CReAte - RBC · This is a carbon neutral publication. ... the production and distribution of this...
Transcript of CReAte - RBC · This is a carbon neutral publication. ... the production and distribution of this...
Royal B
ank of Canada 2008 Annual R
eport
Royal Bank of Canada2008 Annual Report
Working hard to help clients
CReAte
a banking experienceright for us
a retirement plan wecan look forward to
an education for our children
my own business
the partnership that drives our business
All paper used in the production of this report is FSC (Forest Stewardship Council) certified, acid free and elemental chlorine free. Fibre used in the manufacture of the paper comes from well-managed forests independently certified by SmartWood Program of the Rainforest Alliance, according to Forest Stewardship Council rules. Paper used for the cover of the report contains 10% post-consumer waste.
Form #81104 (12/2008)
This is a carbon neutral publication. Net carbon dioxide equivalent emissions associated with the production and distribution of this report have been neutralized through the purchase and retirement of certified emission reductions (CERs). CERs are subjected to a rigorous validation, certification, registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are recognized under the Kyoto Protocol.
a mining powerhouse
a learning experience
a leader in our category
Corporate headquartersStreet address:Royal Bank of Canada200 Bay StreetToronto, Ontario Canada M5J 2J5Tel: (416) 974-5151Fax: (416) 955-7800
Mailing address:P.O. Box 1Royal Bank PlazaToronto, Ontario Canada M5J 2J5
website:rbc.com
Transfer Agent and RegistrarMain AgentComputershare Trust Company of Canada
1500 University Street Suite 700Montreal, Quebec Canada H3A 3S8Tel: 1-866-586-7635 (Canada and the United States) or (514) 982-7555 (International)Fax: (514) 982-7580
website:computershare.com
Co-Transfer Agent (U.S.) Computershare Trust Company, N.A.350 Indiana Street Suite 800Golden, Colorado U.S.A. 80401Tel: 1-800-962-4284
Co-Transfer Agent (United Kingdom)Computershare Investor Services PLCSecurities Services – Registrars P.O. Box No. 82, The Pavilions Bridgwater Road, BristolBS99 7NH England
Stock exchange listings(Symbol: RY)
Common shares are listed on:CanadaToronto Stock Exchange (TSX) U.S.New York Stock Exchange (NYSE) SwitzerlandSwiss Exchange (SWX)
All preferred shares are listed on the Toronto Stock Exchange.
Valuation Day priceFor capital gains purposes, the Valuation Day (December 22, 1971) cost base for our common shares is $7.38 per share. This amount has been adjusted to reflect the two-for-one share split of March 1981 and the two-for-one share split of February 1990. The one-for-one share divi dend paid in October 2000 and April 2006 did not affect the Valuation Day value for our common shares.
Shareholder contactsFor dividend information, change in share registration or address, lost stock certificates, tax forms, estate transfers or dividend reinvestment, please contact: Computershare Trust Company of Canada100 University Avenue, 9th FloorToronto, Ontario, Canada M5J 2Y1Tel: 1-866-586-7635 (Canada and the United States) or (514) 982-7555 (International)Fax: 1-888-453-0330 (Canada and the United States) or (416) 263-9394 (International)e-mail: [email protected]
For other shareholder inquiries, please contact: Shareholder RelationsRoyal Bank of Canada 200 Bay Street, 9th Floor South Tower Toronto, OntarioCanada M5J 2J5Tel: (416) 955-7806Fax: (416) 974-3535
For financial information inquiries, please contact: Investor RelationsRoyal Bank of Canada200 Bay Street 14th Floor, South Tower Toronto, Ontario Canada M5J 2J5 Tel: (416) 955-7802Fax: (416) 955-7800 or visit our website at rbc.com/investorrelations
Direct deposit serviceShareholders in Canada and the United States may have their RBC common share dividends deposited directly to their bank account by electronic funds trans-fer. To arrange for this service, please contact our Transfer Agent and Registrar, Computershare Trust Company of Canada.
Eligible Dividend DesignationFor purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all dividends (and deemed dividends) paid by us to Canadian residents on our common and preferred shares after December 31, 2005, are designated as “eligible dividends.” Unless stated other-wise, all dividends (and deemed dividends) paid by us hereafter are designated as “eligible dividends” for the purposes of such rules.
Common share repurchasesWe are engaged in a Normal Course Issuer Bid (NCIB) through the facilities of the Toronto Stock Exchange. During the one-year period commencing November 1, 2008, we may repurchase up to 20 million common shares in the open market at market prices. We determine the amount and timing of the purchases under the NCIB, subject to prior consultation with OSFI.
A copy of our Notice of Intention to file a NCIB may be obtained, without charge, by contacting our Secretary at our Toronto mailing address.
2009 Annual MeetingThe Annual Meeting of Shareholders will be held on Thursday, February 26, 2009 at 9:00 a.m. (Pacific Standard Time) at the Vancouver Convention & Exhibition Centre, Parkview Terrace, 999 Canada Place, Vancouver, British Columbia, Canada.
2009 Quarterly earnings release datesFirst quarter February 26 Second quarter May 29 Third quarter August 27 Fourth quarter December 4
Dividend dates for 2009Subject to approval by the Board of Directors
Record dates Payment dates
Common and preferred January 26 February 24shares series W, AA, AB, AC, April 23 May 22AD, AE, AF, AG, AH, AJ and AL July 27 August 24 October 26 November 24
Equal EmploymEnt opportunity: As required by our Code of Conduct, which applies to all RBC companies and applies equally to employees, we are committed to providing equal opportunity in all dealings with employees, clients, suppliers and others. In the U.S., our subsidiaries are committed to providing Equal Employment Opportunity in compliance with relevant U.S. federal legislation and regulations (EEO rules) to all employees and applicants for employment. Consistent with this commitment, all employment decisions of our U.S. subsidiaries are based upon skill and performance without regard to race, colour, national origin or ancestry, religion, age, disability, gender, sexual orientation, status as a veteran or any other factors or characteristics protected by law. Our U.S. subsidiaries are Equal Opportunity Employers and comply with U.S. federal, state and municipal employment laws, including regulations applicable to federal contractors. Disclosure in our 2008 Annual Report to Shareholders about our U.S. subsidiaries’ Equal Employment Opportunity practices is required pursuant to EEO rules.
Information contained in or otherwise accessible through the websites mentioned in this report to shareholders does not form a part of this report. All references in this report to shareholders to websites are inactive textual references and are for your information only.
Trademarks used in this report include the LION & GLOBE Symbol, ROYAL BANK OF CANADA, RBC, RBC BANK, RBC BLUEPRINT FOR DOING BETTER, RBC BLUE WATER PROJECT, RBC CAPITAL TRUST, RBC COMMUNITY BLUEPRINT, RBC DIRECT INVESTING, RBC ENVIRONMENTAL BLUEPRINT, RBC INSURANCE, RBC SUBORDINATED NOTES TRUST, RBC TSNs, RBC TruCS and RBC WEALTH MANAGEMENT which are trademarks of Royal Bank of Canada used by Royal Bank of Canada and/or its subsidiaries under license. All other trademarks mentioned in this report, which are not the property of Royal Bank of Canada, are owned by their respective holders. RBC Dexia IS and affiliated RBC Dexia IS companies are licensed users of the RBC trademark.In
terb
rand
Printed in CanadaThis annual report is printed on acid-free paper and the entire book is recyclable.
La Banque Royale publie aussi son Rapport annuel en français.
Legal Deposit, fourth quarter, 2008Bibliothèque nationale du Québec
Shareholder information
royal BanK oF CanaDa (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. We are Canada’s largest bank as measured by assets and market capitalization, one of North America’s leading diversified financial services companies and among the largest banks in the world, as measured by market capitalization. We provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. We employ more than 80,000 full- and part-time employees who serve more than 17 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 48 other countries. For more information, please visit rbc.com.
Contents 1 Financial highlights 4 Chief Executive Officer’s
message 9 Performance review 10 Business discussion 16 Chairman’s message 17 Corporate governance 19 Corporate responsibility 28 Management’s Discussion
and Analysis 29 Overview 35 Accounting and control matters 39 Financial performance 51 Quarterly financial information 53 Business segment results 75 Financial condition 83 Risk, capital and liquidity
management 112 Overview of other risks 116 Additional factors that may
affect future results 119 Additional financial
information
125 Consolidated Financial Statements
126 Management’s responsibility for financial reporting
126 Report of Independent Registered Chartered Accountants
127 Management’s Report on Internal Control over Financial Reporting
127 Report of Independent Registered Chartered Accountants
128 Consolidated Balance Sheets 129 Consolidated Statements
of Income 130 Consolidated Statements of
Comprehensive Income and Changes in Shareholders’ Equity
131 Consolidated Statements of Cash Flows
132 Notes to the Consolidated Financial Statements
201 Supplementary information 205 Glossary 207 Directors and executive
officers 208 Principal subsidiaries 209 Shareholder information
This annual report contains 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 applicable Canadian securities legislation. We caution readers not to place undue reliance on these statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. Additional information about these factors can be found under Caution regarding forward-looking statements on page 29.
Vision• Always earning the right to
be our clients’ first choice
Values• Excellent service to clients
and each other• Working together to succeed• Personal responsibility for
high performance• Diversity for growth and
innovation• Trust through integrity in
everything we do
Strategic goals• In Canada, to be the undisputed
leader in financial services• In the U.S., to be a leading
provider of banking, wealth management and capital markets services by building on and leveraging RBC’s considerable capabilities
• Internationally, to be a premier provider of select banking, wealth management and capital markets services in markets of choice
Financialhighlights RoyalBankofCanada:AnnualReport2008
(C$millions,exceptpershare 2008 vs. 2007 andpercentageamounts) 2008 2007 2006 Increase (decrease)
Operating performance Totalrevenue $ 21,582 $ 22,462 $ 20,637 $ (880) (4)% Provisionforcreditlosses 1,595 791 429 804 102% Non-interestexpense 12,351 12,473 11,495 (122) (1)% Netincome 4,555 5,492 4,728 (937) (17)% Returnoncommonequity(ROE) 18.0% 24.6% 23.5% n.m. (660)bps Earningspershare(EPS)–diluted $ 3.38 $ 4.19 $ 3.59 $ (.81) (19)%
Capital(1) Tier1capitalratio 9.0% 9.4% 9.6% n.m. (40)bps Totalcapitalratio 11.1% 11.5% 11.9% n.m. (40)bps Risk-adjustedassets $ 278,579 $ 247,635 $ 223,709 $ 30,944 12%
Keydrivers Totalloans(beforeallowancefor loanlosses) $ 291,755 $ 239,429 $ 209,939 $ 52,326 22% Deposits 438,575 365,205 343,523 73,370 20% Totalassets 723,859 600,346 536,780 123,513 21% Assetsundermanagement(AUM) 226,900 161,500 143,100 65,400 40% Assetsunderadministration(AUA)–RBC(2) 623,300 615,100 582,300 8,200 1%
Commonshareinformation Shareprice(RYontheTSX) High $ 55.84 $ 61.08 $ 51.49 $ (5.24) (9)% Low 39.05 49.50 41.29 (10.45) (21)% Close 46.84 56.04 49.80 (9.20) (16)% Dividendsdeclaredpershare 2.00 1.82 1.44 .18 10% Bookvaluepershare 20.99 17.58 16.52 3.41 19% Marketcapitalization(C$millions) 62,825 71,522 63,788 (8,697) (12)%
(1) 2008capitalratiosandrisk-adjustedassetsarecalculatedusingguidelinesissuedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI)underthenewBaselIIframework.Comparativecapitalratiosandrisk-adjustedassetsarecalculatedusingguidelinesissuedbyOSFIundertheBaselIframework.BaselIandBaselIIarenotdirectlycomparable.
(2) Assetsunderadministration–RBC:RevisedtoincludemutualfundssoldthroughourCanadianbranchnetwork.Comparativeamountshavebeenrevisedtoreflectthischange.n.m. notmeaningful
Financial Highlights
$12
4
2004 2005 2006 2007 2008
$16
8
$20
7
$24
0
$24
0
Total shareholder returns (TSR)(on a $100 investment on Nov. 1, 2001)
$2,
803
2004 2005 2006 2007 2008
$3,
387
$4,
728 $
5,49
2
$4,
555
Net income
$2.
11
2004 2005 2006 2007 2008
$2.
57
$3.
59
$4.
19
$3.
38
EPS – diluted
15.6
%
2004 2005 2006 2007 2008
18.0
%
23.5
%
24.6
%
18.0
%
ROE
15.6
%
2004 2005 2006 2007 2008
18.0
%
23.5
%
24.6
%
24.6
%
Return on equity(ROE)
1
the next generationof mobile commerce
a visionary leaderin biotech
our dream vacationmy future, the way
I design it
an improved water system
a software revolution
an addition toour family home
new ways to powerthe planet
a detailed plan to act upon
an oil and gas pioneer
my first new car a global opportunity
4 RoyalBankofCanada:AnnualReport2008 ChiefExecutiveOfficer’smessage
CHIEFEXECUTIVEOFFICER’sMEssAGE
Working hard to help clients create
“Ifwehavelearnedonethingfromtheeventsofthepastyear,itisthatindifficulttimesclientsmostneedandvaluehonestandexpertadvicefromprofessionalswhocandeliversolutions.AtRBC,weareworkinghardtohelpclientscreateconfidenceintheirfuture.”
–GordonM.Nixon
Uncertaintimesbringintosharprelieftheimportanceoffundamentals.Thisyear,asmarketandeconomic
conditionswereattheirmostchallenging,RBCemerged,notunscathed,butstrongandstablelargelyduetoourcommit-menttotheessentialelementsofsoundmanagement:businessdiversification,comprehensiveriskmanagement,aclearstrategy,andastrongbalancesheet.
Ifwehavelearnedonethingfromtheeventsofthepastyear,itisthatindifficulttimesclientsneedandvaluehonestandexpertadvicefromprofessionalswhocandeliversolutions.AtRBC,weareworkinghardtoputourclientsfirstbygivingthemadvice,productsandservicesthathelpthemcreateconfidenceintheirfuture.Wehaveencouragedamorecollaborativeandaccountableculturewhereemployeesareempoweredtocreateasuperiorclientexperience.Thiscultureisreflectedinourclient-centricvision,intheworkofmorethan80,000professionalsleveragingtheirexperienceandexpertise,andinRBC’sdepthandbreadthofresourcesforthebenefitofallourclients.
Thecurrentfinancialcrisishasshownitsabilitytosubstan-tiallyaltertheenvironmentformanyindividuals,companies,financialinstitutions,andourshareholders.Whilewehavenotbeenabletoescapetheyearwithoutsomelosses,in2008,RBCgeneratedmorethan$4.5billionofearningsandareturnonequityof18.0%.Theseresultsprovethat,astherulesforoursectorandourdomesticandglobaleconomiesarebeingrewritten,RBC’sstrategyofactivelymanagingadiversifiedportfolioofbusinessesandexcellingattheexecutionofourrevenueandcost-efficiencyinitiativeshasenabledustowithstandthepastyear’smarketshocksandpressuresandcontinuetogeneratevalueforourclientsandshareholders.
