株探米国株
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エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
6-K
 
 
Report of Foreign Private Issuer
Pursuant to Rule
13a-16
or
15d-16
under the Securities Exchange Act of 1934
For the month of August 2023
Commission File Number:
001-13928
 
 
Royal Bank of Canada
(Translation of registrant’s name into English)
 
 
 
200 Bay Street
Royal Bank Plaza
Toronto, Ontario
Canada M5J 2J5
Attention: Senior Vice-President,
Associate General Counsel
& Secretary
  
1 Place Ville Marie
Montreal, Quebec
Canada H3B 3A9
Attention: Senior Vice-President,
Associate General Counsel
& Secretary
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F
or Form
40-F.
Form
20-F  ☐            Form
40-F  ☒
This report on Form
6-K,
management’s discussion and analysis and unaudited interim condensed consolidated financial statements included in exhibit 99.2, and exhibit 99.3 hereto are incorporated by reference as exhibits into the Registration Statement on Form
F-3
(File
No. 333-259205)
and the Registration Statements on Form
S-8
(File Nos.
333-12036,
333-12050,
333-13052,
333-13112,
333-117922,
333-207754,
333-207750,
333-207748,
333-252536
and
333-268715).
 
 
 

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
ROYAL BANK OF CANADA
Date: August 24, 2023
 
 
By:
 
/s/ Nadine Ahn
 
 
Name:
 
Nadine Ahn
 
 
Title:
 
Chief Financial Officer

EXHIBIT INDEX
 
Exhibit
  
Description of Exhibit
99.1
  
Third Quarter 2023 Earnings
Release
99.2
  
Third Quarter 2023 Report to Shareholders (which includes management’s discussion and analysis and unaudited interim condensed consolidated financial statements)
99.3
  
Return on Equity and Assets Ratios
  
Rule
13a-14(a)/15d-14(a)
Certifications
31.1
  
- Certification of the Registrant’s Chief Executive Officer
31.2
  
- Certification of the Registrant’s Chief Financial Officer
101
  
Interactive Data File (formatted as Inline XBRL)
104
  
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

EX-99.1 2 d510945dex991.htm EX-99.1 EX-99.1
   Exhibit 99.1
LOGO   

THIRD QUARTER 2023

EARNINGS RELEASE

 

  ROYAL BANK OF CANADA REPORTS THIRD QUARTER 2023 RESULTS

 

All amounts are in Canadian dollars and are based on financial statements presented in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Our Q3 2023 Report to Shareholders and Supplementary Financial Information are available at: http://www.rbc.com/investorrelations.

 

Net income 

 

$3.9 Billion 

 

Up 8% YoY

 

   

Diluted EPS1 

 

$2.73 

 

Up 9% YoY 

 

   

Total PCL2 

 

$616 Million 

 

PCL on loans ratio3

down 1 bp4 QoQ

    

   

ROE5 

 

14.6% 

 

Flat YoY 

   

CET1 Ratio6 

 

14.1% 

 

Above regulatory 

requirements 

    

Adjusted Net income7

 

$4.0 Billion

 

Up 11% YoY

   

Adjusted Diluted EPS7

 

$2.84 

 

Up 11% YoY 

 

   

Total ACL8

 

$5.0 Billion

 

ACL on loans ratio9

up 2 bps4 QoQ

    

   

Adjusted ROE7 

 

15.1% 

 

Up 30 bps YoY 

   

LCR10

 

134% 

 

Down slightly from 135% last quarter

 

TORONTO, August 24, 2023 — Royal Bank of Canada11 (RY on TSX and NYSE) today reported net income of $3.9 billion for the quarter ended July 31, 2023, up $295 million or 8% from the prior year. Diluted EPS was $2.73, up 9% over the same period. Adjusted net income7 and adjusted EPS7 of $4.0 billion and $2.84, respectively, were both up 11% from the prior year.

 

Results this quarter reflected higher provisions for credit losses, with a PCL on loans ratio of 29 bps. Results benefitted from lower taxes reflecting a favourable shift in earnings mix.

 

Pre-provision, pre-tax earnings7 of $5.2 billion were up $353 million or 7% from a year ago, mainly due to higher revenue in Capital Markets reflecting higher revenue in Corporate and Investment Banking, including the impact of loan underwriting markdowns in the prior period, as well as in Global Markets. Higher net interest income driven by higher interest rates and strong volume growth in Canadian Banking also contributed to the increase. These factors were partially offset by higher staff-related expenses, mainly due to higher salaries as well as higher variable and stock-based compensation, and higher professional fees. Ongoing technology investments and higher discretionary costs to support strong client-driven growth also contributed to higher expenses.

 

Compared to last quarter, net income was up 6% reflecting higher results in Personal & Commercial Banking and Insurance. Capital Markets results were relatively flat. These factors were partially offset by lower results in Wealth Management. Adjusted net income7 was up 7% over the same period. Pre-provision, pre-tax earnings7 were up 5% as higher revenue more than offset expense growth.

 

The number of full-time equivalent (FTE) employees was down 1% from last quarter, and we expect to further reduce FTE by approximately 1-2% next quarter.

 

Our capital position remains robust, with a CET1 ratio of 14.1%, supporting solid volume growth and $1.9 billion in common share dividends. We also have a strong average LCR of 134%.

 

 

“Despite a complex operating environment, our Q3 results exemplify RBC’s ability to consistently deliver solid revenue and volume growth underpinned by prudent risk management. We remain focused on executing on our cost reduction strategy while leveraging our strong balance sheet and diversified business model to support our growth and bring long-term value to our clients, communities and shareholders.”

– Dave McKay, President and Chief Executive Officer of Royal Bank of Canada

 

 

 

Q3 2023

Compared to

Q3 2022

 

Reported:

•  Net income of $3,872 million

•  Diluted EPS of $2.73

•  ROE of 14.6%

•  CET1 ratio of 14.1%

 

 

h   8%

h   9%

®  0 bps

h   100 bps

 

Adjusted7:

•  Net income of $4,017 million

•  Diluted EPS of $2.84

•  ROE of 15.1%

 

 

h   11%

h   11%

h   30 bps

 

 

Q3 2023

Compared to

Q2 2023

 

•  Net income of $3,872 million

•  Diluted EPS of $2.73

•  ROE of 14.6%

•  CET1 ratio of 14.1%

 

h   6%

h   6%

h   20 bps

h   40 bps

 

•  Net income of $4,017 million

•  Diluted EPS of $2.84

•  ROE of 15.1%

 

h   7%

h   7%

h   20 bps

 

 

YTD 2023

Compared to

YTD 2022

 

•  Net income of $10,735 million

•  Diluted EPS of $7.60

•  ROE of 13.9%

 

i   10%

i   9%

i   280 bps

 

•  Net income of $12,118 million

•  Diluted EPS of $8.59

•  ROE of 15.7%

 

®  0%

h   2%

i   120 bps

 

 

 

1

Earnings per share (EPS).

2

Provision for credit losses (PCL).

3

PCL on loans ratio is calculated as PCL on loans as a percentage of average net loans and acceptances.

4

Basis points (bps).

5

Return on equity (ROE). For further information, refer to the Key performance and non-GAAP measures section on page 3 and 4 of this Earnings Release.

6

This ratio is calculated by dividing Common Equity Tier 1 (CET1) by risk-weighted assets, in accordance with OSFI’s Basel III Capital Adequacy Requirements guideline.

7

This is a non-GAAP measure. For further information, including a reconciliation, refer to the Key performance and non-GAAP measures section on page 3 and 4 of this Earnings Release.

8

Allowance for credit losses (ACL).

9

ACL on loans ratio is calculated as ACL on loans as a percentage of total loans and acceptances.

10

Liquidity coverage ratio (LCR).

11

When we say “we”, “us”, “our”, “the bank” or “RBC”, we mean Royal Bank of Canada and its subsidiaries, as applicable.

 

- 1 -


  Personal & Commercial Banking

 

 

Net income of $2,134 million increased $111 million or 5% from a year ago, primarily attributable to higher net interest income reflecting higher spreads (as the benefit of higher interest rates more than offset changes in product mix) and average volume growth in Canadian Banking of 8% in deposits and 6% in loans (with strong double-digit loan growth in business lending and credit cards). Higher service charges and foreign exchange revenue driven by increased client activity also contributed to the increase. These factors were partially offset by the retrospective impact of harmonized sales tax (HST) on payment card clearing services ($66 million reduction in revenue), which was announced in the Government of Canada’s 2023 budget and enacted in the current quarter, as well as higher staff-related costs and ongoing technology investments.

 

Compared to last quarter, net income increased $219 million or 11%, primarily attributable to higher net interest income driven by the impact of three more days in the current quarter, higher spreads and average volume growth of 2% in Canadian Banking. Lower PCL on performing loans, primarily driven by favourable changes to our credit quality and macroeconomic outlook, and higher card service revenue also contributed to the increase. These factors were partially offset by the retrospective impact of HST on payment card clearing services as described above, as well as ongoing technology investments. The number of full-time equivalent employees was down 1% in Canadian Banking.

 

  Wealth Management

 

 

Net income of $674 million decreased $147 million or 18% from a year ago, mainly reflecting continued investments in the operational infrastructure of City National and higher PCL, partly offset by the gain on the sale of the European asset servicing activities of RBC Investor Services® and its associated Malaysian centre of excellence (the partial sale of RBC Investor Services operations). Wealth Management benefited from 17% growth in assets under management, including RBC Brewin Dolphin.

 

Compared to last quarter, net income decreased $68 million or 9%, primarily due to higher PCL on performing loans, largely driven by unfavourable changes to our macroeconomic and credit quality outlook. Lower net interest income, largely reflecting the impact of lower spreads and deposit volume and an increase in non-interest expenses also contributed to the decrease. These factors were partially offset by the gain on the partial sale of RBC Investor Services operations and higher average fee-based client assets reflecting market appreciation.

 

  Insurance

 

 

Net income of $227 million increased $41 million or 22% from a year ago, primarily due to higher favourable investment-related experience, partially offset by higher capital funding costs.

 

Compared to last quarter, net income increased $88 million or 63%, primarily due to higher favourable investment-related experience.

 

  Capital Markets

 

 

Net income of $938 million increased $339 million or 57% from a year ago, primarily driven by higher revenue in Corporate and Investment Banking, including the impact of loan underwriting markdowns in the prior year. Lower taxes reflecting changes in earnings mix and higher revenue in Global Markets, largely due to higher fixed income trading revenue across all regions, also contributed to the increase. These factors were partially offset by higher compensation on improved results and higher PCL.

 

Compared to last quarter, net income remained relatively flat as lower taxes reflecting changes in earnings mix and higher revenue, mainly reflecting higher equity and fixed income trading revenue, were offset by higher expenses and higher PCL on impaired loans in a few sectors.

 

  Capital, Liquidity and Credit Quality

 

 

Capital – As at July 31, 2023, our CET1 ratio was 14.1%, up 40 bps from last quarter, mainly reflecting net internal capital generation, share issuances under the Dividend reinvestment plan (DRIP) and the impact of the partial sale of RBC Investor Services operations.

 

Liquidity – For the quarter ended July 31, 2023, the average LCR was 134%, which translates into a surplus of approximately $97 billion, compared to 135% and a surplus of approximately $102 billion last quarter. LCR levels decreased compared to the prior quarter mainly due to the partial sale of RBC Investor Services operations and loan growth, partially offset by an increase in deposits.

 

The Net Stable Funding Ratio (NSFR) as at July 31, 2023 was 112%, which translates into a surplus of approximately $104 billion, compared to 113% and a surplus of approximately $110 billion last quarter. NSFR decreased compared to the prior quarter primarily due to loan growth and the partial sale of RBC Investor Services operations, partially offset by an increase in deposits and stable funding.

 

- 2 -


Credit Quality

 

Q3 2023 vs. Q3 2022

 

Total PCL increased $276 million or 81% from a year ago, primarily reflecting higher provisions in Capital Markets and Wealth Management. The PCL on loans ratio of 29 bps increased 12 bps. The PCL on impaired loans ratio of 23 bps increased 15 bps.

 

PCL on performing loans decreased $57 million or 32%, primarily reflecting lower provisions in our Canadian Banking retail portfolios, mainly driven by favourable changes to our macroeconomic outlook, including the impact of a favourable revision to our Canadian housing price forecast. This was partially offset by higher provisions in U.S. Wealth Management (including City National) and Capital Markets, reflecting unfavourable changes to our credit quality and macroeconomic outlook.

 

PCL on impaired loans increased $329 million, mainly due to provisions taken in Capital Markets in the current quarter in a few sectors, including the real estate and related, transportation and industrial products sectors, compared to recoveries in the same quarter last year. Higher provisions in our Canadian Banking retail portfolios also contributed to the increase.

 

Q3 2023 vs. Q2 2023

 

Total PCL increased $16 million or 3% from last quarter, primarily reflecting higher provisions in Wealth Management and Capital Markets, largely offset by lower provisions in Personal & Commercial Banking. The PCL on loans ratio decreased 1 bp. The PCL on impaired loans ratio increased 2 bps.

 

PCL on performing loans decreased $53 million or 31%, mainly due to lower provisions in our Canadian Banking retail portfolios, largely driven by favourable changes to our macroeconomic and credit quality outlook, including the impact of a favourable revision to our Canadian housing price forecast. This was partially offset by higher provisions in U.S. Wealth Management (including City National), primarily driven by unfavourable changes to our macroeconomic and credit quality outlook.

 

PCL on impaired loans increased $58 million or 13%, mainly due to higher provisions in Capital Markets in a few sectors.

 

  Key Performance and Non-GAAP Measures

 

 

Performance measures

We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions.

 

Non-GAAP measures

We believe that certain non-GAAP measures (including non-GAAP ratios) are more reflective of our ongoing operating results and provide readers with a better understanding of management’s perspective on our performance. These measures enhance the comparability of our financial performance for the three and nine months ended July 31, 2023 with the corresponding periods in the prior year and the three months ended April 30, 2023. Non-GAAP measures do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.

 

The following discussion describes the non-GAAP measures we use in evaluating our operating results.

 

Pre-provision, pre-tax earnings

Pre-provision, pre-tax earnings is calculated as income (Q3 2023: $3,872 million; Q2 2023: $3,649 million; Q3 2022: $3,577 million) before income taxes (Q3 2023: $761 million; Q2 2023: $771 million; Q3 2022: $979 million) and PCL (Q3 2023: $616 million; Q2 2023: $600 million; Q3 2022: $340 million). We use pre-provision, pre-tax earnings to assess our ability to generate sustained earnings growth outside of credit losses, which are impacted by the cyclical nature of the credit cycle.

 

Adjusted results

We believe that providing adjusted results and certain measures excluding the impact of the specified items discussed below and amortization of acquisition-related intangibles enhance comparability with prior periods and enables readers to better assess trends in the underlying businesses. Specified items impacting our results for the three and nine months ended July 31, 2023 and the three months ended April 30, 2023 are:

 

  Canada Recovery Dividend (CRD) and other tax related adjustments: reflects the impact of the CRD and the 1.5% increase in the Canadian corporate tax rate applicable to fiscal 2022, net of deferred tax adjustments, which were announced in the Government of Canada’s 2022 budget and enacted in the first quarter of 2023

 

  Transaction and integration costs relating to our planned acquisition of HSBC Bank Canada (HSBC Canada)

 

- 3 -


The following table provides a reconciliation of adjusted results to our reported results and illustrates the calculation of adjusted measures presented. The adjusted results and measures presented below are non-GAAP measures.

 

Consolidated results, reported and adjusted

     As at or for the three months ended             As at or for the nine months ended  

(Millions of Canadian dollars,

except per share, number of and percentage amounts)

   

July 31

                  2023


 

    

April 30

                  2023


 

    

July 31

              2022 (1


   

July 31

                  2023


 

   

July 31

              2022 (1


Total revenue

  $ 14,489      $ 13,520      $ 12,132     $ 43,103     $ 36,418  

    PCL

    616        600        340       1,748       103  

    Non-interest expense

    7,861        7,494        6,386       23,030       19,400  

    Income before income taxes

    4,633        4,420        4,556       14,395       15,248  

    Income taxes

    761        771        979       3,660       3,323  

Net income

  $ 3,872      $ 3,649      $ 3,577     $ 10,735     $ 11,925  

Net income available to common shareholders

  $ 3,812      $ 3,581      $ 3,517     $ 10,561     $ 11,738  

Average number of common shares (thousands)

      1,393,515        1,388,388        1,396,381       1,388,217       1,409,292  

Basic earnings per share (in dollars)

  $ 2.74      $ 2.58      $ 2.52     $ 7.61     $ 8.33  

Average number of diluted common shares (thousands)

    1,394,939        1,390,149        1,398,667       1,389,857       1,411,934  

Diluted earnings per share (in dollars)

  $ 2.73      $ 2.58      $ 2.51     $ 7.60     $ 8.31  

ROE (2)

    14.6%      14.4%      14.6%     13.9%     16.7%

Effective income tax rate

    16.4%      17.4%      21.5%     25.4%     21.8%

Total adjusting items impacting net income (before-tax)

  $ 191      $ 138      $ 62     $ 426     $ 188  

    Specified item: HSBC Canada transaction and integration costs (3)

    110        56        -       177       -  

    Amortization of acquisition-related intangibles (4)

    81        82        62       249       188  

Total income taxes for adjusting items impacting net income

  $ 46      $ 29      $ 16     $ (957   $ 49  

    Specified item: CRD and other tax related adjustments (3), (5)

    -        -        -       (1,050     -  

    Specified item: HSBC Canada transaction and integration costs (3)

    26        13        -       42       -  

    Amortization of acquisition-related intangibles (4)

    20        16        16       51       49  

Adjusted results (6)

           

    Income before income taxes - adjusted

    4,824        4,558        4,618       14,821       15,436  

    Income taxes - adjusted

    807        800        995       2,703       3,372  

Net income - adjusted

  $ 4,017      $ 3,758      $ 3,623     $ 12,118     $ 12,064  

Net income available to common shareholders - adjusted

  $ 3,957      $ 3,690      $ 3,563     $ 11,944     $ 11,877  

Average number of common shares (thousands)

    1,393,515        1,388,388        1,396,381       1,388,217       1,409,292  

Basic earnings per share (in dollars) - adjusted

  $ 2.84      $ 2.66      $ 2.55     $ 8.60     $ 8.43  

Average number of diluted common shares (thousands)

    1,394,939        1,390,149        1,398,667       1,389,857       1,411,934  

Diluted earnings per share (in dollars) - adjusted

  $ 2.84      $ 2.65      $ 2.55     $ 8.59     $ 8.41  

ROE - adjusted

    15.1%      14.9%      14.8%     15.7%     16.9%

Adjusted effective income tax rate

    16.7%      17.6%      21.5%     18.2%     21.8%

 

(1)

There were no specified items for the three months ended July 31, 2022 or for the nine months ended July 31, 2022.

(2)

ROE is based on actual balances of average common equity before rounding.

(3)

These amounts have been recognized in Corporate Support.

(4)

Represents the impact of amortization of acquisition-related intangibles (excluding amortization of software), and any goodwill impairment.

(5)

The impact of the CRD and other tax related adjustments does not include $0.2 billion recognized in other comprehensive income.

(6)

Effective the second quarter of 2023, we included HSBC Canada transaction and integration costs and amortization of acquisition-related intangibles as adjusting items for non-GAAP measures and non-GAAP ratios. Therefore, comparative adjusted results have been revised from those previously presented to conform to our basis of presentation for this non-GAAP measure.

 

Additional information about ROE and other key performance and non-GAAP measures can be found under the Key performance and non-GAAP measures section of our Q3 2023 Report to Shareholders.

 

- 4 -


 

  CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this Earnings Release, in other filings with Canadian regulators or the SEC, in reports to shareholders, and in other communications, including statements by our President and Chief Executive Officer. Forward-looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals and expected cost containment measures. The forward-looking information contained in this Earnings Release is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “might”, “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, that our financial performance, environmental & social or other objectives, vision and strategic goals will not be achieved, and that our actual results may differ materially from such predictions, forecasts, projections, expectations or conclusions.

We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of which can be difficult to predict – include: credit, market, liquidity and funding, insurance, operational, regulatory compliance (which could lead to us being subject to various legal and regulatory proceedings, the potential outcome of which could include regulatory restrictions, penalties and fines), strategic, reputation, competitive, model, legal and regulatory environment, systemic risks and other risks discussed in the risk sections of our annual report for the fiscal year ended October 31, 2022 (the 2022 Annual Report) and the Risk management section of our Q3 2023 Report to Shareholders; including business and economic conditions in the geographic regions in which we operate, Canadian housing and household indebtedness, information technology and cyber risks, geopolitical uncertainty, environmental and social risk (including climate change), digital disruption and innovation, privacy, data and third party related risks, regulatory changes, culture and conduct risks, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and the emergence of widespread health emergencies or public health crises such as pandemics and epidemics, including the COVID-19 pandemic and its impact on the global economy, financial market conditions and our business operations, and financial results, condition and objectives. Additional factors that could cause actual results to differ materially from the expectations in such forward-looking statements can be found in the risk section of our 2022 Annual Report and the Risk management section of our Q3 2023 Report to Shareholders.

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Material economic assumptions underlying the forward-looking statements contained in this Earnings Release are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook sections in our 2022 Annual Report, as updated by the Economic, market and regulatory review and outlook section of our Q3 2023 Report to Shareholders. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.

Additional information about these and other factors can be found in the risk sections of our 2022 Annual Report and the Risk management section of our Q3 2023 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.

 

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 2023 Report to Shareholders at rbc.com/investorrelations.

 

Quarterly conference call and webcast presentation

Our quarterly conference call is scheduled for August 24, 2023 at 8:00 a.m. (EDT) and will feature a presentation about our third 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 rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (416-340-2217, 866-696-5910, passcode 5046546#). Please call between 7:50 a.m. and 7:55 a.m. (EDT).

Management’s comments on results will be posted on our website shortly following the call. A recording will be available by 5:00 p.m. (EDT) from August 24, 2023 until November 29, 2023 at rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (905-694-9451 or 800-408-3053, passcode 8061913#).

 

Media Relations Contacts

Gillian McArdle, Senior Director, Corporate Communications, gillian.mcardle@rbccm.com, 416-842-4231

Fiona McLean, Director, Financial Communications, fiona.mclean@rbc.com, 437-778-3506

 

Investor Relations Contacts

Asim Imran, Vice President, Head of Investor Relations, asim.imran@rbc.com, 416-955-7804

Marco Giurleo, Senior Director, Investor Relations, marco.giurleo@rbc.com, 437-239-5374

 

ABOUT RBC

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 97,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.

We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at rbc.com/community-social-impact.

 

® Registered Trademarks of Royal Bank of Canada.

 

 

                                                                                                                                                     

 

 

- 5 -

Exhibit 99.2
 
 
 
Royal Bank of Canada third quarter 2023 results
 
 
 
All amounts are in Canadian dollars and are based on financial statements presented in compliance with International Accounting Standard 34
Interim Financial Reporting
, unless otherwise noted.
 
 
Net income
$3.9 Billion
Up 8% YoY
    
 
Diluted EPS
1
$2.73
Up 9% YoY
   
 
 
Total PCL
1
$616 Million
PCL on loans ratio
1
down 1 bp
1
QoQ
 
   
 
 
 
ROE
1, 2
14.6%
Flat YoY
 
   
 
 
CET1 Ratio
1
14.1%
A
bove regulatory
requirements
 
                
 
 
Adjusted
Net income
3
$4.0 Billion
Up 11% YoY
 
    
 
 
Adjusted
Diluted EPS
3
$2.84
Up 11% YoY
 
   
 
 
Total ACL
1
$5.0 Billion
ACL on loans ratio
1
up 2 bps
1
QoQ
 
   
 
 
Adjusted ROE
3
15.1% Up
30 bps YoY
 
   
 
 
LCR
1
134%
Down
slightly from 135%
last quarter
 
TORONTO, August
 24, 2023
– Royal Bank of Canada
4
(RY on TSX and NYSE) today reported net income of $3.9 billion for the quarter ended July 31, 2023, up $295 million or 8% from the prior year. Diluted EPS was $2.73, up 9% over the same period. Adjusted net income
3
and adjusted EPS
3
of $4.0 billion and $2.84, respectively, were both up 11% from the prior year.
Results this quarter reflected higher provisions for credit losses, with a PCL on loans ratio of 29 bps. Results benefitted from lower taxes reflecting a favourable shift in earnings mix.
Pre-provision, pre-tax earnings
5
of $5.2 billion were up $353 million or 7% from a year ago, mainly due to higher revenue in Capital Markets, reflecting higher revenue in Corporate and Investment Banking, including the impact of loan underwriting markdowns in the prior period, as well as in Global Markets. Higher net interest income driven by higher interest rates and strong volume growth in Canadian Banking also contributed to the increase. These factors were partially offset by higher staff-related expenses, mainly due to higher salaries as well as higher variable and stock-based compensation, and higher professional fees. Ongoing technology investments and higher discretionary costs to support strong client-driven growth also contributed to higher expenses.
Compared to last quarter, net income was up 6% reflecting higher results in Personal & Commercial Banking and Insurance. Capital Markets results were relatively flat. These factors were partially offset by lower results in Wealth Management. Adjusted net income
3
was up 7% over the same period. Pre-provision, pre-tax earnings
5
were up 5% as higher revenue more than offset expense growth.
The number of full-time equivalent (FTE) employees was down 1% from last quarter, and we expect to further reduce FTE by approximately 1-2% next quarter.
Our capital position remains robust, with a CET1 ratio of 14.1%, supporting solid volume growth and $1.9 billion in common share dividends. We also have a strong average LCR of 134%.
 
 
Despite a complex operating environment, our Q3 results exemplify RBC’s ability to consistently deliver solid revenue and volume growth underpinned by prudent risk management. We remain focused on executing on our cost reduction strategy while leveraging our strong balance sheet and diversified business model to support our growth and bring long-term value to our clients, communities and shareholders.”
– Dave McKay, President and Chief Executive Officer of Royal Bank of Canada
 
 
     
 
Q3 2023
Compared to
Q3 2022
 
 
   
Reported:
•   Net income of $3,872 million
•   Diluted EPS of $2.73
•   ROE of 14.6%
•   CET1 ratio of 14.1%
 
 

h
  8%
h
  9%
g
 0 bps
h
  100 bps
 
 
Adjusted
3
:
•   Net income of $4,017 million
•   Diluted EPS of $2.84
•   ROE of 15.1%
 

h
  11%
h
  11%
h
  30 bps
 
             
       
 
Q3 2023
Compared to
Q2 2023
 
 
 
   
•   Net income of $3,872 million
•   Diluted EPS of $2.73
•   ROE of 14.6%
•   CET1 ratio of 14.1%
 
 
h
  6%
h
  6%
h
  20 bps
h
  40 bps
 
 
•   Net income of $4,017 million
•   Diluted EPS of $2.84
•   ROE of 15.1%
 
 
h
  7%
h
  7%
h
  20 bps
 
             
       
 
YTD 2023
Compared to
YTD 2022
 
 
 
   
•   Net income of $10,735 million
•   Diluted EPS of $7.60
•   ROE of 13.9%
 
 
¯
  10%
¯
  9%
¯
  280 bps
 
 
•   Net income of $12,118 million
•   Diluted EPS of $8.59
•   ROE of 15.7%
 
 
®
 0%
h
  2%
¯
  120 bps
 
             
 
(1)
See Glossary section of this Q3 2023 Report to Shareholders for composition of this measure.
(2)
Return on equity (ROE). This measure does not have a standardized meaning under generally accepted accounting principles (GAAP). For further information, refer to the Key performance and
non-GAAP
measures section of this Q3 2023
Report to Shareholders.
(3)
This is a
non-GAAP
measure. For further information, including a reconciliation, refer to the Key performance and
non-GAAP
measures section of this Q3 2023
Report to Shareholders.
(4)
When we say “we”, “us”, “our”, ‘the bank” or “RBC”, we mean Royal Bank of Canada and its subsidiaries, as applicable.
(5)
Pre-provision,
pre-tax
(PPPT) earnings is calculated as income (July 31, 2023: $3,872 million; July 31, 2022: $3,577 million) before income taxes (July 31, 2023: $761 million; July 31, 2022: $979 million) and PCL (July 31, 2023: $616 million; July 31, 2022: $340 million). This is a
non-GAAP
measure. PPPT earnings do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions. We use PPPT earnings to assess our ability to generate sustained earnings growth outside of credit losses, which are impacted by the cyclical nature of a credit cycle. We believe that certain
non-GAAP
measures are more reflective of our ongoing operating results and provide readers with a better understanding of management’s perspective on our performance.

2         
Royal Bank of Canada
        Third Quarter 2023
 
 
Table of contents
 
1
 
2
 
2
 
3
 
  3   About Royal Bank of Canada
  4   Selected financial and other highlights
  5   Economic, market and regulatory review and outlook
6
 
7
 
  7   Overview
12
 
  12   How we measure and report our business segments
  12   Key performance and non-GAAP measures
  15   Personal & Commercial Banking
  17   Wealth Management
  19   Insurance
  20   Capital Markets
  21   Corporate Support
22
 
23
 
  23   Condensed balance sheets
  24   Off-balance sheet arrangements
24
 
  24   Credit risk
  28   Market risk
  32   Liquidity and funding risk
40
 
45
 
  45   Summary of accounting policies and estimates
  46   Controls and procedures
46
 
47
 
49
 
50
  (unaudited)
56
  (unaudited)
80
 
 
 
 
 
 
Management’s Discussion and Analysis
 
Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the three and nine month periods ended or as at July 31, 2023, compared to the corresponding periods in the prior fiscal year and the three month period ended April 30, 2023. This MD&A should be read in conjunction with our unaudited Interim Condensed Consolidated Financial Statements for the quarter ended July 31, 2023 (Condensed Financial Statements) and related notes and our 2022 Annual Report. This MD&A is dated August 23, 2023. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise noted.
Additional information about us, including our 2022 Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on the Canadian Securities Administrators’ website at sedar.com and on the EDGAR section of the United States (U.S.) Securities and Exchange Commission’s (SEC) website at sec.gov.
Information contained in or otherwise accessible through the websites mentioned herein does not form part of this report. All references in this report to websites are inactive textual references and are for your information only.
 
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 Q3 2023 Report to Shareholders, in other filings with Canadian regulators or the SEC, in other reports to shareholders, and in other communications. Forward-looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, the economic, market, and regulatory review and outlook for Canadian, U.S., U.K., European and global economies, the regulatory environment in which we operate, the impact from rising interest rates, the implementation of IFRS 17
Insurance Contracts
, the expected closing of the transaction involving HSBC Bank Canada, the expected closing of the transaction involving the U.K. branch of RBC Investor Services Trust and the RBC Investor Services business in Jersey and the risk environment including our credit risk, market risk, liquidity and funding risk, and includes our President and Chief Executive Officer’s statements. The forward-looking information contained in this document is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “might”, “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 that our financial performance, environmental & social or other objectives, vision and strategic goals will not be achieved and that our actual results may differ materially from such predictions, forecasts, projections, expectations or conclusions.
We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of which can be difficult to predict – include: credit, market, liquidity and funding, insurance, operational, regulatory compliance (which could lead to us being subject to various legal and regulatory proceedings, the potential outcome of which could include regulatory restrictions, penalties and fines), strategic, reputation, competitive, model, legal and regulatory environment, systemic risks and other risks discussed in the risk sections of our 2022 Annual Report and the Risk management section of this Q3 2023 Report to Shareholders; including business and economic conditions in the geographic regions in which we operate, Canadian housing and household indebtedness, information technology and cyber risks, geopolitical uncertainty, environmental and social risk (including climate change), digital disruption and innovation, privacy, data and third-party related risks, regulatory changes, culture and conduct risks, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and the emergence of widespread health emergencies or public health crises such as pandemics and epidemics, including the
COVID-19
pandemic and its impact on the global economy, financial market conditions and our business operations, and financial results, condition and objectives. Additional factors that could cause actual results to differ materially from the expectations in such forward-looking statements can be found in the risk sections of our 2022 Annual Report.

Royal Bank of Canada
        Third Quarter 2023         3
 
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Material economic assumptions underlying the forward-looking statements contained in this Q3 2023 Report to Shareholders are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook sections in our 2022 Annual Report, as updated by the Economic, market and regulatory review and outlook section of this Q3 2023 Report to Shareholders. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.
Additional information about these and other factors can be found in the risk sections of our 2022 Annual Report and the Risk management section of this Q3 2023 Report to Shareholders.
 
Overview and outlook
 
 
About Royal Bank of Canada
 
Royal Bank of Canada is a global financial institution with a purpose-driven,
principles-led
approach to delivering leading performance. Our success comes from the 97,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
Effective the first quarter of 2023, we simplified our reporting structure by eliminating the Investor & Treasury Services segment and moving its former businesses to existing segments. We moved our Investor Services business to our Wealth Management segment, and our Treasury Services and Transaction Banking businesses to our Capital Markets segment. From a reporting perspective, there were no changes to our Personal & Commercial Banking and Insurance segments. Comparative results in this MD&A have been revised to conform to our new basis of segment presentation.
Our business and reporting segments are described below.
 
 
Personal & Commercial Banking
   Provides a broad suite of financial products and services in Canada, the Caribbean and the U.S. Our commitment to building and maintaining deep and meaningful relationships with our clients is underscored by the breadth of our product suite, our depth of expertise, and the features of our digital solutions.
  
 
Wealth Management
   Serves affluent, high net worth (HNW) and ultra-high net worth (UHNW) clients from our offices in key financial centres mainly in Canada, the U.S., the United Kingdom (U.K.), Europe, and Asia. We offer a comprehensive suite of investment, trust, banking, credit and other advice-based solutions. We also provide asset management products to institutional and individual clients through our distribution channels and third-party distributors. Asset and payment services are also provided to financial institutions and asset owners worldwide.
  
 
Insurance
   Offers a wide range of advice and solutions for individual and business clients including life, health, wealth, home, auto, travel, annuities and reinsurance.
  
 
Capital Markets
   Provides expertise in advisory & origination, sales & trading, and lending & financing, and transaction banking to corporations, institutional clients, asset managers, private equity firms and governments globally. We serve clients from 63 offices in 18 countries across North America, the U.K. & Europe, and Australia, Asia & other regions.
  
 
Corporate Support
   Corporate Support consists of Technology & Operations, which provides the technological and operational foundation required to effectively deliver products and services to our clients, Functions, which includes our finance, human resources, risk management, internal audit and other functional groups, as well as our Corporate Treasury function.

4         
Royal Bank of Canada
        Third Quarter 2023
 
Selected financial and other highlights
 
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars, except per share,
number of and percentage amounts)
 
July 31
2023
   
April 30
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Total revenue
 
$
14,489
 
  $ 13,520     $ 12,132      
$
  43,103
 
  $ 36,418  
Provision for credit losses (PCL)
 
 
616
 
    600       340      
 
1,748
 
    103  
Insurance policyholder benefits, claims and
acquisition expense (PBCAE)
 
 
1,379
 
    1,006       850      
 
3,930
 
    1,667  
Non-interest
expense
 
 
7,861
 
    7,494       6,386      
 
23,030
 
    19,400  
Income before income taxes
 
 
4,633
 
    4,420       4,556    
 
 
 
14,395
 
    15,248  
Net income
 
$
3,872
 
  $ 3,649     $ 3,577    
 
 
$
10,735
 
  $ 11,925  
Net income adjusted
(1)
 
$
4,017
 
  $ 3,758     $ 3,623    
 
 
$
12,118
 
  $ 12,064  
Segments – net income
           
Personal & Commercial Banking
 
$
2,134
 
  $ 1,915     $ 2,023      
$
6,175
 
  $ 6,231  
Wealth Management
(2)
 
 
674
 
    742       821      
 
2,264
 
    2,451  
Insurance
 
 
227
 
    139       186      
 
514
 
    589  
Capital Markets
(2)
 
 
938
 
    939       599      
 
3,100
 
    2,578  
Corporate Support
 
 
(101
    (86     (52  
 
 
 
(1,318
    76  
Net income
 
$
3,872
 
  $ 3,649     $ 3,577    
 
 
$
10,735
 
  $ 11,925  
Selected information
           
Earnings per share (EPS) – basic
 
$
2.74
 
  $ 2.58     $ 2.52      
$
7.61
 
  $ 8.33  
                                          – diluted
 
 
2.73
 
    2.58       2.51      
 
7.60
 
    8.31  
Earnings per share (EPS) – basic adjusted
(1)
 
 
2.84
 
    2.66       2.55      
 
8.60
 
    8.43  
                                          – diluted adjusted
(1)
 
 
2.84
 
    2.65       2.55      
 
8.59
 
    8.41  
Return on common equity (ROE)
(3)
 
 
14.6%
 
    14.4%     14.6%    
 
13.9%
 
    16.7%
Return on common equity (ROE) adjusted
(1)
 
 
15.1%
 
    14.9%     14.8%    
 
15.7%
 
    16.9%
Average common equity
(3)
 
$
103,850
 
  $ 101,850     $ 95,750      
$
101,800
 
  $ 93,850  
Net interest margin (NIM) – on average earning assets, net
(4)
 
 
1.50%
 
    1.53%     1.52%    
 
1.50%
 
    1.46%
PCL on loans as a % of average net loans and acceptances
 
 
0.29%
 
    0.30%     0.17%    
 
0.28%
 
    0.02%
PCL on performing loans as a % of average net loans and acceptances
 
 
0.06%
 
    0.09%     0.09%    
 
0.08%
 
    (0.07)%  
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.23%
 
    0.21%     0.08%    
 
0.20%
 
    0.09%
Gross impaired loans (GIL) as a % of loans and acceptances
 
 
0.38%
 
    0.34%     0.25%    
 
0.38%
 
    0.25%
Liquidity coverage ratio (LCR)
(4), (5)
 
 
134%
 
    135%     123%    
 
134%
 
    123%
Net stable funding ratio (NSFR)
(4), (5)
 
 
112%
 
    113%     113%  
 
 
 
112%
 
    113%
Capital, Leverage and Total loss absorbing capacity (TLAC) ratios 
(4), (6)
           
Common Equity Tier 1 (CET1) ratio
 
 
14.1%
 
    13.7%     13.1%    
 
14.1%
 
    13.1%
Tier 1 capital ratio
 
 
15.4%
 
    14.9%     14.3%    
 
15.4%
 
    14.3%
Total capital ratio
 
 
17.3%
 
    16.8%     15.9%    
 
17.3%
 
    15.9%
Leverage ratio
 
 
4.2%
 
    4.2%     4.6%    
 
4.2%
 
    4.6%
TLAC ratio
 
 
30.9%
 
    31.0%     27.6%    
 
30.9%
 
    27.6%
TLAC leverage ratio
 
 
8.5%
 
    8.7%     8.8%  
 
 
 
8.5%
 
    8.8%
Selected balance sheet and other information
(7)
           
Total assets
 
$
  1,957,734
 
  $   1,940,302     $   1,842,092      
$
  1,957,734
 
  $   1,842,092  
Securities, net of applicable allowance
 
 
372,625
 
    319,828       298,795      
 
372,625
 
    298,795  
Loans, net of allowance for loan losses
 
 
835,714
 
    831,187       796,314      
 
835,714
 
    796,314  
Derivative related assets
 
 
115,914
 
    124,149       122,058      
 
115,914
 
    122,058  
Deposits
 
 
1,215,671
 
    1,210,053       1,178,604      
 
1,215,671
 
    1,178,604  
Common equity
 
 
105,004
 
    103,937       96,570      
 
105,004
 
    96,570  
Total risk-weighted assets (RWA)
(4)
 
 
585,899
 
    593,533       589,050      
 
585,899
 
    589,050  
Assets under management (AUM)
(4)
 
 
1,095,400
 
    1,083,600       937,700      
 
1,095,400
 
    937,700  
Assets under administration (AUA)
(4), (8)
 
 
4,415,700
 
    5,911,100       5,748,900    
 
 
 
4,415,700
 
    5,748,900  
Common share information
           
Shares outstanding (000s) – average basic
 
 
1,393,515
 
    1,388,388       1,396,381      
 
1,388,217
 
    1,409,292  
– average diluted
 
 
1,394,939
 
    1,390,149       1,398,667      
 
1,389,857
 
    1,411,934  
– end of period
 
 
1,394,997
 
    1,389,730       1,390,629      
 
1,394,997
 
    1,390,629  
Dividends declared per common share
 
$
1.35
 
  $ 1.32     $ 1.28      
$
3.99
 
  $ 3.68  
Dividend yield
(4)
 
 
4.2%
 
    4.0%     3.9%    
 
4.1%
 
    3.7%
Dividend payout ratio
(4)
 
 
49%
 
    51%     51%    
 
53%
 
    44%
Common share price (RY on TSX)
(9)
 
$
130.73
 
  $ 134.51     $ 124.86      
$
130.73
 
  $ 124.86  
Market capitalization (TSX)
(9)
 
 
182,368
 
    186,933       173,634    
 
 
 
182,368
 
    173,634  
Business information
(number of)
           
Employees (full-time equivalent) (FTE)
 
 
93,753
 
    94,398       88,541      
 
93,753
 
    88,541  
Bank branches
 
 
1,257
 
    1,258       1,283      
 
1,257
 
    1,283  
Automated teller machines (ATMs)
 
 
4,353
 
    4,357       4,364    
 
 
 
4,353
 
    4,364  
Period average US$ equivalent of C$1.00
(10)
 
 
0.750
 
    0.737       0.783      
 
0.744
 
    0.786  
Period-end
US$ equivalent of C$1.00
 
 
0.758
 
    0.738       0.781    
 
 
 
0.758
 
    0.781  
 
(1)   This is a
non-GAAP
measure, which is calculated excluding the impact of the Canada Recovery Dividend (CRD) and other tax related adjustments, HSBC Canada transaction and integration costs (net of tax), as well as the
after-tax
impact of amortization of acquisition-related intangibles. Amounts have been revised from those previously presented to conform to our basis of presentation for this
non-GAAP
measure. For further details, including a reconciliation, refer to the Key performance and
non-GAAP
measures section.
(2)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(3)   Average amounts are calculated using methods intended to approximate the average of the daily balances for the period. This includes average common equity used in the calculation of ROE. For further details, refer to the Key performance and
non-GAAP
measures section.
(4)   See Glossary for composition of this measure.
(5)   The LCR and NSFR are calculated in accordance with the Office of the Superintendent of Financial Institutions’ (OSFI) Liquidity Adequacy Requirements (LAR) guideline. LCR is the average for the three months ended for each respective period. For further details, refer to the Liquidity and funding risk section.
(6)   Capital ratios are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline, the Leverage ratio is calculated using OSFI’s Leverage Requirements (LR) guideline, and both the TLAC and TLAC leverage ratios are calculated using OSFI’s TLAC guideline. The results for the period ended July 31, 2023 and April 30, 2023 reflect our adoption of the revised CAR and LR guidelines that came into effect in Q2 2023 as part of OSFI’s implementation of the Basel III reforms. For further details, refer to the Capital management section.
(7)   Represents
period-end
spot balances.
(8)   AUA includes $13 billion and $7 billion (April 30, 2023 – $15 billion and $8 billion; July 31, 2022 – $14 billion and $5 billion) of securitized residential mortgages and credit card loans, respectively.
(9)   Based on TSX closing market price at
period-end.
(10)   Average amounts are calculated using
month-end
spot rates for the period.

Royal Bank of Canada
        Third Quarter 2023         5
 
Economic, market and regulatory review and outlook – data as at August 23, 2023
 
The predictions and forecasts in this section are based on information and assumptions from sources we consider reliable. If this information or these assumptions are not accurate, actual economic outcomes may differ materially from the outlook presented in this section.
Economic and market review and outlook
The near-term macroeconomic backdrop has been more resilient than expected with unemployment rates remaining low across most advanced economies despite increases in interest rates over the last calendar year. Inflation has slowed with energy prices falling below calendar year-ago levels and global supply chain pressures have substantially eased. However, inflation is unlikely to reduce to central bank target rates without some slowing in consumer spending and higher unemployment. Central banks have responded with additional interest rate increases. More recently, there have been early signs that economic growth is slowing. Consumer delinquency rates, as published by the Bank of Canada, have been edging higher and the unemployment rate has begun to rise in Canada. We continue to expect mild recessions in the U.S. and Canada beginning in the second half of calendar 2023.
Canada
Canadian GDP is expected to have increased 0.5%
1
in the second calendar quarter of 2023 after rising 3.1%
1
in the first calendar quarter of 2023. Near-term GDP growth has been supported by resilient consumer spending despite higher interest rates. However, GDP is expected to decline marginally over the second half of calendar 2023 as higher interest rates and associated increases in debt payments leave less household income available for spending. The rate of consumer price growth has slowed substantially, with energy prices below levels a calendar year ago and global supply chain disruptions easing. However, other measures of inflation, including the Bank of Canada (BoC)’s preferred trim and median core Consumer Price Index (CPI) measures, remain at levels above the central bank’s target range. The unemployment rate rose by 0.5% over the three months ended July 2023 and is expected to continue to increase over the second half of calendar 2023. The BoC responded to persistent inflation with a 25-basis point interest rate increase in each of the June and July 2023 policy decisions, bringing the overnight rate to 5.0%. We expect no further increases in calendar 2023 contingent on slower consumer spending, further moderate increases in unemployment, and easing of broader inflation trends.
U.S.
U.S. GDP grew by 2.4%
1
in the second calendar quarter of 2023 after a 2%
1
increase in the first calendar quarter of 2023. Labour markets have remained strong with the unemployment rate trending around pre-pandemic levels during the first half of calendar 2023. However, the unemployment rate is projected to rise from current low levels during the second half of calendar 2023 and into calendar 2024. Higher interest rates are reducing household purchasing power and tighter financial conditions are expected to slow business spending and investment. As a result, we expect softening in GDP over the second half of calendar 2023. Consumer price growth continued to slow in the U.S., reflecting lower energy prices as well as a narrowing in the breadth of inflation pressures. Excluding food and energy products, year-over-year core CPI growth of 4.7% in July 2023 is still elevated but is down from a peak of 6.6% in September 2022. The Federal Reserve (Fed) increased the fed funds target range by 25 basis points in July to a 5.25% to 5.5% range. We expect the Fed will pause interest rate increases for the remainder of calendar year 2023.
Europe
Euro area GDP increased 0.3% in the second calendar quarter of 2023 after remaining flat in the first calendar quarter of 2023. Euro area inflation has been moderating after peaking in late 2022 as energy prices trend lower. However, core inflation remains elevated. Despite some signs of an economic slowdown, elevated core inflation is driving the European Central Bank (ECB) to raise interest rates. The ECB increased the deposit rate by 25 bps in July 2023 to 3.75%. We expect no further increases from the ECB for the remainder of calendar 2023. U.K. GDP rose 0.2% in the second calendar quarter of 2023 after rising 0.1% in the first calendar quarter of 2023. Inflation in the U.K. continues to be stronger than expected amid robust labour demand and elevated wage growth. The Bank of England (BoE) has continued to increase interest rates in response. We expect the BoE to raise interest rates to 5.5% by the end of calendar 2023. Higher interest rates are expected to slow consumer spending and labour demand over the second half of calendar 2023 for both the Euro area and the U.K., driving the unemployment rates in these regions higher.
Financial markets
Bond yields increased over the first half of calendar 2023 as a more robust than expected economic backdrop and persistent price pressure drove central banks to continue to raise interest rates. The spread between longer- and shorter-duration bond yields, which is a commonly used recession indicator, remains inverted in the U.S. and Canada, as markets continue to expect deterioration in the economic outlook. Equity markets have rebounded since the beginning of calendar 2023. Global inflation pressures have shown persistent signs of easing with headline inflation rates closer to target rates in some regions like the U.S. and Canada, in large part due to lower energy prices. However, underlying price pressures are not expected to fully ease until there is a more pronounced slowdown in domestic demand and the economy.
 
