Royal Bank Of Canada · TSX:RY

Royal Bank Of Canada — Q1 2021 Earnings Presentation

38 slides from Royal Bank Of Canada's earnings presentation, Feb 24, 2021

  1. Slide 1: Royal Bank of Canada First Quarter Results

    Royal Bank of Canada First Quarter Results February 24, 2021 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 2021 Report t

  2. 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

  3. Slide 3: Overview

    Overview Dave McKay President and Chief Executive Officer

  4. Slide 4: Strong volume growth and client activity offset impact of low interest rates

    Strong volume growth and client activity offset impact of low interest rates Diversified revenue streams(1)($BN) Expenses well controlled (YoY) Strong earnings growth 2.6% Total Non-interest Expense +6% YoY Capital Markets Total NIE (excl. Variable and Net Income $3.8BN +10% YoY Stock-based compensa

  5. Slide 5: Strong volume growth and market share gains in our largest businesses

    Strong volume growth and market share gains in our largest businesses Canadian Banking average loans Canadian Banking average Wealth Management (non-U.S.) ($ billions) (1) deposits ($ billions) AUM and AUA ($ billions) 6% 19% $155 BN 488 472 431 459 88 396 88 364 696 81 220 620 176 541 528 557 161 4

  6. Slide 6: Solid results from our U.S. operations

    Solid results from our U.S. operations Net Income (US$ millions) U.S. Operations Revenue (US$ billions)(2) Last 12 months ended Q1/2021 22% 33% CNB Net 652 Interest Income 19% 536 489 RBC CM Total U.S. 45% 490 RBC WM $9.0 billion 345 (ex-CNB 373 NII) 35% 104 55 103 87 61 59 Other(3) Q1/2020 Q4/2020

  7. Slide 7: Our 14MM+ Canadian Banking clients continue to adopt our digital channels

    Our 14MM+ Canadian Banking clients continue to adopt our digital channels Active Digital Users (000s)(1) Digital Adoption Rate(2) Active Mobile Users (000s)(1) 5% 350 bps 12% 7,755 5,171 7,601 56.0% 5,031 7,354 54.0% 4,619 52.5% Q1/20 Q4/20 Q1/21 Q1/20 Q4/20 Q1/21 Q1/20 Q4/20 Q1/21 Mobile Sessions (

  8. Slide 8: ESG performance highlights: Putting our Purpose into practice

    ESG performance highlights: 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 Climate change: accelerating Preparing youth for the and driving a diverse & responsible inves

  9. Slide 9: Financial Review

    Financial Review Rod Bolger Chief Financial Officer

  10. Slide 10: Higher fee-based revenue, volume growth and lower PCL offset low interest rates

    Higher fee-based revenue, volume growth and lower PCL offset low interest rates Reported Earnings ($ millions, except for EPS and ROE) Q1/2021 YoY QoQ  Q1/2021 net income of $3.8 billion, up 10% YoY; diluted Revenue 12,943 1% 17% earnings per share (EPS) of $2.66, up 11% YoY o Adjusted diluted EPS

  11. Slide 11: Record capital generation reinvested into strong organic client-driven growth

    Record capital generation reinvested into strong organic client-driven growth CET1 Movement 41 bps 6 bps 5 bps (46) bps  CET1 ratio of 12.5%, flat QoQ, reflecting: (9) bps  Record internal capital generation 3 bps  Strong organic RWA growth supporting client-driven business activities  Partial r

  12. Slide 12: Net interest income: Strong volume growth more than offset by lower interest rates

    Net interest income: Strong volume growth more than offset by lower interest rates  Net interest income down 4% YoY as strong volume growth in Canadian Banking and City National was more than offset by the impact of lower interest rates  All-bank NIM declined 2 bps QoQ, primarily due to asset mix,

  13. Slide 13: Non-interest income: Strong results in Capital Markets and Wealth Management

    Non-interest income: Strong results in Capital Markets and Wealth Management Non-Interest Income(1) ($ millions) Q1/2021 Highlights Q1/20 Revenue (net of FV change) (1) 7,147  Non-interest income was up 4% YoY; up 6% net of (2) Insurance FV change(1) Market-related Investment, brokerage & custodial

  14. Slide 14: Non-interest expense: Higher variable compensation commensurate with results

    Non-interest expense: Higher variable compensation commensurate with results Non-Interest Expense ($ millions) Q1/2021 Highlights % of Total Q1/20 Expenses 6,378  Non-interest expense was up 3% YoY Expense  Excluding variable and stock-based compensation Compensation 34% Salaries & Benefits 5 (whi

