Securities – Investment, net of applicable allowance; Loans – RetailDeposits – Business and government; Deposits – PersonalSecurities – Investment, net of applicable allowance; Loans – RetailDeposits - Business and governmentDeposits – Business and government; Deposits – PersonalSecurities – Investment, net of applicable allowance; Loans – RetailDeposits – Business and governmentSecurities – Investment, net of applicable allowance; Loans – Retail0.01000.01000.00500.00500.01000.01000.0100P5YP3Y000.01000.01000.00500.00500.01000.0100P1YP1Y0Securities – Investment, net of applicable allowance; Loans – Retail; Loans – WholesaleDeposits - Business and government; Subordinated debenturesSecurities – Investment, net of applicable allowance; Loans – Retail; Loans – WholesaleDeposits – Business and government; Subordinated debentures
Exhibit 2
Management’s Discussion and Analysis
 
Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the fiscal year ended October 31, 2021, compared to the preceding fiscal year. This MD&A should be read in conjunction with our 2021 Annual Consolidated Financial Statements and related notes and is dated November 30, 2021. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise noted.
 
Additional information about us, including our 2021 Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on the Canadian Securities Administrators’ website at sedar.com and on the EDGAR section of the United States (U.S.) Securities and Exchange Commission’s (SEC) website at sec.gov.
 
Information contained in or otherwise accessible through the websites mentioned herein does not form part of this report. All references in this report to websites are inactive textual references and are for your information only.
 
 
 
Table of contents
 
 
 
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123
 
 
 
 
 
Caution regarding forward-looking statements
 
From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the
United States Private Securities Litigation Reform Act of 1995
and any applicable Canadian securities legislation. We may make forward-looking statements in this 2021 Annual Report, in other filings with Canadian regulators or the SEC, in other reports to shareholders, and in other communications. Forward-looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, climate related goals, the Economic, market, and regulatory review and outlook for Canadian, U.S., European and global economies, the regulatory environment in which we operate, the Strategic priorities and Outlook sections for each of our business segments, the risk environment including our credit risk, market risk, liquidity and funding risk, and the potential continued impacts of the coronavirus (COVID-19) pandemic on our business operations, financial results, condition and objectives and on the global economy and financial market conditions and includes our President and Chief Executive Officer’s statements. The forward-looking information contained in this document is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “plan” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “should”, “could” or “would”.
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved. We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of which can be difficult to predict – include: credit, market, liquidity and funding, insurance, operational, regulatory compliance (which could lead to us being subject to various legal and regulatory proceedings, the potential outcome of which could include regulatory restrictions, penalties and fines), strategic, reputation, competitive, legal and regulatory environment, and systemic risks and other risks discussed in the risk sections and Impact of COVID-19 pandemic section of this 2021 Annual Report including business and economic conditions, information technology and cyber risks, environmental and social risk (including climate change), digital disruption and innovation, Canadian housing and household indebtedness, geopolitical uncertainty, privacy, data and third-party related risks, regulatory changes, culture and conduct, the business and economic conditions in the geographic regions in which we operate, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and the emergence of widespread health emergencies or public health crises such as pandemics and epidemics, including the COVID-19 pandemic and its impact on the global economy, financial market conditions and our business operations, and financial results, condition and objectives. In addition, as we work to advance our climate goals, external factors outside of RBC’s reasonable control may act as constraints on their achievement, including varying decarbonization efforts across economies, the need for thoughtful climate policies around the world, more and better data, reasonably supported methodologies, technological advancements, the evolution of consumer behaviour, the challenges of balancing interim emissions goals with an orderly and just transition, and other significant considerations such as legal and regulatory obligations.
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Material economic assumptions underlying the forward-looking statements contained in this 2021 Annual Report are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook headings. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.
Additional information about these and other factors can be found in the risk sections and Impact of COVID-19 pandemic section of this 2021 Annual Report.
 
Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            13

Table of Contents
 
Overview and outlook
 
 
 
Selected financial and other highlights                
 
                          
 
 
 
 
Table 1  
 
 
 
 
(Millions of Canadian dollars, except per share, number of and percentage amounts)
 
2021
    2020    
 
2021 vs. 2020
Increase (decrease)
 
Total revenue
 
$
49,693
 
  $ 47,181    
$
2,512
 
 
 
5.3%
 
Provision for credit losses (PCL)
 
 
(753
    4,351    
 
(5,104
 
 
(117.3)%
 
Insurance policyholder benefits, claims and acquisition expense (PBCAE)
 
 
3,891
 
    3,683    
 
208
 
 
 
5.6%
 
Non-interest expense
 
 
25,924
 
    24,758    
 
1,166
 
 
 
4.7%
 
Income before income taxes
 
 
20,631
 
    14,389    
 
6,242
 
 
 
43.4%
 
Net income
 
$
16,050
 
  $ 11,437    
$
4,613
 
 
 
40.3%
 
Segments – net income
                               
Personal & Commercial Banking
 
$
7,847
 
  $ 5,087    
$
2,760
 
 
 
54.3%
 
Wealth Management
(1)
 
 
2,626
 
    2,154    
 
472
 
 
 
21.9%
 
Insurance
 
 
889
 
    831    
 
58
 
 
 
7.0%
 
Investor & Treasury Services
 
 
440
 
    536    
 
(96
 
 
(17.9)%
 
Capital Markets
 
 
4,187
 
    2,776    
 
1,411
 
 
 
50.8%
 
Corporate Support
(1)
 
 
61
 
    53    
 
8
 
 
 
n.m.
 
Net income
 
$
16,050
 
  $ 11,437    
$
4,613
 
 
 
40.3%
 
Selected information
                               
Earnings per share (EPS) – basic
 
$
11.08
 
  $ 7.84    
$
3.24
 
 
 
41.3%
 
                                          – diluted
 
 
11.06
 
    7.82    
 
3.24
 
 
 
41.4%
 
Return on common equity (ROE)
(2
)
 
 
18.6%
      14.2%    
 
n.m.
   
 
440 bps
 
Average common equity
(2)
 
$
84,850
 
  $ 78,800    
$
6,050
 
 
 
7.7%
 
Net interest margin (NIM) – on average earning assets, net
(3
)
 
 
1.48%
      1.55%    
 
n.m.
   
 
(7) bps
 
PCL on loans as a % of average net loans and acceptances
 
 
(0.10)%
 
    0.63%    
 
n.m.
   
 
(73) bps
 
PCL on performing loans as a % of average net loans and acceptances
 
 
(0.20)%
 
    0.39%    
 
n.m.
   
 
(59) bps
 
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.10%
      0.24%    
 
n.m.
   
 
(14) bps
 
Gross impaired loans (GIL) as a % of loans and acceptances
 
 
0.31%
      0.47%    
 
n.m.
   
 
(16) bps
 
Liquidity coverage ratio (LCR)
(4)
 
 
123%
      145%    
 
n.m.
   
 
(2200) bps
 
Net stable funding ratio (NSFR)
(5)
 
 
116%
      n.a.    
 
n.a.
   
 
n.a.
 
Capital ratios and Leverage ratio
(6)
                               
Common Equity Tier 1 (CET1) ratio
 
 
13.7%
      12.5%    
 
n.m.
   
 
120 bps
 
Tier 1 capital ratio
 
 
14.9%
      13.5%    
 
n.m.
   
 
140 bps
 
Total capital ratio
 
 
16.7%
      15.5%    
 
n.m.
   
 
120 bps
 
Leverage ratio
 
 
4.9%
      4.8%    
 
n.m.
   
 
10 bps
 
Selected balance sheet and other information
(7)
                               
Total assets
 
$
  1,706,323
 
  $ 1,624,548    
$
81,775
 
 
 
5.0%
 
Securities, net of applicable allowance
 
 
284,724
 
    275,814    
 
8,910
 
 
 
3.2%
 
Loans, net of allowance for loan losses
 
 
717,575
 
    660,992    
 
56,583
 
 
 
8.6%
 
Derivative related assets
 
 
95,541
 
    113,488    
 
(17,947
 
 
(15.8)%
 
Deposits
 
 
1,100,831
 
    1,011,885    
 
88,946
 
 
 
8.8%
 
Common equity
 
 
91,983
 
    80,719    
 
11,264
 
 
 
14.0%
 
Total risk-weighted assets
 
 
552,541
 
    546,242    
 
6,299
 
 
 
1.2%
 
Assets under management (AUM)
(3)
 
 
1,008,700
 
    843,600    
 
165,100
 
 
 
19.6%
 
Assets under administration (AUA)
(3)
,
(8)
 
 
6,347,300
 
    5,891,200    
 
456,100
 
 
 
7.7%
 
Common share information
                               
Shares outstanding (000s) – average basic
 
 
1,424,343
 
    1,423,915    
 
428
 
 
 
0.0%
 
                                           – average diluted
 
 
1,426,735
 
    1,428,770    
 
(2,035
 
 
(0.1)%
 
                                           – end of period
 
 
1,424,525
 
    1,422,473    
 
2,052
 
 
 
0.1%
 
Dividends declared per common share
 
$
4.32
 
  $ 4.29    
$
0.03
 
 
 
0.7%
 
Dividend yield
(3)
 
 
3.8%
      4.7%    
 
n.m.
   
 
(90) bps
 
Dividend payout ratio
(3)
 
 
39%
      55%    
 
n.m.
   
