Royal Bank of Canada (RY) Barclays 22nd Annual Global Financial Services Conference (Transcript)

Core Insights - Royal Bank of Canada (RBC) is focused on efficient capital allocation, maintaining a strong balance sheet, and achieving cost synergies, particularly following the HSBC acquisition [3][4][7] Capital Allocation and Financial Performance - RBC's Common Equity Tier 1 (CET1) ratio stands at 12.8%, above target levels, following the HSBC acquisition [4] - The bank generated internal capital of 70 basis points in Q3, with dividends paid out resulting in a net capital generation of 38 basis points [20] - RBC is prioritizing organic growth with high returns, followed by dividends and share buybacks, while considering smaller acquisitions in the current regulatory environment [21][22] HSBC Acquisition Insights - The HSBC acquisition has performed better than expected, with lower client attrition than forecasted and a clean credit quality book [8][9] - RBC has already realized $120 million of the anticipated$740 million in cost synergies from the acquisition, with a strong focus on integrating technology and operations [7][14] - Revenue synergies are expected from cross-selling RBC's products to HSBC's affluent client base, with $100 million in assets under management already connected to wealth management services [17] Canadian Banking Performance - RBC's Canadian banking segment shows strong loan growth, with leading market shares in mortgages, personal loans, and commercial banking [35][37] - The bank maintains a loan-to-deposit ratio of 100%, supported by a solid core deposit franchise [36] - While mortgage growth is slowing due to competition and interest rates, RBC is focused on profitability rather than chasing market share aggressively [39][40] Wealth Management Strategy - RBC's wealth management segment is a significant driver of business, with strong positions in Canada and the U.S. [66][67] - The bank is exploring opportunities for small acquisitions in the fragmented U.K. wealth management market [70] Credit Quality and Consumer Resilience - The Canadian consumer remains resilient, with high liquidity levels and prudent spending behaviors observed [48][50] - RBC has seen a slight uptick in delinquency rates in unsecured lending but maintains a high-quality loan book with strong credit metrics [51][52] Interest Rate Environment and NII Management - RBC is managing its net interest income (NII) through hedging strategies, with a focus on maintaining stability despite declining interest rates [56][58] - The bank expects that lower interest rates will eventually stimulate demand, with a forecasted positive impact on the economy over the next 18 to 24 months [54][55]