Dave Mun - Senior Vice President and Head, Investor Relations Dave McKay - President and Chief Executive Officer Rod Bolger - Chief Financial Officer Mark Hughes - Chief Risk Officer Neil McLaughlin - Group Head, Personal & Commercial Banking Doug Guzman - Group Head, Wealth Management & Insurance Doug McGregor - Group Head, Capital Markets and Investor & Treasury Services

Robert Sedran - CIBC Capital Markets Meny Grauman - Cormark Securities Sumit Malhotra - Scotiabank Gabriel Dechaine - National Bank Financial Ebrahim Poonawala - Bank of America/Merrill Lynch Doug Young - Desjardins Capital Markets Sohrab Movahedi - BMO Capital Markets Mario Mendonca - TD Securities Steve Theriault - Eight Capital Nick Stogdill - Credit Suisse Scott Chan - Canaccord Genuity

Good morning, ladies and gentlemen. Welcome to the RBC 2017 Fourth Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Dave Mun, SVP and Head of Investor Relations. Please go ahead, Mr. Mun.

Thanks, operator and good morning. Speaking today will be Dave McKay, President and Chief Executive Officer; Rod Bolger, Chief Financial Officer; and Mark Hughes, Chief Risk Officer. We will open the call for questions following their comments. To give everyone a chance to ask a question, we ask that you keep it to one question and then re-queue. Joining us in the room are our business heads, Neil McLaughlin, Group Head of Personal & Commercial Banking; Doug Guzman, Group Head, Wealth Management & Insurance; and Doug McGregor, Group Head, Capital Markets and Investor & Treasury Services. As noted on Slide 2, our comments may contain forward-looking statements which involve applying assumptions and have inherent risks and uncertainties. Actual results could differ materially. With that, I will turn it over to Dave.

Thanks, Dave and good morning, everyone and thanks for joining us. This morning, we recorded quarterly earnings of $2.8 billion capping off a successful year in which we met all of our medium-term financial objectives. We delivered record revenue of over $40 billion in 2017 and earnings of $11.5 billion, up 10% year-over-year. We generated strong ROE of 17% for the year, while maintaining a CET1 capital ratio of 10.9%. Demonstrating our commitment to drive long-term shareholder value, we delivered on our growth strategies and returned a record $8 billion of capital this year through dividends and buybacks. Our results not only reflect our diverse client franchises, but also our commitment to invest for the future. As we re-imagined the role we play in our customers’ lives, we have been accelerating our investments and finding new ways beyond traditional banking to add value to our clients. Each of our business segments delivered strong underlying earnings growth in 2017, while making significant investments. During the year, we spent $3 billion in technology including digital initiatives and cybersecurity and we have expanded our capabilities in artificial intelligence. We will open a new AI lab in Montréal building on our existing Borealis AI locations in Toronto and Edmonton allowing us to provide better insights for our clients. We also invested in our people to drive sustainable growth. I continue to be impressed by our employees who are innovating to generate new solutions for 16 million customers. And I am excited about the momentum we have built as we enter 2018 in an environment of strong employment levels, rising interest rates and solid GDP growth. Before I share my view on our business outlook, I would like to mention that our thoughts remain with our Caribbean employees impacted by the hurricanes and we will continue to support communities in the region as they rebuilt. In Canadian banking, we generated record revenues in each of our businesses in 2017 resulting in net income of over $5.5 billion. As the Canadian housing industry digests the changing regulatory landscape, we expect mortgage growth is slightly moderate to the mid single digits. Household demand however should still be supported by changing demographics including the large influx of Americans expected in Canada over the next 3 years. Increasingly, we are developing innovative tools such as the RBC True House Affordability tool and Neighbourhood Explorer to help more of our clients find their perfect home. In 2017, we captured 23% market share of Kansas credit card purchase volume and grew at a premium to the market. Our RBC Westjet co-brand credit card has shown strong growth with new cardholders up 32% year-over-year and I am proud of our Linked Loyalty Card with Petro-Canada, which was built through an innovative relationship to drive new accounts to RBC and deliver material fuel savings to millions of personal and business customers. In fact, our RBC Rewards program, Canada’s largest and most flexible bank owned proprietary loyalty program recently received 3 awards of the Loyalty360 Customer Awards for demonstrating our commitment to client experience, advocacy and innovation. We also implemented new technologies to simplify customer experience as we have seen a shift in the way retail clients are interacting with us. For example, self-serve transactions represent 84% of our total activity and we have seen a growing shift towards mobile usage. Our mobile community grew 19% over the year to 3.2 million active users and growth in mobile sessions was up 30%. Since the recent launch of Know Me, our mobile customers have benefited from actively reading more than 15 million financial insights using as predictive analytics to help manage their day-to-day finances. We are also creating an ecosystem for small business clients to help grow their businesses. For example, if you are collaborating with an award winning software firm called Wave to provide business owners access to an integrated financial management and accounting platform. We partnered with the digital health benefits provider called Lead to help manage small business employees’ healthcare expenses. And last week, we introduced My Business dashboard, a tool that brings together complete picture of these and other online financial metrics into a single view on any device for better decision-making. Together, with our commercial banking business, where we are increasing our sales force by 10%, we are investing in capabilities to help grow clients – that will help clients grow their businesses that support our economy. We have strong momentum with business clients and intend to grow our 26% share of business loans in Canada. Our Canadian banking and wealth management teams are also working together to offer a full spectrum of investment solutions ranging from self-serve to full-service advice models. For example, we will soon launch Investees, our new digital investing offering to help clients manage their investments at a lower cost. This follows the success of MyAdvisor, our mutual fund clients at 4,000 appointments with digital financial specialists in the first four months of its launch. In 2017, our wealth management businesses generated revenue of over $10 billion and earnings of over $1.8 billion. In Canadian Wealth Management, the strong expertise and productivity of our 1,700 advisors were drivers behind our receipt being awarded the best private bank in Canada by the banker. In Global Asset Management, our strong fund performance and enhanced product suite were drivers that allowed us to capture 23% of industry net sales in 2017 adding to our industry leading 15% market share of Canadian retail assets under management. RBC Global Asset Management won Ten Lipper Canada fund awards was recognized as the best bond funds ETF group. In U.S. wealth management, including City National, our growth was driven by client acquisitions through a growing sales force and expanding footprint. We welcome the new teams in Washington DC, Minneapolis and New York City to drive an accelerated growth strategy. This is supporting our above average loan growth and we continue to benefit from rising interest rates. And all of our teams in the U.S., including capital markets have collaborated very well and generated over $1 billion of referrals in the U.S. marketplace. Our insurance segment generated strong net income of $726 million in the year. Our partnership with Aviva Canada has allowed us to deepen client relationships from our comprehensive suite of insurance products, while new mobile apps such as My Benefits and PATH enhanced the customer experience. As part of our collaboration efforts, investor and treasury services was recently appointed custodian for Aviva Canada adding to our successful home and auto insurance relationship. Investor and treasury services posted very strong results for the year, with assets under custody reaching a record $4.3 trillion and earnings of over $740 million. We continue to make significant multiyear investments in data and analytics within our advanced client experience program to provide better customer-driven solutions. This has driven notable client wins and renewals in Canada, Australia and Ireland. We are also investing heavily in the robotic process automation tools to make ourselves more efficient and improve the client experience. Capital markets also had another strong year with net income of $2.5 billion driven by record revenue and disciplined risk management and you are characterized by market uncertainty and lower volatility we remain the leader in Canada and are working together across borders to provide financing for deals such as the acquisition of digital globe by macro technologies for over $4.5 billion. We are deepening client relationships within corporate and investment banking in the U.S. and lab managing directors and specialist teams in our U.S. and European locations to develop new relationships adding a solid pipeline. Our fixed income and equities businesses performed well despite market headwinds that the testament to the strength of our global equity research team we received the top 10 ranking overall by institutional investor. As positions as well for any changes driven by method two and proud the progress we made across the businesses in 2017 and how we are driving strategies forward for our customers. In conclusion I remain confident in our growth outlook and ability to meet our medium-term financial objectives we are adding client facing employees to serve more customers to capture market share what we see is a solid economy and stable credit environment at the same time we are investing in new technologies for clients be more efficient across her businesses. Our industry-leading employee engagement in the trust that clients have in us position us very well for the future. And with that turn I will turn the call over to Rod.

