Operator: Good morning, ladies and gentlemen and welcome to RBC's 2024 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Asim Imran, Head of Investor Relations. Please go ahead, Mr. Imran.

Asim Imran: Thank you, and good morning, everyone. Speaking today will be Dave McKay, President & Chief Executive Officer; Katherine Gibson, Interim Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your questions, Neil McLaughlin, Group Head, Personal & Commercial Banking; Doug Guzman, Group Head, Wealth Management & Insurance; and Derek Neldner, Group Head, Capital Markets. As noted on Slide 1, our comments may contain forward-looking statements, which involve assumptions, and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis, and considers both to be useful in assessing underlying business performance. To give everyone a chance to ask questions, we ask that you limit your questions, and then re-queue. With that, I'll turn it over to Dave.

David McKay: Thank you, Asim and good morning, everyone. Thank you for joining us today. Today we reported second quarter earnings of $4 billion or adjusted earnings of $4.2 billion. Return on equity, which is a key pillar of our shareholder value creation framework increased to 14.5% this quarter. Adjusted ROE increased to 15.5% as we successfully executed our strategic priorities, including client-driven organic growth, expense discipline, maintaining a strong balance sheet, and accretive capital allocation, including the acquisition of HSBC Bank Canada. This quarter we saw strong growth across diversified revenue streams. Capital markets reported record revenue of $3.2 billion as we gained market share in key areas of focus, such as advisory and origination. Canadian Banking revenue growth was driven by strong volume growth and higher interest rates, reflecting benefits of our structurally advantaged balance sheet. Asset management and North American Wealth Management Advisory revenue benefited from double-digit fee-based asset growth. Our increasing scale advantages and disciplined cost management helps drive all bank operating leverage of 1.4% or a strong 4.5% adjusting for specified items. Canadian Banking reported a 39% efficiency ratio. While we focused on creating efficiencies, we continued to invest in improving the client experience. RBC was the first Canadian bank to be awarded the Digital CX Award for Excellence in Omni-Channel Customer Experiences by the Digital Banker, along with being awarded the Celent Model Bank Award for digital onboarding. We're also actively investing in artificial intelligence beyond retail banking and risk management. In U.S. wealth management, we're using the power of AI to help financial advisors identify and act on new opportunities to provide even more value to clients. And in capital markets, we're seeing continued success with Aiden, our well-established AI-powered trading platform. Our balance sheet remains strong, even after successfully closing the largest acquisition in our 155-year history. We reported common equity, Tier 1 ratio of 12.8%. Our Canadian Banking loan-to-deposit ratio improved to 98% as we continued to attract new clients to our client value propositions. Furthermore, we diversified our funding profile with the launch of our U.S. cash management business, which I will speak to shortly. And we continue to prudently add to our reserves with PCL on performing loans of $244 million. Our results continue to demonstrate our ability to generate long-term value. Our premium return on equity drove gross internal capital generation of over 70 basis points and book value growth of 8%. This morning we announced a $0.04 or 3% increase in our quarterly dividend. We also announced our intention to repurchase up to 30 million common shares under a normal course issuer bid as we look to offset the dilution from the shares issued under the dividend reinvestment plan. I will now speak to the acquisition of HSBC Canada, which we completed on March 28th. This was a pivotal milestone as we continued to focus on driving premium long-term ROE and growth. We're excited to welcome 780,000 clients from HSBC Canada, which added approximately $75 billion of both loans and relation-based deposits to our balance sheet. I would like to thank our employees who made an extremely complex close-and-convert integration possible all within a single weekend. This smooth integration also demonstrates the power of the technology investments we've made in recent years. The level of employee engagement is high and we're excited about the journey ahead. As a combined organization, we are well positioned as the bank of choice for commercial clients with international needs, newcomers to Canada, and retail clients who need global capabilities. A significant percentage of the acquired retail accounts are affluent clients. Through HSBC Canada, we also acquired a well-established premier commercial bank with a leading trade finance value proposition and one which skews to a larger client segment than we have historically competed. We are pleased that the client-based and acquired loan portfolio, which can be seen on Slide 28, is largely within levels forecasted when we announced the transaction 18 months ago. These loans continue to be supported by a high-quality, low-cost deposit franchise, which is largely within forecasted levels. This included the expected repayment of non-interest bearing CEBA deposits. Similar to our own experience, net interest margins were impacted by a shift in deposit mix towards term products and more intense competition for mortgages and deposits than we'd initially assumed. Since the acquisition date, HSBC Canada reported a loss of $51 million or a loss of $33 million adjusting for amortization of intangibles. As you can see on the bottom of Slide 6, underlying HSBC Canada net income of $63 million represented approximately one month of earnings. This quarter's results further benefited from the accretion of purchase price accounting marks, which Katherine will speak to shortly. In addition, we realized $30 million of before-tax expense synergies this quarter equating to an annualized run rate savings of $360 million or approximately 50% of our stated target. In contrast results were negatively impacted this quarter by the recognition of day one PCL, which Graeme will speak to shortly, as well as the cost of a short-term special welcome offer for qualifying HSBC Canada high-interest saving account clients. We continue to expect approximately $740 million of expense synergies within the two-year timeline we provided last quarter. Following the uncertainty of a long approval, which led to a slowdown in net new sales, the re-energized sales force is rebuilding pipelines with clients with whom they have long-standing relationships. They are also leveraging the added benefits that come with RBC's technology ecosystem and a double-A balance sheet. Furthermore, we believe our combined product and service offerings should drive compelling cross-sell revenue synergies across retail and business banking and while it's early, we are seeing positive signs. We continue to estimate the transaction will generate $1.4 billion of fully synergized adjusted earnings, excluding the accretion of purchase accounting marks. However, the initial lower-than-expected margins may push out the realization of our previously stated two-year target by a couple of quarters. Should we see mortgage and deposit spreads recover, we expect that the realization timeline will accelerate. Before discussing the expanding client value proposition and our businesses, I will provide my perspective on the macro environment. The relative strength of the U.S. economy, including a tighter labor market and healthy consumer spending, has kept U.S. inflation persistently above the targeted range. In contrast, Canada continues to lag its peers in GDP growth per capita as the impact of higher interest rates and rising unemployment begins to weigh on households, which Graeme will speak to in his remarks. Canadian inflation metrics are now within the 1% to 3% target range. The bifurcation and trends suggest that Bank of Canada should move earlier than the Fed and start lowering interest rates over the coming months. The expectation of central bank rate cuts has led to strong equity market returns this year and should also have positive implications for loan growth and M&A deal flow, while also providing relief for Canadians. With this context, we are executing on our growth strategy across our largest franchises, starting with Canadian Banking. Deposits were up double-digits from last year, or strong 9% excluding the benefit of the HSBC Canada acquisition. We welcomed a record number of newcomer clients this quarter, reflecting a 30% increase year-over-year. More broadly, new to RBC account acquisition was approximately 40% higher than last year due to our innovative client value propositions, which now include expansion of our partnership with METRO and its Moi Rewards program in Ontario. This partnership will continue to build on the successful launch of our co-brand credit card in Quebec. Additionally, RBC announced the launch of a new loyalty partnership with Pattison Food Group and its Moi Rewards loyalty program, which has more than 3.5 million household members in Western Canada. Furthermore, since launching our Avion Select tier for non-clients, we've registered nearly a half a million new members. We remain focused on attracting new primary client deposits, which provide a foundation for profitable loan growth, credit insights, deepening relationships, and earning stability through the cycle. Commercial loans are up 25% or up 14% excluding HSBC Canada loans. Our growth strategy remains focused amongst a diversified set of existing clients we know well. Turning to our record results in capital markets. Investment banking revenue grew 45% from last year. Our market share is up 40 basis points over the last 12 months, reflecting gains across all major products. We continue to focus on multi-product mandates and improved sector diversification. While geopolitical risks and an evolving regulatory environment creates uncertainty, the market backdrop is creating opportunities for increased dialogue with clients and a healthy M&A pipeline that continues to build. Global markets reported $1.5 billion in revenue, largely due to higher debt and equity origination and higher fixed income trading revenue. We also recently launched RBC Clear, a cloud-native next generation U.S. cash management business with a digital end-to-end onboarding platform and ability to offer enriched insights to corporate treasurers. Our initial focus is to increasingly diversify our U.S. funding sources to reduce reliance on costlier wholesale funding and in turn improve ROE. Now moving to our wealth management segment, RBC Global Asset Management's AUM increased 11% from last year, particularly in Canadian strategies, benefiting both from higher markets and inflows from institutional mandates. An easing of monetary policy may also start a shift away from term deposits and cash ETFs towards fixed income opportunities, which is one of the core strengths of RBC Global Asset Management. In Europe, RBC Blue Bay has been recognized by Morningstar's Excellence Awards and the Lipper Awards for its fixed income strategies. RBC GAM was also named the top gun investment team of the year in Canada for the ninth time in 11 years. Assets under administration and our leading Canadian wealth management business were up 15% or nearly 80 billion from last year, increasing to a record level of nearly $620 billion, benefiting from higher equity markets and net sales of $16 billion over the last 12 months. Assets under administration at our U.S. wealth management platform, including the sixth largest wealth advisor in the U.S. also increased 12% year-over-year to $610 billion, another record. One of our ongoing key strategic objectives for our wealth management businesses is to attract and retain top performing financial advisors. To close, our premium ROE reflects efficient capital deployment, diversified funding, prudent risk management, disciplined expense control, and the execution of our client-focused strategies, including the acquisition of HSBC Canada. In turn, our strong internal capital generation through economic cycles allows us to invest in organic growth while also returning capital to shareholders. Now I'd like to turn it over to Katherine Gibson, our Interim CFO, and welcome her to our first quarterly call. Katherine brings deep financial sector experience and knowledge of RBC. Katherine, over to you.

