ROYAL BANK OF CANADA REPORTS 2010 AND FOURTH QUARTER RESULTS
All amounts are in Canadian dollars unless otherwise noted and are based on our audited annual and unaudited interim Consolidated Financial Statements prepared in accordance with Canadian generally accepted accounting principles (GAAP). Our 2010 Annual Report to Shareholders (which includes our audited annual Consolidated Financial Statements and accompanying Management's Discussion & Analysis), our 2010 Annual Information Form and our Supplementary Financial Information are available on our website at rbc.com/investorrelations.
TORONTO, Dec. 3 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) reported net income of $5.2 billion (Diluted earnings per share (EPS) of $3.46) for the year ended October 31, 2010, up $1.4 billion or 35% from a year ago. Results in the current year include a $116 million loss on the announced sale of Liberty Life Insurance Company (Liberty Life) and our 2009 results included a $1 billion goodwill impairment charge.
Earnings excluding the above items(1), were up $481 million, or 10%, driven by record earnings in Canadian Banking and solid business growth in Wealth Management and Insurance. In Capital Markets, trading revenue was down from strong levels in the prior year, while increased deal activity drove higher revenues in our investment banking businesses. Additionally, provision for credit losses (PCL) was lower reflecting stabilizing asset quality. The strengthening of the Canadian dollar in the current year had a significant impact on our financial results, reducing revenue by $1,180 million, net income by $150 million and diluted EPS by $0.10.
"RBC once again demonstrated the power of our diversified business model, delivering strong earnings of $5.2 billion in a year characterized by economic, regulatory and market uncertainty," said Gordon M. Nixon, RBC President and CEO, "We continue to extend our leading market positions and grow our businesses in Canada and globally by focusing on serving our clients' needs."
2010 compared to 2009
- Net income of $5,223 million (up from $3,858 million)
- Diluted EPS of $3.46 (up from $2.57)
- Return on common equity (ROE) of 14.9% (up from 11.9%)
- Tier 1 capital ratio of 13%
2010 compared to 2009, excluding the loss on Liberty Life and the goodwill impairment charge(1)
- Net income of $5,339 million (up from $4,858 million)
- Diluted EPS of $3.54 (up from $3.28)
- ROE of 15.3% (up from 14.9%)
-------------------------
(1) Measures excluding the loss on Liberty Life and the goodwill
impairment charge are non-GAAP measures. See page 10 of this release
for more information and reconciliations.
2010 Business Segment Performance
Canadian Banking net income was $3,044 million, up $381 million or 14% from last year, reflecting revenue growth in all businesses and lower PCL. These results were driven by strong volume growth in home equity and personal deposit products, increased credit card transaction volumes and higher mutual fund distribution fees. Higher pension and performance-related compensation expense and increased costs supporting business growth partially offset the increase.
"Canadian Banking underpinned our results with record earnings this year. We are extending our leadership position and making the necessary investments to drive further operational efficiencies and improve the client experience," Nixon said.
Wealth Management net income was $669 million, up $86 million, or 15% from the prior year, mainly due to higher average fee-based client assets and higher transaction volumes as market conditions improved. Favourable income tax adjustments in the current year also contributed to the increase, while spread compression and the impact of the stronger Canadian dollar partially offset the increase.
"In Wealth Management, we are extending our leadership position in Canada, leveraging our position in the U.S. as the sixth largest full-service wealth manager and expanding our presence in targeted international markets to solidify our position as a global leader in wealth and asset management. Our agreement to acquire BlueBay Asset Management highlights our strategic focus on growing our Global Asset Management business," Nixon said.
Insurance net income was $405 million, down $91 million, or 18% from last year largely reflecting the $116 million loss on Liberty Life. Excluding this loss(1), net income was $521 million, up $25 million, or 5% driven by favourable actuarial adjustments, higher net investment gains, our ongoing focus on cost management and volume growth. These factors were partially offset by higher claims and unfavourable life policyholder experience.
"Our insurance business complements our retail product offering by providing innovative and effective solutions to both our Canadian Banking and Wealth Management clients," Nixon said.
International Banking net loss of $317 million compares to a net loss of $1,446 million last year, mainly reflecting the goodwill impairment charge in the prior year. Lower PCL in our U.S. banking loan portfolio and the impact of a stronger Canadian dollar also contributed to the lower loss. These factors were partially offset by higher losses on our available for sale (AFS) securities.
"In International Banking, our U.S. retail bank continues to be challenged by weak economic and credit conditions and we remain focused on restoring its operating performance and returning to profitability," Nixon said.
Capital Markets net income was $1,647 million, down $121 million, or 7% from last year, as trading revenue was impacted by lower client volumes and tighter credit spreads. The impact of a stronger Canadian dollar also contributed to the decrease. Losses on certain market and credit related items this year were significantly lower than our market environment-related losses in the prior year. Lower PCL and strong growth in our investment banking businesses also partially offset the decrease.
"In Capital Markets, our strategic focus on business and geographic diversity allowed us to take advantage of global opportunities and deliver another year of solid earnings. Although trading results were impacted by unfavourable economic and market conditions in the latter half of the year, our investment banking businesses delivered strong results across all products and geographies," Nixon said.
Q4 2010 Business Segment Performance
"We continue to execute on opportunities to grow our franchises both in Canada and globally," Nixon said. "Over the quarter, we reinvested across all segments to further build on our strong market positions and drive operational efficiencies."
Fourth quarter 2010 compared to fourth quarter 2009
- Net income of $1,121 million (down from $1,237 million)
- Diluted EPS of $.74 (down from $.82)
- ROE of 12.3% (down from 14.7%)
Fourth quarter 2010 compared to fourth quarter 2009, excluding the loss on Liberty Life(2)
- Net income of $1,237 million (flat compared to the prior year)
- Diluted EPS of $.82 (flat compared to the prior year)
- ROE of 13.7% (down from 14.7%)
Q4 2010 vs. Q4 2009
Fourth quarter net income of $1,121 million was down $116 million, or 9% from the prior year. Excluding the $116 million loss on Liberty Life, earnings were flat. We had solid volume growth in Canadian Banking, favourable actuarial adjustments in Insurance, higher average fee-based client assets in Wealth Management and lower PCL. Losses on certain market and credit related items this year were significantly lower than our market environment-related losses in the prior year. These factors were offset by lower trading revenue, increased expenses and the impact of the stronger Canadian dollar.
The increase in non-interest expense over last year was primarily driven by higher initiative and marketing costs and the full quarter impact of the harmonized sales tax (HST). In addition, the prior year included a year-end adjustment that lowered variable compensation in Capital Markets. The savings from our ongoing focus on cost management were reinvested into new initiatives and infrastructure to drive future business growth and efficiencies.
Q4 2010 vs. Q3 2010
Fourth quarter net income of $1,121 million was down $155 million, or 12% from the prior quarter. Excluding the loss on Liberty Life, earnings were down 3% from the prior quarter as higher trading revenue in Capital Markets and solid volume growth in Canadian Banking and Wealth Management were more than offset by increased expenses.
