For the fiscal year ended October 31, 2023 | Commission File Number 001-13928
|
Canada | 6029 | Not Applicable | ||
(Province or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number (if applicable)) |
Joe Cumming Royal Bank of Canada 200 Bay Street Toronto, Ontario Canada M5J 2J5 Tel: (437) 779-7209
|
Donald R. Crawshaw Sullivan & Cromwell LLP 125 Broad Street New York, New York USA 10004-2498 Tel: (212) 558-4000 |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Common Shares |
RY |
New York Stock Exchange |
Not Applicable |
||||
(Title of Class) |
Not Applicable |
||||
(Title of Class) |
Common Shares |
1,402,372,572 |
|||
First Preferred Shares* |
||||
Series AZ |
20,000,000 |
|||
Series BB |
20,000,000 |
|||
Series BD |
24,000,000 |
|||
Series BF |
12,000,000 |
|||
Series BH |
6,000,000 |
|||
Series BI |
6,000,000 |
|||
Series BO |
14,000,000 |
|||
Series BQ |
1,750,000** |
|||
Series BR |
1,250,000** |
|||
Series BS |
1,000,000** |
|||
Series BT |
750,000*** |
|||
Series C-2 |
15,385**** |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
||
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. |
☒ | |
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. |
☐ | |
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).
|
☐ |
ROYAL BANK OF CANADA | ||
By: | /s/ David McKay |
|
Name: | David McKay | |
Title: | President and Chief Executive Officer | |
Date: | November 30, 2023 |
Exhibit |
Exhibit No. |
|
Royal Bank of Canada Annual Information Form dated November 29, 2023 |
1 | |
Financial Review |
2 | |
• Management’s Discussion and Analysis |
||
• Caution Regarding Forward-Looking Statements |
||
• Management’s Responsibility for Financial Reporting |
||
• Management’s Report on Internal Control over Financial Reporting |
||
• Report of Independent Registered Public Accounting Firm |
||
• Consolidated Financial Statements |
||
Consent of Independent Registered Public Accounting Firm |
3 | |
Code of Conduct |
4 | |
Return on Equity and Assets Ratios |
5 | |
Rule 13a-14(a)/15d-14(a) |
31 | |
• Certification of the Registrant’s Chief Executive Officer • Certification of the Registrant’s Chief Financial Officer |
||
Section 1350 Certifications |
32 | |
• Certification of the Registrant’s Chief Executive Officer • Certification of the Registrant’s Chief Financial Officer |
||
Royal Bank of Canada Policy for the Recovery of Erroneously Awarded Incentive-based Compensation from Executive Officers |
97 | |
Interactive Data File (formatted as Inline XBRL) |
101 | |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
104 |
Exhibit 1
ROYAL BANK OF CANADA
ANNUAL
INFORMATION
FORM
November 29, 2023
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 2023 Annual Information Form and in the documents incorporated by reference herein, in other filings with Canadian regulators or the United States (U.S.) Securities and Exchange Commission (SEC), in reports to shareholders, and in other communications. In addition, our representatives may communicate forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements in this document and in the documents incorporated by reference herein 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 implementation of IFRS 17 Insurance Contracts, the expected closing of the transaction involving HSBC Bank Canada, including plans for the combination of our operations with HSBC Bank Canada and the financial, operational and capital impacts of the transaction, the expected closing of the transaction involving the U.K. branch of RBC Investor Services Trust and the RBC Investor Services business in Jersey, the expected impact of the Federal Deposit Insurance Corporation’s special assessment, the Strategic priorities and Outlook sections for each of our business segments, as discussed in our 2023 Annual Report for the fiscal year ended October 31, 2023 (the 2023 Annual Report), the risk environment including our credit risk, market risk, liquidity and funding risk as set out in our 2023 Management’s Discussion and Analysis for the fiscal year ended October 31, 2023 (the 2023 Management’s Discussion and Analysis) as well as the effectiveness of our risk monitoring, our climate- and sustainability-related beliefs, targets and goals (including our net-zero and sustainable finance commitments) and related legal and regulatory developments as set out in our 2023 Management’s Discussion and Analysis, and includes statements made by our President and Chief Executive Officer and other members of management. The forward-looking statements contained in this Annual Information Form and in the documents incorporated by reference represent the views of management and are 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, strategic goals and priorities and anticipated financial performance, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “suggest”, “seek”, “foresee”, “forecast”, “schedule”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan”, “outlook”, “timeline” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “might”, “should”, “could”, “can” or “would” or negative or grammatical variations thereof.
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature, 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 our forward-looking 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, but are not limited to: 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, legal and regulatory environment, competitive, model, systemic risks and other risks discussed in the risk sections of our 2023 Annual Report, including business and economic conditions in the geographic regions in which we operate, Canadian housing and household indebtedness, information technology, cyber and third-party risks, geopolitical uncertainty, environmental and social risk (including climate change), digital disruption and innovation, privacy and data related risks, regulatory changes, culture and conduct risks, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and our ability to anticipate and successfully manage risks arising from all of the foregoing factors. 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 2023 Annual Report, as may be updated by subsequent quarterly reports.
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, as well as the inherent uncertainty of forward-looking statements. Material economic assumptions underlying the forward-looking statements contained in this 2023 Annual Information Form are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook headings in our 2023 Annual Report, as such sections may be updated by subsequent quarterly reports. 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 2023 Management’s Discussion and Analysis contained in our 2023 Annual Report, as may be updated by subsequent quarterly reports.
TABLE OF CONTENTS
MD&A Incorporated by Reference |
||||||
CORPORATE STRUCTURE |
1 | |||||
Name, Address and Incorporation |
1 | |||||
Intercorporate Relationships |
1 | |||||
GENERAL DEVELOPMENT OF THE BUSINESS |
1 | |||||
Three Year History |
1 | 23-26, 185* | ||||
DESCRIPTION OF THE BUSINESS |
3 | |||||
General Summary |
3 | 23-26, 32-57 | ||||
Seasonality |
3 | 58-59 | ||||
Competition |
3 | 32-57 | ||||
Government Regulation and Supervision – Canada |
4 | |||||
Government Regulation and Supervision – United States |
6 | |||||
Risk Factors |
10 | 63-109 | ||||
Environmental and Social Policies |
10 | 107-109 | ||||
DESCRIPTION OF CAPITAL STRUCTURE |
10 | |||||
General Description |
10 | 109-118, 214-216* | ||||
Prior Sales |
13 | 109-118, 213-216* | ||||
Constraints |
13 | |||||
Ratings |
14 | 93 | ||||
MARKET FOR SECURITIES |
16 | |||||
Trading Price and Volume |
16 | |||||
DIVIDENDS |
18 | 115-116, 214-216* | ||||
SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER |
18 | |||||
DIRECTORS AND EXECUTIVE OFFICERS |
19 | |||||
Directors |
19 | |||||
Committees of the Board |
20 | |||||
Executive Officers |
20 | |||||
Ownership of Securities |
22 | |||||
Cease Trade Orders, Bankruptcies, Penalties or Sanctions |
22 | |||||
Conflicts of Interest |
23 | |||||
LEGAL PROCEEDINGS AND REGULATORY ACTIONS |
23 | 223-224* | ||||
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS |
23 | |||||
TRANSFER AGENT AND REGISTRAR |
24 | |||||
EXPERTS |
24 | |||||
AUDIT COMMITTEE |
24 | |||||
Audit Committee Mandate |
24 | |||||
Composition of Audit Committee |
24 | |||||
Relevant Education and Experience of Audit Committee Members |
24 | |||||
Pre-Approval Policies and Procedures |
25 | |||||
Independent Registered Public Accounting Firm Fees |
26 | |||||
ADDITIONAL INFORMATION |
27 | |||||
TRADEMARKS |
27 | |||||
APPENDIX A – PRINCIPAL SUBSIDIARIES |
28 | |||||
APPENDIX B – EXPLANATION OF RATINGS AND OUTLOOK |
29 | |||||
APPENDIX C – AUDIT COMMITTEE MANDATE |
32 | |||||
APPENDIX D – PRE-APPROVAL POLICIES AND PROCEDURES |
38 |
*Notes 6, 19, 20 and 25 to the 2023 Annual Consolidated Financial Statements for the fiscal year ended October 31, 2023 (the 2023 Annual Consolidated Financial Statements) for Royal Bank of Canada are incorporated by reference herein.
INFORMATION IS AT OCTOBER 31, 2023, UNLESS OTHERWISE NOTED.
CORPORATE STRUCTURE
Name, Address and Incorporation1
Royal Bank of Canada is a Schedule I bank under the Bank Act (Canada), which constitutes its charter. The Bank was created as Merchants Bank in 1864 and was incorporated under the “Act to Incorporate the Merchants’ Bank of Halifax” assented to June 22, 1869. The Bank changed its name to The Royal Bank of Canada in 1901 and to Royal Bank of Canada in 1990.
The Bank’s corporate headquarters are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada and its head office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada.
Intercorporate Relationships
Information about intercorporate relationships with principal subsidiaries, including place of incorporation and percentage of securities owned by the Bank, is provided in Appendix A.
GENERAL DEVELOPMENT OF THE BUSINESS
Three Year History
Our business strategies and actions are guided by our vision, “To be among the world’s most trusted and successful financial institutions.” Our three strategic goals are:
• | In Canada, to be the undisputed leader in financial services; |
• | In the U.S., to be the preferred partner to institutional, corporate, commercial and high net worth clients and their businesses; and |
• | In select global financial centres, to be a leading financial services partner valued for our expertise. |
In 2021, the Canadian economy showed growth and RBC reported net income of $16.1 billion, up 40% from the prior year. These results reflected higher earnings in Personal & Commercial Banking, Capital Markets, Wealth Management and Insurance, partially offset by lower earnings in Investor & Treasury Services, as well as releases of provisions on performing loans primarily driven by improvements in our macroeconomic and credit quality outlook.
In 2022, Canadian output growth was supported by recovery from the COVID-19 pandemic in the travel and hospitality sectors and increased activity in the oil and gas and mining sectors reflecting higher global commodity prices. In the U.S., while inflation rates began to decrease as global supply chain disruptions eased, and the price of gasoline declined from higher levels in the spring, price growth remained very high and broad-based. Bond yields increased substantially from the second calendar quarter of 2022 as central banks responded to high inflation.
In 2022, RBC reported net income of $15.8 billion, down 2% from 2021, reflecting lower results in Capital Markets and Insurance, partially offset by higher earnings in Personal & Commercial Banking, Wealth Management and Investor & Treasury Services. 2022 also reflected lower releases of provisions on performing loans.
1 When we say “we”, “us”, “our”, or “RBC”, we mean Royal Bank of Canada and its subsidiaries, as applicable. References to “the Bank” mean Royal Bank of Canada without its subsidiaries.
In 2023, GDP growth slowed across most advanced economies as headwinds from higher interest rates continued to have a lagged impact. Global inflation pressures showed signs of easing. However, underlying price pressures are not expected to fully ease until there is a more pronounced slowdown in domestic demand and the economy. In Canada, output in early calendar 2023 was supported by strength in consumer spending and an unexpectedly strong rebound in housing market activity in the spring. Canadian gross domestic product declined slightly in the second quarter of 2023 as consumer spending slowed. The U.S. economy remained resilient with strong consumer spending despite rising interest rates, and employment has continued to increase. The Euro area economy is losing momentum as inflation is still high but has begun to slow. Bond yields increased substantially in 2023 as markets demand higher term premiums and expect central banks to hold policy interest rates higher for longer. Interest rates have increased to levels that most central banks view as sufficient to slow economic growth and reduce inflationary pressure over time, and are expected to remain significantly higher than pre-pandemic levels.
Effective the first quarter of 2023, we simplified our reporting structure by eliminating the Investor & Treasury Services segment and moving our Investor Services business to our Wealth Management segment and our Treasury Services and Transaction Banking businesses to our Capital Markets segment. Effective the fourth quarter of 2023, we moved the Investor Services lending business from our Wealth Management segment to our Capital Markets segment.
In 2023, RBC reported net income of $14.9 billion, down 6% from last year, reflecting lower earnings in Wealth Management, Personal & Commercial Banking and Insurance, which were partially offset by higher results in Capital Markets, and the impact of the Canada recovery dividend and other tax related adjustments in the current year. 2023 also reflects higher provisions on credit losses, reflecting higher provisions on impaired loans and provisions taken on performing loans as compared to releases of provisions on performing loans last year.
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 2023 Annual Report. 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 2023 Annual Report. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of our 2023 Annual Report.
Our acquisitions and dispositions that have influenced the general development of our business over the past three years are summarized in the following table:
Business Segment | Acquisition/Disposition |
Key Characteristics | ||
Wealth Management |
Acquisition of Brewin Dolphin Holdings PLC (2022) | Creates a premier wealth manager in the U.K., Channel Islands and Ireland | ||
Partial disposition of RBC Investor Services operations (2023) | Divests 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. |
On November 29, 2022, we entered into an agreement to acquire 100% of the common shares of HSBC Bank Canada for an all-cash purchase price of $13.5 billion. We will also purchase all of the existing preferred shares and subordinated debt of HSBC Canada held directly or indirectly by HSBC Holdings plc at par value. The agreement includes an additional amount that accrues from August 30, 2023 to the closing date, which is calculated based on the all-cash purchase price for the common shares of HSBC Canada and the Canadian Overnight Repo Rate Average. 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.
2
Additional information can also be found under “Overview and outlook” beginning on page 23 and under “Key corporate events” beginning on page 25 of our 2023 Management’s Discussion and Analysis and in Note 6 “Significant acquisitions and disposition” on page 185 of our 2023 Annual Consolidated Financial Statements, which sections and note are incorporated by reference herein.
DESCRIPTION OF THE BUSINESS
General Summary
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 94,000+ 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.
Our business segments are Personal & Commercial Banking, Wealth Management, Insurance and Capital Markets. Our business segments are supported by Corporate Support.
Additional information about our business and each segment (including segment results) can be found under “Overview and outlook” beginning on page 23 and under “Business segment results” beginning on page 32 of our 2023 Management’s Discussion and Analysis, which sections are incorporated by reference herein.
Seasonality
Information about seasonality is provided under “Quarterly results and trend analysis” beginning on page 58 of our 2023 Management’s Discussion and Analysis, which section is incorporated by reference herein.
Competition
Personal & Commercial Banking competes with other Schedule 1 banks, independent trust companies, foreign banks, credit unions, caisses populaires, auto financing companies, as well as emerging entrants to the financial services industry, in Canada; other banks, emerging digital banks, trust companies and investment management companies serving retail and corporate clients, as well as public institutions, in the Caribbean; and other Canadian banking institutions that have U.S. operations, in the U.S.
Our Canadian Wealth Management business competes with domestic banks and trust companies, investment counselling firms, bank-owned full-service brokerages and boutique brokerages, mutual fund companies and global private banks. In Canada, bank-owned wealth managers continue to be the major players. Our U.S. Wealth Management business (including City National Bank (CNB)) operates in a fragmented and highly competitive industry and competitors include other broker-dealers, commercial banks and other financial institutions that service high net worth and ultra-high net worth individuals, entrepreneurs and their businesses. Our Global Asset Management business faces competition in Canada from banks, insurance companies and asset management organizations; in the U.S. from independent asset management firms, as well as those that are part of national and international banks and insurance companies; and internationally from asset managers that are owned by international banks, as well as national and regional asset managers in the geographies where we serve clients. Competitors to our International Wealth Management business include global wealth managers, traditional private banks and domestic wealth managers. Competitors to our Investor Services business include domestic and international custodians with Canadian and U.K. operations.
3
In our Canadian Insurance business, many of our competitors specialize in either life and health, wealth or in property and casualty products. In our International Insurance business we compete in the global reinsurance market which is competitive as there are many participants. Market share is largely held by a small number of reinsurers, with RBC Insurance continuing to selectively pursue niche opportunities.
Our Capital Markets business is a market leader in Canada and competes with large global investment banks in the U.S. Outside North America, we have a targeted presence in the U.K. & Europe, Australia, Asia & other markets aligned with our global expertise.
Additional information about our competition can be found under “Business segment results” beginning on page 32 of our 2023 Management’s Discussion and Analysis, which section is incorporated by reference herein.
Government Regulation and Supervision – Canada
The Bank is a “Schedule I” bank under the Bank Act (Canada) (Bank Act), and, as such, is a federally regulated financial institution. It has Canadian insurance and trust and loan company subsidiaries that are also federally regulated financial institutions (FRFI Subsidiaries and, together with the Bank, FRFIs) governed by (respectively) the Insurance Companies Act (Canada) and the Trust and Loan Companies Act (Canada). The activities of the FRFI Subsidiaries are also regulated under provincial and territorial laws in respect of their activities in the provinces and territories. In certain provinces, some of the Bank’s capital markets and wealth management activities are regulated under provincial securities laws (which are administered and enforced by securities regulatory authorities).
The Office of the Superintendent of Financial Institutions (OSFI), an independent agency of the Government of Canada, reports to the Minister of Finance (the Minister) for the supervision of the FRFIs. OSFI is required, at least once a year, to examine the affairs and business of each FRFI for the purpose of determining whether the FRFI is complying with the provisions of its governing statute and it is in sound financial condition, and report to the Minister. The FRFIs are also required to make periodic filings and reports to OSFI.
The FRFIs are also subject to regulation under the Financial Consumer Agency of Canada Act (FCAC Act).2 The Financial Consumer Agency of Canada (Agency), among other things, enforces consumer-related provisions of the federal statutes which govern these financial institutions. The Commissioner of the Agency must report to the Minister on all matters connected with the administration of the FCAC Act and consumer provisions of other federal statutes, including the Bank Act, Trust and Loan Companies Act and Insurance Companies Act. The FRFIs are also subject to provincial and territorial laws of general application.
The Bank and the following subsidiaries are member institutions of the Canada Deposit Insurance Corporation (CDIC): Royal Trust Corporation of Canada, The Royal Trust Company, Royal Bank Mortgage Corporation and RBC Investor Services Trust. CDIC insures certain deposits held at its member institutions. Under the Bank Act, the Bank is prohibited from engaging in or carrying on any business other than the business of banking, except as permitted under that statute. The business of banking includes providing any financial services; acting as a financial agent; providing investment counselling services and portfolio management services; issuing payment, credit or charge cards; and operating payment, credit or charge card plans.
2 For the Bank’s trust subsidiaries, only their retail deposit taking activities are subject to regulation under the FCAC Act.
4
The Bank has broad powers to invest in securities, but is limited in making “substantial investments” in or in controlling certain types of entities. A “substantial investment” will arise through direct or indirect beneficial ownership of voting shares carrying more than 10 per cent of the voting rights attached to all outstanding voting shares of a corporation, shares representing more than 25 per cent of the shareholders’ equity in a corporation or interests representing more than 25 per cent of the ownership interests in any unincorporated entity. The Bank can make controlling, and in certain circumstances, non-controlling substantial investments in certain entities in accordance with the investment provisions under the Bank Act. Some substantial investments may be made only with the prior approval of the Minister or the Superintendent of Financial Institutions (the Superintendent).
Each FRFI is also required to maintain, in relation to its operations, adequate capital and liquidity, and OSFI may direct financial institutions to increase capital and/or to provide additional liquidity.
Bail-in Regime
Canada has a bank recapitalization regime (the Bail-in Regime) for domestic systemically important banks, including the Bank. Under the Canada Deposit Insurance Corporation Act, in circumstances where the Bank has ceased, or is about to cease, to be viable, the Governor in Council may, upon recommendation of the Minister that they are of the opinion that it is in the public interest to do so, by order:
• | vest in CDIC the shares and subordinated debt of the Bank specified in the order (a vesting order); |
• | appoint CDIC as receiver in respect of the Bank (a receivership order); |
• | if a receivership order has been made, direct the Minister to incorporate a federal institution designated in the order as a bridge institution wholly-owned by CDIC and specifying the date and time as of which the Bank’s deposit liabilities are assumed (a bridge bank order); or |
• | if a vesting order or receivership order has been made, direct CDIC to carry out a conversion, by converting or causing the Bank to convert, in whole or in part – by means of a transaction or series of transactions and in one or more steps – the shares and liabilities of the Bank that are subject to the Bail-in Regime into common shares of the Bank or any of its affiliates (a conversion order). |
Upon the making of a conversion order, prescribed shares and liabilities under the Bail-in Regime that are subject to that conversion order will, to the extent converted, be converted into common shares of the Bank or any of its affiliates, as determined by CDIC. Subject to certain exceptions, senior debt issued on or after September 23, 2018, with an initial or amended term to maturity (including explicit or embedded options) greater than 400 days, that is unsecured or partially secured and that has been assigned a CUSIP or ISIN or similar identification number is subject to a bail-in conversion. For a description of Canadian bank resolution powers and the consequent risk factors attaching to certain liabilities of the Bank reference is made to rbc.com/investor-relations/_assets-custom/pdf/bail-in-overview.pdf.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the PCMLTA) is applicable to all of our businesses in Canada. The PCMLTA implements specific measures designed to detect and deter money laundering and the financing of terrorist activities. Further, the PCMLTA sets out obligations related to deterring and detecting money laundering and terrorist financing from a global perspective, in order to minimize the possibility that RBC could become a party to these activities. RBC has enterprise-wide anti-money laundering policies and procedures which assist in reducing the risk of facilitating money laundering and terrorist financing activities.
Broker-Dealer/Investment Management Subsidiaries
The activities of certain of the Bank’s subsidiaries, such as RBC Dominion Securities Inc. (RBC DS), RBC Direct Investing Inc. (RBC DI), Royal Mutual Funds Inc. (RMFI), RBC Global Asset Management Inc., Phillips, Hager & North Investment Funds Ltd. (PH&N IF), RBC Phillips, Hager & North Investment Counsel Inc. and RBC InvestEase Inc., which act as securities dealers (including investment dealers, mutual fund dealers and exempt market dealers), advisors (portfolio manager) or investment fund managers are regulated in Canada under provincial and territorial securities laws (which are administered and enforced by the applicable securities regulatory authorities) and, for investment dealers and mutual fund dealers, by the rules of the applicable self-regulatory organization (the New Self-Regulatory Organization of Canada (New SRO) formed by the amalgamation of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada (MFDA) effective January 1, 2023 and renamed the Canadian Investment Regulatory Organization (CIRO) on June 1, 2023). Each of RBC DS, RBC DI, RMFI and PH&N IF are members of the Canadian Investor Protection Fund. The Canadian Investor Protection Fund protects customers’ accounts against certain losses of customer property held by an insolvent CIRO member within specified limits.
5
Insurance
The activities of the Bank’s regulated Canadian insurance subsidiaries, RBC Life Insurance Company (RBC Life) and RBC Insurance Company of Canada (RICC), are federally governed by the Insurance Companies Act and by provincial legislation in each province and territory in which they carry on business. In addition, the Bank Act sets out a framework for insurance activities that the Bank may or may not carry out. The Bank may administer, promote and provide advice in relation to certain authorized types of insurance and may conduct any aspect of the business of insurance, other than the underwriting of insurance, outside of Canada and in respect of risks outside Canada. However, in Canada, the Bank may not act as agent for any person in the placing of insurance. The Bank can promote an insurance company, agent or broker or non-authorized types of insurance (e.g. life and home and automobile insurance) to certain prescribed groups where the promotion takes place outside of physical bank branches. Additionally, and subject to applicable restrictions under the Bank Act, RBC Wealth Management Financial Services Inc., a wholly owned indirect subsidiary of the Bank, is licensed under applicable provincial and territorial laws to sell insurance products, including individual and group life and living benefits insurance along with money products such as annuities and segregated funds, for both related and independent insurance companies in Canada.
RBC Life is a member of Assuris, which is a not-for-profit organization that protects Canadian life insurance policyholders against loss of benefits due to the financial failure of a member company. RICC is a member of the Property and Casualty Insurance Compensation Corporation, which is the corporation protecting Canadian property and casualty policyholders against loss of benefits due to the financial failure of a member company.
RBC Insurance Agency Ltd. and RBC Commercial Insurance Agency Inc., wholly owned indirect Bank subsidiaries, are licensed insurance agencies that distribute insurance products underwritten by non-RBC entities. These products include home and auto insurance and commercial insurance that are underwritten by an unaffiliated insurance company.
Government Regulation and Supervision – United States
Banking
In the U.S., the Bank is characterized as a foreign banking organization (FBO). Generally, the operations of an FBO and its U.S. subsidiaries and offices are subject to the same comprehensive regulatory regime that governs the operations of U.S. domestic banking organizations. The Bank’s U.S. businesses are subject to supervision and oversight by various U.S. authorities, including federal and state regulators, as well as self-regulatory organizations. An FBO must meet several conditions in order to maintain “well managed” status for U.S. bank regulatory purposes: (i) the FBO must have received a composite regulatory rating of “satisfactory” or better for its U.S. branch, agency and commercial lending company operations following its last regulatory examination, (ii) the FBO’s home country supervisor must consent to it expanding its activities in the U.S. to include activities permissible for a financial holding company (FHC), (iii) the FBO’s management must meet standards comparable to those required for a U.S. bank subsidiary of an FHC and (iv) each U.S. depository institution subsidiary of the FBO and/or bank holding company (BHC) must be deemed to be “well managed”, which is based on regulatory examination ratings.
6
Under the International Banking Act of 1978, as amended (IBA) and the Bank Holding Company Act of 1956, as amended (BHCA), all of the Bank’s U.S. banking operations are subject to supervision and regulation by the Board of Governors of the Federal Reserve System (Federal Reserve). Under the IBA, the BHCA, and related regulations of the Federal Reserve, the Bank generally may not open a branch, agency or representative office in the U.S., nor acquire five per cent or more of the voting stock of any U.S. bank or BHC, without notice to or prior approval of the Federal Reserve. The Federal Reserve is the U.S. “umbrella regulator” responsible for supervision and oversight of the Bank’s consolidated U.S. activities. The Federal Reserve consults with and obtains information from other prudential and functional U.S. regulators that exercise supervisory authority over the Bank’s various U.S. operations. Reports of financial condition and other information relevant to the Bank’s U.S. businesses are regularly filed with the Federal Reserve.
In 2000, the Bank became a U.S. FHC, as authorized by the Federal Reserve. Pursuant to the Gramm-Leach-Bliley Act of 1999, as amended, an FHC may engage in, or acquire companies engaged in, a broader range of financial and related activities than are permitted to banking organizations that do not maintain FHC status. To qualify as an FHC, the Bank, as an FBO and BHC, must meet certain capital requirements and must be deemed to be “well managed” for U.S. bank regulatory purposes. In addition, any U.S. depository institution subsidiaries of the FBO or BHC must also meet certain capital requirements and be deemed to be “well managed” and must have at least a “satisfactory” rating under the Community Reinvestment Act of 1977, as amended. An FBO must meet several conditions in order to maintain “well managed” status for U.S. bank regulatory purposes: (i) the FBO must have received a composite regulatory rating of “satisfactory” or better for its U.S. branch, agency and commercial lending company operations following its last regulatory examination, (ii) the FBO’s home country supervisor must consent to it expanding its activities in the U.S. to include activities permissible for a financial holding company (FHC), (iii) the FBO’s management must meet standards comparable to those required for a U.S. bank subsidiary of an FHC and (iv) each U.S. depository institution subsidiary of the FBO and/or bank holding company (BHC) must be deemed to be “well managed”, which is based on regulatory examination ratings.
The Federal Reserve, however, has the authority to limit an FHC’s ability to conduct activities that would otherwise be permissible if the FHC or any of its U.S. depositary institution subsidiaries does not satisfactorily meet certain capital requirements or is not deemed to be “well managed”. In such cases, the Federal Reserve may impose corrective capital and/or managerial requirements, as well as additional limitations or conditions. If the deficiencies persist, the FHC may be required to divest its U.S. depository institution subsidiaries or to cease engaging in activities other than the business of banking and certain closely related activities. If any insured depository institution subsidiary of an FHC fails to maintain at least a “satisfactory” rating under the Community Reinvestment Act of 1977, as amended, the FHC would be subject to restrictions on certain new activities and acquisitions.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was enacted. The statute effected significant changes to U.S. financial regulations and required rulemaking by the U.S. financial regulators, with material cross-border implications. Section 165 of the Dodd-Frank Act required the Federal Reserve to establish Enhanced Prudential Standards for Foreign Banking Organizations (Regulation YY). Amongst other regulatory requirements, Regulation YY required the Bank to establish an intermediate holding company (IHC) organized under U.S. law. The IHC is required to hold, directly or indirectly, the Bank’s entire ownership interest in its U.S. insured depository institution subsidiaries and other U.S. subsidiaries (excluding so called section 2(h)(2) companies and branch subsidiaries acquired by debt previously contracted). The Bank has established a two-tier BHC structure in the U.S., consisting of RBC US Group Holdings LLC (RIHC), its top-tier BHC, as the Bank’s IHC and the parent of RBC USA Holdco Corporation, the parent of most of the Bank’s U.S. subsidiaries. Both RIHC and RBC USA Holdco Corporation are BHCs and FHCs. The Bank fulfills its Regulation YY regulatory requirements through RIHC, which include capital adequacy, capital planning and stress testing, risk management and governance, liquidity and liquidity stress testing, financial regulatory reporting and other requirements that are similar to, or the same as, those applicable to U.S. domestic BHCs that are similarly categorized under the rules that tailor enhanced prudential standards for FBOs and large U.S. banking organizations. In addition, the Bank is registered as a “Swap Dealer” with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) and as a “Security-Based Swap Dealer” with the SEC.
7
The USA PATRIOT Act of 2001, as amended, which amended the Bank Secrecy Act of 1970, as amended (the Act), requires U.S. banks and certain other financial institutions with U.S. operations to maintain appropriate policies, procedures and controls reasonably designed to comply with the Act, including, as applicable, anti-money laundering compliance programs, suspicious activity and currency transaction reporting and other obligations including due diligence on customers to prevent, detect and report individuals and entities involved in money laundering and the financing of terrorism. In January 2021, the Anti-Money Laundering Act of 2020 (AMLA), which also amended the Act, was enacted. The AMLA is intended to comprehensively reform and modernize U.S. anti-money laundering laws. In September 2022, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act, which was part of the AMLA. The BOI rule, which goes into effect January 1, 2024, implements sweeping beneficial owner disclosure requirements applicable to all U.S. companies and foreign companies doing business in the U.S., subject to certain exceptions. The BOI rule is the first of three related rulemakings. The remaining rulemakings will address (i) access to the BOI collected under a registry being developed by FinCEN; and (ii) required revisions to FinCEN’s Customer Due Diligence rule. Several other provisions of the AMLA require additional rulemakings, reports and other measures.
The Bank maintains two branches in New York that are licensed and supervised as full federal branches with fiduciary licenses by the Office of the Comptroller of the Currency (OCC), the U.S. supervisor of national banks. In general, the Bank’s branches may exercise the same rights and privileges, and are subject to the same restrictions, as would apply to a U.S. national bank at the same location(s). The Bank’s branches may accept wholesale deposits, but may not take U.S. domestic retail deposits outside of an available exemption. Deposits in the Bank’s branches are not insured by the Federal Deposit Insurance Corporation (FDIC). The Bank also maintains a limited federal branch in Jersey City, New Jersey which may exercise the same rights and privileges as the Bank’s New York federal branches except that it generally can only take deposits from non-U.S. sources.
The OCC examines and supervises the Bank’s U.S. branch office/agency’s activities and operations. In addition, the Bank’s U.S. branches are required to maintain a capital equivalency deposit in their state(s) of residence, which deposits are pledged to the OCC. Furthermore, the Bank’s U.S. branch offices are subject to supervisory guidance based on the examiners’ assessment of risk management, operational controls, compliance and asset quality.
The Bank also maintains a state-licensed agency in Texas and state-licensed representative offices in California, Delaware and Texas. In general, the activities conducted at the Bank’s agency include a broad range of banking powers, including lending and maintaining credit balances, but agencies are limited in their ability to accept deposits from citizens or residents of the U.S. Further limitations may be placed on such agencies’ activities based on state laws. The activities conducted at the representative offices are limited to representational and administrative functions; such representative offices do not have authority to make credit decisions and may not solicit or contract for any deposit or deposit-like liability. The representative offices are examined and assessed by both the Federal Reserve and state regulators and are required to adhere to any applicable state regulations.
Banking activities are also conducted at CNB and RBC Bank (Georgia), National Association (RBC Bank), both of which are national banking associations chartered by the OCC. CNB and RBC Bank are members of the Federal Reserve. The OCC serves as the primary federal prudential regulator of CNB and RBC Bank. As U.S. banks, CNB and RBC Bank are allowed to take retail deposits, and they offer retail and commercial banking services, including deposit and credit services, such as consumer lending products (including credit card and mortgage loans), and business and commercial loans. CNB and RBC Bank are subject to capital requirements, dividend restrictions, limitations on investments and subsidiaries, limitations on transactions with affiliates (including the Bank and its branches), deposit reserve requirements and other requirements administered by the OCC and the Federal Reserve. Deposits at CNB and RBC Bank are FDIC-insured to the extent applicable. CNB and RBC Bank are also required to comply with applicable consumer protection laws and regulations such as those promulgated by the Consumer Financial Protection Bureau, an independent agency created under the Dodd-Frank Act. As an OCC chartered U.S. national bank, CNB also has fiduciary powers and offers trust and investment management services.
8
CNB also conducts trust and investment management activities through CNB’s wholly-owned subsidiary, RBC Trust Company (Delaware) Limited (RBC Trust). RBC Trust is a Delaware trust company chartered and supervised by the Delaware State Banking Commission and, as a BHC subsidiary, is subject to oversight by the Federal Reserve. RBC Trust is subject to dividend restrictions, limitations on investments and other applicable state banking law requirements.
Broker-Dealer Activities and Broker-Dealer Subsidiaries
The securities brokerage, trading and investment banking activities are conducted by and through the following U.S.-registered broker-dealer subsidiaries:
• | RBC Capital Markets, LLC (RBC CM LLC), |
• | RBC CMA LLC, |
• | City National Securities, Inc., |
• | CNR Securities, LLC (formerly RIM Securities LLC) and |
• | Symphonic Securities LLC. |
The SEC, state securities regulators, the Financial Industry Regulatory Authority and other self-regulatory organizations regulate these broker-dealer subsidiaries. Certain activities of RBC CM LLC and RBC CMA LLC are also subject to regulation by the CFTC and the NFA. Pursuant to the Dodd-Frank Act, RBC CM LLC is registered as a “Swaps Firm” with the NFA. Certain activities of RBC CM LLC are subject to regulation by the Municipal Securities Rulemaking Board.
Investment Management and Other Fiduciary Activities
The Bank’s New York branches have fiduciary powers, under which these branches conduct investment management and custody activities for certain customers. In addition, other affiliates are involved in the business of investment management. In many cases, these activities require that the affiliates be registered with the SEC as investment advisers under the U.S. Investment Advisers Act of 1940, as amended (Advisers Act). The Advisers Act and related rules regulate the registration and activities of investment advisers. Although the regulatory regime for investment advisers is similar in some ways to that for broker-dealers, the standard of conduct is higher due to the advisers’ status as fiduciaries.
The following entities are the Bank’s subsidiaries that are registered as “investment advisers” with the SEC:
• | RBC CM LLC, |
• | RBC Global Asset Management (U.S.) Inc. (GAM), |
• | RBC Global Asset Management (UK) Limited (GAM UK), |
• | RBC Private Counsel (USA) Inc., |
• | City National Rochdale, LLC (CNR), |
• | City National Securities, Inc. and |
• | Symphonic Financial Advisors LLC. |
GAM and CNR also each sponsor and act as the adviser to U.S. mutual funds. The U.S. Investment Company Act of 1940, as amended, and related rules regulate the registration and operation of mutual funds and certain activities of the funds’ advisers and other affiliates and certain of the funds’ other service providers. Certain activities of GAM UK and GAM are also subject to regulation by the CFTC and the NFA.
ERISA and the Internal Revenue Code
The U.S. Employee Retirement Income Security Act of 1974, as amended (ERISA), and its related rules regulate, among other things, the activities of the financial services industry with respect to pension plan clients. Similarly, the U.S. Internal Revenue Code and the regulations implemented thereunder impose requirements with respect to such clients and also individual retirement accounts (IRAs). Brokers, dealers and investment advisers to pension plans and IRAs must conduct their business in compliance with both ERISA and applicable tax regulations.
9
Risk Factors
A discussion of risks affecting us and our businesses appears under the headings “Risk management”, “Transactional/positional risk drivers”, “Operational/regulatory compliance risk drivers”, “Strategic risk drivers”, “Macroeconomic risk drivers” and “Overview of other risks” from pages 63-109 of our 2023 Management’s Discussion and Analysis, which discussions are incorporated by reference herein.
Environmental and Social Policies
Each year the Bank publishes its Environmental, Social and Governance (ESG) Performance Report outlining how the Bank is addressing ESG issues. This report is part of a suite of ESG reporting, including the Bank’s annual Climate Report which highlights how the Bank is managing climate-related risks and opportunities. These reports and other related information are available on the Bank’s website at rbc.com/community-social-impact/reporting-performance/index.html. Additional information about our environmental and social risk policies, including information about factors that could materially adversely affect our ability to achieve our climate and sustainable-finance-related commitments, goals and targets, can be found under “Overview of other risks – Environmental and social risk” beginning on page 107 of our 2023 Management’s Discussion and Analysis, which section is incorporated by reference herein.
DESCRIPTION OF CAPITAL STRUCTURE
General Description
The Bank’s authorized share capital consists of an unlimited number of common shares without nominal or par value and an unlimited number of first preferred shares and second preferred shares without nominal or par value, issuable in series; provided that the maximum aggregate consideration for all first preferred shares outstanding at any time may not exceed $30 billion, and for all second preferred shares that may be issued may not exceed $5 billion.
The Bank may also issue an unlimited amount of Limited Resource Capital Notes (LRCNs), which are compound instruments with both equity and liability features. The following summary of share capital and LRCNs is qualified in its entirety by the Bank’s by-laws and the actual terms and conditions of such shares and LRCNs.
Common Shares
The holders of the Bank’s common shares are entitled to vote at all meetings of shareholders, except meetings at which only holders of a specified class, other than common shares, or series of shares are entitled to vote. The holders of common shares are entitled to receive dividends as and when declared by the board of directors, subject to the preference of the preferred shares. After payment to the holders of the preferred shares of the amount or amounts to which they may be entitled, and after payment of all outstanding debts, the holders of the common shares will be entitled to receive any remaining property upon liquidation, dissolution or winding-up.
10
Preferred Shares
First preferred shares may be issued, from time to time, in one or more series with such rights, privileges, restrictions and conditions as the board of directors may determine, subject to the Bank Act and to the Bank’s by-laws. The first preferred shares are entitled to preference over any second preferred shares (discussed below) and common shares and over any other shares ranking junior to the first preferred shares with respect to the payment of dividends and in the distribution of property in the event of liquidation, dissolution or winding-up.
As at November 29, 2023, Non-Cumulative First Preferred Shares Series AZ, BB, BD, BF, BH, BI, BO, BQ, BR, BS and BT are outstanding. The Non-Cumulative First Preferred Shares Series AZ, BB, BD, BF, BH, BI and BO are listed on the Toronto Stock Exchange. The Non-Cumulative First Preferred Shares Series BQ, BR, BS and BT are not listed on an exchange. On November 7, 2023, we redeemed all of our issued and outstanding Non-Cumulative First Preferred Shares Series C-2 (the Series C-2 Preferred Shares). The Bank’s Depositary Shares representing interests in the Series C-2 Preferred Shares were listed on the New York Stock Exchange.
Effective January 1, 2013, in accordance with capital adequacy requirements adopted by OSFI, non-common capital instruments issued after January 1, 2013, including first preferred shares, must include terms providing for the full and permanent conversion of such securities into common shares upon the occurrence of certain trigger events relating to financial viability (the Non-Viability Contingent Capital requirements) in order to qualify as regulatory capital. As of January 1, 2013, all outstanding capital instruments that do not meet the Non-Viability Contingent Capital requirements are considered non-qualifying capital instruments and are to be phased out beginning January 1, 2013 at the rate of 10 per cent each year for 10 years. The Non-Cumulative First Preferred Shares Series AZ, BB, BD, BF, BH, BI, BO, BQ, BR, BS and BT contain non-viability contingent capital provisions necessary to qualify as Tier 1 regulatory capital under Basel III and are therefore convertible into common shares upon the occurrence of a non-viability contingent capital trigger event.
We are prohibited by the Bank Act from declaring or paying any dividends on our preferred or common shares when we are, or would be placed as a result of the declaration, in contravention of the capital adequacy and liquidity regulations or any regulatory directives issued under the Bank Act. We may not pay dividends on our common shares or redeem, purchase or otherwise retire common shares or preferred shares at any time without the approval of the holders of outstanding first preferred shares unless all dividends to which first preferred shareholders are then entitled have been declared and paid or set apart for payment.
The Non-Cumulative First Preferred Shares Series BT were issued on November 5, 2021 to certain institutional investors.
The Non-Cumulative First Preferred Shares Series BQ, BR and BS (the LRCN Preferred Shares) were respectively issued on July 28, 2020, November 2, 2020 and June 8, 2021 in connection with the Bank’s concurrent issuances of LRCNs. The LRCN Preferred Shares are held by Computershare Trust Company of Canada as trustee (the Trustee) for Leo LRCN Limited Recourse Trust™ (the Limited Recourse Trust). In certain circumstances, including non-payment of interest on, principal of or redemption price for the LRCNs when due, or the occurrence of an event of default or a non-viability contingent capital trigger event, the Trustee of the Limited Recourse Trust will deliver to holders of LRCNs their proportionate share of the Limited Recourse Trust’s assets, which will consist of the LRCN Preferred Shares except in limited circumstances, in full satisfaction of the Bank’s obligations under the LRCNs.
For so long as the LRCN Preferred Shares are held by the Trustee on behalf of the Limited Recourse Trust, such shares will not be entitled to receive dividends.
On November 2, 2015, in connection with the merger of CNB with and into RBC USA Holdco Corporation, the Bank issued Non-Cumulative First Preferred Shares Series C-1 and C-2 in exchange for two series of outstanding CNB preferred stock. Neither series remains outstanding as of November 29, 2023.
11
In the event the Bank failed to pay, declare or set aside for payment, dividends on any of the Series C-2 Preferred Shares or any other series of preferred shares of the Bank for six quarterly dividend periods, or their equivalent, whether or not consecutive, the number of directors of the board of directors would have been increased by two at the Bank’s first annual meeting of shareholders held thereafter. The holders of the Series C-2 Preferred Shares had the right, together with holders of any shares that, by their terms, expressly provided that they rank pari passu with the Series C-2 Preferred Shares (together, the Series C-2 Parity Shares) and that have similar voting rights, if any, to elect, as a class together, such additional two members to the Bank’s board of directors for a term of one year. Upon the payment, or the declaration and setting aside for payment, in full, of all the cumulative dividends payable for all past dividend periods and continuous noncumulative dividends for at least one year on all outstanding preferred shares of the Bank, the terms of such two directors would have terminated, the number of directors of the Bank’s board of directors would have been reduced by two and the voting rights of the holders of the Series C-2 Preferred Shares and the Series C-2 Parity Shares would have ceased (subject to the revesting of such voting rights in the event of each and every additional failure in the payment of dividends for six quarterly dividend periods).
Second preferred shares may be issued, from time to time, in one or more series with such rights, privileges, restrictions and conditions as the board of directors may determine, subject to the Bank Act and to the Bank’s by-laws. There are no second preferred shares currently outstanding. Second preferred shares would rank junior to the first preferred shares. Second preferred shares would be entitled to preference over the common shares and over any other shares ranking junior to the second preferred shares with respect to the payment of dividends and in the distribution of property in the event of our liquidation, dissolution or winding-up.
Except as outlined above with respect to the Series C-2 Preferred Shares and the Series C-2 Parity Shares, holders of the first and second preferred shares are not entitled to any voting rights as a class except as provided under the Bank Act or the Bank’s by-laws. Under the Bank Act, the Bank may not create any other class of shares ranking equal with or superior to a particular class of preferred shares, increase the authorized number of, or amend the rights, privileges, restrictions or conditions attaching to such class of preferred shares, without the approval of the holders of that class of preferred shares.
Any approval to be given by the holders of the first and second preferred shares may be given in writing by the holders of not less than all of the outstanding preferred shares of each class or by a resolution carried by the affirmative vote of not less than 662⁄3 per cent of the votes cast at a meeting of holders of each class of preferred shares at which a quorum is represented. A quorum at any meeting of holders of each class of preferred shares is 51 per cent of the shares entitled to vote at such meeting, except that at an adjourned meeting there is no quorum requirement.
Limited Recourse Capital Notes
LRCNs are the Bank’s direct unsecured obligations constituting subordinated indebtedness for the purpose of the Bank Act and are intended to qualify as our additional Tier 1 capital within the meaning of the regulatory capital adequacy requirements to which we are subject. The LRCNs are not deposits insured under the Canada Deposit Insurance Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon the insolvency of a deposit taking institution.
In the event of a non-payment by the Bank of the principal amount of, interest on or redemption price for the LRCNs when due, the sole remedy of holders of LRCNs shall be the delivery of the LRCN Preferred Shares held by the Trustee for the Limited Recourse Trust.
If the Bank becomes insolvent or is wound-up, the LRCNs will rank (i) subordinate in right of payment to the prior payment in full of all outstanding deposit liabilities of the Bank including certain subordinated indebtedness (within the meaning of the Bank Act); and (ii) in right of payment equally with and not prior to the Bank’s indebtedness which by its terms ranks equally in right of payment with, or is subordinate to, the LRCNs (other than the Bank’s indebtedness which by its terms ranks subordinate to the LRCNs) and will be subordinate in right of payment to the claims of our depositors and other unsubordinated creditors, provided that in any such case and in case of the Bank’s non-payment of the principal amount of, interest on or redemption price for the LRCNs when due, the sole remedy of the holders of the LRCNs shall be the delivery of the LRCN Preferred Shares held by the Trustee for the Limited Recourse Trust.
12
Holders of LRCNs are not entitled to any voting rights, other than in certain limited circumstances.
Additional information about the Bank’s share capital can be found under “Capital management” beginning on page 109 of our 2023 Management’s Discussion and Analysis and in Note 20 “Equity” beginning on page 214 of our 2023 Annual Consolidated Financial Statements, which section and note are incorporated by reference herein.
Prior Sales
From time to time, the Bank issues principal at risk notes, securities for which the amount payable at maturity is determined by reference to the price, value or level of an underlying interest such as a stock index, an exchange traded fund or a notional portfolio of equities or other securities. In addition, the Bank periodically issues subordinated debt, preferred shares and other equity instruments which are not listed or quoted on a marketplace.
For information about the Bank’s issuances of subordinated debentures, Limited Recourse Capital Notes and other equity instruments since October 31, 2022, see the “Capital management” section beginning on page 109 of our 2023 Management’s Discussion and Analysis, Note 19 “Subordinated debentures” on page 213 and Note 20 “Equity” beginning on page 214 of our 2023 Annual Consolidated Financial Statements, which section and notes are incorporated by reference herein.
Constraints
The Bank Act contains restrictions on the issue, transfer, acquisition, beneficial ownership and voting of shares of a chartered bank. The following is a summary of several key restrictions.
Subject to certain exceptions contained in the Bank Act, no person may be a major shareholder of a bank having equity of $12 billion or more (which includes the Bank). A person is a major shareholder if:
(a) | the aggregate of the shares of any class of voting shares of the Bank beneficially owned by that person, by entities controlled by that person and by any person associated or acting jointly or in concert with that person is more than 20 per cent of the outstanding shares of that class of voting shares, or |
(b) | the aggregate of shares of any class of non-voting shares of the Bank beneficially owned by that person, by entities controlled by that person and by any person associated or acting jointly or in concert with that person is more than 30 per cent of the outstanding share of that class of non-voting shares. |
Additionally, no person may have a significant interest in any class of shares of a bank (including the Bank) unless the person first receives the approval of the Minister. For purposes of the Bank Act, a person has a significant interest in a class of shares of a bank where the aggregate of any shares of the class beneficially owned by that person, by entities controlled by that person and by any person associated or acting jointly or in concert with that person exceeds 10 per cent of all of the outstanding shares of that class of shares of such bank.
The Bank Act also prohibits a bank from purchasing or redeeming any of its shares or paying any dividends if there are reasonable grounds for believing the bank is, or the payment would cause the bank to be, in contravention of the Bank Act requirement to maintain, in relation to its operations, adequate capital and appropriate forms of liquidity and to comply with any regulations or directions of the Superintendent in relation thereto. Under the Bank Act, the Bank cannot redeem or purchase any shares for cancellation unless the prior consent of the Superintendent has been obtained.
13
Subject to certain exceptions, the Bank Act also prohibits the registration of a transfer or issue of any shares of a Canadian bank to any government or government agency of Canada or any province of Canada, or to any government of any foreign country, or any political subdivision, or agency of any foreign country.
Ratings
Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective basis is primarily dependent upon maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies reflect their views and methodologies. Our credit ratings are largely determined by the rating agencies’ assessment of the quality of our earnings, the adequacy of our capital and the effectiveness of our risk management programs. 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. There can be no assurance that our credit ratings and rating outlooks will not be lowered or that rating agencies will not issue adverse commentaries about us, potentially resulting in adverse consequences for our funding capacity or access to capital markets.
A lowering of our credit ratings may also affect our ability, and the cost, to enter into normal course derivative or hedging transactions and may require us to post additional collateral under certain contracts. However, we estimate, based on periodic reviews of ratings triggers embedded in our existing businesses and of our funding capacity sensitivity, that a minor downgrade would not materially influence our liability composition, funding access, collateral usage and associated costs.
14
As at November 29, 2023, RBC had the following ratings from the rating agencies listed below:
RATING CLASS* | RATING | RANK** | ||||
Moody’s Investors Service |
Legacy Senior Long-term Debt1 | Aa1 |
2 of 21 | |||
Senior Long-term Debt2 | A1 |
5 of 21 | ||||
Short-term Debt | P-1 |
1 of 4 | ||||
Subordinated Debt | A3 |
7 of 21 | ||||
NVCC Subordinated Debt | A3 (hyb) |
7 of 21 | ||||
Preferred Shares | Baa2 (hyb) |
9 of 21 | ||||
NVCC Preferred Shares | Baa2 (hyb) |
9 of 21 | ||||
NVCC Limited Recourse Capital Notes | Baa2 (hyb) |
9 of 21 | ||||
Outlook – Stable | ||||||
Standard & Poor’s |
Legacy Senior Long-term Debt1 | AA- |
4 of 22 | |||
Senior Long-term Debt2 | A |
6 of 22 | ||||
Short-term Debt | A-1+ |
1 of 7 | ||||
Subordinated Debt | A |
6 of 22 | ||||
NVCC Subordinated Debt | A- |
7 of 22 | ||||
Preferred Shares | BBB+ |
8 of 22 | ||||
NVCC Preferred Shares | BBB |
9 of 22 | ||||
NVCC Limited Recourse Capital Notes | BBB |
9 of 22 | ||||
Outlook – Stable | ||||||
Fitch Ratings |
Legacy Senior Long-term Debt1 | AA |
3 of 23 | |||
Senior Long-term Debt2 | AA- |
4 of 23 | ||||
Short-term Debt | F1+ |
1 of 8 | ||||
Subordinated Debt | A |
6 of 23 | ||||
NVCC Subordinated Debt | A |
6 of 23 | ||||
Preferred Shares | BBB+ |
8 of 23 | ||||
NVCC Preferred Shares | BBB+ |
8 of 23 | ||||
NVCC Limited Recourse Capital Notes | BBB+ |
8 of 23 | ||||
Outlook – Stable | ||||||
DBRS |
Legacy Senior Long-term Debt1 | AA (high) |
2 of 23 | |||
Senior Long-term Debt2 | AA |
3 of 23 | ||||
Short-term Debt | R-1 (high) |
1 of 10 | ||||
Subordinated Debt | AA (low) |
4 of 23 | ||||
NVCC Subordinated Debt | A |
6 of 23 | ||||
Preferred Shares | Pfd-1 (low) |
3 of 16 | ||||
NVCC Preferred Shares | Pfd-2 (high) |
4 of 16 | ||||
NVCC Limited Recourse Capital Notes | A (low) |
7 of 23 | ||||
Outlook – Stable |
* | Our rating classes may differ from the rating category nomenclatures used by the rating agencies. |
** | Relative rank of each rating within the organization’s overall classification system. |
1 | 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. |
2 | Includes senior long-term debt issued on or after September 23, 2018, which is subject to conversion under the Bail-in Regime. |
A definition of the categories of each rating as at November 29, 2023 has been obtained from the respective rating agency’s website and is outlined in Appendix B, and a more detailed explanation may be obtained from the applicable rating agency.
On June 20, 2023, Fitch Ratings affirmed our ratings with a stable outlook.
On May 12, 2023, DBRS affirmed our ratings with a stable outlook.
On May 25, 2023, Standard & Poor’s affirmed our ratings with a stable outlook.
On November 6, 2023, Moody’s affirmed our ratings with a stable outlook.
Credit ratings, including stability or provisional ratings (collectively, Ratings) are not recommendations to purchase, sell or hold a financial obligation inasmuch as they do not comment on market price or suitability for a particular investor. Ratings may not reflect the potential impact of all risks on the value of securities. In addition, real or anticipated changes in the rating assigned to a security will generally affect the market value of that security. 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. Each Rating listed in the table above should be evaluated independently of any other Rating applicable to our debt and preferred shares. As is customary, RBC pays rating agencies to assign Ratings for the parent company as well as our subsidiaries, and for certain other services.
15
Additional information about Ratings is provided under “Transactional/positional risk drivers – Liquidity and funding risk – Credit ratings” on page 93 of our 2023 Management’s Discussion and Analysis, which section is incorporated by reference herein.
MARKET FOR SECURITIES
Trading Price and Volume
The Bank’s common shares are listed on the Toronto Stock Exchange (TSX) in Canada and the New York Stock Exchange (NYSE) in the U.S. The Bank’s Non-Cumulative First Preferred Shares Series AZ, BB, BD, BF, BH, BI and BO are listed on the TSX.
The following table sets out the price range and trading volumes of the common shares on the TSX and the US Composite for the periods indicated. Prices are based on the reported amounts from TSX InfoSuite and NYSE Connect.
Common Shares (TSX) | Common Shares (NYSE) | |||||||||||||||||||||||
Month | High ($) | Low ($) | Volume (Millions) | High (US$) | Low (US$) | Volume | ||||||||||||||||||
November 2022 |
135.69 | 124.65 | 71.11 | 101.43 | 90.33 | 13,388,872 | ||||||||||||||||||
December 2022 |
135.45 | 126.35 | 54.03 | 100.96 | 92.36 | 23,036,085 | ||||||||||||||||||
January 2023 |
136.30 | 127.36 | 126.69 | 102.43 | 93.31 | 20,009,132 | ||||||||||||||||||
February 2023 |
140.18 | 135.14 | 78.69 | 104.69 | 98.95 | 12,323,592 | ||||||||||||||||||
March 2023 |
137.78 | 125.32 | 77.29 | 101.23 | 90.99 | 21,585,639 | ||||||||||||||||||
April 2023 |
135.40 | 129.36 | 120.16 | 100.56 | 96.00 | 18,729,095 | ||||||||||||||||||
May 2023 |
135.35 | 120.10 | 83.13 | 100.01 | 88.03 | 17,764,875 | ||||||||||||||||||
June 2023 |
126.88 | 120.97 | 53.17 | 96.11 | 89.30 | 12,222,637 | ||||||||||||||||||
July 2023 |
132.70 | 124.78 | 120.44 | 100.83 | 93.66 | 22,836,318 | ||||||||||||||||||
August 2023 |
130.50 | 119.64 | 72.48 | 98.49 | 88.14 | 21,061,344 | ||||||||||||||||||
September 2023 |
124.23 | 117.11 | 52.68 | 92.08 | 86.65 | 17,090,385 | ||||||||||||||||||
October 2023 |
119.01 | 107.92 | 118.03 | 87.26 | 77.90 | 34,151,919 |
16
The following tables provide the price range and trading volumes of the first preferred shares on the TSX for the periods indicated. Prices are based on the reported amounts from TSX InfoSuite.
Series AZ | Series BB | Series BD | ||||||||||||||||||||||||||||||||||
Month | High ($) | Low ($) | Volume | High ($) | Low ($) | Volume | High ($) | Low ($) | Volume | |||||||||||||||||||||||||||
November 2022 |
18.73 | 17.07 | 252,552 | 19.00 | 17.30 | 201,695 | 19.20 | 18.20 | 573,191 | |||||||||||||||||||||||||||
December 2022 |
18.01 | 17.00 | 404,915 | 18.00 | 17.05 | 276,990 | 19.49 | 18.50 | 380,356 | |||||||||||||||||||||||||||
January 2023 |
19.30 | 17.29 | 208,798 | 19.60 | 17.25 | 251,018 | 20.66 | 18.50 | 266,485 | |||||||||||||||||||||||||||
February 2023 |
18.54 | 17.06 | 288,316 | 18.65 | 18.11 | 193,555 | 20.43 | 19.19 | 188,670 | |||||||||||||||||||||||||||
March 2023 |
18.16 | 16.56 | 363,886 | 18.30 | 16.60 | 246,083 | 19.48 | 17.35 | 272,041 | |||||||||||||||||||||||||||
April 2023 |
18.13 | 17.13 | 226,039 | 18.29 | 17.05 | 209,412 | 19.11 | 17.89 | 358,975 | |||||||||||||||||||||||||||
May 2023 |
17.77 | 16.44 | 211,976 | 17.48 | 16.46 | 178,978 | 18.34 | 17.01 | 437,149 | |||||||||||||||||||||||||||
June 2023 |
17.74 | 16.61 | 242,424 | 17.80 | 16.70 | 512,902 | 18.79 | 17.50 | 384,998 | |||||||||||||||||||||||||||
July 2023 |
18.31 | 17.245 | 328,509 | 18.28 | 17.15 | 227,238 | 19.30 | 18.21 | 244,913 | |||||||||||||||||||||||||||
August 2023 |
18.00 | 17.00 | 575,143 | 17.85 | 16.93 | 479,184 | 19.18 | 17.29 | 224,806 | |||||||||||||||||||||||||||
September 2023 |
18.29 | 17.03 | 342,576 | 18.10 | 16.90 | 233,797 | 18.10 | 17.23 | 432,288 | |||||||||||||||||||||||||||
October 2023 |
18.70 | 17.53 | 305,171 | 18.17 | 17.11 | 244,364 | 18.29 | 16.83 | 259,669 |
Series BF | Series BH | Series BI | ||||||||||||||||||||||||||||||||||
Month | High ($) | Low ($) | Volume | High ($) | Low ($) | Volume | High ($) | Low ($) | Volume | |||||||||||||||||||||||||||
November 2022 |
19.10 | 17.55 | 163,676 | 21.95 | 20.12 | 118,525 | 22.00 | 20.30 | 96,724 | |||||||||||||||||||||||||||
December 2022 |
18.99 | 17.78 | 269,199 | 22.60 | 20.72 | 44,635 | 22.05 | 21.01 | 53,594 | |||||||||||||||||||||||||||
January 2023 |
19.79 | 17.96 | 62,446 | 23.61 | 21.35 | 35,298 | 23.79 | 21.20 | 52,349 | |||||||||||||||||||||||||||
February 2023 |
19.38 | 18.33 | 170,873 | 23.28 | 21.61 | 39,947 | 23.33 | 21.86 | 17,088 | |||||||||||||||||||||||||||
March 2023 |
18.49 | 16.71 | 460,214 | 22.80 | 22.00 | 33,393 | 23.00 | 22.02 | 23,327 | |||||||||||||||||||||||||||
April 2023 |
18.35 | 17.45 | 93,822 | 22.67 | 21.50 | 29,698 | 22.78 | 21.47 | 86,887 | |||||||||||||||||||||||||||
May 2023 |
17.55 | 16.56 | 92,777 | 21.83 | 20.70 | 47,007 | 21.76 | 21.10 | 77,789 | |||||||||||||||||||||||||||
June 2023 |
17.70 | 16.82 | 74,212 | 21.86 | 20.82 | 25,673 | 22.14 | 20.84 | 25,610 | |||||||||||||||||||||||||||
July 2023 |
19.29 | 17.23 | 75,702 | 21.91 | 21.05 | 46,282 | 21.96 | 21.18 | 22,825 | |||||||||||||||||||||||||||
August 2023 |
18.46 | 16.85 | 150,588 | 21.99 | 20.44 | 40,105 | 22.01 | 20.34 | 43,315 | |||||||||||||||||||||||||||
September 2023 |
17.26 | 16.44 | 178,538 | 21.33 | 20.64 | 11,949 | 21.33 | 20.76 | 72,358 | |||||||||||||||||||||||||||
October 2023 |
16.90 | 15.65 | 258,678 | 21.15 | 19.35 | 47,305 | 21.35 | 19.57 | 48,938 |
Series BO | ||||||||||||
Month | High ($) | Low ($) | Volume | |||||||||
November 2022 | 21.51 | 20.20 | 143,372 | |||||||||
December 2022 | 21.10 | 19.55 | 305,217 | |||||||||
January 2023 | 22.00 | 19.80 | 114,758 | |||||||||
February 2023 | 21.05 | 20.28 | 111,243 | |||||||||
March 2023 | 20.91 | 19.25 | 192,153 | |||||||||
April 2023 | 20.68 | 19.84 | 140,872 | |||||||||
May 2023 | 20.10 | 19.21 | 112,798 | |||||||||
June 2023 | 20.25 | 19.60 | 100,281 | |||||||||
July 2023 | 20.88 | 19.65 | 260,287 | |||||||||
August 2023 | 20.37 | 19.73 | 127,264 | |||||||||
September 2023 | 21.33 | 19.75 | 177,896 | |||||||||
October 2023 | 21.06 | 20.10 | 268,522 |
17
The following table provides the price range and trading volumes of the Depositary Shares on the NYSE for the period indicated. Prices are based on the reported amounts from NYSE Connect.
Series C-23 | ||||||||||||
Month | High (US$) | Low (US$) | Volume | |||||||||
November 2022 | 25.70 | 25.10 | 32,102 | |||||||||
December 2022 | 26.69 | 25.44 | 30,789 | |||||||||
January 2023 | 26.74 | 26.03 | 13,521 | |||||||||
February 2023 | 26.05 | 25.26 | 44,654 | |||||||||
March 2023 | 26.27 | 25.01 | 27,429 | |||||||||
April 2023 | 25.92 | 25.50 | 16,540 | |||||||||
May 2023 | 25.50 | 25.12 | 27,346 | |||||||||
June 2023 | 25.49 | 25.16 | 21,616 | |||||||||
July 2023 | 25.89 | 25.31 | 39,807 | |||||||||
August 2023 | 25.41 | 25.25 | 46,210 | |||||||||
September 2023 | 25.42 | 25.15 | 42,573 | |||||||||
October 2023 | 25.41 | 25.05 | 30,254 |
DIVIDENDS
The Bank has had an uninterrupted history of paying dividends on its common shares and on each of its outstanding series of first preferred shares. Information about the Bank’s dividends paid or payable per share on the common shares and each outstanding series of first preferred shares in each of the two most recently completed years appears under the heading “Selected capital management activity” in the “Capital management” section beginning on page 115 of our 2023 Management’s Discussion and Analysis, which section is incorporated by reference herein. Information about restrictions on the payment of dividends appears under the heading “Restrictions on the payment of dividends” in Note 20 “Equity” on page 214 of our 2023 Annual Consolidated Financial Statements, which note is incorporated by reference herein.
The declaration amount and payment of future dividends will be subject to the discretion of the Bank’s board of directors, and will be dependent upon the Bank’s results of operations, financial condition, cash requirements and future regulatory restrictions on the payment of dividends and other factors deemed relevant by the board of directors.
Information about our dividends and our dividend payout ratio (common share dividends as a percentage of net income less preferred share dividends) is provided under the heading “Selected capital management activity” in the “Capital management” section beginning on page 115 of our 2023 Management’s Discussion and Analysis and in Note 20 “Equity” beginning on page 214 of our 2023 Annual Consolidated Financial Statements, which section and note are incorporated by reference herein.
SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
In connection with each issuance of LRCNs, the Bank also concurrently issues first preferred shares. These LRCN Preferred Shares are held in the Limited Recourse Trust. Pursuant to the Amended and Restated Declaration of Trust for the Limited Recourse Trust and the share provisions for the LRCN Preferred Shares, the Trustee of the Limited Recourse Trust will only deliver the LRCN Preferred Shares to holders of LRCNs under certain prescribed circumstances further described herein under “Description of Capital Structure – Limited Recourse Capital Notes”.
3 On November 7, 2023, we redeemed all of our issued and outstanding First Preferred Shares Series C-2 (Series C-2). The Bank’s Depositary Shares representing interests in the Series C-2 were listed on NYSE prior to the redemption.
18
Securities Subject to Contractual Restriction on Transfer as at November 29, 2023
Designation of Class |
Number of Securities that are Subject to a Contractual Restriction on Transfer |
Percentage of Class | ||
First Preferred Shares | 1,750,000 Non-Cumulative First Preferred Shares Series BQ
1,250,000 Non-Cumulative First Preferred Shares Series BR
1,000,000 Non-Cumulative First Preferred Shares Series BS |
3.75% |
DIRECTORS AND EXECUTIVE OFFICERS
Directors
The following are the Bank’s directors as at November 29, 2023:
Name and Year Elected | Province/State and Country of Residence |
Occupation | ||
Mirko Bibic (2022) | Ontario, CAN | President and Chief Executive Officer, BCE Inc. and Bell Canada | ||
Andrew A. Chisholm (2016) | Ontario, CAN | Corporate Director | ||
Jacynthe Côté (2014) | Quebec, CAN | Chair of the Board, Royal Bank of Canada | ||
Toos N. Daruvala (2015) | New York, U.S. | Corporate Director | ||
Cynthia Devine (2020) | Ontario, CAN | Interim President and Chief Executive Officer, Maple Leaf Sports and Entertainment | ||
Roberta L. Jamieson (2021) | Ontario, CAN | Corporate Director | ||
David I. McKay (2014) | Ontario, CAN | President and Chief Executive Officer, Royal Bank of Canada | ||
Barry Perry (2023) | Newfoundland and Labrador, CAN | Corporate Director | ||
Maryann Turcke (2020) | Ontario, CAN | Corporate Director | ||
Thierry Vandal (2015) | New York, U.S. | President, Axium Infrastructure US Inc. | ||
Bridget A. van Kralingen (2011) | Florida, U.S. | Corporate Director | ||
Frank Vettese (2019) | Ontario, CAN | Co-Founder, SummitNorth Advisory Corp. | ||
Jeffery Yabuki (2017) | Wisconsin, U.S. | Chairman, Sportradar AG and Chairman, Motive Partners GP, LLC |
19
Directors are elected annually and hold office until the next annual meeting of shareholders. Since November 1, 2018, the directors have held the principal occupations described above, except for the following:
Mr. Mirko Bibic served in a variety of leadership positions since joining BCE Inc. in 2004, including Chief Operating Officer from 2018 through 2020.
Mr. Toos N. Daruvala was Co-Chief Executive Officer, MIO Partners, Inc. from November 2016 through March 2021.
Ms. Roberta L. Jamieson was President and Chief Executive Officer of Indspire (a Canadian Indigenous charity that invests in the education of First Nations, Inuit and Métis people) from November 2004 through December 2020.
Mr. Barry Perry was President and Chief Executive Officer of Fortis Inc. from 2015 through 2020.
Ms. Maryann Turcke was Senior Advisor, Brookfield Infrastructure Partners L.P. from September 2020 through September 2022, Senior Advisor, National Football League from September 2020 through 2021 and Chief Operating Officer, National Football League from April 2017 through September 2020.
Ms. Bridget van Kralingen served in a variety of leadership positions since joining IBM Corporation in 2004 until her retirement as Senior Vice-President of Special Projects in December 2021. She has also served as Senior Vice-President of Global Markets, Senior Vice-President of Global Industries, Platform and Blockchain, Senior Vice-President of IBM Global Business Services and General Manager of IBM North America.
Mr. Frank Vettese served in a variety of leadership positions since joining Deloitte Canada in 2002, most recently as Managing Partner and Chief Executive from 2012 through June 2019.
Mr. Jeffery Yabuki was Executive Chairman, Fiserv, Inc. from June through December 2020 and Chief Executive Officer, Fiserv, Inc. from 2005 through June 2020.
Committees of the Board
Audit Committee: F. Vettese (Chair), T.N Daruvala, C. Devine, B. Perry, M. Turcke and B.A. van Kralingen.
Risk Committee: A.A. Chisholm (Chair), M. Bibic, R.L. Jamieson, T. Vandal and J. Yabuki.
Governance Committee: M. Turcke (Chair), M. Bibic, A.A. Chisholm, C. Devine and R.L. Jamieson.
Human Resources Committee: T. Vandal (Chair), T.N. Daruvala, B. Perry, B.A. van Kralingen, F. Vettese and J. Yabuki.
Executive Officers
The following are the Bank’s executive officers as at November 29, 2023:
Name | Province/State and Country of Residence |
Title | ||
Nadine Ahn | Ontario, CAN | Chief Financial Officer | ||
Maria Douvas | New York, U.S. | Chief Legal Officer | ||
Douglas Guzman | Ontario, CAN | Group Head, RBC Wealth Management & RBC Insurance |
20
Name | Province/State and Country of Residence |
Title | ||
Graeme Hepworth | Ontario, CAN | Chief Risk Officer | ||
Christoph Knoess | New York, U.S. | Chief Administrative & Strategy Officer | ||
David I. McKay | Ontario, CAN | President & Chief Executive Officer | ||
Neil McLaughlin | Ontario, CAN | Group Head, Personal & Commercial Banking | ||
Derek Neldner | Ontario, CAN | CEO and Group Head, RBC Capital Markets | ||
Kelly Pereira | Ontario, CAN | Chief Human Resources Officer | ||
Bruce Ross | Ontario, CAN | Group Head, Technology and Operations |
Since November 1, 2018, the executive officers have held the positions described below:
Ms. Nadine Ahn was appointed to Group Executive in her role as Chief Financial Officer effective November 1, 2021. Prior to her current role, Ms. Ahn was Senior Vice President, Wholesale Finance & Investor Relations since March 2019 and Senior Vice President, CFO Wholesale Finance since June 2016 and Vice President & Controller, Global Head of Financial Control, Capital Markets Finance since 2014.
Ms. Maria Douvas was appointed to the Group Executive in her role as Chief Legal Officer effective September 17, 2021. Prior to her current role, Ms. Douvas was Executive Vice President and General Counsel since February 2021, Senior Vice President, U.S. General Counsel and Global Head of Litigation since September 2018 and Vice President and Global Head of Litigation and Employment Law since April 2016.
Mr. Douglas Guzman was appointed to Group Executive in his role as Group Head, RBC Wealth Management & Insurance effective November 1, 2015 and assumed leadership of RBC Investor & Treasury Services effective November 1, 2019. Effective November 1, 2022, RBC eliminated the Investor & Treasury Services segment by moving Treasury Services to Capital Markets and Investor Services to Wealth Management, which Mr. Guzman continues to lead. Prior to his current role, Mr. Guzman was Managing Director and Head Global Investment Banking, Capital Markets since 2006.
Mr. Graeme Hepworth was appointed to Group Executive in his role as Chief Risk Officer of Royal Bank of Canada effective April 9, 2018. Prior to his current role, Mr. Hepworth was Executive Vice President, Group Risk Management, Retail and Commercial Risk since 2017, Senior Vice President, Group Risk Management, Personal & Commercial Banking since 2015.
Mr. Christoph Knoess was appointed to the Group Executive in his role as Chief Administrative Officer effective December 2, 2019. Prior to joining RBC, Mr. Knoess was a Partner in Digital, Technology and Organizational Agility in Banking at McKinsey & Company since 2017 and prior to that he was a Partner and Global Head of the Digital, Technology and Analytics Practice at Oliver Wyman since 2008.
Mr. David I. McKay was appointed President of Royal Bank of Canada effective in February 2014 and Chief Executive Officer effective in August 2014. Mr. McKay was appointed to Group Executive in his role as Group Head, Canadian Banking in April 2008 and was appointed Group Head, Personal & Commercial Banking effective October 31, 2012.
Mr. Neil McLaughlin was appointed to Group Executive in his role as Group Head, Personal & Commercial Banking effective May 2017. In September 2021, Mr. McLaughlin also assumed responsibility for RBC Ventures. Prior to his current role, Mr. McLaughlin was Executive Vice President, Business Financial Services, Personal & Commercial Banking since October 2014.
21
Mr. Derek Neldner was appointed to the Group Executive in his role as Group Head and CEO, Capital Markets effective November 1, 2019. Prior to his current role, Mr. Neldner was Global Head of Investment Banking since June 2018, and Head, Canadian and Asia Pacific Banking since June 2014. In addition to his leadership role with RBC Capital Markets, Derek is also Board Chair and Chief Executive Officer of RBC US Group Holdings LLC, an intermediate holding company (IHC) organized under U.S. law.
Ms. Kelly Pereira was appointed to Group Executive in her role as Chief Human Resources Officer effective June 1, 2022. Prior to her current role, Ms. Pereira was Senior Vice President, Talent Strategy and Solutions since June 2020, and Senior Vice President Leadership Development and Reimagine HR since July 2017.
Mr. Bruce Ross was appointed to Group Executive in his role as Group Head, Technology and Operations effective in January 2014. Prior to joining RBC, Mr. Ross was with IBM, holding a series of progressively more senior positions.
Ownership of Securities
To our knowledge, as at October 31, 2023, the directors and executive officers, as a group, beneficially own or exercise control or direction over less than one per cent (1%) of our common and preferred shares. None of our directors or executive officers holds shares of our subsidiaries except where required for qualification as a director of a subsidiary.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
To the best of our knowledge, no director or executive officer,
(a) | is, as at November 29, 2023 or has been, within the 10 years before, a director, chief executive officer or chief financial officer of any company (including our company), that while that person was acting in that capacity, |
(i) | was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under Canadian securities legislation,4 for a period of more than 30 consecutive days, or |
(ii) | was subject to an event that resulted, after the director or executive officer ceased to be a director, chief executive officer or chief financial officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under Canadian securities legislation,4 for a period of more than 30 consecutive days, or |
(b) | is, as at November 29, 2023 or has been, within the 10 years before, a director or executive officer of any company (including our company), that while that person was acting in that capacity or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or |
(c) | has, within the 10 years before November 29, 2023, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer, |
Except for the following:
Ms. Turcke is a director of Diamond Sports Group, LLC, which filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas on March 14, 2023. |
4 National Instrument 14-101 restricts the meaning of “securities legislation” to Canadian provincial and territorial legislation and “securities regulatory authority” to Canadian provincial and territorial securities regulatory authorities.
22
To the best of our knowledge, none of our directors or executive officers have been subject to (a) any penalties or sanctions imposed by a court relating to Canadian securities legislation5 or by a Canadian securities regulatory authority5 or has entered into a settlement agreement with a Canadian securities regulatory authority,5 or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
Conflicts of Interest
To the best of our knowledge, no director or executive officer has an existing or potential material conflict of interest with us or any of our subsidiaries.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
In the ordinary course of our business, we are routinely involved in or parties to various ongoing, pending and threatened legal actions and proceedings.
A description of certain legal proceedings to which we are a party appears in Note 25 “Legal and regulatory matters” beginning on page 223 of our 2023 Annual Consolidated Financial Statements, which note is incorporated by reference herein.
Since October 31, 2022, (a) there have been no penalties or sanctions imposed against us by a court relating to Canadian securities legislation5 or by a Canadian securities regulatory authority5 which are individually or in the aggregate material to the Bank, (b) there have been no other penalties or sanctions imposed by a court or regulatory body against us that would likely be considered important to a reasonable investor in making an investment decision, and (c) we have not entered into any settlement agreements with a court relating to Canadian securities legislation5 or with a Canadian securities regulatory authority5, except that Royal Bank of Canada entered into no-contest settlement agreements with the Ontario Securities Commission (OSC) and Authorité des Marchés Financiers (AMF) in October 2023, in relation to the failure to properly record the costs associated with internally developed software projects from 2008 through 2020. RBC does not admit or deny the allegations. The settlement included a voluntary payment of CAD $4 million to the OSC and AMF. This settlement was not material to RBC.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
To the best of our knowledge, there were no directors or executive officers or any associate or affiliate of a director or executive officer with a material interest in any transaction within the three most recently completed financial years or during the current financial year that has materially affected us or is reasonably expected to materially affect us.
5 National Instrument 14-101 restricts the meaning of “securities legislation” to Canadian provincial and territorial legislation and “securities regulatory authority” to Canadian provincial and territorial securities regulatory authorities.
23
TRANSFER AGENT AND REGISTRAR
For Canada, Computershare Trust Company of Canada is the transfer agent and registrar for our common shares and our preferred shares. Their principal offices are in the cities of: Montreal, QC, Toronto, ON, Calgary, AB and Vancouver, BC. In the U.S., Computershare Trust Company, N.A. is the co-transfer agent located in Canton, Massachusetts and Jersey City, New Jersey. In the U.K., Computershare Services PLC is the co-transfer agent located in Bristol, England.
EXPERTS
PricewaterhouseCoopers LLP (PwC), Chartered Professional Accountants, Licensed Public Accountants, audited our Annual Consolidated Financial Statements, which comprise the consolidated balance sheets as of October 31, 2023 and October 31, 2022 and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years then ended, including the related notes and the effectiveness of our internal control over financial reporting as of October 31, 2023. PwC has advised that they are independent with respect to the Bank within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario and the rules and regulations adopted by the SEC and the Public Company Accounting Oversight Board (United States).
AUDIT COMMITTEE
Audit Committee Mandate
The mandate of the Audit Committee is attached as Appendix C to this Annual Information Form.
Composition of Audit Committee
The Audit Committee consists of Frank Vettese (Chair), Toos N. Daruvala, Cynthia Devine, Barry Perry, Maryann Turcke and Bridget A. van Kralingen. The board has determined that each member of the Audit Committee is independent under our Director Independence Policy, which incorporates the independence standards under applicable Canadian and U.S. laws and regulations and none receives, directly or indirectly, any compensation from us other than ordinary course compensation for service as a member of the board of directors and its committees or of a board of directors of one or more of our subsidiaries. All members of the Audit Committee are financially literate within the meaning of National Instrument 52-110 – Audit Committees and of the Corporate Governance Standards of the NYSE. In considering the criteria for determining financial literacy, the board of directors looks at the ability of a director to read and understand a balance sheet, an income statement and a cash flow statement of a financial institution. The board has determined that each of Frank Vettese, Cynthia Devine and Barry Perry qualifies as an “audit committee financial expert” as defined by the SEC.
Relevant Education and Experience of Audit Committee Members
In addition to each member’s general business experience, the education and experience of each Audit Committee member that is relevant to the performance of their responsibilities as an Audit Committee member is as follows:
24
Frank Vettese, B.B.A., FCA, earned his Bachelor of Business Administration from the Schulich School of Business and is a Chartered Accountant and a fellow of the Canadian Institute of Chartered Accountants. Mr. Vettese was Managing Partner and Chief Executive of Deloitte Canada from 2012 to June 2019. Mr. Vettese has been a member of the Audit Committee since July 2019.
Toos N. Daruvala earned his MBA from the University of Michigan and his Bachelor of Technology degree in electrical engineering from the Indian Institute of Technology. Mr. Daruvala was Co-Chief Executive Officer of MIO Partners, Inc. from 2015 to 2021, and held various senior positions at McKinsey & Company from 1983 to 2015, including Senior Partner, Risk Practice and Director, Banking and Securities Practice. He concluded his 33 year career at McKinsey & Company by serving as Senior Advisor and Director Emeritus in 2016. Mr. Daruvala has been a member of the Audit Committee since April 2022.
Cynthia Devine, FCPA, FCA, HBA, earned her Honors Business Administration degree from Western University. Ms. Devine became a Fellow of the Institute of Chartered Accountants of Ontario in 2011. Ms. Devine is the interim President and Chief Executive Officer of Maple Leaf Sports & Entertainment. She was the Chief Financial Officer from 2017 to 2022. From 2003 to 2014, Ms. Devine served as Chief Financial Officer of Tim Hortons Inc., and from 2015 to 2017 served as Executive Vice President, Chief Financial Officer and Corporate Secretary of RioCan Real Estate Investment Trust. Ms. Devine serves as a director for Empire Company Limited/Sobeys Inc. Ms. Devine has been a member of the Audit Committee since July 2020.
Barry Perry earned his Bachelor of Commerce degree (Honours) from Memorial University of Newfoundland and is a Chartered Professional Accountant. Mr. Perry was President and Chief Executive Officer of Fortis Inc. from 2015 to 2020 and served as Executive Vice President of Finance and Chief Financial Officer from 2004 to 2014. Mr. Perry is a member of the boards of Capital Power Corporation and Canada Pension Plan Investment Board. Mr. Perry has been a member of the Audit Committee since August 2023.
Maryann Turcke, B.S., M.S., M.B.A, earned her Bachelor of Science in Civil Engineering degree from Queen’s University, her Master of Science in Engineering degree from the University of Toronto and her Master of Business Administration from Queen’s University. Ms. Turcke was Chief Operating Officer of the National Football League from 2018 to 2020, President, NFL Network, Digital Media, IT and Films from 2017 to 2018 and President of Bell Media from 2014 to 2017. Ms. Turcke is Senior Advisor of Brookfield Infrastructure Partners. Ms. Turcke has been a member of the Audit Committee since January 2020.
Bridget A. van Kralingen, M.C., B.C., earned her Bachelor of Commerce from the University of the Witwatersrand, South Africa, her Master of Commerce in Industrial and Organisational Psychology from the University of South Africa, and her honours degree in commerce from the University of Johannesburg. Ms. van Kralingen is Senior Vice-President, Special Projects of IBM Corporation. Ms. van Kralingen held various senior positions at IBM Corporation from 2004 to 2021, including Senior Vice-President, Global Markets and Senior Vice-President, Global Business Services. Ms. van Kralingen was Managing Partner at Deloitte Consulting, US from 2001 to 2004. Ms. van Kralingen is a member of the boards of the New York Historical Society and the Partnership for New York City. Ms. van Kralingen has been a member of the Audit Committee since August 2021.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires pre-approval by the Audit Committee of audit services and other services within permissible categories of non-audit services. The policy prohibits us from engaging the Bank’s independent auditor for “prohibited” categories of non-audit services. A copy of our Pre-Approval Policies and Procedures can be found in Appendix D.
25
Independent Registered Public Accounting Firm Fees
Following a tender process, PwC was appointed our independent auditor by the Board of Directors on January 29, 2016, which appointment was approved by the Bank’s shareholders at the Annual and Special Meeting of Common Shareholders held on April 6, 2016. Fees relating to the years ended October 31, 2023 and October 31, 2022 to PwC and its affiliates, including the nature of each category of fees, are detailed below.
|
Year ended October 31, 2023 ($Millions) |
|
|
Year ended October 31, 2022 ($Millions) |
|
|||||||||||||||||||
Bank and Subsidiaries |
Mutual Funds(1) |
Total | Bank and Subsidiaries |
Mutual Funds(1) |
Total | |||||||||||||||||||
Audit fees |
43.3 | 2.5 | 45.8 | 41.6 | 3.3 | 44.9 | ||||||||||||||||||
Audit-related fees |
10.4 | - | 10.4 | 9.9 | - | 9.9 | ||||||||||||||||||
Tax fees |
0.1 | 0.3 | 0.4 | 0.1 | 0.3 | 0.4 | ||||||||||||||||||
All other fees |
0.8 | 0.6 | 1.4 | 0.5 | 0.5 | 1.0 | ||||||||||||||||||
Total fees |
54.6 | 3.4 | 58.0 | 52.1 | 4.1 | 56.2 |
(1) The Mutual Funds category includes fees paid for professional services provided by PwC for certain mutual funds managed by subsidiaries of the Bank. In addition to other administrative costs, the subsidiaries are responsible for the auditors’ fees for professional services rendered in connection with the annual audit, statutory and regulatory filings and other services for the Mutual Funds in return for a fixed administration fee.
Audit Fees
Audit fees were paid for professional services rendered by the Bank’s independent auditor for the integrated audit of the 2023 Annual Consolidated Financial Statements of the Bank, including its audit of the effectiveness of our internal control over financial reporting, and any financial statement audits of our subsidiaries. In addition, audit fees were paid for services that generally only the Bank’s independent auditor reasonably can provide, which includes services provided in connection with statutory and regulatory filings, including those related to prospectuses and other offering documents.
Audit-Related Fees
Audit-related fees were paid for assurance and related services that are reasonably related to the performance of the audit or review of our 2023 Annual Consolidated Financial Statements and are not reported under the audit fees item above. These services consisted of:
• | employee benefit plan audits; |
• | due diligence related to mergers and acquisitions; |
• | consultations and audits in connection with acquisitions, including evaluating the accounting treatment for proposed transactions; |
• | attest services not required by statute or regulation; |
• | reporting on the effectiveness of internal controls as required by contract or for business reasons; |
• | the audits of various trusts and limited partnerships; and |
• | consultations regarding financial and reporting standards. |
Tax Fees
Tax fees were paid for tax compliance services including preparation of tax returns for certain mutual funds managed by subsidiaries of the Bank and a subscription for services to provide specific tax data and information to complete routine tax schedules and calculations for clients.
26
All Other Fees
These services consist of translation of financial statements and related continuous disclosure and other public documents containing financial information for us and certain of our subsidiaries, regulatory compliance services, as well as accounting and other research software subscriptions and publications.
ADDITIONAL INFORMATION
Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of our securities and securities authorized for issuance under equity compensation plans, where applicable, is contained in the Bank’s Management Proxy Circular for the most recent annual meeting of shareholders. Additional financial information is provided in our 2023 Annual Consolidated Financial Statements and 2023 Management’s Discussion and Analysis which are included in our 2023 Annual Report.
Copies of this Annual Information Form, our 2023 Annual Report and Management Proxy Circular in respect of the most recent annual meeting of shareholders may be obtained from Investor Relations at 200 Bay Street, South Tower, Toronto, Ontario, M5J 2J5.
This Annual Information Form, the 2023 Annual Consolidated Financial Statements and 2023 Management’s Discussion and Analysis, as well as additional information about us may be found on our website at rbc.com, on SEDAR+, the Canadian Securities Administrators’ website, at sedarplus.ca, and on the EDGAR section of the SEC’s website at sec.gov.