Katherine Gibson: Thanks, Dave and good morning, everyone. Overall, our results benefited from strong revenue momentum across all our segments, underscoring the bank's diversified business model. Disciplined cost management also drove robust operating leverage. Starting on Slide 8, we reported earnings per share of $2.74 this quarter. Adjusted diluted earnings per share was $2.92, up 9% from last year. These adjusted results included a net loss from HSBC Canada of $33 million, reflecting the day one PCL impact of $145 million after tax. We are excited by the earnings power from this transaction, as it will provide yet another source of internal capital generation. Turning to capital on Slide 9, we reported a CET1 ratio of 12.8%, down 210 basis points from last quarter, reflecting the impact of the HSBC Canada transactions and strong client-driven volume growth. This was partly offset by the ongoing strength in internal capital generation. We do not expect the Basel III floors to be binding in fiscal 2024 and anticipate a minimal impact in the second half of 2025, absent optimization action. Moving to Slide 10, all bank net interest income was up 9% year-over-year or up 10% excluding trading revenue. These results were largely driven by higher spread and average volume growth in Canadian Banking, as well as the addition of HSBC Canada. We also recognize purchase accounting fair value adjustments on HSBC Canada loans, which will accrete to net interest income over time. This quarter, the benefit was $45 million. All bank NIM excluding trading revenue was up 3 basis points from last quarter driven by tailwinds in Canadian Banking. This was partly offset by the diluted impact of HSBC Canada’s lower yielding 21 billion securities portfolio that has been consolidated into our existing portfolios in corporate support. Canadian Banking NIM was up 4 basis points from last quarter. HSBC Canada added 2 basis points to NIM this quarter as a benefit from the accretion of purchase accounting fair value adjustment, was partly offset by modest dilution from the HSBC Canada portfolio. Core banking NIM was up 2 basis points sequentially. This structural advantage of retracted core personal banking deposit portfolio continued to come through this quarter, reflecting the latent benefit of interest rate hikes. Additionally, we saw benefits from changes in asset mix associated with seasonally higher credit card revolve rates, which we anticipate would come off next quarter. These benefits were partly offset by ongoing intense competition for deposit. Going forward with five-year swap rates of approximately 200 basis points from five years ago, our core deposit portfolio is well positioned for continued benefits from tractored maturities rolling on at higher yields. We expect this benefit to be partly offset by ongoing market competition and a moderating client driven shift into higher yielding deposits. While the migration of bankers' acceptances to core-based loans may be marginally diluted to NIMs, we expect the impact will be net neutral to total revenue. In addition, the benefit of HSBC Canada purchase price marks will continue to accrete into net interest income, adding approximately 135 million per quarter in 2024, followed by 110 million benefit per quarter in 2025. This will partially offset modest dilution from a relatively lower spread HSBC Canada portfolio. Taken all together, we anticipate Canadian Banking net interest margins to be slightly higher in the back half of the year. Moving to Slide 11, non-interest expenses were up 12% from last year. Adjusted expense growth was 8%, excluding HSBC Canada transaction and integration cost, as well as the impact of amortization of intangibles. Further, excluding the macro-driven factors such as FX and share-based compensation and the addition of HSBC Canada run rate expenses, core expense growth was 6% year-over-year. Higher variable compensations driven by strong results in capital markets and wealth management made up 4% of the core expense growth. Looking forward, all bank core expense growth inclusive of HSBC Canada business cost is expected to come in at the top of the mid-single digit range for fiscal 2024. Turning now to our Q2 statement result, beginning on Slide 12, personal and commercial banking reported earnings of 2.1 billion. Canadian Banking net income was up 7% year-over-year, including the day-one PCL of 181 million. My following comments will now exclude any impact to Canadian Banking from HSBC Canada. Canadian Banking earnings were up a strong 11% year-over-year, net interest income was up 11% from last year, non-interest income was up 5% year-over-year, as increased client activity underpinned higher service revenue and FX revenue, while market appreciation drove higher mutual fund distribution fees. Expenses were up 3% from last year helping to drive 6% operating leverage. For the full year, including the benefit from the HSBC Canada transaction, we now expect Canadian Banking operating leverage to come in above our historical 1% to 2% target range. Turning to Slide 13, wealth management’s earnings were up 7% from last year. The underlying performance of our wealth management advisory and asset management business benefited from the higher fee-based client assets across each of our businesses, largely reflecting market appreciation and net sales. These factors were partly offset by higher variable compensation and lower net interest income in our Canadian and international wealth management businesses. City National generated U.S. $73 million in adjusted earnings this quarter, or U.S. $86 million excluding the impact of the FDIC special assessment. Looking forward, our efforts to enhance expense and capital efficiency and deepen client relationships should allow City National to achieve more normalized profitability as we exit 2025. However, the path to normalized profitability may not be linear from quarter-to-quarter. Turning to Capital Markets results on Slide 14, pre-provision, pretax earnings of $1.4 billion increased 24% from last year. Corporate and Investment Banking revenue was up 23% from last year, reflecting record investment banking fees, underpinned by market share gains across all major products and a recovery in fee pools. Global Markets revenue was up 8% from last year, including higher fixed income trading revenue led by mortgages and secured financing. This was partially offset by a normalization in rates trading from a very robust quarter last year. Strong results year-to-date benefited from very robust investment banking activity and higher volumes in Global Markets. While we continue to see good client activity levels and momentum in our business performance, we expect results in the second half to be seasonally lower. Turning to Insurance on Slide 15, net income of $177 million was up 4% from last year, driven by a higher insurance investment results from favorable investment-related experience. It is important to note that the results in the prior year period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17. Turning to Slide 33, this quarter, we included additional details on our Corporate Support segment. Results for Corporate Support mainly reflect enterprise-level activities, which are not allocated to business segments, and therefore represents a modest 3% of all bank average assets. Results in the first half of the year included slightly elevated earnings on excess capital we were holding ahead of the HSBC Canada transaction closed. As we look to the rest of the year, we expect Corporate Support to generate a net loss of approximately $100 million to $150 million per quarter. To conclude, our focus on thoughtful capital allocation and ongoing discipline around cost containment contributed to this quarter's strong results and remains a key priority going forward. With that, I'll now turn it over to Graeme.

