Royal Bank of Canada

About

Royal Bank of Canada is a Canada-based diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services globally. Its segments include Personal & Commercial Banking, Wealth Management, Insurance, Investor and Treasury Services, Capital Markets, and Corporate Support. Personal & Commercial Banking segment provides a range of financial products and services to individuals and businesses for their day-to-day banking, investing, and financing needs through two businesses: Canadian Banking, and Caribbean and United States Banking. Wealth Management offers comprehensive investment, trust, banking, credit, and other advice-based solutions. Its insurance segment offers a range of advice and solutions for individual and business clients including life, health, wealth, home, auto, travel, annuities, and reinsurance.

The bank reported interest income of CAD 40,771 million for the fiscal year ended October 2022 (FY2022), an increase of 44.9% over FY2021. In FY2022, the bank’s operating margin was 41.1%, compared to an operating margin of 41.5% in FY2021. In FY2022, the bank recorded a net margin of 23.6%, compared to a net margin of 27.7% in FY2021.

Key Achievements

• #1 market share in all key product categories in Canadian Banking
• 9^th largest global investment bank
• Largest retail mutual fund in Canada
• #1 in market share for high net worth/ultra-high net worth in Canada
• Largest Canadian-bank owned insurance organization
• 6^th largest wealth advisory firm in the US

Products and Services

RBC is a provider of banking products and related services. Its key products and services include:

• Accounts and Deposits:
  • Savings and Checking Accounts
  • Business Trust Accounts
  • Tax-free savings account
• Cards:
  • Commercial Cards
  • Credit Cards
• Loans and Financing:
  • Fixed and Variable Rate Mortgages
  • Line of Credit and Operating loans
  • Car loans
  • Personal loans
• Investment Products:
  • Mutual Funds and ETFs
  • Equity and Fixed Income Products
  • Alternative Investments
  • Guaranteed Investment Certificates
  • Retirement funds
• Insurance:
  • Life and Non-life insurance
• Services:
  • Portfolio and Investment Solutions
  • Online banking and trade services

Segments

Personal and Commercial Banking

RBC’s Personal and Commercial Banking vertical provides a broad suite of financial products and services to individuals and businesses. Its operations are conducted through two businesses – Canadian banking and Caribbean and US banking.

KPIs:

• Over 14 million clients in Canadian Banking
• #1 or #2 ranking in market share for all key retail and business products

Revenue share FY22

The P&CB segment brought in CAD 20.1 billion in FY22 which is a 10% increase in revenue when compared to FY21 which was at CAD 18.3 billion.

• The Personal Banking segment’s revenue rose by 5%, which is primarily due to higher interest rates. Average residential mortgages increased by 11% from FY21 primarily due to rising interest rates, changes in product mix and lower prepayment revenue. Average deposits increased by 9% from FY21 mainly due to the acquisition of new clients and an increase in activity from existing clients.
• Business banking’s revenue increased by 26%, majorly due to higher interest rates, credit fees and service charges. Average loan acceptance increased by 11% and average deposits increased by 11%.
• Caribbean and US Banking revenue increased by 11%, resulting from average volume growth of 11%, higher card service revenue and higher spreads. Average loans and acceptances increased by 12% and average deposits increased by 11% primarily due to increased client activity and the impact of foreign exchange translation.

Loan Mix for Q2FY23

• The loans stand at CAD 846 BN with 50% of it accounting for residential mortgages
• Canadian Banking weighted average FICO Score stands at 789 with over 81% of customers with a score of more than 720
• 30–89-day delinquency rates were stable QoQ across all portfolios
• In the residential mortgage portfolio, fixed-rate mortgages accounted for 68% of the mortgages. The Average Duration for Remaining Mortgage Amortization stands at 26 years

Risk review as of Q2FY23

• Allowance for Credit Losses increased by CAD 328 MM
• Provisions for Credit Losses for the commercial business were at CAD 57 MM up CAD 33 MM QoQ, primarily driven by provisions in the consumer discretionary and consumer staples sectors. Retail PCL was at CAD 245 MM up CAD 10 MM QoQ, due to higher provisions in the Credit Card portfolio
• Gross Impaired Loans stand at CAD 1.3 BB, with increases in both retail and commercial portfolios. Write-offs increased by CAD 28 MM QoQ, driven by higher write-offs on Credit Cards and Personal Loans

Wealth Management

RBC’s Wealth Management business is a global business serving HNW and UHNW clients across key financial centres. Lines of businesses include Canadian Wealth Management, US Wealth Management, Global Asset Management, and International Wealth Management.

