RY
Royal Bank of Canada
$196.30
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 27.9% above fair value
You pay
$196.30
Bear
$104.26
Fair
$153.49
Bull
$183.03
Bear
$104.26
-46.9%
ROTCE 13.6% → 1.82x TBV
Fair
$153.49
-21.8%
ROTCE 18.1% → 2.68x TBV
Bull
$183.03
-6.8%
ROTCE 20.9% → 3.19x TBV
Adjust Assumptions
18.1%
9.3%
Key Value Driver
ROTCE (18.1%) vs. cost of equity (9.3%)
Implied Market Multiple
3.42x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (30 analysts)
$225.00
Divergence from AlphaVal
32%
Summary
With ROTCE of 18.1% vs. 9.3% cost of equity, fair P/TBV is 2.68x on $57.37 tangible book, implying $153.49 per share. DDM cross-check: $118.98.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $225.00 (from 30 analysts). Our estimate is 32% below the consensus -- consider that gap carefully.
Financial statements were converted from CAD into USD using USDCAD at 0.7101 USD per CAD.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly