Q1 2022 Royal Bank of Canada Earnings Call

February 24, 2022

Please standby your meeting is about to begin.

Good morning, ladies and gentlemen, welcome to Rbc's conference call for the first quarter 2020 do financial results.

Please be advised that this call is being recorded I would like to show in the meeting over to assume Enron head of Investor Relations. Please go ahead Mr. Enron.

Thank you and good morning, everyone speaking today will be Dave Mckay, President and Chief Executive Officer, Nathan on Chief Financial Officer, and Graeme Hepworth Chief Risk Officer also joining us today for your questions.

Mclaughlin group head personal and commercial banking, Doug Guzman group head wealth management insurance, and INTS and Derek Millner group head capital markets.

As noted on slide one our comments may contain forward looking statements, which involve assumptions and have inherent risks and uncertainties actual results could differ materially.

I'd also remind listeners that the bank assesses this performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance.

To give everyone. The chance to ask questions. We ask that you limit your questions and then re queue with that I'll turn it over to Dave.

Thank you and good morning, everyone. Thanks again for joining US today, we reported earnings of $4 1 billion.

Our second highest on record underscoring the strength and scale of our franchises.

Net income was up 6% from last year, and we generated positive all bank operating leverage while continuing to invest for growth.

Pre provision pretax earnings were up 10% year over year.

Benefiting from robust client driven volume growth in Canadian banking.

And city National strong wealth management results and record investment banking revenue.

These were partially offset by continued moderation.

Our trading revenue and the impact of lower spreads.

Our 17, 3% return on equity.

Combined with a strong capital ratio enabled us to deploy capital in a balanced manner to support client driven.

Growth and long term shareholder value.

Our capital position supported $1 7 billion in dividends to our largely Canadian shareholder base as well as almost $9 million of share repurchases.

In aggregate, we returned nearly $3 billion to our shareholders for a total payout ratio of 72%.

We also deployed our balance sheet across our businesses to support our clients' needs and ambitions, resulting in organic <unk> growth of $14 billion in the current quarter.

We ended this quarter with a robust CET one ratio of 13, 5% representing $13 billion in excess capital over an 11% level.

This provides significant flexibility to continue investing in talent.

And technology.

To accelerate the deployment of capital for organic growth.

Opportunities and I will speak more to this strategy in a moment.

Our strong capital position also enables further share repurchases as well as providing us optionality to acquire quality franchises in growth segments.

That align with our current strategy and geographic footprint.

Looking forward, we have a consistent and clear focus on creating client and shareholder value.

And a disciplined balanced approach to capital deployment as evidenced by our 15% year.

Year over year growth and book value per share this quarter, and a 9% compounded annual growth rate over the last three years.

Before I speak toward growth opportunities I want to touch on the macro environment.

We continue to experience market and economic volatility driven by heightened geopolitical risk continued supply chain disruption.

Acute labor capacity shortages, LNG market imbalances, and resulting high inflationary conditions.

However, the underlying economic drivers are.

We are still strong.

As we move past the Omicron peak, we can look to record household savings.

Over $200 billion of Candida alone.

Driving consumer spending on goods and services.

<unk> immigration driving demand for housing increased business investment and to just in case inventory strategies and building new digital capabilities.

Recent hawkish central bank commentary around a concerning level of inflation and north American economies, reaching full potential suggest eminent rate increases and an acceleration of quantitative tightening programs.

While the prospect of benchmark rate increases has driven volatility in equity markets.

We are well positioned to benefit from rising interest rates, which dean will speak to later.

However, we have also seen the yield curve flattened significantly over the last three months.

This combined with tight labor markets and economies, reaching full potential so.

Yes, we are closer to mid cycle economic growth than early stages of an economic recovery.

As it relates to Canadian housing, we continue to monitor supply demand imbalances across the country.

We have long argued the supply side of the market must be made more responsive to demand.

We encourage policymakers at all levels of government across all jurisdictions to continue working together to implement policies that address the longer term problems of limited supply.

Which are driving house price inflation, and creating a risk to the long term competitiveness of the Canadian economy.

I will now expand on an increasing number of client focused opportunities to drive accretive organic growth across our core businesses.

Our leading scale enables us to invest concurrently in technology sales capacity and client value.

<unk> us to deploy capital to drive revenue growth, while increasing productivity, which nadeem will speak to later.

And we will continue to leverage the significant investments we have made across our businesses over the last number of years.

In Canadian banking mortgages were up 11% year over year, adding nearly $9 billion this quarter alone.

We expect strong Canadian mortgage growth to continue in the high single digit range.

Driven by renewed levels of immigration pent up demand met by increased supply and our continued investment in expanding our mortgage sales force to capture this opportunity.

On the payment side overall consumer spending in late January and early February was up 15% over pre pandemic levels as restrictions continue to ease across Canada.

We expect the continued reopening of the Canadian economy to drive increased credit card spend and in time, a steeper recovery and revolving credit card balances.

Our investments to enhance digital capabilities in these businesses resulted in over 55% of all new credit cards being sold digitally this quarter at our mortgage retention rates are exceptionally strong at 90%.

We have also invested in a set of integrated banking and investment solutions to provide even more value to our clients, including last year's launch of RBC vantage.

In addition investments made to enhance our client value proposition continued to attract new clients.

We are seeing increased engagement with our digital payment and investment products, including my adviser, which now has nearly 3 million clients up from $2 million in just one year.

And the last two years alone we have gained over 80 basis points of market share in core checking deposits and nearly 50 basis points of market share in mortgages.

And a gross number of retail clients added in the last four years have contributed nearly $1 billion of revenue to our Canadian banking franchise.

We also expect stronger growth in commercial lending from higher credit line utilization driven by our clients desire to rebuild inventory levels and adjust business models in light of the persistent supply chain disruptions and labor shortages.

We are expanding our commercial account management teams and re imagining our products and services to capture this changing client value chain.

Including growing owner on RBC venture and RBC ex our platform to help entrepreneurs scale up tech and life science and verticals.

Turning to city National average loans, excluding triple P loans grew 15% from last year with retail loans up 25%.

Loan balances have increased to $56 billion nearly two five times the levels from when we acquired this high quality growth franchise in fiscal 2016.

We are in the process of further investing in city National's technology and operational infrastructure for the next phase of growth, including deploying improved commercial lending and mobile banking platforms.

Looking forward, we expect city national to continue to generate strong accretive growth through a multi pronged strategy. This includes expanding private banking capabilities through mortgage led growth and growing our mid market commercial division.

These strategies alone have added 6 billion U S dollars in loans over the past two years.

Furthermore, city National's, leading entertainment franchise supported by our film track acquisition is well positioned to benefit from the industry trend of increasing investment in original content and programming.

Turning to our broader wealth and asset management franchises across North America, we're continuing to drive growth in these higher ROE businesses building on our current momentum.

Canadian and U S wealth management increased 18% and 14% year over year, respectively and.

In RBC global asset management, AUM increased 9% from last year to nearly 600 billion.

