Royal Bank of Canada reports record first quarter 2007 results

    The financial information in this press release is in Canadian dollars
    and based on financial statements prepared in accordance with Canadian
    generally accepted accounting principles (GAAP), unless otherwise noted.
    Our Q1 2007 Report to Shareholders and Supplementary financial
    information are available on our website at

    First quarter 2007 highlights compared with the first quarter of 2006(1):

    -  Net income of $1,494 million, up 27.6%.
    -  Diluted earnings per share (EPS) of $1.14, up 28.1%.
    -  Return on common equity (ROE) of 27.3%, up 340 basis points.
    -  Revenue of $5,698 million, up $738 million, or 15%.
    -  Non-interest expense of $3,067 million, up $316 million, or 11%.
    -  Announced a $.06, or 15%, increase to our quarterly dividend.

    TORONTO, March 2 /CNW/ - Royal Bank of Canada (RY on TSX & NYSE) reported
record net income of $1,494 million for the first quarter ended January 31,
2007, up $323 million, or 27.6%, from a year ago. Diluted EPS were $1.14, up
28.1%. ROE was 27.3%, compared to 23.9% a year ago. This growth was largely
attributable to strong earnings across all our business segments including an
increase of 31% in RBC Canadian Personal and Business, 27% in RBC Capital
Markets and 48% in RBC U.S. and International Personal and Business.
    Commenting on the results, Gordon M. Nixon, President & CEO, said, "We
have started 2007 with outstanding results that reflect continued investments
in all our business segments. Execution of our strategic initiatives is
helping us improve market share in Canada and expand our businesses globally."
    Total revenue increased $738 million, or 15%, from a year ago primarily
due to solid growth in our wealth management and banking businesses driven by
expansion, targeted acquisitions and the successful execution of our strategic
initiatives. Stronger equity and debt trading results due to significant
transactions and increased revenue from certain equity trading strategies also
contributed to the increase. These factors were partially offset by lower
insurance-related revenue mainly due to the negative impact of the
implementation of the new financial instruments accounting standards which was
largely offset in insurance policyholder benefits, claims and acquisition
    Non-interest expense increased $316 million, or 11%, from a year ago
primarily due to higher variable compensation on improved business
performance. Higher costs in support of our growth, including increased
staffing levels in our distribution network and additional branches, also
contributed to the increase.
    Total provision for credit losses increased $115 million from a year ago,
primarily reflecting a $50 million reversal of the general allowance in the
prior year and lower corporate recoveries this quarter. Higher provisions in
our personal unsecured credit line, small business and credit card portfolios
in the current period also contributed to the increase.
    Insurance policyholder benefits, claims and acquisition expense decreased
$136 million, or 21%, from the prior year. The decrease mainly reflected the
positive impact of the implementation of the new financial instruments
accounting standards, and the prior year hurricane-related charge. These
factors were partially offset by growth in our European life reinsurance and
domestic businesses.
    Income tax expense increased $103 million, or 31%, over the prior year
largely commensurate with higher earnings before income taxes. The effective
income tax rate of 22.3% in the current quarter compares to 22.0% a year ago.
    RBC Canadian Personal and Business net income increased $208 million, or
31%, from a year ago. This was largely due to strong growth across all
business lines, reflecting the ongoing successful execution of our growth
initiatives. The improvement in our results also reflected the prior year
hurricane-related charge and a favourable adjustment related to the
reallocation of foreign investment capital in the current quarter.
    RBC U.S. and International Personal and Business net income increased
$48 million, or 48%, from the prior year. In U.S. dollars, net income was up
US$40 million, or 45%, largely driven by the successful execution of our
growth initiatives including the acquisition of Flag Financial Corporation
    RBC Capital Markets net income increased $90 million, or 27%, from a year
ago largely driven by broad-based growth across most businesses and product
    Compared to the fourth quarter of 2006, our consolidated net income
increased $232 million, or 18%, and diluted EPS rose $.18, or 19%. This
increase largely reflected higher trading results in RBC Capital Markets,
strong earnings growth across all business lines in RBC Canadian Personal and
Business and solid business growth in RBC U.S. and International Personal and
Business due to the successful execution of our growth initiatives including
the acquisition of Flag. These factors were partially offset by higher
variable compensation primarily in RBC Capital Markets due to stronger
business performance.
    As at January 31, 2007, the Tier 1 capital ratio of 9.2% was down from
9.5% a year ago, and down from 9.6% at the end of the previous quarter as the
increase in risk-adjusted assets related to our lending and trading activities
exceeded our strong internal capital generation. The Total capital ratio of
11.2% was down 160 basis points (bps) from 12.8% a year ago, and down 70 bps
from 11.9% last quarter.

