canada's banking industry

John E. CleghornChairman & CEO

Presentation atUBS Warburg

Financial ServicesConference

New YorkJune 26, 2000

1

Canada’s banking industry•Nationwide banking

•RY has 1,400 service delivery units and 4,700 ABMscoast-to-coast

•RY has over 975,000 on-line and 1.8 million telephonebanking clients

•Highly efficient clearing system•Fierce competition•Following partial deregulation in 1980s,

entered•investment banking•brokerage (full service and discount)•money management•trust•insurance (limited powers)

2

• Canada’s largest bank by assets and leaderin most products

• Canada’s most profitable financialinstitution (20.3% ROE - Q2/00)

• Profitable business & geographic mix• Committed to eBusiness leadership and

profitable international expansion• Strong shareholder orientation• Attractive valuation

RY - premier Canadian bank

3

1. Strong fundamentals2. eBusiness leadership3. Expansion outside Canada4. Growth of high-return businesses

Key priorities

4

• Profitability• return on equity• growth in earnings per share

• Revenue growth• Cost control• Asset quality and risk profile• Capital managementObjective: Deliver financial performance in top quartile of North American banks

Priority #1

Strong fundamentals

5

Priority #1Bonus plan encouragesstrong fundamentals

Payout factors:

• earnings growth• top-line growth• expense management• performance versus competition

• customer service vs. other Canadian financial companies

• EPS growth vs. 15 North American banks

6

Priority #1Strong performance versus U.S. banks

Royal BankQ2/00 vs. Q2/99

US Banks*Q1/00 vs. Q1/99

EPS growth

Revenue growth

Non-interestrevenue growth

38%

20%

31%

12%

7%

12%

* Source: Morgan Stanley Dean Witter report of May 2, 2000US GAAP

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ROEEPS growth (fully diluted)Revenue growthExpense growthEfficiency Specific provision for credit losses/

average loans, BAs & reposDividend payout ratioCommon equity to

risk-adjusted assetsTier 1 capital (OSFI)Total capital (OSFI)

US GAAP

3-5 year goal

17-20%---

59.5%

0.35-0.40%30-40%

7.0%8.0%

11.0-12.0%

Q2/00

20.3%38%20%13%

62.4%

0.30%31%

7.1%8.0%

11.1%

Target for2000

17-20%12-14%

mid-single digits< revenue growth

-

0.30-0.40%-

---

Performance

Priority #1

Solid Q2/00 performance

Q2/99

15.8%(9)%4%8%

66.3%

0.41%37%

7.0%7.1%

11.4%

*core numbers exclude one-time items - there were one-time items in Q2/98

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Priority #1

Favourable ROE & EPS trends

$1.27 $1.25$1.33

$1.40

$1.57

$1.73

16.0% 15.8% 16.1% 16.6%

18.4%

20.3%

Q1/99 Q2/99 Q3/99 Q4/99 Q1/00 Q2/00Core fully diluted earnings per share* Core return on common equity*

US GAAP*excludes one-time items - there were no one-time items in Q2/99, Q1/00 & Q2/00

(EPS C$)

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20.8%19.0%

17.6% 16.8% 16.5%

11.2%

RY CM BMO BNS NA TD

Cdn GAAP

Priority #1Highest Canadian bank ROE

Core ROE*

*excludes one-time items for all the banks

10

8%

38% 37%

5%

Personal &commercial

financial services

Royal InvestmentServices (wealthmanagement)

Corporate &investment

banking

GlobalIntegratedSolutions

(transactionprocessing)

US GAAP

Priority #120% top-line growth

(Q2/00 vs. Q2/99)

Growth by segment

20%

Royal BankFinancial Group

+ + + =

11

1996 1997 1998 1999 Q1/00 Q2/00

40.5%

45.3%

48.2%

51.1%

54.5%

US GAAP

Priority #1Non-interest revenue

continues to grow

Non-interest revenue as a % of total revenue*

*excluding one-time items (none in Q1/00 & Q2/00). One-time revenues wereC$105MM in 1999, C$247MM in 1998, C$115MM in 1997 and C$83MM in 1996

56.1%

12

Priority #1Less volatile trading revenues

generate more sustainable earnings

25%

48%54%

73%82%

116%

RY TD BNS CM BMO NA

Growth in trading revenue(Q2/00 vs. 4-quarter trailing average)

source: banks’ Q2/00 supplementary financial packages Cdn GAAP

13

Priority #1Cost savings and revenue growth

are improving efficiencyCore efficiency ratio*

*excluding one-time items (none in Q2/99, Q1/00 & Q2/00).

