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RBC provides information on fourth quarter results
Canada's largest bank maintains strong financial position
TORONTO, November 24, 2008 — Royal Bank of
Canada (RY on TSX and NYSE) today announced that it expects
net income for the fourth quarter ended October 31, 2008 to
be approximately $1.1 billion (down 15% from $1.3 billion
a year ago), which reflects business performance and the items
described below. RBC expects its Tier 1 capital ratio to be
approximately 9.0 per cent.
Note that RBC is in the process of preparing its fourth quarter
results, and the information in this release is based on current
estimates and assumptions and may change. RBC will release
its fourth quarter and fiscal 2008 results on December 5,
2008. Details on how to access our results are provided at
the end of this release.
"These are challenging times, with extreme volatility
in the global financial markets and an uncertain outlook,"
said Gord Nixon, RBC's president and CEO. "However, RBC
continues to be in a strong financial position. We are focused
on prudently managing our balance sheet, while continuing
to provide our clients with excellent financial advice and
service."
RBC's fourth quarter earnings are expected to include the
following items:
- Earnings reduced due to certain items relating to the
market environment totaling approximately $360 million ($670
million of losses before tax and related compensation adjustments),
as described below:
- Losses on held-for-trading securities: Approximately
$645 million of losses on held-for-trading securities,
primarily in Capital Markets. In addition, consistent
with recent amendments to Canadian generally accepted
accounting principles, we reclassified most of our U.S.
auction rate securities and U.S. agency and non-agency
mortgage-backed securities from held-for-trading to
available-for-sale. This reclassification is effective
August 1, 2008. Accordingly, any unrealized changes
in the fair value of these securities will not be reflected
in our fourth quarter earnings.
- Other-than-temporary impairment: Approximately
$355 million of losses on available-for-sale securities,
as a result of other-than-temporary impairment or sale.
- Gain on RBC credit spread: Approximately $330
million gain on the change in fair value of RBC's liabilities
designated as held-for-trading as a result of our credit
spreads widening over the fourth quarter.
- Earnings increased due to a reduction in the estimated
provision for our outstanding Enron Corp. related litigation
of US$450 million, or approximately $540 million ($250 million
after tax and related compensation adjustments). Continuing
positive developments, including a number of recent U.S.
court decisions, have materially affected our assessment
of the probability of loss and altered our estimate of any
potential loss. We considered these developments with our
external advisors and concluded that maintaining this litigation
provision at its prior level is no longer supportable. We
will continue to vigorously defend ourselves in these cases
and will exercise our judgment in resolving them.
In addition, RBC expects its provision for credit losses
for the fourth quarter to be approximately $620 million (compared
to $334 million in the third quarter). This includes an increase
in the specific provision of approximately $150 million, primarily
reflecting deterioration in U.S portfolios and the foreign
exchange impact of the depreciation of the Canadian dollar
compared to the U.S. dollar, and an increase in the general
provision of approximately $135 million. We reassess our general
provision on a quarterly basis and increased it in the fourth
quarter to reflect portfolio growth and weaker credit quality
metrics over prior periods.
RBC will release its fourth quarter and fiscal 2008 results
on December 5, 2008. Information related to RBC's financial
results will be available at: www.rbc.com/investorrelations.
A conference call is scheduled for December 5 at 1:30 p.m.
(EST) and will feature a presentation by RBC executives. Investors
are invited to submit questions by email to invesrel@rbc.com.
Interested parties can access the call live on a listen-only
basis at: www.rbc.com/investorrelations/ir_events_presentations.html
or by telephone (416-340-2216 or 1-866-898-9626). Please call
between 1:20 p.m. and 1:25 p.m. (EST).
Speaker's notes will be posted on RBC's website shortly following
the call. Also, a recording will be available by 5:00 p.m.
on December 5 until February 28, 2009 at www.rbc.com/investorrelations/ir_quarterly.html
or by telephone (416-695-5800 or 1-800-408-3053, passcode
326576#).
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For further information, please contact:
Investor contact:
Marcia Moffat,
VP & Head, Investor Relations
(416) 955-7803, marcia.moffat@rbc.com
Media contact:
Katherine Gay,
VP & Head, Corporate Communications
(416) 974-6286, katherine.gay@rbc.com
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 harbor" provisions of the United
States Private Securities Litigation Reform Act of 1995 and
any applicable Canadian securities legislation. These forward-looking
statements include, but are not limited to, statements with
respect to our fourth quarter net income and Tier 1 capital,
as well as statements with respect to losses on held-for-trading
and available-for-sale securities, gains on liabilities designated
as held-for-trading, reduction in Enron Corp. related litigation
provision, and provision for credit losses. The forward-looking
information contained in this document is presented for the
purpose of assisting our shareholders and analysts in understanding
our financial position as at the date of this release and
may not be appropriate for other purposes. Forward-looking
statements are typically identified by words such as "believe,"
"expect," "estimate" and similar expressions
of future or conditional verbs such as "will," "may,"
"should" 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 other
forward looking information, including statements about our
fourth quarter 2008 earnings will not be achieved. We caution
readers not to place undue reliance on these statements as
a number of important factors could cause our actual results
to differ materially from the expectations expressed in such
forward-looking statements.
These factors include credit, market, operational, liquidity
and funding risks, and other risks discussed in the Risk management
sections in our Third Quarter 2008 Report to Shareholders
and in our 2007 Annual Report to Shareholders; the impact
of the market environment, including the impact from the continuing
volatility in the financial markets and lack of liquidity
in credit markets, and our ability to effectively manage our
liquidity and capital ratios, and implement effective risk
management procedures; general business and economic conditions
in Canada, the United States, and other countries in which
we conduct business; the impact of the movement of the Canadian
dollar relative to other currencies, particularly the U.S.
dollar, British pound and Euro; changes in accounting standards,
policies and estimates, including changes in our estimates
of provisions, allowances and valuations; the effects of changes
in government monetary and other policies; the effects of
competition in the markets in which we operate; the impact
of changes in laws and regulations including tax laws; judicial
or regulatory judgments and legal proceedings; the accuracy
and completeness of information concerning our clients and
counterparties; our ability to successfully execute our strategies
and to complete and integrate strategic acquisitions and joint
ventures successfully; changes to our credit ratings; and
development and integration of our distribution networks.
We caution that the foregoing list of important factors that
may affect future results is not exhaustive and other factors
could also adversely affect our results. 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 our Third Quarter 2008 Report to Shareholders
and in our 2007 Annual Report.
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