Mr. Dave McKay reports

ROYAL BANK OF CANADA REPORTS FIRST QUARTER 2024 RESULTS

Royal Bank of Canada had net income of $3.6-billion for the quarter ended Jan. 31, 2024, up $449-million, or 14 per cent, from the prior year, which included the $1.05-billion impact of the Canada recovery dividend (CRD) and other tax-related adjustments. Diluted EPS was $2.50, up 12% over the same period. Adjusted net income7 and adjusted diluted EPS7 of $4.1 billion and $2.85 were down 5% and 6%, respectively, from the prior year.

Our consolidated results reflect an increase in total PCL of $281 million from a year ago, mainly reflecting higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in Wealth Management. The PCL on loans ratio of 37 bps increased 12 bps from the prior year. The PCL on impaired loans ratio12 was 31 bps, up 14 bps from the prior year as provisions continue to trend upwards, reflecting the impact of higher interest rates and rising unemployment.

Results also reflected the impact of specified items relating to the planned acquisition of HSBC Bank Canada (HSBC Canada), including transaction and integration costs ($265 million before-tax and $218 million after-tax), and management of closing capital volatility ($286 million before-tax and $207 million after-tax). The cost of the Federal Deposit Insurance Corporation (FDIC) special assessment of $159 million before-tax ($115 million after-tax) also impacted results.

Pre-provision, pre-tax earnings7 of $5.2 billion were down $607 million or 11% from last year, mainly due to higher expenses, and lower revenue in Capital Markets, largely reflecting lower trading revenue compared to a strong prior year. These factors were partially offset by higher insurance investment results from favourable investment performance as we repositioned our portfolio for transition to IFRS 17. Results benefitted from higher net interest income driven by solid volume growth, as well as higher fee-based client assets reflecting market appreciation and net sales in Wealth Management.

Compared to last quarter, net income was down 9%, partly reflecting a higher effective tax rate, as results in the prior quarter included the favourable impact of the specified item relating to certain deferred tax adjustments, and higher PCL on impaired loans. Lower results in Corporate Support and Personal & Commercial Banking were partially offset by higher results in Wealth Management, Capital Markets and Insurance. Adjusted net income7 was up 8% over the same period. Pre-provision, pre-tax earnings7 were up 12% as higher revenue more than offset expense growth.

Our capital position remains robust, with a CET1 ratio6 of 14.9%, supporting solid volume growth and $1.9 billion in common share dividends.

"As our first quarter results show, RBC has the right strategy in place to grow today while also generating long-term value for shareholders. Underpinned by our balance sheet strength, prudent approach to risk management and diversified business model, we delivered solid, client-driven volume growth and a continued focus on expense control. As we look towards the completion of our planned HSBC Canada acquisition, we remain focused on being a trusted advisor to clients through the delivery of new and differentiated banking experiences." - Dave McKay, President and Chief Executive Officer of Royal Bank of Canada

Personal & Commercial Banking

Net income of $2,061 million decreased $65 million or 3% from a year ago, primarily attributable to higher PCL and non-interest expenses. These factors were partially offset by higher net interest income reflecting average volume growth of 9% in deposits (including 11% in personal deposits) and 5% in loans (including double-digit growth in business lending and credit cards of 14% and 13%, respectively) in Canadian Banking, and higher spreads.

Compared to last quarter, net income decreased $30 million or 1%, primarily attributable to higher PCL. This was largely offset by lower non-interest expenses, higher card service revenue, as well as higher net interest income reflecting average volume growth of 1% and higher spreads in Canadian Banking.

Wealth Management

Net income of $606 million decreased $224 million or 27% from a year ago, mainly due to the cost of the FDIC special assessment of $159 million before-tax ($115 million after-tax) in U.S. Wealth Management (including City National) in the current quarter. Higher variable compensation commensurate with increased commissionable revenue, higher staff costs and professional fees, largely reflecting continued investments in the operational infrastructure of City National, and lower net interest income also contributed to the decrease. These factors were partially offset by higher fee-based client assets reflecting market appreciation and net sales.

Compared to last quarter, net income increased $391 million, as last quarter reflected the impact of the specified item relating to impairment losses on our interest in an associated company and legal provisions in U.S. Wealth Management (including City National). These factors were partially offset by the cost of the FDIC special assessment, in the current quarter, as noted above. U.S. Wealth Management (including City National) results also included the impact of releases of provisions on performing loans in the current quarter, as compared to provisions taken last quarter.

Insurance

Net income of $220 million increased $153 million from a year ago, primarily due to higher insurance investment result from favourable investment performance as we repositioned our portfolio for the transition to IFRS 17. The current period also benefitted from favourable market conditions. The results in the prior period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.

Compared to last quarter, net income increased $123 million, as the prior quarter included the impact of unfavourable annual actuarial assumption updates in insurance service result. Insurance investment result increased largely from favourable investment performance as we repositioned our portfolio for the transition to IFRS 17. The current period also benefitted from favourable market conditions. The results in the prior period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.