Thanks and good morning everyone. I will talk about our business performs in the quarter and will add to Dave’s Outlook comments. Starting on slide 6 we reported strong earnings growth of 12% in the fourth quarter. Our EPS growth rate of 14% benefited from 36 million of share repurchases reducing shares outstanding by 2% from a year ago we have now repurchased almost all of the shares we issued for the City National acquisition two years ago. Good revenue growth and lower PCL drove our earnings this quarter as we supported clients across our businesses and benefited from favorable macroeconomic conditions. Both segments reported strong double-digit earnings growth and while strong results drove higher variable compensation we generated positive all bank operating leverage of 1.5% net of the insurance fair value change. This Dave mentioned we invested heavily in talent and new capabilities to help us deliver great customer experiences reduce inefficiencies and strengthen our risk infrastructure including cybersecurity and compliance with regulatory requirements such as CCAR. Our results this quarter included pretax average cost of $66 million which brings our full year’s average to approximately $240 million pretax. Finally the lower tax rate this quarter was due to changes in earnings next and capital markets including higher revenue and US municipal banking. Turning to Slide 7 our CET1 ratio remained strong at 10.9% which is in line with our target range of 10.5 to 11% we generated strong internal capital repurchased a further half billion dollars of shares and sell good organic RWA growth in our retail businesses balance within prove credit quality and RWA optimization in certain portfolios however a big driver of our capital ratio this quarter was the triggering of the Basel I regulatory for which was largely driven by growth in our wholesale and retail businesses as well as FX rate impacts. We understand that ISV is currently reviewing its Basel one for guidance for Canadian banks in response to requests from the industry looking for revisions to the current floor and as you know we are adopting IFRS9 in the first quarter 2018 and based on current estimates the transition to the new accounting standard is not expected to have a significant impact on our capital ratios since we already have a sizable $1.2 billion capital deduction for shortfall of allowance to expected loss. This shortfall is expected to absorb our estimated $600 million reduction in retained earnings for IFRS9 transition. We would still have room under the shortfall to absorb future PCL impacts from a capital perspective furthermore the financial stability Board recently designated us G-SIB reflecting scale of our global operations. And given our status as a G-SIB in Canada we are already carrying 100 basis point capital surcharge which meets our QC requirements. We remain very comfortable with our CET1 ratio and do not expect the G-SIB designation IFRS9 or Basel one florist impact of business growth capital management or deployment strategy. Given our competitive position and desire to invest and manage capital carefully for clients and shareholders we expect to target the higher end of our 10.5 to 11% range in 2018. Let me turn to the performance of our business segments starting on Slide 8, Personal, Commercial Banking $1.4 billion, Canadian Banking net income of 1.36 billion was up a strong 9% from a year ago. Revenue growth of 5% was driven by solid volume growth higher spreads and higher mutual fund distribution fees. This was partially offset by nonrecurring items in cards revenue. Mortgages were up over 6% as we won new customers and increase – increasingly retained existing ones. Business loan growth was up a strong 11% we adapted to changing client preferences in a rising rate environment by growing combined personal deposit and investment product balances 9% over the year. NIM increased 2 basis points year-over-year and 4 basis points quarter-over-quarter, benefiting from bank of Canada rate hikes in July and September and given a gradual outlook for rising rates we expect NIM to increase 46 basis points in 2018 with some variability quarter-to-quarter. Operating leverage in Canadian Banking was 1.5% in Q4 and for the full year adjusted operating leverage was 0.9% including the elevated severance costs or 1.3% if you exclude the severance. We continue to target operating leverage of 1 to 2% as we expect solid revenue growth to be partially offset by increased investments in technology including digital initiatives. Turning to Slide 9, Wealth Management reported earnings of $491 million up 24%. In Canadian Wealth Management our focus on customer relationships from higher fee-based revenue year-over-year and global asset management our strong fund performance, broad distribution network and low fee structure helped us win even more new business. Our U.S. Wealth Management revenue was up a strong 14% year-over-year, as we continue to benefit from recent fed rate hikes and strong loan growth, which we expect to continue at a double-digit rate. Our Wealth Management segment had record earnings in the quarter and in fact each of our 3 key businesses had record quarter notwithstanding niche market performance with North American equities performing favorably, but the opposite in fixed income markets. What we invest for future growth we expect to maintain a good efficiency trends in each of our wealth businesses. Moving to Slide 10, our insurance business ended the year with strong Q4 earnings of $265 million, reflecting actuarial adjustment updates. The timing of the recognition of the experience is based on accounting an actuarial standard. We generally, see about $50 million of assumption experience benefits in the fourth quarter and this year we saw around 100 million, which is really indicative of – indicative of good experience. In many businesses, this would flow through evenly over each quarter, over the current insurance accounting it tends to be lumpy. This was partially offset by our earnings from new U.K. annuity contracts, which were lower this year by proximally $33 million, given a general slowdown in the U.K. longevity transactions market. We believe the rebound is expected in 2018, so the timing of such contracts will continue to be variable quarter-over-quarter. We discuss investment treasury services results on Slide 11. Earnings of $156 million were down 10% year-over-year as we continue to invest heavily in technology, which is an important factor in recent client wins and renewals. And recall last year’s funding and liquidity earnings benefited from tightening credit spreads and FX volatility. Fine deposits were up 11% and assets under administration were up 9% as we benefited from the strength of our core ratings, reputation and product offering. On Slide 12, capital markets net income of $584 million was up 21% year-over-year reflecting lower PCL and higher corporate investment banking activity. We generated more lending revenue in Canada and so higher municipal banking revenue in the U.S. our global markets business continued to deliver solid results has been a tougher quarter for the industry driven by low volatility, which particularly impacted corporate investment grade and rates products within fixed income trading. Capital markets achieved strong returns and record revenue of $8.2 billion in 2017, while reducing our risk-weighted assets in the business by 6% over the last 2 years. Similarly, both market risk RWA and the average group VaR is down over 30% since 2015. We’re pleased with our fourth quarter and a record full year results in 2017 all of our businesses deliver strong earnings growth. We met all of our medium-term financial performance objectives both in 2017 and over the last 3 years on average. We remain committed to these objectives and believe our business model with scale franchises will continue to drive long-term value to our shareholders while supporting our clients and communities. As we look ahead to the first quarter our year-over-year comparables for our wholesale businesses are expected to be more difficult given the strong first quarter we had earlier this year. However, all of our businesses are collaborating innovative sport clients and when new business. And we are starting to see the benefits from interest rate hikes which will grow over time. We expect to see over $180 million benefit from the July and September rate hikes another 25 basis point hike in Canada we left net interest income by approximately $90 million in first year and a similar hike in the U.S. when increased revenue by US 50 million in the first year and we expect to improve underlying efficiency ratio across all of our businesses. And with that I will turn it over to Mark.

