Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Q4 2024 Earnings Presentation
55 slides from Royal Bank Of Canada's earnings presentation, Dec 4, 2024
Slide 1: Royal Bank of Canada Fourth Quarter Results
Royal Bank of Canada Fourth Quarter Results December 4, 2024 All amounts are in Canadian dollars unless otherwise indicated and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Effective November 1
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: Q4/24 Key Messages: Accelerating value creation
Q4/24 Key Messages: Accelerating value creation Reported Adjusted(1) Reported Adjusted(1) Strong results across our businesses underpinning sustainable earnings growth $2.91 $3.07 5% 16% Diluted Earnings Per Share Diluted EPS growth Personal Commercial Banking Banking $2.9BN +24% Strong, diversified
Slide 5: Client assets and activity: Solid momentum across our largest businesses
Client assets and activity: Solid momentum across our largest businesses Personal Banking average loans Commercial Banking average Capital Markets loans and market and deposits ($ billions) loans and deposits ($ billions) share ($ billions; %)(2) 7% 11% 24% 37% +4% LTM(3) GIB(4) 2-YR CAGR(1) YoY 2-Y
Slide 6: Medium-term objectives and updates
Medium-term objectives and updates Financial performance compared to our medium-term objectives Average (reported)(2) Average (adjusted)(3) Medium-term objectives(1) 3-Year 5-Year 3-Year 5-Year Diluted EPS growth 7%+ 1% 5% 3% 6% Profitability ROE 16%+ 15.0% 15.6% 15.8% 16.1% Capital Capital rati
Slide 7: 2024 Net Income: Results underpinned by a diversified business model
2024 Net Income: Results underpinned by a diversified business model 2024 Net Income Personal Banking Commercial Banking ▪ #1 in residential mortgages, credit cards and Share Reported Adjusted(2) ▪ #1 in commercial lending & deposits(3) deposits(3) ▪ >1MM Commercial Banking clients $16.2BN $17.4BN ▪
Slide 8: HSBC Canada: Expense synergies ahead of schedule
HSBC Canada: Expense synergies ahead of schedule On track to deliver $740MM of targeted cost synergies – As at Q4/24, RBC has achieved ~55% of annualized targeted cost synergies Fiscal Year F2024 F2025 Oct-24 Oct-25 $740MM Realized Synergies Target 30% 60% 80% 100% achieved Year 1 Year 2 Deal Year M
Slide 9: Diversified business model: Driving strong value creation through the cycle
Diversified business model: Driving strong value creation through the cycle Premium growth in Reimagining Deepening client leading Canadian innovation relationships franchises Canadian Banking clients with in key Canadian Banking transaction accounts, #1 product categories(1) 18% investments, borrow
Slide 10: Q4/2024 Financial Review
Q4/2024 Financial Review Katherine Gibson Chief Financial Officer
Slide 11: Strong, diversified revenue growth drove solid all-bank operating leverage
Q4/24: Strong, diversified revenue growth drove solid all-bank operating leverage Financial Results Earnings Reported HBCA $ millions (except for EPS) Q4/2024 ▪ Net income is up 7% YoY; ex-HBCA Flat YoY YoY QoQ impact Revenue 15,074 19% 3% $743 ▪ Adjusted net income(2) is up 18% YoY; ex-HBCA up 9% Y
Slide 12: Capital: Strong position supports strategic deployment and shareholder returns
Capital: Strong position supports strategic deployment and shareholder returns CET1(1) Movement ▪ CET1(1) ratio of 13.2%, up 20 bps QoQ, reflecting: 66 bps (32) bps (18) bps 3 bps + Net internal capital generation ‒ Higher RWA(1) (excluding FX), mainly from business +34 bps growth and net credit mig
Slide 13: Net interest income: Solid volume growth and benefits from higher interest rates