66.3%

63.3%62.4%

59.5%

61.9%

65.3%

62.4%

Q2/99 Q3/99 Q4/99 Q1/00 Q2/00 TARGETexiting2000

Cdn GAAP

US GAAP

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58.0%61.9% 62.0%

66.8%

71.5%

78.8%

BNS RY BMO NA CM TD

Cdn GAAP

Priority #1Strong efficiency ratio

Q2/00 core efficiency ratios*

*includes goodwill amortization and excludes one-time items. Numbers used toderive competitors’ ratios have been confirmed by them

15

-340 -340-300

-110

180

1,300

RY BMO BNS CM NA TD

Cdn GAAP

Priority #1Leader in efficiency improvement

Change in core efficiency ratios*(Q2/00 vs. Q2/99)

*includes goodwill amortization and excludes one-time items

16

$10

$38

$63

$54

$76

Q2/99 Q3/99 Q4/99 Q1/00 Q2/00

US GAAP

Priority #1Increasing investments in

strategic initiatives(C$ millions)

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Priority #1

Share repurchases

Share buyback program expanded onFeb. 23, 2000 to 6.0% of commonshare float (18.7 million commonshares) from 3.5%:• As at April 30, 2000, 13.3 million shares

repurchased for C$853 million• Buyback program ended June 23, 2000

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0.37 0.39 0.390.42 0.42

0.46 0.46 0.46 0.46 0.48 0.48

0.54 0.54

0.60

Q2/97 Q3/97 Q4/97 Q1/98 Q2/98 Q3/98 Q4/98 Q1/99 Q2/99 Q3/99 Q4/99 Q1/00 Q2/00 Q3/00

Dividends per common share in C$

• Dividend payout target range 30-40% (31% payout in Q2/00)

Priority #1

History of dividend growth

19

32%

25%

14%

6% 6%

10%

TD RY BNS CM BMO NA

Priority #1Above-average dividend increases

Percentage dividend increase in past year*

*indicated Q3/00 dividend versus Q3/99 dividend

Peeraverage

12%

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Objective

Be leading eBusiness financialinstitution in Canada, withstrong link to the US

Priority #2

eBusiness leadership

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Priority #2

eBusiness leadership5 announcements since Q2 results released on May 18

• J.V. with Mediagrif Interactive Technologies to buildvertical B2B electronic marketplaces

• J.V. with Bottomline Technologies to develop web-based custody and related product applications

• Alliance with Chariots.com to provide online autofinancing

• J.V. with Baldhead Systems to launch encryptedwireless banking and brokerage service for Palmorganizer

• Launched e-SELECT, a virtual payment terminal foron-line merchants, that provides on-line businesseswith a new, real-time Internet payment service

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530,000

2,000,000

975,000+ 1,000,000+

10/31/99 6/23/00 7/31/00 Est. Target 2002

Priority #2

eBusiness leadership• SFNB rated “best overall” Internet bank for 6th consecutive quarter

Customerpenetration 5.3% 9.8% 10% 20%

• Canadian on-line customers

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Priority #2

eBusiness - US platform• Security First Network Bank (SFNB) - ranked #1 among

60 US Internet banks by Gomez Advisors(www.gomezadvisors.com) for 6 consecutive quarters

• Bull & Bear Securities - on-line discount broker• Prism Financial - one of the fastest growing Internet

mortgage originators in the US (Internet originationgrowth of 175% in 1999 to US$336 mm)

• PrimeStreet - open finance on-line lending for smallbusiness in which we have a 34% stake

