Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — RBC Financial Group — Merrill Lynch Canadian Banks' CEO Conference 2003
36 slides from Royal Bank Of Canada's conference presentation, Jan 22, 2003
Slide 1: Building on our strengths
Building on our strengths “RY” on TSX & NYSE Merrill Lynch Canadian Banks’ CEO Conference 2003 Gord Nixon President & CEO RBC Financial Group Toronto January 22, 2003
Slide 2: Presentation to analysts and institutional investors (speech text)
Gord Nixon, President & CEO, RBC Financial Group Presentation to analysts and institutional investors Merrill Lynch Canada’s Canadian Banks’ CEO Conference January 22, 2003 Good afternoon, everyone. [Slide 1.] At the advice of our legal counsel, our first slide is a safe harbor statement. Jamie aske
Slide 3: Risk management and cost management (speech text)
[Slide 5.] Part of our success stems from our disciplined approach to risk management. Since the end of 1999, we’ve recorded the lowest increase in non-accrual loans among our Canadian peers and our non-accrual loans ratio is also the lowest. This improvement reflects the fact that, since 1998, we h
Slide 4: Capital generation and net income (speech text)
[Slide 8.] Our strong financial performance has led to solid internal capital generation – $1.8 billion in 2002 after paying out over $1 billion in common share dividends and almost $100 million in preferred share dividends. We repurchased $764 million of common shares last year and committed to acq
Slide 5: Modified medium-term goals (speech text)
[Slide 11.] We have also modified some of our medium-term goals. We have raised our dividend payout goal to 35-45% from 30-40%, underscoring our commitment to rewarding our shareholders. Our payout ratio was 37% in 2002 and we raised our common share dividends by 10 per cent during the year. We have
Slide 6: High-return, high-P/E businesses and cross-platform leverage (speech text)
[Slide 14.] Our third priority is the growth of high-return and high-P/E multiple businesses. While our primary focus is on Personal & Commercial Banking and Wealth Management, all business platforms have selected segments for priority growth. However, we will invest only in those areas of our core
Slide 7: Retaining leadership positions in Canada (speech text)
[Slide 17.] We intend to retain our leadership positions in Canada by continuing to offer our products and services in an integrated manner, differentiating ourselves from our competitors. We believe that time is one of the most precious commodities we have today, and customers will increasingly val
Slide 8: Developing profitable customer relationships (speech text)
[Slide 21.] So how do we go about developing a profitable relationship with every customer? We have a significant amount of information about our customers including transactional, demographic and attitudinal data. We use this information and our proprietary decisioning technology to segment our cli
Slide 9: Referrals and cross-selling (speech text)
[Slide 24.] Referrals are not new to our sales forces. We have a successful history of cross-selling products in Canada, having generated almost $17 billion of new business from referrals within the group between 1997 and 2002. That’s $1.82 of new business for every dollar of business referred. With
Slide 10: Best in class provider in the U.S. (speech text)
[Slide 27.] Now turning to our second key goal - to be recognized as a best in class provider of select financial services in the United States. When we embarked on our U.S. expansion strategy, we did so in a very deliberate manner. We adopted a platform extension strategy, focusing on businesses wh
Slide 11: North-South initiatives at RBC Centura (speech text)
[Slide 31.] From a North-South perspective (that is, working between Canada and the U.S.), RBC Centura has leveraged our Canadian expertise in sales practices, performance management as well as segment and product management. It realigned its reporting structure along Personal & Small Business Banki
Slide 12: Cost benefits and East-West initiatives (speech text)
[Slide 32.] In addition to revenue-oriented initiatives, cost benefits are also beginning to accrue from the centralization of certain aspects of operations and information technology, sales and functional units. For example, RBC Centura in-bound calls and branch service support is being handled by