RBC’sdiversifiedbusinessportfolioremainsthefoundationofbothourstabilityandoursuccess,particularlythroughtryingtimes.Whileseveralofourbusinesseshavebeensignificantlyimpactedbycurrenteconomicevents,thediversificationofourportfolioofbusinessesacrossindustries,geographiesandclientsegmentshasreducedtheoverallvolatilityofour
revenuesandearnings.Thisprovidesuswiththeflexibilityandstabilitynecessarytomakeinvestmentsinpursuitofourlong-termstrategyandgoals.Giventheoverallstrengthofourportfolioofbusinesses,wefindourselvesinapositiontotakeadvantageofopportunitiesthatmanyofourcompetitorscannolongerconsider.
Ourongoingcommitmenttostrongriskandperformancemanagementhasallowedustostayoncoursebetterthanmanyofourdomesticandinternationalcompetitors.Wediver-sifyourriskinnumerouswayswhilecontinuingtoprudentlyuseourbalancesheettoproducehigh-qualityearnings.Werecognizethatmaintainingandcontinuallyenhancingourriskmanagementcapabilitieswillbecriticalaswenavigatethechallengingterritoryaheadofus.Inaddition,thestrengthofourassetqualityandourliquiditypositionshouldprovideasolidbaseforfuturegrowth.
Insummary,ourcontinuedstrongearningsperformancerelativetopeersandtopquartileperformanceofoursharepriceoverthemedium-andlong-termperiodsofthree,fiveand10yearsreflectoursoundriskmanagementapproach,ourfranchise’sstrongfinancialfoundation,thebenefitsofourdiversifiedbusinessmodeland,mostimportantly,thehardworkofourdedicatedemployees.
2008 Strategic goalsThroughoutthisyear,ourpeopleandbusinesseshavebeencommittedtopursuingourthreelong-termstrategicgoals:• InCanada,tobetheundisputedleaderinfinancialservices• IntheU.S.,tobealeadingproviderofbanking,wealthmanagementandcapitalmarketsservices,buildingonandleveragingRBC’sconsiderablecapabilities
• Internationally,tobeapremierproviderofselectbanking,wealthmanagementandcapitalmarketsservicesinmarketsofchoice.
InCanada,ourretailbanking,wealthmanagement,insuranceandcapitalmarketsbusinessesmadesignificantstrides
5 ChiefExecutiveOfficer’smessage RoyalBankofCanada:AnnualReport2008
duringtheyear,enhancingourmarketleadershippositionswhilemakingiteasierforclientstodobusinesswithus.
InthefiercelycompetitiveCanadianbankingmarketplace,wemustcontinuetoearnourclients’businessbyensuringouradviceandservicesareaccessibleandavailableacrossavarietyofchannels.Wehavemadeitmoreconvenientforclientstodobusinesswithusbygrowingourmobileandspecializedsalesforces,addingnewbankbranchesandautomatedtellermachines(ATMs),andincreasingthenumberofbankbranchesthatareopenextendedhours,includingSaturdays,particularlyinhigh-growthareas.Ourclientscannowdobusinesswithourcontactcentreagentsinover150languages,andoursmallbusinessandcommercialbusinessclientsinallmajorinterna-tionaltradingregionscannowfulfillalltheirbusinessneedsthroughasinglerelationship.Furthermore,wehavedeepenedclientrelationshipsandrewardedclientsfortheirloyaltythroughinnovativeofferings.Theseandmanyothereffortshavenotgoneunnoticed,withmanynotablethirdpartiesrecognizingusforourclientservicescapabilitiesincludingSynovate,Euromoney,andMaritzCanadaInc.
AsthelargestCanadianproviderofwealthmanagementservices,wecontinuedtoofferourclientsafullrangeofinvestmentadviceandplanningservices,supportedbyateamofexpertsinfinancialandretirementplanning,tax,law,andtrustsandestates.Ourclientshaveaccesstoanextensivefamilyofequityandfixedincomeinvestmentproductsfromourassetmanagementdivision,whichbroadeneditscapabilitiesbyacquiringPhillips,Hager&NorthInvestmentManagementLtd.(PH&N)onMay1,2008.TheacquisitionmakesusthelargestmutualfundcompanyinCanadawitha16%marketshareandthelargestprivateassetmanager.Thestrengthofthisbusinessisfurtherreflectedby$8.8billionintotalmutualfundnetsalesinfiscal2008.
RBCistheonlybankinCanadatoofferasuiteofinsurancesolutionsforbothpersonalandbusinessclients,andwearetheCanadianmarketleaderincreditorandtravelinsurance
andthesecondlargestprovideroflivingbenefitsproducts.Ourproductanddistributioncapabilitiesarealsounique.RBCInsuranceoffersabroadrangeoflifeandhealth,andpropertyandcasualtyproductsthroughproprietarychannels(adjacentinsurancebranchesandcareersalesforces)aswellasthroughavarietyofthird-partychannels(travelagentsandlifeinsurancebrokers),allowingourclientstheopportunitytocreatepeaceofmindbyaddressingalloftheirinsuranceneeds.
AsaleaderinmostaspectsoftheCanadianwholesalemarketplace,wearethecountry’slargestinvestmentbank,andnumberoneortwoinmanydomesticrankings,includingdomesticdebtcapitalmarketsandequityresearch.Importantly,astrongbalancesheetandarespectedbrandnamehaveenabledustosuccessfullyexportkeycompetitivestrengthsintonewmarkets.
OutsideCanada,wehavedevotedsignificantmanagementandfinancialresourcestobuildingourcapabilities,ourclientbase,andourbrand.
Since2001,wehavethoughtfullygrownourbankingbusinessinthesoutheasternU.S.market.Throughmeasuredorganicgrowthandexpansionthroughstrategicacquisitions,wehavecreatedanetworkofnearly440branchesinNorthCarolina,SouthCarolina,Virginia,Georgia,Alabama,andFlorida.
OurU.S.bankingbusinesshasbeensignificantlyaffectedbytheongoingstressintheU.S.housingmarketandtheweakeningU.S.economy.Wehavetakenstepstoaddresstheseissues,consistentwithourcommitmenttoprudentriskmanagementpractices.Weexitedourresidentialbuilderfinancebusinessoutsideourfootprintandareactivelymanagingtheassetsinthatportfoliotoreducetheimpactofimpairedloansoverthelongterm.Whileweareaggressivelymonitoringandmanagingourretailandcommercialloanport-folios,weareselectivelygrowingourassetbasebyacquiringhigh-qualitypersonalandbusinessclientswhoareattractedtothequalityoftheRBCfranchise.Inaddition,wearefocusedonleveragingthewell-developedbusinessandcommercial
GordonM.NixonPresidentandChiefExecutiveOfficer
JaniceR.FukakusaChiefFinancialOfficer
6 RoyalBankofCanada:AnnualReport2008 ChiefExecutiveOfficer’smessage
strategyinourU.S.bankingbusinesstodevelopanequallyrobustretailstrategytoprovideclientswithanintegratedexperienceandafullproductsuitetoservetheirbusinessandretailneeds.
WearekeenlyawarethatimprovingourU.S.bank’searningswillbealong-termprocess,asweneedtoworkthroughtheresidualweaknessintheU.S.economy.Wehavedoneagreatdealofworktocreatemomentumforthenextfewyearsand,whilethereisnodoubtthatwefacestructural,creditandeconomicheadwindsintheU.S.bankingenvironment,webelievethatwewillbewell-positionedwhentheenvironmentimproves.
Overthepastyear,weextendedthereachofourwealthmanagementservicesintheU.S.OuracquisitionofFerris,BakerWatts,Incorporated(FBW),significantlyexpandedourpresenceinkeyregionsandaddedmorethan300financialconsultantstoourbusiness.Inaddition,overthepastyear,wehaveattractedexperiencedfinancialconsultantsfromourcompetitorstoourU.S.wealthmanagementbusiness,atesta-menttoboththequalityofourbusinessandtoourgrowingreputationintheU.S.RBCnowhasmorethan2,000financialconsultantsservingclientsin41statesfrom204retailoffices,makingustheseventh-largestnationalinvestmentadvisoryfirmintheU.S.WealsocompletedtheconversionofourU.S.wealthmanagementbusinesstoasinglebroker-dealerplat-form,alongwithourcapitalmarketsoperations.Asaresult,ourclientswillhaveincreasedaccesstotheglobalcapabilitiesofRBCaswellastothebroadproductdevelopmentcapabili-tiesofourcapitalmarketsbusiness.
WhileeconomiceventsoverthepastyearhadanegativeimpactonsomeofourcapitalmarketsbusinessesintheU.S.,manyotherswereabletocapitalizeonopportunitiescreatedbythemarketenvironment,addingtalentandresourcesthatweredrawntothestrengthandstabilityoftheRBCbrandname.Andwhilemanyofourcompetitorshavebeenforcedtodownsizeorsignificantlychangetheirfundamentalbusinessmodels,thesoundnessofourU.S.capitalmarketsbusiness
hasenabledustoaggressivelyrepositionandredirectresourcestotakeadvantageofabroadrangeofopportunitiesthattheevolvingmarkethascreated.Forexample,busi-nesseshurtbythemarket’srecentinstability,suchasourstructuredproductsandsecuritizationbusinesses,havebeenrationalized,whilethosethathadnewopportunitiescreatedbytheturmoil,suchasinvestmentbanking,fixedincomeandsecurities,havesignificantlyupgradedtheircapabilitiesbyrecruitingexperiencedtalentfromcompetitororganizations.
Wehavenot,however,changedourfundamentalriskappetiteorprofile.Consistentwithouremphasisonprudentriskmanagementandmaintainingourstrongbalancesheet,ourcapitalmarketsbusinessisfocusedondeployingcapitalinamannerthatenhancesandexpandskeyclientrelation-ships,particularlyatatimewhenweknowclientsareplacingapremiumonstrongandstablebankingrelationships.
ClosingouracquisitionofRBTTFinancialGroup(RBTT)wasthemostsignificantdevelopmentoutsideNorthAmericain2008.CombinedwithourexistingCaribbeanbankingbusi-ness,theacquisitionmadeRBCthesecond-largestbankinggroupintheEnglish-speakingCaribbean,withapproximately7,000employeesservingclientsin17countriesthrough127branchesandbusinesscentres.TheRBTTfootprintwasanexcellentcomplementtoourbusinessandhasprovideduswithimmediatelystrongmarketpositionsintwonewmarkets–TrinidadandTobago,oneofthestrongesteconomiesintheCaribbean,andJamaica.
OurwealthmanagementoperationscontinuedtoexpandoutsideNorthAmericabyopeninganewofficeinChileand,withourcapitalmarketsoperations,inIndia.Overall,thebusinesscontinuestogrowbyrecruitingexperiencedprivatebankingprofessionals,aidedbyourreputationwithintheindustryasapremierproviderofwealthmanagementservicestoclientsaroundtheworld.
Ourjointventure,RBCDexiaInvestorServices(RBCDexiaIS),differentiatesitselfasaproviderofinternationaltrustservices
W.JamesWestlakeGroupHead,InternationalBankingandInsurance
DavidI.McKayGroupHead,CanadianBanking
7 ChiefExecutiveOfficer’smessage RoyalBankofCanada:AnnualReport2008
byprovidingsuperiorcustomerserviceandglobalreach.In2008,wewerenamednumberoneoverallglobalcustodianbyGlobal Investorforthefifthconsecutiveyear.However,therealproofofsuccessisthatincurrentconditions,RBCDexiaIShasattractednewclientsandgainedmorebusinessfromexistingcustomers.
AsCanada’sonlyglobalinvestmentbank,wecontinuedtogrow,generatingapproximately50%ofourrevenueoutsideCanadaasweexecutedadeliberateanddisciplinedinter-nationalgrowthstrategy.Duringthepastyear,weaddedaleveragedfinanceteaminLondontosupportourEuropeaninvestmentbankingbusiness,andweexpandedtheU.K.-basedinfrastructurefinancingbusinessintoContinentalEuropeandAustraliaaswellastheU.S.Finally,wecontinuedtoextendourglobalcapabilitiesrelatedtotheenergyandminingsectors,becomingapreferredproviderofservicesinaverydynamicmarket.
2008 Performance against objectivesWeestablishedour2008objectivesinNovember2007basedonoureconomicandbusinessoutlooksfor2008atthattime.Whileweacknowledgedthatearly2008wouldbechallenging,withcontinuedmarketvolatilityandslowereconomicgrowth,wedidnotanticipatetheseconditionstopersistforthedura-tionoftheyearnorfortheimpacttobeassignificant.Duringtheyear,weacknowledgedthatourprogresstowardscertainobjectiveswasimpededlargelybymarketvolatilityanduncer-tainty–reflectedinwritedowns,higherprovisionsforcreditlossesinourU.S.bankingbusiness,anddeclininginterestmargins.Asaresult,exceptforourTier1capitalratio,wedidnotmeettheannualobjectiveswesetatthebeginningofthisfiscalyear.Ourcapitalpositionremainedstrongthroughout2008withourTier1capitalratioaboveourtarget.
Duringtheturbulentenvironmentofthepastyear,theimportanceofoursoundbusinessapproachandthebenefitsofourdiversifiedbusinessmodelhelpedsustainourshareperformancerelativetoourpeers.Wedeliveredtopquartile
shareperformanceof8%and12%inthemedium-termperiodsofthreeandfiveyears,respectively,whileincreasingdividendspaidoverthethree-yearperiodatanaverageannualcompoundedrateof19%.
How we will measure ourselves in the futureWeexpectouroperatingenvironmentin2009willcontinuetoposechallengesthatwilldemandourcontinueddiligenceinthemanagementandallocationofourresources.Volatilefinancialmarketconditionswillcontinueinto2009ascreditandliquidityconcernspersistandglobaleconomiesslowdown.Webelievethatrecentgovernmentmeasuressuchasinterestratecuts,financialmarketrescuepackagesandenhancedintra-banklendingguaranteeswilleventuallyworktoimprovemarketstability.