  15. Slide 15: Strong volume growth in Personal and Commercial Banking

    Strong volume growth in Personal and Commercial Banking Net Income ($ millions) Q1/2021 Highlights 6% Canadian Banking 19%  Net income up 8% YoY 1,686 1,793  Strong volume growth and lower PCL, partially offset by lower 1,502 spreads  Revenue flat YoY  Net interest income declined 1% YoY  NIM o

  16. Slide 16: Solid results in Wealth Management driven by market performance and net sales

    Solid results in Wealth Management driven by market performance and net sales Net Income ($ millions) Q1/2021 Highlights 4%  Net income up 4% YoY  Strong average volume growth, higher average fee-based 19% client assets, higher performance fees, and lower PCL, partially offset by the impact of low

  17. Slide 17: Solid results in Insurance

    Solid results in Insurance Net Income ($ millions) Q1/2021 Highlights 11%  Net income up 11% YoY (21%)  Improved claims experience and higher favourable investment-related experience, partially offset by the impact of lower new longevity reinsurance contracts and lower 254 international life volum

  18. Slide 18: I&TS continues to be impacted by less favourable rates and elevated liquidity

    I&TS continues to be impacted by less favourable rates and elevated liquidity Net Income ($ millions) Q1/2021 Highlights (14%)  Net income down 14% YoY 35%  Lower revenue from funding and liquidity, and client 143 deposits 123  Revenue down 5% YoY 91  Lower funding and liquidity revenue, largely

  19. Slide 19: Record earnings of over $1 billion in Capital Markets

    Record earnings of over $1 billion in Capital Markets Net Income ($ millions) Q1/2021 Highlights 21%  Net income up 21% YoY 27%  Strong revenue growth in Global Markets and lower PCL, partially offset by higher taxes 1,067 882 840  Revenue up 6% YoY  Global Markets up 12% YoY  Higher equity tra

  20. Slide 20: Risk Review

    Risk Review Graeme Hepworth Chief Risk Officer

  21. Slide 21: ACL reflects our prudent approach to provisioning

    ACL reflects our prudent approach to provisioning Movement in Allowance for Credit Losses on Loans(1) ($ millions) - (97) - 0.89% 218 ACL to L&A 61% P&CB (primarily Retail) and 38% Capital Markets (322) 0.85% ACL to L&A 6,115 5,914 ACL (Q4/20) PCL on Impaired Loans PCL on Performing Loans Net write-

  22. Slide 22: Muted wholesale formations partially offset by rising retail formations

    Muted wholesale formations partially offset by rising retail formations Gross Impaired Loans (GIL) ($ millions, bps) Key Drivers of GIL (QoQ) 57  Total GIL decreased $323 million (down 6 bps QoQ)  New formations were down $21 million QoQ 51 47 Canadian Banking 45 41  GIL increased $95 million, wi

  23. Slide 23: PCL on impaired loans remains below pre-pandemic levels

    PCL on impaired loans remains below pre-pandemic levels Total RBC ($ millions, bps) Wealth Management ($ millions, bps) 37 21 8 23 -1 0 21 $43 15 $15 $- -13 $613 13 $398 $(1) $338 $(27) $251 $218 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21  Lower provisions QoQ in Capital Markets an

  24. Slide 24: Strong underlying credit quality in Canadian Banking (CB)

    Strong underlying credit quality in Canadian Banking (CB) Canadian Banking PCL on Impaired Loans and Gross Impaired Loans CB Retail FICO Score Distribution (Q1/21) <620 Q1/21 PCL on Impaired Loans Gross Impaired Loans 3% Avg FICO Avg Loan (bps) (1) (bps) Score Balances 620- Q1/20 Q4/20 Q1/21 Q1/20 Q

  25. Slide 25: Appendices

    Appendices

  26. Slide 26: Net Interest Income sensitivity

    Net Interest Income sensitivity Interest Rate Risk in the Banking Book (IRRBB) Sensitivities – NII risk(1) ($ millions) NII risk  Q1/2021: The quarter-over-quarter change in net Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 interest income sensitivity is largely attributed to growth in demand and notice deposits m

  27. Slide 27: Strong volume growth in Canadian Banking

    Strong volume growth in Canadian Banking Average Gross Loans & Acceptances(1) ($ billions) Average Deposits(1) ($ billions) 6% 19% 2% 2% 396 463 472 488 459 476 17 20 17 88 214 220 88 88 78 176 78 80 305 248 252 272 293 220 Q1/2020 Q4/2020 Q1/2021 Q1/2020 Q4/2020 Q1/2021 Percentage Change(1) YoY QoQ

