1 Royal Bank of Canada First Quarter 2007 Report to ... · First quarter 2007 highlights compared...

Tableofcontents1 Firstquarterhighlights2 President&ChiefExecutiveOfficer’s

message4 Management’sDiscussionand Analysis4 AboutRoyalBankofCanada4 Cautionregardingforward-looking

statements5 Selectedfinancialhighlights6 Executivesummary10 Consolidatedresults

14 Quarterlyresultsandtrendanalysis15 Accountingmattersandcontrols16 Businesssegmentresults16 Howwemeasureandreportour

businesssegments16 Impactofforeignexchangerateson ourbusinesssegments17 Keyperformanceandnon-GAAP measures19 RBCCanadianPersonalandBusiness21 RBCU.S.andInternationalPersonal

andBusiness

23 RBCCapitalMarkets24 CorporateSupport25 Balancesheetdataandanalysis26 Capitalmanagement29 Off-balancesheetarrangements29 Relatedpartytransactions29 Riskmanagement34 InterimConsolidatedFinancial

Statements38 NotestotheInterimConsolidated

FinancialStatements51 Shareholderinformation

ThefinancialinformationinthisdocumentisinCanadiandollarsandbasedonfinancialstatementspreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(GAAP),unlessotherwisenoted.

Firstquarter2007highlightscomparedwiththefirstquarterof2006(1):• Netincomeof$1,494million,up27.6%• Dilutedearningspershare(EPS)of$1.14,up28.1%• Returnoncommonequity(ROE)of27.3%,up 340basispoints• Revenueof$5,698million,up$738million,or15%• Non-interestexpenseof$3,067million,up$316million, or11%• Announceda$.06,or15%,increasetoourquarterly dividend

TORONTO,March2,2007–RoyalBankofCanada(RYonTSX&NYSE)reportedrecordnetincomeof$1,494millionforthefirstquarterendedJanuary31,2007,up$323million,or27.6%,fromayearago.DilutedEPSwere$1.14,up28.1%.ROEwas27.3%,comparedto23.9%ayearago.Thisgrowthwaslargelyattribut-abletostrongearningsacrossallourbusinesssegmentsincludinganincreaseof31%inRBCCanadianPersonalandBusiness,27%inRBCCapitalMarketsand48%inRBCU.S.andInternationalPersonalandBusiness.

Commentingontheresults,GordonM.Nixon,President&CEO,said,“Wehavestarted2007withoutstandingresultsthatreflectcontinuedinvestmentsinallourbusinesssegments.ExecutionofourstrategicinitiativesishelpingusimprovemarketshareinCanadaandexpandourbusinessesglobally.”

Totalrevenueincreased$738million,or15%,fromayearagoprimarilyduetosolidgrowthinourwealthmanagementandbankingbusinessesdrivenbyexpansion,targetedacquisitionsandthesuccessfulexecutionofourstrategicinitiatives.Strongerequityanddebttradingresultsduetosignificanttransactionsandincreasedrevenuefromcertainequitytradingstrategiesalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbylowerinsurance-relatedrevenuemainlyduetothenegativeimpactoftheimplementationofthenewfinancialinstrumentsaccountingstandardswhichwaslargelyoffsetininsurancepolicyholderbenefits,claimsandacquisitionexpense.

(1) EffectiveNovember1,2006,resultsreportedonatotalconsolidatedbasisarecomparabletoresultsreportedasfromcontinuingoperationsforthecorrespondingpriorperiods.

RoyalBankofCanadareportsrecordresultsforthefirstquarterof2007

1Reporttoshareholders

Royal Bank of Canada First Quarter 2007

2RoyalBankofCanadaFirstQuarter2007

Ourearningsthisquarterof$1.49billionweredrivenbyrevenuegrowthinmostbusinesslinesaswecontinuedtoexecutegrowthinitiativesinCanadaandabroad.Thisperformancereflectedthestrengthofourdiversegroupofbusinessesglobally.

InCanada,wehaveexpandedoursalesforceandopenedbranchestoextendourdistributionnetworkandbuildcapacityaroundclientrelationships.IntheU.S.,wehavecompletedkeyacquisitionsandarecontinuingtoexpandourdistributionnetworktohelpuspursueourgrowthinitiatives.Globally,wecontinuedtointroducenewproductsandsolutionstomeetourclients’needs.Wealsocontinuedtoinvestintechnologiestomakedoingbusinesswithuseveneasier.TheseeffortshavehelpedimproveourmarketshareinCanadaandgrowourbusi-nessesglobally.Wehavedeployedcapitalthroughassetgrowthinourbusinesses,targetedacquisitions,dividendsandsharebuybacks,allofwhicharehelpingtogeneratestrongreturnsforourshareholders.

Our2007annualobjectiveswereestablishedattheendof2006basedonoureconomicandbusinessoutlooks.Ourfirstquarterresultsaretrackingwelltotheseobjectives:

Non-interestexpenseincreased$316million,or11%,fromayearagoprimarilyduetohighervariablecompensationonimprovedbusinessperformance.Highercostsinsupportofourgrowth,includingincreasedstaffinglevelsinourdistributionnetworkandadditionalbranches,alsocontributedtotheincrease.

Totalprovisionforcreditlossesincreased$115millionfromayearago,primarilyreflectinga$50millionreversalofthegeneralallowanceintheprioryearandlowercorporaterecover-iesthisquarter.Higherprovisionsinourpersonalunsecuredcreditline,smallbusinessandcreditcardportfoliosinthecurrentperiodalsocontributedtotheincrease.

Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$136million,or21%,fromtheprioryear.Thedecreasemainlyreflectedthepositiveimpactoftheimple-mentationofthenewfinancialinstrumentsaccountingstandards,andtheprioryearhurricane-relatedcharge.ThesefactorswerepartiallyoffsetbygrowthinourEuropeanlifereinsuranceanddomesticbusinesses.

Incometaxexpenseincreased$103million,or31%,overtheprioryearlargelycommensuratewithhigherearningsbeforeincometaxes.Theeffectiveincometaxrateof22.3%inthecurrentquartercomparesto22.0%ayearago.

RBCCanadianPersonalandBusinessnetincomeincreased$208million,or31%,fromayearago.Thiswaslargelyduetostronggrowthacrossallbusinesslines,reflectingtheongoingsuccessfulexecutionofourgrowthinitiatives.Theimprovementinourresultsalsoreflectedtheprioryearhurricane-related

chargeandafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalinthecurrentquarter.

RBCU.S.andInternationalPersonalandBusinessnetincomeincreased$48million,or48%,fromtheprioryear.InU.S.dollars,netincomewasupUS$40million,or45%,largelydrivenbythesuccessfulexecutionofourgrowthinitiativesincludingtheacqui-sitionofFlagFinancialCorporation(Flag).

RBCCapitalMarketsnetincomeincreased$90million,or27%,fromayearagolargelydrivenbybroad-basedgrowthacrossmostbusinessesandproductcategories.

Comparedtothefourthquarterof2006,ourconsolidatednetincomeincreased$232million,or18%,anddilutedEPSrose$.18,or19%.ThisincreaselargelyreflectedhighertradingresultsinRBCCapitalMarkets,strongearningsgrowthacrossallbusi-nesslinesinRBCCanadianPersonalandBusinessandsolidbusi-nessgrowthinRBCU.S.andInternationalPersonalandBusinessduetothesuccessfulexecutionofourgrowthinitiativesinclud-ingtheacquisitionofFlag.ThesefactorswerepartiallyoffsetbyhighervariablecompensationprimarilyinRBCCapitalMarketsduetostrongerbusinessperformance.

AsatJanuary31,2007,theTier1capitalratioof9.2%wasdownfrom9.5%ayearago,anddownfrom9.6%attheendofthepreviousquarterastheincreaseinrisk-adjustedassetsrelatedtoourlendingandtradingactivitiesexceededourstronginternalcapitalgeneration.TheTotalcapitalratioof11.2%wasdown160basispoints(bps)from12.8%ayearago,anddown70bpsfrom11.9%lastquarter.

President&ChiefExecutiveOfficer’smessage

2007 Q1 2007 Objectives Performance

1.Dilutedearningspersharegrowth 10%+ 28.1% 2. Operatingleverage(1) >3% 6% 3.Returnoncommonequity(ROE) 20%+ 27.3% 4.Tier1capitalratio(2) 8%+ 9.2%5.Dividendpayoutratio 40–50% 35%

(1) Ouroperatingleverageisdefinedasthedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Revenueisbasedonatax-ableequivalentbasisandexcludesconsolidatedvariableinterestentities(VIEs),accountingadjustmentsrelatedtothenewfinancialinstrumentsaccountingstandardsandGlobalInsurancerevenue.Non-interestexpenseexcludesGlobalInsurance-relatedexpense.Thisisanon-GAAPmeasure.Forfurtherinformationincludingareconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

(2) CalculatedusingguidelinesissuedbytheOfficeoftheSuperintendentofFinancial InstitutionsCanada(OSFI).

OurdilutedEPSgrowthof28.1%andROEof27.3%comparefavourablywithourEPSgrowthobjectiveofmorethan10%andROEobjectiveofmorethan20%.Ourthree-monthoperatingleverageof6%compareswithourobjectiveofgreaterthan3%.Wehavemaintainedasolidcapitalposition,withaTier1capitalratioof9.2%,whichremainscomfortablyaboveourtargetofgreaterthan8%.Inlightofourcontinuingstrongearnings,weareraisingourquarterlycommonsharedividendby$.06,or15%,to$.46inthesecondquartertohelpusachieveour2007divi-dendpayoutobjectiveof40–50%.

RoyalBankofCanadaFirstQuarter20073

Wecontinuedtomakeprogressonourstrategicgoalsthisquarter.

1. TobetheundisputedleaderinfinancialservicesinCanada• RBCopened4newbankbranchesandbegantoupgrade

55branches.Wealsocelebrated10yearsofonlinebankingandtodayserveover3millioncustomersonline.

• OurinstallationofFraudulentDeviceInhibitorsinourATMnetworkishelpinguscombatillegalactivityandmaximizeclientsecurity.

• RBCAssetManagementlaunchedanumberofnewproductsincludingtheRBCSelectAggressiveGrowthFundandtwonewRBCO’Shaughnessyfunds.

• Aspartofourcommitmenttocontinuouslyimprovethevalueweprovidetoretailinvestors,wereducedmanage-mentfeesoninternationalandglobalequitymutualfunds.

• RBCAssetManagementwasthefirstfundcompanyinCanadatoimplementthenewsecuritiesregulationrequiringindependentoversightofmutualfunds,continuingitslead-ershipintheareaoffundgovernance.

• RBCInsuranceopened3newbranches,bringingthetotalto13.

• RBCCapitalMarketswasnamedTopDealmakerin2006(National Post).

• RBCCapitalMarketsledCanadaHousingTrust’s$8.1billionbondissue,whichwasthelargestbondissueinCanadianhistory.

2. Tobuildonourstrengthsinbanking,wealthmanagement andcapitalmarketsintheUnitedStates• RBCCenturacompletedtheacquisitionofFlagFinancial

Corporation(Flag).• RBCDainRauscher’sapprovedlinesundertheRBCPremier

LineofCreditprogram,whichisofferedthroughRBCGlobalPrivateBanking,grewinthequartertoreachUS$950million,upfromUS$500millionayearago.

• RBCCapitalMarketscompletedtheacquisitionsofCarlinFinancialGroupandDaniels&Associates,L.P.

• RBCCapitalMarketsexpandeditscapabilitiestoservemin-ingsectorclientsbycreatingabasemetalsdeskinNewYorktocomplementtheteamestablishedinLondonayearago.

3. Tobeapremierproviderofselectedglobalfinancial services• RBCCapitalMarketsled2007’sfirsttwoUS$1billion

Eurobondissues.• RBCCapitalMarketscontinueditsdominanceoftheMaple

bondmarket,asjoint-leadandbookrunnerforthelargestfixed-ratesingletrancheMaplebondinthesovereigns,supranationalsandagenciessector.

• RBCCapitalMarketscompleteditsfirstAIMtransactionbyadvisingAustralian-baseduraniumminingcompany,BerkeleyResourcesLtd.,onitsnewlistingontheLondonexchange.

• GlobalPrivateBankingwasnamedthetopprovideroftrustservicesintheU.K.(Euromoney).

AnewWealthManagementsegmentStartingnextquarter,wewillreportourresultsunderournewbusinessstructurethatincludesournewlycreatedWealthManagementsegment.Thisnewsegmentwillconsistofbusi-nessesthatdirectlyservethegrowingneedsofaffluentandhighnetworthclientsglobally,andbusinessesthatprovideassetmanagementandtrustproducts.

Webelievethatglobaldemandforwealthmanagementproductsandserviceswillcontinuetoriseasglobaleconomiesdevelopanddemographicsshift.Thisorganizationalrealign-mentpositionsuswelltogrowourwealthmanagementpresenceaggressivelyoverthenextseveralyears.

OurCorporateResponsibilityWeknowthatacompany’svaluecannotbejudgedsolelyonitscurrentfinancialresultsandunderstandthattoday’sinvestorsdemandtopperformingcompaniesincludealonger-termviewofhowthoseresultswereachieved.Whenmakingbusinessdecisions,weconsiderthepresentandfutureinterestsofallourstakeholders,includingourclients,employees,investorsandcommunities.Ibelievethisholisticapproachhascontributedsignificantlytoourlong-termsuccess.

Werecentlyreleasedour2006CorporateResponsibilityReportandPublicAccountabilityStatement,whichprovidesanoverviewofRBC’ssocial,economicandenvironmentalcommit-mentsandourimpactonthecommunitiesandcountriesinwhichwedobusiness.Italsosummarizesourbusinessandworkplacepractices,whichwetakeseriouslytoachievesustainableprosperityforallstakeholders.WehavebeenoneofCanada’sleadersincorporateresponsibilityandthereporthighlightsglobalhonoursthatweareprivilegedtohavereceived.Forexam-ple,RBCwasagainnamedoneoftheworld’stop100sustainablecompanies(Innovest, Corporate Knights, BusinessWeek),andwecontinuetobeincludedontheDowJonesSustainabilityIndex,FTSE4GoodIndexandJantziSocialIndex.

WewerealsoprivilegedtohaverankednumbertwoforCanada’sMostAdmiredCorporateCultures(Waterstone Human Capital,Canadian Business),andasoneoftheTop100BrandsinBanking(Brand Finance,The Banker)andthemostvaluablebrandinCanada(Interbrand).

Weintendtocontinuetodemonstratesustainabilityprinciplesthroughourbusinesspracticesandperformance,andprovideleadershipinselectsocialandenvironmentalareaswherewecanmakeadifference.

Finally,Iwouldliketoacknowledgeouremployeesfortheirout-standingperformance,whichbenefitsallourstakeholders,andthankourclientsforcontinuingtoprovideuswiththeirbusiness.

GordonM.NixonPresident&ChiefExecutiveOfficer

Management’sDiscussionandAnalysis(MD&A)isprovidedtoenableareadertoassessourresultsofoperationsandfinancialconditionforthethreemonthsendedJanuary31,2007,comparedtothecorrespondingperiodinthepriorfiscalyearandthethree-monthperiodendedOctober31,2006.ThisMD&AshouldbereadinconjunctionwithourunauditedInterimConsolidatedFinancialStatementsandrelatednotesandour2006AnnualReporttoShareholders(2006AnnualReport).ThisMD&AisdatedMarch2,2007.AllamountsareinCanadiandollars,unlessotherwisespecified,andarebasedonfinancialstatementspreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(GAAP).EffectiveOctober31,2006,RBCMortgageCompanyhaddisposedofsubstantiallyallofitsremainingassetsandobligationsandwenolongerseparatelyclassifyitsresultsinourunauditedInterimConsolidatedFinancialStatements.Resultsreportedonatotalconsolidatedbasisarecomparabletoresultsfromcontinuingoperationsforthecorrespondingpriorperiods.

Additionalinformationaboutus,includingour2006AnnualInformationFormisavailablefreeofchargeonourwebsiteatrbc.com/investorrelations,ontheCanadianSecuritiesAdministrators’websiteatsedar.comandontheEDGARsectionoftheUnitedStatesSecuritiesandExchangeCommission’s(SEC)websiteatsec.gov.


RoyalBankofCanada(RYonTSXandNYSE)anditssubsidiariesoperateunderthemasterbrandnameofRBC.WeareCanada’slargestbankasmeasuredbyassetsandmarketcapitalizationandoneofNorthAmerica’sleadingdiversifiedfinancialservicescompanies.Weprovidepersonalandcommercialbanking,wealthmanagementservices,insurance,corporateandinvestment

bankingandtransactionprocessingservicesonaglobalbasis.Weemployapproximately70,000full-andpart-timeemployeeswhoservemorethan14millionpersonal,business,publicsectorandinstitutionalclientsthroughofficesinNorthAmericaand34countriesaroundtheworld.

Fromtimetotime,wemakewrittenororalforward-lookingstate-mentswithinthemeaningofcertainsecuritieslaws,includingthe“safeharbour”provisionsoftheUnited States Private Securities Litigation Reform Act of 1995andanyapplicableCanadiansecuritieslegislation.Wemaymakesuchstatementsinthisdocument,inotherfilingswithCanadianregulatorsortheUnitedStatesSecuritiesandExchangeCommission(SEC),inreportstoshareholdersorinothercommunications.Theseforward-lookingstatementsinclude,amongothers,statementswithrespecttoourmedium-termand2007objec-tives,andstrategiestoachieveourobjectives,aswellasstatementswithrespecttoourbeliefs,outlooks,plans,objectives,expectations,anticipations,estimatesandintentions.Thewords“may,”“could,”“should,”“would,”“suspect,”“outlook,”“believe,”“plan,”“anticipate,”“estimate,”“expect,”“intend,”“forecast,”“objective”andwordsandexpressionsofsimilarimportareintendedtoidentifyforward-lookingstatements.

Bytheirverynature,forward-lookingstatementsinvolvenumerousfactorsandassumptions,andaresubjecttoinherentrisksanduncertainties,bothgeneralandspecific,whichgiverisetothepossibilitythatpredictions,forecasts,projectionsandotherforward-lookingstatementswillnotbeachieved.Wecautionreadersnottoplaceunduerelianceonthesestatementsasanumberofimportantfactorscouldcauseouractualresultstodiffermateriallyfromtheexpectationsexpressedinsuchforward-lookingstatements.Thesefactorsincludecredit,market,operationalandotherrisksidentifiedanddiscussedundertheRiskmanagementsection;generalbusinessandeconomicconditionsinCanada,theUnitedStatesandothercountriesinwhichweconductbusiness;theimpactofthemove-mentoftheCanadiandollarrelativetoothercurrencies,particularlytheU.S.dollarandBritishpound;theeffectsofchangesingovern-mentmonetaryandotherpolicies;theeffectsofcompetitioninthemarketsinwhichweoperate;theimpactofchangesinlawsandregulationsincludingtaxlaws;judicialorregulatoryjudgmentsandlegalproceedings;theaccuracyandcompletenessofinformationconcerningourclientsandcounterparties;successfulexecutionof

ourstrategy;ourabilitytocompleteandintegratestrategicacquisi-tionsandjointventuressuccessfully;changesinaccountingstan-dards,policiesandestimates,includingchangesinourestimatesofprovisionsandallowances;andourabilitytoattractandretainkeyemployeesandexecutives.Otherfactorsthatmayaffectfutureresultsinclude:thetimelyandsuccessfuldevelopmentofnewprod-uctsandservices;thesuccessfulexpansionandnewdevelopmentofourdistributionchannelsandrealizingincreasedrevenuefromthesechannels;globalcapitalmarketsactivity;technologicalchangesandourrelianceonthirdpartiestoprovidecomponentsofourbusinessinfrastructure;unexpectedchangesinconsumerspendingandsavinghabits;thepossibleimpactonourbusinessfromdiseaseorillnessthataffectslocal,nationalorglobaleconomies;disruptionstopublicinfrastructure,includingtransportation,communication,powerandwater;thepossibleimpactonourbusinessesofinternationalcon-flictsandotherpoliticaldevelopmentsincludingthoserelatingtothewaronterrorism;andoursuccessinanticipatingandmanagingtheassociatedrisks.

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

AdditionalinformationaboutthesefactorscanbefoundundertheRiskmanagementsectionandinour2006AnnualReportundertheRiskmanagementandAdditionalrisksthatmayaffectfutureresultssections.

Informationcontainedinorotherwiseaccessiblethroughtheweb-sitesmentioneddoesnotformapartofthisdocument.Allreferencesinthisdocumenttowebsitesareinactivetextualreferencesandareforyourinformationonly.

Management’sDiscussionandAnalysis

AboutRoyalBankofCanada

Cautionregardingforward-lookingstatements


Change Asatorforthethreemonthsended January31,2007vs.

January 31 October31 January31 October31 January31

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

Totalrevenue $ 5,698 $ 5,349 $ 4,960 $ 349 $ 738 Non-interestexpense 3,067 2,955 2,751 112 316 Provisionforcreditlosses 162 159 47 3 115 Insurancepolicyholderbenefits,claimsandacquisitionexpense 516 611 652 (95) (136) Netincomebeforeincometaxesandnon-controllinginterest insubsidiaries 1,953 1,624 1,510 329 443 Netincomefromcontinuingoperations 1,494 1,263 1,172 231 322 Netlossfromdiscontinuedoperations – (1) (1) 1 1Net income $ 1,494 $ 1,262 $ 1,171 $ 232 $ 323

Selected information Earningspershare(EPS)–basic $ 1.16 $ .97 $ .90 $ .19 $ .26 Earningspershare(EPS)–diluted $ 1.14 $ .96 $ .89 $ .18 $ .25 Returnoncommonequity(ROE)(1) 27.3% 23.9% 23.9% 340bps 340bps Returnonriskcapital(RORC)(2) 41.6% 37.3% 37.9% 430bps 370bps Netinterestmargin(3) 1.33% 1.31% 1.39% 2bps (6)bpsCapital ratios(4) Tier1capitalratio 9.2% 9.6% 9.5% (40)bps (30)bps Totalcapitalratio 11.2% 11.9% 12.8% (70)bps (160)bpsSelected balance sheet and other information Totalassets $ 571,615 $ 536,780 $ 487,874 $ 34,835 $ 83,741 Securities 196,851 184,869 165,658 11,982 31,193 Consumerloans 151,867 148,732 138,581 3,135 13,286 Businessandgovernmentloans 67,851 61,207 55,615 6,644 12,236 Deposits 365,606 343,523 314,872 22,083 50,734 Averagecommonequity(1) 21,450 20,500 19,300 950 2,150 Averageriskcapital(2) 14,100 13,150 12,150 950 1,950 Risk-adjustedassets(4) 242,290 223,709 204,247 18,581 38,043 Assetsundermanagement 157,700 143,100 128,500 14,600 29,200 Assetsunderadministration–RBC 561,200 525,800 486,000 35,400 75,200 –RBCDexiaIS(5) 2,050,000 1,893,000 1,738,100 157,000 311,900Common share information Sharesoutstanding(000s)–averagebasic 1,274,354 1,274,697 1,284,333 (343) (9,979) –averagediluted 1,293,085 1,293,864 1,304,378 (779) (11,293) –endofperiod 1,275,950 1,280,890 1,290,983 (4,940) (15,033) Dividendsdeclaredpershare $ .40 $ .40 $ .32 $ – $ .08 Dividendyield 3.0% 3.3% 2.9% (30)bps 10bps Commonshareprice(RYonTSX)–close,endofperiod $ 54.60 $ 49.80 $ 44.54 $ 4.80 $ 10.06 Marketcapitalization(TSX) 69,667 63,788 57,494 5,879 12,173Business information (number of) Employees(full-timeequivalent) 62,755 60,858 59,429 1,897 3,326 Bankbranches 1,467 1,443 1,421 24 46 Automatedbankingmachines 4,273 4,232 4,268 41 5

PeriodaverageUSDequivalentofC$1.00(6) $ .861 $ .897 $ .865 $ (.04) $ (.00)Period-endUSDequivalentofC$1.00 .850 .890 .878 (.04) (.03)

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

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

theperiod.(4) CalculatedusingguidelinesissuedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI).(5) Assetsunderadministration–RBCDexiaISrepresentsthetotalassetsunderadministration(AUA)asatDecember31,2006,ofthejointventure,ofwhichwehavea50%ownershipinterest.(6) Averageamountsarecalculatedusingmonth-endspotratesfortheperiod.

Selectedfinancialhighlights


Wereportedrecordnetincomeof$1,494millionforthefirstquarterendedJanuary31,2007,up$323million,or27.6%,fromayearago.DilutedEPSwere$1.14,up28.1%.ROEwas27.3%,comparedto23.9%ayearago.Thisgrowthwaslargelyattrib-utabletosolidvolumegrowthinourwealthmanagementandbankingoperationsandstrongertradingresultsandoriginationactivity.Thesefactorswerepartiallyoffsetbyhighervariablecompensationduetoimprovedbusinessperformance.

Totalrevenueincreased$738million,or15%,fromayearagoprimarilyduetosolidgrowthinourwealthmanagementandbankingbusinessesdrivenbyexpansion,targetedacquisitionsandthesuccessfulexecutionofourstrategicinitiatives.Strongerequityanddebttradingresultsduetosignificanttransactionsandincreasedrevenuefromcertainequitytradingstrategiesalsocontributedtotheincrease.Thecurrentquarterwasalsofavour-ablyimpactedbytheinclusionofafullquarterofresultsfromRBCDexiaIScomparedtothetwomonthsofresultsfromourformerbusinessInstitutional & Investor Services (IIS)recordedinthepriorperiodandbyafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalinthecurrentperiod.Thesefactorswerepartiallyoffsetbylowerinsurance-relatedrevenuemainlyduetothenegativeimpactoftheimplementa-tionofthenewfinancialinstrumentsaccountingstandardswhichwaslargelyoffsetininsurancepolicyholderbenefits,claimsandacquisitionexpense.

Non-interestexpenseincreased$316million,or11%,fromayearagoprimarilyduetohighervariablecompensationonimprovedbusinessperformance.Highercostsinsupportofourgrowth,includingincreasedstaffinglevelsinourdistributionnet-workandadditionalbranches,alsocontributedtotheincrease.TheincreasealsoreflectedhighercostsatRBCDexiaIS,primarily

duetotheinclusionofanadditionalmonthofresults,andtheinclusionofrecentacquisitions.

Totalprovisionforcreditlossesincreased$115millionfromayearago,primarilyreflectinga$50millionreversalofthegeneralallowanceintheprioryearandlowercorporaterecoveriesthisquarter.Higherprovisionsinourpersonalunsecuredcreditline,smallbusinessandcreditcardportfoliosinthecurrentperiodalsocontributedtotheincrease.

Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$136million,or21%,fromtheprioryear.Excludingthepositiveimpactoftheimplementationofthenewfinancialinstrumentsaccountingstandardsandtheprioryearhurricane-relatedcharge,insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$6million,or1%,fromtheprioryear.ThedecreasewaslargelyattributabletolowerU.S.annuitysalesandahigherleveloffavourablenetactuarialliabilityadjustmentsthisquarter.Thecurrentquarterincludeda$38millioncumulativevaluationadjustmentrelatingtopriorperiods,whiletheprioryearincludedasimilaramount.ThesefactorswerepartiallyoffsetbygrowthinourEuropeanlifereinsuranceanddomesticbusinesses.ForareconciliationofInsurancepolicyholderbenefits,claimsandacquisitionexpenseexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Incometaxexpenseincreased$103million,or31%,overtheprioryearlargelycommensuratewithhigherearningsbeforeincometaxes.Theeffectiveincometaxrateof22.3%inthecurrentquartercomparesto22.0%,ayearago.Thecurrentquarterwasfavourablyimpactedbyhigherearningsreportedbyourinterna-tionalsubsidiariesoperatinginjurisdictionswithlowerincometaxratesandahigherlevelofincomefromtax-efficientsources.

ThepaceofgrowthintheCanadianeconomywasmodest,pri-marilyreflectingthesofteninghousingmarketandslowingcon-sumerspending.Nevertheless,thereexistedencouragingsignsfromrenewedstrengthinretailsales,manufacturingshipmentsandexportgrowthinthelatterpartofthequarter.TheBankofCanadaheldtheovernightratesteadyat4.25%fortheperiod,withinflationlargelyinlinewiththeBankofCanada’starget.

TheU.S.economyrecordedstronger-than-expectedgrowthintheperioddespitetheweakeninghousingmarket.Strongconsumerspendingwasthedominantdriverofeconomicgrowthintheperiodasbusinessinvestmentwaned.TheU.S.FederalReservealsokeptthefederalfundsrateunchangedat5.25%fortheperiodtakingintoaccountmoderatedinflationarypressure,firmereconomicgrowthandsignsofastabilizationoftheslow-downinthehousingmarket.

Globaleconomicgrowthremainedbuoyantintheperiod,providingfavourableconditionsforthefinancialindustry.StronggrowthintheEurozoneandtheUnitedKingdomsupportedby

lowunemploymentrateshadraisedinflationaryconcerns.Asaresult,theEuropeanCentralBankandtheBankofEnglandincreasedinterestratesintheperiodtocontaininflationarypressures.Chinaalsocontinuedtogrowatarapidpace,largelyunderpinnedbysolidexportgrowthparticularlytotheU.S.,givenitscompetitiveadvantagesonlabour-intensivemanufacturingindustries.

InNorthAmerica,creditgrowthremainedstrong,thoughcreditqualityweakenedslightlyintheperiod.ChangestotheincometrustregulationsinCanadaresultedinasurgeinper-sonaldepositbalancesandmutualfundsales.

Globalcapitalmarketconditionsweregenerallyrobust,characterizedbystrongtradingvolumesandimprovedequityanddebtoriginationactivities.InCanada,therewereanumberofnotableequityoriginationdealsthisquarterandtheM&Amarketremainedstronginthecurrentperiod,withaveragedealvaluesincreasing.IntheU.S.andglobally,M&Aactivityremainedvibrantsupportedbyfavourablemarketconditions.

Theseresultswerealsounderpinnedbythegenerallyfavour-ableeconomicconditionsreflectingstableinterestrates,strongemploymentlevelsandhigherwages,despitetheslowinghous-ingmarkets.

Weachievedstrongearningsthisquarterreflectingpositivemomentumacrossourdiversebusinessesandgeographies.Ourresultsareattributabletocontinuedgrowthinourwealthmanagement,capitalmarketsandinsurancebusinessesandthestrengtheningofourproductofferingsinourbankingoperations.

Executivesummary

Economicandmarketreview

Financialperformance


bankingbusinessesandstrongerequityanddebtoriginationactivity.Thesefactorswerepartiallyoffsetbyhighervariablecompensationduetostrongerbusinessperformance.

NetincomeinourU.S.geographicoperationswasdown$22million,or9%,comparedtothepreviousquarter.Thedecreaselargelyrelatedtoyear-endadjustmentstovariablecompensationrecordedinourcapitalmarketsbusinessesinthepriorquarter.

CapitalratiosAsatJanuary31,2007,theTier1capitalratioof9.2%wasdownfrom9.5%ayearago,anddownfrom9.6%attheendofthepre-viousquarterastheincreaseinrisk-adjustedassetsrelatedtoourlendingandtradingactivitiesexceededthefavourableimpactofourstronginternalcapitalgeneration.TheTotalcapitalratioof11.2%wasdown160basispoints(bps)from12.8%ayearago,anddown70bpsfrom11.9%lastquarter.

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

TheaverageCanadiandollarexchangerateremainedrelativelystablecomparedtoayearago,resultingina$5millionincreaseinthetranslatedvalueofourU.S.dollar-denominatednetincomeandhadnoimpactonourcurrentquarter’sdilutedEPS.

TheaverageCanadiandollarexchangeratedepreciated4%comparedtothepriorquarterresultingina$10millionincreaseinthetranslatedvalueofourU.S.dollar-denominatednetincomeandanincreaseof$.01onourdilutedEPSforthecurrentquarter.

Theeffectiveincometaxrateintheprioryearwasfavourablyimpactedbya$70millionreversalofamountsaccruedinprioryearsduetoafavourableresolutionofanincometaxaudit.