Information contained in or otherwise accessible through the websites mentioned in this Annual Information Form does not form a part of this Annual Information Form. All references in this Annual Information Form to websites are inactive textual references and are for your information only.
TRADEMARKS
Trademarks used in this Annual Information Form include the RBC LION & GLOBE Design, ROYAL BANK OF CANADA, RBC, RBC Insurance, RBC Investor Services and Leo LRCN Limited Recourse Trust which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or by its subsidiaries under license. All other trademarks mentioned in this Annual Information Form, which are not the property of Royal Bank of Canada, are owned by their respective holders.
27
APPENDIX A – PRINCIPAL SUBSIDIARIES
(Millions of Canadian dollars) | As at October 31, 2023 | |||||
|
||||||
Principal subsidiaries (1) | Principal office address (2) |
Carrying value of voting shares owned by the Bank (3) |
||||
|
||||||
Royal Bank Holding Inc. |
Toronto, Ontario, Canada | $ | 85,823 | |||
RBC Direct Investing Inc. |
Toronto, Ontario, Canada | |||||
RBC Insurance Holdings Inc. |
Mississauga, Ontario, Canada | |||||
RBC Life Insurance Company |
Mississauga, Ontario, Canada | |||||
Investment Holdings (Cayman) Limited |
George Town, Grand Cayman, Cayman Islands | |||||
RBC (Barbados) Funding Ltd. |
St. James, Barbados | |||||
Capital Funding Alberta Limited |
Calgary, Alberta, Canada | |||||
RBC Global Asset Management Inc. |
Toronto, Ontario, Canada | |||||
RBC Investor Services Trust |
Toronto, Ontario, Canada | |||||
RBC (Barbados) Trading Bank Corporation |
St. James, Barbados | |||||
|
||||||
RBC US Group Holdings LLC (2) |
Toronto, Ontario, Canada | 32,278 | ||||
RBC USA Holdco Corporation (2) |
New York, New York, U.S. | |||||
RBC Capital Markets, LLC (2) |
New York, New York, U.S. | |||||
City National Bank (2) |
Los Angeles, California, U.S. | |||||
|
||||||
RBC Dominion Securities Limited |
Toronto, Ontario, Canada | 15,290 | ||||
RBC Dominion Securities Inc. |
Toronto, Ontario, Canada | |||||
|
||||||
Royal Bank Mortgage Corporation |
Toronto, Ontario, Canada | 6,277 | ||||
|
||||||
RBC Europe Limited |
London, England | 2,977 | ||||
|
||||||
The Royal Trust Company |
Montreal, Quebec, Canada | 1,367 | ||||
|
||||||
Royal Trust Corporation of Canada |
Toronto, Ontario, Canada | 553 | ||||
|
(1) The Bank directly or indirectly controls each subsidiary.
(2) Each subsidiary is incorporated or organized under the laws of the state, province or country in which the principal office is situated, except for RBC US Group Holdings LLC and RBC USA Holdco Corporation which are incorporated under the laws of the State of Delaware, U.S., RBC Capital Markets, LLC, which is organized under the laws of the State of Minnesota, U.S., and City National Bank which is a national bank, chartered under the laws of the United States of America.
(3) The carrying value of voting shares is stated as the Bank’s equity in such investments.
28
APPENDIX B – EXPLANATION OF RATINGS AND OUTLOOK
Institution | Rating | Outlook | ||||
Moody’s | ● Obligations rated ‘Aa’ are judged to be of high quality and are subject to very low credit risk. ● Obligations rated ‘A’ are judged to be upper medium-grade and are subject to low credit risk. ● Obligations rated ‘Baa’ are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. ● Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. ● Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms. ● Ratings of ‘P-1’ reflect a superior ability to repay short-term obligations.
|
A Moody’s rating outlook is an opinion regarding the likely rating direction over the medium term. | ||||
Standard & Poor’s | ● An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. ● An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitments on the obligation is still strong. ● An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments on the obligation. ● Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. ● A short-term obligation rated ‘A-1’ is rated in the highest category by S&P Global Ratings. The obligor’s capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitments on these obligations is extremely strong. A short term obligation rated ‘A-1+’ has extremely strong capacity to meet its financial commitments. |
An S&P Global Ratings outlook assesses the potential direction of a long-term credit rating over the intermediate term, which is generally up to two years for investment grade and generally up to one year for speculative grade. |
29
Institution | Rating | Outlook | ||||
Fitch | ● ‘AA’ (Very High Credit Quality) ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. ● ‘A’ (High Credit Quality) ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. ● ‘BBB’ (Good Credit Quality) ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. ● The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. ● ‘F1’ (Highest Short-Term Credit Quality) ratings indicate the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
|
Outlooks indicate the direction a rating is likely to move over a one- to two-year period. They reflect financial or other trends that have not yet reached or been sustained the level that would cause a rating action, but which may do so if such trends continue. | ||||
DBRS | ● An obligation rated ‘AA’ is of superior credit quality. The capacity for the payment of financial obligations is considered high. Credit quality differs from AAA only to a small degree. Unlikely to be significantly vulnerable to future events. ● An obligation rated ‘A’ is of good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser credit quality than AA. May be vulnerable to future events, but qualifying negative factors are considered manageable. ● All rating categories from AA to CCC contain the subcategories (high) and (low). The absence of either a (high) or (low) designation indicates the credit rating is in the middle of the category. ● R-1 ratings indicate the highest credit quality. The capacity for the payment of short-term financial obligations as they fall due is exceptionally high. Unlikely to be adversely affected by future events. The R-1 and R-2 rating categories are further denoted by the subcategories “(high)”, “(middle)”, and “(low)”. ● Preferred shares rated Pfd-1 are generally of superior credit quality and are supported by entities with strong earnings and balance sheet characteristics. Pfd-1 ratings generally correspond with issuers with a AAA or AA category reference point. ● Preferred shares rated Pfd-2 are generally of good credit quality. Protection of dividends and principal is still substantial, but earnings, the balance sheet and coverage ratios are not as strong as Pfd-1 rated companies. Generally, Pfd-2 ratings correspond with issuers with an A category or higher reference point. ● Each rating category of the preferred shares may be denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the middle of the category. |
Rating Trends provide guidance in respect of DBRS Morningstar’s opinion regarding the outlook for a rating. Rating Trends have three categories: “Positive”, “Stable” or “Negative”. The Rating Trend indicates the direction in which DBRS Morningstar considers the rating may move if present circumstances continue, or in certain cases as it relates to the Corporate Finance sector, unless challenges are addressed by the issuer. |
30
WHAT THE RATINGS ADDRESS:
Short-term and Long-term Senior Debt
Short-term and long-term senior debt credit ratings are the current opinion of the rating agency on creditworthiness of an obligor with respect to fixed-income obligations whose original maturity is of a short and medium to long-term nature, respectively. They address the possibility that a financial obligation will not be honoured as promised and reflect both the likelihood of default and any financial loss suffered in the event of default.
Subordinated Debt
Subordinated debt credit ratings are the current opinion of the rating agency on creditworthiness of an obligor with respect to a specific financial obligation and a specific class of financial obligation for a specific financial program. Ratings take into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
Preferred Shares
Preferred shares ratings address the issuer’s capacity and willingness to pay dividends and principal, in case of limited life, on a timely basis. They address the likelihood of timely payment of dividends, notwithstanding the legal ability to pass on or defer a dividend payment.
Rating Outlook
Rating Outlook assesses the potential direction of a credit rating over the intermediate to longer term. In determining a Rating Outlook consideration is given to any changes in the economic and fundamental business conditions. An Outlook is not necessarily a precursor of a rating change.
31
APPENDIX C – AUDIT COMMITTEE MANDATE
ROYAL BANK OF CANADA
(the Bank)
November 29, 2023
AUDIT COMMITTEE MANDATE
A. | PURPOSE AND DUTIES OF THE COMMITTEE |
1. | General Purpose |
The Committee is responsible for assisting the Bank’s board of directors (the Board) in its oversight of (i) the integrity of the Bank’s financial statements; (ii) the qualifications, performance and independence of the external auditors; (iii) the performance of the Bank’s internal audit function; (iv) internal controls; and (v) compliance with legal and regulatory requirements.
2. | Financial Statements and other Documents |
The Committee will regularly review and discuss the following:
a) | prior to review and approval by the Board, the Bank’s annual statement which includes its annual consolidated financial statements, its quarterly financial statements, and related management’s discussion and analysis; |
b) | earnings releases on interim and annual results, the annual information form, the annual report and other financial information, earnings guidance and presentations provided to analysts, rating agencies and the public; |
c) | such other periodic disclosure documents as requested by regulators or that may be required by law; |
d) | investments and transactions brought to the Committee’s attention that could adversely affect the Bank’s well-being; |
e) | prospectuses relating to the issuance of securities of the Bank; |
f) | representations provided by management to the auditors, where appropriate; |
g) | reports on any litigation matters which could significantly affect the Bank; |
h) | tax matters that are material to the financial statements; |
i) | reports from the Chief Compliance Officer (the CCO) on regulatory compliance matters, and from the Chief Anti-Money Laundering Officer (the CAMLO) on anti-money laundering matters; and |
j) | other reports as required to be communicated by the auditors by the Canadian Public Accountability Board, the Office of the Superintendent of Financial Institutions, and the U.S. Public Company Accounting Oversight Board. |
32
Moreover, the Committee will ensure that adequate procedures are in place for the review of the Bank’s public disclosure of financial information derived from the Bank’s financial statements, and will periodically assess the adequacy of these procedures.
3. | External Auditor |
Subject to the shareholders’ powers conferred by the Bank Act, the Committee will recommend the appointment (or revocation thereof) of any registered public accounting firm (including the external auditor) engaged to prepare or issue an audit report or to perform other audit, review or attest services. The Committee will fix the remuneration and oversee the work of these accounting firms, including the resolution of disagreements with management regarding financial reporting. Such accounting firms will report directly to the Committee.
Moreover, as part of its oversight of the external auditor the Committee will:
a) | meet with the external auditor to review and discuss the annual audit plan, the results of the audit, the auditor’s report with respect to the annual statement, and all other reports, returns and transactions as required by applicable laws; |
b) | approve all audit engagement fees and terms, as well as the terms of any permitted non-audit services to be provided by the external auditor to the Bank, with such approvals to be given specifically or pursuant to preapproval policies and procedures adopted by the Committee in accordance with applicable laws; |
c) | review any concerns that may be brought forward by the external auditor, including any difficulties they may encounter in conducting their audit, as well as management’s response to such concerns; |
d) | review material correspondence between the external auditor and management relating to audit findings; |
e) | taking into account the opinions of management and the Bank’s internal auditor, annually assess the external auditor’s qualifications and performance, including relevant experience, geographical reach, professional scepticism, quality of services and communications, and independence and objectivity; |
f) | review formal written statements delineating all relationships between the external auditor and the Bank that may impact its independence and objectivity; |
g) | annually assess the risk of the external auditor withdrawing from the audit; |
h) | discuss with the external auditor and with management the annual audited financial statements and quarterly financial statements, as well as related management’s discussion and analysis; |
i) | review hiring policies concerning partners, employees and former partners and employees of the present and former external auditors; |
j) | review and evaluate the qualifications, performance and independence of the external auditor’s lead partner and discuss the timing and process for implementing the rotation of the lead audit partner, the concurring audit partners and any other active audit engagement team partner; |
33
k) | on a periodic basis, perform a comprehensive review of the performance of the External Auditor over multiple years to assess the audit firm, its independence and application of professional skepticism; and |
l) | at least annually, obtain and review a report by the external auditor describing: (i) the external auditor’s internal quality-control procedures; (ii) the external auditor’s internal procedures to ensure independence; and (iii) any material issues raised by the most recent internal quality-control review or peer review of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditor, and any steps taken to deal with any such issues. |
4. | Oversight of Independent Control Functions |
The Committee will oversee the finance, compliance, anti-money laundering and internal audit functions, having regard to their independence from the businesses whose activities they review. The Committee will review and approve the appointment or removal of each of the Chief Financial Officer (the CFO), the CCO, the CAMLO, and the Chief Audit Executive (the CAE), as well as their respective mandates and the mandates or charters of their respective functions. The Committee will approve each of the functions’ organizational structures, budgets and resources. Every year the Committee will assess the performance of each of the CFO, CCO, CAMLO and CAE and the effectiveness their respective functions. It will also periodically review independent assessments of each of these functions. Moreover, it will annually review and approve the internal audit function’s overall risk methodology.
5. | Internal Control |
The Committee will assist in the oversight of internal control by engaging in the following activities:
a) | requiring management to implement and maintain appropriate systems of internal control, including internal controls over financial reporting and for the prevention and detection of fraud and error; |
b) | evaluating and approving systems of internal control and meeting regularly with the CAE and with management to assess the adequacy and effectiveness of these systems; |
c) | receiving reasonable assurances on a regular basis from management that the organization is in control; |
d) | reviewing reports from the Chief Executive Officer (the CEO) and the CFO regarding any significant deficiency or material weakness in the design or operation of internal controls over financial reporting and the detection of fraud involving management or other employees who have a significant role in the Bank’s internal control over financial reporting; |
e) | reviewing and approving the Bank’s disclosure policy and reviewing reports on the effectiveness of the Bank’s disclosure controls and procedures; |
f) | reviewing the process relating to the CEO and CFO’s certifications on the design and effectiveness of the Bank’s disclosure controls and procedures and internal control over financial reporting, and the integrity of the Bank’s quarterly and annual financial statements. |
34
6. | Internal Auditor |
The Committee will regularly meet with the CAE to review and approve the annual internal audit plan and review internal audit activities. The Committee will review and discuss with the CAE issues reported to management by the internal audit function and management’s responses and/or corrective actions. The Committee will also evaluate the status of identified control weaknesses, as well as the adequacy and degree of compliance with the Bank’s systems of internal control. Other issues that the Committee may review with the CAE include audit scope, information access, resource limitations or any other difficulties encountered by the internal audit function.
7. | Capital Management |
The Committee will review capital transactions and may designate and authorize the issue of (i) First Preferred Shares and (ii) securities qualifying as additional Tier 1 capital under capital adequacy guidelines issued by the Superintendent of Financial Institutions. The Committee may also review and approve securities disclosure documents in connection with issues of the Bank’s subordinated indebtedness as provided in the relevant resolution of the Board.
The Committee will review the adequacy and effectiveness of internal controls related to capital management. It will also discuss with the external auditors any matters arising from the audit that may have an impact on regulatory or capital disclosures included in the Bank’s annual statement.
8. | Committee Reports |
The Committee is responsible for preparing any report from the Committee that may be included in the Bank’s annual proxy statement.
9. | Other |
a) | The Committee will discuss major issues regarding accounting principles and financial statement presentations, including significant changes in the Bank’s selection or application of accounting principles and analyses prepared by management or the external auditors regarding financial reporting issues and judgments made in connection with the preparation of the financial statements; |
b) | The Committee will establish procedures for managing complaints received by the Bank regarding accounting, internal accounting controls or auditing matters, as well as procedures for the confidential and anonymous submission by employees of concerns regarding accounting, internal accounting controls or auditing matters. The Committee will receive reports from the Vice-President, Client Complaints Appeal Office at each Committee meeting and will meet with the Vice-President, Client Complaints Appeal Office annually in relation to these procedures; |
c) | The Committee will review and discuss any reports concerning material violations submitted to it by the Bank’s legal counsel pursuant to applicable law and policy; |
d) | The Committee will discuss the major financial risk exposures of the Bank and the steps management has taken to monitor and control such exposures; |
e) | Subject to the laws applicable to the subsidiary, the Committee may perform for and on behalf of a subsidiary the functions of an audit committee of the subsidiary. |
35
B. | COMMITTEE COMPOSITION AND PROCEDURES |
1. | Composition of Committee |
The Committee will be composed of five or more directors. No Committee member may be an officer or employee of the Bank or of an affiliate of the Bank. Each Committee member will be (i) unaffiliated, as determined in accordance with the regulations made under the Bank Act, and (ii) independent, as determined by director independence standards adopted by the Board. Committee membership will reflect a balance of experience and expertise required to fulfill the Committee’s mandate.
All Committee members will be financially literate or become financially literate within a reasonable period after appointment to the Committee. At least one member will have accounting or financial management expertise. No member may serve on the audit committees of more than two other public companies, unless the Board determines such simultaneous service would not impair the member’s ability to serve effectively on the Committee.
2. | Appointment of Committee Members |
The Board will appoint or reappoint the Committee members at the annual organizational meeting of the directors. In the normal course members will serve a minimum of three years. Each member will remain a member until a successor is appointed, unless the member resigns, is removed or ceases to be a director. The Board may fill a vacancy that occurs in the Committee at any time.
3. | Committee Chair and Secretary |
The Board will appoint or reappoint a Committee Chair from among the members of the Committee. If the Board fails to do so, the Committee members will make the appointment or re-appointment. In the normal course the Committee Chair will serve a minimum of three years. The Committee Chair will not be a former employee of the Bank or of an affiliate. The Secretary of the Committee need not be a director.
4. | Time and Place of Meetings |
Meetings may be called by any Committee member, the external auditors, the CFO, the Board Chair, the CEO or the Chief Audit Executive. The Committee members will determine the time and place of and the procedure at meetings, provided that the Committee meets at least quarterly. The Committee members may participate in meetings in person or by telephone, electronic or other communications facilities. The Committee may request any officer or employee of the Bank or the Bank’s outside counsel or external auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
5. | Quorum |
A quorum for meetings will be three members.
6. | Notice of Meetings |
Notice of the time and place of each meeting will be generally given in writing or by telephone, or by electronic or other communications facilities, to each Committee member and to the external auditors at least 24 hours prior to the time fixed for such meeting; however, The Committee may designate a sub-committee to review any matter within the Committee’s mandate.
36
a) | a member may in any manner waive notice of a meeting and attendance of a member at a meeting is a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called; |
b) | a resolution in writing signed by all the members entitled to vote on that resolution at a Committee meeting, other than a resolution of the Committee carrying out its duties under subsection 194(3) of the Bank Act, will be as valid as if it had been passed at a meeting of the Committee; and |
c) | capital transactions may be reviewed and/or authorized at a meeting of which at least one hour prior notice is given. |
7. | Delegation |
8. | Reporting to the Board |
The Committee will report to the Board following each meeting with respect to its activities and recommendations. It will also report to the Board on the annual statement and returns that must be approved by the directors under the Bank Act.
9. | Access to Management and External Advisors |
In fulfilling its responsibilities, the Committee will have unrestricted access to management and employees of the Bank. The Committee will select, retain, oversee, terminate and approve the fees of any external advisor that the Committee deems necessary, including any legal or accounting advisor, to assist it in fulfilling its responsibilities. The Bank will provide appropriate funding, as determined by the Committee, for any such engagement.
The Committee may also investigate any matter with full access to all books, records, facilities, management and employees of the Bank.
10. | Private Meetings |
At least quarterly the Committee will meet with no members of management present and have separate private meetings with the external auditors, and each of the CAE, the CFO, the CCO, the CAMLO and the Chief Legal Officer, to discuss any matters that the Committee or these parties believe should be discussed.
11. | Minutes |
Minutes of meetings of the Committee will be maintained by the Secretary and subsequently presented to the Committee and to the Board, if required by the Board.
12. | Evaluation of Effectiveness and Review of Mandate |
The Committee will annually review and assess the adequacy of its mandate and evaluate its effectiveness in fulfilling its mandate.
37
APPENDIX D – PRE-APPROVAL POLICIES AND PROCEDURES
Policies and Procedures
for the Monitoring, and Pre-Approval of Services
to be Performed by Public Accounting Firms
and the Review of the External Auditors
(effective January 25, 2023)
Mandate
1. | The mandate of the Audit Committee established by the Board of Directors (“Board”) confers on the Audit Committee the authority and responsibility (among other things) to: |
• | Pre-approve all audit and any legally permissible non-audit services to be provided by the external auditors and all audit, review and attest services provided by any other public accounting firm, with such approval to be given either specifically or pursuant to pre-approval policies and procedures adopted by the Audit Committee; and |
• | To complete an annual and five year comprehensive reviews of the external auditor’s performance and to recommend to the Board the selection and termination of the external auditor subject to shareholder approval. |
Purpose
2. | These Policies and Procedures are intended to: |
a) | specify the methods by which the Audit Committee may pre-approve the provision of audit, review and attest services by any public accounting firm to the Bank and its subsidiaries; |
b) | specify the methods by which the Audit Committee may pre-approve the provision of non-audit services to the Bank and its subsidiaries by the Bank’s external auditors and their affiliates (the “auditors”) that do not impair the independence of the auditors under applicable laws and professional standards, including the rules of the Chartered Professional Accountants Canada, the Public Company Accounting Oversight Board (“PCAOB”), the Canadian Securities Administrators and the U.S. Securities and Exchange Commission; |
c) | set forth procedures designed to ensure that any services to be provided by the auditors and that any audit, review or attestation services to be performed by any other public accounting firm have been properly authorized and pre-approved under the authority of the Audit Committee, and that the Audit Committee is promptly informed of each service; |
d) | ensure that the Audit Committee’s responsibilities are not delegated to management in violation of applicable law; |
e) | specify the policies relating to the annual and comprehensive evaluation of the external auditor and selection of the external auditor by the Audit Committee for recommendation to the Board. |
Required Approval of Audit and Non-Audit Services
3. | The Audit Committee shall pre-approve all engagements of the auditors by: |
a) | the Bank; or |
b) | any subsidiary. |
4. | The Audit Committee shall pre-approve all engagements of any public accounting firm to provide audit, review or attest services to: |
a) | the Bank; or |
b) | any subsidiary. |
38
5. | The Audit Committee shall evidence its pre-approval by resolution of the Audit Committee or through the exercise of delegated authority in accordance with these Policies and Procedures. |
6. | “Subsidiary” has the meaning set forth in Rule 210.1-02(x) of the U.S. Securities and Exchange Commission’s Regulation S-X. |
7. | For the purpose of these Policies and Procedures and any pre-approval: |
a) | “Audit services” include services that are a necessary part of the audit process and any activity that is a necessary procedure used by the accountant in reaching opinions on the financial statements and on internal control over financial reporting as is required under applicable auditing standards (“AAS”), including technical reviews to reach an audit judgment on complex accounting issues; |
b) | The term “audit services” is broader than those services strictly required to perform an audit pursuant to AAS and include such services as: |
i) | the issuance of comfort letters and consents in connection with offerings of securities; |
ii) | the performance of domestic and foreign statutory audits; |
iii) | attest services required by statute or regulation; and |
iv) | assistance with and review of documents filed with the Office of the Superintendent of Financial Institutions, Canadian Securities Administrators, the Securities and Exchange Commission, the Board of Governors of the Federal Reserve Board and other regulators having jurisdiction over the activities of the Bank and its subsidiaries, and responding to comments from such regulators; |
c) | “Audit-related” services are assurance and related services traditionally performed by the Bank’s independent auditor and that are reasonably related to the performance of the audit or review of financial statements and not categorized under “audit fees” for disclosure purposes. |
“Audit-related services” include:
i) | employee benefit plan audits; |
ii) | due diligence related to mergers and acquisitions, |
iii) | consultations and audits in connection with acquisitions, including evaluating the accounting treatment for proposed transactions; |
iv) | reporting on the effectiveness of internal controls as required by contract or for business reasons; |
v) | the audits of various trusts and limited partnerships; |
vi) | attest services not required by statute or regulation; and |
vii) | consultations regarding financial accounting and reporting standards. |
Non-financial operational audits are not “audit-related” services.
d) | “Review services” are services applied to unaudited financial statements and consist of the inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to financial statements for them to be in conformity with International Financial Reporting Standards or, if applicable, any other comprehensive basis of accounting. |
e) | “Attest” services are engagements where the accountant issues an examination, a review, or an agreed-upon procedures report on a subject matter, or an assertion about the subject matter that is the responsibility of another party. Examples of the subject matter of an “attest” engagement include: examinations (i.e., audits) of financial forecasts and projections; reviews of pro-forma financial information; reporting on a company’s internal control over financial reporting; and examinations of compliance with contractual arrangements or laws and regulations. |
39
f) | A “subsidiary” of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries. |
External Auditor Selection and Appointment
8. | The Audit Committee shall monitor, review and assess the quality of the external auditor on an annual basis. The annual assessment will include: |
a) | quality and thoroughness of the audit approach and methodology; |
b) | level of professional skepticism, and critical judgments applied by the audit team; |
c) | independence of the external audit firm and the engagement partner; |
d) | skills and knowledge of the audit team; |
e) | level of understanding of our businesses and the financial services industry; |
f) | sufficiency of resources and ability to complete the audit in a timely manner; |
g) | partner rotation; |
h) | value for money; |
i) | quality of communications; |
j) | risk of likelihood of withdrawal from the audit; |
k) | input from senior management of RBC; |
l) | input from RBC Internal Audit; |
m) | a self-assessment prepared by the auditor; and |
n) | audit quality metrics and other matters as determined by the Audit Committee or the Board of Directors. |
9. | At least every five years the Audit Committee will conduct a comprehensive assessment of the external auditor. The assessment will include: |
a) | considerations included within the annual assessment; |
b) | performance since the last comprehensive review, or appointment of the external auditor; |
c) | quality and continuity of the engagement team; |
d) | tenure of the auditor; |
e) | incidence of independence threats and effectiveness of applied safeguards; |
f) | track record of the auditor applying professional skepticism; and |
g) | responsiveness to changes in the Bank’s businesses (i.e. significant acquisitions or changes to systems) and calls for improvement from regulators, inspectors, Audit Committee or management. |
10. | The Audit Committee will take the following into account in deciding whether to recommend the tendering of the external audit engagement of the Bank: |
a) | the results of the annual and comprehensive assessments (refer to factors described in sections 8 and 9); |
b) | the impact of regulatory and legislative requirements, including mandatory tendering and rotation requirements on the Bank and its subsidiaries; and |
c) | other factors deemed relevant by the Audit Committee or the Board. |
Delegation
11. | The Audit Committee may from time to time delegate to one or more of its members who are “independent” (within the meanings of applicable law and the rules or policies of a securities commission having jurisdiction, and the New York Stock Exchange) the power to pre-approve from time to time: |
a) | audit, audit-related, review or attest services to be provided by any public accounting firm (including the auditors) that have not been otherwise approved by the Audit Committee; |
b) | permissible non-audit services to be provided by the auditors that have not otherwise been approved by the Audit Committee, and |
c) | changes in the scope of pre-approved engagements and the maximum estimated fees for engagements that have been pre-approved by the Audit Committee. |
40
12. | The member(s) exercising such delegated authority must report at the next regularly scheduled meeting of the Audit Committee any services that were pre-approved under this delegated authority since the date of the last regularly scheduled meeting. |
13. | The member(s) exercising delegated authority may evidence his or her approval by signing an instrument in writing that describes the engagement with reasonable specificity, or by signing an engagement letter containing such a description. |
14. | In addition, member(s) exercising delegated authority may pre-approve an engagement orally, if any such oral approval is promptly confirmed in writing. Such written confirmation may be given by fax or e-mail and must describe the engagement with reasonable specificity. |
15. | The Audit Committee may pre-approve a limited ($500,000) management fee addendum budget on an annual basis relating to fees that may arise subsequent to submission of fees for approval at the next scheduled meeting of the Audit Committee for engagements that must either commence or are required to be completed in advance of the next scheduled meeting of the Audit Committee. Any engagement subject to this budget will be limited to those with little or no risk of independence breaches, and will be reported to the Audit Committee at the next scheduled meeting. The limitation on the scope of services only extend to: (i) addendums to existing statutory audit engagements, (ii) new audit and audit-related engagements; and (iii) audit-related services related to Service Organization Control 1 reports and include a limitation on fee increases to one-half or less of the original pre-approved fee, capped at a maximum of $100,000 per engagement. |
Responsibilities of External Auditors
16. | To support the independence process, the external auditors shall: |
a) | confirm in engagement letters that performance of the work will not impair independence; |
b) | satisfy the Audit Committee that they have in place comprehensive internal policies and processes to ensure adherence, world-wide, to independence requirements, including robust monitoring and communications; |
c) | provide communication and confirmation to the Audit Committee on independence on a regular basis, and at least annually; |
d) | provide for Audit Committee approval, in connection with each annual audit engagement, a scope of services outlining the full and limited scope areas of the consolidated bank audit, and overview of all statutory audits and regulatory/client driven engagements to be performed and to perform a review of the detailed description of audit-related services outlined by management; |
e) | utilize the tracking numbers assigned by management to all pre-approved services in all fee billings and correspondence, provide detailed annual fee reporting and review management’s detailed quarterly fee reporting. |
f) | communicate to the Audit Committee all matters required to be communicated by the Canadian Public Accountability Board and U.S. Public Company Accounting Oversight Board. |
g) | maintain certification by the Canadian Public Accountability Board and registration with the U.S. Public Company Accounting Oversight Board; and |
h) | review their partner rotation plan and advise the Audit Committee on an annual basis. |
Engagements
17. | The Audit Committee will not, as a general rule, pre-approve a service more than one year prior to the time at which it is anticipated that the firm of accountants will be engaged to provide the service. |
18. | Engagements will not be considered to be revolving in nature and may not operate from year-to-year without re-approval. |
41
19. | All audit, audit-related, and non-audit services to be provided by the auditor, and all audit, audit-related, review or attest services to be provided by any public accounting firm, shall be provided pursuant to an engagement letter that shall: |
a) | be in writing and signed by the auditors or public accounting firm; |
b) | specify the particular services to be provided; |
c) | specify the period in which the services will be performed; |
d) | specify the maximum total fees to be paid; and |
e) | in the case of engagements of the auditors, include a confirmation by the auditors that the services are not within a category of services the provision of which would impair their independence under applicable law and Canadian and U.S. generally accepted auditing standards. |
20. | Management shall, before signing and delivering an engagement letter on behalf of the Bank or a subsidiary and before authorizing the commencement of an engagement: |
a) | obtain an engagement letter in accordance with these Policies and Procedures; |
b) | confirm that the services are described in the engagement letter accurately and with reasonable specificity; |
c) | obtain confirmation from the auditors that they have conducted an analysis that supports their conclusion that performance of the services will not impair their independence; |
d) | with respect to engagements for the provision of services other than audit and audit-related services, obtain confirmation from legal counsel of the Bank that performance of the services will not impair independence; and |
e) | verify that the performance of the services has specifically been approved by the Audit Committee or a member in accordance with authority delegated by the Audit Committee. |
All engagement letters entered into pursuant to these Policies and Procedures shall be made available to the Audit Committee upon request.
Tax Services
21. | The Audit Committee, and any member in the exercise of delegated power, shall consider the provision of tax services by the auditors on an engagement-by-engagement basis. |
22. | The Audit Committee shall not pre-approve, and any member of the Audit Committee may not exercise delegated power to engage the auditors to provide, tax services to the Bank or a subsidiary: |
a) | to represent the Bank or a subsidiary before a tax or other court; |
b) | if the provision of the services would be prohibited, as prescribed by paragraph 26 of these Policies and Procedures; or |
c) | related to marketing, planning or opinion in favour of the tax treatment of (1) a transaction offered under conditions of confidentiality and for which a fee has been or will be paid by the Bank; or (2) a transaction that was initially recommended directly or indirectly, by the accountant and a significant purpose of which is tax avoidance, unless the proposed tax treatment is at least more likely than not to be allowable under applicable tax laws. |
23. | The Audit Committee shall not pre-approve, and any member of the Audit Committee may not exercise delegated power to engage the auditors to provide, tax services to a person in a financial oversight role at the Bank, or an immediate family member of such a person, except as would be permitted by the PCAOB rules. |
Other Non-Audit Services
24. | The Audit Committee, and any member in the exercise of delegated power, shall consider the provision of other non-audit services (non-audit services other than audit-related services and tax services, and including non-audit services relating to internal control and business recovery services) by the auditors on an engagement-by-engagement basis. Any approval of non-audit services relating to internal control must be preceded by a discussion with the auditors of the potential effects of the services on independence as required by the rules of the PCAOB. |
42
Value-Added Services
25. | The Audit Committee recognizes and approves of the fact that the auditors from time to time provide, without charge or commitment, value added services to the Bank and its subsidiaries that do not involve an engagement of the auditors. Such value added services may include surveys, educational sessions, workshops, roundtable meetings with peers, benchmarking studies, and monitoring of contest draws as an independent observer. The Audit Committee receives and reviews periodic reports from management and the auditors providing representative examples of such services as part of its monitoring of the Bank’s overall relationship with the auditors. |
Prohibited Services
26. | The Audit Committee shall not pre-approve, and any member may not exercise delegated power to engage the auditors to provide, any services, including tax services or business recovery services, that (i) provide for a contingency or commission fee arrangement; or (ii) involve the auditors performing any of the non-audit services set forth in paragraph (c)(4) of Rule 210.2-01 of the U.S. Securities and Exchange Commission’s Regulation S-X, which include: |
a. | providing bookkeeping or other services related to the accounting records or financial statements of the Bank or any of its subsidiaries, |
b. | providing financial information systems design and implementation to the Bank or any of its subsidiaries, |
c. | providing appraisal or valuation services, fairness opinions, or contribution-in-kind reports to the Bank or any of its subsidiaries, |
d. | providing actuarial services to the Bank or any of its subsidiaries, |
e. | providing internal audit outsourcing services to the Bank or any of its subsidiaries, |
f. | functioning in the role of management for the Bank or any of its subsidiaries, |
g. | providing human resources services to the Bank or any of its subsidiaries, |
h. | providing broker-dealer, investment adviser, or investment banking services to the Bank or any of its subsidiaries, |
i. | providing legal services to the Bank or any of its subsidiaries, |
j. | providing services that fall within the category of “expert” services that are prohibited by applicable law to the Bank or any of its subsidiaries, |
k. | auditing their own work in relation to the Bank or any of its subsidiaries, |
l. | serving in an advocacy role for the Bank or any of its subsidiaries, or |
m. | providing services to the Bank or any of its subsidiaries that would otherwise compromise their independence under applicable regulatory guidance. |
For the purposes of the Prohibited Services listed in Section 26, a “subsidiary” includes any entity for which the Bank uses the equity method of accounting and where it is material to the Bank. Therefore, the Audit Committee is not permitted to pre-approve the provision of the prohibited services listed above by the auditors to these entities.
Timely Reporting to the Audit Committee
27. | Management shall provide a quarterly written report to the Audit Committee of services performed and related fees, and if necessary, proposals for approval of any increase in fees or new engagements at the scheduled meetings of the Audit Committee held following the end of each fiscal quarter end, or more frequently if required. |
43
No Delegation to Management
28. | Nothing in these Policies and Procedures shall be interpreted as a delegation to management of the Audit Committee’s responsibilities in violation of applicable law. |
Effective Date
29. | These updated Policies and Procedures are effective as of and from January 25, 2023. |
Disclosure
30. | The Bank shall disclose these Policies and Procedures in its periodic filings, as required by applicable law. |
Review
31. | The Audit Committee shall review and reassess the adequacy of these Policies and Procedures on a triennial basis. |
44
Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the fiscal year ended October 31, 2023, compared to the preceding fiscal year. This MD&A should be read in conjunction with our 2023 Annual Consolidated Financial Statements and related notes and is dated November 29, 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 2023
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. |
22 |
||||
23 |
||||
23 | ||||
24 | ||||
24 | ||||
24 | ||||
25 | ||||
26 | ||||
26 |
||||
26 | ||||
27 | ||||
27 | ||||
29 | ||||
29 | ||||
30 | ||||
30 | ||||
31 | ||||
32 |
||||
32 | ||||
32 |
33 | ||||
37 | ||||
42 | ||||
49 | ||||
53 | ||||
57 | ||||
57 |
||||
57 | ||||
58 | ||||
60 |
||||
60 | ||||
60 | ||||
63 |
||||
63 | ||||
65 | ||||
66 | ||||
71 |
||||
71 | ||||
81 | ||||
86 | ||||
100 |
100 |
||||
100 | ||||
102 | ||||
103 |
||||
103 | ||||
103 | ||||
104 | ||||
105 | ||||
105 |
||||
105 | ||||
106 |
||||
109 |
||||
118 |
||||
118 | ||||
122 | ||||
122 |
||||
122 |
||||
130 |
||||
132 |
Caution regarding forward-looking statements |
Overview and outlook |
Selected financial and other highlights |
Table 1 |
(Millions of Canadian dollars, except per share, number of and percentage amounts) |
2023 |
2022 |
2023 vs. 2022 Increase (decrease) |
|||||||||||||
Total revenue |
$ |
56,129 |
$ | 48,985 | $ |
7,144 |
14.6% |
|||||||||
Provision for credit losses (PCL) |
2,468 |
484 | 1,984 |
n.m. |
||||||||||||
Insurance policyholder benefits, claims and acquisition expense (PBCAE) |
4,022 |
1,783 | 2,239 |
n.m. |
||||||||||||
Non-interest expense |
31,173 |
26,609 | 4,564 |
17.2% |
||||||||||||
Income before income taxes |
18,466 |
20,109 | (1,643 |
) |
(8.2)% |
|||||||||||
Net income |
$ |
14,866 |
$ | 15,807 | $ |
(941 |
) |
(6.0)% |
||||||||
Net income – adjusted (1)
|
16,083 |
15,998 | 85 |
0.5% |
||||||||||||
Segments – net income |
||||||||||||||||
Personal & Commercial Banking |
$ |
8,266 |
$ | 8,370 | $ |
(104 |
) |
(1.2)% |
||||||||
Wealth Management (2)
|
2,427 |
3,210 | (783 |
) |
(24.4)% |
|||||||||||
Insurance |
803 |
857 | (54 |
) |
(6.3)% |
|||||||||||
Capital Markets (2)
|
4,139 |
3,368 | 771 |
22.9% |
||||||||||||
Corporate Support |
(769 |
) |
2 | (771 |
) |
n.m. |
||||||||||
Net income |
$ |
14,866 |
$ | 15,807 | $ |
(941 |
) |
(6.0)% |
||||||||
Selected information |
||||||||||||||||
Earnings per share (EPS) – basic |
$ |
10.51 |
$ | 11.08 | $ |
(0.57 |
) |
(5.1)% |
||||||||
– diluted |
10.50 |
11.06 | (0.56 |
) |
(5.1)% |
|||||||||||
Earnings per share (EPS) – basic adjusted (1)
|
11.39 |
11.21 | 0.18 |
1.6% |
||||||||||||
– diluted adjusted (1)
|
11.38 |
11.19 | 0.19 |
1.7% |
||||||||||||
Return on common equity (ROE) (3), (4)
|
14.2% |
16.4% | n.m. |
(220) bps |
||||||||||||
Return on common equity (ROE) adjusted (1)
|
15.4% |
16.6% | n.m. |
(120) bps |
||||||||||||
Average common equity (3)
|
$ |
102,800 |
$ | 94,700 | $ |
8,100 |
8.6% |
|||||||||
Net interest margin (NIM) – on average earning assets, net (4)
|
1.50% |
1.48% | n.m. |
2 bps |
||||||||||||
PCL on loans as a % of average net loans and acceptances |
0.29% |
0.06% | n.m. |
23 bps |
||||||||||||
PCL on performing loans as a % of average net loans and acceptances |
0.08% |
(0.04)% | n.m. |
12 bps |
||||||||||||
PCL on impaired loans as a % of average net loans and acceptances |
0.21% |
0.10% | n.m. |
11 bps |
||||||||||||
Gross impaired loans (GIL) as a % of loans and acceptances |
0.42% |
0.26% | n.m. |
16 bps |
||||||||||||
Liquidity coverage ratio (LCR) (4), (5)
|
131% |
125% | n.m. |
600 bps |
||||||||||||
Net stable funding ratio (NSFR) (4), (5)
|
113% |
112% | n.m. |
100 bps |
||||||||||||
Capital, Leverage and Total loss absorbing capacity (TLAC) ratios (4), (6)
|
||||||||||||||||
Common Equity Tier 1 (CET1) ratio |
14.5% |
12.6% | n.m. |
190 bps |
||||||||||||
Tier 1 capital ratio |
15.7% |
13.8% | n.m. |
190 bps |
||||||||||||
Total capital ratio |
17.6% |
15.4% | n.m. |
220 bps |
||||||||||||
Leverage ratio |
4.3% |
4.4% | n.m. |
(10) bps |
||||||||||||
TLAC ratio |
31.0% |
26.4% | n.m. |
460 bps |
||||||||||||
TLAC leverage ratio |
8.5% |
8.5% | n.m. |
– bps |
||||||||||||
Selected balance sheet and other information (7)
|
||||||||||||||||
Total assets |
$ |
2,004,992 |
$ | 1,917,219 | $ |
87,773 |
4.6% |
|||||||||
Securities, net of applicable allowance |
409,730 |
318,223 | 91,507 |
28.8% |
||||||||||||
Loans, net of allowance for loan losses |
852,773 |
819,965 | 32,808 |
4.0% |
||||||||||||
Derivative related assets |
142,450 |
154,439 | (11,989 |
) |
(7.8)% |
|||||||||||
Deposits |
1,231,687 |
1,208,814 | 22,873 |
1.9% |
||||||||||||
Common equity |
110,347 |
100,746 | 9,601 |
9.5% |
||||||||||||
Total risk-weighted assets (RWA) (4), (6)
|
596,223 |
609,879 | (13,656 |
) |
(2.2)% |
|||||||||||
Assets under management (AUM) (4)
|
1,067,500 |
999,700 | 67,800 |
6.8% |
||||||||||||
Assets under administration (AUA) (4), (8), (9)
|
4,338,000 |
5,653,600 | (1,315,600 |
) |
(23.3)% |
|||||||||||
Common share information |
||||||||||||||||
Shares outstanding (000s) – average basic |
1,391,020 |
1,403,654 | (12,634 |
) |
(0.9)% |
|||||||||||
– average diluted |
1,392,529 |
1,406,034 | (13,505 |
) |
(1.0)% |
|||||||||||
– end of period |
1,400,511 |
1,382,911 | 17,600 |
1.3% |
||||||||||||
Dividends declared per common share |
$ |
5.34 |
$ | 4.96 | $ |
0.38 |
7.7% |
|||||||||
Dividend yield (4)
|
4.3% |
3.7% | n.m. |
60 bps |
||||||||||||
Dividend payout ratio (4)
|
51% |
45% | n.m. |
600 bps |
||||||||||||
Common share price (RY on TSX) (10)
|
$ |
110.76 |
$ | 126.05 | $ |
(15.29 |
) |
(12.1)% |
||||||||
Market capitalization (TSX) (10)
|
155,121 |
174,316 | (19,195 |
) |
(11.0)% |
|||||||||||
Business information |
||||||||||||||||
Employees (full-time equivalent) (FTE) |
91,398 |
91,427 | (29 |
) |
(0.0)% |
|||||||||||
Bank branches |
1,247 |
1,271 | (24 |
) |
(1.9)% |
|||||||||||
Automated teller machines (ATMs) |
4,341 |
4,368 | (27 |
) |
(0.6)% |
|||||||||||
Period average US$ equivalent of C$1.00 (11)
|
$ |
0.741 |
$ | 0.774 | $ |
(0.033 |
) |
(4.3)% |
||||||||
Period-end US$ equivalent of C$1.00 |
$ |
0.721 |
$ | 0.734 | $ |
(0.013 |
) |
(1.8)% |
(1) | This is a non-GAAP measure. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section. Amounts have been revised from those previously presented to conform to our basis of presentation for this non-GAAP measure. |
(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 and RWA 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 year ended October 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. For further details, refer to the Capital management section. |
(7) | Represents year-end spot balances. |
(8) | AUA includes $13 billion and $7 billion (2022 – $15 billion and $6 billion) of securitized residential mortgages and credit card loans, respectively. |
(9) | Comparative amounts have been revised from those previously presented. |
(10) | Based on TSX closing market price at period-end. |
(11) | Average amounts are calculated using month-end spot rates for the period. |
n.m. | not meaningful |
About Royal Bank of Canada |
Personal & Commercial Banking |
Provides a broad suite of financial products and services to both individual and business clients 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 delivery of exceptional client experiences, 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 wealth, 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. We provide financial institutions, asset managers and asset owners with asset services and investor services. | |
Insurance |
Offers a comprehensive suite of advice and solutions for individual and business clients including life, health, wealth, property & casualty, travel, group benefits, annuities, and reinsurance. | |
Capital Markets |
Provides expertise in advisory & origination, sales & trading, lending & financing and transaction banking to corporations, institutional clients, asset managers, private equity firms and governments globally. We serve clients from 60 offices in 16 countries across North America, the U.K. & Europe, Australia, Asia and other regions. |
Vision and strategic goals
|
• | In Canada, to be the undisputed leader in financial services; |
• | In the U.S., to be the preferred partner to institutional, corporate, commercial and HNW clients and their businesses; and |
• | In select global financial centres, to be a leading financial services partner valued for our expertise. |
Economic, market and regulatory review and outlook – data as at November 29, 2023 |
Key corporate events |
Defining and measuring success through total shareholder returns |
Financial performance compared to our medium-term objectives |
Table 2 |
Medium-term objectives (1)
|
3-year (2)
|
5-year (2)
|
||||||||||
Diluted EPS growth of 7% + |
10% |
5% |
||||||||||
ROE of 16% + |
16.4% |
16.0% |
||||||||||
Strong capital ratio (CET1) (3)
|
13.6% |
13.1% |
||||||||||
Dividend payout ratio 40% – 50% |
45% |
47% |
(1) | A medium-term (3-5 year) objective is considered to be achieved when the performance goal is met in either a 3- or 5-year period. These objectives assume a normal business environment and our ability to achieve them in a period may be adversely affected by the macroeconomic backdrop. |
(2) | Diluted EPS growth is calculated using a Compound Annual Growth Rate (CAGR). ROE, CET1 and dividend payout ratio are calculated using an average. |
(3) | The CET1 ratio is calculated using OSFI’s CAR guideline. For further details on the CET1 ratio, refer to the Capital management section. |
• | Canadian financial institutions: |
• | U.S. banks: |
• | International banks: |
Medium-term objectives – 3- and 5-year TSR vs. peer group average |
Table 3 |
3-year TSR
(1)
|
5-year TSR
(1)
|
|||||||
Royal Bank of Canada |
10% | 7% | ||||||
Bottom half | Top half | |||||||
Peer group average (excluding RBC) |
14% | 5% |
(1) | The 3- and 5-year annualized TSR are calculated based on our common share price appreciation as per the TSX closing market price plus reinvested dividends for the period October 31, 2020 to October 31, 2023 and October 31, 2018 to October 31, 2023. |
Common share and dividend information |
Table 4 |
For the year ended October 31 |
2023 |
2022 | 2021 | 2020 | 2019 | |||||||||||||||
Common share price (RY on TSX) – close, end of period |
$ |
110.76 |
$ | 126.05 | $ 128.82 | $ | 93.16 | $ | 106.24 | |||||||||||
Dividends paid per share |
5.34 |
4.96 | 4.32 | 4.26 | 4.00 | |||||||||||||||
Increase (decrease) in share price |
(12.1)% |
(2.2)% | 38.3% | (12.3)% | 10.8% | |||||||||||||||
Total shareholder return |
(8.3)% |
1.6% | 43.8% | (8.4)% | 15.2% |
Financial performance |
Overview |
Impact of foreign currency translation |
Table 5 |
||||
(Millions of Canadian dollars, except per share amounts) |
2023 vs. 2022 |
|||
Increase (decrease): |
||||
Total revenue |
$ |
936 |
||
PCL |
29 |
|||
Non-interest expense |
607 |
|||
Income taxes |
9 |
|||
Net income |
291 |
|||
Impact on EPS |
||||
Basic |
$ |
0.21 |
||
Diluted |
0.21 |
Table 6 |
(Average foreign currency equivalent of C$1.00) (1) |
2023 |
2022 | ||||||
U.S. dollar |
0.741 |
0.774 | ||||||
British pound |
0.599 |
0.618 | ||||||
Euro |
0.689 |
0.727 |
(1) | Average amounts are calculated using month-end spot rates for the period. |
Total revenue |
Table 7 |
(Millions of Canadian dollars, except percentage amounts) |
2023 |
2022 | ||||||
Interest and dividend income |
$ |
86,991 |
$ | 40,771 | ||||
Interest expense |
61,862 |
18,054 | ||||||
Net interest income |
$ |
25,129 |
$ | 22,717 | ||||
NIM |
1.50% |
1.48% | ||||||
Insurance premiums, investment and fee income |
$ |
5,675 |
$ | 3,510 | ||||
Trading revenue |
2,392 |
926 | ||||||
Investment management and custodial fees |
8,344 |
7,610 | ||||||
Mutual fund revenue |
4,063 |
4,289 | ||||||
Securities brokerage commissions |
1,463 |
1,481 | ||||||
Service charges |
2,099 |
1,976 | ||||||
Underwriting and other advisory fees |
2,005 |
2,058 | ||||||
Foreign exchange revenue, other than trading |
1,292 |
1,038 | ||||||
Card service revenue |
1,240 |
1,203 | ||||||
Credit fees |
1,489 |
1,512 | ||||||
Net gains on investment securities |
193 |
43 | ||||||
Income (loss) from joint ventures and associates |
(219 |
) |
110 | |||||
Other |
964 |
512 | ||||||
Non-interest income |
$ |
31,000 |
$ | 26,268 | ||||
Total revenue |
$ |
56,129 |
$ | 48,985 |
Table 8 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Net interest income (1)
|
$ |
1,510 |
$ | 2,024 | ||||
Non-interest income |
2,392 |
926 | ||||||
Total trading revenue |
$ |
3,902 |
$ | 2,950 | ||||
Total trading revenue by product |
||||||||
Interest rate and credit |
$ |
2,528 |
$ | 1,147 | ||||
Equities |
604 |
951 | ||||||
Foreign exchange and commodities |
770 |
852 | ||||||
Total trading revenue |
$ |
3,902 |
$ | 2,950 |
(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). |
Provision for credit losses (1)
|
Table 9 |
For the year ended | ||||||||
(Millions of Canadian dollars, except percentage amounts) |
October 31 2023 |
October 31 2022 |
||||||
Personal & Commercial Banking |
$ |
370 |
$ | (281 | ) | |||
Wealth Management (2)
|
153 |
20 | ||||||
Capital Markets (2)
|
137 |
(20 | ) | |||||
Corporate Support and other (3)
|
– |
– | ||||||
PCL on performing loans |
660 |
(281 | ) | |||||
Personal & Commercial Banking |
$ |
1,225 |
$ | 755 | ||||
Wealth Management (2)
|
175 |
13 | ||||||
Capital Markets (2)
|
436 |
9 | ||||||
Corporate Support and other |
– |
1 | ||||||
PCL on impaired loans (3)
|
1,836 |
778 | ||||||
PCL – Loans |
2,496 |
497 | ||||||
PCL – Other (4)
|
(28 |
) |
(13 | ) | ||||
Total PCL |
$ |
2,468 |
$ | 484 | ||||
PCL on loans is comprised of: |
||||||||
Retail |
$ |
295 |
$ | (31 | ) | |||
Wholesale |
365 |
(250 | ) | |||||
PCL on performing loans |
660 |
(281 | ) | |||||
Retail |
1,051 |
648 | ||||||
Wholesale |
785 |
130 | ||||||
PCL on impaired loans |
1,836 |
778 | ||||||
PCL – Loans |
$ |
2,496 |
$ | 497 | ||||
PCL on loans as a % of average net loans and acceptances |
0.29% |
0.06% | ||||||
PCL on impaired loans as a % of average net loans and acceptances |
0.21% |
0.10% |
(1) | Information on loans represents loans, acceptance 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. |
Insurance policyholder benefits, claims and acquisition expense (PBCAE) |
Non-interest expense |
Table 10 |
(Millions of Canadian dollars, except percentage amounts) |
2023 |
2022 | ||||||
Salaries |
$ |
8,597 |
$ | 7,251 | ||||
Variable compensation |
7,607 |
7,127 | ||||||
Benefits and retention compensation |
2,139 |
2,015 | ||||||
Share-based compensation |
628 |
135 | ||||||
Human resources |
18,971 |
16,528 | ||||||
Equipment |
2,381 |
2,099 | ||||||
Occupancy |
1,634 |
1,554 | ||||||
Communications |
1,271 |
1,082 | ||||||
Professional fees |
2,223 |
1,511 | ||||||
Amortization of other intangibles |
1,487 |
1,369 | ||||||
Other |
3,206 |
2,466 | ||||||
Non-interest expense |
$ |
31,173 |
$ | 26,609 | ||||
Efficiency ratio (1)
|
55.5% |
54.3% | ||||||
Adjusted efficiency ratio (2), (3)
|
58.2% |
55.8% |
(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. |
Income and other taxes |
Table 11 |
(Millions of Canadian dollars, except percentage amounts) |
2023 |
2022 | ||||||
Income taxes |
$ |
3,600 |
$ | 4,302 | ||||
Other taxes |
||||||||
Value added and sales taxes |
597 |
508 | ||||||
Payroll taxes |
990 |
871 | ||||||
Capital taxes |
55 |
90 | ||||||
Property taxes |
144 |
129 | ||||||
Insurance premium taxes |
35 |
31 | ||||||
Business taxes |
82 |
72 | ||||||
1,903 |
1,701 | |||||||
Total income and other taxes |
$ |
5,503 |
$ | 6,003 | ||||
Income before income taxes |
$ |
18,466 |
$ | 20,109 | ||||
Effective income tax rate |
19.5% |
21.4% | ||||||
Effective total tax rate (1)
|
27.0% |
27.5% | ||||||
Adjusted results (2)
|
||||||||
Adjusted income taxes |
$ |
3,346 |
$ | 4,367 | ||||
Adjusted income before income taxes |
19,429 |
20,365 | ||||||
Adjusted effective income tax rate |
17.2% |
21.4% |
(1) | Total income and other taxes as a percentage of income before income taxes and other taxes. |
(2) | These are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section. |
Client assets |
AUA by geographic mix and asset class |
Table 12 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Canada (1)
|
||||||||
Money market |
$ |
34,900 |
$ | 43,200 | ||||
Fixed income |
705,800 |
735,800 | ||||||
Equity |
770,500 |
734,000 | ||||||
Multi-asset and other |
1,045,800 |
1,006,300 | ||||||
Total Canada |
2,557,000 |
2,519,300 | ||||||
U.S. (1)
|
||||||||
Money market |
31,600 |
40,700 | ||||||
Fixed income |
131,600 |
116,000 | ||||||
Equity |
271,600 |
246,300 | ||||||
Multi-asset and other |
326,500 |
304,300 | ||||||
Total U.S. |
761,300 |
707,300 | ||||||
Other International (1)
|
||||||||
Money market |
19,100 |
38,200 | ||||||
Fixed income (2)
|
130,000 |
255,200 | ||||||
Equity |
404,100 |
636,600 | ||||||
Multi-asset and other (2)
|
466,500 |
1,497,000 | ||||||
Total International (2)
|
1,019,700 |
2,427,000 | ||||||
Total AUA (2)
|
$ |
4,338,000 |
$ | 5,653,600 |
(1) | Geographic information is based on the location from where our clients are serviced. |
(2) | Comparative amounts have been revised from those previously presented. |
Client assets – AUM |
Table 13 |
2023 |
2022 | |||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Money market |
Fixed income |
Equity |
Multi-asset
and other |
Total |
Total | ||||||||||||||||||||||
AUM, beginning balance |
$ |
37,800 |
$ |
197,800 |
$ |
129,900 |
$ |
634,200 |
$ |
999,700 |
$ | 1,008,700 | ||||||||||||||||
Institutional inflows |
160,200 |
52,500 |
7,000 |
19,400 |
239,100 |
175,600 | ||||||||||||||||||||||
Institutional outflows |
(159,400 |
) |
(42,300 |
) |
(10,000 |
) |
(14,300 |
) |
(226,000 |
) |
(180,000 | ) | ||||||||||||||||
Personal flows, net |
800 |
2,600 |
(2,100 |
) |
9,100 |
10,400 |
21,400 | |||||||||||||||||||||
Total net flows |
1,600 |
12,800 |
(5,100 |
) |
14,200 |
23,500 |
17,000 | |||||||||||||||||||||
Market impact |
800 |
3,200 |
4,600 |
19,300 |
27,900 |
(117,400 | ) | |||||||||||||||||||||
Acquisition/dispositions |
– |
– |
– |
– |
– |
58,500 | ||||||||||||||||||||||
Foreign exchange |
400 |
3,500 |
800 |
11,700 |
16,400 |
32,900 | ||||||||||||||||||||||
Total market, acquisition/dispositions and foreign exchange impact |
1,200 |
6,700 |
5,400 |
31,000 |
44,300 |
(26,000 | ) | |||||||||||||||||||||
AUM, balance at end of year |
$ |
40,600 |
$ |
217,300 |
$ |
130,200 |
$ |
679,400 |
$ |
1,067,500 |
$ | 999,700 |
Business segment results |
Results by business segments |
Table 14 |
2023 |
2022 | |||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Personal & Commercial Banking |
Wealth Management |
Insurance |
Capital Markets (1)
|
Corporate Support (1)
|
Total |
Total | |||||||||||||||||||||||||
Net interest income |
$ |
16,074 |
$ |
4,495 |
$ |
– |
$ |
3,379 |
$ |
1,181 |
$ |
25,129 |
$ | 22,717 | ||||||||||||||||||
Non-interest income |
6,046 |
13,049 |
5,675 |
7,672 |
(1,442 |
) |
31,000 |
26,268 | ||||||||||||||||||||||||
Total revenue |
22,120 |
17,544 |
5,675 |
11,051 |
(261 |
) |
56,129 |
48,985 | ||||||||||||||||||||||||
PCL |
1,579 |
328 |
– |
561 |
– |
2,468 |
484 | |||||||||||||||||||||||||
PBCAE |
– |
– |
4,022 |
– |
– |
4,022 |
1,783 | |||||||||||||||||||||||||
Non-interest expense |
9,215 |
14,128 |
653 |
6,509 |
668 |
31,173 |
26,609 | |||||||||||||||||||||||||
Income before income taxes |
11,326 |
3,088 |
1,000 |
3,981 |
(929 |
) |
18,466 |
20,109 | ||||||||||||||||||||||||
Income taxes |
3,060 |
661 |
197 |
(158 |
) |
(160 |
) |
3,600 |
4,302 | |||||||||||||||||||||||
Net income |
$ |
8,266 |
$ |
2,427 |
$ |
803 |
$ |
4,139 |
$ |
(769 |
) |
$ |
14,866 |
$ | 15,807 | |||||||||||||||||
ROE (2)
|
27.8% |
9.9% |
37.3% |
14.6% |
n.m. |
14.2% |
16.4% | |||||||||||||||||||||||||
Average assets |
$ |
616,600 |
$ |
193,100 |
$ |
23,500 |
$ |
1,107,100 |
$ |
62,600 |
$ |
2,002,900 |
$ | 1,886,900 |
(1) | Net interest income, Non-interest income, Total revenue, Income before income taxes, and Income taxes are presented in Capital Markets on a taxable equivalent basis (teb). The teb adjustment is eliminated in the Corporate Support segment. For a further discussion, refer to the How we measure and report our business segments section. |
(2) | For further details, refer to the Key performance and non-GAAP measures section. |
n.m. | not meaningful |
How we measure and report our business segments |
• | Wealth Management results include disclosure in U.S. dollars, primarily for U.S. Wealth Management (including City National) as we review and manage the results of this business largely in this currency. |
• | Capital Markets results are reported on a teb basis, which grosses up total revenue from certain tax-advantaged sources (Canadian taxable corporate dividends and the U.S. tax credit investment business) to their effective taxable equivalent value with a corresponding offset recorded in the provision for income taxes. We record the elimination of the teb adjustments in Corporate Support. We believe these adjustments are useful and reflect how Capital Markets manages its business, since it enhances the comparability of revenue and related ratios across taxable revenue and our principal tax-advantaged sources of revenue. The use of teb adjustments and measures may not be comparable to similar GAAP measures or similarly adjusted amounts disclosed by other financial institutions. |
• | Corporate Support results include all enterprise level activities that are undertaken for the benefit of the organization that are not allocated to our four business segments, such as certain treasury and liquidity management activities, including amounts associated with unattributed capital, and consolidation adjustments, including the elimination of the teb gross-up amounts. In addition, we record gains (losses) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, which are reflected in revenue, and related variability in share-based compensation expense driven by changes in the fair value of liabilities relating to these plans in Corporate Support as we believe this presentation more closely aligns with how we view business performance and manage the underlying risks. |
Key performance and non-GAAP measures |
Calculation of ROE |
Table 15 |
2023 |
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 |
$ |
8,192 |
$ |
2,372 |
$ |
798 |
$ |
4,077 |
$ |
(816 |
) |
$ |
14,623 |
$ | 15,547 | |||||||||||||||||
Total average common equity (1), (2)
|
29,500 |
24,050 |
2,150 |
27,850 |
19,250 |
102,800 |
94,700 | |||||||||||||||||||||||||
ROE (3)
|
27.8% |
9.9% |
37.3% |
14.6% |
n.m. |
14.2% |
16.4% |
(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 |
• | Impairment losses: reflects impairment losses on our interest in an associated company in the fourth quarter of 2023. For further details, refer to Note 12 of our 2023 Annual Consolidated Financial Statements. |
• | Certain deferred tax adjustments: reflects the recognition of deferred tax assets relating to realized losses in City National associated with the intercompany sale of certain debt securities in the fourth quarter of 2023 |
• | 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 |
Table 16 |
(Millions of Canadian dollars, except per share, number of and percentage amounts) |
2023 |
2022 (1)
|
||||||
Total revenue |
$ |
56,129 |
$ | 48,985 | ||||
PCL |
2,468 |
484 | ||||||
Non-interest expense |
31,173 |
26,609 | ||||||
Income before income taxes |
18,466 |
20,109 | ||||||
Income taxes |
3,600 |
4,302 | ||||||
Net income |
$ |
14,866 |
$ | 15,807 | ||||
Net income available to common shareholders |
$ |
14,623 |
$ | 15,547 | ||||
Average number of common shares (thousands) |
1,391,020 |
1,403,654 | ||||||
Basic earnings per share (in dollars) |
$ |
10.51 |
$ | 11.08 | ||||
Average number of diluted common shares (thousands) |
1,392,529 |
1,406,034 | ||||||
Diluted earnings per share (in dollars) |
$ |
10.50 |
$ | 11.06 | ||||
ROE (2)
|
14.2% |
16.4% | ||||||
Effective income tax rate |
19.5% |
21.4% | ||||||
Total adjusting items impacting net income (before-tax)
|
$ |
963 |
$ | 256 | ||||
Specified item: HSBC Canada transaction and integration costs (3)
|
380 |
– | ||||||
Specified item: Impairment losses on our interest in an associated company (4)
|
242 |
– | ||||||
Amortization of acquisition-related intangibles (5)
|
341 |
256 | ||||||
Total income taxes for adjusting items impacting net income |
$ |
(254 |
) |
$ | 65 | |||
Specified item: CRD and other tax related adjustments (3), (6)
|
(1,050 |
) |
– | |||||
Specified item: Certain deferred tax adjustments (3)
|
578 |
– | ||||||
Specified item: Impairment losses on our interest in an associated company (4)
|
65 |
– | ||||||
Specified item: HSBC Canada transaction and integration costs (3)
|
78 |
– | ||||||
Amortization of acquisition-related intangibles (5)
|
75 |
65 | ||||||
Adjusted results (7)
|
||||||||
Income before income taxes – adjusted |
19,429 |
20,365 | ||||||
Income taxes – adjusted |
3,346 |
4,367 | ||||||
Net income – adjusted |
$ |
16,083 |
$ | 15,998 | ||||
Net income available to common shareholders – adjusted |
$ |
15,840 |
$ | 15,738 | ||||
Average number of common shares (thousands) |
1,391,020 |
1,403,654 | ||||||
Basic earnings per share (in dollars) – adjusted |
$ |
11.39 |
$ | 11.21 | ||||
Average number of diluted common shares (thousands) |
1,392,529 |
1,406,034 | ||||||
Diluted earnings per share (in dollars) – adjusted |
$ |
11.38 |
$ | 11.19 | ||||
ROE – adjusted |
15.4% |
16.6% | ||||||
Adjusted effective income tax rate |
17.2% |
21.4% | ||||||
Adjusted efficiency ratio (8)
|
||||||||
Total revenue |
$ |
56,129 |
$ | 48,985 | ||||
Less: PBCAE |
4,022 |
1,783 | ||||||
Add specified item: Impairment losses on our interest in an associated company (before-tax) (4)
|
242 |
– | ||||||
Total revenue – adjusted |
$ |
52,349 |
$ | 47,202 | ||||
Non-interest expense |
$ |
31,173 |
$ | 26,609 | ||||
Less specified item: HSBC Canada transaction and integration costs (before-tax) (3)
|
380 |
– | ||||||
Less: Amortization of acquisition-related intangibles (before-tax) (5)
|
341 |
256 | ||||||
Non-interest expense – adjusted |
$ |
30,452 |
$ | 26,353 | ||||
Efficiency ratio |
55.5% |
54.3% | ||||||
Efficiency ratio – adjusted |
58.2% |
55.8% |
(1) | There were no specified items for the year ended October 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) | During the fourth quarter of 2023, we recognized impairment losses on our interest in an associated company. This amount has been recognized in Wealth Management. |
(5) | Represents the impact of amortization of acquisition-related intangibles (excluding amortization of software), and any goodwill impairment. |
(6) | The impact of the CRD and other tax related adjustments does not include $0.2 billion recognized in other comprehensive income. |
(7) | 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. |
(8) | Effective the second quarter of 2023, we revised the composition of this non-GAAP ratio, which is calculated based on Non-interest expense adjusted divided by total revenue adjusted. Therefore, comparative adjusted results have been revised from those previously presented to conform to our basis of presentation for this non-GAAP ratio. |
Wealth Management |
Table 17 |
2023 (1)
|
||||||||||||
Item excluded |
||||||||||||
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) | As reported |
Specified item (2)
|
Adjusted |
|||||||||
Total revenue |
$ |
17,544 |
$ |
242 |
$ |
17,786 |
||||||
PCL |
328 |
– |
328 |
|||||||||
Non-interest expense |
14,128 |
– |
14,128 |
|||||||||
Net income before income taxes |
3,088 |
242 |
3,330 |
|||||||||
Net income |
$ |
2,427 |
$ |
177 |
$ |
2,604 |
||||||
Net income available to common shareholders |
2,372 |
177 |
2,549 |
|||||||||
Total average common equity (3), (4)
|
24,050 |
24,050 |
||||||||||
Revenue by business |
||||||||||||
U.S. Wealth Management (including City National) |
$ |
7,969 |
$ |
242 |
$ |
8,211 |
||||||
U.S. Wealth Management (including City National) (US$ millions) |
5,908 |
175 |
6,083 |
|||||||||
Key ratios |
||||||||||||
ROE (5)
|
9.9% |
10.6% |
||||||||||
Pre-tax margin (6)
|
17.6% |
18.7% |
(1) | There were no specified items for the year ended October 31, 2022. |
(2) | Impairment losses on our interest in an associated company. |
(3) | Total average common equity represents rounded figures. |
(4) | The amounts for the segments are referred to as attributed capital. |
(5) | ROE is based on actual balances of average common equity before rounding. |
(6) | Pre-tax margin is defined as Income before income taxes divided by Total revenue. |
Personal & Commercial Banking |
~15 million |
#1 or #2 |
38,027 |
||||||
Number of Canadian Banking clients |
Ranking in market share for all key retail and business products |
Employees |
||||||
Revenue by business lines |
We operate through two businesses – Canadian Banking and Caribbean & U.S. Banking. Canadian Banking serves our home market in Canada. We have the largest branch network, the most ATMs, and one of the largest mobile sales forces across Canada along with market-leading digital capabilities. In Caribbean & U.S. Banking, we offer a broad range of financial products and services in targeted markets. In Canada, we compete with other Schedule 1 banks, independent trust companies, foreign banks, credit unions, caisses populaires, auto financing companies, as well as emerging entrants to the financial services industry. In the Caribbean, our competition includes banks, emerging digital banks, trust companies and investment management companies serving retail and corporate clients, as well as public institutions. In the U.S., we compete primarily with other Canadian banking institutions that have U.S. operations. |
|||||||
|
||||||||
› |
In response to persistent inflation, the BoC continued tightening its monetary policy, raising the benchmark interest rate by 125 basis points in fiscal 2023; and by 475 basis points since the beginning of March 2022. As a result of these interest rate increases, we continued to see NIM expansion. The combination of higher NIM and solid volumes drove strong growth in net interest income. |
› |
The credit environment was impacted by slowing economic growth and rising interest rates, resulting in higher provisions on performing and impaired loans. |
› |
For Canadian Banking, non-interest expense reflects investments in staff, mainly increased average FTE, marketing costs and ongoing investments in technology. |
› |
Our results were also impacted by a higher effective tax rate reflecting the 1.5% increase in the Canadian corporate tax rate, which was implemented at the beginning of the fiscal year. |
› |
As a result of interest rate increases, housing activity has slowed and household debt servicing costs have increased, driving a decline in mortgage originations from prior year levels. |
› |
We experienced significant growth in term deposit products, reflecting client preference for low-risk products at higher yields, driven by the BoC’s monetary policy. Despite this, volumes for personal and business demand deposits remained above pre-pandemic levels. |
› |
We continued to see unfavourable market conditions in fiscal 2023, driving lower sales of mutual fund products, which was also impacted by the client preference shift to term deposit products. We also continued to see a declining trend in overall trade volume activity in our Direct Investing business. |
› |
Growth in cards volume was strong in fiscal 2023, reflecting strong acquisition levels. Purchase volumes were stable and reflect an environment where clients are increasingly mindful of their spending habits. |
› |
Clients are increasingly demonstrating a preference for digital offerings, and we continue to invest in digital solutions to improve the client experience and deliver personalized advice. |
› |
Our Caribbean Banking business was favourably impacted by increases in interest rates, driving strong net interest income growth. As well, we saw higher fee-based income, reflecting higher client activity driven by the recovery of the travel industry since the COVID-19 pandemic. |
› |
In the U.S., higher interest rates had a favourable impact on net interest income. |
OUR STRATEGY |
PROGRESS IN 2023 |
PRIORITIES IN 2024 |
||
Accelerate our growth and deepen relationships |
Avion Rewards, the largest proprietary loyalty program in Canada, was recognized as the International Loyalty Program of the Year in Americas and Best Loyalty / Benefits in a Financial Product at the 2023 International Loyalty Awards; In 2023, Avion Rewards expanded access to all Canadians regardless of where they bank or shop, bringing unparalleled savings and flexibility and making a fundamental shift in how the rewards program delivers benefits Announced a new loyalty partnership with METRO Inc. with the launch of the no annual fee moi ® Visa‡ Moi ‡ Launched Canada’s new First Home Savings Account (FHSA) in April 2023 to help Canadians save tax free for their first home, making it available as quickly and conveniently as possible through multiple channels, including RBC Direct Investing, RBC InvestEase ® and RBC in-branch advisorsAcquired OJOHome Canada Ltd., which operates a comprehensive real estate technology platform, Houseful TM (formerly OJO), bolstered by artificial intelligence (AI), to further streamline the home buying journey for Canadians while supporting them at every stage with intuitive, digitally-enabled and insights-driven experiencesContinued to build world-class capabilities through the RBC PayEdge TM platform, leveraging data to increase strategic value through industry and client-specific insights to offer superior working capital solutions to our business clientsMaintained our focus on key high-growth and high-value segments, such as youth and young adults, newcomers, business owners, healthcare professionals, retirees, and HNW clients Drove significant new-to-RBC client acquisition from newcomers and new partnerships, including ICICI Bank Canada |
Continue to build a suite of best-in-class Focus on engaging key high-growth client segments and empowering our advisors to build new and deeper relationships with superior advice to drive industry-leading volume growth Establish additional key partnerships to continue to add value for our clients Enable unparalleled value for both consumers and merchants through a best-in-class |
||
Transform sales, advice and service, while digitizing to unlock productivity |
Enhanced NOMI ® Forecast – RBC’s cutting-edge capability that provides clients with a seven-day view into their future cashflow – to include bill payments, e-transfers, investment contributions and salary payments; NOMI Forecast was awarded the Best Use of AI for Customer Experience at The 2023 Digital Banker Digital CX AwardsReceived highest ranking in Customer Satisfaction with Retail Banking Advice for a third consecutive year in the J.D. Power 2023 Canada Retail Banking Advice Satisfaction Study Entered a strategic partnership with Conquest Planning Inc. to bring a next-generation financial planning platform to clients and financial advisors, using powerful AI to identify effective financial strategies and deliver world-class digital advice and planning for clients to help them achieve their financial goals Recognized as the best small and medium enterprise (SME) bank in North America by Global Finance Magazine, for the broad array of services offered to businesses beyond traditional banking, including Ownr, the online platform that has helped more than 55,000 entrepreneurs launch their businesses, and RBC Insight Edge which enables companies to leverage aggregated data to gain relevant insights into their markets and attract new clients Collaborated with the Canadian Chamber of Commerce on the launch of SME Institute, a first-of-its one-stop service that provide SMEs the training, support, and advice they need to adapt, grow and thrive in a rapidly evolving economyThe first bank in Canada to launch Swift Go through the RBC PayEdge TM platform, a new way to make fast, secure, and cost-effective cross-border payments, highlighting RBC’s ongoing commitment to innovations in digital banking and payments |
Provide flexibility by continuing to deliver anytime, anywhere solutions to our clients across all channels Lead in mobile capabilities and enable fulfillment of servicing through digital channels with access to advisors to help clients on their chosen path of interaction Continue to reimagine our branch network to meet the evolving needs of our clients Continuously upskill our expert advisor network to deliver more personalized insights and address complex advice needs for superior client experience Leverage digital and agile to drive faster delivery of products and services while improving productivity and efficiency Transform our Moneris joint venture to deliver greater value to Canadian merchants, through integrated value propositions, products and services |
OUR STRATEGY |
PROGRESS IN 2023 |
PRIORITIES IN 2024 |
||
Build sustainable communities |
Launched the RBC Electric Vehicle (EV) Cost Calculator and established exclusive relationships with two EV manufacturers – VinFast and Lucid – to contribute to the expansion of the EV market across Canada Expanded our sustainable finance product suite for businesses, including leveraging Export Development Canada’s Sustainable Financing Guarantee to increase our lending support aimed at carbon reduction and sustainable finance Continued to help clients reduce emissions through new solutions, delivery of tailored advice through dedicated teams, and developed industry-specific value propositions, such as championing climate-smart agriculture insights and incentives for Canadian farmers Launched RBC My Money Matters TM , a new digital destination with comprehensive content, resources, and tools to help Canadians take control of their financial wellbeing and make thinking about money less stressfulContinued to expand RBC’s Survivor Inclusion Initiative to provide survivors of human trafficking with financial literacy programming, basic banking services, and access to specially trained financial advisors who have undertaken trauma-informed sensitivity training Continued to support the path to prosperity and growth of Black entrepreneurs through inclusive financing, community advocacy and sponsorship programs as part of a five year $100-million commitment to supporting Black entrepreneurs announced in 2020 |
Continue to focus on opportunities to support Canadians and businesses in their transition to net zero, including building upon our existing portfolio of products, services and advice Continue to focus on increasing employee awareness, knowledge and engagement on climate initiatives to better support clients on their sustainability journey Continue to support the financial wellbeing of Canadians by enabling individuals and small businesses to build confidence, establish financial security, and reach their goals through dedicated products, services and ecosystem partnerships |
||
Attract, grow and retain future-ready talent |
Provided numerous solutions to ensure employees continued to be productive and engaged, including targeted initiatives to develop and retain our best talent, advancing return to premises strategy to re-ignite connection and collaborationInvested in future skills development, elevating performance and fostering a culture of inclusive leadership through programs, such as people manager masterclasses, reskilling programs and learning series Helped employees achieve their work and life goals and supported health and wellbeing through initiatives, such as the Make It Yours TM campaign, increased vacation entitlement for select workforces, and increased paternity leave benefits for employees in the CaribbeanStrengthened our culture of inclusion and belonging by driving growth and development of diverse talent through targeted initiatives and programs, including: Canadian Banking Women’s Forum, BIPOC Rotational Program, and Indigenous People’s Development Program |
Elevate leadership capabilities to grow and develop talent Continue to strengthen our culture of inclusion and belonging Drive a high-performance culture that empowers and enables people to deliver on our ambitious goals |
||
In the Caribbean |
Accelerated actions focused on enhancing the client experience underpinned by programs across our growth and transformation priorities, including product development and digitization |
Continue our Investing for Growth strategy by expanding product offerings while progressing initiatives to simplify and digitize our operational processes to deliver an enhanced client and employee experience |
||
In the U.S. |
Leveraged momentum from higher cross-border travel after the COVID-19 pandemic to drive solid business growth.Continued focus on automation of processes and controls, and development of digital tools to enhance scalability, simplify processes and improve the client experience |
Further aligning products and channel experiences through deeper integration with the Canadian franchise to support market share growth while making it easier to do banking in the U.S. Continue digitization efforts, focusing on real estate financing processes and client experience |
Personal & Commercial Banking |
Table 18 |
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) |
2023 |
2022 | ||||||
Net interest income |
$ |
16,074 |
$ | 14,019 | ||||
Non-interest income |
6,046 |
6,124 | ||||||
Total revenue |
22,120 |
20,143 | ||||||
PCL on performing assets |
371 |
(283 | ) | |||||
PCL on impaired assets |
1,208 |
746 | ||||||
PCL |
1,579 |
463 | ||||||
Non-interest expense |
9,215 |
8,437 | ||||||
Income before income taxes |
11,326 |
11,243 | ||||||
Net income |
$ |
8,266 |
$ | 8,370 | ||||
Revenue by business |
||||||||
Canadian Banking |
$ |
21,050 |
$ | 19,282 | ||||
Personal Banking |
15,018 |
13,957 | ||||||
Business Banking |
6,032 |
5,325 | ||||||
Caribbean & U.S. Banking |
1,070 |
861 | ||||||
Key ratios |
||||||||
ROE |
27.8% |
30.9% | ||||||
NIM |
2.74% |
2.55% | ||||||
Efficiency ratio (1)
|
41.7% |
41.9% | ||||||
Operating leverage (1)
|
0.6% |
4.0% | ||||||
Selected balance sheet information |
||||||||
Average total assets |
$ |
616,600 |
$ | 575,900 | ||||
Average total earning assets, net |
585,900 |
548,900 | ||||||
Average loans and acceptances, net |
593,000 |
553,300 | ||||||
Average deposits |
597,500 |
552,100 | ||||||
Other information |
||||||||
AUA (2), (3), (4)
|
$ |
336,800 |
$ | 340,300 | ||||
Average AUA (4)
|
350,800 |
356,300 | ||||||
AUM (3)
|
5,900 |
5,600 | ||||||
Number of employees (FTE) |
38,027 |
38,450 | ||||||
Credit information |
||||||||
PCL on impaired loans as a % of average net loans and acceptances |
0.21% |
0.14% | ||||||
Other selected information – Canadian Banking |
||||||||
Net income |
$ |
7,922 |
$ | 8,024 | ||||
NIM |
2.69% |
2.54% | ||||||
Efficiency ratio |
40.4% |
40.5% | ||||||
Operating leverage |
0.2% |
3.8% |
(1) | See Glossary for composition of this measure. |
(2) | AUA includes securitized residential mortgages and credit card loans as at October 31, 2023 of $13 billion and $7 billion, respectively (October 31, 2022 – $15 billion and $6 billion). |
(3) | Represents year-end spot balances. |
(4) | Comparative amounts have been revised from those previously presented. |
Business line review |
Personal Banking |
Selected highlights |
Table 19 |
(Millions of Canadian dollars, except number of) |
2023 |
2022 | ||||||
Total revenue |
$ |
15,018 |
$ | 13,957 | ||||
Other information |
||||||||
Average residential mortgages |
358,400 |
338,400 | ||||||
Average other loans and acceptances, net |
76,300 |
75,700 | ||||||
Average deposits |
333,800 |
293,500 | ||||||
Average credit card balances |
20,800 |
18,200 | ||||||
Credit card purchase volumes |
174,200 |
162,200 | ||||||
Branch mutual fund balances (1)
|
174,700 |
178,600 | ||||||
Average branch mutual fund balances |
183,100 |
194,400 | ||||||
AUA – Self-directed brokerage (1)
|
128,700 |
127,600 | ||||||
Number as at October 31: |
||||||||
Branches |
1,143 |
1,162 | ||||||
ATMs |
4,003 |
4,028 |
(1) | Represents year-end spot balances. |
Business Banking |
Selected highlights |
Table 20 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
6,032 |
$ | 5,325 | ||||
Other information (average) |
||||||||
Loans and acceptances, net |
125,800 |
110,800 | ||||||
Deposits |
241,800 |
237,900 |
Caribbean & U.S. Banking |
Selected highlights |
Table 21 |
|||||||
(Millions of Canadian dollars,
except number of and percentage amounts)
|
2023 |
2022 | ||||||
Total revenue |
$ |
1,070 |
$ | 861 | ||||
Other information |
||||||||
NIM |
4.08% |
2.90% | ||||||
Average loans and acceptances, net |
11,700 |
10,200 | ||||||
Average deposits |
21,900 |
20,800 | ||||||
AUA (1), (2)
|
10,800 |
10,400 | ||||||
Average AUA (2)
|
10,500 |
10,200 | ||||||
AUM (1)
|
5,500 |
5,300 | ||||||
Number as at October 31: |
||||||||
Branches |
38 |
38 | ||||||
ATMs |
271 |
269 |
(1) | Represents year-end spot balances. |
(2) | Comparative amounts have been revised from those previously presented. |
Wealth Management |
$17.5 billion |
> 6,100 |
~ 83% |
||||||||
Total revenue |
Client-facing advisors |
GAM AUM outperforming the benchmark on a 3-year basis 1
|
Asset under Administration (AUA) |
Assets under Management (AUM) |