• S1 Technologies - 2.8% equity stake• VIP Private Capital - open finance on-line private banking

for individuals with >US$500,000 in investable assets

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•Intend to continue expanding outside Canada•Each business segment has a global mandate•Largely targeting the US through a niche

approach:• where we have competitive advantage• where we can generate top tier value

and growth for our shareholders• through combination of acquisitions,

alliances and expansion of existing operations

Priority #3

Expansion outside Canada

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Global High Performer*Bank Global Performance Score

1. Royal Bank of Canada 21.5 1. Bank of Nova Scotia 21.5 3. HSBC 17.8 4. Chase Manhattan 17.3 5. ABN Amro Holding 12.5 5. JPMorgan 12.5 7. Royal Bank of Scotland 11.8 8. American Express 9.7 9. Lloyds TSB 7.610. Morgan Stanley Dean Witter 7.1

* source: Templeton Global Performance Index 2000 published by Templeton College, Oxford University,April 2000. Ranking based on the world’s leading 214 multinational enterprises (as listed in the FortuneMagazine Global 500 ranking in 1999) according to the performance of their foreign operations.

Overall Global Performance Score

1. Nortel Networks 45.5 2. Glaxo Wellcome 37.6 3. Coca-Cola 32.5 4. Merck 29.8 5. Pfizer 28.5

18. Royal Bank of Canada 21.518. Bank of Nova Scotia 21.520. Bristol-Meyers Squibb 19.9

Priority #3


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ü Hambros Bond Businessü U.S. High Yield Teamü U.S. Energy Team

Royal Investment ServicesPersonal & commercial bankingü Credit Suisse Private Bankingü Coutts Groupü Bull & Bear Securities*ü Hartley Poynton• Connor Clarkü Ernst & Young - Guernseyü Ernst & Young - Jerseyü VIP Private Capital*

ü Security First Network Bank*ü S1 Technologies*• AOL Canada*• Ernex• E-route*ü PrimeStreet*ü Prism Financial*• Mediagrif Interactive Technologies*• Bank One’s credit card business Corporate & investment bankingInsurance• Mutual of Omaha• Prudential Canadaü Liberty Life & Liberty Insurance

ServicesTotal Canadian C $ 450 MMü Total International C $1,390 MM

Total Investments C $1,840 MM

Priority #3Substantial investments outside

Canada in the past two years

ü= international, *= eBusiness

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US Expansion - Liberty Life & Liberty Insurance Services

• RY to acquire Liberty Life and Liberty InsuranceServices (the insurance operations of LibertyCorporation) for US $580 million

• Liberty provides RY a platform in the US to expandinto other forms of insurance and distribution, a stableearnings stream, a presence in the growing directbusiness, a significant presence in the emerging fee-based administration business and a well-knownbrand in the Southeastern US market

• Opportunities to cross-sell insurance products tocustomers of Prism, SFNB and Bull & Bear andbanking products to customers of Liberty

Priority #3


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US Expansion - Prism Financial• Acquired for US$115 million in April 2000• Niche entry into the US residential mortgage origination business• Growing on-line capability, salesforce of over 1,100 loan officers,

159 branches in 25 states, and a successful acquisition trackrecord

• Sell SFNB, Bull & Bear and Liberty Life products to Prism’scustomers

• Lower Prism’s on-balance sheet funding costs• Continue its acquisition strategy and expand its national presence• Recent American Express alliance to provide white label Internet

mortgage origination

Priority #3


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Corporate & investment banking

• Build, hire teams or do niche acquisitions (nobulge bracket aspirations)

• Very successful niche acquisitions:• Hambros bond business (London - 1998)• global equity derivatives team (New York - 1995)

• Expanding in US energy, telecom. & technology• hired energy team in Houston (Sept ‘99)• formed high-yield group (Oct. ‘99)

• Niche expertise globally:• credit derivatives• build-out of global equity derivatives in Europe

Priority #3


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Priority #4Growth of high-return, high-P/E

multiple businesses

• Royal Investment Services (wealthmanagement)• highest priority (50%+ ROE)

