Exhibit 99.2

ROYAL BANK OF CANADA THIRD QUARTER 2015 – REPORT TO SHAREHOLDERS

Royal Bank of Canada third quarter 2015 results

All amounts are in Canadian dollars and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted.

TORONTO, August 26, 2015 – Royal Bank of Canada (RY on TSX and NYSE) today reported net income of $2,475 million for the third quarter ended July 31, 2015, up $97 million or 4% from the prior year. Excluding a specified item in the prior year, net income was up $57 million or 2%.⁽¹⁾ Our results reflect record earnings in Personal & Commercial Banking, strong growth in Investor & Treasury Services, and stable earnings in Wealth Management. These factors were partially offset by lower earnings in Capital Markets compared to record results last year, and lower earnings in Insurance which included the impact of a change in Canadian tax legislation. Results also reflect the positive impact of foreign exchange translation.

Compared to the prior quarter, net income decreased $27 million. Excluding a specified item in the prior quarter, net income was up $81 million or 3%⁽¹⁾, mainly reflecting record earnings in Personal & Commercial Banking and higher earnings in Insurance, partially offset by lower earnings in Capital Markets reflecting less favourable market conditions.

Credit quality remained strong with a provision for credit loss (PCL) ratio of 0.23%. As of July 31, 2015, our Basel III Common Equity Tier 1 (CET1) ratio was 10.1% as we continued to strengthen our capital position in advance of closing the announced acquisition of City National, which is expected in the fourth calendar quarter of 2015. Today we announced an increase to our quarterly dividend of $0.02 or 3%, to $0.79 per share.

“We delivered a solid quarter, with earnings of over $2.4 billion, reflecting underlying strength across our businesses and strong execution in a challenging environment. I’m pleased to announce today a 3% increase to our quarterly dividend,” said Dave McKay, RBC President and CEO. “RBC achieved strong results for the first nine months of the year and we believe our diversified business model, by segment and geography, along with our differentiated client-focused strategy, positions us to continue adapting to the changing market and to economic headwinds.”

Q3 2015 compared to Q3 2014

• Net income of $2,475 million (up 4% from $2,378 million)

• Diluted earnings per share (EPS) of $1.66 (up $0.07 from $1.59)

• Return on common equity (ROE) of 18.1% (down from 19.6%)

• Basel III CET1 ratio of 10.1% (up from 9.5%)

Excluding specified item⁽¹⁾: Q3 2015 compared to Q3 2014

• Net income of $2,475 million (up 2% from $2,418 million)

• Diluted EPS of $1.66 (up $0.04 from $1.62)

• ROE of 18.1% (down from 20.0%)

Q3 2015 compared to Q2 2015

• Net income of $2,475 million (down 1% from $2,502 million)

• Diluted EPS of $1.66 (down $0.02 from $1.68)

• ROE of 18.1% (down from 19.3%)

• Basel III CET1 ratio of 10.1% (up from 10.0%)

Excluding specified item⁽¹⁾: Q3 2015 compared to Q2 2015

• Net income of $2,475 million (up 3% from $2,394 million)

• Diluted EPS of $1.66 (up $0.05 from $1.61)

• ROE of 18.1% (down from 18.5%)

YTD 2015 compared to YTD 2014

• Net income of $7,433 million (up 11% from $6,671 million)

• Diluted EPS of $4.99 (up $0.56 from $4.43)

• ROE of 18.9% (down from 19.0%)

Excluding specified items⁽¹⁾: YTD 2015 compared to YTD 2014

• Net income of $7,325 million (up 8% from $6,803 million)

• Diluted EPS of $4.92 (up $0.40 from $4.52)

• ROE of 18.6% (down from 19.4%)

(1) Specified items comprise: In Q2 2015, a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of foreign currency translation adjustment (CTA) that was previously booked in other components of equity (OCE); in Q3 2014, a loss of $40 million (before- and after-tax), related to the closing of the sale on June 27, 2014 of RBC Jamaica; and in Q1 2014, a loss of $60 million (before- and after-tax) also related to the sale of RBC Jamaica, and a provision related to post-employment benefits and restructuring charges in the Caribbean of $40 million ($32 million after-tax).

Table of contents

1 Third quarter highlights

2 Management’s Discussion and Analysis

2 Caution regarding forward-looking statements

2 Overview and outlook

2 About Royal Bank of Canada

3 Selected financial and other highlights

4 Economic, market and regulatory review and outlook

5 Key corporate events of 2015

6 Financial performance

6 Overview

10 Business segment results

10 How we measure and report our business segments

10 Key performance and non-GAAP measures

14 Personal & Commercial Banking

16 Wealth Management

17 Insurance

18 Investor & Treasury Services

19 Capital Markets

20 Corporate Support

21 Results by geographic segment

22 Quarterly results and trend analysis

23 Financial condition

23 Condensed balance sheets

24 Off-balance sheet arrangements

26 Risk management

26 Credit risk

33 Market risk

38 Liquidity and funding risk

48 Capital management

53 Additional financial information

53 Exposures to selected financial instruments

54 Accounting and control matters

54 Summary accounting policies and estimates

54 Changes in accounting policies and disclosure

54 Future changes in regulatory disclosure

54 Controls and procedures

54 Related party transactions

55 Enhanced Disclosure Task Force recommendations index

56 Interim Condensed Financial Statements (unaudited)

62 Notes to the Interim Condensed Financial Statements (unaudited)

92 Shareholder information

2        Royal Bank of Canada        Third Quarter 2015

Management’s Discussion and Analysis

Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the three and nine month periods ended or as at July 31, 2015, compared to the corresponding periods in the prior fiscal year and the three month period ended April 30, 2015. This MD&A should be read in conjunction with our unaudited Interim Condensed Consolidated Financial Statements for the quarter ended July 31, 2015 (Condensed Financial Statements) and related notes and our 2014 Annual Report. This MD&A is dated August 25, 2015. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), unless otherwise noted.

Additional information about us, including our 2014 Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on the Canadian Securities Administrators’ website at sedar.com and on the EDGAR section of the United States (U.S.) Securities and Exchange Commission’s (SEC) website at sec.gov.

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 Q3 2015 Report to Shareholders, in other filings with Canadian regulators or the SEC, in other reports to shareholders and in other communications. Forward-looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, the economic and market review and outlook for Canadian, U.S., European and global economies, the regulatory environment in which we operate, the outlook and priorities for each of our business segments, and the risk environment including our liquidity and funding risk. The forward-looking information contained in this document 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 financial performance objectives, vision and strategic goals, 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 financial performance objectives, vision and 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, liquidity and funding, insurance, regulatory compliance, operational, strategic, reputation, legal and regulatory environment, competitive and systemic risks and other risks discussed in the Risk management and Overview of other risks sections of our 2014 Annual Report and the Risk management section of this Q3 2015 Report to Shareholders; anti-money laundering, growth in wholesale credit, the high levels of Canadian household debt; cybersecurity; the business and economic conditions in Canada, the U.S. and certain other countries in which we operate; the effects of changes in government fiscal, monetary and other policies; tax risk and transparency; our ability to attract and retain employees; the accuracy and completeness of information concerning our clients and counterparties; the development and integration of our distribution networks; model, information technology, information management, social media, environmental and third party and outsourcing risk.

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. Material economic assumptions underlying the forward looking statements contained in this Q3 2015 Report to Shareholders are set out in the Overview and outlook section and for each business segment under the heading Outlook and priorities in our 2014 Annual Report, as updated by the Overview and outlook section of this Q3 2015 Report to Shareholders. 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 2014 Annual Report and the Risk management section of this Q3 2015 Report to Shareholders.

Information contained in or otherwise accessible through the websites mentioned does not form part of this report. All references in this report to websites are inactive textual references and are for your information only.

Overview and outlook

About Royal Bank of Canada

Royal Bank of Canada is Canada’s largest bank, and one of 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, insurance, investor services and capital markets products and services on a global basis. We employ approximately 79,000 full- and part-time employees who serve more than 16 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 38 other countries. For more information, please visit rbc.com.

Royal Bank of Canada        Third Quarter 2015        3

Selected financial and other highlights

	As at or for the three months ended							As at or for the nine months ended
(Millions of Canadian dollars, except per share, number of and percentage amounts)	July 31 2015		April 30 2015		July 31 2014			July 31 2015		July 31 2014
Total revenue	$	8,828	$	8,830	$	8,990		$	27,302	$	25,726
Provision for credit losses (PCL)		270		282		283			822		819
Insurance policyholder benefits, claims and acquisition expense (PBCAE)		656		493		1,009			2,671		2,821
Non-interest expense		4,635		4,736		4,602			13,991		13,321
Net income before income taxes		3,267		3,319		3,096			9,818		8,765
Net income	$	2,475	$	2,502	$	2,378		$	7,433	$	6,671
Segments – net income
Personal & Commercial Banking	$	1,281	$	1,200	$	1,138		$	3,736	$	3,324
Wealth Management		285		271		285			786		798
Insurance		173		123		214			481		525
Investor & Treasury Services		167		159		110			468		328
Capital Markets		545		625		641			1,764		1,653
Corporate Support		24		124		(10	)		198		43
Net income	$	2,475	$	2,502	$	2,378		$	7,433	$	6,671
Selected information
EPS – basic	$	1.66	$	1.68	$	1.59		$	5.00	$	4.45
– diluted		1.66		1.68		1.59			4.99		4.43
ROE (1), (2)		18.1%		19.3%		19.6%			18.9%		19.0%
PCL on impaired loans as a % of average net loans and acceptances		0.23%		0.25%		0.26%			0.24%		0.26%
Gross impaired loans (GIL) as a % of loans and acceptances		0.50%		0.46%		0.45%			0.50%		0.45%
Liquidity coverage ratio (3)		117%		113%		n.a.			117%		n.a.
Capital ratios, Leverage ratio and multiples(4)
Common Equity Tier 1 (CET1) ratio (4)		10.1%		10.0%		9.5%			10.1%		9.5%
Tier 1 capital ratio (4)		11.7%		11.6%		11.2%			11.7%		11.2%
Total capital ratio (4)		13.4%		13.5%		13.0%			13.4%		13.0%
Assets-to-capital multiple (4)		n.a.		n.a.		17.3X			n.a.		17.3X
Leverage ratio (4)		4.2%		4.0%		n.a.			n.a.		n.a.
Selected balance sheet and other information
Total assets	$	1,085,173	$	1,032,172	$	913,870		$	1,085,173	$	913,870
Securities		235,515		222,643		199,114			235,515		199,114
Loans (net of allowance for loan losses)		462,599		448,310		430,421			462,599		430,421
Derivative related assets		112,459		107,004		72,823			112,459		72,823
Deposits		694,236		651,551		601,691			694,236		601,691
Common equity		55,153		51,779		46,965			55,153		46,965
Average common equity (1)		52,600		51,500		46,400			51,100		45,300
Total capital risk-weighted assets		421,908		398,992		371,949			421,908		371,949
Assets under management (AUM)		508,700		486,300		446,500			508,700		446,500
Assets under administration (AUA) (5)		5,012,900		4,835,100		4,472,300			5,012,900		4,472,300
Common share information
Shares outstanding (000s) – average basic		1,443,052		1,442,078		1,442,312			1,442,579		1,442,615
– average diluted		1,449,540		1,448,651		1,449,455			1,449,206		1,452,868
– end of period		1,443,192		1,443,102		1,441,536			1,443,192		1,441,536
Dividends declared per common share	$	0.77	$	0.77	$	0.71		$	2.29	$	2.09
Dividend yield (6)		4.0%		4.0%		3.7%			3.9%		3.7%
Common share price (RY on TSX)	$	76.26	$	80.11	$	80.47		$	76.26	$	80.47
Market capitalization (TSX)		110,058		115,607		116,000			110,058		116,000
Business information (number of)
Employees (full-time equivalent) (FTE)		74,214		73,136		74,542			74,214		74,542
Bank branches		1,354		1,361		1,364			1,354		1,364
Automated teller machines (ATMs)		4,892		4,913		4,940			4,892		4,940
Period average US$ equivalent of C$1.00 (7)	$	0.789	$	0.806	$	0.925		$	0.811	$	0.919
Period-end US$ equivalent of C$1.00	$	0.765	$	0.829	$	0.917		$	0.765	$	0.917

(1) Average amounts are calculated using methods intended to approximate the average of the daily balances for the period. This includes ROE and Average common equity. For further details, refer to the Key performance and non-GAAP measures section.

(2) These measures may not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions. For further details, refer to the Key performance and non-GAAP measures section.

(3) Effective the second quarter of 2015, we calculate the Liquidity Coverage Ratio (LCR) using the Liquidity Adequacy Requirements (LAR) guideline. The LCR is a new regulatory measure under the Basel III framework. The LCR is not applicable (n.a.) for prior periods as it was adopted prospectively, effective the second quarter of 2015. The LCR for Q2 2015 has been revised from that previously disclosed. For further details, refer to the Liquidity and funding risk section.

(4) Capital and Leverage ratios presented above are on an “all-in” basis. Effective the first quarter of 2015, the Leverage ratio has replaced the Assets-to-capital multiple (ACM). The Leverage ratio is a regulatory measure under the Basel III framework and is n.a. for prior periods. The ACM is presented on a transitional basis for prior periods. For further details, refer to the Capital management section.

(5) AUA represents period-end spot balances and includes securitized residential mortgages and credit card loans as at July 31, 2015 of $21.7 billion and $8.4 billion, respectively (April 30, 2015 – $22.5 billion and $7.9 billion; July 31, 2014 – $23.1 billion and $8.3 billion).

(6) Defined as dividends per common share divided by the average of the high and low share price in the relevant period.

(7) Average amounts are calculated using month-end spot rates for the period.

4        Royal Bank of Canada        Third Quarter 2015

Economic, market and regulatory review and outlook – data as at August 25, 2015

Canada

The Canadian economy contracted at an estimated rate of (1.2)% in the second calendar quarter of 2015, following a decline in growth of (0.6)% in the first calendar quarter of 2015. This was mostly due to continuing weakness in investment by the energy sector and slow export activity. Lower growth than expected in the first two calendar quarters of 2015 resulted in an increase in excess capacity and created downward risks to the inflation outlook, leading the Bank of Canada (BoC) to reduce its overnight rate by 25 bps to 0.50% in July 2015, the second decrease in the calendar year. The Canadian dollar declined in value against the U.S. dollar following the BoC rate decision, and reached an 11 year low in August 2015, as the market priced in a further divergence in monetary policy between the two countries. Housing market activity overall remained solid during the calendar quarter, helped by very low interest rates and solid labour markets. The unemployment rate held steady at 6.8% in July 2015, as job gains in the second calendar quarter were accompanied by an increase in the labour force.

Despite the contraction in the first half of calendar 2015, we expect the Canadian economy to grow in calendar 2015 at an estimated rate of 1.0%, which is below our previous estimates. We expect growth of 1.8% in the third calendar quarter and growth of 2.6% in the fourth calendar quarter to offset the contraction of the economy in the first six months of the year due to the effect of solid consumer spending and firmer export growth with the latter benefiting from the lower Canadian dollar relative to the U.S. dollar. We expect the BoC to maintain its policy rate at 0.50% through the first half of 2016. However, there is a possibility of a further cut to the overnight rate if economic weakness persists during the second calendar half of 2015.

U.S.

The U.S. economy recovered from the slowdown experienced in the first calendar quarter of 2015, and grew in the second calendar quarter at an estimated rate of 2.3%. Consumer spending growth during the calendar quarter was supported by continuing improvements in the labour market as well as higher disposable income due to lower gasoline prices. The U.S. housing market showed some recovery during the calendar quarter, while the unemployment rate improved further to 5.3% in July 2015, which is close to the range considered full employment by the Federal Reserve (Fed). Despite this improvement in the labour and housing markets, the Fed pointed to weaker exports and business investment at its July 2015 meeting, and maintained its cautious policy stance by holding its funds target range at historically low levels.

We expect the U.S. economy to grow at an estimated rate of 2.4% in calendar 2015, which is below our previous estimates, reflecting the soft start to the year. Firmer consumer spending growth and improved business investment are expected to result in the economy growing at an above-potential pace in the second calendar half of the year. The recovery in economic growth and the unemployment rate moving towards the range considered full employment by the Fed are expected to result in the Fed announcing a 25 bps increase to its current funds target range of 0.0% to 0.25% in September 2015.

Europe

The Euro area economy continued its recovery and grew in the second calendar quarter of 2015 at an estimated rate of 0.3%, mostly due to the effects of the stimulative monetary policy adopted by the European Central Bank (ECB), lower energy prices, and a weaker Euro. Uncertainty relating to a potential Greek exit from the Euro area resulting from an inability to make sovereign debt payments did not disrupt economic growth during the calendar quarter. The Euro area inflation rate increased to 0.2% in July 2015 from 0.0% in April 2015, as a decline in energy prices was more than offset by higher price gains in other sectors. The unemployment rate improved marginally to 11.1% in June 2015, from 11.2% in March 2015. The ECB continued its monthly asset purchase program, the Public Sector Purchase Program (PSPP), by making monthly purchases of up to €60 billion of a combination of euro-denominated public sector securities, asset-backed securities and covered bonds.

We expect the Euro area economy to grow at an estimated rate of 1.4% in calendar 2015, in line with our previous estimates, as the economy benefits from the stimulus undertaken by the ECB, a weaker Euro, and lower oil prices. We expect the ECB to continue the PSPP as planned until at least September 2016, and to hold its key interest rate steady at 0.05% for the foreseeable future.

Financial markets

Equity indices in Canada, the U.S. and major European economies displayed some volatility during our current fiscal quarter, mostly related to the effect of low global oil prices, diverging monetary policies amongst global central banks, a possible Greek exit from the Euro as well as a sustained decline in the Chinese equity markets. Yields on both Canadian and U.S. long-term government bonds fluctuated during the fiscal quarter. The Canadian benchmark 10-year government bond yield ended the fiscal quarter lower than the previous quarter, whereas the U.S. Treasury 10-year bond ended the fiscal quarter above the previous quarter’s yield, reflecting market sentiment on divergent central bank policy for the two economies. Credit spreads on corporate bonds in North America and Europe widened during the fiscal quarter. Crude oil prices recovered slightly during the first two months of the fiscal quarter, but declined sharply in July 2015 and the early part of August 2015 based on oversupply concerns related to the possible lifting of economic sanctions on Iran and expectations that demand could slow from China, as recent data show weakening in its manufacturing sector. Prices for non-precious metals continued to decline due to a combination of strong supply and weaker demand from emerging economies, including China.

The macroeconomic headwinds described above, including the slowing Canadian economy and weak exports, continuing low oil prices, as well as potential further cuts by the BoC to its key overnight rate, may negatively impact our results for the remainder of fiscal 2015.

Regulatory environment

We continue to monitor and prepare for regulatory developments in a manner that seeks to ensure compliance with new requirements while mitigating any adverse business or economic impacts. Such impacts could result from new or amended regulations and the expectations of those who enforce them. Significant developments are discussed below.

Royal Bank of Canada        Third Quarter 2015        5

Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), together with the implementing rules of the U.S. regulatory agencies (collectively, the Volcker Rule), established broad prohibitions and restrictions on proprietary trading and investing in or sponsoring hedge funds or private equity funds. Subject to conformance period requirements, the Volcker Rule became effective on July 21, 2015. The Volcker Rule is complex and, subject to certain exceptions, applies to the worldwide operations of non-U.S. banking organization such as RBC that operate a branch or agency or have a bank subsidiary in the U.S. As previously reported, RBC has exited certain activities that could not be restructured to comply with the Volcker Rule. Exiting those activities will not have a material impact on our overall results.

We continue to prepare for implementation of the Fed’s “Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations”, which are rules adopted pursuant to section 165 of the Dodd-Frank Act. These rules introduce a new oversight regime for non-U.S. banks with subsidiaries, affiliates and branches operating in the U.S. and whose U.S. operations have significant assets (generally $50 billion or more), and will require RBC to manage its U.S.-based operations pursuant to risk management, governance, liquidity and capital standards set forth in the enhanced supervision rules. RBC has incurred, and will continue to incur, costs to comply with the additional U.S.-based financial reporting, risk management and governance requirements of the rule and we may have less flexibility in our capital and liquidity planning which historically has been managed on a global basis. These impacts are not expected to materially affect our overall results.

In November 2014, the Financial Stability Board (FSB) proposed minimum common international standards related to the Total Loss-Absorbing Capacity (TLAC) of global systemically important banks (G-SIBs). The standards are intended to address the sufficiency of G-SIBs’ capital to absorb losses in a resolution situation in a manner that minimizes the impact on financial stability and ensures continuity of critical and long-term debt functions. To date, neither RBC nor any other Canadian bank has been designated as a G-SIB. Designation as a G-SIB could result in higher capital requirements over and above the additional 1% domestic capital buffer established by the Office of the Superintendent of Financial Institutions (OSFI) for the largest six Canadian banks, including RBC, designated as domestic systemically important banks (D-SIBs).

In its April 21, 2015 Federal Budget announcement, the Government of Canada (GoC) confirmed its plans to adopt a “bail-in” regime for Canada’s D-SIBs to limit taxpayer exposure to potential losses of a failing bank and to ensure a bank’s shareholders and creditors remain responsible for bearing losses. The proposed regime would only apply to certain unsecured debt and not to customer deposits, and would allow for the permanent conversion of eligible liabilities of a non-viable bank into common shares. Banks would be subject to comprehensive disclosure and reporting requirements, along with minimum loss absorbency requirements to ensure they can withstand significant losses and to emerge from a conversion well-capitalized. The manner in which the proposal is finalized could adversely impact our cost of funding.

The 2015 Federal Budget announced a new principles-based Consumer Code for banks which would include new rules in areas such as basic banking access, board obligations, business practices, consumer disclosures and complaints reporting. Further details on these proposed changes will likely not be made available until early 2016.

The 2015 Federal Budget also included several proposed tax changes that could negatively impact our earnings in fiscal 2016. While we are continuing to assess the full impact of these changes, we do not expect them to materially impact our financial results.

The GoC is continuing consultations on potential reforms to the Canadian payments system in areas like next-generation payments and minimum standards to address risks associated with unregulated participants. Similar consultations are underway in the U.S. and Europe. Related to this, the GoC has indicated it would be monitoring the level of interchange fees charged to merchants for potential adverse impacts on the market, including as it relates to the recent 5-year commitment entered into by Visa and MasterCard to lower the average fee charged on domestic consumer credit cards to merchants. RBC is well-positioned for this change and does not anticipate the GoC will take further action in this area in the near-term.

For a discussion on risk factors resulting from these and other regulatory developments which may affect our business and financial results, refer to the Risk management – Top and emerging risks section of our 2014 Annual Report. For further details on our framework and activities to manage risks, refer to the Risk management and Capital management sections of our 2014 Annual Report and of this Q3 2015 Report to Shareholders.

Key corporate events of 2015

Royal Bank of Canada (Suisse) SA (RBC Suisse)

On July 14, 2015, we announced that we have entered into a definitive agreement to sell Royal Bank of Canada (Suisse) SA, (RBC Suisse), to SYZ Group, subject to customary closing conditions including regulatory approvals. The transaction is expected to close in the fourth quarter of 2015. For further details, refer to Note 7 of our Condensed Financial Statements.

RBC Royal Bank (Suriname) N.V.

On July 31, 2015, we completed the sale of RBC Royal Bank (Suriname) N.V. (RBC Suriname), as previously announced on April 1, 2015. As a result of the transaction, we recorded a total loss on disposal of $19 million (before and after-tax), including a loss of $23 million in the second quarter in Non-interest expense – Other, and a gain of $4 million in the third quarter including foreign currency translation gains reclassified from Other components of equity. For further details, refer to Note 7 of our Condensed Financial Statements.

City National Corporation

On January 22, 2015, we announced that we had entered into a merger agreement to acquire City National Corporation (City National), the holding company for City National Bank, for cash and RBC common shares. As at the date of announcement, the total transaction value was approximately US$5.4 billion. The aggregate consideration will be paid with approximately US$2.7 billion in cash and

6        Royal Bank of Canada        Third Quarter 2015

approximately 44 million RBC common shares. The total number of RBC common shares to be issued and the amount of cash to be paid in the transaction are both fixed. The transaction value will be determined at the time of closing based upon the price of our common shares at such time. The transaction is expected to close in the first quarter of 2016 and is subject to customary closing conditions, including regulatory approvals. Common stockholders of City National approved the transaction in a vote held on May 27, 2015. For further details, refer to Note 7 of our Condensed Financial Statements.

Financial performance

Overview

Q3 2015 vs. Q3 2014

Net income of $2,475 million was up $97 million or 4% from a year ago. Diluted earnings per share (EPS) of $1.66 was up $0.07 and return on common equity (ROE) of 18.1% was down 150 bps from 19.6% last year. Our Common Equity Tier 1 (CET1) ratio was 10.1%.

Excluding a specified item last year described below, net income was up $57 million or 2% from last year, and diluted EPS of $1.66 was up $0.04. Our results reflected solid volume growth and strong fee-based revenue growth across most businesses in Canadian Banking, the positive impact of foreign exchange translation on earnings, and growth in average fee-based client assets. Higher earnings from our foreign exchange businesses also contributed to the increase. These factors were partially offset by lower trading results due to less favourable market conditions, a higher effective tax rate, lower transaction volumes and the change in fair value of our U.S. share-based compensation plan in Wealth Management.

For further details on our results and CET1 ratio, refer to the Business segment results and Capital management sections, respectively.

Q3 2015 vs. Q2 2015

Net income decreased $27 million or 1% from the prior quarter. Diluted EPS was down $0.02 and ROE was down 120 bps compared to 19.3% last quarter.

Excluding a specified item last quarter described below, net income increased $81 million or 3% from the prior quarter, and diluted EPS was up $0.05. Our results reflected higher earnings due to the positive impact of seasonal factors, including additional days in the quarter particularly in Canadian Banking, and strong fee-based revenue growth and solid volume growth across most businesses in Canadian Banking. Lower claims costs, largely in our life retrocession business, a favourable impact of investment-related activities on the Canadian life business, and higher M&A activity also contributed to the increase. These factors were partially offset by lower trading results reflecting less favourable market conditions, and lower origination activity as compared to the strong levels last quarter.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income of $7,433 million increased $762 million or 11% from a year ago. Nine months diluted EPS of $4.99 was up $0.56 and ROE of 18.9% was down 10 bps.

Excluding the specified items described below, net income increased $522 million or 8% from the prior year, and diluted EPS was up $0.40. Our results reflected solid volume growth and strong fee-based revenue growth across most businesses in Canadian Banking, and strong business growth in Capital Markets. Higher earnings from growth in average fee-based client assets, the positive impact of foreign exchange translation, higher earnings from our foreign exchange businesses, and higher earnings from new U.K. annuity contracts also contributed to the increase. These factors were partially offset by higher costs in support of business growth, lower spreads, and restructuring costs of $76 million ($53 million after-tax) related to our U.S. & International Wealth Management business.

Specified items

For the nine months ended July 31, 2015, our results were impacted by a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of foreign currency translation adjustment (CTA) that was previously booked in other components of equity (OCE), which was recorded in Corporate Support last quarter. During the three months ended July 31, 2014, our results were impacted by a loss of $40 million (before- and after-tax), which included foreign currency translation related to the closing of the sale of RBC Jamaica. For the nine months ended July 31, 2014, our results were impacted by a total loss of $100 million (before- and after-tax) related to the sale of RBC Jamaica, as well as a provision of $40 million ($32 million after-tax) related to post-employment benefits and restructuring charges in the Caribbean. Results excluding these specified items are non-GAAP measures. For further details, refer to the Key performance and non-GAAP measures section.

Estimated impact of foreign currency translation on our consolidated financial results

Our foreign currency-denominated results are impacted by exchange rate fluctuations. Revenue, PCL, insurance policyholder benefits, claims and acquisition expense (PBCAE), non-interest expense and net income denominated in foreign currency are translated at the average rate of exchange for the period.

Royal Bank of Canada        Third Quarter 2015        7

The following table reflects the estimated impact of foreign exchange translation on key income statement items:

	For the three months ended				For the nine months ended
(Millions of Canadian dollars, except per share amounts)	Q3 2015 vs. Q3 2014		Q3 2015 vs. Q2 2015		Q3 2015 vs. Q3 2014
Increase (decrease):
Total revenue	$	295	$	60	$	694
PCL		3		–		5
PBCAE		25		10		45
Non-interest expense		196		43		440
Income taxes		27		2		85
Net income		44		5		119
Impact on EPS
Basic	$	.03	$	.00	$	.08
Diluted		.03		.00		.08

The relevant average exchange rates that impact our business are shown in the following table:

	For the three months ended						For the nine months ended
(Average foreign currency equivalent of C$1.00) (1)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
U.S. dollar	$	0.789	$	0.806	$	0.925	$	0.811	$	0.919
British pound		0.508		0.530		0.547		0.527		0.550
Euro		0.715		0.729		0.682		0.716		0.673

(1) Average amounts are calculated using month-end spot rates for the period.

Total revenue

	For the three months ended						For the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Interest income	$	5,755	$	5,557	$	5,673	$	17,014	$	16,543
Interest expense		1,972		2,000		2,026		6,043		5,987
Net interest income	$	3,783	$	3,557	$	3,647	$	10,971	$	10,556
Net interest margin (on average earning assets)(1)		1.72%		1.71%		1.90%		1.72%		1.88%
Investments (2)	$	2,063	$	2,020	$	1,849	$	6,070	$	5,431
Insurance (2)		1,021		806		1,383		3,719		3,790
Trading		56		359		285		755		895
Banking (2)		1,071		1,195		1,093		3,261		3,078
Underwriting and other advisory		531		559		552		1,535		1,381
Other (2)		303		334		181		991		595
Non-interest income	$	5,045	$	5,273	$	5,343	$	16,331	$	15,170
Total revenue	$	8,828	$	8,830	$	8,990	$	27,302	$	25,726
Additional information
Total trading revenue
Net interest income	$	623	$	595	$	578	$	1,758	$	1,505
Non-interest income		56		359		285		755		895
Total trading revenue	$	679	$	954	$	863	$	2,513	$	2,400

(1) Net interest margin (on average earning assets) is calculated as net interest income divided by average earning assets.

(2) Refer to the Financial Performance section of our 2014 Annual Report for the definition of these categories.

Q3 2015 vs. Q3 2014

Total revenue decreased $162 million or 2% from last year, which included the negative change in fair value of investments backing our policy holders liabilities of $292 million, which was largely offset in PBCAE. The positive impact of foreign exchange translation this quarter increased total revenue by $295 million.

Net interest income increased $136 million or 4%, mainly due to solid volume growth across most businesses in Canadian Banking, and higher lending activity in Capital Markets. These factors were partially offset by lower spreads.

Net interest margin was down 18 bps compared to last year, largely due to the lower interest rate environment and competitive pressures. The change in the fourth quarter of 2014 in recording of certain loan fees in our business portfolio from Net interest income to Non-interest income in Personal & Commercial Banking also contributed to the decrease.

Investments revenue increased $214 million or 12%, mainly due to growth in average fee-based client assets and the positive impact of foreign exchange translation. Higher securities brokerage commissions in Capital Markets, and higher mutual fund distribution fees in Canadian Banking also contributed to the increase. These factors were partly offset by lower transaction volumes in Wealth Management reflecting uncertain market conditions, and the change in fair value of our U.S. share-based compensation plan.

Insurance revenue decreased $362 million or 26%, mainly due to the negative change in fair value of investments backing our policyholder liabilities resulting from the increase in long-term interest rates, and a reduction of revenue related to our retrocession contracts, both of which were largely offset in PBCAE. These factors were partially offset by business growth in our life, home and auto insurance businesses.

8        Royal Bank of Canada        Third Quarter 2015

Trading revenue in Non-interest income decreased $229 million. Total trading revenue of $679 million, which comprises trading-related revenue recorded in Net interest income and Non-interest income, was down $184 million or 21%, mainly reflecting lower trading results due to less favourable market conditions as compared to the strong levels last year, partially offset by the positive impact of foreign exchange translation.

Banking revenue decreased $22 million or 2%, mainly due to the change in fair value of certain available-for-sale (AFS) securities used for funding activities which is offset in Other revenue. This factor was partially offset by higher credit card loan balances and transaction volumes, and higher foreign exchange revenue reflecting increased client activity mainly due to market volatility.

Underwriting and other advisory revenue decreased $21 million or 4%, primarily due to lower equity origination in the U.S. and Canada as compared to strong levels last year. This factor was partially offset by strong growth in M&A activity in the U.S. and Europe, higher debt origination activity mainly in the U.S., and the positive impact of foreign exchange translation.

Other revenue increased $122 million or 67%, mainly due to the change in fair value of certain derivatives used to economically hedge our funding activities noted above.

Q3 2015 vs. Q2 2015

Total revenue decreased $2 million from the prior quarter. Excluding a specified item in the prior quarter noted above, total revenue increased $106 million or 1%, primarily due to the positive change in fair value of investments backing our policyholder liabilities, largely offset in PBCAE. The positive impact of seasonal factors on our banking businesses, including additional days in the quarter, strong fee-based revenue growth and solid volume growth across most businesses in Canadian Banking, and the positive impact of foreign exchange translation also contributed to the increase. These factors were partially offset by lower trading revenue reflecting less favourable market conditions, and lower origination activity as compared to the strong levels last quarter.

Q3 2015 vs. Q3 2014 (Nine months ended)

Total revenue increased $1,576 million or 6%. Excluding a specified item noted above, total revenue increased $1,468 million or 6%, primarily due to the positive impact of foreign exchange translation, and solid volume growth across most businesses as well as strong fee-based revenue growth in Canadian Banking. Solid growth in our corporate and investment banking businesses, growth in Canadian Insurance, higher revenue from U.K. annuity contracts, and higher trading revenue reflecting increased client activity and more favourable market conditions in the first half of the year also contributed to the increase. These factors were partially offset by a reduction of revenue related to our retrocession contracts, largely offset in PBCAE, lower spreads, and lower equity origination activity.

Revenue excluding the specified item noted above is a non-GAAP measure. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Provision for credit losses

Q3 2015 vs. Q3 2014

Total PCL decreased $13 million or 5% from a year ago, mainly due to lower PCL in Caribbean Banking, partially offset by higher PCL in Capital Markets and Canadian Banking.

Q3 2015 vs. Q2 2015

Total PCL decreased $12 million or 4% from the prior quarter, mainly due to lower PCL in Wealth Management, partially offset by higher PCL in Canadian Banking.

Q3 2015 vs. Q3 2014 (Nine months ended)

Total PCL increased $3 million from the prior year, mainly due to higher PCL in Wealth Management and Capital Markets, largely offset by lower PCL in Personal & Commercial Banking.

For further details on PCL, refer to the Credit quality performance section.

Insurance policyholder benefits, claims and acquisition expense

Q3 2015 vs. Q3 2014

PBCAE decreased $353 million or 35% from a year ago, mainly due to the negative change in fair value of our investments backing our policyholder liabilities, and a reduction of PBCAE related to our retrocession contracts, which were largely offset in insurance revenue. These factors were partially offset by business growth, including a new U.K. annuity contract, and higher claims costs in our life retrocession business.

Q3 2015 vs. Q2 2015

PBCAE increased $163 million or 33% from the prior quarter, mainly due to the positive change in fair value of our investments backing our policyholder liabilities, largely offset in insurance revenue. This factor was partially offset by a favourable impact of investment-related activities in the Canadian life business and lower net claims costs.

Q3 2015 vs. Q3 2014 (Nine months ended)

PBCAE decreased $150 million or 5% from the prior year, mainly due to a reduction of PBCAE related to our retrocession contracts, which was largely offset in insurance revenue, and lower claims costs in Canadian Insurance. These factors were partially offset by business growth in International insurance, including new U.K. annuity contracts, and the positive change in fair value of investments backing our policyholder liabilities, largely offset in insurance revenue. In addition, our prior year results were impacted by favourable actuarial adjustments reflecting management actions and assumption changes.

Royal Bank of Canada        Third Quarter 2015        9

Non-interest expense

	For the three months ended						For the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July  31 2014 (2)		July 31 2015		July  31 2014 (2)
Salaries	$	1,309	$	1,273	$	1,216	$	3,849	$	3,601
Variable compensation		1,133		1,264		1,253		3,578		3,465
Benefits and retention compensation		399		421		373		1,252		1,200
Share-based compensation		49		38		24		222		184
Human resources	$	2,890	$	2,996	$	2,866	$	8,901	$	8,450
Equipment		327		311		287		935		859
Occupancy		351		356		350		1,042		997
Communications		213		224		207		635		588
Professional fees		223		204		178		625		500
Amortization of other intangibles		180		178		171		532		490
Other		451		467		543		1,321		1,437
Non-interest expense	$	4,635	$	4,736	$	4,602	$	13,991	$	13,321
Efficiency ratio(1)		52.5%		53.6%		51.2%		51.2%		51.8%

(1) Efficiency ratio is calculated as non-interest expense divided by total revenue.

(2) Amounts have been revised from those previously presented.

Q3 2015 vs. Q3 2014

Non-interest expense increased $33 million or 1%. Excluding the prior year loss of $40 million (before- and after-tax) related to the closing of the sale of RBC Jamaica, non-interest expense increased $73 million or 2%, including an increase of $196 million due to the impact of foreign exchange translation. Higher costs to support business growth were more than offset by lower variable compensation, and lower litigation provisions and related legal costs in Capital Markets, and continuing benefits from our efficiency management activities.

Our efficiency ratio of 52.5% increased 130 bps from 51.2% last year. Excluding the prior year specified item noted above, our efficiency ratio increased 180 bps from last year, mainly due to the change in fair value of investments backing our policyholder liabilities, which was largely offset in PBCAE.

Q3 2015 vs. Q2 2015

Non-interest expense decreased $101 million or 2%, primarily due to lower variable compensation in Capital Markets and lower restructuring costs related to our U.S. & International Wealth Management business. These factors were partially offset by the unfavourable impact of seasonal factors, including additional days in the current quarter, and the impact of foreign exchange translation. The prior quarter included the loss of $23 million (before- and after-tax) related to the previously announced sale of RBC Suriname.

Our efficiency ratio of 52.5% decreased 110 bps from 53.6% last quarter. Excluding the gain of $108 million related to the release of CTA which favourably impacted revenue last quarter, our efficiency ratio decreased 180 bps from last quarter, mainly due to the change in fair value of investments backing our policyholder liabilities, which was largely offset in PBCAE.

Q3 2015 vs. Q3 2014 (Nine months ended)

Non-interest expense increased $670 million or 5%. Excluding the prior year specified items noted above, non-interest expense increased $810 million or 6%, mainly reflecting higher costs to support business growth, an increase due to the impact of foreign exchange translation, and restructuring costs in Wealth Management as noted above. These factors were partially offset by lower litigation provisions and related legal costs in Capital Markets.

Our efficiency ratio of 51.2% decreased 60 bps from 51.8% last year. Excluding the specified items in both the current and prior years noted above, our efficiency ratio of 51.4%, increased 20 bps from last year.

Non-interest expense and the efficiency ratio excluding the specified items noted above, are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

10        Royal Bank of Canada        Third Quarter 2015

Income taxes

	For the three months ended						For the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Income taxes	$	792	$	817	$	718	$	2,385	$	2,094
Net income before income taxes	$	3,267	$	3,319	$	3,096	$	9,818	$	8,765
Canadian statutory income tax rate (1)		26.3%		26.3%		26.3%		26.3%		26.3%
Lower average tax rate applicable to subsidiaries		(0.2)%		(0.3)%		(2.5)%		(0.7)%		(2.3)%
Tax-exempt income from securities		(3.2)%		(2.7)%		(4.3)%		(2.9)%		(3.5)%
Tax rate change		0.1%		0.6%		0.0%		0.2%		0.0%
Effect of previously unrecognized tax loss, tax credit or temporary differences		(0.1)%		0.0%		0.0%		0.0%		0.0%
Other		1.3%		0.7%		3.7%		1.4%		3.4%
Effective income tax rate(2)		24.2%		24.6%		23.2%		24.3%		23.9%

(1) Blended Federal and Provincial statutory income tax rate.

(2) Total income taxes as a percentage of net income before income taxes.

Q3 2015 vs. Q3 2014

Income tax expense increased $74 million or 10% from last year, mainly due to higher earnings before income taxes. The effective income tax rate of 24.2% increased 100 bps primarily due to lower tax-exempt income and the impact of increased income in higher tax rate jurisdictions in the current year. These factors were partially offset by lower unfavourable tax adjustments.

Q3 2015 vs. Q2 2015

Income tax expense decreased $25 million or 3% from last quarter, mainly due to lower earnings before income taxes. The effective income tax rate of 24.2% decreased 40 bps from 24.6% in the last quarter, mainly due to higher tax-exempt income.

Q3 2015 vs. Q3 2014 (Nine months ended)

Income tax expense increased $291 million or 14%, mainly due to higher earnings before income taxes. The effective income tax rate of 24.3% increased 40 bps primarily due to lower tax-exempt income and the impact of increased income in higher tax rate jurisdictions in the current year. These factors were partially offset by lower unfavourable tax adjustments.

Business segment results

How we measure and report our business segments

The key methodologies and assumptions used in our management reporting framework are periodically reviewed by management to ensure they remain valid and remain unchanged from October 31, 2014. For further details, refer to the How we measure and report our business segments section of our 2014 Annual Report.

Key performance and non-GAAP measures

Performance measures

Return on common equity (ROE)

We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. We use ROE, at both the consolidated and business segment levels, as a measure of return on total capital invested in our business. Management views the business segment ROE measure as a useful measure for supporting investment and resource allocation decisions because it adjusts for certain items that may affect comparability between business segments and certain competitors. For further details, refer to the Key performance and non-GAAP measures section of our 2014 Annual Report.

The following table provides a summary of our ROE calculations:

	For the three months ended
	July 31 2015															April 30 2015		July 31 2014
(Millions of Canadian dollars, except percentage amounts)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets		Corporate Support			Total		Total		Total
Net income available to common shareholders	$	1,264	$	278	$	172	$	164	$	530	$	(9	)	$	2,399	$	2,426	$	2,297
Total average common equity (1), (2)		16,550		5,950		1,550		2,650		16,300		9,600			52,600		51,500		46,400
ROE (3)		30.3%		18.6%		43.6%		24.5%		12.9%		n.m.			18.1%		19.3%		19.6%

Royal Bank of Canada        Third Quarter 2015        11

	For the nine months ended
	July 31 2015														July 31 2014
(Millions of Canadian dollars, except percentage amounts)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets		Corporate Support		Total		Total
Net income available to common shareholders	$	3,686	$	769	$	478	$	460	$	1,721	$	105	$	7,219	$	6,425
Total average common equity (1), (2)		16,300		5,900		1,550		2,550		16,300		8,500		51,100		45,300
ROE (3)		30.3%		17.5%		41.1%		24.2%		14.1%		n.m.		18.9%		19.0%

(1) Average common equity represents rounded figures.

(2) The amounts for the segments are referred to as attributed capital.

(3) ROE is based on actual balances of average common equity before rounding.

n.m. not meaningful

Non-GAAP measures

We believe that certain non-GAAP measures described below are more reflective of our ongoing operating results, and provide readers with a better understanding of management’s perspective on our performance. These measures enhance the comparability of our financial performance for the three and nine months ended July 31, 2015 with the corresponding periods in the prior year and the three months ended April 30, 2015 as well as, in the case of economic profit, measure relative contribution to shareholder value. Non-GAAP measures do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.

The following discussion describes the non-GAAP measures we use in evaluating our operating results.

Economic profit

Economic profit is net income excluding the after-tax effect of amortization of other intangibles less a capital charge for use of attributed capital. It measures the return generated by our businesses in excess of our cost of capital, thus enabling users to identify relative contributions to shareholder value.

The capital charge includes a charge for common equity and preferred shares. In 2014, we revised our cost of equity to 9.0% from 8.5% in 2013, largely as a result of higher long-term interest rates. For 2015, our cost of capital remains 9.0%.

The following table provides a summary of our Economic profit:

	For the three months ended
	July 31 2015																			April 30 2015			July 31 2014
(Millions of Canadian dollars)	Personal & Commercial Banking			Wealth Management			Insurance		Investor & Treasury Services			Capital Markets		Corporate Support			Total			Total			Total
Net income	$	1,281		$	285		$	173	$	167		$	545	$	24		$	2,475		$	2,502		$	2,378
add: Non-controlling interests		(1	)		(1	)		–		–			–		(24	)		(26	)		(29	)		(26	)
After-tax effect of amortization of other intangibles		4			17			–		5			1		–			27			30			29
Intangibles writedown		–			–			–		–			–		–			–			4			2
Adjusted net income (loss)	$	1,284		$	301		$	173	$	172		$	546	$	–		$	2,476		$	2,507		$	2,383
less: Capital charge		392			140			36		63			386		227			1,244			1,176			1,107
Economic profit (loss)	$	892		$	161		$	137	$	109		$	160	$	(227	)	$	1,232		$	1,331		$	1,276
	For the nine months ended
	July 31 2015																			July 31 2014
(Millions of Canadian dollars)	Personal & Commercial Banking			Wealth Management			Insurance		Investor & Treasury Services			Capital Markets		Corporate Support			Total			Total
Net income	$	3,736		$	786		$	481	$	468		$	1,764	$	198		$	7,433		$	6,671
add: Non-controlling interests		(6	)		(1	)		–		(1	)		–		(69	)		(77	)		(77	)
After-tax effect of amortization of other intangibles		19			52			–		16			1		(1	)		87			93
Intangibles writedown		–			4			–		–			–		–			4			2
Adjusted net income (loss)	$	3,749		$	841		$	481	$	483		$	1,765	$	128		$	7,447		$	6,689
less: Capital charge		1,140			412			108		178			1,140		599			3,577			3,220
Economic profit (loss)	$	2,609		$	429		$	373	$	305		$	625	$	(471	)	$	3,870		$	3,469

12        Royal Bank of Canada        Third Quarter 2015

Results excluding specified items

Our results were impacted by the following specified items:

• For the three months ended April 30, 2015 and the nine months ended July 31, 2015, a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of foreign CTA that was previously booked in OCE, which was recorded in Corporate Support in the second quarter of 2015;

• For the three months ended July 31, 2014, a loss of $40 million (before- and after-tax) related to the closing of the sale of RBC Jamaica in our Personal & Commercial Banking segment; and

• For the nine months ended July 31, 2014, a total loss of $100 million (before- and after-tax) related to the sale of RBC Jamaica, comprised of the loss of $40 million (before- and after-tax) noted above recorded in the third quarter of 2014 and a loss of $60 million (before- and after-tax) recorded in the first quarter of 2014, as well as a provision of $40 million ($32 million after-tax) related to post-employment benefits and restructuring charges in the Caribbean, both in our Personal & Commercial Banking segment.