Non-interest expense was up compared to the prior quarter, driven by higher staff costs, primarily due to higher variable compensation commensurate with improved results in Capital Markets, seasonally higher marketing spend, increased initiative spend and the full impact of the HST, partially offset by our ongoing focus on cost management.
Credit Quality
Total PCL in 2010 was $1.9 billion, down $1.6 billion from last year, reflecting stabilizing asset quality due to the general improvement in the global economic environment. Specific PCL of $1.8 billion decreased $1 billion mainly due to lower provisions in our corporate loan portfolio in Capital Markets and our residential builder finance portfolio in U.S. banking. We incurred a general provision of $26 million relating to our U.S. banking business, as compared to $589 million in the prior year.
In the current quarter, total PCL of $432 million decreased $451 million from last year and was flat from the prior quarter. Specific PCL decreased $299 million from last year and $9 million from last quarter. We incurred a general provision of $4 million this quarter as compared to $156 million last year and a credit of $5 million in the prior quarter.
SELECTED FINANCIAL AND OTHER HIGHLIGHTS
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CONSOLIDATED RESULTS
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Selected financial and other highlights
-------------------------------------------------------------------------
(C$ millions, As at or for the
except per share, three months ended For the year ended
number of and -------------------------------- ----------------------
percentage October 31 July 31 October 31 October 31 October 31
amounts) 2010 2010 2009 2010 2009
--------------------------------------------------- ---------------------
Total revenue $ 7,202 $ 6,827 $ 7,459 $ 28,330 $ 29,106
Provision for
credit losses
(PCL) 432 432 883 1,861 3,413
Insurance
policyholder
benefits, claims
and acquisition
expense (PBCAE) 1,423 1,459 1,322 5,108 4,609
Non-interest
expense 3,818 3,377 3,606 14,393 14,558
Goodwill
impairment charge - - - - 1,000
Net income before
income taxes and
non-controlling
interest (NCI)
in subsidiaries 1,529 1,559 1,648 6,968 5,526
Net income $ 1,121 $ 1,276 $ 1,237 $ 5,223 $ 3,858
--------------------------------------------------- ---------------------
Segments - net
income (loss)
Canadian Banking $ 765 $ 766 $ 717 $ 3,044 $ 2,663
Wealth Management 175 185 161 669 583
Insurance 27 153 104 405 496
International
Banking (157) (76) (125) (317) (1,446)
Capital Markets 373 201 561 1,647 1,768
Corporate Support (62) 47 (181) (225) (206)
Net income $ 1,121 $ 1,276 $ 1,237 $ 5,223 $ 3,858
--------------------------------------------------- ---------------------
Selected information
Earnings per
share (EPS)
- basic $ .74 $ .85 $ .83 $ 3.49 $ 2.59
- diluted $ .74 $ .84 $ .82 $ 3.46 $ 2.57
Return on common
equity (ROE)(1) 12.3% 14.3% 14.7% 14.9% 11.9%
Return on risk
capital (RORC)(1) 20.6% 24.3% 26.0% 25.4% 19.5%
Specific PCL as
a % of average
net loans and
acceptances 0.57% 0.59% 1.00% 0.63% 0.97%
Gross impaired
loans (GIL) as
a % of loans
and acceptances 1.65% 1.68% 1.86% 1.65% 1.86%
Capital ratios and
multiples
Tier 1 capital
ratio 13.0% 12.9% 13.0% 13.0% 13.0%
Total capital
ratio 14.4% 14.2% 14.2% 14.4% 14.2%
Assets-to-capital
multiple 16.5X 16.5X 16.3X 16.5X 16.3X
Tier 1 common
ratio(2) 9.8% 9.6% 9.2% 9.8% 9.2%
Selected balance
sheet and other
information
Total assets $ 726,206 $ 704,424 $ 654,989 $ 726,206 $ 654,989
Securities 193,331 192,739 186,272 193,331 186,272
Loans (net of
allowance for
loan losses) 292,206 288,919 280,963 292,206 280,963
Derivative
related assets 106,246 96,436 92,173 106,246 92,173
Deposits 433,033 418,975 398,304 433,033 398,304
Average common
equity(1) 34,000 33,500 31,600 33,250 30,450
Average risk
capital(1) 20,350 19,800 17,900 19,500 18,600
Risk-weighted
assets (RWA) 260,456 258,766 244,837 260,456 244,837
Assets under
management (AUM) 264,700 253,900 249,700 264,700 249,700
Assets under
administration
(AUA)
- RBC 683,800 655,800 648,800 683,800 648,800
- RBC Dexia
IS(3) 2,779,500 2,652,500 2,484,400 2,779,500 2,484,400
Common share
information
Shares
outstanding
(000s)
- average
basic 1,422,565 1,421,777 1,413,644 1,420,719 1,398,675
- average
diluted 1,434,353 1,434,379 1,428,409 1,433,754 1,412,126
- end of
period 1,424,922 1,423,744 1,417,610 1,424,922 1,417,610
Dividends
declared per
share $ .50 $ .50 $ .50 $ 2.00 $ 2.00
Dividend yield(4) 3.8% 3.5% 3.7% 3.6% 4.8%
Common share
price (RY on
TSX) - close,
end of period $ 54.39 $ 53.72 $ 54.80 $ 54.39 $ 54.80
Market
capitalization
(TSX) 77,502 76,484 77,685 77,502 77,685
Business information
(number of)
Employees:
full-time
equivalent (FTE) 72,126 71,972 71,186 72,126 71,186
Bank branches 1,762 1,756 1,761 1,762 1,761
Automated teller
machines (ATMs) 5,033 5,048 5,030 5,033 5,030
--------------------------------------------------- ---------------------
Period average
US$ equivalent
of C$1.00(5) $ .963 $ .957 $ .924 $ .959 $ .858
Period-end US$
equivalent of
C$1.00 .980 .972 .924 .980 .924
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(1) Average common equity and return on common equity (ROE) are
calculated using methods intended to approximate the average of the
daily balances for the period. This includes ROE, RORC, Average
common equity and Average Risk Capital. For further discussion on
Average risk capital and Return on risk capital (RORC), refer to the
Key performance and non-GAAP measure section.
(2) For further discussion, refer to the Key performance and non-GAAP
measures section on page 63 of our 2010 Annual Report to
Shareholders.
(3) Represents the total AUA of the joint venture, of which we have a 50%
ownership interest, reported on a one-month lag.
(4) Defined as dividends per common share divided by the average of the
high and low share price in the relevant period.
(5) Average amounts are calculated using month-end spot rates for the
period.