    (1) Effective November 1, 2006, results reported on a total consolidated
        basis are comparable to results reported as from continuing
        operations for the corresponding prior periods.


    Our earnings this quarter of $1.49 billion were driven by revenue growth
in most business lines as we continued to execute growth initiatives in Canada
and abroad. This performance reflected the strength of our diverse group of
businesses globally.
    In Canada, we have expanded our sales force and opened branches to extend
our distribution network and build capacity around client relationships. In
the U.S., we have completed key acquisitions and are continuing to expand our
distribution network to help us pursue our growth initiatives. Globally, we
continued to introduce new products and solutions to meet our clients' needs.
We also continued to invest in technologies to make doing business with us
even easier.  These efforts have helped improve our market share in Canada and
grow our businesses globally. We have deployed capital through asset growth in
our businesses, targeted acquisitions, dividends and share buybacks, all of
which are helping to generate strong returns for our shareholders.
    Our 2007 annual objectives were established at the end of 2006 based on
our economic and business outlooks. Our first quarter results are tracking
well to these objectives:

                                                                    Q1 2007
                                                2007 Objectives   Performance
    1. Diluted earnings per share growth              10%+           28.1%
    2. Operating leverage(1)                   (greater than) 3%      6%
    3. Return on common equity (ROE)                  20%+           27.3%
    4. Tier 1 capital ratio(2)                         8%+            9.2%
    5. Dividend payout ratio                         40-50%           35%
    (1) Our operating leverage is defined as the difference between our
        revenue growth rate (as adjusted) and non-interest expense growth
        rate (as adjusted). Revenue is based on a taxable equivalent basis
        and excludes consolidated variable interest entities (VIEs),
        accounting adjustments related to the new financial instruments
        accounting standards and Global Insurance revenue. Non-interest
        expense excludes Global Insurance-related expense. This is a non-GAAP
        measure. For further information including a reconciliation, refer to
        the Key performance and non-GAAP measures section.
    (2) Calculated using guidelines issued by the Office of the
        Superintendent of Financial Institutions Canada (OSFI).

    Our diluted EPS growth of 28.1% and ROE of 27.3% compare favourably with
our EPS growth objective of more than 10% and ROE objective of more than 20%.
Our three-month operating leverage of 6% compares with our objective of
greater than 3%. We have maintained a solid capital position, with a Tier 1
capital ratio of 9.2%, which remains comfortably above our target of greater
than 8%. In light of our continuing strong earnings, we are raising our
quarterly common share dividend by $.06, or 15%, to $.46 in the second quarter
to help us achieve our 2007 dividend payout objective of 40 - 50%.

    We continued to make progress on our strategic goals this quarter.

    1. To be the undisputed leader in financial services in Canada
       -  RBC opened 4 new bank branches and began to upgrade 55 branches.
          We also celebrated 10 years of online banking and today serve over
          3 million customers online.
       -  Our installation of Fraudulent Device Inhibitors in our ATM network
          is helping us combat illegal activity and maximize client security.
       -  RBC Asset Management launched a number of new products including
          the RBC Select Aggressive Growth Fund and two new RBC O'Shaughnessy
       -  As part of our commitment to continuously improve the value we
          provide to retail investors, we reduced management fees on
          international and global equity mutual funds.
       -  RBC Asset Management was the first fund company in Canada to
          implement the new securities regulation requiring independent
          oversight of mutual funds, continuing its leadership in the area of
          fund governance.
       -  RBC Insurance opened 3 new branches, bringing the total to 13.
       -  RBC Capital Markets was named Top Dealmaker in 2006 (National
       -  RBC Capital Markets led Canada Housing Trust's $8.1 billion bond
          issue, which was the largest bond issue in Canadian history.