Thank you Rod and good morning I am very pleased with our credit performance this year with annual provisions for credit losses of 21 basis points similar to the lows that we last experienced in 2005. This is reflective of our strong underwriting practices low unemployment levels in an improving microeconomic backdrop particularly in the oil and gas sector. Turning to slide 16 in the fourth quarter total provisions for credit losses of $234 million were down $86 million or 27% from last quarter with provisions down across all business segment. The PCL ratio of 17 basis points was down 6 basis points quarter over quarter as I have mentioned in the past both provisions and recoveries with in our wholesale book could show some degree of variability from quarter to quarter excluding a few outsized recoveries in capital markets are total PCL ratio would have been 20 basis points this quarter. In our Canadian banking business provisions of $251 million decreased $8 million quarter over quarter reflecting lower PCL in our commercial lending portfolio. Caribbean and U.S. banking provisions were up $5 million from last quarter reflecting higher provisions in our Caribbean lending portfolios. Wealth management has no provisions this quarter capital markets had a net recovery of $38 million this quarter largely due to recoveries on a few accounts in the oil and gas in real estate and related sectors. Turning to Slide 17 gross impaired loans of $2.6 billion were down $320 million or 11% from last quarter largely driven by repayment and accounts roof turning to performing status and our capital markets and wealth management portfolios. Our gross impaired loan ratio of 46 basis points was down 7 basis points from last quarter. Our gross impaired loans do not yet reflect the impact from the recent hurricanes in the Caribbean where our exposure of approximately $300 million is limited think Martine and Dominica. We had limited access to our clients in these regions and continue to assess the full extent of damages as we regain access to the hardest hit region. Positive trends in internal and economic indicators for certain wholesale and retail portfolios allowed us to absorb an increase in the collective allowances for Caribbean banking related to the hurricane. Let’s now turn to the Canadian retail exposure on Slide 18, delinquency rates and PCL ratio sprinted lower year-over-year for most retail products supported by low unemployment levels in key provinces along with steady wage growth. Slide19 shows that the credit quality of our Canadian mortgage portfolio continues to be strong with average provisions of just one basis point for fiscal 2017. In this rising rate environment we remain comfortable with our clients ability to repay given over 90% of our mortgages have already been thrust of the rates above the contract rate. At origination we have not seen any material changes in average PICO scores LTV or amortization periods over the last 12 months. And more recently we have seen an increasing number of fixed rate mortgage originations signaling increase conservatism by our clients in a raising rate environment. Our variable rate HELOC portfolio continues to perform well with delinquency ratio similar to that of our insured mortgage portfolio. Furthermore HELOC utilization rates have remained relatively stable over the past year with over 90% of our total online clients paying down the principal. Looking ahead we remain conservative in our credit adjudication strategies and we continue to leverage digital capabilities to support credit decision and predict early warning signs in order to mitigate risks. For 2018 we are still thinking our PCL ratio could be in the 25 to 30 basis point range. Given the current micro – macro environment and the quality of our portfolio, we would expect PCL ratio to be at the low end of that range or possibly lower for at least the start of 2018. Having said this as we implement IFRS 9, growth and variability from stage I and stage II, market and economic factors as well as forward-looking considerations could add some quarterly volatility towards the higher end of the range as we move through the year. Through a full economic cycle, the level of provisions under IFRS 9, should be relatively similar to provisions under the previous accounting standards. And finally, turning to market risk, market risk VaR of $18 million in Q4 with the lowest level of the this year, in addition the average VaR for the year was $11 million lower year-over-year. During the quarter, we had no days of net trading losses, we incurred only one day of net trading losses during 2017, compared to 7 days in 2016. With that, I’ll turn it back to Dave.

