Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Q3 2021 Earnings Presentation
42 slides from Royal Bank Of Canada's earnings presentation, Aug 25, 2021
Slide 1: Royal Bank of Canada Third Quarter Results
Royal Bank of Canada Third Quarter Results August 25, 2021 All amounts are in Canadian dollars unless otherw ise indicated and are based on financial statements prepared in compliance w ith International Accounting Standard 34 Interim Financial Reporting, unless otherw ise noted. Our Q3 2021 Report
Slide 2: Caution regarding forward-looking statements
Caution regarding forward-looking statements From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian
Slide 3: Overview
Overview Dave McKay President and Chief Executive Officer
Slide 4: Strong client activity and volume growth underpinned by balance sheet strength
Strong client activity and volume growth underpinned by balance sheet strength (1) Diversified revenue streams ($BN) Expenses well controlled (YoY) Strong earnings growth (10)% YoY 1.5% +34% I&TS Capital 0.6% Net Income $4.3BN $0.5 Markets +7% YoY YoY $2.5 P&CB 7% YoY $4.7 Pre-Provision, +6% Insuran
Slide 5: Strong volume growth and market share gains in our largest businesses
Strong volume growth and market share gains in our largest businesses Canadian Banking average loans Canadian Banking average Wealth Management (non-U.S.) and acceptances ($ billions)(1) deposits ($ billions) AUM and AUA ($ billions) 7% 8% 14% 10% 14% 16% 2-YR CAGR YoY 2-YR CAGR YoY 2-YR CAGR YoY 50
Slide 6: Canadian Banking: Moving Beyond Banking for Canadian businesses
Canadian Banking: Moving Beyond Banking for Canadian businesses Beyond Banking provides more value to business clients along their journey through RBC solutions and strategic partners Start my Attract more Manage my Manage my Simplify my business clients team cashflow business Help people early in t
Slide 7: Canadian Banking: Increasing client flows into mutual funds
Canadian Banking: Increasing client flows into mutual funds Increasing portion of net retail inflows have been invested into % of total client net flows(1) into mutual funds mutual funds (Based on cumulative net flows since Q3/2020) o Inflows into mutual funds largely from savings accounts, chequi
Slide 8: Financial Review
Financial Review Rod Bolger Chief Financial Officer
Slide 9: PCL releases add to strong volume growth and expense discipline
PCL releases add to strong volume growth and expense discipline Reported Earnings ($ millions, except for EPS and ROE) Q3/2021 Net income up 34% YoY; Pre-provision, pre-tax earnings up 6% YoY QoQ Revenue 12,756 (1)% 10% Revenue Revenue Net of Insurance FV Change (1) 12,281 3% 1% Net interest inc
Slide 10: Strong capital and earnings growth continue to underpin shareholder returns
Strong capital and earnings growth continue to underpin shareholder returns CET1 Movement (35) bps CET1 ratio of 13.6%, up 80 bps QoQ, reflecting: 69 bps (1) bp Favourable impact of model parameter updates 49 bps Record internal capital generation Partly offset by RWA growth supporting clien
Slide 11: Net interest income: Strong volume growth offset by lower trading results
Net interest income: Strong volume growth offset by lower trading results Net interest income down 2% YoY as strong volume growth was more than offset by lower spreads and lower trading revenue in Capital Markets o Net interest income (ex-trading) was up 6%(1) due to strong volume growth in Canadi
Slide 12: Interest rate sensitivity: Well positioned for rising interest rates
Interest rate sensitivity: Well positioned for rising interest rates 25 bps increase in interest rates 100 bps change in interest rates across the curve Roughly half of the Canadian Banking and CNB deposit base is As at July 31, 2021, an immediate and sustained +100 bps would non-interest bearin
Slide 13: Non-interest income: Strong market-related performance across businesses
Non-interest income: Strong market-related performance across businesses Non-Interest Income(1) ($ millions) Q3/2021 Highlights Q3/20 Revenue (net of FV change) (1) 6,784 Non-interest income was down 1% YoY; up 7% net of (2) Insurance FV change (1) Market-related Investment, brokerage & custodial
Slide 14: Non-interest expense: Disciplined expense management
Non-interest expense: Disciplined expense management Non-Interest Expense ($ millions) Q3/2021 Highlights Q3/20 Expenses Non-interest expense was up 1% YoY 6,380 Down 1% YoY excluding variable and share-based compensation Compensation Salaries & Benefits (26) (which includes changes in U.S. WM W
Slide 15: Strong revenue growth and operating leverage in Personal & Commercial Banking
