Royal Bank of Canada reports second quarter 2009 results

    All amounts are in Canadian dollars, and are based on our unaudited
    Interim Consolidated Financial Statements and related notes prepared in
    accordance with Canadian generally accepted accounting principles (GAAP),
    unless otherwise noted. Our Q2 2009 Report to Shareholders and
    supplementary financial information are available on our website at

    TORONTO, May 29 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE)
earnings for the second quarter ended April 30, 2009 were impacted by a
previously announced goodwill impairment charge of $1 billion. As a result,
RBC reported a net loss of $50 million while cash net income was $993 million,
up 4% from $955 million last year.(1) The goodwill impairment charge is a
non-cash item and does not affect our ongoing operations or our capital
ratios. Our results were also impacted by the market environment-related
losses and general provision noted below. Canadian Banking generated volume
growth across all businesses and Capital Markets produced strong earnings by
capitalizing on market conditions.
    "The environment remains challenging, but our company is strong and we
are taking advantage of opportunities in the marketplace. This quarter, we
generated cash net income of almost $1 billion," said Gordon M. Nixon, RBC
President and CEO. "Clients are choosing to do more business with us,
reflecting our brand, our financial strength and our expertise. Across our
enterprise, our people are providing advice to help our clients create what is
important to them today as they plan for their future."

    Second quarter 2009 compared to second quarter 2008

    -   Net loss of $50 million (down from net income of $928 million)
    -   Cash net income of $993 million (up from $955 million)(1)
    -   Diluted loss per share of $.07 (down from earnings per share (EPS) of
    -   Cash diluted EPS of $.66 (down from $.72)(1)
    -   Return on common equity (ROE) of (1.4%) (down from 15.7%)
    -   Cash ROE of 12.3% (down from 16.0%)(1)
    -   Tier 1 capital ratio of 11.4%

    First six months of 2009 compared to first six months of 2008

    -   Net income of $1,003 million (down from $2,173 million)
    -   Cash net income of $2,097 million (down from $2,222 million)(1)
    -   Diluted EPS of $.65 (down from $1.64) - Cash diluted EPS of $1.43
        (down from $1.68)(1)
    -   ROE of 6.2% (down from 18.6%)
    -   Cash ROE of 13.3% (down from 18.8%)(1)

    Items impacting second quarter 2009 results

    -   Goodwill impairment charge reduced net income by $1 billion
        (US$838 million) and EPS by $.71 - previously disclosed April 16,
    -   Market environment-related losses reduced net income by $296 million
        and EPS by $.21
    -   General provision reduced net income by $146 million and EPS by

    (1) We compute "cash" measures by excluding the goodwill impairment
        charge and the after-tax impact of amortization of other intangibles.
        Cash measures are non-GAAP measures. See page 2 of this release for
        more information including a reconciliation.

    Canadian Banking net income was $581 million, down 4% or $23 million from
last year reflecting higher PCL, continued spread compression and lower mutual
fund distribution fees. We generated volume growth across all businesses,
expanded our branch network and continued to deliver positive operating
leverage. Compared to last quarter, earnings were down 17% reflecting higher
PCL and the negative impact of seasonal factors, including fewer days this

    Wealth Management net income was $126 million, down 31% or $56 million
over last year due to the impact of capital markets declines on fee-based
revenue, and transaction volumes. Net income was down 2% or $2 million from
last quarter from spread compression and lower fee-based revenue.

    Insurance net income was $113 million, up 9% or $9 million over last year
and flat from last quarter. The increase from last year was due to lower
funding charges, business growth and our ongoing focus on cost management.
This was partially offset by unfavourable actuarial adjustments compared to
the prior year.

    International Banking net loss of $1,126 million compares to net income
of $38 million last year and net loss of $144 million last quarter. The net
loss in the current quarter was primarily due to the non-cash goodwill
impairment charge noted above, reflecting the prolonged challenging economic
conditions, particularly in the U.S. Higher PCL, largely in U.S. banking, also
contributed to the loss.

    Capital Markets net income was $420 million, up $407 million from a year
ago driven by higher revenue from our sales and trading businesses,
particularly U.K. and U.S. fixed income, money markets, and U.S. based equity
businesses. Also contributing to the increase were lower market
environment-related losses and gains on credit valuation adjustments on
certain derivative contracts. Compared to last quarter, net income was up $195
million largely from lower market environment-related losses and gains on
valuation adjustments noted above.

    Credit quality - The current quarter included a specific PCL of $751
million and a general provision of $223 million. The general provision
reflects higher provisions predominately in U.S. banking and, to a lesser
extent, our Canadian retail lending portfolio on loans that have not yet been
specifically identified as impaired.

    In International Banking, specific PCL increased $198 million from a year
ago and $89 million over last quarter. This relates primarily to U.S. banking
and is due to continued credit deterioration in our wholesale and retail
portfolios consistent with the sustained recessionary conditions.
    In Canadian Banking, specific PCL increased $127 million from a year ago
and $81 million over last quarter. This reflects higher impaired business
loans, as well as increased loss rates in our unsecured portfolio including
credit cards and personal loans. Our residential real estate portfolio
continued to perform well.
    In Capital Markets, specific PCL increased $87 million from a year ago
and decreased $15 million from last quarter. The increase over last year
relates to a few impaired loans in our U.S. corporate lending portfolio. The
current quarter included a further provision on loans to certain
RBC-administered conduits. We also had realized gains this quarter on
securities collateral that was recovered in the first quarter of 2009 from a
specific prime brokerage client in our Canadian corporate portfolio.