Thanks. Before, we take Q&A I believe Dave wanted to say a few words. Sorry, we’ll take – operator, we’ll take questions now.

Thank you. We will now take questions from the telephone lines. [Operator Instructions] Our first question is from Robert Sedran with CIBC Capital Markets. Please go ahead.

Hi, good morning. I just wanted to come back to the IFRS 9, I guess outlook on loan losses. Rod, I’m paraphrasing, but you said something along the lines have the buffer leaves you room to absorb from a capital perspective and increase in loan losses. Does that suggest that as the IFRS 9, losses may roll through the income statement, you’re going to have a benefit to see if you want to that buffer gets reduce still further?

No, I wouldn’t say there is a benefit to see if you want Robert I’d say that the old Basel short deduction was about 1.24 billion in Q4, the 600 million I mentioned will largely go and reduce that [Indiscernible] workout dollar for dollar thus the mechanics of the Basel deduction is a different expected loss methodology then what is going to be the expected loss methodology under IFRS 9, there could be some puts and takes, but largely the first – think about the first 1.2 billion of increases under IFRS 9, should be note, so negligible impact on CET1, there could be some puts and takes there depending on the nuances of calculation of course.

And so understanding it’s not dollar-for-dollar, but the 600 comes out of that $1.2 billion.

Yes.

But the 600 impact on retained earnings as the opening adjustment from IFRS 9.

Largely now, now it within that 600 there’s a small amount of classification and measurement and that’s where the old AFS accounting is going away and so there was some volatility that went through OCI there, so there’s a portion of that is it’s only 50 million. So the 600 is in the dollar-for-dollar there, but it’s within 50 million.

Okay. And Mark understanding that the IFRS 9, is not going away, but were it not for IFRS 9, would you still be suggesting 25 to 30 basis points for next year?

I would certainly be saying at the low-end of that range as I said in my comments a possibly lower at least at the start of the year.

Okay, thank you.

Thank you. Our next question is from Meny Grauman with Cormark Securities. Please go ahead.

Hi, good morning. Just a question on Slide 22, little bit of extra disclosure in terms of self-serve transactions and climbing steadily, I just want to ask in terms of – in terms of that – that’s – that self-service transactions, percentage of self-service transactions going through the branch networks, I just want to clarify that and then just ask where do you think that can go over a reasonable timeframe and how does that compare to your peers as everyone facing looking the same or is there something different and what you’re doing that is making that number higher for you?