The following tables provide calculations of our consolidated and segment results and measures excluding these specified items for the nine months ended July 31, 2015, the three months ended April 30, 2015, and for the three and nine months ended July 31, 2014:

Consolidated

	For the three months ended (1)
	April 30 2015							July 31 2014
			Item excluded							Item excluded
(Millions of Canadian dollars, except per share and percentage amounts)	As reported		Release of CTA			Adjusted		As reported (3)		Loss related to the sale of RBC Jamaica			Adjusted
Continuing operations
Total revenue	$	8,830	$	(108	)	$	8,722	$	8,990	$	–		$	8,990
PCL		282		–			282		283		–			283
PBCAE		493		–			493		1,009		–			1,009
Non-interest expense		4,736		–			4,736		4,602		(40	)		4,562
Net income before income taxes	$	3,319	$	(108	)	$	3,211	$	3,096	$	40		$	3,136
Income taxes		817		–			817		718		–			718
Net income	$	2,502	$	(108	)	$	2,394	$	2,378	$	40		$	2,418
Net income available to common shareholders	$	2,426	$	(108	)	$	2,318	$	2,297	$	40		$	2,337
Average number of common shares (thousands)		1,442,078					1,442,078		1,442,312					1,442,312
Basic earnings per share (in dollars)	$	1.68	$	(0.07	)	$	1.61	$	1.59	$	0.03		$	1.62
Average number of diluted common shares (thousands)		1,448,651					1,448,651		1,449,455					1,449,455
Diluted earnings per share (in dollars)	$	1.68	$	(0.07	)	$	1.61	$	1.59	$	0.03		$	1.62
Average common equity	$	51,500				$	51,500	$	46,400				$	46,400
ROE (2)		19.3%					18.5%		19.6%					20.0%
Efficiency ratio		53.6%					54.3%		51.2%					50.7%
Effective tax rate		24.6%					25.4%		23.2%					22.9%

	For the nine months ended (1)
	July 31 2015							July 31 2014
			Item excluded							Item excluded
(Millions of Canadian dollars, except per share and percentage amounts)	As reported		Release of CTA			Adjusted		As reported (3)		Loss related to the sale of RBC Jamaica			Provision for post-employment benefits and restructuring charges			Adjusted
Continuing operations
Total revenue	$	27,302	$	(108	)	$	27,194	$	25,726	$	–		$			$	25,726
PCL		822		–			822		819		–						819
PBCAE		2,671		–			2,671		2,821		–						2,821
Non-interest expense		13,991		–			13,991		13,321		(100	)		(40	)		13,181
Net income before income taxes	$	9,818	$	(108	)	$	9,710	$	8,765	$	100		$	40		$	8,905
Income taxes		2,385		–			2,385		2,094		–			8			2,102
Net income	$	7,433	$	(108	)	$	7,325	$	6,671	$	100		$	32		$	6,803
Net income available to common shareholders	$	7,219	$	(108	)	$	7,111	$	6,425	$	100		$	32		$	6,557
Average number of common shares (thousands)		1,442,579					1,442,579		1,442,615								1,442,615
Basic earnings per share (in dollars)	$	5.00	$	(0.07	)	$	4.93	$	4.45	$	0.07		$	0.02		$	4.54
Average number of diluted common shares (thousands)		1,449,206					1,449,206		1,452,868								1,452,868
Diluted earnings per share (in dollars)	$	4.99	$	(0.07	)	$	4.92	$	4.43	$	0.07		$	0.02		$	4.52
Average common equity	$	51,100				$	51,100	$	45,300							$	45,300
ROE (2)		18.9%					18.6%		19.0%								19.4%
Efficiency ratio		51.2%					51.4%		51.8%								51.2%
Effective tax rate		24.3%					24.6%		23.9%								23.6%

(1) There were no specified items for the three months ended July 31, 2015 or January 31, 2015.

(2) ROE is based on actual balances of average common equity before rounding.

(3) Amounts have been revised from those previously presented.

Royal Bank of Canada        Third Quarter 2015        13

Personal & Commercial Banking
	For the three months ended (1)
	July 31 2014
				Item excluded
(Millions of Canadian dollars, except percentage amounts)	As reported (2)			Loss related to the sale of RBC Jamaica			Adjusted
Total revenue	$	3,462		$	–		$	3,462
PCL		284			–			284
Non-interest expense		1,632			(40	)		1,592
Net income before taxes		1,546			40			1,586
Net income	$	1,138		$	40		$	1,178
Selected balances and other information
Non-interest expense	$	1,632		$	(40	)	$	1,592
Total revenue		3,462			–			3,462
Efficiency ratio		47.1%						46.0%
Revenue growth rate		2.7%						2.7%
Non-interest expense growth rate		2.9%						0.4%
Operating leverage		(0.2%	)					2.3%

	For the nine months ended (1)
	July 31 2014
				Items excluded
(Millions of Canadian dollars, except percentage amounts)	As reported (2)			Loss related to the sale of RBC Jamaica			Provision for post-employment benefits and restructuring charges			Adjusted
Total revenue	$	10,179		$	–		$	–		$	10,179
PCL		789			–			–			789
Non-interest expense		4,877			(100	)		(40	)		4,737
Net income before taxes		4,513			100			40			4,653
Net income	$	3,324		$	100		$	32		$	3,456
Selected balances and other information
Non-interest expense	$	4,877		$	(100	)	$	(40	)	$	4,737
Total revenue		10,179									10,179
Efficiency ratio		47.9%									46.5%
Revenue growth rate		4.8%									4.8%
Non-interest expense growth rate		6.8%									3.7%
Operating leverage		(2.0%	)								1.1%

(1) There were no specified items recorded in Personal & Commercial Banking for the three and nine months ended July 31, 2015.

(2) Amounts have been revised from those previously presented.

14        Royal Bank of Canada        Third Quarter 2015

Personal & Commercial Banking

	As at or for the three months ended						As at or for the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Net interest income	$	2,543	$	2,399	$	2,475	$	7,435	$	7,296
Non-interest income		1,083		1,073		987		3,229		2,883
Total revenue		3,626		3,472		3,462		10,664		10,179
PCL		257		235		284		744		789
Non-interest expense		1,648		1,618		1,632		4,894		4,877
Net income before income taxes		1,721		1,619		1,546		5,026		4,513
Net income	$	1,281	$	1,200	$	1,138	$	3,736	$	3,324
Revenue by business
Canadian Banking	$	3,390	$	3,244	$	3,252	$	9,970	$	9,523
Caribbean & U.S. Banking		236		228		210		694		656
Selected balances and other information
ROE		30.3%		29.7%		29.4%		30.3%		29.2%
NIM (1)		2.72%		2.70%		2.79%		2.71%		2.79%
Efficiency ratio (2)		45.4%		46.6%		47.1%		45.9%		47.9%
Efficiency ratio adjusted (2), (3)		n.a.		n.a.		46.0%		n.a.		46.5%
Operating leverage		3.8%		2.1%		(0.2)%		4.4%		(2.0)%
Operating leverage adjusted (3)		1.2%		n.a.		2.3%		1.5%		1.1%
Effective income tax rate		25.6%		25.9%		26.4%		25.7%		26.3%
Average total earning assets (4)	$	370,700	$	365,100	$	352,500	$	366,200	$	349,200
Average loans and acceptances (4)		369,100		363,800		351,500		364,800		348,500
Average deposits		299,200		294,400		279,100		295,800		276,700
AUA (5)		227,900		226,700		213,600		227,900		213,600
PCL on impaired loans as a % of average net loans and acceptances		0.28%		0.26%		0.32%		0.27%		0.30%
Estimated impact of U.S. dollar and Trinidad & Tobago dollar (TTD) translation on key income statement items (Millions of Canadian dollars, except percentage amounts)					For the three months ended				For the nine months ended
					Q3 2015 vs. Q3 2014		Q3 2015 vs. Q2 2015		Q3 2015 vs. Q3 2014
Increase (decrease):
Total revenue					$	17	$	2	$	50
Non-interest expense						11		1		31
Net income						4		1		13
Percentage change in average US$ equivalent of C$1.00						(15)%		(2)%		(12)%
Percentage change in average TTD equivalent of C$1.00						(16)%		(2)%		(13)%

(1) NIM is calculated as Net interest income divided by Average total earning assets.

(2) Efficiency ratio is calculated as Non-interest expense divided by Total revenue.

(3) Measures have been adjusted by excluding the Q3 2014 loss of $40 million related to the closing of RBC Jamaica, and the Q1 2014 loss of $60 million related to the sale of RBC Jamaica and the provision of $40 million related to post-employment benefits and restructuring charges in the Caribbean. These are non-GAAP measures. For further details, refer to the Key performance and non-GAAP measures section.

(4) Average total earning assets and average loans and acceptances include average securitized residential mortgages and credit card loans for the three months ended July 31, 2015 of $56.6 billion and $8.4 billion, respectively (April 30, 2015 – $56.7 billion and $7.9 billion; July 31, 2014 – $52.0 billion and $8.3 billion).

(5) AUA represents period-end spot balances and includes securitized residential mortgages and credit card loans as at July 31, 2015 of $21.7 billion and $8.4 billion, respectively (April 30, 2015 – $22.5 billion and $7.9 billion; July 31, 2014 – $23.1 billion and $8.3 billion).

n.a. not applicable

Q3 2015 vs. Q3 2014

Net income increased $143 million or 13% compared to last year. Excluding the loss last year of $40 million (before- and after-tax) related to the closing of the sale of RBC Jamaica, net income increased $103 million or 9%, primarily due to solid volume growth and strong fee-based revenue growth across most businesses in Canada, and higher earnings in the Caribbean. This was partially offset by higher costs to support business growth and lower spreads.

Total revenue increased $164 million or 5%.

Canadian Banking revenue increased $138 million or 4%, reflecting solid volume growth across most businesses and strong fee-based revenue growth primarily attributable to strong net long-term fund sales and capital appreciation resulting in higher mutual fund distribution fees, and higher cards service and foreign exchange revenue. These factors were partially offset by lower spreads.

Caribbean & U.S. Banking revenue increased $26 million or 12% compared to last year, mainly due to the positive impact of foreign exchange translation. The prior year included revenue from RBC Jamaica.

Net interest margin decreased 7 bps mainly due to the change in the fourth quarter of 2014 in recording of certain loan fees in our business portfolio from Net interest income to Non-interest income, which reduced net interest margin by 3 bps. The lower interest rate environment and competitive pressures also contributed to the decrease.

PCL decreased $27 million and the PCL ratio decreased 4 bps mainly due to lower provisions in our Caribbean portfolios, partially offset by higher write-offs in our credit card portfolio and higher PCL in our personal lending and residential mortgage portfolios in Canada. For further details, refer to the Credit quality performance section.

Non-interest expense increased $16 million or 1%. Excluding the prior year loss related to the closing of the sale of RBC Jamaica noted above, non-interest expense increased $56 million or 4% mainly due to higher costs in support of business growth and an increase due to the impact of foreign exchange translation. These factors were partially offset by continuing benefits from our efficiency management activities. The prior year included expenses from RBC Jamaica.

Q3 2015 vs. Q2 2015

Net income increased $81 million or 7% from last quarter, reflecting the positive impact of seasonal factors, including additional days in the quarter, and strong fee-based revenue growth and solid volume growth across most businesses in Canada. These factors were

Royal Bank of Canada        Third Quarter 2015        15

partially offset by higher costs to support business growth and higher PCL. The prior quarter included the loss related to the previously announced sale of RBC Suriname.

Net interest margin increased 2 bps. Net interest margin in the prior quarter was unfavourably impacted by a cumulative accounting adjustment.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income increased $412 million or 12%. Excluding the loss last year of $100 million (before- and after-tax) related to the sale of RBC Jamaica and a provision of $40 million ($32 million after-tax) related to post-employment benefits and restructuring charges in the Caribbean, net income increased $280 million or 8%, largely due to solid volume growth and strong fee-based revenue growth across most businesses in Canada, as well as higher earnings in the Caribbean, partly offset by higher costs to support business growth and lower spreads.

Total revenue increased $485 million or 5% reflecting solid volume growth across most businesses in Canada and strong fee-based revenue growth primarily attributable to strong net long-term fund sales and capital appreciation resulting in higher mutual funds distribution fees, and higher cards service revenue. The positive impact of foreign exchange translation and the implementation of full-service pricing in the Caribbean also contributed to the increase. These factors were partly offset by lower spreads. The prior year included revenue from RBC Jamaica.

PCL decreased $45 million, with the PCL ratio decreasing 3 bps, largely due to lower provisions in our commercial lending and personal loans portfolios, partially offset by higher write-offs in our credit card portfolio.

Non-interest expense increased $17 million. Excluding the prior year specified items noted above, non-interest expense was up $157 million or 3%, mostly due to higher infrastructure, marketing, and staff costs to support business growth. Higher non-interest expense due to the impact of foreign exchange translation and the loss related to the previously announced sale of RBC Suriname as noted above also contributed to the increase. These factors were partially offset by continuing benefits from our efficiency management activities. The prior year included expenses related to RBC Jamaica.

Results excluding the specified items noted above are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Canadian Banking

	As at or for the three months ended						As at or for the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Net interest income	$	2,381	$	2,248	$	2,331	$	6,970	$	6,863
Non-interest income		1,009		996		921		3,000		2,660
Total revenue		3,390		3,244		3,252		9,970		9,523
PCL		238		212		230		684		692
Non-interest expense		1,476		1,426		1,426		4,362		4,208
Net income before income taxes		1,676		1,606		1,596		4,924		4,623
Net income	$	1,239	$	1,191	$	1,185	$	3,650	$	3,432
Revenue by business
Personal Financial Services	$	1,949	$	1,843	$	1,857	$	5,678	$	5,442
Business Financial Services		780		745		771		2,317		2,266
Cards and Payment Solutions		661		656		624		1,975		1,815
Selected balances and other information
ROE		36.5%		37.1%		37.7%		36.8%		37.4%
NIM (1)		2.66%		2.64%		2.73%		2.66%		2.73%
Efficiency ratio (2)		43.5%		44.0%		43.8%		43.8%		44.2%
Operating leverage		0.7%		2.4%		1.7%		1.0%		1.0%
Effective income tax rate		26.1%		25.8%		25.8%		25.9%		25.8%
Average total earning assets (3)	$	354,600	$	349,000	$	339,000	$	350,400	$	336,100
Average loans and acceptances (3)		360,300		354,700		344,000		356,000		340,900
Average deposits		282,000		277,000		264,100		278,700		261,500
AUA (4)		217,700		216,900		204,300		217,700		204,300
PCL on impaired loans as a % of average net loans and acceptances		0.26%		0.25%		0.26%		0.26%		0.27%

(1) NIM is calculated as Net interest income divided by Average total earning assets.

(2) Efficiency ratio is calculated as Non-interest expense divided by Total revenue.

(3) Average total earning assets and average loans and acceptances include average securitized residential mortgages and credit card loans for the three months ended July 31, 2015 of $56.6 billion and $8.4 billion, respectively (April 30, 2015 – $56.7 billion and $7.9 billion; July 31, 2014 – $52.0 billion and $8.3 billion).

(4) AUA represents period-end spot balances and includes securitized residential mortgages and credit card loans as at July 31, 2015 of $21.7 billion and $8.4 billion respectively (April 30, 2015 – $22.5 billion and $7.9 billion; July 31, 2014 – $23.1 billion and $8.3 billion).

Q3 2015 vs. Q3 2014

Net income increased $54 million or 5% compared to last year, reflecting solid volume growth and strong fee-based revenue growth across most businesses, partly offset by lower spreads.

Total revenue increased $138 million or 4% from last year.

Personal Financial Services revenue increased $92 million or 5%, largely due to volume growth in personal deposits and residential mortgages, and higher fee-based revenue primarily attributable to strong net long-term fund sales and capital appreciation resulting in higher mutual fund distribution fees.

Business Financial Services revenue increased $9 million or 1%, as solid volume growth in business deposits and loans was largely offset by lower spreads.

Cards and Payment Solutions revenue increased $37 million or 6%, mainly due to higher loan balances and transaction volumes.

16        Royal Bank of Canada        Third Quarter 2015

Net interest margin decreased 7 bps compared to last year mainly due to the change in the fourth quarter of 2014 in recording of certain loan fees, which reduced net interest margin by 3 bps. The lower interest rate environment and competitive pressures also contributed to the decrease.

PCL increased $8 million mainly due to higher write-offs in our credit card portfolio and higher PCL in our personal lending and residential mortgage portfolios. The PCL ratio remained flat.

Non-interest expense increased $50 million or 4%, due to higher costs to support business growth.

Q3 2015 vs. Q2 2015

Net income increased $48 million or 4% from last quarter, mainly due to the positive impact of seasonal factors, including additional days in the quarter, and strong fee-based revenue growth and solid volume growth across most businesses. These factors were partially offset by higher costs in support of business growth and higher PCL.

Net interest margin increased 2 bps. Net interest margin in the prior quarter was unfavourably impacted by a cumulative accounting adjustment.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income increased $218 million or 6% due to solid volume growth across most businesses and strong fee-based revenue growth, partially offset by higher costs to support business growth and lower spreads.

Total revenue increased $447 million or 5% reflecting solid volume growth across most businesses as well as strong fee-based revenue growth primarily attributable to strong net long-term fund sales and capital appreciation resulting in higher mutual fund distribution fees, and higher cards service revenue.

PCL decreased $8 million, with the PCL ratio decreasing 1 bp, mostly due to lower provisions in our commercial lending and small business portfolios, partially offset by higher write-offs in our credit card portfolio.

Non-interest expense increased $154 million or 4% mainly due to higher infrastructure, marketing, and staff costs to support business growth.

Wealth Management

	As at or for the three months ended						As at or for the nine months ended
(Millions of Canadian dollars, except number of and percentage amounts and as otherwise noted)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Net interest income	$	129	$	122	$	117	$	375	$	346
Non-interest income
Fee-based revenue		1,200		1,166		1,059		3,511		3,073
Transactional and other revenue		379		460		409		1,236		1,255
Total revenue		1,708		1,748		1,585		5,122		4,674
PCL		–		32		–		45		19
Non-interest expense		1,302		1,340		1,191		3,975		3,555
Net income before income taxes		406		376		394		1,102		1,100
Net income	$	285	$	271	$	285	$	786	$	798
Revenue by business
Canadian Wealth Management	$	561	$	564	$	555	$	1,664	$	1,603
U.S. & International Wealth Management		691		729		609		2,085		1,800
U.S. & International Wealth Management (US$ millions)		545		591		564		1,693		1,656
Global Asset Management (1)		456		455		421		1,373		1,271
Selected balances and other information
ROE		18.6%		18.3%		20.3%		17.5%		19.1%
Pre-tax margin (2)		23.8%		21.5%		24.9%		21.5%		23.5%
Number of advisors (3)		4,044		4,074		4,244		4,044		4,244
Average loans and acceptances	$	17,700	$	17,900	$	15,900	$	17,800	$	15,400
Average deposits		40,500		40,600		35,900		40,300		35,600
AUA – total (4)		778,400		747,500		700,600		778,400		700,600
– U.S. & International Wealth Management (4)		488,500		459,400		419,500		488,500		419,500
– U.S. & International Wealth Management (US$ millions) (4)		373,900		381,500		384,400		373,900		384,400
AUM (4)		503,200		481,100		442,100		503,200		442,100
Average AUA		764,700		767,000		694,600		758,200		682,600
Average AUM		496,200		485,700		436,200		482,600		420,600

Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items (Millions of Canadian dollars, except percentage amounts and as otherwise noted)	For the three months ended				For the nine months ended
	Q3 2015 vs. Q3 2014		Q3 2015 vs. Q2 2015		Q3 2015 vs. Q3 2014
Increase (decrease):
Total revenue	$	88	$	19	$	202
Non-interest expense		75		16		175
Net income		8		2		13
Percentage change in average US$ equivalent of C$1.00		(15)%		(2)%		(12)%
Percentage change in average British pound equivalent of C$1.00		(7)%		(4)%		(4)%
Percentage change in average Euro equivalent of C$1.00		5%		(2)%		6%

(1) Effective the first quarter of 2014, BlueBay results are no longer reported on a one-month lag. As a result, the first quarter of 2014 included four months of results from BlueBay.

(2) Pre-tax margin is defined as net income before income taxes divided by Total revenue.

(3) Represents client-facing advisors across all our wealth management businesses.

(4) Represents period-end spot balances.

Royal Bank of Canada        Third Quarter 2015        17

Q3 2015 vs. Q3 2014

Net income of $285 million was flat from a year ago, as higher earnings from growth in average fee-based client assets was offset by lower transaction volumes and the change in fair value of our U.S. share-based compensation plan.

Total revenue increased $123 million or 8%, including the positive impact of foreign exchange translation of $88 million.

Canadian Wealth Management revenue increased $6 million or 1%, mainly due to growth in average fee-based client assets resulting from net sales and capital appreciation, largely offset by lower transaction volumes reflecting uncertain market conditions.

U.S. & International Wealth Management revenue increased $82 million or 13%. In U.S. dollars, revenue decreased $19 million, mainly due to lower transaction volumes reflecting uncertain market conditions, and the change in fair value of our U.S. share-based compensation plan.

Global Asset Management revenue increased $35 million or 8%, mainly due to growth in average fee-based client assets resulting from capital appreciation and net sales.

Non-interest expense increased $111 million or 9%, mainly reflecting an increase due to the impact of foreign exchange translation, higher costs to support business growth in Canadian Wealth Management and Global Asset Management, and additional restructuring costs of $5 million ($4 million after-tax) related to our U.S. & International Wealth Management business.

Q3 2015 vs. Q2 2015

Net income of $285 million increased $14 million or 5% from the prior quarter mainly due to lower PCL, lower restructuring costs related to our U.S. & International Wealth Management business and higher earnings from growth in average fee-based client assets. These factors were partially offset by lower transaction volumes.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income of $786 million decreased $12 million, mainly due to restructuring costs of $76 million ($53 million after-tax), lower transaction volumes, the change in fair value of our U.S. share-based compensation plan and higher PCL. These factors were mostly offset by higher earnings from growth in average fee-based client assets.

Total revenue increased $448 million or 10%, mainly due to growth in average fee-based client assets resulting from capital appreciation and net sales, and the positive impact of foreign exchange translation. These factors were partially offset by lower transaction volumes.

PCL increased $26 million mainly due to provisions on a couple of accounts related to our U.S. & International Wealth Management business.

Non-interest expense increased $420 million or 12%, mainly reflecting an increase due to the impact of foreign exchange translation, higher staff costs and infrastructure investments to support business growth in Canadian Wealth Management and Global Asset Management, the restructuring costs as noted above, and higher variable compensation driven by higher revenue.

Insurance

	As at or for the three months ended								As at or for the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015			April 30 2015			July 31 2014		July 31 2015		July 31 2014
Non-interest income
Net earned premiums	$	843		$	829		$	923	$	2,574	$	2,802
Investment income (1)		52			(164	)		381		788		779
Fee income		126			141			79		357		209
Total revenue		1,021			806			1,383		3,719		3,790
Insurance policyholder benefits and claims (1)		610			446			925		2,504		2,537
Insurance policyholder acquisition expense		46			47			84		167		284
Non-interest expense		153			156			143		455		430
Net income before income taxes		212			157			231		593		539
Net income	$	173		$	123		$	214	$	481	$	525
Revenue by business
Canadian Insurance	$	603		$	337		$	871	$	2,430	$	2,265
International Insurance		418			469			512		1,289		1,525
Selected balances and other information
ROE		43.6%			33.0%			53.2%		41.1%		45.5%
Premiums and deposits (2)	$	1,252		$	1,217		$	1,310	$	3,707	$	3,846
Fair value changes on investments backing policyholder liabilities (1)		(37	)		(300	)		255		438		396

(1) Investment income can experience volatility arising from fluctuation of fair value through profit or loss (FVTPL) assets. The investments which support actuarial liabilities are predominantly fixed income assets designated as at FVTPL. Consequently, changes in the fair values of these assets are recorded in investment income in the consolidated statement 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) Premiums and deposits include premiums on risk-based insurance and annuity products, and individual and group segregated fund deposits, consistent with insurance industry practices.

Q3 2015 vs. Q3 2014

Net income decreased $41 million or 19% from a year ago, mainly due to a change in Canadian tax legislation impacting certain foreign affiliates which became effective November 1, 2014 and higher net claims costs in our life retrocession business. In addition, prior year results were impacted by favourable actuarial adjustments reflecting management actions and assumption changes. These factors were partially offset by higher earnings from a new U.K. annuity contract and a favourable impact of investment-related activities on the Canadian life business.

18        Royal Bank of Canada        Third Quarter 2015

Canadian Insurance revenue decreased $268 million or 31%, mainly due to the negative change in fair value of investments backing our policyholder liabilities resulting from the increase in long-term interest rates, largely offset in PBCAE. This factor was partially offset by business growth in our life, home and auto insurance businesses.

International Insurance revenue decreased $94 million or 18%, mainly due to a reduction of revenue related to our retrocession contracts, largely offset in PBCAE. This factor was partially offset by business growth including revenue from the new U.K. annuity contract.

PBCAE decreased $353 million or 35%, mainly due to the negative change in fair value of our investments backing our policyholder liabilities, and a reduction of PBCAE related to our retrocession contracts, which were largely offset in revenue. These factors were partially offset by business growth, including a new U.K. annuity contract, and higher claims costs as noted above.

Non-interest expense increased $10 million or 7%, primarily due to higher costs to support business growth.

Q3 2015 vs. Q2 2015

Net income increased $50 million or 41% from the prior quarter mainly due to lower net claims costs, largely in our life retrocession business, a favourable impact of investment-related activities on the Canadian life business, and higher earnings from a new U.K. annuity contract.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income decreased $44 million or 8%, mainly due to a change in Canadian tax legislation impacting certain foreign affiliates as noted above. In addition, prior year results were impacted by favourable actuarial adjustments as noted above. Higher net claims costs mainly in our International insurance business also contributed to the decrease. These factors were partially offset by higher earnings from new U.K. annuity contracts.

Total revenue decreased $71 million or 2%, mainly due to a reduction of revenue related to our retrocession contracts, largely offset in PBCAE. This factor was partially offset by business growth in International and Canadian Insurance, including higher revenue from new U.K. annuity contracts, and the positive change in fair value of investments backing our policyholder liabilities, largely offset in PBCAE.

PBCAE decreased $150 million or 5%, mainly due to a reduction of PBCAE related to our retrocession contracts, which were largely offset in revenue, and lower claims costs in Canadian Insurance. These factors were partially offset by business growth in International Insurance, including new U.K. annuity contracts, and the positive change in fair value of investments backing our policyholder liabilities, largely offset in revenue. In addition, prior year results were impacted by favourable actuarial adjustments as noted above.

Non-interest expense increased $25 million or 6%, mainly due to higher staff costs to support business growth in Canadian Insurance.

Investor & Treasury Services

	As at or for the three months ended							As at or for the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015		April 30 2015		July 31 2014			July 31 2015		July 31 2014
Net interest income	$	204	$	198	$	182		$	598	$	549
Non-interest income		352		330		298			992		859
Total revenue(1)		556		528		480			1,590		1,408
Non-interest expense		331		312		330			958		965
Net income before income taxes		225		216		150			632		443
Net income	$	167	$	159	$	110		$	468	$	328
Selected balances and other information
ROE		24.5%		24.2%		20.1%			24.2%		20.0%
Average deposits	$	144,200	$	136,200	$	110,200		$	136,200	$	111,900
Client deposits		52,000		48,800		42,700			48,300		41,900
Wholesale funding deposits		92,200		87,400		67,500			87,900		70,000
AUA (2)		3,990,900		3,846,900		3,546,100			3,990,900		3,546,100
Average AUA		3,924,300		3,798,500		3,481,977			3,796,100		3,429,000
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items (Millions of Canadian dollars, except percentage amounts)					For the three months ended					For the nine months ended
					Q3 2015 vs. Q3 2014			Q3 2015 vs. Q2 2015		Q3 2015 vs. Q3 2014
Increase (decrease):
Total revenue					$	(2	)	$	5	$	(17	)
Non-interest expense						(5	)		4		(19	)
Net income						2			0		0
Percentage change in average US$ equivalent of C$1.00						(15)%			(2)%		(12)%
Percentage change in average British pound equivalent of C$1.00						(7)%			(4)%		(4)%
Percentage change in average Euro equivalent of C$1.00						5%			(2)%		6%

(1) Effective the third quarter of 2015, we have aligned the reporting period of Investor Services, which resulted in an additional month of earnings being included in the third quarter of 2015. The net impact of the additional month was recorded in revenue.

(2) Represents period-end spot balances.

Royal Bank of Canada        Third Quarter 2015        19

Q3 2015 vs. Q3 2014

Net income increased $57 million or 52%, primarily due to an additional month of earnings in Investor Services of $42 million ($28 million after-tax), higher earnings from our foreign exchange businesses, and increased custodial fees. These factors were partially offset by lower funding and liquidity earnings.

Total revenue increased $76 million or 16%, mainly related to the impact of an additional month in Investor Services as noted above, higher revenue from our foreign exchange businesses reflecting increased client activity mainly due to market volatility, and higher custodial fees. These factors were partially offset by lower funding and liquidity revenue as the prior year benefitted from tighter credit spreads.

Non-interest expense increased $1 million, largely reflecting continuing benefits from our efficiency management activities.

Q3 2015 vs. Q2 2015

Net income increased $8 million or 5%, primarily related to an additional month of earnings in Investor Services as noted above, partially offset by lower funding and liquidity earnings driven by widening credit spreads.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income increased $140 million or 43%, driven by higher earnings from our foreign exchange businesses, an additional month of earnings in Investor Services as noted above, and increased custodial fees.

Total revenue increased $182 million or 13%, mainly due to higher revenue from our foreign exchange businesses reflecting increased client activity primarily due to market volatility, an additional month in Investor Services as noted above, and higher custodial fees.

Non-interest expense decreased $7 million, mainly due to continuing benefits from our efficiency management activities.

Capital Markets

(Millions of Canadian dollars, except percentage amounts)	As at or for the three months ended								As at or for the nine months ended
	July 31 2015			April 30 2015			July 31 2014		July 31 2015			July 31 2014
Net interest income (1)	$	1,016		$	940		$	999	$	2,872		$	2,608
Non-interest income		1,030			1,307			1,186		3,454			3,259
Total revenue(1)		2,046			2,247			2,185		6,326			5,867
PCL		15			15			1		35			12
Non-interest expense		1,187			1,280			1,269		3,624			3,445
Net income before income taxes		844			952			915		2,667			2,410
Net income	$	545		$	625		$	641	$	1,764		$	1,653
Revenue by business(2)
Corporate and Investment Banking	$	1,006		$	958		$	965	$	2,850		$	2,591
Global Markets		1,070			1,323			1,184		3,542			3,175
Other		(30	)		(34	)		36		(66	)		101
Selected balances and other information
ROE		12.9%			14.9%			16.9%		14.1%			15.3%
Average total assets	$	465,200		$	465,400		$	391,500	$	469,600		$	384,000
Average trading securities		116,100			118,800			103,200		117,700			103,300
Average loans and acceptances		81,300			77,700			66,300		77,600			63,600
Average deposits		62,700			60,000			49,000		59,300			46,300
PCL on impaired loans as a % of average net loans and acceptances		0.07%			0.08%			0.01%		0.06%			0.02%
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items (Millions of Canadian dollars, except percentage amounts and as otherwise noted)							For the three months ended					For the nine months ended
							Q3 2015 vs. Q3 2014		Q3 2015 vs. Q2 2015			Q3 2015 vs. Q3 2014
Increase (decrease):
Total revenue							$	174	$	24		$	434
Non-interest expense								114		21			252
Net income								37		1			112
Percentage change in average US$ equivalent of C$1.00								(15)%		(2)%			(12)%
Percentage change in average British pound equivalent of C$1.00								(7)%		(4)%			(4)%
Percentage change in average Euro equivalent of C$1.00								5%		(2)%			6%

(1) The taxable equivalent basis (teb) adjustment for the three months ended July 31, 2015 was $133 million (April 30, 2015 – $115 million, July 31, 2014 – $174 million) and for the nine months ended July 31, 2015 was $357 million (July 31, 2014 – $391 million). For further discussion, refer to the How we measure and report our business segments section of our 2014 Annual Report.

(2) Effective the first quarter of 2015, we reclassified amounts from Global Markets to Other related to certain proprietary trading strategies which we exited in the fourth quarter of 2014 to comply with the Volcker Rule. Prior period amounts have been revised from those previously presented.

Q3 2015 vs. Q3 2014

Net income decreased $96 million or 15% as compared to very strong results last year, driven by lower trading results due to less favourable market conditions as compared to the strong levels last year. A higher effective tax rate reflecting increased earnings in higher tax jurisdictions also contributed to the decrease, partially offset by lower variable compensation, the positive impact of foreign exchange translation, and growth in our corporate and investment banking businesses.

Total revenue decreased $139 million or 6%, which included the positive impact of foreign exchange translation.

20        Royal Bank of Canada        Third Quarter 2015

Corporate and Investment Banking revenue increased $41 million or 4%, which included the positive impact of foreign exchange translation, largely due to strong growth in M&A activity in the U.S. and Europe, and higher lending and debt origination activity mainly in the U.S. These factors were partially offset by lower equity origination in the U.S. and Canada as compared to robust levels last year.

Global Markets revenue decreased $114 million or 10%, primarily due to lower trading revenue as noted above. Lower equity origination in Canada and the U.S. as compared to robust levels last year also contributed to the decrease. These factors were partially offset by the positive impact of foreign exchange translation, and higher debt origination activity in the U.S. and Canada.

Other revenue decreased $66 million, mainly due to lower revenue in certain legacy portfolios.

PCL of $15 million increased $14 million, primarily due to provisions taken on a single account. For further details, refer to the Credit quality performance section.

Non-interest expense decreased $82 million or 6%, largely due to lower variable compensation, and lower litigation provisions and related legal costs, partially offset by an increase due to the impact of foreign exchange translation.

Q3 2015 vs. Q2 2015

Net income decreased $80 million or 13%, primarily due to lower trading results reflecting less favourable market conditions, and lower origination activity as compared to the strong levels last quarter. These factors were partially offset by lower variable compensation and higher M&A activity in Europe and the U.S.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income increased $111 million or 7%, driven by strong business growth, reflecting our continued focus on origination and lending, higher trading results, and the positive impact of foreign exchange translation. These factors were partially offset by higher costs to support business growth, and a higher effective tax rate reflecting increased earnings in higher tax jurisdictions, largely in the U.S.

Total revenue increased $459 million or 8%, mainly due to the positive impact of foreign exchange translation, strong growth in debt origination reflecting increased issuance activity in the U.S., growth in lending largely in the U.S. and Europe, and higher M&A activity. Higher trading revenue reflecting increased client activity and more favourable market conditions in the first half of the year also contributed to the increase. These factors were partially offset by lower equity origination activity across all regions as compared to the strong levels in the prior year.

PCL of $35 million increased $23 million from the prior year, primarily due to provisions taken on a few accounts.

Non-interest expense increased $179 million or 5%, largely reflecting an increase due to the impact of foreign exchange translation, and higher costs to support business growth. These factors were partially offset by lower litigation provisions and related legal costs, and lower variable compensation.

Corporate Support

	As at or for the three months ended									As at or for the nine months ended
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Net interest income (loss) (1)	$	(109	)	$	(102	)	$	(126	)	$	(309	)	$	(243	)
Non-interest income (loss)		(20	)		131			21			190			51
Total revenue(1)		(129	)		29			(105	)		(119	)		(192	)
PCL		(2	)		–			(2	)		(1	)		(1	)
Non-interest expense		14			30			37			84			49
Net income (loss) before income taxes (1)		(141	)		(1	)		(140	)		(202	)		(240	)
Income taxes (recoveries) (1)		(165	)		(125	)		(130	)		(400	)		(283	)
Net income(2)	$	24		$	124		$	(10	)	$	198		$	43

(1) Teb adjusted.

(2) Net income reflects income attributable to both shareholders and Non-Controlling Interests (NCI). Net income attributable to NCI for the three months ended July 31, 2015 was $24 million (April 30, 2015 – $22 million; July 31, 2014 – $23 million), and for the nine months ended July 31, 2015 was $69 million (July 31, 2014 – $69 million).

Due to the nature of activities and consolidation adjustments reported in this segment, we believe that a comparative period analysis is not relevant. The following identifies material items affecting the reported results in each period.

Net interest income (loss) and income taxes (recoveries) in each period in Corporate Support include the deduction of the teb adjustments related to the gross-up of income from Canadian taxable corporate dividends recorded in Capital Markets. The amount deducted from net interest income (loss) was offset by an equivalent increase in income taxes (recoveries). The teb amount for the three months ended July 31, 2015 was $133 million as compared to $115 million in the prior quarter and $174 million last year. For the nine months ended July 31, 2015, the amount was $357 million as compared to $391 million in the prior year. For further discussion, refer to the How we measure and report our business segments section of our 2014 Annual Report.

In addition to the teb impacts noted above, the following identifies the other material items affecting the reported results in each period.

Q3 2015

Net income was $24 million, largely reflecting asset/liability management activities.

Q2 2015

Net income was $124 million, largely reflecting a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of CTA that was previously booked in OCE, and asset/liability management activities.

Royal Bank of Canada        Third Quarter 2015        21

Q3 2014

Net loss was $10 million largely reflecting net unfavourable tax adjustments, mostly offset by asset/liability management activities.

Q3 2015 (Nine months ended)

Net income was $198 million, largely reflecting the gain of $108 million through the release of CTA as noted above, a gain on sale of a real estate asset in Q1 2015 and asset/liability management activities.

Q3 2014 (Nine months ended)

Net income was $43 million, largely reflecting asset/liability management activities and gains on private equity investments, partially offset by net unfavourable tax adjustments.

Results by geographic segment (1)

For geographic reporting, our segments are grouped into the following: Canada, U.S., and Other International. Transactions are primarily recorded in the location that best reflects the risk due to negative changes in economic conditions and prospects for growth due to positive economic changes. The following table summarizes our financial results by geographic region.

	For the three months ended																		For the nine months ended
	July 31 2015						April 30 2015 (2)						July 31 2014 (2)						July 31 2015						July 31 2014 (2)
(Millions of Canadian dollars)	Canada		U.S.		Other International		Canada		U.S.		Other International		Canada		U.S.		Other International		Canada		U.S.		Other International		Canada		U.S.		Other International
Total revenue	$	5,546	$	1,679	$	1,603	$	5,304	$	1,848	$	1,678	$	5,624	$	1,641	$	1,725	$	17,261	$	5,186	$	4,855	$	16,089	$	4,654	$	4,983
Net income	$	1,868	$	254	$	353	$	1,866	$	321	$	315	$	1,764	$	295	$	319	$	5,545	$	851	$	1,037	$	4,952	$	837	$	882

(1) For further details, refer to Note 30 of our audited 2014 Annual Consolidated Financial Statements.

(2) Amounts have been revised from those previously presented.

Q3 2015 vs. Q3 2014

Net income in Canada was up $104 million or 6% from the prior year, mainly due to solid volume growth and strong fee-based revenue growth across most businesses in Canadian Banking, and higher earnings in Investor & Treasury Services. These factors were partially offset by lower trading results due to less favourable market conditions and lower equity origination activity as compared to the strong levels last year, higher costs in support of business growth, and lower spreads.

U.S. net income decreased $41 million or 14% compared to last year, primarily due to lower trading results as a result of less favourable market conditions and lower equity origination activity as compared to strong levels last year, partially offset by strong growth in M&A activity and the positive impact of foreign exchange translation.

Other International net income was up $34 million or 11% from the prior year. The positive impact of foreign exchange translation, lower provisions in our Caribbean portfolios, and higher M&A activity, were largely offset by lower trading results. In addition, our prior year results were unfavourably impacted by the loss of $40 million (before- and after-tax) related to the closing of the sale of RBC Jamaica.

Q3 2015 vs. Q2 2015

Net income in Canada was up $2 million from the prior quarter, due to the positive impact of seasonal factors, including additional days in the quarter, and strong fee-based revenue growth and solid volume growth across most businesses in Canadian Banking. In addition, our prior quarter results were favourably impacted by a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of CTA that was previously booked in OCE, which was recorded in Corporate Support.

U.S. net income decreased $67 million or 21% from the prior quarter, primarily due to lower trading results as noted above, partially offset by higher M&A activity.

Other International net income was up $38 million or 12% from the prior quarter, mainly due to higher earnings from a new U.K. annuity contract. In addition, our results in the prior quarter were unfavourably impacted by the loss related to the announced sale of RBC Suriname.

Q3 2015 vs. Q3 2014 (Nine months ended)

Net income in Canada was up $593 million or 12% from the prior year, mainly due solid volume growth and strong fee-based revenue growth across most businesses in Canadian Banking, and higher earnings in our Investor & Treasury Services businesses. The gain recorded in Corporate Support through the release of CTA as noted above also contributed to the increase. These factors were partially offset by higher costs in support of business growth and lower spreads.

U.S. net income was up $14 million or 2% from the prior year including the positive impact of foreign exchange translation, primarily due to strong business growth in Capital Markets, reflecting our continued focus on origination and lending, and higher trading results. This factor was partially offset by higher restructuring costs related to our U.S. & International Wealth Management business, a higher effective tax rate in Capital Markets, and higher PCL in Wealth Management.

Other International net income was up $155 million or 18% as the prior year was unfavourably impacted by a loss of $100 million (before- and after-tax) related to the sale of RBC Jamaica, a provision of $40 million ($32 million after-tax) related to post-employment benefits and restructuring charges in the Caribbean, and lower PCL.

22        Royal Bank of Canada        Third Quarter 2015

Quarterly results and trend analysis

Our quarterly results are impacted by a number of trends and recurring factors, which include seasonality of certain businesses, general economic and market conditions, and fluctuations in the Canadian dollar relative to other currencies. The following table summarizes our results for the last eight quarters (the period):

Quarterly results (1)

	2015						2014									2013
(Millions of Canadian dollars, except per share and percentage amounts)	Q3		Q2		Q1		Q4		Q3			Q2		Q1		Q4
Net interest income	$	3,783	$	3,557	$	3,631	$	3,560	$	3,647		$	3,449	$	3,460	$	3,351
Non-interest income		5,045		5,273		6,013		4,822		5,343			4,827		5,000		4,568
Total revenue	$	8,828	$	8,830	$	9,644	$	8,382	$	8,990		$	8,276	$	8,460	$	7,919
PCL		270		282		270		345		283			244		292		334
PBCAE		656		493		1,522		752		1,009			830		982		878
Non-interest expense		4,635		4,736		4,620		4,340		4,602			4,332		4,387		4,151
Net income before income taxes	$	3,267	$	3,319	$	3,232	$	2,945	$	3,096		$	2,870	$	2,799	$	2,556
Income taxes		792		817		776		612		718			669		707		455
Net income	$	2,475	$	2,502	$	2,456	$	2,333	$	2,378		$	2,201	$	2,092	$	2,101
EPS – basic	$	1.66	$	1.68	$	1.66	$	1.57	$	1.59		$	1.47	$	1.39	$	1.40
– diluted		1.66		1.68		1.65		1.57		1.59			1.47		1.38		1.39
Segments – net income (loss)
Personal & Commercial Banking	$	1,281	$	1,200	$	1,255	$	1,151	$	1,138		$	1,115	$	1,071	$	1,070
Wealth Management		285		271		230		285		285			278		235		202
Insurance		173		123		185		256		214			154		157		107
Investor & Treasury Services		167		159		142		113		110			112		106		91
Capital Markets		545		625		594		402		641			507		505		469
Corporate Support		24		124		50		126		(10	)		35		18		162
Net income	$	2,475	$	2,502	$	2,456	$	2,333	$	2,378		$	2,201	$	2,092	$	2,101
Effective income tax rate		24.2%		24.6%		24.0%		20.8%		23.2%			23.3%		25.3%		17.8%
Period average US$ equivalent of C$1.00	$	0.789	$	0.806	$	0.839	$	0.900	$	0.925		$	0.907	$	0.926	$	0.960

(1) Fluctuations in the Canadian dollar relative to other foreign currencies have affected our consolidated results over the period.

Specified items affecting our consolidated results

• In the second quarter of 2015, our results included a gain of $108 million (before- and after-tax) from the wind-up of a U.S.-based funding subsidiary that resulted in the release of CTA that was previously booked in OCE.

• In the third quarter of 2014, our results included a loss of $40 million (before- and after-tax) which includes foreign currency translation related to the closing of the sale of RBC Jamaica.

• In the first quarter of 2014, our results included a loss of $60 million (before- and after-tax) related to the announced sale of RBC Jamaica, as well as a provision of $40 million ($32 million after-tax) related to post-employment benefits and restructuring charges in the Caribbean.

• In the fourth quarter of 2013, our results included a charge of $160 million ($118 million after-tax) as a result of tax legislation in Canada, which affects policyholders’ tax treatment of certain individual life insurance policies, as well as net favourable income tax adjustments, including a $124 million income tax adjustment related to prior years.

Trend analysis

The Canadian and U.S. economies have generally improved over the period, reflecting solid consumer spending, stronger labour markets and firm housing market activity. Since the third quarter of 2014, growth in Canada has moderated with growth contracting in the first two calendar quarters of 2015 due to the sharp decline in global oil prices, and weak export activity. Global equity indices experienced volatility throughout the period resulting from geopolitical uncertainty, the possibility of Euro area recession, and the lower global oil prices. For further details, refer to the Economic and market review and outlook section.

Earnings have generally trended upwards over the period, driven by solid volume growth and higher fee-based revenue growth in our Canadian Banking businesses and higher earnings from growth in average-fee based client assets reflecting capital appreciation and strong net sales in Wealth Management. Capital Markets results have generally trended upwards since the fourth quarter of 2013, and were negatively impacted in the fourth quarter of 2014 by the exit of certain proprietary trading strategies to comply with the Volcker Rule and the implementation of valuation adjustments related to funding costs on uncollateralized OTC derivatives. Results in our Insurance segment have fluctuated over the period, as the fourth quarter of 2013 was impacted by an unfavourable charge resulting from tax legislation in Canada as noted above, while results in 2015 were impacted by an unfavourable change in Canadian tax legislation impacting certain foreign affiliates, which became effective November 1, 2014. Investor & Treasury Services results have generally trended upwards over the period largely due to benefits from our efficiency management activities, and strong growth in our foreign exchange businesses reflecting favourable market conditions since the first quarter of 2015. In addition, Investor & Treasury Services results in the third quarter of 2015 benefited from an additional month of earnings as a result of aligning reporting periods.