1   Annualized rate

6         
Royal Bank of Canada
        Third Quarter 2023
 
Regulatory environment
We continue to monitor and prepare for regulatory developments and changes in a manner that seeks to ensure compliance with new requirements while mitigating adverse business or financial impacts. Such impacts could result from new or amended laws or regulations and the expectations of those who enforce them. A high level summary of the key regulatory changes that have the potential to increase or decrease our costs and the complexity of our operations is included in the Legal and regulatory environment risk section of our 2022 Annual Report and updates are listed below.
Global uncertainty
Significant uncertainty about inflationary pressures and geopolitical tensions continues to pose risks to the global economic outlook. In July 2023, the International Monetary Fund (IMF) projected global growth of 3.0% in calendar 2023, up 0.2% from its April forecast. The recent resolution of the U.S. debt ceiling standoff, and decisive actions taken by global authorities to contain instability in the banking sector have reduced the immediate risks of financial turmoil. However, uncertainty remains regarding: the severity and impact of central banks’ monetary policy tightening as they attempt to reduce persistent levels of elevated inflation; ongoing geopolitical tensions, including those between Russia and Ukraine; extreme weather-related events; and the potential re-emergence of financial sector instability as banks face regulatory reform in the U.S. Our diversified business model, as well as our product and geographic diversification, continue to help mitigate the risks posed by global uncertainty.
Climate-related regulatory activity
On March 7, 2023, OSFI released its final Guideline
B-15
– Climate Risk Management, which sets out expectations for the management of climate-related risks for federally regulated financial institutions (FRFIs) and aims to support FRFIs in developing greater resilience to, and management of, these risks. The guideline will be effective starting fiscal 2024 and OSFI intends to review and amend the guideline as practices and standards evolve. We are currently assessing the impact of the guideline and have initiated a project to meet the requirements by the effective date. We will continue to monitor any updates and future developments.
Government of Canada 2023 budget
On March 28, 2023, the Government of Canada presented its 2023 budget (“Budget 2023”), which introduced a number of proposed measures including a proposal to deny the dividend received deduction in respect of dividends received by financial institutions after December 31, 2023 on shares of corporations resident in Canada where such shares are
mark-to-market
property for tax purposes, and a new 2% tax on net share buybacks for publicly listed corporations occurring on or after January 1, 2024. Budget 2023 also reinforced the Government of Canada’s commitment to the Organization for Economic
Co-operation
and Development’s
two-pillar
plan for international tax reform, including a global 15% minimum tax on multinational enterprises, and associated draft legislation for a Global Minimum Tax Act was published on August 4, 2023 and is open for public comment until September 29, 2023. Timing of enactment of these changes remains uncertain, and legislation remains subject to amendment prior to enactment. The ultimate impact of the proposed measures will depend on the final legislation.
Budget 2023 also introduced harmonized sales tax (HST) on payment card clearing services, to be applied prospectively in all cases and retroactively under certain circumstances. A bill with this legislation received royal assent and became law on June 22, 2023.
Third-party risk management
On April 24, 2023, OSFI released its final Guideline
B-10
– Third-Party Risk Management, which sets out expectations for managing risks associated with third-party arrangements for FRFIs.
This guideline will be effective on May 1, 2024. We have assessed the requirements and do not anticipate any issues in complying with the requirements by the effective date.
Interest Rate Benchmark Reform
As part of the interest rate benchmark reform, the publication of all remaining USD London Interbank Offered Rate (LIBOR) settings ceased on June 30, 2023. As at July 31, 2023, and consistent with our transition plan, our exposure to financial instruments referencing USD LIBOR is no longer material to our Condensed Financial Statements.
Additionally, on July 27, 2023 the Canadian Alternative Reference Rate Working Group published a market notice confirming that effective November 1, 2023, no new CDOR or Bankers’ Acceptance (BA) based lending will be permitted. This announcement does not impact the ability to draw on existing CDOR or BA loan facilities entered into prior to November 1, 2023. Our transition plan has been updated to reflect this announcement.
For a discussion on risk factors resulting from these and other developments which may affect our business and financial results, refer to the risk sections of our 2022 Annual Report. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of this Q3 2023 Report to Shareholders.
 
Key corporate events
 
HSBC Bank Canada
On November 29, 2022, we entered into an agreement to acquire 100% of the common shares of HSBC Bank Canada (HSBC Canada) for an all-cash purchase price of $13.5 billion. In addition, we will purchase all of the existing preferred shares and subordinated debt of HSBC Canada held directly or indirectly by HSBC Holdings plc at par value. HSBC Canada is a premier Canadian personal and commercial bank focused on globally connected clients.


Royal Bank of Canada
        Third Quarter 2023         7
 
The transaction is expected to close in the first calendar quarter of 2024 and is subject to the satisfaction of customary closing conditions, including regulatory approvals. For further details, refer to Note 6 of our Condensed Financial Statements.
RBC Investor Services
On July 3, 2023, we completed the previously announced sale of the European asset servicing activities of RBC Investor Services
®
and its associated Malaysian centre of excellence (the partial sale of RBC Investor Services operations) to CACEIS, the asset servicing banking group of Crédit Agricole S.A. and Banco Santander, S.A. As a result of the transaction, we recorded a pre-tax gain on disposal of $69 million in Non-Interest income within the Wealth Management segment ($77 million after-tax).
The completion of the sale of the business of the U.K. branch of RBC Investor Services Trust and the RBC Investor Services business in Jersey remains subject to customary closing conditions, including regulatory approvals. For further details, refer to Note 6 of our Condensed Financial Statements.
 
Financial performance
 
 
Overview
 
Q3 2023 vs. Q3 2022
Net income of $3,872 million was up $295 million or 8% from a year ago. Diluted EPS of $2.73 was up $0.22 or 9% and ROE of 14.6% was flat. Our CET1 ratio of 14.1% was up 100 bps from a year ago.
Adjusted net income of $4,017 million was up $394 million or 11% from a year ago. Adjusted diluted EPS of $2.84 was up $0.29 or 11% and adjusted ROE of 15.1% was up from 14.8% last year.
Our earnings reflect higher results in Capital Markets, Personal & Commercial Banking and Insurance, partially offset by lower results in Wealth Management.
Q3 2023 vs. Q2 2023
Net income of $3,872 million was up $223 million or 6% from last quarter. Diluted EPS of $2.73 was up $0.15 or 6% and ROE of 14.6% was up from 14.4% in the prior quarter. Our CET1 ratio of 14.1% was up 40 bps from last quarter.
Adjusted net income of $4,017 million was up $259 million or 7% from last quarter. Adjusted diluted EPS of $2.84 was up $0.19 or 7% and adjusted ROE of 15.1% was up from 14.9% last quarter.
Our earnings reflect higher results in Personal & Commercial Banking and Insurance, as well as relatively flat results in Capital Markets, partially offset by lower earnings in Wealth Management.
Q3 2023 vs. Q3 2022 (Nine months ended)
Net income of $10,735 million was down $1,190 million or 10% from the same period last year. Diluted EPS of $7.60 was down $0.71 or 9% and ROE of 13.9% was down from 16.7% in the prior year.
Adjusted net income of $12,118 million was up $54 million from the same period last year. Adjusted diluted EPS of $8.59 was up $0.18 or 2% and adjusted ROE of 15.7% was down from 16.9% in the prior year.
Our earnings were down from the same period last year, primarily driven by the impact of the CRD and other tax related adjustments in the current period, which is reported in Corporate Support. Our results also reflect lower earnings in Wealth Management, Insurance and Personal & Commercial Banking. This was partially offset by higher results in Capital Markets. Current period results include higher PCL, reflecting higher provisions on impaired loans and provisions taken on performing loans as compared to releases of provisions on performing loans in the same period last year.
For further details on our business segment results and CET1 ratio, refer to the Business segment results and Capital management sections, respectively.
Adjusted results
Adjusted results exclude specified items, consisting of the CRD and other tax related adjustments and HSBC Canada transaction and integration costs (net of tax), as well as the
after-tax
impact of amortization of acquisition-related intangibles. Adjusted results are
non-GAAP
measures. For further details, including a reconciliation, refer to the Key performance and
non-GAAP
measures section.
Impact of foreign currency translation
The following table reflects the estimated impact of foreign currency translation on key income statement items:
 
     For the three months ended            For the nine months ended  
(Millions of Canadian dollars, except per share amounts)
 
Q3 2023 vs.
Q3 2022
   
Q3 2023 vs.
Q2 2023
          
Q3 2023 vs.
Q3 2022
 
Increase (decrease):
                               
Total revenue
 
$
277
 
 
$
(84
         
 
$       812
 
PCL
 
 
10
 
 
 
(6
         
 
25
 
Non-interest
expense
 
 
187
 
 
 
(52
         
 
515
 
Income taxes
 
 
(3
 
 
 
         
 
6
 
Net income
 
 
83
 
 
 
(26
         
 
266
 
Impact on EPS
                               
Basic
 
$
0.06
 
 
$
(0.02
         
 
$       0.19
 
Diluted
 
 
0.06
 
 
 
(0.02
         
 
0.19
 

8         
Royal Bank of Canada
        Third Quarter 2023
 
The relevant average exchange rates that impact our business are shown in the following table:
 
     For the three months ended            For the nine months ended  
(Average foreign currency equivalent of C$1.00) (1)
 
July 31
2023
   
April 30
2023
   
July 31
2022
          
July 31
2023
   
July 31
2022
 
U.S. dollar
 
 
0.750
 
    0.737       0.783            
 
0.744
 
    0.786  
British pound
 
 
0.592
 
    0.599       0.636            
 
0.601
 
    0.608  
Euro
 
 
0.690
 
    0.681       0.747            
 
0.690
 
    0.721  
 
  (1)   Average amounts are calculated using
month-end
spot rates for the period.
 
Total revenue
 
(Millions of Canadian dollars, except percentage amounts)   For the three months ended            For the nine months ended  
 
July 31
2023
   
April 30
2023
   
July 31
2022
          
July 31
2023
   
July 31
2022
 
Interest and dividend income
 
$
22,834
 
  $ 20,318     $ 10,737            
$
62,489
 
  $ 25,873  
Interest expense
 
 
16,548
 
    14,219       4,847            
 
43,902
 
    9,438  
Net interest income
 
$
6,286
 
  $ 6,099     $ 5,890            
$
18,587
 
  $ 16,435  
NIM
 
 
  1.50%
    1.53%       1.52%            
 
1.50%
    1.46%  
Insurance premiums, investment and fee income
 
$
1,848
 
  $ 1,347     $ 1,233            
$
5,086
 
  $ 2,866  
Trading revenue
 
 
485
 
    430       (128          
 
1,984
 
    475  
Investment management and custodial fees
 
 
2,099
 
    2,083       1,857            
 
6,238
 
    5,710  
Mutual fund revenue
 
 
1,034
 
    1,000       1,028            
 
3,049
 
    3,279  
Securities brokerage commissions
 
 
362
 
    377       344            
 
1,100
 
    1,132  
Service charges
 
 
529
 
    511       499            
 
1,551
 
    1,464  
Underwriting and other advisory fees
 
 
472
 
    458       369            
 
1,442
 
    1,577  
Foreign exchange revenue, other than trading
 
 
289
 
    322       250            
 
1,044
 
    772  
Card service revenue
 
 
334
 
    279       314            
 
938
 
    893  
Credit fees
 
 
342
 
    357       301            
 
1,078
 
    1,175  
Net gains on investment securities
 
 
27
 
    111       28            
 
191
 
    66  
Share of profit in joint ventures and associates
 
 
(37
    12       33            
 
4
 
    86  
Other
 
 
419
 
    134       114            
 
811
 
    488  
Non-interest
income
 
 
8,203
 
    7,421       6,242            
 
24,516
 
    19,983  
Total revenue
 
$
14,489
 
  $   13,520     $   12,132            
$
  43,103
 
  $   36,418  
Additional trading information
                                               
Net interest income
(1)
 
$
510
 
  $ 469     $ 465            
$
1,165
 
  $ 1,621  
Non-interest
income
 
 
485
 
    430       (128          
 
1,984
 
    475  
Total trading revenue
 
$
995
 
  $ 899     $ 337            
$
3,149
 
  $ 2,096  
 
  (1)   Reflects net interest income arising from trading-related positions, including assets and liabilities that are classified or designated at fair value through profit or loss (FVTPL).  
Q3 2023 vs. Q3 2022
Total revenue increased $2,357 million or 19% from a year ago, mainly due to higher Insurance premiums, investment and fee income (insurance revenue) and trading revenue, including the impact of loan underwriting markdowns in the prior year. Higher net interest income, other revenue, investment management and custodial fees as well as underwriting and other advisory fees also contributed to the increase. The impact of foreign exchange translation increased revenue by $277 million.
Net interest income increased $396 million or 7%, largely due to higher spreads and average volume growth in both deposits and loans in Canadian Banking. These factors were partially offset by lower revenue from non-trading derivatives, which was offset in Other revenue, in Capital Markets.
NIM was down 2 bps compared to last year, mainly due to higher funding costs in Capital Markets, with related revenue recorded in non-interest income, and an unfavourable shift in deposit mix in Canadian Banking. These factors were partially offset by the benefit of higher interest rates in Canadian Banking.
Insurance revenue increased $615 million or 50%, primarily due to higher group annuity sales and business growth across most products, partially offset by the change in fair value of investments backing policyholder liabilities, all of which are largely offset in PBCAE.
Trading revenue increased $613 million, as the prior year included the impact of loan underwriting markdowns, partially offset by lower equity trading revenue in the U.S. and Europe.
Investment management and custodial fees increased $242 million or 13%, mainly reflecting the inclusion of RBC Brewin Dolphin.
Underwriting and other advisory fees increased $103 million or 28%, largely due to higher debt origination across all regions.
Other revenue increased $305 million, mainly attributable to gains from our non-trading portfolios, which were offset in Net interest income, and changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense, and the gain on the partial sale of RBC Investor Services operations. These factors were partially offset by the impact of economic hedges.

Royal Bank of Canada
        Third Quarter 2023         9
 
Q3 2023 vs. Q2 2023
Total revenue increased $969 million or 7% from last quarter, largely due to higher insurance revenue, other revenue and net interest income.
Net interest income increased $187 million or 3%, primarily driven by the impact of three more days in the current quarter to Canadian Banking and Wealth Management, and higher spreads and average volume growth in Canadian Banking.
Insurance revenue increased $501 million or 37%, primarily due to higher group annuity sales, partially offset by the change in fair value of investments backing policyholder liabilities, both of which are largely offset in PBCAE.
Other revenue increased $285 million, mainly attributable to changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense, gains from our non-trading portfolios and the gain on the partial sale of RBC Investor Services operations. These factors were partially offset by the impact of economic hedges.
Q3 2023 vs. Q3 2022 (Nine months ended)
Total revenue increased $6,685 million or 18% from the same period last year, primarily driven by higher insurance revenue, net interest income and trading revenue, including the impact of loan underwriting markdowns in the prior year. Higher investment management and custodial fees, other revenue, as well as foreign exchange revenue, other than trading also contributed to the increase. These factors were partially offset by lower mutual fund revenue. The impact of foreign exchange translation increased revenue by $812 million.
Net interest income increased $2,152 million or 13%, largely due to higher spreads in Canadian Banking and Wealth Management and average volume growth in Canadian Banking. These factors were partially offset by lower revenue from
non-trading
derivatives, which was offset in Other revenue, and lower fixed income trading revenue, both in Capital Markets.
Insurance revenue increased $2,220 million or 77%, primarily due to the change in fair value of investments backing policyholder liabilities.
Trading revenue increased $1,509 million, mainly due to higher fixed income trading revenue across all regions. The prior year also included the impact of loan underwriting markdowns. This factor was partially offset by lower equity trading revenue across the U.S. and Europe.
Investment management and custodial fees increased $528 million or 9%, mainly reflecting the inclusion of RBC Brewin Dolphin.
Mutual fund revenue decreased $230 million or 7%, mainly reflecting lower average fee-based client assets driven by unfavourable market conditions in Wealth Management, and lower average mutual fund balances driving lower distribution fees in Canadian Banking.
Foreign exchange revenue, other than trading increased $272 million or 35%, primarily driven by foreign currency translation gains associated with certain foreign currency denominated funding, which was offset by the impact of economic hedges in Other revenue.
Other revenue increased $323 million or 66%, mainly attributable to gains from our non-trading portfolios, which were offset in Net interest income, and changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense. These factors were partially offset by the impact of economic hedges.

10         
Royal Bank of Canada
        Third Quarter 2023
 
Provision for credit losses
(1)
 
     For the three months ended            For the nine months ended  
(Millions of Canadian dollars, except percentage amounts)
 
July 31
2023
   
April 30
2023
   
July 31
2022
          
July 31
2023
   
July 31
2022
 
Personal & Commercial Banking
 
$
2
 
  $ 124     $ 145      
$
266
 
  $ (337
Wealth Management
(2)
 
 
64
 
    2       13      
 
90
 
    (31
Capital Markets
(2)
 
 
54
 
    47       20      
 
110
 
    (39
Corporate Support and other
(3)
 
 
 
          (1          
 
 
     
PCL on performing loans
 
 
120
 
    173       177            
 
466
 
    (407
Personal & Commercial Banking
 
$
303
 
  $ 302     $ 185      
$
867
 
  $ 523  
Wealth Management
(2)
 
 
38
 
    26       1      
 
106
 
    2  
Capital Markets
(2)
 
 
158
 
    113       (17    
 
324
 
    (2
Corporate Support and other
(3)
 
 
 
          1            
 
 
    1  
PCL on impaired loans
 
 
499
 
    441       170            
 
1,297
 
    524  
PCL – Loans
 
 
619
 
    614       347      
 
1,763
 
    117  
PCL – Other
(4)
 
 
(3
    (14     (7          
 
(15
    (14
Total PCL
 
$
616
 
  $ 600     $ 340            
$
1,748
 
  $ 103  
PCL on loans is comprised of:            
Retail
 
$
(1
  $ 97     $ 133      
$
230
 
  $ (113
Wholesale
 
 
121
 
    76       44            
 
236
 
    (294
PCL on performing loans
 
 
120
 
    173       177            
 
466
 
    (407
Retail
 
 
270
 
    249       163      
 
758
 
    447  
Wholesale
 
 
229
 
    192       7            
 
539
 
    77  
PCL on impaired loans
 
 
499
 
    441       170            
 
1,297
 
    524  
PCL – Loans
 
$
619
 
  $ 614     $ 347            
$
1,763
 
  $ 117  
PCL on loans as a % of average net loans and acceptances
 
 
  0.29%
      0.30%       0.17%    
 
  0.28%
      0.02%
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.23%
    0.21%     0.08%          
 
0.20%
    0.09%
 
(1)   Information on loans represents loans, acceptances and commitments.
(2)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(3)   Includes PCL recorded in Corporate Support and Insurance.
(4)   PCL – Other includes amounts related to debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, accounts receivable, and financial and purchased guarantees.
Q3 2023 vs. Q3 2022
Total PCL increased $276 million or 81% from a year ago, primarily reflecting higher provisions in Capital Markets and Wealth Management. The PCL on loans ratio increased 12 bps.
PCL on performing loans decreased $57 million or 32%, primarily reflecting lower provisions in our Canadian Banking retail portfolios, mainly driven by favourable changes to our macroeconomic outlook, including the impact of a favourable revision to our Canadian housing price forecast. This was partially offset by higher provisions in U.S. Wealth Management (including City National) and Capital Markets, reflecting unfavourable changes to our credit quality and macroeconomic outlook.
PCL on impaired loans increased $329 million, mainly due to provisions taken in Capital Markets in the current quarter in a few sectors, including the real estate and related, transportation and industrial products sectors, compared to recoveries in the same quarter last year. Higher provisions in our Canadian Banking retail portfolios also contributed to the increase.
Q3 2023 vs. Q2 2023
Total PCL increased $16 million or 3% from last quarter, primarily reflecting higher provisions in Wealth Management and Capital Markets, largely offset by lower provisions in Personal & Commercial Banking. The PCL on loans ratio decreased 1 bp.
PCL on performing loans decreased $53 million or 31%, mainly due to lower provisions in our Canadian Banking retail portfolios, largely driven by favourable changes to our macroeconomic and credit quality outlook, including the impact of a favourable revision to our Canadian housing price forecast. This was partially offset by higher provisions in U.S. Wealth Management (including City National), primarily driven by unfavourable changes to our macroeconomic and credit quality outlook.
PCL on impaired loans increased $58 million or 13%, mainly due to higher provisions in Capital Markets in a few sectors.
Q3 2023 vs. Q3 2022 (Nine months ended)
Total PCL increased $1,645 million from the same period last year, mainly reflecting higher provisions in Personal & Commercial Banking. Provisions taken in the current period as compared to releases in the prior period in Capital Markets and Wealth Management also contributed to the increase. The PCL on loans ratio increased 26 bps.
PCL on performing loans was $466 million compared to $(407) million in the same period last year, primarily reflecting provisions taken in the current period driven by unfavourable changes to our credit quality and macroeconomic outlook as compared to releases in the prior period which reflected reduced uncertainty from the COVID-19 pandemic, in Personal & Commercial Banking, Capital Markets and U.S. Wealth Management (including City National).

Royal Bank of Canada
        Third Quarter 2023         11
 
PCL on impaired loans increased $773 million, largely due to higher provisions in our Canadian Banking portfolios. Higher provisions in Capital Markets in a few sectors, including the real estate and related, consumer discretionary and transportation sectors, also contributed to the increase.
Insurance policyholder benefits, claims and acquisition expense (PBCAE)
Q3 2023 vs. Q3 2022
PBCAE increased $529 million or 62% from a year ago, primarily due to higher group annuity sales and business growth, partially offset by the change in fair value of investments backing policyholder liabilities, all of which are largely offset in revenue. PBCAE also reflected higher favourable investment-related experience.
Q3 2023 vs. Q2 2023
PBCAE increased $373 million or 37% from last quarter, mainly due to higher group annuity sales, partially offset by the change in fair value of investments backing policyholder liabilities, both of which are largely offset in revenue. PBCAE also reflected higher favourable investment-related experience.
Q3 2023 vs. Q3 2022 (Nine months ended)
PBCAE increased $2,263 million from the same period last year, primarily reflecting the change in fair value of investments backing policyholder liabilities, which is largely offset in revenue. Higher group annuity sales, increased investment income, and business growth also contributed to the increase. These factors were partially offset by higher favourable investment-related experience.
Non-interest
expense
 
     For the three months ended            For the nine months ended  
(Millions of Canadian dollars, except percentage amounts)
 
July 31
2023
   
April 30
2023
   
July 31
2022
          
July 31
2023
   
July 31
2022
 
Salaries
 
$
2,190
 
  $ 2,096     $ 1,820      
$
6,323
 
  $ 5,316  
Variable compensation
 
 
1,815
 
    1,812       1,473      
 
5,652
 
    5,168  
Benefits and retention compensation
 
 
546
 
    560       497      
 
1,650
 
    1,529  
Share-based compensation
 
 
243
 
    132       68            
 
645
 
    132  
Human resources
 
 
4,794
 
    4,600       3,858      
 
14,270
 
    12,145  
Equipment
 
 
611
 
    589       514      
 
1,769
 
    1,528  
Occupancy
 
 
411
 
    408       381      
 
1,230
 
    1,153  
Communications
 
 
324
 
    317       277      
 
923
 
    763  
Professional fees
 
 
592
 
    521       373      
 
1,517
 
    1,039  
Amortization of other intangibles
 
 
369
 
    380       342      
 
1,118
 
    1,015  
Other
 
 
760
 
    679       641            
 
2,203
 
    1,757  
Non-interest
expense
 
$
7,861
 
  $ 7,494     $ 6,386      
$
23,030
 
  $ 19,400  
Efficiency ratio
(1)
 
 
54.3%
      55.4%       52.6%    
 
  53.4%
      53.3%
Adjusted efficiency ratio
(2), (3)
 
 
  58.5%
    58.8%     56.1%          
 
57.7%
    55.3%
 
  (1)   Efficiency ratio is calculated as
Non-interest
expense divided by Total revenue.
 
  (2)   This is a
non-GAAP
ratio. For further details, refer to the Key performance and
non-GAAP
measures section.
 
  (3)   Effective Q2 2023, we revised the composition of this
non-GAAP
ratio. Comparative adjusted amounts have been revised to conform with this presentation.
 
Q3 2023 vs. Q3 2022
Non-interest expense increased $1,475 million or 23% from a year ago, primarily due to higher staff costs, higher variable compensation commensurate with increased revenue, the inclusion of RBC Brewin Dolphin and related costs, the impact of foreign exchange translation, as well as higher professional fees. The change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue, transaction and integration costs relating to the planned acquisition of HSBC Canada and ongoing technology investments also contributed to the increase.
Our efficiency ratio of 54.3% increased 170 bps from 52.6% last year. Our adjusted efficiency ratio of 58.5% increased 240 bps from 56.1% last year.
Q3 2023 vs. Q2 2023
Non-interest
expense increased $367 million or 5% from last quarter, mainly due to the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue, as well as higher professional fees. Transaction and integration costs relating to the planned acquisition of HSBC Canada and higher staff costs also contributed to the increase. These factors were partially offset by the impact of foreign exchange translation.
Our efficiency ratio of 54.3% decreased 110 bps from 55.4% last quarter. Our adjusted efficiency ratio of 58.5% decreased 30 bps from 58.8% last quarter.
Q3 2023 vs. Q3 2022 (Nine months ended)
Non-interest
expense increased $3,630 million or 19% from the same period last year, largely due to higher staff costs, the inclusion of RBC Brewin Dolphin and related costs and the impact of foreign exchange translation. The change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue, higher professional fees, ongoing technology investments, higher variable compensation as well as transaction and integration costs relating to the planned acquisition of HSBC Canada also contributed to the increase.
Our efficiency ratio of 53.4% increased 10 bps from 53.3% last year. Our adjusted efficiency ratio of 57.7% increased 240 bps from 55.3% last year.

12         
Royal Bank of Canada
        Third Quarter 2023
 
Adjusted efficiency ratio is a
non-GAAP
ratio. For further details, including a reconciliation, refer to the Key performance and
non-GAAP
measures section.
Income taxes
 
     For the three months ended            For the nine months ended  
(Millions of Canadian dollars, except percentage amounts)
 
July 31
2023
   
April 30
2023
   
July 31
2022
          
July 31
2023
   
July 31
2022
 
Income taxes
 
$
761
 
  $ 771     $ 979            
$
3,660
 
  $ 3,323  
Income before income taxes
 
 
4,633
 
      4,420         4,556            
 
  14,395
 
      15,248  
Effective income tax rate
 
 
  16.4%
 
    17.4%     21.5%          
 
25.4%
 
    21.8%
Adjusted effective income tax rate
(1), (2)
 
 
16.7%
    17.6%     21.5%          
 
18.2%
 
    21.8%
 
  (1)   This is a
non-GAAP
measure. For further details, including a reconciliation, refer to the Key performance and
non-GAAP
measures section.
 
  (2)   Effective Q2 2023, we revised the composition of this
non-GAAP
measure. Comparative adjusted amounts have been revised to conform with this presentation.
 
Q3 2023 vs. Q3 2022
Income tax expense decreased $218 million or 22% and the effective income tax rate of 16.4% decreased 5.1% from a year ago, primarily due to the impact of changes in earnings mix, partially offset by the impact of the 1.5% increase in the Canadian corporate tax rate enacted in the current year.
Q3 2023 vs. Q2 2023
Income tax expense decreased $10 million or 1% from last quarter, largely due to the net impact of tax adjustments as well as the impact of changes in earnings mix, partially offset by higher income before income taxes.
The effective income tax rate of 16.4% decreased 1.0%, primarily due to the net impact of tax adjustments.
Q3 2023 vs. Q3 2022 (Nine months ended)
Income tax expense increased $337 million or 10%, from the same period last year, primarily due to the impact of the CRD and other tax related adjustments and the 1.5% increase in the Canadian corporate tax rate in the current period. These factors were partially offset by the impact of changes in earnings mix and lower income before income taxes.
The effective income tax rate of 25.4% increased 3.6%, primarily due to the impact of the CRD and other tax related adjustments noted above and the 1.5% increase in the Canadian corporate tax rate. These factors were partially offset by the impact of changes in earnings mix. The adjusted effective income tax rate of 18.2% decreased 3.6% mainly due to the impact of changes in earnings mix, partially offset by the 1.5% increase in the Canadian corporate tax rate in the current period.
The adjusted effective income tax rate is a
non-GAAP
measure. For further details, including a reconciliation, refer to the Key performance and
non-GAAP
measures section.
 
Business segment results
 
 
How we measure and report our business segments
 
The key methodologies and assumptions used in our management reporting framework are periodically reviewed by management to ensure they remain valid. Effective the first quarter of 2023, we simplified our reporting structure by eliminating the Investor & Treasury Services segment and moving its former businesses to existing segments. For further details, refer to the About Royal Bank of Canada section. Other than changes necessary to effect our new basis of segment presentation, our key methodologies and assumptions remain unchanged from October 31, 2022.
For further details on the key methodologies and assumptions used in our management reporting framework, refer to the How we measure and report our business segments section of our 2022 Annual Report.
 
Key performance and
non-GAAP
measures
 
Performance measures
We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions.
Return on common equity
We use ROE, at both the consolidated and business segment levels, as a measure of return on total capital invested in our business. Management views the business segment ROE measure as a useful measure for supporting investment and resource allocation decisions because it adjusts for certain items that may affect comparability between business segments and certain competitors.

Royal Bank of Canada
        Third Quarter 2023         13
 
Our consolidated ROE calculation is based on net income available to common shareholders divided by total average common equity for the period. Business segment ROE calculations are based on net income available to common shareholders divided by average attributed capital for the period. For each segment, average attributed capital includes the capital required to underpin various risks as described in the Capital management section and amounts invested in goodwill and intangibles.
The attribution of capital involves the use of assumptions, judgments and methodologies that are regularly reviewed and revised by management as deemed necessary. Changes to such assumptions, judgments and methodologies can have a material effect on the business segment ROE information that we report. Other companies that disclose information on similar attributions and related return measures may use different assumptions, judgments and methodologies.
The following table provides a summary of our ROE calculations:
 
     For the three months ended  
   
July 31
2023
       
April 30
2023
       
July 31
2022
 
(Millions of Canadian dollars,
except percentage amounts)
 
Personal &
Commercial
Banking
   
Wealth
Management
   
Insurance
   
Capital
Markets
   
Corporate
Support
   
Total
         Total          Total  
Net income available to common shareholders
 
$
2,115
 
 
$
661
 
 
$
226
 
 
$
923
 
 
$
(113
 
$
3,812
 
    $ 3,581       $ 3,517  
Total average common equity
(1), (2)
 
 
29,900
 
 
 
24,200
 
 
 
2,200
 
 
 
27,500
 
 
 
20,050
 
 
 
103,850
 
          101,850             95,750  
ROE
(3)
 
 
  28.1%
 
 
  10.8%
 
 
  40.7%
 
 
  13.3%
 
 
  n.m.
 
 
  14.6%
        14.4%         14.6%
 
     For the nine months ended      
   
July 31
2023
       
July 31
2022
           
(Millions of Canadian dollars,
except percentage amounts)
 
Personal &
Commercial
Banking
   
Wealth
Management
   
Insurance
   
Capital
Markets
   
Corporate
Support
   
Total
         Total                                   
Net income available to common shareholders
 
$
  6,122
 
 
$
  2,224
 
 
$
511
 
 
$
  3,055
 
 
$
  (1,351
 
$
  10,561
 
    $   11,738      
Total average common equity
(1), (2)
 
 
29,100
 
 
 
24,450
 
 
 
2,100
 
 
 
27,800
 
 
 
18,350
 
 
 
101,800
 
        93,850      
ROE
(3)
 
 
28.1%
 
 
12.1%
 
 
  32.3%
 
 
14.7%
 
 
n.m.
 
 
13.9%
        16.7%    
 
(1)   Total average common equity represents rounded figures.
(2)   The amounts for the segments are referred to as attributed capital.
(3)   ROE is based on actual balances of average common equity before rounding.
n.m.   not meaningful
Non-GAAP
measures
We believe that certain
non-GAAP
measures (including
non-GAAP
ratios) are more reflective of our ongoing operating results and provide readers with a better understanding of management’s perspective on our performance. These measures enhance the comparability of our financial performance for the three and nine months ended July 31, 2023 with the corresponding periods in the prior year and the three months ended April 30, 2023.
Non-GAAP
measures do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.
The following discussion describes the
non-GAAP
measures we use in evaluating our operating results.
Adjusted results
We believe that providing adjusted results and certain measures excluding the impact of the specified items discussed below and amortization of acquisition-related intangibles enhance comparability with prior periods and enables readers to better assess trends in the underlying businesses. Specified items impacting our results for the three and nine months ended July 31, 2023 and the three months ended April 30, 2023 are:
 
CRD and other tax related adjustments: reflects the impact of the CRD and the 1.5% increase in the Canadian corporate tax rate applicable to fiscal 2022, net of deferred tax adjustments, which were announced in the Government of Canada’s 2022 budget and enacted in the first quarter of 2023
 
Transaction and integration costs relating to our planned acquisition of HSBC Canada
Adjusted efficiency ratio
The adjusted efficiency ratio is a
non-GAAP
ratio and is calculated based on adjusted
Non-interest
expense excluding HSBC Canada transaction and integration costs and amortization of acquisition-related intangibles divided by total revenue net of PBCAE, both of which are
non-GAAP
measures. We believe that the adjusted efficiency ratio is a useful measure as the change in fair value of investments backing policyholder liabilities can lead to volatility in revenue, which is largely offset within PBCAE, that could obscure trends in underlying business performance and reduce comparability with prior periods.

14         
Royal Bank of Canada
        Third Quarter 2023
 
Consolidated results, reported and adjusted
The following table provides a reconciliation of adjusted results to our reported results and illustrates the calculation of adjusted measures presented. The adjusted results and measures presented below are
non-GAAP
measures or ratios.
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars,
except per share, number of and percentage amounts)
 
July 31
2023
   
April 30
2023
   
July 31
2022 (1)
        
July 31
2023
   
July 31
2022 (1)
 
Total revenue
 
$
14,489
 
  $ 13,520     $ 12,132      
$
43,103
 
  $ 36,418  
PCL
 
 
616
 
    600       340      
 
1,748
 
    103  
Non-interest
expense
 
 
7,861
 
    7,494       6,386      
 
23,030
 
    19,400  
Income before income taxes
 
 
4,633
 
    4,420       4,556      
 
14,395
 
    15,248  
Income taxes
 
 
761
 
    771       979      
 
3,660
 
    3,323  
Net income
 
$
3,872
 
  $ 3,649     $ 3,577      
$
10,735
 
  $ 11,925  
Net income available to common shareholders
 
$
3,812
 
  $ 3,581     $ 3,517    
 
 
$
10,561
 
  $ 11,738  
Average number of common shares (thousands)
 
 
1,393,515
 
    1,388,388       1,396,381      
 
1,388,217
 
    1,409,292  
Basic earnings per share (in dollars)
 
$
2.74
 
  $ 2.58     $ 2.52    
 
 
$
7.61
 
  $ 8.33  
Average number of diluted common shares (thousands)
 
 
1,394,939
 
    1,390,149       1,398,667      
 
1,389,857
 
    1,411,934  
Diluted earnings per share (in dollars)
 
$
2.73
 
  $ 2.58     $ 2.51    
 
 
$
7.60
 
  $ 8.31  
ROE
(2)
 
 
14.6%
    14.4%     14.6%    
 
13.9%
    16.7%
Effective income tax rate
 
 
16.4%
    17.4%     21.5%  
 
 
 
25.4%
    21.8%
Total adjusting items impacting net income
(before-tax)
 
$
191
 
  $ 138     $ 62      
$
426
 
  $ 188  
Specified item: HSBC Canada transaction and integration costs 
(3)
 
 
110
 
    56            
 
177
 
     
Amortization of acquisition-related intangibles
(4)
 
 
81
 
    82       62    
 
 
 
249
 
    188  
Total income taxes for adjusting items impacting net income
 
$
46
 
  $ 29     $ 16      
$
(957
  $ 49  
Specified item: CRD and other tax related adjustments
(3), (5)
 
 
 
               
 
(1,050
     
Specified item: HSBC Canada transaction and integration costs 
(3)
 
 
26
 
    13            
 
42
 
     
Amortization of acquisition-related intangibles
(4)
 
 
20
 
    16       16    
 
 
 
51
 
    49  
Adjusted results
(6)
           
Income before income taxes – adjusted
 
 
4,824
 
    4,558       4,618      
 
14,821
 
    15,436  
Income taxes – adjusted
 
 
807
 
    800       995      
 
2,703
 
    3,372  
Net income – adjusted
 
$
4,017
 
  $ 3,758     $ 3,623      
$
12,118
 
  $ 12,064  
Net income available to common shareholders – adjusted
 
$
3,957
 
  $ 3,690     $ 3,563    
 
 
$
11,944
 
  $ 11,877  
Average number of common shares (thousands)
 
 
  1,393,515
 
      1,388,388         1,396,381      
 
1,388,217
 
    1,409,292  
Basic earnings per share (in dollars) – adjusted
 
$
2.84
 
  $ 2.66     $ 2.55    
 
 
$
8.60
 
  $ 8.43  
Average number of diluted common shares (thousands)
 
 
1,394,939
 
    1,390,149       1,398,667      
 
  1,389,857
 
      1,411,934  
Diluted earnings per share (in dollars) – adjusted
 
$
2.84
 
  $ 2.65     $ 2.55    
 
 
$
8.59
 
  $ 8.41  
ROE – adjusted
 
 
15.1%
    14.9%     14.8%    
 
15.7%
    16.9%
Adjusted effective income tax rate
 
 
16.7%
    17.6%     21.5%  
 
 
 
18.2%
    21.8%
           
Adjusted efficiency ratio
(7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$
14,489
 
  $ 13,520     $ 12,132      
$
43,103
 
  $ 36,418  
Less: PBCAE
 
 
1,379
 
    1,006       850      
 
3,930
 
    1,667  
Total revenue – adjusted
 
$
13,110
 
  $ 12,514     $ 11,282      
$
39,173
 
  $ 34,751  
Non-interest
expense
 
$
7,861
 
  $ 7,494     $ 6,386      
$
  23,030
 
  $ 19,400  
Less specified item: HSBC Canada transaction and integration costs
(before-tax)
(3)
 
 
110
 
    56          
 
 
 
177
 
     
Less: Amortization of acquisition-related intangibles
(before-tax) 
(4)
 
 
81
 
    82       62      
 
249
 
    188  
Non-interest
expense – adjusted
 
$
7,670
 
  $ 7,356     $ 6,324    
 
 
$
22,604
 
  $ 19,212  
Efficiency ratio
 
 
54.3%
    55.4%     52.6%    
 
53.4%
    53.3%
Efficiency ratio – adjusted
 
 
  58.5%
    58.8%     56.1%  
 
 
 
57.7%
    55.3%
 
(1)   There were no specified items for the three months ended July 31, 2022 or for the nine months ended July 31, 2022.
(2)   ROE is based on actual balances of average common equity before rounding.
(3)   These amounts have been recognized in Corporate Support.
(4)   Represents the impact of amortization of acquisition-related intangibles (excluding amortization of software), and any goodwill impairment.
(5)   The impact of the CRD and other tax related adjustments does not include $0.2 billion recognized in other comprehensive income.
(6)   Effective the second quarter of 2023, we included HSBC Canada transaction and integration costs and amortization of acquisition-related intangibles as adjusting items for
non-GAAP
measures and
non-GAAP
ratios. Therefore, comparative adjusted results have been revised from those previously presented to conform to our basis of presentation for this
non-GAAP
measure.
(7)   Effective the second quarter of 2023, we revised the composition of this
non-GAAP
ratio, which is calculated based on adjusted
Non-interest
expense excluding HSBC Canada transaction and integration costs and amortization of acquisition-related intangibles divided by total revenue net of PBCAE. Therefore, comparative adjusted results have been revised from those previously presented to conform to our basis of presentation for this
non-GAAP
ratio.

Royal Bank of Canada
        Third Quarter 2023         15
 
Personal & Commercial Banking
 
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars, except
percentage amounts and as otherwise noted)
 
July 31
2023
   
April 30
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Net interest income
 
$
4,062
 
  $ 3,817     $ 3,655        
$
11,886
 
  $ 10,118  
Non-interest
income
 
 
1,501
 
    1,481       1,527        
 
4,516
 
    4,606  
Total revenue
 
 
5,563
 
    5,298       5,182        
 
16,402
 
    14,724  
PCL on performing assets
 
 
5
 
    122       141        
 
268
 
    (339
PCL on impaired assets
 
 
300
 
    300       183        
 
860
 
    516  
PCL
 
 
305
 
    422       324        
 
1,128
 
    177  
Non-interest
expense
 
 
2,319
 
    2,257       2,130        
 
6,805
 
    6,167  
Income before income taxes
 
 
2,939
 
    2,619       2,728        
 
8,469
 
    8,380  
Net income
 
$
2,134
 
  $ 1,915     $ 2,023        
$
6,175
 
  $ 6,231  
Revenue by business
                                           
Canadian Banking
 
$
5,292
 
  $ 5,040     $ 4,974        
$
  15,616
 
  $ 14,103  
Caribbean & U.S. Banking
 
 
271
 
    258       208        
 
786
 
    621  
Selected balance sheet and other information
                                           
ROE
 
 
28.1%
    26.5%       29.2%        
 
28.1%
    31.0%  
NIM
 
 
2.74%
    2.70%       2.61%        
 
2.73%
    2.50%  
Efficiency ratio
(1)
 
 
41.7%
 
    42.6%       41.1%        
 
41.5%
    41.9%  
Operating leverage
(1)
 
 
(1.5)%
    (0.2)%       4.8%        
 
1.1%
    2.5%  
Average total earning assets, net
 
$
  588,400
 
  $   579,800     $   555,400        
$
  581,400
 
  $   542,100  
Average loans and acceptances, net
 
 
596,000
 
    586,700       560,300        
 
588,200
 
    546,300  
Average deposits
 
 
601,100
 
    588,000       555,300        
 
589,600
 
    546,000  
AUA
(2)
 
 
353,400
 
    351,100       346,500        
 
353,400
 
    346,500  
Average AUA
 
 
349,100
 
    347,900       343,500        
 
346,800
 
    361,400  
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.20%
    0.21%       0.13%        
 
0.20%
    0.13%  
Other selected information – Canadian Banking
                                           
Net income
 
$
2,043
 
  $ 1,825     $ 1,971        
$
5,924
 
  $ 6,025  
NIM
 
 
2.68%
    2.65%       2.60%        
 
2.69%
    2.49%  
Efficiency ratio
 
 
  40.5%
 
    41.4%       39.7%        
 
40.3%
    40.6%  
Operating leverage
 
 
(2.0)%
    (0.6)%       4.5%        
 
0.8%
    2.1%  
 
(1)   See Glossary for composition of this measure.
(2)   AUA represents
period-end
spot balances and includes securitized residential mortgages and credit card loans as at July 31, 2023 of $13 billion and $7 billion, respectively (April 30, 2023 – $15 billion and $8 billion; July 31, 2022 – $14 billion and $5 billion).
Financial performance
Q3 2023 vs. Q3 2022
Net income increased $111 million or 5% from a year ago, primarily attributable to higher net interest income reflecting higher spreads and average volume growth of 7% in Canadian Banking. These factors were partially offset by the retrospective impact of HST on payment card clearing services, which was announced in the Government of Canada’s 2023 budget and enacted in the current quarter, as well as higher staff-related costs and ongoing technology investments.
Total revenue increased $381 million or 7%.
Canadian Banking revenue increased $318 million or 6%, primarily due to higher net interest income reflecting higher spreads and average volume growth of 8% in deposits and 6% in loans. Increased client activity contributed to higher service charges and foreign exchange revenue. These factors were partially offset by the retrospective impact of HST on payment card clearing services as described above.
Caribbean & U.S. Banking revenue increased $63 million or 30%, mainly due to higher net interest income reflecting improved spreads.
NIM was up 13 bps, mainly due to the impact of the rising interest rate environment, partially offset by an unfavourable shift in deposit mix.
PCL decreased $19 million or 6%, primarily reflecting lower provisions on performing loans in our Canadian Banking retail portfolios, mainly driven by favourable changes to our macroeconomic outlook, including the impact of a favourable revision to our Canadian housing price forecast. This was partially offset by higher provisions on impaired loans in our Canadian Banking retail portfolios, resulting in an increase of 7 bps in the PCL on impaired loans ratio.
Non-interest
expense increased $189 million or 9%, primarily attributable to higher staff-related costs, ongoing technology investments and higher marketing costs.

16         
Royal Bank of Canada
        Third Quarter 2023
 
Q3 2023 vs. Q2 2023
Net income increased $219 million or 11% from last quarter, primarily attributable to higher net interest income driven by the impact of three more days in the current quarter, higher spreads and average volume growth of 2% in Canadian Banking. Lower PCL on performing loans, mainly in our Canadian Banking retail portfolios driven by favourable changes to our macroeconomic and credit quality outlook, including the impact of a favourable revision to our Canadian housing price forecast, and higher card service revenue also contributed to the increase. These factors were partially offset by the retrospective impact of HST on payment card clearing services as described above, as well as ongoing technology investments.
NIM was up 4 bps, mainly due to the impact of the rising interest rate environment.
Q3 2023 vs. Q3 2022 (Nine months ended)
Net income decreased $56 million or 1% from the same period last year, primarily attributable to higher PCL, higher staff-related costs and ongoing technology investments. A higher effective tax rate reflecting the 1.5% increase in the Canadian corporate tax rate also contributed to the decrease. These factors were largely offset by higher net interest income.
Total revenue increased $1,678 million or 11%, mainly due to higher net interest income reflecting higher spreads and average volume growth in Canadian Banking of 8% in both deposits and loans.
PCL increased $951 million, mainly reflecting provisions taken on performing loans in the current period, primarily in our Canadian Banking portfolios, driven by unfavourable changes to our credit quality and macroeconomic outlook as compared to releases in the prior period which reflected reduced uncertainty relating to the COVID-19 pandemic. The current period also reflected higher provisions on impaired loans, primarily in our Canadian Banking retail portfolios, resulting in an increase of 7 bps in the PCL on impaired loans ratio.
Non-interest
expense increased $638 million or 10%, primarily attributable to higher staff-related costs and ongoing technology investments.