Capital Markets

Net income of $1,154 million decreased $87 million or 7% from a year ago, primarily driven by lower revenue in Global Markets compared to stronger results in the prior year and higher PCL. These factors were partially offset by lower taxes reflecting changes in earnings mix.

Compared to last quarter, net income increased $167 million or 17%, mainly due to higher revenue in Global Markets, largely driven by higher fixed income revenue across most regions. These factors were partially offset by higher taxes. ________________________________________ 13 This ratio is calculated by dividing CET1 by RWA, in accordance with OSFI's Basel III CAR guideline. 14 These are non-GAAP measures. For further information, including a reconciliation, refer to the Key performance and non-GAAP measures section on pages 3 to 5 of this Earnings Release.

Corporate Support

Net loss was $459 million for the current quarter, primarily due to the after-tax impact of transaction and integration costs of $218 million and the after-tax impact of management of closing capital volatility of $207 million, both of which are related to the planned acquisition of HSBC Canada and treated as specified items.

Net income was $549 million in the prior quarter, primarily due to a specified item relating to certain deferred tax adjustments of $578 million, as well as a favourable impact from tax-related items. These factors were partially offset by the after-tax impact of transaction and integration costs of $167 million relating to the planned acquisition of HSBC Canada, which is treated as a specified item.

Net loss was $1,131 million in the prior year, primarily due to the impact of the CRD and other tax related adjustments of $1,050 million, which is a specified item. Asset/liability management activities and residual unallocated items also contributed to the net loss.

Capital, Liquidity and Credit Quality

Capital - As at January 31, 2024, our CET1 ratio15 was 14.9%, up 40 bps from last quarter, mainly reflecting net internal capital generation, the favourable impact of fair value OCI adjustments and share issuances under the DRIP. These factors were partially offset by RWA growth (excluding FX) and the net impact of regulatory updates.

Liquidity - For the quarter ended January 31, 2024, the average LCR16 was 132%, which translates into a surplus of approximately $94 billion, compared to 131% and a surplus of approximately $91 billion in the prior quarter. Average LCR16 remained relatively stable from the prior quarter as increased wholesale funding volumes and deposits were largely offset by on-balance sheet securities and loan growth.

The Net Stable Funding Ratio17 (NSFR) as at January 31, 2024 was 113%, which translates into a surplus of approximately $112 billion, compared to 113% and a surplus of approximately $109 billion in the prior quarter. NSFR remained relatively stable from the previous quarter as lower funding requirements for loans and securities financing transactions were largely offset by additional funding requirements on securities.

Credit Quality

Q1 2024 vs. Q1 2023

Total PCL increased $281 million or 53% from a year ago, mainly reflecting higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in Wealth Management. The PCL on loans ratio increased 12 bps. The PCL on impaired loans ratio of 31 bps increased 14 bps.

PCL on performing loans decreased $40 million or 23%, mainly due to releases in the current quarter in U.S. Wealth Management (including City National), largely driven by favourable changes to our macroeconomic forecast, partially offset by unfavourable changes in credit quality, as compared to provisions taken last year.

PCL on impaired loans increased $328 million, primarily due to higher provisions in our Canadian Banking portfolios and Capital Markets, mainly in the real estate and related sector.

Q1 2024 vs. Q4 2023

Total PCL increased $93 million or 13% from last quarter, mainly due to higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in U.S. Wealth Management (including City National). The PCL on loans ratio increased 3 bps. The PCL on impaired loans ratio increased 6 bps.

PCL on performing loans decreased $61 million or 31%, mainly due to releases in the current quarter as compared to provisions in the prior quarter in U.S. Wealth Management (including City National) and lower provisions in Capital Markets, both of which were largely due to favourable changes to our macroeconomic forecast, partially offset by unfavourable changes in credit outlook. These factors were partially offset by higher provisions in our Canadian Banking portfolios, mainly due to favourable changes to our macroeconomic forecast in the prior quarter as compared to unfavourable changes this quarter, partially offset by lower unfavourable changes in credit quality.

PCL on impaired loans increased $146 million or 27%, primarily due to higher provisions in our Canadian Banking portfolios.

ACCESS TO QUARTERLY RESULTS MATERIALS

Interested investors, the media and others may review this quarterly Earnings Release, quarterly results slides, supplementary financial information and our Q1 2024 Report to Shareholders at rbc.com/investorrelations.

Quarterly conference call and webcast presentation

Our quarterly conference call is scheduled for February 28, 2024 at 8:00 a.m. (EDT) and will feature a presentation about our first quarter results by RBC executives. It will be followed by a question and answer period with analysts. Interested parties can access the call live on a listen-only basis at rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (416-340-2217 or 866-696-5910, passcode 4255087#). Please call between 7:50 a.m. and 7:55 a.m. (EDT).

Management's comments on results will be posted on our website shortly following the call. A recording will be available by 5:00 p.m. (EDT) from February 28, 2024 until May 30, 2024 at rbc.com/investorrelations/quarterly-financial-statements.html or by telephone (905-694-9451 or 800-408-3053, passcode 7594177#).

ABOUT RBC

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 94,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada's biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.

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