Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Q1 2022 Earnings Presentation
46 slides from Royal Bank Of Canada's earnings presentation, Feb 24, 2022
Slide 1: Royal Bank of Canada First Quarter Results
Royal Bank of Canada First Quarter Results February 24, 2022 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. Our Q1 2022 Report t
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: Strategic investments and capital deployment supporting strong client-driven growth
Strategic investments and capital deployment supporting strong client-driven growth (4) Strong earnings growth Diversified revenue streams ($BN) Expense growth (YoY) +4% YoY Impact of legal provision release +6% Net Income $4.1BN Capital YoY Markets +5% YoY 3.1% I&TS $2.8 $0.6 P&CB +4% YoY $4.8 0.6%
Slide 5: Balanced capital deployment driving sustainable long-term shareholder value
Balanced capital deployment driving sustainable long-term shareholder value 16%+ ROE Strong capital ratio Medium-term objective (1) Reinvesting to drive organic growth (RWA $BN) Committed to sustainable dividend growth (Q1/22) CET1 18 15 15 (33) bps 13 $1.7BN 42% 11 1 Dividend payout 2 Common share
Slide 6: Strong volumes and client activity in our largest businesses
Strong volumes and client activity in our largest businesses Canadian Banking average(1) loans Canadian Banking average Wealth Management (non-U.S.) and acceptances ($ billions)(2) deposits ($ billions)(3) AUA(1) and AUM(1) ($ billions) 7% 8% 15% 10% 12% 13% 2-YR CAGR YoY 2-YR CAGR YoY 2-YR CAGR YoY
Slide 7: Q1/2022 Financial Review
Q1/2022 Financial Review Nadine Ahn Chief Financial Officer
Slide 8: Strong client activity and volume growth with positive operating leverage
Strong client activity and volume growth with positive operating leverage Reported Earnings ($ millions, except for EPS and ROE) Q1/2022 Net income up 6% YoY; Pre-provision, pre-tax earnings(2) up 10% YoY QoQ YoY Revenue 13,066 1% 6% Revenue Net of Insurance FV Change(1) 13,496 7% 7% Revenue Non-I
Slide 9: Capital: Strong capital and earnings growth continue to drive shareholder returns
Capital: Strong capital and earnings growth continue to drive shareholder returns CET1 Movement 74 bps CET1 ratio of 13.5%, down 20 bps QoQ, reflecting: Strong RWA growth supporting higher volumes (32) bps (29) bps Repurchase of 8.9MM shares for $1.2BN (22) bps (6) bps +42 bps Partly offset
Slide 10: Net interest income: Higher volumes driving net interest income growth
Net interest income: Higher volumes driving net interest income growth Net interest income up 5% YoY as strong volume growth more than offset lower spreads o Net interest income (ex-trading) up 6%(1) YoY All-bank NIM on average earning assets(2) was down 11 bps YoY (down 4 bps QoQ) o NIM (ex-Tra
Slide 11: Net interest margin: Well-positioned for rising interest rates
Net interest margin: Well-positioned for rising interest rates Canadian Banking NIM on Average Earning Assets 25 bps increase in interest rates Roughly half of the Canadian Banking and City National deposit 0.02% 0.01% base is non-interest bearing or low-rate deposits 2.42% 2.41% 2.41% Most of U
Slide 12: Non-interest expense: Higher expenses to support client growth
Non-interest expense: Higher expenses to support client growth Non-Interest Expense (NIE, $ millions) Q1/2022 Highlights % of LTM NIE Q1/21 Expenses 6,542 Non-interest expense up 1% YoY Up 3% YoY excluding variable and share-based compensation Salaries 34% Salaries & Benefits 99 (which includes
Slide 13: Expense expectations: Improving productivity while investing for growth