RBCCanadianPersonalandBusinessnetincomeincreased$208million,or31%,fromayearago.Thiswaslargelyduetostronggrowthacrossallbusinesslines,reflectingtheongoingsuccessfulexecutionofourgrowthinitiatives.Werecordeddouble-digitrevenuegrowthinourPersonal Banking andWealth Managementbusinesses,andexperiencedsolidgrowthinourBusiness Financial Services andCards and Payment Solutionsbusinesses.Theimprovementinourresultsalsoreflectedtheprioryearhurricane-relatedchargeandafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalinthecur-rentperiod.Thesefactorswerepartiallyoffsetbyincreasedvari-ablecompensationresultingfromstrongerbusinessperformanceandhighercostsinsupportofbusinessgrowth.

RBCU.S.andInternationalPersonalandBusinessnetincomeincreased$48million,or48%,fromtheprioryear.InU.S.dollars,netincomewasupUS$40million,or45%,largelydrivenbystronggrowthreflectingthesuccessfulexecutionofourgrowthinitiativesincludingtheacquisitionofFlagFinancialCorporation(Flag).ThesefactorswerepartiallyoffsetbyhigherstaffingcostsinsupportofourgrowthinitiativesincludingtheacquisitionofFlagandincreasedvariablecompensationprimarilyinWealth Management onstrongerrevenue.

RBCCapitalMarketsnetincomeincreased$90million,or27%,fromayearagolargelydrivenbybroad-basedgrowthacrossmostbusinessesandproductcategoriesandalowereffectivetaxrate.Theincreaseinrevenueprimarilyreflectedhighertradingresultsandstrongerequityanddebtoriginationactivity.ThecurrentquarterwasalsofavourablyimpactedbytheinclusionofafullquarterofresultsfromRBCDexiaIScomparedtothetwomonthsofresultsfromourformerbusinessInstitutional & Investor Services (IIS)recordedinthepriorperiod.Thesefactorswerepartiallyoffsetbyhighervariablecompensationonstrongerbusinessperformanceanda$50milliongeneralallowancerever-salrecordedintheprioryear.

CorporateSupportnetincomeof$48millioninthequartermainlyreflectedincometaxamountswhichwerelargelyrelatedtoenter-prisefundingactivitiesnotallocatedtothebusinesssegments.Thegainrelatedtosecuritizationactivityandinterestearnedontaxoverpaymentsalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyacumulativeadjustmentforlossesresult-ingfromthefairvaluingofcertainderivativesthatdidnotqualifyforhedgeaccounting.

Comparedtothefourthquarterof2006,ourconsolidatednetincomeincreased$232million,or18%,anddilutedEPSrose$.18,or19%.ThisincreaselargelyreflectedhighertradingresultsinRBCCapitalMarkets,strongearningsgrowthacrossallbusinesslinesinRBCCanadianPersonalandBusinessandsolidbusinessgrowthinRBCU.S.andInternationalPersonalandBusinessduetothesuccessfulexecutionofourgrowthinitiativesincludingtheacquisitionofFlag.ThesefactorswerepartiallyoffsetbyhighervariablecompensationprimarilyinRBCCapitalMarketsduetostrongerbusinessperformance.

U.S.geographicoperations(1)NetincomeinourU.S.geographicoperationswas$225millionforthethreemonthsendedJanuary31,2007,up$54million,or32%,comparedtoayearago.Theincreasemainlyreflectedstrongtradingresults,growthinourwealthmanagementand

Our2007annualobjectiveswereestablishedattheendof2006basedonoureconomicandbusinessoutlooks.Ourfirstquarterresultsaretrackingwellagainsttheseobjectives.OurdilutedEPSgrowthof28.1%andROEof27.3%areontargettomeetourobjectiveswhichare:DilutedEPSgrowthofmorethan10%andROEofmorethan20%.Operatingleverageof6%alsoexceededourobjectiveofgreaterthan3%.WealsomaintainedoursolidcapitalpositionwithaTier1capitalratioof9.2%,whichremainssignificantlyaboveourtargetofgreaterthan8%.Ourdividendpayoutratioof35%forthecurrentquarterfellshortofourtargetpayoutratio,despitea24%increaseindividendsfromayearago,duetoourstrongperformancethisquarter.Inlightofourcontinuingstrongresults,weannouncedanincreaseof$.06,or15%,inourquarterlycommonsharedividendto$.46,effectivethesecondquarter,tohelpusachieveour2007dividendpayoutobjectiveof40–50%.

(1) Forgeographicreporting,oursegmentsaregroupedintoCanada,UnitedStatesandOtherInternational.Transactionsareprimarilyrecordedinthelocationthatbestreflectstherisksandgrowthopportunitiesduetochangesineconomicconditions.Thislocationfrequentlycorrespondswiththelocationofthelegalentitythroughwhichthebusinessisconductedandthelocationofourclients.

Performancevs.objectives

2007 Q1 2007 Objectives Performance

1.Dilutedearningspersharegrowth 10%+ 28.1% 2.Operatingleverage(1) >3% 6% 3.Returnoncommonequity(ROE) 20%+ 27.3% 4.Tier1capitalratio(2) 8%+ 9.2%5.Dividendpayoutratio 40–50% 35%

(1) Ouroperatingleverageisdefinedasthedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Revenueisbasedonatax-ableequivalentbasisandexcludesconsolidatedvariableinterestentities(VIEs),accountingadjustmentsrelatedtothenewfinancialinstrumentsaccountingstandardsandGlobalInsurancerevenue.Non-interestexpenseexcludesGlobalInsurance-relatedexpense.Thisisanon-GAAPmeasure.Forfurtherinformationincludingareconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

(2) CalculatedusingguidelinesissuedbytheOSFI.

8 RoyalBankofCanada FirstQuarter2007

AmSouth Bank branches: OnNovember1,2006,RBCCenturaannounceditsintentiontoacquire39branchesinAlabamaownedbyAmSouthBank,expandingRBCCentura’sfootprintinthefast-growingSoutheasternU.S.ThetransactionissubjecttonormalclosingconditionsandisexpectedtocloseinMarch2007.

Flag Financial Corporation (Flag):OnDecember8,2006,RBCCenturacompletedtheacquisitionofFlag,expandingRBCCentura’sbranchnetworktomorethan50branchesinthestateofGeorgia,akeygrowthmarket.

Carlin Financial Group:OnJanuary3,2007,RBCCapitalMarketscompletedtheacquisitionofCarlinFinancialGroupandrenameditasRBCCarlin.RBCCarlinprovidesRBCCapitalMarketsanadvancedtechnologyplatformtoassisthedgefundmanagers,pro-fessionaltradersandfinancialinstitutions.

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

New Wealth Management segment: OnFebruary7,2007,weannouncedthecreationofanewWealthManagementbusi-nesssegmentconsistingoftheWealth ManagementlinesofbusinessescurrentlyincludedinourRBCCanadianPersonalandBusinessandRBCU.S.andInternationalPersonalandBusinesssegments.Wewillbeginreportingfinancialresultsaccordingtothisnewstructureasofoursecondquarter.

Keyeventsof2007

Impactofthenewfinancialinstrumentsaccountingstandards

OnNovember1,2006,weadopted,onaprospectivebasis,threenewaccountingstandardsrelatedtofinancialinstrumentsthatwereissuedbytheCanadianInstituteofCharteredAccountants(CICA).ThestandardsrequireagreaterportionoftheConsolidatedBalanceSheettobemeasuredatfairvalue.WiththeexceptionofInvestmentsecuritiesandderivativesdesignatedincashflowhedgesorhedgesofnetinvestmentsinforeignoperations,changesinthefairvaluesoverthereportingperiodofimpactedbalancesheetitemsarereportedinincome.ThechangesinfairvaluesofInvestmentsecuritiesandderivativesdesignatedincashflowhedgesorhedgesofnetinvestmentsinforeignoperationsarereportedinAccumulatedothercomprehensiveincome(AOCI),anewcomponentofShareholders’equity.

Thestandardsalsoprovidenewguidanceontheaccountingforderivativesinhedgingrelationships.InadditiontorequiringallderivativestobefairvaluedontheConsolidatedBalanceSheets,thestandardsrequiretheeffectivenessofthehedgingrelationshipsforthereportingperiodtobequantified.Theinef-fectiveportionofanyhedgingrelationshipmustnowbereportedinincomefortheperiod.Forfurtherdetails,refertoNote1toourunauditedInterimConsolidatedFinancialStatements.

Uponadoptionofthesestandards,ourtotalassetsincreasedby$434millionasanumberoffinancialinstrumentspreviouslymeasuredatamortizedcostarenowreportedatfairvalue.Thebalancesheetitemsmostsignificantlyimpactedontransitionaresetoutinthetablebelow.ThefavourableimpactonnetincomeforthethreemonthsendedJanuary31,2007,was$22million.

Securities Uponadoptionofthenewstandards,Securitiesincreased$338million,primarilyreflectingthefairvalueofthe$10.6billionofsecuritiesdesignatedandreclassifiedasTradingsecurities.Thesesecurities,whichwerepreviouslyclassifiedasInvestmentsecuritiesandmeasuredatamortizedcost,include$6.7billionrelatedtothesecuritiesbackingthelifeandhealthinsurancebusinesses,$2.5billioninRBCCapitalMarketsprimarilyrelatedtomoneymarketsecurities,and$1.4billionofmortgage-backedsecuritiesheldinCorporateSupport.

DerivativesThetransitionadjustmentof$268millionreflectedthefairvalueofderivativesthatqualifyforhedgeaccounting.Previously,thesederivativeswerereportedonanaccrualbasiswithinterestreceivableandpayableanddeferredgainsandlossesrecorded

inOtherassetsorOtherliabilities,asappropriate,ontheConsolidatedBalanceSheet.

Other assets Thetransitionadjustment,adecreaseof$200million,largelyreflectedamountsassociatedwithderivativespreviouslyreportedonanaccrualbasisthatarenowreportedatfairvalueinDerivativesassetsorliabilities,asappropriate,ontheConsolidatedBalanceSheet.

Insurance claims and policy benefit liabilities Asnotedearlier,securitiesbackingthelifeandhealthinsurancebusinessesarenowbeingmeasuredattheirfairvalue.Asaresult,therewasacorrespondingincreaseof$420millionintheinsuranceliabilities,whicharevaluedinaccordancewithactu-arialstandards.

ImpactofthetransitionadjustmentonselectedConsolidatedBalanceSheetlineitems

Transition adjustment

(C$millions) as at November 1, 2006

Trading $ 10,950 Investment (10,612)

Securities $ 338Derivatives 268Otherassets (200)Insuranceclaimsandpolicybenefitliabilities 420 Subordinateddebentures 189 Retainedearnings (86)Accumulatedothercomprehensiveincome(loss) (45)


ImpactonselectedConsolidatedStatementofIncomelineitems

Forthethree monthsended

January 31

(C$millions) 2007 SignificantlyImpactedSegments

Non-interestincome Insurancepremiums,investmentandfeeincome $ (70) RBCCanadianPersonalandBusiness Tradingrevenue 8 RBCCapitalMarkets Other 25 RBCU.S.andInternationalPersonal andBusinessandCorporateSupport

Totalrevenue $ (37)Insurancepolicyholderbenefits,claimsandacquisitionexpense $ (69) RBCCanadianPersonalandBusinessNetincome $ 22

ThemainimpactsonourConsolidatedStatementsofIncomearisingfromtheimplementationofthenewstandardsinclude:

RBC Canadian Personal and Business Aspreviouslydiscussed,thesecuritiesbackingourlifeandhealthinsurancebusinessesarenowbeingmeasuredontheConsolidatedBalanceSheetattheirfairvalues.Inordertomini-mizethenetincomevolatilitythatarisesfromthemeasurementoftheinsuranceliabilities,wechosetodesignatethesesecuri-tiesasTradingsecuritieswithchangesintheirfairvaluesnowrecordedinInsurancepremiums,investmentandfeeincome.

ForthethreemonthsendedJanuary31,2007,werecordedanunrealizedlossof$70millioninInsurancepremiums,invest-mentandfeeincomerelatedtothechangesinthefairvaluesofthelifeandhealthinsuranceinvestments.Thislosswaslargelyoffsetbyacorresponding$69millionreductioninInsurancepolicyholderbenefits,claimsandacquisitionexpense.

RBC Capital MarketsAnumberofportfolioswerepreviouslyclassifiedasInvestmentsecuritiesandmeasuredatamortizedcost.Underthenewstan-dards,theseportfolioshavebeenreclassifiedasTradingsecuritiesandarenowreportedonafairvaluebasiswithchangesinfairvaluerecordedinTradingrevenue.

ForthethreemonthsendedJanuary31,2007,werecognizedagainof$8millioninTradingrevenueasaresultofthenetincreaseinfairvaluesinvarioustradingportfoliospreviouslymeasuredatamortizedcost.

RBC U.S. and International Personal and Business CertainInvestmentsecuritiesdenominatedinforeigncurrenciesarefundedbydepositsdenominatedinthesamecurrencyinordertominimizeexposuretochangesinforeignexchangerates.Theforeignexchangetranslationforbothoftheseitemswaspreviouslyrecordedinrevenue,effectivelyminimizingaccountingvolatilityassociatedwithforeignexchangetranslation.Upontheadoptionofthenewstandards,theforeignexchangetranslationassociatedwiththedepositscontinuestoberecordedinrevenue,whiletheforeigncurrencytranslationadjustmentfortherelatedInvestmentsecuritiesisnowrecordedinAOCI.Althoughourforeignexchangeexposureinthesetransactionscontinuestobeeconomicallyhedged,thenewstandardsgiverisetoaccountingvolatility.

ForthethreemonthsendedJanuary31,2007,werecordeda$17millionforeigncurrencytranslationgaininNon-interestincome–Otherrelatedtothesedeposits,whilethecorrespondingforeigncurrencytranslationlossontherelatedInvestmentsecuri-tieswasrecordedinAOCI.

Corporate Support Certainstructurednotesweredesignatedasheld-for-tradingliabilitiesunderthenewstandards.ForthethreemonthsendedJanuary31,2007,wereporteda$21millionunrealizedgaininNon-interestincome–Other.

Inaddition,werecordedunrealizedlossesof$13milliononderivativehedgingandotheractivities.

TheCanadianeconomyisnowexpectedtogrowatamoderatepaceof2.5%in2007.Domesticdemandisanticipatedtoremaintheprimarydriverofeconomicgrowth.Consumerspendingshouldbenefitfromasolidlabourmarket,goodhouseholdbal-ancesheetconditionsandrelativelystableinterestrates,whilebusinessinvestmentincapitalgoodsshouldcontinuetobesup-portedbystrongcorporatebalancesheets.WeexpecttheBankofCanadatoholdinterestratessteadythroughouttheremainderoftheyearontheexpectationthatinflationwillfallinlinewiththeBankofCanada’starget.WeforecastthattheCanadiandollarwillmarginallydepreciateagainsttheU.S.dollarinresponsetoeasingenergyandcommodityprices,ongoingnegativeinterestratespreadsversustheU.S.market,theresilientU.S.economy,andthestabilizationoftheU.S.fiscalandtradedeficits.

TheU.S.economyisprojectedtoexpandatamoderaterateof2.6%in2007.Weexpectgrowthtobeslowerinthefirsthalfof2007duetothecoolinghousingmarket,andthelaggedeffectsofhigherinterestrates.Growthisthenexpectedtoimproveinthesecondhalfoftheyear,reflectingresilientconsumerspend-ingsupportedbylowerenergyprices,stronghouseholdliquid-ity,atightlabourmarketandrisingwages.Businessinvestmentshouldalsoremainstrong,aidedbyhealthycorporatebalancesheets.DuetotherecentimprovementinU.S.economiccondi-tions,weanticipatetheU.S.FederalReservewillonlycutitsrateby25bpslateinthesecondquarterinordertoensurethattheeconomytransitionstoafirmergrowthpath.

Globaleconomicgrowthisexpectedtoremainstrong.How-ever,thisgrowthwillcontinuetobeunevenlydivided,withChinaandIndialeadingthegrowthchartsandmostindustrialized

2007Outlook

Subordinated debenturesThetransitionadjustmentreflectedthecumulativechangeinfairvalueattributedtointerestrateriskforoursubordinated

debenturesinhedgingrelationships.Thesewerepreviouslyreportedatamortizedcost.

TotalrevenueThefollowingtablepresentsourrevenuebykeyproductsandservices:

Forthethreemonthsended

January 31 October31 January31

(C$millions) 2007 2006 2006

Interestincome $ 6,444 $ 6,120 $ 4,978 Interestexpense 4,577 4,389 3,296

Netinterestincome $ 1,867 $ 1,731 $ 1,682

Investments(1) $ 1,047 $ 978 $ 878 Insurance(2) 820 863 858 Trading 803 620 547 Banking(3) 649 642 591 Underwritingandotheradvisory 288 293 219 Other(4) 224 222 185

Non-interestincome $ 3,831 $ 3,618 $ 3,278

Total revenue $ 5,698 $ 5,349 $ 4,960

Totaltradingrevenue: Netinterestincome–relatedtotradingactivities (151) (173) (82) Non-interestincome–Tradingrevenue 803 620 547

Total trading revenue $ 652 $ 447 $ 465

Totaltradingrevenuebyproduct: Fixedincomeandmoneymarkets $ 375 $ 255 $ 264 Equity 201 130 125 Foreignexchangecontracts 76 62 76

Total trading revenue $ 652 $ 447 $ 465

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

ThefollowingprovidesadiscussionofourreportedresultsforthethreemonthsendedJanuary31,2007.Factorsthatprimarily


Effectivethefirstquarterof2007,wenolongerclassifyamountsasspecifieditems.For2006,theitemspreviouslynotedasspeci-fieditemsareasfollows:

Q12006Income tax reduction:Werealizedafavourableresolutionofanincometaxauditrelatedtoprioryears,resultingina$70millionreductioninincometaxexpenseinCorporateSupport.

General allowance reversal: Wereversed$50millionofthegeneralallowancerelatedtoourcorporateloanportfolioinRBCCapitalMarkets,inlightofthecontinuedfavourablecreditconditionsandthestrengtheningofthecreditqualityofthecorporateloanportfolio.

Hurricane-related charges: Werecordeda$61million(before-andafter-tax)chargeinourinsurancebusiness,whichwasincludedinourRBCCanadianPersonalandBusinesssegment,

foradditionalestimatednetclaimsfordamagespredominatelyrelatedtoHurricaneWilmawhichoccurredinlateOctober2005.

Amounts related to the transfer of Institutional & Investor Services (IIS) toRBC Dexia IS:OnJanuary2,2006,wecombinedour Institutional & Investor Services (IIS)business,previouslypartofRBCCapitalMarkets,withtheDexiaFundServicesbusinessofDexiaBanqueInternationaleàLuxembourg(Dexia)inreturnfora50%jointventureinterestinthenewcompany,RBCDexiaInvestorServices(RBCDexiaIS).NetchargesincurredassociatedwiththetransferofourIISbusinesstoRBCDexiaISwere$16mil-lionbefore-tax($19millionafter-taxwhichincludedawrite-offofdeferredtaxes).Asthereisaone-monthlaginreportingofearn-ingsfromRBCDexiaIS,October1,toDecember31,2006earningswerereportedinthefirstquarterof2007,andnoearningsfromRBCDexiaISwerereportedforthefirstquarterof2006.

relatetoaspecificsegmentarediscussedindetailintherespec-tivesegmentresultssection.

Consolidatedresults

Specifieditems

economiesexperiencingslowergrowthcomparedto2006.Inpar-ticular,growthintheEurozoneandtheUnitedKingdomisexpectedtomoderatein2007.However,duetoinflationaryconcernsweexpecttheEuropeanCentralBanktocontinuetoincreaseinterestrates,andtheBankofEnglandtoholditspolicyrateatitshighestlevelinfiveandahalfyears.Japanisexpectedtocontinuetoedgeitspolicyratehigherin2007aslongasinflationremainspositiveandtheeconomycontinuestogrowatitscurrenttrendrate.

InNorthAmerica,consumerlendingisexpectedtorecordmodestgrowthduringtheyear,largelyreflectingsomewhat

slowerconsumerspendingandweakerhousingmarkets.Weexpectbusinesslendingtoremainrobustdrivenbyinvestmentininventories,machineryandequipment,albeitwithlendinginpartconstrainedbythereallocationofhighlevelsofcorporateliquid-ity.Businessandhouseholdcreditqualitywilllikelydeterioratemoderatelyfromthecurrentstronglevel,butshouldremainsolidduetohealthycashflowpositions.Theoutlookforglobalcapitalmarketsisexpectedtoremainrelativelyfavourablewithmoder-atelyhigherinterestrates,healthyequitymarketsandcontinuedstrengthintheglobalM&Amarket.


Q12007vs.Q12006Totalrevenueincreased$738million,or15%,fromayearagoprimarilyduetosolidgrowthinourwealthmanagementandbankingbusinessesdrivenbyexpansion,targetedacquisitionsandthesuccessfulexecutionofourstrategicinitiatives.Strongerequityanddebttradingresultsduetosignificanttransactionsandincreasedrevenuefromcertainequitytradingstrategiesalsocontributedtotheincrease.Thecurrentquarterwasalsofavour-ablyimpactedbytheinclusionofafullquarterofresultsfromRBCDexiaIScomparedtothetwomonthsofresultsfromourformerbusinessInstitutional & Investor Services (IIS)recordedinthepriorperiodandafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalinthecurrentperiod.Thesefactorswerepartiallyoffsetbylowerinsurance-relatedrevenuemainlyduetothenegativeimpactoftheimplementa-tionofthenewfinancialinstrumentsaccountingstandardswhicharelargelyoffsetininsurancepolicyholderbenefits,claimsandacquisitionexpense.

Net interest incomeincreased$185million,or11%,largelyduetostrongloananddepositgrowth.Thesefactorswerepartiallyoffsetbyincreasedfundingcostsrelatedtocertainequitytradingstrategies.Netinterestmarginof1.33%wasdown6bpscomparedtotheprioryear.Thedecreasewaslargelyattrib-utabletohighergrowthandactivityinlower-yieldingandnon-interestearningassetsincludingTradingsecuritiesandAssetspurchasedunderreverserepurchaseagreementsandsecuritiesborrowedlargelyinsupportofourtradingbusinesseswhichgen-eratenon-interestincome.

Investments-relatedrevenueincreased$169million,or19%,mainlyduetocontinuedgrowthinfee-basedaccountsandclientassetsandvolumesreflectingstrongequitymarketsandtheresultofaggressiverecruitingofhigh-performingfinancialadvisors.Strongnetsalesandcapitalappreciationinourmutualfundbusinesses,theinclusionofanadditionalmonthofRBCDexiaISresultsandhighervolumesinourbrokeragebusinessesalsocontributedtotheincrease.

Insurance-relatedrevenuewasdown$38million,or4%,fromtheprioryear.Excludingthenegativeimpactrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandards,Insurance-relatedrevenueincreased$32million,or4%,fromtheprioryear.TheincreasewasprimarilyduetogrowthinourEuropeanlifereinsuranceanddomesticbusinesses.ThesefactorswerepartiallyoffsetbylowerU.S.annuitysalesduetotherelativelylowinterestrateenvironment,andlowerrevenuefromourpropertycatastrophereinsuranceoperationswherewehaveceasedunderwritingnewbusiness.ForareconciliationofInsurance-relatedrevenueexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Banking revenueincreased$58million,or10%.ThisincreaseprimarilyreflectedtheinclusionofanadditionalmonthofRBCDexiaISresults.Higherservicefeesandincreasedforeignexchangerevenueduetoimprovedtransactionvolumesalsocontributedtotheincrease.

Trading revenueincreased$256million,or47%,fromayearago.Totaltradingrevenue(includingNetinterestincomeandNon-interestincomerelatedtotrading)was$652million,up$187million,or40%,fromayearagomainlyduetohigherequityanddebttradingresultsdrivenlargelybysignificanttransactionsandincreasedrevenuefromcertainequitytradingstrategies.

Underwriting and other advisoryrevenueincreased$69million,or32%,fromayearagomainlyduetoincreasedequityandU.S.debtoriginationactivity.ThiswaspartiallyoffsetbylowerM&Afeesastheprioryearincludedseveralnotabledealswhichwerenotrepeatedthisquarter.

Otherrevenueincreased$39million,or21%,primarilyduetoafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalandhigherdistributionsfromprivateequityinvestments.Thesefactorswerepartiallyoffsetbyacumulativeadjustmentforlossesresultingfromthefairvaluingofcertainderivativesthatdidnotqualifyforhedgeaccounting.

Q12007vs.Q42006Totalrevenueincreased$349million,or7%,comparedtothepreviousquarterprimarilyduetostrongtradingresultsreflectingseveralsignificanttransactions,improvedclientactivityandfavourablemarketconditions.Solidvolumegrowthinourwealthmanagementandbankingbusinessesalsocontributedtotheincrease.Thesefactorswereprimarilyoffsetbylowerinsurance-relatedrevenuemainlyduetothenegativeimpactoftheimple-mentationofthenewfinancialinstrumentsaccountingstandardswhicharelargelyoffsetininsurancepolicyholderbenefits,claimsandacquisitionexpense.

Net interest incomeincreased$136million,or8%,largelyreflectinghigherloansanddepositvolumesandimprovedspreadsinpersonalproducts.Lowerfundingcostsonpositionsrelatedtocertainequitytradingstrategiesalsocontributedtotheincrease.

Investments-relatedrevenueincreased$69million,or7%,mainlyduetostronggrowthinfee-basedclientassets,highervolumesinourbrokeragebusinessesandsolidnetsalesandcapitalappreciationinourmutualfundbusinesses.

Insurance-relatedrevenuewasdown$43million,or5%,fromthepriorquarter.Excludingthenegativeimpactrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandards,Insurance-relatedrevenueincreased$27million,or3%,fromthepriorquarter.Theincreaseprimarilyreflectedgrowthinourdomesticoperations.ThiswaspartiallyoffsetbyafavourableadjustmentrelatingtoCanadianlifereinsurancepremiumsinthepriorquarter,lowerU.S.annuitysalesandlowerrevenuefromourpropertycatastrophereinsuranceoperations.

Bankingrevenueincreased$7million,or1%.ThisincreaseprimarilyreflectedhigherforeignexchangerevenueduetostrongervolumesandimprovedresultsatRBCDexiaIS.Thesefactorswerepartiallyoffsetbylowerservicefees.

Tradingrevenueincreased$183million,or30%,fromthepre-viousquarter.Totaltradingrevenue(includingNetinterestincomeandNon-interestincomerelatedtotrading)was$652million,up$205million,or46%,fromthepriorquarterprimarilyreflect-ingsignificanttransactionsandimprovedclientactivity.

Underwriting and other advisoryrevenuedecreased$5million,or2%,fromthepreviousquarter.LowerM&AfeesmainlyinCanadaandweakerdebtoriginationactivityreflectinglowernewissuanceswerelargelyoffsetbyhigherequityorigina-tionactivitybothintheU.S.andCanada.

Otherrevenueincreased$2million,or1%.Theincreasewaspartiallyattributedtoafavourableadjustmentrelatedtothereal-locationofforeigninvestmentcapital,higherdistributionsfromprivateequityinvestmentsandaforeignexchangetranslationgainoncertaindeposits.Thesefactorswerelargelyoffsetbyacumulativeadjustmentforlossesresultingfromthefairvaluingofcertainderivativesthatdidnotqualifyforhedgeaccounting,alossonthesaleofcertaininvestmentportfoliosecuritiesandalowergainonthefairvaluingofcertainsecuritiesheldtoeconomicallyhedgethestock-basedcompensationplanatRBCDainRauscher.


Non-interestexpenseThefollowingtablepresentsthemaincomponentsofnon-interestexpense:



(C$millions) 2007 2006 2006

Salaries $ 890 $ 853 $ 782 Variablecompensation 791 698 662 Benefitsandretentioncompensation 294 243 281 Stock-basedcompensation 58 35 68

Humanresources $ 2,033 $ 1,829 $ 1,793 Equipment 244 257 231 Occupancy 198 225 182 Communications 156 200 146 Professionalandotherexternalservices 215 251 210 Otherexpenses 199 171 175 Amortizationofintangibles 22 22 14

Non-interest expense $ 3,067 $ 2,955 $ 2,751

Q12007vs.Q12006Non-interestexpenseincreased$316million,or11%,fromayearagoprimarilyduetohighervariablecompensationonimprovedbusinessperformance.Highercostsinsupportofourgrowthincludingincreasedstaffinglevelsinourdistributionnetworkandanadditionalnumberofbranchesresultingfromde novoexpan-sionandtheacquisitionofFlagalsocontributedtotheincrease.TheincreasealsoreflectedhighercostsatRBCDexiaIS,primarilyduetotheinclusionofanadditionalmonthofresultsandtheinclusionofrecentacquisitions.

Q12007vs.Q12006Totalprovisionforcreditlossesincreased$115million,or245%,fromayearago,primarilyreflectinga$50millionreversalofthegeneralallowanceintheprioryearandlowercorporaterecoveriesthisquarter.Higherprovisionsinourpersonalunsecuredcreditline,smallbusinessandcreditcardportfoliosinthecurrentperiod,inpartduetoloangrowth,alsocontributedtotheincrease.

Specificprovisionforcreditlossesforconsumerloansincreased$21million,or17%,fromlastyear.Theincreasewaslargelyattributabletohigherprovisionsinourpersonalunse-curedcreditlineandcreditcardportfoliosprimarilyreflectingportfoliogrowth.

Specificprovisionforcreditlossesforbusinessandgovern-mentloansincreased$39millioncomparedtotheprioryear.Theincreasemainlyreflectedhigherprovisionsinoursmallbusi-nessportfolioandlowercorporaterecoveriesastheprioryearincludeda$25millionrecoveryofEnron-relatedloanspreviouslywrittenoff.ThesefactorswerepartiallyoffsetbylowerprovisionsinourU.S.loanportfolioreflectingcontinuedstrongcreditquality.

Therewasnogeneralprovisioninthecurrentperiod.Thepriorperiodrecoveryof$55millionprimarilyreflecteda$50millionreversalofthegeneralallowanceinlightofthestrengtheningofourcorporateloanportfolioonfavourablecreditconditions.

Q12007vs.Q42006Totalprovisionforcreditlossesincreased$3million,or2%,comparedtothepreviousquarter.Theincreaseprimarilyreflectedhigherprovisionsinourcreditcardportfoliowhichwerelargelyoffsetbyincreasedrecoveriesinourcorporateportfolio.

Specificprovisionforcreditlossesforconsumerloansincreased$14million,or11%,fromthepriorquarter.Theincreasewaslargelyattributabletohigherprovisionsincreditcardspartiallyreflectingportfoliogrowth.

Businessandgovernmentspecificprovisionforcreditlossesdecreased$9million,or31%,comparedtothepriorquarter.Thedecreasewaslargelyaresultofhighercorporaterecoveriesandlowerprovisionsinoursmallbusinessandcommercialloanportfolios.ThiswaspartlyoffsetbyhigherprovisionsinourCaribbeanportfolio.

Provisionfor(recoveryof)creditlosses



(C$millions) 2007 2006 2006

Residentialmortgages $ 2 $ 2 $ 2Personal 91 86 75Creditcards 49 40 44

Consumer $ 142 $ 128 $ 121Businessandgovernment 20 29 (19)

Specificprovision $ 162 $ 157 $ 102Generalprovision – 2 (55)

Provision for credit losses $ 162 $ 159 $ 47

Q12007vs.Q42006Non-interestexpenseincreased$112million,or4%,comparedtothepreviousquarterlargelyreflectinghighervariablecompensa-tion,primarilyinRBCCapitalMarketsduetostrongerbusinessperformance.Highersalariesandbenefitcostsreflectinghigherstaffinglevelsinsupportofgrowthandtheimpactofcertainsea-sonalemployee-relatedpayoutsandaccruals,alsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyseasonallylowermarketingandadvertisingcostsandthepriorquarteraccrualrelatedtoaleasedspacewhichwewillnotoccupy.