Revenue generally trended upwards over the period, mostly due to solid volume growth and higher fee-based revenue growth in our Canadian Banking businesses, and growth in average fee-based client assets in Wealth Management. Trading revenue has generally trended upwards since the fourth quarter of 2013, and was unfavourably impacted in the fourth quarter of 2014 by the exit

Royal Bank of Canada        Third Quarter 2015        23

of certain proprietary trading strategies and the implementation of valuation adjustments related to funding costs on uncollateralized OTC derivatives. Canadian Banking revenue in the fourth quarter of 2014 was favourably impacted by net cumulative accounting adjustments. Net interest income has trended upwards over the period, largely due to solid volume growth across our Canadian Banking businesses, and higher trading related net interest income and solid lending activity in Capital Markets. Starting in the first

quarter of 2014, the positive impact of foreign exchange translation due to a generally weaker Canadian dollar has also contributed to the increase in revenue. Insurance revenue is primarily impacted by changes in the fair value of investments backing our policyholder liabilities, which is largely offset in PBCAE. Investor & Treasury Services revenue in the third quarter of 2015 included an additional month as noted above.

Asset quality remained strong over the period despite increased lending and has resulted in PCL remaining relatively stable over the period. The fourth quarter of 2014 included an additional provision in Personal & Commercial Banking related to our impaired residential mortgages portfolio in the Caribbean. Wealth Management had provisions in the last quarter of 2013 and the first quarter of 2014 related to a few accounts, as well as provisions in the first two quarters of 2015 on a couple of accounts related to our U.S. & International Wealth Management business. PCL in Capital Markets has fluctuated over the period.

PBCAE has fluctuated quarterly as it includes the changes to the fair value of investments backing our policyholder liabilities, which is largely offset in revenue. PBCAE has also been impacted by volume growth in our Insurance businesses as well as actuarial liability adjustments and generally lower claims costs. PBCAE in the fourth quarter of 2013 included a charge as a result of tax legislation in Canada as noted above.

While we continue to focus on efficiency management activities, non-interest expense has generally trended upwards over the period, mostly to support business growth. Restructuring costs related to our U.S. and International Wealth Management businesses have impacted non-interest expense since the fourth quarter of 2014. The first quarter of 2014 was impacted by the loss related to the sale of RBC Jamaica and a provision in the Caribbean, while the third quarter of 2014 was impacted by a loss including foreign currency translation related to the closing of the sale of RBC Jamaica. The second quarter of 2015 was impacted by the loss related to the previously announced sale of RBC Suriname. Since the first quarter of 2014, non-interest expense has increased due to the impact of foreign exchange translation generally reflecting the weaker Canadian dollar.

Our effective income tax rate has fluctuated over the period, mostly due to varying levels of income being reported in jurisdictions with different tax rates, as well as fluctuating levels of income from tax-advantaged sources such as Canadian taxable corporate dividends. Our effective income tax rate was impacted in the second quarter of 2015 by a gain through the release of CTA as noted above, and has generally been impacted over the period by higher earnings before income taxes, increased earnings in higher tax jurisdictions, and by net favourable tax adjustments.

Financial condition

Condensed balance sheets (1)

	As at
(Millions of Canadian dollars)	July 31 2015			April 30 2015			October 31 2014			July 31 2014
Assets
Cash and due from banks	$	19,976		$	18,393		$	17,421		$	16,297
Interest-bearing deposits with banks		10,731			4,402			8,399			5,383
Securities		235,515			222,643			199,148			199,114
Assets purchased under reverse repurchase agreements and securities borrowed		172,659			163,368			135,580			135,205
Loans
Retail		343,463			336,064			334,269			329,999
Wholesale		121,214			114,283			102,954			102,348
Allowance for loan losses		(2,078	)		(2,037	)		(1,994	)		(1,926	)
Segregated fund net assets		821			780			675			645
Other – Derivatives		112,459			107,004			87,402			72,823
– Other		70,413			67,272			56,696			53,982
Total assets	$	1,085,173		$	1,032,172		$	940,550		$	913,870
Liabilities
Deposits	$	694,236		$	651,551		$	614,100		$	601,691
Segregated fund liabilities		821			780			675			645
Other – Derivatives		116,083			112,219			88,982			75,096
– Other		204,761			201,580			174,431			176,131
Subordinated debentures		7,374			7,795			7,859			6,810
Total liabilities		1,023,275			973,925			886,047			860,373
Equity attributable to shareholders		60,103			56,431			52,690			51,714
Non-controlling interests		1,795			1,816			1,813			1,783
Total equity		61,898			58,247			54,503			53,497
Total liabilities and equity	$	1,085,173		$	1,032,172		$	940,550		$	913,870

(1) Foreign currency-denominated assets and liabilities are translated to Canadian dollars.

Our consolidated balance sheet was impacted by foreign exchange translation which increased our total assets and our total liabilities and equity by approximately $94 billion compared to last year, $95 billion compared to October 31, 2014, and $35 billion compared to last quarter due to the weaker Canadian dollar.

24        Royal Bank of Canada        Third Quarter 2015

Q3 2015 vs. Q3 2014

Total assets were up $171 billion or 19% from last year, including an increase due to the impact of foreign exchange translation as noted above.

Interest-bearing deposits with banks increased $5 billion, largely reflecting higher deposits with central banks.

Securities were up $36 billion or 18% compared to last year, primarily reflecting an increase due to the impact of foreign exchange translation, and higher government and corporate debt securities largely as a result of our management of liquidity and funding risk and increased client activity.

Assets purchased under reverse repurchase agreements (reverse repos) and securities borrowed increased $37 billion or 28%, mainly attributable to an increase due to the impact of foreign exchange translation and increased client and business activities.

Loans were up $32 billion or 7%, predominantly due to solid volume growth in residential mortgages, growth in wholesale loans, and an increase due to the impact of foreign exchange translation.

Derivative assets were up $40 billion or 54%, mainly attributable to an increase due to the impact of foreign exchange translation and increased fair values on interest rate swaps, partially offset by increased financial netting.

Other assets were up $16 billion or 30%, largely reflecting higher cash collateral requirements and an increase due to the impact of foreign exchange translation.

Total liabilities were up $163 billion or 19% from last year, including an increase due to the impact of foreign exchange translation as noted above.

Deposits increased $93 billion or 15%, mainly reflecting an increase due to the impact of foreign exchange translation, the issuance of fixed term notes to satisfy our funding requirements, and growth in business and retail deposits.

Derivative liabilities were up $41 billion or 55%, mainly attributable to an increase due to the impact of foreign exchange translation and increased fair values on interest rate swaps, partially offset by increased financial netting.

Other liabilities increased $29 billion or 16%, mainly reflecting an increase due to the impact of foreign exchange translation and higher obligations related to repurchase agreements. An increase in cash collateral requirements also contributed to the increase.

Total equity increased $8 billion or 16%, largely reflecting an increase due to the impact of foreign exchange translation and earnings, net of dividends.

Q3 2015 vs. Q2 2015

Total assets increased $53 billion or 5% from the prior quarter, primarily attributable to an increase due to the impact of foreign exchange translation, solid volume growth in residential mortgages, higher deposits with central banks, and an increase in derivative assets due to higher fair values on cross-currency interest rate swaps and lower financial netting.

Total liabilities increased $49 billion or 5% from the prior quarter, primarily attributable to an increase due to the impact of foreign exchange translation, the issuance of fixed-term notes to satisfy our funding requirements, and growth in business deposits.

Q3 2015 vs. Q4 2014

Total assets increased $145 billion or 15%, mainly attributable to an increase due to the impact of foreign exchange translation and an increase in reverse repos largely due to higher client activity. Higher government debt securities, growth in wholesale loans and residential mortgages, and an increase in cash collateral requirements also contributed to the increase. These factors were partially offset by a decrease in derivative assets due to lower fair values on interest rate swaps and increased financial netting.

Total liabilities increased $137 billion or 15%, mainly reflecting an increase due to the impact of foreign exchange translation, higher deposits largely reflecting our issuance of fixed-term notes to satisfy funding requirements and increased client activity, and higher obligations related to repurchase agreements. These factors were partially offset by a decrease in derivative liabilities due to the reasons noted above.

Off-balance sheet arrangements

In the normal course of business, we engage in a variety of financial transactions that, for accounting purposes, are not recorded on our Consolidated Balance Sheets. Off-balance sheet transactions are generally undertaken for risk, capital and funding management purposes which benefit us and our clients. These include transactions with structured entities and may also include the issuance of guarantees. These transactions give rise to, among other risks, varying degrees of market, credit, liquidity and funding risk, which are discussed in the Risk management section. Please refer to pages 43 to 46 of our 2014 Annual Report for a more detailed discussion of these types of arrangements.

We use structured entities to securitize our financial assets as well as assist our clients in securitizing their financial assets. These entities are not operating entities, typically have no employees, and may or may not be recorded on our Consolidated Balance Sheets.

In the normal course of business, we engage in a variety of financial transactions that may qualify for derecognition. We apply the derecognition rules to determine whether we have effectively transferred substantially all the risks and rewards or control associated with the financial assets to a third party. If the transaction meets specific criteria, it may qualify for full or partial derecognition from our Consolidated Balance Sheets.

Securitizations of our financial assets

We periodically securitize our credit card receivables, residential and commercial mortgage loans and bond participation certificates primarily to diversify our funding sources, to enhance our liquidity position and for capital purposes. We also securitize residential and commercial mortgage loans for sales and trading activities.

We securitize our credit card receivables, on a revolving basis, through a consolidated structured entity. We securitize single and multiple-family residential mortgages through the National Housing Act Mortgage-Backed Securities (NHA MBS) program. The majority of our securitization activities are recorded on our Consolidated Balance Sheets as we do not meet the derecognition criteria. During the second quarter, we derecognized $967 million of purchased mortgages where both the NHA MBS and the residual interests in the mortgages were sold to third parties resulting in the transfer of substantially all of the risks and rewards. There were no such

Royal Bank of Canada        Third Quarter 2015        25

transactions in the current quarter or prior year. For additional details of our securitization activities, refer to Note 6 and Note 7 of our audited 2014 Annual Consolidated Financial Statements.

We periodically securitize residential mortgage loans for the Canadian social housing program through the NHA MBS program, which are derecognized from our Consolidated Balance Sheets when sold to third party investors. During the third quarter of 2015, we did not have any securitization transactions of residential mortgage loans for the Canadian social housing program (April 30, 2015 – $63 million; July 31, 2014 – $80 million).

We also periodically securitize commercial mortgages by selling them in collateral pools, which meet certain diversification, leverage and debt coverage criteria, to structured entities, one of which is sponsored by us. Securitized commercial mortgage loans are derecognized from our Consolidated Balance Sheets as we have transferred substantially all of the risk and rewards of ownership of the securitized assets. Our continuing involvement with the transferred assets is limited to servicing the underlying commercial mortgages sold to our sponsored structured entity. As at July 31, 2015, there were $1.3 billion of commercial mortgages outstanding related to these securitization activities (April 30, 2015 – $1.2 billion and July 31, 2014 – $1.2 billion). During the current quarter, we securitized $195 million of commercial mortgages which were sold to our sponsored entity (April 30, 2015 - nil and July 31, 2014 – nil).

Involvement with unconsolidated structured entities

In the normal course of business, we engage in a variety of financial transactions with structured entities to support our customers’ financing and investing needs, including securitization of client financial assets, creation of investment products, and other types of structured financing.

We have the ability to use credit mitigation tools such as third party guarantees, credit default swaps, and collateral to mitigate risks assumed through securitization and re-securitization exposures. The process in place to monitor the credit quality of our securitization and re-securitization exposures involves, among other things, reviewing the performance of the underlying assets. We affirm our ratings each quarter and formally confirm or assign a new rating at least annually. For further details on our activities to manage risks, refer to the Risk management section.

Below is a description of our activities with respect to certain significant unconsolidated structured entities. For a complete discussion of our interests in consolidated and unconsolidated structured entities, refer to Note 7 of our audited 2014 Annual Consolidated Financial Statements.

RBC-administered multi-seller conduits

We administer multi-seller conduits which are used primarily for the securitization of our clients’ financial assets. As at July 31, 2015, our maximum exposure to loss from these conduits was $39 billion (April 30, 2015 – $39 billion; July 31, 2014 – $32 billion), primarily representing backstop liquidity and partial credit enhancement facilities extended to the conduits.

As at July 31, 2015, the notional amount of backstop liquidity facilities we provided was $39 billion (April 30, 2015 – $39 billion; July 31, 2014 – $32 billion) and the partial credit enhancement facilities we provided were $3.7 billion (April 30, 2015 – $3.7 billion; July 31, 2014 – $2.9 billion). The increases in the amount of backstop liquidity and credit enhancement facilities provided to the multi-seller conduits compared to the prior year primarily reflect an increase in the outstanding securitized assets of the multi-seller conduits and fluctuations in exchange rates.

Total loans extended to the multi-seller conduits under the backstop liquidity facilities were $774 million, a decrease of $132 million from the prior quarter and a decrease of $78 million from the prior year due mainly to principal repayments, partially offset by fluctuations in the exchange rates. Total assets of the multi-seller conduits as at July 31, 2015 were $38 billion (April 30, 2015 – $38 billion; July 31, 2014 – $31 billion). The increase from the prior year was primarily due to increases in the Student loans, Auto loans and leases, Transportation finance and Consumer loans asset classes and fluctuations in exchange rates.

As at July 31, 2015, the total asset-backed commercial paper (ABCP) issued by the conduits amounted to $26 billion (April 30, 2015 – $26 billion; July 31, 2014 – $20 billion). The rating agencies that rate the ABCP rated 71% of the total amount issued within the top ratings category (April 30, 2015 – 71%; July 31, 2014 – 72%) and the remaining amount in the second highest ratings category. We sometimes purchase ABCP issued by the multi-seller conduits in our capacity as a placement agent in order to facilitate overall program liquidity. As at July 31, 2015, the fair value of our inventory was $34 million, an increase of $27 million from the prior quarter and an increase of $2 million from the prior year. The fluctuations in inventory held reflect normal trading activity. This inventory is classified as Securities – Trading on our Consolidated Balance Sheets.

Structured finance

We invest in auction rate securities of trusts which fund their long-term investments in student loans by issuing short-term senior and subordinated notes. Our maximum exposure to loss in these auction rate securities trusts as at July 31, 2015 was $0.5 billion (April 30, 2015 – $0.6 billion; July 31, 2014 – $0.9 billion). The decrease in our maximum exposure to loss is primarily related to the sale of auction rate securities, partially offset by exchange rate differences. As at July 31, 2015, approximately 89% of these investments were rated AA or higher based on ratings published by Standard & Poor’s.

We also provide liquidity facilities to certain municipal bond Tender Option Bond (TOB) trusts in which we have an interest but do not consolidate because the residual certificates issued by the TOB trusts are held by third parties. As at July 31, 2015, our maximum exposure to loss from these unconsolidated municipal bond TOB trusts was $0.8 billion (April 30, 2015 – $0.9 billion; July 31, 2014 – $0.7 billion). The decrease in our maximum exposure to loss relative to the prior quarter is primarily related to the decrease in the number of TOB trusts. The increase in our maximum exposure to loss relative to the prior year is primarily related to the additions of new TOB trusts.

During fiscal 2014, we entered the collateralized loan obligation market as a senior warehouse lender and structuring and placement agent. We provide senior warehouse financing to discrete unaffiliated structured entities that are established by third parties to acquire loans and issue term collateralized loan obligations. A portion of the proceeds from the sale of the term collateralized loan obligations certificates is used to fully repay the senior warehouse financing that we provide. As at July 31, 2015, our maximum exposure to loss associated with the outstanding senior warehouse financing facilities was $135 million (April 30, 2015 – $318 million; July 31, 2014 – $305 million). The decreases in our maximum exposure to loss relative to the prior quarter and prior year are related to a decrease in the outstanding drawings on certain financing facilities.

26        Royal Bank of Canada        Third Quarter 2015

Investment funds

We enter into fee-based equity derivative transactions with third parties including mutual funds and other investment funds. These transactions provide their investors with the desired exposure to the reference funds, and we economically hedge our exposure from these derivatives by investing in those third party managed reference funds. Our maximum exposure as at July 31, 2015, which is primarily related to our investments in such reference funds, was $3 billion (April 30, 2015 – $3.2 billion; July 31, 2014 – $3.3 billion). The decreases in our maximum exposure compared to the prior quarter and prior year are primarily due to redemptions of funds, partially offset by exchange rate differences.

We also provide liquidity facilities to certain third party investment funds that issue unsecured variable-rate preferred shares and invest in portfolios of tax exempt bonds. As at July 31, 2015, our maximum exposure to these funds was $744 million (April 30, 2015 – $686 million; July 31, 2014 – $621 million). The increases in our maximum exposure compared to the prior quarter and prior year are primarily due to exchange rate differences.

Third-party securitization vehicles

We hold interests in certain unconsolidated third-party securitization vehicles, which are structured entities. We, as well as other financial institutions, are obligated to provide funding to these entities up to our maximum commitment level and are exposed to credit losses on the underlying assets after various credit enhancements. As at July 31, 2015, our maximum exposure to loss in these entities was $9.8 billion (April 30, 2015 – $4.3 billion; July 31, 2014 – $2.3 billion). The increases in our maximum exposure compared to the prior quarter and prior year reflect additional securitized assets and exchange rate fluctuations.

Guarantees, retail and commercial commitments

We provide guarantees and commitments to our clients that expose us to liquidity and funding risks. Our maximum potential amount of future payments in relation to our commitments and guarantee products as at July 31, 2015 was $308 billion (April 30, 2015 – $282 billion; July 31, 2014 – $246 billion). The increases compared to the prior quarter and prior year relate primarily to the impact of exchange rate fluctuations and business growth in Other commitments and Securities lending indemnifications. Refer to Liquidity and funding risk and Note 26 of our audited 2014 Annual Consolidated Financial Statements for details regarding our guarantees and commitments.

Risk management

Credit risk

Gross credit risk exposure by portfolio and sector

	As at
	July 31 2015												April 30 2015		October 31 2014
	Lending-related and other						Trading-related
	Loans and acceptances
(Millions of Canadian dollars)	Outstanding		Undrawn commitments (1)		Other (2)		Repo-style transactions		Derivatives (3)		Total exposure (4)		Total exposure (4)		Total exposure (4)
Residential mortgages	$	229,088	$	–	$	188	$	–	$	–	$	229,276	$	222,751	$	219,454
Personal		94,819		88,060		146		–		–		183,025		181,353		180,140
Credit cards		15,544		21,730		–		–		–		37,274		38,262		36,613
Small business (5)		4,012		5,246		8		–		–		9,266		9,039		8,707
Retail	$	343,463	$	115,036	$	342	$	–	$	–	$	458,841	$	451,405	$	444,914
Business (5)
Agriculture	$	5,981	$	1,089	$	84	$	–	$	100	$	7,254	$	7,159	$	6,879
Automotive		7,061		4,928		403		–		1,352		13,744		13,054		12,085
Consumer goods		7,020		6,971		575		–		482		15,048		13,922		14,189
Energy
Oil and gas		7,483		13,318		1,374		–		755		22,930		20,713		18,589
Utilities		5,445		12,551		2,781		66		1,571		22,414		20,300		18,118
Non-bank financial services		6,031		12,278		17,812		194,316		32,153		262,590		233,714		212,681
Forest products		1,105		464		106		–		37		1,712		1,777		1,557
Industrial products		4,718		5,662		528		–		634		11,542		10,892		10,321
Mining & metals		1,442		3,894		957		–		306		6,599		5,934		5,240
Real estate & related		33,149		9,559		1,884		62		388		45,042		43,246		40,185
Technology & media		6,533		9,438		596		3		1,589		18,159		15,879		14,995
Transportation & environment		6,043		4,009		2,081		–		1,499		13,632		12,808		11,568
Other		35,283		18,613		14,852		6,237		13,540		88,525		75,825		65,618
Sovereign (5)		5,282		5,863		58,969		31,858		10,371		112,343		103,251		91,762
Bank (5)		1,399		1,034		86,033		109,312		27,397		225,175		209,149		192,824
Wholesale	$	133,975	$	109,671	$	189,035	$	341,854	$	92,174	$	866,709	$	787,623	$	716,611
Total exposure	$	477,438	$	224,707	$	189,377	$	341,854	$	92,174	$	1,325,550	$	1,239,028	$	1,161,525

(1) Undrawn commitments represent an estimate of the contractual amount that may be drawn upon at the time of default of an obligor.

(2) Includes credit equivalent amounts for contingent liabilities such as letters of credit and guarantees, outstanding amounts for available-for-sale (AFS) debt securities, deposits with financial institutions and other assets.

(3) Credit equivalent amount after factoring in master netting agreements.

(4) Gross credit risk exposure is before allowance for loan losses. Exposures under Basel III asset classes of qualifying revolving retail and other retail are largely included within Personal and Credit cards, while home equity lines of credit (HELOC) are included in Personal.

(5) Refer to Note 5 of our audited 2014 Annual Consolidated Financial Statements for the definitions of these terms.

Royal Bank of Canada        Third Quarter 2015        27

Q3 2015 vs. Q2 2015

Total gross credit risk exposure increased $87 billion or 7% from the prior quarter, primarily reflecting an increase due to the impact of foreign exchange translation, growth in loans and acceptances and higher deposits with central banks.

Retail exposure increased $7 billion or 2%, mainly due to volume growth in Canadian residential mortgages and personal loans, partly offset by a decrease in exposure to credit cards.

Wholesale exposure increased $79 billion or 10%, primarily attributable to an increase in Other lending-related exposure related to deposits with central banks and AFS securities, higher loans and acceptances reflecting solid growth across most sectors, and an increase in derivative assets due to higher fair values on cross currency interest rate swaps and lower financial netting. The growth also reflects an increase due to the impact of foreign exchange translation on foreign currency-denominated assets as a result of a weaker Canadian dollar. Wholesale loan utilization is marginally down to 37% from 38% last quarter.

Gross credit risk exposure by geography (1)

	As at
	July 31 2015												April 30 2015		October 31 2014
	Lending-related and other						Trading-related
	Loans and acceptances
(Millions of Canadian dollars)	Outstanding		Undrawn commitments		Other		Repo-style transactions		Derivatives		Total exposure		Total exposure		Total exposure
Canada	$	404,426	$	149,903	$	75,847	$	59,035	$	28,137	$	717,348	$	704,057	$	674,079
U.S.		39,125		55,789		37,420		172,627		14,625		319,586		272,496		258,167
Europe		18,653		15,549		56,772		64,957		44,526		200,457		182,112		163,066
Other International		15,234		3,466		19,338		45,235		4,886		88,159		80,363		66,213
Total Exposure	$	477,438	$	224,707	$	189,377	$	341,854	$	92,174	$	1,325,550	$	1,239,028	$	1,161,525

(1) Geographic profile is based on country of residence of the borrower.

Q3 2015 vs. Q2 2015

Relative to the previous quarter, the U.S. exposure increased 17%, Europe 10%, Other International 10% and Canada 2% largely reflecting an increase due to the impact of foreign exchange translation, volume increases and higher deposits with central banks.

European exposure

	As at
	July 31 2015														April 30 2015		October 31 2014
	Loans and acceptances				Other
(Millions of Canadian dollars)	Outstanding		Undrawn commitments (1)		Securities (2)		Letters of credit and guarantees		Repo-style transactions		Derivatives		Total European exposure		Total European exposure		Total European exposure
Gross exposure to Europe	$	18,653	$	15,549	$	31,592	$	25,180	$	64,957	$	44,526	$	200,457	$	182,112	$	163,066
Less: Collateral held against repo-style transactions		–		–		–		–		63,642		–		63,642		61,179		51,386
Potential future credit exposure add-on amount		–		–		–		–		–		29,961		29,961		26,461		22,403
Undrawn commitments		–		15,549		–		25,180		–		–		40,729		39,449		38,079
Gross drawn exposure to Europe	$	18,653	$	–	$	31,592	$	–	$	1,315	$	14,565	$	66,125	$	55,023	$	51,198
Less: Collateral applied against derivatives		–		–		–		–		–		10,665		10,665		9,640		8,249
Add: Trading securities		–		–		13,895		–		–		–		13,895		14,379		15,471
Net exposure to Europe(3)	$	18,653	$	–	$	45,487	$	–	$	1,315	$	3,900	$	69,355	$	59,762	$	58,420

(1) These amounts are comprised of $14.4 billion to corporate entities, $0.3 billion to financial entities and $0.8 billion to sovereign entities. On a country basis, exposure is comprised of $7.0 billion to the U.K., $2.4 billion to France, $1.9 billion to Germany, $0.4 billion to Ireland, $0.1 billion to Spain, and $0.1 billion to Italy, with the remaining $3.4 billion related to Other Europe. Of the undrawn commitments, over 80% are to investment grade entities.

(2) Securities include $13.9 billion of trading securities (April 30, 2015 – $14.4 billion), $17.6 billion of deposits (April 30, 2015 – $13.6 billion), and $14.0 billion of AFS securities (April 30, 2015 – $10.3 billion).

(3) Excludes $3.1 billion (April 30, 2015 – $3.9 billion) of exposures to supranational agencies.

Our gross credit risk exposure is calculated based on the definitions provided under the Basel III framework whereby risk exposure is calculated before taking into account any collateral and inclusive of an estimate of potential future changes to that credit exposure. On that basis, our total European exposure as at July 31, 2015 was $200 billion. Our gross drawn exposure to Europe was $66 billion, after taking into account collateral held against repo-style transactions of $64 billion, letters of credit and guarantees, and undrawn commitments for loans of $41 billion and potential future credit exposure to derivatives of $30 billion. Our net exposure to Europe was $69 billion, after taking into account $11 billion of collateral, primarily in cash, we hold against derivatives and the addition of trading securities of $14 billion held in our trading book. Our net exposure to Europe also reflected $1.3 billion of mitigation through credit default swaps, which are largely used to hedge single name exposures and market risk.

28        Royal Bank of Canada        Third Quarter 2015

Net European exposure by country (1)

	As at
	July 31 2015										April 30 2015		October 31 2014
(Millions of Canadian dollars)	Loans outstanding		Securities		Repo-style transactions		Derivatives		Total		Total		Total
U.K.	$	11,125	$	12,928	$	947	$	1,235	$	26,235	$	22,824	$	24,033
Germany		1,219		8,319		8		819		10,365		11,049		10,172
France		353		4,891		55		535		5,834		4,404		4,284
Total U.K., Germany, France	$	12,697	$	26,138	$	1,010	$	2,589	$	42,434	$	38,277	$	38,489
Greece	$	–	$	–	$	–	$	–	$	–	$	–	$	–
Ireland		1,142		95		29		73		1,339		1,344		883
Italy		44		39		–		20		103		134		150
Portugal		8		2		–		1		11		17		9
Spain		315		46		–		58		419		490		476
Total Peripheral(2)	$	1,509	$	182	$	29	$	152	$	1,872	$	1,985	$	1,518
Luxembourg	$	681	$	3,805	$	1	$	32	$	4,519	$	2,231	$	1,909
Netherlands		854		3,495		8		715		5,072		4,732		4,260
Norway		430		4,269		–		34		4,733		3,503		3,011
Sweden		353		3,184		95		6		3,638		2,153		2,731
Switzerland		627		2,564		151		98		3,440		3,798		3,557
Other		1,502		1,850		21		274		3,647		3,083		2,945
Total Other Europe	$	4,447	$	19,167	$	276	$	1,159	$	25,049	$	19,500	$	18,413
Total exposure to Europe	$	18,653	$	45,487	$	1,315	$	3,900	$	69,355	$	59,762	$	58,420

(1) Geographic profile is based on country of risk, which reflects our assessment of the geographic risk associated with a given exposure. Typically, this is the residence of the borrower.

(2) Gross credit risk exposure to peripheral Europe is comprised of Greece $nil (April 30, 2015 – $nil), Ireland $7.4 billion (April 30, 2015 – $2.5 billion), Italy $0.3 billion (April 30, 2015 – $0.3 billion), Portugal $nil (April 30, 2015 – $nil), and Spain $1.3 billion (April 30, 2015 – $1.2 billion).

Q3 2015 vs. Q2 2015

Net credit risk exposure to Europe increased $10 billion from last quarter, largely driven by increased exposure in the U.K., Luxembourg, Sweden and France. Our net exposure to peripheral Europe, which includes Greece, Ireland, Italy, Portugal and Spain, remained minimal, with total outstanding exposure decreasing $0.1 billion during the quarter to $1.9 billion.

Our exposure was predominantly investment grade. Our net exposure to larger European countries, including the U.K., Germany and France, was primarily related to our capital markets, wealth management, and investor services businesses, particularly in fixed income, treasury services, derivatives, and corporate and individual lending. These are predominantly client-driven businesses where we transact with a range of European financial institutions, corporations, and individuals. In addition, we engage in primary dealer activities in the U.K., where we participate in auctions of government debt and act as a market maker and provide liquidity to clients. Exposures to other European countries are largely related to securities which include trading securities, deposits, and AFS securities.

Our trading securities are related to both client market-making activities and our funding and liquidity management needs. All of our trading securities are marked-to-market on a daily basis. Deposits are primarily related to deposits with central banks or financial institutions and also included deposits related to our wealth management business in the Channel Islands. AFS securities are largely comprised of Organization for Economic Co-operation and Development government and corporate debt. Our European corporate loan book is managed on a global basis and the underwriting standards for this loan book reflect the same approach to the use of our balance sheet as we have applied in both Canada and the U.S. We had PCL on this portfolio of $0.3 million this quarter. The gross impaired loans ratio of this loan book was 0.3%, up from 0.2% last quarter.

Net European exposure by client type

	As at
	July 31 2015																								April 30 2015		October 31 2014
(Millions of Canadian dollars)	U.K.		Germany		France		Total U.K., Germany, France		Greece		Ireland		Italy		Portugal		Spain		Total Peripheral		Other Europe		Total Europe		Total Europe		Total Europe
Financials	$	6,513	$	6,913	$	711	$	14,137	$	–	$	165	$	65	$	1	$	54	$	285	$	12,553	$	26,975	$	24,524	$	24,641
Sovereign		9,879		1,202		4,533		15,614		–		9				–		77		86		7,653		23,353		17,466		17,527
Corporate		9,843		2,250		590		12,683		–		1,165		38		10		288		1,501		4,843		19,027		17,772		16,252
Total	$	26,235	$	10,365	$	5,834	$	42,434	$	–	$	1,339	$	103	$	11	$	419	$	1,872	$	25,049	$	69,355	$	59,762	$	58,420

Q3 2015 vs. Q2 2015

Our net exposure to Sovereign increased $5.9 billion mainly due to increases in U.K., Other Europe and France. The increase in Financials of $2.5 billion was largely in Other Europe, partly offset by a decrease in Germany. The net exposure to Corporates of $1.3 billion was mainly due to increases in Other Europe and U.K.

Royal Bank of Canada        Third Quarter 2015        29

Residential mortgages and home equity lines of credit (insured vs. uninsured)

Residential mortgages and home equity lines of credit are secured by residential properties. The following table presents a breakdown by geographic region:

	As at July 31, 2015
(Millions of Canadian dollars, except percentage amounts)	Residential mortgages (1)										Home equity lines of credit (3)
	Insured (2)				Uninsured				Total		Total
Region (4)
Canada
Atlantic provinces	$	6,751	56	%	$	5,405	44	%	$	12,156	$	2,057
Quebec		13,342	49			14,058	51			27,400		4,122
Ontario		36,509	40			55,187	60			91,696		16,840
Prairie provinces		27,142	53			23,955	47			51,097		10,009
B.C. and territories		15,765	37			26,895	63			42,660		9,368
Total Canada (5)	$	99,509	44	%	$	125,500	56	%	$	225,009	$	42,396
U.S.		2	–			735	100			737		307
Other International		14	–			3,210	100			3,224		2,984
Total International	$	16	–	%	$	3,945	100	%	$	3,961	$	3,291
Total	$	99,525	43	%	$	129,445	57	%	$	228,970	$	45,687
	As at April 30, 2015
(Millions of Canadian dollars, except percentage amounts)	Residential mortgages (1)										Home equity lines of credit (3)
	Insured (2)				Uninsured				Total		Total
Region (4)
Canada
Atlantic provinces	$	6,572	56	%	$	5,262	44	%	$	11,834	$	2,059
Quebec		13,470	50			13,498	50			26,968		4,168
Ontario		35,785	40			53,160	60			88,945		16,902
Prairie provinces		26,326	53			23,003	47			49,329		10,093
B.C. and territories		15,493	37			26,185	63			41,678		9,541
Total Canada (5)	$	97,646	45	%	$	121,108	55	%	$	218,754	$	42,763
U.S.		4	1			613	99			617		316
Other International		13	–			2,938	100			2,951		2,796
Total International	$	17	–	%	$	3,551	100	%	$	3,568	$	3,112
Total	$	97,663	44	%	$	124,659	56	%	$	222,322	$	45,875

(1) The residential mortgages amounts exclude our third party mortgage-backed securities (MBS) of $119 million (April 30, 2015 – $163 million).

(2) Insured residential mortgages are mortgages whereby our exposure to default is mitigated by insurance through the Canada Mortgage and Housing Corporation (CMHC) or other private mortgage default insurers.

(3) HELOC includes revolving and non-revolving loans.

(4) Refer to the Risk management section of our 2014 Annual Report for the definitions of these regions.

(5) Total consolidated residential mortgages in Canada of $224 billion (April 30, 2015 – $219 billion) is comprised of $201 billion (April 30, 2015 – $196 billion) of residential mortgages and $5 billion (April 30, 2015 – $5 billion) of mortgages with commercial clients of which $3 billion (April 30, 2015 – $3 billion) are insured mortgages, both in Canadian Banking, and $18 billion (April 30, 2015 – $18 billion) of residential mortgages in Capital Markets held for securitization purposes.

Home equity lines of credit are uninsured and reported within the personal loan category. As at July 31, 2015, home equity lines of credit in Canadian Banking were $42 billion (April 30, 2015 – $43 billion). Approximately 98% of these home equity lines of credit (April 30, 2015 – 98%) are secured by a first lien on real estate, and 7% (April 30, 2015 – 8%) of the total homeline clients pay the scheduled interest payment only.

30        Royal Bank of Canada        Third Quarter 2015

Residential mortgages portfolio by amortization period

The following table provides a summary of the percentage of residential mortgages that fall within the remaining amortization periods based upon current customer payment amounts, which incorporate payments larger than the minimum contractual amount and/or higher frequency of payments:

	As at
	July 31 2015									April 30 2015
	Canada			U.S. and Other International			Total			Canada			U.S. and Other International			Total
Amortization period
£ 25 years		74	%		93	%		75	%		73	%		93	%		73	%
> 25 years £ 30 years		23			7			23			23			7			23
> 30 years £ 35 years		3			–			2			4			–			4
> 35 years		–			–			–			–			–			–
Total		100	%		100	%		100	%		100	%		100	%		100	%

Average loan-to-value (LTV) ratio for newly originated and acquired uninsured residential mortgages and homeline products

The following table provides a summary of our average LTV ratio for newly originated and acquired uninsured residential mortgages and homeline products by geographic region:

	For the three months ended												For the nine months ended
	July 31 2015						April 30 2015						July 31 2015
	Uninsured						Uninsured						Uninsured
	Residential mortgages (1)			Homeline products (2)			Residential mortgages (1)			Homeline products (2)			Residential mortgages (1)			Homeline products (2)
Region (3)
Atlantic provinces		73	%		75	%		73	%		75	%		74	%		75	%
Quebec		72			73			71			73			71			73
Ontario		71			70			71			70			71			70
Prairie provinces		73			74			74			74			73			74
B.C. and territories		69			66			68			66			69			66
U.S.		72			n.m.			72			n.m.			72			n.m.
Other International		85			n.m.			85			n.m.			85			n.m.
Average of newly originated and acquired for the year (4), (5)		71	%		70	%		71	%		70	%		71	%		70	%
Total Canadian Banking residential mortgages portfolio		56	%		55	%		56	%		55	%		56	%		55	%

(1) Residential mortgages excludes residential mortgages within the homeline products.

(2) Homeline products are comprised of both residential mortgages and home equity lines of credit.

(3) Refer to the Risk management section of our 2014 Annual Report for the definitions of these regions.

(4) The average LTV ratio for newly originated and acquired uninsured residential mortgages and homeline products is calculated on a weighted basis by mortgage amounts at origination.

(5) For newly originated mortgages and homeline products, LTV is calculated based on the total facility amount for the residential mortgage and homeline product divided by the value of the related residential property.

n.m. not meaningful

While the above table provides the LTV ratios for the current quarter originations, the LTV ratio on our outstanding balances of the entire Canadian Banking uninsured residential mortgages, including homeline products, is 55% as at July 31, 2015 (April 30, 2015 – 56%). This calculation is weighted by mortgage balances and adjusted for property values based on the Teranet – National Bank National Composite House Price Index.

We employ a risk-based approach to property valuation. Property valuation methods include automated valuation models (AVM) and appraisals. An AVM is a tool that estimates the value of a property by reference to market data including sales of comparable properties and price trends specific to the Metropolitan Statistical Area in which the property being valued is located. Using a risk-based approach, we also employ appraisals which can include drive-by or full on-site appraisals.

We continue to actively manage our entire mortgage portfolio and perform stress testing, based on a combination of increasing unemployment, rising interest rates, and a downturn in real estate markets. Our stress test results indicate the vast majority of our residential mortgage and homeline clients have sufficient capacity to continue making payments in the event of a shock to one of the above noted parameters.

Royal Bank of Canada        Third Quarter 2015        31

Credit quality performance

Provision for (recovery of) credit loss

	For the three months ended									For the nine months ended
(Millions of Canadian dollars, except percentage amounts)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Personal & Commercial Banking	$	257		$	235		$	284		$	744		$	789
Wealth Management		–			32			–			45			19
Capital Markets		15			15			1			35			12
Corporate Support and Other (1)		(2	)		–			(2	)		(2	)		(1	)
Total PCL	$	270		$	282		$	283		$	822		$	819
Canada (2)
Residential mortgages	$	6		$	5		$	4		$	19		$	17
Personal		98			97			96			291			299
Credit cards		92			94			88			278			260
Small business		7			9			8			25			33
Retail		203			205			196			613			609
Wholesale		42			11			30			81			88
PCL on impaired loans		245			216			226			694			697
U.S. (2)
Retail	$	–		$	1		$	1		$	1		$	1
Wholesale		4			10			4			21			7
PCL on impaired loans		4			11			5			22			8
Other International (2)
Retail	$	9		$	10		$	21		$	23		$	60
Wholesale		12			45			31			83			54
PCL on impaired loans		21			55			52			106			114
Total PCL	$	270		$	282		$	283		$	822		$	819
PCL ratio (3)
Total PCL ratio		0.23	%		0.25	%		0.26	%		0.24	%		0.26	%
Personal & Commercial Banking		0.28			0.26			0.32			0.27			0.30
Canadian Banking		0.26			0.25			0.26			0.26			0.27
Caribbean Banking		0.99			1.06			3.07			0.99			1.85
Wealth Management		0.01			0.73			(0.02	)		0.34			0.16
Capital Markets		0.07			0.08			0.01			0.06			0.02

(1) PCL in Corporate Support and Other is primarily comprised of PCL for legacy portfolios and PCL for loans not yet identified as impaired. For further information, refer to the How we measure and report our business segments section.

(2) Geographic information is based on residence of borrower.

(3) PCL on impaired loans as a % of average net loans and acceptances.

Q3 2015 vs. Q3 2014

Total PCL decreased $13 million, or 5%, from a year ago. The PCL ratio of 23 bps decreased 3 bps.

PCL in Personal & Commercial Banking decreased $27 million or 10%, and the PCL ratio of 28 bps decreased 4 bps, mainly due to lower provisions in our Caribbean portfolios. This factor was partially offset by higher write-offs in our Canadian credit cards portfolio and higher PCL in our Canadian personal lending and residential mortgage portfolios.

PCL in Capital Markets increased $14 million, mainly due to provisions taken on a single account.

Q3 2015 vs. Q2 2015

Total PCL decreased $12 million, or 4%, from last quarter. The PCL ratio of 23 bps decreased 2 bps.

PCL in Personal & Commercial Banking increased $22 million or 9%, and the PCL ratio of 28 bps increased 2 bps, mainly due to a reversal of a single account in our Canadian commercial lending portfolio last quarter. Our current quarter included lower provisions in our Caribbean portfolios.

PCL in Wealth Management decreased $32 million as the prior quarter included a provision taken on a single account related to our U.S. & International Wealth Management business.

PCL in Capital Markets was flat as compared to the prior quarter.

Q3 2015 vs. Q3 2014 (Nine months ended)

Total PCL increased $3 million from the prior year. PCL ratio of 24 bps, decreased 2 bps.

PCL in Personal & Commercial Banking decreased $45 million or 6%, and the PCL ratio of 27 bps decreased 3 bps, mainly due to lower provisions in our Caribbean portfolios, and in our Canadian commercial lending and small business portfolios. These factors were partially offset by higher write-offs in our credit cards portfolio.

PCL in Wealth Management increased $26 million, mainly due to provisions on a couple of accounts primarily related to our U.S. & International Wealth Management business.

PCL in Capital Markets increased $23 million, mainly due to provisions taken on a few accounts.

32        Royal Bank of Canada        Third Quarter 2015

Gross impaired loans (GIL)

	As at
(Millions of Canadian dollars, except percentage amounts)	July 31 2015			April 30 2015			July 31 2014
Personal & Commercial Banking	$	1,919		$	1,901		$	1,929
Wealth Management		130			91			17
Capital Markets		328			151			50
Investor & Treasury Services		2			2			2
Corporate Support and Other		–			–			1
Total GIL	$	2,379		$	2,145		$	1,999
Canada (1)
Retail	$	640		$	675		$	696
Wholesale		589			490			480
GIL		1,229			1,165			1,176
U.S. (1)
Retail	$	10		$	10		$	13
Wholesale		199			99			18
GIL		209			109			31
Other International (1)
Retail	$	382		$	360		$	327
Wholesale		559			511			465
GIL		941			871			792
Total GIL	$	2,379		$	2,145		$	1,999
Impaired loans, beginning balance	$	2,145		$	2,133		$	1,975
Classified as impaired during the period (new impaired) (2)		498			438			330
Net repayments (2)		(18	)		(44	)		(19	)
Amounts written off		(326	)		(323	)		(299	)
Other (2), (3)		80			(59	)		12
Impaired loans, balance at end of period	$	2,379		$	2,145		$	1,999
GIL ratio (4)
Total GIL ratio		0.50	%		0.46	%		0.45	%
Personal & Commercial Banking		0.52			0.52			0.55
Canadian Banking		0.31			0.32			0.33
Caribbean Banking		9.93			9.23			11.01
Wealth Management		0.73			0.51			0.10
Capital Markets		0.40			0.19			0.08

(1) Geographic information is based on residence of borrower.

(2) Certain GIL movements for Canadian Banking retail and wholesale portfolios are generally allocated to New Impaired, as Return to performing status, Net repayments, Sold, and Exchange and other movements amounts are not reasonably determinable. Certain GIL movements for Caribbean Banking retail and wholesale portfolios are generally allocated to Exchange and other movements, as Return to performing status, Net repayments, and Sold amounts are not reasonably determinable.

(3) Includes Return to performing status during the year, Recoveries of loans and advances previously written off, Sold, and Exchange and other movements.

(4) GIL as a % of loans and acceptances.

Q3 2015 vs. Q3 2014

Total GIL increased $380 million or 19% from a year ago. The GIL ratio of 50 bps increased 5 bps.

GIL in Personal & Commercial Banking decreased $10 million, and the GIL ratio of 52 bps decreased 3 bps, mainly due to lower impaired loans in our residential mortgages and personal loans portfolios, partially offset by an increase due to the impact of foreign exchange translation on our Caribbean portfolios.

GIL in Wealth Management increased $113 million, mainly due to higher impaired loans in the U.S. & International Wealth Management business.

GIL in Capital Markets increased $278 million, primarily due to higher impaired loans in the oil and gas, utilities and consumer goods sectors.

Q3 2015 vs. Q2 2015

Total GIL increased $234 million from the prior quarter. The GIL ratio of 50 bps increased 4 bps.

GIL in Personal & Commercial Banking increased $18 million, mainly due to higher impaired loans in our Canadian commercial lending portfolio and an increase due to the impact of foreign exchange translation on our Caribbean portfolios, partially offset by lower impaired loans in our Canadian residential mortgages and personal lending portfolios. The GIL ratio of 52 bps was flat as compared to the prior quarter.

GIL in Wealth Management increased $39 million or 43%, mainly due to higher impaired loans on a single account related to our U.S. & International Wealth Management business.

GIL in Capital Markets increased $177 million, due to a few accounts primarily in the oil and gas sector.

Royal Bank of Canada        Third Quarter 2015        33

Allowance for credit losses (ACL)

	As at
(Millions of Canadian dollars)	July 31 2015		April 30 2015		July 31 2014
Allowance for impaired loans
Personal & Commercial Banking	$	595	$	584	$	537
Wealth Management		49		45		10
Capital Markets		55		37		17
Investor & Treasury Services		2		2		2
Corporate Support and Other		1		–		1
Total allowance for impaired loans		702		668		567
Canada (1)
Retail	$	142	$	147	$	150
Wholesale		148		139		156
Allowance for impaired loans		290		286		306
U.S. (1)
Retail	$	1	$	2	$	1
Wholesale		36		27		16
Allowance for impaired loans		37		29		17
Other International (1)
Retail	$	183	$	168	$	113
Wholesale		192		185		131
Allowance for impaired loans		375		353		244
Total allowance for impaired loans		702		668		567
Allowance for loans not yet identified as impaired		1,467		1,460		1,450
Total ACL	$	2,169	$	2,128	$	2,017

(1) Geographic information is based on residence of borrower.

Q3 2015 vs. Q3 2014

Total ACL increased $152 million or 8% from a year ago, mainly related to higher ACL in Caribbean Banking reflecting an increase due to the impact of foreign exchange translation, and higher ACL in Wealth Management and Capital Markets consistent with PCL recorded since last year net of write-offs. These factors were partially offset by lower ACL in Canadian Banking.

Q3 2015 vs. Q2 2015

Total ACL increased $41 million or 2% from last quarter, mainly related to higher ACL in Capital Markets consistent with PCL recorded in the current quarter on a single account and higher ACL in Caribbean Banking reflecting an increase due to the impact of foreign exchange translation.

Market risk

Market risk is defined to be the impact of market prices upon our financial condition. This includes potential gains or losses due to changes in market determined variables such as interest rates, credit spreads, equity prices, commodity prices, foreign exchange rates and implied volatilities.

The measures of financial condition impacted by market risk, and ways in which market risk manifests itself, are as follows:

1. Positions whose revaluation gains and losses are reported in Revenue, which includes:

a) Changes in the fair value of instruments classified or designated as at fair value through profit and loss (FVTPL),

b) Impairment on AFS securities, and

c) Hedge ineffectiveness.

2. CET1 capital, which includes:

a) All of the above, plus

b) Changes in the fair value of AFS securities where revaluation gains and losses are reported as other comprehensive income,

c) Changes in the Canadian dollar value of investments in foreign subsidiaries, net of hedges, due to foreign exchange translation, and

d) Remeasurements of employee benefit plans.

