale and less on sale.” Instead, she attributed slower HELOC growth to consumer behavior, saying that in periods of uncertainty clients seek more payment certainty—often favoring fixed-rate mortgage structures over revolving HELOC balances. She also noted structural constraints in the product, including 65% loan-to-value caps for HELOCs.
Credit cards, delinquency, fintech competition, and AI priorities
Nielsen said credit card payment behavior is moving back toward pre-COVID patterns, which she suggested may reflect ongoing resilience among Canadian consumers. On delinquency, she said RBC is seeing delinquency rates that are in line with expectations across credit cards and mortgages, and described the trend as being driven more by macroeconomic factors than vulnerabilities specific to RBC’s underwriting.
She pointed to employment as a key variable, noting areas of greater stress such as Ontario (including the GTA and surrounding areas) and parts of British Columbia, where unemployment is elevated relative to other provinces.
On fintech competition and potential regulatory changes that could make it easier for new entrants, Nielsen said RBC is monitoring disruption “in a very material way” and views fintechs as often targeting niche parts of the customer experience where banks have historically been “suboptimal.” She said RBC intends to respond by improving digital and human experiences, highlighting payments as an area where customers want greater convenience and where fintech activity is active.
Nielsen also addressed operating leverage, saying recent strength was driven by franchise momentum and margin expansion, but that as conditions normalize she would expect operating leverage to “retrenched back” toward RBC’s guidance of 1%–2%.
On artificial intelligence, Nielsen said RBC is learning quickly and gaining more confidence about where AI can create competitive differentiation. She emphasized the advantage of scale—using the breadth of RBC’s client base to build models that can outperform those without comparable data. She also described a framework for allocating resources: focusing internal capabilities (including Borealis) on areas that drive differentiation while purchasing third-party AI tools in areas where AI is less of a competitive advantage but may help accelerate execution and support cost efficiency.
About Royal Bank Of Canada (NYSE:RY)
Royal Bank of Canada (NYSE: RY) is a diversified financial services company and one of Canada’s largest banks. Founded in 1864 in Halifax, Nova Scotia, the firm is now headquartered in Toronto, Ontario. It provides a broad range of banking and financial services to individuals, businesses, and institutional clients through a network of branches, digital platforms and international offices.
RBC operates across several principal business segments including personal and commercial banking, wealth management, insurance, investor and treasury services, capital markets, and global asset management.
