Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — RBC Financial Group — Salomon Smith Barney 2003 Financial Services Conference
38 slides from Royal Bank Of Canada's conference presentation, Jan 28, 2003
Slide 1: Building momentum
Building momentum “RY” on TSX & NYSE Salomon Smith Barney 2003 Financial Services Conference Peter Currie Vice-Chairman & CFO RBC Financial Group New York January 28, 2003
Slide 2: Speaker notes: introduction and market capitalization
[Slide 1.] Good morning everyone. At the advice of our legal counsel, our first slide is a safe harbor statement. I’d like to take this opportunity to talk to you about the performance, strategy and future prospects of RBC Financial Group, Canada’s largest corporation and a growing North American fi
Slide 3: Speaker notes: share performance, restructuring, Canadian economy
[Slide 5.] Turning to our share price performance, as you can see, the total return on our common shares for the five years ended October 31, 2002, of 10.7%, outperformed some major North American indices. [Slide 6.] Since the mid – 1990’s we’ve significantly restructured our businesses – and you ca
Slide 4: Speaker notes: Canadian dollar and strategic priorities
[Slide 8.] Firmer commodity prices, strong growth, solid fiscal position, current account surplus and interest rate premiums have helped the Canadian dollar turn the corner from all-time lows in 2002. All these forces should remain supportive for the currency in the year ahead, particularly as risk
Slide 5: Speaker notes: credit losses and cost management
[Slide 15.] Our conservative risk management has also resulted in a provision for credit losses ratio that was the lowest among the Canadian banks in 2002 and also relatively consistent over the past three years, despite the difficult credit environment facing our industry. [Slide 16.] We are mainta
Slide 6: Speaker notes: capital, dividends, 2002 results
internally generated capital through a combination of share repurchases, dividends, capital investment and targeted acquisitions. [Slide 19.] Our shareholders have also benefited from our strong financial performance through a 33% increase in common share dividends over the past 2 years. We have a l
Slide 7: Speaker notes: international expansion in the U.S.
book, which has loss ratios above the earlier goal range, and the expected growth of our small business and commercial loan portfolios. [Slide 23.] Turning now to our international expansion priority, we’ve put together a diversified platform in the U.S. with a focus on retail businesses. Our invest
Slide 8: Speaker notes: high-return businesses and cross-platform leverage
[Slide 26.] 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 9: Speaker notes: Canadian leadership and success factors
sizeable share of our total earnings. We are re-doubling our efforts on that front – increasing the number of salespeople in the branches, improving customer service through better problem resolution and other initiatives and investing in our network. [Slide 30.] We intend to retain our leadership p
Slide 10: Speaker notes: RBC Centura
acquisition costs are absorbed in the earlier years of an acquisition. While we are encouraged by the results to date, we are striving to further improve operating results. [Slide 35.] With its approximately 800,000 personal and commercial clients, 246 retail and business branches in 5 Southeastern
Slide 11: Speaker notes: RBC Centura products and cost benefits
new products, RBC Centura recently introduced two new wrap account products and a rising rate CD, just to name a few. Sales of the Rising Rate CD, which was introduced in July 2002, hit $160 million as of October 31, 2002, far surpassing the initial sales goal of $60 million. What’s important is tha
Slide 12: Speaker notes: RBC Dain Rauscher
cross-selling initiatives that have improved our top-line growth and improved the degree of integration of our product and service offerings. [Slide 39.] RBC Centura intends to continue to expand its footprint in the Southeast U.S. through a combination of branch openings and selective acquisitions.
