Royal Bank of Canada is positioning Canada’s expected surge in defense, Arctic, infrastructure, and energy-related spending as a potential deployment outlet for excess capital.
Speaking on Thursday during the bank’s quarterly earnings call, CEO David McKay said the firm sees “more growth coming from a significant number of projects that are going to get built in this country.”
McKay said those projects will require “a significant amount of domestic and foreign capital,” which places banks and other financial firms in a position to finance, invest in, or otherwise support the buildout. He added that RBC sees “an acceleration of growth opportunities coming at us on the organic side,” while the bank works to anticipate timing.
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Prime Minister Mark Carney has said Canada will spend hundreds of billions of dollars over the next decade on defense, including national security and Arctic infrastructure, as the country seeks to reduce reliance on US contractors.
For RBC, the opportunity is arriving from a position of capital strength. McKay said the bank has ample regulatory capital, and RBC reported an adjusted return on equity of 17.8% in fiscal first quarter, above its stated target of 17% or more.
Management is explicitly weighing several uses for that excess capacity. McKay said the defense and energy project wave is one of a “handful of levers,” with share buybacks and acquisitions also under consideration.
“We continue to be on the lookout for the right acquisition,” McKay said.
That caution follows RBC’s 2024 acquisition of HSBC Holdings Plc’s Canadian assets, a transaction that already expanded its domestic footprint.
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