merrill lynch canadian banks’ ceo conference 2003customer relationship management and...

Building on our strengthsBuilding on our strengths

Gord NixonPresident & CEO

RBC Financial Group

Merrill LynchCanadian Banks’

CEO Conference 2003

Merrill LynchCanadian Banks’

CEO Conference 2003

TorontoJanuary 22, 2003

“RY” on TSX & NYSE

Good afternoon, everyone.

[Slide 1.] At the advice of our legal counsel, our first slide is a safe harbor statement.

Jamie asked me to speak to you this afternoon about how we are using our strengths in

customer relationship management and cross-selling, which we refer to as cross-

platform leverage.

[Slide 2.] While I will spend some time on that subject, I would also like to review our

performance in relation to our four key priorities and our three key goals. You may

recall that our priorities are strong fundamentals (that is, financial performance),

international expansion (largely in the United States), growth of high-return and high-

P/E multiple businesses and cross-platform leverage (meaning, leveraging the

capabilities of our various platforms to realize cost and revenue synergies).

[Slide 3.] We’ve been consistently meeting the strong fundamentals priority. Our core

ROE continues to surpass the average of our North American peer group and with our

cross-platform leverage initiatives gaining traction the potential exists to further enhance

our relative earnings performance going forward.

[Slide 4.] And our earnings have been very stable relative to that same group, as you

can see on this slide.

[Slide 5.] Part of our success stems from our disciplined approach to risk management.

Since the end of 1999, we’ve recorded the lowest increase in non-accrual loans among

our Canadian peers and our non-accrual loans ratio is also the lowest. This

improvement reflects the fact that, since 1998, we have reduced our corporate loans

outstanding by approximately 35%.

[Slide 6.] Our conservative risk management has also resulted in a provision for credit

losses ratio that was the lowest among the Canadian banks in 2002 and also relatively

consistent over the past three years, despite the difficult credit environment facing our

industry.

[Slide 7.] We are also maintaining a focus on cost management and, last year,

reduced operating expenses (excluding U.S. acquisitions) by 5%. Since 1999, when we

embarked on a serious cost-reduction effort, we have lowered the core efficiency ratio

of RBC Banking by 670 basis points, bringing it down to 59% last year. We are

targeting a ratio in the low 50’s in three years time. We intend to realize cost savings

through technology initiatives such as straight through processing while at the same

time continuing to leverage economies of scale through centralized environments for

managing our sourcing and spending. We’ve developed a scaleable model that allows

us to make additional investments in our sales resources with savings garnered through

streamlining of our back office and service delivery processes. Over the past three

years, nearly half of RBC Banking’s cost base was directed to customer and sales

activities and we expect to increase that number. This should enhance our customer

service, customer satisfaction and top-line revenue growth.

[Slide 8.] Our strong financial performance has led to solid internal capital generation –

$1.8 billion in 2002 after paying out over $1 billion in common share dividends and

almost $100 million in preferred share dividends. We repurchased $764 million of

common shares last year and committed to acquisitions totaling approximately $900

million. In deciding how to deploy our capital, we balance our need for strong capital

ratios and high credit ratings against our desires to grow the business through

acquisitions and investment in our existing businesses, and to enhance returns through

share repurchases and higher dividends. In 2003, we expect to continue to deploy our

internally generated capital through a combination of share repurchases, dividends,

capital investment and targeted acquisitions.

[Slide 9.] In 2002, we generated record net income of $2.9 billion, up 30 per cent from

2001 on a core basis. We also met almost all of our objectives despite ongoing

concerns about global economic growth, financial market uncertainty and geopolitical

tensions. While adjusting our businesses to perform well in the short term, we also

continued to expand our capabilities and take action to position ourselves for sustained

long-term growth and consistent performance. We remain highly committed to our

priority of strong fundamentals and are very focused on managing the balance between

long-term growth and short-term returns.

[Slide 10.] In terms of our 2003 financial objectives, we have increased our EPS

growth target to 10-15% from 5-10% and reduced our revenue growth target to a more

realistic 5-8% from 7-10% last year, when we had benefited from a full year of revenues

at RBC Centura, which was acquired seven months into 2001. These changes reflect

our expectation that the capital markets will pick up slightly in 2003 and cost

management efforts will allow expenses to grow at a lower rate than revenues.

[Slide 11.] We have also modified some of our medium-term goals. We have raised

our dividend payout goal to 35-45% from 30-40%, underscoring our commitment to

rewarding our shareholders. Our payout ratio was 37% in 2002 and we raised our

common share dividends by 10 per cent during the year. We have also increased our

Tier 1 capital ratio goal to 8-8.5% from 8% to make our capital ratios more comparable

to those of other well-capitalized North American banks. Finally, we have raised our

specific provision for credit losses ratio goal to .35-.45% from .30-.40% to reflect the

uncertain economic environment, the growth of our Canadian and U.S. consumer loan

book, which has loss ratios above the earlier goal range, and the expected growth of

our small business and commercial loan portfolios.