BUSINESS SEGMENT RESULTS
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CANADIAN BANKING
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
(C$ millions, except percentage October 31 July 31 October 31
amounts) 2010 2010 2009
-------------------------------------------------------------------------
Net interest income $ 1,934 $ 1,865 $ 1,811
Non-interest income 764 763 762
Total revenue $ 2,698 $ 2,628 $ 2,573
PCL $ 287 $ 284 $ 314
Non-interest expense 1,313 1,243 1,213
Net income before income taxes $ 1,098 $ 1,101 $ 1,046
Net income $ 765 $ 766 $ 717
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Revenue by business
Personal Financial Services $ 1,501 $ 1,421 $ 1,390
Business Financial Services 654 644 628
Cards and Payment Solutions 543 563 555
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Selected average balances and other
information
ROE 34.1% 34.7% 37.0%
RORC 44.4% 45.4% 50.5%
NIM(1) 2.75% 2.70% 2.74%
Specific PCL as a % of average
net loans and acceptances .41% .41% .48%
Operating leverage (3.4)% (0.4)% 5.6%
Average total earning assets(2) $ 279,000 $ 274,400 $ 262,200
Average loans and acceptances(2) 276,800 271,700 258,800
Average deposits 197,400 193,000 182,700
AUA 148,200 141,100 133,800
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(1) Calculated as Net interest income divided by Average total earning
assets.
(2) Includes average securitized residential mortgage and credit card
loans for the three months ended October 31, 2010, of $37 billion and
$3 billion, respectively (July 31, 2010 - $37 billion and $4 billion;
October 31, 2009 - $37 billion and $4 billion).
Q4 2010 vs. Q4 2009
Net income increased $48 million, or 7% compared to the prior year, driven by revenue growth across all businesses and lower PCL, partially offset by higher costs in support of business growth.
Total revenue increased $125 million, or 5% from last year, largely reflecting solid growth in personal deposits, home equity products, higher credit card transaction volumes and mutual fund balances. The prior year had a gain of $18 million on the sale of a portion of our remaining Visa Inc. IPO shares.
PCL decreased $27 million, or 9% mainly due to lower loss rates in our credit card and unsecured personal loan portfolios.
Non-interest expense increased $100 million, or 8% driven by higher operational costs in support of business growth, an increase in marketing costs and higher staff costs mainly related to pension and performance related compensation. The introduction of the HST in Ontario and British Columbia also contributed to the increase.
Q4 2010 vs. Q3 2010
Net income was flat from last quarter as solid volume growth and improved spreads were offset by higher non-interest expense due to seasonally higher marketing spend and higher operational costs in support of business growth.
PCL of $287 million increased $3 million over last quarter mainly due to higher provisions in our personal portfolios which were largely offset by lower write-offs in our card portfolio.
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WEALTH MANAGEMENT
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
(C$ millions, except percentage October 31 July 31 October 31
amounts) 2010 2010 2009
-------------------------------------------------------------------------
Net interest income $ 80 $ 75 $ 85
Non-interest income
Fee-based revenue 615 594 572
Transaction and other revenue 410 375 417
Total revenue $ 1,105 $ 1,044 $ 1,074
PCL $ - $ 3 $ -
Non-interest expense $ 855 $ 806 $ 841
Net income before income taxes $ 250 $ 235 $ 233
Net income $ 175 $ 185 $ 161
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Revenue by business
Canadian Wealth Management $ 384 $ 354 $ 360
U.S. & International Wealth
Management 534 505 545
U.S. & International Wealth
Management (US$ millions) 515 483 504
Global Asset Management 187 185 169
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Selected other information
ROE 18.7% 19.9% 15.8%
RORC 70.9% 75.9% 53.3%
Pre-tax margin(1) 22.6% 22.5% 21.7%
Number of advisors(2) 4,299 4,388 4,504
AUA - Total $ 521,600 $ 501,000 $ 502,300
- U.S. & International Wealth
Management (US$ millions) 322,100 308,000 303,300
AUM 261,800 251,100 245,700
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For the three
months ended
-------------------------
Estimated impact of US$ Q4 2010 Q4 2010
translation on key vs. vs.
income statement items Q3 2010 Q4 2009
--------------------------------------------------------------
Impact on income increase
(decrease):
Total revenue $ (5) $ (20)
Non-interest expense 5 15
Net income - (5)
--------------------------------------------------------------
Percentage change in average US$
equivalent of C$1.00 1% 4%
--------------------------------------------------------------
(1) Defined as net income before income taxes divided by total revenue.
(2) Represents client-facing advisors across all our wealth management
businesses.
Q4 2010 vs. Q4 2009
Net income of $175 million increased $14 million, or 9% from the prior year mainly due to higher average fee-based client assets, partially offset by the impact of a stronger Canadian dollar.
Total revenue increased $31 million, or 3% mainly due to higher average fee-based client assets resulting from capital appreciation and higher gains on our stock-based compensation plan in our U.S. brokerage business. These factors were partially offset by the impact of a stronger Canadian dollar, lower transaction volumes and higher fee waivers largely on U.S. money market funds.
Non-interest expense increased $14 million, or 2% mainly due to higher variable compensation driven by higher commission-based revenue and the increase in the fair value of our earned compensation liability related to our U.S. stock-based compensation plan. These factors were largely offset by the impact of the stronger Canadian dollar.
Q4 2010 vs. Q3 2010
Net income of $175 million decreased $10 million, or 5% from the prior quarter as the prior quarter had a favourable accounting impact of $26 million ($24 million after-tax) and a favourable income tax adjustment. The current quarter had higher transaction volumes and average fee-based client assets reflecting improved market conditions, and a gain, compared to a loss in the prior quarter, on our stock-based compensation plan in our U.S. brokerage business and higher costs in support of business growth.
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INSURANCE
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
(C$ millions, except percentage October 31 July 31 October 31
amounts) 2010 2010 2009
-------------------------------------------------------------------------
Non-interest income
Net earned premiums $ 1,127 $ 1,257 $ 1,098
Investment income(1) 516 454 396
Fee income 67 48 71
Other(2) (116) - -
Total revenue $ 1,594 $ 1,759 $ 1,565
Insurance policyholder benefits
and claims(1) $ 1,253 $ 1,272 $ 1,167
Insurance policyholder
acquisition expense 170 187 155
Non-interest expense 145 142 145
Net income before income taxes $ 26 $ 158 $ 98
Net income $ 27 $ 153 $ 104
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Revenue by business
Canadian Insurance $ 832 $ 724 $ 677
U.S. Insurance 321 517 489
U.S. Insurance (US$ millions) 304 494 452
International & Other Insurance 441 518 399
-------------------------------------------------------------------------
Selected other information
ROE 6.6% 37.0% 32.3%
RORC 7.5% 41.5% 37.7%
Premiums and deposits(3) $ 1,430 $ 1,574 $ 1,388
Fair value changes on investments
backing policyholder liabilities(1) 324 230 229
-------------------------------------------------------------------------
For the three
months ended
-------------------------
Estimated impact of US$ and British Q4 2010 Q4 2010
pound translation on key income vs. vs.
statement items Q3 2010 Q4 2009
--------------------------------------------------------------
Impact on income increase
(decrease):
Total revenue $ - $ (25)
PBCAE - 20
Non-interest expense - -
Net income - (5)
--------------------------------------------------------------
Percentage change in average US$
equivalent of C$1.00 1% 4%
Percentage change in average
British pound equivalent of C$1.00 (3)% 8%
--------------------------------------------------------------
(1) Investment income can experience volatility arising from quarterly
fluctuation in the fair value of held-for-trading (HFT) assets. The
investments which support actuarial liabilities are predominantly
fixed income assets designated as HFT. Consequently, changes in fair
values of these assets are recorded in investment income in the
consolidated statements of income and are largely offset by changes
in the fair value of the actuarial liabilities, the impact of which
is reflected in insurance policyholder benefits and claims.