 
(1600) bps
 
Common share price (RY on TSX)
(9)
 
$
128.82
 
  $ 93.16    
$
35.66
 
 
 
38.3%
 
Market capitalization (TSX)
(9)
 
 
183,507
 
    132,518    
 
50,989
 
 
 
38.5%
 
Business information
(number of)
                               
Employees (full-time equivalent) (FTE)
 
 
85,301
 
    83,842    
 
1,459
 
 
 
1.7%
 
Bank branches
 
 
1,295
 
    1,329    
 
(34
 
 
(2.6)%
 
Automated teller machines (ATMs)
 
 
4,378
 
    4,557    
 
(179
 
 
(3.9)%
 
Period average US$ equivalent of C$1.00
(10)
 
$
0.796
 
  $ 0.744    
$
0.052
 
 
 
7.0%
 
Period-end US$ equivalent of C$1.00
 
$
0.808
 
  $ 0.751    
$
0.057
 
 
 
7.5%
 
 
 
(1)
Effective Q4 2021, gains (losses) on economic hedges of our U.S. share-based compensation plans, which are reflected in revenue, and related variability in share-based compensation expense driven by changes in the fair value of liabilities relating to our U.S. share-based compensation plans have been reclassified from our Wealth Management segment to Corporate Support. Comparative amounts have been reclassified to conform with this presentation.
(2)
Average amounts are calculated using methods intended to approximate the average of the daily balances for the period. This includes average common equity used in the calculation of ROE. For further details, refer to the Key performance and non-GAAP measures section.
(3)
See Glossary for composition of this measure.
(4)
LCR is the average for the three months ended for each respective period and is calculated in accordance with the Office of the Superintendent of Financial Institutions’ (OSFI) Liquidity Adequacy Requirements (LAR) guidance. For further details, refer to the Liquidity and funding risk section.
(5)
Beginning in Q1 2021, OSFI requires Canadian Domestic Systemically Important Banks (D-SIBs) to disclose the NSFR on a prospective basis. The NSFR is calculated in accordance with OSFI’s Liquidity Adequacy Requirements (LAR) guideline. For further details, refer to the Liquidity and funding risk section.
(6)
Capital ratios are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline and the Leverage ratio is calculated using OSFI’s Leverage Requirements (LR) guideline.
(7)
Represents year-end spot balances.
(8)
AUA includes $15 billion and $3 billion (2020 – $16 billion and $7 billion) of securitized residential mortgages and credit card loans, respectively.
(9)
Based on TSX closing market price at period-end.
(10)
Average amounts are calculated using month-end spot rates for the period.
n.a.
not applicable
n.m.
not meaningful
 
14             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
 
About Royal Bank of Canada
 
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 87,000+ 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 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
Our business segments are described below.
 
 
Personal &
Commercial Banking
 
Provides a broad suite of financial products and services in Canada, the Caribbean and the U.S. Our commitment to building and maintaining deep and meaningful relationships with our clients is underscored by the breadth of our product suite, our depth of expertise, and the features of our digital solutions.
     
Wealth
Management
 
Serves affluent, high net worth (HNW) and ultra-high net worth (UHNW) clients from our offices in key financial centres mainly in Canada, the U.S., the United Kingdom (U.K.), Europe, and Asia. We offer a comprehensive suite of investment, trust, banking, credit and other advice-based solutions. We also provide asset management products to institutional and individual clients through our distribution channels and third-party distributors.
     
Insurance
 
Offers a wide range of life, health, home, auto, travel, wealth, annuities, reinsurance advice and solutions, as well as business insurance solutions, to individual, business and group clients.
     
 
Investor & Treasury
Services
 
Provides asset servicing, custody, payments and treasury services to financial and other investors worldwide. Trusted with over $4 trillion in assets under administration, and with offices in 16 countries in North America, Europe, the U.K., and Asia-Pacific, our focus is on safeguarding client assets and simplifying our clients’ operations in support of their growth.
     
Capital Markets
 
Provides expertise in advisory & origination, sales & trading, and lending & financing to corporations, institutional investors, asset managers, private equity firms and governments globally. We serve clients from 58 offices in 14 countries across North America, the U.K. & Europe, and Australia, Asia & other regions.
     
Corporate Support
 
Corporate Support consists of Technology & Operations, which provides the technological and operational foundation required to effectively deliver products and services to our clients, Functions, which includes our finance, human resources, risk management, internal audit and other functional groups, as well as our Corporate Treasury function.
 
 
Vision and strategic goals
 
Our business strategies and actions are guided by our vision,
“To be among the world’s most trusted and successful financial institutions.”
Our three strategic goals are:
 
In Canada, to be the undisputed leader in financial services;
 
In the U.S., to be the preferred partner to corporate, institutional and high net worth clients and their businesses; and
 
In select global financial centres, to be a leading financial services partner valued for our expertise.
For our progress in 2021 against our business strategies and strategic goals, refer to the Business segment results section.
 
 
Economic, market and regulatory review and outlook – data as at November 30, 2021
 
The predictions and forecasts in this section are based on information and assumptions from sources we consider reliable. If this information or these assumptions are not accurate, actual economic outcomes may differ materially from the outlook presented in this section.
Economic and market review and outlook
While the global economic recovery has continued, momentum has waned amid ongoing uncertainty regarding the extent and duration of the impacts of the COVID-19 pandemic. Reopening of economies and the significant fiscal and monetary policy stimulus put in place to support the recovery are contributing to stronger GDP growth and improved labour market conditions globally, though this remains uneven. Although increasing vaccination rates are expected to support a continued economic recovery, exceptional government support programs have begun to wind down, and uncertainty remains regarding the emergence and progression of new variants of COVID-19 and the potential impact of vaccine hesitancy. Supply chain disruptions, rising business input costs, and labour shortages are also limiting the pace of further improvement, particularly in goods-producing industries, and adding to rising inflation concerns.
Canada
Canadian GDP is expected to increase by 5.1% in calendar 2021 following a 5.2% contraction in calendar 2020. Activity in high-contact service sectors like restaurants and accommodations improved over the summer as provincial economies reopened, although travel-related industries remain depressed relative to pre-pandemic levels. Output on the goods-producing side of the economy is being constrained by ongoing supply chain disruptions. Consumer price growth has accelerated as the economy
 
Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            15

Table of Contents
reopened, and higher business input costs driven by rising demand and supply chain disruptions are threatening further increases at above pre-pandemic rates through calendar 2022. Although the unemployment rate remained above pre-pandemic levels at 6.7% in October, labour markets have improved substantially since the onset of the COVID-19 pandemic and are expected to continue to improve into 2022. While government support programs have begun to wind down, household purchasing power continues to be supported by large amounts of savings. An improved economic growth backdrop and above-target inflation rates are expected to prompt the Bank of Canada (BoC) to begin raising interest rates in calendar 2022. GDP is expected to increase a further 4.3% in calendar 2022. Despite substantial improvement to date, the economy has yet to fully recover from the impacts of the pandemic, particularly in the high-contact and travel service sectors.
U.S.
U.S. GDP is expected to increase 5.5% in calendar 2021 after a 3.4% contraction in calendar 2020. The pace of the economic recovery slowed over the summer amid ongoing supply chain disruptions and the continued spread of COVID-19 in some regions. While employment remains well below pre-pandemic levels, labour markets have continued to improve with the unemployment rate declining to 4.6% in October, down from 6.9% a year earlier. Consumer spending on goods has declined from elevated levels in the spring of 2021 but spending on services has increased as spending rotates away from merchandise and back to leisure and hospitality services that have been in many cases unavailable through the pandemic. Households have accumulated substantial savings, in part due to exceptional government income transfers, to support a further recovery in spending as the virus threat continues to ease. Consumer prices have increased sharply as the economy has re-opened. Higher business input costs and expected further growth in household demand are increasing the risk that inflation growth will persist at rates above pre-pandemic levels for longer than expected. The Federal Reserve (Fed) has committed to maintaining extraordinary policy support until the economic slack is fully absorbed and the labour market has recovered. The Fed is expected to begin the process of raising interest rates in calendar 2022.
Europe
Euro area GDP is expected to rise by 5.2% in calendar 2021 following a 6.5% drop in calendar 2020, amid lifting of most containment measures across member states. Similarly, U.K. GDP is projected to rise by 7.1% in calendar 2021 after a larger 9.7% decline in 2020. Labour market conditions also improved throughout the year, both in the U.K. and Euro area. While labour shortages and supply chain challenges continue to curtail businesses’ abilities to increase production to meet rising demand, leading to inflation concerns, a further economic rebound in both the Euro area and the U.K. is expected in calendar 2022, though likely at a slower pace relative to 2021 in light of these challenges. In the U.K., the Bank of England is expected to begin raising interest rates before the end of calendar 2021, while the European Central Bank (ECB) is expected to hold policy rates through calendar 2022.
Financial markets
Government bond yields remain low but have risen in the latter half of calendar 2021 as the global economic recovery has continued and inflation rates have risen. Equity markets have broadly continued to improve, supported by the positive economic outlook, and prices for some raw materials, including crude oil, have increased to well above pre-pandemic levels reflecting limited supply and rising demand as the virus threat eases globally.
Regulatory environment
We continue to monitor and prepare for regulatory developments and changes in a manner that seeks to ensure compliance with new requirements, while mitigating adverse business or financial impacts. Such impacts could result from new or amended laws or regulations and the expectations of those who enforce them. A high level summary of the key regulatory changes that have the potential to increase or decrease our costs and the complexity of our operations is included in the Legal and regulatory environment risk section of this 2021 Annual Report. A summary of the additional regulatory changes instituted by governments globally and by OSFI in response to the COVID-19 pandemic are included in the Impact of COVID-19 pandemic and Capital management sections of this 2021 Annual Report.
For a discussion on risk factors resulting from these and other developments which may affect our business and financial results, refer to the risk sections of this 2021 Annual Report. For further details on our framework and activities to manage risks, refer to the Impact of COVID-19 pandemic, risk and Capital management sections of this 2021 Annual Report.
 