Net interest income: Solid volume growth and benefits from higher interest rates ▪ Net interest income was up 17% All-Bank Net Interest Income ($ millions) o Net interest income (ex-trading) was up 15% YoY reflecting the Personal Banking Commercial Banking inclusion of HBCA net interest income, high
Slide 14: Non-interest expense: Improved results driving higher variable compensation
Non-interest expense: Improved results driving higher variable compensation Non-Interest Expense (NIE, $ millions) Q4/2024 Highlights Q4/23 Expenses 8,059 ▪ Reported Non-interest expense up 12% YoY % of LTM NIE − HBCA run-rate expenses excluding adjusted items(2) added ~3% Salaries & Benefits 199 Sa
Slide 15: Personal Banking: Strong results driven by solid volume growth and higher NIM
Personal Banking: Strong results driven by solid volume growth and higher NIM Personal Banking: Key Metrics(1) Q4/2024 Highlights HBCA Reported Personal Banking $ millions (unless otherwise stated) Q4/2024 Impact ▪ Net income up 16% or 18% adjusted(3) YoY; PPPT(2) up 18% YoY QoQ YoY Revenue 4,658 16
Slide 16: Commercial Banking: Strong growth in loans and deposits
Commercial Banking: Strong growth in loans and deposits Commercial Banking: Key Metrics(1) Q4/2024 Highlights HBCA Reported Commercial Banking $ millions (unless otherwise stated) Q4/2024 Impact YoY QoQ ▪ Net income up 16% or 19% YoY adjusted(3); PPPT(2) up 36% Revenue 2,077 33% 2% 381 YoY Net inter
Slide 17: Wealth Management: Strong results driven by market performance and net sales
Wealth Management: Strong results driven by market performance and net sales Key Metrics(1) Q4/2024 Highlights Reported $ millions (unless otherwise stated) Q4/2024 ▪ Net income up $697MM or $484MM YoY adjusted(3) YoY QoQ Revenue 5,186 20% 4% + Pre-provision, pre-tax earnings(2) up $689MM YoY Net in
Slide 18: Capital Markets: Record Q4 revenue in C&IB and Global Markets
Capital Markets: Record Q4 revenue in C&IB and Global Markets Key Metrics(1) Q4/2024 Highlights Reported ▪ Net income Flat YoY $ millions (unless otherwise stated)(2) Q4/2024 YoY QoQ + Pre-provision, pre-tax(3) earnings up 14% YoY Revenue 2,903 13% (3)% Corporate & Investment Banking 1,589 9% (3)% ▪
Slide 19: Insurance: Strong Insurance service results driven by growth across products
Insurance: Strong Insurance service results driven by growth across products Key Metrics Q4/2024 Highlights Reported $ millions (unless otherwise stated) (1) Q4/2024 ▪ Net income up 67% YoY YoY QoQ Revenue 278 12% (2)% ▪ Revenue up 12% YoY Insurance Service Result 173 26% (19)% + Insurance service r
Slide 20: Risk Review
Risk Review Graeme Hepworth Chief Risk Officer
Slide 21: Allowance for Credit Losses: Prudent reserve increases on performing loans
Allowance for Credit Losses: Prudent reserve increases on performing loans 2024 Allowance for Credit Losses (ACL) on Loans & Acceptances (L&A) ($ millions) L&A: $880BN L&A: $987BN - ACL to L&A: 0.64% ACL to L&A: 0.61% 2,620 (2,243) PCL on Performing Loans of $627MM 672 (325) 87 6,352 193 5,348 5,888
Slide 22: Gross Impaired Loans: New formations trended lower
Gross Impaired Loans: New formations trended lower Gross Impaired Loans (GIL) ($ millions, bps) Key Drivers of GIL (QoQ) ▪ Total GIL increased $182MM (up 1 bp QoQ) 58 59 55 Personal Banking 48 ▪ GIL of $1,652MM increased $100MM QoQ, mainly driven by higher GIL in 42 residential mortgages within Pers
Slide 23: PCL on impaired loans: Trended higher in Canadian Banking
PCL on impaired loans: Trended higher in Canadian Banking Total RBC ($ millions, bps) Wealth Management ($ millions, bps) Average historical loss rate(1): 30 bps 24 31 30 26 26 25 16 13 11 11 $685 $69 $672 $623 $640 $539 $46 $38 $32 $32 Q4/23 Q1/24 Q2/24 Q3/24 Q4/24 Q4/23 Q1/24 Q2/24 Q3/24 Q4/24 ▪ P
