EX-99.1 2 d800022dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO    FOURTH QUARTER 2019
  

 

EARNINGS RELEASE

 

 

 ROYAL BANK OF CANADA REPORTS FOURTH QUARTER AND 2019 RESULTS

    

All amounts are in Canadian dollars and are based on our audited Annual and unaudited Interim Consolidated Financial Statements for the year and quarter ended October 31, 2019 and related notes prepared in accordance with International Financial Reporting Standards (IFRS). Our 2019 Annual Report (which includes our audited Annual Consolidated Financial Statements and accompanying Management’s Discussion & Analysis), our 2019 Annual Information Form and our Supplementary Financial Information are available on our website at: http://www.rbc.com/investorrelations.

 

LOGO

TORONTO, December 4, 2019 – Royal Bank of Canada (RY on TSX and NYSE) today reported record net income of $12,871 million for the year ended October 31, 2019, up $440 million or 4% from the prior year, with diluted EPS1 growth of 5%. Results reflected strong earnings growth in Personal & Commercial Banking and Wealth Management as we continued to leverage our scale and unique client value proposition to drive strong client-driven volumes. Solid results in Insurance were mainly driven by the impact of new longevity reinsurance contracts. These were partially offset by lower earnings in Investor & Treasury Services, primarily due to lower funding and liquidity revenue and severance and related costs associated with repositioning of the business, and in Capital Markets, due to a challenging market environment. Our results also reflect an increase due to foreign exchange translation. Provisions for credit losses (PCL) ratio on loans of 31 basis points (bps) increased by 8 bps from the prior year and the PCL on impaired loans ratio was 27 bps.

Our capital position remained robust with a Common Equity Tier 1 (CET1) ratio of 12.1%, up 60 bps from the prior year. In addition, we increased our quarterly dividend twice during 2019, for an annual dividend increase of 8%. In 2019, we repurchased 10.3 million shares for $1 billion.

 

 

“Against a challenging macroeconomic environment, we delivered solid results in 2019 and maintained a leading return on equity, a testament to the strength of our diversified business model, and the power of our Purpose to engage employees on our journey to transform the bank for the future. We have been investing significantly in talent, technology and our trusted global brand to offer differentiated advice and experiences across our businesses, and believe this positions us well to continue delivering long-term sustainable value for our clients, communities and shareholders.”

– Dave McKay, RBC President and Chief Executive Officer    

 

2019 Full Year Business Segment Performance

6% earnings growth in Personal & Commercial Banking, mainly due to average volume growth of 7% (average loan growth in Canadian Banking: +6% residential mortgages and +11% business loans; average deposits growth: +9% in both business and personal deposits) and higher spreads as higher interest rates more than offset the impact of competitive pricing pressures. These factors were partially offset by higher PCL. PCL on impaired loans ratio increased 4 bps, largely reflecting higher provisions on impaired loans in Canadian Banking. We generated positive operating leverage of 2.4%, while continuing to invest in the business to create more value for our >14 million Personal & Commercial Banking clients and build new client relationships. Higher staff-related costs were in part due to the addition of commercial account managers and investment advisors to deliver more advice and insights to our clients. We also continued our investments in technology, including in digital solutions for both our personal and business banking clients.

 

13% earnings growth in Wealth Management, mainly due to higher average fee-based client assets reflecting market appreciation and net sales benefiting from our scale, talent and infrastructure advantage, as well as higher net interest income driven by average volume growth at City National Bank, which continued to add both teams and offices in key locations such as New York City and Washington D.C. Net income also included a gain on the sale of the private debt business of BlueBay ($134 million after-tax). These factors were partially offset by increased costs in support of business growth, higher variable compensation commensurate with revenue growth and higher PCL.

 

4% earnings growth in Insurance, mainly due to the impact of new longevity reinsurance contracts, partially offset by higher claims costs.

 

36% lower earnings in Investor & Treasury Services, primarily due to lower funding and liquidity revenue driven by the short-term interest rate environment and lower gains from the disposition of certain securities, as well as severance and related costs ($83 million after-tax) associated with repositioning of the business. Lower revenue from our asset services business largely driven by secular industry trends, also contributed to the decrease.

 

4% lower earnings in Capital Markets, as Corporate and Investment Banking revenue saw headwinds from challenging market conditions driving lower industry-wide investment banking activity. Higher PCL and higher technology and related costs also

 

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 on page 11 of this Earnings Release.

 

- 1 -


 

contributed to the decrease. These factors were partially offset by a lower effective tax rate, largely reflecting changes in earnings mix, higher revenue in Global Markets and the impact of foreign exchange translation. Despite a challenging market environment, RBC Capital Markets® continues to be well positioned as a premier global investment bank. We have been successful in winning more and higher quality mandates, increasing our ranking to top 10 in U.S. M&A advisory for announced transactions, our highest ranking achieved to date.

Q4 2019 Performance

Earnings of $3,206 million were down $44 million or 1% from a year ago, due to lower results in Investor & Treasury Services, Capital Markets, Insurance and Corporate Support. These were partially offset by higher earnings in Wealth Management and Personal & Commercial Banking.

Earnings were down $57 million or 2% from last quarter, due to lower earnings in Investor & Treasury Services, Capital Markets, Personal & Commercial Banking and Corporate Support. These were partially offset by higher earnings in Wealth Management and Insurance.

 

      

 

  Q4 2019

  compared to        

  Q4 2018

   

 

•    Net income of $3,206 million

  

 

ê 1%

   

•    Diluted EPS1 of $2.18

   ê 1%
   

•    ROE2 of 16.2%

   ê 140 bps
   

•    CET1 ratio of 12.1%

 

  

é 60 bps

 

      

 

  Q4 2019

  compared to        

  Q3 2019

   

 

•    Net income of $3,206 million

  

 

ê 2%

   

•    Diluted EPS1 of $2.18

   ê 2%
   

•    ROE2 of 16.2%

   ê 50 bps
   

•    CET1 ratio of 12.1%

 

  

é 20 bps

 

Q4 2019 Business Segment Performance

 

  Personal & Commercial Banking

Net income of $1,618 million increased $80 million or 5% from a year ago, mainly due to average volume growth of 6% in loans and 10% in deposits in Canadian Banking, benefiting from solid housing activity, our growing client-facing sales force as well as a favourable interest rate environment. These factors were partially offset by higher PCL. Total PCL increased $70 million or 22%. PCL on impaired loans ratio increased 4 bps, largely driven by higher provisions on impaired loans in Canadian Banking portfolios.

Compared to last quarter, net income decreased $46 million or 3%. Higher net interest income driven by average volume growth of 2%, partially offset by lower spreads, was more than offset by higher PCL and the timing of professional fees.

 

  Wealth Management

Net income of $729 million increased $176 million or 32% from a year ago, mainly due to a gain on the sale of the private debt business of BlueBay ($134 million after-tax) as well as higher average fee-based client assets reflecting market appreciation and industry-leading net sales in Canada.

