Royal Bank Of Canada

All participants, please stand by your conferences, ready to begin. Good morning, ladies and gentlemen. Welcome to RBC's conference call for the first quarter 2020 financial results. Please be advised that this call is being recorded. I would now like to turn the meeting over to Nadine Ahn, Head of Investor Relations. Please go ahead, Ms. Ahn.

Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer of Rod Bolger, Chief Financial Officer, and Graham Hepworth, Chief Risk Officer. Then we'll open the call for questions. To give everyone a chance to ask a question, we ask that you limit your questions and then recue. We also have with us in the room Neil McLaughlin, Group Head, Personal and Commercial Banking, Doug Guzman, Group Head, Wealth Management, Insurance, and INPS, and Derek Nelner, 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 would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. With that, I'll turn it over to Dave.

Thanks, Nadine. Good morning, everyone, and thank you for joining us. We had a great start to the year, delivering record quarterly earnings of $3.5 billion. We reported record results in Canadian banking and capital markets, and very strong results in wealth management despite interest rate headwinds, and a good quarter in insurance. Our results were driven by strong volume growth across our leading client franchises, lower PCL, and prudent expense management. We continue to win market share while maintaining a risk profile at the lower end of our appetite and generating an ROE of 17.6%, a premium relative to our global peers. I'm pleased to announce a $0.03 increase to our dividend, bringing our quarterly dividend to $1.08 per share. Our strong capital generation and robust 12% CT1 ratio are proof of our disciplined capital deployment strategy, which is one of RBC's core strengths. Along with the dividend increase, we bought back 7 million shares this quarter, supporting our focus on delivering long-term value for our shareholders. While share buybacks will always be an effective and flexible lever to improve returns, allocating capital for net income growth will continue to be our primary focus. Our leading scale and diversity of revenue streams enables us to invest concurrently in technology, sales capacity, and client value, positioning us to succeed in this period of secular change and macro uncertainty. In addition, we constantly review our portfolio of businesses to ensure they provide long-term sustainable growth opportunities and meet our return hurdle rates. Along with repositioning part of our international custody business, as announced in Q4, We entered into agreements to sell all of our banking operations in the Eastern Caribbean this quarter. Similarly, we actively manage our capital markets loan book to build sustainable relationships and returns. Before moving to segment results, I want to touch on the macro environment for a minute. While the start of the fiscal year saw a reduction in global trade tensions, which was positively impacting market sentiment and yield curves, Recent uncertainty related to the coronavirus is reigniting downside risks to the global economic outlook, given the potential for disruption to global supply chains. We are monitoring the situation closely. While we have limited direct exposure to the regions impacted hardest by the virus, we are concerned for those affected by the recent outbreak. Turning to our domestic business, the Bank of Canada's tone has become more cautious given recent economic data showing weaker business investment, exports and consumer spending, despite positive business sentiment and low unemployment levels. A key strength of the Canadian economy is housing. We continue to see strengthening in Toronto's housing market, with low interest rates and constrained supply pushing prices higher. We are also seeing signs of recovery in Vancouver and high activity levels continuing in Montreal and Ottawa. With household demand being supported by economic and population growth, including immigration, we would support measures to address an increasingly limited housing supply. Against this backdrop, I want to update you on our business segment performance. Canadian banking reported another record quarter with net income of over $1.6 billion. We continue to leverage our multi-year investments in sales capacity and digital capabilities to drive strong client-driven volumes. Over the last year, we added over $60 billion in total volumes across loans and deposits. With respect to deposits, our growth in checking accounts accelerated to 6% over last year. As a key Canadian banking product, this has been a core focus for us as we continue to deepen relationships with our clients. 