3. CET1 ratio, which includes:

a) All of the above, plus

b) Changes in risk-weighted assets (RWA) resulting from changes in traded market risk factors, and

c) Changes in the Canadian dollar value of RWA due to foreign exchange translation.

4. The economic value of the Bank, which includes:

a) Points 1 and 2 above, plus

b) Changes in the value of other non-trading positions whose value is a function of market risk factors.

34        Royal Bank of Canada        Third Quarter 2015

Market risk controls – FVTPL positions

As an element of the Enterprise Risk Appetite Framework, the Board of Directors approves the overall market risk constraints for RBC. Group Risk Management (GRM) creates and manages the control structure for FVTPL positions that ensures that business is conducted consistent with Board requirements. The Market and Trading Credit Risk function within GRM is responsible for creating and managing the controls and governance procedures that ensure that risk taken is consistent with risk appetite constraints set by the Board. These controls include limits on probabilistic measures of potential loss such as Value-at-Risk and Stressed Value-at-Risk as defined below:

Value-at-Risk (VaR) – is a statistical measure of potential loss for a financial portfolio computed at a given level of confidence and over a defined holding period. We measure VaR at the 99th percentile confidence level for price movements over a one day holding period using historic simulation of the last two years of equally weighted historic market data. These calculations are updated daily with current risk positions with the exception of Credit Valuation Adjustments (CVA) and certain other positions which are updated weekly.

Stressed Value-at-Risk (SVaR) – is calculated in an identical manner as VaR with the exception that it is computed using a fixed historical one year period of extreme volatility and its inverse rather than the most recent two year history. The stress period used is the interval from September 2008 through August 2009. Stressed VaR is calculated weekly for all portfolios.

These measures are computed on all positions that are FVTPL for financial reporting purposes, with the exception of those in a designated hedging relationship and those in our insurance businesses.

Market risk measures – FVTPL positions

VaR and SVaR

The following table presents our Market risk VaR and Market risk SVaR figures.

	July 31, 2015												April 30, 2015						July 31, 2014
	As at Jul. 31			For the three months ended									As at Apr. 30			For the three months ended			As at Jul. 31			For the three months ended
(Millions of Canadian dollars)				Average			High			Low						Average						Average
Equity	$	13		$	9		$	17		$	6		$	9		$	11		$	9		$	10
Foreign exchange		5			4			7			3			4			4			1			2
Commodities		4			3			6			3			3			4			2			2
Interest rate (1)		29			29			34			23			26			29			19			22
Credit specific (1)		8			8			8			8			8			8			8			8
Diversification (2)		(26	)		(22	)		(28	)		(16	)		(21	)		(22	)		(16	)		(18	)
Market risk VaR	$	33		$	31		$	37		$	26		$	29		$	34		$	23		$	26
Market risk SVaR	$	122		$	91		$	122		$	73		$	86		$	105		$	76		$	87

	July 31, 2015												July 31, 2014
	As at Jul. 31			For the nine months ended									As at Jul. 31			For the nine months ended
(Millions of Canadian dollars)				Average			High			Low						Average
Equity	$	13		$	10		$	20		$	6		$	9		$	10
Foreign exchange		5			4			7			3			1			2
Commodities		4			4			6			3			2			3
Interest rate (1)		29			28			34			23			19			29
Credit specific (1)		8			8			9			7			8			9
Diversification (2)		(26	)		(21	)		(34	)		(15	)		(16	)		(21	)
Market risk VaR	$	33		$	33		$	40		$	26		$	23		$	32
Market risk SVaR	$	122		$	101		$	157		$	73		$	76		$	97

(1) General credit spread risk is measured under interest rate VaR while credit specific risk captures issuer-specific credit spread volatility.

(2) Market risk VaR is less than the sum of the individual risk factor VaR results due to portfolio diversification.

Q3 2015 vs. Q3 2014

Average market risk VaR of $31 million was up $5 million compared to the prior year mainly reflecting an increase due to the impact of foreign exchange translation and higher exposure to our credit risk due to the implementation of valuation adjustments related to funding costs on uncollateralized OTC derivatives (FVA) at the end of the fourth quarter of 2014.

Average SVaR of $91 million was up $4 million compared to the prior year, largely due to the implementation of FVA as noted above and an increase due to the impact of foreign exchange translation. SVaR of $122 million as at July 31, 2015 was the highest level observed during the quarter, which was primarily driven by higher equity risk.

Q3 2015 vs. Q2 2015

Average market risk VaR was down $3 million compared to the prior quarter, mainly due to the roll forward of the historical time period used to calculate VaR, which no longer included the market volatility from the summer of 2013 when the Federal Reserve Board signalled the end of its quantitative easing program.

Royal Bank of Canada        Third Quarter 2015        35

Average SVaR was down $14 million over the prior quarter, mainly driven by lower equity risk through the first half of the third quarter. SVaR of $122 million as at July 31, 2015 was the highest level observed during the quarter, which was mainly driven by higher equity risk at the end of the quarter, and was consistent with levels observed during the second quarter of 2015.

Q3 2015 vs. Q3 2014 (Nine months ended)

Average market risk VaR of $33 million increased $1 million compared to the prior year, mainly reflecting an increase due to the impact of foreign exchange translation and the implementation of FVA as noted above.

Average SVaR of $101 million increased by $4 million compared to the prior year due to the impact of foreign exchange translation and the implementation of FVA as noted above.

The following chart graphically displays a bar chart of our daily trading profit and loss and a line chart of our daily Market risk VaR. There were no daily net trading losses during the quarter, as was also the case in the second quarter of 2015.

Market risk measures for other FVTPL positions – Assets and liabilities of RBC Insurance

We offer a range of insurance products to clients and hold investments to meet the future obligations to policyholders. The investments which support actuarial liabilities are predominantly fixed income assets designated as at FVTPL. Consequently, changes in the 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. As at July 31, 2015, we had liabilities in respect to insurance obligations of $9.4 billion and trading securities of $7.5 billion in support of the liabilities.

Market risk controls – Structural Interest Rate Risk (SIRR) positions⁽¹⁾

The asset/liability mismatch of positions not marked-to-market is referred to as SIRR and is subject to a separate set of limits and controls. The Board of Directors approves the overall risk appetite for SIRR, and the Asset Liability Committee (ALCO) along with GRM provide oversight for this risk through risk policies, limits, and operating standards. In addition, interest rate risk reports are reviewed regularly by GRM, ALCO, the Group Risk Committee, the Risk Committee of the Board and the Board of Directors.

Structural Interest Rate Risk measurement

SIRR measures include the impact of interest rate changes to both one year’s net interest income and the instantaneous impact to economic value of equity. These measures are reported on a weekly basis and are subject to limits and controls set by ALCO and GRM.

We further supplement our assessment by measuring interest rate risk for a range of dynamic and static market scenarios. Dynamic scenarios simulate our interest income in response to various combinations of business and market factors. Business factors include assumptions about future pricing strategies and volume and mix of new business, whereas market factors include assumed changes in interest rate levels and changes in the shape of the yield curve. Static scenarios supplement dynamic scenarios and are employed for assessing the risks to the value of equity and net interest income.

As part of our monitoring process, the effectiveness of our interest rate risk mitigation activity is assessed on value and earnings bases, and model assumptions are validated against actual client behavior.

(1) SIRR positions include impact of derivatives in hedge accounting relationships and AFS securities used for interest rate risk management.

36        Royal Bank of Canada        Third Quarter 2015

Market risk measures – Structural Interest Rate Positions

The following table provides the potential before-tax impact of an immediate and sustained 100 bps increase or decrease in interest rates on net interest income and economic value of equity of our non-trading portfolio, assuming that no further hedging is undertaken. These measures are based upon assumptions made by senior management and validated by empirical research. All interest rate risk measures are based upon interest rate exposures at a specific time and continuously change as a result of business activities and our risk management actions. During the third quarter of 2015, our interest rate risk exposure was within our target level.

	July 31 2015																		April 30 2015						July 31 2014
	Economic value of equity risk									Net interest income risk (2)
(Millions of Canadian dollars)	Canadian dollar impact			U.S. dollar impact (1)			Total			Canadian dollar impact			U.S. dollar impact (1)			Total			Economic value of equity risk			Net interest income risk (2)			Economic value of equity risk			Net interest income risk (2)
Before-tax impact of:
100bps increase in rates	$	(884	)	$	(9	)	$	(893	)	$	326		$	11		$	337		$	(877	)	$	357		$	(827	)	$	394
100bps decrease in rates		566			–			566			(313	)		(6	)		(319	)		622			(353	)		685			(321	)

(1) Represents the impact on the non-trading portfolios held in our U.S. banking operations.

(2) Represents the 12-month Net interest income exposure to an instantaneous and sustained shift in interest rates.

Market risk measures for other material non-trading portfolios

AFS securities

We held $60 billion of securities classified as AFS as at July 31, 2015, which is up from $50 billion in the prior quarter. We hold debt securities designated as AFS primarily as investments and to manage liquidity and interest rate risk in our non-trading banking activity. Certain legacy debt portfolios are also classified as AFS. As at July 31, 2015, our portfolio of AFS securities exposes us to interest rate risk of a pre-tax loss of $8.6 million as measured by the change in the value of the securities for a one basis point parallel increase in yields. The portfolio also exposes us to credit spread risk of a pre-tax loss of $18.6 million, as measured by the change in value for a one basis point widening of credit spreads. Changes in the value of these securities are reported in other comprehensive income. The value of the AFS securities included in our Structural Interest Rate Risk measure as at July 31, 2015 was $50.2 billion, up from $46.9 billion as at April 30, 2015. Our AFS securities also include equity exposures of $1.8 billion as at July 31, 2015, up from $1.7 billion in the prior quarter.

Derivatives related to non-trading activity

We use derivatives to hedge market risk exposures unrelated to our trading activity. In aggregate, derivative assets not related to trading activity of $7.7 billion as at July 31, 2015 were up from $5.7 billion last quarter, and derivative liabilities of $4.5 billion as at July 31, 2015 were up from $3.6 billion in last quarter.

Non-trading derivatives in hedge accounting relationships

The derivative assets and liabilities described above included derivative assets in a designated hedge accounting relationship of $2.7 billion as at July 31, 2015, up from $2.6 billion in the last quarter, and derivative liabilities of $2.4 billion as at July 31, 2015, up from $1.7 billion in the last quarter. These derivative assets and liabilities are included in our Structural Interest Rate Risk measure. We use interest rate swaps to manage our AFS securities and structural interest rate risk, as described above. To the extent these swaps are considered effective hedges, changes in their fair value are recognized in other comprehensive income. The interest rate risk for the designated cash flow hedges, measured as the change in the fair value of the derivatives for a one basis point parallel increase in yields, was $5.8 million as of July 31, 2015.

We also use interest rate swaps to hedge changes in the fair value of certain fixed-rate instruments. Changes in fair value of the interest rate swaps and the hedged instruments that are related to interest rate movements are reflected in income.

We also use foreign exchange derivatives to manage our exposure to equity investments in subsidiaries that are denominated in foreign currencies, particularly the U.S. dollar and British pound. Changes in the fair value of these hedges and the cumulative translation adjustment related to our structural foreign exchange risk are reported in other comprehensive income.

Other non-trading derivatives

We use derivatives including interest rate swaps and foreign exchange derivatives that are not in designated hedge accounting relationships to manage other non-trading exposures. These derivatives have been designated as fair value through profit and loss with changes in the fair value of these derivatives reflected in income. Derivative assets of $5 billion as at July 31, 2015 on these trades were up from $3.1 billion last quarter, and derivative liabilities of $2.1 billion as at July 31, 2015 were up from $1.9 billion last quarter.

Non-trading foreign exchange rate risk

Foreign exchange rate risk is the potential adverse impact on earnings and economic value due to changes in foreign currency rates. Our revenue, expenses and income denominated in currencies other than the Canadian dollar are subject to fluctuations as a result of changes in the value of the average Canadian dollar relative to the average value of those currencies. Our most significant exposure is to the U.S. dollar, due to our level of operations in the U.S. and other activities conducted in U.S. dollars. Other significant exposures are to the British pound and the Euro, due to our activities conducted internationally in these currencies. A strengthening or weakening of the Canadian dollar compared to the U.S. dollar, British pound and the Euro could reduce or increase, as applicable, the translated value of our foreign currency denominated revenue, expenses and earnings and could have a significant effect on the results of our operations. We are also exposed to foreign exchange rate risk arising from our investments in foreign operations. For

Royal Bank of Canada        Third Quarter 2015        37

un-hedged equity investments, when the Canadian dollar appreciates against other currencies, the unrealized translation losses on net foreign investments decreases our shareholders’ equity through the other components of equity and decreases the translated value of the RWA of the foreign currency-denominated asset. The reverse is true when the Canadian dollar depreciates against other currencies. Consequently, we consider these impacts in selecting an appropriate level of our investments in foreign operations to be hedged.

Our overall trading and non-trading market risk objectives, policies and methodologies have not changed significantly from 2014.

Linkage of market risk to selected balance sheet items

The following table provides the linkages between selected balance sheet items with positions included in our trading market risk and non-trading market risk disclosures, which illustrates how we manage market risk for our assets and liabilities through different risk measures.

	As at July 31, 2015
				Market risk measure
(Millions of Canadian dollars)	Balance sheet amount			Traded risk (1)		Non-traded risk (2)			Non-traded risk primary risk sensitivity
Assets subject to market risk
Cash and due from banks (3)	$	19,976		$	12,697	$	7,279			Interest rate
Interest-bearing deposits with banks (4)		10,731			5,103		5,628			Interest rate
Securities
Trading (5)		172,370			164,483		7,887			Interest rate, credit spread
Available-for-sale (6)		63,145			–		63,145			Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed (7)		172,659			172,469		190			Interest rate
Loans
Retail (8)		343,463			15,828		327,635			Interest rate
Wholesale (9)		121,214			144		121,070			Interest rate
Allowance for loan losses		(2,078	)		–		(2,078	)		Interest rate
Segregated fund net assets (10)		821			–		821			Interest rate
Derivatives		112,459			104,783		7,676			Interest rate, foreign exchange
Other assets (11)		64,695			23,313		41,382			Interest rate
Assets not subject to market risk(12)		5,718
Total assets	$	1,085,173		$	498,820	$	580,635
Liabilities subject to market risk
Deposits (13)	$	694,236		$	160,953	$	533,283			Interest rate
Segregated fund liabilities (14)		821			–		821			Interest rate
Other
Obligations related to securities sold short		55,656			55,656		–
Obligations related to assets sold under repurchase agreements and securities loaned (15)		83,236			83,055		181			Interest rate
Derivatives		116,083			111,548		4,535			Interest rate, foreign exchange
Other liabilities (16)		59,156			18,573		40,583			Interest rate
Subordinated debentures		7,374			–		7,374			Interest rate
Liabilities not subject to market risk(17)		6,713
Total liabilities	$	1,023,275		$	429,785	$	586,777
Total equity	$	61,898
Total liabilities and equity	$	1,085,173

(1) Traded risk includes FVTPL positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR, SVaR and Stress testing are used as risk controls for traded risk.

(2) Non-traded risk includes positions used in the management of the SIRR and other non-trading portfolios. Other material non-trading portfolios include positions from our Insurance business and AFS securities not included in SIRR.

The following footnotes provide additional information on the Non-traded risk amounts:

(3) Cash and due from banks includes $6,104 million included in SIRR. An additional $1,175 million is included in other risk controls.

(4) Interest-bearing deposits with banks of $5,628 million are included in SIRR.

(5) Trading securities include $7,887 million in securities used in the management of the SIRR of RBC Insurance, which is not included in our disclosed SIRR measure.

(6) Includes available-for-sale securities of $59,842 million and held-to-maturity securities of $3,303 million. $53,468 million of the total securities are included in SIRR. An additional $1,834 million are held by our insurance businesses that do not contribute to our disclosed SIRR measures. The remaining $7,844 million are captured in other internal non-trading market risk reporting.

(7) Assets purchased under reverse repurchase agreements include $190 million reflected in SIRR.

(8) Retail loans include $327,638 million reflected in SIRR.

(9) Wholesale loans include $119,666 million reflected in SIRR. An additional $1,404 million is used in the management of the SIRR of RBC Insurance.

(10) Investments for the account of segregated fund holders are included in the management of the SIRR of RBC Insurance.

(11) Other assets include $38,732 million reflected in SIRR. An additional $2,650 million is used in the management of the SIRR of RBC Insurance.

(12) Assets not subject to market risk include $5,718 million of physical and other assets.

(13) Deposits include $533,283 million reflected in SIRR.

(14) Insurance and investment contracts for the account of segregated fund holders are included in the management of the SIRR of RBC Insurance.

(15) Obligations related to assets sold under repurchase agreements include $181 million reflected in SIRR.

(16) Other liabilities include $10,269 million used in the management of the SIRR of RBC Insurance, and $30,314 million contribute to our SIRR measure.

(17) Liabilities not subject to market risk include $6,713 million of payroll related and other liabilities.

38        Royal Bank of Canada        Third Quarter 2015

	As at April 30, 2015
				Market risk measure
(Millions of Canadian dollars)	Balance sheet amount			Traded risk (1)		Non-traded risk (2)			Non-traded risk primary risk sensitivity
Assets subject to market risk
Cash and due from banks (3)	$	18,393		$	10,431	$	7,962			Interest rate
Interest-bearing deposits with banks (4)		4,402			784		3,618			Interest rate
Securities
Trading (5)		169,763			162,380		7,383			Interest rate, credit spread
Available-for-sale (6)		52,880			–		52,880			Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed (7)		163,368			163,250		118			Interest rate
Loans
Retail (8)		336,064			15,792		320,272			Interest rate
Wholesale (9)		114,283			272		114,011			Interest rate
Allowance for loan losses		(2,037	)		–		(2,037	)		Interest rate
Segregated fund net assets (10)		780			–		780			Interest rate
Derivatives		107,004			101,296		5,708			Interest rate, foreign exchange
Other assets (11)		60,354			22,029		38,325			Interest rate
Assets not subject to market risk(12)		6,918
Total assets	$	1,032,172		$	476,234	$	549,020
Liabilities subject to market risk
Deposits (13)	$	651,551		$	142,353	$	509,198			Interest rate
Segregated fund liabilities (14)		780			–		780			Interest rate
Other
Obligations related to securities sold short		54,314			54,314		–
Obligations related to assets sold under repurchase agreements and securities loaned (15)		81,207			81,097		110			Interest rate
Derivatives		112,219			108,610		3,609			Interest rate, foreign exchange
Other liabilities (16)		58,206			17,965		40,241			Interest rate
Subordinated debentures		7,795			–		7,795			Interest rate
Liabilities not subject to market risk(17)		7,853
Total liabilities	$	973,925		$	404,339	$	561,733
Total equity	$	58,247
Total liabilities and equity	$	1,032,172

(1) Traded risk includes FVTPL positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR, SVaR and Stress testing are used as risk controls for traded risk.

(2) Non-traded risk includes positions used in the management of the SIRR and other non-trading portfolios. Other material non-trading portfolios include positions from our Insurance business and AFS securities not included in SIRR.

The following footnotes provide additional information on the Non-traded risk amounts:

(3) Cash and due from banks includes $7,134 million included in SIRR. An additional $828 million is included in other risk controls.

(4) Interest-bearing deposits with banks of $3,618 million are included in SIRR.

(5) Trading securities include $7,383 million in securities used in the management of the SIRR of RBC Insurance, which is not included in our disclosed SIRR measure.

(6) Available-for-sale securities of $50,053 million are included in SIRR. An additional $2,827 million are held by our insurance businesses that do not contribute to our disclosed SIRR measures and certain legacy assets.

(7) Assets purchased under reverse repurchase agreements include $118 million reflected in SIRR.

(8) Retail loans include $320,276 million reflected in SIRR.

(9) Wholesale loans include $112,757 million reflected in SIRR. An additional $1,254 million is used in the management of the SIRR of RBC Insurance.

(10) Investments for the account of segregated fund holders are included in the management of the SIRR of RBC Insurance.

(11) Other assets include $35,642 million reflected in SIRR. An additional $2,683 million is used in the management of the SIRR of RBC Insurance.

(12) Assets not subject to market risk include $6,918 million of physical and other assets.

(13) Deposits include $509,198 million reflected in SIRR.

(14) Insurance and investment contracts for the account of segregated fund holders are included in the management of the SIRR of RBC Insurance.

(15) Obligations related to assets sold under repurchase agreements include $110 million reflected in SIRR.

(16) Other liabilities include $10,151 million used in the management of the SIRR of RBC Insurance, and $30,090 million contribute to our SIRR measure.

(17) Liabilities not subject to market risk include $7,853 million of payroll related and other liabilities.

Liquidity and funding risk

There have been no material changes to our Liquidity Management Framework from the framework described in our 2014 Annual Report. We continue to maintain liquidity and funding that is appropriate for the execution of our strategy and, as appropriate, modify our risk policies, practices and processes to align with regulatory developments and to position ourselves for prospective regulatory reforms. Our liquidity and funding risk remains well within our risk appetite.

Regulatory environment

In May 2014, OSFI issued the final version of the “Liquidity Adequacy Requirements (LAR)” guideline. The LAR guideline aims to convert the BCBS liquidity requirements, including the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) liquidity metrics together with monitoring tools, into OSFI guidance and formalize the use of the OSFI-designed Net Cumulative Cash Flow (NCCF) as a supervisory monitoring tool. Consistent with these requirements, we are submitting monthly LCR and NCCF reports and quarterly NSFR results to OSFI as well as Quantitative Impact Study reports on LCR and NSFR for OSFI and BCBS twice a year.

In August 2014, the Government of Canada’s Department of Finance released its bail-in consultation paper “Taxpayer Protection and Bank Recapitalization Regime”. Bail-in regimes are being implemented in a number of jurisdictions following the 2008 financial crisis in an effort to limit taxpayer exposure to potential losses of a failing institution and ensure the institution’s shareholders and creditors remain responsible for bearing such losses. The proposed regime applies only to D-SIBs and focuses on a specific range of

Royal Bank of Canada        Third Quarter 2015        39

liabilities and excludes deposits. In its April 21, 2015 Federal Budget announcement, the Government of Canada confirmed its intention to move forward with the Taxpayer Protection and Bank Recapitalization Regime, although no firm timeline was provided.

In October 2014, the BCBS issued the final standard for the NSFR and banks are required to meet the minimum standard by January 1, 2018. The final “Net stable funding ratio disclosure standards” document was issued by the BCBS in June 2015 and banks will be required to comply with them from the date of the first reporting period after January 1, 2018.

Risk measurement

To monitor and control risk within appropriate tolerances, limits are set on various metrics reflecting a range of time horizons and severity of stress conditions. Risk methodologies and underlying assumptions are periodically reviewed and validated to ensure alignment with our operating environment, expected economic and market conditions, rating agency preferences, regulatory requirements and accepted practices.

Liquidity risk is measured using contractual maturity dates for some assets and liabilities (e.g., wholesale lending and funding) and effective maturity for others. In the effective maturity approach, the liquidity value of assets and liabilities is determined based on observed behavioural or market-based patterns unrelated to contractual maturity. For example, effective maturity may be shorter than contractual maturity if the demonstrated behaviour of the asset suggests that it can be monetized before maturity. Effective maturity for a liability may be longer than contractual maturity if the demonstrated behaviour of the liability suggests that it will be extended or rolled over at maturity. Specific examples include government bonds for assets as they can be quickly and reliably monetized and relationship-based deposits for liabilities where a significant portion is typically assigned core value although contractual maturity dates may be quite short or even legally characterized as available on demand (conversely, demand loans display attributes of longer term assets and are treated accordingly from an effective maturity perspective). Internally derived assumptions consider all relevant material and available data, information and methods of quantifying liquidity risk.

For further details on our methodologies and measurement, refer to the Liquidity and funding risk section of our 2014 Annual Report.

Risk profile

As at July 31, 2015, relationship-based deposits as internally defined, which are the primary source of funding for retail loans and mortgages, were $419 billion or 50% of our total funding (April 30, 2015 – $406 billion or 51%). Funding for highly liquid assets consisted primarily of short-term wholesale funding that reflects the expected monetization period of these assets. This wholesale funding comprised unsecured short-term liabilities of $108 billion and secured (repos and short sales) liabilities of $157 billion, and represented 13% and 19% of total funding as at July 31, 2015, respectively (April 30, 2015 – $91 billion and $150 billion or 11% and 19% of total funding, respectively). Long-term wholesale funding is mostly used to fund less liquid wholesale assets. Additional quantitative information is provided in the Funding section below.

As at July 31, 2015, we held earmarked contingency liquidity assets of $13 billion, of which $8 billion was in U.S. currency and $5 billion was in Canadian currency (April 30, 2015 – $13 billion of which $8 billion was in U.S. currency and $5 billion was in Canadian currency). During the quarter ended July 31, 2015, we held on average $13 billion, of which $8 billion was in U.S. currency and $5 billion was in Canadian currency (April 30, 2015 – $13 billion of which $8 billion was in U.S. currency and $5 billion was in Canadian currency). We also held a derivatives pledging liquid asset buffer of US$4 billion as at July 31, 2015 to mitigate the volatility of our net pledging requirements for derivatives trading (April 30, 2015 – US$4 billion). This buffer averaged US$4 billion during the quarter ended July 31, 2015 (April 30, 2015 – US$4 billion). These assets are included in our high-quality liquid asset (HQLA) pool, which is discussed below.

Liquidity Coverage Ratio (LCR)

The Liquidity Coverage Ratio, is a Basel III metric that measures the sufficiency of HQLA available to meet net short-term financial obligations over a thirty day period in an acute stress scenario. The BCBS regulatory minimum coverage level for LCR is currently 60%, increasing each year to 100% by January 2019. In May 2014, OSFI released the final LAR guideline and adopted a minimum LCR requirement of 100% for Canadian banks, effective January 1, 2015.

In July 2014, OSFI released the final guideline on “Public Disclosure Requirements for Domestic Systemically Important Banks on Liquidity Coverage Ratio (LCR)”, implementing without change the BCBS LCR Disclosure Standards. OSFI required Canadian banks to disclose the LCR beginning in Q2 2015. LCR is disclosed using the standard Basel disclosure template and is calculated using the average of month-end positions during the quarter.

40        Royal Bank of Canada        Third Quarter 2015

Liquidity coverage ratio common disclosure template (1)

	As at
	July 31 2015				April 30 2015(2)
(Millions of Canadian dollars, except percentage amount)
	Total unweighted value (average)		Total weighted value (average)		Total unweighted value (average)		Total weighted value (average)
High-quality liquid assets
Total high-quality liquid assets (HQLA)			$	176,928			$	166,321
Cash outflows
Retail deposits and deposits from small business customers, of which: (3)	$	175,522	$	13,368	$	167,940	$	12,644
Stable deposits (4)		59,784		1,794		59,301		1,780
Less stable deposits		115,738		11,574		108,639		10,864
Unsecured wholesale funding, of which:		212,854		94,770		208,522		92,455
Operational deposits (all counterparties) and deposits (5) in networks of cooperative banks		93,469		22,417		90,446		21,643
Non-operational deposits		105,075		58,043		101,514		54,250
Unsecured debt		14,310		14,310		16,562		16,562
Secured wholesale funding				26,428				24,926
Additional requirements, of which:		173,249		40,123		166,313		39,689
Outflows related to derivative exposures and other collateral requirements		31,333		8,433		30,536		8,342
Outflows related to loss of funding on debt products		4,828		4,828		6,131		6,131
Credit and liquidity facilities		137,088		26,862		129,646		25,216
Other contractual funding obligations (6)		29,652		29,652		35,307		35,307
Other contingent funding obligations (7)		426,680		6,325		423,274		6,285
Total cash outflows			$	210,666			$	211,306
Cash inflows
Secured lending (e.g. reverse repos)	$	114,680	$	31,963	$	118,959	$	32,286
Inflows from fully performing exposures		10,138		6,824		11,203		7,330
Other cash inflows		21,018		21,018		25,055		25,055
Total Cash inflows			$	59,805		155,217	$	64,671
			Total adjusted value				Total adjusted value
Total HQLA			$	176,928			$	166,321
Total net cash outflows				150,861				146,635
Liquidity coverage ratio				117%				113%

(1) LCR is calculated using OSFI LAR and BCBS liquidity coverage ratio requirements.

(2) Prior period amounts have been revised from those previously presented.

(3) Excludes deposits with 0% cash outflow rates.

(4) As defined by BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank has an established relationship with the client making the withdrawal unlikely.

(5) Operational deposits from non-retail and non-small and medium-sized enterprise customers are deposits which clients need to keep with the bank in order to facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.

(6) Other contractual funding obligations primarily include outflows from unsettled securities trades and outflows from obligations related to securities sold short.

(7) Other contingent funding obligations include outflows related to other off-balance sheet facilities that carry low LCR runoff factors (0% – 5%).

We manage our LCR position within a target range that reflects management’s liquidity risk tolerance and takes into account business mix, asset composition and funding capabilities. The range is subject to periodic review in light of changes to internal requirements and external developments.

We maintain HQLAs in major currencies with dependable market depth and breadth. Our treasury management practices ensure that the levels of HQLA are actively managed, including contingency and cash management liquid assets, to meet our target LCR objectives. Our Level 1 assets, as calculated according to OSFI LAR and the BCBS LCR requirements, represent 78% of total HQLA. These assets consist of cash, placements with central banks and highly rated securities issued or guaranteed by governments, central banks and supranational entities.

LCR captures cash flows from on- and off-balance sheet activities that are either expected or could potentially occur within 30 days in an acute stress scenario. Cash outflows result from application of withdrawal and non-renewal factors to demand and term deposits which are differentiated by client type (wholesale, retail and small- and medium-sized enterprises). Cash outflows also arise from business activities that create contingent funding and collateral requirements, such as repo funding, derivatives, short sales of securities and the extension of credit and liquidity commitments to client. Cash inflows arise primarily from maturing secured loans, interbank loans and non-HQLA securities.

LCR does not reflect any market funding capacity that management believes would be available to the Bank in a stress situation. All maturing wholesale debt is assigned 100% outflow in the LCR calculation.

Royal Bank of Canada        Third Quarter 2015        41

Q3 2015 vs. Q2 2015

LCR of 117% increased from 113% in the prior quarter, primarily due to higher HQLA, and growth in client deposits and other funding sources receiving favourable treatment under the OSFI LAR guidelines.

Liquidity reserve and asset encumbrance

As recommended by the Enhanced Disclosure Task Force (EDTF), the following tables provide summaries of our liquidity reserve and asset encumbrance. Unencumbered assets represent, for the most part, a ready source of funding that can be accessed quickly, when required. In the Liquidity reserve table, available liquid assets consist of on-balance sheet cash and securities holdings as well as securities received as collateral from securities financing (reverse repos and off-balance sheet collateral swaps) and derivative transactions and constitute the preferred source for quickly accessing liquidity. The other component of our liquidity reserve consists primarily of uncommitted and undrawn central bank credit facilities that could be accessed under exceptional circumstances provided certain pre-conditions could be met and where advances could be supported by eligible assets (e.g. certain unencumbered loans) not included in the liquid assets category. The Asset encumbrance table provides a comprehensive view of the assets available to the Bank, not just the liquidity reserve, and identifies assets already pledged as well as those available for use as collateral (including unencumbered assets from the Liquidity reserve table) for secured funding purposes. Less liquid assets such as mortgages and credit card receivables can in part be monetised although require more lead time relative to liquid assets. As at July 31, 2015, our assets available as collateral comprised 62% of our total liquid assets. For the purpose of constructing the following tables, encumbered assets include: (i) bank-owned liquid assets that are either pledged as collateral (e.g., repo financing and derivative pledging) or not freely available due to regulatory or internal policy requirements (e.g., earmarked to satisfy mandatory reserve or local capital adequacy requirements and to maintain continuous access to payment and settlement systems); (ii) securities received as collateral from securities financing and derivative transactions which have either been re-hypothecated where permissible (e.g., to obtain financing through repos or to cover securities sold short) or have no liquidity value since re-hypothecation is prohibited; and (iii) illiquid assets that have been securitized and sold into the market or that have been pledged as collateral in support of structured term funding vehicles. We do not include encumbered assets as a source of available liquidity in measuring liquidity risk. Unencumbered assets are the difference between total and encumbered assets from both on- and off-balance sheet sources.

42        Royal Bank of Canada        Third Quarter 2015

Liquidity reserve (1)

	As at July 31, 2015
(Millions of Canadian dollars)	Bank-owned liquid assets		Securities received as collateral from securities financing and derivative transactions		Total liquid assets		Encumbered liquid assets		Unencumbered liquid assets
Cash and holding at central banks	$	20,656	$	–	$	20,656	$	1,211	$	19,445
Deposits in other banks available overnight		2,783		–		2,783		501		2,282
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (2), (3)		256,313		20,079		276,392		139,335		137,057
Other (2)		153,113		30,825		183,938		82,519		101,419
Liquidity assets eligible at central banks (not included above) (4)		65		–		65		–		65
Undrawn credit lines granted by central banks (5)		10,621		–		10,621		–		10,621
Other assets eligible as collateral for discount (6)		125,985		–		125,985		–		125,985
Other liquid assets (7)		20,682		–		20,682		20,682		–
Total liquid assets	$	590,218	$	50,904	$	641,122	$	244,248	$	396,874
(Millions of Canadian dollars)	As at April 30, 2015
	Bank-owned liquid assets		Securities received as collateral from securities financing and derivative transactions		Total liquid assets		Encumbered liquid assets		Unencumbered liquid assets
Cash and holding at central banks	$	14,655	$	–	$	14,655	$	1,179	$	13,476
Deposits in other banks available overnight		3,640		–		3,640		572		3,068
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (2), (3)		244,976		19,133		264,109		137,090		127,019
Other (2)		145,227		31,928		177,155		76,169		100,986
Liquidity assets eligible at central banks (not included above) (4)		64		–		64		–		64
Undrawn credit lines granted by central banks (5)		9,420		–		9,420		–		9,420
Other assets eligible as collateral for discount (6)		125,311		–		125,311		–		125,311
Other liquid assets (7)		18,571		–		18,571		18,571		–
Total liquid assets	$	561,864	$	51,061	$	612,925	$	233,581	$	379,344

	As at
(Millions of Canadian dollars)	July 31 2015		April 30 2015
Royal Bank of Canada	$	248,299	$	231,244
Foreign branches		56,223		54,522
Subsidiaries		92,352		93,578
Total unencumbered liquid assets	$	396,874	$	379,344

(1) Information is provided from an enterprise-wide perspective and amounts shown are based on face value. In managing liquidity risk, we consider legal, regulatory, tax and other constraints that may impede transferability of liquidity among RBC units.

(2) The Bank-owned liquid assets amount includes securities owned outright by the bank or acquired via on-balance sheet securities finance transactions.

(3) Includes liquid securities issued by provincial governments and U.S. government sponsored entities working under U.S. Federal government’s conservatorship (e.g. Federal National Mortgage Association and Federal Home Loan Mortgage Corporation).

(4) Includes Auction Rate Securities.

(5) Includes loans that qualify as eligible collateral for the discount window facility available to us at the Federal Reserve Bank of New York. Amounts are face value and would be subject to collateral margin requirements applied by the Federal Reserve Bank to determine collateral value/borrowing capacity. Access to the discount window borrowing program is conditional on meeting requirements set by the Federal Reserve Bank and borrowings are typically expected to be infrequent and due to uncommon occurrences requiring temporary accommodation.

(6) Represents our unencumbered Canadian dollar non-mortgage loan book (at face value) that could, subject to satisfying conditions precedent to borrowing and application of prescribed collateral margin requirements, be pledged to the Bank of Canada for advances under its Emergency Lending Assistance (ELA) program. ELA and other central bank facilities are not considered sources of available liquidity in our normal liquidity risk profile but could in extraordinary circumstances, where normal market liquidity is seriously impaired, allow us and other banks to monetize assets eligible as central bank collateral to meet requirements and mitigate further market liquidity disruption.

(7) Represents pledges related to OTC and exchange-traded derivative transactions.

Royal Bank of Canada        Third Quarter 2015        43

Q3 2015 vs. Q2 2015

Total liquid assets increased $28 billion or 5%, mainly reflecting an increase due to the impact of foreign exchange translation.

Asset encumbrance (1)

	As at
	July 31 2015												April 30 2015
	Encumbered				Unencumbered								Encumbered				Unencumbered
(Millions of Canadian dollars)	Pledged as collateral		Other (2)		Available as collateral (3)		Other (4)			Total (5)			Pledged as collateral		Other (2)		Available as collateral (3)		Other (4)			Total (5)
Cash and due from banks	$	401	$	1,211	$	18,044	$	320		$	19,976		$	476	$	1,179	$	16,430	$	308		$	18,393
Interest-bearing deposits with banks		105		–		10,626		–			10,731			97		–		4,305		–			4,402
Securities
Trading		77,130		–		93,840		1,400			172,370			71,567		–		96,657		1,539			169,763
Available-for-sale		9,316		71		49,979		3,779			63,145			7,138		73		43,333		2,336			52,880
Assets purchased under reverse repurchase agreements and securities borrowed		149,653		–		93,468		13,022			256,143			144,959		–		86,827		9,415			241,201
Loans
Retail
Mortgage securities (6)		35,671		–		33,130		–			68,801			35,982		–		31,869		–			67,851
Mortgage loans (6)		31,733		–		–		128,554			160,287			28,323		–		–		126,311			154,634
Non-mortgage loans		9,671		–		97,530		7,174			114,375			10,250		–		96,045		7,284			113,579
Wholesale		–		–		39,077		82,137			121,214			–		–		38,687		75,596			114,283
Allowance for loan losses		–		–		–		(2,078	)		(2,078	)		–		–		–		(2,037	)		(2,037	)
Segregated fund net assets		–		–		–		821			821			–		–		–		780			780
Other – Derivatives		–		–		–		112,459			112,459			–		–		–		107,004			107,004
– Others (7)		20,650		–		–		49,763			70,413			18,571		–		–		48,701			67,272
Total assets	$	334,330	$	1,282	$	435,694	$	397,351		$	1,168,657		$	317,363	$	1,252	$	414,153	$	377,237		$	1,110,005

(1) Information is provided from an enterprise-wide perspective and amounts shown are based on face value. In managing liquidity risk, we consider legal, regulatory, tax and other constraints that may impede transferability of liquidity among RBC units.

(2) Includes assets restricted from use to generate secured funding due to legal or other constraints.

(3) Includes loans that could be used to collateralize central bank advances. Our unencumbered Canadian dollar non-mortgage loan book (at face value) could, subject to satisfying conditions precedent to borrowing and application of prescribed collateral margin requirements, be pledged to the Bank of Canada for advances under its ELA program. We also lodge loans that qualify as eligible collateral for the discount window facility available to us at the Federal Reserve Bank of New York. ELA and other central bank facilities are not considered sources of available liquidity in our normal liquidity risk profile but could in extraordinary circumstances, where normal market liquidity is seriously disrupted, allow us and other banks to monetize assets eligible as central bank collateral to meet requirements and mitigate market liquidity dislocations.

(4) Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but would not be considered readily available since they may not be acceptable at central banks or for other lending programs.

(5) Includes bank-owned liquid assets and securities received as collateral from off-balance sheet securities financing and derivative transactions.

(6) Amounts have been revised from those previously disclosed.

(7) The Pledged as collateral amounts relate to OTC and exchange traded derivative transactions.

Other sources of liquidity that could be available to mitigate stressed conditions include: (i) our unused wholesale funding capacity, which is regularly assessed using an established methodology that is periodically reviewed and, as necessary, revised, and (ii) central bank borrowing facilities if, in extraordinary circumstances, market sources were not sufficient to allow us to monetize our assets available as collateral to meet our requirements (e.g., Bank of Canada, Federal Reserve Bank, Bank of England, and Bank of France).

Funding

Funding strategy

Core funding, comprising capital, longer-term wholesale liabilities and a diversified pool of personal and, to a lesser extent, commercial and institutional deposits, is the foundation of our structural liquidity position.

Deposit profile

Core deposits consist of our own statistically derived liquidity adjusted estimates of the highly stable portions of our relationship-based balances (demand, notice and fixed-term) together with wholesale funds maturing beyond one year and as at July 31, 2015 represented 66% of our total deposits (April 30, 2015 – 67%). Based on average balances over the past quarter, core deposits increased 1% as growth in core relationship deposits was mostly offset by a decrease in core wholesale funds. For further details on the gross dollar amounts of our relationship-based deposits and our wholesale funding maturity schedule, refer to the Risk profile section and the following Composition of wholesale funding table, respectively.

Long-term debt issuance

Our wholesale funding activities are well-diversified by geography, investor segment, currency, structure and maturity. We maintain an ongoing presence in different funding markets, which allows us to continuously monitor market developments and trends, identify opportunities and risks, and take appropriate and timely actions. We maintain a number of longer-term debt issuance programs. The following table summarizes these programs with their authorized limits at the time they were established by geography.

44        Royal Bank of Canada        Third Quarter 2015

Programs by geography

Canada	U.S.	Europe/Asia
•   Canadian Shelf – $15 billion	•   SEC Registered Medium Term Note Program – US$40 billion	•   European Debt Issuance Program – US$40 billion
	•   SEC Registered Covered Bond Program – US$15 billion (1)	•   Global Covered Bond Program – Euro 32 billion
		•   Japanese Issuance Programs – JPY 1 trillion

(1) Subject to the Euro 32 billion Global Covered Bond Program limit.

We also raise long-term funding using Canadian Deposit Notes, Canadian NHA MBS, Canada Mortgage Bonds, credit card receivable-backed securities, Kangaroo Bonds (issued in the Australian domestic market by foreign firms) and Yankee Certificates of Deposit (issued in the U.S. domestic market by foreign firms). We continuously evaluate expansion into new markets and untapped investor segments against relative issuance costs since diversification expands our wholesale funding flexibility and minimizes funding concentration and dependency, and generally reduces financing costs. As presented in the following charts, our current long-term debt profile is well diversified by currency as well as by type of long-term funding products. Maintaining competitive credit ratings is also critical to cost-effective funding.

(1)     Based on original term to maturity greater than 1 year (2)     Mortgage-backed securities and Canada Mortgage Bonds

Royal Bank of Canada        Third Quarter 2015        45

The following table provides our composition of wholesale funding based on remaining term to maturity and represents our enhanced disclosure in response to EDTF recommendations.

Composition of wholesale funding (1)

	As at July 31, 2015
(Millions of Canadian dollars)	Less than 1 month		1 to 3 months		3 to 6 months		6 to 12 months		Less than 1 year sub-total		1 year to 2 years		2 years and greater		Total
Deposits from banks (2)	$	6,779	$	48	$	59	$	37	$	6,923	$	–	$	–	$	6,923
Certificates of deposit and commercial paper		1,567		9,358		18,077		13,404		42,406		3,173		174		45,753
Asset-backed commercial paper (3)		1,355		2,076		3,156		5,174		11,761		–		–		11,761
Senior unsecured medium-term notes (4)		54		1,397		7,408		8,499		17,358		18,409		40,825		76,592
Senior unsecured structured notes (5)		375		403		784		802		2,364		622		5,358		8,344
Mortgage securitization		96		596		1,251		1,954		3,897		2,694		16,385		22,976
Covered bonds/asset-backed securities (6)		3		692		1,500		3,543		5,738		4,887		27,521		38,146
Subordinated liabilities		–		–		1,500		–		1,500		105		5,620		7,225
Other (7)		2,356		4,842		1,196		1,116		9,510		20		4,430		13,960
Total	$	12,585	$	19,412	$	34,931	$	34,529	$	101,457	$	29,910	$	100,313	$	231,680
Of which:
– Secured	$	3,756	$	7,214	$	5,907	$	10,670	$	27,547	$	7,580	$	43,907	$	79,034
– Unsecured		8,829		12,198		29,024		23,859		73,910		22,330		56,406		152,646

	As at April 30, 2015
(Millions of Canadian dollars)		Less than 1 month		1 to 3 months		3 to 6 months		6 to 12 months		Less than 1 year sub-total		1 year to 2 years		2 years and greater		Total
Deposits from banks (2)	$	4,361	$	22	$	24	$	60	$	4,467	$	–	$	–	$	4,467
Certificates of deposit and commercial paper		5,536		8,427		7,608		16,327		37,898		3,180		48		41,126
Asset-backed commercial paper (3)		1,048		2,175		3,390		4,229		10,842		–		–		10,842
Senior unsecured medium-term notes (4)		1,071		1,728		1,348		10,948		15,095		19,393		37,620		72,108
Senior unsecured structured notes (5)		291		657		519		935		2,402		776		5,190		8,368
Mortgage securitization		113		654		891		1,784		3,442		3,287		16,509		23,238
Covered bonds/asset-backed securities (6)		1,229		665		698		2,024		4,616		6,303		24,837		35,756
Subordinated liabilities		–		1,500		–		1,500		3,000		–		4,643		7,643
Other (7)		3,701		118		969		1,420		6,208		39		4,106		10,353
Total	$	17,350	$	15,946	$	15,447	$	39,227	$	87,970	$	32,978	$	92,953	$	213,901
Of which:
– Secured	$	5,804	$	3,494	$	4,980	$	8,037	$	22,315	$	9,590	$	41,346	$	73,251
– Unsecured		11,546		12,452		10,467		31,190		65,655		23,388		51,607		140,650

(1) Excludes bankers’ acceptances.

(2) Only includes deposits raised by treasury. Excludes deposits associated with services we provide to these banks (e.g., custody, cash management).

(3) Only includes consolidated liabilities, including our collateralized commercial paper program.

(4) Includes deposit notes.

(5) Includes notes where the payout is tied to movements in foreign exchange, commodities and equities.

(6) Includes credit card, auto and mortgage loans.

(7) Includes tender option bonds (secured) of $6,071 million (April 30, 2015 – $3,341 million), bearer deposit notes (unsecured) of $3,748 million (April 30, 2015 – $3,180 million) and other long-term structured deposits (unsecured) of $4,141 million (April 30, 2015 – $3,832 million).

Contractual maturities of financial assets, financial liabilities and off-balance sheet items

The following tables provide remaining contractual maturity profiles of all our assets, liabilities, and off-balance sheet items at their carrying value (i.e. amortized cost or fair value) at the balance sheet date and have been enhanced in response to EDTF recommendations. Off-balance sheet items are allocated based on the expiry date of the contract.

Details of contractual maturities and commitments to extend funds are a source of information for the management of liquidity risk. Among other purposes, these details form a basis for modeling a behavioural balance sheet with effective maturities to calculate liquidity risk measures. For further details, refer to the Risk measurement section.