Q12007vs.Q12006Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$136million,or21%,fromtheprioryear.Excludingthepositiveimpactoftheimplementationofthenewfinancialinstrumentsaccountingstandardsandtheprioryearhurricane-relatedcharge,insurancepolicyholderbenefits,claimsandacqui-sitionexpensedecreased$6million,or1%,fromtheprioryear.ThedecreasewaslargelyattributabletolowerU.S.annuitysalesandahigherleveloffavourablenetactuarialliabilityadjustmentsthisquarter.Thecurrentquarterincludeda$38millioncumulativevaluationadjustmentrelatingtopriorperiods,whiletheprioryearincludedasimilaramount.ThesefactorswerepartiallyoffsetbygrowthinourEuropeanlifereinsuranceanddomesticbusinesses.ForareconciliationofInsurancepolicyholderbenefits,claimsandacquisitionexpenseexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Q12007vs.Q42006Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$95million,or16%,fromthepriorquarter.Excludingthepositiveimpactrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandards,insurancepolicy-holderbenefits,claimsandacquisitionexpensedecreased$26million,or4%,fromthepriorquarter.Thedecreasewaslargelyattributabletoafavourablenetactuarialliabilityadjust-mentthisquarterwhichincludeda$38millioncumulativevaluationadjustmentrelatedtopriorperiods.ImprovedclaimsexperienceandlowerU.S.annuitysalesalsocontributedtothedecrease.Thesefactorswerepartiallyoffsetbygrowthinourdomesticbusiness.

Incometaxes



(C$millions,exceptpercentageamounts) 2007 2006 2006

Netincomebeforeincometaxes $ 1,953 $ 1,624 $ 1,510Incometaxexpense 435 342 332

Effectiveincometaxrate(1) 22.3% 21.1% 22.0%

(1) Incometaxesasapercentageofnetincomebeforeincometaxes.

Q12007vs.Q12006Incometaxexpenseincreased$103million,or31%,overtheprioryearlargelycommensuratewithhigherearningsbeforeincometaxes.Theeffectiveincometaxrateof22.3%inthecurrentquartercomparesto22.0%,ayearago.Thecurrentquarterwasfavourablyimpactedbyhigherearningsreportedbyourinterna-tionalsubsidiariesoperatinginjurisdictionswithlowerincometaxratesandahigherlevelofincomefromtax-efficientsources.Theeffectiveincometaxrateintheprioryearwasfavourablyimpacted

bya$70millionreversalofamountsaccruedinprioryearsduetoafavourableresolutionofanincometaxaudit.

Q12007vs.Q42006Incometaxesincreased$93million,or27%,overthepriorquarterduelargelytohigherearningsbeforeincometaxes.Theeffectiveincometaxrateinthecurrentperiodwas22.3%com-paredto21.1%inthepriorquarter,withtheincreasebeingduetothemixofincomereportedinvariousinternationalsubsidiaries.

Comprehensiveincome


January 31

(C$millions) 2007

Net income $ 1,494 Othercomprehensiveincome,netoftaxes Netunrealizedgains(losses)onavailable-for-salesecurities 26 Reclassificationof(gains)lossesonavailable-for-salesecuritiestoincome 13

39

Unrealizedforeigncurrencytranslationgains(losses) 879 Reclassificationof(gains)lossesonforeigncurrencytranslationtoincome (40) Netforeigncurrencytranslationgains(losses)fromhedgingactivities (623)

216

Netgains(losses)onderivativesdesignatedascashflowhedges 17 Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 17

34

Other comprehensive income 289

Total comprehensive income $ 1,783

Insurancepolicyholderbenefits,claimsandacquisitionexpense



(C$millions) 2007 2006 2006

Insurancepolicyholderbenefits,claimsandacquisitionexpense $ 516 $ 611 $ 652


Ourquarterlyearnings,revenueandexpenseareimpactedbyanumberoftrendsandrecurringfactorswhichincludeseasonality,generaleconomicandmarketconditions.

SeasonalitySeasonalfactorsimpactourresults,inmostquarters,tovaryingdegrees.Thesecondquarterhasfewerdaysthantheotherthreequarters,resultinginadecreaseinindividualrevenueandexpenseitems.Thethirdandfourthquartersincludethesummermonths,duringwhichmarketactivityfrequentlyslows,nega-tivelyimpactingtheresultsofourcapitalmarkets,brokerageandinvestmentmanagementbusinesses.

ImpactofeconomicandmarketconditionsIngeneral,economicconditionsremainedfavourableoverthepastninequarters,positivelyimpactingourbusinessperfor-mance.Arelativelysolidhousingmarket,alowbutrisinginter-estrateenvironment,stronglabourmarketsconditions,aswellassolidconsumerandbusinessspendingsupportedloanand

depositgrowthandstrongdemandforourwealthmanagementproductsovertheperiod.Thesefavourablefactors,alongwithourcontinuedriskmanagementefforts,contributedtoageneralimprovementinourportfoliocreditquality.Ingeneral,capitalmarketconditionsweremorefavourablein2006comparedto2005,characterizedbyhigherequitymarketvolatility,nearrecordhighM&AactivityandsolidcashequitiesbusinesswhichbenefitedfromhealthyforeigndemandforCanadiannaturalresource-basedequities.Partlyoffsettingthesefavourablefac-torswasthestrengtheningoftheCanadiandollarduring2006,whichresultedinalowertranslatedvalueofourU.S.dollar-andBritishpound(GBP)-denominatedearnings,primarilyinourwholesaleandU.S.retailoperations.Duringtheperiod,therehasbeenincreasedcompetitioninwholesalebanking,asU.S.-basedinvestmentbanksexpandedtheirpresenceinCanadaaftertheeliminationofforeigncontentrestrictionsonCanadianregisteredretirementproducts.

Thefollowingtablesummarizesourresultsfortheninemostrecentlycompletedquarters.

2007 2006 2005

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

Netinterestincome $ 1,867 $ 1,731 $ 1,766 $ 1,617 $ 1,682 $ 1,763 $ 1,663 $ 1,668 $ 1,699 Non-interestincome 3,831 3,618 3,440 3,505 3,278 3,033 3,266 3,018 3,074

Total revenue $ 5,698 $ 5,349 $ 5,206 $ 5,122 $ 4,960 $ 4,796 $ 4,929 $ 4,686 $ 4,773 Non-interestexpense 3,067 2,955 2,861 2,928 2,751 3,310 2,732 2,661 2,654 Provisionforcreditlosses 162 159 99 124 47 103 128 116 108 Insurancepolicyholderbenefits, claimsandacquisitionexpense 516 611 627 619 652 740 681 622 582 Businessrealignmentcharges – – – – – 40 1 2 2

Netincomebeforeincometaxesand non-controllinginterestinsubsidiaries$ 1,953 $ 1,624 $ 1,619 $ 1,451 $ 1,510 $ 603 $ 1,387 $ 1,285 $ 1,427 Incometaxes 435 342 381 348 332 90 392 353 443 Non-controllinginterestinnetincome ofsubsidiaries 24 19 44 (25) 6 (30) (6) 16 7

Netincomefromcontinuingoperations $ 1,494 $ 1,263 $ 1,194 $ 1,128 $ 1,172 $ 543 $ 1,001 $ 916 $ 977Netincomefrom discontinuedoperations – (1) (17) (10) (1) (21) (22) (9) 2

Net income $ 1,494 $ 1,262 $ 1,177 $ 1,118 $ 1,171 $ 522 $ 979 $ 907 $ 979

Earningspershare –basic $ 1.16 $ .97 $ .91 $ .86 $ .90 $ .40 $ .75 $ .70 $ .76 –diluted $ 1.14 $ .96 $ .90 $ .85 $ .89 $ .39 $ .74 $ .69 $ .75

Net income (loss) RBCCanadianPersonalandBusiness $ 877 $ 775 $ 742 $ 608 $ 669 $ 504 $ 679 $ 524 $ 597 RBCU.S.andInternational PersonalandBusiness 149 126 111 106 101 132 80 82 93 RBCCapitalMarkets 420 315 329 433 330 (57) 255 294 268 CorporateSupport 48 47 12 (19) 72 (36) (13) 16 19 Discontinuedoperations(1) – (1) (17) (10) (1) (21) (22) (9) 2

Net income $ 1,494 $ 1,262 $ 1,177 $ 1,118 $ 1,171 $ 522 $ 979 $ 907 $ 979

PeriodaverageUSDequivalent ofC$1.00(2) $ .861 $ .897 $ .896 $ .877 $ .865 $ .850 $ .810 $ .811 $ .827Period-endUSDequivalentofC$1.00 .850 .890 .884 .894 .878 .847 .817 .795 .806

(1) Representsdiscontinuedoperations(RBCMortgageCompany)oftheRBCU.S.andInternationalPersonalandBusinesssegment.(2) Averageamountsarecalculatedusingmonth-endspotratesfortheperiod.

Quarterlyresultsandtrendanalysis

OthercomprehensiveincomerepresentschangesinShareholders’equityduringaperiodandincludesunrealizedgainsandlossesonfinancialassetsclassifiedasavailable-for-sale,unrealizedforeigncurrencytranslationgainsorlossesnetofhedgingactivities,arisingfromself-sustainingforeign

operations,andchangesinthefairvalueoftheeffectiveportionofcashflowhedginginstruments.ForthethreemonthsendedJanuary31,2007,Othercomprehensiveincomewas$289million.Thisamountlargelycompriseda$216millionunrealizedgainonforeigncurrencytranslationnetofhedgingactivities.


TrendanalysisOverviewOverthelastninequarters,ourresultswereaffectedbyanumberoffavourableandunfavourablespecifieditems.Inthefirstquarterof2006andthefourthquarterof2005,ourinsurancebusinessresultswerenegativelyimpactedbyhurricane-relatedchargesof$61million(before-andafter-tax)and$203million(before-andafter-tax),respectively.Inthefourthquarterof2005,werecordeda$591million($326millionafter-tax)provisionforEnronCorp.(Enron)litigation-relatedmatters.A$50millionreversalofthegeneralallowancewasrecordedinthefirstquarterof2006inlightofthestrongcreditqualityofourcorporateloanportfoliowhichpartiallyreflectedthefavourablecreditconditions.Ourresultswerealsoimpactedbytheacquisitionanddisposi-tionofcertainbusinesses.Werecordedanadditional$40millionbusinessrealignmentchargeforcontinuingoperationsinthefourthquarterof2005.Inaddition,RBCMortgagewasclassifiedasdiscontinuedoperationsinthesecondquarterof2005andcertainassetsofRBCMortgageweresoldinthefourthquarterof2005.

ConsolidatedresultsOurconsolidatednetincomehasconsistentlyexceeded$1billionoverthelastfivequarters.Thislargelyreflectedageneralincreaseinrevenueacrossallourbusinesssegments.Thisposi-tivetrendwaspartiallyoffsetbythelowertranslatedvalueofforeigncurrency-denominatedrevenueandearningsasaresultofthestrengtheningoftheCanadiandollarduring2006relativeto2005.TheCanadiandollarexchangerateweakenedinthefirstquarterof2007.

Non-interestexpenseincreasedovertheperiod,largelyreflectingincreasedvariablecompensationonimprovedbusinessperformanceandhighercostsinsupportofourgrowth,exceptforthefourthquarterof2005,whenwerecordedaprovisionforEnronlitigation-relatedmatters.

Provisionforcreditlosseshavebeenrelativelystablebutincreasingovertheperiodprimarilycommensuratewithloangrowth.Thedecreaseinprovisionsinthefirstquarterof2006wasprimarilyduetothe$50millionreversalofthegeneralallowance.Themostrecentquartershaveexperiencedanincreasedueto

higherprovisionsforpersonalandsmallbusinessloanspartiallyduetoloangrowthandlowercorporaterecoveriesreflectingfewerproblemloans.

Incometaxeshavegenerallytrendeddownwardovertheperiod,despitehigherearningsbeforeincometaxesfromcontinuingoperations.Thislargelyreflectedhigherearningsreportedbyourinternationalsubsidiariesoperatinginlowerincometaxjurisdictionsandhigherincomefromtax-advantagedsources(Canadiantaxablecorporatedividends)andthefavour-ableresolutionofanincometaxauditinthefirstquarterof2006.Thesefactorscontributedtoareductioninoureffectiveincometaxrateoverthelastninequartersfrom31.0%to22.3%.

Non-controllinginterestinnetincomeofsubsidiariesfluctu-atedovertheperiod,whichdependsonthenetincomeattributedtothirdpartyinvestorsinentitiesinwhichwedonothave100%ownership,butarerequiredtoconsolidate.

BusinesssegmentresultsRBCCanadianPersonalandBusinessnetincomegenerallyincreasedoverthelastninequarters.Thisreflectedstrongvolumegrowthacrossmostbusinesslinesandgenerallystablemargins,despitestrongmarketcompetitionandashiftinclientprefer-encestowardslowerspreadproducts.Ourresultsinthefourthquarterof2005andthefirstquarterof2006werenegativelyimpactedbyhurricane-relatedcharges.

RBCU.S.andInternationalPersonalandBusinessresultslargelytrendedupwardovertheperiod.Thiswasprimarilydrivenbysolidrevenuegrowth,albeitpartlyrestrainedbythenegativeimpactonthetranslatedvalueofU.S.dollar-denominatedearningsduetothegenerallystrongerCanadiandollar.

RBCCapitalMarketsrecordedageneralimprovementinearningsovertheperiod,withtheexceptionofthefourthquarterof2005,whichincludedthe$591million($326millionafter-tax)provisionforEnronlitigation-relatedmatters.Ourdiversebusi-nessandproductofferings,togetherwithbusinessexpansionsandgrowingglobaldistributioncapabilities,contributedtothispositivetrend.However,thesefactorswerepartiallyoffsetbythelowertranslatedvalueofU.S.dollar-andGBP-denominatedearningsresultingfromthestrongerCanadiandollar.

CriticalaccountingpoliciesandestimatesOurunauditedInterimConsolidatedFinancialStatementshavebeenpreparedinaccordancewithCanadianGAAP.ThesignificantaccountingpoliciesaredescribedinNote1toourunauditedInterimConsolidatedFinancialStatementsandNote1onpages106to110ofour2006AnnualReport.Certainoftheseaccountingpolicies,aswellasestimatesmadebymanagementinapplyingsuchpolicies,arerecognizedascriticalbecausetheyrequiremanagementtomakesubjectiveorcomplexjudgmentsaboutmattersthatareinherentlyuncertain.Ourcriticalaccountingpoliciesandestimatesrelatetotheallowanceforcreditlosses,fairvalueoffinancialinstruments,securitization,variableinterestentities,pensionsandotherpost-employmentbenefits,incometaxesandother-than-temporaryimpairmentofinvestmentsecurities.Forfurtherdetails,refertopages33to37ofour2006AnnualReport.

ChangesinaccountingpoliciesorestimatesFinancial Instruments OnNovember1,2006,weadopted,onaprospectivebasis,threenewaccountingstandardsthatwereissuedbytheCICA:HandbookSection1530,Comprehensive Income,HandbookSection3855,Financial Instruments – Recognition and Measurement,andHandbookSection3865,Hedges.Thesestandards,andtheimpactonourfinancialpositionandresultsofoperations,arediscussedintheImpactofthenewfinancialinstrumentsaccountingstandardssectionandinNote1toourunauditedInterimConsolidatedFinancialStatements.

FuturechangesinaccountingpoliciesorestimatesCanadian GAAPVariableInterestEntities(VIEs)OnSeptember15,2006,theEmergingIssuesCommitteeissuedAbstractNo.163,Determining the Variability to be Considered in Applying AcG-15(EIC-163).EIC-163providesadditionalclarifica-tiononhowtoanalyzeandconsolidateVIEs.EIC-163becameeffectiveforusonFebruary1,2007anditsimplementationwillresultinthedeconsolidationofcertaininvestmentfunds.TheimpactofEIC-163isnotexpectedtobematerialtoourconsoli-datedfinancialpositionorresultsofoperations.

Accountingmattersandcontrols


Ourmanagementreportingframeworkisintendedtomeasuretheperformanceofeachbusinesssegmentasifitwasastand-alonebusinessandreflectthewaythebusinesssegmentsaremanaged.

Thisapproachisintendedtoensurethatourbusinesssegments’resultsreflectallrelevantrevenueandexpensesassociatedwiththeconductoftheirbusinessanddepictshowmanagementviewstheirresults.

Thekeymethodologiesandassumptionsusedinourman-agementreportingframeworkareexpenseallocation,capitalattribution,fundstransferpricingandtaxableequivalentbasis(teb),andareoutlinedintheHowwemanageourbusinesssegmentssectionofour2006AnnualReport.Managementperi-odicallyreviewsthesekeymethodologiesandassumptionstoensurethattheyremainvalid.

Wealsouseandreportcertainnon-GAAPfinancialmeasures,consistentwithourmanagementframework.ThesemeasuresdonothavestandardizedmeaningsunderGAAPandarenotneces-sarilycomparablewithsimilarinformationreportedbyotherfinancialinstitutions.

Changesmadeinthefirstquarterof2007WithinRBCCanadianPersonalandBusiness,certainamountsrelatedtotrusteeserviceshavebeenreclassifiedfromNon-interestincome–InvestmentmanagementandcustodialfeestoNetinterestincometobetterreflecttheirnature.Allcomparativeamountshavebeenrestatedtoreflectthisreclassification.

WealthManagementcomprisesbusinessesthatdirectlyserveourclients’growingwealthmanagementneedsincludingthoseofaffluentandhighnetworthclientsglobally,andbusinessesthatprovideassetmanagementandtrustproducts.

U.S.&InternationalBankingcomprisesourbankingbusi-nessesoutsideCanada,includingRBCCenturaintheU.S.,andRBC’sCaribbeanbankingoperations.Inaddition,thissegmentincludesour50%ownershipinRBCDexiaIS.

CapitalMarketscontinuesasourglobalwholesalebankingsegmentprovidingawiderangeofcorporateandinvestmentbanking,salesandtrading,researchandrelatedproductsandservicestocorporations,publicsectorandinstitutionalclientsinNorthAmericaandspecializedproductsandservicesinselectglobalmarkets.

Wewillreportourresultsbasedonthesenewbusinessseg-mentsstartingthesecondquarterof2007.

Thefollowingsectionprovidesanoverviewofhowwemeasuretheperformanceandreporttheresultsofourbusinesssegments.

Periodically,certainbusinessesand/orsubsidiariesaretransferredbetweensegmentstoalignmorecloselywithourorganizationalstructureandstrategicpriorities.Wherethesetransfersaredeemedmaterial,comparativeamountsarerestated.

Newbusinesssegmentseffectivesecondquarter2007EffectiveFebruary7,2007,ourpreviousthreebusinesssegments(RBCCanadianPersonalandBusiness,RBCU.S.andInternationalPersonalandBusinessandRBCCapitalMarkets)werereorga-nizedintofournewbusinesssegmentsandrenamed:

CanadianBankingcomprisesourdomesticpersonalandbusinessbankingoperations,certainretailinvestmentbusinessesandourglobalinsuranceoperations.

Businesssegmentresults

Howwemeasureandreportourbusinesssegments

PersonalandBusinessnetincomeincreased$1millionandRBCCapitalMarketsnetincomeincreased$15millionasaresultoftheimpactofthechangeintheCanadiandollarexchangerates.

TheCanadiandollardepreciated4%onaverageand8%onaveragerelativetotheU.S.dollarandGBP,respectively,comparedtothepreviousquarter.RBCU.S.andInternationalPersonalandBusinessnetincomeincreased$5millionandRBCCapitalMarketsnetincomeincreased$10million,asaresultoftheimpactofthechangeintheCanadiandollarexchangerates.

ThetranslatedvalueofRBCU.S.andInternationalPersonalandBusinessU.S.dollar-denominatedresultsisimpactedbyfluctua-tionsintheU.S./Canadiandollarexchangerate.ThetranslatedvalueofRBCCapitalMarketsU.S.dollar-andGBP-denominatedresultsisalsoimpactedbyfluctuationsintherespectiveexchangeratestotheCanadiandollar.

TheCanadiandollarremainedrelativelystableonaveragerelativetotheU.S.dollaranddepreciated13%onaveragerelativetotheGBP,comparedtoayearago.RBCU.S.andInternational

Impactofforeignexchangeratesonourbusinesssegments

U.S. GAAPThefollowingnewguidancewillbeeffectiveforourU.S.GAAPfinancialstatementsinthefuture:(i)FinancialAccountingStandardsBoard(FASB)InterpretationNo.48,Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109;(ii)FASBStatementNo.158,Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R);(iii)FASBStatementNo.157,Fair Value Measurement; and(iv)FASBStatementNo.159,The Fair Value Option for

Financial Assets and Liabilities.Forfurtherdetails,refertoourReconciliationofCanadianandUnitedStatesgenerallyacceptedaccountingprinciplesinNote15toourunauditedInterimConsolidatedFinancialStatements.

InternalcontroloverfinancialreportingNochangesweremadeinourinternalcontroloverfinancialreportingduringtheinterimperiodendedJanuary31,2007,thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.


Wemeasureandevaluatetheperformanceofourconsolidatedoperationsandeachbusinesssegmentusinganumberoffinancialmetricssuchasnetincome,returnonaveragecommonequity(ROE)andreturnonaverageriskcapital(RORC).WhilenetincomeisinaccordancewithGAAP,theothersareconsiderednon-GAAPfinancialmeasureswhichdonothavestandardizedmeaningsunderGAAPandmaynotbecomparabletosimilarmeasuresusedbyotherfinancialinstitutions.Forfurtherdetails,refertotheHowwemanageourbusinesssegmentsandKeyfinancialmeasures(non-GAAP)sectionsinour2006AnnualReport.

ReturnonequityandReturnonriskcapitalWeuseROEandRORC,atboththeconsolidatedandsegmentlevels,asameasureofreturnontotalcapitalinvestedinourbusinesses.

OurquarterlyconsolidatedROEcalculationisbasedonannu-alizedquarterlynetincomeavailabletocommonshareholders

dividedbytotalaveragecommonequityfortheperiod,whichexcludespreferredshares.OurquarterlybusinesssegmentROEcalculationsarebasedonnetincomeavailabletocommonshare-holdersdividedbyaverageattributedcapitalfortheperiod.Foreachsegment,averageattributedcapitalisbasedonattributedriskcapitalandamountsinvestedingoodwillandintangibles.

OurquarterlyRORCcalculationsarebasedonnetincomeavailabletocommonshareholdersdividedbyattributedriskcapi-tal(whichexcludesgoodwillandintangiblesandunattributedcapital).ThebusinesssegmentROEandRORCmeasuresareviewedbymanagementasusefulmeasuresforsupportinginvestmentandresourceallocationdecisionsbecausetheyadjustforcertainitemsthatmayaffectcomparabilitybetweenbusinesssegmentsandcertaincompetitors.

ThefollowingtableprovidesareconciliationoftheROEandRORCcalculations.

Keyperformanceandnon-GAAPmeasures

ReturnonequityandReturnonriskcapital

Forthethreemonthsended Forthethreemonthsended


2007 2006 2006

RBC U.S. RBC Canadian International Personal and Personal and RBC Corporate(C$millions)(1),(2) Business Business Capital Markets Support Total Total Total

Netincomefromcontinuingoperations $ 877 $ 149 $ 420 $ 48 $ 1,494 $ 1,263 $ 1,172Netlossfromdiscontinuedoperations – – – – – (1) (1)

Netincome $ 877 $ 149 $ 420 $ 48 $ 1,494 $ 1,262 $ 1,171 less:Preferreddividends (7) (3) (4) (2) (16) (26) (10)

Netincomeavailabletocommonshareholders $ 870 $ 146 $ 416 $ 46 $ 1,478 $ 1,236 $ 1,161

Averageequity $ 9,400 $ 3,800 $ 5,400 $ 2,850 $ 21,450 $ 20,500 $ 19,300 less:Unattributedcapital – – – 1,950 1,950 2,650 2,700 less:Goodwillandintangiblecapital 2,600 1,650 1,150 – 5,400 4,700 4,450Averageriskcapital(2) $ 6,800 $ 2,150 $ 4,250 $ 900 $ 14,100 $ 13,150 $ 12,150

Returnonequity(ROE) 36.7% 15.3% 30.5% 6.4% 27.3% 23.9% 23.9%Returnonriskcapital(RORC) 50.8% 26.7% 38.7% n.m. 41.6% 37.3% 37.9%

(1) Theaverageriskcapital,goodwillandintangiblecapital,averageattributedequityandaverageequityfiguresshownaboveandthroughoutthisdocumentrepresentroundedfigures.Theseamountsarecalculatedusingmonth-endbalancesfortheperiod.TheROEandRORCmeasuresshownaboveandthroughoutthisdocumentarebasedonactualbalancesbeforerounding.

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

n.m. notmeaningful

RBCCapitalMarketstotalrevenue(teb)excludingrevenuerelatedtoConsolidatedVariableInterestEntities(VIEs)WeconsolidatecertainentitiesinaccordancewithCICAAcG-15,Consolidation of Variable Interest Entities(VIEs).ConsolidationofaVIEisbasedonourexposuretovariabilityintheVIE’sassetsandnotonwhetherwehavevotingcontrol.RevenueandexpensesfromcertainoftheseVIEshavebeenincludedinRBCCapitalMarketsresults.However,theamountsthathavebeenconsolidated,whichareattributabletootherequityinvestorsintheseVIEsareoffsetinNon-controllinginterestinnetincomeofsubsidiariesandhavenoimpactonourreported

netincome.Astheamountsattributabletootherequityinvestorsdonothaveanimpactonourreportednetincome,managementbelievesthatadjustingfortheseitemsenhancesthecomparabilityofRBCCapitalMarketsresultsandrelatedratiosandenablesamoremeaningfulcomparisonofourfinancialperformancewithcertainotherfinancialinstitutions.Astheexpensesarenotviewedasmaterial,wehaveonlyadjustedfortherevenueattrib-utedtootherequityinvestors.

Thefollowingtableprovidesareconciliationoftotalrevenue(teb)excludingVIEsforRBCCapitalMarkets.



(C$millions) 2007 2006 2006

Total revenue (teb)(1) $ 1,400 $ 1,160 $ 1,013RevenuerelatedtoVIEsoffsetinNon-controllinginterest(2) 11 4 (8)

Total revenue (teb) excluding VIEs $ 1,389 $ 1,156 $ 1,021

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


RBCCanadianPersonalandBusinessrevenueandInsurance-relatedresultsexcludingtheimpactsofthenewfinancialinstrumentsaccountingstandardsandcertainitemsInthefirstquartersof2007and2006,therewerecertainitemsthatimpactedtheinsurancepremiums,investmentandfeeincome,theinsurancepolicyholderbenefits,claimsandacqui-sitionexpenseincomestatementlines,andtheassociatedbusinesslineandsegmentresultsunderwhichtheyarealsoreported.Managementbelievesthatadjustingfortheseitemsenhancesthecomparabilityofourresults,andenablesamoremeaningfulcomparisonofourfinancialperformancewithcertainotherfinancialinstitutions.Thefollowingprovidesthedetailsoftheitemsthatmanagementbelievesshouldbeexcludedfromtherespectiveresults.

Impact of the new financial instruments accounting standards ForthethreemonthsendedJanuary31,2007,werecordedanunrealizednetlossof$70millionrelatedtotheimpactofchangesininterestratesonthefairvaluationofthesecuritiesbackingourlifeandhealthinsuranceliabilities.Thisnetlosswasrecordedininsurance-relatedrevenue,andwaslargelyoffsetbyacorre-spondingchangeintheunderlyingliabilitiesthatwasrecordedininsurancepolicyholderbenefitsclaimsandacquisitionexpense.Thenewfinancialinstrumentsaccountingstandardshavebeen

implementedprospectively,andthenetamounthadnosignifi-cantimpactonourreportednetincome.

Results excluding a favourable adjustment related to the reallocation of foreign investment capitalDuringthequarter,wereallocatedcertainforeigninvestmentcapitalfromourinternationalinsuranceoperations,whichhadsupportedourpropertycatastrophereinsurancebusiness,aswehavestrategicallyexitedthislineofbusiness.Accordingly,werecognizedafavourableforeigncurrencytranslationadjust-mentof$40million(before-andafter-tax)associatedwiththiscapital.ThisamountwaspreviouslyrecordedinShareholders’equityandhasbeenreclassifiedtoincomeintheperiod.

Results excluding hurricane-related chargesWerecordeda$61million(before-andafter-taxcharge)inourinsurancebusinessinthefirstquarterof2006foradditionalestimatednetclaimsfordamagespredominantlyrelatedtoHurricaneWilmawhichoccurredinlateOctober2005.

ThefollowingtableprovidesareconciliationofRBCCanadianPersonalandBusinessrevenueandInsurance-relatedresultsexcludingtheimpactsofthenewfinancialinstrumentsaccountingstandardsandtheitemsnotedabove.


January 31 January31

2007 2006 Insurance Insurance RBC Canadian Insurance policyholder policyholder Personal and Global premiums, benefits, claims benefits,claims Business Insurance investment and and acquisition andacquisition(C$millions) revenue (1) revenue (1) fee income (2) expense(2) expense

GAAPreportedamounts $ 3,546 $ 860 $ 820 $ 516 $ 652Exclude:Impactofthenewfinancialinstrumentsaccountingstandards 70 70 70 69 – Impactofforeigncurrencytranslationadjustment (40) (40) – – – Hurricane-relatedcharges – – – – (61)

Amountsexcludingtheimpactofthenewfinancialinstrumentsaccounting standardsandcertainitemsnotedabove $ 3,576 $ 890 $ 890 $ 585 $ 591

(1) Forfurtherdetails,refertotheRBCCanadianPersonalandBusinesssection.(2) Forfurtherdetails,refertotheConsolidatedresultssection.

Operatingleverageratiocalculation


Q1 2007 vs. (C$millions,exceptpercentageamounts) Q1 2007 Q12006 Q1 2006

Total revenue $ 5,698 $ 4,960 add:tebadjustment 70 37 less:RevenuerelatedtoVIEs 11 (8) less:GlobalInsurancerevenue 860 858 less:Impactofthenewfinancialinstrumentsaccountingstandards(1) 33 –

Total revenue (adjusted) $ 4,864 $ 4,147 17.3%

Non-interest expense $ 3,067 $ 2,751 less:GlobalInsurance-relatednon-interestexpense 128 116

Non-interest expense (adjusted) $ 2,939 $ 2,635 11.5%

Q1 2007 Operating leverage 5.8%

(1) ExcludestheimpactofthenewfinancialinstrumentsaccountingstandardsrelatedtoGlobalInsurance.

OperatingleverageOuroperatingleverageisdefinedasthedifferencebetweenourrevenuegrowthrate(asadjusted)andnon-interestexpensegrowthrate(asadjusted).Revenueisbasedonataxableequiva-lentbasis,whiletheimpactofconsolidatedVIEsisexcludedastheyhavenomaterialimpactonourearnings.GlobalInsurancerevenueandaccountingadjustmentsrelatedtothenewfinancialinstrumentsaccountingstandardsarealsoexcludedfromrevenue.Non-interestexpenseexcludesGlobalInsurance-relatedexpense.

GlobalInsuranceresultsareexcludedascertainchangesinrev-enuecanbelargelyoffsetininsurancepolicyholderbenefits,claimsandacquisitionexpensewhichisnotcapturedinouroperatingleveragecalculation.Theimpactofthenewfinancialinstrumentsaccountingstandardsisexcludedasitgivesrisetoaccountingvolatilityandisnotviewedasameasureofeconomicperformance.

ThefollowingtableshowstheQ12007operatingleverageratiocalculation.