KPIs:

• 6,100 client-facing advisors
• >CAD 55 billion AUA net flows
• CAD 1.33 BB assets under administration
• CAD 992 BB assets under management

Revenue Share FY22

• Canadian Wealth Management increased by 10% YoY primarily driven by higher average fee-based client assets, largely driven by net sales and higher interest income from higher interest rates. FY22 total revenue stands at CAD 4.38 BB.
• US Wealth Management business increased by 18% from FY21 and revenue increased by 14%, primarily due to higher net interest income driven by average volume growth of 14% in loans and 9% in deposits as well as higher interest rates, which also drove higher revenue from sweep deposits.
• The revenue for Global Asset Management decreased by 2%, largely due to changes in the fair value of seed capital investments, the impact of foreign exchange translation as well as lower performance fees.
• International Wealth Management revenue is up significantly increasing by CAD 84 MM or 25% from FY21, primarily due to higher interest rates and higher spreads.

Capital Markets

RBC Capital Markets is a global investment bank providing expertise in advisory & origination, sales & trading, and lending & financing to corporations, institutional clients, asset managers, private equity firms and governments globally.

KPIs:

• 9^th largest global investment bank
• Over 19,500 clients

Revenue Share FY22

• Corporate and Investment Banking revenues were down 11% from FY21. Investment Banking revenues decreased CAD 773 MM, mainly due to the impact of decreased loan origination and M&A activity primarily in the US. Lending and other revenues increased by 11%, primarily due to average volume growth in the US and Europe.
• 
  Revenue in Fixed income, currencies and commodities business decreased CAD 308 MM or 11%, largely driven by lower fixed-income trading revenue and lower debt origination both primarily in the U.S. These factors were partially offset by higher foreign exchange trading revenue across all regions. Equities business revenue decreased by CAD 73 MM or 5%, primarily due to lower equity origination across most regions. Revenue in Repo and secured financing business increased by CAD 84 MM or 7%, mainly due to increased client activity.

Risk review as of Q2FY23

• Lower M&A and loan syndication activity across most regions
• Lower equity trading revenue and lower fixed-income trading across most regions
• Higher expenses resulting from foreign exchange translations

Insurance

RBC Insurance is the largest bank-owned insurance in Canada and offers advice and solutions for life, health, wealth, home, auto, travel, annuities, and reinsurance.

KPIs:

• Largest Canadian-bank owned insurance organization
• >4.9 million clients

Revenue Share FY22

• Canadian Insurance revenue decreased 78% from FY21, primarily due to the change in the fair value of investments backing policyholder liabilities and lower group annuity sales. Premiums and deposits decreased by 5%
• International Insurance, which is primarily focused on the reinsurance business had its revenue increase by CAD 174 MM from FY21

Ownership Structure

Top 10 Shareholders

Name	Equities	Percentage	Valuation
The Vanguard Group, Inc.	44,849,838	3.24%	4,284 M $
RBC Global Asset Management, Inc.	36,433,061	2.63%	3,480 M $
RBC Dominion Securities, Inc.	32,743,241	2.36%	3,127 M $
CIBC World Markets, Inc.	22,562,411	1.63%	2,155 M $
Norges Bank Investment Management	16,830,957	1.22%	1,608 M $
Mackenzie Financial Corp.	16,648,177	1.20%	1,590 M $
1832 Asset Management LP	15,766,416	1.14%	1,506 M $
Fidelity Management & Research Co. LLC	14,076,997	1.02%	1,344 M $
BMO Asset Management, Inc.	11,357,393	0.82%	1,085 M $
Wellington Management Co. LLP	10,922,870	0.79%	1,043 M $

The Team

David I. McKay, Chief Executive Officer, Director, President

Dave McKay is President and CEO of RBC, Canada’s biggest bank, and one of the largest in the world based on market capitalization. He is reimagining the future of financial services to help RBC’s clients thrive and communities prosper. Dave holds a Bachelor of Mathematics and an honorary Doctor of Mathematics degree from the University of Waterloo. He also holds an MBA and an honorary Doctor of Laws degree from the Richard Ivey School of Business at the University of Western Ontario, and an honorary degree from Toronto Metropolitan University. He is both a member and a Board of Director at the Business Council of Canada, a member of the U.S. Business Council, a Board of Director with the Institute of International Finance (IIF) and the Bank Policy Institute (BPI). Dave also serves on the Catalyst Canada Advisory Board and is the chair of the Business/Higher Education Roundtable, which brings together Canada’s top businesses, universities and colleges to find ways to better link workplaces and classrooms.

