Royal Bank of Canada reports third quarter 2008 results



    
    The financial information in this earnings release is in Canadian dollars
    and is based on financial statements prepared in accordance with Canadian
    generally accepted accounting principles (GAAP), unless otherwise noted.
    Our Q3 2008 Report to Shareholders and supplementary financial
    information are available on our website at rbc.com/investorrelations.

    Third quarter 2008 compared to third quarter 2007

    -   Net income of $1,262 million (down 10% from $1,395 million)
    -   Diluted earnings per share (EPS) of $.92 (down $.14 from $1.06)
    -   Revenue of $5,912 million (up 8% from $5,480 million)
    -   Impact of writedowns - Revenue: $498 million
                             - Net income: $263 million, EPS: $.20
    -   Return on common equity (ROE) of 19.4% (down 500 basis points from
        24.4%)
    -   Tier 1 capital ratio of 9.5%

    First nine months of 2008 compared to first nine months of 2007

    -   Net income of $3,435 million (down 18% from $4,168 million)
    -   Diluted EPS of $2.57 (down $.61 from $3.18)
    -   Revenue of $16,513 million (down 2% from $16,847 million)
    -   Impact of writedowns - Revenue: $1,782 million
                             - Net income: $886 million, EPS: $.68
    -   ROE of 18.7% (down 640 basis points from 25.1%)
    

    TORONTO, Aug. 28 /CNW/ - Royal Bank of Canada (RY on TSX & NYSE) today
reported net income of $1,262 million for the third quarter ended July 31,
2008, down $133 million or 10% from a year ago and up $334 million or 36% from
last quarter. We had strong results in Canadian Banking, Wealth Management,
Insurance and certain businesses in Capital Markets. Earnings over last year
were reduced by writedowns of $498 million before-tax ($263 million after-tax
and compensation adjustments), as well as higher provisions for credit losses
largely in our U.S. banking operations.
    "We have been able to effectively manage our costs, while seizing revenue
opportunities and investing for future growth. Our record revenue and solid
performance through difficult market conditions demonstrate the strength of
our diversified businesses. I am confident we have the right strategies and
disciplines in place for long-term success," said Gordon M. Nixon, President
and CEO.
    Canadian Banking net income was $709 million, up 19% from last year
reflecting strong volume growth across all business lines and a continued
focus on cost management, partially offset by margin compression. Solid
revenue growth combined with our cost containment efforts produced 8.1%
operating leverage.
    Wealth Management net income was $186 million, up 5% or $9 million over
last year on higher fee-based revenue, including the contribution from our
Phillips, Hager & North acquisition, and higher loan and deposit balances in
international wealth management. This quarter, we continued to lead the
Canadian mutual fund industry in total net fund sales. Transaction volumes
across our full service brokerage businesses were lower due to weak market
conditions.
    Insurance net income was $137 million, up 33% or $34 million over last
year mainly due to higher favourable actuarial adjustments reflecting
management actions and assumption changes, and solid business growth, largely
in our reinsurance business.
    International Banking net loss was $16 million, down $103 million from
net income of $87 million a year ago. The decline was due to higher provisions
for credit losses reflecting higher impaired loans in our U.S. residential
builder finance, commercial and retail loan portfolios and a writedown of
$53 million before-tax ($33 million after-tax) on the investment portfolio in
our U.S. banking operations. These factors were partially offset by the
contribution from our acquisitions of Alabama National BanCorporation and RBTT
Financial Group and business growth at RBC Dexia IS.
    Capital Markets net income was $269 million, down $91 million from a year
ago due to writedowns of $342 million before-tax ($153 million after-tax and
compensation adjustments). Although equity origination activity, distributions
on private equity investments and M&A activities were down from a strong
quarter last year, we had strong results in certain trading businesses,
including fixed income, equity derivatives and foreign exchange in addition to
higher gains on credit derivative contracts used to economically hedge our
corporate lending portfolio.

