Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — CIBC World Markets Frontenac Institutional Investor Conference 2002
35 slides from Royal Bank Of Canada's conference presentation, Sep 26, 2002
Slide 1: Continuing to create superior shareholder value
Continuing to create superior shareholder value “RY” on TSX & NYSE CIBC World Markets Frontenac Institutional Investor Conference Peter Currie Vice Chairman & CFO Royal Bank of Canada Quebec City September 26, 2002
Slide 2: Presentation to institutional investors (speaker notes)
Peter Currie, Vice Chairman & CFO, Royal Bank of Canada Presentation to institutional investors CIBC World Markets Frontenac Institutional Investors Conference Quebec City, September 26, 2002 Good morning everyone. I’d like to take this opportunity to tell you what RBC Financial Group is doing to bu
Slide 3: Speaker notes: growth since 1995 and goals
[Slide 3.] Since 1995, we’ve grown our revenues and earnings by 12-13% annually, dividends by 14% and share price by 21% annually. In addition, we’ve raised our dividend payout ratio from 34% to 37%. In fact, using the fourth quarter of this year’s indicated dividend of 40 cents per share, our payou
Slide 4: Speaker notes: international expansion and priorities
I will also discuss U.S. expansion in detail in a few moments. Outside North America, we will continue to focus only on those businesses where we are strong globally, have a competitive advantage and can generate attractive returns. Examples of businesses that meet our third goal include global cust
Slide 5: Speaker notes: trading revenues and costs
[Slide 14.] Our trading revenues have held up reasonably well and have shown much less volatility than many of our competitors, helping drive a more consistent bottom line. We’d attribute this to the diversification of our trading book and a very conservative philosophy whereby we don’t take large b
Slide 6: Speaker notes: capital, dividends and 2002 objectives
[Slide 20.] We are generating substantial capital internally – $1.3 billion already this year, after paying out over $750 million in common share dividends and over $70 million in preferred share dividends. We have bought back $400 million of common shares and made acquisitions aggregating about $90
Slide 7: Speaker notes: U.S. platform and acquisitions
[Slide 26.] We’ve put together a diversified platform in the U.S. with an emphasis on retail businesses. Our investment emphasis has been in wealth management and personal and commercial banking. With about 3,500 brokers in North America, we are not far from our 4,000 target and believe RBC Dain Rau
Slide 8: Speaker notes: RBC Centura and Dain Rauscher integration
[Slide 33.] RBC Centura expects to achieve during this year most of the $70 million of cost savings targeted for mid-2004. We were able to realize a quicker and higher degree of integration than originally planned of Security First Network Bank into RBC Centura. The two former SFNB branches in Atlan
Slide 9: Speaker notes: U.S. consolidation and synergies
[Slide 39.] Our near-term priority for the U.S. remains on consolidating thes e acquisitions and meeting our operating targets. To do so, we’re looking at opportunities on a North-South basis, that is each platform is looking at its entire North American business and determining ways to maximize its
Slide 10: Speaker notes: cross-platform financial planning
[Slide 44.] A great example of cross-platform leverage is RBC Investments and RBC Banking joining forces to deliver a streamlined, efficient, and ‘best in class’ financial planning sales force of over 1,600. They will focus on a couple of key customer segments, allowing us to better retain and servi
Slide 11: Speaker notes: closing remarks
[Slide 47.] Our management team is united in its efforts to grow the company in a disciplined manner, maintain a diversified business base, continue our strong risk management, watch costs, judiciously manage capital and maintain leadership in our various businesses by winning more of our customers’
