Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Investor Day (April 2008)
46 slides from Royal Bank Of Canada's investor day presentation, Apr 29, 2008
Slide 1: 2008 Investor Day
2008 Investor Day April 29, 2008 Financial information is in Canadian dollars and is based on Canadian GAAP, unless otherwise indicated Caution regarding forward-looking statements From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, in
Slide 2: Gordon M. Nixon / Today's agenda
Gordon M. Nixon President and Chief Executive Officer 3 Today’s agenda • Canadian Banking – Dave McKay, Group Head, Canadian Banking • Wealth Management – George Lewis, Group Head, Wealth Management • Enterprise Risk Management – Barbara Stymiest, Chief Operating Officer – Morten Friis, Chief Risk O
Slide 3: What's changed since last year? Widening the gap over our competition
What’s changed since last year? • Market turbulence following the sub prime crisis • Economic downturn and outlook • New financial environment emerging – Heightened risk aversion – Increased transparency – Simpler products – Lower financial leverage – Wider credit spreads • Liquidity and access to c
Slide 4: Staying focused on our strategic goals
Staying focused on our strategic goals 7 Two-pronged approach to continued success Profitable Business Growth Businesses delivering advice while Enterprise-wide foundation collaborating to benefit our clients for business success Canadian Banking Making it easier for clients Wealth Management to do
Slide 5: Deepening client relationships to unlock potential
Deepening client relationships to unlock potential • Discipline across our businesses to put clients’ needs first in every business activity since we implemented “Client First” in 2004 • Result: – More insight into our clients needs, more collaboration across our businesses, more client loyalty and
Slide 6: Dave McKay, Group Head, Canadian Banking
Realigned to leverage management expertise Gordon M. Nixon President & CEO Dave McKay Jim Westlake George Lewis Chuck Winograd International Canadian Banking Banking Wealth Management Capital Markets Insurance 11 Dave McKay Group Head, Canadian Banking 12 6
Slide 7: Canadian Banking – outpacing our competition
Canadian Banking – outpacing our competition • Contributes over 50% of revenue and earnings to RBC – Driven by high-quality residential mortgage and credit card assets, and fee-revenue • Clear leader with market share momentum – #1 or 2 in all major personal and business products, and growing market
Slide 8: Faster rate of NIAT growth than peer average
Faster rate of NIAT growth than peer average ) % (1 GR 16.6 3,500 RB C C A (2) 14.5 Peer CAGR 3,000 2,500 NIAT $mm 2,000 1,500 1,000 500 0 2004 2005 2006 2007 RBC Canadian peer average (1) RBC retail NIAT includes Canadian business results: Banking-related results, Wealth Management, Insurance. Excl
Slide 9: Collaborating and aligning
Collaborating and aligning Branch Online Account Banking Managers RBC Direct Financial Investing Planners ATM 24/7 Small Business Sales Managers How we align to meet (Indirect Lending) Advisors customer needs Mortgage Specialists Specialized Commercial Relationship Private Managers Bankers Investmen
Slide 10: Recent achievements
Recent achievements • Extended our leadership in Canada – Increased Home Equity by 17%+ year-over-year in Q1 2008 – Increased Personal Core Deposits by 16% year-over-year in Q1 2008 – Increased Business Loans by 10% year-over-year in Q1 2008 • Strong gains in deposit balances and market share – Laun
Slide 11: Momentum in personal core deposits; Well-positioned for continued success
Momentum in personal core deposits 14.00% 13.94% 46 b p s 13.75% 13.48% 13.50% 13.25% May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Proof that our new product suite launched 1 year ago is working! Source: RBC 21 Well-positioned for continued success Æ Focus on execution Strategic Goal Be t
Slide 12: Appendix: Personal Financial Services
Appendix 23 Personal Financial Services Æ Growing by meeting client needs Home equity: Ç 17% in Q1 2008 (vs. Q1 2007) Total personal loans: Ç Market share lead to 50 bps over nearest competitor Personal core deposits: Ç 16% in Q1 2008 (vs. Q1 2007), closing the gap on top spot Strategic Priorities:
Slide 13: Business Financial Services; Cards & Payment Solutions
Business Financial Services Æ Partnering with Canadian businesses Business loans: Ç 10% (Q1/08 vs. Q1/07) Market share 160 bps over nearest competitor Business deposits: Ç 5% (Q1/08 vs. Q1/07) Market share 840 bps over nearest competitor Strategic Priorities: • Leverage our 800 specialist commercial
Slide 14: Canadian mortgage fundamentals are solid
Canadian mortgage fundamentals are solid Canada U.S. • 1 to 5-year terms typical, with up to 40-year • 30-year terms with matching amortization Products amortization. Prepayment penalties. • “Teasers” (low initial rate, then increases) • Limited use of “teasers” • Major banks are over 60% of market
Slide 15: Canadian households' financial position is sound
Canadian households’ financial position is sound Household Debt as % of Homeowners' Equity as % of Disposable Income Total Value of Real Estate Assets 190% 75% 170% 70% 65% 150% 60% 130% 55% 110% 50% 90% 45% 2000 2001 2002 2003 2004 2005 2006 2007 2000 2001 2002 2003 2004 2005 2006 2007 Canada U.S.