Compared to last quarter, net income increased $90 million or 14%, largely due to a gain on the sale of the private debt business of BlueBay and higher average fee-based client assets reflecting market appreciation and net sales. These factors were partially offset by a decrease in net interest income driven by lower spreads (mainly at City National Bank), increased costs in support of business growth and higher variable compensation commensurate with revenue growth.

 

  Insurance

Net income of $282 million decreased $36 million or 11% from a year ago, primarily due to lower favourable reinsurance contract renegotiations and lower favourable annual actuarial assumption updates. Higher claims costs and lower favourable investment-related experience also contributed to the decrease. These factors were partially offset by the impact of new longevity reinsurance contracts.

Compared to last quarter, net income increased $78 million or 38%, primarily due to the impact of new longevity reinsurance contracts and favourable reinsurance contract renegotiations in the current quarter, partially offset by lower favourable investment-related experience.

 

  Investor & Treasury Services

Net income of $45 million decreased $110 million or 71% from a year ago, primarily due to severance and related costs associated with

 

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 on page 11 of this Earnings Release.

 

- 2 -


repositioning of the business ($83 million after-tax), as well as lower funding and liquidity revenue driven by the short-term rate environment. Lower revenue from our asset services business due to reduced client activity and lower deposit margins also contributed to the decrease.

Compared to last quarter, net income decreased $73 million or 62%, mainly driven by severance and related costs associated with repositioning of the business.

 

  Capital Markets

Net income of $584 million decreased $82 million or 12% from a year ago, largely driven by lower revenue in Corporate and Investment Banking, partly due to lower global investment banking fee pools and higher PCL. These factors were partially offset by a lower effective tax rate, largely reflecting changes in earnings mix. Global Markets generated higher revenue despite heightened market uncertainty.

Compared to last quarter, net income decreased $69 million or 11%, mainly due to lower M&A revenues, primarily in the U.S., lower equity origination, largely in the U.S. and Europe, as well as higher costs related to changes in the timing of deferred compensation. Lower fixed income trading, mainly in the U.S., and higher PCL also contributed to the decrease. These factors were partially offset by a lower effective tax rate, higher foreign exchange trading revenue, mainly in Europe, higher debt origination, largely in the U.S., and higher municipal banking activity.

 

  Corporate Support

Net loss was $52 million in the current quarter, largely due to impact of an unfavourable accounting adjustment. Net loss was $15 million in the prior quarter, mainly due to net unfavourable tax adjustments, largely offset by asset/liability management activities. Net income was $20 million in the prior year, largely reflecting net favourable tax adjustments.

 

  Capital and Credit Quality

Capital – As at October 31, 2019, Basel III CET1 ratio was 12.1%, up 20 bps from last quarter, mainly reflecting internal capital generation which was partially offset by higher risk-weighted assets due to continued business growth, and share buybacks. We continued to deliver a strong return of capital to shareholders with $2 billion returned to shareholders in the fourth quarter, including $474 million of net repurchases.

Credit Quality – Total PCL was $499 million. PCL on loans of $505 million increased $172 million or 52% from a year ago, due to higher provisions in Personal & Commercial Banking, Capital Markets and Wealth Management, as we returned to a more normalized level of credit losses towards the end of 2019. The PCL ratio on loans of 32 bps increased by 9 bps and the PCL on impaired loans ratio was 27 bps.

Total PCL in Personal & Commercial Banking increased $70 million or 22% from a year ago. PCL on impaired loans ratio increased 4 bps, largely driven by higher provisions on impaired loans in our Canadian Banking commercial portfolios and retail portfolios.

Total PCL in Wealth Management increased $30 million from a year ago. PCL on impaired loans ratio increased 17 bps, largely driven by higher provisions on impaired loans in U.S. Wealth Management (including City National), mainly in the consumer discretionary sector.

Total PCL in Capital Markets increased $46 million from a year ago. PCL on impaired loans ratio increased 17 bps, driven by higher provisions on impaired loans in the industrial products and oil & gas sectors.

Compared to last quarter, total PCL on loans increased $76 million or 18%, mainly due to higher provisions in Personal & Commercial Banking and Capital Markets. The PCL ratio on loans was up 5 bps and the PCL on impaired loans ratio was up 2 bps from last quarter.

PCL on loans in Personal & Commercial Banking increased $48 million from the prior quarter, reflecting higher provisions on performing loans largely in Canadian Banking, mainly driven by unfavourable changes in portfolio mix, partially offset by favourable changes in macroeconomic factors and model updates. Higher provisions on impaired loans in Canadian Banking, partially offset by lower provisions on impaired loans in Caribbean Banking, also contributed to the increase.

PCL on loans in Capital Markets increased $22 million from the prior quarter, driven by higher provisions on performing loans due to unfavourable changes in portfolio mix. Higher provisions on impaired loans also contributed to the increase.

 

  Digitally Enabled Relationship Bank

90-day Active Mobile users increased 16% from a year ago to 4.5 million, resulting in a 20% increase in mobile sessions. Digital adoption increased to 52%.

 

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In September 2019, RBC announced the launch of the RBC Insight Edge™ platform for its business banking clients across Canada. RBC Insight Edge™ is a first-of-its-kind Canadian platform that RBC advisors will use to provide clients with relevant insights about their industry performance, customers, and markets. RBC Insight Edge™ leverages the bank’s expertise in information management and insight development which is safeguarded by rigorous privacy standards to help business owners and managers turn insights into actions that improve client loyalty and productivity and drive growth.

 

- 4 -


 Selected financial and other highlights

 

     As at or for the three months ended             For the year ended  
(Millions of Canadian dollars, except per share, number of and percentage amounts)    October 31
2019
    July 31
2019
    October 31
2018
           October 31
2019
    October 31
2018
 

Total revenue

   $ 11,370     $ 11,544     $ 10,669        $ 46,002     $ 42,576  

Provision for credit losses (PCL)

     499       425       353          1,864       1,307  

Insurance policyholder benefits, claims and acquisition expense (PBCAE)

     654       1,046       494          4,085       2,676  

Non-interest expense

     6,319       5,992       5,882          24,139       22,833  

Income before income taxes

     3,898       4,081       3,940          15,914       15,760  

Net income

   $ 3,206     $ 3,263     $ 3,250              $ 12,871     $ 12,431  

Segments - net income

             

Personal & Commercial Banking

   $ 1,618     $ 1,664     $ 1,538        $ 6,402     $ 6,028  

Wealth Management

     729       639       553          2,550       2,265  

Insurance

     282       204       318          806       775  

Investor & Treasury Services

     45       118       155          475       741  

Capital Markets

     584       653       666          2,666       2,777  

Corporate Support

     (52     (15     20          (28     (155

Net income

   $ 3,206     $ 3,263     $ 3,250        $ 12,871     $ 12,431  

Selected information

                                                 