Our lines of business include Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management (GAM), International Wealth Management and Investor Services. • Canadian Wealth Management is the largest full-service wealth advisory business in Canada, as measured by AUA, serving HNW and UHNW clients • U.S. Wealth Management (including City National) encompasses our private client group (PCG) and clearing and custody (C&C) businesses. PCG is the 6 th largest full-service wealth advisory firm in the U.S., as measured by AUA, and City National is a U.S.-based relationship bank serving the entertainment industry, mid-market businesses, HNW individuals and other clients who value personalized banking relationships• GAM is the largest retail mutual fund company in Canada as measured by AUM, as well as a leading institutional asset manager • International Wealth Management serves HNW and UHNW clients, primarily through key financial centres in the U.K., Ireland, the Channel Islands and Asia • Investor Services safeguards client assets and supports the growth of Canadian and U.K. asset managers and asset owners, investment counsellors and other financial institutions |
||||||
1 |
As at September 2023, gross of fees. |
› |
Earnings in the current fiscal year benefitted from the high interest rate environment reflecting rate increases by the Fed, BoC and other central banks, while shifting client preferences in favour of higher yielding products and unfavourable market conditions impacted our fee-based revenue. |
› |
Our wealth advisory businesses performed well with continued net positive flows of fee-based client assets reflecting the strength of our business driven by the quality of our advice, the breadth of our investment and holistic wealth planning solutions and clients’ trust in our brand. The mutual fund sector continues to be impacted by lower sales due to the high interest rate environment and market volatility. |
› |
Results for our Investor Services business were impacted by industry headwinds, such as continued pricing pressure, partially offset by rising interest rates. |
› |
We continued to invest in our people and technology to maintain our competitive advantage and increase efficiencies in an environment characterized by market volatility, rapidly changing client preferences and increasing regulatory requirements. |
› |
The credit environment was impacted by slowing economic growth and rising interest rates, resulting in higher provisions on impaired and performing loans. |
OUR STRATEGY |
PROGRESS IN 2023 |
PRIORITIES IN 2024 |
||
In Canada, be the premier service provider for HNW and UHNW clients |
Further extended our position as industry leader in our full-service private wealth business Continued to focus on holistic wealth planning, including advisor training on intergenerational and business wealth transfer Continued to expand RBC ® Premier Banking to deepen banking relationships with Wealth Management clientsFocused on the business owner client segment, deepening client relationships across the various business segments Continued to enhance our digital and data capabilities to drive increased client satisfaction and advisor productivity Implemented unique capabilities that are becoming increasingly important to our client base, such as private alternative investment products |
Continue to retain and attract top-performing advisors to strengthen our talent advantageDeliver a differentiated client experience through enriched advisor-client interactions and seamless digital experiences Deepen client relationships by leveraging the combined strengths across other business segments with a focus on the business owner client segment Continue to invest in digital solutions to streamline and improve efficiency and advisor productivity Modernize legacy infrastructure and systems to ensure ongoing resiliency in our technology platforms |
||
In the U.S., become the leading private and commercial bank and wealth manager in our key markets |
Continued to invest in key areas needed to grow our U.S. Wealth Management business, including substantial financial advisor recruitment, executing on our technology transformation and providing proactive liquidity to our clients through a revamped securities-based lending platform At City National, we continued to focus on enhancing our risk management and compliance capabilities across the three lines of defence for sustainable, organic growth in the future |
Continue to deliver an exceptional client experience for targeted HNW, UHNW, middle market and business banking segments Leverage the combined strengths within U.S. Wealth Management (including City National) and Capital Markets to deepen client relationships At City National, we will continue to focus on enhancing our risk management and compliance capabilities across the three lines of defence for sustainable, organic growth in the future |
||
In select global financial centres, become the most trusted regional private bank |
Continued to deliver on successful growth initiatives, bringing the full strength and breadth of RBC to our clients Focused on delivering a differentiated client experience by leveraging our global capabilities Leveraged RBC Brewin Dolphin to increase distribution, AUM and client base to position ourselves as top five largest wealth manager in the U.K. In Asia, continued growth momentum achieved through the addition of experienced client-facing advisors and net new assets |
Focus on growing market share in target markets Continue to leverage our global strengths to better serve clients Continue to deliver an exceptional client experience and increase business effectiveness and talent capabilities Successful integration of RBC Brewin Dolphin to enhance client value proposition and consolidation of position in the U.K. local market In Asia, focus on deepening cross-business, global collaboration and enhancing digital and product capabilities |
||
In asset management, be a leading, diversified asset manager focused on global institutional and North American retail clients |
Maintained #1 market share in Canadian mutual fund AUM RBC ® iShares strategic alliance maintained #1 market share in Canadian ETFsCompleted shift to a more unified asset management operating model to increase collaboration and better leverage infrastructure and people resources |
Continue to focus on delivering exceptional investment performance and valued insights with the client experience at the centre of all that we do Continue to expand our investment capabilities to meet evolving client needs in our target distribution regions |
||
Attract, grow and retain future-ready talent |
Advanced our representation and strengthened inclusion of historically underrepresented groups through targeted engagement initiatives and partnerships including: Ivey’s Women in Asset Management Program, Women Advisor Experience Listening Sessions, Diversity Leadership Councils and Employee Resource Groups |
Elevate leadership capabilities to grow and develop talent Continue to strengthen our culture of inclusion and belonging Drive a high-performance culture that empowers and enables people to deliver on our ambitious goals |
Wealth Management |
Table 22 |
(Millions of Canadian dollars, except number of, percentage amounts and as otherwise noted) |
2023 |
2022 (1)
|
||||||
Net interest income |
$ |
4,495 |
$ | 3,886 | ||||
Non-interest income |
13,049 |
12,357 | ||||||
Total revenue |
17,544 |
16,243 | ||||||
PCL on performing assets |
153 |
20 | ||||||
PCL on impaired assets |
175 |
13 | ||||||
PCL |
328 |
33 | ||||||
Non-interest expense |
14,128 |
12,015 | ||||||
Income before income taxes |
3,088 |
4,195 | ||||||
Net income |
$ |
2,427 |
$ | 3,210 | ||||
Revenue by business |
||||||||
Canadian Wealth Management |
$ |
4,443 |
$ | 4,308 | ||||
U.S. Wealth Management (including City National) |
7,969 |
7,448 | ||||||
U.S. Wealth Management (including City National) (US$ millions) |
5,908 |
5,757 | ||||||
Global Asset Management |
2,626 |
2,667 | ||||||
International Wealth Management |
1,273 |
426 | ||||||
Investor Services (2)
|
1,233 |
1,394 | ||||||
Key ratios |
||||||||
ROE |
9.9% |
15.8% | ||||||
NIM |
2.66% |
2.47% | ||||||
Pre-tax margin (3)
|
17.6% |
25.8% | ||||||
Selected balance sheet information |
||||||||
Average total assets |
$ |
193,100 |
$ | 177,400 | ||||
Average total earning assets, net |
169,300 |
157,100 | ||||||
Average loans and acceptances, net |
113,800 |
102,400 | ||||||
Average deposits (2)
|
163,800 |
198,000 | ||||||
Other information |
||||||||
AUA (2), (4), (5)
|
$ |
3,981,500 |
$ | 5,294,800 | ||||
U.S. Wealth Management (including City National) (4)
|
752,700 |
700,100 | ||||||
U.S. Wealth Management (including City National) (US$ millions) (4)
|
542,800 |
513,700 | ||||||
Investor Services (4)
|
2,488,600 |
3,906,900 | ||||||
AUM (4)
|
1,058,900 |
991,500 | ||||||
Average AUA (2)
|
4,987,200 |
5,710,700 | ||||||
Average AUM |
1,058,000 |
966,300 | ||||||
PCL on impaired loans as a % of average net loans and acceptances |
0.15% |
0.01% | ||||||
Number of employees (FTE) |
25,196 |
26,150 | ||||||
Number of advisors (6)
|
6,169 |
6,158 | ||||||
Adjusted results (7)
|
||||||||
Total revenue – adjusted |
$ |
17,786 |
$ | 16,243 | ||||
Income before income taxes – adjusted |
3,330 |
4,195 | ||||||
Net income – adjusted |
2,604 |
3,210 | ||||||
U.S. Wealth Management (including City National) revenue – adjusted |
8,211 |
7,448 | ||||||
U.S. Wealth Management (including City National) revenue (US$ millions) – adjusted |
6,083 |
5,757 | ||||||
Key ratios – adjusted (7)
|
||||||||
Selected balance sheet and other information |
||||||||
ROE – adjusted |
10.6% |
15.8% | ||||||
Pre-tax margin – adjusted |
18.7% |
25.8% | ||||||
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items |
|
|||||||
(Millions of Canadian dollars, except percentage amounts) |
2023 vs. 2022 |
|||||||
Increase (decrease): |
||||||||
Total revenue |
$ |
441 |
||||||
PCL |
10 |
|||||||
Non-interest expense |
369 |
|||||||
Net income |
50 |
|||||||
Percentage change in average U.S. dollar equivalent of C$1.00 |
(4)% |
|||||||
Percentage change in average British pound equivalent of C$1.00 |
(3)% |
|||||||
Percentage change in average Euro equivalent of C$1.00 |
(5)% |
(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 2023 Annual Consolidated Financial Statements. |
(3) |
Pre-tax margin is defined as Income before income taxes divided by Total revenue. |
(4) | Represents year-end spot balances. |
(5) | In addition to Canadian Wealth Management, U.S. Wealth Management (including City National), International Wealth Management and Investor Services AUA includes $6,200 million (2022 – $6,400 million) related to GAM. |
(6) | Represents client-facing advisors across all our Wealth Management businesses. |
(7) | These are non-GAAP measures and non-GAAP ratios. During the year ended October 31, 2023, we recognized impairment losses of $177 million (before–tax $242 million) on our interest in an associated company. For further details on this specified item, including a reconciliation, refer to the Key performance and non-GAAP measures section. |
Client assets – AUA |
Table 23 |
(Millions of Canadian dollars) |
2023 |
2022 |
||||||
AUA, beginning balance (1)
|
$ |
1,387,900 |
$ | 1,322,300 | ||||
Asset inflows |
414,600 |
380,600 | ||||||
Asset outflows |
(396,400 |
) |
(325,100 | ) | ||||
Total net flows (1)
|
18,200 |
55,500 | ||||||
Market impact |
44,400 |
(153,000 | ) | |||||
Acquisitions/dispositions |
– |
79,800 | ||||||
Foreign exchange/other |
42,400 |
83,300 | ||||||
Total market, acquisition/dispositions and foreign exchange/other impact (1)
|
86,800 |
10,100 | ||||||
AUA, balance at end of year (1)
|
1,492,900 |
1,387,900 | ||||||
Investor Services, balance at end of year (2)
|
2,488,600 |
3,906,900 | ||||||
Total AUA |
$ |
3,981,500 |
$ | 5,294,800 |
(1) | Includes AUA from the following lines of business; Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and International Wealth Management. |
(2) | Includes the impact from the partial sale of RBC Investor Services operations. For further details, refer to Note 6 of our 2023 Annual Consolidated Financial Statements. |
AUA by geographic mix and asset class |
Table 24 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Canada (1), (2)
|
||||||||
Money market |
$ |
21,600 |
$ | 26,200 | ||||
Fixed income |
46,100 |
30,500 | ||||||
Equity |
86,700 |
81,800 | ||||||
Multi-asset and other |
388,800 |
369,500 | ||||||
Total Canada |
543,200 |
508,000 | ||||||
U.S. (1), (2)
|
||||||||
Money market |
31,600 |
40,700 | ||||||
Fixed income |
131,600 |
116,000 | ||||||
Equity |
271,600 |
246,300 | ||||||
Multi-asset and other |
318,000 |
297,100 | ||||||
Total U.S. |
752,800 |
700,100 | ||||||
Other International (1), (2)
|
||||||||
Money market |
18,800 |
16,600 | ||||||
Fixed income |
11,300 |
8,900 | ||||||
Equity |
49,300 |
47,000 | ||||||
Multi-asset and other |
117,500 |
107,300 | ||||||
Total International |
196,900 |
179,800 | ||||||
AUA, balance at end of year (2)
|
1,492,900 |
1,387,900 | ||||||
Investor Services, balance at end of year (3)
|
2,488,600 |
3,906,900 | ||||||
Total AUA |
$ |
3,981,500 |
$ | 5,294,800 |
(1) | Geographic information is based on the location from where our clients are served. |
(2) | Includes AUA from the following lines of business; Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and International Wealth Management. |
(3) | Includes the impact from the partial sale of RBC Investor Services operations. For further details, refer to Note 6 of our 2023 Annual Consolidated Financial Statements. |
Client assets – AUM |
Table 25 |
2023 |
2022 | |||||||||||||||||||||||
(Millions of Canadian dollars) |
Money market |
Fixed income |
Equity |
Multi-asset
and other |
Total |
Total | ||||||||||||||||||
AUM, beginning balance |
$ |
37,800 |
$ |
195,600 |
$ |
129,400 |
$ |
628,700 |
$ |
991,500 |
$ |
1,000,600 |
||||||||||||
Institutional inflows |
160,200 |
52,500 |
7,000 |
19,500 |
239,200 |
175,600 | ||||||||||||||||||
Institutional outflows |
(159,400 |
) |
(42,300 |
) |
(10,000 |
) |
(14,300 |
) |
(226,000 |
) |
(180,000 | ) | ||||||||||||
Personal flows, net |
800 |
2,600 |
(2,100 |
) |
9,000 |
10,300 |
21,000 | |||||||||||||||||
Total net flows |
1,600 |
12,800 |
(5,100 |
) |
14,200 |
23,500 |
16,600 | |||||||||||||||||
Market impact |
800 |
2,900 |
4,600 |
19,200 |
27,500 |
(116,700 | ) | |||||||||||||||||
Acquisition/dispositions |
– |
– |
– |
– |
– |
58,500 | ||||||||||||||||||
Foreign exchange |
400 |
3,500 |
800 |
11,700 |
16,400 |
32,500 | ||||||||||||||||||
Total market, acquisition/dispositions and foreign exchange impact |
1,200 |
6,400 |
5,400 |
30,900 |
43,900 |
(25,700 | ) | |||||||||||||||||
AUM, balance at end of year |
$ |
40,600 |
$ |
214,800 |
$ |
129,700 |
$ |
673,800 |
$ |
1,058,900 |
$ | 991,500 |
Business line review |
Canadian Wealth Management |
Selected highlights |
Table 26 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
4,443 |
$ | 4,308 | ||||
Other information |
||||||||
Average loans and acceptances, net |
5,200 |
5,600 | ||||||
Average deposits |
20,900 |
28,600 | ||||||
AUA (1)
|
548,600 |
511,300 | ||||||
AUM (1)
|
184,300 |
171,700 | ||||||
Average AUA |
536,100 |
519,600 | ||||||
Average AUM |
182,200 |
171,800 |
(1) | Represents year-end spot balances. |
U.S. Wealth Management (including City National) |
Selected highlights |
Table 27 |
(Millions of Canadian dollars, except as otherwise noted) |
2023 |
2022 | ||||||
Total revenue |
$ |
7,969 |
$ | 7,448 | ||||
Other information (Millions of U.S. dollars) |
||||||||
Total revenue |
5,908 |
5,757 | ||||||
NIM |
2.53% |
2.38% | ||||||
Average earning assets, net |
103,500 |
98,100 | ||||||
Average loans, guarantees and letters of credit, net |
75,900 |
68,800 | ||||||
Average deposits |
83,200 |
90,600 | ||||||
AUA (1)
|
542,800 |
513,700 | ||||||
AUM (1)
|
176,900 |
159,200 | ||||||
Average AUA |
544,000 |
538,100 | ||||||
Average AUM |
174,500 |
168,100 |
(1) | Represents year-end spot balances. |
Global Asset Management |
Selected highlights |
Table 28 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
2,626 |
$ | 2,667 | ||||
Other information |
||||||||
Canadian net long-term mutual fund sales (redemptions) (1)
|
(11,367 |
) |
(5,246 | ) | ||||
Canadian net money market mutual fund sales (redemptions) (1)
|
1,121 |
(127 | ) | |||||
AUM (2)
|
541,300 |
522,700 | ||||||
Average AUM |
550,700 |
562,200 |
(1) | As reported to the Investment Funds Institute of Canada. Includes all prospectus-based mutual funds across our Canadian GAM businesses. |
(2) | Represents year-end spot balances. |
International Wealth Management |
Selected highlights |
Table 29 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
1,273 |
$ | 426 | ||||
Other information |
||||||||
Average loans, guarantees and letters of credit, net |
4,800 |
5,000 | ||||||
Average deposits |
11,800 |
12,300 | ||||||
AUA (1), (2)
|
185,400 |
170,100 | ||||||
AUM (1), (2)
|
87,900 |
80,100 | ||||||
Average AUA |
185,200 |
97,200 | ||||||
Average AUM |
89,600 |
15,400 |
(1) | Represents year-end spot balances. |
(2) | AUA and AUM reflect the inclusion of $79,800 million and $72,400 million, respectively, due to the acquisition of RBC Brewin Dolphin, which closed on September 27, 2022. |
Investor Services |
Selected highlights |
Table 30 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue (1)
|
$ |
1,233 |
$ | 1,394 | ||||
Other information |
||||||||
Average deposits (1)
|
18,000 |
39,203 | ||||||
AUA (1), (2)
|
2,488,600 |
3,906,900 | ||||||
Average AUA (1)
|
3,525,500 |
4,392,600 |
(1) | Amounts reflect the impact of the partial sale of RBC Investor Services operations, which was completed on July 3, 2023. For further details, refer to Note 6 of our 2023 Annual Consolidated Financial Statements. |
(2) | Represents year-end spot balances. |
Insurance |
$5.7 billion |
> 4.8 million |
2,781 |
||||||
Total revenue |
Number of clients |
Employees |
||||||
Premiums and Deposits |
RBC Insurance ® is one of the largest Canadian bank-owned insurance organizations on a total revenue basis and operates under two business lines: Canadian Insurance and International Insurance.In Canada, we offer life, health, travel, wealth accumulation solutions, and annuities to individuals and businesses. We also offer property & casualty insurance through a distribution agreement with Aviva Canada. Our products and services are distributed through multiple channels, including proprietary sales force, digital platforms, and a network of independent brokers and partners. Outside Canada, we operate globally in the reinsurance and retrocession markets offering longevity reinsurance, life retrocession, and reinsurance for creditor life, disability, and critical illness. |
|||||||
› |
In Canada, the industry continued to face challenges and opportunities, including a higher interest rate environment, generational and demographic change, the growing importance of an omnichannel experience, and novel distribution partnerships to reach new client segments. In response, we continued our journey towards becoming a client-led organization underpinned by superior advice and solutions to provide clients with the coverage they need. We sustained a strong presence across most insurance businesses serving retail and business clients and remain well-positioned to deliver innovative products through our strong network of advisors and partners. Additionally, progress has been realized across our strategic objectives to establish digital leadership and to develop and sustain excellence in distribution. Prioritizing investment in our people and positioning ourselves as an employer of choice also remains a key area of focus. Our ambition is to be at the forefront of tailored, client-led advice and solutions, leveraging technology and data. |
› |
In the U.K., the reinsurance market for longevity risk transfer remains competitive. Our business strategy continues to selectively pursue niche opportunities in the longevity markets as potential clients actively manage longevity risk. |
OUR STRATEGY |
PROGRESS IN 2023 |
PRIORITIES IN 2024 |
||
Grow our core insurance business |
Generated over $1B in group annuity new business sales representing ~20% growth, and providing retirement income security to more Canadian retirees Maintained leadership in market share for individual disability insurance Enhanced our mental health offering in partnership with Personalize Prescribing Inc. (PPI), providing access to affordable drug compatibility testing for all group plan members and their eligible dependents before a mental illness becomes debilitating |
Drive profitable business growth by continuing the journey to become a client-led organization underpinned by superior advice and solutionsGrow our client base by leveraging proprietary channels to deepen client relationships across multiple products and solutions |
||
Develop and sustain excellence in distribution |
Ranked #1 for broker relationship management capabilities 1 and #1 proprietary insurance distribution network2
Reduced end-to-end re-design
Launched RBC YourTerm ® on the eApplication platform for our proprietary sales force, providing digital signature capability, and eliminating the need for signature booklets |
Drive deep client relationships through distribution excellence, including channel growth and by supporting our agents and partners with best-in-class |
||
Accelerate investments in product innovation, digitization, and data |
Achieved a near 40% reduction in claim decision time for individual disability claims through end-to-end Developed and implemented predictive analytics data models to assist in claims processing, fraud detection, and personalized product recommendations for clients Launched digital enrollment solutions for Guarantee Standard Issue ® (GSI® ) clients, automating the entire intake process including application, underwriting, policy issue, settlement, and online policy viewPartnered with Epilogue Wills, one of the leading digital estate planning tools in the market, launching a new digital capability to embed a fully integrated and interactive quote for the RBC Simplified ® Term insurance productLaunched Wealth electronic forms for segregated funds to simplify the way we do business by reducing manual transaction costs while also improving the advisor and client experience |
Invest in technology, digital, and data capabilities to drive market leading experience with personalized, easy to navigate end-to-end |
||
Evolve our risk culture |
Published the inaugural market update on the funds in participating life account. The funds outperformed the overall market as well as participating competitor funds in a turbulent year In partnership with Medaca Health Group, we enhanced our disability claims management practices by providing individuals on disability and struggling with mental health diagnosis, with rapid access to workplace psychiatrists and mental health professionals Progressed final preparations for the implementation of the new accounting standard IFRS 17 effective for us on November 1, 2023 |
Evolve our robust risk frameworks, controls, and risk culture to enable business growth in strategic areas, protect clients, and meet the expectations of both federal and provincial regulators |
||
Attract, grow, and retain future-ready talent |
Remained a highly engaged, diverse workforce receptive to change and willing to go above and beyond to serve our clients and deliver strong ROE to RBC Launched a Diversity Champion program to promote awareness and discussion on psychological safety and explore the individual and collective meaning of diversity, inclusion, equity and belonging |
Elevate leadership capabilities to grow and develop talent Continue to strengthen our culture of inclusion and belonging Drive a high-performance culture that empowers and enables people to deliver on our ambitious goals |
1 |
NMG Consulting Canadian Individual Life Insurance Study 2022 |
2 |
Investment Executive Insurance Advisors’ Report Card |
Insurance |
Table 31 |
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) |
2023 |
2022 | ||||||
Non-interest income |
||||||||
Net earned premiums |
$ |
5,131 |
$ | 4,653 | ||||
Investment Income, gains/(losses) on assets supporting insurance policyholder liabilities (1)
|
326 |
(1,363 | ) | |||||
Fee income |
218 |
220 | ||||||
Total revenue |
5,675 |
3,510 | ||||||
PCL |
– |
– | ||||||
Insurance policyholder benefits and claims (1)
|
3,699 |
1,468 | ||||||
Insurance policyholder acquisition expense |
323 |
315 | ||||||
Non-interest expense |
653 |
588 | ||||||
Income before income taxes |
1,000 |
1,139 | ||||||
Net income |
$ |
803 |
$ | 857 | ||||
Revenue by business |
||||||||
Canadian Insurance |
$ |
3,087 |
$ | 653 | ||||
International Insurance |
2,588 |
2,857 | ||||||
Key ratios |
||||||||
ROE |
37.3% |
36.4% | ||||||
Selected balance sheet information |
||||||||
Average total assets |
$ |
23,500 |
$ | 22,500 | ||||
Other information |
||||||||
Premiums and deposits (2)
|
$ |
5,929 |
$ | 5,498 | ||||
Canadian Insurance |
3,385 |
2,999 | ||||||
International Insurance |
2,544 |
2,499 | ||||||
Insurance claims and policy benefit liabilities |
11,966 |
11,511 | ||||||
Fair value changes on investments backing policyholder liabilities (1)
|
(91 |
) |
(1,888 | ) | ||||
Number of employees (FTE) |
2,781 |
2,731 |
(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 individual and group insurance and annuity products as well as segregated fund deposits, consistent with insurance industry practices. |
Business line review |
Canadian Insurance |
Selected highlights |
Table 32 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
3,087 |
$ | 653 | ||||
Other information |
||||||||
Premiums and deposits |
||||||||
Life and health |
1,614 |
1,416 | ||||||
Property and casualty |
108 |
81 | ||||||
Annuity |
1,067 |
834 | ||||||
Segregated fund deposits |
596 |
668 | ||||||
Fair value changes on investments backing policyholder liabilities |
(224 |
) |
(2,259 | ) |
International Insurance |
Selected highlights |
Table 33 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Total revenue |
$ |
2,588 |
$ | 2,857 | ||||
Other information |
||||||||
Premiums and deposits |
||||||||
Life and health |
1,040 |
1,044 | ||||||
Annuity |
1,504 |
1,455 | ||||||
Fair value changes on investments backing policyholder liabilities |
133 |
371 |
Capital Markets |
> 21,500 |
#9 |
7,253 |
||||||
Number of clients |
Global league table rankings 1
|
Employees |
||||||
Revenue by Geography |
We operate two main business lines, Corporate & Investment Banking and Global Markets. In North America, we offer a full suite of products and services which include equity and debt origination and distribution, advisory services, sales & trading, and transaction banking. In Canada, we are a market leader with a strategic presence in all lines of capital markets businesses. In the U.S., where our competitors include large global investment banks, we have a full industry sector coverage and investment banking product range, as well as capabilities in credit, secured lending, municipal finance, fixed income, currencies & commodities, and equities. Outside North America, we have a targeted strategic presence in the U.K. & Europe, Australia, Asia & other markets aligned to our global expertise. In the U.K. & Europe, we offer a diversified set of capabilities in key industry sectors of focus. In Australia and Asia, we compete with global and regional investment banks in targeted areas aligned to our global expertise, including fixed income distribution and currencies trading, secured financing, as well as corporate & investment banking. |
|||||||
› |
The fiscal 2023 operating environment was characterized by an uncertain outlook amidst financial sector turmoil, slower economic growth, persistent inflation and ongoing geopolitical risks. While industry-wide fee pools continue to remain muted as clients largely maintain a risk-off position, our market share gains helped deliver strong results. |
› |
Trading activity remained elevated as we saw improvement in the credit trading environment as well as robust results in macro-focused businesses, such as rates and foreign exchange, underpinned by strong client flows. We continued to be disciplined with our moderate growth strategy in our lending business. Despite elevated funding costs putting pressure on net interest margins, we delivered strong results and our balance sheet strength enabled us to continue to support our clients during the 2023 fiscal year. |
› |
The credit environment was impacted by slowing economic growth and rising interest rates, resulting in higher provisions on impaired and performing loans. |
1 |
Source: Dealogic, based on global investment bank fees, Fiscal 2023 |
OUR STRATEGY |
PROGRESS IN 2023 |
PRIORITIES IN 2024 |
||
Grow and deepen client relationships |
Delivered holistic coverage to clients and deepened key relationships, resulting in high quality mandates and notable wins in Corporate & Investment Banking and Global Markets Awarded Best Investment Bank in Canada as part of Euromoney’s Awards of Excellence in 2023 Notable client examples include: • Exclusive Buyside Advisor to Saint-Gobain on its C$1.3 billion acquisition of Building Products of Canada • Joint Active Bookrunner on American Water Works Company’s US$1.7 billion follow-on equity offering |
Extend our client centric approach and drive multi-product global client relationships to gain market share Strengthen client coverage in underpenetrated sectors and products Drive greater collaboration and connectivity across RBC to better support clients |
||
Lead with advice and extend capabilities |
Built new product capabilities, including in U.S. Cash Management, and expanded in advisory areas including in risk solutions to lead with ideas and insights Notable client examples include: • Exclusive Financial Advisor to TransAlta Corporation and provided fairness opinion to the Board of Directors on the acquisition of the outstanding common shares of TransAlta Renewables for consideration of C$1.4 billion • Exclusive Financial Advisor on the sale of 20% of Corient (CI Financial’s U.S. Wealth Management business) for US$1.0 billion (implying US$5 billion Enterprise Value), the largest private transaction in the wealth management sector in 2023 |
Further grow in areas of advisory and origination, through additional investments and partnerships across Corporate & Investment Banking and Global Markets Continue to advance ESG initiatives, including supporting clients in achieving their energy transition goals |
||
Leverage digital and data to deliver innovative solutions |
Expanded our digital research platform into next generation applications, utilizing alternative data Launched Aiden ® Arrival, the second algorithm on RBC’s AI-based electronic trading platform, in Europe. RBC Capital Markets was ranked 2nd overall among North American and European banks at incorporating and advancing AI technology by Evident AI Index in February 2023 |
Generate differentiated insights and thought leadership leveraging Elements, RBC’s alternative data and analytics platform Advance the client digital experience and broaden electronic execution capabilities |
||
Prioritize and align for impact |
Integrated Treasury Services and Transaction Banking into Capital Markets, driving stronger strategic alignment across the business Further embedded a culture of productivity and efficiency to enable accelerated investments |
Strategically invest across talent, technology and capital, prioritizing areas of greatest impact Align business and functional strategies to improve execution on an end-to-end basis to build scale and maximize return on investment |
||
Drive agility and ease of doing business |
Prioritized investments in technology and functional infrastructure in alignment with business strategy Shifted investment mix more towards client digitization and new product capabilities |
Simplify functional processes to improve client and employee experience Continue to drive cross-platform and geographic collaboration across businesses and asset classes |
||
Engage, enable and empower our talent |
Invested in talent across internal promotions and external senior hires, and increased internal mobility Progressed diverse representation by embedding our Diversity & Inclusion (D&I) strategy more deeply into the business Recognized as the Best FX Bank for Diversity as part of the Euromoney’s 2023 FX Awards |
Elevate leadership capabilities to grow and develop talent Advance diverse representation and continue to strengthen our culture of inclusion and belonging Drive a high-performance culture that empowers and enables people to deliver on our ambitious goals |
Capital Markets |
Table 34 |
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) |
2023 |
2022 (1)
|
||||||
Net interest income (2)
|
$ |
3,379 |
$ | 4,944 | ||||
Non-interest income (2)
|
7,672 |
5,005 | ||||||
Total revenue (2)
|
11,051 |
9,949 | ||||||
PCL on performing assets |
125 |
(32 | ) | |||||
PCL on impaired assets |
436 |
19 | ||||||
PCL |
561 |
(13 | ) | |||||
Non-interest expense |
6,509 |
5,816 | ||||||
Income before income taxes |
3,981 |
4,146 | ||||||
Net income |
$ |
4,139 |
$ | 3,368 | ||||
Revenue by business |
||||||||
Corporate & Investment Banking |
$ |
5,375 |
$ | 4,765 | ||||
Global Markets |
6,013 |
5,619 | ||||||
Other |
(337 |
) |
(435 | ) | ||||
Key ratios |
||||||||
ROE |
14.6% |
12.1% | ||||||
Selected balance sheet information |
||||||||
Average total assets |
$ |
1,107,100 |
$ | 1,056,100 | ||||
Average trading securities |
160,900 |
139,400 | ||||||
Average loans and acceptances, net |
144,900 |
131,400 | ||||||
Average deposits |
291,700 |
284,800 | ||||||
Other information |
||||||||
Number of employees (FTE) |
7,253 |
7,017 | ||||||
Credit information |
||||||||
PCL on impaired loans as a % of average net loans and acceptances |
0.30% |
0.01% | ||||||
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items |
|
|||||||
(Millions of Canadian dollars, except percentage amounts) |
2023 vs. 2022 |
|||||||
Increase (decrease): |
||||||||
Total revenue |
$ |
374 |
||||||
PCL |
19 |
|||||||
Non-interest expense |
186 |
|||||||
Net income |
165 |
|||||||
Percentage change in average U.S. dollar equivalent of C$1.00 |
(4)% |
|||||||
Percentage change in average British pound equivalent of C$1.00 |
(3)% |
|||||||
Percentage change in average Euro equivalent of C$1.00 |
(5)% |
(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 teb adjustment for 2023 was $559 million (2022 – $572 million). For further discussion, refer to the How we measure and report our business segments section. |
Business line review |
Corporate
&
Investment Banking
|
Selected highlights |
Table 35 |
(Millions of Canadian dollars) |
2023 |
2022 (1)
|
||||||
Total revenue (2)
|
$ |
5,375 |
$ | 4,765 | ||||
Breakdown of revenue (2)
|
||||||||
Investment banking |
2,065 |
1,786 | ||||||
Lending and other (3)
|
3,310 |
2,979 | ||||||
Other information |
||||||||
Average assets |
125,000 |
109,000 | ||||||
Average loans and acceptances, net |
117,000 |
101,500 |
(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 teb adjustment for the year ended October 31, 2023 was $135 million (October 31, 2022 – $39 million). For further discussion, refer to the How we measure and report our business segments section. |
(3) | Comprises our corporate lending, client securitization, and global credit businesses. |
Global Markets |
Selected highlights |
Table 36 |
(Millions of Canadian dollars) |
2023 |
2022 (1)
|
||||||
Total revenue (2)
|
$ |
6,013 |
$ | 5,619 | ||||
Breakdown of revenue (2)
|
||||||||
Fixed income, currencies and commodities |
3,335 |
2,681 | ||||||
Equities |
1,309 |
1,458 | ||||||
Treasury services and funding (3), (4)
|
1,369 |
1,480 | ||||||
Other information |
||||||||
Average assets |
968,000 |
930,000 |
(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 teb adjustment for the year ended October 31, 2023 was $424 million (October 31, 2022 – $533 million). For further discussion, refer to the How we measure and report our business segments section. |
(3) | Effective the first quarter of 2023, the Treasury Services business moved to the Capital Markets segment, combining with our Repo and secured financing business. For further details, refer to the About Royal Bank of Canada section. |
(4) | Comprises our secured funding businesses for internal businesses and external clients. |
Other |
Corporate Support |
Corporate Support |
Table 37 |
(Millions of Canadian dollars) |
2023 |
2022 | ||||||
Net interest income (loss) (1)
|
$ |
1,181 |
$ | (132 | ) | |||
Non-interest income (loss) (1), (2)
|
(1,442 |
) |
(728 | ) | ||||
Total revenue (1), (2)
|
(261 |
) |
(860 | ) | ||||
PCL |
– |
1 | ||||||
Non-interest expense (2)
|
668 |
(247 | ) | |||||
Income (loss) before income taxes (1)
|
(929 |
) |
(614 | ) | ||||
Income taxes (recoveries) (1)
|
(160 |
) |
(616 | ) | ||||
Net income (loss) |
$ |
(769 |
) |
$ | 2 |
(1) | Teb adjusted. |
(2) | Revenue for the year ended October 31, 2023, included gains of $111 million (October 31, 2022 – losses of $363 million) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, and non-interest expense included $109 million (October 31, 2022 – $(289) 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. |
Quarterly financial information |
Fourth quarter performance |
Quarterly results and trend analysis |
Quarterly results (1)
|
Table 38 |
2023 |
2022 | |||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except per share and percentage amounts) |
Q4 |
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||||||
Personal & Commercial Banking |
$ |
5,718 |
$ | 5,563 | $ | 5,298 | $ | 5,541 | $ | 5,419 | $ | 5,182 | $ | 4,739 | $ | 4,803 | ||||||||||||||||||||
Wealth Management (2)
|
4,188 |
4,402 | 4,394 | 4,560 | 4,287 | 3,997 | 3,973 | 3,986 | ||||||||||||||||||||||||||||
Insurance |
589 |
1,848 | 1,347 | 1,891 | 644 | 1,233 | 234 | 1,399 | ||||||||||||||||||||||||||||
Capital Markets (2), (3)
|
2,564 |
2,679 | 2,662 | 3,146 | 2,505 | 1,889 | 2,531 | 3,024 | ||||||||||||||||||||||||||||
Corporate Support (3)
|
(33 |
) |
(3 | ) | (181 | ) | (44 | ) | (288 | ) | (169 | ) | (257 | ) | (146 | ) | ||||||||||||||||||||
Total revenue |
13,026 |
14,489 | 13,520 | 15,094 | 12,567 | 12,132 | 11,220 | 13,066 | ||||||||||||||||||||||||||||
PCL |
720 |
616 | 600 | 532 | 381 | 340 | (342 | ) | 105 | |||||||||||||||||||||||||||
PBCAE |
92 |
1,379 | 1,006 | 1,545 | 116 | 850 | (180 | ) | 997 | |||||||||||||||||||||||||||
Non-interest expense |
8,143 |
7,861 | 7,494 | 7,675 | 7,209 | 6,386 | 6,434 | 6,580 | ||||||||||||||||||||||||||||
Income before income taxes |
4,071 |
4,633 | 4,420 | 5,342 | 4,861 | 4,556 | 5,308 | 5,384 | ||||||||||||||||||||||||||||
Income taxes |
(60 |
) |
761 | 771 | 2,128 | 979 | 979 | 1,055 | 1,289 | |||||||||||||||||||||||||||
Net income |
$ |
4,131 |
$ | 3,872 | $ | 3,649 | $ | 3,214 | $ | 3,882 | $ | 3,577 | $ | 4,253 | $ | 4,095 | ||||||||||||||||||||
EPS – basic |
$ |
2.90 |
$ | 2.74 | $ | 2.58 | $ | 2.29 | $ | 2.75 | $ | 2.52 | $ | 2.97 | $ | 2.84 | ||||||||||||||||||||
– diluted |
2.90 |
2.73 | 2.58 | 2.29 | 2.74 | 2.51 | 2.96 | 2.84 | ||||||||||||||||||||||||||||
Effective income tax rate |
(1.5)% |
16.4% | 17.4% | 39.8% | 20.1% | 21.5% | 19.9% | 23.9% | ||||||||||||||||||||||||||||
Period average US$ equivalent of C$1.00 |
$ |
0.732 |
$ | 0.750 | $ | 0.737 | $ | 0.745 | $ | 0.739 | $ | 0.783 | $ | 0.789 | $ | 0.787 |
(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. |
Financial condition |
Condensed balance sheets |
Table 39 |
As at October 31 (Millions of Canadian dollars) |
2023 |
2022 | ||||||
Assets |
||||||||
Cash and due from banks |
$ |
61,989 |
$ | 72,397 | ||||
Interest-bearing deposits with banks |
71,086 |
108,011 | ||||||
Securities, net of applicable allowance (1)
|
409,730 |
318,223 | ||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
340,191 |
317,845 | ||||||
Loans |
||||||||
Retail |
569,951 |
549,751 | ||||||
Wholesale |
287,826 |
273,967 | ||||||
Allowance for loan losses |
(5,004 |
) |
(3,753 | ) | ||||
Other – Derivatives |
142,450 |
154,439 | ||||||
– Other (2)
|
126,773 |
126,339 | ||||||
Total assets |
$ |
2,004,992 |
$ | 1,917,219 | ||||
Liabilities |
||||||||
Deposits |
$ |
1,231,687 |
$ | 1,208,814 | ||||
Other – Derivatives |
142,629 |
153,491 | ||||||
– Other (2)
|
501,530 |
436,714 | ||||||
Subordinated debentures |
11,386 |
10,025 | ||||||
Total liabilities |
1,887,232 |
1,809,044 | ||||||
Equity attributable to shareholders |
117,661 |
108,064 | ||||||
Non-controlling interests |
99 |
111 | ||||||
Total equity |
117,760 |
108,175 | ||||||
Total liabilities and equity |
$ |
2,004,992 |
$ | 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. |
Off-balance sheet arrangements |
Liquidity and credit enhancement facilities |
Table 40 |
2023 |
2022 | |||||||||||||||||||||
As at October 31 (Millions of Canadian dollars) |
Notional of committed amounts |
Allocable notional amounts |
Maximum exposure to loss |
Notional of committed amounts (1) |
Allocable notional amounts |
Maximum exposure to loss (2) |
||||||||||||||||
Backstop liquidity facilities |
$ |
54,713 |
$ |
51,469 |
$ |
51,469 |
$ | 48,235 | $ | 45,261 | $ 45,261 | |||||||||||
Credit enhancement facilities (3)
|
3,244 |
3,244 |
3,244 |
2,974 | 2,974 | 2,974 | ||||||||||||||||
Total |
$ |
57,957 |
$ |
54,713 |
$ |
54,713 |
$ | 51,209 | $ | 48,235 | $ 48,235 |
(1) | Based on total committed financing limit. |
(2) | Not presented in the table above are derivative assets with a fair value of $2 million (October 31, 2022 – $25 million) which are a component of our total maximum exposure to loss from our interests in the multi-seller conduits. Refer to Note 8 of our 2023 Annual Consolidated Financial Statements for more details. |
(3) | Includes $18 million (October 31, 2022 – $14 million) of Financial standby letters of credit. |
Maximum exposure to loss by client type |
Table 41 |
2023 |
2022 | |||||||||||||||||||||||
As at October 31 (Millions of dollars) | US$ |
C$ |
Total C$ |
US$ | C$ | Total C$ | ||||||||||||||||||
Outstanding securitized assets |
||||||||||||||||||||||||
Auto and truck loans and leases |
$ |
11,197 |
$ |
3,874 |
$ |
19,402 |
$ | 10,553 | $ | 3,967 | $ | 18,351 | ||||||||||||
Consumer loans |
4,170 |
– |
5,783 |
3,198 | – | 4,359 | ||||||||||||||||||
Credit cards |
4,226 |
510 |
6,371 |
4,932 | 719 | 7,441 | ||||||||||||||||||
Dealer floor plan receivables |
1,075 |
592 |
2,083 |
1,012 | 580 | 1,960 | ||||||||||||||||||
Equipment receivables |
2,086 |
965 |
3,858 |
2,291 | 243 | 3,365 | ||||||||||||||||||
Fleet finance receivables |
1,835 |
190 |
2,735 |
785 | 213 | 1,283 | ||||||||||||||||||
Commercial loans (1)
|
542 |
530 |
1,282 |
143 | 428 | 624 | ||||||||||||||||||
Residential mortgages |
– |
1,785 |
1,785 |
– | 1,785 | 1,785 | ||||||||||||||||||
Student loans |
2,312 |
141 |
3,348 |
2,013 | 139 | 2,882 | ||||||||||||||||||
Trade receivables |
2,954 |
– |
4,097 |
2,306 | – | 3,144 | ||||||||||||||||||
Transportation finance |
2,752 |
153 |
3,969 |
2,119 | 153 | 3,041 | ||||||||||||||||||
Total |
$ |
33,149 |
$ |
8,740 |
$ |
54,713 |
$ | 29,352 | $ | 8,227 | $ | 48,235 | ||||||||||||
Canadian equivalent |
$ |
45,973 |
$ |
8,740 |
$ |
54,713 |
$ | 40,007 | $ | 8,227 | $ | 48,235 |
(1) | Exposures previously classified as Insurance premiums are now classified as Commercial loans, reflecting an alignment with rating agency classification and reporting. |
Risk management |
Top and emerging risks |
Top & emerging risks |
Description |
|
Business and economic conditions |
Our financial results are affected to varying degrees by the general business and economic conditions in the geographic regions in which we operate. These conditions may include factors such as: economic growth or contraction trends, consumer saving and spending habits; consumer and corporate borrowing and repayment patterns; unemployment rates; the differing economic trajectories among nations across the globe; global tensions and geopolitical uncertainty; the level of business investment and overall business sentiment; trade; the emergence of a new outbreak of a pandemic or other health crisis; the level of government spending, as well as fiscal and monetary policy; the level of activity and volatility of the financial markets; disruptions to energy and other commodity markets; competitiveness; supply chain challenges and labour shortages; the evolution of elevated inflationary pressures; and possible stagflation or deflation. Moreover, interest rate changes and actions taken by central banks to manage inflation or the broader economy have implications for us. Our financial results are sensitive to changes in interest rates, as described in the Systemic risk section. For example, a slowdown in economic growth or an economic downturn could adversely impact employment rates and household incomes, consumer spending, housing prices, corporate earnings and business investment, and could adversely affect our business, including, but not limited to, the demand for our loan and other products, and result in lower earnings, and higher credit losses. In addition to risks arising from monetary policy tightening, risks are also emerging around how governments may continue to seek to recoup pandemic-related support, or any new support provided to deal with emerging economic challenges. This may include, for example, changes to tax policy to address fiscal capacity concerns and to balance budgets in the future. There are also emerging risks related to wealth and income inequality, as well as changing demographics and immigration, which could impact the labour market, the housing market, inflation, demand and consumer trends, and potentially have broader societal and government policy implications. |
|
Canadian housing and household indebtedness |
Canadian housing and household indebtedness risks remain heightened in the current interest rate environment. Concerns around elevated levels of Canadian household debt, which accelerated during the
COVID-19 pandemic, could escalate if interest rates remain higher for longer, if the cost of living increases further, or if job losses increase significantly, potentially resulting in, among other things, higher credit losses. Moreover, continued interest rate increases or slowing economic growth could adversely impact housing market activity and housing prices, which could push loan-to-value While real estate rental activity has rebounded in certain markets, challenging affordability conditions, supply constraints, elevated borrowing and construction costs may have an adverse impact on future real estate investment and demand. |
Top & emerging risks |
Description |
|
Information technology, cyber and third-party risks |
Information technology (IT) risk, cyber risks and third-party risk remain top risks, not only for the financial services sector, but for other industries worldwide. Geopolitical tensions have increased the risk of nation state actors attacking critical infrastructure, including banks and critical third parties (e.g., utilities, telecom providers, etc.). We continue to be subject to the heightened inherent risk of cyberattacks, data breaches, cyber extortion and similar compromises, due to: (i) the size, scale and global nature of our operations; (ii) our heavy reliance on the internet to conduct
day-to-day Ransomware threats are growing in sophistication and being used to launch major supply chain attacks. Additionally, clients’ use of personal devices can create further avenues for potential cyber-related incidents, as the bank has little or no control over the safety of these devices. Resulting implications could include business interruptions, client service disruptions, financial loss, theft of intellectual property and confidential information, litigation, enhanced regulatory attention and penalties, as well as reputational damage. Furthermore, the adoption of emerging technologies, such as cloud computing, AI, including generative AI, and robotics, call for continued focus and investment to manage risks effectively. For more details on how we are managing these risks, refer to the Operational risk section. |
|
Geopolitical uncertainty |
In 2023, the Russia-Ukraine conflict continued to produce turmoil in the geopolitical landscape, with ongoing impacts to the global economy and markets. Domestic disturbances in Russia may also signal weakening internal stability and growing tail risks associated with Russia-West tensions. The duration and path of the conflict remains uncertain and could continue to exacerbate global tensions, energy and other commodity shortages, supply chain disruptions, inflationary pressures, weakening sentiment and growth prospects, market volatility, cyberattacks, and the proliferation of sanctions and trade measures. In particular, Europe continues to face uncertainty given its trade relationships with impacted regions and its weakening economic prospects. Tensions remain elevated between China and the U.S. and its allies over a number of issues, including trade, technology, human rights, Taiwan, Hong Kong and Macau. Moreover, these trade tensions produce additional vulnerabilities to the Canadian economy given the country’s trading relationship with the U.S. and China, Canada’s two largest trading partners. Tensions between China and its neighbours over territorial claims, and the prospect of even closer relations between China and Russia, as well as closer relations between these two countries and Iran and North Korea, add further global and economic uncertainty. Geopolitical tensions in the Middle East and other regions could also add to economic and market uncertainties. Should the war between Israel and Hamas broaden or escalate regionally, this may destabilize global security, markets, and economic growth, along with key commodity markets. In addition, an uncertain geopolitical or economic environment could lead to increases in polarization, social unrest or terrorism, each of which could have direct or indirect impacts to the bank. More broadly, the future of global trade remains uncertain, as countries look to decrease reliance on the global supply chain and nations with differing values. Increased protectionism and economic nationalism could reshape global alliances and financial systems as the supply of critical goods of economic and national importance (e.g., energy, critical minerals, semiconductors) remains one of the top priorities of governments. We will continue to monitor these developments and others, and will assess the implications they have on us. |
|
Environmental and social risk (including climate change) |
We, like other organizations, are subject to increased regulatory requirements and stakeholder expectations to address social and racial inequality and other human rights issues. Risks associated with climate change are evolving as it relates to the global transition to a
net-zero economy and physical climate risks (e.g., extreme weather events and chronic shifts in climate).Environmental and social risks, including climate change, are each unique and transverse risks, and impact all of our principal risk types in different ways and to varying degrees, including but not limited to strategic, operational, credit, reputation, legal and regulatory environment, and regulatory compliance risks. For details on these risks and how we are managing them, refer to the Overview of other risks – Environmental and Social risk section. |
Top & emerging risks |
Description |
|
Digital disruption and innovation |
As the demand for digital banking services grow, the need to meet the rapidly evolving needs of clients and compete with traditional and
non-traditional competitors has increased our strategic and reputation risks. Additional risks continue to emerge as demographic trends, evolving client expectations, the increased power to analyze data and the emergence of disruptors are creating competitive pressures across a number of sectors. Moreover, established technology companies, new competitors, and regulatory changes continue to foster new business models that could challenge traditional banks and financial products. Finally, while the adoption of new technologies, such as AI (including generative AI) and machine learning, presents opportunities for us, it is resulting or could result in new and complex strategic, operational, regulatory, compliance and reputation risks that would need to be managed effectively. |
|
Privacy and data related risks |
The protection and responsible use of personal information are critical to maintaining our clients’ trust. In addition, the management and governance of our data also remains a top risk given the high value attributed to our data for the insights it can generate for clients and communities. Resulting implications from failing to manage data and privacy risks could include financial loss, theft of intellectual property and/or confidential information, litigation, enhanced regulatory attention and penalties, as well as reputational damage. Effective privacy and information management practices continue to grow in importance, as demonstrated by the continued development of complex regulations in the jurisdictions in which we operate. Privacy and data related risks have also heightened as a result of the evolving threat landscape, and associated data breach risks. For details on how we are managing these risks, refer to the Operational risk section. |
|
Regulatory changes |
The ongoing introduction of new or revised regulations requires enhanced focus across the organization on meeting additional regulatory requirements across the multiple jurisdictions in which we operate. Financial and other reforms that have been implemented or are being implemented across multiple jurisdictions, such as digital, data and technology reforms, cyber security and anti-money laundering regulations, interest rate benchmark and payments reform, as well as privacy, climate, sustainability and consumer protection regulatory initiatives, continue to impact our operations and strategies. For more details, refer to the Legal and regulatory environment risk section. |
|
Culture and conduct risks |
Our Purpose, values and risk principles are key dimensions of our culture. We demonstrate our culture through our conduct – the behaviours, decisions and actions of the organization and our employees. Culture and conduct risks are considered top risks for the financial services industry due to the impact that our choices, behaviours, and overall risk governance can have on outcomes for our clients and other stakeholders. We embed client considerations into our decision-making processes and continue to focus on the fair treatment of clients which also aligns with regulatory direction. We seek to be responsive to evolving employee needs while expecting employees to always act with integrity. Regulators continue to focus on conduct risks, and heightened expectations generally from regulators could lead to investigations, remediation requirements, higher compliance costs and enforcement actions and fines, and potential criminal prosecutions or imposition of sanctions, which may involve prohibitions or restrictions on some of our activities. While we take steps to continue to strengthen our conduct practices, and prevent and detect risk outcomes which could potentially harm clients, employees or the integrity of the markets, such outcomes may not always be prevented or detected. For more details, refer to the Culture and conduct risks section. |
Overview |
• | Effectively balance risk and reward to enable sustainable growth. |
• | Collectively share the responsibility for risk management. |
• | Undertake only risks we understand and make thoughtful and future-focused risk decisions. |
• | Always uphold our Purpose and vision, and consistently abide by our values and Code of Conduct to maintain our reputation and the trust of our clients, colleagues and communities. |
• | Maintain a healthy and robust control environment to protect our stakeholders. |
• | Use judgment and common sense. |
• | Always be operationally prepared and financially resilient for a potential crisis. |
Enterprise risk management |
Effective risk management protects us from unacceptable losses or undesirable outcomes with respect to earnings volatility, capital adequacy or liquidity, reputation risk or other risks while supporting and enabling our overall business strategy. It requires the clear articulation of our risk appetite, which is the amount and type of risk that we are able and willing to accept in the pursuit of our business objectives. It reflects our self-imposed upper bound to risk-taking, set at levels inside of regulatory limits and constraints, and influences our risk management philosophy, Code of Conduct, business practices and resource allocation. It provides clear boundaries and sets an overall tone for balancing risk-reward trade-offs to ensure the long-term viability of the organization. Our risk appetite is integrated into our strategic, financial, and capital planning processes, as well as ongoing business decision-making processes and is reviewed and approved annually by the Board. Our Enterprise Risk Appetite Framework (ERAF) outlines the foundational aspects of our approach to risk appetite, articulates our quantitative and qualitative risk appetite statements and their supporting measures and associated constraints, which can be applied at the enterprise, business segment, business unit and legal entity level, and describes our requirements and expectations to embed effective risk appetite practices throughout the organization. |
|
Risk appetite statements |
||||||||||||
Quantitative statements |
Qualitative statements |
|||||||||||
• Manage earnings volatility and exposure to future losses under normal and stressed conditions. • Avoid excessive concentrations of risk. • Ensure capital adequacy and sound management of liquidity and funding risk. • Ensure sound management of operational and regulatory compliance risk. • Maintain strong credit ratings and a risk profile in the top half of our peer group. |
• Always uphold our Purpose and vision and consistently abide by our values and Code of Conduct to maintain our reputation and the trust of our clients, colleagues and communities. • Undertake only risks we understand. Make thoughtful and future-focused risk decisions, taking environmental and social considerations into account. • Effectively balance risk and reward to enable sustainable growth. • Maintain a healthy and robust control environment to protect our stakeholders. • Always be operationally prepared and financially resilient for a potential crisis. |
|||||||||||
• | Quantifying expected loss: losses that are statistically expected to occur as a result of conducting business in a given time period; |
• | Quantifying unexpected loss: an estimate of the deviation of actual earnings from expected earnings, over a specified time horizon; |
• | Stress testing: evaluates, from a forward-looking perspective, the potential effects of a set of specified changes in risk factors, corresponding to exceptional but plausible adverse economic and financial market events; and |
• | Back-testing: the realized values are compared to the parameter estimates that are currently used in an effort to ensure the parameters remain appropriate for regulatory and economic capital calculations. |
• | Assessing the viability of long-term business plans and strategies; |
• | Monitoring our risk profile relative to our risk appetite in terms of earnings and capital at risk; |
• | Setting limits; |
• | Identifying key risks to, and potential shifts in, our capital and liquidity levels, as well as our financial position; |
• | Enhancing our understanding of available mitigating actions in response to potential adverse events; and |
• | Assessing the adequacy of our capital and liquidity levels. |
The shaded text along with the tables specifically marked with an asterisk (*) in the following sections of the MD&A represent our disclosures on credit, market and liquidity and funding risks in accordance with IFRS 7 , Financial Instruments: Disclosures |
Transactional/positional risk drivers |
Credit risk |
• | Ensuring credit quality is not compromised for growth; |
• | Managing credit risks in transactions, relationships and portfolios; |
• | Avoiding excessive concentrations in correlated credit risks; |
• | Using our credit risk rating and scoring systems or other approved credit risk assessment or rating methodologies, policies and tools; |
• | Pricing appropriately for the credit risk taken; |
• | Detecting and preventing inappropriate credit risk through effective systems and controls; |
• | Applying consistent credit risk exposure measurements; |
• | Ongoing credit risk monitoring and administration; |
• | Transferring credit risk to third parties where appropriate through approved credit risk mitigation techniques (e.g., sale, hedging, insurance, securitization); and |
• | Avoiding activities that are inconsistent with our values, Code of Conduct or policies. |
• | Probability of default (PD): An estimated percentage that represents the likelihood of default within a given time period of an obligor for a specific rating grade or for a particular pool of exposure. |
• | Exposure at default (EAD): An amount expected to be owed by an obligor at the time of default. |
• | Loss given default (LGD): An estimated percentage of EAD that is not expected to be recovered during the collections and recovery process following a default. |
• | Basel PDs are based on long-run averages over an entire economic cycle. IFRS PDs are based on current conditions, adjusted for estimates of future conditions that will impact PD under probability-weighted macroeconomic scenarios. |
• | Basel PDs consider the probability of default over the next 12 months. IFRS PDs consider the probability of default over the next 12 months only for instruments in stage 1. Expected credit losses for instruments in stage 2 are calculated using lifetime PDs. |
• | Basel LGDs are based on severe but plausible downturn economic conditions. IFRS LGDs are based on current conditions, adjusted for estimates of future conditions that will impact LGD under probability-weighted macroeconomic scenarios. |
• | Loans and acceptances outstanding, undrawn commitments, and other exposures, including contingent liabilities such as letters of credit and guarantees, debt securities carried at FVOCI or amortized cost and deposits with financial institutions. Undrawn commitments represent an estimate of the contractual amount that may be drawn upon at the time of default of an obligor. |
• | Repo-style transactions, which include repurchase and reverse repurchase agreements and securities lending and borrowing transactions. For repo-style transactions, gross exposure represents the amount at which securities were initially financed, before taking collateral into account. |
• | Derivative amounts which represent the credit equivalent amount, as defined by OSFI as the replacement cost plus an add-on amount for potential future credit exposure, scaled by a regulatory factor. For further details on replacement cost and credit equivalent amounts, refer to Note 9 of our 2023 Annual Consolidated Financial Statements. |
Internal ratings map* |
Table 42 |
PD Bands |
||||||||||||
Ratings |
Business and Bank |
Sovereign |
BRR |
S&P |
Moody’s |
Description |
||||||
1 | 0.0000% – 0.0500% | 0.0000% – 0.0150% | 1+ | AAA | Aaa | Investment Grade | ||||||
2 | 0.0000% – 0.0500% | 0.0151% – 0.0250% | 1H | AA+ | Aa1 | |||||||
3 | 0.0000% – 0.0500% | 0.0251% – 0.0350% | 1M | AA | Aa2 | |||||||
4 | 0.0000% – 0.0500% | 0.0351% – 0.0450% | 1L | AA- | Aa3 | |||||||
5 | 0.0000% – 0.0550% | 0.0451% – 0.0550% | 2+H | A+ | A1 | |||||||
6 | 0.0551% – 0.0650% | 2+M | A | A2 | ||||||||
7 | 0.0651% – 0.0750% | 2+L | A- | A3 | ||||||||
8 | 0.0751% – 0.0850% | 2H | BBB+ | Baa1 | ||||||||
9 | 0.0851% – 0.1030% | 2M | BBB | Baa2 | ||||||||
10 | 0.1031% – 0.1775% | 2L | BBB- | Baa3 | ||||||||
11 | 0.1776% – 0.3470% | 2-H | BB+ | Ba1 |
Non-investment Grade |
|||||||
12 | 0.3471% – 0.6460% | 2-M | BB | Ba2 | ||||||||
13 | 0.6461% – 1.0620% | 2-L | BB- | Ba3 | ||||||||
14 | 1.0621% – 1.5520% | 3+H | B+ | B1 | ||||||||
15 | 1.5521% – 2.2165% | 3+M | B | B2 | ||||||||
16 | 2.2166% – 4.5070% | 3+L | B- | B3 | ||||||||
17 | 4.5071% – 7.1660% | 3H | CCC+ | Caa1 | ||||||||
18 | 7.1661% – 13.1760% | 3M | CCC | Caa2 | ||||||||
19 | 13.1761% – 24.9670% | 3L | CCC- | Caa3 | ||||||||
20 | 24.9671% – 99.9990% | 4 | CC | Ca | ||||||||
21 | 100% | 5 | D | C | Impaired | |||||||
22 | 100% | 6 | D | C |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
• |
The use of standardized agreements such as the International Swaps and Derivatives Association Master Agreement and Credit Support Annex; |
• |
Generally restricting eligible collateral to high quality liquid assets, primarily cash and highly-rated government securities, subject to appropriate haircuts; and |
• |
The use of initial margin and variation margin arrangements in accordance with regulatory requirements and internal risk standards. |
• |
Specific wrong-way risk, which exists when our exposure to a particular counterparty is positively correlated with the PD of the counterparty due to the nature of our transactions with them (e.g., loans collateralized by shares or debt issued by the counterparty or a related party). Specific wrong-way risk over-the-counter pre-approved by GRM. Factors considered in reviewing such trades include the credit quality of the counterparty, the nature of the asset(s) underlying the derivative and the existence of credit mitigation. |
• | General wrong-way risk, which exists when there is a positive correlation between the PD of the counterparties and general macroeconomic or market factors. General wrong way risk can arise in various circumstances, depending on the transaction, collateral type, and the nature of the counterparty. We monitor general wrong-way counterparty credit risk using a variety of metrics including stress scenarios, correlation analysis, and investment strategy concentration. |
Internal ratings map* |
Table 43 | |
PD bands |
Description | |
0.050% – 3.965% | Low risk | |
3.966% – 7.428% | Medium risk | |
7.429% – 99.99% | High risk | |
100% | Impaired/Default |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
We seek to reduce our exposure to credit risk through a variety of means, including the structuring of transactions and the use of collateral. Structuring of transactions Specific credit policies and procedures set out the requirements for structuring transactions. Risk mitigants include the use of guarantees, collateral, seniority, LTV requirements and covenants. Product-specific guidelines set out appropriate product structuring as well as client and guarantor criteria. Collateral When we advance credit, we often require obligors to pledge collateral as security. The extent of risk mitigation provided by collateral depends on the amount, type and quality of the collateral taken. Specific requirements relating to collateral valuation and management are set out in our credit risk management policies. The types of collateral we use to secure credit or trading facilities within the bank are varied. For example, our securities financing and collateralized OTC derivatives activities are primarily secured by cash and highly-rated liquid government and agency securities. Wholesale lending to business clients is often secured by pledges of the assets of the business, such as accounts receivable, inventory, operating assets and commercial real estate. In Canadian Banking and Wealth Management, collateral typically consists of a pledge over a real estate property, or a portfolio of debt securities and equities trading on a recognized exchange.• We employ a risk-based approach to property valuation. Property valuation methods include automated valuation models (AVM) and appraisals. An AVM is a tool that estimates the value of a property by reference to market data including sales of comparable properties and price trends specific to the Metropolitan Statistical Area in which the property being valued is located. Using a risk-based approach, we also employ appraisals which can include drive-by or full on-site appraisals. |
||
• We continue to actively manage our mortgage portfolio and perform stress testing, based on a combination of increasing unemployment, rising interest rates and a downturn in real estate markets. • We seek to be in compliance with regulatory requirements that govern residential mortgage underwriting practices, including LTV parameters and property valuation requirements. |
There were no significant changes regarding our risk management policies on collateral or to the quality of the collateral held during the period. |
Credit risk approval The Board, GE, GRC and other senior management committees work together to ensure the ECRMF and supporting policies, processes and procedures exist to manage credit risk and approve related credit risk limits. Reports are provided to the Board, the GRC, and senior executives to keep them informed of our risk profile, including significant credit risk issues, shifts in exposures and trending information, to ensure appropriate and timely actions can be taken where necessary. Our enterprise-wide credit risk policies set out the minimum requirements for the management of credit risk in a variety of borrower, transactional and portfolio management contexts. |
||
Transaction approval Credit transactions are governed by our RBC Enterprise Policy on Risk Limits and Risk Approval Authorities that captures the authorities and risk limits delegated to management as well as the credit rules policy, which outlines the minimum standards for managing credit risk at the individual client relationship and/or transaction level. The credit rules policy is further supported by business and/or product-specific policies and guidelines as appropriate. Where a transaction will exceed senior management’s authorities, the approval of the Risk Committee of the Board is required. |
||
Product approval Proposals for credit products and services are comprehensively reviewed and approved under a risk assessment process and are subject to product and suitability risk approval authorities which increase as the level of risk increases. New and amended products must be reviewed relative to all risk drivers, including credit risk. All existing products must be reviewed on a regular basis following a risk-based assessment approach. Credit risk limits • The allocation of risk appetite and Board delegated authorities are supported by the establishment of risk limits which take both regulatory constraints and internal risk management judgment into account. Risk limits are established at the following levels: single name limits, regional, country and industrial sector limits (notional and economic capital), regulatory large exposure limits, product and portfolio limits, and underwriting and distribution risk limits. These limits apply across all businesses, portfolios, transactions and products. • We actively manage credit exposures and limits to ensure alignment with our risk appetite, to maintain our target business mix and to ensure that there is no undue concentration risk. • Concentration risk is defined as the risk arising from large exposures that are highly correlated such that their ability to meet contractual obligations could be similarly affected by changes in economic, political, or other risk drivers. • Credit concentration limits are reviewed on a regular basis after considering business, economic, financial, and regulatory environments. |
Credit risk exposure by portfolio, sector and geography |
Table 44 |
As at | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
October 31 2023 (1)
|
October 31 2022 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit risk |
Counterparty credit risk |
Credit risk (2), (3) | Counterparty credit risk (6)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
On-balance sheet amount |
Off-balance sheetamount |
Repo-style transactions |
Derivatives |
Total exposure |
On-balance sheet amount |
Off-balance sheetamount (4) |
Repo-style transactions |
Derivatives |
Total exposure |
|||||||||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Undrawn |
Other |
Undrawn | Other (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Retail |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential secured (7)
|
$ |
451,610 |
$ |
114,612 |
$ |
– |
$ |
– |
$ |
– |
$ |
566,222 |
$ | 393,346 | $ | 107,604 | $ | – | $ | – | $ | – | $ | 500,950 | ||||||||||||||||||||||||||||||||
Qualifying revolving (8)
|
36,091 |
110,473 |
– |
– |
– |
146,564 |
32,474 | 94,949 | – | – | – | 127,423 | ||||||||||||||||||||||||||||||||||||||||||||
Other retail |
48,162 |
20,804 |
136 |
– |
– |
69,102 |
98,070 | 19,993 | 136 | – | – | 118,199 | ||||||||||||||||||||||||||||||||||||||||||||
Total retail |
$ |
535,863 |
$ |
245,889 |
$ |
136 |
$ |
– |
$ |
– |
$ |
781,888 |
$ | 523,890 | $ | 222,546 | $ | 136 | $ | – | $ | – | $ | 746,572 | ||||||||||||||||||||||||||||||||
Wholesale |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agriculture |
$ |
11,316 |
$ |
2,792 |
$ |
46 |
$ |
– |
$ |
117 |
$ |
14,271 |
$ | 10,417 | $ | 2,089 | $ | 36 | $ | – | $ | 161 | $ | 12,703 | ||||||||||||||||||||||||||||||||
Automotive |
11,568 |
8,586 |
680 |
– |
1,148 |
21,982 |
8,919 | 9,184 | 317 | – | 1,606 | 20,026 | ||||||||||||||||||||||||||||||||||||||||||||
Banking |
82,319 |
3,060 |
2,267 |
101,736 |
41,300 |
230,682 |
73,335 | 5,487 | 1,036 | 111,559 | 38,830 | 230,247 | ||||||||||||||||||||||||||||||||||||||||||||
Consumer discretionary |
18,348 |
9,132 |
650 |
– |
1,030 |
29,160 |
19,666 | 9,297 | 569 | – | 949 | 30,481 | ||||||||||||||||||||||||||||||||||||||||||||
Consumer staples |
8,680 |
6,996 |
546 |
– |
2,070 |
18,292 |
7,103 | 6,750 | 346 | – | 1,923 | 16,122 | ||||||||||||||||||||||||||||||||||||||||||||
Oil and gas |
6,498 |
8,373 |
1,614 |
– |
3,134 |
19,619 |
6,086 | 11,272 | 1,923 | – | 5,959 | 25,240 | ||||||||||||||||||||||||||||||||||||||||||||
Financial services |
48,589 |
24,140 |
4,818 |
83,692 |
22,611 |
183,850 |
45,394 | 25,017 | 3,530 | 69,790 | 24,546 | 168,277 | ||||||||||||||||||||||||||||||||||||||||||||
Financing products |
3,988 |
1,265 |
1,447 |
472 |
1,079 |
8,251 |
5,762 | 2,352 | 163 | 237 | 780 | 9,294 | ||||||||||||||||||||||||||||||||||||||||||||
Forest products |
1,485 |
1,004 |
313 |
– |
67 |
2,869 |
1,143 | 1,033 | 230 | – | 78 | 2,484 | ||||||||||||||||||||||||||||||||||||||||||||
Governments |
270,382 |
6,960 |
1,482 |
10,736 |
5,692 |
295,252 |
279,401 | 5,678 | 1,563 | 18,745 | 6,290 | 311,677 | ||||||||||||||||||||||||||||||||||||||||||||
Industrial products |
11,251 |
9,898 |
623 |
– |
811 |
22,583 |
10,755 | 9,319 | 601 | – | 1,216 | 21,891 | ||||||||||||||||||||||||||||||||||||||||||||
Information technology |
5,252 |
6,942 |
357 |
118 |
704 |
13,373 |
5,291 | 7,144 | 298 | 55 | 1,908 | 14,696 | ||||||||||||||||||||||||||||||||||||||||||||
Investments |
25,921 |
4,608 |
701 |
– |
383 |
31,613 |
23,764 | 3,946 | 669 | 157 | 458 | 28,994 | ||||||||||||||||||||||||||||||||||||||||||||
Mining and metals |
2,144 |
3,548 |
1,044 |
– |
391 |
7,127 |
2,377 | 4,259 | 945 | – | 467 | 8,048 | ||||||||||||||||||||||||||||||||||||||||||||
Public works and infrastructure |
2,613 |
1,534 |
529 |
– |
156 |
4,832 |
2,614 | 2,417 | 497 | – | 144 | 5,672 | ||||||||||||||||||||||||||||||||||||||||||||
Real estate and related |
102,235 |
20,406 |
1,592 |
– |
850 |
125,083 |
89,926 | 18,295 | 1,872 | – | 818 | 110,911 | ||||||||||||||||||||||||||||||||||||||||||||
Other services |
30,617 |
14,203 |
2,598 |
– |
741 |
48,159 |
27,839 | 13,425 | 2,848 | 33 | 852 | 44,997 | ||||||||||||||||||||||||||||||||||||||||||||
Telecommunication and media |
8,597 |
6,529 |
132 |
– |
2,794 |
18,052 |
7,301 | 8,298 | 79 | – | 2,751 | 18,429 | ||||||||||||||||||||||||||||||||||||||||||||
Transportation |
8,461 |
5,925 |
1,009 |
– |
2,408 |
17,803 |
6,394 | 6,386 | 930 | – | 2,069 | 15,779 | ||||||||||||||||||||||||||||||||||||||||||||
Utilities |
14,495 |
20,389 |
6,367 |
– |
4,638 |
45,889 |
12,318 | 20,651 | 5,275 | – | 5,081 | 43,325 | ||||||||||||||||||||||||||||||||||||||||||||
Other sectors |
8,698 |
2,773 |
1,193 |
88 |
20,084 |
32,836 |
4,113 | 1,700 | 71 | 73 | 20,126 | 26,083 | ||||||||||||||||||||||||||||||||||||||||||||
Total wholesale |
$ |
683,457 |
$ |
169,063 |
$ |
30,008 |
$ |
196,842 |
$ |
112,208 |
$ |
1,191,578 |
$ | 649,918 | $ | 173,999 | $ | 23,798 | $ | 200,649 | $ | 117,012 | $ | 1,165,376 | ||||||||||||||||||||||||||||||||
Total exposure (2)
|
$ |
1,219,320 |
$ |
414,952 |
$ |
30,144 |
$ |
196,842 |
$ |
112,208 |
$ |
1,973,466 |
$ | 1,173,808 | $ | 396,545 | $ | 23,934 | $ | 200,649 | $ | 117,012 | $ | 1,911,948 | ||||||||||||||||||||||||||||||||
By geography (9)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Canada |
$ |
729,131 |
$ |
306,474 |
$ |
10,676 |
$ |
80,664 |
$ |
42,123 |
$ |
1,169,068 |
$ | 697,015 | $ | 284,705 | $ | 9,444 | $ | 79,795 | $ | 41,923 | $ | 1,112,882 | ||||||||||||||||||||||||||||||||
U.S. |
358,605 |
79,256 |
13,459 |
62,966 |
24,878 |
539,164 |
334,821 | 79,829 | 10,145 | 59,866 | 24,161 | 508,822 | ||||||||||||||||||||||||||||||||||||||||||||
Europe |
58,496 |
21,987 |
3,467 |
27,637 |
31,749 |
143,336 |
79,343 | 25,485 | 2,603 | 39,244 | 36,107 | 182,782 | ||||||||||||||||||||||||||||||||||||||||||||
Other International |
73,088 |
7,235 |
2,542 |
25,575 |
13,458 |
121,898 |
62,629 | 6,526 | 1,742 | 21,744 | 14,821 | 107,462 | ||||||||||||||||||||||||||||||||||||||||||||
Total exposure (2)
|
$ |
1,219,320 |
$ |
414,952 |
$ |
30,144 |
$ |
196,842 |
$ |
112,208 |
$ |
1,973,466 |
$ | 1,173,808 | $ | 396,545 | $ | 23,934 | $ | 200,649 | $ | 117,012 | $ | 1,911,948 |
(1) | Balances as at October 31, 2023 reflect our adoption of the revised CAR guidelines that came into effect in Q2 2023 as part of OSFI’s implementation of the Basel III reforms. |
(2) | Excludes securitization, banking book equities and other assets not subject to the standardized or IRB approach. |
(3) | EAD for standardized exposures are reported net of allowance for impaired assets and EAD for IRB exposures are reported gross of all ACL and partial write-offs as per regulatory definitions. |
(4) | EAD for undrawn credit commitments and other off-balance sheet amounts are reported after the application of credit conversion factors. |
(5) | Includes other off-balance sheet exposures such as letters of credit and guarantees. |
(6) | Counterparty credit risk EAD reflects exposure amounts after netting. Collateral is included in EAD for repo-style transactions to the extent allowed by regulatory guidelines. Exchange traded derivatives are included in Other sectors. |
(7) | Includes residential mortgages and home equity lines of credit. |
(8) | Includes credit cards, unsecured lines of credit and overdraft protection products. |
(9) | Geographic profile is based on country of residence of the borrower. |
Net International exposure by region and client type (1), (2)
|
Table 45 |
As at | ||||||||||||||||||||||||||||||||||||||||||||
October 31 2023 |
October 31 2022 |
|||||||||||||||||||||||||||||||||||||||||||
Asset type |
Client type |
|||||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Loans Outstanding |
Securities |
Repo-style transactions |
Derivatives |
Financials |
Sovereign |
Corporate |
Total |
Total | |||||||||||||||||||||||||||||||||||
Europe (excluding U.K.) |
$ |
15,112 |
$ |
19,204 |
$ |
1,772 |
$ |
2,271 |
$ |
15,202 |
$ |
5,518 |
$ |
17,639 |
$ |
38,359 |
$ | 57,753 | ||||||||||||||||||||||||||
U.K. |
7,144 |
23,919 |
534 |
3,131 |
9,318 |
17,791 |
7,619 |
34,728 |
39,949 | |||||||||||||||||||||||||||||||||||
Caribbean |
8,331 |
11,029 |
381 |
186 |
7,267 |
4,190 |
8,470 |
19,927 |
19,688 | |||||||||||||||||||||||||||||||||||
Asia-Pacific |
6,746 |
36,150 |
1,695 |
1,083 |
15,004 |
25,344 |
5,326 |
45,674 |
35,338 | |||||||||||||||||||||||||||||||||||
Other (4)
|
357 |
1,876 |
332 |
20 |
427 |
1,693 |
465 |
2,585 |
3,043 | |||||||||||||||||||||||||||||||||||
Net International exposure (5), (6)
|
$ |
37,690 |
$ |
92,178 |
$ |
4,714 |
$ |
6,691 |
$ |
47,218 |
$ |
54,536 |
$ |
39,519 |
$ |
141,273 |
$ | 155,771 |
(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 $326 billion against repo-style transactions (October 31, 2022 – $357 billion) and $15 billion against derivatives (October 31, 2022 – $14 billion). |
(3) | Securities include $13 billion of trading securities (October 31, 2022 – $13 billion), $41 billion of deposits (October 31, 2022 – $56 billion), and $38 billion of investment securities (October 31, 2022 – $35 billion). |
(4) | Includes exposures in the Middle East, Africa, and Latin America. |
(5) | Excludes $4,790 million (October 31, 2022 – $5,213 million) of exposures to supranational agencies. |
(6) | Reflects $2,533 million of mitigation through credit default swaps, which are largely used to hedge single name exposures and market risk (October 31, 2022 – $2,233 million). |
Residential mortgages and home equity lines of credit |
Table 46 |
As at October 31, 2023 |
||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Residential mortgages |
Home equity lines of credit (3)
|
||||||||||||||||||||||||||||||||||
Insured (2)
|
Uninsured |
Total |
Total |
|||||||||||||||||||||||||||||||||
Region (4)
|
||||||||||||||||||||||||||||||||||||
Canada |
||||||||||||||||||||||||||||||||||||
Atlantic provinces |
$ |
8,474 |
44 |
% |
$ |
10,765 |
56 |
% |
$ |
19,239 |
$ |
1,630 |
||||||||||||||||||||||||
Quebec |
11,831 |
27 |
31,741 |
73 |
43,572 |
3,111 |
||||||||||||||||||||||||||||||
Ontario |
30,359 |
15 |
168,264 |
85 |
198,623 |
16,558 |
||||||||||||||||||||||||||||||
Alberta |
18,840 |
45 |
22,596 |
55 |
41,436 |
4,403 |
||||||||||||||||||||||||||||||
Saskatchewan and Manitoba |
8,546 |
42 |
11,803 |
58 |
20,349 |
1,749 |
||||||||||||||||||||||||||||||
B.C. and territories |
11,911 |
16 |
62,475 |
84 |
74,386 |
7,048 |
||||||||||||||||||||||||||||||
Total Canada (5)
|
89,961 |
23 |
307,644 |
77 |
397,605 |
34,499 |
||||||||||||||||||||||||||||||
U.S. |
– |
– |
33,683 |
100 |
33,683 |
2,090 |
||||||||||||||||||||||||||||||
Other International |
– |
– |
3,213 |
100 |
3,213 |
1,538 |
||||||||||||||||||||||||||||||
Total International |
– |
– |
36,896 |
100 |
36,896 |
3,628 |
||||||||||||||||||||||||||||||
Total |
$ |
89,961 |
21 |
% |
$ |
344,540 |
79 |
% |
$ |
434,501 |
$ |
38,127 |
||||||||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Residential mortgages | Home equity lines of credit (3)
|
||||||||||||||||||||||||||||||||||
Insured (2)
|
Uninsured | Total | Total | |||||||||||||||||||||||||||||||||
Region (4)
|
||||||||||||||||||||||||||||||||||||
Canada |
||||||||||||||||||||||||||||||||||||
Atlantic provinces |
$ | 8,460 | 46 | % | $ | 10,052 | 54 | % | $ | 18,512 | $ | 1,659 | ||||||||||||||||||||||||
Quebec |
12,444 | 29 | 30,623 | 71 | 43,067 | 3,300 | ||||||||||||||||||||||||||||||
Ontario |
31,409 | 17 | 156,700 | 83 | 188,109 | 17,009 | ||||||||||||||||||||||||||||||
Alberta |
19,663 | 47 | 22,154 | 53 | 41,817 | 4,923 | ||||||||||||||||||||||||||||||
Saskatchewan and Manitoba |
8,847 | 43 | 11,808 | 57 | 20,655 | 1,940 | ||||||||||||||||||||||||||||||
B.C. and territories |
12,290 | 17 | 59,347 | 83 | 71,637 | 7,386 | ||||||||||||||||||||||||||||||
Total Canada (5)
|
93,113 | 24 | 290,684 | 76 | 383,797 | 36,217 | ||||||||||||||||||||||||||||||
U.S. |
– | – | 31,956 | 100 | 31,956 | 1,776 | ||||||||||||||||||||||||||||||
Other International |
– | – | 3,043 | 100 | 3,043 | 1,621 | ||||||||||||||||||||||||||||||
Total International |
– | – | 34,999 | 100 | 34,999 | 3,397 | ||||||||||||||||||||||||||||||
Total |
$ | 93,113 | 22 | % | $ | 325,683 | 78 | % | $ | 418,796 | $ | 39,614 |
(1) | Disclosure is provided in accordance with the requirements of OSFI’s Guideline B-20 (Residential Mortgage Underwriting Practices and Procedures). |
(2) | 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. |
(3) | Includes $38,108 million and $19 million of uninsured and insured home equity lines of credit, respectively (October 31, 2022 – $39,591 million and $23 million, respectively), reported within the personal loan category. The amounts in the U.S. and Other International include term loans collateralized by residential mortgages. |
(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, and B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon. |
(5) | Total consolidated residential mortgages in Canada of $398 billion (October 31, 2022 – $384 billion) includes $12 billion (October 31, 2022 – $12 billion) of mortgages with commercial clients in Canadian Banking, of which $9 billion (October 31, 2022 – $9 billion) are insured mortgages, and $18 billion (October 31, 2022 – $17 billion) of residential mortgages in Capital Markets, of which $18 billion (October 31, 2022 – $17 billion) are held for securitization purposes. All of the residential mortgages held for securitization purposes are insured (October 31, 2022 – all insured). |
Residential mortgages portfolio by amortization period |
Table 47 |
As at | ||||||||||||||||||||||||||
October 31 2023 |
October 31 2022 |
|||||||||||||||||||||||||
Canada (2)
|
U.S. and other International |
Total |
Canada | U.S. and other International |
Total | |||||||||||||||||||||
Amortization period |
||||||||||||||||||||||||||
≤ 25 years |
57% |
26% |
55% |
57% | 25% | 54% | ||||||||||||||||||||
> 25 years ≤ 30 years |
20 |
74 |
24 |
16 | 75 | 21 | ||||||||||||||||||||
> 30 years ≤ 35 years |
1 |
– |
1 |
2 | – | 2 | ||||||||||||||||||||
> 35 years |
22 |
– |
20 |
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. |
Average LTV ratios |
Table 48 |
For the year ended | ||||||||||||||||||
October 31 2023 |
October 31 2022 |
|||||||||||||||||
Uninsured |
Uninsured | |||||||||||||||||
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% |
72% | 73% | ||||||||||||||
Quebec |
70 |
70 |
72 | 72 | ||||||||||||||
Ontario |
70 |
64 |
70 | 66 | ||||||||||||||
Alberta |
72 |
71 |
73 | 73 | ||||||||||||||
Saskatchewan and Manitoba |
73 |
73 |
73 | 75 | ||||||||||||||
B.C. and territories |
68 |
63 |
68 | 66 | ||||||||||||||
U.S. |
74 |
n.m. |
75 | n.m. | ||||||||||||||
Other International |
69 |
n.m. |
72 | n.m. | ||||||||||||||
Average of newly originated and acquired for the period (5), (6)
|
70% |
66% |
71% | 68% | ||||||||||||||
Total Canadian Banking residential mortgages portfolio (7)
|
55% |
47% |
52% | 46% |
(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 address of the property mortgaged. The Atlantic provinces are comprised of Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick, and B.C. and territories are comprised of British Columbia, Nunavut, Northwest Territories and Yukon. |
(5) | The average LTV ratio for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan ® products is 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 Composite House Price Index. |
n.m. | not meaningful |
Gross impaired loans (GIL) |
Table 49 |
As at and for the year ended | ||||||||
(Millions of Canadian dollars, except percentage amounts) |
October 31 2023 |
October 31 2022 |
||||||
Personal & Commercial Banking |
$ |
1,905 |
$ | 1,362 | ||||
Wealth Management |
514 |
278 | ||||||
Capital Markets |
1,285 |
559 | ||||||
Total GIL |
$ |
3,704 |
$ | 2,199 | ||||
Impaired loans, beginning balance |
$ |
2,199 |
$ | 2,308 | ||||
Classified as impaired during the period (new impaired) (1)
|
3,959 |
1,711 | ||||||
Net repayments (1)
|
(622 |
) |
(450 | ) | ||||
Amounts written off |
(1,572 |
) |
(1,149 | ) | ||||
Other (2)
|
(260 |
) |
(221 | ) | ||||
Impaired loans, balance at end of period |
$ |
3,704 |
$ | 2,199 | ||||
GIL as a % of related loans and acceptances |
||||||||
Total GIL as a % of related loans and acceptances |
0.42% |
0.26% | ||||||
Personal & Commercial Banking |
0.31% |
0.23% | ||||||
Canadian Banking |
0.26% |
0.18% | ||||||
Caribbean Banking |
3.45% |
3.93% | ||||||
Wealth Management (3)
|
0.44% |
0.24% | ||||||
Capital Markets (3)
|
0.89% |
0.39% |
(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. |
Allowance for credit losses |
Table 50 |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Personal & Commercial Banking |
$ |
3,718 |
$ | 3,200 | ||||
Wealth Management (1)
|
618 |
383 | ||||||
Capital Markets (1)
|
1,012 |
598 | ||||||
ACL on loans |
5,348 |
4,181 | ||||||
ACL on other financial assets (2)
|
18 |
33 | ||||||
Total ACL |
$ |
5,366 |
$ | 4,214 | ||||
ACL on loans is comprised of: |
||||||||
Retail |
$ |
2,591 |
$ | 2,285 | ||||
Wholesale |
1,609 |
1,227 | ||||||
ACL on performing loans |
$ |
4,200 |
$ | 3,512 | ||||
ACL on impaired loans |
1,148 |
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. |
Market risk |
Market risk is defined to be the impact of market prices upon our financial condition. This includes potential 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. |
1. | Positions whose revaluation gains and losses are reported in revenue, which includes: |
a) | Changes in the fair value of instruments classified or designated as FVTPL, and |
b) | Hedge ineffectiveness. |
2. | CET1 capital, which includes: |
a) | All of the above, plus |
b) | Changes in the fair value of FVOCI securities where revaluation gains and losses are reported as OCI, |
c) | Changes in the Canadian dollar value of investments in foreign subsidiaries, net of hedges, due to foreign exchange translation, and |
d) | Changes in the fair value of employee benefit plan deficits. |
3. | CET1 ratio, which includes: |
a) | All of the above, plus |
b) | Changes in RWA resulting from changes in traded market risk factors, and |
c) | Changes in the Canadian dollar value of RWA due to foreign exchange translation. |
4. | The economic value of the Bank, which includes: |
a) | Points 1 and 2 above, plus |
b) | Changes in the economic value of other non-trading positions, net interest income, and fee based income, as a result of changes in market risk factors. |
Market risk controls – FVTPL positions, including trading portfolios
1
As an element of the ERAF, the Board approves our overall market risk constraints. GRM creates and manages the control structure for FVTPL positions which
are designed to ensure that business is conducted on a basis consistent with Board requirements. The Market and Counterparty Credit Risk function within GRM is responsible for creating and managing the controls and governance procedures that are designed to ensure that risk taken is consistent with risk appetite constraints set by the Board. These controls include limits on probabilistic measures of potential loss such as Value-at-Risk Value-at-Risk one-day holding period using historic simulation of the last two years of equally weighted historic market data. These calculations are updated daily with current risk positions, with the exception of certain less material positions that are not actively traded and are updated on at least a monthly basis.non-trading FVTPL positions such as loan underwriting commitments. Total VaR captures potential loss for all positions classified as FVTPL.
VaR is a statistical estimate based on historical market data and should be interpreted with knowledge of its limitations, which include the following:
• VaR will not be predictive of future losses if the realized market movements differ significantly from the historical periods used to compute it.
• VaR projects potential losses over a
one-day holding period and does not project potential losses for risk positions held over longer time periods.• VaR is measured using positions at close of business and does not include the impact of trading and hedging activity over the course of a day.