    2. To build on our strengths in banking, wealth management and capital
       markets in the United States
       -  RBC Centura completed the acquisition of Flag Financial Corporation
       -  RBC Dain Rauscher's approved lines under the RBC Premier Line of
          Credit program, which is offered through RBC Global Private
          Banking, grew in the quarter to reach US$950 million, up from
          US$500 million a year ago.
       -  RBC Capital Markets completed the acquisitions of Carlin Financial
          Group and Daniels & Associates, L.P.
       -  RBC Capital Markets expanded its capabilities to serve mining
          sector clients by creating a base metals desk in New York to
          complement the team established in London a year ago.

    3. To be a premier provider of selected global financial services
       -  RBC Capital Markets led 2007's first two US$1 billion Eurobond
       -  RBC Capital Markets continued its dominance of the Maple bond
          market, as joint-lead and bookrunner for the largest fixed-rate
          single tranche Maple bond in the sovereigns, supranationals and
          agencies sector.
       -  RBC Capital Markets completed its first AIM transaction by advising
          Australian-based uranium mining company, Berkeley Resources Ltd.,
          on its new listing on the London exchange.
       -  Global Private Banking was named the top provider of trust services
          in the U.K. (Euromoney).

    A new Wealth Management segment

    Starting next quarter, we will report our results under our new business
structure that includes our newly created Wealth Management segment. This new
segment will consist of businesses that directly serve the growing needs of
affluent and high net worth clients globally, and businesses that provide
asset management and trust products.
    We believe that global demand for wealth management products and services
will continue to rise as global economies develop and demographics shift. This
organizational realignment positions us well to grow our wealth management
presence aggressively over the next several years.

    Our Corporate Responsibility

    We know that a company's value cannot be judged solely on its current
financial results and understand that today's investors demand top performing
companies include a longer-term view of how those results were achieved. When
making business decisions, we consider the present and future interests of all
our stakeholders, including our clients, employees, investors and communities.
I believe this holistic approach has contributed significantly to our
long-term success.
    We recently released our 2006 Corporate Responsibility Report and Public
Accountability Statement, which provides an overview of RBC's social, economic
and environmental commitments and our impact on the communities and countries
in which we do business. It also summarizes our business and workplace
practices, which we take seriously to achieve sustainable prosperity for all
stakeholders. We have been one of Canada's leaders in corporate responsibility
and the report highlights global honours that we are privileged to have
received. For example, RBC was again named one of the world's top 100
sustainable companies (Innovest, Corporate Knights, BusinessWeek), and we
continue to be included on the Dow Jones Sustainability Index, FTSE4Good Index
and Jantzi Social Index.
    We were also privileged to have ranked number two for Canada's Most
Admired Corporate Cultures (Waterstone Human Capital, Canadian Business), and
as one of the Top 100 Brands in Banking (Brand Finance, The Banker) and the
most valuable brand in Canada (Interbrand).
    We intend to continue to demonstrate sustainability principles through
our business practices and performance, and provide leadership in select
social and environmental areas where we can make a difference.
    Finally, I would like to acknowledge our employees for their outstanding
performance, which benefits all our stakeholders, and thank our clients for
continuing to provide us with their business.


