3 royal bank of canada third quarter 2007 report to ...€¦ · 2 royal bank of canada third...

Tableofcontents1 Thirdquarterhighlights2 Management’sdiscussionand analysis2 Cautionregardingforward-looking

statements3 AboutRoyalBankofCanada3 Selectedfinancialhighlights4 Economicandmarketreviewand 2007Outlook4 Financialperformance10 Quarterlyresultsandtrendanalysis

11 Accountingmattersandcontrols12 Businesssegmentresults13 Keyperformanceandnon-GAAP measures17 CanadianBanking19 WealthManagement20 U.S.&InternationalBanking21 CapitalMarkets22 CorporateSupport23 Resultsbygeographicsegment

24 Financialcondition24 Balancesheet25 Capitalmanagement26 Off-balancesheetarrangements27 Relatedpartytransactions27 Riskmanagement31 InterimConsolidatedFinancial

Statements35 NotestotheInterimConsolidated

FinancialStatements47 Shareholderinformation

ThefinancialinformationinthisdocumentisinCanadiandollarsandisbasedonfinancialstatementspreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(GAAP),unlessotherwisenoted.

Firstninemonthsof2007comparedwiththefirstninemonthsof2006:• Netincomeof$4,168million,up20%• DilutedEPSof$3.18,up20.5%• ROEof25.1%,up180basispoints• Revenue(1)of$16,847million,up10%• PBCAEof$1,536million,down19%• Non-interestexpense(1)of$9,380million,up10%

(1) EffectiveNovember1,2006,resultsreportedonatotalconsolidatedbasisarecomparabletoresultsasreportedfromcontinuingoperationsforthecorrespondingpriorperiods.(2) ForareconciliationofrevenueandPBCAEexcludingtheimpactrelatedtoFIAS,refertotheKeyperformanceandnon-GAAPmeasuressection.

RoyalBankofCanadareportsstrongresultsforthethirdquarterof2007

3Reporttoshareholders

Royal Bank of Canada Third Quarter 2007

Thirdquarter2007highlightscomparedwiththethirdquarterof2006:• Netincomeof$1,395million,up19%• Dilutedearningspershare(EPS)of$1.06,up18%• Returnoncommonequity(ROE)of24.4%,up130basispoints• Revenue(1)of$5,480million,up5% – Revenuewasup9%(2)excludingtheimpactrelatedto thenewfinancialinstrumentsaccountingstandards(FIAS)• Insurancepolicyholderbenefits,claimsandacquisition expense(PBCAE)of$343million,down45% – PBCAEwasdown12%(2)excludingtheimpactrelated toFIAS• Non-interestexpense(1)of$3,165million,up11%• Tier1capitalratioof9.3%,down30basispoints• Announceda$.04,or9%,increasetoourquarterlydividend

TORONTO,August24,2007–RoyalBankofCanada(RYonTSXandNYSE)reportednetincomeof$1,395millionforthethirdquarterendedJuly31,2007,up$218million,or19%,fromayearago.DilutedEPSwere$1.06,up18%overthesameperiod.ROEwas24.4%comparedto23.1%ayearago.OurstrongresultsforthequarterwerelargelyattributabletosolidperformanceacrossourCapitalMarkets,WealthManagementandCanadianBankingsegmentsreflectingtheongoingsuccessfulexecutionofourgrowthinitiatives,aswellasgenerallyfavourableeconomicandmarketconditionsformostofthequarterandalowereffectivetaxrate.Solidgrowthinourbankingoperationswasoffsetbyhighercostsduetoincreasedbusinesslevelsandspendinginsupportofourgrowthinitiatives,aswellashigherprovisionsforcreditlosses.

Commentingontheresults,GordonM.Nixon,President&CEO,said,“Iamverypleasedwiththeresultsthisquarteracrossallofourbusinesssegments.WecontinuedtoextendourleadershippositioninCanadaandexpandedonourstrengthsintheU.S.andinternationally,whiledeliveringtopquartilereturnstoourshareholders.”

2RoyalBankofCanadaThirdQuarter2007

Management’sdiscussionandanalysis(MD&A)isprovidedtoenableareadertoassessourresultsofoperationsandfinancialconditionforthethree-andnine-monthperiodsendedJuly31,2007,comparedtothecorrespondingperiodsintheprioryearandthethree-monthperiodendedApril30,2007.ThisMD&AshouldbereadinconjunctionwithourunauditedInterimConsolidatedFinancialStatementsandrelatednotesandour2006AnnualReporttoShareholders(2006AnnualReport).ThisMD&AisdatedAugust24,2007.AllamountsareinCanadiandollars,unlessotherwisespecified,andarebasedonfinancialstatementspreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(GAAP).EffectiveOctober31,2006,RBCMortgageCompanyhaddisposedofsubstantiallyallofitsremainingassetsandobligationsandwenolongerseparatelyclassifyitsresultsinourunauditedInterimConsolidatedFinancialStatements.Resultsreportedonatotalconsolidatedbasisarecomparabletoresultsreportedfromcontinuingoperationsforthecorrespondingpriorperiods.

U.S.GAAPCommencingthisquarter,wehaveelectedtonolongerincludeaU.S.GAAPreconciliationinourunauditedInterimConsolidatedFinancialStatementsonaquarterlybasis.However,wewillcontinuetoincludeaU.S.GAAPreconciliationsettingoutthematerialdifferencesbetweenCanadianandU.S.GAAPinourannualauditedConsolidatedFinancialStatementsandinourunauditedInterimConsolidatedFinancialStatementsforthesix-monthperiodendingApril30.SinceApril30,2007,nonewsignificantCanadianGAAPdifferencestoU.S.GAAPhavearisen.

Additionalinformationaboutus,includingour2006AnnualInformationForm,isavailablefreeofchargeonourwebsiteatrbc.com/investorrelations,ontheCanadianSecuritiesAdministrators’websiteatsedar.comandontheEDGARsectionoftheUnitedStatesSecuritiesandExchangeCommission’s(SEC)websiteatsec.gov.

Fromtimetotime,wemakewrittenororalforward-lookingstatementswithinthemeaningofcertainsecuritieslaws,includ-ingthe“safeharbour”provisionsoftheUnited States Private Securities Litigation Reform Act of 1995andanyapplicableCanadiansecuritieslegislation.Wemaymakesuchstatementsinthisdocument,inotherfilingswithCanadianregulatorsortheUnitedStatesSEC,inreportstoshareholdersorinothercom-munications.Theseforward-lookingstatementsinclude,amongothers,statementswithrespecttoourmedium-termand2007objectives,andstrategiestoachieveourobjectives,aswellasstatementswithrespecttoourbeliefs,outlooks,plans,objec-tives,expectations,anticipations,estimatesandintentions.Thewords“may,”“could,”“should,”“would,”“suspect,”“outlook,”“believe,”“plan,”“anticipate,”“estimate,”“expect,”“intend,”“forecast,”“objective,”“opportunity,”andwordsandexpres-sionsofsimilarimportareintendedtoidentifyforward-lookingstatements.

Bytheirverynature,forward-lookingstatementsinvolvenumerousfactorsandassumptions,andaresubjecttoinherentrisksanduncertainties,bothgeneralandspecific,whichgiverisetothepossibilitythatpredictions,forecasts,projectionsandotherforward-lookingstatementswillnotbeachieved.Wecautionreadersnottoplaceunduerelianceonthesestate-mentsasanumberofimportantfactorscouldcauseouractualresultstodiffermateriallyfromtheexpectationsexpressedinsuchforward-lookingstatements.Thesefactorsincludecredit,market,operationalandotherrisksidentifiedanddiscussedundertheRiskmanagementsection;generalbusinessandeconomicconditionsinCanada,theUnitedStates,andothercountriesinwhichweconductbusiness,includingtheimpactfromthecontinuingvolatilityintheU.S.subprimemarketsandlackofliquidityinthefinancialmarkets;theimpactofthemovementoftheCanadiandollarrelativetoothercurrencies,particularlytheU.S.dollarandBritishpound;theeffectsofchangesingovernmentmonetaryandotherpolicies;theeffectsofcompetitioninthemarketsinwhichweoperate;theimpactofchangesinlawsandregulationsincludingtaxlaws;judicialorregulatoryjudgmentsandlegalproceedings;theaccuracyand

completenessofinformationconcerningourclientsandcoun-terparties;successfulexecutionofourstrategy;ourabilitytocompleteandintegratestrategicacquisitionsandjointventuressuccessfully;changesinaccountingstandards,policiesandestimates,includingchangesinourestimatesofprovisionsandallowances;andourabilitytoattractandretainkeyemployeesandexecutives.Otherfactorsthatmayaffectfutureresultsinclude:thetimelyandsuccessfuldevelopmentofnewproductsandservices;thesuccessfulexpansionandnewdevelopmentofourdistributionchannelsandrealizingincreasedrevenuefromthesechannels;globalcapitalmarketsactivity;technologicalchangesandourrelianceonthirdpartiestoprovidecomponentsofourbusinessinfrastructure;fraudbyinternalorexternalparties;unexpectedchangesinconsumerspendingandsav-inghabits;thepossibleimpactonourbusinessfromdiseaseorillnessthataffectslocal,nationalorglobaleconomies;disruptionstopublicinfrastructure,includingtransportation,communication,powerandwater;thepossibleimpactonourbusinessesofinternationalconflictsandotherpoliticaldevelop-mentsincludingthoserelatingtothewaronterrorism;andoursuccessinanticipatingandmanagingtheassociatedrisks.

Wecautionthattheforegoinglistofimportantfactorsthatmayaffectfutureresultsisnotexhaustive.Whenrelyingonourforward-lookingstatementstomakedecisionswithrespecttous,investorsandothersshouldcarefullyconsidertheforegoingfactorsandotheruncertaintiesandpotentialevents.Wedonotundertaketoupdateanyforward-lookingstatement,whetherwrittenororal,thatmaybemadefromtimetotimebyusoronourbehalf.

AdditionalinformationaboutthesefactorscanbefoundundertheRiskmanagementsectionandinour2006AnnualReportundertheRiskmanagementandAdditionalrisksthatmayaffectfutureresultssections.

Informationcontainedinorotherwiseaccessiblethroughthewebsitesmentioneddoesnotformapartofthisdocument.Allreferencesinthisdocumenttowebsitesareinactivetextualreferencesandareforyourinformationonly.

Management’sdiscussionandanalysis

Cautionregardingforward-lookingstatements

RoyalBankofCanadaThirdQuarter20073

Asatorforthethreemonthsended Asatorfortheninemonthsended

July 31 April30 July31 July 31 July31

(C$millions,exceptpershare,numberofandpercentageamounts) 2007 2007 2006 2007 2006

Totalrevenue $ 5,480 $ 5,669 $ 5,206 $ 16,847 $ 15,288 Non-interestexpense 3,165 3,148 2,861 9,380 8,540 Provisionforcreditlosses 178 188 99 528 270 Insurancepolicyholderbenefits,claimsandacquisitionexpense 343 677 627 1,536 1,898 Netincomebeforeincometaxesandnon-controllinginterest insubsidiaries 1,794 1,656 1,619 5,403 4,580 Netincomefromcontinuingoperations 1,395 1,279 1,194 4,168 3,494 Netlossfromdiscontinuedoperations – – (17) – (28)Net income $ 1,395 $ 1,279 $ 1,177 $ 4,168 $ 3,466

Selected information Earningspershare(EPS)–basic $ 1.07 $ .99 $ .91 $ 3.22 $ 2.68 Earningspershare(EPS)–diluted $ 1.06 $ .98 $ .90 $ 3.18 $ 2.64 Returnoncommonequity(ROE)(1) 24.4% 23.5% 23.1% 25.1% 23.3% Returnonriskcapital(RORC)(2) 36.9% 35.2% 35.7% 37.9% 36.4% Netinterestmargin(3) 1.33% 1.35% 1.38% 1.34% 1.37%Capital ratios(4) Tier1capitalratio 9.3% 9.3% 9.6% 9.3% 9.6% Totalcapitalratio 11.4% 11.7% 12.4% 11.4% 12.4%Selected balance sheet and other information Totalassets $ 604,582 $ 589,076 $ 523,969 $ 604,582 $ 523,969 Securities 190,219 198,509 172,803 190,219 172,803 Consumerloans 163,118 156,356 146,502 163,118 146,502 Businessandgovernmentloans 69,681 69,293 59,418 69,681 59,418 Deposits 376,325 372,728 334,702 376,325 334,702 Averagecommonequity(1) 22,250 21,950 20,050 21,850 19,700 Averageriskcapital(2) 14,700 14,650 12,950 14,500 12,600 Risk-adjustedassets(4),(5) 250,197 243,202 218,482 250,197 218,482 Assetsundermanagement 159,900 159,000 134,100 159,900 134,100 Assetsunderadministration–RBC 563,100 560,900 504,700 563,100 504,700 –RBCDexiaIS(6) 2,190,800 2,119,000 1,832,700 2,190,800 1,832,700Common share information Sharesoutstanding(000s) –averagebasic 1,272,913 1,272,212 1,279,300 1,273,246 1,281,815 –averagediluted 1,288,227 1,288,415 1,297,340 1,289,947 1,301,165 –endofperiod 1,275,780 1,275,327 1,281,279 1,275,780 1,281,279 Dividendsdeclaredpershare $ .46 $ .46 $ .36 $ 1.32 $ 1.04 Dividendyield 3.2% 3.3% 3.1% 3.2% 3.0% Commonshareprice(RYonTSX)–close,endofperiod $ 54.09 $ 57.82 $ 46.03 $ 54.09 $ 46.03 Marketcapitalization(TSX) 69,007 73,739 58,977 69,007 58,977Business information (number of) Employees(full-timeequivalent) 65,833 63,493 60,875 65,833 60,875 Bankbranches 1,524 1,515 1,430 1,524 1,430 Automatedbankingmachines 4,377 4,333 4,297 4,377 4,297

PeriodaverageUSDequivalentofC$1.00(7) .937 .874 .896 .889 .879Period-endUSDequivalentofC$1.00 .937 .901 .884 .937 .884

(1) AveragecommonequityandReturnoncommonequityarecalculatedusingmonth-endbalancesfortheperiod.(2) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.AverageriskcapitalandReturnonriskcapitalarenon-GAAPfinancial

measures.Forfurtherdiscussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.(3) Netinterestmargin(NIM)iscalculatedasNetinterestincomedividedbyAverageassets.Averageassetsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybal-

ancesfortheperiod.(4) CalculatedusingguidelinesissuedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI).(5) Risk-adjustedassetsforApril30,2007,havebeenrestatedtoreflecta$563millionadjustmentrelatedtoequityderivativecontracts.(6) Assetsunderadministration–RBCDexiaISrepresentsthetotalAssetsunderadministration(AUA)asatJune30,2007,ofthejointventure,ofwhichwehavea50%ownershipinterest.(7) Averageamountsarecalculatedusingmonth-endspotratesfortheperiod.

Selectedfinancialhighlights

RoyalBankofCanada(RYonTSXandNYSE)anditssubsidiariesoperateunderthemasterbrandnameofRBC.WeareCanada’slargestbankasmeasuredbyassetsandmarketcapitalizationandoneofNorthAmerica’sleadingdiversifiedfinancialservicescompanies.Weprovidepersonalandcommercialbanking,wealthmanagementservices,insurance,corporateandinvest-mentbanking,andtransactionprocessingservicesonaglobalbasis.Weemployapproximately70,000full-andpart-timeemployeeswhoservemorethan15millionpersonal,business,publicsectorandinstitutionalclientsthroughoutofficesinNorthAmericaand34countriesaroundtheworld.Formoreinformation,pleasevisitrbc.com.

EffectiveFebruary7,2007,ourpreviousthreebusinesssegments(RBCCanadianPersonalandBusiness,RBCU.S.andInternationalPersonalandBusiness,andRBCCapitalMarkets)werereorganizedintofourbusinesssegmentsandrenamed:CanadianBanking,WealthManagement,U.S.&InternationalBankingandCapitalMarkets.Thehistoricalcomparativesegmentfinancialinformationhasbeenrestatedtoreflectthisrealignment.Forfurtherdetails,refertotheBusinesssegmentresultssection.

AboutRoyalBankofCanada


CanadaEconomicgrowthinCanadaremainedstrongduringthequarter,largelyreflectingsolidconsumerspendingunderpinnedbylowunemploymentandrisingwages,aswellasbusinessinvest-ment.Tocontaininflationarypressures,theBankofCanadaraisedtheovernightrateby25basispoints(bps)to4.5%inJuly,thefirstincreasesinceMayoflastyear.WhilecreditgrowthofbothconsumerandbusinesslendinginCanadawassolid,creditqualityweakenedmoderatelyduringtheperiodasconditionsappeartoberevertingtomorenormalizedlevels.ToaddresstheliquidityconcernsarisingfromtherecentU.S.subprimemarketissuesandtosupportthestabilityoftheCanadianfinancialsystem,theBankofCanadainjectedliquidityintothefinancialmarketsinAugust.Inaddition,anumberoffinancialinstitutionsinitiatedconcertedeffortstoprovideliquiditysupportfornon-banksponsoredasset-backedcommercialpaperinAugust.

TheCanadianeconomyisexpectedtogrowat2.6%in2007,largelyunderpinnedbycontinuingsolidconsumerspendingandbusinessinvestment.Inaddition,weexpecttheBankofCanadatoraiseinterestratesfurther,oncetherecentliquidityconcernsandthegeneralrepricingofriskhavesubsided.WeforecastthattheCanadiandollarwillremainelevatedagainsttheU.S.dollaramidstrongglobaleconomicgrowthandfirmcommodityprices.

UnitedStatesGrowthintheU.S.economypickedupduringtheperiod,primar-ilydrivenbysolidbusinessspending,despitetheongoinghousingmarketcorrection.WhilecreditgrowthintheU.S.remainedhealthyduringtheperiod,ithasslowedsincelastfallinpartduetothewidespreadrepricingofrisk.Ingeneral,con-sumerandcorporatecreditqualityremainedsolidbutweakenedslightlyduringtheperiod.ThemajorexceptiontothistrendwashigherdefaultsrelatedtoU.S.subprimemortgages.AlthoughtheU.S.subprimemarketconcernshaveexistedforawhile,theproblemsescalatedinJulyandrecentlyspilledoverintootherfinancialmarkets,includinghigh-qualityasset-backedpaper

andotherfinancialmarkets.Theresulthasbeensignificantmarketvolatility,includingawideningofcreditspreadsinthehistoricalcontext,andatighteningofliquidityglobally.ToeasethemountingliquidityconcernsandtosupportthestabilityoftheU.S.financialsystem,theU.S.FederalReserveinjectedasig-nificantamountofliquidityintothefinancialmarketsaswellasdecreaseditsdiscountrateby50bpsinAugust.

Amidthecontinuedweaknessinresidentialinvestmentandrecentspilloverintofinancialmarkets,theU.S.FederalReserveisnowexpectedtolowerratestopreventthefinancialmarketturmoilfromspillingoverintotheeconomy.Despitetherecentmarketevents,theU.S.economyisprojectedtoexpandatamoderatepaceof2.2%in2007,asweexpectfirmbusinessinvestment,strongexportgrowth,andstill-solidconsumerspendingtocontinuetosupporteconomicgrowth.Whilecon-sumercreditqualityisanticipatedtodeterioratemoderately,corporatecreditqualityshouldremainsolidduetocontinuingstrongcorporatebalancesheets.

OtherglobaleconomiesOtherglobaleconomiesalsoremainedrobustduringmostoftheperiod,continuingtoprovidefavourableconditionsforthefinancialservicesindustry.MostmajorequitymarketsreachedrecordhighsinJuly,andthendeclinedasdidthedebtmarkets,largelyduetothespillovereffectsoftheU.S.subprimemort-gagemarket.Debtandequityoriginationaswellasmergersandacquisitions(M&A)activitieswerestrongatthebeginningoftheperiod,however,anumberoforiginationshaverecentlybeenpostponedduetolessfavourablepricingandalackofliquidity.

Globaleconomicgrowthisexpectedtoremainsolid,thoughatamoderatelyslowerpacecomparedto2006.Globalcapitalmarketconditionsareexpectedtoimprovemoderatelyandreacharenewedpointofstability,giventherecentinjectionofliquiditybyanumberofcentralbanksintotheirrespectivefinancialmarkets.

Economicandmarketreviewand2007Outlook

Wereportednetincomeof$1,395millionforthethirdquarterendedJuly31,2007,up$218million,or19%,fromayearago.DilutedEPSwere$1.06,up18%overthesameperiod.ROEwas24.4%,comparedto23.1%ayearago.OurstrongresultswerelargelyattributabletosolidperformanceacrossourCapitalMarkets,WealthManagementandCanadianBankingsegmentsreflectingtheongoingsuccessfulexecutionofourgrowthinitiatives,aswellasgenerallyfavourableeconomicandmarketconditionsformostofthequarterandalowereffectivetaxrate.TheincreaseinearningsprimarilyreflectedrobustM&Aandequityoriginationactivitiesaswellashigherforeignexchangeandequitytradingresults.Higherclientfee-basedassetsandtransactionalvolumes,favourabledisabilityclaimsexperienceandsolidgrowthinourEuropeanlifereinsurancebusinessalsocontributedtotheincrease.Solidgrowthinourdomesticbankingoperationswasoffsetbyhighercostsduetoincreasedbusinesslevelsandspendinginsupportofourgrowthinitia-tives,increasedprovisionsforcreditlosses,aswellasnarrowerinterestmargin.TheTier1capitalratioof9.3%wasdownfrom9.6%ayearago.TheTotalcapitalratioof11.4%wasdown100bpsfrom12.4%ayearago.

Forthefirstninemonthsof2007,netincomewas$4,168million,up$702million,or20%,fromayearago.Nine-monthdilutedEPSwere$3.18,up$.54,or20.5%,andROEwas25.1%,up180bpsfrom2006.Thestronggrowthinourearningsreflectedcontinuedstrongresultsacrossallourbusinesssegments.Thisperformanceismainlyattributabletothesuccessfulexecutionofourgrowthinitiativesincludingbranchexpansionandacquisitions,andgenerallyfavourablemarketconditionsthroughoutmostofthecurrentperiod.Theincreaseinearningswasdrivenprimarilybysolidloananddepositgrowthacrossmostbankingbusinesses,stronggrowthinclientfee-basedassetsreflectingnewsalesandcapitalappreciation,strongertradingvolumesandoriginationactivity.ImprovedGlobal Insuranceresultslargelyreflectedtheprioryearhurricane-relatedcharges,aswellasthefavourableimpactofanadjustmentrelatedtothereallocationofcertainforeigninvestmentcapitalrecordedinthefirstquarterof2007andsolidgrowthinourEuropeanlifereinsurancebusiness.Thesefactorswerepartiallyoffsetbyahigherprovisionforcreditlossesduetoportfoliogrowthaswellasincreasinglossratesandhigherimpairments,bothofwhichhavetrendedtowardsmorenormalizedlevels.

Financialperformance


Performanceversus2007objectivesWeestablishedour2007annualobjectivesattheendof2006basedonoureconomicandbusinessoutlooks.Year-to-date,ourperformanceistrackingwelltotheseobjectives:

Year-to-datedilutedEPSgrowthof20.5%andROEof25.1%comparedfavourablytoourstatedannualgrowthobjectives,reflectingstrongperformanceacrossmostofourbusinesses.Ournine-monthoperatingleverageof2.8%isslightlybelowourannualobjectiveofgreaterthan3%,reflectingstrongbusinessgrowthandinvestmentinnewgrowthinitiatives,includingacqui-sitions.OurcapitalpositionremainsstrongwithaTier1capitalratioof9.3%,comfortablyaboveourtargetofgreaterthan8%.Inlightofourearnings,weareraisingourquarterlycommonsharedividendby$.04,or9%,to$.50inthefourthquarter.

Comparedtothesecondquarterof2007,netincomeincreased$116million,or9%,anddilutedEPSwereup$.08,or8%.ROEwas24.4%,comparedto23.5%.Thisincreasewaslargelyduetostrongresultsinourinsuranceandbankingbusinessesprimarilyreflectingimproveddisabilityclaimsexperience,increasedcardbalancesandtransactionvolumes,solidloananddepositgrowth,includingrecentacquisitions,andtheadditionaldaysthisquarter.IncreasedbusinessvolumesinRBC Dexia IS,higherprivateequitydistributionsandafavourabletaxsettle-mentinthequarteralsocontributedtotheincrease.Thesefac-torswerepartiallyoffsetbylowertradingresultsandincreasedcostsinsupportofgrowthinitiatives.AsatJuly31,2007,theTier1capitalratioof9.3%wasunchangedfrom9.3%attheendofthepreviousquarter.TheTotalcapitalratioof11.4%wasdown30bpsfrom11.7%lastquarter.

Keyeventsof2007Flag Financial Corporation (Flag):OnDecember8,2006,U.S.&InternationalBankingcompletedtheacquisitionofFlag,expandingRBCCentura’sbranchnetworktomorethan50branchesinGeorgia,akeygrowthmarket.

Carlin Financial Group:OnJanuary3,2007,CapitalMarketscompletedtheacquisitionofCarlinFinancialGroupandrenameditRBCCarlin.RBCCarlinprovidesCapitalMarketsadirectmarketaccesstechnologyplatform.

Daniels & Associates, L.P.: OnJanuary10,2007,CapitalMarketscompletedtheacquisitionofDaniels&Associates,L.P.andrenameditRBCDaniels,aleadingU.S.M&Aadvisortothecable,telecom,broadcastandInternetservicesindustries,buildingonourpresenceintheU.S.andglobally.

AmSouth Bank (AmSouth) branches:OnMarch9,2007,U.S.&InternationalBankingcompletedtheacquisitionof39branchesinAlabamaownedbyAmSouthBank,markingRBCCentura’sentryintoAlabama.

Merchant banking joint venture:OnApril17,2007,weannouncedthesigningofadefinitivejointventureagreementpursuanttowhichU.S.&InternationalBankingwillacquirea50%interestinFidelityBank&TrustInternationalLimited’swhollyownedBahamas-basedsubsidiary,FidelityMerchantBank&TrustLimited.Thetransactionissubjecttonormalclos-ingconditionsincludingregulatoryapprovalsandisexpectedtocloseinthefourthquarterof2007.

J.B. Hanauer & Co.: OnMay18,2007,WealthManagementcompletedtheacquisitionofJ.B.Hanauer&Co.,expandingourpresenceinNewJersey,PennsylvaniaandFlorida.

Seasongood & Mayer, LLC:OnJune18,2007,CapitalMarketscompletedtheacquisitionofSeasongood&Mayer,LLC,strengtheningourfranchiseasoneoftheleadingmunicipalfinanceplatformsintheU.S.

ImpactofU.S.vs.CanadiandollarOurU.S.dollar-denominatedconsolidatedresultsareimpactedbyfluctuationsintheU.S.dollar/Canadiandollarexchangerate.

TheCanadiandollarexchangerateappreciated5%onaver-agecomparedtoayearago,resultingina$2milliondecreaseinthetranslatedvalueofourU.S.dollar-denominatednetincomewhichhadnoimpactonourcurrentquarter’sdilutedEPS.

TheCanadiandollarexchangerateappreciated1%onaveragecomparedtothefirstninemonthsof2006,buthadnoimpactonthetranslatedvalueofourU.S.dollar-denominatednetincome,onourcurrentquarter’sdilutedEPS.

TheCanadiandollarexchangerateappreciated7%onaver-agecomparedtothepriorquarter,resultingina$15milliondecreaseinthetranslatedvalueofourU.S.dollar-denominatednetincomeandadecreaseof$.01onourdilutedEPSforthecurrentquarter.

SpecifieditemsEffectivethefirstquarterof2007,wenolongerclassifyamountsasspecifieditems.Fordetailsconcerningtheitemspreviouslynotedasspecifieditemsin2006,refertoour2006AnnualReport.

2007 Nine-month

Objectives performance

1.Dilutedearningspersharegrowth 10%+ 20.5% 2. Operatingleverage(1) > 3% 2.8% 3.Returnoncommonequity(ROE) 20%+ 25.1% 4.Tier1capitalratio(2) 8%+ 9.3%5.Dividendpayoutratio 40–50% 41%

(1) Ouroperatingleverageisdefinedasthedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Revenueisbasedonataxableequivalentbasisandexcludesconsolidatedvariableinterestentities(VIEs),accountingadjustmentsrelatedtothenewfinancialinstrumentsaccountingstandardsandGlobalInsurancerevenue.Non-interestexpenseexcludesGlobalInsuranceexpense.Thisisanon-GAAPmeasure.Forfurtherinformationincludingareconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

(2) CalculatedusingguidelinesissuedbytheOSFI.


CanadianBankingForthethreemonthsendedJuly31,2007,werecordedalossof$212millioninInsurancepremiums,investmentandfeeincomerelatedtothechangesinthefairvaluesofthesecuritiesbackingourlifeandhealthinsurancebusinesses.Theselosseswerelargelyoffsetbyacorresponding$208milliondecreaseinthemeasurementofcertainliabilitiesrelatedtolifeandhealthinsurancepolicies,recordedinInsurancepolicyholderbenefits,claimsandacquisitionexpense(PBCAE).

FortheninemonthsendedJuly31,2007,werecognized$18millioninnetinterestincomerelatedtotheapplicationoftheeffectiveinterestmethodonourresidentialmortgageportfolioandwerecordedalossof$227millioninInsurancepremiums,investmentandfeeincome,whichwaslargelyoffsetbyacorresponding$219millionreductioninPBCAE.

CapitalMarketsForthethreemonthsendedJuly31,2007,werecognizedagainof$12millioninTradingrevenueasaresultofthenetincreaseinfairvaluesinvarioustradingportfoliospreviouslymeasuredatamortizedcost.

FortheninemonthsendedJuly31,2007,werecognizedagainof$27million.

Forthethree Forthenine monthsended monthsended

July 31 April30 July 31

(C$millions) 2007 2007 2007 Significantlyimpactedsegments

Netinterestincome $ – $ 18 $ 18 CanadianBanking

Non-interestincome Insurancepremiums,investmentandfeeincome $ (212) $ 55 $ (227) CanadianBanking Tradingrevenue 12 7 27 CapitalMarkets

Other 9 10 36 WealthManagement

Other 2 (3) 7 CorporateSupport

Total revenue $ (189) $ 87 $ (139)Insurance policyholder benefits, claims and acquisition expense (208) 58 (219) CanadianBankingNet income $ 21 $ 19 $ 62

WealthManagementForthethreemonthsendedJuly31,2007,werecordeda$9millionforeigncurrencytranslationgaininNon-interestincome–OtherrelatedtodepositsusedtofundcertainInvestmentsecuritiesdenominatedinforeigncurrenciesinordertominimizeexposuretochangesinforeignexchangerates.ThecorrespondingforeigncurrencytranslationlossontherelatedInvestmentsecuritieswasrecordedinAOCI.

FortheninemonthsendedJuly31,2007,werecordeda$36millionforeigncurrencytranslationgainonthesedepositsandacorrespondingforeigncurrencytranslationlossontherelatedInvestmentsecuritieswasrecordedinAOCI.

CorporateSupportForthethreemonthsendedJuly31,2007,werecognizedagainof$2million.Thiscompriseda$21milliongaininNon-interestincome–Otherrelatedtocertainlong-termfundingnotesandsubordinateddebenturesthatwereissuedanddesignatedasheld-for-tradingliabilitiesunderthenewaccountingstandards,whichwasoffsetbyalossof$19milliononrelatedderivatives.

FortheninemonthsendedJuly31,2007,werecognizeda$7milliongain.Thiscompriseda$31milliongainoncertainlong-termfundingnotesandsubordinateddebenturesliabilitiesnetofa$24millionlossonrelatedderivatives.

ImpactofthenewfinancialinstrumentsaccountingstandardsOnNovember1,2006,weadoptedthreenewaccountingstandardsrelatedtofinancialinstrumentsthatwereissuedbytheCanadianInstituteofCharteredAccountants(CICA).ThestandardsrequireagreaterportionoftheConsolidatedBalanceSheettobemeasuredatfairvaluewithchangesinthefairvaluesreportedinincomeintheperiodtheyoccur,exceptforinvestmentsecurities,derivativesdesignatedascashflowhedges,andhedgesofnetinvestmentsinforeignoperations,thechangesinfairvalueofwhicharerecognizedinAccumulated

othercomprehensiveincome(AOCI),anewcomponentofShareholders’Equity.Thestandardsalsoprovidenewguidanceontheaccountingforderivativesinhedgingrelationships.

ThefollowingtableprovidesthemainimpactsonourConsolidatedStatementsofIncomearisingfromtheapplicationofthenewaccountingstandards.Forfurtherdetailsaboutthenewfinancialinstrumentsaccountingstandards,refertoNotes1and2toourunauditedInterimConsolidatedFinancialStatements.


Totalrevenue

Forthethreemonthsended Fortheninemonthsended


(C$millions) 2007 2007 2006 2007 2006

Interestincome $ 6,898 $ 6,747 $ 5,849 $ 20,089 $ 16,084 Interestexpense 4,920 4,846 4,083 14,343 11,019

Netinterestincome $ 1,978 $ 1,901 $ 1,766 $ 5,746 $ 5,065

Investments(1) $ 1,156 $ 1,093 $ 941 $ 3,296 $ 2,808 Insurance(2) 590 855 821 2,265 2,485 Trading 546 575 683 1,924 1,954 Banking(3) 701 684 648 2,034 1,749 Underwritingandotheradvisory 309 319 253 916 731 Other(4) 200 242 94 666 496

Non-interestincome $ 3,502 $ 3,768 $ 3,440 $ 11,101 $ 10,223

Total revenue $ 5,480 $ 5,669 $ 5,206 $ 16,847 $ 15,288

Totaltradingrevenue: Netinterestincome–relatedtotradingactivities $ (31) $ (31) $ (146) $ (213) $ (366) Non-interestincome–Tradingrevenue 546 575 683 1,924 1,954

Total trading revenue $ 515 $ 544 $ 537 $ 1,711 $ 1,588

(1) Includesbrokerage,investmentmanagementandmutualfunds.(2) IncludesInsurancepremiums,investmentandfeeincome.(3) Includesservicecharges,foreignexchangeotherthantrading,cardservicesandcreditfees.(4) Includesothernon-interestincome,gain/lossonsecuritiessalesandsecuritization.

Q32007vs.Q32006Totalrevenueincreased$274million,or5%,fromayearago.Revenueincreased$463million,or9%,comparedtoayearago,excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandards.Thisincreasewasprimarilyduetocontinuedstrongbalanceandvolumegrowthinourbankingandwealthmanagementbusinesses.Theincreasealsoreflectedhigherrevenuefrommostcapitalmarketsbusinesses.Forareconciliationoftotalrevenueexcludingtheimpactofthenewfinancialinstrumentsaccountingstandards,refertotheKeyperformanceandnon-GAAPmeasuressection.

Net interest incomeincreased$212million,or12%,largelyduetostrongloananddepositgrowthandhighertrading-relatedincomeonincreasedsecuritiesborrowingandlendingactivity.Netinterestmarginof1.33%wasdown5bpscomparedtotheprioryear.

Investments-relatedrevenueincreased$215million,or23%,mainlyduetocontinuedstronggrowthinfee-basedclientassetsreflectingstrongnewsales,capitalappreciationandtherecruit-mentofadditionalexperiencedadvisors.GrowthincustodianandsecuritieslendingactivitiesatRBC Dexia IS,higherclienttransactionalvolumesinourbrokeragebusinessesandstrongermutualfundnetsalesandcapitalappreciationalsocontributedtotheincrease.

Insurance-relatedrevenuedecreased$231million,or28%,fromtheprioryear.Excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandards,Insurance-relatedrevenuedecreased$19million,or2%,fromtheprioryear.ThedecreasewasmainlyattributabletolowerU.S.annuitysales,largelyduetorelativelylowerlong-terminterestrates,andlowerrevenuefromourpropertycatastrophereinsuranceoperationsaswenolongerunderwritenewbusiness.ThesefactorswerepartiallyoffsetbysolidgrowthinourEuropeanlifereinsuranceandalldomesticbusinesses.ForareconciliationofInsurance-relatedrevenueexcludingtheimpactofthenewfinancialinstrumentsaccountingstandards,refertotheKeyperformanceandnon-GAAPmeasuressection.

Tradingrevenuedecreased$137million,or20%,fromayearago.Totaltradingrevenue(includingNetinterestincome

andNon-interestincomerelatedtotrading)was$515million,down$22million,or4%,fromayearago.

Bankingrevenueincreased$53million,or8%primarilyreflectinghighertransactionvolumesandclientbalances,andincreasedloansyndicationactivity.

Underwriting and other advisoryrevenueincreased$56million,or22%,fromayearago,mainlyduetohigherM&AactivityinCanadaandtheU.S.andstrongerequityoriginationactivityacrossallgeographies.

Otherrevenueincreased$106million,or113%.Theincreasewasprimarilyduetogainsonthefairvaluingofcreditderivativesusedtoeconomicallyhedgeourcorporateloanportfolioandtheinclusionofincomerelatedtoacertainbusi-ness(whichislargelyoffsetintheNon-controllinginterestinnetincomeofsubsidiariesline).Highergainsanddistributionsonprivateequityinvestmentsandlowerlossesonthefairvalueofotherderivativesusedtoeconomicallyhedgecertainpositionsalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbylossesrelatedtosecuritizationactivityinthecurrentquarter.

Q32007vs.Q32006(Ninemonthsended)Totalrevenueincreased$1,559million,or10%,fromayearago.Revenuewasup$1,698million,or11%,comparedtoayearago,excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandards.Thisincreasewasprimarilyduetostronggrowthacrossourbanking,wealthmanagementandmostcapitalmarketsbusinesses.Thestronggrowthlargelyreflectedthesuccessfulexecutionofourgrowthstrategyincludingexpan-sionandacquisitions,aswellasthecontinuationofgenerallyfavourablemarketconditions.

Net interest incomeincreased$681million,or13%,largelyduetostrongloananddepositgrowthandhighertrading-relatedincomeonincreasedsecuritiesborrowingandlendingactivity.Netinterestmarginof1.34%wasdown3bpscomparedtotheprioryear.

Investments-relatedrevenueincreased$488million,or17%,mainlyduetocontinuedgrowthinfee-basedclientassets,reflectingstrongnewsales,capitalappreciationandthe


recruitmentofadditionalexperiencedadvisors.Growthincustodianandsecuritieslendingactivitiesandhighertransac-tionalvolumesinourbrokeragebusinessesalsocontributedtotheincrease.

Insurance-relatedrevenuewasdown$220million,or9%,fromtheprioryear.Excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandards, Insurance-relatedrevenueincreased$7millionfromtheprioryear.TheincreasewasprimarilyattributabletosolidgrowthinourEuropeanlifereinsuranceandalldomesticbusinesses.ThesefactorswerelargelyoffsetbylowerU.S.annuitysalesprimarilyresultingfromrelativelylowerlong-terminterestrates,andlowerrevenuefromourpropertycatastrophereinsuranceoperationsaswenolongerunderwritenewbusiness.

Trading revenuedecreased$30million,or2%,fromayearago.Totaltradingrevenue(includingNetinterestincomeandNon-interestincomerelatedtotrading)was$1,711million,up$123million,or8%,fromayearago.Theincreasereflectedhigherequitytradingrevenueonexpansionofcertaintradingstrategies,partiallyoffsetbylowertradingrevenueinourfixedincomebusinesses,whichwasrecentlynegativelyimpactedbywideningcreditspreadsandreducedliquidityinthemarket.

Banking revenueincreased$285million,or16%.Thisincreaseprimarilyreflectedhighercardbalancesandtransactionvolumes.Higherservicefeesandforeignexchangerevenueduetoincreasedtransactionvolumesandimprovedloansyndi-cationactivityalsocontributedtotheincrease.Theprioryearincludedanadjustmenttoincreasetheliabilityassociatedwithourcustomerloyaltyrewardprogramswhichwasnotrepeatedthisyear.

Underwriting and other advisoryrevenueincreased$185million,or25%,fromayearago,mainlyduetohigherU.S.andCanadianequityoriginationactivityandimprovedM&Aactivity.

Otherrevenueincreased$170million,or34%,primarilyduetogainsrelatedtosecuritizationactivity,gainsonthefairvaluingofcreditderivativesusedtoeconomicallyhedgeourcorporateloanportfolioandthefavourableadjustmentrelatedtothereallocationofcertainforeigninvestmentcapital.Higherdistributionsfromprivateequityinvestmentsandaforeignexchangetranslationgainoncertaindepositsresultingfromtheimplementationofthenewfinancialinstrumentsaccount-ingstandardsalsocontributedtotheincrease.Theprioryearincludedafeerelatedtotheterminationofanagreement.

Q32007vs.Q22007Totalrevenuedecreased$189million,or3%,comparedtothepreviousquarter.Revenuewasup$87million,or2%,excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandards.Thisincreasewasprimarilyduetostrongloananddepositgrowth,additionaldaysthisquarter,aswellasimprovedbusinessvolumesinRBC Dexia ISreflectingseasonalfactorsandstrongmarketactivity.Highercardbalancesandtransactionvolumesalsoreflectedseasonalfactors;increasedgainsanddistributionsonprivateequityinvestments,M&Aactivityandhigherfee-basedclientassetsalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbylowertradingresults,whichwereatelevatedlevelsinthepreviousquarter,andlowerbrokeragevolumesandequityoriginationinpartduetoamodestsummerslowdown.

Non-interestexpense



(C$millions) 2007 2007 2006 2007 2006

Salaries $ 899 $ 880 $ 812 $ 2,643 $ 2,360 Variablecompensation 755 804 716 2,350 2,129 Benefitsandretentioncompensation 294 295 272 883 837 Stock-basedcompensation 44 43 28 145 134

Humanresources $ 1,992 $ 2,022 $ 1,828 $ 6,021 $ 5,460 Othercosts 1,173 1,126 1,033 3,359 3,080

Non-interest expense $ 3,165 $ 3,148 $ 2,861 $ 9,380 $ 8,540

Q32007vs.Q32006Non-interestexpensewasup$304million,or11%,fromayearago,primarilyreflectinghighercostsduetoincreasedbusinesslevels,whichincludedincreasedsalesandservicepersonnel,highersystemdevelopmentandprocessingcosts,andincreasedvariablecompensationonhighercommission-basedrevenueinWealthManagement.AdditionalcostsinsupportofourgrowthinitiativesincludingourrecentacquisitionsandU.S.andCanadiande novobranchexpansionandbranchupgradeprogramsalsocontributedtotheincrease.

Q32007vs.Q32006(Ninemonthsended)Non-interestexpenseincreased$840million,or10%,fromayearago,primarilyduetohighercostsreflectingincreased

businesslevels,whichincludedincreasedsalesandserviceper-sonnel,highersystemdevelopmentandprocessingcosts,andhighervariablecompensationonstrongerbusinessperformanceinWealthManagementandCapitalMarkets.Theincreasewasalsoattributabletotheinclusionofourrecentacquisitionsandintegration-relatedcostsandincreasedspendinginsupportofgrowthinitiativesincludingde novobranchexpansion.

Q32007vs.Q22007Non-interestexpenseincreased$17million,or1%,comparedtothepreviousquarter.HigherprocessingcostsduetoincreasedbusinessvolumeatRBC Dexia ISandtheinclusionofourrecentacquisitionswerelargelyoffsetbylowervariablecompensationinCapitalMarkets.


Q32007vs.Q32006Provisionforcreditlosses(PCL)increased$79millionfromayearago,whichhadbeenatacyclicallylowlevel,andhastrendedtowardsamorenormalizedlevel.Theincreasewaslargelyattributabletohigherprovisionsinourcreditcardandpersonalunsecuredcreditlinesportfolios,primarilyreflectinghigherlossratesandportfoliogrowth.Higherprovisionsinoursmallbusinessandcommercialloanportfolios,mainlyduetoincreasedimpairment,alsocontributedtotheincrease.

SpecificPCLratioincreasedfromayearago,primarilyreflectinghigherlossratesinourconsumerportfolioandincreasedimpairmentinourbusinessportfolio,bothofwhichhavetrendedtowardsmorenormalizedlevels.

Q32007vs.Q32006(Ninemonthsended)Provisionforcreditlossesincreased$258millionfromthepriorperiod,whichhadbeenatacyclicallylowlevel,andhastrended

towardsamorenormalizedlevelthisyear.Theincreasewasprimarilyattributabletohigherprovisionsinourpersonalunsecuredcreditlinesandcreditcardportfolios,largelyduetohigherlossratesandportfoliogrowth.Higherprovisionsinoursmallbusinessandcommercialloanportfoliosmainlyreflectingincreasedimpairment,alsocontributedtotheincrease.Theprioryearincludeda$50millionreversalofthegeneralallow-ancerelatedtoourcorporateloanportfolioaswellashighercorporaterecoveries.

Q32007vs.Q22007Provisionforcreditlossesdecreased$10millionfromthepriorquarter.Thedecreasewasprimarilyattributabletolowerwrite-offsinourpersonalloanportfoliointhecurrentperiod,asthepriorquarterwasimpactedbyseasonalfactors.Thesefactorswerepartiallyoffsetbyhigherprovisionsinourcommercialloanportfolioduetoahigherlevelofimpairment.

Q32007vs.Q32006Insurancepolicyholderbenefits,claimsandacquisitionexpense(PBCAE)decreased$284million,or45%,fromtheprioryear.Excludingtheimpactofthenewfinancialinstrumentsaccountingstandards,PBCAEdecreased$76million,or12%,primarilydrivenbytheimpactoflowerU.S.annuitysaleslargelyduetorelativelylowerlong-terminterestrates,aswellasimproveddisabilityandotherclaimsexperiencethisquarter.Afavourableactuarialliabilityadjustmentthisquarter,reflectingachangeinourinvestmentportfoliostrategy,alsocontributedtothedecrease.ThesefactorswerepartiallyoffsetbyhighercostsassociatedwithgrowthinourEuropeanlifereinsuranceandalldomesticbusinesses.ForareconciliationofPBCAEexcludingtheimpactofthenewfinancialinstrumentsaccountingstandards,refertotheKeyperformanceandnon-GAAPmeasuressection.

Q32007vs.Q32006(Ninemonthsended)PBCAEexpensedecreased$362million,or19%,fromtheprioryear.Excludingtheimpactrelatedtothenewfinancialinstrumentsaccountingstandardsandtheprioryearhurricane-relatedcharges,PBCAEdecreased$82million,or4%,fromtheprioryear.ThedecreasewaslargelyattributabletolowerU.S.annuitysalesandahigherleveloffavourablenetactuarialliabilityadjustmentsinthecurrentperiod.ThesefactorswerepartiallyoffsetbyhighercostsinsupportofgrowthinourEuropeanlifereinsuranceandalldomesticbusinesses.

Q32007vs.Q22007PBCAEexpensedecreased$334million,or49%,fromthepriorquarter.Excludingtheimpactrelatedtothenewfinancialinstru-mentsaccountingstandards,PBCAEdecreased$68million,or11%,fromthepriorquarter.Thedecreaseprimarilyreflectedimproveddisabilityclaimsexperiencethisquarter,lowertravelclaimsexperiencelargelyduetoseasonalfactors,andafavour-ableactuarialliabilityadjustmentthisquarter.Thesefactorswerepartiallyoffsetbyhighercostsinsupportofbusinessgrowth.

Insurancepolicyholderbenefits,claimsandacquisitionexpense



(C$millions) 2007 2007 2006 2007 2006

Insurancepolicyholderbenefitsandclaims $ 189 $ 524 $ 459 $ 1,082 $ 1,470 Insurancepolicyholderacquisitionexpense 154 153 168 454 428

Insurancepolicyholderbenefits,claimsandacquisitionexpense $ 343 $ 677 $ 627 $ 1,536 $ 1,898

Provisionfor(recoveryof)creditlosses



(C$millions) 2007 2007 2006 2007 2006

Residentialmortgages $ – $ 1 $ – $ 3 $ 4Personal 79 96 60 266 220Creditcards 58 59 36 166 123

Consumer $ 137 $ 156 $ 96 $ 435 $ 347Businessandgovernment 38 39 1 97 (22)

Specificprovision $ 175 $ 195 $ 97 $ 532 $ 325Generalprovision 3 (7) 2 (4) (55)

Provision for credit losses $ 178 $ 188 $ 99 $ 528 $ 270

SpecificPCLasa%ofaverageloansandacceptances .29% .35% .18% .31% .21%


Incometaxes



(C$millions,exceptpercentageamounts) 2007 2007 2006 2007 2006

Netincomebeforeincometaxes $ 1,794 $ 1,656 $ 1,619 $ 5,403 $ 4,580Incometaxexpense 349 353 381 1,137 1,061

Effectiveincometaxrate(1) 19.5% 21.3% 23.5% 21.0% 23.2%

(1) Incometaxesasapercentageofnetincomebeforeincometaxes.

Q32007vs.Q32006Incometaxexpensedecreased$32million,or8%,fromayearago,despitehigherearningsbeforeincometaxes,primarilyreflectingarecoveryofincometaxesduetoafavourabletaxsettlementinthecurrentquarter.Theeffectiveincometaxrateof19.5%inthecurrentquartercomparedfavourablyto23.5%ayearago.Thelowereffectiveincometaxrateinthecurrentquarterwaslargelyduetoahigherlevelofincomefromtax-advantagedsources(Canadiantaxablecorporatedividends),higherearn-ingsreportedbyoursubsidiariesoperatinginjurisdictionswithlowerincometaxratesandthefavourabletaxsettlement.

Q32007vs.Q32006(Ninemonthsended)Incometaxexpenseincreased$76million,or7%,fromayearagolargelycommensuratewithhigherearningsbeforeincome

taxes.Theeffectiveincometaxrateof21.0%inthecurrentperiodcomparedfavourablyto23.2%ayearago.Thedecreaseintheeffectiveincometaxratewaslargelyduetohigherearningsreportedbyoursubsidiariesoperatinginjurisdictionswithlowerincometaxratesandahigherlevelofincomefromtax-advantagedsources.Bothperiodswerealsofavourablyimpactedbythereversalofamountsaccruedinprioryearsduetofavourableincometaxsettlements.

Q32007vs.Q22007Incometaxesdecreased$4million,or1%,overthepriorquarterdespitehigherearningsbeforeincometaxes.Theeffectiveincometaxrateinthecurrentperiodwas19.5%andcomparesfavourablyto21.3%inthepriorquarter.

Ourquarterlyearnings,revenueandexpensesareimpactedbyanumberoftrendsandrecurringfactors,whichincludeseasonality,andgeneraleconomicandmarketconditions.Forfurtherdetails,refertopage43ofour2006AnnualReport.

Thefollowingtablesummarizesourresultsfortheninemostrecentlycompletedquarters.

2007 2006 2005

(C$millions,exceptpershareamounts) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

Netinterestincome $ 1,978 $ 1,901 $ 1,867 $ 1,731 $ 1,766 $ 1,617 $ 1,682 $ 1,763 $ 1,663 Non-interestincome 3,502 3,768 3,831 3,618 3,440 3,505 3,278 3,033 3,266

Total revenue $ 5,480 $ 5,669 $ 5,698 $ 5,349 $ 5,206 $ 5,122 $ 4,960 $ 4,796 $ 4,929 Non-interestexpense 3,165 3,148 3,067 2,955 2,861 2,928 2,751 3,310 2,732 Provisionforcreditlosses 178 188 162 159 99 124 47 103 128 Insurancepolicyholderbenefits, claimsandacquisitionexpense 343 677 516 611 627 619 652 740 681 Businessrealignmentcharges – – – – – – – 40 1

Netincomebeforeincometaxesand non-controllinginterestinsubsidiaries$ 1,794 $ 1,656 $ 1,953 $ 1,624 $ 1,619 $ 1,451 $ 1,510 $ 603 $ 1,387 Incometaxes 349 353 435 342 381 348 332 90 392 Non-controllinginterestin netincomeofsubsidiaries 50 24 24 19 44 (25) 6 (30) (6)

Netincomefromcontinuingoperations $ 1,395 $ 1,279 $ 1,494 $ 1,263 $ 1,194 $ 1,128 $ 1,172 $ 543 $ 1,001Netincome(loss)fromdiscontinued operations – – – (1) (17) (10) (1) (21) (22)

Net income $ 1,395 $ 1,279 $ 1,494 $ 1,262 $ 1,177 $ 1,118 $ 1,171 $ 522 $ 979

Earningspershare–basic $ 1.07 $ .99 $ 1.16 $ .97 $ .91 $ .86 $ .90 $ .40 $ .75 –diluted $ 1.06 $ .98 $ 1.14 $ .96 $ .90 $ .85 $ .89 $ .39 $ .74

PeriodaverageUSDequivalent ofC$1.00(1) .937 .874 .861 .897 .896 .877 .865 .850 .810Period-endUSDequivalentofC$1.00 .937 .901 .850 .890 .884 .894 .878 .847 .817

(1) Averageamountsarecalculatedusingmonth-endspotratesfortheperiod.

Quarterlyresultsandtrendanalysis


TrendanalysisOurconsolidatednetincomehasconsistentlyexceeded$1billionoverthelastsevenquarters.Thefourthquarterof2005wasimpactedbytheEnronCorp.litigation-relatedprovisionandthehurricane-relatedcharges,whilethethirdquarterof2005includedalossof$22millionrelatedtodiscontinuedopera-tions.Thesestrongresultslargelyreflectedageneralincreaseinrevenueacrossallourbusinesssegments.Thispositivetrendwaspartiallyoffsetbythelowertranslatedvalueofforeigncurrency-denominatedrevenueandearningsasaresultofthestrengtheningoftheCanadiandollaragainsttheU.S.dollardur-ingmostoftheperiod,withtheeffectsbeingmorepronouncedinthecurrentquarter.

Ourresultswerealsoimpactedbyseveralacquisitionsduringtheperiod.Inaddition,certainassetsofRBCMortgage,whichhadbeenearlierclassifiedasdiscontinuedoperations,weresoldinthefourthquarterof2005.Wealsorecordeda$40millionbusinessrealignmentchargeinthefourthquarterof2005inadditiontothechargesrecordedin2004.

Non-interestexpenseincreasedoverthelastninequarters,largelyreflectingincreasedvariablecompensationonimprovedbusinessperformanceandhighercostsduetoincreasedbusi-nesslevelsandhigherspendinginsupportofourgrowthinitia-tives.Thefourthquarterof2005alsoincludedaprovisionforEnronCorp.litigation-relatedmatters.

Provisionforcreditlosseshasbeenatacyclicallylowlevelduringmostoftheperiod,primarilyreflectingagenerallybenigncreditenvironmentandfavourablecorporaterecoveries.However,ithasbeenincreasingoverthepastyearduetoportfoliogrowth,aswellasincreasinglossratesandhigher

impairments,bothofwhichhavetrendedtowardsmorenormal-izedlevels.Thedecreaseinprovisionsinthefirstquarterof2006wasprimarilyduetoa$50millionreversalofthegeneralallowanceinlightofthestrongcreditqualityofourcorporateloanportfolioatthattime.

Insurancepolicyholderbenefits,claimsandacquisitionexpense(PBCAE)hasfluctuatedconsiderablyovertheperiod.AlthoughunderlyingbusinessgrowthhasgenerallyincreasedPBCAE,therecanbesignificantquarterlyvolatilityresultingfromclaimsexperience,actuarialliabilityadjustmentsandcapitalmarketimpactsonequitiesbackinguniversallifepolicyholderfunds.Theimpactofthenewfinancialinstrumentsaccountingstandardsimplementedinthefirstquarterof2007introducedadditionalvolatilitytothisline.Otherthanclaimsexperienceandactuarialliabilityadjustments,theseitemsarepredomi-natelyoffsetinInsurance-relatedrevenue.Aswell,thefourthquarterof2005andthefirstquarterof2006wereimpactedbyhurricane-relatedcharges.

Incometaxrateshavegenerallytrendeddownwardfrom28.3%to19.5%overtheperiod,despitehigherearningsbeforeincometaxesfromcontinuingoperations.Thislargelyreflectedhigherearningsreportedbyoursubsidiariesoperatinginlowerincometaxjurisdictions,higherincomefromtax-advantagedsources(Canadiantaxablecorporatedividends),andfavourableincometaxsettlementsinthefirstquarterof2006andsecondandthirdquartersof2007.

Non-controllinginterestinnetincomeofsubsidiariesfluctuatedovertheperiod,whichdependsonthenetincomeattributedtothird-partyinvestorsinentitiesinwhichwedonothave100%ownership,butarerequiredtoconsolidate.

Accountingmattersandcontrols

CriticalaccountingpoliciesandestimatesOurunauditedInterimConsolidatedFinancialStatementshavebeenpreparedinaccordancewithCanadianGAAP.ThesignificantaccountingpoliciesaredescribedinNote1toourunauditedInterimConsolidatedFinancialStatementsandNote1onpages106to110ofour2006AnnualReport.Ourcriticalaccountingpoliciesandestimatesrelatedtotheallowanceforcreditlosses,fairvalueoffinancialinstruments,securitization,variableinterestentities,pensionsandotherpost-employmentbenefits,incometaxes,andother-than-temporaryimpairmentofinvestmentsecuritiesaredetailedonpages33to37ofour2006AnnualReport.

ChangesinaccountingpoliciesorestimatesFinancial Instruments OnNovember1,2006,weadoptedthreenewaccountingstandardsthatwereissuedbytheCICA:HandbookSection1530,Comprehensive Income,HandbookSection3855,Financial Instruments – Recognition and Measurement,andHandbookSection3865,Hedges,whicharediscussedinNote1toour

unauditedInterimConsolidatedFinancialStatements.Thesestandards,andtheimpactonourresultsofoperations,arealsodiscussedintheImpactofthenewfinancialinstrumentsaccountingstandardssection.

Variable Interest Entities (VIEs) OnFebruary1,2007,weadoptedCICAEmergingIssuesCommitteeAbstractNo.163,Determining the Variability to be Considered in Applying AcG-15(EIC-163).EIC-163providesadditionalclarificationonhowtoanalyzeandconsolidateVIEs.TheimplementationofEIC-163resultedinthedeconsolidationofcertaininvestmentfunds,buttheimpactwasnotmaterialtoourconsolidatedfinancialpositionorresultsofoperations.

InternalcontroloverfinancialreportingNochangesweremadeinourinternalcontroloverfinancialreportingduringtheinterimperiodendedJuly31,2007,thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.


U.S.&InternationalBankingcomprisesourbankingbusi-nessesoutsideCanada,includingRBCCenturaintheU.S.andRBC’sCaribbeanbankingoperations.Inaddition,thissegmentincludestheresultsfromour50%ownershipinRBCDexiaIS.

CapitalMarketscomprisesourglobalwholesalebankingsegmentprovidingawiderangeofcorporateandinvestmentbanking,salesandtrading,researchandrelatedproductsandservicestocorporations,publicsectorandinstitutionalclientsinNorthAmerica,andspecializedproductsandservicesinselectglobalmarkets.Also,giventhegrowthinourNationalClientsbusiness,wetransferredthisbusinessinthesecondquarterof2007toourGlobalInvestmentBankingandEquityMarketsbusinesslinefromourOtherbusinessline.

Historicalcomparativesegmentfinancialinformationhasbeenrevisedtoreflecttheabovechanges.Therestatedhistori-calsegmentfinancialinformationdidnotimpactourpreviouslyreportedconsolidatedfinancialinformation.

Thefollowingsectionprovidesanoverviewofhowwemeasuretheperformanceofandreporttheresultsofourbusinesssegments.

Periodically,certainbusinessesand/orsubsidiariesaretransferredbetweensegmentstoalignmorecloselywithourorganizationalstructureandstrategicpriorities.Wherethesetransfersaredeemedmaterial,comparativeamountsarerestated.

Newbusinesssegmentseffectivesecondquarter2007EffectiveFebruary7,2007,ourpreviousthreebusinessseg-ments(RBCCanadianPersonalandBusiness,RBCU.S.andInternationalPersonalandBusiness,andRBCCapitalMarkets)werereorganizedintofourbusinesssegmentsandrenamed:

CanadianBankingcomprisesourdomesticpersonalandbusinessbankingoperations,certainretailinvestmentbusi-nessesandourglobalinsuranceoperations.

WealthManagementcomprisesbusinessesthatdirectlyserveourclients’growingwealthmanagementneedsincludingthoseofaffluentandhighnetworthclientsglobally,andbusi-nessesthatprovideassetmanagementandtrustproducts.

Businesssegmentresults

Ourmanagementreportingframeworkisintendedtomeasuretheperformanceofeachbusinesssegmentasifitwasastand-alonebusinessandreflectthewaythebusinesssegmentsaremanaged.Thisapproachisintendedtoensurethatourbusinesssegments’resultsreflectallrelevantrevenueandexpensesassociatedwiththeconductoftheirbusinessanddepictshowmanagementviewstheirresults.

Thekeymethodologiesandassumptionsusedinourman-agementreportingframeworkareexpenseallocation,capitalattribution,fundstransferpricingandtaxableequivalentbasis(teb)forrevenuerecognition,andareoutlinedintheHowwemanageourbusinesssegmentssectionofour2006AnnualReport.Managementperiodicallyreviewsthesekeymethodolo-giesandassumptionstoensurethattheyremainvalid.

Wealsouseandreportcertainnon-GAAPfinancialmea-sures,consistentwithourmanagementframework.Thesemea-suresdonothavestandardizedmeaningsunderGAAPandarenotnecessarilycomparablewithsimilarinformationreportedbyotherfinancialinstitutions.

Changesmadeinthefirstninemonthsof2007Inthethirdquarter,wereclassifiedcertaindepositsreportedinCapitalMarketsandU.S.&InternationalBankingrelatedtoRBCDexiaIS,inaccordancewiththeQ22007businessrealign-ment.Thisreclassificationdidnotimpacttheconsolidatedbal-ancesheet.

Aswell,inthethirdquarter,wereclassifiedexpensesrelatedtointernallydevelopedsoftwarefromNon-interestexpense–OthertomorespecificNon-interestexpenselines.Allrelatedcomparativeamountshavebeenrestatedtoreflectthisreclassification,whichimpactedtheCorporateSupportsegmentonly,andhadnoimpactontotalNon-interestexpense.

Inthefirstquarterof2007,withinCanadianBanking,certainamountsrelatedtotrusteeserviceshavebeenreclas-sifiedfromNon-interestincome–InvestmentmanagementandcustodialfeestoNetinterestincometobetterreflecttheirnature.Allcomparativeamountshavebeenrestatedtoreflectthisreclassification.

Howwemeasureandreportourbusinesssegments


Wemeasureandevaluatetheperformanceofourconsolidatedoperationsandeachbusinesssegmentusinganumberoffinan-cialmetricssuchasnetincome,returnonaveragecommonequity(ROE)andreturnonaverageriskcapital(RORC).WhilenetincomeisinaccordancewithGAAP,theothersareconsiderednon-GAAPfinancialmeasures,whichdonothavestandardizedmeaningsunderGAAPandmaynotbecomparabletosimilarmeasuresusedbyotherfinancialinstitutions.Forfurtherdetails,refertotheHowwemanageourbusinesssegmentsandKeyfinancialmeasures(non-GAAP)sectionsinour2006AnnualReport.

ReturnonequityandReturnonriskcapitalWeuseROEandRORC,atboththeconsolidatedandsegmentlevels,asameasureofreturnontotalcapitalinvestedinourbusinesses.

OurquarterlyconsolidatedROEcalculationisbasedonannualizedquarterlynetincomeavailabletocommonshare-holdersdividedbytotalaveragecommonequityfortheperiod,whichexcludespreferredshares.OurquarterlybusinesssegmentROEcalculationsarebasedonannualizedsegmentnetincomeavailabletocommonshareholdersdividedbyaverageattributedcapitalfortheperiod.Foreachsegment,averageattributedcapitalisbasedonattributedriskcapitalandamountsinvestedingoodwillandintangibles.

Keyperformanceandnon-GAAPmeasures

Forthefirstninemonthsof2007,comparedtothepriornine-monthperiod,theCanadiandollarappreciated1%onaveragerelativetotheU.S.dollar,depreciated8%onaveragerelativetotheGBP,anddepreciated7%onaveragerelativetotheEuro.Asaresultoftheimpactofthechangesintherespec-tiveexchangeratesfromlastyear,WealthManagementnetincomedecreased$2million,U.S.&InternationalBankingnetincomeincreased$2million,whileCapitalMarketsnetincomeincreased$4million.

ForthethreemonthsendedJuly31,2007,comparedtolastquarter,theCanadiandollarappreciated7%onaveragerelativetotheU.S.dollar,appreciated6%onaveragerelativetotheGBPandappreciated6%onaveragerelativetotheEuro.Asaresultoftheimpactofthechangesintherespectiveexchangeratesfromlastquarter,WealthManagementnetincomedecreased$5million,U.S.&InternationalBankingnetincomewasdown$5million,whileCapitalMarketsnetincomedecreased$20million.

ThetranslatedvalueofourbusinesssegmentresultsisimpactedbyfluctuationsintherespectiveexchangeratesrelativetotheCanadiandollar.WealthManagement,U.S.&InternationalBankingandCapitalMarketseachhavesignifi-cantU.S.dollar-denominatedoperations,U.S.&InternationalBankingalsohasmaterialEuro-denominatedresultsrelatedtoRBCDexiaIS,andCapitalMarketsalsohassignificantGBP-denominatedoperations.

ForthethreemonthsendedJuly31,2007,comparedtoayearago,theCanadiandollarappreciated5%onaveragerela-tivetotheU.S.dollar,depreciated3%onaveragerelativetotheGBP,anddepreciated1%onaveragerelativetotheEuro.Asaresultoftheimpactofthechangesintherespectiveexchangeratesfromlastyear,WealthManagementnetincomewasdown$3million,U.S.&InternationalBankingnetincomewasdown$2million,whileCapitalMarketsnetincomeremainedflat.

Impactofforeignexchangeratesonourbusinesssegments


ReturnonequityandReturnonriskcapital

Forthethreemonthsended Forthethreemonthsended

July 31 April30 July31

2007 2007 2006 U.S. & (C$millions, Canadian Wealth International Capital Corporateexceptpercentageamounts)(1),(2) Banking Management Banking Markets Support Total Total Total

Netincomefromcontinuing operations $ 699 $ 177 $ 87 $ 360 $ 72 $ 1,395 $ 1,279 $ 1,194Netlossfromdiscontinued operations – – – – – – – (17)

Netincome $ 699 $ 177 $ 87 $ 360 $ 72 $ 1,395 $ 1,279 $ 1,177 less:Preferreddividends (10) (3) (4) (6) (3) (26) (22) (13)

Netincomeavailabletocommon shareholders $ 689 $ 174 $ 83 $ 354 $ 69 $ 1,369 $ 1,257 $ 1,164Averageequity $ 8,650 $ 2,350 $ 3,650 $ 4,800 $ 2,800 $ 22,250 $21,950 $20,050 less:Unattributedcapital – – – – 1,800 1,800 1,700 2,300 less:Goodwillandintangible capital 2,150 1,150 1,550 900 – 5,750 5,600 4,800Averageriskcapital(2) $ 6,500 $ 1,200 $ 2,100 $ 3,900 $ 1,000 $ 14,700 $14,650 $12,950

Returnonequity(ROE) 31.6% 29.4% 9.0% 29.3% 9.8% 24.4% 23.5% 23.1%Returnonriskcapital(RORC) 41.9% 58.6% 15.5% 35.9% n.m. 36.9% 35.2% 35.7%

Forthenine Fortheninemonthsended monthsended

July 31 July31

2007 2006 U.S. & (C$millions, Canadian Wealth International Capital Corporateexceptpercentageamounts)(1),(2) Banking Management Banking Markets Support Total Total

Netincomefromcontinuing operations $ 2,088 $ 582 $ 221 $ 1,106 $ 171 $ 4,168 $ 3,494Netlossfromdiscontinued operations – – – – – – (28)

Netincome $ 2,088 $ 582 $ 221 $ 1,106 $ 171 $ 4,168 $ 3,466 less:Preferreddividends (25) (7) (10) (15) (7) (64) (34)

Netincomeavailabletocommon shareholders $ 2,063 $ 575 $ 211 $ 1,091 $ 164 $ 4,104 $ 3,432Averageequity $ 8,600 $ 2,350 $ 3,350 $ 4,850 $ 2,700 $ 21,850 $19,700 less:Unattributedcapital – – – – 1,750 1,750 2,350 less:Goodwillandintangible capital 2,150 1,200 1,350 900 – 5,600 4,750Averageriskcapital(2) $ 6,450 $ 1,150 $ 2,000 $ 3,950 $ 950 $ 14,500 $12,600

Returnonequity(ROE) 32.1% 32.7% 8.4% 30.2% 8.0% 25.1% 23.3%Returnonriskcapital(RORC) 42.9% 65.9% 14.2% 36.7% n.m. 37.9% 36.4%

(1) TheAverageriskcapitalandGoodwillandintangiblecapital,averageattributedcapitalandaveragecapitalfiguresshownaboveandthroughoutthisdocumentrepresentroundedfigures.Theseamountsarecalculatedusingmonth-endbalancesfortheperiod.TheROEandRORCmeasuresshownaboveandthroughoutthisdocumentarebasedonactualbalancesbeforerounding.

(2) AverageriskcapitalincludesCredit,Market(tradingandnon-trading),Insurance,OperationalandBusiness,andfixedassetriskcapital.ForfurtherdetailsrefertoEconomicCapitalintheCapitalmanagementsection.

n.m. notmeaningful

OurquarterlyRORCcalculationsarebasedonannualizednetincomeavailabletocommonshareholdersdividedbyattrib-utedriskcapital(whichexcludesgoodwillandintangiblecapitalandunattributedcapital).ThebusinesssegmentROEandRORCmeasuresareviewedbymanagementasusefulmeasures

forsupportinginvestmentandresourceallocationdecisionsbecausetheyidentifycertainitemsthatmayaffectcomparabil-itybetweenbusinesssegmentsandcertaincompetitors.

ThefollowingtableprovidesareconciliationoftheROEandRORCcalculations.


CapitalMarketstotalrevenue(teb)excludingrevenuerelatedtoConsolidatedVariableInterestEntities(VIEs)WeconsolidatecertainentitiesinaccordancewithCICAAcG-15,Consolidation of Variable Interest Entities(VIEs).ConsolidationofaVIEisbasedonourexposuretovariabilityintheVIE’sassetsandnotonwhetherwehavevotingcontrol.RevenueandexpensesfromcertainoftheseVIEshavebeenincludedinCapitalMarketsresults.However,theamountsthathavebeenconsolidated,whichareattributabletootherequityinvestorsintheseVIEs,areoffsetinNon-controllinginterestinnetincomeofsubsidiariesandhavenoimpactonourreportednetincome.

Astheamountsattributabletootherequityinvestorsdonothaveanimpactonourreportednetincome,managementbelievesthatidentifyingtheseitemsenhancesthecomparabilityofCapitalMarketsresultsandrelatedratiosandenablesamoremeaningfulcomparisonofourfinancialperformancewithcer-tainotherfinancialinstitutions.Astheexpensesarenotviewedasmaterial,wehaveonlyidentifiedrevenueattributedtootherequityinvestors.

Thefollowingtableprovidesareconciliationoftotalrevenue(teb)excludingVIEsforCapitalMarkets.

CapitalMarkets



(C$millions) 2007 2007 2006 2007 2006

Total revenue (teb)(1) $ 1,158 $ 1,182 $ 1,022 $ 3,570 $ 3,128RevenuerelatedtoVIEsoffsetinNon-controllinginterest(2) 13 8 32 32 (11)

Total revenue (teb) excluding VIEs $ 1,145 $ 1,174 $ 990 $ 3,538 $ 3,139

(1) Taxableequivalentbasis.Forfurtherdiscussion,refertotheHowwemanageourbusinesssegmentssectionofour2006AnnualReport.(2) RepresentsrevenueattributedtootherequityinvestorsofconsolidatedVIEs.

Fortheninemonthsended

July 31 July31

(C$millions,exceptpercentageamounts) 2007 2006 Change

Total revenue $ 16,847 $ 15,288 add:tebadjustment 215 163 less:RevenuerelatedtoVIEs 32 (11) less:GlobalInsurancerevenue 2,305 2,485 less:Impactofthenewfinancialinstrumentsaccountingstandards(1) 88 –

Total revenue (adjusted) $ 14,637 $ 12,977 12.8%

Non-interest expense $ 9,380 $ 8,540 less:GlobalInsurance-relatednon-interestexpense 400 375

Non-interest expense (adjusted) $ 8,980 $ 8,165 10.0%

Operating leverage for the nine months ended July 31, 2007 2.8%

(1) ExcludestheimpactofthenewfinancialinstrumentsaccountingstandardsrelatedtoGlobalInsurance.

OperatingleverageOuroperatingleverageisdefinedasthedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Revenueisbasedonataxableequiv-alentbasis,whiletheimpactofconsolidatedVIEsisexcludedastheyhavenomaterialimpactonourearnings.GlobalInsurancerevenueandcertainaccountingadjustmentsrelatedtothenewfinancialinstrumentsaccountingstandardsarealsoexcludedfromrevenue.Non-interestexpenseexcludesGlobalInsuranceexpense.GlobalInsuranceresultsareexcludedas

certainchangesinrevenuecanbelargelyoffsetinInsurancepolicyholderbenefits,claimsandacquisitionexpense,whichisnotcapturedinouradjustedoperatingleveragecalculation.Theimpactofthenewfinancialinstrumentsaccountingstandardsisexcludedasitgivesrisetoaccountingvolatility,primarilyrelatingtounrealizedgainsandlossesarisingfromfairvaluingoftheinstrumentsandisnotviewedasameasureofeconomicperformance.

ThefollowingtableshowstheadjustedoperatingleverageratiocalculationfortheninemonthsendedJuly31,2007.

ConsolidatedrevenueandInsurance-relatedresultsexcludingtheimpactofthenewfinancialinstrumentsaccountingstandardsandcertainotheritemsInthefirstninemonthsof2007and2006,therewerecertainitemsthatimpactedTotalconsolidatedrevenue,Insurancepremiums,investmentandfeeincome,theInsurancepolicyholderbenefits,claimsandacquisitionexpenseincomestatementlines,andtheassociatedbusinesslineandsegmentresultsunderwhichtheyarealsoreported.Managementbelievesthatidentifyingtheseitemsenhancesthecomparabilityofourresults,andenablesamoremeaningfulcomparisonofourfinancialperformancewithcertainotherfinancialinstitutions.Thefollowingprovidesthedetailsandareconciliation.

Impact of the new financial instruments accounting standards ForthethreeandninemonthsendedJuly31,2007,werecordedanetlossof$212millionandanetlossof$227million,respec-tively,relatedtotheimpactofchangesininterestratesonthefairvaluationofthesecuritiesbackingourlifeandhealthinsur-anceliabilities.TheseamountswererecordedinInsurance-relatedrevenueandwerelargelyoffsetbycorrespondingchangesintheunderlyingliabilitiesthatwererecordedinInsurancepolicyholderbenefits,claimsandacquisitionexpense.Inaddi-tion,forthethreeandninemonthsendedJuly31,2007,werecordedanetgainof$23millionandanetgainof$88million,respectively,relatedtootheritemsincludingchangesinthefairvalueofvarioustradingportfoliosandstructurednotes,andthe


translationofcertainforeign-denominateddeposits.Forfurtherdetails,refertotheImpactofthenewfinancialinstrumentsaccountingstandardssection.Thenewfinancialinstrumentsaccountingstandardshavebeenimplementedprospectively,andthenetamounthadnosignificantimpactonourreportednetincome.

Impact of foreign currency translation adjustmentDuringthefirstquarterof2007,wereallocatedcertainforeigninvestmentcapitalfromourinternationalinsuranceoperations,whichhadsupportedourpropertycatastrophereinsurancebusiness,aswehavestrategicallyexitedthislineofbusiness.Werecognizedafavourableforeigncurrencytranslationadjust-mentof$40million(before-andafter-tax)associatedwiththis

capital.ThisamountwaspreviouslyrecordedinShareholders’equityandwasreclassifiedtoincomeinthefirstquarterof2007.

Results excluding hurricane-related chargesWerecordeda$61millioncharge(before-andafter-tax)inourinsurancebusinessinthefirstquarterof2006foradditionalestimatednetclaimsfordamagespredominantlyrelatedtoHurricaneWilma,whichoccurredinlateOctober2005.

Thefollowingtableprovidesareconciliationofconsolidatedrevenue,GlobalInsuranceandInsurance-relatedresultsexclud-ingtheimpactsofthenewfinancialinstrumentsaccountingstandardsandtheitemsnotedabove.

Forthethreemonthsended

July 31 April30

2007 2007 Insurance Insurance Insurance policyholder Insurance policyholder Global premiums, benefits, claims Global premiums, benefits,claims Consolidated Insurance investment and and acquisition Consolidated Insurance investmentand andacquisition(C$millions) revenue (1) revenue (2) fee income (1) expense(1) revenue(1) revenue(2) feeincome(1) expense(1)

GAAPreportedamounts $ 5,480 $ 590 $ 590 $ 343 $ 5,669 $ 855 $ 855 $ 677Exclude: Impactofthenew financialinstruments accountingstandards 189 212 212 208 (87) (55) (55) (58)

Amountsexcludingtheimpacts ofthenewfinancialinstruments accountingstandardsand certainitemsnotedabove $ 5,669 $ 802 $ 802 $ 551 $ 5,582 $ 800 $ 800 $ 619


July 31 July31

2007 2006 Insurance Insurance Insurance policyholder Insurance policyholder Global premiums, benefits, claims Global premiums, benefits,claims Consolidated Insurance investment and and acquisition Consolidated Insurance investmentand andacquisition(C$millions) revenue (1) revenue (2) fee income (1) expense(1) revenue(1) revenue(2) feeincome(1) expense(1)

GAAPreportedamounts $ 16,847 $ 2,305 $ 2,265 $ 1,536 $15,288 $ 2,485 $ 2,485 $ 1,898Exclude: Impactofthenew financialinstruments accountingstandards 139 227 227 219 – – – – Impactofforeign currencytranslation adjustment – (40) – – – – – – Hurricane-related charges – – – – – – – (61)

Amountsexcludingtheimpacts ofthenewfinancialinstruments accountingstandardsand certainitemsnotedabove $ 16,986 $ 2,492 $ 2,492 $ 1,755 $15,288 $ 2,485 $ 2,485 $ 1,837

(1) Forfurtherdetails,refertotheFinancialperformancesection.(2) Forfurtherdetails,refertotheCanadianBankingsection.





Netinterestincome $ 1,605 $ 1,559 $ 1,498 $ 4,711 $ 4,286 Non-interestincome 1,302 1,521 1,477 4,357 4,362Total revenue $ 2,907 $ 3,080 $ 2,975 $ 9,068 $ 8,648 Non-interestexpense $ 1,356 $ 1,295 $ 1,254 $ 3,926 $ 3,741 Provisionforcreditlosses 190 204 121 576 431 Insurancepolicyholderbenefits,claimsandacquisitionexpense(PBCAE) 343 677 627 1,536 1,898Net income before income taxes and non-controlling interest in subsidiaries $ 1,018 $ 904 $ 973 $ 3,030 $ 2,578Net income $ 699 $ 618 $ 660 $ 2,088 $ 1,751

Revenue by business line PersonalFinancialServices(1) $ 1,284 $ 1,262 $ 1,197 $ 3,783 $ 3,420 BusinessFinancialServices(1) 585 552 541 1,692 1,582 CardsandPaymentSolutions(1) 448 411 416 1,288 1,161 GlobalInsurance 590 855 821 2,305 2,485

Selected average balances and other information (2) Returnonequity (3) 31.6% 29.0% 32.6% 32.1% 29.3% Netinterestmargin (4) 3.15% 3.25% 3.26% 3.19% 3.21% Operatingleverage(Banking-relatedoperations)(5) (.9)% 9.6% 3.9% 4.9% 4.6% Totalearningassets (6) $ 202,200 $ 196,800 $ 182,500 $ 197,200 $ 178,300 Loansandacceptances(6) 202,400 195,900 182,300 196,600 177,100 Deposits 147,200 145,100 140,600 146,100 137,900 Assetsunderadministration 51,200 49,700 42,100 51,200 42,100 Assetsundermanagement 300 300 300 300 300 Grossinsurancepremiumsanddeposits 889 816 860 2,600 2,542

Banking-related operations (1) Totalrevenue $ 2,317 $ 2,225 $ 2,154 $ 6,763 $ 6,163 Provisionforcreditlosses 190 204 121 576 431 Non-interestexpense 1,219 1,160 1,123 3,526 3,366 Netincome 596 566 599 1,748 1,555Global insurance Totalrevenue $ 590 $ 855 $ 821 $ 2,305 $ 2,485 Insurancepolicyholderbenefits,claimsandacquisitionexpense(PBCAE) 343 677 627 1,536 1,898 Non-interestexpense 137 135 131 400 375 Netincome 103 52 61 340 196

(1) TheBanking-relatedoperationsofCanadianBankingcomprisethefollowing:PersonalFinancialServices,BusinessFinancialServices,andCardsandPaymentSolutions.(2) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(3) BusinesssegmentReturnonequityisanon-GAAPfinancialmeasureandiscalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.Forfurther

discussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.(4) Netinterestmargin(NIM)iscalculatedasNetinterestincomedividedbyAverageearningassets.Averageearningassetsarecalculatedusingmethodsintendedtoapproximatetheaverageof

thedailybalancesfortheperiod.(5) Definedasthedifferencebetweenrevenuegrowthrateandnon-interestexpensegrowthrateforBanking-relatedoperations.(6) Totalearningassets,andloansandacceptancesincludeaveragesecuritizedresidentialmortgagesandcreditcardsforthethreemonthsendedJuly31,2007,of$18.7billionand$3.7billion,

respectively.(April30,2007–$18.5billionand$3.7billion;July31,2006–$16.0billionand$3.7billion.)

Q32007vs.Q32006Netincomeof$699millionincreased$39million,or6%,fromayearago.TheincreasewasattributabletoimprovedresultsinGlobal InsuranceprimarilyduetofavourabledisabilityclaimsexperiencethisquarterandsolidgrowthinourEuropeanlifereinsurancebusiness.Banking-relatedoperationsnetincomedecreasedslightlyfromayearago,assolidgrowthinloansanddepositswasoffsetbyhighercostsinsupportofbusinessgrowthandinvestmentinfuturegrowth,increasedprovisionsforcreditlosses,aswellasnarrowerinterestmargin.

Banking-related operations Banking-relatedoperationsnetincomewasdown$3million.

Totalrevenuewasup$163million,or8%,overtheprioryear.Theincreasewasmainlyattributabletostrongvolumegrowthacrossallbusinesses,reflectingthesuccessfulexecutionofourgrowthinitiativesandgenerallyfavourabledomesticmarketconditions.

Personal Financial Services revenuewasup$87million,or7%.Theincreaselargelyreflectedcontinuedstronggrowthinhomeequitylendingandhigherdepositbalancesmainlyduetothesuccessofrecentlylaunchedproductandserviceofferings.Highermutualfunddistributionfeesonstrongnetsalesandcapitalappreciationinourretailinvestmentbusiness,aswellashighertradingvolumesinourdirectinvestingbusiness,alsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyspreadcompressionondeposits.

Business Financial Services revenueincreased$44million,or8%,primarilyattributabletosolidloananddepositgrowth,partiallyoffsetbylowerspreadsondeposits.

Cards and Payment Solutionsrevenuewasup$32million,or8%,largelyattributabletostrongbalanceandtransactiongrowthandimprovedspreads,partiallyoffsetbyhighercustomerloyaltyrewardprogramcosts.

Netinterestmargindecreased11bpscomparedtotheprioryear,primarilyduetotheimpactofchangeinproductmixandlowerspreadsonmortgagesandpersonaldeposits.

CanadianBanking


Non-interestexpensewasup$102million,or8%,primarilyreflectinghighercostsinsupportofourgrowthinitiativesandinvestmentinfuturegrowth.Theseadditionalcostsreflecteda6%increaseinsalesandservicepersonnel,ourde novobranchexpansionandbranchupgradeprograms,aswellashighersys-temdevelopmentcosts.Highersundrylossesalsocontributedtotheincrease.

Provisionforcreditlossesincreased$69million,or57%,fromayearago,whichhadbeenatacyclicallylowlevel,andhastrendedtowardsamorenormalizedlevelthisyear.Theincreasewaslargelyattributabletohigherprovisionsinourcreditcardandpersonalunsecuredcreditlinesportfolios,primarilyreflect-inghigherlossratesandportfoliogrowth.Higherprovisionsinoursmallbusinessandcommercialloanportfoliosmainlyduetoincreasedimpairmentalsocontributedtotheincrease.

Global InsuranceGlobalInsurancenetincomeincreased$42million,or69%,fromayearago,largelydrivenbyfavourabledisabilityclaimsexperience,andsolidgrowthinourEuropeanlifereinsurancebusiness.Afavourableactuarialliabilityadjustmentthisquarterreflectingachangeinourinvestmentportfoliostrategyalsocontributedtotheincrease.ForadetaileddiscussionregardingInsurance-relatedrevenueandInsurancepolicyholderbenefits,claimsandacquisitionexpense,refertotheFinancialperformancesection.

