http://www.rns-pdf.londonstockexchange.com/rns/5272H_1-2020-12-3.pdf

                             FOURTH QUARTER 2020
                 
EARNINGS RELEASE

  ROYAL BANK OF CANADA REPORTS FOURTH QUARTER AND 2020 RESULTS
    

All amounts are in Canadian dollars and are based on our audited Annual and unaudited Interim Consolidated Financial Statements for the year and quarter ended October 31, 2020 and related notes prepared in accordance with International Financial Reporting Standards (IFRS). Our 2020 Annual Report (which includes our audited Annual Consolidated Financial Statements and accompanying Management's Discussion & Analysis), our 2020 Annual Information Form and our Supplementary Financial Information are available on our website at: http://www.rbc.com/investorrelations.

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TORONTO, December 2, 2020 - Royal Bank of Canada (RY on TSX and NYSE) today reported net income of $11,437 million for the year ended October 31, 2020, down $1,434 million or 11% from the prior year. Diluted EPS was $7.82, down 11% over the same period. Our consolidated results reflect higher PCL (increased by $2.5 billion from the prior year), as we prudently built reserves given the unprecedented challenges brought on by the COVID-19 pandemic, in addition to the impact of lower interest rates. Lower results in Personal & Commercial Banking and Wealth Management were partially offset by robust earnings in Capital Markets, as well as higher results in Investor & Treasury Services and Insurance.

The PCL on loans ratio of 63 bps increased by 32 bps from the prior year, largely resulting from higher provisions on performing loans due to the impact of the COVID-19 pandemic. The PCL on impaired loans ratio was 24 bps, down 3 bps from the prior year. Our capital position remained robust, with a Common Equity Tier 1 (CET1) ratio of 12.5%, up 40 bps from the prior year (pre-pandemic levels). We also had a strong average Liquidity Coverage Ratio (LCR) of 145%.

 "In what has been an unparalleled year due to the global pandemic, RBC
demonstrated the strength and resilience of our franchise. The combination of
prudent risk management, a strong balance sheet and diversified business
model, and our Purpose-led approach to supporting employees, clients and
communities, defined our success in a challenging operating environment," said
Dave McKay, RBC President and Chief Executive Officer. "Looking ahead, while
it is difficult to predict how the coming year will unfold, RBC has the
strength, stability and operational resilience to face a range of scenarios,
and to continue creating long-term sustainable value. I want to sincerely
thank all RBCers for their unwavering support of our clients, communities and
each other." 

2020 Full Year Business Segment Performance

◾    21% lower earnings in Personal & Commercial Banking, mainly due to higher PCL, primarily attributable to the impact of the COVID-19 pandemic on performing loans. The net increase in costs associated with the COVID-19 pandemic, including additional staff-related costs, also contributed to the decrease. Earnings also reflected a decline in net interest income, as strong average volume growth (+6% in loans and +14% in deposits in Canadian Banking) was more than offset by the impact of lower interest rates and competitive pricing pressures. In addition, we continued our investment in digital solutions to improve our clients' experience and deliver personalized advice as the pandemic amplified client preferences for digital offerings.

◾    15% lower earnings in Wealth Management, primarily due to a gain in the prior year on the sale of the private debt business of BlueBay ($134 million after-tax), a decline in net interest income from lower interest rates partially offset by volume growth, and higher staff-related costs. Lower income from sweep deposits also contributed to the decrease. These factors were partially offset by an increase in earnings from higher average fee-based client assets, primarily reflecting net sales and market appreciation, net of the associated variable compensation.

◾    3% earnings growth in Insurance, largely due to higher favourable investment-related experience, partially offset by unfavourable annual actuarial assumption updates.

◾    13% earnings growth in Investor & Treasury Services, as the prior year included severance and related costs ($83 million after-tax) associated with the repositioning of the business. The repositioning combined with the impact of ongoing efficiency initiatives also resulted in lower staff-related costs in the current year. These factors were partially offset by lower client deposit revenue due to margin compression primarily driven by lower interest rates.

◾    4% earnings growth in Capital Markets, largely due to higher fixed income trading revenue across all regions as elevated market volatility drove increased client activity, and higher debt origination across most regions as the low interest rate environment drove increased primary issuance. Higher equity trading revenue primarily in the U.S. also contributed to the increase. These factors were partially offset by higher PCL mainly attributable to the impact of the COVID-19 pandemic on performing assets, higher taxes due to an increase in the proportion of earnings from higher tax rate jurisdictions, and higher compensation on improved results.

[1]       Earnings per share (EPS).

[2]       Provision for credit losses (PCL).

[3]       Basis points (bps).

[4]       Return on equity (ROE). This measure does not have a standardized meaning under GAAP. For further information, refer to the Key Performance and non-GAAP measures section on page 12 of this Earnings Release.

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• Royal Bank of Canada