[Slide 12.] Turning now to our international expansion priority, we’ve put together a

diversified platform in the U.S. with a focus on retail businesses. Our investment

emphasis has been in Personal & Commercial Banking and Wealth Management –

businesses we know well and in which, over time, we believe we can become

recognized in the U.S. as being best in class. RBC Centura forms the base from which

we are building our personal and commercial banking business. The focus of our

growth efforts will likely be a combination of targeted acquisitions and branch openings

in the Southeast U.S. Eagle Bancshares, acquired last July, and Admiralty Bancorp

(which should close shortly), though both relatively small acquisitions, give us important

footprints in two of America’s highest growth regions – Atlanta and Florida, respectively.

RBC Dain Rauscher forms the foundation on which we are building our wealth

management business. Further wealth management acquisitions will likely be small

additions to our existing business base.

[Slide 13.] These acquisitions have resulted in an increase in the proportion of U.S.

revenues in our revenue mix. In 2002, U.S. revenues were 28% of the total, up from

7% in 2000. We expect this trend to continue and over time a greater proportion to fall

to our bottom line as the costs of acquisitions decline and we continue to enhance

revenues and improve operational efficiency.

[Slide 14.] Our third priority is the growth of high-return and high-P/E multiple

businesses. While our primary focus is on Personal & Commercial Banking and Wealth

Management, all business platforms have selected segments for priority growth.

However, we will invest only in those areas of our core platforms where we see

profitable growth opportunities and reasonable returns on capital. We have also

reduced businesses that utilize a disproportionate amount of capital relative to return

such as corporate lending. [Slide 15.] And finally, we added cross-platform leverage as a strategic priority in 2002

in recognition of the fact that at an integrated financial services company such as RBC

Financial Group, the whole has the potential to be much greater than the sum of the

parts. Cross-platform leverage is about working across our businesses and functions to

grow revenues by sharing best practices and offering our broad array of products and

services in an integrated fashion to our clients. It’s also about cutting costs by

eliminating duplication that arises when businesses and functions operate

autonomously. We are well positioned for cross-selling with our broadly diversified

business mix, strong market positions in most businesses in Canada, sizeable customer

base as well as strengths in customer relationship management and a philosophy of

deepening customer relationships. We have generated strong cross-selling results in

Canada and plan, over time, to pick up momentum on that front in the U.S. as well.

[Slide 16.] Turning to our goals, the first of which is to be recognized as the undisputed

lead provider of integrated financial services in Canada, we rank #1 or #2 in virtually all

of our Canadian businesses and are committed to retaining our strong positions,

particularly in retail businesses, which account for a sizeable share of our total earnings.

We have re-doubled our efforts on this front – increasing the number of sales people in

our branches, improving customer service through better problem resolution and other

initiatives and, re-investing in our network. In the interest of time, I will focus my

discussion on our banking and wealth management businesses, as they are the two we

are most intent on growing.

[Slide 17.] We intend to retain our leadership positions in Canada by continuing to offer

our products and services in an integrated manner, differentiating ourselves from our

competitors. We believe that time is one of the most precious commodities we have

today, and customers will increasingly value the convenience and timesavings garnered

from one-stop financial services shopping. By increasing the degree of integration of

our product and service offering, we can better meet the needs of our customers,

improve customer satisfaction and as a result be rewarded with more of their business.

As I will discuss shortly, we have recently taken steps to improve our ability to deliver

integrated financial solutions to our customers, including overhauling our customer

referral program.

[Slide 18.] Our strong brand name, strong customer relationship management and

customer segmentation capabilities and proven expertise in cost reduction initiatives

and large project management are some of the factors behind our success.

[Slide 19.] A key competitive differentiator for us from our Canadian banking peers is

our CRM capability as this case study conducted by the TowerGroup attests to. The

Direct Marketing Association Financial Services Council also recognized our CRM

capabilities when it named us its Company of the Year in April 2002.

[Slide 20.] We have approximately 11 million banking customers in Canada. Our

customers have different needs depending on their unique situation. Our ability to

identify their unique needs and preferences to create a tailored customer experience is

a key to our success. What we know about our customers gives us insights into their

lifetime value, vulnerability, risk, propensity to buy and their channel preference. We

use this information to develop a tailored strategy for each of our personal and business

banking customers that optimizes our sales effectiveness. We pay extraordinary

attention to our high value and high potential customers.

[Slide 21.] So how do we go about developing a profitable relationship with every

customer? We have a significant amount of information about our customers including

transactional, demographic and attitudinal data. We use this information and our

proprietary decisioning technology to segment our client base based on their needs and

preferences and their current and expected future profitability. This allows us to

develop a personalized strategy for every customer that reflects the correct product mix,

price point and channel preference and that is also profitable to us.

[Slide 22.] To ensure a consistent customer experience, we automate our client

strategies to deliver them consistently across each point of contact. Head office

focuses on defining our client sales strategies, allowing our sales people to focus on

sales and service. For example, the desktops used by our sales people provide them

with a wealth of valuable information about their clients such as their next most likely

purchase. This and other information assists them in delivering the products and

services that best satisfy our customers’ financial needs and preferences. Our sales

effectiveness is also enhanced by automated sales tracking and performance

management.

