Exhibit 99.2

Royal Bank of Canada first quarter 2019 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, February 22, 2019 — Royal Bank of Canada (RY on TSX and NYSE) today reported net income of $3,172 million for the quarter ended January 31, 2019, up $160 million or 5% from the prior year, with solid diluted EPS⁽¹⁾ growth of 7%. Results reflect solid underlying earnings growth in Personal & Commercial Banking and Insurance. Challenging market conditions impacted several business segments in the first quarter of 2019 contributing to results being flat in Wealth Management and lower results in Capital Markets and Investor & Treasury Services. Our results also reflect an increase due to foreign exchange translation and the write-down of net deferred tax assets in the prior year related to the U.S. Tax Reform.

Compared to last quarter, net income was down $78 million with higher earnings in Wealth Management, Personal & Commercial Banking, and Investor & Treasury Services. These were more than offset by lower earnings in Insurance, and Capital Markets due to challenging market conditions.

Results this quarter also reflect investments in client-facing staff and technology initiatives, as well as higher provisions for credit losses (PCL), with a total PCL ratio on loans of 34 basis points (bps). PCL on impaired loans ratio of 28 bps was up 8 bps compared to last quarter, largely due to higher provisions related to one account in Capital Markets. Our capital position remained strong, with a Common Equity Tier 1 (CET1) ratio of 11.4%. In addition, today we announced an increase to our quarterly dividend of $0.04 or 4% to $1.02 per share.

“Our strategy and unwavering focus on delivering value for our clients and shareholders continues to underpin our ability to consistently deliver solid results, even against a challenging market backdrop. In addition to delivering earnings of $3.2 billion, we are pleased to increase our quarterly dividend by 4% today. We remain focused on prudently managing our risks and balancing our investments for long-term growth as we transform the client journey.”

– Dave McKay, RBC President and Chief Executive Officer    

	• Net income of $3,172 million • Diluted EPS(1) of $2.15 • ROE(2) of 16.7% • CET1 ratio of 11.4%	h  5% h  7% ¯  70 bps h  40 bps
	• Net income of $3,172 million • Diluted EPS(1) of $2.15 • ROE(2) of 16.7% • CET1 ratio of 11.4%	¯  2% ¯  2% ¯  90 bps ¯  10 bps

(1) Earnings per share (EPS).

(2) Return on Equity (ROE). This measure does not have a standardized meaning under GAAP. For further information, refer to the Key performance and non-GAAP measures section of this Q1 2019 Report to Shareholders.

Table of contents

1 First 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 Financial performance

5 Overview

9 Business segment results

9 How we measure and report our business segments

9 Key performance and non-GAAP measures

11 Personal & Commercial Banking

12 Wealth Management

14 Insurance

15 Investor & Treasury Services

16 Capital Markets

17 Corporate Support

18 Quarterly results and trend analysis

19 Financial condition

19 Condensed balance sheets

20 Off-balance sheet arrangements

21 Risk management

21 Credit risk

27 Market risk

31 Liquidity and funding risk

38 Capital management

42 Capital, liquidity, and other regulatory developments

43 Accounting and control matters

43 Summary of accounting policies and estimates

43 Change in accounting policies and disclosures

43 Controls and procedures

43 Related party transactions

44 Enhanced Disclosure Task Force recommendations index

45 Interim Condensed Consolidated Financial Statements (unaudited)

50 Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

67 Shareholder Information

2        Royal Bank of Canada        First Quarter 2019

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 month period ended or as at January 31, 2019, compared to the corresponding period in the prior fiscal year and the three month period ended October 31, 2018. This MD&A should be read in conjunction with our unaudited Interim Condensed Consolidated Financial Statements for the quarter ended January 31, 2019 (Condensed Financial Statements) and related notes and our 2018 Annual Report. This MD&A is dated February 21, 2019. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise noted.

Additional information about us, including our 2018 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.

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.

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 Q1 2019 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, market, and regulatory review and outlook for Canadian, U.S., European and global economies, the regulatory environment in which we operate, and the risk environment including our liquidity and funding risk, and includes our President and Chief Executive Officer’s statements. 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, as well as 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, operational, regulatory compliance, strategic, reputation, legal and regulatory environment, competitive and systemic risks and other risks discussed in the risk sections of our 2018 Annual Report and the Risk management section of this Q1 2019 Report to Shareholders; including global uncertainty, Canadian housing and household indebtedness, information technology and cyber risk, regulatory changes, digital disruption and innovation, data and third party related risks, climate change, the business and economic conditions in the geographic regions in which we operate, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and environmental and social 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 Q1 2019 Report to Shareholders are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook headings in our 2018 Annual Report, as updated by the Economic, market and regulatory review and outlook section of this Q1 2019 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 sections of our 2018 Annual Report and the Risk management section of this Q1 2019 Report to Shareholders.

Overview and outlook

About Royal Bank of Canada

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 84,000+ employees who bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank, and one of the largest in the world based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our 16 million clients in Canada, the U.S. and 33 other countries. Learn more at rbc.com.

Royal Bank of Canada        First Quarter 2019        3

Selected financial and other highlights

	As at or for the three months ended							For the three months ended
(Millions of Canadian dollars, except per share, number of and percentage amounts)	January 31 2019		October 31 2018		January 31 2018			Q1 2019 vs. Q4 2018			Q1 2019 vs. Q1 2018
Total revenue	$	11,589	$	10,669	$	10,828		$	920		$	761
Provision for credit losses (PCL)		514		353		334			161			180
Insurance policyholder benefits, claims and acquisition expense (PBCAE)		1,225		494		836			731			389
Non-interest expense		5,912		5,882		5,611			30			301
Income before income taxes		3,938		3,940		4,047			(2	)		(109	)
Net income	$	3,172	$	3,250	$	3,012		$	(78	)	$	160
Segments – net income
Personal & Commercial Banking	$	1,571	$	1,538	$	1,521		$	33		$	50
Wealth Management		597		553		597			44			–
Insurance		166		318		127			(152	)		39
Investor & Treasury Services		161		155		219			6			(58	)
Capital Markets		653		666		748			(13	)		(95	)
Corporate Support		24		20		(200	)		4			224
Net income	$	3,172	$	3,250	$	3,012		$	(78	)	$	160
Selected information
Earnings per share (EPS) – basic	$	2.15	$	2.21	$	2.02		$	(0.06	)	$	0.13
– diluted		2.15		2.20		2.01			(0.05	)		0.14
Return on common equity (ROE) (1) (2)		16.7%		17.6%		17.4%			(90) bps			(70) bps
Average common equity (1)	$	73,550	$	71,700	$	66,850		$	1,850		$	6,700
Net interest margin (NIM) – on average earning assets (1)		1.62%		1.67%		1.65%			(5) bps			(3) bps
PCL on loans as a % of average net loans and acceptances		0.34%		0.23%		0.24%			11 bps			10 bps
PCL on impaired loans as a % of average net loans and acceptances		0.28%		0.20%		0.23%			8 bps			5 bps
Gross impaired loans (GIL) as a % of loans and acceptances		0.46%		0.37%		0.45%			9 bps			1 bps
Liquidity coverage ratio (LCR) (3)		128%		123%		122%			500 bps			600 bps
Capital ratios and Leverage ratio (4)
Common Equity Tier 1 (CET1) ratio		11.4%		11.5%		11.0%			(10) bps			40 bps
Tier 1 capital ratio		12.7%		12.8%		12.4%			(10) bps			30 bps
Total capital ratio		14.5%		14.6%		14.4%			(10) bps			10 bps
Leverage ratio		4.3%		4.4%		4.2%			(10) bps			10 bps
Selected balance sheet and other information (5)
Total assets	$	1,366,207	$	1,334,734	$	1,276,275		$	31,473		$	89,932
Securities, net of applicable allowance		235,832		222,866		222,262			12,966			13,570
Loans, net of allowance for loan losses		589,820		576,818		538,044			13,002			51,776
Derivative related assets		84,816		94,039		105,512			(9,223	)		(20,696	)
Deposits		852,564		837,046		800,020			15,518			52,544
Common equity		74,147		73,552		66,430			595			7,717
Total capital risk-weighted assets		508,512		496,459		466,758			12,053			41,754
Assets under management (AUM)		688,000		671,000		656,700			17,000			31,300
Assets under administration (AUA) (6)		5,363,900		5,533,700		5,653,500			(169,800)			(289,600)
Common share information
Shares outstanding (000s) – average basic		1,437,074		1,440,207		1,451,781			(3,133	)		(14,707	)
– average diluted		1,443,195		1,446,514		1,458,714			(3,319	)		(15,519	)
– end of period (7)		1,435,073		1,438,794		1,443,915			(3,721	)		(8,842	)
Dividends declared per common share	$	0.98	$	0.98	$	0.91		$	–		$	0.07
Dividend yield (8)		4.1%		3.8%		3.5%			30 bps			60 bps
Common share price (RY on TSX) (9)	$	100.02	$	95.92	$	105.32		$	4.10		$	(5.30	)
Market capitalization (TSX) (9)		143,536		138,009		152,089			5,527			(8,553	)
Business information (number of)
Employees (full-time equivalent) (FTE)		82,108		81,870		78,648			238			3,460
Bank branches		1,334		1,333		1,368			1			(34	)
Automated teller machines (ATMs)		4,568		4,537		4,660			31			(92	)
Period average US$ equivalent of C$1.00 (10)	$	0.749	$	0.767	$	0.794		$	(0.018	)	$	(0.045	)
Period-end US$ equivalent of C$1.00	$	0.761	$	0.760	$	0.813		$	0.001		$	(0.052	)

(1) Average amounts are calculated using methods intended to approximate the average of the daily balances for the period. This includes Average common equity used in the calculation of ROE. 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) LCR is the average for the three months ended for each respective period and is calculated in accordance with OSFI’s Liquidity Adequacy Requirements (LAR) guideline. For further details, refer to the Liquidity and funding risk section.

(4) The Leverage ratio is a regulatory measure under the Basel III framework. For further details, refer to the Capital management section.

(5) Represents period-end spot balances.

(6) AUA includes $16.6 billion and $8.5 billion (October 31, 2018 – $16.7 billion and $9.6 billion; January 31, 2018 – $18.2 billion and $9.1 billion) of securitized residential mortgages and credit card loans, respectively.

(7) Effective Q4 2018, Common shares outstanding includes the impact of treasury shares. Comparative amounts have been adjusted to conform with this presentation.

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

(9) Based on TSX closing market price at period-end.

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

4        Royal Bank of Canada        First Quarter 2019

Economic, market and regulatory review and outlook – data as at February 21, 2019

The predictions and forecasts in this section are based on information and assumptions from sources we consider reliable. If this information or these assumptions are not accurate, actual economic outcomes may differ materially from the outlook presented in this section.

Economic and market review and outlook

Canada

The Canadian economy is estimated to have grown by 1.1%¹ during the last calendar quarter of 2018, which is down from a 2.0%¹ increase in the previous calendar quarter. The slowdown partially reflected a pullback in the Canadian energy sector, while consumer spending and housing activity remained soft. Some local housing markets have yet to fully stabilize following a decline in resales in calendar 2018. Despite slower GDP growth toward the end of last year, job growth has remained strong. The unemployment rate rose to 5.8% in January 2019 as more Canadians looked for work, but that rate remains close to historical lows. The Bank of Canada (BoC) held its overnight rate steady at 1.75% in January and struck a fairly balanced tone in light of the slowdown. We expect a return to near 2% growth later this year with non-energy exports and business investment offsetting a slowdown in consumer spending and housing.

U.S.

Overall growth in the U.S. economy is estimated to have slowed to 2.5%¹ in the fourth calendar quarter of 2018, down from the 3.4%¹ increase in the previous calendar quarter. Two months of healthy consumer spending in the last calendar quarter was capped off by an unexpected decline in December’s retail sales. Manufacturing output increased at a solid rate in the last calendar quarter of 2018 despite indicators pointing to slower growth. The labour market remained strong toward the end of calendar 2018 and wages continued to rise. We expect the U.S. economy will continue to grow at a solid pace throughout calendar 2019 despite recent softening in sentiment indicators. Equity markets rebounded in January following sharp declines during the last calendar quarter in 2018. The Federal Reserve (Fed) also expects sustained economic expansion and low unemployment, but has emphasized a more patient approach to setting monetary policy amid growing risks to the outlook. Those include signs of slowing global growth, persistent uncertainty over trade policy, some sustained tightening in financial conditions and a government shutdown that will impact growth in the current calendar quarter.

Europe

The Euro area’s growth was stagnant in the fourth calendar quarter of 2018 with GDP growth remaining at 0.2%. Some temporary factors, including production issues in the German auto sector and labour disruptions in France, were behind the loss of momentum, and export growth was hampered by a slowdown in some emerging market economies. In the U.K., rising uncertainty over Brexit was likely a significant factor to its loss of growth momentum, adversely impacting business sentiment and investment. Labour markets in the Euro area and the U.K. continued to improve toward the end of the calendar year, however, recent indicators point to a slowdown in hiring activity. We expect growth within the Euro area and the U.K. to remain soft over the first half of 2019 as geopolitical uncertainty persists.

Financial markets

Equity markets were under downward pressure toward the end of the last calendar year due to concerns about rising interest rates, geopolitical tensions and slowing global growth. Both the S&P 500 Index and the S&P/TSX Composite experienced double-digit declines in the fourth calendar quarter of 2018. However, the indices partially rebounded in January. Key foreign indices experienced similar movements. Flattening in the U.S. yield curve may have also contributed to the increase in market volatility as investors worry the end of the business cycle is drawing closer.

Regulatory environment

We continue to monitor and prepare for regulatory developments and changes in a manner that seeks to ensure compliance with new requirements while mitigating any adverse business or financial impacts. Such impacts could result from new or amended laws or regulations and the expectations of those who enforce them. A high level summary of the key regulatory changes that have the potential to increase our costs, impact our profitability, and increase the complexity of our operations are disclosed in the Legal and regulatory environment risk section of our 2018 Annual Report, as updated below.

Global Uncertainty

Trade policy remains a risk to the global economic outlook, including the ratification of the Canada-United States-Mexico Agreement (CUSMA), the outcome of the Brexit negotiations, and tensions between the U.S. and China. While Canada, the U.S., and Mexico have successfully renegotiated the North American Free Trade Agreement, the new CUSMA deal has yet to be ratified and could face challenges in a divided U.S. Congress. The outcome of the Brexit negotiations and its resulting impact on global trade also remains uncertain. Although tension remains between the U.S. and China, trade discussions are ongoing between the two countries, and there may be a further extension on when the U.S. will increase tariffs on Chinese imports, which is currently set at March 1, 2019. These ongoing concerns have contributed to the International Monetary Fund further lowering its 2019 global growth projections in January, with the possibility for additional downgrades in the event of further escalation in trade tensions.

Consumer Protection

The Canadian federal government has focused its attention on issues relating to consumer protection and the sales practices of banks. While the government’s proposed legislative changes to consumer protection provisions applicable to banks was approved on December 13, 2018, the government remains in the early stages of developing a regulatory framework to support the new provisions.

1 Annualized rate

Royal Bank of Canada        First Quarter 2019        5

Privacy

Legislative developments in data privacy are being closely monitored following the enactment of the General Data Protection Regulation (GDPR). Data privacy risks remain a key focus, and European data protection authorities have issued the first significant fines to certain non-financial services entities in January 2019.

London Interbank Offered Rate (LIBOR)

LIBOR is the most widely referenced benchmark interest rate across the globe for derivatives, bonds, loans and other floating rate instruments; however, there is a regulator-led push to transition the market from LIBOR to alternative risk-free, or nearly risk-free, rates that are based on actual overnight transactions. In addition to the U.S. and U.K., regulators internationally, including the Bank of Canada, have warned the market they will need to be prepared for LIBOR to be discontinued at the end of 2021. Derivatives, floating rate notes and other financial contracts whose terms extend beyond 2021, and that refer to LIBOR as the reference rate, will be impacted. At this time, local jurisdictions are evaluating the potential impacts and solutions for replacement benchmark rates.

Other Regulatory Initiatives Impacting Financial Services in Canada

On January 11, 2019, the federal government released a consultation paper on the merits of open banking. The government will also be holding roundtables and anticipates that the Advisory Committee on this issue will provide a report to the Minister of Finance following the completion of its work.

United States Regulatory Initiatives

Policymakers continue to consider reforms to various U.S. regulations, certain of which may, if implemented, result in reduced complexity of the U.S. regulatory framework and lower compliance costs. The Fed is expected to release a proposal in March 2019 to tailor its enhanced prudential standards applicable to foreign bank organizations.

United States Tax Reform

Regulations implementing and/or clarifying certain aspects of the U.S. Tax Cuts and Jobs Act legislation (U.S. Tax Reform) are being released on a rolling basis. In December 2018, the U.S. Treasury released proposed regulations clarifying some of the rules for calculating a Base Erosion Anti-Abuse Tax (BEAT) as well as proposed regulations relating to deductions on certain cross-border interest and royalty payments (the Anti-Hybrid rules). We are currently reviewing the impact of these proposed regulations.

U.K. and European Regulatory Reform

The U.K. remains in negotiations with regards to its exit from the European Union, scheduled to take place on March 29, 2019. Until the date of its exit or, if there is a transition period, until the period expires, the U.K. will continue to remain an EU Member State, subject to all EU legislation. Other forthcoming regulatory initiatives include the transaction reporting of securities financing transactions, which is expected to take effect in the first calendar quarter of 2020, extended from its previous effective date of the first calendar quarter of 2019.

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 and Legal and regulatory environment risk sections of our 2018 Annual Report and the Capital, liquidity and other regulatory developments section of this Q1 2019 Report to Shareholders. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of our 2018 Annual Report and the Risk management and Capital management sections of this Q1 2019 Report to Shareholders.

Financial performance

Overview

Q1 2019 vs. Q1 2018

Net income of $3,172 million was up $160 million or 5% from a year ago. Diluted earnings per share (EPS) of $ 2.15 was up $0.14 or 7% and return on common equity (ROE) of 16.7% was down 70 bps from 17.4% last year. Our Common Equity Tier 1 (CET1) ratio of 11.4% was up 40 bps from a year ago.

Our results reflected solid earnings growth in Personal & Commercial Banking and Insurance, and consistent earnings in Wealth Management, partially offset by lower results in Capital Markets and Investor & Treasury Services. Our results also reflect an increase due to foreign exchange translation and the impact in the prior year of the U.S. Tax Reform which resulted in the write-down of net deferred tax assets.

Personal & Commercial Banking earnings were up mainly due to volume growth and higher spreads. These factors were partially offset by higher staff and technology related costs, higher provision for credit losses (PCL) and a gain relating to the reorganization of Interac in the prior year. The current year also included a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados.

Insurance results increased primarily reflecting favourable life retrocession contract renegotiations and lower claims costs.

Wealth Management results remained unchanged from a year ago as higher net interest income and an increase in average fee-based client assets were offset by higher costs related to business growth, increases in PCL and regulatory costs, and lower transaction volumes. A favourable accounting adjustment related to Canadian Wealth Management in the current period was largely offset by the impact of a favourable accounting adjustment related to City National in the prior period.

Capital Markets results were down primarily due to higher PCL and lower revenue in Corporate and Investment Banking. These factors were partially offset by a lower effective tax rate reflecting changes in earnings mix and the impact of foreign exchange translation.

6        Royal Bank of Canada        First Quarter 2019

Investor & Treasury Services earnings decreased primarily due to lower funding and liquidity revenue, higher costs in support of business growth, and lower revenue from our asset services business. These factors were partially offset by improved client deposit margins.

Corporate Support net income was $24 million in the current quarter, largely reflecting net favourable tax adjustments. Net loss was $200 million in the prior year, largely due to the impact of the U.S. Tax Reform of $178 million which was mainly related to the write-down of net deferred tax assets.

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

Q1 2019 vs. Q4 2018

Net income of $3,172 million was down $78 million or 2% from the prior quarter. Diluted EPS of $ 2.15 was down $0.05 or 2% and ROE of 16.7% was down 90 bps. Our CET1 ratio of 11.4%, was down 10 bps.

Our results reflected lower earnings in Insurance and Capital Markets, partially offset by higher earnings in Wealth Management, Personal & Commercial Banking, and Investor & Treasury Services.

Insurance earnings were down as the prior period included annual actuarial assumption updates, higher favourable investment-related experience, and higher favourable life retrocession contract renegotiations.

Capital Markets earnings decreased primarily due to lower revenue in Corporate and Investment Banking and higher PCL. These factors were partially offset by higher revenue in Global Markets and a lower effective tax rate reflecting changes in earnings mix.

Wealth Management earnings were up primarily reflecting an increase in net interest income, a favourable accounting adjustment related to Canadian Wealth Management in the current period, and the change in fair value of seed capital investments. These factors were partially offset by higher costs in support of business growth, and lower fee-based revenue resulting from challenging market conditions throughout the earlier part of Q1 2019.

Personal & Commercial Banking results were up reflecting volume growth, seasonally lower marketing costs, and lower professional fees. These factors were partially offset by higher staff-related costs and an increase in PCL. The current year also included a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados.

Investor & Treasury Services earnings increased primarily due to higher funding and liquidity revenue, lower technology costs, and improved client deposit margins. These factors were partially offset by annual regulatory costs in the current period.

Impact of foreign currency translation

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

	For the three months ended
(Millions of Canadian dollars, except per share amounts)	Q1 2019 vs. Q1 2018		Q1 2019 vs. Q4 2018
Increase (decrease):
Total revenue	$	186	$	86
PCL		8		3
PBCAE		–		–
Non-interest expense		115		57
Income taxes		7		3
Net income		56		23
Impact on EPS
Basic	$	0.04	$	0.02
Diluted		0.04		0.02

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

(Average foreign currency equivalent of C$1.00) (1)	For the three months ended
	January 31 2019		October 31 2018		January 31 2018
U.S. dollar		0.749		0.767		0.794
British pound		0.582		0.593		0.578
Euro		0.656		0.666		0.656

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

Royal Bank of Canada        First Quarter 2019        7

Total revenue

	For the three months ended
(Millions of Canadian dollars)	January 31 2019		October 31 2018		January 31 2018
Interest and dividend income	$	10,149	$	8,990	$	7,540
Interest expense		5,265		4,261		3,095
Net interest income	$	4,884	$	4,729	$	4,445
NIM		1.62%		1.67%		1.65%
Insurance premiums, investment and fee income	$	1,579	$	1,039	$	1,144
Trading revenue		358		123		318
Investment management and custodial fees		1,450		1,387		1,325
Mutual fund revenue		873		896		885
Securities brokerage commissions		342		349		355
Service charges		468		459		440
Underwriting and other advisory fees		345		514		541
Foreign exchange revenue, other than trading		249		267		281
Card service revenue		282		264		257
Credit fees		315		371		328
Net gains on investment securities		46		33		39
Share of profit in joint ventures and associates		15		8		25
Other		383		230		445
Non-interest income	$	6,705	$	5,940	$	6,383
Total revenue	$	11,589	$	10,669	$	10,828
Additional information
Total trading revenue
Net interest income	$	601	$	548	$	550
Non-interest income		358		123		318
Total trading revenue	$	959	$	671	$	868

Q1 2019 vs. Q1 2018

Total revenue increased $761 million or 7% from last year, mainly due to higher net interest income, insurance premiums, investment and fee income (Insurance revenue), and investment management and custodial fees. These factors were partially offset by lower underwriting and advisory fees. In addition, the impact of foreign exchange translation increased total revenue by $186 million.

Net interest income increased $439 million or 10%, largely due to the impact from higher interest rates and volume growth in Canadian Banking and Wealth Management. Higher trading revenue, primarily in commodities and equities, and higher lending revenue in Capital Markets also contributed to the increase. Net interest income was also impacted by lower funding and liquidity revenue, which was largely offset by the related gains on non-trading derivatives in Other revenue.

NIM was down 3 bps compared to last year, due to changes in average earning asset mix with volume growth primarily in reverse repos, and lower funding and liquidity revenue. These factors were partially offset by improved spreads on deposits in Canadian Banking and Wealth Management, reflecting higher interest rates. The impact associated with lower funding and liquidity revenue was largely offset by the related gains on non-trading derivatives in Other revenue.

Insurance revenue increased $435 million or 38%, mainly reflecting the change in fair value of investments backing our policyholder liabilities and higher group annuity sales, both of which are largely offset in PBCAE. Business growth in longevity reinsurance, and favourable life retrocession contract renegotiations also contributed to the increase.

Investment management and custodial fees increased $125 million or 9%, mainly due to a favourable accounting adjustment in Wealth Management in the current period and higher average fee-based client assets reflecting net sales.

Underwriting and other advisory fees decreased $196 million or 36%, largely due to lower equity and debt origination primarily in North America.

Q1 2019 vs. Q4 2018

Total revenue increased $920 million or 9% from the prior quarter, primarily due to the change in fair value of investments backing our policyholder liabilities, which is largely offset in PBCAE, higher equity and fixed income trading revenue, primarily in North America, and the impact from volume growth and higher interest rates in Canadian Banking and Wealth Management. These factors were partially offset by lower equity and debt origination, primarily in North America. In addition, the impact of foreign exchange translation increased total revenue by $86 million.

Provision for credit losses

Q1 2019 vs. Q1 2018

Total PCL in Q1 2019 was $514 million.

PCL on loans of $516 million increased $182 million, or 54% from the prior year, mainly due to higher provisions in Capital Markets, Personal & Commercial Banking and Wealth Management. PCL ratio on loans of 34 bps increased 10 bps.

8        Royal Bank of Canada        First Quarter 2019

Q1 2019 vs. Q4 2018

Total PCL increased $161 million from the prior quarter.

PCL on loans of $516 million increased $183 million, or 55% from the prior quarter, mainly due to higher provisions in Capital Markets and Personal & Commercial Banking. PCL ratio on loans increased 11 bps.

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

Insurance policyholder benefits, claims and acquisition expense (PBCAE)

Q1 2019 vs. Q1 2018

PBCAE increased $389 million or 47% from a year ago, primarily due to the change in fair value of investments backing our policyholder liabilities and higher group annuity sales, both of which are largely offset in revenue, and growth in longevity reinsurance. These factors were partially offset by favourable life retrocession contract renegotiations, and lower claims costs mainly due to lower claims volumes in our life retrocession and international life portfolios.

Q1 2019 vs. Q4 2018

PBCAE increased $731 million from the prior quarter, mainly due to the change in fair value of investments backing our policyholder liabilities, which is largely offset in revenue, business growth, and lower favourable investment-related experience. The prior quarter included favourable annual actuarial assumption updates and higher favourable life retrocession contract renegotiations. These factors were partially offset by lower group annuity sales, which is largely offset in revenue.