With over 80% of AUM outperforming the benchmark on a three year basis.

Looking forward, we will continue to expand our existing team of over 2000 advisers in Canadian wealth management.

Our differentiated technology advantage and investment expertise helped drive strong advisor productivity generating revenue per adviser that is over 20% above the Canadian industry average.

In the U S wealth management, we remain focused on organically scaling our platform by adding experienced advisors and leveraging our investment in new products and technology.

Investments, we made in new securities lending products resulted in strong lending growth of nearly $3 billion over the past year.

This new portfolio generated nearly $80 million of revenue in 2021 alone.

Since the start of fiscal 2019, we.

We have hired financial advisers, who are expected to bring in over $60 billion of <unk>.

These advisers are attracted to our client first culture, coupled with our leading integrated technology platform.

Our growing investments in people and technology has resulted in considerable momentum in our capital markets franchise as demonstrated by our record corporate and investment banking revenue of $1 $4 billion this quarter.

We have strengthened our talent in key verticals, including adding managing directors in U S investment banking.

Especially in the technology and healthcare sectors as well as our M&A group.

These investments have propelled RBC capital markets to ninth in the global League tables and position us to win increasingly attractive mandates going forward and some of the most active sectors.

We're also helping our clients execute on their own sustainability strategies, we've provided $84 billion in sustainable finance in 2021 up from 73 billion in 2020 building towards our target of $500 billion by 2025.

And Aden, our AI based <unk> tronic trading platform has continued to gain traction supporting our global markets clients. During these volatile times.

We believe these investments are structurally enhance the earnings power of capital markets franchise and.

And we expect to continue to drive pre provision pre tax earnings above $1 billion per quarter through 2022.

Our investment banking pipeline remains healthy given the near term economic outlook and an increased desire from clients to accelerate their own growth strategies.

In this context, we will look to continue to deploy capital to capital markets, including support for underwriting commitments as our global clients continue to rely on us as an innovative and trusted partner.

To sum up we have started 2022 with continued strong momentum across our largest franchise.

Our results reflect significant investments in our people technology and products and services to deliver differentiated value for existing clients and to continue attracting new client relationships.

We have a clear focus on driving long term shareholder value and we'll continue to deploy capital in a balanced manner.

Nadine over to you.

Thanks, Dave and good morning, everyone I'll start on slide seven we reported earnings per share of $2.84. This quarter up 7% from last year revenue growth was driven by strong investment management fees and mutual fund revenue as well as strong M&A advisory fees.

Pre provision pretax earnings increased 10% year over year also benefiting from positive all bank operating leverage.

Our effective tax rate increased 270 basis points from last year, mainly due to the net impact of tax adjustments and changes in earnings mix.

Going forward, we expect our effective tax rate to normalize back towards 22% to 23% through the rest of the fiscal year.

Before I discuss our segment results I will spend some time on three key topics capital deployment rate sensitivity and our expense outlook.

Starting with capital on slide eight.

Our CET one ratio was down 20 basis points sequentially to 13, 5% our earnings added 74 basis points of capital this quarter well in excess of 29 basis points of capital used to generate client driven <unk> growth.

Net credit migration lowered <unk> by $2 billion.

Balanced capital deployment included 54 basis points of capital returned to shareholders through dividends and share repurchases.

Moving on to slide nine.

Net interest income was up 5% year over year as strong client driven volume growth in Canadian banking and city National continued to offset the impact of lower net interest margin.

Now to slide 10, while the impact of low interest rates continued to persist we started to see a stabilization of net interest margins and our banking franchises on both sides of the border.

Canadian banking NIM was down one basis points sequentially as the competitive nature of the mortgage market drove asset spreads lower we continue to see lower benefits from mortgage prepayment revenue a trend we expect to moderate going forward.

These factors were partially offset by an accounting adjustment that impacted NIM last quarter.

City National NIM was up six basis points relative to last quarter with Paycheck protection program loans contributing most of the increase we expect our triple P loan portfolio to largely run off by year end.

To provide context on our sensitivity to rising interest rates. It is important to remember that the cumulative impact of lower interest rates across 2020, and 2021 reduced our revenue by approximately $2 billion.

This was partly driven by lower Canadian banking deposit spreads and lower asset yields impacting city national.

Going forward, we are well positioned to benefit from the likely scenario of rising interest rates.

We estimate that a 25 basis point increase in short term interest rate results in over $175 million of additional revenue over 12 months and our Canadian banking and wealth management businesses.

We expect this benefit to be compounded by higher volumes and a shift in mix towards higher yielding assets over time.

At the same time, we expect the benefit from rate hikes to be impacted by the competitive asset pricing environment as economies recover.

As interest rates increase we expect deposit repricing and our low beta retail banking deposit franchises will slowly increase towards historical levels over time, reflecting trends, we experienced in the previous rate hike cycle.

An environment of higher interest rates and a normalization of surplus liquidity in wholesale market will be beneficial to our 300 billion repo business, where spreads have declined significantly from 2020 levels.

Turning to expenses on slide 11.

Non interest expenses were up 1% year over year or 3%, excluding the impact of variable and stock based compensation.

Adjusting for the partial release of the legal provision in U S wealth management and excluding variable on share based compensation across our businesses expense growth was 5% year over year.

Salaries and benefits were up 4% as we continued to invest in sales capacity and backend operations to support increasing client activity and our many growth vertical we.

We also saw an increase in marketing and travel cost compared to levels in the first half of 2021.

The top top of Slide 12 gives you an idea of how we think about expenses.

We have group total costs across the continuum of key categories, including the foundational governance costs to run the bank.

These would include regulatory and risk management costs.

A large part of our run the bank spend is also related to operational and technology costs, including our core system.

We continue to act on opportunities to drive efficiencies and productivity in these areas, while investing and innovating for the future.

We expect our scale and growing revenue to generate inherent operating leverage over this cost base, which is relatively less variable in nature.

Our new digital account opening experience for our retail clients has reduced the average time to completion by nearly 70%. This has freed up capacity for our advisors to focus on delivering value added advice and deepening client relationships.

Our App Dev teams are utilizing our next generation development platform, which is generating efficiency through automation and reuse.

There's another bucket of costs, which are investments to add new revenue generating products and capabilities, which Dave spoke to earlier.

And lastly, there are investments to drive growth to have a flexible cost structure, which represent approximately 30% of our cost base.

These are costs that largely scale up or down with revenue generated including our commission sales force and client facing employees and our capital markets and wealth management platform, where we pay for performance.

There are also variable non compensation costs, such as trade execution, where we will look to drive productivity improvement.

Now to the bottom of the slide four our expense expectations, excluding variable and share based compensation.

We expect structural cost to be higher this year, partly due to the impact of inflation along with the realization of previously committed costs such as higher salaries.

We will continue to invest in technology add to our client facing sales force across our largest segment and scale, our marketing spend to drive forward our strategic priorities.

And we will continue to invest in efficiency initiatives that streamline and simplify our operations and processes.

In aggregate, we expect annual expenses, excluding variable and share based compensation to grow at the higher end of the low single digit range in 2022.