[Slide 23.] As part of our cross-platform leverage initiative, we recently rolled out a new

and much more robust referral program - RBC Referrals. We expect it will result in

improved revenue growth, efficiency, profitability, client retention and shareholder value

creation. This referral program includes banking, insurance, investments, capital

markets and global services and, in that respect, is much broader than the previous

referral program. It also includes a redefined process for working together, incentives

for our employees to hand off business to another business segment when it’s the right

thing to do for the client, role clarity grids to assist them in understanding the products

and services offered by other business segments and a referral office to help them.

[Slide 24.] Referrals are not new to our sales forces. We have a successful history of

cross-selling products in Canada, having generated almost $17 billion of new business

from referrals within the group between 1997 and 2002. That’s $1.82 of new business

for every dollar of business referred. With a renewed and vigorous commitment

amongst all our partners and platforms, we expect new business generated by referrals

to increase over the next five years.

[Slide 25.] A good example of cross-platform leverage is RBC Investments and RBC

Banking joining forces to deliver a streamlined, efficient financial planning sales force of

over 1,600 working under the brand name RBC Investments Financial Planning. RBC

Investments is providing its expertise in compliance and investment products, whereas

RBC Banking is providing the client base, sales force, business premises, and sales

effectiveness expertise.

[Slide 26.] By focusing on a couple of key customer segments, the Builders and

Borrowers and the Wealth Accumulators, we will be able to better retain and service our

customers throughout their life cycle stages, leading to more revenue and improved

customer loyalty. An estimated $80 to $140 billion (life insurance, real estate, pension

proceeds, financial assets and business assets) will transfer from one generation to the

next annually in Canada over the next 50 years. Our goal is to capture more of these

assets transferred by proactively addressing our clients’ needs.

We have initially targeted approximately 370,000 RBC Royal Bank high-potential clients

and expect that by the end of the 1st quarter of 2003, all of these potential clients will

have been contacted to determine whether the RBC Investments Financial Planning

value proposition is the right one for them. We are planning on initially offering

proprietary products and expanding the product offering to include third party mutual

funds by the end of 2003. The financial planners have aggressive sales targets.

[Slide 27.] Now turning to our second key goal - to be recognized as a best in class

provider of select financial services in the United States. When we embarked on our

U.S. expansion strategy, we did so in a very deliberate manner. We adopted a platform

extension strategy, focusing on businesses where we could become recognized in the

U.S. as a best in class provider, namely, personal and commercial banking and wealth

management. These are businesses in which we have considerable exportable know-

how and in which we feel we possess a competitive advantage. Significant platform

investments were made in 2000 and 2001, with smaller add-on acquisitions in 2002.

We have worked hard at integrating our recent acquisitions, sharing best practices

within and between platforms – all geared to becoming recognized as a best in class

provider over time.

[Slide 28.] Our recent U.S. acquisitions have started to pay off. Net income was $232

million in 2002, up from a loss of $23 million in 2001.

[Slide 29.] This improvement reflects the acquisition of Centura Banks in June 2001,

better performance at RBC Dain Rauscher and the fact that a lot of the upfront

acquisition costs are absorbed in the earlier years of an acquisition. While we are

encouraged by the results to date, we are striving to further improve operating results.

[Slide 30.] With its approximately 800,000 personal and commercial clients, 246 retail

and business branches in 5 Southeastern states and strong national mortgage and

builder finance businesses, RBC Centura provides a solid foundation for growth in retail

and business banking in the fast-growing Southeast U.S. and niche business lines

across the U.S.

[Slide 31.] From a North-South perspective (that is, working between Canada and the

U.S.), RBC Centura has leveraged our Canadian expertise in sales practices,

performance management as well as segment and product management. It realigned

its reporting structure along Personal & Small Business Banking and Commercial

Banking lines and its retail branch model to be consistent with the Canadian structure.

Each business has dedicated sales management committed to rapidly evolving sales

routines to grow revenues and enhance efficiency. And RBC Centura has also

increased the level of specialization of its sales force with the introduction of new

positions such as Account Manager Investments in the Personal & Small Business

segment and industry segment specialists in the Commercial segment. Early gains are

accruing as a result of the adoption of a more focused approach. In the Personal &

Small Business Banking segment, consumer loans were up 7% and scored small

business loans were up 18% for the one-year period ended October 31, 2002. RBC

Centura’s Commercial Markets team acquired 240 new client relationships in 2002, a

31% increase over 2001 and also grew commercial loans by 21% in what was a tough

environment.

