Royal Bank of Canada has signalled that it could spend more than C$1bn ($965m) of its bulging capital on share buy-backs, underlining the contrasting financial health of Canada’s banks and many of their US and European counterparts.

Canadian banks have built a sizeable capital cushion over the past 18 months through retained earnings and new equity and preferred-share issues designed to protect themselves from the credit market meltdown and recession-induced loan losses.