  28. Slide 28: Strong net sales at RBC Global Asset Management

    Strong net sales at RBC Global Asset Management RBC Global Asset Management AUM ($ billions) RBC Global Asset Management Net Sales ($ billions) 13% 6% 7.2 548 519 486 93 5.3 84 0.0 75 66 6.1 3.1 51 70 1.0 112 2.7 104 109 3.1 6.8 3.1 2.0 -2.4 256 256 277 -4.4 -0.3 -0.5 Q1/2020 Q4/2020 Q1/2021 Q1/2020

  29. Slide 29: Lower rates more than offset growth in U.S. Wealth Management (incl. CNB)

    Lower rates more than offset growth in U.S. Wealth Management (incl. CNB) Net Income (US$ millions) Q1/2021 Highlights (US$) (15%)  Net income down 15% YoY  Strong double-digit average volume growth was offset by 40% the impact of lower interest rates and higher expenses  Revenue up 7% YoY  High

  30. Slide 30: Capital Markets revenue and loan breakdown by geography

    Capital Markets revenue and loan breakdown by geography Capital Markets Revenue Breakdown by Geography ($ millions)  Canada: Down YoY, driven by lower fixed income trading and 2,708 lower M&A fees, partially offset by higher FX trading and 2,548 135 132 2,275 lending 427 377 133  U.S.: Up YoY, dri

  31. Slide 31: Canadian residential portfolio has strong underlying credit quality

    Canadian residential portfolio has strong underlying credit quality Q1/2021 Highlights Canadian Banking Residential Lending Portfolio(1)  Strong underlying quality of uninsured residential mortgage Total ($335.8BN) Uninsured ($261BN) portfolio(1) Mortgage $300.0BN $225.2BN  53% of uninsured portfo

  32. Slide 32: IFRS 9 range of macroeconomic scenario assumptions (as of January 31)

    IFRS 9 range of macroeconomic scenario assumptions (as of January 31) Canada Real GDP ($ Trillions)(1) Canada Unemployment Rate (%)(3) 2.4 11 2.3 9 2.2 7 2.1 5 2.0 1.9 3 U.S. Real GDP (US$ Trillions)(2) U.S. Unemployment Rate (%)(3) 21.5 11 21.0 9 20.5 20.0 7 19.5 19.0 5 18.5 18.0 3 Oil price (West

  33. Slide 33: Exposure to wholesale sectors most vulnerable to COVID-19 impacts

    Exposure to wholesale sectors most vulnerable to COVID-19 impacts  Our most vulnerable wholesale exposure represents $36.5 billion or 5% of total loans & acceptances outstanding Sector Group Information (Q1/21) Sector Exposure Most Vulnerable to COVID-19 (Q1/21) Loans & PCL on Impaired Loans & Acce

  34. Slide 34: ACL coverage: Lower-risk residential mortgages a large part of our balance sheet

    ACL coverage: Lower-risk residential mortgages a large part of our balance sheet Allocation of ACL by Product Q4 / 2020 Q1 / 2021 % of Loans & Acceptances % of Loans & Acceptances Product Stage 1 Stage 2 Stage 1 & 2 Stage 3 Total Stage 1 Stage 2 Stage 1 & 2 Stage 3 Total (1) Residential mortgages 0.

  35. Slide 35: Market risk trading revenue and VaR

    Market risk trading revenue and VaR ($ millions) 150 100 50 0 -50 -100 -150 -200 -250 Trading Revenue (1) Market Risk VaR  There were no days with net trading losses during Q1/2021.  RBC maintained a cautious market risk profile in Q1/2021, with a further improvement in VaR levels from lower avera

  36. Slide 36: Additional Notes (slides 3 to 11)

    Additional Notes (slides 3 to 11) Slide 3 2. Revenue net of insurance fair value change of investments backing policyholder liabilities liabilities (Q1/21: $346MM; Q1/20: $468MM). This is a non-GAAP measure. For more information, see slide 37. 3. Expenses excluding variable and stock based compensat

  37. Slide 37: Additional Notes (slides 12 to 33)

    Additional Notes (slides 12 to 33) Slide 12 19. Comprised of Net gain on investment securities, Share of profit (loss) in joint ventures and associates, U.S. wealth accumulation plans (WAP) gains / (losses) and Other. Slide 13 20. Other non-interest expenses include YoY change in non-interest expens

  38. Slide 38: 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

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