Strong revenue growth and operating leverage in Personal & Commercial Banking Net Income ($ millions) Q3/2021 Highlights 55% Canadian Banking 11% Net income up 52% YoY 2,113 Pre-provision, pre-tax earnings up 13%(1) YoY 1,908 Revenue up 8% YoY 1,367 Net interest income up 5% YoY Strong vol
Slide 16: Record results in Wealth Management driven by market performance and net sales
Record results in Wealth Management driven by market performance and net sales Net Income ($ millions) Q3/2021 Highlights 31% Net income up 31% YoY 7% Pre-provision, pre-tax earnings up 16%(1) YoY Revenue increased 8% YoY (up 12% ex-U.S. WAP 738 gains/(losses)(3) 691 Wealth Management (non-U
Slide 17: Solid results in Insurance
Solid results in Insurance Net Income ($ millions) Q3/2021 Highlights 8% Net income up 8% YoY 25% Revenue down 21% YoY (up 5% net of Insurance FV change)(1) 216 234 Change in fair value of investments backing policyholder 187 liabilities, which is largely offset in PBCAE Impact of realized i
Slide 18: Investor & Treasury Services results impacted by lower deposit revenue
Investor & Treasury Services results impacted by lower deposit revenue Net Income ($ millions) Q3/2021 Highlights 16% Net income up 16% YoY (27)% Revenue up 7% YoY 120 Higher funding and liquidity revenue as the prior year reflected unfavourable impacts from interest rate movements and a 88 he
Slide 19: Record Investment Banking revenue in Capital Markets
Record Investment Banking revenue in Capital Markets Net Income ($ millions) Q3/2021 Highlights 19% Net income up 19% YoY 5% Pre-provision, pre-tax earnings down 14%(1) YoY 1,129 1,071 Revenue down 10% YoY 949 Corporate and Investment Banking revenue up 19% YoY Record Investment Banking re
Slide 20: Risk Review
Risk Review Graeme Hepworth Chief Risk Officer
Slide 21: ACL declining with improvements in macroeconomic and credit quality outlook
ACL declining with improvements in macroeconomic and credit quality outlook Movement in Allowance for Credit Losses on Loans ($ millions) ACL to L&A 0.89% - ACL to L&A - 0.79% 146 (638) ACL to L&A 0.67% (166) 6,115 5,525 ACL to L&A 5,033 4,867 4,867 0.53% 3,471 ACL (Q1/20) Peak ACL ACL (Q2/21) PCL o
Slide 22: GIL below pre-pandemic levels with new formations at 9-year lows
GIL below pre-pandemic levels with new formations at 9-year lows Gross Impaired Loans (GIL) ($ millions, bps) Key Drivers of GIL (QoQ) 57 Total GIL decreased $216 million (down 5 bps QoQ) Canadian Banking 47 GIL decreased $112 million, as muted new formations were more than 41 40 offset by relat
Slide 23: PCL on impaired loans lower for the fifth consecutive quarter
PCL on impaired loans lower for the fifth consecutive quarter Total RBC ($ millions, bps) Wealth Management ($ millions, bps) 23 21 15 0 2 -1 13 11 $43 -13 $398 8 $3 $0 $251 $218 $- $177 $(2) $146 $(27) Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Lower provisions QoQ in Canadian Ba
Slide 24: Commercial Real Estate (CRE) portfolio summary
Commercial Real Estate (CRE) portfolio summary Q3/2021 Highlights Exposure by Business Segment Exposure by Geography CRE exposure of $61 billion at Q3/2021 Other (2) 1% accounts for 8.5% of total loans and acceptances Wealth Other Management International Remains well-diversified by geography, 1
Slide 25: Appendices
Appendices
Slide 26: ESG performance highlights: Putting our Purpose into practice
ESG performance highlights: Putting our Purpose into practice Royal Bank of Canada is a purpose-driven, principles-led organization How we deliver value Building & attracting talent Sustainable finance and Climate change: accelerating clean Preparing youth for the and driving a diverse & responsible
Slide 27: Strong volume growth in Canadian Banking
Strong volume growth in Canadian Banking Average Gross Loans & Acceptances(1) ($ billions) Average Deposits(1) ($ billions) 8% 10% 2% 3% 489 504 477 492 446 467 17 17 16 90 91 89 76 222 230 76 203 78 283 311 320 255 259 243 Q3/2020 Q2/2021 Q3/2021 Q3/2020 Q2/2021 Q3/2021 Percentage Change (1) YoY Qo
Slide 28: Our 14MM+ Canadian Banking clients continue to adopt our digital channels
Our 14MM+ Canadian Banking clients continue to adopt our digital channels Active Digital Users (000s)(1) Digital Adoption Rate (2) Active Mobile Users (000s)(1) 5% 260 bps 10% 7,873 7,876 56.8% 56.4% 5,394 5,266 7,527 53.8% 4,917 Q3/20 Q2/21 Q3/21 Q3/20 Q2/21 Q3/21 Q3/20 Q2/21 Q3/21 Mobile Sessions
Slide 29: Strong net sales at RBC Global Asset Management
Strong net sales at RBC Global Asset Management RBC Global Asset Management AUM(1) ($ billions) RBC Global Asset Management Net Sales ($ billions) 13% Last 12 months ended Q3/2021 5% Total Long-Term Canadian Retail 587 $35.3BN $21.5BN 559 520 98 93 14.7 83 2.0 67 62 73 10.4 10.2 112 0.4 111 1.9 7.6