    
    Progress on Strategic Goals

    We continue to strengthen our leadership position in Canada

    -   On May 1, we completed the acquisition of Phillips, Hager & North,
        which, combined with our existing businesses, provides us access to
        all client segments through all distribution channels (including a
        significant presence in the institutional business) while creating
        the largest mutual fund company in Canada.
    -   Over the course of the quarter, we opened 7 bank branches and 5
        insurance branches, added 70 offsite ATMs, renovated 74 branches, and
        began renovating 63 additional branches to further improve access and
        enhance the experience of our clients.
    -   On August 7, we announced a definitive agreement to acquire ABN
        AMRO's Canadian commercial leasing division. This acquisition is a
        strategic fit for our commercial leasing business and will provide us
        with further capabilities to serve our clients' leasing needs.

    In the U.S., we continue to build our presence in banking, wealth
management and capital markets

    -   On August 5, we completed the acquisition of Richardson Barr & Co, a
        leading Houston-based energy advisory firm specializing in
        acquisitions and divestitures in the exploration and production
        sector.
    -   On June 23, we acquired a 10% interest in O'Shaughnessy Asset
        Management, an experienced and respected money management firm
        running quantitative investment strategies, extending our existing
        strong partnership with the firm and allowing RBC Asset Management to
        further participate in industry growth in the U.S.
    -   On June 20, we completed the acquisition of Ferris, Baker Watts,
        adding more than 330 experienced financial consultants, 42 branch
        offices and approximately US$19 billion in assets under
        administration. U.S. Wealth Management now has over 2,100 financial
        consultants operating in 201 retail branches across 42 states.

    Internationally, we continue to build on our strengths in selected markets
and product areas

    -   On June 16, we completed the acquisition of RBTT Financial Group,
        creating one of the most expansive banking networks in the Caribbean
        with a presence in 18 countries and territories across the region.
    -   In May, we extended our integrated global financial services,
        allowing Canadian-based small and commercial businesses and their
        foreign subsidiaries access to a full range of global treasury
        management solutions for day-to-day banking in Europe and
        Asia/Pacific.
    

    Year-to-date Performance versus 2008 Objectives

    We established our 2008 objectives in November 2007 based on our economic
and business outlooks for 2008 at that time. While we acknowledged that early
2008 would be challenging, with continued market volatility and slower
economic growth, we did not anticipate these conditions to persist for as long
as they have nor the impact to be as broad. Year-to-date progress towards our
objectives has been affected largely by the writedowns, higher provisions for
credit losses in U.S. banking and spread compression. Our capital position
remains strong with a Tier 1 capital ratio of 9.5%, well above our objective
of greater than 8%.

    
    -------------------------------------------------------------------------
                                     2008 Objectives  Nine-month Performance
                                    -----------------------------------------
    1. Diluted earnings per share
        growth                                7%-10%                   (19)%
    2. Defined operating
        leverage(1)                  greater than 3%                  (1.8)%
    3. Return on common equity (ROE)            20%+                   18.7%
    4. Tier 1 capital ratio(2)                   8%+                    9.5%
    5. Dividend payout ratio                 40%-50%                     58%
    -------------------------------------------------------------------------

    (1) Non-GAAP measure and refers to the difference between our revenue and
        non-interest expense growth rates (each as adjusted). For further
        information, refer to the Key performance and non-GAAP measures
        section in our Q3 2008 Report to Shareholders.
    (2) Calculated using guidelines issued by the Office of the
        Superintendent of Financial Institutions (OSFI) under Basel II.
    

    For 2008, we expect our Tier 1 capital ratio will remain well above our
8%+ objective. Market conditions have significantly impacted our ability to
meet our other performance objectives, and markets continue to reflect
liquidity and pricing pressures. We hold trading and certain other investment
assets at fair value, with the value determined using market prices or
valuation models that depend on assumptions regarding market conditions. As a
result, the fair value of these assets and their impact on our financial
results will depend on future market developments. Though we face near-term
challenges, we remain focused on delivering long-term growth to our
shareholders.