46        Royal Bank of Canada        Third Quarter 2015

Contractual maturities of financial assets, financial liabilities and off-balance sheet items

	As at July 31, 2015
(Millions of Canadian dollars)	Less than 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 year to 2 years		2 years to 5 years		5 years and greater		With no specific maturity		Total
Assets
Cash and deposits with banks	$	26,717	$	71	$	–	$	–	$	406	$	–	$	–	$	–	$	3,513	$	30,707
Securities
Trading (1)		112,448		45		41		27		79		184		586		5,923		53,037		172,370
Available-for-sale		2,983		5,073		1,875		947		3,223		5,504		24,753		16,912		1,875		63,145
Assets purchased under reverse repurchase agreements and securities borrowed		77,804		36,437		22,785		7,559		16,741		3,405		–		–		7,928		172,659
Loans (net of allowance for loan losses)		18,537		13,618		12,526		20,156		22,750		55,378		196,319		35,754		87,561		462,599
Other
Customers’ liability under acceptances		9,599		2,910		196		23		26		6		1		–		–		12,761
Derivatives		7,828		7,943		7,184		3,313		3,237		10,745		26,041		46,161		7		112,459
Other financial assets		27,616		3,066		616		216		61		80		27		394		1,009		33,085
Total financial assets	$	283,532	$	69,163	$	45,223	$	32,241	$	46,523	$	75,302	$	247,727	$	105,144	$	154,930	$	1,059,785
Other non-financial assets		1,891		817		1,590		357		85		573		1,615		2,479		15,981		25,388
Total assets	$	285,423	$	69,980	$	46,813	$	32,598	$	46,608	$	75,875	$	249,342	$	107,623	$	170,911	$	1,085,173
Liabilities and equity
Deposits (2)
Unsecured borrowing	$	43,158	$	26,685	$	40,985	$	29,044	$	20,778	$	37,437	$	49,651	$	13,407	$	335,314	$	596,459
Secured borrowing		1,381		4,628		5,577		6,231		6,517		10,435		20,290		9,577		–		64,636
Covered bonds		–		–		1,963		–		2,294		1,195		22,038		5,651		–		33,141
Other
Acceptances		9,599		2,910		196		23		26		6		1		–		–		12,761
Obligations related to securities sold short		55,656		–		–		–		–		–		–		–		–		55,656
Obligations related to assets sold under repurchase agreements and securities loaned		69,634		3,793		1,967		104		424		410		2		–		6,902		83,236
Derivatives		6,169		8,540		8,121		3,906		3,801		13,718		28,609		43,214		5		116,083
Other financial liabilities		21,441		3,078		357		184		168		70		227		4,086		368		29,979
Subordinated debentures		–		–		–		–		–		–		–		7,374		–		7,374
Total financial liabilities	$	207,038	$	49,634	$	59,166	$	39,492	$	34,008	$	63,271	$	120,818	$	83,309	$	342,589	$	999,325
Other non-financial liabilities		1,066		419		2,524		182		252		828		2,525		8,852		7,302		23,950
Equity		–		–		–		–		–		–		–		–		61,898		61,898
Total liabilities and equity	$	208,104	$	50,053	$	61,690	$	39,674	$	34,260	$	64,099	$	123,343	$	92,161	$	411,789	$	1,085,173
Off-balance sheet items
Financial guarantees	$	543	$	1,183	$	3,545	$	1,092	$	5,732	$	3,048	$	5,528	$	259	$	26	$	20,956
Lease commitments		59		120		181		176		171		612		1,254		1,285		–		3,858
Commitments to extend credit		3,761		6,849		6,129		7,128		8,215		27,821		130,145		13,235		3,434		206,717
Other commitments		247		465		580		893		2,656		258		730		322		74,609		80,760
Total off-balance sheet items	$	4,610	$	8,617	$	10,435	$	9,289	$	16,774	$	31,739	$	137,657	$	15,101	$	78,069	$	312,291

(1) Trading debt securities classified as fair value through profit or loss have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.

(2) A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base, as explained in the preceding Deposit profile section, for our operations and liquidity needs.

Royal Bank of Canada        Third Quarter 2015        47

	As at April 30, 2015
(Millions of Canadian dollars)	Less than 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 year to 2 years		2 years to 5 years		5 years and greater		With no specific maturity		Total
Assets
Cash and deposits with banks	$	19,619	$	34	$	1	$	–	$	252	$	–	$	–	$	–	$	2,889	$	22,795
Securities
Trading (1)		108,623		30		41		40		30		230		532		5,850		54,387		169,763
Available-for-sale		1,939		5,586		427		1,383		813		4,537		22,646		13,768		1,781		52,880
Assets purchased under reverse repurchase agreements and securities borrowed		73,307		30,490		23,857		6,906		13,767		4,794		–		–		10,247		163,368
Loans (net of allowance for loan losses)		19,813		12,004		11,021		17,523		17,977		65,644		185,800		31,306		87,222		448,310
Other
Customers’ liability under acceptances		9,833		2,562		125		73		35		8		1		–		–		12,637
Derivatives		5,911		7,221		4,118		5,534		2,644		9,504		24,227		47,838		7		107,004
Other financial assets		25,200		1,268		505		353		86		276		328		910		1,014		29,940
Total financial assets	$	264,245	$	59,195	$	40,095	$	31,812	$	35,604	$	84,993	$	233,534	$	99,672	$	157,547	$	1,006,697
Other non-financial assets		3,078		816		343		985		283		593		1,499		2,488		15,390		25,475
Total assets	$	267,323	$	60,011	$	40,438	$	32,797	$	35,887	$	85,586	$	235,033	$	102,160	$	172,937	$	1,032,172
Liabilities and equity
Deposits (2)
Unsecured borrowing	$	39,128	$	20,886	$	26,492	$	29,849	$	26,860	$	40,189	$	46,806	$	12,874	$	318,849	$	561,933
Secured borrowing		2,296		3,988		5,711		4,312		4,473		10,008		21,515		9,176		–		61,479
Covered bonds		–		–		–		1,809		–		3,311		19,432		3,587		–		28,139
Other
Acceptances		9,833		2,562		125		73		35		8		1		–		–		12,637
Obligations related to securities sold short		54,314		–		–		–		–		–		–		–		–		54,314
Obligations related to assets sold under repurchase agreements and securities loaned		70,816		3,050		970		434		92		400		–		–		5,445		81,207
Derivatives		4,627		8,342		4,479		6,703		3,150		13,006		26,869		45,041		2		112,219
Other financial liabilities		22,764		1,485		571		374		277		242		633		4,288		354		30,988
Subordinated debentures		–		–		–		–		–		–		–		7,795		–		7,795
Total financial liabilities	$	203,778	$	40,313	$	38,348	$	43,554	$	34,887	$	67,164	$	115,256	$	82,761	$	324,650	$	950,711
Other non-financial liabilities		1,151		398		262		1,908		168		795		2,385		8,810		7,337		23,214
Equity		–		–		–		–		–		–		–		–		58,247		58,247
Total liabilities and equity	$	204,929	$	40,711	$	38,610	$	45,462	$	35,055	$	67,959	$	117,641	$	91,571	$	390,234	$	1,032,172
Off-balance sheet items
Financial guarantees	$	496	$	2,793	$	1,799	$	2,894	$	2,168	$	5,022	$	3,104	$	224	$	62	$	18,562
Lease commitments		58		116		171		170		167		605		1,185		1,309		–		3,781
Commitments to extend credit		2,931		6,682		6,810		6,850		7,097		23,735		118,190		12,360		2,338		186,993
Other commitments		150		660		617		647		2,737		215		759		270		70,389		76,444
Total off-balance sheet items	$	3,635	$	10,251	$	9,397	$	10,561	$	12,169	$	29,577	$	123,238	$	14,163	$	72,789	$	285,780

(1) Trading debt securities classified as fair value through profit or loss have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.

(2) A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base, as explained in the preceding Deposit profile section, for our operations and liquidity needs.

Credit ratings

Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective basis are primarily dependent upon maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies reflect their views and are based on their methodologies. Ratings are subject to change from time to time, based on a number of factors including, but not limited to, our financial strength, competitive position and liquidity and other factors not completely within our control.

On January 23, 2015, Fitch Ratings affirmed our ratings with a stable outlook along with the ratings of the other five largest Canadian banks.

On April 30, 2015, Moody’s affirmed our ratings with a negative outlook along with the ratings of the other five largest Canadian banks.

On May 20, 2015, Dominion Bond Rating Services (DBRS) revised the outlook on our senior and subordinated debt ratings to negative from stable, along with the ratings of the other five largest Canadian banks. The outlook revision is linked to DBRS’ view that expected changes in Canadian legislation and regulation imply that the potential for timely systemic support for D-SIBs is declining.

On July 16, 2015, DBRS affirmed our ratings with a negative outlook along with the ratings of the other five largest Canadian banks.

48        Royal Bank of Canada        Third Quarter 2015

The following table presents our major credit ratings⁽¹⁾ and outlooks as at August 25, 2015:

Credit ratings

	As at August 25, 2015
	Short-term debt		Senior long- term debt		Outlook
Moody’s		P-1		Aa3		negative
Standard & Poor’s		A-1+		AA-		negative
Fitch Ratings		F1+		AA		stable
Dominion Bond Rating Services		R-1(high)		AA		negative	(2)

(1) Credit ratings are not recommendations to purchase, sell or hold a financial obligation inasmuch as they do not comment on market price or suitability for a particular investor. Ratings are determined by the rating agencies based on criteria established from time to time by them, and are subject to revision or withdrawal at any time by the rating organization.

(2) On May 20, 2015, DBRS revised the outlook on our senior and subordinated debt to negative from stable.

Additional contractual obligations for rating downgrades

A lowering of our credit rating may have potentially adverse consequences for our funding capacity or access to the capital markets, may also affect our ability, and the cost, to enter into normal course derivative or hedging transactions and may require us to post additional collateral under certain contracts. However, we estimate, based on periodic reviews of ratings triggers embedded in our existing businesses and of our funding capacity sensitivity, that a minor downgrade would not significantly influence our liability composition, funding access, collateral usage and associated costs. The following table presents the additional collateral obligations required at the reporting date in the event of a one-, two- or three-notch downgrade to our credit ratings. These additional collateral obligations are incremental requirements for each successive downgrade and do not represent the cumulative impact of multiple downgrades. The amounts reported change periodically as a result of several factors, including the transfer of trading activity to centrally cleared financial market infrastructures and exchanges, the expiration of transactions with downgrade triggers, the imposition of internal limitations on new agreements to exclude downgrade triggers, as well as normal course mark to market of positions with collateralized counterparties moving from a negative to a positive position. There is no outstanding senior debt issued in the market that contains rating triggers which would lead to early prepayment of principal.

Additional contractual obligations for rating downgrades

	As at
	July 31 2015						April 30 2015
(Millions of Canadian dollars)	One-notch downgrade		Two-notch downgrade		Three-notch downgrade		One-notch downgrade		Two-notch downgrade		Three-notch downgrade
Contractual derivatives funding or margin requirements	$	712	$	148	$	1,014	$	661	$	140	$	878
Other contractual funding or margin requirements (1)		422		94		–		403		70		–

(1) Includes GICs issued by our municipal markets business out of New York and London.

Capital management

We continue to manage our capital in accordance with our Capital Management Framework as described in our 2014 Annual Report. In addition, we continue to monitor and prepare for new regulatory capital developments in order to ensure timely and accurate compliance with these requirements.

OSFI expects Canadian banks to currently meet the “all-in” targets (minimum ratios plus the capital conservation buffer – January 1, 2019 BCBS requirements) for Common Equity Tier 1 (CET1), Tier 1 and Total capital ratios. The CVA capital charge is phased in over a five-year period beginning 2014 and ending December 31, 2018 to ensure an implementation similar to that in other countries. In accordance with the guidance, there are two possible options to phase in the CVA capital charge. Under the option selected by RBC, option 1, CVA increased RWA for purposes of calculating CET1, Tier 1 and Total Capital ratios in accordance with each ratio scalar. The scalars increase each year and will reach 100% by the end of 2018. The 2015 CET1, Tier 1 and Total Capital ratios phase-in scalars are 64%, 71% and 77%, respectively. OSFI released the list of six Canadian banks, including RBC, which are designated as D-SIBs in March 2013, for which an additional 1% risk-weighted capital surcharge will be required commencing January 1, 2016.

Banks are required to disclose the leverage ratio and its components, which has replaced the OSFI Assets-to-capital multiple (ACM), effective the first fiscal quarter of 2015. The leverage ratio is defined as the capital measure divided by the exposure measure. The capital measure is currently defined as Tier 1 capital and the exposure measure is the sum of (a) on-balance sheet exposures; (b) derivative exposures; (c) securities financing transaction (SFT) exposures; and (d) off-balance sheet items. Banks are expected to maintain a leverage ratio that meets or exceeds 3% at all times.

Per OSFI advisory “Global systemically important banks (G-SIBs) – Public disclosure requirements”, all federally-regulated banks with a Basel III leverage ratio total exposure exceeding EUR 200 billion are required to disclose, at a minimum, the twelve indicators used in the G-SIB assessment methodology, with the goal of enhancing the transparency of the relative scale of banks’ potential global systemic importance and data quality. In the first quarter of 2015, Canadian banks, including RBC, that meet the BCBS size threshold and were not designated as G-SIBs in the previous year are required to disclose in their report to shareholders the twelve indicators only (not the full template) for financial year ends 2013 and 2014. For subsequent year ends, disclosure should be made as part of a bank’s annual report to shareholders.

Royal Bank of Canada        Third Quarter 2015        49

In December 2014, BCBS issued the final standards on the revised securitization framework, which aim to strengthen the capital standards for securitization exposures held in the banking book, with an effective date of January 2018.

The BCBS also issued two consultative papers in December 2014 “Capital floor: the design of a framework based on standardized approaches” and “Revisions to the standardized approach for credit risk”. The capital floor consultative document focuses on the design of a capital floor framework based on the standardized approach, with the objective to mitigate model risk and measurement error stemming from internal models and enhance comparability of capital across banks. This framework will replace the current transitional floor, which is based on the Basel I standard. The revisions to the standardized approach for credit risk document is designed to strengthen the existing regulatory capital framework, with the objective of reducing reliance on external credit ratings, increasing risk sensitivity, and increasing comparability of capital requirements to the IRB approach. These revisions will as a result increase the comparability of capital requirements between banks using the standardized approach.

We will continue to monitor and assess the capital impact of these regulatory developments.

The following table provides a summary of OSFI regulatory target ratios under Basel III.

Basel III Capital ratios and leverage

OSFI regulatory target requirements for large banks under Basel III

RBC capital and leverage ratios as at July 31, 2015

Meet or exceed OSFI regulatory target ratios

Minimum

Capital Conservation Buffer

Minimum including Capital Conservation Buffer

D-SIBs Surcharge (1)

Minimum including Capital Conservation Buffer and D-SIBs surcharge (1)

Common Equity Tier 1

> 4.5%

2.5%

> 7.0%

1.0%

> 8.0%

10.1%

ü

Tier 1 capital

> 6.0%

2.5%

> 8.5%

1.0%

> 9.5%

11.7%

ü

Total capital

> 8.0%

2.5%

> 10.5%

1.0%

> 11.5%

13.4%

ü

Leverage ratio

> 3.0%

n.a.

> 3.0%

n.a.

> 3.0%

4.2%

ü

(1) The D-SIBs surcharge will be applicable to risk-weighted capital commencing January 1, 2016.

The following table provides details on our regulatory capital, RWA and capital ratios. Our capital position remained strong during the quarter and our capital ratios remain well above OSFI regulatory targets.

Regulatory capital, RWA and capital ratios

Regulatory capital, risk-weighted assets (RWA) and capital ratios
	As at
(Millions of Canadian dollars, except percentage and multiple amounts and as otherwise noted)	July 31 2015		April 30 2015		October 31 2014		July 31 2014
Capital(1)
CET1 capital	$	42,405	$	39,608	$	36,406	$	34,967
Tier 1 capital		49,049		45,989		42,202		41,408
Total capital		56,553		53,932		50,020		48,188
Risk-weighted assets (RWA) used in calculation of capital ratios(1), (2)
CET1 capital RWA		419,484		396,874		368,594		368,320
Tier 1 capital RWA		420,789		398,014		369,976		369,772
Total capital RWA		421,908		398,992		372,050		371,949
Total capital RWA consisting of: (1)
Credit risk	$	330,577	$	306,831	$	286,327	$	281,684
Market risk		41,322		42,915		38,460		44,042
Operational risk		50,009		49,246		47,263		46,223
Total capital RWA	$	421,908	$	398,992	$	372,050	$	371,949
Capital ratios, Leverage ratio and multiples(1), (3)
CET1 ratio		10.1%		10.0%		9.9%		9.5%
Tier 1 capital ratio		11.7%		11.6%		11.4%		11.2%
Total capital ratio		13.4%		13.5%		13.4%		13.0%
Assets-to-capital multiple (4)		n.a.		n.a.		17.0X		17.3X
Gross-adjusted assets (GAA) (4) (billions)		n.a.		n.a.	$	885.0	$	867.9
Leverage ratio		4.2%		4.0%		n.a.		n.a.
Leverage ratio exposure (billions)	$	1,178.4	$	1,137.8		n.a.		n.a.

(1) Capital, RWA, capital ratios and multiples are calculated using OSFI Capital Adequacy Requirements based on the Basel III framework. Leverage ratios are calculated using OSFI Leverage Requirements Guideline based on the Basel III framework. Effective the first quarter of 2015, the leverage ratio has replaced the ACM. The leverage ratio is a regulatory measure under the Basel III framework and is not applicable (n.a.) for periods prior to Q1 2015. Capital ratios presented above are on an “all-in” basis.

(2) Effective Q3 2014, different scalars were applied to the CVA included in each of the three tiers of capital. In Q3 and Q4, 2014, the CVA scalars 57%, 65% and 77% were applied to CET 1, Tier 1 and Total Capital respectively. In fiscal 2015, the CVA scalars are 64%, 71% and 77% for CET1, Tier 1 and Total capital respectively.

(3) To enhance comparability among other global financial institutions, the following are our transitional capital and leverage ratios. The transitional CET1, Tier 1, Total capital and leverage ratios as at July 31, 2015 were 11.6%, 11.8%, 13.5% and 4.3% respectively. Transitional is defined as capital calculated according to the current year’s phase-in of regulatory adjustments and phase-out of non-qualifying capital instruments.

(4) Assets-to-capital multiples and GAA were calculated on a transitional basis in the prior periods.

50        Royal Bank of Canada        Third Quarter 2015

Q3 2015 vs. Q2 2015

(1) Represents round figures.

(2) Internal capital generation includes $1.3 billion which represents Net income available to shareholders less common and preferred shares dividends.

Q3 2015 vs. Q2 2015

Our CET1 ratio was 10.1%, up 10 bps from last quarter, mainly reflecting internal capital generation and the positive impact of a higher discount rate in determining our pension and other post-employment benefit obligations. These factors were partially offset by higher RWA reflecting business growth, and the net impact of foreign exchange translation.

CET1 capital RWA increased $23 billion, mainly reflecting an increase due to the impact of foreign exchange translation and business growth largely in our wholesale lending portfolio, repo-style transactions and derivatives.

Our Tier 1 capital ratio of 11.7% was up 10 bps, mainly due to the factors noted under the CET1 ratio, and the issuance of preferred shares.

Our Total capital ratio of 13.4% was down 10 bps, as the factors noted under Tier 1 capital ratio above were mostly offset by net redemption of subordinated debentures.

Our Leverage ratio of 4.2% was up 20 bps, mainly due to internal capital generation, the positive impact of a higher discount rate in determining our pension and other post-employment benefit obligations, and the issuance of preferred shares. These factors were partially offset by the net impact of foreign exchange translation.

Q3 2015 vs. Q4 2014

Our CET1 ratio increased 20 bps from October 31, 2014, mainly reflecting internal capital generation, partially offset by higher RWA reflecting business growth, and the net impact of foreign exchange translation.

CET1 capital RWA increased $51 billion, mainly reflecting an increase due to the impact of foreign exchange translation and business growth largely in our wholesale lending portfolio, repo-style transactions and derivatives.

Our Tier 1 capital ratio increased 30 bps, mainly reflecting the factors noted under CET1 ratio, and the net issuance of preferred shares.

Our Total capital ratio was flat, as the factors noted under Tier 1 capital ratio were mostly offset by the net redemption of subordinated debentures.

Royal Bank of Canada        Third Quarter 2015        51

Selected capital management activity

The following table provides our selected capital management activity for the three and nine months ended July 31, 2015.

Selected capital management activity
	For the three months ended July 31, 2015					For the nine months ended July 31, 2015
(Millions of Canadian dollars, except number of shares)	Number of shares (000s)		Amount			Number of shares (000s)			Amount
Tier 1 capital
Common shares issued
Stock options exercised (1)		90	$	5			959		$	50
Issuance of preferred shares Series BD (2), (3), (4)		–		–			24,000			600
Issuance of preferred shares Series BF (2), (3), (4)		–		–			12,000			300
Issuance of preferred shares Series BH (2), (3), (4)		6,000		150			6,000			150
Issuance of preferred shares Series BI (2), (3), (4)		6,000		150			6,000			150
Redemption of preferred shares Series AX		–		–			(13,000	)		(325	)
Tier 2 capital
Issuance of June 4, 2025 subordinated debentures (2), (4)				1,000						1,000
Maturity of November 14, 2014 subordinated debentures (2)				–						(200	)
Redemption of June 15, 2020 subordinated debentures (2)				(1,500	)					(1,500	)

(1) Amounts include cash received for stock options exercised during the period and the fair value adjustments to stock options.

(2) For further details, refer to Note 10 of our Condensed Financial Statements.

(3) Based on gross amount.

(4) Non-Viable Contingent Capital (NVCC) capital instruments.

Selected share data (1)

	As at July 31, 2015
(Millions of Canadian dollars, except number of shares)	Number of shares (000s)			Amount		Dividends declared per share
Common shares outstanding		1,443,192		$	14,561	$	0.77
First preferred shares outstanding
Non-cumulative Series W (2)		12,000			300		0.31
Non-cumulative Series AA		12,000			300		0.28
Non-cumulative Series AB		12,000			300		0.29
Non-cumulative Series AC		8,000			200		0.29
Non-cumulative Series AD		10,000			250		0.28
Non-cumulative Series AE		10,000			250		0.28
Non-cumulative Series AF		8,000			200		0.28
Non-cumulative Series AG		10,000			250		0.28
Non-cumulative Series AJ (3)		13,579			339		0.22
Non-cumulative Series AK (3)		2,421			61		0.16
Non-cumulative Series AL (3)		12,000			300		0.27
Non-cumulative Series AZ (3), (4)		20,000			500		0.25
Non-cumulative Series BB (3), (4)		20,000			500		0.24
Non-cumulative Series BD (3), (4)		24,000			600		0.23
Non-cumulative Series BF (3), (4)		12,000			300		0.40
Non-cumulative Series BH (4)		6,000			150		–
Non-cumulative Series BI (4)		6,000			150		–
Treasury shares held – preferred		(6	)		–
Treasury shares held – common		479			37
Stock options
Outstanding		8,414
Exercisable		5,463
Dividends
Common					1,110
Preferred					50

(1) For further details about our capital management activity, refer to Note 10 of our Condensed Financial Statements.

(2) Effective February 24, 2010, we have the right to convert into common shares at our option, subject to certain restrictions.

(3) Dividend rate will reset every five years.

(4) NVCC capital instruments.

On November 1, 2014, we renewed our normal course issuer bid (NCIB) which permits us to purchase up to 12 million of our common shares. The NCIB expires on October 31, 2015. For the three months and nine months ended July 31, 2015, we have not purchased any shares under the 2015 NCIB.

On June 4, 2015, we issued $1 billion of subordinated debentures due June 4, 2025. The subordinated debentures bear interest at a fixed rate of 2.48% per annum until June 4, 2020, and at the three-month Banker’s acceptance rate plus 1.1% thereafter until their maturity on June 4, 2025.

On June 5, 2015, we issued 6 million Non-cumulative First Preferred Shares Series BH for gross proceeds of $150 million. Net proceeds will be used for general business purposes.

52        Royal Bank of Canada        Third Quarter 2015

On July 22, 2015, we issued 6 million Non-cumulative First Preferred Shares Series BI for gross proceeds of $150 million. Net proceeds will be used for general business purposes.

As at August 21, 2015, the number of outstanding common shares and stock options was 1,443,191,703 and 8,413,811, respectively, and the number of Treasury shares – preferred and Treasury shares – common was 42,863 and 393,104, respectively.

NVCC provisions require the conversion of our capital instruments into a variable number of common shares in the event that OSFI deems the Bank to be non-viable or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. If a NVCC trigger event were to occur, our NVCC capital instruments preferred shares Series AZ, preferred shares Series BB, preferred shares Series BD, preferred shares Series BF, preferred shares Series BH, preferred shares Series BI, subordinated debentures due on July 17, 2024, subordinated debentures due on September 29, 2026 and subordinated debentures due on June 4, 2025 would be converted into RBC common shares pursuant to an automatic conversion formula with a conversion price based on the greater of: (i) a floor price of $5.00, and (ii) the current market price of our common shares at the time of the trigger event (10-day weighted average). Based on a floor price of $5.00 and including an estimate for accrued dividends and interest, these NVCC capital instruments would convert into a maximum of 1,358 million RBC common shares, on aggregate, which would represent a dilution impact of 48.48% based on the number of RBC common shares outstanding as at July 31, 2015.

Attributed capital

Our methodology for allocating capital to our business segments is based on the higher of fully diversified economic capital and the Basel III regulatory capital requirements. Risk-based capital attribution provides a uniform base for performance measurement among business segments, which compares to our overall corporate return objective and facilitates management decisions in resource allocation in conjunction with other factors. The following outlines our attributed capital.

Attributed capital

	For the three months ended
(Millions of Canadian dollars)	July 31 2015		April 30 2015		October 31 2014		July 31 2014
Credit risk	$	16,500	$	16,050	$	15,250	$	13,900
Market risk (trading and non-trading)		3,800		3,900		4,200		4,000
Operational risk		4,600		4,800		4,200		4,550
Business and fixed asset risk		2,900		3,050		2,600		2,850
Insurance risk		550		550		500		500
Goodwill and other intangibles		11,950		11,850		11,400		11,300
Regulatory capital allocation		5,100		5,400		4,200		4,050
Attributed capital	$	45,400	$	45,600	$	42,350	$	41,150
Under attribution of capital		7,200		5,900		5,100		5,250
Average common equity	$	52,600	$	51,500	$	47,450	$	46,400

Q3 2015 vs. Q2 2015

Attributed capital decreased $0.2 billion largely due to lower operational and business risks reflecting lower revenue primarily due to lower trading revenue, and lower regulatory capital allocation. These factors were partially offset by higher credit risk mainly due to growth in loan book including residential mortgages, derivatives and trading securities. The increase in goodwill and other intangibles risk reflects the increase due to the impact of foreign exchange as a result of the weaker Canadian dollar. We remain well capitalized with current levels of available capital exceeding the attributed capital required to underpin all of our material risks.

Royal Bank of Canada        Third Quarter 2015        53

Additional financial information

Exposures to selected financial instruments

	As at
	July 31, 2015										July 31, 2014
(Millions of Canadian dollars)	Subprime RMBS			Alt-A RMBS			CDOs that may contain subprime or Alt-A		Total		Subprime RMBS		Alt-A RMBS		CDOs that may contain subprime or Alt-A		Total
Fair value of securities	$	242		$	218		$	–	$	460	$	212	$	193	$	–	$	405
Fair value of securities by rating
AAA	$	–		$	–		$	–			$	2	$	–	$	–
AA		125			1			–				27		4		–
A		25			2			–				66		3		–
BBB		5			17			–				24		4		–
Below BBB-		87			198			–				93		182		–
Total	$	242		$	218		$	–	$	460	$	212	$	193	$	–	$	405
Fair value of securities by vintage
2003 (or before)	$	–		$	1		$	–			$	–	$	23	$	–
2004		30			18			–				7		38		–
2005		49			64			–				80		82		–
2006		114			105			–				103		42		–
2007 and later		49			30			–				22		8		–
Total	$	242		$	218		$	–	$	460	$	212	$	193	$	–	$	405
Amortized cost of subprime/Alt-A mortgages (whole loans)	$	9		$	43		$	–	$	52	$	9	$	37	$	–	$	46
Total subprime and Alt-A exposures	$	251		$	261		$	–	$	512	$	221	$	230	$	–	$	451
Sensitivities of fair value of securities to changes in assumptions:
100bps increase in credit spread	$	(10	)	$	(11	)
100bps increase in interest rates		(3	)		(37	)
20% increase in default rates		(5	)		(7	)
25% decrease in prepayment rates		(2	)		13

Certain activities and transactions we enter into expose us to the risk of default of U.S. subprime and Alt-A residential mortgages. Our exposures to U.S. subprime and Alt-A residential mortgages of $512 million represented less than 0.1% of our total assets as at July 31, 2015, compared to $451 million or less than 0.1% last year. The increase of $61 million primarily reflected an increase due to the impact of foreign exchange translation.

Q3 2015 vs. Q3 2014

Our total holdings of RMBS noted in the table above may be exposed to U.S. subprime risk. As at July 31, 2015, our U.S. subprime RMBS exposure of $242 million increased $30 million or 14% from last year, primarily due to the impact of foreign exchange translation. Of this exposure, $150 million or 62% of our related holdings were rated A and above, an increase of $55 million from last year due to the purchase of securities and an increase due to the impact of foreign exchange translation.

As at July 31, 2015, our exposure to U.S. subprime loans of $9 million was flat compared to the prior year.

Of our total portfolio of RMBS, holdings with a fair value of $218 million may be exposed to U.S. Alt-A risk. U.S. Alt-A exposures increased $25 million from last year primarily reflecting an increase due to the impact of foreign exchange translation. Approximately 62% of U.S. Alt-A exposures were issued during 2006 and onwards, which compares to 26% last year. As at July 31, 2015, our exposure to U.S. Alt-A loans of $43 million increased $6 million from last year.

Of our total portfolio of CDOs, we have no holdings that are exposed to U.S. subprime or Alt-A risk. As at July 31, 2015, the fair value of our U.S. corporate CDOs of $1,148 million, which were predominantly comprised of corporate collateralized loan obligations, increased $224 million from last year mainly reflecting an increase due to the impact of foreign exchange translation.

Commercial mortgage-backed securities

The fair value of our total direct holdings of Canadian and U.S. commercial mortgage-backed securities was $673 million as at July 31, 2015.

Assets and liabilities measured at fair value

Our financial instruments carried at fair value are classified as Level 1, 2, or 3, in accordance with the fair value hierarchy set out in IFRS 13 Fair Value Measurement. For further details on the fair value of our financial instruments and transfers between levels of the fair value hierarchy, refer to Note 3 of our audited 2014 Annual Consolidated Financial Statements.

54        Royal Bank of Canada        Third Quarter 2015

The following table presents the total fair value of each major class of financial assets and financial liabilities measured at fair value and the percentage of the fair value of each class categorized as Level 1, 2, or 3 as at July 31, 2015.

	As at July 31, 2015
(Millions of Canadian dollars, except percentage amounts)	Fair value (1)		Level 1 (1)			Level 2 (1)			Level 3 (1)			Total
Financial assets
Securities at FVTPL	$	172,370		40	%		60	%		0	%		100	%
Available-for-sale		59,827		13			81			6			100
Assets purchased under reverse repurchase agreements and securities borrowed		105,393		0			100			0			100
Loans – Wholesale		3,569		0			81			19			100
Derivatives		201,964		1			98			1			100
Financial liabilities
Deposits	$	108,284		0	%		99	%		1	%		100	%
Obligations related to securities sold short		55,656		66			34			0			100
Obligations related to assets sold under repurchase agreements and securities loaned		74,474		0			100			0			100
Derivatives		205,751		1			98			1			100

(1) The derivative assets and liabilities presented in the table above do not reflect the impact of netting.

Accounting and control matters

Summary accounting policies and estimates

Our Condensed Financial Statements are presented in compliance with International Accounting Standards (IAS) 34 Interim Financial Reporting. The significant accounting policies are described in Note 2 of our Condensed Financial Statements and Note 2 of our audited 2014 Annual Consolidated Financial Statements.

Changes in accounting policies and disclosure

We have adopted amendments to IAS 32 Financial Instruments: Presentation, and International Financial Reporting Standards (IFRS) Interpretations Committee IFRIC Interpretation 21 Levies, effective November 1, 2014. Refer to Note 2 of our Condensed Financial Statements for details of these changes.

Future changes in regulatory disclosure

Basel Committee on Banking Supervision revised Pillar 3 disclosure requirements

In January 2015, the BCBS issued the final standard for the revised Pillar 3 disclosure requirements with the goal of enhancing the transparency and improve comparability and consistency of banks’ capital and risk disclosure. BCBS requires all banks to provide the revised Pillar 3 disclosures by the end of fiscal 2016 and OSFI is expected to issue their domestic guidance for Canadian banks in the fall of 2015.

Controls and procedures

Disclosure controls and procedures

As of July 31, 2015, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Administrative Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as defined under rules adopted by the U.S. SEC. Based on that evaluation, the President and Chief Executive Officer and the Chief Administrative Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 31, 2015.

Internal control over financial reporting

No changes were made in our internal control over financial reporting during the quarter ended July 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Related party transactions

In the ordinary course of business, we provide normal banking services and operational services, and enter into other transactions with associated and other related corporations, including our joint venture entities, on terms similar to those offered to non-related parties. We grant loans to directors, officers and other employees at rates normally accorded to preferred clients. In addition, we offer deferred share and other plans to non-employee directors, executives and certain other key employees. For further information, refer to Notes 12 and 29 of our audited 2014 Annual Consolidated Financial Statements.

Royal Bank of Canada        Third Quarter 2015        55

EDTF recommendations index

On October 29, 2012, the Enhanced Disclosure Task Force (EDTF), established by the Financial Stability Board, issued its report Enhancing the Risk Disclosures of Banks, which included 32 recommendations aimed at achieving transparent, high-quality risk disclosures. As a result, our enhanced disclosures have been provided in our 2014 Annual Report, Q3 2015 Report to Shareholders (RTS) and Supplementary Financial Information package (SFI).

The following index summarizes our disclosure by EDTF recommendation:

			Location of disclosure
Type of Risk	Recommendation	Disclosure	RTS page	Annual Report page	SFI page
General	1	Table of contents for EDTF risk disclosure	55	107	1
	2	Define risk terminology and measures	–	47-52 199-201	–
	3	Top and emerging risks	–	46-47	–
	4	New regulatory ratios	39-41,48-49	69,85-86	–
Risk governance, risk management and business model	5	Risk management organization	–	47-52	–
	6	Risk culture	–	49-50	–
	7	Risk in the context of our business activities	–	93	–
	8	Stress testing	–	50,63	–
Capital adequacy and risk-weighted assets (RWA)	9	Minimum Basel III capital ratios and Domestic systemically important bank surcharge	48-49	86	–
	10	Composition of capital and reconciliation of the accounting balance sheet to the regulatory balance sheet	–	–	21-24
	11	Flow statement of the movements in regulatory capital	–	–	25
	12	Capital strategic planning	–	85-86	–
	13	RWA by business segments	–	–	28
	14	Analysis of capital requirement, and related measurement model information	–	52-55	26-27
	15	RWA credit risk and related risk measurements	–	–	42-44
	16	Movement of risk-weighted assets by risk type	–	–	28
	17	Basel back-testing	–	50,53	42
Liquidity	18	Quantitative and qualitative analysis of our liquidity reserve	42-43	70-71	–
Funding	19	Encumbered and unencumbered assets by balance sheet category, and contractual obligations for rating downgrades	43,48	72 77-78	–
	20	Maturity analysis of consolidated total assets, liabilities and off-balance sheet commitments analyzed by remaining contractual maturity at the balance sheet date	46-47	75-77	–
	21	Sources of funding and funding strategy	43-45	73-74	–
Market risk	22	Relationship between the market risk measures for trading and non-trading portfolios and the balance sheet	37-39	67-68	–
	23	Decomposition of market risk factors	34-36	63-65	–
	24	Market risk validation and back-testing	–	63	–
	25	Primary risk management techniques beyond reported risk measures and parameters	–	63-64	–
Credit risk	26	Bank’s credit risk profile	26-33 80-82	52-63 146-148	31-44
		Quantitative summary of aggregate credit risk exposures that reconciles to the balance sheet		100-106	40
	27	Policies for identifying impaired loans	–	55,97 125	–
	28	Reconciliation of the opening and closing balances of impaired loans and impairment allowances during the year	–	–	33,37
	29	Quantification of gross notional exposure for OTC derivatives or exchange-traded derivatives	–	53	46
	30	Credit risk mitigation, including collateral held for all sources of credit risk	–	54	41
Other	31	Other risk types	–	78-85	–
	32	Publicly known risk events	–	80 185	–

56        Royal Bank of Canada        Third Quarter 2015

Interim Condensed Consolidated Financial Statements (unaudited)

Interim Condensed Consolidated Balance Sheets (unaudited)

	As at
(Millions of Canadian dollars)	July 31 2015			April 30 2015			October 31 2014			July 31 2014
Assets
Cash and due from banks	$	19,976		$	18,393		$	17,421		$	16,297
Interest-bearing deposits with banks		10,731			4,402			8,399			5,383
Securities (Note 4)
Trading		172,370			169,763			151,380			152,756
Available-for-sale		63,145			52,880			47,768			46,358
		235,515			222,643			199,148			199,114
Assets purchased under reverse repurchase agreements and securities borrowed		172,659			163,368			135,580			135,205
Loans(Note 5)
Retail		343,463			336,064			334,269			329,999
Wholesale		121,214			114,283			102,954			102,348
		464,677			450,347			437,223			432,347
Allowance for loan losses (Note 5)		(2,078	)		(2,037	)		(1,994	)		(1,926	)
		462,599			448,310			435,229			430,421
Segregated fund net assets		821			780			675			645
Other
Customers’ liability under acceptances		12,761			12,637			11,462			10,443
Derivatives (Note 6)		112,459			107,004			87,402			72,823
Premises and equipment, net		2,667			2,595			2,684			2,603
Goodwill		9,322			8,890			8,647			8,568
Other intangibles		2,810			2,779			2,775			2,782
Investments in joint ventures and associates		346			319			295			306
Employee benefit assets		108			84			138			179
Other assets		42,399			39,968			30,695			29,101
		182,872			174,276			144,098			126,805
Total assets	$	1,085,173		$	1,032,172		$	940,550		$	913,870
Liabilities and equity
Deposits(Note 8)
Personal	$	218,629		$	215,903		$	209,217		$	204,427
Business and government		449,397			415,311			386,660			377,635
Bank		26,210			20,337			18,223			19,629
		694,236			651,551			614,100			601,691
Segregated fund net liabilities		821			780			675			645
Other
Acceptances		12,761			12,637			11,462			10,443
Obligations related to securities sold short		55,656			54,314			50,345			52,054
Obligations related to assets sold under repurchase agreements and securities loaned		83,236			81,207			64,331			65,423
Derivatives (Note 6)		116,083			112,219			88,982			75,096
Insurance claims and policy benefit liabilities		9,395			9,373			8,564			8,473
Employee benefit liabilities		2,431			2,611			2,420			2,205
Other liabilities		41,282			41,438			37,309			37,533
		320,844			313,799			263,413			251,227
Subordinated debentures (Note 10)		7,374			7,795			7,859			6,810
Total liabilities		1,023,275			973,925			886,047			860,373
Equity attributable to shareholders
Preferred shares (Note 10)		4,950			4,650			4,075			4,750
Common shares (shares issued – 1,443,191,703, 1,443,101,716, 1,442,232,886 and 1,441,535,962) (Note 10)		14,561			14,556			14,511			14,475
Treasury shares – preferred (shares held – (5,704), 70,730, 1,207 and (57,070))		–			2			–			(1	)
– common (shares held – 478,978, (1,357,362), 891,733 and 117,579)		37			(104	)		71			10
Retained earnings		35,795			34,142			31,615			30,526
Other components of equity		4,760			3,185			2,418			1,954
		60,103			56,431			52,690			51,714
Non-controlling interests		1,795			1,816			1,813			1,783
Total equity		61,898			58,247			54,503			53,497
Total liabilities and equity	$	1,085,173		$	1,032,172		$	940,550		$	913,870

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada        Third Quarter 2015        57

Interim Condensed Consolidated Statements of Income (unaudited)

	For the three months ended						For the nine months ended
(Millions of Canadian dollars, except per share amounts)	July 31 2015		April 30 2015		July 31 2014		July 31 2015		July 31 2014
Interest income
Loans	$	4,241	$	4,130	$	4,318	$	12,679	$	12,710
Securities		1,177		1,111		1,097		3,360		3,060
Assets purchased under reverse repurchase agreements and securities borrowed		319		298		237		918		718
Deposits and other		18		18		21		57		55
		5,755		5,557		5,673		17,014		16,543
Interest expense
Deposits and other		1,387		1,460		1,493		4,348		4,410
Other liabilities		525		477		473		1,509		1,394
Subordinated debentures		60		63		60		186		183
		1,972		2,000		2,026		6,043		5,987
Net interest income		3,783		3,557		3,647		10,971		10,556
Non-interest income
Insurance premiums, investment and fee income		1,021		806		1,383		3,719		3,790
Trading revenue		56		359		285		755		895
Investment management and custodial fees		966		943		838		2,836		2,469
Mutual fund revenue		739		716		671		2,150		1,930
Securities brokerage commissions		358		361		340		1,084		1,032
Service charges		405		391		380		1,188		1,108
Underwriting and other advisory fees		531		559		552		1,535		1,381
Foreign exchange revenue, other than trading		137		301		215		592		620
Card service revenue		209		192		181		605		509
Credit fees		320		311		317		876		841
Net gain on available-for-sale securities (Note 4)		42		42		36		111		130
Share of profit in joint ventures and associates		28		39		44		109		128
Other		233		253		101		771		337
		5,045		5,273		5,343		16,331		15,170
Total revenue		8,828		8,830		8,990		27,302		25,726
Provision for credit losses(Note 5)		270		282		283		822		819
Insurance policyholder benefits, claims and acquisition expense		656		493		1,009		2,671		2,821
Non-interest expense
Human resources (Note 9)		2,890		2,996		2,866		8,901		8,450
Equipment		327		311		287		935		859
Occupancy		351		356		350		1,042		997
Communications		213		224		207		635		588
Professional fees		223		204		178		625		500
Amortization of other intangibles		180		178		171		532		490
Other		451		467		543		1,321		1,437
		4,635		4,736		4,602		13,991		13,321
Income before income taxes		3,267		3,319		3,096		9,818		8,765
Income taxes		792		817		718		2,385		2,094
Net income	$	2,475	$	2,502	$	2,378	$	7,433	$	6,671
Net income attributable to:
Shareholders	$	2,449	$	2,473	$	2,352	$	7,356	$	6,594
Non-controlling interests		26		29		26		77		77
	$	2,475	$	2,502	$	2,378	$	7,433	$	6,671
Basic earnings per share (in dollars)(Note 11)	$	1.66	$	1.68	$	1.59	$	5.00	$	4.45
Diluted earnings per share (in dollars)(Note 11)		1.66		1.68		1.59		4.99		4.43
Dividends per common share(in dollars)		0.77		0.77		0.71		2.29		2.09

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

58        Royal Bank of Canada        Third Quarter 2015

Interim Condensed Consolidated Statements of Comprehensive Income (unaudited)

	For the three months ended									For the nine months ended
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Net income	$	2,475		$	2,502		$	2,378		$	7,433		$	6,671
Other comprehensive income (loss), net of taxes
Items that will be reclassified subsequently to income:
Net change in unrealized gains (losses) on available-for-sale securities
Net unrealized gains (losses) on available-for-sale securities		14			(122	)		39			100			121
Reclassification of net losses (gains) on available-for-sale securities to income		(9	)		(20	)		(7	)		(29	)		(42	)
		5			(142	)		32			71			79
Foreign currency translation adjustments
Unrealized foreign currency translation gains (losses)		3,542			(2,116	)		(203	)		5,982			1,819
Net foreign currency translation gains (losses) from hedging activities		(1,771	)		1,096			166			(3,280	)		(1,115	)
Reclassification of losses (gains) on foreign currency translation to income		(4	)		(167	)		47			(182	)		44
Reclassification of losses (gains) on net investment hedging activities to income		–			59			–			69			3
		1,767			(1,128	)		10			2,589			751
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges		(236	)		36			2			(582	)		(76	)
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income		46			79			(3	)		276			(8	)
		(190	)		115			(1	)		(306	)		(84	)
Items that will not be reclassified subsequently to income:
Remeasurements of employee benefit plans (Note 9)		203			413			(178	)		126			(84	)
Net fair value change due to credit risk on financial liabilities designated as at fair value through profit or loss		165			(79	)		(28	)		161			(110	)
		368			334			(206	)		287			(194	)
Total other comprehensive income (loss), net of taxes		1,950			(821	)		(165	)		2,641			552
Total comprehensive income	$	4,425		$	1,681		$	2,213		$	10,074		$	7,223
Total comprehensive income attributable to:
Shareholders	$	4,392		$	1,657		$	2,187		$	9,985		$	7,146
Non-controlling interests		33			24			26			89			77
	$	4,425		$	1,681		$	2,213		$	10,074		$	7,223

The income tax effect on the Interim Condensed Consolidated Statements of Comprehensive Income is shown in the table below.