Q32007vs.Q32006(Ninemonthsended)Netincomeincreased$337million,or19%,fromayearago,largelydrivenbystrongresultsacrossallbusinesses,reflectingtheongoingsuccessfulexecutionofourgrowthinitiativesandeffectivecost-containmentefforts.Ourresultsalsoreflectedtheprioryearhurricane-relatedchargesandafavourableadjust-mentrelatedtothereallocationofcertainforeigninvestmentcapitalinthecurrentperiod.Thegrowthinnetincomewaspar-tiallyoffsetbyhighercostsinsupportofbusinessgrowthandincreasedprovisionsforcreditlosses.

Banking-related operations Banking-relatedoperationsnetincomewasup$193million,or12%,largelyattributabletosolidgrowthacrossallbusinesses.

Totalrevenueincreased$600million,or10%,overtheprioryear,reflectingstronggrowthinhomeequitylending,retailinvestments,businessloansanddepositsbalances,aswellascardbalancesandtransactionvolumes.

Netinterestmargindecreased2bpscomparedtotheprioryearlargelyreflectingtheimpactofchangeinproductmix.

Non-interestexpensewasup$160million,or5%,primarilyreflectinghighercostsinsupportofbusinessgrowth,includingincreasedsalesandservicepersonnel,aswellashighersystemdevelopment,marketingandpremisescosts.

Provisionforcreditlossesincreased$145million,or34%,fromthepriorperiod,whichhadbeenatacyclicallylowlevel,andhastrendedtowardsamorenormalizedlevelthisyear.Theincreasewasmainlyattributabletohigherprovisionsinourpersonalunsecuredcreditlinesandcreditcardportfolios,largelyreflectinghigherlossratesandportfoliogrowth.Higherprovisionsinoursmallbusinessandcommercialloanportfoliosmainlyreflectingincreasedimpairmentalsocontributedtotheincrease.

Global InsuranceGlobalInsurancenetincomeincreased$144million,or73%,comparedtotheprioryear.Theincreaselargelyreflectedtheprioryearhurricane-relatedcharges,andthefavourableimpactofanadjustmentrelatedtothereallocationofcertainforeigninvestmentcapitalinthefirstquarterof2007.SolidgrowthinourEuropeanlifereinsurancebusiness,andahigherleveloffavourablenetactuarialliabilityadjustmentsinthecurrentperiodalsocontributedtotheincrease.Thesefactorswerepar-tiallyoffsetbylowerincomefromourpropertycatastropherein-suranceoperationsaswenolongerunderwritenewbusiness.ForadetaileddiscussionregardingInsurance-relatedrevenueandInsurancepolicyholderbenefits,claimsandacquisitionexpense,refertotheFinancialperformancesection.

Q32007vs.Q22007Netincomeincreased$81million,or13%,comparedtothepriorquarteronimprovedresultsacrossallbusinessesbutprimarilyreflectingstrongerresultsinourGlobal InsuranceandCards and Payment Solutionsbusinesses.Global Insurance resultswereup,primarilyreflectingimproveddisabilityclaimsexperience.Banking-relatedoperationsresultswerealsoup,largelydrivenbyincreasedcardbalancesandtransactionvolumesduetobusinessgrowthandseasonalfactors.Growthinbusinessloansanddeposits,homeequitylendingandpersonaldeposits,lowerprovisionforcreditlosses,aswellasthefavourableimpactofadditionaldaysthisquarteralsocontributedtotheincrease.ThesefactorswerepartiallyoffsetbyhigherstaffingandpremisescostsinsupportofgrowthinourBanking-related operations,aswellasincreasedsundrylossesinthecurrentperiod.


Q32007vs.Q32006Netincomeincreased$41million,or30%,fromayearago.TheincreasewaslargelydrivenbycontinuedstrongearningsgrowthinourdomesticbusinessesandsolidearningsgrowthinourU.S.andotherinternationalbusinessesreflectingtheongoingsuccessfulexecutionofourgrowthinitiativesandgenerallyfavourablemarketconditions.Fee-basedrevenueincreasedasaresultofstronggrowthinclientassetsfromstrongnewsalesandcapitalappreciation,whiletransactionalandotherrevenueincreasedprimarilyduetohigherbrokeragevolumes.Thesefactorswerepartiallyoffsetbyincreasedvari-ablecompensationonhighercommission-basedrevenueandincreasedcostsinsupportofbusinessgrowth.

Totalrevenueincreased$163million,or19%,fromayearagowithallbusinesslinescontributingtothisresult.

Canadian Wealth Management revenueincreased$53mil-lion,or17%,mostlyduetogrowthinfee-basedclientassetsreflectingnetnewsales,capitalappreciationandtherecruitmentandretentionofexperiencedadvisors.Higherclienttransac-tionalvolumesinourbrokeragebusinessalsocontributedtotheincrease.

U.S. & International Wealth Managementrevenueincreased$80million,or19%.InU.S.dollars,revenuewasup$91million,or25%.Theincreaselargelyreflectedhigherclienttransac-tionalvolumesinourU.S.brokeragebusiness,theinclusionofourrecentacquisitionofJ.B.Hanauer,continuedgrowthinfee-basedclientassets,solidloananddepositgrowthinourinter-nationalwealthmanagementbusinessandaforeignexchangetranslationgainoncertaindeposits.Forfurtherdetailsregard-ingtheforeignexchangetranslationgain,refertotheImpactofthenewfinancialinstrumentsaccountingstandardssection.

Global Asset Management revenuewasup$30million,or26%,primarilyfromstrongnetmutualfundsalesandcapitalappreciation.

Non-interestexpenseincreased$101million,or16%,fromayearago.Theincreasereflectedhighervariablecompensationcommensuratewithhighercommission-basedrevenue,higherstaffinglevelsandothercostsinsupportofbusinessgrowth,includingourJ.B.Hanaueracquisition.

Q32007vs.Q32006(Ninemonthsended)Netincomeincreased$142million,or32%,fromayearagoreflectingstrongrevenuegrowthacrossallourbusinesses.Thiswaspartiallyoffsetbyhighervariablecompensationandincreasedcostsinsupportofourbusinessgrowth.Aforeignexchangetranslationgainoncertaindepositsalsocontributedtotheincrease.

Totalrevenuewasup$422million,or16%,largelyduetostronggrowthinfee-basedclientassetsacrossallbusinesses,reflectingnewsales,capitalappreciationandtherecruitmentofexperiencedadvisors.Highertransactionalvolumesinourbrokeragebusinesses,aforeignexchangetranslationgainoncertaindeposits,andsolidloananddepositgrowthinourinternationalwealthmanagementbusinessalsocontributedtotheincrease.

Non-interestexpenseincreased$229million,or12%,fromayearagomainlyduetohighervariablecompensationcommen-suratewithhighercommission-basedrevenue,higherstaffinglevelsandcostsinsupportofbusinessgrowth,includingouracquisitionofJ.B.Hanauer.

Q32007vs.Q22007Netincomedecreased$17million,or9%,fromthepreviousquarter.Solidgrowthinfee-basedclientassetsreflectedcontin-uedsolidnetnewsalesandcapitalappreciationandwasmorethanoffsetbythetraditionalseasonalslowdownintransactionvolumesinourbrokeragebusinessesandhighercostsinsup-portofgrowthinitiatives.

WealthManagement




Netinterestincome $ 106 $ 104 $ 99 $ 318 $ 296 Fee-basedrevenue(1) 545 524 446 1,571 1,283 Transactionalandotherrevenue(1) 355 380 298 1,117 1,005Total revenue $ 1,006 $ 1,008 $ 843 $ 3,006 $ 2,584 Non-interestexpense $ 747 $ 722 $ 646 $ 2,171 $ 1,942 Provisionforcreditlosses – – – – 1Net income before income taxes and non-controlling interest in subsidiaries $ 259 $ 286 $ 197 $ 835 $ 641Net income $ 177 $ 194 $ 136 $ 582 $ 440

Revenue by business line CanadianWealthManagement $ 369 $ 366 $ 316 $ 1,091 $ 956 U.S.&InternationalWealthManagement 493 508 413 1,509 1,284 GlobalAssetManagement 144 134 114 406 344

Selected other information Returnonequity (2) 29.4% 34.3% 24.7% 32.7% 27.5% Assetsunderadministration $ 505,100 $ 505,800 $ 458,300 $ 505,100 $ 458,300 Assetsundermanagement 159,600 158,700 133,800 159,600 133,800

(1) ReportedasNon-interestincome.(2) BusinesssegmentReturnonequityisanon-GAAPfinancialmeasureandiscalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.Forfurther

discussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.




(C$millions,exceptpercentageamounts)(1) 2007 2007 2006 2007 2006

Netinterestincome $ 263 $ 272 $ 240 $ 792 $ 702 Non-interestincome 259 221 191 668 497Total revenue $ 522 $ 493 $ 431 $ 1,460 $ 1,199 Non-interestexpense $ 389 $ 381 $ 307 $ 1,118 $ 904 Provisionforcreditlosses 17 10 5 37 20Net income before income taxes and non-controlling interest in subsidiaries $ 116 $ 102 $ 119 $ 305 $ 275Net income $ 87 $ 67 $ 82 $ 221 $ 182

Revenue by business line Banking $ 302 $ 309 $ 271 $ 887 $ 796 RBCDexiaInvestorServices(2) 220 184 160 573 403

Selected average balances and other information (3) Returnonequity(4) 9.0% 7.4% 12.3% 8.4% 10.1% Loansandacceptances $ 23,800 $ 23,700 $ 19,600 $ 22,900 $ 18,300 Deposits 35,100 35,600 34,100 34,100 28,200 Assetsunderadministration–RBCDexiaIS(5) 2,190,800 2,119,000 1,832,700 2,190,800 1,832,700

(1) In2006,resultsofthissegmentwerereportedonacontinuingoperationsbasis.(2) OnJanuary2,2006,wecombinedourInstitutional & Investor Services (IIS) businesswiththeinstitutionalinvestorservicebusinessofDexia,forminganewcompany,RBC Dexia IS.

As RBC Dexia ISreportsonacalendarquarter,thereisaone-monthlaginthereportingofitsearnings.(3) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(4) BusinesssegmentReturnonequityisanon-GAAPfinancialmeasureandiscalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.Forfurther

discussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.(5) Assetsunderadministration–RBCDexiaISrepresentsthetotalassetsunderadministration(AUA)ofthejointventure,ofwhichwehavea50%ownershipinterest.RBC Dexia ISwascreated

onJanuary2,2006,andwecontributedAUAof$1,400billiontothejointventureatthattime.AsRBC Dexia ISreportsonaone-monthlag,Assetsunderadministration–RBCDexiaISareasatJune30,2007.

Q32007vs.Q32006Netincomeincreased$5million,or6%,fromtheprioryear.TheincreasewaslargelyattributabletostrongrevenuegrowthinRBC Dexia ISandtheinclusionofourrecentacquisitionsofFlagandtheAmSouthbranches.Thesefactorsweremostlyoffsetbyhighercostsinsupportofbusinessgrowthandtheinclusionofourrecentacquisitions.

Totalrevenueincreased$91million,or21%,comparedtotheprioryear.

Bankingrevenuewasup$31million,or11%,overtheprioryear.InU.S.dollars,Bankingrevenueincreased$41million,or17%,largelyduetoloananddepositgrowthmainlyreflectingtheinclusionofFlagandtheAmSouthbranches.Theincreaseinrevenuealsoreflectedthe17U.S.de novo branchopeningssincethepriorperiod.

RBC Dexia IS revenueincreased$60million,or38%,primarilyduetogrowthincustodianandsecuritieslendingactivities,reflectingstrongmarketactivity,andtheacquisitionofnewcustomers,aswellasvolumegrowthwithexistingclients.

Non-interestexpenseincreased$82million,or27%,overtheprioryearinsupportofbusinessgrowth.ProcessingandstaffcostswereupatRBC Dexia IScommensuratewithincreasedbusinessvolume,whilehigherBankingcostsreflectedtheinclusionofourrecentacquisitionsandde novobranchopenings.

Provisionforcreditlosseswasup$12million,primarilyattributabletoahigherlevelofnetwrite-offsandincreasedimpairment,whichhadbeenatlowlevelsandhaverecentlytrendedtowardsmorenormalizedlevels.

Q32007vs.Q32006(Ninemonthsended)Netincomeincreased$39million,or21%,fromtheprioryear.TheincreasewasprimarilyattributabletostrongbusinessgrowthinRBC Dexia ISandtheinclusionofourrecentBanking acquisi-tions.AnadditionalmonthofresultsrelatingtoRBC Dexia ISreportedinthecurrentperiodalsocontributedtotheincrease.Thegrowthwaspartiallyoffsetbythelossrelatedtothesaleof

certaininvestmentsecuritiesinthefirstquarterof2007,doneaspartofthestrategicrestructuringofRBCCentura’sinvestmentportfoliotobettertakeadvantageofmarketopportunitiesandthegrowthinourbalancesheet.

Totalrevenueincreased$261million,or22%,fromayearago.TheincreasewasprimarilyattributabletoRBC Dexia IS,reflectingstrongmarketactivity,anadditionalmonthofresultsandbusinessgrowth.Bankingresultswerealsouplargelyduetoloananddepositgrowth,mainlyreflectingtheinclusionofourrecentacquisitions.ThesefactorswerepartiallyoffsetbyalossontherestructuringofRBCCentura’sinvestmentportfolioasnotedabove.

Non-interestexpenseincreased$214million,or24%,overtheprioryear.Theincreaselargelyreflectedhighercostsinsup-portofincreasedbusinessvolumesinRBC Dexia IS,theinclusionofourrecentacquisitionsandtherelatedintegrationcosts,andde novo branchopenings.HighercostsassociatedwithanadditionalmonthofresultsrelatingtoRBC Dexia IS,aswellasanincreaseinsalesandservicepersonnelinourbranchnetworkalsocontributedtotheincrease.

Provisionforcreditlosseswasup$17million,largelyduetoahigherlevelofnetwrite-offsandincreasedimpairment,whichhadbeenatlowlevelsandhaverecentlytrendedtowardsmorenormalizedlevels.

Q32007vs.Q22007Netincomeincreased$20million,or30%,comparedtothepreviousquarter.Theincreasepartiallyreflectedincreasedbusi-nessvolumesinRBC Dexia ISduetoseasonalfactors,strongmarketactivityandincreasedclientbase.Loweracquisition-relatedintegrationcosts,thefavourableimpactoftheadditionalnumberofdaysthisquarter,andafullquarterofresultsfromtheAmSouthbranchesin Bankingalsocontributedtotheincrease.ThesefactorswerepartiallyoffsetbyadecreaseinthetranslatedvalueofourU.S.dollar-andEuro-denominatedresultsduetothestrengtheningoftheCanadiandollar.

U.S.&InternationalBanking





Netinterestincome(teb)(1) $ 175 $ 169 $ 28 $ 400 $ 138 Non-interestincome 983 1,013 994 3,170 2,990Total revenue (teb) (1) $ 1,158 $ 1,182 $ 1,022 $ 3,570 $ 3,128 Non-interestexpense $ 693 $ 754 $ 648 $ 2,185 $ 1,959 Provisionfor(recoveryof)creditlosses (7) (5) (7) (20) (115)Net income before income taxes (teb) and non-controlling interest in subsidiaries (1) $ 472 $ 433 $ 381 $ 1,405 $ 1,284Net income $ 360 $ 350 $ 303 $ 1,106 $ 1,055

Revenue by business line GlobalMarkets $ 622 $ 682 $ 644 $ 2,108 $ 1,972 GlobalInvestmentBankingandEquityMarkets(2) 456 431 341 1,273 1,029 Other(2) 80 69 37 189 127

Selected average balances and other information(3) Returnonequity(4) 29.3% 28.5% 28.2% 30.2% 32.7% Tradingsecurities $ 154,300 $ 154,900 $ 129,100 $ 155,000 $ 130,400 Loansandacceptances 28,100 27,800 22,100 27,800 21,300 Deposits 124,700 130,400 102,200 127,000 106,800

(1) Taxableequivalentbasis.Forfurtherinformation,refertotheHowwemeasureandreportourbusinesssegmentssection.(2) EffectiveQ22007,wehavetransferredourNationalClientsbusiness,whichwaspreviouslyreflectedundertheOtherbusinessline,toourGlobalInvestmentBankingandEquityMarkets

businessline.Allcomparativeamountshavebeenrestatedtoreflectthistransfer.(3) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(4) BusinesssegmentReturnonequityisanon-GAAPfinancialmeasureandiscalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.Forfurther

discussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

CapitalMarkets

Q32007vs.Q32006Netincomeincreased$57million,or19%,fromayearagoonstrongperformanceacrossmostbusinesses.ThisperformancelargelyreflectedrobustM&Aandequityoriginationactivities,higherforeignexchangeandequitytradingresultsandgainsassociatedwithcreditderivativecontractsusedtoeconomicallyhedgeourcorporateloanportfolio.Thesefactorswerepartiallyoffsetbylowerfixedincometradingresults,whichwereaffectedbywideningcreditspreads,concernsovertheU.S.subprimemarketandreducedliquidityinthemarketlateinthisquarter.

Totalrevenue(teb)wasup$136million,or13%,comparedtotheprioryear.Totalrevenue(teb)excludingVIEswas$1,145million,up$155million,or16%,fromtheprioryear.ForareconciliationofTotalrevenue(teb)excludingVIEs,refertotheKeyperformanceandnon-GAAPmeasuressection.

Global Marketsrevenuewasdown$22million,or3%,mainlyduetolowertradingrevenueinourfixedincomebusinesses,whichwaspartiallyoffsetbyhigherforeignexchangeandequitytradingrevenue,thelatterduetoexpansionofcertaintradingstrategies.

Global Investment Banking andEquity Marketsrevenueincreased$115million,or34%,mostlyduetohigherM&AactivityinCanadaandtheU.S.andtheinclusionofRBCCarlinandRBCDaniels.Higherdistributionsonprivateequityinvestmentsandstrongerequityoriginationactivityacrossallgeographiesalsocontributedtotheincrease.

Otherrevenueincreased$43million,or116%,fromayearago,largelyreflectinggainsassociatedwithcreditderivativecontractsduetowideningcreditspreads.

Non-interestexpenseincreased$45million,or7%,fromayearagomainlyduetotheinclusionofourrecentacquisitionsandhighercostsinsupportofourgrowthinitiatives,includinghigherstaffinglevels.Thesefactorswerepartiallyoffsetbylowervariablecompensationinpartduetolowertradingresults.

Q32007vs.Q32006(Ninemonthsended)Netincomeincreased$51million,or5%,fromayearagoonstronggrowthacrossmostbusinessesduetogenerallyfavour-ablemarketconditions,businessexpansionandrecentacquisi-tions.Theincreasewasreducedbyareversalofthegeneralallowanceandhighercreditrecoveriesinthepriorperiod.

Totalrevenue(teb)wasup$442million,or14%,fromtheprioryearlargelyduetohigherequitytradingrevenuereflectingexpansionofcertaintradingstrategies,increasedU.S.andCanadianequityoriginationactivity,theinclusionofourrecentacquisitionsandhigherloansyndicationactivity.HigherprivateequitydistributionsandimprovedM&Aactivityalsocontributedtotheincrease.Totalrevenue(teb)excludingVIEswas$3,538million,up$399million,or13%,fromtheprioryear.

Non-interestexpenseincreased$226million,or12%,fromayearago,mainlyduetoincreasedcostsinsupportofbusinessgrowth,includinghigherstaffinglevelsandtheinclusionofourrecentacquisitions.Increasedvariablecompensationonhigherbusinessperformancealsocontributedtotheincrease.

Therecoveryofcreditlossesof$20millioninthecurrentperiodcomparestorecoveriesof$65millioninthepriorperiod.Thepriorperiodalsoincludeda$50millionreversalofthegen-eralallowance.

Q32007vs.Q22007Netincomeincreased$10million,or3%,comparedtothepriorquarter,despitea$20millionnegativeimpactofastrongerCanadiandollaronthetranslatedvalueofU.S.dollar-andGBP-denominatedearnings.Theincreasewasmainlyattributabletoreducedvariablecompensationduetoweakerperformanceincertainbusinesses.


ThereportedresultsfortheCorporateSupportsegmentmainlyreflectactivitiesthatareundertakenforthebenefitoftheorga-nizationthatarenotallocatedtothebusinesssegmentssuchascertainelementsofenterprisefunding,securitizationandthenetearningsassociatedwithunattributedcapital.TheresultsalsoincludeconsolidationadjustmentssuchastheeliminationofthetebadjustmentsrecordedinCapitalMarketsrelatedtothegross-upofincomefromCanadiantaxablecorporatedivi-

dendstotheirtaxequivalentvalue.Thetebadjustmentsarerecordedinnetinterestincomeandoffsetintheprovisionforincometaxes.

Duetothenatureofthecorporatelevelactivitiesandcon-solidationadjustmentsreportedinthissegment,webelievethataperiodoverperiodtrendanalysisisnotrelevant.Thefollowingidentifiesthesignificantitemsaffectingthereportedresultsineachrespectiveperiod.

CorporateSupport



(C$millions) 2007 2007 2006 2007 2006

Netinterestincome(teb)(1) $ (171) $ (203) $ (99) $ (475) $ (357) Non-interestincome 58 109 34 218 86Total revenue (teb) (1) $ (113) $ (94) $ (65) $ (257) $ (271) Non-interestexpense (20) (4) 6 (20) (6) Recoveryofcreditlosses (22) (21) (20) (65) (67)Net loss before income taxes and non-controlling interest in subsidiaries (teb) (1) $ (71) $ (69) $ (51) $ (172) $ (198)Net income $ 72 $ 50 $ 13 $ 171 $ 66

Selected average balance sheet and other information(2) Totalassets $ (7,100) $ (5,800) $ (5,600) $ (6,200) $ (5,300)Securitization Totalsecuritizationssoldandoutstanding(3) 20,826 19,664 16,109 20,826 16,109 Newsecuritizationactivityintheperiod(4) 1,834 1,583 1,442 4,855 5,470

(1) Taxableequivalentbasis.Forfurtherinformation,refertotheHowwemeasureandreportourbusinesssegmentssection.TheseamountsincludedtheeliminationofadjustmentsrecordedinCapitalMarketsrelatedtothegross-upofcertaintax-advantagedincome(Canadiantaxablecorporatedividends).TheamountforthethreemonthsendedJuly31,2007,was$79million(April30,2007–$66million;July31,2006–$46million).TheamountfortheninemonthsendedJuly31,2007,was$215million(July31,2006–$163million).

(2) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(3) TotalsecuritizationssoldandoutstandingarecomprisedofResidentialmortgagesandCreditcardloans.(4) NewsecuritizationactivitycomprisesResidentialmortgagesandCreditcardloanssecuritizedandsoldintheperiod.Forfurtherdetails,refertoNote4toourunauditedInterimConsolidated

FinancialStatements.ThisamountdoesnotincludecommercialmortgagesecuritizationactivityofCapitalMarkets.

Q32007Netincomeof$72millionprimarilyreflectedincometaxamountslargelyrelatedtoenterprisefundingactivitiesthatwerenotallocatedtothebusinesssegments,andafavourabletaxsettlementrelatedtoprioryears.Thesefactorswerepartiallyoffsetbylossesrelatedtosecuritizationactivityinthequarter.

Q22007Netincomeof$50millionmainlyreflectedtheimpactofthefavourableincometaxsettlementrelatedtoprioryearsandincometaxamountslargelyrelatedtoenterprisefundingactivitiesthatwerenotallocatedtothebusinesssegments.Gainsrelatedtosecuritizationactivitywerealsorecordedinthequarter.Thesefactorswerepartiallyoffsetbyfundingadjust-mentsmadeinthecurrentquarterrelatedtothepreviousquarter,whichwereoffsetinCanadianBanking.

Q32006Netincomeof$13millionmainlyreflectedincometaxamountswhichwerelargelyrelatedtoenterprisefundingactivitiesandnotallocatedtothebusinesssegmentsandmark-to-marketgainsonderivativesrelatingtocertaineconomichedgesinthequarter.Thesefactorswerepartiallyoffsetbylossesrelatedtosecuritizationactivityrecordedinthequarter.

Q32007(Ninemonthsended)Netincomeof$171millionfortheperiodincludedincometaxamountslargelyrelatedtoenterprisefundingactivitiesthatwerenotallocatedtothebusinesssegments,andfavourableincometaxsettlementsrelatedtoprioryears.Thesefactorswerepartiallyoffsetbythemark-to-marketlossesonderivativesrelatingtocertaineconomichedgesandacumulativeadjust-mentforlossesresultingfromthefairvaluingofcertainderiva-tivesthatdidnotqualifyforhedgeaccounting.

Q32006(Ninemonthsended)Netincomeof$66millionfortheperiodmainlyreflectedincometaxamountswhichwerelargelyrelatedtoenterprisefundingactivitiesandnotallocatedtothebusinesssegments.Favourableincometaxsettlementsrelatedtoprioryearswerealsorecordedintheperiod.




2007 2007 2006

United Other United Other United Other(C$millions) Canada States International Total Canada States International Total Canada States International Total

Totalrevenue $ 3,595 $ 1,108 $ 777 $ 5,480 $ 3,635$ 1,291$ 743$ 5,669$ 3,444$ 1,083$ 679$ 5,206

Netincome $ 937 $ 207 $ 251 $ 1,395$ 827$ 205$ 247$ 1,279$ 797$ 151$ 229$ 1,177


July 31 July31

2007 2006

United Other United Other(C$millions) Canada States International Total Canada States International Total

Totalrevenue $ 10,941 $ 3,565 $ 2,341 $ 16,847 $10,008$ 3,363$ 1,917$15,288

Netincome $ 2,687 $ 637 $ 844 $ 4,168 $ 2,344$ 523$ 599$ 3,466

(1) Forgeographicreporting,oursegmentsaregroupedintoCanada,UnitedStatesandOtherInternational.Forfurtherdetailsregardinggeographicreporting,refertoNote30ofthe2006AnnualReport.

Resultsbygeographicsegment(1)

Q32007vs.Q32006NetincomeinCanadawas$937million,up$140million,or18%,comparedtotheprioryear.Thisincreasewaslargelyduetoimprovedresultsacrossourdomesticinsuranceandwealthmanagementbusinesses.ImprovedM&Aandequityoriginationactivitiesalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyhighercostsreflectingincreasedbusinesslevelsandinsupportofgrowthinitiativesandhigherprovisionsforcreditlosses.

U.S.netincomeof$207millionwasup$56million,or37%,fromtheprioryearlargelyreflectinghigherM&Aandequityoriginationactivities.Thesefactorswerepartiallyoffsetbylowertradingresultsandhighercostsinsupportofbusinessgrowth.

Otherinternationalnetincomewas$251million,up$22million,or10%,fromtheprioryear,mainlyduetoafavour-abletaxsettlementinthecurrentquarterandstronggrowthatRBC Dexia ISreflectingstrongmarketactivityandanincreasedclientbase.GrowthinourinternationalwealthmanagementandEuropeanlifereinsurancebusinessesalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyincreasedstaff-ingcostsinsupportofbusinessgrowth.

Q32007vs.Q32006(Ninemonthsended)NetincomeinCanadawas$2,687million,up$343million,or15%,comparedtotheprioryear.Thisincreaselargelyreflectedcontinuedstrongresultsacrossmostofourdomesticbusi-nesses.Thesefactorswerepartiallyoffsetbyincreasedcostsinsupportofbusinessgrowthandhigherprovisionsforcreditlossesinourconsumerandbusinessloanportfolios.Thepriorperiodincludeda$50millionreversalofthegeneralallowance.

U.S.netincomeof$637millionwasup$114million,or22%,fromtheprioryear,largelyreflectinghigherequitytradingresultsduetoexpansionofcertaintradingstrategiesandimprovedequityoriginationactivityinourcapitalmarketsbusi-nesses.GrowthinourU.S.brokeragebusinessreflectinghigherfee-basedrevenueandclienttransactionvolumes,andtheinclu-sionofourrecentacquisitionsalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbylowercorporaterecoveries

inthecurrentyear,lowertradingincertainfixedincomebusi-nessesandhighercoststosupportbusinessgrowthincludingincreasedstaffinglevels,theinclusionofrecentacquisitions,andde novobranchopenings.

Otherinternationalnetincomeof$844millionwasup$245million,or41%,fromtheprioryear.Theincreasewaspartlyduetoimprovedinsuranceresultsreflectingtheprioryearhurricane-relatedcharges,andthecurrentperiodfavourableadjustmentrelatedtothereallocationofcertainforeigninvest-mentcapital.GrowthatRBC Dexia ISandinourinternationalwealthmanagementbusinessalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyhighervariablecompensa-tionandlowertradingresultsincertainfixedincomebusinesses.