Royal Bank of Canada
        Third Quarter 2023         17
 
Wealth Management
 
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars, except number of,
percentage amounts and as otherwise noted)
 
July 31
2023
   
April 30
2023
   
July 31
2022 
(1)
        
July 31
2023
   
July 31
2022 
(1)
 
Net interest income
 
$
1,007
 
  $ 1,096     $ 1,051        
$
3,328
 
  $ 2,782  
Non-interest
income
 
 
3,411
 
    3,328       2,971        
 
10,099
 
    9,259  
Total revenue
 
 
4,418
 
    4,424       4,022        
 
13,427
 
    12,041  
PCL on performing assets
 
 
64
 
    2       13        
 
90
 
    (31
PCL on impaired assets
 
 
38
 
    26       1        
 
106
 
    2  
PCL
 
 
102
 
    28       14        
 
196
 
    (29
Non-interest
expense
 
 
3,498
 
    3,447       2,929        
 
10,379
 
    8,844  
Income before income taxes
 
 
818
 
    949       1,079        
 
2,852
 
    3,226  
Net income
 
$
674
 
  $ 742     $ 821        
$
2,264
 
  $ 2,451  
Revenue by business
                                           
Canadian Wealth Management
 
$
1,111
 
  $ 1,094     $ 1,070        
$
3,316
 
  $ 3,213  
U.S. Wealth Management (including City National)
 
 
1,969
 
    2,005       1,878        
 
6,102
 
    5,380  
U.S. Wealth Management (including City National) (US$ millions)
 
 
1,477
 
    1,477       1,470        
 
4,539
 
    4,228  
Global Asset Management
 
 
635
 
    634       609        
 
1,952
 
    2,023  
International Wealth Management
 
 
324
 
    323       98        
 
935
 
    257  
Investor Services
(2)
 
 
379
 
    368       367        
 
1,122
 
    1,168  
Selected balance sheet and other information
                                           
ROE
 
 
10.8%
 
    12.1%       15.7%        
 
12.1%
 
    16.3%  
NIM
 
 
2.29%
 
    2.44%       2.59%        
 
2.46%
 
    2.30%  
Pre-tax
margin
(3)
 
 
18.5%
    21.5%       26.8%        
 
21.2%
 
    26.8%  
Number of advisors
(4)
 
 
6,239
 
    6,246       5,622        
 
6,239
 
    5,622  
Average total earning assets, net
 
$
174,200
 
  $ 184,000     $ 161,300        
$
181,200
 
  $ 161,800  
Average loans and acceptances, net
 
 
119,300
 
    121,600       111,600        
 
121,100
 
    106,500  
Average deposits
(2)
 
 
154,300
 
    158,600       194,600        
 
166,300
 
    198,800  
AUA
(2), (5)
 
 
4,043,600
 
    5,540,900       5,385,000        
 
4,043,600
 
    5,385,000  
U.S. Wealth Management (including City National)
(5)
 
 
756,300
 
    737,500       683,400        
 
756,300
 
    683,400  
U.S. Wealth Management (including City National) (US$ millions) 
(5)
 
 
573,500
 
    544,300       533,600        
 
573,500
 
    533,600  
Investor Services
(5)
 
 
2,544,500
 
      4,067,800         4,089,900        
 
2,544,500
 
      4,089,900  
AUM
(5)
 
 
1,086,800
 
    1,074,900       929,600        
 
1,086,800
 
    929,600  
Average AUA
(2)
 
 
4,987,300
 
    5,499,000       5,540,800        
 
5,301,000
 
    5,797,100  
Average AUM
 
 
1,074,600
 
    1,060,300       922,000        
 
1,054,000
 
    974,400  
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.13%
 
    0.09%       0.00%        
 
0.12%
 
    0.00%  
 
Estimated impact of U.S. dollar, British pound
and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
 
For the three
months ended
         
For the nine
months ended
 
 
Q3 2023 vs.
Q3 2022
   
Q3 2023 vs.
Q2 2023
          
Q3 2023 vs.
Q3 2022
 
Increase (decrease):
                               
Total revenue
 
$
131
 
 
$
(34
         
$
380
 
PCL
 
 
3
 
 
 
(3
         
 
8
 
Non-interest
expense
 
 
111
 
 
 
(30
         
 
315
 
Net income
 
 
15
 
 
 
(1
         
 
46
 
Percentage change in average U.S. dollar equivalent of C$1.00
 
 
(4)%
 
 
 
2%
 
         
 
(5)%
 
Percentage change in average British pound equivalent of C$1.00
 
 
(7)%
 
 
 
(1)%
 
         
 
(1)%
 
Percentage change in average Euro equivalent of C$1.00
 
 
(8)%
 
 
 
1%
 
         
 
(4)%
 
 
(1)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(2)   On July 3, 2023, we completed the partial sale of RBC Investor Services operations. The completion of the sale of the business of the U.K. branch of RBC Investor Services Trust and the RBC Investor Services business in Jersey remains subject to customary closing conditions, including regulatory approvals. For further details, refer to Note 6 of our Condensed Financial Statements.
(3)  
Pre-tax
margin is defined as Income before income taxes divided by Total revenue.
(4)   Represents client-facing advisors across all of our Wealth Management businesses.
(5)   Represents
period-end
spot balances.

18         
Royal Bank of Canada
        Third Quarter 2023
 
Financial performance
Q3 2023 vs. Q3 2022
Net income decreased $147 million or 18% from a year ago, mainly reflecting continued investments in the operational infrastructure of City National and higher PCL, partly offset by the gain on the partial sale of RBC Investor Services operations.
Total revenue increased $396 million or 10%.
Canadian Wealth Management revenue increased $41 million or 4%, primarily due to higher average fee-based client assets reflecting market appreciation and net sales.
U.S. Wealth Management (including City National) revenue increased $91 million or 5%. In U.S. dollars, revenue increased $7 million, as benefits from hedging activities in the current quarter and higher revenue from sweep deposits more than offset the impact of spread compression driven by higher funding costs.
Global Asset Management revenue increased $26 million or 4%, primarily due to the impact of foreign exchange translation.
International Wealth Management revenue increased $226 million, mainly reflecting the inclusion of RBC Brewin Dolphin, as well as an increase in net interest income driven by higher spreads.
Investor Services revenue increased $12 million or 3%, primarily due to the gain on the partial sale of RBC Investor Services operations, partially offset by reduced revenue due to the sale.
PCL increased $88 million, primarily in U.S. Wealth Management (including City National), reflecting higher provisions on performing loans, mainly driven by unfavourable changes to our credit quality and macroeconomic outlook. Higher provisions on impaired loans, primarily in the real estate and related sector, also contributed to an increase of 13 bps in the PCL on impaired loans ratio.
Non-interest
expense increased $569 million or 19%, largely due to the inclusion of RBC Brewin Dolphin and related costs. Continued investments in the operational infrastructure of City National, including higher professional fees and staff costs, as well as the impact of foreign exchange translation, also contributed to the increase. The current quarter also reflects lower expenses due to the partial sale of RBC Investor Services operations.
Q3 2023 vs. Q2 2023
Net income decreased $68 million or 9% from last quarter, primarily due to higher PCL on performing loans, largely driven by unfavourable changes to our macroeconomic and credit quality outlook. Lower net interest income, largely reflecting the impact of lower spreads and deposit volume and an increase in non-interest expenses also contributed to the decrease. These factors were partially offset by the gain on the partial sale of RBC Investor Services operations and higher average fee-based client assets reflecting market appreciation.
Q3 2023 vs. Q3 2022 (Nine months ended)
Net income decreased $187 million or 8% from the same period last year, mainly due to lower average fee-based client assets, higher PCL as well as higher staff costs and professional fees. These factors were partially offset by an increase in net interest income and higher revenue from sweep deposits.
Total revenue increased $1,386 million or 12%, mainly due to the inclusion of RBC Brewin Dolphin as well as an increase in net interest income driven by higher spreads reflecting higher interest rates, which also drove higher revenue from sweep deposits. The impact of foreign exchange translation also contributed to the increase. These factors were partially offset by lower average fee-based client assets driven by unfavourable market conditions.
PCL was $196 million, compared to $(29) million in the same period last year, primarily in U.S. Wealth Management (including City National), mainly attributable to provisions taken on performing loans in the current period driven by unfavourable changes to our credit quality and macroeconomic outlook as compared to releases in the prior period which reflected reduced uncertainty relating to the COVID-19 pandemic. The current period also reflected higher provisions on impaired loans in a few sectors, including the real estate and related and other services sectors resulting in an increase of 12 bps in the PCL on impaired loans ratio.
Non-interest expense increased $1,535 million or 17%, largely due to the inclusion of RBC Brewin Dolphin and related costs and the impact of foreign exchange translation. Higher staff costs and professional fees, including continued investments in the operational infrastructure of City National as well as the impact of a legal provision release in U.S. Wealth Management (including City National) in the same period last year also contributed to the increase.

Royal Bank of Canada
        Third Quarter 2023         19
 
Insurance
 
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars, except
percentage amounts and as otherwise noted)
 
July 31
2023
   
April 30
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Non-interest
income
           
Net earned premiums
 
$
1,773
 
  $ 1,195     $ 936      
$
4,010
 
  $ 3,745  
Investment income, gains/(losses) on assets supporting insurance policyholder liabilities
(1)
 
 
18
 
    103       245      
 
919
 
    (1,029
Fee income
 
 
57
 
    49       52      
 
157
 
    150  
Total revenue
 
 
1,848
 
    1,347       1,233      
 
5,086
 
    2,866  
Insurance policyholder benefits and claims
(1)
 
 
1,295
 
    923       773      
 
3,683
 
    1,426  
Insurance policyholder acquisition expense
 
 
84
 
    83       77      
 
247
 
    241  
Non-interest
expense
 
 
165
 
    159       139      
 
480
 
    431  
Income before income taxes
 
 
304
 
    182       244      
 
676
 
    768  
Net income
 
$
227
 
  $ 139     $ 186        
$
514
 
  $ 589  
Revenue by business
           
Canadian Insurance
 
$
1,184
 
  $ 695     $ 597      
$
3,176
 
  $ 783  
International Insurance
 
 
664
 
    652       636        
 
1,910
 
    2,083  
Selected balances and other information
           
ROE
 
 
40.7%
 
    26.9%     32.3%    
 
32.3%
 
    33.1%
Premiums and deposits
(2)
 
$
1,974
 
  $ 1,419     $ 1,155      
$
4,632
 
  $ 4,427  
Fair value changes on investments backing policyholder liabilities
(1)
 
 
(99
    12       115        
 
576
 
    (1,448
 
(1)   Includes unrealized gains and losses on investments backing policyholder liabilities attributable to fluctuation of assets designated as FVTPL. The investments which support actuarial liabilities are predominantly fixed income assets designated as FVTPL. Consequently, changes in the fair values of these assets are recorded in Insurance premiums, investment and fee income in the Consolidated Statements of Income and are largely offset by changes in the fair value of the actuarial liabilities, the impact of which is reflected in PBCAE.
(2)   Premiums and deposits include premiums on risk-based insurance and annuity products, and individual and group segregated fund deposits, consistent with insurance industry practices.
Financial performance
Q3 2023 vs. Q3 2022
Net income increased $41 million or 22% from a year ago, primarily due to higher favourable investment-related experience, partially offset by higher capital funding costs.
Total revenue increased $615 million or 50%.
Canadian Insurance revenue increased $587 million or 98%, primarily due to higher group annuity sales and business growth across most products, partially offset by the change in fair value of investments backing policyholder liabilities, all of which are largely offset in PBCAE as indicated below.
International Insurance revenue increased $28 million or 4%, primarily due to business growth in longevity reinsurance, which is largely offset in PBCAE as indicated below.
PBCAE increased $529 million or 62%, primarily due to higher group annuity sales and business growth, partially offset by the change in fair value of investments backing policyholder liabilities, all of which are largely offset in revenue. PBCAE also reflected higher favourable investment-related experience.
Non-interest
expense increased $26 million or 19%, largely due to higher staff-related costs and ongoing technology investments.
Q3 2023 vs. Q2 2023
Net income increased $88 million or 63% from last quarter, primarily due to higher favourable investment-related experience.
Q3 2023 vs. Q3 2022 (Nine months ended)
Net income decreased $75 million or 13% from the same period last year, primarily due to higher capital funding costs, partially offset by higher favourable investment-related experience.
Total revenue increased $2,220 million or 77%, primarily due to the change in fair value of investments backing policyholder liabilities.
PBCAE increased $2,263 million, primarily reflecting the change in fair value of investments backing policyholder liabilities, which is largely offset in revenue. Higher group annuity sales, increased investment income, and business growth also contributed to the increase. These factors were partially offset by higher favourable investment-related experience.
Non-interest
expense increased $49 million or 11%, largely due to higher staff-related costs and ongoing technology investments.

20         
Royal Bank of Canada
        Third Quarter 2023
 
Capital Markets
 
 
     As at or for the three months ended          As at or for the nine months ended  
(Millions of Canadian dollars, except
percentage amounts and as otherwise noted)
 
July 31
2023
   
April 30
2023
   
July 31
2022 
(1)
        
July 31
2023
   
July 31
2022 
(1)
 
Net interest income
(2)
 
$
891
 
  $ 920     $ 1,233      
$
2,579
 
  $ 3,760  
Non-interest
income
(2)
 
 
1,772
 
    1,712       631      
 
5,837
 
    3,599  
Total revenue
(2)
 
 
2,663
 
    2,632       1,864      
 
8,416
 
    7,359  
PCL on performing assets
 
 
51
 
    37       19      
 
100
 
    (52
PCL on impaired assets
 
 
158
 
    113       (17    
 
324
 
    6  
PCL
 
 
209
 
    150       2      
 
424
 
    (46
Non-interest
expense
 
 
1,620
 
    1,510       1,186      
 
4,831
 
    4,136  
Income before income taxes
 
 
834
 
    972       676      
 
3,161
 
    3,269  
Net income
 
$
938
 
  $ 939     $ 599        
$
3,100
 
  $ 2,578  
Revenue by business
           
Corporate and Investment Banking
 
$
1,260
 
  $ 1,331     $ 725      
$
3,890
 
  $ 3,381  
Global Markets
 
 
1,484
 
    1,393       1,258      
 
4,762
 
    4,302  
Other
 
 
(81
    (92     (119      
 
(236
    (324
Selected balance sheet and other information
           
ROE
 
 
13.3%
 
    13.7%     8.4%    
 
14.7%
 
    12.7%
Average total assets
 
$
  1,082,600
 
  $   994,800     $   1,033,900      
$
  1,088,400
 
  $   1,025,100  
Average trading securities
 
 
157,400
 
    143,000       134,700      
 
151,900
 
    139,900  
Average loans and acceptances, net
 
 
136,700
 
    139,000       127,600      
 
138,100
 
    120,700  
Average deposits
 
 
285,500
 
    296,800       281,700      
 
296,400
 
    280,800  
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.46%
 
    0.33%     (0.05)%        
 
0.31%
 
    0.00%
 
Estimated impact of U.S. dollar, British pound
and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
 
For the three
months ended
         
For the nine
months ended
 
 
Q3 2023 vs.
Q3 2022
          
Q3 2023 vs.
Q2 2023
          
Q3 2023 vs.
Q3 2022
 
Increase (decrease):
         
Total revenue
 
$
111
 
   
$
(33
   
$
318
 
PCL
 
 
8
 
   
 
(3
   
 
17
 
Non-interest
expense
 
 
61
 
   
 
(15
   
 
151
 
Net income
 
 
48
 
         
 
(16
         
 
147
 
Percentage change in average U.S. dollar equivalent of C$1.00
 
 
(4)%
 
   
 
2%
 
   
 
(5)%
 
Percentage change in average British pound equivalent of C$1.00
 
 
(7)%
 
   
 
(1)%
 
   
 
(1)%
 
Percentage change in average Euro equivalent of C$1.00
 
 
(8)%
 
         
 
1%
 
         
 
(4)%
 
 
(1)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(2)   The taxable equivalent basis (teb) adjustment for the three months ended July 31, 2023 was $113 million (April 30, 2023 – $213 million; July 31, 2022 – $143 million) and for the nine months ended July 31, 2023 was $442 million (July 31, 2022 – $430 million). For further discussion, refer to the How we measure and report our business segments section of our 2022 Annual Report.
Financial performance
Q3 2023 vs. Q3 2022
Net income increased $339 million or 57% from a year ago, primarily driven by higher revenue in Corporate and Investment Banking, lower taxes reflecting changes in earnings mix and higher revenue in Global Markets. These factors were partially offset by higher compensation on increased results and higher PCL.
Total revenue increased $799 million or 43%.
Corporate and Investment Banking revenue increased $535 million or 74%, as the prior year included the impact of loan underwriting markdowns. The impact of foreign exchange translation, higher debt origination across all regions, and improved margins in our transaction banking business also contributed to the increase. These factors were partially offset by lower lending revenue across most regions.
Global Markets revenue increased $226 million or 18%, largely due to higher fixed income trading revenue across all regions, partially offset by lower equity trading revenue across all regions.
Other revenue improved $38 million or 32%, primarily reflecting lower residual funding costs.
PCL increased $207 million, primarily reflecting provisions taken on impaired loans in the current quarter in a few sectors, including the real estate and related, transportation and industrial products sectors, compared to recoveries in the same quarter last year resulting in an increase of 51 bps in the PCL on impaired loans ratio.
Non-interest
expense increased $434 million or 37%, mainly driven by higher compensation on improved results, the impact of foreign exchange translation and ongoing technology investments.
Q3 2023 vs. Q2 2023
Net income remained relatively flat from last quarter as lower taxes reflecting changes in earnings mix and higher revenue, mainly reflecting higher equity and fixed income trading revenue, were offset by higher expenses and higher PCL on impaired loans in a few sectors.

Royal Bank of Canada
        Third Quarter 2023         21
 
Q3 2023 vs. Q3 2022 (Nine months ended)
Net income increased $522 million or 20% from the same period last year, mainly driven by lower taxes reflecting changes in earnings mix, as well as higher revenue in Corporate and Investment Banking and Global Markets. These factors were partially offset by higher PCL and higher compensation on increased results.
Total revenue increased $1,057 million or 14%, mainly due to higher fixed income trading revenue across all regions. The prior year also included the impact of loan underwriting markdowns. The impact of foreign exchange translation also contributed to the increase. These factors were partially offset by lower equity trading revenue across all regions.
PCL was $424 million compared to $(46) million in the same period last year, largely reflecting higher provisions on impaired loans in a few sectors, including the real estate and related, consumer discretionary and transportation sectors, resulting in an increase of 31 bps in the PCL on impaired loans ratio. Provisions taken on performing loans in the current period driven by unfavourable changes to our credit quality and macroeconomic outlook as compared to releases in the prior period, which reflected reduced uncertainty relating to the COVID-19 pandemic, also contributed to the increase.
Non-interest
expense increased $695 million or 17%, mainly driven by higher compensation on improved results, the impact of foreign exchange translation and ongoing technology investments.
 
Corporate Support
 
 
     For the three months ended          For the nine months ended  
(Millions of Canadian dollars)
 
July 31
2023
   
April 30
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Net interest income (loss)
(1)
 
$
326
 
  $ 266     $ (49    
$
794
 
  $ (225
Non-interest
income (loss)
(1), (2)
 
 
(329
    (447     (120    
 
(1,022
    (347
Total revenue
(1), (2)
 
 
(3
    (181     (169    
 
(228
    (572
PCL
 
 
 
               
 
 
    1  
Non-interest
expense
(2)
 
 
259
 
    121       2      
 
535
 
    (178
Income (loss) before income taxes
(1)
 
 
(262
    (302     (171    
 
(763
    (395
Income taxes (recoveries)
(1)
 
 
(161
    (216     (119    
 
555
 
    (471
Net income (loss)
 
$
(101
  $   (86   $ (52      
$
(1,318
  $ 76  
 
(1)   Teb adjusted.
(2)   Revenue for the three months ended July 31, 2023 included gains of $129 million (April 30, 2023 and July 31, 2022 – gains of $11 million and losses of $22 million, respectively) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, and
non-interest
expense included $118 million (April 30, 2023 and July 31, 2022 – $19 million and $(15) million, respectively) of share-based compensation expense driven by changes in the fair value of liabilities relating to our U.S. Wealth Management (including City National) share-based compensation plans. Revenue for the nine months ended July 31, 2023 included gains of $261 million (July 31, 2022 – losses of $265 million) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, and
non-interest
expense included $237 million (July 31, 2022 – $(208) million) of share-based compensation expense driven by changes in the fair value of liabilities relating to our U.S. Wealth Management (including City National) share-based compensation plans.
Due to the nature of activities and consolidation adjustments reported in this segment, we believe that a comparative period analysis is not relevant.
Total revenue and Income taxes (recoveries) in each period in Corporate Support include the deduction of the teb adjustments related to the
gross-up
of income from Canadian taxable corporate dividends and the U.S. tax credit investment business recorded in Capital Markets. The amount deducted from revenue was offset by an equivalent increase in Income taxes (recoveries).
The teb amount for the three months ended July 31, 2023 was $113 million, compared to $213 million in the prior quarter and $143 million in the same quarter last year. The teb amount for the nine months ended July 31, 2023 was $442 million, compared to $430 million in the same period last year.
The following identifies the material items, other than the teb impacts noted previously, affecting the reported results in each period.
Q3 2023
Net loss was $101 million, primarily due to transaction and integration costs of $84 million relating to the planned acquisition of HSBC Canada (for further details on this specified item, refer to the Key performance and non-GAAP measures section).
Q2 2023
Net loss was $86 million, primarily due to residual unallocated items, as well as transaction and integration costs of $43 million relating to the planned acquisition of HSBC Canada (for further details on this specified item, refer to the Key performance and
non-GAAP
measures section).
Q3 2022
Net loss was $52 million, primarily due to residual unallocated items and unfavourable tax adjustments.
Q3 2023 (Nine months ended)
Net loss was $1,318 million, primarily due to the impact of the CRD and other tax related adjustments of $1,050 million, as well as transaction and integration costs of $135 million relating to the planned acquisition of HSBC Canada (for further details on these specified items, refer to the Key performance and non-GAAP measures section).
Q3 2022 (Nine months ended)
Net income was $76 million, mainly due to net favourable tax adjustments.

22         
Royal Bank of Canada
        Third Quarter 2023
 
Quarterly results and trend analysis
 
Our quarterly results are impacted by a number of trends and recurring factors, which include seasonality of certain businesses, general economic and market conditions, and fluctuations in the Canadian dollar relative to other currencies. The following table summarizes our results for the last eight quarters (the period):
Quarterly results
(1)
 
    
2023
           2022            2021  
(Millions of Canadian dollars,
except per share and percentage amounts)
 
Q3
    Q2     Q1            Q4     Q3     Q2     Q1            Q4  
Personal & Commercial Banking
 
$
5,563
 
  $ 5,298     $ 5,541       $ 5,419     $ 5,182     $ 4,739     $ 4,803       $ 4,605  
Wealth Management
(2)
 
 
4,418
 
    4,424       4,585         4,308       4,022       4,001       4,018         3,862  
Insurance
 
 
1,848
 
    1,347       1,891         644       1,233       234       1,399         1,501  
Capital Markets
(2), (3)
 
 
2,663
 
    2,632       3,121         2,484       1,864       2,503       2,992         2,428  
Corporate Support
(3)
 
 
(3
    (181     (44             (288     (169     (257     (146             (20
Total revenue
 
 
  14,489
 
      13,520         15,094           12,567         12,132         11,220         13,066           12,376  
PCL
 
 
616
 
    600       532         381       340       (342     105         (227
PBCAE
 
 
1,379
 
    1,006       1,545         116       850       (180     997         1,032  
Non-interest
expense
 
 
7,861
 
    7,494       7,675               7,209       6,386       6,434       6,580               6,583  
Income before income taxes
 
 
4,633
 
    4,420       5,342         4,861       4,556       5,308       5,384         4,988  
Income taxes
 
 
761
 
    771       2,128               979       979       1,055       1,289               1,096  
Net income
 
$
3,872
 
  $ 3,649     $ 3,214             $ 3,882     $ 3,577     $ 4,253     $ 4,095             $ 3,892  
EPS  – basic
 
$
2.74
 
  $ 2.58     $ 2.29       $ 2.75     $ 2.52     $ 2.97     $ 2.84       $ 2.68  
         – diluted
 
 
2.73
 
    2.58       2.29               2.74       2.51       2.96       2.84               2.68  
Effective income tax rate
 
 
16.4%
 
    17.4%     39.8%       20.1%     21.5%     19.9%     23.9%       22.0%
Period average US$ equivalent of C$1.00
 
$
0.750
 
  $ 0.737     $ 0.745             $ 0.739     $ 0.783     $ 0.789     $ 0.787             $ 0.796  
 
(1)   Fluctuations in the Canadian dollar relative to other foreign currencies have affected our consolidated results over the period.
(2)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(3)   Teb adjusted. For further discussion, refer to the How we measure and report our business segments section of our 2022 Annual Report.
Seasonality
Seasonal factors may impact our results in certain quarters. The first quarter has historically been stronger for our Capital Markets businesses. The second quarter has fewer days than the other quarters, which generally results in a decrease in net interest income and certain expense items. The third and fourth quarters include the summer months which generally results in lower client activity and may negatively impact the results of our Capital Markets trading business.
Trend analysis
Earnings over the period have been impacted by the factors noted below.
Personal & Commercial Banking revenue has benefitted from solid volume growth in loans and deposits over the period. NIM has been favourably impacted over the majority of the period by the rising interest rate environment, whereas a low interest rate environment persisted in the earlier part of the period. Towards the end of the period, NIM has been adversely impacted by a shift in product mix.
Wealth Management revenue has generally benefitted from growth in average
fee-based
client assets, which is impacted by market conditions, and volume growth in loans over the period. The rising interest rate environment also favourably impacted revenue over the recent quarters, whereas a low interest rate environment persisted in the earlier part of the period. The revenue of RBC Brewin Dolphin has been included since the acquisition closed on September 27, 2022. On July 3, 2023, we completed the sale of the European asset servicing activities of RBC Investor Services and its associated Malaysian centre of excellence.
Insurance revenue has fluctuated over the period, primarily due to the impact of changes in the fair value of investments backing policyholder liabilities as well as the timing of group annuity sales, both of which are largely offset in PBCAE. Group annuity sales can vary significantly by quarter and are generally higher in the first half of the fiscal year.
Capital Markets revenue is influenced, to a large extent, by market conditions that impact client activity. Beginning in the second quarter of 2022, there was a decline in global investment banking fee pools. Sales and trading results were impacted notably in the third quarter of 2022 amidst challenging market conditions, driving lower fixed income trading revenue, including the impact from loan underwriting markdowns. In 2023, we saw improvement in sales and trading, reflecting strong client activity.
PCL is comprised of provisions taken on performing assets and provisions taken on impaired assets. PCL on performing assets fluctuated over the period as it is impacted by changes in credit quality, macroeconomic conditions, and exposures. Throughout the last quarter of 2021 and the first half of 2022, we saw improvements in our macroeconomic and credit quality outlook, as the economic impact from the
COVID-19
pandemic eased in most regions, resulting in releases of provisions on performing assets. Since the second quarter of 2022 we have seen increases in provisions on performing assets generally reflecting unfavourable changes in our macroeconomic and credit quality outlook. PCL on impaired assets remained low during the early part of the period, but began to trend upwards over the latter half of the period.

Royal Bank of Canada
        Third Quarter 2023         23
 
PBCAE has fluctuated over the period reflecting changes in the fair value of investments backing policyholder liabilities, which is impacted by changes in market conditions, as well as group annuity sales, both of which are largely offset in revenue. PBCAE has also fluctuated due to the impact of investment-related experience and claims costs over the period. Actuarial adjustments, which generally occur in the fourth quarter of each year, also impact PBCAE.
Non-interest
expense has been impacted by fluctuations in variable compensation over the period, commensurate with fluctuations in revenue and earnings. Changes in the fair value of our U.S. share-based compensation plans, which are largely offset in revenue, have also contributed to fluctuations over the period and are impacted by market conditions. While we continue to focus on efficiency management activities, expenses over the period also reflect investments in staff and technology. The fourth quarter of 2021 included a legal provision in U.S. Wealth Management (including City National) that was partially released in the first quarter of 2022.
Non-interest
expenses of RBC Brewin Dolphin have been included since the acquisition closed on September 27, 2022.
Our effective income tax rate has fluctuated over the period, mostly due to varying levels of tax adjustments and changes in earnings mix. The second and fourth quarters of 2022 reflected the impact of net favourable tax adjustments and an increase in income from lower tax rate jurisdictions, respectively. The first quarter of 2023 reflects the impact of the CRD and other tax related adjustments.
 
Financial condition
 
 
Condensed balance sheets
 
 
        
 
As at
 
    
 
(Millions of Canadian dollars)
 
July 31
2023
   
October 31
2022
 
Assets
               
Cash and due from banks
 
$
80,358
 
  $ 72,397  
Interest-bearing deposits with banks
 
 
87,650
 
    108,011  
Securities, net of applicable allowance
(1)
 
 
372,625
 
    318,223  
Assets purchased under reverse repurchase agreements and securities borrowed
 
 
347,151
 
    317,845  
Loans
               
Retail
 
 
561,212
 
    549,751  
Wholesale
 
 
278,997
 
    273,967  
Allowance for loan losses
 
 
(4,495
    (3,753
Other – Derivatives
 
 
115,914
 
    154,439  
     – Other
(2)
 
 
118,322
 
    126,339  
Total assets
 
$
  1,957,734
 
  $   1,917,219  
Liabilities
               
Deposits
 
$
1,215,671
 
  $ 1,208,814  
Other – Derivatives
 
 
117,244
 
    153,491  
     – Other
(2)
 
 
501,188
 
    436,714  
Subordinated debentures
 
 
11,202
 
    10,025  
Total liabilities
 
 
1,845,305
 
    1,809,044  
Equity attributable to shareholders
 
 
112,334
 
    108,064  
Non-controlling
interests
 
 
95
 
    111  
Total equity
 
 
112,429
 
    108,175  
Total liabilities and equity
 
$
1,957,734
 
  $ 1,917,219  
 
(1)   Securities are comprised of trading and investment securities.
(2)   Other – Other assets and liabilities include Segregated fund net assets and liabilities, respectively.
Q3 2023 vs. Q4 2022
Total assets increased $41 billion or 2% from October 31, 2022. Foreign exchange translation decreased total assets by $46 billion.
Cash and due from banks was up $8 billion or 11%, mainly due to higher deposits with central banks, reflecting our short-term cash management activities.
Interest-bearing deposits with banks decreased $20 billion or 19%, primarily reflecting the impact of the partial sale of RBC Investor Services operations. For further details, refer to Note 6 of our Condensed Financial Statements.
Securities, net of applicable allowance, were up $54 billion or 17%, largely due to higher government debt securities, mainly reflecting business activities. Higher equity trading and corporate debt securities also contributed to the increase.
Assets purchased under reverse repurchase agreements (reverse repos) and securities borrowed increased $29 billion or 9%, primarily due to increased client demand.
Loans (net of Allowance for loan losses) were up $16 billion or 2%, primarily due to volume growth in residential mortgages and wholesale loans.
Derivative assets were down $39 billion or 25%, primarily attributable to the impact of foreign exchange translation.
Other assets were down $8 billion or 6%, primarily reflecting lower cash collateral.

24         
Royal Bank of Canada
        Third Quarter 2023
 
Total liabilities increased $36 billion or 2%. Foreign exchange translation decreased total liabilities by $46 billion.
Deposits increased $7 billion due to an increase in term deposits attributable to higher interest rates and issuances of long-term notes for funding requirements. These factors were partially offset by a decrease in demand deposits, the impact of the partial sale of RBC Investor Services operations, and the impact of foreign exchange translation.
Derivative liabilities were down $36 billion or 24%, primarily attributable to the impact of foreign exchange translation.
Other liabilities were up $64 billion or 15%, primarily due to higher obligations related to repurchase agreements (repos) reflecting increased client demand.
Total equity increased $4 billion or 4%, primarily reflecting earnings, net of dividends.
 
Off-balance
sheet arrangements
 
In the normal course of business, we engage in a variety of financial transactions that, for accounting purposes, are not recorded on our consolidated balance sheets.
Off-balance
sheet transactions are generally undertaken for risk, capital and funding management purposes which benefit us and our clients. These include transactions with structured entities and may also include the purchase or issuance of guarantees. These transactions give rise to, among other risks, varying degrees of market, credit, and liquidity and funding risks, which are discussed in the Risk management section of this Q3 2023 Report to Shareholders.
The following provides an update to our significant
off-balance
sheet transactions, which are described on pages 56 to 58 of our 2022 Annual Report.
Involvement with unconsolidated structured entities
RBC-administered
multi-seller conduits
We administer multi-seller conduits which are used primarily for the securitization of our clients’ financial assets. Our maximum exposure to loss under these transactions primarily relates to backstop liquidity and partial credit enhancement facilities extended to the conduits. As at July 31, 2023, the total assets of the multi-seller conduits were $52 billion (October 31, 2022 – $47 billion) and our maximum exposure to loss was $53 billion (October 31, 2022 – $48 billion). The increase reflects higher securitization activities since October 31, 2022 in most asset classes. This was partially offset by the impact of foreign exchange translation.
As at July 31, 2023, the total asset-backed commercial paper (ABCP) issued by the conduits amounted to $36 billion (October 31, 2022 – $33 billion). The rating agencies that rate the ABCP rated 100% (October 31, 2022 – 100%) of the total amount issued within the top ratings category.
 
Risk management
 
 
Credit risk
 
Credit risk is the risk of loss associated with an obligor’s potential inability or unwillingness to fulfill its contractual obligations on a timely basis and may arise directly from the risk of default of a primary obligor (e.g., issuer, debtor, counterparty, borrower or policyholder), indirectly from a secondary obligor (e.g., guarantor or reinsurer), through
off-balance
sheet exposures, contingent credit risk, associated credit risk and/or transactional risk. Credit risk includes counterparty credit risk arising from both trading and
non-trading
activities.
Our Enterprise Credit Risk Management Framework (ECRMF) and supporting credit policies are designed to clearly define roles and responsibilities, acceptable practices, limits and key controls. There have been no material changes to our ECRMF as described in our 2022 Annual Report.

Royal Bank of Canada
        Third Quarter 2023         25
 
Residential mortgages and home equity lines of credit (insured vs. uninsured)
(1)
Residential mortgages and home equity lines of credit are secured by residential properties. The following table presents a breakdown by geographic region.
 
    
As at July 31, 2023
 
(Millions of Canadian dollars,
except percentage amounts)
 
Residential mortgages
       
Home equity
lines of credit 
(2)
 
 
Insured
(3)
        
Uninsured
        
Total
        
Total
 
Region
(4)
                 
Canada
                 
Atlantic provinces
 
$
8,394
 
 
 
44
   
$
10,558
 
 
 
56
   
$
18,952
 
   
$
1,620
 
Quebec
 
 
11,988
 
 
 
28
 
   
 
31,502
 
 
 
72
 
   
 
43,490
 
   
 
3,111
 
Ontario
 
 
30,708
 
 
 
16
 
   
 
165,545
 
 
 
84
 
   
 
196,253
 
   
 
16,556
 
Alberta
 
 
19,039
 
 
 
46
 
   
 
22,471
 
 
 
54
 
   
 
41,510
 
   
 
4,516
 
Saskatchewan and Manitoba
 
 
8,621
 
 
 
42
 
   
 
11,811
 
 
 
58
 
   
 
20,432
 
   
 
1,793
 
B.C. and territories
 
 
12,036
 
 
 
16
 
     
 
61,603
 
 
 
84
 
     
 
73,639
 
     
 
7,081
 
Total Canada
(5)
 
 
90,786
 
 
 
23
 
   
 
303,490
 
 
 
77
 
   
 
394,276
 
   
 
34,677
 
U.S.
 
 
 
 
 
 
   
 
32,124
 
 
 
100
 
   
 
32,124
 
   
 
1,976
 
Other International
 
 
 
 
 
 
     
 
3,023
 
 
 
100
 
     
 
3,023
 
     
 
1,564
 
Total International
 
 
 
 
 
 
     
 
35,147
 
 
 
100
 
     
 
35,147
 
     
 
3,540
 
Total
 
$
  90,786
 
 
 
21
     
$
  338,637
 
 
 
79
     
$
  429,423
 
     
$
  38,217
 
                 
     As at April 30, 2023  
(Millions of Canadian dollars,
except percentage amounts)
  Residential mortgages         Home equity
lines of credit (2)
 
  Insured (3)          Uninsured          Total          Total  
Region
(4)
                 
Canada
                 
Atlantic provinces
  $ 8,329       45     $ 10,329       55     $ 18,658       $ 1,619  
Quebec
    12,008       28         30,957       72         42,965         3,192  
Ontario
    30,868       16         161,255       84         192,123         16,716  
Alberta
    19,325       46         22,251       54         41,576         4,655  
Saskatchewan and Manitoba
    8,651       42         11,790       58         20,441         1,833  
B.C. and territories
    12,106       17           60,313       83           72,419           7,159  
Total Canada
(5)
    91,287       24         296,895       76         388,182         35,174  
U.S.
                  32,663       100         32,663         2,089  
Other International
                    3,065       100           3,065           1,703  
Total International
                    35,728       100           35,728           3,792  
Total
  $   91,287       22       $   332,623       78       $   423,910         $   38,966  
 
  (1)   Disclosure is provided in accordance with the requirements of OSFI’s Guideline
B-20
(Residential Mortgage Underwriting Practices and Procedures).
 
  (2)   Includes $38,197 million and $20 million of uninsured and insured home equity lines of credit, respectively (April 30, 2023 – $38,945 million and $21 million, respectively), reported within the personal loan category. The amounts in U.S. and Other International include term loans collateralized by residential properties.  
  (3)   Insured residential mortgages are mortgages whereby our exposure to default is mitigated by insurance through the Canadian Mortgage and Housing Corporation or other private mortgage default insurers.  
  (4)   Region is based upon the address of the property mortgaged. The Atlantic provinces are comprised of Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick; B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon.  
  (5)   Total consolidated residential mortgages in Canada of $394 billion (April 30, 2023 – $388 billion) includes $12 billion (April 30, 2023 – $12 billion) of mortgages with commercial clients in Canadian Banking, of which $9 billion (April 30, 2023 – $9 billion) are insured, and $18 billion (April 30, 2023 – $18 billion) of residential mortgages in Capital Markets, of which $17 billion (April 30, 2023 – $17 billion) are held for securitization purposes. All of the residential mortgages held for securitization purposes are insured (April 30, 2023 – all insured).  
Residential mortgages portfolio by amortization period
(1)
The following table provides a summary of the percentage of residential mortgages that fall within the remaining amortization periods based upon current customer payment amounts, which incorporate payments larger than the minimum contractual amount and/or higher frequency of payments.
 
      As at     
    
July 31
2023
     
April 30
2023
     
Canada 
(2)
 
U.S. and other
International
  
Total
       Canada (2)   U.S. and other
International
  Total
Amortization period
               
25 years
  
 
57
 
 
26
  
 
55
      57     25     54
> 25 years
30 years
  
 
19
 
 
 
74
 
  
 
23
 
      17       75       22  
> 30 years
35 years
  
 
1
 
 
 
 
  
 
1
 
      1             1  
> 35 years
  
 
23
 
 
 
 
  
 
21
 
        25             23  
Total
  
 
100
 
 
100
  
 
100
        100     100     100
 
  (1)   Disclosure is provided in accordance with the requirements of OSFI’s Guideline
B-20
(Residential Mortgage Underwriting Practices and Procedures).
 
  (2)   Our policy is to originate mortgages with amortization periods of 30 years or less. Amortization periods greater than 30 years reflect the impact of increases in interest rates on our variable rate mortgage portfolios. For these loans, the amortization period resets to the original amortization schedule upon renewal. We do not originate mortgage products with a structure that would result in negative amortization, as payments on variable rate mortgages automatically increase to ensure accrued interest is covered.  

26         
Royal Bank of Canada
        Third Quarter 2023
 
Average
loan-to-value
(LTV) ratios
(1)
The following table provides a summary of our average LTV ratios for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan
®
products by geographic region, as well as the respective LTV ratios for our total Canadian Banking residential mortgage portfolio outstanding.
 
     For the three months ended        For the nine months ended
   
July 31
2023
     
April 30
2023
     
July 31
2023
   
Uninsured
       Uninsured       
Uninsured
    
Residential
mortgages 
(2)
 
RBC Homeline
Plan products 
(3)
       Residential
mortgages (2)
  RBC Homeline
Plan products (3)
      
Residential
mortgages 
(2)
 
RBC Homeline
Plan products 
(3)
Average of newly originated and acquired for the period,
by region
(4)
               
Atlantic provinces
 
 
71
 
 
71
      71     72    
 
71
 
 
71
Quebec
 
 
71
 
 
 
71
 
      70       70      
 
70
 
 
 
70
 
Ontario
 
 
70
 
 
 
64
 
      71       64      
 
71
 
 
 
64
 
Alberta
 
 
72
 
 
 
71
 
      73       71      
 
72
 
 
 
71
 
Saskatchewan and Manitoba
 
 
73
 
 
 
73
 
      73       73      
 
73
 
 
 
73
 
B.C. and territories
 
 
68
 
 
 
62
 
      67       63      
 
68
 
 
 
63
 
U.S.
 
 
73
 
 
 
n.m.
 
      75       n.m.      
 
74
 
 
 
n.m.
 
Other International
 
 
70
 
 
 
n.m.
 
        69       n.m.        
 
70
 
 
 
n.m.
 
Average of newly originated and acquired for the period 
(5), (6)
 
 
70
 
 
66
        71     66      
 
71
 
 
66
Total Canadian Banking residential mortgages portfolio 
(7)
 
 
56
 
 
49
        57     50      
 
56
 
 
49
 
  (1)   Disclosure is provided in accordance with the requirements of OSFI’s Guideline
B-20
(Residential Mortgage Underwriting Practices and Procedures).
 
  (2)   Residential mortgages exclude residential mortgages within the RBC Homeline Plan products.  
  (3)   RBC Homeline Plan products are comprised of both residential mortgages and home equity lines of credit.  
  (4)   Region is based upon the address of the property mortgaged. The Atlantic provinces are comprised of Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick; B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon.  
  (5)   The average LTV ratios for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan products are calculated on a weighted basis by mortgage amounts at origination.  
  (6)   For newly originated mortgages and RBC Homeline Plan products, LTV is calculated based on the total facility amount for the residential mortgage and RBC Homeline Plan product divided by the value of the related residential property.  
  (7)   Weighted by mortgage balances and adjusted for property values based on the Teranet-National Bank National
House Price Index
.
 
  n.m.   not meaningful  
Net International wholesale exposure by region, asset type and client type
(1), (2)
The following table provides a breakdown of our credit risk exposure by region, asset type and client type.
 
     As at  
   
July 31
2023
       
April 30
2023
 
   
Asset type
       
Client type
                     
(Millions of Canadian dollars)  
Loans
Outstanding
   
Securities 
(3)
   
Repo-style
transactions
   
Derivatives
        
Financials
   
Sovereign
   
Corporate
        
Total
         Total  
Europe (excluding U.K.)
 
$
13,993
 
 
$
27,795
 
 
$
1,828
 
 
$
1,757
 
   
$
16,526
 
 
$
16,077
 
 
$
12,770
 
   
$
45,373
 
    $ 66,497  
U.K.
 
 
7,132
 
 
 
23,682
 
 
 
683
 
 
 
2,697
 
   
 
10,320
 
 
 
17,747
 
 
 
6,127
 
   
 
34,194
 
      41,860  
Caribbean
 
 
7,852
 
 
 
10,591
 
 
 
381
 
 
 
278
 
   
 
7,312
 
 
 
3,983
 
 
 
7,807
 
   
 
19,102
 
      19,768  
Asia-Pacific
 
 
6,737
 
 
 
32,731
 
 
 
1,031
 
 
 
697
 
   
 
13,682
 
 
 
22,502
 
 
 
5,012
 
   
 
41,196
 
      43,061  
Other
(4)
 
 
362
 
 
 
1,790
 
 
 
314
 
 
 
39
 
     
 
445
 
 
 
1,606
 
 
 
454
 
     
 
2,505
 
        2,706  
Net International exposure 
(5), (6)
 
$
  36,076
 
 
$
  96,589
 
 
$
  4,237
 
 
$
  5,468
 
     
$
  48,285
 
 
$
  61,915
 
 
$
  32,170
 
     
$
  142,370
 
      $   173,892  
 
(1)   Geographic profile is based on country of risk, which reflects our assessment of the geographic risk associated with a given exposure. Typically, this is the residence of the borrower.
(2)   Exposures are calculated on a fair value basis and net of collateral, which includes $344 billion against repo-style transactions (April 30, 2023 – $370 billion) and $13 billion against derivatives (April 30, 2023 – $13 billion).
(3)   Securities include $14 billion of trading securities (April 30, 2023 – $14 billion), $43 billion of deposits (April 30, 2023 – $72 billion), and $40 billion of investment securities (April 30, 2023 – $37 billion).
(4)   Includes exposures in the Middle East, Africa and Latin America.
(5)   Excludes $4,972 million (April 30, 2023 – $6,186 million) of exposures to supranational agencies.
(6)   Reflects $2,529 million of mitigation through credit default swaps, which are largely used to hedge single name exposures and market risk (April 30, 2023 – $2,147 million).

Royal Bank of Canada
        Third Quarter 2023         27
 
Credit quality performance
The following credit quality performance tables and analysis provide information on loans, which represents loans, acceptances and commitments, and other financial assets:
Gross impaired loans
 
     As at and for the three months ended  
(Millions of Canadian dollars, except percentage amounts)
 
July 31
2023
   
April 30
2023
   
October 31
2022
 
Personal & Commercial Banking
 
$
1,701
 
  $ 1,653     $ 1,362  
Wealth Management
 
 
396
 
    404       278  
Capital Markets
 
 
1,187
 
    836       559  
Total GIL
 
$
3,284
 
  $ 2,893     $ 2,199  
Impaired loans, beginning balance
 
$
2,893
 
  $ 2,599     $ 2,059  
Classified as impaired during the period (new impaired)
(1)
 
 
1,255
 
    767       592  
Net repayments
(1)
 
 
(219
    (109     (130
Amounts written off
 
 
(446
    (361     (362
Other
(2)
 
 
(199
    (3     40  
Impaired loans, balance at end of period
 
$
3,284
 
  $ 2,893     $ 2,199  
GIL as a % of related loans and acceptances
     
Total GIL as a % of related loans and acceptances
 
 
  0.38%
 
      0.34%       0.26%
Personal & Commercial Banking
 
 
0.28%
 
    0.28%     0.23%
Canadian Banking
 
 
0.23%
 
    0.23%     0.18%
Caribbean Banking
 
 
3.62%
 
    3.80%     3.93%
Wealth Management
(3)
 
 
0.34%
 
    0.33%     0.23%
Capital Markets
(3)
 
 
0.88%
 
    0.61%     0.42%
 
(1)   Certain GIL movements for Canadian Banking retail and wholesale portfolios are generally allocated to new impaired, as Net repayments and certain Other movements are not reasonably determinable. Certain GIL movements for Caribbean Banking retail and wholesale portfolios are generally allocated to Net repayments and new impaired, as Net repayments and certain Other movements are not reasonably determinable.
(2)   Includes return to performing status during the period, recoveries of loans and advances previously written off, sold, and foreign exchange translation and other movements.
(3)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
Q3 2023 vs. Q2 2023
Total GIL increased $391 million or 14% from last quarter, and the total GIL ratio increased 4 bps, primarily due to higher impaired loans in Capital Markets.
GIL in Personal & Commercial Banking increased $48 million or 3%, primarily due to higher impaired loans in our Canadian Banking retail portfolios. This was partially offset by lower impaired loans in our Caribbean Banking portfolios.
GIL in Capital Markets increased $351 million or 42%, mainly due to higher impaired loans in the real estate and related sector.
Allowance for credit losses (ACL)
 
     As at  
(Millions of Canadian dollars)
 
July 31
2023
   
April 30
2023
   
October 31
2022
 
Personal & Commercial Banking
 
$
3,552
 
  $ 3,543     $ 3,200  
Wealth Management
(1)
 
 
473
 
    421       384  
Capital Markets
(1)
 
 
934
 
    813       597  
ACL on loans
 
 
4,959
 
    4,777       4,181  
ACL on other financial assets
(2)
 
 
31
 
    31       33  
Total ACL
 
$
4,990
 
  $ 4,808     $    4,214  
ACL on loans is comprised of:
     
Retail
 
$
2,518
 
  $ 2,521     $ 2,285  
Wholesale
 
 
1,441
 
    1,341       1,227  
ACL on performing loans
 
$
   3,959
 
  $    3,862     $ 3,512  
ACL on impaired loans
 
 
1,000
 
    915       669  
 
(1)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation. For further details, refer to the About Royal Bank of Canada section.
(2)   ACL on other financial assets mainly represents allowances on debt securities measured at FVOCI and amortized cost, accounts receivable and financial guarantees.
Q3 2023 vs. Q2 2023
Total ACL increased $182 million or 4% from last quarter, reflecting an increase in ACL on loans.
ACL on performing loans increased $97 million or 3%, primarily due to higher ACL in Wealth Management and Capital Markets attributable to unfavourable changes in our macroeconomic and credit quality outlook.
ACL on impaired loans increased $85 million or 9%, primarily due to higher ACL in Capital Markets.
For further details, refer to Note 5 of our Condensed Financial Statements.