Earnings per share (EPS) - basic

   $ 2.19     $ 2.23     $ 2.21        $ 8.78     $ 8.39  

- diluted

     2.18       2.22       2.20          8.75       8.36  

Return on common equity (ROE) (1) (2)

     16.2     16.7     17.6        16.8     17.6

Average common equity (1)

   $ 76,600     $ 75,800     $ 71,700        $ 75,000     $ 68,900  

Net interest margin (NIM) - on average earning assets, net (3)

     1.60     1.61     1.65        1.61     1.64

PCL on loans as a % of average net loans and acceptances

     0.32     0.27     0.23        0.31     0.23

PCL on performing loans as a % of average net loans and acceptances

     0.05     0.02     0.03        0.04     0.03

PCL on impaired loans as a % of average net loans and acceptances

     0.27     0.25     0.20        0.27     0.20

Gross impaired loans (GIL) as a % of loans and acceptances

     0.46     0.47     0.37        0.46     0.37

Liquidity coverage ratio (LCR) (4)

     127     122     123        127     123

Capital ratios and Leverage ratio

                                                 

Common Equity Tier 1 (CET1) ratio

     12.1     11.9     11.5        12.1     11.5

Tier 1 capital ratio

     13.2     13.0     12.8        13.2     12.8

Total capital ratio

     15.2     15.0     14.6        15.2     14.6

Leverage ratio

     4.3     4.4     4.4        4.3     4.4

Selected balance sheet and other information (5)

                                                 

Total assets

   $ 1,428,935     $ 1,406,902     $ 1,334,734        $ 1,428,935     $ 1,334,734  

Securities, net of applicable allowance

     249,004       240,661       222,866          249,004       222,866  

Loans, net of allowance for loan losses

     618,856       612,393       576,818          618,856       576,818  

Derivative related assets

     101,560       98,774       94,039          101,560       94,039  

Deposits (3)

     886,005       880,239       836,197          886,005       836,197  

Common equity

     77,816       76,550       73,552          77,816       73,552  

Total capital risk-weighted assets

     512,856       510,664       496,459          512,856       496,459  

Assets under management (AUM)

     762,300       744,800       671,000          762,300       671,000  

Assets under administration (AUA) (6)

     5,678,000       5,588,600       5,533,700          5,678,000       5,533,700  

Common share information

                                                 

Shares outstanding (000s)          - average basic

     1,432,685       1,434,276       1,440,207          1,434,779       1,443,894  

            - average diluted

     1,438,257       1,440,130       1,446,514          1,440,682       1,450,485  

            - end of period

     1,430,096       1,433,954       1,438,794          1,430,096       1,438,794  

Dividends declared per common share

   $ 1.05     $ 1.02     $ 0.98        $ 4.07     $ 3.77  

Dividend yield (7)

     4.0     3.9     3.8        4.1     3.7

Common share price (RY on TSX) (8)

   $ 106.24     $ 104.22     $ 95.92        $ 106.24     $ 95.92  

Market capitalization (TSX) (8)

     151,933       149,447       138,009          151,933       138,009  

Business information (number of)

                                                 

Employees (full-time equivalent) (FTE)

     82,801       84,087       81,870          82,801       81,870  

Bank branches

     1,327       1,328       1,333          1,327       1,333  

Automated teller machines (ATMs)

     4,600       4,586       4,537          4,600       4,537  

Period average US$ equivalent of C$1.00 (9)

   $ 0.755     $ 0.754     $ 0.767              $ 0.752     $ 0.776  

Period-end US$ equivalent of C$1.00

   $ 0.759     $ 0.757     $ 0.760              $ 0.759     $ 0.760  

 

(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 of our 2019 Annual Report.

(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. See the How we measure and report our business segments section and the Key performance and Non-GAAP Measures section of this Earnings Release, our Q4 2019 Supplementary Financial Information and our 2019 Annual Report for additional information.

(3)

Commencing Q4 2019, the interest component and the accrued interest payable recorded on certain deposits carried at Fair Value Through Profit and Loss (FVTPL) previously presented in trading revenue and deposits, respectively, are presented in net interest income and other liabilities respectively. Comparative amounts have been reclassified to conform with this presentation.

(4)

LCR is the average for the three months ended for each respective period and is calculated in accordance with the Office of the Superintendent of Financial Institutions’ (OSFI) Liquidity Adequacy Requirements (LAR) guideline. For further details, refer to the Liquidity and funding risk section of our 2019 Annual Report.

(5)

Represents period-end spot balances.

(6)

AUA includes $15.5 billion and $8.1 billion (July 31, 2019 – $15.7 billion and $8.3 billion; October 31, 2018 – $16.7 billion and $9.6 billion) of securitized residential mortgages and credit card loans, respectively.

(7)

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

(8)

Based on TSX closing market price at period-end.

(9)

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

 

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 Personal & Commercial Banking

 

     As at or for the three months ended  
     October 31     July 31     October 31  
(Millions of Canadian dollars, except number of and percentage amounts and as otherwise noted)    2019     2019     2018  

Net interest income

   $ 3,238     $ 3,221     $ 3,067  

Non-interest income

     1,330       1,325       1,297  

Total revenue

     4,568       4,546       4,364  

PCL on performing assets

     50       15       25  

PCL on impaired assets

     337       326       292  

Total PCL

     387       341       317  

Non-interest expense

     2,007       1,959       1,987  

Net income before income taxes

     2,174       2,246       2,060  

Net income

   $ 1,618     $ 1,664     $ 1,538  
       

Revenue by business

      

Canadian Banking

     4,321       4,304       4,132  

Caribbean & U.S. Banking

     247       242       232  
       

Selected balances and other information

      

ROE

     27.0     28.0     26.7

NIM

     2.82     2.86     2.82

Efficiency ratio (1)

     43.9     43.1     45.5

Operating leverage

     3.7     3.5     2.5

Average total assets

   $         477,900     $         468,400     $         451,100  

Average total earning assets, net

     456,100       447,200       431,500  

Average loans and acceptances, net

     458,900       449,500       432,200  

Average deposits

     405,200       396,300       368,700  

AUA (2) (3)

     283,800       282,200       266,500  

Average AUA

     281,800       280,600       274,900  

AUM (3)

     5,000       4,900       4,700  

PCL on impaired loans as a % of average net loans and acceptances

     0.29     0.29     0.25
       

Other selected information - Canadian Banking

      

Net income

   $ 1,555     $ 1,609     $ 1,463  

NIM

     2.76     2.80     2.77

Efficiency ratio (1)

     42.0     41.5     43.8

Operating leverage

     4.3     1.7     2.3

 

(1)

Calculated as non-interest expense divided by total revenue.