Nadine Ahn, Chief Financial Offfice

Nadine Ahn joined RBC more than 20 years ago and has held progressively senior positions within Corporate Treasury and Finance. As Chief Financial Officer, Nadine is responsible for Finance, Taxation, Performance Management, Investor Relations, Corporate Treasury, and Corporate Development. Together with other members of Group Executive, she is responsible for setting the overall strategic direction of RBC. In addition, Nadine chairs RBC’s Asset-Liability Committee. Nadine is a CPA and holds a Bachelor of Commerce from the University of Toronto. She joined the Board of Michael Garron Hospital Foundation in 2023. A champion of RBC’s Purpose and Values, Nadine previously served on the enterprise Diversity Leadership Council and as the Executive Sponsor of the CFO Group’s Diversity Leadership Council. She is also recognized within the financial services industry for her leadership and vision. In 2019, she was honoured by Women in Capital Markets as a Champion of Change, an award which recognizes leaders who push the boundaries for the advancement of women.

Doug Guzman Group Head, Wealth Management, Insurance and RBC Investor & Treasury Services

As Group Head, RBC Wealth Management, RBC Insurance and RBC Investor & Treasury Services, Doug Guzman leads RBC’s businesses that serve the wealth management needs of affluent and high net worth clients globally, and teams that provide asset management and trust products. He also oversees RBC Insurance, which provides a wide range of insurance, wealth and reinsurance solutions to individual, business and group clients. In addition, along with other members of Group Executive, Mr. Guzman is responsible for setting the overall strategic direction of RBC. Prior to this appointment, Mr. Guzman was Managing Director and Head of Global Investment Banking, RBC Capital Markets, responsible for the firm's Investment Banking teams globally, as well as U.S. Municipal Finance. Before joining RBC in 2005, he was a Managing Director at Goldman Sachs in New York and Toronto, where he had co-head responsibility for each of the Global Metals and Mining and the Canadian Investment Banking businesses.

Graeme Hepworth, Chief Risk Officer

As Chief Risk Officer, Graeme oversees the strategic management of risk on an enterprise-wide basis. He is a member of Group Executive, which sets the overall strategic direction of RBC. He was appointed Chief Risk Officer in 2018. Graeme joined RBC in 1997 as an analyst in Group Risk Management, focusing on foreign exchange products. In 2001, he took on the role of Vice President for GRM's Portfolio Management team focused on loan portfolio risk analysis, economic capital and policy. Graeme moved to New York in 2004 to become Head of Market Risk for the Capital Markets trading businesses in the U.S. In 2011, Graeme moved to London to take on the role as Chief Risk Officer for Europe & Asia. Prior to being appointed CRO, Graeme was EVP, Retail & Commercial Credit Risk, where he led a number of teams that provide the primary risk management support to RBC’s Insurance, Wealth Management and Personal and Commercial Banking (P&CB) businesses. Graeme is a qualified Chartered Financial Analyst and has a Masters in Mathematics from the University of Waterloo.

Maria Douvas, Chief Legal Officer

Maria E. Douvas is Chief Legal Officer and a member of RBC’s Group Executive. In this role, she has oversight of the bank’s global Legal Affairs & Compliance Group, which comprises the bank’s legal, regulatory compliance and government affairs teams. Maria joined RBC in 2016 and has held progressively senior positions over this time, including Executive Vice President & General Counsel, U.S. General Counsel and Global Head of Litigation, and has served on the Operating Committees for both the CFO Group and RBC Capital Markets U.S. She has successfully led RBC’s efforts on a broad range of litigation and regulatory matters, and provides strategic counsel to senior leaders across RBC’s businesses and functions globally. Prior to joining RBC, Maria was a partner at a leading international law firm, and a federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York. She earned her J.D. in 1998 cum laude, Order of the Coif, from the University of Pennsylvania Law School, and her B.A. in 1995 from Columbia University.

Neil McLaughlin, Group Head, Personal & Commercial Banking

As Group Head, Personal & Commercial Banking, Neil McLaughlin is responsible for RBC’s banking businesses in Canada, the Caribbean and the US, including personal and commercial financial services, credit cards and payments, and digital solutions, as well as RBC’s sales and branch distribution, operations and advice centres. He is also responsible for RBCx, the tech banking and innovation group focused on re-imagining the role RBC plays in clients’ lives now and for the future. Prior to his current position, Neil was Executive Vice President, Business Financial Services for RBC’s Canadian Banking division, responsible for setting the strategic direction and leading all lines of business that serve small business and commercial clients through RBC’s extensive business banking network. Neil joined RBC in 1998 and has held a wide range of senior management and executive positions in Canadian Banking, including roles in the Credit Card and Personal Lending businesses, distribution and operations. He also served as Senior Vice President, Risk Operations within Canadian Banking Operations, responsible for credit adjudication, fraud, collections, operational risk and the Commercial Advisory Group.