Slide 30: Movements in net interest margins
Movements in net interest margins All-Bank Asset Yields(1) All-Bank Deposit Costs(2) 3.37% 3.34% 3.28% 3.24% 1.41% 3.16% Loan yield 1.16% 1.15% 1.09% 0.96% Term deposit costs 2.36% 0.72% 2.27% 0.63% 2.15% 2.13% 0.58% 0.55% 2.09% Total earning 0.48% Total deposit 2.31% 1.93% asset yield costs 1.85% 1
Slide 31: Solid results from our U.S. operations
Solid results from our U.S. operations Net Income (US$ millions) U.S. Operations Revenue (US$ billions)(2) 10% Last 12 months ended Q3/2021 (2%) CNB Net 656 Interest 642 Income 582 18% Capital 466 451 Total U.S. Markets 454 WM (ex- $9.8 billion 45% CNB NII) 37% 114 121 86 42 76 70 Q3/2020 Q2/2021 Q3
Slide 32: Strong client-driven growth in U.S. Wealth Management (incl. CNB)
Strong client-driven growth in U.S. Wealth Management (incl. CNB) Net Income (US$ millions) Q3/2021 Highlights (US$) 49% Net income up 49%YoY 1% Pre-provision, pre-tax earnings(4) up 2% YoY Revenue up 9% YoY Revenue up 17% ex-U.S. WAP gains/(losses)(2) Higher average fee-based client asset
Slide 33: Capital Markets revenue and loan breakdown by geography
Capital Markets revenue and loan breakdown by geography Capital Markets Revenue Breakdown by Geography ($ millions) Canada: Up YoY mainly driven by increases in M&A, equity 2,748 2,718 origination and loan syndication activities, partially offset by lower 151 115 2,463 fixed income and commodities
Slide 34: Strong underlying credit quality in Canadian Banking (CB)
Strong underlying credit quality in Canadian Banking (CB) Canadian Banking PCL on Impaired Loans and Gross Impaired Loans CB Retail FICO Score Distribution (Q3/21) Q3/21 Avg PCL on Impaired Loans Gross Impaired Loans Avg <620 Loan (bps) (1) (bps) FICO 3% Balances Score Q3/20 Q2/21 Q3/21 Q3/20 Q2/21
Slide 35: Canadian residential portfolio has strong underlying credit quality
Canadian residential portfolio has strong underlying credit quality Q3/2021 Highlights Canadian Banking Residential Lending Portfolio(1) Strong underlying quality of uninsured residential lending portfolio(1) Total $349BN Uninsured $275.3BN 53% of uninsured portfolio have a FICO score >800 $314B
Slide 36: ACL coverage: Lower-risk residential mortgages a large part of our balance sheet
ACL coverage: Lower-risk residential mortgages a large part of our balance sheet Allocation of ACL by Product Q2 / 2021 Q3 / 2021 % of Loans & Acceptances % of Loans & Acceptances Product Stage 1 Stage 2 Stage 1 & 2 Stage 3 Total Stage 1 Stage 2 Stage 1 & 2 Stage 3 Total Residential mortgages (1) 0.
Slide 37: Market risk trading revenue and VaR
Market risk trading revenue and VaR ($ millions) 80 60 40 20 0 -20 -40 -60 -80 -100 -120 (1) Trading Revenue (1) VaR During Q3/2021, there were no days with net trading losses VaR remained stable QoQ The historical period used to compute VaR covers the past 2 years (1) Includes loan underwriti
Slide 38: Impact of foreign currency translation
Impact of foreign currency translation Estimated impact of foreign currency translation on key income statement items For the three months ended (Millions of Canadian dollars, Q3/21 vs. Q3/21 vs. except per share amounts) Q3/20 Q2/21 Increase (decrease): Total revenue (347) (63) PCL 12 - Non-interes
Slide 39: Additional Notes (slides 3 to 11)
Additional Notes (slides 3 to 11) Slide 3 1. Return on Average Tangible Common Shareholders’ Equity (ROTCE) does not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions. Net income available to shareholders excluding the afte
Slide 40: Additional Notes (slides 12 to 30)
Additional Notes (slides 12 to 30) Slide 12 16. Comprised of Net gain on investment securities, Share of profit (loss) in joint ventures and associates, U.S. WM wealth accum ulation plans (WAP) gains / (losses) and Other. Slide 13 17. Other non-interest expenses include YoY change in non-interest ex
Slide 41: Additional Notes (slides 31 to 37)
Additional Notes (slides 31 to 37) Slide 31 27. Revenue net of U.S. Wealth Management wealth accumulation plans (WAP) gains/(losses) which where US$41MM in Q3/21, US$108MM in Q2/21 and US$115MM in Q3/20, is a non-GAAP measure. For more information, see slide 41. 28. Expenses net of U.S. Wealth Manag
Slide 42: Note to users
Note to users We use a variety of financial measures to evaluate our performance. In addition to generally accepted accounting principles ( GAAP) prescribed measures, we use certain key performance and non-GAAP measures we believe provide useful information to investors regarding our financial condi