(2)

AUA includes $15.5 billion and $8.1 billion (July 31, 2019 – $15.7 billion and $8.3 billion; October 31, 2018 – $16.7 billion and $9.6 billion) of securitized residential mortgages and credit card loans, respectively.

(3)

Represents period-end spot balances.

Q4 2019 vs. Q4 2018

Net income of $1,618 million increased $80 million or 5% compared to the prior year, largely reflecting average volume growth of 8%, partially offset by higher PCL.

Total revenue increased $204 million or 5%, mainly due to average volume growth of 6% in loans and 10% in deposits in Canadian Banking.

Net interest margin was flat compared to prior year, as higher interest rates were offset by the impact of competitive pricing pressures.

Total PCL increased $70 million or 22%. PCL on impaired loans ratio increased 4 bps, largely driven by higher provisions on impaired loans in our Canadian Banking portfolios. For further details on PCL, refer to Credit quality in the Q4 2019 Business Segment Performance section on page 3 of this Earnings Release.    

Non-interest expense increased $20 million or 1%, primarily attributable to an increase in staff-related costs, partially offset by lower marketing costs.

Q4 2019 vs. Q3 2019

Net income decreased $46 million or 3% from the prior quarter. Higher net interest income driven by average volume growth of 2%, partially offset by lower spreads, was more than offset by higher PCL and the timing of professional fees.

 

- 6 -


Wealth Management
     As at or for the three months ended  
     October 31     July 31     October 31  
(Millions of Canadian dollars, except number of and percentage amounts and as otherwise noted)    2019     2019     2018  

Net interest income

   $ 745     $ 773     $ 679  

Non-interest income

      

Fee-based revenue

     1,786       1,740       1,662  

Transactional and other revenue

     656       516       399  

Total revenue

     3,187       3,029       2,740  

PCL on performing assets

     (1     10       (3

PCL on impaired assets

     35       17       7  

Total PCL

     34       27       4  

Non-interest expense

     2,262       2,183       2,061  

Net income before income taxes

     891       819       675  

Net income

   $ 729     $ 639     $ 553  
       

Revenue by business

      

Canadian Wealth Management

   $ 823     $ 821     $ 796  

U.S. Wealth Management (including City National)

     1,556       1,546       1,345  

U.S. Wealth Management (including City National) (US$ millions)

     1,175       1,168       1,031  

Global Asset Management

     713       567       513  

International Wealth Management

     95       95       86  

Selected balances and other information

                        

ROE

     19.5     17.2     15.9

NIM

     3.30     3.59     3.49

Pre-tax margin (1)

     28.0     27.0     24.6

Average total assets

   $             103,900     $ 99,700     $ 91,300  

Average total earning assets, net

     89,500       85,500       77,100  

Average loans and acceptances, net

     66,700       64,400       57,800  

Average deposits

     100,700       95,300       91,800  

AUA - total (2)

     1,062,200               1,050,800               970,500  

- U.S. Wealth Management (including City National) (2)

     543,300       538,800       483,000  

- U.S. Wealth Management (including City National) (US$ millions) (2)

     412,600       408,100       367,100  

AUM (2)

     755,700       738,300       664,900  

Average AUA

     1,055,700       1,039,700       988,900  

Average AUM

     753,300       729,300       679,900  

PCL on impaired loans as a % of average net loans and acceptances

     0.21     0.11     0.04

Number of advisors (3)

     5,296       5,222       5,042  

 

(1)

Pre-tax margin is defined as net income before income taxes divided by total revenue.

(2)

Represents period-end spot balances.

(3)

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

Q4 2019 vs. Q4 2018

Net income increased $176 million or 32% from the prior year, mainly due to a gain on the sale of the private debt business of BlueBay of $134 million (after-tax) and higher average fee-based client assets.

Total revenue increased $447 million or 16%, mainly due to a gain on the sale of the private debt business of BlueBay of $151 million, higher average fee-based client assets reflecting market appreciation and net sales, and 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. Higher net interest income driven by average loan growth of 15%, partially offset by lower spreads, also contributed to the increase.

Total PCL increased $30 million. PCL on impaired loans ratio increased 17 bps, largely driven by higher provisions on impaired loans in U.S. Wealth Management (including City National), mainly in one sector. For further details on PCL, refer to Credit quality in the Q4 2019 Business Segment Performance section on page 3 of this Earnings Release.

Non-interest expense increased $201 million or 10%, primarily due to the change in the fair value our U.S. share-based compensation plans, which was largely offset in revenue, increased costs in support of business growth, largely reflecting higher staff-related costs, and higher variable compensation commensurate with revenue growth.

Q4 2019 vs. Q3 2019

Net income increased $90 million or 14% from the prior quarter, largely due to a gain on the sale of the private debt business of BlueBay of $134 million (after-tax) and higher average fee-based client assets reflecting market appreciation and net sales. These factors were partially offset by a decrease in net interest income driven by lower spreads, increased costs in support of business growth and higher variable compensation commensurate with revenue growth.

 

- 7 -


Insurance

     As at or for the three months ended  
(Millions of Canadian dollars, except percentage amounts)    October 31
2019
    July 31
2019
    October 31
2018
 

Non-interest income

      

Net earned premiums

   $ 944     $ 914     $ 1,222  

Investment income (1)

     168       505       (230

Fee income

     41       44       47  

Total revenue

     1,153       1,463       1,039  

Insurance policyholder benefits and claims (1)

     572       971       416  

Insurance policyholder acquisition expense

     82       75       78  

Non-interest expense

     153       149       159  

Net income before income taxes

     346       268       386  

Net income

   $ 282     $ 204     $ 318  
       

Revenue by business

      

Canadian Insurance

   $ 609     $ 991     $ 536  

International Insurance

     544       472       503  

Selected balances and other information

                        

ROE

     50.3     39.2     57.2

Premiums and deposits (2)

   $ 1,105     $ 1,079     $ 1,374  

Fair value changes on investments backing policyholder liabilities (1)

     (28     385       (342

 

(1)

Investment income can experience volatility arising from fluctuation of fair value through profit or loss (FVTPL) assets. The investments which support actuarial liabilities are predominantly fixed income assets designated as 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.

Q4 2019 vs. Q4 2018

Net income decreased $36 million or 11% from a year ago, primarily due to lower favourable reinsurance contract renegotiations and lower favourable annual actuarial assumption updates. Higher claims costs and lower favourable investment-related experience also contributed to the decrease. These factors were partially offset by the impact of new longevity reinsurance contracts.

Total revenue increased $114 million or 11%, largely due to the change in fair value of investments backing our policyholder liabilities, which is largely offset in PBCAE as indicated below and realized investment gains. Business growth, largely in longevity reinsurance, also contributed to the increase. These factors were partially offset by lower group annuity sales, which is largely offset in PBCAE as indicated below.