Slide 24: Commercial Banking: Disciplined risk management
Commercial Banking: Disciplined risk management Total Commercial Banking Exposure ($183.3BN(1); 18.6% of total L&A) $183.3BN $183.3BN ▪ Portfolio was originated with sound lending standards, is well secured, and remains well-diversified Remaining sectors 45% $50MM+ (Individually ▪ Growth mainly driv
Slide 25: Appendices
Appendices
Slide 26: Net Interest Margin: Average rates and balances
Net Interest Margin: Average rates and balances Interest Income Yield(1) Average Assets ($ billions) Q4/23 Q1/24 Q2/24 Q3/24 Q4/24 Q4/23 Q1/24 Q2/24 Q3/24 Q4/24 Loans 5.56% 5.74% 5.87% 5.96% 5.89% Loans 847 851 897 964 973 Securities 4.53% 4.36% 4.22% 4.20% 4.08% Securities 401 415 405 425 433 Repo
Slide 27: Net Interest Income: Interest rate sensitivity
Net Interest Income: Interest rate sensitivity All-Bank: Impact of 100 bps change Impact of 25 bps decrease(2) across the curve(1) Net interest Revenue Short-term rates(2) Across the curve(2) income ($MM) Increase Decrease ($MM) Q3/24 Q4/24 Q3/24 Q4/24 Canadian $264 $(315) Dollar Impact Canadian $(2
Slide 28: Net Interest Margin: Canadian Banking and City National
Net Interest Margin: Canadian Banking and City National Canadian Banking NIM(1) QoQ Waterfall CNB NIM QoQ Waterfall 0.05% 0.02% 0.02% (0.01)% 2.80% (0.05)% 2.78% (0.02)% 2.97% 2.98% 2.93% 2.93% 2.97% Q3/24 NIM Rate Impacts Competitive Product Q4/24 NIM Q3/24 NIM Asset Yields Liabilities Cost Mix/Oth
Slide 29: Non-interest income: Strong markets and client activity driving robust growth
Non-interest income: Strong markets and client activity driving robust growth Non-Interest Income ($ millions) Q4/2024 Highlights ▪ Reported non-interest income was up 21% YoY Q4/23 Non-interest income 6,143 + Prior year included impairment losses with respect to interest in an associated company (1
Slide 30: Canadian Banking: Solid volume growth and higher margin
Canadian Banking: Solid volume growth and higher margin Key Metrics - Q4/2024(1) Personal Reported Commercial Canadian HBCA $ millions (unless otherwise stated) Banking – Banking Banking YoY QoQ Impact Canada Revenue 4,366 2,077 6,443 22% 3% 655 Net interest income 3,109 1,763 4,872 26% 4% 579 Non-i
Slide 31: Canadian Banking: Our ~16MM clients continue to adopt our digital channels
Canadian Banking: Our ~16MM clients continue to adopt our digital channels Active Digital Users (000s)(1) Digital Personal Adoption Rate(2) Active Mobile Users (000s)(1) 9% 80 bps 14% Pre- 62.7% 62.8% pandemic 9,718 9,851 62.0% 7,802 7,609 9,016 7,354 6,865 Pre- pandemic Pre- pandemic 54.4% 4,619 Q1
Slide 32: U.S. WM (incl. CNB): Market appreciation, net new assets, and lower PCL
U.S. WM (incl. CNB): Market appreciation, net new assets, and lower PCL Key Metrics (US$ millions) Q4/2024 Highlights US$ millions (unless otherwise stated) Q4/2024 YoY QoQ ▪ Net income up $381 million YoY Revenue 1,709 25% 6% + CNB net income was up $313 million YoY Expenses 1,543 0.3% 8% Pre-Provi
Slide 33: Corporate Support
Corporate Support Financial performance ($ millions)(1) Q4/2024 Highlights Reported Q4/2024 Q3/2024 Q4/2023 ▪ Net income of $(247)MM Revenue (TEB ) (2) (28) (148) (33) − HBCA transaction and integration costs ($134MM after-tax) U.S. WAP gains/(losses) 47 166 (150) Non-Interest Expense 270 223 261 ▪
Slide 34: Non-Interest Expense: Market volatility leads to swings in share-based compensation