Q32007vs.Q22007NetincomeinCanadawas$937million,up$110million,or13%,comparedtothepriorquarter.Thisincreaselargelyreflectedimproveddisabilityclaimsexperienceandafavour-ableactuarialliabilityadjustment.Increasedcardbalancesandtransactionalvolumes,aswellashighergainsanddistributionsonprivateequityinvestmentsandimprovedM&Aactivityalsocontributedtotheincrease.Thesefactorswerepartiallyoff-setbyincreasedstaffingcostsinourbankingoperationsandreducedequityoriginationactivityduetoamodestsummerslowdown.

U.S.netincomeof$207millionwasup$2million,or1%,fromthepriorquarter.Loweracquisition-relatedcosts,thefavourableimpactoftheadditionalnumberofdaysthisquarterandafullquarterofresultsfromtheAmSouthbrancheswerelargelyoffsetbylowerequitytradingresults,reducedequityoriginationactivityandlowerbrokeragevolumesduetoamod-estseasonalslowdown.

Otherinternationalnetincomeof$251millionwasup$4million,or2%,fromthepriorquarter.Theincreasewaslargelyduetoafavourabletaxsettlementinthecurrentquarter,increasedbusinessvolumesinRBC Dexia ISduetoseasonalfactors,strongmarketactivity,andanincreasedclientbase,aswellashigherM&Aactivity.


Asat


(C$millions) 2007 2007 2006

Interest-bearing deposits with banks $ 10,159 $ 8,512 $ 11,430Securities 190,219 198,509 172,803Assets purchased under reverse repurchase agreements and securities borrowed 77,183 72,142 63,981Loans 232,799 225,649 205,920Other assets 90,580 81,440 67,436Total assets 604,582 589,076 523,969Deposits 376,325 372,728 334,702Other liabilities 194,266 182,274 156,398Non-controlling interest in subsidiaries 1,560 1,508 1,800Shareholders’ equity 24,547 24,081 21,547

Financialcondition

Balancesheet

Q32007vs.Q32006Total assetswereup$81billion,or15%,fromayearago,drivenbygrowthacrossmostassetcategories.Theincreasewaslargelyattributabletohighertradingandlendingactivities,aswellassolidgrowthinresidentialmortgagesandbusinessloansamidgenerallyfavourabledomesticmarketconditions.

Interest-bearing deposits with banksdeclined$1billion,or11%,fromtheprioryear,largelyreflectingashiftinourportfoliomixtohigher-yieldingassets.

Securitieswereup$17billion,or10%,fromayearago,primarilyattributabletoanincreaseintradingsecuritiesinsupportofbusinessgrowthinequityandfixedincometradingactivities.AsatJuly31,2007,wehada$1.1billionnetexposuretotheU.S.subprimemarket,representinglessthan.2%ofourtotalassets.Ourexposuresaremainlyintheformofresidentialmortgage-backedsecurities(RMBS)andcollateralizeddebtobligations(CDOs),allofwhichareinvestmentgrade,with59%ratedAAA.

Assets purchased under reverse repurchase agreements and securities borrowedincreased$13billion,or21%,fromayearago.Theincreaseprimarilyreflectedhigherbalancesinsupportofourequityandfixedincometradingstrategies.

Loansincreased$27billion,or13%,fromayearago,reflectingincreasesacrossallcategories.Thelargestgrowthwasattributabletodomesticresidentialmortgages,whichincreased$11billion,or11%,(despitetheoffsettingeffectof$13billionofsecuritizationsoverthepast12months)andpersonalloans,largelydrivenbydemandforHomelineproductsamidcontinuedstrongdomestichousingmarketactivities.Solidgrowthofbusinessandgovernmentloansof$10billion,or17%,includinggrowthincorporatelendingandincreaseddebtfinanc-ingintheUnitedKingdomalsocontributedtotheincrease.

Other assetswereup$23billion,or34%.Theincreasewasmainlyattributabletoderivative-relatedamountslargelyreflect-ingbusinessgrowthandchangesinmarketconditions.Higherreceivablebalancesfrombrokersanddealersduetoincreasedbusinessactivitiesalsocontributedtotheincrease.

Depositsincreased$42billion,or12%,fromayearago.Theincreasewaslargelyduetohigherbusinessandgovernmentdepositsinsupportoffundingrequirementsforourtradingandlendingactivitiesaswellasbusinessgrowth.Higherpersonaldeposits,primarilyreflectingthesuccessofournewdomesticproductofferingsandservices,theinclusionofourrecentU.S.acquisitionsandbusinessgrowth,alsocontributedtotheincrease.

Other liabilitiesrose$38billion,or24%,fromlastyear.Thegrowthwasmainlyduetoderivative-relatedamounts,primarilyreflectingincreasedbusinessactivitiesandchangesinmarketconditions.Increasedsecuritiessoldshort,aswellaspayablestobrokersanddealersinsupportofbusinessactivitiesalsocon-tributedtotheincrease.

Shareholders’ equityincreased$3billion,or14%,overtheprioryear.Thegrowthlargelyreflectedstrongearningsgrowth,netofdividends,anda$1billionnetissuanceofpreferredsharessincethepriorperiod.

Q32007vs.Q22007Total assetsincreased$16billion,or3%,fromthepriorquarter.Theincreasereflectedgrowthacrossmostassetcategories,withthemajorityattributabletogrowthinderivative-relatedamountsandwaspartiallyoffsetbyadecreaseinfixedincometradingactivity.

Interest-bearing deposits with banks increased$2billion,or19%,fromthepriorquarter,primarilyreflectingahigherlevelofcashinRBC Dexia IS.

Securitiesweredown$8billion,or4%,fromthepriorquarter,primarilyduetolowerfixedincometradingactivitiesthisquarter.

Assets purchased under reverse repurchase agreements and securities borrowedincreased$5billion,or7%,fromthepriorquarter,mainlyinsupportofourequitytradingstrategies.

Loansrose$7billion,or3%,fromthepriorquarter.Theincreasewasaresultofgrowthacrossallcategories,withthemajorityattributabletodomesticresidentialmortgagesandpersonalloanslargelyduetocontinuedstrongdemandforHomelineproducts.

Other assetswereup$9billion,or11%,fromthepriorquarter,mainlyattributabletoderivative-relatedamountslargelyreflectingbusinessgrowthandchangesinmarketconditions.

Deposits increased$4billion,or1%,fromthepriorquarter.Theincreasewasduetogrowthinbusinessandgovernmentdepositsinsupportoffundingrequirementsforourlendingandtradingactivities.

Other liabilitiesincreased$12billion,or7%,fromthepriorquarter,largelyduetoderivative-relatedamountsmainlyreflectingincreasedbusinessactivitiesandchangesinmarketconditions.Increasedsecuritiessoldshortinsupportofbusinessactivitiesalsocontributedtotheincrease.

Shareholders’ equitywasup$.5billion,or2%,overthepriorquarteronearningsgrowth,netofdividends.


Weactivelymanageourcapitaltobalancethedesiretomaintainstrongcapitalratiosandhighdebtratingswiththeobjectiveofprovidingstrongreturnstoourshareholders.Forfurtherdetails,refertopages64to68ofour2006AnnualReport.

RegulatorycapitalandcapitalratiosCapitallevelsforCanadianbanksareregulatedpursuanttoguidelinesissuedbytheOSFI,basedonstandardsissuedbytheBankofInternationalSettlements.

Capitalmanagement

Asat

(C$millions,except July 31 April30 October31 July31

percentageamounts)(1) 2007 2007 2006 2006

Tier1capital $ 23,202 $ 22,716 $ 21,478 $ 20,888 Totalcapital 28,443 28,506 26,664 27,148 Totalrisk-adjusted assets(2) 250,197 243,202 223,709 218,482Capital ratios Tier1capitalratio 9.3% 9.3% 9.6% 9.6% Totalcapitalratio 11.4% 11.7% 11.9% 12.4%

(1) CalculatedusingguidelinesissuedbytheOSFI.(2) Totalrisk-adjustedassetsforApril30,2007,hasbeenrestatedtoreflecta$563million adjustmentrelatedtoequityderivativecontracts.

Q32007vs.Q32006AsatJuly31,2007,theTier1capitalratiowas9.3%andtheTotalcapitalratiowas11.4%.

TheTier1capitalratiowasdown30bpsfromthesameperiodayearago.Thedecreasewaslargelyduetobusinessgrowth,includingacquisitions,whichresultedinanincreaseinRisk-adjustedassets(RAA)andahighergoodwilldeductionfromcapital,aswellastheimpactofcommonsharerepur-chases.Thesefactorswerepartiallyoffsetbystronginternalcapitalgenerationandtheissuanceofpreferredshares.

TheTotalcapitalratiowasdown100bpsfromthesameperiodayearagoduetogrowthinRAAandtheredemptionofsubordinateddebentures.Thesefactorswerepartiallyoffsetbytheissuanceoftrustsubordinatednotes.

RAAincreased$32billion,whichwaslargelyduetostronggrowthacrossmostbusinessesandtheinclusionofrecentacqui-sitions.ThisresultedinincreasesinRAAacrossmostcategoriesincludingloans,off-balancesheetcreditinstruments,mortgagesandtradingsecurities.

Q32007vs.Q42006TheTier1capitalratiowasdown30bpsfromtheendoffiscal2006asbusinessgrowth,includingacquisitions,whichresultedinanincreaseinRAAandahighergoodwilldeductionfromcapital,alongwiththeimpactofsharerepurchases,exceededourstronginternalcapitalgenerationandtheissuanceofpreferredshares.

TheTotalcapitalratiowasdown50bpsfromtheendof2006duetogrowthinRAAandtheredemptionofsubordinateddebenturespartiallyoffsetbytheissuanceoftrustsubordi-natednotes.

TheincreaseinRAAof$26billioncomparedtotheendof2006largelyreflectedbroad-basedbusinessgrowthincludingacquisitions.

Sharedataanddividends

Asat

July 31

2007 Dividends (C$millions,exceptnumberof Number of declared sharesandpershareamounts) shares (000s) Amount per share

First Preferred (1) Non-cumulativeSeriesN 12,000 $ 300 $ .29 Non-cumulativeSeriesW 12,000 300 .31 Non-cumulativeSeriesAA 12,000 300 .28 Non-cumulativeSeriesAB 12,000 300 .29 Non-cumulativeSeriesAC 8,000 200 .29 Non-cumulativeSeriesAD 10,000 250 .28 Non-cumulativeSeriesAE 10,000 250 .28 Non-cumulativeSeriesAF 8,000 200 .50 Non-cumulativeSeriesAG 10,000 250 .37

Total First Preferred $ 2,350

Common shares outstanding 1,275,780 $ 7,283 $ .46Treasury shares – preferred (122) (3)Treasury shares – common (2,744) (116)Stock options Outstanding 27,417 Exercisable 22,718

(1) AsatJuly31,2007,theaggregatenumberofcommonsharesissuableontheconversion oftheFirstPreferredSharesSeriesNwasapproximately5,619,000.AsatJuly31,2007, theFirstPreferredSharesSeriesWwasnotyetconvertible.Theotherpreferredshares donothaveconversionoptions.

AsatAugust20,2007,thenumberofoutstandingcommonsharesandstockoptionswere1,275,826,000and27,370,000,respectively.Thenumberoftreasuryshares–commonoutstandingasatAugust20,2007,were3,193,000.

Selectedcapitalmanagementactivity


July 31 July 31

(C$millions) 2007 2007

Dividendsdeclared Common $ 587 $ 1,684 Preferred 26 64 Preferredsharesissued – 1,150 Preferredsharesredeemed – (150) Repurchaseofcommonshares–normal courseissuerbid (58) (631) TrustSubordinatedNotesissued – 1,000 Subordinateddebenturesissued 87 87 Repurchaseandredemptionofdebentures (500) (985)

Q32007vs.Q22007TheTier1capitalratiowasunchangedfromthepreviousquarterasgrowthinRAAwasoffsetbyourstronginternalcapitalgeneration.

TheTotalcapitalratiowasdown30bpsmainlyduetotheredemptionofsubordinateddebentures.

RAAincreased$7billionlargelyduetogrowthinmortgages,loansandoff-balancesheetcreditinstruments.


Q32007Tier 1EffectiveNovember1,2006,werenewedourNormalCourseIssuerBid(NCIB)foroneyear,topurchase,forcancellation,upto40millioncommonshares.Wepurchasedonemillioncom-monsharesthisquarterfor$58million;fortheninemonthsendedJuly31,2007,wepurchased11.5millioncommonsharesfor$631million.

Q32007vs.Q32006AttributedEconomicCapitalincreased$2.7billionfromthesameperiodayearagodrivenbygrowthacrossallbusinesssegments,mainlyimpactingCredit,Operational,andBusinessandfixedassetrisks.TheincreaseinGoodwillandintangibleswasmainlyattributabletoourrecentacquisitions.

Q32007vs.Q22007AttributedEconomicCapitalincreased$.2billionfromthepreviousquarterlargelyduetohigherCreditriskreflectinggrowthinourlendingbusinesses.



(C$millionsaveragebalances) 2007 2007 2006

Creditrisk $ 6,950 $ 6,800 $ 5,850 Marketrisk(tradingandnon-trading) 2,800 2,850 2,600 Operationalrisk 2,800 2,850 2,500 Businessandfixedassetrisk 2,000 2,000 1,750 Insurancerisk 150 150 250

Riskcapital $ 14,700 $ 14,650 $ 12,950Goodwillandintangibles 5,750 5,600 4,800

Attributedcapital(EconomicCapital) $ 20,450 $ 20,250 $ 17,750Unattributedcapital(1) 1,800 1,700 2,300

Common equity $ 22,250 $ 21,950 $ 20,050

(1) UnattributedcapitalisreportedintheCorporateSupportsegment.

Tier 2OnJune4,2007,weredeemedallofouroutstanding$500millionsubordinateddebenturesdueJune4,2012,atparvalueplusaccruedinterest.

OnJune26,2007,weissuedJP¥10billion($87millionCAD)JapaneseYen-denominatedsubordinateddebentures.ThesedebenturesqualifyasTier2Bcapitalforregulatorypurposes.

Forfurtherdetailsaboutourcapitalmanagementactivity,refertoNote6toourunauditedInterimConsolidatedFinancialStatements.

Inthenormalcourseofbusiness,weengageinavarietyoffinancialtransactionsthat,underGAAP,arenotrecordedonourConsolidatedBalanceSheets.Foracompletediscussionofthesetypesofarrangements,includingtheirnature,businesspurposeandimportance,seepages69to71ofour2006AnnualReport.

DerivativefinancialinstrumentsOnNovember1,2006,weadoptedthreenewaccountingstan-dardsthatwereissuedbytheCICArelatingtofinancialinstru-ments.ThesestandardsandtheimpactonourfinancialpositionandresultsofoperationsarediscussedintheImpactofthenewfinancialinstrumentsaccountingstandardssectionandinNote1toourunauditedInterimConsolidatedFinancialStatements.

Withtheadoptionofthesestandards,allderivatives,includingcertainderivativesthatareusedtomanageourrisks

andarespecificallydesignatedandqualifyforhedgeaccounting,arerecordedontheConsolidatedBalanceSheetsatfairvalue.PriortoNovember1,2006,derivativesthatqualifiedforhedgeaccountingwerenotcarriedatfairvalueontheConsolidatedBalanceSheetsandweredisclosedasoff-balancesheetitems.

SecuritizationsWeperiodicallysecuritizesomeofourcreditcardloansandresidentialandcommercialmortgagesprimarilytodiversifyourfundingsourcesandenhanceourliquidityposition.Thefollow-inghighlightsthenotionalvalueofsecuritizationactivitiesthatimpactedourunauditedInterimConsolidatedBalanceSheets.Forfurtherdetails,refertoNote4toourunauditedInterimConsolidatedFinancialStatements.

Off-balancesheetarrangements

EconomicCapitalEconomicCapitalisourownquantificationofriskassociatedwithbusinessactivities.EconomicCapitalisattributedtoeachbusinesssegmentinproportiontotherisksinherentinthe

respectivebusinesssegmentanddrivestheoptimizationofreturnsintermsofriskandreward.Forfurtherdetails,refertopage68ofour2006AnnualReport.


Ourbusinessactivitiesexposeustoawidevarietyofrisks,whichareinherentinvirtuallyallaspectsofouroperations.Ourgoalinmanagingtheserisksistoprotecttheenterprisefromanunacceptablelevelofearningsvolatilitywhilesupportingandenablingbusinessopportunities.

Forfurtherdetails,refertopages72to90ofour2006AnnualReport.Ourapproachtothemanagementofriskhasnotchangedsignificantlyfromthatdescribedinour2006AnnualReport.

OurpoliciesandproceduresforrelatedpartytransactionshavenotchangedmateriallyfromOctober31,2006.Forfurther

information,refertoNote29ofour2006AnnualReport.

Relatedpartytransactions

Riskmanagement

Creditqualityperformance

Asatorforthethreemonthsended


(C$millions,exceptpercentageamounts) 2007 2007 2006

Gross impaired loans (GIL) Consumer $ 339 $ 346 $ 316 Businessandgovernment 601 533 475

Totalgrossimpairedloans $ 940 $ 879 $ 791

Allowance for credit losses (ACL) Consumer $ 103 $ 103 $ 101 Businessandgovernment 196 189 161

Specificallowance $ 299 $ 292 $ 262 Generalallowance 1,230 1,234 1,223

Totalallowanceforcreditlosses $ 1,529 $ 1,526 $ 1,485

Key credit quality ratios GILasa%ofgrossloansandacceptances .39% .37% .37%Totalnetwrite-offsasa%ofaverageloansandacceptances .28% .33% .24%

Creditriskistheriskoflossassociatedwithacounterparty’sinabilitytofulfillitspaymentobligations.Weincurcreditriskinourbusinesssegmentsthroughtheextensionofcreditandothertransactionswithvariouscounterparties,including

on-andoff-balancesheetitemssuchasloans,acceptances,lettersofcreditandguarantees.Forfurtherdetailsrelatedtohowwemanagecreditrisk,refertopages75to80ofour2006AnnualReport.

Creditrisk

Q32007(Threemonthsended)Duringthethirdquarterof2007,wesecuritized$3.3billionofdomesticresidentialmortgages,ofwhich$1.8billionweresoldandtheremaining$1.5billionwereretained.Wealsosecuritizedandsold$.7billionofcommercialmortgages.

Q32007(Ninemonthsended)FortheninemonthsendedJuly31,2007,wesecuritized$8.4bil-lionofdomesticresidentialmortgages,ofwhich$4.9billionweresoldandtheremaining$3.5billionwereretained.Wealsosecuritizedandsold$1.6billionofcommercialmortgages.

Q32007(Twelvemonthsended)ForthetwelvemonthsendedJuly31,2007,wesecuritized$13.2billionofdomesticresidentialmortgages,ofwhich$6.9billionweresoldandtheremaining$6.3billionwereretained.Wealsosecuritizedandsold$1.9billionofcommercialmortgages.

GuaranteesInthenormalcourseofbusiness,weenterintonumerousagree-mentswiththirdpartiesthatmaycontainfeaturesdefinedasaguarantee,includingcreditderivatives,writtenputoptions,securitieslendingindemnifications,backstopliquidityfacilities,financialstandbylettersofcredit,performanceguarantees,stablevalueproducts,creditenhancements,mortgageloanssoldwithrecourseandcertainindemnificationagreements.AsatJuly31,2007,wehad$40billioninbackstopliquidityfacilitiesrelatedtoasset-backedcommercialpaperprograms,ofwhich94%werecommittedtoRBC-administeredconduits.

EffectiveNovember1,2006,aliabilityisnowrecognizedontheConsolidatedBalanceSheetsatinceptionofaguaranteeforthefairvalueoftheobligationundertakeninissuingtheguaran-tee.Forfurtherdetails,refertoNote1toourunauditedInterimConsolidatedFinancialStatements.


Marketriskistheriskoflossthatresultsfromchangesininterestandforeignexchangerates,equityandcommodityprices,andcreditspreads.Weareexposedtomarketriskinourtradingactivitiesandourassetliabilitymanagementactivities.Thelevelofmarketrisktowhichweareexposedvariesdependingonmarketconditions,expectationsoffuturepriceandyieldmove-mentsandthecompositionofourtradingportfolio.Forfurtherdetails,refertopages81to84ofour2006AnnualReport.

TradingactivitiesTradingmarketriskencompassesvariousrisksassociatedwithcashandrelatedderivativeproductsthataretradedininterestrate,foreignexchange,equity,creditandcommodity

markets.WeusemeasurementtoolssuchasValue-At-Risk(VAR)inassessingglobalrisk-returntrends.VARisastatisticaltechniquethatmeasurestheworst-caselossexpectedovertheperiodwithina99%confidencelevel.Thebreadthofourtradingactivityisdesignedtodiversifymarketrisktoanyparticularstrategy,andtoreducetradingrevenuevolatility.Forfurtherdetails,refertopages81to83ofour2006AnnualReport.Thesepolicies,processesandmethodologieshavenotchangedmateriallyfromthosestatedinthe2006AnnualReport.

ThefollowingtableshowsourglobalVARfortotaltradingactivitiesbymajorriskcategoryandthediversification,whichiscalculatedasthedifferencebetweentheglobalVARandthesumoftheseparateriskfactorVARs.

Marketrisk

GlobalVAR

July 31, 2007 April30,2007 July31,2006

Forthethree Forthethree For the three months ended monthsended monthsended

As at Asat Asat(C$millions) July 31 High Average Low April30 Average July31 Average

Equity $ 7 $ 14 $ 10 $ 6 $ 9 $ 7 $ 6 $ 7 Foreignexchange 3 6 2 1 2 3 2 1 Commodities(1) 1 2 1 1 1 1 1 1 Interestrate 19 21 19 17 21 19 14 13 Creditspecific 4 5 3 3 4 3 3 3 Diversification (15) n.m. (14) n.m. (12) (11) (9) (7)

Global VAR $ 19 $ 25 $ 21 $ 18 $ 25 $ 22 $ 17 $ 18

July 31, 2007 July31,2006

Forthenine For the nine months ended monthsended

As at Asat(C$millions) July 31 High Average Low July31 Average

Equity $ 7 $ 14 $ 9 $ 4 $ 6 $ 8 Foreignexchange 3 7 2 1 2 2 Commodities(1) 1 2 1 – 1 1 Interestrate 19 23 18 13 14 13 Creditspecific 4 5 3 2 3 3 Diversification (15) n.m. (13) n.m. (9) (8)

Global VAR $ 19 $ 27 $ 20 $ 15 $ 17 $ 19

(1) EffectiveMay2006,marketriskincommodities-tradingactivitieshasbeenincludedinbothourVARmeasurementandregulatorycapitalrequirementunderamodelsbasedapproach.n.m. notmeaningful

Q32007vs.Q32006Gross impaired loans Totalgrossimpairedloansincreased$149million,or19%,fromayearago,primarilyreflectingahigherlevelofimpairmentinourbusinessloanportfolio,includingU.S.realestateandrelated,aswellasdomesticsmallbusinessloans.Increasedimpairmentindomesticresidentialmortgageslargelycommen-suratewithportfoliogrowthalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbytheresolutionofpreviouslyimpairedcorporateloansandlowerimpairedstudentloans.

Allowance for credit lossesTotalallowanceforcreditlossesincreased$44million,or3%,fromayearago,primarilyreflectinganincreaseinspecificallowancelargelyduetoahigherlevelofimpairmentinoursmallbusinessandcommercialloanportfolios.

Q32007vs.Q22007Gross impaired loans Totalgrossimpairedloansincreased$61million,or7%,com-paredtothepriorquarter.Theincreasewasmainlyduetoahigherlevelofimpairmentinourbusinessloanportfolios,includingU.S.realestateandrelated,aswellascommercialandsmallbusinessloans.Thesefactorswerepartiallyoffsetbylowerimpairedstudentloans.

Allowance for credit lossesTotalallowanceforcreditlossesincreased$3millionfromthepriorquarter.TheincreaseinspecificallowanceinthequarterduetohigherimpairedbusinessloanswaspartiallyoffsetbyadecreaseinthegeneralallowanceprimarilyreflectingtheimpactonthetranslatedvalueofourU.S.dollar-denominatedallowanceduetothestrongerCanadiandollar.


(1) TradingrevenueonataxableequivalentbasisexcludingrevenuerelatedtoconsolidatedVIEs.

Q32007vs.Q32006AverageglobalVARforthequarterof$21millionwasupcom-paredto$18millionayearago.TheincreaselargelyreflectedanincreaseinbothInterestrateandEquityrisksduetoahigherleveloftradingactivity.Theseincreasesweremostlyoffsetbyanimprovementintheoveralldiversificationeffect,whichroseto44%comparedto28%ayearago.

Q32007vs.Q32006(Ninemonthsended)FortheninemonthsendedJuly31,2007,averageglobalVARincreasedto$20millionfrom$19millioninthepriorperiod.ThisincreasewaslargelyduetoanincreaseinInterestrateVARprimarilyreflectingincreasedtradingactivityandwaspartiallyoffsetbyanimprovementintheoveralldiversificationeffect.

Q32007vs.Q22007AverageglobalVARforthequarterof$21millionwasdowncomparedto$22millioninthepreviousquarter.AnincreaseinEquityrisklargelyattributabletohigherequitytradingactivitywasmorethanoffsetbyanimprovementintheoveralldiversifi-cationeffect.

TheglobalVARattheendofthequarterof$19millionwasdownfrom$25millionattheendoflastquarterlargelyreflectingagradualreductioninriskinbothInterestrateandEquityrisklevelsduringthequarteraswellasanimprovementinthediver-sificationeffect.

ForthefirsttwoweeksofAugust,averageglobalVARhasremainedstablerelativetothethirdquarterof2007.

Marketriskmeasures–Non-tradingbankingactivities


2007 2007 2006 Economic value Net interest Economicvalue Netinterest Economicvalue Netinterest(C$millions) of equity risk income risk ofequityrisk incomerisk ofequityrisk incomerisk

Before-taximpactof:100bpincreaseinrates $ (307) $ 82 $ (500) $ 66 $ (454) $ 93 100bpdecreaseinrates 201 (140) 372 (123) 335 (173)Before-taximpactof:200bpincreaseinrates (666) 160 (1,061) 119 (946) 165 200bpdecreaseinrates 337 (287) 682 (246) 588 (357)

Non-tradingmarketrisk(assetandliabilitymanagement)Traditionalnon-tradingbankingactivities,suchasdeposittakingandlending,exposeustomarketrisk,ofwhichInterestrateriskisthelargestcomponent.

OurgoalistomanagetheInterestrateriskofthenon-tradingbalancesheettoatargetlevel.Wemodifytheriskprofileofthebalancesheetthroughproactivehedgingtoachieveourtargetlevel.WecontinuallymonitortheeffectivenessofourInterestrateriskmitigationactivityonavalueandearningsbasis.

Moreinformationaboutourmarketriskmanagementpoliciesandprocessesassociatedwithournon-tradingactivitiesisdetailedonpage83ofour2006AnnualReport.Thesepoliciesandprocedureshavenotchangedmateriallyfromthosestatedinour2006AnnualReport.

Thefollowingtableprovidesthepotentialbefore-taximpactofanimmediateandsustained100and200bpsincreaseordecreaseininterestratesonNetinterestincomeandeconomicvalueofequityofournon-tradingportfolio,assumingthatnofurtherhedgingisundertaken.Overthequarterandlast12months,ourInterestrateriskexposurewaswellwithinourtargetlevel.

60

50

40

30

20

0

(10)

(20)

6

0

-5

0 5 10 15

20

25

TOTAL TRADING REVENUE FOR THE QUARTER ENDED JANUARY 31, 2007 (1)(number of days)

Daily net trading revenue (C$ millions)

TRADING REVENUE AND GLOBAL VAR (1)(C$ millions)

0

Nov. 03 Oct. 04

GLOBAL VAR BY MAJOR RISK CATEGORY(C$ millions)

Daily equity VAR Daily foreign exchange VAR Daily interest rate VAR

4

2

(10)

(30)

(5)

(15)

(20)

Daily interest rate specific VAR

August 2006 May 2007

Daily net trading revenue Global trading VAR

(40)February 2007 July 2007November 2006

10

45

TradingrevenueDuringthequarter,thereweresixdayswithnettradinglosses,noneofwhichexceededtheglobalVARfortheirrespectiveday.FiveofthesixnettradinglossdaysthisquarterwerelargelyattributabletosignificantvolatilityexperiencedintheequityandcreditmarketsinthelatterhalfofJuly.