PBCAE increased $160 million or 32%, mainly due to the change in fair value of investments backing our policyholder liabilities, lower favourable investment-related experience, business growth and lower favourable reinsurance contract negotiations. Lower favourable annual actuarial assumption updates, largely related to unfavourable mortality, morbidity and commission experience, partially offset by favourable economic assumptions, and higher claims costs also contributed to the increase. These factors were partially offset by lower group annuity sales and the favourable impact of new longevity reinsurance contracts.

Non-interest expense decreased $6 million or 4%, driven by cost management initiatives.     

Q4 2019 vs. Q3 2019

Net income increased $78 million or 38% from the prior quarter, primarily due to the impact of new longevity reinsurance contracts and favourable reinsurance contract renegotiations in the current quarter, partially offset by lower favourable investment-related experience.

 

Investor & Treasury Services

     As at or for the three months ended  
(Millions of Canadian dollars, except percentage amounts)    October 31
2019
    July 31
2019
    October 31
2018
 

Net interest income

   $ 37     $ (16   $ 19  

Non-interest income

     529       577       605  

Total revenue

     566       561       624  

PCL

     (1     1       -    

Non-interest expense

     508       411       421  

Net income before income taxes

     59       149       203  

Net income

   $ 45     $ 118     $ 155  
       

Selected balances and other information

      

ROE

     4.8     13.2     19.2

Average deposits

   $ 175,200     $ 179,300     $ 163,600  

Average client deposits

     57,600       60,100       59,200  

Average wholesale funding deposits

     117,600       119,200       104,400  

AUA (1)

     4,318,100       4,242,100       4,283,100  

Average AUA

     4,296,300       4,290,900       4,295,200  

 

(1)

Represents period-end spot balances.

 

- 8 -


Q4 2019 vs. Q4 2018

Net income decreased $110 million or 71% from a year ago, primarily due to severance and related costs, as well as lower funding and liquidity revenue.

Total revenue decreased $58 million or 9%, mainly reflecting lower funding and liquidity revenue, primarily driven by the short-term rate environment and lower gains from the disposition of certain securities, as well as lower revenue from our asset services business due to reduced client activity. Lower client deposit revenue, largely driven by margin compression reflecting spread tightening, also contributed to the decrease.

Non-interest expense increased $87 million or 21%, largely driven by severance and related costs associated with repositioning of the business.

Q4 2019 vs. Q3 2019

Net income decreased $73 million or 62% from last quarter, mainly driven by severance and related costs associated with repositioning of the business.

 

Capital Markets

 

     As at or for the three months ended  
     October 31     July 31     October 31  
(Millions of Canadian dollars, except percentage amounts)    2019     2019     2018  

Net interest income (1), (2)

   $ 1,063     $ 1,018     $ 885  

Non-interest income (1), (2)

     924       1,016       1,171  

Total revenue (1)

     1,987       2,034       2,056  

PCL on performing assets

     18       3       17  

PCL on impaired assets

     60       53       15  

Total PCL

     78       56       32  

Non-interest expense

     1,308       1,269       1,244  

Net income before income taxes

     601       709       780  

Net income

   $ 584     $ 653     $ 666  
       

Revenue by business

      

Corporate and Investment Banking

   $ 934     $ 962     $ 1,087  

Global Markets

     1,095       1,106       1,035  

Other

     (42     (34     (66

Selected balances and other information

                        

ROE

     10.0     11.1     11.8

Average total assets

   $ 696,100     $ 676,700     $ 591,700  

Average trading securities

     103,800       101,400       88,000  

Average loans and acceptances, net

     98,100       101,100       90,700  

Average deposits (2)

     76,800       75,900       73,700  

PCL on impaired loans as a % of average net loans and acceptances

     0.24     0.21     0.07

 

(1)

The taxable equivalent basis (teb) adjustment for the three months ended October 31, 2019 was $112 million (July 31, 2019 - $111 million, October 31, 2018 - $142 million).

(2)

Commencing Q4 2019, the interest component and the accrued interest payable recorded on certain deposits carried at FVTPL previously presented in trading revenue and deposits, respectively, are presented in net interest income and other liabilities respectively. Comparative amounts have been reclassified to conform with this presentation.

Q4 2019 vs. Q4 2018

Net income decreased $82 million or 12% from a year ago, largely driven by lower revenue in Corporate and Investment Banking and higher PCL. These factors were partially offset by a lower effective tax rate largely reflecting changes in earnings mix, as well as higher revenue in Global Markets.

Total revenue decreased $69 million or 3%, mainly due to lower M&A activity across all regions and lower equity trading revenue primarily in the U.S. These factors were partially offset by higher fixed income trading revenue, largely in North America.

Total PCL increased $46 million. PCL on impaired loans ratio increased 17 bps, driven by higher provisions on impaired loans in a couple of sectors. For further details on PCL, refer to Credit quality in the Q4 2019 Business Segment Performance section on page 3 of this Earnings Release.

Non-interest expense increased $64 million or 5%, mainly driven by higher costs related to changes in the timing of deferred compensation and higher technology and related costs.

Q4 2019 vs. Q3 2019

Net income decreased $69 million or 11% from the prior quarter, mainly due to lower M&A revenues, primarily in the U.S., lower equity origination, largely in the U.S. and Europe, as well as higher costs related to changes in the timing of deferred compensation. Lower fixed income trading, mainly in the U.S. and higher PCL also contributed to the decrease. These factors were partially offset by a lower effective tax rate, higher foreign exchange trading revenue, mainly in Europe, higher debt origination, largely in the U.S., and higher municipal banking activity.

 

- 9 -


Corporate Support

 

     As at or for the three months ended  
     October 31     July 31     October 31  
(Millions of Canadian dollars)    2019     2019     2018  

Net interest income (loss) (1)

   $ 28     $ 22     $ 17  

Non-interest income (loss) (1)

     (119     (111     (171

Total revenue (1)

     (91     (89     (154

PCL

     1       -         -    

Non-interest expense

     81       21       10  

Net income (loss) before income taxes (1)

     (173     (110     (164

Income (recoveries) taxes (1)

     (121     (95     (184

Net income (2)

   $ (52   $ (15   $ 20  

 

(1)

Teb adjusted.

(2)

Net income (loss) reflects income attributable to both shareholders and Non-Controlling Interests (NCI). Net income attributable to NCI for the three months ended October 31, 2019 was $(1) million (July 31, 2019 – $(1) million; October 31, 2018 – $(1) 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 October 31, 2019 was $112 million, $111 million in the prior quarter and $142 million last year. For further discussion, refer to the How we measure and report our business segments section of our 2019 Annual Report.

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

Q4 2019

Net loss was $52 million in the current quarter, largely due to impact of an unfavourable accounting adjustment.

Q3 2019

Net loss was $15 million in the prior quarter, mainly due to net unfavourable tax adjustments, largely offset by asset/liability management activities.

