Royal Bank Of Canada

Good morning, ladies and gentlemen. Welcome to RBC's conference call for the fourth quarter 2021 financial results. Please be advised that this call is being recorded. I would now like to turn the meeting over to Asim Imran, Head of Investor Relations. Please go ahead, Mr. Imran.

Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer, Nadine Ahn, Chief Financial Officer, and Graham 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 INTS, 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. To give everyone a 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, Asim, and congratulations on your recent appointment to RBC's Head of Investor Relations. And good morning, everyone, and thank you for joining us today. This morning we reported fourth quarter earnings of $3.9 billion. Our results include further releases of PCL on performing loans, primarily reflecting improvements in our macroeconomic and credit quality outlook. Pre-provision, pre-tax earnings of $4.8 billion were driven by robust client activity, driving fee-based revenue growth in Canadian banking, wealth management, and investment banking. In addition, Canadian banking and Citi National continue to generate strong volume growth. These factors were partly offset by a moderation in our global markets businesses that continued impact of low interest rates and higher expenses largely due to variable compensation. As we continue to invest in our core businesses and strategies, we're committed to running our bank efficiently and driving improved productivity. Looking back, 2021 was a year that saw RBC stepping up for our clients. and communities while supporting our employees. Across our core businesses, we saw robust client activity, and as a result, we delivered record revenue of nearly $50 billion. We earned $16 billion in net income and generated a 19% ROE while paying $6.1 billion in taxes, over $6 billion in dividends, and meeting all of our medium-term objectives. Also noteworthy was our strong double digit growth in book value per share, highlighting our ability to compound the value of our business while maintaining the quality and risk appetite of the RBC franchise. We ended a strong year with a record CET1 ratio of 13.7%, up 120 basis points with CET1 capital up $7.5 billion from last year. As we turn our focus to 2022, From a macro perspective, we continue to see a strong recovery with consumer spending almost 20% above 2019 levels, increased mobility in society, and corporate management teams actively pursuing growth opportunities. At the same time, we recognize our significant challenges, including supply, demand, and balances, disrupting supply chains and various parts of the economy, including labor, housing, and energy markets. These factors are driving uncertainty and adding to inflation risk, which we are closely monitoring. While higher interest rates could add some drag to economic growth, we do not see material credit concerns given excess client liquidity, strong underwriting, including testing for higher rates. As the Dean will speak to later, we are well positioned to benefit from rising interest rates given our leading Canadian deposit franchise and the asset-sensitive nature of U.S. Wealth Management's balance sheet. To highlight the potential benefit over time, the impact of lower interest rates reduced our revenue by approximately $1 billion in each of the last two years, the majority in Canadian banking and U.S. wealth management, including Citi National. Additionally, we are poised to benefit from the deployment of unprecedented buildup of liquidity that we expect Canadians will use for a better tomorrow, whether that is to buy a home, increase discretionary spending, or invest in financial markets. Within this context, let me expand how our momentum and ability to create value for clients, along with our premium franchises, position RBC to succeed heading into 2022 and beyond. Our strong balance sheet gives us flexibility to continue supporting our growth momentum and strategic initiatives, in addition to driving increasing shareholder returns. And this morning, we announced a $0.12 or 11% increase in our quarterly dividend while also announcing our intention to repurchase up to 45 million common shares under a normal course issuer bid. We remain focused on driving premium organic growth, including expanding our market-leading position in Canada. We see growth opportunities in each of our Canadian businesses, and our results this year reflect the value we create for our clients. In Canadian banking, we added over $35 billion in mortgages, and over $22 billion in personal deposits over the last year, leading to market share gains in both these anchor products. We have added and continue to add to our $1,750-plus mortgage specialist sales force. We also continue to invest in digital tools and capabilities to enhance the client experience and the productivity of our sales team. Looking forward, we expect mortgage growth to be strong in a high single-digit range, supported by low interest rates supply, demand, and balances affecting prices and increasing immigration activity. We are seeing a strong recovery in transactional purchase activity, which helped drive a sequential increase in credit card balances, including revolvers. And though commercial utilization rates remain well below pre-pandemic levels, we are seeing an uptick, which is helping drive the emergence of stronger commercial lending activity. We are also hiring commercial account managers in priority industries including in RBCX, where we provide capital and advice to the growing innovation ecosystem. As we move up the value chain and continue to reimagine banking and innovation, we are well positioned for a world of payment modernization and open banking. RBC Ventures remains core to accelerating our growth by creating value beyond banking, including in our healthcare and youth ecosystems. We are excited about Dr. Bill. a venture which helps reduce the complexity of medical billing for physicians. We are currently serving nearly 3,000 Canadian physicians, up 28% from last year. Also within the healthcare vertical, we continue to support Canada's medical community with our exclusive multi-year strategic partnership with the Royal College of Physicians and Surgeons of Canada. In the youth segment, Mido is a new pillar that helps kids learn and practice money management. We recently hit a milestone, having onboarded 10,000 Canadian households. Over the last two years, we have added 350,000 net new Canadian banking clients, including over 200,000 this year alone. In a period when clients weren't making as many decisions to switch banks, and immigration activity was muted. Given the value-added initiatives we've put in place, we are well-positioned to continue attracting even more clients an important area of focus. Almost 70% of our Canadian banking clients who have a core checking