Non-interest expense

	For the three months ended
(Millions of Canadian dollars, except percentage amounts)	January 31 2019		October 31 2018		January 31 2018
Salaries	$	1,608	$	1,575	$	1,466
Variable compensation		1,388		1,433		1,384
Benefits and retention compensation		492		402		480
Share-based compensation		155		19		172
Human resources	$	3,643	$	3,429	$	3,502
Equipment		431		419		372
Occupancy		397		400		379
Communications		240		316		224
Professional fees		305		418		281
Amortization of other intangibles		290		279		261
Other		606		621		592
Non-interest expense	$	5,912	$	5,882	$	5,611
Efficiency ratio (1)		51.0%		55.1%		51.8%
Efficiency ratio adjusted (2)		52.1%		53.4%		51.9%

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

(2) Measures have been adjusted by excluding the change in fair value of investments backing our policyholder liabilities. These are non-GAAP measures. For further details, refer to the Key performance and non-GAAP measures section.

Q1 2019 vs. Q1 2018

Non-interest expense increased $301 million or 5%, largely due to the impact of foreign exchange translation, increased costs in support of business growth and higher staff-related costs. Increased technology and related costs, including digital initiatives, and higher regulatory costs also contributed to the increase. These factors were partially offset by the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue.

Our efficiency ratio of 51.0% decreased 80 bps from 51.8% last year. Excluding the change in fair value of investments backing our policyholder liabilities, our efficiency ratio of 52.1% increased 20 bps from 51.9% last year, primarily due to increased costs in support of business growth and higher staff-related costs, increased technology and related costs, including digital initiatives, and higher regulatory costs. These factors were largely offset by revenue growth across most business segments.

Q1 2019 vs. Q4 2018

Non-interest expense increased $30 million or 1%, largely due to increased costs in support of business growth and higher staff-related costs, and the impact of foreign exchange translation. These factors were largely offset by seasonally lower marketing costs and lower professional fees.

Our efficiency ratio of 51.0% decreased 410 bps from 55.1% last quarter. Excluding the change in fair value of investments backing our policyholder liabilities, our efficiency ratio of 52.1% decreased 130 bps from 53.4% last quarter, primarily due to higher revenue across all business segments, seasonally lower marketing costs and lower professional fees. These factors were partially offset by increased costs in support of business growth and higher staff-related costs.

Efficiency ratio excluding the change in fair value of investments backing our policyholder liabilities is a non-GAAP measure. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Royal Bank of Canada        First Quarter 2019        9

Income taxes

	For the three months ended
(Millions of Canadian dollars, except percentage amounts)	January 31 2019		October 31 2018		January 31 2018
Income taxes	$	766	$	690	$	1,035
Income before income taxes	$	3,938	$	3,940	$	4,047
Canadian statutory income tax rate (1)		26.5%		26.5%		26.5%
Lower average tax rate applicable to subsidiaries (2)		(5.1)%		(6.3)%		(3.2)%
Tax-exempt income from securities		(1.8)%		(1.9)%		(1.6)%
Tax rate change (3)		0.5%		–%		3.6%
Other		(0.6)%		(0.8)%		0.3%
Effective income tax rate		19.5%		17.5%		25.6%

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

(2) As the reduced tax rates from the U.S. Tax Reform were effective on January 1, 2018, the Lower average tax rate applicable to subsidiaries for the three months ended October 31, 2018 and January 31, 2018 reflects the fiscal 2018 blended rate for U.S. subsidiaries.

(3) In Q1 2018, the tax rate change is primarily related to the impact of the U.S. Tax Reform.

Q1 2019 vs. Q1 2018

Income tax expense decreased $269 million or 26% from last year, primarily due to the impact of the U.S. Tax Reform which resulted in the write-down of net deferred tax assets in the prior year, and changes in earnings mix. These factors were partially offset by a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados in the current period.

The effective income tax rate of 19.5% decreased 610 bps, mainly due to impact of the U.S. Tax Reform in the prior year, higher income from lower tax rate jurisdictions, and net favourable tax adjustments in the current quarter. These factors were partially offset by a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados in the current period.

Q1 2019 vs. Q4 2018

Income tax expense increased $76 million or 11% from last quarter, and the effective income tax rate of 19.5% increased 200 bps, primarily due to lower net favourable tax adjustments and a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados in the current period.

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. They remain unchanged from October 31, 2018.

For further details on our key methodologies and assumptions used in our management reporting framework, refer to the How we measure and report our business segments section of our 2018 Annual Report.

Key performance and non-GAAP measures

Performance measures

Return on common equity

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. ROE does not have a standardized meaning under 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 of our 2018 Annual Report.

The following table provides a summary of our ROE calculations:

	For the three months ended
	January 31 2019														October 31 2018		January 31 2018
(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	$	1,546	$	583	$	164	$	157	$	630	$	16	$	3,096	$	3,176	$	2,929
Total average common equity (1) (2)		23,050		14,050		1,900		3,600		23,150		7,800		73,550		71,700		66,850
ROE (3)		26.6%		16.4%		34.7%		17.3%		10.8%		n.m.		16.7%		17.6%		17.4%

(1) Total 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

10        Royal Bank of Canada        First Quarter 2019

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 months ended January 31, 2019 with the corresponding period in the prior year and the three months ended October 31, 2018, 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 shareholders’ equity, thus enabling users to identify relative contributions to shareholder value.

The capital charge includes a charge for common equity and preferred shares. For 2019, our cost of common equity remains unchanged at 8.5%.

The following table provides a summary of our Economic profit:

	For the three months ended
	January 31 2019																	October 31 2018			January 31 2018
(Millions of Canadian dollars)	Personal & Commercial Banking			Wealth Management		Insurance		Investor & Treasury Services		Capital Markets		Corporate Support			Total			Total			Total
Net income	$	1,571		$	597	$	166	$	161	$	653	$	24		$	3,172		$	3,250		$	3,012
add: Non-controlling interests		(2	)		–		–		–		–		–			(2	)		(3	)		(11	)
After-tax effect of amortization     of other intangibles		3			49		–		2		–		–			54			55			54
Adjusted net income (loss)	$	1,572		$	646	$	166	$	163	$	653	$	24		$	3,224		$	3,302		$	3,055
less: Capital charge		516			315		42		81		519		176			1,649			1,607			1,505
Economic profit (loss)	$	1,056		$	331	$	124	$	82	$	134	$	(152	)	$	1,575		$	1,695		$	1,550

Results excluding specified item

• For the three months ended January 31, 2017, our share of a gain related to the sale by our payment processing joint venture Moneris of its U.S. operations to Vantiv, Inc., which was $212 million (before- and after-tax) and recorded in Canadian Banking.

There were no specified items for the three months ended January 31, 2019, October 31, 2018 and January 31, 2018.

The following table provides calculations of our Canadian Banking results and measures excluding the specified item for the three months ended January 31, 2017 for the purpose of calculating adjusted operating leverage which is a non-GAAP measure:

Canadian Banking

	For the three months ended
	January 31 2017
	Item excluded
(Millions of Canadian dollars, except percentage amounts)	As reported		Gain related to the sale by Moneris (1)			Adjusted
Total revenue	$	3,824	$	(212	)	$	3,612
PCL		250		–			250
Non-interest expense		1,560		–			1,560
Net income before income taxes	$	2,014	$	(212	)	$	1,802
Net income	$	1,546	$	(212	)	$	1,334
Other information
Non-interest expense	$	1,560	$	–		$	1,560
Total revenue		3,824		(212	)		3,612
Efficiency ratio		40.8%					43.2%
Revenue growth rate		10.4%					4.3%
Non-interest expense growth rate		1.5%					1.5%
Operating leverage		8.9%					2.8%

(1) Includes foreign currency translation.

Efficiency ratio excluding the change in fair value of investments in Insurance

Our efficiency ratio is impacted by the change in fair value of investments backing our policyholder liabilities, which is reported in revenue and largely offset in PBCAE.

Royal Bank of Canada        First Quarter 2019        11

The following table provides calculations of our consolidated efficiency ratio excluding the change in fair value of investments backing our policyholder liabilities:

	For the three months ended
		January 31 2019							October 31 2018						January 31 2018
				Item excluded							Item excluded						Item excluded
				Change in fair value of							Change in fair value of						Change in fair value of
(Millions of Canadian dollars,				investments backing							investments backing						investments backing
except percentage amounts)		As reported		policyholder liabilities			Adjusted		As reported		policyholder liabilities		Adjusted		As reported		policyholder liabilities			Adjusted
Total revenue	$	11,589	$	(247	)	$	11,342	$	10,669	$	342	$	11,011	$	10,828	$	(26	)	$	10,802
Non-interest expense		5,912		–			5,912		5,882		–		5,882		5,611		–			5,611
Efficiency ratio		51.0%					52.1%		55.1%				53.4%		51.8%					51.9%

Personal & Commercial Banking

	As at or for the three months ended
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	January 31 2019		October 31 2018		January 31 2018
Net interest income	$	3,134	$	3,067	$	2,856
Non-interest income		1,284		1,297		1,309
Total revenue		4,418		4,364		4,165
PCL on performing assets		35		25		41
PCL on impaired assets		313		292		276
PCL		348		317		317
Non-interest expense		1,915		1,987		1,801
Income before income taxes		2,155		2,060		2,047
Net income	$	1,571	$	1,538	$	1,521
Revenue by business
Canadian Banking	$	4,170	$	4,132	$	3,927
Caribbean & U.S. Banking		248		232		238
Selected balance sheet and other information
ROE		26.6%		26.7%		28.6%
NIM		2.84%		2.82%		2.73%
Efficiency ratio		43.3%		45.5%		43.2%
Operating leverage		(0.2)%		2.5%		0.4%
Effective income tax rate		27.1%		25.3%		25.7%
Average total earning assets, net	$	437,100	$	431,500	$	415,600
Average loans and acceptances, net		438,100		432,200		416,000
Average deposits		382,200		368,700		357,000
AUA (1)		268,500		266,500		270,800
Average AUA		264,000		274,900		268,500
PCL on impaired loans as a % of average net loans and acceptances		0.28%		0.25%		0.26%
Other selected information – Canadian Banking
Net income	$	1,544	$	1,463	$	1,480
NIM		2.79%		2.77%		2.68%
Efficiency ratio		41.6%		43.8%		41.5%
Operating leverage		(0.2)%		2.3%		(1.7)%
Operating leverage adjusted (2)		n.a.		n.a.		4.3%
Effective income tax rate		26.3%		25.8%		25.9%

(1) AUA represents period-end spot balances and includes securitized residential mortgages and credit card loans as at January 31, 2019 of $16.6 billion and $8.5 billion, respectively (October 31, 2018 – $16.7 billion and $9.6 billion; January 31, 2018 – $18.2 billion and $9.1 billion).

(2) This is a non-GAAP measure. Q1 2018 operating leverage of (1.7)% in Canadian Banking was impacted by our share of the gain related to the sale of the U.S. operations of Moneris of $212 million (before- and after-tax) in Q1 2017, which was a specified item. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section. Q1 2018 revenue and expense growth rates in Canadian Banking were 2.7% and 4.4%, respectively. Excluding our share of the gain as noted above, Q1 2018 adjusted revenue growth rate was 8.7%.

n.a. not applicable

Financial performance

Q1 2019 vs. Q1 2018

Net income increased $50 million or 3% from last year, mainly due to volume growth and higher spreads. These factors were partially offset by higher staff and technology related costs, higher PCL and a gain relating to the reorganization of Interac in the prior year. The current year also included a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados.

Total revenue increased $253 million or 6%.

Canadian Banking revenue increased $243 million or 6% compared to last year, largely reflecting average volume growth of 5% in loans and 7% in deposits and improved spreads. These factors were partially offset by a gain relating to the reorganization of Interac in the prior year.

Caribbean & U.S. Banking revenue increased $10 million or 4% compared to last year, due to the impact of foreign exchange translation.

Net interest margin was up 11 bps, mainly due to improved spreads on deposits in Canadian Banking, reflecting higher interest rates, partially offset by the impact of competitive pricing pressures.

PCL increased $31 million or 10%, driving an increase of 2 bps on the PCL on impaired loans ratio. For further details, refer to Credit quality performance in the Credit risk section.

Non-interest expense increased $114 million or 6%, primarily attributable to higher staff-related costs, an increase in technology and related costs, including digital initiatives, and higher marketing costs.

12        Royal Bank of Canada        First Quarter 2019

Q1 2019 vs. Q4 2018

Net income increased $33 million or 2% from last quarter, reflecting volume growth, lower marketing costs, and lower professional fees. These factors were partially offset by higher staff-related costs and an increase in PCL. The current year also included a write-down of deferred tax assets resulting from a change in the corporate tax rate in Barbados.

Total revenue increased $54 million or 1% from last quarter, mainly driven by average volume growth of 1% in loans and 4% in deposits in Canadian Banking and higher purchase volumes resulting in higher card service revenue. These factors were partially offset by lower average balances driving lower mutual fund distribution fees.

Net interest margin was up 2 bps largely due to improved spreads on deposits in Canadian Banking, partially offset by the impact of competitive pricing pressures.

PCL increased $31 million or 10%, mainly due to higher PCL on impaired loans, partially offset by provisions taken in the prior quarter on the restructuring of Barbados securities. PCL on impaired loans ratio increased 3 bps. For further details, refer to Credit quality performance in the Credit risk section.

Non-interest expense decreased $72 million or 4%, largely reflecting seasonally lower marketing costs, and lower professional fees. These factors were partially offset by higher staff-related costs.

Wealth Management

	As at or for the three months ended
(Millions of Canadian dollars, except number of and percentage amounts and as otherwise noted)	January 31 2019		October 31 2018			January 31 2018
Net interest income	$	744	$	679		$	612
Non-interest income
Fee-based revenue		1,714		1,662			1,589
Transaction and other revenue		490		399			582
Total revenue		2,948		2,740			2,783
PCL on performing assets		15		(3	)		(7	)
PCL on impaired assets		11		7			5
PCL		26		4			(2	)
Non-interest expense		2,164		2,061			2,011
Income before income taxes		758		675			774
Net income	$	597	$	553		$	597
Revenue by business
Canadian Wealth Management	$	842	$	796		$	749
U.S. Wealth Management (including City National)		1,471		1,345			1,384
U.S. Wealth Management (including City National) (US$ millions)		1,103		1,031			1,100
Global Asset Management		543		513			556
International Wealth Management		92		86			94
Selected balance sheet and other information
ROE		16.4%		15.9%			17.3%
NIM		3.67%		3.49%			3.27%
Pre-tax margin (1)		25.7%		24.6%			27.8%
Number of advisors (2)		5,119		5,042			4,901
Average total earning assets, net	$	80,500	$	77,100		$	74,300
Average loans and acceptances, net		61,200		57,800			52,500
Average deposits		94,300		91,800			92,600
AUA (3)		981,400		970,500			938,800
U.S. Wealth Management (including City National) (3)		496,500		483,000			453,000
U.S. Wealth Management (including City National) (US$ millions) (3)		378,000		367,100			368,100
AUM (3)		682,000		664,900			651,000
Average AUA		986,800		988,900			938,600
Average AUM (4)		675,100		679,900			648,400
PCL on impaired loans as a % of average net loans and acceptances		0.07%		0.04%			0.04%

	For the three months ended
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)	Q1 2019 vs. Q1 2018		Q1 2019 vs. Q4 2018
Increase (decrease):
Total revenue	$	83	$	36
PCL		2		1
Non-interest expense		64		28
Net income		14		6
Percentage change in average U.S. dollar equivalent of C$1.00		(6)%		(2)%
Percentage change in average British pound equivalent of C$1.00		1%		(2)%
Percentage change in average Euro equivalent of C$1.00		–%		(1)%

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

(2) Represents client-facing advisors across all our Wealth Management businesses.

(3) Represents period-end spot balances.

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

Royal Bank of Canada        First Quarter 2019        13

Financial performance

Q1 2019 vs. Q1 2018

Net income remained unchanged from a year ago as higher net interest income and an increase in average fee-based client assets were offset by higher costs related to business growth, increases in PCL and regulatory costs, and lower transaction volumes. A favourable accounting adjustment related to Canadian Wealth Management in the current period was largely offset by the impact of a favourable accounting adjustment related to City National in the prior period.

Total revenue increased $165 million or 6%.

Canadian Wealth Management revenue increased $93 million or 12%, primarily due to a favourable accounting adjustment, higher average fee-based client assets reflecting net sales despite challenging market conditions, and an increase in net interest income attributable to higher interest rates. These factors were partially offset by lower transaction volumes.

U.S. Wealth Management (including City National) revenue increased $87 million or 6%. In U.S. dollars, revenue remained relatively unchanged from the prior year. An increase in net interest income due to volume growth and higher interest rates, and higher average fee-based client assets reflecting net sales despite challenging market conditions, were offset by the change in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in non-interest expense, a favourable accounting adjustment related to City National in the prior period, and lower transaction volumes.

Global Asset Management revenue decreased $13 million or 2%, reflecting challenging market conditions in the current quarter that resulted in lower performance fees.

PCL increased $28 million, largely reflecting an increase in PCL on performing assets in U.S. Wealth Management (including City National), primarily driven by unfavourable changes in certain near-term macroeconomic variables. PCL on impaired loans ratio increased 3 bps. For further details, refer to Credit quality performance in the Credit risk section.

Non-interest expense increased $153 million or 8%, mainly due to the impact of foreign exchange translation, and increased costs in support of business growth largely reflecting higher staff-related costs. Higher variable compensation, including the impact of the accounting adjustment in Canadian Wealth Management, and higher regulatory costs also contributed to the increase. These factors were partially offset by the change in the fair value of our U.S. share-based compensation plans, which was largely offset in revenue.

Q1 2019 vs. Q4 2018

Net income increased $44 million or 8%, primarily reflecting an increase in net interest income, a favourable accounting adjustment related to Canadian Wealth Management in the current period, and the change in fair value of seed capital investments. These factors were partially offset by higher costs in support of business growth, and lower fee-based revenue resulting from challenging market conditions throughout the earlier part of Q1 2019.

Total revenue increased $208 million or 8%, mainly due to the impact of a favourable accounting adjustment related to Canadian Wealth Management, the change in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in non-interest expense, and higher net interest income due to volume growth and higher interest rates. The impact of foreign exchange translation and the change in fair value of seed capital investments also contributed to the increase. These factors were partially offset by lower fee-based revenue resulting from challenging market conditions throughout the earlier part of Q1 2019.

PCL increased $22 million, primarily reflecting higher PCL on performing assets in U.S. Wealth Management (including City National), driven by unfavourable changes in certain near-term macroeconomic variables. PCL on impaired loans ratio increased 3 bps. For further details, refer to Credit quality performance in the Credit risk section.

Non-interest expense increased $103 million or 5%, primarily reflecting increased costs in support of business growth mainly due to higher staff-related costs, the change in the fair value of our U.S. share-based compensation plans, which was largely offset in revenue, and the impact of foreign exchange translation. Higher variable compensation due to an accounting adjustment in Canadian Wealth Management also contributed to the increase.

14        Royal Bank of Canada        First Quarter 2019

Insurance

	As at or for the three months ended
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	January 31 2019		October 31 2018			January 31 2018
Non-interest income
Net earned premiums	$	1,162	$	1,222		$	939
Investment income (1)		381		(230	)		166
Fee income		36		47			39
Total revenue		1,579		1,039			1,144
Insurance policyholder benefits and claims (1)		1,129		416			768
Insurance policyholder acquisition expense		96		78			68
Non-interest expense		154		159			142
Income before income taxes		200		386			166
Net income	$	166	$	318		$	127
Revenue by business
Canadian Insurance	$	1,039	$	536		$	621
International Insurance		540		503			523
Selected balances and other information
ROE		34.7%		57.2%			28.2%
Premiums and deposits (2)	$	1,314	$	1,374		$	1,095
Fair value changes on investments backing policyholder liabilities (1)		247		(342	)		26

(1) Investment income can experience volatility arising from fluctuation of assets designated as fair value through profit and loss (FVTPL). The investments which support actuarial liabilities are predominantly fixed income assets designated as FVTPL. Consequently, changes in the fair values of these assets are recorded 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, claims and acquisition expense.

(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.

Financial performance

Q1 2019 vs. Q1 2018

Net income increased $39 million or 31% from a year ago, primarily reflecting favourable life retrocession contract renegotiations and lower claims costs.

Total revenue increased $435 million or 38%.

Canadian Insurance revenue increased $418 million or 67%, mainly due to the change in fair value of investments backing our policyholder liabilities and higher group annuity sales, both of which are largely offset in PBCAE, as indicated below.

International Insurance revenue increased $17 million or 3%, mainly due to business growth in longevity reinsurance, and favourable life retrocession contract renegotiations. These factors were partially offset by the change in fair value of investments backing our policyholder liabilities, which is largely offset in PBCAE, as indicated below.

PBCAE increased $389 million or 47%, primarily due to the change in fair value of investments backing our policyholder liabilities, and business growth. These factors were partially offset by favourable life retrocession contract renegotiations, and lower claims costs mainly due to lower claims volumes in our life retrocession and international life portfolios.

Non-interest expense increased $12 million or 8%, largely reflecting higher regulatory costs and an increase in costs to support sales and client service activities.

Q1 2019 vs. Q4 2018

Net income decreased $152 million or 48%, as the prior period included annual actuarial assumption updates, higher favourable investment-related experience, and higher favourable life retrocession contract renegotiations.

Total revenue increased $540 million or 52%, mainly reflecting the change in fair value of investments backing our policyholder liabilities, which is largely offset in PBCAE, as indicated below, and business growth in both Canadian and International Insurance. These factors were partially offset by lower group annuity sales, which is largely offset in PBCAE, as indicated below.

PBCAE increased $731 million, mainly due to the change in fair value of investments backing our policyholder liabilities, business growth, and lower favourable investment-related experience. The prior quarter included favourable annual actuarial assumption updates and higher favourable life retrocession contract renegotiations. These factors were partially offset by lower group annuity sales.

Non-interest expense decreased $5 million or 3%, mainly reflecting lower staff and marketing-related costs.

Royal Bank of Canada        First Quarter 2019        15

Investor & Treasury Services

(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	As at or for the three months ended
	January 31 2019			October 31 2018		January 31 2018
Net interest income	$	(31	)	$	19	$	128
Non-interest income		662			605		548
Total revenue		631			624		676
Non-interest expense		418			421		389
Net income before income taxes		213			203		287
Net income	$	161		$	155	$	219
Selected balance sheet and other information
ROE		17.3%			19.2%		26.9%
Average deposits	$	171,900		$	163,600	$	155,300
Average client deposits		59,200			59,200		56,900
Average wholesale funding deposits		112,700			104,400		98,400
AUA (1)		4,100,900			4,283,100		4,431,800
Average AUA		4,191,300			4,295,200		4,439,300

(1) Represents period-end spot balances.

Q1 2019 vs. Q1 2018

Net income decreased $58 million or 26%, primarily due to lower funding and liquidity revenue, higher costs in support of business growth, and lower revenue from our asset services business. These factors were partially offset by improved client deposit margins.

Total revenue decreased $45 million or 7%, mainly due to lower funding and liquidity revenue driven by gains from the disposition of certain securities in the prior year and the impact of reduced money market opportunities in the current year. Lower revenue from our asset services business due to challenging market conditions and lower client activity also contributed to the decrease. These factors were partially offset by improved client deposit margins.

Non-interest expense increased $29 million or 7%, largely driven by higher costs in support of business growth mainly reflecting staff-related costs and increased investment in technology initiatives, as well as higher regulatory costs.

Q1 2019 vs. Q4 2018

Net income increased $6 million or 4%, primarily due to higher funding and liquidity revenue, lower technology costs, and improved client deposit margins. These factors were partially offset by annual regulatory costs.

Total revenue increased $7 million or 1%, mainly due to higher funding and liquidity revenue driven by capitalizing on money market opportunities in the quarter and improved client deposit margins. These factors were partially offset by gains from the disposition of certain securities in the prior quarter.

Non-interest expense decreased $3 million or 1%, largely driven by lower technology costs and decreased staff-related costs, partially offset by annual regulatory costs in the current period.

16        Royal Bank of Canada        First Quarter 2019

Capital Markets

	As at or for the three months ended
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	January 31 2019			October 31 2018			January 31 2018
Net interest income (1)	$	1,006		$	947		$	866
Non-interest income (1)		1,092			1,109			1,309
Total revenue (1)		2,098			2,056			2,175
PCL on performing assets		38			17			(25	)
PCL on impaired assets		102			15			45
PCL		140			32			20
Non-interest expense		1,230			1,244			1,214
Net income before income taxes		728			780			941
Net income	$	653		$	666		$	748
Revenue by business
Corporate and Investment Banking	$	927		$	1,087		$	994
Global Markets		1,227			1,035			1,221
Other		(56	)		(66	)		(40	)
Selected balance sheet and other information
ROE		10.8%			11.8%			14.7%
Average total assets	$	643,700		$	591,700		$	570,200
Average trading securities		102,100			88,000			100,800
Average loans and acceptances, net		98,400			90,700			81,400
Average deposits		79,000			74,600			64,900
PCL on impaired loans as a % of average net loans and acceptances		0.41%			0.07%			0.22%

	For the three months ended
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)	Q1 2019 vs. Q1 2018		Q1 2019 vs. Q4 2018
Increase (decrease):
Total revenue	$	80	$	36
Non-interest expense		38		20
Net income		30		13
Percentage change in average U.S. dollar equivalent of C$1.00		(6)%		(2)%
Percentage change in average British pound equivalent of C$1.00		1%		(2)%
Percentage change in average Euro equivalent of C$1.00		–%		(1)%

(1) The taxable equivalent basis (teb) adjustment for the three months ended January 31, 2019 was $107 million (October 31, 2018 – $142 million; January 31, 2018 – $92 million). For further discussion, refer to the How we measure and report our business segments section of our 2018 Annual Report.

Q1 2019 vs. Q1 2018

Net income decreased $95 million or 13%, primarily due to higher PCL and lower revenue in Corporate and Investment Banking. These factors were partially offset by a lower effective tax rate reflecting changes in earnings mix and the impact of foreign exchange translation.

Total revenue decreased $77 million or 4%.

Corporate and Investment Banking revenue decreased $67 million or 7%, mainly driven by lower equity and debt origination primarily in North America due to challenging market conditions and lower issuance activity. These factors were partially offset by the impact of foreign exchange translation and higher lending revenue.

Global Markets revenue remained relatively flat. Higher equity trading revenue largely in the U.S. and the impact of foreign exchange translation were largely offset by lower fixed income trading revenue across all regions and lower equity and debt origination, primarily in North America, due to challenging market conditions throughout the earlier part of Q1 2019 driving lower client activity.

Other revenue decreased $16 million largely reflecting gains in our legacy U.S. portfolios in the prior year.

PCL increased $120 million, mainly due to higher PCL on performing assets, primarily driven by unfavourable changes in certain near-term macroeconomic variables. Higher PCL on impaired loans also contributed to the increase with the PCL on impaired loans ratio increasing 19 bps, primarily due to a provision taken on one account in the utilities sector. For further details, refer to Credit quality performance in the Credit risk section.

Non-interest expense increased $16 million or 1%, mainly due to the impact of foreign exchange translation and increased technology and related costs. These factors were partially offset by lower compensation on decreased results.

Q1 2019 vs. Q4 2018

Net income decreased $13 million or 2%, primarily due to lower revenue in Corporate and Investment Banking and higher PCL. These factors were partially offset by higher revenue in Global Markets and a lower effective tax rate reflecting changes in earnings mix.