• Niche segments of personal &commercial financial services andcorporate & investment banking

• Newly created segment of GlobalIntegrated Solutions effective Q2/00

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US GAAP*growth over Q2/99 results

(C$ millions)


multiple businesses

Net income contributions - Q2/00

Personal &commercial

financial services52%

Corporate &investment

banking26%

RoyalInvestment

Services21%

NIAT $115NIAT growth* 66%ROE 52.8%Efficiency 72.7%



Global IntegratedSolutions 5%


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multiple businesses• Have been operating an integrated platform of financial

services since the late 1980s• Cross-selling success is gaining momentum and is

embedded in the organization

Total referrals between RBFG businesses

* Three months - from August 1/97 to October 31/97

Year

1997*19981999

BusinessReferred

(C $ billions)

3.02.41.2

New Sales(C $ billions)

2.74.03.9

New Sales/BusinessReferred

.9 X1.6 X3.3 X

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Royal Investment Services

• In Canada, #1 in 3 businesses (private banking,full-service brokerage, investment managementand trust), #2 in discount brokerage and #3 inmutual funds

• Targeting earnings growth of 15-20% per year• growth of 66% in Q2/00 vs. Q2/99• goal to take earnings to 25%+ of total bank core

earnings from 21%• Strong ROE (52.8% in Q2/00)


multiple businesses

34

Action Direct*Private client division**Global private bankingRoyal Mutual Funds***Other

Total RIS

Strong growth in all RIS businesses

(C$ millions)

*discount brokerage **full-service brokerage ***growth in assets under management(assets are administered by custody group, now part of GIS segment)

AUA growth vs. Q2/99

64% 11 59 1110

28%

vs. Q2/99

131% 36 44

946

38%

Rev. growthNIAT growth vs. Q2/99

127% 102 40 1777

66%

Rev. - Q2/00

$ 62288100101115

$666

US GAAP


multiple businesses

35

Personal & commercial financial services(Consisting of Personal & commercial banking and Insurance)

• Leading Canadian market share in residential mortgages,consumer credit and business loans

• Highest retail customer satisfaction among 6 largestCanadian banks

• Significant improvement in efficiency Q2/00 over Q2/99 –650 basis points (US GAAP)

• Performance targets:• revenue growth in mid-to-high single digits (8% in Q2/00)• significant cost reduction (NIE down 3% in Q2/00)• sales targets with linked variable compensation• leverage sophisticated datamining & segmentation techniques


multiple businesses

Personal & commercial banking

36

• One of Canada’s fastest growing insurance organizations• Becoming a major player in the Canadian marketplace• Well-positioned for international expansion• Defining new models to add value for shareholders• Investment portfolio has expanded significantly• RBC Insurance is:

• 4th in individual life policy sales in Canada* (37,000)• 10th in new individual life premiums in Canada* (C $22

million) - 8th with the addition of PruCan acquisition (05/00)• #1 in sales of creditor products among Canadian financial

institutions (C $293 million)• A market leader with C $160 million in travel insurance

premiums in 1999

Insurance - no. 1 Canadian bank-owned insurer


multiple businesses

*from 1999 LIMRA surveys

37

(C$ millions)

Net Income After Tax

Premiums

Q2/00

$29

$262

6 Mos. 2000

$55

$523

Change vs.

Q2/99

32%

15%

Change vs.

Q2/99

37%

31%


multiple businessesInsurance - Q2/00 results*

*results included in Personal & commercial financial services

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Corporate & investment bankingGlobal Banking Global Equity Global Markets

• Origination • Sales & trading • Fixed income• Debt products • Research • Money markets• Equity capital markets • Equity derivatives • Foreign exchange• Mergers & acquisitions

• Largest securities underwriter in Canada in 1999• Ranked #1 in Canadian syndicated lending• Leading securities trader on Canadian exchanges• The leading M&A advisor in Canada for the past 11 years• Significant improvement in performance in first six months

of 2000 (ROE of 24.0%, up 430 b.p. - US GAAP)• 2000 targets include revenue growth of >10% and net

income growth of >20% reflecting efficiency gains


multiple businesses

39

• Newly created (effective Q2/00)• Comprises custody, cash management, trade finance,

correspondent banking and large value payments• Allows for a more integrated sales relationship with business

clients• Brings together specialized businesses that already have

strong client relationships, well established franchises andleading market positions