    
    SELECTED FINANCIAL HIGHLIGHTS

                                         As at or for the three months ended
                                         ------------------------------------
    (C$ millions, except per share,          July 31    April 30     July 31
     number of and percentage amounts)          2008        2008        2007
    -------------------------------------------------------------------------
      Total revenue                       $    5,912  $    4,954  $    5,480
      Provision for credit losses (PCL)          334         349         178
      Insurance policyholder benefits,
       claims and acquisition expense            553         548         343
      Non-interest expense                     3,272       2,970       3,165
      Net income before income taxes and
       non-controlling interest in
       subsidiaries                            1,753       1,087       1,794
    Net income                            $    1,262  $      928  $    1,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segments - net income (loss)
      Canadian Banking                    $      709  $      604  $      596
      Wealth Management                          186         182         177
      Insurance                                  137         104         103
      International Banking                      (16)         38          87
      Capital Markets                            269          13         360
      Corporate Support                          (23)        (13)         72
    Net income                            $    1,262  $      928  $    1,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Selected information
      Earnings per share (EPS) - basic    $     0.93  $     0.70  $     1.07
      Earnings per share (EPS) - diluted  $     0.92  $     0.70  $     1.06
      Return on common equity (ROE)(1)         19.4%       15.6%       24.4%
      Return on risk capital (RORC)(2)         31.1%       26.0%       36.9%
      Net interest margin (NIM)(3)             1.42%       1.37%       1.32%
      Specific PCL to average net loans
       and acceptances                         0.47%       0.54%       0.29%
      Gross impaired loans (GIL) as a %
       of loans and acceptances                0.76%       0.70%       0.38%
    Capital ratios and multiples(4)
      Tier 1 capital                            9.5%        9.5%        9.3%
      Total capital                            11.7%       11.5%       11.4%
      Assets-to-capital multiple               19.4X       20.1X       20.5X
    Selected balance sheet and other
     information
      Total assets                        $  636,792  $  627,471  $  604,582
      Securities                             176,377     175,352     190,219
      Retail loans                           190,669     181,802     165,554
      Wholesale loans                         81,603      77,822      67,245
      Deposits                               409,091     399,425     376,325
      Average common equity(1)                25,400      23,550      22,250
      Average risk capital(2)                 15,750      14,150      14,700
      Risk-adjusted assets(4)                254,189     249,242     250,197
      Assets under management (AUM)          248,400     173,100     159,900
      Assets under administration (AUA)
       - RBC(5)                              649,600     612,800     627,500
       - RBC Dexia IS(6)                   2,803,900   2,697,000   2,843,400
    Common share information
      Shares outstanding (000s)
       - average basic                     1,323,293   1,287,245   1,272,913
       - average diluted                   1,340,239   1,298,069   1,288,227
       - end of period                     1,338,308   1,294,084   1,275,780
      Dividends declared per share        $     0.50  $     0.50  $     0.46
      Dividend yield                            4.4%        4.2%        3.2%
      Common share price (RY on TSX) -
       close, end of period               $    47.25  $    48.02  $    54.09
      Market capitalization (TSX)             63,235      62,142      69,007
    Business information (number of)
      Employees (full-time equivalent)(7)     73,773      66,748      65,537
      Bank branches                            1,729       1,648       1,524
      Automated teller machines                4,897       4,634       4,377
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Period average US$ equivalent of
     C$1.00(8)                            $    0.988  $    0.994  $    0.937
    Period-end US$ equivalent of C$1.00        0.977       0.993       0.937
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                As at or for the
                                               nine months ended
                                         ------------------------
    (C$ millions, except per share,          July 31     July 31
     number of and percentage amounts)          2008        2007
    -------------------------------------------------------------
      Total revenue                       $   16,513  $   16,847
      Provision for credit losses (PCL)          976         528
      Insurance policyholder benefits,
       claims and acquisition expense          1,717       1,536
      Non-interest expense                     9,362       9,380
      Net income before income taxes and
       non-controlling interest in
       subsidiaries                            4,458       5,403
    Net income                            $    3,435  $    4,168
    -------------------------------------------------------------
    Segments - net income (loss)
      Canadian Banking                    $    1,986  $    1,748
      Wealth Management                          549         582
      Insurance                                  330         340
      International Banking                       53         221
      Capital Markets                            586       1,106
      Corporate Support                          (69)        171
    Net income                            $    3,435  $    4,168
    -------------------------------------------------------------
    Selected information
      Earnings per share (EPS) - basic    $     2.60  $     3.22
      Earnings per share (EPS) - diluted  $     2.57  $     3.18
      Return on common equity (ROE)(1)         18.7%       25.1%
      Return on risk capital (RORC)(2)         30.9%       37.9%
      Net interest margin (NIM)(3)             1.39%       1.33%
      Specific PCL to average net loans
       and acceptances                         0.48%       0.31%
      Gross impaired loans (GIL) as a %
       of loans and acceptances                0.76%       0.38%
    Capital ratios and multiples(4)
      Tier 1 capital                            9.5%        9.3%
      Total capital                            11.7%       11.4%
      Assets-to-capital multiple               19.4X       20.5X
    Selected balance sheet and other
     information
      Total assets                        $  636,792  $  604,582
      Securities                             176,377     190,219
      Retail loans                           190,669     165,554
      Wholesale loans                         81,603      67,245
      Deposits                               409,091     376,325
      Average common equity(1)                24,000      21,850
      Average risk capital(2)                 14,550      14,500
      Risk-adjusted assets(4)                254,189     250,197
      Assets under management (AUM)          248,400     159,900
      Assets under administration (AUA)
       - RBC(5)                              649,600     627,500
       - RBC Dexia IS(6)                   2,803,900   2,843,400
    Common share information
      Shares outstanding (000s)
       - average basic                     1,294,946   1,273,246
       - average diluted                   1,308,387   1,289,947
       - end of period                     1,338,308   1,275,780
      Dividends declared per share        $     1.50  $     1.32
      Dividend yield                            4.2%        3.2%
      Common share price (RY on TSX) -
       close, end of period               $    47.25  $    54.09
      Market capitalization (TSX)             63,235      69,007
    Business information (number of)
      Employees (full-time equivalent)(7)     73,773      65,537
      Bank branches                            1,729       1,524
      Automated teller machines                4,897       4,377
    -------------------------------------------------------------
    Period average US$ equivalent of
     C$1.00(8)                            $    0.994  $    0.889
    Period-end US$ equivalent of C$1.00        0.977       0.937
    -------------------------------------------------------------
    (1) Calculated using month-end balances for the period.
    (2) Calculated using methods intended to approximate the average of the
        daily balances for the period. For more information, refer to the Key
        performance and non-GAAP measures section of our Q3 2008 Report to
        Shareholders.
    (3) Calculated as Net interest income divided by Average assets. Average
        assets are calculated per note (2) above.
    (4) Effective Q1 2008, capital ratios and risk-adjusted assets are
        calculated using the OSFI Basel II guidelines. Prior period capital
        ratios and risk-adjusted assets are calculated using the OSFI Basel I
        guidelines. Effective Q2 2008, the OSFI amended the treatment of the
        general allowance in the calculation of the Basel II Assets-to-
        capital multiple. Prior period multiples have not been revised. For
        discussion of Basel II, refer to the Capital Management section of
        our Q3 2008 Report to Shareholders.
    (5) Assets under administration (AUA) - RBC has been revised as of Q1
        2008 to include mutual funds sold through our Canadian branch
        network. Prior periods have been revised to reflect this change.
    (6) AUA - RBC Dexia IS represents the total AUA of the joint venture as
        at June 30, 2008, of which we have a 50% ownership interest.
    (7) Effective Q1 2008, we excluded statutory holiday pay for part-time
        employees from our full-time equivalent (FTE) calculation consistent
        with our management reporting framework. Prior periods reflect the
        change to the FTE calculation.
    (8) Calculated using month-end spot rates for the period.
    