Yes, thanks for the question. It’s Neil. So in terms of the self-service transaction, this would be inclusive of our ATMs our online banking capability and mobile and we are comparing that to the total transaction so you the trend is really been driven by [indiscernible] we look at mobile and so we would look back and say that 2017 is the year that the mobiles really taken off. Mobile became more active our customers are more active in our mobile application now the Mariner online banking application so that’s really the driver in terms of your word we benchmark ourselves versus our peers we do have an award-winning mobile app and we are seeing growth that were quite proud about 90% for the year.

And where do you think that number can get to the realistic to get to the high 90s mid 90s and with which your view on?

What I guess we look at sort of what the what the ceiling would be we have the benchmark against the Scandinavian bank is a very different model that they have employed other gun very hard at mobile and they would be in the end of that mid-90 range I think right now our focus is really about no sustaining growth activity in the mobile app and continue to drive functionality.

Thank you.

Thank you our next question is from Sumit Malhotra with Scotiabank. Please go ahead.

Thank you. Good morning. For stuff either for Dave or Rod, just thinking about the share repurchase activity this year and into next year I think Dave in your comments you talked about the $8 billion return of capital and three of that was share repurchases I have never really thought of royal is a thank you been in the past a very large buyback bank and this level of activity this year would you say that it was it was very much related to the sum of those third-party sure specific or third-party specific transactions you are able to enter into or resisting your view just a better reflection of how you want to deploy capital in the near term?

Thanks for your question. I will say a few comments in hand it to Rod. And as we look at the year in the past versus project import certainly we had an opportunity to repurchase shares of the year we had the strong capital ratios at the same time are able to grow balance sheet so we did take the opportunity to buy back shares throughout the year as you saw in returned almost 3 billion of capital to shareholders via a mechanism look for new here at my comments are on organic growth opportunities across the business we expect our corporate lending portfolios to start growing again as you noted it has been relatively flat as we repurpose the recycle capital among client franchises there are a number of years very effectively we still see strong growth in the Canadian market place of the biggest on the consumer side of the business financial services are growing well we have a unique opportunity to grow in United States putting your balance sheet to work across all those corporate institutional commercial and high net worth customer franchises so first and foremost is the very strong opportunity deploy capital organically into all three of our core customer franchises going forward we exit the year with a strong 10.9% CET1 ratio obviously impacted by the noted about the one floor thought again we still see the flexibility to grow our business but also return capital to shareholders via share buybacks going forward and potentially in organically if the opportunity were to present itself having said that we remains primarily focused on growing our business organically Rod did you want to make any comments about share buybacks.

Yes. And I think some of your comment on the historical view is online in and that’s largely as a result of us growing a capital base of the last 5 6 7 years you know from the 8% 9% level up to the 10.9% that were currently at the also had the city national acquisition which created good well that we needed to basically accrete capital back into the business so is it as Dave outlined our first preference is to grow client organic business obviously dividends we continue to maintain that the same medium term objective and we will buy back shares if that makes sense is not a first objective but we also you know accrete capital a very seriously and would not want to absorb unnecessary capital into our capital ratio.

Rod, those specific share repurchase programs that you participated in this year is there more of that to do or has that particular type of transaction largely run its course.

I would not, yes I don’t want to comment, because those are our single counterparty transaction. So I would not want to comment on those if there are opportunities in the future, we would look to do them, and they’re absolutely done.

[indiscernible] within the current respect buyback shares write about 10 million.

Yes, yes, we’re about two thirds of the way through 20.5 out of 30 million from the current NCIB program.

I think last thing Rod just to clarify, I think you said on the Canadian Banking NIM in your prepared remarks you expect 4 to 6 basis points of margin expansion through the year, first half am I correct on that and secondly is that a pro forma i.e., not baking at any further action by the Bank of Canada?

Yes, I’d say that’s based on the 2 that the taken place and it’s based upon the yield curve kind of behaving where we think it’s going to behave that you obviously if the longer and contracts or that the yield curve inverts or anything like that, which I don’t anticipate happening that those numbers would change, but based on the current outlook for the economy I’d say that’s – that’s a safe assumption.

That is very helpful. Thank you for your time guys.

Thank you. Our next question is from Gabriel Dechaine with National Bank Financial. Please go ahead.

Good morning. I want to ask you about mortgages and B20 which is just being implemented the next few weeks and get a frequent questions on demand is being pulled forward ahead of that. Are you seeing that in your business today?

Yes. Thanks for the question. It’s Neil. We have seen a little bit of pull forward this fall as we talk to customers, some of them are surprisingly aware of exactly what is stressed about and have decided to move more quickly. As Dave mentioned, we’ve taken look at the portfolio and we still look at the overall impact of the business to be fairly modest and we’ve included B20 in our outlook having our home equity portfolio grow in the mid single-digit.

So how much, just for some perspective, can you – I know you made some comments for the conference recently, but get some actual numbers like how much do you originate in mortgage volumes in a given year or this year for example and how much would that number decline due to B20, we got one number from competitor yesterday. And I guess from a credit risk standpoint, and if we start thinking or maybe if it’s worse than 10% compression, it starts trickling into economic activity. What sort of decline would be I guess [indiscernible] from a credit standpoint if we start seeing that in terms of impact on housing start, job 20% of the economy after all?