This includes the recognition and subsequent partial release of the legal provision in U S wealth management.

And as we recognize the benefits of the forward curve, we expect our full year Canadian banking efficiency ratio to fall under 40% in 2023.

Moving to our business segment performance beginning on slide 13.

Personal and commercial banking reported earnings of $2 billion this quarter up 10% from last year.

Canadian banking net interest income was up 3% year over year as strong volume growth was partially offset by lower spreads.

Growth in business volumes was strong on both sides of the balance sheet, while credit card balances increased this was largely due to higher transact or balances as revolve rates remain near pandemic load.

Higher credit card spend also contributed to higher non interest income as did higher mutual fund distribution fees.

Canadian banking generated operating leverage of two 8% with expenses up 3% year over year.

Turning to slide 14.

Wealth management reported earnings of $795 million up 24% from last year.

This segment generated positive operating leverage even after adjusting for the partial release of last quarter's legal provision.

Canadian wealth management U S wealth management, and RBC Global asset management revenue growth benefit benefited from higher fee based client assets, reflecting favorable equity markets and net sales.

RBC Gam generated positive net sales of over $5 billion this quarter.

However, Canadian retail sales were lower than the prior year, partly due to redemptions out of fixed income funds, especially in December which saw heightened market volatility.

U S wealth management revenue also benefited from continued double digit volume growth at city national partially offset by lower spreads.

Turning to insurance on slide 15.

Net income of $197 million decreased 2% from record first quarter results a year ago.

Lower earnings were largely due to claims experience and the impact of lower new longevity reinsurance contracts.

These factors were partially offset by business growth and higher favorable investment related experience.

On to slide 16.

<unk> net income of $118 million decreased 4% from a year ago, mainly reflecting higher technology related costs.

The current quarter also saw higher revenue from funding and liquidity client deposit and asset services businesses.

Turning to slide 17 cap.

Capital markets reported earnings of over 1 billion down 3% from last year, including the impact of a higher effective tax rate.

Pre provision pretax earnings surpassed $1 billion again, this quarter, helping drive our strong book value growth.

Corporate and investment banking reported record revenues of $1 4 billion underpinned by record loan syndication and M&A fees higher equity origination fees record lending revenue and higher debt origination fees also contributed to stronger revenue.

In contrast, global markets revenue continued to moderate from elevated levels last year as narrower spreads impacted both thick and repo revenues, which were down 12% and 5% respectively.

<unk> revenues were robust, but down 2% from strong results last year.

To conclude we are well positioned to continue growing client driven volumes and benefit from higher interest rates.

Looking forward, we remain focused on disciplined cost management and balancing our capital deployment to continue delivering value for our shareholders and clients.

With that I'll turn it over to Graeme.

Thank you, Dave and good morning, everyone.

Starting on slide 19 allowance for credit losses on loans of $4 4 billion remained largely unchanged from last quarter as write offs and the release of reserves on performing loans were nearly offset by higher provisions on impaired loans.

This marks our fifth consecutive quarter with reserve releases on performing loans.

Flipping continued improvement in our macroeconomic outlook and in the credit quality of our portfolio.

However, the magnitude of the releases this quarter were tempered by the economic uncertainty related to the headwinds I noted last quarter.

Namely the <unk> wave of the COVID-19, pandemic inflationary pressure to the pace and scale of anticipated interest rate increases.

As Dave noted earlier, while the impact of the Omicron wave is now largely subsided.

Impacts of inflation and rising rates are expected to persist.

Reserve releases of $80 million this quarter bring our total east of $1 4 billion since the start of 2021.

When combined with considerable portfolio growth of 17% over the last two years, our ACL ratio is now approaching pre pandemic levels 58 basis points.

Turning to slide 20, our gross impaired loans of $2 1 billion were down $167 million were three basis points during the quarter.

Impaired loan balances once again decreased across all our major businesses.

New formations of $263 million were at their lowest level in almost 10 years.

Flipping the significant liquidity accumulate over the pandemic the ongoing economic recovery and the continued benefits to clients from government support programs.

Turning to slide 21, PCL on impaired loans of $180 million were nine basis points was up two basis points quarter over quarter, but remains well below pre pandemic levels and below our long term averages.

In our Canadian banking retail portfolio PCL on impaired loans was up $13 million quarter over quarter with modest increases across most products.

Also saw delinquencies began to rise during the quarter. These increases can be attributed to a few factors, including seasonality the winding down of certain government support programs and the client behavior, beginning to revert to more historic norms.

Overall delinquency levels remain below pre pandemic levels.

So our Canadian banking commercial portfolio PCL on impaired loans was up $27 million quarter over quarter.

Which is largely driven by provisions on to larger accounts.

Despite the increase this quarter, we continued to see positive credit migration and a reduction in watch list exposure in this portfolio.

In capital markets, we had a $12 million net recovery unimpaired loans in the quarter, which was the fourth consecutive quarter with net recoveries and capital markets.

Portfolio continues to benefit from a constructive operating environment strong market liquidity.

Finally in wealth management, PCL on impaired loans decreased $11 million quarter over quarter.

Largely due to the reversal of a provision taken in the information technology sector last quarter at city National.

I'll now turn briefly to Mercury risk on slide 22.

During the quarter, we saw market volatility increase the central Bank started to reverse course on monetary policy beyond the current wave of the pandemic hit its peak geopolitical tensions rose in Ukraine, and Russia, and inflationary pressure came to the forefront.

But withstanding the increased market volatility there were no days with net trading losses in the quarter as we effectively manage our market risk profile.

Looking ahead, we will be impact of the Olympic one wave has largely subsided market volatility is likely to persist driven by ongoing uncertainty around monetary policy policies.

Geopolitical tensions and inflationary pressure.

We continue to take a prudent approach to market and counterparty credit risks supported by a consistent risk appetite and a strong control environment.

To conclude we continue to be pleased with the ongoing performance of our portfolios and the resiliency of our operations through the pandemic.

We noted last quarter the increase in PCL. This quarter was anticipated as losses start to return to pre pandemic levels.

We still expect our PCL ratio on impaired loans to trend back towards historic norms in the course of 2022 and into 2023.

As always the quality of our client base and our prudent risk managed approach.

<unk> well to manage through any uncertainty.

Shortly we remain steadfast in our commitment to supporting our clients and delivering advice products and insight to help them navigate.

Evolving macroeconomic and operating environment.

So with that operator, let's open the lines for Q&A.

Thank you we will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please state your handset before making your selection.

If you have a question. Please press star one on your devices keypad. If at any time you wish to cancel the question. Please press Star two please press star one at this time if you have a question there will be a brief pause for participants register.

For your patience.

Yeah.

And your first question is from John Aiken from Barclays.

Please go ahead.

Morning, Nathan Thank you for the discussion on the outlook on expenses on Slide 12 quick question for you when we look at the more variable expenses sales advice for revenue generation is there.

And I know that encompasses a whole host of different factors, but within that pocket is there the possibility to generate positive operating leverage within those expenses or is this more of a function of a one to one in terms of expenses versus revenues.