Derek Neldner, CEO and Group Head, RBC Capital Markets

Derek Neldner is CEO and Group Head of RBC Capital Markets and is a member of RBC’s Group Executive. Derek has global oversight of the firm and, along with the Capital Markets Operating Committee, sets the growth strategy for RBC’s Corporate & Investment Banking and Global Markets business activities worldwide. Together with other members of Group Executive, Derek is also responsible for setting the overall strategic direction of RBC. Derek joined RBC in 1995 and has held a broad array of responsibilities across the firm, and served as Global Head of Investment Banking prior to his current role. He has significant experience across all aspects of investment banking including mergers and acquisitions, debt and equity financing, and he continues to provide senior coverage and advice to a number of the firm’s most significant clients. Derek is also a strong advocate for diversity and inclusion, taking an active role in driving progress across the firm through his role as Executive Chair of the RBC Capital Markets Global Diversity Leadership Council. Derek holds a Bachelor of Commerce degree in Finance from the University of Alberta and is a Chartered Financial Analyst (CFA), as designated by the CFA Institute. Derek is married with four children and lives in Toronto, Canada.

Financials

Income Statement

Fiscal Year is Nov-Oct. All values CAD millions
	FY18	FY19	FY20	FY21	FY22
Interest Income	33,021.00	41,333.00	34,883.00	28,145.00	40,771.00
Interest and Fees on Loans	21,249.00	24,863.00	23,420.00	21,654.00	26,565.00
Interest Income on Fed. Funds	5,536.00	8,960.00	4,668.00	1,309.00	5,447.00
Interest on Bank Deposits	566.00	683.00	307.00	305.00	1,697.00
Other Interest or Dividend Income	5,670.00	6,827.00	6,488.00	4,877.00	7,062.00
Interest Income Growth	-	0.25	-0.16	-0.19	0.45
Total Interest Expense	15,069.00	21,584.00	14,048.00	8,143.00	18,054.00
Interest Expense on Bank Deposits	9,842.00	12,988.00	8,783.00	5,448.00	10,751.00
Other Interest Expense	5,227.00	8,596.00	5,265.00	2,695.00	7,303.00
Interest Expense on Debt	322.00	365.00	280.00	179.00	288.00
Other Borrowed Funds	4,905.00	8,231.00	4,985.00	2,516.00	7,015.00
Total Interest Expense Growth	-	0.43	-0.35	-0.42	1.22
Net Interest Income	17,952.00	19,749.00	20,835.00	20,002.00	22,717.00
Net Interest Income Growth	-	0.10	0.06	-0.04	0.14
Loan Loss Provision	1,307.00	1,864.00	4,351.00	-753.00	484.00
Net Interest Income after Provision	16,645.00	17,885.00	16,484.00	20,755.00	22,233.00
Net Interest Inc After Loan Loss Prov Growth	-	0.07	-0.08	0.26	0.07
Net Interest Margin	-	-	-	-	0.01
Non-Interest Income	23,505.00	25,191.00	25,257.00	28,495.00	25,120.00
Securities Gain	147.00	125.00	90.00	145.00	43.00
Trading Account Income	1,150.00	995.00	1,239.00	1,183.00	926.00
Trust Income, Commissions & Fees	16,601.00	16,744.00	17,703.00	20,079.00	20,129.00
Trust Income	8,928.00	9,376.00	9,813.00	11,383.00	11,899.00
Commission & Fee Income	7,673.00	7,368.00	7,890.00	8,696.00	8,230.00
Other Operating Income	5,607.00	7,327.00	6,225.00	7,088.00	4,022.00
Non-Interest Expense	25,509.00	28,224.00	28,441.00	29,815.00	28,392.00
Labor & Related Expense	13,776.00	14,600.00	15,252.00	16,539.00	16,528.00
Equipment Expense	3,151.00	3,412.00	3,567.00	3,570.00	3,653.00
Depreciation & Amortization	569.00	627.00	1,333.00	1,276.00	1,265.00
Operating Income	14,641	14,852	13,300	19,435	18,961
Operating Income Growth	-	0.01	-0.10	0.46	-0.02
Operating Income Margin	-	-	-	-	28.78%
Non-Operating Income (Expense)	1,098	986.00	1,012.00	1,066	1,038.00
Miscellaneous Non Operating Expense	1,098	986	1,012	1,066	1,038
Pretax Income	15,739	15,838	14,312	20,501	19,999
Pretax Income Growth	-	0.63%	-9.64%	43.24%	-2.45%
Pretax Margin	-	-	-	-	0.30
Income Taxes	3,329.00	3,043.00	2,952.00	4,581.00	4,302.00
Income Tax - Current - Domestic	3,128.00	3,199.00	3,542.00	4,785.00	3,921.00
Income Tax - Deferred - Domestic	201	-156	-590.00	-204.00	381.00
Equity in Affiliates	2100.00%	7600.00%	7700.00%	13000.00%	110
Consolidated Net Income	12,431.00	12,871.00	11,437.00	16,050.00	15,807.00
Minority Interest Expense	31.00	11.00	5.00	12.00	13.00
Net Income	12,400	12,860	11,432	16,038	15,794
Net Income Growth	-	0.04	-0.11	0.40	-0.02
Net Margin	-	-	-	-	0.24
Net Income After Extraordinaries	12,400.00	12,860.00	11,432.00	16,038.00	15,794.00
Preferred Dividends	285	269	268	257	247
Net Income Available to Common	12,115	12,591	11,164	15,781	15,547
EPS (Basic)	8.39	8.78	7.84	11.08	11.08
EPS (Basic) Growth	-	4.59%	-10.66%	41.31%	-0.03%
Basic Shares Outstanding	1,444.00	1,435.00	1,424.00	1,424.00	1,404.00
EPS (Diluted)	8.36	8.75	7.82	11.06	11.06
EPS (Diluted) Growth	-	0.05	-0.11	0.41	0.00
Diluted Shares Outstanding	1,450.00	1,441.00	1,429.00	1,427.00	1,406.00