Slide 13: Speaker notes: Dain Rauscher growth and U.S. near term
approximately 750 RBC Dain Rauscher Financial Consultants have completed the new wealth management business development course. The top 35% who took this course last year saw their business increase on average 29%, while those who haven’t yet taken the course saw their revenues decline on average by
Slide 14: Speaker notes: global businesses and conclusion
through additional niche acquisitions, by establishing alliances with other global private banks and through an open architecture approach to money management. [Slide 47.] I would like to conclude by saying that our management team is united in its efforts to grow the company in a disciplined manner
Slide 15: Caution regarding forward-looking statements
Caution regarding forward-looking statements From time to time, we make written and oral forward-looking statements, included in this presentation, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications, which
Slide 16: Solid growth in market value among top U.S. banks
Solid growth in market value among top 10 U.S. banks (U$ billions) Growth over 23-Jan-03 Dec 31/01 Citigroup 190.9 (28)% Bank of America (BK) 107.4 7% Wells Fargo (WFC) 80.5 9% JP Morgan Chase (JPM) 50.2 (30)% Wachovia (WB)1 50.2 16% Bank One (ONE) 44.3 (5)% US Bancorp (USB) 41.7 2% Fifth Third Banc
Slide 17: Outperformed benchmarks and major indices
Outperformed benchmarks and major indices Five year annualized total return1 (October 31, 1997 – October 31, 2002) 200 175 RBC 10.7% 150 TSX Banks & Trusts 8.0% S&P Banks 125 Index 5.5% S&P 500 Index 2.8% 100 S&P/TSX Composite Index -.3%% 75 1997 1998 1999 2000 2001 2002 1 in Canadian dollars, assum
Slide 18: Canadian economy expected to continue to out-perform U.S. in 2003
Canadian economy expected to continue to out-perform U.S. in 2003 Canadian and U.S. real GDP % change, year-over-year 6 6 U.S. 5 Canada 5 4 4 3 3 2 2 1 1 0 0 -1 -1 97 98 99 00 01 02 03 Source: Bureau of Economic Analysis, Statistics Canada, RBC Financial Group 7 Canadian dollar expected to strengthe
Slide 19: Our key strategic priorities
Our key strategic priorities Strong fundamentals International expansion Growth of high-return & high-P/E multiple businesses Cross-platform leverage 9 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.
Slide 20: Leadership in EPS growth continues
Priority #1 – Strong fundamentals Leadership in EPS growth continues Reported EPS growth 1 Core EPS growth 1 23% 11% 11% 1% -19% -15% -66% -78% -112% -113% TD CIBC BNS BMO RBC TD CIBC BNS BMO RBC 1 full year 2002 over full year 2001. Core EPS excludes unusual items (such as restructuring charges and
Slide 21: 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 $2,525 256
Slide 22: Lowest and consistent loan loss ratio
Priority #1 – Strong fundamentals Lowest and consistent loan loss ratio Total provision for credit losses as a % of average loans, BAs and reverse repos 2.00% TD1 1.75% 1.50% 1.25% 1.00% CM2 0.75% BNS3 BMO 0.50% RBC 0.25% 0.00% 2000 2001 2002 1 Using estimated average annual reverse repo balances ba
Slide 23: Acquisitions drive revenue growth
Priority #1 – Strong fundamentals Acquisitions drive revenue growth Core revenues1 (C$ millions) $15,770 11 .4 % R= $14,239 CAG 5-yr $11,987 $10,538 $9,851 $9,205 1997 1998 1999 2000 2001 2002 1 excluding one-time revenues in 1997, 1998, 1999 & 2001 17 U.S. GAAP Priority #1 – Strong fundamentals Gen
Slide 24: Dividends up 33% since Q4/00
Priority #1 – Strong fundamentals Dividends up 33% since Q4/00 Steady dividend increases (C$ per share) 0.40 0.38 0.38 0.36 0.36 0.36 0.33 0.33 0.30 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 History of uninterrupted dividend payments Target payout goal increased to 35-45% (was 30-40%) 20
Slide 25: 2003 objectives
Priority #1 – Strong fundamentals 2003 objectives 2003 objectives1 EPS growth 10 - 15% ROE 17 - 19% Revenue growth 5 – 8% Expense growth Operating expense growth < operating revenue growth Specific provision ratio2 0.45 - 0.55% Capital management2 Maintain strong capital ratios 1 based on core resul
Slide 26: Building sizeable U.S. platform
Priority #2 – Expansion outside Canada Building sizeable U.S. platform U.S. acquisitions since April 2000 RBC RBC RBC RBC Capital Banking Insurance Investments Markets Centura Banks, Inc. Liberty Life Dain Rauscher Corp. US$2.2 billion Insurance & Liberty US$1.2 billion June 5, 2001 Insurance Servic