RBC Centura has also been collaborating with its Canadian colleagues to build its CRM

information infrastructure and sales automation tools to accelerate revenue growth. The

fact that it will take less than 2 years to build the CRM information infrastructure at RBC

Centura when it took approximately 5 years to develop RBC Royal Bank’s CRM

information infrastructure underscores the benefit of sharing best practices. In terms of

new products, RBC Centura recently introduced two new wrap account products and a

rising rate CD, just to name a few. Sales of the Rising Rate CD, which was introduced

in July 2002, hit $160 million as of October 31, 2002, far surpassing the initial sales goal

of $60 million. What’s important is that it has resulted in over 8,200 new account

openings bringing in over $40 million of new money.

[Slide 32.] In addition to revenue-oriented initiatives, cost benefits are also beginning to

accrue from the centralization of certain aspects of operations and information

technology, sales and functional units. For example, RBC Centura in-bound calls and

branch service support is being handled by RBC Royal Bank’s call center in Moncton,

New Brunswick. This change is not only delivering cost savings but it has also freed up

time at the RBC Centura call center to make out-bound revenue generating calls.

[Slide 33.] On an East-West basis (that is, within the U.S.), RBC Centura has also

been working hard with its sister companies in the U.S. to increase sales revenues by

cross-selling products and services. For example, RBC Centura has been working with

RBC Liberty Insurance to offer insurance solutions to its clients through the recently-

introduced life specialist program. Under this program, a mobile RBC Liberty Insurance

specialist is assigned to approximately 5 RBC Centura branch locations from which they

receive insurance leads. The results to date have been very encouraging with nearly

2,000 referrals in fiscal 2002. Another cross-selling initiative that is yielding favorable

results is the sale of the RBC Mortgage adjustable rate mortgage to RBC Centura

clients. Prior to partnering with RBC Mortgage, RBC Centura did not have a capability

in this area. Since rolling out this product in November 2001, RBC Centura achieved

new mortgage originations totaling $900 million, for the year ended October 31, 2002.

RBC Centura also introduced RBC Dain Rauscher to a number of governmental entities

in the Southeast U.S., which resulted in RBC Dain Rauscher securing a considerable

amount of public sector finance and investment management business. Also, Centura

Securities has been transitioned to RBC Dain Rauscher, with similar plans for RBC

Centura’s trust and asset management groups. These are just a few examples of

cross-selling initiatives that have improved our top-line growth and improved the degree

of integration of our product and service offerings.

[Slide 34.] RBC Centura intends to continue to expand its footprint in the Southeast

U.S. through a combination of branch openings and selective acquisitions. Additional

growth will also come from the expansion of niche business lines such as RBC Builder

Finance and RBC Mortgage.

[Slide 35.] Our acquisition of RBC Dain Rauscher provided us with a wealth

management foundation on which to build. Following the Tucker Anthony Sutro

acquisition, RBC Dain Rauscher has 2,000 financial consultants operating out of 142

branch offices in 39 states and CDN$133 billion of assets under administration. RBC

Dain ranks as the 9th largest full-service brokerage firm in the U.S. based on the number

of financial consultants.

[Slide 36.] The third quarter of 2002 represented the turning point for RBC Dain

Rauscher, which posted a profit of $10 million, reflecting cost-take outs from the Tucker

Anthony Sutro integration and good performance in its fixed income business. The

acquisition and integration of Tucker Anthony Sutro has been very successful.

[Slide 37.] Retention compensation costs are expected to decline significantly in 2003,

and register further reductions over the coming years, which should further enhance

RBC Dain Rauscher’s performance.

[Slide 38.] Similar to RBC Centura, RBC Dain Rauscher is working hard with its

Canadian counterpart to enhance operating performance. RBC Dominion Securities, as

many of you are aware, was an early adopter among the Canadian bank-owned

investment dealers of the more holistic advisory approach to wealth management in

place of the traditional product-oriented transaction approach, contributing to their

broadening and deepening client relationships and increasing fee-based revenues.

RBC Dain Rauscher has adopted this approach and is showing early gains. To date,

approximately 750 RBC Dain Rauscher Financial Consultants have completed the new

wealth management business development course. The top 35% who took this course

last year saw their business increase on average 29%, while those who haven’t yet

taken the course saw their revenues decline on average by 16%. That is a significant

gain.

It is also important to point out that RBC Dain Rauscher also expects to increase its

client base and assets under administration through expansion of the existing branch

office network, recruitment of experienced Financial Consultants and small opportunistic

acquisitions of existing brokerage operations or assets.

[Slide 39.] Our near-term priority for the U.S. continues to be on meeting our operating

targets and adopting best practices to enhance revenues, efficiency and profitability.

Additional acquisitions in the near term will likely be focused on Personal & Commercial

banking, largely in the Southeast U.S. We will only make acquisitions that make sense

from strategic, cultural and financial perspectives.

[Slide 40.] Our third goal is to be recognized as a premier provider of specialized

global financial services. Outside North America, we will focus largely on those

businesses where we are strong globally, have a competitive advantage and can

generate attractive returns. Global custody, global private banking and our global

trading business such as the foreign exchange business are examples of global

businesses that meet our criteria.