 
Defining and measuring success through total shareholder returns
 
Our focus is to maximize total shareholder returns (TSR) through the achievement of top half performance compared to our global peer group over the medium-term (3-5 years), which we believe reflects a longer-term view of strong and consistent financial performance.
Maximizing TSR is aligned with our three strategic goals discussed earlier and we believe represents the most appropriate measure of shareholder value creation. TSR is a concept used to compare the performance of our common shares over a period of time, reflecting share price appreciation and dividends paid to common shareholders. The absolute size of TSR will vary depending on market conditions, and the bank’s position reflects the market’s perception over a period of time of our overall performance relative to our peers.
Financial performance objectives are used to measure our performance against our medium-term TSR objectives and are used as goals as we execute against our strategic priorities. We review and revise these financial performance objectives as economic, market and regulatory environments change.
 
16             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
The following table provides a summary of our 3-year and 5-year performance against our medium-term financial performance objectives:
 
 
Financial performance compared to our medium-term objectives
 
 
 
Table 2  
 
Medium-term objectives
(1)
      
3-year
 
(2)
    
 
    5-year 
(2)
 
Diluted EPS growth of 7% +
   
 
10%
 
  
 
10%
 
ROE of 16% +
 
        
 
 
16.5%
 
  
 
16.8%
 
Strong capital ratio (CET1)
(3)
   
 
12.8%
 
  
 
12.1%
 
Dividend payout ratio 40% – 50%
 
 
 
 
47%
 
  
 
46%
 
 
(1)   A medium-term (3-5 year) objective is considered to be achieved when the performance goal is met in either a 3- or 5-year period. These objectives assume a normal business environment and our ability to achieve them in a period may be adversely affected by extraordinary developments such as the COVID-19 pandemic and the current low interest rate environment.
(2)   Diluted EPS growth is calculated using a Compound Annual Growth Rate (CAGR). ROE, CET1 and dividend payout ratio are calculated using an average.
(3)   For further details on the CET1 ratio, refer to the Capital management section.
Our 3-year and 5-year medium-term financial performance objectives will remain unchanged in fiscal 2022.
We compare our TSR to that of a global peer group approved by our Board of Directors (the Board). The global peer group consists of the following 9 financial institutions:
 
Canadian financial institutions:
Bank of Montreal, Canadian Imperial Bank of Commerce, Manulife Financial Corporation, National Bank of Canada, The Bank of Nova Scotia, and Toronto-Dominion Bank.
 
U.S. banks:
JPMorgan Chase & Co. and Wells Fargo & Company.
 
International banks:
Westpac Banking Corporation.
 
 
Medium-term objectives – 3- and 5-year TSR vs. peer group average
 
 
 
Table 3  
 
    
3-year TSR 
(1)
    
 
5-year TSR 
(1)
 
Royal Bank of Canada
    16%        13%  
 
    Top half        Top half  
Peer group average (excluding RBC)
    14%        12%  
 
(1)   The 3- and 5-year annualized TSR are calculated based on our common share price appreciation as per the TSX closing market price plus reinvested dividends for the period October 31, 2018 to October 31, 2021 and October 31, 2016 to October 31, 2021.
 
 
Common share and dividend information
 
 
 
Table 4  
 
For the year ended October 31
  
2021
     2020      2019      2018      2017  
Common share price (RY on TSX) – close, end of period
  
$
128.82
 
   $ 93.16      $ 106.24      $ 95.92      $ 100.87  
Dividends paid per share
  
 
4.32
 
     4.26        4.00        3.70        3.40  
Increase (decrease) in share price
  
 
38.3%
 
     (12.3)%        10.8%        (4.9)%        20.4%  
Total shareholder return
  
 
43.8%
 
     (8.4)%        15.2%        (1.0)%        25.0%  
 
 
Impact of COVID-19 pandemic
 
On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic. The breadth and depth of the impact of the COVID-19 pandemic on the global economy and financial markets has continued to evolve with disruptive effects in countries in which we operate and beyond, while also contributing to increased market volatility and changes to the macroeconomic environment. In addition, the COVID-19 pandemic has continued to affect our employees, clients and communities, with resultant impacts on our operations, financial results and present and future risks to our business.
Measures to contain the spread of COVID-19, including business closures, social distancing protocols, travel restrictions, school closures, quarantines, and restrictions on gatherings and events, have been widespread. These measures have had and continue to have extensive implications for the global economy, including the pace and magnitude of recovery, as well as on related market functions, unemployment rates, inflation, fiscal and monetary policies and supply chains. As the COVID-19 pandemic evolves, including through the emergence and progression of new variants of COVID-19 in different regions, governments continue to adjust their response and approach to the pandemic. While rising vaccination rates have supported a substantial or full easing of containment measures in some regions, progress towards re-opening has been accompanied by resurgences in the spread of COVID-19 and the re-imposition of restrictions in other regions. Consequently, the extent of containment measures and progress towards reopening continues to vary and fluctuate across regions. Despite positive developments, uncertainty remains regarding new variants of COVID-19, the potential impact of vaccine hesitancy, and global vaccine supply and availability, including uneven vaccine access across regions. All of these factors contribute to the uncertainty regarding the timing of a full recovery. Moreover, the COVID-19 pandemic, the containment measures and the phased reopening approach taken in many regions could have longer-term effects on economic and commercial activity and consumer behaviour after the COVID-19 pandemic recedes and containment measures are fully lifted. In conjunction with the COVID-19 pandemic containment measures, governments, regulatory bodies, central banks and private organizations around the globe have provided and continue to provide unprecedented relief programs and temporary measures to facilitate the continued operation of the global economy and financial system, all of which are intended to provide support to individuals and businesses. While some programs and temporary measures have come to an end, others remain in place or have continued to be developed in an effort to support the overall economy. We expect that governments, regulatory bodies, central banks and private organizations will continue to assess the need for these programs and measures.
 
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For further details on these measures and their impact on us, refer to Impact of pandemic risk factor and Relief program sections outlined below as well as the risk and Capital management sections of this 2021 Annual Report.
In addition to the broad impacts of the COVID-19 pandemic on our employees, clients, communities and operations, the COVID-19 pandemic has impacted and may continue to impact our financial results. Results across all of our business segments have been and continue to be impacted to varying degrees by downstream implications from changes in the macroeconomic environment, including lower interest rates, changes in consumer spending patterns, market volatility, fluctuations in credit spreads, as well as other impacts including changes in credit risk, increased client-driven volumes and changes in operating costs. Notwithstanding these challenges, our financial results and condition amid these challenges demonstrate the resilience of our capital and liquidity positions, which have been bolstered by our position of strength at the time of entering this crisis and throughout fiscal 2020 and 2021.
We are closely monitoring the potential effects and impacts of the COVID-19 pandemic. Given the uncertainty of the extent and duration of the COVID-19 pandemic and its impacts on the economy and society as a whole, as well as the timeline of the transition to a fully reopened economy, the future impact on our businesses and our financial results and condition remains uncertain.
Impact of pandemic risk factor
Pandemics, epidemics or outbreaks of an infectious disease in Canada or worldwide could have an adverse impact on our business, including changes to the way we operate, and on our financial results and condition. The spread of the COVID-19 pandemic, given its severity and scale, has affected and may continue to adversely affect our business and our clients to varying degrees, and also continues to pose risks to the global economy. At the onset of the COVID-19 pandemic, governments and regulatory bodies in affected areas imposed a number of measures designed to contain the COVID-19 pandemic, including widespread business closures, social distancing protocols, travel restrictions, school closures, quarantines, and restrictions on gatherings and events. While rising vaccination rates have supported a substantial or full easing of containment measures in a number of regions, the extent of containment measures and progress towards reopening continues to vary and fluctuate across different regions. As a result, containment measures continue to impact the macroeconomic environment and global economic activity, including the pace and magnitude of recovery. As the impacts of the COVID-19 pandemic continue to evolve, the prolonged effects of the disruption continue to have an impact on our business strategies and initiatives, and could adversely affect our financial results.
Governments, monetary authorities, regulators and financial institutions, including us, have taken and continue to take actions in support of the economy and financial system. These actions include fiscal, monetary and other financial measures to increase liquidity, and provide financial aid to individual, small business, commercial and corporate clients. We expect that these governments, monetary authorities, regulators, and institutions will continue to assess the need for these programs and measures. Additionally, we implemented various temporary relief programs beyond the available government programs to further support our clients in financial need. Although the temporary relief programs have largely concluded, we have assessed and will continue to assess the needs of each individual client and continue to provide support to clients on a case by case basis. For more information on these programs, refer to the Relief programs, Liquidity and funding risk and Capital management sections.
Uncertainty remains as to the full impacts of the COVID-19 pandemic on the global economy, financial markets, and us, including on our financial results, regulatory capital and liquidity ratios and ability to meet regulatory and other requirements. The ultimate impacts will depend on future developments that are highly uncertain and cannot be predicted, including the scope, severity, duration and additional subsequent waves of the COVID-19 pandemic, as well as the effectiveness of actions and measures taken by government, monetary and regulatory authorities and other third parties. Despite positive developments, uncertainty remains regarding new variants of COVID-19, the potential impact of vaccine hesitancy, and global vaccine supply and availability, including uneven vaccine access.
The COVID-19 pandemic has and may continue to result in disruptions to some of our clients and the way in which we conduct our business and could continue to adversely impact our business operations and the quality and continuity of service to clients. We have taken proactive measures through our business continuity plans to adapt to the ongoing work from home arrangements and carefully plan the return to premise for some of our employees, and are maintaining our focus on the well-being of our employees and our ability to serve clients.
In addition to the impact that the COVID-19 pandemic has had and continues to have on our business, it may also continue to increase financial stress, possibly arising from support programs coming to an end, on some of our clients. This, in conjunction with operational constraints due to the impacts of social distancing, could lead to increased pressure on the financial performance of some of our clients, which, to some extent, creates uncertainty around potential future expected credit losses for us.
If the COVID-19 pandemic is further prolonged, including the possibility of additional subsequent waves, or further diseases emerge that give rise to similar effects, the adverse impact on the economy could deepen and could potentially result in volatility and declines in financial markets. Moreover, it remains uncertain how the macroeconomic environment, and societal and business norms will be impacted following the COVID-19 pandemic. Unexpected developments in financial markets, regulatory environments, or consumer behaviour and confidence may also have adverse impacts on our financial results and condition, business operations and reputation, for a substantial period of time.
We are closely monitoring the potential continued effects and impacts of the COVID-19 pandemic, which continues to be an evolving situation.
In virtually all aspects of our operations, our view of risks is not static as our business activities expose us to a wide variety of risks. Consistent with our Enterprise Risk Management Framework (ERMF), we actively manage our risks to help protect and enable our businesses. Additionally, we continue to evaluate the impacts that the COVID-19 pandemic has had and continues to have on our business, including the impact on our top and emerging risks, operational and reputational risks as well as credit, market and liquidity and funding risks. For further details on our Top and emerging and Operational risks, refer to the risk sections in this 2021 Annual Report.
Relief programs
In response to the COVID-19 pandemic, several government programs have been developed to provide financial aid to individuals and businesses, which include wage replacement for individuals, wage subsidies and rent relief for businesses, and lending
 