TheCanadianeconomylikelyslippedintoarecessioninthefinalquarterof2008andweforecastitwillgrowbyonly.3%in2009duetoweakerdomesticdemand.Whileconsumerspendingisexpectedtoslow,reflectingmodestweakeninginthelabourandhousingmarkets,theeconomicslowdownisexpectedtoresultincalmerinflationarypressuresandmorestablecommodityprices.Meanwhile,weprojecttheU.S.economywillhavenegativegrowthof1%in2009.WeanticipatethatdeterioratingeconomicconditionsandfinancialmarketvolatilitywillcontinuetodampenbothconsumerandbusinessspendingandwilllikelycausetheU.S.recessiontodeepenasnegativeeconomicgrowthpersistsovertheremainderof2008andinearly2009.Growthinotherglobaleconomies,particularlythoseintheEurozone,willlikelyweakenfurtherin2009,asoverseaseconomiescontinuetocontractduetoweakerdomesticdemand,financialmarketvolatilityandreduceddemandforexportsfrommajortradingpartners.Emergingeconomies,ledbyChina,areexpectedtogrowataverymoderatepacein2009givenuncertaintyinglobalfinancialmarketsandrecessionaryconditionsinsomeindustrializedcountries.
M.GeorgeLewisGroupHead,WealthManagement
BarbaraG.stymiestChiefOperatingOfficer
8 RoyalBankofCanada:AnnualReport2008 ChiefExecutiveOfficer’smessage
Weanticipatethatthemediumtermwillseemorecyclicalandstructuralchangesforthefinancialservicesindustry,includinghigherfundingcosts,highercapitallevels,theimpactofthedeleveragingofbalancesheetsandamovetoabove-averageloan-losslevelsfromrecenthistoriclows.
Becausemarketandeconomicconditionsintroduceahighdegreeofuncertaintyintotheshort-termplanninghorizon,wehavecreatedasetofmedium-termperformanceobjec-tives(shownonpage9)thatwethinkbetterreflectrealisticgoalsagainstthebackdropofnear-termmarketturbulence.Byconcentratingonthesemedium-termobjectives,ourmanage-mentteamwillfocusonbothcurrentperformanceaswellasonprudentinvestmentinhigher-returnbusinessesthatwillprovideuswithcompetitiveadvantagesandsustainedandstableearningsgrowthforthefuture.
Ourmedium-termobjectiveistogenerateearningspersharegrowthof7%ormore.Ourfocusoncostmanagementrelativetorevenuegrowthisunderlinedbyamedium-termoperatingleverageobjectiveofabove3%whilestrivingforareturnonequitytargetof18%ormore.Wewillkeepakeeneyeonourcapitalbase,withourobjectiveofmaintainingaTier1capitalratioof8.5%orhigher,wellaheadofregulatoryrequirementsandaboveour2008objectiveof8%.Finally,ourobjectiveistomaintainadividendpayoutratiooverthemediumtermofbetween40%and50%,thesameasin2008.
Helping our clients create a more confident futureDuringtroubledtimes,strong,diversifiedandwell-managedcompanieslikeRBChaveanadvantageovermanyothers.Ourmomentumhasbeenpositive,butmoreimportantly,wehavebeenabletodeliversolidearningsinaverydifficultenvironment.WeareencouragedbyhavingourhomemarketheraldedbytheWorldEconomicForumasthebaseofthesoundestbankingsystemworldwide.Andwhileweare
cautiousandconservativeaboutconditionsoverthenearterm,weareproudofourconsistentfinancialstrength,soundriskmanagementpoliciesanddiversifiedbusinessmixthathaveenabledustoprovideconfidencetoourmillionsofclientsandshareholders.
OutsideCanada,we’reworkingthroughthechallengesandfindingwaystoinvestcapital,tohiretoptalent,tomakeacquisitions,andtocontinuetobuildonthestrategiesthatwehavepursuedoverthepastseveralyears.AcrossRBC,wehaverenewedourattentiontocostmanagementbecauseweunderstandthatourabilitytocontrolcostsiscriticaltogivingustheflexibilitytoovercomecurrentchallengesandsupportourfuturegrowth.
2008wasadifficultyear,butI’mpleasedtosayouremployeesrosetoitschallenges.Iamproudofallourprofessionalsandourmanagementteamwhohavedemonstratedtheyareunshakenbytheuncertainconditionswehaveencounteredandareundeterredbythosethatmightlieahead.Morethanever,weunderstandthatourclientsneedandvaluesoundadvice,andwewillredoubleoureffortstoreachouttothemtohelpthemcreateamoreconfidentfuture.
Isincerelywanttothankallofourclientsfortheircontinuedtrust.AndIwanttothankourmorethan80,000professionals,whosehardwork,integrityanddedicationareresponsibleforourongoingresults.
GordonM.NixonPresidentandChiefExecutiveOfficer
A.DouglasMcGregorChairmanandCo-CEO,CapitalMarkets
MarkA.standishPresidentandCo-CEO,CapitalMarkets
2008Performance
review
2008 Objectives 2008 Performance
DilutedEPSgrowth 7%–10% (19)%
Definedoperatingleverage(1) >3% 1.0%
ROE 20%+ 18.0%
Tier1capitalratio(2) 8%+ 9.0%
Dividendpayoutratio 40%–50% 59.0%
3-year TSR 5-year TSR
Totalshareholderreturn(TSR)(3) Topquartile Topquartile Topquartile
(1) Ourdefinedoperatingleverageisanon-GAAPmeasureandreferstothedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Forfurtherinformation,refertotheKeyperformanceandnon-GAAPmeasuressection.
(2) CalculatedusingguidelinesissuedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI)underthenewBaselIIframework.(3) CalculatedforperiodendedOctober31,2008,basedonsharepriceappreciationplusreinvesteddividendincomeversustheTSRofsevenCanadianfinancial
institutions(ManulifeFinancialCorporation,BankofNovaScotia,TheToronto-DominionBank,BankofMontreal,SunLifeFinancialInc.,CanadianImperialBankofCommerceandNationalBankofCanada)andTSR(inU.S.dollars)of13U.S.financialinstitutions(BankofAmerica,JPMorganChase&Co.,WellsFargo&Company,WachoviaCorporation,USBancorp,SunTrustBanks,Inc.,TheBankofNewYorkMellon,BB&TCorporation,FifthThirdBancorp,NationalCityCorporation,ThePNCFinancialServicesGroup,KeyCorpandNorthernTrustCorporation).
Thetablebelowshowsourmedium-termobjectives.
Objectives
DilutedEPSgrowth 7%+
Definedoperatingleverage(1) >3% ROE 18%+
Tier1capitalratio(2) 8.5%+
Dividendpayoutratio 40%–50%
(1) Seenote(1)above.(2) Seenote(2)above.
Thetablebelowshowsour2008performancecomparedtoourobjectivesfortheyear.
10 RoyalBankofCanada:AnnualReport2008 CanadianBanking
Canadian Banking
C A N A DI A NBA NKINGprovidespersonalandbusinessfinancialservicesinCanada.ThroughourleadingnationaldistributionnetworkandthemostvaluablebrandinCanada,wereachapproximately10millionclientsthroughourextensivebranchandATMnetwork,proprietaryandspecializedsalesforces,onlinechannelsandcontactcentres.
(C$millions,except 2008 vs. 2007percentageamounts) 2008 2007 2006 Increase (decrease)
Totalrevenue $ 9,586 $ 9,329 $ 8,348 $ 257 3%Netincome 2,662 2,545 2,124 117 5%Averageloansandacceptances(1) 225,000 199,200 179,000 25,800 13%Averagedeposits 155,000 147,100 139,200 7,900 5%Operatingleverage 2.6% 6.5% 4.4% n.m. (390)bp
(1) Totalassets,Totalearningassets,andLoansandacceptancesincludeaveragesecuritizedresidentialmortgageandcreditcardloansfortheyearof$22billionand$4billion,respectively.
2008 Revenue contribution
Personal Financial ServicesBusiness Financial ServicesCards and Payment Solutions
55%26%19%
2008 Key performance highlights • Netincomewasup$117million,or5%,overlastyear,reflectingrevenuegrowthandeffectivecostmanagementefforts.Prioryearresultsincludeda$326million($269millionafter-tax)gainrelatedtotheVisaInc.restructuring,partiallyoffsetbyanincreasetoourcreditcardcustomerloyaltyrewardprogramliabilityof$121million($79millionafter-tax).
• Totalrevenueincreased$257million,or3%,overtheprioryear,reflectingcontinuedsolidvolumegrowthacrossallbusinesses,partiallyoffsetbymargincompression.Thegrowthwasachievedwellwithinourrisk-rewardparameters.TheprioryearincludedthegainrelatedtotheVisaInc.restructuringandthepointsliabilitycostasnotedabove.
• Ourloanbookincreasedby13%asaresultofstronggrowthinthehomeequitybusinessandthelaunchofnewcreditcardofferings.
• Wegrewourdepositbaseby5%throughtheintroductionofnewpersonalandbusinessproductsthatincludedU.S.dollareSavingsaccountsandtwonewhigh-yieldinvestmentsolutionsforbusinessclients.
Business achievements in 2008 • Weexpandedourreachtoclientsbygrowingourmobileandspecializedsalesforces,addingnewbankbranchesandATMsandincreasingthenumberofbankbranchesthatareopenextendedhours,includingSaturdays,particularlyinhigh-growthmarkets.
• ClientshavegreateraccesstomorecustomizedandenhancedfinancialplanningandadvicetoolswithYourFuturebyDesign®,auniqueapproachtoclientadvice.Wealsocontinuedtodevelopandprovideclientswithinteractiveonlineplanningresources,suchasCreditSolutionsSelector,MortgageCalculator,BusinessSolutionsSelector,andCashFlowtools.
• Wehavedeepenedclientrelationshipsandrewardedclientsfortheirloyaltywithfurtherdevelopmentstoourmulti-productrebatesandnew,innovativeproductsincludingaline-upofCanadianandU.S.dollarhigh-interestsavingsaccounts;thenewVisaInfinitecard,providingexclusivebenefitsandprivilegestocardholders;security-enhanced,chip-enabledcreditcards;andeStatementsandpreferredcommissionpricingforourDirectInvestingclients.
• WiththelaunchofourLanguageLineinterpreterservice,ourclientscannowdobusinesswithourcontactcentreagentsinover150languages.
• WiththeacquisitionofABNAMRON.V.’sCanadiancommercialleasingdivision,weextendedourleadershippositionasthelargestbank-ownedcommercialleasingbusinessinCanada,asmeasuredbyassets.
• WemadeiteasierforourbusinessclientswhenwelaunchedtheGlobalBankingforBusinessprogramtoprovideasinglepointofcontactforsmallandcommercialbusinessclientsinallmajorinternationaltradingregions.
• Wecontinuedtoberecognizedforoureffortstoimproveourclientservice.In2008wewerenamed:
– AleaderamongtheBigFiveBanksinBranchServiceandFinancialAdvice(SynovateBestBankingAwards:TheSynovateCustomerServiceIndex(CSI)2008–PersonalBanking)
– ThenumberonedomesticPrivateBankinCanada(Euromoney2008PrivateBankingSurvey)
– Bestinoverallservice:RBCDirectInvesting(Dalbar2007DirectBrokerageServiceAward)
– Thenumberonebankchosenbymostcommercialclients*inCanada,withalmostthreein10CanadiancommercialbusinessesdealingwithRBC,andstrongyearoveryeargainsinclientloyalty(MaritzIndustrySurvey,2008)
* Businesseswithsalesrevenueof$1millionorabove.
2009 and beyond• WewillfocusoncontinuingtomakeiteasierforclientstodobusinesswithRBCthroughgreatproducts,services,improvedprocessesandincreasedaccessibility.
• Wewillcontinuetofocusondeliveringasuperiorclientexperience.
• Wewillstrivetodeliverinsightful,relevantfinancialadviceandsolutionstoretainandattractclientstoRBCinspecificmarkets,geographiesandlifestages.
• Wewillfocusonaligningourinfrastructure,productsandservices,salesandretailcapabilitiestodrivefuturegrowth,efficienciesandclientvalue.
11 WealthManagement RoyalBankofCanada:AnnualReport2008
WE A LTHM A N AGEMENTbusinessesserveaffluentandhighnetworthclientsaroundtheworldandprovideassetmanagementandestateandtrustservicesdirectlytoclientsandthroughinternalpartnersandthird-partydistributors.ThissegmentcomprisesCanadianWealthManagement,U.s.&InternationalWealthManagementandGlobalAssetManagement.WeareamarketleaderinCanadianwealthandassetmanagement,andwehavestrongandgrowingbusinessesintheU.s.andinternationally.Withmorethan4,000financialconsultants,advisors,privatebankersandtrustofficersin24countries,wehelpclientsgrow,protectandtransfertheirwealth.
WealthManagement
(C$millions,except 2008 vs. 2007percentageamounts) 2008 2007 2006 Increase (decrease)
Totalrevenue $ 3,987 $ 3,992 $ 3,487 $ (5) 0%Netincome 665 762 604 (97) (13)%Assetsunderadministration 495,100 488,500 476,500 6,600 1%Assetsundermanagement 222,600 161,200 142,800 61,400 38%
2008 Revenue contribution
Canadian Wealth ManagementU.S. & International Wealth ManagementGlobal Asset Management
37%
47%16%
2008 Key performance highlights•Netincomedecreased$97million,or13%,fromlastyearprimarilyduetolowertransactionactivityamidcontinueduncertaintyinglobalfinancialmarketsandthecombinedimpactoftheitemsrelatedtotheReservePrimaryFundandauctionratesecurities(describedintheWealthManagementsectionoftheMD&A).
•Totalrevenuewasrelativelyflattolastyear.Lowertransactionvolumes,adeclineinthefairvalueofcertainsecuritiesheldtoeconomicallyhedgeourstock-basedcompensationplan,andtheunfavourableimpactofthestrongerCanadiandollarweremostlyoffsetbyrecentacquisitionsandsolidgrowthinfee-basedclientassetsformostoftheyear.
•Assetsundermanagementincreased$61billion,or38%,fromlastyear,reflectingtheacquisitionofPH&Nandstrongnetmutualfundsalesformostoftheyear.
•Assetsunderadministrationincreased$7billion,or1%,fromlastyear,reflectingthefavourableimpactofthestrongerU.S.dollaronthetranslationofourU.S.dollar-denominatedassetsunderadministration,asatOctober31,2008.Assetsunderadministrationalsoincreased,reflectingtheacquisitionofFBW,partiallyoffsetbylowerclientassetsduetouncertaintyinglobalfinancialmarkets.
Business achievements in 2008 • RBC’sstrengthandstability,combinedwiththeattractivenessofourWealthManagementplatformandtheacquisitionsmadebyourbusinesses,haveenabledustogrowtomorethan4,000client-facingadvisors.
• InacquiringPH&N,weestablishedourselvesastheleadingproviderofretail,highnetworth,andinstitutionalassetmanagementservices,andbecameoneofthetoppensionplanmanagersinCanada,asmeasuredbyassetsundermanagement.
• WearenowthelargestfundcompanyinCanadawith16%marketshare,leadingtheindustrywith$8.8billionintotalmutualfundnetsalesinfiscal2008.
• AddingthePH&NprivateclientteamtoourexistingcapabilityalsomadeusoneofthelargestprivateinvestmentcounsellingfirmsinCanada,withmarketstrengthscoasttocoast.
