Buyers could not notice it, however Royal Financial institution of Canada (TSX:RY) is very large. I’m not speaking as a financial institution, I’m speaking as a worldwide inventory. Not solely is RY inventory the biggest inventory on the TSX immediately, however it’s additionally bigger than a few of the largest American banks on the market!

But with its measurement, buyers may assume that the expansion is over — removed from it. The Large Six financial institution has confirmed its price quarter after quarter, 12 months after 12 months, recession after recession. And that occurred as soon as once more after the current third-quarter earnings. The query is, although, can it stick with it? Let’s dig in.

What occurred?

First, let’s have a look at what’s been occurring by way of RY inventory and evaluate it to its friends. RY inventory provides retail banking, wealth administration, capital markets, insurance coverage, and U.S. industrial banking. The third quarter noticed report internet earnings and earnings per share (EPS), with materials year-over-year progress throughout all its segments. However can the identical be mentioned for the opposite banks?

Toronto-Dominion Financial institution can be giant and has Canadian retail and U.S. private and industrial banking, with giant publicity to the USA. It’s seen regular retail income, however nothing to submit headlines about. Financial institution of Nova Scotia additionally has a big worldwide footprint, particularly in Latin America, however efficiency has been combined as a result of worldwide publicity and price resets.

There’s additionally Financial institution of Montreal, which is various and has stable outcomes, however it doesn’t have the company-wide report beat that RY inventory has. Nationwide Financial institution focuses extra on Quebec with steady efficiency, so it’s nothing thrilling. Lastly, Canadian Imperial Financial institution of Commerce is extra concentrated in Canadian private and enterprise banking, seeing enchancment however lagging friends in scale and diversification. Total, RY inventory is a transparent winner.

Behind the expansion

Why is RY inventory doing so nicely in comparison with its friends? Its report internet earnings of $5.4 billion rose 21% 12 months over 12 months. Administration emphasised progress throughout all enterprise segments, one thing its friends can not match, creating a robust catalyst for progress.

It’s additionally cash-rich, with robust profitability and return metrics that matter to buyers. It reveals administration is incomes extra on shareholders’ capital. In the meantime, it’s doing all this whereas enhancing complete provisions for credit score losses on loans. Decrease credit score drag means stronger ahead earnings energy versus friends.

Then there’s the momentum and dividend. RY inventory holds a stable 3% dividend yield and a payout ratio, leaving room for loads of progress. What’s extra, it trades at simply 13.7 occasions earnings at writing. So, buyers can purchase up enhancing earnings with out paying high greenback. And these beats have created stable momentum for each the enterprise and shares. Altogether, it’s a frontrunner within the trade that doesn’t look as if it’ll surrender its high spot any time quickly.

Backside line

On the subject of Large Six banks, RY inventory appears to be leagues forward. The mixture of report efficiency, company-wide earnings beats, materially increased returns and enhancing metrics reveals it’s a progress story that’s not carried out. Whereas the opposite banks must scale out, RY inventory merely wants to sit down again and keep the course. And buyers can get in on that upside for a robust worth, making it a stable purchase on the TSX immediately.