Yes. So, again we have taken look at our originations, we don’t see a material reduction and what we expect to originate from this, the number put out yesterday by one of our competitors, we would see a similar number as we look at the stress test and the capacity of the borrowers and we think wouldn’t be applicable to really originate. Right now, I mean Mark had mentioned over 90% of our mortgages are already under written at the – at these higher rates. So the waste majority of the portfolio and our originations are not really going to be impacted. In terms of our expectations of the impact, we did a number of things really impacting the mortgage market interest rates being one regulation being the second. I think the overall consensus is that, the overall consensus is that it will take a couple of months really into 2017 as these things get implemented in January to really understand the impact. But one thing, we’ve also want to emphasize is that with the regulations does not apply to existing customers. So as we look at the size of our franchise, we – you see this is a positive and we do expect some lift in our retention rate.

Okay. And on the credit maybe Mark, I don’t know if [indiscernible] there and also the origination volume number, is that a number you can share like we can’t see that anywhere actually?

On the credit side, it’s Mark here. I mean I at the movement we are not really seeing expectation per decline of a nature that would [indiscernible] from a credit perspective of our portfolios.

Okay.

Next question operator.

Thank you our next question is from Ebrahim Poonawala with Bank of America/Merrill Lynch. Please go ahead.

Good morning guys. I just wanted to follow up something that Dave you mentioned in your opening remarks around in outlook for a strong economy and consumer and job market next year I think that we sort of get into 2018 can you talk about sort of do you see more like this year we were surprised to the upside in terms of how strong the GDP growth was as you look into 2018 did you see more downside risks to economic growth in Canada and can you talk about in terms of the risks to the consumer from the beauty rate hikes I think we are on track for maybe two or three hikes next year would like to get your thoughts on those? A - Dave McKay Yes, absolutely. As we look at the Canadian economy going forward do you expect growth to moderate from the higher 2017 levels into the 2 to 2.5% range which is still on the new economy relatively strong growth so we see that growth balance are seeing stronger exports of the Canadian economy and with improved global conditions you would look at the bank account a forecast you are seeing good export growth you are seeing good investment by businesses that we didn’t see in 2015 and early ‘16 [indiscernible] the government stimulus and infrastructure are having affects you got balance growth in other parts of the economy that are taking some of the pressure off the consumer and consumption side is been driving our economy for the past decade almost but we are seeing balance growth across sectors and that’s why you are seeing a business financial services deposits and lending growth so strongly are still seeing consumption very strong on credit card side and that we project that to continue going forward so I see a bit of a moderation but a better balance in the economy is where is the growth occurring in one at a better balance geographically you seeing in the West strong BC strong on terrible you are seeing in a bit of a rebound out in Saskatchewan again and in Alberta we are seeing bouncing around strong impacts of good geographic bounds good sectorial bounce across the country and that’s reflected I think is in our numbers as we exit the year and where we are seeing growth we also see that the United States and a very strong economy will have a forecast of the corporate rate impact on growth yet or an infrastructure spend there any loosening of standards for the banking industry that can accelerate growth so forcing growth balanced across the City National franchise and or wealth franchises and or capital markets franchise seeing good pipelines as we exit the year so we are seeing very much balance conditions that there that give us confidence in the year to come.

That’s helpful. And just as follow-up to that just listening to your remarks around PCS for next year it sounds like if anything that’s probably it could be better than sort of the guided range have you think about 18 like should we be right side of the consumer leverage levels and what higher rates might do next year on you not concerned about that?

We have always said that as we stress our portfolio the primary driver of credit stress and the consumer book is unemployment second is divorce when you look at the impact of race is Mark so we have already stressed 90% of our mortgage portfolio to 200 basis point higher rate it’s unlikely that we are going to see rates at the longer end of the curve go up that much what you are seeing or short-term rates go up a flattening of the yield curve you are not the longer-term rates go up to the same extent so as we look at where the stress is a manifest itself we project strong employment growth strong economic conditions the primary driver of credit stress doesn’t seem to be on the horizon therefore we are not forecasted in the lower range that Mark nominated including the impacts from IFRS9 which obviously in stage III for stage I growth in your portfolio does impact your overall number not something relevant or just two of the coming year.

That’s helpful. Thank you.

Thank you our next question is from Doug Young with Desjardins Capital Markets. Please go ahead.

Good morning. Rod, just on the second one, it sounds like [indiscernible] relaxed about the one risk-weighted asset for a speaker that from software from when your competitors obviously that would be a positive however sounds like Basel 4.0 or whatever you want to call it could be agreed to next week in some ways they perform that could include obviously some floors, I’m just trying to get a sense of how we should think about this are we going to simply replace the old Basel I floors with something new that’s coming in. Just wanted to get your thoughts on that?

Yes, obviously, I would – you could assume that as we would replace Basel I floor with another floor and then Basel IV as you refer to what others are referring to is Basel 3.5 would be a different floor regime that would have a phase in period. So we would probably take a couple of years before it would check in and then what there, what we’ve heard from people is that it would be a several year phase in and as we may choose to accelerate that. Based on what we’re hearing and what we’ve read in the press and what in Switzerland and in Europe told us if it falls into the 72.5% range for the Basel IV if not going to be a significant impact to our RWA in fact it would be smaller than what you saw this quarter for the Basel I floor, but again that would not come into play for us for several years.

So the way to think of it is you would get a benefit potentially for a few years until at a phase in started to happen in 2020 and thereafter. Is that a fair way to think of it?