• Wecontinuedtoofferourclientsafullrangeofinvestmentadviceandplanningservices,supportedbyateamofexperts
infinancialandretirementplanning,tax,law,andtrustsandestates.AccesstothisspecializedwealthmanagementservicesteaminCanadaisonereasonourinvestmentadvisorsgaveustopmarksinasatisfactionsurveyofbank-owned,regionalandnationalindependentinvestmentdealers(Investment Executive 2008BrokerageReportCard).
• U.S.clientsgainedaccesstotheglobalcapabilitiesofRBCwhenweconvertedtoasingleU.S.broker-dealerplatformwithCapitalMarkets.AcquiringFBWsignificantlyexpandedourpresenceinkeyU.S.regionsandaddedmorethan300financialconsultants.Wenowoperate204retailbranchesin41states.
• WeopenedanewofficewithCapitalMarketsinMumbai,India,whileournewofficeinSantiago,Chile,broadenedourpresenceinLatinAmerica.
• WewerenamedthetopprovideroftrustservicesintheU.K.,andthehighest-rankedCanadianfirminLatinAmerica(Euromoney).
• Ourassetmanagementbusinesscontinuedtodeliverstronginvestmentperformance,whilekeepingmanagementexpenseratiosbelowthemedianandofferingpricingoptionsthatprovideclientswithtransparencyandchoiceinseekingadvice.
• WewerenamedBestOverallFundGroupinCanadaand,asaresultofthePH&Nacquisition,BestBondFundFamilyinCanada,bothforthesecondconsecutiveyear(LipperInc.).
2009 and beyond• WewillcontinueworkingtoextendourleadintheCanadianwealthandassetmanagementmarkets,withclient-focusedproducts,servicesandstrategies.
• WeplantoimproveoperatingperformanceandtoexpandU.S.WealthManagementthroughorganicgrowthandbolt-onacquisitions.
• WeplantoexpandourhighnetworthInternationalWealthManagementbusinessthroughorganicgrowthandbolt-onacquisitions.
• Weplantoexpandassetmanagementgloballybyleveragingourcapabilitiesintheinstitutionalmarketandintheindividualmarketthroughsub-advisoryandallianceopportunities.
• Wewillworkhardtocontinueattractingandretainingexperiencedadvisors,privatebankersandotherprofessionalsacrossallourbusinesses.
12 RoyalBankofCanada:AnnualReport2008 Insurance
Insurance
WeprovideCanadianswithimprovedaccesstoINsUR A NCEchoicesthroughawiderangeofinsurancesolutionsincludinglife,health,travel,home,auto,andcreditorinsuranceservicestoindividualandbusinessclients.Theseproductsaredistributedthroughthird-partychannelsincludingindependentlifeinsuranceadvisorsandtravelagentsaswellasthroughourgrowingproprietarychannelssuchasretailinsurancebranches,bankbranches,callcentres,online,andourcareersalesforce.IntheU.s.,weofferlifeinsurance,annuityproductsandtravelinsurance.OutsideNorthAmerica,weoperateaspecialtyreinsurancebusiness.
(C$millions,except 2008 vs. 2007percentageamounts) 2008 2007 2006 Increase (decrease)
Totalrevenue $ 2,610 $ 3,192 $ 3,348 $ (582) (18)%Netincome 389 442 302 (53) (12)%Premiumsanddeposits(1) 3,861 3,460 3,406 401 12%
(1) Premiumsanddepositsincludepremiumsonrisk-basedinsuranceandannuityproducts,anddepositsonindividualandgroupsegregatedfunddeposits,consistentwithinsuranceindustrypractices.
2008 Revenue contribution
Reinsurance & OtherCanadian Life and HealthProperty & CasualtyU.S. Life and Health
41%30%24%
5%
2008 Key performance highlights • Netincomewasdown12%,or$53million,overlastyear,mainlydueto$110million($80millionaftertaxes)ofinvestmentlossesondisposalsandimpairments,aswellasimpactsfromequitymarketmovements.ThiswaspartiallyoffsetbyfavourableactuarialadjustmentsandsolidgrowthinourreinsuranceandCanadianbusinesses.Ourprioryearincludeda$40million(before-andafter-tax)gainrelatedtothereallocationofcertainforeigninvestmentcapitalwhichhadsupportedourpropertycatastrophereinsurancebusiness,exitedin2007.ThisdeclinewaspartiallyoffsetbyhighernetactuarialadjustmentsreflectingmanagementactionsandassumptionchangesandsolidgrowthinourreinsuranceandCanadianbusinesses.
•Revenuedecreased18%,or$582million,overlastyearmainlyduetothechangeinfairvalueofinvestmentsbackingourlifeandhealthpolicyholderliabilities,largelyoffsetinpolicyholderbenefits,claimsandacquisitionexpense.Thedecrease,whichalsoreflectslowerU.S.annuitysalesaswellasinvestmentlossesondisposalsandimpairments,aswellasimpactsfromequitymarketmovementswaspartiallyoffsetbygrowthinourreinsuranceandCanadianbusinesses.
•Premiumsanddepositsgrew$401million,or12%,fromayearago,largelyreflectingnewsalesgrowth,aU.K.annuityreinsurancearrangementandcontinuedstrongclientretention.
Business achievements in 2008 • WeexpandedourretailinsurancenetworkinCanadato35branchesin2008,from21branchesin2007,givingourclientsmoreconvenientaccesstoinsuranceservicesandadvice.Advisor’s Edge,atradepublication,recognizedtheimpactofourretailinsurancepresence,namingthedevelopmentofourinsurancebranchnetworkasoneofthemostsignificanteventsinfinancialservicesoverthelast10years.
• WeexpandedourinsuranceofferinginanumberofwaystosupportlargeandsmallCanadianbusinesses,includingreachinganagreementwithAonReedStenhouseInc.(Aon)toprovidecommercialpropertyandcasualtyandtradecreditinsurancesolutionstobusinessowners.ThisagreementwithAon,combinedwithourexistingproductsandservices,willenableustoprovidelargeandsmallCanadianbusinesseswithinnovativeadviceandeffectivesolutionstailoredtomeettheirinsuranceneeds.
• WecontinuedtomakeiteasierforCanadianclientstodobusinesswithusbyofferingasimplifiedlifeinsuranceproductforthemassmarketandimprovingouronlinetravelinsuranceofferings.
• RBCwasrecognizedforourWirelessRoadAdvisorprojectatthe21stannualCIO100AwardsprogramasaninnovativeorganizationthatusesITtocreatebusinessvalue.Thissystemenablesmobileclaimsadjusterstousetheirlaptopstoaccessclaimsinformationoverawirelessnetworktohelpclientswiththeclaimsprocess.
• WewerethefirstCanadian-ownedtravelinsuranceprovidertosignonwithInRoomMD,ahealthcareconciergeprogramprovidingin-roomhotelvisits24hoursaday,sevendaysaweek,wheneverpossible,savingtravellerstheinconvenienceofhavingtosearchformedicalassistancewhilevisitingtheU.S.
• ThroughourCanadianBankingoperations,wealsobecamethefirstmajorCanadianbanktolaunchadisabilityinsuranceoptionunderourBusinessLoanInsurancePlanwhichassistsbusinessownersbycoveringinsuredbusinessloanandmortgagepayments.
2009 and beyond• Wewillfocusonprovidingsuperiorinsurancesolutionsforourclientsthroughnewandexistingdistributionchannels.
• WewillenhancetheclientexperiencebyprovidingcustomerswithacomprehensivesuiteofRBCproductsandservicesbasedontheirneeds.
• TheLeanSixSigmamethodologywillbeappliedtoprocessreviewsofvariousgroups–includinghealthclaimsmanagement,newproductdevelopment,andnewapplicationprocessing–withafocusonimmediateenhancementsbutalsoeffectingacycleofcontinuousimprovement.
• WewillfocusongrowinginternationallythroughourreinsuranceoperationsbyexecutingontransactionsthatfitwithinRBC’soverallriskframework.
• WewillworktoleverageourexpandedretailbankingpresenceintheU.S.andCaribbeantogrownon-Canadianinsurancerevenue,providingclientswithanintegratedexperienceandRBCproductsuitetoservetheirbusinessneeds.
13 InternationalBanking RoyalBankofCanada:AnnualReport2008
INTERN ATION A LBA NKINGincludesRBC’sbankingbusinessesintheU.s.andCaribbean,aswellasglobalcustodyandinvestorservices.
InternationalBanking
(C$millions,except 2008 vs. 2007percentageamounts) 2008 2007 2006 Increase (decrease)
Totalrevenue $ 2,101 $ 1,915 $ 1,628 $ 186 10%Netincome (153) 242 261 (395) (163)%Averageloansandacceptances 27,000 22,300 18,500 4,700 21%Averagedeposits 42,500 34,200 28,700 8,300 24%Assetsunderadministration–RBC(1) 11,200 11,200 n.m. –RBCDexiaIS(2) 2,585,000 2,713,100 2,421,100 (128,100) (5)%Assetsundermanagement–RBC(3) 3,900 3,900 n.m.(1) AUA–RBCrepresentstheAUAforRBTTasatSeptember30.(2) RBCDexiaInvestorServicesrepresentsthetotalassetsunderadministrationasatSeptember30ofthejointventure
establishedJanuary2,2006,ofwhichwehavea50%ownershipinterest.(3) AUM–RBCrepresentstheAUMforRBTTasatSeptember30.
2008 Revenue contribution
BankingRBC Dexia IS
59%41%
OurU.S.bankingoperationsofferawiderangeoffinancialservicesandadvice,includingacompletelineofbankingservicestoindividuals,businessesandpublicinstitutionsthroughoutthesoutheasternU.S.Ournetworkincludes439full-servicebankingcentres,anextensiveATMnetwork,andtelephoneandonlinebanking.WearenowamongthetopfivedepositholdersinNorthCarolinaandrankseventhoverallasmeasuredbydepositsinoursix-statesoutheasternbankingfootprint(NorthCarolina,SouthCarolina,Virginia,Georgia,AlabamaandFlorida).
IntheCaribbean,wehaveoneofthemostextensivebankingnetworks,withoperationsin17countriesandterritories.Weprovidebankingsolutionstoindividualsandbusinessesthroughoutournetworkof127branches.
OurU.S.andCaribbeanbankingbusinessincludesourcardsoperations,whichprovideawiderangeofsolutionsforpersonal,businessandmerchantclientsinmorethan18countries.
Wehavea50%ownershipinRBCDexiaIS,whichoffersacompleterangeofinvestorservices,suchascustodyandfundadministration,toinstitutionsworldwide.
2008 Key performance highlights• Netlossof$153millioncomparestonetincomeof$242millionayearago.Thiswasmainlyattributabletoahigherprovisionforcreditlosses,andwritedownsandlossesonourinvestmentportfolios.
• Totalrevenueincreased$186million,or10%,fromlastyear,dueprimarilytoloananddepositgrowthfromourAlabamaNationalBanCorporation(ANB)andRBTTacquisitions.
• Averageloansandacceptancesanddepositsgrew21%and24%,respectively,duelargelytoourANBandRBTTacquisitions.
• AssetsunderadministrationthroughRBCDexiaISdecreasedto$2.585trillion,ora5%decreasefrom2007asaresultofthecapitaldepreciationonclientassets.
Business achievements in 2008 • FollowingtheintegrationofouracquisitionofRBTT,ourclientshaveaccesstooneofthemostextensivebankingnetworksintheCaribbean.OurCaribbeanoperationsasofOctober31,2008,havemorethanUS$22billioninassets,127branches,withapproximately7,000employeesservingmorethan1.6millionclients.
• IntheU.S.,wesuccessfullyintegratedouracquisitionofANBbyretainingclient-facingemployeesandleveragingtheirlocalmarketexpertisewithtechnologyandmanagementresourcestoimprovetheclientexperience.Theacquisitionaddedmorethan100bankinglocationstoourbranchnetwork.OurU.S.bankingoperations,whichwereranked40thlargestintheU.S.byassets(asofJune30,2008),serveapproximatelyonemillionclientsinsixsoutheasternstates.
• In2008,RBCDexiaISwasdistinguishedinseveralimportantindustryrankings:numberoneglobalcustodianforarecordfifthconsecutiveyear(Global Investor,2004–2008),numberoneproviderofglobalcustodyservicesinCanada,EuropeandU.K.(R&MConsultants,2008),transferagentoftheyear(ICFA,2008)andglobalcustodyclientrelationshipmanageroftheyear(ICFA,2008).
2009 and beyond• IntheU.S.,wewillrefineouroperatingmodeltoimproveefficienciesandenhanceourcompetitivenessinoursoutheasternfootprintwhileremainingconsistentwithourriskmanagementdiscipline.
• WewillfocusonbuildingourU.S.bankingbusinessandcommercialstrategytodeveloparobustretailstrategythatprovidesourclientswithanintegratedexperienceandafullproductsuitetoservetheirneeds.
• WewillfocusonintegratingRBTT’sinfrastructure,technology,productsandservicestoprovideacommonplatformforgrowthandexpansionintheCaribbean.
• WewillfocusonleveragingthestrengthofRBCandRBTT’scombinedoperationsandinfrastructuretopursueopportunitiesinhigh-growthmarketssuchastheSpanishCaribbeanandCentralandSouthAmerica.
• WewillfocusonpursuinggrowthstrategieswithRBCDexiaISthatincludestrengtheningourglobalclientfranchise,buildingnewvalue-addedproductsandexpandingourpresenceinhigh-potentialmarkets.
• Wewillworktoleverageoursize,scaleandexpertiseinCanadatosignificantlygrowourinternationalcreditcardbusiness.
14 RoyalBankofCanada:AnnualReport2008 CapitalMarkets
CapitalMarkets
OurdiverseC A PITA LM A RKE Tsbusinessesprovidecorporate,government,andinstitutionaladvice,capital,andaccesstotheworld’sfinancialmarketsandinnovativeproductstohelpthemachievetheirgrowthobjectives.ByleveragingourleadershippositioninCanada,wehavebuiltastrongandgrowingU.s.mid-marketcapitalmarketsfranchise.OutsideNorthAmerica,wehaveestablishedourselvesasaleadingproviderofglobalfinancialservicesandarerecognizedasatop15globalinvestmentbank.Notableareasofstrengthincludeglobalfixedincomedistributioncapabilities,structuringandtrading,andforeignexchange.Inaddition,wecontinuetobuildourglobalcapabilitiesinenergy,miningandinfrastructurefinance.
(C$millions,except 2008 vs. 2007percentageamounts) 2008 2007 2006 Increase (decrease)
Totalrevenue(1) $ 3,935 $ 4,389 $ 4,136 $ (454) (10)%Netincome 1,170 1,292 1,355 (122) (9)%Tradingrevenue(1) 967 2,929 2,143 (1,962) (67)%Averageassets 340,300 311,200 260,600 29,100 9%
(1) Taxableequivalentbasis.