Slide 12: Caution regarding forward-looking statements
Caution regarding forward-looking statements Royal Bank of Canada, from time to time, makes written and oral forward-looking statements, included in this presentation, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other co
Slide 13: Created significant shareholder value
Our evolution Created significant shareholder value (C$ millions, except per share amounts) 1995 9 Mos. 2002 CAGR Income statement: Gross revenues $7,317 $15,7991 12% Net income after-tax $1,258 $2,8881 13% Fully diluted EPS $1.74 $4.091 13% Return on common equity 16.2% 16.7% 50 bp Closing share pr
Slide 14: Share price outperforming Canadian peers
Share price outperforming Canadian peers Relative share price performance (Weekly close October 31, 2001 to September 20, 2002) $130 $125 $120 $115 $110 RBC $105 BMO $100 BNS $95 $90 $85 CM $80 TD $75 12-Apr 26-Apr 2-Aug 16-Aug 30-Aug 5-Jul 19-Jul 1-Mar 15-Mar 29-Mar 31-Oct 9-Nov 23-Nov 7-Dec 21-Dec
Slide 15: Our goals / Key priorities
Our goals In Canada: Committed to retaining our #1 or #2 market positions. Intend to: è increase the number of salespeople in the branches è improve customer service è re-invest in our network è introduce more innovative products Tremendous opportunity in the financial planning area Outside North Am
Slide 16: Leadership in EPS growth continues
Priority #1 – Strong fundamentals Leadership in EPS growth continues Reported EPS growth1 Core EPS growth1 14% 13% -14% -20% -27% -26% -49% -47% -95% -98% TD CIBC BMO BNS RBC TD CIBC BNS BMO RBC 1 9 months 2002 over 9 months 2001. Core EPS excludes unusual items (such as restructuring charges and ga
Slide 17: Strong ROE performance vs. North American peer group
Priority #1 – Strong fundamentals Strong ROE performance vs. North American peer group Core ROE Royal Bank Peer Group 1 19.3% 18.1% 17.8% 17.9% 16.6% 16.7% 17.4% 16.1% 17.5% 15.9% 14.4% 11.8% 1997 1998 1999 2000 2001 9 Months 2 2002 1 selected peer group consists of: Bank of New York, Wells Fargo, P
Slide 18: Potential upside from market turnaround
Priority #1 – Strong fundamentals Potential upside from market turnaround Average market-sensitive revenues as a % of total core revenues1 (Q1/01 to Q3/02) 35.5% 32.4% 27.6% 19.9% 20.2% BNS BMO RBC CM TD 1 trailing 7 quarter average of market-sensitive revenues (include capital market and brokerage
Slide 19: Continuing to watch costs / Stronger balance sheet
Priority #1 – Strong fundamentals Continuing to watch costs Operating expenses1 (ex. U.S. acquisitions) down 5% in 9 months 2002 versus flat operating revenues RBC Banking core efficiency ratio down 710 b.p. since 1999 to 58.6% for 9 months 2002 C$580 million taken out of cost base in 1999- 2000 Con
Slide 20: Strong credit culture
Priority #1 – Strong fundamentals Strong credit culture Reputed to have strong credit culture Lowest gross impaired loans ratio and growth of gross impaired loans of Big 5 Canadian banks (C$ millions) Growth GILs/Loans Q4/99 Q3/02 % $ & BAs1 TD $ 709 $2,024 185% $1,315 1.24% BNS $2,380 $4,839 103% $
Slide 21: Canadian consumer loan portfolio credit quality remains stable
Priority #1 – Strong fundamentals Canadian consumer loan portfolio credit quality remains stable Provision for credit losses % of outstanding balance1 0.12% 0.11% 0.11% 0.11% 0.10% 0.10% 0.10% 0.09% 0.09% Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 1 total Canadian consumer loans, excludin
Slide 22: 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 range 30-40% (37% in Q3/02) 21 U.S. GAAP
Slide 23: Aggressive performance targets
Priority #1 – Strong fundamentals Aggressive performance targets 3 - 5 year goals1 ROE 20%+ EPS growth 15%+ Revenue growth 8 - 10% Specific provision ratio2 0.30 - 0.40% Dividend payout ratio 30 - 40% Capital management2 Tier 1 capital 8% Total capital 11 – 12% 1 based on core results 2 based on Can
Slide 24: U.S. expansion strategy
