Royal Bank Of Canada

by your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the RBC's 2025 Third Quarter Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Asim Imran, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer, Catherine Gibson, Chief Financial Officer, and Graham Hepworth, Chief Risk Officer. Also joining us today for your question, Erica Nielsen, Group Head, Personal Banking, Shana Matagauji, Group Head, Commercial Banking, Neil McLaughlin, Group Head, Wealth Management, Derek Nelner, Group Head, Capital Markets, and Jennifer Publicover, Group Head, Insurance. As noted on slide two, 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. Good morning, everyone, and thank you for joining us. Today we reported record third quarter earnings of $5.4 billion, up 21%, or over $900 million from last year. These outstanding results underpinned a strong return on equity of over 17% for the quarter, or over 16% year-to-date, supported by a robust capital ratio of 13.2%. We are gaining momentum towards meeting our medium-term investor day targets, and are confident in continuing to achieve an ROE of at least 16% in fiscal 2026 and beyond. This quarter's strong earnings added 77 basis points of gross capital generation, truly showcasing the underlying earnings power of the bank, including realizing our targeted annualized cost synergies related to the acquisition of HSBC Bank Canada. Our diversified business model is built to drive strong risk-adjusted returns which in turn supports both our clients and the return of capital to shareholders, including increased share buybacks this quarter. Strong client-driven and risk-weighted asset growth supported revenue of $17 billion this quarter, including record revenue in capital markets and double-digit growth in personal banking and wealth management. We achieved our results in an environment of record equity markets and cyclically low investment-grade credit spreads, while seeing an increased flow of client deposits and market-related client activity. However, the constructive environment for market-related revenue continues to be tempered by geopolitical risks and the uncertainty around trade policy, particularly China's levy against Canada's canola exports, and the potential review or renegotiation of KUSMA. We continue to monitor the negotiations, and we encourage policymakers on all sides to build on the foundational strengths of current trade agreements, which have provided significant benefits to all parties. Should current KUSMA-compliant goods largely maintain their qualified exemption to tariffs, Canada's effective tariff rate should remain low, and the economy should remain resilient. However, as trade tensions extend, there may be persistent impacts, including declining consumer confidence, lower corporate profit margins, rising inflation, and softening labour markets across both the US and Canada, with uncertain implications to monetary policy and capital flows. Amidst this shifting landscape, we are operating from a position of strength. Our robust capital levels are reinforced by a strong allowance for credit loss of 74 basis points of loans, including elevated weightings toward downside scenarios. We believe our well-underwritten portfolio is prudently provisioned. The diversification of assets and revenue streams across client sectors, geographies, products and businesses further mitigates the impact of heightened uncertainty and volatility. As the country's largest financial institution by market capitalization, we have an important role to play in helping support our clients build an even better Canada while executing against the strategic priorities we highlighted at our Investor Day, both within and outside of Canada. We are accelerating our investments in strategic initiatives by seeding growth across our segments and geographies, including new product and cross-border capabilities. We are also improving and expanding our talent pool by hiring senior coverage and relationship talent in capital markets and client-facing account managers in commercial banking. In addition, we continue to attract experienced financial advisors in wealth management, especially in the United States, where we expect higher recurring revenue from this recruitment. Our ongoing investments in technology build upon our leading competitive advantage in artificial intelligence, including our proprietary Adam Foundation model and Lumina data platform. These investments underpin the enterprise value we expect to generate from AI over the medium term. Furthermore, our expansion into transaction banking continues to be on track, with RBC Clear receiving two awards at the recent Digital Bankers Global Transaction Banking Innovation Awards. With this context, I will now speak to key trends we are seeing across our businesses, starting with personal banking. In our Canadian business, average deposits were up 2% from last year, including 7% growth in banking and savings accounts. We continue to focus on client acquisition while also capturing the shifting money in motion given the evolving interest rate and market outlook. These core deposits provide a structural funding cost advantage. Average residential mortgages