Asatorforthethreemonthsended


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

Netinterestincome $ 1,588 $ 1,567 $ 1,443 Non-interestincome 1,958 1,918 1,855Total revenue $ 3,546 $ 3,485 $ 3,298 Non-interestexpense $ 1,575 $ 1,566 $ 1,502 Provisionforcreditlosses(PCL) 182 173 142 Insurancepolicyholderbenefits,claimsandacquisitionexpense 516 611 652Net income before income taxes and non-controlling interest in subsidiaries $ 1,273 $ 1,135 $ 1,002Net income $ 877 $ 775 $ 669

Revenue by business line PersonalBanking $ 969 $ 946 $ 869 BusinessFinancialServices 555 559 526 CardsandPaymentSolutions 429 425 404 WealthManagement 733 692 641 GlobalInsurance 860 863 858

Key ratios Returnonequity(2) 36.7% 34.2% 30.0% Returnonriskcapital(2) 50.8% 46.3% 41.5% Netinterestmargin(3) 3.26% 3.30% 3.26% Operatingleverage(excludingGlobalInsurance)(4) 5.7% 4.6% 3.6%Selected average balance sheet and other information (5) Totalassets (6) $ 213,900 $ 207,800 $ 194,600 Totalearningassets (6) 193,500 188,300 175,800 Loansandacceptances(6) 192,400 188,200 173,300 Deposits 152,900 149,500 142,700 Attributedcapital(2) 9,400 8,950 8,750 Riskcapital(2) 6,800 6,600 6,350 Assetsunderadministration 221,900 213,200 195,400 Assetsundermanagement 96,800 89,700 79,300 Insurancepremiumsanddeposits 895 864 860Credit information Grossimpairedloansasa%ofaverageloansandacceptances .33% .31% .30% SpecificPCLasa%ofaverageloansandacceptances .38% .36% .33%Other information Numberofemployees(full-timeequivalent) 28,997 28,271 27,662

(1) Inthequarter,wereclassifiedamountsfromnon-interestincometonetinterestincomeduetochangesincertaintrusteeservicesagreements.Our2006resultshavebeenrestatedtoreflectthesechanges.

(2) AverageattributedcapitalandReturnonequityarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.SegmentReturnonequity,AverageriskcapitalandReturnonriskcapitalarenon-GAAPfinancialmeasures.Forfurtherdiscussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

(3) Netinterestmargin(NIM)iscalculatedasNetinterestincomedividedbyAverageearningassets.Averageearningassetsarecalculatedusingmethodsintendedtoapproximatetheaverageearningsassetbalancesfortheperiod.

(4) Definedasthedifferencebetweenrevenuegrowthrateandnon-interestexpensegrowthrateforthesegment,excludingGlobalInsuranceduetothenatureofitsbusiness.(5) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(6) Totalassets,totalearningassets,andloansandacceptancesincludeaveragesecuritizedresidentialmortgagesandcreditcardsforthethreemonthsendingJanuary31,2007of$18billionand

$3.7billion,respectively.

RBCCanadianPersonalandBusinesssegmentconsistsofourpersonalandbusinessbankingandwealthmanagementbusi-nessesinCanadaaswellasourglobalinsurancebusiness.

ThissegmentcomprisesPersonal Banking, Business Financial Services, Cards and Payment Solutions, Wealth ManagementandGlobal Insurance.

Q12007vs.Q12006Netincomeincreased$208million,or31%,fromayearago.Thiswaslargelyduetostronggrowthacrossallbusinesslines,reflectingtheongoingsuccessfulexecutionofourgrowthinitia-tives.Werecordeddouble-digitrevenuegrowthinour Personal Banking andWealth Management businesses,andexperiencedsolidgrowthinourBusiness Financial ServicesandCards and Payment Solutionsbusinesses.Theimprovementinourresultsalsoreflectedtheprioryearhurricane-relatedchargeandafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapitalinthecurrentquarter.Thesefactorswerepartiallyoffsetbyincreasedvariablecompensationresultingfromstrongerbusinessperformanceandhighercostsinsupportofbusinessgrowth.

Totalrevenueincreased$248million,or8%,fromayearago.Excludingthenegativeimpactrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandardsandafavour-ableadjustmentrelatedtothereallocationofforeigninvestmentcapital,totalrevenueincreased$278million,or8%.Theincreaseprimarilyreflectedstrongvolumegrowthinourbanking,wealthmanagementandinsuranceoperations.ForareconciliationofRBCCanadianPersonalandBusinessrevenueexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Netinterestmarginremainedstableat3.26%,asimprovedspreadsonpersonaldepositswereoffsetbylowerspreadsonbusinessdepositsandcreditcards.

RBCCanadianPersonalandBusiness


Personal Bankingrevenuewasup$100million,or12%,largelyreflectingstronggrowthinhomeequitylendingandimprovedlendinganddepositspreadsacrossallproducts.

Business Financial Services revenueincreased$29million,or6%,primarilyasaresultofsolidloananddepositgrowth,partiallyoffsetbylowerspreadsondeposits.

Cards and Payment Solutionsrevenuewasup$25million,or6%,mainlyreflectingincreasedbalancesandimprovedtransac-tionvolumes.Theincreasewaspartlyoffsetbyhighercustomerloyaltyrewardprogramcostsandspreadcompression.

Wealth Managementrevenueincreased$92million,or14%,reflectingstrongercontributionsfrommostproductlines.Inpar-ticular,theincreasewasdrivenbystrongernetsalesandcapitalappreciationinmutualfunds.Continuedgrowthinfee-basedaccountsandhighervolumesinourbrokeragebusinessesalsocontributedtotheincrease.

Global Insurance revenuewasup$2millionfromtheprioryear.Excludingthenegativeimpactrelatedtotheimplementa-tionofthenewfinancialinstrumentsaccountingstandards,andafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapital,Global Insurancerevenueincreased$32mil-lion,or4%,fromtheprioryear.TheincreasewasprimarilyduetogrowthinourEuropeanlifereinsuranceanddomesticbusi-nesses.ThesefactorswerelargelyoffsetbylowerU.S.annuitysalesduetotherelativelylowinterestrateenvironment,andlowerrevenuefromourpropertycatastrophereinsuranceopera-tionswherewehaveceasedunderwritingnewbusiness.ForareconciliationofGlobal Insurance revenueexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Non-interestexpensewasup$73million,or5%,reflectingincreasedvariablecompensationonstrongerwealthmanage-mentrevenue,aswellasincreasedsalespersonnelandhigherinfrastructure,marketingandadvertisingcostsinsupportofbusinessgrowth.

Totalprovisionforcreditlossesincreased$40million,or28%.Theincreasewasaresultofhigherprovisionsinpersonalunsecuredcreditlinesreflectingportfoliogrowthandahigherlossrate,andincreasedprovisionsinsmallbusinessloansduetohigherimpairment.Higherprovisionsincreditcardscommen-suratewithportfoliogrowthalsocontributedtotheincrease.

Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$136million,or21%,fromtheprioryear.Excludingthepositiveimpactoftheimplementationofthenewfinancialinstrumentsaccountingstandardsandtheprioryearhurricane-relatedcharge,insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$6million,or1%,fromtheprioryear.ThedecreasewaslargelyattributabletolowerU.S.annuitysalesandahigherleveloffavourablenetactuarialliabilityadjustmentsthisquarter.Thecurrentquarterincludeda$38millioncumulativevaluationadjustmentrelatingtopriorperi-ods,whiletheprioryearincludedasimilaramount.Thesefactors

werepartiallyoffsetbygrowthinourEuropeanlifereinsuranceanddomesticbusinesses.ForareconciliationofInsurancepolicy-holderbenefits,claimsandacquisitionexpenseexcludingtheimpactoftheitemsnotedabove,refertotheKeyperformanceandnon-GAAPmeasuressection.

Averageassetsincreased$19billion,or10%,overtheprioryear,reflectingstronggrowthinhomeequitylending,businessloansandcreditcardbalances.Depositswereup$10billion,or7%,overtheprioryearreflectinggrowthinbusinessdepositsandpersonalGICs.

Q12007vs.Q42006Netincomeincreased$102million,or13%,comparedtothepriorquarter.TheincreasewaslargelyduetostrongresultsinourGlobal Insurancebusiness,reflectingthefavourableimpactsofanadjustmentrelatedtothereallocationofforeigninvestmentcapitalandanetactuarialliabilityadjustmentthisquarter,aswellasimprovedclaimsexperienceacrossmostproductlines.StrongrevenuegrowthinWealth Managementalsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbyhigherprovisionsforcreditlossesincreditcardspartiallyreflectingportfoliogrowthandincreasedstaffingcosts.

Totalrevenueincreased$61million,or2%,fromtheprevi-ousquarter.Excludingthenegativeimpactrelatedtotheimple-mentationofthenewfinancialinstrumentsaccountingstandards,andafavourableadjustmentrelatedtothereallocationofforeigninvestmentcapital,totalrevenueincreased$91million,or3%.Theincreasewasprimarilyduetostrongvolumegrowthinourwealthmanagementanddomesticinsurancebusinesses.

Netinterestmargindeclined4bpsto3.26%,mainlyduetolowerspreadsonbusinessdepositsandcreditcards.

Non-interestexpensewasup$9million,or1%,largelyasaresultofaseasonalincreaseinbenefits,andhighervariablecom-pensationonstrongerwealthmanagementrevenue.Theincreasewasmainlyoffsetbylowermarketingandadvertisingcostsduetoseasonalfactors.

Totalprovisionforcreditlossesincreased$9million,or5%,largelyreflectinghigherprovisionsincreditcardsinpartreflect-ingportfoliogrowth.Theincreasewaspartlyoffsetbylowerprovisionsinoursmallbusinessandcommercialloanportfolios.

Insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$95million,or16%,fromthepriorquarter.Excludingthepositiveimpactrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandards,insurancepolicyholderbenefits,claimsandacquisitionexpensedecreased$26million,or4%,fromthepriorquarter.Thedecreasewaslargelyattributabletoafavourablenetactuarialliabilityadjust-mentthisquarter,whichincludeda$38millioncumulativevaluationadjustmentrelatedtopriorperiods.ImprovedclaimsexperienceandlowerU.S.annuitysalesalsocontributedtothedecrease.Thesefactorswerepartiallyoffsetbygrowthinourdomesticbusiness.


RBCU.S.andInternationalPersonalandBusinessconsistsofourpersonalandbusinessbankingandretailbrokeragebusinessesintheU.S.,bankingintheCaribbean,andprivatebankinginter-nationally.ThissegmentcomprisesWealth Management,whichincludesGlobalPrivateBankingandcertainactivitiesofRBCDain

Rauscher,andBanking,whichincludesourRBCCenturaandCaribbeanbankingoperations.

OnDecember8,2006,weacquiredFlag,expandingourBanking business.



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

Netinterestincome $ 302 $ 279 $ 279 Non-interestincome 501 461 431Total revenue $ 803 $ 740 $ 710 Non-interestexpense 611 575 567 Provisionforcreditlosses(PCL) 10 5 10 Businessrealignmentcharges – 1 –Net income before income taxes and non-controlling interest in subsidiaries $ 182 $ 159 $ 133Net income $ 149 $ 126 $ 101

Revenue by business line WealthManagement $ 527 $ 466 $ 446 Banking 276 274 264

Key ratios Returnonequity(ROE)(2) 15.3% 14.8% 13.3% Returnonriskcapital(RORC)(2) 26.7% 24.0% 21.6%Selected average balance sheet and other information (3) Totalassets $ 43,700 $ 40,100 $ 36,800 Loansandacceptances 23,000 21,000 20,600 Deposits 37,100 34,200 31,900 Attributedcapital(2) 3,800 3,350 3,000 Riskcapital(2) 2,150 2,050 1,850 Assetsunderadministration 333,900 307,900 287,300 Assetsundermanagement 60,900 53,400 49,200Credit information Grossimpairedloansasa%ofaverageloansandacceptances .81% .89% .81%Other information Numberofemployees(full-timeequivalent) 11,660 11,238 11,020

(US$millions)

Netinterestincome $ 262 $ 250 $ 241 Non-interestincome 431 413 374Total revenue $ 693 $ 663 $ 615 Non-interestexpense 526 517 490 Provisionforcreditlosses(PCL) 9 4 9 Businessrealignmentcharges – 1 –Net income before income taxes and non-controlling interest in subsidiaries $ 158 $ 141 $ 116Net income $ 128 $ 114 $ 88

Revenue by business line WealthManagement $ 454 $ 417 $ 387 Banking $ 239 $ 246 $ 228

(1) Inpriorquarters,resultsofthissegmentwerereportedonacontinuingoperationsbasis.(2) AverageattributedcapitalandReturnonequityarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.SegmentReturnonequity,Averageriskcapital

andReturnonriskcapitalarenon-GAAPfinancialmeasures.Forfurtherdiscussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.(3) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.

Q12007vs.Q12006Netincomeincreased$48million,or48%,fromtheprioryear.InU.S.dollars,netincomewasupUS$40million,or45%,largelydrivenbystronggrowthreflectingthesuccessfulexecutionofourgrowthinitiativesincludingtheacquisitionofFlag.ThesefactorswerepartiallyoffsetbyhigherstaffingcostsinsupportofourgrowthinitiativesincludingtheacquisitionofFlagandincreasedvariablecompensationprimarilyinWealth Management onstron-gerrevenue.

Revenueincreased$93million,or13%,overtheprioryear.InU.S.dollars,revenuewasupUS$78million,or13%,primarilyduetostronggrowthinfee-basedclientassetsandhigherclienttransactionvolumesinWealth Managementandimprovedvol-umegrowthinloansanddepositsacrossallbusinesses.

Wealth Managementrevenueimproved$81million,or18%.InU.S.dollars,Wealth ManagementrevenuewasupUS$67mil-lion,or17%.Theimprovementwasmainlyduetocontinuedstronggrowthinfee-basedclientassets,reflectingbothstrongequitymarketgrowthandaggressiverecruitmentofhigh-performing

RBCU.S.andInternationalPersonalandBusiness


financialconsultants.TheincreasealsoreflectedaUS$14millionforeignexchangetranslationgainoncertaindeposits,theinclu-sionofanadditionalmonthofresultsrelatedtotheacquisitionofAbacusFinancialGroupLimited(Abacus)andhigherclienttransactionvolumesandstronggrowthinloansanddeposits.Thesefactorswerepartlyoffsetbyalowergainresultingfromthefairvaluingofcertainsecuritiesheldtoeconomicallyhedgethestock-basedcompensationplanatRBCDainRauscher(whichisoffsetbylowerstock-basedcompensationnotedinnon-interestexpensebelow).

Bankingrevenueincreased$12million,or5%.InU.S.dollars,BankingrevenueincreasedUS$11million,or5%,duetosolidgrowthinloananddepositvolumesprimarilyreflectingouracquisitionofFlag,growthinfee-basedactivitiesandhighermortgageoriginationactivity.ThesefactorswerepartiallyoffsetbyaUS$18millionlossonthesaleofcertaininvestmentsecuri-tiesduetothestrategicrestructuringofRBCCentura’sinvest-mentportfoliototakeadvantageofmarketopportunitiesandgrowthinourbalancesheet.

Non-interestexpenseincreased$44million,or8%,overtheprioryear.InU.S.dollars,non-interestexpenseincreasedUS$36million,or7%,largelyreflectinghigherstaffingandoccu-pancycostsinsupportofourgrowthinitiatives,includingtheacquisitionofFlagand17additionalde novobranchesinRBCCenturaandCaribbeancomparedtotheprioryear.Theinclusionofanadditionalmonthofcostsrelatedtotheacquisi-tionofAbacusandhighervariablecompensation,primarilyinWealth Management,commensuratewithstrongerrevenuealsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbylowerstock-basedcompensationinRBCDainRauscher.Allotherexpensecategorieswerelargelyunchangedcomparedtotheprioryearreflectingcontinuedcostmanagementefforts.

Provisionforcreditlossesof$10millionwasflatcomparedtotheprioryear.InU.S.dollars,theprovisionofUS$9millionwasunchangedfromayearagoaslowerprovisionsinourRBCCenturaloanportfolioreflectingstrongcreditqualitywereoffsetbyincreasedprovisionsinourCaribbeanportfolio.

Averageassetsincreased$7billion,or19%.InU.S.dollarsaverageassetsgrewUS$6billion,or18%,largelyreflectinggrowthatGlobalPrivateBankingduemainlytotheacquisitionofAbacus.StrongloangrowthatRBCCentura,includingtheacquisi-tionofFlag,alsocontributedtotheincrease.

Q12007vs.Q42006Netincomeincreased$23million,or18%,fromthepreviousquarter.InU.S.dollars,netincomewasupUS$14million,or12%.Theimprovedresultsweredrivenbyrevenuegrowthprimarilyinourwealthmanagementbusinessesandthereversalrecordedthisquarterofincometaxesexpensedinpriorperiods.ThiswaspartiallyoffsetbytheUS$18millionlossonthesaleofcertaininvestmentsecurities.

Revenueincreased$63million,or9%,overthepriorquarter.InU.S.dollars,revenuewasupUS$30million,or5%.Theincreasewasmainlyduetohigherclienttransactionvolumesandcontin-uedgrowthinfee-basedclientassetsinWealth Management.AUS$14millionforeignexchangetranslationgainandvolumegrowthinloansanddepositsalsocontributedtotheincrease.ThesefactorswerepartiallyoffsetbytheUS$18millionlossonthesaleofcertaininvestmentsecurities.

Non-interestexpenseincreased$36million,or6%,overthepriorquarter.InU.S.dollars,non-interestexpenseincreasedUS$9million,or2%,largelyreflectinghigherstaffingcosts,theinclusionofFlagandhigherstock-basedcompensationatRBCDainRauscher.Thesefactorswerepartiallyoffsetbylowervariablecompensation.

Provisionforcreditlosseswasup$5million.InU.S.dollars,theincreasewasUS$5million,reflectinghigherprovisionsinourCaribbeanloanportfolio.





Netinterestincome(teb)(1) $ 78 $ 14 $ 68 Non-interestincome 1,322 1,146 945Total revenue (teb) (1) $ 1,400 $ 1,160 $ 1,013 Non-interestexpense 877 770 686 Provisionfor(recoveryof)creditlosses(PCL) (8) – (85) Businessrealignmentcharges – (1) –Net income before income taxes (teb) and non-controlling interest in subsidiaries (1) $ 531 $ 391 $ 412Net income $ 420 $ 315 $ 330

Revenue by business line GlobalMarkets $ 804 $ 607 $ 574 GlobalInvestmentBankingandEquityMarkets 352 319 274 RBCDexiaInvestorServices(2) 170 155 84 Other 74 79 81

Key ratios Returnonequity(ROE)(3) 30.5% 25.8% 30.0% Returnonriskcapital(RORC)(3) 38.7% 33.4% 37.8%Selected average balance sheet and other information(4) Totalassets $ 306,900 $ 283,100 $ 252,800 Tradingsecurities 155,900 137,800 132,500 Loansandacceptances 29,300 26,200 20,500 Deposits 139,300 125,100 115,900 Attributedcapital(3) 5,400 4,750 4,300 Riskcapital(3) 4,250 3,700 3,400 Assetsunderadministration–RBC 5,400 4,700 3,300 Assetsunderadministration–RBCDexiaIS(5) 2,050,000 1,893,000 1,738,100Credit information Grossimpairedloansasa%ofaverageloansandacceptances .22% .23% .55% SpecificPCLasa%ofaverageloansandacceptances (.11%) .00% (.68%)Other information Numberofemployees(full-timeequivalent) 3,140 2,938 2,812

(1) Taxableequivalentbasis.Forfurtherinformation,refertotheHowwemeasureandreportourbusinesssegmentssection.(2) OnJanuary2,2006,wecombinedourInstitutional & Investor Services(IIS)businesswiththeinstitutionalinvestorservicebusinessofDexiaforminganewcompanyRBCDexiaInvestorServices.

Giventhesimilarityofthesebusinesses,wehavedisclosedrevenuefromourpriorbusiness,IIS,andour50%proportionateownershipofRBCDexiaISonthesamelineforcomparativepurposes.AsRBCDexiaISreportsonacalendarquarterthereisaonemonthlaginthereportingofitsearnings.ComparativeamountsforthethreemonthsendedJanuary31,2006onlyrepresenttwomonthsofrevenuefromIIS.

(3) AverageattributedcapitalandReturnonequityarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.SegmentReturnonequity,AverageriskcapitalandReturnonriskcapitalarenon-GAAPfinancialmeasures.Forfurtherdiscussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.

(4) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(5) Assetsunderadministration–RBCDexiaISrepresentsthetotalassetsunderadministration(AUA)ofthejointventure,ofwhichwehavea50%ownershipinterest.RBCDexiaISwascreatedon

January2,2006,andwecontributedAUAof$1,400billiontothejointventureatthattime.AsRBCDexiaISreportsonaone-monthlag,Assetsunderadministration–RBCDexiaISareasatDecember31,2006.

Q12007vs.Q12006Netincomeincreased$90million,or27%,fromayearagolargelydrivenbybroad-basedgrowthacrossmostbusinessesandproductcategoriesandalowereffectivetaxrate.Theincreaseinrevenueprimarilyreflectedhighertradingresultsandstrongerequityanddebtoriginationactivity.ThecurrentquarterwasalsofavourablyimpactedbytheinclusionofafullquarterofresultsfromRBCDexiaIScomparedtothetwomonthsofresultsfromourformerbusinessInvestment & Institutional Services(IIS)recordedinthepriorperiod.Thesefactorswerepartiallyoffsetbyhighervariablecompensationonstrongerbusinessperformanceanda$50milliongeneralallowancereversalrecordedintheprioryear.

Totalrevenue(teb)rose$387million,or38%,fromtheprioryearlargelyduetohigherequityanddebttradingresultsmainlyduetosignificanttransactionsinourInfrastructureFinancegroup,increasedrevenuefromcertainequitytradingstrategiesandtheinclusionofanadditionalmonthofRBCDexiaISresults.HigherCanadianandU.S.equityoriginationactivity,increaseddistributionsfromprivateequityinvestmentsandimprovedU.S.debtoriginationactivityalsocontributedtotheincrease.ThesefactorswerepartiallyoffsetbylowerM&Afees.Totalrevenue(teb)excludingVIEswas$1,389million,up$368million,or36%,fromayearago.ForareconciliationofTotalrevenue(teb)excludingVIEsrefertotheKeyperformanceandnon-GAAPmeasuressection.

RBCCapitalMarketsprovidesawiderangeofcorporateandinvestmentbanking,salesandtrading,researchandrelatedproductsandservicestocorporations,publicsectorandinstitu-tionalclientsinNorthAmericaandspecializedproductsandser-vicesinselectglobalmarkets.Thissegmentconsistsoftwomainbusinesses,GlobalMarketsandGlobalInvestmentBankingandEquityMarkets,andour50%ownershipinRBCDexiaIS.AllotherbusinessesaregroupedunderOther.

InJanuary2007,weacquiredCarlinFinancialGroup(RBCCarlin)andDaniels&Associates,L.P.(RBCDaniels),build-ingonourinvestmentbankingandtradingcapabilitiesintheU.S.andglobally.ThefinancialresultsofRBCCarlinandRBCDanielsarereportedinGlobal Investment Banking and Equity Markets.

RBCCapitalMarkets


Global Marketsrevenuewasup$230million,or40%,largelyduetohigherequityanddebttradingresultsmainlyduetosignif-icanttransactionsinourInfrastructureFinancegroup,increasedrevenuefromcertainequitytradingstrategiesandimproveddebtoriginationactivitymainlyintheU.S.

Global Investment Banking and Equity Marketsrevenueincreased$78million,or28%,mostlyduetoincreasedCanadianandU.S.equityorigination,higherdistributionsfromprivateequityinvestmentsandimprovedU.S.debtoriginationactivity,partiallyoffsetbylowerM&Afeesastheprioryearincludedseveralnotabledealswhichwerenotrepeatedthisquarter.

RBC Dexia ISrevenuewas$170million,whichreflectedhigherdepositbalancesandstrongbusinessactivity.Thiscom-paresto$84millionintheprioryearwhichreflectedonlytwomonthsofresultsfromourformerbusiness,IIS.

Otherdecreased$7million,or9%,fromayearagolargelyduetotheprioryeargainsfromthesaleofconvertibleassetsinourGlobalCreditbusinesscomparedtofairvaluelossesassociatedwithcreditprotectionderivativecontractsusedtoeconomicallyhedgeourcorelendingportfoliorecordedinthecurrentquarter.

Non-interestexpenseincreased$191million,or28%,fromayearagomainlyduetohighervariablecompensationonstrongerbusinessperformance,andtheinclusionofanadditionalmonthofcostsinRBCDexiaIS.

Recoveryofcreditlosseswas$8millioncomparedtoarecoveryof$85millionayearagowhichincludeda$50millionreversalofthegeneralallowanceanda$25millionrecoveryofEnron-relatedloanspreviouslywrittenoff.

Incometaxes(teb)wereup$10million,or11%,largelycommensuratewithhigherearningspartiallyoffsetbythecur-rentperiodreversalofincometaxespreviouslyexpensed,duetotheresolutionofcertaintaxaudits,andthewrite-offofdeferredtaxesrecordedinthepriorquarterduetothetransferoftheIISbusinesstoRBCDexiaIS.

Averageassetsincreased$54billion,or21%,comparedtoayearagolargelyresultingfromahigherleveloftradingsecuritiesrelatedtogrowthincertainequitytradingstrategiesandnewbusinessinitiatives,andgrowthincorporateloansprimarilyresultingfromimprovedinvestmentbankingactivityandgrowthintheU.S.

Q12007vs.Q42006Netincomeincreased$105million,or33%,comparedtothepriorquarterdrivenbyrevenuegrowthacrossmostbusinessesreflectinghighertradingrevenueduetosignificanttransactions,improvedclientactivityandfavourablemarketconditions.Thesefactorswerepartiallyoffsetbyhighervariablecompensationonstrongerbusinessperformance.

Totalrevenue(teb)rose$240million,or21%,fromthepriorquarterlargelyduetostrongerdebtandequitytradingresults,higherequityoriginationinboththeU.S.andCanada,andincreaseddistributionsfromprivateequityinvestments.ImprovedbusinessvolumesatRBCDexiaISalsocontributedtotheincrease.ThesefactorswerepartiallyoffsetbylowerM&AfeesmainlyinCanadaandweakerdebtoriginationactivity.Totalrevenue(teb)excludingVIEswas$1,389million,up$233million,or20%,fromthepriorquarter.

Non-interestexpenseincreased$107million,or14%,mainlyduetohighervariablecompensationonstrongerbusinessperformance.

Recoveryofcreditlosseswas$8millioninthecurrentquartercomparedtonorecoveryinthepriorquarter.

Incometaxes(teb)wereup$33millionoverthepriorquartercommensuratewiththehigherearningsbeforeincometaxesandbusinessmix.

Averageassetsincreased$24billion,or8%,comparedtothepriorquarterlargelyresultingfromahigherleveloftradingsecuritiesinsupportofgrowthincertainequitytradingstrategiesandhighercorporateloanvolumeslargelyonimprovedcapitalmarketsactivity.

CorporateSupportsegmentactivitiesincludeourGlobalTechnologyandOperationsGroup,CorporateTreasury,Finance,HumanResources,RiskManagement,InternalAuditandotherGlobalFunctions,thecostsofwhicharelargelyallocatedtothebusinesssegments.OurCorporateSupportteamsemployover18,000full-timeequivalentstaff.

ThereportedresultsfortheCorporateSupportsegmentmainlyreflectactivitiesthatareundertakenforthebenefitoftheorganizationthatarenotallocatedtothebusinesssegmentssuchasenterprisefunding,securitizationandthenetearnings

associatedwithunattributedcapital.TheresultsalsoincludeconsolidationadjustmentssuchastheeliminationofthetebadjustmentsrecordedinRBCCapitalMarketsrelatedtothegross-upofincomefromCanadiantaxablecorporatedividendstotheirtaxequivalentvalue.Theseadjustmentsarerecordedinnetinterestincomeandoffsetintheprovisionforincometaxes.

Duetothenatureofactivitiesandconsolidatedadjustmentsreportedinthissegment,webelievethataperiodoverperiodtrendanalysisisnotrelevant.Thefollowingidentifiesthesignifi-cantitemsaffectingthereportedresultsineachperiod.

CorporateSupport


Asat


(C$millions) 2007 (1) 2006 2006

Interest-bearing deposits with banks $ 7,637 $ 10,502 $ 10,913Securities Trading $ 169,030 $ 147,237 $ 131,551 Investment 27,821 37,632 34,107Total securities $ 196,851 $ 184,869 $ 165,658Assets purchased under reverse repurchase agreements and securities borrowed $ 67,744 $ 59,378 $ 47,564Loans Residentialmortgages $ 98,527 $ 96,675 $ 91,776 Personal 45,787 44,902 41,337 Creditcards 7,553 7,155 5,468 Businessandgovernment 67,851 61,207 55,615Total loans $ 219,718 $ 209,939 $ 194,196Other assets $ 77,242 $ 69,100 $ 66,300Total assets $ 571,615 $ 536,780 $ 487,874Deposits $ 365,606 $ 343,523 $ 314,872Other liabilities $ 172,261 $ 160,575 $ 141,036Non-controlling interest in subsidiaries $ 1,799 $ 1,775 $ 1,916Shareholders’ equity $ 23,458 $ 22,123 $ 20,235

(1) TheamountsincludedthetransitionadjustmentrelatedtotheimplementationofthenewfinancialinstrumentsaccountingstandardseffectiveNovember1,2006.Forfurtherdetails,refertotheImpactofnewfinancialinstrumentsaccountingstandardssection.

Q12007Netincomeof$48millioninthequartermainlyreflectedincometaxamountswhichwerelargelyrelatedtoenterprisefundingactivitiesnotallocatedtothebusinesssegmentsandgainsrelatedtosecuritizationactivity.Interestearnedontaxoverpaymentsreceivedandthecurrentperiodnetfavourableimpactattributabletotheineffectiveportionofcertaincashflowhedgesarisingfromtheimplementationofthenewfinancialinstrumentsaccountingstandardsinthecurrentquarteralsocontributedtotheincrease.Thesefactorswerepartiallyoffsetbya$20millionafter-taxcumu-lativeadjustmentforlossesresultingfromthefairvaluingofcer-tainderivativesthatdidnotqualifyforhedgeaccounting.

Q42006Netincomeof$47millioninthequartermainlyreflectedincometaxamountswhichwerelargelyrelatedtoenterprisefundingactivitiesnotallocatedtothebusinesssegmentsandgainsresult-ingfromthefairvaluingofcertainderivativesrelatedtocertaineconomichedges.Thesefactorswerepartiallyoffsetbyanamountaccruedrelatedtoaleasedspacewhichwewillnotoccupyandexpecttosubleaseataratelowerthanourcontractedrate.

Q12006Netincomeof$72millionlargelyreflectedthefavourableresolu-tionofanincometaxauditrelatedtoprioryearswhichresultedina$70millionreversalofamountsaccruedinprioryears.



(C$millions) 2007 2006 2006

Netinterestincome(teb)(1) $ (101) $ (129) $ (108) Non-interestincome 50 93 47Total revenue (teb) (1) $ (51) $ (36) $ (61) Non-interestexpense 4 44 (4) Recoveryofcreditlosses (22) (19) (20)Net loss before income taxes and non-controlling interest in subsidiaries (teb) (1) $ (33) $ (61) $ (37)Net income $ 48 $ 47 $ 72

Selected average balance sheet and other information(2) Totalassets $ (5,600) $ (5,700) $ (4,500) Attributedcapital(3) 2,850 3,450 3,250Securitization Totalsecuritizationssoldandoutstanding(4) 18,732 17,781 15,172 Newsecuritizationactivityintheperiod(5) 1,438 2,059 2,733

(1) Taxableequivalentbasis.Forfurtherinformation,refertotheHowwemeasureandreportourbusinesssegmentssection.TheseamountsincludedtheeliminationoftheadjustmentsrecordedinRBCCapitalMarketsrelatedtothegross-upofcertaintax-advantagedincome(Canadiantaxablecorporatedividends).TheamountforthethreemonthsendedJanuary31,2007,was$70million(October31,2006–$50million;January31,2006–$37million).

(2) Averageamountsarecalculatedusingmethodsintendedtoapproximatetheaverageofthedailybalancesfortheperiod.(3) Averageattributedcapitalisanon-GAAPfinancialmeasure.Forfurtherdiscussionandreconciliation,refertotheKeyperformanceandnon-GAAPmeasuressection.(4) TotalsecuritizationssoldandoutstandingarecomprisedofCreditcardloansandResidentialmortgages.(5) NewsecuritizationactivitycomprisesResidentialmortgagesandCreditcardloanssecuritizedandsoldintheperiod.Forfurtherdetails,refertoNote6toourunauditedInterimConsolidatedFinancial

Statements.ThisamountdoesnotincludecommercialmortgagesecuritizationactivityofRBCCapitalMarkets.