Graeme Hepworth: Thank you, Katherine and good morning, everyone. Turning on to Slide 17, I'll discuss our allowances in the context of both the macroeconomic environment and the HSBC Canada acquisition. As Dave noted earlier, the economies of Canada and the U.S. continue to diverge. In Canada, relatively weaker consumer demand, higher unemployment rates, and the impact of almost two years of elevated interest rates are continuing to weigh on consumers and businesses. In the U.S., more persistent inflation means they have to cope with a more prolonged period of higher interest rates. With this backdrop, we saw credit quality continued to weaken this quarter with net credit downgrades, additions to our watch list and elevated delinquency rates. These outcomes are in line with our expectations for where we are in the credit cycle and consistent with last quarter, we added reserves on performing loans, reflecting weaker credit quality partially offset by a release of reserves, reflecting an improving macroeconomic outlook. During the quarter, we also added reserves for the performing loans we acquired from HSBC Canada. As a reminder, the acquired impaired loan came on to our balance sheet at their fair value, net of any credit impairments. Additionally, under IFRS 9 accounting rules, we are required to take provisions on the acquired performing portfolio. These initial provisions are over and above the credit mark embedded in the fair value adjustment established for the purchase. This resulted in an initial provision on performing loans of $193 million this quarter. As this portfolio is all deemed to be Stage 1 at acquisition, provisions in the coming quarters will reflect credit migration, moving more of the portfolio into Stage 2. Since transaction closed, our analysis has confirmed the credit quality of the acquired portfolio is strong and in line with our expectations from due diligence. Relative to our Canadian Banking commercial portfolio, the acquired commercial loans have a similar ratings profile, are skewed towards larger exposures that are more diversified by sector. Compared to our Canadian Banking retail portfolio, the acquired retail loans are more concentrated in residential mortgages. However, the acquired mortgages have a lower average loan-to-value ratio that are supported by clients with relatively higher incomes and better FICO scores. Across acquired loans in our existing portfolio, we took a total of $244 million of provisions on performing loans this quarter. Our total ACL on loans and acceptances increased by $444 million to $6.1 billion and represents over 2.8 times our PCL on impaired loans over the last 12 months. Moving to Slide 18, gross impaired loans were up $1.1 billion or 7 basis points this quarter, primarily due to increases in Capital Markets and Canadian Banking. In Capital Markets, new formations of $809 million were largely a function of two loans. One loan was in the commercial real estate sector, which I'll speak to shortly, and the other loan was a securitization transaction related to a corporate loan that defaulted last quarter in the automotive sector. This is a relatively large impaired loans, securitization facilities are structured to minimize loss in the event of default. In Canadian Banking, new formations were lower compared to last quarter, remained elevated, reflecting both the macroeconomic environment that I noted earlier, and the impaired loans we acquired from HSBC Canada. Despite higher formations of gross impaired loans this quarter, you can see on Slide 19 that provisions on impaired loans were down $13 million or 1 basis point relative to last quarter. Modestly higher provisions in Canadian Banking and Wealth Management were more than offset by lower provisions in Capital Markets. In our Canadian Banking retail portfolio, provisions were up $24 million driven by higher provisions on credit cards. In our Canadian Banking commercial portfolio, provisions were down $9 million compared to last quarter, remained above pre-pandemic levels. Credit outcomes in the commercial portfolio are in line with our expectations, with stress in the portfolio skewed to smaller borrowers, forwards in sectors that are closely tied to consumer spending, and borrowers still recovering from the impacts of the pandemic. In Capital Markets, provisions were down $46 million compared to last quarter, primarily due to a reversal on a previously impaired loan in the oil and gas sector. This quarter, nearly three quarters of our Capital Markets provisions were taken on a multifamily commercial real estate loan backed by a portfolio of rent-controlled properties in San Francisco. We have now had two large impairments in provisions in our U.S. multifamily commercial real estate portfolio, so we have provided some additional details on our exposure on Slide 20. This sector has generally been performing well, supported by strong demand for housing. However, pockets of geographic weakness have surfaced on rent-controlled properties in places like New York and San Francisco. Our exposure to U.S. multifamily commercial real estate loans of $8.3 billion represents less than 1% of total loans and acceptances. Almost two thirds of our exposure is in Wealth Management where loans typically benefit from amortization and additional recourse outside of the properties held as collateral. Today, impairments and losses have been in our capital markets portfolio on rent-controlled properties in San Francisco. Following a deep dive into our remaining $1.9 billion performing Capital Market exposure to the sector, we remain comfortable with the risk, and we are not expecting any additional impairments at this time. Stepping back from the multifamily sector and looking at commercial real estate more broadly, as I noted last quarter, impairments and losses have been consistent with our expectations and are well within our risk appetite. We remain prudently provisioned with full exposure to this sector with our downside provisioning material accounting for a reduction in commercial real estate prices of 25% to 40%. To conclude, credit performance this quarter remained in line with our expectations and we continue to expect provisions on impaired loans between 30 and 35 basis points for the year. We are pleased with the quality of the loans we acquired from HSBC Canada, and as Dave noted earlier, we are thrilled with how well the integration has gone. Alongside provisions we took on the acquired loans, we continue to prudently build reserves on performing loans, reflecting the credit outcomes of the software macroeconomic environment we are currently experiencing. Moving forward, credit outcomes will continue to be dependent on the magnitude and change in unemployment rates, direction and magnitude of changes in interest rates, and residential and commercial real estate prices. As always, we continue to proactively manage risk through the cycle and remain well capitalized to withstand plausible yet more severe macroeconomic outcomes. With that, operator, let's open the lines for Q&A.

