RBC raises provisions again amid renewed tariff uncertainty

• Key Insight: Canada's largest bank is once again bracing for pressure on the Canadian economy from U.S. tariffs.
• Supporting Data: In the quarter ending Jan. 31, RBC raised provisions for credit losses by 4% year over year.
• Expert Quote: "While we believe the Canadian economy has demonstrated resilience, factors such as U.S. trade policy … add ongoing uncertainty to our outlook," said RBC Chief Risk Officer Graeme Hepworth.

The Royal Bank of Canada is back where it was a year ago — bracing for possible trouble from U.S. tariffs.

Though the Toronto-based bank beat analysts' earnings expectations in the quarter that ended Jan. 31, it also raised provisions for credit losses to CA$1.09 billion, up 4% from one year ago. Its allowance for credit losses rose to CA$7.77 billion, up 12% year over year.

Those actions were taken at least in part to address concerns over U.S.-Canadian trade relations, as RBC Chief Risk Officer Graeme Hepworth made clear Thursday.

"Looking ahead, while we believe the Canadian economy has demonstrated resilience, factors such as U.S. trade policy … and geopolitical tensions add ongoing uncertainty to our outlook," Hepworth said during a call with analysts. "Against this backdrop, we have maintained a prudent approach with our allowances."

In March 2025, U.S. President Donald Trump imposed a 25% tariff on most Canadian goods, which he later raised to 35%. Since then, the new Canada-United States-Mexico Agreement exempted most Canadian goods from that tariff. Then came this month's U.S. Supreme Court decision finding that last year's tariffs were illegal, though Trump vowed to revive them by other means. 

The upshot for Canada's businesses has been a heavy dose of uncertainty.

RBC remains "cautiously optimistic" about the Canadian economy, Hepworth said. But the scenarios the bank has prepared for include a possible "severe North American recession driven by escalating global trade wars," he said.

CEO Dave McKay echoed these concerns.

"The Canadian economy remained resilient through the elevated uncertainty from persistent and evolving geopolitical and trade tensions," McKay said. "That said, the impact from tariffs on the economy varies depending on the clients or sectors. We are seeing strong profitability and improving productivity for many of our corporate clients, while commercial clients in tariff-impacted sectors and geographies are facing headwinds."

This is not the first time RBC has raised its provisions amid tariff concerns. In the first quarter of 2025, shortly after Trump began his second term, the bank increased its provision for credit losses to CA$1.05 billion, a CA$237 million jump from the year before.

Going forward, RBC is hoping for the best but preparing for the worst. Its base outlook, Hepworth said, is still that tariffs and Canada-United States-Mexico-Agreement-related exemptions will remain at their current levels.

For the quarter, RBC's earnings per share reached CA$4.03, beating analysts' consensus estimate of CA$3.81, according to S&P. Net income was also a beat, rising to CA$5.78 billion, above estimates of CA$5.33 billion.

Canada's largest bank got solid contributions from its U.S. operations. Revenue from U.S. wealth management, including at the American subsidiary City National Bank, rose to US$1.93 billion in the first quarter, a 12% increase from one year before.

RBC acquired City National in 2015, but starting in 2023, the Los Angeles-based bank struggled amid rising interest rates and regulatory problems. By 2025, City National's net income and credit outlook were improving — a comeback that has continued into this year. 

In the first quarter of 2026, City National's net income rose to US$143 million, RBC said during the call, more than doubling year over year.

"We are very excited about being on a growth front-footing right now with that business, profitability-wise and customer growth-wise," McKay said.