Royal Bank Of Canada

Good morning, ladies and gentlemen. Welcome to the RBC's 2026 first quarter results conference call. Please be advised that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the meeting over to Asim Imran. Please go ahead.

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 questions, 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 earnings of $5.8 billion and adjusted earnings of $5.9 billion. Pre-provision, pre-tax earnings were nearly $8.5 billion and were up 14% from last year. These strong results were underpinned by record revenue of nearly $18 billion and a 5% operating leverage. Both wealth management and capital markets reported record revenue and pre-provisioned pre-tax earnings, benefiting from a constructive environment for our market-related businesses. Personal banking and commercial banking reported record results underpinned by growth in money and balances, higher margins, and strong operating leverage as well. This was achieved even as housing conditions and uncertainty around trade policies continued to temper loan growth in Canada. Our return on assets increased to nearly 90 basis points, and we bought back over 4 million shares this quarter for approximately $1 billion. Our performance delivered a return on equity of 17.6% on a foundation of a robust 13.7% common equity tier one ratio. This powerful combination drove 9% growth in retained earnings. Before covering client activity and business results, I'll briefly discuss the macro environment shaping our revenue drivers. The Canadian economy remained resilient through the elevated uncertainty from persistent and evolving geopolitical and trade tensions. GDP and job growth continued despite lower immigration levels, and household balance sheets are improving. That said, the impact from tariffs on the economy varies depending on the clients or sectors. We are seeing strong profitability and improving productivity for many of our corporate clients. While commercial clients in tariff-impacted sectors and geographies are facing headwinds, and the impact of the K-shaped economy continues to bifurcate Canadians. Going forward, we expect increased fiscal stimulus and the diversification of new trading relationships to create a multiplier effect of supporting economic growth and client activity over the near to medium term. With this context, I will now speak briefly to key trends we are seeing across our businesses as seen on slide five. In personal banking, mortgage growth remained modest as housing demand remained soft in key regions. This was due to the affordability challenges, economic uncertainty, and a pullback in immigration levels. Looking forward, given weaker demand, we reiterate our low-to-mid single-digit mortgage growth guidance for the year. This growth will be supported by Propriety Mortgage Specialist Salesforce, capturing switch opportunities and driving strong retention through increased investments in channel capacity. Further, our recently announced strategic partnership with Realtor.ca will create new top-of-funnel opportunities. The strength of our money in franchise was on display again this quarter. We saw growth across demand deposits and mutual funds, as many of our clients sought higher returns amidst term deposit renewals. The aggregate flows to personal and savings accounts, GICs, and mutual funds increased almost 50% from last quarter, driving strong revenue growth. Commercial banking loans were up 4%, with strength in health care and agriculture. growth was moderated by a tariff-related slowdown in supply chain sectors and demand-driven headwinds in commercial real estate, which represents approximately 40% of the portfolio. On a provincial level, Ontario continues to experience tariff-related headwinds, while we are seeing resilience in the prairies. Even though larger clients are cautiously returning to growth mode, we expect commercial loan growth to stay closer to the lower end of our mid- to high-single-digit range for the year, the longer we go without clarity on the KUSMA trade negotiations. Deposit growth was stronger, up 5% year-over-year, reflecting broad-based expansion across nearly all sectors amidst a competitive landscape. To build on this momentum, we continued to invest across our Salesforce capacity and enhance digital and AI-driven underwriting capabilities while elevating our transaction banking offerings. Our wealth management segment had a very strong quarter, generating over $6 billion in revenue, $1.7 billion in pre-provision, pre-tax earnings, and $1.3 billion in net income. Growth in fee-based assets benefited from market appreciation as North American equity markets rose double digits year over year, and bond indices also moved higher. In addition, we recorded strong net new assets over the last 12 months, benefiting from clients moving back into the markets, as well as continued advisor recruitment. Assets under administration were up 13% year-over-year in Canadian wealth management, surpassing $1 trillion for the first time. U.S. wealth management AUA was up 12% to U.S. $777 billion. And RBC GAM assets under management were up 11% to $796 billion. Furthermore, Citi Nationals earnings continued to grow with both pre-provisioned pre-tax earnings and net income more than doubling year-over-year. This quarter, wealth management announced the expansion of RBC Echelon, our premier platform for a growing base of ultra-high net worth U.S. clients. We are also addressing the needs of new and aspiring self-directed investors by launching GoSmart, an intuitive mobile-first platform integrated within the RBC mobile app. Capital markets also had a record quarter, with revenue of $4 billion, pre-provisioned pre-tax earnings of $1.9 billion, and net income of $1.5 billion. Global markets generated record revenue of $2.2 billion with robust client activity amidst a constructive environment. We benefited from notable performance in equities where we've made strategic investments to bolster our equity derivatives and financing capabilities. Corporate investment banking benefited from higher debt and equity origination activity, higher M&A activity, and higher North American lending revenue with average loans up 8% from last year. We continue to have a healthy