Expense expectations: Improving productivity while investing for growth 2021 Non-Interest Expense Breakdown by Type(1) Investing for growth Less variable Scales with revenue Gaining market share and adding scale in our largest segments Technology Infrastructure Sales Operations Advice Ente
Slide 14: Personal & Commercial Banking: Continued strong client-driven volume growth
Personal & Commercial Banking: Continued strong client-driven volume growth Net Income ($ millions) Q1/2022 Highlights 10% Canadian Banking (3)% Net income up 9% YoY 2,033 Pre-provision, pre-tax earnings up 8%(1) YoY 1,974 1,793 Revenue up 6% YoY Net interest income up 3% YoY (see slides 9 &
Slide 15: Wealth Management: Strong results driven by markets, net sales and volumes
Wealth Management: Strong results driven by markets, net sales and volumes Net Income ($ millions)(1) Q1/2022 Highlights 24% Net income up 24% YoY 42% Pre-provision, pre-tax earnings up 27%(2) YoY Revenue increased 12% YoY 795 Wealth Management (non-U.S.) revenue up 12% YoY 641 558 Higher
Slide 16: Insurance: Strong group annuity sales and investment related experience
Insurance: Strong group annuity sales and investment related experience Net Income ($ millions) Q1/2022 Highlights (2)% Net income down 2% YoY (26)% Claims experience and the impact of lower new longevity reinsurance contracts mostly offset by business growth and higher favourable investment-rel
Slide 17: Investor & Treasury Services: Increased client activity offset by higher costs
Investor & Treasury Services: Increased client activity offset by higher costs Net Income ($ millions) Q1/2022 Highlights (4)% Net income down 4% YoY 8% Revenue up 4% YoY Higher funding and liquidity revenue reflecting a heightened 123 118 impact from elevated enterprise liquidity in the prior
Slide 18: Capital Markets: Record Investment Banking revenue offset lower trading results
Capital Markets: Record Investment Banking revenue offset lower trading results Net Income ($ millions) Q1/2022 Highlights (3)% Net income down 3% YoY 12% Record pre-provision, pre-tax earnings up 6%(1) YoY Higher taxes reflecting favourable tax adjustments last year and 1,067 changes in earni
Slide 19: Risk Review
Risk Review Graeme Hepworth Chief Risk Officer
Slide 20: Allowance for Credit Losses: Trending towards pre-pandemic levels
Allowance for Credit Losses: Trending towards pre-pandemic levels Movement in Allowance for Credit Losses (ACL) on Loans ($ millions) L&A $685BN - ACL to L&A - 0.89% L&A L&A $742BN $763BN ACL to L&A ACL to L&A 0.60% 0.58% L&A 6,115 180 (80) (130) $652BN ACL to L&A 0.53% 4,419 4,519 4,389 4,389 3,471
Slide 21: Gross Impaired Loans: Continue trending lower on muted new formations
Gross Impaired Loans: Continue trending lower on muted new formations Gross Impaired Loans (GIL) ($ millions, bps) Key Drivers of GIL (QoQ) Total GIL decreased $167MM (down 3 bps QoQ) 41 40 Canadian Banking 35 GIL of $1,169MM decreased $70MM QoQ, as muted new formations 31 (particularly in our c
Slide 22: PCL on impaired loans: Remain below pre-pandemic and long-term averages
PCL on impaired loans: Remain below pre-pandemic and long-term averages Total RBC ($ millions, bps) Wealth Management ($ millions, bps) 13 5 2 0 11 (1) 9 8 7 (13) $3 $12 $1 $218 $(2) $177 $180 $146 $137 $(27) Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Higher provisions QoQ, due to
Slide 23: Market risk trading revenue and VaR
Market risk trading revenue and VaR ($ millions) 80 60 40 20 0 -20 -40 -60 -80 -100 Trading Revenue (teb) (1) VaR During Q1/2022, there were no days with net trading losses VaR (2) increased in Q1/2022 driven by the impact of heightened market volatility on our equity derivatives portfolio, and