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programs for businesses, which we are administering for our clients. To further support our clients in financial need, various temporary relief programs were launched beyond the available government programs.
RBC relief programs
During the second quarter of 2020, we announced the RBC Client Relief program which aimed to provide relief for clients impacted by the COVID-19 pandemic. The RBC Client Relief program for the majority of our commercial and small business clients closed on June 30, 2020 and loan deferrals within the program closed for retail clients on September 30, 2020. Payment deferral periods for clients that participated in these programs largely concluded by the end of the second quarter of 2021, however we have assessed and will continue to assess the needs of each individual client and continue to provide support to clients on a case by case basis.
Government programs in response to the COVID-19 pandemic
Government of Canada
Commencing in the second quarter of 2020, the Department of Finance Canada announced new programs and revisions to existing programs to help support the functioning of markets and finance businesses while ensuring the financial sector remains sound, well-capitalized and resilient, in light of the impact of the COVID-19 pandemic. To support businesses experiencing cash flow challenges during this unprecedented time, the Canadian Federal government established the following significant programs in which Canadian financial institutions are assisting with financial relief:
 
The Canada Emergency Business Account (CEBA) – Under this program, Canadian banks were able to facilitate interest-free loans of up to $60,000 to existing eligible small business clients as a source of liquidity for immediate operating costs. The loans were funded by the Government of Canada, with the Canadian banks retaining no credit risk. The application window for the CEBA program closed on June 30, 2021.
 
Export Development Canada (EDC) Business Credit Availability Program Guarantee – Under this program, Canadian banks are able to provide existing eligible mid-sized and large business clients, focused on both export oriented and domestic sales-based businesses, with loans of up to $6.25 million to support short-term liquidity needs. These loans must be used for certain operating costs and are 80% guaranteed by the EDC. On June 2, 2021, the EDC announced that the application deadline for this program has been extended to December 31, 2021.
 
Business Development Canada (BDC) Co-Lending Program – Under this program, the BDC and Canadian banks jointly provide loans, which are funded based on an 80%/20% split, respectively, to eligible business clients of up to $6.25 million to meet their operational and liquidity needs. The maximum loan varies by the size of the business and may be structured with an interest-only payment obligation for the first year. On June 2, 2021, the BDC announced that the application deadline for this program has been extended to December 31, 2021.
 
BDC Mid-Market Financing Program – Under this program, the BDC and Canadian banks provide loans, which are funded based on a 90%/10% split, respectively, to eligible mid-sized business clients ranging between $12.5 million and $60 million to meet their operational and liquidity needs. On June 2, 2021, the BDC announced that the application deadline for this program has been extended to December 31, 2021.
 
EDC Mid-Market Guarantee and Financing Program – Under this program, Canadian banks are able to provide existing eligible mid-sized and large business clients, focused on both export oriented and domestic sales-based businesses, with loans ranging from $12.5 million to a maximum of $80 million for terms up to 5 years, to support their liquidity needs. These loans must be used for certain operating costs and are 75% guaranteed by the EDC. On June 2, 2021, the EDC announced that the application deadline for this program has been extended to December 31, 2021.
 
On January 26, 2021, the Canadian Federal government announced the BDC Highly Affected Sectors Credit Availability Program (HASCAP). Under this program, Canadian banks are able to provide low-interest loans ranging from $25,000 to $1 million to businesses that have been heavily impacted by the COVID-19 pandemic to cover operational cash flow needs. Loans funded under this program are fully guaranteed by the BDC. The application deadline for this program has been extended from June 30, 2021 to December 31, 2021.
As at October 31, 2021, we have facilitated the administration of relief to more than 203,100 clients (July 31, 2021 – 200,900) who have enrolled in the Canadian federal government programs, with corresponding exposures of $12 billion (July 31, 2021 – $12 billion), of which $11 billion (July 31, 2021 – $11 billion) was funded. For further details, refer to Note 6 of our 2021 Annual Consolidated Financial Statements.
U.S. Government
In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law, which is in addition to other programs that were enacted by the U.S. Federal Government. As part of the CARES Act, the Paycheck Protection Program (PPP) offers small businesses with loans, guaranteed by the U.S. Federal Government, to support the payment of payroll costs, interest on mortgages, rent, and utilities. Through this program, we have provided loans directly to our clients based on their assessment of certain eligibility requirements and failure to meet these requirements will result in recourse actions for the borrower. In some cases, the U.S. Small Business Administration may forgive all or a portion of the loan.
On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) was signed into law, which amends the CARES Act and is intended to provide additional relief from the original terms of the PPP, including but not limited to, the extension of the period available for support payments from 8 to 24 weeks after PPP loan origination, the extension of the maturity of PPP loans granted from two to five years and the modification of eligibility requirements. Applications for the PPP closed on August 8, 2020.
In January 2021, the U.S. Small Business Administration (SBA), in consultation with the U.S. Treasury Department, pursuant to the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” (Economic Aid Act) relaunched the PPP, extending it through March 31, 2021, and announced a number of updates to the PPP for current and future loans. The expanded program includes new categories of eligible expenses, including operating expenditures, property damage costs, supplier costs and worker protection expenditures, in addition to payroll costs, utilities and mortgage interest. Borrowers are also provided with additional flexibility, including the ability to set their covered period for forgivable expenditures to be any length between 8 and 24 weeks. Certain borrowers with existing PPP loans may qualify for a second draw loan and may be eligible for a supplemental increase to their first draw. On March 30, 2021, the “PPP Extension Act” was signed into law, extending the PPP for an additional
 
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two months to May 31, 2021, and providing an additional 30-day period for the SBA to process pending applications. The application window for the PPP closed on May 31, 2021.
As at October 31, 2021, loans outstanding under the PPP were $2 billion (US$2 billion) (July 31, 2021 – $3 billion, (US$3 billion)) to 10,441 clients (July 31, 2021 – 12,220 clients).
Programs in support of liquidity and funding
Commencing in the second quarter of 2020, governments and federal agencies expanded the eligibility criteria to existing funding programs and announced new programs to provide further liquidity to banks as well as providing additional sources to access funding to support clients during this time of uncertainty. The majority of these measures or programs have been discontinued or are winding down and we expect that governments and federal agencies will continue to assess the need for these programs as the global economy continues to recover from the effects of the COVID-19 pandemic.
For further details on how we are managing our liquidity and funding profile, refer to the Liquidity and funding risk section of this 2021 Annual Report.
 
 
Financial performance
 
 
 
Overview
 
2021 vs. 2020
Net income of $16,050 million increased $4,613 million or 40% from last year. Diluted EPS of $11.06 was up $3.24 or 41% and ROE of 18.6% was up 440 bps. Our Common Equity Tier 1 (CET1) ratio was 13.7%, up 120 bps from last year.
Our results reflected higher earnings in Personal & Commercial Banking, Capital Markets, Wealth Management, and Insurance, partially offset by lower earnings in Investor & Treasury Services. The prior year reflected elevated provisions on performing loans due to the impact of the COVID-19 pandemic, which unfavourably impacted results in Personal & Commercial Banking, Capital Markets and Wealth Management, whereas current year results reflect releases of provisions on performing loans primarily driven by improvements in our macroeconomic and credit quality outlook.
For further details on our business segment results and CET1 ratio, refer to the Business segment results and Capital management sections, respectively.
 
 
Impact of foreign currency translation
 
The following table reflects the estimated impact of foreign currency translation on key income statement items:
 
 
  
 
 
 
 
Table 5
 
 
 
 
(Millions of Canadian dollars, except per share amounts)
  
 
2021 vs. 2020
 
Increase (decrease):
  
Total revenue
  
$
(977
PCL
  
 
28
 
Non-interest expense
  
 
(707
Income taxes
  
 
(50
Net income
  
 
(248
Impact on EPS
  
Basic
  
$
(0.17
Diluted
  
 
(0.17
The relevant average exchange rates that impact our business are shown in the following table:
 
 
 
 
Table 6  
 
(Average foreign currency equivalent of C$1.00) (1)
 
            2021
    
 
            2020
 
U.S. dollar
 
 
0.796
 
     0.744  
British pound
 
 
0.579
 
     0.579  
Euro
 
 
0.668
 
     0.658  
 
  (1)   Average amounts are calculated using month-end spot rates for the period.  
 