(2) Relates to the loss on the announced sale of Liberty Life.
(3) Includes premiums on risk-based insurance and annuity products, and
deposits on individual and group segregated fund deposits, consistent
with insurance industry practices.
Q4 2010 vs. Q4 2009
Net income of $27 million decreased $77 million from last year. Excluding the loss on Liberty Life of $116 million, net income was $143 million(1), up $39 million due to favourable actuarial adjustments.
Total revenue increased $29 million, or 2%. Excluding the Liberty Life loss of $116 million, revenue was $1,710 million(1), up $145 million, or 9%, primarily due to the change in fair value of investments backing our life and health policyholder liabilities which were largely offset in policyholder benefits, claims and acquisition expense (PBCAE). Volume growth across all businesses and higher investment gains in the current quarter also contributed to the increase.
PBCAE increased $101 million, mainly reflecting the change in fair value of investments and higher cost commensurate with volume growth, partially offset by favourable actuarial adjustments reflecting management actions and assumption changes.
Non-interest expense was flat reflecting higher costs in support of volume growth, offset by our ongoing focus on cost management.
Q4 2010 vs. Q3 2010
Net income of $27 million decreased $126 million from the last quarter. Excluding the loss on Liberty Life, net income was $143 million(1), down $10 million reflecting the impact of a new UK annuity arrangement in the prior quarter and lower investment gains, partially offset by lower claims costs, largely in our reinsurance businesses in the current quarter.
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INTERNATIONAL BANKING
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
(C$ millions, except percentage October 31 July 31 October 31
amounts) 2010 2010 2009
-------------------------------------------------------------------------
Net interest income $ 356 $ 340 $ 391
Non-interest income 165 224 193
Total revenue $ 521 $ 564 $ 584
PCL $ 191 $ 192 $ 229
Non-interest expense 561 524 556
Net (loss) before income taxes and
NCI in subsidiaries $ (231) $ (152) $ (201)
Net (loss) $ (157) $ (76) $ (125)
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Revenue by business
Banking(1) $ 350 $ 393 $ 422
RBC Dexia IS(1) 171 171 162
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Selected average balances and other
information
ROE (9.7)% (5.3)% (8.3)%
RORC (20.8)% (11.5)% (19.4)%
Specific PCL as a % of average
net loans and acceptances 2.63% 2.59% 2.80%
Average loans and acceptances $ 28,900 $ 29,400 $ 32,400
Average deposits 45,700 46,200 48,200
AUA - RBC(2) 7,800 7,900 7,700
- RBC Dexia IS(3) 2,779,500 2,652,500 2,484,400
AUM - RBC(2) 2,600 2,600 3,800
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For the three
months ended
-------------------------
Estimated impact of US$, Euro and Q4 2010 Q4 2010
TTD translation on key income vs. vs.
statement items Q3 2010 Q4 2009
--------------------------------------------------------------
Impact on income increase
(decrease):
Total revenue $ 10 $ (30)
PCL - 5
Non-interest expense (10) 35
Net income - 5
--------------------------------------------------------------
Percentage change in average US$
equivalent of C$1.00 1% 4%
Percentage change in average Euro
equivalent of C$1.00 (6)% 13%
Percentage change in average TTD
equivalent of C$1.00 1% 5%
--------------------------------------------------------------
(1) RBTT Financial Group (RBTT) and RBC Dexia IS results are reported on
a one-month lag.
(2) These represent the AUA and AUM of RBTT, reported on a one-month lag.
(3) Represents the total AUA of the RBC Dexia IS joint venture, of which
we have a 50% ownership interest, reported on a one-month lag.
Q4 2010 vs. Q4 2009
Net loss of $157 million compares to a net loss of $125 million a year ago. The higher net loss mainly reflected higher losses on foreclosed assets in U.S. banking and on AFS securities, partially offset by a decrease in PCL. Total revenue decreased $63 million, or 11%, primarily due to higher losses on foreclosed assets as a result of the challenging market environment, the impact of the stronger Canadian dollar and higher losses in our AFS portfolio. We had a provision related to the restructuring of certain Caribbean banking mutual funds in the prior year.
PCL decreased $38 million, or 17%, largely as a result of lower provisions in U.S. banking, primarily in the residential builder finance portfolio, which offset increased provisions in the commercial portfolio in Caribbean banking.
Non-interest expense increased $5 million, or 1%. The increase was due to higher staff costs including higher pension and benefits and increased infrastructure investments in Caribbean banking, largely offset by the impact of the stronger Canadian dollar and our continued focus on cost management in our U.S. banking business.
Q4 2010 vs. Q3 2010
Net loss of $157 million compares to a net loss of $76 million last quarter. The higher net loss mainly reflected increased losses on foreclosed assets in U.S. banking, higher staff costs including higher pension and benefits and infrastructure investments in Caribbean banking.
PCL of $191 million was flat compared to the prior quarter as lower provisions, primarily in the U.S. residential builder finance portfolio, were offset by higher provisions mainly in the commercial portfolio in Caribbean banking.
-------------------------------------------------------------------------
CAPITAL MARKETS
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
(C$ millions, except percentage October 31 July 31 October 31
amounts) 2010 2010 2009
-------------------------------------------------------------------------
Net interest income(1) $ 692 $ 638 $ 721
Non-interest income 801 316 1,113
Total revenue(1) $ 1,493 $ 954 $ 1,834
PCL $ (22) $ (9) $ 220
Non-interest expense 933 674 826
Net income before income taxes and
NCI in subsidiaries(1) $ 582 $ 289 $ 788
Net income $ 373 $ 201 $ 561
-------------------------------------------------------------------------
Revenue by business
Capital Markets Sales and Trading $ 889 $ 415 $ 1,338
Corporate and Investment Banking 604 539 496
-------------------------------------------------------------------------
Selected average balances and other
information
ROE 17.0% 9.2% 27.9%
RORC 19.3% 10.5% 32.2%
Average trading securities $ 129,600 $ 133,300 $ 124,700
Specific PCL as a % of average
net loans and acceptances (0.31)% (0.12)% 2.63%
Average loans and acceptances 29,000 29,200 33,200
Average deposits 103,400 95,900 91,300
-------------------------------------------------------------------------
For the three
months ended
-------------------------
Estimated impact of US$, British Q4 2010 Q4 2010
pound and Euro translation on key vs. vs.
income statement items Q3 2010 Q4 2009
--------------------------------------------------------------
Impact on income increase
(decrease):
Total revenue $ - $ (50)
Non-interest expense - 35
Net income - (10)
--------------------------------------------------------------
Percentage change in average US$
equivalent of C$1.00 1% 4%
Percentage change in average British
pound equivalent of C$1.00 (3)% 8%
Percentage change in average Euro
equivalent of C$1.00 (6)% 13%
--------------------------------------------------------------
(1) Taxable equivalent basis. For further discussion, refer to the How
we measure and report our business segments section on page 12 of our
2010 Annual Report to Shareholders.
Q4 2010 vs. Q4 2009
Net income of $373 million decreased $188 million from last year primarily due to lower trading results, partially offset by lower PCL and growth in our investment banking businesses. The strengthening of the Canadian dollar also contributed to the decrease.