    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 United States Securities and Exchange Commission,
in reports to shareholders and in other communications. Forward-looking
statements include, but are not limited to, statements relating to our
medium-term and 2008 objectives, our strategic goals and priorities and the
economic and business outlook for us, for each of our business segments and
for the Canadian, United States and international economies. Forward-looking
statements are typically identified by words such as "believe," "expect,"
"forecast," "anticipate," "intend," "estimate," "goal," "plan" and "project"
and similar expressions of future or conditional verbs such as "will," "may,"
"should," "could," or "would".
    By their very nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties, which give
rise to the possibility that our predictions, forecasts, projections,
expectations or conclusions will not prove to be accurate, that our
assumptions may not be correct and that our objectives, strategic goals and
priorities will not be achieved. We caution readers not to place undue
reliance on these statements as a number of important factors could cause our
actual results to differ materially from the expectations expressed in such
forward-looking statements. These factors include credit, market, operational,
liquidity and funding risks, and other risks discussed in our Q3 2008 Report
to Shareholders and our 2007 Annual Report to Shareholders; general business
and economic conditions in Canada, the United States and other countries in
which we conduct business, including the impact from the continuing volatility
in the U.S. subprime and related markets and lack of liquidity in financial
markets; the impact of the movement of the Canadian dollar relative to other
currencies, particularly the U.S. dollar, British pound and Euro; the effects
of changes in government monetary and other policies; the effects of
competition in the markets in which we operate; the impact of changes in laws
and regulations; judicial or regulatory judgments and legal proceedings; the
accuracy and completeness of information concerning our clients and
counterparties; our ability to successfully execute our strategies and to
complete and integrate strategic acquisitions and joint ventures successfully;
changes in accounting standards, policies and estimates, including changes in
our estimates of provisions and allowances; our ability to attract and retain
key employees and executives; changes to our credit ratings; and development
and integration of our distribution networks.
    We caution that the foregoing list of important factors is not exhaustive
and other factors could also adversely affect our results. When relying on our
forward-looking statements to make decisions with respect to us, investors and
others should carefully consider the foregoing factors and other uncertainties
and potential events. Except as required by law, we do not undertake to update
any forward-looking statement, whether written or oral, that may be made from
time to time by us or on our behalf.
    Additional information about these and other factors can be found in our
Q3 2008 Report to Shareholders and in our 2007 Annual Report to Shareholders.
    Information contained in or otherwise accessible through the websites
mentioned does not form part of this document. All references in this document
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 Q3 2008 Report to Shareholders on our website at
rbc.com/investorrelations.