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Total revenue
 
 
 
 
 
Table 7  
 
(Millions of Canadian dollars, except percentage amounts)
 
            2021
    
 
            2020
 
Interest and dividend income
 
$
    28,145
 
   $ 34,883  
Interest expense
 
 
8,143
 
     14,048  
Net interest income
 
$
20,002
 
   $ 20,835  
NIM
 
 
1.48%
       1.55%  
Insurance premiums, investment and fee income
 
$
5,600
 
   $ 5,361  
Trading revenue
 
 
1,183
 
     1,239  
Investment management and custodial fees
 
 
7,132
 
     6,101  
Mutual fund revenue
 
 
4,251
 
     3,712  
Securities brokerage commissions
 
 
1,538
 
     1,439  
Service charges
 
 
1,858
 
     1,842  
Underwriting and other advisory fees
 
 
2,692
 
     2,319  
Foreign exchange revenue, other than trading
 
 
1,066
 
     1,012  
Card service revenue
 
 
1,078
 
     969  
Credit fees
 
 
1,530
 
     1,321  
Net gains on investment securities
 
 
145
 
     90  
Share of profit in joint ventures and associates
 
 
130
 
     77  
Other
 
 
1,488
 
     864  
Non-interest income
 
$
29,691
 
   $ 26,346  
Total revenue
 
$
49,693
 
   $ 47,181  
2021 vs. 2020
Total revenue increased $2,512 million or 5% from last year, largely due to higher investment management and custodial fees, other revenue, mutual fund revenue, and underwriting and other advisory fees. Higher insurance premiums, investment and fee income (Insurance revenue) and credit fees also contributed to the increase. These factors were partially offset by a decrease in net interest income. The impact of foreign exchange translation decreased total revenue by $977 million.
Net interest income decreased $833 million or 4%, largely reflecting lower trading revenue in Capital Markets and the impact of foreign exchange translation. In Canadian Banking and U.S. Wealth Management (including City National), volume growth more than offset the impact of lower spreads.
NIM was down 7 bps compared to last year, largely reflecting lower spreads in U.S. Wealth Management (including City National) driven by the impact of lower interest rates and changes in average earning assets mix, and lower spreads in Canadian Banking primarily due to the impact of lower interest rates and changes in product mix.
Insurance revenue increased $239 million or 4%, mainly reflecting higher group annuity sales as well as business growth, both of which are largely offset in PBCAE. These factors were partially offset by the change in fair value of investments backing policyholder liabilities and the impact of realized investment gains in the prior year.
Investment management and custodial fees increased $1,031 million or 17%, primarily driven by higher average fee-based client assets reflecting market appreciation and net sales, partially offset by the impact of foreign exchange translation.
Mutual fund revenue increased $539 million or 15%, primarily due to higher average fee-based client assets reflecting market appreciation and net sales in Wealth Management, and higher average mutual fund balances driving higher distribution fees in Canadian Banking.
Underwriting and other advisory fees increased $373 million or 16%, mainly due to higher M&A activity and higher equity origination, across most regions.
Credit fees increased $209 million or 16%, primarily driven by higher loan syndication activity across most regions.
Other revenue increased $624 million or 72%, largely attributable to changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense, and the impact of economic hedges.
Additional trading information
 
 
 
 
Table 8  
 
(Millions of Canadian dollars)
 
 
            
2021
                 2020  
Net interest income
(1)
 
$
    2,623
 
   $     3,459  
Non-interest income
 
 
1,183
 
     1,239  
Total trading revenue
 
$
3,806
 
   $ 4,698  
Total trading revenue by product
                
Interest rate and credit
 
$
1,948
 
   $ 2,838  
Equities
 
 
1,285
 
     1,234  
Foreign exchange and commodities
 
 
573
 
     626  
Total trading revenue
 
$
3,806
 
   $ 4,698  
 
  (1)   Reflects net interest income arising from trading-related positions, including assets and liabilities that are classified or designated at fair value through profit or loss (FVTPL).  
 
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2021 vs. 2020
Total trading revenue of $3,806 million, which is comprised of trading-related revenue recorded in Net interest income and
Non-interest
income, decreased $892 million or 19% from last year, mainly reflecting lower fixed income trading across all regions due to spread compression in repo and secured financing products and reduced client activity.
 
 
Provision for credit losses
 
2021 vs. 2020
Total PCL decreased $5,104 million from last year, primarily reflecting elevated provisions on performing loans in the prior year due to the impact of the COVID-19 pandemic and releases in the current year primarily driven by improvements in our macroeconomic and credit quality outlook. The PCL on loans ratio of (10) bps decreased 73 bps.
For further details on PCL, refer to Credit quality performance in the Credit risk section.
 
 
Insurance policyholder benefits, claims and acquisition expense (PBCAE)
 
2021 vs. 2020
PBCAE of $3,891 million increased $208 million or 6% from last year, mainly reflecting higher group annuity sales and business growth, both of which are largely offset in revenue. Lower favourable investment-related experience and a lower impact from reinsurance contract renegotiations also contributed to the increase. These factors were partially offset by the change in fair value of investments backing policyholder liabilities, favourable annual actuarial assumption updates in the current year largely related to mortality and economic assumptions, and lower claims costs mainly in our travel and disability products.
 
 
Non-interest
expense
 
 
 
 
 
Table 9  
 
(Millions of Canadian dollars, except percentage amounts)
 
 
            
2021
                 2020  
Salaries
 
$
6,724
 
   $ 6,758  
Variable compensation
 
 
7,145
 
     6,040  
Benefits and retention compensation
 
 
2,053
 
     1,994  
Share-based compensation
 
 
617
 
     460  
Human resources
 
 
16,539
 
     15,252  
Equipment
 
 
1,986
 
     1,907  
Occupancy
 
 
1,584
 
     1,660  
Communications
 
 
931
 
     989  
Professional fees
 
 
1,351
 
     1,330  
Amortization of other intangibles
 
 
1,287
 
     1,273  
Other
 
 
2,246
 
     2,347  
Non-interest expense
 
$
25,924
 
   $ 24,758  
Efficiency ratio
(1)
 
 
52.2%
       52.5%  
Efficiency ratio adjusted
(2)
 
 
52.2%
       52.8%  
 
 
  (1)   Efficiency ratio is calculated as Non-interest expense divided by Total revenue.  
  (2)   This is a non-GAAP ratio. This measure has been adjusted by excluding the change in fair value of investments backing policyholder liabilities from total revenue. For further details, refer to the Key performance and non-GAAP measures section.  
2021 vs. 2020
Non-interest expense increased $1,166 million or 5% from last year, primarily attributable to higher variable compensation on improved results. Higher staff-related costs and the change in the fair value of our U.S share-based compensation plans, which was largely offset in Other revenue, also contributed to the increase. These factors were partially offset by the impact of foreign exchange translation.
Our efficiency ratio of 52.2% decreased 30 bps from last year. Excluding the change in fair value of investments backing policyholder liabilities, our efficiency ratio of 52.2% decreased 60 bps from last year.
Efficiency ratio excluding the change in fair value of investments backing policyholder liabilities is a non-GAAP ratio. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.
 
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Income and other taxes
 
 
 
 
 
Table 10  
 
(Millions of Canadian dollars, except percentage amounts)
 
 
            
2021
                 2020  
Income taxes
 
$
4,581
 
   $ 2,952  
Other taxes
                
Value added and sales taxes
 
 
443
 
     496  
Payroll taxes
 
 
810
 
     771  
Capital taxes
 
 
73
 
     52  
Property taxes
 
 
140
 
     140  
Insurance premium taxes
 
 
31
 
     29  
Business taxes
 
 
39
 
     43  
 
 
 
1,536
 
     1,531  
Total income and other taxes
 
$
6,117
 
   $ 4,483  
Income before income taxes
 
$
20,631
 
   $ 14,389  
Effective income tax rate
 
 
22.2%
       20.5%  
Effective total tax rate
(1)
 
 
27.6%
       28.2%  
 
 
  (1)   Total income and other taxes as a percentage of income before income taxes and other taxes.  
2021 vs. 2020
Income tax expense increased $1,629 million or 55% from last year, primarily due to higher income before income taxes.
The effective income tax rate of 22.2% increased 170 bps, as the prior year reflected a higher proportion of income from lower tax rate jurisdictions and tax exempt income relative to the decline in earnings experienced last year.
Other taxes increased $5 million from last year, mainly due to higher payroll taxes driven by higher staff-related costs and higher capital taxes, largely offset by lower value added and sales taxes commensurate with reduced purchase activity.
 
 
Client assets
 
Assets under administration
Assets under administration (AUA) are assets administered by us which are beneficially owned by our clients. We provide services that are administrative in nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record keeping. Underlying investment strategies within AUA are determined by our clients and generally do not impact the administrative fees that we receive. Administrative fees can be impacted by factors such as asset valuation level changes from market movements, types of services administered, transaction volumes, geography and client relationship pricing based on volumes or multiple services.
Our Investor & Treasury Services business is the primary business segment that has AUA with approximately 73% of total AUA, as at October 31, 2021, followed by our Wealth Management and Personal & Commercial Banking businesses with approximately 21% and 6% of total AUA, respectively.
2021 vs. 2020
AUA increased $456 billion or 8% from last year, primarily reflecting market appreciation, partially offset by lower client activity in Investor & Treasury Services and the impact of foreign exchange translation.
The following table summarizes AUA by geography and asset class:
 
 
AUA by geographic mix and asset class
 
 
Table 11  
 
(Millions of Canadian dollars)
 
 
2021
     2020  
Canada
(1)
                
Money market
 
$
42,700
 
   $ 42,800  
Fixed income
 
 
772,400
 
     763,500  
Equity
 
 
781,400
 
     591,200  
Multi-asset and other
 
 
1,150,400
 
     954,800  
Total Canada
 
 
2,746,900
 
  
 
2,352,300
 
U.S.
(1)
                
Money market
 
 
49,800
 
     40,100  
Fixed income
 
 
90,400
 
     107,300  
Equity
 
 
256,000
 
     195,400  
Multi-asset and other
 
 
324,600
 
     256,000  
Total U.S.
 
 
720,800
 
  
 
598,800
 
Other International
(1)
                
Money market
 
 
32,800
 
     40,700  
Fixed income
 
 
308,200
 
     375,400  
Equity
 
 
865,000
 
     837,200  
Multi-asset and other
 
 
1,673,600
 
  
 
1,686,800
 
Total International
 
 
2,879,600
 
  
 
2,940,100
 
Total AUA
 
$
6,347,300
 
  
$
5,891,200
 
 
(1)   Geographic information is based on the location from where our clients are serviced.
 