M&A and origination pipeline as a macro and regulatory environment is expected to support growing fee pools. I now want to talk about our focus on compounding long-term shareholder value. Our philosophy has remained consistent. As noted last quarter, we constantly evaluate opportunities to optimize shareholder value, not just maximize ROE. We concurrently want to enhance client-driven profitable growth while upholding our disciplined risk appetite, and we've done both. This requires both the deployment of capital as well as leveraging our structural advantages in funding and on interest expenses, along with our leading franchises, distribution, and technology. On dividends, we look to progressive increases underpinned by sustainable earnings growth as we strive towards the midpoint of our 40% to 50% medium-term objectives. When it comes to the level of share buybacks during times of uncertainty and volatility, we are aware of our book value multiples and intend to maintain capital levels near the higher end of our targeted range. Similarly, we have a high bar when it comes to acquisitions, and we will continue to be patient for the right opportunities to accelerate growth instead of solving capability gaps. Our priority continues to be investing to organically grow our businesses. At the top of slide six, on the top left side of slide six, highlights the organic RWA deployed to support our clients' financing needs and growth aspirations discussed earlier. We have increased the level of client-driven growth given an expanding suite of opportunities. Organic RWA growth this quarter was greater than the quarterly average of each of the last three years. Our diversified business model allows us to strategically grow RWA through a changing macro environment. We took advantage of constructive opportunities to utilize our resources to grow access across our capital markets businesses over the past year and reduced client demand and lowered growth in commercial banking. The bottom left charts on page six illustrate growth by ROE bands across our segments and sub-lines of business. When it comes to allocating capital to drive client growth, we don't just allocate capital to grow the highest ROE businesses, We also look to strengthen market share, invest in new technologies, and lay the foundation for new growth verticals to enhance future value and diversification across 1RBC. These create a flywheel multiplier effect for driving durable ancillary revenue streams. An important point to make is that some of our largest businesses are inherently capital light and do not need a lot of capital to grow. These are mostly funded by non-interest expenses. Growth in less capital-intensive, higher ROE businesses is a key driver of our revenue mix and growth. A relatively equal weighting between capital light fee-based revenue and more capital-intensive net interest income provides us with an attractive business mix as well as a lower credit risk profile. While some of our capital-intensive businesses generated returns below our expectations in fiscal 2025, this was partly due to several headwinds, which we expect to reverse over time. These include elevated PCL and performing loans, higher wholesale PCL, elevated spend in the US, and lower mortgage spreads due to increased competition. Furthermore, we look to offset any dilution from growing businesses with a lower standalone ROE by deepening client relationships to drive improved revenue productivity while also becoming more efficient. We also won't grow for the sake of growth as evidenced by our discipline on mortgage growth and pricing amidst intense competition. We target profitable revenue growth that drives future value. Looking forward, we see momentum and significant opportunities to organically deploy capital across our diversified business model to accelerate profitable revenue growth. We are growing capital markets corporate loans, which would initially generate a lower standalone ROE. However, this growth creates opportunities to add on higher ROE revenue, such as transaction banking and investment banking fees. Additionally, we will continue to support client activities by deploying RWA into our financing businesses, which can further monetize sales and trading intermediation activities. Combination of growth and deepening relationships drives a higher segment and client relationship ROE. Another strategic initiative is to align transaction banking with our growing city national bank commercial loan book, as we build out teams while launching U.S. mortgage and credit card products to increase penetration within a high net worth client segment in U.S. wealth management. We also expect meaningful opportunities in commercial banking when we have certainty around KUSMA and when we start seeing the execution of large-scale infrastructure projects highlighted in the Canadian federal budget. The segment's ROE of over 16% this quarter highlights the power of the franchise when PCL is normalized. We are applying similar approaches across our strategic initiatives, some of which are listed on the right-hand side of slide six. We are not trying to just acquire loans. We are building relationships, and there are a lot of opportunities to grow without diluting our ROE. To close, we are focused on creating sustainable shareholder value by accelerating our ambitions to drive both profitable growth and a premium ROE underpinned by our investor day targets, including improving revenue productivity and cost efficiencies. We also remain committed to using our strong internal capital generation to return capital to shareholders through both dividends and buybacks. Our future success will include opportunities to turn our highest potential AI use cases into solutions that bring value to clients. To do that, we recently announced that our Group Head Technology and Operations, Bruce Ross, will lead our newly created AI group to accelerate our AI ambitions. Moving into the Group Head Technology and Operations role is Naeem Kazmi. a transformational leader who has held multiple leadership roles as most recently the technology lead for the successful close and convert integration of HSBC Canada. We look forward to their continued success. And with that, Catherine, over to you.