2008 Revenue contribution
Global MarketsGlobal Investment Banking and Equity MarketsOther
48%
39%13%
2008 Key performance highlights • 2008financialperformanceinCapitalMarketswassignificantlyimpactedbywritedownsresultingfromthechallengingmarketenvironment.Thesewritedownsreducedrevenueby$2,091millioncomparedto$393millionlastyearandreducednetincomeby$920millionafter-taxandrelatedcompensationadjustmentsascomparedto$173millionlastyear.
• ManyofourCapitalMarketsbusinessescontinuedtoperformwell,despitethechallengingenvironment,includingcertainfixedincomeandforeignexchangetradingbusinessesalongwithourU.S.cashequitiesandlendingbusinesses.
• Notwithstandingthemarketenvironment,ourdiversifiedplatformandstrongriskmanagementallowedustogenerateROEof20.5%,downfrom26.6%lastyear.
• Averageassetswereup$29billion,or9%,primarilyduetoanincreaseinderivativeassets,largelyreflectingincreasedmarketvolatilityandanincreaseinloanassetsduetogrowthincorporatelendingactivities.
Business achievements in 2008 •WecontinuedtobeCanada’sleadingglobalinvestmentbank,asreflectedbythefollowingnoteworthyrecognitions:
– DealmakeroftheYearinCanadaforfiveofthepastsixyears(Financial Post)
– Globalrankingof12thintheBloomberg 20(2007)
– NumberonerankinginCanadianM&A,equityunderwritingandcorporatedebtfinancing(Bloomberg,2007)
– GlobalBondArrangeroftheYear(Project Financemagazine,2007),recognizingourstrengthininfrastructurefinanceandourglobalbondplatform
– BestInvestmentBankinCanada(Euromoney)
– OurresearchteamwasrecognizedforitsabilitytoprovideinvestmentresearchonaNorthAmericanand,increasingly,onagloballevel
– Globalrankingof12thintheWorld’sBestStockPickersawards(Bloomberg)
– Numberone(tied)intheStarMineAnalystAwards(Financial Post)
• WestrengthenedourmarketshareinourU.S./globalequitycapitalmarketsbusinesses,ranking12thand19thaccordingtoDealogic(U.S.)andBloomberg(global),respectively.
• Welaunchedglobalcapabilitiesforgreenhousegasemissiontrading,actingasamarket-makingprovider,takingprincipalrisk,providingpricingliquidityandfacilitatinghedgingforclientsonexchangesinCanada,theU.S.andEurope.
2009 and beyond• WewillstrivetoremaintheCanadianwholesaleclient’sfirstchoiceforfinancialproductsandservices.
• IntheU.S.,wewillbuildonthesolidperformanceofourinvestmentbankingandequitysalesandtradingbusinessestostrengthenrelationshipswithourclientsandexpandourmarketshare.
• FurtherextendourU.K.infrastructurefinanceandprojectadvisorycapabilitiesintheEuropean,U.S.andCanadianmarkets.WewillfurtherenhanceourmunicipalbankingbusinessandexpandourleveragedfinancecapabilitiestogrowourEuropeanclientbase.
• Wewillcontinuetobuildoutourcapabilitiesandinfrastructuretosupportourglobalenergyandminingbusinesses,expandourcommoditiesfranchiseandenhanceourelectronictradingplatforms.Inaddition,wewillfocusonexpandingourleveragedfinancecapabilitiestogrowourEuropeanclientbase.
•WewillfocusonmakingfurtherinvestmentsinourdebtcapitalmarketsbusinesseswithinourAsianandNewYork-basedemergingmarketsdistributionplatformstodeliverfixedincomeandstructuredproductstohighnetworthandinstitutionalclients.
15 Corporatesupport RoyalBankofCanada:AnnualReport2008
CorporateSupport
GTOprovidestheprocessesandtechnologyforasecure,flexible,reliableandconvenientclientexperience.Wedevelopandmanagetheessentialinformationtechnologyandoperationsfoundation,theprocessingandfulfillmentsupport,aswellasthecontactcentre-deliveredcustomersalesandservicethatsupportourdiversebusinessactivities.
GlobalFunctionsprovidesvalue-addedservicesandadvicetosupportbusinessgrowthaswellasthecriticalcontrols,systemsandexpertisenecessarytomeetregulatoryandfinancialreporting,balancesheetmanagementandcorporatefundingrequirements.GlobalFunctionsalsoprovidesleadershiprelatedtothemanagementofcriticalenterpriseassets,includingourpeople,corporatereputation,capitalbase,debtratings,andenterprisestrategy.
Business achievements in 2008 • Inayearofextremeturbulenceintheworld’sfinancialmarkets,RBCcontinuedtobeasourceofstabilityandstrengthforourclients.Ourenterpriseriskmanagementframeworkunderpinsourstrengthandstabilityandisatthecoreofourcontinuedsuccessunderextremelyadversebusinessconditions.Wearedisciplinedandproactiveinmanagingourriskprofilewithinourriskappetite.
• Ourtreasurymanagementteamhasskillfullyandsuccessfullymaintainedourliquiditypositionandaccessedfundingatrelativelyattractiveratesfromsourcesaroundtheworldinanenvironmentwhereotherfinancialinstitutionshavestruggledtoaccessdebtandcapital.
• Wesafelyandsecurelycompletedmorethan300millionATMtransactions,118millionclientcalls,140milliononlinebankingtransactions,600millionpoint-of-saletransactionsand230millionequitytransactionsonbehalfofourclients.
• WewerethePrivateSectorWinneroftheConferenceBoardofCanada/SpencerStuart2008NationalAwardsinGovernanceinrecognitionofinnovationinperformancemanagementforcreatingaframeworkthatfacilitatesthemoreaccurateandtimelyassessmentoftheimplementationofstrategicinitiatives.
• TheCanadianInstituteofCharteredAccountantspresentedRBCforthesecondconsecutiveyearwiththeAwardofExcellenceforCorporateReportinginFinancialServices,givingusthehighestaveragerankingamongCanadianfinancialindustrycompetitors
forourfinancialreporting,corporategovernancedisclosure,electronicdisclosureandsustainabledevelopmentreporting.
• WeachievedBestOverallScoreintheForresterResearch,Inc.2008CanadianBankSecureWebSiteRankings.
• IR MagazinepresentedRBCwiththe2008BestRetailInvestorCommunicationsAward.
• RBCwasonceagainincludedintwoDowJonesSustainabilityindicesfor2009(theWorldIndexandtheNorthAmericanIndex).
• RBCwasdeclaredoneofCanada’s10MostAdmiredCorporateCulturesof2008(WaterstoneHumanCapital).
ThefollowingrankingsrecognizedthestrengthoftheRBCbrandin2008:
• Canada’sTop50BrandspublishedinCanadian BusinessmagazinegavetheRBCbrandtopplacewithanA+rating
• BrandZTop100MostPowerfulBrandsmadeRBCthefirstCanadiancompanytobenamedtoitsgloballist.
2009 and beyond• OurCorporateSupportteamswillcontinuetostrivetoeffectivelyandefficientlydelivervalue-addedservicesandadvicenecessarytosupporttheachievementofourstrategicandperformancegoals.
• GTOwillworkinalignmentwiththestrategicprioritiesofourbusinessestomakeiteasierforclientstodobusinesswithus,whileenhancingclientservices,contributingtoourriskandcomplianceobjectives,andensuringthesafetyandsoundnessofourinfrastructure.
• GlobalFunctionswillcontributetoRBC’sfinancialperformancebyworkingtomaintainastrongbalancesheet,soundcreditqualityandcapitalratios;effectivelymanagingourtaxposition;andimplementingcost-savinginitiatives,whileimprovingthealignmentofbusinessstrategiesandriskexposures.
• GlobalFunctionswillsupportbusinessgrowthbyexecutingstrategiestoattract,retainandmotivatetalentedemployees;bymaintainingstrongrisk,governanceandcomplianceregimes;andbypromotingarelevantandcustomer-centricbrandstrategy,aclearandcompellingenterprisestrategy,andsolidrelationshipswithinvestors,creditratingagencies,regulatorsandotherstakeholders.
CORP OR ATEsUPP ORTcomprisesGlobalTechnologyandOperations(GTO)andGlobalFunctions.Together,theseteamscontributetoachievingenterpriseandbusinessobjectivesbyenablingthestrategiesofeachbusinessplatform,andbydrivinginnovativeprocessandtechnologyimprovements,enhancingclientservice,executingagainstRBC’sriskandcomplianceobjectives,andensuringthesafetyandsoundnessofourorganization.
ForfinancialhighlightsrelatedtoCorporatesupport,pleaseseepage74oftheMD&A.
16 RoyalBankofCanada:AnnualReport2008 Chairman’smessage
Chairman’smessage
“TheBoardofDirectorshasbeenactivelyengagedinreviewingRBC’sriskprofile,whileoverseeingmanagement’sprogressthroughouttheyearinimplementingbusinessstrategiesinthefaceofarapidlychangingmarketplace.”
–DavidP.O’Brien
Inthedifficultmarketconditionsof2008,theboard’sroleinoverseeingmanagementoftheprincipalrisksofRBC’sbusinessestookonaddedsignificance.TheBoardofDirectorshasbeenactivelyengagedinreviewingRBC’sriskprofile,whileoverseeingmanagement’sprogressthroughouttheyearinimplementingbusinessstrategiesinthefaceofarapidlychangingmarketplace.Indoingso,wehavebroughtourcollectivebusinessexperiencetobearinassessingwhethermanagement’splansandactivitiesareprudentandfocusedongeneratingshareholdervalueandachievingsuccessintheshort,mediumandlongtermwithinaneffectiveriskcontrolenvironment.During2008,weregularlymeasuredcorporateperformanceagainstobjectives,approvingsignificantcapitalexpendituresandmajortransactionsthatwereinalignmentwiththestrategicplanapprovedbytheboard.Balancedbyourcarefuloversightofpolicies,processesandsystemsthataredesignedtosupportprudentmanagementofrisks,weprovidedforward-lookingadvicetomanagementconcerningseveralstrategicinitiatives,includingthesignificantexpansionofRBC’spresenceinCanadaandinternationally.Inparticular,theboardplayedanimportantroleinadvisingmanagementonmajoracquisitionsthatfurtherbuiltRBC’sbusinessinCanada(PH&N),theU.S.(ANBandFBW)andtheCaribbean(RBTT).
Tomaximizeourcontribution,theBoardofDirectorsiscommittedtoadaptingbestpracticesingovernancetotheneedsoftheorganization.ThisyearwearetheprivatesectorwinneroftheNationalAwardinGovernance,conferredbyTheConferenceBoardofCanadaandSpencerStuart.Whileourgovernancepractices,policiesandprocesseshavereceivedrecognitioninthepast,thislatestawardisespeciallymeaningful.ItrecognizesthecreationofaperformancemanagementframeworkaimedatenhancingtheflowandqualityofinformationtomanagementandtheBoardofDirectors.Theavailabilityofmoretimely,accurateandactionableinformationfacilitatesinsightfulanalysisbydirectorsandpromotesconstructivedebate,bothwithintheboardandbetweentheboardandmanagement.
ThisinnovationreflectsRBC’scontinuousimprovementofitsprogressivegovernanceprocesses.Thisapproachtocorporategovernancesupportsusinourroleasstewardsoftheorganization,safeguardingtheinterestsofshareholdersbyexercisingindependentsupervision,whileactingaskeyadvisorstomanagementinpursuitofasharedgoal:enhancinglong-termshareholdervalue.
Harnessingtheenergiesandtalentsofstrongindividualsintoadynamicteamisamongmydutiesasnon-executiveChairman.MygoalistoprovideleadershiptoenabletheBoardofDirectorstocontinuetoaddvaluetoRBC’sperformance.Thisinvolvesinstillingacommonvision,maintaininghighstandardsofboardindependenceandoverseeingprocessesofboardassessmentandpeerreviewtooptimizetheboard’seffectivenessinfulfillingitsmandate.Anotherpriorityisourcontinuingeducationprogramwhichequipsdirectorstoprovidecurrentandknowledgeableguidancetomanagementinarapidlyevolvingregulatoryandbusinessenvironment.Overthepastyear,theboardreceivedpresentationsdealingwithsuchmattersasmethodologiesusedinassessingandcontrollingrisk,theimplicationsoftheBaselIICapitalAccord,financialinstitutiondisclosurepractices,andimplementationofInternationalFinancialReportingStandards.
Theabilityofboardmemberstocontributefromadiversityofthoughtandbusinessexperienceenhancesthevaluewebringtotheorganization.ActingthroughourCorporateGovernanceandPublicPolicyCommittee,theboardplacesconsiderableimportanceontheprocessofselectingdirectorcandidates,weighingtheexistingstrengthsoftheboardagainsttheevolvingneedsoftheorganization.Weseekhighlycapableandindependentindividualswithagraspofstrategicmanagement,whohavebeenactivelyengagedinbusinessleadershipandhavedemonstratedhighpersonalstandardsofbehaviourandvalues.In2008wewerepleasedtowelcomeournewestdirector,EdwardSonshine,Q.C.,presidentandchiefexecutiveofficerofRioCanRealEstateInvestmentTrust,whoseexperienceaddsanimportantdimensiontotheboard.
Inachallengingyearforthefinancialservicesindustry,RoyalBankofCanadamaintaineditsmomentumandcontinuedtobuildonpastsuccesses.YourBoardofDirectorsisproudtobeactivelyengagedintheorganization’sachievements.Onbehalfoftheboard,Iwouldliketoextendappreciationtomanagementandemployeesaroundtheworldfortheircontributionstothesuccessoftheorganization.Whilecontinuingtooperateinachallengingenvironment,theBoardofDirectors,managementandemployeesremainfocusedonservingRBC’sclientsandcreatingvalueforshareholders.
DavidP.O’BrienChairmanoftheBoard
17 Corporategovernance RoyalBankofCanada:AnnualReport2008
Corporategovernance
Beyond compliance RBC’sBoardofDirectorshaslongbeenproactiveinadoptingprogressivegovernancepracticesandpolicies.OurdynamicapproachlooksbeyondregulatorycomplianceandbuildsonourstronggovernancefundamentalsbyincorporatingbestpracticestosupporttheBoardofDirectors’abilitytosuperviseandadvisemanagementwiththegoalofenhancinglong-termshareholdervalue.
TransparencyisakeyaspectofgoodgovernanceandtheboardtakesseriouslyRBC’scommitmenttoclearandcomprehensivedisclosure.OurpracticesandpoliciescomplywithregulationsandguidelinesestablishedbyCanadiansecuritiesregulators,aswellasapplicableprovisionsoftheU.S. Sarbanes-Oxley Act of 2002andrequirementsoftheNewYorkStockExchangeandtheU.S.SecuritiesandExchangeCommissionapplicabletoforeignprivateissuerssuchasRBC.