Total revenue increased $42 million or 2%, mainly due to higher equity, fixed income and foreign exchange trading revenue. The impact of foreign exchange translation also contributed to the increase. These factors were partially offset by lower debt and equity origination, primarily in North America due to challenging market conditions throughout the earlier part of Q1 2019, decreased loan syndication activity primarily in North America and lower municipal banking activity.

PCL increased $108 million, primarily due to higher PCL on impaired loans. PCL on impaired loans ratio increased 34 bps, primarily due to a provision taken on one account in the utilities sector. For further details, refer to Credit quality performance in the Credit risk section.

Royal Bank of Canada        First Quarter 2019        17

Non-interest expense decreased $14 million or 1%, mainly due to lower compensation and decreased regulatory and technology costs, partially offset by the impact of foreign exchange translation.

Corporate Support

	For the three months ended
(Millions of Canadian dollars)	January 31 2019			October 31 2018			January 31 2018
Net interest income (loss) (1)	$	31		$	17		$	(17	)
Non-interest income (loss) (1)		(116	)		(171	)		(98	)
Total revenue (1)		(85	)		(154	)		(115	)
PCL		–			–			(1	)
Non-interest expense		31			10			54
Net income (loss) before income taxes (1)		(116	)		(164	)		(168	)
Income taxes (recoveries) (1)		(140	)		(184	)		32
Net income (loss) (2)	$	24		$	20		$	(200	)

(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 January 31, 2019 was $nil (October 31, 2018 – $(1) million; January 31, 2018 – $9 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.

Total revenue 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 and the U.S. tax credit investment business recorded in Capital Markets. The amount deducted from revenue was offset by an equivalent increase in income taxes (recoveries).

The teb amount for the three months ended January 31, 2019 was $107 million, as compared to $142 million in the prior quarter and $92 million last year.

The following identifies the material items, other than the teb impacts noted previously, affecting the reported results in each period.

Q1 2019

Net income was $24 million, largely reflecting net favourable tax adjustments.

Q4 2018

Net income was $20 million, largely reflecting net favourable tax adjustments.

Q1 2018

Net loss was $200 million, largely due to the impact of the U.S. Tax Reform of $178 million which was primarily related to the write-down of net deferred tax assets.

18        Royal Bank of Canada        First Quarter 2019

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)

	2019			2018												2017
(Millions of Canadian dollars, except per share and percentage amounts)	Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2
Personal & Commercial Banking	$	4,418		$	4,364		$	4,284		$	4,103		$	4,165		$	4,019		$	3,970		$	3,798
Wealth Management		2,948			2,740			2,798			2,605			2,783			2,562			2,547			2,481
Insurance		1,579			1,039			1,290			806			1,144			1,612			1,009			1,448
Investor & Treasury Services		631			624			620			671			676			602			594			608
Capital Markets (2)		2,098			2,056			2,157			2,010			2,175			1,954			2,040			2,117
Corporate Support (2)		(85	)		(154	)		(124	)		(141	)		(115	)		(226	)		(72	)		(40	)
Total revenue	$	11,589		$	10,669		$	11,025		$	10,054		$	10,828		$	10,523		$	10,088		$	10,412
PCL (3)		514			353			346			274			334			234			320			302
PBCAE		1,225			494			925			421			836			1,137			643			1,090
Non-interest expense		5,912			5,882			5,858			5,482			5,611			5,611			5,537			5,331
Net income before income taxes	$	3,938		$	3,940		$	3,896		$	3,877		$	4,047		$	3,541		$	3,588		$	3,689
Income taxes		766			690			787			817			1,035			704			792			880
Net income	$	3,172		$	3,250		$	3,109		$	3,060		$	3,012		$	2,837		$	2,796		$	2,809
EPS – basic	$	2.15		$	2.21		$	2.10		$	2.06		$	2.02		$	1.89		$	1.86		$	1.86
– diluted		2.15			2.20			2.10			2.06			2.01			1.88			1.85			1.85
Segments – net income (loss)
Personal & Commercial Banking	$	1,571		$	1,538		$	1,510		$	1,459		$	1,521		$	1,404		$	1,399		$	1,360
Wealth Management		597			553			578			537			597			491			486			431
Insurance		166			318			158			172			127			265			161			166
Investor & Treasury Services		161			155			155			212			219			156			178			193
Capital Markets		653			666			698			665			748			584			611			668
Corporate Support		24			20			10			15			(200	)		(63	)		(39	)		(9	)
Net income	$	3,172		$	3,250		$	3,109		$	3,060		$	3,012		$	2,837		$	2,796		$	2,809
Effective income tax rate		19.5%			17.5%			20.2%			21.1%			25.6%			19.9%			22.1%			23.9%
Period average US$ equivalent of C$1.00	$	0.749		$	0.767		$	0.767		$	0.778		$	0.794		$	0.792		$	0.770		$	0.746

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

(2) Teb adjusted. For further discussion, refer to the How we measure and report our business segments section of our 2018 Annual Report.

(3) Effective November 1, 2017, we adopted IFRS 9, Financial Instruments. Under IFRS 9, PCL relates primarily to loans, acceptances, and commitments, and also applies to all financial assets except for those classified or designated as FVTPL and equity securities designated as fair value through other comprehensive income (FVOCI). Prior to the adoption of IFRS 9, PCL related only to loans, acceptances, and commitments. PCL on loans, acceptances, and commitments is comprised of PCL on impaired loans (Stage 3 PCL under IFRS 9 and PCL on impaired loans under IAS 39) and PCL on performing loans (Stage 1 and Stage 2 PCL under IFRS 9 and PCL on loans not yet identified as impaired under IAS 39).

Seasonality

Seasonal factors may impact our results in certain quarters. The first quarter has historically been stronger for our Capital Markets businesses. The second quarter has fewer days than the other quarters, which generally results in a decrease in net interest income and certain expense items. The third and fourth quarters include the summer months which results in lower client activity and may negatively impact the results of our Capital Markets’ brokerage business and our Wealth Management’s investment management business.

Trend analysis

Earnings have generally trended upward over the period. However, results in the first quarter of 2019 were impacted by challenging market conditions throughout the earlier part of the quarter. Quarterly earnings are also affected by foreign currency translation.

Personal & Commercial Banking revenue has benefitted from solid volume growth, higher spreads since the latter half of 2017, and higher fee-based revenue.

Wealth Management revenue has generally trended upwards primarily due to growth in average fee-based client assets which benefitted from net sales and market appreciation, and the impact of higher interest rates and volume growth driving higher net interest income since the first half of 2017. The change in the fair value of the hedges related to our U.S. share-based compensation plans, which is largely offset in Non-interest expense, also contributed to fluctuations in revenue over the period.

Insurance revenue fluctuated over the period, primarily due to the impact of changes in the fair value of investments backing our policyholder liabilities. Since 2017, revenues have generally benefitted from the impact of new group annuity and restructured international life contracts, which are largely offset in PBCAE. We have also benefitted from business growth in Canadian and International Insurance throughout 2018 and the first quarter of 2019.

Investor & Treasury Services revenue is impacted by fluctuations in market conditions and client activity. Revenue generally remained stable throughout the period, with the first half of 2018 trending higher due to generally higher market volatility, growth in client deposits, and increased client activity from our asset services business, combined with an increase in funding & liquidity performance, generally experienced in the first quarter of each year, driven by higher spreads and money market opportunities.

Royal Bank of Canada        First Quarter 2019        19

Capital Markets revenue is influenced, to a large extent, by market conditions and activity in the fixed income and equity trading business, with the first quarter results generally stronger than the remaining quarters. The second quarter of 2018 experienced lower equity originations driven by lower market activity, decreased fixed income trading across all regions, and lower equity trading revenue in the U.S. The decline experienced in the fourth quarter of 2018 largely resulted from lower fixed income trading revenue, primarily in North America. The first quarter of 2019 experienced higher equity and fixed income trading revenue, which was partially offset by lower debt and equity origination primarily in North America.

PCL saw a general improvement in 2017 due to lower provisions and higher recoveries in our Capital Markets and Canadian Banking portfolios and lower provisions on impaired assets for the majority of 2018. On November 1, 2017, we adopted IFRS 9, which resulted in the introduction of PCL on performing financial assets. PCL on performing assets has fluctuated over the period as it is impacted by macroeconomic conditions and volume growth. The fourth quarter of 2018 was also impacted by the restructuring of portfolios in Barbados. The first quarter of 2019 was impacted by a higher provision for impaired loans in Capital Markets taken on one account.

PBCAE has fluctuated quarterly as it includes the changes to the fair value of investments backing our policyholder liabilities, the impact of group annuity sales and restructured international life contracts, all of which are largely offset in Revenue. PBCAE has also increased due to business growth, and has been impacted by investment-related experience, and claims volumes over the period. The results are impacted by actuarial adjustments, which generally occur in the fourth quarter of each year.

While we continue to focus on efficiency management activities, Non-interest expense has generally trended upwards over the period. Growth in Non-interest expense over the period mainly reflects higher costs in support of business growth and our ongoing investments in technology and related costs, including digital initiatives. The increase in Non-interest expense in 2017 and 2018 mainly reflected higher variable compensation on improved results in Wealth Management and Capital Markets. The third quarter of 2017 was also impacted by higher severance costs. Fiscal 2018 was impacted by higher regulatory costs, and the decrease over the second and fourth quarter of 2018 mainly reflects the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Revenue. The increase in the first quarter of 2019 also reflected the impact of foreign exchange translation and the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Revenue, partially offset by seasonally lower marketing costs and lower professional fees.

Our effective income tax rate has fluctuated over the period, mostly due to varying levels of income reported in jurisdictions with different tax rates, as well as fluctuating levels of income from tax-advantaged sources and various levels of tax adjustments. The first quarter of 2018 was adversely impacted by the U.S. Tax Reform, which resulted in the write-down of net deferred tax assets, however, this was more than offset during 2018 by the ongoing lower corporate tax rate. Our effective income tax rate has generally been impacted over the period by net favourable tax adjustments and changes to the earnings mix.

Financial condition

Condensed balance sheets

	As at
(Millions of Canadian dollars)	January 31 2019			October 31 2018
Assets
Cash and due from banks	$	40,033		$	30,209
Interest-bearing deposits with banks		38,653			36,471
Securities, net of applicable allowance (1)		235,832			222,866
Assets purchased under reverse repurchase agreements and securities borrowed		297,660			294,602
Loans
Retail		401,767			399,452
Wholesale		191,114			180,278
Allowance for loan losses		(3,061	)		(2,912	)
Other – Derivatives		84,816			94,039
– Other (2)		79,393			79,729
Total assets	$	1,366,207		$	1,334,734
Liabilities
Deposits	$	852,564		$	837,046
Other – Derivatives		81,766			90,238
– Other (2)		341,972			318,364
Subordinated debentures		9,255			9,131
Total liabilities		1,285,557			1,254,779
Equity attributable to shareholders		80,553			79,861
Non-controlling interests		97			94
Total equity		80,650			79,955
Total liabilities and equity	$	1,366,207		$	1,334,734

(1) Securities are comprised of Trading and Investment securities.

(2) Other – Other assets and liabilities include Segregated fund net assets and liabilities, respectively.

20        Royal Bank of Canada        First Quarter 2019

Q1 2019 vs. Q4 2018

Total assets increased $31 billion or 2% from last quarter. Foreign exchange translation decreased total assets by $6 billion.

Cash and due from banks was up $10 billion, mainly due to higher deposits with central banks, reflecting short-term cash management activities.

Interest-bearing deposits with banks increased $2 billion or 6%, primarily due to higher deposits with central banks, reflecting our cash management activities.

Securities, net of applicable allowance, were up $13 billion or 6%, largely due to higher government debt trading securities.

Assets purchased under reverse repurchase agreements (reverse repos) and securities borrowed increased $3 billion or 1%, mainly attributable to increased client activities, partially offset by higher financial netting.

Loans were up $13 billion or 2%, largely due to volume growth, which led to higher wholesale loans and residential mortgages.

Derivative assets were down $9 billion or 10%, primarily attributable to the impact of foreign exchange translation on foreign exchange contracts.

Total liabilities increased $31 billion or 2%. Foreign exchange translation decreased total liabilities by $6 billion.

Deposits increased $16 billion or 2%, mainly as a result of higher retail deposits, driven by increased client activity and higher issuances of fixed-term notes due to funding requirements.

Derivative liabilities were down $8 billion or 9%, primarily attributable to the impact of foreign exchange translation on foreign exchange contracts.

Other liabilities increased $24 billion or 7%, mainly attributable to higher obligations related to repurchase agreements due to increased client activities and funding requirements, partially offset by higher financial netting.

Total equity increased $1 billion or 1%.

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, and liquidity and funding risk, which are discussed in the Risk management section of this Q1 2019 Report to Shareholders. Our significant off-balance sheet transactions include those described on pages 47 to 49 of our 2018 Annual Report.

Royal Bank of Canada        First Quarter 2019        21

Risk management

Credit risk

Credit risk exposure by portfolio, sector and geography

The following table presents our credit risk exposures under the Basel regulatory defined classes and reflects exposures at default (EAD). The classification of our sectors aligns with our view of credit risk by industry. Beginning in Q1 2019 we have prospectively implemented the standardized approach for measuring counterparty credit risk (SA-CCR) under the Capital Adequacy Requirements (CAR) guidelines which primarily impacted on-balance sheet cash collateral and derivatives exposures.

	As at
	January 31 2019												October 31 2018 (1)
	Credit risk						Counterparty credit risk (2)
	On-balance sheet amount		Off-balance sheet amount (3)				Repo-style transactions		Derivatives		Total exposure		Total exposure
(Millions of Canadian dollars)			Undrawn		Other (4)
Retail
Residential secured (5)	$	300,348	$	61,224	$	–	$	–	$	–	$	361,572	$	358,395
Qualifying revolving (6)		25,025		70,202		–		–		–		95,227		89,840
Other retail		55,704		14,084		71		–		–		69,859		66,915
Total retail	$	381,077	$	145,510	$	71	$	–	$	–	$	526,658	$	515,150
Wholesale
Agriculture	$	8,799	$	1,723	$	39	$	–	$	64	$	10,625	$	10,358
Automotive		9,898		7,053		359		–		1,215		18,525		16,220
Banking		40,633		1,788		531		51,701		19,528		114,181		128,858
Consumer discretionary		16,770		7,810		611		–		522		25,713		24,592
Consumer staples		5,174		6,490		513		–		1,036		13,213		12,167
Oil & gas		6,868		10,784		1,440		–		1,370		20,462		20,090
Financial services		24,140		22,173		2,903		109,330		15,998		174,544		191,133
Financing products		1,351		1,389		358		167		1,017		4,282		3,214
Forest products		1,455		743		89		–		40		2,327		2,185
Governments		119,675		5,962		1,514		8,638		6,711		142,500		136,214
Industrial products		6,976		7,803		694		–		719		16,192		17,111
Information technology		6,387		5,948		191		–		4,031		16,557		12,155
Investments		15,870		1,046		389		13		176		17,494		17,670
Mining & metals		1,537		4,130		914		–		158		6,739		6,473
Public works & infrastructure		1,932		1,799		424		–		171		4,326		4,275
Real estates & related		56,858		11,259		1,373		–		661		70,151		68,045
Other services		25,314		11,332		918		1		1,091		38,656		37,774
Telecom & media		6,832		11,822		259		–		1,221		20,134		21,741
Transportation		5,691		5,857		2,272		–		1,517		15,337		14,916
Utilities		10,274		18,735		3,900		–		3,059		35,968		35,097
Other sectors		2,699		293		1		11		16,652		19,656		14,259
Total wholesale	$	375,133	$	145,939	$	19,692	$	169,861	$	76,957	$	787,582	$	794,547
Total exposure (7)	$	756,210	$	291,449	$	19,763	$	169,861	$	76,957	$	1,314,240	$	1,309,697
By geography (8)
Canada	$	522,082	$	211,263	$	9,956	$	75,296	$	32,521	$	851,118	$	833,074
U.S.		146,940		59,663		8,520		39,788		17,781		272,692		273,652
Europe		57,051		18,162		1,151		49,862		22,251		148,477		162,254
Other International		30,137		2,361		136		4,915		4,404		41,953		40,717
Total exposure (7)	$	756,210	$	291,449	$	19,763	$	169,861	$	76,957	$	1,314,240	$	1,309,697

(1) Amounts previously reflected gross credit risk exposures.

(2) Counterparty credit risk EAD reflects exposure amounts after netting. Collateral is included in EAD for repo-style transactions to the extent allowed by regulatory guidelines.

(3) EAD for undrawn credit commitments and other off-balance sheet amounts are reported after the application of credit conversion factors.

(4) Includes other off-balance sheet exposures such as letters of credit and guarantees.

(5) Includes residential mortgages and home equity lines of credit.

(6) Includes credit cards, unsecured lines of credit and overdraft protection products.

(7) Excludes securitization, banking book equities and other assets not subject to the standardized or Internal Ratings Based Approach.

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

Q1 2019 vs. Q4 2018

Total credit risk exposure increased $5 billion from the prior quarter, primarily due to growth in loans and acceptances, higher deposits with central banks, and higher undrawn retail exposures, largely offset by decreases related to cash collateral and derivatives due to the adoption of SA-CCR in Q1 2019.

Retail exposure increased $12 billion or 2%, largely driven by growth in the qualifying revolving and residential secured portfolios.

Wholesale exposure decreased $7 billion or 1%, primarily due to the adoption of SA-CCR as noted above, and lower undrawn exposures partially offset by growth in loans and acceptances in the governments and other sectors.

22        Royal Bank of Canada        First Quarter 2019

The geographic mix of our credit risk exposure increased in Canada and decreased in Europe. Our exposure in Canada, the U.S., Europe and Other International was 65%, 21%, 11% and 3%, respectively (October 31, 2018 – 64%, 21%, 12% and 3%, respectively). The increase in Canada was largely driven by business growth in loans and acceptances. The decrease in Europe was driven by the reduction of cash collateral and derivatives both due to the adoption of SA-CCR as noted above.

Net European exposure by country, asset type and client type (1) (2)

	As at
	January 31 2019																October 31 2018
	Asset type								Client type
(Millions of Canadian dollars)	Loans Outstanding		Securities  (3)		Repo-style transactions		Derivatives		Financials		Sovereign		Corporate		Total		Total
U.K.	$	8,405	$	22,688	$	333	$	1,361	$	13,424	$	11,558	$	7,805	$	32,787	$	20,078
Germany		1,671		5,962		–		253		3,777		2,311		1,798		7,886		9,417
France		700		10,121		8		432		1,152		9,200		909		11,261		10,668
Total U.K., Germany, France	$	10,776	$	38,771	$	341	$	2,046	$	18,353	$	23,069	$	10,512	$	51,934	$	40,163
Ireland	$	795	$	29	$	327	$	23	$	408	$	4	$	762	$	1,174	$	931
Italy		83		167		–		19		118		63		88		269		677
Portugal		–		12		32		–		33		–		11		44		33
Spain		669		186		–		17		144		1		727		872		1,443
Total peripheral	$	1,547	$	394	$	359	$	59	$	703	$	68	$	1,588	$	2,359	$	3,084
Luxembourg (4)	$	1,875	$	7,953	$	242	$	51	$	1,516	$	7,544	$	1,061	$	10,121	$	9,000
Netherlands (4)		593		1,038		45		176		1,015		4		833		1,852		2,815
Norway		184		1,796		54		40		1,640		221		213		2,074		1,871
Sweden		224		3,593		46		9		2,334		1,295		243		3,872		4,308
Switzerland		451		5,537		140		114		515		5,258		469		6,242		6,835
Other		1,506		1,793		141		239		1,225		832		1,622		3,679		3,795
Total other Europe	$	4,833	$	21,710	$	668	$	629	$	8,245	$	15,154	$	4,441	$	27,840	$	28,624
Net exposure to Europe (5)	$	17,156	$	60,875	$	1,368	$	2,734	$	27,301	$	38,291	$	16,541	$	82,133	$	71,871

(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) Exposures are calculated on a fair value basis and net of collateral, which includes $114.8 billion against repo-style transactions (October 31, 2018 – $111.1 billion) and $10.7 billion against derivatives (October 31, 2018 – $11.6 billion).

(3) Securities include $13.9 billion of trading securities (October 31, 2018 – $16.2 billion), $33.7 billion of deposits (October 31, 2018 – $23.3 billion), and $13.3 billion of securities carried at FVOCI (October 31, 2018 – $12.5 billion).

(4) Excludes $1.8 billion (October 31, 2018 – $2.5 billion) of exposures to supranational agencies.

(5) Reflects $1.5 billion of mitigation through credit default swaps, which are largely used to hedge single name exposures and market risk (October 31, 2018 – $1.2 billion).

Q1 2019 vs. Q4 2018

Net credit risk exposure to Europe increased $10 billion from last quarter, primarily driven by an increase in deposits with central banks. Our net exposure to peripheral Europe, which includes Ireland, Italy, Portugal and Spain, decreased $725 million during the quarter to $2.4 billion.

Our European corporate loan book is managed on a global basis with underwriting standards reflecting the same approach to the use of our balance sheet as we have applied in both Canada and the U.S. PCL on loans taken on this portfolio was not material this quarter. The gross impaired loans ratio of this loan book was 10 bps, unchanged from last quarter.

Royal Bank of Canada        First Quarter 2019        23

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 January 31, 2019
	Residential mortgages										Home equity lines of credit
(Millions of Canadian dollars, except percentage amounts)	Insured (1)				Uninsured				Total		Total
Region (2)
Canada
Atlantic provinces	$	7,575	54	%	$	6,579	46	%	$	14,154	$	1,900
Quebec		12,777	40			19,387	60			32,164		3,644
Ontario		37,802	32			80,570	68			118,372		16,613
Alberta		20,490	55			17,010	45			37,500		6,619
Saskatchewan and Manitoba		8,950	51			8,593	49			17,543		2,475
B.C. and territories		15,274	31			33,946	69			49,220		8,302
Total Canada (3)	$	102,868	38	%	$	166,085	62	%	$	268,953	$	39,553
U.S. (4)		1	–			14,212	100			14,213		1,937
Other International (4)		7	–			3,139	100			3,146		1,443
Total International	$	8	–	%	$	17,351	100	%	$	17,359	$	3,380
Total	$	102,876	36	%	$	183,436	64	%	$	286,312	$	42,933

	As at October 31, 2018
	Residential mortgages										Home equity lines of credit
(Millions of Canadian dollars, except percentage amounts)	Insured (1)				Uninsured				Total		Total
Region (2)
Canada
Atlantic provinces	$	7,616	54	%	$	6,398	46	%	$	14,014	$	1,926
Quebec		13,045	41			18,911	59			31,956		3,730
Ontario		38,708	33			77,649	67			116,357		16,811
Alberta		20,615	55			16,738	45			37,353		6,706
Saskatchewan and Manitoba		9,007	51			8,503	49			17,510		2,534
B.C. and territories		15,452	32			33,189	68			48,641		8,436
Total Canada (3)	$	104,443	39	%	$	161,388	61	%	$	265,831	$	40,143
U.S. (4)		1	–			13,492	100			13,493		2,099
Other International (4)		7	–			3,140	100			3,147		1,513
Total International	$	8	–	%	$	16,632	100	%	$	16,640	$	3,612
Total	$	104,451	37	%	$	178,020	63	%	$	282,471	$	43,755

(1) 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.

(2) Region is based upon address of the property mortgaged. The Atlantic provinces are comprised of Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick, and B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon.

(3) Total consolidated residential mortgages in Canada of $269 billion (October 31, 2018 – $266 billion) was largely comprised of $246 billion (October 31, 2018 – $243 billion) of residential mortgages and $7 billion (October 31, 2018 – $7 billion) of mortgages with commercial clients, of which $4 billion (October 31, 2018 – $4 billion) are insured mortgages, both in Canadian Banking, and $16 billion (October 31, 2018 – $16 billion) of residential mortgages in Capital Markets held for securitization purposes.

(4) Home equity lines of credit include term loans collateralized by residential mortgages.

Home equity lines of credit are uninsured and reported within the personal loan category. As at January 31, 2019, home equity lines of credit in Canadian Banking were $39 billion (October 31, 2018 – $40 billion). Approximately 98% of these home equity lines of credit (October 31, 2018 – 98%) are secured by a first lien on real estate, and 7% (October 31, 2018 – 7%) of the total Homeline clients pay the scheduled interest payment only.

24        Royal Bank of Canada        First Quarter 2019

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
	January 31 2019									October 31 2018
	Canada			U.S. and other International			Total			Canada			U.S. and other International			Total
Amortization period
£ 25 years		70	%		39	%		69	%		70	%		40	%		68	%
> 25 years £ 30 years		23			61			25			23			60			25
> 30 years £ 35 years		5			–			4			5			–			5
> 35 years		2			–			2			2			–			2
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
	January 31 2019						October 31 2018
	Uninsured						Uninsured
	Residential mortgages (1)			Homeline products (2)			Residential mortgages (1)			Homeline products (2)
Region (3)
Atlantic provinces		74	%		74	%		72	%		74	%
Quebec		71			73			71			73
Ontario		70			67			70			67
Alberta		72			71			73			71
Saskatchewan and Manitoba		74			74			74			74
B.C. and territories		66			64			67			64
U.S.		74			n.m.			69			n.m.
Other International		71			n.m.			66			n.m.
Average of newly originated and acquired for the period (4), (5)		70	%		68	%		70	%		68	%
Total Canadian Banking residential mortgages portfolio (6)		56	%		50	%		55	%		49	%

(1) Residential mortgages exclude residential mortgages within the Homeline products.

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

(3) Region is based upon address of the property mortgaged. The Atlantic provinces are comprised of Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick, and B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon.

(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.

(6) Weighted by mortgage balances and adjusted for property values based on the Teranet – National Bank National Composite House Price Index.

n.m. not meaningful

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 to perform stress testing based on a combination of increasing unemployment, rising interest rates and a downturn in real estate markets.

Royal Bank of Canada        First Quarter 2019        25

Credit quality performance

The following credit quality performance tables and analysis provide information on loans, which represents loans, acceptances and commitments, and other financial assets.

Provision for (recovery of) credit loss

	For the three months ended
(Millions of Canadian dollars, except percentage amounts)	January 31 2019			October 31 2018			January 31 2018
Personal & Commercial Banking	$	347		$	297		$	312
Wealth Management		26			4			(2	)
Capital Markets		143			32			25
Corporate Support and other		–			–			(1	)
PCL – Loans	$	516		$	333		$	334
PCL – Other financial assets		(2	)		20			–
Total PCL	$	514		$	353		$	334
Retail	$	33		$	26		$	20
Wholesale		60			18			(11	)
PCL on performing loans	$	93		$	44		$	9
Retail	$	269		$	248		$	245
Wholesale		154			41			80
PCL on impaired loans	$	423		$	289		$	325
PCL – Loans	$	516		$	333		$	334
PCL ratio – Loans (1)		0.34%			0.23%			0.24%
PCL on impaired loans ratio (2)		0.28%			0.20%			0.23%
Additional information by geography
Canada (3)
Residential mortgages	$	10		$	17		$	10
Personal		121			121			113
Credit cards		116			115			107
Small business		5			6			7
Retail		252			259			237
Wholesale		41			22			34
PCL on impaired loans	$	293		$	281		$	271
U.S. (3)
Retail	$	2		$	1		$	1
Wholesale		110			34			22
PCL on impaired loans	$	112		$	35		$	23
Other International (3)
Retail	$	15		$	(12	)	$	7
Wholesale		3			(15	)		24
PCL on impaired loans	$	18		$	(27	)	$	31
PCL on impaired loans	$	423		$	289		$	325

(1) PCL ratio – Loans is calculated using PCL on Loans as a percentage of average net loans and acceptances.