Slide 16: George Lewis, Group Head, Wealth Management
Canadian Banking 31 George Lewis Group Head, Wealth Management 32 16
Slide 17: Wealth Management: Outpacing our competition
Wealth Management Outpacing our competition in Canada plus global growth • Generates high quality earnings for RBC with minimal use of balance sheet • Top performing Canadian asset manager with momentum – #1 fund performance, #1 financial performance – Significant presence across all key client segm
Slide 18: Historical financial performance
Wealth Management Historical financial performance $ millions Revenue Earnings G R 13% CA R 23% CAG 3,992 3,487 762 3,151 604 502 2005 2006 2007 2005 2006 2007 Assets Under Care (1) Proportion of Fee-Based plus Spread (2) Revenue ($ billions) G R 64% 14% CA 619 650 61% 499 58% 2005 2006 2007 2005 20
Slide 19: Wealth Management Recent achievements
Wealth Management Recent achievements • Asset Management: Strengthened Canadian mutual fund leadership – Grew mutual funds market share to 12.5% of industry, a 40% increase from 2002 – Won Lipper Award for best overall investment performance • Canadian Wealth: Extended industry-leading position – Ra
Slide 20: RBC Asset Management: leader in long-term mutual fund asset growth
RBC Asset Management The leader in long-term mutual fund asset growth 45 40 38.5 35 26.2 TD 30 25.9 CI Funds Asset Growth ($ billions) 25 21.5 Investors Group 19.2 CIBC 20 17.7 BMO 15 15.6 Dynamic 14.2 Mackenzie 10 13.4 Fidelity 9.3 AIM Trimark 5 7.5 Scotiabank 0 5.8 AGF -5 Oct-02 Feb-03 Oct-05 Jun-
Slide 21: Top performance with low management fees
RBC Asset Management Top performance with low management fees • Over 70% of mutual funds in top quartile over 1-, 3- and 5- years – And, over 80% of assets in top two quartiles over 1-, 3-, 5- and 10- years Percent of Funds Rank Percent of Rank Assets 1-year return 80% 1 88% 1 3-year return 70% 1 88
Slide 22: Developing outcome-oriented solutions for clients
RBC Asset Management Developing outcome-oriented solutions for clients Æ Example: Withdrawing Withdrawing assets to fund retirement “By providing financial protection against the major 18th and 19th century risk of dying too soon … life insurance became the biggest financial industry of that century
Slide 23: Has diversified and improved our asset mix
RBC Asset Management Has diversified and improved our asset mix October 2002 October 2007 $37 Billion $88 Billion Asset Mix Money Market 15% Fixed Income Equity 27% Money Market Equity 6% 36% 38% Balanced/ Balanced/ Portfolio Portfolio Solutions Solutions 30% 41% Fixed Income 7% More assets in equit
Slide 24: Will create #1 provider of mutual funds
RBC Asset Management Will create #1 provider of mutual funds Mutual Funds Net Assets Market Net Asset Growth (%) Rank Firm ($MM) Share (%) 3 yr CAGR 5 yr CAGR 1 RBC AM + PH&N 105,109 15.3 18 20 RBC AM 85,690 12.5 20 21 PH&N 19,420 2.8 12 16 2 IGM Financial 104,628 15.2 7 10 3 CI Investments 60,139 8
Slide 25: Looking forward in Global Asset Management
Global Asset Management Looking forward in Global Asset Management • Focus on all client segments across Canada to extend our leadership – Maintain focus on serving high growth advisory channels – Enhanced focus on serving institutional investors and direct-to-investor channels – Focus on full-advic
Slide 26: Leading share in fastest growing channels
Canadian Wealth Leading share in fastest growing channels Industry CAGR Market Size RBC Forecast (AUA $ billions) Market Share (2006-2016) Advice Channels (total) $1,526 14% 10.4% Full-Service Broker 722 22% 11.7% (RBC Dominion Securities) Private Client Management 178 12% 13.6% (Private Counsel / E
Slide 27: RBC Dominion Securities
Canadian Wealth RBC Dominion Securities Æ Highest revenue and AUA per advisor (1) 2005 2006 2007 Q1/07 Q1/08 Assets Under Administration $125.6 $145.2 $158.6 $149.7 $152.0 ($ billions) Number of Investment Advisors 1,288 1,324 1,347 1,334 1,374 (excl. Associate Investment Advisors) Revenue per Inves
Slide 28: Opportunities in our growing U.S. platform
U.S. Wealth Opportunities in our growing U.S. platform • Continue to attract and retain advisors by supporting their success – Small firm feel with global resources provides strong competitive positioning – Support their career through “Finishing Well” program – Provide tools to enable them to becom
Slide 29: Building on our strengths internationally
International Wealth Building on our strengths internationally • Assist over 35,000 high net worth clients with their cross-border needs – 36 offices in 22 countries in both developed and emerging markets – Clients from more than 100 countries (40% U.K., 16% Latin America, 13% Asia) • Helping client
Slide 30: Well-positioned for continued success
Wealth Management Well-positioned for continued success Extend our lead in Canada Continue extending our lead in the Canadian wealth and asset management markets Grow outside Canada Improve operating performance, and expand our U.S. Wealth Management business through organic growth and “bolt-on” acq
Slide 31: Enterprise Risk Management
