Royal Bank of Canada (RY) Q1 2023 Earnings Call Transcript

For the period ending January 31, 2023

March 1, 2023 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to RBC's Conference Call for the First Quarter 2023 Financial Results. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Asim Imran, Head of Investor Relations. Please go ahead, Mr. Imran.

Asim Imran - Head of IR

Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer; Nadine Ahn, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your questions Neil McLaughlin, Group Head, Personal & Commercial Banking; Doug Guzman, Group Head, Wealth Management and Insurance; and Derek Neldner, Group Head, Capital Markets.

As noted on Slide 1, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance.

With that, I'll turn it over to Dave.

Dave McKay - President and CEO

Thank you, Asim, and good morning, everyone. Thank you for joining us. Today, we reported first quarter earnings of $3.2 billion or $4.3 billion adjusting for the Canada recovery dividend and other items. Our results are a testament to our diversified business model underpinned by momentum from client-driven growth across our largest segments as well as the benefit from higher interest rates.

Our performance this quarter also reflected record capital markets revenue driven by strong Global Markets results as well as market share gains in Investment Banking.

What has been a difficult industry-wide environment for advisory and origination activities. Reported expense growth was elevated to 17% year-over-year. However, as Nadine will speak to shortly, expense growth included a number of notable drivers this quarter. Expense growth over the last 12 months has reflected strategic investments in client-facing roles and technology to enhance our value proposition and infrastructure, including artificial intelligence capabilities. A credit to these investments, RBC was recently ranked number two amongst global banks and a recent benchmark of AI maturity in business.

While we're seeing the benefits of our strategic investments in talent and technology, the entire leadership team is committed to moderating expense growth from these elevated levels and driving efficiencies across the bank. Our results were also impacted by higher PCL this quarter, although PCL on impaired loans remained well below historical averages, given strong employment and consumer balance sheets, we expect them to continue increasing from cyclical lows.