Building on our tradition of excellenceTomaintainourhighstandards,wecontinuouslyreviewandassessourcorporategovernancesystem.TheBoardofDirectors’dynamicapproachtogovernanceendeavourstoanticipatebestpracticesastheyevolve.Overthepastfewyears,RBChasadoptedmanysignificantleadinggovernancepractices:
• ApolicyrequiringdirectorstotendertheirresignationsfollowingtheAnnualMeetingiftheyfailtoreceivemajorityshareholdersupport
• OurcomprehensiveDirectorIndependencePolicyhascontinuedtoevolveinresponsetobestpracticesandregulatoryrefinements.Fourteenofthe15directorscurrentlyservingareindependent
• Meetingsofindependentdirectorsareheldfollowingeachregularlyscheduledboardmeeting
• Aminimumshareownershiprequirementof$500,000fordirectors,ensuringstrongalignmentoftheirinterestswiththoseofshareholders
• Increasedminimumshareownershiprequirementsforexecutiveofficerstofurtheralignmanagementandshareholderinterests.ThePresidentandCEOmusthaveshareholdingsworthatleasteighttimesthelastthreeyears’averagebasesalary.This
requirementextendsfortwoyearsintoretirement.ThestandardforothermembersoftheGroupExecutiveissixtimesthelastthreeyears’averagebasesalary,excepttheHeadofCapitalMarkets,whomustholdsharesworthatleasttwotimesthelastthreeyears’averagesalaryplusbonus.Theserequirementsextendforoneyearintoretirement
• APerformanceDeferredShareProgramtostrengthenthealignmentoftheinterestsofmanagementwithshareholdersbytyingseniormanagement’srewardstotheperformanceofRBCrelativetoaNorthAmericanpeergroupofcompetingfinancialinstitutions
• Reducedthenumberofstockoptiongrantsawardedtomanagementbyapproximately70%since2003.
Inaddition:• AllmembersofeverycommitteeoftheBoardofDirectorsareindependent:theAuditCommittee,HumanResourcesCommittee,CorporateGovernanceandPublicPolicyCommittee,andConductReviewandRiskPolicyCommittee
• FortheAuditCommittee,morestringentindependencecriteriaapplytomembers,fourindividualshavebeendesignatedasAuditCommitteefinancialexperts,andapolicylimitingtheserviceofourAuditCommitteemembersontheauditcommitteesofothercompanieswasadoptedin2004
• TheAudit,HumanResources,andCorporateGovernanceandPublicPolicycommitteeshavesoleauthoritytoretainandapprovethefeesofindependent,externaladvisors.TheHumanResourcesCommitteeretainsanindependentcompensationconsultant.
18 RoyalBankofCanada:AnnualReport2008 Corporategovernance
Demonstrating leadershipThesemeasuresbuildonourpreviousgovernanceinitiatives,whichinclude,amongmanyothers:
• EnsuringindependentleadershipoftheBoardofDirectorsbybeingfirstamongourpeercompaniestoseparatethepositionsofChairmanandCEOin2001
• Establishingboardanddirectorevaluationprocedures,withwrittenpeerreviewstocomplementthepeerassessmentpracticeofone-on-oneinterviewswiththeChairman.Inaddition,eachboardcommitteeassessesitsowneffectivenessannually
• Adoptingapolicylimitinginterlockingdirectorshipsofboardmembersin2002
• PermanentlydiscontinuinggrantsundertheDirectorStockOptionPlanin2002
• BeingamongthefirstmajorCanadiancompaniestoexpensestockoptionsinfinancialstatements,whichwehavedonesince2003
• Providingacontinuouseducationprogramfordirectorssotheyremainknowledgeableandinformedabouttheever-changingbusinessandregulatoryenvironmentandthespecializedandcomplexaspectsoffinanceandourbusinessoperations.
Enhancing our disclosure Inkeepingwithourgoalsofcontinuouslyimprovinggovernanceandprovidinggreatertransparencyandsimplicityinourcommunications,inrecentyearswehaveenhanceddisclosureinourManagementProxyCircular,including:
• Moredetailonthecompensationpaidtoindividualdirectorsandtheirshareownership
• Easy-to-read,three-yearoverviewsofnamedexecutiveofficers’compensation
• Aggregatecompensationoftopexecutivesasapercentageofmarketcapitalizationandapercentageofnetincomeafter-tax
• DescriptionofhowthePresidentandCEO’scompensationalignswithcorporateperformance
• Detailsofcomparatorcompaniesusedforbenchmarkingofbothcorporateperformanceandexecutivepay
• Increaseddisclosureregardingexecutivepensionsandthevalueofretirementplansfortopexecutives.
Important information about our governance practicesThefollowingadditionalinformationonourgovernancepracticesisavailableatrbc.com/governance:
• OurStatementofCorporateGovernancePractices
• OurCodeofConduct
• ThechartersofourBoardofDirectorsandeachofitscommittees
• OurDirectorIndependencePolicy
• PositiondescriptionsfortheChairmanoftheBoard,thechairsofcommitteesoftheboard,andthePresidentandCEO
• AsummaryofsignificantdifferencesbetweentheNYSErulesapplicabletoU.S.-listedcompaniesandourgovernancepracticesasaforeignprivateissuer
• OurCorporateResponsibilityReportandPublicAccountabilityStatement.
Corporategovernance
2008 Annual MeetingShareholdersareinvitedtoattendourAnnualMeetingat9a.m.(Pacifictime)onThursday,February26,2009,attheVancouverConvention&ExhibitionCentre,ParkviewTerrace,999CanadaPlace,Vancouver,B.C.
19 Corporateresponsibility RoyalBankofCanada:AnnualReport2008
Corporateresponsibility
AtRBC,webelieveourdutyistooperateourbusinesswithethicsandintegrityatalltimessothatwecancontinuetoensurethepresentandfuturewell-beingofourstakeholders:clients,employees,investors,suppliers,governments,communitiesandnon-governmentalorganizations.
Economic impact
•Providestrongreturnstoshareholders
•Payfairshareoftaxes
•Supportsmallbusinessandcommunityeconomicdevelopment
•Fosterinnovationandentrepreneurship
•Purchasegoodsandservicesresponsibly
•Createemployment
Marketplace
•Developandprovideproductsresponsibly
•Protectandeducateconsumers
•Provideaccesstobasicbankingservices
Environment
•Reduceintensityofouroperationalfootprint
•Lendresponsibly
•Leveragegreenbusinessopportunities
Community
•Providedonationswithalastingsocialimpact
•Sponsorkeycommunityinitiatives
•Enableemployeestocontribute
Workplace
• Fosteracultureofemployeeengagement
• Providecompetitivecompensationandtotalrewards
• Enablegrowththroughtraininganddevelopmentopportunities
• Respectdiversityandpromoteinclusion
Corporate responsibility priorities
VisionRBCiscommittedtodoingbetterforourclients,ourinvestors,ouremployeesandourcommunitiesthroughafocusedapproachtocorporateresponsibility,theRBCBlueprintforDoingBetter™.Ourgoalsaretodemonstrateintegrityinourbusinesspracticesandprovideleadershipintheworkplaceandthemarketplace.Twoofourkeyfocusareasarediversityandtheenvironment,whichweavethroughallofourbusinesses.Wearecommittedtobeingastrongsupporterofthecommunitiesinwhichwedobusinessandtotransparencyinsustainabilityreportingpractices.
StructureAtRBC,ourwholecompany,everyemployee,isresponsibleforbehavingresponsibly,asoutlinedinourCodeofConduct,whichreads:
“It is our duty as a corporate citizen to add value to society while earning a profit for our shareholders. RBC companies take responsibility for the effects of their actions, both social and economic.”
In2008,inordertorespondtoincreasedexpectationsforintegratedprogramsandreporting,RBCcreatedanewCorporateCitizenshipgroup,encompassingCorporateResponsibility,CorporateEnvironmentalAffairsandDonations.
ReportingRBChasadoptedamulti-prongedapproachtoreportingourcorporateresponsibilitypractices,sometimescallednon-financialorsustainabilityreporting.WefollowtheguidelinessuggestedbytheGlobalReportingInitiativeandundertakearangeofreportingactivitiesgearedtovariousstakeholdergroups,withourwebsitebeingourprimaryreportingmedium.OurannualCorporateResponsibilityReportandPublicAccountabilityStatementisprovidedonlineatrbc.com.
RecognitionIn2008,RBCwasprivilegedtoreceiveanumberofglobalawardsandhonoursforourcorporateresponsibilityeffortsandperformance:
• Fortheninthconsecutiveyear,RBCwasnamedtotheDowJonesSustainabilityWorldIndex,anannualreviewthatrecognizestheworld’sfinancial,socialandenvironmentalcorporateleaders.
• RBCisincludedontheJantziSocialIndexandforthelastsevenconsecutiveyears,hasbeenincludedontheFTSE4GoodIndex.
• Forthefourthconsecutiveyear,RBCwasnamedoneoftheworld’stop100sustainablecompanies,accordingtotheGlobal100rankingunveiledattheWorldEconomicForuminDavos,Switzerland.
• RBCwasincludedonthe2008Best50CorporateCitizensinCanadaranking,accordingtoCorporate Knightsmagazine.
For more information, visit rbc.com/responsibility/approach
CORPORATE KNIGHTS • 2008
20 RoyalBankofCanada:AnnualReport2008 Ethicsandbusinessintegrity
Ethics and business integrity
Atrulysustainablecompanymusthaveethicalbusinesspractices.AtRBC,oneofourkeyvaluesistooperatewithtrustthroughintegrityineverythingwedo.Ourblueprintforethicalbehaviourincludesastrongfoundationofprinciples,codesandformalpoliciesdesignedtoprotectconsumers,combatcorruption,ensurebusinesscontinuity,andfacilitatereportingofbreachesorconcerns.
PoliciesRBChasenterprise-widecompliancepoliciesandprocessestosupporttheassessmentandmanagementofrisks,includingpoliciestoaddressissuessuchaseconomicsanctions,lendingtopoliticalparties,moneylaundering,terrorismfinancing,conflictsofinterestandgiftsandentertainment.Policiesandcontrolsarereviewedregularlytoensurecontinuedeffectivenessandalignmentwithrelevantlawsandregulations.
Anti-money laundering RBCisstronglycommittedtopreventingtheuseofourfinancialservicesformoneylaunderingorterroristfinancingpurposes.Annually,everyRBCemployeeworldwide,regardlessofhisorherroleintheorganization,takesananti-moneylaundering/anti-terrorismfinancingcourseandexam.Thecourseistailoredforeachbusiness,functionandgeographywithmaterialspecifictothelawsof48countriesandjurisdictionsinwhichweoperate.OurGlobalAnti-MoneyLaunderingComplianceGroupdevelopsandmaintainspolicies,guidelines,trainingandriskassessmenttoolsandmodelsandothercontrolstohelpouremployeesprotectRBCandourclientsandtoensurewearemanagingever-evolvingmoneylaunderingandterrorismfinancingrisks.OurcontrolsinthisareaincorporateKnowYourClientrulesestablishedbyvariousregulatorstoensureweproperlyidentifyourclientsandprotectagainsttheillegaluseofourproductsandservices.
Code of ConductAllRBCemployeesworldwidearegovernedbyourCodeofConduct,whichwasfirstestablishedmorethan20yearsago.Thecodeisreviewedregularlyandwasupdatedin2008toclarifyprovisionsregardinguseofcompany-providedInternetaccess,sharingofinformationwiththirdpartiesandcontactsforreportingirregularities.Allemployeesarerequiredtotakeaweb-basedlearningprogramandtestorfollowanalternativeprocessapprovedbyourHumanResourcesGroup,sothattheyknowandunderstandthecode’sprinciplesandcomplianceelements.EmployeesmustreviewthecodeandacknowledgeadherencetoitwhentheyjoinRBCandatleastonceeverytwoyearsthereafter.Thecompany’smostseniorofficersandselectothersmustcompletetheprogramannually.
Crisis managementRBCusesabest-in-classBusinessContinuityManagementprogramtoensurethatourbusinessesareadequatelypreparedtodealwithanydisruptionofservicetoclients.Riskassessmentsofallareasareconductedannuallyandfurthersupportedwithcontingencyplansandperiodictesting.
TheRBCEnterpriseCrisisManagementteam,consistingofseniorexecutivesfromacrosstheorganization,isresponsibleforensuringcontinuedservicetoourclients.Itissupportedbyaglobalnetworkofregional,business-lineandlocalincidentmanagementteams.Theseteamsareoncallaroundtheclocktoaddressanysituationthatmayposematerialrisktostaff,corporatereputationorourabilitytodeliverservicetoclients.Regularcrisissimulationsareconductedtotestthereadinessfor,andtimelinessofresponsestoemergencysituations.
TheRBCBusinessEmergencyInformationLineisourlinktoemployees,providingcurrentupdatesintheeventofacrisisorexternalsituationaffectingtheirabilitytoaccessRBCofficesorserveourclients.
Reporting suspected irregularitiesRBCemployeesaroundtheworldhavethedutytoreportsuspectedbreachesofourCodeofConduct,otherirregularitiesanddishonesty.Wehavelong-establishedprocessesthatenableemployeestodoso,andourCodeofConductprotectsemployeesfromretaliationforanyreportmadeingoodfaith.
Specifictofinancialreportingpractices,theRBCReportingHotlinewasestablishedsoemployeesandthirdpartiesaroundtheworldcanreportsuspectedirregularitiesorwrongdoingrelatingtoaccounting,auditingorinternalaccountingcontrolsdirectlytotheRBCOmbudsman,anonymously,confidentiallyandwithoutfearofretaliation.
For more information, visit rbc.com/responsibility/governance
21 Economicimpact RoyalBankofCanada:AnnualReport2008
Economic impact
Companiesbothlargeandsmallcanhelpshapetheeconomiesofthecommunitiesandcountriesinwhichtheydobusiness,simplythroughtheirday-to-daybusinessdecisionsandactions.
Priorities• Providestrongreturnstoshareholders• Payfairshareoftaxes• Supportsmallbusinessandcommunityeconomicdevelopment
• Fosterinnovationandentrepreneurship• Purchasegoodsandservicesresponsibly
• Createemployment
Economic developmentRBCinvestsinsustainableeconomicdevelopment,andwearecommittedtocontributingtothesuccessofpeopleandbusinessesinthecommunitiesinwhichweoperate.Wesupport:
• Economicgrowthincommunitiesinwhichwedobusiness
• Initiativesthathelpbuildwell-being,wealthandcapacityinAboriginalcommunities
•Initiativesthathelpnewcomerssucceedintheiradoptedcountry
•Resourcestopromoteeconomicself-sufficiency
•Financialliteracyprograms
•Programsthataddressbasicneeds,suchasfoodbanks.