Thanks, John that is the objective when we look at when we are particularly our sales force I mentioned some comments around how we increase their productivity and efficiency in terms of the tools that we've deployed to them in the way that they work.

The other component of that I would say is part of that is also the support groups that also travel with the with the frontline staff and so there will also we're looking to drive optimization through a number of programs such that for every dollar of cost we generate that much more dollar of revenue.

That's great and as a follow on David.

David mentioned that you continue to grow the residential mortgage sales force.

What frictional costs are associated with potential downsizing, so if and when we see a slowdown in the housing marketplace.

How much of a lag would that be on the efficiency ratio because of the buildup of the sales force.

Let's turn it over to Neil maybe.

Yes, thanks for the question.

I mean, I don't think we really are looking at.

A scenario, where we would we haven't really contemplated that to be truthful.

These are variable.

Commission based salespeople so for the most part I think we will be looking for them to go out and continue to.

Compete for volume and at the margin if we needed to slim down that salesforce. The friction costs would be negligible, it's not something that would really factor into our outlook on an op Lev.

Understood. Thank you.

Thank you. The next question is from Ebrahim <unk> from Bank of America. Please go ahead.

Good morning.

I guess just wanted to go back to your prepared remarks in terms of everything that you talked about mortgage kudos commercial lending consumer spend.

Very bullish clearing a lot of cross cutting you said the market is paying attention to including inflation geopolitical today's could you just give us a sense of when you look at the outlook you mentioned, where maybe mid cycle not early cycle in terms of the.

Economic cycle.

Whereas in Q2 do you see more downside just because we are moving forward to the growth outlook or do you think are the <unk>.

Markets caught up with some of these things that might be transitory and the underlying trends around immigration things reopening back are much more stronger would love any insights there.

It's an important question because there are a lot of mixed signals out there when we look at the stage of the economic cycle you would say.

Commercial utilization and even monetary policy would be early cycle, but.

Capacity left in the economy would be late cycle and the balance of where the consumer is where the economy is solid mid cycle, which could mean and we expect there is a good solid couple of years of growth here more.

We would hope so of the risk factors are that will all the ones, we see a geopolitical risks inflation risks.

One of the top risk factors as the lack of labor capacity in the workforce and does does the liquidity that sitting on consumer balance sheets lead to inflation or does it lead to growth.

Those are the types of things, we're going to watch and see how they play out net net immigration consumer spending returning to normal goods and services consumption. All of those are very positive for kind of a mid cycle growth outlook. So I think to your question, we have to watch kind of economic capacity here and what's the inflationary pressures.

Our two grams points is one of the real risk to our economy is it real GDP growth or are we just going to use that 200 or $300 billion of liquidity $2 five trillion by the way the United States is that just create more inflationary pressure.

The answer to your question.

Yeah. That's helpful and I think this is a follow up I think you mentioned.

Talking about capital deployment looking to acquire potentially looking to acquire quality franchises in growth segments unpack that for us in terms of what are the things that could be attractive to the ROI that you've not been very acquisitive.

You've talked about asset generation capabilities in the past.

Would love any color, especially in a period, where we are seeing some asset price dislocation connection in the public markets.

We're very focused on the type of growth and quality franchise, we're looking for it and as with city National There was no option around city National It was based on a relationship I built with Goldsmith family and Russell Goldsmith over a number of years to the point, where we saw our future together and we're doing very similar things right now.

The high quality high growth assets don't come up for auction for obvious reasons. So we are obviously looking to expand our network. The timing is hard to predict but we always wanted to be the first call and there are a number of really attractive assets that exist when and how they make their strategic decisions will.

So I think from that perspective, we are continuing to maintain we're looking for commercial and wealth Ultra high net worth franchises in the United States and Europe .

And we have active dialogues, but that doesn't mean things are going to happen. So I think from that perspective. It's a continued focus the city National model works look at the organic growth, we don't need to make an acquisition to continue to accelerate the growth and outperform so when you get the right franchise you can you can grow it.

And run on it for a long period of time and when we made the city National acquisition. We said, we don't need to make other acquisitions. This franchise has enormous organic growth potential. So we are looking for similar platforms to build on.

Like that and as I said, many times capital does not have a half life.

Only dissipates if you Miss spend it so we are being smart about it and you've seen the growth numbers.

And we are returning some of that capital to you as you saw in our share buybacks.

Thank you thanks, Steve.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead.

Thank you good morning.

Compelled I just have asked this question because the magnitude of what's happening in Europe are there any kind of first order impacts we should be thinking about in terms of.

Russian sanctions and RBC.

And maybe I'll, let Graham start and then I'll jump in with my perspective, Graeme over to you Sir.

The first point.

We do not have any director meaningful exposure to Russia, Ukraine.

That's a byproduct of the fact that we don't operate in those countries and we don't have a risk appetite.

<unk> allows us to operate with clients or markets that are high risk like that.

So I think what we're focused on is more of the indirect impacts that could flow through and certainly.

High levels of commodity prices.

Interesting ones that have kind of multiple effects that we need to think through.

One hand, Canada is a net exporter of natural resources and Thats a positive for our economy on the other hand those are things, we're going to continue to fuel an exacerbated kind of current risk concerns like inflation. So those would be areas of concern that we would be focused on in this environment, but again I think are a risk update our operating model will serve us well and position us well against these.

Emerging concerns that are happening right now in eastern Europe .

Only thing I would add is as you look at how markets react the office volatility.

Coming from Investor uncertainty global uncertainty, but the effect on the yield curve, you've seen a little bit of tightening at the long into the curve is always a flight to quality. When you have such geopolitical volatility you have seen that today I think with the tightening in U S curve of about 10 points.

At the long in the curve and does it invert temporarily what we've seen historically as you all see as that geopolitical risk tends to smooth out over time, but can be quite volatile in the short term. So I still expect the strength of the economy. The inflationary pressures that we talked about.

Economic capacity being used that I would still expect.

Some form of rate increase to continue to move forward and monetary policy to continue to tighten this underlying core drivers are very strong.

Okay Thats, great Thats actually leads me perfectly into my real question, which is for you only get one.

Sure.

As for Nadine and sort of the the NIM sensitivity or NII sensitivity you provide obviously theres a number of assumptions that go into that and kind of talked about some of the variables in your prepared remarks.

I'm, particularly curious on are there certain factors.

That may lead to more NII.

Benefit from rate tightening than what you've put into your disclosed sensitivities and if there are can you give us sense of what those factors might be in.

Sort of a general order of magnitude.

So I think typically we would have referenced in the slides is the impact on our retail franchises both Canadian banking.

And in the U S wealth management business and pointed out as I called in my remarks, focusing on what it looks like more of the curve flattening. So the rising in the short end of the rate.

As it relates to other businesses, you always have wealth management, Canada will benefit as well from.

The spread margin expansion on their deposit base I would say one of the other big areas that I did call out in my remarks relates to capital markets and the repo business that we have about $300 billion balance and saw margins compressed there in about 10 basis points for that business, obviously as rates start to move up in the short end with <unk>.