    Gordon M. Nixon
    President & Chief Executive Officer



                                         As at or for the three months ended
    (C$ millions, except per share,     January 31   October 31   January 31
     number of and percentage amounts)        2007         2006         2006
      Total revenue                    $     5,698  $     5,349  $     4,960
      Non-interest expense                   3,067        2,955        2,751
      Provision for credit losses              162          159           47
      Insurance policyholder benefits,
       claims and acquisition expense          516          611          652
      Net income before income taxes
       and non-controlling interest
       in subsidiaries                       1,953        1,624        1,510
      Net loss from discontinued
       operations                                -           (1)          (1)
    Net income                         $     1,494  $     1,262  $     1,171
    Selected information
      Earnings per share (EPS)
       - basic                         $      1.16  $      0.97  $      0.90
      Earnings per share (EPS)
       - diluted                       $      1.14  $      0.96  $      0.89
      Return on common equity (ROE)(1)       27.3%        23.9%        23.9%
      Net interest margin(2)                 1.33%        1.31%        1.39%
    Capital ratios(3)
      Tier 1 capital ratio                    9.2%         9.6%         9.5%
      Total capital ratio                    11.2%        11.9%        12.8%
    Selected balance sheet and
     other information
      Total assets                     $   571,615  $   536,780  $   487,874
      Securities                           196,851      184,869      165,658
      Consumer loans                       151,867      148,732      138,581
      Business and government loans         67,851       61,207       55,615
      Deposits                             365,606      343,523      314,872
      Risk-adjusted assets(3)              242,290      223,709      204,247
      Assets under management              157,700      143,100      128,500
      Assets under administration
        - RBC                              561,200      525,800      486,000
        - RBC Dexia IS(4)                2,050,000    1,893,000    1,738,100
    Common share information
      Shares outstanding (000s)
        - average basic                  1,274,354    1,274,697    1,284,333
        - average diluted                1,293,085    1,293,864    1,304,378
        - end of period                  1,275,950    1,280,890    1,290,983
      Dividends declared per share     $      0.40  $      0.40  $      0.32
      Dividend yield                          3.0%         3.3%         2.9%
      Common share price (RY on TSX)
       - close, end of period          $     54.60  $     49.80  $     44.54
      Market capitalization (TSX)           69,667       63,788       57,494
    Period average USD equivalent
     of C$1.00(5)                      $      .861  $      .867  $      .865
    Period-end USD equivalent
     of C$1.00                                .850         .890         .878

                                           January 31, 2007 vs.
    (C$ millions, except per share,     October 31   January 31
     number of and percentage amounts)        2006         2006
      Total revenue                    $       349  $       738
      Non-interest expense                     112          316
      Provision for credit losses                3          115
      Insurance policyholder benefits,
       claims and acquisition expense          (95)        (136)
      Net income before income taxes
       and non-controlling interest
       in subsidiaries                         329          443
      Net loss from discontinued
       operations                                1            1
    Net income                         $       232  $       323
    Selected information
      Earnings per share (EPS)
       - basic                         $      0.19  $      0.26
      Earnings per share (EPS)
       - diluted                       $      0.18  $      0.25
      Return on common equity (ROE)(1)     340 bps      340 bps
      Net interest margin(2)                 2 bps      (6) bps
    Capital ratios(3)
      Tier 1 capital ratio                (40) bps     (30) bps
      Total capital ratio                 (70) bps    (160) bps
    Selected balance sheet and
     other information
      Total assets                     $    34,835       83,741
      Securities                            11,982       31,193
      Consumer loans                         3,135       13,286
      Business and government loans          6,644       12,236
      Deposits                              22,083       50,734
      Risk-adjusted assets(3)               18,581       38,043
      Assets under management               14,600       29,200
      Assets under administration
        - RBC                               35,400       75,200
        - RBC Dexia IS(4)                  157,000      311,900
    Common share information
      Shares outstanding (000s)
        - average basic                       (343)      (9,979)
        - average diluted                     (779)     (11,293)
        - end of period                     (4,940)     (15,033)
      Dividends declared per share     $         -  $      0.08
      Dividend yield                      (30) bps       10 bps
      Common share price (RY on TSX)
       - close, end of period          $      4.80  $     10.06
      Market capitalization (TSX)            5,879       12,173
    Period average USD equivalent
     of C$1.00(5)                      $     (0.01) $     (0.00)
    Period-end USD equivalent
     of C$1.00                               (0.04)       (0.03)
    (1) Average common equity and Return on common equity are calculated
        using month-end balances for the period.
    (2) Net interest margin (NIM) is calculated as Net interest income
        divided by Average assets. Average assets are calculated using
        methods intended to approximate the average of the daily balances for
        the period.
    (3) Calculated using guidelines issued by the Office of the
        Superintendent of Financial Institutions Canada (OSFI).
    (4) Assets under administration - RBC Dexia IS represents the total
        assets under administration (AUA) as at December 31, 2006, of the
        joint venture, of which we have a 50% ownership interest.
    (5) Average amounts are calculated using month-end spot rates for the