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Assets under management
Assets under management (AUM) are assets managed by us which are beneficially owned by our clients. Management fees are paid by the investment funds and other clients for the investment capabilities of an investment manager and can also cover administrative services. Management fees may be calculated daily, monthly or quarterly as a percentage of the AUM, depending on the distribution channel, product and investment strategies. In general, equity strategies carry a higher fee rate than fixed income or money market strategies. Fees are also impacted by asset mix and relationship pricing for clients using multiple services. Higher risk assets generally produce higher fees, while clients using multiple services can take advantage of synergies which reduce the fees they are charged. Certain funds may have performance fee arrangements where fees are recorded when certain benchmarks or performance targets are achieved. These factors could lead to differences in fees earned by product and therefore net return by asset class may vary despite similar average AUM. Our Wealth Management segment is the primary business segment that has AUM with approximately 99% of total AUM as at October 31, 2021.
2021 vs. 2020
AUM increased $165 billion or 20% from last year, primarily due to market appreciation and net sales, partially offset by the impact of foreign exchange translation.
The following table presents the change in AUM for the year ended October 31, 2021:
 
 
Client assets – AUM
 
 
Table 12  
 
   
2021
         
 
2020
 
(Millions of Canadian dollars)
 
 
Money market
 
   
Fixed income
 
   
Equity
 
   
 
 
Multi-asset

and other
 
   
Total
 
          
Total
 
 
AUM, beginning balance
 
$
48,900
 
 
$
227,600
 
 
$
96,000
 
 
$
471,100
 
 
$
843,600
 
          $ 762,300  
Institutional inflows
 
 
20,200
 
 
 
55,000
 
 
 
12,300
 
 
 
10,500
 
 
 
98,000
 
            106,700  
Institutional outflows
 
 
(16,300
 
 
(42,200
 
 
(6,300
 
 
(8,900
 
 
(73,700
            (80,300
Personal flows, net
 
 
(2,400
 
 
3,300
 
 
 
3,500
 
 
 
47,100
 
 
 
51,500
 
            31,600  
Total net flows
 
 
1,500
 
 
 
16,100
 
 
 
9,500
 
 
 
48,700
 
 
 
75,800
 
            58,000  
Market impact
 
 
 
 
 
(300
 
 
33,400
 
 
 
90,700
 
 
 
123,800
 
            17,900  
Acquisition/dispositions
 
 
(4,500
 
 
 
 
 
 
 
 
 
 
 
(4,500
            700  
Foreign exchange
 
 
(2,400
 
 
(8,000
 
 
(1,300
 
 
(18,300
 
 
(30,000
            4,700  
Total market, acquisition/dispositions and foreign exchange impact
 
 
(6,900
 
 
(8,300
 
 
32,100
 
 
 
72,400
 
 
 
89,300
 
            23,300  
AUM, balance at end of year
 
$
43,500
 
 
$
235,400
 
 
$
137,600
 
 
$
592,200
 
 
$
1,008,700
 
          $ 843,600  
 
 
Business segment results
 
 
 
Results by business segments
 
 
   
 
Table 13  
 
   
2021
         
 
2020
 
                   
(Millions of Canadian dollars,
except percentage amounts)
 
 

Personal &
Commercial
Banking

 
 
 
Wealth
Management
 
 
Insurance
   
 

Investor &
Treasury
Services

 
 
 
Capital
Markets 
(1)
 
 
Corporate
Support 
(1)
 
 
Total
              Total  
Net interest income
 
$
12,621
 
 
$
2,689
 
 
$
 
 
$
460
 
 
$
4,553
 
 
$
(321
 
$
20,002
 
          $ 20,835  
Non-interest income
 
 
5,725
 
 
 
10,607
 
 
 
5,600
 
 
 
1,704
 
 
 
5,634
 
 
 
421
 
 
 
29,691
 
            26,346  
Total revenue
 
 
18,346
 
 
 
13,296
 
 
 
5,600
 
 
 
2,164
 
 
 
10,187
 
 
 
100
 
 
 
49,693
 
            47,181  
PCL
 
 
(187
 
 
(47
 
 
(1
 
 
(8
 
 
(509
 
 
(1
 
 
(753
            4,351  
PBCAE
 
 
 
 
 
 
 
 
3,891
 
 
 
 
 
 
 
 
 
 
 
 
3,891
 
            3,683  
Non-interest expense
 
 
7,978
 
 
 
9,929
 
 
 
596
 
 
 
1,589
 
 
 
5,427
 
 
 
405
 
 
 
25,924
 
            24,758  
Income before income taxes
 
 
10,555
 
 
 
3,414
 
 
 
1,114
 
 
 
583
 
 
 
5,269
 
 
 
(304
 
 
20,631
 
            14,389  
Income taxes
 
 
2,708
 
 
 
788
 
 
 
225
 
 
 
143
 
 
 
1,082
 
 
 
(365
 
 
4,581
 
            2,952  
Net income
 
$
7,847
 
 
$
2,626
 
 
$
889
 
 
$
440
 
 
$
4,187
 
 
$
61
 
 
$
16,050
 
          $ 11,437  
ROE
(2)
 
 
32.0%
   
 
15.9%
   
 
37.4%
   
 
14.0%
   
 
18.3%
   
 
n.m.
   
 
18.6%
              14.2%  
Average assets
 
$
527,100
 
 
$
136,000
 
 
$
21,600
 
 
$
235,400
 
 
$
710,200
 
 
$
47,900
 
 
$
 1,678,200
 
          $  1,636,700  
 
(1)   Net interest income, Non-interest income, Total revenue, Income before income taxes, and Income taxes are presented in Capital Markets on a taxable equivalent basis (teb). The teb adjustment is eliminated in the Corporate Support segment. For a further discussion, refer to the How we measure and report our business segments section.
(2)   For further details, refer to the Key performance and non-GAAP measures section.
n.m.
not meaningful
 
24             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
 
How we measure and report our business segments
 
Our management reporting framework is intended to measure the performance of each business segment as if it were a stand-alone business and reflects the way that the business segment is managed. This approach is intended to ensure that our business segments’ results include all applicable revenue and expenses associated with the conduct of their business and depicts how management views those results.
Key methodologies
The following outlines the key methodologies and assumptions used in our management reporting framework. These are periodically reviewed by management to ensure they remain valid.
Expense and tax allocation
To ensure that our business segments’ results include expenses associated with the conduct of their business, we allocate costs incurred or services provided by Technology & Operations and Functions, which are directly undertaken or provided on the business segments’ behalf. For other costs not directly attributable to our business segments, including overhead costs and other indirect expenses, we use our management reporting framework for allocating these costs to each business segment in a manner that is intended to reflect the underlying benefits.
Capital attribution
Our management reporting framework also determines the attribution of capital to our business segments in a manner that is intended to consistently measure and align economic costs with the underlying benefits and risks associated with the activities of each business segment. The amount of capital assigned to each business segment is referred to as attributed capital. Unattributed capital and associated amounts are reported in Corporate Support. For further information, refer to the Capital management section.
Funds transfer pricing
Funds transfer pricing refers to the pricing of intra-company borrowing or lending for management reporting purposes. We employ a funds transfer pricing process to enable risk-adjusted management reporting of segment results. This process determines the costs and revenue for intra-company borrowing and lending of funds after taking into consideration our interest rate risk and liquidity risk management objectives, as well as applicable regulatory requirements.
Provisions for credit losses
PCL is recorded to recognize estimated credit losses on all financial assets, except for financial assets classified or designated as FVTPL and equity securities designated as fair value through other comprehensive income (FVOCI), which are not subject to impairment assessment. For details on our accounting policy on Allowance for credit losses (ACL), refer to Note 2 of our 2021 Annual Consolidated Financial Statements.
PCL is included in the results of each business segment to fully reflect the appropriate expenses related to the conduct of each business segment.
In addition to the key methodologies described above, the following components of our management reporting framework also impact how our business segments are managed and reported:
 
Wealth Management results include disclosure in U.S. dollars, primarily for U.S. Wealth Management (including City National) as we review and manage the results of this business largely in this currency.
 
Capital Markets results are reported on a teb basis, which grosses up total revenue from certain tax-advantaged sources (Canadian taxable corporate dividends and the U.S. tax credit investment business) to their effective taxable equivalent value with a corresponding offset recorded in the provision for income taxes. We record the elimination of the teb adjustments in Corporate Support. We believe these adjustments are useful and reflect how Capital Markets manages its business, since it enhances the comparability of revenue and related ratios across taxable revenue and our principal tax-advantaged sources of revenue. The use of teb adjustments and measures may not be comparable to similar GAAP measures or similarly adjusted amounts disclosed by other financial institutions.
 
Corporate Support results include all enterprise level activities that are undertaken for the benefit of the organization that are not allocated to our five business segments, such as certain treasury and liquidity management activities, including amounts associated with unattributed capital, and consolidation adjustments, including the elimination of the teb gross-up amounts. In addition, we record gains (losses) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, which are reflected in revenue, and related variability in share-based compensation expense driven by changes in the fair value of liabilities relating to these plans in Corporate Support as we believe this presentation more closely aligns with how we view business performance and manage the underlying risks.
 
Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            25

Table of Contents
 
Key performance and non-GAAP measures
 
Performance measures
We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions.
Return on common equity
We use ROE, at both the consolidated and business segment levels, as a measure of return on total capital invested in our business. Management views the business segment ROE measure as a useful measure for supporting investment and resource allocation decisions because it adjusts for certain items that may affect comparability between business segments and certain competitors.
Our consolidated ROE calculation is based on net income available to common shareholders divided by total average common equity for the period. Business segment ROE calculations are based on net income available to common shareholders divided by average attributed capital for the period. For each segment, average attributed capital includes the capital required to underpin various risks as described in the Capital management section and amounts invested in goodwill and intangibles.
The attribution of capital involves the use of assumptions, judgments and methodologies that are regularly reviewed and revised by management as deemed necessary. Changes to such assumptions, judgments and methodologies can have a material effect on the business segment ROE information that we report. Other companies that disclose information on similar attributions and related return measures may use different assumptions, judgments and methodologies.
 
