Royal Bank of Canada is on track to having a whop­p­ing $17 billion in excess capital during its 2012 fin­ancial year, says a UBS Investment Research report.

UBS analyst Peter Rozenberg upgraded RBC to a “buy” rating yesterday, arguing that “strong excess capital” would fuel higher returns in future years.

He also estimates that RBC finished fiscal 2009, which ended Oct. 31, with about $8 billion in surplus capital.

Flush with cash, RBC probably has one of the highest capital levels of any bank in the world.

That places it in good stead at a time when its American and European peers are coming under increasing pressure to bolster their own capital levels. RBC could potentially use its massive surplus funds for acquisitions, share buybacks or to eventually raise its dividend.

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