Operator: [Operator Instructions]. The first question is from John Aiken from Jefferies. Please go ahead.

John Aiken: Good morning. I'd like to kick this off with a question not related to HSBC Canada. Derek, very strong performance in capital markets this quarter. I know Katherine mentioned in her prepared remarks that we should expect some level of moderation. But in terms of having us try to triangulate what that means, can you give us a sense in terms of what the pipeline is for your advisory work and how comfortable you are with the current quarter's run rate on trading?

Derek Neldner: Sure. Thanks, John. I appreciate the question. Obviously, we're very pleased. We had a very strong second quarter results in capital markets, and that really reflected, as Dave touched on, both an improvement in the overall client activity, but also continued and fairly significant market share gains that we saw across all of our products. As we look forward, we continue to think the environment will remain quite constructive. If we look at the fundamentals for investment banking, for example, as we're starting to see a little further clarity on the economic environment and outlook over the next two years, stabilization in the rate environment, obviously, improving capital markets and availability of financing, that is all coming together to drive further both strategic M&A activity, but also associated financing with that. We think those fundamentals will continue and create a healthy environment. That being said, and to Katherine's comments, obviously, we've had a very strong first half. We do tend to see some slower seasonality as we go into the second half. And as well, when you just look at some of the ongoing uncertainty around the exact trajectory of rates, if we're in a higher for longer scenario and financing costs remain a little elevated, combined with probably some uncertainty as we look at a range of global elections underway, we think that will likely moderate activity a little bit as we go into H2. But as we look at our previously stated guidance of $1.1 billion a quarter of pre-provision pretax, we remain very comfortable, the strategic steps we're taking will continue to allow us to outperform that kind of benchmark.

John Aiken: Great. Thanks for the color, Derek. I'll requeue.

Operator: Thank you. The next question is from Ebrahim Poonawala, Bank of America. Please go ahead.

Ebrahim Poonawala: Hey, good morning. I guess maybe a question, Dave, for you with HSBC now done, like I was just thinking about strategically overall 15.5% ROE, capital levels where they are today, just give us a sense of how you're thinking about capital allocation from your, just in terms of the mind frame, where you think you can play offense to drive growth, is it in Canada, is it in the U.S.? And also just maybe if you can double-click on the opportunity created by RBC Clear in kind of cross-selling to your sort of capital markets plans? Thank you.