28         
Royal Bank of Canada
        Third Quarter 2023
 
Market risk
 
Market risk is defined to be the impact of market factors and prices upon our financial condition. This includes potential financial gains or losses due to changes in market-determined variables such as interest rates, credit spreads, equity prices, commodity prices, foreign exchange rates and implied volatilities. There have been no material changes to our Market Risk Management Framework from the framework described in our 2022 Annual Report. Using that framework, we continuously seek to ensure that our market risk exposure is consistent with risk appetite constraints set by the Board of Directors.
Market risk controls include limits on probabilistic measures of potential loss in trading positions, such as
Value-at-Risk
(VaR), Stressed
Value-at-Risk
(SVaR), stress testing and Incremental Risk Charge (IRC). Market risk controls are also in place to manage Interest Rate Risk in the Banking Book (IRRBB). To monitor and control IRRBB, we assess two primary metrics, Net Interest Income (NII) risk and Economic Value of Equity (EVE) risk, under a range of market shocks, scenarios, and time horizons. There has been no material change to the IRRBB measurement methodology, controls, or limits from those described in our 2022 Annual Report. For further details on our approach to the management of market risk, refer to the Market risk section of our 2022 Annual Report.
Market risk measures – FVTPL positions
VaR and SVaR
The following table presents our Market risk VaR and Market risk SVaR figures:
 
    
July 31, 2023
         April 30, 2023          July 31, 2022  
         
For the three
months ended
              For the three
months ended
              For the three
months ended
 
(Millions of Canadian dollars)  
As at
   
Average
   
High
   
Low
         As at     Average          As at     Average  
Equity
 
$
16
 
 
$
15
 
 
$
21
 
 
$
11
 
    $ 18     $ 18       $ 38     $ 36  
Foreign exchange
 
 
5
 
 
 
4
 
 
 
6
 
 
 
2
 
      3       3         4       3  
Commodities
 
 
5
 
 
 
5
 
 
 
5
 
 
 
4
 
      4       5         5       5  
Interest rate
(1)
 
 
32
 
 
 
36
 
 
 
52
 
 
 
29
 
      40       45         42       31  
Credit specific
(2)
 
 
6
 
 
 
5
 
 
 
6
 
 
 
4
 
      5       5         7       7  
Diversification
(3)
 
 
(37
 
 
(29
 
 
n.m.
 
 
n.m.
          (29     (29         (34       (32
Market risk VaR
(4)
 
$
27
 
 
$
36
 
 
$
49
 
 
$
27
 
      $ 41     $ 47         $ 62     $ 50  
Market risk Stressed VaR
(4)
 
$
   35
 
 
$
   63
 
 
$
103
 
 
$
31
 
      $ 68     $   108         $   150     $ 102  
                   
    
July 31, 2023
         July 31, 2022                     
         
For the nine
months ended
              For the nine
months ended
                  
(Millions of Canadian dollars)  
As at
   
Average
   
High
   
Low
         As at     Average                   
Equity
 
$
16
 
 
$
23
 
 
$
47
 
 
$
11
 
   
$
38
 
 
$
34
 
     
Foreign exchange
 
 
5
 
 
 
3
 
 
 
6
 
 
 
2
 
   
 
4
 
 
 
4
 
     
Commodities
 
 
5
 
 
 
5
 
 
 
8
 
 
 
4
 
   
 
5
 
 
 
4
 
     
Interest rate (1)
 
 
32
 
 
 
41
 
 
 
58
 
 
 
29
 
   
 
42
 
 
 
31
 
     
Credit specific (2)
 
 
6
 
 
 
5
 
 
 
6
 
 
 
4
 
   
 
7
 
 
 
8
 
     
Diversification (3)
 
 
(37
 
 
(31
 
 
0
 
 
0
     
 
(34
 
 
  (30
       
Market risk VaR
(5)
 
$
27
 
 
$
46
 
 
$
65
 
 
$
27
 
     
$
62
 
 
$
51
 
       
Market risk Stressed VaR
(5)
 
$
35
 
 
$
116
 
 
$
  205
 
 
$
31
 
     
$
  150
 
 
$
84
 
       
 
(1)   General credit spread risk and funding spread risk associated with uncollateralized derivatives are included under interest rate VaR.
(2)   Credit specific risk captures issuer-specific credit spread volatility.
(3)   Market risk VaR is less than the sum of the individual risk factor VaR results due to risk factor diversification.
(4)   The average market risk VaR and average SVaR for the three months ended July 31, 2023 includes $9 million and $24 million, respectively (April 30, 2023 – $22 million and $96 million; July 31, 2022 – $7 million and $32 million), related to loan underwriting commitments.
(5)   The average market risk VaR and average SVaR for the nine months ended July 31, 2023 includes $17 million and $79 million, respectively (July 31, 2022 – $6 million and $21 million), related to loan underwriting commitments.
n.m.   not meaningful
Q3 2023 vs. Q3 2022
Average market risk VaR of $36 million decreased $14 million and average SVaR of $63 million decreased $39 million from a year ago, primarily driven by exposure changes in our equity derivative portfolio.
Q3 2023 vs. Q2 2023
Average market risk VaR of $36 million decreased $11 million and average SVaR of $63 million decreased $45 million from last quarter. This was driven by exposure changes in both our loan underwriting commitments and equity derivatives portfolio.

Royal Bank of Canada
        Third Quarter 2023         29
 
Q3 2023 vs. Q3 2022 (Nine months ended)
Average market risk VaR of $46 million decreased $5 million from the same period last year. This was driven by prior year VaR levels being elevated due to the impact of the Q2 2020 period of significant market volatility in our two-year historical VaR period. This effect was partially offset by the effects of unfavourable market conditions in the first half of this year, which impacted loan underwriting commitments.
Average SVaR of $116 million increased $32 million, due to the effects of unfavourable market conditions which impacted loan underwriting commitments, as noted above.
The following chart displays a bar graph of our daily trading profit and loss and a line graph of our daily market risk VaR. We incurred no net trading losses in the three months ended July 31, 2023 and 1 day of net trading loss in the three months ended April 30, 2023, largely associated with stresses in the U.S. regional banking sector, which did not exceed VaR.
 
 
 
 
  (1)   Trading revenue (teb) in the chart above excludes the impact of loan underwriting commitments.
Market risk measures for assets and liabilities of RBC Insurance
®
We offer a range of insurance products to clients and hold investments to meet the future obligations to policyholders. The investments which support actuarial liabilities are predominantly fixed income assets designated as FVTPL. Consequently, changes in the fair values of these assets are recorded in the Consolidated Statements of Income and are largely offset by changes in the fair value of the actuarial liabilities, the impact of which is reflected in PBCAE. As at July 31, 2023, we held assets in support of $13 billion of liabilities with respect to insurance obligations (April 30, 2023 – $12 billion).
Market risk measures – IRRBB sensitivities
The following table shows the potential
before-tax
impact of an immediate and sustained 100 bps increase or decrease in interest rates on projected
12-month
NII and EVE, assuming no subsequent hedging. Interest rate risk measures are based on current on and
off-balance
sheet positions which can change over time in response to business activity and management actions.
 
    
July 31
2023
        
April 30
2023
        
July 31
2022
 
   
EVE risk
       
NII risk
(1)
                                 
(Millions of Canadian dollars)  
Canadian
dollar
impact
   
U.S.
dollar
impact
   
Total
        
Canadian
dollar
impact
   
U.S.
dollar
impact
   
Total
         EVE risk     NII risk (1)          EVE risk     NII risk (1)  
Before-tax
impact of:
                                                                                           
100 bps increase in rates
 
$
  (1,480
 
$
  (519
 
$
  (1,999
     
$
441
 
 
$
139
 
 
$
580
 
      $   (1,726   $ 824         $   (1,411   $ 1,091  
100 bps decrease in rates
 
 
1,455
 
 
 
334
 
 
 
1,789
 
 
 
 
 
  (475
 
 
  (173
 
 
  (648
 
 
    1,507         (894  
 
    914         (1,189
 
(1)   Represents the
12-month
NII exposure to an instantaneous and sustained shift in interest rates.
As at July 31, 2023, an immediate and sustained
-100
bps shock would have had a negative impact to our NII of $648 million, down from $894 million last quarter. An immediate and sustained +100 bps shock as at July 31, 2023 would have had a negative impact to the bank’s EVE of $1,999 million, up from $1,726 million last quarter. Quarter-over-quarter NII sensitivity decreased and EVE sensitivity increased as a result of a marginal increase in fixed rate assets held within banking books. During the third quarter of 2023, NII and EVE risks remained within approved limits.

30         
Royal Bank of Canada
        Third Quarter 2023
 
Linkage of market risk to selected balance sheet items
The following tables provide the linkages between selected balance sheet items with positions included in our trading market risk and
non-trading
market risk disclosures, which illustrates how we manage market risk for our assets and liabilities through different risk measures:
 
    
As at July 31, 2023
         
Market risk measure
     
(Millions of Canadian dollars)  
Balance sheet
amount
   
Traded risk
(1)
   
Non-traded
risk
(2)
   
Non-traded
risk
primary risk sensitivity
Assets subject to market risk
                           
Cash and due from banks
 
$
80,358
 
 
$
              –
 
 
$
80,358
 
 
Interest rate
Interest-bearing deposits with banks
 
 
87,650
 
 
 
81,356
 
 
 
6,294
 
 
Interest rate
Securities
                           
Trading
 
 
176,603
 
 
 
164,175
 
 
 
12,428
 
 
Interest rate, credit spread
Investment, net of applicable allowance
 
 
196,022
 
 
 
 
 
 
196,022
 
 
Interest rate, credit spread, equity
Assets purchased under reverse repurchase
agreements and securities borrowed
 
 
347,151
 
 
 
296,430
 
 
 
50,721
 
 
Interest rate
Loans
                           
Retail
 
 
561,212
 
 
 
6,807
 
 
 
554,405
 
 
Interest rate
Wholesale
 
 
278,997
 
 
 
7,193
 
 
 
271,804
 
 
Interest rate
Allowance for loan losses
 
 
(4,495
 
 
 
 
 
(4,495
 
Interest rate
Segregated fund net assets
 
 
2,921
 
 
 
 
 
 
2,921
 
 
Interest rate
Other
                           
Derivatives
 
 
115,914
 
 
 
111,315
 
 
 
4,599
 
 
Interest rate, foreign exchange
Other assets
 
 
100,510
 
 
 
7,776
 
 
 
92,734
 
 
Interest rate
Assets not subject to market risk
(3)
 
 
14,891
 
                   
Total assets
 
$
1,957,734
 
 
$
675,052
 
 
$
1,267,791
 
   
Liabilities subject to market risk
                           
Deposits
 
$
1,215,671
 
 
$
127,401
 
 
$
1,088,270
 
 
Interest rate
Segregated fund liabilities
 
 
2,921
 
 
 
 
 
 
2,921
 
 
Interest rate
Other
                           
Obligations related to securities sold short
 
 
36,653
 
 
 
36,653
 
 
 
 
   
Obligations related to assets sold under repurchase agreements and securities loaned
 
 
334,465
 
 
 
300,901
 
 
 
33,564
 
 
Interest rate
Derivatives
 
 
117,244
 
 
 
105,064
 
 
 
12,180
 
 
Interest rate, foreign exchange
Other liabilities
 
 
106,791
 
 
 
11,799
 
 
 
94,992
 
 
Interest rate
Subordinated debentures
 
 
11,202
 
 
 
 
 
 
11,202
 
 
Interest rate
Liabilities not subject to market risk
(4)
 
 
20,358
 
                   
Total liabilities
 
$
  1,845,305
 
 
$
581,818
 
 
$
  1,243,129
 
   
Total equity
 
 
112,429
 
                   
Total liabilities and equity
 
$
1,957,734
 
                   
 
(1)   Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR, SVaR, IRC and stress testing are used as risk controls for traded risk.
(2)  
Non-traded
risk includes positions used in the management of IRRBB and other
non-trading
portfolios. Other material
non-trading
portfolios include positions from RBC Insurance and investment securities, net of applicable allowance, not included in IRRBB.
(3)   Assets not subject to market risk include physical and other assets.
(4)   Liabilities not subject to market risk include payroll related and other liabilities.

Royal Bank of Canada
        Third Quarter 2023         31
 
     As at April 30, 2023
          Market risk measure      
(Millions of Canadian dollars)   Balance sheet
amount
    Traded risk (1)    
Non-traded

risk (2)
   
Non-traded
risk
primary risk sensitivity
Assets subject to market risk
       
Cash and due from banks
  $ 99,199     $     $ 99,199     Interest rate
Interest-bearing deposits with banks
    81,880       77,609       4,271     Interest rate
Securities
       
Trading
    136,207       123,967       12,240     Interest rate, credit spread
Investment, net of applicable allowance
    183,621             183,621     Interest rate, credit spread, equity
Assets purchased under reverse repurchase
agreements and securities borrowed
    335,239       284,637       50,602     Interest rate
Loans
       
Retail
    554,139       6,837       547,302     Interest rate
Wholesale
    281,380       7,162       274,218     Interest rate
Allowance for loan losses
    (4,332           (4,332   Interest rate
Segregated fund net assets
    2,883             2,883     Interest rate
Other
       
Derivatives
    124,149       119,757       4,392     Interest rate, foreign exchange
Other assets
    130,639       8,421       122,218     Interest rate
Assets not subject to market risk
(3)
    15,298                      
Total assets
  $ 1,940,302     $ 628,390     $ 1,296,614      
Liabilities subject to market risk
       
Deposits
  $ 1,210,053     $ 135,014     $ 1,075,039     Interest rate
Segregated fund liabilities
    2,883             2,883     Interest rate
Other
       
Obligations related to securities sold short
    36,048       36,048          
Obligations related to assets sold
under repurchase agreements and
securities loaned
    291,558       262,165       29,393     Interest rate
Derivatives
    123,898       113,531       10,367     Interest rate, foreign exchange
Other liabilities
    132,427       12,102       120,325     Interest rate
Subordinated debentures
    11,565             11,565     Interest rate
Liabilities not subject to market risk
(4)
    20,516                      
Total liabilities
  $   1,828,948     $   558,860     $   1,249,572      
Total equity
    111,354        
Total liabilities and equity
  $ 1,940,302        
 
(1)   Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue. Market risk measures of VaR, SVaR, IRC and stress testing are used as risk controls for traded risk.
(2)  
Non-traded
risk includes positions used in the management of IRRBB and other
non-trading
portfolios. Other material
non-trading
portfolios include positions from RBC Insurance and investment securities, net of applicable allowance, not included in IRRBB.
(3)   Assets not subject to market risk include physical and other assets.
(4)   Liabilities not subject to market risk include payroll related and other liabilities.

32         
Royal Bank of Canada
        Third Quarter 2023
 
Liquidity and funding risk
 
Liquidity and funding risk (liquidity risk) is the risk that we may be unable to generate sufficient cash or its equivalents in a timely and cost-effective manner to meet our commitments. Liquidity risk arises from mismatches in the timing and value of
on-balance
sheet and
off-balance
sheet cash flows.
Our Liquidity Risk Management Framework (LRMF) is designed to ensure that we have sufficient liquidity to satisfy current and prospective commitments in both normal and stressed conditions. There have been no material changes to our LRMF as described in our 2022 Annual Report.
We continue to maintain liquidity and funding that we believe is appropriate for the execution of our strategy. Liquidity risk remains well within our risk appetite.
Liquidity reserve
Our liquidity reserve consists of available unencumbered liquid assets. Although unused wholesale funding capacity, which is regularly assessed, could be another potential source of liquidity to mitigate stressed conditions, it is excluded in the determination of the liquidity reserve. Similarly, uncommitted and undrawn central bank borrowing facilities that could be accessed subject to satisfying certain preconditions as set by various central banks (e.g., BoC, the Fed, Bank of England, and Bank of France), as well as amounts that qualify as eligible collateral at the Federal Reserve Bank of New York (FRBNY) and Federal Home Loan Bank (FHLB) are also excluded from the determination of the liquidity reserve.
 
    
As at July 31, 2023
 
(Millions of Canadian dollars)  
Bank-owned

liquid assets
   
Securities
received
as collateral
from securities
financing
and derivative
transactions
          
Total liquid
assets
   
Encumbered
liquid assets
   
Unencumbered
liquid assets
 
Cash and deposits with banks
(1)
 
$
170,468
 
 
$
 
   
$
170,468
 
 
$
3,343
 
 
$
167,125
 
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks
(2)
 
 
291,972
 
 
 
359,408
 
   
 
651,380
 
 
 
428,372
 
 
 
223,008
 
Other securities
 
 
125,284
 
 
 
123,650
 
   
 
248,934
 
 
 
151,850
 
 
 
97,084
 
Other liquid assets
(3)
 
 
28,484
 
 
 
 
         
 
28,484
 
 
 
26,127
 
 
 
2,357
 
Total liquid assets
 
$
616,208
 
 
$
483,058
 
         
$
1,099,266
 
 
$
609,692
 
 
$
489,574
 
 
 
    
As at April 30, 2023
 
(Millions of Canadian dollars)  
Bank-owned

liquid assets
    Securities
received
as collateral
from securities
financing
and derivative
transactions
           Total liquid
assets
    Encumbered
liquid assets
    Unencumbered
liquid assets
 
Cash and deposits with banks
(1)
  $ 202,692     $       $ 202,692     $ 3,936     $ 198,756  
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks
(2)
    248,352       339,071         587,423       386,613       200,810  
Other securities
    115,107       128,447         243,554       145,627       97,927  
Other liquid assets
(3)
    33,619                     33,619       30,816       2,803  
Total liquid assets
  $   599,770     $   467,518             $   1,067,288     $   566,992     $   500,296  
 
 
     As at                             
(Millions of Canadian dollars)
 
July 31
2023
   
April 30
2023
                         
Royal Bank of Canada
 
$
205,432
 
  $ 205,189          
Foreign branches
 
 
101,799
 
    97,977          
Subsidiaries
 
 
182,343
 
    197,130          
Total unencumbered liquid assets
 
$
489,574
 
  $ 500,296          
 
(1)   Includes balances that are classified as held for sale and presented in Other assets. For further details, refer to Note 6 of our Condensed Financial Statements.
(2)   Includes liquid securities issued by provincial governments and U.S. government-sponsored entities working under U.S. Federal government’s conservatorship (e.g., Federal National Mortgage Association and Federal Home Loan Mortgage Corporation).
(3)   Encumbered liquid assets amount represents cash collateral and margin deposit amounts pledged related to
over-the-counter
and exchange-traded derivative transactions.
The liquidity reserve is typically most affected by routine flows of retail and commercial client banking activities, where liquid asset portfolios reflect changes in deposit and loan balances, as well as business strategies and client flows related to the activities in Capital Markets. Corporate Treasury and Capital Markets activities also affect liquidity reserves through the management of funding issuances where reserves absorb timing mismatches between debt issuances and deployment into business activities.

Royal Bank of Canada
        Third Quarter 2023         33
 
Q3 2023 vs. Q2 2023
Total unencumbered liquid assets decreased $11 billion or 2% from last quarter, mainly due to a decrease in cash and deposits with banks, which was largely driven by the partial sale of RBC Investor Services operations.
Asset encumbrance
The table below provides a summary of our
on-
and
off-balance
sheet amounts for cash, securities and other assets, distinguishing between those that are encumbered or
available-for-sale
or use as collateral in secured funding transactions. Other assets, such as mortgages and credit card receivables, can also be monetized, albeit over longer timeframes than those required for marketable securities. As at July 31, 2023, our unencumbered assets available as collateral comprised 24% of total assets (April 30, 2023 – 25%).
 
     As at  
   
July 31
2023
       
April 30
2023
 
   
Encumbered
       
Unencumbered
                  Encumbered         Unencumbered        
(Millions of Canadian dollars)  
Pledged as
collateral
   
Other 
(1)
        
Available as
collateral 
(2)
   
Other 
(3)
        
Total
         Pledged as
collateral
    Other (1)          Available as
collateral (2)
    Other (3)     Total  
Cash and deposits with banks
(4)
 
$
 
 
$
3,343
 
     
$
167,125
 
 
$
 
     
$
170,468
 
      $     $ 3,936         $ 198,756     $     $ 202,692  
Securities
                                                                                               
Trading
 
 
93,240
 
 
 
 
     
 
92,971
 
 
 
2,317
 
     
 
188,528
 
        64,544                 78,517       2,411       145,472  
Investment, net of applicable allowance
 
 
7,853
 
 
 
 
     
 
188,169
 
 
 
 
     
 
196,022
 
        11,096                 173,213             184,309  
Assets purchased under reverse repurchase agreements and securities borrowed
(5)
 
 
498,928
 
 
 
24,687
 
     
 
3,910
 
 
 
2,123
 
     
 
529,648
 
        476,663       22,843           13,707       3,248       516,461  
Loans
                                                                                               
Retail
                                                                                               
Mortgage securities
 
 
27,418
 
 
 
 
     
 
27,012
 
 
 
 
     
 
54,430
 
        27,952                 27,406             55,358  
Mortgage loans
 
 
72,983
 
 
 
 
     
 
31,411
 
 
 
270,599
 
     
 
374,993
 
        73,961                 28,736       265,855       368,552  
Non-mortgage
loans
 
 
7,190
 
 
 
 
     
 
 
 
 
124,599
 
     
 
131,789
 
        7,385                       122,844       130,229  
Wholesale
 
 
 
 
 
 
     
 
9,050
 
 
 
270,150
 
     
 
279,200
 
                        9,445       272,429       281,874  
Allowance for loan losses
 
 
 
 
 
 
     
 
 
 
 
(4,495
     
 
(4,495
                              (4,332     (4,332
Segregated fund net assets
 
 
 
 
 
 
     
 
 
 
 
2,921
 
     
 
2,921
 
                              2,883       2,883  
Other
                                                                                               
Derivatives
 
 
 
 
 
 
     
 
 
 
 
115,914
 
     
 
115,914
 
                              124,317       124,317  
Others
(6)
 
 
26,127
 
 
 
 
     
 
2,357
 
 
 
84,254
 
     
 
112,738
 
        30,816                 2,803       85,837       119,456  
Total assets
 
$
  733,739
 
 
$
  28,030
 
     
$
  522,005
 
 
$
  868,382
 
     
$
  2,152,156
 
      $   692,417     $   26,779         $   532,583     $   875,492     $   2,127,271  
 
(1)   Includes assets restricted from use to generate secured funding due to legal or other constraints.
(2)   Represents assets that are readily available for use as collateral, including National Housing Act Mortgage-Backed Securities (NHA MBS), our unencumbered mortgage loans that qualify as eligible collateral at FHLB, as well as loans that qualify as eligible collateral for discount window facility available to us and lodged at the FRBNY.
(3)   Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but would not be considered readily available.
(4)   Includes balances that are classified as held for sale and presented in Other assets. For further details, refer to Note 6 of our Condensed Financial Statements.
(5)   Includes bank-owned liquid assets and securities received as collateral from
off-balance
sheet securities financing, derivative transactions, and margin lending. Includes $25 billion (April 30, 2023 – $23 billion) of collateral received through reverse repurchase transactions that cannot be rehypothecated in its current legal form.
(6)   The Pledged as collateral amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.
Funding
Funding strategy
Core funding, comprising capital, longer-term wholesale liabilities and a diversified pool of personal and, to a lesser extent, commercial and institutional deposits, is the foundation of our structural liquidity position.
Deposit and funding profile
As at July 31, 2023, relationship-based deposits, which are the primary source of funding for retail and commercial lending, were $822 billion or 51% of our total funding (April 30, 2023 – $826 billion or 53%). The remaining portion is comprised of short- and long-term wholesale funding.
Funding for highly liquid assets consists primarily of short-term wholesale funding that reflects the monetization period of those assets. Long-term wholesale funding is used mostly to fund less liquid wholesale assets and to support liquid asset buffers.
Senior long-term debt issued by the bank on or after September 23, 2018, that has an original term greater than 400 days and is marketable, subject to certain exceptions, is subject to the Canadian Bank Recapitalization
(Bail-in)
regime. Under the
Bail-in
regime, in circumstances when the Superintendent of Financial Institutions has determined that a bank may no longer be viable, the Governor in Council may, upon a recommendation of the Minister of Finance that he or she is of the opinion that it is in the public interest to do so, grant an order directing the Canada Deposit Insurance Corporation (CDIC) to convert all or a portion of certain shares and liabilities of that bank into common shares. As at July 31, 2023, the notional value of issued and outstanding long-term debt subject to conversion under the
Bail-in
regime was $107 billion (April 30, 2023 – $101 billion).
For further details on our wholesale funding, refer to the Composition of wholesale funding tables below.

34         
Royal Bank of Canada
        Third Quarter 2023
 
Long-term debt issuance
Our wholesale funding activities are well-diversified by geography, investor segment, instrument, currency, structure and maturity. We maintain an ongoing presence in different funding markets, which allows us to continuously monitor market developments and trends, identify opportunities and risks, and take appropriate and timely actions. We operate long-term debt issuance registered programs. The following table summarizes these programs with their authorized limits by geography:
 
Programs by geography
 
 
Canada
 
U.S.
  
Europe/Asia
•  Canadian Shelf Program – $25 billion
 
•  U.S. Shelf Program – US$50 billion
  
•  European Debt Issuance Program – US$75 billion
     
        
•  Global Covered Bond Program –
75 billion
     
 
 
 
  
•  Japanese Issuance Programs – ¥1 trillion
We also raise long-term funding using Canadian Senior Notes, Canadian National Housing Act MBS, Canada Mortgage Bonds, credit card receivable-backed securities, Kangaroo Bonds (issued in the Australian domestic market by foreign firms) and Yankee Certificates of Deposit (issued in the U.S. domestic market by foreign firms). We continuously evaluate opportunities to expand into new markets and untapped investor segments since diversification expands our wholesale funding flexibility, minimizes funding concentration and dependency, and generally reduces financing costs. As presented in the following charts, our current long-term debt profile is well-diversified by both currency and product. Maintaining competitive credit ratings is also critical to cost-effective funding.
 
 
(1)   Includes unsecured and secured long-term funding and subordinated debentures with an original term to maturity greater than 1 year
 
(1)   Includes unsecured and secured long-term funding and subordinated debentures with an original term to maturity greater than 1 year
 
(2)  Mortgage-backed securities and Canada Mortgage Bonds
The following table provides our composition of wholesale funding based on remaining term to maturity:
Composition of wholesale funding
(1)
 
    
As at July 31, 2023
 
(Millions of Canadian dollars)  
Less than 1
month
   
1 to 3
months
   
3 to 6
months
   
6 to 12
months
   
Less than 1
year sub-total
   
1 year
to 2 years
   
2 years and
greater
   
Total
 
Deposits from banks
(2)
 
$
5,807
 
 
$
 
 
$
586
 
 
$
484
 
 
$
6,877
 
 
$
 
 
$
 
 
$
6,877
 
Certificates of deposit and commercial paper
 
 
9,595
 
 
 
16,391
 
 
 
16,345
 
 
 
20,296
 
 
 
62,627
 
 
 
 
 
 
 
 
 
62,627
 
Asset-backed commercial paper
(3)
 
 
4,110
 
 
 
4,852
 
 
 
4,757
 
 
 
1,259
 
 
 
14,978
 
 
 
 
 
 
 
 
 
14,978
 
Senior unsecured medium-term notes
(4)
 
 
232
 
 
 
9,333
 
 
 
6,205
 
 
 
13,672
 
 
 
29,442
 
 
 
22,520
 
 
 
54,101
 
 
 
106,063
 
Senior unsecured structured notes
(5)
 
 
2,256
 
 
 
1,616
 
 
 
2,244
 
 
 
2,967
 
 
 
9,083
 
 
 
5,291
 
 
 
12,018
 
 
 
26,392
 
Mortgage securitization
 
 
 
 
 
1,992
 
 
 
532
 
 
 
1,448
 
 
 
3,972
 
 
 
2,667
 
 
 
9,381
 
 
 
16,020
 
Covered bonds/asset-backed securities
(6)
 
 
791
 
 
 
 
 
 
3,173
 
 
 
 
 
 
3,964
 
 
 
9,114
 
 
 
45,711
 
 
 
58,789
 
Subordinated liabilities
 
 
 
 
 
 
 
 
 
 
 
1,490
 
 
 
1,490
 
 
 
2,722
 
 
 
7,669
 
 
 
11,881
 
Other
(7)
 
 
6,883
 
 
 
6,448
 
 
 
7,823
 
 
 
3,635
 
 
 
24,789
 
 
 
11,094
 
 
 
68
 
 
 
35,951
 
Total
 
$
  29,674
 
 
$
  40,632
 
 
$
  41,665
 
 
$
  45,251
 
 
$
  157,222
 
 
$
  53,408
 
 
$
  128,948
 
 
$
  339,578
 
Of which:
                                                               
– Secured
 
$
9,838
 
 
$
12,299
 
 
$
12,592
 
 
$
2,707
 
 
$
37,436
 
 
$
11,781
 
 
$
55,092
 
 
$
104,309
 
– Unsecured
 
 
19,836
 
 
 
28,333
 
 
 
29,073
 
 
 
42,544
 
 
 
119,786
 
 
 
41,627
 
 
 
73,856
 
 
 
235,269
 

Royal Bank of Canada
        Third Quarter 2023         35
 
     As at April 30, 2023  
(Millions of Canadian dollars)   Less than 1
month
    1 to 3
months
    3 to 6
months
    6 to 12
months
    Less than 1
year
sub-total
    1 year
to 2 years
    2 years and
greater
    Total  
Deposits from banks
(2)
  $ 5,060     $ 1,216     $ 553     $ 902     $ 7,731     $     $     $ 7,731  
Certificates of deposit and commercial paper
    10,098       15,149       25,783       17,523       68,553                   68,553  
Asset-backed commercial paper
(3)
    3,606       2,663       6,098       952       13,319             227       13,546  
Senior unsecured medium-term notes
(4)
    2,935       2,258       9,739       6,428       21,360       28,489       52,585       102,434  
Senior unsecured structured notes
(5)
    983       1,854       2,792       3,055       8,684       5,053       11,468       25,205  
Mortgage securitization
          613       1,994       912       3,519       3,327       9,308       16,154  
Covered bonds/asset-backed securities
(6)
          2,239       813       3,265       6,317       5,323       47,740       59,380  
Subordinated liabilities
          110                   110       2,963       8,978       12,051  
Other
(7)
    6,498       6,060       10,284       5,777       28,619       10,063       39       38,721  
Total
  $   29,180     $   32,162     $   58,056     $   38,814     $   158,212     $   55,218     $   130,345     $   343,775  
Of which:
               
– Secured
  $ 8,984     $ 10,239     $ 16,533     $ 5,129     $ 40,885     $ 8,650     $ 57,275     $ 106,810  
– Unsecured
    20,196       21,923       41,523       33,685       117,327       46,568       73,070       236,965  
 
(1)   Excludes bankers’ acceptances and repos.
(2)   Excludes deposits associated with services we provide to banks (e.g., custody, cash management).
(3)   Only includes consolidated liabilities, including our collateralized commercial paper program.
(4)   Includes deposit notes.
(5)   Includes notes where the payout is tied to movements in foreign exchange, commodities and equities.
(6)   Includes credit card and mortgage loans.
(7)   Includes tender option bonds (secured) of $5,288 million (April 30, 2023 – $5,740 million), bearer deposit notes (unsecured) of $5,160 million (April 30, 2023 – $4,908 million), floating rate notes (unsecured) of $1,675 million (April 30, 2023 – $1,675 million), other long-term structured deposits (unsecured) of $14,385 million (April 30, 2023 – $14,207 million) and FHLB advances (secured) of $9,233 million (April 30, 2023 – $11,991 million) and wholesale guaranteed interest certificates of $210 million (April 30, 2023 – $200 million).
Credit ratings
Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective basis are primarily dependent upon maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies reflect their views and methodologies. Ratings are subject to change, based on a number of factors including, but not limited to, our financial strength, competitive position, liquidity and other factors not completely within our control.
Other than as noted below, there have been no changes to our major credit ratings as disclosed in our 2022 Annual Report.
Credit ratings
(1)
 
     
As at August 23, 2023
 
     
Short-term

debt
    
Legacy senior
long-term debt 
(2)
      
Senior long-
term debt 
(3)
      
Outlook
 
Moody’s
(4)
  
 
P-1
 
  
 
Aa1
 
    
 
A1
 
    
 
stable
 
Standard & Poor’s
(5)
  
 
A-1+
 
  
 
AA-
 
    
 
A
 
    
 
stable
 
Fitch Ratings
(6)
  
 
F1+
 
  
 
AA
 
    
 
AA-
 
    
 
stable
 
DBRS
(7)
  
 
R-1 (high)
 
  
 
AA (high)
 
    
 
AA
 
    
 
stable
 
 
  (1)   Credit ratings are not recommendations to purchase, sell or hold a financial obligation in as much as they do not comment on market price or suitability for a particular investor. Ratings are determined by the rating agencies based on criteria established from time to time by them, and are subject to revision or withdrawal at any time by the rating organization.  
  (2)   Includes senior long-term debt issued prior to September 23, 2018 and senior long-term debt issued on or after September 23, 2018 which is excluded from the
Bail-in
regime.
 
  (3)   Includes senior long-term debt issued on or after September 23, 2018 which is subject to conversion under the
Bail-in
regime.
 
  (4)   In December 2022, Moody’s affirmed our ratings and assessments with a stable outlook following the announcement of the acquisition of HSBC Canada.  
  (5)   On May 25, 2023, Standard & Poor’s affirmed our ratings with a stable outlook.  
  (6)   On June 20, 2023, Fitch Ratings affirmed our ratings with a stable outlook.  
  (7)   On May 12, 2023, DBRS affirmed our ratings with a stable outlook.  
Additional contractual obligations for rating downgrades
We are required to deliver collateral to certain counterparties in the event of a downgrade to our current credit rating. The following table provides the additional collateral obligations required at the reporting date in the event of a
one-,
two-
or three-notch downgrade to our credit ratings. These additional collateral obligations are incremental requirements for each successive downgrade and do not represent the cumulative impact of multiple downgrades. The amounts reported change periodically as a result of several factors, including the transfer of trading activity to centrally cleared financial market infrastructures and exchanges, the expiration of transactions with downgrade triggers, the imposition of internal limitations on new agreements to exclude downgrade triggers, as well as normal course
mark-to-market.
There is no outstanding senior debt issued in the market that contains rating triggers that would lead to early prepayment of principal.
 
      As at  
   
July 31
2023
       
April 30
2023
 
(Millions of Canadian dollars)  
One-notch

downgrade
   
Two-notch

downgrade
   
Three-notch

downgrade
        
One-notch

downgrade
   
Two-notch

downgrade
   
Three-notch

downgrade
 
Contractual derivatives funding or margin requirements
 
$
149
 
 
$
63
 
 
$
175
 
    $ 137     $ 56     $ 136  
Other contractual funding or margin requirements
(1)
 
 
34
 
 
 
50
 
 
 
26
 
 
 
    42       35       24  
 
(1)   Includes Guaranteed Investment Certificates (GICs) issued by our municipal markets business out of New York.

36         
Royal Bank of Canada
        Third Quarter 2023
 
Liquidity Coverage Ratio (LCR)
The LCR is a Basel III metric that measures the sufficiency of high-quality liquid assets (HQLA) available to meet liquidity needs over a
30-day
period in an acute stress scenario. The Basel Committee on Banking Supervision (BCBS) and OSFI regulatory minimum coverage level for LCR is 100%.
OSFI requires Canadian banks to disclose the LCR using the standard Basel disclosure template and calculated using the average of daily LCR positions during the quarter.
Liquidity coverage ratio common disclosure template
(1)
 
     For the three months ended  
   
July 31
2023
 
(Millions of Canadian dollars, except percentage amounts)  
Total unweighted
value (average) 
(2)
   
Total weighted
value (average)
 
High-quality liquid assets
   
Total high-quality liquid assets (HQLA)
 
 
 
 
 
$
  382,789
 
Cash outflows
   
Retail deposits and deposits from small business customers, of which:
 
$
      357,948
 
 
$
33,722
 
Stable deposits
(3)
 
 
122,742
 
 
 
3,682
 
Less stable deposits
 
 
235,206
 
 
 
30,040
 
Unsecured wholesale funding, of which:
 
 
409,457
 
 
 
198,361
 
Operational deposits (all counterparties) and deposits in networks of cooperative banks
(4)
 
 
158,415
 
 
 
37,558
 
Non-operational
deposits
 
 
219,541
 
 
 
129,302
 
Unsecured debt
 
 
31,501
 
 
 
31,501
 
Secured wholesale funding
   
 
36,983
 
Additional requirements, of which:
 
 
340,393
 
 
 
75,693
 
Outflows related to derivative exposures and other collateral requirements
 
 
67,577
 
 
 
18,297
 
Outflows related to loss of funding on debt products
 
 
10,674
 
 
 
10,674
 
Credit and liquidity facilities
 
 
262,142
 
 
 
46,722
 
Other contractual funding obligations
(5)
 
 
24,871
 
 
 
24,871
 
Other contingent funding obligations
(6)
 
 
763,194
 
 
 
12,312
 
Total cash outflows
 
 
 
 
 
$
381,942
 
Cash inflows
   
Secured lending (e.g., reverse repos)
 
$
300,753
 
 
$
52,017
 
Inflows from fully performing exposures
 
 
17,816
 
 
 
10,793
 
Other cash inflows
 
 
33,605
 
 
 
33,605
 
Total cash inflows
 
 
 
 
 
$
96,415
 
         
Total
adjusted value
 
Total HQLA
   
$
382,789
 
Total net cash outflows
 
 
 
 
 
 
285,527
 
Liquidity coverage ratio
 
 
 
 
 
 
134%
                 
   
April 30
2023
 
(Millions of Canadian dollars, except percentage amounts)          Total adjusted
value
 
Total HQLA
    $ 390,546  
Total net cash outflows
 
 
 
 
    288,446  
Liquidity coverage ratio
 
 
 
 
    135%
 
(1)   The LCR is calculated in accordance with OSFI’s LAR guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS. The LCR for the quarter ended July 31, 2023 is calculated as an average of 64 daily positions.
(2)   With the exception of other contingent funding obligations, unweighted inflow and outflow amounts are items maturing or callable in 30 days or less. Other contingent funding obligations also include debt securities with remaining maturity greater than 30 days.
(3)   As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank has an established relationship with the client making the withdrawal unlikely.
(4)   Operational deposits from customers other than retail and small and
medium-sized
enterprises, are deposits which clients need to keep with the bank in order to facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
(5)   Other contractual funding obligations primarily include outflows from unsettled securities trades and outflows from obligations related to securities sold short.
(6)   Other contingent funding obligations include outflows related to other
off-balance
sheet facilities that carry low LCR runoff factors (0% – 5%).

Royal Bank of Canada
        Third Quarter 2023         37
 
We manage our LCR position within a target range that reflects our liquidity risk tolerance and takes into account business mix, asset composition and funding capabilities. The range is subject to periodic review in light of changes to internal requirements and external developments.
We maintain HQLAs in major currencies with dependable market depth and breadth. Our treasury management practices ensure that the levels of HQLA are actively managed to meet target LCR objectives. Our Level 1 assets, as calculated according to OSFI LAR and the BCBS LCR requirements, represent 88% of total HQLA. These assets consist of cash, placements with central banks and highly rated securities issued or guaranteed by governments, central banks and supranational entities.
LCR captures cash flows from
on-
and
off-balance
sheet activities that are either expected or could potentially occur within 30 days in an acute stress scenario. Cash outflows result from the application of withdrawal and
non-renewal
factors to demand and term deposits, differentiated by client type (wholesale, retail and small- and
medium-sized
enterprises). Cash outflows also arise from business activities that create contingent funding and collateral requirements, such as repo funding, derivatives, short sales of securities and the extension of credit and liquidity commitments to clients. Cash inflows arise primarily from maturing secured loans, interbank loans and
non-HQLA
securities.
LCR does not reflect any market funding capacity that we believe would be available in a stress situation. All maturing wholesale debt is assigned 100% outflow in the LCR calculation.
Q3 2023 vs. Q2 2023
The average LCR for the quarter ended July 31, 2023 was 134%, which translates into a surplus of approximately $97 billion, compared to 135% and a surplus of approximately $102 billion last quarter. LCR levels decreased compared to the prior quarter mainly due to the partial sale of RBC Investor Services operations and loan growth, partially offset by an increase in deposits.
Net Stable Funding Ratio (NSFR)
NSFR is a Basel III metric that measures the sufficiency of available stable funding relative to the amount of required stable funding. The BCBS and OSFI regulatory minimum coverage level for NSFR is 100%.
Available stable funding is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. Required stable funding is a function of the liquidity characteristics and residual maturities of the various assets held by the bank as well as those of its
off-balance
sheet exposures.
OSFI requires Canadian Domestic Systemically Important Banks
(D-SIBs)
to disclose the NSFR using the standard Basel disclosure template. Amounts presented in this disclosure template are determined in accordance with the requirements of OSFI’s LAR guideline and are not necessarily aligned with the classification requirements prescribed under IFRS.

38         
Royal Bank of Canada
        Third Quarter 2023
 
Net Stable Funding Ratio common disclosure template
(1)
 
    
As at July 31, 2023
 
   
Unweighted value by residual maturity
(2)
       
(Millions of Canadian dollars, except percentage amounts)  
No maturity
   
< 6 months
   
6 months to
< 1 year
   
 1 year
   
Weighted
value
 
Available Stable Funding (ASF) Item
         
Capital:
 
$
112,315
 
 
$
 
 
$
 
 
$
10,879
 
 
$
123,194
 
Regulatory Capital
 
 
112,315
 
 
 
 
 
 
 
 
 
10,879
 
 
 
123,194
 
Other Capital Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail deposits and deposits from small business customers:
 
 
301,943
 
 
 
99,784
 
 
 
46,522
 
 
 
49,424
 
 
 
460,947
 
Stable deposits
(3)
 
 
98,898
 
 
 
42,403
 
 
 
23,907
 
 
 
22,372
 
 
 
179,319
 
Less stable deposits
 
 
203,045
 
 
 
57,381
 
 
 
22,615
 
 
 
27,052
 
 
 
281,628
 
Wholesale funding:
 
 
277,942
 
 
 
526,214
 
 
 
52,808
 
 
 
146,153
 
 
 
342,371
 
Operational deposits
(4)
 
 
157,652
 
 
 
 
 
 
 
 
 
 
 
 
78,826
 
Other wholesale funding
 
 
120,290
 
 
 
526,214
 
 
 
52,808
 
 
 
146,153
 
 
 
263,545
 
Liabilities with matching interdependent assets
(5)
 
 
90
 
 
 
4,780
 
 
 
2,885
 
 
 
20,528
 
 
 
 
Other liabilities:
 
 
42,139
 
 
 

217,885

 

 
 
12,358
 
NSFR derivative liabilities
   
 

26,233

 

 
All other liabilities and equity not included in the above categories
 
 
42,139
 
 
 
179,084
 
 
 
420
 
 
 
12,148
 
 
 
12,358
 
Total ASF
                                 
$
938,870
 
Required Stable Funding (RSF) Item
         
Total NSFR high-quality liquid assets (HQLA)
         
$
39,817
 
Deposits held at other financial institutions for operational purposes
 
 
 
 
 
1,404
 
 
 
 
 
 
 
 
 
702
 
Performing loans and securities:
 
 
209,271
 
 
 
319,512
 
 
 
108,201
 
 
 
524,112
 
 
 
689,988
 
Performing loans to financial institutions secured by
Level 1 HQLA
 
 
 
 
 
143,841
 
 
 
14,202
 
 
 
660
 
 
 
15,227
 
Performing loans to financial institutions secured by
non-Level
1 HQLA and unsecured performing loans to financial institutions
 
 
4,310
 
 
 
87,968
 
 
 
36,368
 
 
 
26,203
 
 
 
58,123
 
Performing loans to
non-financial
corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which:
 
 
131,074
 
 
 
59,841
 
 
 
29,706
 
 
 
165,638
 
 
 
295,911
 
With a risk weight of less than or equal to 35% under
the Basel II standardized approach for credit risk
 
 
 
 
 
815
 
 
 
738
 
 
 
2,180
 
 
 
2,194
 
Performing residential mortgages, of which:
 
 
37,131
 
 
 
24,641
 
 
 
25,877
 
 
 
312,617
 
 
 
270,705
 
With a risk weight of less than or equal to 35% under
the Basel II standardized approach for credit risk
 
 
37,131
 
 
 
24,621
 
 
 
25,861
 
 
 
311,645
 
 
 
269,861
 
Securities that are not in default and do not qualify as
HQLA, including exchange-traded equities
 
 
36,756
 
 
 
3,221
 
 
 
2,048
 
 
 
18,994
 
 
 
50,022
 
Assets with matching interdependent liabilities
(5)
 
 
90
 
 
 
4,780
 
 
 
2,885
 
 
 
20,528
 
 
 
 
Other assets:
 
 
2,232
 
 
 

287,719

 

 
 
75,831
 
Physical traded commodities, including gold
 
 
2,232
 
       
 
1,897
 
Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs
   
 

18,268

 

 
 
15,528
 
NSFR derivative assets
   
 

19,515

 

 
 
 
NSFR derivative liabilities before deduction of variation margin posted
   
 

61,192

 

 
 
3,060
 
All other assets not included in the above categories
 
 
 
 
 
135,450
 
 
 
169
 
 
 
53,125
 
 
 
55,346
 
Off-balance
sheet items
         
 

757,602

 

 
 
28,444
 
Total RSF
                                 
$
834,782
 
Net Stable Funding Ratio (%)
                                 
 
112%
         
     As at April 30, 2023         
(Millions of Canadian dollars, except percentage amounts)                              
Weighted
value
 
Total ASF
                                  $   939,683  
Total RSF
                                    829,777  
Net Stable Funding Ratio (%)
                                    113%
 
(1)   The NSFR is calculated in accordance with OSFI’s LAR guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS.
(2)   Totals for the following rows encompass the residual maturity categories of less than 6 months, 6 months to less than 1 year, and greater than or equal to 1 year in accordance with the requirements of the common disclosure template prescribed by OSFI: Other liabilities, NSFR derivative liabilities, Other assets, Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs), NSFR derivative assets, NSFR derivative liabilities before deduction of variation margin posted, and
Off-balance
sheet items.
(3)   As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank has an established relationship with the client making the withdrawal unlikely.
(4)   Operational deposits from customers other than retail and small and
medium-sized
enterprises, are deposits which clients need to keep with the bank in order to facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
(5)   Interdependent assets and liabilities represent NHA MBS liabilities, including liabilities arising from transactions involving the Canada Mortgage Bond program and their corresponding encumbered mortgages.

Royal Bank of Canada
        Third Quarter 2023         39
 
Available stable funding is comprised primarily of a diversified pool of personal and commercial deposits, capital, as well as long-term wholesale liabilities. Required stable funding is driven mainly by the bank’s mortgage and loan portfolio, secured loans to financial institutions and to a lesser extent by other less liquid assets. NSFR does not reflect any unused market funding capacity that we believe is available to the bank.
Volume and composition of available stable funding is actively managed to optimize our structural funding position and meet NSFR objectives. Our NSFR is managed in accordance with our comprehensive LRMF.
Q3 2023 vs. Q2 2023
The NSFR as at July 31, 2023 was 112%, which translates into a surplus of approximately $104 billion, compared to 113% and a surplus of approximately $110 billion last quarter. NSFR decreased compared to the prior quarter primarily due to loan growth and the partial sale of RBC Investor Services operations, partially offset by an increase in deposits and stable funding.
Contractual maturities of financial assets, financial liabilities and
off-balance
sheet items
The following tables provide remaining contractual maturity profiles of all our assets, liabilities, and
off-balance
sheet items at their carrying value (e.g., amortized cost or fair value) at the balance sheet date.
Off-balance
sheet items are allocated based on the expiry date of the contract.
Details of contractual maturities and commitments to extend funds are a source of information for the management of liquidity risk. Among other purposes, these details form a basis for modelling a behavioural balance sheet with effective maturities to calculate liquidity risk measures. For further details, refer to the Risk measurement section within the Liquidity and funding risk section of our 2022 Annual Report.
 
