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Corporate

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Corporate

  1. 1. Corporate & Investment Banking Chuck Winograd Chief Executive Officer Presentation to Analysts & Institutional Investors October 22, 2001 Toronto Business focus Wholesale banking and advisory unit of RBC Financial Group Encompasses: è Corporate and institutional business of Dominion Securities è Royal Bank’s corporate banking business è Capital markets business of Dain Rauscher Corporation è Reorganized private equity business of RBC Financial Group 1
  2. 2. Business performance Net income1 & contribution to total bank net income (in C$ millions) $502 $379 $390 $387 23% 21% 24% 22% 1999 2000 9 mos '00 9 mos '01 1 Excluding special items 2 Performance by division Contribution to RBC Capital Markets total revenue 100% 80% 60% DRW Global Banking 40% Global Equities Global Markets 20% RBC Capital Partners 0% 1999 2000 9mos '00 9mos '01 -20% 3
  3. 3. Geographic diversification After-tax profits 1999 2001 YTD 42% 58% 49% 51% International Domestic International Domestic 4 Existing organization structure 2001 Global Global Global RBC Capital Dain Rauscher Banking Equity Markets Partners Wessels Corporate Finance Equity Research Foreign Exchange Private Equity Corporate Finance Mergers & Money Market Mergers & Equity Sales & Mezzanine Debt Acquisitions Trading Funding & Balance Acquisitions Equity Capital Sheet Management Equity Derivatives Equity Capital Markets Debt & Credit Markets Lending & Derivatives Equity Research Structured Finance Fixed Income Equity Sales & Loan Portfolio High Yield Trading Management Loan Administration Securitization Loan Syndication Loan Trading 5
  4. 4. New organization structure Effective November 1, 2001 Capital Market Global Financial Global Treasury Global RBC Capital Services Products Services Credit Partners Corporate Finance Fixed Income Foreign Exchange Relative Value Private Equity Portfolio Equity Capital High Yield Money Market Markets Mezzanine Debt Debt & Credit Funding & Balance Demarket Mergers & Derivatives Sheet Management Portfolio Acquisitions Equity Derivatives Loan Relationship Administration Lending Securitization Structured Finance Mark to Market Loan Syndication Loan Trading Equity Research Equity Sales & Trading 6 Core strategic and structural issues Canadian market size Canadian market growth Extensive existing market share 7
  5. 5. Extensive market share in the domestic market Domestic market share positions as high as any in the free world (Y2000) Canadian M&A (14 of top 20 transactions) First Equity Underwriting 14% Debt underwriting 21% Equity Trading 15% Bond Trading 13% Syndicated Loans (agent only) 36% 8 Reducing Canadian companies - an example Oil and Gas Producers (TSE 300 Composite Index Oil and Gas Producers (TSE 300 Composite Index Relative Weight on Relative Weight on Company Name Composite (%) Company Name Composite (%) Alberta Energy 1.03 Northrock Resources (55%) 0.05 Anderson Exploration 0.38 Northstar Energy 0.05 Beau Canada Exploration 0.04 PanCanadian Petroleum (13%) 0.13 Berkley Petroleum 0.20 Petromet Resources Ltd. 0.04 Bonavista Petroleums 0.05 Poco Petroleums 0.32 Baytex Energy Ltd. Cl A 0.05 Paramount Resources Ltd. (51%) 0.10 Cabre Exploration 0.04 Probe Exploration Inc. 0.01 Chieftain International 0.06 Penn West Petroleum 0.21 Canadian Natural Resources 0.51 Rio Alto Exploration 0.26 Crestar Energy 0.18 Renaissance Energy 0.50 Canadian Occidental (71%) 0.44 Ranger Oil 0.13 Canadian 88 Energy Corporation 0.07 Rigel Energy 0.11 Genesis Exploration Inc. 0.06 Reserve Royalty Corp. 0.01 Gulf Canada Resources 0.04 Talisman Energy 0.85 Gulfstream Resources 0.03 Tri Link Resources 0.04 Canadian Hunter Exploration Ltd. (61%) 0.14 Ulster Petroleums 0.10 Numas Energy (75%) 0.05 Vermillion Resources 0.04 Newport Petroleum 0.07 9
  6. 6. Reducing new company formation IPOs – 1997 to 2001 Number Value ($ billions) 1997 106 11.6 1998 45 3.5 1999 36 4.8 2000 55 6.2 2001 (YTD) 25 3.0 Total Canadian Market Total Canadian Market 10 Integration of markets Disappearance of borders Growth is outside the country U.S. equity performance Access to U.S. equities market accepted fact in Canada Our equities universe now North American, not Canadian 11
  7. 7. Convergence of capital markets Lending and capital markets High yield and equity markets Equity markets and private equity Convergence has more purely priced components of traditional securities - credit, option value, interest rate risk, etc. 12 The rise of structuring and customization Convergence has created repackaging opportunities Internal proprietary trading books provide R&D for customization Customization and structuring provide answers to problems Clients will pay for solutions Need to focus cost structure away from commodity product 13