account and or mortgage with us also have a card and investment relationship. And clients with mortgage and checking accounts that were onboarded three years ago in 2018 have deepened their relationship to all four products at a rate that is three times greater than any other acquisition relationship. This leads to another core part of our Canadian strategy. which is to deepen our client relationships, including providing access to best-in-class, award-winning service and advice, which has defined our leadership in wealth and asset management. As I noted earlier, we expect much of the buildup of liquidity in the system will be used to increase discretionary spending or be invested. And our whole set of integrated, end-to-end, industry-leading wealth and asset management solutions have well over $1 trillion in client assets. These cover the full spectrum of client segments and needs, ranging from digital-only solutions up to full-service discretionary wealth management. Following a record year last year, RBC Direct Investing finished 2021 with another year of exceptional growth, including record trading volumes and record new client acquisition, with nearly half of new clients added this year being under the age of 35. And InvestEase has been... has seen account openings double from the last year. In the wealth advisory space, our leading scale is complemented by our differentiated technology and investment expertise, including private banking, insurance, estate, philanthropy, and business planning solutions. These factors drive strong advisor productivity, with RBC Dominion Securities ranked number one amongst bank-owned advisory firms in 2021 investment executive brokerage report card. And my advisor, our digital platform to review financial plans, now has nearly 3 million clients. Overall, our wealth management businesses continue to see strong growth in client assets. On a year-over-year basis, Canadian Banking and Wealth Management Canada increased 26% each, with RBC Global Asset Management We have a leading North American asset manager at scale with 85% of AUM outperforming the benchmark over the last three years at below average fees. It's a testament to the strength of the platform. RBC Global Asset Management was recognized for its outstanding investment performance at the 2021 Canada Lipper Fund Awards. RBC GAM AUM was up 15% year over year. While higher markets were a large contributor, we also saw record Canadian long-term retail net sales of over $20 billion, or 17% of all industry-wide flows, adding to its leading market share in industry AUM. And though we can't control where equity markets will go, we are well positioned to add to our market share in industry net flows, as clients can choose from a broad range of products and advisory services, which increasingly include an ESG and alternatives product suite. Our scale, innovation, and ability to deepen client relationships with leading value propositions underpin our 30% ROE across our banking, wealth, and asset management platforms in Canada. Turning to the U.S., I want to focus on our diversified growth strategy. Our client franchises across wealth management, private and commercial banking, and capital markets generated US$10 billion or 25% of total revenue over the last 12 months. Our US capital markets franchise, our largest US business, had yet another great quarter as we reported strong investment banking revenue on higher M&A advisory and loan syndication activity. We are increasingly deepening relationships and winning significant M&A advisory mandates with important partners such as Blackstone. Earlier this year, RBC Capital Markets acted as exclusive financial advisor to Blackstone on the acquisition of Ellucian, a leading education technology solutions provider. This followed being the advisor on their acquisition of Signature Aviation. Looking forward, our investment banking pipeline remains strong. benefiting from the strength of our franchise. Our goal is to be a top 10 global investment bank while maintaining our position as a clear leader in Canada. And with this in mind, we have added a number of managing directors in U.S. investment banking, especially in technology and healthcare sectors, while also focusing on sustainable finance, a growth opportunity for us and our clients. Citi National continues to be a growth company, with wholesale loans up a further 3% over last year, or up 11% excluding PPP trends. Our mid-market strategy, along with expansion of market coverage, is expected to add to our growth trajectory. Mortgages at City National were up 23% year-over-year as we continue to grow our high net worth private banking capabilities with a mortgage-led growth strategy. And deposit growth was up a strong 25% this year. Going forward, we continue to expect strong loan growth in our city and national businesses. And in U.S. wealth management, we grew client assets 30% year-over-year to nearly $570 billion U.S., including the addition of high-quality advisors to our private client group platform. We are increasingly adding lending products to provide holistic advice to our U.S. wealth clients. Our securities-based lending portfolio has increased by over $2 billion, or nearly 60% year over year. Beyond our underlying business performance in 2021, we recognize we have an important role to play in accelerating clean economic growth. A key pillar of our enterprise strategy is to play a leadership role in the transition of our economy to net zero emissions, including helping clients work through an orderly energy transition. As part of that, we are committed to providing $500 billion in sustainable finance by 2025. And in addition to our own net zero commitments, we are pleased to have joined the Net Zero Banking Alliance. To sum up, we are entering 2022 with strong momentum and are well positioned to take advantage of secular and macro trends and deliver client and shareholder value over the near and long term. Our focus will be to drive growth, while maintaining prudent risk management and expense discipline. We will continue to leverage the size and strength of our balance sheet to consolidate our broad-based leadership position in Canada, including deepening client relationships and investing for the innovation economy. And in the U.S., we will continue to execute on our multi-pronged growth strategy across capital markets, city-national and wealth management. Before I conclude, I want to thank our more than 87,000 colleagues for their relentless dedication in living our purpose through these extraordinary times. And now I will pass it to Nadine Ahn, our new CFO, who is well-known to the investment community from her time as head of investor relations and CFO of RBC Capital Markets previously. Nadine brings a wealth of experience gained over 20 years at RBC, including a number of positions of increasing responsibility in our corporate treasury group. And Nadine, over to you.