(2) PCL on impaired loans ratio is calculated using PCL on impaired loans as a percentage of average net loans and acceptances.

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

Q1 2019 vs. Q1 2018

Total PCL was $514 million. PCL on loans of $516 million increased $182 million, or 54% from the prior year, mainly due to higher provisions in Capital Markets, Personal & Commercial Banking and Wealth Management. The PCL ratio on loans of 34 bps increased 10 bps.

PCL on performing loans of $93 million, compared to $9 million in the prior year, driven by unfavourable changes in certain near-term macroeconomic variables, largely impacting Capital Markets and Wealth Management.

PCL on impaired loans of $423 million was $98 million higher than the prior year, mainly due to increased provisions in Capital Markets and Personal & Commercial Banking.

PCL on loans in Personal & Commercial Banking increased $35 million, reflecting higher provisions on impaired loans across most portfolios.

PCL on loans in Wealth Management increased $28 million, primarily reflecting higher provisions on performing loans in U.S. Wealth Management (including City National) as described above.

PCL on loans in Capital Markets increased $118 million, largely driven by higher provisions on performing loans as described above. Higher provisions on impaired loans also contributed to the increase, mainly driven by one account in the utilities sector.

Q1 2019 vs. Q4 2018

PCL on loans of $516 million increased $183 million, or 55% from the prior quarter, mainly due to higher provisions in Capital Markets and Personal & Commercial Banking. The PCL ratio on loans of 34 bps increased 11 bps.

PCL on performing loans of $93 million, compared to $44 million in the prior quarter, was driven by unfavourable changes in certain near-term macroeconomic variables, largely impacting Capital Markets and Wealth Management.

26        Royal Bank of Canada        First Quarter 2019

PCL on impaired loans of $423 million increased $134 million from the prior quarter, mainly due to higher provisions in Capital Markets and Personal & Commercial Banking.

PCL on loans in Personal & Commercial Banking increased $50 million, primarily reflecting higher provisions on impaired loans in the Caribbean Banking and Canadian Business Banking portfolios.

PCL on loans in Wealth Management increased $22 million, primarily reflecting an increase in provisions on performing loans in U.S. Wealth Management (including City National) as described above.

PCL on loans in Capital Markets increased $111 million, largely driven by a provision on impaired loans taken on one account in the utilities sector. Higher PCL on performing loans also contributed to the increase.

Gross impaired loans

	As at
(Millions of Canadian dollars, except percentage amounts)	January 31 2019			October 31 2018			January 31 2018
Personal & Commercial Banking	$	1,653		$	1,605		$	1,713
Wealth Management		223			203			273
Capital Markets		906			375			541
Corporate Support and other		–			–			–
Total GIL	$	2,782		$	2,183		$	2,527
Canada (1)
Retail	$	749		$	723		$	715
Wholesale		407			396			518
GIL	$	1,156		$	1,119		$	1,233
U.S. (1)
Retail	$	30		$	23		$	39
Wholesale		949			401			386
GIL	$	979		$	424		$	425
Other International (1)
Retail	$	331		$	327		$	327
Wholesale		316			313			542
GIL	$	647		$	640		$	869
Total GIL	$	2,782		$	2,183		$	2,527
Impaired loans, beginning balance	$	2,183		$	2,321		$	2,576
Classified as impaired during the period (new impaired) (2)		1,133			553			694
Net repayments (2)		(99	)		(107	)		(126	)
Amounts written off		(377	)		(382	)		(321	)
Other (2), (3)		(58	)		(202	)		(296	)
Impaired loans, balance at end of period	$	2,782		$	2,183		$	2,527
GIL ratio (4)
Total GIL ratio		0.46%			0.37%			0.45%
Personal & Commercial Banking		0.37%			0.37%			0.41%
Canadian Banking		0.26%			0.26%			0.29%
Caribbean Banking		6.54%			6.36%			6.44%
Wealth Management		0.37%			0.34%			0.52%
Capital Markets		0.90%			0.41%			0.67%

(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 Net repayments and new impaired, as return to performing status, sold, and exchange and other movements amounts are not reasonably determinable.

(3) Includes return to performing status during the period, recoveries of loans and advances previously written off, sold, and exchange and other movements.

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

Q1 2019 vs. Q1 2018

Total GIL of $2,782 million increased $255 million or 10% from the prior year, and the total GIL ratio of 46 bps increased 1 bp, mainly reflecting higher impaired loans in Capital Markets, partially offset by lower impaired loans in Personal & Commercial Banking and Wealth Management.

GIL in Personal & Commercial Banking decreased $60 million or 4%, primarily due to lower impaired loans in our Canadian Business Banking portfolios, partially offset by higher impaired loans in our Canadian Personal Banking and Caribbean Banking portfolios.

GIL in Wealth Management decreased $50 million or 18%, largely reflecting lower impaired loans in International Wealth Management and U.S. Wealth Management (including City National) due to repayments.

GIL in Capital Markets increased $365 million or 67%, mainly due to one account in the utilities sector. Movements in other sectors also contributed to the change.

Q1 2019 vs. Q4 2018

Total GIL increased $599 million or 27% from the prior quarter, and the total GIL ratio of 46 bps increased 9 bps.

GIL in Personal & Commercial Banking increased $48 million or 3%, largely due to higher impaired loans in our Canadian Banking portfolios.

Royal Bank of Canada        First Quarter 2019        27

GIL in Wealth Management increased $20 million or 10%, mainly reflecting higher impaired loans in U.S. Wealth Management (including City National).

GIL in Capital Markets increased $531 million, mainly due to one account in the utilities sector.

Allowance for credit losses (ACL)

	As at
(Millions of Canadian dollars)	January 31 2019		October 31 2018		January 31 2018
Personal & Commercial Banking	$	2,604	$	2,536	$	2,426
Wealth Management		202		202		218
Capital Markets		464		347		350
Corporate Support and other		3		3		1
ACL on loans	$	3,273	$	3,088	$	2,995
ACL on other financial assets		69		71		103
Total ACL	$	3,342	$	3,159	$	3,098
ACL on loans is comprised of:
ACL on performing loans	$	2,478	$	2,388	$	2,242
ACL on impaired loans		795		700		753
Retail	$	1,785	$	1,753	$	1,643
Wholesale		693		635		599
ACL on performing loans	$	2,478	$	2,388	$	2,242
Additional information by geography
Canada (1)
Retail	$	176	$	168	$	153
Wholesale		111		92		140
ACL on impaired loans	$	287	$	260	$	293
U.S. (1)
Retail	$	2	$	1	$	1
Wholesale		226		164		135
ACL on impaired loans	$	228	$	165	$	136
Other International (1)
Retail	$	169	$	166	$	157
Wholesale		111		109		167
ACL on impaired loans	$	280	$	275	$	324
ACL on impaired loans	$	795	$	700	$	753

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

Q1 2019 vs. Q1 2018

Total ACL of $3,342 million increased $244 million or 8% from the prior year, reflecting an increase of $278 million in ACL on loans, partially offset by a decrease of $34 million in ACL on other financial assets.

ACL on performing loans of $2,478 million increased $236 million from the prior year, driven by unfavourable changes in certain near-term macroeconomic variables and volume growth, primarily impacting Personal & Commercial Banking. Capital Markets also contributed to the increase.

ACL on impaired loans of $795 million increased $42 million from the prior year, primarily due to higher ACL in Capital Markets, partially offset by lower ACL in Wealth Management.

ACL on other financial assets decreased $34 million, primarily due to the restructuring of Barbados securities in the prior year.

Q1 2019 vs. Q4 2018

Total ACL of $3,342 million increased $183 million or 6% from the prior quarter, reflecting an increase of $185 million in ACL on loans.

ACL on performing loans of $2,478 million was $90 million higher than the prior quarter, reflecting increased ACL in Capital Markets and Personal & Commercial Banking, driven by unfavourable changes in certain near-term macroeconomic variables.

ACL on impaired loans of $795 million increased $95 million from the prior quarter, primarily due to higher ACL in Capital Markets.

For further details, refer to Note 5 of our Condensed Financial Statements.

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. There have been no material changes to our Market Risk Framework from the framework described in our 2018 Annual Report. We continue to manage the controls and governance procedures that ensure that our market risk exposure is

28        Royal Bank of Canada        First Quarter 2019

consistent with risk appetite constraints set by the Board of Directors. These controls include limits on probabilistic measures of potential loss in trading positions, such as Value-at-Risk (VaR) and Stressed Value-at-Risk (SVaR).

Market risk controls are also in place to manage structural interest rate risk (SIRR) arising from traditional banking products. Factors contributing to SIRR include the mismatch between future asset and liability repricing dates, relative changes in asset and liability rates, and product features that could affect the expected timing of cash flows, such as options to pre-pay loans or redeem term deposits prior to contractual maturity. To monitor and control SIRR, we assess two primary financial metrics, Net Interest Income (NII) risk and Economic Value of Equity (EVE) risk, under a range of market shocks and scenarios. For further details of our approach to the management of market risk, refer to the Market risk section of our 2018 Annual Report. There has been no material change to the SIRR measurement methodology, controls, or limits from those described in our 2018 Annual Report.

Market risk measures – FVTPL positions

VaR and SVaR

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

	January 31, 2019										October 31, 2018						January 31, 2018
				For the three months ended							As at			For the three months ended			As at			For the three months ended
(Millions of Canadian dollars)	As at			Average			High		Low					Average						Average
Equity	$	20		$	22		$	30	$	14	$	34		$	16		$	15		$	16
Foreign exchange		4			6			13		3		12			5			3			3
Commodities		2			3			4		2		2			2			1			2
Interest rate (1)		14			16			19		12		15			15			12			17
Credit specific (2)		5			5			5		5		5			5			5			5
Diversification (3)		(15	)		(18	)		n.m.		n.m.		(29	)		(19	)		(14	)		(18	)
Market risk VaR	$	30		$	34		$	45	$	27	$	39		$	24		$	22		$	25
Market risk Stressed VaR	$	113		$	123		$	161	$	79	$	91		$	72		$	84		$	81

(1) General credit spread risk and funding spread risk associated with uncollateralized derivatives are included under interest rate VaR.

(2) Credit specific risk captures issuer-specific credit spread volatility.

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

n.m. not meaningful

Q1 2019 vs. Q1 2018

Average market risk VaR of $34 million increased $9 million from the prior year, primarily reflecting increased equity markets volatility impacting the historical window used to calculate VaR and the impact of foreign exchange translation.

Average SVaR of $123 million increased $42 million from the prior year, mainly due to growth in our fixed income portfolios and equity markets volatility. The impact of foreign exchange translation also contributed to the increase.

Q1 2019 vs. Q4 2018

Average market risk VaR of $34 million increased $10 million and average SVaR of $123 million increased $51 million from the prior quarter, mainly due to growth in our fixed income portfolios and equity markets volatility. The impact of foreign exchange translation also contributed to the increase.

The following chart displays a bar graph of our daily trading profit and loss and a line graph of our daily market risk VaR. We incurred no net trading losses in the three months ended January 31, 2019 and October 31, 2018.

Royal Bank of Canada        First Quarter 2019        29

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 FVTPL. Consequently, changes in the fair values of these assets are recorded in investment income within Total revenue 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, claims and acquisition expense. As at January 31, 2019, we had liabilities with respect to insurance obligations of $10.5 billion, up from $10.0 billion in the prior quarter, and assets of $8.6 billion in support of the liabilities, up from $8.1 billion last quarter.

Market risk measures – Structural Interest Rate Sensitivities

The following table shows the potential before-tax impact of an immediate and sustained 100 bps increase or decrease in interest rates on projected 12-month NII and EVE for our structural balance sheet, assuming no subsequent hedging. Rate floors are applied within the declining rates scenarios, with floor levels set based on rate changes experienced globally. Interest rate risk measures are based upon interest rate exposures at a specific time and continuously change as a result of business activities and management actions.

	January 31 2019																		October 31 2018					January 31 2018
	EVE risk									NII risk (1)
(Millions of Canadian dollars)	Canadian dollar impact			U.S. dollar impact (2)			Total			Canadian dollar impact			U.S. dollar impact (2)			Total			EVE risk		NII risk (1)			EVE risk		NII risk (1)
Before-tax impact of:
100bps increase in rates	$	(976	)	$	(43	)	$	(1,019	)	$	360		$	127		$	487		$	(1,140)	$	505			$  (1,224)	$	458
100bps decrease in rates		877			(328	)		549			(468	)		(149	)		(617	)		755		(582	)		809		(578	)

(1) Represents the 12-month NII exposure to an instantaneous and sustained shift in interest rates.

(2) Represents the impact on the SIRR portfolios held in our City National and U.S. banking operations.

As at January 31, 2019, an immediate and sustained -100 bps shock would have had a negative impact to our NII of $617 million, up from $582 million last quarter. An immediate and sustained +100 bps shock at the end of January 31, 2019 would have had a negative impact to the Bank’s EVE of $1,019 million, down from $1,140 million reported last quarter. The quarter-over-quarter increase in NII risk was mainly attributed to interest rate changes and deposit growth. During the first quarter of 2019, NII and EVE risks remained well within approved limits.

Market risk measures for other material non-trading portfolios

Investment securities carried at FVOCI

We held $51.9 billion of investment securities carried at FVOCI as at January 31, 2019 compared to $48.5 billion in the prior quarter. We hold debt securities carried at FVOCI primarily as investments, as well as to manage liquidity risk and hedge interest rate risk in our non-trading banking balance sheet. As at January 31, 2019, our portfolio of investment securities carried at FVOCI is interest rate sensitive and would impact OCI by a pre-tax change in value of $7 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 change in value of $21 million, as measured by the change in value for a one basis point widening of credit spreads. The value of the investment securities carried at FVOCI included in our SIRR measure as at January 31, 2019 was $6.0 billion, down from $7.1 billion in the prior quarter. Our investment securities carried at FVOCI also include equity exposures of $0.5 billion as at January 31, 2019 compared to $0.4 billion last quarter.

Derivatives related to non-trading activity

Derivatives are also used to hedge market risk exposures unrelated to our trading activity. In aggregate, derivative assets not related to trading activity of $2.5 billion as at January 31, 2019 were down from $2.8 billion last quarter, and derivative liabilities of $2.1 billion as at January 31, 2019 were down from $2.9 billion last quarter.

Non-trading derivatives in hedge accounting relationships

The derivative assets and liabilities described above include derivative assets in a designated hedge accounting relationship of $1.0 billion as at January 31, 2019, down from $1.5 billion as at October 31, 2018, and derivative liabilities of $1.6 billion as at January 31, 2019, down from $2.1 billion last quarter. These derivative assets and liabilities are included in our SIRR measure and other internal non-trading market risk measures. We use interest rate swaps to manage our investment securities and SIRR. To the extent these swaps are considered effective, changes in their fair value are recognized in Other comprehensive income. The interest rate risk for the swaps designated as cash flow hedges, measured as the change in the fair value of the derivatives for a one basis point parallel increase in yields, was $7 million as of January 31, 2019, unchanged from $7 million as of October 31, 2018.

Interest rate swaps are also used to hedge changes in the fair value of certain fixed-rate instruments. Changes in fair value of the hedged instruments that are related to interest rate movements and the corresponding interest rate swaps are reflected in the Consolidated Statement of 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, British pound, and Euro. 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

Derivatives, including interest rate swaps and foreign exchange derivatives, that are not in designated hedge accounting relationships are used to manage other non-trading exposures. Changes in the fair value of these derivatives are reflected in the Consolidated Statement of Income. Derivative assets of $1.5 billion as at January 31, 2019 were up from $1.3 billion as at October 31, 2018, and derivative liabilities of $0.5 billion as at January 31, 2019 were down from $0.8 billion last quarter.

30        Royal Bank of Canada        First Quarter 2019

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 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 income 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 unhedged 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 Risk-weighted Assets (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.

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 January 31, 2019
				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	$	40,033		$	–	$	40,033			Interest rate
Interest-bearing deposits with banks		38,653			22,859		15,794			Interest rate
Securities
Trading		138,173			129,595		8,578			Interest rate, credit spread
Investment, net of applicable allowance		97,659			–		97,659			Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed		297,660			223,953		73,707			Interest rate
Loans
Retail		401,767			7,112		394,655			Interest rate
Wholesale		191,114			8,778		182,336			Interest rate
Allowance for loan losses		(3,061	)		–		(3,061	)		Interest rate
Segregated fund net assets		1,443			–		1,443			Interest rate
Derivatives		84,816			82,307		2,509			Interest rate, foreign exchange
Other assets		71,692			2,439		69,253			Interest rate
Assets not subject to market risk (3)		6,258
Total assets	$	1,366,207		$	477,043	$	882,906
Liabilities subject to market risk
Deposits	$	852,564		$	96,229	$	756,335			Interest rate
Segregated fund liabilities		1,443			–		1,443			Interest rate
Other
Obligations related to securities sold short		33,242			33,242		–
Obligations related to assets sold under repurchase agreements and securities loaned		224,529			218,297		6,232			Interest rate
Derivatives		81,766			79,647		2,119			Interest rate, foreign exchange
Other liabilities		78,383			7,887		70,496			Interest rate
Subordinated debentures		9,255			–		9,255			Interest rate
Liabilities not subject to market risk (4)		4,375
Total liabilities	$	1,285,557		$	435,302	$	845,880
Total equity	$	80,650
Total liabilities and equity	$	1,366,207

(1) Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR and 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 RBC Insurance and investment securities, net of applicable allowance, not included in SIRR.

(3) Assets not subject to market risk include $6,258 million of physical and other assets.

(4) Liabilities not subject to market risk include $4,375 million of payroll related and other liabilities.

Royal Bank of Canada        First Quarter 2019        31

	As at October 31, 2018
				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	$	30,209		$	–	$	30,209		Interest rate
Interest-bearing deposits with banks		36,471			20,277		16,194		Interest rate
Securities
Trading		128,258			120,163		8,095		Interest rate, credit spread
Investment, net of applicable allowance		94,608			–		94,608		Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed		294,602			219,108		75,494		Interest rate
Loans
Retail		399,452			4,307		395,145		Interest rate
Wholesale		180,278			9,128		171,150		Interest rate
Allowance for loan losses		(2,912	)		–		(2,912	)	Interest rate
Segregated fund net assets		1,368			–		1,368		Interest rate
Derivatives		94,039			91,275		2,764		Interest rate, foreign exchange
Other assets		71,655			2,259		69,396		Interest rate
Assets not subject to market risk (3)		6,706
Total assets	$	1,334,734		$	466,517	$	861,511
Liabilities subject to market risk
Deposits	$	837,046		$	82,281	$	754,765		Interest rate
Segregated fund liabilities		1,368			–		1,368		Interest rate
Other
Obligations related to securities sold short		32,247			32,247		–
Obligations related to assets sold under repurchase agreements and securities loaned		206,814			201,839		4,975		Interest rate
Derivatives		90,238			87,352		2,886		Interest rate, foreign exchange
Other liabilities		72,116			7,661		64,455		Interest rate
Subordinated debentures		9,131			–		9,131		Interest rate
Liabilities not subject to market risk (4)		5,819
Total liabilities	$	1,254,779		$	411,380	$	837,580
Total equity	$	79,955
Total liabilities and equity	$	1,334,734

(1) Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR and 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 RBC Insurance and investment securities, net of applicable allowance, not included in SIRR.

(3) Assets not subject to market risk include $6,706 million of physical and other assets.

(4) Liabilities not subject to market risk include $5,819 million of payroll related and other liabilities.

Liquidity and funding risk

Liquidity and funding risk (liquidity risk) is the risk that we may be unable to generate sufficient cash or its equivalents in a timely and cost-effective manner to meet our commitments as they come due. Liquidity risk arises from mismatches in the timing and value of on-balance sheet and off-balance sheet cash flows.

Our Liquidity Risk Management Framework (LRMF) is designed to ensure that we have sufficient liquidity to satisfy current and prospective commitments in both normal and stressed conditions. There have been no material changes to our LRMF as described in our 2018 Annual Report.

We continue to maintain liquidity and funding that is appropriate for the execution of our strategy. Liquidity risk remains well within our risk appetite.

Liquidity reserve

Our liquidity reserve consists of available unencumbered liquid assets as well as uncommitted and undrawn central bank borrowing facilities that could be accessed under extraordinary circumstances subject to satisfying certain preconditions as set by various Central Banks (e.g., BoC, the Fed, Bank of England, and Bank of France).

To varying degrees, unencumbered liquid assets represent a ready source of funding. Unencumbered assets are the difference between total and encumbered assets from both on- and off-balance sheet sources. Encumbered assets, in turn, are not considered a source of liquidity in measures of liquidity risk.

Although unused wholesale funding capacity, which is regularly assessed, could be another potential source of liquidity to mitigate stressed conditions, it is excluded in the determination of our liquidity reserve.

32        Royal Bank of Canada        First Quarter 2019

	As at January 31, 2019
(Millions of Canadian dollars)	Bank-owned liquid assets		Securities received as collateral from securities financing derivative transactions		Total liquid assets		Encumbered liquid assets		Unencumbered liquid assets
Cash and due from banks	$	40,033	$	–	$	40,033	$	2,585	$	37,448
Interest-bearing deposits with banks		38,653		–		38,653		328		38,325
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (1)		196,493		277,661		474,154		329,626		144,528
Other securities		79,484		120,017		199,501		84,522		114,979
Undrawn credit lines granted by central banks (2)		10,722		–		10,722		–		10,722
Other assets eligible as collateral for discount (3)		95,157		–		95,157		–		95,157
Other liquid assets (4)		18,498		–		18,498		18,137		361
Total liquid assets	$	479,040	$	397,678	$	876,718	$	435,198	$	441,520

	As at October 31, 2018
(Millions of Canadian dollars)	Bank-owned liquid assets		Securities received as collateral from securities financing derivative transactions		Total liquid assets		Encumbered liquid assets		Unencumbered liquid assets
Cash and due from banks	$	30,209	$	–	$	30,209	$	2,573	$	27,636
Interest-bearing deposits with banks		36,471		–		36,471		366		36,105
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (1)		188,911		261,119		450,030		297,681		152,349
Other securities		78,090		126,209		204,299		84,589		119,710
Undrawn credit lines granted by central banks (2)		9,988		–		9,988		–		9,988
Other assets eligible as collateral for discount (3)		99,120		–		99,120		–		99,120
Other liquid assets (4)		19,758		–		19,758		19,406		352
Total liquid assets	$	462,547	$	387,328	$	849,875	$	404,615	$	445,260

	As at
(Millions of Canadian dollars)	January 31 2019		October 31 2018
Royal Bank of Canada	$	201,440	$	219,197
Foreign branches		81,969		73,015
Subsidiaries		158,111		153,048
Total unencumbered liquid assets	$	441,520	$	445,260

(1) 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).

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

(3) 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 BoC for advances under its Emergency Lending Assistance (ELA) program. ELA is not considered a source 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 collateral to meet requirements and mitigate further market liquidity disruption. The balance also includes our unencumbered mortgage loans that qualify as eligible collateral at Federal Home Loan Bank (FHLB).

(4) Encumbered liquid assets amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.

The liquidity reserve is typically most affected by routine flows of client banking activity where liquid asset portfolios adjust to the change in cash balances, and additionally from capital markets activities where business strategies and client flows may also affect the addition or subtraction of liquid assets in the overall calculation of the liquidity reserve. Corporate Treasury also affects liquidity reserves through the management of funding issuances where reserves absorb timing mismatches between debt issuances and deployment into business activities.

Q1 2019 vs. Q4 2018

Total liquid assets increased $27 billion or 3%, primarily due to an increase in on-balance sheet securities and securities received as collateral under reverse repurchase agreements and collateral swap transactions, and higher deposits with central banks, reflecting short-term cash management activities. However, the increase in collateral received was offset with a corresponding increase in collateral pledged under encumbered liquid assets due to repurchase transactions and collateral swap transactions.

Asset encumbrance

The table below provides a summary of cash, securities and other assets, distinguishing between those that are encumbered or available for sale or use as collateral in secured funding transactions. Other assets, such as mortgages and credit card receivables, can also be monetized, albeit over longer timeframes than those required for marketable securities. As at January 31, 2019, our Unencumbered assets available as collateral comprised 29% of total assets (October 31, 2018 – 29%).

Royal Bank of Canada        First Quarter 2019        33

Asset encumbrance

	As at
	January 31 2019												October 31 2018
	Encumbered				Unencumbered								Encumbered				Unencumbered
(Millions of Canadian dollars)	Pledged as collateral		Other (1)		Available as collateral (2)		Other (3)			Total			Pledged as collateral		Other (1)		Available as collateral (2)		Other (3)			Total
Cash and due from banks	$	–	$	2,585	$	37,448	$	–		$	40,033		$	–	$	2,573	$	27,636	$	–		$	30,209
Interest-bearing deposits with banks		–		328		38,325		–			38,653			–		366		36,105		–			36,471
Securities
Trading		40,659		–		94,912		2,602			138,173			40,640		–		84,270		3,348			128,258
Investment, net of applicable allowance		14,047		–		83,550		62			97,659			12,195		–		82,351		62			94,608
Assets purchased under reverse repurchase agreements and securities borrowed (4)		379,112		22,633		35,373		9,041			446,159			348,597		22,188		53,590		5,722			430,097
Loans
Retail
Mortgage securities		30,494		–		37,069		–			67,563			34,286		–		36,234		–			70,520
Mortgage loans		44,961		–		14,400		159,388			218,749			36,959		–		17,784		157,208			211,951
Non-mortgage loans		9,251		–		58,701		47,503			115,455			8,553		–		59,611		48,817			116,981
Wholesale		–		–		33,302		157,812			191,114			–		–		32,478		147,800			180,278
Allowance for loan losses		–		–		–		(3,061	)		(3,061	)		–		–		–		(2,912	)		(2,912	)
Segregated fund net assets		–		–		–		1,443			1,443			–		–		–		1,368			1,368
Other – Derivatives		–		–		–		84,816			84,816			–		–		–		94,039			94,039
– Others (5)		18,137		–		361		59,452			77,950			19,406		–		352		58,603			78,361
Total assets	$	536,661	$	25,546	$	433,441	$	519,058		$	1,514,706		$	500,636	$	25,127	$	430,411	$	514,055		$	1,470,229

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

(2) 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 for borrowing and application of prescribed collateral margin requirements, be pledged to the BoC for advances under its ELA program. It also includes our unencumbered mortgage loans that qualify as eligible collateral at FHLB. We also lodge loans that qualify as eligible collateral for the discount window facility available to us at the FRBNY. ELA and other central bank facilities are not considered sources of available liquidity in our normal liquidity risk profile. However, banks could monetize assets meeting collateral criteria during periods of extraordinary and severe disruption to market-wide liquidity.

