Royal Bank Of Canada

Good morning, ladies and gentlemen. Welcome to the RBC's 2026 Second 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 speakers are marked, 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, Eric Nielsen, Group Head Personal Banking, Shana Madagougie, Group Head Commercial Banking, and Neil McLaughlin, Group Head Wealth Management, and Derek Nelner, Group Head Capital Markets. 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.

Thanks, Awesome, and good morning, everyone, and thank you for joining us. Today, we reported earnings of $5.5 billion and adjusted earnings of $5.6 billion, our second highest quarterly performance on record. As you'll see on slide four, pre-provision, pre-tax earnings were up 15% from last year, benefiting from strong revenue growth of 11% and all-bank operating leverage of over 3%. Our performance this quarter delivered a 17.2% return on equity on the foundation of our robust 13.5% common equity tier one ratio. These results were underpinned by the strength of our diversified business model benefiting from both a constructive environment for market related businesses and offering scale in our Canadian personal bank and commercial banking segments. Capital markets reported record net income reflecting strong performance in both global markets and investment banking. Wealth management continued to report strong results across our North American advisory and asset management businesses. Personal banking results were driven by an operating leverage of 3% and growth of in-money balances. Commercial banking generated an ROE of over 17%. Moving to slide five, starting with capital markets, where global investment banking improved their last 12-month market share over 2% as we saw record levels of fee-based revenue from strong M&A advisory activity as well as debt and equity origination. In global markets, our ongoing investments in talent and technology are strengthening our equities franchise, which also reported record revenue this quarter. Our strong FIC franchise also reported solid results. We also saw solid growth in our financing transaction banking businesses as we continued to support our clients' growth aspirations. With a leading Canadian franchise as well as a top 10 ranked global business, we are in a great position to support and grow alongside key macro trends, including AI, energy, digital infrastructure, and aerospace and defense around the world. In AI and related infrastructure, we advise CPIB on its U.S. $4.2 billion acquisition of AtNorth, a pan-Nordic data center operator, as well as acted as joint active book runner on Alphabet's $8.5 billion inaugural Maple Senior unsecured notes offering, the largest bond offering ever in the Canadian market. In the energy space, RBC acted as an exclusive financial advisor to ARC Resources on their sale agreement with Shell, a transaction valued at $22 billion. In the United States, RBC acted as joint lead book runner to Ferbo Energy on their recent $2.2 billion IPO. Wealth management continues to drive strong performance in a volatile environment. Clients are coming to us for trusted advice as they move money back into investments across our distribution network. including our full-service Dominion Securities and PHN Investment Council channels, as well as through our personal banking network. Our leading Canadian wealth management business, with assets under administration of over $1 trillion, benefited from both market appreciation as well as $10 billion in net new assets this quarter. U.S. Wealth Management, AUA, of nearly U.S. $800 billion, included U.S. $5 billion in net new assets this quarter, and over U.S. $2 billion in recruited assets, benefiting from our continued advisor recruitment. Furthermore, credit and lending balances were up 16% from last year, reflecting growing demand from U.S. clients for our full-service capabilities. Loan growth in Citi National was also strong, up 9% year-over-year in U.S. dollars. RBC Global Asset Management Assets Under Management surpassed $800 billion this quarter, benefiting from leading mutual fund net sales as we continue to capture money in motion in retail channels amidst changing client preferences. In this context, the combined personal banking Canada average deposits and AUA were up 5%, or $34 billion year-over-year, with spot personal banking AUA surpassing $300 billion for the first time. We maintain very high retention rates as clients move between deposits and investments. As always, we're guided by doing what we think is right for them given interest rate and equity market conditions. Mortgage growth continued to be impacted by macro uncertainty and moderating house prices with funded volumes largely driven by an increase in switch activity. Importantly, approximately 90% of home equity balances had a multi-product relationship. Commercial banking growth remains resilient, despite facing two structural demand headwinds with Ontario seeing the greatest impact. Firstly, tariff-driven uncertainty is having a disproportionate impact on the growth in trade-exposed sectors, such as supply chain. Secondly, we continue to see moderating demand in commercial real estate, particularly in condo development. Nonetheless, we have delivered 12 consecutive quarters of market share capture and leading balances, and lending balances as of last quarter. We're seeing growth in healthcare and other service-oriented sectors and regions, such as the prairies, and we're also beginning to see increased FX and cash management-related activity. I'll now shift to the macro environment. We are operating in a world of competing signals. Equity markets are hitting record highs, driven in part by expectations of rising corporate profits and an AI-enabled future. At the same time, Bond yields tell a different story, reflecting the risk of monetary tightening as inflation pressures build from both the direct and indirect