    
As at July 31, 2023
 
(Millions of Canadian dollars)  
Less than
1 month
   
1 to 3
months
   
3 to 6
months
   
6 to 9
months
   
9 to 12
months
   
1 year
to 2 years
   
2 years
to 5 years
   
5 years
and greater
   
With no
specific
maturity
   
Total
 
Assets
                   
Cash and deposits with banks
 
$
165,753
 
 
$
17
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
2,238
 
 
$
168,008
 
Securities
                   
Trading (1)
 
 
105,650
 
 
 
88
 
 
 
102
 
 
 
23
 
 
 
20
 
 
 
129
 
 
 
171
 
 
 
10,139
 
 
 
60,281
 
 
 
176,603
 
Investment, net of applicable allowance
 
 
6,607
 
 
 
6,660
 
 
 
4,540
 
 
 
3,313
 
 
 
7,404
 
 
 
35,464
 
 
 
51,662
 
 
 
79,454
 
 
 
918
 
 
 
196,022
 
Assets purchased under reverse repurchase agreements and securities borrowed (2)
 
 
165,182
 
 
 
80,855
 
 
 
34,719
 
 
 
27,584
 
 
 
16,647
 
 
 
934
 
 
 
 
 
 
 
 
 
21,230
 
 
 
347,151
 
Loans, net of applicable allowance
 
 
26,514
 
 
 
24,184
 
 
 
31,631
 
 
 
31,641
 
 
 
38,463
 
 
 
192,089
 
 
 
329,148
 
 
 
74,050
 
 
 
87,994
 
 
 
835,714
 
Other
                   
Customers’ liability under acceptances
 
 
12,174
 
 
 
7,230
 
 
 
2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(41
 
 
19,365
 
Derivatives
 
 
7,000
 
 
 
9,852
 
 
 
8,907
 
 
 
6,006
 
 
 
4,842
 
 
 
16,093
 
 
 
26,939
 
 
 
36,273
 
 
 
2
 
 
 
115,914
 
Other financial assets
 
 
38,084
 
 
 
1,704
 
 
 
2,022
 
 
 
468
 
 
 
590
 
 
 
177
 
 
 
248
 
 
 
2,407
 
 
 
3,565
 
 
 
49,265
 
Total financial assets
 
 
526,964
 
 
 
130,590
 
 
 
81,923
 
 
 
69,035
 
 
 
67,966
 
 
 
244,886
 
 
 
408,168
 
 
 
202,323
 
 
 
176,187
 
 
 
1,908,042
 
Other
non-financial
assets
 
 
5,482
 
 
 
1,689
 
 
 
250
 
 
 
(336
 
 
137
 
 
 
5,612
 
 
 
2,694
 
 
 
5,061
 
 
 
29,103
 
 
 
49,692
 
Total assets
 
$
532,446
 
 
$
132,279
 
 
$
82,173
 
 
$
68,699
 
 
$
68,103
 
 
$
250,498
 
 
$
410,862
 
 
$
207,384
 
 
$
205,290
 
 
$
1,957,734
 
Liabilities and equity
                   
Deposits (3)
                   
Unsecured borrowing
 
$
105,383
 
 
$
68,197
 
 
$
70,277
 
 
$
56,195
 
 
$
75,349
 
 
$
53,805
 
 
$
76,279
 
 
$
28,143
 
 
$
579,441
 
 
$
1,113,069
 
Secured borrowing
 
 
5,040
 
 
 
9,726
 
 
 
6,559
 
 
 
1,908
 
 
 
2,273
 
 
 
5,928
 
 
 
14,659
 
 
 
8,305
 
 
 
 
 
 
54,398
 
Covered bonds
 
 
 
 
 
 
 
 
2,490
 
 
 
 
 
 
 
 
 
8,933
 
 
 
30,593
 
 
 
6,188
 
 
 
 
 
 
48,204
 
Other
                   
Acceptances
 
 
12,175
 
 
 
7,230
 
 
 
2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,407
 
Obligations related to securities
sold short
 
 
36,653
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36,653
 
Obligations related to assets sold under repurchase agreements and securities loaned (2)
 
 
197,507
 
 
 
106,321
 
 
 
5,672
 
 
 
974
 
 
 
 
 
 
938
 
 
 
 
 
 
 
 
 
23,053
 
 
 
334,465
 
Derivatives
 
 
7,419
 
 
 
12,466
 
 
 
9,177
 
 
 
6,377
 
 
 
4,929
 
 
 
15,145
 
 
 
26,811
 
 
 
34,920
 
 
 
 
 
 
117,244
 
Other financial liabilities
 
 
40,208
 
 
 
7,422
 
 
 
6,289
 
 
 
1,470
 
 
 
1,638
 
 
 
857
 
 
 
2,248
 
 
 
12,258
 
 
 
4,016
 
 
 
76,406
 
Subordinated debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,841
 
 
 
9,361
 
 
 
 
 
 
11,202
 
Total financial liabilities
 
 
404,385
 
 
 
211,362
 
 
 
100,466
 
 
 
66,924
 
 
 
84,189
 
 
 
85,606
 
 
 
152,431
 
 
 
99,175
 
 
 
606,510
 
 
 
1,811,048
 
Other
non-financial
liabilities
 
 
952
 
 
 
1,025
 
 
 
5,192
 
 
 
316
 
 
 
152
 
 
 
1,056
 
 
 
1,945
 
 
 
13,834
 
 
 
9,785
 
 
 
34,257
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
112,429
 
 
 
112,429
 
Total liabilities and equity
 
$
405,337
 
 
$
212,387
 
 
$
105,658
 
 
$
67,240
 
 
$
84,341
 
 
$
86,662
 
 
$
154,376
 
 
$
113,009
 
 
$
728,724
 
 
$
1,957,734
 
Off-balance
sheet items
                   
Financial guarantees
 
$
512
 
 
$
3,015
 
 
$
2,660
 
 
$
3,367
 
 
$
4,090
 
 
$
1,262
 
 
$
5,901
 
 
$
1,123
 
 
$
22
 
 
$
21,952
 
Commitments to extend credit
 
 
4,620
 
 
 
8,011
 
 
 
15,917
 
 
 
15,702
 
 
 
18,433
 
 
 
58,048
 
 
 
199,303
 
 
 
22,194
 
 
 
5,196
 
 
 
347,424
 
Other credit-related commitments
 
 
12,628
 
 
 
966
 
 
 
1,667
 
 
 
1,614
 
 
 
1,823
 
 
 
189
 
 
 
389
 
 
 
47
 
 
 
86,102
 
 
 
105,425
 
Other commitments
 
 
7
 
 
 
9
 
 
 
15
 
 
 
15
 
 
 
15
 
 
 
56
 
 
 
128
 
 
 
177
 
 
 
897
 
 
 
1,319
 
Total
off-balance
sheet items
 
$
17,767
 
 
$
12,001
 
 
$
20,259
 
 
$
20,698
 
 
$
24,361
 
 
$
59,555
 
 
$
205,721
 
 
$
23,541
 
 
$
92,217
 
 
$
476,120
 
 
(1)   Trading debt securities classified as FVTPL have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.
(2)   Open reverse repo and repo contracts, which have no set maturity date and are typically short term, have been included in the with no specific maturity category.
(3)   A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.

40         
Royal Bank of Canada
        Third Quarter 2023
 
     As at April 30, 2023  
(Millions of Canadian dollars)  
Less than
1 month
    1 to 3
months
    3 to 6
months
    6 to 9
months
    9 to 12
months
    1 year
to 2 years
    2 years
to 5 years
    5 years
and greater
    With no
specific
maturity
    Total  
Assets
                   
Cash and deposits with banks
  $ 178,490     $ 5     $     $     $     $     $     $     $ 2,584     $ 181,079  
Securities
                   
Trading (1)
    70,150       1,115       24       76       23       141       130       10,015       54,533       136,207  
Investment, net of applicable allowance
    4,797       6,216       3,823       4,599       3,823       21,330       54,591       83,486       956       183,621  
Assets purchased under reverse repurchase agreements and securities borrowed (2)
    135,148       67,541       66,718       18,388       23,429                         24,015       335,239  
Loans, net of applicable allowance
    29,831       29,719       31,452       31,034       30,733       183,187       329,594       76,651       88,986       831,187  
Other
                   
Customers’ liability under acceptances
    11,944       8,275       5       2                               (41     20,185  
Derivatives
    6,370       10,713       6,923       7,989       5,898       17,236       27,446       41,573       1       124,149  
Other financial assets
    63,216       6,662       1,792       114       675       165       241       2,385       3,512       78,762  
Total financial assets
    499,946       130,246       110,737       62,202       64,581       222,059       412,002       214,110       174,546       1,890,429  
Other
non-financial
assets
    5,805       1,661       239       (389     193       4,319       1,620       5,451       30,974       49,873  
Total assets
  $   505,751     $   131,907     $   110,976     $   61,813     $   64,774     $   226,378     $   413,622     $   219,561     $   205,520     $   1,940,302  
Liabilities and equity
                   
Deposits (3)
                   
Unsecured borrowing
  $ 112,270     $ 59,775     $ 79,544     $ 66,729     $ 54,570     $ 57,916     $ 72,665     $ 28,859     $ 575,209     $ 1,107,537  
Secured borrowing
    4,486       4,974       10,366       2,478       860       7,002       15,369       8,282             53,817  
Covered bonds
          2,229             2,543             5,233       32,297       6,397             48,699  
Other
                   
Acceptances
    11,945       8,275       5       2                               1       20,228  
Obligations related to securities sold short
    36,048                                                       36,048  
Obligations related to assets sold under repurchase agreements and securities loaned (2)
    233,535       33,718       1,026       717       907       1                   21,654       291,558  
Derivatives
    6,923       13,269       6,399       8,161       5,788       16,078       27,525       39,755             123,898  
Other financial liabilities
    44,611       6,622       9,511       1,356       1,530       916       2,329       12,849       22,805       102,529  
Subordinated debentures
          110                               1,919       9,536             11,565  
Total financial liabilities
    449,818       128,972       106,851       81,986       63,655       87,146       152,104       105,678       619,669       1,795,879  
Other
non-financial
liabilities
    973       1,083       182       4,453       322       968       1,844       13,347       9,897       33,069  
Equity
                                                    111,354       111,354  
Total liabilities and equity
  $ 450,791     $ 130,055     $ 107,033     $ 86,439     $ 63,977     $ 88,114     $ 153,948     $ 119,025     $ 740,920     $ 1,940,302  
Off-balance
sheet items
                   
Financial guarantees
  $ 880     $ 2,147     $ 3,400     $ 2,907     $ 3,458     $ 1,098     $ 5,968     $ 1,070     $ 25     $ 20,953  
Commitments to extend credit
    5,644       11,750       12,600       16,202       17,862       57,647       204,060       21,147       11,911       358,823  
Other credit-related commitments
    8,951       995       1,505       1,703       1,532       570       411       48       88,944       104,659  
Other commitments
    7       11       16       16       15       55       127       188       851       1,286  
Total
off-balance
sheet items
  $ 15,482     $ 14,903     $ 17,521     $ 20,828     $ 22,867     $ 59,370     $ 210,566     $ 22,453     $ 101,731     $ 485,721  
 
(1)   Trading debt securities classified as FVTPL have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.
(2)   Open reverse repo and repo contracts, which have no set maturity date and are typically short term, have been included in the with no specific maturity category.
(3)   A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.
 
Capital management
 
We continue to manage our capital in accordance with our Capital Management Framework as described in our 2022 Annual Report. In addition, we continue to monitor for new regulatory capital developments, including OSFI guidance relating to the BCBS Basel III reforms, in order to ensure compliance with these requirements as disclosed in the Capital management section in our 2022 Annual Report, as updated below.
OSFI expects Canadian banks to meet the Basel III targets for CET1, Tier 1, and Total capital ratios. Under Basel III, banks select from two main approaches, the Standardized Approach (SA) or the Internal Ratings Based (IRB) Approach, to calculate their minimum regulatory capital required to support credit, market and operational risks.
The Financial Stability Board (FSB) has
re-designated
us as a Global Systemically Important Bank
(G-SIB).
This designation requires us to maintain a higher loss absorbency requirement (common equity as a percentage of RWA) of 1% consistent with the
D-SIB
requirement.
OSFI’s Total Loss Absorbing Capacity (TLAC) guideline establishes two minimum standards: the risk-based TLAC ratio, which builds on the risk-based capital ratios described in the CAR guideline, and the TLAC leverage ratio, which builds on the leverage ratio described in OSFI’s LR guideline. The TLAC requirement is intended to address the sufficiency of a
D-SIB’s
loss absorbing capacity in supporting its recapitalization in the event of its failure. TLAC is defined as the aggregate of Tier 1 capital, Tier 2 capital, and external TLAC instruments, which allow conversion in whole or in part into common shares under the CDIC Act and meet all of the eligibility criteria under the guideline.

Royal Bank of Canada
        Third Quarter 2023         41
 
OSFI’s revised capital, leverage, and disclosure guidelines incorporating and implementing OSFI’s first phase of the adoption of the final BCBS Basel III reforms came into effect in Q2 2023. The second phase of OSFI’s implementation of the final BCBS Basel III reforms relating to the revised credit valuation adjustment (CVA) and market risk chapters of the CAR guideline will be effective for us in Q1 2024. The revised CAR and LR guidelines implemented beginning in Q2 2023 include the following notable changes:
 
For IRB portfolios, elimination of a 6% regulatory scaling factor applied to RWA generated by internal models and introduction of prescribed supervisory parameters applicable to certain asset classes within our wholesale portfolio.
 
Adoption of a new operational risk SA framework based on 3 years of average income and 10 years of historical losses.
 
Adoption of a new SA framework enhancing risk sensitivity.
 
Prescribed revisions to the existing regulatory capital floor from 70% to 65% requiring a transition to a new regulatory capital floor of 72.5% of RWA under the SA by 2026. This new regulatory floor will be transitioned over three years, reflecting a regulatory capital floor requirement of 67.5%, 70% and 72.5% in, fiscal 2024, 2025 and 2026, respectively.
 
Application of a 50 bps leverage ratio buffer to all
D-SIBs.
On June 20, 2023, OSFI announced an increase in the Domestic Stability Buffer’s (DSB) level from the current 3% to 3.5% of total RWA effective November 1, 2023.
For further details, refer to the Capital management section of our 2022 Annual Report. We have incorporated the effective adjustments and guidance, as applicable, into our results and in our ongoing capital planning activities.
The following table provides a summary of OSFI’s current regulatory target ratios under Basel III and Pillar 2 requirements. We are in compliance with all current capital, leverage and TLAC requirements imposed by OSFI:
 
Basel III
capital,
leverage and TLAC
ratios
 
 
OSFI regulatory target requirements for large banks under Basel III
   
 
RBC
capital,
leverage
and TLAC
ratios as at
July 31,
2023
   
Domestic
Stability
Buffer 
(3)
   
Minimum including
Capital Buffers,
D-SIB/G-SIB
surcharge and
Domestic Stability
Buffer as at
July 31, 2023
 
 
Minimum
   
Capital
Buffers
   
Minimum
including
Capital
Buffers
   
D-SIB/G-SIB
surcharge
 
(2)
   
Minimum including
Capital Buffers
and
D-SIB/G-SIB

surcharge 
(1), (2)
 
                 
Common Equity Tier 1     4.5%       2.6%       7.1%       1.0%       8.1%       14.1%       3.0%       11.1%  
Tier 1 capital     6.0%       2.6%       8.6%       1.0%       9.6%       15.4%       3.0%       12.6%  
Total capital     8.0%       2.6%       10.6%       1.0%       11.6%       17.3%       3.0%       14.6%  
Leverage ratio     3.5%       n.a.       3.5%       n.a.       3.5%       4.2%       n.a.       3.5%  
TLAC ratio     21.6%      
n.a.
 
    21.6%       n.a.       21.6%       30.9%       3.0%       24.6%  
TLAC leverage ratio     7.25%       n.a.       7.25%       n.a.       7.25%       8.5%       n.a.       7.25%  
 
(1)   The capital buffers include the capital conservation buffer of 2.5% and the countercyclical capital buffer (CCyB) as prescribed by OSFI. The CCyB, calculated in accordance with OSFI’s CAR guidelines, was 0.06% as at July 31, 2023 (April 30, 2023 - 0.04% and October 31, 2022 – 0.01%).
(2)   A capital surcharge, equal to the higher of our
D-SIB
surcharge and the BCBS’s
G-SIB
surcharge, is applicable to risk-weighted capital.
(3)   The DSB can range from 0% to 4% of total RWA and as at July 31, 2023 is set at 3% by OSFI. Effective November 1, 2023, the DSB level will increase by 50 bps.
n.a.   not applicable

42         
Royal Bank of Canada
        Third Quarter 2023
 
The following table provides details on our regulatory capital, TLAC available, RWA, and on ratios for capital, leverage and TLAC. Our capital position remains strong and our capital, leverage and TLAC ratios remain well above OSFI regulatory targets.
 
     As at  
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
 
July 31
2023
   
April 30
2023
   
October 31
2022
 
Capital
(1)
     
CET1 capital
 
$
82,892
 
  $ 81,103     $ 76,945  
Tier 1 capital
 
 
90,193
 
    88,400       84,242  
Total capital
 
 
101,072
 
    99,540       93,850  
RWA used in calculation of capital ratios
(1)
     
Credit risk
 
$
470,732
 
  $ 479,953     $ 496,898  
Market risk
 
 
37,426
 
    37,685       35,342  
Operational risk
 
 
77,741
 
    75,895       77,639  
Total RWA
 
$
  585,899
 
  $   593,533     $   609,879  
Capital ratios and Leverage ratio
(1)
     
CET1 ratio
 
 
14.1%
    13.7%     12.6%
Tier 1 capital ratio
 
 
15.4%
    14.9%     13.8%
Total capital ratio
 
 
17.3%
    16.8%     15.4%
Leverage ratio
 
 
4.2%
    4.2%     4.4%
Leverage ratio exposure (billions)
 
$
2,142
 
  $ 2,116     $ 1,898  
TLAC available and ratios
(2)
     
TLAC available
 
$
181,035
 
  $ 183,978     $ 160,961  
TLAC ratio
 
 
30.9%
    31.0%     26.4%
TLAC leverage ratio
 
 
8.5%
    8.7%     8.5%
 
  (1)   Capital, RWA, and capital ratios are calculated using OSFI’s CAR guideline and the Leverage ratio is calculated using OSFI’s LR guideline. Both the CAR guideline and LR guideline are based on the Basel III framework. The results for the period ended July 31, 2023 and April 30, 2023 reflect our adoption of the revised CAR and LR guidelines that came into effect in Q2 2023 as part of OSFI’s implementation of the Basel III reforms.  
  (2)   TLAC available and TLAC ratios are calculated using OSFI’s TLAC guideline. The TLAC standard is applied at the resolution entity level which for us is deemed to be Royal Bank of Canada and its subsidiaries. A resolution entity and its subsidiaries are collectively called a resolution group. The TLAC ratio and TLAC leverage ratio are calculated using the TLAC available as a percentage of total RWA and leverage exposure, respectively.  

Royal Bank of Canada
        Third Quarter 2023         43
 
Q3 2023 vs. Q2 2023
 
 
 
(1)   Represents rounded figures.
(2)   Represents net internal capital generation of $1.9 billion or 32 bps consisting of Net income available to shareholders excluding the impact of the specified item and the partial sale of RBC Investor Services operations, less common and preferred share dividends and distributions on other equity instruments.
(3)   Excludes the specified item for the transaction and integration costs relating to our planned acquisition of HSBC Canada and the impact of the partial sale of RBC Investor Services operations.
(4)   For further details about the Dividend reinvestment plan (DRIP), refer to Note 10 of our Condensed Financial Statements.
(5)   On July 3, 2023, we completed the partial sale of RBC Investor Services operations. For further details, refer to Note 6 of our Condensed Financial Statements.
(6)   Includes the impact of the specified item for the transaction and integration costs relating to our planned acquisition of HSBC Canada.
Our CET1 ratio was 14.1%, up 40 bps from last quarter, mainly reflecting net internal capital generation, share issuances under the DRIP and the impact of the partial sale of RBC Investor Services operations.
Total RWA decreased by $8 billion, primarily reflecting the impact of foreign exchange translation, favourable models and methodology updates, as well as the impact of the partial sale of RBC Investor Services operations. These factors were partially offset by the net impact of business growth, including growth in personal and commercial lending in Canada that was partly offset by a reduction in trading activities. In our CET1 ratio, the impact of foreign exchange translation on RWA is largely mitigated with economic hedges.
Our Tier 1 capital ratio of 15.4% was up 50 bps and our Total capital ratio of 17.3% was up 50 bps, mainly reflecting factors noted above under CET1 ratio.
Our Leverage ratio of 4.2% was unchanged from last quarter, as net internal capital generation, the impact of the sale, as noted above and share issuances under the DRIP were offset by business-driven growth in leverage exposures.
Leverage exposures increased by $26 billion, mainly driven by business growth primarily in securities and repo-style transactions. This was partially offset by the impact of foreign exchange translation, as well as the impact of the partial sale of RBC Investor Services operations.
Our TLAC ratio of 30.9% was down 10 bps, reflecting the factors noted above under the Total capital ratio, as well as an unfavourable impact from a net decrease in eligible external TLAC instruments.
Our TLAC leverage ratio of 8.5% was down 20 bps, reflecting the factors noted above under the Leverage ratio, as well as an unfavourable impact from a net decrease in eligible external TLAC instruments.
External TLAC instruments include long-term debt subject to conversion under the
Bail-in
regime. For further details, refer to Deposit and funding profile in the Liquidity and funding risk section.
Selected capital management activity
The following table provides our selected capital management activity:
 
    
For the three months ended
July 31, 2023
          
For the nine months ended
July 31, 2023
 
(Millions of Canadian dollars, except number of shares)  
Issuance or
redemption date
   
Number of
shares 
(000s)
   
Amount
          
Number of
shares 
(000s)
   
Amount
 
Tier 1 capital
                                               
Common shares activity
                                               
Issued in connection with share-based compensation plans 
(1)
         
 
174
 
 
$
16
 
         
 
678
 
 
$
61
 
Issued under the DRIP
(2)
         
 
5,355
 
 
 
670
 
         
 
9,959
 
 
 
1,291
 
Tier 2 capital
                                               
Issuance of February 1, 2033 subordinated debentures
(3), (4)
 
 
January 31, 2023
 
         
$
         –
 
                 
$
  1,500
 
 
  (1)   Amounts include cash received for stock options exercised during the period and fair value adjustments to stock options.
  (2)   During the three months ended July 31, 2023 and April 30, 2023, the requirements of the DRIP were satisfied through shares issued from treasury.
  (3)   For further details, refer to Note 10 of our Condensed Financial Statements.
  (4)  
Non-Viability
Contingent Capital (NVCC) instruments.
As at July 31, 2023, we did not have an active normal course issuer bid (NCIB).
On January 31, 2023, we issued $1,500 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of 5.01% per annum until February 1, 2028, and at the Daily Compounded Canadian Overnight Repo Rate Average plus 2.12% thereafter until their maturity on February 1, 2033.

44         
Royal Bank of Canada
        Third Quarter 2023
 
Selected share data
(1)
 
    
As at July 31, 2023
 
(Millions of Canadian dollars,
except number of shares and as otherwise noted)
 
Number of
shares 
(000s)
   
Amount
   
Dividends
declared per
share
 
Common shares issued
 
 
1,396,228
 
 
$
  18,670
 
 
      $
1.35
 
Treasury shares – common shares
(2)
 
 
(1,231
 
 
(158
       
Common shares outstanding
 
 
1,394,997
 
 
$
18,512
 
       
Stock options and awards
                       
Outstanding
 
 
7,922
 
               
Exercisable
 
 
3,891
 
               
First preferred shares issued
                       
Non-cumulative
Series AZ
(3), (4)
 
 
20,000
 
 
$
500
 
 
      $
0.23
 
Non-cumulative
Series BB
(3), (4)
 
 
20,000
 
 
 
500
 
 
 
0.23
 
Non-cumulative
Series BD
(3), (4)
 
 
24,000
 
 
 
600
 
 
 
0.20
 
Non-cumulative
Series BF
(3), (4)
 
 
12,000
 
 
 
300
 
 
 
0.19
 
Non-cumulative
Series BH
(4)
 
 
6,000
 
 
 
150
 
 
 
0.31
 
Non-cumulative
Series BI
(4)
 
 
6,000
 
 
 
150
 
 
 
0.31
 
Non-cumulative
Series BO
(3), (4)
 
 
14,000
 
 
 
350
 
 
 
0.30
 
Non-cumulative
Series BT
(3), (4), (5)
 
 
750
 
 
 
750
 
 
 
  4.20%
 
Non-cumulative
Series
C-2
(6)
 
 
15
 
 
 
23
 
 
US$
16.88
 
Other equity instruments issued
                       
Limited recourse capital notes Series 1
(3), (4), (7), (8)
 
 
1,750
 
 
 
1,750
 
 
 
4.50%
 
Limited recourse capital notes Series 2
(3), (4), (7), (8)
 
 
1,250
 
 
 
1,250
 
 
 
4.00%
 
Limited recourse capital notes Series 3
(3), (4), (7), (8)
 
 
1,000
 
 
 
1,000
 
 
 
3.65%
 
Preferred shares and other equity instruments issued
 
 
106,765
 
 
 
7,323
 
       
Treasury instruments – preferred shares and other equity instruments
(2)
 
 
6
 
 
 
7
 
       
Preferred shares and other equity instruments outstanding
 
 
106,771
 
 
$
7,330
 
       
Dividends on common shares
         
$
1,885
 
       
Dividends on preferred shares and distributions on other equity instruments
(9)
         
 
58
 
       
 
  (1)   For further details about our capital management activity, refer to Note 10 of our Condensed Financial Statements.  
  (2)   Positive amounts represent a short position and negative amounts represent a long position.  
  (3)   Dividend rate will reset every five years.  
  (4)   NVCC instruments.  
  (5)   The dividends declared per share represent the per annum dividend rate applicable to the shares issued as at the reporting date.  
  (6)   Represents 615,400 depositary shares relating to preferred shares Series
C-2.
Each depositary share represents
one-fortieth
interest in a share of Series
C-2.
 
  (7)   For Limited Recourse Capital Notes (LRCN) Series, the number of shares represent the number of notes issued and the dividends declared per share represent the annual interest rate percentage applicable to the notes issued as at the reporting date.  
  (8)   In connection with the issuance of LRCN Series 1, on July 28, 2020, we issued $1,750 million of First Preferred Shares Series BQ (Series BQ); in connection with the issuance of LRCN Series 2, on November 2, 2020, we issued $1,250 million of First Preferred Shares Series BR (Series BR); and in connection with the issuance of LRCN Series 3, on June 8, 2021, we issued $1,000 million of First Preferred Shares Series BS (Series BS). The Series BQ, BR and BS preferred shares were issued at a price of $1,000 per share and were issued to a consolidated trust to be held as trust assets in connection with the LRCN structure. For further details, refer to Note 20 of our 2022 Annual Consolidated Financial Statements.  
  (9)   Excludes distributions to
non-controlling
interests.
 
As at August 18, 2023, the number of outstanding common shares was 1,395,266,075, net of treasury shares held of 969,114, and the number of stock options and awards was 7,916,225.
NVCC provisions require the conversion of the capital instrument into a variable number of common shares in the event that OSFI deems a bank to be
non-viable
or a federal or provincial government in Canada publicly announces that a bank has accepted or agreed to accept a capital injection. If a NVCC trigger event were to occur, our NVCC capital instruments as at July 31, 2023, which were the preferred shares Series AZ, BB, BD, BF, BH, BI, BO, BT, LRCN Series 1, LRCN Series 2, LRCN Series 3 and subordinated debentures due on January 27, 2026, July 25, 2029, December 23, 2029, June 30, 2030, January 28, 2033, November 3, 2031, May 3, 2032, and February 1, 2033 would be converted into common shares pursuant to an automatic conversion formula with a conversion price based on the greater of: (i) a contractual floor price of $5.00, and (ii) the current market price of our common shares at the time of the trigger event
(10-day
weighted average). Based on a floor price of $5.00 and including an estimate for accrued dividends and interest, these NVCC capital instruments would convert into a maximum of 4,982 million common shares, in aggregate, which would represent a dilution impact of 78.13% based on the number of common shares outstanding as at July 31, 2023.

Royal Bank of Canada
        Third Quarter 2023         45
 
Accounting and control matters
 
 
Summary of accounting policies and estimates
 
Our Condensed Financial Statements are presented in compliance with International Accounting Standard (IAS) 34
Interim Financial Reporting
. Our significant accounting policies are described in Note 2 of our audited 2022 Annual Consolidated Financial Statements.
Future changes in accounting policies and disclosures
Future changes in accounting policies and disclosures that are not yet effective for us are described in Note 2 of our audited 2022 Annual Consolidated Financial Statements and updates are provided below.
IFRS 17
Insurance Contracts
(IFRS 17)
In May 2017, the IASB issued IFRS 17 to establish a comprehensive insurance standard which provides guidance on the recognition, measurement, presentation and disclosure of insurance contracts issued and reinsurance contracts held and will replace the existing IFRS 4
Insurance Contracts
(IFRS 4). In June 2020, the IASB issued amendments to IFRS 17, including deferral of the effective date by two years. This new standard is effective for us on November 1, 2023 and is to be applied retrospectively.
Under IFRS 17, insurance contracts are contracts under which we accept significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Embedded derivatives, investment components and promises to provide non-insurance services, provided specific criteria are met, are separated from the measurement of insurance and reinsurance contracts. Insurance and reinsurance contracts are aggregated into portfolios that are subject to similar risks and are managed together, and then divided into groups based on the period of issuance and profitability. Groups are separately recognized and measured using one of three measurement models depending on the characteristics of the contracts:
 
For insurance contracts with direct participating features, the contracts are measured using the variable fee approach (VFA).
 
For insurance contracts and reinsurance contracts held with a short duration of one year or less, the premium allocation approach (PAA) may be elected.
 
The general measurement method (GMM) is applied to all remaining contracts.
Under the GMM and VFA, the liabilities for remaining coverage and incurred claims for groups of contracts are measured as the sum of the fulfilment cash flows and the contractual service margin (CSM), which are recalculated at the end of each reporting period. The fulfilment cash flows consist of the present value of future cash flows and a risk adjustment for non-financial risk. For insurance contracts, the CSM represents the unearned profit for providing insurance coverage. For reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. Under the PAA, the liability for remaining coverage for each group is measured as the premiums received less insurance revenue recognized for services provided, while the liability for incurred claims is measured as the fulfillment cash flows for incurred claims plus adjustment on any financing components. Losses from the recognition of onerous groups of insurance contracts, regardless of the measurement model applied, are recognized in the Consolidated Statements of Income immediately.
The following are key differences between IFRS 17 and IFRS 4:
 
New business profits are deferred and measured as the CSM component of the insurance contract liabilities and amortized into income as insurance contract services are provided, while losses are recognized into income immediately. Under IFRS 4, gains and losses are recognized in income immediately. On July 18, 2023, OSFI released regulatory guidance to allow the inclusion of the CSM in calculating CET1 capital and related ratios, and therefore, we expect no impact on the capital metrics from such reduction in retained earnings resulting from the CSM.
 
Discount rates used in calculating the present value of insurance contract liabilities are based on the characteristics of the insurance contracts unlike IFRS 4 which is based on the assets supporting the liabilities.
 
Presentation and disclosure changes are expected due to the new requirements.
The overall impact of establishing the CSM, as well as other measurement impacts on our assets and liabilities, is expected to result in a reduction to retained earnings on adoption of IFRS 17. While IFRS 17 impacts the timing of profit recognition of insurance contracts, it will have no impact on total profit recognized over the lifetime of these contracts.
Governance
We are in the advanced stages of implementation for IFRS 17. As part of the implementation process, a comprehensive program and governance structure led by Finance and the Insurance business was established to focus on the evaluation of the impacts of the standard and implementation of policies, systems and processes required for the adoption. Regular updates are provided to senior management as well as the Audit Committee and Board of Directors to ensure escalation of key issues and risks. We have enhanced existing controls, and designed and implemented new controls and governance procedures to support the implementation of IFRS 17, including controls over data and systems, key assumptions, and measurement approaches.

46         
Royal Bank of Canada
        Third Quarter 2023
 
Transition
Upon the adoption of IFRS 17, we will apply IFRS 17 retrospectively by adjusting our Consolidated Balance Sheets as at November 1, 2022 and restating the comparative information as at and for the year ended October 31, 2023. The full retrospective approach will be applied for all insurance and reinsurance contracts unless it is impracticable to do so. When impracticable, the fair value approach will be applied, which calculates the CSM or loss component of the liability for remaining coverage as the difference between the fair value of a group of contracts and the fulfillment cash flows measured at the date of transition.
As permitted by IFRS 17, we also expect to change the classification and measurement of certain eligible financial assets held in respect of an activity that relates to insurance contracts upon the adoption of IFRS 17. We will apply these changes retrospectively by adjusting our Consolidated Balance Sheets as at November 1, 2023, the date of the initial application of IFRS 17, with no restatement of comparative information.
The quantification of the transition impacts is in progress, and we expect to provide an estimate in our 2023 Annual Report.
 
Controls and procedures
 
Disclosure controls and procedures
As of July 31, 2023, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, the effectiveness of our disclosure controls and procedures as defined under rules adopted by the Canadian securities regulatory authorities and the U.S. SEC. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 31, 2023.
Internal control over financial reporting
No changes were made in our internal control over financial reporting during the quarter ended July 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Related party transactions
 
In the ordinary course of business, we provide normal banking services and operational services, and enter into other transactions with associated and other related corporations, including our joint venture entities, on terms similar to those offered to
non-related
parties. We grant loans to directors, officers and other employees at rates normally accorded to preferred clients. In addition, we offer deferred share and other plans to
non-employee
directors, executives and certain other key employees. For further information, refer to Notes 12 and 26 of our audited 2022 Annual Consolidated Financial Statements.

Royal Bank of Canada
        Third Quarter 2023         47
 
Glossary
 
 
Acceptances
A bill of exchange or negotiable instrument drawn by the borrower for payment at maturity and accepted by a bank. The acceptance constitutes a guarantee of payment by the bank and can be traded in the money market. The bank earns a “stamping fee” for providing this guarantee.
Allowance for credit losses (ACL)
The amount deemed adequate by management to absorb expected credit losses as at the balance sheet date. The allowance is established for all financial assets subject to impairment assessment, including certain loans, debt securities, customers’ liability under acceptances, financial guarantees, and undrawn loan commitments. The allowance is changed by the amount of provision for credit losses recorded, which is charged to income, and decreased by the amount of write-offs net of recoveries in the period.
ACL on loans ratio
ACL on loans ratio is calculated as ACL on loans as a percentage of total loans and acceptances.
Asset-backed securities (ABS)
Securities created through the securitization of a pool of assets, for example auto loans or credit card loans.
Assets under administration (AUA)
Assets administered by us, which are beneficially owned by clients, unless otherwise noted. Services provided in respect of assets under administration are of an administrative nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record keeping.
Assets under management (AUM)
Assets managed by us, which are beneficially owned by clients, unless otherwise noted. Services provided in respect of assets under management include the selection of investments and the provision of investment advice. We have assets under management that are also administered by us and included in assets under administration.
Attributed capital
Attributed capital is based on the Basel III regulatory capital requirements and economic capital.
Auction rate securities (ARS)
Debt securities whose interest rates are regularly reset through an auction process.
Average earning assets, net
Average earning assets include interest-bearing deposits with other banks, securities, net of applicable allowance, assets purchased under reverse repurchase agreements and securities borrowed, loans, net of allowance, cash collateral and margin deposits. Insurance assets, and all other assets not specified are excluded. The averages are based on the daily balances for the period.
Basis point (bp)
One
one-hundredth
of a percentage point (.01%).
Collateral
Assets pledged as security for a loan or other obligation. Collateral can take many forms, such as cash, highly rated securities, property, inventory, equipment and receivables.
Collateralized debt obligation (CDO)
Securities with multiple tranches that are issued by structured entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand.
Commercial mortgage-backed securities (CMBS)
Securities created through the securitization of commercial mortgages.
Commitments to extend credit
Unutilized amount of credit facilities available to clients either in the form of loans, bankers’ acceptances and other
on-balance
sheet financing, or through
off-balance
sheet products such as guarantees and letters of credit.
Common Equity Tier 1 (CET1) capital
A regulatory Basel III capital measure comprised mainly of common shareholders’ equity less regulatory deductions and adjustments for goodwill and intangibles, defined benefit pension fund assets, shortfall in allowances and other specified items.
Common Equity Tier 1 capital ratio
A risk-based capital measure calculated as CET1 capital divided by risk-weighted assets.
Covered bonds
Full recourse
on-balance
sheet obligations issued by banks and credit institutions that are fully collateralized by assets over which investors enjoy a priority claim in the event of an issuer’s insolvency.
Credit default swaps (CDS)
A derivative contract that provides the purchaser with a
one-time
payment should the referenced entity/entities default (or a similar triggering event occur).
Derivative
A contract between two parties, which requires little or no initial investment and where payments between the parties are dependent upon the movements in price of an underlying instrument, index or financial rate. Examples of derivatives include swaps, options, forward rate agreements and futures. The notional amount of the derivative is the contract amount used as a reference point to calculate the payments to be exchanged between the two parties, and the notional amount itself is generally not exchanged by the parties.
Dividend payout ratio
Common dividends as a percentage of net income available to common shareholders.
Dividend yield
Dividends per common share divided by the average of the high and low share price in the relevant period.
Earnings per share (EPS), basic
Calculated as net income available to common shareholders divided by the average number of shares outstanding.
Earnings per share (EPS), diluted
Calculated as net income available to common shareholders divided by the average number of shares outstanding adjusted for the dilutive effects of stock options and other convertible securities.
Efficiency Ratio
Non-interest
expense as a percentage of total revenue.
Expected credit losses
The difference between the contractual cash flows due to us in accordance with the relevant contractual terms and the cash flows that we expect to receive, discounted to the balance sheet date.
Fair value
Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Funding Valuation Adjustment
Funding valuation adjustments are calculated to incorporate cost and benefit of funding in the valuation of uncollateralized and under-collateralized OTC derivatives. Future expected cash flows of these derivatives are discounted to reflect the cost and benefit of funding the derivatives by using a funding curve, implied volatilities and correlations as inputs.
Guarantees and standby letters of credit
These primarily represent irrevocable assurances that a bank will make payments in the event that its client cannot meet its financial obligations to third parties. Certain other guarantees, such as bid and performance bonds, represent
non-financial
undertakings.
Hedge
A risk management technique used to mitigate exposure from market, interest rate or foreign currency exchange risk arising from normal banking operations. The elimination or reduction of such exposure is accomplished by establishing offsetting positions. For example, assets denominated in foreign currencies can be offset with liabilities in the same currencies or through the use of foreign exchange hedging instruments such as futures, options or foreign exchange contracts.
Hedge funds
A type of investment fund, marketed to accredited high net worth investors, that is subject to limited regulation and restrictions on its investments compared to retail mutual funds, and that often utilize aggressive strategies such as selling short, leverage, program trading, swaps, arbitrage and derivatives.
High-quality liquid assets (HQLA)
HQLA are cash or assets that can be converted into cash quickly through sales (or by being pledged as collateral) with no significant loss of value.
Impaired loans
Loans are classified as impaired when there has been a deterioration of credit quality to the extent that management no longer has reasonable assurance of timely collection of the full amount of principal and interest in accordance with the contractual terms of the loan agreement. Credit card balances are not classified as impaired as they are directly written off after payments are 180 days past due.
International Financial Reporting Standards (IFRS)
IFRS are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Board.
Leverage ratio
A Basel III regulatory measure, the ratio divides Tier 1 capital by the sum of total assets plus specified
off-balance
sheet items.

48         
Royal Bank of Canada
        Third Quarter 2023
 
Liquidity Coverage Ratio (LCR)
The Liquidity Coverage Ratio is a Basel III metric designed to ensure banks hold a sufficient reserve of high-quality liquidity assets (HQLA) to allow them to service a period of significant liquidity stress lasting 30 calendar days.
Loan-to-value
(LTV) ratio
Calculated based on the total facility amount for the residential mortgage and RBC Homeline Plan product divided by the value of the related residential property.
Master netting agreement
An agreement between us and a counterparty designed to reduce the credit risk of multiple derivative transactions through the creation of a legal right of offset of exposure in the event of a default.
Net interest income
The difference between what is earned on assets such as loans and securities and what is paid on liabilities such as deposits and subordinated debentures.
Net interest margin (NIM) on average earning assets, net
Calculated as net interest income divided by average earning assets, net.
Net Stable Funding Ratio (NSFR)
The Net Stable Funding Ratio is a Basel III metric defined as the amount of available stable funding (ASF) relative to the amount of requested stable funding (RSF). The ratio should be at least equal to 100% on an ongoing basis.
Normal course issuer bid (NCIB)
A program for the repurchase of our own shares for cancellation through a stock exchange that is subject to the various rules of the relevant stock exchange and securities commission.
Notional amount
The contract amount used as a reference point to calculate payments for derivatives.
Off-balance
sheet financial instruments
A variety of arrangements offered to clients, which include credit derivatives, written put options, backstop liquidity facilities, stable value products, financial standby letters of credit, performance guarantees, credit enhancements, mortgage loans sold with recourse, commitments to extend credit, securities lending, documentary and commercial letters of credit, sponsor member guarantees, securities lending indemnifications and indemnifications.
Office of the Superintendent of Financial Institutions Canada (OSFI)
The primary regulator of federally chartered financial institutions and federally administered pension plans in Canada. OSFI’s mission is to safeguard policyholders, depositors and pension plan members from undue loss.
Operating leverage
The difference between our revenue growth rate and
non-interest
expense growth rate.
Options
A contract or a provision of a contract that gives one party (the option holder) the right, but not the obligation, to perform a specified transaction with another party (the option issuer or option writer) according to specified terms.
Provision for credit losses (PCL)
The amount charged to income necessary to bring the allowance for credit losses to a level determined appropriate by management. This includes provisions on performing and impaired financial assets.
PCL on loans ratio
PCL on loans ratio is calculated using PCL on loans as a percentage of average net loans and acceptances.
RBC Homeline Plan products
This is comprised of residential mortgages and secured personal loans whereby the borrower pledges real estate as collateral.
Repurchase agreements
These involve the sale of securities for cash and the simultaneous repurchase of the securities for value at a later date. These transactions normally do not constitute economic sales and therefore are treated as collateralized financing transactions.
Return on common equity (ROE)
Net income available to common shareholders, expressed as a percentage of average common equity.
Reverse repurchase agreements
These involve the purchase of securities for cash and the simultaneous sale of the securities for value at a later date. These transactions normally do not constitute economic sales and therefore are treated as collateralized financing transactions.
Risk-weighted assets (RWA)
Assets adjusted by a regulatory risk-weight factor to reflect the riskiness of on and
off-balance
sheet exposures. Certain assets are not risk-weighted, but deducted from capital. The calculation is defined by OSFI’s Capital Adequacy Requirements guidelines. For more details, refer to the Capital management section.
Securities lending
Transactions in which the owner of securities agrees to lend it under the terms of a prearranged contract to a borrower for a fee. Collateral for the loan consists of either high quality securities or cash and collateral value must be at least equal to the market value of the loaned securities. Borrowers pay a negotiated fee for loans collateralized by securities, whereas for cash collateral lenders pay borrowers interest at a negotiated rate and reinvest the cash collateral to earn a return. An intermediary such as a bank often acts as agent lender for the owner of the security in return for a share of the revenue earned by the owner from lending securities. Most often, agent lenders indemnify the owner against the risk of the borrower’s failure to redeliver the loaned securities – counterparty credit risk if a borrower defaults and market risk if the value of the
non-cash
collateral declines. The agent lender does not indemnify against the investment risk of
re-investing
cash collateral which is borne by the owner.
Securities sold short
A transaction in which the seller sells securities and then borrows the securities in order to deliver them to the purchaser upon settlement. At a later date, the seller buys identical securities in the market to replace the borrowed securities.
Securitization
The process by which various financial assets are packaged into newly issued securities backed by these assets.
Standardized Approach (SA)
Risk weights prescribed by OSFI are used to calculate RWA for the credit risk exposures. Credit assessments by OSFI-recognized external credit rating agencies of S&P, Moody’s, Fitch, and DBRS are used to risk-weight our Sovereign and Bank exposures based on the standards and guidelines issued by OSFI. For our Business and Retail exposures, we use the standard risk weights prescribed by OSFI.
Structured entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding who controls the entity, such as when the activities that significantly affect the entity’s returns are directed by means of contractual arrangements. Structured entities often have restricted activities, narrow and well defined objectives, insufficient equity to finance their activities, and financing in the form of multiple contractually-linked instruments.
Taxable equivalent basis (teb)
Income from certain specified tax advantaged sources (eligible Canadian taxable corporate dividends) is increased to a level that would make it comparable to income from taxable sources. There is an offsetting adjustment in the tax provision, thereby generating the same
after-tax
net income.
Tier 1 capital
Tier 1 capital comprises predominantly of CET1 capital, with additional Tier 1 items such as preferred shares, limited recourse capital notes and
non-controlling
interests in subsidiaries Tier 1 instruments.
Tier 2 capital
Tier 2 capital consists mainly of subordinated debentures that meet certain criteria, certain loan loss allowances and
non-controlling
interests in subsidiaries’ Tier 2 instruments.
Total Loss Absorbing Capacity (TLAC)
The aggregate of Tier 1 capital, Tier 2 capital, and external TLAC instruments which allow conversion in whole or in part into common shares under the Canada Deposit Insurance Corporation Act and meet all of the eligibility criteria under the guideline.
TLAC ratio
The risk-based TLAC ratio is defined as TLAC divided by total risk-weighted assets.
TLAC leverage ratio
The TLAC leverage ratio is defined as TLAC divided by the Leverage ratio exposure.
Total capital and total capital ratio
Total capital is defined as the total of Tier 1 and Tier 2 capital. The total capital ratio is calculated by dividing total capital by risk-weighted assets.
Tranche
A security class created whereby the risks and returns associated with a pool of assets are packaged into several classes of securities offering different risk and return profiles from those of the underlying asset pool. Tranches are typically rated by ratings agencies, and reflect both the credit quality of underlying collateral as well as the level of protection based on the tranches’ relative subordination.
Unattributed capital
Unattributed capital represents common equity in excess of common equity attributed to our business segments and is reported in the Corporate Support segment.
Value-at-Risk
(VaR)
A generally accepted risk-measurement concept that uses statistical models based on historical information to estimate within a given level of confidence the maximum loss in market value we would experience in our trading portfolio from an adverse
one-day
movement in market rates and prices.