(3) 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.

(4) Includes bank-owned liquid assets and securities received as collateral from off-balance sheet securities financing, derivative transactions, and margin lending. Includes $22.6 billion (October 31, 2018 – $22.2 billion) of collateral received through reverse repurchase transactions that cannot be rehypothecated in its current legal form.

(5) The Pledged as collateral amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.

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 and funding profile

As at January 31, 2019, relationship-based deposits, which are the primary source of funding for retail loans and mortgages, were $551 billion or 49% of our total funding (October 31, 2018 – $545 billion or 50%). The remaining portion is comprised of short- and long-term wholesale funding.

Funding for highly liquid assets consists primarily of short-term wholesale funding that reflects the monetization period of those assets. Long-term wholesale funding is used mostly to fund less liquid wholesale assets and to support liquidity asset buffers.

For further details on our wholesale funding, refer to the Composition of wholesale funding tables below.

Long-term debt issuance

Our wholesale funding activities are well-diversified by geography, investor segment, instrument, 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 operate longer-term debt issuance registered programs. The following table summarizes these programs with their authorized limits by geography.

    Programs by geography

Canada	U.S.	Europe/Asia
• Canadian Shelf Program – $25 billion	• SEC Shelf Program – US$40 billion	• European Debt Issuance Program – US$40 billion
		• Global Covered Bond Program – €32 billion
		• Japanese Issuance Programs – ¥1 trillion

34        Royal Bank of Canada        First Quarter 2019

We also raise long-term funding using Canadian Deposit Notes, Canadian National Housing Act 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 opportunities to expand into new markets and untapped investor segments since diversification expands our wholesale funding flexibility, 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 both currency and product. Maintaining competitive credit ratings is also critical to cost-effective funding.

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

The following table provides our composition of wholesale funding based on remaining term to maturity:

Composition of wholesale funding (1)

(Millions of Canadian dollars)	As at January 31, 2019
	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)	$	4,141	$	29	$	709	$	–	$	4,879	$	–	$	–	$	4,879
Certificates of deposit and commercial paper		5,461		16,769		16,232		15,804		54,266		66		131		54,463
Asset-backed commercial paper (3)		2,029		3,160		6,183		4,702		16,074		–		–		16,074
Senior unsecured medium-term notes (4)		121		7,400		6,180		4,282		17,983		25,540		31,213		74,736
Senior unsecured structured notes (5)		65		275		450		1,759		2,549		1,511		5,514		9,574
Mortgage securitization		–		527		513		1,109		2,149		3,660		11,597		17,406
Covered bonds/asset-backed securities (6)		1,313		3,338		1,503		3,932		10,086		12,167		26,836		49,089
Subordinated liabilities		–		–		1,000		2,095		3,095		2,499		3,798		9,392
Other (7)		9,373		2,810		3,189		1,855		17,227		157		9,065		26,449
Total	$	22,503	$	34,308	$	35,959	$	35,538	$	128,308	$	45,600	$	88,154	$	262,062
Of which:
– Secured	$	11,764	$	8,945	$	10,169	$	10,794	$	41,672	$	15,827	$	38,433	$	95,932
– Unsecured		10,739		25,363		25,790		24,744		86,636		29,773		49,721		166,130

(Millions of Canadian dollars)	As at October 31, 2018
	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)	$	4,507	$	10	$	42	$	–	$	4,559	$	–	$	–	$	4,559
Certificates of deposit and commercial paper		3,658		9,000		20,994		14,926		48,578		197		132		48,907
Asset-backed commercial paper (3)		1,908		2,581		5,877		6,197		16,563		–		–		16,563
Senior unsecured medium-term notes (4)		122		6,132		7,424		8,090		21,768		23,125		33,513		78,406
Senior unsecured structured notes (5)		185		215		353		693		1,446		2,603		5,608		9,657
Mortgage securitization		–		2,473		527		1,099		4,099		3,027		12,193		19,319
Covered bonds/asset-backed securities (6)		–		21		4,641		5,409		10,071		8,581		26,861		45,513
Subordinated liabilities		–		–		–		1,103		1,103		2,993		5,301		9,397
Other (7)		7,639		1,658		419		1,189		10,905		4		9,122		20,031
Total	$	18,019	$	22,090	$	40,277	$	38,706	$	119,092	$	40,530	$	92,730	$	252,352
Of which:
– Secured	$	8,292	$	5,666	$	11,045	$	12,706	$	37,709	$	11,608	$	39,054	$	88,371
– Unsecured		9,727		16,424		29,232		26,000		81,383		28,922		53,676		163,981

(1) Excludes bankers’ acceptances and repos.

(2) Excludes deposits associated with services we provide to 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 and mortgage loans.

(7) Includes tender option bonds (secured) of $8,240 million (October 31, 2018 – $6,978 million), bearer deposit notes (unsecured) of $4,176 million (October 31, 2018 – $4,084 million), other long-term structured deposits (unsecured) of $8,910 million (October 31, 2018 – $8,969 million), and FHLB advances (secured) of $5,123 million (October 31, 2018 – $nil).

Royal Bank of Canada        First Quarter 2019        35

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 methodologies. Ratings are subject to change, based on a number of factors including, but not limited to, our financial strength, competitive position, liquidity and other factors not completely within our control.

The following table presents our major credit ratings (1):

Credit ratings

	As at February 21, 2019
	Short-term debt		Legacy senior long-term debt (2)		Senior long- term debt (3)		Outlook
Moody’s (4)		P-1		Aa2		A2		stable
Standard & Poor’s (5)		A-1+		AA-		A		stable
Fitch Ratings (6)		F1+		AA		AA		stable
DBRS (7)		R-1(high)		AA		AA (low)		positive

(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) Includes senior long-term debt issued prior to September 23, 2018 and senior long-term debt issued on or after September 23, 2018 which is excluded from the Canadian Bank Recapitalization (Bail-in) regime.

(3) Includes senior long-term debt issued on or after September 23, 2018 which is subject to conversion under the Bail-in regime.

(4) On July 16, 2018, Moody’s upgraded our legacy senior long-term debt rating two notches and revised our outlook to stable from negative. On July 16, 2018, Moody’s also announced our rating for senior long-term debt of A2.

(5) On June 27, 2018, S&P revised our outlook to stable from negative. On August 16, 2018, S&P announced our rating for senior long-term debt of A.

(6) On June 21, 2018, Fitch Ratings announced that our rating for senior long-term debt will be the same as our legacy senior long-term debt, as they did not expect any immediate rating changes as a result of the Bail-in regime. On October 22, 2018, Fitch Ratings affirmed our ratings with a stable outlook.

(7) On June 26, 2018, DBRS revised our outlook to positive from stable. On April 19, 2018, DBRS announced our rating for senior long-term debt of AA (low).

Additional contractual obligations for rating downgrades

We are required to deliver collateral to certain counterparties in the event of a downgrade to our current credit rating. The following table provides 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 that would lead to early prepayment of principal.

Additional contractual obligations for rating downgrades

	As at
	January 31 2019						October 31 2018
(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	$	179	$	63	$	150	$	125	$	45	$	191
Other contractual funding or margin requirements (1)		185		176		–		185		176		–

(1) Includes Guaranteed Investment Certificates (GICs) issued by our municipal markets business out of New York.

Liquidity Coverage Ratio (LCR)

The LCR is a Basel III metric that measures the sufficiency of high-quality liquid assets (HQLA) available to meet liquidity needs over a 30-day period in an acute stress scenario. The Basel Committee on Banking Supervision (BCBS) and OSFI regulatory minimum coverage level for LCR is currently 100%.

OSFI requires Canadian banks to disclose the LCR using the standard Basel disclosure template and calculated using the average of daily LCR positions during the quarter.

36        Royal Bank of Canada        First Quarter 2019

Liquidity coverage ratio common disclosure template (1)

		For the three months ended
	January 31 2019				October 31 2018
(Millions of Canadian dollars, except percentage amounts)	Total unweighted value (average)  (2)		Total weighted value (average)		Total unweighted value (average) (2)		Total weighted value (average)
High-quality liquid assets
Total high-quality liquid assets (HQLA)		n.a.	$	221,751		n.a.	$	212,818
Cash outflows
Retail deposits and deposits from small business customers, of which:	$	257,222		19,754	$	252,514		19,398
Stable deposits (3)		85,262		2,558		83,611		2,508
Less stable deposits		171,960		17,196		168,903		16,890
Unsecured wholesale funding, of which:		291,119		132,359		285,140		129,249
Operational deposits (all counterparties) and deposits in networks of cooperative banks (4)		127,648		30,410		126,889		30,276
Non-operational deposits		141,227		79,705		136,572		77,294
Unsecured debt		22,244		22,244		21,679		21,679
Secured wholesale funding		n.a.		33,728		n.a.		29,837
Additional requirements, of which:		269,708		80,563		260,417		79,668
Outflows related to derivative exposures and other collateral requirements		64,633		44,379		61,154		42,867
Outflows related to loss of funding on debt products		4,532		4,532		6,232		6,232
Credit and liquidity facilities		200,543		31,652		193,031		30,569
Other contractual funding obligations (5)		19,966		19,966		26,811		26,811
Other contingent funding obligations (6)		427,209		7,601		420,344		7,557
Total cash outflows		n.a.	$	293,971		n.a.	$	292,520
Cash inflows
Secured lending (e.g., reverse repos)	$	279,932	$	54,853	$	233,784	$	49,183
Inflows from fully performing exposures		13,697		9,631		14,345		10,156
Other cash inflows		56,739		56,739		59,683		59,683
Total cash inflows		n.a.	$	121,223		n.a.	$	119,022
			Total adjusted value				Total adjusted value
Total HQLA			$	221,751			$	212,818
Total net cash outflows				172,748				173,498
Liquidity coverage ratio				128%				123%

(1) The LCR is calculated in accordance with OSFI’s LAR guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS. The LCR for the quarter ended January 31, 2019 is calculated as an average of 62 daily positions.

(2) With the exception of other contingent funding obligations, unweighted inflow and outflow amounts are items maturing or callable in 30 days or less. Other contingent funding obligations also include debt securities with remaining maturity greater than 30 days.

(3) As defined by the 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.

(4) Operational deposits from customers other than retail and small and medium-sized enterprises (SMEs), 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.

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

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

n.a. not applicable

We manage our LCR position within a target range that reflects our 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 to meet target LCR objectives. Our Level 1 assets, as calculated according to OSFI LAR and the BCBS LCR requirements, represent 84% 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 the application of withdrawal and non-renewal factors to demand and term deposits, 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 clients. Cash inflows arise primarily from maturing secured loans, interbank loans and non-HQLA securities.

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

Q1 2019 vs. Q4 2018

The average LCR for the quarter ended January 31, 2019 was 128%, which translates into a surplus of approximately $49 billion, compared to 123% in the prior quarter. The increase in the LCR surplus from the previous quarter is primarily due to a change in funding and business mix.

Royal Bank of Canada        First Quarter 2019        37

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 (e.g., amortized cost or fair value) at the balance sheet date. 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 modelling a behavioural balance sheet with effective maturities to calculate liquidity risk measures. For further details, refer to the Risk measurement section within the Liquidity and funding risk section of our 2018 Annual Report.

	As at January 31, 2019
(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	$	76,344	$	3	$	–	$	–	$	–	$	–	$	–	$	–	$	2,339		$	78,686
Securities
Trading (1)		96,872		19		53		–		21		50		70		7,411		33,677			138,173
Investment, net of applicable allowance		1,868		3,935		3,110		2,556		2,530		13,199		29,140		40,827		494			97,659
Assets purchased under reverse repurchase agreements and securities borrowed		179,266		64,013		21,311		10,609		13,659		610		–		–		8,192			297,660
Loans, net of applicable allowance		20,699		16,596		26,144		23,958		27,730		124,862		215,764		47,888		86,179			589,820
Other
Customers’ liability under acceptances		11,152		5,605		17		–		2		5		–		–		(31	)		16,750
Derivatives		5,056		6,624		4,549		2,586		4,634		9,269		16,174		35,920		4			84,816
Other financial assets		23,621		1,139		682		60		197		117		243		1,765		2,148			29,972
Total financial assets	$	414,878	$	97,934	$	55,866	$	39,769	$	48,773	$	148,112	$	261,391	$	133,811	$	133,002		$	1,333,536
Other non-financial assets		2,129		1,300		416		493		627		1,142		1,291		1,402		23,871			32,671
Total assets	$	417,007	$	99,234	$	56,282	$	40,262	$	49,400	$	149,254	$	262,682	$	135,213	$	156,873		$	1,366,207
Liabilities and equity
Deposits (2)
Unsecured borrowing	$	51,080	$	46,688	$	39,785	$	36,807	$	30,939	$	38,178	$	53,336	$	14,950	$	437,877		$	749,640
Secured borrowing		3,608		6,400		7,080		6,053		2,659		9,648		21,529		5,961		–			62,938
Covered bonds		–		2,599		1,509		3,004		–		11,988		17,331		3,555		–			39,986
Other
Acceptances		11,149		5,605		16		2		–		6		–		–		3			16,781
Obligations related to securities sold short		33,242		–		–		–		–		–		–		–		–			33,242
Obligations related to assets sold under repurchase agreements and securities loaned		183,875		29,749		2,892		159		–		496		–		–		7,358			224,529
Derivatives		5,450		6,902		4,535		3,041		3,811		7,960		14,816		35,244		7			81,766
Other financial liabilities		27,942		2,000		2,543		1,435		371		162		588		6,894		810			42,745
Subordinated debentures		–		–		–		102		–		–		317		8,836		–			9,255
Total financial liabilities	$	316,346	$	99,943	$	58,360	$	50,603	$	37,780	$	68,438	$	107,917	$	75,440	$	446,055		$	1,260,882
Other non-financial liabilities		1,156		847		191		902		1,957		643		768		10,043		8,168			24,675
Equity		–		–		–		–		–		–		–		–		80,650			80,650
Total liabilities and equity	$	317,502	$	100,790	$	58,551	$	51,505	$	39,737	$	69,081	$	108,685	$	85,483	$	534,873		$	1,366,207
Off-balance sheet items
Financial guarantees	$	291	$	1,450	$	2,598	$	1,933	$	3,074	$	1,506	$	4,764	$	713	$	51		$	16,380
Lease commitments		66		131		200		199		191		724		1,558		2,820		–			5,889
Commitments to extend credit		1,372		5,036		8,245		10,037		15,554		35,718		172,094		14,821		209			263,086
Other credit-related commitments		574		1,047		1,477		1,098		1,425		494		699		114		102,298			109,226
Other commitments		23		–		–		–		–		–		–		–		527			550
Total off-balance sheet items	$	2,326	$	7,664	$	12,520	$	13,267	$	20,244	$	38,442	$	179,115	$	18,468	$	103,085		$	395,131

(1) Trading debt securities classified as FVTPL 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 for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.

38        Royal Bank of Canada        First Quarter 2019

	As at October 31, 2018
(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	$	64,201	$	2	$	–	$	–	$	–	$	–	$	–	$	–	$	2,477		$	66,680
Securities
Trading (1)		86,551		20		22		16		1		52		72		6,982		34,542			128,258
Investment, net of applicable allowance		3,529		6,855		1,419		2,593		2,399		12,989		25,061		39,396		367			94,608
Assets purchased under reverse repurchase agreements and securities borrowed		168,810		66,854		28,828		10,298		11,692		552		–		–		7,568			294,602
Loans, net of applicable allowance		22,534		14,967		21,079		26,753		25,271		122,687		211,768		44,191		87,568			576,818
Other
Customers’ liability under acceptances		10,774		4,788		94		1		–		5		–		–		(21	)		15,641
Derivatives		6,070		10,179		4,930		4,032		3,030		11,130		18,067		36,581		20			94,039
Other financial assets		25,670		873		938		78		157		112		231		1,758		2,120			31,937
Total financial assets	$	388,139	$	104,538	$	57,310	$	43,771	$	42,550	$	147,527	$	255,199	$	128,908	$	134,641		$	1,302,583
Other non-financial assets		1,809		1,268		590		364		559		971		1,352		1,125		24,113			32,151
Total assets	$	389,948	$	105,806	$	57,900	$	44,135	$	43,109	$	148,498	$	256,551	$	130,033	$	158,754		$	1,334,734
Liabilities and equity
Deposits (2)
Unsecured borrowing	$	46,793	$	33,849	$	47,209	$	30,511	$	36,116	$	34,641	$	50,792	$	15,693	$	440,246		$	735,850
Secured borrowing		2,340		6,571		9,321		5,433		4,232		7,135		23,388		5,902		–			64,322
Covered bonds		–		–		2,579		1,499		2,982		10,022		16,360		3,432		–			36,874
Other
Acceptances		10,775		4,787		94		1		–		5		–		–		–			15,662
Obligations related to securities sold short		32,247		–		–		–		–		–		–		–		–			32,247
Obligations related to assets sold under repurchase agreements and securities loaned		146,205		44,248		9,030		91		–		–		–		–		7,240			206,814
Derivatives		5,998		8,585		4,650		4,176		3,311		9,808		17,205		36,496		9			90,238
Other financial liabilities		27,414		1,003		582		233		414		154		522		6,784		733			37,839
Subordinated debentures		–		–		–		–		103		–		318		8,710		–			9,131
Total financial liabilities	$	271,772	$	99,043	$	73,465	$	41,944	$	47,158	$	61,765	$	108,585	$	77,017	$	448,228		$	1,228,977
Other non-financial liabilities		992		5,095		346		183		157		765		868		9,449		7,947			25,802
Equity		–		–		–		–		–		–		–		–		79,955			79,955
Total liabilities and equity	$	272,764	$	104,138	$	73,811	$	42,127	$	47,315	$	62,530	$	109,453	$	86,466	$	536,130		$	1,334,734
Off-balance sheet items
Financial guarantees	$	532	$	2,026	$	1,647	$	2,696	$	1,337	$	1,910	$	4,179	$	1,125	$	50		$	15,502
Lease commitments		66		131		194		199		194		695		1,517		2,814		–			5,810
Commitments to extend credit		4,122		3,417		8,736		9,667		11,406		33,030		168,071		23,899		269			262,617
Other credit-related commitments		577		795		1,586		1,498		1,324		478		680		148		107,499			114,585
Other commitments		141		–		–		–		–		–		–		–		556			697
Total off-balance sheet items	$	5,438	$	6,369	$	12,163	$	14,060	$	14,261	$	36,113	$	174,447	$	27,986	$	108,374		$	399,211

(1) Trading debt securities classified as FVTPL 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 for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.

Capital management

We continue to manage our capital in accordance with our Capital Management Framework as described in our 2018 Annual Report. In addition, we continue to monitor and prepare for new regulatory capital developments, including the BCBS Basel III reforms, in order to ensure timely and accurate compliance with these requirements. For additional details on new regulatory developments that relate to our Capital Management Framework, refer to the Capital, liquidity and other regulatory developments section of this Q1 2019 Report to Shareholders.

OSFI expects Canadian banks to meet the Basel III targets for CET1, Tier 1 and Total capital ratios. Effective January 1, 2014, OSFI allowed Canadian banks to phase in the Basel III Credit Valuation Adjustment (CVA) risk capital charge over a five-year period ending December 31, 2018. As of January 1, 2019, the CVA scalars were fully phased-in for each tier of capital, resulting in all tiers of capital having the same risk weighted assets value. In fiscal 2018, the CVA scalars were 80%, 83% and 86% for CET1, Tier 1 and Total capital, respectively.

The Financial Stability Board (FSB) has designated us as a Global Systemically Important Bank (G-SIB). This designation requires us to maintain a higher loss absorbency requirement (common equity as a percentage of risk-weighted assets) of 1%. As the Domestic Systemically Important Bank (D-SIB) requirement is equivalent to the G-SIB requirement of 1% of RWA, the G-SIB designation had no further impact to the loss absorbency requirements on our CET1 ratio. We provide our G-SIB assessment indicators below.

On April 18, 2018, OSFI released its final guideline on Total Loss Absorbing Capacity (TLAC), which applies to Canadian D-SIBs as part of the Federal Government’s Bail-in Regime. The guideline is consistent with the TLAC standard released on November 9, 2015, by the FSB for institutions designated as G-SIBs, but tailored to the Canadian context. The TLAC requirement is intended to address the sufficiency of a systemically important banks loss absorbing capacity in supporting its recapitalization in the event of its failure. TLAC is defined as the aggregate of Tier 1 capital, Tier 2 capital, and other TLAC instruments, which allow conversion in whole or in part into common shares under the Canada Deposit Insurance Corporation (CDIC) Act and meet all of the eligibility criteria under the guideline.

Royal Bank of Canada        First Quarter 2019        39

TLAC requirements established two minimum standards, which are required to be met effective November 1, 2021: the risk-based TLAC ratio, which builds on the risk-based capital ratios described in the Capital Adequacy Requirements (CAR) guideline, and the TLAC leverage ratio, which builds on the leverage ratio described in OSFI’s Leverage Requirements guideline. The risk-based TLAC ratio is defined as TLAC divided by Total risk-weighted assets (RWA) while the TLAC leverage ratio is defined as TLAC divided by the Leverage ratio exposure. OSFI has provided notification requiring systemically important banks to maintain a minimum TLAC ratio of 23.25%, which includes the revised Domestic Stability Buffer (DSB) as noted below, and a TLAC leverage ratio of 6.75%. We began issuing bail-in eligible debt in the fourth quarter of 2018 and this has contributed to improving our TLAC ratio. We expect our TLAC ratio to improve through normal course refinancing of maturing unsecured term debt.

Effective November 1, 2018, we are required to adopt OSFI’s revisions to the CAR guidelines relating to the securitization framework and the standardized approach for measuring counterparty credit risk (SA-CCR).

For further details on regulatory developments, refer to the Capital, liquidity and other regulatory developments section of this Q1 2019 Report to Shareholders.

The following table provides a summary of OSFI’s current regulatory target ratios under Basel III and Pillar 2 requirements. We are in compliance with all current capital and leverage requirements imposed by OSFI:

Basel III Capital ratios and leverage

OSFI regulatory target requirements for large banks under Basel III

RBC capital and leverage ratios as at January 31, 2019

Domestic Stability Buffer (3)

Minimum including Capital Buffers, D-SIB/G-SIB surcharge and Domestic  Stability Buffer

Minimum

Capital Buffers (1)

Minimum including Capital Buffers

D-SIB/G-SIB Surcharge (2)

Minimum including Capital Buffers  and D-SIB/G-SIB surcharge (2)

Common Equity Tier 1

> 4.5%

2.5%

> 7.0%

1.0%

> 8.0%

11.4%

1.5%

> 9.5%

Tier 1 capital

> 6.0%

2.5%

> 8.5%

1.0%

> 9.5%

12.7%

1.5%

> 11.0%

Total capital

> 8.0%

2.5%

> 10.5%

1.0%

> 11.5%

14.5%

1.5%

> 13.0%

Leverage ratio

> 3.0%

n.a.

> 3.0%

n.a.

> 3.0%

4.3%

n.a.

> 3.0%

(1) The capital buffers include the capital conservation buffer and the countercyclical capital buffer as prescribed by OSFI.

(2) A capital surcharge, equal to the higher of our D-SIB surcharge and the BCBS’s G-SIB surcharge, is applicable to risk-weighted capital.

(3) Effective June 20, 2018, OSFI required the public disclosure of their Pillar 2 DSB. Effective April 30, 2019, OSFI has raised the level for the DSB to 1.75% of RWA.

n.a. not applicable

The following table provides details on our regulatory capital, RWA, and capital and leverage ratios. Our capital position remains strong and our capital and leverage ratios remain well above OSFI regulatory targets.

	As at
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	January 31 2019		October 31 2018		January 31 2018
Capital (1)
CET1 capital	$	57,963	$	57,001	$	51,145
Tier 1 capital		64,341		63,279		57,925
Total capital		73,758		72,494		66,984
Risk-weighted Assets (RWA) used in calculation of capital ratios (1), (2)
CET1 capital RWA	$	508,512	$	495,528	$	466,758
Tier 1 capital RWA		508,512		495,993		466,758
Total capital RWA		508,512		496,459		466,758
Total capital RWA consisting of: (1)
Credit risk	$	410,003	$	401,534	$	375,260
Market risk		34,862		32,209		30,100
Operational risk		63,647		62,716		60,119
Regulatory floor adjustment (3)		–		–		1,279
Total capital RWA	$	508,512	$	496,459	$	466,758
Capital ratios and Leverage ratio (1)
CET1 ratio		11.4%		11.5%		11.0%
Tier 1 capital ratio		12.7%		12.8%		12.4%
Total capital ratio		14.5%		14.6%		14.4%
Leverage ratio		4.3%		4.4%		4.2%
Leverage ratio exposure (billions)	$	1,501.8	$	1,450.8	$	1,363.9

(1) Capital, RWA, and capital ratios are calculated using OSFI’s Capital Adequacy Requirements based on the Basel III framework. The Leverage ratio is calculated using OSFI Leverage Requirements Guideline based on the Basel III framework.

(2) In fiscal 2018, amounts included CVA scalars of 80%, 83% and 86%, respectively.

(3) Since the introduction of Basel II in 2008, OSFI has prescribed a capital floor requirement for institutions that use the advanced internal ratings-based (AIRB) approach for credit risk. Effective February 1, 2018, the minimum capital floor will be required if the capital requirement under the Basel III Standards, as specified by OSFI, is less than 75% of the RWA based on the standardized Basel II approach. Prior to February 1, 2018, the threshold was 90% of the capital requirements as calculated under Basel I.

40        Royal Bank of Canada        First Quarter 2019

Q1 2019 vs. Q4 2018

(1) Represents rounded figures.

(2) Internal capital generation of $1.7 billion which represents Net income available to shareholders, less common and preferred shares dividends.

Our CET1 ratio was 11.4%, down 10 bps from last quarter, mainly reflecting higher RWA due to business growth, regulatory changes relating to the phase-out of the CVA scalars and revisions to the CAR guidelines, as noted previously, and share repurchases, partially offset by internal capital generation.

CET1 capital RWA increased $13 billion, driven by business growth in wholesale and retail lending, and market risk portfolios. The impact of regulatory changes in the current quarter also contributed to the increase.

Our Tier 1 capital ratio of 12.7% was down 10 bps, reflecting the factors noted above under the CET1 ratio. Tier 1 capital ratio was also favourably impacted by net preferred share issuances.

Our Total capital ratio of 14.5% was down 10 bps, reflecting the factors noted above under the Tier 1 ratio.

Our Leverage ratio of 4.3% was down 10 bps from last quarter, primarily due to growth in leverage ratio exposures, mainly in loans and securities, regulatory changes, and share repurchases, partially offset by internal capital generation.

Selected capital management activity

The following table provides our selected capital management activity:

	For the three months ended January 31, 2019
(Millions of Canadian dollars, except number of shares)	Issuance or redemption date		Number of shares (000s)			Amount
Tier 1 capital
Common shares activity
Issued in connection with share-based compensation plans (1)				159		$	11
Purchased for cancellation				(3,684	)		(45	)
Issuance of preferred shares, Series BO (2)		November 2, 2018		14,000			350
Redemption of preferred shares, Series AD (2)		November 24, 2018		(10,000	)		(250	)

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

(2) For further details, refer to Note 9 of our Condensed Financial Statements.

