Buy Canadian Index: While Canada’s Biggest Market Cap, Royal Bank Barely Qualifies

By Will Ashworth

The S&P/TSX 60 Index is a collection of 60 large-cap Canadian companies with weightings similar to the larger S&P/TSX Composite Index, which has 218 stocks. 

The largest market cap in the S&P/TSX 60 is Royal Bank (RY, Also NYSE: RY) at $248.22 billion. It is one of Canada’s largest, if not the largest, banks, with more than 17 million clients across the country, the U.S., and 27 other countries. 

As of Jan. 31, 2025, 92% of its $481.92 billion in residential mortgages were held by Canadians. The bank plays a key role in this country’s housing sector. 

According to the latest report (June 2023) about the financial well-being of Canadian homeowners from the Financial Consumer Agency of Canada (FCAC),  35.5% of Canadians have a mortgage.    

Without financing from the Royal Bank and other Canadian banks, many Canadians could not own a house. There is no question that these banks serve a purpose. 

Yielding 3.4%, Royal Bank is an attractive dividend stock for Canadian investors. 

However, that doesn’t mean it qualifies for the Buy Canadian Index. Here’s why. 

Royal Bank Stock is Dual Listed

Royal Bank’s history dates to 1864, when it was founded as the Merchants Bank in Halifax. It made short-term loans to the merchant trade operating on the city’s bustling waterfront. It received its official charter as the Merchants’ Bank of Halifax five years later. 

By 1901, it had opened branches from coast to coast, changing its name to the Royal Bank of Canada. Six years later, it moved its head office from Halifax to Montreal. The rest is history. 

The bank’s shares were listed on the Toronto Stock Exchange in June 1905 and on the NYSE in December 1972.  

10 points - A stock is listed only on a Canadian stock exchange.

6 points - A stock is dual-listed on a Canadian and a foreign exchange. 

3 points - A stock is only listed on a stock exchange outside Canada.

Royal Bank gets 6 points for this criterion. 

Here’s Where Royal Bank Derives Its Revenue

The bank’s Q1 2025 revenue was $16.74 billion, 24.1% higher than a year earlier. In fiscal 2024 (October year-end), revenues were $57.34 billion, 11.1% higher than in 2023. 

Royal Bank generates U.S. and international revenue from three areas: City National Bank, RBC Capital Markets, and Wealth Management. The bank acquired Los Angeles-based City National in November 2015 for US$5.0 billion, paying for the acquisition with cash (52%) and stock (48%). Its results are included in the bank’s wealth management segment.

According to FactSet, 62.5% of its revenue exposure is from Canada, with 26.2% from the U.S.  We know that the overall revenue for its Wealth Management and Capital Markets segments in 2024 was $19.63 billion and $12.0 billion, respectively. The U.S. and international portion is a percentage of this revenue. 

The annual report says its U.S. Wealth Management revenue was $8.91 billion (US$6.55 billion), 33% of the $19.63 billion overall. If you include revenues from Global Asset Management ($2.95 billion), which consists of some revenue generated in Canada, and International Wealth Management ($1.30 billion), the percentage of U.S. and international revenue rises to 67%. 

The 2024 annual report breaks out the Capital Markets segment by geography. Canada accounted for 28% of the $12.0 billion in 2024 revenue. That’s $8.64 billion in non-Canadian revenue. 

Assuming the correct percentage for U.S. and international wealth management revenue is between 33% and 67%, say 50%, the segment’s non-Canadian revenue was $6.0 billion in 2024. 

Therefore, the U.S. and international revenue for the two segments was $14.64 billion, or 25.5% overall. 

10 points - A stock generates 75% of its revenue in Canada. 

6 points - A stock generates 50.1% to 74.9% of its revenue in Canada.

3 points - A stock generates 50.0% or less of its revenue in Canada. 

Although my estimated percentage of revenue generated in Canada is 74.5%, I’ve seen estimates of 80% in the media. Therefore, Royal Bank gets 10 points for revenue. 

How Canadian is Royal Bank’s Ownership 

Canadian ownership is the most difficult to pin down of the four criteria for qualifying for the Buy Canadian Index. 

According to S&P Global Market Intelligence, 1,031 institutions account for 48.6% of its outstanding shares, with public investors and insiders accounting for 51.4%. 

Assuming Canadians account for 50% of the two groups, the Canadian ownership is estimated at 50%. I’ll bump this to 50.1% to help Royal Bank score higher. 

10 points - Canadian investors hold 75% or more of its shares.  

6 points - Canadian investors hold 50.1% to 74.9% of its shares.

3 points - Canadian investors hold 50.0% or less of their shares.

Royal Bank gets 6 points. 

How Many Royal Bank Employees Are Located in Canada?

As of Jan. 31, 2025, according to S&P Global Market Intelligence, Royal Bank had 94,624 employees, 5% higher than in 2023, due to its $13.5 billion acquisition of HSBC Holdings' (HSBC) Canadian banking business. 

In March, the bank admitted that it had laid off some employees due to the reorganization of its leadership, the separation of its personal and commercial banking businesses, and the overlap from the HSBC acquisition.     

The 2024 annual report says that its Personal Banking unit had 38,642 employees. The unit generated 93% of its revenue in Canada. Let’s assume 93% or 35,937 are based in Canada.  

In commercial banking, virtually all of its revenue is generated in Canada. It had 1,290 employees as of Jan. 31. I’ll assume they’re all Canadian. 

Wealth Management had 25.672 full-time employees. Since 75% of its revenue is Canadian, 19,254 are Canadian. 

The Insurance business had 2,788 employees at the end of fiscal 2024. All are Canadian. 

Lastly, the Capital Markets unit had 7,424 employees. Based on 28% Canadian revenue, the number of Canadian employees for the unit is 2,079.

Added up, it had 61,348 Canadian employees at the end of 2024, accounting for 65% overall. 

10 points - 75% of its employees are based in Canada. 

6 points - 50.1% to 74.9% of its employees are based in Canada. 

3 points - Less than 50.0% of its employees are based in Canada. 

Royal Bank stock gets 6 points for this criterion. 

Does Royal Bank Qualify for the Buy Canadian Index? 

With 28 points, RY stock qualifies for the Buy Canadian Index. 

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Will Ashworth is currently ranked 132 out of 31,164 financial bloggers analyzed by TipRanks, with a 16.3% return on his buy and sell ratings. He is one of the founding contributors to this newsletter.

Will has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.