    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 such
statements in this press release, in other filings with Canadian regulators or
the United States Securities and Exchange Commission (SEC), in reports to
shareholders or in other communications. These forward-looking statements
include, among others, statements with respect to our medium-term and 2007
objectives, and strategies to achieve our objectives, as well as statements
with respect to our beliefs, outlooks, plans, objectives, expectations,
anticipations, estimates and intentions. The words "may," "could," "should,"
"would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate,"
"expect," "intend," "forecast," "objective" and words and expressions of
similar import are intended to identify forward-looking statements.
    By their very nature, forward-looking statements involve numerous factors
and assumptions, and are subject to inherent risks and uncertainties, both
general and specific, which give rise to the possibility that predictions,
forecasts, projections and other forward-looking statements 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 and other risks identified
and discussed under the Risk management section; general business and economic
conditions in Canada, the United States and other countries in which we
conduct business; the impact of the movement of the Canadian dollar relative
to other currencies, particularly the U.S. dollar and British pound; 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 including tax laws; judicial or regulatory judgments and legal
proceedings; the accuracy and completeness of information concerning our
clients and counterparties; successful execution of our strategy; our ability
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; and our
ability to attract and retain key employees and executives. Other factors that
may affect future results include: the timely and successful development of
new products and services; the successful expansion and new development of our
distribution channels and realizing increased revenue from these channels;
global capital markets activity; technological changes and our reliance on
third parties to provide components of our business infrastructure; unexpected
changes in consumer spending and saving habits; the possible impact on our
business from disease or illness that affects local, national or global
economies; disruptions to public infrastructure, including transportation,
communication, power and water; the possible impact on our businesses of
international conflicts and other political developments including those
relating to the war on terrorism; and our success in anticipating and managing
the associated risks.
    We caution that the foregoing list of important factors that may affect
future results is not exhaustive. 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. 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 factors can be found under the Risk
management section and in our 2006 Annual Report under the Risk management and
Additional risks that may affect future results sections.

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


    Interested investors, the media and others may review this quarterly
earnings release, our quarterly results slides, supplementary financial
information and our Q1 2007 Report to Shareholders on our website at

    Quarterly and year-end conference call and webcast presentation

    The conference call is scheduled for Friday, March 2, 2007 at 1:30 p.m.
(EST). At that time, senior executives will comment on the results for the
first quarter of 2007 and respond to questions from analysts and institutional
    Interested parties can listen to our first quarter results conference
call with analysts and institutional investors live, and archived, via the
Internet and toll-free telephone:

    via the Internet at:

    via telephone at:
    416-340-2216 (within Toronto) or 1-866-898-9626 (toll-free outside
    Toronto). Please call between 1:20 and 1:25 p.m. (EST). A recording of
    the conference call can be accessed after 5:00 p.m. (EST) on March 2
    until May 25, 2007, at 416-695-5800 or 1-800-408-3053, by entering
    passcode 3213863 followed by the number sign.


    Royal Bank of Canada (RY on TSX and 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. Our corporate
support team enables business growth with expert professional advice and
state-of-the-art processes and technology. We employ approximately 70,000
full- and part-time employees who serve more than 14 million personal,
business, public sector and institutional clients through offices in North
America and 34 countries around the world.

For further information:

For further information: Media Relations Contact: Beja Rodeck, Media
Relations,, (416) 974-5506 (within Toronto) or
1-888-880-2173 (toll-free outside Toronto); Investor Relations Contacts:
Marcia Moffat, Head, Investor Relations,, (416)
955-7803; Dave Mun, Senior Manager, Investor Relations,,
(416) 955-7808

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