Royal Bank of Canada
        Third Quarter 2023         49
 
Enhanced Disclosure Task Force recommendations index
 
We aim to present transparent, high-quality risk disclosures by providing disclosures in our 2022 Annual Report, Q3 2023 Report to Shareholders (RTS), Supplementary Financial Information package (SFI), and Pillar 3 Report, in accordance with recommendations from the FSB’s Enhanced Disclosure Task Force (EDTF). Information within the SFI and Pillar 3 Report is not and should not be considered incorporated by reference into our Q3 2023 Report to Shareholders.
The following index summarizes our disclosure by EDTF recommendation:
 
            
Location of disclosure
Type of Risk
 
Recommendation
 
Disclosure
  
RTS
page
 
Annual
Report page
  
SFI
page
General
 
1
 
Table of contents for EDTF risk disclosure
  
49
 
128
  
1
  2  
Define risk terminology and measures
    
60-65,

126-127
  
  3  
Top and emerging risks
    
58-60
  
 
4
 
New regulatory ratios
  
40-43
 
105-110
  
Risk governance, risk management and business model
 
  5  
Risk management organization
    
60-65
  
  6  
Risk culture
    
60-65
  
  7  
Risk in the context of our business activities
     113   
  8  
Stress testing
  
 
 
63-64, 76
  
Capital adequacy and risk-weighted assets (RWA)
 
9
 
Minimum Basel III capital ratios and Domestic systemically important bank surcharge
  
41
 
105-110
  
  10  
Composition of capital and reconciliation of the accounting balance sheet to the regulatory balance sheet
        *
  11  
Flow statement of the movements in regulatory capital
        19
  12  
Capital strategic planning
    
105-110
  
  13  
RWA by business segments
        20
  14  
Analysis of capital requirement, and related measurement model information
    
66-69
   *
  15  
RWA credit risk and related risk measurements
        *
  16  
Movement of RWA by risk type
        20
  17  
Basel back-testing
  
 
  63,
66-67
   31
 
Liquidity
 
18
 
Quantitative and qualitative analysis of our liquidity reserve
  
32-33
 
83-84, 88-89
  
Funding
  19  
Encumbered and unencumbered assets by balance sheet category, and contractual obligations for rating downgrades
   33, 35   84, 87   
 
20
 
Maturity analysis of consolidated total assets, liabilities and
off-balance
sheet commitments analyzed by remaining contractual maturity at the balance sheet date
  
39-40
 
91-92
  
 
21
 
Sources of funding and funding strategy
  
33-35
 
84-86
  
Market risk
 
22
 
Relationship between the market risk measures for trading and
non-trading
portfolios and the balance sheet
  
30-31
 
80-81
  
 
23
 
Decomposition of market risk factors
  
28-29
 
76-81
  
  24  
Market risk validation and back-testing
     76   
  25  
Primary risk management techniques beyond reported risk measures and parameters
  
 
 
76-79
  
Credit risk
  26  
Bank’s credit risk profile
   24-27  
66-75, 175-182
  
21-31,*
   
Quantitative summary of aggregate credit risk exposures that reconciles to the balance sheet
  
65-71
 
120-125
  
*
  27  
Policies for identifying impaired loans
    
68-70, 115, 147-149
  
  28  
Reconciliation of the opening and closing balances of impaired loans and impairment allowances during the year
        23, 28
  29  
Quantification of gross notional exposure for
over-the-counter
derivatives or exchange-traded derivatives
     71    32
  30  
Credit risk mitigation, including collateral held for all sources of credit risk
  
 
 
69-70
   *
Other
 
  31  
Other risk types
    
94-104
  
  32  
Publicly known risk events
  
 
 
98-99, 219-220
  
 
*   These disclosure requirements are satisfied or partially satisfied by disclosures provided in our Pillar 3 Report for the quarter ended July 31, 2023 and for the year ended October 31, 2022.

50
         
Royal Bank of Canada
        Third Quarter 2023
 
 
 
Interim Condensed Consolidated Financial Statements
(unaudited)
 
 
Interim Condensed Consolidated Balance Sheets 
(unaudited)
 
 
      As at  
(Millions of Canadian dollars)
  
July 31
2023
    
October 31
2022
 
Assets
     
Cash and due from banks
  
$
  80,358
 
   $ 72,397  
Interest-bearing deposits with banks
 
  
 
 
87,650
 
 
 
    
 
108,011
 
 
 
Securities
     
Trading
  
 
176,603
 
     148,205  
Investment, net of applicable allowance
(Note 4)
  
 
196,022
 
     170,018  
    
 
372,625
 
     318,223  
Assets purchased under reverse repurchase agreements and securities borrowed
 
  
 
 
347,151
 
 
 
    
 
317,845
 
 
 
Loans
(Note 5)
     
Retail
  
 
561,212
 
     549,751  
Wholesale
  
 
278,997
 
     273,967  
  
 
840,209
 
     823,718  
Allowance for loan losses
(Note 5)
  
 
(4,495
     (3,753
    
 
835,714
 
     819,965  
Segregated fund net assets
 
  
 
 
2,921
 
 
 
    
 
2,638
 
 
 
Other
     
Customers’ liability under acceptances
  
 
19,365
 
     17,827  
Derivatives
  
 
115,914
 
     154,439  
Premises and equipment
  
 
6,793
 
     7,214  
Goodwill
  
 
12,299
 
     12,277  
Other intangibles
  
 
5,892
 
     6,083  
Other assets
(Note 6)
  
 
71,052
 
     80,300  
    
 
231,315
 
     278,140  
Total assets
  
$
1,957,734
 
   $ 1,917,219  
Liabilities and equity
     
Deposits
(Note 7)
     
Personal
  
$
434,047
 
   $ 404,932  
Business and government
  
 
736,730
 
     759,870  
Bank
  
 
44,894
 
     44,012  
    
 
1,215,671
 
     1,208,814  
Segregated fund net liabilities
 
  
 
 
2,921
 
 
 
    
 
2,638
 
 
 
Other
     
Acceptances
  
 
19,407
 
     17,872  
Obligations related to securities sold short
  
 
36,653
 
     35,511  
Obligations related to assets sold under repurchase agreements and securities loaned
  
 
334,465
 
     273,947  
Derivatives
  
 
117,244
 
     153,491  
Insurance claims and policy benefit liabilities
  
 
12,700
 
     11,511  
Other liabilities
(Note 6)
  
 
95,042
 
     95,235  
    
 
615,511
 
     587,567  
Subordinated debentures
(Note 10)
 
  
 
 
11,202
 
 
 
    
 
10,025
 
 
 
Total liabilities
  
 
1,845,305
 
     1,809,044  
Equity attributable to shareholders
     
Preferred shares and other equity instruments
  
 
7,330
 
     7,318  
Common shares
(Note 10)
  
 
18,512
 
     16,984  
Retained earnings
  
 
82,011
 
     78,037  
Other components of equity
  
 
4,481
 
     5,725  
  
 
112,334
 
     108,064  
Non-controlling
interests
  
 
95
 
     111  
Total equity
  
 
112,429
 
     108,175  
Total liabilities and equity
  
$
  1,957,734
 
   $   1,917,219  
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada
        Third Quarter 2023         
51
 
Interim Condensed Consolidated Statements of Income
(unaudited)
 
 
     For the three months ended   For the nine months ended  
(Millions of Canadian dollars, except per share amounts)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Interest and dividend income
(Note 3)
         
Loans
 
$
11,219
 
  $ 6,761      
$
31,600
 
  $ 18,025  
Securities
 
 
3,751
 
    1,822      
 
9,932
 
    4,597  
Assets purchased under reverse repurchase agreements and securities borrowed
 
 
6,063
 
    1,601      
 
15,736
 
    2,506  
Deposits and other
 
 
1,801
 
    553        
 
5,221
 
    745  
   
 
22,834
 
    10,737        
 
62,489
 
    25,873  
Interest expense
(Note 3)
         
Deposits and other
 
 
9,775
 
    2,786      
 
26,203
 
    5,554  
Other liabilities
 
 
6,599
 
    1,984      
 
17,218
 
    3,707  
Subordinated debentures
 
 
174
 
    77        
 
481
 
    177  
   
 
16,548
 
    4,847        
 
43,902
 
    9,438  
Net interest income
 
 
6,286
 
    5,890        
 
18,587
 
    16,435  
Non-interest
income
         
Insurance premiums, investment and fee income
 
 
1,848
 
    1,233      
 
5,086
 
    2,866  
Trading revenue
 
 
485
 
    (128    
 
1,984
 
    475  
Investment management and custodial fees
 
 
2,099
 
    1,857      
 
6,238
 
    5,710  
Mutual fund revenue
 
 
1,034
 
    1,028      
 
3,049
 
    3,279  
Securities brokerage commissions
 
 
362
 
    344      
 
1,100
 
    1,132  
Service charges
 
 
529
 
    499      
 
1,551
 
    1,464  
Underwriting and other advisory fees
 
 
472
 
    369      
 
1,442
 
    1,577  
Foreign exchange revenue, other than trading
 
 
289
 
    250      
 
1,044
 
    772  
Card service revenue
 
 
334
 
    314      
 
938
 
    893  
Credit fees
 
 
342
 
    301      
 
1,078
 
    1,175  
Net gains on investment securities
 
 
27
 
    28      
 
191
 
    66  
Share of profit in joint ventures and associates
 
 
(37
    33      
 
4
 
    86  
Other
 
 
419
 
    114        
 
811
 
    488  
   
 
8,203
 
    6,242        
 
24,516
 
    19,983  
Total revenue
 
 
14,489
 
    12,132        
 
43,103
 
    36,418  
Provision for credit losses
(Notes 4 and 5)
 
 
616
 
    340        
 
1,748
 
    103  
Insurance policyholder benefits, claims and acquisition expense
 
 
1,379
 
    850        
 
3,930
 
    1,667  
Non-interest
expense
         
Human resources
(Note 8)
 
 
4,794
 
    3,858      
 
14,270
 
    12,145  
Equipment
 
 
611
 
    514      
 
1,769
 
    1,528  
Occupancy
 
 
411
 
    381      
 
1,230
 
    1,153  
Communications
 
 
324
 
    277      
 
923
 
    763  
Professional fees
 
 
592
 
    373      
 
1,517
 
    1,039  
Amortization of other intangibles
 
 
369
 
    342      
 
1,118
 
    1,015  
Other
 
 
760
 
    641        
 
2,203
 
    1,757  
   
 
7,861
 
    6,386        
 
23,030
 
    19,400  
Income before income taxes
 
 
4,633
 
    4,556      
 
14,395
 
    15,248  
Income taxes
(Note 9)
 
 
761
 
    979        
 
3,660
 
    3,323  
Net income
 
$
3,872
 
  $ 3,577        
$
10,735
 
  $ 11,925  
Net income attributable to:
         
Shareholders
 
$
3,870
 
  $ 3,575      
$
10,730
 
  $ 11,918  
Non-controlling
interests
 
 
2
 
    2        
 
5
 
    7  
   
$
3,872
 
  $ 3,577        
$
10,735
 
  $ 11,925  
Basic earnings per share
(in dollars) (Note 11)
 
$
2.74
 
  $ 2.52      
$
7.61
 
  $ 8.33  
Diluted earnings per share
(in dollars) (Note 11)
 
 
2.73
 
    2.51      
 
7.60
 
    8.31  
Dividends per common share
(in dollars)
 
 
1.35
 
    1.28        
 
3.99
 
    3.68  
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

5
2
         
Royal Bank of Canada
        Third Quarter 2023
 
Interim Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
  
 
For the three months ended
 
 
  
 
For the nine months ended
 
(Millions of Canadian dollars)
 
July 31
2023
 
 
July 31
2022
 
 
  
 
July 31
2023
 
 
July 31
2022
 
Net income
 
$
3,872
 
 
$
3,577
 
 
 
 
$
10,735
 
 
$
11,925
 
Other comprehensive income (loss), net of taxes
 
 
 
 
 
Items that will be reclassified subsequently to income:
 
 
 
 
 
Net change in unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income
 
 
 
 
 
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income
 
 
(85
 
 
(247
 
 
 
527
 
 
 
(1,392
Provision for credit losses recognized in income
 
 
(3
 
 
(2
 
 
 
(3
 
 
(13
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income
 
 
(21
 
 
(5
 
 
 
 
(134
 
 
(34
 
 
 
(109
 
 
(254
 
 
 
 
390
 
 
 
(1,439
Foreign currency translation adjustments
 
 
 
 
 
Unrealized foreign currency translation gains (losses)
 
 
(1,878
 
 
(459
 
 
 
(1,296
 
 
1,213
 
Net foreign currency translation gains (losses) from hedging activities
 
 
722
 
 
 
213
 
 
 
 
175
 
 
 
(157
Reclassification of losses (gains) on foreign currency translation to income
 
 
(160
 
 
 
 
 
 
(160
 
 
(18
Reclassification of losses (gains) on net investment hedging activities to income
 
 
146
 
 
 
 
 
 
 
 
146
 
 
 
17
 
 
 
 
(1,170
 
 
(246
 
 
 
 
(1,135
 
 
1,055
 
Net change in cash flow hedges
 
 
 
 
 
Net gains (losses) on derivatives designated as cash flow hedges
 
 
10
 
 
 
(296
 
 
 
(581
 
 
671
 
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income
 
 
(7
 
 
46
 
 
 
 
 
79
 
 
 
194
 
 
 
 
3
 
 
 
(250
 
 
 
 
(502
 
 
865
 
Items that will not be reclassified subsequently to income:
 
 
 
 
 
Remeasurement gains (losses) on employee benefit plans
(1), (Note 8)
 
 
147
 
 
 
(319
 
 
 
(212
 
 
729
 
Net gains (losses) from fair value changes due to credit risk on financial liabilities designated at fair value through profit or loss
 
 
(388
 
 
324
 
 
 
 
(875
 
 
1,357
 
Net gains (losses) on equity securities designated at fair value through other comprehensive income
 
 
 
 
 
10
 
 
 
 
 
18
 
 
 
53
 
 
 
 
(241
 
 
15
 
 
 
 
 
(1,069
 
 
2,139
 
Total other comprehensive income (loss), net of taxes
 
 
(1,517
 
 
(735
 
 
 
 
(2,316
 
 
2,620
 
Total comprehensive income (loss)
 
$
2,355
 
 
$
2,842
 
 
 
 
$
8,419
 
 
$
14,545
 
Total comprehensive income attributable to:
 
 
 
 
 
Shareholders
 
$
2,356
 
 
$
2,841
 
 
 
$
8,417
 
 
$
14,536
 
Non-controlling
interests
 
 
(1
 
 
1
 
 
 
 
 
2
 
 
 
9
 
 
 
$
  2,355
 
 
$
  2,842
 
 
 
 
$
  8,419
 
 
$
  14,545
 

(1)   Includes $(9) million that was reclassified from other comprehensive income to retained earnings.
The income tax effect on the Interim Condensed Consolidated Statements of Comprehensive Income is shown in the table below.
 

  
 
For the three months ended
 
 
  
 
For the nine months ended
 
(Millions of Canadian dollars)
 
July 31
2023
 
 
July 31
2022
 
 
  
 
July 31
2023
 
 
July 31
2022
 
Income taxes on other comprehensive income
 
 
 
 
 
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income
 
$
(71
  $ (20      
$
120
 
  $ (388
Provision for credit losses recognized in income
 
 
(1
           
 
 
    (2
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income
 
 
(8
    (3      
 
(38
    (7
Unrealized foreign currency translation gains (losses)
 
 
(1
           
 
 
     
Net foreign currency translation gains (losses) from hedging activities
 
 
267
 
    75        
 
203
 
    (43
Reclassification of losses (gains) on net investment hedging activities to income
 
 
45
 
           
 
45
 
    6  
Net gains (losses) on derivatives designated as cash flow hedges
 
 
10
 
    (112      
 
(130
    251  
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income
 
 
(2
    17        
 
32
 
    70  
Remeasurement gains (losses) on employee benefit plans
 
 
55
 
    (115      
 
(17
    252  
Net gains (losses) from fair value changes due to credit risk on financial liabilities designated at fair value through profit or loss
 
 
(150
    114        
 
(337
    480  
Net gains (losses) on equity securities designated at fair value through other comprehensive income
 
 
(1
    (7  
 
 
 
14
 
    (8
Total income tax expenses (recoveries)
 
$
143
 
  $ (51  
 
 
$
(108
  $ 611  
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada
        Third Quarter 2023         53
 
Interim Condensed Consolidated Statements of Changes in Equity
(unaudited)
 
 
  
 
For the three months ended July 31, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other components of equity
 
 
 
 
 
 
 
 
 
 
(Millions of Canadian dollars)
 
Preferred
shares and
other equity
instruments
 
 
Common
shares
 
 
Treasury –
preferred
shares and
other equity
instruments
 
 
Treasury –
common
shares
 
 
Retained
earnings
 
 
FVOCI
securities
and loans
 
 
Foreign
currency
translation
 
 
Cash flow
hedges
 
 
Total other
components
of equity
 
 
Equity
attributable to
shareholders
 
 
Non-controlling
interests
 
 
Total
equity
 
Balance at beginning of period
 
$
        7,323
 
 
$
  17,984
 
 
$
(4
 
$
      (127
 
$
  80,326
 
 
$
  (1,858
 
$
      5,723
 
 
$
  1,889
 
 
$
        5,754
 
 
$
  111,256
 
 
$
                  98
 
 
$
  111,354
 
Changes in equity
 
 
 
 
 
 
 
 
 
 
 
 
Issues of share capital and other equity instruments
 
 
 
 
 
686
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
686
 
 
 
 
 
 
686
 
Common shares purchased for cancellation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redemption of preferred shares and other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
72
 
 
 
883
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
955
 
 
 
 
 
 
955
 
Purchases of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
             (61
 
 
(914
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(975
 
 
 
 
 
(975
Share-based compensation awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends on common shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,885
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,885
 
 
 
 
 
(1,885
Dividends on preferred shares and distributions on other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(58
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(58
 
 
(2
 
 
(60
Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1
 
 
 
 
 
(1
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,870
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,870
 
 
 
2
 
 
 
3,872
 
Total other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(241
 
 
(109
 
 
(1,167
 
 
3
 
 
 
(1,273
 
 
(1,514
 
 
(3
 
 
(1,517
Balance at end of period
 
$
7,323
 
 
$
18,670
 
 
$
7
 
 
$
(158
 
$
82,011
 
 
$
(1,967
 
$
4,556
 
 
$
1,892
 
 
$
4,481
 
 
$
112,334
 
 
$
95
 
 
$
112,429
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
For the three months ended July 31, 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other components of equity
 
 
 
 
 
 
 
 
 
 
(Millions of Canadian dollars)
 
Preferred
shares and
other equity
instruments
 
 
Common
shares
 
 
Treasury –
preferred
shares and
other equity
instruments
 
 
Treasury –
common
shares
 
 
Retained
earnings
 
 
FVOCI
securities
and loans
 
 
Foreign
currency
translation
 
 
Cash flow
hedges
 
 
Total other
components
of equity
 
 
Equity
attributable to
shareholders
 
 
Non-controlling
interests
 
 
Total
equity
 
Balance at beginning of period
 
$
7,323
 
 
$
17,488
 
 
$
(25
 
$
(174
 
$
75,931
 
 
$
(1,273
 
$
3,353
 
 
$
1,681
 
 
$
3,761
 
 
$
104,304
 
 
$
101
 
 
$
104,405
 
Changes in equity
 
 
 
 
 
 
 
 
 
 
 
 
Issues of share capital and other equity instruments
 
 
 
 
 
8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
 
 
 
 
 
 
8
 
Common shares purchased for cancellation
 
 
 
 
 
(129
 
 
 
 
 
 
 
 
(1,209
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,338
 
 
 
 
 
(1,338
Redemption of preferred shares and other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
194
 
 
 
1,181
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,375
 
 
 
 
 
 
1,375
 
Purchases of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
(164
 
 
  (1,282
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,446
 
 
 
 
 
(1,446
Share-based compensation awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends on common shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,784
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,784
 
 
 
 
 
(1,784
Dividends on preferred shares and distributions on other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(58
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(58
 
 
(2
 
 
(60
Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4
 
 
 
 
 
(4
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,575
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,575
 
 
 
2
 
 
 
3,577
 
Total other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
 
 
 
(254
 
 
(245
 
 
(250
 
 
(749
 
 
(734
 
 
(1
 
 
(735
Balance at end of period
 
$
7,323
 
 
$
17,367
 
 
$
5
 
 
$
(275
 
$
76,466
 
 
$
(1,527
 
$
3,108
 
 
$
1,431
 
 
$
3,012
 
 
$
103,898
 
 
$
100
 
 
$
103,998
 

5
4
         
Royal Bank of Canada
        Third Quarter 2023
 
    
For the nine months ended July 31, 2023
 
                                 
Other components of equity
                   
(Millions of Canadian dollars)  
Preferred
shares and
other equity
instruments
   
Common
shares
   
Treasury –
preferred
shares and
other equity
instruments
   
Treasury –
common
shares
   
Retained
earnings
   
FVOCI
securities
and loans
   
Foreign
currency
translation
   
Cash flow
hedges
   
Total other
components
of equity
   
Equity
attributable to
shareholders
   
Non-controlling
interests
   
Total
equity
 
Balance at beginning of period
 
$
        7,323
 
 
$
  17,318
 
 
$
(5
 
$
(334
 
$
  78,037
 
 
$
  (2,357
 
$
       5,688
 
 
$
  2,394
 
 
$
        5,725
 
 
$
        108,064
 
 
$
                  111
 
 
$
  108,175
 
Changes in equity
                       
Issues of share capital and other equity instruments
 
 
 
 
 
1,352
 
 
 
 
 
 
 
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,353
 
 
 
 
 
 
1,353
 
Common shares purchased for cancellation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redemption of preferred shares and other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
461
 
 
 
2,960
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,421
 
 
 
 
 
 
3,421
 
Purchases of treasury shares and other equity instruments
 
 
 
 
 
 
 
 
           (449
 
 
(2,784
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,233
 
 
 
 
 
(3,233
Share-based compensation awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
 
 
 
 
 
4
 
Dividends on common shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,550
 
 
 
 
 
(5,550
Dividends on preferred shares and distributions on other equity instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(169
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(169
 
 
(18
 
 
(187
Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
 
 
 
 
 
 
27
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,730
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,730
 
 
 
5
 
 
 
10,735
 
Total other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,069
 
 
390
 
 
 
(1,132
 
 
(502
 
 
(1,244
 
 
(2,313
 
 
(3
 
 
(2,316
Balance at end of period
 
$
7,323
 
 
$
18,670
 
 
$
7
 
 
$
(158
 
$
82,011
 
 
$
(1,967
 
$
4,556
 
 
$
1,892
 
 
$
4,481
 
 
$
112,334
 
 
$
95
 
 
$
112,429
 
                       
     For the nine months ended July 31, 2022  
                                  Other components of equity                    
(Millions of Canadian dollars)   Preferred
shares and
other equity
instruments
    Common
shares
    Treasury –
preferred
shares and
other equity
instruments
   
Treasury –
common
shares
    Retained
earnings
   
FVOCI
securities
and loans
    Foreign
currency
translation
    Cash flow
hedges
   
Total other
components
of equity
    Equity
attributable to
shareholders
   
Non-controlling
interests
   
Total
equity
 
Balance at beginning of period
  $ 6,723     $ 17,728     $ (39   $ (73   $ 71,795     $ (88   $ 2,055     $ 566     $ 2,533     $ 98,667     $ 95     $ 98,762  
Changes in equity
                       
Issues of share capital and other equity instruments
    750       50                   (1                             799             799  
Common shares purchased for cancellation
          (411                 (4,033                             (4,444           (4,444
Redemption of preferred shares and other equity instruments
    (150                       (5                             (155           (155
Sales of treasury shares and other equity instruments
                502       3,888                                     4,390             4,390  
Purchases of treasury shares and other equity instruments
                (458     (4,090                                   (4,548           (4,548
Share-based compensation awards
                            2                               2             2  
Dividends on common shares
                            (5,172                             (5,172           (5,172
Dividends on preferred shares and distributions on other equity instruments
                            (180                             (180     (4     (184
Other
                            3                               3             3  
Net income
                            11,918                               11,918       7       11,925  
Total other comprehensive income (loss), net of taxes
                            2,139       (1,439     1,053       865       479       2,618       2       2,620  
Balance at end of period
  $ 7,323     $ 17,367     $ 5     $ (275   $ 76,466     $ (1,527   $ 3,108     $ 1,431     $ 3,012     $ 103,898     $ 100     $ 103,998  
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Royal Bank of Canada
        Third Quarter 2023         5
5
 
Interim Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
     For the three months ended          For the nine months ended  
(Millions of Canadian dollars)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Cash flows from operating activities
         
Net income
 
$
3,872
 
  $ 3,577      
$
10,735
 
  $ 11,925  
Adjustments for
non-cash
items and others
         
Provision for credit losses
 
 
616
 
    340      
 
1,748
 
    103  
Depreciation
 
 
324
 
    314      
 
952
 
    941  
Deferred income taxes
 
 
168
 
    (237    
 
(183
)
 
    408  
Amortization and impairment of other intangibles
 
 
383
 
    343      
 
1,155
 
    1,022  
Net changes in investments in joint ventures and associates
 
 
37
 
    (33    
 
(3
)
 
    (85
Losses (Gains) on investment securities
 
 
(27
)
    (28    
 
(191
)
 
    (66
Losses (Gains) on disposition of businesses
 
 
(92
)
    (11    
 
(92
)
    (100
Adjustments for net changes in operating assets and liabilities
         
Insurance claims and policy benefit liabilities
 
 
457
 
    (40    
 
1,189
 
    (783
Net change in accrued interest receivable and payable
 
 
(168
)
    (167    
 
1,784
 
    (246
Current income taxes
 
 
(749
)
    29      
 
(158
)
    (3,061
Derivative assets
 
 
8,235
 
    34,146      
 
38,362
 
    (26,517
Derivative liabilities
 
 
(6,654
)
    (31,673    
 
(35,837
)
 
    28,429  
Trading securities
 
 
(40,396
)
    1,810      
 
(28,398
)
    (2,716
Loans, net of securitizations
 
 
(4,690
)
    (21,959    
 
(17,120
)
 
    (78,916
Assets purchased under reverse repurchase agreements and securities borrowed
 
 
(11,912
)
    (1,867    
 
(29,306
)
 
    (10,662
Obligations related to assets sold under repurchase agreements and securities loaned
 
 
42,907
 
    1,811      
 
60,518
 
    18,948  
Obligations related to securities sold short
 
 
605
 
    (960    
 
1,142
 
    663  
Deposits, net of securitizations
 
 
5,618
 
    26,954      
 
27,974
 
    78,323  
Brokers and dealers receivable and payable
 
 
1,290
 
    3,032      
 
(1,879
)
 
    4,131  
Other
 
 
9,212
 
    (2,261      
 
4,810
 
    550  
Net cash from (used in) operating activities
 
 
9,036
 
    13,120        
 
37,202
 
    22,291  
Cash flows from investing activities
         
Change in interest-bearing deposits with banks
 
 
(5,770
)
    (29,316    
 
2,179
 
    (18,507
Proceeds from sales and maturities of investment securities
 
 
39,464
 
    25,257      
 
116,661
 
    72,752  
Purchases of investment securities
 
 
(56,943
)
    (30,653    
 
(145,776
)
 
    (86,876
Net acquisitions of premises and equipment and other intangibles
 
 
(557
)
    (586    
 
(1,962
)
 
    (1,729
Net proceeds from (cash transferred for) dispositions
 
 
1,712
 
    (408      
 
1,712
 
    (313
Net cash from (used in) investing activities
 
(22,094
)
    (35,706      
 
(27,186
)
 
    (34,673
Cash flows from financing activities
         
Issuance of subordinated debentures
 
 
 
         
 
1,500
 
    1,000  
Repayment of subordinated debentures
 
 
(110
)
         
 
(170
)
 
     
Issue of common shares, net of issuance costs
 
 
16
 
    8      
 
58
 
    46  
Common shares purchased for cancellation
 
 
 
    (1,338    
 
 
    (4,444
Issue of preferred shares and other equity instruments, net of issuance costs
 
 
 
         
 
 
    749  
Redemption of preferred shares and other equity instruments
 
 
 
         
 
 
    (155
Sales of treasury shares and other equity instruments
 
 
955
 
    1,375      
 
3,421
 
    4,390  
Purchases of treasury shares and other equity instruments
 
 
(975
)
    (1,446    
 
(3,233
)
 
    (4,548
Dividends paid on shares and distributions paid on other equity instruments
 
 
(1,234
)
    (1,754    
 
(4,327
)
 
    (5,118
Dividends/distributions paid to
non-controlling
interests
 
 
(2
)
    (2    
 
(18
)
 
    (4
Change in short-term borrowings of subsidiaries
 
 
(2,758
)
    128      
 
(376
)
    129  
Repayment of lease liabilities
 
 
(167
)
    (166      
 
(496
)
 
    (483
Net cash from (used in) financing activities
 
 
(4,275
)
    (3,195      
 
(3,641
)
    (8,438
Effect of exchange rate changes on cash and due from banks
 
 
(1,508
)
    (1,038      
 
1,586
 
    (3,916
Net change in cash and due from banks
 
 
(18,841
)
    (26,819    
 
7,961
 
    (24,736
Cash and due from banks at beginning of period
(1)
 
 
99,199
 
    115,929        
 
72,397
 
    113,846  
Cash and due from banks at end of period
(1)
 
$
  80,358
 
  $   89,110        
$
  80,358
 
  $   89,110  
Cash flows from operating activities include:
         
Amount of interest paid
 
$
16,018
 
  $ 3,705      
$
39,040
 
  $ 7,233  
Amount of interest received
 
 
21,696
 
    9,223      
 
58,252
 
    22,824  
Amount of dividends received
 
 
921
 
    746      
 
2,541
 
    2,291  
Amount of income taxes paid
 
 
1,470
 
    1,130        
 
3,878
 
    6,466  
 
(1)   We are required to maintain balances due to regulatory requirements or contractual restrictions from central banks, other regulatory authorities, and other counterparties. The total balances were $2 billion as at July 31, 2023 (April 30, 2023 – $3 billion; October 31, 2022 – $2 billion; July 31, 2022 – $2 billion; October 31, 2021 – $2 billion).
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

5
6
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 1    General information
 
Royal Bank of Canada and its subsidiaries (the Bank) provide diversified financial services including Personal & Commercial Banking, Wealth Management, Insurance and Capital Markets products and services on a global basis. Refer to Note 13 for further details on our business segments.
Our unaudited Interim Condensed Consolidated Financial Statements (Condensed Financial Statements) are presented in compliance with International Accounting Standard (IAS) 34
Interim Financial Reporting
. The Condensed Financial Statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with our audited 2022 Annual Consolidated Financial Statements and the accompanying notes included on pages 138 to 229 in our 2022 Annual Report. Unless otherwise stated, monetary amounts are stated in Canadian dollars. Tabular information is stated in millions of dollars, except as noted. On August 23, 2023, the Board of Directors authorized the Condensed Financial Statements for issue.
 
Note 2    Summary of significant accounting policies, estimates and judgments
 
The Condensed Financial Statements have been prepared using the same accounting policies and methods used in the preparation of our audited 2022 Annual Consolidated Financial Statements. Our significant accounting policies and future changes in accounting policies and disclosures that are not yet effective for us are described in Note 2 of our audited 2022 Annual Consolidated Financial Statements and updates are provided below.
Future changes in accounting policy and disclosure
IFRS 17
Insurance Contracts
(IFRS 17)
In May 2017, the IASB issued IFRS 17 to establish a comprehensive insurance standard which provides guidance on the recognition, measurement, presentation and disclosure of insurance contracts issued and reinsurance contracts held and will replace the existing IFRS 4
Insurance Contracts
(IFRS 4). In June 2020, the IASB issued amendments to IFRS 17, including deferral of the effective date by two years. This new standard is effective for us on November 1, 2023 and is to be applied retrospectively.
Under IFRS 17, insurance contracts are contracts under which we accept significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Embedded derivatives, investment components and promises to provide non-insurance services, provided specific criteria are met, are separated from the measurement of insurance and reinsurance contracts. Insurance and reinsurance contracts are aggregated into portfolios that are subject to similar risks and are managed together, and then divided into groups based on the period of issuance and profitability. Groups are separately recognized and measured using one of three measurement models depending on the characteristics of the contracts:
 
For insurance contracts with direct participating features, the contracts are measured using the variable fee approach (VFA).
 
For insurance contracts and reinsurance contracts held with a short duration of one year or less, the premium allocation approach (PAA) may be elected.
 
The general measurement method (GMM) is applied to all remaining contracts.
Under the GMM and VFA, the liabilities for remaining coverage and incurred claims for groups of contracts are measured as the sum of the fulfilment cash flows and the contractual service margin (CSM), which are recalculated at the end of each reporting period. The fulfilment cash flows consist of the present value of future cash flows and a risk adjustment for non-financial risk. For insurance contracts, the CSM represents the unearned profit for providing insurance coverage. For reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. Under the PAA, the liability for remaining coverage for each group is measured as the premiums received less insurance revenue recognized for services provided, while the liability for incurred claims is measured as the fulfillment cash flows for incurred claims plus adjustment on any financing components. Losses from the recognition of onerous groups of insurance contracts, regardless of the measurement model applied, are recognized in the Consolidated Statements of Income immediately.
The following are key differences between IFRS 17 and IFRS 4:
 
New business profits are deferred and measured as the CSM component of the insurance contract liabilities and amortized into income as insurance contract services are provided, while losses are recognized into income immediately. Under IFRS 4, gains and losses are recognized in income immediately. On July 18, 2023, OSFI released regulatory guidance to allow the inclusion of the CSM in calculating CET1 capital and related ratios, and therefore, we expect no impact on the capital metrics from such reduction in retained earnings resulting from the CSM.
 
Discount rates used in calculating the present value of insurance contract liabilities are based on the characteristics of the insurance contracts unlike IFRS 4 which is based on the assets supporting the liabilities.
 
Presentation and disclosure changes are expected due to the new requirements.
The overall impact of establishing the CSM, as well as other measurement impacts on our assets and liabilities, is expected to result in a reduction to retained earnings on adoption of IFRS 17. While IFRS 17 impacts the timing of profit recognition of insurance contracts, it will have no impact on total profit recognized over the lifetime of these contracts.
Transition
Upon the adoption of IFRS 17, we will apply IFRS 17 retrospectively by adjusting our Consolidated Balance Sheets as at November 1, 2022 and restating the comparative information as at and for the year ended October 31, 2023. The full retrospective approach will be applied for all insurance and reinsurance contracts unless it is impracticable to do so.

Royal Bank of Canada
        Third Quarter 2023         5
7
 
When impracticable, the fair value approach will be applied, which calculates the CSM or loss component of the liability for remaining coverage as the difference between the fair value of a group of contracts and the fulfillment cash flows measured at the date of transition.
As permitted by IFRS 17, we also expect to change the classification and measurement of certain eligible financial assets held in respect of an activity that relates to insurance contracts upon the adoption of IFRS 17. We will apply these changes retrospectively by adjusting our Consolidated Balance Sheets as at November 1, 2023, the date of the initial application of IFRS 17, with no restatement of comparative information.
The quantification of the transition impacts is in progress, and we expect to provide an estimate in our 2023 Annual Report.
Interest Rate Benchmark Reform
As part of the interest rate benchmark reform, the publication of all remaining USD London Interbank Offered Rate (LIBOR) settings ceased on June 30, 2023. As at July 31, 2023, and consistent with our transition plan, our exposure to financial instruments referencing USD LIBOR is no longer material to our Condensed Financial Statements.
 
Note 3    Fair value of financial instruments
 
Carrying value and fair value of financial instruments
The following tables provide a comparison of the carrying values and fair values for financial instruments classified or designated as fair value through profit or loss (FVTPL) and fair value through other comprehensive income (FVOCI). Embedded derivatives are presented on a combined basis with the host contracts. Refer to Note 2 and Note 3 of our audited 2022 Annual Consolidated Financial Statements for a description of the valuation techniques and inputs used in the fair value measurement of our financial instruments. There have been no significant changes to our determination of fair value during the quarter.
 

  
 
As at July 31, 2023
 
 
 
Carrying value and fair value
 
 
 
 
Carrying value
 
 
 
 
Fair value
 
 
 
 
 
 
 
(Millions of Canadian dollars)
 
Financial
instruments
classified as
FVTPL
 
 
Financial
instruments
designated as
FVTPL
 
 
Financial
instruments
classified as
FVOCI
 
 
Financial
instruments
designated as
FVOCI
 
 
  
 
Financial
instruments
measured at
amortized cost
 
 
  
 
Financial
instruments
measured at
amortized cost
 
 
Total carrying
amount
 
 
Total fair value
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks
 
$
 
 
$
81,356
 
 
$
 
 
$
 
 
 
 
$
6,294
 
 
 
 
$
6,294
 
 
$
87,650
 
 
$
87,650
 
Securities
 
 
 
 
 
 
 
 
 
 
Trading
 
 
165,913
 
 
 
10,690
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
176,603
 
 
 
176,603
 
Investment, net of applicable allowance
 
 
 
 
 
 
 
 
116,382
 
 
 
942
 
 
 
 
 
78,698
 
 
 
 
 
72,692
 
 
 
196,022
 
 
 
190,016
 
 
 
 
  165,913
 
 
 
  10,690
 
 
 
  116,382
 
 
 
942
 
 
 
 
 
78,698
 
 
 
 
 
72,692
 
 
 
372,625
 
 
 
366,619
 
Assets purchased under reverse repurchase agreements and securities borrowed
 
 
296,430
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,721
 
 
 
 
 
50,721
 
 
 
347,151
 
 
 
347,151
 
Loans, net of applicable allowance
 
 
 
 
 
 
 
 
 
 
Retail
 
 
94
 
 
 
378
 
 
 
277
 
 
 
 
 
 
 
557,876
 
 
 
 
534,243
 
 
 
558,625
 
 
 
534,992
 
Wholesale
 
 
5,851
 
 
 
3,069
 
 
 
571
 
 
 
 
 
 
 
 
267,598
 
 
 
 
 
261,382
 
 
 
277,089
 
 
 
270,873
 
 
 
 
5,945
 
 
 
3,447
 
 
 
848
 
 
 
 
 
 
 
 
825,474
 
 
 
 
 
795,625
 
 
 
835,714
 
 
 
805,865
 
Other
 
 
 
 
 
 
 
 
 
 
Derivatives
 
 
115,914
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
115,914
 
 
 
115,914
 
Other assets
(1)
 
 
4,365
 
 
 
5
 
 
 
 
 
 
 
 
 
 
 
61,594
 
 
 
 
 
61,594
 
 
 
65,964
 
 
 
65,964
 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
 
Personal
 
$
309
 
 
$
26,452
 
 
 
 
 
$
407,286
 
 
 
$
405,156
 
 
$
434,047
 
 
$
431,917
 
Business and government
(2)
 
 
201
 
 
 
139,696
 
 
 
 
 
 
596,833
 
 
 
 
595,211
 
 
 
736,730
 
 
 
735,108
 
Bank
(3)
 
 
 
 
 
10,517
 
 
 
 
 
 
 
 
 
 
 
 
 
34,377
 
 
 
 
 
34,323
 
 
 
44,894
 
 
 
44,840
 
 
 
 
510
 
 
 
176,665
 
 
 
 
 
 
 
 
 
 
 
 
 
  1,038,496
 
 
 
 
 
  1,034,690
 
 
 
  1,215,671
 
 
 
  1,211,865
 
Other
 
 
 
 
 
 
 
 
 
 
Obligations related to securities sold short
 
 
36,653
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36,653
 
 
 
36,653
 
Obligations related to assets sold under repurchase agreements and securities loaned
 
 
 
 
 
301,752
 
 
 
 
 
 
32,713
 
 
 
 
32,713
 
 
 
334,465
 
 
 
334,465
 
Derivatives
 
 
117,244
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
117,244
 
 
 
117,244
 
Other liabilities
(4)
 
 
(877
 
 
19
 
 
 
 
 
 
89,225
 
 
 
 
89,193
 
 
 
88,367
 
 
 
88,335
 
Subordinated debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,202
 
 
 
 
 
11,072
 
 
 
11,202
 
 
 
11,072
 

5
8
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 3    Fair value of financial instruments
(continued)
 
 
     As at October 31, 2022  
    Carrying value and fair value         Carrying value         Fair value              
(Millions of Canadian dollars)   Financial
instruments
classified as
FVTPL
    Financial
instruments
designated as
FVTPL
    Financial
instruments
classified as
FVOCI
    Financial
instruments
designated as
FVOCI
         Financial
instruments
measured at
amortized cost
         Financial
instruments
measured at
amortized cost
    Total carrying
amount
    Total fair value  
Financial assets
                                                                       
Interest-bearing deposits with banks
  $     $ 84,468     $     $    
 
  $ 23,543    
 
  $ 23,543     $ 108,011     $ 108,011  
Securities
                                                                       
Trading
    138,507       9,698                                       148,205       148,205  
Investment, net of applicable allowance
                  92,063         828    
 
    77,127    
 
    70,073       170,018       162,964  
 
    138,507       9,698       92,063       828    
 
    77,127    
 
    70,073       318,223       311,169  
Assets purchased under reverse repurchase agreements and
securities borrowed
      264,665                      
 
    53,180    
 
    53,180       317,845       317,845  
Loans, net of applicable allowance
                                                                       
Retail
    73       375       218                 546,767           521,428       547,433       522,094  
Wholesale
    6,914       3,222       563          
 
    261,833    
 
    253,816       272,532       264,515  
 
    6,987       3,597       781          
 
    808,600    
 
    775,244       819,965       786,609  
Other
                                                                       
Derivatives
    154,439                                             154,439       154,439  
Other assets
(1)
    3,377                      
 
    73,084    
 
    73,084       76,461       76,461  
Financial liabilities
                                                                       
Deposits
                                                                       
Personal
  $ 298     $ 21,959                         $ 382,675         $ 380,396     $ 404,932     $ 402,653  
Business and government
(2)
    447       152,119                           607,304           605,102       759,870       757,668  
Bank
(3)
          7,196    
 
 
 
 
 
 
 
 
 
    36,816    
 
    36,758       44,012       43,954  
 
    745       181,274    
 
 
 
 
 
 
 
 
 
      1,026,795    
 
      1,022,256         1,208,814         1,204,275  
Other
                                                                       
Obligations related to securities sold short
    35,511                                                 35,511       35,511  
Obligations related to assets sold under repurchase agreements and securities loaned
            248,835                           25,112           25,112       273,947       273,947  
Derivatives
    153,491                                                 153,491       153,491  
Other liabilities
(4)
    (360     69                           90,348           90,160       90,057       89,869  
Subordinated debentures
             
 
 
 
 
 
 
 
 
 
    10,025    
 
    9,668       10,025       9,668  
 
(1)   Includes Customers’ liability under acceptances and financial instruments recognized in Other assets.
(2)   Business and government deposits include deposits from regulated deposit-taking institutions other than banks.
(3)   Bank deposits refer to deposits from regulated banks and central banks.
(4)   Includes Acceptances and financial instruments recognized in Other liabilities.

Royal Bank of Canada
        Third Quarter 2023         5
9
 
Fair value of assets and liabilities measured at fair value on a recurring basis and classified using the fair value hierarchy
 
  
 
     As at 
 
 
 
July 31, 2023
 
 
 
 
October 31, 2022
 
 
 
Fair value measurements using
 
 
Netting
adjustments
 
 
 
 
 
 
 
 
Fair value measurements using
 
 
Netting
adjustments
 
 
 
 
 
(Millions of Canadian dollars)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Fair value
 
 
  
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Fair value
 
Financial assets
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Interest-bearing deposits with banks
 
$
 
 
$
81,356
 
 
$
 
 
$
 
 
 
$
81,356
 
 
 
 
$
 
 
$
84,468
 
 
$
 
 
$
 
 
 
$
84,468
 
Securities
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Trading
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Debt issued or guaranteed by:
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Canadian government
(1)
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Federal
 
 
18,595
 
 
 
2,067
 
 
 
 
 
     
 
 
20,662
 
 
 
 
 
15,024
 
 
 
3,779
 
 
 
 
 
     
 
 
18,803
 
Provincial and municipal
 
 
 
 
 
14,148
 
 
 
 
 
     
 
 
14,148
 
 
 
 
 
 
 
 
13,257
 
 
 
 
 
     
 
 
13,257
 
U.S. federal, state, municipal and agencies
(1), (2)
 
 
3,507
 
 
 
48,288
 
 
 
 
 
     
 
 
51,795
 
 
 
 
 
1,254
 
 
 
35,570
 
 
 
4
 
 
     
 
 
36,828
 
Other OECD government
(3)
 
 
2,919
 
 
 
2,790
 
 
 
 
 
     
 
 
5,709
 
 
 
 
 
1,325
 
 
 
3,452
 
 
 
 
 
     
 
 
4,777
 
Mortgage-backed securities
(1)
 
 
 
 
 
2
 
 
 
 
 
     
 
 
2
 
 
 
 
 
 
 
 
2
 
 
 
 
 
     
 
 
2
 
Asset-backed securities
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Non-CDO
securities
(4)
 
 
 
 
 
1,239
 
 
 
 
 
     
 
 
1,239
 
 
 
 
 
 
 
 
1,308
 
 
 
2
 
 
     
 
 
1,310
 
Corporate debt and other debt
 
 
 
 
 
22,767
 
 
 
 
 
     
 
 
22,767
 
 
 
 
 
 
 
 
21,162
 
 
 
7
 
 
     
 
 
21,169
 
Equities
 
 
55,847
 
 
 
2,255
 
 
 
2,179
 
 
 
 
 
 
 
60,281
 
 
 
 
 
46,592
 
 
 
3,593
 
 
 
1,874
 
 
 
 
 
 
 
52,059
 
 
 
 
80,868
 
 
 
93,556
 
 
 
2,179
 
 
 
 
 
 
 
176,603
 
 
 
 
 
64,195
 
 
 
82,123
 
 
 
1,887
 
 
 
 
 
 
 
148,205
 
Investment
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Debt issued or guaranteed by:
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Canadian government
(1)
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Federal
 
 
1,175
 
 
 
3,659
 
 
 
 
 
     
 
 
4,834
 
 
 
 
 
1,226
 
 
 
2,555
 
 
 
 
 
     
 
 
3,781
 
Provincial and municipal
 
 
 
 
 
2,582
 
 
 
 
 
     
 
 
2,582
 
 
 
 
 
 
 
 
2,124
 
 
 
 
 
     
 
 
2,124
 
U.S. federal, state, municipal and agencies
(1)
 
 
102
 
 
 
62,377
 
 
 
 
 
     
 
 
62,479
 
 
 
 
 
440
 
 
 
43,918
 
 
 
 
 
     
 
 
44,358
 
Other OECD government
 
 
 
 
 
6,417
 
 
 
 
 
     
 
 
6,417
 
 
 
 
 
 
 
 
5,144
 
 
 
 
 
     
 
 
5,144
 
Mortgage-backed securities
(1)
 
 
 
 
 
2,521
 
 
 
30
 
 
     
 
 
2,551
 
 
 
 
 
 
 
 
2,860
 
 
 
28
 
 
     
 
 
2,888
 
Asset-backed securities
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
CDO
 
 
 
 
 
7,618
 
 
 
 
 
     
 
 
7,618
 
 
 
 
 
 
 
 
7,524
 
 
 
 
 
     
 
 
7,524
 
Non-CDO
securities
 
 
 
 
 
432
 
 
 
 
 
     
 
 
432
 
 
 
 
 
 
 
 
524
 
 
 
 
 
     
 
 
524
 
Corporate debt and other debt
 
 
 
 
 
29,328
 
 
 
141
 
 
     
 
 
29,469
 
 
 
 
 
 
 
 
25,569
 
 
 
151
 
 
     
 
 
25,720
 
Equities
 
 
37
 
 
 
474
 
 
 
431
 
 
 
 
 
 
 
942
 
 
 
 
 
36
 
 
 
395
 
 
 
397
 
 
 
 
 
 
 
828
 
 
 
 
1,314
 
 
 
115,408
 
 
 
602
 
 
 
 
 
 
 
117,324
 
 
 
 
 
1,702
 
 
 
90,613
 
 
 
576
 
 
 
 
 
 
 
92,891
 
Assets purchased under reverse repurchase agreements and securities borrowed
 
 
 
 
 
296,430
 
 
 
 
 
     
 
 
296,430
 
 
 
 
 
 
 
 
264,665
 
 
 
 
 
     
 
 
264,665
 
Loans
 
 
 
 
 
7,929
 
 
 
2,311
 
 
     
 
 
10,240
 
 
 
 
 
 
 
 
9,673
 
 
 
1,692
 
 
     
 
 
11,365
 
Other
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Derivatives
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Interest rate contracts
 
 
 
 
 
35,685
 
 
 
237
 
 
     
 
 
35,922
 
 
 
 
 
 
 
 
39,804
 
 
 
263
 
 
     
 
 
40,067
 
Foreign exchange contracts
 
 
 
 
 
65,792
 
 
 
7
 
 
     
 
 
65,799
 
 
 
 
 
 
 
 
99,424
 
 
 
13
 
 
     
 
 
99,437
 
Credit derivatives
 
 
 
 
 
298
 
 
 
 
 
     
 
 
298
 
 
 
 
 
 
 
 
388
 
 
 
 
 
     
 
 
388
 
Other contracts
 
 
2,811
 
 
 
13,327
 
 
 
98
 
 
     
 
 
16,236
 
 
 
 
 
3,939
 
 
 
14,786
 
 
 
62
 
 
     
 
 
18,787
 
Valuation adjustments
 
 
 
 
 
(1,484
 
 
3
 
 
 
 
 
 
 
(1,481
 
 
 
 
 
 
 
(2,100
 
 
45
 
 
 
 
 
 
 
(2,055
Total gross derivatives
 
 
2,811
 
 
 
113,618
 
 
 
345
 
 
     
 
 
116,774
 
 
 
 
 
3,939
 
 
 
152,302
 
 
 
383
 
 
     
 
 
156,624
 
Netting adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(860)
 
 
 
(860
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,185)
 
 
 
(2,185
Total derivatives
 
     
 
     
 
     
 
     
 
 
115,914
 
 
 
 
     
 
     
 
     
 
     
 
 
154,439
 
Other assets
 
 
1,453
 
 
 
2,906
 
 
 
11
 
 
 
 
 
 
 
4,370
 
 
 
 
 
1,221
 
 
 
2,141
 
 
 
15
 
 
 
 
 
 
 
3,377
 
 
 
$
86,446
 
 
$
711,203
 
 
$
5,448
 
 
$
(860)
 
 
$
802,237
 
 
 
 
$
  71,057
 
 
$
  685,985
 
 
$
  4,553
 
 
$
  (2,185)
 
 
$
  759,410
 
Financial liabilities
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Deposits
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Personal
 
$
 
 
$
26,480
 
 
$
281
 
 
$
 
 
 
$
26,761
 
 
 
 
$
 
 
$
22,016
 
 
$
241
 
 
$
 
 
 
$
22,257
 
Business and government
 
 
 
 
 
139,897
 
 
 
 
 
     
 
 
139,897
 
 
 
 
 
 
 
 
152,566
 
 
 
 
 
     
 
 
152,566
 
Bank
 
 
 
 
 
10,517
 
 
 
 
 
     
 
 
10,517
 
 
 
 
 
 
 
 
7,196
 
 
 
 
 
     
 
 
7,196
 
Other
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Obligations related to securities sold short
 
 
15,005
 
 
 
21,648
 
 
 
 
 
     
 
 
36,653
 
 
 
 
 
16,383
 
 
 
19,128
 
 
 
 
 
     
 
 
35,511
 
Obligations related to assets sold under repurchase agreements and securities loaned
 
 
 
 
 
301,752
 
 
 
 
 
     
 
 
301,752
 
 
 
 
 
 
 
 
248,835
 
 
 
 
 
     
 
 
248,835
 
Derivatives
 
     
 
     
 
     
 
     
 
     
 
 
 
     
 
     
 
     
 
     
 
     
Interest rate contracts
 
 
 
 
 
36,323
 
 
 
869
 
 
     
 
 
37,192
 
 
 
 
 
 
 
 
39,592
 
 
 
1,122
 
 
     
 
 
40,714
 
Foreign exchange contracts
 
 
 
 
 
58,164
 
 
 
53
 
 
     
 
 
58,217
 
 
 
 
 
 
 
 
94,310
 
 
 
145
 
 
     
 
 
94,455
 
Credit derivatives
 
 
 
 
 
109
 
 
 
 
 
     
 
 
109
 
 
 
 
 
 
 
 
125
 
 
 
 
 
     
 
 
125
 
Other contracts
 
 
3,408
 
 
 
19,256
 
 
 
539
 
 
     
 
 
23,203
 
 
 
 
 
3,847
 
 
 
16,663
 
 
 
847
 
 
     
 
 
21,357
 
Valuation adjustments
 
 
 
 
 
(609
 
 
(8
 
 
 
 
 
 
(617
 
 
 
 
 
 
 
(967
 
 
(8
 
 
 
 
 
 
(975
Total gross derivatives
 
 
3,408
 
 
 
113,243
 
 
 
1,453
 
 
     
 
 
118,104
 
 
 
 
 
3,847
 
 
 
149,723
 
 
 
2,106
 
 
     
 
 
155,676
 
Netting adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(860)
 
 
 
(860
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,185)
 
 
 
(2,185
Total derivatives
 
     
 
     
 
     
 
     
 
 
117,244
 
 
 
 
     
 
     
 
     
 
     
 
 
153,491
 
Other liabilities
 
 
400
 
 
 
(1,258
 
 
 
 
 
 
 
 
 
(858
 
 
 
 
341
 
 
 
(632
 
 
 
 
 
 
 
 
 
(291
 
 
$
18,813
 
 
$
612,279
 
 
$
1,734
 
 
$
(860)
 
 
$
631,966
 
 
 
 
$
20,571
 
 
$
598,832
 
 
$
2,347
 
 
$
(2,185)
 
 
$
619,565
 
(1)   As at July 31, 2023, residential and commercial mortgage-backed securities (MBS) included in all fair value levels of trading securities were $13,037
 
million
 
and $nil (October 31, 2022 – $12,273 million and $nil), respectively, and in all fair value levels of Investment securities were $21,641
 
million
 
and $2,462 
million
 
(October 31, 2022 – $23,362 million and $2,755 million), respectively.
(2)   United States (U.S.).
(3)   Organisation for Economic
Co-operation
and Development (OECD).
(4)   Collateralized debt obligation
s (CDO).