Total revenue of $1,493 million decreased $341 million from the prior year, largely in our fixed income and U.S. based equity trading businesses. Trading revenue was negatively impacted by significantly lower client volumes resulting from sovereign debt concerns and regulatory uncertainty, and the tightening of credit and bid/ask spreads compared to strong trading results in the prior year. Strong revenue growth in most of our investment banking businesses, particularly in debt origination and mergers and acquisitions (M&A) in the U.S. and Europe partially offset the decrease.
During the current quarter, we had a recovery in PCL of $22 million, comprised of recoveries on a few large accounts that more than offset PCL in the quarter compared to PCL of $220 million in the prior year.
Non-interest expense increased $107 million largely due to higher costs in support of business growth and new regulatory requirements. In addition, there was a year-end adjustment recorded in the prior year which lowered last year's fourth quarter variable compensation.
Q4 2010 vs. Q3 2010
Net income of $373 million increased $172 million from the prior quarter mainly reflecting higher trading revenue in our fixed income and U.S. based equity businesses. This included a gain of $99 million ($46 million after-tax and related compensation adjustments) on our U.S. subprime assets hedged with MBIA and a gain of $66 million ($23 million after-tax and related compensation adjustments) on our bank-owned life insurance stable value contracts (BOLI) as compared to losses in the prior quarter. Solid revenue growth in our investment banking business, particularly in debt origination and M&A, also contributed to the increase. These factors were partially offset by increased non-interest expense due to higher variable compensation and higher costs supporting business growth.
We had a recovery in PCL of $22 million comprised of recoveries on a few large accounts that more than offset PCL in the quarter, compared to a recovery of $9 million in the prior quarter.
-------------------------------------------------------------------------
CORPORATE SUPPORT
-------------------------------------------------------------------------
As at or for the three months ended
-------------------------------------
October 31 July 31 October 31
(C$ millions) 2010 2010(1) 2009(1)
-------------------------------------------------------------------------
Net interest income(2) $ (279) $ (170) $ (132)
Non-interest income 70 48 (39)
Total revenue(2) $ (209) $ (122) $ (171)
PCL(3) (24) (38) 120
Non-interest expense 11 (12) 25
Net loss before income taxes and NCI
in subsidiaries(2) $ (196) $ (72) $ (316)
Net income (loss) $ (62) $ 47 $ (181)
-------------------------------------------------------------------------
Securitization
Total securitizations sold and
outstanding(4) $ 31,503 $ 31,780 $ 32,685
New securitization activity in
the period(5) 1,601 2,707 1,430
-------------------------------------------------------------------------
(1) Certain amounts have been reclassified. For further details, refer to
the How we measure and report our business segments section on page
12 of our 2010 Annual Report to Shareholders.
(2) Taxable equivalent basis. For further discussion, refer to the How we
measure and report our business segments section on page 12 of our
2010 Annual Report to Shareholders. These amounts included the
elimination of the adjustments related to the gross-up of income from
Canadian taxable corporate dividends recorded in Capital Markets. The
amount for the three months ended October 31, 2010 was $158 million
(July 31, 2010 - $83 million, October 31, 2009 - $76 million).
(3) PCL in Corporate Support primarily comprises the general provision,
an adjustment related to PCL on securitized credit card loans managed
by Canadian Banking and an amount related to the reclassification of
certain AFS securities to loans recorded in the prior year. For
further information, refer to the How we measure and report our
business segments section on page 12 of our 2010 Annual Report to
Shareholders.
(4) Total securitizations sold and outstanding comprise credit card loans
and residential mortgages.
(5) New securitization activity comprises Canadian residential mortgages
and credit card loans securitized and sold in the year. For further
details, refer to Note 5 to our Consolidated Financial Statements on
page 100 of our 2010 Annual Report to Shareholders. This amount does
not include Canadian residential mortgage and commercial mortgage
securitization activity of Capital Markets.
Q4 2010
Net loss of $62 million included unfavourable tax adjustments, losses of $33 million ($23 million after-tax) related to the change in fair value of certain derivatives used to economically hedge our funding activities, and losses of $21 million on both a before and after-tax basis attributed to an investment accounted for under the equity method.
Q3 2010
Net income was $47 million mainly due to a favourable income tax audit related to a prior year.
Q4 2009
Net loss of $181 million included losses of $182 million ($125 million after-tax) on our AFS portfolio, a general PCL of $156 million ($104 million after-tax), losses related to the change in fair value of certain derivatives used to economically hedge our funding activities, and losses of $31 million ($22 million after-tax) on fair value adjustments on certain RBC debt designated as HFT. These factors were partially offset by securitization gains inclusive of new and re-investment related activity, net of economic hedging activities, totaling $97 million ($67 million after-tax).
-------------------------------------------------------------------------
KEY PERFORMANCE AND NON-GAAP MEASURES
-------------------------------------------------------------------------
Additional information about our annual key performance and non-GAAP measures can be found under the "Key performance and non-GAAP measures" section on page 63 of our 2010 Annual Report to Shareholders.
Return on Equity and Return on Risk Capital
We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics such as net income, return on equity (ROE) and return on risk capital (RORC). We use ROE and RORC, at both the consolidated and business segment levels, as measures of return on total capital invested in our businesses. The business segment ROE and RORC measures are viewed as useful measures for supporting investment and resource allocation decisions because they adjust for certain items that may affect comparability between business segments and certain competitors. RORC does not have standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.
See our 2010 Annual Report to Shareholders for further information. The following table provides a summary of our ROE and RORC calculations.