  8. 8. U.S. strategy synthesis U.S. capital markets focus - purchase of Dain Rauscher Wessels Time has come for integration Integrated client solution driven Broaden the DRW product line Deepen the RBC DS product line with U.S. expertise and distribution 14 U.S. strategy synthesis Full service provider in Canada; sustain and expand industry leading share Industry focused penetration in the U.S. è energy è telecom è technology è health care Mid-market focus in U.S. market for broad product range è targeted megacap coverage for CAD$ and forex, and other customized product Geographic spread of management 15
  9. 9. Restructuring the loan business Large ticket loan business largely commoditized Challenge to make this a real business Substantial progress made in reducing exposures and cost structure over last three years 16 Significant pruning of corporate loans Loan exposure down 32% Single names down from 1,400 to 1,000 Reduced staff by more than a third Increased return criteria 17
  10. 10. Restructuring the loan business Split portfolio into “core” and “non-core” components - substantial reduction in client base Fully allocate capital to core loans and impose strict minimum return criteria Mark to market management system Value added portfolio managed for risk- adjusted return Total commitment to reducing loan losses 18 Non-interest expense control 2,700 40% 2,650 35% 2,600 30% 2,550 25% 2,500 20% 2,450 15% 2,400 10% 2,350 5% 2,300 0% 1999 1 2000 2001 YTD Core RBC DS staff count Non-interest expenses (ex. variable compensation) as % of revenues 1 Includes $78 million of restructuring, without is 33% 19
  11. 11. Recent initiatives Structured finance capability in the U.K. Securitization team Credit derivatives in London & New York High-yield in Greenwich 20 New organization structure 2002 Capital Market Global Financial Global Treasury Global RBC Capital Services Products Services Credit Partners Corporate Finance Fixed Income Foreign Exchange Relative Value Private Equity Portfolio Equity Capital High Yield Money Market Markets Mezzanine Debt Debt & Credit Funding & Balance Demarket Mergers & Derivatives Sheet Management Portfolio Acquisitions Equity Derivatives Loan Relationship Administration Lending Securitization Structured Finance Mark to Market Loan Syndication Loan Trading Equity Research Equity Sales & Trading 21
  12. 12. The RBC Capital Markets strategy Maintain Canadian leadership position while building North American business Mid-market U.S. focus with broad product portfolio delivered through industry expertise Focus on structured value added solutions for clients Continue to build global niche businesses 22 Caution regarding forward- looking statements Royal Bank of Canada, from time to time, makes written and oral forward-looking statements, included in this presentation, the Annual Report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications, which are made pursuant to the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements with respect to the bank’s objectives for 2001, and the medium to long term, and strategies to achieve those objectives, as well as statements with respect to the bank’s beliefs, plans, expectations, anticipations, estimates and intentions. The words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and words and expressions of similar import are intended to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. The bank cautions readers not to place undue reliance on these statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian economy in general and the strength of the local economies within Canada in which the bank conducts operations; the strength of the United States economy and the economies of other nations in which the bank conducts significant operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada and the Board of Governors of the Federal Reserve System; changes in trade policy; the effects of competition in the markets in which the bank operates; inflation; capital market and currency market fluctuations; the timely development and introduction of new products and services by the bank in receptive markets; the impact of changes in the laws and regulations regulating financial services (including banking, insurance and securities); changes in tax laws; technological changes; the ability of the bank to complete strategic acquisitions and to integrate acquisitions; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and saving habits; and the bank’s anticipation of and success in managing the risks implicated by the foregoing. The bank cautions that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the bank, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the bank. 23

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