    Quarterly conference call and webcast presentation

    Our quarterly conference call is scheduled for Thursday, August 28, 2008
at 12:30 p.m. (EDT) and will feature a presentation about our third quarter
and year-to-date results by RBC executives. It will be followed by a question
and answer period with analysts.
    Interested parties can access the call live on a listen-only basis at:
www.rbc.com/investorrelations/ir_events_presentations.html or by telephone
(416-340-2216 or 1-866-898-9626). Please call between 12:20 p.m. and
12:25 p.m. (EDT).
    Speakers' notes will be posted on our website shortly after the call.
Also, a recording will be available by 5 p.m. on August 28 until November 28,
2008 at: www.rbc.com/investorrelations/ir_quarterly.html or by telephone
(416-695-5800 or 1-800-408-3053, passcode 3265764 followed by the number
sign).

    ABOUT RBC

    Royal Bank of Canada (RY on TSX & NYSE) and its subsidiaries operate
under the master brand name of RBC. We are Canada's largest bank as measured
by assets and market capitalization and one of North America's leading
diversified financial services companies. We provide personal and commercial
banking, wealth management services, insurance, corporate and investment
banking, and transaction processing services on a global basis. We employ
approximately 75,000 full- and part-time employees who serve more than
17 million personal, business, public sector and institutional clients through
offices in Canada, the U.S. and 46 other countries. For more information,
please visit rbc.com.

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





For further information:

For further information: Media Relations Contact: Beja Rodeck, Media
Relations, beja.rodeck@rbc.com, (416) 974-5506 (within Toronto) or
1-888-880-2173 (toll-free outside Toronto); Investor Relations Contacts:
Marcia Moffat, Head, Investor Relations, marcia.moffat@rbc.com, (416)
955-7803; Bill Anderson, Director, Investor Relations,
william.anderson@rbc.com, (416) 955-7804; Amy Cairncross, Director, Investor
Relations, amy.cairncross@rbc.com, (416) 955-7809


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