	For the three months ended									For the nine months ended
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Income taxes on other comprehensive income
Net unrealized gains (losses) on available-for-sale securities	$	14		$	(35	)	$	26		$	47		$	56
Reclassification of net losses (gains) on available-for- sale securities to income		(4	)		(5	)		(3	)		(7	)		(6	)
Unrealized foreign currency translation gains (losses)		4			(3	)		–			7			4
Net foreign currency translation gains (losses) from hedging activities		(625	)		387			59			(1,160	)		(395	)
Reclassification of losses (gains) on net investment hedging activities to income		–			19			–			23			1
Net gains (losses) on derivatives designated as cash flow hedges		(85	)		14			1			(208	)		(27	)
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income		16			28			(2	)		98			(3	)
Remeasurements of employee benefit plans		70			147			(64	)		44			(34	)
Net fair value change due to credit risk on financial liabilities designated as at fair value through profit or loss		61			(29	)		(10	)		60			(40	)
Total income tax (recoveries) expenses	$	(549)		$	523		$	7		$	(1,096)		$	(444	)

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada        Third Quarter 2015        59

Interim Condensed Consolidated Statements of Changes in Equity (unaudited)

															Other components of equity
(Millions of Canadian dollars)	Preferred shares		Common shares			Treasury shares – preferred			Treasury shares – common			Retained earnings			Available- for-sale securities			Foreign currency translation			Cash flow hedges			Total other components of equity			Equity attributable to shareholders			Non-controlling interests			Total equity
Balance at April 30, 2014	$	4,250	$	14,458		$	–		$	73		$	29,489		$	394		$	1,427		$	92		$	1,913		$	50,183		$	1,793		$	51,976
Changes in equity
Issues of share capital		500		19			–			–			(7	)		–			–			–			–			512			–			512
Common shares purchased for cancellation		–		(2	)		–			–			(11	)		–			–			–			–			(13	)		–			(13	)
Sales of treasury shares		–		–			49			1,746			–			–			–			–			–			1,795			–			1,795
Purchases of treasury shares		–		–			(50	)		(1,809	)		–			–			–			–			–			(1,859	)		–			(1,859	)
Share-based compensation awards		–		–			–			–			(1	)		–			–			–			–			(1	)		–			(1	)
Dividends on common shares		–		–			–			–			(1,025	)		–			–			–			–			(1,025	)		–			(1,025	)
Dividends on preferred shares and other		–		–			–			–			(55	)		–			–			–			–			(55	)		(47	)		(102	)
Other		–		–			–			–			(10	)		–			–			–			–			(10	)		11			1
Net income		–		–			–			–			2,352			–			–			–			–			2,352			26			2,378
Total other comprehensive income (loss), net of taxes		–		–			–			–			(206	)		32			10			(1	)		41			(165	)		–			(165	)
Balance at July 31, 2014	$	4,750	$	14,475		$	(1	)	$	10		$	30,526		$	426		$	1,437		$	91		$	1,954		$	51,714		$	1,783		$	53,497
Balance at January 31, 2015	$	4,350	$	14,531		$	1		$	(57	)	$	32,505		$	640		$	3,831		$	(136	)	$	4,335		$	55,665		$	1,756		$	57,421
Changes in equity
Issues of share capital		300		25			–			–			(6	)		–			–			–			–			319			–			319
Sales of treasury shares		–		–			56			1,887			–			–			–			–			–			1,943			–			1,943
Purchases of treasury shares		–		–			(55	)		(1,934	)		–			–			–			–			–			(1,989	)		–			(1,989	)
Share-based compensation awards		–		–			–			–			(2	)		–			–			–			–			(2	)		–			(2	)
Dividends on common shares		–		–			–			–			(1,111	)		–			–			–			–			(1,111	)		–			(1,111	)
Dividends on preferred shares and other		–		–			–			–			(47	)		–			–			–			–			(47	)		–			(47	)
Other		–		–			–			–			(4	)		–			–			–			–			(4	)		36			32
Net income		–		–			–			–			2,473			–			–			–			–			2,473			29			2,502
Total other comprehensive income (loss), net of taxes		–		–			–			–			334			(142	)		(1,123	)		115			(1,150	)		(816	)		(5	)		(821	)
Balance at April 30, 2015	$	4,650	$	14,556		$	2		$	(104	)	$	34,142		$	498		$	2,708		$	(21	)	$	3,185		$	56,431		$	1,816		$	58,247
Changes in equity
Issues of share capital		300		5			–			–			(5	)		–			–			–			–			300			–			300
Sales of treasury shares		–		–			26			1,495			–			–			–			–			–			1,521			–			1,521
Purchases of treasury shares		–		–			(28	)		(1,354	)		–			–			–			–			–			(1,382	)		–			(1,382	)
Share-based compensation awards		–		–			–			–			–			–			–			–			–			–			–			–
Dividends on common shares		–		–			–			–			(1,110	)		–			–			–			–			(1,110	)		–			(1,110	)
Dividends on preferred shares and other		–		–			–			–			(50	)		–			–			–			–			(50	)		(46	)		(96	)
Other		–		–			–			–			1			–			–			–			–			1			(8	)		(7	)
Net income		–		–			–			–			2,449			–			–			–			–			2,449			26			2,475
Total other comprehensive income (loss), net of taxes		–		–			–			–			368			5			1,760			(190	)		1,575			1,943			7			1,950
Balance at July 31, 2015	$	4,950	$	14,561		$	–		$	37		$	35,795		$	503		$	4,468		$	(211	)	$	4,760		$	60,103		$	1,795		$	61,898

60        Royal Bank of Canada        Third Quarter 2015

																Other components of equity
(Millions of Canadian dollars)	Preferred shares			Common shares			Treasury shares – preferred			Treasury shares – common			Retained earnings			Available- for-sale securities		Foreign currency translation		Cash flow hedges			Total other components of equity		Equity attributable to shareholders			Non-controlling interests			Total equity
Balance at October 31, 2013	$	4,600		$	14,377		$	1		$	41		$	27,438		$	347	$	686	$	175		$	1,208	$	47,665		$	1,795		$	49,460
Changes in equity
Issues of share capital		1,000			114			–			–			(14	)		–		–		–			–		1,100			–			1,100
Common shares purchased for cancellation		–			(16	)		–			–			(97	)		–		–		–			–		(113	)		–			(113	)
Preferred shares redeemed		(850	)		–			–			–			–			–		–		–			–		(850	)		–			(850	)
Sales of treasury shares		–			–			100			3,848			–			–		–		–			–		3,948			–			3,948
Purchases of treasury shares		–			–			(102	)		(3,879	)		–			–		–		–			–		(3,981	)		–			(3,981	)
Share-based compensation awards		–			–			–			–			(6	)		–		–		–			–		(6	)		–			(6	)
Dividends on common shares		–			–			–			–			(3,016	)		–		–		–			–		(3,016	)		–			(3,016	)
Dividends on preferred shares and other		–			–			–			–			(169	)		–		–		–			–		(169	)		(94	)		(263	)
Other		–			–			–			–			(10	)		–		–		–			–		(10	)		5			(5	)
Net income		–			–			–			–			6,594			–		–		–			–		6,594			77			6,671
Total other comprehensive income (loss), net of taxes		–			–			–			–			(194	)		79		751		(84	)		746		552			–			552
Balance at July 31, 2014	$	4,750		$	14,475		$	(1	)	$	10		$	30,526		$	426	$	1,437	$	91		$	1,954	$	51,714		$	1,783		$	53,497
Balance at October 31, 2014	$	4,075		$	14,511		$	–		$	71		$	31,615		$	432	$	1,891	$	95		$	2,418	$	52,690		$	1,813		$	54,503
Changes in equity
Issues of share capital		1,200			50			–			–			(18	)		–		–		–			–		1,232			–			1,232
Preferred shares redeemed		(325	)		–			–			–			–			–		–		–			–		(325	)		–			(325	)
Sales of treasury shares		–			–			97			5,163			–			–		–		–			–		5,260			–			5,260
Purchases of treasury shares		–			–			(97	)		(5,197	)		–			–		–		–			–		(5,294	)		–			(5,294	)
Share-based compensation awards		–			–			–			–			–			–		–		–			–		–			–			–
Dividends on common shares		–			–			–			–			(3,302	)		–		–		–			–		(3,302	)		–			(3,302	)
Dividends on preferred shares and other		–			–			–			–			(137	)		–		–		–			–		(137	)		(92	)		(229	)
Other		–			–			–			–			(6	)		–		–		–			–		(6	)		(15	)		(21	)
Net income		–			–			–			–			7,356			–		–		–			–		7,356			77			7,433
Total other comprehensive income (loss), net of taxes		–			–			–			–			287			71		2,577		(306	)		2,342		2,629			12			2,641
Balance at July 31, 2015	$	4,950		$	14,561		$	–		$	37		$	35,795		$	503	$	4,468	$	(211	)	$	4,760	$	60,103		$	1,795		$	61,898

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada        Third Quarter 2015        61

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

	For the three months ended									For the nine months ended
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Cash flows from operating activities
Net income	$	2,475		$	2,502		$	2,378		$	7,433		$	6,671
Adjustments for non-cash items and others
Provision for credit losses		270			282			283			822			819
Depreciation		127			134			125			388			367
Deferred income taxes		(54	)		98			(177	)		49			(24	)
Amortization and Impairment of other intangibles		179			184			173			538			492
Impairment of investments in joint ventures and associates		5			9			5			20			17
Loss (gain) on sale of premises and equipment		5			(1	)		8			(34	)		13
Loss (gain) on available-for-sale securities		(64	)		(60	)		(39	)		(165	)		(156	)
Loss (gain) on disposition of business		(4	)		23			40			19			100
Impairment of available-for-sale securities		10			18			2			42			17
Share of loss (profit) in joint ventures and associates		(28	)		(39	)		(44	)		(109	)		(128	)
Adjustments for net changes in operating assets and liabilities
Insurance claims and policy benefit liabilities		22			(67	)		310			831			439
Net change in accrued interest receivable and payable		(172	)		262			(133	)		(228	)		77
Current income taxes		(107	)		738			434			(512	)		(132	)
Derivative assets		(5,459	)		43,560			(190	)		(25,061	)		1,999
Derivative liabilities		3,879			(40,650	)		1,890			27,116			(1,649	)
Trading securities		(2,569	)		11,231			(4,380	)		(21,083	)		(8,629	)
Loans, net of securitizations		(15,048	)		(1,380	)		(9,108	)		(29,497	)		(21,969	)
Assets purchased under reverse repurchase agreements and securities borrowed		(9,291	)		205			(1,224	)		(37,079	)		(17,688	)
Deposits, net of securitizations		44,991			(1,610	)		10,732			83,988			39,930
Obligations related to assets sold under repurchase agreements and securities loaned		2,029			(94	)		1,633			18,905			5,007
Obligations related to securities sold short		1,342			(5,171	)		1,631			5,311			4,942
Brokers and dealers receivable and payable		(794	)		(538	)		(631	)		(162	)		(628	)
Other		(4,336	)		(4,573	)		978			(10,853	)		(809	)
Net cash from (used in) operating activities		17,408			5,063			4,696			20,679			9,078
Cash flows from investing activities
Change in interest-bearing deposits with banks		(6,688	)		(581	)		(173	)		(2,497	)		3,656
Proceeds from sale of available-for-sale securities		2,579			2,824			703			7,630			3,776
Proceeds from maturity of available-for-sale securities		8,047			8,365			10,383			24,718			27,941
Purchases of available-for-sale securities		(18,288	)		(15,826	)		(14,381	)		(42,295	)		(38,173	)
Proceeds from maturity of held-to-maturity securities		16			–			73			16			285
Purchases of held-to-maturity securities		(103	)		(122	)		(367	)		(1,832	)		(552	)
Net acquisitions of premises and equipment and other intangibles		(449	)		(218	)		(290	)		(948	)		(832	)
Proceeds from dispositions		63			–			91			63			91
Net cash from (used in) investing activities		(14,823	)		(5,558	)		(3,961	)		(15,145	)		(3,808	)
Cash flows from financing activities
Redemption of trust capital securities		–			–			–			–			(900	)
Issue of subordinated debentures		1,000			–			1,000			1,000			1,000
Repayment of subordinated debentures		(1,500	)		–			(600	)		(1,700	)		(1,600	)
Issue of common shares		5			25			19			50			114
Common shares purchased for cancellation		–			–			(13	)		–			(113	)
Issue of preferred shares		300			300			500			1,200			1,000
Redemption of preferred shares		–			–			–			(325	)		(850	)
Sales of treasury shares		1,521			1,943			1,795			5,260			3,948
Purchase of treasury shares		(1,382	)		(1,989	)		(1,859	)		(5,294	)		(3,981	)
Dividends paid		(1,158	)		(1,121	)		(1,077	)		(3,404	)		(3,131	)
Issuance costs		(5	)		(6	)		(7	)		(18	)		(14	)
Dividends/distributions paid to non-controlling interests		(46	)		–			(47	)		(92	)		(94	)
Change in short-term borrowings of subsidiaries		(17	)		(111	)		(20	)		(104	)		(18	)
Net cash from (used in) financing activities		(1,282	)		(959	)		(309	)		(3,427	)		(4,639	)
Effect of exchange rate changes on cash and due from banks		280			(180	)		(8	)		448			116
Net change in cash and due from banks		1,583			(1,634	)		418			2,555			747
Cash and due from banks at beginning of period (1)		18,393			20,027			15,879			17,421			15,550
Cash and due from banks at end of period(1)	$	19,976		$	18,393		$	16,297		$	19,976		$	16,297
Cash flows from operating activities include:
Amount of interest paid	$	1,882		$	1,588		$	1,999		$	5,502		$	5,656
Amount of interest received		5,370			5,349			5,169			15,885			15,570
Amount of dividend received		542			483			537			1,430			1,290
Amount of income taxes paid		296			586			360			1,447			1,591

(1) We are required to maintain balances with central banks and other regulatory authorities. The total balances were $2.9 billion as at July 31, 2015 (April 30, 2015 – $2.3 billion; January 31, 2015 – $2.8 billion; October 31, 2014 – $2.0 billion; July 31, 2014 – $2.3 billion; April 30, 2014 – $2.3 billion; October 31, 2013 – $2.6 billion).

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

62        Royal Bank of Canada        Third Quarter 2015

Note 1    General information

Our unaudited Interim Condensed Consolidated Financial Statements (Condensed Financial Statements) are presented in compliance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The Condensed Financial Statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with our audited 2014 Annual Consolidated Financial Statements and the accompanying notes included on pages 108 to 196 in our 2014 Annual Report. Tabular information is stated in millions of Canadian dollars, except per share amounts and percentages. On August 25, 2015, the Board of Directors authorized the Condensed Financial Statements for issue.

Note 2    Summary of significant accounting policies, estimates and judgments

Except as indicated below, the Condensed Financial Statements have been prepared using the same accounting policies and methods used in preparation of our audited 2014 Annual Consolidated Financial Statements.

Changes in accounting policies

During the first quarter, we adopted the following new accounting pronouncements:

IAS 32 Financial Instruments: Presentation (IAS 32)

Amendments to IAS 32 clarify the existing requirements for offsetting financial assets and financial liabilities. The standard provides clarifications on the legal right to offset transactions, and when transactions settled through a gross settlement system would meet the simultaneous settlement criteria. We retrospectively adopted the amendments on November 1, 2014. The adoption of these amendments did not have an impact on our consolidated financial statements.

International Financial Reporting Standards (IFRS) Interpretations Committee IFRIC Interpretation 21 Levies (IFRIC 21)

IFRIC 21 provides guidance on when to recognize a liability to pay a levy that is accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. It also addresses the accounting for a liability to pay a levy whose timing and amount is certain. The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. We prospectively adopted the standard on November 1, 2014. We did not restate our quarterly or annual results for periods before November 1, 2014 as the amounts were not significant. The adoption of this interpretation did not have a material impact on our consolidated financial statements.

Future changes in accounting policy and disclosure

The following are developments in new accounting standards that took place during the nine months to date:

IFRS 15 Revenue from Contracts with Customers (IFRS 15)

In July 2015, the International Accounting Standards Board (IASB) announced a one-year deferral of the IFRS 15 effective date. The standard provides a single, principles based five-step model for revenue recognition to be applied to all contracts with customers. The formal amendment to the standard, specifying the new effective date, is expected to be issued in September 2015. IFRS 15 will be effective for us on November 1, 2018.

IFRS 9 Financial Instruments (IFRS 9)

In January 2015, the Office of the Superintendent of Financial Institutions (OSFI) issued an advisory with respect to the early adoption of IFRS 9 for Domestic Systemically Important Banks (D-SIBs), requiring D-SIBs to adopt IFRS 9 for the annual period beginning on November 1, 2017. As a D-SIB, we will be required to adopt IFRS 9 beginning on November 1, 2017, with the exception of the own credit provisions which we adopted in the second quarter of 2014.

Royal Bank of Canada        Third Quarter 2015        63

Note 3    Fair value of financial instruments

Carrying value and fair value of selected financial instruments

The following tables provide a comparison of the carrying and fair values for each classification of financial instruments. Refer to Note 2 and Note 3 of our audited 2014 Annual Consolidated Financial Statements for a description of the valuation techniques and inputs used in the fair value measurement of our financial instruments. There have been no significant changes to our determination of fair value during the quarter.

	As at July 31, 2015
	Carrying value and fair value						Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as at FVTPL		Financial instruments designated as at FVTPL		Available- for-sale instruments measured at fair value		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Securities
Trading	$	162,060	$	10,310	$	–	$	–	$	–	$	172,370	$	172,370
Available-for-sale (1)		–		–		59,842		3,303		3,524		63,145		63,366
		162,060		10,310		59,842		3,303		3,524		235,515		235,736
Assets purchased under reverse repurchase agreements and securities borrowed		–		105,393		–		67,266		67,282		172,659		172,675
Loans
Retail		–		–		–		342,223		343,941		342,223		343,941
Wholesale		1,895		1,674		–		116,807		116,059		120,376		119,628
		1,895		1,674		–		459,030		460,000		462,599		463,569
Other
Derivatives		112,459		–		–		–		–		112,459		112,459
Other assets (2)		–		979		–		44,867		44,867		45,846		45,846
Financial liabilities
Deposits
Personal	$	78	$	17,763			$	200,788	$	201,219	$	218,629	$	219,060
Business and government (3)		–		82,242				367,155		368,875		449,397		451,117
Bank (4)		–		8,201				18,009		18,014		26,210		26,215
		78		108,206				585,952		588,108		694,236		696,392
Other
Obligations related to securities sold short		55,656		–				–		–		55,656		55,656
Obligations related to assets sold under repurchase agreements and securities loaned		–		74,474				8,762		8,762		83,236		83,236
Derivatives		116,083		–				–		–		116,083		116,083
Other liabilities (5)		132		11				42,597		42,550		42,740		42,693
Subordinated debentures		–		110				7,264		7,198		7,374		7,308

64        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

	As at April 30, 2015
	Carrying value and fair value						Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as at FVTPL		Financial instruments designated as at FVTPL		Available- for-sale instruments measured at fair value		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Securities
Trading	$	159,077	$	10,686	$	–	$	–	$	–	$	169,763	$	169,763
Available-for-sale (1)		–		–		49,622		3,258		3,370		52,880		52,992
		159,077		10,686		49,622		3,258		3,370		222,643		222,755
Assets purchased under reverse repurchase agreements and securities borrowed		–		102,395		–		60,973		60,979		163,368		163,374
Loans
Retail		–		–		–		334,837		336,726		334,837		336,726
Wholesale		2,248		1,806		–		109,419		108,725		113,473		112,779
		2,248		1,806		–		444,256		445,451		448,310		449,505
Other
Derivatives		107,004		–		–		–		–		107,004		107,004
Other assets (2)		–		939		–		41,091		41,091		42,030		42,030
Financial liabilities
Deposits
Personal	$	104	$	17,563			$	198,236	$	198,699	$	215,903	$	216,366
Business and government (3)		–		74,021				341,290		343,158		415,311		417,179
Bank (4)		–		6,999				13,338		13,340		20,337		20,339
		104		98,583				552,864		555,197		651,551		653,884
Other
Obligations related to securities sold short		54,314		–				–		–		54,314		54,314
Obligations related to assets sold under repurchase agreements and securities loaned		–		71,218				9,989		9,989		81,207		81,207
Derivatives		112,219		–				–		–		112,219		112,219
Other liabilities (5)		131		21				42,865		42,834		43,017		42,986
Subordinated debentures		–		106				7,689		7,667		7,795		7,773

	As at October 31, 2014
	Carrying value and fair value						Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as at FVTPL		Financial instruments designated as at FVTPL		Available- for-sale instruments measured at fair value		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Securities
Trading	$	141,217	$	10,163	$	–	$	–	$	–	$	151,380	$	151,380
Available-for-sale (1)		–		–		46,009		1,759		1,762		47,768		47,771
		141,217		10,163		46,009		1,759		1,762		199,148		199,151
Assets purchased under reverse repurchase agreements and securities borrowed		–		85,292		–		50,288		50,288		135,580		135,580
Loans
Retail		–		–		–		333,045		334,475		333,045		334,475
Wholesale		1,337		2,278		–		98,569		98,461		102,184		102,076
		1,337		2,278		–		431,614		432,936		435,229		436,551
Other
Derivatives		87,402		–		–		–		–		87,402		87,402
Other assets (2)		–		930		–		32,975		32,975		33,905		33,905
Financial liabilities
Deposits
Personal	$	112	$	13,289			$	195,816	$	195,964	$	209,217	$	209,365
Business and government (3)		–		59,446				327,214		328,328		386,660		387,774
Bank (4)		–		6,592				11,631		11,636		18,223		18,228
		112		79,327				534,661		535,928		614,100		615,367
Other
Obligations related to securities sold short		50,345		–				–		–		50,345		50,345
Obligations related to assets sold under repurchase agreements and securities loaned		–		58,411				5,920		5,921		64,331		64,332
Derivatives		88,982		–				–		–		88,982		88,982
Other liabilities (5)		20		30				36,816		36,762		36,866		36,812
Subordinated debentures		–		106				7,753		7,712		7,859		7,818

Royal Bank of Canada        Third Quarter 2015        65

	As at July 31, 2014
	Carrying value and fair value							Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as at FVTPL			Financial instruments designated as at FVTPL		Available- for-sale instruments measured at fair value		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Securities
Trading	$	142,768		$	9,988	$	–	$	–	$	–	$	152,756	$	152,756
Available-for-sale (1)		–			–		45,677		681		681		46,358		46,358
		142,768			9,988		45,677		681		681		199,114		199,114
Assets purchased under reverse repurchase agreements and securities borrowed		–			92,405		–		42,800		42,800		135,205		135,205
Loans
Retail		–			–		–		328,833		329,617		328,833		329,617
Wholesale		1,524			2,129		–		97,935		98,120		101,588		101,773
		1,524			2,129		–		426,768		427,737		430,421		431,390
Other
Derivatives		72,823			–		–		–		–		72,823		72,823
Other assets (2)		–			905		–		30,666		30,666		31,571		31,571
Financial liabilities
Deposits
Personal	$	129		$	12,323			$	191,975	$	192,318	$	204,427	$	204,770
Business and government (3)		–			58,784				318,851		320,019		377,635		378,803
Bank (4)		–			7,410				12,219		12,219		19,629		19,629
		129			78,517				523,045		524,556		601,691		603,202
Other
Obligations related to securities sold short		52,054			–				–		–		52,054		52,054
Obligations related to assets sold under repurchase agreements and securities loaned		–			60,134				5,289		5,289		65,423		65,423
Derivatives		75,096			–				–		–		75,096		75,096
Other liabilities (5)		(2	)		32				36,531		36,531		36,561		36,561
Subordinated debentures		–			112				6,698		6,719		6,810		6,831

(1) Available-for-sale securities include held-to-maturity securities that are recorded at amortized cost.

(2) The total carrying amount is comprised of Customers’ liability under acceptances and financial instruments included in Other assets of $12.8 billion and $33 billion (April 30, 2015 – $12.6 billion and $29.4 billion; October 31, 2014 – $11.5 billion and $22.4 billion; July 31, 2014 – $10.4 billion and $21.2 billion), respectively.

(3) Business and government includes deposits from regulated deposit-taking institutions other than regulated banks.

(4) Bank refers to regulated banks.

(5) The total carrying amount is comprised of Acceptances and financial instruments included in Other liabilities of $12.8 billion and $29.9 billion (April 30, 2015 – $12.6 billion and $30.4 billion; October 31, 2014 – $11.5 billion and $25.4 billion; July 31, 2014 – $10.4 billion and $26.2 billion), respectively.

66        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

Fair value of assets and liabilities measured on a recurring basis and classified using the fair value hierarchy

The following tables present the financial instruments that are measured at fair value on a recurring basis and classified by the fair value hierarchy.

	As at
	July 31, 2015																	April 30, 2015
	Fair value measurements using								Total gross fair value			Netting adjustments			Assets/ liabilities at fair value			Fair value measurements using								Total gross fair value			Netting adjustments			Assets/ liabilities at fair value
(Millions of Canadian dollars)	Level 1		Level 2			Level 3												Level 1		Level 2			Level 3
Financial assets
Interest bearing deposits with banks	$	–	$	4,917		$	–		$	4,917		$			$	4,917		$	–	$	728		$	–		$	728		$			$	728
Securities
Trading
Canadian government debt (1)
Federal		10,024		7,457			–			17,481						17,481			10,468		7,090			–			17,558						17,558
Provincial and municipal		–		13,565			–			13,565						13,565			–		12,797			–			12,797						12,797
U.S. state, municipal and agencies debt (1)		3,442		34,106			12			37,560						37,560			5,368		31,456			1			36,825						36,825
Other OECD government debt (2)		5,338		9,657			–			14,995						14,995			4,619		10,026			–			14,645						14,645
Mortgage-backed securities (1)		–		2,823			6			2,829						2,829			–		3,038			9			3,047						3,047
Asset-backed securities
CDOs (3)		–		11			64			75						75			–		17			54			71						71
Non-CDO securities		–		2,583			29			2,612						2,612			–		1,809			41			1,850						1,850
Corporate debt and other debt		24		30,127			65			30,216						30,216			21		28,396			166			28,583						28,583
Equities		49,912		2,995			130			53,037						53,037			50,312		3,900			175			54,387						54,387
		68,740		103,324			306			172,370						172,370			70,788		98,529			446			169,763						169,763
Available-for-sale (4)
Canadian government debt (1)
Federal		324		11,363			–			11,687						11,687			319		11,421			–			11,740						11,740
Provincial and municipal		–		1,372			–			1,372						1,372			–		1,044			–			1,044						1,044
U.S. state, municipal and agencies debt (1)		–		11,718			878			12,596						12,596			–		7,506			682			8,188						8,188
Other OECD government debt		7,152		8,130			13			15,295						15,295			6,619		6,995			12			13,626						13,626
Mortgage-backed securities (1)		–		460			–			460						460			–		124			–			124						124
Asset-backed securities
CDOs		–		1,148			–			1,148						1,148			–		925			30			955						955
Non-CDO securities		–		575			198			773						773			–		441			165			606						606
Corporate debt and other debt		–		12,961			1,675			14,636						14,636			–		9,824			1,734			11,558						11,558
Equities		426		320			1,014			1,760						1,760			146		502			1,010			1,658						1,658
Loan substitute securities		100		–			–			100						100			83		25			–			108						108
		8,002		48,047			3,778			59,827						59,827			7,167		38,807			3,633			49,607						49,607
Assets purchased under reverse repurchase agreements and securities borrowed		–		105,393			–			105,393						105,393			–		102,395			–			102,395						102,395
Loans		–		2,901			668			3,569						3,569			–		3,437			617			4,054						4,054
Other
Derivatives
Interest rate contracts		10		143,797			384			144,191						144,191			88		143,875			441			144,404						144,404
Foreign exchange contracts		–		49,164			93			49,257						49,257			–		45,569			54			45,623						45,623
Credit derivatives		–		88			6			94						94			–		127			8			135						135
Other contracts		2,949		5,954			638			9,541						9,541			2,678		4,661			423			7,762						7,762
Valuation adjustments (5)		–		(1,080	)		(39	)		(1,119	)					(1,119	)		–		(910	)		(36	)		(946	)					(946	)
Total gross derivatives		2,959		197,923			1,082			201,964						201,964			2,766		193,322			890			196,978						196,978
Netting adjustments													(89,505	)		(89,505	)													(89,974	)		(89,974	)
Total derivatives																112,459																	107,004
Other assets		725		254			–			979						979			730		209			–			939						939
	$	80,426	$	462,759		$	5,834		$	549,019		$	(89,505	)	$	459,514		$	81,451	$	437,427		$	5,586		$	524,464		$	(89,974	)	$	434,490
Financial Liabilities
Deposits
Personal	$	–	$	17,205		$	636		$	17,841		$			$	17,841		$	–	$	17,032		$	635		$	17,667		$			$	17,667
Business and government		–		82,234			8			82,242						82,242			–		73,938			83			74,021						74,021
Bank		–		8,201			–			8,201						8,201			–		6,999			–			6,999						6,999
Other
Obligations related to securities sold short		36,733		18,923			–			55,656						55,656			35,910		18,404			–			54,314						54,314
Obligations related to assets sold under repurchase agreements and securities loaned		–		74,474			–			74,474						74,474			–		71,218			–			71,218						71,218
Derivatives
Interest rate contracts		1		137,443			841			138,285						138,285			70		137,484			899			138,453						138,453
Foreign exchange contracts		–		54,602			41			54,643						54,643			–		52,075			30			52,105						52,105
Credit derivatives		–		199			7			206						206			–		256			9			265						265
Other contracts		2,983		8,902			877			12,762						12,762			2,561		7,667			914			11,142						11,142
Valuation adjustments (5)		–		(160	)		15			(145	)					(145	)		–		(42	)		15			(27	)					(27	)
Total gross derivatives		2,984		200,986			1,781			205,751						205,751			2,631		197,440			1,867			201,938						201,938
Netting adjustments													(89,668	)		(89,668	)													(89,719	)		(89,719	)
Total derivatives																116,083																	112,219
Other liabilities		100		11			32			143						143			89		21			42			152						152
Subordinated debentures		–		110			–			110						110			–		106			–			106						106
	$	39,817	$	402,144		$	2,457		$	444,418		$	(89,668	)	$	354,750		$	38,630	$	385,158		$	2,627		$	426,415		$	(89,719	)	$	336,696

Royal Bank of Canada        Third Quarter 2015        67

	As at
	October 31, 2014																	July 31, 2014
	Fair value measurements using								Total gross fair value			Netting adjustments			Assets/ liabilities at fair value			Fair value measurements using								Total gross fair value			Netting adjustments			Assets/ liabilities at fair value
(Millions of Canadian dollars)	Level 1		Level 2			Level 3												Level 1		Level 2			Level 3
Financial assets
Interest bearing deposits with banks	$	–	$	5,603		$	–		$	5,603		$			$	5,603		$	–	$	1,195		$	–		$	1,195		$			$	1,195
Securities
Trading
Canadian government debt (1)
Federal		8,288		5,855			–			14,143						14,143			8,547		6,810			–			15,357						15,357
Provincial and municipal		–		11,371			–			11,371						11,371			–		11,994			–			11,994						11,994
U.S. state, municipal and agencies debt (1)		1,838		27,628			6			29,472						29,472			4,932		25,194			7			30,133						30,133
Other OECD government debt (2)		7,334		7,991			–			15,325						15,325			4,958		9,470			–			14,428						14,428
Mortgage-backed securities (1)		–		964			4			968						968			–		1,139			21			1,160						1,160
Asset-backed securities
CDOs (3)		–		37			74			111						111			–		31			71			102						102
Non-CDO securities		–		889			364			1,253						1,253			–		990			302			1,292						1,292
Corporate debt and other debt		15		27,422			149			27,586						27,586			14		27,600			197			27,811						27,811
Equities		47,396		3,589			166			51,151						51,151			46,579		3,736			164			50,479						50,479
		64,871		85,746			763			151,380						151,380			65,030		86,964			762			152,756						152,756
Available-for-sale (4)
Canadian government debt (1)
Federal		429		11,540			–			11,969						11,969			313		11,482			–			11,795						11,795
Provincial and municipal		–		799			–			799						799			–		822			–			822						822
U.S. state, municipal and agencies debt (1)		29		4,839			1,389			6,257						6,257			–		4,986			2,092			7,078						7,078
Other OECD government debt		6,979		7,303			11			14,293						14,293			6,949		6,684			11			13,644						13,644
Mortgage-backed securities (1)		–		138			–			138						138			–		134			–			134						134
Asset-backed securities
CDOs		–		857			24			881						881			–		890			71			961						961
Non-CDO securities		–		381			182			563						563			–		338			177			515						515
Corporate debt and other debt		–		7,714			1,573			9,287						9,287			–		7,309			1,566			8,875						8,875
Equities		140		514			1,028			1,682						1,682			144		523			1,045			1,712						1,712
Loan substitute securities		102		24			–			126						126			104		24			–			128						128
		7,679		34,109			4,207			45,995						45,995			7,510		33,192			4,962			45,664						45,664
Assets purchased under reverse repurchase agreements and securities borrowed		–		85,292			–			85,292						85,292			–		92,405			–			92,405						92,405
Loans		–		3,154			461			3,615						3,615			–		3,193			460			3,653						3,653
Other
Derivatives
Interest rate contracts		13		102,176			339			102,528						102,528			21		85,264			361			85,646						85,646
Foreign exchange contracts		–		33,761			48			33,809						33,809			–		20,489			43			20,532						20,532
Credit derivatives		–		244			10			254						254			–		182			14			196						196
Other contracts		3,238		4,839			560			8,637						8,637			2,671		4,512			500			7,683						7,683
Valuation adjustments (5)		–		(702	)		(56	)		(758	)					(758	)		–		(450	)		(65	)		(515	)					(515	)
Total gross derivatives		3,251		140,318			901			144,470						144,470			2,692		109,997			853			113,542						113,542
Netting adjustments													(57,068	)		(57,068	)													(40,719	)		(40,719	)
Total derivatives																87,402																	72,823
Other assets		604		326			–			930						930			573		332			–			905						905
	$	76,405	$	354,548		$	6,332		$	437,285		$	(57,068	)	$	380,217		$	75,805	$	327,278		$	7,037		$	410,120		$	(40,719	)	$	369,401
Financial Liabilities
Deposits
Personal	$	–	$	12,904		$	497		$	13,401		$			$	13,401		$	–	$	11,990		$	462		$	12,452		$			$	12,452
Business and government		–		59,376			70			59,446						59,446			–		58,608			176			58,784						58,784
Bank		–		6,592			–			6,592						6,592			–		7,410			–			7,410						7,410
Other
Obligations related to securities sold short		32,857		17,484			4			50,345						50,345			35,027		17,011			16			52,054						52,054
Obligations related to assets sold under repurchase agreements and securities loaned		–		58,411			–			58,411						58,411			–		60,134			–			60,134						60,134
Derivatives
Interest rate contracts		9		96,752			709			97,470						97,470			15		80,647			720			81,382						81,382
Foreign exchange contracts		–		35,664			39			35,703						35,703			–		22,816			28			22,844						22,844
Credit derivatives		–		327			15			342						342			–		288			19			307						307
Other contracts		2,886		8,537			1,062			12,485						12,485			2,452		8,026			1,092			11,570						11,570
Valuation adjustments (5)		–		(65	)		29			(36	)					(36	)		–		11			22			33						33
Total gross derivatives		2,895		141,215			1,854			145,964						145,964			2,467		111,788			1,881			116,136						116,136
Netting adjustments													(56,982	)		(56,982	)													(41,040	)		(41,040	)
Total derivatives																88,982																	75,096
Other liabilities		–		30			20			50						50			–		32			(2	)		30						30
Subordinated debentures		–		106			–			106						106			–		112			–			112						112
	$	35,752	$	296,118		$	2,445		$	334,315		$	(56,982	)	$	277,333		$	37,494	$	267,085		$	2,533		$	307,112		$	(41,040	)	$	266,072

(1) As at July 31, 2015, residential and commercial mortgage-backed securities included in all fair value levels of trading securities were $10,682 million and $295 million (April 30, 2015 – $12,100 million and $130 million; October 31, 2014 – $6,564 million and $81 million; July 31, 2014 – $7,455 million and $81 million), respectively, and in all fair value levels of available-for-sale securities, $7,554 million and $378 million (April 30, 2015 – $7,545 million and $32 million; October 31, 2014 – $6,956 million and $34 million; July 31, 2014 – $6,340 million and $25 million), respectively.

(2) OECD stands for Organisation for Economic Co-operation and Development.

(3) CDOs stand for collateralized debt obligations.

(4) Excludes $15 million of available-for-sale securities (April 30, 2015 – $15 million; October 31, 2014 – $14 million; July 31, 2014 – $13 million) that are carried at cost.

(5) We are permitted an exception, through an accounting policy choice, to measure the fair value of a portfolio of financial instruments on a net open risk position basis when certain criteria are met. We have elected to use this policy choice to determine fair value of certain portfolios of financial instruments, primarily derivatives, on a net exposure to market or credit risk. The valuation adjustment amounts in this table include those determined on a portfolio basis.

68        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

Quantitative information about fair value measurements using significant unobservable inputs (Level 3 Instruments)

The following table presents fair values of our significant Level 3 financial instruments, valuation techniques used to determine their fair values, ranges and weighted averages of unobservable inputs. Refer to Note 3 of our audited 2014 Annual Consolidated Financial Statements for a description of the sensitivity to unobservable inputs and interrelationships between unobservable inputs used in the determination of fair value of our Level 3 financial instruments. There have been no significant changes to these sensitivities or interrelationships during the quarter.

As at July 31, 2015 (Millions of Canadian dollars, except for prices, percentages and ratios)

Fair value

Range of input values (2), (3)

Products

Reporting line in the fair value hierarchy table

Assets

Liabilities

Valuation techniques

Significant unobservable inputs (1)

Low

High

Weighted average / Inputs distribution (4)

Non-derivative financial instruments

Asset-backed securities

Price-based

Prices

n.a.

n.a.

n.a.

Asset-backed securities

$

112

Discounted cash flows

Discount margins

1.24%

10.65%

5.95%

Obligations related to securities sold short

$

–

Yields

2.80%

3.24%

2.92%

Default rates

0.00%

5.00%

2.50%

Prepayment rates

0.00%

30.00%

15.00%

Loss severity rates

20.00%

70.00%

45.00%

Auction rate securities

Discounted cash flows

Discount margins

1.50%

4.40%

2.63%

U.S. state, municipal and agencies debt

705

Default rates

9.00%

10.00%

9.96%

Asset-backed securities

179

Prepayment rates

4.00%

8.00%

4.35%

Recovery rates

40.00%

97.50%

91.71%

Corporate debt

Price-based

Prices

$

57.51

$

160.78

$

115.08

Corporate debt and other debt

97

Discounted cash flows

Yields

3.29%

7.24%

4.77%

Loans

668

Credit Spreads

n.a.

n.a.

n.a.

Obligations related to securities sold short

–

Capitalization rates

5.84%

8.71%

6.63%

Liquidity discounts (5)

n.a.

n.a.

n.a.

Government debt and

Price-based

Prices

$

67.04

$

100.00

$

90.60

municipal bonds

U.S. state, municipal and agencies debt

185

Discounted cash flows

Yields

0.36%

21.79%

3.06%

Other OECD government debt

13

Corporate debt and other debt

1,643

Bank funding and deposits

Discounted cash flows

Funding spreads

n.a.

n.a.

n.a.

Deposits

–

Interest rate (IR)-IR correlations

n.a.

n.a.

n.a.

Subordinated debentures

–

Foreign exchange (FX)-FX correlations

n.a.

n.a.

n.a.

FX-IR correlations

n.a.

n.a.

n.a.

Private equities, hedge fund

Market comparable

EV/EBITDA multiples

6.30X

15.50X

8.19X

investments and related

Price-based

P/E multiples

9.40X

22.40X

12.15X

equity derivatives

Equities

1,144

Discounted cash flows

EV/Rev multiples

0.29X

7.50X

3.21X

Derivative-related assets

14

Liquidity discounts (5)

0.00%

50.00%

27.14%

Derivative-related liabilities

338

Discount rate

12.00%

17.00%

16.41%

Obligations related to securities sold short

–

Net asset values / prices (6)

n.a.

n.a.

n.a.

Derivative financial instruments

Interest rate derivatives and

Discounted cash flows

Interest rates

2.51%

2.54%

Even

interest-rate-linked

Option pricing model

CPI swap rates

1.60%

2.01%

Even

structured notes (7)

Derivative-related assets

435

Funding spreads

n.a.

n.a.

n.a.

Deposits

–

IR-IR correlations

19.00%

67.00%

Even

Derivative-related liabilities

842

FX-IR correlations

29.00%

56.00%

Even

FX-FX correlations

68.00%

68.00%

Even

IR volatilities (9)

1.54%

7.54%

Even

Equity derivatives and

Discounted cash flows

Dividend yields

0.03%

26.53%

Lower

equity-linked structured

Option pricing model

Funding spreads

n.a.

n.a.

n.a.

notes (7)

Derivative-related assets

508

Equity (EQ)-EQ correlations

13.90%

96.90%

Middle

Deposits

636

EQ-FX correlations

(69.90)%

29.30%

Middle

Derivative-related liabilities

403

EQ volatilities

0.30%

182.00%

Lower

Other (8)

Mortgage-backed securities

6

Corporate debt and other debt

–

Derivative-related assets

125

Deposits

8

Derivative-related liabilities

198

Other liabilities

32

Total

$

5,834

$

2,457

Royal Bank of Canada        Third Quarter 2015        69

As at April 30, 2015 (Millions of Canadian dollars, except for prices, percentages and ratios)

Fair value

Range of input values (2), (3)

Products

Reporting line in the fair value hierarchy table

Assets

Liabilities

Valuation techniques

Significant unobservable inputs (1)

Low

High

Weighted average / Inputs distribution (4)

Non-derivative financial instruments

Asset-backed securities

Price-based

Prices

$

37.53

$

37.53

$

37.53

Asset-backed securities

$

143

Discounted cash flows

Discount margins

1.32%

20.67%

11.00%

Obligations related to securities sold short

$

–

Yields

2.84%

2.99%

2.88%

Default rates

0.00%

5.00%

2.50%

Prepayment rates

0.00%

30.00%

15.00%

Loss severity rates

20.00%

70.00%

45.00%

Auction rate securities

Discounted cash flows

Discount margins

1.38%

4.25%

2.37%

U.S. state, municipal and agencies debt

639

Default rates

9.00%

10.00%

9.96%

Asset-backed securities

147

Prepayment rates

4.00%

8.00%

4.37%

Recovery rates

40.00%

97.50%

91.29%

Corporate debt

Price-based

Prices

$

57.66

$

157.79

$

99.30

Corporate debt and other debt

151

Discounted cash flows

Yields

5.22%

7.50%

6.23%

Loans

617

Credit spreads

n.a.

n.a.

n.a.

Obligations related to securities sold short

–

Capitalization rates

5.72%

9.20%

6.86%

Liquidity discounts (5)

n.a.

n.a.

n.a.

Government debt and

Price-based

Prices

$

67.15

$

100.00

$

82.77

municipal bonds

U.S. state, municipal and agencies debt

44

Discounted cash flows

Yields

0.02%

34.89%

2.68%

Other OECD government debt

12

Corporate debt and other debt

1,712

Bank funding and deposits

Discounted cash flows

Funding spreads

n.a.

n.a.

n.a.

Deposits

–

Interest rate (IR)-IR correlations

n.a.

n.a.

n.a.

Subordinated debentures

–

Foreign exchange (FX)-FX correlations

n.a.

n.a.

n.a.

FX-IR correlations

n.a.

n.a.

n.a.

Private equities, hedge fund

Market comparable

EV/EBITDA multiples

5.00X

15.50X

8.05X

investments and related

Price-based

P/E multiples

9.40X

22.40X

12.21X

equity derivatives

Equities

1,185

Discounted cash flows

EV/Rev multiples

0.29X

7.50X

3.07X

Derivative-related assets

52

Liquidity discounts (5)

0.00%

50.00%

27.12%

Derivative-related liabilities

500

Discount rate

12.00%

17.00%

16.41%

Obligations related to securities sold short

–

Net asset values / prices (6)

n.a.

n.a.

n.a.

Derivative financial instruments

Interest rate derivatives and

Discounted cash flows

Interest rates

2.56%

2.56%

Even

interest-rate-linked

Option pricing model

CPI swap rates

1.40%

2.23%

Even

structured notes (7)

Derivative-related assets

468

Funding spreads

n.a.

n.a.

n.a.

