Royal Bank of Canada reports strong results for the third quarter of 2007

    The financial information in this press 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 2007 Report to Shareholders and Supplementary financial
    information are available on our website at

    Third quarter 2007 highlights compared with the third quarter of 2006:

    -  Net income of $1,395 million, up 19%.
    -  Diluted earnings per share (EPS) of $1.06, up 18%.
    -  Return on common equity (ROE) of 24.4%, up 130 basis points.
    -  Tier 1 capital ratio of 9.3%, down 30 basis points.
    -  Announced a $.04, or 9%, increase to our quarterly dividend.

    First nine months of 2007 compared with the first nine months of 2006:

    -  Net income of $4,168 million, up 20%.
    -  Diluted EPS of $3.18, up 20.5%.
    -  ROE of 25.1%, up 180 basis points.

    TORONTO, Aug. 24 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE)
reported net income of $1,395 million for the third quarter ended July 31,
2007, up $218 million, or 19%, from a year ago. Diluted EPS were $1.06, up 18%
over the same period. ROE was 24.4% compared to 23.1% a year ago. Our strong
results for the quarter were largely attributable to solid performance across
our Capital Markets, Wealth Management and Canadian Banking segments
reflecting the ongoing successful execution of our growth initiatives, as well
as generally favourable economic and market conditions for most of the quarter
and a lower effective tax rate.
    Commenting on the results, Gordon M. Nixon, President & CEO, said, "I am
very pleased with the results this quarter across all of our business
segments. We continued to extend our leadership position in Canada and
expanded on our strengths in the U.S. and internationally, while delivering
top quartile returns to our shareholders."

    Canadian Banking net income was up 6% over last year. Banking-related
revenue was up 8% as a result of solid growth across all our businesses, as
our lending volumes grew 11% and deposit balances increased 5%.
Banking-related net income decreased slightly from a year ago due to business
reinvestment, increased provisions for credit losses and narrower interest
margins. We have invested significantly in the past year in our client-facing
staff and infrastructure, as evidenced by a 6% increase in our sales and
service personnel. These investments are enabling us to raise our service
levels so that we can increase client loyalty and retention, and should
position us for continued growth. In addition, our provision for credit losses
was up from a cyclically low level a year ago. We also experienced some margin
compression during the quarter, due to a change in product mix and slightly
lower spreads as compared to the prior year.
    Global Insurance net income was up 69% over last year, largely due to
favourable disability claims experience and solid growth in our European life
reinsurance business. Our insurance operations provide a wide range of life,
creditor, health, travel and home and auto insurance to individuals and
businesses in Canada and the U.S., and reinsurance for clients around the
world, and add breadth to our earnings.
    "Our domestic banking-related business continued to underpin our
franchise, delivering a diversified stream of earnings derived from a truly
national retail presence across all markets and products. We are using this
position of strength to reinvest in our businesses in order to better serve
our clients and grow our business," Nixon said.

    Wealth Management net income increased 30% from a year ago, as our
domestic businesses continued to deliver strong results. Canadian Wealth
Management grew fee-based client assets and transactional volumes. RBC Asset
Management continued to have strong net mutual fund sales and all businesses
benefited from favourable market conditions. We continued to build on our
solid foundation in U.S. & International Wealth Management by investing in
infrastructure and people.
    "We are committed to extending our wealth management market leadership
position in Canada, while strategically investing to grow our presence in the
U.S. and globally," Nixon said.

    U.S. & International Banking net income increased 6% from last year as a
result of strong revenue growth in RBC Dexia Investor Services (IS), coupled
with our expansion of banking in the U.S. Southeast. RBC Dexia IS revenue was
up 38% due in part to strong market activity and the acquisition of new
clients. This quarter, RBC Centura completed the integration of Flag and the
AmSouth branches and opened 2 de novo branches, growing its retail
distribution network by 26% from last year. Caribbean banking also continued
to deliver consistent profitable results.
    "We are very pleased with the success of RBC Dexia IS and the progress of
our international banking operations," Nixon said.

    Capital Markets net income increased 19% from a year ago on strong
performance across most businesses. This growth largely reflected robust
mergers and acquisitions (M&A) and equity origination activities, higher
foreign exchange trading results and gains associated with credit derivative
contracts. Increased earnings were partially offset by lower fixed income
trading results, which were affected by widening credit spreads, concerns over
the U.S. subprime market and reduced liquidity in the market in late July.
    "A key strength of our Capital Markets business is the diversity of our
earnings across geographies and products, which enables us to manage through
challenging market environments," Nixon said.
    Commenting on the impact of recent market conditions on RBC, Nixon added,
"Risk is now more appropriately priced, which we believe will have a positive
long-term impact on our performance. RBC has prudent risk management practices
designed to proactively manage exposures and control risk. We have a
comprehensive framework for managing liquidity and funding, and our current
liquidity and funding position is sound. We have a strong capital position,
with a 9.3% Tier 1 capital ratio that is well above most global financial
institutions. The diversity of our businesses across multiple products,
markets and geographies is one of the core strengths of RBC and I believe we
can continue to deliver solid results to our shareholders."
    Nixon added, "I'll briefly comment on a few specific topical areas of
recent concern - the U.S. subprime market, leveraged buy-outs (LBOs), hedge
funds and non-bank sponsored asset-backed commercial paper (ABCP) programs. We
do not originate U.S. subprime loans, and have minimal exposure to U.S.
subprime residential mortgage-backed securities and collateralized debt
obligations. Our underwriting commitments to LBOs are minimal, as is our
exposure to hedge funds. Finally, we have nominal exposure to Canadian
non-bank sponsored ABCP conduits with general market disruption liquidity
facilities, which is the market segment that has been experiencing illiquidity
recently. None of this paper is held in RBC Asset Management or in any of
RBC's private client accounts."