We validate our VaR measures through a variety of means – including subjecting the models to vetting and validation by a group independent of the model developers and by back-testing the VaR against daily
marked-to-market Stress tests marked-to-market. COVID-19 Pandemic of 2020, Global Financial Crisis of 2008 and the Taper Tantrum of 2013. Hypothetical scenarios are designed to be forward-looking at potential future market stresses, and are designed to be severe but plausible. We are constantly evaluating and refining these scenarios as market conditions change. Stress results are calculated assuming an instantaneous revaluation of our positions with no management action. |
1 |
Trading portfolios are comprised of trading instruments in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline. Trading involves market-making, positioning and arbitrage activities conducted primarily within our Global Markets business in the Capital Markets segment. |
Market risk measures* |
Table 51 |
October 31, 2023 |
October 31, 2022 (1)
|
|||||||||||||||||||||||||||||||
For the year ended |
For the year ended | |||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | As at |
Average |
High |
Low |
As at | Average | High | Low | ||||||||||||||||||||||||
Equity |
$ |
10 |
$ |
11 |
$ |
26 |
$ |
6 |
$ | 20 | $ | 18 | $ | 30 | $ | 10 | ||||||||||||||||
Foreign exchange |
4 |
3 |
25 |
2 |
3 | 4 | 7 | 1 | ||||||||||||||||||||||||
Commodities |
5 |
5 |
8 |
4 |
6 | 5 | 6 | 3 | ||||||||||||||||||||||||
Interest rate (2)
|
38 |
32 |
49 |
20 |
31 | 29 | 65 | 13 | ||||||||||||||||||||||||
Credit specific (3)
|
7 |
5 |
8 |
4 |
5 | 7 | 9 | 4 | ||||||||||||||||||||||||
Diversification (4)
|
(35 |
) |
(31 |
) |
n.m. |
n.m. |
(34 | ) | (33 | ) | n.m. | n.m. | ||||||||||||||||||||
Trading VaR |
$ |
29 |
$ |
25 |
$ |
36 |
$ |
16 |
$ | 31 | $ | 30 | $ | 50 | $ | 19 | ||||||||||||||||
Total VaR (5)
|
$ |
121 |
$ |
51 |
$ |
127 |
$ |
27 |
$ | 59 | $ | 53 | $ | 87 | $ | 34 |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
(1) | Amounts have been revised from those previously presented to align with a trading VaR view. |
(2) | General credit spread risk and funding spread risk associated with uncollateralized derivatives are included under interest rate VaR. |
(3) | Credit specific risk captures issuer-specific credit spread volatility. |
(4) | Trading VaR is less than the sum of the individual risk factor VaR results due to risk factor diversification. |
(5) | The average total VaR for the year ended October 31, 2023 includes $14 million (October 31, 2022 – $11 million) related to loan underwriting commitments. |
n.m. | not meaningful |
(1) | Trading revenue (teb) amounts in the chart above exclude the impact of loan underwriting commitments. |
(2) | VaR amounts in the chart above have been revised from those previously presented to reflect Trading VaR corresponding to our trading porfolios. |
(1) | Trading revenue (teb) amounts in the chart above exclude the impact of loan underwriting commitments and structured entities. |
Market risk controls – Interest Rate Risk in the Banking Book (IRRBB) positions 2
IRRBB arises primarily from traditional customer-originated banking products such as deposits and loans, and includes related hedges and interest rate risk from securities held for liquidity management purposes. Factors contributing to IRRBB include mismatches between asset and liability repricing dates, relative changes in asset and liability rates in response to market rate scenarios, and other product features affecting the expected timing of cash flows, such as options to pre-pay loans or redeem term deposits prior to contractual maturity. IRRBB sensitivities are regularly measured and reported, and subject to limits and controls with independent oversight from GRM.The Board approves the risk appetite for IRRBB, and the Asset Liability Committee (ALCO) and GRM provide ongoing governance through IRRBB risk policies, limits, operating standards and other controls. IRRBB reports are reviewed regularly by GRM, ALCO, the GRC, the Risk Committee of the Board and the Board. |
IRRBB measurement 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. Market scenarios include currency-specific parallel and non-parallel yield curve changes, interest rate volatility shocks, and interest rate scenarios prescribed by regulators.In measuring NII risk, detailed banking book balance sheets and income statements are dynamically simulated to estimate the impact of market stress scenarios on projected NII. Assets, liabilities and off-balance sheet positions are simulated over various time horizons. The simulations incorporate maturities, renewals, and new originations along with prepayment and redemption behaviour. Product pricing and volumes are forecasted based on past experience to determine response expectations under a given market shock scenario. EVE risk captures the market value sensitivity to changes in rates. In measuring EVE risk, deterministic (single-scenario) and stochastic (multiple-scenario) valuation techniques are applied to spot position data. NII and EVE risks are measured for a range of market risk stress scenarios which include extreme but plausible changes in market rates and volatilities. IRRBB measures assume continuation of existing hedge strategies.Management of NII and EVE risk is complementary and supports our efforts to generate a sustainable high-quality NII stream. NII and EVE risks for specific units are measured daily, weekly or monthly depending on materiality, complexity and hedge strategy. A number of assumptions affecting cash flows, product re-pricing and the administration of rates underlie the models used to measure NII and EVE risk. The key assumptions pertain to the projected funding date of mortgage rate commitments, fixed-rate loan prepayment behaviour, term deposit redemption behaviour, and the term and rate profile of non-maturity deposits. All assumptions are derived empirically based on historical client behaviour and product pricing with consideration of possible forward-looking changes. All models and assumptions used to measure IRRBB are subject to independent oversight by GRM. |
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 EVE and 12-month NII, 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. |
2 |
IRRBB positions include the impact of derivatives in hedge accounting relationships, FVOCI securities used for interest rate risk management and economic hedges. |
Market risk – IRRBB measures* |
Table 52 |
October 31 2023 |
October 31 2022 |
|||||||||||||||||||||||||||||||||||
EVE risk |
NII risk |
|||||||||||||||||||||||||||||||||||
(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) |
||||||||||||||||||||||||||||
Before-tax impact of: |
||||||||||||||||||||||||||||||||||||
100 bps increase in rates |
$ |
(1,445 |
) |
$ |
(107 |
) |
$ |
(1,552 |
) |
$ |
381 |
$ |
270 |
$ |
651 |
$ | (1,900 | ) | $ | 781 | ||||||||||||||||
100 bps decrease in rates |
1,430 |
(77 |
) |
1,353 |
(409 |
) |
(342 |
) |
(751 |
) |
1,709 | (839 | ) |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
(1) | Represents the 12-month NII exposure to an instantaneous and sustained shift in interest rates. |
Non-trading foreign exchange rate riskForeign exchange rate risk is the potential adverse impact on earnings and economic value due to changes in foreign currency rates. Our revenue, expenses and income denominated in currencies other than the Canadian dollar are subject to fluctuations as a result of changes in the value of the average Canadian dollar relative to the average value of those currencies. Our most significant exposure is to the U.S. dollar, due to our operations in the U.S. and other activities conducted in U.S. dollars. Our other significant exposure is to the British pound due to our activities conducted internationally in this currency . A strengthening or weakening of the Canadian dollar compared to the U.S. dollar and British pound could reduce or increase, as applicable, the translated value of our foreign currency denominated revenue, expenses and earnings and could have a significant effect on the results of our operations. We are also exposed to foreign exchange rate risk arising from our investments in foreign operations. For unhedged equity investments, when the Canadian dollar appreciates against other currencies, the unrealized translation losses on net foreign investments decreases our shareholders’ equity through the other components of equity and decreases the translated value of the RWA of the foreign currency-denominated asset. The reverse is true when the Canadian dollar depreciates against other currencies. Consequently, we consider these impacts in selecting an appropriate level of our investments in foreign operations to be hedged. |
Linkage of market risk to selected balance sheet items |
Table 53 |
As at October 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 |
$ |
61,989 |
$ |
– |
$ |
61,989 |
Interest rate | |||||||
Interest-bearing deposits with banks |
71,086 |
1 |
71,085 |
Interest rate | ||||||||||
Securities |
||||||||||||||
Trading |
190,151 |
171,483 |
18,668 |
Interest rate, credit spread | ||||||||||
Investment, net of applicable allowance |
219,579 |
– |
219,579 |
Interest rate, credit spread, equity | ||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
340,191 |
304,672 |
35,519 |
Interest rate | ||||||||||
Loans |
||||||||||||||
Retail |
569,951 |
– |
569,951 |
Interest rate | ||||||||||
Wholesale |
287,826 |
3,134 |
284,692 |
Interest rate | ||||||||||
Allowance for loan losses |
(5,004 |
) |
– |
(5,004 |
) |
Interest rate | ||||||||
Segregated fund net assets |
2,760 |
– |
2,760 |
Interest rate | ||||||||||
Other |
||||||||||||||
Derivatives |
142,450 |
139,011 |
3,439 |
Interest rate, foreign exchange | ||||||||||
Other assets |
108,178 |
8,699 |
99,479 |
Interest rate | ||||||||||
Assets not subject to market risk (3)
|
15,835 |
|||||||||||||
Total assets |
$ |
2,004,992 |
$ |
627,000 |
$ |
1,362,157 |
||||||||
Liabilities subject to market risk |
||||||||||||||
Deposits |
$ |
1,231,687 |
$ |
51,025 |
$ |
1,180,662 |
Interest rate | |||||||
Segregated fund liabilities |
2,760 |
– |
2,760 |
Interest rate | ||||||||||
Other |
||||||||||||||
Obligations related to securities sold short |
33,651 |
33,555 |
96 |
|||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
335,238 |
312,551 |
22,687 |
Interest rate | ||||||||||
Derivatives |
142,629 |
130,094 |
12,535 |
Interest rate, foreign exchange | ||||||||||
Other liabilities |
109,533 |
12,491 |
97,042 |
Interest rate | ||||||||||
Subordinated debentures |
11,386 |
– |
11,386 |
Interest rate | ||||||||||
Liabilities not subject to market risk (4)
|
20,348 |
|||||||||||||
Total liabilities |
$ |
1,887,232 |
$ |
539,716 |
$ |
1,327,168 |
||||||||
Total equity |
117,760 |
|||||||||||||
Total liabilities and equity |
$ |
2,004,992 |
(1) | Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading portfolios. Market risk measures of VaR and stress tests 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. |
As at October 31, 2022 (1) | ||||||||||||||||
Market risk measure | ||||||||||||||||
(Millions of Canadian dollars) |
Balance sheet amount |
Traded risk (2)
|
Non-traded
risk (3)
|
Non-traded risk primary risk sensitivity |
||||||||||||
Assets subject to market risk |
||||||||||||||||
Cash and due from banks |
$ | 72,397 | $ | – | $ | 72,397 | Interest rate | |||||||||
Interest-bearing deposits with banks |
108,011 | 2 | 108,009 | Interest rate | ||||||||||||
Securities |
||||||||||||||||
Trading |
148,205 | 131,071 | 17,134 | Interest rate, credit spread | ||||||||||||
Investment, net of applicable allowance |
170,018 | – | 170,018 | Interest rate, credit spread, equity | ||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
317,845 | 287,454 | 30,391 | Interest rate | ||||||||||||
Loans |
||||||||||||||||
Retail |
549,751 | 26 | 549,725 | Interest rate | ||||||||||||
Wholesale |
273,967 | 5,921 | 268,046 | Interest rate | ||||||||||||
Allowance for loan losses |
(3,753 | ) | – | (3,753 | ) | Interest rate | ||||||||||
Segregated fund net assets |
2,638 | – | 2,638 | Interest rate | ||||||||||||
Other |
||||||||||||||||
Derivatives |
154,439 | 151,244 | 3,195 | Interest rate, foreign exchange | ||||||||||||
Other assets |
109,629 | 8,826 | 100,803 | Interest rate | ||||||||||||
Assets not subject to market risk (4)
|
14,072 | |||||||||||||||
Total assets |
$ | 1,917,219 | $ | 584,544 | $ | 1,318,603 | ||||||||||
Liabilities subject to market risk |
||||||||||||||||
Deposits |
$ | 1,208,814 | $ | 39,000 | $ | 1,169,814 | Interest rate | |||||||||
Segregated fund liabilities |
2,638 | – | 2,638 | Interest rate | ||||||||||||
Other |
||||||||||||||||
Obligations related to securities sold short |
35,511 | 35,482 | 29 | |||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
273,947 | 264,025 | 9,922 | Interest rate | ||||||||||||
Derivatives |
153,491 | 139,406 | 14,085 | Interest rate, foreign exchange | ||||||||||||
Other liabilities |
102,881 | 10,594 | 92,287 | Interest rate | ||||||||||||
Subordinated debentures |
10,025 | – | 10,025 | Interest rate | ||||||||||||
Liabilities not subject to market risk (5)
|
21,737 | |||||||||||||||
Total liabilities |
$ | 1,809,044 | $ | 488,507 | $ | 1,298,800 | ||||||||||
Total equity |
108,175 | |||||||||||||||
Total liabilities and equity |
$ | 1,917,219 |
(1) |
Amounts have been revised from those previously presented to align with the definition of trading risk in accordance with OSFI’s CAR Guidelines. |
(2) | Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading portfolios. Market risk measures of VaR and stress tests are used as risk controls for traded risk. |
(3) |
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®
|
(4) | Assets not subject to market risk include physical and other assets. |
(5) | Liabilities not subject to market risk include payroll related and other liabilities. |
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. |
Governance of liquidity risk Our liquidity risk management activities are conducted in accordance with internal frameworks and policies, including the Enterprise Risk Management Framework (ERMF), the Enterprise Risk Appetite Framework (ERAF), the Enterprise Liquidity Risk Management Framework (LRMF), the Enterprise Liquidity Risk Policy, and the Enterprise Pledging Policy. Collectively, our frameworks and policies establish liquidity and funding management requirements appropriate for the execution of our strategy and ensuring liquidity risk remains within our risk appetite. Liquidity risk objectives, policies and risk appetite are reviewed regularly, and updated to reflect changes in industry practice and relevant regulatory guidance. Enterprise policies are supported by subsidiary, operational, desk and product-level policies and standards that specify risk control elements, such as parameters, methodologies, limits and authorities governing the measurement and management of liquidity. Management practices, parameters, models and methodologies are also subject to regular review, and are updated to reflect market conditions and business mix. Stress testing is employed to assess the robustness of the control framework and inform liquidity contingency plans. |
• |
The Board, the Risk Committee of the Board, the GRC and the ALCO regularly review information on our consolidated liquidity position; |
• |
The PRC approves the Liquidity Risk Policy, which establishes minimum risk control elements in accordance with the Board-approved risk appetite and the LRMF, and the Pledging Policy, which outlines the requirements and authorities for the management of our pledging activities; |
• |
The ALCO annually approves the Enterprise Liquidity Contingency Plan (ELCP) and provides strategic direction and oversight to Corporate Treasury, other functions, and business segments on the management of liquidity and funding. |
• |
Maintaining a sufficient buffer of cash, central bank reserves, and unencumbered marketable securities, supported by a demonstrated capacity to monetize these securities during stress; |
• |
Access to a broad range of funding sources, including a stable base of core client deposits and a diversified wholesale funding mix; |
• |
Access to central bank funding facilities in Canada and the U.S., and select other jurisdictions in which we operate; |
• |
Timely and granular risk measurement and reporting to control and monitor liquidity sources and uses, and inform liquidity risk management decisions; |
• |
A comprehensive program for liquidity stress testing and crisis management; |
• |
Governance of pledging activity through limits and designated liquid asset buffers to address potential increased pledging activity; |
• |
Achieving an appropriate balance between the level of exposure allowed under our risk appetite and the cost of risk mitigation; |
• |
Transparent liquidity transfer pricing and cost allocation mechanisms to align risk management with business strategies; and |
• |
A three-lines-of-defence governance model providing effective oversight and challenge of liquidity risk strategies, metrics, assumptions, and controls. |
Liquidity reserve |
Table 54 |
As at October 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)
|
$ |
135,353 |
$ |
– |
$ |
135,353 |
$ |
3,329 |
$ |
132,024 |
||||||||||
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (2)
|
325,002 |
363,377 |
688,379 |
425,109 |
263,270 |
|||||||||||||||
Other securities |
130,209 |
118,651 |
248,860 |
153,700 |
95,160 |
|||||||||||||||
Other liquid assets (3)
|
31,706 |
– |
31,706 |
28,953 |
2,753 |
|||||||||||||||
Total liquid assets |
$ |
622,270 |
$ |
482,028 |
$ |
1,104,298 |
$ |
611,091 |
$ |
493,207 |
||||||||||
As at October 31, 2022 |
||||||||||||||||||||
(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 |
$ |
180,408 |
$ |
– |
$ |
180,408 |
$ |
3,601 |
$ |
176,807 |
||||||||||
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks (2)
|
246,916 |
326,089 |
573,005 |
373,893 |
199,112 |
|||||||||||||||
Other securities |
110,057 |
119,129 |
229,186 |
135,349 |
93,837 |
|||||||||||||||
Other liquid assets (3)
|
42,090 |
– |
42,090 |
40,318 |
1,772 |
|||||||||||||||
Total liquid assets |
$ |
579,471 |
$ |
445,218 |
$ |
1,024,689 |
$ |
553,161 |
$ |
471,528 |
||||||||||
As at |
||||||||||||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||||||||||||||
Royal Bank of Canada |
$ |
210,191 |
$ |
186,855 |
||||||||||||||||
Foreign branches |
79,947 |
90,910 |
||||||||||||||||||
Subsidiaries |
203,069 |
193,763 |
||||||||||||||||||
Total unencumbered liquid assets |
$ |
493,207 |
$ |
471,528 |
(1) |
Includes balances that are classified as held for sale and presented in Other assets. For further details, refer to Note 6 of our 2023 Annual Consolidated 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 OTC and exchange-traded derivative transactions. |
Asset encumbrance |
Table 55 |
As at | ||||||||||||||||||||||||||||||||||||||||||||||||
October 31 2023 |
October 31
2022
|
|||||||||||||||||||||||||||||||||||||||||||||||
Encumbered |
Unencumbered |
Encumbered | Unencumbered | |||||||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Pledged as collateral |
Other |
Available as collateral |
Other |
Total |
Pledged as collateral |
Other (1) | Available as collateral (2) |
Other (3) | Total | ||||||||||||||||||||||||||||||||||||||
Cash and deposits with banks (4)
|
$ |
– |
$ |
3,329 |
$ |
132,024 |
$ |
– |
$ |
135,353 |
$ | – | $ | 3,601 | $ | 176,807 | $ | – | $ | 180,408 | ||||||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||||||||||
Trading |
99,990 |
– |
100,517 |
2,252 |
202,759 |
62,941 | – | 91,738 | 3,303 | 157,982 | ||||||||||||||||||||||||||||||||||||||
Investment, net of applicable allowance |
7,752 |
– |
211,827 |
– |
219,579 |
7,996 | – | 162,022 | – | 170,018 | ||||||||||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed (5)
|
495,233 |
27,343 |
6,876 |
1,862 |
531,314 |
456,292 | 21,709 | 9,192 | 3,409 | 490,602 | ||||||||||||||||||||||||||||||||||||||
Loans |
||||||||||||||||||||||||||||||||||||||||||||||||
Retail |
||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage securities |
26,365 |
– |
28,079 |
– |
54,444 |
28,208 | – | 27,263 | – | 55,471 | ||||||||||||||||||||||||||||||||||||||
Mortgage loans |
69,802 |
– |
37,313 |
272,942 |
380,057 |
62,905 | – | 26,696 | 273,724 | 363,325 | ||||||||||||||||||||||||||||||||||||||
Non-mortgage loans |
6,775 |
– |
– |
128,675 |
135,450 |
6,066 | – | – | 124,889 | 130,955 | ||||||||||||||||||||||||||||||||||||||
Wholesale |
– |
– |
10,056 |
278,052 |
288,108 |
– | – | 9,119 | 264,848 | 273,967 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
– |
– |
– |
(5,004 |
) |
(5,004 |
) |
– | – | – | (3,753 | ) | (3,753 | ) | ||||||||||||||||||||||||||||||||||
Segregated fund net assets |
– |
– |
– |
2,760 |
2,760 |
– | – | – | 2,638 | 2,638 | ||||||||||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives |
– |
– |
– |
142,450 |
142,450 |
– | – | – | 154,439 | 154,439 | ||||||||||||||||||||||||||||||||||||||
Others (6)
|
28,953 |
– |
2,753 |
89,747 |
121,453 |
40,318 | – | 1,772 | 81,611 | 123,701 | ||||||||||||||||||||||||||||||||||||||
Total assets |
$ |
734,870 |
$ |
30,672 |
$ |
529,445 |
$ |
913,736 |
$ |
2,208,723 |
$ | 664,726 | $ | 25,310 | $ | 504,609 | $ | 905,108 | $ | 2,099,753 |
(1) | Includes assets restricted from use to generate secured funding due to legal or other constraints. |
(2) | Represents assets that are immediately available for use as collateral, including 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 immediately available. |
(4) | Includes balances that were classified as held for sale and presented in Other assets. For further details, refer to Note 6 of our 2023 Annual Consolidated 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 $27 billion (October 31, 2022 – $22 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 strategy Maintaining a diversified funding base is a key strategy for managing our liquidity risk profile.
Core funding, comprising capital, longer-term wholesale liabilities and a diversified pool of personal as well as
the stable portion of our commercial and institutional deposits, is the foundation of our structural liquidity position.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 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.
We regularly assess our funding concentration and have implemented limits on certain funding sources to support diversification of our funding base.
|
We use residential mortgage and credit card securitization programs as a source of funding and for liquidity and asset/liability management purposes. Our total secured long-term funding includes outstanding MBS sold, covered bonds that are collateralized with residential mortgages and securities backed by credit card receivables.
|
Long-term funding sources* (1)
|
Table 56 |
As at | ||||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||||||
Unsecured long-term funding |
$ |
139,882 |
$ | 119,241 | ||||||||
Secured long-term funding |
74,720 |
68,953 | ||||||||||
Subordinated debentures |
12,038 |
10,639 | ||||||||||
$ |
226,640 |
$ | 198,833 |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
(1) | Based on original term to maturity greater than 1 year. |
Programs by geography |
Table 57 |
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 |
(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 |
Composition of wholesale funding (1)
|
Table 58 |
As at October 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)
|
$ |
4,606 |
$ |
460 |
$ |
319 |
$ |
355 |
$ |
5,740 |
$ |
– |
$ |
– |
$ |
5,740 |
||||||||||||||||
Certificates of deposit and commercial paper |
10,130 |
7,020 |
11,858 |
27,029 |
56,037 |
69 |
– |
56,106 |
||||||||||||||||||||||||
Asset-backed commercial paper (3)
|
4,533 |
3,829 |
6,354 |
2,155 |
16,871 |
– |
– |
16,871 |
||||||||||||||||||||||||
Senior unsecured medium-term notes (4)
|
43 |
6,311 |
133 |
18,828 |
25,315 |
22,790 |
54,070 |
102,175 |
||||||||||||||||||||||||
Senior unsecured structured notes (5)
|
1,343 |
1,898 |
2,081 |
3,343 |
8,665 |
5,495 |
15,744 |
29,904 |
||||||||||||||||||||||||
Mortgage securitization |
– |
530 |
375 |
1,484 |
2,389 |
2,225 |
9,607 |
14,221 |
||||||||||||||||||||||||
Covered bonds/asset-backed securities (6)
|
– |
3,236 |
– |
1,685 |
4,921 |
10,844 |
44,733 |
60,498 |
||||||||||||||||||||||||
Subordinated liabilities |
– |
– |
– |
1,500 |
1,500 |
2,748 |
7,791 |
12,039 |
||||||||||||||||||||||||
Other (7)
|
8,918 |
5,098 |
2,293 |
2,462 |
18,771 |
14,058 |
90 |
32,919 |
||||||||||||||||||||||||
Total |
$ |
29,573 |
$ |
28,382 |
$ |
23,413 |
$ |
58,841 |
$ |
140,209 |
$ |
58,229 |
$ |
132,035 |
$ |
330,473 |
||||||||||||||||
Of which: |
||||||||||||||||||||||||||||||||
– Secured |
$ |
10,861 |
$ |
10,124 |
$ |
7,483 |
$ |
5,324 |
$ |
33,792 |
$ |
13,069 |
$ |
54,340 |
$ |
101,201 |
||||||||||||||||
– Unsecured |
18,712 |
18,258 |
15,930 |
53,517 |
106,417 |
45,160 |
77,695 |
229,272 |
As at October 31, 2022 |
||||||||||||||||||||||||||||||||
(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)
|
$ | 5,758 | $ | 34 | $ | 311 | $ | 1,766 | $ | 7,869 | $ | – | $ | – | $ | 7,869 | ||||||||||||||||
Certificates of deposit and commercial paper |
9,482 | 16,575 | 23,676 | 39,674 | 89,407 | – | – | 89,407 | ||||||||||||||||||||||||
Asset-backed commercial paper (3)
|
3,488 | 2,373 | 6,646 | 722 | 13,229 | – | 323 | 13,552 | ||||||||||||||||||||||||
Senior unsecured medium-term notes (4)
|
375 | 5,968 | 2,846 | 13,189 | 22,378 | 19,108 | 48,556 | 90,042 | ||||||||||||||||||||||||
Senior unsecured structured notes (5)
|
404 | 721 | 2,136 | 4,091 | 7,352 | 2,363 | 9,898 | 19,613 | ||||||||||||||||||||||||
Mortgage securitization |
– | 1,238 | 421 | 2,614 | 4,273 | 2,402 | 9,697 | 16,372 | ||||||||||||||||||||||||
Covered bonds/asset-backed securities (6)
|
– | 1,016 | 1,960 | 2,838 | 5,814 | 4,575 | 42,194 | 52,583 | ||||||||||||||||||||||||
Subordinated liabilities |
60 | – | – | 110 | 170 | 1,483 | 8,986 | 10,639 | ||||||||||||||||||||||||
Other (7)
|
7,241 | 2,934 | 8,673 | 4,387 | 23,235 | 10,219 | 409 | 33,863 | ||||||||||||||||||||||||
Total |
$ | 26,808 | $ | 30,859 | $ | 46,669 | $ | 69,391 | $ | 173,727 | $ | 40,150 | $ | 120,063 | $ | 333,940 | ||||||||||||||||
Of which: |
||||||||||||||||||||||||||||||||
– Secured |
$ | 9,030 | $ | 6,641 | $ | 15,367 | $ | 7,536 | $ | 38,574 | $ | 6,977 | $ | 52,605 | $ | 98,156 | ||||||||||||||||
– Unsecured |
17,778 | 24,218 | 31,302 | 61,855 | 135,153 | 33,173 | 67,458 | 235,784 |
(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 $5,104 million (October 31, 2022 – $6,038 million), bearer deposit notes (unsecured) of $4,529 million (October 31, 2022 – $3,478 million), floating rate notes (unsecured) of $1,675 million (October 31, 2022 – $2,145 million), other long-term structured deposits (unsecured) of $16,896 million (October 31, 2022 – $12,411 million), and FHLB advances (secured) of $4,507 million (October 31, 2022 – $9,609 million), and wholesale guaranteed interest certificates of $208 million (October 31, 2022 – $182 million). Bearer deposit notes (unsecured), floating rate notes (unsecured) and wholesale guaranteed interest certificates amounts have been revised from those previously presented. |
Credit ratings (1)
|
Table 59 |
As at November 29, 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) | On November 6, 2023, Moody’s affirmed our ratings with stable outlook. |
(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 |
|
Table 60 |
|
As at | ||||||||||||||||||||||||||||
October 31 2023 |
October 31
2022
|
|||||||||||||||||||||||||||
(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 |
$ |
217 |
$ |
138 |
$ |
199 |
$ | 236 | $ | 146 | $ | 304 | ||||||||||||||||
Other contractual funding or margin requirements (1)
|
41 |
57 |
42 |
38 | 21 | 25 |
(1) | Includes GICs issued by our municipal markets business out of New York. |
Liquidity coverage ratio common disclosure template (1)
|
Table 61 |
For the three months ended | ||||||||
October 31
2023 |
||||||||
(Millions of Canadian dollars, except percentage amounts) |
Total unweighted value (average) |
Total weighted value (average) |
||||||
High-quality liquid assets |
||||||||
Total high-quality liquid assets (HQLA) |
$ |
384,290 |
||||||
Cash outflows |
||||||||
Retail deposits and deposits from small business customers, of which: |
$ |
360,167 |
$ |
34,667 |
||||
Stable deposits (3)
|
121,924 |
3,658 |
||||||
Less stable deposits |
238,243 |
31,009 |
||||||
Unsecured wholesale funding, of which: |
407,280 |
198,854 |
||||||
Operational deposits (all counterparties) and deposits in networks of cooperative banks (4)
|
150,032 |
35,505 |
||||||
Non-operational deposits |
221,760 |
127,861 |
||||||
Unsecured debt |
35,488 |
35,488 |
||||||
Secured wholesale funding |
39,561 |
|||||||
Additional requirements, of which: |
349,440 |
79,711 |
||||||
Outflows related to derivative exposures and other collateral requirements |
70,080 |
20,190 |
||||||
Outflows related to loss of funding on debt products |
10,736 |
10,736 |
||||||
Credit and liquidity facilities |
268,624 |
48,785 |
||||||
Other contractual funding obligations (5)
|
26,747 |
26,747 |
||||||
Other contingent funding obligations (6)
|
760,747 |
12,569 |
||||||
Total cash outflows |
$ |
392,109 |
||||||
Cash inflows |
||||||||
Secured lending (e.g., reverse repos) |
$ |
312,357 |
$ |
53,592 |
||||
Inflows from fully performing exposures |
16,102 |
9,851 |
||||||
Other cash inflows |
35,338 |
35,338 |
||||||
Total cash inflows |
$ |
98,781 |
||||||
Total adjusted value |
||||||||
Total HQLA |
$ |
384,290 |
||||||
Total net cash outflows |
293,328 |
|||||||
Liquidity coverage ratio |
131% |
|||||||
July 31 2023 |
||||||||
(Millions of Canadian dollars, except percentage amounts) | Total adjusted value |
|||||||
Total HQLA |
$ | 382,789 | ||||||
Total net cash outflows |
285,527 | |||||||
Liquidity coverage ratio |
134% |
(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 October 31, 2023 is calculated as an average of 62 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%). |
Net Stable Funding Ratio common disclosure template (1)
|
Table 62 |
As at October 31, 2023 |
||||||||||||||||||||
Unweighted value by residual maturity |
Weighted value |
|||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) | No maturity |
< 6 months |
6 months to < 1 year |
≥
1 year |
||||||||||||||||
Available Stable Funding (ASF) Item |
||||||||||||||||||||
Capital: |
$ |
117,650 |
$ |
– |
$ |
– |
$ |
11,047 |
$ |
128,697 |
||||||||||
Regulatory Capital |
117,650 |
– |
– |
11,047 |
128,697 |
|||||||||||||||
Other Capital Instruments |
– |
– |
– |
– |
– |
|||||||||||||||
Retail deposits and deposits from small business customers: |
301,314 |
104,626 |
46,055 |
55,553 |
470,509 |
|||||||||||||||
Stable deposits (3)
|
97,270 |
44,770 |
24,000 |
26,429 |
184,167 |
|||||||||||||||
Less stable deposits |
204,044 |
59,856 |
22,055 |
29,124 |
286,342 |
|||||||||||||||
Wholesale funding: |
285,377 |
510,037 |
64,539 |
148,995 |
358,921 |
|||||||||||||||
Operational deposits (4)
|
163,133 |
– |
– |
– |
81,567 |
|||||||||||||||
Other wholesale funding |
122,244 |
510,037 |
64,539 |
148,995 |
277,354 |
|||||||||||||||
Liabilities with matching interdependent assets (5)
|
68 |
1,800 |
2,964 |
20,378 |
– |
|||||||||||||||
Other liabilities: |
45,718 |
235,759 |
14,112 |
|||||||||||||||||
NSFR derivative liabilities |
24,683 |
|||||||||||||||||||
All other liabilities and equity not included in the above categories |
45,718 |
196,349 |
1,230 |
13,497 |
14,112 |
|||||||||||||||
Total ASF |
$ |
972,239 |
||||||||||||||||||
Required Stable Funding (RSF) Item |
||||||||||||||||||||
Total NSFR high-quality liquid assets (HQLA) |
$ |
44,012 |
||||||||||||||||||
Deposits held at other financial institutions for operational purposes |
– |
664 |
– |
– |
332 |
|||||||||||||||
Performing loans and securities: |
211,825 |
312,964 |
115,838 |
536,388 |
706,996 |
|||||||||||||||
Performing loans to financial institutions secured by Level 1 HQLA |
– |
110,421 |
20,430 |
275 |
16,133 |
|||||||||||||||
Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions |
4,886 |
118,014 |
26,780 |
29,873 |
60,715 |
|||||||||||||||
Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which: |
135,078 |
59,852 |
32,108 |
170,886 |
305,884 |
|||||||||||||||
With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk |
– |
744 |
710 |
2,666 |
2,460 |
|||||||||||||||
Performing residential mortgages, of which: |
36,953 |
21,769 |
34,707 |
315,334 |
275,215 |
|||||||||||||||
With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk |
36,953 |
21,751 |
34,689 |
314,368 |
274,376 |
|||||||||||||||
Securities that are not in default and do not qualify as HQLA, including exchange-traded equities |
34,908 |
2,908 |
1,813 |
20,020 |
49,049 |
|||||||||||||||
Assets with matching interdependent liabilities (5)
|
68 |
1,800 |
2,964 |
20,378 |
– |
|||||||||||||||
Other assets: |
2,662 |
311,650 |
82,617 |
|||||||||||||||||
Physical traded commodities, including gold |
2,662 |
2,262 |
||||||||||||||||||
Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs |
18,788 |
15,970 |
||||||||||||||||||
NSFR derivative assets |
25,787 |
1,103 |
||||||||||||||||||
NSFR derivative liabilities before deduction of variation margin posted |
54,824 |
2,741 |
||||||||||||||||||
All other assets not included in the above categories |
– |
154,335 |
19 |
57,897 |
60,541 |
|||||||||||||||
Off-balance sheet items |
791,176 |
29,674 |
||||||||||||||||||
Total RSF |
$ |
863,631 |
||||||||||||||||||
Net Stable Funding Ratio (%) |
113% |
As at July 31, 2023 | ||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Weighted value |
|||||||||||||||||||
Total ASF |
$ | 938,870 | ||||||||||||||||||
Total RSF |
834,782 | |||||||||||||||||||
Net Stable Funding Ratio (%) |
112% |
(1) | The NSFR is calculated in accordance with OSFI’s Liquidity Adequacy Requirements (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 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 National Housing Act Mortgage-Backed Securities (NHA MBS) liabilities, including liabilities arising from transactions involving the Canada Mortgage Bond program and their corresponding encumbered mortgages. |
Contractual maturities of financial assets, financial liabilities and off-balance sheet items |
Table 63 |
As at October 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 |
$ |
130,121 |
$ |
8 |
$ |
– |
$ |
– |
$ |
– |
$ |
– |
$ |
– |
$ |
– |
$ |
2,946 |
$ |
133,075 |
||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||
Trading (1) |
117,373 |
56 |
103 |
26 |
46 |
99 |
127 |
8,997 |
63,324 |
190,151 |
||||||||||||||||||||||||||||||
Investment, net of applicable allowance |
5,090 |
6,436 |
3,890 |
5,547 |
8,678 |
41,734 |
66,047 |
81,337 |
820 |
219,579 |
||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed (2) |
146,722 |
71,346 |
60,468 |
20,475 |
16,889 |
3,754 |
– |
– |
20,537 |
340,191 |
||||||||||||||||||||||||||||||
Loans, net of applicable allowance |
30,889 |
23,026 |
31,442 |
37,978 |
41,285 |
201,479 |
320,082 |
77,460 |
89,132 |
852,773 |
||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||
Customers’ liability under acceptances |
16,493 |
5,247 |
– |
– |
– |
– |
5 |
– |
(50 |
) |
21,695 |
|||||||||||||||||||||||||||||
Derivatives |
10,074 |
13,655 |
9,292 |
6,955 |
6,173 |
18,905 |
33,260 |
44,136 |
– |
142,450 |
||||||||||||||||||||||||||||||
Other financial assets |
41,116 |
2,836 |
3,205 |
212 |
587 |
191 |
279 |
2,600 |
3,170 |
54,196 |
||||||||||||||||||||||||||||||
Total financial assets |
497,878 |
122,610 |
108,400 |
71,193 |
73,658 |
266,162 |
419,800 |
214,530 |
179,879 |
1,954,110 |
||||||||||||||||||||||||||||||
Other non-financial assets |
5,657 |
1,793 |
1,765 |
191 |
2,591 |
1,976 |
2,422 |
5,776 |
28,711 |
50,882 |
||||||||||||||||||||||||||||||
Total assets |
$ |
503,535 |
$ |
124,403 |
$ |
110,165 |
$ |
71,384 |
$ |
76,249 |
$ |
268,138 |
$ |
422,222 |
$ |
220,306 |
$ |
208,590 |
$ |
2,004,992 |
||||||||||||||||||||
Liabilities and equity |
||||||||||||||||||||||||||||||||||||||||
Deposits (3) |
||||||||||||||||||||||||||||||||||||||||
Unsecured borrowing |
$ |
109,666 |
$ |
59,128 |
$ |
62,531 |
$ |
76,957 |
$ |
66,846 |
$ |
59,845 |
$ |
77,782 |
$ |
27,314 |
$ |
588,165 |
$ |
1,128,234 |
||||||||||||||||||||
Secured borrowing |
4,992 |
6,044 |
7,337 |
4,100 |
1,489 |
6,965 |
13,616 |
8,706 |
– |
53,249 |
||||||||||||||||||||||||||||||
Covered bonds |
– |
2,543 |
– |
– |
1,687 |
9,422 |
31,847 |
4,705 |
– |
50,204 |
||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||
Acceptances |
16,493 |
5,247 |
– |
– |
– |
– |
5 |
– |
– |
21,745 |
||||||||||||||||||||||||||||||
Obligations related to securities sold short |
33,651 |
– |
– |
– |
– |
– |
– |
– |
– |
33,651 |
||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned (2) |
254,955 |
37,121 |
19,509 |
(6 |
) |
(1 |
) |
279 |
– |
– |
23,381 |
335,238 |
||||||||||||||||||||||||||||
Derivatives |
9,716 |
16,359 |
9,311 |
6,346 |
5,974 |
19,290 |
32,400 |
43,233 |
– |
142,629 |
||||||||||||||||||||||||||||||
Other financial liabilities |
44,207 |
5,295 |
3,028 |
1,382 |
1,692 |
959 |
2,253 |
14,402 |
3,945 |
77,163 |
||||||||||||||||||||||||||||||
Subordinated debentures |
– |
– |
– |
– |
– |
– |
1,937 |
9,449 |
– |
11,386 |
||||||||||||||||||||||||||||||
Total financial liabilities |
473,680 |
131,737 |
101,716 |
88,779 |
77,687 |
96,760 |
159,840 |
107,809 |
615,491 |
1,853,499 |
||||||||||||||||||||||||||||||
Other non-financial liabilities |
929 |
6,613 |
221 |
216 |
150 |
1,102 |
2,009 |
12,928 |
9,565 |
33,733 |
||||||||||||||||||||||||||||||
Equity |
– |
– |
– |
– |
– |
– |
– |
– |
117,760 |
117,760 |
||||||||||||||||||||||||||||||
Total liabilities and equity |
$ |
474,609 |
$ |
138,350 |
$ |
101,937 |
$ |
88,995 |
$ |
77,837 |
$ |
97,862 |
$ |
161,849 |
$ |
120,737 |
$ |
742,816 |
$ |
2,004,992 |
||||||||||||||||||||
Off-balance sheet items |
||||||||||||||||||||||||||||||||||||||||
Financial guarantees |
$ |
544 |
$ |
2,013 |
$ |
3,528 |
$ |
3,691 |
$ |
4,716 |
$ |
784 |
$ |
7,314 |
$ |
701 |
$ |
23 |
$ |
23,314 |
||||||||||||||||||||
Commitments to extend credit |
7,086 |
8,338 |
14,774 |
14,447 |
18,361 |
58,978 |
205,504 |
23,181 |
5,524 |
356,193 |
||||||||||||||||||||||||||||||
Other credit-related commitments |
14,799 |
1,173 |
1,563 |
1,858 |
1,659 |
169 |
435 |
49 |
95,099 |
116,804 |
||||||||||||||||||||||||||||||
Other commitments |
91 |
10 |
15 |
15 |
15 |
55 |
128 |
178 |
985 |
1,492 |
||||||||||||||||||||||||||||||
Total off-balance sheet items |
$ |
22,520 |
$ |
11,534 |
$ |
19,880 |
$ |
20,011 |
$ |
24,751 |
$ |
59,986 |
$ |
213,381 |
$ |
24,109 |
$ |
101,631 |
$ |
497,803 |
(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. |
As at October 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
(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 |
$ | 177,946 | $ | 2 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 2,460 | $ | 180,408 | ||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||
Trading (1) |
86,491 | 592 | 71 | 8 | – | 104 | 170 | 8,710 | 52,059 | 148,205 | ||||||||||||||||||||||||||||||
Investment, net of applicable allowance |
3,250 | 7,490 | 7,390 | 3,537 | 4,873 | 12,303 | 50,979 | 79,387 | 809 | 170,018 | ||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed (2) |
122,836 | 76,590 | 58,750 | 19,246 | 17,212 | 1,131 | – | – | 22,080 | 317,845 | ||||||||||||||||||||||||||||||
Loans, net of applicable allowance |
31,203 | 21,795 | 29,253 | 39,919 | 34,658 | 150,826 | 348,411 | 75,091 | 88,809 | 819,965 | ||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||
Customers’ liability under acceptances |
11,632 | 6,235 | 5 | – | – | – | – | – | (45 | ) | 17,827 | |||||||||||||||||||||||||||||
Derivatives |
13,100 | 19,753 | 10,184 | 7,004 | 6,009 | 20,709 | 36,081 | 41,571 | 28 | 154,439 | ||||||||||||||||||||||||||||||
Other financial assets |
48,485 | 1,964 | 1,666 | 199 | 457 | 246 | 231 | 2,364 | 3,025 | 58,637 | ||||||||||||||||||||||||||||||
Total financial assets |
494,943 | 134,421 | 107,319 | 69,913 | 63,209 | 185,319 | 435,872 | 207,123 | 169,225 | 1,867,344 | ||||||||||||||||||||||||||||||
Other non-financial assets |
6,744 | 1,609 | 196 | (357 | ) | 2,647 | 1,691 | 2,510 | 5,192 | 29,643 | 49,875 | |||||||||||||||||||||||||||||
Total assets |
$ | 501,687 | $ | 136,030 | $ | 107,515 | $ | 69,556 | $ | 65,856 | $ | 187,010 | $ | 438,382 | $ | 212,315 | $ | 198,868 | $ | 1,917,219 | ||||||||||||||||||||
Liabilities and equity |
||||||||||||||||||||||||||||||||||||||||
Deposits (3) |
||||||||||||||||||||||||||||||||||||||||
Unsecured borrowing |
$ | 91,052 | $ | 56,920 | $ | 52,671 | $ | 64,685 | $ | 83,220 | $ | 39,327 | $ | 60,161 | $ | 18,500 | $ | 645,195 | $ | 1,111,731 | ||||||||||||||||||||
Secured borrowing |
4,343 | 6,271 | 7,365 | 2,007 | 4,626 | 6,059 | 15,400 | 7,824 | – | 53,895 | ||||||||||||||||||||||||||||||
Covered bonds |
– | 1,016 | 1,960 | 1,993 | – | 3,839 | 28,692 | 5,688 | – | 43,188 | ||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||
Acceptances |
11,632 | 6,235 | 5 | – | – | – | – | – | – | 17,872 | ||||||||||||||||||||||||||||||
Obligations related to securities sold short |
35,511 | – | – | – | – | – | – | – | – | 35,511 | ||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned (2) |
211,929 | 35,600 | 7,743 | 1,055 | 313 | 946 | – | – | 16,361 | 273,947 | ||||||||||||||||||||||||||||||
Derivatives |
13,096 | 22,073 | 10,994 | 7,097 | 5,244 | 20,135 | 34,226 | 40,626 | – | 153,491 | ||||||||||||||||||||||||||||||
Other financial liabilities |
57,152 | 1,390 | 1,353 | 656 | 958 | 892 | 2,378 | 11,411 | 1,117 | 77,307 | ||||||||||||||||||||||||||||||
Subordinated debentures |
– | – | – | 110 | – | – | 1,881 | 8,034 | – | 10,025 | ||||||||||||||||||||||||||||||
Total financial liabilities |
424,715 | 129,505 | 82,091 | 77,603 | 94,361 | 71,198 | 142,738 | 92,083 | 662,673 | 1,776,967 | ||||||||||||||||||||||||||||||
Other non-financial liabilities |
1,021 | 6,585 | 298 | 156 | 178 | 1,046 | 1,073 | 12,357 | 9,363 | 32,077 | ||||||||||||||||||||||||||||||
Equity |
– | – | – | – | – | – | – | – | 108,175 | 108,175 | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 425,736 | $ | 136,090 | $ | 82,389 | $ | 77,759 | $ | 94,539 | $ | 72,244 | $ | 143,811 | $ | 104,440 | $ | 780,211 | $ | 1,917,219 | ||||||||||||||||||||
Off-balance sheet items |
||||||||||||||||||||||||||||||||||||||||
Financial guarantees |
$ | 545 | $ | 2,211 | $ | 3,745 | $ | 3,274 | $ | 3,446 | $ | 1,415 | $ | 4,550 | $ | 1,068 | $ | 37 | $ | 20,291 | ||||||||||||||||||||
Commitments to extend credit |
7,016 | 6,879 | 14,184 | 21,094 | 17,133 | 49,135 | 193,990 | 19,269 | 4,516 | 333,216 | ||||||||||||||||||||||||||||||
Other credit-related commitments |
1,934 | 1,135 | 1,674 | 1,448 | 1,469 | 541 | 520 | 85 | 90,821 | 99,627 | ||||||||||||||||||||||||||||||
Other commitments |
24 | 11 | 16 | 16 | 16 | 60 | 136 | 187 | 849 | 1,315 | ||||||||||||||||||||||||||||||
Total off-balance sheet items |
$ | 9,519 | $ | 10,236 | $ | 19,619 | $ | 25,832 | $ | 22,064 | $ | 51,151 | $ | 199,196 | $ | 20,609 | $ | 96,223 | $ | 454,449 |
(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. |
Contractual maturities of financial liabilities and off-balance sheet items – undiscounted basis* |
Table 64 |
As at October 31, 2023 |
||||||||||||||||||||||||
(Millions of Canadian dollars) | On demand |
Within 1 year |
1 year to 2 years |
2 years to 5 years |
5 years and greater |
Total |
||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||
Deposits (1)
|
$ |
510,868 |
$ |
482,738 |
$ |
74,465 |
$ |
124,906 |
$ |
42,920 |
$ |
1,235,897 |
||||||||||||
Other |
||||||||||||||||||||||||
Acceptances |
– |
21,740 |
– |
5 |
– |
21,745 |
||||||||||||||||||
Obligations related to securities sold short |
– |
33,741 |
– |
– |
– |
33,741 |
||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
23,381 |
311,154 |
279 |
– |
– |
334,814 |
||||||||||||||||||
Other liabilities |
608 |
54,844 |
284 |
657 |
12,463 |
68,856 |
||||||||||||||||||
Lease liabilities |
– |
653 |
621 |
1,519 |
1,971 |
4,764 |
||||||||||||||||||
Subordinated debentures |
– |
– |
– |
1,939 |
9,457 |
11,396 |
||||||||||||||||||
534,857 |
904,870 |
75,649 |
129,026 |
66,811 |
1,711,213 |
|||||||||||||||||||
Off-balance sheet items |
||||||||||||||||||||||||
Financial guarantees (2)
|
$ |
23,308 |
$ |
2 |
$ |
4 |
$ |
– |
$ |
– |
$ |
23,314 |
||||||||||||
Other commitments (3)
|
– |
61 |
55 |
128 |
178 |
422 |
||||||||||||||||||
Commitments to extend credit (2)
|
5,617 |
114,495 |
48,848 |
178,048 |
9,185 |
356,193 |
||||||||||||||||||
28,925 |
114,558 |
48,907 |
178,176 |
9,363 |
379,929 |
|||||||||||||||||||
Total financial liabilities and off-balance sheet items |
$ |
563,782 |
$ |
1,019,428 |
$ |
124,556 |
$ |
307,202 |
$ |
76,174 |
$ |
2,091,142 |
||||||||||||
As at October 31, 2022 |
||||||||||||||||||||||||
(Millions of Canadian dollars) | On demand |
Within 1 year |
1 year to 2 years |
2 years to 5 years |
5 years and greater |
Total | ||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||
Deposits (1)
|
$ | 562,288 | $ | 463,711 | $ | 50,169 | $ | 106,568 | $ | 37,260 | $ | 1,219,996 | ||||||||||||
Other |
||||||||||||||||||||||||
Acceptances |
– | 17,872 | – | – | – | 17,872 | ||||||||||||||||||
Obligations related to securities sold short |
– | 35,395 | – | – | – | 35,395 | ||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
16,367 | 256,756 | 948 | – | – | 274,071 | ||||||||||||||||||
Other liabilities |
508 | 61,420 | 220 | 709 | 9,191 | 72,048 | ||||||||||||||||||
Lease liabilities |
– | 654 | 630 | 1,609 | 2,217 | 5,110 | ||||||||||||||||||
Subordinated debentures |
– | 110 | – | 1,884 | 8,042 | 10,036 | ||||||||||||||||||
579,163 | 835,918 | 51,967 | 110,770 | 56,710 | 1,634,528 | |||||||||||||||||||
Off-balance sheet items |
||||||||||||||||||||||||
Financial guarantees (2)
|
$ | 20,289 | $ | 2 | $ | – | $ | – | $ | – | $ | 20,291 | ||||||||||||
Other commitments (3)
|
– | 73 | 60 | 136 | 187 | 456 | ||||||||||||||||||
Commitments to extend credit (2)
|
284,606 | 48,573 | 1 | 36 | – | 333,216 | ||||||||||||||||||
304,895 | 48,648 | 61 | 172 | 187 | 353,963 | |||||||||||||||||||
Total financial liabilities and off-balance sheet items |
$ | 884,058 | $ | 884,566 | $ | 52,028 | $ | 110,942 | $ | 56,897 | $ | 1,988,491 |
* | This table represents an integral part of our 2023 Annual Consolidated Financial Statements. |
(1) | 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. |
(2) |
We believe that it is highly unlikely that all or substantially all of these guarantees and commitments will be drawn or settled within one year, and contracts may expire without being drawn or settled. The management of the liquidity risk associated with potential extensions of funds is outlined in the preceding Risk measurement and internal liquidity reporting section. |
(3) | Includes commitments related to short-term and low-dollar value leases, leases not yet commenced, and lease payments related to non-recoverable tax. |
Insurance risk |
Operational/regulatory compliance risk drivers |
Operational risk |
• | Risk identification and assessment tools, including the collection and analysis of risk event data, help risk owners understand and proactively manage operational risk exposures. Risk assessments are intended to ensure alignment between risk exposures and efforts to manage them. Management uses outputs of these tools to make informed risk decisions. |
• | Risk monitoring tools alert management to changes in the operational risk profile. When paired with escalation and monitoring triggers, risk monitoring tools can identify risk trends, warn management of risk levels that approach or exceed defined limits, as well as prompt actions and mitigation plans to be undertaken. |
• | Risk capital measurement is designed to provide credible estimation of potential risk exposure, including surfacing risk vulnerabilities, and informs strategic and capital planning decisions, which are ultimately intended to ensure that the bank is sufficiently resilient to withstand operational risk losses both in normal times and under stress situations. |
• | Risk reporting and communication processes seek to ensure that relevant operational risk information is made available to management in a timely manner to support risk-informed business decisions. |
Operational risk |
Management strategy |
|
Information technology and cybersecurity risk |
Information technology risk is the risk associated with the use, ownership, operation and adoption of information systems that can result in business interruptions, client service disruptions and loss of confidential information causing financial loss, reputational damage, and regulatory fines and penalties. We maintain a risk driven program to address the risks following our operational risk framework supported by a global team of technology risk management experts. Cybersecurity risk is the risk to the business associated with cyberattacks initiated to disrupt or disable our operations or to expose or damage data. We have a dedicated team of technology and cybersecurity professionals that manage a comprehensive program to help protect the organization against breaches and other incidents by ensuring appropriate security and operational controls are in place. We continue to strengthen our cyber-control framework and to improve our resilience and cybersecurity capabilities including 24 hour monitoring, cyber intelligence analysis of internal and external threats, and alerting of potentially suspicious security events and incidents. Throughout the year, we continued to invest in our cybersecurity program, and multiple scenarios, assessments and simulations were conducted to test our resiliency strategy. |
|
Information management and privacy risk |
Information management risk is the risk of failing to manage information appropriately through its lifecycle due to inadequate processes, controls and technology resulting in legal and regulatory consequences, reputational damage and/or financial loss. We have made substantial investments in the Enterprise Chief Data Office (CDO) and functional and regional data management and data governance units to promote awareness of and effectively manage information management risk. Managing information management risk is fundamental to realizing our Data Vision, which is to become a data-driven organization that uses data effectively and efficiently to improve client experience and decision-making. Privacy risk is defined as the risk of improper creation or collection, use, disclosure, retention or destruction of personal information (PI) that identifies an individual or can be reasonably used to identify an individual. PI includes the personal information entrusted to RBC by its Clients and Employees. Privacy Risk includes the risk of failure to safeguard PI against unauthorized access or use. The collection, use and sharing of data, as well as the management and governance of data, are increasingly important as we continue to invest in digital solutions and innovation, as well as expanding our business activities, which is also reflected through regulatory developments relating to data privacy. The CDO and the Global Privacy Office partner with cross-functional teams to develop and implement enterprise-wide standards and practices that describe how data is used, protected, managed and governed. |
|
Money laundering and Terrorist financing risk |
Money laundering and Terrorist financing risk is the risk that our products, services and delivery channels are misused to facilitate the laundering of proceeds of crime, financing of terrorist activity, bribery, corruption and other activities that may violate applicable economic sanctions (collectively know as “Financial Crimes”). We maintain an enterprise-wide program designed to deter, detect and report suspected money laundering and terrorist financing or suspicious activities across our organization, while seeking to ensure compliance with the laws and regulations of the various jurisdictions in which we operate. Our Enterprise Financial Crimes program is dedicated to the continuous development and maintenance of robust policies, guidelines, training, risk-assessment tools and models to enable our employees to manage evolving money laundering and terrorist financing risks, economic sanctions and regulatory expectations. The Enterprise Financial Crimes program is regularly evaluated in an effort to ensure it remains current and aligned with industry standards, best practices and all applicable laws, regulations and guidance. Risks of non-compliance can include enforcement actions, criminal prosecutions and reputational damage. |
|
Third-party risk |
Third-party risk is the risk of failure to effectively manage third parties which may expose us to service disruptions, regulatory action, financial loss, litigation or reputational damage. We have a risk-based enterprise-wide program designed to provide oversight for third-party relationships, ensure compliance with global regulatory expectations, and enable effective responses to events that can cause service disruptions, financial loss or various other risks that could impact us. Our approach to third-party risk mitigation is outlined in policies and standards that establish the requirements for identifying and managing risks throughout the engagement with a third-party (including risks resultant from supplier concentration and through fourth parties across the supply chain). Third-party providers critical to our operations are actively monitored for their ability to deliver services to us, including impacts resultant from vendors of our third-party providers (i.e. fourth parties). |
|
Business continuity risk |
Business continuity risk is the risk of being unable to maintain, continue or restore essential business operations during and/or after an event that prevents us from conducting business in the normal course. Exposure to disruptive operational events interrupts the continuity of our business operations and could negatively impact our financial results, reputation, client outcomes and/or result in harm to our employees. These operational events could result from the impact of severe weather, outbreak of a pandemic or other health crisis, failed processes, technology failures or cyber threats. Our risk-based enterprise-wide business continuity management program considers multiple scenarios to address the consequences of a disruption and its effects on the availability of our people, processes, facilities, technology and third-party arrangements. Our approach to business continuity management is outlined in policies and standards embedded across the organization and the related risks are regularly measured, monitored, reported and integrated into our operational risk management and control framework. |
Regulatory compliance risk |
Strategic risk drivers |
Strategic risk |
Reputation risk |
Legal and regulatory environment risk |
Competitive risk |
Macroeconomic risk drivers |
Systemic risk |
Overview of other risks |
Government fiscal, monetary and other policies |
Tax risk and transparency |
• | Act with integrity and in a straightforward, open and honest manner in all tax matters; |
• | Ensure tax strategy is aligned with our business strategy supporting only bona fide transactions with a business purpose and economic substance; |
• | Ensure all intercompany transactions are conducted in accordance with applicable transfer pricing requirements; |
• | Ensure our full compliance and full disclosure to tax authorities of our statutory obligations; and |
• | Endeavour to work with the tax authorities to build positive long-term relationships and where disputes occur, address them constructively. |
|
|
Environmental and social risk |
1 |
The E&S Risk Policy is not inclusive of the activities of, and assets under management by, RBC Global Asset Management (RBC GAM). RBC GAM has developed its own policy with respect to these matters. RBC GAM includes, but is not limited to, the following wholly owned indirect subsidiaries of the Bank: RBC Global Asset Management Inc. (including Phillips, Hager & North Investment Management), RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited and BlueBay Asset Management LLP. |
2 |
See RBC’s Policy Guidelines for Sensitive Sectors and Activities which address our lending activities. |
• | RBC is a member of the Net-Zero Banking Alliance (NZBA), which is a global industry-led initiative to accelerate and support efforts to address climate change by aligning member banks’ lending and investment portfolios with net-zero emissions by 2050 3 . As a member of the NZBA, we made a commitment to setting and disclosing interim emissions reduction targets for our key high-emitting sectors. |
• | RBC is a member of the Partnership for Carbon Accounting Financials (PCAF), which is an industry-led partnership to facilitate transparency and enable financial institutions to assess and disclose greenhouse gas emissions of loans and investments. In October 2022, in accordance with our NZBA commitment, we published our initial interim emissions reduction targets in our lending activities for the oil and gas, power generation and automotive sectors 3 . |
• | RBC is a signatory to the Equator Principles (EP), which is a benchmark for determining, assessing and managing E&S risks for project finance. We report annually on projects assessed according to the EP framework. |
• | RBC GAM and Brewin Dolphin Holdings Limited are signatories to the United Nations Principles for Responsible Investment (UN PRI) and report on their responsible investment activities to the UN PRI. |
3 |
Our NZBA commitments to achieving net-zero emissions in our lending by 2050 and to our initial 2030 interim emissions reduction targets for lending in three key sectors (oil & gas, power generation and automotive) are not inclusive of the activities of, and the assets under management by, RBC GAM and RBC Wealth Management (RBC WM). RBC WM includes, but is not limited to, the following affiliates: (a) RBC Dominion Securities Inc. (Member–Canadian Investor Protection Fund), RBC Direct Investing Inc. (Member–Canadian Investor Protection Fund), Royal Mutual Funds Inc., RBC Wealth Management Financial Services Inc., Royal Trust Corporation of Canada and The Royal Trust Company, which are separate but affiliated subsidiaries of us; and (b) Brewin Dolphin Holdings PLC and its subsidiaries. |
4 |
Sustainable finance refers to financial activities that take into account environmental, social and governance factors. |
5 |
External factors that could cause our actual results to differ materially from our expectations expressed in such commitments, goals and targets include the need for more and better climate data and standardization of climate-related measurement methodologies, our ability to gather and verify data, our ability to successfully implement various initiatives throughout our enterprise under expected time frames, difficulty in identifying transactions, products and services that meet the sustainable finance classification criteria, the risk that eligible transactions or related initiatives will not be completed within any specified period or at all or with the results or outcome as originally expected or anticipated by us, our ability to track transactions and report on them as performance against our climate or sustainable finance commitment, the compliance of various third parties with our policies and procedures and their commitment to us, the need for active and continuing participation and action of various stakeholders, technological advancements, the evolution of consumer behaviour, varying decarbonization efforts across economies, the need for thoughtful climate policies around the world, the challenges of balancing emission reduction targets with an orderly, just and inclusive transition and geopolitical factors that impact global energy needs, the legal and regulatory environment, and regulatory compliance considerations. Our climate- or sustainable finance-related commitments, goals and targets are aspirational and may need to be changed or recalibrated as data improve and as climate science, transition pathways and market practices regarding standards, methodologies, metrics and measurements evolve. |
Capital management |
Basel III – OSFI regulatory targets |
Table 65 |
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 October 31, 2023 |
Domestic Stability Buffer (3)
|
Minimum including Capital Buffers, D-SIB/G-SIB surcharge and Domestic Stability Buffer as at October 31, 2023 |
Minimum including Capital Buffers, D-SIB/G-SIB surcharge and Domestic Stability Buffer effective November 1, 2023 (4)
|
|||||||||||||||||||||||||||||||
Minimum |
Capital Buffers |
Minimum including Capital Buffers |
D-SIB/G-SIB surcharge (1)
|
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% | 14.5% | 3.0% | 11.1% | 11.6% | |||||||||||||||||||||||||||
Tier 1 capital |
6.0% | 2.6% | 8.6% | 1.0% | 9.6% | 15.7% | 3.0% | 12.6% | 13.1% | |||||||||||||||||||||||||||
Total capital |
8.0% | 2.6% | 10.6% | 1.0% | 11.6% | 17.6% | 3.0% | 14.6% | 15.1% | |||||||||||||||||||||||||||
Leverage ratio |
3.5% | n.a. | 3.5% | n.a. | 3.5% | 4.3% | n.a. | 3.5% | 3.5% | |||||||||||||||||||||||||||
TLAC ratio |
21.6% | n.a. | 21.6% | n.a. | 21.6% | 31.0% | 3.0% | 24.6% | 25.1% | |||||||||||||||||||||||||||
TLAC leverage ratio |
7.25% | n.a. | 7.25% | n.a. | 7.25% | 8.5% | n.a. | 7.25% | 7.25% |
(1) | 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. |
(2) | 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 October 31, 2023 (October 31, 2022 – 0.01%). |
(3) | The DSB can range from 0% to 4% of total RWA and as at October 31, 2023 was set at 3% by OSFI. |
(4) | Effective November 1, 2023, the DSB level increased by 50 bps. Minimum target requirements reflect CCyB requirements as at October 31, 2023 which are subject to change based on exposures held at the reporting date. |
n.a. | not applicable |
(1) | In accordance with OSFI’s regulatory adjustments announced in Q2 2020, our 2022 figures include capital modifications associated with Stage 1 and 2 allowances which were subject to a 25% after-tax exclusion rate in fiscal 2022. This guidance ceased to apply at the beginning of fiscal 2023. |
(2) | First level: The amount by which each of the items exceeds a 10% threshold of CET1 capital (after all deductions but before threshold deductions) will be deducted from CET1 capital. Second level: The aggregate amount of the three items not deducted from the first level above and in excess of 15% of CET1 capital after regulatory adjustments will be deducted from capital, and the remaining balance not deducted will be risk-weighted at 250%. |
(3) |
Non-significant investments are subject to certain CAR criteria that drive the amount eligible for deduction. |
Regulatory capital, TLAC available, RWA and capital, leverage and TLAC ratios |
Table 66 |
As at | ||||||||
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) |
October 31 2023 |
October 31 2022 |
||||||
Capital (1)
|
||||||||
CET1 capital |
$ |
86,611 |
$ | 76,945 | ||||
Tier 1 capital |
93,904 |
84,242 | ||||||
Total capital |
104,952 |
93,850 | ||||||
Risk-weighted assets (RWA) used in calculation of capital ratios (1)
|
||||||||
Credit risk |
$ |
475,842 |
$ | 496,898 | ||||
Market risk |
40,498 |
35,342 | ||||||
Operational risk |
79,883 |
77,639 | ||||||
Total RWA |
$ |
596,223 |
$ | 609,879 | ||||
Capital ratios and Leverage ratio (1)
|
||||||||
CET1 ratio |
14.5% |
12.6% | ||||||
Tier 1 capital ratio |
15.7% |
13.8% | ||||||
Total capital ratio |
17.6% |
15.4% | ||||||
Leverage ratio |
4.3% |
4.4% | ||||||
Leverage ratio exposure (billions) |
$ |
2,180 |
$ | 1,898 | ||||
TLAC available and ratios (2)
|
||||||||
TLAC available |
$ |
184,916 |
$ | 160,961 | ||||
TLAC ratio |
31.0% |
26.4% | ||||||
TLAC leverage ratio |
8.5% |
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 year ended October 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 a percentage of total RWA and leverage exposure, respectively. |
Regulatory capital and TLAC available |
Table 67 |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
CET1 capital: instruments and reserves and regulatory adjustments |
||||||||
Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock surplus |
$ |
19,365 |
$ | 17,162 | ||||
Retained earnings |
84,130 |
77,859 | ||||||
Accumulated other comprehensive income (and other reserves) |
6,852 |
5,725 | ||||||
Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies) |
– |
– | ||||||
Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) |
11 |
11 | ||||||
Regulatory adjustments applied to CET1 under Basel III |
(23,747 |
) |
(23,812 | ) | ||||
Common Equity Tier 1 capital (CET1) |
$ |
86,611 |
$ |
76,945 |
||||
Additional Tier 1 capital: instruments and regulatory adjustments |
||||||||
Directly issued qualifying Additional Tier 1 instruments plus related stock surplus |
$ |
7,291 |
$ | 7,294 | ||||
Directly issued capital instruments to phase out from Additional Tier 1 |
– |
– | ||||||
Additional Tier 1 instruments issued by subsidiaries and held by third parties (amount allowed in group AT1) |
2 |
3 | ||||||
Regulatory adjustments applied to Additional Tier 1 under Basel III |
– |
– | ||||||
Additional Tier 1 capital (AT1) |
$ |
7,293 |
$ |
7,297 |
||||
Tier 1 capital (T1 = CET1 + AT1) |
$ |
93,904 |
$ |
84,242 |
||||
Tier 2 capital: instruments and provisions and regulatory adjustments |
||||||||
Directly issued qualifying Tier 2 instruments plus related stock surplus |
$ |
9,683 |
$ | 8,587 | ||||
Directly issued capital instruments subject to phase out from Tier 2 |
– |
– | ||||||
Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in group Tier 2) |
3 |
3 | ||||||
Collective allowance |
1,362 |
1,018 | ||||||
Regulatory adjustments applied to Tier 2 under Basel III |
– |
– | ||||||
Tier 2 capital (T2) |
$ |
11,048 |
$ |
9,608 |
||||
Total capital (T1 + T2) |
$ |
104,952 |
$ |
93,850 |
||||
External TLAC: instruments and regulatory adjustments |
||||||||
External TLAC instruments |
$ |
78,952 |
$ | 66,528 | ||||
Amortised portion of T2 instruments where remaining maturity > 1 year |
1,248 |
818 | ||||||
Regulatory adjustments applied to TLAC under Basel III |
|
(236 |
) |
|
(235 |
) |
||
TLAC available (Total capital + External TLAC) |
$ |
184,916 |
$ | 160,961 |
(1) | Represents rounded figures. |
(2) | Represents net internal capital generation of $8 billion or 132 bps consisting of Net income available to shareholders excluding the impact of specified items and the partial sale of RBC Investor Services operations, less common and preferred share dividends and distributions on other equity instruments. |
(3) | Excludes specified items for the impact of the CRD and other tax related adjustments, certain deferred tax adjustments, transaction and integration costs relating to our planned acquisition of HSBC Canada and the impact of impairment losses on our interest in an associated company. |
(4) | For further details about the Dividend reinvestment plan (DRIP), refer to Note 20 of our 2023 Annual Consolidated Financial Statements. |
(5) | Includes the impact of the specified item for the impact of the CRD and other tax related adjustments. |
(6) | Includes the impact of specified items for certain deferred tax adjustments, transaction and integration costs relating to our planned acquisition of HSBC Canada and the impact of impairment losses on our interest in an associated company, as well as the impact of the partial sale of RBC Investor Services operations. |
Total capital risk-weighted assets |
Table 68 |
2023 |
2022 | |||||||||||||||||||||||||||||||||
Exposure |
Average of risk- weights |
Risk-weighted assets All-in Basis |
||||||||||||||||||||||||||||||||
As at October 31 (Millions of Canadian dollars, except percentage amounts) |
Standardized approach |
Advanced approach (A-IRB)
|
Foundation approach (F-IRB)
|
Other |
Total |
Total | ||||||||||||||||||||||||||||
Credit risk |
||||||||||||||||||||||||||||||||||
Lending-related and other |
||||||||||||||||||||||||||||||||||
Residential mortgages |
$ |
566,257 |
8% |
$ |
3,817 |
$ |
41,047 |
$ |
– |
$ |
– |
$ |
44,864 |
$ | 41,662 | |||||||||||||||||||
Other retail (personal, credit cards and small business treated as retail) |
215,682 |
29% |
5,369 |
56,345 |
– |
– |
61,714 |
65,506 | ||||||||||||||||||||||||||
Business (corporate, commercial, medium-sized enterprises and non-bank financial institutions) |
493,178 |
48% |
70,130 |
93,208 |
75,227 |
– |
238,565 |
238,823 | ||||||||||||||||||||||||||
Sovereign (government) |
348,790 |
4% |
2,767 |
11,251 |
– |
– |
14,018 |
15,910 | ||||||||||||||||||||||||||
Bank |
35,751 |
40% |
5,713 |
– |
8,626 |
– |
14,339 |
5,483 | ||||||||||||||||||||||||||
Total lending-related and other |
$ |
1,659,658 |
23% |
$ |
87,796 |
$ |
201,851 |
$ |
83,853 |
$ |
– |
$ |
373,500 |
$ | 367,384 | |||||||||||||||||||
Trading-related |
||||||||||||||||||||||||||||||||||
Repo-style transactions |
$ |
1,153,730 |
1% |
$ |
107 |
$ |
222 |
$ |
7,367 |
$ |
96 |
$ |
7,792 |
$ | 8,668 | |||||||||||||||||||
Derivatives – including CVA |
129,288 |
26% |
568 |
3,040 |
15,730 |
13,657 |
32,995 |
40,138 | ||||||||||||||||||||||||||
Total trading-related |
$ |
1,283,018 |
3% |
$ |
675 |
$ |
3,262 |
$ |
23,097 |
$ |
13,753 |
$ |
40,787 |
$ | 48,806 | |||||||||||||||||||
Total lending-related and other and trading-related |
$ |
2,942,676 |
14% |
$ |
88,471 |
$ |
205,113 |
$ |
106,950 |
$ |
13,753 |
$ |
414,287 |
$ | 416,190 | |||||||||||||||||||
Bank book equities |
4,896 |
206% |
10,074 |
– |
– |
– |
10,074 |
5,682 | ||||||||||||||||||||||||||
Securitization exposures |
69,736 |
17% |
5,332 |
6,178 |
– |
– |
11,510 |
12,543 | ||||||||||||||||||||||||||
Regulatory scaling factor |
n.a. |
n.a. |
n.a. |
– |
– |
n.a. |
– |
18,267 | ||||||||||||||||||||||||||
Other assets |
32,681 |
122% |
n.a. |
n.a. |
n.a. |
39,971 |
39,971 |
44,216 | ||||||||||||||||||||||||||
Total credit risk |
$ |
3,049,989 |
16% |
$ |
103,877 |
$ |
211,291 |
$ |
106,950 |
$ |
53,724 |
$ |
475,842 |
$ | 496,898 | |||||||||||||||||||
Market risk |
||||||||||||||||||||||||||||||||||
Interest rate |
$ |
3,575 |
$ |
12,831 |
$ |
– |
$ |
– |
$ |
16,406 |
$ | 13,256 | ||||||||||||||||||||||
Equity |
2,534 |
1,125 |
– |
– |
3,659 |
4,001 | ||||||||||||||||||||||||||||
Foreign exchange |
2,641 |
1,024 |
– |
– |
3,665 |
3,735 | ||||||||||||||||||||||||||||
Commodities |
1,055 |
102 |
– |
– |
1,157 |
1,750 | ||||||||||||||||||||||||||||
Specific risk |
8,276 |
1,583 |
– |
– |
9,859 |
8,411 | ||||||||||||||||||||||||||||
Incremental risk charge |
– |
5,752 |
– |
– |
5,752 |
4,189 | ||||||||||||||||||||||||||||
Total market risk |
$ |
18,081 |
$ |
22,417 |
$ |
– |
$ |
– |
$ |
40,498 |
$ | 35,342 | ||||||||||||||||||||||
Operational risk |
$ |
79,883 |
$ |
– |
$ |
– |
$ |
– |
$ |
79,883 |
$ | 77,639 | ||||||||||||||||||||||
Total risk-weighted assets |
$ |
3,049,989 |
$ |
201,841 |
$ |
233,708 |
$ |
106,950 |
$ |
53,724 |
$ |
596,223 |
$ | 609,879 |
(1) | Balances as at October 31, 2023 reflect our adoption of the revised CAR guidelines that came into effect in Q2 2023 as part of OSFI’s implementation of the Basel III reforms. |
(2) | Total exposure represents exposure at default (EAD) which is the expected gross exposure upon the default of an obligor. This amount excludes any allowance against impaired loans or partial write-offs and does not reflect the impact of credit risk mitigation. |
(3) | Represents the average of counterparty risk weights within a particular category. |
n.a. | not applicable |
Selected capital management activity |
Table 69 |
For the year ended October 31, 2023 |
||||||||||||
(Millions of Canadian dollars, except number of shares) |
Issuance or redemption date |
Number of shares |
Amount |
|||||||||
Tier 1 capital |
||||||||||||
Common shares activity |
||||||||||||
Issued in connection with share-based compensation plans (1)
|
740 |
$ |
68 |
|||||||||
Issued under the DRIP (2)
|
16,042 |
2,012 |
||||||||||
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 October 31, 2023, July 31, 2023 and April 30, 2023, the requirements of the DRIP were satisfied through shares issued from treasury. For further details, refer to Note 20 of our 2023 Annual Consolidated Financial Statements. |
(3) | For further details, refer to Note 19 of our 2023 Annual Consolidated Financial Statements. |
(4) |
Non-Viability Contingent Capital (NVCC) instruments. |
Selected share data (1)
|
Table 70 |
2023 |
2022 | |||||||||||||||||||||||||||
(Millions of Canadian dollars, except number of shares and as otherwise noted) |
Number of shares |
Amount |
Dividends declared per share |
Number of shares (000s) |
Amount | Dividends declared per share |
||||||||||||||||||||||
Common shares issued |
1,402,373 |
$ |
19,398 |
$ |
5.34 |
1,385,591 | $ | 17,318 | $ | 4.96 | ||||||||||||||||||
Treasury shares – common shares (2)
|
(1,862 |
) |
(231 |
) |
(2,680 | ) | (334 | ) | ||||||||||||||||||||
Common shares outstanding |
1,400,511 |
$ |
19,167 |
1,382,911 | $ | 16,984 | ||||||||||||||||||||||
Stock options and awards |
||||||||||||||||||||||||||||
Outstanding |
7,793 |
7,535 | ||||||||||||||||||||||||||
Exercisable |
3,830 |
3,502 | ||||||||||||||||||||||||||
Available for grant |
3,693 |
4,696 | ||||||||||||||||||||||||||
First preferred shares issued |
||||||||||||||||||||||||||||
Non-cumulative Series AZ (3), (4)
|
20,000 |
$ |
500 |
$ |
0.93 |
20,000 | $ | 500 | $ | 0.93 | ||||||||||||||||||
Non-cumulative Series BB (3), (4)
|
20,000 |
500 |
0.91 |
20,000 | 500 | 0.91 | ||||||||||||||||||||||
Non-cumulative Series BD (3), (4)
|
24,000 |
600 |
0.80 |
24,000 | 600 | 0.80 | ||||||||||||||||||||||
Non-cumulative Series BF (3), (4)
|
12,000 |
300 |
0.75 |
12,000 | 300 | 0.75 | ||||||||||||||||||||||
Non-cumulative Series BH (4)
|
6,000 |
150 |
1.23 |
6,000 | 150 | 1.23 | ||||||||||||||||||||||
Non-cumulative Series BI (4)
|
6,000 |
150 |
1.23 |
6,000 | 150 | 1.23 | ||||||||||||||||||||||
Non-cumulative Series BO (3), (4)
|
14,000 |
350 |
1.20 |
14,000 | 350 | 1.20 | ||||||||||||||||||||||
Non-cumulative Series BT (3), (4), (5)
|
750 |
750 |
4.20% |
750 | 750 | 4.20% | ||||||||||||||||||||||
Non-cumulative Series C-2 (6)
|
15 |
23 |
US$ |
67.50 |
15 | 23 | US$ | 67.50 | ||||||||||||||||||||
Other equity instruments issued |
||||||||||||||||||||||||||||
Limited recourse capital notes Series 1 (3), (4), (7), (8)
|
1,750 |
1,750 |
4.50% |
1,750 | 1,750 | 4.50% | ||||||||||||||||||||||
Limited recourse capital notes Series 2 (3), (4), (7), (8)
|
1,250 |
1,250 |
4.00% |
1,250 | 1,250 | 4.00% | ||||||||||||||||||||||
Limited recourse capital notes Series 3 (3), (4), (7), (8)
|
1,000 |
1,000 |
3.65% |
1,000 | 1,000 | 3.65% | ||||||||||||||||||||||
Preferred shares and other equity instruments issued |
106,765 |
$ |
7,323 |
106,765 | $ | 7,323 | ||||||||||||||||||||||
Treasury instruments – preferred shares and other equity instruments (2)
|
(9 |
) |
(9 |
) |
(12 | ) | (5 | ) | ||||||||||||||||||||
Preferred shares and other equity instruments outstanding |
106,756 |
$ |
7,314 |
106,753 | $ | 7,318 | ||||||||||||||||||||||
Dividends on common shares |
$ |
7,443 |
$ | 6,946 | ||||||||||||||||||||||||
Dividends on preferred shares and distributions on other equity instruments (9)
|
236 |
247 |
(1) | For further details about our capital management activity, refer to Note 20 of our 2023 Annual Consolidated 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 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. On November 7, 2023, we redeemed all 15 thousand of our issued and outstanding Non-Cumulative First Preferred Shares Series C-2 at a redemption price of US$ 1,000 per share. Concurrently, we redeemed all 615 thousand Series C-2 depositary shares, each of which represents a one-fortieth interest in a Series C-2 share. |
(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 2023 Annual Consolidated Financial Statements. |
(9) | Excludes distributions to non-controlling interests. |
(1) | RWA amount represents period-end spot balances. Attributed Capital represents average balances. |
(2) | Other includes (a) non-Insurance segments: equity required to underpin Basel III regulatory capital deductions other than Goodwill and other intangibles as well as capital modifications for expected loss provisioning and (b) Insurance segment: equity required to underpin risks associated with business, fixed assets and insurance risks. |
(3) | Insurance RWA represents our investments in the insurance subsidiaries capitalized at the regulatory prescribed rate as required under the OSFI CAR guideline. |
• | Consolidation: entities which we control are consolidated on our Consolidated Balance Sheets. |
• | Deduction: certain holdings are deducted from our regulatory capital. These include all unconsolidated “substantial investments”, as defined by the Bank Act (Canada) in the capital of financial institutions, as well as all investments in insurance subsidiaries and certain equity investments in funds. |
• | Risk-weighting: equity investments that are not deducted from capital are risk-weighted at a prescribed rate for determination of capital charges. |
• | 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. |
Accounting and control matters |
Critical accounting policies and estimates |
• | Performing financial assets |
• | Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses expected to result from defaults occurring over the 12 months following the reporting date. |
• | Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset. |
• | Impaired financial assets |
• | Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount. |
• | 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) is elected. |
• | The general measurement method (GMM) is applied to all remaining contracts. |
• | New business profits are deferred and measured as the CSM 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, therefore, there will be 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. |
Controls and procedures |
Related party transactions |
Supplementary information |
Selected annual information |
Table 71 |
(Millions of Canadian dollars, except per share amounts) |
2023 |
2022 | 2021 | |||||||||
Total revenue |
$ |
56,129 |
$ | 48,985 | $ | 49,693 | ||||||
Net income attributable to: |
||||||||||||
Shareholders |
14,859 |
15,794 | 16,038 | |||||||||
Non-controlling interest |
7 |
13 | 12 | |||||||||
$ |
14,866 |
$ | 15,807 | $ | 16,050 | |||||||
Basic earnings per share |
$ |
10.51 |
$ | 11.08 | $ | 11.08 | ||||||
Diluted earnings per share |
10.50 |
11.06 | 11.06 | |||||||||
Dividends declared per common shares |
5.34 |
4.96 | 4.32 | |||||||||
Total assets |
$ |
2,004,992 |
$ | 1,917,219 | $ | 1,706,323 | ||||||
Deposits |
1,231,687 |
1,208,814 | 1,100,831 |
Net interest income on average assets and liabilities |
Table 72 |
Average balances | Interest | Average rate | ||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except for percentage amounts) (1) |
2023 |
2022 | 2023 |
2022 | 2023 |
2022 | ||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Deposits with other banks |
||||||||||||||||||||||||||||||||
Canada |
$ |
13,607 |
$ | 13,119 | $ |
1,698 |
$ | 582 | 12.48% |
4.44% | ||||||||||||||||||||||
U.S. |
88,774 |
81,962 | 3,963 |
911 | 4.46 |
1.11 | ||||||||||||||||||||||||||
Other International |
15,402 |
22,819 | 1,191 |
204 | 7.73 |
0.89 | ||||||||||||||||||||||||||
117,783 |
117,900 | 6,852 |
1,697 | 5.82 |
1.44 | |||||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||
Trading |
154,741 |
135,117 | 7,465 |
4,754 | 4.82 |
3.52 | ||||||||||||||||||||||||||
Investment, net of applicable allowance |
180,174 |
150,384 | 7,047 |
2,308 | 3.91 |
1.53 | ||||||||||||||||||||||||||
334,915 |
285,501 | 14,512 |
7,062 | 4.33 |
2.47 | |||||||||||||||||||||||||||
Asset purchased under reverse repurchase agreements and securities borrowed |
383,246 |
360,068 | 22,164 |
5,447 | 5.78 |
1.51 | ||||||||||||||||||||||||||
Loans (2)
|
||||||||||||||||||||||||||||||||
Canada |
||||||||||||||||||||||||||||||||
Retail |
502,459 |
478,696 | 23,862 |
15,146 | 4.75 |
3.16 | ||||||||||||||||||||||||||
Wholesale |
120,047 |
103,034 | 8,878 |
5,344 | 7.40 |
5.19 | ||||||||||||||||||||||||||
622,506 |
581,730 | 32,740 |
20,490 | 5.26 |
3.52 | |||||||||||||||||||||||||||
U.S. |
158,443 |
136,937 | 6,891 |
4,037 | 4.35 |
2.95 | ||||||||||||||||||||||||||
Other International |
50,782 |
49,630 | 3,832 |
2,038 | 7.55 |
4.11 | ||||||||||||||||||||||||||
831,731 |
768,297 | 43,463 |
26,565 | 5.23 |
3.46 | |||||||||||||||||||||||||||
Total interest-earning assets |
1,667,675 |
1,531,766 | 86,991 |
40,771 | 5.22 |
2.66 | ||||||||||||||||||||||||||
Non-interest-bearing deposits with other banks |
71,959 |
99,564 | – |
– | – |
– | ||||||||||||||||||||||||||