Promotingself-sufficiencyandgrowthWehelpstimulateeconomicgrowthbyinvestinginprogramsthatenableeconomicdevelopmentwithasocialpurpose.Forinstance,inCanada,wesupport:
• TheNeilSquireSociety’sEmployAbilityProgramwhichassistsphysicallydisabledadultsinCanadaseekingemployableskills,educationandconfidence
•TheWinnipegSalvationArmy’sWorkReadinessProgramwhichhelpsincomeassistancerecipientsfindajobandbecomeself-sufficient
• MiziweBiik,whichiscommittedtoimprovingthesocio-economicstatusoftheGreaterTorontoAreaAboriginalpopulationthroughaccesstotraining,employmentopportunities,businessdevelopmentservices,andemploymentcounselling
• YouthEmploymentServices,aleadingCanadianyouthorganizationthatprovidesinnovativeprogramsempoweringdisadvantagedandvulnerableyouthtobecomeself-sufficient,contributingmembersofsociety.
IntheU.S.,RBCBankprovidesmillionsofdollarsinfinancingforcommunitydevelopmentprojects,benefitinglow-andmoderate-incomepopulations.Projectsincludelow-incomerentalandownershiphousingdevelopments,aswellasaffordablehousingfortheelderlyandpeoplewithdisabilities.
PartnershipsRBCalsopromoteseconomicgrowththroughindustrypartnerships.Forexample,wesupporttheGreaterHalifaxPartnershipwhichbringstogetherover150privatesectorcompanies,threelevelsofgovernmentandskilledbusinessprofessionalsdedicatedtoengagingthecommunityinthegrowthofGreaterHalifax’seconomy.
InnovationRBCtakesaleadershiproleinsupportinginnovationandthecommercializationofresearch.InMay2008,wejoinedResearchinMotionLimitedandThomsonReuterstolaunchBlackBerryPartnersFund,aUS$150millionventurecapitalfund,toinvestinmobileapplicationsandservicesfortheBlackBerryplatformandothermobileplatforms.
Small businessSmallbusinessisanimportantenginedrivingeconomicgrowth.WearethemarketleaderinCanada,servingalmostoneinfoursmallbusinessowners.WehaveoverhalfamillionsmallbusinessclientsinCanada,theU.S.andtheCaribbean.Financingisessentialformanysmallbusinessestostart,operateorgrow,andRBCoffersahostofcreditsolutionstailoredtomeettheneedsofdiversebusinessesatvariousstages.Wealsostrivetoprovidethebestpossibleproducts,adviceandexpertisetohelpthissectorprosper.
PurchasingOurprocurementpoliciesareinclusiveandaimtopromotesustainablebusinesspracticesandeconomicdevelopmentwherepossibleandappropriate.Tomaintainthehigheststandards,wereviewourpurchasingpoliciesannually.
Wepromotefairpurchasingpracticesandstrivetosupport,wheneverpossible,thecommunitiesinwhichweoperate.WeareafoundingmemberoftheCanadianAboriginalandMinoritySupplierCouncil(CAMSC).RBChasbeenamemberofCAMSC’sU.S.affiliate,theNationalMinoritySupplierDevelopmentCouncil,since2002.
For more information, visit rbc.com/responsibility/economic
2008 Highlights• Deliveredtop-quartileshareperformanceof8%and12%overthree-andfive-yearperiods,respectively,whileincreasingdividendspaidoverthethree-yearperiodatanaverageannualcompoundrateof19%
• Incurredtaxesof$2.08billionworldwide• ServedmorethanhalfamillionsmallbusinessclientsinCanada,theU.S.andtheCaribbean
• Purchasedgoodsandservicestotalling$4.7billionfrominternational,national,regionalandlocalsuppliersofallsizes
22 RoyalBankofCanada:AnnualReport2008 Workplace
Workplace
Thetalentedandhighlymotivatedpeoplewhomakeupourworkforcearekeytoourblueprintforbuildingasustainableandsuccessfulfuture.ConsistentlyrankedasoneofthetopemployersinCanada,RBCstrivestostrengthenourreputationasaqualityemployerinallcountriesinwhichwedobusiness.
A culture of employee engagementAsourbusinessandworkforcegrowandbecomemorediverse,it’simportantthatwecontinuefosteringastrongsenseofhowwesucceedtogether.WedothisbymakingiteasyforemployeestounderstandtherolestheyplayinfulfillingRBC’sstrategies,helpingemployeesgrowpersonallyandprofessionally,andbeingcommittedtoemployeeengagement.
Werecognizethatwell-informedemployeesaremorelikelytoaligntheiractionswithcompanygoals.Employeeshavemanyopportunitiestolearnandaskquestionsaboutcompanygoals,strategiesandprogressthroughmeetingswithseniormanagement,regularformalcommunicationsandourextensiveintranet.
Wehavealonghistoryoflisteningandrespondingtoouremployees,andweregularlyseekfeedbackandcomments.Wehavebeenconductingemployeeopinionsurveyssince1981.In2008,wegatheredemployeeinputonourprogressinkeyareasincludingcareerdevelopment,performanceenablement,employeeengagementandworkplaceculture.Byunderstandingemployees’views,RBCcantakeactiontoaddresstheirneedsandthecompany’spriorities.Thisresultsinhighlevelsofemployeeengagementandastrongcommitmenttoclients.
Diversity and inclusionRBCisaleaderinvaluingdiversity.Ourstrengthcomesfromacombinationofwhatwehaveincommon,likesharedvaluesandpurpose,andwhatmakesusdifferent,likeexperiencesandperspectives.Bybringingtogetherthosesimilaritiesanddifferences,weareabletobreaknewgroundandbetterserveourclientsandcommunities.
Webelieveincreatinganinclusiveenvironmentforouremployees,wheretheycanfeelvalued,respectedandsupported–aplacewhereemployeescandeveloptheirownuniqueabilitiesand
realizetheiraspirations.Wealsoleadbystimulatingpublicdiscussionondiversityissuesthroughsponsoringresearchstudiesandawardsthatdrawattentiontodiversityissues.
OurannualDiversityProgressReportisavailableatrbc.com/careers/diversity.
Competitive compensation and total rewardsAttheheartofanengagedworkforceisaflexible,competitiveandmeaningfulTotalRewardsprogram.Ourprogramisbasedonanunderstandingofwhatemployeesvalue.Itrecognizesthatflexibilityandchoicearethebestresponsetomeetingouremployees’diverseneeds.Ourcomprehensiveapproachrewardspeoplefortheirskillsandcontributionsbyofferingemployeescompetitivecompensation,benefitsandapositiveworkenvironment.
EmployeesavingsandshareownershipprogramsarealsoapartofourTotalRewardsprogram.InCanada,over70%ofemployeesareshareholdersthroughtheseprograms,whichhelpalignemployee,investorandcompanyobjectives.
Growth through training and developmentEmployeesexpectongoingcareerandlearningopportunitiestobeapartoftheirTotalRewardsprogramandourcommitmenttocontinuousemployeegrowthanddevelopmenthelpsensurewemeetthecurrentandfutureneedsofbothourpeopleandourclients.Experienceisoftenthebestteacher,andexperience-basedlearningintheformofworkassignments,projectsandone-on-onecoachingiscentraltogrowthatRBC.Employeesalsohaveaccesstothetrainingresourcestheyneedtolearnandgrowthroughourmanyonlinelearningandclassroomtrainingopportunities.
For more information, visit rbc.com/responsibility/workplace
Priorities• Fosteracultureofemployeeengagement
• Providecompetitivecompensationandtotalrewards
• Enablegrowththroughtraininganddevelopmentopportunities
• Respectdiversityandpromoteinclusion
2008 Highlights• Providedemploymenttomorethan80,000peopleworldwide• Paid$7.8billionincompensationandbenefits• Invested$149millioninformaltraininganddevelopmentinitiativestocomplementextensiveon-the-joblearning
23 Marketplace RoyalBankofCanada:AnnualReport2008
Marketplace
Corporateresponsibilityisn’tsomuchabouthowacompanyspendsitsmoney,buthowacompanymakesitsmoney.AtRBC,ourblueprintforbuildingsustainable,long-termrelationshipswithourclientsincludesresponsiblepracticesinthemarketplace,suchassolicitingandactingonclientfeedback,providingresponsiblydevelopedfinancialproducts,maintainingvigilantconsumerprotectionmeasuresandensuringaccesstofinancialservices.
Product responsibility DevelopmentofproductsandservicesRBCfollowsadefined,rigorousprocessbeforelaunchinganynewproductorsignificantlychanginganexistingone.Weevaluateproductsforarangeofrisksandensuretheyalignwithclientneeds,ourCodeofConduct,lawsandregulations,andvoluntaryconsumerprotectioncodesthatwehavesigned.ApprovallevelswithinRBCcorrespondtothelevelofriskidentifiedforaparticularproductorservice.
Low-carbonbankingforconsumersOneofourprioritiesistoprovideproductsandservicesthathelpourclientsmitigatetheirenvironmentalimpact.Thisincludesonlinebanking,andelectronicstatementsandbillpayment.In2008,wecontinuedtoofferoptionsforourenvironmentallyconsciousclientsincludingincentivestoswitchoffpaperstatements,haveahomeenergyaudit,buyalower-emissioncar,andswitchtogreenpower.
Sociallyresponsibleinvesting(SRI)AsinvestorscontinuetoexpressaninterestinSRI,RBChasreinforceditscommitmenttoofferingproductsthatincorporateenvironmental,socialandgovernancecriteriaintheinvestmentprocess.In2008,weexpandedourSRIoptionsthroughtheacquisitionofPH&N,whichmanagesthePH&NCommunityValuesFunds.ThroughVoyageurAssetManagementInc.,wealsoacquiredcertainassetsofBoston-basedAccessCapitalStrategies,LLC(AccessCapital).AccessCapitalinvestsindebtsecuritiesthatsupportcommunitydevelopmentservinglow-andmoderate-incomeindividualsandcommunitiesacrosstheU.S.
ResponsiblelendingRBCprovidescreditandbankingservicestocompaniesinmanyindustries.Ourpoliciescoverenvironmentalimplicationsandotherareasofconcern.Forinstance,ourCreditRiskManagementFramework,releasedinOctober2008,statescertaintypesofclientsandtransactionsmustinallcasesbeavoided,includingthedirectfinancingofcompaniesmanufacturingequipmentormaterielfornuclear,chemicalorbiologicalwarfarelandminesandclusterbombs.RBCisasignatorytotheEquatorPrinciples,asetofvoluntaryguidelinesaddressingenvironmentalandsocialrisksassociatedwithprojectfinance.
RBChasanumberofanti-corruptioncontrolswhichrequireustoapplyappropriatescrutinyandmonitoringmeasurestohigh-riskclientswhosebusinessactivitiesareknowntobesusceptibletocriminalactivityorhavebeendesignatedashighriskformoneylaunderingorfinancingterrorism.
Consumer protection PrivacyandinformationsecurityRBCisdedicatedtosafeguardingtheprivacyandconfidentialityofpersonal,business,financialandotherinformation.Infact,itisoneofourhighestprioritiesandremainsacornerstoneofourcommitmenttoourclients,employeesandotherstakeholders.WehavehadaformalPrivacyCodesince1991,overseenbyourChiefPrivacyOfficer,andweuserigoroussecuritysafeguardsandinternalcontrolstoensuretheprivacyandsecurityofinformationentrustedtous.In2008,wecontinuedtobuilduponourrobustframeworkformanagingprivacy,informationsecurity,andrecordsandcontentmanagementbyfocusingonimportantareassuchasclientandemployeeawareness.ThisincludesthedevelopmentofaPhishingResourceCentretohelpeducateourclientsonhowtorecognizefakewebsitesande-mailscams,aswellasaninternalfocusonemployeeeducationanddevelopment.Wealsorevisedourpublicwebsitetomakeiteasierforconsumerstoobtainimportantinformationaboutprivacy,informationsecurity,andfraudprevention.
FraudpreventionRBChasstringentsecuritypoliciesandpractices,supportedbyaround-the-clockresourcestoprevent,detectandinvestigatepotentialfraud.Ourguaranteesforonlinebankingandself-directedbrokerageclientsoffer100%reimbursementforfundslostthroughunauthorizedtransactionsintheiraccounts.Wecontinuetofocusonoperationsbyintroducingsimplerprocesses,withpositiveresultsasevidentinthesignificantdecreaseintheturnaroundtimeforfraudclaims,resultinginquickerreimbursementtoourclients.Wecontinuetodevelopfraud-educationinitiativesincludingup-to-datetipsandalerts,brochuresandclientpresentations.
Priorities• Protect,educateandlistentoconsumers
• Provideaccesstobasicbankingservices
• Developandprovideproductsresponsibly
2008 Highlights• Addedmoregreenbankingoptionsandsociallyresponsibleinvestmentproducts
• Expandedline-upofbankingproductsandservicesdesignedfornewcomerstoCanada
• Enhancedcustomerandemployeeawarenessofprivacyandinformationsecurity
24 RoyalBankofCanada:AnnualReport2008 Marketplace
Marketplace
TreatingcustomersfairlyAtRBC,weputourclientsfirst,andthatmeansitisofcentralimportancetousthatwetreatourclientsfairly.Weabidebyanumberofmarketconductrulesandregulationsdesignedtoprotectfinancialservicesclients,suchastheCanadiancostofborrowingandotherdisclosurerequirements,U.S.fairlendingrequirementsandU.K.TreatingCustomersFairlyregime.Inaddition,theCanadianbankingindustryhasdevelopedanumberofvoluntarycodestoprotectconsumers,towhichourCanadianbusinesseshavecommitted.Thesearelistedatrbc.com/voluntary-codes-public-commitments.
KnowYourClientrulesKnowYourClientrulesarekeytotheprotectionofallourclients.Ouremployeesarerequiredtomakeallnecessaryeffortstounderstandaclient’sprofile,andfinancialandpersonalobjectivesbeforemakingrecommendationsrelevanttotheclient’sneeds.Ourduediligencealsocoverscompliancewithapplicablesecurities,consumerprotection,anti-moneylaundering,anti-terrorismandeconomicsanctionslegislation.
ClientcomplaintprocessOurformalprocessforhandlingclientconcernsisoutlinedonourwebsiteandinourStraightTalkbrochures.IfclientsbelieveanissueisunresolvedfollowingreceiptofaresponsefromtheRBCrepresentativedealingwiththeirconcern,theymayappealtotheOfficeoftheOmbudsman,whichexaminesdecisionsmadebyRBCcompaniesandreviewstheircompliancewithproperbusinessprocedures.Theofficeensurescustomersgetafairandimpartialhearingandaretreatedwithconsiderationandrespect.Wealsorespectthedignityandprivacyofallpartiesinvolvedintheproceedings.CertaindisputesthatremainunresolvedafterbeingreviewedbytheOmbudsmanmaybedirectedtoanumberofagenciesandregulatorslistedonourwebsiteandinourStraightTalkbrochures.