    Progress on strategic goals

    During the third quarter of 2007, we continued to make advances to
    strengthen our leadership position in Canada.

    -  We were recognized for our leadership and innovation when we became
       the first major Canadian bank to offer investors socially responsible
       mutual funds and the first to issue a tailor-made pricing option for
       self-directed investors with RBC Series D Funds.
    -  RBC Dominion Securities received the highest overall rating for
       bank-affiliated firms as rated by advisors in the Investment Executive
       2007 Account Manager's Report Card among all bank-affiliated firms and
       continued to rank as Canada's top full service brokerage by assets in
       the third quarter, as noted by Investor Economics.
    -  RBC Capital Markets was ranked No. 1 in Canadian debt markets and top
       advisor in Canadian M&A activity by Euromoney in its 2007 Awards of
    -  Our commitment to environmental, social and governance issues was
       recognized by Corporate Knights magazine when it named RBC as Canada's
       Best Corporate Citizen for 2007.

    In the U.S., we continued to build our presence in three key areas:
    banking, wealth management and capital markets.

    -  In banking, we have maintained our focus on becoming the bank for
       business, business owners and professionals in the U.S. Southeast, and
       strengthened RBC Centura's ability to compete in key markets through
       our expanded retail network.
    -  In Wealth Management, we completed the acquisition of J.B. Hanauer &
       Co., a private company with over 135 advisors and $10 billion in
       assets under administration, extending our distribution network in the
       key markets of Florida, New Jersey and Pennsylvania.
    -  In Capital Markets, we completed the acquisition of Seasongood &
       Mayer, LLC, Ohio's top-ranked public finance firm and leading
       underwriter of municipal debt.

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

    -  RBC Capital Markets was ranked the No. 1 convertible debt underwriter
       globally for companies with market capitalizations of US$1 billion or
       less by Bloomberg for the first half of 2007.
    -  Our wealth management business continued expanding our Latin American
       presence in Brazil, Uruguay, Mexico, and Venezuela with new offices
       also planned in other key Latin American locations.

    Progress toward our 2007 objectives

    We established our 2007 annual objectives at the end of 2006 based on our
economic and business outlooks. Year-to-date, our performance is tracking well
to these objectives:

                                    2007 Objectives   Nine-month Performance
    1. Diluted earnings per
       share growth                            10%+                    20.5%
    2. Operating leverage(1)       greater than 3%                      2.8%
    3. Return on common
       equity (ROE)                            20%+                    25.1%
    4. Tier 1 capital ratio(2)                  8%+                     9.3%
    5. Dividend payout ratio                40-50%                       41%
    (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 expense. This is a non-GAAP
        measure. For further information, including a reconciliation, refer
        to the Key performance and non-GAAP measures section of our Q3 2007
        Report to Shareholders.
    (2) Calculated using guidelines issued by the Office of the
        Superintendent of Financial Institutions Canada (OSFI).

    Year-to-date diluted EPS growth of 20.5% and ROE of 25.1% compared
favourably to our stated annual growth objectives, reflecting strong
performance across most of our businesses. Our nine-month operating leverage
of 2.8% is slightly below our annual objective of greater than 3%, reflecting
strong business growth and investment in growth initiatives, including
acquisitions. Our capital position remains strong with a Tier 1 capital ratio
of 9.3%, comfortably above our target of greater than 8%. In light of our
earnings, we are raising our quarterly common share dividend by $.04, or 9%,
to $.50 in the fourth quarter.
    "Over the last few years, we've taken advantage of our excellent
performance to reinvest significantly in our businesses, and our ability to
serve the needs of our clients in every market is as strong as ever," Nixon
said. "I am confident that RBC is well positioned to make the most of the
opportunities presented by the volatility and uncertainty in the current
    "I would like to thank our clients for continuing to choose RBC and
recognize the hard work of our 70,000 employees for their outstanding
contribution this quarter and throughout the year," Nixon said.