Jennifer from that margin expansion as well coupled with the fact that we did see some balances come off with the elevated liquidity levels.

Those are primarily I would say two of the primary drivers from a pure interest rate perspective.

That's great that's it for me thank you.

Thank you. The next question is from many grauman from Scotiabank. Please go ahead.

Hi, good morning.

You've been very clear in terms of your guidance on expenses I think.

What's interesting to me is theres still does seem to be a disconnect a little bit between maybe the commentary that some especially larger U S. Banks are talking about with respect to their expenses.

And the way you are presenting the outlook. So I'm wondering if you could kind of delve into that in terms of structural or fundamental reasons. Why your expense structure is different than let's say some from large banks in the U S. So basically trying to get into <unk>.

How is your outlook on expenses.

We're optimistic.

That's really the fundamental nature of the question.

Thanks Manny.

I would say there is two primary components related to that first off we have been investing for a significant portion of time both in our technology. Our infrastructure is you would have also noticed in our front office sales support staff that client acquisition arm of it. So we have been <unk>.

Investing in technology for a long time and scaling across our Canadian businesses. You'll also notice that from the prospect of depreciation that will start that drips and over time, so that doesn't necessarily result in an increasing cost base the extent that you've been spending equally through the years.

I would say that the other thing that we talked about was around our efficiency and our sustainability of looking at our productivity options that we have to deploy not only technology tools, but how we can be more efficient in our in that cost base I referenced to the far end of the chart, there, which can tend to be a bit more fixed over time. So it's twofold there.

We look at how we can be more efficient, where we work how we work with digitization of processes automation and in addition, how we can become more productive in our Salesforce stop.

So how we can expand upon the every cost dollar we put out there in the revenue multiple that we generate off of that so I think part of it is really we've been investing over consistently over a period of time I think others may be catching up to where we thought it was having to increase their spend levels.

But in addition, we do focus consistently across the organization on the efficiency and productivity arm of it to be able to continue with that investment growth.

That's helpful. Thank you.

Thank you.

Next question is from Doug Young from Deutsche Bank Capital markets. Please go ahead.

Good morning, just wanted to go back to the capital discussion I think you've been clear about where you see the growth opportunities, but I guess the crux of my question is I'm curious if you can put your substantial excess capital to work organically.

Such that you would be driving down your set one ratio and what are those best opportunities and so we saw a risk weighted asset growth reduce the ratio by 29 basis points this quarter could we see.

<unk> growth push that ratio down 50, 60, 70 basis points is really kind of where I'm going.

Yeah, I mean, I think that you've hit on the <unk>.

Primary objective there in terms of our organic growth and we have seen the significant ability to deploy that capital in higher ROE businesses and looking at good returns as seen at both within capital markets and higher ROE This quarter continue around.

Around how they're able to deploy it in the higher margin underwriting businesses the loan book as well as city national with that double digit growth. So we are looking at how we scaled up our businesses, particularly with the advancement of our <unk>.

<unk> sales force and the ability to deploy that balance sheet. So that is definitely an opportunity. Obviously, we saw last year some of the.

Model changes with respect to <unk>, so that brought it down and we are Basel III coming on the horizon next year, which has the opportunity to improve again <unk> position. So there's obviously puts and takes on that but we definitely let's say to continue to deploy from an organic perspective.

And I guess, where I'm going with this is this because everyone talks about M&A and we can all speculate on that and then buybacks at the margin, but the real opportunity would be to put a 100 basis points of RW way to work or.

To put it work like organically and I know the credit card balances coming back commercial card balances, but like.

What I'm trying to get at is what are the best opportunities.

Do you foresee and what's the most capital intensive opportunities.

I think we are putting a lot of our <unk> to work.

Beauty of the model is that we're generating so much surplus capital from profitability and.

And our scale and our efficiency that it it.

It drives our self funding model to your point. So I think the beauty is we can accelerate growth we are accelerating growth and we're funding a lot of it from profitability. So youre seeing US said returning capital to shareholders and we still have significant strategic optionality to put capital work in an inorganic fashion when the right opportunity comes to the table. So we're in a great.

Place you saw strong strong growth driven by previous investments that we've made we continue to invest we generate organic capital we have strategic Optionality. We are in a very good place to continue to drive premium total shareholder return.

Great I appreciate the color. Thanks.

Thank you.

Question is from Sohrab <unk> from BMO capital markets. Please go ahead.

I have two questions, maybe I'll start with.

Where I think Doug less staff at <unk>.

<unk> or Dave you've mentioned capital markets. Several times I think is a good source of.

I guess capital deployment is that would that be more so in the traditional banking businesses credit underwriting and the like.

Could there also be some capital chewed up in market risk.

Why don't we have Derek answer that.

Okay.

Sure. Thanks, Sarah.

I appreciate the question I think we see opportunities right now across both of the banking business and the global markets business. As Nadine said, we are very focused on trying to make sure. We are only deploying capital where we see good returns, but as you've seen with the capital markets business over the last couple of years.

Due to the environment, but partially due to some of the strategic initiatives and changes we've undertaken.

We have notably moved up our ROE and so that is giving us opportunities right across the platform.

Clearly there are opportunities to deploy capital organically through the loan book and that has the ancillary benefit of also supporting the non lending or ancillary revenue opportunities through investment banking or otherwise.

There are some modest capital deployment through our loan syndications and underwriting business, although we remain very mindful of the risk environment and so we're being quite prudent and disciplined about that and then in different pockets of our markets business as we're looking to grow out different areas of the trading platform.

In both the U S and Europe , I think we will see additional opportunities to deploy capital in trading as well. So it is quite quite diversified right now, but probably led more by the loan book in the investment banking side.

And Derik just to clarify with no real change even at the margin and risk appetite.

Correct.

Thank you and then my second question is for Aneel I think you talked you've provided some statistics I think Dave did actually around market share gains.

Both in checking.

I think checking deposit stuff in mortgages in the revenue pick up.

Is there any way Neil you could attribute how much of that is because of <unk>.

Kind of consistent emphasis on the RBC ventures initiatives.

Yes. Thanks for the question I wouldn't point to ventures as a market share driver there I would point to the drivers.

Maybe just start with mortgages.

We've talked for I think quite a quite a long time just about.

Since we've made just picking up on <unk> point really thinking about that franchise front tobacco about finding processes investing in digital investments and our our sales force.

How we flow leads to those those market those mortgage professionals. So it's really been I think a consistent.

Steady strategy, that's really paying off in the mortgage business, a little bit different in the core deposits business, whereas last year.

We really came away and said we haven't refreshed the value proposition for our core deposits business and we felt we needed to make some investments there that was I think a great example of a technology investment that we're seeing pay off Nadine touched on sort of the tools and the ability to reduce the amount of time. It takes to open one of those checking accounts, but we also put some.