RespondingtofeedbackEveryyear,RBCbusinessestrackclientsatisfactionthrougharangeoffeedbackmechanismssuchastelephone,paperandonlinesurveysinordertoimproveourproductsandservices.Forinstance,in2008,weasked492,000clientswithinourCanadianretailbankingoperationfortheirfeedback,whichhelpedprovidedirectionforthefollowinginitiatives:
• Moregreenbankingoptionssuchaspaperlessstatements
• BankingproductsandservicestailoredfornewcomerstoCanada
• Newbankingchannelsandfunctionalities
• Productfeaturesthatrewardcustomersfortheirloyalty
• NewFamilyFinancialKittohelpparentsofyoungchildrenorganizetheirfamily’sfinancialfuture
• Enhancedcustomeradvicetomeetallbankingandfinancialneeds
• Morerelevantmarketingandcommunicationmaterials.
Access to banking servicesRBCiscommittedtoprovidingbankingaccessthroughcustomizedproductsandservicestoahostofgroupswhoweretraditionallyunderserved.AfulldescriptionofthesecanbefoundinourannualCorporateResponsibilityReportandPublicAccountabilityStatementatrcb.com/pas.
For more information, visit rbc.com/responsibility/marketplace
25 Environment RoyalBankofCanada:AnnualReport2008
RBCiscommittedtoenvironmentalsustainability,asoutlinedintheRBCEnvironmentalBlueprint™.Wecontinuetodevelopandimplementthenecessaryprograms,proceduresandguidelinestosupportthiscommitment.Webelievethatfulfillingourenvironmentalgoalswillleadtoshort-andlong-termbenefitsforclients,shareholders,employeesandthecommunitiesinwhichweliveandconductbusiness.
PolicyTheRBCEnvironmentalPolicywasdevelopedin1991andsubstantiallyrevisedin2004and2007toreflectthechangingenvironmentalprioritiesofourcompanyandourstakeholders.Thepolicyaddressesenvironmentalmatterspertainingtooperations,businessactivities,productsandservices,employees,compliance,reportingtransparencyandpartnerships.
Progress on our prioritiesReducetheintensityofourenvironmentalfootprintRBCiscommittedtoreducingourenergyuse,GHGemissions,paperconsumptionandwateruse.Wearealsocommittedtoreducingthenegativeenvironmentalimpactsassociatedwiththewastewegenerateandourprocurementactivities.Weknowthatimprovingouroperationalefficiency,reducingourconsumptionofenergyandnaturalresources,anddecreasingGHGemissionsassociatedwithourbusinessactivitiescanleadtopositiveenvironmentalandeconomicresults.Amongotherhighlightsin2008,we:
• DevelopedaglobalResponsibleProcurementPolicythatwillincreasetheacquisitionofenvironmentallyandsociallypreferableproductsandservicesandreducethenegativeimpactsassociatedwithoursupplychain
• Updatedtheelectrical,mechanicalandarchitecturalstandardsforourCanadianbranchnetworktoeliminateexcesscapacityandtoimproveenergyefficiency
• Opened36newgreen-poweredbranchesinCanada.AttheendofOctober2008,wehad76Canadianbranchespoweredbycertified“green”emission-freepower.
PromoteenvironmentallyresponsiblebusinessactivitiesAtRBC,weworkwithourclientsandthecompaniesinwhichweinvestintoidentifyandmitigateenvironmentalrisksandsupportenvironmentallyresponsiblebusinessmodels.Comprehensiveenvironmentalriskmanagementpoliciesandproceduresfacilitatetheenvironmentalreviewoftransactions,andweregularlyupdatethesepoliciesandprocedurestoaddressregulatorychanges,emergingissuesandinternationalbestpractices.Inourlendingactivities,policiesrequirethatcertaintransactionsbereviewedbyinternalorthird-partyenvironmentalspecialiststoensurethatweareappropriatelyidentifyingandaddressingenvironmentalrisks.
Amongotherhighlightsin2008,we:
• Analyzedtheexposureofborrowersinourloanandinvestmentportfoliotoclimatechangerisksandregulations
• Conductedresearchonwaterissues,includingananalysisofwaterscarcityandtheimpactsoncertainindustrialsectorsandgeographicalregionsintheU.S.andCanada
• UpdatedRBCpoliciesregardingenvironmentalriskmanagementforbusinessandcommercialmarkets.
OfferenvironmentalproductsandservicesRBCseekstoofferanexpandingarrayofproductsandservicesthatprovideenvironmentalbenefitsandempowerclientstoreducetheirenvironmentalfootprintatlittleornoadditionalcost.Amongotherhighlightsin2008:
• SinceJanuary2006,over3.2millionRBCaccountshavebeenswitchedfrompaperstatementstoelectronicstatements.Theresultingpapersavingsamounttoapproximately112.5millionsheetsor511metrictonnesofpaper.UsingtheEnvironmentalDefenseFundPaperCalculator,thesepapersavingsareequivalenttoapproximately13,500trees.
• LaunchedtheRBCEnergySaverMortgageinCanadawhichoffersa$300rebateonahomeenergyaudit.Ahomeenergyauditisareportgeneratedbyalicensedprofessionalwhoisspeciallytrainedtoexamineelectrical,mechanicalandarchitecturalaspectsofresidentialhomes.Theauditprovidesrecommendationstohelpimproveahome’senergyefficiencyandlowerenergycosts.
• CommissionedareporttoreviewsustainabilityindicesanddisclosureinitiativesinNorthAmericaandEuropeincollaborationwithseveralU.S.andCanadianbanksandtheUNEnvironmentProgrammeFinanceInitiative.
Environment Priorities• Reducetheintensityofourenvironmentalfootprint
• Promoteenvironmentallyresponsiblebusinessactivities
• Offerenvironmentalproductsandservices
2008 Highlights• ConvertedallofficepaperpurchasedinCanadaandtheUnitedStatestoForestStewardshipCouncil(FSC)certifiedsourcesandconvertedallofficepaperintheBritishIslestoeitherFSC,ProgramfortheEndorsementofForestCertificationor100%recycledcontent
• Launchedourgreenhousegas(GHG)emissionstradingdeskwithcapabilitiestotransactonexchangesinCanada,theU.S.andtheEuropeanUnion
26 RoyalBankofCanada:AnnualReport2008 Environment
Key environmental issuesWhendevelopingtheRBCEnvironmentalBlueprint,weprioritizedourkeyenvironmentalissuesbyassessingourpotentialexposureto,andinfluenceover,theissue,aswellasitsimportancetoourcompletearrayofstakeholders.Ourkeyenvironmentalissuesareclimatechange,biodiversityandwater.
ClimatechangeClimatechangepresentsenvironmental,socialandfinancialchallengestotheglobaleconomy,humanhealthandourownbusinessesandoperations.Webelievethatitisofvitalimportancethatweallcontributetoeffortstoreducegreenhousegasemissionsandeffectivelyadapttotheunavoidableimpactsofclimatechange.
BiodiversityBiologicaldiversity,orbiodiversity,referstothevarietyofdifferentspecies,thegeneticvariabilityofeachspeciesandthevarietyofdifferentecosystemsthattheyform.Environmentaldegradationresultingfromhumanactivityandtheforcesofclimatechangeisdisruptingthenaturalbiodiversityofhabitatsandecosystems.RBCalsorecognizesthattheidentity,culturalbeliefsandeconomiesofsomeindigenouspeoplesareintrinsicallytiedtotheirregion’shistory,biodiversityandnaturallandscapes.Criticalnaturalsystemsandtheabundantbiodiversitytheysupportmustbepreservedinordertomaintainhealthycommunities,culturalvaluesandshareholdervalue.
WaterWateristhemostimportantnaturalresourceonearth,andwithoutit,alllifewouldcease.Accesstocleanfreshwater,thepreservationandmanagementofwatershedsandwaterconservationarebecomingincreasinglyurgentenvironmentalconcerns,bothgloballyandinmanyoftheregionsinwhichweoperate.Climatechange,pollutionandinefficientwaterusagearefactorscontributingtoagrowingwatercrisis.
Environment 2008 Highlights (continued)• Performeddetailedenvironmentalcreditriskassessmentson650transactionsinCanadaandtheUnitedStates
• ConvenedapanelofexpertstoadviseRBContheRBCBlueWaterProject™,andcommittedalmost$11.8millioningrantsto39organizationsgloballytosupportwatershedprotectionandaccesstocleandrinkingwater
• NamedtotheCarbonDisclosureLeadershipIndex2008undertheCarbonDisclosureProject.Amongfinancialinstitutions,RBCwasrankednumberoneinCanada,andtiedforsecondplaceglobally
• TrainedRBCCapitalMarketsandRiskManagementstaffonclimatechangeandcarbonmarkets
Sustaining the RBC Environmental Blueprint KeepingtheRBCEnvironmentalBlueprintoncourserequiresanopenandproactivedialoguewithourstakeholdersandpeers,independentandco-operativeresearchtoidentifyandbetterunderstandemergingenvironmentalissuesandtransparentandrelevantreportingofourinitiativesandprogress.Wealsorecognizetheimportanceofphilanthropytohelpcommunitiesmeettheirenvironmentalobjectives.Werefertotheseactivitiesas“SustainingtheRBCEnvironmentalBlueprint.”Amongotherhighlightsin2008,we:
• Proactivelycollaboratedwithnon-governmentalorganizationsincludingRainforestActionNetwork,ForestEthics,NatureConservancyofCanada,theCanadianBorealInitiative,Zerofootprint,FlickOff,andtheDurrellWildlifePreservationTrust
• Respondedtoinquiriesfromsustainabilityindices,sociallyresponsibleinvestmentcompaniesandanalystsincludingtheEthicalFundsCompany,JantziResearch,theCarbonDisclosureProject,DowJonesSustainabilityIndexandInnovestStrategicValueAdvisors
• Researchedandauthoredanumberofreportsonwater-relatedissuesincludingopportunitiestosupportsafedrinkingwaterinFirstNationscommunities;watersupplyissuesintheCaribbean;impactofwaterscarcityonindustrialsectorsandgeographicregionsintheU.S.andCanada;andtheimpactgolfcourseshaveontheenvironment.
For more information, visit rbc.com/environment
27 Community RoyalBankofCanada:AnnualReport2008
Community
TheRBCCommunityBlueprint™containsabroadsuiteofprogramsandinitiativestohelpbuildstronger,moresustainableandprosperouscommunitiesaroundtheworld.Ouremployeesandpensionersalsomakeenormouscontributionsfinanciallyandasvolunteers,sharingtheirfinancialandbusinessknowledge,timeandenthusiasmwiththousandsofcommunitygroupsworldwide.
DonationsDonationsareacornerstoneofourcommunityprograms,whichhaveatraditionofphilanthropydatingbacktoourroots.Infact,wehavedonationsonrecordasfarbackas1891.WeareoneofCanada’slargestcorporatedonors.WecontributetocommunitiesacrossNorthAmericaandaroundtheworld.Wearecommittedtomakingalastingsocialimpactthroughinspired,responsiblegivingandbybuildingstrongpartnershipswiththecharitablesector.Ourpriorityareasforfundinginclude:
•Supportingfreshwaterinitiatives
•Helpingkeepchildreninschool
•Supportingcommunityhealthcarethroughchildren’smentalhealthprograms
•Providingforemergingartistprograms.
Community sponsorshipsSponsorshipsareanimportantcomponentofacompany’spromotionalandmarketingactivities,andRBCsponsorseventsandinitiativesthatareimportanttoourclientsandourcommunities.ThroughstrategicpartnershipsattheCanadianandinternationallevel,aswellaslocallyinregionswherewedobusiness,weintendtodifferentiateRBCasaleadingcompanycommittedtoenablingthesuccessofourclientsandourcommunities.
Forexample,wesupportthedevelopmentofamateurathletesthroughsponsorshipofgrassrootseventsinlocalcommunitiesandnationalsportassociations.WearethelongeststandingsupporterofCanada’sOlympicTeam,datingbackto1947,andaPremierNationalPartnerofthe2010OlympicandParalympicWinterGamesinVancouver.RBCisalsoco-sponsoringtheOlympicTorchRelay,whichwilltouchcommunitiesallacrossCanada.
Webelievethatinvestmentsincreativevisionandartistictalentwillresultinhealthy,vibrantcommunities.Wesupportcommunityevents,artexhibitionsandtheatreperformances.Forexample,RBCistheofficialbankandmajorsponsoroftheTorontoInternationalFilmFestival.Aspartofoursponsorship,wewilllendfurtherassistancetotheculturalgrowthofCanadathroughtheRBCEmergingArtistBursaryProgram.Celebratingits10thanniversarythisyear,theRBCCanadianPaintingCompetitionrecognizesthetalentofemergingprofessionalvisualartistsinCanada.
Employee contributionsVolunteerismOurEmployeeVolunteerGrantsProgramwaslaunchedin1999tosupportandencouragecommunityinvolvement.Employeesandpensionerswhovolunteeraminimumof40hoursayeartoaregisteredcharityareeligiblefora$500granttotheorganizationintheirhonour.Since1999,RBChasmadeover14,500grantsanddonatedmorethan$7.2milliontocelebrateouremployees’volunteerefforts.In2008,weexpandedtheprogramtoRBCemployeesglobally,celebratingthecommunityworkofdedicatedRBCemployeevolunteersaroundtheworld.
EmployeegivingNotonlyisRBConeofthelargestprivatesectorcontributorstotheUnitedWayinCanada,wealsohaveoneofthelargestprivatesectoremployeegivingcampaignsinCanada.InNorthAmerica,ouremployeesdonatedmorethan$12.6millionin2008,facilitatedthroughpayrolldeduction,inadditiontodirectgivingandemployee-drivenfundraisingevents.
For more information, visit rbc.com/community
Priorities• Providedonationswithalastingsocialimpact
• Sponsorkeycommunityinitiatives
• Enableemployeestocontribute
2008 Highlights• Contributedmorethan$99milliontocommunitycausesworldwidethroughdonationsofmorethan$51.5millionandanadditional$47.5milliontothesponsorshipofcommunityeventsandnationalorganizations
• LaunchedleadershipandcommunityactiongrantsaspartoftheRBCBlueWaterProject,a$50millionphilanthropiccommitmentover10yearstosupportprogramstoenhanceaccesstocleandrinkingwater,watershedmanagementandwaterconservation
2008 Worldwide RBC donations by geography(C$ millions)
Canada $44.1 International $ 7.4 Total $51.5
2008 RBC donations in Canada by cause
Social services 17.3%Arts and culture 8.9%Civic 9.4%Health 29.3%Education 30%Environment 5.1%