Customers’ liability under acceptances |
19,912 |
18,354 | – |
– | – |
– | ||||||||||||||||||||||||||
Other assets |
243,328 |
237,167 | – |
– | – |
– | ||||||||||||||||||||||||||
Total assets |
$ |
2,002,874 |
$ | 1,886,851 | $ |
86,991 |
$ | 40,771 | 4.34% |
2.16% | ||||||||||||||||||||||
Liabilities and shareholders’ equity |
||||||||||||||||||||||||||||||||
Deposits (3)
|
||||||||||||||||||||||||||||||||
Canada |
$ |
770,309 |
$ | 684,452 | $ |
27,627 |
$ | 8,660 | 3.59% |
1.27% | ||||||||||||||||||||||
U.S. |
153,838 |
153,039 | 5,383 |
1,044 | 3.50 |
0.68 | ||||||||||||||||||||||||||
Other International |
93,658 |
101,058 | 3,669 |
1,047 | 3.92 |
1.04 | ||||||||||||||||||||||||||
1,017,805 |
938,549 | 36,679 |
10,751 | 3.60 |
1.15 | |||||||||||||||||||||||||||
Obligations related to securities sold short |
36,365 |
39,079 | 2,933 |
2,409 | 8.07 |
6.16 | ||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
352,282 |
315,871 | 20,433 |
4,351 | 5.80 |
1.38 | ||||||||||||||||||||||||||
Subordinated debentures |
11,036 |
10,133 | 666 |
288 | 6.03 |
2.84 | ||||||||||||||||||||||||||
Other interest-bearing liabilities |
37,639 |
26,000 | 1,151 |
255 | 3.06 |
0.98 | ||||||||||||||||||||||||||
Total interest-bearing liabilities |
1,455,127 |
1,329,632 | 61,862 |
18,054 | 4.25 |
1.36 | ||||||||||||||||||||||||||
Non-interest-bearing deposits |
193,815 |
226,376 | – |
– | – |
– | ||||||||||||||||||||||||||
Acceptances |
19,954 |
18,409 | – |
– | – |
– | ||||||||||||||||||||||||||
Other liabilities |
223,121 |
209,890 | – |
– | – |
– | ||||||||||||||||||||||||||
Total liabilities |
$ |
1,892,017 |
$ | 1,784,307 | $ |
61,862 |
$ | 18,054 | 3.27% |
1.01% | ||||||||||||||||||||||
Equity |
$ |
110,857 |
$ | 102,544 | n.a. |
n.a. | n.a. |
n.a. | ||||||||||||||||||||||||
Total liabilities and shareholders’ equity |
$ |
2,002,874 |
$ | 1,886,851 | $ |
61,862 |
$ | 18,054 | 3.09% |
0.96% | ||||||||||||||||||||||
Net interest income and margin |
$ |
2,002,874 |
$ | 1,886,851 | $ |
25,129 |
$ | 22,717 | 1.25% |
1.20% | ||||||||||||||||||||||
Net interest income and margin (average earning assets, net) (4)
|
||||||||||||||||||||||||||||||||
Canada |
$ |
970,243 |
$ | 870,147 | $ |
18,752 |
$ | 15,761 | 1.93% |
1.81% | ||||||||||||||||||||||
U.S. |
497,556 |
437,357 | 5,065 |
5,423 | 1.02 |
1.24 | ||||||||||||||||||||||||||
Other International |
208,221 |
224,261 | 1,312 |
1,533 | 0.63 |
0.68 | ||||||||||||||||||||||||||
Total |
$ |
1,676,020 |
$ | 1,531,765 | $ |
25,129 |
$ | 22,717 | 1.50% |
1.48% |
(1) | Insurance segment assets and liabilities are included in Other assets and Other liabilities, respectively. |
(2) | Interest income includes loan fees of $1,149 million (2022 – $1,033 million; 2021 – $888 million). |
(3) | Deposits include personal chequing and savings deposits with average balances of $250 billion (2022 – $279 billion; 2021 – $258 billion), interest expense of $2,840 million (2022 – $712 million; 2021 – $175 million) and average rates of 1.14% (2022 – 0.26%; 2021 – 0.07%). Deposits also include term deposits with average balances of $624 billion (2022 – $500 billion; 2021 – $437 billion), interest expense of $24,260 million (2022 – $7,323 million; 2021 – $4,487 million) and average rates of 3.89% (2022 – 1.46%; 2021 – 1.03%). |
(4) | Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities. |
n.a. | not applicable |
Change in net interest income |
Table 73 |
2023 vs. 2022 |
2022 vs. 2021 | |||||||||||||||||||||||||||
Increase (decrease) due to changes in |
Increase (decrease) due to changes in |
|||||||||||||||||||||||||||
(Millions of Canadian dollars) (1) |
Average volume |
Average rate |
Net change |
Average volume (2) |
Average rate (2) |
Net change | ||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Deposits with other banks |
||||||||||||||||||||||||||||
Canada (3)
|
$ |
22 |
$ |
1,094 |
$ |
1,116 |
$ | 25 | $ | 451 | $ | 476 | ||||||||||||||||
U.S. (3)
|
76 |
2,976 |
3,052 |
28 | 820 | 848 | ||||||||||||||||||||||
Other international (3)
|
(66 |
) |
1,053 |
987 |
4 | 64 | 68 | |||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||
Trading |
690 |
2,021 |
2,711 |
178 | 840 | 1,018 | ||||||||||||||||||||||
Investment, net of applicable allowance |
457 |
4,282 |
4,739 |
163 | 1,004 | 1,167 | ||||||||||||||||||||||
Asset purchased under reverse repurchase agreements and securities borrowed |
351 |
16,366 |
16,717 |
173 | 3,965 | 4,138 | ||||||||||||||||||||||
Loans |
||||||||||||||||||||||||||||
Canada (3)
|
||||||||||||||||||||||||||||
Retail (3)
|
752 |
7,964 |
8,716 |
1,155 | 333 | 1,488 | ||||||||||||||||||||||
Wholesale (3)
|
882 |
2,652 |
3,534 |
657 | 1,130 | 1,787 | ||||||||||||||||||||||
U.S. (3)
|
634 |
2,220 |
2,854 |
695 | 462 | 1,157 | ||||||||||||||||||||||
Other international (3)
|
47 |
1,747 |
1,794 |
346 | 133 | 479 | ||||||||||||||||||||||
Total interest income |
$ |
3,845 |
$ |
42,375 |
$ |
46,220 |
$ | 3,424 | $ | 9,202 | $ | 12,626 | ||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||||||
Canada (3)
|
1,086 |
17,881 |
18,967 |
434 | 3,526 | 3,960 | ||||||||||||||||||||||
U.S. (3)
|
5 |
4,334 |
4,339 |
35 | 778 | 813 | ||||||||||||||||||||||
Other international (3)
|
(77 |
) |
2,699 |
2,622 |
20 | 510 | 530 | |||||||||||||||||||||
Obligations related to securities sold short |
(167 |
) |
691 |
524 |
297 | 303 | 600 | |||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
502 |
15,580 |
16,082 |
83 | 3,694 | 3,777 | ||||||||||||||||||||||
Subordinated debentures |
26 |
352 |
378 |
19 | 90 | 109 | ||||||||||||||||||||||
Other interest-bearing liabilities |
114 |
782 |
896 |
14 | 108 | 122 | ||||||||||||||||||||||
Total interest expense |
$ |
1,489 |
$ |
42,319 |
$ |
43,808 |
$ | 902 | $ | 9,009 | $ | 9,911 | ||||||||||||||||
Net interest income |
$ |
2,356 |
$ |
56 |
$ |
2,412 |
$ | 2,522 | $ | 193 | $ | 2,715 |
(1) | Insurance segment assets and liabilities are included in Other assets and Other liabilities, respectively. |
(2) | Volume/rate variance is allocated on the percentage relationships of changes in balances and changes in rates to the total net change in net interest income. |
(3) | Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities. |
Loans and acceptances by geography |
Table 74 |
As at October 31 (Millions of Canadian dollars) |
2023 |
2022 | ||||||
Canada (1)
|
||||||||
Residential mortgages |
$ |
397,605 |
$ | 383,797 | ||||
Personal |
79,705 |
79,422 | ||||||
Credit cards |
22,140 |
19,778 | ||||||
Small business |
13,681 |
12,669 | ||||||
Retail |
513,131 |
495,666 | ||||||
Wholesale |
143,475 |
126,751 | ||||||
$ |
656,606 |
$ | 622,417 | |||||
U.S. (1)
|
||||||||
Retail |
50,058 |
47,402 | ||||||
Wholesale |
119,068 |
114,799 | ||||||
169,126 |
162,201 | |||||||
Other International (1)
|
||||||||
Retail |
6,762 |
6,683 | ||||||
Wholesale |
47,028 |
50,289 | ||||||
53,790 |
56,972 | |||||||
Total loans and acceptances |
$ |
879,522 |
$ | 841,590 | ||||
Total allowance for credit losses |
(5,054 |
) |
(3,798 | ) | ||||
Total loans and acceptances, net of allowance for credit losses |
$ |
874,468 |
$ | 837,792 |
(1) | Geographic information is based on residence of borrower. |
Loans and acceptances by portfolio and sector |
Table 75 |
As at October 31 (Millions of Canadian dollars) |
2023 |
2022 | ||||||
Residential mortgages |
$ |
434,501 |
$ | 418,796 | ||||
Personal |
98,734 |
97,709 | ||||||
Credit cards |
23,035 |
20,577 | ||||||
Small business |
13,681 |
12,669 | ||||||
Retail |
$ |
569,951 |
$ | 549,751 | ||||
Agriculture |
11,026 |
10,105 | ||||||
Automotive |
11,503 |
8,770 | ||||||
Banking |
7,146 |
7,016 | ||||||
Consumer discretionary |
17,546 |
19,405 | ||||||
Consumer staples |
8,463 |
6,940 | ||||||
Oil and gas |
6,421 |
5,959 | ||||||
Financial services |
38,029 |
41,353 | ||||||
Financing products |
13,683 |
13,781 | ||||||
Forest products |
1,428 |
1,094 | ||||||
Governments |
5,767 |
5,632 | ||||||
Industrial products |
11,057 |
10,537 | ||||||
Information technology |
5,096 |
5,232 | ||||||
Investments |
18,212 |
19,952 | ||||||
Mining and metals |
1,858 |
2,223 | ||||||
Public works and infrastructure |
2,970 |
3,006 | ||||||
Real estate and related |
90,981 |
79,506 | ||||||
Other services |
27,048 |
24,393 | ||||||
Telecommunication and media |
8,507 |
7,176 | ||||||
Transportation |
8,038 |
6,542 | ||||||
Utilities |
13,978 |
11,847 | ||||||
Other sectors |
814 |
1,370 | ||||||
Wholesale |
$ |
309,571 |
$ | 291,839 | ||||
Total loans and acceptances |
$ |
879,522 |
$ | 841,590 | ||||
Total allowance for credit losses |
(5,054 |
) |
(3,798 | ) | ||||
Total loans and acceptances, net of allowance for credit losses |
$ |
874,468 |
$ | 837,792 |
Gross impaired loans by portfolio and geography |
Table 76 |
As at October 31 (Millions of Canadian dollars, except for percentage amounts) |
2023 |
2022 | ||||||||||
Residential mortgages |
$ |
682 |
$ | 560 | ||||||||
Personal |
280 |
200 | ||||||||||
Small business |
244 |
138 | ||||||||||
Retail |
1,206 |
898 | ||||||||||
Agriculture |
$ |
36 |
$ | 18 | ||||||||
Automotive |
26 |
9 | ||||||||||
Banking |
3 |
1 | ||||||||||
Consumer discretionary |
315 |
254 | ||||||||||
Consumer staples |
148 |
122 | ||||||||||
Oil and gas |
17 |
57 | ||||||||||
Financial services |
85 |
96 | ||||||||||
Financing products |
– |
– | ||||||||||
Forest products |
9 |
7 | ||||||||||
Governments |
16 |
3 | ||||||||||
Industrial products |
147 |
77 | ||||||||||
Information technology |
26 |
5 | ||||||||||
Investments |
96 |
9 | ||||||||||
Mining and metals |
1 |
12 | ||||||||||
Public works and infrastructure |
15 |
16 | ||||||||||
Real estate and related |
1,104 |
322 | ||||||||||
Other services |
180 |
246 | ||||||||||
Telecommunication and media |
186 |
8 | ||||||||||
Transportation |
59 |
6 | ||||||||||
Utilities |
– |
– | ||||||||||
Other sectors |
24 |
27 | ||||||||||
Wholesale |
2,493 |
1,295 | ||||||||||
Acquired credit-impaired loans |
5 |
6 | ||||||||||
Total GIL (1)
|
$ |
3,704 |
$ | 2,199 | ||||||||
Canada (2)
|
||||||||||||
Residential mortgages |
$ |
481 |
$ | 352 | ||||||||
Personal |
247 |
174 | ||||||||||
Small business |
244 |
138 | ||||||||||
Retail |
972 |
664 | ||||||||||
Agriculture |
16 |
17 | ||||||||||
Automotive |
24 |
6 | ||||||||||
Banking |
3 |
1 | ||||||||||
Consumer discretionary |
195 |
69 | ||||||||||
Consumer staples |
55 |
40 | ||||||||||
Oil and gas |
17 |
10 | ||||||||||
Financial services |
– |
4 | ||||||||||
Financing products |
– |
– | ||||||||||
Forest products |
9 |
7 | ||||||||||
Governments |
13 |
3 | ||||||||||
Industrial products |
42 |
28 | ||||||||||
Information technology |
8 |
3 | ||||||||||
Investments |
20 |
2 | ||||||||||
Mining and metals |
1 |
4 | ||||||||||
Public works and infrastructure |
10 |
7 | ||||||||||
Real estate and related |
168 |
88 | ||||||||||
Other services |
72 |
56 | ||||||||||
Telecommunication and media |
4 |
5 | ||||||||||
Transportation |
27 |
6 | ||||||||||
Utilities |
– |
– | ||||||||||
Other sectors |
1 |
– | ||||||||||
Wholesale |
685 |
356 | ||||||||||
Total |
$ |
1,657 |
$ | 1,020 | ||||||||
U.S. (2)
|
||||||||||||
Retail |
$ |
53 |
$ | 34 | ||||||||
Wholesale |
1,469 |
674 | ||||||||||
Total |
$ |
1,522 |
$ | 708 | ||||||||
Other International (2)
|
||||||||||||
Retail |
$ |
181 |
$ | 200 | ||||||||
Wholesale |
344 |
271 | ||||||||||
Total |
$ |
525 |
$ | 471 | ||||||||
Total GIL |
$ |
3,704 |
$ | 2,199 | ||||||||
Allowance on impaired loans |
(1,148 |
) |
(669 | ) | ||||||||
Net impaired loans |
$ |
2,556 |
$ | 1,530 | ||||||||
GIL as a % of loans and acceptances |
||||||||||||
Residential mortgages |
0.16% |
0.13% | ||||||||||
Personal |
0.28% |
0.20% | ||||||||||
Small business |
1.78% |
1.09% | ||||||||||
Retail |
0.21% |
0.16% | ||||||||||
Wholesale |
0.81% |
0.45% | ||||||||||
Total |
0.42% |
0.26% | ||||||||||
Allowance on impaired loans as a % of GIL |
31.00% |
30.41% |
(1) | Past due loans greater than 90 days not included in impaired loans were $257 million in 2023 |
(2) | Geographic information is based on residence of borrower. |
Provision for credit losses by portfolio and geography |
Table 77 |
For the year ended October 31 (Millions of Canadian dollars, except for percentage amounts) |
2023 |
2022 | ||||||||||
Residential mortgages |
$ |
63 |
$ | 13 | ||||||||
Personal |
467 |
259 | ||||||||||
Credit cards |
460 |
333 | ||||||||||
Small business |
61 |
43 | ||||||||||
Retail |
1,051 |
648 | ||||||||||
Agriculture |
$ |
20 |
$ | 1 | ||||||||
Automotive |
8 |
3 | ||||||||||
Banking |
– |
(3 | ) | |||||||||
Consumer discretionary |
143 |
47 | ||||||||||
Consumer staples |
51 |
35 | ||||||||||
Oil and gas |
11 |
(2 | ) | |||||||||
Financial services |
10 |
3 | ||||||||||
Financing products |
– |
– | ||||||||||
Forest products |
5 |
1 | ||||||||||
Governments |
(1 |
) |
(1 | ) | ||||||||
Industrial products |
56 |
(6 | ) | |||||||||
Information technology |
12 |
(8 | ) | |||||||||
Investments |
15 |
3 | ||||||||||
Mining and metals |
(1 |
) |
9 | |||||||||
Public works and infrastructure |
(3 |
) |
5 | |||||||||
Real estate and related |
222 |
32 | ||||||||||
Other services |
72 |
25 | ||||||||||
Telecommunication and media |
85 |
(1 | ) | |||||||||
Transportation |
74 |
(16 | ) | |||||||||
Utilities |
– |
1 | ||||||||||
Other sectors |
6 |
3 | ||||||||||
Wholesale |
785 |
131 | ||||||||||
Acquired credit-impaired loans |
– |
(1 | ) | |||||||||
Total PCL on impaired loans |
$ |
1,836 |
$ | 778 | ||||||||
Canada (1)
|
||||||||||||
Residential mortgages |
$ |
61 |
$ | 15 | ||||||||
Personal |
463 |
271 | ||||||||||
Credit cards |
449 |
326 | ||||||||||
Small business |
61 |
43 | ||||||||||
Retail |
1,034 |
655 | ||||||||||
Agriculture |
4 |
1 | ||||||||||
Automotive |
7 |
3 | ||||||||||
Banking |
– |
1 | ||||||||||
Consumer discretionary |
101 |
36 | ||||||||||
Consumer staples |
34 |
9 | ||||||||||
Oil and gas |
(2 |
) |
(21 | ) | ||||||||
Financial services |
1 |
1 | ||||||||||
Financing products |
– |
– | ||||||||||
Forest products |
5 |
1 | ||||||||||
Governments |
(1 |
) |
(1 | ) | ||||||||
Industrial products |
16 |
9 | ||||||||||
Information technology |
2 |
1 | ||||||||||
Investments |
8 |
2 | ||||||||||
Mining and metals |
– |
2 | ||||||||||
Public works and infrastructure |
2 |
– | ||||||||||
Real estate and related |
41 |
23 | ||||||||||
Other services |
12 |
9 | ||||||||||
Telecommunication and media |
1 |
1 | ||||||||||
Transportation |
9 |
1 | ||||||||||
Utilities |
– |
– | ||||||||||
Other sectors |
(1 |
) |
– | |||||||||
Wholesale |
239 |
78 | ||||||||||
Total |
$ |
1,273 |
$ | 733 | ||||||||
U.S. (1)
|
||||||||||||
Retail |
$ |
17 |
$ | 2 | ||||||||
Wholesale |
509 |
68 | ||||||||||
Total |
$ |
526 |
$ | 70 | ||||||||
Other International (1)
|
||||||||||||
Retail |
$ |
– |
$ | (9 | ) | |||||||
Wholesale |
37 |
(16 | ) | |||||||||
Total |
$ |
37 |
$ | (25 | ) | |||||||
Total PCL on impaired loans |
$ |
1,836 |
$ | 778 | ||||||||
Total PCL on performing loans |
660 |
(281 | ) | |||||||||
Total PCL on other financial assets |
(28 |
) |
(13 | ) | ||||||||
Total PCL |
$ |
2,468 |
$ | 484 | ||||||||
PCL on loans as a % of average net loans and acceptances |
0.29% |
0.06% | ||||||||||
PCL on impaired loans as a % of average net loans and acceptances (1)
|
0.21% |
0.10% |
(1) | Geographic information is based on residence of borrower. |
Allowance on loans by portfolio and geography (1)
|
Table 78 |
As at and for the year ended October 31 (Millions of Canadian dollars, except percentage amounts) |
2023 |
2022 | ||||||||||
Allowance against impaired loans |
||||||||||||
Canada (2)
|
||||||||||||
Residential mortgages |
$ |
86 |
$ | 44 | ||||||||
Personal |
138 |
85 | ||||||||||
Small business |
58 |
48 | ||||||||||
Retail |
$ |
282 |
$ | 177 | ||||||||
Agriculture |
$ |
4 |
$ | 2 | ||||||||
Automotive |
5 |
4 | ||||||||||
Banking |
1 |
– | ||||||||||
Consumer discretionary |
85 |
27 | ||||||||||
Consumer staples |
30 |
10 | ||||||||||
Oil and gas |
4 |
7 | ||||||||||
Financial services |
1 |
1 | ||||||||||
Financing products |
– |
– | ||||||||||
Forest products |
3 |
1 | ||||||||||
Governments |
– |
1 | ||||||||||
Industrial products |
18 |
12 | ||||||||||
Information technology |
2 |
2 | ||||||||||
Investments |
7 |
1 | ||||||||||
Mining and metals |
1 |
2 | ||||||||||
Public works and infrastructure |
5 |
4 | ||||||||||
Real estate and related |
41 |
25 | ||||||||||
Other services |
5 |
12 | ||||||||||
Telecommunication and media |
1 |
1 | ||||||||||
Transportation |
8 |
3 | ||||||||||
Utilities |
– |
– | ||||||||||
Other sectors |
– |
– | ||||||||||
Wholesale |
$ |
221 |
$ | 115 | ||||||||
Total |
$ |
503 |
$ | 292 | ||||||||
U.S. (2)
|
||||||||||||
Retail |
$ |
7 |
$ | 2 | ||||||||
Wholesale |
445 |
175 | ||||||||||
Total |
$ |
452 |
$ | 177 | ||||||||
Other International (2)
|
||||||||||||
Retail |
$ |
92 |
$ | 98 | ||||||||
Wholesale |
101 |
102 | ||||||||||
Total |
$ |
193 |
$ | 200 | ||||||||
Total allowance on impaired loans |
$ |
1,148 |
$ | 669 | ||||||||
Allowance on performing loans |
||||||||||||
Residential mortgages |
$ |
313 |
$ | 300 | ||||||||
Personal |
1,073 |
946 | ||||||||||
Credit cards |
1,069 |
893 | ||||||||||
Small business |
136 |
146 | ||||||||||
Retail |
$ |
2,591 |
$ | 2,285 | ||||||||
Wholesale |
$ |
1,609 |
$ | 1,227 | ||||||||
Total allowance on performing loans |
$ |
4,200 |
$ | 3,512 | ||||||||
Total allowance on loans |
$ |
5,348 |
$ | 4,181 | ||||||||
Key ratios |
||||||||||||
Allowance on loans as a % of loans and acceptances |
0.61% |
0.50% | ||||||||||
Net write-offs as a % of average net loans and acceptances |
0.14% |
0.10% |
(1) | Includes loans, acceptances, and commitments. |
(2) | Geographic information is based on residence of borrower. |
Credit quality information by Canadian province (1)
|
Table 79 |
As at and for the year ended October 31 (Millions of Canadian dollars) |
2023 |
2022 | ||||||||||
Loans and acceptances |
||||||||||||
Atlantic provinces (2)
|
$ |
32,513 |
$ | 30,709 | ||||||||
Quebec |
76,204 |
73,743 | ||||||||||
Ontario |
321,139 |
300,477 | ||||||||||
Alberta |
76,018 |
73,638 | ||||||||||
Other Prairie provinces (3)
|
36,076 |
35,699 | ||||||||||
B.C. and territories (4)
|
114,656 |
108,151 | ||||||||||
Total loans and acceptances in Canada |
$ |
656,606 |
$ | 622,417 | ||||||||
Gross impaired loans |
||||||||||||
Atlantic provinces (2)
|
$ |
122 |
$ | 65 | ||||||||
Quebec |
275 |
172 | ||||||||||
Ontario |
689 |
323 | ||||||||||
Alberta |
260 |
233 | ||||||||||
Other Prairie provinces (3)
|
137 |
121 | ||||||||||
B.C. and territories (4)
|
174 |
106 | ||||||||||
Total GIL in Canada |
$ |
1,657 |
$ | 1,020 | ||||||||
PCL on impaired loans |
||||||||||||
Atlantic provinces (2)
|
$ |
52 |
$ | 20 | ||||||||
Quebec |
81 |
47 | ||||||||||
Ontario |
901 |
529 | ||||||||||
Alberta |
99 |
48 | ||||||||||
Other Prairie provinces (3)
|
55 |
39 | ||||||||||
B.C. and territories (4)
|
85 |
50 | ||||||||||
Total PCL on impaired loans in Canada |
$ |
1,273 |
$ | 733 |
(1) | Geographic information is based on residence of borrower. |
(2) | Comprises Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick. |
(3) | Comprises Manitoba and Saskatchewan. |
(4) | Comprises British Columbia, Nunavut, Northwest Territories and Yukon. |
Glossary |
EDTF recommendations index |
Location of disclosure | ||||||||
Type of Risk |
Recommendation |
Disclosure |
Annual Report page |
SFI page | ||||
General |
1 |
Table of contents for EDTF risk disclosure |
132 |
1 | ||||
2 |
Define risk terminology and measures |
65-70, 130-131
|
– | |||||
3 |
Top and emerging risks |
63-65 |
– | |||||
4 |
New regulatory ratios |
109-114 |
– | |||||
Risk governance, risk management and business model |
5 |
Risk management organization |
65-70 |
– | ||||
6 |
Culture and conduct risk |
65-70 |
– | |||||
7 |
Risk in the context of our business activities |
117 |
– | |||||
8 |
Stress testing |
68-69, 81 |
– | |||||
Capital adequacy and risk-weighted assets (RWA) |
9 |
Minimum Basel III capital ratios and Domestic systemically important bank surcharge |
109-114 |
– | ||||
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 |
109-114 |
– | |||||
13 |
RWA by business segments |
– |
20 | |||||
14 |
Analysis of capital requirement, and related measurement model information |
71-75 |
* | |||||
15 |
RWA credit risk and related risk measurements |
– |
* | |||||
16 |
Movement of risk-weighted assets by risk type |
– |
20 | |||||
17 |
Basel back-testing |
68, 71-73 |
31 | |||||
Liquidity |
18 |
Quantitative and qualitative analysis of our liquidity reserve |
88-89, 94-95 |
– | ||||
Funding |
19 |
Encumbered and unencumbered assets by balance sheet category, and contractual obligations for rating downgrades |
90, 93 |
– | ||||
20 |
Maturity analysis of consolidated total assets, liabilities and off-balance sheet commitments analyzed by remaining contractual maturity at the balance sheet date |
97-98 |
– | |||||
21 |
Sources of funding and funding strategy |
90-92 |
– | |||||
Market risk |
22 |
Relationship between the market risk measures for trading and non-trading portfolios and the balance sheet |
85-86 |
– | ||||
23 |
Decomposition of market risk factors |
81-86 |
– | |||||
24 |
Market risk validation and back-testing |
81 |
– | |||||
25 |
Primary risk management techniques beyond reported risk measures and parameters |
81-84 |
– | |||||
Credit risk |
26 |
Bank’s credit risk profile |
71-81, 178-185 |
21-31,* | ||||
Quantitative summary of aggregate credit risk exposures that reconciles to the balance sheet |
124-129 |
* | ||||||
27 |
Policies for identifying impaired loans |
73-75, 119, 149-151 |
– | |||||
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 OTC derivatives or exchange-traded derivatives |
76 |
32 | |||||
30 |
Credit risk mitigation, including collateral held for all sources of credit risk |
74-75 |
* | |||||
Other |
31 |
Other risk types |
100-109 |
– | ||||
32 |
Publicly known risk events |
104-105, 223-224 |
– |
* |
These disclosure requirements are satisfied or partially satisfied by disclosures provided in our Pillar 3 Report for the quarter ended October 31, 2023 and for the year ended October 31, 2022. |
REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS |
Reports | ||||
134 |
| |||
134 |
| |||
138 |
| |||
Consolidated Financial Statements | ||||
140 |
| |||
141 |
| |||
142 |
| |||
143 |
| |||
144 |
|
Notes to Consolidated Financial Statements | ||||||||
145 | Note 1 | | ||||||
145 | Note 2 | | ||||||
161 | Note 3 | | ||||||
174 | Note 4 | | ||||||
178 | Note 5 | | ||||||
185 | Note 6 | | ||||||
185 | Note 7 | | ||||||
186 | Note 8 | | ||||||
190 | Note 9 | | ||||||
200 | Note 10 | | ||||||
201 | Note 11 | | ||||||
203 | Note 12 | | ||||||
204 | Note 13 | | ||||||
204 | Note 14 | | ||||||
205 | Note 15 | | ||||||
207 | Note 16 | | ||||||
208 | Note 17 | | ||||||
213 | Note 18 | | ||||||
213 | Note 19 | | ||||||
214 | Note 20 | | ||||||
216 | Note 21 | | ||||||
218 | Note 22 | | ||||||
220 | Note 23 | | ||||||
221 | Note 24 | | ||||||
223 | Note 25 | | ||||||
224 | Note 26 | | ||||||
226 | Note 27 | | ||||||
227 | Note 28 | | ||||||
228 | Note 29 | | ||||||
229 | Note 30 | | ||||||
231 | Note 31 | | ||||||
232 | Note 32 | | ||||||
234 | Note 33 | |
Management’s Responsibility for Financial Reporting |
Management’s Report on Internal Control over Financial Reporting |
• | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions related to and dispositions of our assets; |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are made only in accordance with authorizations of our management and directors; and |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. |
Report of Independent Registered Public Accounting Firm |
Consolidated Balance Sheets |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Assets |
||||||||
Cash and due from banks |
$ |
61,989 |
$ | 72,397 | ||||
Interest-bearing deposits with banks |
71,086 |
108,011 | ||||||
Securities (Note 4)
|
||||||||
Trading |
190,151 |
148,205 | ||||||
Investment, net of applicable allowance |
219,579 |
170,018 | ||||||
409,730 |
318,223 | |||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
340,191 |
317,845 | ||||||
Loans (Note 5)
|
||||||||
Retail |
569,951 |
549,751 | ||||||
Wholesale |
287,826 |
273,967 | ||||||
857,777 |
823,718 | |||||||
Allowance for loan losses (Note 5)
|
(5,004 |
) |
(3,753 | ) | ||||
852,773 |
819,965 | |||||||
Segregated fund net assets (Note 16)
|
2,760 |
2,638 | ||||||
Other |
||||||||
Customers’ liability under acceptances |
21,695 |
17,827 | ||||||
Derivatives (Note 9)
|
142,450 |
154,439 | ||||||
Premises and equipment (Note 10)
|
6,749 |
7,214 | ||||||
Goodwill (Note 11)
|
12,594 |
12,277 | ||||||
Other intangibles (Note 11)
|
5,907 |
6,083 | ||||||
Other assets (Note 13)
|
77,068 |
80,300 | ||||||
266,463 |
278,140 | |||||||
Total assets |
$ |
2,004,992 |
$ | 1,917,219 | ||||
Liabilities and equity |
||||||||
Deposits (Note 14)
|
||||||||
Personal |
$ |
441,946 |
$ | 404,932 | ||||
Business and government |
745,075 |
759,870 | ||||||
Bank |
44,666 |
44,012 | ||||||
1,231,687 |
1,208,814 | |||||||
Segregated fund net liabilities (Note 16)
|
2,760 |
2,638 | ||||||
Other |
||||||||
Acceptances |
21,745 |
17,872 | ||||||
Obligations related to securities sold short |
33,651 |
35,511 | ||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
335,238 |
273,947 | ||||||
Derivatives (Note 9)
|
142,629 |
153,491 | ||||||
Insurance claims and policy benefit liabilities (Note 15)
|
11,966 |
11,511 | ||||||
Other liabilities (Note 18)
|
96,170 |
95,235 | ||||||
641,399 |
587,567 | |||||||
Subordinated debentures (Note 19)
|
11,386 |
10,025 | ||||||
Total liabilities |
1,887,232 |
1,809,044 | ||||||
Equity attributable to shareholders |
||||||||
Preferred shares and other equity instruments (Note 20)
|
7,314 |
7,318 | ||||||
Common shares (Note 20)
|
19,167 |
16,984 | ||||||
Retained earnings |
84,328 |
78,037 | ||||||
Other components of equity |
6,852 |
5,725 | ||||||
117,661 |
108,064 | |||||||
Non-controlling interests |
99 |
111 | ||||||
Total equity |
117,760 |
108,175 | ||||||
Total liabilities and equity |
$ |
2,004,992 |
$ | 1,917,219 |
David I. McKay |
Frank Vettese | |||
President and Chief Executive Officer |
Director |
Consolidated Statements of Income |
For the year ended
|
||||||||
(Millions of Canadian dollars, except per share amounts) |
October 31 2023 |
October 31
2022
|
||||||
Interest and dividend income (Note 3)
|
||||||||
Loans |
$ |
43,463 |
$ | 26,565 | ||||
Securities |
14,512 |
7,062 | ||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
22,164 |
5,447 | ||||||
Deposits and other |
6,852 |
1,697 | ||||||
86,991 |
40,771 | |||||||
Interest expense (Note 3)
|
||||||||
Deposits and other |
36,679 |
10,751 | ||||||
Other liabilities |
24,517 |
7,015 | ||||||
Subordinated debentures |
666 |
288 | ||||||
61,862 |
18,054 | |||||||
Net interest income |
25,129 |
22,717 | ||||||
Non-interest income |
||||||||
Insurance premiums, investment and fee income (Note 15)
|
5,675 |
3,510 | ||||||
Trading revenue |
2,392 |
926 | ||||||
Investment management and custodial fees |
8,344 |
7,610 | ||||||
Mutual fund revenue |
4,063 |
4,289 | ||||||
Securities brokerage commissions |
1,463 |
1,481 | ||||||
Service charges |
2,099 |
1,976 | ||||||
Underwriting and other advisory fees |
2,005 |
2,058 | ||||||
Foreign exchange revenue, other than trading |
1,292 |
1,038 | ||||||
Card service revenue |
1,240 |
1,203 | ||||||
Credit fees |
1,489 |
1,512 | ||||||
Net gains on investment securities |
193 |
43 | ||||||
Income (loss) from joint ventures and associates (Note 12)
|
(219 |
) |
110 | |||||
Other |
964 |
512 | ||||||
31,000 |
26,268 | |||||||
Total revenue |
56,129 |
48,985 | ||||||
Provision for credit losses (Notes 4 and 5)
|
2,468 |
484 | ||||||
Insurance policyholder benefits, claims and acquisition expense (Note 15)
|
4,022 |
1,783 | ||||||
Non-interest expense |
||||||||
Human resources (Notes 17 and 21)
|
18,971 |
16,528 | ||||||
Equipment |
2,381 |
2,099 | ||||||
Occupancy |
1,634 |
1,554 | ||||||
Communications |
1,271 |
1,082 | ||||||
Professional fees |
2,223 |
1,511 | ||||||
Amortization of other intangibles (Note 11)
|
1,487 |
1,369 | ||||||
Other |
3,206 |
2,466 | ||||||
31,173 |
26,609 | |||||||
Income before income taxes |
18,466 |
20,109 | ||||||
Income taxes (Note 22)
|
3,600 |
4,302 | ||||||
Net income |
$ |
14,866 |
$ | 15,807 | ||||
Net income attributable to: |
||||||||
Shareholders |
$ |
14,859 |
$ | 15,794 | ||||
Non-controlling interests |
7 |
13 | ||||||
$ |
14,866 |
$ | 15,807 | |||||
Basic earnings per share (in dollars) (Note 23)
|
$ |
10.51 |
$ | 11.08 | ||||
Diluted earnings per share (in dollars) (Note 23)
|
10.50 |
11.06 | ||||||
Dividends per common share (in dollars)
|
5.34 |
4.96 |
Consolidated Statements of Comprehensive Income |
For the year ended |
||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Net income |
$ |
14,866 |
$ | 15,807 | ||||
Other comprehensive income (loss), net of taxes (Note 22)
|
||||||||
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 |
(14 |
) |
(2,241 | ) | ||||
Provision for credit losses recognized in income |
(14 |
) |
(16 | ) | ||||
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income |
(131 |
) |
(12 | ) | ||||
(159 |
) |
(2,269 | ) | |||||
Foreign currency translation adjustments |
||||||||
Unrealized foreign currency translation gains (losses) |
2,148 |
5,091 | ||||||
Net foreign currency translation gains (losses) from hedging activities |
(1,208 |
) |
(1,449 | ) | ||||
Reclassification of losses (gains) on foreign currency translation to income |
(160 |
) |
(18 | ) | ||||
Reclassification of losses (gains) on net investment hedging activities to income |
146 |
17 | ||||||
926 |
3,641 | |||||||
Net change in cash flow hedges |
||||||||
Net gains (losses) on derivatives designated as cash flow hedges |
216 |
1,634 | ||||||
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income |
146 |
194 | ||||||
362 |
1,828 | |||||||
Items that will not be reclassified subsequently to income: |
||||||||
Remeasurement gains (losses) on employee benefit plans (1), (Note 17)
|
(344 |
) |
821 | |||||
Net gains (losses) from fair value changes due to credit risk on financial liabilities designated at fair value through profit or loss |
(576 |
) |
1,747 | |||||
Net gains (losses) on equity securities designated at fair value through other comprehensive income |
44 |
50 | ||||||
(876 |
) |
2,618 | ||||||
Total other comprehensive income (loss), net of taxes |
253 |
5,818 | ||||||
Total comprehensive income (loss) |
$ |
15,119 |
$ | 21,625 | ||||
Total comprehensive income attributable to: |
||||||||
Shareholders |
$ |
15,110 |
$ | 21,604 | ||||
Non-controlling interests |
9 |
21 | ||||||
$ |
15,119 |
$ | 21,625 |
(1) | Includes $(9) million that was reclassified from other comprehensive income to retained earnings. |
Consolidated Statements of Changes in Equity |
For the year ended October 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 |
– |
2,080 |
– |
– |
1 |
– |
– |
– |
– |
2,081 |
– |
2,081 |
||||||||||||||||||||||||||||||||||||
Common shares purchased for cancellation |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
||||||||||||||||||||||||||||||||||||
Redemption of preferred shares and other equity instruments |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
||||||||||||||||||||||||||||||||||||
Sales of treasury shares and other equity instruments |
– |
– |
515 |
3,659 |
– |
– |
– |
– |
– |
4,174 |
– |
4,174 |
||||||||||||||||||||||||||||||||||||
Purchases of treasury shares and other equity instruments |
– |
– |
(519 |
) |
(3,556 |
) |
– |
– |
– |
– |
– |
(4,075 |
) |
– |
(4,075 |
) |
||||||||||||||||||||||||||||||||
Share-based compensation awards |
– |
– |
– |
– |
4 |
– |
– |
– |
– |
4 |
– |
4 |
||||||||||||||||||||||||||||||||||||
Dividends on common shares |
– |
– |
– |
– |
(7,443 |
) |
– |
– |
– |
– |
(7,443 |
) |
– |
(7,443 |
) |
|||||||||||||||||||||||||||||||||
Dividends on preferred shares and distributions on other equity instruments |
– |
– |
– |
– |
(236 |
) |
– |
– |
– |
– |
(236 |
) |
(21 |
) |
(257 |
) |
||||||||||||||||||||||||||||||||
Other |
– |
– |
– |
– |
(18 |
) |
– |
– |
– |
– |
(18 |
) |
– |
(18 |
) |
|||||||||||||||||||||||||||||||||
Net income |
– |
– |
– |
– |
14,859 |
– |
– |
– |
– |
14,859 |
7 |
14,866 |
||||||||||||||||||||||||||||||||||||
Total other comprehensive income (loss), net of taxes |
– |
– |
– |
– |
(876 |
) |
(159 |
) |
924 |
362 |
1,127 |
251 |
2 |
253 |
||||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
7,323 |
$ |
19,398 |
$ |
(9 |
) |
$ |
(231 |
) |
$ |
84,328 |
$ |
(2,516 |
) |
$ |
6,612 |
$ |
2,756 |
$ |
6,852 |
$ |
117,661 |
$ |
99 |
$ |
117,760 |
|||||||||||||||||||||
For the year ended October 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 | 99 | – | – | (1 | ) | – | – | – | – | 848 | – | 848 | |||||||||||||||||||||||||||||||||||
Common shares purchased for cancellation |
– | (509 | ) | – | – | (4,917 | ) | – | – | – | – | (5,426 | ) | – | (5,426 | ) | ||||||||||||||||||||||||||||||||
Redemption of preferred shares and other equity instruments |
(150 | ) | – | – | – | (5 | ) | – | – | – | – | (155 | ) | – | (155 | ) | ||||||||||||||||||||||||||||||||
Sales of treasury shares and other equity instruments |
– | – | 552 | 4,922 | – | – | – | – | – | 5,474 | – | 5,474 | ||||||||||||||||||||||||||||||||||||
Purchases of treasury shares and other equity instruments |
– | – | (518 | ) | (5,183 | ) | – | – | – | – | – | (5,701 | ) | – | (5,701 | ) | ||||||||||||||||||||||||||||||||
Share-based compensation awards |
– | – | – | – | 2 | – | – | – | – | 2 | – | 2 | ||||||||||||||||||||||||||||||||||||
Dividends on common shares |
– | – | – | – | (6,946 | ) | – | – | – | – | (6,946 | ) | – | (6,946 | ) | |||||||||||||||||||||||||||||||||
Dividends on preferred shares and distributions on other equity instruments |
– | – | – | – | (247 | ) | – | – | – | – | (247 | ) | (5 | ) | (252 | ) | ||||||||||||||||||||||||||||||||
Other |
– | – | – | – | (56 | ) | – | – | – | – | (56 | ) | – | (56 | ) | |||||||||||||||||||||||||||||||||
Net income |
– | – | – | – | 15,794 | – | – | – | – | 15,794 | 13 | 15,807 | ||||||||||||||||||||||||||||||||||||
Total other comprehensive income (loss), net of taxes |
– | – | – | – | 2,618 | (2,269 | ) | 3,633 | 1,828 | 3,192 | 5,810 | 8 | 5,818 | |||||||||||||||||||||||||||||||||||
Balance at end of period |
$ | 7,323 | $ | 17,318 | $ | (5 | ) | $ | (334 | ) | $ | 78,037 | $ | (2,357 | ) | $ | 5,688 | $ | 2,394 | $ | 5,725 | $ | 108,064 | $ | 111 | $ | 108,175 |
Consolidated Statements of Cash Flows |
For the year ended
|
||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Cash flows from operating activities |
||||||||
Net income |
$ |
14,866 |
$ | 15,807 | ||||
Adjustments for non-cash items and others |
||||||||
Provision for credit losses |
2,468 |
484 | ||||||
Depreciation |
1,275 |
1,265 | ||||||
Deferred income taxes |
(995 |
) |
569 | |||||
Amortization and impairment of other intangibles |
1,595 |
1,387 | ||||||
Net changes in investments in joint ventures and associates |
221 |
(108 | ) | |||||
Losses (Gains) on investment securities |
(193 |
) |
(43 | ) | ||||
Losses (Gains) on disposition of business |
(92 |
) |
(100 | ) | ||||
Adjustments for net changes in operating assets and liabilities |
||||||||
Insurance claims and policy benefit liabilities |
455 |
(1,305 | ) | |||||
Net change in accrued interest receivable and payable |
2,837 |
333 | ||||||
Current income taxes |
(986 |
) |
(3,336 | ) | ||||
Derivative assets |
11,826 |
(58,898 | ) | |||||
Derivative liabilities |
(10,452 |
) |
62,052 | |||||
Trading securities |
(41,946 |
) |
(8,931 | ) | ||||
Loans, net of securitizations |
(34,688 |
) |
(102,653 | ) | ||||
Assets purchased under reverse repurchase agreements and securities borrowed |
(22,346 |
) |
(9,942 | ) | ||||
Obligations related to assets sold under repurchase agreements and securities loaned |
61,291 |
11,746 | ||||||
Obligations related to securities sold short |
(1,860 |
) |
(2,330 | ) | ||||
Deposits, net of securitizations |
43,990 |
108,533 | ||||||
Brokers and dealers receivable and payable |
(2,444 |
) |
4,612 | |||||
Other |
1,257 |
2,800 | ||||||
Net cash from (used in) operating activities |
26,079 |
21,942 | ||||||
Cash flows from investing activities |
||||||||
Change in interest-bearing deposits with banks |
18,743 |
(28,373 | ) | |||||
Proceeds from sales and maturities of investment securities |
156,466 |
99,143 | ||||||
Purchases of investment securities |
(202,456 |
) |
(122,964 | ) | ||||
Net acquisitions of premises and equipment and other intangibles |
(2,730 |
) |
(2,500 | ) | ||||
Net proceeds from (cash transferred for) dispositions |
1,712 |
(313 | ) | |||||
Cash used in acquisitions, net of cash acquired |
– |
(2,047 | ) | |||||
Net cash from (used in) investing activities |
(28,265 |
) |
(57,054 | ) | ||||
Cash flows from financing activities |
||||||||
Issuance of subordinated debentures |
1,500 |
1,000 | ||||||
Repayment of subordinated debentures |
(170 |
) |
(192 | ) | ||||
Issue of common shares, net of issuance costs |
65 |
51 | ||||||
Common shares purchased for cancellation |
– |
(5,426 | ) | |||||
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 |
4,174 |
5,474 | ||||||
Purchases of treasury shares and other equity instruments |
(4,075 |
) |
(5,701 | ) | ||||
Dividends paid on shares and distributions paid on other equity instruments |
(5,549 |
) |
(6,960 | ) | ||||
Dividends/distributions paid to non-controlling interests |
(21 |
) |
(5 | ) | ||||
Change in short-term borrowings of subsidiaries |
(5,102 |
) |
9,609 | |||||
Repayment of lease liabilities |
(655 |
) |
(629 | ) | ||||
Net cash from (used in) financing activities |
(9,833 |
) |
(2,185 | ) | ||||
Effect of exchange rate changes on cash and due from banks |
1,611 |
(4,152 | ) | |||||
Net change in cash and due from banks |
(10,408 |
) |
(41,449 | ) | ||||
Cash and due from banks at beginning of period (1)
|
72,397 |
113,846 | ||||||
Cash and due from banks at end of period (1)
|
$ |
61,989 |
$ | 72,397 | ||||
Cash flows from operating activities include: |
||||||||
Amount of interest paid |
$ |
54,698 |
$ | 13,677 | ||||
Amount of interest received |
81,095 |
35,817 | ||||||
Amount of dividends received |
3,362 |
3,144 | ||||||
Amount of income taxes paid |
4,964 |
7,326 |
(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 $3 billion as at October 31, 2023 (October 31, 2022 – $2 billion; October 31, 2021 – $2 billion). |
Note 1 General information |
Note 2 Summary of significant accounting policies, estimates and judgments |
Consolidation of structured entities |
Note 2
Note 8
|
Application of the effective interest method | Note 2 | |||
Fair value of financial instruments |
Note 2
Note 3
|
Derecognition of financial assets |
Note 2
Note 7
|
|||
Allowance for credit losses |
Note 2
Note 4
Note 5
|
Income taxes |
Note 2
Note 22
|
|||
Employee benefits |
Note 2
Note 17
|
Provisions |
Note 2
Note 24
Note 25
|
|||
Goodwill and other intangibles |
Note 2
Note 11
|
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
• | How the economic activities of our businesses generate benefits, for example through trading revenue, enhancing yields or hedging funding or other costs and how such economic activities are evaluated and reported to key management personnel; |
• | The significant risks affecting the performance of our businesses, for example, market risk, credit risk, or other risks as described in the Risk Management section of the MD&A, and the activities undertaken to manage those risks; |
• | Historical and future expectations of sales of the loans or securities portfolios managed as part of a business model; and |
• | The compensation structures for managers of our businesses, to the extent that these are directly linked to the economic performance of the business model. |
• | HTC: The objective of this business model is to hold loans and securities to collect contractual principal and interest cash flows. Sales are incidental to this objective and are expected to be insignificant or infrequent. |
• | HTC&S: Both collecting contractual cash flows and sales are integral to achieving the objective of the business model. |
• | Other fair value business models: These business models are neither HTC nor HTC&S, and primarily represent business models where assets are held-for-trading or managed on a fair value basis. |
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
• | Performing financial assets |
• | Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses expected to result from defaults occurring over the 12 months following the reporting date. |
• | Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset. |
• | Impaired financial assets |
• | Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount. |
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
(1) | We have established thresholds for significant increases in credit risk based on both a percentage and absolute change in lifetime PD relative to initial recognition. For our wholesale portfolio, a decrease in the borrower’s risk rating is also required to determine that credit risk has increased significantly. |
(2) | Additional qualitative reviews may be performed, as necessary, to assess the staging results, which may lead to adjustments to better reflect the positions whose credit risk has increased significantly. These reviews are completed at both the individual borrower levels and the portfolio level and may result in an instrument, a portfolio or a portion of a portfolio moving from Stage 1 to Stage 2. |
(3) | Instruments which are 30 days past due are generally considered to have experienced a significant increase in credit risk, even if our other metrics do not indicate that a significant increase in credit risk has occurred. |
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
• | 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) is elected. |
• | The general measurement method (GMM) is applied to all remaining contracts. |
• | New business profits are deferred and measured as the CSM 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, therefore, there will be 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. |
Note 2 Summary of significant accounting policies, estimates and judgments (continued)
|
As at | ||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||
(Millions of Canadian dollars) |
Non-derivative
financial assets (1)
|
Non-derivative
financial liabilities (2)
|
Derivative notional |
Non-derivative
financial assets (1)
|
Non-derivative
financial liabilities (2)
|
Derivative notional (3)
|
||||||||||||||||||
CDOR (4)
|
$ |
29,496 |
$ |
24,735 |
$ |
2,154,345 |
$ | 18,493 | $ | 18,572 | $ | 2,226,700 |
(1) | Non-derivative assets represent the drawn outstanding balance of Loans and Customers’ liability under acceptances and the fair value of Securities. |
(2) | Non-derivative liabilities represent Subordinated debentures, Deposits and Acceptances. |
(3) | Amounts have been updated from those previously presented to reflect the cessation of USD LIBOR. |
(4) | Includes our exposure to financial instruments referencing interest rates substantially similar to CDOR. |
As at | ||||||||
(Millions of Canadian dollars) | October 31, 2023 |
October 31, 2022 | ||||||
Authorized and committed undrawn commitments |
||||||||
CDOR (1), (2)
|
$ |
40,010 |
$ | 26,913 |
(1) | Includes our exposure to financial instruments referencing interest rates substantially similar to CDOR. |
(2) | Undrawn commitments exclude amounts related to drawn outstanding balances, which in certain cases may exclude extension options. |
Note 3 Fair value of financial instruments |
As at October 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 |
$ |
– |
$ |
60,856 |
$ |
– |
$ |
– |
$ |
10,230 |
$ |
10,230 |
$ |
71,086 |
$ |
71,086 |
||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||
Trading |
180,651 |
9,500 |
– |
– |
– |
– |
190,151 |
190,151 |
||||||||||||||||||||||||||||
Investment, net of applicable allowance |
– |
– |
127,624 |
842 |
91,113 |
83,667 |
219,579 |
212,133 |
||||||||||||||||||||||||||||
180,651 |
9,500 |
127,624 |
842 |
91,113 |
83,667 |
409,730 |
402,284 |
|||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
285,869 |
– |
– |
– |
54,322 |
54,322 |
340,191 |
340,191 |
||||||||||||||||||||||||||||
Loans, net of applicable allowance |
||||||||||||||||||||||||||||||||||||
Retail |
114 |
362 |
280 |
– |
566,376 |
542,480 |
567,132 |
543,236 |
||||||||||||||||||||||||||||
Wholesale |
5,629 |
3,619 |
597 |
– |
275,796 |
268,843 |
285,641 |
278,688 |
||||||||||||||||||||||||||||
5,743 |
3,981 |
877 |
– |
842,172 |
811,323 |
852,773 |
821,924 |
|||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Derivatives |
142,450 |
– |
– |
– |
– |
– |
142,450 |
142,450 |
||||||||||||||||||||||||||||
Other assets (1)
|
4,819 |
5 |
– |
– |
68,537 |
68,537 |
73,361 |
73,361 |
||||||||||||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||||||||||||||
Personal |
$ |
109 |
$ |
26,702 |
$ |
415,135 |
$ |
412,886 |
$ |
441,946 |
$ |
439,697 |
||||||||||||||||||||||||
Business and government (2)
|
174 |
137,454 |
607,447 |
605,260 |
745,075 |
742,888 |
||||||||||||||||||||||||||||||
Bank (3)
|
– |
11,462 |
33,204 |
33,160 |
44,666 |
44,622 |
||||||||||||||||||||||||||||||
283 |
175,618 |
1,055,786 |
1,051,306 |
1,231,687 |
1,227,207 |
|||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Obligations related to securities sold short |
33,651 |
– |
– |
– |
33,651 |
33,651 |
||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
– |
298,679 |
36,559 |
36,559 |
335,238 |
335,238 |
||||||||||||||||||||||||||||||
Derivatives |
142,629 |
– |
– |
– |
142,629 |
142,629 |
||||||||||||||||||||||||||||||
Other liabilities (4)
|
(937 |
) |
11 |
92,500 |
92,402 |
91,574 |
91,476 |
|||||||||||||||||||||||||||||
Subordinated debentures |
– |
– |
11,386 |
11,213 |
11,386 |
11,213 |
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. |
As at or for the year ended October 31, 2023 |
||||||||||||||||||||
Contractual maturity amount |
Carrying value |
Difference between carrying value and contractual maturity amount |
Changes in fair value attributable to changes in credit risk included in OCI for positions still held |
|||||||||||||||||
(Millions of Canadian dollars) |
During the period |
Cumulative |
||||||||||||||||||
Term deposits |
||||||||||||||||||||
Personal |
$ |
27,131 |
$ |
26,702 |
$ |
(429 |
) |
$ |
112 |
$ |
(57 |
) | ||||||||
Business and government (3)
|
147,844 |
137,454 |
(10,390 |
) |
683 |
(1,030 |
) | |||||||||||||
Bank (4)
|
11,485 |
11,462 |
(23 |
) |
– |
– |
||||||||||||||
186,460 |
175,618 |
(10,842 |
) |
795 |
(1,087 |
) | ||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
298,734 |
298,679 |
(55 |
) |
3 |
4 |
||||||||||||||
Other liabilities |
11 |
11 |
– |
– |
– |
|||||||||||||||
$ |
485,205 |
$ |
474,308 |
$ |
(10,897 |
) |
$ |
798 |
$ |
(1,083 |
) |
As at or for the year ended October 31, 2022 (1) | ||||||||||||||||||||
Contractual maturity amount |
Carrying value | Difference between carrying value and contractual maturity amount |
Changes in fair value attributable to changes in credit risk included in OCI for positions still held |
|||||||||||||||||
(Millions of Canadian dollars) |
During the period | Cumulative (2) | ||||||||||||||||||
Term deposits |
||||||||||||||||||||
Personal |
$ | 22,328 | $ | 21,959 | $ | (369 | ) | $ | (238 | ) | $ | (166 | ) | |||||||
Business and government (3)
|
160,775 | 152,119 | (8,656 | ) | (2,135 | ) | (1,718 | ) | ||||||||||||
Bank (4)
|
7,208 | 7,196 | (12 | ) | – | – | ||||||||||||||
190,311 | 181,274 | (9,037 | ) | (2,373 | ) | (1,884 | ) | |||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
248,963 | 248,835 | (128 | ) | 1 | 1 | ||||||||||||||
Other liabilities |
69 | 69 | – | – | – | |||||||||||||||
$ | 439,343 | $ | 430,178 | $ | (9,165 | ) | $ | (2,372 | ) | $ | (1,883 | ) |
(1) | $29 million in changes in fair value attributable to changes in credit risk were recognized in income for the year ended October 31, 2023, and $17 million in cumulative changes in credit risk were included in income for positions still held life-to-date |
(2) | The cumulative change is measured from the initial designation of the liabilities as FVTPL. For the year ended October 31, 2023, $2 million of fair value gains previously included in OCI relate to financial liabilities derecognized during the year (October 31, 2022 – $3 million of fair value gains). |
(3) | Business and government term deposits include amounts from regulated deposit-taking institutions other than regulated banks. |
(4) | Bank term deposits refer to amounts from regulated banks and central banks. |
For the year ended | ||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||||
Net gains (losses) (1)
|
||||||||||
Classified as fair value through profit or loss (2)
|
$ |
1,998 |
$ | (7,382 | ) | |||||
Designated as fair value through profit or loss (3)
|
1,499 |
8,543 | ||||||||
$ |
3,497 |
$ | 1,161 | |||||||
By product line (1)
|
||||||||||
Interest rate and credit (4)
|
$ |
3,515 |
$ | 1,251 | ||||||
Equities |
(510 |
) |
(843 | ) | ||||||
Foreign exchange and commodities |
492 |
753 | ||||||||
$ |
3,497 |
$ | 1,161 |
(1) | Excludes the following amounts related to our insurance operations and included in Insurance premiums, investment and fee income in the Consolidated Statements of Income: Net losses from financial instruments designated as FVTPL of $371 million (October 31, 2022 – losses of $2,805 million). |
(2) | Excludes derivatives designated in a hedging relationship. Refer to Note 9 for net gains (losses) on these derivatives. |
(3) | For the year ended October 31, 2023, $1,524 million of net fair value gains on financial liabilities designated as FVTPL, other than those attributable to changes in our own credit risk, were included in Non-interest income (October 31, 2022 – gains of $8,536 million). |
(4) | Includes gains (losses) recognized on cross currency interest rate swaps. |
For the year ended | ||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||||
Interest and dividend income (1), (2)
|
||||||||||
Financial instruments measured at fair value through profit or loss |
$ |
31,464 |
$ | 10,999 | ||||||
Financial instruments measured at fair value through other comprehensive income |
5,127 |
1,177 | ||||||||
Financial instruments measured at amortized cost |
50,400 |
28,595 | ||||||||
86,991 |
40,771 | |||||||||
Interest expense (1)
|
||||||||||
Financial instruments measured at fair value through profit or loss |
$ |
28,446 |
$ | 8,336 | ||||||
Financial instruments measured at amortized cost |
33,416 |
9,718 | ||||||||
61,862 |
18,054 | |||||||||
Net interest income |
$ |
25,129 |
$ | 22,717 |
(1) | Excludes the following amounts related to our insurance operations and included in Insurance premiums, investment and fee income in the Consolidated Statements of Income: Interest income of $451 million (October 31, 2022 – $601 million), and Interest expense of $35 million (October 31, 2022 – $6 million). |
(2) | Includes dividend income for the year ended October 31, 2023 of $3,215 million (October 31, 2022 – $2,954 million), which is presented in Interest and dividend income in the Consolidated Statements of Income. |
Note 3 Fair value of financial instruments (continued)
|
As at
|
||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022
|
|||||||||||||||||||||||||||||||||||||||||
Fair value measurements using |
Netting adjustments |
Fair value |
Fair value measurements using |
Netting adjustments |
Fair value | |||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Level 1 |
Level 2 |
Level 3 |
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits with banks |
$ |
– |
$ |
60,856 |
$ |
– |
$ |
$ |
60,856 |
$ | – | $ | 84,468 | $ | – | $ | $ | 84,468 | ||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||||
Trading |
||||||||||||||||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||||||||||||||||
Canadian government (1)
|
||||||||||||||||||||||||||||||||||||||||||
Federal |
26,675 |
2,581 |
– |
29,256 |
15,024 | 3,779 | – | 18,803 | ||||||||||||||||||||||||||||||||||
Provincial and municipal |
– |
16,389 |
– |
16,389 |
– | 13,257 | – | 13,257 | ||||||||||||||||||||||||||||||||||
U.S. federal, state, municipal and agencies (1), (2)
|
2,249 |
50,439 |
– |
52,688 |
1,254 | 35,570 | 4 | 36,828 | ||||||||||||||||||||||||||||||||||
Other OECD government (3)
|
2,055 |
2,577 |
– |
4,632 |
1,325 | 3,452 | – | 4,777 | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities (1)
|
– |
2 |
– |
2 |
– | 2 | – | 2 | ||||||||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||||
Non-CDO securities (4)
|
– |
1,245 |
– |
1,245 |
– | 1,308 | 2 | 1,310 | ||||||||||||||||||||||||||||||||||
Corporate debt and other debt |
– |
22,615 |
– |
22,615 |
– | 21,162 | 7 | 21,169 | ||||||||||||||||||||||||||||||||||
Equities |
58,826 |
2,232 |
2,266 |
63,324 |
46,592 | 3,593 | 1,874 | 52,059 | ||||||||||||||||||||||||||||||||||
89,805 |
98,080 |
2,266 |
190,151 |
64,195 | 82,123 | 1,887 | 148,205 | |||||||||||||||||||||||||||||||||||
Investment |
||||||||||||||||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||||||||||||||||
Canadian government (1)
|
||||||||||||||||||||||||||||||||||||||||||
Federal |
2,731 |
3,528 |
– |
6,259 |
1,226 | 2,555 | – | 3,781 | ||||||||||||||||||||||||||||||||||
Provincial and municipal |
– |
2,748 |
– |
2,748 |
– | 2,124 | – | 2,124 | ||||||||||||||||||||||||||||||||||
U.S. federal, state, municipal and agencies (1)
|
275 |
73,020 |
– |
73,295 |
440 | 43,918 | – | 44,358 | ||||||||||||||||||||||||||||||||||
Other OECD government |
– |
6,192 |
– |
6,192 |
– | 5,144 | – | 5,144 | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities (1)
|
– |
2,672 |
29 |
2,701 |
– | 2,860 | 28 | 2,888 | ||||||||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||||
CDO |
– |
8,265 |
– |
8,265 |
– | 7,524 | – | 7,524 | ||||||||||||||||||||||||||||||||||
Non-CDO securities |
– |
441 |
– |
441 |
– | 524 | – | 524 | ||||||||||||||||||||||||||||||||||
Corporate debt and other debt |
– |
27,574 |
149 |
27,723 |
– | 25,569 | 151 | 25,720 | ||||||||||||||||||||||||||||||||||
Equities |
38 |
338 |
466 |
842 |
36 | 395 | 397 | 828 | ||||||||||||||||||||||||||||||||||
3,044 |
124,778 |
644 |
128,466 |
1,702 | 90,613 | 576 | 92,891 | |||||||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
– |
285,869 |
– |
285,869 |
– | 264,665 | – | 264,665 | ||||||||||||||||||||||||||||||||||
Loans |
– |
8,742 |
1,859 |
10,601 |
– | 9,673 | 1,692 | 11,365 | ||||||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||||
Derivatives |
||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts |
– |
39,243 |
290 |
39,533 |
– | 39,804 | 263 | 40,067 | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts |
– |
89,644 |
4 |
89,648 |
– | 99,424 | 13 | 99,437 | ||||||||||||||||||||||||||||||||||
Credit derivatives |
– |
224 |
– |
224 |
– | 388 | – | 388 | ||||||||||||||||||||||||||||||||||
Other contracts |
2,352 |
13,927 |
111 |
16,390 |
3,939 | 14,786 | 62 | 18,787 | ||||||||||||||||||||||||||||||||||
Valuation adjustments |
– |
(1,805 |
) |
4 |
(1,801 |
) |
– | (2,100 | ) | 45 | (2,055 | ) | ||||||||||||||||||||||||||||||
Total gross derivatives |
2,352 |
141,233 |
409 |
143,994 |
3,939 | 152,302 | 383 | 156,624 | ||||||||||||||||||||||||||||||||||
Netting adjustments |
(1,544 |
) |
(1,544 |
) |
(2,185 | ) | (2,185 | ) | ||||||||||||||||||||||||||||||||||
Total derivatives |
142,450 |
154,439 | ||||||||||||||||||||||||||||||||||||||||
Other assets |
1,392 |
3,421 |
11 |
4,824 |
1,221 | 2,141 | 15 | 3,377 | ||||||||||||||||||||||||||||||||||
$ |
96,593 |
$ |
722,979 |
$ |
5,189 |
$ |
(1,544 |
) |
$ |
823,217 |
$ | 71,057 | $ | 685,985 | $ | 4,553 | $ | (2,185 | ) | $ | 759,410 | |||||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||||||||||||||||||||
Personal |
$ |
– |
$ |
26,428 |
$ |
383 |
$ |
$ |
26,811 |
$ | – | $ | 22,016 | $ | 241 | $ | $ | 22,257 | ||||||||||||||||||||||||
Business and government |
– |
137,628 |
– |
137,628 |
– | 152,566 | – | 152,566 | ||||||||||||||||||||||||||||||||||
Bank |
– |
11,462 |
– |
11,462 |
– | 7,196 | – | 7,196 | ||||||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||||
Obligations related to securities sold short |
14,391 |
19,260 |
– |
33,651 |
16,383 | 19,128 | – | 35,511 | ||||||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
– |
298,679 |
– |
298,679 |
– | 248,835 | – | 248,835 | ||||||||||||||||||||||||||||||||||
Derivatives |
||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts |
– |
41,249 |
952 |
42,201 |
– | 39,592 | 1,122 | 40,714 | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts |
– |
81,750 |
53 |
81,803 |
– | 94,310 | 145 | 94,455 | ||||||||||||||||||||||||||||||||||
Credit derivatives |
– |
176 |
– |
176 |
– | 125 | – | 125 | ||||||||||||||||||||||||||||||||||
Other contracts |
3,119 |
17,306 |
549 |
20,974 |
3,847 | 16,663 | 847 | 21,357 | ||||||||||||||||||||||||||||||||||
Valuation adjustments |
– |
(982 |
) |
1 |
(981 |
) |
– | (967 | ) | (8 | ) | (975 | ) | |||||||||||||||||||||||||||||
Total gross derivatives |
3,119 |
139,499 |
1,555 |
144,173 |
3,847 | 149,723 | 2,106 | 155,676 | ||||||||||||||||||||||||||||||||||
Netting adjustments |
(1,544 |
) |
(1,544 |
) |
(2,185 | ) | (2,185 | ) | ||||||||||||||||||||||||||||||||||
Total derivatives |
142,629 |
153,491 | ||||||||||||||||||||||||||||||||||||||||
Other liabilities |
370 |
(1,296 |
) |
– |
(926 |
) |
341 | (632 | ) | – | (291 | ) | ||||||||||||||||||||||||||||||
$ |
17,880 |
$ |
631,660 |
$ |
1,938 |
$ |
(1,544 |
) |
$ |
649,934 |
$ | 20,571 | $ | 598,832 | $ | 2,347 | $ | (2,185 | ) | $ | 619,565 |
(1) | As at October 31, 2023, residential and commercial mortgage -backed securities (MBS) included in all fair value levels of trading securities were $14,345 million and $nil (October 31, 2022 – $12,273 million and $nil), respectively, and in all fair value levels of Investment securities were $24,365 million and $2,618 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 obligations (CDO). |
Note 3 Fair value of financial instruments (continued)
|
As at October 31, 2023 (Millions of Canadian dollars, except for prices, percentages and ratios) |
||||||||||||||||||||||||||||
Fair value |
Range of input values |
|||||||||||||||||||||||||||
Products | Reporting line in the fair value hierarchy table |
Assets |
Liabilities |
Valuation techniques |
Significant unobservable inputs (3) |
Low |
High |
Weighted average / Inputs distribution |
||||||||||||||||||||
Corporate debt and related derivatives |
Price-based | Prices | $ |
9.88 |
$ |
107.13 |
$ |
87.66 |
||||||||||||||||||||
Corporate debt and other debt | $ |
– |
Discounted cash flows | Credit spread | 1.89% |
9.96% |
5.93% |
|||||||||||||||||||||
Loans | 1,859 |
Credit enhancement | 11.70% |
15.60% |
13.00% |
|||||||||||||||||||||||
Derivative related liabilities |
$ |
2 |
||||||||||||||||||||||||||
Government debt and municipal bonds |
||||||||||||||||||||||||||||
Corporate debt and other debt | 149 |
Discounted cash flows | Yields | 7.73% |
10.38% |
8.60% |
||||||||||||||||||||||
Private equities, hedge fund investments and related equity derivatives |
Market comparable | EV/EBITDA multiples | 4.16X |
14.90X |
6.93X |
|||||||||||||||||||||||
Equities | 2,732 |
Price-based | P/E multiples | 6.60X |
22.60X |
8.60X |
||||||||||||||||||||||
Derivative related liabilities | – |
Discounted cash flows | EV/Rev multiples | 1.00X |
5.00X |
3.00X |
||||||||||||||||||||||
Liquidity discounts (4) | 10.00% |
40.00% |
16.91% |
|||||||||||||||||||||||||
Discount rate | 8.50% |
13.30% |
10.70% |
|||||||||||||||||||||||||
NAV / prices (5) | n.a. |
n.a. |
n.a. |
|||||||||||||||||||||||||
Interest rate derivatives and interest-rate-linked structured notes (6), (7) |
Discounted cash flows | Interest rates | 2.39% |
5.18% |
High |
|||||||||||||||||||||||
Derivative related assets | 293 |
Option pricing model | CPI swap rates | 1.84% |
2.35% |
Even |
||||||||||||||||||||||
Derivative related liabilities | 995 |
IR-IR correlations |
19.00% |
67.00% |
Even |
|||||||||||||||||||||||
FX-IR correlations |
29.00% |
56.00% |
Even |
|||||||||||||||||||||||||
FX-FX correlations |
68.00% |
68.00% |
Even |
|||||||||||||||||||||||||
Equity derivatives and equity-linked structured notes (6), (7) |
Discounted cash flows |
Dividend yields |
0.14% |
10.71% |
Lower |
|||||||||||||||||||||||
Derivative related assets | 111 |
Option pricing model | Equity (EQ)-EQ correlations |
32.50% |
96.49% |
Middle |
||||||||||||||||||||||
Deposits | 383 |
EQ-FX correlations |
(83.15)% |
38.44% |
Middle |
|||||||||||||||||||||||
Derivative related liabilities | 485 |
EQ volatilities | 6.70% |
110.72% |
Lower |
|||||||||||||||||||||||
Other (8) |
||||||||||||||||||||||||||||
Asset-backed securities | – |
|||||||||||||||||||||||||||
Derivative related assets | 5 |
|||||||||||||||||||||||||||
Other assets | 11 |
|||||||||||||||||||||||||||
Mortgage-backed securities | 29 |
|||||||||||||||||||||||||||
U.S. state, municipal and agencies debt |
– |
|||||||||||||||||||||||||||
Derivative related liabilities | 73 |
|||||||||||||||||||||||||||
Total |
$ |
5,189 |
$ |
1,938 |
As at October 31, 2022 (Millions of Canadian dollars, except for prices, percentages and ratios) |
||||||||||||||||||||||||||||
Fair value | Range of input values (1), (2) | |||||||||||||||||||||||||||
Products | Reporting line in the fair value hierarchy table |
Assets | Liabilities | Valuation techniques |
Significant unobservable inputs (3) |
Low | High | Weighted average / Inputs distribution |
||||||||||||||||||||
Corporate debt and related derivatives |
Price-based | Prices | $ | 1.00 | $ | 111.90 | $ | 85.64 | ||||||||||||||||||||
Corporate debt and other debt |
$ | 7 | Discounted cash flows | Credit spread | 1.67% | 10.73% | 6.20% | |||||||||||||||||||||
Loans |
1,692 | Credit enhancement | 11.70% | 15.60% | 13.00% | |||||||||||||||||||||||
Derivative related liabilities |
$ | 130 | ||||||||||||||||||||||||||
Government debt and municipal bonds |
||||||||||||||||||||||||||||
Corporate debt and other debt |
151 | Discounted cash flows | Yields | 7.85% | 10.72% | 8.92% | ||||||||||||||||||||||
Private equities, hedge fund investments and related equity derivatives |
Market comparable | EV/EBITDA multiples | 3.97X | 14.31X | 8.59X | |||||||||||||||||||||||
Equities | 2,271 | Price-based | P/E multiples | 8.47X | 24.04X | 12.46X | ||||||||||||||||||||||
Derivative related liabilities | 2 | Discounted cash flows | EV/Rev multiples | 0.35X | 5.77X | 3.88X | ||||||||||||||||||||||
Liquidity discounts (4) | 10.00% | 40.00% | 17.35% | |||||||||||||||||||||||||
Discount rate | 10.80% | 10.80% | 10.80% | |||||||||||||||||||||||||
NAV / prices (5) | n.a. | n.a. | n.a. | |||||||||||||||||||||||||
Interest rate derivatives and interest-rate-linked structured notes (6), (7) |
Discounted cash flows | Interest rates | 1.88% | 4.49% | High | |||||||||||||||||||||||
Derivative related assets | 270 | Option pricing model | CPI swap rates | 1.98% | 2.59% | Even | ||||||||||||||||||||||
Derivative related liabilities | 1,216 |
IR-IR correlations |
19.00% | 67.00% | Even | |||||||||||||||||||||||
FX-IR correlations |
29.00% | 56.00% | Even | |||||||||||||||||||||||||
FX-FX correlations |
68.00% | 68.00% | Even | |||||||||||||||||||||||||
Equity derivatives and equity-linked structured notes (6), (7) |
Discounted cash flows |
Dividend yields |
(0.63)% |
8.28% |
Lower |
|||||||||||||||||||||||
Derivative related assets | 62 | Option pricing model | Equity (EQ)-EQ correlations |
33.00% | 94.90% | Middle | ||||||||||||||||||||||
Deposits | 241 |
EQ-FX correlations |
(83.15)% | 38.44% | Middle | |||||||||||||||||||||||
Derivative related liabilities | 655 | EQ volatilities | 7.00% | 129.00% | Upper | |||||||||||||||||||||||
Other (8) |
||||||||||||||||||||||||||||
Asset-backed securities | 2 | |||||||||||||||||||||||||||
Derivative related assets | 51 | |||||||||||||||||||||||||||
Other assets | 15 | |||||||||||||||||||||||||||
Mortgage-backed securities | 28 | |||||||||||||||||||||||||||
U.S. state, municipal and agencies debt |
4 | |||||||||||||||||||||||||||
Derivative related liabilities | 103 | |||||||||||||||||||||||||||
Total |
$ | 4,553 | $ | 2,347 |
(1) | The low and high input values represent the actual highest and lowest level inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the different underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date. Where provided, the weighted average of the input values is calculated based on the relative fair values of the instruments within the product category. The weighted averages for derivatives are not presented in the table as they would not provide a comparable metric; instead, distribution of significant unobservable inputs within the range for each product category is indicated in the table. |
(2) | Price-based inputs are significant for certain debt securities and are based on external benchmarks, comparable proxy instruments or pre-quarter-end |
(3) | The significant unobservable inputs include the following: (i) Enterprise Value (EV); (ii) Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA); (iii) Price / Earnings (P/E); (iv) Revenue (Rev); (v) Consumer Price Index (CPI); (vi) Interest Rate (IR); (vii) Foreign Exchange (FX); and (viii) Equity (EQ). |
(4) | Fair value of securities with liquidity discount inputs totalled $483 million (October 31, 2022 – $373 million). |
(5) | NAV of a hedge fund is total fair value of assets less liabilities divided by the number of fund units. Private equities are valued based on NAV or valuation techniques. The range for NAV per unit or price per share has not been disclosed for the hedge funds or private equities due to the dispersion of prices given the diverse nature of the investments. |
(6) | The level of aggregation and diversity within each derivative instrument category may result in certain ranges of inputs being wide and inputs being unevenly distributed across the range. In the table, we indicated whether the majority of the inputs are concentrated toward the upper, middle, or lower end of the range, or evenly distributed throughout the range. |
(7) | The structured notes contain embedded equity or interest rate derivatives with unobservable inputs that are similar to those of the equity or interest rate derivatives. |
(8) | Other primarily includes certain insignificant instruments such as auction rate securities, commodity derivatives, foreign exchange derivatives, contingent considerations, bank-owned life insurance and retractable shares. |
n.a. | not applicable |
Note 3 Fair value of financial instruments (continued)
|
For the year ended October 31, 2023 |
||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Fair value at beginning of period |
Gains (losses) included in earnings |
Gains (losses) included in OCI |
Purchases (issuances) |
Settlement (sales) and other |
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 |
(196 |
) |
21 |
586 |
(67 |
) |
48 |
– |
2,266 |
(154 |
) | ||||||||||||||||||||||||
1,887 |
(196 |
) |
21 |
588 |
(89 |
) |
65 |
(10 |
) |
2,266 |
(154 |
) | ||||||||||||||||||||||||
Investment |
||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
28 |
– |
– |
1 |
– |
– |
– |
29 |
n.a. |
|||||||||||||||||||||||||||
Corporate debt and other debt |
151 |
– |
9 |
– |
(11 |
) |
– |
– |
149 |
n.a. |
||||||||||||||||||||||||||
Equities |
397 |
– |
70 |
1 |
(2 |
) |
– |
– |
466 |
n.a. |
||||||||||||||||||||||||||
576 |
– |
79 |
2 |
(13 |
) |
– |
– |
644 |
n.a. |
|||||||||||||||||||||||||||
Loans |
1,692 |
(95 |
) |
33 |
1,443 |
(868 |
) |
30 |
(376 |
) |
1,859 |
(44 |
) | |||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Net derivative balances (3)
|
||||||||||||||||||||||||||||||||||||
Interest rate contracts |
(859 |
) |
(63 |
) |
5 |
(48 |
) |
235 |
42 |
26 |
(662 |
) |
(43 |
) | ||||||||||||||||||||||
Foreign exchange contracts |
(132 |
) |
10 |
10 |
(14 |
) |
44 |
– |
33 |
(49 |
) |
8 |
||||||||||||||||||||||||
Other contracts |
(785 |
) |
83 |
4 |
(143 |
) |
78 |
(159 |
) |
484 |
(438 |
) |
152 |
|||||||||||||||||||||||
Valuation adjustments |
53 |
– |
– |
– |
(50 |
) |
– |
– |
3 |
– |
||||||||||||||||||||||||||
Other assets |
15 |
– |
1 |
– |
(5 |
) |
– |
– |
11 |
– |
||||||||||||||||||||||||||
$ |
2,447 |
$ |
(261 |
) |
$ |
153 |
$ |
1,828 |
$ |
(668 |
) |
$ |
(22 |
) |
$ |
157 |
$ |
3,634 |
$ |
(81 |
) | |||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||||||
Deposits |
$ |
(241 |
) |
$ |
5 |
$ |
– |
$ |
(260 |
) |
$ |
23 |
$ |
(134 |
) |
$ |
224 |
$ |
(383 |
) |
$ |
24 |
||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Other liabilities |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|||||||||||||||||||||||||||
$ |
(241 |
) |
$ |
5 |
$ |
– |
$ |
(260 |
) |
$ |
23 |
$ |
(134 |
) |
$ |
224 |
$ |
(383 |
) |
$ |
24 |
|||||||||||||||
For the year ended October 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 | $ | – | $ | 2 | $ | – | $ | (23 | ) | $ | – | $ | – | $ | 4 | $ | – | |||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||
Non-CDO securities |
2 | – | – | – | – | – | – | 2 | – | |||||||||||||||||||||||||||
Corporate debt and other debt |
25 | (3 | ) | – | – | (6 | ) | 9 | (18 | ) | 7 | – | ||||||||||||||||||||||||
Equities |
1,530 | 14 | 100 | 314 | (82 | ) | 1 | (3 | ) | 1,874 | 43 | |||||||||||||||||||||||||
1,582 | 11 | 102 | 314 | (111 | ) | 10 | (21 | ) | 1,887 | 43 | ||||||||||||||||||||||||||
Investment |
||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
20 | – | 8 | – | – | – | – | 28 | n.a. | |||||||||||||||||||||||||||
Corporate debt and other debt |
152 | – | 2 | – | – | – | (3 | ) | 151 | n.a. | ||||||||||||||||||||||||||
Equities |
334 | – | 51 | 11 | (1 | ) | 37 | (35 | ) | 397 | n.a. | |||||||||||||||||||||||||
506 | – | 61 | 11 | (1 | ) | 37 | (38 | ) | 576 | n.a. | ||||||||||||||||||||||||||
Loans |
1,077 | (25 | ) | (37 | ) | 407 | (466 | ) | 802 | (66 | ) | 1,692 | (78 | ) | ||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Net derivative balances (3)
|
||||||||||||||||||||||||||||||||||||
Interest rate contracts |
(635 | ) | (187 | ) | (5 | ) | 17 | 64 | (13 | ) | (100 | ) | (859 | ) | (16 | ) | ||||||||||||||||||||
Foreign exchange contracts |
47 | (103 | ) | (2 | ) | (22 | ) | 3 | 5 | (60 | ) | (132 | ) | (90 | ) | |||||||||||||||||||||
Other contracts |
(393 | ) | 165 | (34 | ) | (245 | ) | 70 | (406 | ) | 58 | (785 | ) | 271 | ||||||||||||||||||||||
Valuation adjustments |
20 | – | – | 25 | (11 | ) | 19 | – | 53 | – | ||||||||||||||||||||||||||
Other assets |
– | – | 1 | 15 | (1 | ) | – | – | 15 | – | ||||||||||||||||||||||||||
$ | 2,204 | $ | (139 | ) | $ | 86 | $ | 522 | $ | (453 | ) | $ | 454 | $ | (227 | ) | $ | 2,447 | $ | 130 | ||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||||||
Deposits |
$ | (151 | ) | $ | 2 | $ | (3 | ) | $ | (120 | ) | $ | 26 | $ | (143 | ) | $ | 148 | $ | (241 | ) | $ | 19 | |||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Other liabilities |
(7 | ) | (1 | ) | – | – | 8 | – | – | – | – | |||||||||||||||||||||||||
$ | (158 | ) | $ | 1 | $ | (3 | ) | $ | (120 | ) | $ | 34 | $ | (143 | ) | $ | 148 | $ | (241 | ) | $ | 19 |
(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 OCI were $65 million for the year ended October 31, 2023 (October 31, 2022 – gains of $50 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 October 31, 2023 included derivative assets of $409 million (October 31, 2022 – $383 million) and derivative liabilities of $1,555 million (October 31, 2022 – $2,106 million). |
n.a. | not applicable |
Note 3 Fair value of financial instruments (continued)
|
As at | ||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||
(Millions of Canadian dollars) | Level 3 fair value |
Positive fair value movement from using reasonably possible alternatives |
Negative fair value movement from using reasonably possible alternatives |
Level 3 fair value |
Positive fair value movement from using reasonably possible alternatives |
Negative fair value movement from using reasonably possible alternatives |
||||||||||||||||||||
Securities |
||||||||||||||||||||||||||
Trading |
||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||
U.S. state, municipal and agencies |
$ |
– |
$ |
– |
$ |
– |
$ | 4 | $ | – | $ | – | ||||||||||||||
Asset-backed securities |
– |
– |
– |
2 | – | – | ||||||||||||||||||||
Corporate debt and other debt |
– |
– |
– |
7 | – | – | ||||||||||||||||||||
Equities |
2,266 |
50 |
(43 |
) |
1,874 | 27 | (23 | ) | ||||||||||||||||||
Investment |
||||||||||||||||||||||||||
Mortgage-backed securities |
29 |
4 |
(4 |
) |
28 | 4 | (4 | ) | ||||||||||||||||||
Corporate debt and other debt |
149 |
11 |
(10 |
) |
151 | 12 | (10 | ) | ||||||||||||||||||
Equities |
466 |
48 |
(47 |
) |
397 | 38 | (39 | ) | ||||||||||||||||||
Loans |
1,859 |
33 |
(37 |
) |
1,692 | 60 | (62 | ) | ||||||||||||||||||
Derivatives |
409 |
10 |
(7 |
) |
383 | 5 | (3 | ) | ||||||||||||||||||
Other assets |
11 |
– |
– |
15 | – | – | ||||||||||||||||||||
$ |
5,189 |
$ |
156 |
$ |
(148 |
) |
$ | 4,553 | $ | 146 | $ | (141 | ) | |||||||||||||
Deposits |
$ |
(383 |
) |
$ |
26 |
$ |
(26 |
) |
$ | (241 | ) | $ | 9 | $ | (9 | ) | ||||||||||
Derivatives |
(1,555 |
) |
59 |
(66 |
) |
(2,106 | ) | 55 | (57 | ) | ||||||||||||||||
Other |
||||||||||||||||||||||||||
Other liabilities |
– |
– |
– |
– | – | – | ||||||||||||||||||||
$ |
(1,938 |
) |
$ |
85 |
$ |
(92 |
) |
$ | (2,347 | ) | $ | 64 | $ | (66 | ) |
Financial assets or liabilities |
Sensitivity methodology |
|
Asset-backed securities, corporate debt, government debt, municipal bonds and loans | Sensitivities are determined based on adjusting, plus or minus one standard deviation, the bid-offer spreads or input prices if a sufficient number of prices are received, adjusting input parameters such as credit spreads or using high and low vendor prices as reasonably possible alternative assumptions. |
|
Private equities, hedge fund investments and related equity derivatives | Sensitivity of direct private equity investments is determined by (i) adjusting the discount rate by 2% when the discounted cash flow method is used to determine fair value, (ii) adjusting the price multiples based on the range of multiples of comparable companies when price-multiples-based models are used, or (iii) using an alternative valuation approach. The private equity fund, hedge fund and related equity derivative NAVs are provided by the fund managers, and as a result, there are no other reasonably possible alternative assumptions for these investments. | |
Interest rate derivatives | Sensitivities of interest rate and cross currency swaps are derived using plus or minus one standard deviation of the inputs, and an amount representing model and parameter uncertainty, where applicable. | |
Equity derivatives | Sensitivity of the Level 3 position is determined by shifting the unobservable model inputs by plus or minus one standard deviation of the pricing service market data including volatility, dividends or correlations, as applicable. | |
Bank funding and deposits | Sensitivities of deposits are calculated by shifting the funding curve by plus or minus certain basis points. | |
Structured notes | Sensitivities for interest-rate-linked and equity-linked structured notes are derived by adjusting inputs by plus or minus one standard deviation, and for other deposits, by estimating a reasonable move in the funding curve by plus or minus certain basis points. |
Note 3 Fair value of financial instruments (continued)
|
As at October 31, 2023 |
||||||||||||||||||||||||
Fair value approximates carrying value (1)
|
Fair value may not approximate carrying value |
|||||||||||||||||||||||
Fair value measurements using |
Total |
Total fair value |
||||||||||||||||||||||
(Millions of Canadian dollars) |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||||||||||
Interest-bearing deposits with banks |
$ |
10,230 |
$ |
– |
$ |
– |
$ |
– |
$ |
– |
$ |
10,230 |
||||||||||||
Amortized cost securities (2)
|
– |
34 |
83,633 |
– |
83,667 |
83,667 |
||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
39,528 |
– |
14,794 |
– |
14,794 |
54,322 |
||||||||||||||||||
Loans |
||||||||||||||||||||||||
Retail |
70,606 |
– |
466,962 |
4,912 |
471,874 |
542,480 |
||||||||||||||||||
Wholesale |
8,231 |
– |
254,342 |
6,270 |
260,612 |
268,843 |
||||||||||||||||||
78,837 |
– |
721,304 |
11,182 |
732,486 |
811,323 |
|||||||||||||||||||
Other assets |
67,400 |
– |
914 |
223 |
1,137 |
68,537 |
||||||||||||||||||
195,995 |
34 |
820,645 |
11,405 |
832,084 |
1,028,079 |
|||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Personal |
252,779 |
– |
159,669 |
438 |
160,107 |
412,886 |
||||||||||||||||||
Business and government |
385,727 |
– |
218,761 |
772 |
219,533 |
605,260 |
||||||||||||||||||
Bank |
16,902 |
– |
16,251 |
7 |
16,258 |
33,160 |
||||||||||||||||||
655,408 |
– |
394,681 |
1,217 |
395,898 |
1,051,306 |
|||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
36,559 |
– |
– |
– |
– |
36,559 |
||||||||||||||||||
Other liabilities |
76,982 |
– |
1,856 |
13,564 |
15,420 |
92,402 |
||||||||||||||||||
Subordinated debentures |
– |
– |
11,213 |
– |
11,213 |
11,213 |
||||||||||||||||||
$ |
768,949 |
$ |
– |
$ |
407,750 |
$ |
14,781 |
$ |
422,531 |
$ |
1,191,480 |
|||||||||||||
As at October 31, 2022 |
||||||||||||||||||||||||
Fair value approximates carrying value (1)
|
Fair value may not approximate carrying value | |||||||||||||||||||||||
Fair value measurements using | Total | Total fair value |
||||||||||||||||||||||
(Millions of Canadian dollars) |
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
Interest-bearing deposits with banks |
$ | 23,543 | $ | – | $ | – | $ | – | $ | – | $ | 23,543 | ||||||||||||
Amortized cost securities (2)
|
– | – | 70,073 | – | 70,073 | 70,073 | ||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
42,224 | – | 10,956 | – | 10,956 | 53,180 | ||||||||||||||||||
Loans |
||||||||||||||||||||||||
Retail |
70,162 | – | 446,809 | 4,457 | 451,266 | 521,428 | ||||||||||||||||||
Wholesale |
17,943 | – | 230,880 | 4,993 | 235,873 | 253,816 | ||||||||||||||||||
88,105 | – | 677,689 | 9,450 | 687,139 | 775,244 | |||||||||||||||||||
Other assets |
72,198 | – | 716 | 170 | 886 | 73,084 | ||||||||||||||||||
226,070 | – | 759,434 | 9,620 | 769,054 | 995,124 | |||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Personal |
271,414 | – | 108,549 | 433 | 108,982 | 380,396 | ||||||||||||||||||
Business and government |
406,045 | – | 198,265 | 792 | 199,057 | 605,102 | ||||||||||||||||||
Bank |
22,638 | – | 14,120 | – | 14,120 | 36,758 | ||||||||||||||||||
700,097 | – | 320,934 | 1,225 | 322,159 | 1,022,256 | |||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
25,112 | – | – | – | – | 25,112 | ||||||||||||||||||
Other liabilities |
77,801 | – | 1,554 | 10,805 | 12,359 | 90,160 | ||||||||||||||||||
Subordinated debentures |
– | – | 9,608 | 60 | 9,668 | 9,668 | ||||||||||||||||||
$ | 803,010 | $ | – | $ | 332,096 | $ | 12,090 | $ | 344,186 | $ | 1,147,196 |
(1) | Certain financial instruments have not been assigned to a level as the carrying amount approximates their fair values. |
(2) | Included in Securities – Investment, net of applicable allowance on the Consolidated Balance Sheets. |
Note 4 Securities |
As at October 31, 2023 |
||||||||||||||||||||||||||||
Term to maturity (1)
|
||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Within 3 months |
3 months to 1 year |
1 year to 5 years |
5 years to 10 years |
Over 10 years |
With no specific maturity |
Total |
|||||||||||||||||||||
Trading (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
$ |
9,867 |
$ |
17,244 |
$ |
8,687 |
$ |
2,932 |
$ |
6,915 |
$ |
– |
$ |
45,645 |
||||||||||||||
U.S. federal, state, municipal and agencies |
15,507 |
8,136 |
15,864 |
4,375 |
8,806 |
– |
52,688 |
|||||||||||||||||||||
Other OECD government |
566 |
1,117 |
815 |
1,040 |
1,094 |
– |
4,632 |
|||||||||||||||||||||
Mortgage-backed securities |
– |
– |
– |
– |
2 |
– |
2 |
|||||||||||||||||||||
Asset-backed securities |
452 |
151 |
234 |
307 |
101 |
– |
1,245 |
|||||||||||||||||||||
Corporate debt and other debt |
||||||||||||||||||||||||||||
Bankers’ acceptances |
143 |
– |
– |
– |
– |
– |
143 |
|||||||||||||||||||||
Other (3)
|
1,207 |
2,219 |
6,681 |
3,656 |
8,709 |
– |
22,472 |
|||||||||||||||||||||
Equities |
63,324 |
63,324 |
||||||||||||||||||||||||||
27,742 |
28,867 |
32,281 |
12,310 |
25,627 |
63,324 |
190,151 |
||||||||||||||||||||||
Fair value through other comprehensive income (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
||||||||||||||||||||||||||||
Federal |
||||||||||||||||||||||||||||
Amortized cost |
2,479 |
1,247 |
1,726 |
640 |
517 |
– |
6,609 |
|||||||||||||||||||||
Fair value |
2,479 |
1,242 |
1,707 |
515 |
316 |
– |
6,259 |
|||||||||||||||||||||
Yield (4)
|
4.5% |
3.2% |
2.6% |
1.2% |
3.4% |
– |
3.4% |
|||||||||||||||||||||
Provincial and municipal |
||||||||||||||||||||||||||||
Amortized cost |
469 |
8 |
1,159 |
52 |
1,708 |
– |
3,396 |