David McKay: Great. Thanks, Ebrahim, and I'll answer the first part and ask Derek to start off with RBC Clear, which we're really excited about and off to a great start. Now as far as our ROEs and capital generation, we are in a very good place. As you saw on an adjusted basis, 15.5% ROE. We have a strong path to our target range of 16% plus when you start looking at executing on the remaining HSBC synergies, fee-based income opportunities we have, margin expansion, roll-on, roll-offs in our books, cross-sell. All of that give us a strong path to 16% plus. And so as you think about the capital generation that's coming off that strong ROE, gives us enormous strategic flexibility, as you pointed out, to return capital to our shareholders, but also to continue to build out our core wealth franchises and commercial franchises in the U.S. and in Europe. So as we think about those opportunities and we prepare, we'll have that capital generation that will allow us to in a timely way to do that. Having said that, our current focus is on the enormous organic opportunities in front of us, whether it's the work that we're doing in simplifying and working on the U.S. through Derek and the team there, the opportunities with City National as we talked about, the opportunities on executing the synergies with Brewin Dolphin internationally, bringing HSBC into the fold and going on the offense after being on defense for 18 months. And I'd like to thank the HSBC Canada team for really holding this bank together through a very prolonged uncertain approval period and execution period. And they've been on the defense for 18 months. And now we're on the offense. And you can see the excitement in their eyes to get back. You can imagine, it's hard to replace people who retire or leave when you're going through an acquisition conversion. It's even harder to bring a new client in when they're going to change banks and go through conversion. So the team has done a great job, and now we're back on to the offense there. So all of that drives opportunity and capital generation to grow organically. But also this enormous capital that we are generating gives us significant strategic flexibility inorganically.

Derek Neldner: Ebrahim, it's Derek. I'll address the question just on RBC Clear. Really four key reasons we're really excited about the business and we saw it as an attractive opportunity. First, it's a very large addressable market amongst our corporate clients in particular. Second, it's another opportunity for us to further support our clients and deepen our relationships with them. Third, as Dave touched on, it provides a very important source of incremental funding and diversification of funding for our businesses in the U.S. And then finally, at its core, it's a very attractive ROE business, attractive efficiency ratio, and one that we think we can drive good earnings growth with over time at a compelling ROE. We've obviously had a multiyear initiative to launch the business. We're very excited to formally launch it in April. We very much partnered with a number of our clients along the journey to get their feedback on what was working in the market today, but as well, where they were seeing pain points and opportunities for a new entrant to provide a differentiated offering. In this case, we had the benefit in the U.S. of coming at this with a bit of a blank sheet of paper. And so we're able to build a very digitally enabled system based on the feedback from our clients. And its early days given we just launched in April, but a very positive, very favorable result to date. It will be a multiyear journey to continue to build this out, but I think a very attractive stand-alone opportunity. Obviously, the U.S. dollar funding it provides will be an important enabler for how we can continue to support clients through the loan book and other products we offer. And then you get a number of areas where it will connect into things like our foreign exchange offering and otherwise where it ties into existing products we offer to clients and allows us to serve them in an even more integrated and holistic way. So very excited about it.

Ebrahim Poonawala: And does this business need to be global in scale to kind of clearly get the full benefit of what your clients might need or can you be a U.S.-only business in cash management and still pick up a decent amount of market share?

Derek Neldner: I think there's a very strong opportunity in the U.S. We obviously do have a very strong and leading Canadian cash management platform today that over time we can connect between the geographies. We think there's a huge opportunity in the U.S. As we execute on that, we can obviously look at further places we can expand the offering.

David McKay: Thank you, Ebrahim. The plan is more to move it down market into mid -- corporate mid-commercial as well as there's a significant opportunity in the United States to look at different target segments. So this platform is extendable horizontally and vertically, which is great.

Ebrahim Poonawala: That’s helpful. Thank you.

Operator: Thank you. Next question is from Meny Grauman from Scotiabank. Please go ahead.

Meny Grauman: Hi, good morning. Graeme, you're guiding to 30 to 35 basis points on the impaired PCL loan ratio. You've been trending at the low end of that. I'm wondering the expectations for the second half of the year, do you see a reasonable chance that we could get to the higher end of that given your rate outlook? And in terms of where you see that peaking, whether it's this year or next year on a quarterly basis in terms of the impaired PCL ratio?

Graeme Hepworth: Yes, Meny, thanks for the question. I'd say, overall, I wouldn't say our outlook on the path of credit here has changed tremendously from Q1. I think we're very much kind of progressing on that path that we kind of had seen previously. I think when I break that down by businesses and just reiterate some of those kind of similar themes, I think certainly, when we think about retail credit and retail credit in Canada, I think we're still on kind of the upswing there, particularly led by the unsecured retail products, your cards, and your unsecured RCL products. That's where we kind of see the most impact kind of rolling forward here. And so I don't know if you can kind of go on the other end, kind of large corporate wholesale side of it, that's been running at kind of, I would say, at the higher end and more elevated levels for the last kind of year and change. I don't really expect that necessarily to accelerate, in fact, might be opportunity the other way there. And so I think when you put all that together, we still see an aggregate that the Stage 3 PCL probably continues to increase to some degree through 2024 and kind of peaks out at the end of this year and maybe in the first half of next year. And then Stage 1 and 2, obviously, is on top of that. And we've been building that for quite some time. We've been in conjunction with this kind of rate hiking cycle and kind of the economic consequences that that's creating, have been building reserves for two years on that. How that moves forward really depend on kind of every quarter, we reassess that, that's forward outlook, and reassess where our kind of credit quality sits. But at some point, we would expect that to start to toggle as that kind of peak period really comes into play and we move from a building stage into a releasing stage. So I think that 30 to 35 we still feel good about this year. And I think 2025 we'll kind of reassess as we get closer to the end of the year.

Meny Grauman: And just a follow-up to that, if we see rate cuts, how long do you expect it to take for that to have a meaningful impact in terms of the behavior of the impaired PCL ratio?