Financialcondition

Balancesheetdataandanalysis


Q12007vs.Q12006Total assetsincreased$84billion,or17%,fromayearago.Theincreasewasbroad-basedacrossmostassetcategories,withthemajorityattributabletogrowthinourtradingandlendingactivities.

Interest-bearing deposits with banksdeclined$3billion,or30%,fromtheprioryear,largelyreflectingashiftinourportfoliomixtohigheryieldingassets.

Total securitieswereup$31billion,or19%,fromayearagoprimarilyresultingfroma$37billionincreaseinTradingsecurities.TheincreaseinTradingsecuritieslargelyreflectedgrowthofourtradingbusinesses.CertainsecuritiespreviouslyclassifiedasInvestmentsecuritiesarenowclassifiedasTradingsecuritieswiththeimplementationofthenewfinancialinstrumentsaccountingstandards.Forfurtherdetails,refertotheImpactofthenewfinancialinstrumentsaccountingstandardssection.

Assets purchased under reverse repurchase agreements and securities borrowedincreased$20billion,or42%,fromayearago.Theincreaseprimarilyreflectedhigherbalancesinsupportofcertainequityanddebttradingstrategies,andincreasedclientbalances.

Total loansincreased$26billion,or13%,fromayearagoasaresultofincreasesacrossallcategories.Thisreflectedstrongloandemanddrivenbythegenerallyfavourableeconomicconditions,andoursuccessfulexecutionofgrowthstrategies.

Residential mortgages wereup$7billion,or7%,despitetheoffsettingeffectof$13billionofsecuritizationsoverthelast12months.Theincreaselargelyreflectedgrowthinourdomesticbusiness.

Personal loansincreased$4billion,or11%,primarilyduetogrowthinourHomelineproducts.

Credit cards increased$2billion,or38%,largelyreflectingsuccessfulsaleseffortsandgrowthinclientspendingandbalances.Theincreasealsoreflected$650millionofpreviouslysecuritizedamountswhichmaturedovertheperiod,resultingintheloansbeingrecordedbackonourbalancesheet.

Business and government loansincreased$12billion,or22%,primarilyattributabletotheacquisitionofFlag,strongloangrowthinRBCCentura,increasedloansrelatedtoinvestmentbankingactivityandgeneralbusinessgrowth.

Other assetswereup$11billion,or17%.Theincreasewasmainlyattributabletoderivativeslargelyreflectingchangesinforeignexchangerates,andincreasedbusinessactivityinreceivablesfrombrokersanddealers,andcustomers’liabilityunderacceptances.

Depositsincreased$51billion,or16%,fromayearago.Thiswaslargelydrivenbyhigherbusinessandgovernmentdepositsinsupportofincreasedbusinessactivities.Theincreasealsoreflectedhigherbankdepositsinsupportoffundingrequirementsforourtradingandlendingactivities.Personaldepositsalsoincreasedprimarilyreflectingstrongersalesoffixed-termdepositproducts.

Other liabilitiesrose$31billion,or22%,fromlastyear,pri-marilyduetoincreasedbusinessactivitiesrelatedtorepurchaseagreementsandsecuritiessoldshort.

Shareholders’ equityincreased$3billion,or16%,overtheprioryear,largelyreflectingstrongearningsgrowth,netofdividends,anda$.9billionnetissuanceofpreferredsharesovertheperiod.

Q12007vs.Q42006Total assets increased$35billion,or6%,fromthepriorquarter.Theincreasewasbroad-basedacrossmostassetcategories,withthemajorityattributabletogrowthinourtradingandlendingactivities.

Interest-bearing deposits with banksdecreased$3billion,or27%,fromthepriorquarter.Thedecreaseprimarilyreflectedashiftinourportfoliomixtomoreliquidandhigheryieldingassets.

Total securitieswereup$12billion,or6%,fromthepriorquarter,primarilyreflectingahigherlevelofTradingsecuritiesinsupportofgrowthinourtradingbusinesses.CertainsecuritiespreviouslyclassifiedasInvestmentsecuritiesarenowclassifiedasTradingsecuritieswiththeimplementationofthenewfinan-cialinstrumentsaccountingstandards.

Assets purchased under reverse repurchase agreements and securities borrowedincreased$8billion,or14%,fromthepriorquarter,generallyinsupportofcertainequityanddebttradingstrategies,andincreasedclientbalances.

Total loans rose$10billion,or5%,fromthepriorquarterasaresultofincreasesacrossallcategories.Thiswaslargelyaresultofincreasedcorporateloansrelatedtoinvestmentbankingactivity,strongloangrowthinRBCCenturaincludingtheacquisi-tionofFlag.Higherdomesticresidentialmortgages(despitetheoffsettingeffectof$2.5billionofsecuritizationsthisquarter)andpersonalsecuredcreditlinesunderpinnedbyresilientdomestichousingmarketactivitiesalsocontributedtotheincrease.

Other assetswereup$8billion,or12%,fromthepriorquar-ter.Theincreasewasmainlyattributabletoderivativesprimarilyduetochangesinforeignexchangerates,andincreasedbusinessactivityinreceivablesfrombrokersanddealers,andcustomers’liabilityunderacceptances.

Depositsincreased$22billion,or6%,fromthepriorquarter,asaresultofgrowthacrossallcategories.Theincreasewaslargelydrivenbygrowthinbusinessandgovernmentdeposits,primarilyreflectingnewissuancesofdepositnotesinthequarter,theacquisitionofFlag,andbusinessgrowthinourU.S.andinternationaloperations.Higherbankandpersonaldepositsalsocontributedtotheincrease.

Other liabilities increased$12billion,or7%,fromthepriorquarter,primarilyreflectingincreasedbusinessactivitiesrelatedtosecuritiessoldshortandderivativesduetochangesinforeignexchangerates.

Shareholders’ equitywasup$1billion,or6%,overthepriorquarter,onstrongearningsgrowth,netofdividends.

Weactivelymanageourcapitaltobalancethedesiretomaintainstrongcapitalratiosandhighdebtratingswiththedesiretopro-videstrongreturnstoourshareholders.Instrivingtoachievethisbalance,weconsidertherequirementsofregulators,ratingagen-cies,depositorsandshareholders,aswellasourfuturebusinessplans,peercomparisonsandourpositionrelativetointernaltargetsforcapitalratios.Additionalconsiderationsincludethecostsandtermsofcurrentandpotentialcapitalissuancesandprojectedcapitalrequirements.Forfurtherdetails,refertopages64to68ofour2006AnnualReport.

Capitalmanagement

RegulatorycapitalandcapitalratiosCapitallevelsforCanadianbanksareregulatedpursuanttoguidelinesissuedbytheOSFI,basedonstandardsissuedbytheBankofInternationalSettlements.

OnNovember1,2006,weadopted,onaprospectivebasis,threenewaccountingstandardsthatwereissuedbythe CICArelatedtotheaccountingforfinancialinstruments.Forfurtherdetails,refertotheAccountingpoliciesandestimatessectionandNote1ofourunauditedInterimConsolidatedFinancialStatements.


Asat



Tier1capital $ 22,263 $ 21,478 $ 19,391 Totalcapital $ 27,035 $ 26,664 $ 26,103 Totalrisk-adjustedassets(1) $ 242,290 $223,709 $ 204,247Capital ratios Tier1capitalratio 9.2% 9.6% 9.5% Totalcapitalratio 11.2% 11.9% 12.8%

(1) CalculatedusingguidelinesissuedbytheOSFI.

Q12007vs.Q12006AsatJanuary31,2007,theTier1capitalratiowas9.2%andtheTotalcapitalratiowas11.2%.TheTier1capitalratiowasdown30bpsfromthesameperiodayearagoduetogrowthinrisk-adjustedassets,whichexceededtheimpactofstronginternalcapitalgeneration.TheTotalcapitalratiowasdown160bpsfromthesameperiodayearago,mainlyduetogrowthinrisk-adjustedassetsandnetcapitalredemption.Risk-adjustedassetsincreased$38billionfromthesameperiodayearagoprimarilyreflectingthegrowthinloans,commitmentstoextendcredit,marketriskandsecurities.

Q12007vs.Q42006TheTier1capitalratiowasdown40bpsfromthepreviousquar-ter,reflectingstronggrowthinrisk-adjustedassetsprimarilyattributabletobusinessgrowth.TheTotalcapitalratiowasdown70bpscomparedtotheendoflastquarter,primarilyduetogrowthinrisk-adjustedassetsandnetcapitalredemption.Theincreaseinrisk-adjustedassetsof$19billioncomparedtotheendoflastquarterwaslargelyduetogrowthinloans,marketriskandsecurities.

Sharedataanddividends

Asat


2007 2006 2006 Dividends Dividends Dividends Number of declared Numberof declared Numberof declared(C$millions,exceptnumberofsharesandpershareamounts) shares (000s) Amount per share shares(000s) Amount pershare shares(000s) Amount pershare

First Preferred Non-cumulativeSeriesN(1) 12,000 $ 300 $ .29 12,000$ 300 $ .29 12,000$ 300$ .29 Non-cumulativeSeriesO – – – 6,000 150 .34 6,000 150 .34 Non-cumulativeSeriesS – – – – – .18 10,000 250 .38 Non-cumulativeSeriesW(1) 12,000 300 .31 12,000 300 .31 12,000 300 .31 Non-cumulativeSeriesAA 12,000 300 .28 12,000 300 .28 – – Non-cumulativeSeriesAB 12,000 300 .29 12,000 300 .41 – – Non-cumulativeSeriesAC(2) 8,000 200 .36 – – – – Non-cumulativeSeriesAD(2) 10,000 250 – – – – – Non-cumulativeSeriesAE(2) 10,000 250 – – – – –

Total First Preferred $ 1,900 $ 1,350 $ 1,000

Common shares outstanding 1,275,950 $ 7,216 $ .40 1,280,890$ 7,196 $ .40 1,290,983$ 7,189$ .32Treasury shares – preferred (141) (3) (94) (2) (118) (3)Treasury shares – common (3,108) (114) (5,486) (180) (6,224) (199)Stock options Outstanding 31,261 32,243 36,296 Exercisable 26,541 26,918 30,858

(1) AsatJanuary31,2007,theaggregatenumberofcommonsharesissuableontheconversionoftheFirstPreferredSharesSeriesNwasapproximately5,840,000.AsatJanuary31,2007,theFirstPreferredSharesSeriesWwasnotyetconvertible.

(2) Thesepreferredsharesdonothaveconversionoptions.Forfurtherdetails,refertotheSelectedcapitalmanagementactivitysection.

AsatFebruary23,2007,thenumberofoutstandingcommonsharesandstockoptionswere1,274,339,000and30,747,000,

respectively.Forfurtherdetails,refertoNote8toourunauditedInterimConsolidatedFinancialStatements.

Theimpactoftheadoptionofthestandardsonregulatorycapitalandrisk-adjustedassetsisdiscussedbelow:

Regulatory capitalUponadoptionofthenewstandards,Shareholders’equitywasreducedthroughadjustmentstoRetainedearningsandthecreationofbalancesinAccumulatedothercomprehensiveincome(AOCI).DetailsonthesetransitionadjustmentsaresummarizedinNote1toourunauditedInterimConsolidatedFinancialStatements.

AsprescribedbytheOSFI,certaincomponentsofAOCIareincludedinthedeterminationofregulatorycapital.AccumulatednetforeigncurrencytranslationadjustmentsareincludedinTier1capital.Netunrealizedfairvaluelossesonavailable-for-sale(AFS)equitiesaredeductedinthedeterminationofTier1capitalwhilenetunrealizedfairvaluegainsonAFSequitiesareincludedinTier2Acapital.

Risk-adjusted assetsAsprescribedbytheOSFI,balancesheetvaluesareusedtodeterminerisk-adjustedassetswiththefollowingexceptions.ForAFSdebtandloanswhicharerecordedatfairvalueonthebalancesheet,amortizedcostisusedasthebasisfordetermin-ingrisk-adjustedassets.

Thefollowingtablepresentsourregulatorycapitalandourregulatorycapitalratios.


Q12007vs.Q12006AttributedEconomicCapitalincreased$2.9billionfromthesameperiodayearagolargelyduetoincreasesinCreditrisk,GoodwillandintangiblesandOperationalriskcapital.TheincreasesinCreditriskandOperationalriskcapitalwerelargelyduetobusi-nessgrowthandtheimpactofourjointventureRBCDexiaIS,whichwascompletedinJanuary2006.TheincreaseinGoodwillandintangibleswasmainlyduetotheacquisitionswecompletedoverthelastyear,includingFlag,AmericanGuaranty&TrustandAbacus.ThecreationofRBCDexiaISalsocontributedtotheincreaseingoodwillandintangibles.

Q12007vs.Q42006AttributedEconomicCapitalincreased$1.7billionfromtheprevi-ousquarterlargelyduetoincreasesinGoodwillandintangibles,CreditriskandOperationalriskcapital.TheincreaseinGoodwillandintangibleswasmainlyduetotheacquisitionofFlagandtheimpactofaweakerCanadiandollaronthetranslatedvalueofU.S.dollar-denominatedbalances.TheincreasesinCreditriskcapitalandOperationalriskcapitalwereprimarilyduetobusi-nessgrowth.

Economic Capital

Asat


(C$millionsaveragebalances) 2007 2006 2006

Creditrisk $ 6,550 $ 6,100 $ 5,500 Marketrisk(tradingandnon-trading) 2,650 2,550 2,400 Operationalrisk 2,750 2,550 2,300 Businessandfixedassetrisk 2,000 1,800 1,700 Insurancerisk 150 150 250

Riskcapital $ 14,100 $ 13,150 $ 12,150Goodwillandintangibles 5,400 4,700 4,450

Attributedcapital(EconomicCapital) $ 19,500 $ 17,850 $ 16,600Unattributedcapital(1) 1,950 2,650 2,700

Common equity $ 21,450 $ 20,500 $ 19,300

(1) UnattributedcapitalisreportedintheCorporateSupportsegment.

Selectedcapitalmanagementactivity


January31

(C$millions) 2007

Dividends Common $ 511 Preferred 16 Preferredsharesissued 700 Preferredsharesredeemed (150)Treasurysharesnetsales–common 66 Repurchaseofcommonshares–NCIB (414) Repurchaseandredemptionofdebentures (485)

Q12007Tier1EffectiveNovember1,2006,werenewedournormalcourseissuerbid(NCIB)foroneyear,topurchase,forcancellation,upto40millioncommonshares.Duringthequarter,wepurchased7.6millioncommonsharesfor$414millionunderourNCIB.

OnJanuary19,2007,weissued$250millionofNon-cumulativeFirstPreferredSharesSeriesAEat$25pershare.

OnDecember13,2006,weissued$250millionofNon-cumulativeFirstPreferredSharesSeriesADat$25pershare.

OnNovember24,2006,weredeemedalloftheissuedandoutstanding$150millionNon-cumulativeFirstPreferredSharesSeriesO.

OnNovember1,2006,weissued$200millionofNon-cumulativeFirstPreferredSharesSeriesACat$25pershare.

Tier2Duringthequarter,wepurchasedUS$24millionoftheoutstand-ingUS$300millionfloating-ratedebenturesmaturingin2085.

OnNovember8,2006,weredeemedallofouroutstandingUS$400millionfloatingratesubordinateddebenturesdueNovember8,2011,for100%oftheirprincipalamountplusaccruedinteresttotheredemptiondate.

SubsequenttoJanuary31,2007,weannouncedthefollowingcapital-relatedtransaction:

OnMarch2,2007,weannouncedourintentiontoredeemallofouroutstanding$500millionsubordinateddebenturesdueJune4,2012,atparvalueplusaccruedinterest.TheredemptionisexpectedtobecompletedonJune4,2007,andwillbefinancedoutofourgeneralcorporatefunds.

EconomicCapitalEconomicCapitalisourownquantificationofrisksassociatedwithbusinessactivities.EconomicCapitalisdefinedasthecapitalrequiredtoremainsolventandinbusinessevenunderextrememarketconditions,givenourdesiretomaintainanAAdebtrating.EconomicCapitalisattributedtoeachbusinesssegmentinproportiontotherisksinherentintherespectivebusinesssegmentanddrivestheoptimizationofreturnsintermsofriskandreward.ItallowsfordirectcomparableperformancemeasurementsthroughReturnonequity(ROE)andReturnonriskcapital(RORC)whicharedescribedindetailintheKeyperfor-manceandnon-GAAPmeasuressection.Accordingly,EconomicCapitalaidsseniormanagementinresourceallocationandservesasareferencepointfortheassessmentofouraggregateriskappetiteinrelationtoourfinancialposition,recognizingthatfactorsoutsidethescopeofEconomicCapitalmustalsobetakenintoconsideration.

EconomicCapitalisanon-GAAPmeasureanditscalculationandattributioninvolvesanumberofassumptionsandjudgments.Forfurtherdetails,refertopage68ofour2006AnnualReport.


Inthenormalcourseofbusiness,weengageinavarietyoffinancialtransactionsthat,underGAAP,arenotrecordedonourbalancesheet.Off-balancesheettransactionsaregenerallyundertakenforriskmanagement,capitalmanagementand/orfundingmanagementpurposesforourbenefitandthebenefitofourclients.Thesetransactionsgiveriseto,amongotherrisks,varyingdegreesofmarket,creditandliquidityandfundingriskwhicharediscussedintheRiskmanagementsection.Foracompletediscussionofthesetypesofarrangements,includingtheirnature,businesspurposeandimportanceseepages69to71ofour2006AnnualReport.

DerivativefinancialinstrumentsOnNovember1,2006,weadopted,onaprospectivebasis,threenewaccountingstandardsthatwereissuedbytheCICArelatedtothefinancialinstruments.ThesestandardsandtheimpactonourfinancialpositionandresultsofoperationsarediscussedintheImpactofthenewfinancialinstrumentsaccountingstandardssectionandinNote1toourunauditedInterimConsolidatedFinancialStatements.

Withtheadoptionofthesestandards,allderivatives,includingcertainderivativesthatareusedtomanageourrisksandarespecificallydesignatedandqualifyforhedgeaccounting,arerecordedontheConsolidatedBalanceSheetsatfairvalue.PriortoNovember1,2006,derivativesthatqualifiedforhedgeaccountingwerenotcarriedatfairvalueontheConsolidatedBalanceSheetsandweredisclosedasoff-balancesheetitems.

SecuritizationsWeperiodicallysecuritizeourcreditcardloansandresidentialandcommercialmortgagesprimarilytodiversifyourfund-ingsourcesandenhanceourliquidityposition.ThefollowinghighlightsthesecuritizationactivitiesforthethreemonthsendedJanuary31,2007,thatimpactedourunauditedInterimConsolidatedBalanceSheets.

Duringthefirstquarterof2007,wesecuritized$2.5billionofresidentialmortgages,ofwhich$1.4billionweresoldandtheremaining$1.1billionwereretained.Weclassified$.9billionoftheretainedsecuritiesasTradingsecuritiesand$.2billionasInvestmentsecurities.Wealsosecuritizedandsold$.3billionofcommercialmortgages.Forfurtherdetails,refertoNote6toourunauditedInterimConsolidatedFinancialStatements.

GuaranteesInthenormalcourseofbusiness,weenterintonumerousagreementswiththirdpartiesthatmaycontainfeaturesdefinedasaguarantee,includingcreditderivatives,writtenputoptions,securitieslendingindemnifications,backstopliquidityfacilities,financialstandbylettersofcredit,performanceguarantees,stablevalueproducts,creditenhancements,mortgageloanssoldwithrecourseandcertainindemnificationagreements.RefertoNote10toourunauditedInterimConsolidatedFinancialStatementsfordetailsregardingsignificantguaranteeswehaveprovidedtothirdpartiesasatJanuary31,2007.

Off-balancesheetarrangements

Ourbusinessactivitiesexposeustoawidevarietyofrisks,whichareinherentinvirtuallyallaspectsofouroperations.Ourgoalinmanagingtheserisksistoprotecttheenterprisefromanunacceptablelevelofearningsvolatilitywhilesupportingandenablingbusinessopportunities.Wedothisbyensuringthattherisksarisingfrombusinessactivitiesandtransactionsprovideanappropriatebalanceofreturnfortheriskassumedandremainwithinourriskappetite.

Ourmanagementofriskissupportedbysoundriskmanage-mentpracticesandaneffectiveriskmanagementframework.Thecornerstoneofourriskmanagementframeworkisastrongriskmanagementculture,supportedbyarobustenterprise-widesetofpolicies,proceduresandlimits,whichinvolveourriskman-agementprofessionals,businesssegmentsandotherfunctionalteams.Thispartnershipisdesignedtoensuretheongoingalign-mentofbusinessstrategiesandactivitieswithourriskappetite.

Forfurtherdetails,refertopages72to90ofour2006AnnualReport.Ourapproachtothemanagementofriskhasnotchangedsignificantlyfromthatdescribedinour2006AnnualReport.

Ourpoliciesandproceduresforrelatedpartytransactionshavenotchangedmateriallyfromthosestatedonpage42ofour2006AnnualReport.

Intheordinarycourseofbusiness,weprovidenormalbank-ingservices,operationalservicesandenterintoothertransactionswithassociatedandotherrelatedcorporations,includingourjointventureentities,ontermssimilartothoseofferedtonon-

relatedparties.Wegrantloanstodirectors,officersandotheremployeesatratesnormallyaccordedtopreferredclients.Inaddition,weofferdeferredshareandotherplanstonon-employeedirectors,executivesandcertainotherkeyemployees.Forfurtherinformation,refertoNote4toourunauditedInterimConsolidatedFinancialStatementsandtoNotes9and21ofour2006AnnualReport.

Relatedpartytransactions

Riskmanagement


Q12007vs.Q12006GrossimpairedloansGrossimpairedloansincreased$76million,or10%,fromayearago,largelyreflectinghigherimpairmentinoursmallbusiness,commercialandresidentialmortgageportfolios.

Consumergrossimpairedloansincreased$2million,reflect-inghigherimpairmentinresidentialmortgagesandpersonalloansinpartreflectingportfoliogrowth,whichwaslargelyoffsetbyadecreaseinimpairmentinstudentloans.

Businessandgovernmentgrossimpairedloansincreased$74million,or17%,mainlyduetohigherimpairmentinoursmallbusiness,commercialandagriculturalportfolios,partiallyoffsetbytheresolutionofpreviouslyimpairedcorporateloans.

AllowanceforcreditlossesTotalallowanceforcreditlossesincreased$25million,or2%,fromayearago.TheincreaselargelyreflectedanincreaseingeneralallowanceduetotheinclusionofFlag,whichmorethanoffsetthereductioninspecificallowanceintheperiod.Thespe-cificallowanceforcreditlossesdecreased$4million,or1%,fromtheprioryear.Thereductionwaslargelyattributabletostudentloans,partiallyoffsetbyincreasedallowanceforoursmallbusi-nessportfolio.Thegeneralallowanceincreased$29million,or2%,primarilyasaresultoftheacquisitionofFlag.

ProvisionforcreditlossesTotalprovisionforcreditlossesincreased$115million,or245%,fromayearago,primarilyreflectinga$50millionreversalofthegeneralallowanceintheprioryearandlowercorporaterecoveriesthisquarter.Higherprovisionsinourpersonalunsecuredcreditline,smallbusinessandcreditcardportfoliosinthecurrentperiod,alsocontributedtotheincrease.

Specificprovisionforcreditlossesforconsumerloansincreased$21million,or17%,fromlastyear.Theincreasewaslargelyattributabletohigherprovisionsinourpersonalunsecuredcreditlineandcreditcardportfoliosprimarilyreflectingportfoliogrowth.

Specificprovisionforcreditlossesforbusinessandgovern-mentloansincreased$39millioncomparedtotheprioryear.Theincreasemainlyreflectedhigherprovisionsinoursmallbusi-nessportfolioandlowercorporaterecoveriesastheprioryearincludeda$25millionrecoveryofEnron-relatedloanspreviouslywrittenoff.ThesefactorswerepartiallyoffsetbylowerprovisionsinourU.S.loanportfolioreflectingcontinuedstrongcreditquality.

Therewasnogeneralprovisioninthecurrentperiod.Thepriorperiodrecoveryof$55millionprimarilyreflectedthe$50millionreversalofthegeneralallowanceinlightofthestrengtheningofourcorporateloanportfolioonfavourablecreditconditions.

Creditqualityperformance




Gross impaired loans (GIL) Consumer $ 356 $ 344 $ 354 Businessandgovernment 520 490 446

Totalgrossimpairedloans $ 876 $ 834 $ 800

Allowance for credit losses (ACL) Consumer $ 105 $ 103 $ 117 Businessandgovernment 176 160 168

Specificallowance $ 281 $ 263 $ 285 Generalallowance 1,253 1,223 1,224

Totalallowanceforcreditlosses $ 1,534 $ 1,486 $ 1,509

Provision for credit losses (PCL) Consumer $ 142 $ 128 $ 121 Businessandgovernment 20 29 (19)

Specificprovision $ 162 $ 157 $ 102 Generalprovision – 2 (55)

Totalprovisionforcreditlosses $ 162 $ 159 $ 47

Key credit quality ratios GILasa%ofgrossloansandacceptances .38% .38% .40%SpecificPCLasa%ofaverageloansandacceptances .29% .29% .20%Totalnetwrite-offsasa%ofaverageloansandacceptances .27% .29% .21%

Creditriskistheriskoflossassociatedwithacounterparty’sinabilitytofulfillitspaymentobligations.Weincurcreditriskinourbusinesssegmentsthroughtheextensionofcreditandothertransactionswithvariouscounterparties,includingon-andoff-balancesheetitemssuchasloans,acceptances,lettersofcreditandguarantees.

OversightofcreditriskisprovidedbytheBoardofDirectorsthroughtheConductReviewandRiskPolicyCommittee(CR&RPC).Creditriskapprovalauthoritiesareestablishedbythe

BoardofDirectorsuponrecommendationoftheCR&RPC,anddelegatedtoseniormanagement.Anytransactionsexceedingmanagement’sauthoritiesmustbeapprovedbytheCR&RPC.

GroupRiskManagement(GRM)setsouttheenterprise-widerequirementsfortheidentification,assessment,monitoringandreportingofcreditrisk.Businesssegmentsareaccountableforthecreditriskswithintheirbusinesses,workinginpartnershipwithGRMontheproperalignmentbetweenriskappetiteandbusinessstrategies.

Creditrisk


Marketriskistheriskoflossthatresultsfromchangesininterestandforeignexchangerates,equityandcommodityprices,andcreditspreads.Weareexposedtomarketriskinourtradingactivityandourassetliabilitymanagementactivities.Thelevelofmarketrisktowhichweareexposedvariesdependingonmarketconditions,expectationsoffuturepriceandyieldmovementsandthecompositionofourtradingportfolio.Forfurtherdetails,refertopages81to84ofour2006AnnualReport.TradingactivitiesTradingmarketriskencompassesvariousrisksassociatedwithcashandrelatedderivativeproductsthataretradedininterestrate,foreignexchange,equity,creditandcommoditymarkets.

Weconducttradingactivitiesoverthecounterandonexchangesinthespot,forward,futuresandoptionsmarkets,andweofferstructuredderivativetransactions.Marketrisksassociatedwithtradingactivitiesarearesultofmarket-making,positioning,andsalesandarbitrageactivitiesintheinterestrate,

foreignexchange,equity,commodities,andcreditmarkets.Ourtradingoperationsprimarilyactasamarketmaker,executingtransactionsthatmeetthefinancialrequirementsofourclientsandtransferringthemarketriskstothebroadfinancialmarket.WealsoactasprincipalandtakeproprietarymarketriskpositionswithintheauthorizedlimitsgrantedbytheBoardofDirectors.Thetradingbookconsistsofcashandderivativepositionsthatareheldforshort-termresale,takenonwiththeintentofbenefit-ingintheshorttermfromactualorexpecteddifferencesbetweentheirbuyingandsellingpricesortolockinarbitrageprofits.Forfurtherdetails,refertopages81to83ofour2006AnnualReport.Thesepolicies,processesandmethodologieshavenotchangedmateriallyfromthosestatedinthe2006AnnualReport.

ThefollowingtableshowsourglobalValue-at-Risk(VAR)fortotaltradingactivitiesbymajorriskcategoryandthediversifica-tionrisk,whichiscalculatedasthedifferencebetweentheglobalVARandthesumoftheseparateriskfactorVARs.

Marketrisk

CreditqualityratiosThegrossimpairedloansratiodecreasedfromayearago,largelyreflectingstrongportfoliogrowth.Theincreaseinthespecificprovisionforcreditlossesratiomainlyreflectedlowercorporaterecoveries,andhigherprovisionsinoursmallbusinessportfolio.Thetotalnetwrite-offsratiorosefromtheprioryearprimarilyduetolowercorporaterecoveriesinthecurrentperiod.

Q12007vs.Q42006GrossimpairedloansGrossimpairedloansincreased$42million,or5%,comparedtothepriorquarter,reflectinghigherimpairmentinbothbusinessandgovernment,andconsumerloanportfolios.

Consumergrossimpairedloansincreased$12million,or3%,largelyduetohigherimpairmentinourpersonalloansandresidentialmortgagesinpartduetoportfoliogrowth,whichwaspartlyoffsetbylowerimpairmentinstudentloans.

Businessandgovernmentgrossimpairedloansincreased$30million,or6%.Theincreaseprimarilyreflectedhigherimpairmentinoursmallbusinessandagricultureportfolios.

AllowanceforcreditlossesTotalallowanceforcreditlossesincreased$48million,or3%,fromthepriorquarter.Thisreflectedincreasesinbothgeneralallowanceandspecificallowance.Thespecificallowancefor

creditlossesincreased$18million,or7%,primarilyattributabletohigherimpairmentinsmallbusinessloans.Thegeneralallow-anceincreased$30million,or2%,largelyduetotheinclusionofFlagthisquarter.

ProvisionforcreditlossesTotalprovisionforcreditlossesincreased$3million,or2%,comparedtothepreviousquarter.Theincreaseprimarilyreflectedhigherprovisionsinourcreditcardportfoliowhichwerelargelyoffsetbyincreasedrecoveriesinourcorporateportfolio.

Specificprovisionforcreditlossesforconsumerloansincreased$14million,or11%,fromthepriorquarter.Theincreasewaslargelyattributabletohigherprovisionsincreditcardsinpartreflectingportfoliogrowth.

Businessandgovernmentspecificprovisionforcreditlossesdecreased$9million,or31%,comparedtothepriorquarter.Thedecreasewaslargelyaresultofhighercorporaterecoveriesandlowerprovisionsinoursmallbusinessandcommercialloanportfolios.ThiswaspartlyoffsetbyhigherprovisionsinourCaribbeanportfolio.

CreditqualityratiosOurportfoliocreditqualityremainedrelativelystablecomparedtothepriorquarter.

GlobalVAR

January 31, 2007 October31,2006 January31,2006

As at For the three months ended Asat Forthethreemonthsended Asat Forthethreemonthsended

(C$millions) January 31 High Average Low October31 High Average Low January31 High Average Low

Equity $ 9 $ 14 $ 9 $ 5 $ 7 $ 9 $ 7 $ 5 $ 7 $ 11 $ 8 $ 5Foreignexchange 1 3 1 – 2 3 1 1 1 4 2 1Commodities(1) 1 1 1 – 1 1 1 – 1 2 1 1Interestrate 16 19 16 13 13 17 14 13 16 20 12 9Creditspecific 2 3 2 2 3 4 3 2 3 4 2 2Diversification (10) n.m. (10) n.m. (9) n.m. (9) n.m. (9) n.m. (7) n.m.Global VAR $ 19 $ 22 $ 19 $ 15 $ 17 $ 20 $ 17 $ 14 $ 19 $ 25 $ 18 $ 13

(1) EffectiveMay2006,marketriskincommodities-tradingactivitieshasbeenincludedinbothourVARmeasurementandregulatorycapitalrequirementunderamodels-basedapproach.n.m. notmeaningful


Marketriskmeasures–Non-tradingbankingactivities


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

Before-taximpactof: 100bpincreaseinrates $ (508) $ 83 $ (496) $ 87 $ (376) $ 107 100bpdecreaseinrates 377 (143) 375 (153) 240 (188)Before-taximpactof:200bpincreaseinrates (1,078) 148 (1,044) 147 (789) 188 200bpdecreaseinrates 680 (287) 658 (319) 385 (407)

Q12007vs.Q12006AverageglobalVARforthequarterof$19millionwasupcomparedto$18millionayearagolargelyduetoanincreaseininterestrateriskreflectingthegrowthintradingactivity.Thiswaslargelyoffsetbyanincreaseinoveralldiversificationeffect,whichroseto34%comparedto28%ayearago.