Yes, we are even later the reports they came out a few months ago was that there is going to be phase in through 2027 or something and it was started a very low floor rate, I’m not going to guess what those rates might be, but if you believe what you read in the press it would not impact this for many years.

Okay, fair enough. And then just a few clarification the insurance impact from the actuarial you said from $50 million to $100 million, that was after-tax I assume?

Yes.

Okay.

Yes. And again that is experience driven, and so we have to go through the different models that we go through on the actuarial side and that were that’s how that works out and so I think what you can from that is that we’ve continue to have strong experience in our insurance book and the share was better than in recent years. There is conservatism built into the actuarial models and into the accounting and so that – that’s how that place out.

And then just one last clarification Mark, I think you talked about your exposure to the [indiscernible] so I didn’t got the number down. Can you just repeat that?

Yes, it’s $300 million.

Thank you very much.

Thank you. Our next question is from Sohrab Movahedi with BMO Capital Markets. Please go ahead.

Thanks. Dave, just maybe color you noted in your outlook specific to expenses, you talking about $3 billion in tech spend as you make investments in the digital initiatives. How does that $3 billion compare to where you’re at right now and relative to your revenues and is that a number that you think about, I guess in dollar terms or do you think about it relative to opportunity to spend if you had more revenues?

Well, I think if you look at where [indiscernible] relationship to revenue I think we benchmark well against our peer group of J.P. Morgan and Bank of America and others were spending 8% 9% of revenue on technology and I think ours is in the similar range in the Navy elevated above were some of our Canadian peers might spend, but we do think about it more in the terms of an absolute spend and the things that we need to achieve where the opportunity lies and I would say that spend the elevated right now it made the comment pretty consistently over the last 6 quarters, as we have an opportunity to transform our business from a digital perspective and create new channels. You seen the customer movement into the mobile channels, we’ve had a number of – if you heard my comments this morning there are 6 or 7 examples of functionality and very exciting capabilities that are coming on stream that we’ve invest heavily in over – over the past starting to see that benefit the customer switch coming out we’re very excited. So we don’t see a need to keep that pace as a percent of revenue going forward and that’s an absolute spend and I think it’s an elevated level you will not see the same type of growth in that as our revenues grow.

Okay, great. Thanks.

Thank you. Our next question is from Mario Mendonca with TD Securities. Please go ahead.

Good morning. These are more just quick clarifications Rod when you referred to 46 basis points of NIM improvement in domestic retail we referring to off of the Q4 level or for the full year Robert?

Yes the Q4 level.

Okay. And then on the margin generally it was great across the board capital markets domestic retail City National and frankly was better than what you would offered us in prior quarters it seems like things just improved what I be right in saying that it was deposit betas came in a little lower than expected it is that what the messages are socially offering is going on?

It’s a combination of factors one I think the generally if the market is anticipating a rate hike it kind of blows into our funding cost ahead of the rate hike we get some compression in that quarter this quarter I think the market was a little surprised and so we did not see that normal compression which benefited us so that benefits us on the landing and the deposit side and so are our ability to price into the loans versus what we passed on the deposits as you mentioned beta I was favorable I will say about a basis point benefit from ALM activity.

So going forward right you wouldn’t. You think this level of margin and capital markets domestic retail City National is sustainable especially in domestic where you actually going for to improve you wouldn’t expect any kind of check back on all bank level next quarter then?

No.

Okay. And then on the severance costs of $240 million pretax for the year seemed a little elevated I think that’s the way you described it as well as that number you would expect to see drop materially next year?

Yes, we would expect that to be much lower your call it in ‘16 it was around $130 million in ‘14 and ‘15 it was around $90 million of we would expect to be back to those levels is not if not below of you know it's hard to say what the future will bring but I would expect to be in a below or at the previous year number.

Thank you.

Thank you. Our next question is from Steve Theriault with Eight Capital. Please go ahead.

Thanks a lot. Couple of things for me. First, Rod did I see the NIM benefited at City National I think 4 basis points from required credit impaired loans. So, I guess IFRS related does that go away under IFRS some of these are tailwinds whether it’s from the acquired credit impaired book or from a performing book in terms of acceptably yield maybe give us a little sense on that?

Yes, if you look at Slide 23 you will notice that the that the Delta which was between those two spreads was quite significant certainly through 2016 that is as basically narrowed and it was down that to 8 basis points as part of the IFRS9 transition the as you as you would recall and correctly point out we did wipe out their loan loss reserve acquisition and purchase accounting now and IFRS9 kind of re-establishes that the meaningful portion not all but that a meaningful portion of the transition adjustment so we would expect the PCL there and the spreads there to be more normalized but no I wouldn’t expect the material difference coming out of IFRS9 on the NIM side or CNB you know I think if you look quarter over quarter we were up two basis points on the NIM excluding the acquired loans and you know absent further FED rate hikes those would be the levels I would look at but if we were given of future fed rate hikes i.e. you would expect that NIM to continue to expand.

Okay that’s all for me. Thank you. And then for Neil, your personal was flagged as an area where you would like to see some improvement we are not seeing at this quarter so maybe you can talk about the drivers there are your outlook for next year and also if you can folding in terms of cards and with early days can you talk a bit about how adoption and utilization is going with the new Petro-Canada relationship?