                                         As at or for the three months ended
    (C$ millions, except per share,          July 31    April 30     July 31
     number of and percentage amounts)          2007        2007        2006
      Total revenue                       $    5,480  $    5,669  $    5,206
      Non-interest expense                     3,165       3,148       2,861
      Provision for credit losses                178         188          99
      Insurance policyholder benefits,
       claims and acquisition expense            343         677         627
      Net income before income taxes and
       non-controlling interest in
       subsidiaries                            1,794       1,656       1,619
      Net loss from discontinued
       operations                                  -           -         (17)
    Net income                            $    1,395  $    1,279  $    1,177
    Selected information
      Earnings per share (EPS) - basic    $     1.07  $     0.99  $     0.91
      Earnings per share (EPS) - diluted  $     1.06  $     0.98  $     0.90
      Return on common equity (ROE)(1)          24.4%       23.5%       23.1%
      Net interest margin(2)                    1.33%       1.35%       1.38%
    Capital ratios(3)
      Tier 1 capital ratio                       9.3%        9.3%        9.6%
      Total capital ratio                       11.4%       11.7%       12.4%
    Selected balance sheet and other
      Total assets                        $  604,582  $  589,076  $  523,969
      Securities                             190,219     198,509     172,803
      Consumer loans                         163,118     156,356     146,502
      Business and government loans           69,681      69,293      59,418
      Deposits                               376,325     372,728     334,702
      Risk-adjusted assets(3),(4)            250,197     243,202     218,482
      Assets under management                159,900     159,000     134,100
      Assets under administration
        - RBC                                563,100     560,900     504,700
        - RBC Dexia IS(5)                  2,190,800   2,119,000   1,832,700
    Common share information
      Shares outstanding (000s)
        - average basic                    1,272,913   1,272,212   1,279,300
        - average diluted                  1,288,227   1,288,415   1,297,340
        - end of period                    1,275,780   1,275,327   1,281,279
      Dividends declared per share        $     0.46  $     0.46  $     0.36
      Dividend yield                             3.2%        3.3%        3.1%
      Common share price (RY on TSX) -
       close, end of period               $    54.09  $    57.82  $    46.03
      Market capitalization (TSX)             69,007      73,739      58,977
    Period average USD equivalent of
     C$1.00(6)                                  .937        .874        .896
    Period-end USD equivalent of C$1.00         .937        .901        .884

                                              As at or for the
                                              nine months ended
    (C$ millions, except per share,          July 31     July 31
     number of and percentage amounts)          2007        2006
      Total revenue                       $   16,847  $   15,288
      Non-interest expense                     9,380       8,540
      Provision for credit losses                528         270
      Insurance policyholder benefits,
       claims and acquisition expense          1,536       1,898
      Net income before income taxes and
       non-controlling interest in
       subsidiaries                            5,403       4,580
      Net loss from discontinued
       operations                                  -         (28)
    Net income                            $    4,168  $    3,466
    Selected information
      Earnings per share (EPS) - basic    $     3.22  $     2.68
      Earnings per share (EPS) - diluted  $     3.18  $     2.64
      Return on common equity (ROE)(1)          25.1%       23.3%
      Net interest margin(2)                    1.34%       1.37%
    Capital ratios(3)
      Tier 1 capital ratio                       9.3%        9.6%
      Total capital ratio                       11.4%       12.4%
    Selected balance sheet and other
      Total assets                        $  604,582  $  523,969
      Securities                             190,219     172,803
      Consumer loans                         163,118     146,502
      Business and government loans           69,681      59,418
      Deposits                               376,325     334,702
      Risk-adjusted assets(3),(4)            250,197     218,482
      Assets under management                159,900     134,100
      Assets under administration
        - RBC                                563,100     504,700
        - RBC Dexia IS(5)                  2,190,800   1,832,700
    Common share information
      Shares outstanding (000s)
        - average basic                    1,273,246   1,281,815
        - average diluted                  1,289,947   1,301,165
        - end of period                    1,275,780   1,281,279
      Dividends declared per share        $     1.32  $     1.04
      Dividend yield                             3.2%        3.0%
      Common share price (RY on TSX) -
       close, end of period               $    54.09  $    46.03
      Market capitalization (TSX)             69,007      58,977
    Period average USD equivalent of
     C$1.00(6)                                  .889        .879
    Period-end USD equivalent of C$1.00         .937        .884
    (1) Return on common equity is 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 OSFI.
    (4) Risk adjusted assets for April 30, 2007 have been restated to reflect
        a $563 million adjustment related to equity derivative contracts.
    (5) Assets under administration - RBC Dexia IS represents the total
        assets under administration (AUA) as at June 30, 2007, of the joint
        venture, of which we have a 50% ownership interest.
    (6) 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", "opportunity" and words and
expressions of similar import are intended to identify forward-looking
    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, including the impact from the continuing volatility in the
U.S. subprime markets and lack of liquidity in the financial markets; 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; fraud by internal or external
parties; 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 Q3 2007 Report to Shareholders on our website at

    Quarterly conference call and webcast presentation

    The conference call is scheduled for Friday, August 24, 2007 at 1:30 p.m.
(EDT). At that time, senior executives will comment on the results for the
third quarter of 2007 and respond to questions from analysts and institutional
investors. Interested parties can listen to our third 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. (EDT). A recording of
    the conference call can be accessed after 5:00 p.m. (EDT) on August 24
    until November 30, 2007 at 416-695-5800 or 1-800-408-3053 by entering
    passcode 3230762 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 15 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; Bill Anderson, Director, Investor Relations,, (416) 955-7804; Amy Cairncross, Director, Investor
Relations,, (416) 955-7809

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