Non-Interest Expense: Market volatility leads to swings in share-based compensation SBC (incl. U.S. WM WAP) had a $165MM impact on YoY expense growth Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 Q4/23 Q1/24 Q2/24 Q3/24 Q4/24 Share-based compensation 47 17 68 3 270 132 243 (17) 397 179 235 148 U.S. WM W
Slide 35: Market Risk Trading Revenue and Trading VaR
Market Risk Trading Revenue and Trading VaR (C$ millions) 30 28 30 29 50 40 30 20 10 0 -10 -20 -30 -40 -50 Trading Revenue (teb) (1) Trading VaR Trading VaR quarterly average ▪ RBC did not incur any net trading losses in fiscal year 2024 ▪ Average Trading VaR of C$29 million remained relatively stab
Slide 36: Canadian Banking: Credit outcomes impacted by higher rates, as anticipated
Canadian Banking: Credit outcomes impacted by higher rates, as anticipated CB Retail Credit Bureau Score Canadian Banking (CB) PCL on Impaired Loans and Gross Impaired Loans Distribution(7) (Q4/24) PCL on Impaired Loans Gross Impaired Loans Avg <636 Q4/24 3.5% (bps) (1) (bps) Credit Avg Loan Bureau
Slide 37: Personal Banking - Canada: Impact at mortgage renewal is reducing
Personal Banking - Canada: Impact at mortgage renewal is reducing Mortgage Balances Renewing Over the Next 5 Years ($BN) (1) ▪ With time, the portfolio is able to benefit from: Fixed Rate 131 − current and future rate cuts 126 Variable Rate − wage and income inflation 96 − principal amortization 45
Slide 38: Canadian residential portfolio: Strong underlying credit quality
Canadian residential portfolio: Strong underlying credit quality Canadian Residential Mortgage Portfolio(1) ($ billions) Canadian Banking RESL Portfolio(2) $221.6 Total $445BN Uninsured $381BN Insured Uninsured 86% Mortgage Balance $408BN $344BN $92.4 $348.7 (21%) (79%) HELOC Balance $37BN $37BN $88
Slide 39: Allowance for Credit Losses: Prudently reserved
Allowance for Credit Losses: Prudently reserved Allocation of ACL by Product as a % of Loans & Acceptances Q4/23 Q3/24 (3) Q4/24 (3) Product Stage 1 & 2 Total Stage 1 & 2 Total Stage 1 & 2 Total Residential mortgages (1) 0.07% 0.11% 0.08% 0.13% 0.07% 0.12% Other Retail 1.69% 1.84% 1.73% 1.92% 1.80%
Slide 40: Funding: Well-diversified
Funding: Well-diversified LCR(1) (total adjusted value, $BN) ▪ As at October 31, 2024, relationship-based deposits, which are the primary source of funding for retail and commercial lending, were High-quality liquid Less Net Cash Surplus = $977 billion or 55% of our total funding (including short-te
Slide 41: Items impacting results (1/3)
Items impacting results (1/3) 2024 ($ millions, except for EPS) Adjusting Item Segments Line Item Before-Tax After-Tax Diluted EPS Q4/2024 Legal provisions No Capital Markets Expenses $(93) $(93) $(0.07) Purchase accounting accretion of fair value Personal Banking and Net Interest No $130 $94 $0.07
Slide 42: Items impacting results (2/3)
Items impacting results (2/3) 2024 ($ millions, except for EPS) Adjusting Item Segments Line Item Before-Tax After-Tax Diluted EPS Q1/2024 $(159) / $(115)/ Cost of the FDIC special assessment No Wealth Management Expenses $(0.08) US$(117) US$(85) Amortization of acquisition-related intangibles Yes M
Slide 43: Items impacting results (3/3)
Items impacting results (3/3) 2023 ($ millions, except for EPS) Adjusting Item Segments Line Item Before-Tax After-Tax Diluted EPS Q4/2023 Legal provisions No Wealth Management Expenses $(166) $(166) $(0.12) Impairment of other intangibles No Wealth Management Expenses $(52) $(38) $(0.03) Higher sev
Slide 44: Impact of foreign currency translation
Impact of foreign currency translation Estimated impact of foreign currency translation on key income statement items For the three months ended ($ millions, except per share Q4/24 vs. Q4/24 vs. amounts) Q4/23 Q3/24 Increase (decrease): Total revenue 48 (4) Non-interest expense 48 7 PPPT Earnings (1