• Q2/00 net income up 21% vs Q2/99, and six month up 29%• ROE - 28.1%, 380 basis point improvement from last year• Efficiency ratio - 67.9%, 120 basis point improvement from

last year

Global Integrated Solutions


multiple businesses

40

Investment Managers - 2000

1. Pictet 5.70 2. ROYAL TRUST 5.51 3. Brown Bros. Harriman 5.44 4. Northern Trust 5.13 5. Chase Manhattan 4.79 6. Bank of New York 4.59 7. State Street 4.36 8. Deutsche Bank 4.20 9. HSBC GIS 4.2010. Citibank 4.1111. Mellon 3.95

* source: R&M Consultants survey, February 2000, ranking custodian performance on customer service, etc.

Overall Global Custodian - 2000

1. Pictet 5.74 2. ROYAL TRUST 5.53 3. Brown Bros. Harriman 5.51 4. Northern Trust 5.28 5. Chase Manhattan 4.89 6. Deutsche 4.83 7. Bank of New York 4.79 8. HSBC GIS 4.74 9. State Street 4.7210. Citibank 4.0911. Mellon 4.00

Highly-rated custody operations


multiple businesses

41

Among top fifteen global custodians

1. Bank of New York (US) 6,3302. State Street (US) 5,9523. Chase Manhattan (US) 5,5764. Deutsche Bank (Ger) 3,9215. Citibank (US) 3,9006. Mellon (US) 1,8747. Northern Trust (US 1,5388. HSBC GIS (UK) 1,0359. BNP/Paribas (Ger) 1,025

10. Dresdner (Can) 80411. Brown Brothers Harriman (Fra) 76512. Royal Bank/Royal Trust (US) 710


multiple businesses

Top 12 International CustodiansYear-end 1999 (Pro Forma) (US$ billions)

42

US Regional

Royal Bank Banks

Price (06/16/00) C$74.25US$50.56

2000E P/E 11.5 14.5

2001E P/E 10.4 12.9

Price/book 2.1x 2.8x

RY - attractive valuation

43

RY – a compelling investment

• Analyst upgrades this year• 11 out of 13 analysts rate the bank a

“strong buy” or a “buy”• Canada’s most profitable bank• Leading market shares in most products• Excellent wealth management franchise• Targeting eBusiness leadership and

international expansion• Proven shareholder value orientation

44

S&PBanksIndex

RY BMO CM BNS TD S&P Banks Index

80859095

100105110115120125130135140

1-F

eb

4-F

eb

11-F

eb

18-F

eb

25-F

eb

3-M

ar

10-M

ar

17-M

ar

24-M

ar

31-M

ar

7-A

pr

14-A

pr

20-A

pr

28-A

pr

5-M

ay

12-M

ay

19-M

ay

26-M

ay

2-Ju

n

9-Ju

n

16-J

un

Relative share price performance (weekly close)

RYBMO

CMBNS

TD

Share price outperforming peers

45

Forward looking statementsThis presentation may contain certain forward looking statements withrespect to the Canadian economy, Royal Bank’s financial condition, results ofoperations, and strategies and objectives for the coming year(s). By their verynature, 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. RoyalBank cautions readers not to place undue reliance on these statements as anumber of important factors could cause actual results to differ materiallyfrom the plans, objectives, expectations, estimates and intentions expressedin such forward looking statements. These factors include, but are not limitedto, changes in Canadian and/or global economic conditions includingfluctuations in currencies, interest rates and inflation, regulatorydevelopments, technological changes, the effects of competition in thegeographic and business areas where the bank operates. Royal Bank cautionsthat the foregoing list of important factors is not exhaustive; when relying onforward looking statements to make decisions with respect to the bank,investors and others should carefully consider the foregoing factors and otheruncertainties and events.

canada's banking industry

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