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    Is Royal Bank Of Canada (TSX:RY) Cheap As Richer Card Rewards Aim To Lift Usage?

    Simply Wall St·11/03/2026 00:36:32
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    Royal Bank of Canada (TSX:RY) has just reshaped its cash back offering by rolling out higher earn rates, removing caps and adding flexible redemptions. These credit card changes directly affect its core consumer banking engine.

    Royal Bank of Canada shares trade at CA$286.21 after a 22.01% year-to-date share price return, with shorter-term momentum showing a 2.62% one-month gain but a 2.47% pullback over three months, while total shareholder return over five years sits at 159.02%.

    Capitalize on the shift in consumer banking that Royal Bank of Canada is leaning into by scanning a curated shortlist of other issuers with rich rewards programs in the 5 high quality undervalued stocks.

    Bulls see Royal Bank of Canada using richer rewards to lock in everyday spending, while bears focus on richer benefits compressing card economics. Which argument fits the current valuation best?

    Most Popular Narrative: 5% Undervalued

    Royal Bank of Canada last closed at CA$286.21 against a widely followed fair value estimate of CA$302.43. This frames the richer rewards push as part of a broader story about fee income, AI and capital deployment.

    The main thing that has to go right is that Royal Bank of Canada continues to convert its AI rollout, Global Transaction Banking build out, and HSBC Canada and City National integrations into sustained fee income growth and durable cost efficiencies despite ongoing credit and macro pressures.

    The current valuation implies that the market is not fully crediting Royal Bank of Canada for its recent 17.9 to 18% ROE on a 13.5% CET1 ratio, its realized HSBC Canada synergies, and the targeted $700 million to $1 billion AI contribution by 2027.

    See why 174 investors see Royal Bank of Canada as 5% undervalued.

    Result: Fair Value of CA$302.43 (UNDERVALUED)

    Still, the thesis can crack if elevated credit losses in areas like U.S. commercial real estate persist, or if HSBC Canada and City National synergies underwhelm.

    Find out about the key risks to this Royal Bank of Canada narrative.

    Next Steps

    With bulls and bears pulling in different directions on Royal Bank of Canada, it helps to stress test the story against the underlying numbers yourself. Move quickly from opinion to evidence by weighing the 4 key rewards and 1 important warning sign.

    Looking for more investment ideas beyond Royal Bank of Canada?

    If you only stop at Royal Bank of Canada, you may miss other opportunities where the numbers and narrative line up just as clearly.