Deposits

–

IR-IR correlations

19.00%

67.00%

Even

Derivative-related liabilities

902

FX-IR correlations

29.00%

56.00%

Even

FX-FX correlations

68.00%

68.00%

Even

IR volatilities (9)

1.19%

7.19%

Even

Equity derivatives and

Discounted cash flows

Dividend yields

0.02%

14.09%

Lower

equity-linked structured

Option pricing model

Funding spreads

n.a.

n.a.

n.a.

notes (7)

Derivative-related assets

254

Equity (EQ)-EQ correlations

(0.70)%

96.60%

Middle

Deposits

635

EQ-FX correlations

(74.50)%

41.70%

Middle

Derivative-related liabilities

305

EQ volatilities

0.30%

169.00%

Lower

Other (8)

Mortgage-backed securities

9

Corporate debt and other debt

37

Derivative-related assets

116

Deposits

83

Derivative-related liabilities

160

Other liabilities

42

Total

$

5,586

$

2,627

70        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

As at October 31, 2014 (Millions of Canadian dollars, except for prices, percentages and ratios)
		Fair value						Range of input values (2), (3)
Products	Reporting line in the fair value hierarchy table	Assets		Liabilities		Valuation techniques	Significant unobservable inputs (1)	Low			High		Weighted average / Inputs distribution (4)
Non-derivative financial instruments
Asset-backed securities						Price-based	Prices	$	53.70		$	90.50	$	75.92
	Asset-backed securities	$	478			Discounted cash flows	Discount margins		0.70%			9.48%		5.09%
	Obligations related to securities sold short			$	–		Yields		2.84%			5.36%		3.52%
							Default rates		1.00%			5.00%		2.00%
							Prepayment rates		15.00%			30.00%		20.00%
							Loss severity rates		30.00%			70.00%		50.00%
Auction rate securities						Discounted cash flows	Discount margins		1.32%			4.63%		2.26%
	U.S. state, municipal and agencies debt		979				Default rates		9.00%			10.00%		9.80%
	Asset-backed securities		166				Prepayment rates		4.00%			8.00%		4.76%
							Recovery rates		40.00%			97.50%		93.51%
Corporate debt						Price-based	Prices	$	2.50		$	119.52	$	97.86
	Corporate debt and other debt		100			Discounted cash flows	Yields		2.75%			7.50%		3.84%
	Loans		461				Credit spreads		n.a.			n.a.		n.a.
	Obligations related to securities sold short				4		Capitalization rates		6.43%			9.47%		7.95%
							Liquidity discounts (5)		10.00%			10.00%		10.00%
Government debt and municipal bonds						Price-based	Prices	$	67.38		$	100.00	$	96.24
	U.S. state, municipal and agencies debt		416			Discounted cash flows	Yields		0.17%			30.15%		3.06%
	Other OECD government debt		11
	Corporate debt and other debt		1,616
Bank funding and deposits						Discounted cash flows	Funding spreads		n.a.			n.a.		n.a.
	Deposits				70		Interest rate (IR)-IR correlations		19.00%			67.00%		Even
	Subordinated debentures				–		Foreign exchange (FX)-FX correlations		68.00%			68.00%		Even
							FX-IR correlations		29.00%			56.00%		Even
Private equities, hedge fund investments and related equity derivatives						Market comparable	EV/EBITDA multiples		4.00X			10.80X		8.73X
						Price-based	P/E multiples		8.79X			15.70X		11.79X
	Equities		1,194			Discounted cash flows	EV/Rev multiples		0.45X			7.50X		4.97X
	Derivative-related assets		11				Liquidity discounts (5)		0.00%			50.00%		26.92%
	Derivative-related liabilities				434		Discount rate		12.00%			17.00%		14.78%
	Obligations related to securities sold short				–		Net asset values / prices (6)		n.a.			n.a.		n.a.
Derivative financial instruments
Interest rate derivatives and interest-rate-linked structured notes (7)						Discounted cash flows	Interest rates		2.96%			2.98%		Even
						Option pricing model	CPI swap rates		1.73%			2.30%		Even
	Derivative-related assets		348				Funding spreads		n.a.			n.a.		n.a.
	Deposits				–		IR-IR correlations		19.00%			67.00%		Even
	Derivative-related liabilities				732		FX-IR correlations		29.00%			56.00%		Even
							FX-FX correlations		68.00%			68.00%		Even
							IR volatilities		26.28%			28.80%		Even
Equity derivatives and equity-linked structured notes (7)						Discounted cash flows	Dividend yields		0.04%			18.11%		Lower
						Option pricing model	Funding spreads		n.a.			n.a.		n.a.
	Derivative-related assets		442				Equity (EQ)-EQ correlations		0.50%			97.20%		Middle
	Deposits				497		EQ-FX correlations		(72.80	)%		53.20%		Middle
	Derivative-related liabilities				529		EQ volatilities		1.00%			172.00%		Lower
Other (8)
	Mortgage-backed securities		4
	Corporate debt and other debt		6
	Derivative-related assets		100
	Deposits				–
	Derivative-related liabilities				159
	Other liabilities				20
Total		$	6,332	$	2,445

Royal Bank of Canada        Third Quarter 2015        71

As at July 31, 2014 (Millions of Canadian dollars, except for prices, percentages and ratios)
		Fair value									Range of input values (2), (3)
Products	Reporting line in the fair value hierarchy table	Assets		Liabilities			Valuation techniques		Significant unobservable inputs (1)		Low		High		Weighted average / Inputs distribution (4)
Non-derivative financial instruments
Asset-backed securities								Price-based		Prices	$	88.75	$	88.75	$	88.75
	Asset-backed securities	$	459					Discounted cash flows		Discount margins		0.66%		6.96%		3.31%
	Obligations related to securities sold short			$	4					Yields		0.03%		1.20%		0.89%
										Default rates		1.00%		5.00%		2.84%
										Prepayment rates		15.00%		30.00%		22.09%
										Loss severity rates		30.00%		70.00%		50.00%
Auction rate securities								Discounted cash flows		Discount margins		1.36%		4.61%		3.16%
	U.S. state, municipal and agencies debt		1,615							Default rates		9.00%		10.00%		9.65%
	Asset-backed securities		162							Prepayment rates		4.00%		8.00%		5.07%
										Recovery rates		40.00%		97.50%		81.86%
Corporate debt								Price-based		Prices	$	1.01	$	107.57	$	96.42
	Corporate debt and other debt		122					Discounted cash flows		Yields		0.51%		9.00%		3.35%
	Loans		460							Credit spreads		3.45%		5.56%		3.65%
	Obligations related to securities sold short				12					Capitalization rates		6.31%		14.14%		10.23%
										Liquidity discounts (5)		n.a.		n.a.		n.a.
Government debt and municipal bonds								Price-based		Prices	$	19.38	$	103.99	$	99.37
	U.S. state, municipal and agencies debt		484					Discounted cash flows		Yields		0.01%		47.27%		2.73%
	Other OECD government debt		11
	Corporate debt and other debt		1,641
Bank funding and deposits								Discounted cash flows		Funding spreads		0.45%		0.45%		0.45%
	Deposits				176					Interest rate (IR)-IR correlations		n.a.		n.a.		n.a.
	Subordinated debentures				–					Foreign exchange (FX)-FX correlations		n.a.		n.a.		n.a.
										FX-IR correlations		n.a.		n.a.		n.a.
Private equities, hedge fund investments and related equity derivatives								Market comparable		EV/EBITDA multiples		3.00X		5.90X		5.73X
								Price-based		P/E multiples		15.83X		15.83X		15.83X
	Equities		1,209					Discounted cash flows		EV/Rev multiples		1.70X		6.10X		5.51X
	Derivative-related assets		10							Liquidity discounts (5)		30.00%		30.00%		30.00%
	Derivative-related liabilities				495					Discount rate		n.a.		n.a.		n.a.
	Obligations related to securities sold short				–					Net asset values / prices (6)		n.a.		n.a.		n.a.
Derivative financial instruments
Interest rate derivatives and interest-rate-linked structured notes (7)								Discounted cash flows		Interest rates		3.16%		3.16%		Even
								Option pricing model		CPI swap rates		1.87%		2.48%		Even
	Derivative-related assets		379							Funding spreads		0.45%		0.45%		Even
	Deposits				–					IR-IR correlations		19.00%		67.00%		Even
	Derivative-related liabilities				743					FX-IR correlations		29.00%		56.00%		Even
										FX-FX correlations		75.00%		75.00%		Even
										IR volatilities		15.00%		24.66%		Upper
Equity derivatives and equity-linked structured notes (7)								Discounted cash flows		Dividend yields		0.02%		13.60%		Lower
								Option pricing model		Funding spreads		0.39%		0.45%		Even
	Derivative-related assets		345							Equity (EQ)-EQ correlations		7.40%		97.40%		Middle
	Deposits				462					EQ-FX correlations		(72.00)%		45.00%		Middle
	Derivative-related liabilities				434					EQ volatilities		1.00%		127.00%		Lower
Other (8)
	Mortgage-backed securities		21
	Corporate debt and other debt		–
	Derivative-related assets		119
	Deposits				–
	Derivative-related liabilities				209
	Other liabilities				(2	)
Total		$	7,037	$	2,533

(1) The acronyms stand for the following: (i) Enterprise Value (EV); (ii) Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA); (iii) Price / Earnings (P/E); (iv) Revenue (Rev); and (v) Consumer Price Index (CPI).

(2) The low and high input values represent the actual highest and lowest level inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the different underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date. Where provided, the weighted average of the input values is calculated based on the relative fair values of the instruments within the product category. The weighted averages for derivatives are not presented in the table as they would not provide a comparable metric; instead, distribution of significant unobservable inputs within the range for each product category is indicated in the table.

(3) Price-based inputs are significant for certain debt securities and are based on external benchmarks, comparable proxy instruments or pre-quarter-end trade data. For these instruments, the price input is expressed in dollars for each $100 par value. For example, with an input price of $105, an instrument is valued at a premium over its par value.

(4) The level of aggregation and diversity within each derivative instrument category may result in certain ranges of inputs being wide and unevenly distributed across the range. In the table, we indicated whether the majority of the inputs are concentrated toward the upper, middle, or lower end of the range, or evenly distributed throughout the range.

(5) Fair value of securities with liquidity discount inputs totalled $133 million (April 30, 2015 – $129 million; October 31, 2014 – $211 million; July 31, 2014 – $68 million).

(6) Net asset values (NAV) of a hedge fund is total fair value of assets less liabilities divided by the number of fund units. The NAVs of the funds and the corresponding equity derivatives referenced to NAVs are not considered observable as we cannot redeem certain of these hedge funds at NAV prior to the next quarter end. Private equities are valued based on NAV or valuation techniques. The range for NAV per unit or price per share has not been disclosed for the hedge funds or private equities due to the dispersion of prices given the diverse nature of the investments.

(7) The structured notes contain embedded equity or interest rate derivatives with unobservable inputs that are similar to those of the equity or interest rate derivatives.

(8) Other primarily includes certain insignificant instruments such as commodity derivatives, foreign exchange derivatives, credit derivatives, bank-owned life insurance and Bank funding and deposits.

(9) The reduction in the range of volatility inputs as at July 31, 2015 and April 30, 2015 as compared to prior periods is due to the implementation of a valuation model which uses a different input convention.

n.a. not applicable

72        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

Changes in fair value measurement for instruments measured on a recurring basis and categorized in Level 3

The following tables present the changes in fair value measurements on a recurring basis for instruments included in Level 3 of the fair value hierarchy.

	For the three months ended July 31, 2015
(Millions of Canadian dollars)	Fair value May 1, 2015			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in other comprehensive income (1)			Purchases of assets/ issuances of liabilities			Sales of assets/ settlements of liabilities and other (2)			Transfers into Level 3			Transfers out of Level 3			Fair value July 31, 2015			Changes in unrealized gains (losses) included in earnings for assets and liabilities for the period ended July 31, 2015 for positions still held
Assets
Securities
Trading
U.S. state, municipal and agencies debt	$	1		$	–		$	–		$	13		$	(2	)	$	–		$	–		$	12		$	–
Other OECD government debt		–			–			–			–			–			–			–			–			–
Mortgage-backed securities		9			(2	)		1			–			(2	)		–			–			6			–
Asset-backed securities
CDOs		54			–			(4	)		50			(32	)		–			(4	)		64			–
Non-CDO securities		41			(2	)		3			29			(43	)		7			(6	)		29			(2	)
Corporate debt and other debt		166			–			5			21			(59	)		–			(68	)		65			–
Equities		175			(16	)		13			–			(24	)		1			(19	)		130			(16	)
		446			(20	)		18			113			(162	)		8			(97	)		306			(18	)
Available-for-sale
U.S. state, municipal and agencies debt		682			–			44			136			16			–			–			878			n.a.
Other OECD government debt		12			–			–			2			(1	)		–			–			13			n.a.
Asset-backed securities
CDOs		30			–			2			–			–			–			(32	)		–			n.a.
Non-CDO securities		165			–			26			–			7			–			–			198			n.a.
Corporate debt and other debt		1,734			–			148			555			(762	)		–			–			1,675			n.a.
Equities		1,010			36			48			11			(60	)		17			(48	)		1,014			n.a.
		3,633			36			268			704			(800	)		17			(80	)		3,778			n.a.
Loans – Wholesale		617			24			16			78			(68	)		1			–			668			–
Other
Net derivative balances (3)
Interest rate contracts		(458	)		(20	)		(4	)		21			4			4			(4	)		(457	)		(21	)
Foreign exchange contracts		24			25			3			5			–			(1	)		(4	)		52			26
Credit derivatives		(1	)		(1	)		–			–			1			–			–			(1	)		(1	)
Other contracts		(491	)		31			(40	)		88			27			57			89			(239	)		30
Valuation adjustments		(51	)		(3	)		(1	)		1			–			–			–			(54	)		(3	)
Other assets		–			–			–			–			–			–			–			–			–
	$	3,719		$	72		$	260		$	1,010		$	(998	)	$	86		$	(96	)	$	4,053		$	13
Liabilities
Deposits
Personal	$	(635	)	$	32		$	(27	)	$	(125	)	$	35		$	(106	)	$	190		$	(636	)	$	32
Business and government		(83	)		(1	)		–			–			1			–			75			(8	)		(1	)
Other
Obligations related to securities sold short		–			–			–			–			–			(1	)		1			–			–
Other liabilities		(42	)		13			(4	)		–			1			–			–			(32	)		13
Subordinated debentures		–			–			–			–			–			–			–			–			–
	$	(760	)	$	44		$	(31	)	$	(125	)	$	37		$	(107	)	$	266		$	(676	)	$	44

Royal Bank of Canada        Third Quarter 2015        73

	For the three months ended April 30, 2015
(Millions of Canadian dollars)	Fair value February 1, 2015			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in other comprehensive income (1)			Purchases of assets/ issuances of liabilities			Sales of assets/ settlements of liabilities and other (2)			Transfers into Level 3			Transfers out of Level 3			Fair value April 30, 2015			Changes in unrealized gains (losses) included in earnings for assets and liabilities for the period ended April 30, 2015 for positions still held
Assets
Securities
Trading
U.S. state, municipal and agencies debt	$	1		$	–		$	–		$	–		$	–		$	–		$	–		$	1		$	–
Other OECD government debt		20			–			–			–			–			–			(20	)		–			–
Mortgage-backed securities		21			(1	)		(1	)		1			(8	)		4			(7	)		9			–
Asset-backed securities
CDOs		73			8			(2	)		28			(66	)		13			–			54			8
Non-CDO securities		55			–			(2	)		56			(56	)		–			(12	)		41			(1	)
Corporate debt and other debt		205			(1	)		(1	)		15			(61	)		55			(46	)		166			–
Equities		178			4			(9	)		8			(30	)		26			(2	)		175			3
		553			10			(15	)		108			(221	)		98			(87	)		446			10
Available-for-sale
U.S. state, municipal and agencies debt		1,500			8			(27	)		–			(753	)		–			(46	)		682			n.a.
Other OECD government debt		13			–			–			2			(3	)		–			–			12			n.a.
Asset-backed securities
CDOs		–			–			–			30			–			–			–			30			n.a.
Non-CDO securities		199			(1	)		4			–			(37	)		–			–			165			n.a.
Corporate debt and other debt		1,733			–			(93	)		640			(509	)		–			(37	)		1,734			n.a.
Equities		1,092			24			(53	)		11			(64	)		–			–			1,010			n.a.
		4,537			31			(169	)		683			(1,366	)		–			(83	)		3,633			n.a.
Loans – Wholesale		836			(3	)		(27	)		137			(248	)		–			(78	)		617			(2	)
Other
Net derivative balances (3)
Interest rate contracts		(494	)		47			4			(2	)		–			7			(20	)		(458	)		48
Foreign exchange contracts		31			(16	)		(1	)		18			(13	)		3			2			24			(15	)
Credit derivatives		(7	)		(4	)		–			–			9			(1	)		2			(1	)		(1	)
Other contracts		(565	)		(41	)		32			(27	)		81			(54	)		83			(491	)		33
Valuation adjustments		(69	)		2			1			–			17			(2	)		–			(51	)		–
Other assets		–			–			–			–			–			–			–			–			–
	$	4,822		$	26		$	(175	)	$	917		$	(1,741	)	$	51		$	(181	)	$	3,719		$	73
Liabilities
Deposits
Personal	$	(415	)	$	(19	)	$	11		$	(264	)	$	20		$	(104	)	$	136		$	(635	)	$	(17	)
Business and government		(88	)		(2	)		5			(32	)		34			–			–			(83	)		1
Other
Obligations related to securities sold short		(6	)		–			–			(1	)		7			–			–			–			–
Other liabilities		(68	)		21			3			–			2			–			–			(42	)		22
Subordinated debentures		–			–			–			–			–			–			–			–			–
	$	(577	)	$	–		$	19		$	(297	)	$	63		$	(104	)	$	136		$	(760	)	$	6

74        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

	For the three months ended July 31, 2014
(Millions of Canadian dollars)	Fair value May 1, 2014			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in other comprehensive income (1)			Purchases of assets/ issuances of liabilities			Sales of assets/ settlements of liabilities and other (2)			Transfers into Level 3			Transfers out of Level 3			Fair value July 31, 2014			Changes in unrealized gains (losses) included in earnings for assets and liabilities for the period ended July 31, 2014 for positions still held
Assets
Securities
Trading
U.S. state, municipal and agencies debt	$	21		$	–		$	–		$	3		$	(16	)	$	–		$	(1	)	$	7		$	–
Other OECD government debt		–			–			–			–			–			–			–			–			–
Mortgage-backed securities		36			(1	)		–			16			(24	)		–			(6	)		21			–
Asset-backed securities
CDOs		18			6			(4	)		58			(7	)		–			–			71			4
Non-CDO securities		433			–			(3	)		342			(467	)		–			(3	)		302			–
Corporate debt and other debt		455			(1	)		(3	)		53			(299	)		–			(8	)		197			–
Equities		218			1			(1	)		16			(10	)		1			(61	)		164			(1	)
		1,181			5			(11	)		488			(823	)		1			(79	)		762			3
Available-for-sale
U.S. state, municipal and agencies debt		2,119			–			28			–			(55	)		–			–			2,092			n.a.
Other OECD government debt		–			–			–			–			11			–			–			11			n.a.
Asset-backed securities
CDOs		81			–			–			–			(8	)		–			(2	)		71			n.a.
Non-CDO securities		169			–			8			–			–			–			–			177			n.a.
Corporate debt and other debt		1,577			–			5			698			(714	)		–			–			1,566			n.a.
Equities		1,103			27			(16	)		11			(80	)		–			–			1,045			n.a.
		5,049			27			25			709			(846	)		–			(2	)		4,962			n.a.
Loans – Wholesale		464			(1	)		(2	)		–			(1	)		–			–			460			–
Other
Net derivative balances (3)
Interest rate contracts		(548	)		(21	)		3			14			(1	)		82			112			(359	)		(40	)
Foreign exchange contracts		24			(7	)		–			–			(1	)		–			(1	)		15			(7	)
Credit derivatives		(5	)		(8	)		–			–			8			–			–			(5	)		(1	)
Other contracts		(636	)		(54	)		4			(17	)		29			(36	)		118			(592	)		(59	)
Valuation adjustments		(124	)		(4	)		1			–			41			–			(1	)		(87	)		(6	)
Other assets		–			–			–			–			–			–			–			–			–
	$	5,405		$	(63	)	$	20		$	1,194		$	(1,594	)	$	47		$	147		$	5,156		$	(110	)
Liabilities
Deposits
Personal	$	(531	)	$	(13	)	$	4		$	(136	)	$	46		$	(44	)	$	212		$	(462	)	$	1
Business and government		(5,072	)		(24	)		10			(169	)		159			–			4,920			(176	)		(3	)
Other
Obligations related to securities sold short		(25	)		–			–			(45	)		54			–			–			(16	)		–
Other liabilities		(1	)		(2	)		–			–			5			–			–			2			2
Subordinated debentures		(112	)		1			(1	)		–			–			–			112			–			1
	$	(5,741	)	$	(38	)	$	13		$	(350	)	$	264		$	(44	)	$	5,244		$	(652	)	$	1

Royal Bank of Canada        Third Quarter 2015        75

	For the nine months ended July 31, 2015
(Millions of Canadian dollars)	Fair value November 1, 2014			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in other comprehensive income (1)			Purchases of assets/ issuances of liabilities			Sales of assets/ settlements of liabilities and other (2)			Transfers into Level 3			Transfers out of Level 3			Fair value July 31, 2015			Changes in unrealized gains (losses) included in earnings for assets and liabilities for the period ended July 31, 2015 for positions still held
Assets
Securities
Trading
U.S. state, municipal and agencies debt	$	6		$	–		$	1		$	13		$	(8	)	$	–		$	–		$	12		$	–
Other OECD government debt		–			–			–			–			–			20			(20	)		–			–
Mortgage-backed securities		4			(4	)		–			23			(26	)		16			(7	)		6			–
Asset-backed securities
CDOs		74			24			(18	)		102			(113	)		13			(18	)		64			6
Non-CDO securities		364			(4	)		47			129			(322	)		12			(197	)		29			(3	)
Corporate debt and other debt		149			–			5			39			(128	)		119			(119	)		65			–
Equities		166			(22	)		24			13			(72	)		45			(24	)		130			(21	)
		763			(6	)		59			319			(669	)		225			(385	)		306			(18	)
Available-for-sale
U.S. state, municipal and agencies debt		1,389			8			161			136			(770	)		–			(46	)		878			n.a.
Other OECD government debt		11			–			–			4			(2	)		–			–			13			n.a.
Asset-backed securities
CDOs		24			–			3			30			–			–			(57	)		–			n.a.
Non-CDO securities		182			(1	)		36			–			(19	)		–			–			198			n.a.
Corporate debt and other debt		1,573			–			256			1,717			(1,871	)		37			(37	)		1,675			n.a.
Equities		1,028			78			74			38			(166	)		17			(55	)		1,014			n.a.
		4,207			85			530			1,925			(2,828	)		54			(195	)		3,778			n.a.
Loans – Wholesale		461			21			47			537			(321	)		1			(78	)		668			–
Other
Net derivative balances (3)
Interest rate contracts		(370	)		(71	)		(2	)		30			(5	)		(11	)		(28	)		(457	)		(46	)
Foreign exchange contracts		9			47			6			32			(7	)		2			(37	)		52			35
Credit derivatives		(5	)		(15	)		(1	)		–			19			(1	)		2			(1	)		(3	)
Other contracts		(502	)		(96	)		(77	)		54			181			(83	)		284			(239	)		80
Valuation adjustments		(85	)		(4	)		(2	)		1			39			(3	)		–			(54	)		(3	)
Other assets		–			–			–			–			–			–			–			–			–
	$	4,478		$	(39	)	$	560		$	2,898		$	(3,591	)	$	184		$	(437	)	$	4,053		$	45
Liabilities
Deposits
Personal	$	(497	)	$	43		$	(41	)	$	(500	)	$	68		$	(272	)	$	563		$	(636	)	$	31
Business and government		(70	)		(5	)		1			(78	)		51			–			93			(8	)		(1	)
Other
Obligations related to securities sold short		(4	)		–			–			(11	)		15			(1	)		1			–			–
Other liabilities		(20	)		(9	)		(6	)		–			3			–			–			(32	)		(7	)
Subordinated debentures		–			–			–			–			–			–			–			–			–
	$	(591	)	$	29		$	(46	)	$	(589	)	$	137		$	(273	)	$	657		$	(676	)	$	23

76        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

	For the nine months ended July 31, 2014
(Millions of Canadian dollars)	Fair value November 1, 2013			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in other comprehensive income (1)			Purchases of assets/ issuances of liabilities			Sales of assets/ settlements of liabilities and other (2)			Transfers into Level 3			Transfers out of Level 3			Fair value July 31, 2014			Changes in unrealized gains (losses) included in earnings for assets and liabilities for the period ended July 31, 2014 for positions still held
Assets
Securities
Trading
U.S. state, municipal and agencies debt	$	22		$	–		$	1		$	34		$	(51	)	$	5		$	(4	)	$	7		$	–
Other OECD government debt		370			–			(4	)		–			–			–			(366	)		–			–
Mortgage-backed securities		28			(1	)		1			82			(62	)		1			(28	)		21			–
Asset-backed securities
CDOs		31			14			(4	)		74			(36	)		7			(15	)		71			4
Non-CDO securities		260			2			9			1,651			(1,624	)		16			(12	)		302			–
Corporate debt and other debt		415			(3	)		30			285			(480	)		–			(50	)		197			(2	)
Equities		183			6			9			79			(61	)		9			(61	)		164			(11	)
		1,309			18			42			2,205			(2,314	)		38			(536	)		762			(9	)
Available-for-sale
U.S. state, municipal and agencies debt		2,014			–			159			–			(72	)		–			(9	)		2,092			n.a.
Other OECD government debt		–			–			–			–			11			–			–			11			n.a.
Asset-backed securities
CDOs		103			–			11			–			(33	)		–			(10	)		71			n.a.
Non-CDO securities		180			(4	)		20			–			(19	)		–			–			177			n.a.
Corporate debt and other debt		1,673			–			75			1,221			(1,334	)		–			(69	)		1,566			n.a.
Equities		969			74			105			33			(136	)		–			–			1,045			n.a.
		4,939			70			370			1,254			(1,583	)		–			(88	)		4,962			n.a.
Loans – Wholesale		414			2			18			27			(1	)		–			–			460			(29	)
Other
Net derivative balances (3)
Interest rate contracts		(458	)		(74	)		(2	)		29			(13	)		82			77			(359	)		(111	)
Foreign exchange contracts		(117	)		(15	)		–			–			1			(2	)		148			15			(11	)
Credit derivatives		(5	)		(23	)		(2	)		–			25			–			–			(5	)		(4	)
Other contracts		(869	)		5			(36	)		(50	)		90			(129	)		397			(592	)		(52	)
Valuation adjustments		(105	)		5			(1	)		–			(65	)		–			79			(87	)		(7	)
Other assets		11			–			–			–			–			–			(11	)		–			–
	$	5,119		$	(12	)	$	389		$	3,465		$	(3,860	)	$	(11	)	$	66		$	5,156		$	(223	)
Liabilities
Deposits
Personal	$	(1,043	)	$	(14	)	$	(52	)	$	(443	)	$	171		$	(160	)	$	1,079		$	(462	)	$	(2	)
Business and government		(3,933	)		(177	)		(186	)		(1,551	)		261			–			5,410			(176	)		(20	)
Other
Obligations related to securities sold short		(16	)		1			(1	)		(147	)		147			–			–			(16	)		–
Other liabilities		(3	)		51			–			–			(50	)		–			4			2			–
Subordinated debentures		(109	)		–			(3	)		–			–			–			112			–			–
	$	(5,104	)	$	(139	)	$	(242	)	$	(2,141	)	$	529		$	(160	)	$	6,605		$	(652	)	$	(22	)

(1) These amounts include the foreign currency translation gains or losses arising on consolidation of foreign subsidiaries relating to the Level 3 instruments, where applicable. The unrealized gains on available-for-sale securities recognized in other comprehensive income were $1 million for the three months ended July 31, 2015 (April 30, 2015 – $38 million; July 31, 2014 – $38 million) and gains of $9 million for the nine months ended July 31, 2015 (July 31, 2014 – $142 million), excluding the translation gains or losses arising on consolidation.

(2) Other includes amortization of premiums or discounts recognized in net income.

(3) Net derivatives as at July 31, 2015 included derivative assets of $1,082 million (April 30, 2015 – $890 million; October 31, 2014 – $901 million; July 31, 2014 – $853 million) and derivative liabilities of $1,781 million (April 30, 2015 – $1,867 million; October 31, 2014 – $1,854 million; July 31, 2014 – $1,881 million)).

n.a. not applicable

Transfers between fair value hierarchy levels for instruments carried at fair value on a recurring basis

Transfers between Level 1 and Level 2, and transfers into and out of Level 3 are assumed to occur at the end of the period. For an asset or a liability that transfers into Level 3 during the period, the entire change in fair value for the period is excluded from the Total realized/unrealized gains (losses) included in earnings column of the above reconciliation, whereas for transfers out of Level 3 during the period, the entire change in fair value for the period is included in the same column of the above reconciliation.

Transfers between Level 1 and Level 2 are dependent on whether fair value is obtained on the basis of quoted market prices in active markets (Level 1) as opposed to fair value estimated using observable inputs in a discounted cash flow method (Level 2). During the three months ended July 31, 2015, $457 million of U.S. state, municipal and agencies debt reported in Trading were transferred from Level 1 to Level 2. During the three months ended July 31, 2015, significant transfers from Level 2 to the corresponding Level 1 balances included $128 million of Canadian government debt reported in Trading and $584 million of Equities reported in Trading and Available-for-sale.

Royal Bank of Canada        Third Quarter 2015        77

During the three months ended April 30, 2015, $421 million of U.S. state, municipal and agencies debt reported in Trading and Available-for-sale were transferred from Level 1 to the corresponding Level 2 balances. In addition, for the three months ended January 31, 2015, $284 million of Canadian government debt reported in Trading and $337 million of Obligations related to securities sold short were transferred from Level 1 to the corresponding Level 2 balances.

During the three months ended July 31, 2015, significant transfers out of Level 3 to Level 2 included: (i) $89 million (net) primarily relating to over-the-counter equity options in Other contracts as certain unobservable inputs did not significantly affect their values and due to increased observability of pricing in the underlying investments ($275 million of derivative-related assets and $364 million derivative-related liabilities) and (ii) $190 million of equity-linked structured notes in Personal Deposits as the unobservable inputs did not significantly affect their values. During the three months ended July 31, 2015, significant transfers out of Level 2 to Level 3 included: (i) $57 million (net) primarily relating to over-the-counter equity options in Other contracts due to decreased observability of the volatility input ($261 million of derivative-related assets and $204 million derivative-related liabilities) and (ii) $106 million equity-linked structured notes in Personal Deposits as the unobservable inputs significantly affected their values.

During the three months ended April 30, 2015, significant transfers out of Level 3 to Level 2 included: (i) $136 million of equity-linked structured notes in Personal Deposits as the unobservable inputs did not significantly affect their values and (ii) $83 million (net) of over-the-counter equity options in Other contracts due to increased observability of the volatility input ($311 million of derivative-related assets and $394 million of derivative-related liabilities). During the three months ended April 30, 2015, significant transfers into Level 3 included $104 million of equity-linked structured notes in Personal Deposits as the unobservable inputs significantly affected their values.

During the three months ended January 31, 2015, significant transfers out of Level 3 to Level 2 included: $179 million of collateralized loan obligations in Non-CDO securities due to improved price transparency, $87 million (net) of over-the-counter equity options in Other contracts due to increased observability of the volatility input ($97 million of derivative-related assets and $184 million derivative-related liabilities), and $237 million of equity-linked structured notes in Personal deposits where the unobservable inputs did not significantly affect their fair values.

Total realized/unrealized gains (losses) of Level 3 instruments recognized in earnings

	For the three months ended
	July 31, 2015									April 30, 2015									July 31, 2014
(Millions of Canadian dollars)	Assets			Liabilities			Total			Assets			Liabilities			Total			Assets			Liabilities			Total
Non-interest income
Insurance premiums, investment and fee income	$	(1	)	$	–		$	(1	)	$	(1	)	$	–		$	(1	)	$	–		$	–		$	–
Trading revenue		174			(92	)		82			51			(47	)		4			165			(282	)		(117	)
Net gain on available-for-sale securities		36			–			36			32			–			32			26			–			26
Credit fees and Other		(1	)		–			(1	)		(1	)		(8	)		(9	)		(1	)		(9	)		(10	)
	$	208		$	(92	)	$	116		$	81		$	(55	)	$	26		$	190		$	(291	)	$	(101	)

	For the nine months ended
	July 31, 2015									July 31, 2014
(Millions of Canadian dollars)	Assets			Liabilities			Total			Assets			Liabilities			Total
Non-interest income
Insurance premiums, investment and fee income	$	(1	)	$	–		$	(1	)	$	1		$	–		$	1
Trading revenue		530			(609	)		(79	)		642			(835	)		(193	)
Net gain on available-for-sale securities		85			–			85			69			–			69
Credit fees and Other		(3	)		(12	)		(15	)		(3	)		(25	)		(28	)
	$	611		$	(621	)	$	(10	)	$	709		$	(860	)	$	(151	)

Changes in unrealized gains (losses) recognized in earnings for assets and liabilities still held at period ends

	For the three months ended
	July 31, 2015									April 30, 2015								July 31, 2014
(Millions of Canadian dollars)	Assets			Liabilities			Total			Assets			Liabilities		Total			Assets			Liabilities			Total
Non-interest income
Trading revenue	$	150		$	(92	)	$	58		$	(55	)	$	135	$	80		$	60		$	(168	)	$	(108	)
Credit fees and Other		(1	)		–			(1	)		(1	)		–		(1	)		(1	)		–			(1	)
	$	149		$	(92	)	$	57		$	(56	)	$	135	$	79		$	59		$	(168	)	$	(109	)

	For the nine months ended
	July 31, 2015									July 31, 2014
(Millions of Canadian dollars)	Assets			Liabilities			Total			Assets			Liabilities			Total
Non-interest income
Trading revenue	$	349		$	(279	)	$	70		$	105		$	(347	)	$	(242	)
Credit fees and Other		(3	)		1			(2	)		(2	)		(1	)		(3	)
	$	346		$	(278	)	$	68		$	103		$	(348	)	$	(245	)

Positive and negative fair value movement of Level 3 financial instruments from using reasonably possible alternative assumptions

A financial instrument is classified as Level 3 in the fair value hierarchy if one or more of its unobservable inputs may significantly affect the measurement of its fair value. In preparing the financial statements, appropriate levels for these unobservable input parameters are chosen so that they are consistent with prevailing market evidence or management judgment. Due to the unobservable nature of the prices or rates, there may be uncertainty about valuation of these Level 3 financial instruments.

78        Royal Bank of Canada        Third Quarter 2015

Note 3    Fair value of financial instruments (continued)

The following table summarizes the impact to fair values of Level 3 financial instruments using reasonably possible alternative assumptions. This sensitivity disclosure is intended to illustrate the potential impact of the relative uncertainty in the fair value of Level 3 financial instruments. In reporting the sensitivities below, we offset balances in instances where: (i) the move in valuation factor caused an offsetting positive and negative fair value movement, (ii) both offsetting instruments are in Level 3, and (iii) when exposures are managed and reported on a net basis. With respect to overall sensitivity, it is unlikely in practice that all reasonably possible alternative assumptions would be simultaneously realized.

	As at
	July 31, 2015								April 30, 2015
(Millions of Canadian dollars)	Level 3 fair value			Positive fair value movement from using reasonably possible alternatives		Negative fair value movement from using reasonably possible alternatives			Level 3 fair value			Positive fair value movement from using reasonably possible alternatives		Negative fair value movement from using reasonably possible alternatives
Securities
Trading
U.S. state, municipal and agencies debt	$	12		$	1	$	(1	)	$	1		$	–	$	–
Mortgage-backed securities		6			1		(1	)		9			1		(1	)
Asset-backed securities		93			7		(7	)		95			2		(3	)
Corporate debt and other debt		65			2		(2	)		166			6		(6	)
Equities		130			–		–			175			–		–
Available-for-sale
U.S. state, municipal and agencies debt		878			18		(35	)		682			12		(30	)
Other OECD government debt		13			–		–			12			–		–
Asset-backed securities		198			11		(16	)		195			11		(16	)
Corporate debt and other debt		1,675			11		(11	)		1,734			9		(8	)
Equities		1,014			75		(31	)		1,010			77		(24	)
Loans		668			21		(44	)		617			24		(34	)
Derivatives		1,082			24		(9	)		890			20		(18	)
	$	5,834		$	171	$	(157	)	$	5,586		$	162	$	(140	)
Deposits		(644	)		18		(18	)		(718	)		17		(17	)
Derivatives		(1,781	)		30		(43	)		(1,867	)		27		(43	)
Other, securities sold short, other liabilities and subordinated debentures		(32	)		–		–			(42	)		–		–
	$	(2,457	)	$	48	$	(61	)	$	(2,627	)	$	44	$	(60	)
	As at
	October 31, 2014								July 31, 2014
(Millions of Canadian dollars)	Level 3 fair value			Positive fair value movement from using reasonably possible alternatives		Negative fair value movement from using reasonably possible alternatives			Level 3 fair value			Positive fair value movement from using reasonably possible alternatives		Negative fair value movement from using reasonably possible alternatives
Securities
Trading
U.S. state, municipal and agencies debt	$	6		$	–	$	–		$	7		$	–	$	–
Mortgage-backed securities		4			1		(1	)		21			2		(2	)
Asset-backed securities		438			10		(14	)		373			11		(12	)
Corporate debt and other debt		149			2		(2	)		197			4		(4	)
Equities		166			–		–			164			–		–
Available-for-sale
U.S. state, municipal and agencies debt		1,389			23		(57	)		2,092			42		(74	)
Other OECD government debt		11			–		–			11			–		–
Asset-backed securities		206			12		(18	)		248			12		(17	)
Corporate debt and other debt		1,573			12		(10	)		1,566			10		(10	)
Equities		1,028			92		(23	)		1,045			21		(20	)
Loans		461			12		(11	)		460			9		(9	)
Derivatives		901			23		(21	)		853			29		(22	)
	$	6,332		$	187	$	(157	)	$	7,037		$	140	$	(170	)
Deposits		(567	)		14		(14	)		(638	)		11		(11	)
Derivatives		(1,854	)		38		(59	)		(1,881	)		38		(57	)
Other, securities sold short, other liabilities and subordinated debentures		(24	)		–		–			(14	)		–		–
	$	(2,445	)	$	52	$	(73	)	$	(2,533	)	$	49	$	(68	)

Sensitivity results

As at July 31, 2015, the effects of applying other reasonably possible alternative assumptions to the Level 3 asset positions would be an increase of $171 million and a reduction of $157 million in fair value, of which $115 million and $86 million would be recorded in Other components of equity, respectively. The effects of applying these assumptions to the Level 3 liability positions would result in a decrease of $48 million and an increase of $61 million in fair value.

Royal Bank of Canada        Third Quarter 2015        79

Level 3 valuation inputs and approaches to developing reasonably possible alternative assumptions

The following is a summary of the unobservable inputs used in the valuation of the Level 3 instruments and our approaches to developing reasonably possible alternative assumptions used to determine sensitivity.

Financial assets or liabilities	Sensitivity methodology
Asset-backed securities, corporate debt, government debt and municipal bonds	Sensitivities are determined based on adjusting, plus or minus one standard deviation, the bid-offer spreads or input prices if a sufficient number of prices is received, or using high and low vendor prices as reasonably possible alternative assumptions.
Auction rate securities	Sensitivity of auction rate securities is determined by decreasing the discount margin between 11% and 15% and increasing the discount margin between 19% and 37%, depending on the specific reasonable range of fair value uncertainty for each particular financial instrument’s market. Changes to the discount margin reflect historic monthly movements in the student loan asset-backed securities market.
Private equities, hedge fund investments and related equity derivatives	Sensitivity of direct private equity investments is determined by (i) adjusting the discount rate by 2% when discounted cash flow method is used to determine fair value, (ii) adjusting the price multiples based on the range of multiples of comparable companies when price-based models are used, or (iii) using an alternative valuation approach. Net asset values of the private equity funds, hedge funds and related equity derivatives are provided by the fund managers, and as a result, there are no other reasonably possible alternative assumptions for these investments.
Interest rate derivatives	Sensitivities of interest rate and cross currency swaps are derived using plus or minus one standard deviation of these inputs, and an amount based on model and parameter uncertainty, where applicable.
Equity derivatives	Sensitivity of the Level 3 position will be determined by shifting the unobservable model inputs by plus or minus one standard deviation of the pricing service market data including volatility, dividends or correlations, as applicable.
Bank funding and deposits	Sensitivities of deposits are calculated by shifting the funding curve by plus or minus certain basis points.
Structured notes	Sensitivities for interest-rate-linked and equity-linked structured notes are derived by adjusting inputs by plus or minus one standard deviation, and for other deposits, by estimating a reasonable move in the funding curve by plus or minus certain basis points.

Note 4    Securities

Unrealized gains and losses on available-for-sale securities (1)

	As at
	July 31, 2015									April 30, 2015
(Millions of Canadian dollars)	Cost/ Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Cost/ Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Canadian government debt
Federal	$	11,198	$	490	$	(1	)	$	11,687	$	11,291	$	449	$	–		$	11,740
Provincial and municipal		1,357		16		(1	)		1,372		1,028		17		(1	)		1,044
U.S. state, municipal and agencies debt (2)		12,651		21		(76	)		12,596		8,271		10		(93	)		8,188
Other OECD government debt		15,269		33		(7	)		15,295		13,590		38		(2	)		13,626
Mortgage-backed securities		456		5		(1	)		460		120		4		–			124
Asset-backed securities
CDOs		1,135		16		(3	)		1,148		939		18		(2	)		955
Non-CDO securities		834		7		(68	)		773		677		7		(78	)		606
Corporate debt and other debt		14,607		59		(30	)		14,636		11,504		69		(15	)		11,558
Equities		1,460		325		(10	)		1,775		1,345		334		(6	)		1,673
Loan substitute securities		101		–		(1	)		100		108		–		–			108
	$	59,068	$	972	$	(198	)	$	59,842	$	48,873	$	946	$	(197	)	$	49,622

	As at
	October 31, 2014									July 31, 2014
(Millions of Canadian dollars)	Cost/ Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Cost/ Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Canadian government debt
Federal	$	11,633	$	338	$	(2	)	$	11,969	$	11,456	$	340	$	(1	)	$	11,795
Provincial and municipal		792		8		(1	)		799		817		6		(1	)		822
U.S. state, municipal and agencies debt (2)		6,330		9		(82	)		6,257		7,169		24		(115	)		7,078
Other OECD government debt		14,275		19		(1	)		14,293		13,633		13		(2	)		13,644
Mortgage-backed securities		133		5		–			138		128		6		–			134
Asset-backed securities
CDOs		857		26		(2	)		881		932		31		(2	)		961
Non-CDO securities		634		5		(76	)		563		581		5		(71	)		515
Corporate debt and other debt		9,249		49		(11	)		9,287		8,840		50		(15	)		8,875
Equities		1,333		369		(6	)		1,696		1,368		375		(18	)		1,725
Loan substitute securities		124		2		–			126		125		4		(1	)		128
	$	45,360	$	830	$	(181	)	$	46,009	$	45,049	$	854	$	(226	)	$	45,677

(1) Excludes $3,303 million of held-to-maturity securities as at July 31, 2015 (April 30, 2015 – $3,258 million; October 31, 2014 – $1,759 million; July 31, 2014 – $681 million) that are carried at amortized cost.

(2) Includes securities issued by U.S. non-agencies backed by government insured assets, mortgage-backed securities and asset-backed securities issued by U.S. government agencies.

80        Royal Bank of Canada        Third Quarter 2015

Note 4    Securities (continued)

Available-for-sale securities are assessed for objective evidence of impairment at each reporting date and more frequently when conditions warrant. Depending on the nature of the securities under review, we apply specific methodologies to assess whether the cost/amortized cost of the security would be recovered. As at July 31, 2015, our gross unrealized losses on available-for-sale securities were $198 million (April 30, 2015 – $197 million; October 31, 2014 – $181 million; July 31, 2014 – $226 million). Management believes that there is no objective evidence of impairment on our available-for-sale securities that are in an unrealized loss position as at July 31, 2015.

Held-to-maturity securities

Held-to-maturity securities stated at amortized cost are subject to periodic impairment review and are classified as impaired when, in management’s opinion, there is no longer reasonable assurance of the timely collection of the full amount of principal and interest. The impairment review of held-to-maturity securities is primarily based on the impairment model for loans. Management believes that there is no objective evidence of impairment on our held-to-maturity securities as at July 31, 2015.

Net gain and loss on available-for-sale securities (1)

	For the three months ended									For the nine months ended
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Realized gains	$	52		$	60		$	39		$	156		$	156
Realized losses		(2	)		–			(1	)		(6	)		(9	)
Impairment losses		(8	)		(18	)		(2	)		(39	)		(17	)
	$	42		$	42		$	36		$	111		$	130

(1) The following related to our insurance operations are excluded from Net gain (loss) on available-for-sale securities and included in Insurance premiums, investment and fee income on the Interim Condensed Consolidated Statements of Income: Realized gains for the three months ended July 31, 2015 of $14 million (April 30, 2015 – $nil; July 31, 2014 – $1 million); realized gains for the nine months ended July 31, 2015 of $15 million (July 31, 2014 – $10 million); $2 million in impairment losses related to our insurance operations for the three months ended July 31, 2015 (April 30, 2015 – $nil; July 31, 2014 – $nil); and $3 million in impairment losses related to our insurance operations for the nine months ended July 31, 2015 (July 31, 2014 – $nil). There were no realized losses for the three months ended July 31, 2015 (April 30, 2015 – $nil; July 31, 2014 – $nil) and no realized losses for the nine months ended July 31, 2015 (July 31, 2014 – $ 1 million).

During the three months ended July 31, 2015, $42 million of net gains were recognized in Non-interest income as compared to $42 million in the prior quarter. The current period reflects net realized gains of $50 million mainly comprised of distributions from, and gains on sales of, certain Equities. Also included in the net gains are $8 million of impairment losses primarily on certain Equities and Loan substitute securities.

For the nine months ended July 31, 2015, $111 million of net gains were recognized in Non-interest income as compared to $130 million in the nine months ended July 31, 2014. The current period reflects net realized gains of $150 million mainly comprised of distributions from, and gains on sales of, certain U.S. state, municipal and agencies debt and Equities. Also included in the net gains are $39 million of impairment losses primarily on certain Equities and Loan substitute securities.

Note 5    Allowance for credit losses and impaired loans

Allowance for credit losses

	For the three months ended July 31, 2015
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses		Write-offs			Recoveries		Unwind of discount			Exchange rate changes/ other			Balance at end of period
Retail
Residential mortgages	$	233	$	14	$	(12	)	$	2	$	(5	)	$	20		$	252
Personal		542		95		(128	)		28		(4	)		7			540
Credit cards		386		95		(127	)		32		–			(1	)		385
Small business		66		7		(11	)		3		(2	)		–			63
		1,227		211		(278	)		65		(11	)		26			1,240
Wholesale
Business		808		59		(48	)		6		(9	)		20			836
Bank (1)		2		–		–			–		–			–			2
		810		59		(48	)		6		(9	)		20			838
Total allowance for loan losses		2,037		270		(326	)		71		(20	)		46			2,078
Allowance for off-balance sheet and other items (2)		91		–		–			–		–			–			91
Total allowance for credit losses	$	2,128	$	270	$	(326	)	$	71	$	(20	)	$	46		$	2,169
Individually assessed	$	245	$	26	$	(16	)	$	2	$	(5	)	$	18		$	270
Collectively assessed		1,883		244		(310	)		69		(15	)		28			1,899
Total allowance for credit losses	$	2,128	$	270	$	(326	)	$	71	$	(20	)	$	46		$	2,169

Royal Bank of Canada        Third Quarter 2015        81

	For the three months ended April 30, 2015
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses		Write-offs			Recoveries		Unwind of discount			Exchange rate changes/ other			Balance at end of period
Retail
Residential mortgages	$	248	$	9	$	(15	)	$	2	$	(6	)	$	(5	)	$	233
Personal		553		103		(127	)		25		(5	)		(7	)		542
Credit cards		386		95		(125	)		30		–			–			386
Small business		65		9		(10	)		2		–			–			66
		1,252		216		(277	)		59		(11	)		(12	)		1,227
Wholesale
Business		803		66		(46	)		11		(9	)		(17	)		808
Bank (1)		2		–		–			–		–			–			2
		805		66		(46	)		11		(9	)		(17	)		810
Total allowance for loan losses		2,057		282		(323	)		70		(20	)		(29	)		2,037
Allowance for off-balance sheet and other items (2)		91		–		–			–		–			–			91
Total allowance for credit losses	$	2,148	$	282	$	(323	)	$	70	$	(20	)	$	(29	)	$	2,128
Individually assessed	$	241	$	42	$	(28	)	$	7	$	(6	)	$	(11	)	$	245
Collectively assessed		1,907		240		(295	)		63		(14	)		(18	)		1,883
Total allowance for credit losses	$	2,148	$	282	$	(323	)	$	70	$	(20	)	$	(29	)	$	2,128

	For the three months ended July 31, 2014
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses		Write-offs			Recoveries		Unwind of discount			Exchange rate changes/ other			Balance at end of period
Retail
Residential mortgages	$	167	$	10	$	(7	)	$	1	$	(7	)	$	18		$	182
Personal		534		111		(133	)		26		(5	)		–			533
Credit cards		386		89		(119	)		29		–			–			385
Small business		66		8		(10	)		3		–			(1	)		66
		1,153		218		(269	)		59		(12	)		17			1,166
Wholesale
Business		728		65		(30	)		14		(8	)		(11	)		758
Bank (1)		2		–		–			–		–			–			2
		730		65		(30	)		14		(8	)		(11	)		760
Total allowance for loan losses		1,883		283		(299	)		73		(20	)		6			1,926
Allowance for off-balance sheet and other items (2)		91		–		–			–		–			–			91
Total allowance for credit losses	$	1,974	$	283	$	(299	)	$	73	$	(20	)	$	6		$	2,017
Individually assessed	$	147	$	39	$	(6	)	$	9	$	(5	)	$	5		$	189
Collectively assessed		1,827		244		(293	)		64		(15	)		1			1,828
Total allowance for credit losses	$	1,974	$	283	$	(299	)	$	73	$	(20	)	$	6		$	2,017

	For the nine months ended July 31, 2015
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses			Write-offs			Recoveries		Unwind of discount			Exchange rate changes/ other		Balance at end of period
Retail
Residential mortgages	$	240	$	36		$	(47	)	$	5	$	(17	)	$	35	$	252
Personal		535		291			(369	)		78		(11	)		16		540
Credit cards		385		284			(374	)		90		–			–		385
Small business		64		25			(32	)		8		(2	)		–		63
		1,224		636			(822	)		181		(30	)		51		1,240
Wholesale
Business		768		187			(142	)		24		(27	)		26		836
Bank (1)		2		(1	)		–			1		–			–		2
		770		186			(142	)		25		(27	)		26		838
Total allowance for loan losses		1,994		822			(964	)		206		(57	)		77		2,078
Allowance for off-balance sheet and other items (2)		91		–			–			–		–			–		91
Total allowance for credit losses	$	2,085	$	822		$	(964	)	$	206	$	(57	)	$	77	$	2,169
Individually assessed	$	214	$	103		$	(71	)	$	13	$	(17	)	$	28	$	270
Collectively assessed		1,871		719			(893	)		193		(40	)		49		1,899
Total allowance for credit losses	$	2,085	$	822		$	(964	)	$	206	$	(57	)	$	77	$	2,169

82        Royal Bank of Canada        Third Quarter 2015

Note 5    Allowance for credit losses and impaired loans (continued)

	For the nine months ended July 31, 2014
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses		Write-offs			Recoveries		Unwind of discount			Exchange rate changes/ other			Balance at end of period
Retail
Residential mortgages	$	151	$	31	$	(20	)	$	1	$	(20	)	$	39		$	182
Personal		583		341		(438	)		78		(17	)		(14	)		533
Credit cards		385		265		(349	)		83		–			1			385
Small business		61		33		(33	)		7		(1	)		(1	)		66
		1,180		670		(840	)		169		(38	)		25			1,166
Wholesale
Business		777		149		(152	)		26		(28	)		(14	)		758
Bank (1)		2		–		–			–		–			–			2
		779		149		(152	)		26		(28	)		(14	)		760
Total allowance for loan losses		1,959		819		(992	)		195		(66	)		11			1,926
Allowance for off-balance sheet and other items (2)		91		–		–			–		–			–			91
Total allowance for credit losses	$	2,050	$	819	$	(992	)	$	195	$	(66	)	$	11		$	2,017
Individually assessed	$	240	$	97	$	(149	)	$	13	$	(18	)	$	6		$	189
Collectively assessed		1,810		722		(843	)		182		(48	)		5			1,828
Total allowance for credit losses	$	2,050	$	819	$	(992	)	$	195	$	(66	)	$	11		$	2,017

(1) Bank refers primarily to regulated deposit-taking institutions and securities firms.