[Slide 41.] Our custody business is the largest in Canada with a 46% market share and

the 12th largest globally with assets under administration of C$1.4 trillion. The business

is highly rated by our customers and is very profitable. In foreign exchange, we are

ranked among the top 15 Global FX banks by revenue and #1 in Canada. As for Global

Private Banking, it is a fragmented business that is profitable all the same. We have

private banking operations in more than 100 countries. We have made a number of

niche acquisitions over the years – the most recent of which was Barclays Bank PLC’s

private banking business in the Americas. We intend to continue to grow this business

through additional niche acquisitions, by establishing alliances with other global private

banks and through an open architecture approach to money management.

[Slide 42.] I would like to conclude by saying that our management team is united in its

efforts to grow the company in a disciplined manner, maintain a diversified business

base, continue our strong risk management focus, watch costs, judiciously manage

capital and maintain leadership in our various businesses by winning more of our

customers’ business. We are reasonably pleased with the progress we have made in

customer relationship management and cross-platform leverage and, as we move

forward, we will make greater use of technology and straight through processing to

enhance efficiency, profitability and customer satisfaction.

We also want to continue to perform in the top quartile of North American financial

companies so that we can further generate superior returns and continue to reward our

shareholders.

Thank you for your attention, and I’ll now take your questions.

1

Caution regarding forward-looking statementsCaution regarding forward-looking statements

From time to time, we make written and oral forward-looking statements, included in this presentation, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications, which are made pursuant to the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements with respect to our objectives for 2003, and the medium and long terms, and strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. The words “may,” “could,” “should,” “would,”“suspect,” “outlook,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and words and expressions of similar import are intended to identify forward-looking statements.By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian economy in general and the strength of the local economies within Canada in which we conduct operations; the strength of the United States economy and the economies of other nations in which we conduct significant operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada and the Board of Governors of the Federal Reserve System in the United States; changes in trade policy; the effects of competition in the markets in which we operate; inflation; capital market and currency market fluctuations; the timely development and introduction of new products and services in receptive markets; the impact of changes in the laws and regulations regulating financial services (including banking, insurance and securities); changes in tax laws; technological changes; our ability to complete strategic acquisitions and to integrate acquisitions; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and saving habits; the possible impact on our businesses of international conflicts and other developments including those relating to the war on terrorism; and our anticipation of and success in managing the risks implicated by the foregoing.We caution that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on our behalf.

2

Our key strategic prioritiesOur key strategic priorities

Strong fundamentals

International expansion

Growth of high-return & high-P/E multiple businesses

Cross-platform leverage

3

Strong ROE performance relative to North American peer groupStrong ROE performance relative to North American peer group

17.8%

15.1%16.6%

16.1%

19.3%18.1%

11.8%

15.9%

17.9%

17.5%

13.5%

17.4%

1997 1998 1999 2000 2001 2002

Royal Bank Peer Group

1 selected peer group consists of: Bank of New York, Wells Fargo, PNC Financial, Bank One, JP Morgan Chase, US Bancorp, Wachovia, Bank of America, FleetBoston, KeyCorp, Power Financial, TD Bank, CIBC, Scotiabank, Bank of Montreal

2 full year 2002 core ROE for Canadian banks and 9 months 2002 core ROE for U.S. banks

Core ROE

U.S. GAAP (where available)

1

Priority #1 – Strong fundamentalsPriority #1 – Strong fundamentals

2

4

Priority #1 – Strong fundamentalsPriority #1 – Strong fundamentalsLess earnings volatility than North American peersLess earnings volatility than North American peers

15% 20%29% 32% 33% 34% 37%

65% 66%75% 77%

114%

133% 138%

172%

RBC

Bank o

f Ameri

caBNS

US Ban

corp

Wells F

argo

BMO

Bank o

f New

York

CIBC

J.P. M

organ

Cha

se

PNC Ban

k

KeyCor

p

Bank O

ne TD

FleetB

osto

n

Wacho

via

1 standard deviation of EPS over 15 quarters ended October 31, 2002 for Canadian banks and ended September 30, 2002 for U.S. banks compared to 14 leading North American banks

EPS Volatility1

5

Reputed to have strong credit cultureLowest gross impaired loans (GILs) ratio and lowest growth of GILs of Big 5 Canadian banks

(C$ millions) Growth GILs/loansQ4/99 Q4/02 % $ & BAs-Q4/021

BNS $2,380 $3,987 68% $1,607 2.02%TD $ 709 $2,525 256% $1,816 1.72%BMO $1,092 $2,337 114% $1,245 1.54%CIBC $1,482 $2,275 54% $ 793 1.40%RBC $1,704 $2,288 34% $ 584 1.06%

Strong credit cultureStrong credit culture

Cdn GAAP


1 gross impaired loans as a % of total gross loans and bankers’ acceptances

6

Lowest and consistent loan loss ratioLowest and consistent loan loss ratio

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2000 2001 2002

RBC BMO

TD1

Total provision for credit losses as a % of average loans, BAs and reverse repos

CM2

BNS3

Cdn GAAP


1 Using estimated average annual reverse repo balances based on average of reported quarter-end balances. TD excluding reverse repos: 2002 - 2.24%; 2001 - 0.71%; 2000 - 0.39%.