|||||||||||||||||||||
Fair value |
469 |
8 |
1,158 |
52 |
1,061 |
– |
2,748 |
|||||||||||||||||||||
Yield (4)
|
4.9% |
3.7% |
2.8% |
4.5% |
4.4% |
– |
3.8% |
|||||||||||||||||||||
U.S. federal, state, municipal and agencies |
||||||||||||||||||||||||||||
Amortized cost |
846 |
8,595 |
33,044 |
16,355 |
16,486 |
– |
75,326 |
|||||||||||||||||||||
Fair value |
856 |
8,572 |
33,050 |
16,193 |
14,624 |
– |
73,295 |
|||||||||||||||||||||
Yield (4)
|
7.4% |
2.1% |
2.7% |
4.0% |
3.6% |
– |
3.2% |
|||||||||||||||||||||
Other OECD government |
||||||||||||||||||||||||||||
Amortized cost |
160 |
1,009 |
5,030 |
1 |
– |
– |
6,200 |
|||||||||||||||||||||
Fair value |
160 |
1,009 |
5,022 |
1 |
– |
– |
6,192 |
|||||||||||||||||||||
Yield (4)
|
6.3% |
4.0% |
3.0% |
4.6% |
– |
– |
3.3% |
|||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||
Amortized cost |
– |
– |
32 |
28 |
2,702 |
– |
2,762 |
|||||||||||||||||||||
Fair value |
– |
– |
31 |
25 |
2,645 |
– |
2,701 |
|||||||||||||||||||||
Yield (4)
|
– |
– |
7.5% |
6.7% |
6.8% |
– |
6.8% |
|||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||
Amortized cost |
– |
– |
16 |
7,542 |
1,194 |
– |
8,752 |
|||||||||||||||||||||
Fair value |
– |
– |
17 |
7,503 |
1,186 |
– |
8,706 |
|||||||||||||||||||||
Yield (4)
|
– |
– |
6.4% |
6.9% |
7.0% |
– |
6.9% |
|||||||||||||||||||||
Corporate debt and other debt |
||||||||||||||||||||||||||||
Amortized cost |
4,928 |
1,759 |
18,798 |
2,248 |
41 |
– |
27,774 |
|||||||||||||||||||||
Fair value |
4,928 |
1,755 |
18,761 |
2,243 |
36 |
– |
27,723 |
|||||||||||||||||||||
Yield (4)
|
3.9% |
4.2% |
3.9% |
5.4% |
4.7% |
– |
4.1% |
|||||||||||||||||||||
Equities |
||||||||||||||||||||||||||||
Cost |
493 |
493 |
||||||||||||||||||||||||||
Fair value (5)
|
842 |
842 |
||||||||||||||||||||||||||
Amortized cost |
8,882 |
12,618 |
59,805 |
26,866 |
22,648 |
493 |
131,312 |
|||||||||||||||||||||
Fair value |
8,892 |
12,586 |
59,746 |
26,532 |
19,868 |
842 |
128,466 |
|||||||||||||||||||||
Amortized cost (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
997 |
1,931 |
17,448 |
6,468 |
– |
– |
26,844 |
|||||||||||||||||||||
Yield (4)
|
2.8% |
3.0% |
2.1% |
2.0% |
– |
– |
2.2% |
|||||||||||||||||||||
U.S. federal, state, municipal and agencies |
424 |
1,427 |
14,536 |
5,156 |
23,025 |
– |
44,568 |
|||||||||||||||||||||
Yield (4)
|
5.0% |
4.1% |
3.3% |
2.9% |
2.5% |
– |
2.9% |
|||||||||||||||||||||
Other OECD government |
375 |
723 |
4,362 |
66 |
– |
– |
5,526 |
|||||||||||||||||||||
Yield (4)
|
2.0% |
0.8% |
2.9% |
1.1% |
– |
– |
2.5% |
|||||||||||||||||||||
Asset-backed securities |
– |
– |
424 |
– |
1 |
– |
425 |
|||||||||||||||||||||
Yield (4)
|
– |
– |
4.9% |
– |
1.4% |
– |
4.9% |
|||||||||||||||||||||
Corporate debt and other debt |
838 |
1,443 |
11,256 |
190 |
23 |
– |
13,750 |
|||||||||||||||||||||
Yield (4)
|
2.3% |
2.9% |
3.4% |
3.1% |
5.6% |
– |
3.3% |
|||||||||||||||||||||
Amortized cost, net of allowance |
2,634 |
5,524 |
48,026 |
11,880 |
23,049 |
– |
91,113 |
|||||||||||||||||||||
Fair value |
2,627 |
5,447 |
46,258 |
10,276 |
19,059 |
– |
83,667 |
|||||||||||||||||||||
Total carrying value of securities |
$ |
39,268 |
$ |
46,977 |
$ |
140,053 |
$ |
50,722 |
$ |
68,544 |
$ |
64,166 |
$ |
409,730 |
As at October 31, 2022 | ||||||||||||||||||||||||||||
Term to maturity (1)
|
||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Within 3 months |
3 months to 1 year |
1 year to 5 years |
5 years to 10 years |
Over 10 years |
With no specific maturity |
Total | |||||||||||||||||||||
Trading (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
$ | 2,255 | $ | 14,181 | $ | 6,907 | $ | 2,706 | $ | 6,011 | $ | – | $ | 32,060 | ||||||||||||||
U.S. federal, state, municipal and agencies |
7,151 | 10,107 | 7,043 | 4,507 | 8,020 | – | 36,828 | |||||||||||||||||||||
Other OECD government |
1,343 | 233 | 606 | 241 | 2,354 | – | 4,777 | |||||||||||||||||||||
Mortgage-backed securities |
– | – | – | – | 2 | – | 2 | |||||||||||||||||||||
Asset-backed securities |
779 | 49 | 67 | 207 | 208 | – | 1,310 | |||||||||||||||||||||
Corporate debt and other debt |
||||||||||||||||||||||||||||
Bankers’ acceptances |
252 | 3 | – | – | – | – | 255 | |||||||||||||||||||||
Other (3)
|
3,055 | 1,837 | 4,813 | 3,037 | 8,172 | – | 20,914 | |||||||||||||||||||||
Equities |
52,059 | 52,059 | ||||||||||||||||||||||||||
14,835 | 26,410 | 19,436 | 10,698 | 24,767 | 52,059 | 148,205 | ||||||||||||||||||||||
Fair value through other comprehensive income (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
||||||||||||||||||||||||||||
Federal |
||||||||||||||||||||||||||||
Amortized cost |
780 | 1,010 | 1,024 | 745 | 522 | – | 4,081 | |||||||||||||||||||||
Fair value |
778 | 1,009 | 1,012 | 635 | 347 | – | 3,781 | |||||||||||||||||||||
Yield (4)
|
2.3% | 2.3% | 2.8% | 1.6% | 3.1% | – | 2.4% | |||||||||||||||||||||
Provincial and municipal |
||||||||||||||||||||||||||||
Amortized cost |
237 | 215 | 616 | 56 | 1,561 | – | 2,685 | |||||||||||||||||||||
Fair value |
237 | 216 | 616 | 56 | 999 | – | 2,124 | |||||||||||||||||||||
Yield (4)
|
2.0% | 2.7% | 2.0% | 3.8% | 4.1% | – | 3.0% | |||||||||||||||||||||
U.S. federal, state, municipal and agencies |
||||||||||||||||||||||||||||
Amortized cost |
802 | 2,613 | 13,586 | 9,104 | 19,929 | – | 46,034 | |||||||||||||||||||||
Fair value |
802 | 2,615 | 13,554 | 9,061 | 18,326 | – | 44,358 | |||||||||||||||||||||
Yield (4)
|
4.9% | 0.4% | 1.9% | 3.4% | 3.0% | – | 2.6% | |||||||||||||||||||||
Other OECD government |
||||||||||||||||||||||||||||
Amortized cost |
1,105 | 642 | 3,406 | 1 | – | – | 5,154 | |||||||||||||||||||||
Fair value |
1,105 | 642 | 3,396 | 1 | – | – | 5,144 | |||||||||||||||||||||
Yield (4)
|
2.4% | 1.2% | 1.7% | 4.4% | – | – | 1.8% | |||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||
Amortized cost |
– | – | – | 41 | 2,944 | – | 2,985 | |||||||||||||||||||||
Fair value |
– | – | – | 37 | 2,851 | – | 2,888 | |||||||||||||||||||||
Yield (4)
|
– | – | – | 4.5% | 4.7% | – | 4.7% | |||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||
Amortized cost |
– | – | 46 | 6,331 | 1,911 | – | 8,288 | |||||||||||||||||||||
Fair value |
– | – | 46 | 6,172 | 1,830 | – | 8,048 | |||||||||||||||||||||
Yield (4)
|
– | – | 4.6% | 5.3% | 5.4% | – | 5.3% | |||||||||||||||||||||
Corporate debt and other debt |
||||||||||||||||||||||||||||
Amortized cost |
5,922 | 4,793 | 12,420 | 2,666 | 51 | – | 25,852 | |||||||||||||||||||||
Fair value |
5,919 | 4,792 | 12,307 | 2,656 | 46 | – | 25,720 | |||||||||||||||||||||
Yield (4)
|
3.2% | 2.8% | 2.6% | 3.1% | 5.1% | – | 2.8% | |||||||||||||||||||||
Equities |
||||||||||||||||||||||||||||
Cost |
551 | 551 | ||||||||||||||||||||||||||
Fair value (5)
|
828 | 828 | ||||||||||||||||||||||||||
Amortized cost |
8,846 | 9,273 | 31,098 | 18,944 | 26,918 | 551 | 95,630 | |||||||||||||||||||||
Fair value |
8,841 | 9,274 | 30,931 | 18,618 | 24,399 | 828 | 92,891 | |||||||||||||||||||||
Amortized cost (2)
|
||||||||||||||||||||||||||||
Debt issued or guaranteed by: |
||||||||||||||||||||||||||||
Canadian government |
929 | 1,734 | 16,655 | 6,101 | – | – | 25,419 | |||||||||||||||||||||
Yield (4)
|
2.4% | 2.8% | 2.0% | 2.3% | – | – | 2.1% | |||||||||||||||||||||
U.S. federal, state, municipal and agencies |
161 | 784 | 3,885 | 3,784 | 25,518 | – | 34,132 | |||||||||||||||||||||
Yield (4)
|
4.4% | 3.0% | 1.7% | 2.3% | 2.4% | – | 2.3% | |||||||||||||||||||||
Other OECD government |
235 | 1,574 | 3,645 | 64 | – | – | 5,518 | |||||||||||||||||||||
Yield (4)
|
1.3% | 1.3% | 1.9% | 1.3% | – | – | 1.7% | |||||||||||||||||||||
Asset-backed securities |
– | – | 573 | 135 | 3 | – | 711 | |||||||||||||||||||||
Yield (4)
|
– | – | 3.0% | 3.5% | 1.5% | – | 3.1% | |||||||||||||||||||||
Corporate debt and other debt |
574 | 2,434 | 7,574 | 741 | 24 | – | 11,347 | |||||||||||||||||||||
Yield (4)
|
0.8% | 1.7% | 2.6% | 2.4% | 4.9% | – | 2.0% | |||||||||||||||||||||
Amortized cost, net of allowance |
1,899 | 6,526 | 32,332 | 10,825 | 25,545 | – | 77,127 | |||||||||||||||||||||
Fair value |
1,899 | 6,455 | 30,579 | 9,433 | 21,707 | – | 70,073 | |||||||||||||||||||||
Total carrying value of securities |
$ | 25,575 | $ | 42,210 | $ | 82,699 | $ | 40,141 | $ | 74,711 | $ | 52,887 | $ | 318,223 |
(1) | Actual maturities may differ from contractual maturities shown above as borrowers may have the right to extend or prepay obligations with or without penalties. |
(2) | Trading securities and FVOCI securities are recorded at fair value. Amortized cost securities, included in Investment securities, are recorded at amortized cost and presented net of allowance for credit losses. |
(3) | Primarily composed of corporate debt, supra-national debt, and commercial paper. |
(4) | The weighted average yield is derived using the contractual interest rate and the carrying value at the end of the year for the respective securities. |
(5) | Certain equity securities that are not held-for-trading purposes are designated as FVOCI. |
Note 4 Securities (continued)
|
As at | ||||||||||||||||||||||||||||||||||||
October 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 |
$ |
6,609 |
$ |
1 |
$ |
(351 |
) |
$ |
6,259 |
$ | 4,081 | $ | 1 | $ | (301 | ) | $ | 3,781 | ||||||||||||||||||
Provincial and municipal |
3,396 |
2 |
(650 |
) |
2,748 |
2,685 | 6 | (567 | ) | 2,124 | ||||||||||||||||||||||||||
U.S. federal, state, municipal and agencies |
75,326 |
343 |
(2,374 |
) |
73,295 |
46,034 | 343 | (2,019 | ) | 44,358 | ||||||||||||||||||||||||||
Other OECD government |
6,200 |
1 |
(9 |
) |
6,192 |
5,154 | 7 | (17 | ) | 5,144 | ||||||||||||||||||||||||||
Mortgage-backed securities |
2,762 |
– |
(61 |
) |
2,701 |
2,985 | 1 | (98 | ) | 2,888 | ||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||
CDO |
8,308 |
3 |
(46 |
) |
8,265 |
7,741 | 3 | (220 | ) | 7,524 | ||||||||||||||||||||||||||
Non-CDO securities |
444 |
2 |
(5 |
) |
441 |
547 | – | (23 | ) | 524 | ||||||||||||||||||||||||||
Corporate debt and other debt |
27,774 |
44 |
(95 |
) |
27,723 |
25,852 | 51 | (183 | ) | 25,720 | ||||||||||||||||||||||||||
Equities |
493 |
357 |
(8 |
) |
842 |
551 | 284 | (7 | ) | 828 | ||||||||||||||||||||||||||
$ |
131,312 |
$ |
753 |
$ |
(3,599 |
) |
$ |
128,466 |
$ | 95,630 | $ | 696 | $ | (3,435 | ) | $ | 92,891 |
(1) | Excludes $91,113 million of held-to-collect securities as at October 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 $(33) million of allowance for credit losses on debt securities at FVOCI as at October 31, 2023 (October 31, 2022 – $(19) million) recognized in income and Other components of equity. |
• | 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. |
For the year ended |
||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 |
|||||||||||||||||||||||||||||||||||||||||||
Performing |
Impaired |
Performing | Impaired | |||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Stage 1 |
Stage 2 |
Stage 3 |
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 |
7 |
– |
– |
7 |
3 | – | – | 3 | ||||||||||||||||||||||||||||||||||||
Sales and maturities |
(2 |
) |
– |
– |
(2 |
) |
(1 | ) | – | – | (1 | ) | ||||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(5 |
) |
– |
(17 |
) |
(22 |
) |
(2 | ) | 1 | (10 | ) | (11 | ) | ||||||||||||||||||||||||||||||
Exchange rate and other |
– |
– |
3 |
3 |
– | – | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
4 |
$ |
– |
$ |
(37 |
) |
$ |
(33 |
) |
$ | 3 | $ | 1 | $ | (23 | ) | $ | (19 | ) |
(1) | Expected credit losses on debt securities at FVOCI are not separately recognized on the Consolidated Balance Sheets 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. |
For the year ended | ||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 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 |
||||||||||||||||||||||||||||||||||||||||||||
Transfers to stage 1 |
– |
– |
– |
– |
– | – | – | – | ||||||||||||||||||||||||||||||||||||
Transfers to stage 2 |
– |
– |
– |
– |
– | – | – | – | ||||||||||||||||||||||||||||||||||||
Transfers to stage 3 |
– |
– |
– |
– |
– | – | – | – | ||||||||||||||||||||||||||||||||||||
Purchases |
10 |
– |
– |
10 |
11 | – | – | 11 | ||||||||||||||||||||||||||||||||||||
Sales and maturities |
(1 |
) |
– |
– |
(1 |
) |
(1 | ) | – | – | (1 | ) | ||||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(9 |
) |
– |
– |
(9 |
) |
(7 | ) | (6 | ) | – | (13 | ) | |||||||||||||||||||||||||||||||
Exchange rate and other |
– |
1 |
– |
1 |
– | 2 | – | 2 | ||||||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
8 |
$ |
15 |
$ |
– |
$ |
23 |
$ | 8 | $ | 14 | $ | – | $ | 22 |
As at | ||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
Performing |
Impaired |
Performing | Impaired | |||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 | Stage 2 | Stage 3 (1) | Total | ||||||||||||||||||||||||||||||||||||
Investment securities |
||||||||||||||||||||||||||||||||||||||||||||
Securities at FVOCI |
||||||||||||||||||||||||||||||||||||||||||||
Investment grade |
$ |
126,732 |
$ |
1 |
$ |
– |
$ |
126,733 |
$ | 91,177 | $ | 56 | $ | – | $ | 91,233 | ||||||||||||||||||||||||||||
Non-investment grade |
742 |
– |
– |
742 |
680 | – | – | 680 | ||||||||||||||||||||||||||||||||||||
Impaired |
– |
– |
149 |
149 |
– | – | 150 | 150 | ||||||||||||||||||||||||||||||||||||
127,474 |
1 |
149 |
127,624 |
91,857 | 56 | 150 | 92,063 | |||||||||||||||||||||||||||||||||||||
Items not subject to impairment (2)
|
842 |
828 | ||||||||||||||||||||||||||||||||||||||||||
$ |
128,466 |
$ | 92,891 | |||||||||||||||||||||||||||||||||||||||||
Securities at amortized cost |
||||||||||||||||||||||||||||||||||||||||||||
Investment grade |
$ |
89,947 |
$ |
– |
$ |
– |
$ |
89,947 |
$ | 76,035 | $ | – | $ | – | $ | 76,035 | ||||||||||||||||||||||||||||
Non-investment grade |
990 |
199 |
– |
1,189 |
898 | 216 | – | 1,114 | ||||||||||||||||||||||||||||||||||||
Impaired |
– |
– |
– |
– |
– | – | – | – | ||||||||||||||||||||||||||||||||||||
90,937 |
199 |
– |
91,136 |
76,933 | 216 | – | 77,149 | |||||||||||||||||||||||||||||||||||||
Allowance for credit losses |
8 |
15 |
– |
23 |
8 | 14 | – | 22 | ||||||||||||||||||||||||||||||||||||
$ |
90,929 |
$ |
184 |
$ |
– |
$ |
91,113 |
$ | 76,925 | $ | 202 | $ | – | $ | 77,127 |
(1) | Reflects $149 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 |
As at October 31, 2023 |
||||||||||||||||||||||||
(Millions of Canadian dollars) |
Canada |
United States |
Other International |
Total |
Allowance for loan losses (1)
|
Total net of allowance |
||||||||||||||||||
Retail (2)
|
||||||||||||||||||||||||
Residential mortgages |
$ |
397,605 |
$ |
33,683 |
$ |
3,213 |
$ |
434,501 |
$ |
(481 |
) |
$ |
434,020 |
|||||||||||
Personal |
79,705 |
15,751 |
3,278 |
98,734 |
(1,145 |
) |
97,589 |
|||||||||||||||||
Credit cards (3)
|
22,140 |
624 |
271 |
23,035 |
(1,013 |
) |
22,022 |
|||||||||||||||||
Small business (4)
|
13,681 |
– |
– |
13,681 |
(180 |
) |
13,501 |
|||||||||||||||||
Wholesale (2), (5)
|
121,762 |
119,067 |
46,997 |
287,826 |
(2,185 |
) |
285,641 |
|||||||||||||||||
Total loans |
$ |
634,893 |
$ |
169,125 |
$ |
53,759 |
$ |
857,777 |
$ |
(5,004 |
) |
$ |
852,773 |
|||||||||||
Undrawn loan commitments – Retail |
277,863 |
5,054 |
3,173 |
286,090 |
(152 |
) |
||||||||||||||||||
Undrawn loan commitments – Wholesale |
128,967 |
247,881 |
84,633 |
461,481 |
(136 |
) |
||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||
(Millions of Canadian dollars) |
Canada | United States |
Other International |
Total | Allowance for loan losses (1)
|
Total net of allowance |
||||||||||||||||||
Retail (2)
|
||||||||||||||||||||||||
Residential mortgages |
$ | 383,797 | $ | 31,956 | $ | 3,043 | $ | 418,796 | $ | (432 | ) | $ | 418,364 | |||||||||||
Personal |
79,422 | 14,888 | 3,399 | 97,709 | (856 | ) | 96,853 | |||||||||||||||||
Credit cards (3)
|
19,778 | 558 | 241 | 20,577 | (849 | ) | 19,728 | |||||||||||||||||
Small business (4)
|
12,669 | – | – | 12,669 | (181 | ) | 12,488 | |||||||||||||||||
Wholesale (2), (5)
|
108,916 | 114,795 | 50,256 | 273,967 | (1,435 | ) | 272,532 | |||||||||||||||||
Total loans |
$ | 604,582 | $ | 162,197 | $ | 56,939 | $ | 823,718 | $ | (3,753 | ) | $ | 819,965 | |||||||||||
Undrawn loan commitments – Retail |
258,115 | 4,630 | 2,212 | 264,957 | (243 | ) | ||||||||||||||||||
Undrawn loan commitments – Wholesale |
118,928 | 225,113 | 81,194 | 425,235 | (135 | ) |
(1) | Excludes allowance for loans measured at FVOCI of $6 million (October 31, 2022 – $5 million). |
(2) | Geographic information is based on residence of the borrower. |
(3) | The credit cards business is managed as a single portfolio and includes both consumer and business cards. |
(4) | Includes small business exposure managed on a pooled basis. |
(5) | Includes small business exposure managed on an individual client basis. |
As at October 31, 2023 |
||||||||||||||||||||||||||||||||
Maturity term (1)
|
Rate sensitivity |
|||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Under 1 year (2)
|
1 to 5 years |
Over 5 years |
Total |
Floating |
Fixed Rate |
Non-rate- sensitive |
Total |
||||||||||||||||||||||||
Retail |
$ |
276,720 |
$ |
249,210 |
$ |
44,021 |
$ |
569,951 |
$ |
183,604 |
$ |
378,656 |
$ |
7,691 |
$ |
569,951 |
||||||||||||||||
Wholesale |
236,126 |
39,358 |
12,342 |
287,826 |
53,655 |
232,024 |
2,147 |
287,826 |
||||||||||||||||||||||||
Total loans |
$ |
512,846 |
$ |
288,568 |
$ |
56,363 |
$ |
857,777 |
$ |
237,259 |
$ |
610,680 |
$ |
9,838 |
$ |
857,777 |
||||||||||||||||
Allowance for loan losses |
(5,004 |
) |
(5,004 |
) |
||||||||||||||||||||||||||||
Total loans net of allowance for loan losses |
$ |
852,773 |
$ |
852,773 |
||||||||||||||||||||||||||||
As at October 31, 2022 |
||||||||||||||||||||||||||||||||
Maturity term (1)
|
Rate sensitivity |
|||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Under 1 year (2)
|
1 to 5 years |
Over 5 years |
Total |
Floating |
Fixed Rate |
Non-rate-
sensitive |
Total |
||||||||||||||||||||||||
Retail |
$ | 277,302 | $ | 226,793 | $ | 45,656 | $ | 549,751 | $ | 199,414 | $ | 342,087 | $ | 8,250 | $ | 549,751 | ||||||||||||||||
Wholesale |
226,813 | 35,802 | 11,352 | 273,967 | 46,660 | 225,123 | 2,184 | 273,967 | ||||||||||||||||||||||||
Total loans |
$ | 504,115 | $ | 262,595 | $ | 57,008 | $ | 823,718 | $ | 246,074 | $ | 567,210 | $ | 10,434 | $ | 823,718 | ||||||||||||||||
Allowance for loan losses |
(3,753 | ) | (3,753 | ) | ||||||||||||||||||||||||||||
Total loans net of allowance for loan losses |
$ | 819,965 | $ | 819,965 |
(1) | Generally, based on the earlier of contractual repricing or maturity date. |
(2) | Includes variable rate loans that can be repriced at the clients’ discretion without penalty. |
For the year ended | ||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 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 (1)
|
Exchange rate and other |
Balance at end of period |
||||||||||||||||||||||||||||||||||
Retail |
||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages |
$ |
432 |
$ |
74 |
$ |
(17 |
) |
$ |
(8 |
) |
$ |
481 |
$ | 416 | $ | 27 | $ | (24 | ) | $ | 13 | $ | 432 | |||||||||||||||||||||
Personal |
1,043 |
593 |
(404 |
) |
(4 |
) |
1,228 |
1,079 | 211 | (248 | ) | 1 | 1,043 | |||||||||||||||||||||||||||||||
Credit cards |
893 |
636 |
(460 |
) |
– |
1,069 |
875 | 348 | (332 | ) | 2 | 893 | ||||||||||||||||||||||||||||||||
Small business |
194 |
43 |
(39 |
) |
(4 |
) |
194 |
177 | 31 | (23 | ) | 9 | 194 | |||||||||||||||||||||||||||||||
Wholesale |
1,574 |
1,145 |
(293 |
) |
(100 |
) |
2,326 |
1,797 | (90 | ) | (136 | ) | 3 | 1,574 | ||||||||||||||||||||||||||||||
Customers’ liability under acceptances |
45 |
5 |
– |
– |
50 |
75 | (30 | ) | – | – | 45 | |||||||||||||||||||||||||||||||||
$ |
4,181 |
$ |
2,496 |
$ |
(1,213 |
) |
$ |
(116 |
) |
$ |
5,348 |
$ | 4,419 | $ | 497 | $ | (763 | ) | $ | 28 | $ | 4,181 | ||||||||||||||||||||||
Presented as: |
||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$ |
3,753 |
$ |
5,004 |
$ | 4,089 | $ | 3,753 | ||||||||||||||||||||||||||||||||||||
Other liabilities – Provisions |
378 |
288 |
241 | 378 | ||||||||||||||||||||||||||||||||||||||||
Customers’ liability under acceptances |
45 |
50 |
75 | 45 | ||||||||||||||||||||||||||||||||||||||||
Other components of equity |
5 |
6 |
14 | 5 |
(1) | Loans written-off are generally subject to continued collection efforts for a period of time following write-off. The contractual amount outstanding on loans written-off during the year ended October 31, 2023 that are no longer subject to enforcement activity was $139 million (October 31, 2022 – $53 million). |
• | Model changes, which generally comprise the impact of significant changes to the quantitative models used to estimate expected credit losses and any staging impacts that may arise. |
• | 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. |
Note 5 Loans and allowance for credit losses (continued)
|
For the year ended | ||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 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 |
||||||||||||||||||||||||||||||||||||||||||||
Model changes |
– |
– |
– |
– |
(21 | ) | 10 | – | (11 | ) | ||||||||||||||||||||||||||||||||||
Transfers to stage 1 |
95 |
(95 |
) |
– |
– |
113 | (98 | ) | (15 | ) | – | |||||||||||||||||||||||||||||||||
Transfers to stage 2 |
(26 |
) |
38 |
(12 |
) |
– |
(14 | ) | 23 | (9 | ) | – | ||||||||||||||||||||||||||||||||
Transfers to stage 3 |
(2 |
) |
(13 |
) |
15 |
– |
(2 | ) | (25 | ) | 27 | – | ||||||||||||||||||||||||||||||||
Originations |
89 |
– |
– |
89 |
159 | – | – | 159 | ||||||||||||||||||||||||||||||||||||
Maturities |
(17 |
) |
(9 |
) |
– |
(26 |
) |
(23 | ) | (9 | ) | – | (32 | ) | ||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(152 |
) |
103 |
60 |
11 |
(167 | ) | 68 | 10 | (89 | ) | |||||||||||||||||||||||||||||||||
Write-offs |
– |
– |
(30 |
) |
(30 |
) |
– | – | (38 | ) | (38 | ) | ||||||||||||||||||||||||||||||||
Recoveries |
– |
– |
13 |
13 |
– | – | 14 | 14 | ||||||||||||||||||||||||||||||||||||
Exchange rate and other |
1 |
1 |
(10 |
) |
(8 |
) |
4 | 4 | 5 | 13 | ||||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
223 |
$ |
90 |
$ |
168 |
$ |
481 |
$ | 235 | $ | 65 | $ | 132 | $ | 432 | ||||||||||||||||||||||||||||
Personal |
||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
285 |
$ |
661 |
$ |
97 |
$ |
1,043 |
$ | 422 | $ | 569 | $ | 88 | $ | 1,079 | ||||||||||||||||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||||||||||||||||||||||
Model changes |
– |
– |
– |
– |
(3 | ) | – | – | (3 | ) | ||||||||||||||||||||||||||||||||||
Transfers to stage 1 |
696 |
(695 |
) |
(1 |
) |
– |
609 | (607 | ) | (2 | ) | – | ||||||||||||||||||||||||||||||||
Transfers to stage 2 |
(88 |
) |
90 |
(2 |
) |
– |
(120 | ) | 121 | (1 | ) | – | ||||||||||||||||||||||||||||||||
Transfers to stage 3 |
(1 |
) |
(57 |
) |
58 |
– |
(2 | ) | (47 | ) | 49 | – | ||||||||||||||||||||||||||||||||
Originations |
103 |
– |
– |
103 |
106 | – | – | 106 | ||||||||||||||||||||||||||||||||||||
Maturities |
(45 |
) |
(112 |
) |
– |
(157 |
) |
(70 | ) | (99 | ) | – | (169 | ) | ||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(671 |
) |
906 |
412 |
647 |
(660 | ) | 724 | 213 | 277 | ||||||||||||||||||||||||||||||||||
Write-offs |
– |
– |
(518 |
) |
(518 |
) |
– | – | (374 | ) | (374 | ) | ||||||||||||||||||||||||||||||||
Recoveries |
– |
– |
114 |
114 |
– | – | 126 | 126 | ||||||||||||||||||||||||||||||||||||
Exchange rate and other |
1 |
– |
(5 |
) |
(4 |
) |
3 | – | (2 | ) | 1 | |||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
280 |
$ |
793 |
$ |
155 |
$ |
1,228 |
$ | 285 | $ | 661 | $ | 97 | $ | 1,043 | ||||||||||||||||||||||||||||
Credit cards |
||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
177 |
$ |
716 |
$ |
– |
$ |
893 |
$ | 233 | $ | 642 | $ | – | $ | 875 | ||||||||||||||||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||||||||||||||||||||||
Model changes |
– |
– |
– |
– |
(2 | ) | – | – | (2 | ) | ||||||||||||||||||||||||||||||||||
Transfers to stage 1 |
539 |
(539 |
) |
– |
– |
495 | (495 | ) | – | – | ||||||||||||||||||||||||||||||||||
Transfers to stage 2 |
(101 |
) |
101 |
– |
– |
(95 | ) | 95 | – | – | ||||||||||||||||||||||||||||||||||
Transfers to stage 3 |
(2 |
) |
(394 |
) |
396 |
– |
(2 | ) | (325 | ) | 327 | – | ||||||||||||||||||||||||||||||||
Originations |
13 |
– |
– |
13 |
10 | – | – | 10 | ||||||||||||||||||||||||||||||||||||
Maturities |
(6 |
) |
(33 |
) |
– |
(39 |
) |
(5 | ) | (29 | ) | – | (34 | ) | ||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(417 |
) |
1,015 |
64 |
662 |
(458 | ) | 826 | 6 | 374 | ||||||||||||||||||||||||||||||||||
Write-offs |
– |
– |
(650 |
) |
(650 |
) |
– | – | (503 | ) | (503 | ) | ||||||||||||||||||||||||||||||||
Recoveries |
– |
– |
190 |
190 |
– | – | 171 | 171 | ||||||||||||||||||||||||||||||||||||
Exchange rate and other |
– |
– |
– |
– |
1 | 2 | (1 | ) | 2 | |||||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
203 |
$ |
866 |
$ |
– |
$ |
1,069 |
$ | 177 | $ | 716 | $ | – | $ | 893 | ||||||||||||||||||||||||||||
Small business |
||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
73 |
$ |
73 |
$ |
48 |
$ |
194 |
$ | 88 | $ | 55 | $ | 34 | $ | 177 | ||||||||||||||||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||||||||||||||||||||||
Model changes |
– |
– |
– |
– |
– | – | – | – | ||||||||||||||||||||||||||||||||||||
Transfers to stage 1 |
39 |
(39 |
) |
– |
– |
27 | (27 | ) | – | – | ||||||||||||||||||||||||||||||||||
Transfers to stage 2 |
(14 |
) |
14 |
– |
– |
(17 | ) | 17 | – | – | ||||||||||||||||||||||||||||||||||
Transfers to stage 3 |
(1 |
) |
(10 |
) |
11 |
– |
(1 | ) | (4 | ) | 5 | – | ||||||||||||||||||||||||||||||||
Originations |
36 |
– |
– |
36 |
32 | – | – | 32 | ||||||||||||||||||||||||||||||||||||
Maturities |
(18 |
) |
(21 |
) |
– |
(39 |
) |
(22 | ) | (24 | ) | – | (46 | ) | ||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(48 |
) |
44 |
50 |
46 |
(43 | ) | 50 | 38 | 45 | ||||||||||||||||||||||||||||||||||
Write-offs |
– |
– |
(50 |
) |
(50 |
) |
– | – | (32 | ) | (32 | ) | ||||||||||||||||||||||||||||||||
Recoveries |
– |
– |
11 |
11 |
– | – | 9 | 9 | ||||||||||||||||||||||||||||||||||||
Exchange rate and other |
3 |
5 |
(12 |
) |
(4 |
) |
9 | 6 | (6 | ) | 9 | |||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
70 |
$ |
66 |
$ |
58 |
$ |
194 |
$ | 73 | $ | 73 | $ | 48 | $ | 194 | ||||||||||||||||||||||||||||
Wholesale |
||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
597 |
$ |
585 |
$ |
392 |
$ |
1,574 |
$ | 566 | $ | 794 | $ | 437 | $ | 1,797 | ||||||||||||||||||||||||||||
Provision for credit losses |
||||||||||||||||||||||||||||||||||||||||||||
Model changes |
– |
– |
– |
– |
(14 | ) | (3 | ) | – | (17 | ) | |||||||||||||||||||||||||||||||||
Transfers to stage 1 |
216 |
(215 |
) |
(1 |
) |
– |
415 | (411 | ) | (4 | ) | – | ||||||||||||||||||||||||||||||||
Transfers to stage 2 |
(87 |
) |
89 |
(2 |
) |
– |
(78 | ) | 80 | (2 | ) | – | ||||||||||||||||||||||||||||||||
Transfers to stage 3 |
(10 |
) |
(60 |
) |
70 |
– |
(3 | ) | (62 | ) | 65 | – | ||||||||||||||||||||||||||||||||
Originations |
651 |
– |
– |
651 |
641 | – | – | 641 | ||||||||||||||||||||||||||||||||||||
Maturities |
(448 |
) |
(270 |
) |
– |
(718 |
) |
(439 | ) | (345 | ) | – | (784 | ) | ||||||||||||||||||||||||||||||
Changes in risk, parameters and exposures |
(153 |
) |
647 |
718 |
1,212 |
(504 | ) | 503 | 71 | 70 | ||||||||||||||||||||||||||||||||||
Write-offs |
– |
– |
(324 |
) |
(324 |
) |
– | – | (202 | ) | (202 | ) | ||||||||||||||||||||||||||||||||
Recoveries |
– |
– |
31 |
31 |
– | – | 66 | 66 | ||||||||||||||||||||||||||||||||||||
Exchange rate and other |
8 |
9 |
(117 |
) |
(100 |
) |
13 | 29 | (39 | ) | 3 | |||||||||||||||||||||||||||||||||
Balance at end of period |
$ |
774 |
$ |
785 |
$ |
767 |
$ |
2,326 |
$ | 597 | $ | 585 | $ | 392 | $ | 1,574 |
• | Changes in the credit quality of the borrower or instrument, primarily reflected in changes in internal risk ratings; |
• | Changes in forward-looking macroeconomic conditions, specifically the macroeconomic variables to which our models are calibrated, which are those most closely correlated with credit losses in the relevant portfolio; |
• | Changes in scenario design and the weight assigned to each scenario; and |
• | Transfers between stages, which can be triggered by changes to any of the above inputs. |
Note 5 Loans and allowance for credit losses (continued)
|
• | Unemployment |
|
|
• | Gross Domestic Product (GDP) |
|
|
• | Oil price (West Texas Intermediate in US$) |
• | Canadian housing price index |
As at | ||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||
(Millions of Canadian dollars) | ACL – All performing loans in Stage 1 |
Impact of staging |
Stage 1 and 2 ACL |
ACL – All performing loans in Stage 1 |
Impact of staging |
Stage 1 and 2 ACL |
||||||||||||||||||||||
Performing loans (1)
|
$ 2,893 |
$ 1,257 |
$ 4,150 |
$ 2,373 | $ 1,094 | $ 3,467 |
(1) | Represents loans and commitments in Stage 1 and Stage 2. |
Note 5 Loans and allowance for credit losses (continued)
|
As at |
||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 |
|||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 | Stage 2 | Stage 3 (1) | Total | ||||||||||||||||||||||||||||
Retail |
||||||||||||||||||||||||||||||||||||
Loans outstanding – Residential mortgages |
||||||||||||||||||||||||||||||||||||
Low risk |
$ |
349,001 |
$ |
1,630 |
$ |
– |
$ |
350,631 |
$ | 340,716 | $ | 2,573 | $ | – | $ | 343,289 | ||||||||||||||||||||
Medium risk |
19,126 |
1,610 |
– |
20,736 |
15,035 | 1,932 | – | 16,967 | ||||||||||||||||||||||||||||
High risk |
1,582 |
4,927 |
– |
6,509 |
1,188 | 3,125 | – | 4,313 | ||||||||||||||||||||||||||||
Not rated (2)
|
54,247 |
1,220 |
– |
55,467 |
51,915 | 1,304 | – | 53,219 | ||||||||||||||||||||||||||||
Impaired |
– |
– |
682 |
682 |
– | – | 560 | 560 | ||||||||||||||||||||||||||||
423,956 |
9,387 |
682 |
434,025 |
408,854 | 8,934 | 560 | 418,348 | |||||||||||||||||||||||||||||
Items not subject to impairment (3)
|
476 |
448 | ||||||||||||||||||||||||||||||||||
Total |
$ |
434,501 |
$ | 418,796 | ||||||||||||||||||||||||||||||||
Loans outstanding – Personal |
||||||||||||||||||||||||||||||||||||
Low risk |
$ |
75,572 |
$ |
1,676 |
$ |
– |
$ |
77,248 |
$ | 73,339 | $ | 2,575 | $ | – | $ | 75,914 | ||||||||||||||||||||
Medium risk |
5,587 |
2,915 |
– |
8,502 |
5,482 | 3,780 | – | 9,262 | ||||||||||||||||||||||||||||
High risk |
477 |
2,088 |
– |
2,565 |
836 | 1,660 | – | 2,496 | ||||||||||||||||||||||||||||
Not rated (2)
|
9,982 |
157 |
– |
10,139 |
9,733 | 104 | – | 9,837 | ||||||||||||||||||||||||||||
Impaired |
– |
– |
280 |
280 |
– | – | 200 | 200 | ||||||||||||||||||||||||||||
Total |
$ |
91,618 |
$ |
6,836 |
$ |
280 |
$ |
98,734 |
$ | 89,390 | $ | 8,119 | $ | 200 | $ | 97,709 | ||||||||||||||||||||
Loans outstanding – Credit cards |
||||||||||||||||||||||||||||||||||||
Low risk |
$ |
16,331 |
$ |
135 |
$ |
– |
$ |
16,466 |
$ | 15,088 | $ | 83 | $ | – | $ | 15,171 | ||||||||||||||||||||
Medium risk |
1,771 |
2,132 |
– |
3,903 |
1,418 | 1,911 | – | 3,329 | ||||||||||||||||||||||||||||
High risk |
41 |
1,734 |
– |
1,775 |
39 | 1,255 | – | 1,294 | ||||||||||||||||||||||||||||
Not rated (2)
|
856 |
35 |
– |
891 |
751 | 32 | – | 783 | ||||||||||||||||||||||||||||
Total |
$ |
18,999 |
$ |
4,036 |
$ |
– |
$ |
23,035 |
$ | 17,296 | $ | 3,281 | $ | – | $ | 20,577 | ||||||||||||||||||||
Loans outstanding – Small business |
||||||||||||||||||||||||||||||||||||
Low risk |
$ |
8,641 |
$ |
920 |
$ |
– |
$ |
9,561 |
$ | 8,571 | $ | 838 | $ | – | $ | 9,409 | ||||||||||||||||||||
Medium risk |
2,238 |
936 |
– |
3,174 |
1,512 | 1,130 | – | 2,642 | ||||||||||||||||||||||||||||
High risk |
99 |
592 |
– |
691 |
102 | 375 | – | 477 | ||||||||||||||||||||||||||||
Not rated (2)
|
11 |
– |
– |
11 |
3 | – | – | 3 | ||||||||||||||||||||||||||||
Impaired |
– |
– |
244 |
244 |
– | – | 138 | 138 | ||||||||||||||||||||||||||||
Total |
$ |
10,989 |
$ |
2,448 |
$ |
244 |
$ |
13,681 |
$ | 10,188 | $ | 2,343 | $ | 138 | $ | 12,669 | ||||||||||||||||||||
Undrawn loan commitments – Retail |
||||||||||||||||||||||||||||||||||||
Low risk |
$ |
266,209 |
$ |
610 |
$ |
– |
$ |
266,819 |
$ | 247,620 | $ | 1,041 | $ | – | $ | 248,661 | ||||||||||||||||||||
Medium risk |
10,759 |
298 |
– |
11,057 |
9,021 | 246 | – | 9,267 | ||||||||||||||||||||||||||||
High risk |
956 |
434 |
– |
1,390 |
876 | 367 | – | 1,243 | ||||||||||||||||||||||||||||
Not rated (2)
|
6,686 |
138 |
– |
6,824 |
5,668 | 118 | – | 5,786 | ||||||||||||||||||||||||||||
Total |
$ |
284,610 |
$ |
1,480 |
$ |
– |
$ |
286,090 |
$ | 263,185 | $ | 1,772 | $ | – | $ | 264,957 | ||||||||||||||||||||
Wholesale – Loans outstanding |
||||||||||||||||||||||||||||||||||||
Investment grade |
$ |
89,037 |
$ |
416 |
$ |
– |
$ |
89,453 |
$ | 88,513 | $ | 202 | $ | – | $ | 88,715 | ||||||||||||||||||||
Non-investment grade |
156,211 |
19,210 |
– |
175,421 |
145,908 | 15,758 | – | 161,666 | ||||||||||||||||||||||||||||
Not rated (2)
|
10,968 |
238 |
– |
11,206 |
11,789 | 360 | – | 12,149 | ||||||||||||||||||||||||||||
Impaired |
– |
– |
2,498 |
2,498 |
– | – | 1,301 | 1,301 | ||||||||||||||||||||||||||||
Items not subject to impairment (3)
|
9,248 |
10,136 | ||||||||||||||||||||||||||||||||||
Total |
$ |
287,826 |
$ | 273,967 | ||||||||||||||||||||||||||||||||
Undrawn loan commitments –Wholesale |
||||||||||||||||||||||||||||||||||||
Investment grade |
$ |
312,178 |
$ |
186 |
$ |
– |
$ |
312,364 |
$ | 284,481 | $ | 179 | $ | – | $ | 284,660 | ||||||||||||||||||||
Non-investment grade |
130,994 |
13,947 |
– |
144,941 |
126,225 | 10,657 | – | 136,882 | ||||||||||||||||||||||||||||
Not rated (2)
|
4,176 |
– |
– |
4,176 |
3,692 | 1 | – | 3,693 | ||||||||||||||||||||||||||||
Total |
$ |
447,348 |
$ |
14,133 |
$ |
– |
$ |
461,481 |
$ | 414,398 | $ | 10,837 | $ | – | $ | 425,235 |
(1) | As at October 31, 2023, 88% of credit-impaired loans were either fully or partially collateralized (October 31, 2022 – 88%). For details on the types of collateral held against credit-impaired assets and our policies on collateral, refer to the Credit risk mitigation section of Management’s Discussion and Analysis. |
(2) | In certain cases where an internal risk rating is not assigned, we use other approved credit risk assessments or rating methodologies, policies and tools to manage our credit risk. |
(3) | Items not subject to impairment are loans held at FVTPL. |
As at |
||||||||||||||||||||||||||
October 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 |
$ |
1,840 |
$ |
208 |
$ |
2,048 |
$ | 1,328 | $ | 168 | $ | 1,496 | ||||||||||||||
Wholesale |
1,823 |
49 |
1,872 |
1,279 | 2 | 1,281 | ||||||||||||||||||||
$ |
3,663 |
$ |
257 |
$ |
3,920 |
$ | 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. Past due loans arising from administrative processes are not representative of the borrowers’ ability to meet their payment obligations. |
Note 6 Significant acquisitions and disposition |
Note 7 Derecognition of financial assets |
Note 7 Derecognition of financial assets (continued)
|
As at |
||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Canadian residential mortgage loans (1), (2)
|
Securities sold under repurchase agreements (3)
|
Securities loaned (3)
|
Total |
Canadian residential mortgage loans (1), (2)
|
Securities sold under repurchase agreements (3)
|
Securities loaned (3)
|
Total | ||||||||||||||||||||||||||
Carrying amount of transferred assets that do not qualify for derecognition |
$ |
28,312 |
$ |
313,558 |
$ |
21,680 |
$ |
363,550 |
$ | 32,812 | $ | 258,615 | $ | 15,332 | $ | 306,759 | ||||||||||||||||||
Carrying amount of associated liabilities |
28,007 |
313,558 |
21,680 |
363,245 |
32,177 | 258,615 | 15,332 | 306,124 | ||||||||||||||||||||||||||
Fair value of transferred assets |
$ |
26,472 |
$ |
313,558 |
$ |
21,680 |
$ |
361,710 |
$ | 31,174 | $ | 258,615 | $ | 15,332 | $ | 305,121 | ||||||||||||||||||
Fair value of associated liabilities |
26,780 |
313,558 |
21,680 |
362,018 |
30,900 | 258,615 | 15,332 | 304,847 | ||||||||||||||||||||||||||
Fair value of net position |
$ |
(308 |
) |
$ |
– |
$ |
– |
$ |
(308 |
) |
$ | 274 | $ | – | $ | – | $ | 274 |
(1) | Includes Canadian residential mortgage loans transferred primarily to Canada Housing Trust at the initial securitization and other permitted investments used for funding requirements after the initial securitization. |
(2) | CMB investors have legal recourse only to the transferred assets, and do not have recourse to our general assets. |
(3) | Does not include over-collateralization of assets pledged. |
Note 8 Structured entities |
Note 8 Structured entities (continued)
|
As at October 31, 2023 |
||||||||||||||||||||||||
(Millions of Canadian dollars) |
Multi-seller conduits (1)
|
Structured finance |
Non-RBC managed investment funds |
Third-party securitization vehicles |
Other |
Total |
||||||||||||||||||
On-balance sheet assets |
||||||||||||||||||||||||
Securities |
$ |
4 |
$ |
– |
$ |
2,411 |
$ |
– |
$ |
743 |
$ |
3,158 |
||||||||||||
Loans |
– |
5,790 |
– |
8,451 |
2,403 |
16,644 |
||||||||||||||||||
Derivatives |
2 |
– |
26 |
– |
91 |
119 |
||||||||||||||||||
Other assets |
– |
– |
– |
– |
365 |
365 |
||||||||||||||||||
$ |
6 |
$ |
5,790 |
$ |
2,437 |
$ |
8,451 |
$ |
3,602 |
$ |
20,286 |
|||||||||||||
On-balance sheet liabilities |
||||||||||||||||||||||||
Deposits |
$ |
– |
$ |
– |
$ |
– |
$ |
– |
$ |
166 |
$ |
166 |
||||||||||||
Derivatives |
245 |
– |
1 |
– |
– |
246 |
||||||||||||||||||
Other liabilities |
– |
– |
– |
– |
7 |
7 |
||||||||||||||||||
$ |
245 |
$ |
– |
$ |
1 |
$ |
– |
$ |
173 |
$ |
419 |
|||||||||||||
Maximum exposure to loss (2)
|
$ |
54,715 |
$ |
10,580 |
$ |
3,068 |
$ |
14,863 |
$ |
5,595 |
$ |
88,821 |
||||||||||||
Total assets of unconsolidated structured entities |
$ |
53,641 |
$ |
31,037 |
$ |
440,924 |
$ |
81,028 |
$ |
461,919 |
$ |
1,068,549 |
||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||
(Millions of Canadian dollars) | Multi-seller conduits (1)
|
Structured finance |
Non-RBC managed investment funds |
Third-party securitization vehicles |
Other | Total | ||||||||||||||||||
On-balance sheet assets |
||||||||||||||||||||||||
Securities |
$ | 255 | $ | – | $ | 3,089 | $ | – | $ | 595 | $ | 3,939 | ||||||||||||
Loans |
– | 5,334 | – | 8,494 | 2,487 | 16,315 | ||||||||||||||||||
Derivatives |
25 | – | – | – | 100 | 125 | ||||||||||||||||||
Other assets |
– | 6 | – | – | 568 | 574 | ||||||||||||||||||
$ | 280 | $ | 5,340 | $ | 3,089 | $ | 8,494 | $ | 3,750 | $ | 20,953 | |||||||||||||
On-balance sheet liabilities |
||||||||||||||||||||||||
Deposits |
$ | – | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||
Derivatives |
171 | – | – | – | – | 171 | ||||||||||||||||||
Other liabilities |
– | – | – | – | – | – | ||||||||||||||||||
$ | 171 | $ | – | $ | – | $ | – | $ | – | $ | 171 | |||||||||||||
Maximum exposure to loss (2)
|
$ | 48,260 | $ | 8,658 | $ | 3,758 | $ | 14,339 | $ | 5,523 | $ | 80,538 | ||||||||||||
Total assets of unconsolidated structured entities |
$ | 47,289 | $ | 26,543 | $ | 548,320 | $ | 64,361 | $ | 554,573 | $ | 1,241,086 |
(1) | Total assets of unconsolidated structured entities represent the maximum assets that may have to be purchased by the conduits under purchase commitments outstanding. Of the purchase commitments outstanding, the conduits have purchased financial assets totalling $37 billion as at October 31, 2023 (October 31, 2022 – $32 billion). |
(2) |
The maximum exposure to loss resulting from our interests in these entities consists mostly of investments, loans, fair value of derivatives, liquidity and credit enhancement facilities. The maximum exposure to loss of the multi-seller conduits is higher than the on-balance sheet assets primarily because of the notional amounts of the backstop liquidity and credit enhancement facilities. Refer to Note 24 for further details. |
Note 8 Structured entities (continued)
|
Note 9 Derivative financial instruments and hedging activities |
As at October 31, 2023 |
||||||||||||||||||||||||
Term to maturity |
||||||||||||||||||||||||
(Millions of Canadian dollars) |
Within 1 year |
1 through 5 years |
Over 5 years |
Total |
Trading |
Other than Trading |
||||||||||||||||||
Over-the-counter contracts |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Forward rate agreements |
$ |
1,008,978 |
$ |
691,397 |
$ |
358 |
$ |
1,700,733 |
$ |
1,700,733 |
$ |
– |
||||||||||||
Swaps |
4,220,675 |
6,651,849 |
4,418,165 |
15,290,689 |
14,169,938 |
1,120,751 |
||||||||||||||||||
Options purchased |
162,845 |
420,341 |
166,275 |
749,461 |
749,257 |
204 |
||||||||||||||||||
Options written |
144,138 |
412,239 |
179,532 |
735,909 |
735,562 |
347 |
||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||||||||
Forward contracts |
2,336,565 |
106,069 |
4,082 |
2,446,716 |
2,363,796 |
82,920 |
||||||||||||||||||
Cross currency swaps |
30,098 |
88,625 |
74,538 |
193,261 |
189,100 |
4,161 |
||||||||||||||||||
Cross currency interest rate swaps |
972,658 |
2,055,058 |
1,141,295 |
4,169,011 |
4,107,125 |
61,886 |
||||||||||||||||||
Options purchased |
244,721 |
73,407 |
2,663 |
320,791 |
320,791 |
– |
||||||||||||||||||
Options written |
254,534 |
71,039 |
2,305 |
327,878 |
327,878 |
– |
||||||||||||||||||
Credit derivatives (2)
|
11,709 |
108,637 |
114,463 |
234,809 |
234,066 |
743 |
||||||||||||||||||
Other contracts (3)
|
261,528 |
140,225 |
13,088 |
414,841 |
401,373 |
13,468 |
||||||||||||||||||
Exchange-traded contracts |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures – long positions |
103,195 |
24,283 |
1 |
127,479 |
126,879 |
600 |
||||||||||||||||||
Futures – short positions |
99,792 |
54,817 |
1 |
154,610 |
154,445 |
165 |
||||||||||||||||||
Options purchased |
12,801 |
3 |
– |
12,804 |
12,804 |
– |
||||||||||||||||||
Options written |
11,206 |
1,468 |
– |
12,674 |
12,674 |
– |
||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||||||||
Futures – long positions |
124 |
– |
– |
124 |
124 |
– |
||||||||||||||||||
Other contracts |
571,970 |
154,677 |
4,586 |
731,233 |
731,233 |
– |
||||||||||||||||||
$ |
10,447,537 |
$ |
11,054,134 |
$ |
6,121,352 |
$ |
27,623,023 |
$ |
26,337,778 |
$ |
1,285,245 |
Note 9 Derivative financial instruments and hedging activities (continued)
|
As at October 31, 2022 | ||||||||||||||||||||||||
Term to maturity | ||||||||||||||||||||||||
(Millions of Canadian dollars) |
Within 1 year |
1 through 5 years |
Over 5 years |
Total | Trading | Other than Trading |
||||||||||||||||||
Over-the-counter contracts |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Forward rate agreements |
$ | 763,398 | $ | 44,188 | $ | 353 | $ | 807,939 | $ | 806,576 | $ | 1,363 | ||||||||||||
Swaps |
4,994,006 | 6,934,996 | 4,781,148 | 16,710,150 | 16,001,414 | 708,736 | ||||||||||||||||||
Options purchased |
100,504 | 577,780 | 151,084 | 829,368 | 829,368 | – | ||||||||||||||||||
Options written |
108,770 | 556,652 | 182,841 | 848,263 | 848,263 | – | ||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||||||||
Forward contracts |
2,187,124 | 86,136 | 2,648 | 2,275,908 | 2,230,901 | 45,007 | ||||||||||||||||||
Cross currency swaps |
87,942 | 67,345 | 82,659 | 237,946 | 233,617 | 4,329 | ||||||||||||||||||
Cross currency interest rate swaps |
518,244 | 1,572,490 | 879,541 | 2,970,275 | 2,918,063 | 52,212 | ||||||||||||||||||
Options purchased |
58,075 | 18,061 | 3,199 | 79,335 | 79,335 | – | ||||||||||||||||||
Options written |
62,266 | 16,623 | 3,274 | 82,163 | 82,163 | – | ||||||||||||||||||
Credit derivatives (2)
|
1,143 | 35,621 | 6,751 | 43,515 | 42,785 | 730 | ||||||||||||||||||
Other contracts (3)
|
228,709 | 93,431 | 19,392 | 341,532 | 327,860 | 13,672 | ||||||||||||||||||
Exchange-traded contracts |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures – long positions |
148,032 | 50,869 | – | 198,901 | 197,251 | 1,650 | ||||||||||||||||||
Futures – short positions |
233,941 | 98,763 | 65 | 332,769 | 332,320 | 449 | ||||||||||||||||||
Options purchased |
56,353 | 12,173 | – | 68,526 | 68,526 | – | ||||||||||||||||||
Options written |
16,394 | 6,168 | – | 22,562 | 22,562 | – | ||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||||||||
Futures – long positions |
164 | – | – | 164 | 164 | – | ||||||||||||||||||
Other contracts |
539,103 | 89,147 | 2,094 | 630,344 | 630,344 | – | ||||||||||||||||||
$ | 10,104,168 | $ | 10,260,443 | $ | 6,115,049 | $ | 26,479,660 | $ | 25,651,512 | $ | 828,148 |
(1) | The derivative notional amounts are determined using the standardized approach for measuring counterparty credit risk (SA-CCR) in accordance with the Capital Adequacy Requirements (CAR). |
(2) | Credit derivatives with a notional value of $1 billion (October 31, 2022 – $1 billion) are economic hedges. Trading credit derivatives comprise protection purchased of $119 billion (October 31, 2022 – $26 billion) and protection sold of $115 billion (October 31, 2022 – $17 billion). |
(3) | Other contracts exclude loan underwriting commitments of $2 billion (October 31, 2022 – $6 billion), which are not classified as derivatives under CAR guidelines. |
As at | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Millions of Canadian dollars) |
Positive |
Negative |
Positive | Negative | ||||||||||||||
Held or issued for trading purposes |
||||||||||||||||||
Interest rate contracts |
||||||||||||||||||
Forward rate agreements |
$ |
76 |
$ |
24 |
$ | 77 | $ | 25 | ||||||||||
Swaps |
26,320 |
22,965 |
25,690 | 21,608 | ||||||||||||||
Options purchased |
11,230 |
– |
12,056 | – | ||||||||||||||
Options written |
– |
11,776 |
– | 12,201 | ||||||||||||||
37,626 |
34,765 |
37,823 | 33,834 | |||||||||||||||
Foreign exchange contracts |
||||||||||||||||||
Forward contracts |
22,972 |
22,655 |
37,734 | 37,631 | ||||||||||||||
Cross currency swaps |
7,370 |
5,815 |
8,680 | 9,087 | ||||||||||||||
Cross currency interest rate swaps |
55,268 |
46,550 |
49,758 | 38,230 | ||||||||||||||
Options purchased |
2,623 |
– |
2,623 | – | ||||||||||||||
Options written |
– |
1,790 |
– | 2,571 | ||||||||||||||
88,233 |
76,810 |
98,795 | 87,519 | |||||||||||||||
Credit derivatives |
175 |
176 |
388 | 125 | ||||||||||||||
Other contracts |
16,319 |
20,865 |
18,474 | 21,084 | ||||||||||||||
142,353 |
132,616 |
155,480 | 142,562 | |||||||||||||||
Held or issued for other-than-trading purposes |
||||||||||||||||||
Interest rate contracts |
||||||||||||||||||
Swaps |
1,907 |
7,436 |
2,244 | 6,880 | ||||||||||||||
1,907 |
7,436 |
2,244 | 6,880 | |||||||||||||||
Foreign exchange contracts |
||||||||||||||||||
Forward contracts |
860 |
509 |
268 | 237 | ||||||||||||||
Cross currency swaps |
– |
– |
– | 22 | ||||||||||||||
Cross currency interest rate swaps |
555 |
4,484 |
374 | 6,677 | ||||||||||||||
1,415 |
4,993 |
642 | 6,936 | |||||||||||||||
Credit derivatives |
49 |
– |
– | – | ||||||||||||||
Other contracts |
71 |
109 |
313 | 273 | ||||||||||||||
3,442 |
12,538 |
3,199 | 14,089 | |||||||||||||||
Total gross fair values before: |
145,795 |
145,154 |
158,679 | 156,651 | ||||||||||||||
Valuation adjustments determined on a pooled basis |
(1,801 |
) |
(981 |
) |
(2,055 | ) | (975 | ) | ||||||||||
Impact of netting agreements that qualify for balance sheet offset |
(1,544 |
) |
(1,544 |
) |
(2,185 | ) | (2,185 | ) | ||||||||||
$ |
142,450 |
$ |
142,629 |
$ | 154,439 | $ | 153,491 |
(1) | The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties. |
As at | ||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Less than 1 year |
1 through 5 years |
Over 5 years |
Total |
Less than 1 year |
1 through 5 years |
Over 5 years |
Total | ||||||||||||||||||||||||||
Derivative assets |
$ |
46,148 |
52,165 |
44,137 |
$ |
142,450 |
$ | 56,050 | 56,792 | 41,597 | $ | 154,439 | ||||||||||||||||||||||
Derivative liabilities |
47,707 |
51,690 |
43,232 |
142,629 |
58,504 | 54,361 | 40,626 | 153,491 |
(1) | The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties. |
As at | ||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||
(Millions of Canadian dollars) |
Notional/Principal amounts |
Notional/Principal amounts |
||||||||
Interest rate contracts |
||||||||||
USD LIBOR |
$ |
– |
$ | 40,208 | ||||||
CDOR |
115,048 |
114,159 | ||||||||
Total Return Swaps |
||||||||||
CDOR |
736 |
801 | ||||||||
Non-derivative instruments |
||||||||||
USD LIBOR |
– |
237 | ||||||||
$ |
115,784 |
$ | 155,405 |
(1) | Excludes interest rate contracts and non-derivative instruments which reference rates in multi-rate jurisdictions, including EURO Interbank Offered Rate and Australian Bank Bill Swap Rate (BBSW). |
Note 9 Derivative financial instruments and hedging activities (continued)
|
As at | ||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Replacement cost |
Credit equivalent amount |
Risk-weighted
equivalent (2)
|
Replacement cost |
Credit equivalent amount |
Risk-weighted
equivalent (2)
|
||||||||||||||||||||||
Over-the-counter contracts |
||||||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||||||
Forward rate agreements |
$ |
58 |
$ |
94 |
$ |
6 |
$ | 46 | $ | 76 | $ | 5 | ||||||||||||||||
Swaps |
9,613 |
24,448 |
3,721 |
9,699 | 21,698 | 5,187 | ||||||||||||||||||||||
Options purchased |
610 |
1,547 |
353 |
108 | 426 | 119 | ||||||||||||||||||||||
Options written |
123 |
564 |
152 |
15 | 543 | 164 | ||||||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||||||||||||
Forward contracts |
5,655 |
27,862 |
5,611 |
8,772 | 29,565 | 5,940 | ||||||||||||||||||||||
Swaps |
4,261 |
21,483 |
4,274 |
6,072 | 22,188 | 4,556 | ||||||||||||||||||||||
Options purchased |
841 |
1,742 |
383 |
536 | 1,111 | 340 | ||||||||||||||||||||||
Options written |
95 |
441 |
109 |
28 | 313 | 86 | ||||||||||||||||||||||
Credit derivatives |
356 |
1,834 |
219 |
299 | 766 | 114 | ||||||||||||||||||||||
Other contracts |
1,933 |
16,002 |
4,929 |
5,196 | 20,457 | 7,520 | ||||||||||||||||||||||
Exchange-traded contracts |
7,186 |
16,191 |
324 |
11,098 | 19,870 | 397 | ||||||||||||||||||||||
$ |
30,731 |
$ |
112,208 |
$ |
20,081 |
$ | 41,869 | $ | 117,013 | $ | 24,428 |
(1) | The amounts presented are net of master netting agreements in accordance with CAR guidelines. |
(2) | The risk-weighted balances are calculated in accordance with CAR guidelines and exclude CVA of $13 billion (October 31, 2022 – $16 billion). |
As at October 31, 2023 |
||||||||||||||||||||||||||||||||||||
Risk rating (1)
|
Counterparty type (2)
|
|||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
AAA, AA |
A |
BBB |
BB or lower |
Total |
Banks |
OECD governments |
Other |
Total |
|||||||||||||||||||||||||||
Gross positive fair values |
$ |
36,224 |
$ |
70,010 |
$ |
28,956 |
$ |
10,605 |
$ |
145,795 |
$ |
69,841 |
$ |
20,268 |
$ |
55,686 |
$ |
145,795 |
||||||||||||||||||
Impact of master netting agreements and applicable margins |
24,025 |
60,556 |
22,765 |
7,718 |
115,064 |
68,151 |
20,237 |
26,676 |
115,064 |
|||||||||||||||||||||||||||
Replacement cost (after netting agreements) |
$ |
12,199 |
$ |
9,454 |
$ |
6,191 |
$ |
2,887 |
$ |
30,731 |
$ |
1,690 |
$ |
31 |
$ |
29,010 |
$ |
30,731 |
||||||||||||||||||
As at October 31, 2022
|
||||||||||||||||||||||||||||||||||||
Risk rating (1)
|
Counterparty type (2)
|
|||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
AAA, AA | A | BBB | BB or lower | Total | Banks | OECD governments |
Other | Total | |||||||||||||||||||||||||||
Gross positive fair values |
$ | 39,001 | $ | 72,983 | $ | 29,690 | $ | 17,005 | $ | 158,679 | $ | 73,616 | $ | 22,727 | $ | 62,336 | $ | 158,679 | ||||||||||||||||||
Impact of master netting agreements and applicable margins |
21,552 | 62,614 | 21,818 | 10,826 | 116,810 | 71,582 | 22,597 | 22,631 | 116,810 | |||||||||||||||||||||||||||
Replacement cost (after netting agreements) |
$ | 17,449 | $ | 10,369 | $ | 7,872 | $ | 6,179 | $ | 41,869 | $ | 2,034 | $ | 130 | $ | 39,705 | $ | 41,869 |
(1) | Our internal risk ratings of AAA, AA, A and BBB represent investment grade ratings and ratings of BB or lower represent non-investment grade ratings, as outlined in the internal ratings maps in the Credit risk section of Management’s Discussion and Analysis. |
(2) | Counterparty type is defined in accordance with CAR guidelines. |
• | Mismatches in the terms of hedged items and hedging instruments, for example the frequency and timing of when interest rates are reset and frequency of payment. |
• | Difference in the discounting factors between the hedged item and the hedging instrument, taking into consideration the different reset frequency of the hedged item and hedging instrument. |
• | Hedging derivatives with a non-zero fair value at inception date of the hedging relationship, resulting in mismatch in terms with the hedged item. |
As at |
||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 |
|||||||||||||||||||||||||||||||||
Designated as hedging instruments in hedging relationships |
Not designated in a hedging relationship |
Designated as hedging instruments in hedging relationships |
Not designated in a hedging relationship |
|||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Fair value |
Cash flow |
Net investment |
Fair value |
Cash flow |
Net investment |
||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||
Derivative instruments |
$ |
156 |
$ |
19 |
$ |
13 |
$ |
142,262 |
$ | 247 | $ | 57 | $ | 36 | $ | 154,099 | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||||
Derivative instruments |
50 |
100 |
409 |
142,070 |
27 | – | 126 | 153,338 | ||||||||||||||||||||||||||
Non-derivative instruments |
– |
– |
25,427 |
n.a. |
– | – | 25,798 | n.a. |
(1) | The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties. |
n.a. | not applicable |
Note 9 Derivative financial instruments and hedging activities (continued)
|
As at October 31, 2023 |
||||||||||||||||||||||||||||
Notional amounts |
Carrying amount (1)
|
|||||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within 1 year |
1 through 5 years |
Over 5 years |
Total |
Assets |
Liabilities |
||||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||||||
Hedge of fixed rate assets |
$ |
8,853 |
$ |
62,948 |
$ |
21,702 |
$ |
93,503 |
$ |
156 |
$ |
– |
||||||||||||||||
Hedge of fixed rate liabilities |
23,592 |
75,130 |
10,236 |
108,958 |
– |
50 |
||||||||||||||||||||||
Weighted average fixed interest rate |
||||||||||||||||||||||||||||
Hedge of fixed rate assets |
4.3% |
3.6% |
3.2% |
3.6% |
||||||||||||||||||||||||
Hedge of fixed rate liabilities |
2.1% |
2.4% |
2.6% |
2.3% |
||||||||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||||||
Notional amounts | Carrying amount (1)
|
|||||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within
1 year
|
1 through
5 years
|
Over
5 years
|
Total | Assets | Liabilities | ||||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||||||
Hedge of fixed rate assets |
$ | 9,083 | $ | 32,173 | $ | 15,516 | $ | 56,772 | $ | 247 | $ | 3 | ||||||||||||||||
Hedge of fixed rate liabilities |
13,231 | 69,419 | 10,094 | 92,744 | – | 24 | ||||||||||||||||||||||
Weighted average fixed interest rate |
||||||||||||||||||||||||||||
Hedge of fixed rate assets |
1.1% | 2.5% | 2.8% | 2.3% | ||||||||||||||||||||||||
Hedge of fixed rate liabilities |
1.9% | 1.8% | 2.0% | 1.9% |
(1) | The carrying amount reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties. |
As at October 31, 2023 |
||||||||||||||||||||||||||
Notional amounts |
Carrying amount (1)
|
|||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within 1 year |
1 through 5 years |
Over 5 years |
Total |
Assets |
Liabilities |
||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||||
Hedge of variable rate assets |
$ |
63,927 |
$ |
68,470 |
$ |
1,097 |
$ |
133,494 |
$ |
– |
$ |
– |
||||||||||||||
Hedge of variable rate liabilities |
16,696 |
63,527 |
32,802 |
113,025 |
– |
– |
||||||||||||||||||||
Weighted average fixed interest rate |
||||||||||||||||||||||||||
Hedge of variable rate assets |
4.5% |
3.4% |
3.7% |
4.0% |
||||||||||||||||||||||
Hedge of variable rate liabilities |
4.9% |
3.8% |
2.8% |
3.7% |
||||||||||||||||||||||
Foreign exchange risk |
||||||||||||||||||||||||||
Cross currency swaps |
$ |
63 |
$ |
916 |
$ |
– |
$ |
979 |
$ |
19 |
$ |
14 |
||||||||||||||
Weighted average CAD-EUR exchange rate |
1.48 |
1.44 |
n.a. |
1.45 |
||||||||||||||||||||||
Weighted average CAD-USD exchange rate |
n.a. |
1.34 |
n.a. |
1.34 |
||||||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||||
Notional amounts | Carrying amount (1)
|
|||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within
1 year
|
1 through
5 years
|
Over
5 years
|
Total | Assets | Liabilities | ||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||||
Hedge of variable rate assets |
$ | 50,436 | $ | 74,726 | $ | 1,023 | $ | 126,185 | $ | – | $ | – | ||||||||||||||
Hedge of variable rate liabilities |
6,221 | 42,830 | 24,024 | 73,075 | – | – | ||||||||||||||||||||
Weighted average fixed interest rate |
||||||||||||||||||||||||||
Hedge of variable rate assets |
3.3% | 2.8% | 2.5% | 3.0% | ||||||||||||||||||||||
Hedge of variable rate liabilities |
2.0% | 1.5% | 2.0% | 1.7% | ||||||||||||||||||||||
Foreign exchange risk |
||||||||||||||||||||||||||
Cross currency swaps |
$ | – | $ | 314 | $ | – | $ | 314 | $ | 32 | $ | – | ||||||||||||||
Weighted average CAD-EUR exchange rate |
n.a. | 1.44 | n.a. | 1.44 | ||||||||||||||||||||||
Weighted average CAD-USD exchange rate |
n.a. | n.a. | n.a. | n.a. |
(1) | The carrying amount reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties. |
n.a. | not applicable |
As at October 31, 2023 |
||||||||||||||||||||||||||
Notional/Principal |
Carrying amount |
|||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within 1 year |
1 through 5 years |
Over 5 years |
Total |
Assets |
Liabilities |
||||||||||||||||||||
Foreign exchange risk |
||||||||||||||||||||||||||
Foreign currency liabilities |
$ |
6,061 |
$ |
14,653 |
$ |
6,413 |
$ |
27,127 |
n.a. |
$ |
25,427 |
|||||||||||||||
Weighted average CAD-USD exchange rate |
1.28 |
1.29 |
1.33 |
1.30 |
||||||||||||||||||||||
Weighted average CAD-EUR exchange rate |
n.a. |
n.a. |
n.a. |
n.a. |
||||||||||||||||||||||
Weighted average CAD-GBP exchange rate |
– |
1.71 |
– |
1.71 |
||||||||||||||||||||||
Forward contracts |
$ |
18,920 |
$ |
– |
$ |
– |
$ |
18,920 |
$ |
13 |
$ |
409 |
||||||||||||||
Weighted average CAD-USD exchange rate |
1.36 |
n.a. |
n.a. |
1.36 |
||||||||||||||||||||||
Weighted average CAD-EUR exchange rate |
1.45 |
n.a. |
n.a. |
1.45 |
||||||||||||||||||||||
Weighted average CAD-GBP exchange rate |
1.68 |
n.a. |
n.a. |
1.68 |
||||||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||||
Notional/Principal | Carrying amount | |||||||||||||||||||||||||
(Millions of Canadian dollars, except average rates) |
Within
1 year
|
1 through 5 years |
Over
5 years
|
Total | Assets | Liabilities | ||||||||||||||||||||
Foreign exchange risk |
||||||||||||||||||||||||||
Foreign currency liabilities |
$ | 5,462 | $ | 20,851 | $ | 1,025 | $ | 27,338 | n.a. | $ | 25,798 | |||||||||||||||
Weighted average CAD-USD exchange rate |
1.31 | 1.28 | 1.28 | 1.29 | ||||||||||||||||||||||
Weighted average CAD-EUR exchange rate |
– | 1.51 | 1.48 | 1.51 | ||||||||||||||||||||||
Weighted average CAD-GBP exchange rate |
– | 1.71 | – | 1.71 | ||||||||||||||||||||||
Forward contracts |
$ | 6,089 | $ | – | $ | – | $ | 6,089 | $ | 36 | $ | 126 | ||||||||||||||
Weighted average CAD-USD exchange rate |
1.34 | n.a. | n.a. | 1.34 | ||||||||||||||||||||||
Weighted average CAD-EUR exchange rate |
1.36 | n.a. | n.a. | 1.36 | ||||||||||||||||||||||
Weighted average CAD-GBP exchange rate |
1.55 | n.a. | n.a. | 1.55 |
n.a. | not applicable |
As at and for the year ended October 31, 2023 |
||||||||||||||||||||||
Carrying amount |
Accumulated amount of fair value adjustments on the hedged item included in the carrying amount |
|||||||||||||||||||||
(Millions of Canadian dollars) |
Assets |
Liabilities |
Assets |
Liabilities |
Consolidated Balance Sheet items: |
Changes in fair values used for calculating hedge ineffectiveness |
||||||||||||||||
Interest rate risk |
||||||||||||||||||||||
Fixed rate assets (1)
|
$ |
86,734 |
$ |
– |
$ |
(3,911 |
) |
$ |
– |
Securities – Investment, net of applicable allowance; Loans – Retail; Loans – Wholesale |
$ |
(1,445 |
) |
|||||||||
Fixed rate liabilities (1)
|
– |
102,535 |
– |
(6,340 |
) |
Deposits – Business and government; Subordinated debentures; Deposits – Bank |
276 |
As at and for the year ended October 31, 2022 | ||||||||||||||||||||||
Carrying amount |
Accumulated amount of fair
value adjustments on the
hedged item included in the
carrying amount |
|||||||||||||||||||||
(Millions of Canadian dollars) |
Assets | Liabilities | Assets | Liabilities | Consolidated Balance Sheet items: | Changes in fair values used for calculating hedge ineffectiveness |
||||||||||||||||
Interest rate risk |
||||||||||||||||||||||
Fixed rate assets (1)
|
$ | 52,216 | $ | – | $ | (3,285 | ) | $ | – |
Securities – Investment, net of
applicable allowance; Loans – Retail;
Loans – Wholesale
|
$ | (3,695 | ) | |||||||||
Fixed rate liabilities (1)
|
– | 86,738 | – | (5,924 | ) |
Deposits – Business and government;
Subordinated debentures; Deposits – Bank
|
5,742 |
(1) | As at October 31, 2023, the accumulated amount of fair value hedge adjustments remaining on our Consolidated Balance Sheets for hedged items that have ceased to be adjusted for hedging gains and losses is a of loss of $539 million for fixed rate as s ets and a gain of $259 million for fixed rate liabilities (October 31, 2022 – loss of $486 million and loss of $25 million, respectively). |
Note 9 Derivative financial instruments and hedging activities (continued)
|
As at and for the year ended October 31, 2023 |
||||||||||||||
Changes in fair values used for calculating hedge ineffectiveness |
Cash flow hedge/foreign currency translation reserve |
|||||||||||||
(Millions of Canadian dollars) |
Consolidated Balance Sheet items: |
Continuing hedges |
Discontinued hedges |
|||||||||||
Cash flow hedges |
||||||||||||||
Interest rate risk |
||||||||||||||
Variable rate assets |
Securities – Investment, net of applicable allowance; Loans – Retail; |
$ |
2,248 |
$ |
(2,115 |
) |
$ |
(3,126 |
) |
|||||
Interest bearing deposits with banks; |
||||||||||||||
Assets purchased under reverse |
||||||||||||||
repurchase agreements and securities borrowed |
||||||||||||||
Variable rate liabilities |
Deposits – Business and government; Deposits – Personal; |
(2,558 |
) |
3,535 |
5,607 |
|||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
||||||||||||||
Foreign exchange risk |
||||||||||||||
Fixed rate assets |
Securities – Investment, net of applicable allowance |
50 |
– |
– |
||||||||||
Net investment hedges |
||||||||||||||
Foreign exchange risk |
||||||||||||||
Foreign subsidiaries |
n.a. |
1,513 |
(7,297 |
) |
(382 |
) |
As at and for the year ended October 31, 2022 | ||||||||||||||
Consolidated Balance Sheet items: |
Changes in fair
values used for
calculating hedge ineffectiveness |
Cash flow hedge/foreign
currency translation reserve
|
||||||||||||
(Millions of Canadian dollars) |
Continuing
hedges
|
Discontinued hedges |
||||||||||||
Cash flow hedges |
||||||||||||||
Interest rate risk |
||||||||||||||
Variable rate assets |
Securities – Investment, net of
applicable allowance; Loans – Retail;
|
$ | 4,720 | $ | (1,777 | ) | $ | (2,668 | ) | |||||
Interest bearing deposits with banks; | ||||||||||||||
Assets purchased under reverse
repurchase agreements and securities borrowed
|
||||||||||||||
Variable rate liabilities |
Deposits – Business and government; | (6,895 | ) | 5,471 | 2,231 | |||||||||
Deposits – Personal; | ||||||||||||||
Obligations related to assets sold under | ||||||||||||||
repurchase agreements and securities loaned | ||||||||||||||
Foreign exchange risk |
||||||||||||||
Fixed rate assets |
Securities – Investment, net of
applicable allowance
|
(17 | ) | 7 | – | |||||||||
Net investment hedges |
||||||||||||||
Foreign exchange risk |
||||||||||||||
Foreign subsidiaries |
n.a. | 1,927 | (5,936 | ) | (421 | ) |
n.a. | not applicable |
For the year ended October 31, 2023 |
||||||||||||||||
(Millions of Canadian dollars) |
Change in fair value of hedging instrument |
Hedge ineffectiveness recognized in income (1)
|
Changes in the value of the hedging instrument recognized in OCI |
Amount reclassified from hedge reserves to income |
||||||||||||
Fair value hedges |
||||||||||||||||
Interest rate risk |
||||||||||||||||
Interest rate contracts – fixed rate assets |
$ |
1,385 |
$ |
(60 |
) |
n.a. |
n.a. |
|||||||||
Interest rate contracts – fixed rate liabilities |
(205 |
) |
71 |
n.a. |
n.a. |
|||||||||||
Cash flow hedges |
||||||||||||||||
Interest rate risk |
||||||||||||||||
Interest rate contracts – variable rate assets |
(2,232 |
) |
7 |
$ |
(3,930 |
) |
$ |
(3,121 |
) |
|||||||
Interest rate contracts – variable rate liabilities |
2,416 |
(11 |
) |
4,498 |
3,045 |
|||||||||||
Foreign exchange risk |
||||||||||||||||
Cross currency swap – fixed rate assets |
(50 |
) |
– |
(44 |
) |
(37 |
) |
|||||||||
Net investment hedges |
||||||||||||||||
Foreign exchange risk |
||||||||||||||||
Foreign currency liabilities |
(684 |
) |
– |
(684 |
) |
– |
||||||||||
Forward contracts |
(828 |
) |
– |
(828 |
) |
(191 |
) |
For the year ended October 31, 2022 | ||||||||||||||||
(Millions of Canadian dollars) |
Change in fair value
of hedging
instrument
|
Hedge
ineffectiveness
recognized in
income
(1)
|
Changes in the value of
the hedging instrument
recognized in OCI
|
Amount reclassified
from hedge reserves
to income
|
||||||||||||
Fair value hedges |
||||||||||||||||
Interest rate risk |
||||||||||||||||
Interest rate contracts – fixed rate assets |
$ | 3,650 | $ | (45 | ) | n.a. | n.a. | |||||||||
Interest rate contracts – fixed rate liabilities |
(5,713 | ) | 29 | n.a. | n.a. | |||||||||||
Cash flow hedges |
||||||||||||||||
Interest rate risk |
||||||||||||||||
Interest rate contracts – variable rate assets |
(4,698 | ) | (36 | ) | $ | (4,432 | ) | $ | (185 | ) | ||||||
Interest rate contracts – variable rate liabilities |
6,713 | 37 | 6,673 | (118 | ) | |||||||||||
Foreign exchange risk |
||||||||||||||||
Cross currency swap – fixed rate assets |
17 | – | 23 | 17 | ||||||||||||
Net investment hedges |
||||||||||||||||
Foreign exchange risk |
||||||||||||||||
Foreign currency liabilities |
(1,771 | ) | (3 | ) | (1,768 | ) | – | |||||||||
Forward contracts |
(159 | ) | – | (159 | ) | (23 | ) |
(1) | Hedge ineffectiveness recognized in income included gains of $3 million that are excluded from the assessment of hedge effectiveness and are offset by economic hedges (October 31, 2022 – losses of $19 million). |
n.a. | not applicable |
For the year ended October 31, 2023 |
For the year ended October 31, 2022 |
|||||||||||||||||
(Millions of Canadian dollars) |
Cash flow hedge reserve |
Foreign currency translation reserve |
Cash flow hedge
reserve
|
Foreign currency
translation reserve
|
||||||||||||||
Balance at the beginning of the year |
$ |
2,394 |
$ |
5,688 |
$ | 566 | $ | 2,055 | ||||||||||
Cash flow hedges |
||||||||||||||||||
Effective portion of changes in fair value: |
||||||||||||||||||
Interest rate risk |
568 |
2,241 | ||||||||||||||||
Foreign exchange risk |
(44 |
) |
23 | |||||||||||||||
Equity price risk |
(119 |
) |
(1 | ) | ||||||||||||||
Net amount reclassified to profit or loss: |
||||||||||||||||||
Ongoing hedges: |
||||||||||||||||||
Interest rate risk |
(377 |
) |
(227 | ) | ||||||||||||||
Foreign exchange risk |
37 |
(17 | ) | |||||||||||||||
Equity price risk |
93 |
(23 | ) | |||||||||||||||
De-designated hedges: |
||||||||||||||||||
Interest rate risk |
453 |
530 | ||||||||||||||||
Hedges of net investment in foreign operations |
||||||||||||||||||
Foreign exchange denominated debt |
(684 |
) |
(1,768 | ) | ||||||||||||||
Forward foreign exchange contracts |
(828 |
) |
(159 | ) | ||||||||||||||
Foreign currency translation differences for foreign operations |
2,164 |
5,085 | ||||||||||||||||
Reclassification of losses (gains) on foreign currency translation to income |
(160 |
) |
(18 | ) | ||||||||||||||
Reclassification of losses (gains) on net investment hedging activities to income |
191 |
23 | ||||||||||||||||
Tax on movements on reserves during the period |
(249 |
) |
241 |
(698 | ) | 470 | ||||||||||||
Balance at the end of the year |
$ |
2,756 |
$ |
6,612 |
$ | 2,394 | $ | 5,688 |
Note 10 Premises and equipment |
For the year ended October 31, 2023 |
||||||||||||||||||||||||||||||||||||||||
Owned by the Bank (1)
|
Right-of-use lease assets |
|||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Land |
Buildings |
Computer equipment |
Furniture, fixtures and other equipment |
Leasehold improvements |
Work in process |
Buildings |
Equipment |
Total |
|||||||||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
141 |
$ |
1,261 |
$ |
1,169 |
$ |
836 |
$ |
2,845 |
$ |
120 |
$ |
5,748 |
$ |
299 |
$ |
12,419 |
||||||||||||||||||||||
Additions |
– |
– |
32 |
12 |
29 |
511 |
385 |
80 |
1,049 |
|||||||||||||||||||||||||||||||
Acquisition through business combination |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|||||||||||||||||||||||||||||||
Transfers from work in process |
– |
19 |
246 |
62 |
187 |
(514 |
) |
– |
– |
– |
||||||||||||||||||||||||||||||
Disposals |
– |
(53 |
) |
(216 |
) |
(96 |
) |
(78 |
) |
(2 |
) |
(331 |
) |
(31 |
)
|
(807 |
) |
|||||||||||||||||||||||
Foreign exchange translation |
1 |
6 |
22 |
9 |
32 |
1 |
103 |
– |
174 |
|||||||||||||||||||||||||||||||
Other |
(2 |
) |
18 |
30 |
12 |
(8 |
) |
(8 |
) |
(12 |
)
|
(31 |
) |
(1 |
) |
|||||||||||||||||||||||||
Balance at end of period |
$ |
140 |
$ |
1,251 |
$ |
1,283 |
$ |
835 |
$ |
3,007 |
$ |
108 |
$ |
5,893 |
$ |
317 |
$ |
12,834 |
||||||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
– |
$ |
627 |
$ |
640 |
$ |
525 |
$ |
1,656 |
$ |
– |
$ |
1,643 |
$ |
114 |
$ |
5,205 |
||||||||||||||||||||||
Depreciation |
– |
51 |
247 |
91 |
235 |
– |
559 |
92 |
1,275 |
|||||||||||||||||||||||||||||||
Disposals |
– |
(50 |
) |
(216 |
) |
(88 |
) |
(70 |
) |
– |
(112 |
) |
(31 |
)
|
(567 |
) |
||||||||||||||||||||||||
Foreign exchange translation |
– |
3 |
16 |
6 |
16 |
– |
31 |
– |
72 |
|||||||||||||||||||||||||||||||
Other |
– |
15 |
36 |
16 |
26 |
– |
28 |
(21 |
)
|
100 |
||||||||||||||||||||||||||||||
Balance at end of period |
$ |
– |
$ |
646 |
$ |
723 |
$ |
550 |
$ |
1,863 |
$ |
– |
$ |
2,149 |
$ |
154 |
$ |
6,085 |
||||||||||||||||||||||
Net carrying amount at end of period |
$ |
140 |
$ |
605 |
$ |
560 |
$ |
285 |
$ |
1,144 |
$ |
108 |
$ |
3,744 |
$ |
163 |
$ |
6,749 |
||||||||||||||||||||||
For the year ended October 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
Owned by the Bank (1)
|
Right-of-use lease assets | |||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Land | Buildings | Computer equipment |
Furniture, fixtures and other equipment |
Leasehold improvements |
Work in process |
Buildings | Equipment | Total | |||||||||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 145 | $ | 1,308 | $ | 1,126 | $ | 773 | $ | 2,754 | $ | 170 | $ | 5,394 | $ | 308 | $ | 11,978 | ||||||||||||||||||||||
Additions |
– | – | 24 | 3 | 28 | 397 | 270 | 138 | 860 | |||||||||||||||||||||||||||||||
Acquisition through business combination |
– | – | 4 | 1 | 6 | 1 | 55 | – | 67 | |||||||||||||||||||||||||||||||
Transfers from work in process |
– | 15 | 195 | 49 | 206 | (465 | ) | – | – | – | ||||||||||||||||||||||||||||||
Disposals |
(10 | ) | (83 | ) | (195 | ) | (5 | ) | (205 | ) | (1 | ) | (153 | ) | (146 | ) | (798 | ) | ||||||||||||||||||||||
Foreign exchange translation |
7 | 24 | 17 | 15 | 67 | 6 | 58 | (1 | ) | 193 | ||||||||||||||||||||||||||||||
Other |
(1 | ) | (3 | ) | (2 | ) | – | (11 | ) | 12 | 124 | – | 119 | |||||||||||||||||||||||||||
Balance at end of period |
$ | 141 | $ | 1,261 | $ | 1,169 | $ | 836 | $ | 2,845 | $ | 120 | $ | 5,748 | $ | 299 | $ | 12,419 | ||||||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | – | $ | 664 | $ | 584 | $ | 427 | $ | 1,589 | $ | – | $ | 1,133 | $ | 157 | $ | 4,554 | ||||||||||||||||||||||
Depreciation |
– | 48 | 234 | 94 | 233 | – | 569 | 87 | 1,265 | |||||||||||||||||||||||||||||||
Disposals |
– | (80 | ) | (192 | ) | (4 | ) | (204 | ) | – | (106 | ) | (146 | ) | (732 | ) | ||||||||||||||||||||||||
Foreign exchange translation |
– | 11 | 12 | 6 | 38 | – | 2 | (1 | ) | 68 | ||||||||||||||||||||||||||||||
Other |
– | (16 | ) | 2 | 2 | – | – | 45 | 17 | 50 | ||||||||||||||||||||||||||||||
Balance at end of period |
$ | – | $ | 627 | $ | 640 | $ | 525 | $ | 1,656 | $ | – | $ | 1,643 | $ | 114 | $ | 5,205 | ||||||||||||||||||||||
Net carrying amount at end of period |
$ | 141 | $ | 634 | $ | 529 | $ | 311 | $ | 1,189 | $ | 120 | $ | 4,105 | $ | 185 | $ | 7,214 |
(1) | As at October 31, 2023, we had total contractual commitments of $120 million to purchase premises and equipment (October 31, 2022 – $185 million). |
Note 11 Goodwill and other intangible assets |
For the year ended October 31, 2023 |
||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Canadian Banking |
Caribbean Banking |
Canadian Wealth Management |
Global Asset Management |
U.S. Wealth Management (including City National) |
International Wealth Management |
Investor Services |
Insurance |
Capital Markets |
Total |
||||||||||||||||||||||||||||||
Balance at beginning of period |
$ |
2,574 |
$ |
1,759 |
$ |
589 |
$ |
1,928 |
$ |
3,027 |
$ |
1,042 |
$ |
59 |
$ |
112 |
$ |
1,187 |
$ |
12,277 |
||||||||||||||||||||
Acquisitions |
70 |
– |
– |
– |
– |
– |
– |
– |
– |
70 |
||||||||||||||||||||||||||||||
Dispositions |
– |
– |
– |
– |
– |
– |
(30 |
) |
– |
– |
(30 |
) |
||||||||||||||||||||||||||||
Currency translations |
– |
32 |
4 |
88 |
53 |
82 |
– |
– |
18 |
277 |
||||||||||||||||||||||||||||||
Balance at end of period |
$ |
2,644 |
$ |
1,791 |
$ |
593 |
$ |
2,016 |
$ |
3,080 |
$ |
1,124 |
$ |
29 |
$ |
112 |
$ |
1,205 |
$ |
12,594 |
||||||||||||||||||||
For the year ended October 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Canadian Banking |
Caribbean Banking |
Canadian Wealth Management |
Global Asset Management |
U.S. Wealth Management (including City National) |
International Wealth Management |
Investor Services (1)
|
Insurance |
Capital Markets (1)
|
Total | ||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 2,557 | $ | 1,600 | $ | 577 | $ | 1,964 | $ | 2,768 | $ | 115 | $ | 60 | $ | 112 | $ | 1,101 | $ | 10,854 | ||||||||||||||||||||
Acquisitions |
17 | – | – | 33 | – | 880 | – | – | – | 930 | ||||||||||||||||||||||||||||||
Dispositions |
– | – | – | – | (19 | ) | – | – | – | – | (19 | ) | ||||||||||||||||||||||||||||
Currency translations |
– | 159 | 12 | (69 | ) | 278 | 47 | (1 | ) | – | 86 | 512 | ||||||||||||||||||||||||||||
Balance at end of period |
$ | 2,574 | $ | 1,759 | $ | 589 | $ | 1,928 | $ | 3,027 | $ | 1,042 | $ | 59 | $ | 112 | $ | 1,187 | $ | 12,277 |
(1) | Amounts have been revised from those previously presented to conform to our new basis of segment presentation. Refer to Note 27 for further details of our business segments. |
Note 11 Goodwill and other intangible assets (continued)
|
As at | ||||||||||||||||||
August 1, 2023 |
August 1, 2022 | |||||||||||||||||
Discount rate (1)
|
Terminal growth rate |
Discount rate (1)
|
Terminal growth rate |
|||||||||||||||
Group of cash generating units |
||||||||||||||||||
Canadian Banking |
11.7% |
3.0% |
11.0% | 3.0% | ||||||||||||||
Caribbean Banking |
12.9 |
3.5 |
12.6 | 3.5 | ||||||||||||||
Canadian Wealth Management |
12.5 |
3.0 |
11.8 | 3.0 | ||||||||||||||
Global Asset Management |
12.5 |
3.0 |
11.8 | 3.0 | ||||||||||||||
U.S. Wealth Management (including City National) |
12.5 |
3.0 |
12.8 | 3.0 | ||||||||||||||
International Wealth Management (2)
|
12.5 |
3.0 |
n.m. | n.m. | ||||||||||||||
Investor Services |
12.4 |
3.0 |
11.8 | 3.0 | ||||||||||||||
Insurance |
12.4 |
3.0 |
11.6 | 3.0 | ||||||||||||||
Capital Markets |
12.7 |
3.0 |
12.4 | 3.0 |
(1) |
Pre-tax discount rates are determined implicitly based on post-tax discount rates. |
(2) | The recoverable amount for our International Wealth Management CGU was determined using a multiples-based approach in 2022. |
n.m. | not meaningful |
For the year ended October 31, 2023 |
||||||||||||||||||||||||
(Millions of Canadian dollars) |
Internally generated software |
Other software |
Core deposit intangibles |
Customer list and relationships |
In process software |
Total |
||||||||||||||||||
Gross carrying amount |
||||||||||||||||||||||||
Balance at beginning of period |
$ |
5,076 |
$ |
908 |
$ |
1,630 |
$ |
2,472 |
$ |
1,535 |
$ |
11,621 |
||||||||||||
Additions |
81 |
179 |
– |
– |
1,134 |
1,394 |
||||||||||||||||||
Acquisition through business combination |
– |
31 |
– |
– |
– |
31 |
||||||||||||||||||
Transfers |
1,067 |
78 |
– |
– |
(1,145 |
) |
– |
|||||||||||||||||
Dispositions |
(509 |
) |
(145 |
) |
– |
(160 |
)
|
8 |
(806 |
)
| ||||||||||||||
Impairment losses |
(73 |
) |
– |
– |
(9 |
) |
(5 |
) |
(87 |
) | ||||||||||||||
Currency translations |
68 |
17 |
28 |
144 |
38 |
295 |
||||||||||||||||||
Other changes |
(115 |
) |
29 |
– |
9 |
(33 |
) |
(110 |
) | |||||||||||||||
Balance at end of period |
$ |
5,595 |
$ |
1,097 |
$ |
1,658 |
$ |
2,456 |
$ |
1,532 |
$ |
12,338 |
||||||||||||
Accumulated amortization |
||||||||||||||||||||||||
Balance at beginning of period |
$ |
(3,031 |
) |
$ |
(612 |
) |
$ |
(1,146 |
) |
$ |
(749 |
) |
$ |
– |
$ |
(5,538 |
) | |||||||
Amortization charge for the year |
(1,009 |
) |
(146 |
) |
(160 |
) |
(172 |
) |
– |
(1,487 |
) | |||||||||||||
Dispositions |
506 |
157 |
– |
114 |
– |
777 |
||||||||||||||||||
Impairment losses |
(19 |
) |
– |
– |
– |
– |
(19 |
) | ||||||||||||||||
Currency translations |
(37 |
) |
(13 |
) |
(24 |
) |
(33 |
) |
– |
(107 |
) | |||||||||||||
Other changes |
(7 |
) |
(44 |
) |
– |
(6 |
) |
– |
(57 |
) | ||||||||||||||
Balance at end of period |
$ |
(3,597 |
) |
$ |
(658 |
) |
$ |
(1,330 |
) |
$ |
(846 |
)
|
$ |
– |
$ |
(6,431 |
)
| |||||||
Net balance at end of period |
$ |
1,998 |
$ |
439 |
$ |
328 |
$ |
1,610 |
$ |
1,532 |
$ |
5,907 |
||||||||||||
For the year ended October 31, 2022 | ||||||||||||||||||||||||
(Millions of Canadian dollars) |
Internally generated software |
Other software |
Core deposit intangibles |
Customer list and relationships |
In process software |
Total | ||||||||||||||||||
Gross carrying amount |
||||||||||||||||||||||||
Balance at beginning of period |
$ | 4,886 | $ | 894 | $ | 1,474 | $ | 1,414 | $ | 1,236 | $ | 9,904 | ||||||||||||
Additions |
25 | 16 | – | – | 1,256 | 1,297 | ||||||||||||||||||
Acquisition through business combination |
– | 14 | – | 1,292 | 148 | 1,454 | ||||||||||||||||||
Transfers |
1,121 | 76 | – | – | (1,197 | ) | – | |||||||||||||||||
Dispositions |
(960 | ) | (111 | ) | – | (329 | ) | (5 | ) | (1,405 | ) | |||||||||||||
Impairment losses |
(16 | ) | – | – | – | (11 | ) | (27 | ) | |||||||||||||||
Currency translations |
71 | 48 | 149 | 113 | 30 | 411 | ||||||||||||||||||
Other changes |
(51 | ) | (29 | ) | 7 | (18 | ) | 78 | (13 | ) | ||||||||||||||
Balance at end of period |
$ | 5,076 | $ | 908 | $ | 1,630 | $ | 2,472 | $ | 1,535 | $ | 11,621 | ||||||||||||
Accumulated amortization |
||||||||||||||||||||||||
Balance at beginning of period |
$ | (2,979 | ) | $ | (572 | ) | $ | (885 | ) | $ | (997 | ) | $ | – | $ | (5,433 | ) | |||||||
Amortization charge for the year |
(976 | ) | (137 | ) | (153 | ) | (103 | ) | – | (1,369 | ) | |||||||||||||
Dispositions |
959 | 109 | – | 315 | – | 1,383 | ||||||||||||||||||
Impairment losses |
9 | – | – | – | – | 9 | ||||||||||||||||||
Currency translations |
(36 | ) | (31 | ) | (98 | ) | 13 | – | (152 | ) | ||||||||||||||
Other changes |
(8 | ) | 19 | (10 | ) | 23 | – | 24 | ||||||||||||||||
Balance at end of period |
$ | (3,031 | ) | $ | (612 | ) | $ | (1,146 | ) | $ | (749 | ) | $ | – | $ | (5,538 | ) | |||||||
Net balance at end of period |
$ | 2,045 | $ | 296 | $ | 484 | $ | 1,723 | $ | 1,535 | $ | 6,083 |
Note 12 Joint ventures and associated companies |
Joint ventures |
Associated companies |
|||||||||||||||||
As at and for the year ended |
||||||||||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
October 31 2023 |
October 31 2022 |
||||||||||||||
Carrying amount |
$ |
215 |
$ | 248 | $ |
286 |
$ | 463 | ||||||||||
Share of: |
||||||||||||||||||
Net income (1)
|
$ |
18 |
$ | 103 | $ |
5 |
$ | 7 |
(1) | Excludes impairment losses recognized on our interests in joint ventures and associated companies. During the year ended October 31, 2023, we recognized impairment losses of $242 million in Non-interest income – Income (loss) from joint ventures and associates with respect to our interest in an associated company in our Wealth Management segment (October 31, 2022 – $nil). |
Note 13 Other assets |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Accounts receivable and prepaids |
$ |
4,373 |
$ | 4,250 | ||||
Accrued interest receivable |
7,775 |
4,703 | ||||||
Cash collateral |
20,104 |
25,634 | ||||||
Commodity trading receivables |
5,979 |
7,054 | ||||||
Deferred income tax asset |
2,446 |
1,472 | ||||||
Employee benefit assets |
2,826 |
3,331 | ||||||
Held-for-sale assets |
2,562 |
11 | ||||||
Insurance-related assets |