Slide 24: Appendices
Appendices
Slide 25: 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 #1 or #2 in key Canadian Banking product categories(1) transaction accounts, 19% investments, b
Slide 26: ESG: Putting our Purpose into practice
ESG: 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 Committed to net-zero emissions Preparing youth for the and driving a diverse & responsible investment and accelerati
Slide 27: Net Interest Income: Average rates and balance sheet
Net Interest Income: Average rates and balance sheet All-Bank Asset Yields(1) All-Bank Deposit Costs(2) 3.28% 3.24% 3.16% 3.03% 3.01% Loans 1.15% 1.09% 0.96% 0.91% 0.89% 2.15% 2.13% 2.09% Total earning Term deposits 1.99% 1.95% assets 1.85% 1.80% Securities 0.58% 1.77% 1.79% 1.70% 0.55% 0.48% 0.46%
Slide 28: Non-interest income: Strong Wealth Management and Investment Banking results
Non-interest income: Strong Wealth Management and Investment Banking results Non-Interest Income ($ millions) Q1/2022 Highlights Q1/21 Revenue (net of FV change) (1) 7,562 Non-interest income was down 1% YoY; up 9% net of Insurance FV change(1) Market-related (2) Investment, brokerage & custodial
Slide 29: Canadian Banking: Strong volume growth
Canadian Banking: Strong volume growth Average Gross Loans & Acceptances(1) ($ billions) Average Deposits(1) ($ billions) 8% 10% 2% 3% 505 519 472 516 528 488 17 18 17 97 241 252 95 89 220 75 75 77 305 330 338 252 264 268 Q1/2021 Q4/2021 Q1/2022 Q1/2021 Q4/2021 Q1/2022 Percentage Change(1) YoY QoQ P
Slide 30: Canadian Banking: Our 14MM clients continue to adopt our digital channels
Canadian Banking: Our 14MM clients continue to adopt our digital channels Active Digital Users (000s)(1) Digital Adoption Rate(2) Active Mobile Users (000s)(1) 5% 150 bps 10% 8,110 57.5% 56.9% 5,695 7,980 5,547 56.0% 7,755 Pre- 5,171 Pre- pandemic pandemic Pre- pandemic 4,619 7,354 52.5% Q1/20 Q1/21
Slide 31: Wealth Management: Strong net sales at RBC Global Asset Management
Wealth Management: Strong net sales at RBC Global Asset Management RBC Global Asset Management AUM(1) ($ billions) RBC Global Asset Management Net Sales ($ billions) Last 12 months ended Q1/2022 9.4% 0.3% Total Long-Term Canadian Retail $42.6BN $20.7BN 597 599 548 99 98 93 12.3 7.2 71 73 66 3.5 5.3
Slide 32: U.S. Wealth Management (incl. CNB): Continued strong volume growth
U.S. Wealth Management (incl. CNB): Continued strong volume growth Net Income (US$ millions)(1) Q1/2022 Highlights (US$) 36% Net income up 36%YoY n.m. Pre-provision, pre-tax earnings(3) up 52% YoY Includes US$78MM Includes US$54MM (after-tax) legal (after-tax) legal provision provision release
Slide 33: Capital Markets: Revenue and loan breakdown by geography
Capital Markets: Revenue and loan breakdown by geography Capital Markets Revenue Breakdown by Geography ($ millions) Canada: Up YoY, mainly driven by an increase in equity and 2,708 2,810 commodities trading as well as higher equity origination, partially 159 135 2,298 offset by lower M&A fees 427
Slide 34: U.S. Operations: Strong client activity and volumes offset by lower spreads
U.S. Operations: Strong client activity and volumes offset by lower spreads Net Income (US$ millions) U.S. Operations Revenue (US$ billions)(2) (9)% Last 12 months ended Q1/2022 23% CNB Net 652 Interest 591 Income 496 18% 479 379 Total U.S. Capital 425 Includes US$54MM $9.8 billion Markets (after-ta
Slide 35: Canadian Banking: Strong underlying credit quality
Canadian Banking: Strong underlying credit quality Canadian Banking (CB) PCL on Impaired Loans and Gross Impaired Loans CB Retail FICO Score Distribution (Q1/22) Q1/22 Avg PCL on Impaired Loans Gross Impaired Loans Avg <620 Loan (bps) (1) (bps) FICO 3% Balances Score 620- ($BN) Q1/21 Q4/21 Q1/22 Q1/