Liquidityandfundingriskistheriskthataninstitutionisunabletogeneratesufficientcashoritsequivalentinatimelyandcost-effectivemannertomeetitscommitmentsastheycomedue.Ourriskmanagementframeworkisdesignedtoprotectusagainstthisriskunderbothnormalandcontemplatedstressconditions.Thedimensionsofthisliquidityandfundingmanage-mentframeworkarediscussedinmoredetailonpages85to87ofour2006AnnualReport.

Duringthequarter,weoperatedundernormalconditionsandwereincompliancewithrequirements.TherehavebeennomaterialchangestoourliquidityandfundingmanagementframeworkorlevelsofliquidityandfundingrisksinceOctober31,2006.Despitetherecentmarketdevelopments,webelieveourliquidityandfundingpositionissoundandadequatetomeetourbusinessrequirements.Therearenoknowntrends,demands,commitmentsoreventsthatarecurrentlyexpectedtomateriallyimpactourcurrentliquidityandfundingposition.

CreditratingsThefollowingtablepresentsourmajorcreditratingsasatAugust23,2007.

AsatAugust23,2007(1)

Senior long- Short-term debt term debt Outlook

Moody’sInvestorsService P-1 Aaa stableStandard&Poor’s A-1+ AA- positiveFitchRatings F1+ AA stableDBRS R-1(high) AA stable

(1) Creditratingsarenotrecommendationstopurchase,sellorholdoursecuritiesinasmuch astheydonotcommentonmarketpriceorsuitabilityforaparticularinvestor.Ratings aresubjecttorevisionorwithdrawalatanytimebytheratingorganization.

SinceOctober31,2006,thereweretwopositivedevelopmentswithrespecttoourratings.Inthesecondquarterof2007,Moody’sInvestorsServiceupgradedourseniorlong-termdebtratingtoAaafromAa2asaresultofrefinementsmadetotheirjointdefaultanalysis,andonMay10,2007,Standard&Poor’srevisedourratingoutlooktopositivefromstable.OurFitchandDBRSratingsandoutlooksremainunchangedfromOctober31,2006.Ourcollectiveratingscontinuetobethehighestcatego-riesassignedbytherespectiveagenciestoaCanadianbankandthesestrongcreditratingssupportourabilitytocompetitivelyaccessunsecuredfundingmarkets.

July 31 April30 October31

2007 2007 2006

(C$millions)(1) Within 1 year 1 to 3 years Over 3 to 5 years Over 5 years Total Total Total

Unsecuredlong-termfunding $ 17,200 $ 13,840 $ 16,066 $ 4,801 $ 51,907 $ 45,278 $ 33,361Subordinateddebentures 133 – – 6,071 6,204 6,809 7,103

$ 17,333 $ 13,840 $ 16,066 $ 10,872 $ 58,111 $ 52,087 $ 40,464

(1) Amountsrepresentprincipalonlyandexcludeaccruedinterest.

Liquidityandfundingrisk

ContractualobligationsInthenormalcourseofbusiness,weenterintocontractsthatgiverisetocommitmentsoffutureminimumpaymentsthataffectourshort-termandlong-termliquidity.Dependingonthe

natureofthesecommitments,theobligationsmayberecordedon-andoff-balancesheet.Thefollowingtableprovidesasum-maryofourprimaryfuturecontractualfundingcommitments.


July 31 April30 October31 July31

(C$millions) 2007 2007 2006 2006

Assets

Cash and due from banks $ 5,091 $ 4,270 $ 4,401 $ 3,814

Interest-bearing deposits with banks 10,159 8,512 10,502 11,430

Securities Trading 163,907 170,205 147,237 137,672 Investment 26,312 28,304 37,632 35,131

190,219 198,509 184,869 172,803

Assets purchased under reverse repurchase agreements and securities borrowed 77,183 72,142 59,378 63,981

Loans Residentialmortgage 106,681 101,479 96,675 95,688 Personal 48,524 47,255 44,902 44,022 Creditcards 7,913 7,622 7,155 6,792 Businessandgovernment 69,681 69,293 61,207 59,418

232,799 225,649 209,939 205,920 Allowanceforloanlosses (1,449) (1,446) (1,409) (1,415)

231,350 224,203 208,530 204,505

Other Customers’liabilityunderacceptances 10,463 9,944 9,108 9,606 Derivatives 54,279 45,692 37,729 37,139 Premisesandequipment,net 2,055 1,993 1,818 1,717 Goodwill 5,055 5,098 4,304 4,137 Otherintangibles 702 727 642 644 Assetsofoperationsheldforsale – – 82 167 Otherassets 18,026 17,986 15,417 14,026

90,580 81,440 69,100 67,436

$ 604,582 $ 589,076 $ 536,780 $ 523,969

Liabilities and shareholders’ equity

Deposits Personal $ 119,405 $ 119,692 $ 114,040 $ 113,590 Businessandgovernment 214,036 210,168 189,140 178,598 Bank 42,884 42,868 40,343 42,514

376,325 372,728 343,523 334,702

Other Acceptances 10,463 9,944 9,108 9,606 Obligationsrelatedtosecuritiessoldshort 51,157 48,377 38,252 40,508 Obligationsrelatedtoassetssoldunderrepurchaseagreementsandsecuritiesloaned 39,842 41,207 41,103 38,030 Derivatives 58,128 48,660 42,094 40,839 Insuranceclaimsandpolicybenefitliabilities 7,534 7,864 7,337 7,352 Liabilitiesofoperationsheldforsale – – 32 36 Otherliabilities 27,142 26,222 22,649 20,027

194,266 182,274 160,575 156,398

Subordinated debentures 6,204 6,809 7,103 7,822

Trust capital securities 1,382 1,379 1,383 1,400

Preferred share liabilities 298 297 298 300

Non-controlling interest in subsidiaries 1,560 1,508 1,775 1,800

Shareholders’ equity Preferredshares 2,050 2,050 1,050 1,300 Commonshares(sharesissued–1,275,779,949;1,275,327,173;1,280,889,745;and1,281,279,227) 7,283 7,250 7,196 7,176 Contributedsurplus 235 241 292 287 Treasuryshares–preferred(sharesheld–121,600;851,051;93,700;and1,759,566) (3) (21) (2) (43) –common(sharesheld–2,743,937;2,647,787;5,486,072;and5,526,196) (116) (99) (180) (181) Retainedearnings 17,517 16,786 15,771 15,120 Accumulatedothercomprehensiveincome(loss) (2,419) (2,126) (2,004) (2,112)

24,547 24,081 22,123 21,547

$ 604,582 $ 589,076 $ 536,780 $ 523,969

InterimConsolidatedFinancialStatements(unaudited)

ConsolidatedBalanceSheets(unaudited)




(C$millions) 2007 2007 2006 2007 2006

Interest income Loans $ 3,768 $ 3,556 $ 3,277 $ 10,871 $ 9,313 Securities 2,033 2,161 1,578 6,055 4,539 Assetspurchasedunderreverserepurchaseagreements andsecuritiesborrowed 980 911 839 2,766 1,918 Depositswithbanks 117 119 155 397 314

6,898 6,747 5,849 20,089 16,084

Interest expense Deposits 3,512 3,384 2,853 10,202 7,667 Otherliabilities 1,327 1,377 1,126 3,888 3,034 Subordinateddebentures 81 85 104 253 318

4,920 4,846 4,083 14,343 11,019

Net interest income 1,978 1,901 1,766 5,746 5,065

Non-interest income Insurancepremiums,investmentandfeeincome 590 855 821 2,265 2,485 Tradingrevenue 546 575 683 1,924 1,954 Investmentmanagementandcustodialfees 403 394 322 1,167 956 Mutualfundrevenue 385 361 328 1,100 905 Securitiesbrokeragecommissions 368 338 291 1,029 947 Servicecharges 327 328 306 973 890 Underwritingandotheradvisoryfees 309 319 253 916 731 Cardservicerevenue 165 134 158 448 349 Foreignexchangerevenue,otherthantrading 138 134 118 394 332 Securitizationrevenue 34 97 61 222 171 Creditfees 71 88 66 219 178 Gainonsaleofinvestmentaccountsecurities 34 5 11 87 72 Other 132 140 22 357 253

Non-interest income 3,502 3,768 3,440 11,101 10,223

Total revenue 5,480 5,669 5,206 16,847 15,288

Provision for credit losses 178 188 99 528 270

Insurance policyholder benefits, claims and acquisition expense 343 677 627 1,536 1,898

Non-interest expense Humanresources 1,992 2,022 1,828 6,021 5,460 Equipment 251 247 233 742 700 Occupancy 200 215 196 613 567 Communications 186 178 168 520 487 Professionalfees 124 129 141 373 405 Outsourceditemprocessing 77 82 70 233 223 Amortizationofotherintangibles 25 25 20 72 54 Other 310 250 205 806 644

3,165 3,148 2,861 9,380 8,540

Income from continuing operations before income taxes 1,794 1,656 1,619 5,403 4,580Incometaxes 349 353 381 1,137 1,061

Netincomebeforenon-controllinginterest 1,445 1,303 1,238 4,266 3,519Non-controllinginterestinnetincomeofsubsidiaries 50 24 44 98 25

Netincomefromcontinuingoperations 1,395 1,279 1,194 4,168 3,494Netlossfromdiscontinuedoperations – – (17) – (28)

Net income $ 1,395 $ 1,279 $ 1,177 $ 4,168 $ 3,466Preferreddividends (26) (22) (13) (64) (34)

Netincomeavailabletocommonshareholders $ 1,369 $ 1,257 $ 1,164 $ 4,104 $ 3,432

Averagenumberofcommonshares(inthousands) 1,272,913 1,272,212 1,279,300 1,273,246 1,281,815Basic earnings per share(indollars) $ 1.07 $ .99 $ .91 $ 3.22 $ 2.68Basic earnings per share from continuing operations(indollars) $ 1.07 $ .99 $ .92 $ 3.22 $ 2.70Basic earnings (loss) per share from discontinued operations (indollars) $ – $ – $ (.01) $ – $ (.02)

Averagenumberofdilutedcommonshares(inthousands) 1,288,227 1,288,415 1,297,340 1,289,947 1,301,165Diluted earnings per share(indollars) $ 1.06 $ .98 $ .90 $ 3.18 $ 2.64Diluted earnings per share from continuing operations(indollars) $ 1.06 $ .98 $ .91 $ 3.18 $ 2.66Diluted earnings (loss) per share from discontinued operations(indollars) $ – $ – $ (.01) $ – $ (.02)

Dividends per share(indollars) $ .46 $ .46 $ .36 $ 1.32 $ 1.04

ConsolidatedStatementsofIncome(unaudited)




(C$millions) 2007 2007 2006 2007 2006

Preferred shares Balanceatbeginningofperiod $ 2,050 $ 1,600 $ 1,000 $ 1,050 $ 700 Issued – 450 300 1,150 600 Redeemedforcancellation – – – (150) –

Balanceatendofperiod 2,050 2,050 1,300 2,050 1,300

Common shares Balanceatbeginningofperiod 7,250 7,216 7,191 7,196 7,170 Issued 39 50 16 152 97 Purchasedforcancellation (6) (16) (31) (65) (91)


Contributed surplus Balanceatbeginningofperiod 241 255 278 292 265 Renouncedstockappreciationrights (1) (2) (1) (5) (1) Stock-basedcompensationawards 1 (10) 10 (48) (20) Other (6) (2) – (4) 43

Balanceatendofperiod 235 241 287 235 287

Treasury shares – preferred Balanceatbeginningofperiod (21) (3) (5) (2) (2) Sales 25 5 3 32 7 Purchases (7) (23) (41) (33) (48)

Balanceatendofperiod (3) (21) (43) (3) (43)

Treasury shares – common Balanceatbeginningofperiod (99) (114) (178) (180) (216) Sales 15 16 16 133 145 Purchases (32) (1) (19) (69) (110)

Balanceatendofperiod (116) (99) (181) (116) (181)

Retained earnings Balanceatbeginningofperiod 16,786 16,264 14,649 15,771 13,704 Transitionadjustment–Financialinstruments(1) – – – (86) – Netincome 1,395 1,279 1,177 4,168 3,466 Preferredsharedividends (26) (22) (13) (64) (34) Commonsharedividends (587) (586) (461) (1,684) (1,336) Premiumpaidoncommonsharespurchasedforcancellation (52) (143) (222) (566) (663) Issuancecostsandother 1 (6) (10) (22) (17)


Accumulated other comprehensive income (loss) Transitionadjustment–Financialinstruments(1) (45) (45) – (45) – Unrealizedgainsandlossesonavailable-for-salesecurities (123) 25 – (123) – Unrealizedforeigncurrencytranslationgainsandlosses, netofhedgingactivities (2,469) (2,173) (2,112) (2,469) (2,112) Gainsandlossesonderivativesdesignatedascashflowhedges 218 67 – 218 –

Balanceatendofperiod (2,419) (2,126) (2,112) (2,419) (2,112)

RetainedearningsandAccumulatedothercomprehensiveincome 15,098 14,660 13,008 15,098 13,008

Shareholders’ equity at end of period $ 24,547 $ 24,081 $ 21,547 $ 24,547 $ 21,547

Comprehensive income Netincome $ 1,395 $ 1,279 $ 1,177 $ 4,168 $ 3,466 Othercomprehensiveincome,netoftaxes Netunrealizedgains(losses)onavailable-for-salesecurities (157) (10) – (141) – Reclassificationof(gains)lossesonavailable-for-salesecuritiestoincome 9 (4) – 18 –

(148) (14) – (123) –

Unrealizedforeigncurrencytranslationgains(losses) (701) (1,036) 276 (858) (592) Reclassificationof(gains)lossesonforeigncurrencytranslationtoincome – (1) – (41) 2 Netforeigncurrencytranslationgains(losses)fromhedgingactivities 405 652 (204) 434 252

(296) (385) 72 (465) (338)

Netgains(losses)onderivativesdesignatedascashflowhedges 144 29 – 190 – Reclassificationtoincomeof(gains)lossesonderivativesdesignated ascashflowhedges 7 4 – 28 –

151 33 – 218 –

Othercomprehensiveincome (293) (366) 72 (370) (338)

Total comprehensive income $ 1,102 $ 913 $ 1,249 $ 3,798 $ 3,128

(1) Thetransitionadjustmentrelatestotheimplementationofthenewfinancialinstrumentsaccountingstandards.RefertoNote1.

ConsolidatedStatementsofChangesinShareholders’EquityandComprehensiveIncome(unaudited)




(C$millions) 2007 2007 2006 2007 2006

Cash flows from operating activitiesNetincomefromcontinuingoperations $ 1,395 $ 1,279 $ 1,194 $ 4,168 $ 3,494Adjustmentstodeterminenetcashfrom(usedin)operatingactivities Provisionforcreditlosses 178 188 99 528 270 Depreciation 109 106 102 317 299 Businessrealignmentpayments (7) (9) (14) (33) (57) Futureincometaxes (102) 57 154 (206) 194 Amortizationofotherintangibles 25 25 20 72 54 (Gain)lossonsaleofpremisesandequipment (4) (4) (4) (12) (13) (Gain)lossonloansecuritizations 32 (38) 8 (43) 18 (Gain)lossonsaleofinvestmentaccountsecurities (34) (5) (11) (87) (72) Changesinoperatingassetsandliabilities Insuranceclaimsandpolicybenefitliabilities (330) (84) 170 197 235 Netchangeinaccruedinterestreceivableandpayable (130) 164 234 37 104 Currentincometaxes 244 169 (261) 372 (415) Derivativeassets (8,587) (3,466) 5,053 (16,550) 1,695 Derivativeliabilities 9,468 4,689 (6,233) 16,034 (1,753) Tradingsecurities 6,318 (1,175) (10,646) (6,038) (11,912) Netchangeinbrokersanddealersreceivableandpayable (381) 1,796 836 (269) (1,435) Other 1,045 496 (1,359) 1,419 2,062

Netcashfrom(usedin)operatingactivitiesfromcontinuingoperations 9,239 4,188 (10,658) (94) (7,232)Netcashfrom(usedin)operatingactivitiesfromdiscontinuedoperations – – (4) – (18)

Net cash from (used in) operating activities 9,239 4,188 (10,662) (94) (7,250)

Cash flows from investing activities Changeininterest-bearingdepositswithbanks (1,647) (875) (2,552) 343 (6,193) Changeinloans,netofloansecuritizations (10,499) (7,438) (9,701) (29,073) (24,354) Proceedsfromloansecuritizations 2,412 2,188 1,406 6,353 5,770 Proceedsfromsaleofinvestmentsecurities 2,571 2,175 2,821 7,047 8,955 Proceedsfrommaturityofinvestmentsecurities 5,356 4,304 6,950 13,501 22,972 Purchasesofinvestmentsecurities (5,034) (6,114) (7,014) (16,743) (27,784) Changeininvestmentsecurities – – 8 – 19 Netacquisitionsofpremisesandequipment (169) (148) (121) (512) (302) Changeinassetspurchasedunderreverserepurchaseagreements andsecuritiesborrowed (5,041) (4,398) (7,680) (17,805) (21,008) Netcashfrom(usedin)acquisitions (90) 290 – (373) (242)

Netcashfrom(usedin)investingactivitiesfromcontinuingoperations (12,141) (10,016) (15,883) (37,262) (42,167)Netcashfrom(usedin)investingactivitiesfromdiscontinuedoperations – – (4) – 82

Net cash from (used in) investing activities (12,141) (10,016) (15,887) (37,262) (42,085)

Cash flows from financing activities Changeindeposits 3,597 4,895 11,915 28,951 27,842 Issueofsubordinateddebentures 87 – – 87 – Repaymentofsubordinateddebentures (500) – (22) (989) (268) Issueofpreferredshares – 450 300 1,150 600 Redemptionofpreferredsharesforcancellation – – – (150) – Issuancecosts 1 (7) (5) (23) (12) Issueofcommonshares 36 46 14 139 88 Purchaseofcommonsharesforcancellation (58) (159) (253) (631) (754) Salesoftreasuryshares 40 21 19 165 152 Purchaseoftreasuryshares (39) (24) (60) (102) (158) Dividendspaid (608) (527) (474) (1,665) (1,321) Dividends/distributionspaidbysubsidiariestonon-controllinginterests (30) (1) – (62) (17) Changeinobligationsrelatedtoassetssoldunderrepurchase agreementsandsecuritiesloaned (1,365) 90 9,715 (1,261) 14,649 Changeinobligationsrelatedtosecuritiessoldshort 2,779 2,016 4,494 12,904 8,117 Changeinshort-termborrowingsofsubsidiaries (153) (478) (524) (403) (697)

Netcashfrom(usedin)financingactivitiesfromcontinuingoperations 3,787 6,322 25,119 38,110 48,221

Net cash from (used in) financing activities 3,787 6,322 25,119 38,110 48,221

Effectofexchangeratechangesoncashandduefrombanks (64) (102) 22 (64) (73)

Net change in cash and due from banks 821 392 (1,408) 690 (1,187)Cashandduefrombanksatbeginningofperiod 4,270 3,878 5,222 4,401 5,001

Cash and due from banks at end of period $ 5,091 $ 4,270 $ 3,814 $ 5,091 $ 3,814

Supplemental disclosure of cash flow information Amountofinterestpaidinperiod $ 4,881 $ 4,341 $ 4,040 $ 14,061 $ 10,643 Amountofincometaxespaidinperiod $ 476 $ 394 $ 432 $ 1,163 $ 1,511

ConsolidatedStatementsofCashFlows(unaudited)


Notestotheinterimconsolidatedfinancialstatements(unaudited)(AlltabularamountsareinmillionsofCanadiandollars,exceptpershareamounts)

TheseunauditedInterimConsolidatedFinancialStatementshavebeenpreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(CanadianGAAP)andfollowthesameaccountingpoliciesandmethodsdescribedinourauditedConsolidatedFinancialStatementsfortheyearendedOctober31,2006,exceptasdescribedbelow.UnderCanadianGAAP,additionaldisclosuresarerequiredinannualfinancialstate-ments;therefore,theseunauditedInterimConsolidatedFinancialStatementsshouldbereadinconjunctionwiththeauditedConsolidatedFinancialStatementsfortheyearendedOctober31,2006,andtheaccompanyingnotesincludedonpages106to156inour2006AnnualReporttoshare-holders(2006AnnualReport).Intheopinionofmanagement,alladjustmentsnecessaryforafairpresentationofresultsfortheperiodsreportedhavebeenincluded.Theseadjustmentsconsistonlyofnormalrecurringadjustments,exceptasotherwisedisclosed.Certaincomparativeamountshavebeenreclassifiedtoconformtothecurrentperiod’spresentation.

Significant accounting changesFinancial InstrumentsOnNovember1,2006,weadoptedthreenewaccountingstandardsthatwereissuedbytheCanadianInstituteofCharteredAccountants(CICA):HandbookSection1530,Comprehensive Income(Section1530),HandbookSection3855,Financial Instruments – Recognition and Measurement(Section3855),andHandbookSection3865,Hedges(Section3865).Comparativeamountsforpriorperiodshavenotbeenrestated.

Comprehensive IncomeSection1530introducesComprehensiveIncome,whichconsistsofNetincomeandOthercomprehensiveincome(OCI).OCIrepresentschangesinShareholders’equityduringaperiodarisingfromtransac-tionsandothereventswithnon-ownersourcesandincludesunrealizedgainsandlossesonfinancialassetsclassifiedasavailable-for-sale,unrealizedforeigncurrencytranslationgainsorlossesarisingfromself-sustainingforeignoperations,netofhedgingactivities,andchangesinthefairvalueoftheeffectiveportionofcashflowhedginginstruments.WehaveincludedinourInterimConsolidatedFinancialStatementsaConsolidatedStatementofComprehensiveIncomeforthechangesintheseitemsduring2007,whilethecumulativechangesinOCIareincludedinAccumulatedothercomprehensiveincome(loss)(AOCI),whichispresentedasanewcategoryofShareholders’equityontheConsolidatedBalanceSheet.

Financial Instruments – Recognition and MeasurementSection3855establishesstandardsforrecognizingandmeasuringfinancialassets,financialliabilitiesandnon-financialderivatives.Itrequiresthatfinancialassetsandfinancialliabilities,includingderivatives,berecognizedontheConsolidatedBalanceSheetwhenwebecomeapartytothecontractualprovisionsofafinancialinstrumentornon-financialderivativecontract.Underthisstandard,allfinancialinstrumentsarerequiredtobemeasuredatfairvalueoninitialrecog-nitionexceptforcertainrelatedpartytransactions.Measurementinsubsequentperiodsdependsonwhetherthefinancialinstrumenthasbeenclassifiedasheld-for-trading,available-for-sale,held-to-maturity,loansandreceivables,orotherfinancialliabilities.Transactioncostsareexpensedasincurredforfinancialinstrumentsclassifiedordesig-natedasheld-for-trading.Forotherfinancialinstruments,transactioncostsarecapitalizedoninitialrecognition.

Financialassetsandfinancialliabilitiesheld-for-tradingaremeasuredatfairvaluewithchangesinthosefairvaluesrecognizedinNon-interestincome.Financialassetsheld-to-maturity,loansandreceivables,andotherfinancialliabilitiesaremeasuredatamortizedcostusingtheeffectiveinterestmethodofamortization.Available-for-salefinancialassets,whichincludeloansubstitutesecurities,arepresentedasInvestmentsecuritiesonourConsolidatedBalanceSheetandmeasuredatfairvaluewithunrealizedgainsandlosses,includingchangesinforeignexchangerates,beingrecognizedinOCI.Investmentsinequityinstrumentsclassifiedasavailable-for-salethatdonothaveaquotedmarketpriceinanactivemarketaremeasuredatcost.

DerivativeinstrumentsarerecordedontheConsolidatedBalanceSheetatfairvalue,includingthosederivativesthatareembeddedinfinancialornon-financialcontractsthatarenotcloselyrelatedtothehostcontracts.ChangesinthefairvaluesofderivativeinstrumentsarerecognizedinNetincomewiththeexceptionofderivativesdesignated

ineffectivecashflowhedgesorhedgesofforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation.RefertotheHedgessection.

Section3855alsoprovidesanentitytheoptiontodesignateafinancialinstrumentasheld-for-trading(thefairvalueoption)onitsinitialrecognitionoruponadoptionofthestandard,evenifthefinancialinstrumentwasnotacquiredorincurredprincipallyforthepurposeofsellingorrepurchasingitinthenearterm.Aninstrumentthatisclassifiedasheld-for-tradingbywayofthisfairvalueoptionmusthaveareliablefairvalueandsatisfyoneofthefollowingcriteriaestablishedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI):(i)whendoingsoeliminatesorsignificantlyreducesameasure-mentorrecognitioninconsistencythatwouldotherwisearisefrommeasuringassetsorliabilities,orrecognizinggainsandlossesonthemonadifferentbasis;(ii)itbelongstoagroupoffinancialassets,financialliabilitiesorbothwhicharemanagedandevaluatedonafairvaluebasisinaccordancewithourriskmanagementorinvestmentstrategy,andarereportedtoseniormanagementonthatbasis;or(iii)itisanembeddedderivativeinafinancialornon-financialhostcontractandthederivativeisnotcloselyrelatedtothehostcontract.

Theprincipalcategoriesofourfinancialassetsdesignatedasheld-for-tradingunderthefairvalueoptioninclude(i)investmentssupportingthepolicybenefitliabilitiesonlifeandhealthinsurancecontractsissuedbyourinsuranceoperations;(ii)investmentsusedtooffsetexposuresunderderivativecontractsinrelationtooursalesandtradingactivities;and(iii)certainloanstocustomerswhoserelatedhedgingderivativesaremeasuredatfairvalue.Financialliabilitiesdes-ignatedasheld-for-tradingaremainlydepositsandstructurednoteswithembeddedderivativesthatarenotcloselyrelatedtothehostcontracts.Fairvaluedesignationforthesefinancialassetsandfinancialliabilitiessignificantlyreducesthemeasurementinconsistencies.

OthersignificantaccountingimplicationsarisingupontheadoptionofSection3855includetheuseoftheeffectiveinterestmethodofamortizationforanytransactioncostsorfees,premiumsordiscountsearnedonfinancialinstrumentsmeasuredatamortizedcost,andtherecognitionoftheinceptionfairvalueoftheobligationundertakeninissuingaguaranteethatmeetsthedefinitionofaguaranteepursuanttoAccountingGuideline14,Disclosure of Guarantees(AcG-14).Subsequentremeasurementatfairvalueisnotrequiredunlessthefinan-cialguaranteealsomeetsthedefinitionofaderivative.TheseguaranteesareremeasuredatfairvalueateachbalancesheetdateandreportedasaderivativeinOtherassetsorOtherliabilities,asappropriate.

HedgesSection3865specifiesthecriteriathatmustbesatisfiedinorderforhedgeaccountingtobeappliedandtheaccountingforeachofthepermittedhedgingstrategies.Weusederivativesandnon-derivativefinancialinstrumentsinourhedgingstrategiestomanageourexpo-surestointerest,currency,creditandothermarketrisks.Whenderiva-tivesareusedtomanageourownexposures,wedetermineforeachderivativewhetherhedgeaccountingcanbeapplied.Wherehedgeaccountingcanbeapplied,ahedgingrelationshipisdesignatedasafairvaluehedge,acashflowhedgeorahedgeofforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation.Thederivativemustbehighlyeffectiveinaccomplishingtheobjectiveofoffsettingeitherchangesinthefairvalueorcashflowsattributabletothehedgedriskbothatinceptionandoverthelifeofthehedge.Hedge

Note 1: Significant accounting policies


accountingisdiscontinuedprospectivelywhenitisdeterminedthatthederivativeisnothighlyeffectiveasahedge,orthederivativeistermi-natedorsold,oruponthesaleorearlyterminationofthehedgeditem.RefertoNote2forthefairvaluesofthederivativesandnon-derivativefinancialinstrumentscategorizedbytheirhedgingrelationships,aswellasderivativesthatarenotdesignatedinhedgingrelationships.

Fair value hedges Inafairvaluehedgingrelationship,thecarryingvalueofthehedgeditemisadjustedforunrealizedgainsorlossesattributabletothehedgedriskandrecognizedinNetincome.Changesinthefairvalueofthehedgeditem,totheextentthatthehedgingrelationshipiseffec-tive,areoffsetbychangesinthefairvalueofthehedgingderivative,whichisalsorecordedinNetincome.Whenhedgeaccountingisdis-continued,thecarryingvalueofthehedgeditemisnolongeradjustedandthecumulativefairvalueadjustmentstothecarryingvalueofthehedgeditemareamortizedtoNetincomeovertheremainingtermoftheoriginalhedgingrelationship.

Wepredominantlyuseinterestrateswapstohedgeourexposuretothechangesinafixedinterestrateinstrument’sfairvaluecausedbychangesininterestrates.

