We are applying our leading resources and expertise to enable our clients to meet their financial goals

We believe that the potential of the whole organization to meet our clients’ needs is much greater than the sum of its parts. Our clients are clients of RBC Financial Group – not just of a single business line or location. That is why we have been working to ensure that our businesses work together to serve our clients better.

In the middle of 2004, we began an intensive process to examine all our operations and structures to better realize our vision of “Always earning the right to be our clients’ first choice” for financial services. Our thorough review focused on our client-oriented activities, our functional support units and our technology and operations areas. We found significant opportunities to increase our focus towards client service and revenue growth and to streamline our organization.

We have successfully established our position as a market leader in Canada and we have a growing and attractive U.S. client base. Our new structure is designed to ensure that RBC is built to anticipate and efficiently serve the distinct needs of key client groups. We believe we can deliver superior long-term revenue growth for our shareholders by better satisfying our clients, earning their continued business, attracting new clients and by delivering our services and products more efficiently.

Effective November 1, 2004, our five prior business segments were realigned into three segments structured around holistic client needs and geographic locations:

• A Canadian personal and business segment, which combines our Canadian banking, investments and global insurance businesses, including Canadian, U.S. and international insurance operations. This business is led by Jim Westlake.
• A U.S. and international segment, which includes banking and investments in the U.S., banking and brokerage in the Caribbean, and Global Private Banking internationally. This business is led by Peter Armenio.
• A global capital markets segment that includes corporate banking, which serves corporate and larger commercial clients. This business is led by Chuck Winograd.

We believe these changes set the foundation for revenue growth and enhanced efficiency. Focusing our insights around the unmet needs of various client groups will accelerate our product and service model innovation. We will have simpler and faster processes for everything from product development to credit approval, from how we resolve problems to how we execute client instructions.

We are streamlining our corporate functions, technology and operations area without compromising service quality and risk control. We expect that these streamlined areas will improve our cost structure and provide an enhanced quality of service to help our businesses reach their sales and client service goals. By more closely aligning functional and operational support to our businesses, we expect to lower delivery costs and increase quality and flexibility, while supporting business growth. Critical changes to our corporate infrastructure include:

• Consolidating responsibility and accountability for strategy, and all corporate functions, including risk management and finance, under Barbara G. Stymiest in the newly created role of chief operating officer reporting to the president and chief executive officer.
• Creating a global technology and operations group led by Marty Lippert to integrate all our operating and systems capabilities. This will allow us to develop technology solutions more effectively and process client and business services more efficiently. This group has global responsibility and accountability for our combined operations and technology and will look to optimize economies of scale, IT platforms and best practices through the establishment of centres of expertise to align common activities across RBC.

We are focused on rolling out elements of our Client First Initiative as quickly as possible. In the fourth quarter, we eliminated a number of executive and senior management positions, commenced streamlining resources, and took actions to close redundant premises. We expect the majority of the remaining staff and occupancy cost reductions to be completed during 2005. The more complex technology initiatives will likely yield results in 2006 and 2007.

Our new structure is intended to result in an efficient head office that can support distribution networks and motivated sales forces with better products and greater innovation. We believe that as a result of the realignment, we will record better revenue growth performance and expense control in Canada and the United States and have accordingly established more aggressive financial objectives for 2005, set out on page 7.