Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Q3 2014 Earnings Presentation
31 slides from Royal Bank Of Canada's earnings presentation, Aug 22, 2014
Slide 1: Royal Bank of Canada Third Quarter Results
Royal Bank of Canada Third Quarter Results August 22, 2014 All amounts are in Canadian dollars and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting unless otherwise noted. Our Q3/2014 Report to Shareholders and Supplementa
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: Record quarterly earnings in Q3/2014
Record quarterly earnings in Q3/2014 Record quarter with net income of $2.38 billion, up 4% YoY Adjusted(1) net income of $2.42 billion, up 10% YoY Strong revenue growth and positive Record earnings in Canadian Banking, Capital Markets, Wealth operating leverage Management and Insurance drove
Slide 5: A diversified business model – RBC's key strength
A diversified business model – RBC’s key strength Diversified business mix, with the right balance of retail and wholesale Almost two-thirds of revenue from Canada Strategic approach in key businesses in the U.S. and select international markets Earnings by business segment(1) Revenue by geogr
Slide 6: Key strategic priorities aligned to our long-term goals
Key strategic priorities aligned to our long-term goals Strategic goals In Canada, to be the undisputed leader in financial services Globally, to be a leading provider of capital markets, investor and wealth management solutions In targeted markets, to be a leading provider of select financial
Slide 7: Risk Review
Risk Review Mark Hughes Chief Risk Officer
Slide 8: Credit quality remains strong
Credit quality remains strong Total PCL ($ millions, except percentage amounts) Personal & Commercial Banking (P&CB) 267 334 292 244 283 P&CB PCL was up $53 million QoQ 4 00 0.32% Caribbean PCL was up $27 million QoQ driven by 0.26% 0.27% 0.26% higher provisions in the commercial and retail 3 5
Slide 9: Strong and stable credit quality in Canadian Banking retail portfolio
Strong and stable credit quality in Canadian Banking retail portfolio Average retail loans ($291 billion)(1,4) 3 .8 0 % PCL Ratio(2) by product Small Credit business 3 .3 0 % cards 2% 2 .8 0 % 2.69% 2.56% 5% 2.46% 2.30% 2.33% Credit cards 2 .3 0 % 1 .8 0 % Personal 29% Residential 1.25% 1 .3 0 % mor
Slide 10: Diversified residential mortgage portfolio in Canadian Banking
Diversified residential mortgage portfolio in Canadian Banking Geographic Diversification Insured vs. Uninsured mortgages As at July 31, 2014 As at July 31, 2014 5% Residential Mortgages: $189 billion(1) 19% 13% LTV: 55%(2) Insured 39% 15% Uninsured 61% 41% 7% Atlantic Quebec Ontario Man/Sask Albert
Slide 11: Financial Review
Financial Review Janice Fukakusa Chief Administrative Officer and Chief Financial Officer
Slide 12: Record quarterly earnings drove a ROE of 19.6% in Q3/2014
Record quarterly earnings drove a ROE of 19.6% in Q3/2014 Q3/2014 Q2/2014 Q3/2013 ($ millions, except for EPS and ROE) Excluding Excluding As Reported specified As Reported As Reported specified items(1) items(1) Revenue $8,977 $8,977 $8,270 $7,168 $7,168 Net income $2,378 $2,418 $2,201 $2,285 $2,19
Slide 13: Strong Basel III Common Equity Tier 1 (CET1) ratio
Strong Basel III Common Equity Tier 1 (CET1) ratio(1) 0.36% (0.28)% (0.24)% (0.02)% 9.7% 9.5% Q2/2014* Internal capital Risk Business Other Q3/2014* generation parameters growth update CET1 ratio down 20 bps from Q2/2014, primarily reflecting higher risk-weighted assets, partially offset by strong
Slide 14: Continued strength in Personal & Commercial Banking
Continued strength in Personal & Commercial Banking Net Income – P&CB ($ millions) Q3/2014 Highlights Canadian Banking (1) 1,178 Record net income of $1,185 million, up 3% YoY, and 1,167 1,115 1,138 up 7% QoQ Amount YoY QoQ ($ billions) Loans $345 3% 1% Deposits $264 6% 1% - Volume growth of 4% Yo
Slide 15: Record earnings in Wealth Management
Record earnings in Wealth Management Net Income ($ millions) Q3/2014 Highlights 285 Record earnings, up 22% YoY and 3% QoQ 278 Higher average fee-based client asset growth 233 across all businesses from capital appreciation and strong net sales Positive operating leverage YoY Prior year incl
Slide 16: Record earnings in Insurance
Record earnings in Insurance Net Income ($ millions) Q3/2014 Highlights Net income up 34% YoY 214 Favourable actuarial adjustments Lower net claims costs in Canadian and International Insurance 160 154 Q3/2013 was impacted by severe weather- related events Q3/2013 included a new UK annuity
Slide 17: Stable performance in Investor & Treasury Services