-------------------------------------------------------------------------
For the three months ended
-------------------------------------------------------------------------
October 31
2010
(C$ millions, ----------------------------------------------------------
except Inter-
percentage Canadian Wealth national Capital
amounts)(1) Banking Management Insurance Banking Markets
-------------------------------------------------------------------------
Net income
(loss)
available to
common
shareholders $ 749 $ 168 $ 24 $ (170) $ 357
-------------------------------------------------------------------------
Average risk
capital(2) $ 6,700 $ 950 $ 1,300 $ 3,250 $ 7,350
add:
Under/(over)
attribution
of capital - - - - -
Goodwill and
intangible
capital 2,000 2,600 150 3,650 950
-------------------------------------------------------------------------
Average
equity(3) $ 8,700 $ 3,550 $ 1,450 $ 6,900 $ 8,300
-------------------------------------------------------------------------
ROE 34.1% 18.7% 6.6% (9.7)% 17.0%
RORC 44.4% 70.9% 7.5% (20.8)% 19.3%
-------------------------------------------------------------------------
-------------------------------------------------------------
For the three For the three
months ended months ended
------------------------------------- -----------------------
October 31 July 31 October 31
2010 2010 2009
(C$ millions, ----------------------- -----------------------
except
percentage Corporate
amounts)(1) Support Total Total Total
------------------------------------- -----------------------
Net income
(loss)
available to
common
shareholders $ (71) $ 1,057 $ 1,211 $ 1,173
------------------------------------- -----------------------
Average risk
capital(2) $ 800 $ 20,350 $ 19,800 $ 17,900
add:
Under/(over)
attribution
of capital 3,550 3,550 3,600 3,350
Goodwill and
intangible
capital - 10,100 10,100 10,350
------------------------------------- -----------------------
Average
equity(3) $ 5,100 $ 34,000 $ 33,500 $ 31,600
------------------------------------- -----------------------
ROE n.m. 12.3% 14.3% 14.7%
RORC n.m. 20.6% 24.3% 26.0%
-------------------------------------------------------------
(1) Average risk capital, Goodwill and intangible capital, and Average
common equity represent rounded figures. ROE and RORC are based on
actual balances before rounding. These are calculated using methods
intended to approximate the average of the daily balances for the
period.
(2) Average risk capital includes Credit, Market (trading and non-
trading), Operational and Business and fixed assets, and Insurance
risk capital. For further details, refer to the Capital management
section on page 50 of our 2010 Annual Report to Shareholders.
(3) The amounts for the segments are referred to as attributed capital or
Economic Capital.
n.m. not meaningful
Non-GAAP measures
Given the nature and purpose of our management reporting framework, we use and report certain non-GAAP financial measures, which are not defined nor do they have a standardized meaning under GAAP. As a result, these reported amounts and related ratios are not necessarily comparable with similar information disclosed by other financial institutions. We believe that excluding the items noted below should enhance the comparability of our financial performance compared to prior periods and will provide readers with a better understanding of management's perspective on our Q4 2010, 2010 and 2009 performance.
-------------------------------------------------------------------------
(C$ millions, For the
except per three months ended For the year ended
share and --------------------------------- ----------------------
percentage October 31 July 31 October 31 October 31 October 31
amounts) 2010 2010 2009 2010 2009
--------------------------------------------------- ---------------------
Net income $ 1,121 $ 1,276 $ 1,237 $ 5,223 $ 3,858
add: Loss on
Liberty Life $ 116 $ - $ - $ 116 $ -
add: Goodwill
impairment
charge - - - - 1,000
-------------------------------------------------------------------------
Net Income
excluding
these items $ 1,237 $ 1,276 $ 1,237 $ 5,339 $ 4,858
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings $ .74 $ .84 $ .82 $ 3.46 $ 2.57
per share(1)
add: Loss on
Liberty Life $ .08 $ - $ - $ .08 $ -
add: Impact
of goodwill
impairment
charge - - - - .71
-------------------------------------------------------------------------
Diluted earnings per
share excluding
these items(1) $ .82 $ .84 $ .82 $ 3.54 $ 3.28
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ROE(1) 12.3% 14.3% 14.7% 14.9% 11.9%
ROE excluding these
items(1) 13.7% 14.3% 14.7% 15.3% 14.9%
-------------------------------------------------------------------------
(1) Based on actual balances before rounding.
-------------------------------------------------------------------------
Consolidated Balance Sheets
-------------------------------------------------------------------------
October 31 July 31 October 31
(C$ millions) 2010(1) 2010(2) 2009(1)
-------------------------------------------------------------------------
Assets
Cash and due from banks $ 9,330 $ 9,056 $ 8,353
-------------------------------------------------------------------------
Interest-bearing deposits with banks 13,252 11,421 8,923
-------------------------------------------------------------------------
Securities
Trading 149,555 152,886 140,062
Available-for-sale 43,776 39,853 46,210
-------------------------------------------------------------------------
193,331 192,739 186,272
-------------------------------------------------------------------------
Assets purchased under reverse
repurchase agreements and securities
borrowed 72,698 68,200 41,580
-------------------------------------------------------------------------
Loans
Retail 221,828 218,294 205,224
Wholesale 73,375 73,693 78,927
-------------------------------------------------------------------------
295,203 291,987 284,151
Allowance for loan losses (2,997) (3,068) (3,188)
-------------------------------------------------------------------------
292,206 288,919 280,963
-------------------------------------------------------------------------
Other
Customers' liability under acceptances 7,371 7,701 9,024
Derivatives 106,246 96,436 92,173
Premises and equipment, net 2,503 2,310 2,367
Goodwill 8,064 8,111 8,368
Other intangibles 1,930 2,021 2,033
Other assets 19,275 17,510 14,933
-------------------------------------------------------------------------
145,389 134,089 128,898
-------------------------------------------------------------------------
$ 726,206 $ 704,424 $ 654,989
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Deposits
Personal $ 161,693 $ 159,783 $ 152,328
Business and government 247,197 240,357 220,772
Bank 24,143 18,835 25,204
-------------------------------------------------------------------------
433,033 418,975 398,304
-------------------------------------------------------------------------
Other
Acceptances 7,371 7,701 9,024
Obligations related to securities
sold short 46,597 46,706 41,359
Obligations related to assets sold
under repurchase agreements and
securities loaned 41,582 44,818 35,150
Derivatives 108,910 100,003 84,390
Insurance claims and policy benefit
liabilities 10,750 10,139 8,922
Other liabilities 29,348 27,949 31,007
-------------------------------------------------------------------------
244,558 237,316 209,852
-------------------------------------------------------------------------
Subordinated debentures 6,681 6,661 6,461
-------------------------------------------------------------------------
Trust capital securities 727 744 1,395
-------------------------------------------------------------------------
Non-controlling interest in subsidiaries 2,256 2,215 2,071
-------------------------------------------------------------------------
Shareholders' equity
Preferred shares 4,813 4,813 4,813
Common shares (shares issued -
1,424,921,817; 1,423,744,006; and
1,417,609,720) 13,378 13,340 13,075
Contributed surplus 236 232 246
Treasury shares
- preferred (shares held - 86,400;
79,500; and 64,600) (2) (2) (2)
- common (shares held - 1,719,092;
1,545,674; and 2,126,699) (81) (71) (95)
Retained earnings 22,706 22,361 20,585
Accumulated other comprehensive (loss) (2,099) (2,160) (1,716)
-------------------------------------------------------------------------
38,951 38,513 36,906
-------------------------------------------------------------------------
$ 726,206 $ 704,424 $ 654,989
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Derived from audited financial statements.
(2) Unaudited.