Cash flow hedge Inacashflowhedgingrelationship,theeffectiveportionofthechangeinthefairvalueofthehedgingderivative,netoftaxes,isrecognizedinOCIwhiletheineffectiveportionisrecognizedinNetincome.Whenhedgeaccountingisdiscontinued,theamountspreviouslyrecognizedinAOCIarereclassifiedtoNetincomeduringtheperiodswhenthevari-abilityinthecashflowsofthehedgeditemaffectsNetincome.GainsandlossesonderivativesarereclassifiedimmediatelytoNetincomewhenthehedgeditemissoldorearlyterminated.

Wepredominantlyuseinterestrateswapstohedgethevariabilityincashflowsrelatedtoavariablerateassetorliability,andallcompo-nentsofeachderivative’schangeinfairvaluehavebeenincludedintheassessmentofcashflowhedgeeffectiveness.

Net investment hedge Inhedgingaforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation,theeffectiveportionofforeignexchangegainsandlossesonthehedginginstruments,netofapplicabletaxes,isrecognizedinOCIandtheineffectiveportionisrecognizedinNetincome.TheamountspreviouslyrecognizedinAOCIarerecognizedinNetincomewhenthereisareductioninthehedgednetinvestmentasaresultofadilutionorsaleofthenetinvestment,orreductioninequityoftheforeignoperationasaresultofdividenddistributions.

Weuseforeignexchangecontractsandforeigncurrency-denominatedliabilitiestomanageourforeigncurrencyexposurestonetinvestmentsinself-sustainingforeignoperationshavingafunctionalcurrencyotherthantheCanadiandollar.

Impact upon adoption of Sections 1530, 3855 and 3865 Thetransitionadjustmentsattributabletotheremeasurementoffinancialassetsandfinancialliabilitiesatfairvalue,otherthanfinancialassetsclassifiedasavailable-for-saleandhedginginstrumentsdesig-natedascashflowhedgesorhedgesofforeigncurrencyexposureofnetinvestmentinself-sustainingforeignoperations,wererecognizedinopeningRetainedearningsasatNovember1,2006.Adjustmentsarisingfromremeasuringfinancialassetsclassifiedasavailable-for-saleatfairvaluewererecognizedinopeningAOCIasatthatdate.

ForhedgingrelationshipsexistingpriortoadoptingSection3865thatcontinuetoqualifyforhedgeaccountingunderthenewstandard,thetransitionaccountingisasfollows:(i)Fairvaluehedges–anygainorlossonthehedginginstrumentwasrecognizedinopeningRetainedearningsandthecarryingamountofthehedgeditemwasadjustedbythecumulativechangeinfairvalueattributabletothedesignatedhedgedriskandwasalsoincludedinopeningRetainedearnings;(ii)Cashflowhedgesandhedgesofnetinvestmentsinself-sustainingforeignoperations–theeffectiveportionofanygainorlossonthehedginginstrumentwasrecognizedinAOCIandthecumulativeineffec-tiveportionwasincludedinopeningRetainedearnings.

WerecordedthefollowingtransitionadjustmentsinourConsolidatedFinancialStatements:(i)areductionof$86million,netoftaxes,toouropeningRetainedearnings,representingchangesmadetothevalueofcertainfinancialinstrumentsandtheineffectiveportionofqualifyinghedges,incompliancewiththemeasurementbasisunderthenewstandardsincludingthoserelatedtotheuseoffairvalueoption;and(ii)recognitioninAOCIof$45million,netoftaxes,relatedtothenetlossesforavailable-for-salefinancialassetsandcumulativelossesontheeffectiveportionofourcashflowhedgesthatarenowrequiredtoberecognizedunderSections3855and3865.Inaddition,wehavereclassifiedtoAOCI,$2,004millionofnetunrealizedforeigncurrencylossesthatwerepreviouslypresentedasaseparateiteminShareholders’equity.

Variable Interest Entities (VIEs) OnFebruary1,2007,weadoptedCICAEmergingIssuesCommitteeAbstractNo.163,Determining the Variability to be Considered in Applying AcG-15(EIC-163).EIC-163providesadditionalclarificationonhowtoanalyzeandconsolidateVIEs.TheimplementationofEIC-163resultedinthedeconsolidationofcertaininvestmentfunds;however,theimpactwasnotmaterialtoourconsolidatedfinancialpositionorresultsofoperations.

Future accounting changes Capital Disclosures and Financial Instruments – Disclosures and Presentation OnDecember1,2006,theCICAissuedthreenewaccountingstandards:HandbookSection1535,Capital Disclosures(Section1535),HandbookSection3862,Financial Instruments – Disclosures(Section3862),andHandbookSection3863,Financial Instruments – Presentation (Section3863).ThesenewstandardswillbeeffectiveforusonNovember1,2007.

Section1535specifiesthedisclosureof(i)anentity’sobjectives,policiesandprocessesformanagingcapital;(ii)quantitativedataaboutwhattheentityregardsascapital;(iii)whethertheentityhascompliedwithanycapitalrequirements;and(iv)ifithasnotcomplied,theconsequencesofsuchnon-compliance.

Sections3862and3863replaceHandbookSection3861,Financial Instruments – Disclosure and Presentation,revisingandenhancingitsdisclosurerequirements,andcarryingforwardunchangeditspresenta-tionrequirements.Thesenewsectionsplaceincreasedemphasisondisclosuresaboutthenatureandextentofrisksarisingfromfinancialinstrumentsandhowtheentitymanagesthoserisks.

Convertible and other debt instruments with embedded derivativesOnMarch5,2007,theEmergingIssuesCommitteeoftheCICAissuedAbstractNo.164,Convertible and Other Debt Instruments with Embedded Derivatives(EIC-164).EIC-164providesclarificationregard-ingtheaccountingtreatmentforcertaintypesofconvertibledebtinstruments,theirclassificationasliabilitiesorequity,andtheimplica-tionsonearningspershare.Italsoprovidesguidanceonwhethertheseinstrumentscontainanyembeddedderivativesthatarerequiredtobeaccountedforseparately.EIC-164willbeeffectiveforusonAugust1,2007andtheimpactisnotexpectedtobematerialtoourconsolidatedfinancialpositionorresultsofoperations.

Accounting Policy Choice for Transaction Costs OnJune1,2007,theEmergingIssuesCommitteeoftheCICAissuedAbstractNo.166, Accounting Policy Choice for Transaction Costs (EIC-166).ThisEICaddressestheaccountingpolicychoiceofexpensingoraddingtransactioncostsrelatedtotheacquisitionoffinancialassetsandfinancialliabilitiesthatareclassifiedasotherthanheld-for-trading.Specifically,itrequiresthatthesameaccountingpolicychoicebeappliedtoallsimilarfinancialinstrumentsclassifiedasotherthanheld-for-trading,butpermitsadifferentpolicychoiceforfinancialinstrumentsthatarenotsimilar.EIC-166willbeeffectiveforusonSeptember30,2007andrequiresretroactiveapplicationtoalltransactioncostsaccountedforinaccordancewithCICAHandbookSection3855,Financial Instruments – Recognition and Measurement.Ourcurrentrecognitionpolicyfortransactioncostsisconsistentwiththisguidance.


Thefairvalueofafinancialinstrumentistheamountofconsiderationthatwouldbeagreeduponinanarm’s-lengthtransactionbetweenknowledgeable,willingpartieswhoareundernocompulsiontoact.Fairvaluesaredeterminedbyreferencetoquotedbidoraskingprices,asappropriate,inthemostadvantageousactivemarketforthatinstrumenttowhichwehaveimmediateaccess.Wherebidandaskpricesareunavailable,weusetheclosingpriceofthemostrecenttransactionofthatinstrument.Intheabsenceofanactivemarket,wedeterminefairvaluesbasedonprevailingmarketrates(bidandaskprices,asappropriate)forinstrumentswithsimilarcharacteristicsandriskprofilesorinternalorexternalvaluationmodels,suchasoptionpricingmodelsanddiscountedcashflowanalysis,usingobservablemarket-basedinputs.

Fairvaluesdeterminedusingvaluationmodelsrequiretheuseofassumptionsconcerningtheamountandtimingofestimatedfuturecashflowsanddiscountrates.Indeterminingthoseassumptions,welookprimarilytoexternalreadilyobservablemarketinputsincludingfactorssuchasinterestrateyieldcurves,currencyrates,andpriceandratevolatilities,asapplicable.Inlimitedcircumstances,weuseinputparametersthatarenotbasedonobservablemarketdataandwebelievethatusingpossiblealternativeassumptionswillnotresultinsignificantlydifferentfairvalues.

Accounting for changes in fair value of financial instruments during the period AsdescribedinNote1,financialinstrumentsclassifiedordesignatedasheld-for-tradingandInvestmentsecuritiesarecarriedatfairvalueonourConsolidatedBalanceSheetexceptforequityinstrumentsclassifiedasInvestmentsecuritiesthatdonothaveaquotedmarketprice,whicharecarriedatcost.Anychangesinthefairvaluesoffinancialinstrumentsclassifiedordesignatedasheld-for-tradingandInvestmentsecuritiesmeasuredatfairvaluearerecognizedinNetincomeandOCI,respectively.ThecumulativechangesinthefairvaluesofInvestmentsecuritiespreviouslyrecognizedinAOCIarereclassifiedtoNetincomewhentheyarederecognizedorthedeclineinvalueisconsideredtobeother-than-temporary.

Investmentsecuritiesmeasuredatfairvalueorcostareassessedforimpairmentateachreportingdate.AsatJuly31,2007,thepre-taxandafter-taxunrealizedlossesforInvestmentsecuritiesmeasuredatfairvalueamountedto$335millionand$222million,respectively($182millionand$117millionasatApril30,2007).Fordebtsecurities,theunrealizedlossesareprimarilyduetoincreasinginterestrates;forequitysecurities,theunrealizedlossesareduetothetimingofmarketprices,foreignexchangemovements,orbecausetheinvesteeisintheearlyyearsofitsbusinesscycle.WedonotconsiderourInvestmentsecuritiesmeasuredatfairvaluetobeother-than-temporarilyimpairedasatJuly31,2007,andwehavetheabilityandintenttoholdthemuntilthefairvaluesrecover.

OntheInvestmentsecuritiesthatwecarryatcost,wehadnounrealizedlossesduringthisquarterorthepreviousquarter.

AsatJuly31,2007,thepre-taxandafter-taxunrealizedgainsonourInvestmentsecuritiestotalled$197millionand$130million,respectively($259millionand$173millionforthequarterendedApril30,2007).Thenetafter-taxunrealizedlossesforthequarterarereflectedinUnrealizedgainsandlossesonavailable-for-salesecuritiesinAccumulatedothercomprehensiveincome(loss).

Derivativesthatarenotdesignatedinhedgingrelationshipsareclassifiedasheld-for-tradingandchangesinthefairvaluesofsuchderivativeinstrumentsarerecognizedinNetincome.

Duringthethirdquarterof2007,thefairvalueofournetfinancialassetsclassifiedasheld-for-tradingincreasedby$649million(increasedby$587millionforthesecondquarterof2007).Thefairvalueofournetfinancialassetsdesignatedasheld-for-tradingdecreasedby$296million(increasedby$34millionforthesecondquarterof2007);substantiallyallofthisdecreasewaseconomicallyhedged.Thefairvalueofthefinancialliabilitiesthatwedesignatedasheld-for-tradingincreasedby$13million(decreasedby$1millionforthesecondquarterof2007)duetochangesinourowncreditrisk.

Hedging activities Fair value hedgesForthequarterendedJuly31,2007,theineffectiveportionoffairvaluehedgesrecognizedinNetincomeamountedtoanafter-taxlossof$5million(quarterendedApril30,2007–$1million).WedidnothedgeanycommitmentsforthequarterendedJuly31,2007.

Cash flow hedgesForthequarterendedJuly31,2007,anafter-taxunrealizedgainof$144million(quarterendedApril30,2007–anafter-taxunrealizedgainof$29million)wasrecordedinOCIfortheeffectiveportionofchangesinfairvalueofderivativesincashflowhedgesandafter-taxunrealizedlossesof$7million(quarterendedApril30,2007–after-taxunrealizedlossesof$4million)werereclassifiedtoNetincome.Theafter-taxnetunrealizedgainsinAOCIwere$163millionasatJuly31,2007(April30,2007–after-taxnetunrealizedgainsof$12million).After-taxunrealizedgainsof$17millionincludedinAOCIasatJuly31,2007(April30,2007–unrealizedlossesof$4million)areexpectedtobereclassifiedtoNetincomeinthenext12months.WedidnothedgeanyanticipatedtransactionsforthequarterendedJuly31,2007.

Duringthequarter,anafter-taxunrealizedlossof$4million(quarterendedApril30,2007–anafter-taxunrealizedlossof$6mil-lion)wasrecognizedinNon-interestincomefortheineffectiveportion.

Net investment hedgesForthequarterendedJuly31,2007,thenetafter-taxlossof$296millionrelatingtoournetinvestmentinforeignoperationswasrecognizedinOCI(quarterendedApril30,2007–netafter-taxlossof$385million).

Note 2: Fair values of financial instruments


Thefollowingtablepresentsthefairvaluesofthederivativesandnon-derivativefinancialinstrumentscategorizedbytheirhedgingrelationships,aswellasderivativesthatarenotdesignatedinhedgingrelationships.

Fair value of derivatives and non-derivative Fairvalueofderivativesandnon-derivative financial instruments as at July 31, 2007 financialinstrumentsasatApril30,2007

Designated in a hedging relationship Designatedinahedgingrelationship

Not designated Notdesignated Cash flow Fair value Net investment in a hedging Cashflow Fairvalue Netinvestment inahedging hedges hedges hedges relationship hedges hedges hedges relationship

Financial assets Derivativefinancialinstruments $ 335 $ 111 $ 149 $ 53,684$ 99$ 239$ 1$ 45,353 Non-derivativefinancialinstruments – – – n.a. – – – n.a.Financial liabilities Derivativefinancialinstruments $ 81 $ 72 $ 60 $ 57,915 $ 76$ 52$ 466$ 48,066 Non-derivativefinancialinstruments – – 4,832 n.a. – – 5,028 n.a.

n.a. notapplicable

AsatApril30,2007

Carryingvalueandfairvalueoffinancialinstruments

Designatedas available- Requiredtobe Designatedas Designatedas Classifiedas for-sale classifiedas held-for- available- loansand recorded held-for-trading trading for-sale receivables(1) atcost

Securities Trading $ 151,220$ 18,985$ –$ –$ – Investment(2),(3) – – 25,937 – 2,367

Totalsecurities $ 151,220$ 18,985$ 25,937$ –$ 2,367

Assetspurchasedunderreverserepurchaseagreementsandsecuritiesborrowed $ –$ 40,458$ –$ 31,684$ –

Loans $ –$ 2,632$ –$ 221,571$ –

AsatOctober31,2006

Carryingvalueoffinancialinstruments

Requiredtobe Designatedas Designatedas classifiedas held-for- available- held-for-trading trading for-sale

Securities Trading $ 139,491$ 18,412$ – Investment(2) – – 26,310 Loansubstitute(3) – – 656

Totalsecurities $ 139,491$ 18,412$ 26,966

(1) Thefairvalueandthecarryingvaluearenotmateriallydifferent.(2) IncludesthevalueofourHeld-to-maturityinvestments,whichisnominal.(3) UponadoptionofSection3855,loansubstituteshavebeenclassifiedasInvestmentsecurities.

Carrying value and fair value of selected financial instruments Asaresultofadoptingthenewfinancialinstrumentsaccountingstandards,certainfinancialinstrumentsarenowmeasuredatfairvaluewhichwerepreviouslyreportedatcostoramortizedcost.ThisisprimarilyduetothereclassificationofcertainsecuritiesasTrading

securities,whichincludessecuritiesdesignatedasheld-for-tradingusingthefairvalueoption.ThefollowingtableprovidesacomparisonofcarryingandfairvaluesasatJuly31,2007,April30,2007andOctober31,2006,forselectedfinancialinstruments:

As atJuly 31 AsatApril30 AsatOctober31

2007 2007 2006 Carrying value and fair value of financial instruments

Designated as available- Required to be Designated as Designated as Classified as for-sale classified as held-for- available- loans and recorded Total carrying Total fair Totalfair Totalfair held-for-trading trading for-sale receivables (1) at cost value value value value

Securities Trading $ 144,180 $ 19,727 $ – $ – $ – $ 163,907 $ 163,907 $ 170,205 Investment(2),(3) – – 25,452 – 860 26,312 26,314 28,305

Totalsecurities $ 144,180 $ 19,727 $ 25,452 $ – $ 860 $ 190,219 $ 190,221 $ 198,510$ 185,239

Assetspurchasedunderreverse repurchaseagreementsand securitiesborrowed $ – $ 45,393 $ – $ 31,790 $ – $ 77,183 $ 77,183$ 72,142$ 59,378

Loans $ – $ 3,737 $ – $ 227,613 $ – $ 231,350 $ 231,350$ 224,203$ 208,638


Significant acquisitions InMarch2007,wecompletedtheacquisitionof39branchesofAmSouthBankinAlabama.InDecember2006,wecompletedtheacquisitionofAtlanta,Georgia-basedFlagFinancialCorporation(Flag)anditssubsidiary,FlagBank.Detailsoftheseacquisitionsareasfollows:

AmSouth branches (1) Flag

Acquisitiondate March 9, 2007 December8,2006

Businesssegment U.S. & International Banking U.S.&InternationalBanking

Percentageofsharesacquired n.a. 100%

Purchaseconsiderationinthecurrencyofthetransaction Cash payment of US$343 CashpaymentofUS$435

PurchaseconsiderationinCanadiandollarequivalent Cash payment of C$405 CashpaymentofC$498

Fairvalueoftangibleassetsacquired $ 2,368 $ 1,912Fairvalueofliabilitiesassumed (2,369) (1,870)

Fairvalueofidentifiablenettangibleassetsacquired(netliabilitiesassumed) (1) 42Coredepositintangiblesandotherintangibles(2),(3) 83 50Goodwill 323 406

Totalpurchaseconsideration $ 405 $ 498

(1) ThepurchasepriceallocationforAmSouthispreliminaryandhasnotbeenfinalizedbecausethevaluationofcertainassetsandliabilitieshasnotbeencompleted.(2) Coredepositintangiblesareamortizedonastraight-linebasisoveranestimatedaverageusefullifeofsevenyears.(3) IncludedintheacquisitionofFlagwas$7millionofOtherintangibles($nilforAmSouth)whichrelatetothenon-competeagreementsandareamortizedoverthetermoftheagreementsfora

maximumofthreeyears.n.a. notapplicable

Other acquisitionsOnJune18,2007,wecompletedtheacquisitionofOhio-basedSeasongood&Mayer,LLC,apublicfinancefirmandleadingunderwriterofmunicipaldebt,anditswhollyownedsubsidiary,SeasongoodAssetManagement,aninvestmentadvisortopublicfundsclients.Theacqui-sition,whichisnotmaterialtoCapitalMarkets,resultedingoodwillof$38million.

OnMay18,2007,wecompletedtheacquisitionofNewJersey-basedJ.B.Hanauer&Co.,aprivatelyheldfinancialservicesfirmwhichspecializesinretailfixedincomeandwealthmanagementservices.TheacquisitionisnotmaterialtoWealthManagement.

OnApril17,2007,weannouncedthesigningofadefinitivejointventureagreementpursuanttowhichwewillacquirea50%interestinFidelityMerchantBank&TrustLimited,theBahamas-basedwhollyownedsubsidiaryofFidelityBank&TrustInternationalLimited.Thisacquisitionissubjecttonormalclosingconditionsincludingregulatoryapprovalsandisexpectedtocloseinthefourthquarterof2007.

InJanuary2007,wecompletedtwoacquisitionsinCapitalMarkets:(i)thebroker-dealerbusinessandcertainotherassetsoftheCarlinFinancialGroup,aNewYork-basedbroker-dealerand(ii)Daniels&Associates,L.P.,anM&Aadvisortothecable,telecom,broadcastandInternetservicesindustries.Theacquisitionsincludetotalgoodwillof$121millionandarenotmaterialtoCapitalMarkets.

Discontinued operations RBCMortgageCompany(RBCMortgage)haddisposedofsubstantiallyallofitsremainingassetsandobligationsbytheendoffiscal2006andwenolongerseparatelyclassifyitsresultsinourInterimConsolidatedFinancialStatements.TheresidualbalancesofRBCMortgageareimmaterial;changesinthesebalancesarenowreportedinCorporateSupport.Forperiodsprecedingfiscal2007,theresultsofRBCMortgagearepresentedseparatelyasdiscontinuedoperations.

Note 3: Significant acquisitions and disposition


ThekeyassumptionsusedtovaluetheretainedinterestsatthedateofsecuritizationforactivitiesduringthequarterendedJuly31,2007,aresummarizedbelow.Allratesareannualized.

Key assumptions Residential mortgage loans

Variable rate Fixed rate

Expectedweightedaveragelifeofprepayable receivables(inyears) 2.57 3.56Paymentrate 30.00% 16.60%Excessspread,netofcreditlosses .80% .75% Expectedcreditlosses n.a. n.a.Discountrate 5.05% 4.79%

n.a. notapplicable

Inadditiontotheabovesecuritizationtransactions,wesold$128million(US$109million)ofparticipationinterestsincommercialmortgagemezza-ninenotestothird-partyinvestorsattheirprincipalamountsduringthefirstquarterof2007.Noneweresoldinthesecondorthirdquartersof2007.

Securitization activity for the three months ended (1) July 31 April30 July31

2007(2) 2007(2) 2006(2),(4) Commercial Residential Commercial Residential Residential mortgage mortgage mortgage mortgage mortgage loans loans(3) loans loans(3) loans(3)

Securitizedandsold $ 650 $ 1,834 $ 602 $ 1,583 $ 1,442Netcashproceedsreceived 634 1,778 606 1,582 1,406Asset-backedsecuritiespurchased – – – – –Retainedrightstofutureexcessinterest – 40 – 35 28Pre-taxgain(loss)onsale (16) (16) 4 34 (8)Securitiescreatedandretained(6) – 867 – 843 920

Securitization activity for the nine months ended (1) July 31 July31

2007(2) 2006 Commercial Residential Credit Commercial Residential mortgage mortgage card mortgage mortgage loans loans(3) loans(5) loans loans(3)

Securitizedandsold $ 1,572 $ 4,855 $ 1,200 $ 396 $ 4,270Netcashproceedsreceived 1,566 4,787 400 397 4,173Asset-backedsecuritiespurchased – – 794 – –Retainedrightstofutureexcessinterest – 117 9 – 75Pre-taxgain(loss)onsale (6) 49 3 1 (22)Securitiescreatedandretained(6) – 1,877 – – 4,482

(1) Wedidnotrecognizeanassetoraliabilityforourservicingrightswithrespecttothesecuritizedloansaswereceivedadequatecompensationforourservices.(2) Wedidnotsecuritizeanycreditcardloansduringtheperiod.(3) Allresidentialmortgageloanssecuritizedaregovernmentguaranteed.(4) Wedidnotsecuritizeanycommercialmortgageloansduringtheperiod.(5) Thenetcashproceedsreceivedrepresentgrosscashproceedsof$1,200millionlessfundsusedtopurchasenotesissuedbyGoldenCreditCardTrustwithaprincipalvalueof$800million.(6) Totalsecuritiescreatedandretainedarecarriedatfairvalue;priortoNovember1,2006,thesesecuritieswerecarriedatamortizedcost.

Note 4: Securitizations

Weofferanumberofbenefitplanswhichprovidepensionandotherpost-employmentbenefitstoeligibleemployees.Expensesforthesebenefitplansarepresentedinthefollowingtable:



2007 2007 2006 2007 2006

Pensionbenefitexpense $ 94 $ 93 $ 99 $ 278 $ 297Otherpost-employmentbenefitexpense 28 28 27 83 86

Note 5: Pension and other post-employment benefits


RBC Trust Subordinated Notes OnApril30,2007,weissued$1billioninnovativesubordinateddebentures,RBCTrustSubordinatedNotes(TSNs)–SeriesA,throughanewspecialpurposeentity,RBCSubordinatedNotesTrust(TrustIII),aclosed-endtrustestablishedunderthelawsoftheProvinceofOntario.Theissuewaspricedat$99.982withayieldtoApril30,2012of4.584%.TheproceedswereusedtopurchaseaseniordepositnotefromuswhichisreportedasaBusinessandgovernmentdepositliability.

TrustIIIisaVIEunderAccountingGuideline15,Consolidation of Variable Interest Entities(AcG-15).WedonotconsolidateTrustIIIaswearenotitsPrimaryBeneficiary(refertoNote11);therefore,theTSNs–SeriesAissuedbyTrustIIIarenotreportedonourConsolidatedBalanceSheet.TheholdersofTSNs–SeriesAareeligibletoreceivesemi-annualfixeddistributionsat4.58%perannumuntilApril30,2012,andquarterlyfloatingdistributionsthereafterat90-dayBanker’sacceptancerateplus1%untiltheirmaturityonApril30,2017.

TheTSNs–SeriesAmayberedeemed,inwholeorinpart,subjecttotheapprovaloftheOSFI,forcashequivalentto(i)theEarlyRedemptionPriceifthenotesareredeemedpriortoApril30,2012,or(ii)theRedemptionPriceifthenotesareredeemedonorafterApril30,2012.TheRedemptionPriceisanamountequalto$1,000plustheunpaiddistributionstotheredemptiondate.TheEarlyRedemptionPriceisanamountequaltothegreaterof(i)theRedemptionPrice,and(ii)thepricecalculatedtoprovideanannualyield,equaltotheyieldonaGovernmentofCanadabondfromtheredemptiondatetoApril30,2012,plus11basispoints.

AlloftheTSNs–SeriesAwillbeexchangedautomatically,withouttheconsentoftheholders,intoourSeries10SubordinatedNotesuponoccurrenceofanyoneofthefollowingevents:(i)proceedingsarecommencedforourwinding-up;(ii)theOSFItakescontrolofus;(iii)wehaveaTier1capitalratiooflessthan5%oraTotalcapitalratiooflessthan8%;(iv)theOSFIdirectsustoincreaseourcapitalorprovideadditionalliquidityandweelectsuchautomaticexchangeorwefailtocomplywithsuchdirection;or(v)wedeterminethatasaresultoftheenactmentoranticipatedenactmentoffederalCanadianincometaxlegislation,theinterestpayableontheTSNs–SeriesAwillnotbedeductiblebyTrustIIIfortaxpurposes.

Wehaveguaranteedthepaymentsofprincipal,interest,redemp-tionprice,ifany,andanyotheramountsontheTSNs–SeriesAwhentheybecomedueandpayable.Thisguaranteewillbeourdirect,unse-curedobligation,andwillbesubordinatetoourdepositliabilitiesandallotherliabilities,exceptforotherguarantees,obligationsorliabilitiesthatareeitherdesignatedasrankingequallywithorsubordinatetothesubordinatedindebtedness.

Theseniordepositnotebearsinterestatanannualrateof4.72%andwillmatureonApril30,2017.SubjecttotheOSFI’sapproval,thenoteisredeemableatouroption,inwholeorinpart,onorafterApril30,2012,attheRedemptionPriceandmayalsoberedeemedearlieratouroptionforthegreateroftheRedemptionPriceortheEarlyRedemptionPrice.

Other significant capital transactionsOnJune26,2007,weissuedatparJapaneseYen-denominated10billion($87million)subordinatedindebtednessat2.86%perannum,payablesemi-annually.Thisissueisredeemableatouroption,onorafterJune26,2017,subjecttotheapprovaloftheOSFI.

OnJune4,2007,weredeemedallofouroutstanding$500million6.75%subordinateddebenturesdueonJune4,2012,atparplusaccruedinterest.

OnApril26,2007,weissued$250millionNon-cumulativeFirstPreferredSharesSeriesAGat$25pershare.Holdersareentitledtoreceivenon-cumulativepreferentialquarterlydividendsintheamountof$.28125persharetoyield4.5%annually.Subjecttoregulatoryapproval,wemayredeemthesesharesonorafterMay24,2012,inwholeorinpart,atadecliningpremium.

OnMarch14,2007,weissued$200millionNon-cumulativeFirstPreferredSharesSeriesAFat$25pershare.Holdersareentitledtoreceivenon-cumulativepreferentialquarterlydividendsintheamountof$.278125persharetoyield4.45%annually.Subjecttoregulatoryapproval,wemayredeemthesesharesonorafterMay24,2012,inwholeorinpart,atadecliningpremium.