Balance Sheet

Fiscal Year is Nov-Oct. All values CAD millions	FY18	FY19	FY20	FY21	FY22
Total Cash & Due from Banks	44,676.00	41,939.00	137,007.00	128,387.00	98,031.00
Cash & Due from Banks Growth	-	-6.13%	227%	-6%	-24%
Investments - Total	611,507.00	657,525.00	702,317.00	688,168.00	790,507.00
Trading Account Securities	220,741.00	247,259.00	247,007.00	233,193.00	303,685.00
Federal Funds Sold & Securities Purchased	294,602.00	306,961.00	313,015.00	307,903.00	317,845.00
Securities Bought Under Resale Agreement	294,602	306,961	313,015	307,903	317,845
Treasury Securities	24,690.00	23,574.00	34,374.00	36,746.00	36,081.00
Federal Agency Securities	238.00	657.00	2,541.00	3,703.00	3,781.00
State & Municipal Securities	34,018.00	40,437.00	64,070.00	65,370.00	80,614.00
Mortgage Backed Securities	10,345.00	11,476.00	10,798.00	11,070.00	11,647.00
Other Securities	25,317.00	26,326.00	27,960.00	28,595.00	37,895.00
Other Investments	1,556.00	835.00	2,552.00	1,588.00	-1,041.00
Investments Growth	-	7.53%	6.81%	-2.01%	14.87%
Net Loans	613,289.00	657,201.00	700,005.00	797,213.00	927,976.00
Commercial & Industrial Loans	185,144.00	201,304.00	214,397.00	230,069.00	286,636.00
Consumer & Installment Loans	112,115	112,561	109,637	111,263	118,286
Interbank Loans	36,471.00	38,345.00	39,013.00	79,638.00	108,011.00
Real Estate Mortgage Loans	282,471.00	308,091.00	342,597.00	380,332.00	418,796.00
Loan Loss Allowances (Reserves)	-2,912.00	-3,100.00	-5,639.00	-4,089.00	-3,753.00
Investment in Unconsolidated Subs.	686.00	652.00	652.00	654.00	711.00
Customer Liability on Acceptances	15,641.00	18,062.00	18,507.00	19,798.00	17,827.00
Loans - 1 Yr Growth Rate	-	0.07	0.07	0.14	0.16
Net Property, Plant & Equipment	2,832.00	3,191.00	7,934.00	7,424.00	7,214.00
Other Assets (Including Intangibles)	44,628	48,376	55,547	62,668	73,481
Other Assets	28,804.00	32,466.00	39,493.00	47,343.00	55,121.00
Intangible Assets	15,824.00	15,910.00	16,054.00	15,325.00	18,360.00
Deferred Charges	626.00	147.00	143.00	2,640	3,331
Total Assets	1,334,734	1,428,935	1,624,548	1,706,323	1,917,219
Total Deposits	803,676.00	860,214.00	967,363.00	1,058,841.00	1,164,802.00
Demand Deposits	373,718.00	397,071.00	498,217.00	563,513.00	551,649.00
Savings/Time Deposits	429,958.00	463,143.00	469,146.00	495,328.00	613,153.00