Slide 13: RBC Dain Rauscher (speech text)
[Slide 35.] Our acquisition of RBC Dain Rauscher provided us with a wealth management foundation on which to build. Following the Tucker Anthony Sutro acquisition, RBC Dain Rauscher has 2,000 financial consultants operating out of 142 branch offices in 39 states and CDN$133 billion of assets under a
Slide 14: RBC Dain Rauscher growth and global services (speech text)
It is also important to point out that RBC Dain Rauscher also expects to increase its client base and assets under administration through expansion of the existing branch office network, recruitment of experienced Financial Consultants and small opportunistic acquisitions of existing brokerage opera
Slide 15: Conclusion (speech text)
[Slide 42.] I would like to conclude by saying that our management team is united in its efforts to grow the company in a disciplined manner, maintain a diversified business base, continue our strong risk management focus, watch costs, judiciously manage capital and maintain leadership in our variou
Slide 16: Caution regarding forward-looking statements
Caution regarding forward-looking statements From time to time, we make written and oral forward-looking statements, included in this presentation, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications, which
Slide 17: Strong ROE performance relative to peers
Priority #1 – Strong fundamentals Strong ROE performance relative to North American peer group Core ROE Royal Bank Peer Group1 19.3% 18.1% 17.8% 17.9% 16.6% 17.4% 16.1% 17.5% 15.1% 15.9% 13.5% 11.8% 2 1997 1998 1999 2000 2001 2002 1 selected peer group consists of: Bank of New York, Wells Fargo, PNC
Slide 18: Strong credit culture
Priority #1 – Strong fundamentals Strong credit culture Reputed to have strong credit culture Lowest gross impaired loans (GILs) ratio and lowest growth of GILs of Big 5 Canadian banks (C$ millions) Growth GILs/loans Q4/99 Q4/02 % $ & BAs-Q4/021 BNS $2,380 $3,987 68% $1,607 2.02% TD $ 709 $2,525 256
Slide 19: Continuing to watch costs; generating capital internally
Priority #1 – Strong fundamentals Continuing to watch costs Operating expenses1 (ex. U.S. acquisitions) down 5% in 2002 versus flat operating revenues RBC Banking core efficiency ratio down 670 b.p. since 1999 to 59% in 2002 – targeting low 50s in 3 years C$580 million taken out of cost base in 1999
Slide 20: Solid financial performance in 2002; 2003 objectives
Priority #1 – Strong fundamentals Solid overall financial performance in 2002 2002 objectives1 2002 performance EPS growth 5 - 10% 27% 13% excluding goodwill amortization in 2001 ROE 17 - 19% 16.6% Revenue growth 7 - 10% 11% Expense growth Operating expense growth Op. exp. growth of 8% < operating r
Slide 21: Aggressive 3-5 year goals; building U.S. platform
Priority #1 – Strong fundamentals Aggressive 3-5 year goals 3 - 5 year goals1 EPS growth 10-15%+ ROE 20%+ Revenue growth 8 - 10% Specific provision ratio2 0.35 - 0.45% (was .30-.40%) Dividend payout ratio 35 - 45% (was 30-40%) Capital management2 Tier 1 capital 8-8.5% (was 8%) Total capital 11 – 12%
Slide 22: Proportion of U.S. revenues growing
Priority #2 – Expansion outside Canada Proportion of U.S. revenues growing 2000 revenues 2002 revenues U.S. 7% U.S. Canadian Canadian 83% 28% 62% Other Int’l Other 10% Int’l 10% 13 U.S. GAAP Priority #3 – Grow high-return or high P/E businesses Grow high-return or high-P/E businesses Primarily focus
Slide 23: Cross-platform leverage
Priority #4 – Cross-platform leverage Cross-platform leverage Cross-platform leverage entails working across businesses and functions to: Î grow revenues by sharing best practices and offering products and services in an integrated fashion Î cut costs by eliminating duplication RBC Financial Group i
Slide 24: Undisputed integrated leader in Canada: success factors
Goal #1 – Undisputed integrated leader in Canada Undisputed lead provider of integrated financial services in Canada Committed to retaining our leadership positions in all our businesses Will achieve this goal by offering our products and services in an integrated manner to: Î differentiate us from