(2) The allowance for off-balance sheet and other items is reported separately in Other liabilities.

Loans past due but not impaired

	As at
	July 31, 2015								April 30, 2015
(Millions of Canadian dollars)	1 to 29 days		30 to 89 days		90 days and greater		Total		1 to 29 days		30 to 89 days		90 days and greater		Total
Retail	$	3,133	$	1,217	$	302	$	4,652	$	2,937	$	1,320	$	309	$	4,566
Wholesale		519		217		–		736		413		214		–		627
	$	3,652	$	1,434	$	302	$	5,388	$	3,350	$	1,534	$	309	$	5,193
	As at
	October 31, 2014								July 31, 2014
(Millions of Canadian dollars)	1 to 29 days		30 to 89 days		90 days and greater		Total		1 to 29 days		30 to 89 days		90 days and greater		Total
Retail	$	3,055	$	1,284	$	316	$	4,655	$	3,201	$	1,292	$	299	$	4,792
Wholesale		431		322		–		753		555		251		–		806
	$	3,486	$	1,606	$	316	$	5,408	$	3,756	$	1,543	$	299	$	5,598

Gross carrying value of loans individually determined to be impaired (1)

	As at
(Millions of Canadian dollars)	July 31 2015		April 30 2015		October 31 2014		July 31 2014
Retail	$	–	$	–	$	–	$	–
Wholesale
Business		1,006		766		631		633
Bank (2)		2		2		2		2
	$	1,008	$	768	$	633	$	635

(1) The average balance of gross individually assessed impaired loans for the three months ended July 31, 2015 was $888 million (April 30, 2015 – $757 million; October 31, 2014 – $634 million; July 31, 2014 – $603 million). For the nine months ended July 31, 2015, the average balance of gross individually assessed impaired loans was $789 million (July 31, 2014 – $704 million).

(2) Bank refers primarily to regulated deposit-taking institutions and securities firms.

Royal Bank of Canada        Third Quarter 2015        83

Note 6    Derivative financial instruments and hedging activities

The following table presents the fair values of the derivative and non-derivative instruments categorized by their hedging relationships, as well as derivatives that are not designated in hedging relationships.

Derivatives and non-derivative instruments

	As at
	July 31, 2015								April 30, 2015
	Designated as hedging instruments in hedging relationships								Designated as hedging instruments in hedging relationships
(Millions of Canadian dollars)	Cash flow hedges		Fair value hedges		Net investment hedges		Not designated in a hedging relationship		Cash flow hedges		Fair value hedges		Net investment hedges		Not designated in a hedging relationship
Assets
Derivative instruments	$	847	$	1,814	$	15	$	109,783	$	688	$	1,697	$	213	$	104,406
Liabilities
Derivative instruments		1,735		284		359		113,705		1,228		273		166		110,552
Non-derivative instruments		–		–		21,483		–		–		–		22,248		–
	As at
	October 31, 2014								July 31, 2014
	Designated as hedging instruments in hedging relationships								Designated as hedging instruments in hedging relationships
(Millions of Canadian dollars)	Cash flow hedges		Fair value hedges		Net investment hedges		Not designated in a hedging relationship		Cash flow hedges		Fair value hedges		Net investment hedges		Not designated in a hedging relationship
Assets
Derivative instruments	$	504	$	1,392	$	87	$	85,419	$	478	$	1,419	$	41	$	70,885
Liabilities
Derivative instruments		511		121		205		88,145		459		284		62		74,291
Non-derivative instruments		–		–		20,949		–		–		–		20,353		–

Results of hedge activities recorded in Net income and Other comprehensive income

	For the three months ended
	July 31, 2015									April 30, 2015									July 31, 2014
(Millions of Canadian dollars)	Net gains (losses) included in Non-interest income			Net gains (losses) included in Net interest income			After-tax unrealized gains (losses) included in OCI			Net gains (losses) included in Non-interest income			Net gains (losses) included in Net interest income			After-tax unrealized gains (losses) included in OCI			Net gains (losses) included in Non-interest income			Net gains (losses) included in Net interest income		After-tax unrealized gains (losses) included in OCI
Fair value hedges
Gains (losses) on hedging instruments	$	127		$	n.a.		$	n.a.		$	(460	)	$	n.a.		$	n.a.		$	56		$	n.a.	$	n.a.
Gains (losses) on hedged items attributable to the hedged risk		(160	)		n.a.			n.a.			444			n.a.			n.a.			(88	)		n.a.		n.a.
Ineffective portion (1)		(33	)		n.a.			n.a.			(16	)		n.a.			n.a.			(32	)		n.a.		n.a.
Cash flow hedges
Ineffective portion		(2	)		n.a.			n.a.			(1	)		n.a.			n.a.			(10	)		n.a.		n.a.
Effective portion		n.a.			n.a.			(236	)		n.a.			n.a.			36			n.a.			n.a.		2
Reclassified to income during the period (2)		n.a.			(62	)		n.a.			n.a.			(107	)		n.a.			n.a.			5		n.a.
Net investment hedges
Ineffective portion		(1	)		n.a.			n.a.			1			n.a.			n.a.			–			n.a.		n.a.
Foreign currency gains (losses)		n.a.			n.a.			3,542			n.a.			n.a.			(2,116	)		n.a.			n.a.		(203	)
Gains (losses) from hedges		n.a.			n.a.			(1,771	)		n.a.			n.a.			1,096			n.a.			n.a.		166
	$	(36	)	$	(62	)	$	1,535		$	(16	)	$	(107	)	$	(984	)	$	(42	)	$	5	$	(35	)

84        Royal Bank of Canada        Third Quarter 2015

Note 6    Derivative financial instruments and hedging activities (continued)

	For the nine months ended
	July 31, 2015									July 31, 2014
(Millions of Canadian dollars)	Net gains (losses) included in Non-interest income			Net gains (losses) included in Net interest income			After-tax unrealized gains (losses) included in OCI			Net gains (losses) included in Non-interest income			Net gains (losses) included in Net interest income		After-tax unrealized gains (losses) included in OCI
Fair value hedges
Gains (losses) on hedging instruments	$	410		$	n.a.		$	n.a.		$	57		$	n.a.	$	n.a.
Gains (losses) on hedged items attributable to the hedged risk		(497	)		n.a.			n.a.			(147	)		n.a.		n.a.
Ineffective portion (1)		(87	)		n.a.			n.a.			(90	)		n.a.		n.a.
Cash flow hedges
Ineffective portion		2			n.a.			n.a.			(9	)		n.a.		n.a.
Effective portion		n.a.			n.a.			(582	)		n.a.			n.a.		(76	)
Reclassified to income during the period (2)		n.a.			(374	)		n.a.			n.a.			11		n.a.
Net investment hedges
Ineffective portion		(2	)		n.a.			n.a.			1			n.a.		n.a.
Foreign currency gains (losses)		n.a.			n.a.			5,982			n.a.			n.a.		1,819
Gains (losses) from hedges		n.a.			n.a.			(3,280	)		n.a.			n.a.		(1,115	)
	$	(87	)	$	(374	)	$	2,120		$	(98	)	$	11	$	628

(1) Includes losses of $23 million for the three months ended July 31, 2015 (April 30, 2015 – $25 million; July 31, 2014 – $32 million) and losses of $76 million for the nine month ended July 31, 2015 (July 31, 2014 – $87 million) that are excluded from the assessment of hedge effectiveness. These amounts are recorded in Non-interest income and are offset by other economic hedges.

(2) After-tax losses of $46 million were reclassified from Other components of equity to income during the three months ended July 31, 2015 (April 30, 2015 – $79 million; July 31, 2014 – gains of $3 million) and losses of $276 million were reclassified during the nine months ended July 31, 2015 (July 31, 2014 – gains of $8 million).

n.a. not applicable

Fair value of derivative instruments by term to maturity

	As at
	July 31, 2015								April 30, 2015
(Millions of Canadian dollars)	Less than 1 year		1 to 5 years		Over 5 years		Total		Less than 1 year		1 to 5 years		Over 5 years		Total
Derivative assets		$  29,505		$  36,786		$  46,168		$  112,459		$  25,428		$  33,731		$  47,845		$  107,004
Derivative liabilities		30,537		42,327		43,219		116,083		27,301		39,875		45,043		112,219

	As at
	October 31, 2014								July 31, 2014
(Millions of Canadian dollars)	Less than 1 year		1 to 5 years		Over 5 years		Total		Less than 1 year		1 to 5 years		Over 5 years		Total
Derivative assets		$  19,485		$  29,838		$  38,079		$  87,402		$  13,832		$  25,052		$  33,939		$  72,823
Derivative liabilities		19,980		32,640		36,362		88,982		15,793		26,695		32,608		75,096

Note 7    Significant acquisitions and dispositions

Acquisition

Wealth Management

On January 22, 2015, we announced a definitive agreement to acquire City National Corporation (City National), the holding company for City National Bank. City National Bank provides banking, investment and trust services throughout the United States and comprises substantially all of the business of City National. Total consideration includes US$2.7 billion in cash and 44 million Royal Bank of Canada common shares. We will also issue US$268 million of first preferred shares upon the cancellation of the outstanding City National preferred shares. If the transaction closed on July 31, 2015, total consideration, including preferred shares, would have been $7.1 billion (US$5.5 billion).

The transaction is subject to customary closing conditions, including regulatory approvals and is expected to close in the first quarter of 2016. The results of the acquired business will be consolidated from the date of close.

Dispositions

Personal & Commercial Banking

On July 31, 2015, we completed the sale of RBC Royal Bank (Suriname) N.V. (RBC Suriname). As a result of the transaction, which was announced on April 1, 2015, we recorded a total loss on disposal of $19 million (before and after-tax), consisting of a loss of $23 million in the second quarter included in Non-interest expense – Other, and a gain of $4 million in the third quarter primarily relating to foreign currency translation gains reclassified from Other components of equity.

Wealth Management

On July 14, 2015, we announced that we have entered into a definitive agreement to sell Royal Bank of Canada (Suisse) SA (RBC Suisse). The transaction is expected to close in the fourth quarter and is subject to customary closing conditions, including regulatory approvals. As a result of the disposition, the assets and liabilities of RBC Suisse are classified as held for sale, measured at the lower of their carrying amount and fair value less costs to sell and presented in Other assets and Other liabilities.

Royal Bank of Canada        Third Quarter 2015        85

The major classes of assets, liabilities and equity that are included in the disposal group as held for sale include:

(Millions of Canadian dollars)	As at July 31, 2015
Assets
Cash and deposits with banks	$	1,754
Securities		43
Loans, net of allowance		523
Other assets		173
Total assets of disposal group included in Other assets		2,493
Liabilities
Deposits	$	2,306
Other liabilities		43
Total liabilities of disposal group included in Other liabilities		2,349
Total Other components of equity of the disposal group	$	1

Note 8    Deposits

The following table details our deposit liabilities:

	As at
	July 31, 2015								April 30, 2015
(Millions of Canadian dollars)	Demand (1)		Notice (2)		Term (3)		Total		Demand (1)		Notice (2)		Term (3)		Total
Personal	$	125,470	$	19,312	$	73,847	$	218,629	$	122,535	$	18,825	$	74,543	$	215,903
Business and government		175,308		6,766		267,323		449,397		166,152		5,177		243,982		415,311
Bank		8,442		16		17,752		26,210		6,138		22		14,177		20,337
	$	309,220	$	26,094	$	358,922	$	694,236	$	294,825	$	24,024	$	332,702	$	651,551
Non-interest-bearing (4)
Canada	$	72,633	$	3,660	$	–	$	76,293	$	68,063	$	3,793	$	–	$	71,856
United States		880		44		–		924		776		49		–		825
Europe (5)		1,536		–		–		1,536		3,435		1		–		3,436
Other International		6,577		297		–		6,874		5,938		450		–		6,388
Interest-bearing (4)
Canada		187,219		13,072		270,859		471,150		180,220		12,204		255,033		447,457
United States		3,828		4,214		65,260		73,302		3,561		3,199		56,536		63,296
Europe (5)		32,830		647		14,186		47,663		29,581		507		12,485		42,573
Other International		3,717		4,160		8,617		16,494		3,251		3,821		8,648		15,720
	$	309,220	$	26,094	$	358,922	$	694,236	$	294,825	$	24,024	$	332,702	$	651,551

	As at
	October 31, 2014								July 31, 2014
(Millions of Canadian dollars)	Demand (1)		Notice (2)		Term (3)		Total		Demand (1)		Notice (2)		Term (3)		Total
Personal	$	120,444	$	17,793	$	70,980	$	209,217	$	117,263	$	17,271	$	69,893	$	204,427
Business and government		162,988		3,038		220,634		386,660		154,793		2,257		220,585		377,635
Bank		5,771		11		12,441		18,223		5,755		10		13,864		19,629
	$	289,203	$	20,842	$	304,055	$	614,100	$	277,811	$	19,538	$	304,342	$	601,691
Non-interest-bearing (4)
Canada	$	65,774	$	3,478	$	–	$	69,252	$	63,594	$	3,521	$	–	$	67,115
United States		1,777		15		–		1,792		1,788		9		–		1,797
Europe (5)		3,314		1		–		3,315		3,915		2		–		3,917
Other International		5,057		279		–		5,336		5,009		299		–		5,308
Interest-bearing (4)
Canada		175,172		10,895		241,902		427,969		168,275		10,649		240,391		419,315
United States		3,497		2,144		45,359		51,000		3,355		1,331		46,248		50,934
Europe (5)		31,118		418		9,282		40,818		29,017		183		10,137		39,337
Other International		3,494		3,612		7,512		14,618		2,858		3,544		7,566		13,968
	$	289,203	$	20,842	$	304,055	$	614,100	$	277,811	$	19,538	$	304,342	$	601,691

(1) Deposits payable on demand include all deposits for which we do not have the right to notice of withdrawal. These deposits include both savings and chequing accounts.

(2) Deposits payable after notice include all deposits for which we can legally require notice of withdrawal. These deposits are primarily savings accounts.

(3) Term deposits include deposits payable on a fixed date. These deposits include term deposits, guaranteed investment certificates and similar instruments. As at July 31, 2015, the balance of term deposits also includes senior deposit notes we have issued to provide long-term funding of $179 billion (April 30, 2015 – $163 billion; October 31, 2014 – $150 billion; July 31, 2014 – $147 billion).

(4) The geographical splits of the deposits are based on the point of origin of the deposits and where the revenue is recognized. As at July 31, 2015, deposits denominated in U.S. dollars, Sterling, Euro and other foreign currencies were $238 billion, $14 billion, $27 billion and $27 billion, respectively (April 30, 2015 – $209 billion, $12 billion, $24 billion and $25 billion; October 31, 2014 – $183 billion, $11 billion, $23 billion and $22 billion; July 31, 2014 – $174 billion, $12 billion, $24 billion and $22 billion).

(5) Europe includes the United Kingdom, Luxembourg and the Channel Islands.

86        Royal Bank of Canada        Third Quarter 2015

Note 8    Deposits (continued)

The following table presents the contractual maturities of our term deposit liabilities.

	As at
(Millions of Canadian dollars)	July 31 2015		April 30 2015		October 31 2014		July 31 2014
Within 1 year:
less than 3 months	$	75,852	$	66,298	$	57,840	$	53,452
3 to 6 months		48,525		32,203		32,880		21,874
6 to 12 months		64,864		67,303		50,300		42,204
1 to 2 years		49,067		53,508		54,354		70,229
2 to 3 years		37,175		30,541		31,559		32,235
3 to 4 years		29,613		29,696		28,946		29,542
4 to 5 years		25,191		27,516		24,673		26,090
Over 5 years		28,635		25,637		23,503		28,716
	$	358,922	$	332,702	$	304,055	$	304,342
Aggregate amount of term deposits in denominations of one hundred thousand dollars or more	$	326,000	$	300,000	$	270,000	$	270,000

Note 9    Employee benefits – Pension and other post-employment benefits

We offer a number of defined benefits and defined contribution plans which provide pension and post-employment benefits to eligible employees. The following tables present the composition of our pension and other post-employment benefit expense and the composition of our remeasurements recorded in other comprehensive income.

Pension and other post-employment benefit expense

	For the three months ended
	Pension plans							Other post-employment benefit plans
(Millions of Canadian dollars)	July 31 2015			April 30 2015		July 31 2014		July 31 2015			April 30 2015		July 31 2014
Current service costs	$	86		$	86	$	79	$	9		$	8	$	7
Past service costs		–			–		5		–			–		–
Net interest expense		7			8		4		19			19		20
Settlement gain		(2	)		–		–		–			–		–
Remeasurements of other long term benefits		–			–		–		(3	)		6		3
Administrative expense		3			3		3		–			–		–
Defined benefit pension expense	$	94		$	97	$	91	$	25		$	33	$	30
Defined contribution pension expense		41			37		33		–			–		–
	$	135		$	134	$	124	$	25		$	33	$	30

	For the nine months ended
	Pension plans					Other post-employment benefit plans
(Millions of Canadian dollars)	July 31 2015			July 31 2014		July 31 2015		July 31 2014
Current service costs	$	259		$	236	$	26	$	23
Past service costs		–			5		–		–
Net interest expense		23			11		56		60
Settlement gain		(2	)		–		–		–
Remeasurements of other long term benefits		–			–		4		6
Administrative expense		9			9		–		–
Defined benefit pension expense	$	289		$	261	$	86	$	89
Defined contribution pension expense		123			103		–		–
	$	412		$	364	$	86	$	89

Remeasurements of employee benefit plans (1)

	For the three months ended
	Defined benefit pension plans									Other post-employment benefit plans
(Millions of Canadian dollars)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			April 30 2015			July 31 2014
Actuarial (gains) losses:
Changes in demographic assumptions	$	8		$	–		$	–		$	–		$	–		$	–
Changes in financial assumptions		(191	)		(571	)		411			(1	)		(79	)		58
Experience adjustments		–			–			–			(1	)		(4	)		–
Return on plan assets (excluding interest based on discount rate)		(86	)		94			(227	)		(2	)		–			–
	$	(269	)	$	(477	)	$	184		$	(4	)	$	(83	)	$	58

Royal Bank of Canada        Third Quarter 2015        87

	For the nine months ended
	Defined benefit pension plans						Other post-employment benefit plans
(Millions of Canadian dollars)	July 31 2015			July 31 2014			July 31 2015			July 31 2014
Actuarial (gains) losses:
Changes in demographic assumptions	$	8		$	–		$	–		$	–
Changes in financial assumptions		435			677			74			95
Experience adjustments		2			–			(9	)		–
Return on plan assets (excluding interest based on discount rate)		(678	)		(654	)		(2	)		–
	$	(233	)	$	23		$	63		$	95

(1) Market based assumptions, including Changes in financial assumptions and Return on plan assets, are reviewed on a quarterly basis. All other assumptions are updated during our annual review of plan assumptions.

Note 10    Significant capital and funding transactions

Subordinated debentures

On June 15, 2015, we redeemed all $1.5 billion outstanding 4.35% subordinated debentures due June 15, 2020 for 100% of their principal amount plus accrued interest to the redemption date.

On June 4, 2015, we issued $1 billion of subordinated debentures. The notes bear interest at a fixed rate of 2.48% per annum until June 4, 2020, and at the three-month Banker’s acceptance rate plus 1.10% thereafter until their maturity on June 4, 2025.

On November 14, 2014, all $200 million outstanding 10% subordinated debentures matured. The principal plus accrued interest were paid to the noteholders on the maturity date.

Preferred shares

On July 22, 2015, we issued 6 million Non-Cumulative First Preferred Shares Series BI (BI) for gross proceeds of $150 million. On June 5, 2015, we issued 6 million Non-Cumulative First Preferred Shares Series BH (BH) for gross proceeds of $150 million. The BI and BH shares pay quarterly cash dividends, if declared, at a rate of 4.9% per annum. Subject to the consent of OSFI and the requirements of the Bank Act (Canada), on and after November 24, 2020, we may redeem the shares in whole or in part for cash at a price per share of $25 plus a premium if redeemed before November 24, 2024. The shares include non-viability contingent capital (NVCC) provisions which are necessary for the shares to qualify as Tier 1 regulatory capital.

On March 13, 2015, we issued 12 million Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF (BF) for gross proceeds of $300 million. For the initial five year period to the earliest redemption date of November 24, 2020, the shares pay quarterly cash dividends, if declared, at a rate of 3.60% per annum. The dividend rate will reset on the earliest redemption date and every fifth year thereafter at a rate equal to the 5-year Government of Canada bond yield plus a premium of 2.62%. Holders have the option to convert their shares into Non-Cumulative Floating Rate First Preferred Shares Series BG, subject to certain conditions, on the earliest redemption date and every fifth year thereafter at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.62%.

On January 30, 2015, we issued 24 million Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BD (BD) for gross proceeds of $600 million. For the initial five year period to the earliest redemption date of May 24, 2020, the shares pay quarterly cash dividends, if declared, at a rate of 3.60% per annum. The dividend rate will reset on the earliest redemption date and every fifth year thereafter at a rate equal to the 5-year Government of Canada bond yield plus a premium of 2.74%. Holders have the option to convert their shares into Non-Cumulative Floating Rate First Preferred Shares Series BE, subject to certain conditions, on the earliest redemption date and every fifth year thereafter at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.74%.

Subject to the consent of OSFI and the requirements of the Bank Act (Canada), we may redeem the BF and BD shares in whole or in part for cash at a price per share of $25 on the earliest redemption date and every fifth year thereafter. The shares include NVCC provisions which are necessary for the shares to qualify as Tier 1 regulatory capital.

On November 24, 2014, we redeemed all 13 million issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series AX for cash at a redemption price of $25 per share.

Common shares issued (1)

	For the three months ended
	July 31, 2015				April 30, 2015				July 31, 2014
(Millions of Canadian dollars, except number of shares)	Number of shares (thousands)		Amount		Number of shares (thousands)		Amount		Number of shares (thousands)			Amount
Stock options exercised (2)		90	$	5		510	$	25		352		$	19
Purchased for cancellation (3)		–		–		–		–		(165	)		(2	)
		90	$	5		510	$	25		187		$	17

	For the nine months ended
	July 31, 2015				July 31, 2014
(Millions of Canadian dollars, except number of shares)	Number of shares (thousands)		Amount		Number of shares (thousands)			Amount
Stock options exercised (2)		959	$	50		2,026		$	114
Purchased for cancellation (3)		–		–		(1,546	)		(16	)
		959	$	50		480		$	98

(1) The requirements of our dividend reinvestment plan (DRIP) are satisfied through either open market share purchases or shares issued from treasury. During the nine months ended July 31, 2015, and July 31, 2014, our DRIP’s requirements were satisfied through open market share purchases.

(2) Amounts include cash received for stock options exercised during the period and the fair value adjustment to stock options.

(3) During the three months ended July 31, 2014, we purchased for cancellation common shares at an average cost of $74.62 per share, with an average book value of $10.03 per share. During the nine months ended July 31, 2014, we purchased for cancellation common shares at an average cost of $72.64 per share, with an average book value of $10.03 per share.

88        Royal Bank of Canada        Third Quarter 2015

Note 11    Earnings per share

	For the three months ended									For the nine months ended
(Millions of Canadian dollars, except share and per share amounts)	July 31 2015			April 30 2015			July 31 2014			July 31 2015			July 31 2014
Basic earnings per share
Net income	$	2,475		$	2,502		$	2,378		$	7,433		$	6,671
Dividends on preferred shares		(50	)		(47	)		(55	)		(137	)		(169	)
Net income attributable to non-controlling interest		(26	)		(29	)		(26	)		(77	)		(77	)
Net income available to common shareholders		2,399			2,426			2,297			7,219			6,425
Weighted average number of common shares (in thousands)		1,443,052			1,442,078			1,442,312			1,442,579			1,442,615
Basic earnings per share (in dollars)	$	1.66		$	1.68		$	1.59		$	5.00		$	4.45
Diluted earnings per share
Net income available to common shareholders	$	2,399		$	2,426		$	2,297		$	7,219		$	6,425
Dilutive impact of exchangeable shares		4			3			3			11			17
Net income available to common shareholders including dilutive impact of exchangeable shares		2,403			2,429			2,300			7,230			6,442
Weighted average number of common shares (in thousands)		1,443,052			1,442,078			1,442,312			1,442,579			1,442,615
Stock options (1)		2,405			2,470			2,966			2,569			2,871
Exchangeable shares (2)		4,083			4,103			4,177			4,058			7,382
Average number of diluted common shares (in thousands)		1,449,540			1,448,651			1,449,455			1,449,206			1,452,868
Diluted earnings per share (in dollars)	$	1.66		$	1.68		$	1.59		$	4.99		$	4.43

(1) The dilutive effect of stock options was calculated using the treasury stock method. When the exercise price of options outstanding is greater than the average market price of our common shares, the options are excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2015, 799,372 average options outstanding with an exercise price of $78.59 were excluded from the calculation of diluted earnings per share (April 30, 2015 – 800,522; July 31, 2014– no outstanding options were excluded). For the nine months ended July 31, 2015, 671,603 average options outstanding with an exercise price of $78.59 were excluded from the calculation of diluted earnings per share (July 31, 2014 – no outstanding options were excluded).

(2) Includes exchangeable preferred shares and trust capital securities.

Note 12    Litigation

We are a large global institution that is subject to many different complex legal and regulatory requirements that continue to evolve. As a result, Royal Bank of Canada and its subsidiaries are and have been subject to a variety of legal proceedings, including civil claims and lawsuits, regulatory examinations, investigations, audits and requests for information by various governmental regulatory agencies and law enforcement authorities in various jurisdictions. Some of these matters may involve novel legal theories and interpretations and may be advanced under criminal as well as civil statutes, and some proceedings could result in the imposition of civil, regulatory enforcement or criminal penalties. Management reviews the status of all proceedings on an ongoing basis and will exercise its judgment in resolving them in such manner as management believes to be in the Bank’s best interest. This is an area of significant judgment and uncertainty and the extent of our financial and other exposure to these proceedings could be material to our results of operations in any particular period.

Our significant legal proceedings include all of the matters disclosed in Note 27 to our audited 2014 Annual Consolidated Financial Statements as updated below:

CFTC litigation

Royal Bank of Canada and the Commodity Futures Trading Commission (CFTC) signed a Consent Order to settle the civil lawsuit brought by the CFTC which was approved by the court in December 2014. The Consent Order requires Royal Bank of Canada, among other things, to pay a civil monetary penalty of US$35 million. Royal Bank of Canada has paid this amount and the matter is closed.

Rural/Metro litigation

A final judgment was entered on February 19, 2015 in the amount of US$93 million. Royal Bank of Canada has appealed the Delaware Court of Chancery’s determination of liability and quantum of damages, and the plaintiffs have cross-appealed the court’s ruling on the attorneys’ fees application.

LIBOR litigation

On August 4, 2015, the U.S. District Court for the Southern District of New York (the Court) issued an additional decision ruling on various motions to dismiss the individual plaintiff claims in the multi-district litigation proceeding. Based on the Court’s decisions to date, many of the claims against Royal Bank of Canada have been dismissed; however a number of these claims are subject to appeal or may be refiled based upon the content of the decisions. The parties are currently working with the Court to confirm the cases which remain active.

Royal Bank of Canada Trust Company (Bahamas) Limited Proceedings

On April 13, 2015, a French investigating judge notified Royal Bank of Canada Trust Limited (RBC Bahamas) of the issuance of an ordonnance de renvoi referring RBC Bahamas and other unrelated persons to the French tribunal correctionnel to face the charge of complicity in estate tax fraud relating to actions taken relating to a trust for which RBC Bahamas serves as trustee. The trial for this matter is expected to commence in January 2016. RBC Bahamas believes that its actions did not violate French law and intends to contest the charge in the French court. Based on the facts currently known, it is not possible to predict the ultimate outcome of this proceeding; however, management believes that its ultimate resolution will not have a material effect on our consolidated financial position, although it may be material to our results of operations in the period it occurs.

Royal Bank of Canada        Third Quarter 2015        89

Interchange fees litigation

Since 2011, seven proposed class actions have been commenced in Canada: Bancroft-Snell v. Visa Canada Corporation, et al., 9085-4886 Quebec Inc. v. Visa Canada Corporation, et al., Coburn and Watson’s Metropolitan Home v. Bank of America Corporation, et al. (Watson), Macaronies Hair Club and Laser Centre Inc. v. BofA Canada Bank, et al., 1023926 Alberta Ltd. v. Bank of America Corporation, et al., The Crown & Hand Pub Ltd. v. Bank of America Corporation, et al., and Hello Baby Equipment Inc. v. BofA Canada Bank, et al. The defendants in each action are VISA Canada Corporation (Visa), MasterCard International Incorporated (MasterCard), Royal Bank of Canada and other financial institutions. The plaintiff class members are Canadian merchants who accept Visa and/or MasterCard branded credit cards for payment. The actions allege, among other things, that from March 2001 to the present, Visa and MasterCard conspired with their issuing banks and acquirers to set default interchange rates and merchant discount fees and that certain rules (Honour All Cards and No Surcharge) have the effect of increasing the merchant discount fees. The actions include claims of civil conspiracy, breach of the Competition Act, interference with economic relations and unjust enrichment. The claims seek unspecified general and punitive damages. In Watson, a decision to partially certify the action as a class proceeding was released on March 27, 2014, and was appealed. On August 19, 2015, the Court of Appeal struck the plaintiff class representative’s cause of action under section 45 of the Competition Act and reinstated the plaintiff class representative’s cause of action in civil conspiracy by unlawful means, among other rulings. Based on the facts currently known, it is not possible at this time for us to predict the ultimate outcome of this proceeding or the timing of its resolution.

Foreign exchange matters

On July 2, 2015, the Brazilian civil antitrust authority Administrative Council for Economic Defense (CADE) initiated an administrative proceeding to investigate possible violations of Brazilian antitrust law by a number of banks, including Royal Bank of Canada, regarding foreign exchange trading. The matter is in its initial stages.

On July 31, 2015, RBC Capital Markets, LLC was added as a new defendant in a pending putative class action initially filed in November 2013 in the United States District Court for the Southern District of New York. The action is brought against multiple foreign exchange dealers and alleges collusive behaviour, among other allegations, in foreign exchange trading. The action is in its initial stages as it relates to the new defendants, including RBC Capital Markets, LLC.

Based on the facts currently known, it is not possible to predict the ultimate outcome of the foreign exchange matters or the timing of their ultimate resolution.

Note 13    Results by business segment

	For the three months ended July 31, 2015
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2), (3)	$	2,543	$	129	$	–	$	204	$	1,016	$	(109	)	$	3,783
Non-interest income		1,083		1,579		1,021		352		1,030		(20	)		5,045
Total revenue		3,626		1,708		1,021		556		2,046		(129	)		8,828
Provision for credit losses		257		–		–		–		15		(2	)		270
Insurance policyholder benefits, claims and acquisition expense		–		–		656		–		–		–			656
Non-interest expense		1,648		1,302		153		331		1,187		14			4,635
Net income (loss) before income taxes		1,721		406		212		225		844		(141	)		3,267
Income taxes (recoveries)		440		121		39		58		299		(165	)		792
Net income	$	1,281	$	285	$	173	$	167	$	545	$	24		$	2,475
Non-interest expense includes:
Depreciation and amortization	$	88	$	41	$	4	$	14	$	6	$	154		$	307
Restructuring provisions		–		2		–		–		–		–			2
Total assets	$	391,687	$	29,933	$	14,243	$	132,619	$	491,420	$	25,271		$	1,085,173
Total liabilities	$	391,712	$	29,913	$	14,244	$	132,565	$	491,340	$	(36,499	)	$	1,023,275

	For the three months ended April 30, 2015
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2), (3)	$	2,399	$	122	$	–	$	198	$	940	$	(102	)	$	3,557
Non-interest income		1,073		1,626		806		330		1,307		131			5,273
Total revenue		3,472		1,748		806		528		2,247		29			8,830
Provision for credit losses		235		32		–		–		15		–			282
Insurance policyholder benefits, claims and acquisition expense		–		–		493		–		–		–			493
Non-interest expense		1,618		1,340		156		312		1,280		30			4,736
Net income (loss) before income taxes		1,619		376		157		216		952		(1	)		3,319
Income taxes (recoveries)		419		105		34		57		327		(125	)		817
Net income	$	1,200	$	271	$	123	$	159	$	625	$	124		$	2,502
Non-interest expense includes:
Depreciation and amortization	$	87	$	39	$	4	$	13	$	7	$	162		$	312
Restructuring provisions		–		20		–		–		–		–			20
Total assets	$	383,278	$	28,835	$	13,753	$	119,198	$	465,304	$	21,804		$	1,032,172
Total liabilities	$	383,266	$	28,825	$	13,757	$	119,126	$	465,280	$	(36,329	)	$	973,925

90        Royal Bank of Canada        Third Quarter 2015

Note 13    Results by business segment(continued)

	For the three months ended July 31, 2014
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2), (3)	$	2,475	$	117	$	–	$	182	$	999	$	(126	)	$	3,647
Non-interest income		987		1,468		1,383		298		1,186		21			5,343
Total revenue		3,462		1,585		1,383		480		2,185		(105	)		8,990
Provision for credit losses		284		–		–		–		1		(2	)		283
Insurance policyholder benefits, claims and acquisition expense		–		–		1,009		–		–		–			1,009
Non-interest expense		1,632		1,191		143		330		1,269		37			4,602
Net income (loss) before income taxes		1,546		394		231		150		915		(140	)		3,096
Income taxes (recoveries)		408		109		17		40		274		(130	)		718
Net income	$	1,138	$	285	$	214	$	110	$	641	$	(10	)	$	2,378
Non-interest expense includes:
Depreciation and amortization	$	85	$	36	$	4	$	14	$	7	$	150		$	296
Restructuring provisions		–		–		–		–		–		–			–
Total assets	$	372,061	$	26,522	$	12,503	$	97,662	$	387,205	$	17,917		$	913,870
Total liabilities	$	372,002	$	26,459	$	12,562	$	97,646	$	387,003	$	(35,299	)	$	860,373

	For the nine months ended July 31, 2015
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services			Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2), (3)	$	7,435	$	375	$	–	$	598		$	2,872	$	(309	)	$	10,971
Non-interest income		3,229		4,747		3,719		992			3,454		190			16,331
Total revenue		10,664		5,122		3,719		1,590			6,326		(119	)		27,302
Provision for credit losses		744		45		–		(1	)		35		(1	)		822
Insurance policyholder benefits, claims and acquisition expense		–		–		2,671		–			–		–			2,671
Non-interest expense		4,894		3,975		455		959			3,624		84			13,991
Net income (loss) before income taxes		5,026		1,102		593		632			2,667		(202	)		9,818
Income taxes (recoveries)		1,290		316		112		164			903		(400	)		2,385
Net income	$	3,736	$	786	$	481	$	468		$	1,764	$	198		$	7,433
Non-interest expense includes:
Depreciation and amortization	$	261	$	118	$	12	$	41		$	21	$	467		$	920
Restructuring provisions		–		59		–		–			–		–			59
Total assets	$	391,687	$	29,933	$	14,243	$	132,619		$	491,420	$	25,271		$	1,085,173
Total liabilities	$	391,712	$	29,913	$	14,244	$	132,565		$	491,340	$	(36,499	)	$	1,023,275

	For the nine months ended July 31, 2014
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2), (3)	$	7,296	$	346	$	–	$	549	$	2,608	$	(243	)	$	10,556
Non-interest income		2,883		4,328		3,790		859		3,259		51			15,170
Total revenue		10,179		4,674		3,790		1,408		5,867		(192	)		25,726
Provision for credit losses		789		19		–		–		12		(1	)		819
Insurance policyholder benefits, claims and acquisition expense		–		–		2,821		–		–		–			2,821
Non-interest expense		4,877		3,555		430		965		3,445		49			13,321
Net income (loss) before income taxes		4,513		1,100		539		443		2,410		(240	)		8,765
Income taxes (recoveries)		1,189		302		14		115		757		(283	)		2,094
Net income	$	3,324	$	798	$	525	$	328	$	1,653	$	43		$	6,671
Non-interest expense includes:
Depreciation and amortization	$	250	$	111	$	12	$	44	$	21	$	419		$	857
Restructuring provisions		3		–		–		–		–		–			3
Total assets	$	372,061	$	26,522	$	12,503	$	97,662	$	387,205	$	17,917		$	913,870
Total liabilities	$	372,002	$	26,459	$	12,562	$	97,646	$	387,003	$	(35,299	)	$	860,373

(1) Taxable equivalent basis (Teb). The Teb adjustment for the three months ended July 31, 2015 was $133 million (April 30, 2015 – $115 million, July 31, 2014 – $174 million) and for the nine months ended July 31, 2015 was $357 million (July 31, 2014 – $391 million).

(2) Inter-segment revenue and share of profits in joint ventures and associates are not material.

(3) Interest revenue is reported net of interest expense as management relies primarily on net interest income as a performance measure.

Royal Bank of Canada        Second Quarter 2015        91

Note 14    Capital management

Regulatory capital and capital ratios

OSFI formally establishes risk-based capital and leverage targets for deposit-taking institutions in Canada. Beginning this year, the asset-to-capital ratio has been replaced by a leverage ratio. The leverage ratio is calculated by dividing Tier 1 capital by an exposure measure. The exposure measure consists of total assets (excluding items deducted from Tier 1 capital) and certain off-balance sheet items converted into credit exposure equivalents. Adjustments are also made to derivatives and secured financing transactions to reflect credit and other risks. During the third quarter of 2015, we complied with all capital and leverage requirements imposed by OSFI.

	As at
(Millions of Canadian dollars, except percentage and multiple amounts)	July 31 2015		April 30 2015		October 31 2014		July 31 2014
Capital(1)
Common Equity Tier 1 capital	$	42,405	$	39,608	$	36,406	$	34,967
Tier 1 capital		49,049		45,989		42,202		41,408
Total capital		56,553		53,932		50,020		48,188
Risk-weighted assets used in calculation of capital ratios(1), (2)
Common Equity Tier 1 capital ratio		419,484		396,874		368,594		368,320
Tier 1 capital ratio		420,789		398,014		369,976		369,772
Total capital ratio		421,908		398,992		372,050		371,949
Total capital risk-weighted assets(1)
Credit risk	$	330,577	$	306,831	$	286,327	$	281,684
Market risk		41,322		42,915		38,460		44,042
Operational risk		50,009		49,246		47,263		46,223
	$	421,908	$	398,992	$	372,050	$	371,949
Capital ratios, leverage ratios and multiples(1)
Common Equity Tier 1 capital ratio		10.1%		10.0%		9.9%		9.5%
Tier 1 capital ratio		11.7%		11.6%		11.4%		11.2%
Total capital ratio		13.4%		13.5%		13.4%		13.0%
Leverage ratio (3)		4.2%		4.0%		n.a.		n.a.
Assets-to-capital multiple (4)		n.a.		n.a.		17.0X		17.3X

(1) Capital, risk-weighted assets and capital ratios and multiples are calculated using OSFI Capital Adequacy Requirements. Leverage ratio is calculated using OSFI Leverage Requirements.

(2) Effective the third quarter of 2014, the credit valuation adjustment to our risk-weighted asset calculation implemented in the first quarter of 2014, must reflect different percentages for each tier of capital. This change reflects a phase-in of credit valuation adjustments ending in the fourth quarter of 2018. During this phase-in period, risk-weighted assets for Common Equity Tier 1, Tier 1 and Total capital ratios will be subject to different annual credit valuation adjustment percentages.

(3) Exposure measure as at July 31, 2015 was $1,178 billion (April 30, 2015 – $1,138 billion).

(4) Beginning this year, the asset-to-capital multiple has been replaced by a leverage ratio. Gross adjusted assets as at October 31, 2014 and July 31, 2014 were $885 billion and $868 billion, respectively.

n.a. not applicable

92        Royal Bank of Canada        Third Quarter 2015

Shareholder Information

Corporate headquarters Street address: Royal Bank of Canada 200 Bay Street Toronto, Ontario M5J 2J5 Canada Tel: 1-888-212-5533   Mailing address: P.O. Box 1 Royal Bank Plaza Toronto, Ontario M5J 2J5 Canada website: rbc.com   Transfer Agent and Registrar Main Agent: Computershare Trust Company of
Canada 1500 Robert Bourassa Blvd. Suite 700 Montreal, Quebec H3A 3S8 Canada Tel: 1-866-586-7635 (Canada and
the U.S.) or 514-982-7555 (International) Fax: 514-982-7580 website: computershare.com\rbc   Co-Transfer Agent (U.S.): Computershare Trust Company,
N.A. 250 Royall Street Canton, Massachusetts 02021 U.S.A.   Co-Transfer Agent (U.K.): Computershare Investor Services
PLC Securities Services – Registrars P.O. Box 82, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ U.K. Stock exchange listings (Symbol: RY)   Common shares are listed on: Canada – Toronto Stock Exchange (TSX) U.S. – New York Stock Exchange (NYSE) Switzerland – Swiss Exchange (SIX)   All preferred shares are listed on
the TSX.   Valuation day price For capital gains purposes, the
Valuation Day (December 22,
1971) cost base for our common
shares is $7.38 per share. This
amount has been adjusted to
reflect the two-for-one share split
of March 1981 and the two-for-one
share split of February 1990. The
one-for-one share dividends paid
in October 2000 and April 2006 did
not affect the Valuation Day value
for our common shares.   Shareholder contacts For dividend information, change
in share registration or address,
lost stock certificates, tax forms,
estate transfers or dividend
reinvestment, please contact:
Computershare Trust Company of
Canada 100 University Avenue, 8th Floor Toronto, Ontario M5J 2Y1 Canada   Tel: 1-866-586-7635 (Canada and
the U.S.) or 514-982-7555
(International) Fax: 1-888-453-0330 (Canada and
the U.S.) or 416-263-9394 Financial analysts, portfolio
managers, institutional
investors For financial information
inquiries, please contact:
Investor Relations Royal Bank of Canada 200 Bay Street North Tower Toronto, Ontario M5J 2W7
Canada Tel: 416-955-7802   or visit our website at rbc.com/investorrelations   Direct deposit service Shareholders in Canada and the
U.S. may have their RBC
common share dividends
deposited directly to their bank
account by electronic funds
transfer. To arrange for this
service, please contact our
Transfer Agent and Registrar,
Computershare Trust Company
of Canada.   Eligible dividend designation For purposes of the enhanced
dividend tax credit rules
contained in the Income Tax Act
(Canada) and any corresponding
provincial and territorial tax
legislation, all dividends (and
deemed dividends) paid by us to
Canadian residents on our
common and preferred shares
after December 31, 2005, are
designated as “eligible
dividends”. Unless stated otherwise, all
dividends (and deemed
dividends) paid by us hereafter
are designated as “eligible
dividends” for the purposes of
such rules.   Common share repurchases We are engaged in a Normal
Course Issuer Bid (NCIB). During
the one-year period commencing
November 1, 2014, we may
repurchase for cancellation, up to
12 million common shares in the
open market at market prices. We
determine the amount and timing
of the purchases under the NCIB,
subject to prior consultation with
the Office of the Superintendent
of Financial Institutions Canada
(OSFI).   A copy of our Notice of Intention
to file a NCIB may be obtained,
without charge, by contacting our
Corporate Secretary at our
Toronto mailing address.   2015 Quarterly earnings release
dates First quarter             February 25 Second quarter       May 28 Third quarter           August 26 Fourth quarter         December 2   2016 Annual Meeting The Annual Meeting of Common
Shareholders will be held on
Wednesday, April 6, 2016, in
Montreal, Quebec.

(International) email: service@computershare.com	Dividend dates for 2015
	Subject to approval by the Board of Directors
For other shareholder inquiries, please contact: Shareholder Relations Royal Bank of Canada 200 Bay Street South Tower Toronto, Ontario M5J 2J5 Canada Tel: 416-955-7806		Ex-dividend dates	Record dates	Payment dates
	Common and preferred shares series W, AA, AB, AC, AD, AE, AF, AG, AJ, AK, AL, AZ and BB	January 22 April 21 July 23 October 22	January 26 April 23 July 27 October 26	February 24 May 22 August 24 November 24
	Preferred shares series BD	April 21 July 23 October 22	April 23 July 27 October 26	May 22 August 24 November 24
	Preferred shares series BF	July 23 October 22	July 27 October 26	August 24 November 24
	Preferred shares series BH and BI	October 22	October 26	November 24

Information contained in or otherwise accessible through the websites mentioned in this report to shareholders does not form a part of this report. All references to websites are inactive textual references and are for your information only.

Trademarks used in this report include the LION & GLOBE Symbol, ROYAL BANK OF CANADA, RBC and RBC INSURANCE 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 report, which are not the property of Royal Bank of Canada, are owned by their respective holders.