-------------------------------------------------------------------------
Consolidated Statements of Income
-------------------------------------------------------------------------
For the For the
three months ended(1) year ended(2),(3)
--------------------------------- ----------------------
October 31 July 31 October 31 October 31 October 31
(C$ millions) 2010 2010 2009(3) 2010 2009
--------------------------------------------------- ---------------------
Interest income
Loans $ 3,476 $ 3,300 $ 3,350 $ 13,370 $ 13,539
Securities 1,186 1,190 1,276 4,770 5,946
Assets purchased
under reverse
repurchase
agreements and
securities
borrowed 155 128 126 474 931
Deposits with
banks 22 14 14 59 162
--------------------------------------------------- ---------------------
4,839 4,632 4,766 18,673 20,578
--------------------------------------------------- ---------------------
Interest expense
Deposits 1,433 1,225 1,424 5,091 6,762
Other liabilities 542 583 420 2,298 1,925
Subordinated
debentures 81 76 71 307 350
--------------------------------------------------- ---------------------
2,056 1,884 1,915 7,696 9,037
--------------------------------------------------- ---------------------
Net interest income 2,783 2,748 2,851 10,977 11,541
--------------------------------------------------- ---------------------
Non-interest income
Insurance premiums,
investment and
fee income 1,707 1,759 1,565 6,174 5,718
Trading revenue 315 (243) 876 1,315 2,750
Investment
management and
custodial fees 458 448 424 1,778 1,619
Mutual fund
revenue 410 388 334 1,571 1,400
Securities
brokerage
commissions 305 313 345 1,271 1,358
Service charges 373 362 374 1,453 1,449
Underwriting and
other advisory
fees 337 295 339 1,193 1,050
Foreign exchange
revenue, other
than trading 165 176 179 614 638
Card service
revenue 129 133 165 524 732
Credit fees 157 158 133 627 530
Securitization
revenue 206 214 177 764 1,169
Net (loss) gain
on available-for-
sale securities (15) (14) (192) 34 (630)
Other (128) 90 (136) 35 (218)
--------------------------------------------------- ---------------------
Non-interest income 4,419 4,079 4,583 17,353 17,565
--------------------------------------------------- ---------------------
Total revenue 7,202 6,827 7,434 28,330 29,106
--------------------------------------------------- ---------------------
Provision for
credit losses 432 432 883 1,861 3,413
--------------------------------------------------- ---------------------
Insurance policy-
holder benefits,
claims and
acquisition
expense 1,423 1,459 1,322 5,108 4,609
--------------------------------------------------- ---------------------
Non-interest
expense
Human resources 2,249 2,000 2,142 8,824 8,978
Equipment 257 252 235 1,000 1,025
Occupancy 283 259 267 1,053 1,045
Communications 226 186 196 813 761
Professional
fees 211 165 170 644 559
Outsourced item
processing 70 69 72 290 301
Amortization
of other
intangibles 135 123 123 500 462
Other 387 323 401 1,269 1,427
--------------------------------------------------- ---------------------
3,818 3,377 3,606 14,393 14,558
--------------------------------------------------- ---------------------
Goodwill
impairment
charge - - - - 1,000
--------------------------------------------------- ---------------------
Income before
income taxes 1,529 1,559 1,623 6,968 5,526
Income taxes 381 257 389 1,646 1,568
--------------------------------------------------- ---------------------
Net income before
non-controlling
interest 1,148 1,302 1,234 5,322 3,958
Non-controlling
interest in net
income of
subsidiaries 27 26 22 99 100
--------------------------------------------------- ---------------------
Net income $ 1,121 $ 1,276 $ 1,212 $ 5,223 $ 3,858
--------------------------------------------------- ---------------------
--------------------------------------------------- ---------------------
Preferred dividends (64) (65) (64) (258) (233)
--------------------------------------------------- ---------------------
Net income available
to common
shareholders $ 1,057 $ 1,211 $ 1,148 $ 4,965 $ 3,625
--------------------------------------------------- ---------------------
--------------------------------------------------- ---------------------
Average number of
common shares (in
thousands) 1,422,565 1,421,777 1,413,644 1,420,719 1,398,675
Basic earnings
per share (in
dollars) $ .74 $ .85 $ .83 $ 3.49 $ 2.59
Average number of
diluted common
shares (in
thousands) 1,434,353 1,434,379 1,428,409 1,433,754 1,412,126
Diluted earnings
per share (in
dollars) $ .74 $ .84 $ .82 $ 3.46 $ 2.57
--------------------------------------------------- ---------------------
Dividends per share
(in dollars) $ .50 $ .50 $ .50 $ 2.00 $ 2.00
-------------------------------------------------------------------------
(1) Unaudited
(2) Derived from audited financial statements.
(3) We reclassified the income statement impact of certain financial
instruments held by Corporate Support for funding purposes in order
to better reflect management's intention for those instruments.
Comparative information has been reclassified. Refer to Note 1 to our
2010 Annual Consolidated Financial Statements.
-------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
-------------------------------------------------------------------------
For the
three months ended(1) For the year ended(2)
--------------------------------- ----------------------
October 31 July 31 October 31 October 31 October 31
(C$ millions) 2010 2010 2009 2010 2009
-------------------------------------------------------------------------
Comprehensive
income
Net income $ 1,121 $ 1,276 $ 1,237 $ 5,223 $ 3,858
Other comp-
rehensive
income, net of
taxes
Net unrealized
gains on
available-for-
sale securities 134 131 309 441 662
Reclassification
of (gains) losses
on available-for-
sale securities
to income (1) (79) 134 (261) 330
-------------------------------------------------------------------------
Net change in
unrealized gains
on available-for-
sale securities 133 52 443 180 992
-------------------------------------------------------------------------
Unrealized foreign
currency trans-
lation gains
(losses) (137) 414 103 (1,785) (2,973)
Reclassification
of (gains)
losses on foreign
currency trans-
lation to income (3) - - (5) 2
Net foreign
currency trans-
lation (losses)
gains from
hedging
activities 109 (353) (124) 1,479 2,399
-------------------------------------------------------------------------
Foreign currency
translation
adjustments (31) 61 (21) (311) (572)
-------------------------------------------------------------------------
Net (losses)
gains on
derivatives
designated as
cash flow
hedges (100) (222) 5 (334) 156
Reclassification
of losses (gains)
on derivatives
designated as
cash flow
hedges to
income 59 32 (13) 82 (38)
-------------------------------------------------------------------------
Net change in
cash flow
hedges (41) (190) (8) (252) 118
-------------------------------------------------------------------------
Other comprehensive
(loss) income 61 (77) 414 (383) 538
-------------------------------------------------------------------------
Total comprehensive
income $ 1,182 $ 1,199 $ 1,651 $ 4,840 $ 4,396
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
-------------------------------------------------------------------------
October 31 July 31 October 31 October 31 October 31
(C$ millions) 2010 2010 2009 2010 2009
-------------------------------------------------------------------------
Preferred shares
Balance at
beginning of
period $ 4,813 $ 4,813 $ 4,813 $ 4,813 $ 2,663
Issued - - - - 2,150
-------------------------------------------------------------------------
Balance at end
of period 4,813 4,813 4,813 4,813 4,813
-------------------------------------------------------------------------
Common shares
Balance at
beginning of
period 13,340 13,331 12,864 13,075 10,384
Issued 38 9 211 303 2,691
-------------------------------------------------------------------------
Balance at end
of period 13,378 13,340 13,075 13,378 13,075
-------------------------------------------------------------------------
Contributed surplus
Balance at
beginning of
period 232 228 238 246 242
Renounced stock
appreciation
rights - - (2) - (7)
Stock-based
compensation
awards - 1 - (9) (11)
Other 4 3 10 (1) 22
-------------------------------------------------------------------------