||||||||
Collateral loans |
528 |
524 | ||||||
Policy loans |
87 |
85 | ||||||
Reinsurance assets |
1,127 |
1,084 | ||||||
Other |
13 |
12 | ||||||
Investments in joint ventures and associates |
501 |
711 | ||||||
Margin deposits |
8,849 |
14,684 | ||||||
Precious metals |
2,753 |
1,772 | ||||||
Receivable from brokers, dealers and clients |
2,834 |
3,299 | ||||||
Taxes receivable |
8,908 |
6,933 | ||||||
Other |
5,403 |
4,741 | ||||||
$ |
77,068 |
$ | 80,300 |
Note 14 Deposits |
As at | ||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Demand (1)
|
Notice (2)
|
Term (3)
|
Total |
Demand (1)
|
Notice (2)
|
Term (3)
|
Total | ||||||||||||||||||||||||||
Personal |
$ |
186,530 |
$ |
57,614 |
$ |
197,802 |
$ |
441,946 |
$ | 203,645 | $ | 64,743 | $ | 136,544 | $ | 404,932 | ||||||||||||||||||
Business and government |
316,200 |
19,056 |
409,819 |
745,075 |
348,004 | 17,855 | 394,011 | 759,870 | ||||||||||||||||||||||||||
Bank |
7,996 |
769 |
35,901 |
44,666 |
10,458 | 490 | 33,064 | 44,012 | ||||||||||||||||||||||||||
$ |
510,726 |
$ |
77,439 |
$ |
643,522 |
$ |
1,231,687 |
$ | 562,107 | $ | 83,088 | $ | 563,619 | $ | 1,208,814 | |||||||||||||||||||
Non-interest-bearing (4)
|
||||||||||||||||||||||||||||||||||
Canada |
$ |
132,994 |
$ |
6,107 |
$ |
168 |
$ |
139,269 |
$ | 149,737 | $ | 7,797 | $ | 466 | $ | 158,000 | ||||||||||||||||||
United States |
40,646 |
– |
– |
40,646 |
52,702 | – | – | 52,702 | ||||||||||||||||||||||||||
Europe (5)
|
17 |
– |
– |
17 |
620 | – | – | 620 | ||||||||||||||||||||||||||
Other International |
7,265 |
– |
– |
7,265 |
7,840 | – | – | 7,840 | ||||||||||||||||||||||||||
Interest-bearing (4)
|
||||||||||||||||||||||||||||||||||
Canada |
302,746 |
14,641 |
493,347 |
810,734 |
305,779 | 17,982 | 409,586 | 733,347 | ||||||||||||||||||||||||||
United States |
16,210 |
55,895 |
78,837 |
150,942 |
11,410 | 57,055 | 85,111 | 153,576 | ||||||||||||||||||||||||||
Europe (5)
|
5,353 |
726 |
51,812 |
57,891 |
28,276 | 254 | 52,144 | 80,674 | ||||||||||||||||||||||||||
Other International |
5,495 |
70 |
19,358 |
24,923 |
5,743 | – | 16,312 | 22,055 | ||||||||||||||||||||||||||
$ |
510,726 |
$ |
77,439 |
$ |
643,522 |
$ |
1,231,687 |
$ | 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 October 31, 2023, deposits denominated in U.S. dollars, British pounds, Euro and other foreign currencies were $445 billion, $34 billion, $49 billion and $32 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. |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Within 1 year: |
||||||||
less than 3 months |
$ |
182,373 |
$ | 159,602 | ||||
3 to 6 months |
69,868 |
61,996 | ||||||
6 to 12 months |
151,079 |
156,531 | ||||||
1 to 2 years |
76,232 |
49,225 | ||||||
2 to 3 years |
49,965 |
42,809 | ||||||
3 to 4 years |
36,774 |
27,609 | ||||||
4 to 5 years |
36,506 |
33,835 | ||||||
Over 5 years |
40,725 |
32,012 | ||||||
$ |
643,522 |
$ | 563,619 | |||||
Aggregate amount of term deposits in denominations of one hundred thousand dollars or more |
$ |
586,000 |
$ | 521,000 |
For the year ended | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Millions of Canadian dollars, except for percentage amounts) |
Average balances |
Average rates |
Average balances |
Average rates |
||||||||||||||
Canada |
$ |
913,669 |
3.02 |
% |
$ | 847,052 | 1.02% | |||||||||||
United States |
196,490 |
2.74 |
207,436 | 0.50 | ||||||||||||||
Europe |
70,426 |
4.22 |
81,824 | 1.03 | ||||||||||||||
Other International |
31,035 |
2.26 |
28,613 | 0.72 | ||||||||||||||
$ |
1,211,620 |
3.03 |
% |
$ | 1,164,925 | 0.92% |
Note 15 Insurance |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Gross premiums |
$ |
5,428 |
$ | 4,913 | ||||
Premiums ceded to reinsurers |
(297 |
) |
(260 | ) | ||||
Net premiums |
$ |
5,131 |
$ | 4,653 | ||||
Gross claims and benefits (1)
|
$ |
3,960 |
$ | 1,741 | ||||
Reinsurers’ share of claims and benefits |
(261 |
) |
(273 | ) | ||||
Net claims |
$ |
3,699 |
$ | 1,468 |
(1) | Includes the change in fair value of investments backing our policyholder liabilities. |
Note 15 Insurance (continued)
|
As at | ||||||||
October 31 2023 |
October 31 2022 |
|||||||
Life Insurance |
||||||||
Canadian Insurance |
||||||||
Mortality rates (1)
|
0.11 |
% |
0.11 | % | ||||
Morbidity rates (2)
|
1.79 |
1.81 | ||||||
Future reinvestment yield (3)
|
3.73 |
3.75 | ||||||
Lapse rates (4)
|
0.50 |
0.50 | ||||||
International Insurance |
||||||||
Mortality rates (1)
|
0.83 |
0.80 | ||||||
Future reinvestment yield (3)
|
2.90 |
2.90 |
(1) | Average annual death rate for the largest portfolio of insured policies. |
(2) | Average net termination rate for the individual and group disability insurance portfolio. |
(3) | Ultimate reinvestment rate of the insurance operations. |
(4) | Ultimate policy termination rate (lapse rate) for the largest permanent life insurance portfolio that relies on a higher termination rate to maintain its profitability (lapse-supported policies). |
As at | ||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||
(Millions of Canadian dollars) |
Gross |
Ceded |
Net |
Gross | Ceded | Net | ||||||||||||||||||||
Life insurance policyholder liabilities |
||||||||||||||||||||||||||
Life, health and annuity |
$ |
11,934 |
$ |
968 |
$ |
10,966 |
$ | 11,481 | $ | 902 | $ | 10,579 | ||||||||||||||
Investment contracts (1)
|
38 |
– |
38 |
41 | – | 41 | ||||||||||||||||||||
$ |
11,972 |
$ |
968 |
$ |
11,004 |
$ | 11,522 | $ | 902 | $ | 10,620 | |||||||||||||||
Non-life insurance policyholder liabilities |
||||||||||||||||||||||||||
Unearned premium provision (1)
|
$ |
9 |
$ |
– |
$ |
9 |
$ | 7 | $ | – | $ | 7 | ||||||||||||||
Unpaid claims provision |
32 |
1 |
31 |
30 | 1 | 29 | ||||||||||||||||||||
$ |
41 |
$ |
1 |
$ |
40 |
$ | 37 | $ | 1 | $ | 36 | |||||||||||||||
$ |
12,013 |
$ |
969 |
$ |
11,044 |
$ | 11,559 | $ | 903 | $ | 10,656 |
(1) | Liabilities for investment contracts and unearned premium provision are reported in Other liabilities on the Consolidated Balance Sheets. |
For the year ended | ||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||
(Millions of Canadian dollars) |
Gross |
Ceded |
Net |
Gross | Ceded | Net | ||||||||||||||||||||
Balances at beginning of period |
$ |
11,522 |
$ |
902 |
$ |
10,620 |
$ | 12,817 | $ | 861 | $ | 11,956 | ||||||||||||||
New and in-force policies (1)
|
552 |
30 |
522 |
(1,288 | ) | (130 | ) | (1,158 | ) | |||||||||||||||||
Changes in assumption and methodology |
(99 |
) |
36 |
(135 |
) |
(6 | ) | 171 | (177 | ) | ||||||||||||||||
Net change in investment contracts |
(3 |
) |
– |
(3 |
) |
(1 | ) | – | (1 | ) | ||||||||||||||||
Balances at end of period |
$ |
11,972 |
$ |
968 |
$ |
11,004 |
$ | 11,522 | $ | 902 | $ | 10,620 |
(1) | Includes the change in fair value of investments backing our policyholder liabilities. |
Net income impact for the year ended |
||||||||||||
(Millions of Canadian dollars, except for percentage amounts) |
Change in
variable |
October 31 2023
|
October 31 2022
|
|||||||||
Increase in market interest rates
(1)
|
1% | $ |
1 |
$ | (10 | ) | ||||||
Decrease in market interest rates
(1)
|
1 | 7 |
5 | |||||||||
Increase in equity market values
(2)
|
10 | 2 |
6 | |||||||||
Decrease in equity market values
(2)
|
10 | (8 |
) |
(10 | ) | |||||||
Increase in maintenance expenses
(3)
|
5 | (32 |
) |
(33 | ) | |||||||
Life Insurance
(3)
|
||||||||||||
Adverse change in annuitant mortality rates
|
2 | (177 |
) |
(166 | ) | |||||||
Adverse change in assurance mortality rates
|
2 | (54 |
) |
(59 | ) | |||||||
Adverse change in morbidity rates
|
5 | (177 |
) |
(181 | ) | |||||||
Adverse change in lapse rates
|
10 | (192 |
) |
(199 | ) |
(1) | Sensitivities for market interest rates include the expected current period earnings impact of a 100 basis points shift in the yield curve by increasing the current reinvestment rates while holding the assumed ultimate rates constant. The sensitivity consists of both the impact on assumed reinvestment rates in the actuarial liabilities and any changes in fair value of assets and liabilities from the yield curve shift. |
(2) | Sensitivities to changes in equity market values are composed of the expected current period earnings impact from differences in the changes in fair value of the equity asset holdings and the partially offsetting impact on the actuarial liabilities. |
(3) | Sensitivities to changes in maintenance expenses and life insurance actuarial assumptions include the expected current period earnings impact from recognition of increased liabilities due to an adverse change in the given assumption over the lifetime of all in-force policies. |
Note 16 Segregated funds |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Cash |
$ |
40 |
$ | 39 | ||||
Investment in mutual funds |
2,719 |
2,598 | ||||||
Other assets (liabilities), net |
1 |
1 | ||||||
$ |
2,760 |
$ | 2,638 |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Net assets at beginning of period |
$ |
2,638 |
$ | 2,666 | ||||
Additions (deductions): |
||||||||
Deposits from policyholders |
734 |
859 | ||||||
Net realized and unrealized gains (losses) |
52 |
(301 | ) | |||||
Interest and dividends |
76 |
56 | ||||||
Payment to policyholders |
(668 |
) |
(573 | ) | ||||
Management and administrative fees |
(72 |
) |
(69 | ) | ||||
Net assets at end of period |
$ |
2,760 |
$ | 2,638 |
Note 17 Employee benefits – Pension and other post-employment benefits |
As at | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Millions of Canadian dollars) |
Defined benefit pension plans |
Other post- employment benefit plans |
Defined benefit pension plans |
Other post- employment benefit plans |
||||||||||||||
Canada |
||||||||||||||||||
Fair value of plan assets |
$ |
13,704 |
$ |
– |
$ | 14,310 | $ | – | ||||||||||
Present value of defined benefit obligation |
11,142 |
1,348 |
11,271 | 1,387 | ||||||||||||||
Net surplus (deficit) |
$ |
2,562 |
$ |
(1,348 |
) |
$ | 3,039 | $ | (1,387 | ) | ||||||||
International |
||||||||||||||||||
Fair value of plan assets |
$ |
664 |
$ |
– |
$ | 716 | $ | – | ||||||||||
Present value of defined benefit obligation |
585 |
69 |
622 | 75 | ||||||||||||||
Net surplus (deficit) |
$ |
79 |
$ |
(69 |
) |
$ | 94 | $ | (75 | ) | ||||||||
Total |
||||||||||||||||||
Fair value of plan assets |
$ |
14,368 |
$ |
– |
$ | 15,026 | $ | – | ||||||||||
Present value of defined benefit obligation |
11,727 |
1,417 |
11,893 | 1,462 | ||||||||||||||
Total net surplus (deficit) |
$ |
2,641 |
$ |
(1,417 |
) |
$ | 3,133 | $ | (1,462 | ) | ||||||||
Effect of asset ceiling |
(9 |
) |
– |
(8 | ) | – | ||||||||||||
Total net surplus (deficit), net of effect of asset ceiling |
$ |
2,632 |
$ |
(1,417 |
) |
$ | 3,125 | $ | (1,462 | ) | ||||||||
Amounts recognized in our Consolidated Balance Sheets |
||||||||||||||||||
Employee benefit assets |
$ |
2,826 |
$ |
– |
$ | 3,331 | $ | – | ||||||||||
Employee benefit liabilities |
(194 |
) |
(1,417 |
) |
(206 | ) | (1,462 | ) | ||||||||||
Total net surplus (deficit), net of effect of asset ceiling |
$ |
2,632 |
$ |
(1,417 |
) |
$ | 3,125 | $ | (1,462 | ) |
As at or for the year ended | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Millions of Canadian dollars) |
Defined benefit pension plans (1)
|
Other post- employment benefit plans |
Defined benefit pension plans (1)
|
Other post- employment benefit plans |
||||||||||||||
Fair value of plan assets at beginning of period |
$ |
15,026 |
$ |
– |
$ | 17,703 | $ | – | ||||||||||
Interest income |
786 |
– |
580 | – | ||||||||||||||
Remeasurements |
||||||||||||||||||
Return on plan assets (excluding interest income) |
(895 |
) |
– |
(2,931 | ) | – | ||||||||||||
Change in foreign currency exchange rate |
55 |
– |
(62 | ) | – | |||||||||||||
Contributions – Employer |
23 |
80 |
177 | 79 | ||||||||||||||
Contributions – Plan participant |
44 |
22 |
45 | 20 | ||||||||||||||
Payments |
(645 |
) |
(102 |
) |
(610 | ) | (99 | ) | ||||||||||
Payments – amount paid in respect of settlements |
– |
– |
3 | – | ||||||||||||||
Business combinations/Disposals |
(17 |
) |
– |
135 | – |
|||||||||||||
Other |
(9 |
) |
– |
(14 | ) | – | ||||||||||||
Fair value of plan assets at end of period |
$ |
14,368 |
$ |
– |
$ | 15,026 | $ | – | ||||||||||
Benefit obligation at beginning of period |
$ |
11,893 |
$ |
1,462 |
$ | 15,315 | $ | 1,780 | ||||||||||
Current service costs |
195 |
33 |
308 | 42 | ||||||||||||||
Past service costs |
– |
(2 |
) |
(1 | ) | 2 | ||||||||||||
Gains and losses on settlements |
– |
– |
(3 | ) | – | |||||||||||||
Interest expense |
624 |
77 |
496 | 63 | ||||||||||||||
Remeasurements |
||||||||||||||||||
Actuarial losses (gains) from demographic assumptions |
(2 |
) |
(24 |
) |
(2 | ) | (1 | ) | ||||||||||
Actuarial losses (gains) from financial assumptions |
(480 |
) |
(46 |
) |
(3,797 | ) | (341 | ) | ||||||||||
Actuarial losses (gains) from experience adjustments |
70 |
(1 |
) |
83 | (9 | ) | ||||||||||||
Change in foreign currency exchange rate |
45 |
1 |
(47 | ) | 6 | |||||||||||||
Contributions – Plan participant |
44 |
22 |
45 | 20 | ||||||||||||||
Payments |
(645 |
) |
(102 |
) |
(610 | ) | (99 | ) | ||||||||||
Payments – amount paid in respect of settlements |
– |
– |
3 | – | ||||||||||||||
Business combinations/Disposals |
(17 |
) |
(3 |
) |
103 | (1 | ) | |||||||||||
Benefit obligation at end of period |
$ |
11,727 |
$ |
1,417 |
$ | 11,893 | $ | 1,462 | ||||||||||
Unfunded obligation |
$ |
18 |
$ |
1,417 |
$ | 23 | $ | 1,462 | ||||||||||
Wholly or partly funded obligation |
11,709 |
– |
11,870 | – | ||||||||||||||
Total benefit obligation |
$ |
11,727 |
$ |
1,417 |
$ | 11,893 | $ | 1,462 |
(1) | For pension plans with funding deficits, the benefit obligations and fair value of plan assets as at October 31, 2023 were $300 million and $106 million, respectively (October 31, 2022 – $323 million and $117 million, respectively). |
For the year ended | ||||||||||||||||||
Pension plans |
Other post-employment
benefit plans |
|||||||||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
October 31 2023 |
October 31 2022 |
||||||||||||||
Current service costs |
$ |
195 |
$ | 308 | $ |
33 |
$ | 42 | ||||||||||
Past service costs |
– |
(1 | ) | (2 |
) |
2 | ||||||||||||
Gains and losses on settlements |
– |
(3 | ) | – |
– | |||||||||||||
Net interest expense (income) |
(162 |
) |
(84 | ) | 77 |
63 | ||||||||||||
Remeasurements of other long term benefits |
– |
– | (1 |
) |
(26 | ) | ||||||||||||
Administrative expense |
9 |
14 | – |
– | ||||||||||||||
Defined benefit pension expense |
$ |
42 |
$ | 234 | $ |
107 |
$ | 81 | ||||||||||
Defined contribution pension expense |
323 |
250 | – |
– | ||||||||||||||
$ |
365 |
$ | 484 | $ |
107 |
$ | 81 |
Note 17 Employee benefits – Pension and other post-employment benefits (continued)
|
For the year ended | ||||||||||||||||||||
Defined benefit pension plans |
Other post-employment benefit plans |
|||||||||||||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
October 31 2023 |
October 31 2022 |
||||||||||||||||
Actuarial (gains) losses: |
||||||||||||||||||||
Changes in demographic assumptions |
$ |
(2 |
) |
$ | (2 | ) | $ |
(27 |
) |
$ | (1 | ) | ||||||||
Changes in financial assumptions |
(480 |
) |
(3,797 | ) | (45 |
) |
(319 | ) | ||||||||||||
Experience adjustments |
70 |
83 | 2 |
(5 | ) | |||||||||||||||
Return on plan assets (excluding interest based on discount rate) |
895 |
2,931 | – |
– | ||||||||||||||||
Change in asset ceiling (excluding interest income) |
1 |
2 | – |
– | ||||||||||||||||
$ |
484 |
$ | (783 | ) | $ |
(70 |
) |
$ | (325 | ) |
• | the nature of the underlying benefit obligations, including the duration and term profile of the liabilities; |
• | the member demographics, including expectations for normal retirements, terminations, and deaths; |
• | the financial position of the pension plans; |
• | the diversification benefits obtained by the inclusion of multiple asset classes; and |
• | expected asset returns, including asset and liability correlations, along with liquidity requirements of the plan. |
As at |
||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 |
|||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentages) |
Fair value |
Percentage of total plan assets |
Quoted in active market (3)
|
Fair value | Percentage of total plan assets |
Quoted in active market (3)
|
||||||||||||||||||||||
Equity securities |
||||||||||||||||||||||||||||
Domestic |
$ |
723 |
5 |
% |
100 |
% |
$ | 1,469 | 10 | % | 100 | % | ||||||||||||||||
Foreign |
1,726 |
12 |
100 |
2,799 | 19 | 100 | ||||||||||||||||||||||
Debt securities |
||||||||||||||||||||||||||||
Domestic government bonds (4)
|
4,343 |
30 |
– |
3,489 | 23 | – | ||||||||||||||||||||||
Foreign government bonds |
128 |
1 |
– |
114 | 1 | – | ||||||||||||||||||||||
Corporate and other bonds |
3,296 |
23 |
– |
3,171 | 21 | – | ||||||||||||||||||||||
Alternative investments and other |
4,152 |
29 |
6 |
3,984 | 26 | 8 | ||||||||||||||||||||||
$ |
14,368 |
100 |
% |
19 |
% |
$ | 15,026 | 100 | % | 30 | % |
(1) | The asset allocation is based on the underlying investments held directly and indirectly through the funds as this is how we manage our investment policy and strategies. |
(2) | Represents the total plan assets held in our Canadian and International pension plans. |
(3) | If our assessment of whether or not an asset was quoted in an active market was based on direct investments, 22% of our total plan assets would be classified as quoted in an active market (October 31, 2022 – 34%). |
(4) | Amounts are net of securities sold under repurchase agreements. |
(Millions of Canadian dollars, except participants and years) | As at October 31, 2023 |
|||||||||||
Canada |
International |
Total |
||||||||||
Number of plan participants |
65,890 |
5,963 |
71,853 |
|||||||||
Actual benefit payments 2023 |
$ |
604 |
$ |
41 |
$ |
645 |
||||||
Benefits expected to be paid 2024 |
670 |
44 |
714 |
|||||||||
Benefits expected to be paid 2025 |
694 |
40 |
734 |
|||||||||
Benefits expected to be paid 2026 |
717 |
42 |
759 |
|||||||||
Benefits expected to be paid 2027 |
738 |
42 |
780 |
|||||||||
Benefits expected to be paid 2028 |
757 |
42 |
799 |
|||||||||
Benefits expected to be paid 2029-2033 |
4,013 |
226 |
4,239 |
|||||||||
Weighted average duration of defined benefit payments |
12.2 years |
15.1 years |
12.3 years |
Note 17 Employee benefits – Pension and other post-employment benefits (continued)
|
As at | ||||||||||||||||||||
Defined benefit pension plans |
Other post-employment benefit plans |
|||||||||||||||||||
October 31 2023 |
October 31
2022
|
October 31 2023 |
October 31
2022
|
|||||||||||||||||
Discount rate |
5.7% |
5.4% | 5.8% |
5.5% | ||||||||||||||||
Rate of increase in future compensation |
3.0% |
3.0% | n.a. |
n.a. | ||||||||||||||||
Healthcare cost trend rates (1)
|
||||||||||||||||||||
– Medical |
n.a. |
n.a. | 3.4% |
3.5% | ||||||||||||||||
– Dental |
n.a. |
n.a. | 3.1% |
3.1% |
(1) | For our other post-employment benefit plans, the assumed trend rates used to measure the expected benefit costs of the defined benefit obligations are also the ultimate trend rates. |
n.a. | not applicable |
As at | ||||||||||||||||||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
Life expectancy at 65 for a member currently at |
Life expectancy at 65 for a member currently at | |||||||||||||||||||||||||||||||||||||||||||
Age 65 |
Age 45 |
Age 65 | Age 45 | |||||||||||||||||||||||||||||||||||||||||
(In years) |
Male |
Female |
Male |
Female |
Male | Female | Male | Female | ||||||||||||||||||||||||||||||||||||
Country |
||||||||||||||||||||||||||||||||||||||||||||
Canada |
23.9 |
24.3 |
24.8 |
25.2 |
23.9 | 24.2 | 24.8 | 25.1 | ||||||||||||||||||||||||||||||||||||
United Kingdom |
23.5 |
25.4 |
24.7 |
26.8 |
23.4 | 25.4 | 24.7 | 26.8 |
Increase (decrease) in obligation |
||||||||
(Millions of Canadian dollars) |
Defined benefit pension plans |
Other post- employment benefit plans |
||||||
Discount rate |
||||||||
Impact of 100 bps increase in discount rate |
$ |
(1,228 |
) |
$ |
(149 |
) |
||
Impact of 100 bps decrease in discount rate |
1,536 |
184 |
||||||
Rate of increase in future compensation |
||||||||
Impact of 50 bps increase in rate of increase in future compensation |
23 |
– |
||||||
Impact of 50 bps decrease in rate of increase in future compensation |
(25 |
) |
– |
|||||
Mortality rate |
||||||||
Impact of an increase in longevity by one additional year |
289 |
18 |
||||||
Healthcare cost trend rate |
||||||||
Impact of 100 bps increase in healthcare cost trend rate |
n.a. |
50 |
||||||
Impact of 100 bps decrease in healthcare cost trend rate |
n.a. |
(42 |
) |
n.a. not | applicable |
Note 18 Other liabilities |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Accounts payable and accrued expenses |
$ |
1,599 |
$ | 1,292 | ||||
Accrued interest payable |
10,936 |
5,019 | ||||||
Cash collateral |
23,365 |
26,143 | ||||||
Commodity liabilities |
11,716 |
10,038 | ||||||
Deferred income |
3,830 |
3,660 | ||||||
Deferred income taxes |
426 |
439 | ||||||
Dividends payable |
1,975 |
1,856 | ||||||
Employee benefit liabilities |
1,611 |
1,668 | ||||||
Held-for-sale liabilities |
2,560 |
– |
||||||
Insurance related liabilities |
342 |
324 | ||||||
Lease liabilities |
4,764 |
5,110 | ||||||
Negotiable instruments |
1,684 |
1,715 | ||||||
Payable to brokers, dealers and clients |
8,065 |
10,974 | ||||||
Payroll and related compensation |
9,088 |
8,991 | ||||||
Precious metals certificates |
775 |
557 | ||||||
Provisions |
644 |
627 | ||||||
Short-term borrowings of subsidiaries |
4,507 |
9,609 | ||||||
Taxes payable |
2,959 |
2,136 | ||||||
Other |
5,324 |
5,077 | ||||||
$ |
96,170 |
$ | 95,235 |
Note 19 Subordinated debentures |
(Millions of Canadian dollars, except percentage and foreign currency) | Interest rate |
Denominated in
foreign currency
(millions) |
As at | |||||||||||||||
Maturity |
Earliest par value redemption date |
October 31 2023 |
October 31
2022
|
|||||||||||||||
June 8, 2023 (1)
|
9.30% | $ |
– |
$ | 110 | |||||||||||||
January 27, 2026 (2)
|
4.65% | US$1,500 | 1,939 |
1,884 | ||||||||||||||
November 1, 2027 (3)
|
November 1, 2022 | 4.75% | TT$300 | – |
60 | |||||||||||||
July 25, 2029 (2)
|
July 25, 2024 | 2.74% |
(4) |
1,459 |
1,415 | |||||||||||||
December 23, 2029 (2)
|
December 23, 2024 | 2.88% |
(5) |
1,442 |
1,412 | |||||||||||||
February 1, 2033 (2)
|
February 1, 2028 | 5.01% |
(6) |
1,418 |
– | |||||||||||||
June 30, 2030 (2)
|
June 30, 2025 | 2.09% |
(7) |
1,249 |
1,250 | |||||||||||||
November 3, 2031 (2)
|
November 3, 2026 | 2.14% |
(8) |
1,637 |
1,637 | |||||||||||||
May 3, 2032 (2)
|
May 3, 2027 | 2.94% |
(9) |
919 |
932 | |||||||||||||
January 28, 2033 (2)
|
January 28, 2028 | 1.67% |
(10) |
868 |
875 | |||||||||||||
October 1, 2083 |
Any interest payment date |
(11) |
224 |
224 | ||||||||||||||
June 29, 2085 |
Any interest payment date |
(12) |
US$174 | 241 |
237 | |||||||||||||
$ |
11,396 |
$ | 10,036 | |||||||||||||||
Deferred financing costs |
(10 |
) |
(11 | ) | ||||||||||||||
$ |
11,386 |
$ | 10,025 |
(1) | On June 8, 2023, all $110 million of outstanding 9.30% subordinated debentures matured. The principal plus accrued interest were paid to noteholders on the maturity date. |
(2) | The notes include NVCC provisions, necessary for the notes to qualify as Tier 2 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is convertible into common shares pursuant to an automatic conversion formula with a multiplier of 1.5 and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of shares issued is determined by dividing the par value of the note (including accrued and unpaid interest on such note) by the conversion price and then times the multiplier. |
(3) | On November 1, 2022, we redeemed all TT$300 million of outstanding 4.75% subordinated debentures due on November 1, 2027 for 100% of their principal amount plus interest accrued to, but excluding, the redemption date. |
(4) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.98% above the 3-month CDOR. |
(5) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.89% above the 3-month CDOR. |
(6) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 2.12% above the Daily Compounded CORRA. |
(7) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.31% above the 3-month CDOR. |
(8) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.61% above the 3-month CDOR. |
(9) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.76% above the 3-month CDOR. |
(10) | Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.55% above the 3-month CDOR. |
(11) | Interest at a rate of 0.40% above the 30-day Bankers’ Acceptance rate. |
(12) | Interest at a rate of 0.25% above the U.S. dollar 3-month London Interbank Mean Rate (LIMEAN) under a synthetic methodology. In the event of a reduction of the annual dividend we declare on our common shares, the interest payable on the debentures is reduced pro rata to the dividend reduction and the interest reduction is payable with the proceeds from the sale of newly issued common shares. |
As at | ||||
(Millions of Canadian dollars) |
October 31 2023 |
|||
Within 1 year |
$ |
– |
||
1 to 5 years |
1,939 |
|||
5 to 10 years |
8,992 |
|||
Thereafter |
465 |
|||
$ |
11,396 |
Note 20 Equity |
As at and for the year ended | ||||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||||||||||
(Millions of Canadian dollars, except the number of shares and as otherwise noted) |
Number of shares (thousands) |
Amount |
Dividends declared per share |
Number of shares (thousands) |
Amount | Dividends declared per share |
||||||||||||||||||||||
Common shares issued |
||||||||||||||||||||||||||||
Balance at beginning of period |
1,385,591 |
$ |
17,318 |
1,425,187 | $ | 17,728 | ||||||||||||||||||||||
Issued in connection with share-based compensation plans (1)
|
740 |
68 |
1,270 | 99 | ||||||||||||||||||||||||
Issued in connection with dividend reinvestment plan |
16,042 |
2,012 |
– | – | ||||||||||||||||||||||||
Purchased for cancellation (2)
|
– |
– |
(40,866 | ) | (509 | ) | ||||||||||||||||||||||
Balance at end of period |
1,402,373 |
$ |
19,398 |
$ |
5.34 |
1,385,591 | $ | 17,318 | $ | 4.96 | ||||||||||||||||||
Treasury – common shares |
||||||||||||||||||||||||||||
Balance at beginning of period (3)
|
(2,680 |
) |
$ |
(334 |
) |
(662 | ) | $ | (73 | ) | ||||||||||||||||||
Purchases |
(30,195 |
) |
(3,556 |
) |
(48,437 | ) | (5,183 | ) | ||||||||||||||||||||
Sales |
31,013 |
3,659 |
46,419 | 4,922 | ||||||||||||||||||||||||
Balance at end of period (3)
|
(1,862 |
) |
$ |
(231 |
) |
(2,680 | ) | $ | (334 | ) | ||||||||||||||||||
Common shares outstanding |
1,400,511 |
$ |
19,167 |
1,382,911 | $ | 16,984 | ||||||||||||||||||||||
Preferred shares and other equity instruments issued |
||||||||||||||||||||||||||||
First preferred (4)
|
||||||||||||||||||||||||||||
Non-cumulative, fixed rate |
||||||||||||||||||||||||||||
Series BH |
6,000 |
$ |
150 |
$ |
1.23 |
6,000 | $ | 150 | $ | 1.23 | ||||||||||||||||||
Series BI |
6,000 |
150 |
1.23 |
6,000 | 150 | 1.23 | ||||||||||||||||||||||
Non-cumulative, 5-Year Rate Reset |
||||||||||||||||||||||||||||
Series AZ |
20,000 |
500 |
0.93 |
20,000 | 500 | 0.93 | ||||||||||||||||||||||
Series BB |
20,000 |
500 |
0.91 |
20,000 | 500 | 0.91 | ||||||||||||||||||||||
Series BD |
24,000 |
600 |
0.80 |
24,000 | 600 | 0.80 | ||||||||||||||||||||||
Series BF |
12,000 |
300 |
0.75 |
12,000 | 300 | 0.75 | ||||||||||||||||||||||
Series BO |
14,000 |
350 |
1.20 |
14,000 | 350 | 1.20 | ||||||||||||||||||||||
Series BT |
750 |
750 |
4.20% |
750 | 750 | 4.20% | ||||||||||||||||||||||
Non-cumulative, fixed rate/floating rate |
||||||||||||||||||||||||||||
Series C-2 (5)
|
15 |
23 |
US$ |
67.50 |
15 | 23 | US$ | 67.50 | ||||||||||||||||||||
Other equity instruments |
||||||||||||||||||||||||||||
Limited recourse capital notes (LRCNs) (6)
|
||||||||||||||||||||||||||||
Series 1 (7)
|
1,750 |
1,750 |
4.50% |
1,750 | 1,750 | 4.50% | ||||||||||||||||||||||
Series 2 (7)
|
1,250 |
1,250 |
4.00% |
1,250 | 1,250 | 4.00% | ||||||||||||||||||||||
Series 3 (7)
|
1,000 |
1,000 |
3.65% |
1,000 | 1,000 | 3.65% | ||||||||||||||||||||||
106,765 |
$ |
7,323 |
106,765 | $ | 7,323 | |||||||||||||||||||||||
Treasury – preferred shares and other equity instruments |
||||||||||||||||||||||||||||
Balance at beginning of period (3)
|
(12 |
) |
$ |
(5 |
) |
(164 | ) | $ | (39 | ) | ||||||||||||||||||
Purchases |
(1,924 |
) |
(519 |
) |
(2,811 | ) | (518 | ) | ||||||||||||||||||||
Sales |
1,927 |
515 |
2,963 | 552 | ||||||||||||||||||||||||
Balance at end of period (3)
|
(9 |
) |
$ |
(9 |
) |
(12 | ) | $ | (5 | ) | ||||||||||||||||||
Preferred shares and other equity instruments outstanding |
106,756 |
$ |
7,314 |
106,753 | $ | 7,318 |
(1) | Includes fair value adjustments to stock options of $6 million (October 31, 2022 – $6 million). |
(2) | During the year ended October 31, 2023, we did not purchase for cancellation any common shares. During the year ended October 31, 2022, we purchased for cancellation common shares at a total fair value of $5,426 million (average cost of $132.80 per share), with a book value of $509 million (book value of $12.47 per share). |
(3) | Positive amounts represent a short position and negative amounts represent a long position. |
(4) | First Preferred Shares were issued at $25 per share with the exception of Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BT (Series BT) and Non-Cumulative Fixed Rate/Floating Rate First Preferred Shares Series C-2 (Series C-2) which were issued at $1,000 and US$1,000 per share (equivalent to US$25 per depositary share), respectively. |
(5) | On November 7, 2023, we redeemed all of our issued and outstanding Non-Cumulative Fixed Rate/Floating Rate First Preferred Shares Series C-2 for cash at a redemption price of US$1,000 per share (equivalent to US$25 per depositary share). |
(6) | Each series of LRCNs (LRCN Series) were issued at a $1,000 per note. 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. |
(7) | In connection with the issuance of LRCN Series 1, we issued $1,750 million of Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BQ (Series BQ); in connection with the issuance of LRCN Series 2, we issued $1,250 million of Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BR (Series BR); in connection with the issuance of LRCN Series 3, we issued $1,000 million of Non-Cumulative 5-Year Rate Reset 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 each respective LRCN Series. |
As at October 31, 2023 |
Current annual yield |
Premium |
Current dividend per share |
Earliest redemption date |
Issue date |
Redemption price |
||||||||||||||||||
Preferred shares |
||||||||||||||||||||||||
First preferred |
||||||||||||||||||||||||
Non-cumulative, fixed rate |
||||||||||||||||||||||||
Series BH (4)
|
4.90% | $ | .306250 | November 24, 2020 | June 5, 2015 | $ | 26.00 | |||||||||||||||||
Series BI (4)
|
4.90% | .306250 | November 24, 2020 | July 22, 2015 | 26.00 | |||||||||||||||||||
Non-cumulative, 5-Year Rate Reset (5)
|
||||||||||||||||||||||||
Series AZ (4)
|
3.70% | 2.21% | .231250 | May 24, 2019 | January 30, 2014 | 25.00 | ||||||||||||||||||
Series BB (4)
|
3.65% | 2.26% | .228125 | August 24, 2019 | June 3, 2014 | 25.00 | ||||||||||||||||||
Series BD (4)
|
3.20% | 2.74% | .200000 | May 24, 2020 | January 30, 2015 | 25.00 | ||||||||||||||||||
Series BF (4)
|
3.00% | 2.62% | .187500 | November 24, 2020 | March 13, 2015 | 25.00 | ||||||||||||||||||
Series BO (4)
|
4.80% | 2.38% | .300000 | February 24, 2024 | November 2, 2018 | 25.00 | ||||||||||||||||||
Series BT (4)
|
4.20% | 2.71% | 21.000000 | February 24, 2027 | November 5, 2021 | 1,000.00 | ||||||||||||||||||
Non-cumulative, fixed rate/floating rate |
||||||||||||||||||||||||
Series C-2 (6)
|
6.75% | 4.052% | US$ | 16.875000 | November 7, 2023 | November 2, 2015 | US$ | 1,000.00 | ||||||||||||||||
Other equity instruments |
||||||||||||||||||||||||
Limited recourse capital notes (7)
|
||||||||||||||||||||||||
Series 1 (8)
|
4.50% | 4.137% | n.a. | October 24, 2025 | July 28, 2020 | $ | 1,000.00 | |||||||||||||||||
Series 2 (9)
|
4.00% | 3.617% | n.a. | January 24, 2026 | November 2, 2020 | 1,000.00 | ||||||||||||||||||
Series 3 (10)
|
3.65% | 2.665% | n.a. | October 24, 2026 | June 8, 2021 | 1,000.00 |
(1) | With the exception of Series BT, non-cumulative preferential dividends of each Series are payable quarterly, as and when declared by the Board of Directors, on or about the 24th day (7th day for Series C-2) of February, May, August and November. In the case of Series BT, non-cumulative preferential dividends are payable semi-annually, as and when declared by the Board of Directors. |
(2) | Subject to the consent of OSFI and the requirements of the Bank Act |
(3) | Subject to the consent of OSFI and the requirements of the Bank Act |
(4) | The preferred shares include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each preferred share is convertible into common shares pursuant to an automatic conversion formula with a multiplier of 1 and with a conversion price based on the greater of: (i) a floor price of $5 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of shares issued is determined by dividing the preferred share value by the conversion price. |
(5) | The dividend rate will reset on the earliest redemption date and every fifth year thereafter at a rate equal to the 5-year Government of Canada bond yield plus the premium indicated. The holders have the option to convert their shares into non-cumulative floating rate First Preferred Shares subject to certain conditions on the earliest redemption date and every fifth year thereafter at a rate equal to the three-month Government of Canada Treasury Bill rate plus the premium indicated. |
(6) | The dividend rate will change on the earliest redemption date at a rate equal to the 3-month LIBOR plus the premium indicated. Series C-2 do not qualify as Tier 1 regulatory capital. On November 7, 2023, we redeemed all of our issued and outstanding Non-Cumulative Fixed Rate/Floating Rate First Preferred Shares Series C-2 for cash at a redemption price of US$1,000 per share (equivalent to US$25 per depositary share). |
(7) | The current annual yield on each LRCN Series represents the annual interest rate applicable to the notes issued as at the reporting date. The payments of interest and principal in cash on the LRCN Series are made at our discretion, and non-payment of interest and principal in cash does not constitute an event of default. In the event of (i) non-payment of interest on any interest payment date, (ii) non-payment of the redemption price in case of a redemption of a LRCN Series, (iii) non-payment of principal at the maturity of a LRCN Series, or (iv) an event of default on a LRCN Series, holders of such LRCN Series will have recourse only to the assets (Trust Assets) held by a third-party trustee in a consolidated trust in respect of such LRCN Series and each such noteholder will be entitled to receive its pro rata share of the Trust Assets. In such an event, the delivery of the Trust Assets for each LRCN Series will represent the full and complete extinguishment of our obligations under the related LRCN Series. The LRCNs include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank non-viable or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is automatically redeemed and the redemption price will be satisfied by the delivery of Trust Assets, which will consist of common shares pursuant to an automatic conversion of the series of preferred shares that were issued concurrently with the related LRCN Series. Each series of preferred shares include an automatic conversion formula with a conversion price based on the greater of: (i) a floor price of $5 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of common shares issued in respect of each series of preferred shares will be determined by dividing the preferred share value ($1,000 plus declared and unpaid dividends) by the conversion price. The number of common shares delivered to each noteholder will be based on such noteholder’s pro rata interest in the Trust Assets. Subject to the consent of OSFI, we may purchase LRCNs for cancellation at such price or prices and upon such terms and conditions as we in our absolute discretion may determine, subject to any applicable law restricting the purchase of notes. |
(8) | LRCN Series 1 bear interest at a fixed rate of 4.5% per annum until November 24, 2025, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year Government of Canada Yield plus 4.137% until maturity on November 24, 2080. The interest is paid semi-annually on or about the 24 th day of May and November. LRCN Series 1 is redeemable during the period from October 24 to and including November 24, commencing in 2025 and every fifth year thereafter to the extent we redeem Series BQ pursuant to their terms and subject to the consent of OSFI and requirements of the Bank Act |
(9) | LRCN Series 2 bear interest at a fixed rate of 4.0% per annum until February 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year Government of Canada Yield plus 3.617% until maturity on February 24, 2081. The interest is paid semi-annually on or about the 24th day of February and August. LRCN Series 2 is redeemable during the period from January 24 to and including February 24, commencing in 2026 and every fifth year thereafter to the extent we redeem Series BR pursuant to their terms and subject to the consent of OSFI and requirements of the Bank Act |
(10) | LRCN Series 3 bear interest at a fixed rate of 3.65% per annum until November 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year Government of Canada Yield plus 2.665% until maturity on November 24, 2081. The interest is paid semi-annually on or about the 24th day of May and November. LRCN Series 3 is redeemable during the period from October 24 to and including November 24, commencing in 2026 and every fifth year thereafter to the extent we redeem Series BS pursuant to their terms and subject to the consent of OSFI and requirements of the Bank Act |
n.a. | not applicable |
Note 20 Equity (continued)
|
Note 21 Share-based compensation |
For the year ended | ||||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||||
(Canadian dollars per share except share amounts) |
Number of options (thousands) |
Weighted average exercise price (1)
|
Number of options (thousands) |
Weighted average exercise price (1)
|
||||||||||||||||
Outstanding at beginning of period |
7,509 |
$ |
100.07 |
7,055 | $ | 92.27 | ||||||||||||||
Granted |
1,088 |
131.64 |
1,184 | 129.99 | ||||||||||||||||
Exercised (2), (3)
|
(740 |
) |
84.76 |
(684 | ) | 73.98 | ||||||||||||||
Forfeited in the period |
(90 |
) |
113.55 |
(46 | ) | 104.28 | ||||||||||||||
Outstanding at end of period |
7,767 |
$ |
106.01 |
7,509 | $ | 100.07 | ||||||||||||||
Exercisable at end of period |
3,830 |
$ |
91.84 |
3,502 | $ | 87.15 |
(1) | The weighted average exercise prices reflect the conversion of foreign currency-denominated options at the exchange rates as of October 31, 2023 and October 31, 2022. For foreign currency-denominated options exercised during the year, the weighted average exercise prices are translated using exchange rates as at the settlement date. |
(2) | Cash received for options exercised during the year was $63 million (October 31, 2022 – $51 million) and the weighted average share price at the date of exercise was $130.94 (October 31, 2022 – $134.10). |
(3) | New shares were issued for all stock options exercised in 2023 and 2022. |
Options outstanding |
Options exercisable |
|||||||||||||||||||||||
(Canadian dollars per share except share amounts and years) |
Number outstanding (thousands) |
Weighted average exercise price (1)
|
Weighted average remaining contractual life (years) |
Number exercisable (thousands) |
Weighted average exercise price (1)
|
|||||||||||||||||||
$64.73 – $79.65 |
936 |
$ |
74.96 |
1.58 |
936 |
$ |
74.96 |
|||||||||||||||||
$90.23 – $96.55 |
1,779 |
93.48 |
3.82 |
1,779 |
93.48 |
|||||||||||||||||||
$102.33 – $104.70 |
1,633 |
103.81 |
5.22 |
1,115 |
103.39 |
|||||||||||||||||||
$106.00 – $106.00 |
1,202 |
106.00 |
7.12 |
– |
– |
|||||||||||||||||||
$129.99 – $131.64 |
2,217 |
130.78 |
8.60 |
– |
– |
|||||||||||||||||||
7,767 |
$ |
106.01 |
5.72 |
3,830 |
$ |
91.84 |
(1) | The weighted average exercise prices reflect the conversion of foreign currency-denominated options at the exchange rate as of October 31, 2023. |
For the year ended |
||||||||
(Canadian dollars per share except percentages and years) |
October 31 2023 |
October 31
2022
|
||||||
Share price at grant date |
$ |
130.16 |
$ | 128.48 | ||||
Risk-free interest rate |
2.89% |
1.25% | ||||||
Expected dividend yield |
3.79% |
3.66% | ||||||
Expected share price volatility |
14% |
13% | ||||||
Expected life of option |
6 Years |
6 Years |
For the year ended | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Units and per unit amounts) |
Units granted (thousands) |
Weighted average fair value per unit |
Units granted (thousands) |
Weighted average fair value per unit |
||||||||||||||
Deferred share unit plans |
466 |
$ |
130.61 |
469 | $ | 131.49 | ||||||||||||
Capital Markets compensation plan unit awards |
4,231 |
110.32 |
3,794 | 125.22 | ||||||||||||||
Performance deferred share award plans |
2,362 |
131.41 |
2,220 | 129.65 | ||||||||||||||
Deferred compensation plans |
103 |
126.81 |
92 | 135.44 | ||||||||||||||
Other share-based plans |
1,506 |
130.12 |
1,083 | 128.50 | ||||||||||||||
8,668 |
$ |
120.79 |
7,658 | $ | 127.48 |
Note 21 Share-based compensation (continued)
|
As at | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 | |||||||||||||||||
(Millions of Canadian dollars except units) |
Units (thousands) |
Carrying amount |
Units (thousands) |
Carrying amount |
||||||||||||||
Deferred share unit plans |
5,786 |
$ |
641 |
5,429 | $ | 684 | ||||||||||||
Capital Markets compensation plan unit awards |
9,934 |
1,098 |
9,398 | 1,182 | ||||||||||||||
Performance deferred share award plans |
5,808 |
643 |
6,006 | 757 | ||||||||||||||
Deferred compensation plans (1)
|
2,654 |
294 |
2,537 | 319 | ||||||||||||||
Other share-based plans |
2,135 |
234 |
1,772 | 218 | ||||||||||||||
26,317 |
$ |
2,910 |
25,142 | $ | 3,160 |
(1) | Excludes obligations not determined based on the quoted market price of our common shares. |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Deferred share unit plans |
$ |
(51 |
) |
$ | 20 | |||
Capital Markets compensation plan unit awards |
126 |
210 | ||||||
Performance deferred share award plans |
216 |
273 | ||||||
Deferred compensation plans |
213 |
(261 | ) | |||||
Other share-based plans |
104 |
91 | ||||||
$ |
608 |
$ | 333 |
Note 22 Income taxes |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Income taxes (recoveries) in Consolidated Statements of Income |
||||||||
Current tax |
||||||||
Tax expense for current year |
$ |
4,081 |
$ | 4,151 | ||||
Adjustments for prior years |
851 |
(230 | ) | |||||
Recoveries arising from previously unrecognized tax loss, tax credit or temporary difference of a prior period |
(100 |
) |
– | |||||
4,832 |
3,921 | |||||||
Deferred tax |
||||||||
Origination and reversal of temporary difference |
(1,286 |
) |
232 | |||||
Effects of changes in tax rates |
(47 |
) |
4 | |||||
Adjustments for prior years |
125 |
231 | ||||||
Recoveries arising from previously unrecognized tax loss, tax credit or temporary difference of a prior period, net |
(24 |
) |
(86 | ) | ||||
(1,232 |
) |
381 | ||||||
3,600 |
4,302 | |||||||
Income taxes (recoveries) in Consolidated Statements of Comprehensive Income and Changes in Equity |
||||||||
Other comprehensive income |
||||||||
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income |
(10 |
) |
(633 | ) | ||||
Provision for credit losses recognized in income |
– |
(2 | ) | |||||
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income |
(39 |
) |
2 | |||||
Unrealized foreign currency translation gains (losses) |
20 |
2 | ||||||
Net foreign currency translation gains (losses) from hedging activities |
(306 |
) |
(478 | ) | ||||
Reclassification of losses (gains) on net investment hedging activities to income |
45 |
6 | ||||||
Net gains (losses) on derivatives designated as cash flow hedges |
190 |
628 | ||||||
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income |
59 |
70 | ||||||
Remeasurement gains(losses) on employee benefit plans |
(68 |
) |
287 | |||||
Net gains(losses) from fair value change due to credit risk on financial liabilities designated at fair value through profit or loss |
(222 |
) |
622 | |||||
Net gains (losses) on equity securities designated at fair value through other comprehensive income |
24 |
(3 | ) | |||||
Share-based compensation awards |
2 |
10 | ||||||
Distributions on other equity instruments and issuance costs |
(59 |
) |
(45 | ) | ||||
(364 |
) |
466 | ||||||
Total income taxes |
$ |
3,236 |
$ | 4,768 |
For the year ended |
||||||||||||||||
(Millions of Canadian dollars, except for percentage amounts) |
October 31, 2023 |
October 31, 2022 |
||||||||||||||
Income taxes at Canadian statutory tax rate |
$ |
5,115 |
27.7 |
% |
$ | 5,269 | 26.2 | % | ||||||||
Increase (decrease) in income taxes resulting from: |
||||||||||||||||
Lower average tax rate applicable to subsidiaries |
(2,130 |
) |
(11.5 |
) |
(428 | ) | (2.1 | ) | ||||||||
Tax-exempt income from securities |
(337 |
) |
(1.8 |
) |
(437 | ) | (2.2 | ) | ||||||||
Tax rate change |
1,050 |
5.7 |
4 | – | ||||||||||||
Other |
(98 |
) |
(0.6 |
) |
(106 | ) | (0.5 | ) | ||||||||
Income taxes in Consolidated Statements of Income / effective tax rate |
$ |
3,600 |
19.5 |
% |
$ | 4,302 | 21.4 | % |
As at and for the year ended October 31, 2023 |
||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Net asset beginning of period |
Change through equity |
Change through profit or loss |
Exchange rate differences |
Acquisitions/ disposals |
Other |
Net asset end of period |
|||||||||||||||||||||
Net deferred tax asset/(liability) |
||||||||||||||||||||||||||||
Allowance for credit losses |
$ |
987 |
$ |
– |
$ |
185 |
$ |
2 |
$ |
– |
$ |
– |
$ |
1,174 |
||||||||||||||
Deferred compensation |
1,504 |
(2 |
) |
(2 |
) |
22 |
– |
– |
1,522 |
|||||||||||||||||||
Business realignment charges |
12 |
– |
11 |
– |
– |
– |
23 |
|||||||||||||||||||||
Tax loss and tax credit carryforwards |
322 |
– |
(57 |
) |
1 |
(5 |
) |
– |
261 |
|||||||||||||||||||
Deferred (income) expense |
6 |
(3 |
) |
661 |
(11 |
) |
(2 |
) |
– |
651 |
||||||||||||||||||
Financial instruments measured at fair value through other comprehensive income |
(16 |
) |
(330 |
) |
– |
25 |
– |
– |
(321 |
) | ||||||||||||||||||
Premises and equipment and intangibles |
(1,234 |
) |
– |
302 |
(27 |
) |
(8 |
) |
– |
(967 |
) | |||||||||||||||||
Pension and post-employment related |
(435 |
) |
68 |
37 |
1 |
(4 |
) |
– |
(333 |
) | ||||||||||||||||||
Other |
(113 |
) |
4 |
95 |
24 |
– |
– |
10 |
||||||||||||||||||||
$ |
1,033 |
$ |
(263 |
) |
$ |
1,232 |
$ |
37 |
$ |
(19 |
) |
$ |
– |
$ |
2,020 |
|||||||||||||
Comprising |
||||||||||||||||||||||||||||
Deferred tax assets |
$ |
1,472 |
$ |
2,446 |
||||||||||||||||||||||||
Deferred tax liabilities |
(439 |
) |
(426 |
) | ||||||||||||||||||||||||
$ |
1,033 |
$ |
2,020 |
|||||||||||||||||||||||||
As at and for the year ended October 31, 2022 | ||||||||||||||||||||||||||||
(Millions of Canadian dollars) |
Net asset beginning of period |
Change through equity |
Change through profit or loss |
Exchange rate differences |
Acquisitions/ disposals |
Other | Net asset end of period |
|||||||||||||||||||||
Net deferred tax asset/(liability) |
||||||||||||||||||||||||||||
Allowance for credit losses |
$ | 974 | $ | – | $ | 2 | $ | 11 | $ | – | $ | – | $ | 987 | ||||||||||||||
Deferred compensation |
1,614 | (10 | ) | (211 | ) | 101 | 10 | – | 1,504 | |||||||||||||||||||
Business realignment charges |
11 | – | 1 | – | – | – | 12 | |||||||||||||||||||||
Tax loss and tax credit carryforwards |
242 | – | 67 | 2 | 8 | 3 | 322 | |||||||||||||||||||||
Deferred (income) expense |
110 | (1 | ) | (126 | ) | 23 | – | – | 6 | |||||||||||||||||||
Financial instruments measured at fair value through other comprehensive income |
(19 | ) | (2 | ) | – | 5 | – | – | (16 | ) | ||||||||||||||||||
Premises and equipment and intangibles |
(836 | ) | – | 4 | (57 | ) | (345 | ) | – | (1,234 | ) | |||||||||||||||||
Pension and post-employment related |
(163 | ) | (287 | ) | 19 | 4 | (8 | ) | – | (435 | ) | |||||||||||||||||
Other |
4 | 22 | (137 | ) | (6 | ) | 4 | – | (113 | ) | ||||||||||||||||||
$ | 1,937 | $ | (278 | ) | $ | (381 | ) | $ | 83 | $ | (331 | ) | $ | 3 | $ | 1,033 | ||||||||||||
Comprising |
||||||||||||||||||||||||||||
Deferred tax assets |
$ | 2,011 | $ | 1,472 | ||||||||||||||||||||||||
Deferred tax liabilities |
(74 | ) | (439 | ) | ||||||||||||||||||||||||
$ | 1,937 | $ | 1,033 |
Note 22 Income taxes (continued)
|
Note 23 Earnings per share |
For the year ended | ||||||||
(Millions of Canadian dollars, except share and per share amounts) |
October 31 2023 |
October 31 2022 |
||||||
Basic earnings per share |
||||||||
Net income |
$ |
14,866 |
$ | 15,807 | ||||
Dividends on preferred shares and distributions on other equity instruments |
(236 |
) |
(247 | ) | ||||
Net income attributable to non-controlling interests |
(7 |
) |
(13 | ) | ||||
Net income available to common shareholders |
$ |
14,623 |
$ | 15,547 | ||||
Weighted average number of common shares (in thousands) |
1,391,020 |
1,403,654 | ||||||
Basic earnings per share (in dollars) |
$ |
10.51 |
$ | 11.08 | ||||
Diluted earnings per share |
||||||||
Net income available to common shareholders |
$ |
14,623 |
$ | 15,547 | ||||
Weighted average number of common shares (in thousands) |
1,391,020 |
1,403,654 | ||||||
Stock options (1)
|
1,483 |
1,918 | ||||||
Issuable under other share-based compensation plans |
26 |
462 | ||||||
Average number of diluted common shares (in thousands) |
1,392,529 |
1,406,034 | ||||||
Diluted earnings per share (in dollars) |
$ |
10.50 |
$ | 11.06 |
(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 year ended October 31, 2023, an average of 2,119,045 outstanding options with an average exercise price of $130.73 were excluded from the calculation of diluted earnings per share. For the year ended October 31, 2022, no outstanding options were excluded from the calculation of diluted earnings per share. |
Note 24 Guarantees, commitments, pledged assets and contingencies |
Maximum exposure to credit losses |
||||||||
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Financial guarantees |
||||||||
Financial standby letters of credit |
$ |
23,314 |
$ | 20,291 | ||||
Commitments to extend credit |
||||||||
Backstop liquidity facilities |
51,544 |
45,336 | ||||||
Credit enhancements |
3,226 |
2,960 | ||||||
Documentary and commercial letters of credit |
291 |
318 | ||||||
Other commitments to extend credit |
301,132 |
284,602 | ||||||
Other credit-related commitments |
||||||||
Securities lending indemnifications |
95,055 |
90,693 | ||||||
Performance guarantees |
7,503 |
7,333 | ||||||
Sponsored member guarantees |
14,043 |
1,241 | ||||||
Other |
203 |
360 |
Note 24 Guarantees, commitments, pledged assets and contingencies (continued)
|
• | The risks and rewards of the pledged assets reside with the pledgor. |
• | The pledged asset is returned to the pledgor when the necessary conditions have been satisfied. |
• | The right of the pledgee to sell or re-pledge the asset is dependent on the specific agreement under which the collateral is pledged. |
• | If there is no default, the pledgee must return the comparable asset to the pledgor upon satisfaction of the obligation. |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Sources of pledged assets and collateral |
||||||||
Bank assets |
||||||||
Loans |
$ |
102,944 |
$ | 97,178 | ||||
Securities |
107,122 |
70,334 | ||||||
Other assets |
28,953 |
40,318 | ||||||
239,019 |
207,830 | |||||||
Client assets (1)
|
||||||||
Collateral received and available for sale or re-pledging |
502,109 |
465,484 | ||||||
Less: not sold or re-pledged |
(6,876 |
) |
(9,192 | ) | ||||
495,233 |
456,292 | |||||||
$ |
734,252 |
$ | 664,122 | |||||
Uses of pledged assets and collateral |
||||||||
Securities borrowing and lending |
$ |
168,681 |
$ | 158,748 | ||||
Obligations related to securities sold short |
46,260 |
45,288 | ||||||
Obligations related to securities lent or sold under repurchase agreements |
331,784 |
274,392 | ||||||
Securitization |
38,686 |
40,438 | ||||||
Covered bonds |
69,802 |
62,905 | ||||||
Derivative transactions |
40,352 |
49,556 | ||||||
Foreign governments and central banks |
9,111 |
9,503 | ||||||
Clearing systems, payment systems and depositories |
10,709 |
8,263 | ||||||
Other |
18,867 |
15,029 | ||||||
$ |
734,252 |
$ | 664,122 |
(1) | Primarily relates to Obligations related to securities lent or sold under repurchase agreements, Securities lent and Derivative transactions. |
Note 25 Legal and regulatory matters |
Note 25 Legal and regulatory matters (continued)
|
Note 26 Related party transactions |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 (1)
|
||||||
Salaries and other short-term employee benefits (2)
|
$ |
23 |
$ | 27 | ||||
Post-employment benefits (3)
|
2 |
2 | ||||||
Share-based payments |
39 |
40 | ||||||
$ |
64 |
$ | 69 |
(1) | During the year ended October 31, 2022 certain executives, who were members of the Bank’s GE as at October 31, 2021, left the Bank and therefore were no longer part of KMP. Compensation for the year ended October 31, 2022 attributable to the former executives, including benefits and share-based payments relating to awards granted in prior years was $14 million. |
(2) | Includes the portion of the annual variable short-term incentive bonus that certain executives elected to receive in the form of DSUs. Refer to Note 21 for further details. Directors receive retainers but do not receive salaries and other short-term employee benefits. |
(3) | Directors do not receive post-employment benefits. |
As at | ||||||||||||||||||
October 31, 2023 |
October 31, 2022 (2) | |||||||||||||||||
(Millions of Canadian dollars, except number of units) |
No. of units held |
Value |
No. of units held |
Value | ||||||||||||||
Stock options (3)
|
2,805,471 |
$ |
26 |
2,409,294 | $ | 59 | ||||||||||||
Other non-option share-based awards (3)
|
991,909 |
110 |
914,496 | 115 | ||||||||||||||
RBC common and preferred shares |
181,648 |
20 |
170,312 | 22 | ||||||||||||||
3,979,028 |
$ |
156 |
3,494,102 | $ | 196 |
(1) | During the year ended October 31, 2023, certain directors, who were members of the Board of Directors as at October 31, 2022, retired. Total shareholdings held upon their retirement was 32,958 units with a value of $4 million. |
(2) | During the year ended October 31, 2022 certain executives, who were members of the Bank’s GE as at October 31, 2021, left the Bank and therefore were no longer KMP. Total shareholdings and options held upon their departure was 569,470 units with a value of $34 million. |
(3) | Directors do not receive stock options or any other non-option share-based awards. |
As at or for the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Commitments and other contingencies |
$ |
1,089 |
$ | 829 | ||||
Other fees received for services rendered |
55 |
50 | ||||||
Other fees paid for services received |
108 |
107 |
Note 27 Results by business segment |
For the year ended October 31, 2023 |
||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Personal & Commercial Banking |
Wealth Management |
Insurance |
Capital Markets |
Corporate Support |
Total |
Canada |
United States |
Other International |
|||||||||||||||||||||||||||
Net interest income (2)
|
$ |
16,074 |
$ |
4,495 |
$ |
– |
$ |
3,379 |
$ |
1,181 |
$ |
25,129 |
$ |
18,752 |
$ |
5,065 |
$ |
1,312 |
||||||||||||||||||
Non-interest income |
6,046 |
13,049 |
5,675 |
7,672 |
(1,442 |
) |
31,000 |
14,851 |
8,563 |
7,586 |
||||||||||||||||||||||||||
Total revenue |
22,120 |
17,544 |
5,675 |
11,051 |
(261 |
) |
56,129 |
33,603 |
13,628 |
8,898 |
||||||||||||||||||||||||||
Provision for credit losses |
1,579 |
328 |
– |
561 |
– |
2,468 |
1,648 |
784 |
36 |
|||||||||||||||||||||||||||
Insurance policyholder benefits, claims and acquisition expense |
– |
– |
4,022 |
– |
– |
4,022 |
2,161 |
– |
1,861 |
|||||||||||||||||||||||||||
Non-interest expense |
9,215 |
14,128 |
653 |
6,509 |
668 |
31,173 |
15,319 |
11,177 |
4,677 |
|||||||||||||||||||||||||||
Net income (loss) before income taxes |
11,326 |
3,088 |
1,000 |
3,981 |
(929 |
) |
18,466 |
14,475 |
1,667 |
2,324 |
||||||||||||||||||||||||||
Income taxes (recoveries) |
3,060 |
661 |
197 |
(158 |
) |
(160 |
) |
3,600 |
4,770 |
(1,103 |
) |
(67 |
) | |||||||||||||||||||||||
Net income |
$ |
8,266 |
$ |
2,427 |
$ |
803 |
$ |
4,139 |
$ |
(769 |
) |
$ |
14,866 |
$ |
9,705 |
$ |
2,770 |
$ |
2,391 |
|||||||||||||||||
Non-interest expense includes: |
||||||||||||||||||||||||||||||||||||
Depreciation and amortization |
$ |
961 |
$ |
1,234 |
$ |
58 |
$ |
509 |
$ |
– |
$ |
2,762 |
$ |
1,570 |
$ |
836 |
$ |
356 |
||||||||||||||||||
Impairment of other intangibles |
13 |
81 |
1 |
2 |
11 |
108 |
28 |
65 |
15 |
|||||||||||||||||||||||||||
Total assets |
$ |
636,046 |
$ |
179,227 |
$ |
22,591 |
$ |
1,100,172 |
$ |
66,956 |
$ |
2,004,992 |
$ |
1,042,663 |
$ |
639,296 |
$ |
323,033 |
||||||||||||||||||
Total assets include: |
||||||||||||||||||||||||||||||||||||
Additions to premises and equipment and intangibles |
$ |
463 |
$ |
1,008 |
$ |
53 |
$ |
311 |
$ |
639 |
$ |
2,474 |
$ |
1,334 |
$ |
700 |
$ |
440 |
||||||||||||||||||
Total liabilities |
$ |
635,952 |
$ |
177,389 |
$ |
23,355 |
$ |
1,099,893 |
$ |
(49,357 |
) |
$ |
1,887,232 |
|||||||||||||||||||||||
For the year ended October 31, 2022 | ||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Personal & Commercial Banking |
Wealth Management (3) |
Insurance | Capital Markets (1), (3) |
Corporate Support (1) |
Total | Canada | United States | Other International |
|||||||||||||||||||||||||||
Net interest income (2)
|
$ | 14,019 | $ | 3,886 | $ | – | $ | 4,944 | $ | (132 | ) | $ | 22,717 | $ | 15,761 | $ | 5,423 | $ | 1,533 | |||||||||||||||||
Non-interest income |
6,124 | 12,357 | 3,510 | 5,005 | (728 | ) | 26,268 | 13,508 | 6,364 | 6,396 | ||||||||||||||||||||||||||
Total revenue |
20,143 | 16,243 | 3,510 | 9,949 | (860 | ) | 48,985 | 29,269 | 11,787 | 7,929 | ||||||||||||||||||||||||||
Provision for credit losses |
463 | 33 | – | (13 | ) | 1 | 484 | 600 | 60 | (176 | ) | |||||||||||||||||||||||||
Insurance policyholder benefits, claims and acquisition expense |
– | – | 1,783 | – | – | 1,783 | (466 | ) | – | 2,249 | ||||||||||||||||||||||||||
Non-interest expense |
8,437 | 12,015 | 588 | 5,816 | (247 | ) | 26,609 | 13,648 | 9,006 | 3,955 | ||||||||||||||||||||||||||
Net income (loss) before income taxes |
11,243 | 4,195 | 1,139 | 4,146 | (614 | ) | 20,109 | 15,487 | 2,721 | 1,901 | ||||||||||||||||||||||||||
Income taxes (recoveries) |
2,873 | 985 | 282 | 778 | (616 | ) | 4,302 | 3,615 | 452 | 235 | ||||||||||||||||||||||||||
Net income |
$ | 8,370 | $ | 3,210 | $ | 857 | $ | 3,368 | $ | 2 | $ | 15,807 | $ | 11,872 | $ | 2,269 | $ | 1,666 | ||||||||||||||||||
Non-interest expense includes: |
||||||||||||||||||||||||||||||||||||
Depreciation and amortization |
$ | 942 | $ | 1,109 | $ | 57 | $ | 514 | $ | 12 | $ | 2,634 | $ | 1,617 | $ | 776 | $ | 241 | ||||||||||||||||||
Impairment of other intangibles |
11 | 2 | 2 | 3 | – | 18 | 11 | 5 | 2 | |||||||||||||||||||||||||||
Total assets |
$ | 602,824 | $ | 198,380 | $ | 21,918 | $ | 1,033,978 | $ | 60,119 | $ | 1,917,219 | $ | 992,485 | $ | 570,255 | $ | 354,479 | ||||||||||||||||||
Total assets include: |
||||||||||||||||||||||||||||||||||||
Additions to premises and equipment and intangibles |
$ | 394 | $ | 2,347 | $ | 49 | $ | 258 | $ | 630 | $ | 3,678 | $ | 1,263 | $ | 666 | $ | 1,749 | ||||||||||||||||||
Total liabilities |
$ | 602,741 | $ | 198,329 | $ | 22,588 | $ | 1,033,689 | $ | (48,303 | ) | $ | 1,809,044 |
(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. |
Note 28 Nature and extent of risks arising from financial instruments |
Note 28 Nature and extent of risks arising from financial instruments (continued)
|
As at October 31, 2023 |
||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Canada |
% |
United States |
% |
Europe |
% |
Other International |
% |
Total |
|||||||||||||||||||||||||||
On-balance sheet assets other than derivatives (1)
|
$ |
798,259 |
66% |
$ |
294,670 |
24% |
$ |
76,637 |
6% |
$ |
50,147 |
4% |
$ |
1,219,713 |
||||||||||||||||||||||
Derivatives before master netting agreements (2), (3)
|
27,221 |
19% |
36,698 |
25% |
67,406 |
46% |
14,470 |
10% |
145,795 |
|||||||||||||||||||||||||||
$ |
825,480 |
60% |
$ |
331,368 |
24% |
$ |
144,043 |
11% |
$ |
64,617 |
5% |
$ |
1,365,508 |
|||||||||||||||||||||||
Off-balance sheet credit instruments (4)
|
||||||||||||||||||||||||||||||||||||
Committed and uncommitted (5)
|
$ |
427,849 |
56% |
$ |
252,071 |
33% |
$ |
51,393 |
8% |
$ |
23,183 |
3% |
$ |
754,496 |
||||||||||||||||||||||
Other |
85,222 |
61% |
30,737 |
22% |
21,428 |
15% |
2,731 |
2% |
140,118 |
|||||||||||||||||||||||||||
$ |
513,071 |
57% |
$ |
282,808 |
32% |
$ |
72,821 |
8% |
$ |
25,914 |
3% |
$ |
894,614 |
|||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
As at October 31, 2022 | ||||||||||||||||||||||||||||||||||||
(Millions of Canadian dollars, except percentage amounts) |
Canada | % | United States |
% | Europe | % | Other International |
% | Total | |||||||||||||||||||||||||||
On-balance sheet assets other than derivatives (1)
|
$ | 759,037 | 65% | $ | 263,736 | 23% | $ | 87,671 | 8% | $ | 48,991 | 4% | $ | 1,159,435 | ||||||||||||||||||||||
Derivatives before master netting agreements (2), (3)
|
32,434 | 20% | 35,921 | 23% | 72,885 | 46% | 17,439 | 11% | 158,679 | |||||||||||||||||||||||||||
$ | 791,471 | 60% | $ | 299,657 | 23% | $ | 160,556 | 12% | $ | 66,430 | 5% | $ | 1,318,114 | |||||||||||||||||||||||
Off-balance sheet credit instruments (4)
|
||||||||||||||||||||||||||||||||||||
Committed and uncommitted (5)
|
$ | 398,719 | 57% | $ | 223,624 | 32% | $ | 52,669 | 8% | $ | 20,857 | 3% | $ | 695,869 | ||||||||||||||||||||||
Other |
79,110 | 66% | 13,847 | 12% | 24,476 | 20% | 2,485 | 2% | 119,918 | |||||||||||||||||||||||||||
$ | 477,829 | 59% | $ | 237,471 | 29% | $ | 77,145 | 9% | $ | 23,342 | 3% | $ | 815,787 |
(1) | Includes Assets purchased under reverse repurchase agreements and securities borrowed, Loans and Customers’ liability under acceptances. The largest concentrations in Canada are Ontario at 57% (October 31, 2022 – 56%), the Prairies at 15% (October 31, 2022 – 15%), British Columbia and the territories at 14% (October 31, 2022 – 15%) and Quebec at 10% (October 31, 2022 – 10%). No industry accounts for more than 20% (October 31, 2022 – 20%) of total on-balance sheet credit instruments, with the exception of Banking, which accounted for 25% (October 31, 2022 – 26%), and Government, which accounted for 28% (October 31, 2022 – 32%). The classification of our sectors aligns with our view of credit risk by industry. |
(2) | A further breakdown of our derivative exposures by risk rating and counterparty type is provided in Note 9. |
(3) | Excludes valuation adjustments determined on a pooled basis. |
(4) | Balances presented are contractual amounts representing our maximum exposure to credit risk. |
(5) | Represents our maximum exposure to credit risk. Retail and wholesale commitments respectively comprise 44% and 56% of our total commitments (October 31, 2022 – 45% and 55%). The largest concentrations in the wholesale portfolio relate to Financial 15% (October 31, 2022 – 15%), s ervices atReal estate and related at 12% (October 31, 2022 – 12%), Utilities at 11% (October 31, 2022 – 11%), Other services at 8% (October 31, 2022 – 7%), and Investmen at 6% (October 31, 2022 – 6%). The classification of our sectors aligns with our view of credit risk by industry. ts
|
Note 29 Capital management |
As at |
||||||||
(Millions of Canadian dollars, except percentage amounts and as otherwise noted) |
October 31 2023 |
October 31
2022
|
||||||
Capital (1)
|
||||||||
CET1 capital |
$ |
86,611 |
$ | 76,945 | ||||
Tier 1 capital |
93,904 |
84,242 | ||||||
Total capital |
104,952 |
93,850 | ||||||
Risk-weighted assets (RWA) used in calculation of capital ratios (1)
|
||||||||
Credit risk |
$ |
475,842 |
$ | 496,898 | ||||
Market risk |
40,498 |
35,342 | ||||||
Operational risk |
79,883 |
77,639 | ||||||
Total RWA |
$ |
596,223 |
$ | 609,879 | ||||
Capital ratios and Leverage ratio (1)
|
||||||||
CET1 ratio |
14.5% |
12.6% | ||||||
Tier 1 capital ratio |
15.7% |
13.8% | ||||||
Total capital ratio |
17.6% |
15.4% | ||||||
Leverage ratio |
4.3% |
4.4% | ||||||
Leverage ratio exposure (billions) |
$ |
2,180 |
$ | 1,898 | ||||
TLAC available and ratios (2)
|
||||||||
TLAC available |
$ |
184,916 |
$ | 160,961 | ||||
TLAC ratio |
31.0% |
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 year ended October 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. Both the TLAC ratio and TLAC leverage ratio are calculated using the TLAC available as percentage of total RWA and leverage exposure, respectively. |
Note 30 Offsetting financial assets and financial liabilities |
Note 30 Offsetting financial assets and financial liabilities (continued)
|
As at October 31, 2023 |
||||||||||||||||||||||||||||||||
Amounts subject to enforceable netting arrangements |
||||||||||||||||||||||||||||||||
Related amounts not offset on the Consolidated Balance Sheets |
||||||||||||||||||||||||||||||||
(Millions of Canadian dollars) | Gross amounts of recognized financial instruments |
Gross amounts offset on the Consolidated Balance Sheets |
Net amounts presented in the Consolidated Balance Sheets |
Impact of master netting agreements |
Financial collateral |
Net amounts |
Amounts not subject to enforceable netting arrangements |
Net amounts presented on the Consolidated Balance Sheets |
||||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
$ |
436,617 |
$ |
96,676 |
$ |
339,941 |
$ |
201 |
$ |
336,112 |
$ |
3,628 |
$ |
250 |
$ |
340,191 |
||||||||||||||||
Derivative assets |
138,318 |
1,544 |
136,774 |
89,889 |
22,310 |
24,575 |
5,676 |
142,450 |
||||||||||||||||||||||||
Other financial assets |
3,306 |
443 |
2,863 |
19 |
421 |
2,423 |
– |
2,863 |
||||||||||||||||||||||||
$ |
578,241 |
$ |
98,663 |
$ |
479,578 |
$ |
90,109 |
$ |
358,843 |
$ |
30,626 |
$ |
5,926 |
$ |
485,504 |
|||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
$ |
427,330 |
$ |
96,676 |
$ |
330,654 |
$ |
201 |
$ |
325,674 |
$ |
4,779 |
$ |
4,584 |
$ |
335,238 |
||||||||||||||||
Derivative liabilities |
132,770 |
1,544 |
131,226 |
89,889 |
17,340 |
23,997 |
11,403 |
142,629 |
||||||||||||||||||||||||
Other financial liabilities |
1,475 |
443 |
1,032 |
19 |
– |
1,013 |
– |
1,032 |
||||||||||||||||||||||||
$ |
561,575 |
$ |
98,663 |
$ |
462,912 |
$ |
90,109 |
$ |
343,014 |
$ |
29,789 |
$ |
15,987 |
$ |
478,899 |
|||||||||||||||||
(Millions of Canadian dollars) | As at October 31, 2022 | |||||||||||||||||||||||||||||||
Amounts subject to enforceable netting arrangements | ||||||||||||||||||||||||||||||||
Related amounts not offset on the Consolidated Balance Sheets (1) |
||||||||||||||||||||||||||||||||
Gross amounts of recognized financial instruments |
Gross amounts offset on the Consolidated Balance Sheets |
Net amounts presented in the Consolidated Balance Sheets |
Impact of master netting agreements |
Financial collateral (2) |
Net amounts | Amounts not subject to enforceable netting arrangements |
Net amounts presented on the Consolidated Balance Sheets |
|||||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
$ | 411,937 | $ | 94,203 | $ | 317,734 | $ | 293 | $ | 314,602 | $ | 2,839 | $ | 111 | $ | 317,845 | ||||||||||||||||
Derivative assets |
146,479 | 2,185 | 144,294 | 98,610 | 21,412 | 24,272 | 10,145 | 154,439 | ||||||||||||||||||||||||
Other financial assets |
1,638 | 304 | 1,334 | 11 | 83 | 1,240 | – | 1,334 | ||||||||||||||||||||||||
$ | 560,054 | $ | 96,692 | $ | 463,362 | $ | 98,914 | $ | 336,097 | $ | 28,351 | $ | 10,256 | $ | 473,618 | |||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
$ | 360,722 | $ | 94,203 | $ | 266,519 | $ | 293 | $ | 265,822 | $ | 404 | $ | 7,428 | $ | 273,947 | ||||||||||||||||
Derivative liabilities |
141,137 | 2,185 | 138,952 | 98,610 | 19,758 | 20,584 | 14,539 | 153,491 | ||||||||||||||||||||||||
Other financial liabilities |
825 | 304 | 521 | 11 | – | 510 | – | 521 | ||||||||||||||||||||||||
$ | 502,684 | $ | 96,692 | $ | 405,992 | $ | 98,914 | $ | 285,580 | $ | 21,498 | $ | 21,967 | $ | 427,959 |
(1) | Financial collateral is reflected at fair value. The financial instrument amounts and financial collateral disclosed are limited to the net balance sheet exposure, and any over-collateralization is excluded from the table. |
(2) | Includes cash collateral of $17 billion (October 31, 2022 – $20 billion) and non-cash collateral of $342 billion (October 31, 2022 – $316 billion) received for financial assets and cash collateral of $15 billion (October 31, 2022 – $19 billion) and non-cash collateral of $328 billion (October 31, 2022 – $267 billion) pledged for financial liabilities. |
Note 31 Recovery and settlement of on-balance sheet assets and liabilities |
As at |
||||||||||||||||||||||||||
October 31, 2023 |
October 31, 2022 |
|||||||||||||||||||||||||
(Millions of Canadian dollars) |
Within one year |
After one year |
Total |
Within one year |
After one year |
Total | ||||||||||||||||||||
Assets |
||||||||||||||||||||||||||
Cash and due from banks (1)
|
$ |
59,793 |
$ |
2,196 |
$ |
61,989 |
$ 71,081 | $ | 1,316 | $ | 72,397 | |||||||||||||||
Interest-bearing deposits with banks |
71,086 |
– |
71,086 |
108,011 | – | 108,011 | ||||||||||||||||||||
Securities |
||||||||||||||||||||||||||
Trading (2)
|
180,929 |
9,222 |
190,151 |
139,810 | 8,395 | 148,205 | ||||||||||||||||||||
Investment, net of applicable allowance |
33,363 |
186,216 |
219,579 |
26,540 | 143,478 | 170,018 | ||||||||||||||||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
336,437 |
3,754 |
340,191 |
316,714 | 1,131 | 317,845 | ||||||||||||||||||||
Loans |
||||||||||||||||||||||||||
Retail |
120,247 |
449,704 |
569,951 |
113,965 | 435,786 | 549,751 | ||||||||||||||||||||
Wholesale |
76,249 |
211,577 |
287,826 |
70,374 | 203,593 | 273,967 | ||||||||||||||||||||
Allowance for loan losses |
(5,004 |
) |
(3,753 | ) | ||||||||||||||||||||||
Segregated fund net assets |
– |
2,760 |
2,760 |
– | 2,638 | 2,638 | ||||||||||||||||||||
Other |
||||||||||||||||||||||||||
Customers’ liability under acceptances |
21,690 |
5 |
21,695 |
17,827 | – | 17,827 | ||||||||||||||||||||
Derivatives (2)
|
140,261 |
2,189 |
142,450 |
151,928 | 2,511 | 154,439 | ||||||||||||||||||||
Premises and equipment |
65 |
6,684 |
6,749 |
59 | 7,155 | 7,214 | ||||||||||||||||||||
Goodwill |
– |
12,594 |
12,594 |
– | 12,277 | 12,277 | ||||||||||||||||||||
Other intangibles |
– |
5,907 |
5,907 |
– | 6,083 | 6,083 | ||||||||||||||||||||
Other assets |
62,555 |
14,513 |
77,068 |
66,071 | 14,229 | 80,300 | ||||||||||||||||||||
$ |
1,102,675 |
$ |
907,321 |
$ |
2,004,992 |
$ 1,082,380 | $ | 838,592 | $ | 1,917,219 | ||||||||||||||||
Liabilities |
||||||||||||||||||||||||||
Deposits (3)
|
$ |
991,484 |
$ |
240,203 |
$ |
1,231,687 |
$ 1,023,324 | $ | 185,490 | $ | 1,208,814 | |||||||||||||||
Segregated fund net liabilities |
– |
2,760 |
2,760 |
– | 2,638 | 2,638 | ||||||||||||||||||||
Other |
||||||||||||||||||||||||||
Acceptances |
21,740 |
5 |
21,745 |
17,872 | – | 17,872 | ||||||||||||||||||||
Obligations related to securities sold short |
32,602 |
1,049 |
33,651 |
34,105 | 1,406 | 35,511 | ||||||||||||||||||||
Obligations related to assets sold under repurchase agreements and securities loaned |
334,959 |
279 |
335,238 |
273,001 | 946 | 273,947 | ||||||||||||||||||||
Derivatives (2)
|
131,352 |
11,277 |
142,629 |
140,808 | 12,683 | 153,491 | ||||||||||||||||||||
Insurance claims and policy benefit liabilities |
1,898 |
10,068 |
11,966 |
1,904 | 9,607 | 11,511 | ||||||||||||||||||||
Other liabilities |
69,187 |
26,983 |
96,170 |
71,689 | 23,546 | 95,235 | ||||||||||||||||||||
Subordinated debentures |
– |
11,386 |
11,386 |
110 | 9,915 | 10,025 | ||||||||||||||||||||
$ |
1,583,222 |
$ |
304,010 |
$ |
1,887,232 |
$ 1,562,813 | $ | 246,231 | $ |
1,809,044 |
(1) | Cash and due from banks are assumed to be recovered within one year, except for cash balances not available for use by the Bank. |
(2) | Trading securities classified as FVTPL and trading derivatives are presented as within one year as this best represents in most instances the short-term nature of our trading activities. Trading securities designated as FVTPL are generally presented based on contractual maturity. Non-trading derivatives are presented according to the recovery or settlement of the hedging transaction. |
(3) | Demand deposits of $511 billion (October 31, 2022 – $562 billion) are presented as within one year due to their being repayable on demand or at short notice on a contractual basis. In practice, these deposits relate to a broad range of individuals and customer-types which form a stable base for our operations and liquidity needs. |
Note 32 Parent company information |
As at | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Assets |
||||||||
Cash and due from banks |
$ |
41,770 |
$ | 48,062 | ||||
Interest-bearing deposits with banks |
61,256 |
84,680 | ||||||
Securities |
217,490 |
174,615 | ||||||
Investments in bank subsidiaries and associated companies (1)
|
55,082 |
49,841 | ||||||
Investments in other subsidiaries and associated companies |
105,070 |
88,260 | ||||||
Assets purchased under reverse repurchase agreements and securities borrowed |
150,207 |
132,829 | ||||||
Loans, net of allowance for loan losses |
709,635 |
679,580 | ||||||
Net balances due from bank subsidiaries (1)
|
– |
7,172 | ||||||
Other assets |
214,145 |
227,767 | ||||||
$ |
1,554,655 |
$ | 1,492,806 | |||||
Liabilities and shareholders’ equity |
||||||||
Deposits |
$ |
1,006,284 |
$ | 955,978 | ||||
Net balances due to bank subsidiaries (1)
|
10,132 |
– | ||||||
Net balances due to other subsidiaries |
6,866 |
36,701 | ||||||
Other liabilities |
402,326 |
382,099 | ||||||
1,425,608 |
1,374,778 | |||||||
Subordinated debentures |
11,386 |
9,964 | ||||||
Shareholders’ equity |
117,661 |
108,064 | ||||||
$ |
1,554,655 |
$ | 1,492,806 |
(1) | Bank refers primarily to regulated deposit-taking institutions and securities firms. |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31 2022 |
||||||
Interest and dividend income (1)
|
$ |
56,495 |
$ | 27,791 | ||||
Interest expense |
44,174 |
12,846 | ||||||
Net interest income |
12,321 |
14,945 | ||||||
Non-interest income (2)
|
5,390 |
5,425 | ||||||
Total revenue |
17,711 |
20,370 | ||||||
Provision for credit losses |
2,002 |
579 | ||||||
Non-interest expense |
11,780 |
10,175 | ||||||
Income before income taxes |
3,929 |
9,616 | ||||||
Income taxes |
1,874 |
2,276 | ||||||
Net income before equity in undistributed income of subsidiaries |
2,055 |
7,340 | ||||||
Equity in undistributed income of subsidiaries |
12,804 |
8,454 | ||||||
Net income |
$ |
14,859 |
$ | 15,794 | ||||
Other comprehensive income (loss), net of taxes |
251 |
5,810 | ||||||
Total comprehensive income |
$ |
15,110 |
$ | 21,604 |
(1) | Includes dividend income from investments in subsidiaries and associated c ompanies of $25 million (October 31, 2022 – $11 million). |
(2) | Includes a nominal share of income (loss) from associated companies (October 31, 2022 – nominal). |
For the year ended | ||||||||
(Millions of Canadian dollars) |
October 31 2023 |
October 31
2022
|
||||||
Cash flows from operating activities |
||||||||
Net income |
$ |
14,859 |
$ | 15,794 | ||||
Adjustments to determine net cash from operating activities: |
||||||||
Change in undistributed earnings of subsidiaries |
(12,804 |
) |
(8,454 | ) | ||||
Change in deposits, net of securitizations |
50,306 |
101,145 | ||||||
Change in loans, net of securitizations |
(30,055 |
) |
(78,288 | ) | ||||
Change in trading securities |
(12,832 |
) |
(10,348 | ) | ||||
Change in obligations related to assets sold under repurchase agreements and securities loaned |
21,954 |
24,133 | ||||||
Change in assets purchased under reverse repurchase agreements and securities borrowed |
(17,378 |
) |
(7,239 | ) | ||||
Change in obligations related to securities sold short |
(819 |
) |
3,024 | |||||
Other operating activities, net |
5,000 |
2,385 | ||||||
Net cash from (used in) operating activities |
18,231 |
42,152 | ||||||
Cash flows from investing activities |
||||||||
Change in interest-bearing deposits with banks |
23,424 |
(27,784 | ) | |||||
Proceeds from sales and maturities of investment securities |
127,965 |
59,304 | ||||||
Purchases of investment securities |
(153,099 |
) |
(71,509 | ) | ||||
Net acquisitions of premises and equipment and other intangibles |
(2,075 |
) |
(1,180 | ) | ||||
Change in cash invested in subsidiaries |
(3,802 |
) |
(2,514 | ) | ||||
Change in net funding provided to subsidiaries |
(12,531 |
) |
(36,981 | ) | ||||
Net cash from (used in) investing activities |
(20,118 |
) |
(80,664 | ) | ||||
Cash flows from financing activities |
||||||||
Issuance of subordinated debentures |
1,500 |
1,000 | ||||||
Repayment of subordinated debentures |
(110 |
) |
– | |||||
Issue of common shares, net of issuance costs |
65 |
51 | ||||||
Common shares purchased for cancellation |
– |
(5,426 | ) | |||||
Issue of preferred shares and other equity instruments, net of issuance costs |
– |
749 | ||||||
Redemption of preferred shares and other equity instruments |
– |
(155 | ) | |||||
Dividends paid on shares and distributions paid on other equity instruments |
(5,549 |
) |
(6,960 | ) | ||||
Repayment of lease liabilities |
(311 |
) |
(302 | ) | ||||
Net cash from (used in) financing activities |
(4,405 |
) |
(11,043 | ) | ||||
Net change in cash and due from banks |
(6,292 |
) |
(49,555 | ) | ||||
Cash and due from banks at beginning of year |
48,062 |
97,617 | ||||||
Cash and due from banks at end of year |
$ |
41,770 |
$ | 48,062 | ||||
Supplemental disclosure of cash flow information |
||||||||
Amount of interest paid |
$ |
35,104 |
$ | 7,801 | ||||
Amount of interest received |
49,098 |
21,332 | ||||||
Amount of dividends received |
2,628 |
2,618 | ||||||
Amount of income taxes paid |
2,604 |
4,641 |
Note 33 Principal subsidiaries |
(Millions of Canadian dollars) |
As at October 31, 2023 |
|||||
Principal subsidiaries (1)
|
Principal office address (2)
|
Carrying value of voting shares owned by the Bank (3)
|
||||
Royal Bank Holding Inc. |
Toronto, Ontario, Canada |
$ |
85,823 |
|||
RBC Direct Investing Inc. |
Toronto, Ontario, Canada |
|||||
RBC Insurance Holdings Inc. |
Mississauga, Ontario, Canada |
|||||
RBC Life Insurance Company |
Mississauga, Ontario, Canada |
|||||
Investment Holdings (Cayman) Limited |
George Town, Grand Cayman, Cayman Islands |
|||||
RBC (Barbados) Funding Ltd. |
St. James, Barbados |
|||||
Capital Funding Alberta Limited |
Calgary, Alberta, Canada |
|||||
RBC Global Asset Management Inc. |
Toronto, Ontario, Canada |
|||||
RBC Investor Services Trust |
Toronto, Ontario, Canada |
|||||
RBC (Barbados) Trading Bank Corporation |
St. James, Barbados |
|||||
RBC US Group Holdings LLC (2)
|
Toronto, Ontario, Canada |
32,278 |
||||
RBC USA Holdco Corporation (2)
|
New York, New York, U.S. |
|||||
RBC Capital Markets, LLC (2)
|
New York, New York, U.S. |
|||||
City National Bank (2)
|
Los Angeles, California, U.S. |
|||||
RBC Dominion Securities Limited |
Toronto, Ontario, Canada |
15,290 |
||||
RBC Dominion Securities Inc. |
Toronto, Ontario, Canada |
|||||
Royal Bank Mortgage Corporation |
Toronto, Ontario, Canada |
6,277 |
||||
RBC Europe Limited |
London, England |
2,977 |
||||
The Royal Trust Company |
Montreal, Quebec, Canada |
1,367 |
||||
Royal Trust Corporation of Canada |
Toronto, Ontario, Canada |
553 |
(1) |
The Bank directly or indirectly controls each subsidiary. |
(2) |
Each subsidiary is incorporated or organized under the laws of the state, province or country in which the principal office is situated, except for RBC US Group Holdings LLC and RBC USA Holdco Corporation which are incorporated under the laws of the State of Delaware, U.S., RBC Capital Markets, LLC, which is organized under the laws of the State of Minnesota, U.S., and City National Bank which is a national bank, chartered under the laws of the United States of America. |
(3) |
The carrying value of voting shares is stated as the Bank’s equity in such investments. |
Exhibit 3
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Annual Report on Form 40-F for the year ended October 31, 2023 of Royal Bank of Canada of our Report of Independent Registered Public Accounting Firm dated November 29, 2023, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in Exhibit 2 to this Annual Report on Form 40-F.