Slide 45: Glossary (1/2)
Glossary (1/2) Assets under administration (AUA): ▪ Assets administered by us, which are beneficially owned by clients, unless otherwise noted. Services provided in respect of assets under administration are of an administrative nature, including safekeeping, collecting investment income, settling p
Slide 46: Glossary (2/2)
Glossary (2/2) Net interest margin (NIM): ▪ Calculated as net interest income divided by average earning assets, net. Net yield: ▪ Net yield is calculated as total repo revenue as a percentage of average reverse repo balances. Operating leverage: ▪ The difference between our revenue growth rate and
Slide 47: Additional Notes (slides 4 to 22)
Additional Notes (slides 4 to 22) Slide 4 1. Net Income and diluted EPS are adjusted for after-tax effect of (i) amortization of acquisition-related intangibles, (ii) HSBC Canada transaction and integration costs, (iii) management of closing capital volatility related to the HSBC Canada transaction,
Slide 48: Additional Notes (slides 26 to 39)
Additional Notes (slides 26 to 39) Slide 26 15. Loan yield is calculated as interest income on loans as a percentage of average total net loans. Securities yield is calculated as interest and dividend income on securities as a percentage of average securities, net of applicable allowance. Repo & sec
Slide 49: Reconciliation for non-GAAP financial measures (1/6)
Reconciliation for non-GAAP financial measures (1/6) Calculation of Adjusted Net Income and Adjusted Diluted EPS IFRS4 IFRS4 IFRS4 IFRS4 IFRS4 IFRS 17 IFRS 17 $ millions (unless otherwise stated) 2019 2020 2021 2022 2023 2023 2024 All-bank Net income 12,871 11,437 16,050 15,807 14,866 14,612 16,240
Slide 50: Reconciliation for non-GAAP financial measures (2/6)
Reconciliation for non-GAAP financial measures (2/6) Calculation of Adjusted Net Income and Adjusted Diluted EPS $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 All-bank Net income 3,939 4,486 4,222 Less: Non-controlling interests (NCI) (2) (3) (3) Less: Dividends on preferred shares and dist
Slide 51: Reconciliation for non-GAAP financial measures (3/6)
Reconciliation for non-GAAP financial measures (3/6) Calculation of Adjusted Effective Tax Rate (teb) $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 All-bank Income taxes Income taxes (33) 887 993 Income taxes for adjusting items impacting net income (noted above: D+E+F+G) 703 73 81 Adjusted
Slide 52: Reconciliation for non-GAAP financial measures (4/6)
Reconciliation for non-GAAP financial measures (4/6) Calculation of Adjusted Net Income $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 Personal Banking Net Income 1,366 1,586 1,579 Add: After-tax effect of amortization of acquisition-related intangibles 5 36 35 Net income excl. specified ite
Slide 53: Reconciliation for non-GAAP financial measures (5/6)
Reconciliation for non-GAAP financial measures (5/6) Calculation of PPPT Calculation of PPPT $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 All-Bank Wealth Management Net income 3,939 4,486 4,222 Net income 272 949 969 Income taxes (33)
Slide 54: Reconciliation for non-GAAP financial measures (6/6)
Reconciliation for non-GAAP financial measures (6/6) Calculation of PPPT Calculation of ex-HBCA amounts Total HBCA Excl. HBCA $ millions (unless otherwise stated) Q4/23 Q3/24 Q4/24 $ millions (unless otherwise stated) Q4/24 Impact Impact U.S. Wealth Management (incl. City National) (US$) All-bank Ne
Slide 55: 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 condit