Q12007vs.Q42006AverageglobalVARforthequarterof$19millionwasupcomparedto$17millioninthepreviousquarterlargelyduetoincreasesininterestrateandequityrisk.ThisincreaseinglobalVARislargelyduetogrowthintradingactivity.Theincreasewasslightlyoffsetbyamarginalimprovementintheoveralldiversifi-cationeffectinthecurrentquarter.

TradingrevenueDuringthequarter,therewasonedaywithnettradingrevenueof$45millionwhichincludedgainsrelatedtotheoriginationofcertainstructuredtransactionsandtherewerenodayswithanettradingloss.Thebreadthofourtradingactivityisdesignedtodiversifymarketrisktoanyparticularstrategy,andtoreducetradingrevenuevolatility.

60

50

40

30

20

0

(5)

(15)

6

0

-5

0 5 10 15

20

25 February 2006 October 2006

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

Daily net trading revenue (C$ millions)

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

Daily net trading revenue Global trading VAR

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)

(25)

(5)

(15)

(20)

Daily interest rate specific VAR

August 2006 January 2007May 2006

10

45

60

50

40

30

20

0

(5)

(15)

6

0

-5

0 5 10 15

20

25 February 2006 October 2006

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

Daily net trading revenue (C$ millions)

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

Daily net trading revenue Global trading VAR

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)

(25)

(5)

(15)

(20)

Daily interest rate specific VAR

August 2006 January 2007May 2006

10

45

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

Ourgoalistomanagetheinterestrateriskofthenon-tradingbalancesheettoatargetlevel.Wemodifytheriskprofileofthebalancesheetthroughproactivehedgingtoachieveourtargetlevel.WecontinuallymonitortheeffectivenessofourinterestrateriskmitigationactivitywithinCorporateTreasuryonavalueandearningsbasis.

Moreinformationaboutourmarketriskmanagementpoli-ciesandprocessesassociatedwithournon-tradingactivitiesisdetailedonpage83ofour2006AnnualReport.Thesepoliciesandprocedureshavenotchangedmateriallyfromthosestatedinour2006AnnualReport.

Thefollowingtableprovidesthepotentialbefore-taximpactofanimmediateandsustained100bpand200bpincreaseordecreaseininterestratesonnetinterestincomeandeconomicvalueofequityofournon-tradingportfolio,assumingthatnofurtherhedgingisundertaken.Thesemeasuresarebaseduponassumptionsmadebyseniormanagementandvalidatedbyempiricalresearch.Allinterestrateriskmeasuresarebaseduponinterestrateexposuresataspecifictimeandcontinuouslychangeasaresultofbusinessactivitiesandourriskmanage-mentinitiatives.Overtheperiod,ourinterestrateriskexposurewaswellwithinourtargetlevel.

(1) TradingrevenueonataxableequivalentbasisexcludingrevenuerelatedtoconsolidatedVIEs.


Liquidityandfundingriskistheriskthataninstitutionisunabletogeneratesufficientcashoritsequivalentinatimelyandcost-effectivemannertomeetitscommitmentsastheycomedue.

Ourliquidityandfundingmanagementframeworkisdesignedtoensurethatreliableandcost-effectivesourcesofcashoritsequivalentsareavailabletosatisfyourcurrentandprospectivefinancialcommitmentsundernormalandcontem-platedstressconditions.Toachievethisgoal,wearededicatedtothepreservationofthefollowingkeyliquidityandfundingriskmitigationstrategies:• Alargebaseofcoreclientdeposits• Continualaccesstodiversifiedsourcesofwholesalefunding• Acomprehensiveandenterprise-wideliquiditycontingency plansupportedbyanearmarkedpoolofunencumbered marketablesecurities(referredtoas“contingencyliquidity assets”)thatprovideassuredaccesstocashinacrisis.

Ourliquidityandfundingmanagementpracticesandprocessesreinforcetheseriskmitigationstrategiesbyassigningprudentiallimitsortargetstometricsassociatedwiththeseactivitiesandregularlymeasuringandmonitoringvarioussourcesofliquidityriskunderbothnormalandstressedmarketconditions.

Duringthequarter,weoperatedundernormalconditionsandwereincompliancewiththeserequirements.Theseandotherelementsoftheliquidityandfundingmanagementframe-workarediscussedinmoredetailonpages85to87ofour2006AnnualReport.TherehavebeennomaterialchangestoourliquidityandfundingmanagementframeworkorlevelsofliquidityandfundingrisksinceOctober31,2006.

Weconsiderourliquidityandfundingpositiontobesoundandadequatetomeetourstrategy.Therearenoknowntrends,demands,commitments,eventsoruncertaintiesthatarepres-entlyviewedaslikelytomateriallychangeourcurrentliquidityandfundingposition.

CreditratingsThefollowingtablepresentsourmajorcreditratingsasatMarch2,2007.

AsatMarch2,2007

Senior long- Short-term debt term debt Outlook

Moody’sInvestorsService P-1 Aa2 stableStandard&Poor’s A-1+ AA- stableFitchRatings F1+ AA stableDBRS R-1(high) AA stable

OurmajorcreditratingsandoutlookremainunchangedfromOctober31,2006.Thesestrongcreditratingssupportourabilitytocompetitivelyaccessunsecuredfundingmarkets.Ourcollec-tiveratingscontinuetobethehighestcategoriesassignedbytherespectiveagenciestoaCanadianbank.

Creditratingsarenotrecommendationstopurchase,sellorholdoursecuritiesinasmuchastheydonotcommentonmarketpriceorsuitabilityforaparticularinvestor.Ratingsaresubjecttorevisionorwithdrawalatanytimebytheratingorganization.

ContractualobligationsInthenormalcourseofbusiness,weenterintocontractsthatgiverisetocommitmentsoffutureminimumpaymentsthataffectourshort-termandlong-termliquidity.Dependingonthenatureofthesecommitments,theobligationsmayberecordedon-andoff-balancesheet.Thefollowingtableprovidesasummaryofourprimaryfuturecontractualfundingcommitments.

January 31 October31

2007 2006

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

Unsecuredlong-termfunding $ 7,206 $ 21,782 $ 10,695 $ 5,347 $ 45,030 $ 33,361Subordinateddebentures – 147 – 6,660 6,807 7,103

$ 7,206 $ 21,929 $ 10,695 $ 12,007 $ 51,837 $ 40,464

(1) Amountsrepresentprincipalonlyandexcludeaccruedinterest.

Operationalriskistheriskoflossresultingfrominadequateorfailedinternalprocesses,peopleandsystemsorfromexternalevents.Operationalriskisembeddedinallouractivities,includ-ingthepracticesandcontrolsusedtomanageotherrisks.Failuretomanageoperationalriskcanleadtofailureinthemanagementofotherriskssuchascreditrisk,marketriskorregulatoryrisk.

Ouroperationalriskmanagementframeworksetsoutacommonlanguageforoperationalriskandtheprinciplesandpracticesbywhichwemanageoperationalrisk,includingriskidentification,measurement,mitigationandmonitoring.

Underthisframework,weconsideroperationalriskfromthreeperspectives:causes,eventsandimpacts.Detailedcategoriesanddefinitionsforeachoftheseareincludedintheframeworktosupporttheconsistentidentificationandassess-mentofrisks.

Forfurtherdetails,refertopages84to85ofour2006AnnualReport.Thesepolicies,processesandmethodologieshavenotchangedmateriallyfromthosestatedinthe2006AnnualReport.

Liquidityandfundingrisk

Operationalrisk



(C$millions) 2007 2006 2006

Assets

Cash and due from banks $ 3,878 $ 4,401 $ 4,682

Interest-bearing deposits with banks 7,637 10,502 10,913

Securities Trading 169,030 147,237 131,551 Investment 27,821 37,632 34,107

196,851 184,869 165,658

Assets purchased under reverse repurchase agreements and securities borrowed 67,744 59,378 47,564

Loans Residentialmortgage 98,527 96,675 91,776 Personal 45,787 44,902 41,337 Creditcards 7,553 7,155 5,468 Businessandgovernment 67,851 61,207 55,615

219,718 209,939 194,196 Allowanceforloanlosses (1,455) (1,409) (1,439)

218,263 208,530 192,757

Other Customers’liabilityunderacceptances 10,011 9,108 7,951 Derivatives 42,226 37,729 38,237 Premisesandequipment,net 1,917 1,818 1,736 Goodwill 4,932 4,304 4,157 Otherintangibles 699 642 704 Assetsofoperationsheldforsale – 82 178 Otherassets 17,457 15,417 13,337

77,242 69,100 66,300

$ 571,615 $ 536,780 $ 487,874

Liabilities and shareholders’ equity

Deposits Personal $ 117,867 $ 114,040 $ 111,880 Businessandgovernment 198,796 189,140 160,221 Bank 48,943 40,343 42,771

365,606 343,523 314,872

Other Acceptances 10,011 9,108 7,951 Obligationsrelatedtosecuritiessoldshort 46,361 38,252 35,856 Obligationsrelatedtoassetssoldunderrepurchaseagreementsandsecuritiesloaned 41,117 41,103 28,841 Derivatives 43,971 42,094 42,668 Insuranceclaimsandpolicybenefitliabilities 7,948 7,337 7,150 Liabilitiesofoperationsheldforsale – 32 37 Otherliabilities 22,853 22,649 18,533

172,261 160,575 141,036

Subordinated debentures 6,807 7,103 8,116

Trust capital securities 1,385 1,383 1,399

Preferred share liabilities 299 298 300

Non-controlling interest in subsidiaries 1,799 1,775 1,916

Shareholders’ equity Preferredshares 1,600 1,050 700 Commonshares(sharesissued–1,275,949,848;1,280,889,745;and1,290,982,576) 7,216 7,196 7,189 Contributedsurplus 255 292 299 Treasuryshares–preferred(sharesheld–141,300;93,700;and118,400) (3) (2) (3) –common(sharesheld–3,108,319;5,486,072;and6,223,880) (114) (180) (199) Retainedearnings 16,264 15,771 14,284 Accumulatedothercomprehensiveincome(loss) (1,760) – – Netforeigncurrencytranslationadjustments – (2,004) (2,035)

23,458 22,123 20,235

$ 571,615 $ 536,780 $ 487,874

InterimConsolidatedFinancialStatements(unaudited)

ConsolidatedBalanceSheets(unaudited)




(C$millions) 2007 2006 2006

Interest income Loans $ 3,547 $ 3,395 $ 2,970 Securities 1,861 1,650 1,451 Assetspurchasedunderreverserepurchaseagreementsandsecuritiesborrowed 875 909 485 Depositswithbanks 161 166 72

6,444 6,120 4,978

Interest expense Deposits 3,306 3,041 2,326 Otherliabilities 1,184 1,247 862 Subordinateddebentures 87 101 108

4,577 4,389 3,296

Net interest income 1,867 1,731 1,682

Non-interest income Insurancepremiums,investmentandfeeincome 820 863 858 Tradingrevenue 803 620 547 Investmentmanagementandcustodialfees 370 345 308 Mutualfundrevenue 354 337 261 Securitiesbrokeragecommissions 323 296 309 Servicecharges 318 326 294 Underwritingandotheradvisoryfees 288 293 219 Cardservicerevenue 149 147 145 Foreignexchangerevenue,otherthantrading 122 106 96 Securitizationrevenue 91 86 49 Creditfees 60 63 56 Gainonsaleofinvestmentsecurities 48 16 39 Other 85 120 97

Non-interest income 3,831 3,618 3,278

Total revenue 5,698 5,349 4,960

Provision for credit losses 162 159 47

Insurance policyholder benefits, claims and acquisition expense 516 611 652

Non-interest expense Humanresources 2,033 1,829 1,793 Equipment 244 257 231 Occupancy 198 225 182 Communications 156 200 146 Professionalfees 141 176 137 Outsourceditemprocessing 74 75 73 Amortizationofotherintangibles 22 22 14 Other 199 171 175

3,067 2,955 2,751

Income from continuing operations before income taxes 1,953 1,624 1,510Incometaxes 435 342 332

Netincomebeforenon-controllinginterest 1,518 1,282 1,178Non-controllinginterestinnetincomeofsubsidiaries 24 19 6

Netincomefromcontinuingoperations 1,494 1,263 1,172Netlossfromdiscontinuedoperations – (1) (1)

Net income $ 1,494 $ 1,262 $ 1,171Preferreddividends (16) (26) (10)

Netincomeavailabletocommonshareholders $ 1,478 $ 1,236 $ 1,161

Averagenumberofcommonshares(inthousands) 1,274,354 1,274,697 1,284,333Basic earnings per share(indollars) $ 1.16 $ .97 $ .90Basic earnings per share from continuing operations(indollars) $ 1.16 $ .97 $ .90Basic earnings (loss) per share from discontinued operations (indollars) $ – $ – $ –

Averagenumberofdilutedcommonshares(inthousands) 1,293,085 1,293,864 1,304,378Diluted earnings per share(indollars) $ 1.14 $ .96 $ .89Diluted earnings per share from continuing operations(indollars) $ 1.14 $ .96 $ .89Diluted earnings (loss) per share from discontinued operations(indollars) $ – $ – $ –

Dividends per share(indollars) $ .40 $ .40 $ .32

ConsolidatedStatementsofIncome(unaudited)




(C$millions) 2007 2006 2006

Preferred shares Balanceatbeginningofperiod $ 1,050 $ 1,300 $ 700 Issued 700 – – Redeemedforcancellation (150) (250) –

Balanceatendofperiod 1,600 1,050 700

Common shares Balanceatbeginningofperiod 7,196 7,176 7,170 Issued 63 30 43 Purchasedforcancellation (43) (10) (24)

Balanceatendofperiod 7,216 7,196 7,189

Contributed surplus Balanceatbeginningofperiod 292 287 265 Renouncedstockappreciationrights (2) (1) – Stock-basedcompensationawards (39) 2 (11) Other 4 4 45

Balanceatendofperiod 255 292 299

Treasury shares – preferred Balanceatbeginningofperiod (2) (43) (2) Sales 2 44 1 Purchases (3) (3) (2)

Balanceatendofperiod (3) (2) (3)

Treasury shares – common Balanceatbeginningofperiod (180) (181) (216) Sales 102 48 96 Purchases (36) (47) (79)

Balanceatendofperiod (114) (180) (199)

Retained earnings Balanceatbeginningofperiod 15,771 15,120 13,704 Transitionadjustment–Financialinstruments(1) (86) – – Netincome 1,494 1,262 1,171 Preferredsharedividends (16) (26) (10) Commonsharedividends (511) (511) (412) Premiumpaidoncommonsharespurchasedforcancellation (371) (80) (169) Issuancecostsandother (17) 6 –

Balanceatendofperiod 16,264 15,771 14,284

Accumulated other comprehensive income (loss) Balanceatbeginningofperiod – Transitionadjustment–Financialinstruments(1) (45) Reclassificationfromnetforeigncurrencytranslationadjustments(2) (2,004) Netchangeinunrealizedgains(losses)onavailable-for-salesecurities 39 Netchangeinforeigncurrencytranslationadjustments,netofhedgingactivities 216 Netchangeingains(losses)onderivativesdesignatedascashflowhedges 34

Balanceatendofperiod (1,760)

Net foreign currency translation adjustments Balanceatbeginningofperiod (2,004) (2,112) (1,774) Reclassificationtoaccumulatedothercomprehensiveincome(2) 2,004 – – Unrealizedforeigncurrencytranslationgains(losses) – 91 (613) Foreigncurrencygains(losses)fromhedgingactivities – 17 352

Balanceatendofperiod – (2,004) (2,035)

Shareholders’ equity at end of period $ 23,458 $ 22,123 $ 20,235

Comprehensive income Netincome $ 1,494 Othercomprehensiveincome,netoftaxes Netunrealizedgains(losses)onavailable-for-salesecurities 26 Reclassificationof(gains)lossesonavailable-for-salesecuritiestoincome 13

39

Unrealizedforeigncurrencytranslationgains(losses) 879 Reclassificationof(gains)lossesonforeigncurrencytranslationtoincome (40) Netforeigncurrencytranslationgains(losses)fromhedgingactivities (623)

216

Netgains(losses)onderivativesdesignatedascashflowhedges 17 Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 17

34

Othercomprehensiveincome 289

Total comprehensive income $ 1,783

(1) Thetransitionadjustmentrelatestotheadoptionofthenewfinancialinstrumentsaccountingstandards.RefertoNote1.(2) Thereclassificationisinaccordancewiththenewfinancialinstrumentsaccountingstandards.RefertoNote1.

ConsolidatedStatementsofChangesinShareholders’EquityandComprehensiveIncome(unaudited)




(C$millions) 2007 2006 2006

Cash flows from operating activitiesNetincomefromcontinuingoperations $ 1,494 $ 1,263 $ 1,172Adjustmentstodeterminenetcashfrom(usedin)operatingactivities Provisionforcreditlosses 162 159 47 Depreciation 102 106 98 Businessrealignmentpayments (17) (17) (27) Futureincometaxes (161) (50) 21 Amortizationofotherintangibles 22 22 14 (Gain)lossonsaleofpremisesandequipment (4) (3) (5) (Gain)lossonloansecuritizations (37) (34) 11 (Gain)lossonsaleofinvestmentaccountsecurities (48) (16) (39) Changesinoperatingassetsandliabilities Insuranceclaimsandpolicybenefitliabilities 611 (15) 33 Netchangeinaccruedinterestreceivableandpayable 3 113 13 Currentincometaxes (41) 212 (35) Derivativeassets (4,497) (590) 597 Derivativeliabilities 1,877 1,255 76 Tradingsecurities (11,181) (9,565) (5,791) Netchangeinbrokersanddealersreceivableandpayable (1,684) 418 (616) Other (122) (1,054) 318

Netcashfrom(usedin)operatingactivitiesfromcontinuingoperations (13,521) (7,796) (4,113)Netcashfrom(usedin)operatingactivitiesfromdiscontinuedoperations – 22 13

Net cash from (used in) operating activities (13,521) (7,774) (4,100)

Cash flows from investing activities Changeininterest-bearingdepositswithbanks 2,865 928 (5,676) Changeinloans,netofloansecuritizations (11,136) (9,180) (6,651) Proceedsfromloansecuritizations 1,753 2,369 2,699 Proceedsfromsaleofinvestmentsecurities 2,301 5,754 3,678 Proceedsfrommaturityofinvestmentsecurities 3,841 5,231 7,043 Purchasesofinvestmentsecurities (5,595) (10,690) (8,415) Changeininvestmentsecurities – – 1 Netacquisitionsofpremisesandequipment (195) (209) (118) Changeinassetspurchasedunderreverserepurchaseagreementsandsecuritiesborrowed (8,366) 4,603 (4,591) Netcashfrom(usedin)acquisitions (573) (14) (242)

Netcashfrom(usedin)investingactivitiesfromcontinuingoperations (15,105) (1,208) (12,272)Netcashfrom(usedin)investingactivitiesfromdiscontinuedoperations – 58 68

Net cash from (used in) investing activities (15,105) (1,150) (12,204)

Cash flows from financing activities Changeindeposits 20,459 8,821 8,012 Repaymentofsubordinateddebentures (489) (685) – Issueofpreferredshares 700 – – Redemptionofpreferredsharesforcancellation (150) (250) – Issuancecosts (17) 6 – Issueofcommonshares 57 28 40 Purchaseofcommonsharesforcancellation (414) (90) (193) Salesoftreasuryshares 104 92 97 Purchaseoftreasuryshares (39) (50) (81) Dividendspaid (530) (486) (425) Dividends/distributionspaidbysubsidiariestonon-controllinginterests (31) (2) (15) Changeinobligationsrelatedtoassetssoldunderrepurchaseagreementsandsecuritiesloaned 14 3,073 5,460 Changeinobligationsrelatedtosecuritiessoldshort 8,109 (2,256) 3,465 Changeinshort-termborrowingsofsubsidiaries 228 1,317 (317)

Netcashfrom(usedin)financingactivitiesfromcontinuingoperations 28,001 9,518 16,043

Net cash from (used in) financing activities 28,001 9,518 16,043

Effectofexchangeratechangesoncashandduefrombanks 102 (7) (58)

Net change in cash and due from banks (523) 587 (319)Cashandduefrombanksatbeginningofperiod 4,401 3,814 5,001

Cash and due from banks at end of period $ 3,878 $ 4,401 $ 4,682

Supplemental disclosure of cash flow information Amountofinterestpaidinperiod $ 4,839 $ 4,035 $ 3,247 Amountofincometaxespaidinperiod $ 293 $ 123 $ 575

ConsolidatedStatementsofCashFlows(unaudited)


Notestotheinterimconsolidatedfinancialstatements(unaudited)(AlltabularamountsareinmillionsofCanadiandollars,exceptpershareamounts)

TheseunauditedInterimConsolidatedFinancialStatementshavebeenpreparedinaccordancewithCanadiangenerallyacceptedaccountingprinciples(CanadianGAAP)andfollowthesameaccountingpoliciesandmethodsdescribedinourauditedConsolidatedFinancialStatementsfortheyearendedOctober31,2006,exceptasdescribedbelow.UnderCanadianGAAP,additionaldisclosuresarerequiredinannualfinancialstatements;therefore,theseunauditedInterimConsolidatedFinancialStatementsshouldbereadinconjunctionwiththeauditedConsolidatedFinancialStatementsfortheyearendedOctober31,2006andtheaccompanyingnotesincludedonpages106to156inour2006AnnualReporttoshareholders(2006AnnualReport).Intheopinionofmanagement,alladjustmentsnecessaryforafairpresentationofresultsfortheperiodsreportedhavebeenincluded.Theseadjustmentsconsistonlyofnormalrecurringadjustments,exceptasotherwisedisclosed.Certaincomparativeamountshavebeenreclassifiedtoconformtothecurrentperiod’spresentation.

Note 1: Significant accounting policies

Significant accounting changesFinancial InstrumentsOnNovember1,2006,weadoptedthreenewaccountingstandardsthatwereissuedbytheCanadianInstituteofCharteredAccountants(CICA):HandbookSection1530,Comprehensive Income,HandbookSection3855,Financial Instruments – Recognition and Measurement,andHandbookSection3865,Hedges.Weadoptedthesestandardsprospectively;accordingly,comparativeamountsforpriorperiodshavenotbeenrestated.

Comprehensive IncomeSection1530introducesComprehensiveincome,whichconsistsofNetincomeandOthercomprehensiveincome(OCI).OCIrepresentschangesinShareholders’equityduringaperiodarisingfromtransactionsandothereventswithnon-ownersourcesandincludesunrealizedgainsandlossesonfinancialassetsclassifiedasavailable-for-sale,unrealizedforeigncurrencytranslationgainsorlossesarisingfromself-sustainingforeignoperations,netofhedgingactivities,andchangesinthefairvalueoftheeffectiveportionofcashflowhedginginstruments.WehaveincludedinourInterimConsolidatedFinancialStatementsaConsolidatedStatementofComprehensiveIncomeforthechangesintheseitemsduringthefirstquarterof2007,whilethecumulativechangesinOCIareincludedinAccumulatedothercomprehensiveincome(AOCI),whichispresentedasanewcategoryofShareholders’equityontheConsolidatedBalanceSheet.

Financial Instruments – Recognition and MeasurementSection3855establishesstandardsforrecognizingandmeasuringfinancialassets,financialliabilitiesandnon-financialderivatives.Itrequiresthatfinancialassetsandfinancialliabilities,includingderivatives,berecognizedontheConsolidatedBalanceSheetwhenwebecomeapartytothecontractualprovisionsofthefinancialinstrumentornon-financialderivativecontract.Underthisstan-dard,allfinancialinstrumentsarerequiredtobemeasuredatfairvalueoninitialrecognitionexceptforcertainrelatedpartytransactions.Measurementinsubse-quentperiodsdependsonwhetherthefinancialinstrumenthasbeenclassifiedasheld-for-trading,available-for-sale,held-to-maturity,loansandreceivables,orotherfinancialliabilities.Transactioncostsareexpensedasincurredforfinancialinstrumentsclassifiedordesignatedasheld-for-trading.Forotherfinancialinstru-ments,transactioncostsarecapitalizedoninitialrecognition.

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

DerivativeinstrumentsarerecordedontheConsolidatedBalanceSheetatfairvalue,includingthosederivativesthatareembeddedinfinancialornon-financialcontractsthatarenotcloselyrelatedtothehostcontracts.ChangesinthefairvaluesofderivativeinstrumentsarerecognizedinNetincomewiththeexcep-tionofderivativesdesignatedineffectivecashflowhedgesorhedgesofforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation.RefertotheHedgessection.

Section3855alsoprovidesanentitytheoptiontodesignateafinancialinstrumentasheld-for-trading(thefairvalueoption)onitsinitialrecognitionoruponadoptionofthestandard,evenifthefinancialinstrument,otherthanloansandreceivables,wasnotacquiredorincurredprincipallyforthepurposeofsellingorrepurchasingitinthenearterm.Aninstrumentthatisclassifiedasheld-for-tradingbywayofthisfairvalueoptionmusthavereliablefairvaluesandsatisfyoneofthefollowingcriteriaestablishedbytheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI):(i)whendoingsoeliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldotherwisearisefrommeasuringassetsorliabilities,orrecognizinggainsandlossesonthemonadifferentbasis;(ii)itbelongstoagroupoffinancialassets,financialliabilitiesorbothwhicharemanagedandevaluatedonafairvaluebasisinaccordancewithourriskmanagementorinvestmentstrategy,andarereportedtoseniormanagementpersonnelonthatbasis;or(iii)itisaderivativeinafinancialassetorfinancialliabilityandthederivativeisnotcloselyrelatedtothehostcontract.

Theprincipalcategoriesofourfinancialassetsdesignatedasheld-for-tradingunderthefairvalueoptioninclude(i)investmentssupportingthepolicybenefit

liabilitiesonlifeandhealthinsurancecontractsissuedbyourinsuranceopera-tions;(ii)investmentsusedtooffsetexposuresunderderivativecontractsinrela-tiontooursalesandtradingactivities;and(iii)certainloanstocustomerswhoserelatedderivativesaremeasuredatfairvalue.Financialliabilitiesdesignatedasheld-for-tradingaremainlydepositsandstructurednoteswithembeddedderiva-tivesthatarenotcloselyrelatedtothehostcontracts.Fairvaluedesignationforthesefinancialassetsandfinancialliabilitiessignificantlyreducesthemeasure-mentinconsistencies.

OthersignificantaccountingimplicationsarisingupontheadoptionofSection3855includetheuseoftheeffectiveinterestmethodofamortizationforanytransactioncostsorfees,premiumsordiscountsearnedorincurredforfinancialinstrumentsmeasuredatamortizedcost,andtherecognitionoftheinceptionfairvalueoftheobligationundertakeninissuingaguaranteethatmeetsthedefinitionofaguaranteepursuanttoAccountingGuideline14,Disclosure of Guarantees(AcG-14).Nosubsequentremeasurementatfairvalueisrequiredunlessthefinan-cialguaranteequalifiesasaderivative.Ifthefinancialguaranteemeetsthedefini-tionofaderivativeitisremeasuredatfairvalueateachbalancesheetdateandreportedasaderivativeinOtherassetsorOtherliabilities,asappropriate.

HedgesSection3865specifiesthecriteriathatmustbesatisfiedinorderforhedgeaccountingtobeappliedandtheaccountingforeachofthepermittedhedgingstrategies:fairvaluehedges,cashflowhedgesandhedgesofforeigncurrencyexposuresofnetinvestmentsinself-sustainingforeignoperations.Hedgeaccount-ingisdiscontinuedprospectivelywhenthederivativenolongerqualifiesasaneffectivehedge,orthederivativeisterminatedorsold,oruponthesaleorearlyterminationofthehedgeditem.

Inafairvaluehedgingrelationship,thecarryingvalueofthehedgeditemisadjustedforunrealizedgainsorlossesattributabletothehedgedriskandrec-ognizedinNetincome.Changesinthefairvalueofthehedgeditem,totheextentthatthehedgingrelationshipiseffective,areoffsetbychangesinthefairvalueofthehedgingderivative,whichisalsorecordedinNetincome.Whenhedgeaccount-ingisdiscontinued,thecarryingvalueofthehedgeditemisnolongeradjustedandthecumulativefairvalueadjustmentstothecarryingvalueofthehedgeditemareamortizedtoNetincomeovertheremainingtermoftheoriginalhedgingrelationship.

Inacashflowhedgingrelationship,theeffectiveportionofthechangeinthefairvalueofthehedgingderivativeisrecognizedinOCIwhiletheineffectiveportionisrecognizedinNetincome.Whenhedgeaccountingisdiscontinued,theamountspreviouslyrecognizedinAOCIarereclassifiedtoNetincomeduringtheperiodswhenthevariabilityinthecashflowsofthehedgeditemaffectsNetincome.GainsandlossesonderivativesarereclassifiedimmediatelytoNetincomewhenthehedgeditemissoldorearlyterminated.

Inhedgingaforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation,theeffectiveportionofforeignexchangegainsandlossesonthehedginginstrumentsisrecognizedinOCIandtheineffectiveportionisrecognizedinNetincome.TheamountspreviouslyrecognizedinAOCIarerecognizedinNetincomewhenthereisareductioninthehedgednetinvestmentasaresultofadilutionorsaleofthenetinvestment;orreductioninequityoftheforeignopera-tionasaresultofdividenddistributions.

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

ForhedgingrelationshipsexistingpriortoadoptingSection3865thatcontinuetoqualifyforhedgeaccountingunderthenewstandard,thetransitionaccountingisasfollows:(i)Fairvaluehedges–anygainorlossonthehedginginstrumentwasrecognizedinopeningRetainedearningsandthecarryingamountofthehedgeditemwasadjustedbythecumulativechangeinfairvalueattribut-abletothedesignatedhedgedriskandwasalsoincludedinopeningRetainedearnings;(ii)Cashflowhedgesandhedgesofnetinvestmentsinself-sustainingforeignoperations–theeffectiveportionofanygainorlossonthehedginginstru-mentwasrecognizedinAOCIandthecumulativeineffectiveportionwasincludedinopeningRetainedearnings.


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

Future accounting changesVariable Interest Entities (VIEs)OnSeptember15,2006,theEmergingIssuesCommitteeissuedAbstractNo.163,Determining the Variability to be Considered in Applying AcG-15(EIC-163).EIC-163providesadditionalclarificationonhowtoanalyzeandconsolidateVIEs.EIC-163becameeffectiveforusonFebruary1,2007,anditsimplementationwillresultinthe

deconsolidationofcertaininvestmentfunds.However,theimpactisnotexpectedtobematerialtoourconsolidatedfinancialpositionorresultsofoperations.

Capital Disclosures and Financial Instruments – Disclosures and PresentationOnDecember1,2006,theCICAissuedthreenewaccountingstandards:HandbookSection1535,Capital Disclosures,HandbookSection3862,Financial Instruments – Disclosures,andHandbookSection3863,Financial Instruments – Presentation.ThesenewstandardswillbeeffectiveforusonNovember1,2007.

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

ThenewSections3862and3863replaceHandbookSection3861, Financial Instruments — Disclosure and Presentation,revisingandenhancingitsdisclosurerequirements,andcarryingforwardunchangeditspresentationrequirements.Thesenewsectionsplaceincreasedemphasisondisclosuresaboutthenatureandextentofrisksarisingfromfinancialinstrumentsandhowtheentitymanagesthoserisks.