Slide 25: Balanced approach sustains CRM leadership
Goal #1 – Undisputed integrated leader in Canada Balanced approach sustains CRM leadership position “An interesting aspect of Royal Bank’s approach to CRM is that it does reflect a balance among technology, people, and business processes… The acknowledgement of this reality and the willingness to al
Slide 26: Developing profitable relationships
Goal #1 – Undisputed integrated leader in Canada Developing profitable relationships Use transactional, Use decisioning technology to segment client base demographic and based on needs and attitudinal data on preferences & current and our clients expected future profitability To create personalized
Slide 27: Enhanced referral program
Goal #1 – Undisputed integrated leader in Canada Enhanced referral program “RBC Referrals” Î will improve revenue growth, efficiency, profitability, client retention and shareholder value creation Î all five business segments participating Î incentives for employees to refer business Î includes role
Slide 28: RBC Investments Financial Planning
Goal #1 – Undisputed integrated leader in Canada RBC Investments Financial Planning a prime example of cross-platform leverage RBC Investments Financial Planning Î streamlined, efficient sales force of over 1,600 accredited financial planners RBC Investments providing expertise in compliance and inv
Slide 29: Best in class provider of select financial services in the U.S.
Goal #2 – Best in class in United States Best in class provider of select financial services in the U.S. Focus on growing personal & commercial banking and wealth management Î businesses in which we have exportable know- how and experience Î businesses in which we have a competitive advantage Goal t
Slide 30: Strong contributions from RBC Centura
Goal #2 – Best in class in United States Strong contributions from RBC Centura (C$ millions) 2002 2001 RBC Centura1 $206 $ 21 RBC Liberty 23 29 RBC Dain Rauscher2 3 (73) Total U.S. acquisitions $ 232 $(23) NOTE: 2001 core numbers included 4 months and 3 weeks of results for RBC Centura, 11 months of
Slide 31: North-South initiatives delivering revenue and efficiency gains
Goal #2 – Best in class in United States North-South initiatives delivering revenue and efficiency gains Exporting Canadian expertise to the U.S. Î sales practices, performance management, segment and product management and retail branch model Î dedicated sales management and specialized sales force
Slide 32: East-West initiatives strengthen revenue synergies
Goal #2 – Best in class in United States East-West initiatives strengthen revenue synergies Examples of initiatives • recently-introduced life specialist program has resulted in nearly 2,000 referrals in 2002 • offering adjustable rate mortgage to RBC Centura clients • RBC Centura achieved new mortg
Slide 33: RBC Dain Rauscher provides foundation to build on
Goal #2 – Best in class in United States RBC Dain Rauscher provides foundation to build on RBC Dain Rauscher is 9th largest U.S. full- service brokerage firm by number of financial consultants Î 2,000 financial consultants operating out of 142 branch offices in 39 states Î assets under administratio
Slide 34: Retention compensation expenses to fall; key growth strategies
Goal #2 – Best in class in United States Retention compensation expenses to fall1 (C$ millions) $176 $158 RBC Capital Markets $87 RBC $53 Investments $31 2001 2002 2003F 2004F 2005F 1 estimate based on fiscal Q4/02 C$/US$ exchange rate 37 U.S. GAAP Goal #2 – Best in class in United States RBC Dain R
Slide 35: What next in the U.S.?
Goal #2 – Best in class in United States What next in the U.S.? Near-term focus Meeting operating targets and adopting best practices to enhance revenues, efficiency and profitability Additional acquisitions will likely focus on personal & commercial banking, largely in the Southeast U.S. 39 Goal #3
Slide 36: Strong global businesses; Conclusion
Goal #3 – Premier provider of specialized global services Strong global businesses Custody business #12 globally, highly-regarded and profitable with AUA of C$1.4 trillion FX business is among top 15 globally, #1 in Canada Global Private Banking in 100+ countries, will expand through targeted acquis
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