Of that technology investment into the core underlying value proposition, which really had a double down on our belief in reciprocity and tying it back to our core relationship strategy, where when our clients bring more of their business to us we reciprocate with a fee reduction structure back to them and the ability to put our rewards points to use on their debit products. So.

Wed say that those types of investments and particularly.

That shift in the value proposition that youre seeing in the marketplace for advertising would be the driver on the deposits business.

Thank you.

Thank you. The next question is from Gabriel Duchaine from National Bank Financial. Please go ahead.

Good morning.

What at what point does inflation become a problem.

But it is a headwind but.

They're a very simple way of thinking it through that over the course of 567 months over a year whatever it is.

And maybe an inflation of 5% to 6% in U S inflation in the 7% range.

Becomes something that compels you to look at your.

There are credit models.

You will start adding to provision and then from your business outlook standpoint.

No.

Consumption or putting more for gas people are paying more for Jonathan.

Other stuff as opposed to Tvs incurred when does that affect your revenue growth outlook.

Sure. Thanks, Gabriel let me I'll start there is certainly on the credit side.

Certainly if inflation is a factor by itself, but I think we would combine that with kind of a rising rate environment to kind of a set of risks that we certainly are mindful of in our in our credit books, and certainly its something front and center with us on that.

I would start with obviously of a backdrop where clients are at a very strong position with very strong liquidity and cash balances as Dave noted earlier I think you can find out. The fact that we've had very strong underwritings persistent underwriting standards for a long time, but are mindful of an operating environment of higher rates and higher inflation and so I don't think we kind of look at this as a surprise and something that shouldnt be considered.

We always talked about being being prudent and consistent through the cycle and these are kind of cyclical events that we do remote and we built into our underwriting standards.

Portfolios, we'll be impacted different times, I think theres, probably more latency and credits in terms of inflation impact in rates impacted maybe we would see in the revenue and expense lines.

It is kind of largely really the fact that we build good resiliency into our portfolios.

Any of our preclinical hit our mortgage portfolio you lose just talking about there is a long duration and that and so clients will have a lot of capacity there and theres a theres a timeframe. There before you would see claims turning over and having to refinance into a higher rate higher cost environment.

So I don't think.

Kind of moving back to my original comments Thats why I don't think we see.

Our views on our credit forecast there havent changed largely since Q4, but those are headwinds that we are considering and I think we will we will accrue over time into higher credit costs, but those will be offset by positives elsewhere on the revenue side as we previously talked about.

So there is a point at which you might have an.

I know, it's a signaling that royal is effectively a bank, but there's a point at which you would have to.

Maybe make an adjustment.

Are you referencing a credit adjustment well.

Yeah Yeah.

Im not sure you say credit adjustment again, we when clients come to the door, we're constantly reassessing and assessing their critical at either capacity rebuild in capacity for rate rises in cost raises in there.

The origination process and when you look at our portfolios there is a lot of <unk>.

Equity buildup with clients that give us a lot of capacity to work with them on that.

Our credit strategy. We said are really designed to work through the cycle and that won't change we constantly reflect these factors though into our.

Reserving models.

Certainly as we've talked about we've had some uncertainty that's coming off with things like Omicron words, and these are some new headwinds that are coming into play and so we will constantly assess.

All of those each quarter and reflect that into our reserving models.

I wouldn't say right now.

The headwind that we would be.

Indicating that we expect to increase that are coming to anytime soon.

Okay.

Question I think the only risk you have to watch out for as if.

Inflationary pressures or road cash flow, because salaries and benefits arent keeping up with it and therefore, it challenges you're certain visibility ratios. So.

What we're seeing now is disposable income and salaries.

Our keeping up.

Tracking the inflationary pressure, but thats, what you have to watch out for.

We're in a unique position, where we have over $200 billion of cash sitting on consumers' balance sheets to mitigate a lot of that.

And most of the economy, but how that gets spent.

And how that drives inflation versus growth. We all have to watch. So I think I think thats, what youre trying to get out and that's what we're watching for.

Okay, well thank you.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.

Morning, Thank you to page 26 of your presentation and specifically the all bank asset yield I'm looking at the loan yield and how it's dropped by 27 basis points over the last 12 months over that time period, the five year Best Canada five years up about 100 points.

Yes.

The increase in five years.

The recent <unk>.

Thought we might start to see a little bit of a move in loan yields.

Might just be mix that I'm seeing here it might be just amount of time, just a matter of timing, but could you speak to when that increase in the fiber that we're seeing will translate into higher loan yields.

Sure. Thank you I mean, I think you're right a bit of it is and it being mixed overall.

Sorry benefit.

Overall, though we're talking about some of the timing.

First as part of the program.

The comments around the mall.

Mortgage book and how the.

<unk> pricing there.

Five year rates have started to two well into higher rates, we have seen those rates go up.

So you are saying, what we are starting to see that do you have a sense for when we might actually.

This exhibit on page 26, we will actually see the inflection in loan yields.

In terms of timing, we have to yes.

Was it a bit for you Mario because again it says.

But the crop.

Markets and city National.

The rise in voting.

It's difficult to probably get back to you and bring you a bit more of a decomposition on it.

National probably plays a role given how much it's impacted at the short end of the curve the long end.

Significant compression that we've talked about in the Sudan.

Jim.

With distorting that number.

Versus have nothing to do with Canadian long yields.

That might be part of it but we'll have to decompose. The one driver will look at roll on roll off on the mortgages and Canada will be another driver and we can we can to a waterfall.

<unk>.

Yeah, I was looking at the Canadian five year, but obviously the yield five years off as well maybe not as much in the Canadian but.

But our balance sheet.

Our engine to the short end of the curve in the United States, We don't have many long term asset.

First off the short end so that's what's driving.

Right.

We'll need to see actual.

Central Bank rate increases before we might see that margin pickup that's correct and that's why we gave you the sensitivity with the short end of the curve move because it has a big impact on the U S and Canada for us.

And.

The longer end of the curve by fly.

Slightly different type of question.

I also care a lot about.

What youre doing on the liquidity front.

The average looking at Repos <unk> Securities X trading obviously that increase those balances increased very significantly.

When the pandemic hit because every bank was was building in liquidity then.

It started to taper off and Paul very recently now we're seeing a really big increase again and Repos for example in Securities could you talk about repo, specifically and the dynamic sort of market dynamics that would cause such a significant increase in repos from last quarter to this quarter.

Sure.

Sure Mario it's Derek.

What youre seeing there is.

A couple of things.

Quarter over quarter, a big part of that is just.

What I'll refer to the sort of seasonality or timing has been a year and so because of the timing of our fiscal year end in our quarters versus many of our global peers that are operating on a calendar fiscal year and.

Many of them will often pull back on liquidity. They are providing in the market stay hedged into December 31 period, because that intra quarter for us that often creates good opportunities for us to step in with liquidity around calendar year end period and support our clients.

Through really just a multi week period around year end and so there is a seasonality element to our repo business, where we are.

Often we can increase our balances to support clients through that time period, and then bring those back down. So that is definitely part of what you saw in terms of the quarter over quarter.