Graeme Hepworth: Yes. I mean rates -- the rate environment, whether higher for longer or whether we're facing cuts, is always a hard one to assess because it really -- answered that by itself, it really is what's going on in the rest of the economy there, right. And so it's going to be much more driven by what's happening with unemployment, what's happening with house prices in conjunction with that. Certainly, in our base case forecast in Canada, we do expect rate cuts to start to begin here shortly and that we do expect kind of 100 basis points of rate cuts by the end of this year and then another 100 in the next year. On the U.S. side, we're obviously much more cautious about the rate environment there. I think we only have a 25 basis point cut in our forecast this year and that's at the tail end of the year. And only another 50 next year and on the long end, we're not really anticipating much change there. So more impact on the U.S. side. Those are in our baseline PCL forecast or IFRS 9 modeling. We do have a pessimistic scenario that kind of looks at more severe outcomes, but it really kind of takes the interest rate environment and looks at things going wrong in that and unemployment really ticking up and GDP really pulling back on that. So that's already kind of reflected in our ACL in that sense. But again, it's hard to comment on the rates by itself. It really depends on what's happening with the other key macroeconomic variables out there.

Meny Grauman: Okay, thank you very much.

Operator: Thank you. The next question is from Matthew Lee, Canaccord. Please go ahead.

Matthew Lee: Hey, good morning guys and welcome to the call, Katherine. I will ask one on HSBC. Can you maybe just talk about the early results of your customer retention strategy, maybe relative to your initial expectations and then provide some specifics as to why you're seeing the early cross-sell opportunities post acquisition?

Neil McLaughlin: Yes, Matt, it's Neil. I'll take that one. Thanks for the question. Maybe I'll just start with retention. I think the headline really across all the businesses is that the early retention is above our expectations. So we're quite pleased across all the businesses. And that's despite what Dave touched on, which was the extended approval time line. So that did give us some concern, I'd say, leading up to it, but really pleased where we are. On the consumer business, overall client count is very strong. The team actually grew the consumer client count in the quarter before migration, which we thought was a great outcome. We're seeing some minor requests for consolidation amongst some of the larger borrowers, just to balance the sort of some of those syndications. Beyond that, I think we're really pleased. And that's entirely reasonable, I think, on the client's part. Dave spoke to business deposits, and there was a couple of things there that we saw which were really nonrevenue-generating roll-off of business deposits as HSBC held the EDC deposits for the CEBA account, which we're really not providing any revenue, but there's about $5 billion of deposits that rolled off to pay off those CEBA loans. And we did see as well in the deposit business some clients actually choose to come to RBC a bit early. And again, net-net, a positive and just had both relationships and came to us and just want to sidestep the migration. So top line, I think each of the businesses feel good about retention. Pivot to your question about cross-sell, I think very similar story there. Each of the businesses identified opportunities where we think we've got a lot of revenue and relationship depth we can provide. In the consumer business, we've identified things like just the credit card portfolio. We have a very strong lineup. We see an opportunity to really deepen it there. HSBC has not had a strong penetration of the HELOC product, which we really view as a much stickier lending product. So we would put that in the mix as well. Dave touched on the commercial business, just access to capital and growing the loan book. We would see that as an opportunity on the go forward. And working with Derek's team, FX is something that this obviously brings us, I think, a real new vector of growth around FX. And maybe just the last one, into Doug's business, we're already seeing some great referrals as we look at what Graeme touched on, which is high-income, affluent customer base that hasn't had the leading wealth management platform that Doug's team leads. So those would be just a few of them.

Matthew Lee: Alright, that’s very helpful. I will pass the line.

Operator: Thank you. The next question is from Gabriel Dechaine, National Bank Financial. Please go ahead.

Gabriel Dechaine: Hi, good morning. We're talking about client retention on the HSBC portfolio. I want to talk about the mortgage book there where they were known as a price leader. Is retention really an objective there or kind of like more of a recycling phenomenon and using a funding to grow your -- the overall mortgage book and could see some margin expansion on the back of that, maybe you could talk about that? And then on the commercial side, the buzz around that -- ahead of that deal and during the -- before the closing anyway was that a lot of the HSBC customers were needing cross-border cash management capabilities. I know you've invested in that over the past year. If you could talk a bit about those investments and what the experience has been from the client side?

Neil McLaughlin: Thanks, Gabe, it's Neil. So maybe just on the mortgage book. We've actually touched on this before. HSBC just didn't have the strong proprietary sales force we did. So they did have a tactic that was to lead with an aggressive price, but they really did not discount once they started the conversation with the client. So we're happy with the spreads in the mortgage book and we've been, I can say, going at it quite aggressively to retain that business. And in the first month, we actually see renewal rate is actually a little bit above our own, and we feel quite good about that. So I'd say definitely put that in the opportunity category. As you talked about on the commercial business and cross-border cash management, yes, this is what we would say is an opportunity. We've added a couple of products to our shelf to make sure we have all those value propositions they're used to. I'd say the headlines have been more sophisticated trade finance capabilities and then at the upper end, liquidity management. So for corporates that just work in a lot of different jurisdictions and want to be able to move that liquidity around. So not only will it be there for those HSBC clients, but obviously, we can cross-sell that into our commercial clients here in Canada. Just where we are on that is there is a very small TSA that we've got, about 2,600 clients, and that will roll off in the first year, and so far, just been exceptionally smooth.

Gabriel Dechaine: Alright, great. And just if I could throw another one in there, if I may. There's a lot of attention paid on AML these days. Can you talk about the -- you're clearly investing in CMB capabilities there, any additional investment required across the rest of the bank and HSBC itself, the Canada part anyway?

David McKay: Maybe I'll start, and -- this is Dave here, and Graeme. We continue to invest in our AML systems and in the overall ecosystem. Obviously, it takes all banks to protect the overall payment system, and we do collaborate around that. We do invest in technology. AI helps us protect the system. So we're constantly on guard and investing in new systems and using technology and training to make sure that we play our role in the overall financial system and we protect the system against this type of crime. It's a complex world and it's a difficult world, but we constantly invest to do that. And we work with our regulators and we work with our governments and all our agencies to protect the financial system. So it's a journey, and the world changes, and we adjust to that. And I would say we make it the highest priority in our organization, and we're all focused on it in every jurisdiction. Graeme, do you want to add anything?