Balance at end
of period 236 232 246 236 246
-------------------------------------------------------------------------
Treasury shares -
preferred
Balance at
beginning of
period (2) (1) (1) (2) (5)
Sales 3 1 3 8 13
Purchases (3) (2) (4) (8) (10)
-------------------------------------------------------------------------
Balance at end
of period (2) (2) (2) (2) (2)
-------------------------------------------------------------------------
Treasury shares -
common
Balance at
beginning of
period (71) (84) (97) (95) (104)
Sales 1 13 5 64 59
Purchases (11) - (3) (50) (50)
-------------------------------------------------------------------------
Balance at end
of period (81) (71) (95) (81) (95)
-------------------------------------------------------------------------
Retained earnings
Balance at
beginning of
period 22,361 21,860 20,120 20,585 19,816
Transition
adjustment -
Financial
instruments - - - - 66
Net income 1,121 1,276 1,237 5,223 3,858
Preferred share
dividends (64) (65) (64) (258) (233)
Common share
dividends (712) (710) (708) (2,843) (2,819)
Issuance costs
and other - - - (1) (103)
-------------------------------------------------------------------------
Balance at end
of period 22,706 22,361 20,585 22,706 20,585
-------------------------------------------------------------------------
Accumulated other
comprehensive (loss)
income
Transition
adjustment -
Financial
instruments 59 59 59 59 59
Unrealized gains
and losses on
available-for-
sale securities 104 (29) (76) 104 (76)
Unrealized
foreign currency
translation gains
and losses, net
of hedging
activities (1,685) (1,654) (1,374) (1,685) (1,374)
Gains and losses
on derivatives
designated as
cash flow hedges (577) (536) (325) (577) (325)
-------------------------------------------------------------------------
Balance at end
of period (2,099) (2,160) (1,716) (2,099) (1,716)
-------------------------------------------------------------------------
Retained earnings
and Accumulated
other comp-
rehensive income 20,607 20,201 18,869 20,607 18,869
-------------------------------------------------------------------------
Shareholders'
equity at end of
period $ 38,951 $ 38,513 $ 36,906 $ 38,951 $ 36,906
-------------------------------------------------------------------------
(1) Unaudited.
(2) Derived from audited financial statements.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this earnings release, in other filings with Canadian regulators or the SEC, in reports to shareholders and in other communications. Forward-looking statements include, but are not limited to, statements relating to our medium-term objectives, our future business growth and efficiencies, our vision and strategic goals and our President and Chief Executive Officer's statements in this earnings release. The forward-looking information contained in this earnings release is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented and our future business growth and efficiencies, our vision and strategic goals and medium-term objectives, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as "believe", "expect", "foresee", "forecast", "anticipate", "intend", "estimate", "goal", "plan" and "project" and similar expressions of future or conditional verbs such as "will", "may", "should", "could" or "would".
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our objectives, strategic goals will not be achieved. We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors - many of which are beyond our control and the effects of which can be difficult to predict - include: credit, market, operational, and liquidity and funding risks, and other risks discussed in the Risk management and Overview of other risks section; general business, economic and financial market conditions in Canada, the United States and certain other countries in which we conduct business, including the effects of the European sovereign debt crisis; changes in accounting standards, policies and estimates, including changes in our estimates of provisions, allowances and valuations; the effects of changes in government fiscal, monetary and other policies; the effects of competition in the markets in which we operate; the impact of changes in laws and regulations, including tax laws, changes to and new interpretations of risk-based capital guidelines, and reporting instructions and liquidity regulatory guidance, and the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations to be issued thereunder; judicial or regulatory judgments and legal proceedings; the accuracy and completeness of information concerning our clients and counterparties; our ability to successfully execute our strategies and to complete and integrate strategic acquisitions and joint ventures successfully; and development and integration of our distribution networks.
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.
Additional information about these and other factors can be found in the Risk management and Overview of other risks sections of our 2010 Annual Report to Shareholders.
Information contained in or otherwise accessible through the websites mentioned does not form part of this earnings release. All references in this earnings release to websites are inactive textual references and are for your information only.
ACCESS TO QUARTERLY RESULTS MATERIALS
Interested investors, the media and others may review this quarterly earnings release, quarterly results slides, supplementary financial information and our 2010 Annual Report to Shareholders, Annual Report on Form 40-F (Form 40-F) and Annual Information Form on our website at rbc.com/investorrelations. Shareholders may request a hard copy of our 2010 Annual Report and 2010 Form 40-F free of charge by contacting Investor Relations at (416) 955-7802. Our 2010 Form 40-F will be filed with the SEC.
Quarterly conference call and webcast presentation
Our conference call is scheduled for Friday, December 3, 2010 at 8:00 a.m. (EST) and will feature a presentation about our fourth quarter and 2010 results by RBC executives. It will be followed by a question and answer period with analysts.
Interested parties can access the call live on a listen-only basis at: www.rbc.com/investorrelations/ir_events_presentations.html or by telephone (416-340-2217 or 1-866-696-5910, passcode 1853457 followed by the number sign). Please call between 7:50 a.m. and 7:55 a.m. (EST).
Management's comments on results will be posted on our website shortly following the call. Also, a recording will be available by 5:00 pm (EST) on December 3 until March 3, 2011 at: www.rbc.com/investorrelations/ir_quarterly.html or by telephone (416-695-5800 or 1-800-408-3053, passcode 3186032 followed by the number sign).
ABOUT RBC
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. We are Canada's largest bank as measured by assets and market capitalization, and among the largest banks in the world, based on market capitalization. We are one of North America's leading diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. We employ approximately 79,000 full- and part-time employees who serve close to 18 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 50 other countries. For more information, please visit rbc.com.
Trademarks used in this release include the LION & GLOBE Symbol, ROYAL BANK OF CANADA and RBC which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or by its subsidiaries under license. All other trademarks mentioned in this release, which are not the property of Royal Bank of Canada, are owned by their respective holders. RBC Dexia IS and affiliated Dexia companies are licensed users of the RBC trademark.
For further information: Media Relations Contact: Katherine Gay, VP & Head, Corporate Communications, [email protected], 416-974-6286 (within Toronto) or 1-888-880-2173 (toll-free outside Toronto); Gillian McArdle, Head, Media & Public Relations, [email protected], 416-974-5506 (within Toronto) or 1-888-880-2173 (toll-free outside Toronto); Investor Relations Contacts: Josie Merenda, VP & Head, Investor Relations, [email protected], 416-955-7803; Bill Anderson, Director, Investor Relations, [email protected], 416-955-7804; Karen McCarthy, Director, Investor Relations, [email protected], 416-955-7809
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