Longer term in that Dean referred to this earlier with all.

The liquidity that's been put into the market by central banks over the last couple of years the demand for financing through things like repo has come down and that has brought down our volumes, but it's also had a notable spread impact I think we would expect as liquidity starts being pulled out of the market we will.

C and increased client demand.

For financing, which would be helpful for us, but also we would over time expect that to translate into higher spreads in that business and.

I'd say, we're very early days and starting to see that this was the first quarter, where we saw a modest uptick in spreads. So it does take time, but we would expect as rates go higher and liquidity comes out of the system that.

That will help the price spreads in that business.

Okay. Thank you.

Yeah.

Thank you. The next question is from.

Lamar Prasad from core Mark. Please go ahead.

Thanks. My question is probably for <unk>. So I think I heard you suggest that in <unk>.

Ration is captured in the structural part of the.

<unk> expense expectation slide.

As expected expense expectations, a waterfall on slide 12.

So maybe clarify that then would it be fair to suggest that their structural costs were more significantly impacted by say higher inflation, but some of that 4% growth in investments and volume spend be deferred or is there just not that much flexibility or Matt I'm, just really trying to.

Assess the possibility of that cost can come in above your.

Your guidance range here.

Any thoughts would be helpful.

Great. Thank you so the 2% structural does have a component and the parts of it relates to inflation would be aware, we had increased salary.

Started the year recognizing the fact that we were under some inflationary pressure, but that's about a third of that about two thirds of that is more scalable related to business volume. So for example trade at sub custody etcetera, and also seeing a bit of a pickup in travel the <unk>.

4% you reference of the investments are.

Large component of that is actually investment in talent. So we've already incorporated as part of that a little bit of inflation as well just in terms of expectations around certain of those groups that we're investing in from a frontline perspective as well as some of the rest of it would be in tools I would say as inflation was two.

It can really spike or pushed through a couple of things just to note. There. So we have put through some of it already into our full across the board salary base. The other piece of it is some of our cost base actually is not going to be immediately impacted by inflation. We do have a number of costs that will be fixed in nature. For example, our occupancy is there any predetermined cost secondly, along.

Depreciation was related to our App Dev spend or some of that investment in technology is actually from historical spend as it flows through from an NII standpoint, we do have opportunity to scale on that but also on the efficiency and productivity side that we referenced there is an area that we're heavily focused on to be able to continue.

To invest and as if inflation persist further.

Into the future. It's an area that we can continue to look at it.

Our investment in play with that lever as well.

Great. Thank you.

Thank you. The next question is from Mike Christina Lake from Stifel. Please go ahead.

Hey, good morning, a question probably for Neal.

I do see the market share gains that you had just looking over a longer term horizon, but you have lost share in the residential mortgage balances I'm, referring to among the big six each of the past three quarters and I know in the past you've had some.

Discussion points around spreads in the market and competitive dynamics and then maybe some aggressive pricing from peers. So I'm wondering what your near term outlook might be on when you expect those market share losses to abate.

Yes, Chris I. Appreciate the question, we made some comments last year just about <unk>.

Making a decision to take a little bit more margin when we're kind of at the height of the market in terms of volumes to make sure. We we.

We didn't lose any any volume in the pipeline.

We converted all of those I was kind of like I say mid year last year. Since then we've been competing I think very hard and feel very comfortable of what were taking out of the market I think one of the things you need to get underneath that the difference between off the market share in the TBA market share data.

Theres different inputs into each of them. So one of the differences being just the wholesale funding and purchasing mortgages something we don't do.

And one at least one of our competitors, we've been a part of what's driving.

Some of the trends I think youre, referring to just gets back to our strategy, which is we believe in owning the channel we have a proprietary.

Sales strategy, we own the relationship and it all kind of ties back to owning the client being able to cross sell.

I don't think we have anything in our sights about us losing market share on the mortgage business.

I appreciate the color and then maybe just a follow up on David's guidance earlier on.

Mortgage growth remaining in that high single digit range for.

For the rest of this year I believe is what the comment was referring to so I'm just looking at some of the trends that we've seen lately, including you've got like the recent originations about 60% of them have been variable and just thinking back to the rate hikes that we saw in 2017.

Sort of pushed the mortgage growth all the way down to that low single digit I think a trough at around 3%. So I'm wondering if we do get what the bond market is pricing in right now something in the range of six rate hikes would your 2023 outlook.

Looking something like low to mid single digit range at best in terms of growth.

Yes, it's Neil again I'll take the question so I.

I guess to give you a bit of an extended outlook, Dave made the comment that mortgage outlook towards the end of the year would be high single digits as we see rates come up naturally cooling the market.

Going down some activity, we'd see that get into mid single digits to end 2023.

Okay. That's helpful. Thanks for the color.

Thank you.

The next question is from Scott Chan from Canaccord Genuity. Please go ahead.

Good morning.

Wanted to ask on the Canadian P&C, but I wanted to kind of focus on that specific national side and the one thing that struck me was.

The retail book, where 25% year over year, and you kind of called.

Called the mortgage growth, beating similar to Canada. So I was just wondering.

<unk>.

Maybe an update on the strategy, there anything differentiated and Paragon.

Fair to assume that the U S growth.

This year would be higher or could be higher on the Canadian side. Thanks.

So lets Dave I'll make some comments on and we're very happy with the city national growth both on the commercial C&I side as well as you pointed out on the consumer side. It's a result of our strategy I've been talking about for years hiring private bankers in our key markets expanding our capability to jumbo mortgages cross selling those jumbo.

Mortgages into core deposit investment accounts. So you are seeing just the acceleration of the investments in this strategy starting to play out for us and it's our fastest growing.

A line of business now followed strongly by a very strong entertainment growth. Our inter containment clients are busy there is enormous amount of content investment as I pointed out in my speech into content global content production.

We have a fantastic core capability and entertainment banking from production through to talent management. So I think from that film track was an important acquisition in the IP side for us to play a bigger and bigger role in the entertainment industry.

Core C&I real estate and commercial we're seeing great progress on our corporate I think we are at almost $2 billion.

Of growth there already.

So that strategy again ceded by investment of building out teams in core markets bring in new clients in the.

This franchise has a proven ability over decades to execute organically at an exceptional high quality growth level and were seeing as we move into new territories, whether it'd be jumbo mortgage our mid corporate commercial that customer centric franchise that brings new clients as.

It's proven that it can extend geographically and it can extend into new customer segments, and we're very very happy with the progress.

Thank you Dave.

One more question on them open at all.

Thank you. So on the last question will be from Sohrab <unk> from BMO capital markets. Please go ahead.

Okay, great. Thank you I just wanted to actually go to Doug Guzman, which Doug you've got the expanded responsibilities now that include I think overall well.

As you think about the opportunities there should we be thinking you will be focused more around the topline or efficiency improvements and maybe you can talk a little bit across the geographies as well.

Sure. Thanks.

Yes first of all I don't think you should expect a radically new strategies across these businesses at all.

The wealth businesses, So U S wealth brokerage business and our Canadian wealth management business also a brokerage model have had.