2 Using estimated average annual BA balances based on average of reported quarter-end balances. CM excluding BA’s: 2002 - 0.94%; 2001 - 0.73%; 2000 - 0.79%

3 BNS including Argentina loans: 2002 - 1.05%.

7

Continuing to watch costsContinuing to watch costs

Operating expenses1 (ex. U.S. acquisitions) down 5% in 2002 versus flat operating revenuesRBC Banking core efficiency ratio down 670 b.p. since 1999 to 59% in 2002 – targeting low 50s in 3 yearsC$580 million taken out of cost base in 1999-2000Continuing cost management focus

� technology and straight through processing

U.S. GAAP


1 operating expenses exclude special items, costs of Stock Appreciation Rights, and certain acquisition expenses such as retention compensation

8

Internal capital generation increased to C$1.8 billion in 2002 from C$1.4 billion in 2001Paid $764 million for common share repurchases in 2002 (bought back 14 million shares) and committed to acquisitions totalling $900 millionCan repurchase an additional 10 million shares up to June 2003Will continue to invest for long-term growth, while balancing need for short-term returns

Generating substantial capital internallyGenerating substantial capital internally

U.S. GAAP


9

2002 objectives1 2002 performance

EPS growth 5 - 10% 27%13% excluding goodwill

amortization in 2001

ROE 17 - 19% 16.6%

Revenue growth 7 - 10% 11%

Expense growth Operating expense growth Op. exp. growth of 8%< operating revenue growth vs. op. rev. growth of 11%

Excl. U.S. acquisitions, op. exp.down 5% and op. rev. flat

Specific provision ratio2 0.45 - 0.55% .51%.49% net of credit derivatives

Capital management2 Maintain strong 9.3% Tier 1 capital ratiocapital ratios 12.7% Total capital ratio

versus medium-term goals of 8%and 11-12%, respectively1 based on core results

2 based on Canadian GAAP financial information

Solid overall financial performance in 2002Solid overall financial performance in 2002

U.S. GAAP


10

2003 objectives1

EPS growth 10 - 15%ROE 17 - 19%Revenue growth 5 – 8%Expense growth Operating expense growth

< operating revenue growthSpecific provision ratio2 0.45 - 0.55%Capital management2 Maintain strong

capital ratios1 based on core results2 based on Canadian GAAP financial information

2003 objectives 2003 objectives

U.S. GAAP


11

3 - 5 year goals1

EPS growth 10-15%+

ROE 20%+

Revenue growth 8 - 10%

Specific provision ratio2 0.35 - 0.45% (was .30-.40%)

Dividend payout ratio 35 - 45% (was 30-40%)

Capital management2Tier 1 capital 8-8.5%

(was 8%)Total capital 11 – 12%

1 based on core results2 based on Canadian GAAP financial information

Aggressive 3-5 year goalsAggressive 3-5 year goals

U.S. GAAP


12

Admiralty Bancorp, Inc.

approx. US$150 millionexpected close Jan. 2003

Business Men’s Assurance Co.approx. US$220 million

expected close subject to regulatory approvals

RBC Banking

RBC Investments

RBC Capital Markets

RBC Insurance

U.S. acquisitions since April 2000

Eagle Bancshares, Inc.US$149 millionJuly 22, 2002

Tucker Anthony SutroUS$594 million

October 31, 2001

Liberty Life Insurance & Liberty Insurance Services

US$580 millionNovember 1, 2000

Prism Financial Corp.Mortgage

OriginationUS$115 millionApril 19, 2000

Centura Banks, Inc.US$2.2 billionJune 5, 2001

Genelco assetsInsurance software and

outsourcingNovember 17, 2000

Dain Rauscher Corp.US$1.2 billion

January 10, 2001

Variable insurance business

Jones & Babson(mutual fund company)

Building sizeable U.S. platformBuilding sizeable U.S. platform

Barclays’ Americas private banking ops.

up to US$90 millionJune 28, 2002

Priority #2 – Expansion outside CanadaPriority #2 – Expansion outside Canada

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2000 revenues

Canadian83%

Other Int’l10%

Canadian62%

Proportion of U.S. revenues growingProportion of U.S. revenues growing

2002 revenues

U.S. 7%

U.S. GAAP

OtherInt’l10%

U.S. 28%

Priority #2 – Expansion outside CanadaPriority #2 – Expansion outside Canada

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Grow high-return or high-P/E businessesGrow high-return or high-P/E businesses

Primarily focusing on personal & commercial banking and wealth management, but all business platforms have select segments for priority growthLower performing or non-strategic business lines to be restructured or soldBuilding solid, highly-profitable U.S. platform a key priority

Priority #3 – Grow high-return or high P/E businessesPriority #3 – Grow high-return or high P/E businesses

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Cross-platform leverageCross-platform leverage

Cross-platform leverage entails working across businesses and functions to:

� grow revenues by sharing best practices and offering products and services in an integrated fashion

� cut costs by eliminating duplicationRBC Financial Group ideally positioned:

� diversified business mix� strong market positions in Canada� sizeable customer base (12+ million)� strengths in CRM

Priority #4 – Cross-platform leveragePriority #4 – Cross-platform leverage

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#1 or #2 in virtually all businesses in CanadaOn retail side, increasing sales people in branches, improving customer service and re-investing in our network

Undisputed lead provider of integrated financial services in CanadaUndisputed lead provider of integrated financial services in Canada

Goal #1 – Undisputed integrated leader in CanadaGoal #1 – Undisputed integrated leader in Canada

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Undisputed lead provider of integrated financial services in CanadaUndisputed lead provider of integrated financial services in Canada

Committed to retaining our leadership positions in all our businessesWill achieve this goal by offering our products and services in an integrated manner to:

� differentiate us from our competitors� offer convenience and time savings to our

customers through one-stop financial services shopping

� better meet the needs of customers and improve customer satisfaction


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Some success factorsSome success factors

Strong brandStrong CRM and customer segmentation capabilitiesProven cost reduction and project management capabilities


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Balanced approach sustains CRM leadership positionBalanced approach sustains CRM leadership position

“An interesting aspect of Royal Bank’sapproach to CRM is that it does reflect a balance among technology, people, and business processes… Theacknowledgement of this reality and the willingness to allocate resources accordingly separates Royal Bank from most other financial services institutions.”

- TowerGroup, January 2001 “CRM Case Study: The Analytics that Power CRM at Royal Bank”


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Creating a tailored customer experience Creating a tailored customer experience

What we know about our customers:� unique needs and preferences� lifetime value, vulnerability, risk, propensity to

buy and channel preferenceWhat we do with this information:

� develop a tailored strategy for every customer� optimize sales effectiveness and customer

contact� pay extraordinary attention to high value and

high potential customers


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Developing profitable relationshipsDeveloping profitable relationships

Use transactional, demographic and attitudinal data on

our clients


Use decisioning technology to segment client base

based on needs and preferences & current and

expected future profitability

To create personalized strategy for each client� correct product mix, price point and channel

preference

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Optimizing sales effectivenessOptimizing sales effectiveness

Automated client strategies to ensure consistent customer experience

� head office focuses on client sales strategies allowing sales people to focus on sales & service

� sales leads are provided to the sales people via their desktops

Sales effectiveness further enhanced by the automation of sales tracking and performance management


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Enhanced referral programEnhanced referral program

“RBC Referrals”� will improve revenue growth, efficiency,

profitability, client retention and shareholder value creation

� all five business segments participating� incentives for employees to refer business � includes role clarity grids to enhance employee

understanding of products and services offered by other segments

� referral office


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Excellent cross-selling results in CanadaExcellent cross-selling results in Canada

RBC has demonstrated cross-sell capability in CanadaCross-selling record

� referrals resulted in new sales of over $16.8 billion between 1997 and 2002

� $1.82 of new externally generated sales for $1 of business referred internally

Expect new business generated from referrals to increase over the next five years


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RBC Investments Financial Planning� streamlined, efficient sales force of over 1,600

accredited financial planners

RBC Investments providing expertise in compliance and investment productsRBC Banking providing client base, sales, force, business premises and sales effectiveness expertise


RBC Investments Financial Planning a prime example of cross-platform leverageRBC Investments Financial Planning a prime example of cross-platform leverage

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Focus on key customer segments - Builders & Borrowers and Wealth Accumulators:

� serve customers through investment life cycle stages

� grow revenues & customer loyalty� enhance customer retention

Extensive client targeting effort – 370,000 clients initiallyInitially launching with proprietary products –third party offerings planned by end of 2003


RBC Investments Financial Planning a prime example of cross-platform leverageRBC Investments Financial Planning a prime example of cross-platform leverage

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Best in class provider of select financial services in the U.S.Best in class provider of select financial services in the U.S.

Focus on growing personal & commercial banking and wealth management

� businesses in which we have exportable know-how and experience

� businesses in which we have a competitive advantage

Goal to become recognized as a best in class provider over time

Goal #2 – Best in class in United StatesGoal #2 – Best in class in United States

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($23)

$232

2001 2002

(C$ millions)

Higher earnings from U.S. acquisitions1Higher earnings from U.S. acquisitions1

U.S. GAAP

1 represents core net income of RBC Centura (includes RBC Mortgage and what was previously SFNB), RBC Liberty Insurance and RBC Dain Rauscher (includes Tucker Anthony Sutro)


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(C$ millions)

Strong contributions from RBC CenturaStrong contributions from RBC Centura

U.S. GAAP

NOTE: 2001 core numbers included 4 months and 3 weeks of results for RBC Centura, 11 months of results for RBC Liberty Insurance and 9 months and 3 weeks of results for RBC Dain Rauscher

1 RBC Centura (acquired in Q3/01) includes RBC Mortgage and what was previously SFNB 2 Includes Tucker Anthony Sutro beginning October 31, 2001

(73)3RBC Dain Rauscher2

$ 21$206RBC Centura1

$ 232

23

2002

$(23)Total U.S. acquisitions

29RBC Liberty

2001


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800,000 personal and commercial clientsRBC Centura

� 246* retail and business branches in five Southeastern states (North Carolina, South Carolina, Virginia, Georgia and Florida)

� strong player in one of the fastest growing banking areas in the U.S.