18% of RBC clients of all four of transaction accounts, credit cards, investments, and boring products with RBC higher than the peer average of 12%. Along with a personal checking account, Canadian residential mortgages are a core long-term product and we're seeing strong client acquisition and retention. Over the last year, our leading distribution and differentiated value proposition has added over $21 billion in mortgage volumes to our market-leading franchise. And nearly 95% of our mortgage clients have more than one product with RBC. While our mortgage growth has impacted Canadian banking's total margins, Canadian mortgages remain a high ROE product given their low risk weighting, jetting returns well in excess of our medium-term ROE objectives. We're still originating prime Canadian retail credit. The credit risk indicators and profile of our new mortgage originations are as strong as our existing portfolio. With strong offers and integrated campaigns, We've deepened the value proposition of our proprietary loyalty program, and we're seeing higher credit card acquisitions year over year. We remain committed to meeting our client acquisition target of 2.5 million new Canadian banking clients by 2023. With net new client acquisitions up 30% from last year, we have had a good start to 2020. Turning to wealth management, we had a third consecutive quarter with earnings over $600 million, and revenue over $3 billion, benefiting from both strong markets and net sales. In global asset management, we added another 40 basis points to our leading Canadian retail market share over the last 12 months. With an uncertain macroeconomic and geopolitical backdrop, our clients continue to come to us for trusted advice and exceptional service. With 82% of AUM outperforming the benchmark on a three-year basis, We added to our track record of superior net flows, generating a further $11 billion of retail net sales over the last 12 months. In Canadian Wealth Management, we continue to grow our top-tier distribution, adding more than 50 investment advisors over the last 12 months, building on the capabilities of our existing team of over 2,000 advisors. Going forward, we expect to continue to leverage our distribution scale to drive sustained growth. Our U.S. wealth management franchise continues to perform well, despite headwinds from lower interest rates. We continue to see very strong double-digit volume growth across AUA, AUM, loans, and deposits as we execute on our accelerated organic growth strategy. With double-digit growth in deposits, we are seeing the results of a wide range of initiatives we spoke about in the first half of 2019, including the rollout of our new treasury management platform, investments into exactuals, film track, and data faction. A priority for us is to grow our U.S. private client group and city national franchises, giving funding synergies and opportunities for increased client referrals, including over $1 billion of mortgage flow through our U.S. wealth management channels. Similar to Canadian banking, mortgages are an important, low-risk anchor product that allows us to build deeper, long-term relationships with our City and National clients. We are also increasingly focused on leveraging our strengths to boost City and National's digital bank offerings. We continue to expect strong loan and deposit growth, given the multi-year investments and sales capacity. Our capital markets business delivered record earnings this quarter, more than $100 million higher than our previous record. We benefited from the closing of landmark transactions, including BB&T's merger with SunTrust, Apollo's acquisition of Cox Media Assets, and Broadcom's acquisition of Symantec Assets. Our strong results this quarter propelled us to ninth in the global league tables. The quarter provided a more favorable environment for the industry relative to last year, narrowing credit spreads, and low interest rates created a favorable environment for companies looking for financing. Likewise, dovish global central banks and low equity volatility helped provide a constructive backdrop for equity markets and deal flow. Our investments over a number of years in strengthening our talent has been an important driver in the rising strength of our capital markets franchise, the benefits of which can be seen by increased roles in global mandates. Our investment banking pipeline remains healthy, reflecting reasonably strong market conditions. However, the conversion of deals to realized revenue remains dependent on market and regulatory conditions, which could be volatile through the year given the uncertainty around the geopolitical landscape and concerns over the coronavirus. Global markets had an impressive quarter with strong performance in our FIC business, reflecting healthy client engagement and the strength of our client-focused franchise. Overall, we delivered a very strong quarter and are starting 2020 from a position of strength. We have scale, leading market share, and momentum across our core franchises. We are well positioned to continue providing value-added advice and service to our existing clients, while attracting new clients and gaining market share across our segments. While we face challenging headwinds from lower interest rates, moderating global growth, and normalizing credit conditions, We remain committed to balancing our investments and continuing to create long-term value for our clients and shareholders. And with that, I'll pass it over to Rod.