Deposits Growth	-	0.07	0.12	0.09	0.10
Total Debt	248,466.00	262,192.00	333,977.00	318,861.00	342,703.00
ST Debt & Current Portion LT Debt	208,324.00	228,967.00	282,395.00	255,669.00	277,471.00
Current Portion of Long Term Debt	-	-	633.00	819.00	764.00
Short Term Debt	208,324.00	228,967.00	281,762.00	254,850.00	276,707.00
Long-Term Debt	40,142.00	33,225.00	51,582.00	63,192.00	65,232.00
LT Debt excl. Capitalized Leases	40,142.00	33,225.00	46,858.00	58,746.00	60,776.00
Provision for Risks & Charges	2,409.00	3,280.00	3,042.00	2,639.00	2,295.00
Long Term Debt Growth	-	-17.23%	55.25%	22.51%	3.23%
Deferred Tax Liabilities	-1,391.00	-1,907.00	-2,527.00	-1,937.00	-1,033.00
Deferred Taxes - Credit	84.00	82.00	52.00	74.00	439.00
Deferred Taxes - Debit	1,475.00	1,989.00	2,579.00	2,011.00	1,472.00
Other Liabilities	200,144.00	219,542.00	233,347.00	227,146.00	298,805.00
Other Liabilities (excl. Deferred Income)	197,885.00	216,979.00	230,402.00	223,628.00	295,145.00
Deferred Income	2,259.00	2,563.00	2,945.00	3,518.00	3,660.00
Total Liabilities	1,254,779.00	1,345,310.00	1,537,781.00	1,607,561.00	1,809,044.00
Preferred Stock (Carrying Value)	6,306.00	5,706.00	5,948.00	6,723.00	7,323.00
Non-Redeemable Preferred Stock	6,306.00	5,706.00	5,948.00	6,723.00	7,323.00
Common Equity (Total)	73,555.00	77,817.00	80,716.00	91,944.00	100,741.00
Common Stock Par/Carry Value	17,635.00	17,645.00	17,628.00	17,728.00	17,318.00
Retained Earnings	51,112	55,981	59,806	71,795	78,037
Cumulative Translation Adjustment/Unrealized For. Exch. Gain	4,147.00	4,221.00	4,632.00	2,055.00	5,688.00
Unrealized Gain/Loss Marketable Securities	-12	33	-139	-88.00	-2,357.00
Other Appropriated Reserves	688.00	-6.00	-1,079.00	566.00	2,394.00
Treasury Stock	-15.00	-57.00	-132.00	-112.00	-339.00
Common Equity / Total Assets	0.06%	0.05%	0.05%	0.05%	0.05%
Total Shareholders' Equity	79,861.00	83,523.00	86,664.00	98,667.00	108,064.00
Total Shareholders' Equity / Total Assets	5.98%	5.85%	5.33%	5.78%	5.64%
Return On Average Total Equity	-	-	-	-	0.15
Accumulated Minority Interest	94.00	102.00	103.00	95.00	111.00
Total Equity	79,955.00	83,625.00	86,767.00	98,762.00	108,175.00
Liabilities & Shareholders' Equity	1,334,734.00	1,428,935.00	1,624,548.00	1,706,323.00	1,917,219.00