Graeme Hepworth: Yes. I mean I think Dave hit the key headlines there. It's a critical area, we treat it no different than the other risk areas. It's a key part of our risk management program, and we made huge investments in that area to make sure not only that we're meeting the obligations and expectations that our partners in the public sector have on us, but that we use that to make sure that we're managing this institution in a safe and sound way. You asked about HSBC within that. Certainly, they have an international client base that presents other unique risk there, and that was a key part of our diligence. And so we spent a lot of time looking at their AML program that HSBC had invested a lot of time in. And so with the benefits of the close and convert, as we bring that into our AML kind of infrastructure and are now in that process of reviewing all those clients and making sure it's kind of our standard and specs. And the other thing I would just say, we talked about the HSBC client base, and Dave referenced earlier, we're also bringing in a lot of really seasoned professionals from HSBC on the AML side, and we're really leaning into their knowledge and experience as well on this. And so that's a real benefit for us on that side as well.

Gabriel Dechaine: Okay. Well, thanks for the HSBC disclosures and commentary, very transparent and much appreciated.

David McKay: Thanks, Gabriel.

Operator: Thank you. Next question is from Mario Mendonca, TD Securities. Please go ahead.

Mario Mendonca: Dave, let me start a quick question for you. Hopefully, this is straightforward. You've announced the NCIB, and in your comments, your opening comments, you said it was the NCIB is there to offset the shares issued under the DRIP. So the obvious question for me is, why do the DRIP if you're just now going to offset it, unless something has improved in your outlook, so maybe that's the question, what's improved in your outlook that would cause you to want to offset what you just completed doing on the DRIP?

David McKay: Yes. So thanks for that question. So obviously, when we undertook this transaction and announced it 18 months ago, that was a long approval journey, and we had to plan a buffer for our capital and make sure that we could close this transaction as we articulate on a cash basis without having to do an equity raise. And in all conservatism, we had to put on a DRIP to make sure that we could grow the organization, execute in all the work that we had in front of us, and deliver this transaction. So there was a lot of moving pieces, Mario, as we took this on in -- a year and half ago. So as we came through that, our earnings have been so strong, and our ROEs have been really strong, and we did produce more capital than we actually planned through the process and, therefore, exited it very strongly, as you just saw at 12.8%. So it does give us the opportunity as we look at the organic momentum that we have, we look at strong ROEs, we're able to generate capital. And therefore, we are going to use buybacks as a strategic tool, including this year to buy back 30 million shares to start. So I think it's a start. It's our plan, and we're going to see about organic growth. We're going to see what the inorganic opportunities are and we're going to see what the state of the economy is and where we should run our actual capital levels. So I think all those things are in play, and it gave us an opportunity to return capital to you to offset the dilution. And therefore, it's part of a normal planning process when you have uncertainty. We ended up in a better place and we're going to drive very strong TSRs for you through it.

Mario Mendonca: I think I understand that. Now one quick question before I leave this topic. I've come to think of 13% as the bogey for our banks in Canada, for the CET1 ratio. Do you have a different impression, is the appropriate level more like 12.5%?

David McKay: Yes.

Mario Mendonca: Okay. That's different. Okay. One quick thing then, maybe not so quick. But I want to focus on, Katherine, the comments you made around the spread between the five-year today and where it was years ago. That's something that's near and dear to me, something I've been focusing a lot on. Is it conceivable then if, let's say, the deposit pricing environment slows, like this shift to the high cost deposit slows a little bit, but the high end of the curve remains relatively high as we see today, even in the context of a shorter -- a lower short end of the curve, so a steeper curve, does that environment -- could that environment drive Royal's all bank margin up somewhat like 1 to 2 basis points a quarter, let's say, over the next year or so, is that reasonable -- a reasonable expectation that the tractors drive that kind of improvement, assuming the deposit environment plays ball?

Katherine Gibson: Thank you for the question. It's Katherine. Yes, I would agree with your assessment as you've laid that out. As mentioned in my notes, we are definitely seeing that positive benefit come through off our deposit portfolio. And as you've laid it out, I would expect to see continued margin expansion flow through to the Canadian Banking NIM.

Mario Mendonca: And the all bank NIM.

Katherine Gibson: And the expectation is that it would flow through to your all bank NIM as well.

Mario Mendonca: Okay, thank you.

Operator: Thank you. Next question is from Paul Holden, CIBC. Please go ahead.

Paul Holden: Hi, thanks, good morning. Maybe just a quick question from me. Just to better understand the additional PCLs -- performing PCLs for HSBC. Is that a matter of just putting on some additional conservatism as you close the transaction, is that a matter of Royal applying its own credit models to the HSBC portfolio, really what I'm getting at is just trying to better understand what is the probability that those PCLs ultimately get released back into earnings?

Graeme Hepworth: Yes. Thanks, Paul. I would say this isn't our conservatism, this is the IFRS 9 rules we're applying. And so basically think about the way the purchase accounting works, it's like we originated these as new loans in effect. So they're kind of mark-to-market as they come across, that mark-to-market goes through the offsets in the goodwill, if you will. And so when we do originate loans, we treat them no different than the other loan we originate. And so they're Stage 1, and we have to establish an allowance for that. And so that's really what that is. And again, the benefits of the close and convert, we brought them over, we put our RBC ratings on all of those, we've run out for all of our IFRS 9 models and all of our governance and review on that and done our own analysis on that. And so we've established those day 1 PCL very much in line and consistent with how we would do all of our other products and portfolios at RBC. The only note I made on that, as I noted in my speech, is that it's all Stage 1 on day 1 because they are newly originated and we would expect in the coming quarters to see the kind of natural migrations and delinquencies in that portfolio, and so some additional Stage 1 and 2 there just as it kind of migrate to a more natural state in that regard.

Paul Holden: Got it. Okay. So you just applied your own IFRS 9 models to the HSBC book. Okay. That makes sense. And maybe one quick follow-up one, Graeme, while I have you. Maybe you can kind of talk through some of the cash flow experience, in and out you're seeing for your Canadian consumers and how they are grappling with higher cost of living and higher cost of borrow? Thanks.