60
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 3    Fair value of financial instruments
(continued)
 
 
Fair value measurements using significant unobservable inputs (Level 3 Instruments)
A financial instrument is classified as Level 3 in the fair value hierarchy if one or more of its unobservable inputs may significantly affect the measurement of its fair value. In preparing the financial statements, appropriate levels for these unobservable input parameters are chosen so that they are consistent with prevailing market evidence or management judgment. Due to the unobservable nature of the prices or rates, there may be uncertainty about the valuation of these Level 3 financial instruments.
During the three months ended July 31, 2023, there were no signifi
c
ant changes made to the valuation techniques and ranges and weighted averages of unobservable inputs used in the determination of fair value of Level 3 financial instruments. As at July 31, 2023, the impacts of adjusting one or more of the unobservable inputs by reasonably possible alternative assumptions did not change significantly from the impacts disclosed in our audited 2022 Annual Consolidated Financial Statements.
Changes in fair value measurement for instruments measured on a recurring basis and categorized in Level 3

 
  
 
For the three months ended July 31, 2023
 
(Millions of Canadian dollars)
 
Fair value
at beginning
of period
 
 
Gains (losses)
included
in earnings
 
 
Gains (losses)
included in
OCI
(1)
 
 
Purchases
(issuances)
 
 
Settlement
(sales) and
other
(2)
 
 
Transfers
into
Level 3
 
 
Transfers
out of
Level 3
 
 
Fair value
at end of
period
 
 
Gains
(losses) included
in earnings for
positions still held
 
Assets
 
 
 
 
 
 
 
 
 
Securities
 
 
 
 
 
 
 
 
 
Trading
 
 
 
 
 
 
 
 
 
Debt issued or guaranteed by:
 
 
 
 
 
 
 
 
 
U.S. state, municipal and agencies
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
Asset-backed securities
 
 
 
 
 
 
 
 
 
Non-CDO securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt and other debt
 
 
19
 
 
 
 
 
 
 
 
 
 
 
 
(16
 
 
 
 
 
(3
 
 
 
 
 
 
Equities
 
 
2,177
 
 
 
(37
 
 
(28
 
 
70
 
 
 
(9
 
 
6
 
 
 
 
 
 
2,179
 
 
 
(13
 
 
 
2,196
 
 
 
(37
 
 
(28
 
 
70
 
 
 
(25
 
 
6
 
 
 
(3
 
 
2,179
 
 
 
(13
Investment
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
 
27
 
 
 
 
 
 
3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
 
 
 
n.a.
 
Corporate debt and other debt
 
 
150
 
 
 
 
 
 
(9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
141
 
 
 
n.a.
 
Equities
 
 
436
 
 
 
 
 
 
(6
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
431
 
 
 
n.a.
 
 
 
 
613
 
 
 
 
 
 
(12
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
602
 
 
 
n.a.
 
Loans
 
 
2,410
 
 
 
(28
 
 
(58
 
 
61
 
 
 
(71
 
 
2
 
 
 
(5
 
 
2,311
 
 
 
(13
Other
 
 
 
 
 
 
 
 
 
Net derivative balances
(3)
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
(638
 
 
(14
 
 
1
 
 
 
1
 
 
 
19
 
 
 
7
 
 
 
(8
 
 
(632
 
 
(8
Foreign exchange contracts
 
 
(56
 
 
3
 
 
 
(1
 
 
(9
 
 
11
 
 
 
 
 
 
6
 
 
 
(46
 
 
2
 
Other contracts
 
 
(413
 
 
(43
 
 
11
 
 
 
(23
 
 
17
 
 
 
(37
 
 
47
 
 
 
(441
 
 
(45
Valuation adjustments
 
 
16
 
 
 
 
 
 
 
 
 
 
 
 
(5
 
 
 
 
 
 
 
 
11
 
 
 
 
Other assets
 
 
13
 
 
 
 
 
 
 
 
 
 
 
 
(2
 
 
 
 
 
 
 
 
11
 
 
 
 
 
 
$
4,141
 
 
$
(119
 
$
(87
 
$
101
 
 
$
(56
 
$
(22
 
$
37
 
 
$
3,995
 
 
$
(77
Liabilities
 
 
 
 
 
 
 
 
 
Deposits
 
$
(250
 
$
1
 
 
$
1
 
 
$
(80
 
$
13
 
 
$
(16
 
$
50
 
 
$
(281
 
$
5
 
Other
 
 
 
 
 
 
 
 
 
Other liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
(250
 
$
1
 
 
$
1
 
 
$
(80
 
$
13
 
 
$
(16
 
$
50
 
 
$
(281
 
$
5
 

Royal Bank of Canada
        Third Quarter 2023         
61

 
  
 
For the three months ended July 31, 2022
 
(Millions of Canadian dollars)
 
Fair value
at beginning
of period
 
 
Gains (losses)
included
in earnings
 
 
Gains (losses)
included in
OCI (1)
 
 
Purchases
(issuances)
 
 
Settlement
(sales) and
other (2)
 
 
Transfers
into
Level 3
 
 
Transfers
out of
Level 3
 
 
Fair value
at end of
period
 
 
Gains
(losses) included
in earnings for
positions still held
 
Assets
                                                                       
Securities
                                                                       
Trading
                                                                       
Debt issued or guaranteed by:
                                                                       
U.S. state, municipal and agencies
  $ 16     $     $     $     $ (6   $     $     $ 10     $  
Asset-backed securities
                                                                       
Non-CDO securities
    2                                           2        
Corporate debt and other debt
    5                         (2     9             12        
Equities
    1,759       (4     (4     84       (16                 1,819       (5
 
    1,782       (4     (4     84       (24     9             1,843       (5
Investment
                                                                       
Mortgage-backed securities
    21             1                               22       n.a.  
Corporate debt and other debt
    149             3                               152       n.a.  
Equities
    349             (2     2                         349       n.a.  
 
    519             2       2                         523       n.a.  
Loans
    782       4       (1     136       (3     9       (33     894       7  
Other
                                                                       
Net derivative balances
(3)
                                                                       
Interest rate contracts
    (663     6             (7     (8     15       2       (655      
Foreign exchange contracts
    24       (13     (2     1       (2     9       10       27       (1
Other contracts
    (436     10       2       (23           10       42       (395     16  
Valuation adjustments
    28                   (7                       21        
Other assets
    15                                           15        
 
  $ 2,051     $ 3     $ (3   $ 186     $ (37   $ 52     $ 21     $ 2,273     $ 17  
Liabilities
                                                                       
Deposits
  $ (157   $ 3     $     $ (7   $ 6     $ (39   $ 13     $ (181   $ 5  
Other
                                                                       
Other liabilities
    (3                                         (3      
 
  $ (160   $ 3     $     $ (7   $ 6     $ (39   $ 13     $ (184   $ 5  
                                                                         
    
For the nine months ended July 31, 2023
 
(Millions of Canadian dollars)  
Fair value
at beginning
of period
   
Gains (losses)
included
in earnings
   
Gains (losses)
included in
OCI
(1)
   
Purchases
(issuances)
   
Settlement
(sales) and
other
(2)
   
Transfers
into
Level 3
   
Transfers
out of
Level 3
   
Fair value
at end of
period
   
Gains
(losses) included
in earnings for
positions still held
 
Assets
                                                                       
Securities
                                                                       
Trading
                                                                       
Debt issued or guaranteed by:
                                                                       
U.S. state, municipal and agencies
 
$
4
 
 
$
 
 
$
 
 
$
 
 
$
(4
)
 
$
 
 
$
 
 
$
 
 
$
 
Asset-backed securities
                                     
 
                               
Non-CDO securities
 
 
2
 
 
 
 
 
 
 
 
 
 
 
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt and other debt
 
 
7
 
 
 
 
 
 
 
 
 
2
 
 
 
(16
)
 
 
17
 
 
 
(10
)
 
 
 
 
 
 
Equities
 
 
1,874
 
 
 
(159
)
 
 
(34
)
 
 
491
 
 
 
(41
)
 
 
48
 
 
 
 
 
 
2,179
 
 
 
(130
)
 
 
 
1,887
 
 
 
(159
)
 
 
(34
)
 
 
493
 
 
 
(63
)
 
 
65
 
 
 
(10
)
 
 
2,179
 
 
 
(130
)
Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
 
Mortgage-backed securities
 
 
28
 
 
 
 
 
 
1
 
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
30
 
 
 
n.a.
 
Corporate debt and other debt
 
 
151
 
 
 
 
 
 
(2
)
 
 
 
 
 
(8
)
 
 
 
 
 
 
 
 
141
 
 
 
n.a.
 
Equities
 
 
397
 
 
 
 
 
 
34
 
 
 
1
 
 
 
(1
)
 
 
 
 
 
 
 
 
431
 
 
 
n.a.
 
 
 
 
576
 
 
 
 
 
 
33
 
 
 
2
 
 
 
(9
)
 
 
 
 
 
 
 
 
602
 
 
 
n.a.
 
Loans
 
 
1,692
 
 
 
(54
)
 
 
(35
)
 
 
1,300
 
 
 
(452
)
 
 
30
 
 
 
(170
)
 
 
2,311
 
 
 
 
Other
             
 
     
 
             
 
                             
 
Net derivative balances
(3)
             
 
     
 
             
 
                             
 
Interest rate contracts
 
 
(859
)
 
 
(10
)
 
 
6
 
 
 
(7
)
 
 
194
 
 
 
30
 
 
 
14
 
 
 
(632
)
 
 
(9
)
Foreign exchange contracts
 
 
(132
)
 
 
4
 
 
 
10
 
 
 
(8
)
 
 
48
 
 
 
 
 
 
32
 
 
 
(46
)
 
 
(2
)
Other contracts
 
 
(785
)
 
 
(6
)
 
 
21
 
 
 
(61
)
 
 
83
 
 
 
(96
)
 
 
403
 
 
 
(441
)
 
 
(35
)
Valuation adjustments
 
 
53
 
 
 
 
 
 
 
 
 
 
 
 
(42
)
 
 
 
 
 
 
 
 
11
 
 
 
 
Other assets
 
 
15
 
 
 
 
 
 
 
 
 
 
 
 
(4
)
 
 
 
 
 
 
 
 
11
 
 
 
 
 
 
$
2,447
 
 
$
(225
)
 
$
1
 
 
$
1,719
 
 
$
(245
)
 
$
29
 
 
$
269
 
 
$
3,995
 
 
$
(176
)
Liabilities
     
 
     
 
             
 
             
 
             
 
     
 
Deposits
 
$
(241
)
 
$
(26
)
 
$
1
 
 
$
(157
)
 
$
19
 
 
$
(67
)
 
$
190
 
 
$
(281
)
 
$
(8
)
Other
     
 
     
 
             
 
             
 
             
 
     
 
Other liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
(241
)
 
$
(26
)
 
$
1
 
 
$
(157
)
 
$
19
 
 
$
(67
)
 
$
190
 
 
$
(281
)
 
$
(8
)

6
2
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 3    Fair value of financial instruments
(continued)
 
 
     For the nine months ended July 31, 2022  
(Millions of Canadian dollars)   Fair value
at beginning
of period
    Gains (losses)
included
in earnings
    Gains (losses)
included in
OCI (1)
    Purchases
(issuances)
    Settlement
(sales) and
other (2)
    Transfers
into
Level 3
    Transfers
out of
Level 3
    Fair value
at end of
period
    Gains
(losses) included
in earnings for
positions still held
 
Assets
                                                                       
Securities
                                                                       
Trading
                                                                       
Debt issued or guaranteed by:
                                                                       
U.S. state, municipal and agencies
  $ 25     $     $ 1     $     $ (16   $     $     $ 10     $  
Asset-backed securities
                                                                       
Non-CDO securities
    2                                           2        
Corporate debt and other debt
    25       (2                 (7     9       (13     12        
Equities
    1,530       74       30       245       (61     1             1,819       75  
 
    1,582       72       31       245       (84     10       (13     1,843       75  
Investment
                                                                       
Mortgage-backed securities
    20             2                               22       n.a.  
Corporate debt and other debt
    152                                           152       n.a.  
Equities
    334             41       10       (1           (35     349       n.a.  
 
    506             43       10       (1           (35     523       n.a.  
Loans
    1,077       (9     (33     353       (465     25       (54     894       (54
Other
                                                                       
Net derivative balances
(3)
                                                                       
Interest rate contracts
    (635     (151     (2     93       58       15       (33     (655     38  
Foreign exchange contracts
    47       (60     (1     22       10       9             27       (49
Other contracts
    (393     194       (9     (138     48       (183     86       (395     218  
Valuation adjustments
    20                   (7     (11     19             21        
Other assets
                      15                         15        
 
  $ 2,204     $ 46     $ 29     $ 593     $ (445   $ (105   $ (49   $ 2,273     $ 228  
Liabilities
                                                                       
Deposits
  $ (151   $ (6   $ (1   $ (86   $ 23     $ (75   $ 115     $ (181   $ 10  
Other
                                                                       
Other liabilities
    (7                       4                   (3      
 
  $ (158   $ (6   $ (1   $ (86   $ 27     $ (75   $ 115     $ (184   $ 10  
 
(1)   These amounts include the foreign currency translation gains or losses arising on consolidation of foreign subsidiaries relating to the Level 3 instruments, where applicable. The unrealized gains on Investment securities recognized in other comprehensive income (OCI) were $3
 
million
 
for the three months ended July 31, 2023 (July 31, 2022 – gains of $9 million) and gains of $33
 
million for the nine months ended July 31, 2023 (July 31, 2022 – gains of $53 million), excluding the translation gains or losses arising on consolidation.
(2)   Other includes amortization of premiums or discounts recognized in net income.
(3)   Net derivatives as at July 31, 2023 included derivative assets of $345
million
 
(July 31, 2022 – $571 million) and derivative liabilities of $1,453
million
 
(July 31, 2022 – $1,573 million).
n.a.   not applicable
Transfers between fair value hierarchy levels for instruments carried at fair value on a recurring basis
Transfers between Level 1 and Level 2, and transfers into and out of Level 3 are assumed to occur at the end of the period. For an asset or a liability that transfers into Level 3 during the period, the entire change in fair value for the period is excluded from the Gains (losses) included in earnings for positions still held column of the above reconciliation, whereas for transfers out of Level 3 during the period, the entire change in fair value for the period is included in the same column of the above reconciliation.
Transfers between Level 1 and 2 are dependent on whether fair value is obtained on the basis of quoted market prices in active markets (Level 1).
During the three months ended July 31, 2023, transfers out of Level 1 to Level 2 included Obligations related to securities sold short of $151 million. During the three months ended July 31, 2022, there were 
no significant transfers out of Level 1 to Level 2.
During the three months ended July 31, 2023 and July 31, 2022, there were no significant transfers out of Level 2 to Level 1.
During the nine months ended July 31, 2023, transfers out of Level 1 to Level 2 included Investment U.S. federal, state, municipal and agencies debt of $435
million, Obligations related to securities sold short of $151 million, and Trading U.S. federal, state, municipal and agencies debt of $
112
million. During the nine months ended July 31, 2022, there were no significant transfers out of Level 1 to Level 2.
During the nine months ended July 31, 2023 and July 31, 2022, there were no significant transfers out of Level 2 to Level 1.
Transfers between Level 2 and Level 3 are primarily due to either a change in the market observability for an input, or a change in an unobservable input’s significance to a financial instrument’s fair value.
During the three months ended July 31, 2023 and July 31, 2022, there were 
no
 significant transfers out of Level 2 to Level 3 or out of Level 3 to Level 2. 

Royal Bank of Canada
        Third Quarter 2023         6
3
 
During the nine months ended July 31, 2023, there were no significant transfers out of Level 2 to Level 3. During the nine months ended July 31, 2022, significant transfers out of Level 2 to Level 3 included Other contracts due to changes in the market observability of inputs.
During the nine months ended July 31, 2023, significant transfers out of Level 3 to Level 2 included Other contracts and Loans due to changes in the market observability of inputs and changes in the significance of unobservable inputs. During the nine months ended July 31, 2022, there were no significant transfers out of Level 3 to Level 2.
Net interest income from financial instruments
Interest and dividend income arising from financial assets and financial liabilities and the associated costs of funding are reported in Net interest income.
 
  
 
For the three months ended
 
 
  
 
For the nine months ended
 
(Millions of Canadian dollars)
 
July 31
2023
 
 
July 31
2022
 
 
  
 
July 31
2023
 
 
July 31
2022
 
Interest and dividend income
(1), (2)
                                   
Financial instruments measured at fair value through profit or loss
 
$
8,546
 
  $ 2,879        
$
22,203
 
  $ 5,873  
Financial instruments measured at fair value through other comprehensive income
 
 
1,383
 
    312        
 
3,439
 
    513  
Financial instruments measured at amortized cost
 
 
12,905
 
    7,546        
 
36,847
 
    19,487  
   
 
22,834
 
      10,737        
 
62,489
 
      25,873  
Interest expense
(1)
                                   
Financial instruments measured at fair value through profit or loss
 
 
7,531
 
    2,346        
 
20,046
 
    4,292  
Financial instruments measured at amortized cost
 
 
9,017
 
    2,501        
 
23,856
 
    5,146  
   
 
  16,548
 
    4,847        
 
  43,902
 
    9,438  
Net interest income
 
$
6,286
 
  $ 5,890        
$
18,587
 
  $ 16,435  
 
(1)   Excludes the following amounts related to our insurance operations and included in Insurance premiums, investment and fee income in the Interim Condensed Consolidated Statements of Income: for the three months
ended July 31, 2023, Interest income of $112
million
 
(July 31, 2022 – $143 million), and Interest expense of $13
million
 
(July 31, 2022 – $1 million); for the nine months ended July 31, 2023, Interest income of $344
 
million
(July 31, 2022 – $486 million), and Interest expense of $25 million (July 31, 2022 – $4 million).
(2)   Includes dividend income for the three months ended July 31, 2023 of $803
million 
(July 31, 2022 – $730 million) and for the nine months ended July 31, 2023 of $2,396 million (July 31, 2022 – $2,170 million), which is presented in Interest and dividend income in the Interim Condensed Consolidated Statements of Income.
 
Note 4    Securities
 
Unrealized gains and losses on securities at FVOCI
(1), (2)
 
      As at       
   
July 31, 2023
        October 31, 2022  
(Millions of Canadian dollars)  
Cost/
Amortized
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
   
Fair value
         Cost/
Amortized
cost
    Gross
unrealized
gains
    Gross
unrealized
losses
    Fair value  
Debt issued or guaranteed by:
                                                                   
Canadian government
                                                                   
Federal
 
$
5,144
 
 
$
2
 
 
$
(312
 
$
4,834
 
      $ 4,081     $ 1     $ (301   $ 3,781  
Provincial and municipal
 
 
3,117
 
 
 
5
 
 
 
(540
 
 
2,582
 
        2,685       6       (567     2,124  
U.S. federal, state, municipal and agencies
 
 
63,945
 
 
 
209
 
 
 
(1,675
 
 
62,479
 
        46,034       343       (2,019     44,358  
Other OECD government
 
 
6,419
 
 
 
3
 
 
 
(5
 
 
6,417
 
        5,154       7       (17     5,144  
Mortgage-backed securities
 
 
2,608
 
 
 
1
 
 
 
(58
 
 
2,551
 
        2,985       1       (98     2,888  
Asset-backed securities
                                                                   
CDO
 
 
7,674
 
 
 
4
 
 
 
(60
 
 
7,618
 
        7,741       3       (220     7,524  
Non-CDO securities
 
 
439
 
 
 
2
 
 
 
(9
 
 
432
 
        547             (23     524  
Corporate debt and other debt
 
 
29,496
 
 
 
47
 
 
 
(74
 
 
29,469
 
        25,852       51       (183     25,720  
Equities
 
 
627
 
 
 
321
 
 
 
(6
 
 
942
 
        551       284       (7     828  
   
$
119,469
 
 
$
594
 
 
$
(2,739
 
$
117,324
 
      $ 95,630     $ 696     $   (3,435   $   92,891  
 
(1)   Excludes $78,698 million of held-to-collect securities as at July 31, 2023 that are carried at amortized cost, net of allowance for credit losses (October 31, 2022 – $77,127 million).
(2)   Gross unrealized gains and losses includes $(23) million of allowance for credit losses on debt securities at FVOCI as at July 31, 2023 (October 31, 2022 – $(19) million) recognized in income and Other components of equity.
Allowance for credit losses on investment securities
The following tables reconcile the opening and closing allowance for debt securities at FVOCI and amortized cost by stage. Reconciling items include the following:
 
Transfers between stages, which are presumed to occur before any corresponding remeasurement of the allowance.
 
Purchases, which reflect the allowance related to assets newly recognized during the period, including those assets that were derecognized following a modification of terms.
 
Sales and maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.
 
Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time.

6
4
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 4    Securities
(continued)
 
 
Allowance for credit losses – securities at FVOCI
(1)
 
  
 
For the three months ended
 
 
 
July 31, 2023
 
 
 
 
 
July 31, 2022
 
 
 
Performing
 
 
 
 
 
Impaired
 
 
 
 
 
 
 
 
Performing
 
 
 
 
 
Impaired
 
 
 
 
(Millions of Canadian dollars)
 
Stage 1
 
 
Stage 2
 
 
  
 
 
Stage 3 
(2)
 
 
Total
 
 
  
 
 
Stage 1
 
 
Stage 2
 
 
  
 
 
Stage 3 (2)
 
 
Total
 
Balance at beginning of period
 
$
3
 
 
$
2
 
         
$
(25
 
$
(20
          $ 2     $ 2             $ (17   $ (13
Provision for credit losses
                                                                                       
Transfers to stage 1
 
 
1
 
 
 
(1
         
 
 
 
 
 
            1       (1                    
Transfers to stage 2
 
 
 
 
 
 
         
 
 
 
 
 
                                       
Transfers to stage 3
 
 
 
 
 
 
         
 
 
 
 
 
                                       
Purchases
 
 
1
 
 
 
 
         
 
 
 
 
1
 
            1                         –       1  
Sales and maturities
 
 
 
 
 
(1
         
 
 
 
 
(1
                                            –  
Changes in risk, parameters and exposures
 
 
(2
 
 
(1
         
 
(2
 
 
(5
            (2                   (2     (4
Exchange rate and other
 
 
 
 
 
1
 
         
 
1
 
 
 
2
 
                                       
Balance at end of period
 
$
    3
 
 
$
     –
 
         
$
  (26
 
$
  (23
          $    2     $     1             $ (19   $ (16
 
     For the nine months ended  
   
July 31, 2023
          July 31, 2022  
   
Performing
         
Impaired
                Performing           Impaired        
(Millions of Canadian dollars)  
Stage 1
   
Stage 2
          
Stage 3 
(2)
   
Total
           Stage 1     Stage 2            Stage 3 (2)     Total  
Balance at beginning of period
 
$
3
 
 
$
1
 
         
$
(23
 
$
(19
          $ 2     $ 1             $ (12   $ (9
Provision for credit losses
                                                                                       
Transfers to stage 1
 
 
1
 
 
 
(1
         
 
 
 
 
 
            1       (1                    
Transfers to stage 2
 
 
 
 
 
 
         
 
 
 
 
 
                                       
Transfers to stage 3
 
 
 
 
 
 
         
 
 
 
 
 
                                    –             –  
Purchases
 
 
4
 
 
 
 
         
 
 
 
 
    4
 
            2                           2  
Sales and maturities
 
 
(1
 
 
(1
         
 
    –
 
 
 
(2
            (1                         (1
Changes in risk, parameters and exposures
 
 
(3
 
 
1
 
         
 
(7
 
 
(9
            (1                   (7     (8
Exchange rate and other
 
 
(1
 
 
 
         
 
4
 
 
 
3
 
            (1     1                      
Balance at end of period
 
$
    3
 
 
$
     –
 
         
$
  (26
 
$
  (23
          $    2     $     1             $ (19   $   (16
 
(1)   Expected credit losses on debt securities at FVOCI are not separately recognized on the balance sheet as the related securities are recorded at fair value. The cumulative amount of credit losses recognized in income is presented in Other components of equity.
(2)   Reflects changes in the allowance for purchased credit impaired securities.
Allowance for credit losses – securities at amortized cost
 
     For the three months ended  
   
July 31, 2023
          July 31, 2022  
   
Performing
         
Impaired
                Performing           Impaired        
(Millions of Canadian dollars)  
Stage 1
   
Stage 2
          
Stage 3
   
Total
           Stage 1     Stage 2            Stage 3     Total  
Balance at beginning of period
 
$
9
 
 
$
13
 
   
$
 
 
$
22
 
    $ 9     $ 16       $     $ 25  
Provision for credit losses
                     
Transfers to stage 1
 
 
 
 
 
 
   
 
 
 
 
 
                           
Transfers to stage 2
 
 
 
 
 
 
   
 
 
 
 
 
                           
Transfers to stage 3
 
 
 
 
 
 
   
 
 
 
 
      –
 
                                –  
Purchases
 
 
3
 
 
 
 
   
 
 
 
 
3
 
      1                     1  
Sales and maturities
 
 
 
 
 
 
   
 
 
 
 
 
                           
Changes in risk, parameters and exposures
 
 
(1
 
 
2
 
   
 
 
 
 
1
 
      (3     (2               –       (5
Exchange rate and other
 
 
(1
 
 
(1
         
 
 
 
 
(2
                  1                     1  
Balance at end of period
 
$
    10
 
 
$
  14
 
         
$
      –
 
 
$
 24
 
          $    7     $   15             $   –     $  22  
 
     For the nine months ended  
   
July 31, 2023
          July 31, 2022  
   
Performing
         
Impaired
                Performing           Impaired        
(Millions of Canadian dollars)  
Stage 1
   
Stage 2
          
Stage 3
   
Total
           Stage 1     Stage 2            Stage 3     Total  
Balance at beginning of period
 
$
8
 
 
$
14
 
   
$
 
 
$
22
 
    $ 5     $ 18       $     $ 23  
Provision for credit losses
                     
Model changes
 
 
 
 
 
 
   
 
 
 
 
 
                           
Transfers to stage 1
 
 
 
 
 
 
   
 
 
 
 
 
                           
Transfers to stage 2
 
 
 
 
 
 
   
 
 
 
 
 
                           
Transfers to stage 3
 
 
 
 
 
 
   
 
 
 
 
      –
 
                                –  
Purchases
 
 
8
 
 
 
 
   
 
 
 
 
8
 
      9                     9  
Sales and maturities
 
 
 
 
 
 
   
 
 
 
 
 
      (1                   (1
Changes in risk, parameters and exposures
 
 
(6
 
 
1
 
   
 
 
 
 
(5
      (6     (4               –       (10
Exchange rate and other
 
 
 
 
 
(1
         
 
 
 
 
(1
                  1                     1  
Balance at end of period
 
$
    10
 
 
$
  14
 
         
$
      –
 
 
$
 24
 
          $    7     $   15             $     $  22  
 

Royal Bank of Canada
        Third Quarter 2023         6
5
 
Credit risk exposure by internal risk rating
The following table presents the fair value of debt securities at FVOCI and gross carrying amount of securities at amortized cost. Risk ratings are based on internal ratings used in the measurement of expected credit losses as at the reporting date, as outlined in the internal ratings maps in the Credit risk section of our 2022 Annual Report.
 
  
 
         As at
 
 
 
July 31, 2023
 
 
 
 
 
October 31, 2022
 
 
 
Performing
 
 
 
 
 
Impaired
 
 
 
 
 
 
 
 
Performing
 
 
 
 
 
Impaired
 
 
 
 
(Millions of Canadian dollars)
 
Stage 1
 
 
Stage 2
 
 
  
 
 
Stage 3 
(1)
 
 
Total
 
 
  
 
 
Stage 1
 
 
Stage 2
 
 
  
 
 
Stage 3 (1)
 
 
Total
 
Investment securities
                                                                                       
Securities at FVOCI
                                                                                       
Investment grade
 
$
  115,552
 
 
$
1
 
         
$
 
 
$
  115,553
 
          $ 91,177     $ 56             $     $ 91,233  
Non-investment grade
 
 
688
 
 
 
 
         
 
 
 
 
688
 
            680                           680  
Impaired
 
 
 
 
 
 
         
 
141
 
 
 
141
 
                                150       150  
   
 
116,240
 
 
 
1
 
         
 
141
 
 
 
116,382
 
            91,857       56                     150       92,063  
Items not subject to impairment
(2)
                                 
 
942
 
                                            828  
                                   
$
117,324
 
                                          $ 92,891  
Securities at amortized cost
                                                                                       
Investment grade
 
$
77,572
 
 
$
 
         
$
 
 
$
77,572
 
          $ 76,035     $             $     $ 76,035  
Non-investment grade
 
 
948
 
 
 
202
 
         
 
 
 
 
1,150
 
            898       216                     1,114  
Impaired
 
 
 
 
 
 
         
 
 
 
 
 
                                       
   
 
78,520
 
 
 
202
 
         
 
 
 
 
78,722
 
            76,933       216                     77,149  
Allowance for credit losses
 
 
10
 
 
 
14
 
         
 
 
 
 
24
 
            8       14                     22  
   
$
  78,510
 
 
$
188
 
         
$
 
 
$
 78,698
 
          $   76,925     $   202             $     $   77,127  
 
(1)   Reflects $141 million of purchased credit impaired securities (October 31, 2022 – $150 million).
(2)   Investment securities at FVOCI not subject to impairment represent equity securities designated as FVOCI.
 
Note 5    Loans and allowance for credit losses
 
Allowance for credit losses
 
     For the three months ended  
   
July 31, 2023
        July 31, 2022  
(Millions of Canadian dollars)  
Balance at
beginning
of period
   
Provision
for credit
losses
   
Net
write-offs
   
Exchange
rate and
other
   
Balance at
end of
period
         Balance at
beginning
of period
    Provision
for credit
losses
    Net
write-offs
    Exchange
rate and
other
    Balance at
end of
period
 
Retail
                                                                                   
Residential mortgages
 
$
480
 
 
$
(5
 
$
(4
 
$
(8
 
$
463
 
      $ 388     $ 51     $ (7   $ (3   $ 429  
Personal
 
 
1,165
 
 
 
97
 
 
 
(106
 
 
(4
 
 
1,152
 
        943       107       (60           990  
Credit cards
 
 
980
 
 
 
154
 
 
 
(117
 
 
 
 
 
1,017
 
        795       128       (89     1       835  
Small business
 
 
225
 
 
 
23
 
 
 
(11
 
 
(2
 
 
235
 
        179       10       (5     3       187  
Wholesale
 
 
1,886
 
 
 
349
 
 
 
(117
 
 
(67
 
 
2,051
 
        1,541       63       (39     (25     1,540  
Customers’ liability under acceptances
 
 
41
 
 
 
1
 
 
 
 
 
 
(1
 
 
41
 
        41       (12           1       30  
   
$
  4,777
 
 
$
     619
 
 
$
  (355
 
$
    (82
 
$
  4,959
 
      $   3,887     $ 347     $ (200   $ (23   $   4,011  
Presented as:
                                                                                   
Allowance for loan losses
 
$
4,332
 
                         
$
4,495
 
      $ 3,566                             $ 3,667  
Other liabilities – Provisions
 
 
397
 
                         
 
416
 
        275                               309  
Customers’ liability under acceptances
 
 
41
 
                         
 
41
 
        41                               30  
Other components of equity
 
 
7
 
                         
 
7
 
        5                               5  
                                                                 

6
6
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 5    Loans and allowance for credit losses
(continued)
 
 

  
 
For the nine months ended
 
 
 
July 31, 2023
 
 
 
 
July 31, 2022
 
(Millions of Canadian dollars)
 
Balance at
beginning
of period
 
 
Provision
for credit
losses
 
 
Net
write-offs
 
 
Exchange
rate and
other
 
 
Balance at
end of
period
 
 
  
 
Balance at
beginning
of period
 
 
Provision
for credit
losses
 
 
Net
write-offs
 
 
Exchange
rate and
other
 
 
Balance at
end of
period
 
Retail
                                                                                   
Residential mortgages
 
$
432
 
 
$
57
 
 
$
(13
 
$
(13
 
$
463
 
      $ 416     $ 29     $ (19   $ 3     $ 429  
Personal
 
 
1,043
 
 
 
402
 
 
 
(287
 
 
(6
 
 
1,152
 
        1,079       86       (172     (3     990  
Credit cards
 
 
893
 
 
 
459
 
 
 
(334
 
 
(1
 
 
1,017
 
        875       201       (243     2       835  
Small business
 
 
194
 
 
 
70
 
 
 
(27
 
 
(2
 
 
235
 
        177       18       (15     7       187  
Wholesale
 
 
1,574
 
 
 
779
 
 
 
(188
 
 
(114
 
 
2,051
 
        1,797       (171     (60     (26     1,540  
Customers’ liability under acceptances
 
 
45
 
 
 
(4
 
 
 
 
 
 
 
 
41
 
        75       (46           1       30  
   
$
  4,181
 
 
$
  1,763
 
 
$
(849
 
$
  (136
 
$
  4,959
 
      $   4,419     $ 117     $   (509   $ (16   $   4,011  
Presented as:
                                                                                   
Allowance for loan losses
 
$
3,753
 
                         
$
4,495
 
      $ 4,089                             $ 3,667  
Other liabilities – Provisions
 
 
378
 
                         
 
416
 
        241                               309  
Customers’ liability under acceptances
 
 
45
 
                         
 
41
 
        75                               30  
Other components of equity
 
 
5
 
                         
 
7
 
        14                               5  
The following table reconciles the opening and closing allowance for each major product of loans and commitments as determined by our modelled, scenario-weighted allowance and the application of expert credit judgment as applicable. Reconciling items include the following:
 
Transfers between stages, which are presumed to occur before any corresponding remeasurements of the allowance.
 
Originations, which reflect the allowance related to assets newly recognized during the period, including those assets that were derecognized following a modification of terms.
 
Maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.
 
Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments and additional draws on existing facilities; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time in stage 1 and stage 2.

Royal Bank of Canada
        Third Quarter 2023         6
7
 
Allowance for credit losses – Retail and wholesale loans
 
     For the three months ended  
   
July 31, 2023
        July 31, 2022  
   
Performing
       
Impaired
              Performing         Impaired        
(Millions of Canadian dollars)  
Stage 1
   
Stage 2
        
Stage 3
   
Total
         Stage 1     Stage 2          Stage 3     Total  
Residential mortgages
                                                                           
Balance at beginning of period
 
$
238
 
 
$
103
 
     
$
139
 
 
$
480
 
      $ 184     $ 71         $ 133     $ 388  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
38
 
 
 
(38
)
 
     
 
 
 
 
 
        22       (17         (5      
Transfers to stage 2
 
 
(4
 
 
6
 
     
 
(2
 
 
 
        (2     3           (1      
Transfers to stage 3
 
 
 
 
 
(4
     
 
4
 
 
 
 
              (5         5        
Originations
 
 
22
 
 
 
 
     
 
 
 
 
22
 
        55                       55  
Maturities
 
 
(4
 
 
(4
     
 
 
 
 
(8
        (6     (1               (7
Changes in risk, parameters and exposures
 
 
(63
)
 
 
 
29
 
     
 
15
 
 
 
(19
        (21     21           3       3  
Write-offs
 
 
 
 
 
 
     
 
(7
 
 
(7
                        (9     (9
Recoveries
 
 
 
 
 
 
     
 
3
 
 
 
3
 
                        2       2  
Exchange rate and other
 
 
 
 
 
(2
 
 
 
 
(6
 
 
(8
 
 
    (2        
 
    (1     (3
Balance at end of period
 
$
227
 
 
$
90
 
 
 
 
$
146
 
 
$
463
 
 
 
  $ 230     $ 72    
 
  $     127     $ 429  
                       
Personal
                                                                           
Balance at beginning of period
 
$
298
 
 
$
747
 
     
$
120
 
 
$
1,165
 
      $ 310     $ 550         $ 83     $ 943  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
177
 
 
 
(177
)
 
     
 
 
 
 
 
        132       (131         (1      
Transfers to stage 2
 
 
(20
)
 
 
 
21
 
     
 
(1
 
 
 
        (30     30                  
Transfers to stage 3
 
 
 
 
 
(13
     
 
13
 
 
 
 
              (12         12        
Originations
 
 
31
 
 
 
 
     
 
 
 
 
31
 
        30                       30  
Maturities
 
 
(10
 
 
(32
     
 
 
 
 
(42
        (16     (24               (40
Changes in risk, parameters and exposures
 
 
(182
)
 
 
 
189
 
     
 
101
 
 
 
108
 
        (133     200           50       117  
Write-offs
 
 
 
 
 
 
     
 
(135
 
 
(135
                        (94     (94
Recoveries
 
 
 
 
 
 
     
 
29
 
 
 
29
 
                        34       34  
Exchange rate and other
 
 
(2
 
 
1
 
 
 
 
 
(3
 
 
(4
 
 
             
 
           
Balance at end of period
 
$
292
 
 
$
736
 
 
 
 
$
124
 
 
$
1,152
 
 
 
  $ 293     $ 613    
 
  $ 84     $ 990  
                       
Credit cards
                                                                           
Balance at beginning of period
 
$
    199
 
 
$
781
 
     
$
 
 
$
980
 
      $ 169     $     626         $     $ 795  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
120
 
 
 
(120
)
 
     
 
 
 
 
 
        99       (99                
Transfers to stage 2
 
 
(31
 
 
31
 
     
 
 
 
 
 
        (21     21                  
Transfers to stage 3
 
 
 
 
 
(103
     
 
103
 
 
 
 
        (1     (87         88        
Originations
 
 
3
 
 
 
 
     
 
 
 
 
3
 
        1                       1  
Maturities
 
 
(3
 
 
(9
     
 
 
 
 
(12
        (1     (8               (9
Changes in risk, parameters and exposures
 
 
(92
)
 
 
 
241
 
     
 
14
 
 
 
163
 
        (71     207                 136  
Write-offs
 
 
 
 
 
 
     
 
(164
 
 
(164
                        (132     (132
Recoveries
 
 
 
 
 
 
     
 
47
 
 
 
47
 
                        43       43  
Exchange rate and other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
    1       1  
Balance at end of period
 
$
196
 
 
$
821
 
 
 
 
$
 
 
$
1,017
 
 
 
  $ 175     $ 660    
 
  $     $ 835  
                       
Small business
                                                                           
Balance at beginning of period
 
$
76
 
 
$
79
 
     
$
70
 
 
$
225
 
      $ 77     $ 66         $ 36     $ 179  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
9
 
 
 
(9
)
 
     
 
 
 
 
 
        9       (9                
Transfers to stage 2
 
 
(4
 
 
4
 
     
 
 
 
 
 
        (4     4                  
Transfers to stage 3
 
 
1
 
 
 
(3
     
 
2
 
 
 
 
        (1               1        
Originations
 
 
12
 
 
 
 
     
 
 
 
 
12
 
        8                       8  
Maturities
 
 
(4
 
 
(4
     
 
 
 
 
(8
        (6     (7               (13
Changes in risk, parameters and exposures
 
 
(13
)
 
 
 
11
 
     
 
21
 
 
 
19
 
        (8     12           11       15  
Write-offs
 
 
 
 
 
 
     
 
(14
 
 
(14
                        (7     (7
Recoveries
 
 
 
 
 
 
     
 
3
 
 
 
3
 
                        2       2  
Exchange rate and other
 
 
1
 
 
 
 
 
 
 
 
(3
 
 
(2
 
 
    3       3    
 
    (3     3  
Balance at end of period
 
$
78
 
 
$
78
 
 
 
 
$
79
 
 
$
235
 
 
 
  $ 78     $ 69    
 
  $ 40     $ 187  
                       
Wholesale
                                                                           
Balance at beginning of period
 
$
668
 
 
$
632
 
     
$
586
 
 
$
1,886
 
      $ 483     $   590         $ 468     $ 1,541  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
45
 
 
 
(44
)
 
     
 
(1
 
 
 
        66       (66                
Transfers to stage 2
 
 
(28
 
 
29
 
     
 
(1
 
 
 
        (14     15           (1      
Transfers to stage 3
 
 
(3
 
 
(17
     
 
20
 
 
 
 
              (21         21        
Originations
 
 
169
 
 
 
 
     
 
 
 
 
169
 
        165                       165  
Maturities
 
 
(129
 
 
(76
     
 
 
 
 
(205
        (103     (68               (171
Changes in risk, parameters and exposures
 
 
(34
)
 
 
 
208
 
     
 
211
 
 
 
385
 
        (48     130           (13     69  
Write-offs
 
 
 
 
 
 
     
 
(126
 
 
(126
                        (48     (48
Recoveries
 
 
 
 
 
 
     
 
9
 
 
 
9
 
                        9       9  
Exchange rate and other
 
 
(10
 
 
(10
 
 
 
 
(47
 
 
(67
 
 
    (5     (5  
 
    (15     (25
Balance at end of period
 
$
678
 
 
$
    722
 
 
 
 
$
    651
 
 
$
  2,051
 
 
 
  $     544     $ 575    
 
  $ 421     $   1,540  

6
8
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 5    Loans and allowance for credit losses
(continued)
 
 
     For the nine months ended  
   
July 31, 2023
        July 31, 2022  
   
Performing
       
Impaired
              Performing         Impaired        
(Millions of Canadian dollars)  
Stage 1
   
Stage 2
        
Stage 3
   
Total
         Stage 1     Stage 2          Stage 3     Total  
Residential mortgages
                                                                           
Balance at beginning of period
 
$
235
 
 
$
65
 
     
$
132
 
 
$
432
 
      $ 186     $ 92         $ 138     $ 416  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
70
 
 
 
(70
)
 
     
 
 
 
 
 
        82       (67         (15      
Transfers to stage 2
 
 
(23
 
 
31
 
     
 
(8
 
 
 
        (8     10           (2      
Transfers to stage 3
 
 
(1
 
 
(9
     
 
10
 
 
 
 
        (1     (20         21        
Originations
 
 
65
 
 
 
 
     
 
 
 
 
65
 
        114                       114  
Maturities
 
 
(12
 
 
(6
     
 
 
 
 
(18
        (18     (5               (23
Changes in risk, parameters and exposures
 
 
(107
)
 
 
 
80
 
     
 
37
 
 
 
10
 
        (125     60           3       (62
Write-offs
 
 
 
 
 
 
     
 
(23
 
 
(23
                        (29     (29
Recoveries
 
 
 
 
 
 
     
 
10
 
 
 
10
 
                        10       10  
Exchange rate and other
 
 
 