Strong national niche business lines:� RBC Mortgage – 215 offices in 28 states� RBC Builder Finance – 17 offices in 13 states

*Pending close of Admiralty Bancorp transaction

RBC Centura provides a solid foundation for RBC Banking growthRBC Centura provides a solid foundation for RBC Banking growth


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North-South initiatives delivering revenue and efficiency gainsNorth-South initiatives delivering revenue and efficiency gains

Exporting Canadian expertise to the U.S.� sales practices, performance management, segment and

product management and retail branch model� dedicated sales management and specialized sales forces

Revenue gainsShowing early gains from adoption of Canadian sales approach

� consumer loans up 7%� scored small business loans up 18%� commercial loans up 21% (240 new client relationships)

Success of new products - Rising Rate CD example� surpassed initial sales goal by $100 million in 4 months� 8,200+ new account openings and $40 million of new money


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North-South initiatives delivering revenue and efficiency gainsNorth-South initiatives delivering revenue and efficiency gains

Efficiency gainsCost and efficiency gains accruing from the centralization of certain aspects of RBC Centura operations and information technology, sales and functional units with RBC Royal Bank

� RBC Centura using Canadian call centres for in-bound calls and branch service support


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• recently-introduced life specialist program has resulted in nearly 2,000 referrals in 2002

• offering adjustable rate mortgage to RBC Centura clients

• RBC Centura achieved new mortgage originations totaling $900 million in 2002

• RBC Dain Rauscher introduced to governmental entities in Southeast U.S., resulting in considerable public sector financing and investment management business

East-West initiatives strengthen revenue synergiesEast-West initiatives strengthen revenue synergies


Examples of initiatives

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RBC Centura to continue disciplined growth strategyRBC Centura to continue disciplined growth strategy

Selective acquisitions and branch expansion focused on high growth U.S. SoutheastExpanding national lines of business

� RBC Mortgage� RBC Builder Finance


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RBC Dain Rauscher provides foundation to build on RBC Dain Rauscher provides foundation to build on

RBC Dain Rauscher is 9th largest U.S. full-service brokerage firm by number of financial consultants

� 2,000 financial consultants operating out of 142 branch offices in 39 states

� assets under administration of C$133 billion in approximately 800,000 client accounts


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Net income(C$ millions)

RBC Dain Rauscher benefiting from Tucker Anthony Sutro integrationRBC Dain Rauscher benefiting from Tucker Anthony Sutro integration

U.S. GAAP

$17$10

-$15-$8

-$22-$25

Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02


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(C$ millions)

Retention compensation expenses to fall1Retention compensation expenses to fall1

U.S. GAAP

2001 2002 2003F 2004F 2005F

RBC Capital Markets

RBC Investments

1 estimate based on fiscal Q4/02 C$/US$ exchange rate

$176$158

$87

$53$31


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RBC Dain Rauscher – key growth strategiesRBC Dain Rauscher – key growth strategies

Broaden and deepen client relationships� 750 Financial Consultants have completed

wealth management business development course - already showing strong business gains

Increase client base and AUA through:� expansion of branch office network� recruitment of experienced Financial

Consultants� opportunistic acquisition of existing brokerage

operations or assets


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What next in the U.S.?What next in the U.S.?

Near-term focusMeeting operating targets and adopting best practices to enhance revenues, efficiency and profitabilityAdditional acquisitions will likely focus on personal & commercial banking, largely in the Southeast U.S.


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A premier provider of specialized global financial servicesA premier provider of specialized global financial services

Focus on expanding businesses where we are:

� strong globally� possess a competitive advantage� can generate attractive returns

Global private banking, custody and foreign exchange businesses meet these criteria and are targeted for growth

Goal #3 – Premier provider of specialized global servicesGoal #3 – Premier provider of specialized global services

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Strong global businessesStrong global businesses

Custody business #12 globally, highly-regarded and profitable with AUA of C$1.4 trillionFX business is among top 15 globally, #1 in CanadaGlobal Private Banking in 100+ countries, will expand through targeted acquisitions, alliances and open architecture approach to money management

� i.e. Barclays Bank PLC’s private banking business in the Americas

Goal #3 – Premier provider of specialized global servicesGoal #3 – Premier provider of specialized global services

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ConclusionConclusion

Will maintain clear focus on shareholder value creation through unwavering commitment to:

� disciplined growth� diversification� business leadership� continued vigilant risk management� efficiency improvements � judicious capital management� superior returns

merrill lynch canadian banks’ ceo conference 2003customer relationship management and...

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