Q4 2018

Net income was $20 million in the prior year, largely reflecting net unfavourable tax adjustments.

 

- 10 -


 Key performance and non-GAAP measures

 

Additional information about these and other key performance and non-GAAP measures can be found under the Key performance and non-GAAP measures section of our 2019 Annual Report.

Return on 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. ROE does not have a standardized meaning under GAAP. We use ROE as a measure of return on total capital invested in our business. The following table provides a summary of our ROE calculations:

 

Calculation of ROE

 

    For the three months ended           For the year ended  
   

October 31,

2019

          October 31,
2019
 

(Millions of Canadian dollars, except

percentage amounts)

  Personal &
Commercial
Banking
    Wealth
Management
    Insurance     Investor &
Treasury
Services
    Capital
Markets
    Corporate
Support
    Total           Total  

Net income available to common shareholders

  $ 1,593     $ 717     $ 280     $ 41     $ 565     $ (59   $ 3,137       $ 12,591  

Total average common equity (1) (2)

  $ 23,400     $ 14,600     $ 2,200     $ 3,450     $ 22,350     $ 10,600     $ 76,600       $ 75,000  

ROE (3)

    27.0     19.5     50.3     4.8     10.0     n.m.       16.2             16.8

 

(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

Non-GAAP Measures

There were no specified items for the three months ended October 31, 2019, July 31, 2019 and October 31, 2018 as well as for the years ended October 31, 2019 and October 31, 2018.

Given the nature and purpose of our management reporting framework, we use and report certain non-GAAP financial measures, which are not defined, do not have a standardized meaning under GAAP, and may not be comparable with similar information disclosed by other financial institutions. We believe that excluding these specified items from our results is more reflective of our ongoing operating results, will provide readers with a better understanding of management’s perspective on our performance, and enhance the comparability of our comparative periods. For further information, refer to the Key performance and non-GAAP measures section of our 2019 Annual Report.

 

- 11 -


Consolidated Balance Sheets

 

     As at  
(Millions of Canadian dollars)    October 31
2019 (1)
    July 31
2019 (2)
    October 31
2018 (1)
 

Assets

      

Cash and due from banks

   $ 26,310     $ 26,863     $ 30,209  

Interest-bearing deposits with banks

     38,345       31,553       36,471  

Securities

      

Trading

     146,534       140,421       128,258  

Investment, net of applicable allowance

     102,470       100,240       94,608  
       249,004       240,661       222,866  

Assets purchased under reverse repurchase agreements and securities borrowed

     306,961       309,640       294,602  

Loans

      

Retail

     426,086       416,583       399,452  

Wholesale

     195,870       198,941       180,278  
     621,956       615,524       579,730  

Allowance for loan losses

     (3,100     (3,131     (2,912
       618,856       612,393       576,818  

Segregated fund net assets

     1,663       1,602       1,368  

Other

      

Customers’ liability under acceptances

     18,062       17,101       15,641  

Derivatives

     101,560       98,774       94,039  

Premises and equipment

     3,191       3,058       2,832  

Goodwill

     11,236       11,115       11,137  

Other intangibles

     4,674       4,735       4,687  

Other assets

     49,073       49,407       44,064  
       187,796       184,190       172,400  

Total assets

   $ 1,428,935     $ 1,406,902     $ 1,334,734  

Liabilities and equity

      

Deposits

      

Personal

   $ 294,732     $ 287,929     $ 270,154  

Business and government

     565,482       562,371       533,522  

Bank

     25,791       29,939       32,521  
       886,005       880,239       836,197  

Segregated fund net liabilities

     1,663       1,602       1,368  

Other

      

Acceptances

     18,091       17,124       15,662  

Obligations related to securities sold short

     35,069       33,602       32,247  

Obligations related to assets sold under repurchase agreements and securities loaned

     226,586       220,027       206,814  

Derivatives

     98,543       96,857       90,238  

Insurance claims and policy benefit liabilities

     11,401       11,480       10,000  

Other liabilities

     58,137       53,799       53,122  
       447,827       432,889       408,083  

Subordinated debentures

     9,815       9,818       9,131  

Total liabilities

     1,345,310       1,324,548       1,254,779  

Equity attributable to shareholders

      

Preferred shares

     5,707       5,705       6,309  

Common shares

     17,587       17,593       17,617  

Retained earnings

     55,981       54,692       51,112  

Other components of equity

     4,248       4,265       4,823  
     83,523       82,255       79,861  

Non-controlling interests

     102       99       94  

Total equity

     83,625       82,354       79,955  

Total liabilities and equity

   $ 1,428,935     $ 1,406,902     $ 1,334,734  

 

(1)

Derived from audited financial statements.

(2)

Derived from unaudited financial statements.

 

- 12 -


Consolidated Statements of Income

 

     For the three months ended             For the year ended  
(Millions of Canadian dollars, except per share amounts)    October 31
2019 (1)
     July 31
2019 (1)
     October 31
2018 (1)
             October 31
2019 (2)
     October 31
2018 (2)
 

Interest and dividend income

                 

Loans

   $     6,186      $     6,394      $     5,733         $     24,863      $     21,249  

Securities

     1,659        1,770        1,434           6,827        5,670  

Assets purchased under reverse repurchase agreements and securities borrowed

     2,268        2,353        1,642           8,960        5,536  

Deposits and other

     329        93        181           683        566  
       10,442        10,610        8,990                 41,333        33,021  

Interest expense

                 

Deposits and other

     3,175        3,284        2,825           12,988        9,842  

Other liabilities

     2,066        2,218        1,411           8,231        4,905  

Subordinated debentures

     90        90        87           365        322  
       5,331        5,592        4,323                 21,584        15,069  

Net interest income

     5,111        5,018        4,667                 19,749        17,952  

Non-interest income

                 

Insurance premiums, investment and fee income

     1,153        1,463        1,039           5,710        4,279  

Trading revenue

     116        170        185           995        1,150  

Investment management and custodial fees

     1,477        1,440        1,387           5,748        5,377  

Mutual fund revenue

     932        924        896           3,628        3,551  

Securities brokerage commissions

     323        324        349           1,305        1,372  

Service charges

     493        480        459           1,907        1,800  

Underwriting and other advisory fees

     428        488        514           1,815        2,053  

Foreign exchange revenue, other than trading

     242        252        267           986        1,098  

Card service revenue

     252        272        264           1,072        1,054  

Credit fees

     344        322        371           1,269        1,394  

Net gains on investment securities

     16        26        33           125        147  

Share of profit (loss) in joint ventures and associates

     26        21        8           76        21  

Other

     457        344        230           1,617        1,328  
       6,259        6,526        6,002                 26,253        24,624  