 
 
(1
 
 
 
 
(12
 
 
(13
 
 
          2    
 
    1       3  
Balance at end of period
 
$
227
 
 
$
90
 
 
 
 
$
146
 
 
$
463
 
 
 
  $ 230     $ 72    
 
  $ 127     $ 429  
                       
Personal
                                                                           
Balance at beginning of period
 
$
285
 
 
$
661
 
     
$
97
 
 
$
1,043
 
      $ 422     $     569         $ 88     $ 1,079  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
474
 
 
 
(473
)
 
     
 
(1
 
 
 
        459       (457         (2      
Transfers to stage 2
 
 
(63
)
 
 
 
65
 
     
 
(2
 
 
 
        (91     91                  
Transfers to stage 3
 
 
(1
 
 
(38
     
 
39
 
 
 
 
        (1     (37         38        
Originations
 
 
79
 
 
 
 
     
 
 
 
 
79
 
        78                       78  
Maturities
 
 
(32
 
 
(82
     
 
 
 
 
(114
        (54     (74               (128
Changes in risk, parameters and exposures
 
 
(450
)
 
 
 
604
 
     
 
283
 
 
 
437
 
        (520     521           135       136  
Write-offs
 
 
 
 
 
 
     
 
(371
 
 
(371
                        (269     (269
Recoveries
 
 
 
 
 
 
     
 
84
 
 
 
84
 
                        97       97  
Exchange rate and other
 
 
 
 
 
(1
 
 
 
 
(5
 
 
(6
 
 
             
 
    (3     (3
Balance at end of period
 
$
    292
 
 
$
    736
 
 
 
 
$
    124
 
 
$
    1,152
 
 
 
  $ 293     $ 613    
 
  $ 84     $ 990  
                       
Credit cards
                                                                           
Balance at beginning of period
 
$
177
 
 
$
716
 
     
$
 
 
$
893
 
      $ 233     $ 642         $     $ 875  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
409
 
 
 
(409
)
 
     
 
 
 
 
 
        374       (374                
Transfers to stage 2
 
 
(73
 
 
73
 
     
 
 
 
 
 
        (72     72                  
Transfers to stage 3
 
 
(1
 
 
(295
     
 
296
 
 
 
 
        (2     (238         240        
Originations
 
 
10
 
 
 
 
     
 
 
 
 
10
 
        7                       7  
Maturities
 
 
(5
 
 
(24
     
 
 
 
 
(29
        (4     (22               (26
Changes in risk, parameters and exposures
 
 
(320
)
 
 
 
760
 
     
 
38
 
 
 
478
 
        (362     580           2       220  
Write-offs
 
 
 
 
 
 
     
 
(465
 
 
(465
                        (370     (370
Recoveries
 
 
 
 
 
 
     
 
131
 
 
 
131
 
                        127       127  
Exchange rate and other
 
 
(1
 
 
 
 
 
 
 
 
 
 
(1
 
 
    1          
 
    1       2  
Balance at end of period
 
$
196
 
 
$
821
 
 
 
 
$
 
 
$
1,017
 
 
 
  $ 175     $ 660    
 
  $     $ 835  
                       
Small business
                                                                           
Balance at beginning of period
 
$
73
 
 
$
73
 
     
$
48
 
 
$
194
 
      $ 88     $ 55         $ 34     $ 177  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
27
 
 
 
(27
)
 
     
 
 
 
 
 
        18       (18                
Transfers to stage 2
 
 
(11
 
 
11
 
     
 
 
 
 
 
        (12     12                  
Transfers to stage 3
 
 
 
 
 
(7
     
 
7
 
 
 
 
        (1     (2         3        
Originations
 
 
28
 
 
 
 
     
 
 
 
 
28
 
        25                       25  
Maturities
 
 
(11
 
 
(14
     
 
 
 
 
(25
        (17     (19               (36
Changes in risk, parameters and exposures
 
 
(31
)
 
 
 
39
 
     
 
59
 
 
 
67
 
        (31     36           24       29  
Write-offs
 
 
 
 
 
 
     
 
(35
 
 
(35
                        (22     (22
Recoveries
 
 
 
 
 
 
     
 
8
 
 
 
8
 
                        7       7  
Exchange rate and other
 
 
3
 
 
 
3
 
 
 
 
 
(8
 
 
(2
 
 
    8       5    
 
    (6     7  
Balance at end of period
 
$
78
 
 
$
78
 
 
 
 
$
79
 
 
$
235
 
 
 
  $ 78     $ 69    
 
  $ 40     $ 187  
                       
Wholesale
                                                                           
Balance at beginning of period
 
$
597
 
 
$
585
 
     
$
392
 
 
$
1,574
 
      $ 566     $     794         $ 437     $ 1,797  
Provision for credit losses
                                                                           
Transfers to stage 1
 
 
145
 
 
 
(144
)
 
     
 
(1
 
 
 
        334       (331         (3      
Transfers to stage 2
 
 
(63
 
 
65
 
     
 
(2
 
 
 
        (55     56           (1      
Transfers to stage 3
 
 
(7
 
 
(44
     
 
51
 
 
 
 
        (2     (48         50        
Originations
 
 
481
 
 
 
 
     
 
 
 
 
481
 
        448                       448  
Maturities
 
 
(345
 
 
(205
     
 
 
 
 
(550
        (301     (259               (560
Changes in risk, parameters and exposures
 
 
(120
)
 
 
 
477
 
     
 
491
 
 
 
848
 
        (444     354           31       (59
Write-offs
 
 
 
 
 
 
     
 
(212
 
 
(212
                        (97     (97
Recoveries
 
 
 
 
 
 
     
 
24
 
 
 
24
 
                        37       37  
Exchange rate and other
 
 
(10
 
 
(12
 
 
 
 
(92
 
 
(114
 
 
    (2     9    
 
    (33     (26
Balance at end of period
 
$
678
 
 
$
722
 
 
 
 
$
651
 
 
$
2,051
 
 
 
  $     544     $ 575    
 
  $ 421     $   1,540  

Royal Bank of Canada
        Third Quarter 2023         6
9
 
Key inputs and assumptions
The following provides an update on the key inputs and assumptions used in the measurement of expected credit losses. For further details, refer to Note 2 and Note 5 of our audited 2022 Annual Consolidated Financial Statements.
Our base scenario reflects rising unemployment rates, high but declining inflation, and high central bank policy interest rates, which result in mild recessions in Canada and the U.S. in calendar 2023. Expectations are that there will be no further increases in central bank interest rates, in Canada and the U.S. Our base scenario also reflects a favourable Canadian housing price outlook and commercial real estate price declines in the near term.
Downside scenarios, including two additional and more severe downside scenarios designed for the energy and real estate sectors, reflect the possibility of a more severe macroeconomic shock beginning in calendar Q4 2023 relative to our base scenario. In these scenarios, conditions are expected to deteriorate from calendar Q3 2023 levels for up to 18 months, followed by a recovery for the remainder of the period. These scenarios assume monetary policy responses that return the economy to a long-run, sustainable growth rate within the forecast period. The possibility of a deeper recession and a more prolonged recovery as compared to our base scenario, including further monetary policy responses to elevated inflation rates which may increase credit risk, is reflected in our general downside scenario.
The upside scenario reflects slightly stronger economic growth than the base scenario, without prompting a further offsetting monetary policy response as compared to our base scenario, followed by a return to a long-run sustainable growth rate within the forecast period.
We increased weight to our downside scenarios relative to April 30, 2023 in order to reflect elevated uncertainty over interest rate expectations and an increased likelihood of more severe recessions as reflected in our downside scenarios relative to the mild recession in our base scenario.
The following provides additional detail about our calendar quarter forecasts for certain key macroeconomic variables used in the models to estimate the allowance for credit losses:
 
 
Unemployment rates
In our base forecast, calendar Q3 2023 unemployment rates are expected to rise to 5.4% in Canada and 3.9% in the U.S.,
peaking in Q2 2024 at
6.6% in Canada and at 4.8% in the U.S.
 
and reverting to long run equilibrium towards the latter end of the forecast horizon.
 
 
 
 
Gross Domestic Product (GDP
)
– In our base forecast, we expect Canadian and U.S. GDP growth to slow, with both Canada and the U.S. expected to experience mild recessions during calendar Q3 and
Q4
 2023. GDP in calendar Q4 2023 is expected to be 0.7%
and 0.2% 
above Q4 2022 levels in Canada and 
the
U.S.
,
 
respectively
.
 
 

70         
Royal Bank of Canada
        Third Quarter 2023
 
Note 5    Loans and allowance for credit losses
(continued)
 
 
 
Oil price (West Texas Intermediate in US$)
– In our base forecast, we expect oil prices to average $75 per barrel over the next 12 months from calendar Q3 2023 and $68 per barrel in the following 2 to 5 years. The range of average prices in our alternative downside and upside scenarios is $27 to $91 per barrel for the next 12 months and $42 to $72 per barrel for the following 2 to 5 years. As at April 30, 2023, our base forecast included an average price of $82 per barrel for the next 12 months and $70 per barrel for the following 2 to 5 years. As at October 31, 2022, our base forecast included an average price of $88 per barrel for the next 12 months and $72 per barrel for the following 2 to 5 years.
 
 
Canadian housing price index
– In our base forecast, we expect housing prices to increase by 2.3% over the next 12 months from calendar Q3 2023, with a compound annual growth rate of 4.2% for the following 2 to 5 years. The range of annual housing price growth (contraction) in our alternative real estate downside and upside scenarios is (30.0)% to 10.9% over the next 12 months and 4.2% to 9.6% for the following 2 to 5 years. As at April 30, 2023, our base forecast included housing price growth of 1.8% for the next 12 months and 4.8% for the following 2 to 5 years. As at October 31, 2022, our base forecast included housing price contraction of (1.0)% from calendar Q4 2022 for the next 12 months and housing price growth of 5.2% for the following 2 to 5 years.

Royal Bank of Canada
        Third Quarter 2023         71
 
Credit risk exposure by internal risk rating
The following table presents the gross carrying amount of loans measured at amortized cost, and the full contractual amount of undrawn loan commitments subject to the impairment requirements of IFRS 9
Financial Instruments
. Risk ratings are based on internal ratings used in the measurement of expected credit losses as at the reporting date, as outlined in the internal ratings maps for Wholesale and Retail facilities in the Credit risk section of our 2022 Annual Report.
 
  
 
      As at 
 
 
 
July 31, 2023
 
 
 
 
October 31, 2022
 
(Millions of Canadian dollars)
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
Total
 
 
  
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
Total
 
Retail
                                                                   
Loans outstanding – Residential mortgages
                                                                   
Low risk
 
$
345,290
 
 
$
3,861
 
 
$
 
 
$
349,151
 
      $ 340,716     $ 2,573     $     $ 343,289  
Medium risk
 
 
18,059
 
 
 
1,734
 
 
 
 
 
 
19,793
 
        15,035       1,932             16,967  
High risk
 
 
1,523
 
 
 
4,437
 
 
 
 
 
 
5,960
 
        1,188       3,125             4,313  
Not rated
(1)
 
 
52,291
 
 
 
1,137
 
 
 
 
 
 
53,428
 
        51,915       1,304             53,219  
Impaired
 
 
 
 
 
 
 
 
619
 
 
 
619
 
                    560       560  
   
 
417,163
 
 
 
11,169
 
 
 
619
 
 
 
428,951
 
        408,854       8,934       560       418,348  
Items not subject to impairment
(2)
                         
 
472
 
                                448  
Total
                         
$
429,423
 
                              $ 418,796  
                   
Loans outstanding – Personal
                                                                   
Low risk
 
$
73,973
 
 
$
2,459
 
 
$
 
 
$
76,432
 
      $ 73,339     $ 2,575     $     $ 75,914  
Medium risk
 
 
4,833
 
 
 
3,150
 
 
 
 
 
 
7,983
 
        5,482       3,780             9,262  
High risk
 
 
450
 
 
 
1,988
 
 
 
 
 
 
2,438
 
        836       1,660             2,496  
Not rated
(1)
 
 
9,008
 
 
 
131
 
 
 
 
 
 
9,139
 
        9,733       104             9,837  
Impaired
 
 
 
 
 
 
 
 
245
 
 
 
245
 
                    200       200  
Total
 
$
88,264
 
 
$
7,728
 
 
$
245
 
 
$
96,237
 
      $ 89,390     $ 8,119     $ 200     $ 97,709  
                   
Loans outstanding – Credit cards
                                                                   
Low risk
 
$
16,104
 
 
$
122
 
 
$
 
 
$
16,226
 
      $ 15,088     $ 83     $     $ 15,171  
Medium risk
 
 
1,683
 
 
 
1,991
 
 
 
 
 
 
3,674
 
        1,418       1,911             3,329  
High risk
 
 
40
 
 
 
1,577
 
 
 
 
 
 
1,617
 
        39       1,255             1,294  
Not rated
(1)
 
 
762
 
 
 
33
 
 
 
 
 
 
795
 
        751       32             783  
Total
 
$
18,589
 
 
$
3,723
 
 
$
 
 
$
22,312
 
      $ 17,296     $ 3,281     $     $ 20,577  
                   
Loans outstanding – Small business
                                                                   
Low risk
 
$
8,522
 
 
$
924
 
 
$
 
 
$
9,446
 
      $ 8,571     $ 838     $     $ 9,409  
Medium risk
 
 
1,949
 
 
 
988
 
 
 
 
 
 
2,937
 
        1,512       1,130             2,642  
High risk
 
 
94
 
 
 
523
 
 
 
 
 
 
617
 
        102       375             477  
Not rated
(1)
 
 
8
 
 
 
 
 
 
 
 
 
8
 
        3                   3  
Impaired
 
 
 
 
 
 
 
 
232
 
 
 
232
 
                    138       138  
Total
 
$
10,573
 
 
$
2,435
 
 
$
232
 
 
$
13,240
 
      $ 10,188     $ 2,343     $ 138     $ 12,669  
                   
Undrawn loan commitments – Retail
                                                                   
Low risk
 
$
261,434
 
 
$
1,318
 
 
$
 
 
$
262,752
 
      $ 247,620     $ 1,041     $     $ 248,661  
Medium risk
 
 
10,529
 
 
 
293
 
 
 
 
 
 
10,822
 
        9,021       246             9,267  
High risk
 
 
886
 
 
 
401
 
 
 
 
 
 
1,287
 
        876       367             1,243  
Not rated
(1)
 
 
6,408
 
 
 
129
 
 
 
 
 
 
6,537
 
        5,668       118             5,786  
Total
 
$
279,257
 
 
$
2,141
 
 
$
 
 
$
281,398
 
      $ 263,185     $ 1,772     $     $ 264,957  
                   
Wholesale – Loans outstanding
                                                                   
Investment grade
 
$
88,108
 
 
$
586
 
 
$
 
 
$
88,694
 
      $ 88,513     $ 202     $     $ 88,715  
Non-investment grade
 
 
150,845
 
 
 
18,531
 
 
 
 
 
 
169,376
 
        145,908       15,758             161,666  
Not rated
(1)
 
 
9,547
 
 
 
272
 
 
 
 
 
 
9,819
 
        11,789       360             12,149  
Impaired
 
 
 
 
 
 
 
 
2,188
 
 
 
2,188
 
                      1,301       1,301  
   
 
248,500
 
 
 
19,389
 
 
 
2,188
 
 
 
270,077
 
        246,210       16,320       1,301       263,831  
Items not subject to impairment
(2)
                         
 
8,920
 
                                10,136  
Total
                         
$
278,997
 
                              $ 273,967  
                   
Undrawn loan commitments – Wholesale
                                                                   
Investment grade
 
$
301,814
 
 
$
225
 
 
$
 
 
$
302,039
 
      $ 284,481     $ 179     $     $ 284,660  
Non-investment grade
 
 
124,422
 
 
 
12,251
 
 
 
 
 
 
136,673
 
        126,225       10,657             136,882  
Not rated
(1)
 
 
4,190
 
 
 
 
 
 
 
 
 
4,190
 
        3,692       1             3,693  
Total
 
$
430,426
 
 
$
12,476
 
 
$
 
 
$
442,902
 
      $   414,398     $   10,837     $     $   425,235  
 
(1)   In certain cases where an internal risk rating is not assigned, we use other approved credit risk assessment or rating methodologies, policies and tools to manage our credit risk.
(2)   Items not subject to impairment are loans held at FVTPL.
Loans past due but not impaired
(1), (2)

 

  
 
As at
 
 
 
July 31, 2023
 
 
 
 
October 31, 2022
 
(Millions of Canadian dollars)
 
30 to 89 days
 
 
90 days
and greater
 
 
Total
 
 
  
 
30 to 89 days
 
 
90 days
and greater
 
 
Total
 
Retail
 
$
1,643
 
 
$
167
 
 
$
1,810
 
      $ 1,328     $ 168     $ 1,496  
Wholesale
 
 
1,062
 
 
 
63
 
 
 
1,125
 
        1,279       2       1,281  
   
$
   2,705
 
 
$
  230
 
 
$
  2,935
 
      $   2,607     $   170     $
 
 
  2,777  

(1)   Excludes loans less than 30 days past due as they are not generally representative of the borrowers’ ability to meet their payment obligations.
(2)   Amounts presented may include loans past due as a result of administrative processes, such as mortgage loans on which payments are restrained pending payout due to sale or refinancing, which can fluctuate based on business volumes. Past due loans arising from administrative processes are not representative of the borrowers’ ability to meet their payment obligations.

72         
Royal Bank of Canada
        Third Quarter 2023
 
Note 6    Significant acquisition and disposition
 
Acquisition
HSBC Bank Canada
On November 29, 2022, we entered into an agreement to acquire 100% of the common shares of HSBC Bank Canada (HSBC Canada) for an all-cash purchase price of $13.5 billion. In addition, we will purchase all of the existing preferred share
s an
d subordinated debt of HSBC Canada held directly or indirectly by HSBC Holdings plc at par value ($2.1 billion as of June 30, 2023). HSBC Canada is a premier Canadian personal and commercial bank focused on globally connected clients.
The transaction is expected to close in the first calendar quarter of 2024 and is subject to the satisfaction of customary closing conditions, including regulatory approvals. The results of the acquired business will be consolidated from the date of close.
Disposition
Wealth Management
On July 3, 2023, we completed the previously announced sale of the European asset servicing activities of RBC Investor Services
®
and its associated Malaysian centre of excellence to CACEIS, the asset servicing banking group of Crédit Agricole S.A. and Banco Santander, S.A. As a result of the transaction, we recorded a pre-tax gain on disposal of $
69 million in Non-Interest income within the Wealth Management segment ($77 million after-tax).
The completion of the sale of the business of the U
.
K
.
branch of RBC Investor Services Trust and the RBC Investor Services business in Jersey remains subject to customary closing conditions, including regulatory approvals. The disposal group consists of $2.7 billion of assets, primarily consisting of cash and due from banks, and $2.7 billion of liabilities, primarily consisting of deposits, and remains classified as held-for-sale, presented in Other assets and Other liabilities.
 
Note 7    Deposits
 
 
             As at  
   
July 31, 2023
        October 31, 2022  
(Millions of Canadian dollars)  
Demand
(1)
   
Notice
(2)
   
Term
(3)
   
Total
         Demand (1)     Notice (2)     Term (3)     Total  
Personal
 
$
188,600
 
 
$
56,910
 
 
$
188,537
 
 
$
434,047
 
      $ 203,645     $ 64,743     $ 136,544     $ 404,932  
Business and government
 
 
307,865
 
 
 
16,864
 
 
 
412,001
 
 
 
736,730
 
        348,004       17,855       394,011       759,870  
Bank
 
 
8,309
 
 
 
893
 
 
 
35,692
 
 
 
44,894
 
        10,458       490       33,064       44,012  
   
$
504,774
 
 
$
74,667
 
 
$
636,230
 
 
$
1,215,671
 
      $ 562,107     $ 83,088     $ 563,619     $ 1,208,814  
Non-interest-bearing
(4)
                                                                   
Canada
 
$
134,054
 
 
$
6,535
 
 
$
182
 
 
$
140,771
 
      $ 149,737     $ 7,797     $ 466     $ 158,000  
United States
 
 
39,060
 
 
 
 
 
 
 
 
 
39,060
 
        52,702                   52,702  
Europe
(5)
 
 
131
 
 
 
 
 
 
 
 
 
131
 
        620                   620  
Other International
 
 
7,177
 
 
 
 
 
 
 
 
 
7,177
 
        7,840                   7,840  
Interest-bearing
(4)
                                                                   
Canada
 
 
298,923
 
 
 
15,090
 
 
 
478,242
 
 
 
792,255
 
        305,779       17,982       409,586       733,347  
United States
 
 
14,751
 
 
 
52,593
 
 
 
85,048
 
 
 
152,392
 
        11,410       57,055       85,111       153,576  
Europe
(5)
 
 
5,244
 
 
 
359
 
 
 
54,012
 
 
 
59,615
 
        28,276       254       52,144       80,674  
Other International
 
 
5,434
 
 
 
90
 
 
 
18,746
 
 
 
24,270
 
        5,743             16,312       22,055  
   
$
504,774
 
 
$
74,667
 
 
$
636,230
 
 
$
1,215,671
 
      $   562,107     $   83,088     $   563,619     $   1,208,814  
 
(1)   Demand deposits are deposits for which we do not have the right to require notice of withdrawal, which include both savings and chequing accounts.
(2)   Notice deposits are deposits for which we can legally require notice of withdrawal. These deposits are primarily savings accounts.
(3)   Term deposits are deposits payable on a fixed date, and include term deposits, guaranteed investment certificates and similar instruments.
(4)   The geographical splits of the deposits are based on the point of origin of the deposits and where the revenue is recognized. As at July 31, 2023, deposits denominated in U.S. dollars, British pounds, Euro and other foreign currencies were $439 billion, $36 billion, $48 billion and $31 billion, respectively (October 31, 2022 – $465 billion, $35 billion, $50 billion and $30 billion, respectively).
(5)   Europe includes the United Kingdom, the Channel Islands, France and Luxembourg.

Royal Bank of Canada
        Third Quarter 2023         73
 
Contractual maturities of term deposits
 

  
 
    As at  
 
(Millions of Canadian dollars)
 
July 31
2023
 
 
October 31
2022
 
Within 1 year:
               
less than 3 months
 
$
188,346
 
  $ 159,602  
3 to 6 months
 
 
79,326
 
    61,996  
6 to 12 months
 
 
135,725
 
    156,531  
1 to 2 years
 
 
68,666
 
    49,225  
2 to 3 years
 
 
47,961
 
    42,809  
3 to 4 years
 
 
35,921
 
    27,609  
4 to 5 years
 
 
37,649
 
    33,835  
Over 5 years
 
 
42,636
 
    32,012  
 
 
$
636,230
 
  $ 563,619  
Aggregate amount of term deposits in denominations of one hundred thousa
nd
dollars or more
 
$
583,000
 
  $   521,000  
 
Note 8    Employee benefits – Pension and other post-employment benefits
 
We offer a number of defined benefit and defined contribution plans which provide pension and post-employment benefits to eligible employees. The following tables present the composition of our pension and other post-employment benefit expense and the effects of remeasurements recorded in OCI:
Pension and other post-employment benefit expense
 
     For the three months ended  
    Pension plans        
Other post-employment benefit plans
 
(Millions of Canadian dollars)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Current service costs
 
$
48
 
  $ 77        
$
8
 
  $ 11  
Past service costs
 
 
 
           
 
 
     
Net interest expense (income)
 
 
(40
    (21      
 
19
 
    16  
Remeasurements of other long-term benefits
 
 
 
           
 
(1
    (10
Administrative expense
 
 
3
 
    3    
 
 
 
 
     
Defined benefit pension expense
 
 
11
 
    59        
 
26
 
    17  
Defined contribution pension expense
 
 
      84
 
    58    
 
 
 
 
     
 
 
$
95
 
  $     117    
 
 
$
      26
 
  $    17  

  
 
For the nine months ended
 
 
 
Pension plans
 
 
 
 
Other post-employment benefit plans
 
(Millions of Canadian dollars)
 
July 31
2023
 
 
July 31
2022
 
 
  
 
July 31
2023
 
 
July 31
2022
 
Current service costs
 
$
146
 
 
$
232
 
 
 
$
24
 
 
$
28
 
Past service costs
 
 
 
 
 
(1
 
 
 
 
 
 
2
 
Net interest expense (income)
 
 
(121
 
 
(63
 
 
 
58
 
 
 
47
 
Remeasurements of other long-term benefits
 
 
 
 
 
 
 
 
 
2
 
 
 
(23
Administrative expense
 
 
9
 
 
 
10
 
 
 
 
 
 
 
 
 
Defined benefit pension expense
 
 
34
 
 
 
178
 
 
 
 
84
 
 
 
54
 
Defined contribution pension expense
 
 
245
 
 
 
188
 
 
 
 
 
 
 
 
 
 
 
$
    279
 
 
$
    366
 
 
 
 
$
      84
 
 
$
   54
 

74         
Royal Bank of Canada
        Third Quarter 2023
 

Note 8    Employee benefits – Pension and other post-employment benefits
(continued)
 
 
Pension and other post-employment benefit remeasurements
(1)
 
     For the three months ended  
    Defined benefit pension plans        
Other post-employment benefit plans
 
(Millions of Canadian dollars)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Actuarial (gains) losses:
                                   
Changes in financial assumptions
(2)
 
$
(483
  $ 81        
$
(45
  $ 16  
Experience adjustments
 
 
1
 
           
 
 
    (1
Return on plan assets (excluding interest based on discoun
t r
ate)
 
 
313
 
    338    
 
 
 
 
     
 
 
$
(169
  $   419    
 
 
$
(45
  $     15  
 
     For the nine months ended  
    Defined benefit pension plans        
Other post-employment benefit plans
 
(Millions of Canadian dollars)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Actuarial (gains) losses:
                                   
Changes in financial assumptions
(2)
 
$
421
 
  $ (2,917      
$
45
 
  $ (241
Experience adjustments
 
 
1
 
    1        
 
(2
    (4
Return on plan assets (excluding interest based on discount rate)
 
 
(248
)
 
      2,180    
 
 
 
 
     
 
 
$
    174
 
  $ (736  
 
 
$
    43
 
  $   (245
 
(1)   Market based assumptions, including Changes in financial assumptions and Return on plan assets, are reviewed on a quarterly basis. All other assumptions are updated during our annual review of plan assumptions.
(2)   Changes in financial assumptions in our defined benefit pension plans primarily relate to changes in discount rates.
 
Note 9    Income taxes
 
On December 15, 2022, Bill C-32, Fall Economic Statement Implementation Act, 2022 (the Bill), tabled by the Government of Canada, received royal assent. The Bill amends the Income Tax Act (Canada) to implement a Canada Recovery Dividend (CRD) and a permanent increase in the Canadian corporate tax rate on banks and life insurer groups.
The CRD is a one-time 15% tax for 2022 determined based on the average taxable income above $1 billion for taxation years 2020 and 2021 and payable in equal installments over five years. The CRD resulted in an increase in income taxes of $1.2 billion for the three months ended January 31, 2023, of which $1 billion was recognized in net income and $0.2 billion was recognized in other comprehensive income.
The permanent increase in the Canadian corporate tax rate is 1.5% on taxable income above $100 million and applies to taxation years that end after April 7, 2022, resulting in an increase in the Canadian statutory tax rate from 26.2% to 27.7% for the year ending October 31, 2023.
Tax examinations and assessments
During the third quarter of 2023, we received proposal letters (the Proposals) from the Canada Revenue Agency (CRA), in respect of the 2018 taxation year, which suggest that Royal Bank of Canada owes additional taxes of approximately $228 million as
the CRA
denied the deductibility of certain dividends. This amount represents the maximum additional taxes owing for that year. The Proposals are consistent with the previously received reassessments as described in Note 22 of our 2022 Annual Consolidated Financial Statements. It is possible that the CRA will reassess us for significant additional income taxes for subsequent years on the same basis. In all cases, we are confident that our tax filing position was appropriate and intend to defend ourselves vigorously.

Royal Bank of Canada
        Third Quarter 2023         75
 
Note 10    Significant capital and funding transactions
 
Subordinated debentures
On January 31, 2023, we issued $1,500 million of non-viability contingent capital (NVCC) subordinated debentures. The notes bear interest at a fixed rate of 5.01% per annum until February 1, 2028, and at the Daily Compounded Canadian Overnight Repo Rate Average plus 2.12% thereafter until their maturity on February 1, 2033.
On June 8, 2023, all $110 million of outstanding 9.30% subordinated debentures matured. The principal plus accrued interest were paid to the noteholders on the maturity date.
Common shares issued
 
     For the three months ended  
   
July 31, 2023
        July 31, 2022  
(Millions of Canadian dollars, except number of shares)  
Number of
shares
(thousands)
   
Amount
         Number of
shares
(thousands)
    Amount  
Issued in connection with share-based compensation plans
(1)
 
 
174
 
 
$
16
 
        100     $         8  
Issued in connection with dividend reinvestment plan
(2)
 
 
5,355
 
 
 
670
 
               
Purchased for cancellation
(3)
 
 
 
 
 
 
        (10,445     (129
   
 
5,529
 
 
$
      686
 
        (10,345   $ (121
 
     For the nine months ended  
   
July 31, 2023
        July 31, 2022  
(Millions of Canadian dollars, except number of shares)  
Number of
shares
(thousands)
   
Amount
         Number of
shares
(thousands)
    Amount  
Issued in connection with share-based compensation plans
(1)
 
 
678
 
 
$
61
 
        612     $       50  
Issued in connection with dividend reinvestment plan
(2)
 
 
9,959
 
 
 
1,291
 
               
Purchased for cancellation
(3)
 
 
 
 
 
 
        (33,016     (411
   
 
10,637
 
 
$
   1,352
 
        (32,404   $ (361
 
(1)   Amounts include cash received for stock options exercised during the period and the fair value adjustment to stock options.
(2)   The requirements of our dividend reinvestment plan (DRIP) are satisfied through either open market share purchases or shares issued from treasury. During the three months ended July 31, 2023 our DRIP requirements were satisfied through shares issued from treasury. During the nine months ended July 31, 2023 our DRIP requirements were satisfied through open market share purchases in the first three months and through shares issued from treasury in the last six months. During the three and nine months ended July 31, 2022 our DRIP requirements were satisfied through open market share purchases.
(3)   During the three and nine months ended July 31, 2023, we did not purchase for cancellation any common shares. During the three months ended July 31, 2022, we purchased for cancellation common shares at a total fair value of $1,338 million (average cost of $128.20 per share), with a book value of $129 million (book value of $12.47 per share). During the nine months ended July 31, 2022, we purchased for cancellation common shares at a total fair value of $4,444 million (average cost of $134.60 per share), with a book value of $411 million (book value of $12.46 per share).
 
Note 11    Earnings per share
 
 
     For the three months ended          For the nine months ended  
(Millions of Canadian dollars, except share and per share amounts)
 
July 31
2023
   
July 31
2022
        
July 31
2023
   
July 31
2022
 
Basic earnings per share
                                   
Net income
 
$
3,872
 
  $ 3,577        
$
10,735
 
  $ 11,925  
Dividends on preferred shares and distributions on other equity instruments
 
 
(58
    (58      
 
(169
    (180
Net income attributable to non-controlling interests
 
 
(2
    (2      
 
(5
    (7
Net income available to common shareholders
 
$
3,812
 
  $ 3,517        
$
10,561
 
  $ 11,738  
Weighted average number of common shares (in thousands)
 
 
  1,393,515
 
      1,396,381        
 
  1,388,217
 
      1,409,292  
Basic earnings per share (in dollars)
 
$
2.74
 
  $ 2.52        
$
7.61
 
  $ 8.33  
Diluted earnings per share
                                   
Net income available to common shareholders
 
$
3,812
 
  $ 3,517        
$
10,561
 
  $ 11,738  
Weighted average number of common shares (in thousands)
 
 
1,393,515
 
    1,396,381        
 
1,388,217
 
    1,409,292  
Stock options
(1)
 
 
1,398
 
    1,680        
 
1,614
 
    2,039  
Issuable under other share-based compensation plans
 
 
26
 
    606        
 
26
 
    603  
Average number of diluted common shares (in thousands)
 
 
1,394,939
 
      1,398,667        
 
1,389,857
 
    1,411,934  
Diluted earnings per share (in dollars)
 
$
2.73
 
  $ 2.51        
$
7.60
 
  $ 8.31  
 
(1)   The dilutive effect of stock options was calculated using the treasury stock method. When the exercise price of options outstanding is greater than the average market price of our common shares, the options are excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2023, an average of 2,244,505 outstanding options with an average exercise price of $130.78 were excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2022, an average of 1,181,140 outstanding options with an average exercise price of $129.99 were excluded from the calculation of diluted earnings per share. For the nine months ended July 31, 2023, an average of 917,036 outstanding options with an average exercise price of $131.64 were excluded from the calculation of diluted earnings per share. For the nine months ended July 31, 2022, no outstanding options were excluded from the calculation of diluted earnings per share.

76         
Royal Bank of Canada
        Third Quarter 2023
 
Note 12    Legal and regulatory matters
 
We are a large global institution that is subject to many different complex legal and regulatory requirements that continue to evolve. We are and have been subject to a variety of legal proceedings, including civil claims and lawsuits, regulatory examinations, investigations, audits and requests for information by various governmental regulatory agencies and law enforcement authorities in various jurisdictions. Some of these matters may involve novel legal theories and interpretations and may be advanced under criminal as well as civil statutes, and some proceedings could result in the imposition of civil, regulatory enforcement or criminal penalties. We review the status of all proceedings on an ongoing basis and will exercise judgment in resolving them in such manner as we believe to be in our best interest. In many proceedings, it is inherently
 
difficult to determine whether any loss is probable or to reliably estimate the amount of any loss. This is an area of significant judgment and uncertainty and the extent of our financial and other exposure to these proceedings after taking into account current provisions could be material to our results of operations in any particular period.
Our significant legal proceeding and regulatory matters are described in Note 25 of our audited 2022 Annual Consolidated Financial Statements and as updated below.
Vacation pay class action
On December 29, 2022, the Ontario Superior Court of Justice certified a class in an action against RBC Dominion Securities Limited and RBC Dominion Securities Inc. (together, RBC DS). The action commenced in July 2020, asserting claims relating to statutory vacation pay and public holiday pay for investment advisors, associates and assistants in our Canadian Wealth Management business, with the exception of those employed in Alberta and British Columbia. On January 13, 2023, RBC DS served a notice of motion for leave to appeal the court’s certification decision. Based on the facts currently known, it is not possible at this time to predict the ultimate outcome of these proceedings or the timing of their resolution.
Foreign exchange matters
On March 29, 2023, the parties executed a settlement agreement resolving all claims in both the U.S. Opt Out Action and the U.K. action, and in May 2023 these actions were dismissed.
London interbank offered rate (LIBOR) litigation
On July 21, 2023, Royal Bank of Canada and several other defendants executed a settlement agreement resolving one of the LIBOR class actions brought on behalf of certain plaintiffs that purchased U.S. dollar LIBOR-based instruments. The settlement was preliminarily approved on August 1, 2023 and remains subject to final court approval.
U.K. Competition and Markets Authority investigation and U.K. Government Bonds litigation
Royal Bank of Canada and RBC Europe Limited are engaging with the U.K. Competition and Markets Authority (CMA) in respect of an investigation involving alleged anti-competitive conduct in relation to U.K. government bonds and related derivatives between 2009 and 2013. In May 2023, the CMA issued a statement of objections to Royal Bank of Canada and RBC Europe Limited, and certain other financial institutions.
Royal Bank of Canada and RBC Europe Limited
 
are contesting the CMA’s case.
In June 2023, RBC Europe Limited and RBC Capital Markets, LLC, among other financial institutions, were named as defendants in a putative class action filed in the U.S. by plaintiffs alleging anti-competitive conduct in the U.K. government bonds market.
The outcome and resulting financial impact of these matters is unknown and not reliably estimable.

Royal Bank of Canada
        Third Quarter 2023         77
 
Note 13    Results by business segment
 
Composition of business segments
For management purposes, based on the products and services offered, we are organized into four business segments: Personal & Commercial Banking, Wealth Management, Insurance and Capital Markets. Effective the first quarter of 2023, we simplified our reporting structure by eliminating the Investor & Treasury Services segment and moving its former businesses to existing segments. We moved our Investor Services business to our Wealth Management segment, and our Treasury Services and Transaction Banking businesses to our Capital Markets segment. From a reporting perspective, there were no changes to our Personal & Commercial Banking and Insurance segments. Comparative results have been revised to conform to our new basis of segment presentation.
 
  
 
For the three months ended July 31, 2023
 
(Millions of Canadian dollars)
 
Personal &
Commercial
Banking
 
 
Wealth
Management
 
 
Insurance
 
 
Capital
Markets 
(1)
 
 
Corporate
Support 
(1)
 
 
Total
 
Net interest income
(2)
 
$
4,062
 
 
$
1,007
 
 
$
 
 
$
891
 
 
$
326
 
 
$
6,286
 
Non-interest
income
 
 
1,501
 
 
 
3,411
 
 
 
1,848
 
 
 
1,772
 
 
 
(329
 
 
8,203
 
Total revenue
 
 
5,563
 
 
 
4,418
 
 
 
1,848
 
 
 
2,663
 
 
 
(3
 
 
14,489
 
Provision for credit losses
 
 
305
 
 
 
102
 
 
 
 
 
 
209
 
 
 
 
 
 
616
 
Insurance policyholder benefits, claims and acquisition expense
 
 
 
 
 
 
 
 
1,379
 
 
 
 
 
 
 
 
 
1,379
 
Non-interest
expense
 
 
2,319
 
 
 
3,498
 
 
 
165
 
 
 
1,620
 
 
 
259
 
 
 
7,861
 
Income (loss) before income taxes
 
 
2,939
 
 
 
818
 
 
 
304
 
 
 
834
 
 
 
(262
 
 
4,633
 
Income taxes (recoveries)
 
 
805
 
 
 
144
 
 
 
77
 
 
 
(104
 
 
(161
 
 
761
 
Net income
 
$
2,134
 
 
$
674
 
 
$
227
 
 
$
938
 
 
$
(101
 
$
3,872
 
Non-interest
expense includes:
 
 
 
 
 
 
Depreciation and amortization
 
$
240
 
 
$
312
 
 
$
15
 
 
$
126
 
 
$
 
 
$
693
 
 
 
 
 
 
 
  
 
For the three months ended July 31, 2022
 
(Millions of Canadian dollars)
 
Personal &
Commercial
Banking
 
 
Wealth
Management (3)
 
 
Insurance
 
 
Capital
Markets (1), (3)
 
 
Corporate
Support (1)
 
 
Total
 
Net interest income
(2)
 
$
3,655
 
 
$
1,051
 
 
$
 
 
$
1,233
 
 
$
(49
 
$
5,890
 
Non-interest
income
 
 
1,527
 
 
 
2,971
 
 
 
1,233
 
 
 
631
 
 
 
(120
 
 
6,242
 
Total revenue
 
 
5,182
 
 
 
4,022
 
 
 
1,233
 
 
 
1,864
 
 
 
(169
 
 
12,132
 
Provision for credit losses
 
 
324
 
 
 
14
 
 
 
 
 
 
2
 
 
 
 
 
 
340
 
Insurance policyholder benefits, claims and acquisition expense
 
 
 
 
 
 
 
 
850
 
 
 
 
 
 
 
 
 
850
 
Non-interest
expense
 
 
2,130
 
 
 
2,929
 
 
 
139
 
 
 
1,186
 
 
 
2
 
 
 
6,386
 
Income (loss) before income taxes
 
 
2,728
 
 
 
1,079
 
 
 
244
 
 
 
676
 
 
 
(171
 
 
4,556
 
Income taxes (recoveries)
 
 
705
 
 
 
258
 
 
 
58
 
 
 
77
 
 
 
(119
 
 
979
 
Net income
 
$
  2,023
 
 
$
  821
 
 
$
  186
 
 
$
  599
 
 
$
(52
 
$
  3,577
 
Non-interest
expense includes:
 
 
 
 
 
 
Depreciation and amortization
 
$
239
 
 
$
271
 
 
$
14
 
 
$
129
 
 
$
3
 
 
$
656
 

7
8
         
Royal Bank of Canada
        Third Quarter 2023
 
Note 13    Results by business segment
(continued)
 
 

  
 
For the nine months ended July 31, 2023
 
(Millions of Canadian dollars)
 
Personal &
Commercial
Banking
 
 
Wealth
Management
 
 
Insurance
 
 
Capital
Markets 
(1)
 
 
Corporate
Support 
(1)
 
 
Total
 
Net interest income
(2)
 
$
11,886
 
 
$
3,328
 
 
$
 
 
$
2,579
 
 
$
794
 
 
$
18,587
 
Non-interest
income
 
 
4,516
 
 
 
10,099
 
 
 
5,086
 
 
 
5,837
 
 
 
(1,022
 
 
24,516
 
Total revenue
 
 
16,402
 
 
 
13,427
 
 
 
5,086
 
 
 
8,416
 
 
 
(228
 
 
43,103
 
Provision for credit losses
 
 
1,128
 
 
 
196
 
 
 
 
 
 
424
 
 
 
 
 
 
1,748
 
Insurance policyholder benefits, claims and acquisition expense
 
 
 
 
 
 
 
 
3,930
 
 
 
 
 
 
 
 
 
3,930
 
Non-interest
expense
 
 
6,805
 
 
 
10,379
 
 
 
480
 
 
 
4,831
 
 
 
535
 
 
 
23,030
 
Income (loss) before income taxes
 
 
8,469
 
 
 
2,852
 
 
 
676
 
 
 
3,161
 
 
 
(763
 
 
14,395
 
Income taxes (recoveries)
 
 
2,294
 
 
 
588
 
 
 
162
 
 
 
61
 
 
 
555
 
 
 
3,660
 
Net income
 
$
6,175
 
 
$
2,264
 
 
$
514
 
 
$
3,100
 
 
$
(1,318
 
$
10,735
 
Non-interest
expense includes:
                                               
Depreciation and amortization
 
$
721
 
 
$
925
 
 
$
43
 
 
$
381
 
 
$
 
 
$
2,070
 
                                                 
     For the nine months ended July 31, 2022  
(Millions of Canadian dollars)   Personal &
Commercial
Banking
    Wealth
Management (3)
    Insurance     Capital
Markets (1), (3)
    Corporate
Support (1)
    Total  
Net interest income
(2)
  $ 10,118     $ 2,782     $     $ 3,760     $ (225   $ 16,435  
Non-interest
income
    4,606       9,259       2,866       3,599       (347     19,983  
Total revenue
    14,724       12,041       2,866       7,359       (572     36,418  
Provision for credit losses
    177       (29           (46     1       103  
Insurance policyholder benefits, claims and acquisition expense
                1,667                   1,667  
Non-interest
expense
    6,167       8,844       431       4,136       (178     19,400  
Income (loss) before income taxes
    8,380       3,226       768       3,269       (395     15,248  
Income taxes (recoveries)
    2,149       775       179       691       (471     3,323  
Net income
  $ 6,231     $ 2,451     $ 589     $ 2,578     $ 76     $ 11,925  
Non-interest
expense includes:
                                               
Depreciation and amortization
  $   704     $   820     $   43     $   382     $   7     $     1,956  
 
(1)   Taxable equivalent basis.
(2)   Interest revenue is reported net of interest expense as we rely primarily on net interest income as a performance measure.
(3)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation.
Total assets and total liabilities by business segment
 
    
As at July 31, 2023
 
(Millions of Canadian dollars)  
Personal &
Commercial
Banking
   
Wealth
Management
   
Insurance
   
Capital
Markets
   
Corporate
Support
   
Total
 
Total assets
 
$
624,943
 
 
$
180,674
 
 
$
24,680
 
 
$
1,065,952
 
 
$
61,485
 
 
$
1,957,734
 
Total liabilities
 
 
624,851
 
 
 
180,529
 
 
 
25,332
 
 
 
1,066,223
 
 
 
(51,630
)
 
 
 
1,845,305
 
                                     
     As at October 31, 2022  
(Millions of Canadian dollars)   Personal &
Commercial
Banking
    Wealth
Management (1)
    Insurance     Capital
Markets (1)
    Corporate
Support
    Total  
Total assets
  $   602,824     $   206,466     $   21,918     $   1,025,892     $     60,119     $   1,917,219  
Total liabilities
    602,741       206,415       22,588       1,025,603       (48,303     1,809,044  
 
(1)   Amounts have been revised from those previously presented to conform to our new basis of segment presentation.

Royal Bank of Canada
        Third Quarter 2023         79
 
Note 14    Capital management
 
Regulatory capital and capital ratios
OSFI formally establishes risk-based capital and leverage minimums and Total Loss Absorbing Capacity (TLAC) ratios for deposit-taking institutions in Canada. During the third
quarter of 2023, we complied with all applicable capital, leverage and TLAC requirements, including the Domestic Stability Buffer, imposed by OSFI.
 
       As at  
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
 
July 31
2023
   
October 31
2022
 
Capital
(1)
               
CET1 capital
 
$
82,892
 
  $ 76,945  
Tier 1 capital
 
 
90,193
 
    84,242  
Total capital
 
 
101,072
 
    93,850  
Risk-weighted assets (RWA) used in calculation of capital ratios
(1)
               
Credit risk
 
$
470,732
 
  $ 496,898  
Market risk
 
 
37,426
 
    35,342  
Operational risk
 
 
77,741
 
    77,639  
Total RWA
 
$
  585,899
 
  $   609,879  
Capital ratios and Leverage ratio
(1)
               
CET1 ratio
 
 
14.1%
 
    12.6%  
Tier 1 capital ratio
 
 
15.4%
 
    13.8%  
Total capital ratio
 
 
17.3%
 
    15.4%  
Leverage ratio
 
 
4.2%
 
    4.4%  
Leverage ratio exposure (billions)
 
$
2,142
 
  $ 1,898  
TLAC available and ratios
(2)
               
TLAC available
 
$
181,035
 
  $ 160,961  
TLAC ratio
 
 
30.9%
 
    26.4%  
TLAC leverage ratio
 
 
8.5%
 
    8.5%  
 
(1)   Capital, RWA, and capital ratios are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline and the Leverage ratio is calculated using OSFI’s Leverage Requirements (LR) guideline. Both the CAR guideline and LR guideline are based on the Basel III framework.
 
The results for the period ended July 31, 2023 reflect our adoption of the revised CAR and LR guidelines that came into effect in Q2 2023 as part of OSFI’s implementation of the Basel III reforms.
(2)   TLAC available and TLAC ratios are calculated using OSFI’s TLAC guideline. The TLAC standard is applied at the resolution entity level which for us is deemed to be Royal Bank of Canada and its subsidiaries. A resolution entity and its subsidiaries are collectively called a resolution group. The TLAC ratio and TLAC leverage ratio are calculated using the TLAC available as percentage of total RWA and leverage exposure, respectively.
EX-99.3 4 d510945dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

Return on Equity and Assets Ratios

 

     Q3 2023     Q2 2023     Q1 2023     Nine months ended
July 31, 2023
    For the Year-Ended
October 2022
 

Return on Assets

     0.77     0.79     0.61     0.72     0.84

Return on Equity

     14.6     14.4     12.6     13.9     16.4

Dividend Payout Ratio

     49     51     58     53     45
EX-31.1 5 d510945dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

SOX 302 Certification

I, David McKay, certify that:

 

1.

I have reviewed this quarterly report for the period ended July 31, 2023 (the “report”) of Royal Bank of Canada (the “registrant”);

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 24, 2023

 

/s/ David McKay

Name:   David McKay
Title:   President and Chief Executive Officer
EX-31.2 6 d510945dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

SOX 302 Certification

I, Nadine Ahn, certify that:

 

1.

I have reviewed this quarterly report for the period ended July 31, 2023 (the “report”) of Royal Bank of Canada (the “registrant”);

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 24, 2023

 

/s/ Nadine Ahn

Name:   Nadine Ahn
Title:   Chief Financial Officer