Enterprise Risk Management Barb Stymiest Chief Operating Officer Morten Friis Chief Risk Officer 61 Strong risk management • Tone set at the top – strong governance – Full support of top-level management, with shared accountability across RBC – Risk function is centralized and works in partnership w
Slide 32: Tone set at the top – strong governance
Tone set at the top – strong governance • Full support of top-level management Board of Directors Ownership Board Culture • Shared accountability between risk Committees Monitoring Framework management and businesses Escalation Group Executive Delegation Oversight Accountability • Independent and ce
Slide 33: How we assess and classify risk
How we assess and classify risk • We evaluate and monitor all types of risk • Market turbulence has increased Systemic several risks: Mo e nc re lue – Systemic: Extraordinary co in f Regulatory ntr circumstances exerting pressure on Competitive & Legal nd ol global financial system la an tro d – Cre
Slide 34: Approach to managing risks – examples
Approach to managing risks – examples Trading Businesses (credit and market risks): Inventory and Portfolio Limits New Business Transaction Distribution Committee Approval Daily Monitoring: – VaR limits – stress limits Lending and Other Businesses (credit risks): Product or Portfolio Limit New Produ
Slide 35: Solid liquidity and funding position
Solid liquidity and funding position • Fund through relationship deposits, unsecured funding and securitizations • Active borrower in a variety of markets, currencies, maturities and structures – Annual wholesale term issuance has ranged from US$15 billion to US$25 billion Wholesale Term Funding by
Slide 36: High quality balance sheet
High quality balance sheet $633 Billion (as at January 31, 2008) Assets 76 Repos 12% 109 Other Assets (1) 17% 72 Wholesale Loans 11% 174 Retail Loans 27% 202 Trading Assets & Cash (2) 33% Liabilities & Capital 87 1 Business, Government & Bank Deposits 14% 121 Personal Deposits 19% 186 Wholesale Fund
Slide 37: Modest term funding requirements in the near-term
Modest term funding requirements in the near-term RBC Term Funding Maturity Profile 21,000 18,000 $ millions (CAD equivalent) 15,000 12,000 9,000 6,000 3,000 0 Q3 & Q4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019- 2008 2085 Term Debt Securitizations Tier 1 capital Tier 2 capital Outstandin
Slide 38: Enterprise Performance Management
Enterprise Risk Management 75 Enterprise Performance Management Janice Fukakusa Chief Financial Officer 76 38
Slide 39: Our approach to the current environment
Our approach to the current environment Stay focused on strategic goals Disciplined approach to balancing revenue and cost initiatives Prioritize for greatest impact Focus on key drivers of revenue for each business Identify near and longer term levers for efficiency improvements Allocate resources
Slide 40: Performance management framework
Performance management framework RBC target setting Review businesses • 3 year rolling horizons • Identify growth opportunities • Sustained top quartile performance • White space opportunities • Requisite CAGRs • Market attractiveness • Competitive position Strategic and Performance Management Trans
Slide 41: Closing Remarks
Enterprise Performance Management 81 Closing Remarks Gordon M. Nixon President and Chief Executive Officer 82 41
Slide 42: Well-positioned to outpace the competition
Well-positioned to outpace the competition • Clear leader in Canada with market share momentum – No one provides more access to valued advice – #1 or 2 across all major financial products and services in Canada – Canadian economy and consumer fundamentals are strong • Collaborating to benefit our cl
Slide 43: Executive Profiles: Gordon Nixon, David McKay
Gordon M. Nixon, President & Chief Executive Officer Mr. Nixon is president and chief executive officer of RBC. He is also a director of RBC and chairman of RBC's Group Executive. Mr. Nixon began his career in 1979 at Dominion Securities in Toronto where he worked in Global Markets and subsequently
Slide 44: George Lewis; Barbara Stymiest
George Lewis, Group Head, Wealth Management As Group Head, Wealth Management, Mr. Lewis leads RBC's businesses that serve the wealth management needs of affluent and high net worth clients globally, and businesses that provide asset management and trust products. As a member of RBC's Group Executive
Slide 45: Morten Friis; Janice Fukakusa
Morten Friis, Chief Risk Officer As Chief Risk Officer, Mr. Friis oversees the strategic management of risk on an enterprise-wide basis. Mr. Friis brings many years of experience to his role. Prior to this position, Mr. Friis was Executive Vice- President and Chief Credit Officer for RBC. Mr. Friis
Slide 46: Note to users
Note to users We use a variety of financial measures to evaluate our performance. In addition to GAAP prescribed measures, we use certain non-GAAP measures we believe provide useful information to investors regarding our financial condition and results of operations. Readers are cautioned that non-G