Total revenue

     11,370        11,544        10,669                 46,002        42,576  

Provision for credit losses

     499        425        353                 1,864        1,307  

Insurance policyholder benefits, claims and acquisition expense

     654        1,046        494                 4,085        2,676  
             

Non-interest expense

                 

Human resources

     3,720        3,615        3,429           14,600        13,776  

Equipment

     452        449        419           1,777        1,593  

Occupancy

     424        409        400           1,635        1,558  

Communications

     296        281        316           1,090        1,049  

Professional fees

     382        328        418           1,305        1,379  

Amortization of other intangibles

     309        299        279           1,197        1,077  

Other

     736        611        621           2,535        2,401  
       6,319        5,992        5,882                 24,139        22,833  
             

Income before income taxes

     3,898        4,081        3,940           15,914        15,760  

Income taxes

     692        818        690           3,043        3,329  

Net income

   $ 3,206      $ 3,263      $ 3,250               $ 12,871      $ 12,431  
             

Net income attributable to:

                 

Shareholders

   $ 3,201      $ 3,263      $ 3,247         $ 12,860      $ 12,400  

Non-controlling interests

     5        -          3           11        31  
     $ 3,206      $ 3,263      $ 3,250               $ 12,871      $ 12,431  

Basic earnings per share (in dollars)

   $ 2.19      $ 2.23      $ 2.21               $ 8.78      $ 8.39  

Diluted earnings per share (in dollars)

     2.18        2.22        2.20           8.75        8.36  

Dividends per common share (in dollars)

     1.05        1.02        0.98                 4.07        3.77  

 

(1)

Derived from unaudited financial statements.

(2)

Derived from audited financial statements.

 

- 13 -


Consolidated Statements of Comprehensive Income

 

(Millions of Canadian dollars)   

For the three months ended

           For the year ended  
   October 31
2019 (1)
    July 31
2019 (1)
    October 31
2018 (1)
           October 31
2019 (2)
    October 31
2018 (2)
 

Net income

   $ 3,206     $ 3,263     $ 3,250        $ 12,871     $ 12,431  

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

     (26     79       (75        192       (70

Provision for credit losses recognized in income

     (2     (2     (24        (14     (9

Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income

     (58     (15     (18        (133     (94
       (86     62       (117        45       (173

Foreign currency translation adjustments

             

Unrealized foreign currency translation gains (losses)

     180       (1,246     453          65       840  

Net foreign currency translation gains (losses) from hedging activities

     (121     590       (107        5       (237

Reclassification of losses (gains) on foreign currency translation to income

      -         -         -           2        -   

Reclassification of losses (gains) on net investment hedging activities to income

     (1      -         -           1        -   
       58       (656     346          73       603  

Net change in cash flow hedges

             

Net gains (losses) on derivatives designated as cash flow hedges

     57       (118     (12        (559     150  

Reclassification of losses (gains) on derivatives designated as cash flow hedges to income

     (47     11       88          (135     107  
       10       (107     76          (694     257  

Items that will not be reclassified subsequently to income:

             

Remeasurements of employee benefit plans

     125       (581     127          (942     724  

Net fair value change due to credit risk on financial liabilities designated as at fair value through profit or loss

     (41     118       10          51       123  

Net gains (losses) on equity securities designated at fair value through other comprehensive income

     (2     (10     (3        25       (2
       82       (473     134          (866     845  

Total other comprehensive income (loss), net of taxes

     64       (1,174     439          (1,442     1,532  

Total comprehensive income (loss)

   $ 3,270     $ 2,089     $ 3,689              $ 11,429     $ 13,963  

Total comprehensive income attributable to:

             

Shareholders

   $ 3,266     $ 2,090     $ 3,686        $ 11,419     $ 13,931  

Non-controlling interests

     4       (1     3                10       32  
     $ 3,270     $ 2,089     $ 3,689              $ 11,429     $ 13,963  

 

(1)

Derived from unaudited financial statements.

(2)

Derived from audited financial statements.

 

- 14 -


Consolidated Statements of Changes in Equity

 

 

    For the three months ended October 31, 2019 (1)  
                                        Other components of equity                    
(Millions of Canadian dollars)   Preferred
shares
    Common
shares
   

Treasury
shares -

preferred

   

Treasury
shares -

common

    Retained
earnings
           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

  $ 5,706     $ 17,652     $ (1   $ (59   $ 54,692       $ 119     $ 4,162     $ (16   $ 4,265     $ 82,255     $ 99     $ 82,354  

Changes in equity

                         

Issues of share capital

     -        49        -         -         -           -         -         -         -        49        -        49  

Common shares purchased for cancellation

     -        (56      -         -        (418        -         -         -         -        (474      -        (474

Redemption of preferred shares

     -         -         -         -         -           -         -         -         -         -         -         -   

Sales of treasury shares

     -         -        37       1,500        -           -         -         -         -        1,537        -        1,537  

Purchases of treasury shares

     -         -        (35     (1,499      -           -         -         -         -        (1,534      -        (1,534

Share-based compensation awards

     -         -         -         -        (8        -         -         -         -        (8      -        (8

Dividends on common shares

     -         -         -         -        (1,503        -         -         -         -        (1,503      -        (1,503

Dividends on preferred shares and other

     -         -         -         -        (64        -         -         -         -        (64     (1     (65

Other

     -         -         -         -        (1        -         -         -         -        (1      -        (1

Net income

     -         -         -         -        3,201          -         -         -         -        3,201       5       3,206  

Total other comprehensive income (loss), net of taxes

     -         -         -         -        82         (86     59       10       (17     65       (1     64  

Balance at end of period

  $ 5,706     $ 17,645     $ 1     $ (58   $ 55,981             $ 33     $ 4,221     $ (6   $ 4,248     $ 83,523     $ 102     $ 83,625  
    For the three months ended October 31, 2018 (1)  
                                        Other components of equity                    
(Millions of Canadian dollars)   Preferred
shares
    Common
shares
    Treasury
shares -
preferred
    Treasury
shares -
common
    Retained
earnings
           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     $ 17,642     $  -      $ (109   $ 49,424       $ 105     $ 3,801     $ 612     $ 4,518     $ 77,781     $ 91     $ 77,872  

Changes in equity

                         

Issues of share capital

     -        23        -         -         -           -         -         -         -        23        -        23  

Common shares purchased for cancellation

     -        (30      -         -        (217        -         -         -         -        (247      -        (247

Redemption of preferred shares

     -         -         -         -         -           -         -         -         -         -         -         -   

Sales of treasury shares

     -         -        57       1,418        -           -         -         -         -        1,475        -        1,475  

Purchases of treasury shares

     -         -        (54     (1,327      -           -         -         -         -        (1,381      -        (1,381

Share-based compensation awards

     -         -         -         -        (4        -         -         -         -        (4      -        (4

Dividends on common shares

     -         -         -         -        (1,412        -         -         -         -        (1,412      -        (1,412

Dividends on preferred shares and other

     -         -         -         -        (71        -         -         -         -        (71      -        (71

Other

     -         -         -         -        11          -         -         -         -        11        -        11  

Net income

     -         -         -         -        3,247          -         -         -         -        3,247       3       3,250  

Total other comprehensive income (loss), net of taxes

     -         -         -         -        134         (117     346       76       305       439        -        439  

Balance at end of period

  $ 6,306     $ 17,635     $ 3     $ (18   $ 51,112             $ (12   $ 4,147     $ 688     $ 4,823     $ 79,861     $ 94     $ 79,955  

 

(1)

Derived from unaudited financial statements.