 
Calculation of ROE
 
 
Table 14  
 
   
2021
         
2020
 
                   
(Millions of Canadian dollars,
except percentage amounts)
 
Personal &
Commercial
Banking
   
Wealth
Management
   
Insurance
   
Investor &
Treasury
Services
   
Capital
Markets
   
Corporate
Support
   
Total
           Total  
Net income available to common shareholders
 
$
7,761
 
 
$
2,577
 
 
$
882
 
 
$
431
 
 
$
4,119
 
 
$
11
 
 
 
$  15,781
 
            $  11,164  
Total average common equity
(1)
,
(2)
 
 
24,200
 
 
 
16,200
 
 
 
2,350
 
 
 
3,100
 
 
 
22,550
 
 
 
16,450
 
 
 
84,850
 
 
 
 
 
    78,800  
ROE
(3)
 
 
32.0%
   
 
15.9%
   
 
37.4%
   
 
14.0%
   
 
18.3%
   
 
n.m.
   
 
18.6%
   
 
 
 
    14.2%  
 
(1)
Total average common equity represents rounded figures.
(2)
The amounts for the segments are referred to as attributed capital.
(3)
ROE is based on actual balances of average common equity before rounding.
n.m.
not meaningful
Non-GAAP measures
We believe that certain non-GAAP measures described below are more reflective of our ongoing operating results and provide readers with a better understanding of management’s perspective on our performance. These measures also enhance the comparability of our financial performance for the year ended October 31, 2021 with the results from last year. Non-GAAP measures (including non-GAAP ratios) do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.
The following discussion describes the non-GAAP measures we use in evaluating our operating results.
Adjusted efficiency ratio
Our efficiency ratio is impacted by the change in fair value of investments backing policyholder liabilities, which is reported in revenue and largely offset in PBCAE. The adjusted efficiency ratio is a non-GAAP ratio and is calculated using adjusted total revenue, which is a non-GAAP measure as it excludes the impact from the change in fair value of investments backing policyholder liabilities. We believe the adjusted efficiency ratio is a useful measure as changes in the fair value of investments backing policyholder liabilities can lead to volatility in total revenue that could obscure trends in underlying business performance and reduce comparability with prior periods.
 
 
Consolidated
non-GAAP
efficiency ratio
 
 
Table 15  
 
    
2021
        
 
2020
 
               
          
 
Item excluded
                      Item excluded        
               
(Millions of Canadian dollars,
except percentage amounts)
 
As reported
    
Change in fair value
of investments backing
policyholder liabilities
    
Adjusted
         As reported      Change in fair value
of investments backing
policyholder liabilities
    Adjusted  
 
Total revenue
 
$
49,693
 
  
$
13
 
  
$
  49,706
 
      $   47,181      $ (277   $ 46,904  
Non-interest expense
 
 
25,924
 
  
 
 
  
 
25,924
 
 
 
    24,758                  24,758  
Efficiency ratio
 
 
52.2%
  
 
 
 
  
 
52.2%
 
 
 
 
52.5%
  
 
 
 
 
 
52.8%
 
26             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
 
Personal & Commercial Banking
 
Personal & Commercial Banking provides a broad suite of financial products and services to individuals and businesses for their day-to-day banking, investing and financing needs. We are focused on building deep and meaningful relationships with our clients, underscored by our exceptional client experience, the breadth of our product suite, our depth of expertise, and the features of our digital solutions.
 
 
> 14 million
      
 
8 million
      
 
36,675
 
         
Number of clients
 
      
Active digital users in Canada
1
 
      
Employees
 
                   
 
Revenue by business lines
      
 
 
We operate through two businesses – Canadian Banking and Caribbean & U.S. Banking. Canadian Banking serves our home market in Canada, where we maintain top (#1 or #2) rankings in market share for all key retail and business products. We have the largest branch network, the most ATMs and one of the largest mobile sales forces across Canada. In Caribbean & U.S. Banking, we offer a broad range of financial products and services in targeted markets.
 
In Canada, we compete with other Schedule 1 banks, independent trust companies, foreign banks, credit unions, caisses populaires, and auto financing companies.
 
In the Caribbean, our competition includes banks, trust companies and investment management companies serving retail and corporate clients, as well as public institutions. In the U.S., we compete primarily with other Canadian banking institutions that have U.S. operations.
 
 
   
                   
2021 Operating environment
 
While impacts from the COVID-19 pandemic continued to persist, client activity improved driving strong volume and fee-based revenue growth throughout fiscal 2021 as economies re-opened due to progress on vaccination distribution, reduced containment measures and continued government support. Further, as businesses began re-opening, unemployment rates also improved.
 
Improvements in the credit environment, driven by the economic recovery from the COVID-19 pandemic, led to favourable changes in our macroeconomic and credit quality outlook, resulting in releases of provisions on performing assets. Lower provisions on impaired loans in our Canadian Banking retail portfolios also reflected the economic recovery underway and the continued impact of the COVID-19 related government support programs.
 
Personal and business deposits continued to see significant growth throughout fiscal 2021, reflecting clients’ preference for the safety of higher cash balances amidst the COVID-19 pandemic.
 
Housing activity was strong with record levels of mortgage originations in fiscal 2021. Despite the industry-wide tightening of mortgage lending criteria in the third quarter, low interest rates and demand for housing continued to support strong growth in residential mortgages.
 
Throughout fiscal 2021, we saw favourable market conditions resulting in solid growth in mutual fund balances from a combination of market appreciation and strong net sales. We also saw significant market activity in the first half of the fiscal year which benefitted our Direct Investing business. While market activity moderated in the second half of the fiscal year, average trading volumes remained above pre-pandemic levels.
 
The ongoing low interest rate environment continued to be a headwind in fiscal 2021, resulting in a further decline in NIM. NIM was also negatively impacted by changes in product mix and competitive pricing pressures.
 
Client preferences for digital offerings continue to evolve and this shift has been accelerated due to the impact of the COVID-19 pandemic. We continued to invest in digital solutions to improve the client experience and deliver personalized advice.
 
Our Caribbean Banking business continued to be negatively impacted by the ongoing low interest rate environment; however, we also saw releases of provisions on performing assets. We also closed the sale of our Eastern Caribbean operations in the second quarter of 2021.
 
In the U.S., earnings were unfavourably impacted by the low interest rate environment and severe limitations on cross-border travel, as a result of the COVID-19 pandemic.
 
 
1
 
  Represents 90-day active clients
 
Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            27

Table of Contents
Strategic priorities
 
 
OUR STRATEGY
 
 
 
PROGRESS IN 2021
 
 
 
PRIORITIES IN 2022
 
 
Transform how we serve our clients
 
 
Enabled the expedited digital processing of nearly 200,000 small business loans under the CEBA program since inception of the program
 
Opened new format branches to address the needs of specific client segments including students and newcomers to Canada
 
Introduced RBC Vantage
TM
that allows clients to unlock rewards, savings, insights and more with any eligible bank account
 
 
 
Provide flexibility by continuing to deliver anytime, anywhere solutions to our clients across all channels, seamlessly integrating mobile and digital services into our clients’ lives
 
Continue to reimagine our branch network to meet the evolving needs of our clients
 
 
 
Accelerate our growth
 
 
Continued to provide personalized advice and valued banking solutions to our clients
 
Maintained our focus on key high-growth and high-value segments such as retirees, youth, newcomers, business owners, high net worth clients, and healthcare professionals
 
Continued to further our partnerships, including helping our clients realize over $90 million in fuel savings with Petro Canada, a Suncor business
 
Partnered with DoorDash to bring eligible RBC credit cardholders additional value through savings and special offers
 
Established a new partnership with GrantMatch, leveraging its Funding Assessment & Strategy Tool to make it easy for business owners to pursue government funding that matches their business needs
 
Launched the RBC ESG Market-Linked GIC which allows investors to support a global portfolio of companies that follow a set of rigorous ESG standards
 
Offered Responsible Investing Portfolios through RBC InvestEase
®
, which are built with a focus on companies that score highest on a wide range of ESG factors, including carbon emissions, product safety and quality, and business ethics
 
 
 
Focus on engaging key high-growth client segments and enabling our advisors to build new and deeper relationships and achieve industry-leading volume growth
 
Establish key partnerships to continue to add value for our clients
 
Build a suite of
best-in-class
value propositions, digital experiences and Beyond Banking ventures
 
Continue to invest in RBC Ventures by working to scale Ventures and accelerate client acquisition
 
 
Rapidly deliver digital solutions to our clients
 
 
Continued to deliver leading digital capabilities and functionalities through our award-winning RBC mobile app
 
Enhanced our Direct Investing client experience by launching a customizable,
web-based
Trading Dashboard, free for all clients
 
Introduced NOMI
®
Forecast, the latest capability in our award-winning NOMI
®
offering, which gives clients a view into their future cash flow by forecasting upcoming preauthorized payment withdrawals from their deposit account
 
Continued to expand the capabilities of MyAdvisor
®
, an online advice platform that digitally connects our clients to an advisor, resulting in over 2.8 million clients activating their personalized investment plans since its launch in 2017
 
Launched RBCx
TM
, a full-service platform designed to provide our business clients with access to capital solutions, innovative products and services, and operational expertise to help technology companies scale
 
Expanded RBC Insight Edge
TM
, our Beyond Banking solution, to provide direct access through a subscription to small and medium retail business and commercial clients
 
Launched an integrated accounts payable solution for business clients through RBC PayEdge
TM
, which helped us earn the 2021 Celent Model Bank Award for Payments Transformation
 