Note 2: Fair values of financial instruments

Thefairvalueofafinancialinstrumentistheamountofconsiderationthatwouldbeagreeduponinanarm’s-lengthtransactionbetweenknowledgeable,willingpartieswhoareundernocompulsiontoact.Fairvaluesaredeterminedbyrefer-encetoquotedbidoraskingprices,asappropriate,inthemostadvantageousactivemarketforthatinstrumenttowhichwehaveimmediateaccess.Wherebidandaskpricesareunavailable,weusetheclosingpriceofthemostrecenttransactionofthatinstrument.Intheabsenceofanactivemarket,wedeterminefairvaluesbasedonprevailingmarketrates(bidandaskprices,asappropriate)forinstrumentswithsimilarcharacteristicsandriskprofilesorinternalorexternalvaluationmodels,suchasoptionpricingmodelsanddiscountedcashflowanaly-sis,usingobservablemarket-basedinputs.

Fairvaluesdeterminedusingvaluationmodelsrequiretheuseofassump-tionsconcerningtheamountandtimingofestimatedfuturecashflowsanddiscountrates.Indeterminingthoseassumptions,welookprimarilytoexternalreadilyobservablemarketinputsincludingfactorssuchasinterestrateyieldcurves,currencyrates,andpriceandratevolatilitiesasapplicable.Inlimitedcir-cumstances,weuseinputparametersthatarenotbasedonobservablemarketdataandwebelievethatusingpossiblealternativeassumptionswillnotresultinsignificantlydifferentfairvalues.

Accounting for changes in fair value of financial instruments during the period AsdescribedinNote1,financialinstrumentsclassifiedordesignatedasheld-for-tradingandInvestmentsecuritiesarecarriedatfairvalueontheConsolidatedBalanceSheetexceptforequityinstrumentsclassifiedasInvestmentsecuritiesthatdonothaveaquotedmarketprice,whicharecarriedatcost.Anychangesinthefairvaluesoffinancialinstrumentsclassifiedordesignatedasheld-for-tradingandInvestmentsecuritiesmeasuredatfairvaluearerecognizedinNetincomeandOCI,respectively.ThecumulativechangesinthefairvaluesofInvestmentsecurities

previouslyrecognizedinAOCIarereclassifiedtoNetincomewhentheyarederec-ognizedorthedeclineinvalueisconsideredtobeother-than-temporary.

Investmentsecuritiesmeasuredatfairvalueorcostareassessedforimpair-mentateachreportingdate.AsatJanuary31,2007,theunrealizedlossesforInvestmentsecuritiesmeasuredatfairvalueorcostamountedto$144millionand$1million,respectively.Unrealizedlossesfordebtsecuritiesareprimarilyduetoincreasinginterestratesandforequitysecurities,theyareduetothetimingofmarketprices,foreignexchangemovements,orbecausetheinvesteeisintheearlyyearsofitsbusinesscycle.Wedonotconsidertheseinvestmentstobeother-than-temporarilyimpairedasatJanuary31,2007,aswehavetheabilityandintenttoholdthemuntilthefairvaluerecovers.

Derivativesthatarenotdesignatedinhedgingrelationshipsareclassifiedasheld-for-tradingandchangesinthefairvaluesofsuchderivativeinstrumentsarerecognizedinNetincome.

BetweenNovember1,2006,andJanuary31,2007,thefairvalueofournetfinancialassetsclassifiedasheld-for-tradingincreasedby$792millionwhilethefairvalueofournetfinancialassetsdesignatedasheld-for-tradingdecreasedby$38million.Thefairvalueofthefinancialliabilitiesthatwedesignatedasheld-for-tradingincreasedby$3millionduetochangesinourowncreditrisk.

Carrying value and Fair value of selected Financial Instruments Asaresultoftheadoptionofthenewaccountingstandards,certainfinancialinstru-mentsarenowmeasuredatfairvaluewhichwerepreviouslyreportedatcostoramortizedcost.ThisisprimarilyduetothereclassificationofcertainsecuritiesasTradingsecurities,whichincludessecuritiesdesignatedasheld-for-tradingusingthefairvalueoption.ThefollowingtableprovidesacomparisonofcarryingvaluesasatJanuary31,2007,andOctober31,2006,forselectedfinancialinstruments:

As atJanuary 31, 2007 AsatOctober31,2006

Carrying value and fair value of financial instruments

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

Securities Trading $ 148,574 $ 20,456 $ – $ – $ – $ 169,030 $ 169,030 Investment(2),(3) – – 24,988 – 2,833 27,821 27,823

Totalsecurities $ 148,574 $ 20,456 $ 24,988 $ – $ 2,833 $ 196,851 $ 196,853 $ 185,239

Assetspurchasedunderreverse repurchaseagreementsand securitiesborrowed $ – $ 45,288 $ – $ 22,456 $ – $ 67,744 $ 67,744 $ 59,378

Loans $ – $ 3,071 $ – $ 215,192 $ – $ 218,263 $ 218,263 $ 208,638

AsatOctober31,2006

Carryingvalueoffinancialinstruments

Requiredtobe classifiedas Designatedas Designatedas held-for-trading held-for-trading available-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-maturityinvestmentswhichisnominal.(3) UponadoptionofSection3855,loansubstituteshavebeenclassifiedasInvestmentsecurities.

40 RoyalBankofCanada FirstQuarter2007

Employee- Premises- related related charges charges Total

BalanceasatOctober31,2006 $ 41 $ 16 $ 57Cashpayments (16) (1) (17)Foreignexchangetranslation – 1 1

TotalbalanceasatJanuary31,2007 $ 25 $ 16 $ 41

Note 3: Business realignment charges

During2005and2004,weimplementedcertaincost-reductioninitiatives.Themajorityoftheinitiativesweresubstantiallycompletedduring2006;however,theassociatedincome-protectionpaymentstoseveredemployeesandcertainleaseobligationsextendbeyondthattime.Ourbusinessrealignmentchargestobepaidinfutureperiodsareemployee-relatedchargesandpremises-relatedcharges.

ChangesinthesechargessinceOctober31,2006aresetoutinthetablebelow.AsatJanuary31,2007,thenumberofemployeepositionsidentifiedfortermina-tionwas2,030and1,999employeeshadbeenterminated(2,030and1,980,respectively,asatOctober31,2006).

Hedging activities Weusederivativesandnon-derivativefinancialinstrumentstomanageourexpo-surestointerest,currency,creditandothermarketrisks.Whenderivativesareusedtomanageourownexposures,wedetermineforeachderivativewhetherhedgeaccountingcanbeapplied.Wherehedgeaccountingcanbeapplied,ahedgerelationshipisdesignatedasafairvaluehedge,acashflowhedgeorahedgeofforeigncurrencyexposureofanetinvestmentinaself-sustainingforeignoperation.Thederivativemustbehighlyeffectiveinaccomplishingtheobjectiveofoffsettingeitherchangesinthefairvalueorcashflowsattributabletothehedgedriskbothatinceptionandoverthelifeofthehedge.Ifitisdeterminedthatthederivativeisnothighlyeffectiveasahedge,hedgeaccountingisdiscontinuedprospectively.

Fair value hedges Wepredominantlyuseinterestrateswapstohedgeourexposuretothechangesinafixedinterestrateinstrument’sfairvaluecausedbychangesininterestrate.

ForthequarterendedJanuary31,2007,theineffectiveportionoffairvaluehedgesrecognizedinNetincomeamountedtoapre-taxnetunrealizedlossof$1million.WedidnothedgeanycommitmentsforthequarterendedJanuary31,2007.

Cash flow hedgeWepredominantlyuseinterestrateswapstohedgethevariabilityincashflowsrelatedtoavariablerateassetorliability.Allcomponentsofeachderivative’schangeinfairvaluehavebeenincludedintheassessmentofcashflowhedgeeffectiveness.

ForthequarterendedJanuary31,2007,pre-taxnetunrealizedgainsof$26millionwererecordedinOCIfortheeffectiveportionofthecashflowhedges,andpre-taxunrealizedlossesof$25millionwerereclassifiedtoNetincome.Anetunrealizedlossof$11millionwasrecognizedinNon-interestincomefortheinef-fectiveportion.

Ofthe$34millionpre-taxlossdeferredinAOCIatJanuary31,2007,$33millionisexpectedtobereclassifiedtoNetincomeinthenext12months.WedidnothedgeanyforecastedtransactionsforthequarterendedJanuary31,2007.

Net investment hedgeWeuseforeignexchangecontractsandforeigncurrency-denominatedliabilitiestomanageourforeigncurrencyexposurestonetinvestmentsinself-sustainingforeignoperationshavingafunctionalcurrencyotherthantheCanadiandollar.ForthequarterendedJanuary31,2007,thenetgainof$216millionrelatingtoournetinvestmentinforeignoperationswasrecognizedinOCI.

Thefollowingtablepresentsthefairvaluesofthederivativesandnon-derivativefinancialinstrumentscategorizedbytheirhedgingrelationships,aswellasderivativesthatarenotdesignatedinhedgingrelationships.

Fair value of derivatives and non-derivative financial instruments as at January 31, 2007

Designated in a hedging relationship

Not designated Cash flow Fair value Net investment in a hedging hedges hedges hedges relationship

Financial assets Derivativefinancialinstruments $ 84 $ 173 $ 214 $ 41,755 Non-derivativefinancialinstruments – – – n.a. Financial liabilities Derivativefinancialinstruments $ 94 $ 58 $ 7 $ 43,812 Non-derivativefinancialinstruments – – 5,499 (1) n.a.

(1) Theamountreflectsthecarryingvalueofdepositswhichisnotmateriallydifferentfromthefairvalue.n.a. notapplicable.


Note 4: RBC Dexia Investor Services joint venture

Weoperateourinstitutional&investorservicesbusinessthroughourjointventure,RBCDexiaInvestorServices(RBCDexiaIS),whichwasformedonJanuary2,2006.

Duringthequarter,RBCDexiaISfinalizedthenetassetscontributionrequire-mentasoutlinedinthejointventureagreement.Asaresult,itwasdeterminedthatwehadcontributed€27million($41million)ofnetassetsinexcessoftheamountrequired.Thisexcess,whichwillbesettledbyRBCDexiaISincash,hasbeenrecognizedbyusinthecurrentquarterasareductioninourinvestmentinthejointventure.

WereporttheresultsofRBCDexiaISonaone-monthlagbasisandhaveincludedinourquarterendedJanuary31,2007,ourproportionateshareofRBCDexiaISfinancialresultsfortheirthreemonthsendedDecember31,2006.AssetsandliabilitiesrepresentingourinterestinRBCDexiaISandourproportion-ateshareofitsfinancialresultsbeforeadjustingforrelatedpartytransactionsarepresentedinthefollowingtables:

WeprovidecertainservicestoRBCDexiaIS,whichincludeadministrativeandtechnologysupport,humanresources,creditandbankingfacilitiestosupportitsoperations.RBCDexiaISalsoprovidescertainservicestous,includingcustodyandtrusteeship,fundandinvestmentadministration,transferagencyandinvestorservices.Theseservicesandfacilitiesareprovidedbytherespectivepartiesinthenormalcourseofoperationsontermssimilartothoseofferedtonon-relatedpar-ties.TheamountsofincomeearnedandexpensesincurredbyRBCDexiaISrelatedtotransactionswithRBCareasfollows:

Asat

January 31 October31

2007 2006

ConsolidatedBalanceSheets Assets(1) $ 13,504 $ 12,354 Liabilities 12,572 11,396

(1) Includes$72millionofgoodwill(October31,2006–$69million)and$195millionofintangibleassets(October31,2006–$208million).


January 31

2007 (1)

ConsolidatedStatementofIncome Netinterestincome $ 27 Non-interestincome 132 Non-interestexpense 120 Netincome 29 ConsolidatedStatementofCashFlows Cashflowsfromoperatingactivities $ (18) Cashflowsfrominvestingactivities (1,154) Cashflowsfromfinancingactivities 1,172

(1) ForourquarterendedJanuary31,2006,wedidnotreportourproportionateshareofRBCDexiaISresultsasthejointventurewasformedonJanuary2,2006,andwereportitsresultsonaone-monthlagbasis.

Note 5: Significant acquisitions and disposition

InDecember2006,wecompletedtheacquisitionofAtlanta,Georgia-basedFlagFinancialCorporation(Flag)anditssubsidiary,FlagBank.Detailsofthisacquisitionareasfollows:


January 31

2007(1)

Netinterestincome $ 41Non-interestincome 6Non-interestexpense 8

(1) ForthequarterendedJanuary31,2006,wedidnotreporttheamountsofincomeearnedandexpensesincurredbyRBCDexiaISrelatedtotransactionswithRBCasthejointventurewasformedonJanuary2,2006,andwereportitsresultsonaone-monthlagbasis.

Flag

Acquisitiondate December 8, 2006

Businesssegment RBC U.S. and International Personal and Business

Percentageofsharesacquired 100%

Purchaseconsideration Cash payment of US$435

Fairvalueoftangibleassetsacquired $ 1,912 Fairvalueofliabilitiesassumed (1,870)

Fairvalueofidentifiablenettangibleassetsacquired 42 Coredepositintangiblesandotherintangibles(1) 50 Goodwill 406

Totalpurchaseconsideration $ 498

(1) Coredepositintangiblesof$43millionareamortizedonastraight-linebasisoveranestimatedaverageusefullifeofsevenyears.Otherintangiblesof$7millionrelatetonon-competeagreementsandareamortizedoverthetermoftheagreements,foramaximumofthreeyears.

InJanuary2007,wecompletedtwoacquisitionsinRBCCapitalMarkets:(i)thebroker-dealerbusinessandcertainotherassetsoftheCarlinFinancialGroup,aNewYork-basedboutiquebroker-dealerand(ii)Daniels&Associates,L.P.,aM&Aadvisortothecable,telecom,broadcastandInternetservicesindustries.Theacqui-sitionsincludetotalgoodwillof$121millionandarenotmaterialtoRBCCapitalMarkets.

Discontinued operationsRBCMortgageCompany(RBCMortgage)haddisposedofsubstantiallyallofitsremainingassetsandobligationsbytheendoffiscal2006andwenolongersepa-ratelyclassifyitsresultsinourInterimConsolidatedFinancialStatements.TheresidualbalancesofRBCMortgageareimmaterial;changesinthesebalancesarenowreportedinCorporateSupport.Forpriorperiods,theresultsofRBCMortgagecontinuetobepresentedseparatelyasdiscontinuedoperations.


ThekeyassumptionsusedtovaluetheretainedinterestsatthedateofsecuritizationforactivitiesduringthethreemonthsendedJanuary31,2007,aresummarizedbelow.Allratesareannualized.

Note 7: Pension and other post-employment benefits

Weofferanumberofbenefitplans,whichprovidepensionandotherpost-employmentbenefitstoeligibleemployees.Expensesforthesebenefitplansarepresentedinthefollowingtable:



2007 2006 2006

Pensionbenefitexpense $ 91 $ 93 $ 99Otherpost-employmentbenefitexpense 27 21 33

Key assumptions

Residential mortgage loans

Variable rate Fixed rate

Expectedweightedaveragelifeofprepayablereceivables(inyears) 2.56 3.43Paymentrate 30.00% 15.52%Excessspread,netofcreditlosses 1.00 1.05Expectedcreditlosses n.a. n.a.Discountrate 4.15 4.23

n.a. notapplicable

Inadditiontotheabovesecuritizationtransactions,wesoldUS$109millionofparticipationinterestsincommercialmortgagemezzaninenotestothird-partyinvestorsattheirprincipalamountsduringthequarter.

Note 6: Securitizations

Securitization activity for the three months ended (1)


2007(2) 2006(2) 2006(3) Commercial Residential Commercial Residential Credit Residential mortgage mortgage mortgage mortgage card mortgage loans loans(4) loans loans(4) loans(5) loans(4)

Securitizedandsold $ 320 $ 1,438 $ 322 $ 2,059 $ 1,200 $ 1,533Netcashproceedsreceived 326 1,427 332 2,037 400 1,499Asset-backedsecuritiespurchased – – – – 794 –Retainedrightstofutureexcessinterest – 42 – 46 9 20Pre-taxgain(loss)onsale 6 31 10 24 3 (14)Securitiescreatedandretained(6) – 1,044 – 2,780 – 1,636

(1) Wedidnotrecognizeaservicingassetorservicingliabilityforourservicingrightswithrespecttothesecuritizedloansaswereceivedadequatecompensationforourservices.(2) Wedidnotsecuritizeanycreditcardloansduringtheperiod.(3) Wedidnotsecuritizeanycommercialmortgageloansduringtheperiod.(4) Allresidentialmortgageloanssecuritizedaregovernmentguaranteed.(5) Thenetcashproceedsreceivedrepresentgrosscashproceedsof$1,200millionlessfundsusedtopurchasenotesissuedbythetrustwithaprincipalvalueof$800million.(6) ForthethreemonthsendedJanuary31,2007,thetotalsecuritiescreatedandretainedconsistof$886millionclassifiedasTradingsecuritiesand$158millionclassifiedasInvestmentsecurities.

ForthepriorperiodsendedOctober31,2006andJanuary31,2006,allsecuritiescreatedandretainedwereclassifiedasInvestmentsecurities.


Note 9: Earnings per share



2007 2006 2006

Basic earnings per share Netincomefromcontinuingoperations $ 1,494 $ 1,263 $ 1,172 Netlossfromdiscontinuedoperations(1) – (1) (1)

Netincome 1,494 1,262 1,171 Preferredsharedividends (16) (26) (10)

Netincomeavailabletocommonshareholders $ 1,478 $ 1,236 $ 1,161

Averagenumberofcommonshares(inthousands) 1,274,354 1,274,697 1,284,333 Basicearningspershare Continuingoperations $ 1.16 $ .97 $ .90 Discontinuedoperations(1) – – –

Total $ 1.16 $ .97 $ .90

Diluted earnings per share Netincomeavailabletocommonshareholders $ 1,478 $ 1,236 $ 1,161

Averagenumberofcommonshares(inthousands) 1,274,354 1,274,697 1,284,333 Stockoptions(2) 14,581 14,339 14,375 Issuableunderotherstock-basedcompensationplans 4,150 4,828 5,670

Averagenumberofdilutedcommonshares(inthousands) 1,293,085 1,293,864 1,304,378 Dilutedearningspershare Continuingoperations $ 1.14 $ .96 $ .89 Discontinuedoperations(1) – – –

Total $ 1.14 $ .96 $ .89

(1) RefertoNote5.(2) Thedilutiveeffectofstockoptionswascalculatedusingthetreasurystockmethod.Forthethree-monthperiodendedJanuary31,2007,weexcludedfromthecalculationofdilutedearningspershare

994,391averageoptionsoutstandingwithanexercisepriceof$54.99,astheexercisepriceoftheseoptionswasgreaterthantheaveragemarketpriceofourcommonshares.Forthethree-monthperiodsendedOctober31,2006andJanuary31,2006,nooptionwasoutstandingwithanexercisepriceexceedingtheaveragemarketpriceofourcommonshares.

Note 8: Significant capital transactions

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.Subjecttoregulatoryapproval,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-cumulative

preferentialquarterlydividendsintheamountof$.2875persharetoyield4.6%annually.Subjecttoregulatoryapproval,wemayredeemthesesharesonorafterNovember24,2011,inwholeorinpart,atadecliningpremium.

EffectiveNovember1,2006,werenewedournormalcourseissuerbidforoneyeartopurchaseforcancellationupto40millionofourcommonsharesthroughthefacilitiesofTorontoStockExchange.Duringthequarter,wepurchased7.6millioncommonsharesatanaveragecostof$54.14pershare.

OnMarch22,2005,weannouncedthatwemay,fromtimetotime,pur-chaseforcancellationsomeorallofouroutstanding$250millionFloating-RateDebenturesduein2083andUS$300millionFloating-RateDebenturesduein2085.Thetiming,priceandothertermsaredeterminedatoursolediscretion.Duringthecurrentquarter,wepurchased$nilmillionofFloating-RateDebenturesduein2083andUS$24million($28million)ofFloating-RateDebenturesduein2085.Sincetheannouncementdate,wehavepurchasedatotalof$26millionofFloating-RateDebenturesduein2083andUS$111million($132million)ofFloating-RateDebenturesduein2085.


Inadditiontotheaboveguarantees,wetransactsubstantiallyallofoursecuritieslendingactivitiesinwhichweactasanagentfortheownersofsecuritiesthroughourjointventure,RBCDexiaIS.AsatJanuary31,2007,RBCDexiaISsecuritieslendingindemnificationstotalled$46,944million(October31,2006–$45,614mil-lion;January31,2006–$36,124million);weareexposedto50%ofthisamount.

RefertoNote27ofour2006AnnualReportforfurtherinformationontheaboveguaranteesandadescriptionofourobligationsundercertainindemnifica-tionagreements.

Enron Corp. (Enron) litigationApurportedclassofpurchasersofEnronwhopubliclytradedequityanddebtsecu-ritiesbetweenJanuary9,1999,andNovember27,2001,hasnamedRoyalBankofCanadaandcertainrelatedentitiesasdefendantsinanactionentitledRegents of the University of Californiav.Royal Bank of CanadaintheUnitedStatesDistrictCourt,SouthernDistrictofTexas(HoustonDivision).Inaddition,RoyalBankofCanadaandcertainrelatedentitieshavebeennamedasdefendantsinseveralotherEnron-relatedcases,whicharefiledinvariouscourtsintheU.S.,assertingsimilarclaimsfiledbypurchasersofEnronsecurities.RoyalBankofCanadaisalsoathird-partydefendantincasesinwhichEnron’saccountants,ArthurAndersenLLP,filedthird-partyclaimsagainstanumberofparties,seekingcontributionifArthurAndersenLLPisfoundliabletoplaintiffsintheseactions.

Wereviewthestatusofthesemattersonanongoingbasisandwillexerciseourjudgmentinresolvingtheminsuchmanneraswebelievetobeinourbestinterests.Aswithanylitigation,therearesignificantuncertaintiessurroundingthetimingandoutcome.Uncertaintyisexacerbatedasaresultofthelargenumberofcases,themultipledefendantsinmanyofthem,thenovelissuespresented,andthecurrentdifficultlitigationenvironment.Althoughitisnotpossibletopredicttheultimateoutcomeoftheselawsuits,thetimingoftheirresolutionorourexposure,duringthefourthquarterof2005,weestablishedalitigationprovisionof$591million(US$500million)or$326millionaftertax(US$276million).Webelievetheultimateresolutionoftheselawsuitsandotherproceedings,whilenotlikelytohaveamaterialadverseeffectonourconsolidatedfinancialposition,maybemate-rialtoouroperatingresultsfortheparticularperiodinwhichtheresolutionoccurs,notwithstandingtheprovisionestablishedinthefourthquarterof2005.Wewillcontinuetovigorouslydefendourselvesinthesecases.

OtherVariousotherlegalproceedingsarependingthatchallengecertainofourpracticesoractions.Weconsiderthattheaggregateliabilityresultingfromtheseotherpro-ceedingswillnotbematerialtoourfinancialpositionorresultsofoperations.

Maximum potential amount of future payments

Asat


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

Creditderivativesandwrittenputoptions(2) $ 48,802 $ 253 $ 54,723 $ 352 $ 26,505 $ 351Backstopliquidityfacilities 38,601 32 34,342 – 33,534 –Stablevalueproducts(2) 19,570 – 16,098 – 13,256 –Financialstandbylettersofcreditandperformanceguarantees 16,632 57 15,902 17 14,678 17Creditenhancements 4,809 26 4,155 – 3,692 –Mortgageloanssoldwithrecourse(3) 218 – 204 – 296 –

(1) AsdescribedinNote1,effectiveNovember1,2006,aliabilityisnowrecognizedontheConsolidatedBalanceSheetatinceptionofaguaranteeforthefairvalueoftheobligationundertakeninissuingtheguarantee.Forcreditderivativesandwrittenputoptions,thepriorperiodcomparativesrepresentthefairvaluesofthederivatives;forfinancialstandbylettersofcreditandperformanceguaran-tees,theyrepresentunamortizedpremiumsreceived.

(2) Thenotionalamountofthecontractapproximatesthemaximumpotentialamountoffuturepayments.(3) AsatOctober31andJanuary31,2006,mortgageloanssoldwithrecourserelatedtothediscontinuedoperationsamountedto$niland$82million,respectively.RefertoNote5.

Note 10: Guarantees and contingencies

GuaranteesInthenormalcourseofourbusiness,weenterintonumerousagreementsthatmaycontainfeaturesthatmeetthedefinitionofaguaranteepursuanttoAcG-14.Themaximumpotentialamountoffuturepaymentsrepresentsthemaximumriskoflossiftherewasatotaldefaultbytheguaranteedparties,withoutconsiderationof

possiblerecoveriesunderrecourseprovisions,insurancepoliciesorfromcollateralheldorpledged.

Thefollowingtablesummarizessignificantguaranteesthatwehaveprovidedtothirdparties:



2007 2006 2006

Netinterestincome $ (151) $ (173) $ (82)Non-interestincome 803 620 547

Total $ 652 $ 447 $ 465

Note 11: Total trading revenue

Totaltradingrevenueincludesbothtrading-relatedNetinterestincomeandTradingrevenuereportedinNon-interestincome.Netinterestincomearisesfrominterestanddividendsrelatedtotradingassetsandliabilitiesandamortizationofpremiumsanddiscountsontheiracquisitionorissuance.Non-interestincome

includesrealizedandunrealizedgainsandlossesfromthepurchaseandsaleofsecurities,andrealizedandunrealizedgainsandlossesontradingderivativefinancialinstruments.

Note 12: Results by business segment

Quarterly earnings RBCCanadian RBCU.S.andInternational PersonalandBusiness PersonalandBusiness RBCCapitalMarkets

Q1/07 Q4/06 Q1/06 Q1/07 Q4/06 Q1/06 Q1/07 Q4/06 Q1/06

Netinterestincome $ 1,588 $ 1,567 $ 1,443 $ 302 $ 279 $ 279 $ 78 $ 14$ 68Non-interestincome 1,958 1,918 1,855 501 461 431 1,322 1,146 945

Totalrevenue 3,546 3,485 3,298 803 740 710 1,400 1,160 1,013Provisionfor(recoveryof)creditlosses 182 173 142 10 5 10 (8) – (85)Insurancepolicyholderbenefits,claimsandacquisitionexpense 516 611 652 – – – – – –Non-interestexpense 1,575 1,566 1,502 611 575 567 877 770 686Businessrealignmentcharges – – – – 1 – – (1) –

Netincome(loss)beforeincometaxes 1,273 1,135 1,002 182 159 133 531 391 412Incometaxes 396 360 333 31 32 30 103 70 93Non-controllinginterestinnetincomeofsubsidiaries – – – 2 1 2 8 6 (11)

Netincomefromcontinuingoperations 877 775 669 149 126 101 420 315 330Netlossfromdiscontinuedoperations(1) – – – – (1) (1) – – –

Net income $ 877 $ 775 $ 669 $ 149 $ 125 $ 100 $ 420 $ 315$ 330


CompositionofbusinesssegmentsFormanagementreportingpurposes,ouroperationsandactivitiesareorganizedintothreebusinesssegments:RBCCanadianPersonalandBusiness,RBCU.S.andInternationalPersonalandBusiness,andRBCCapitalMarkets.RBCCanadianPersonalandBusinessconsistsofbankingandwealthmanagementbusinessesinCanadaandourglobalinsurancebusiness,anditsresultsreflecthowitisman-aged,inclusiveofsecuritizedassetsandrelatedamountsforincomeandprovisionforcreditlosses.RBCU.S.andInternationalPersonalandBusinessconsistsofourbankingandretailbrokeragebusinessesintheU.S.,bankingintheCaribbeanandinternationalprivatebanking.RBCCapitalMarketsprovidesawiderangeofcorporateandinvestmentbanking,salesandtrading,researchandrelatedprod-uctsandotherservices.Allotherenterpriselevelactivitiesthatarenotallocatedtothesethreebusinesssegments,suchassecuritizationandotheritemsandnetchargesassociatedwithunattributedcapital,arereportedunderCorporateSupport.Consolidationadjustments,includingtheeliminationofthetaxableequivalentbasis(teb)gross-upamounts,arealsoincludedinCorporateSupport.TebadjustmentsgrossupNetinterestincomefromcertaintax-advantagedsourcestotheireffectivetaxequivalentvaluewiththecorrespondingoffsetrecordedintheprovisionforincometaxes.ManagementbelievesthattheseadjustmentsarenecessaryforRBCCapitalMarketstoreflecthowitismanaged.Theuseofthetebadjustmentsenhancesthecomparabilityofrevenueacrossourtaxableandtax-advantagedsources.Theuseoftebadjustmentsandmeasuresmaynotbecom-parabletosimilarGAAPmeasuresorsimilarlyadjustedamountsatotherfinancialinstitutions.

CorporateSupport Total

Q1/07 Q4/06 Q1/06 Q1/07 Q4/06 Q1/06

Netinterestincome $ (101) $ (129)$ (108) $ 1,867 $ 1,731$ 1,682Non-interestincome 50 93 47 3,831 3,618 3,278

Totalrevenue (51) (36) (61) 5,698 5,349 4,960Provisionfor(recoveryof)creditlosses (22) (19) (20) 162 159 47Insurancepolicyholderbenefits,claimsandacquisitionexpense – – – 516 611 652Non-interestexpense 4 44 (4) 3,067 2,955 2,751Businessrealignmentcharges – – – – – –

Netincome(loss)beforeincometaxes (33) (61) (37) 1,953 1,624 1,510Incometaxes (95) (120) (124) 435 342 332Non-controllinginterestinnetincomeofsubsidiaries 14 12 15 24 19 6

Netincomefromcontinuingoperations 48 47 72 1,494 1,263 1,172Netlossfromdiscontinuedoperations(1) – – – – (1) (1)

Net income $ 48 $ 47 $ 72 $ 1,494 $ 1,262$ 1,171

(1) RefertoNote5.

Ourmanagementreportingframeworkisintendedtomeasuretheperfor-manceofeachbusinesssegmentasifitwasastand-alonebusinessandreflectthewaythatthebusinesssegmentismanaged.Thisapproachensuresourbusinesssegments’resultsreflectallrelevantrevenueandexpensesassociatedwiththeconductoftheirbusinessanddepictshowmanagementviewsthoseresults.Theseitemsdonotimpactourconsolidatedresults.

Theexpensesineachbusinesssegmentmayincludecostsorservicesdirectlyincurredorprovidedontheirbehalfattheenterpriselevel.Forothercostsnotdirectlyattributabletooneofourbusinesssegments,weuseamanagementreportingframeworkthatusesassumptions,estimatesandmethodologiesforallocatingoverheadcostsandindirectexpensestoourbusinesssegmentsandthatassistsintheattributionofcapitalandthetransferpricingoffundstoourbusinesssegmentsinamannerthatfairlyandconsistentlymeasuresandalignstheeconomiccostswiththeunderlyingbenefitsandrisksofthatspecificbusinesssegment.Activitiesandbusinessconductedbetweenourbusinesssegmentsaregenerallyatmarketrates.AllotherenterpriselevelactivitiesthatarenotallocatedtoourthreebusinesssegmentsarereportedunderCorporateSupport.

Ourassumptionsandmethodologiesusedinourmanagementreportingframeworkareperiodicallyreviewedbymanagementtoensuretheyremainvalid.Thecapitalattributionmethodologiesinvolveanumberofassumptionsandestimatesthatarerevisedperiodically.

Changes to comparativesWithinRBCCanadianPersonalandBusiness,wereclassifiedcertainamountsrelatedtotrusteeservicesfromNon-interestincometoNetinterestincomeasaresultofanewagreementbetweenthreeofourCanadianwealthmanagementlinesofbusiness.Thecomparativeresultsreflectthischange.

Note 13: Variable interest entities

Weadministersixmulti-sellerasset-backedcommercialpaperconduitprograms(multi-sellerconduits).Theseconduitsprimarilypurchasefinancialassetsfromcli-entsandfinancethosepurchasesbyissuingasset-backedcommercialpaper.Ourclientsprimarilyutilizemulti-sellerconduitstodiversifytheirfinancingsourcesandtoreducefundingcosts.Certainofthemulti-sellerconduitsalsofinancedassetsintheformofeithersecuritiesorinstrumentsthatcloselyresemblesecuritiessuchascredit-linkednotes.Inthesesituations,themulti-sellerconduitisoftenoneofmanyinvestorsinthesecuritiesorsecurity-likeinstruments.