Sure. Thanks for the question. In terms of personal franchise guess maybe two comments one we are looking at that the personal lending portfolio reversing some good momentum in our auto business in terms of branch-based personal loans unsecured credit lines in installment loans it’s been fairly stagnant and this is something we look at in terms of needed to focus on both value proposition and distribution to start to move that long in 2018 in terms of deposit side of the personal business, it is about the personal deposit accounts and we do believe that’s an opportunity to drive some innovation starting in the back portion of 2018 to really have a client acquisition as a driver in the personal franchise. In terms of credit cards, we’re feeling really, really, really good about the credit card franchise continuing to really outperform in terms of purchase volume trending about 10% year-over-year in terms of purchase volume growth as a key driver of other income both from the Avion product and Dave mentioned our [indiscernible] product is that something that continually gaining steam and we have a great relationship with [indiscernible] that we’re quite proud of. In terms of Petro-Canada it’s early days, but we’ve been very pleased with the response from clients, part of this is due to just the share value that Petro-Canada and ourselves have put how to consumers. And the second portion would be just the ease of the experience. So once those clients simply go online and link their cards, the entire values is automated. And so Petro-Canada is obviously benefiting as more of our customers move to their locations to take advantage of the value.

Okay, thanks. And the Allied run-off is that run its course or we still feeling some of that?

Essentially, yes, it is essentially one it’s course and that’s one of the drivers of why we are mentioning that there is renewed momentum in the auto business.

Okay, thanks for that.

Thank you. Our next question is from Nick Stogdill with Credit Suisse. Please go ahead.

Hi, good morning. Just sticking with the card service revenue line, Rod you called out the nonrecurring item in that line in this quarter. Is that the thing to do with the recent partnership you’ve signed and absent that item would growth have been similar to what we’ve seen in the past few quarters high single digits year-over-year and tied to that was that most of the slower growth in Canadian Banking in this quarter?

Hi, it’s Neil. I’ll take that question. I had mentioned our card purchase volume continues at 10% so that the drop and other income is predominately due to card is really 2 drivers. The first being, we’ve had 2 fewer processing days in the quarter and so that’s just, what those transactions were actually recorded completely unrelated to the – to the year-over-year growth in purchase volume. The second is the onetime – onetime cost that we needed to incur as we transition the high net worth card portfolio to new value proposition and combined with about a $20 million in quarter impact.

Okay. Thank you. So we should see a sort of growth resume next quarter that item.

Yes.

Okay, great. Thank you. My second question just on IFRS 9, could you give us a sense on how much of the 600 million allowance trip is being driven by retail versus commercial [indiscernible] most of that increase relates to Canadian Banking or is it [indiscernible] other segments as well?

Yes, I mentioned the impact to the City National which we’re certainly does have a portion of that, but there is also largely in Canadian retail as where you see in the rest of it we also saw some increase in Caribbean as well but the wholesale side we saw a slight decrease.

Some more on the retail side. Okay, great. And then on last one on the investor and treasury services are you called at the higher tech spend this quarter should we expect a similar level of spending to continue through 2018 in that business line?

There was an unusual item in the last quarter there was little lumpy related [indiscernible] Dave mentioned that in his comments, but the spend will be pretty consistent frankly if you look at the spend through the whole year and you’ll see that going through the numbers for the next couple of years.

Okay, great. Thank you.

Thank you. Our next question is from Scott Chan with Canaccord Genuity. Please go ahead.

Good morning. On the Canadian side you talked about the mortgage with expectations. I was just wondering on the commercial business side very strong in the quarter, is there reasonable to assume that that you guys expect double digit loan growth on that side of the business in 2018?

It’s Neil. Thanks for the question. Yes, we’re feeling quite good about the commercial and business loan segments growing, a lot of it really in 2 fronts, first being we took our time to really make sure we understood the risk that we were taking on having not that were completed rejected some policies and at the same time grow our sales force so David mentioned we have 10% increase in the commercial account managers covering his clients in between the two levers will expect that growth the continuing in to ’18.

Okay, great. And maybe just one on while the consolidation happening Canada and the Derby CCN opportunities in certain pockets of distribution would be passive on the manufacturing site in Canada?

As far as this question I think we see opportunity in the order what’s going on in the outside world accrues to those who outsized and have a range of options and we have a distinguished number of channels and able to access clients is lien and with human advice is the general trend to it was certainly an attractive destination for investment advisors as they consider whether they are in homes that are able to invest at the rate that like to serve the clients I don’t know that we see a lot of inorganic consolidation in Canada but we do see it being tougher and tougher for those who have was to work with to be both an attractive place for the investment advisors also for the other customers.

Okay great. Thank you.

Thanks operator. We are going to have to end the question there.

Thank you. I will now turn the call back to Mr. McKay.

Thank you. Just before we finish I would like to comment on this morning’s announcement that Mark Hughes has decided to retire in April after 37 years at RBC and there be many opportunities to recognizable the coming months but I like to take this moment to thank him for significant contributions to the bank to our clients and our shareholders and personal note I want to thank Mark for his incomparable counsel partnership over the years I am pleased that Graham Hepworth currently Executive Vice President of retail and commercial risk will take on the role of deputy chief risk officer in February and then assume the role of chief risk officer in April 2018 when Mark retires Graham is been with RBC for 20 years and help progressively senior roles in our risk management group brings a deep expertise and risk as well as experience working across multiple businesses and regions is well positioned for his new role I want to thank everyone for attending our call today I wish you a happy and healthy holiday season and will see you in Q1 in February 2018. Thanks very much everyone.

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