Stable performance in Investor & Treasury Services Net Income ($ millions) Q3/2014 Highlights 112 Net income up 6% YoY (1) 110 104 Higher funding and liquidity revenue from tightening credit spreads Higher net interest income from growth in client deposits Lower custodial fees and securities
Slide 18: Record earnings in Capital Markets
Record earnings in Capital Markets Net Income ($ millions) Q3/2014 Highlights 641 Net income up 66% YoY (1) Strong fixed income and equity trading revenue reflecting: 507 Improved market conditions in our fixed income credit, equity and municipal businesses 386 Increased activity from client
Slide 19: Appendices
Appendices
Slide 20: Continued leadership in Canadian Banking
Continued leadership in Canadian Banking Q3/2014 Q3/2013 Canadian Market Share Rank Market Share(1) Rank Market Share(1) Consumer Lending(2) 1 23.6% 1 23.6% Personal Core Deposits + GICs 2 20.2% 2 20.0% Long-Term Mutual Funds(3) 1 14.2% 1 14.2% Business Loans(4) ($0 - $25 million) 1 25.6% 1 24.6% Bu
Slide 21: Stable net interest margin in Canadian Banking
Stable net interest margin(1) in Canadian Banking Net interest margin decreased 1 bp QoQ and 4 bps YoY, or up 1 bp (2,3) YoY on an adjusted basis A more favourable funding mix, driven by deposit growth outpacing loan growth, continues to be offset by competitive pressures and the low interest ra
Slide 22: Continued volume growth in Canadian Banking
Continued volume growth in Canadian Banking Average Loans & Acceptances(1) Average Deposits(2) ($ billions) ($ billions) % QoQ 3.2% YoY; 1.1 % QoQ 5.7% YoY; 1.3 261 264 341 345 250 334 56 58 58 97 98 14 14 92 14 85 85 85 158 164 166 179 185 187 Q3/2013 Q2/2014 Q3/2014 Q3/2013 Q2/2014 Q3/2014 Percent
Slide 23: Strong growth in asset under management
Strong growth in asset under management Canadian mutual fund balances and market share(1) ($ billions, except percentage amounts) 14.6% 14.6% 14.7% 14.6% 14.5% 14.5% 14.4% 14.4% 14.5% 2 00 1 5 .0% 180 14.1% 14.1% 14.2% 14.2% 14.2% 14.1% 14.1% 14.1% 14.2% 160 1 2 .0% 6.2 6.5 152.7 140 6.8 145.7 7.4 7
Slide 24: Capital Markets revenue – diversified by business
Capital Markets revenue – diversified by business ($ millions) Q3/2014 Q2/2014 Q3/2013 QoQ YoY Investment banking 511 393 310 30% 65% Lending and other 454 407 359 12% 26% Corporate & Investment Banking $965 $800 $669 21% 44% Fixed income, currencies and commodities (FICC) 574 524(1) 352 10% 63% Glo
Slide 25: Capital Markets revenue – diversified by geography
Capital Markets revenue – diversified by geography ($ millions) Q3/2014 Q2/2014 Q3/2013 QoQ YoY Canada 645 525 486 23% 33% U.S. 1,164 1,027 703 13% 66% Europe 323 227 175 42% 85% Asia and Other 51 53 43 (4)% 19% Geographic revenue excluding certain items(1) $2,183 $1,832 $1,407 19% 55% Add / (Deduct
Slide 26: Prudently growing Capital Markets' loan book
Prudently growing Capital Markets’ loan book Lending and Syndication Revenue and Loans Outstanding by Industry(1) Loans Outstanding by Region(1) ($ billions) Q3/2014 In the last 2 years, our lending and syndication revenue grew by 23%, exceeding our loan book growth of 17%(2) Energy, Mining, Explo
Slide 27: Strong Capital Markets' trading revenue
Strong Capital Markets’ trading revenue ($ millions) Q3/2014 Q2/2014 Q3/2013 QoQ YoY Capital Markets total revenue (teb) $2,185 $1,872 $1,428 17% 53% Capital Markets non-trading revenue(1) 1,250 1,062 885 18% 41% Capital Markets trading revenue (teb) $935 $810 $543 15% 72% Add / (Deduct): BOLI(2) (4
Slide 28: Credit trends near historic lows
Credit trends near historic lows Total GIL ($ millions, except percentage amounts) 2,072 2,201 2,111 1,975 1,999 0.50% 0.52% 0.49% 0.45% 0.45% 2 5 00 96 76 219 229 2 000 139 56 50 1 5 00 1 000 1,811 1,872 1,891 1,905 1,929 5 00 0 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Personal & Commercial Banking
Slide 29: Other – other income
Other – other income ($ millions) Q3/2014 Q2/2014 Q3/2013 QoQ YoY Other income – segments 89 104 114 (14)% (22)% FV adjustments on RBC debt(1) - 2 4 n.m. n.m. CDS on corporate loans 2 (7) (5) n.m. n.m. Funding related and other hedging items 10 (21) 16 n.m. n.m. Total Other – other income $101 $78 $
Slide 30: Specified items impacting results
Specified items impacting results Provisions for Loss Income tax post-employment Consolidated Results related to Restructuring adjustment ($ millions, except for earnings per share benefits and Reported sale of RBC charge related to Adjusted(1) (EPS) amounts) restructuring Jamaica (I&TS) prior years
Slide 31: 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 non-GAAP measures we believe provide useful information to investors regarding our financial condition and result of op