Priority #2 – Expansion outside Canada U.S. expansion strategy Roll-out, platform extensions, not “bet- the-bank” strategy Expanded in businesses where we have competitive advantage 2002 acquisitions to be limited to approximately $1 billion 25 Priority #2 – Expansion outside Canada Building sizeabl
Slide 25: Branding / Growing U.S. client base
Priority #2 – Expansion outside Canada Branding 27 Priority #2 – Expansion outside Canada Growing U.S. client base Approximate # of clients RBC Liberty Insurance 700,000+ households RBC Centura 800,000 RBC Dain Rauscher 500,000 accounts Tucker Anthony 300,000 accounts Eagle Bancshares 90,000 account
Slide 26: Proportion of U.S. revenues growing
Priority #2 – Expansion outside Canada Proportion of U.S. revenues growing 2000 revenues 9 month 2002 revenues U.S. 7% U.S. Canadian Canadian 84% 28% 62% Other Int’l Other 9% Int’l 9% 29 U.S. GAAP Priority #2 – Expansion outside Canada Higher earnings from U.S. acquisitions1 (C$ millions) $153 -$19
Slide 27: Strong contributions from RBC Centura
Priority #2 – Expansion outside Canada Strong contributions from RBC Centura (C$ millions) 9 mos. 9 mos. 2002 2001 RBC Centura1 $149 $ 10 RBC Liberty 17 21 RBC Dain Rauscher2 (13) (50) Total U.S. acquisitions $ 153 $(19) NOTE: 9 months 2001 core numbers included 7 weeks of results for RBC Centura, 8
Slide 28: RBC Centura delivering on cost savings
Priority #2 – Expansion outside Canada RBC Centura delivering on cost savings (US$ Millions) 3 year % of target Key initiatives FY02 plan1 target by FY02 Consolidate Internet platforms & back end product and marketing $30 $45 150% capabilities Shared mortgage operations & back office for mortgage $2
Slide 29: Retention compensation expenses to fall
Priority #2 – Expansion outside Canada Retention compensation expenses to fall1 (C$ millions) $176 $158 RBC Capital Markets $87 RBC $53 Investments $31 2001 2002F 2003F 2004F 2005F 1 forecasts based on current C$/US$ exchange rates 35 U.S. GAAP Priority #2 – Expansion outside Canada U.S. brokerage w
Slide 30: Disciplined acquisitions – should be accretive in 2-3 years
Priority #2 – Expansion outside Canada Disciplined acquisitions – should be accretive in 2-3 years Cash EPS accretion Eagle Bancshares In Year 1 Liberty Insurance In Year 1 Prism Financial In Year 1 Admiralty Bancorp In Year 2 Barclays’ Americas private banking operations In Year 21 Business Men’s A
Slide 31: U.S. expansion priorities
Priority #2 – Expansion outside Canada U.S. expansion priorities Near-term focus è Consolidating recent acquisitions è Meeting operating targets 39 Priority #2 – Expansion outside Canada North-South initiatives well underway RBC Banking exporting its Canadian expertise to the U.S. è specialized sale
Slide 32: East-West initiatives enhance synergies
Priority #2 – Expansion outside Canada East-West initiatives enhance synergies Partnering with: To sell: • Credit insurance to RBC Centura clients • Variable annuities from RBC Centura Securities to RBC Liberty clients • Credit insurance to RBC Mortgage clients nationally • Brokerage services to RBC
Slide 33: Cross-platform leverage
Priority #4 – Cross-platform leverage Cross-platform leverage RBC Financial Group ideally positioned: è diversified business mix è strong market positions è sizeable customer base (12+ million) è strengths in CRM 43 Priority #4 – Cross-platform leverage RBC Investments and RBC Banking financial plan
Slide 34: Blocking & tackling largely complete
Priority #4 – Cross-platform leverage Blocking & tackling largely complete – benefits to commence in 2003 Sales force of 1,640 planners ready, with increased focus on variable compensation Successful spring/summer 2002 pilots Extensive client targeting effort – 370,000 clients 75% of customers expec
Slide 35: Conclusion
Conclusion Will maintain clear focus on shareholders through unwavering commitment to: è disciplined growth è diversification è business leadership è continued strong risk management è improved efficiency è judicious capital management è superior returns 47
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