On February 23, 2018, we announced a normal course issuer bid (NCIB) to purchase up to 30 million of our common shares. The NCIB commenced on February 27, 2018 and will continue until February 26, 2019 or such earlier date as we complete the repurchase of all shares permitted under the bid. We determine the amount and timing of the purchases under the NCIB, subject to prior consultation with OSFI. Purchases may be made through the TSX, the NYSE and other designated exchanges and alternative Canadian trading systems. The price paid for repurchased shares is at the prevailing market price at the time of acquisition.

For the three-months ended January 31, 2019, the total number of common shares repurchased and cancelled under our NCIB program was approximately 3.7 million. The total cost of the shares repurchased was $348 million.

Since the inception of the current NCIB, the total number of common shares repurchased and cancelled under our NCIB program was approximately 9.7 million, at a cost of approximately $947 million.

On November 2, 2018, we issued 14 million Non-Cumulative 5-Year Rate Reset Preferred Shares Series BO at a price of $25 per share.

On November 24, 2018, we redeemed all 10 million Non-Cumulative First Preferred Shares Series AD at a price of $25 per share.

We have also announced our intention to redeem all 2.4 million Non-Cumulative Floating Rate First Preferred Shares Series AK, all 13.6 million Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AJ, and all 12 million Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AL, on February 24, 2019. The shares will be redeemed at a price of $25 per share.

Royal Bank of Canada        First Quarter 2019        41

Selected share data

	As at January 31, 2019
(Millions of Canadian dollars, except number of shares and as otherwise noted)	Number of shares (000s)			Amount			Dividends declared per share
Common shares issued (1)		1,435,505		$	17,601		$	0.98
Treasury shares – common shares		(432	)		(36	)
Common shares outstanding		1,435,073		$	17,565
Stock options and awards
Outstanding		9,435
Exercisable		4,589
First preferred shares issued
Non-cumulative Series W (2)		12,000		$	300		$	0.31
Non-cumulative Series AA		12,000			300			0.28
Non-cumulative Series AC		8,000			200			0.29
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			0.23
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			0.23
Non-cumulative Series BH (4)		6,000			150			0.31
Non-cumulative Series BI (4)		6,000			150			0.31
Non-cumulative Series BJ (4)		6,000			150			0.33
Non-cumulative Series BK (3), (4)		29,000			725			0.34
Non-cumulative Series BM (3), (4)		30,000			750			0.34
Non-cumulative Series BO (3), (4)		14,000			350			0.37
Non-cumulative Series C-2 (5)		20			31		US$	16.88
Preferred shares issued		255,020		$	6,406
Treasury shares – preferred shares (6)		7			–
Preferred shares outstanding		255,027		$	6,406
Dividends
Common				$	1,407
Preferred					74

(1) For further details about our capital management activity, refer to Note 9 of our Condensed Financial Statements.

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

(3) Dividend rate will reset every five years.

(4) Non-viable contingent capital (NVCC) instruments.

(5) Represents 815,400 depositary shares relating to preferred shares Series C-2. Each depositary share represents one-fortieth interest in a share of Series C-2.

(6) Positive amounts represent a short position in treasury shares.

As at February 15, 2019, the number of outstanding common shares were 1,435,383,084, net of treasury shares held of 207,046 and the number of stock options and awards were 9,347,472.

NVCC provisions require the conversion of the capital instrument into a variable number of common shares in the event that OSFI deems a bank to be non-viable or a federal or provincial government in Canada publicly announces that a bank has accepted or agreed to accept a capital injection. If a NVCC trigger event were to occur, our NVCC capital instruments, which are the preferred shares Series AZ, preferred shares Series BB, preferred shares Series BD, preferred shares Series BF, preferred shares Series BH, preferred shares Series BI, preferred shares Series BJ, preferred shares Series BK, preferred shares Series BM, preferred shares Series BO, subordinated debentures due on July 17, 2024, subordinated debentures due on September 29, 2026, subordinated debentures due on June 4, 2025, subordinated debentures due on January 20, 2026 and subordinated debentures due on January 27, 2026, would be converted into RBC common shares pursuant to an automatic conversion formula with a conversion price based on the greater of: (i) a contractual 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 2,820 million RBC common shares, in aggregate, which would represent a dilution impact of 66.28% based on the number of RBC common shares outstanding as at January 31, 2019.

42        Royal Bank of Canada        First Quarter 2019

Global systemically important banks (G-SIBs) 12 assessment indicators (1)

The BCBS and FSB use 12 indicators in the assessment methodology for determining the systemic importance of large global banks. As noted previously, we are designated as a G-SIB. The following table provides the 12 indicators used in the G-SIB assessment:

	As at
(Millions of Canadian dollars)	October 31 2018		October 31 2017
Cross-jurisdictional activity (2)
Cross-jurisdictional claims	$	612,292	$	507,554
Cross-jurisdictional liabilities		441,686		337,153
Size (3)
Total exposures as defined for use in the Basel III leverage ratio		1,467,438		1,331,641
Interconnectedness (4)
Intra-financial system assets		126,112		144,688
Intra-financial system liabilities		140,979		130,724
Securities outstanding		353,591		351,781
Substitutability/financial institution infrastructure (5)
Payment activity		42,917,581		37,964,746
Assets under custody		4,262,294		4,061,111
Underwritten transactions in debt and equity markets		245,992		235,431
Complexity (6)
Notional amount of over-the-counter derivatives		17,467,923		12,937,404
Trading and investment securities (7) (8)		55,855		53,781
Level 3 assets		2,549		3,574

(1) The G-SIBs indicators are prepared based on the methodology prescribed in BCBS guidelines published in July 2013 and instructions provided by BCBS in January 2019. The indicators are based on regulatory scope of consolidation, which excludes RBC Insurance subsidiaries. For our 2018 standalone G-SIB disclosure, please refer to our Regulatory Disclosures at rbc.com/investorrelations/.

(2) Represents a bank’s level of interaction outside its domestic jurisdiction.

(3) Represents the total on- and off- balance sheet exposures of the bank determined as per the Basel III leverage ratio rules before regulatory adjustments.

(4) Represents transactions with other financial institutions.

(5) Represents the extent to which the bank’s services could be substituted by other institutions.

(6) Includes the level of complexity and volume of a bank’s trading activities represented through derivatives, trading securities, investment securities and level 3 assets.

(7) Effective November 1, 2017, investment securities represent debt and equity securities at FVOCI and debt securities at amortized cost, net of the applicable allowance, under IFRS 9. Prior to November 1, 2017, investment securities represented available-for-sale securities and held-to-maturity securities, under IAS 39.

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

Q4 2018 vs. Q4 2017

During 2018, notional amounts for over-the-counter derivatives increased mainly due to higher trading activity on interest rate swaps and forward rate agreements. Total exposures as defined for use in the Basel III leverage ratio increased due to client activity in our assets purchased under reverse repurchase agreements and securities borrowed, and volume growth in loans (net of allowance for loan losses). Other movements from the prior year primarily reflect normal changes in business activity and the impact of foreign currency translation.

Capital, liquidity, and other regulatory developments

Pillar 3 disclosure requirements

In December 2018, the BCBS issued its third and final phase of the Pillar 3 disclosure requirements, Pillar 3 disclosure requirements – updated framework. This phase incorporates revisions and additions to the Pillar 3 framework arising from the finalization of the Basel III reforms in December 2017, such as additional disclosure requirements comparing RWA as determined by banks’ internal models against results based on the standardized approach, and new disclosure requirements on asset encumbrance and capital distribution constraints. The phase three requirements, together with the phase one and two disclosure requirements released in January 2015 and March 2017, respectively, complete the Pillar 3 framework.

The phase one requirements were effective for us in the fourth quarter of 2018. At this time, OSFI has not yet released the implementation date for the BCBS phase two and three disclosure requirements. We expect consultations to begin in mid-2019.

Minimum Capital Requirements for Market Risk

On January 19, 2019, the BCBS released its final standards on the Minimum capital requirement for market risk, which replaces an earlier version published in January 2016. The revisions refined the standardized approach framework, clarified the scope of exposures subject to market risk capital requirements, revised the assessment process for evaluating the adequacy of internal risk management models, and revised the requirements for identifying risk factors eligible for internal modelling. The BCBS expects member jurisdictions to implement these revisions by 2022. OSFI has not yet released their final guidance and expected implementation date.

Domestic Stability Buffer

In December 2018, OSFI announced that the DSB will be increased from 1.5% to 1.75% of total RWA, effective April 30, 2019. This change arose from OSFI’s semi-annual review of the DSB, based on its ongoing monitoring of federally regulated financial institutions as well as system-wide and industry developments. We do not anticipate any challenges in meeting this requirement by the effective date.

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 and Legal and regulatory environment risk sections of our 2018

Royal Bank of Canada        First Quarter 2019        43

Annual Report and the Economic, market and regulatory review and outlook section of this Q1 2019 Report to Shareholders. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of our 2018 Annual Report and the Risk management and Capital management sections of this Q1 2019 Report to Shareholders.

Accounting and control matters

Summary of accounting policies and estimates

Our Condensed Financial Statements are presented in compliance with International Accounting Standard (IAS) 34 Interim Financial Reporting. Our significant accounting policies are described in Note 2 of our audited 2018 Annual Consolidated Financial Statements and our Q1 2019 Condensed Financial Statements.

Changes in accounting policies and disclosures

Changes in accounting policies

During the first quarter, we adopted IFRS 15 Revenue from Contracts with Customers (IFRS 15). As permitted by the transition provisions of IFRS 15, we elected not to restate comparative period results; accordingly, all comparative period information prior to November 1, 2018 is presented in accordance with our previous accounting policies, as described in our 2018 Annual Report. As a result of the adoption of IFRS 15, we adjusted our opening retained earnings as at November 1, 2018 to align the recognition of certain fees with the transfer of the performance obligations. Refer to Note 2 of our Condensed Financial Statements for details of these changes.

Future changes in accounting policies and disclosures

Future changes in accounting policies and disclosures that are not yet effective for us are described in Note 2 of our audited 2018 Annual Consolidated Financial Statements.

Controls and procedures

Disclosure controls and procedures

As of January 31, 2019, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the 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 Financial Officer concluded that our disclosure controls and procedures were effective as of January 31, 2019.

Internal control over financial reporting

No changes were made in our internal control over financial reporting during the quarter ended January 31, 2019 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 11 and 26 of our audited 2018 Annual Consolidated Financial Statements.

44        Royal Bank of Canada        First Quarter 2019

EDTF recommendations index

We aim to present transparent, high-quality risk disclosures by providing disclosures in our 2018 Annual Report, Q1 2019 Report to Shareholders (RTS), Supplementary Financial Information package (SFI), and Pillar 3 Report, in accordance with recommendations from the Financial Stability Board’s (FSB) Enhanced Disclosure Task Force (EDTF). Information within the SFI and Pillar 3 Report is not and should not be considered incorporated by reference into our Q1 2019 Report to Shareholders.

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	44	112	1
	2	Define risk terminology and measures		50, 52-55 213-214	–
	3	Top and emerging risks		50-51	–
	4	New regulatory ratios	38-39	91-93	–
Risk governance, risk management and business model	5	Risk management organization		50, 52-55	–
	6	Risk culture		52-55	–
	7	Risk in the context of our business activities		98	–
	8	Stress testing		53-54, 67	–
Capital adequacy and risk-weighted assets (RWA)	9	Minimum Basel III capital ratios and Domestic systemically important bank surcharge	39	91-93	–
	10	Composition of capital and reconciliation of the accounting balance sheet to the regulatory balance sheet		–	20-23
	11	Flow statement of the movements in regulatory capital		–	24
	12	Capital strategic planning		90-93	–
	13	RWA by business segments		–	26
	14	Analysis of capital requirement, and related measurement model information		56-59	25,*
	15	RWA credit risk and related risk measurements		–	*
	16	Movement of risk-weighted assets by risk type		–	26
	17	Basel back-testing		53, 56-57	40
Liquidity	18	Quantitative and qualitative analysis of our liquidity reserve	31-32	73-75, 79-80	–
Funding	19	Encumbered and unencumbered assets by balance sheet category, and contractual obligations for rating downgrades	32-33,35	75,78	–
	20	Maturity analysis of consolidated total assets, liabilities and off-balance sheet commitments analyzed by remaining contractual maturity at the balance sheet date	37-38	80-81	–
	21	Sources of funding and funding strategy	33-34	75-77	–
Market risk	22	Relationship between the market risk measures for trading and non-trading portfolios and the balance sheet	30-31	71-72	–
	23	Decomposition of market risk factors	27-30	67-70	–
	24	Market risk validation and back-testing		67	–
	25	Primary risk management techniques beyond reported risk measures and parameters		67-70	–
Credit risk	26	Bank’s credit risk profile Quantitative summary of aggregate credit risk exposures that reconciles to the balance sheet	21-27 58-61	56-66, 159-165 106-111	29-40,* *
	27	Policies for identifying impaired loans		57-59, 101-102, 123-126, 128-129	–
	28	Reconciliation of the opening and closing balances of impaired loans and impairment allowances during the year		–	31,36
	29	Quantification of gross notional exposure for OTC derivatives or exchange-traded derivatives		60	42
	30	Credit risk mitigation, including collateral held for all sources of credit risk		59	39
Other	31	Other risk types		83-90	–
	32	Publicly known risk events		86-87, 202-203	–

* These disclosure requirements are satisfied or partially satisfied by disclosures provided in our Pillar 3 Report for the quarter ended January 31, 2019 and for the year ended October 31, 2018.

Royal Bank of Canada        First Quarter 2019        45

Interim Condensed Consolidated Financial Statements (unaudited)

Interim Condensed Consolidated Balance Sheets (unaudited)

	As at
(Millions of Canadian dollars)	January 31 2019			October 31 2018
Assets
Cash and due from banks	$	40,033		$	30,209
Interest-bearing deposits with banks		38,653			36,471
Securities
Trading		138,173			128,258
Investment, net of applicable allowance (Note 4)		97,659			94,608
		235,832			222,866
Assets purchased under reverse repurchase agreements and securities borrowed		297,660			294,602
Loans (Note 5)
Retail		401,767			399,452
Wholesale		191,114			180,278
		592,881			579,730
Allowance for loan losses (Note 5)		(3,061	)		(2,912	)
		589,820			576,818
Segregated fund net assets		1,443			1,368
Other
Customers’ liability under acceptances		16,750			15,641
Derivatives		84,816			94,039
Premises and equipment		2,918			2,832
Goodwill		11,149			11,137
Other intangibles		4,711			4,687
Other assets		42,422			44,064
		162,766			172,400
Total assets	$	1,366,207		$	1,334,734
Liabilities and equity
Deposits (Note 6)
Personal	$	280,171		$	270,154
Business and government		540,234			534,371
Bank		32,159			32,521
		852,564			837,046
Segregated fund net liabilities		1,443			1,368
Other
Acceptances		16,781			15,662
Obligations related to securities sold short		33,242			32,247
Obligations related to assets sold under repurchase agreements and securities loaned		224,529			206,814
Derivatives		81,766			90,238
Insurance claims and policy benefit liabilities		10,512			10,000
Other liabilities		55,465			52,273
		422,295			407,234
Subordinated debentures		9,255			9,131
Total liabilities		1,285,557			1,254,779
Equity attributable to shareholders
Preferred shares (Note 9)		6,406			6,309
Common shares (Note 9)		17,565			17,617
Retained earnings		52,208			51,112
Other components of equity		4,374			4,823
		80,553			79,861
Non-controlling interests		97			94
Total equity		80,650			79,955
Total liabilities and equity	$	1,366,207		$	1,334,734

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

46        Royal Bank of Canada        First Quarter 2019

Interim Condensed Consolidated Statements of Income (unaudited)

	For the three months ended
	January 31		January 31
(Millions of Canadian dollars, except per share amounts)	2019		2018
Interest and dividend income (Note 3)
Loans	$	6,160	$	4,973
Securities		1,696		1,354
Assets purchased under reverse repurchase agreements and securities borrowed		2,148		1,108
Deposits and other		145		105
		10,149		7,540
Interest expense (Note 3)
Deposits and other		3,225		1,987
Other liabilities		1,948		1,034
Subordinated debentures		92		74
		5,265		3,095
Net interest income		4,884		4,445
Non-interest income
Insurance premiums, investment and fee income		1,579		1,144
Trading revenue		358		318
Investment management and custodial fees		1,450		1,325
Mutual fund revenue		873		885
Securities brokerage commissions		342		355
Service charges		468		440
Underwriting and other advisory fees		345		541
Foreign exchange revenue, other than trading		249		281
Card service revenue		282		257
Credit fees		315		328
Net gains on investment securities (Note 4)		46		39
Share of profit in joint ventures and associates		15		25
Other		383		445
		6,705		6,383
Total revenue		11,589		10,828
Provision for credit losses (Notes 4 and 5)		514		334
Insurance policyholder benefits, claims and acquisition expense		1,225		836
Non-interest expense
Human resources (Note 7)		3,643		3,502
Equipment		431		372
Occupancy		397		379
Communications		240		224
Professional fees		305		281
Amortization of other intangibles		290		261
Other		606		592
		5,912		5,611
Income before income taxes		3,938		4,047
Income taxes		766		1,035
Net income	$	3,172	$	3,012
Net income attributable to:
Shareholders	$	3,170	$	3,001
Non-controlling interests		2		11
	$	3,172	$	3,012
Basic earnings per share (in dollars) (Note 10)	$	2.15	$	2.02
Diluted earnings per share (in dollars) (Note 10)		2.15		2.01
Dividends per common share (in dollars)		0.98		0.91

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

Royal Bank of Canada        First Quarter 2019        47

Interim Condensed Consolidated Statements of Comprehensive Income (unaudited)

	For the three months ended
(Millions of Canadian dollars)	January 31 2019			January 31 2018
Net income	$	3,172		$	3,012
Other comprehensive income (loss), net of taxes
Items that will be reclassified subsequently to income:
Net change in unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income		(1	)		(24	)
Provision for credit losses recognized in income		(1	)		15
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income		(29	)		(28	)
		(31	)		(37	)
Foreign currency translation adjustments
Unrealized foreign currency translation gains (losses)		35			(2,006	)
Net foreign currency translation gains (losses) from hedging activities		(66	)		658
Reclassification of losses (gains) on foreign currency translation to income		2			–
Reclassification of losses (gains) on net investment hedging activities to income		2			–
		(27	)		(1,348	)
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges		(316	)		424
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income		(74	)		(153	)
		(390	)		271
Items that will not be reclassified subsequently to income:
Remeasurements of employee benefit plans (Note 7)		(394	)		49
Net fair value change due to credit risk on financial liabilities designated as at fair value through profit or loss		163			(18	)
Net gains (losses) on equity securities designated at fair value through other comprehensive income		7			(2	)
		(224	)		29
Total other comprehensive income (loss), net of taxes		(672	)		(1,085	)
Total comprehensive income (loss)	$	2,500		$	1,927
Total comprehensive income attributable to:
Shareholders	$	2,497		$	1,919
Non-controlling interests		3			8
	$	2,500		$	1,927

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

	For the three months ended
(Millions of Canadian dollars)	January 31 2019			January 31 2018
Income taxes on other comprehensive income
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income	$	(4	)	$	42
Provision for credit losses recognized in income		–			(4	)
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income		(17	)		(15	)
Unrealized foreign currency translation gains (losses)		1			(5	)
Net foreign currency translation gains (losses) from hedging activities		(24	)		219
Reclassification of losses (gains) on net investment hedging activities to income		1			–
Net gains (losses) on derivatives designated as cash flow hedges		(113	)		183
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income		(27	)		(86	)
Remeasurements of employee benefit plans		(125	)		20
Net fair value change due to credit risk on financial liabilities designated as at fair value through profit or loss		59			(7	)
Net gains (losses) on equity securities designated at fair value through other comprehensive income		(1	)		(1	)
Total income tax expenses (recoveries)	$	(250	)	$	346

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

48        Royal Bank of Canada        First Quarter 2019

Interim Condensed Consolidated Statements of Changes in Equity (unaudited)

	For the three months ended January 31, 2019
																Other components of equity
(Millions of Canadian dollars)	Preferred shares			Common shares			Treasury shares – preferred			Treasury shares – common			Retained earnings			Available- for-sale securities			FVOCI securities and loans			Foreign currency translation			Cash flow hedges			Total other components of equity			Equity attributable to shareholders			Non-controlling interests			Total equity
Balance at beginning of period	$	6,306		$	17,635		$	3		$	(18	)	$	51,112					$	(12	)	$	4,147		$	688		$	4,823		$	79,861		$	94		$	79,955
Transition adjustment (Note 2)		–			–			–			–			(70	)					–			–			–			–			(70	)		–			(70	)
Adjusted balance at beginning of period	$	6,306		$	17,635		$	3		$	(18	)	$	51,042					$	(12	)	$	4,147		$	688		$	4,823		$	79,791		$	94		$	79,885
Changes in equity
Issues of share capital		350			11			–			–			–						–			–			–			–			361			–			361
Common shares purchased for cancellation		–			(45	)		–			–			(303	)					–			–			–			–			(348	)		–			(348	)
Redemption of preferred shares		(250	)		–			–			–			–									–			–			–			(250	)		–			(250	)
Sales of treasury shares		–			–			82			1,529			–						–			–			–			–			1,611			–			1,611
Purchases of treasury shares		–			–			(85	)		(1,547	)		–						–			–			–			–			(1,632	)		–			(1,632	)
Share-based compensation awards		–			–			–			–			2						–			–			–			–			2			–			2
Dividends on common shares		–			–			–			–			(1,407	)					–			–			–			–			(1,407	)		–			(1,407	)
Dividends on preferred shares and other		–			–			–			–			(74	)					–			–			–			–			(74	)		–			(74	)
Other		–			–			–			–			2						–			–			–			–			2			–			2
Net income		–			–			–			–			3,170						–			–			–			–			3,170			2			3,172
Total other comprehensive income (loss), net of taxes		–			–			–			–			(224	)					(31	)		(28	)		(390	)		(449	)		(673	)		1			(672	)
Balance at end of period	$	6,406		$	17,601		$	–		$	(36	)	$	52,208					$	(43	)	$	4,119		$	298		$	4,374		$	80,553		$	97		$	80,650
	For the three months ended January 31, 2018
																Other components of equity
(Millions of Canadian dollars)	Preferred shares			Common shares			Treasury shares – preferred			Treasury shares – common			Retained earnings			Available- for-sale securities			FVOCI securities and loans			Foreign currency translation			Cash flow hedges			Total other components of equity			Equity attributable to shareholders			Non-controlling interests			Total equity
Balance at beginning of period	$	6,413		$	17,730		$	–		$	(27	)	$	45,359		$	378					$	3,545		$	431		$	4,354		$	73,829		$	599		$	74,428
Transition adjustment		–			–			–			–			(558	)		(378	)	$	299			–			–			(79	)		(637	)		–			(637	)
Adjusted balance at beginning of period	$	6,413		$	17,730		$	–		$	(27	)	$	44,801		$	–		$	299		$	3,545		$	431		$	4,275		$	73,192		$	599		$	73,791
Changes in equity
Issues of share capital		–			30			–			–			–						–			–			–			–			30			–			30
Common shares purchased for cancellation		–			(113	)		–			–			(810	)					–			–			–			–			(923	)		–			(923	)
Redemption of preferred shares		(107	)		–			–			–			2						–			–			–			–			(105	)		–			(105	)
Sales of treasury shares		–			–			69			1,425			–						–			–			–			–			1,494			–			1,494
Purchases of treasury shares		–			–			(69	)		(1,405	)		–						–			–			–			–			(1,474	)		–			(1,474	)
Share-based compensation awards		–			–			–			–			(3	)					–			–			–			–			(3	)		–			(3	)
Dividends on common shares		–			–			–			–			(1,319	)					–			–			–			–			(1,319	)		–			(1,319	)
Dividends on preferred shares and other		–			–			–			–			(72	)					–			–			–			–			(72	)		(18	)		(90	)
Other		–			–			–			–			135						(138	)		–			–			(138	)		(3	)		(1	)		(4	)
Net income		–			–			–			–			3,001						–			–			–			–			3,001			11			3,012
Total other comprehensive income (loss), net of taxes		–			–			–			–			29						(37	)		(1,345	)		271			(1,111	)		(1,082	)		(3	)		(1,085	)
Balance at end of period	$	6,306		$	17,647		$	–		$	(7	)	$	45,764					$	124		$	2,200		$	702		$	3,026		$	72,736		$	588		$	73,324

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

Royal Bank of Canada        First Quarter 2019        49

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

	For the three months ended
(Millions of Canadian dollars)	January 31 2019			January 31 2018
Cash flows from operating activities
Net income	$	3,172		$	3,012
Adjustments for non-cash items and others
Provision for credit losses		514			334
Depreciation		150			135
Deferred income taxes		(162	)		271
Amortization and impairment of other intangibles		293			261
Net changes in investments in joint ventures and associates		(15	)		(22	)
Losses (Gains) on investment securities		(49	)		(43	)
Adjustments for net changes in operating assets and liabilities
Insurance claims and policy benefit liabilities		512			195
Net change in accrued interest receivable and payable		86			(132	)
Current income taxes		(159	)		(1,970	)
Derivative assets		9,223			(10,489	)
Derivative liabilities		(8,472	)		12,092
Trading securities		(9,915	)		1,194
Loans, net of securitizations		(13,151	)		(3,579	)
Assets purchased under reverse repurchase agreements and securities borrowed		(3,058	)		(38,789	)
Deposits, net of securitizations		15,518			10,414
Obligations related to assets sold under repurchase agreements and securities loaned		17,715			40,235
Obligations related to securities sold short		995			396
Brokers and dealers receivable and payable		(478	)		(166	)
Other		(1,492	)		1,225
Net cash from (used in) operating activities		11,227			14,574
Cash flows from investing activities
Change in interest-bearing deposits with banks		(2,182	)		(4,607	)
Proceeds from sale of investment securities		3,285			5,217
Proceeds from maturity of investment securities		15,019			7,132
Purchases of investment securities		(20,668	)		(13,342	)
Net acquisitions of premises and equipment and other intangibles		(561	)		(357	)
Net cash from (used in) investing activities		(5,107	)		(5,957	)
Cash flows from financing activities
Issue of common shares		9			23
Common shares purchased for cancellation		(348	)		(923	)
Issue of preferred shares		350			–
Redemption of preferred shares		(250	)		(105	)
Sales of treasury shares		1,611			1,494
Purchases of treasury shares		(1,632	)		(1,474	)
Dividends paid		(1,483	)		(1,396	)
Dividends/distributions paid to non-controlling interests		–			(18	)
Change in short-term borrowings of subsidiaries		4,860			(1	)
Net cash from (used in) financing activities		3,117			(2,400	)
Effect of exchange rate changes on cash and due from banks		587			(136	)
Net change in cash and due from banks		9,824			6,081
Cash and due from banks at beginning of period (1)		30,209			28,407
Cash and due from banks at end of period (1)	$	40,033		$	34,488
Cash flows from operating activities include:
Amount of interest paid	$	4,748		$	3,001
Amount of interest received		9,660			7,255
Amount of dividends received		493			410
Amount of income taxes paid		791			3,118

(1) We are required to maintain balances with central banks and other regulatory authorities. The total balances were $2.3 billion as at January 31, 2019 (October 31, 2018 – $2.4 billion; January 31, 2018 – $2.5 billion; October 31, 2017 – $2.3 billion).