Themulti-sellerconduitsarenotconsolidatedunderCICAAccountingGuideline15, Consolidation of Variable Interest Entities,aswearenotthePrimaryBeneficiary.However,wedoholdsignificantvariableinterestsinthesemulti-sellerconduitsresultingfromourprovisionofbackstopliquidityfacilities,partialcreditenhancementandourentitlementtoresidualfees.

Asaresultofincreasedactivitiesandchangesintheexchangerateduringthequarter,thetotalassetsofourmulti-sellerconduitsgrewto$39billionasatJanuary31,2007(October31,2006–$34billion),andourmaximumexposuretolossincreasedto$39billion(October31,2006–$35billion).


Note 15: Reconciliation of Canadian and United States generally accepted accounting principles

TheInterimConsolidatedFinancialStatementsarepreparedinaccordancewithSubsection308oftheBank Act(Canada),whichstatesthatexceptasotherwisespecifiedbytheOSFI,theInterimConsolidatedFinancialStatementsaretobepreparedinaccordancewithCanadianGAAP.AsrequiredbytheU.S.Securitiesand

ExchangeCommission(SEC),materialdifferencesbetweenCanadianandUnitedStatesGAAParequantifiedbelow.ForacompletediscussionofCanadianandU.S.GAAPdifferences,refertoNote31inour2006AnnualReport.

Condensed Consolidated Balance Sheets

As at January 31 AsatOctober31 AsatJanuary31

2007 2006 2006

Canadian U.S. Canadian U.S. Canadian U.S. GAAP Differences GAAP GAAP Differences GAAP GAAP Differences GAAP

AssetsCash and due from banks $ 3,878 $ (152) $ 3,726 $ 4,401 $ (101)$ 4,300 $ 4,682 $ (4)$ 4,678

Interest-bearing deposits with banks 7,637 (4,225) 3,412 10,502 (4,223) 6,279 10,913 (4,634) 6,279

Securities Trading 169,030 (14,387) 154,643 147,237 (282) 146,955 131,551 (1,722) 129,829 Investment 27,821 (27,821) – 37,632 (37,632) – 34,107 (34,107) – Available-for-sale – 38,150 38,150 – 37,535 37,535 – 33,877 33,877

196,851 (4,058) 192,793 184,869 (379) 184,490 165,658 (1,952) 163,706

Assets purchased under reverse repurchase agreements and securities borrowed 67,744 (2,641) 65,103 59,378 (2,148) 57,230 47,564 (926) 46,638

Loans (net of allowance for loan losses) 218,263 (741) 217,522 208,530 (111) 208,419 192,757 (868) 191,889

Other Customers’liabilityunderacceptances 10,011 – 10,011 9,108 – 9,108 7,951 – 7,951 Derivatives 42,226 (233) 41,993 37,729 717 38,446 38,237 1,055 39,292 Premisesandequipment,net 1,917 (96) 1,821 1,818 (86) 1,732 1,736 (70) 1,666 Goodwill 4,932 (58) 4,874 4,304 (61) 4,243 4,157 (70) 4,087 Otherintangibles 699 (197) 502 642 (211) 431 704 (10) 694 Reinsurancerecoverables – 1,210 1,210 – 1,182 1,182 – 1,181 1,181 Separateaccountassets – 118 118 – 111 111 – 115 115 Assetsofoperationsheldforsale – – – 82 – 82 178 – 178 Otherassets 17,457 28,032 45,489 15,417 24,893 40,310 13,337 32,268 45,605

77,242 28,776 106,018 69,100 26,545 95,645 66,300 34,469 100,769

$ 571,615 $ 16,959 $ 588,574 $ 536,780 $ 19,583 $ 556,363 $ 487,874 $ 26,085$ 513,959

Liabilities and shareholders’ equity

Deposits $ 365,606 $ (10,232) $ 355,374 $ 343,523 $ (9,466)$ 334,057 $ 314,872 $ (9,663)$ 305,209

Other Acceptances 10,011 – 10,011 9,108 – 9,108 7,951 – 7,951 Obligationsrelatedtosecuritiessoldshort 46,361 158 46,519 38,252 (1,188) 37,064 35,856 (1,094) 34,762 Obligationsrelatedtoassetssoldunderrepurchaseagreements andsecuritiesloaned 41,117 (1,519) 39,598 41,103 (1,141) 39,962 28,841 (922) 27,919 Derivatives 43,971 (410) 43,561 42,094 312 42,406 42,668 541 43,209 Insuranceclaimsandpolicybenefitliabilities 7,948 2,485 10,433 7,337 2,686 10,023 7,150 2,669 9,819 Separateaccountliabilities – 118 118 – 111 111 – 115 115 Liabilitiesofoperationsheldforsale – – – 32 – 32 37 – 37 Otherliabilities 22,853 26,127 48,980 22,649 27,877 50,526 18,533 34,210 52,743

172,261 26,959 199,220 160,575 28,657 189,232 141,036 35,519 176,555

Subordinated debentures 6,807 6 6,813 7,103 300 7,403 8,116 281 8,397

Trust capital securities 1,385 (1,385) – 1,383 (1,383) – 1,399 (1,399) –

Preferred share liabilities 299 (299) – 298 (298) – 300 (300) –

Non-controlling interest in subsidiaries 1,799 1,105 2,904 1,775 1,083 2,858 1,916 1,381 3,297

Shareholders’ equity 23,458 805 24,263 22,123 690 22,813 20,235 266 20,501

$ 571,615 $ 16,959 $ 588,574 $ 536,780 $ 19,583 $ 556,363 $ 487,874 $ 26,085$ 513,959


January 31

2007

Netunrealizedgains(losses)onavailable-for-salesecurities $ 18 Reclassificationof(gains)lossesonavailable-for-salesecuritiestoincome 8 Netforeigncurrencytranslationgains(losses)fromhedgingactivities (352) Netgains(losses)onderivativesdesignatedascashflowhedges 9 Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 8

Total income taxes (recovery) $ (309)

Note 14: Income taxes on components of Other comprehensive Income

TheincometaxexpenseorbenefitallocatedtoeachcomponentofOthercomprehensiveincomeispresentedinthetablebelow:


Condensed Consolidated Statements of Income



2007 2006 2006

Netincomefromcontinuingoperations,CanadianGAAP $ 1,494 $ 1,263 $ 1,172Differences:Netinterestincome Derivativeinstrumentsandhedgingactivities – (42) 7 Jointventures (27) (27) – Liabilitiesandequity 29 28 28Non-interestincome Insuranceaccounting (1) (116) (140) Derivativeinstrumentsandhedgingactivities (3) 2 (33) Reclassificationoffinancialinstruments(1) 44 7 3 Variableinterestentities 4 (10) – Limitedpartnerships – (6) (1) Jointventures (145) (150) (40) Reclassificationofforeigncurrencytranslation (40) – (4) Other (9) (8) (8)Provisionfor(recoveryof)creditlosses Jointventures 1 1 (1)Insurancepolicyholderbenefits,claimsandacquisitionexpense Insuranceaccounting (11) 89 102Non-interestexpense Stockappreciationrights 9 7 6 Insuranceaccounting 18 19 16 Jointventures 149 151 30 Variableinterestentities 2 2 – Other 9 8 8Incometaxesandnetdifferenceinincometaxesduetotheaboveitems – 38 22Non-controllinginterestinnetincomeofsubsidiaries Variableinterestentities (6) 8 – Jointventures – 3 – Liabilitiesandequity (25) (25) (25)

Netincomefromcontinuingoperations,U.S.GAAP $ 1,492 $ 1,242 $ 1,142

Netlossfromdiscontinuedoperations,CanadianGAAP(2) $ – $ (1) $ (1)Difference–Other – – –

Netlossfromdiscontinuedoperations,U.S.GAAP(2) $ – $ (1) $ (1)

Netincome,U.S.GAAP $ 1,492 $ 1,241 $ 1,141

Basicearningspershare(3) CanadianGAAP $ 1.16 $ .97 $ .90 U.S.GAAP $ 1.15 $ .95 $ .87Basicearningspersharefromcontinuingoperations CanadianGAAP $ 1.16 $ .97 $ .90 U.S.GAAP $ 1.15 $ .95 $ .87Basicearningspersharefromdiscontinuedoperations(2) CanadianGAAP $ – $ – $ – U.S.GAAP $ – $ – $ –Dilutedearningspershare(3) CanadianGAAP $ 1.14 $ .96 $ .89 U.S.GAAP $ 1.14 $ .93 $ .86Dilutedearningspersharefromcontinuingoperations CanadianGAAP $ 1.14 $ .96 $ .89 U.S.GAAP $ 1.14 $ .93 $ .86Dilutedearningspersharefromdiscontinuedoperations(2) CanadianGAAP $ – $ – $ – U.S.GAAP $ – $ – $ –

(1) Reclassificationoffinancialinstrumentsreflectsdifferencesinclassificationarisingfromtheuseofthefairvalueoption.Priortotheadoptionofthenewfinancialinstrumentsaccountingstandards,thisitemreflectedthereclassificationofsecuritiesonly.RefertothediscussionunderChangesinsignificantaccountingpoliciesaffectingCanadianandU.S.GAAPdifferences.

(2) RefertoNote5.(3) Two-classmethodofcalculatingearningspershare:Theimpactofcalculatingearningspershareusingthetwo-classmethodreducedU.S.GAAPbasicanddilutedearningspershareforallperiods

presentedbylessthanonecent.

Note 15: Reconciliation of Canadian and United States generally accepted accounting principles (continued)


Condensed Consolidated Statements of Cash Flows (1)



2007 2006 2006

Cash flows from (used in) operating activities, Canadian GAAP $ (13,521) $ (7,774) $ (4,100)U.S.GAAPadjustmentfornetincome (2) (22) (30)Adjustmentstodeterminenetcashfrom(usedin)operatingactivities Provisionforcreditlosses (1) (1) – Depreciation (5) (6) (4) Futureincometaxes (2) 240 51 Amortizationofotherintangibles (6) (8) – Changesinoperatingassetsandliabilities Insuranceclaimsandpolicybenefitliabilities (201) 55 26 Netchangeinaccruedinterestreceivableandpayable 253 (183) 80 Derivativeassets 950 (3) 102 Derivativeliabilities (722) (136) (38) Tradingsecurities 3,493 1,177 745 Reinsurancerecoverable 28 27 (9) Netchangeinbrokersanddealersreceivableandpayable (4,563) 1,253 2,014 Other (691) (767) 2,868

Net cash from (used in) operating activities, U.S. GAAP (14,990) (6,148) 1,705

Cash flows from (used in) investing activities, Canadian GAAP (15,105) (1,150) (12,204) Changeininterest-bearingdepositswithbanks 2 (553) 4,602 Changeinloans,netofloansecuritizations 630 (102) 1,807 Proceedsfromsaleofinvestmentsecurities (2,301) (5,754) (3,678) Proceedsfrommaturityofinvestmentsecurities (3,841) (5,231) (7,043) Purchasesofinvestmentsecurities 5,595 10,690 8,415 Proceedsfromsaleofavailable-for-salesecurities 2,301 5,754 3,678 Proceedsfrommaturityofavailable-for-salesecurities 3,841 5,231 7,044 Purchasesofavailable-for-salesecurities (5,465) (11,078) (8,191) Changeininvestmentsecurities – – (1) Netacquisitionsofpremisesandequipment 15 20 41 Changeinassetspurchasedunderreverserepurchaseagreementsandsecuritiesborrowed 493 (376) 926

Net cash from (used in) investing activities, U.S. GAAP (13,835) (2,549) (4,604)

Cash flows from financing activities, Canadian GAAP 28,001 9,518 16,043 Changeindeposits (20,459) (8,821) (8,012) Changeindeposits–Canada 129 10,175 (6,267) Changeindeposits–International 19,564 (115) 4,588 Issueofcommonshares – 1 – Salesoftreasuryshares 1 – – Purchaseoftreasuryshares – (2) – Dividendspaid (4) (2) (4) Changeinobligationsrelatedtoassetssoldunderrepurchaseagreementsandsecuritiesloaned (378) (75) (922) Dividends/distributionspaidbysubsidiariestonon-controllinginterests (51) – (51) Changeinobligationsrelatedtosecuritiessoldshort 1,346 (1,324) (2,741)

Net cash from financing activities, U.S. GAAP $ 28,149 $ 9,355 $ 2,634

Effectofexchangeratechangesoncashandduefrombanks $ 102 $ (7) $ (58)

Net change in cash and due from banks (574) 651 (323)Cashandduefrombanksatbeginningofperiod $ 4,300 $ 3,649 $ 5,001

Cash and due from banks at end of period, U.S. GAAP $ 3,726 $ 4,300 $ 4,678

(1) Wedidnothavediscontinuedoperationsinthefirstquarterof2007.ForthethreemonthsendedOctober31,2006andJanuary31,2006,CanadianandU.S.GAAPcashflowreconcilingitemsrelatingtodiscontinuedoperationswerenotmaterial.RefertoNote5.

Accumulated other comprehensive income (loss), net of income taxes

Asat


2007 2006(1) 2006(1) Canadian U.S. GAAP Differences GAAP

Unrealizedgains(losses)onavailable-for-salesecurities $ 50 $ 155 $ 205 $ 191 $ 50Unrealizedforeigncurrencytranslationgains(losses),netofhedgingactivities (1,788) 44 (1,744) (2,000) (2,025)Gains(losses)onderivativesdesignatedascashflowhedges (22) 5 (17) (52) (82)Additionalpensionobligation – (62) (62) (62) (313)

Accumulatedothercomprehensiveincome(loss),netofincometaxes $ (1,760) $ 142 $ (1,618) $ (1,923) $ (2,370)

(1) TheconceptofAOCIwasintroducedunderCanadianGAAPupontheadoptionofSection1530onNovember1,2006(refertoNote1).Accordingly,thereisnoreconciliationforthepriorperiods.



Material balance sheet reconciling itemsThefollowingtablespresenttheincreasesor(decreases)inassets,liabilitiesandshareholders’equitybymaterialdifferencesbetweenCanadianandU.S.GAAP.

As at January 31, 2007

As at October 31, 2006

Derivative

instrumentsand

hedgingactivities

Variableinterest

entities

Jointventures

Insurance

accounting

Reclassificationof

financial

instruments(1)

Limited

partnerships

Stock

appreciation

rights

Liabilities

andequity

Additional

pension

obligation

Tradedate

accounting

Non-cash

collateral

Rightofoffset

Guarantees,loan

commitmentsand

otherminoritems

Total

Consolidated Statements of Comprehensive Income



2007 2006(1) 2006(1) Canadian U.S. GAAP Differences GAAP

Netincome $ 1,494 $ (2) $ 1,492 $ 1,241 $ 1,141Othercomprehensiveincome,netoftaxes Netunrealizedgains(losses)onavailable-for-salesecurities 39 (25) 14 253 (33) Unrealizedforeigncurrencytranslationgains(losses) 879 – 879 91 (609) Reclassificationof(gains)lossesonforeigncurrencytranslationtoincome (40) 40 – – – Netforeigncurrencytranslationgains(losses)fromhedgingactivities (623) – (623) 17 352 Netgains(losses)onderivativesdesignatedascashflowhedges 17 1 18 (69) 42 Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 17 – 17 47 41 Additionalpensionobligation – – – 251 –

Totalcomprehensiveincome $ 1,783 $ 14 $ 1,797 $ 1,831 $ 934

Incometaxes(recovery)deductedfromtheaboveitems: Netunrealizedgains(losses)onavailable-for-salesecurities $ 26 $ (19) $ 7 $ 134 $ (18) Netforeigncurrencytranslationgains(losses)fromhedgingactivities (352) – (352) 11 173 Netgains(losses)onderivativesdesignatedascashflowhedges 9 – 9 (35) 23 Reclassificationtoincomeof(gains)lossesonderivativesdesignatedascashflowhedges 8 – 8 24 21 Additionalpensionobligation – – – 134 –

Totalincometaxes(recovery) $ (309) $ (19) $ (328) $ 268 $ 199

(1) AnewConsolidatedStatementofComprehensiveIncomewasintroducedunderCanadianGAAPupontheadoptionofSection1530onNovember1,2006(refertoNote1).Accordingly,thereisnoreconciliationforthepriorperiods.

Assets Cashandduefrombanks $ – – (101) – – – – – – – – – –$ (101)Interest-bearingdepositswithbanks $ (33) – (4,190) – – – – – – – – – –$ (4,223)Securities $ – (342) (288) – 369 (179) – – – 60 – – 1 $ (379)Assetspurchasedunderreverserepurchase agreementsandsecuritiesborrowed $ – – (2,148) – – – – – – – – – –$ (2,148)Loans $ 41 – (1,004) – – – – – – – – 852 –$ (111)Otherassets $ 321 (2) (3,723) 2,890 (128) 164 (22) – (25) 10,401 16,558 – 111 $26,545Liabilities and shareholders’ equity Deposits $ 52 – (9,518) – – – – – – – – – –$ (9,466)Otherliabilities $ (77) (39) (1,907) 2,777 – – (58) (34) 37 10,461 16,558 852 87 $28,657Subordinateddebentures $ 300 – – – – – – – – – – – –$ 300Trustcapitalsecurities $ – – – – – – – (1,383) – – – – –$ (1,383)Preferredshareliabilities $ – – – – – – – (298) – – – – –$ (298)Non-controllinginterestinsubsidiaries $ – (305) (29) – – – – 1,417 – – – – –$ 1,083Shareholders’equity $ 54 – – 113 241 (15) 36 298 (62) – – – 25 $ 690

(1) Reclassificationoffinancialinstrumentsreflectsdifferencesinclassificationarisingfromtheuseofthefairvalueoption.Priortotheadoptionofthenewfinancialinstrumentsaccountingstandards,thiscolumnreflectedthereclassificationofsecuritiesonly.RefertothediscussionunderChangesinsignificantaccountingpoliciesaffectingCanadianandU.S.GAAPdifferences.

AssetsCashandduefrombanks $ – – (152) – – – – – – – – – – $ (152)Interest-bearingdepositswithbanks $ (62) – (4,163) – – – – – – – – – – $ (4,225)Securities $ (1) (328) (382) – (1) (190) – – – (3,157) – – 1 $ (4,058)Assetspurchasedunderreverserepurchase agreementsandsecuritiesborrowed $ – – (2,641) – – – – – – – – – – $ (2,641)Loans $ 35 – (1,707) – (14) – – – – – – 893 52 $ (741)Otherassets $ (214) – (3,624) 2,871 3 175 (24) – (25) 11,777 17,747 – 90 $ 28,776 Liabilities and shareholders’ equity Deposits $ 88 – (10,355) – 39 – – – – – – – (4) $ (10,232)Otherliabilities $ (406) (70) (2,284) 2,529 (15) – (63) (8) 37 8,620 17,747 893 (21) $ 26,959 Subordinateddebentures $ 6 – – – – – – – – – – – – $ 6 Trustcapitalsecurities $ – – – – – – – (1,385) – – – – – $ (1,385)Preferredshareliabilities $ – – – – – – – (299) – – – – – $ (299)Non-controllinginterestinsubsidiaries $ – (258) (30) – – – – 1,393 – – – – – $ 1,105 Shareholders’equity $ 70 – – 342 (36) (15) 39 299 (62) – – – 168 $ 805


Derivative

instrumentsand

hedgingactivities

Variableinterest

entities

Jointventures

Insurance

accounting

Reclassification

ofsecurities(1)

Limited

partnerships

Stock

appreciation

rights

Liabilities

andequity

Additional

pension

obligation

Tradedate

accounting

Non-cash

collateral

Rightofoffset

Guarantees,loan

commitmentsand

otherminoritems

Total


Changes in significant accounting policies affecting Canadian and U.S. GAAP differencesCanadian GAAPFinancialinstrumentsWiththeadoptionofHandbookSection1530,Comprehensive income,HandbookSection3855,Financial Instruments – Recognition and Measurement,andHandbookSection3865,Hedges,theaccountingofsecurities,derivativeinstru-ments,hedgingactivitiesandguaranteesaresubstantiallyharmonizedwithU.S.GAAP.ThesignificantdifferencesubsequenttotheadoptionofthesenewCanadianstandardsprimarilyrelatestotheuseofthe“fairvalueoption”.AsdescribedinNote1,Section3855allowsthedesignationofanyfinancialinstru-mentasheld-for-tradingonitsinitialrecognitionoruponadoptionofthenewstandard.ThefairvalueoptionunderCanadianGAAPhasabroaderapplicationasitcanbeelectedforanyfinancialinstrumentascomparedtocurrentU.S.GAAPwhichonlyallowsitforservicingrightsandcertainhybridfinancialinstruments(refertothesectiononU.S.GAAPbelow).TheprincipalcategoriesoffinancialinstrumentswherewehaveappliedthefairvalueoptionunderCanadianGAAParedescribedinNote1andarereflectedintheReclassificationoffinancialinstrumentscolumnintheMaterial balance sheet reconciling itemstableasatJanuary31,2007.

U.S. GAAPAccountingforcertainhybridfinancialinstrumentsOnNovember1,2006,weadoptedtheFinancialAccountingStandardsBoard(FASB)StatementNo.155,Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140(FAS155).FAS155allowsanentitytomeasureanyhybridfinancialinstrumentthatcontainsanembeddedderivativethatrequiresbifurcationatitsfairvalue,withchangesinfairvaluerec-ognizedinearnings.TheadoptionofthisU.S.accountingstandarddidnotmateri-allyimpactourconsolidatedfinancialpositionorresultsofoperations.

AccountingforservicingfinancialassetsOnNovember1,2006,weadoptedFASBStatementNo.156,Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140(FAS156).UnderFAS156,anentityisrequiredtoinitiallymeasureitsservicingrightsatfairvalueandcanelecttosubsequentlyamortizeitsinitialfairvalueoverthetermoftheservicingrights,orremeasurethematfairvaluewithchangesrecognizedinNetincome.TheabilitytoremeasureservicingrightsatfairvaluethroughNetincomeeliminatestheaccountingmismatchbetweentheservicingrightsandtherelatedderivativesthatwouldotherwiseresultintheabsenceofhedgeaccounting.TheadoptionofthisU.S.accountingstandarddidnotmateriallyimpactourconsolidatedfinancialpositionorresultsofoperations.

Future accounting changesGuidance for quantifying financial statement misstatementsOnSeptember13,2006,theSecuritiesandExchangeCommission(SEC)issuedStaffAccountingBulletinNo.108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements(SAB108).Itrequiresthatinquantifyingandanalyzingmisstatements,boththeincomestatementapproachandthebalancesheetapproachshouldbeusedtoevaluatethematerialityoffinancialstatementmisstatements.SAB108willbeeffectiveforourannual2007financialstatements.

Accounting for defined benefit pension and other post-retirement plansOnSeptember29,2006,FASBissuedStatementNo.158,Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)(FAS158).FAS158requiresanentityto(i)recognizethefundedstatusofabenefitplanonthebalancesheet;(ii)recog-nizeinOCItheexistingunrecognizednetgainsandlosses,prior-servicecostsandcredits,andnettransitionassetsorobligations;and(iii)measuredefinedbenefitplanassetsandobligationsasatthefiscalyear-enddate.Thisstatementiseffectiveprospectivelyforusattheendoffiscalyear2007inrespectofrecognitionrequirementsmentionedin(i)and(ii)above,andattheendofthefiscalyear2009inrespectofmeasurementdatechangesmentionedin(iii)above.

Guidance on accounting for income taxesOnJuly13,2006,FASBissuedFASBInterpretationNo.48,Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109(FIN48),whichprovidesadditionalguidanceonhowtorecognize,measureanddiscloseincometaxbenefits.FIN48willbeeffectiveforusonNovember1,2007.

Accounting for deferred acquisition costs for insurance operationsOnSeptember19,2005,theAccountingStandardsExecutiveCommitteeoftheAmericanInstituteofCertifiedPublicAccountantsissuedStatementofPosition05-1,Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts(SOP05-1).SOP05-1providesguidanceonaccountingfordeferredacquisitioncostsoninternalreplacementsofinsuranceandinvestmentcontractsotherthanthosespecificallydescribedinFASBStatementNo.97,Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.SOP05-1definesaninternalreplacementasamodificationinproductbenefits,features,rights,orcoveragesthatoccursbytheexchangeofacontractforanewcontract,byamendmentorendorsement,ridertoacontract,orbytheelectionofafeatureorcoveragewithinacontract.Areplacementcontractthatissubstantiallychangedfromthereplacedcontractisaccountedforasanextinguishmentofthereplacedcontract,resultinginexpens-ingoftheunamortizeddeferredacquisitioncosts.ThisSOP05-1willbeeffectiveforusonNovember1,2007.

Framework on fair value measurementOnSeptember15,2006,FASBissuedStatementNo.157,Fair Value Measurements(FAS157),whichestablishesaframeworkformeasuringfairvalueinU.S.GAAP,andisapplicabletootheraccountingpronouncementswherefairvalueisconsid-eredtobetherelevantmeasurementattribute.FAS157alsoexpandsdisclosuresaboutfairvaluemeasurementsandwillbeeffectiveforusonNovember1,2008.

Fair value option for financial assets and liabilitiesOnFebruary15,2007,theFASBissuedStatementNo.159,The Fair Value Option for Financial Assets and Liabilities(FAS159).FAS159providesanentitytheoptiontoreportselectedfinancialassetsandliabilitiesatfairvalueandestablishesnewdisclosurerequirementsforassetsandliabilitiestowhichthefairvalueoptionisapplied.FAS159willbeeffectiveforusonNovember1,2008.

Wearecurrentlyassessingtheimpactofadoptingtheabovestandardsonourconsolidatedfinancialpositionandresultsofoperations.

Significant capital transactionOnMarch2,2007,weannouncedourintentiontoredeemallofouroutstanding$500millionsubordinateddebenturesdueJune4,2012,atparvalueplusaccruedinterest.TheredemptionisexpectedtobecompletedonJune4,2007.

Note 16: Subsequent event


AssetsCashandduefrombanks $ – – (4) – – – – – – – – – –$ (4)Interest-bearingdepositswithbanks $ (35) – (4,599) – – – – – – – – – –$ (4,634)Securities $ – – (274) – 193 (142) – – – (1,692) – – (37) $ (1,952)Assetspurchasedunderreverserepurchase agreementsandsecuritiesborrowed $ – – (926) – – – – – – – – – –$ (926)Loans $ 42 – (1,775) – – – – – – – – 865 –$ (868)Otherassets $ 706 – (3,281) 2,800 (68) 128 (19) – 167 13,378 20,522 – 136 $34,469Liabilities and shareholders’ equity Deposits $ (82) – (9,581) – – – – – – – – – –$ (9,663)Otherliabilities $ 473 – (1,252) 2,710 – – (50) (8) 480 11,686 20,522 865 93 $35,519Subordinateddebentures $ 281 – – – – – – – – – – – –$ 281Trustcapitalsecurities $ – – – – – – – (1,399) – – – – –$ (1,399)Preferredshareliabilities $ – – – – – – – (300) – – – – –$ (300)Non-controllinginterestinsubsidiaries $ – – (26) – – – – 1,407 – – – – – $ 1,381Shareholders’equity $ 41 – – 90 125 (14) 31 300 (313) – – – 6 $ 266

(1) Reclassificationoffinancialinstrumentsreflectsdifferencesinclassificationarisingfromtheuseofthefairvalueoption.Priortotheadoptionofthenewfinancialinstrumentsaccountingstandards,thiscolumnreflectedthereclassificationofsecuritiesonly.RefertothediscussionunderChangesinsignificantaccountingpoliciesaffectingCanadianandU.S.GAAPdifferences.

As at January 31, 2006 Derivative

instrumentsand

hedgingactivities

Variableinterest

entities

Jointventures

Insurance

accounting

Reclassification

ofsecurities(1)

Limited

partnerships

Stock

appreciation

rights

Liabilities

andequity

Additional

pension

obligation

Tradedate

accounting

Non-cash

collateral

Rightofoffset

Guarantees,loan

commitmentsand

otherminoritems

Total


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

Mailingaddress:P.O.Box1RoyalBankPlazaToronto,OntarioCanadaM5J2J5

website:rbc.com

TransferAgentandRegistrar

Main AgentComputershareTrustCompanyofCanada

Streetaddress:1500UniversityStreetSuite700Montreal,QuebecCanadaH3A3S8Tel:(514)982-7555,or1-866-586-7635Fax:(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:CanadaTorontoStockExchange(TSX)U.S.NewYorkStockExchange(NYSE)SwitzerlandSwissExchange(SWX)

AllpreferredsharesarelistedontheTorontoStockExchange.

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

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

Forothershareholderinquiries,contact:InvestorRelationsRoyalBankofCanada123FrontStreetWest,6thFloorToronto,OntarioCanadaM5J2M2Tel:(416)955-7806orvisitourwebsiteat:rbc.com/investorrelations

DirectdepositserviceShareholdersinCanadaandtheU.S.mayhavetheirdividendsdepositedbyelectronicfundstransfer.Toarrangeforthisservice,pleasecontactComputershareTrustCompanyofCanadaatitsmailingaddress.

DividendReinvestmentPlanOurDividendReinvestmentPlanprovidesourregisteredcommonshareholdersresidinginCanadaandtheUnitedStateswiththemeanstopurchaseadditionalcommonsharesofthebankthroughtheautomaticreinvest-mentoftheircashdividends.

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)andanycorrespond-ingprovincialandterritorialtaxlegislation,alldividends(anddeemeddividends)paidbyustoCanadianresidentsonourcommonandpreferredshares

afterDecember31,2005,aredesignatedas“eligibledivi-dends”.Unlessstatedotherwise,alldividends(anddeemeddivi-dends)paidbythebankhere-afteraredesignatedas“eligibledividends”forthepurposesofsuchrules.

Institutionalinvestors,brokersandsecurityanalystsForfinancialinformationinquiries,contact:InvestorRelationsRoyalBankofCanada123FrontStreetWest6thFloorToronto,OntarioCanadaM5J2M2Tel:(416)955-7803Fax:(416)955-7800

CommonsharerepurchasesWeareengagedinanormalcourseissuerbidthroughthefacilitiesoftheTorontoStockExchange.Duringtheone-yearperiodcommencingNovember1,2006,wemayrepurchaseupto40millionsharesintheopenmar-ketatmarketprices.Wedeter-minetheamountandtimingofthepurchases.

AcopyofourNoticeofIntentiontofileanormalcourseissuerbidmaybeobtained,withoutcharge,bycontactingRBC’sSecretaryatourTorontomailingaddress.

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.23

InformationcontainedinorotherwiseaccessiblethroughthewebsitesmentionedinthisReporttoShareholdersdoesnotformapartofthisreport.AllreferencesinthisReporttoShareholderstowebsitesareinactivetextualreferencesandareforyourinformationonly.

TrademarksusedinthisreportincludetheLION&GLOBESymbol,ROYALBANKOFCANADA,RBC,RBCCENTURA,RBCDAINRAUSCHER,RBCINSURANCE,RBCMORTGAGE,RBCCAPITALMARKETS,RBCCANADIANPERSONALANDBUSINESS,RBCU.S.ANDINTERNATIONALPERSONALANDBUSINESS,RBCASSETMANAGEMENT,RBCCARLIN,RBCDANIELS,RBCGLOBALPRIVATEBANKING,RBCPREMIERLINEOFCREDIT,RBCSELECTAGGRESSIVEGROWTHFUNDandRBCSUISSEwhicharetrademarksofRoyalBankofCanadausedbyRoyalBankofCanadaand/oritssubsidiariesunderlicense.Allothertrademarksmentionedinthisreport,whicharenotthepropertyofRoyalBankofCanada,areownedbytheirrespectiveholders.RBCDexiaISandaffiliatedRBCDexiacompaniesarelicensedusersoftheRBCtrademark.

Shareholderinformation

FSC Supplier SW-COC-952

ThisreporthasbeenprintedonForestStewardshipCouncil(FSC)-certifiedDomtarOpaquePlainfieldtext.FSCfibreusedinthemanufactureofDomtarOpaquePlainfieldpapercomesfromwell-managedforestsindependentlycertifiedbySmartWoodaccordingtoForestStewardshipCouncilrules.

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