    Non-GAAP measures

    We use and report certain "cash" measures consistent with our management
framework. These cash measures do not have standardized meanings under GAAP
and are not necessarily comparable with similar information disclosed by other
financial institutions. We believe that excluding the goodwill impairment
charge and the after-tax impact of amortization of other intangibles from net
income will provide readers with a better understanding of management's
perspective on our performance. Cash net income, cash EPS and cash ROE should
also enhance the comparability of our financial performance in the second
quarter of 2009 with the corresponding prior periods. The following table
provides a calculation of cash net income, cash EPS, and cash ROE.

                                    For the three             For the six
                                     months ended             months ended
    (C$ millions, except    ----------------------------- -------------------
     per share and             April   January     April     April     April
     percentage amounts)     30 2009   31 2009   30 2008   30 2009   30 2008
    ----------------------------------------------------- -------------------
    Net (loss) income       $    (50) $  1,053  $    928  $  1,003  $  2,173
      add: Goodwill
       impairment charge       1,000         -         -     1,000         -
    ----------------------------------------------------- -------------------
    Adjusted net income     $    950  $  1,053  $    928  $  2,003  $  2,173
      add: After-tax effect
       of amortization of
       other intangibles(1)       43        51        27        94        49
    ----------------------------------------------------- -------------------
    Cash net income         $    993  $  1,104  $    955  $  2,097  $  2,222
    ----------------------------------------------------- -------------------
    ----------------------------------------------------- -------------------
    Diluted (loss) earnings
     per share(2) (in
     dollars)               $  (0.07) $   0.73  $   0.70  $   0.65  $   1.64
      add: Impact of
       goodwill impairment
       charge                   0.71         -         -      0.72         -
    ----------------------------------------------------- -------------------
    Adjusted diluted
     earnings per
     share(2)(3) (in
     dollars)               $   0.63  $   0.73  $   0.70  $   1.36  $   1.64
      add: After-tax effect
       of amortization of
       other intangibles(1)     0.03      0.04      0.02      0.07      0.04
    ----------------------------------------------------- -------------------
    Cash diluted earnings
     per share(2) (in
     dollars)               $   0.66  $   0.77  $   0.72  $   1.43  $   1.68
    ----------------------------------------------------- -------------------
    ----------------------------------------------------- -------------------
    ROE(2)                    (1.4)%     13.8%     15.7%      6.2%     18.6%
    Adjusted ROE(2)(3)         12.0%     13.8%     15.7%     13.0%     18.6%
    Cash ROE(2)                12.3%     14.3%     16.0%     13.3%     18.8%
    ----------------------------------------------------- -------------------
    ----------------------------------------------------- -------------------

    (1) Excludes the amortization of computer software intangibles.
    (2) Based on actual balances before rounding.
    (3) Non-GAAP measure. Refer to the Key performance and non-GAAP measures
        section of Q2 2009 Report to Shareholders.


    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
(SEC), in reports to shareholders and in other communications. Forward-looking
statements include, but are not limited to, statements relating to our
medium-term 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. 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 and our strategic priorities and
objectives, and may not be appropriate for other purposes. 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 - many of which are beyond our
control and the effects of which can be difficult to predict - include:
credit, market, operational, liquidity and funding risks, and other risks
discussed in the Risk, capital and liquidity management section of our Q2 2009
Report to Shareholders and in our 2008 Annual Report to Shareholders; market
environment impacts, including the impact of the continuing volatility in the
financial markets and lack of liquidity in certain credit markets, and our
ability to effectively manage our liquidity and our capital ratios and
implement effective risk management procedures; general business and economic
conditions, including recessionary conditions in Canada, the United States and
certain other countries in which we conduct business; changes in accounting
standards, policies and estimates, including changes in our estimates of
provisions, allowances and valuations; 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 fiscal, 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; our
ability to successfully execute our strategies and to complete and integrate
strategic acquisitions and joint ventures successfully; 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 the
Risk, capital and liquidity management section of our Q2 2009 Report to
Shareholders, and in our 2008 Annual Report to Shareholders.
    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.


    Interested investors, the media and others may review this quarterly
earnings release, quarterly results slides, supplementary financial
information and our Q2 2009 Report to Shareholders on our website at

    Quarterly conference call and webcast presentation

    Our quarterly conference call is scheduled for Friday, May 29, 2009 at
1:30 p.m. (EDT) and will feature a presentation about our second quarter
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: or by telephone
(416-340-2216 or 1-866-898-9626). Please call between 1:20 p.m. and 1:25 p.m.
    Speakers' notes will be posted on our website shortly following the call.
Also, a recording will be available by 5:00 pm (EDT) on May 29 until August
31, 2009 at: or by telephone
(416-695-5800 or 1-800-408-3053, passcode 8321037 followed by the number


    Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate
under the master brand name RBC. We are Canada's largest bank as measured by
assets and market capitalization, one of North America's leading diversified
financial services companies and among the largest banks in the world, as
measured by market capitalization. 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
80,000 full- and part-time employees who serve more than 18 million personal,
business, public sector and institutional clients through offices in Canada,
the U.S. and 53 other countries. For more information, please visit

    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 by its subsidiaries under license. RBC
    Dexia IS and affiliated Dexia companies are licensed users of the RBC

For further information:

For further information: Media Relations Contact: Stephanie Lu, Head,
Media & Public Relations,, (416) 974-5506 (within
Toronto) or 1-888-880-2173 (toll-free outside Toronto); Investor Relations
Contacts: Marcia Moffat, VP & Head, Investor Relations,,
(416) 955-7803; Bill Anderson, Director, Investor Relations,, (416) 955-7804; Josie Merenda, Director, Investor
Relations,, (416) 955-7809

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