OnJanuary19,2007,weissued$250millionNon-cumulativeFirstPreferredSharesSeriesAEat$25pershare.Holdersareentitledtoreceivenon-cumulativepreferentialquarterlydividendsintheamountof$.28125persharetoyield4.5%annually.Subjecttoregulatoryapproval,wemayredeemthesesharesonorafterFebruary24,2012,inwholeorinpart,atadecliningpremium.

OnDecember13,2006,weissued$250millionNon-cumulativeFirstPreferredSharesSeriesADat$25pershare.Holdersareentitledtoreceivenon-cumulativepreferentialquarterlydividendsintheamountof$.28125persharetoyield4.5%annually.Subjecttoregula-toryapproval,wemayredeemthesesharesonorafterFebruary24,2012,inwholeorinpart,atadecliningpremium.

OnNovember24,2006,weredeemedallofouroutstandingsixmillionNon-cumulativeFirstPreferredSharesSeriesOat$25.50pershare,includinga$.50pershareredemptionpremium.

OnNovember8,2006,weredeemedallofouroutstandingUS$400millionsubordinateddebenturesdueNovember8,2011,atparvalueplusaccruedinterest.

OnNovember1,2006,weissued$200millionNon-cumulativeFirstPreferredSharesSeriesACat$25pershare.Holdersareentitledtoreceivenon-cumulativepreferentialquarterlydividendsintheamountof$.2875persharetoyield4.6%annually.Subjecttoregula-toryapproval,wemayredeemthesesharesonorafterNovember24,2011,inwholeorinpart,atadecliningpremium.

EffectiveNovember1,2006,werenewedournormalcourseissuerbidforoneyeartopurchaseforcancellationupto40millionofourcommonsharesthroughthefacilitiesoftheTorontoStockExchange.Duringthequarter,wepurchasedonemillioncommonsharesatanaveragecostof$57.50pershare.Sincetherenewaldate,wehavepurchasedatotalof11.5millioncommonsharesatanaveragecostof$54.61pershare.

OnMarch22,2005,weannouncedthatwemay,fromtimetotime,purchaseforcancellationsomeorallofouroutstanding$250millionFloating-RateDebenturesduein2083andUS$300millionFloating-RateDebenturesduein2085.Thetiming,priceandothertermsaredeterminedatoursolediscretion.Duringthecurrentquarter,wedidnotpurchaseanyFloating-RateDebenturesduein2083ortheUS$Floating-RateDebenturesduein2085.Sincetheannouncementdate,wehavepurchasedatotalof$26millionofFloating-RateDebenturesduein2083andUS$111million($132million)ofFloating-RateDebenturesduein2085.

Note 6: Significant capital transactions




2007 2007 2006 2007 2006

Basic earnings per share Netincomefromcontinuingoperations $ 1,395 $ 1,279 $ 1,194 $ 4,168 $ 3,494 Netlossfromdiscontinuedoperations(1) – – (17) – (28)

Netincome 1,395 1,279 1,177 4,168 3,466 Preferredsharedividends (26) (22) (13) (64) (34)

Netincomeavailabletocommonshareholders $ 1,369 $ 1,257 $ 1,164 $ 4,104 $ 3,432

Averagenumberofcommonshares(inthousands) 1,272,913 1,272,212 1,279,300 1,273,246 1,281,815 Basicearningspershare Continuingoperations $ 1.07 $ .99 $ .92 $ 3.22 $ 2.70 Discontinuedoperations(1) – – (.01) – (.02)

Total $ 1.07 $ .99 $ .91 $ 3.22 $ 2.68

Diluted earnings per share Netincomeavailabletocommonshareholders $ 1,369 $ 1,257 $ 1,164 $ 4,104 $ 3,432

Averagenumberofcommonshares(inthousands) 1,272,913 1,272,212 1,279,300 1,273,246 1,281,815 Stockoptions(2) 12,808 13,621 13,316 13,693 14,075 Issuableunderotherstock-basedcompensationplans 2,506 2,582 4,724 3,008 5,275

Averagenumberofdilutedcommonshares(inthousands) 1,288,227 1,288,415 1,297,340 1,289,947 1,301,165 Dilutedearningspershare Continuingoperations $ 1.06 $ .98 $ .91 $ 3.18 $ 2.66 Discontinuedoperations(1) – – (.01) – (.02)

Total $ 1.06 $ .98 $ .90 $ 3.18 $ 2.64

(1) RefertoNote3.(2) Thedilutiveeffectofstockoptionswascalculatedusingthetreasurystockmethod.ForthethreemonthsendedJuly31,2007,weexcludedfromthecalculationofdilutedearningspershare

41,124averageoptionsoutstandingwithanexercisepriceof$57.90(April30,2007–22,179averageoptionsoutstandingwithanexercisepriceof$57.90),astheexercisepriceoftheseoptionswasgreaterthantheaveragemarketpriceofourcommonshares.FortheninemonthsendedJuly31,2007,weexcludedfromthecalculationofdilutedearningspershare21,089aver-ageoptionsoutstandingwithanexercisepriceof$57.90.ForeachofthethreeandninemonthsendedJuly31,2006,therewerenoaverageoptionsoutstandingwheretheexercisepricesweregreaterthantheaveragemarketpriceofourcommonshares.

Note 7: Earnings per share

Inthenormalcourseofourbusiness,weenterintonumerousagree-mentsthatmaycontainfeaturesthatmeetthedefinitionofaguaranteepursuanttoAcG-14.Themaximumpotentialamountoffuturepaymentsrepresentsthemaximumriskoflossiftherewasatotaldefaultbythe

Note 8: Guarantees and contingencies

guaranteedparties,withoutconsiderationofpossiblerecoveriesunderrecourseprovisions,insurancepoliciesorfromcollateralheldorpledged.

Thefollowingtablesummarizessignificantguaranteesthatwehaveprovidedtothirdparties:

Asat

July 31 October31 July31

2007 2006 2006 Maximum Maximum Maximum potential potential potential amount of future Carrying amountoffuture Carrying amountoffuture Carrying payments amount(1) payments amount(1) payments amount(1)

Creditderivativesandwrittenputoptions(2) $ 73,267 $ 1,834 $ 54,723 $ 352 $ 29,996 $ 266Backstopliquidityfacilities 40,414 31 34,342 – 34,432 –Stablevalueproducts(2) 18,903 – 16,098 – 15,704 –Financialstandbylettersofcreditandperformanceguarantees 18,224 61 15,902 17 14,744 18Creditenhancements 4,897 33 4,155 – 4,159 –Mortgageloanssoldwithrecourse(3) 241 – 204 – 253 –

(1) AsdescribedinNote1,effectiveNovember1,2006,aliabilityisnowrecognizedontheConsolidatedBalanceSheetatinceptionofaguaranteeforthefairvalueoftheobligationundertakeninissuingtheguarantee.Forcreditderivativesandwrittenputoptions,thepriorperiodcomparativesrepresentthefairvaluesofthederivatives;forfinancialstandbylettersofcreditandperformanceguarantees,theyrepresentunamortizedpremiumsreceived.

(2) Thenotionalamountofthecontractapproximatesthemaximumpotentialamountoffuturepayments.(3) AsatOctober31andJuly31,2006,mortgageloanssoldwithrecourserelatedtothediscontinuedoperationsamountedto$niland$13million,respectively.RefertoNote3.

Inadditiontotheaboveguarantees,wetransactsubstantiallyallofoursecuritieslendingactivitiesinwhichweactasanagentfortheownersofsecuritiesthroughourjointventure,RBCDexiaIS.AsatJuly31,2007,RBCDexiaISsecuritieslendingindemnificationstotalled$58,258million(October31,2006–$45,614million;July31,2006–$40,502million);weareexposedto50%ofthisamount.

RefertoNote27ofour2006AnnualReportforfurtherinformationontheaboveguaranteesandadescriptionofourobligationsundercertainindemnificationagreements.


exacerbatedasaresultofthelargenumberofcases,themultipledefendantsinmanyofthem,thenovelissuespresented,andthecurrentdifficultlitigationenvironment.Althoughitisnotpossibletopredicttheultimateoutcomeoftheselawsuits,thetimingoftheirresolutionorourexposure,duringthefourthquarterof2005,weestablishedalitigationprovisionof$591million(US$500million)or$326millionafter-tax(US$276million).Webelievetheultimateresolutionoftheselawsuitsandotherproceedings,whilenotlikelytohaveamaterialadverseeffectonourconsolidatedfinancialposition,maybematerialtoouroperatingresultsfortheparticularperiodinwhichtheresolutionoccurs,notwithstandingtheprovisionestablishedinthefourthquarterof2005.Wewillcontinuetovigorouslydefendourselvesinthesecases.

Other Variousotherlegalproceedingsarependingthatchallengecertainofourpracticesoractions.Weconsiderthattheaggregateliabilityresult-ingfromtheseotherproceedingswillnotbematerialtoourfinancialpositionorresultsofoperations.



2007 2007 2006 2007 2006

Netinterestincome $ (31) $ (31) $ (146) $ (213) $ (366)Non-interestincome 546 575 683 1,924 1,954

Total $ 515 $ 544 $ 537 $ 1,711 $ 1,588

Totaltradingrevenueincludesbothtrading-relatedNetinterestincomeandTradingrevenuereportedinNon-interestincome.Netinterestincomearisesfrominterestanddividendsrelatedtotradingassetsandliabilitiesandtheamortizationofpremiumsanddiscountsarisingon

theiracquisitionorissuance.Non-interestincomeincludesrealizedandunrealizedgainsandlossesontradingsecuritiesandtradingderivativefinancialinstruments.

Note 9: Total trading revenue

Composition of business segments EffectiveFebruary7,2007,ourpreviousthreebusinesssegments(RBCCanadianPersonalandBusiness,RBCU.S.andInternationalPersonalandBusiness,andRBCCapitalMarkets)werereorganizedandrenamedintothefollowingfourbusinesssegments:

CanadianBankingcomprisesourdomesticpersonalandbusinessbankingoperations,certainretailinvestmentbusinessesandourglobalinsuranceoperations.

WealthManagementcomprisesbusinessesthatdirectlyserveourclients’growingwealthmanagementneedsincludingthoseofaffluentandhighnetworthclientsglobally,andbusinessesthatprovideassetmanagementandtrustproducts.

U.S.&InternationalBankingcomprisesourbankingbusinessesoutsideCanada,includingRBCCenturaintheU.S.andRBC’sCaribbeanbankingoperations.Inaddition,thissegmentincludesour50%owner-shipinRBCDexiaIS.

CapitalMarketscomprisesourglobalwholesalebankingsegment,providingawiderangeofcorporateandinvestmentbanking,salesandtrading,researchandrelatedproductsandservicestocorporations,publicsectorandinstitutionalclientsinNorthAmericaandspecializedproductsandservicesinselectglobalmarkets.

Allotherenterpriselevelactivitiesthatarenotallocatedtothesefourbusinesssegments,suchassecuritization,netchargesassociatedwithunattributedcapital,andconsolidationadjustments,includingtheeliminationofthetaxableequivalentbasis(teb)gross-upamounts,areincludedinCorporateSupport.TebadjustmentsgrossupNetinterestincomefromcertaintax-advantagedsourcestotheireffectivetaxequivalentvaluewiththecorrespondingoffsetrecordedinthepro-visionforincometaxes.ManagementbelievesthattheseadjustmentsarenecessaryforCapitalMarketstoreflecthowitismanaged.Theuseofthetebadjustmentsenhancesthecomparabilityofrevenueacrossourtaxableandtax-advantagedsources.TheuseoftebadjustmentsandmeasuresmaynotbecomparabletosimilarGAAPmeasuresorsimilarlyadjustedamountsatotherfinancialinstitutions.

Ourmanagementreportingframeworkisintendedtomeasuretheperformanceofeachbusinesssegmentasifitwereastand-alonebusi-nessandtoreflectthewaythatitismanaged.Thisapproachensuresthatourbusinesssegments’resultsreflectallrelevantrevenueandexpensesassociatedwiththeconductoftheirbusinessanddepictshowmanagementviewsthoseresults.Theseitemsdonotimpactourconsolidatedresults.

Theexpensesineachbusinesssegmentmayincludecostsorservicesdirectlyincurredorprovidedontheirbehalfattheenterpriselevel.Forothercostsnotdirectlyattributabletooneofourbusinesssegments,weuseamanagementreportingframeworkthatusesassumptions,estimatesandmethodologiesforallocatingoverheadcostsandindirectexpensestoourbusinesssegmentsandthatassistsintheattributionofcapitalandthetransferpricingoffundstoourbusi-nesssegmentsinamannerthatfairlyandconsistentlymeasuresandalignstheeconomiccostswiththeunderlyingbenefitsandrisksofthatspecificbusinesssegment.Activitiesandbusinessconductedbetweenourbusinesssegmentsaregenerallyatmarketrates.

Ourassumptionsandmethodologiesusedinourmanagementreportingframeworkareperiodicallyreviewedbymanagementtoensuretheyremainvalid.Thecapitalattributionmethodologiesinvolveanumberofassumptionsandestimatesthatarerevisedperiodically.

Thereorganizationofourbusinesssegmentsalsoresultedintherealignmentofcertainreportingunits.Accordingly,wereallocatedourgoodwilltothenewreportingunits,testeditforimpairment,andconcludedthattherewasnoimpairment.

Changes to comparatives Thecomparativeresultshavebeenrestatedtoconformtoournewbasisofsegmentpresentation.

Note 10: Results by business segment

Enron Corp. (Enron) litigation ApurportedclassofpurchasersofEnronwhopubliclytradedequityanddebtsecuritiesbetweenJanuary9,1999,andNovember27,2001,hasnamedRoyalBankofCanadaandcertainrelatedentitiesasdefendantsinanactionentitledRegents of the University of California v. Royal Bank of CanadaintheUnitedStatesDistrictCourt,SouthernDistrictofTexas(HoustonDivision).Inaddition,RoyalBankofCanadaandcertainrelatedentitieshavebeennamedasdefendantsinseveralotherEnron-relatedcases,whicharefiledinvariouscourtsintheU.S.,assertingsimilarclaimsfiledbypurchasersofEnronsecurities.RoyalBankofCanadaisalsoathird-partydefendantincasesinwhichEnron’saccountants,ArthurAndersenLLP,filedthird-partyclaimsagainstanumberofparties,seekingcontributionifArthurAndersenLLPisfoundliabletoplaintiffsintheseactions.

Wereviewthestatusofthesemattersonanongoingbasisandwillexerciseourjudgmentinresolvingtheminsuchamanneraswebelievetobeinourbestinterests.Aswithanylitigation,therearesignificantuncertaintiessurroundingthetimingandoutcome.Uncertaintyis

Quarterly earnings Canadian Wealth U.S.&International Banking Management Banking

Q3/07 Q2/07 Q3/06 Q3/07 Q2/07 Q3/06 Q3/07 Q2/07 Q3/06

Netinterestincome $ 1,605$ 1,559$ 1,498$ 106 $ 104$ 99$ 263$ 272$ 240Non-interestincome 1,302 1,521 1,477 900 904 744 259 221 191

Totalrevenue 2,907 3,080 2,975 1,006 1,008 843 522 493 431Provisionfor(recoveryof)creditlosses 190 204 121 – – – 17 10 5Insurancepolicyholderbenefits,claimsand acquisitionexpense 343 677 627 – – – – – –Non-interestexpense 1,356 1,295 1,254 747 722 646 389 381 307

Netincome(loss)beforeincometaxes 1,018 904 973 259 286 197 116 102 119Incometaxes 319 286 313 82 92 61 27 32 36Non-controllinginterestinnetincomeofsubsidiaries – – – – – – 2 3 1

Netincomefromcontinuingoperations 699 618 660 177 194 136 87 67 82Netlossfromdiscontinuedoperations(1) – – – – – – – – (17)

Net income $ 699$ 618$ 660$ 177$ 194$ 136$ 87$ 67$ 65

Total average assets(2) $ 221,800 $216,900$201,300$ 15,700 $16,400$15,900$ 41,100$41,000$36,200

Quarterly earnings CapitalMarkets CorporateSupport Total

Q3/07 Q2/07 Q3/06 Q3/07 Q2/07 Q3/06 Q3/07 Q2/07 Q3/06

Netinterestincome $ 175$ 169$ 28$ (171) $ (203)$ (99)$ 1,978$ 1,901$ 1,766Non-interestincome 983 1,013 994 58 109 34 3,502 3,768 3,440

Totalrevenue 1,158 1,182 1,022 (113) (94) (65) 5,480 5,669 5,206Provisionfor(recoveryof)creditlosses (7) (5) (7) (22) (21) (20) 178 188 99Insurancepolicyholderbenefits,claimsand acquisitionexpense – – – – – – 343 677 627Non-interestexpense 693 754 648 (20) (4) 6 3,165 3,148 2,861

Netincome(loss)beforeincometaxes 472 433 381 (71) (69) (51) 1,794 1,656 1,619Incometaxes 79 77 51 (158) (134) (80) 349 353 381Non-controllinginterestinnetincomeofsubsidiaries 33 6 27 15 15 16 50 24 44

Netincomefromcontinuingoperations 360 350 303 72 50 13 1,395 1,279 1,194Netlossfromdiscontinuedoperations(1) – – – – – – – – (17)

Net income $ 360 $ 350$ 303 $ 72$ 50$ 13 $ 1,395$ 1,279$ 1,177

Total average assets(2) $ 317,300 $310,200$261,700 $ (7,100) $ (5,800)$ (5,600)$ 588,800 $578,700 $509,500

Nine-month earnings Canadian Wealth U.S.&International Banking Management Banking

2007 2006 2007 2006 2007 2006

Netinterestincome $ 4,711$ 4,286 $ 318$ 296$ 792 $ 702Non-interestincome 4,357 4,362 2,688 2,288 668 497

Totalrevenue 9,068 8,648 3,006 2,584 1,460 1,199Provisionfor(recoveryof)creditlosses 576 431 – 1 37 20Insurancepolicyholderbenefits,claimsandacquisitionexpense 1,536 1,898 – – – –Non-interestexpense 3,926 3,741 2,171 1,942 1,118 904

Netincome(loss)beforeincometaxes 3,030 2,578 835 641 305 275Incometaxes 942 827 253 201 77 89Non-controllinginterestinnetincomeofsubsidiaries – – – – 7 4

Netincomefromcontinuingoperations 2,088 1,751 582 440 221 182Netlossfromdiscontinuedoperations(1) – – – – – (28)

Net income $ 2,088 $ 1,751$ 582$ 440$ 221 $ 154

Total average assets(2) $ 217,000 $196,700$ 16,300 $14,800$ 39,900$32,300

(1) RefertoNote3.(2) Calculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.



Nine-month earnings CapitalMarkets CorporateSupport Total

2007 2006 2007 2006 2007 2006

Netinterestincome $ 400$ 138 $ (475)$ (357)$ 5,746 $ 5,065Non-interestincome 3,170 2,990 218 86 11,101 10,223

Totalrevenue 3,570 3,128 (257) (271) 16,847 15,288Provisionfor(recoveryof)creditlosses (20) (115) (65) (67) 528 270Insurancepolicyholderbenefits,claimsandacquisitionexpense – – – – 1,536 1,898Non-interestexpense 2,185 1,959 (20) (6) 9,380 8,540

Netincome(loss)beforeincometaxes 1,405 1,284 (172) (198) 5,403 4,580Incometaxes 252 253 (387) (309) 1,137 1,061Non-controllinginterestinnetincomeofsubsidiaries 47 (24) 44 45 98 25

Netincomefromcontinuingoperations 1,106 1,055 171 66 4,168 3,494Netlossfromdiscontinuedoperations(1) – – – – – (28)

Net income $ 1,106$ 1,055$ 171 $ 66$ 4,168$ 3,466

Total average assets(2) $ 308,400 $255,900$ (6,200)$ (5,300)$ 575,400 $494,400

(1) RefertoNote3.(2) Calculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.

Multi-seller conduitsWeadministersixmulti-sellerasset-backedcommercialpaperconduitprograms(multi-sellerconduits).Theseconduitsprimarilypurchasefinancialassetsfromclientsandfinancethosepurchasesbyissuingasset-backedcommercialpaper.Ourclientsprimarilyutilizemulti-sellerconduitstodiversifytheirfinancingsourcesandtoreducefundingcosts.Certainofthemulti-sellerconduitsalsofinancedassetsintheformofeithersecuritiesorinstrumentsthatcloselyresemblesecuritiessuchascredit-linkednotes.Inthesesituations,themulti-sellerconduitisoftenoneofmanyinvestorsinthesecuritiesorsecurity-likeinstruments.

Themulti-sellerconduitsarenotconsolidatedunderAcG-15aswearenotthePrimaryBeneficiary.However,wedoholdsignificantvari-ableinterestsinthesemulti-sellerconduitsresultingfromourprovisionofbackstopliquidityfacilitiesandpartialcreditenhancement.

Thetotalassetsofourmulti-sellerconduitsasatJuly31,2007were$41billion(April30,2007–$39billion;October31,2006–$34billion),andourmaximumexposuretolosswas$42billion(April30,2007–$40billion;October31,2006–$35billion),reflectingchangesintheirlevelofactivitiesduringthequarter.

RBC Subordinated Notes TrustTrustIIIwascreatedtoissue$1billionTrustSubordinatedNotes(refertoNote6).Althoughweownthecommonequityandvotingcontrolofthistrust,wearenotthePrimaryBeneficiarysincewearenotexposedtothemajorityoftheexpectedlosses.

Note 11: Variable interest entities

TheincometaxexpenseorbenefitallocatedtoeachcomponentofOthercomprehensiveincomeispresentedinthetablebelow:


July 31 April30 July 31

2007 2007 2007

Netunrealizedgains(losses)onavailable-for-salesecurities $ (83) $ 3 $ (62) Reclassificationof(gains)lossesonavailable-for-salesecuritiestoincome 5 (3) 10 Netforeigncurrencytranslationgains(losses)fromhedgingactivities 225 337 210Netgains(losses)onderivativesdesignatedascashflowhedges 77 15 101Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 4 3 15

Total income taxes (recovery) $ 228 $ 355 $ 274

Note 12: Income taxes on components of Other comprehensive income


CorporateheadquartersStreetaddress:RoyalBankofCanada200BayStreetToronto,Ontario,CanadaTel:(416)974-5151Fax:(416)955-7800

Mailingaddress:P.O.Box1RoyalBankPlazaToronto,OntarioCanadaM5J2J5

website:rbc.com

TransferAgentandRegistrar

Main AgentComputershareTrustCompanyofCanada

1500UniversityStreetSuite700Montreal,QuebecCanadaH3A3S8Tel:(514)982-7555or1-866-586-7635Fax:(514)982-7635

website:computershare.com

Co-Transfer Agent (U.S.)TheBankofNewYork101BarclayStreetNewYork,NewYorkU.S.10286

Co-Transfer Agent (United Kingdom)ComputershareServicesPLCSecuritiesServices–RegistrarsP.O.BoxNo.82,ThePavilions,BridgwaterRoad,BristolBS997NHEngland

Stockexchangelistings(Symbol:RY)

Commonsharesarelistedon:Canada –TorontoStockExchange(TSX)U.S. –NewYorkStockExchange(NYSE)Switzerland –SwissExchange(SWX)

AllpreferredsharesarelistedontheTorontoStockExchange.

ValuationDaypriceForcapitalgainspurposes,theValuationDay(December22,1971)costbaseforourcommonsharesis$7.38pershare.Thisamounthasbeenadjustedtoreflectthetwo-for-onesharesplitofMarch1981andthetwo-for-onesharesplitofFebruary1990.Theone-for-onesharedividendspaidinOctober2000andApril2006didnotaffecttheValuationDayvalueforourcommonshares.

ShareholdercontactsForinformationaboutstocktransfers,addresschanges,dividends,loststockcertificates,taxforms,estatetransfers,contact:ComputershareTrustCompanyofCanada100UniversityAve.,9thFloorToronto,OntarioM5J2Y1Tel:(514)982-7555or1-866-586-7635

Forothershareholderinquiries,contact:ShareholderRelationsRoyalBankofCanada200BayStreet9thFloor,SouthTowerToronto,OntarioCanadaM5J2J5Tel:(416)955-7806Fax:(416)974-3535

Forfinancialinformationinquiries,contact:InvestorRelationsRoyalBankofCanada200BayStreet14thFloor,SouthTowerToronto,OntarioCanadaM5J2J5Tel:(416)955-7802Fax:(416)955-7800orvisitourwebsiteatrbc.com/investorrelations

DirectdepositserviceShareholdersinCanadaandtheU.S.mayhavetheirdividendsdepositedbyelectronicfundstransfer.Toarrangeforthisservice,pleasecontactComputershareTrustCompanyofCanadaatitsmailingaddress.

DividendReinvestmentPlanOurDividendReinvestmentPlanprovidesourregisteredcommonshareholdersresidinginCanadaandtheU.S.withthemeanstopurchaseadditionalRBCcommonsharesthroughtheautomaticreinvestmentoftheircashdividends.

FormoreinformationonparticipationintheDividendReinvestmentPlan,pleasecontactourPlanAgent:

ComputershareTrustCompanyofCanadaAttn:DividendReinvestmentDept.100UniversityAve.,9thFloorToronto,OntarioM5J2Y1Tel:1-866-586-7635(CanadaandU.S.)or(514)982-7555Fax:(416)263-9394or1-888-453-0330e-mail:[email protected]

EligibledividenddesignationForpurposesoftheenhanceddividendtaxcreditrulescon-tainedintheIncome Tax Act (Canada)andanycorrespondingprovincialandterritorialtaxlegislation,alldividends(anddeemeddividends)paidbyus

toCanadianresidentsonourcommonandpreferredsharesafterDecember31,2005,aredesignatedas“eligibledivi-dends”.Unlessstatedotherwise,alldividends(anddeemeddividends)paidbyushereafteraredesignatedas“eligibledividends”forthepurposesofsuchrules.

CommonsharerepurchasesWeareengagedinaNormalCourseIssuerBidthroughthefacilitiesoftheTorontoStockExchange.Duringtheone-yearperiodcommencingNovember1,2006,wemayrepurchaseupto40millioncommonsharesintheopenmarketatmarketprices.Wedeterminetheamountandtimingofthepurchases.

AcopyofourNoticeofIntentiontofileaNormalCourseIssuerBidmaybeobtained,withoutcharge,bycontactingRBC’sSecretaryatourTorontomailingaddress.

2008AnnualMeetingOurannualmeetingofCommonShareholderswillbeheldonFriday,February29,2008,attheMetroTorontoConventionCentre,NorthBuilding,255FrontStreetWest,Toronto,Ontario,Canada.

2007QuarterlyearningsreleasedatesFirstquarter March2Secondquarter May25Thirdquarter August24Fourthquarter November30

Dividenddatesfor2007SubjecttoapprovalbytheBoardofDirectors

Recorddates Paymentdates

Commonandpreferred Jan.25 Feb.23sharesseriesN,W,AA,ABandAC Apr.25 May24 Jul.26 Aug.24 Oct.25 Nov.23ADandAE Apr.25 May24 Jul.26 Aug.24 Oct.25 Nov.23AFandAG Jul.26 Aug.24 Oct.25 Nov.23

Informationcontainedinorotherwiseaccessiblethroughthewebsitesmentionedinthisreporttoshareholdersdoesnotformapartofthisreport.Allreferencesinthisreporttoshareholderstowebsitesareinactivetextualreferencesandareforyourinformationonly.

TrademarksusedinthisreportincludetheLION&GLOBESymbol,ROYALBANKOFCANADA,RBC,RBCCENTURA,RBCMORTGAGE,RBCCAPITALMARKETS,RBCCANADIANPERSONALANDBUSINESS,RBCU.S.ANDINTERNATIONALPERSONALANDBUSINESS,RBCASSETMANAGEMENT,RBCCARLIN,RBCDANIELS,RBCDOMINIONSECURITIESandRBCTRUSTSUBORDINATEDNOTESwhicharetrademarksofRoyalBankofCanadausedbyRoyalBankofCanadaand/oritssubsidiariesunderlicense.Allothertrademarksmentionedinthisreport,whicharenotthepropertyofRoyalBankofCanada,areownedbytheirrespectiveholders.RBCDexiaISandaffiliatedRBCDexiaIScompaniesarelicensedusersoftheRBCtrademark.

Shareholderinformation

FSC Supplier SW-COC-952

ThisreporthasbeenprintedonForestStewardshipCouncil(FSC)-certifiedDomtarOpaquePlainfieldtext.FSCfibreusedinthemanufactureofDomtarOpaquePlainfieldpapercomesfromwell-managedforestsindependentlycertifiedbySmartWoodaccordingtoForestStewardshipCouncilrules.

3 royal bank of canada third quarter 2007 report to ...€¦ · 2 royal bank of canada third...

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