Cash Flow Statement

Fiscal Year is Nov-Oct. All values CAD millions	FY18	FY19	FY20	FY21	FY22
Funds from Operations	15,659.00	15,705.00	17,567.00	18,166.00	19,261.00
Funds from Operations Growth	-	0.29%	11.86%	3.41%	6.03%
Changes in Working Capital	1,408.00	9,808.00	25.00	1,124	62,826
Net Operating Cash Flow	17,067.00	25,513.00	17,592.00	19,290.00	82,087.00
Net Operating Cash Flow Growth	-	49.49%	-31.05%	9.65%	325.54%
Capital Expenditures	-1,980	-2,261	-2,629	-2,186	-2,500
Capital Expenditures (Fixed Assets)	-1,980	-2,261	-2,629	-2,186	-2,500
Net Assets from Acquisitions	-65	-106	-22	-	-2,360
Sale of Fixed Assets & Businesses	14.00	173.00	-	78.00	-
Purchase/Sale of Investments	-72,523	-45,214	-43,835	5,273	-101,592
Purchase of Investments	-132,912.00	-110,591.00	-167,498.00	-126,711.00	-200,735.00
Sale/Maturity of Investments	60,389	65,377	123,663	131,984	99,143
Increase in Loans	-45,286	-44,546	-46,315	-95,605	-131,026
Net Investing Cash Flow	-119,840	-91,954	-92,801	-92,440	-237,478
Net Investing Cash Flow Growth	-	23.27%	-0.92%	0.39%	-156.90%
Cash Dividends Paid - Total	-5,640	-6,025.00	-6,333.00	-6,420.00	-6,960.00
Common Dividends	-5,640.00	-6,025.00	-6,333.00	-6,420.00	-6,960.00
Cash Dividend Growth	-	-0.07	-0.05	-1.37%	-8.41%
Increase in Deposits	48,499	49,808	126,826	88,876	108,533
Change in Capital Stock	-2,043.00	-1,567.00	-582.00	880.00	-5,008.00
Repurchase of Common & Preferred Stk.	-7,853	-7,544	-7,175	-6,218	-11,282
Sale of Common & Preferred Stock	5,810	5,977	6,593	7,098	6,274
Proceeds from Stock Options	5,810	5,977	6,593	7,098	6,274
Issuance/Reduction of Debt, Net	63,730	19,909	47,408	-11,794	22,163
Change in Current Debt	63,730	19,509	47,658	-12,044	21,355
Change in Long-Term Debt	-	400	-250	250	808
Issuance of Long-Term Debt	-	1,500	2,750	2,750	1,000
Reduction in Long-Term Debt	-	-1,100	-3,000	-2,500	-192
Other Funds	-37.00	-2.00	-6.00	-3.00	-5.00
Other Uses	-37.00	-2.00	-6.00	-3.00	-5.00
Net Financing Cash Flow	104,509	62,123	166,725	70,918	118,094
Net Financing Cash Flow Growth	-	-40.56%	168.38%	-57.46%	66.52%

Capital Structure

Debt Ratios	FY18	FY19	FY20	FY21	FY22
Debt Ratio	0.94	0.94	0.95	0.94	0.94
Debt to Equity Ratio	3.11	3.14	3.85	3.23	3.17
Long-term Debt to Capitalization	0.35	0.30	0.39	0.41	0.39
Total Debt to Capitalization	0.77	0.77	0.81	0.78	0.77
Interest Coverage	0.97	0.69	0.95	2.39	1.05
Cash flow to Debt Ratio	0.07	0.10	0.05	0.06	0.24
Equity Multiplier	16.69	17.09	18.72	17.28	17.72

Tax Rate
		FY18	FY19	FY20	FY21	FY22
Historical Tax Rate	Effective Tax Rate from B/S	21.10%	19.10%	20.50%	22.20%	21.40%
Selected Tax Rate						20.86%

Cost of Debt (Effective Interest Rate Method)
		FY18	FY19	FY20	FY21	FY22
Interest Expense	From I/S	15,069	21,584	14,048	8,143	18,054
Total Debt	From B/S	248,466	262,192	333,977	318,861	342,703
Effective Interest Rate		6.06%	8.23%	4.21%	2.55%	5.27%
Average Effective Interest Rate						5.27%

Weighted Average Cost of Capital
Share Price	130.16
Beta	0.78
Diluted Shares Outstanding	1,406.00
Cost of Debt	5.27%
Tax Rate	20.86%
After Tax Cost of Debt	4.17%
Risk Free Rate	3.53%
Market Risk Premium	14.86%
Cost of Equity	15.10%
Total Debt	342,703.00
Total Equity	183,004.96
Total Capital	525,707.96
Debt Weighting	65.19%
Equity Weighting	34.81%
WACC	7.97%

RBC has a credit rating of Aa- which is investment grade. It has maintained an interest coverage ratio of 0.97 - 2.39 from FY18-FY22 indicating that it has more interest expenses that EBIT. The debt/equity ratio ranged from 3.11 - 3.85 from FY18-FY22 indicating that RBC is a highly levered firm. The Weighted Average Cost of Capital is 7.97%.