Slide 27: Proportion of U.S. revenues growing
Priority #2 – Expansion outside Canada Proportion of U.S. revenues growing 2000 revenues 2002 revenues U.S. 7% U.S. Canadian Canadian 83% 28% 62% Other Int’l Other 10% Int’l 10% # of U.S. clients: .7 million # of U.S. clients: 2.3 million 25 U.S. GAAP Priority #3 – Grow high-return or high P/E busin
Slide 28: Cross-platform leverage
Priority #4 – Cross-platform leverage Cross-platform leverage Cross-platform leverage entails working across businesses and functions to: Î grow revenues by sharing best practices and offering products and services in an integrated fashion Î cut costs by eliminating duplication RBC Financial Group i
Slide 29: Undisputed lead provider of integrated financial services in Canada
Goal #1 – Undisputed integrated leader in Canada Undisputed lead provider of integrated financial services in Canada #1 or #2 in virtually all businesses in Canada On retail side, increasing sales people in branches, improving customer service and re-investing in our network 29 Goal #1 – Undisputed
Slide 30: Some success factors
Goal #1 – Undisputed integrated leader in Canada Some success factors Strong brand Strong CRM and customer segmentation capabilities Proven cost reduction and project management capabilities 31 Goal #2 – Best in class in United States Best in class provider of select financial services in the U.S. F
Slide 31: Higher earnings from U.S. acquisitions
Goal #2 – Best in class in United States Higher earnings from U.S. acquisitions1 (C$ millions) $232 ($23) 2001 2002 1 represents core net income of RBC Centura (includes RBC Mortgage and what was previously SFNB), RBC Liberty Insurance and RBC Dain Rauscher (includes Tucker Anthony Sutro) 33 U.S. GA
Slide 32: RBC Centura provides a solid foundation for RBC Banking growth
Goal #2 – Best in class in United States RBC Centura provides a solid foundation for RBC Banking growth 800,000 personal and commercial clients RBC Centura Î 246* retail and business branches in five Southeastern states (North Carolina, South Carolina, Virginia, Georgia and Florida) Î strong player
Slide 33: North-South and East-West initiatives
Goal #2 – Best in class in United States North-South initiatives delivering revenue and efficiency gains Efficiency gains Cost and efficiency gains accruing from the centralization of certain aspects of RBC Centura operations and information technology, sales and functional units with RBC Royal Bank
Slide 34: RBC Centura growth strategy and RBC Dain Rauscher foundation
Goal #2 – Best in class in United States RBC Centura to continue disciplined growth strategy Selective acquisitions and branch expansion focused on high growth U.S. Southeast Expanding national lines of business Î RBC Mortgage Î RBC Builder Finance 39 Goal #2 – Best in class in United States RBC Dai
Slide 35: RBC Dain Rauscher benefiting from Tucker Anthony Sutro integration
Goal #2 – Best in class in United States RBC Dain Rauscher benefiting from Tucker Anthony Sutro integration Net income (C$ millions) $17 $10 -$8 -$15 -$22 -$25 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 41 U.S. GAAP Goal #2 – Best in class in United States Retention compensation expenses to fall1 (C$ milli
Slide 36: RBC Dain Rauscher key growth strategies
Goal #2 – Best in class in United States RBC Dain Rauscher – key growth strategies Broaden and deepen client relationships Î 750 Financial Consultants have completed wealth management business development course - already showing strong business gains Increase client base and AUA through: Î expansio
Slide 37: A premier provider of specialized global financial services
Goal #3 – Premier provider of specialized global services A premier provider of specialized global financial services Focus on expanding businesses where we are: Î strong globally Î possess a competitive advantage Î can generate attractive returns Global private banking, custody and foreign exchange
Slide 38: Conclusion
Conclusion Will maintain clear focus on shareholder value creation through unwavering commitment to: Î disciplined growth Î diversification Î business leadership Î continued vigilant risk management Î efficiency improvements Î judicious capital management Î superior returns 47
RBC Financial Group — Salomon Smith Barney 2003 Financial Services Conference on 6ix