Transaction Processing Marty Lippert Vice-Chairman Presentation to Analysts & Institutional Investors October 22, 2001 Toronto Business profile Global Custody Cash Management Trade Correspondent Banking Payments Specialized transaction processing services SME, commercial, corporate & institutional clients Domestic and select international markets Revenues driven by recurring fees, transactional fees and residual balances from these businesses Less impacted by economic cycle and capital market activity 1
Market leadership Global Custody Correspondent Banking & Payments Cash Management Trade Finance Canada #1 Ranking 46% share of AUA #1 Ranking 56 of the world s top 100 banks use RBC as their exclusive Cdn. interbank payment agent # 1 Ranking Corporate #1-26% Mid Market #1-24% # 1 Ranking North America #8 Ranking in North America #11 Globally #5 in North America For ACH type payments (after Chase, Bank One, Wells Fargo and B of A) Unavailable #5 Ranking in North America (based on 2001 Brendan Woods Intl. North American Trade Study) 2 Growing Canadian market share in custody Canadian Market Share (%) 60 55 50 45 40 35 30 25 2001 Status: 46% share of the Canadian market 1994 1995 1996 1997 1998 1999 2000 2001 2002E 2003E 2004E 2005E 3
Top international custodians As at December 31, 2000 (in US$ billions) 1 Bank of New York (U.S.) 7,026 2 JP Morgan (U.S.) 6,300 3 State Street (U.S.) 6,118 4 Citibank (U.S.) 4,300 5 Deutsche (Ger) 4,300 6 Mellon * (U.S.) 1,849 7 Northern Trust (U.S.) 1,684 8 BNP Paribas (Fra) 1,400 9 HSBC (U.K.) 1,150 10 Brown Brothers Harriman (U.S.) 900 11 RBC Financial Group (Can) 827 12 Société Générale (Fra) 748 13 Dresdner (Ger) 725 14 CDC Ixis (Fra) 652 15 Fortis (Bel) 471 *Excludes CIBC Mellon ($323) and ABN-AMRO Mellon ($95) US$=C$1.50 4 Highly rated custody operations International Ratings 1 Consistently ranked among the best in global custody ratings 1994-2001 Annual Average 2001 1. Brown Brothers Harriman (U.S.) 70.6 71.7 2. Pictet (Swi) 68.2 67.6 3. Royal Bank/Royal Trust (Can) 66.7 67.9 4. JP Morgan Chase & Co (U.S.) 64.0 62.7 5. State Street (U.S.) 62.1 66.6 6. Northern Trust (U.S.) 62.0 67.1 7. Bank of New York (U.S.) 61.9 59.2 Canadian Ratings 2 Best overall (#1 ranked) Canadian sub-custodian for 2001 Achieved Top-Rated status for 13 years (#1 ranking for 11 of the 13 years since 1989) (1) Source: Global Investor - ratings based on responses from fund managers in North America, Europe and Asia in the annual survey of global investment managers (2) Source: Global Custodian Agent Bank Review - ratings based on independent survey of Canadian sub-custody clients 5
Highly rated cash management services Ranked #1 in market share of relationships and transactions in mid-market since 96 1 Ra`nked #1 in market share of relationships in large corporates since 94 1 Lead both mid-market and large corporate market in 2 innovation expertise flexibility technology 1 Based on bi-annual Brendan Woods International surveys for Canada 2 Based on 2000 Brendan Woods International Corporate Electronic Banking survey for Canada 6 Trade Leveraging Canadian strength for growth Brendan Woods International North American Trade Study (2001) * Proportion of Corporate clients in North America market that are served by each bank % Market Penetration* 1. Bank of America 36.0 2. Citibank 19.8 3. JP Morgan Chase & Co 18.4 4. Bank One 14.9 5. RBC Financial Group 11.8 6. Wells Fargo 10.4 North American Trade Market Share of Bank Supported Trade Services % Market Share 1. Bank of America 14 2. JP Morgan Chase & Co 7 3. Citibank 6 4. RBC Financial Group 5 5. Bank One 5 7
2001 achievements New Business Won Citibank mandate for Canadian correspondent banking services Over $75 billion in new custody business won in Europe Alliances/Acquisitions/Partnerships Acquisition of Perpetual Fund Services in Australia CI Mutual Funds - Outsourcing Build New Products Won over 50% of Continuous Link Settlement CAD$ mandates Mutual Fund Securities lending Efficient & Effective Use of Technology 8 Consistently high cash ROE Cash ROE (%) 28% 30% 34% 30% 31% 33% 32% 1 1 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 1 Excluding impact of one-time items 9
Revenue trends Revenue (in $millions) 176 173 175 175 178 157 159 59 57 60 52 51 58 51-3% YTD Rate Sensitive Fees 99 108 117 116 115 123 128 + 13% YTD 1 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 1 Excluding impact of one-time items 10 Medium to long term goals Grow revenue at double digit rate Maintain superior economic returns Improve operating efficiency Increase proportion of revenue from US and International markets 11
Strategic thrusts Leverage client relationships and leadership in Canada for new business in global niche markets Pursue alliances, acquisitions and partnerships Build new product and service propositions Enhance processing & systems platforms for efficiency and economies of scale 12 2002 priorities Alliances and acquisitions U.S. and European targets under review Positioning for further Canadian consolidation Mutual fund outsourcing Continuous enhancements to technology platform infrastructure Web projects Cash management suite Payments Continue to win at least 50% of new CLS CAD$ mandates 13
Summary Canadian market leader and strong North American presence in these businesses Highly rated customer service Consistent, high return businesses Significant progress in 2001 against all key strategies 14 Caution regarding forwardlooking statements Royal Bank of Canada, from time to time, makes written and oral forward-looking statements, included in this presentation, the Annual Report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications, which are made pursuant to the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements with respect to the bank s objectives for 2001, and the medium to long term, and strategies to achieve those objectives, as well as statements with respect to the bank s beliefs, plans, expectations, anticipations, estimates and intentions. The words may, could, should, would, suspect, outlook, believe, anticipate, estimate, expect, intend, plan, and words and expressions of similar import are intended to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. The bank cautions readers not to place undue reliance on these statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian economy in general and the strength of the local economies within Canada in which the bank conducts operations; the strength of the United States economy and the economies of other nations in which the bank conducts significant operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada and the Board of Governors of the Federal Reserve System; changes in trade policy; the effects of competition in the markets in which the bank operates; inflation; capital market and currency market fluctuations; the timely development and introduction of new products and services by the bank in receptive markets; the impact of changes in the laws and regulations regulating financial services (including banking, insurance and securities); changes in tax laws; technological changes; the ability of the bank to complete strategic acquisitions and to integrate acquisitions; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and saving habits; and the bank s anticipation of and success in managing the risks implicated by the foregoing. The bank cautions that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the bank, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the bank. 15