 

- 15 -


    For the year ended October 31, 2019 (1)  
                                        Other components of equity                    
(Millions of Canadian dollars)   Preferred
shares
    Common
shares
    Treasury
shares -
preferred
    Treasury
shares -
common
    Retained
earnings
           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

     -         -         -         -        (94              -         -         -         -        (94      -        (94

Adjusted balance at beginning of period

  $ 6,306     $ 17,635     $ 3     $ (18   $ 51,018       $ (12   $ 4,147     $ 688     $ 4,823     $ 79,767     $ 94     $ 79,861  

Changes in equity

                         

Issues of share capital

    350       136        -         -         -           -         -         -         -        486        -        486  

Common shares purchased for cancellation

     -        (126      -         -        (904        -         -         -         -        (1,030      -        (1,030

Redemption of preferred shares

    (950      -         -         -         -           -         -         -         -        (950      -        (950

Sales of treasury shares

     -         -        182       5,340        -           -         -         -         -        5,522        -        5,522  

Purchases of treasury shares

     -         -        (184     (5,380      -           -         -         -         -        (5,564      -        (5,564

Share-based compensation awards

     -         -         -         -        (23        -         -         -         -        (23      -        (23

Dividends on common shares

     -         -         -         -        (5,840        -         -         -         -        (5,840      -        (5,840

Dividends on preferred shares and other

     -         -         -         -        (269        -         -         -         -        (269     (2     (271

Other

     -         -         -         -        5          -         -         -         -        5        -        5  

Net income

     -         -         -         -        12,860          -         -         -         -        12,860       11       12,871  

Total other comprehensive income (loss), net of taxes

     -         -         -         -        (866       45       74       (694     (575     (1,441     (1     (1,442

Balance at end of period

  $ 5,706     $ 17,645     $ 1     $ (58   $ 55,981             $ 33     $ 4,221     $ (6   $ 4,248     $ 83,523     $ 102     $ 83,625  
    For the year ended October 31, 2018 (1)  
                                        Other components of equity                    
(Millions of Canadian dollars)   Preferred
shares
    Common
shares
    Treasury
shares -
preferred
    Treasury
shares -
common
    Retained
earnings
           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   $ 44,801       $ 299     $ 3,545     $ 431     $ 4,275     $ 73,192     $ 599     $ 73,791  

Changes in equity

                         

Issues of share capital

     -        92        -         -         -           -         -         -         -        92        -        92  

Common shares purchased for cancellation

     -        (187      -         -        (1,335        -         -         -         -        (1,522      -        (1,522

Redemption of preferred shares

    (107      -         -         -        2          -         -         -         -        (105      -        (105

Redemption of trust capital securities

     -         -         -         -         -           -         -         -         -         -        (500     (500

Sales of treasury shares

     -         -        259       5,479        -           -         -         -         -        5,738        -        5,738  

Purchases of treasury shares

     -         -        (256     (5,470      -           -         -         -         -        (5,726      -        (5,726

Share-based compensation awards

     -         -         -         -        (10        -         -         -         -        (10      -        (10

Dividends on common shares

     -         -         -         -        (5,442        -         -         -         -        (5,442      -        (5,442

Dividends on preferred shares and other

     -         -         -         -        (285        -         -         -         -        (285     (37     (322

Other

     -         -         -         -        136         (138      -         -        (138     (2      -        (2

Net income

     -         -         -         -        12,400          -         -         -         -        12,400       31       12,431  

Total other comprehensive income (loss), net of taxes

     -         -         -         -        845         (173     602       257       686       1,531       1       1,532  

Balance at end of period

  $ 6,306     $ 17,635     $ 3     $ (18   $ 51,112             $ (12   $ 4,147     $ 688     $ 4,823     $ 79,861     $ 94     $ 79,955  

 

(1)

Derived from audited financial statements.

 

- 16 -


 CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this Earnings Release, in other filings with Canadian regulators or the SEC, in 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, and include our President and Chief Executive Officer’s statements. The forward-looking information contained in this Earnings Release is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, 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 annual report for the fiscal year ended October 31, 2019 (the 2019 Annual Report); including information technology and cyber risk, privacy, data and third party related risk, geopolitical uncertainty, Canadian housing and household indebtedness, regulatory changes, digital disruption and innovation, 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 Earnings Release 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 2019 Annual Report. 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 2019 Annual Report.

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

ACCESS TO QUARTERLY RESULTS MATERIALS

Interested investors, the media and others may review this quarterly Earnings Release, quarterly results slides, supplementary financial information and our 2019 Annual Report at rbc.com/investorrelations.

Quarterly conference call and webcast presentation

Our quarterly conference call is scheduled for December 4, 2019 at 8:00 a.m. (EST) and will feature a presentation about our fourth quarter and 2019 results by RBC executives. It will be followed by a question and answer period with analysts.

Interested parties can access the call live on a listen-only basis at rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (416-340-2217, 866-696-5910, passcode 3486214#). Please call between 7:50 a.m. and 7:55 a.m. (EST).

Management’s comments on results will be posted on our website shortly following the call. A recording will be available by 5:00 p.m. (EST) from December 4, 2019 until February 20, 2020 at rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (905-694-9451 or 800-408-3053, passcode 5654710#).

Media Relations Contact

Gillian McArdle, Senior Director, Communications, Group Risk Management and Finance, gillian.mcardle@rbccm.com, 416-842-4231

Investor Relations Contacts

Nadine Ahn, SVP Wholesale Finance and Investor Relations, nadine.ahn@rbccm.com, 416-974-3355

Asim Imran, Senior Director, Investor Relations, asim.imran@rbc.com, 416-955-7804

Jennifer Nugent, Senior Director, Investor Relations, jennifer.nugent@rbc.com, 416-955-7805

ABOUT RBC

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 85,000+ 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 17 million clients in Canada, the U.S. and 34 other countries. Learn more at rbc.com.

We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at

rbc.com/community-social-impact.

Trademarks used in this earnings release include the LION & GLOBE Symbol, ROYAL BANK OF CANADA and RBC which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or by its subsidiaries under license. All other trademarks mentioned in this earnings release, which are not the property of Royal Bank of Canada, are owned by their respective holders.

 

 

 

- 17 -