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

50        Royal Bank of Canada        First Quarter 2019

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 2018 Annual Consolidated Financial Statements and the accompanying notes included on pages 113 to 211 in our 2018 Annual Report. Tabular information is stated in millions of Canadian dollars, except per share amounts and percentages. On February 21, 2019, 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 2018 Annual Consolidated Financial Statements. Our significant accounting policies and future changes in accounting policies and disclosures that are not yet effective for us are described in Note 2 of our audited 2018 Annual Consolidated Financial Statements.

Changes in accounting policies

During the first quarter, we adopted IFRS 15 Revenue from Contracts with Customers (IFRS 15). As permitted by the transition provisions of IFRS 15, we elected not to restate comparative period results; accordingly, all comparative period information is presented in accordance with our previous accounting policies, as described in our 2018 Annual Report. As a result of the adoption of IFRS 15, we reduced our opening retained earnings by $70 million, on an after tax basis as at November 1, 2018 (the date of initial application), to align the recognition of certain fees with the transfer of the performance obligations.

Commissions and fees

Commission and fees primarily relate to Investment management and custodial fees, Mutual fund revenue, Securities brokerage commissions, Services charges, Underwriting and other advisory fees, Card service revenue and Credit fees, and are recognized based on the applicable service contracts with customers.

Investment management and custodial fees and Mutual fund revenue are generally calculated as a percentage of daily or period-end net asset values based on the terms of the contract with customers and are received monthly, quarterly, semi-annually or annually, depending on the terms of the contract. Investment management and custodial fees are generally derived from assets under management (AUM) when our clients solicit the investment capabilities of an investment manager or from assets under administration (AUA) where the investment strategy is directed by the client or a designated third party manager. Mutual fund revenue is derived from the daily net asset value (NAV) of the mutual funds. Investment management and custodial fees and Mutual fund revenue are recognized over time when the service is provided to the customer provided that it is highly probable that a significant reversal in the amount of revenue recognized will not occur.

Commissions earned on Securities brokerage services and Service charges that are related to the provision of specific transaction type services are recognized when the service is fulfilled. Where services are provided over time, revenue is recognized as the services are provided.

Underwriting and other advisory fees primarily relate to underwriting of new issuances of debt or equity and various advisory services. Underwriting fees are generally expressed as a percentage of the funds raised through issuance and are recognized when the service has been completed. Advisory fees vary depending on the scope and type of engagement and can be fixed in nature or contingent on a future event. Advisory fees are recognized over the period in which the service is provided and are recognized only to the extent that it is highly probable that a significant reversal in the amount of revenue will not occur.

Card service revenue primarily includes interchange revenue and annual card fees. Interchange revenue is calculated as a fixed percentage of the transaction amount and recognized when the card transaction is settled. Annual card fees are fixed fees and are recognized over a twelve month period.

Credit fees are primarily earned for arranging syndicated loans and making credit available on undrawn facilities. The timing of the recognition of credit fees varies based on the nature of the services provided.

When service fees and other costs are incurred in relation to commissions and fees earned, we record these costs on a gross basis in either Non-interest expense – Other or Non-interest expense – Human resources based on our assessment of whether we have primary responsibility to fulfill the contract with the customer and have discretion in establishing the price for the commissions and fees earned, which may require judgment.

Royal Bank of Canada        First Quarter 2019        51

Note 3    Fair value of financial instruments

Carrying value and fair value of financial instruments

The following tables provide a comparison of the carrying and fair values for each classification of financial instruments. Embedded derivatives are presented on a combined basis with the host contracts. Refer to Note 2 and Note 3 of our audited 2018 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 January 31, 2019
	Carrying value and fair value									Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as FVTPL			Financial instruments designated as FVTPL		Financial instruments classified as FVOCI		Financial instruments designated as FVOCI		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Interest-bearing deposits with banks	$	–		$	22,856	$	–	$	–	$	15,797	$	15,797	$	38,653	$	38,653
Securities
Trading		130,542			7,631		–		–		–		–		138,173		138,173
Investment, net of applicable allowance		–			–		51,366		529		45,764		45,546		97,659		97,441
		130,542			7,631		51,366		529		45,764		45,546		235,832		235,614
Assets purchased under reverse repurchase agreements and securities borrowed		223,953			–		–		–		73,707		73,707		297,660		297,660
Loans, net of applicable allowance
Retail		118			194		95		–		399,325		397,339		399,732		397,746
Wholesale		6,671			1,643		463		–		181,311		179,595		190,088		188,372
		6,789			1,837		558		–		580,636		576,934		589,820		586,118
Other
Derivatives		84,816			–		–		–		–		–		84,816		84,816
Other assets (1)		1,350			–		–		–		45,372		45,372		46,722		46,722
Financial liabilities
Deposits
Personal	$	146		$	15,088					$	264,937	$	264,491	$	280,171	$	279,725
Business and government (2)		12			110,561						429,661		430,314		540,234		540,887
Bank (3)		–			5,942						26,217		26,256		32,159		32,198
		158			131,591						720,815		721,061		852,564		852,810
Other
Obligations related to securities sold short		33,242			–						–		–		33,242		33,242
Obligations related to assets sold under repurchase agreements and securities loaned		–			218,297						6,232		6,234		224,529		224,531
Derivatives		81,766			–						–		–		81,766		81,766
Other liabilities (4)		(1,113	)		23						60,616		60,578		59,526		59,488
Subordinated debentures		–			–						9,255		9,416		9,255		9,416

52        Royal Bank of Canada        First Quarter 2019

Note 3    Fair value of financial instruments (continued)

	As at October 31, 2018
	Carrying value and fair value									Carrying value		Fair value
(Millions of Canadian dollars)	Financial instruments classified as FVTPL			Financial instruments designated as FVTPL		Financial instruments classified as FVOCI		Financial instruments designated as FVOCI		Financial instruments measured at amortized cost		Financial instruments measured at amortized cost		Total carrying amount		Total fair value
Financial assets
Interest-bearing deposits with banks	$	–		$	20,274	$	–	$	–	$	16,197	$	16,197	$	36,471	$	36,471
Securities
Trading		121,031			7,227		–		–		–		–		128,258		128,258
Investment, net of applicable allowance		–			–		48,093		406		46,109		45,367		94,608		93,866
		121,031			7,227		48,093		406		46,109		45,367		222,866		222,124
Assets purchased under reverse repurchase agreements and securities borrowed		219,108			–		–		–		75,494		75,490		294,602		294,598
Loans, net of applicable allowance
Retail		69			190		94		–		397,102		394,051		397,455		394,404
Wholesale		7,129			1,540		458		–		170,236		168,087		179,363		177,214
		7,198			1,730		552		–		567,338		562,138		576,818		571,618
Other
Derivatives		94,039			–		–		–		–		–		94,039		94,039
Other assets (1)		1,373			–		–		–		46,205		46,205		47,578		47,578
Financial liabilities
Deposits
Personal	$	150		$	14,602					$	255,402	$	255,115	$	270,154	$	269,867
Business and government (2)		(11	)		103,446						430,936		431,158		534,371		534,593
Bank (3)		–			7,072						25,449		25,462		32,521		32,534
		139			125,120						711,787		711,735		837,046		836,994
Other
Obligations related to securities sold short		32,247			–						–		–		32,247		32,247
Obligations related to assets sold under repurchase agreements and securities loaned		–			201,839						4,975		4,976		206,814		206,815
Derivatives		90,238			–						–		–		90,238		90,238
Other liabilities (4)		(1,434	)		18						54,917		54,880		53,501		53,464
Subordinated debentures		–			–						9,131		9,319		9,131		9,319

(1) Includes Customers’ liability under acceptances and financial instruments recognized in Other assets.

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

(3) Bank deposits refer to deposits from regulated banks and central banks.

(4) Includes Acceptances and financial instruments recognized in Other liabilities.

Royal Bank of Canada        First Quarter 2019        53

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

	As at
	January 31, 2019																	October 31, 2018
	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	$	–	$	22,856		$	–		$	22,856		$			$	22,856		$	–	$	20,274		$	–		$	20,274		$			$	20,274
Securities
Trading
Issued or guaranteed
Canadian government debt (1)
Federal		11,168		5,725			–			16,893						16,893			8,342		6,231			–			14,573						14,573
Provincial and municipal		–		11,679			–			11,679						11,679			–		11,350			–			11,350						11,350
U.S. state, municipal and agencies debt (1)		979		43,329			65			44,373						44,373			2,068		31,030			66			33,164						33,164
Other OECD government debt (2)		2,941		5,917			–			8,858						8,858			1,151		9,018			–			10,169						10,169
Mortgage-backed securities (1)		–		965			–			965						965			–		1,001			–			1,001						1,001
Asset-backed securities
Non-CDO securities (3)		–		797			9			806						806			–		1,023			110			1,133						1,133
Corporate debt and other debt		–		20,900			22			20,922						20,922			2		22,303			21			22,326						22,326
Equities		30,316		2,285			1,076			33,677						33,677			30,847		2,547			1,148			34,542						34,542
		45,404		91,597			1,172			138,173						138,173			42,410		84,503			1,345			128,258						128,258
Investment
Issued or guaranteed
Canadian government debt (1)
Federal		–		527			–			527						527			–		238			–			238						238
Provincial and municipal		–		2,281			–			2,281						2,281			–		1,554			–			1,554						1,554
U.S. state, municipal and agencies debt (1)		34		18,142			–			18,176						18,176			–		18,136			–			18,136						18,136
Other OECD government debt		–		1,964			–			1,964						1,964			–		1,470			–			1,470						1,470
Mortgage-backed securities (1)		–		2,226			27			2,253						2,253			–		2,174			–			2,174						2,174
Asset-backed securities
CDO		–		6,424			–			6,424						6,424			–		6,239			–			6,239						6,239
Non-CDO securities		–		891			–			891						891			–		863			–			863						863
Corporate debt and other debt		–		18,715			135			18,850						18,850			–		17,227			192			17,419						17,419
Equities		41		217			247			505						505			42		103			237			382						382
Loan substitute securities		–		24			–			24						24			–		24			–			24						24
		75		51,411			409			51,895						51,895			42		48,028			429			48,499						48,499
Assets purchased under reverse repurchase agreements and securities borrowed		–		223,953			–			223,953						223,953			–		219,108			–			219,108						219,108
Loans		–		8,358			826			9,184						9,184			–		8,929			551			9,480						9,480
Other
Derivatives
Interest rate contracts		–		35,044			209			35,253						35,253			1		33,862			222			34,085						34,085
Foreign exchange contracts		–		33,819			42			33,861						33,861			–		43,253			53			43,306						43,306
Credit derivatives		–		134			–			134						134			–		38			–			38						38
Other contracts		4,720		11,656			159			16,535						16,535			5,868		11,654			296			17,818						17,818
Valuation adjustments		–		(441	)		10			(431	)					(431	)		–		(631	)		6			(625	)					(625	)
Total gross derivatives		4,720		80,212			420			85,352						85,352			5,869		88,176			577			94,622						94,622
Netting adjustments													(536	)		(536	)													(583	)		(583	)
Total derivatives																84,816																	94,039
Other assets		1,105		184			61			1,350						1,350			1,020		288			65			1,373						1,373
	$	51,304	$	478,571		$	2,888		$	532,763		$	(536	)	$	532,227		$	49,341	$	469,306		$	2,967		$	521,614		$	(583	)	$	521,031
Financial Liabilities
Deposits
Personal	$	–	$	15,143		$	91		$	15,234		$			$	15,234		$	–	$	14,362		$	390		$	14,752		$			$	14,752
Business and government		–		110,573			–			110,573						110,573			–		103,440			(5	)		103,435						103,435
Bank		–		5,942			–			5,942						5,942			–		7,072			–			7,072						7,072
Other
Obligations related to securities sold short		18,124		15,118			–			33,242						33,242			17,732		14,515			–			32,247						32,247
Obligations related to assets sold under repurchase agreements and securities loaned		–		218,297			–			218,297						218,297			–		201,839			–			201,839						201,839
Derivatives
Interest rate contracts		–		29,658			759			30,417						30,417			–		29,620			726			30,346						30,346
Foreign exchange contracts		–		34,285			30			34,315						34,315			–		41,836			32			41,868						41,868
Credit derivatives		–		208			–			208						208			–		94			–			94						94
Other contracts		3,135		13,674			261			17,070						17,070			4,369		13,730			380			18,479						18,479
Valuation adjustments		–		295			(3	)		292						292			–		29			5			34						34
Total gross derivatives		3,135		78,120			1,047			82,302						82,302			4,369		85,309			1,143			90,821						90,821
Netting adjustments													(536	)		(536	)													(583	)		(583	)
Total derivatives																81,766																	90,238
Other liabilities		262		(1,404	)		52			(1,090	)					(1,090	)		170		(1,654	)		68			(1,416	)					(1,416	)
	$	21,521	$	441,789		$	1,190		$	464,500		$	(536	)	$	463,964		$	22,271	$	424,883		$	1,596		$	448,750		$	(583	)	$	448,167

(1) As at January 31, 2019, residential and commercial mortgage-backed securities (MBS) included in all fair value levels of trading securities were $28,175 million and $nil (October 31, 2018 – $16,776 million and $nil), respectively, and in all fair value levels of Investment securities were $4,961 million and $1,450 million (October 31, 2018 – $4,713 million and $1,348 million), respectively.

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

(3) CDO stands for collateralized debt obligations.

54        Royal Bank of Canada        First Quarter 2019

Note 3    Fair value of financial instruments (continued)

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

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 the valuation of these Level 3 financial instruments.

During the three months ended January 31, 2019, there were no significant changes made to the valuation techniques and ranges and weighted averages of unobservable inputs used in the determination of fair value of Level 3 financial instruments. As at January 31, 2019, the impacts of adjusting one or more of the unobservable inputs by reasonably possible alternative assumptions did not change significantly from the impacts disclosed in our 2018 Annual Consolidated Financial Statements.

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

	For the three months ended January 31, 2019
(Millions of Canadian dollars)	Fair value at beginning of period			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in OCI (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 at end of period			Changes in unrealized gains (losses) included in earnings for assets and liabilities for positions still held
Assets
Securities
Trading
Issued or guaranteed
U.S. state, municipal and agencies debt	$	66		$	(1	)	$	–		$	–		$	–		$	–		$	–		$	65		$	–
Asset-backed securities
Non-CDO securities		110			15			–			–			(116	)		–			–			9			1
Corporate debt and other debt		21			1			–			–			–			–			–			22			–
Equities		1,148			(18	)		–			80			(143	)		9			–			1,076			(5	)
		1,345			(3	)		–			80			(259	)		9			–			1,172			(4	)
Investment
Mortgage-backed securities		–			–			–			27			–			–			–			27			n.a.
Corporate debt and other debt		192			(3	)		2			–			(56	)		–			–			135			n.a.
Equities		237			–			10			–			–			–			–			247			n.a.
Loan substitute securities		–			–			–			–			–			–			–			–			n.a.
		429			(3	)		12			27			(56	)		–			–			409			n.a.
Loans		551			17			1			264			(2	)		–			(5	)		826			16
Other
Net derivative balances (3)
Interest rate contracts		(504	)		(68	)		–			–			40			2			(20	)		(550	)		(6	)
Foreign exchange contracts		21			(7	)		6			2			–			(1	)		(9	)		12			(1	)
Credit derivatives		–			–			–			–			–			–			–			–			–
Other contracts		(84	)		45			–			(9	)		(23	)		(17	)		(14	)		(102	)		60
Valuation adjustments		1			–			–			–			12			–			–			13			–
Other assets		65			–			–			–			(4	)		–			–			61			–
	$	1,824		$	(19	)	$	19		$	364		$	(292	)	$	(7	)	$	(48	)	$	1,841		$	65
Liabilities
Deposits
Personal	$	(390	)	$	(30	)	$	(1	)	$	(9	)	$	5		$	(18	)	$	352		$	(91	)	$	2
Business and government		5			–			–			–			–			–			(5	)		–			–
Other
Other liabilities		(68	)		–			–			–			16			–			–			(52	)		1
	$	(453	)	$	(30	)	$	(1	)	$	(9	)	$	21		$	(18	)	$	347		$	(143	)	$	3

Royal Bank of Canada        First Quarter 2019        55

	For the three months ended January 31, 2018
(Millions of Canadian dollars)	Fair value at beginning of period			Total realized/ unrealized gains (losses) included in earnings			Total unrealized gains (losses) included in OCI (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 at end of period			Changes in unrealized gains (losses) included in earnings for assets and liabilities for positions still held
Assets
Securities
Trading
Issued or guaranteed
U.S. state, municipal and agencies debt	$	508		$	4		$	(13	)	$	–		$	(312	)	$	–		$	–		$	187		$	(5	)
Asset-backed securities
Non-CDO securities		196			12			(6	)		–			(6	)		–			–			196			10
Corporate debt and other debt		30			(1	)		–			–			–			–			–			29			(1	)
Equities		923			(68	)		(21	)		179			(40	)		4			(2	)		975			(43	)
		1,657			(53	)		(40	)		179			(358	)		4			(2	)		1,387			(39	)
Investment
Mortgage-backed securities		–			–			–			–			–			–			–			–			n.a.
Corporate debt and other debt		29			(5	)		4			–			–			–			–			28			n.a.
Equities		217			–			26			–			3			–			–			246			n.a.
Loan substitute securities		3			–			–			–			–			–			–			3			n.a.
		249			(5	)		30			–			3			–			–			277			n.a.
Loans		477			(1	)		(1	)		50			(4	)		–			–			521			(1	)
Other
Net derivative balances (3)
Interest rate contracts		(455	)		45			–			27			1			–			(130	)		(512	)		46
Foreign exchange contracts		21			6			1			–			4			1			–			33			4
Credit derivatives		–			–			–			–			–			–			–			–			–
Other contracts		(181	)		53			6			(30	)		(2	)		(34	)		31			(157	)		24
Valuation adjustments		(16	)		–			–			–			5			–			–			(11	)		–
Other assets		–			–			–			–			–			–			–			–			–
	$	1,752		$	45		$	(4	)	$	226			$  (351	)		$  (29	)		$  (101	)	$	1,538		$	34
Liabilities
Deposits
Personal	$	(465	)	$	(31	)	$	4		$	(149	)	$	22		$	(52	)	$	117		$	(554	)	$	(24	)
Business and government		–			–			–			–			–			–			–			–			–
Other
Other liabilities		(24	)		(1	)		1			(5	)		1			–			–			(28	)		–
	$	(489	)	$	(32	)	$	5		$	(154	)	$	23			$  (52	)	$	117		$	(582	)	$	(24	)

(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 Investment securities recognized in OCI were $11 million for the three months ended January 31, 2019 (January 31, 2018 – gains of $32 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 January 31, 2019 included derivative assets of $420 million (January 31, 2018 – $485 million) and derivative liabilities of $1,047 million (January 31, 2018 – $1,132 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 2 are dependent on whether fair value is obtained on the basis of quoted market prices in active markets (Level 1).

During the three months ended January 31, 2019, transfers out of Level 1 to Level 2 included Trading U.S. state, municipal and agencies debt and Obligations related to securities sold short of $497 million and $172 million, respectively.

During the three months ended January 31, 2019 there were no transfers out of Level 2 to Level 1.

Transfers between Level 2 and Level 3 are primarily due to either a change in the market observability for an input, or a change in an unobservable input’s significance to a financial instrument’s fair value.

During the three months ended January 31, 2019, significant transfers out of Level 3 to Level 2 include: 

• $8 million of OTC equity options in Other contracts, comprised of $203 million of derivative related assets and $195 million of derivative related liabilities, due to a change in the market observability of inputs.

• $352 million of Personal deposits, due to changes in the significance of the unobservable inputs and market observability of inputs used to calculate fair values.

56        Royal Bank of Canada        First Quarter 2019

Note 3    Fair value of financial instruments (continued)

Net interest income from financial instruments

Interest and dividend income arising from financial assets and financial liabilities and the associated costs of funding are reported in Net interest income.

	For the three months ended
(Millions of Canadian dollars)	January 31 2019		January 31 2018
Interest income and dividend income (1), (2)
Financial instruments measured at fair value through profit or loss	$	2,794	$	1,644
Financial instruments measured at fair value through other comprehensive income		272		152
Financial instruments measured at amortized cost		7,083		5,744
		10,149		7,540
Interest expense (1)
Financial instruments measured at fair value through profit or loss	$	2,730	$	1,410
Financial instruments measured at amortized cost		2,535		1,685
		5,265		3,095
Net interest income	$	4,884	$	4,445

(1) Excludes the following amounts related to our insurance operations and included in Insurance premiums, investment and fee income in the Consolidated Statements of Income: Interest income of $129 million (January 31, 2018 – $124 million), and Interest expense of $1 million (January 31, 2018 – $2 million).

(2) Includes dividend income for the three months ended January 31, 2019 of $437 million (January 31, 2018 – $367 million), which is presented in Interest and dividend income in the Condensed Consolidated Statements of Income.

Note 4    Securities

Unrealized gains and losses on securities at FVOCI (1) (2)

	As at
	January 31, 2019									October 31, 2018
(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
Issued or guaranteed
Canadian government debt
Federal (3)	$	529	$	–	$	(2	)	$	527	$	244	$	–	$	(6	)	$	238
Provincial and municipal		2,282		10		(11	)		2,281		1,578		2		(26	)		1,554
U.S. state, municipal and agencies debt (3)		18,086		180		(90	)		18,176		18,000		285		(149	)		18,136
Other OECD government debt		1,964		1		(1	)		1,964		1,469		2		(1	)		1,470
Mortgage-backed securities (3)		2,275		1		(23	)		2,253		2,176		1		(3	)		2,174
Asset-backed securities
CDO		6,468		1		(45	)		6,424		6,248		1		(10	)		6,239
Non-CDO securities		887		5		(1	)		891		856		9		(2	)		863
Corporate debt and other debt		18,856		26		(32	)		18,850		17,439		22		(42	)		17,419
Equities		312		195		(2	)		505		197		186		(1	)		382
Loan substitute securities		25		–		(1	)		24		25		–		(1	)		24
	$	51,684	$	419	$	(208	)	$	51,895	$	48,232	$	508	$	(241	)	$	48,499

(1) Excludes $45,764 million of held-to-collect securities as at January 31, 2019 that are carried at amortized cost, net of allowance for credit losses (October 31, 2018 – $46,109 million).

(2) Gross unrealized gains and losses includes $9 million of allowance for credit losses on debt securities at FVOCI as at January 31, 2019 (October 31, 2018 – $11 million) recognized in income and Other components of equity.

(3) The majority of the MBS are residential. Cost/Amortized cost, gross unrealized gains, gross unrealized losses and fair value related to commercial MBS are $1,467 million, $nil, $17 million and $1,450 million, respectively as at January 31, 2019 (October 31, 2018 – $1,442 million, $nil, $6 million and $1,436 million, respectively).

Allowance for credit losses on investment securities

The following tables reconcile the opening and closing allowance for debt securities at FVOCI and amortized cost by stage. Reconciling items include the following:

• Transfers between stages, which are presumed to occur before any corresponding remeasurement of the allowance.

• Purchases and originations, which reflect the allowance related to assets newly recognized during the period, including those assets that were derecognized following a modification of terms.

• Derecognitions and maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.

• Remeasurements, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time.

Royal Bank of Canada        First Quarter 2019        57

Allowance for credit losses – securities at FVOCI (1)

	For the three months ended
	January 31, 2019											January 31, 2018
	Performing						Impaired					Performing					Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2			Stage 3 (2)		Total			Stage 1		Stage 2			Stage 3		Total
Balance at beginning of period	$	4		$	7		$	–	$	11		$	3	$	22		$	–	$	25
Provision for credit losses
Transfers in (out) to Stage 1		–			–			–		–			–		–			–		–
Transfers in (out) to Stage 2		–			–			–		–			–		–			–		–
Purchases and originations		2			–			–		2			34		–			–		34
Derecognitions and maturities		(1	)		(7	)		–		(8	)		–		(17	)		–		(17	)
Remeasurements		1			–			3		4			–		2			–		2
Exchange rate and other		–			–			–		–			–		(2	)		–		(2	)
Balance at end of period	$	6		$	–		$	3	$	9		$	37	$	5		$	–	$	42

(1) Expected credit losses on debt securities at FVOCI are not separately recognized on the balance sheet as the related securities are recorded at fair value. The cumulative amount of credit losses recognized in income is presented in Other components of equity.

(2) Stage 3 includes $3 million of allowance for credit losses on purchased credit impaired securities.

Allowance for credit losses – securities at amortized cost

	For the three months ended
	January 31, 2019											January 31, 2018
	Performing						Impaired					Performing						Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total			Stage 1			Stage 2			Stage 3		Total
Balance at beginning of period	$	6		$	32		$	–	$	38		$	9		$	45		$	–	$	54
Provision for credit losses
Transfers in (out) to Stage 1		–			–			–		–			3			(3	)		–		–
Transfers in (out) to Stage 2		–			–			–		–			(7	)		7			–		–
Purchases and originations		1			–			–		1			1			–			–		1
Derecognitions and maturities		–			–			–		–			(1	)		(9	)		–		(10	)
Remeasurements		(1	)		(2	)		–		(3	)		(1	)		(2	)		–		(3	)
Exchange rate and other		–			–			–		–			–			(3	)		–		(3	)
Balance at end of period	$	6		$	30		$	–	$	36		$	4		$	35		$	–	$	39

Credit risk exposure by internal risk rating

The following table presents the fair value of debt securities at FVOCI and gross carrying amount of securities at amortized cost. Risk ratings are based on internal ratings as at the reporting date as outlined in the internal ratings maps in the Credit risk section of our 2018 Annual Report.

	As at
	January 31, 2019								October 31, 2018
	Performing				Impaired				Performing				Impaired
(Millions of Canadian dollars)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Investment securities
Securities at FVOCI
Investment grade	$	50,640	$	3	$	–	$	50,643	$	46,956	$	479	$	–	$	47,435
Non-investment grade		594		1		–		595		500		33		–		533
Impaired		–		–		127		127		–		–		125		125
	$	51,234	$	4	$	127	$	51,365	$	47,456	$	512	$	125	$	48,093
Items not subject to impairment (2)								530								406
							$	51,895							$	48,499
Securities at amortized cost
Investment grade	$	44,454	$	112	$	–	$	44,566	$	44,958	$	119	$	–	$	45,077
Non-investment grade		549		685		–		1,234		367		703		–		1,070
Impaired		–		–		–		–		–		–		–		–
	$	45,003	$	797	$	–	$	45,800	$	45,325	$	822	$	–	$	46,147
Allowance for credit losses		6		30		–		36		6		32		–		38
Amortized cost	$	44,997	$	767	$	–	$	45,764	$	45,319	$	790	$	–	$	46,109

(1) Includes $127 million of purchased credit impaired securities (October 31, 2018 – $125 million).