Slide 36: Canadian residential portfolio: Strong underlying credit quality
Canadian residential portfolio: Strong underlying credit quality Q1/2022 Highlights(1) Canadian Banking Residential Lending Portfolio(1) Strong underlying quality of uninsured residential lending portfolio Total $365.7BN Uninsured $301.4BN 52% of uninsured portfolio have a FICO score >800 $330.5
Slide 37: Allowance for Credit Losses: Trending towards pre-pandemic levels
Allowance for Credit Losses: Trending towards pre-pandemic levels Allocation of ACL by Product as a % of Loans & Acceptances Pre- Peak Total Product Pandemic Q2/20 Q3/20 ACL Ratio Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q1/20 Q4/20 Residential mortgages (1) 0.12% 0.15% 0.16% 0.15% 0.15% 0.14% 0.12% 0.11% 0.10
Slide 38: Additional Notes (slides 3 to 20)
Additional Notes (slides 3 to 20) Slide 3 1. Pre-provision, pre-tax earnings is calculated as income before income taxes and PCL. This is a non-GAAP measure. For reconciliation, see slides 41-44. For more information, see slide 45. 2. Adjusted for (i) after-tax effect of amortization of other intang
Slide 39: Additional Notes (slides 25 to 36)
Additional Notes (slides 25 to 36) Slide 25 18. Includes FTSE4Good, MSCI, Vigeo EIRIS and S&P Corporate Sustainability Assessment. 19. Statistics based on internal data reported to the Governance Committee of the Board, updated October 31, 2021. Slide 26 20. Loan yield is calculated as interest inco
Slide 40: Glossary (1/2)
Glossary (1/2) Assets under administration (AUA): Assets administered by us, which are beneficially owned by clients. Services provided in respect of assets under administration are of an administrative nature, including safekeeping, collecting investment income, settling purchase and sale transac
Slide 41: Glossary (2/2)
Glossary (2/2) Liquidity Coverage Ratio (LCR): Liquidity Coverage Ratio is the average for the three months ended for each respective period and is calculated in accordance with OSFI’s Liquidity Adequacy Requirements guidance. Net interest margin (NIM) (average earning assets, net): Net interest
Slide 42: Reconciliation for non-GAAP financial measures (1/4)
Reconciliation for non-GAAP financial measures (1/4) Calculation of ROTCE $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 Net income available to common shareholders 3,787 3,819 4,039 Add: After-tax effect of amortization of other intangibles 48 46 47 Net income available to common shareholde
Slide 43: Reconciliation for non-GAAP financial measures (2/4)
Reconciliation for non-GAAP financial measures (2/4) Calculation of Effective tax rate (teb) Calculation of NIE excl. VC & SBC $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 Income Taxes (teb) Expenses 6,542 6,583 6,580 Income Taxes 1,03
Slide 44: Reconciliation for non-GAAP financial measures (3/4)
Reconciliation for non-GAAP financial measures (3/4) Calculation of PPPT Calculation of PPPT $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 All-Bank U.S. Operations (US$) Net income 3,847 3,892 4,095 Net income 652 479 591 Income taxes 1
Slide 45: Reconciliation for non-GAAP financial measures (4/4)
Reconciliation for non-GAAP financial measures (4/4) Calculation of Adjusted PPPT $ millions (unless otherwise stated) Q1/21 Q4/21 Q1/22 U.S. Operations (US$) PPPT 706 570 750 Add: CNB’s amortization of intangibles 36 36 36 Adjusted PPPT 743 606 786 U.S. Operations (C$) PPPT 907 717 952 Add: CNB’s a
Slide 46: 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