Launched a new way for Canadians to pay for their purchases through PayPlan which offers clients a transparent and convenient pay-over-time solution for big-ticket purchases at participating retailers and merchants throughout Canada
 
 
 
Deliver more personalized insights to improve the client experience while continuing to simplify and digitize everyday banking
 
Enhance the digital experience for our small business and commercial clients and make it easier for them to transact with us
 
Lead in mobile capabilities, enable fulfillment of servicing through digital channels, and move towards a higher degree of agile delivery to transform
end-to-end
client experience
 
 
Innovate to become a more agile and efficient bank
 
 
Continued to invest in solutions that simplify, digitize and automate experiences for clients and employees, and enable employees to deliver relevant and expert advice
 
Continued to help small businesses thrive by simplifying and automating business formation and everyday legal work with Ownr
®
, Canada’s leading business and legal management platform
 
 
 
Invest in new tools and capabilities and proactively seek ways to simplify and streamline both our internal processes and the end to end client experience at an accelerated speed
 
 
In the Caribbean
 
 
Continued transforming the business and overall client experience while driving profitability, simplifying operations, and strategically navigating the
COVID-19
pandemic and its continued impact on our clients and employees
 
Successfully executed Eastern Caribbean divestiture which included the sale of 11 branches in 7 countries. This transaction aligns our investments and resources into markets where our vision can be executed more successfully
 
 
 
Remain focused on becoming the premier digitally-enabled relationship bank by transforming the client experience through automation, digitization and process simplification, and enabling our employees for success
 
 
In the U.S.
 
 
Despite travel restrictions associated with the
COVID-19
pandemic, continued to attract new clients and drive record real estate lending
 
Made focused investments in digital capabilities to improve productivity, offer a more digitally-enabled client experience, and enhance small business services to support Canadian businesses needing U.S. payment and collection services
 
 
Drive accelerated cross-border client growth leading with real estate financing tailored specifically for Canadians, offering advice, tools and resources, value offers and discounts, and access to cross-border experts to guide clients through the full life cycle of owning U.S. property
 
Ongoing digitization of
end-to-end
processes and controls to enhance client self-serve capabilities and improve operational scalability
 
28             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
Outlook
While uncertainty remains regarding the COVID-19 pandemic, we expect the global economic recovery to continue in 2022, though this could vary or be uneven across different regions. The BoC and other central banks are expected to begin raising interest rates in fiscal 2022. Ongoing inflationary pressures also have the potential to impact our results in fiscal 2022. We will continue to pursue industry-leading volume growth, operational efficiency efforts and channel transformation to achieve our vision of being a digitally-enabled relationship bank.
In the Caribbean, an economic recovery is expected as travel and tourism continue to improve, supported by rising vaccination rates. Continued fiscal stimulus and accommodative monetary conditions in some countries are expected to bolster consumer spending and unemployment relief. We will continue to focus on growth strategies in our target markets, improving operational efficiency, and adding value for our clients.
For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.
 
 
Personal & Commercial Banking
 
 
 
Table 16  
 
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)
 
 
2021
    2020  
Net interest income
 
$
12,621
 
  $ 12,568  
Non-interest income
 
 
5,725
 
    5,163  
Total revenue
 
 
18,346
 
    17,731  
PCL on performing assets
 
 
(909
    1,818  
PCL on impaired assets
 
 
722
 
    1,073  
PCL
 
 
(187
    2,891  
Non-interest expense
 
 
7,978
 
    7,946  
Income before income taxes
 
 
10,555
 
    6,894  
Net income
 
$
7,847
 
  $ 5,087  
Revenue by business
               
Canadian Banking
 
$
17,570
 
  $ 16,838  
Personal Banking
 
 
13,337
 
    12,703  
Business Banking
 
 
4,233
 
    4,135  
Caribbean & U.S. Banking
 
 
776
 
    893  
Key ratios
               
ROE
 
 
32.0%
 
    21.7%  
NIM
 
 
2.51%
 
    2.67%  
Efficiency ratio
 
 
43.5%
 
    44.8%  
Operating leverage
(1)
 
 
3.1%
 
    (3.1)%  
Selected balance sheet information
               
Average total assets
 
$
527,100
 
  $ 494,600  
Average total earning assets, net
 
 
502,000
 
    470,200  
Average loans and acceptances, net
 
 
505,600
 
    473,400  
Average deposits
 
 
504,300
 
    447,300  
Other information
               
AUA
(2), (3)
 
$
367,700
 
  $ 292,800  
Average AUA
 
 
340,800
 
    287,600  
AUM
(3)
 
 
5,400
 
    5,300  
Number of employees (FTE)
 
 
36,675
 
    35,964  
Credit information
               
PCL on impaired loans as a % of average net loans and acceptances
 
 
0.14%
 
    0.23%  
Other selected information – Canadian Banking
               
Net income
 
$
7,620
 
  $ 5,077  
NIM
 
 
2.50%
 
    2.64%  
Efficiency ratio
 
 
42.0%
 
    43.2%  
Operating leverage
 
 
2.9%
 
    (3.3)%  
 
(1)   See Glossary for composition of this measure.
(2)   AUA includes securitized residential mortgages and credit card loans as at October 31, 2021 of $15 billion and $3 billion, respectively (October 31, 2020 – $16 billion and $7 billion).
(3)   Represents year-end spot balances.
Financial performance
2021 vs. 2020
Net income increased $2,760 million or 54% from last year, primarily attributable to lower PCL. Average volume growth of 10% in Canadian Banking and higher non-interest income also contributed to the increase. These factors were partially offset by lower spreads.
Total revenue increased $615 million or 3%, largely due to average volume growth in Canadian Banking of 7% in loans and 13% in deposits, and higher average mutual fund balances driving higher distribution fees. Increased client activity also contributed to higher card service revenue, securities brokerage commissions and foreign exchange revenue. These factors were partially offset by lower spreads.
NIM decreased 16 bps, primarily due to the impact of lower interest rates and changes in product mix.
PCL decreased $3,078 million, as last year reflected elevated provisions on performing loans due to the impact of the COVID-19 pandemic as compared to releases in the current year primarily driven by improvements in our macroeconomic and credit quality outlook. Lower provisions on impaired loans in our Canadian Banking retail portfolios also contributed to the decrease, resulting in a decrease of 9 bps in the PCL on impaired loans ratio. For further details, refer to Credit quality performance in the Credit risk section.
 
Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            29

Table of Contents
Non-interest expense increased $32 million, largely due to higher staff-related costs, partially offset by the prior year impact of additional compensation for certain employees, primarily those client facing amidst the COVID-19 pandemic, and lower other operating costs.
Average loans and acceptances increased $32 billion or 7%, driven by growth in residential mortgages.
Average deposits increased $57 billion or 13%, reflecting growth in business and personal deposits.
 
 
Business line review
 
In Canada, we operate through two business lines: Personal Banking and Business Banking.
 
 
Personal Banking
 
Personal Banking offers a full range of products focused on meeting the needs of our individual Canadian clients at every stage of their lives through a wide range of financing and investment products and services. This includes home equity financing, personal lending, chequing and savings accounts, private banking, indirect lending (including auto financing), mutual funds and self-directed brokerage accounts, Guaranteed Investment Certificates (GICs), credit cards, and payment products and solutions.
We rank #1 or #2 in market share for all key Personal Banking products in Canada and our retail banking network is the largest in Canada with 1,182 branches and 4,032 ATMs.
Financial performance
Total revenue increased $634 million or 5% compared to last year, largely reflecting average volume growth of 8% and higher average mutual fund balances of 17% driving higher distribution fees. Increased client activity also contributed to higher card service revenue, securities brokerage commissions and foreign exchange revenue. These factors were partially offset by lower spreads driven by the ongoing impact of the low interest rate environment and changes in product mix.
Average residential mortgages increased 12% compared to last year, largely driven by strong housing activity driving record mortgage originations, partially offset by higher mortgage prepayment activity.
Average deposits increased 9% from last year, largely driven by clients’ preference for the safety of higher cash balances amidst the COVID-19 pandemic.
 
 
Selected highlights
 
 
Table 17  
 
(Millions of Canadian dollars, except number of)
 
2021
   
 
2020
 
Total revenue
 
$
13,337
 
  $ 12,703  
Other information
               
Average residential mortgages
 
 
305,400
 
      273,200  
Average other loans and acceptances, net
 
 
74,800
 
    77,800  
Average deposits
 
 
270,500
 
    248,100  
Average credit card balances
 
 
16,600
 
    18,100  
Credit card purchase volumes
 
 
132,400
 
    118,100  
Branch mutual fund balances
(1)
 
 
205,500
 
    166,000  
Average branch mutual fund balances
 
 
191,300
 
    163,600  
AUA – Self-directed brokerage
(1)
 
 
135,900
 
    96,400  
Number as at October 31:
               
Branches
 
 
1,182
 
    1,201  
ATMs
 
 
4,032
 
    4,182  
 
(1)   Represents year-end spot balances.
 
30             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

Table of Contents
 
Business Banking
 
Business Banking offers a wide range of lending, leasing, deposit, investment, foreign exchange, cash management, auto dealer financing, trade products, and services to small and medium-sized commercial businesses across Canada. With one of the largest teams of relationship managers and specialists in the industry, our commitment to client experience and trusted advice has earned us leading market share in business lending and deposits.
Financial performance
Total revenue increased $98 million or 2% compared to last year, largely due to average volume growth of 14% and higher credit fees reflecting increased client activity. These factors were partially offset by lower spreads, primarily driven by the impact of lower interest rates.
Average loans and acceptances increased 5%, due to the deepening of our existing client relationships.
Average deposits increased 19% from last year, mainly reflecting higher liquidity maintained by our clients amidst the COVID-19 pandemic.
 
 
Selected highlights
 
 
Table 18