were up 3% year-over-year as we added $4 billion of average balances this quarter. While we have maintained discipline on both credit quality and pricing, we are benefiting from higher switching volumes and an increase in mortgage retention rates. While we see a pickup in housing starts, the signs of price stabilization and buyer confidence returning As affordability improves, we continue to expect Canadian housing resell activity to be dampened by underperformance in Ontario, particularly in the greater Toronto area. In contrast, credit card growth was solid at 7% this quarter, driven by account acquisition, higher revolve rates, and increased client engagement. Our proprietary RBC consumer spending tracker highlights that Canadian cardholder spending remained resilient, particularly in their retail and everyday categories. This quarter, we expanded our partnership with the Paterson Food Group into Western Canada and launched the WestJet RBC World Elite MasterCard credit card for business clients. Turning to commercial banking, average loan growth moderated to 6% year-over-year within the updated guidance we provided last quarter. Growth has been slower and more tariff-sensitive sectors, including manufacturing, transportation, and logistics, along with cyclical headwinds in commercial real estate. While our pipelines are building in a competitive market, clients continue to hold back their capital and inventory spend. We are well positioned to support our clients when they are ready. Moving to wealth management, we reported double-digit growth in assets under administration in both Canadian and U.S. wealth management, to $935 billion and U.S. dollars $718 billion respectively. Our global wealth management franchises benefited from market appreciation while continuing to drive net new client assets along with increased volumes in our U.S. lending solutions. We also launched RBC Premium Savings in the U.S. this year, a new non-sweep high-yield deposit product which is seeing positive traction. Direct investing trading volumes were supported by strong market activity. Assets under management in RBC Global Asset Management increased by 12% to a record $741 billion, reflecting net sales into both long-term institutional and retail mandates. Like our wealth management businesses, we are seeing momentum in Canadian Retail Mutual Fund net sales as our clients move back into markets across our broad set of strategies across fixed income, balanced and equity mandates. Now to capital markets, which reported record revenue of $3.8 billion, pre-provisioned pre-tax earnings of $1.7 billion, and net income of $1.3 billion this quarter. On a year-to-date basis, capital markets generated close to $11 billion in revenue and approximately $4 billion in net income. These are truly exceptional results across our diversified franchises. Global markets reported revenue of over $1.9 billion, with strong results in our fixed businesses, reflecting strength in spread and rates products, which are areas of traditional strength. We also reported a strong performance in both cash equities and equity derivatives as we supported heightened client activity, benefiting from increasing investments in the franchise. Corporate investment banking generated revenue of over $1.7 billion, benefiting from an increased number of larger M&A advisory mandates, along with higher lending revenue in the U.S. and Europe, reflecting the strength of our global franchise. Looking forward, we continue to maintain a high level of engagement with our clients in what we deem a constructive environment for capital markets. While the second half of the year is seasonally slower than the first, we are encouraged by the increased optimism and confidence amongst our corporate and sponsor clients, and we expect higher levels of transactions and deal closures over the next 12 months. We also expect our global markets franchise to remain resilient as we deepen our expertise across products. Finally, I will comment on our broader U.S. region, which reported U.S. $635 million of net income this quarter. Citi National Bank reported earnings of U.S. $114 million or adjusted earnings of U.S. $139 million. Geographic efficiency ratio improved 6.6 percentage points year-over-year to 81.5%. While there's still work to be done, we are seeing early signs of success as we continue to build a more cohesive U.S. operating model. To close, despite the uncertain environment, we are confident in our ability to generate a strong return on equity while continuing to deepen client relationships, grow market share, drive operating leverage, and return capital to shareholders. The strategic vision we articulated at our Investor Day remains clear, and we are already seeing the outcomes unfolding. We strive to further extend our leadership across Canada while scaling growth and unlocking new revenue streams in key markets and geographies, including the United States. Finally, in the spirit of continued transparency and accountability, we will look to provide an update on how we are performing against our Investor Day financial targets when we report our fourth quarter results later this year. And with that, Catherine, over to you.