10 Best Diversified Bank Stocks to Buy Now

8. Royal Bank of Canada (NYSE:RY)

Number of Hedge Fund Holders In Q2 2024: 21

Royal Bank of Canada (NYSE:RY) is one of the biggest banks in Canada with close to 100,000 employees. Like other diversified banks, it generates a significant portion of its revenue from noninterest income. In fact, for Royal Bank of Canada (NYSE:RY), its revenue is split a precise half by its interest and noninterest income. For the first nine months of its FY2024, Royal Bank of Canada (NYSE:RY) earned C$42.2 billion in revenue, out of which C$20.2 billion and C$21.9 billion were through its interest and noninterest income, respectively. The bank has already started to position itself for lower interest income through the start of the rate cut cycle in Canada. This is because Royal Bank of Canada (NYSE:RY) completed a mega acquisition of HSBC’s Canada operations in March 2024. The deal added C$134 billion in assets and 130 branches into its portfolio, which substantially bolsters Royal Bank of Canada (NYSE:RY)’s position in the Canadian banking market. As of its Q3, the bank’s CET1 ratio was 13%, which protects it well against any turbulence in case of an economic downturn.

Royal Bank of Canada (NYSE:RY)’s management is aware of the broader macro economic risks to its business. Here’s what it had to say during the Q3 2024 earnings call:

“Before discussing our business results in greater detail, I will provide my perspective on the macro environment where the U.S. has outperformed a softening Canadian macro backdrop. In Canada, higher interest rates and rising unemployment are impacting consumer spending and business investment. This in turn has led to a moderating non-shelter inflation and lower GDP per capita. Contrast, U.S. inflation remains above the targeted range. However, there are signs that the restrictive interest rate policy is stabilizing supercore inflation measures, while the U.S. labor market remains resilient. Declining job openings and rates of attrition point to some weakening. The short-term divergence of monetary policy between the Bank of Canada and the U.S. Federal Reserve is expected to narrow ahead of expected and accelerating U.S. interest rate cuts, with positive implications for yield curves.

While there’s a higher degree of geopolitical uncertainty and volatility, our diversified businesses are well positioned for the macro driven shifts in the operating environment. We expect to see the benefits of lower short-term interest rates and capital markets activity, constructive equity markets, availability of credit, improved debt serviceability and the flow of money from deposits into investments. As we continue to provide our clients with valued advice and solutions amidst a complex backdrop. We’re also delivering on our strategic priorities across our largest businesses and geographies, including expanding our funding and transaction banking capabilities.”