Parts of their operations that made sense to be centralized have been.

So our operations function, we run on the same rails on the operations side of the products and strategy function.

At the margin, maybe theres, a little more room for more communication, but I don't think youre going to see much really different there Dave talked to to city national topline growth is really important they're growing the infrastructure into the size of the revenue base is also important and expenses are important. So I don't think I'd pick between revenue and expense, but were optimistic both of those.

Businesses in the U S are showing really strong growth big investments in technology in the U S wealth management brokerage.

Very attractive destination for Fas financial advisers in the U S. We've had good growth.

On that side.

Expense expense control throughout on the Canadian businesses, you continue to see us outselling the competition our market share in <unk>.

Global asset management, and retail mutual fund business remains <unk>.

50% above number two and it's actually gapping out because our sales exceed our underlying.

Market share similarly in wealth management, Canada, where we've had great success, attracting advisors and very low direct expense growth. So.

I think kind of both the caveat of course is markets we can control.

Markets.

But we feel like we're positioned for any eventuality, historically and market disruptions in our home market.

Benefited because we've been able to remain consistent and we've got a higher level of advice content delivery. There remains considerable cash on the retail customer individuals' balance sheets and that cash needs to move to longer term investments for.

For their life planning and we're working on that as well so feel pretty good about all the bits I just covered.

And just just for Crystal clarity you don't think you need any capital for inorganic engines. On this this is all organic you are talking about we don't need capital for inorganic.

The the growth.

Emphasis.

In domestic wealth management on the distribution side has been hiring people. So thats touch expense investment in people and building capabilities.

And that's the reason, we're continuing to gain market share, we're able to deliver more to our customers.

On a relationship than we have in the past and that protects fees over time, we don't need more scale in Canada.

Early in other markets.

While we're open to it we don't need to do anything on the acquisition side.

Thank you for taking my follow up question.

Thank you. This will conclude the question answer session I would like to turn the meeting back over to Mr. Dave Mackay.

I'd like to thank everyone for a lot of great questions.

So as I sum up our quarter again, we're very happy with the way we started the year and the themes that we wanted to really leave you with today was just.

The impact of the investments and the consistent investment strategy across all our businesses is producing higher Roe.

High quality growth across all our franchises in your questions touched on all of that growth today, whether it's private banking and 25 and <unk>, 25% jumbo mortgage growth with high net worth customers.

Strong <unk> entertainment real estate and now mid market growth fueled by an expansion.

And hiring strategy there U S wealth management building completely new technology platforms that investment has led to an $8 billion secured lending portfolio with $80 million of revenue Canadian banks, launching vantage and continuing to expand our value proposition driving really strong customer acquisition and in profitability.

<unk> core banking and market share gains capital markets. Our long term strategy is executing against expanded industrial coverage, bringing new Mds and focusing on high growth high opportunity sectors like health care and technology, driving really strong noninterest revenue growth.

It's the consistency in the approach and the focus on this strategy is delivering results.

That's the message that we really wanted to hear and as many of your questions pointed to we have a line of sight and flexibility to manage the uncertainty around the inflationary environment, we have levers you've touched on those levers with your questions.

And very much we feel like we have an exciting year ahead of us. So thank you very much for your questions look forward to seeing you in Q2 B well.

Thank you.

France has now ended please disconnect your lines at this time and thank you for your participation.

Yeah.

This conference is no longer being recorded.

<unk>.

[music].

Good morning, ladies and gentlemen, welcome to Rbc's conference call for the first quarter 2020 do financial results. Please be advised that this call is being recorded I would like to turn the meeting over to assume Enron head of Investor Relations. Please go ahead Mr. Enron.

Thank you and good morning, everyone speaking today will be Dave Mckay, President and Chief Executive Officer.

And then on Chief Financial Officer, and Graeme Hepworth, Chief risk Officer.

Also joining us today for your questions Neil Mclaughlin group head personal and commercial banking, Doug Guzman group head wealth management insurance and I N T S and Derek Millner group head capital markets.

As noted on slide one our comments may contain forward looking statements, which involve assumptions and have inherent risks and uncertainties actual results could differ materially.

I'd also remind listeners that the bank assesses this performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance to give everyone. The chance to ask questions. We ask that you limit your questions and then re queue with that I'll turn it over to Dave.

Thank you and good morning, everyone.

Again for joining US today, we reported earnings of $4 1 billion.

Our second highest on record underscoring the strength and scale of our franchises.

Net income was up 6% from last year, and we generated positive all bank operating leverage while continuing to invest for growth.

Pre provision pretax earnings were up 10% year over year.

Benefiting from robust client driven volume growth in Canadian banking.

And city National strong wealth management results and record investment banking revenue.

These were partially offset by continued moderation.

And our trading revenue and the impact of lower spreads.

Our 17, 3% return on equity.

Combined with a strong capital ratio enabled us to deploy capital in a balanced manner to support client driven.

Growth and long term shareholder value.

Our capital position supported $1 7 billion in dividends to our largely Canadian shareholder base as well as almost $9 million of share repurchases.

In aggregate, we returned nearly $3 billion to our shareholders for a total payout ratio of 72%.

We also deployed our balance sheet across our businesses to support our clients' needs and ambitions, resulting in organic <unk> growth of $14 billion in the current quarter.

We ended this quarter with a robust CET one ratio of 13, 5% representing $13 billion in excess capital over an 11% level.

This provides significant flexibility to continue investing in talent.

And technology.

To accelerate the deployment of capital for organic growth.

Opportunities and I will speak more to this strategy in a moment.

Our strong capital position also enables further share repurchases as well as providing us optionality to acquire quality franchises in growth segments.

That align with our current strategy and geographic footprint.

Looking forward, we have a consistent and clear focus on creating client and shareholder value in.

And a disciplined balanced approach to capital deployment as evidenced by our 15% year.

Year over year growth and book value per share this quarter, and a 9% compounded annual growth rate over the last three years.

Before I speak to our growth opportunities I want to touch on the macro environment.

We continue to experience market and economic volatility driven by heightened geopolitical risk continued supply chain disruption.

Acute labor capacity shortages, LNG market imbalances, and the resulting high inflationary conditions.

However, the underlying economic drivers are still strong.

As we move past the Omicron peak, we can look to record household savings.

Over 200 billion in Canada alone.

Driving consumer spending on goods and services renewed immigration driving demand for housing increased business investment into just in case inventory strategies and building new digital capabilities.

Recent hawkish central bank commentary around the concerning level of inflation and north American economies, reaching full potential suggest imminent rate increases and an acceleration of quantitative tightening programs.

While the prospect of benchmark rate increases has driven volatility in equity markets.

We are well positioned to benefit from rising interest rates, which Nadine will speak to later.

However, we have also seen the yield curve flattened significantly over the last three months. This combined with tight labor markets and economies, reaching full potential suggest we are closer to mid cycle economic growth than early stages of an economic recovery.

As it relates to Canadian housing, we continue to monitor supply demand imbalances across the country we.