gl presentation - nigeria_updated (2) - 201011

8/3/2019 GL Presentation - Nigeria_updated (2) - 201011

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Published under permission from CIBN - 2010111

Chartered Institute of Bankers of Nigeria (CIBN)

George Lewis, Group Head, RBC Wealth ManagementOctober 20, 2011


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Contents

RBC and Canada Evolution of Global Status in Financial Services

Universal Banking Definition and Context / Speaker Bias

Universal Banking History and Contribution vs. Monolines to MarketDisruption

Performance During Market Disruption Reasons for DifferencesBetween Countries/Markets

Client and Market Outcomes / Risks to Universal Banking Model

Concluding Thoughts for Financial Systems of Developing Economies


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1. Source: Bloomberg, as at August 19, 2011.

Market Capitalization US$ billions (1)

50 100 150 200 250

RBC Among the Top 20 Largest Banks Globally

1 ICBC

2 China Construction Bank

3 HSBC

4 JP Morgan

5 Wells Fargo6 Bank of China

7 Citigroup

8 Commonwealth Bank of Aus.

9 Banco Santander

10 RBC

11 Banco Itau

12 Bank of America

13 TD

14 Mitsubishi UFJ Financial

15 Sberbank

16 Westpac Banking

17 Goldman Sachs

18 BNP Paribas

19 Banco Bradesco

20 Scotiabank


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Universal bank in Canada with selective focus globally

Active in all banking areas in Canada with leading market positions / Canada rated#1 by WEF for four straight years for safety and soundness of banking

Global capabilities in capital markets and wealth management

Diversified model with the right mix of businesses and geographies

Able to generate significant returns throughout the economic cycle

Long-term strategic balance

75% retail banking, wealth management and insurance businesses

25% capital markets businesses

Canada and

other geographies Continuing to invest in our businesses while focusing on cost effectiveness

Robust capital position and senior debt ratings

Managing our company for long-term success

Who we are Universal bank with financial strength


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-4.0%-5.0%

3.0%

10%

5%

10%11.0%

5.0%

7.0%

Strong Shareholder Returns

Global Peers 2RBC

Total Shareholder Return 1

S&P/TSX Bank Index

Strong earnings generation and consistent increase in shareholder value

$0.6

9

$0

.76

$0.8

6

$1.0

1

$1.1

8 $1.4

4

$1.8

2

$2.0

0

$2.0

0

$2.0

0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

History of delivering stable andgrowing dividends

Announced dividend increase in Q22011 by 8% to $0.54 per share (per

quarter) .

1. Price appreciation plus dividends reinvested, as at August 19, 20112. See 2010 Annual Report for details on Global Peer group.

3-year 5-year 10-year


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1. Universal Banking Definition and Context

Provision of a full range of financial services (deposits, investments,

brokerage/discretionary, trusts, mortgage lending, cards and payments,fx, business and corporate services, capital markets services, insurance)to a full range of client segments within one or across multiple geographicmarkets.

Distribution of all products/services is a necessary condition to bedefined as a universal bank. Manufacturing each one is a choice.


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2. Universal Banking History and Contribution vs. Monolinesto Market Disruption

Europe/Asia/Latin America Historical Model (although with large, separate insurance sector)

U.K. / Commonwealth (eg Canada, Australia)

25 year history since Four Pillars (commercial banking, investmentbanking, trusts and insurance) could combine

United States

just beginning life as a universal banking market (will it be allowed to

last?)


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Originate and Distribute monoline mortgage model in U.S. createdfeedstock for market disruption of 2008/2009 With Absolute Certainty

single product focus at client level versus multi-faceted relationship ata universal bank

Did the Complexity or Size of Universal Banks contribute to marketdisruption of 2008/2009? Less Clear

origin of contagion (US-based Investment Banks) not part of universalbanks at the time

confusion of market-making versus product-placement duties mayhave contributed

clear and correctable regulatory/public policy failures versus aninherent too big to fail/too many conflicts problem

2. Universal Banking History and Contribution vs. Monolinesto Market Disruption


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3. Universal Banking Geographic Differences in Performance

Canada/Australia (+ve) versus U.K. (-ve)

ability to capture significant share of wealth management, capitalmarkets business diversifiers

smaller markets attract fewer global monoline competitors

alternative banking models (grocers, internet banks) present but not assuccessful with anti-bank positioning and encountered significantchallenges

public policy / regulatory differences

quantitative/rules-based differences e.g. absolute leverage limit

qualitative/principle differences industry/govt/CB/regulatorrelations

business strategy and execution


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4. Universal Banking Client and Market Outcomes(Canada)

Efficiency, Stability, Choice

long-term decline in spreads in basic banking where universal bankingmodel prevalent ability to provide profitable additional services makes

basic banking more affordable diversification of earnings streams adds to stability of individual universal

banks and to system overall

mix of universal banks and global monolines can be desirable from client

choice and market efficiency perspective as long as there are no barriers touniversal banks choosing to provide both manufacturing and distribution ofproducts and services.


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4. Universal Banking Risks to Universal Banking Model

Legislative Proposals to limit scope of activities based on incorrect

views that conflicts cant be managed, activities cant be properlyregulated and an insufficient appreciation for the benefits of efficiency,stability and choice that universal banking model can (and has) delivered.(eg. Dodd-Frank in the U.S. prohibition on proprietary trading)

Regulatory Proposals

Basel III Proposal which could create an unlevel playing fieldbetween universal banks and monoline/shadow-banking providersin some cases

UK Proposal (Vickers report) to ring-fence wholesale bankingactivities puts at risk the efficiency and client/shareholder benefits ofuniversal banking model in order to attain absolute protection oftaxpayers in terms of exposure to deposit guarantees not asurprising proposal/outcome given performance of UK banking

industry in last crisis (i.e., government capital required)


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Concluding Thoughts For Developing Economies

Follow the developed Commonwealth colonies not theU.K in terms of public policy and financial servicesregulation

Encourage technological innovation (eg mobile access) to

strengthen branch-based universal banking and promoteuniversal access

Encourage mix of domestically-controlled universal bank(s)

and global providers of select services to select segments

gl presentation - nigeria_updated (2) - 201011

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