We also consent to the incorporation by reference in the Registration Statements on Form S-8 Nos.333-12036, 333-12050, 333-13052, 333-13112, 333-117922, 333-207754, 333-207750, 333-207748, 333-252536 and 333-268715, and on Form F-3 No.333-259205 of Royal Bank of Canada of our Report of Independent Registered Public Accounting Firm dated November 29, 2023 referred to above.
We also consent to the reference to us under the heading “Experts” in the Annual Information Form, filed as Exhibit 1 to this Annual Report on Form 40-F, which is incorporated by reference in such Registration Statements.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
November 30, 2023
Exhibit 4
RBC Code of Conduct
A Message from David McKay
President and CEO
Building trust by speaking up and doing the right thing
At RBC, holding ourselves to the highest standards of integrity plays a critical role in achieving our Purpose to help clients thrive and communities prosper, and our Vision to be among the world’s most trusted and successful financial institutions.
In short, how we do things is just as important as what we do.
Our Values and our Code of Conduct guide us and set expectations for our behaviour and decision-making. Our Code is the roadmap we follow to serve our clients with the highest standards of integrity. It also lays the foundation for how we work together in a respectful, transparent and fair environment.
Guided by our Leadership Model, we are each responsible for speaking up and doing the right thing to protect and enhance RBC’s reputation and put our clients first. We all have a duty to report actual or possible misconduct and the right to be treated with dignity and respect when we do. And that includes speaking up, challenging and reporting unethical behaviour when it occurs, without fear of retaliation.
Together, we can foster a culture that’s built on trust, dignity and respect for all.
Please read the Code carefully, discuss what it means with your manager and colleagues, and ask questions to ensure you understand it and what it requires of you.
Our success depends on these principles. And it starts with each one of us.
David McKay, President and CEO
i
Our Vision and Values
RBC’s Values define what we stand for everywhere we do business. They are reflected in our behaviour and the way we build relationships and deliver value to all our clients, employees, shareholders, communities and others we deal with. Guided by our shared Values and united in a common purpose, we can achieve our strategic goals and accomplish great results.
We demonstrate our Vision – To be Among the World’s Most Trusted and Successful Financial Institutions – by living our Values in the decisions and actions we take every day. These five Values set the tone for our culture and unify us across geographies and businesses:
CLIENT FIRST: We will always earn the right to be our clients’ first choice.
• Put client needs above our own whatever our role, to build lasting relationships
• Listen with empathy, understand client needs to offer the right advice and solutions
• Bring the best of RBC to deliver excellent value and differentiated client experiences
COLLABORATION: We win as One RBC.
• Believe in each other and trust in teamwork and colleagues’ intentions
• Share knowledge, listen and teach to learn and achieve more together
• Look beyond ourselves to see the bigger picture for opportunities and solutions
ACCOUNTABILITY: We take ownership for personal and collective high performance.
• Be bolder, reach higher, act with courage to realize potential and make a difference
• Own it; seek out accountability and empowerment to grow and excel
• Be curious and learn continuously to build skills and careers
DIVERSITY & INCLUSION: We embrace diversity for innovation and growth.
• Speak up for inclusion and empower people to grow and achieve more
• Seek out and respect different perspectives to challenge conventional approaches
• Identify and act on the opportunities and needs that client diversity brings
INTEGRITY: We hold ourselves to the highest standards to build trust.
• Be respectful, transparent and fair in all relationships
• Stand up for what we believe; speak with candour; constructively challenge
• Build trust of clients, colleagues and community partners by listening to and understanding their interests and needs
At RBC we bring these Values to life every day – continuing to earn the trust of RBC’s clients and each other and ensuring our strong reputation for doing what’s right.
ii
Table of Contents
1. LIVING OUR VALUES |
1 | |||
1.1 ACTING WITH INTEGRITY – DOING WHAT’S RIGHT |
1 | |||
1.2 OUR SHARED COMMITMENT AND ACCOUNTABILITY |
2 | |||
1.2.1 APPROVAL OF THE CODE |
2 | |||
1.2.2 WAIVERS |
2 | |||
2. SPEAKING UP |
3 | |||
2.1 SPEAKING UP, ASKING QUESTIONS AND CONSTRUCTIVELY CHALLENGING |
3 | |||
2.2 REPORTING MISCONDUCT |
3 | |||
2.3 INVESTIGATIONS, INQUIRIES AND REVIEWS |
4 | |||
2.4 RBC’S COMMITMENT TO NON-RETALIATION |
4 | |||
2.5 WHAT WE EXPECT OF OUR PEOPLE MANAGERS |
5 | |||
3. INTEGRITY IN DEALING WITH RBC CLIENTS, COMMUNITIES AND OTHERS |
6 | |||
3.1 PROTECTING RBC CLIENT INFORMATION |
6 | |||
3.2 PROTECTING RBC BUSINESS INFORMATION |
6 | |||
3.3 PROTECTING RBC EMPLOYEE INFORMATION |
7 | |||
3.4 PROTECTING RBC’S REPUTATION IN OUR COMMUNITIES |
7 | |||
4. INTEGRITY IN WORKING TOGETHER AT RBC |
10 | |||
4.1 RESPECTFUL WORKPLACE |
10 | |||
4.2 EQUITABLE OPPORTUNITIES, FAIR WORKPLACE, ACCESSIBILITY AND HUMAN RIGHTS |
11 | |||
4.3 WORKPLACE HEALTH AND SAFETY |
12 | |||
5. INTEGRITY IN HOW WE DO BUSINESS |
13 | |||
5.1 MANAGING BUSINESS DEALINGS |
13 | |||
5.2 AVOIDING AND MANAGING CONFLICTS OF INTEREST |
13 | |||
5.2.1 MANAGING OUR CLOSE PERSONAL RELATIONSHIPS IN RBC DEALINGS |
14 | |||
5.2.2 MANAGING CLOSE PERSONAL RELATIONSHIPS AT WORK |
15 | |||
5.2.3 MANAGING OUTSIDE ACTIVITIES AND EXTERNAL DIRECTORSHIPS |
15 | |||
5.2.4 MANAGING GIFTS AND ENTERTAINMENT |
16 | |||
5.2.5 MANAGING INSIDE INFORMATION AND SECURITIES TRADING |
17 | |||
5.2.6 ACCEPTING APPOINTMENTS OR INHERITANCES |
18 | |||
5.3 PREVENTING FINANCIAL CRIME |
18 | |||
5.4 MANAGING COMPLIANCE WITH GLOBAL ECONOMIC SANCTIONS |
19 | |||
5.5 ENSURING FAIR COMPETITION |
20 |
iii
6. INTEGRITY IN SAFEGUARDING ENTRUSTED ASSETS |
21 | |||
6.1 PROTECTING RBC CLIENT PROPERTY |
21 | |||
6.2 PROTECTING RBC PROPERTY |
21 | |||
6.3 KEEPING ACCURATE BOOKS AND RECORDS |
24 | |||
7. CONCLUSION |
25 |
Publication date: January 1, 2023
iv
1. Living Our Values
1.1 Acting with Integrity – Doing What’s Right
RBC is a values-based organization. Our respect for and our commitments to our clients, shareholders, communities and each other are rooted in our Values. RBC’s Code of Conduct (the “Code”) incorporates RBC’s Values, and in particular our Value of Integrity, to guide our day-to-day actions and decisions so we can always do the right thing.
Throughout the Code, “RBC” means Royal Bank of Canada and all its subsidiaries.
Every day our actions demonstrate not only our Value of always earning the right to be our clients’ first choice, but also our personal commitments. We each have a responsibility to be truthful, respect others and comply with applicable laws and regulations and RBC’s policies (in the Code, the word “policy” includes policies, procedures, standards, standing orders and frameworks). Over many years RBC has earned trust and a reputation for doing what’s right through the actions of those who work here. A continued strong focus on doing what’s right will sustain and build on that trust – the cornerstone of the financial services industry and our relationships with clients and communities.
We do business across the globe, and each one of us has a responsibility to behave with integrity so that we can continue to serve clients and generate value for RBC’s shareholders. More than simply being aware of our Values and following our Code, we need to make them an integral part of how we operate day to day. This will ensure we tell the truth, respect others, uphold the law, speak up to challenge what we believe is wrong, and comply with policies and practices. Our foundation is based on acting with integrity and doing what’s right.
For resources and information, visit Doing What’s Right on RBCNet.
Tell the truth
Our work places us in a position of trust. RBC clients, shareholders, communities and our colleagues rely on us to be honest and do business responsibly. We do what we say we will do and earn the trust and loyalty of our clients, shareholders, communities and colleagues.
Respect others and treat them fairly
Showing respect for everyone we work with and the clients we serve, treating them fairly and taking personal responsibility for high performance enable us to achieve RBC’s strategic goals. By living our Values and following the Code, we show others we honour the trust they place in us – making RBC a great place to work and do business.
Uphold the law
RBC is subject to the laws of the countries where we do business. RBC’s policies are designed to comply with its legal and regulatory obligations, including the intent and spirit of the laws that apply to it. By doing so, RBC maintains its reputation for acting with integrity. To this end, each of us must understand and comply with RBC’s policies and practices that apply to the way we do our jobs. Keep in mind that breaking the law could result in disciplinary action up to and including termination of our employment, civil, criminal and regulatory penalties, including fines, for RBC and the individual involved, as well as damage to both RBC’s and the individual’s reputation.
Speak up to challenge and do what’s right
Constructively challenging decisions and behaviour helps ensure we continue to live our Values in our work at RBC. Seeking out constructive challenge when we make business decisions helps ensure those decisions are right for RBC – and clients, colleagues, shareholders and communities.
1
Comply with policies and instructions
We are each responsible for knowing and following the RBC policies that apply to us. We must also comply with managers’ instructions unless they are inconsistent with the Code, RBC Values or policies, are against the law or result in health and safety risks. In these circumstances, or if we are unsure about the right thing to do, we should raise our concerns with one of the Key Contacts.
We must always be aware of both enterprise and local policies specific to business or geographic areas and work within the boundaries of what we have been authorized to do.
1.2 Our Shared Commitment and Accountability
The Code applies to all RBC employees, contract workers and members of the boards of directors of Royal Bank of Canada and all its subsidiaries.
Understanding and complying with the Code is a condition of our work at RBC, and critical to earning each other’s trust, as well as the trust of our clients and communities. The Code helps to protect our personal integrity and reputation as well as the integrity and reputation of RBC and the financial services industry as a whole.
Any one of us who breaches, or fails to report an actual or possible breach of, the Code will be subject to corrective or disciplinary action.
Corrective or disciplinary action is RBC’s response to unacceptable behaviour, including breaches of the Code, and can range from reprimands and impact on performance ratings and compensation, to termination of our working relationship with RBC.
We also expect RBC third party suppliers to follow similar principles and share our commitment to ethics and integrity as set out in our Supplier Code of Conduct.
1.2.1 Approval of the Code
The Board of Directors of Royal Bank of Canada approves the Code.
1.2.2 Waivers
Waivers of the Code, or any of its provisions, are seldom granted. If a waiver is necessary to accommodate exceptional circumstances, it must be approved by RBC’s Chief Human Resources Officer and RBC’s Chief Risk Officer. A waiver of the Code for Royal Bank of Canada directors, executive officers or specified officers must be approved by Royal Bank of Canada’s Board of Directors (or a designated Board committee) and disclosed publicly, as required by applicable laws and RBC policies.
2
2. Speaking Up
Acting with integrity involves more than just personally complying with the Code. It also means we speak up for the good of RBC and that all concerns are heard.
2.1 Speaking Up, Asking Questions and Constructively Challenging
While the Code and RBC policies outline the ethical behaviour expected of us, they cannot anticipate every situation we encounter. By speaking up and asking questions, we help ensure RBC does the right thing and we protect our clients’ interests and assets, RBC’s reputation and each other. If we need guidance, have questions or are unsure about the right thing to do, we should speak with our manager, senior management or one of the Key Contacts.
Doing What’s Right
I notice that it’s common for the team I work with to circulate emails with inappropriate material, like GIFs. I think some might find some of the material offensive, and it might not be aligned to our Code of Conduct. But, given everyone seems to do it, including my manager, what do I do?
If you see someone doing something that breaches the Code of Conduct a discussion with the person is encouraged. If the conduct continues you have an obligation to raise your concern with a manager or one of the Key Contacts, without the fear of retaliation.
2.2 Reporting Misconduct
We have a duty to report actual, or possible, misconduct that we become aware of, even our own. This includes speaking up about conduct that is, or may be, in violation of the Code, policies and laws, or is otherwise unethical and could put RBC at risk of loss or harm. There are a number of reporting channels we can use to report misconduct. We can notify our managers, senior management, Human Resources, Compliance, or we can report through the Conduct Hotline. The Conduct Hotline also provides us with the option to report anonymously.
Those of us who receive a report of misconduct are expected to promptly engage other Key Contacts and Human Resources, as appropriate, to assist with the review and investigation of the report.
All reports of misconduct are taken seriously and investigated promptly and thoroughly, as appropriate. RBC keeps the identity of the person making the report and the details confidential, and will only disclose this information to the extent necessary to investigate and address the situation or as legally required.
Refer to RBC Standards on Reporting Misconduct and the Speak Up! webpage for further details.
Some examples of misconduct are:
◾ | deliberate failure to comply with policies, management instructions or the law |
◾ | disrespectful behaviour, discrimination, harassment, racism and actual or threatened violence |
◾ | misappropriation (including fraud, theft and kiting), improper use of company or client assets or systems, and improper sales reporting |
◾ | promoting products and services to clients inappropriately |
3
◾ | inappropriate client referrals, failing to report unusual client transactions and inappropriate use or disclosure of client information |
◾ | inappropriate social media use |
◾ | failing to disclose, manage and, if necessary, eliminate conflicts of interest, and |
◾ | insider trading. |
2.3 Investigations, Inquiries and Reviews
At times we may be asked to participate in an internal or external investigation, inquiry or review of concerns or possible misconduct. We have a duty to cooperate and provide honest, accurate, complete and timely information. We may receive an inquiry from government authorities or regulators regarding RBC business. When approached for information by an external party, we must follow the procedures established for our business unit. This includes escalating the inquiry to our manager and local Compliance group or Law Group, as appropriate, for response.
2.4 RBC’s Commitment to Non-Retaliation
There will be no retaliation for asking questions, speaking up and making a truthful report of actual or possible misconduct, participating in an investigation or exercising our legal rights. Retaliation can include behaviour or actions that punish or deter someone from speaking up, which we have a duty to and must report. If you believe you or someone else has encountered any form of retaliation, contact one of the channels listed on the Speak Up! webpage to ensure the situation is addressed promptly.
Our commitment to non-retaliation means RBC:
◾ | investigates every claim of retaliation |
◾ | in appropriate cases, periodically follows up with employees who raise concerns to identify actions or behaviours that could be found to be retaliatory |
◾ | reviews performance ratings and compensation decisions made in relation to those who report misconduct to address potential retaliation, if applicable |
◾ | provides education and coaching on retaliation to managers of employees who raise concerns, and |
◾ | takes disciplinary action to address retaliation. |
Some examples of retaliation are:
◾ | an unjustified decision affecting someone’s compensation, job security, career mobility or performance rating |
◾ | excluding someone from meetings or team events, or |
◾ | withholding work-related information. |
Some examples of activities that are not retaliation are:
◾ | appropriate disciplinary action for misconduct |
◾ | managing performance, and |
◾ | routine coaching. |
4
2.5 What We Expect of Our People Managers
While we are all held to the high ethical standards set out in our Values and the Code, those of us who are people managers are accountable for leading by example. This includes:
• | promoting our teams’ awareness and understanding of RBC’s Values, the Code and our policies to ensure ongoing compliance |
• | demonstrating RBC’s high standards for integrity by behaving in a way that reflects our Values, both in and outside the workplace |
• | actively listening to employees and fostering an environment where employees feel comfortable and safe to speak up |
• | being respectful, transparent and fair in all relationships |
• | maintaining an environment that prohibits retaliation, where everyone feels safe to ask questions, raise concerns and report misconduct, and respecting the privacy of those who do, and |
• | promptly escalating concerns and reports of possible or actual misconduct as required, and following up to ensure they are addressed. |
Simple questions are useful tools to test decisions and identify potential risks and issues. Ask yourself:
◾ | Do you feel this situation might violate RBC policies or our Code of Conduct? |
◾ | Could this situation be viewed as unethical, dishonest or discriminatory? |
◾ | Does this situation conflict with RBC’s culture and values? |
◾ | Could this situation negatively impact RBC clients, colleagues, third parties or the community? |
◾ | Could there be possible consequences of our actions or inaction? |
◾ | Could this situation damage RBC’s reputation? |
◾ | Could this situation be damaging to you if it became public? |
If you cannot confidently answer “No” to any of the questions, you should do the right thing and speak up.
5
3. Integrity in Dealing with RBC Clients, Communities and Others
We are committed to promoting fairness in our dealings with our clients, communities, shareholders, third parties and others, carefully weighing our responsibilities to all.
We are in a relationship business and we pride ourselves on the quality of the service, advice and products we provide RBC clients. Integrity and trust help us better serve RBC clients, and we make sure we put their interests above our own. The same applies to the communities where we live and work, making us a company that people want to do business with and work for.
3.1 Protecting RBC Client Information
Clients care deeply about the privacy of the information they share with us. Protecting their information and keeping their trust is integral to the financial services industry. It’s also central to our culture of doing what’s right. We each have a duty to keep RBC client information confidential and secure from the risk of theft, loss, misuse, and/or improper access or disclosure. We do this by complying with the RBC Enterprise Privacy Risk Management Policy. Unless legally required, we must also never share client information — accidentally or intentionally — with a third party or colleague who does not have a business need to know. We are responsible for and trusted with keeping RBC client information private, even after we leave RBC’s service. This includes returning all paper and digital client information in our possession to RBC upon departure.
In the event of a privacy breach, we must follow established procedures. We must immediately report a potential or actual privacy breach in our “Privacy Incident Reporting” tool to engage our local Privacy Officer, and we must never share any details about the breach with others who do not have a business need to know. For more information, please refer to the RBC Enterprise Privacy Risk Management Policy.
3.2 Protecting RBC Business Information
RBC’s business information is one of our most important assets, so we have a duty to safeguard it by complying with RBC information security policies.
For more information, please refer to the RBC Enterprise Information Security Policy and “Proprietary information” in section 6.2 below.
What can I do to protect RBC business or client information?
◾ | Never access or use RBC business or client information to benefit ourselves, our families, our friends, or for any purpose unrelated to the performance of our duties. |
◾ | Operate on a “need to know” rather than “nice to know” basis, and share RBC business or client information only with those who need it for an appropriate business purpose. |
◾ | Always use proper procedures to share information securely. |
◾ | Avoid working in public places. |
◾ | When working from home or off-site, ensure RBC business or client information is not overheard, visible or left behind. |
◾ | Minimize off-site printing and dispose of confidential information securely as soon as it’s no longer needed. |
◾ | Never use your non-RBC personal email address or other non-approved tools, platforms or applications to receive, forward, upload or send business or client information. |
◾ | Immediately report any potential or actual privacy or information security incidents or breaches. |
6
3.3 Protecting RBC Employee Information
Those of us who work at RBC have a right to privacy. Personal information about each of us is confidential. Keeping information private and confidential is a matter of personal integrity, honouring the trust others place in us. Collection, use and disclosure of this information must be relevant to our working relationship with RBC, and compliant with relevant laws, the Code and RBC’s policies. For more information, please refer to RBC’s Employee Privacy Notice.
Some examples of personal information RBC maintains as confidential are:
◾ | information required to verify credentials and education |
◾ | date of birth |
◾ | employment-related credit and other background checks |
◾ | home address |
◾ | home phone number and personal cell phone number |
◾ | government-issued identification numbers |
◾ | diversity data |
◾ | compensation |
◾ | performance reviews |
◾ | corrective/disciplinary actions, and |
◾ | health and benefit information and insurance records. |
3.4 Protecting RBC’s Reputation in Our Communities
Individual character and personal activities
We must avoid any conduct or association which could bring our honesty, integrity or judgment into question. It’s important to understand how closely our clients, shareholders, communities and colleagues associate us with RBC, even when we are off-duty, and how our off-duty conduct impacts RBC’s reputation and brand. We are required to disclose immediately to our manager or Human Resources when we are charged with, and again if we are convicted of, any criminal offence, unless prohibited by local law. Managers should contact Human Resources to seek further guidance. We are held to RBC’s Values and the standards set out in the Code, both on- and off-duty, and our duty to report actual or possible misconduct applies equally when we’re off-duty.
“Off-duty” conduct can become an issue when it:
◾ | damages RBC’s reputation (e.g. you post a disparaging social media comment about your colleague’s abilities) |
◾ | impedes our ability to perform our duties (e.g. a mobile employee has their driver’s licence revoked and cannot drive to see clients), or |
◾ | brings our integrity and Values into question (e.g. cyber-bullying or harassing a colleague off hours). |
Communication and external representation
Our Values and the Code provide a foundation for our behaviour when we represent RBC at work and in our communities. Our integrity and trust must be beyond reproach.
• | Business and corporate use of external social media |
One of the ways RBC communicates is through social media. To ensure our business and corporate social media use is appropriate and consistent with RBC’s general communication strategy, only employees specifically approved for business use may participate in the external social media channels approved by their RBC unit. Refer to the RBC Enterprise Policy on the Use of External Social Media, which includes links to additional business-specific documents and definitions of business and corporate use.
7
• | Personal use of social media |
When we participate in social media in a personal capacity, we must consider the potential impact our personal posts may have on RBC’s reputation, and be guided by our Values and the standards set out in the Code. While social media can be used to create greater awareness and promote RBC’s brand, it is not an appropriate venue to express concerns about RBC, our clients, colleagues or the competition which could be resolved more constructively through one of the channels listed on RBC’s Speak Up! webpage. Confidential, non-public information relating to RBC and its clients must never be shared in our public or private social media conversations. For more guidance on personal use of social media, refer to the RBC Enterprise Guidelines for Personal Use of Social Media.
When using any social media platform, remember that our comments are public and permanent. We should follow the practices below when using social media.
Do:
◾ | identify yourself as an RBC employee when posting about RBC on your personal social media accounts; for example #RBCemployee or #MyCompany |
◾ | follow your business segment’s or functional unit’s Social Media Standard (where applicable) and the RBC Enterprise Guidelines for Personal Use of Social Media, and |
◾ | contact socialmedia@rbc.com if you have questions or concerns or for guidance when using personal social media accounts to promote RBC products or services. |
Do Not:
◾ | post on social media if our personal and professional reputations, or the reputation of RBC, may be negatively impacted |
◾ | post content about our colleagues or other individuals without prior consent |
◾ | include confidential, non-public information relating to RBC and/or RBC clients, employees, contract workers, third parties or other people in digital public forums, such as social media platforms, chat rooms and blogs. Some examples include RBC’s financial information, client and employee personal information, business plans or strategies, pending product launches, partnerships with third parties and employment relationships |
◾ | try to address an issue involving RBC unfolding in social media, or speak on RBC’s behalf, unless authorized by Corporate Communications and our manager |
◾ | use third party content without permission, or |
◾ | use RBC’s trademarks without prior approval. |
8
• | RBC public endorsements and influencer marketing |
An influencer is anyone who publicly talks or posts about RBC (e.g. including products, services, promotions and charitable events) through any channel (e.g. including personal social media or online channels) and has a connection with RBC. A connection can include an employment relationship, receipt of an incentive (e.g. payment, gift or benefit) or a family or close personal relationship with an employee. It is misleading if an influencer does not disclose their connection to RBC because it can change a viewer’s perception of an endorsement. For more guidance, refer to the RBC Enterprise Endorsement and Influencer Marketing Policy.
Some examples of influencers:
◾ | Employees |
◾ | Members of the board of directors of RBC or any of its subsidiaries |
◾ | Endorsers (e.g. celebrities, athletes or other third parties) |
◾ | Reviewers |
◾ | Bloggers |
◾ | Those who have a family or a close personal relationship with an employee |
• | Media interactions and public statements |
Our Corporate Communications team manages and protects RBC’s reputation and ensures consistency and accuracy in responding to media inquiries. Only those of us who have been authorized to do so may communicate with the media on RBC’s behalf. If contacted by a reporter, or receive requests for a third party testimonial/endorsement, employees must immediately reach out to their Corporate Communications representatives. For more information, refer to the RBC Media and Communications Standards.
Supporting our communities
Creating positive social impact is integral to how we do business and core to RBC’s purpose of helping clients thrive and communities prosper. We support the communities where we live, work and do business. We also accept accountability for the social and economic effects of our business decisions. We take pride in the value of our contributions and encourage employee involvement in the community.
We must obtain our manager’s permission to solicit for or promote causes or issues, including charitable ones, in RBC workplaces. Personal involvement in our communities must be at our own expense and must not interfere with our work at RBC or RBC’s operations, and may require manager permission depending on the activity. Refer to the RBC Conflicts of Interest Control Standards for Outside Business Activities and External Directorships for more information.
Environmental sustainability
RBC promotes environmental sustainability. This means minimizing our environmental footprint and offering products and services that support environmental responsibility. We believe fulfilling our goals in these areas will lead to short- and long-term benefits for RBC shareholders, clients, colleagues and the communities where we live and do business.
Political involvement and contributions
We support participation in general political processes and respect our colleagues’ diverse opinions.
We must not use RBC time or resources to promote political candidates or causes, either inside or outside the workplace. If we choose to participate in political activity, we do so on our own behalf, at our own expense, and not as representatives of RBC. We must never use our affiliation with RBC to market our political activities.
It is important to note that certain jurisdictions impose restrictions on political contributions and/or engagement, including volunteer activities and lobbying, by corporations and/or employees of companies. Employees should review various jurisdictional laws, regulations, and/or policies before making a political contribution. If we have any questions, we should ask our manager and/or Compliance.
9
4. Integrity in Working Together at RBC
At RBC, we have a strong and capable global team serving our clients, working together to deliver on our strategy, and creating value and growth for our clients, communities and shareholders. We believe in each other and have confidence and trust in the capabilities and intentions of our colleagues. Our integrity, diversity & inclusiveness, and collaboration help make RBC a great place to work, belong and thrive.
4.1 Respectful Workplace
We all have a right to work in an environment that is respectful and professional. Mutual respect and dignity ensure an environment that is healthy and productive for RBC employees, clients and others we interact with.
We must all behave in a way that contributes to a workplace free from discrimination, disrespectful and inappropriate behaviour, harassment, sexual harassment, violence and retaliation. Inappropriate in-person or online behaviours of any kind, whether intentional or unintentional, are not tolerated at RBC.
Harassment is any course of action, behaviour or comments that, because of their nature or persistence, are known, or would reasonably be considered, to interfere with an individual’s professionalism or create an offensive, hostile or intimidating workplace. We must ensure that an individual’s physical and mental well-being is not impacted negatively while also not undermining the integrity of our relationship with RBC and one another.
Maintaining a respectful workplace also requires us to behave professionally while using RBC systems. We must not use RBC networks, systems, devices or access to the Internet to view or communicate inappropriate material.
Keep in mind, respecting confidences and refraining from gossiping about our colleagues is a matter of personal integrity. However, if we become aware of information regarding a possible Code breach, we have a duty to Speak Up! and must report any misconduct.
Refer to RBC’s Respectful Workplace Policy for additional information.
Examples of harassment include:
◾ | intimidating, threatening or coercing another individual |
◾ | bullying, which is a persistent pattern of mistreatment of others that causes harm (e.g. spreading rumours, humiliating, ostracizing or negatively using influence to control another person’s conduct) |
◾ | unwelcome physical contact |
◾ | intruding on an individual’s privacy, including speculating or outing someone on any grounds of discrimination, and |
◾ | offensive or demeaning statements or behaviour (e.g. micro-aggressions, stereotypes, social marginalization) about a person or group, related to any grounds of discrimination. |
Sexual harassment is a specific form of harassment that includes unwelcome behaviour such as:
◾ | unwelcome advances, flirtation, propositions, invitations for sexual favours |
◾ | sexual physical contact |
◾ | verbal comments, actions or gestures of a sexual nature |
◾ | sexist behaviour that represents a belief that one gender is inferior to the other |
◾ | disseminating or displaying sexually suggestive or explicit pictures, cartoons, objects or jokes |
◾ | conversations or inquiries about sexual exploits or desires, or using lewd language |
◾ | explicitly or implicitly making submission to sexual behaviour a term or condition of employment, or |
◾ | using the submission to, or rejection of, sexual behaviour as a basis for employment decisions. |
10
Not all negative interactions are harassment, discrimination or retaliation. For example,
◾ | minor conflicts that arise because of differences in work or communication styles, and general disagreements are not harassment |
◾ | managing performance and other manager activities that are part of their responsibilities and performed for legitimate business purposes are not harassment, discrimination or retaliation, and |
◾ | constructive challenge that encourages the exchange of ideas is not harassment. |
Examples of disrespectful and inappropriate behaviour are:
◾ | excessive swearing or shouting |
◾ | swearing or shouting directed at others |
◾ | circulating, posting or making demeaning comments, gestures, pranks or jokes |
◾ | circulating or posting derogatory or offensive pictures, posters or communications, and |
◾ | conduct that embarrasses or degrades another based on personal characteristics (e.g. body shaming, socio-economic status shaming). |
Speak Up!
◾ | If you witness or experience inappropriate behaviour, you have a responsibility to report it in a timely manner to a manager, your Human Resources contact or through the Conduct Hotline. |
◾ | Early, informal and direct communication with the person whose behaviour you feel is inappropriate is encouraged where you feel comfortable doing so. Oftentimes, this is a helpful way to address the conduct quickly and effectively. |
◾ | If you decide not to talk directly to the person, or the conduct continues, you must raise your concern with a manager or one of the Key Contacts. Refer to Doing What’s Right. |
◾ | The duty to report does not prevent you from pursuing other processes available by law to report concerns. |
4.2 Equitable Opportunities, Fair Workplace, Accessibility and Human Rights
Equitable opportunities
RBC promotes equitable opportunities in all dealings with RBC employees, contract workers, clients and others we deal with. In addition, RBC enables equitable development and career opportunities in the workplace by staffing vacant positions based on business needs, candidates’ merits and RBC Values.
Fair workplace
We treat all employees and contract workers fairly, pay fair compensation and provide respectful work environments. All employees are encouraged to raise concerns with their manager or any of the Key Contacts.
Accessibility
At RBC, we are committed to removing barriers to promote dignity, independence and equal opportunity in the workplace and in the products and services we offer. We must always take steps to ensure that clients, employees, contract workers, job applicants and members of the boards of directors of Royal Bank of Canada or any of its subsidiaries are treated fairly and with dignity and respect, taking into account their feedback and accessibility needs. Contact Human Resources for guidance as needed. Refer to the Enterprise Accessibility Guidelines or visit Accessibility at RBC for more information.
11
How can we ensure we provide an inclusive environment for persons with accessibility needs?
◾ | Speak appropriately and respectfully with and about any person with a disability (whether visible or non-visible), emphasizing the person first, not the disability. |
◾ | Seek to understand the potential needs of others. |
◾ | Provide accessible premises, equipment, technology and services, where reasonable or required by applicable legislation. |
Human rights
We comply with all applicable laws and relevant international guiding principles regarding non-discrimination and human rights in the jurisdictions where we operate. We strive to avoid causing or contributing to adverse human rights impacts through our own business activities, and aim to prevent and mitigate adverse impacts that we may be directly linked to, by taking appropriate action. We also expect our employees, contract workers, suppliers and other third parties with whom RBC has a business relationship to share our commitment to respect human rights. Our Human Rights Position Statement is adopted at the highest levels of our organization and sets out our commitment.
RBC prohibits harassment and discrimination on the grounds of age, national origin, citizenship, ethnicity, colour, religion or creed, race and ancestry (which is inclusive of those who identify as Indigenous), physical or mental disability, veteran status, family status, pregnancy, marital status, civil or same sex union, biological sex (including intersex), sexual orientation, gender identity/expression or any other characteristic protected by law.
RBC is committed to fostering diversity and inclusion and to respecting and appreciating our differences. Even where laws allow for discrimination on these grounds, RBC operates in a way that treats people fairly.
4.3 Workplace Health and Safety
RBC is committed to providing a healthy and safe workplace and complying with applicable health and safety laws. Maintaining such a workplace is a shared responsibility of RBC and its employees and contract workers.
All employees and contract workers are to take every reasonable and necessary precaution to ensure their health and safety as well as those of their colleagues. A workplace includes all RBC premises and any other place where work related activity occurs, including work related social events and business travel.
To ensure our workplaces are healthy and safe, we understand and follow RBC’s health and safety policies and procedures. We also:
• | do not have weapons of any kind in our possession while on RBC premises, and |
• | obtain management approval and any required permits before arranging events or serving alcohol on RBC premises. |
12
5. Integrity in How We Do Business
Ethical behaviour governs every aspect of our business, from day-to-day transactions to special projects.
5.1 Managing Business Dealings
As representatives of RBC, we have a duty to never mislead others – even by omission – about products or services we offer. We must be mindful in our communications to provide information that is clear, simple and not misleading in any way. We must make every reasonable effort to provide full and fair information and correct errors or ambiguity in any statement made on RBC’s behalf. This is especially important with regard to our sales representations, marketing and advertising.
We ensure our sales practices are fair and not misleading by ensuring that we:
• | are knowledgeable about the products and services we recommend to clients |
• | recommend products and services based on an understanding of a client’s needs and never for personal gain or to meet performance incentive goals or other targets |
• | clearly and accurately explain the terms and conditions outlined, and give appropriate disclosures about a product or service in clear, simple and not misleading language |
• | are not pressuring or coercing our clients for any reason, and |
• | obtain proper and informed consent from our clients in line with RBC’s policies. |
5.2 Avoiding and Managing Conflicts of Interest
By acting in a way that puts RBC and our clients’ interests above our personal interests, we can assure RBC stakeholders of our integrity. This means that the decisions we make in our work with RBC must be made independently of our own interests.
Obligations arising from our other business, family and social relationships must not play a role in our work for RBC. A conflict of interest – actual, potential or perceived – is a situation that could cause others to doubt our ability to perform our jobs effectively and objectively. Keep in mind that a conflict of interest can exist even where we have behaved properly and ethically. Even the impression of a conflict of interest can affect RBC’s reputation and our own. We must think about how our actions would look to others. Just because we don’t perceive our situation to be a conflict, doesn’t mean others share the same view.
Conflicts often arise where there is a personal interest that could compromise our objectivity (i.e. a personal conflict), but also where there may be conflicting interests between RBC and third parties (i.e. a corporate conflict). Even where there is no opportunity for personal gain in a situation, we must consider whether RBC’s interest may conflict with a client’s. Irrespective of the type, we have an ongoing responsibility to identify, disclose, manage and, if necessary, eliminate conflicts of interest in relation to RBC, its employees, its clients and its third parties.
What are some scenarios that present actual, potential or perceived conflicts of interest?
◾ | Borrowing money from or lending money (including co-signing or being a guarantor of loans) to other RBC employees, contract workers or clients, unless the amount is nominal |
◾ | Using your position at RBC to promote an outside organization or business |
◾ | Using your position at RBC to inappropriately influence any employees or transactions |
◾ | Working on behalf of RBC in any transaction or business relationship where you, your family or someone you have a close personal relationship with has a personal or financial interest |
◾ | Processing a transaction for another employee without exercising the same due diligence as you would for any other RBC client |
◾ | Excessive or irresponsible gambling that could place an employee in financial difficulty |
13
What are some examples of corporate conflicts?
◾ | An RBC analyst conducts securities research on a company that is intended to provide an objective opinion on those securities, while also being in possession of inside information about another client that could influence their opinion |
◾ | An employee offers entertainment to a regulatory agency that has oversight of RBC |
Some conflicts arise by virtue of certain types of relationships we have, while others are a result of engaging in certain activities. Common conflicts of interest are described in the following sections. Note that in these sections “family” includes:
• | a spouse, common-law partner or domestic partner |
• | children and step-children |
• | parents and siblings |
• | grandparents and grandchildren, and |
• | other relatives by blood or marriage. |
We must make sure we read and understand the RBC Enterprise Conflicts of Interest Policy and related control standards as well as the RBC Enterprise Anti-Bribery Anti-Corruption Policy. These resources explain how to disclose actual, potential or perceived conflicts with external parties. Where we are unsure about a potential conflict or need more information, we should check with our local Compliance group. Where the conflict relates to another RBC employee, we should speak with our manager or contact Human Resources for guidance as needed. Directors of Royal Bank of Canada should check with the Corporate Secretariat. Non-employee directors of subsidiaries should check with the Subsidiary Governance Office.
5.2.1 Managing Our Close Personal Relationships in RBC Dealings
It is important that we handle our financial dealings responsibly, with integrity and in compliance with RBC policies.
We often use RBC products and services ourselves, as do many of our friends and family members. We must make sure all our personal, family and friend dealings with RBC are handled at arm’s length – independent of their relationship to us and our relationship with RBC – by following relevant procedures for the business we work in.
Likewise, our loyalties can become conflicted if friends or family members work for a company that does or seeks to do business with RBC as an RBC client or third party. This is especially likely to be a problem if it happens to those of us who are involved in the approval or selection process, contract negotiations or relationship management with RBC clients or third parties. In these cases, we must inform our manager or local Compliance group so the conflict can be addressed.
14
5.2.2 Managing Close Personal Relationships at Work
It is possible for our close personal relationships to have an effect on our work at RBC. We must understand the actual or perceived effects that close personal relationships may have in order to avoid situations that would reflect negatively on RBC.
It’s important to identify and disclose immediately if we will be working with family or others who we are in a close personal relationship with so conflicts can be appropriately managed or avoided.
Remember, there is no substitute for good judgment and common sense. If we are ever in doubt about a relationship that may put us in a conflict of interest, we should speak with our manager or Human Resources.
What are some examples of “close personal relationships”?
◾ | Family |
◾ | Romantic or intimate relationships |
◾ | Household members such as roommates |
◾ | Close friends |
◾ | Persons with whom we have a significant financial relationship (e.g. business partner or co-investor) |
What types of close personal relationships could cause a conflict of interest and must be disclosed so they can be appropriately managed or avoided?
◾ | A supervisory relationship with a family member or someone we are in a close personal relationship with |
◾ | Any working relationship with a family member or someone we are in a close personal relationship with where we may have, or be perceived to have, the ability to impact compensation, work or promotion prospects |
5.2.3 Managing Outside Activities and External Directorships
Some of us take on additional activities or roles outside of our work at RBC. For example, we may work part-time elsewhere, run a personal business from home or take on a directorship, officer position or similar role at another company, organization, club, association or foundation. No matter the activity or role, it must not be with one of RBC’s competitors. It must also not compromise our ability to do our best work and fulfill our responsibilities to RBC or its clients.
We must be aware of actual, potential or perceived conflicts of interest and potential reputational issues related to outside activities and external directorships, and must comply with the Code and RBC policies on disclosure and approval. Doing so allows us to maintain our commitment to integrity while maximizing our business and relationships.
The following may be considered competitors of RBC:
◾ | Banks |
◾ | Credit unions |
◾ | Asset management firms |
◾ | Insurance companies |
◾ | Mortgage companies |
15
◾ | Trust companies |
◾ | Certain financial technology companies (i.e. FinTech) |
◾ | Other companies that provide financial services |
Even if an outside activity or external directorship is not with a direct competitor of RBC, conflicts of interest may still arise if the activity or role directly relates to, interferes with or overlaps with our work at RBC (for example, subject matter, job function, technical expertise or using RBC time/systems/resources).
For more information on managing outside activities or work and managing external directorships, refer to the RBC Enterprise Conflicts of Interest Policy and the RBC Conflicts of Interest Control Standards for Outside Business Activities and External Directorships for the required process and approvals.
◾ | Directors of Royal Bank of Canada should refer to the Policies and procedures – Conflicts of interest section in the Royal Bank of Canada Director’s Guide and consult the Corporate Secretariat. |
◾ | Non-employee directors of subsidiaries should refer to the RBC Policy on the Legal Governance of Subsidiaries and consult the Corporate Secretary of the relevant subsidiary. |
5.2.4 Managing Gifts and Entertainment
In business, it is common to foster relationships and show appreciation by exchanging courtesies such as meals, gifts and entertainment. However, we must ensure that the gifts and entertainment we accept are not intended or designed to influence our business judgment on behalf of RBC. Likewise, we must never give gifts or entertainment intended to inappropriately influence or create a sense of obligation to those we have a business relationship with. To keep our purposes clear, all gifts and entertainment we accept or give must comply with RBC policies and be customary and consistent with usual business practices.
RBC policies and business practices require that all gifts and entertainment given or received, with certain exceptions (such as gifts and entertainment of a nominal value or promotional gifts), be disclosed and approved by the appropriate Approval Authority. We must take extra caution when the intended recipient of a gift or entertainment is a public official.
Gifts are anything of value given or received in relation to RBC business. We may only give or accept gifts that are customary, modest and culturally sensitive. We must never accept or give cash, cash equivalents, bonds or negotiable securities, although gift certificates or gift cards are allowed as long as their intended purpose is for the purchase of what would otherwise be considered a gift.
Key things to remember when considering gifts or entertainment:
◾ | Cash, bonds and negotiable securities are never acceptable gifts regardless of the amount. |
◾ | The RBC Conflicts of Interest Control Standards for Gifts and Entertainment sets out limits for gifts, as set out below. Note that the annual cumulative limits that an employee may give to (or receive from) the same client or third party recipient should not exceed: |
◾ | $100 CAD in Canada |
◾ | $100 USD in the United States |
◾ | £100 GBP in the United Kingdom |
◾ | €100 Euro in Europe, and |
◾ | in all other jurisdictions, the local currency equivalent to 100 Canadian dollars. |
16
◾ | Entertainment must not seem excessive or inappropriate; if unsure, seek guidance from your manager or Compliance before accepting an invitation. |
◾ | You must seek guidance from your local Money Laundering Reporting Officer (MLRO) or designated compliance officer before providing a gift or entertainment to, or accepting any gifts or entertainment from, a public official. |
◾ | Gifts and entertainment must not create a sense of obligation for either party – it’s never wrong to question the motive behind business gifts and entertainment. |
◾ | Follow your RBC policies and business practices regarding gifts or entertainment, including recordkeeping. |
◾ | Gifts or entertainment between employees must never be given in exchange for a business referral, to influence or to gain another form of business advantage now or in the future. |
Entertainment includes any event we host or attend for business related purposes. Common examples include meals, sporting events, theatrical performances and educational events. Entertainment should always be in good taste and consistent with usual business practice. As with gifts, we must avoid entertainment that is lavish or too expensive because it may also be seen to influence our judgment.
If only one party attends the event, it is considered a gift rather than entertainment. For example, if a third party gives us tickets to an event, but does not attend, we must follow our process for gifts received from a third party. The same would be true if RBC offers entertainment to a third party, but no one from RBC attends the event. Employees who are invited by a supplier to attend an RBC sponsored event as a gift may be subject to a different approval process and requirements. Refer to the RBC Conflicts of Interest Control Standards for Gifts and Entertainment or consult with your local Compliance group.
RBC has restrictions on payment and acceptance of payment of travel or lodging expenses. These apply to situations where RBC is providing entertainment or where we are accepting travel or lodging expenses from a third party.
In all cases, we must comply with the RBC Enterprise Conflicts of Interest Policy, the RBC Conflicts of Interest Control Standards for Gifts and Entertainment and the RBC Enterprise Anti-Bribery Anti-Corruption Policy. Your RBC unit may also have more specific rules; for further information you should contact your local Compliance group.
5.2.5 Managing Inside Information and Securities Trading
From time to time, we may have access to material, non-public information (“inside information”) about a company, including RBC, or its clients. As a rule, inside information can reasonably be expected to affect the market value or price of a company’s securities, or considered important to a reasonable investor’s investment decision. Having inside information offers an unfair advantage when deciding whether to buy, sell or hold onto a security. As a result, many of the countries where we do business have laws regarding when we can trade in securities issued by any company.
When we have inside information about a company, we must notify Compliance immediately to ensure that the potential conflict is managed appropriately. In addition, we must not trade in the securities of that company. Doing so is called “insider trading” – which is illegal and subject to fines and penalties. It is also illegal to provide inside information to another (this is usually called “tipping”) unless it is necessary to accomplish a legitimate business purpose. Employees should be familiar with information barriers and other tools outlined in RBC policies, which are used to manage conflicts.
17
Many of our investment activities, even where they are not illegal, may still pose personal conflicts that must be managed or eliminated in accordance with RBC policies. Regardless of whether we have access to or possess inside information, we are all subject to the requirements of RBC personal trading policies. Before trading in the securities of RBC, its clients or any other company, we must familiarize ourselves with these requirements, as well as the effect that the perception of wrongdoing may have.
For more information, refer to the RBC Conflicts of Interest Control Standards for Personal Trading and the RBC Conflicts of Interest Control Standards for Inside Information and Information Barriers, as well as applicable local or business-specific policies.
Directors of Royal Bank of Canada should refer to the Insider Trading and Reporting Policy and Procedures for Directors of Royal Bank of Canada.
Non-executive directors of Royal Bank of Canada’s subsidiaries who are not officers, employees or directors of Royal Bank of Canada should refer to the RBC Policy on the Legal Governance of Subsidiaries.
Key things to remember when engaging in securities transactions and trading:
◾ | All employees need pre-approval for personal investments in private companies, be it a small family business or a larger company. |
◾ | Never accept favoured share allotments for initial public offerings that are a result of a relationship you have with a company through RBC. |
◾ | It doesn’t matter how you come to possess inside information, you are always obligated to protect it in accordance with RBC policies and applicable laws. |
◾ | Be particularly mindful when trading in RBC securities, as there might be additional restrictions. |
5.2.6 Accepting Appointments or Inheritances
RBC’s clients look to us for advice on their financial matters. Clients may ask or appoint us to represent them or their interests in a variety of situations. These appointments include our acting as attorneys, mandataries, trustees, executors, administrators, liquidators, protectors, and in other appointments or fiduciary roles. In some instances, clients wish to show their appreciation for the value of our services by giving us a gift effective on their death. These can be made in the client’s will, by designation as beneficiary under a client’s policy, plan or account, or by joint ownership of an asset.
To make sure there is no actual, potential or perceived conflict of interest, we and our families must not accept these requests, appointments, gifts or benefits unless they arise independently of the client relationship. If a request, appointment, gift or benefit does not arise independently of the client relationship, but we believe that special circumstances apply, we must follow established procedures before we or our families accept it. Management and local Compliance approvals, appropriate for the business we work in, are required. When acceptance of certain appointments is part of our role (such as being a discretionary investment manager), we must also follow RBC policies.
5.3 Preventing Financial Crime
Money laundering, terrorist financing, bribery and corruption, activities that may violate applicable economic sanctions and tax evasion are serious crimes that have damaging effects on global economies, countries, communities and businesses. Global efforts to prevent these crimes receive significant attention from regulators, governments, international organizations and law enforcement agencies.
RBC is committed to doing business based on the quality of our reputation and the services we provide, and not because we have gained any dishonest or unfair advantage. RBC supports efforts to detect and prevent these financial crimes through our commitment to operate with integrity. It is very important that we know and comply with all applicable laws and RBC policies designed to prevent and detect these crimes.
18
Reporting financial crimes
We must be vigilant and exercise good judgment when dealing with unusual or suspicious transactions or activities. If we know of or suspect or have any concerns relating to money laundering, terrorist financing, bribery and corruption, activities that may violate applicable economic sanctions, tax evasion or criminal activity, we must Speak Up! and report them as soon as possible to our manager or one of the Key Contacts. We must also never advise (“tip-off”) anyone we suspect of committing these crimes.
For more information or guidance, please refer to the RBC Enterprise Control Standards on Anti-Money Laundering and Anti-Terrorist Financing and the RBC Enterprise Anti-Bribery Anti-Corruption Policy.
What can I do to identify and prevent money laundering or terrorist financing?
◾ | Obtain current and adequate Know Your Client information for all client relationships. |
◾ | Be aware of AML risks and report concerns every time you observe unusual or suspicious activity. |
◾ | Never knowingly assist anyone to transfer the proceeds of crime or alter, remove or disguise information to facilitate a transaction that would otherwise be prohibited under the law. |
What can I do to prevent bribery and corruption?
◾ | Never knowingly facilitate any transaction associated with the proceeds of bribery and corruption. |
◾ | Never solicit, give, receive or promise anything of value, either directly or indirectly, with the intent of helping RBC obtain an inappropriate advantage. This includes offering, providing or receiving excessive or inappropriate gifts and entertainment. |
◾ | Never make facilitation payments. These are typically small payments made to government officials to obtain or speed up routine actions or services such as obtaining licences or permits. |
What can I do to prevent tax evasion?
◾ | Follow RBC’s Know Your Client procedures to understand the source and use of a client’s funds and affairs. If you suspect tax evasion or inappropriate tax reporting, escalate the matter to your manager and AML Compliance contact. Refer to the RBC Enterprise Control Standards on Anti-Money Laundering and Anti-Terrorist Financing for more information on when and how to escalate. |
◾ | Do not knowingly facilitate or ignore tax evasion, either in connection with RBC’s corporate tax affairs or in servicing our clients. If you are aware of any such behaviour at RBC, report it through one of the channels listed on RBC’s Speak Up! webpage. |
5.4 Managing Compliance with Global Economic Sanctions
As a regulated financial institution, RBC must comply with economic sanctions in Canada and other jurisdictions where we operate. We must be aware of any economic sanctions that may apply and their impact to RBC and RBC clients. Further, we must not knowingly avoid sanction regulations, either personally or in servicing our clients. Contact the RBC Law Group or Global Economic Sanctions team for advice if you are unsure of the right course of action.
For more information, please refer to RBC’s Enterprise Economic Sanctions Policy.
19
5.5 Ensuring Fair Competition
RBC seeks to ensure fair business practices are followed wherever we do business. Many countries where we do business have laws to promote fair competition and reduce monopolistic (or anti-competitive) activity.
At RBC, each of us has a responsibility to know and comply with applicable competition and anti-trust laws. We need to be able to recognize and avoid situations that may conflict with these laws. To ensure we comply with these laws, we must be especially careful when dealing with competitors of RBC or other third parties. Never agree or arrange with a competitor to do any of the following directly or indirectly:
• | fix, maintain, increase or try to control the price of a product or service |
• | divide or allocate sales, clients, suppliers or markets for the supply, or acquisition of, products or services, or |
• | fix, maintain, increase, lessen, prevent, eliminate or otherwise try to control the production or supply of a product or service. |
We must take great care at industry association meetings or other events where we may interact with competitors or other third parties. If a discussion appears to be leading into prohibited areas, we must voice our concern, withdraw from the discussion and immediately advise local Compliance or the RBC Law Group. While industry associations can provide excellent opportunities for networking and business development, they pose challenges as well. When attending events, we must be careful to avoid even the appearance that RBC participates in or endorses unfair or manipulative business conduct.
Other examples of activities where competition issues arise:
◾ | Bid-rigging or secretly making agreements with other bidders when submitting bids or tenders |
◾ | Tied selling or making the availability of a product or service conditional on the purchase of another product or service |
◾ | Communications that could be interpreted to show an anti-competitive intent or behaviour, such as advertisements that are misleading, unfair or inaccurate when they compare RBC products with those of our competitors |
◾ | Benchmarking or exchanging information with competitors, particularly where the information could raise possible concerns relating to conspiracy, bid-rigging, illegal trade practices or anti-competitive agreements |
◾ | Entering into agreements with another company to set or fix employee compensation or benefits (e.g. wage-fixing agreements) |
◾ | Improper agreements with another company not to hire or solicit its employees |
◾ | Any other act that is likely to harm competition substantially if done in circumstances where RBC is an important participant in a market or a class of business |
For more information, please refer to RBC’s Enterprise Anti-Trust and Competition Law Policy and Enterprise Compliance Control Standards for Anti-Trust and Competition Law.
20
6. Integrity in Safeguarding Entrusted Assets
As a financial institution, we manage the assets in our care responsibly and ethically to earn and maintain our stakeholders’ trust.
6.1 Protecting RBC Client Property
In order to earn RBC clients’ trust, we must safeguard their property. This property should be used only in accordance with their directions, relevant RBC policy and the law. Using client property inappropriately or for personal gain is a violation of this trust.
6.2 Protecting RBC Property
Fraud, misappropriation and misuse
Many of us have access to premises, systems and information about RBC processes that are not available to RBC clients or the general public. We must never use this access or information to benefit ourselves, our families or our friends, or for any purpose unrelated to the performance of our duties. Fraud, misappropriation of property or corporate opportunities and other types of misuse are never tolerated.
Acts of fraud may include intentionally concealing or misrepresenting facts for the purpose of inducing, deceiving or misleading others.
Some examples of fraud are:
◾ | improper financial reporting (such as improper revenue recognition and over- or understating assets or liabilities) |
◾ | deliberate failure to fulfill our disclosure obligations, and |
◾ | falsifying records (such as forging client or management signatures). |
“Misappropriation” includes theft or other intentional misuse of RBC assets, systems, processes or RBC client funds. Misuse can include any purpose not related to the performance of our duties.
Some examples of misappropriation and misuse are:
◾ | intentional personal use of RBC expense accounts or corporate credit cards — expense accounts and corporate credit cards must be used only for expenses eligible for reimbursement under RBC’s expense guidelines |
◾ | unauthorized “borrowing” and “kiting” (taking advantage of the time delay required for an item to clear) |
◾ | obtaining funds through false pretences such as depositing a cheque known to be NSF (Non- Sufficient Funds) or making an “empty envelope deposit” in an automated banking machine |
◾ | allowing others to benefit from opportunities only available to RBC employees |
◾ | making unauthorized changes to a client profile, and |
◾ | submitting false benefit claims. |
21
Proprietary information
RBC proprietary information includes non-public or undisclosed information we withhold from general knowledge. This information is critical to our business, and could be useful to our competitors or harmful to RBC if disclosed.
Some examples of proprietary information are:
◾ | RBC client lists and trade secrets |
◾ | technical and statistical information |
◾ | RBC developed program source code |
◾ | financial documents |
◾ | contract documentation |
◾ | legal, regulatory or business matters |
◾ | business processes, and |
◾ | corporate strategies and plans. |
Data protection and protecting against data misuse is a shared responsibility and we all have a role to play. We must be diligent at all times, particularly when sending information outside of RBC, receiving information from outside of RBC or even when sharing data internally across legal entities and jurisdictions. It’s important to remember that any loss or misuse of data could impact RBC’s reputation and client confidence, and may have legal, regulatory and financial impacts. For more detail on how to protect proprietary information, please refer to the “Protecting RBC Business Information” in section 3.2 above.
Keep in mind:
◾ | Never send work-related material to your personal email. |
◾ | Take caution and check for correct email addresses before emailing any RBC information. |
◾ | Never upload RBC business information to external file sharing or online storage sites, without authorization from the appropriate parties. |
◾ | Ensure that sharing of information with another party (internal or external) is supported by legitimate business reasons or otherwise authorized. |
◾ | Adhere to a clear desk policy for all your work environments. |
◾ | Additional examples of how to protect RBC business or client information can be found in section 3.2. |
RBC’s proprietary information may be disclosed to outside parties only if required by law or if properly authorized. Authorization can often be obtained through a confidentiality agreement. Our responsibility to safeguard RBC’s proprietary information continues, even after we leave RBC’s service. This includes returning all paper and digital proprietary information in our possession to RBC upon departure.
Trademarks, copyright and other intellectual property
RBC intellectual property has important commercial value and is crucial to RBC’s effective competition in the marketplace. It includes any of the following that we create while working for RBC:
• | inventions, improvements, works of authorship, developments, concepts or ideas |
• | data, processes, online websites or applications, computer software programs, or discoveries, and |
• | trade secrets, trademarks, brand names, copyrights or logos. |
22
Any intellectual property we generate in our RBC work belongs to RBC and remains with RBC after we leave RBC’s service. We should use RBC intellectual property only as permitted in this Code and RBC policies.
RBC intellectual property must not be used by a third party without RBC’s prior approval. Similarly, we may use a third party’s intellectual property only with the third party’s prior approval. For example, all original musical, artistic and literary works, computer software, performances and sound recordings are protected by copyright laws. We must not download, install or copy any such material to our RBC-issued computers or devices without first obtaining the owner’s permission.
We should seek guidance from the RBC Law Group if we suspect RBC intellectual property has been infringed upon or otherwise misused, or if we have any questions on the use of intellectual property.
Proper use of RBC networks, systems software, devices, applications and the Internet
We must comply with the Code, RBC policies and any terms and conditions governing the use of RBC equipment, systems, computer networks, applications, software, computers and portable devices, as well as the messages communicated within them. Where RBC policies permit us to use our personal equipment for RBC work, we must follow the policies associated with that use.
When sending communications through RBC networks, we must always maintain a professional tone and comply with the Code and RBC policies, including the Respectful Workplace Policy. We must follow these requirements whether we are using RBC equipment or our own.
In addition, when we conduct work for RBC on any device or network, we must only use electronic messaging channels approved and provided by RBC and the applicable RBC units.
Doing What’s Right
My client, who is a friend of mine, often sends me business-related emails or will text me on my personal device. Given they initiate the message, and we have a personal relationship, is this ok?
If contacted by any client or business associate through non-approved electronic messaging channels, it is important to always redirect them to an RBC approved electronic communication channel (e.g. RBC email address) for business-related communications, and to forward or copy the electronic message into an RBC approved electronic communication channel so that there is a record of the electronic communication within RBC systems. Using non-approved electronic communication channels for work related purposes is prohibited.
RBC reserves the right to monitor, audit and inspect our use of RBC systems and technology, including internet usage, audio recordings of conversations conducted by telephone and electronic messages using email, instant messaging or other electronic means. For more information on the purpose and ways in which RBC monitors the use of RBC systems and technology, please refer to the appendix of RBC’s Employee Privacy Notice.
While we may use RBC equipment, systems and technology for personal reasons, we must always comply with the Code and RBC policies, including the Respectful Workplace Policy, and our personal use must be reasonable. In line with this policy, we must not use these systems to view or communicate inappropriate material. These systems also must not be used to do work on behalf of another business or organization, unless authorized by RBC.
Some examples of inappropriate material are:
◾ | sexually explicit material |
◾ | gambling websites |
◾ | derogatory jokes, and |
◾ | offensive or demeaning statements or images about a person or group, including those that relate to race, religion, disability, sexual orientation or gender. |
23
Some examples of electronic messaging channels, all of which need to be approved and provided by RBC before using for RBC work, are:
◾ | |
◾ | instant messaging/chat, including chats in deal rooms or other third party applications |
◾ | mobile SMS |
◾ | any application that can be downloaded and installed from an app store, and |
◾ | social media communication tools like LinkedIn, Facebook and YouTube. |
6.3 Keeping Accurate Books and Records
RBC’s credibility depends on the integrity of its books, records and accounting. Clients rely on us to maintain and provide accurate records of their dealings with us – a duty RBC takes seriously. We must ensure RBC’s books and records are accurate, timely and complete, and reflect RBC’s business, operations, earnings and financial status.
To maintain accurate books and records, we follow internal processes and procedures. This includes capturing information in the proper system and labelling it correctly so it is complete and accurate.
We are expected to act honestly and with integrity in handling RBC accounts at all times. For instance, overstating an amount on an expense report or falsifying a sales record in order to exceed a target would be a serious violation of RBC’s trust in us and the Code. We must also never mischaracterize a payment in order to hide its true purpose (such as disguising a bribe as a “sales fee” or legitimate expense). False statements such as these are never tolerated, no matter how small the amount or the reason behind the action.
We all provide information that RBC uses to prepare financial statements, regulatory reports and publicly filed documents. This means we all play a role in ensuring that the information we record complies with all applicable accepted accounting principles and RBC internal controls.
You must know that falsifying financial or business records (including client documentation) or making false statements to our auditors is against the law. Likewise, we must not make a payment or establish an account on RBC’s behalf under false pretenses.
24
7. Conclusion
Our Code of Conduct is integral to the way we do business at RBC. As employees, contract workers, and members of the boards of directors of RBC and all its subsidiaries, it is our duty to read and understand the Code. That said, there will be times when complex and sensitive issues arise that may cause confusion. Don’t hesitate to speak up, ask questions and seek help.
“We are all responsible for protecting and enhancing RBC’s reputation by following our Code of Conduct. It’s also important that we support one another in doing what’s right, including feeling empowered to challenge situations we believe are wrong.”
David McKay, President and CEO, RBC
25
Exhibit 5
Return on Equity and Assets Ratios
For the Year-Ended October 2023 |
For the Year-Ended October 2022 |
For the Year-Ended October 2021 |
||||||||||
Return on Assets |
0.74 | % | 0.84 | % | 0.96 | % | ||||||
Return on Equity |
14.2 | % | 16.4 | % | 18.6 | % | ||||||
Dividend Payout Ratio |
51 | % | 45 | % | 39 | % | ||||||
|
|
|
|
|
|
Exhibit 31.1
SOX 302 CERTIFICATION
I, David McKay, certify that:
1. | I have reviewed this annual report on Form 40-F of Royal Bank of Canada; |
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 issuer as of, and for, the periods presented in this report; |
4. | The issuer’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 issuer 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 issuer, 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 issuer’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 issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’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 issuer’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 issuer’s internal control over financial reporting. |
November 30, 2023
/s/ David McKay |
||
Name: | David McKay | |
Title: | President and Chief Executive Officer |
Exhibit 31.2
SOX 302 CERTIFICATION
I, Nadine Ahn, certify that:
1. | I have reviewed this annual report on Form 40-F of Royal Bank of Canada; |
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 issuer as of, and for, the periods presented in this report; |
4. | The issuer’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 issuer 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 issuer, 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 issuer’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 issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’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 issuer’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 issuer’s internal control over financial reporting. |
November 30, 2023
/s/ Nadine Ahn |
||
Name: | Nadine Ahn | |
Title: | Chief Financial Officer |
Exhibit 32.1
CERTIFICATIONS
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Royal Bank of Canada, a Canadian chartered Bank (the “Bank”), hereby certifies, to such officer’s knowledge, that:
The annual report on Form 40-F for the year ended October 31, 2023 (the “Report”) of the Bank fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Bank.
Dated: November 30, 2023 | /s/ David McKay |
|||||
Name: David McKay | ||||||
Title: President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATIONS
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Royal Bank of Canada, a Canadian chartered Bank (the “Bank”), hereby certifies, to such officer’s knowledge, that:
The annual report on Form 40-F for the year ended October 31, 2023 (the “Report”) of the Bank fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Bank.
Dated: November 30, 2023 | /s/ Nadine Ahn |
|||||
Name: Nadine Ahn | ||||||
Title: Chief Financial Officer |
Exhibit 97
ROYAL BANK OF CANADA POLICY FOR THE
RECOVERY OF ERRONEOUSLY AWARDED INCENTIVE-BASED COMPENSATION FROM
EXECUTIVE OFFICERS
I. BACKGROUND
Royal Bank of Canada (“RBC”) has adopted this policy (this “Policy”) to provide for the recovery or “clawback” of certain incentive compensation in the event of a Restatement (as defined below). This Policy is intended to comply with, and will be interpreted to be consistent with, the requirements of Section 303A.14 of the New York Stock Exchange (“NYSE”) Listed Company Manual.
II. STATEMENT OF POLICY
RBC shall recover reasonably promptly the amount of erroneously awarded Incentive-Based Compensation (as defined below) in the event that RBC is required to prepare an accounting restatement due to the material noncompliance of RBC with any financial reporting requirement under applicable securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a “Restatement”).
RBC shall recover erroneously awarded Incentive-Based Compensation in compliance with this Policy except to the extent provided under the section entitled “V. Exceptions” herein.
III. SCOPE OF POLICY
A. Covered Persons and Recovery Period. This Policy applies to all Incentive-Based Compensation received by a person:
● | after beginning service as an Executive Officer (as defined below), |
● | who served as an Executive Officer at any time during the performance period for that Incentive-Based Compensation, |
● | while RBC has a class of securities listed on NYSE, and |
● | during the three completed fiscal years immediately preceding the date that RBC is required to prepare a Restatement (the “Recovery Period”). |
Notwithstanding this look-back requirement, RBC is only required to apply this Policy to Incentive-Based Compensation received on or after October 2, 2023.
For purposes of this Policy, Incentive-Based Compensation shall be deemed “received” in RBC’s fiscal period during which the Financial Reporting Measure (as defined herein) specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
B. Transition Period. In addition to the Recovery Period, this Policy applies to any transition period (that results from a change in RBC’s fiscal year) within or immediately following the Recovery Period (a “Transition Period”), provided that a Transition Period between the last day of RBC’s previous fiscal year end and the first day of RBC’s new fiscal year that comprises a period of nine to 12 months will be deemed a completed fiscal year. For clarity, RBC’s obligation to recover erroneously awarded Incentive-Based Compensation under this Policy is not dependent on if or when a Restatement is filed.
C. Determining Recovery Period. For purposes of determining the relevant Recovery Period, the date that RBC is required to prepare the Restatement is the earlier to occur of:
● | the date the board of directors of RBC (the “Board”), a committee of the Board, or the officer or officers of RBC authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that RBC is required to prepare a Restatement, and |
● | the date a court, regulator, or other legally authorized body directs RBC to prepare a Restatement. |
IV. AMOUNT SUBJECT TO RECOVERY
A. Recoverable Amount. The amount of Incentive-Based Compensation subject to recovery under this Policy is the amount of Incentive-Based Compensation received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the restated amounts, computed without regard to any taxes paid.
B. Covered Compensation Based on RBC’s Common Share Price or TSR. For Incentive-Based Compensation based on the price of RBC’s common shares or total shareholder return (“TSR”), where the amount of erroneously awarded Incentive-Based Compensation is not subject to mathematical recalculation directly from the information in a Restatement, the recoverable amount shall be based on a reasonable estimate of the effect of the Restatement on the share price or TSR upon which the Incentive-Based Compensation was received. In such event, RBC shall maintain documentation of the determination of that reasonable estimate and provide such documentation to the NYSE.
V. EXCEPTIONS
RBC shall recover erroneously awarded Incentive-Based Compensation in compliance with this Policy except to the extent that the conditions set out below are met and the Human Resources Committee of RBC’s Board of Directors (the “Committee”) has made a determination that recovery would be impracticable:
A. Direct Expense Exceeds Recoverable Amount. The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered; provided, however, that before concluding it would be impracticable to recover any amount of erroneously awarded Incentive-Based Compensation based on the anticipated expense of enforcement, RBC shall make a reasonable attempt to recover such erroneously awarded Incentive-Based Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the NYSE.
B. Violation of Home Country Law. Recovery would violate applicable Canadian federal or provincial law (“Canadian law”) where that law was adopted prior to November 28, 2022; provided, however, that before concluding it would be impracticable to recover any amount of erroneously awarded Incentive-Based Compensation based on violation of Canadian law, RBC shall obtain an opinion of Canadian counsel, acceptable to the NYSE, that recovery would result in such a violation, and shall provide such opinion to NYSE.
C. Recovery from Certain Tax-Qualified Retirement Plans. Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of RBC, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
VI. PROHIBITION AGAINST INDEMNIFICATION
RBC shall not indemnify any Executive Officer or former Executive Officer against the loss of erroneously awarded Incentive-Based Compensation.
VII. DISCLOSURE
RBC shall file all disclosures with respect to recoveries under this Policy in accordance with the requirements of all applicable Canadian and U.S. Federal securities laws, including the disclosure required to be included in applicable Securities and Exchange Commission (“SEC”) filings.
VIII. DEFINITIONS
Unless the context otherwise requires, the following definitions apply for purposes of this Policy:
“Executive Officer” means RBC’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of RBC in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policymaking functions for RBC. Executive officers of RBC’s subsidiaries are deemed Executive Officers of RBC if they perform such policy making functions for RBC. Policy-making function is not intended to include policymaking functions that are not significant. Identification of an Executive Officer for purposes of this Policy will include at a minimum executive officers identified pursuant to 17 CFR 229.401(b).
“Financial Reporting Measures” means any of the following: (i) measures that are determined and presented in accordance with the accounting principles used in preparing RBC’s financial statements, and any measures that are derived wholly or in part from such measures, (ii) stock price and (iii) TSR. A Financial Reporting Measure need not be presented within RBC’s financial statements or included in a filing with the SEC.
“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
IX. APPROVAL AUTHORITY; REVIEW SCHEDULE.
This Policy is reviewed for approval by the Committee, following review by the Compensation Risk Management Oversight Committee and Group Risk Committee, every three years and reviewed by the Compensation Sub-Group annually. This Policy should be reviewed more frequently if required by changes to applicable laws or regulations or to ensure the effectiveness of this Policy and RBC’s adherence to best practices. This Policy was last approved by the Committee on October 18, 2023.
X. NON-SUBSTANTIVE CHANGES
Non-substantive changes to this Policy will be approved by the SVP, Compensation and Benefits.
XI. EFFECTIVENESS; OTHER RECOUPMENT RIGHTS
This Policy shall be effective as of October 18, 2023. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to RBC and its subsidiaries and affiliates under applicable law or pursuant to the terms of any similar policy or similar provision in any employment agreement, equity award agreement or similar agreement.
XII. MONITORING FOR EFFECTIVENESS AND/OR REPORTING REQUIREMENTS
Human Resources, Financial & Regulatory Reporting and the Accounting Policy Group, and Law Group are responsible for monitoring and interpreting the application of this Policy.
XIII. OWNERSHIP / RESPONSBILITY FOR THIS POLICY
This document is the responsibility of Human Resources, Compensation and Benefits.