impacts of the energy shock. Throughout this period of volatility, the Canadian economy has remained resilient, with annualized GDP growth tracking at 1.7% in Q1 2026. Core inflation, excluding energy, has stayed broadly stable, and our own card spending data shows consumers are still spending and service-related sectors despite the energy disruption. So far, weakness in tariff-exposed sectors has not spread to the broader economy, with growth seen in several sectors including energy and agriculture. However, uncertainty remains elevated. The near-term outlook for Canada hinges on how Kuzma negotiations unfold and how long the Middle East conflict persists, with impacts yet to be fully felt on input costs. The outcome of these factors will have implications for client demand, supply chain stability, and the direction of monetary policy. Looking further out, there are emerging opportunities that are creating optimism. We believe the resolution of Kuzma uncertainty, new trading relationships, and the advancement of major nation-building projects can meaningfully expand the Canadian economic ecosystem, creating a multiplier effect over the near to medium term. RBC Research sheds light an enormous opportunity for Canada. The country can become an energy superpower, strengthen its presence in the critical mineral supply chain, expand power infrastructure, and build a stronger strategic defense posture. We encourage policymakers and all levels of government to continue to work together to secure Canada's future prosperity. As Canada's largest bank, we're well positioned to support the future. With a strong balance sheet and leading franchises, We've backed that commitment with action. We recently announced an Indigenous advisory and finance practice within RBC Capital Markets to help expand access to capital for Indigenous-owned major projects and investments. Beyond Canada, global people have maintained their momentum as the macro environment continues to support growing corporate activity and strategic boardroom discussions. Our own investment banking pipeline remains healthy, in part due to our ongoing investments in talent to build spend strength in high-priority areas. Moving to slide six, we constantly strive to optimize long-term shareholder value through increased profitability, client-driven growth, and returning capital to shareholders. We have increased our return on assets to approximately 90 basis points by executing against key strategic initiatives. We've increased our revenue productivity through our diversified feed-based businesses and by leveraging our technology and operational scale to improve cost efficiency, all while continuing to grow our businesses. We've improved our U.S. region efficiency ratio from 83% in 2024 to 75% this quarter. We continue to make significant progress in bringing together our strong U.S. franchises as we drive towards our target of a regional efficiency ratio in the low 70s. We're also committed to our bold ambitions when it comes to generating $700 million to $1 billion in enterprise value from AI. We've developed over 200 leading-edge AI models, rethinking how we operate, streamline workflows, and delivering more hyper-personalized client experiences by leveraging a proprietary Atom Foundation model and our increasing data scale within our Lumina platform. Since 2025, LLM token usage has increased by over 500%, reflecting the speed at which AI is being integrated into daily workflows and critical business processes. Our digital assistant uses AI for intent detection and orchestration, navigating clients to digital capabilities or the best advisor across the network, allowing our people to focus on deepening client relationships. We've also deployed AI to deliver significant time savings. An AI-powered search of policy procedure articles for two advisors is processing approximately 2 million searches per month. Commercial banking, our client's financials are being injected and spread using AI. AI is also accelerating how we're building our technology platform of the future. To date, AI has contributed to the development of over 24 million lines of code and facilitated over 120,000 code reviews. Given the importance of combining technology with talent, we continue to invest in our people to accelerate client-driven, profitable growth opportunities, which remains our priority. We are hiring senior talent in key sectors and capital markets, growing our advisory base in North American wealth advisory businesses, while adding relationship managers across our commercial banking businesses in Canada and Sydney National Bank. Beyond these strategic investments, we remain committed to returning capital to shareholders in a balanced way. Our total payout ratio has increased from 51% in 2024 to 65% in the first half of 2026. This morning, we increased our dividend by $0.12 from last quarter, a 14% increase year-over-year as we look to drive our dividend payout ratio towards the midpoint of our 40% to 50% medium-term objective. Buybacks remain an important avenue for returning capital to shareholders. We increased our buybacks to 7 million shares this quarter at an annualized pace of 2% of our common share's outstanding. Furthermore, we announced our intention this morning, subject to relevant stock exchange and regulatory approvals, to commence a normal course issue bid to repurchase for cancellation of the 45 million common shares. We plan to continue buying back our shares as we believe their intrinsic value remains higher than current valuations, given the opportunities to improve both profitability and growth while maintaining a strong balance sheet in an uncertain environment. However, we remain disciplined We will look to optimize not only ROE and EPS growth, but also a compound of our book value per share growth, which is also an important driver of long-term shareholder value. And with that, Catherine, over to you.