Graeme Hepworth: Yes, it's a good question there, Paul. I mean so we have a number of tools we kind of look at to kind of better understand the health of our client base, and the consumer, certainly we put our own ratings on each of our clients, and those ratings are inherently tied to what we see happening in their kind of cash flow and their savings and their deposits. We kind of have some -- we obviously have really rich information to understand kind of clients' overall phasings and deposit profile, kind of give us an overall health there. One of the reasons the Canadian consumer has been quite resilient as they built up a lot of savings and a lot of, if you will, buffer starting the pandemic. We have seen that in aggregate draw down over the last few years. But I would still say it's kind of, in aggregate, elevated, somewhat elevated beyond kind of what would be more of a normal growth than that. But what that does also tell us, it does point to those clients that are facing more stress, right. And this goes back to the mortgage clients that have faced those payment triggers and don't have the quite the same resilience, we really do see those cash buffers and reserves start to draw down on that. And so that's, again, overall, I would say we still see a pretty healthy Canadian consumer out there, but those pockets of stress are exactly the ones we've identified, and that really is tied to kind of where we're increasing our allowance and reserves accordingly.

Paul Holden: Okay, that’s it for me. Thank you.

Operator: Thank you. The next question is from Sohrab Movahedi, BMO Capital Markets. Please go ahead.

Sohrab Movahedi: Okay, thank you. I know we're tight on time. Hopefully, three quick questions. Dave, are you price-sensitive on the NCIB or is it just intended to offset the dilution period?

David McKay: It's a good question. You always think about the overall value and you look at where your intrinsic value per share is and you make that call. So we'd obviously like to accelerate on any dips. We don't want dips, obviously, but you'd accelerate on a dip. And price does come into it. But we do have an overall strategy of how to return capital to shareholders to create the overall premium total shareholder return that we are going to deliver. So I can't give you more guidance, it's obviously a variable you think about.

Sohrab Movahedi: Okay, I appreciate that. That's helpful. Katherine, you had mentioned that you hope by the end of 2025, City National will be back to more normalized earnings levels. What would that be compared to where you are today, obviously, you've had to make some extra spendings and what have you to rectify some stuff down there, I'm just curious as to what does that normalize look like?

David McKay: Sohrab, maybe I'll take that, it's Dave. I've spent a lot of time on it. So as I talked about, you can see that the -- our expense trajectory has the full run rate of our remediation efforts and our overall building of heightened standards and our replatforming of C&B. So you've seen, as we talked about, the significant amount of work we're doing is embedded in the current run rate, which gives you kind of a line of sight on the cost line. Our revenue line is stable and higher interest rates will help us. We are putting on some tractors to protect that revenue line in the event of a declining rate environment. So I think that's a positive as well. The line items that will have a little bit of volatility going forward that could accelerate or decelerate will be that there are a number of opportunities for us to simplify this business, whether it's selling noncore parts of C&B or taking out real estate that all have positive run rate benefits and positive shareholder value creation. So you may see, to Katherine's point, the odd onetime, not material, but the odd onetime that will impact the quarter where we're able to create long-term shareholder value by simplifying and selling something or taking out leases, what it happens to be. So I think Katherine's kind of point was on there will be a little bit of bumpiness towards that. Getting to kind of where are we going to come out of this, I think you can look at to where kind of peer ROAs are and look at our balance sheet. There's no reason why we can't achieve that. And therefore, for us to get to that peer ROA, we have to complete our remediation and start to bring a very significant cost structure down, which we plan to do, and that will happen, we hope, over the next roughly 18 months. So I think that is, since all the things that have to kind of go well, but you should take comfort that our run rates reflect the full cost run rate of remediating and building a stronger platform.

Sohrab Movahedi: Thank you for squeezing my questions.

Operator: Thank you. We will take one more question from Lemar Persaud, Cormark Securities. Please limit yourself to one question. please go ahead.

Lemar Persaud: Yeah, thanks. Just using my one question here on -- it seems like you guys are highlighting these cross-selling opportunities at HSBC. So it really does beg the question, can you guys put some numbers around that and would that be potential upside to the $1.4 billion in earnings, I think the answer is yes. So any numbers you could put around that and time lines to achieve, it just sounds like you guys are very excited about this? Thanks.

Neil McLaughlin: Thanks, Lemar. It's Neil. Yes, I mean, you can probably sense that we do think there's a real opportunity here. Reason we stepped into it, we felt that the cross-sell opportunities would be as much or more than any of the attrition risks. I think we feel quite confident that that is going to be the case, but it's not something we're going to put numbers around at this point.

David McKay: Yes. It's Dave. I think as we -- you've got to give us a quarter or so to get a deeper knowledge of the client base we brought in. We know it's an affluent client base. Neil, I think, outlined really well the opportunities across all the businesses and services from investments to credit cards, to core operating accounts, to treasury management, to cross-border, all that exists. So we're just going to go through a process over the next quarter or so of testing that and then we're going to size that for you, and we will talk about that in the coming quarters. But just give us a quarter to make sure we're solid on our expectations of the valuation of that cross-sell. We want to get it right for you. But we're very excited about it.

Lemar Persaud: Thanks for the time.

Operator: Thank you. I would now like to turn the meeting over to Mr. Dave McKay. Please go ahead.

David McKay: Yes. So just to wrap up, thanks for all your questions. Now the theme I wanted the team to get across, which I think we did, is really along the lines that not only did we close one of the most complex transactions and we did a close and convert seamlessly, we didn't lose any momentum in the business. In fact, we accelerated the momentum in the core business, across capital markets, across wealth, and particularly across commercial and consumer banking. You see it in the volume growth. You see it in the profitability growth. You see it in a very strong operating leverage. The business -- the core business accelerated over the past year. We did not lose momentum. And we've got now HSBC opportunities. We've got RBC Clear. We're building on very strong core momentum with these additional inorganic investments. And therefore, when you think about the ROE potential of the bank, when you think about the capital generation of the bank, when you think about the EPS trajectory, we feel very strongly that we've got momentum, we've got great investments, and we're going to continue to build from one strength to the next. So I think that was the message that we really wanted to deliver today. Thank you for your questions. And we look forward to seeing you at the end of the summer, in August.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.