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

 

 

 

 

14             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

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.

 

 

For our progress in 2021 against our business strategies and strategic goals, refer to the Business segment results section.

 

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.

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.

 

Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            15

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. 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.

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.

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.

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.

 

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

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.

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:

 

 

 

 

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.

 

Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            17

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.

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.

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

 

18             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

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.

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.

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:

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.

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

 

Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            19

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).

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.

 

 

Impact of foreign currency translation

			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	)

		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.

 

		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).

Non-interest

 

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.

 

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 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.

 

22             Royal Bank of Canada: Annual Report 2021             Management’s Discussion and Analysis

 

 

 

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.

 

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.

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:

 

 

 

Management’s Discussion and Analysis             Royal Bank of Canada: Annual Report 2021            23

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