Valuations

Dividend Discount Model

Current Price	130.16
Dividend yield	3.94%
Dividend payout ratio	44.07%
Retention rate	55.93%
ROE	14.60%
Growth Rate	8.17%
Current Dividend	4.96
Risk Free Rate	3.53%
Market Risk Premium	14.86%
Beta	0.78
Cost of Equity	15.10%
1 year forward dividend	5.37
DDM fair value	77.36

Sensitivity Analysis
		Growth Rate
	77.36	5.0%	5.5%	6.0%	6.5%	7.0%	7.5%	8.0%	8.5%	9.0%	9.5%	10.0%	10.5%	11.0%
Required Rate of Return	11%	86.80	95.14	105.15	117.39	132.68	152.34	178.56	215.26	270.32	362.08	545.60	1096.16	-1.3224E+17
	12%	74.40	80.50	87.63	96.04	106.14	118.49	133.92	153.76	180.21	217.25	272.80	365.39	550.56
	13%	65.10	69.77	75.11	81.27	88.45	96.95	107.14	119.59	135.16	155.18	181.87	219.23	275.28
	14%	57.87	61.56	65.72	70.43	75.82	82.03	89.28	97.85	108.13	120.69	136.40	156.59	183.52
	15%	52.08	55.08	58.42	62.15	66.34	71.09	76.53	82.79	90.11	98.75	109.12	121.80	137.64
	16%	47.35	49.84	52.58	55.60	58.97	62.73	66.96	71.75	77.23	83.56	90.93	99.65	110.112
	17%	43.40	45.50	47.80	50.31	53.07	56.13	59.52	63.31	67.58	72.42	77.94	84.32	91.76
	18%	40.06	41.86	43.81	45.93	48.25	50.78	53.57	56.65	60.07	63.90	68.20	73.08	78.65142857
	19%	37.20	38.76	40.44	42.26	44.23	46.37	48.70	51.25	54.06	57.17	60.62	64.48	68.82
	20%	34.72	36.09	37.55	39.13	40.82	42.66	44.64	46.80	49.15	51.73	54.56	57.69	61.17333333
	21%	32.55	33.76	35.05	36.43	37.91	39.50	41.21	43.05	45.05	47.23	49.60	52.20	55.056

Implied Growth Rate
Current Price	130.16
Estimated Next Year Dividend	5.37
Cost of Equity	15.10%
Implied Growth Rate	10.98%

For the dividend discount model, the growth rate was calculated using the ROE and Retention rate. Cost of equity was calculated using the CAPM. The fair value for RBC's stock price comes up to CAD 77.36 which is at a 40% discount to the current market price of 130.16.

Multiples Approach

Competitors	P/Ex	P/Bx
Bank of America Corp	9.10	0.9
BMO Bank of Montreal	9.34	1.29
Citi Group	7.14	0.49
HSBC Holdings	6.94	0.9
JPMorgan Chase & Co.	10.41	1.5
Toronto-Dominion Bank	10.73	1.41
Wells Fargo & Co.	11.00	0.9
Average	9.24	1.06
Median	9.34	0.90

Calculating the price based on P/E multiple
P/E	Earnings	Shares	Price	Market cap
9.24x	15,794.00	1,406.00	103.76	145,891.43

Calculating the price based on P/B multiple
P/B	Book Value	Shares	Price	Market cap
1.06x	108,175.00	1,406.00	81.22	114,201.89

For the multiples approach, the average P/E and P/B ratio was calculated using a basket of P/E and P/B ratios of competitors. Based on the P/E multiple, the price is CAD 103.76 which is at a 23% discount to the current market price. Based on the P/B multiple, the price is CAD 81.22 which is at a 37.5% discount to the current market price.

Risks

Interest Rate Risks

• Arguably, the biggest factor affecting the banking sector is the high interest rate environments. Central banks of developed countries have gone through a process of aggressive rate hikes over the past year to combat persistent inflation. However, it is expected that the central banks are approaching the end of their current cycle of rate increases, for example, even though the Fed raised the interest rates to 5.5%in the recent meeting, it is expected that this is the last rate hike.
• The lagged effects of aggressive rate hikes are beginning to show, with easing inflation but mild recessions expected in some of the large global economies.
• We have already seen a rise in the provisions for Gross Impaired Loans, Allowances for Credit Losses and Write-Offs in Credit Cards and Personal Loans

Canadian Housing and Household Indebtness

• Canadian housing and household indebtedness risks remain heightened in the current rising interest rate environment. Concerns related to elevated levels of mortgage-related Canadian household debt, which accelerated during the COVID-19 pandemic, could escalate if the BoC continues to increase interest rates, if the current period of elevated inflation is prolonged or if unemployment increases, potentially resulting in, among other things, higher credit losses.

Credit Risk

• Credit risk includes retail credit risk, wholesale credit risk and wrong-way risk. Total credit risk exposure increased CAD179 billion or 10% from FY21, primarily due to the impact of foreign exchange translation, volume growth in loans, higher derivative exposure and an increase in securities.