(2) Investment securities at FVOCI not subject to impairment represent equity securities designated as FVOCI.

58        Royal Bank of Canada        First Quarter 2019

Note 5    Loans and allowance for credit losses

Allowance for credit losses

	For the three months ended
	January 31, 2019												January 31, 2018
(Millions of Canadian dollars)	Balance at beginning of period		Provision for credit losses		Net write-offs			Exchange rate and other (1)			Balance at end of period		Balance at beginning of period		Provision for credit losses			Net write-offs			Exchange rate and other (1)			Balance at end of period
Retail
Residential mortgages	$	382	$	33	$	(4	)	$	(2	)	$	409	$	378	$	13		$	(13	)	$	(15	)	$	363
Personal		895		123		(113	)		(13	)		892		826		145			(102	)		(8	)		861
Credit cards		760		140		(120	)		–			780		693		98			(110	)		(1	)		680
Small business		51		6		(5	)		(1	)		51		49		9			(7	)		(1	)		50
Wholesale		979		204		(61	)		(12	)		1,110		1,010		72			(18	)		(39	)		1,025
Customers’ liability under acceptances		21		10		–			–			31		20		(3	)		–			(1	)		16
	$	3,088	$	516	$	(303	)	$	(28	)	$	3,273	$	2,976	$	334		$	(250	)	$	(65	)	$	2,995
Presented as:
Allowance for loan losses	$	2,912									$	3,061	$	2,749										$	2,776
Other liabilities – Provisions		154										180		207											202
Customers’ liability under acceptances		21										31		20											16
Other components of equity		1										1		–											1

(1) Includes interest income on impaired loans of $21 million for the three months ended January 31, 2019 (January 31, 2018 – $17 million).

The following table reconciles the opening and closing allowance for loans and commitments, by stage, for each major product category.

Reconciling items include the following:

• Transfers between stages, which are presumed to occur before any corresponding remeasurements of the allowance.

• Purchases and originations, which reflect the allowance related to assets newly recognized during the period, including those assets that were derecognized following a modification of terms.

• Derecognitions and maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.

• Remeasurements, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments and additional draws on existing facilities; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time in Stage 1 and Stage 2.

Royal Bank of Canada        First Quarter 2019        59

Allowance for credit losses – Retail and wholesale loans

	For the three months ended
	January 31, 2019												January 31, 2018
	Performing						Impaired						Performing						Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Residential mortgages
Balance at beginning of period	$	142		$	64		$	176		$	382		$	140		$	65		$	173		$	378
Provision for credit losses
Transfers in (out) to Stage 1		8			(8	)		–			–			22			(22	)		–			–
Transfers in (out) to Stage 2		(3	)		4			(1	)		–			(5	)		5			–			–
Transfers in (out) to Stage 3		(1	)		(8	)		9			–			–			(3	)		3			–
Purchases and originations		13			–			–			13			16			–			–			16
Derecognitions and maturities		(3	)		(2	)		–			(5	)		(3	)		(3	)		–			(6	)
Remeasurements		(18	)		30			13			25			(36	)		27			12			3
Write-offs		–			–			(5	)		(5	)		–			–			(14	)		(14	)
Recoveries		–			–			1			1			–			–			1			1
Exchange rate and other		–			(1	)		(1	)		(2	)		(4	)		(2	)		(9	)		(15	)
Balance at end of period	$	138		$	79		$	192		$	409		$	130		$	67		$	166		$	363
Personal
Balance at beginning of period	$	242		$	512		$	141		$	895		$	278		$	427		$	121		$	826
Provision for credit losses
Transfers in (out) to Stage 1		132			(132	)		–			–			204			(204	)		–			–
Transfers in (out) to Stage 2		(23	)		23			–			–			(42	)		42			–			–
Transfers in (out) to Stage 3		–			(44	)		44			–			–			(43	)		43			–
Purchases and originations		23			–			–			23			26			2			–			28
Derecognitions and maturities		(7	)		(30	)		–			(37	)		(9	)		(35	)		–			(44	)
Remeasurements		(132	)		190			79			137			(180	)		271			70			161
Write-offs		–			–			(144	)		(144	)		–			–			(129	)		(129	)
Recoveries		–			–			31			31			–			–			27			27
Exchange rate and other		–			–			(13	)		(13	)		(2	)		(1	)		(5	)		(8	)
Balance at end of period	$	235		$	519		$	138		$	892		$	275		$	459		$	127		$	861
Credit cards
Balance at beginning of period	$	161		$	599		$	–		$	760		$	251		$	442		$	–		$	693
Provision for credit losses
Transfers in (out) to Stage 1		110			(110	)		–			–			228			(228	)		–			–
Transfers in (out) to Stage 2		(19	)		19			–			–			(40	)		40			–			–
Transfers in (out) to Stage 3		–			(80	)		80			–			–			(37	)		37			–
Purchases and originations		1			–			–			1			3			1			–			4
Derecognitions and maturities		(1	)		(6	)		–			(7	)		(4	)		(30	)		–			(34	)
Remeasurements		(84	)		190			40			146			(224	)		279			73			128
Write-offs		–			–			(153	)		(153	)		–			–			(142	)		(142	)
Recoveries		–			–			33			33			–			–			32			32
Exchange rate and other		–			–			–			–			(2	)		1			–			(1	)
Balance at end of period	$	168		$	612		$	–		$	780		$	212		$	468		$	–		$	680
Small business
Balance at beginning of period	$	17		$	16		$	18		$	51		$	15		$	15		$	19		$	49
Provision for credit losses
Transfers in (out) to Stage 1		5			(5	)		–			–			8			(8	)		–			–
Transfers in (out) to Stage 2		(1	)		1			–			–			(2	)		2			–			–
Transfers in (out) to Stage 3		–			(3	)		3			–			–			(3	)		3			–
Purchases and originations		3			–			–			3			3			–			–			3
Derecognitions and maturities		(1	)		(2	)		–			(3	)		(1	)		(2	)		–			(3	)
Remeasurements		(7	)		11			2			6			(7	)		12			4			9
Write-offs		–			–			(7	)		(7	)		–			–			(9	)		(9	)
Recoveries		–			–			2			2			–			–			2			2
Exchange rate and other		–			–			(1	)		(1	)		1			(1	)		(1	)		(1	)
Balance at end of period	$	16		$	18		$	17		$	51		$	17		$	15		$	18		$	50
Wholesale
Balance at beginning of period	$	274		$	340		$	365		$	979		$	251		$	352		$	407		$	1,010
Provision for credit losses
Transfers in (out) to Stage 1		24			(24	)		–			–			58			(58	)		–			–
Transfers in (out) to Stage 2		(9	)		11			(2	)		–			(35	)		35			–			–
Transfers in (out) to Stage 3		(1	)		(16	)		17			–			–			(6	)		6			–
Purchases and originations		68			10			–			78			52			8			–			60
Derecognitions and maturities		(43	)		(43	)		–			(86	)		(41	)		(52	)		–			(93	)
Remeasurements		(11	)		84			139			212			(32	)		63			74			105
Write-offs		–			–			(68	)		(68	)		–			–			(27	)		(27	)
Recoveries		–			–			7			7			–			–			9			9
Exchange rate and other		(1	)		(1	)		(10	)		(12	)		(4	)		(8	)		(27	)		(39	)
Balance at end of period	$	301		$	361		$	448		$	1,110		$	249		$	334		$	442		$	1,025

60        Royal Bank of Canada        First Quarter 2019

Note 5    Loans and allowance for credit losses (continued)

Credit risk exposure by internal risk rating

The following table presents the gross carrying amount of loans measured at amortized cost, and the full contractual amount of undrawn loan commitments subject to the impairment requirements of IFRS 9. Risk ratings are based on internal ratings as at the reporting date as outlined in the internal ratings maps for Wholesale and Retail facilities in the Credit risk section of our 2018 Annual Report.

	As at
	January 31, 2019								October 31, 2018
(Millions of Canadian dollars)	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Retail
Loans outstanding – Residential mortgages
Low risk	$	224,589	$	4,523	$	–	$	229,112	$	222,026	$	3,688	$	–	$	225,714
Medium risk		13,229		1,455		–		14,684		13,681		1,369		–		15,050
High risk		2,559		2,836		–		5,395		2,577		2,897		–		5,474
Not rated		35,451		604		–		36,055		34,670		578		–		35,248
Impaired		–		–		754		754		–		–		726		726
		275,828		9,418		754		286,000		272,954		8,532		726		282,212
Items not subject to impairment (1)								312								259
Total								286,312								282,471
Loans outstanding – Personal
Low risk	$	70,837	$	1,383	$	–	$	72,220	$	71,763	$	1,256	$	–	$	73,019
Medium risk		6,002		2,107		–		8,109		6,124		1,925		–		8,049
High risk		945		1,641		–		2,586		998		1,672		–		2,670
Not rated		8,041		70		–		8,111		8,595		64		–		8,659
Impaired		–		–		310		310		–		–		303		303
Total		85,825		5,201		310		91,336		87,480		4,917		303		92,700
Loans outstanding – Credit cards
Low risk	$	13,030	$	102	$	–	$	13,132	$	13,185	$	100	$	–	$	13,285
Medium risk		2,124		1,621		–		3,745		2,234		1,632		–		3,866
High risk		131		1,293		–		1,424		139		1,331		–		1,470
Not rated		833		31		–		864		764		30		–		794
Total		16,118		3,047		–		19,165		16,322		3,093		–		19,415
Loans outstanding – Small business
Low risk	$	2,147	$	29	$	–	$	2,176	$	2,004	$	46	$	–	$	2,050
Medium risk		2,180		99		–		2,279		2,230		102		–		2,332
High risk		88		188		–		276		95		178		–		273
Not rated		176		1		–		177		166		1		–		167
Impaired		–		–		46		46		–		–		44		44
Total		4,591		317		46		4,954		4,495		327		44		4,866
Undrawn loan commitments – Retail
Low risk	$	186,385	$	1,474	$	–	$	187,859	$	182,426	$	1,270	$	–	$	183,696
Medium risk		9,791		244		–		10,035		10,794		239		–		11,033
High risk		3,745		158		–		3,903		3,740		166		–		3,906
Not rated		2,473		36		–		2,509		2,584		35		–		2,619
Total		202,394		1,912		–		204,306		199,544		1,710		–		201,254
Wholesale
Loans outstanding
Investment grade	$	52,494	$	201	$	–	$	52,695	$	46,869	$	324	$	–	$	47,193
Non-investment grade		109,104		12,015		–		121,119		106,027		10,190		–		116,217
Not rated		6,928		411		–		7,339		6,692		411		–		7,103
Impaired		–		–		1,647		1,647		–		–		1,096		1,096
		168,526		12,627		1,647		182,800		159,588		10,925		1,096		171,609
Items not subject to impairment (1)								8,314								8,669
Total								191,114								180,278
Undrawn loan commitments – Wholesale
Investment grade	$	227,610	$	2	$	–	$	227,612	$	222,970	$	93	$	–	$	223,063
Non-investment grade		90,067		8,110		–		98,177		88,828		7,069		–		95,897
Not rated		4,764		–		–		4,764		4,291		–		–		4,291
Total		322,441		8,112		–		330,553		316,089		7,162		–		323,251

(1) Retail loans outstanding – Residential mortgages and Wholesale loans outstanding items not subject to impairment are loans held at FVTPL.

Royal Bank of Canada        First Quarter 2019        61

Loans past due but not impaired (1)

	As at
	January 31, 2019								October 31, 2018
(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	$	2,992	$	1,403	$	174	$	4,569	$	2,995	$	1,402	$	179	$	4,576
Wholesale		1,562		485		–		2,047		1,246		468		–		1,714
	$	4,554	$	1,888	$	174	$	6,616	$	4,241	$	1,870	$	179	$	6,290

(1) Amounts presented may include loans past due as a result of administrative processes, such as mortgage loans on which payments are restrained pending payout due to sale or refinancing. Past due loans arising from administrative processes are not representative of the borrowers’ ability to meet their payment obligations.

Note 6    Deposits

	As at
	January 31, 2019								October 31, 2018
(Millions of Canadian dollars)	Demand (1)		Notice (2)		Term (3)		Total		Demand (1)		Notice (2)		Term (3)		Total
Personal	$	138,660	$	49,566	$	91,945	$	280,171	$	135,101	$	48,873	$	86,180	$	270,154
Business and government		233,044		8,416		298,774		540,234		238,617		8,606		287,148		534,371
Bank		8,019		172		23,968		32,159		8,750		299		23,472		32,521
	$	379,723	$	58,154	$	414,687	$	852,564	$	382,468	$	57,778	$	396,800	$	837,046
Non-interest-bearing (4)
Canada	$	88,807	$	5,058	$	–	$	93,865	$	88,119	$	5,086	$	–	$	93,205
United States		30,411		–		–		30,411		34,098		–		–		34,098
Europe (5)		582		–		–		582		564		–		–		564
Other International		5,595		5		–		5,600		5,495		5		–		5,500
Interest-bearing (4)
Canada		215,335		15,229		311,520		542,084		213,747		15,112		292,641		521,500
United States		2,510		33,430		63,170		99,110		2,478		33,099		67,211		102,788
Europe (5)		31,089		1,168		27,597		59,854		32,930		1,412		26,598		60,940
Other International		5,394		3,264		12,400		21,058		5,037		3,064		10,350		18,451
	$	379,723	$	58,154	$	414,687	$	852,564	$	382,468	$	57,778	$	396,800	$	837,046

(1) Demand deposits are deposits for which we do not have the right to require notice of withdrawal, which includes both savings and chequing accounts.

(2) Notice deposits are deposits for which we can legally require notice of withdrawal. These deposits are primarily savings accounts.

(3) Term deposits are deposits payable on a fixed date, and include term deposits, guaranteed investment certificates and similar instruments.

(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 January 31, 2019, deposits denominated in U.S. dollars, British pounds, Euro and other foreign currencies were $315 billion, $21 billion, $42 billion and $32 billion, respectively (October 31, 2018 – $309 billion, $20 billion, $38 billion and $32 billion, respectively).

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

62        Royal Bank of Canada        First Quarter 2019

Note 6    Deposits (continued)

Contractual maturities of term deposits

	As at
(Millions of Canadian dollars)	January 31 2019		October 31 2018
Within 1 year:
less than 3 months	$	110,375	$	89,553
3 to 6 months		48,374		59,109
6 to 12 months		79,462		80,773
1 to 2 years		59,814		51,798
2 to 3 years		42,381		45,550
3 to 4 years		26,131		21,127
4 to 5 years		23,684		23,863
Over 5 years		24,466		25,027
	$	414,687	$	396,800
Aggregate amount of term deposits in denominations of one hundred thousand dollars or more (1)	$	378,000	$	362,000

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

Note 7    Employee benefits – Pension and other post-employment benefits

We offer a number of defined benefit 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 effects of 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)	January 31 2019			January 31 2018		January 31 2019		January 31 2018
Current service costs	$	74		$	89	$	10	$	10
Net interest expense (income)		(5	)		2		16		16
Remeasurements of other long term benefits		–			–		2		–
Administrative expense		4			4		–		–
Defined benefit pension expense	$	73		$	95	$	28	$	26
Defined contribution pension expense		61			52		–		–
	$	134		$	147	$	28	$	26

Pension and other post-employment benefit remeasurements (1)

	For the three months ended
	Defined benefit pension plans						Other post-employment benefit plans
(Millions of Canadian dollars)	January 31 2019			January 31 2018			January 31 2019			January 31 2018
Actuarial (gains) losses:
Changes in financial assumptions	$	607		$	18		$	57		$	–
Experience adjustments		–			–			(1	)		(2	)
Return on plan assets (excluding interest based on discount rate)		(144	)		(85	)		–			–
	$	463		$	(67	)	$	56		$	(2	)

(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.

Royal Bank of Canada        First Quarter 2019        63

Note 8    Income taxes

Tax examinations and assessments

During the first quarter, we received reassessments from the Canada Revenue Agency (CRA) in respect of the 2013 and 2012 taxation years which disallowed dividend deductions resulting in additional income taxes as the tax deductibility of certain dividends was denied on the basis that they were part of a “dividend rental arrangement”. The reassessments are consistent with the previously received proposal letters as described in Note 22 of our 2018 Annual Consolidated Financial Statements. We are confident that our tax filing position was appropriate and intend to defend ourselves vigorously.

Note 9     Significant capital and funding transactions

Preferred shares

On November 2, 2018, we issued 14 million Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BO at a price of $25 per share, for total gross proceeds of $350 million. For the initial five year period to the earliest redemption date of February 24, 2024, the Series BO Preferred Shares pay quarterly cash dividends, if declared, at a rate of 4.8% 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 2.38%. Holders have the option to convert their shares into Non-Cumulative Floating Rate First Preferred Shares, Series BP, 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 2.38%. Subject to the consent of OSFI and the requirements of the Bank Act (Canada), we may redeem the Series BO Preferred Shares in whole or in part at a price per share of $25 on the earliest redemption date and every fifth year thereafter. The Series BO Preferred Shares include NVCC provisions which are necessary for the shares to qualify as Tier 1 regulatory capital.

On November 24, 2018, we redeemed all 10 million Non-Cumulative First Preferred Shares Series AD at a price of $25 per share.

Common shares issued (1)

	For the three months ended
	January 31, 2019						January 31, 2018
(Millions of Canadian dollars, except number of shares)	Number of shares (thousands)			Amount			Number of shares (thousands)			Amount
Issued in connection with share-based compensation plans (2)		159		$	11			464		$	30
Purchased for cancellation (3)		(3,684	)		(45	)		(9,297	)		(113	)
		(3,525	)	$	(34	)		(8,833	)	$	(83	)

(1) The requirements of our dividend reinvestment plan (DRIP) are satisfied through either open market share purchases or shares issued from treasury. During the three months ended January 31, 2019 and January 31, 2018, 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 January 31, 2019, we purchased for cancellation common shares at a total fair value of $348 million (average cost of $94.40 per share), with a book value of $45 million (book value of $12.25 per share). During the three months ended January 31, 2018, we purchased for cancellation common shares at a total fair value of $923 million (average cost of $99.29 per share), with a book value of $113 million (book value of $12.25 per share).

64        Royal Bank of Canada        First Quarter 2019

Note 10    Earnings per share

	For the three months ended
(Millions of Canadian dollars, except share and per share amounts)	January 31 2019			January 31 2018
Basic earnings per share
Net income	$	3,172		$	3,012
Preferred share dividends		(74	)		(72	)
Net income attributable to non-controlling interest		(2	)		(11	)
Net income available to common shareholders		3,096			2,929
Weighted average number of common shares (in thousands)		1,437,074			1,451,781
Basic earnings per share (in dollars)	$	2.15		$	2.02
Diluted earnings per share
Net income available to common shareholders	$	3,096		$	2,929
Dilutive impact of exchangeable shares		4			4
Net income available to common shareholders including dilutive impact of exchangeable shares		3,100			2,933
Weighted average number of common shares (in thousands)		1,437,074			1,451,781
Stock options (1)		2,033			3,069
Issuable under other share-based compensation plans		737			751
Exchangeable shares (2)		3,351			3,113
Average number of diluted common shares (in thousands)		1,443,195			1,458,714
Diluted earnings per share (in dollars)	$	2.15		$	2.01

(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 January 31, 2019, 1,364,706 outstanding options with an average price of $99.73 were excluded from the calculation of diluted earnings per share. For the three months ended January 31, 2018, no outstanding options were excluded from the calculation of diluted earnings per share.

(2) Includes exchangeable preferred shares.

Note 11     Legal and regulatory matters

We are a large global institution that is subject to many different complex legal and regulatory requirements that continue to evolve. As a result, we 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. We review the status of all proceedings on an ongoing basis and will exercise judgment in resolving them in such manner as we believe to be in our best interest. This is an area of significant judgment and uncertainty and the extent of our financial and other exposure to these proceedings after taking into account current accruals could be material to our results of operations in any particular period.

Our significant legal proceedings and regulatory matters are those disclosed in our audited 2018 Annual Consolidated Financial Statements as updated below:

Interchange fees litigation

The trial in the Watson proceeding has been rescheduled from October 14, 2019 to October 19, 2020.

Royal Bank of Canada        First Quarter 2019        65

Note 12     Results by business segment

	For the three months ended January 31, 2019
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services			Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2)	$	3,134	$	744	$	–	$	(31	)	$	1,006	$	31		$	4,884
Non-interest income		1,284		2,204		1,579		662			1,092		(116	)		6,705
Total revenue		4,418		2,948		1,579		631			2,098		(85	)		11,589
Provision for credit losses		348		26		–		–			140		–			514
Insurance policyholder benefits, claims and acquisition expense		–		–		1,225		–			–		–			1,225
Non-interest expense		1,915		2,164		154		418			1,230		31			5,912
Net income (loss) before income taxes		2,155		758		200		213			728		(116	)		3,938
Income taxes (recoveries)		584		161		34		52			75		(140	)		766
Net income	$	1,571	$	597	$	166	$	161		$	653	$	24		$	3,172
Non-interest expense includes:
Depreciation and amortization	$	153	$	147	$	11	$	34		$	95	$	–		$	440

	For the three months ended January 31, 2018
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management			Insurance		Investor & Treasury Services		Capital Markets (1)		Corporate Support (1)			Total
Net interest income (2)	$	2,856	$	612		$	–	$	128	$	866	$	(17	)	$	4,445
Non-interest income		1,309		2,171			1,144		548		1,309		(98	)		6,383
Total revenue		4,165		2,783			1,144		676		2,175		(115	)		10,828
Provision for credit losses		317		(2	)		–		–		20		(1	)		334
Insurance policyholder benefits, claims and acquisition expense		–		–			836		–		–		–			836
Non-interest expense		1,801		2,011			142		389		1,214		54			5,611
Net income (loss) before income taxes		2,047		774			166		287		941		(168	)		4,047
Income taxes (recoveries)		526		177			39		68		193		32			1,035
Net income	$	1,521	$	597		$	127	$	219	$	748	$	(200	)	$	3,012
Non-interest expense includes:
Depreciation and amortization	$	140	$	130		$	9	$	30	$	87	$	–		$	396

(1) Taxable equivalent basis.

(2) Interest revenue is reported net of interest expense as we rely primarily on net interest income as a performance measure.

Total assets and total liabilities by business segment

	As at January 31, 2019
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets		Corporate Support			Total
Total assets	$	458,817	$	93,905	$	16,787	$	148,670	$	604,422	$	43,606		$	1,366,207
Total liabilities	$	458,826	$	94,050	$	16,826	$	148,658	$	604,438	$	(37,241	)	$	1,285,557
	As at October 31, 2018
(Millions of Canadian dollars)	Personal & Commercial Banking		Wealth Management		Insurance		Investor & Treasury Services		Capital Markets		Corporate Support			Total
Total assets	$	453,879	$	93,063	$	16,210	$	136,030	$	590,950	$	44,602		$	1,334,734
Total liabilities	$	453,878	$	93,162	$	16,289	$	135,944	$	590,582	$	(35,076	)	$	1,254,779

66        Royal Bank of Canada        First Quarter 2019

Note 13    Capital management

Regulatory capital and capital ratios

OSFI formally establishes risk-based capital and leverage targets for deposit-taking institutions in Canada. During the first quarter of 2019, we complied with all capital and leverage requirements, including the domestic stability buffer, imposed by OSFI.

	As at
(Millions of Canadian dollars, except Capital ratios and leverage ratios)	January 31 2019		October 31 2018
Capital(1)
CET1 capital	$	57,963	$	57,001
Tier 1 capital		64,341		63,279
Total capital		73,758		72,494
Risk-weighted Assets (RWA) used in calculation of capital ratios (1) (2)
CET1 capital RWA		508,512		495,528
Tier 1 capital RWA		508,512		495,993
Total capital RWA		508,512		496,459
Total capital RWA consisting of: (1)
Credit risk		410,003		401,534
Market risk		34,862		32,209
Operational risk		63,647		62,716
Total Capital RWA	$	508,512	$	496,459
Capital ratios and Leverage ratios (1)
CET1 ratio		11.4%		11.5%
Tier 1 capital ratio		12.7%		12.8%
Total capital ratio		14.5%		14.6%
Leverage ratio		4.3%		4.4%
Leverage ratio exposure (billions)	$	1,501.8	$	1,450.8

(1) Capital, RWA, and capital ratios are calculated using OSFI Capital Adequacy Requirements based on the Basel III framework. The leverage ratio is calculated using OSFI Leverage Requirements Guideline based on the Basel III framework.

(2) In fiscal 2018, amounts included CVA scalars of 80%, 83% and 86%, respectively.

Royal Bank of Canada        First Quarter 2019        67

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 Valuation day price For Canadian income tax purposes, Royal Bank of Canada’s common stock was quoted at $29.52 per share on the Valuation Day (December 22, 1971). This is equivalent to $7.38 per share after adjusting for the two-for-one stock split of March 1981 and the two-for-one stock split of February 1990. The one-for-one stock dividends in October 2000 and April 2006 did not affect the Valuation Day amount 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 (International) 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 Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all dividends (and deemed dividends) paid by RBC to Canadian residents on both its common and preferred shares, are designated as “eligible dividends”, unless stated otherwise.   Common share repurchases We are engaged in a Normal Course Issuer Bid (NCIB) which allows us to repurchase for cancellation, up to 30 million common shares during the period spanning from February 27, 2018 to February 26, 2019, when the bid expires, or such earlier date as we may complete the purchases pursuant to our Notice of Intention filed with the Toronto Stock Exchange. 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.   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.   2019 Quarterly earnings release dates First quarter            February 22 Second quarter      May 23 Third quarter          August 21 Fourth quarter        December 4   2019 Annual Meeting The Annual Meeting of Common Shareholders will be held on Thursday, April 4, 2019, at 9:30 a.m. (Atlantic Time) at the Halifax Convention Centre, 1650 Argyle Street, Halifax, Nova Scotia, Canada.

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 with the exception of the series C-2. The related depository shares of the series C-2 preferred shares are listed on the NYSE.	email: service@computershare.com 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 Financial analysts, portfolio managers, institutional investors For financial information inquiries, please contact: Investor Relations Royal Bank of Canada 155 Wellington Street West Toronto, Ontario M5V 3K7 Canada Tel: 416-955-7802 or visit our website at rbc.com/investorrelations
		Dividend dates for 2019
		Subject to approval by the Board of Directors
			Record dates	Payment dates
		Common and preferred shares series W, AA, AC, AE, AF, AG, AZ, BB, BD, BF, BH, BI, BJ, BK, BM and BO	January 24 April 25 July 25 October 24	February 22 May 24 August 23 November 22
		Preferred shares series AJ,AK and AL	January 24	February 22
		Preferred shares series C-2 (US$)	January 28 April 26 July 26 October 28	February 7 May 7 August 7 November 7
		Governance Summaries of the significant ways in which corporate governance practices followed by RBC differ from corporate governance practices required to be followed by U.S. domestic companies under the NYSE listing standards are available on our website at rbc.com/governance.

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.