RBC Dain Rauscher Forms the Foundation on Which We Are Building Our Wealth Management Business

AA qualityquality investmentinvestment inin uncertainuncertain timestimes “RY” on TSX & NYSE MorganMorgan StanleyStanley FixedFixed IncomeIncome 20032003 BanksBanks andand InsuranceInsurance CapitalCapital ConferenceConference Nabanita Merchant Senior Vice President Investor Relations RBC Financial Group London January 29, 2003 [Slide 1.] Good afternoon everyone. At the advice of our legal counsel, our first slide is a safe harbor statement. I’d like to take this opportunity to talk to you about the performance, strategy and future prospects of RBC Financial Group, Canada’s largest corporation and a growing North American financial services company. I will address those in the context of our four key priorities and three key goals. But before doing so, I’d like to provide a little background about our company and the Canadian economy. [Slide 2.] We are the largest company in Canada by market capitalization and the largest bank by total assets. We have #1 or #2 market positions in virtually all of our Canadian businesses and are committed to retaining our strong positions, particularly in retail businesses, which account for a sizeable share of our total earnings. We have a well diversified business mix and strong debt ratings. [Slide 3.] Our business diversification is reflected in this pie chart. You’ll note that more than half of our earnings are from personal and commercial banking and approximately one-quarter of our earnings are from asset quality-immune businesses – wealth management, insurance and transaction processing. Wealth management’s results have suffered due to weak capital markets but, as markets recover, its contribution should rise. [Slide 4.] Our loan portfolio is well diversified across industry sectors, which reduces our credit risk. [Slide 5.] It is in recognition of our strong franchise, prudent risk management and consistent performance that rating agencies have accorded us high debt ratings. Our credit ratings are a competitive advantage, which we do not want to compromise. [Slide6.] Turning now to the Canadian economy – it continues to out-pace the U.S. economy, a trend that has run virtually uninterrupted for the last four years. We expect the pattern of out-performance to continue in 2003 with Canadian growth expected to come in at 3.7% compared to a more moderate 3.0% for the U.S. The relative out- performance of the Canadian economy can be traced to a number of factors, some structural and some cyclical. The structural forces reflect earlier restructuring initiatives including broadening trade agreements, a move to low inflation and fiscal restraint. Cyclical support for the Canadian economy has come in the form of higher energy prices, a more moderate investment boom/bust cycle and a weak Canadian dollar. These forces, in combination with low interest rates and buoyant employment, have contributed to a release of pent-up demand in both the auto and housing markets. The firm growth has put the Bank of Canada on a tightening track as they adjust interest rates to more sustainable levels. [Slide 7.] Firmer commodity prices, strong growth, solid fiscal position, current account surplus and interest rate premiums have helped the Canadian dollar turn the corner from all-time lows in 2002. All these forces should remain supportive for the currency in the year ahead, particularly as risk aversion diminishes, allowing further appreciation of the currency by year-end. [Slide 8.] RBC Financial Group’s four key strategic priorities are strong fundamentals (that is, financial performance), international expansion (largely in the United States), growth of high-return and high-P/E multiple businesses and cross-platform leverage (meaning, leveraging the capabilities of our various platforms to realize cost and revenue synergies). [Slide 9.] We’ve been consistently meeting the strong fundamentals priority. Our core ROE continues to surpass the average of our North American peer group and with our cross-platform leverage initiatives gaining traction the potential exists to further enhance our relative earnings performance going forward. [Slide 10.] We’ve produced the leading EPS growth in the last year among our Canadian banking peers by generating strong revenue growth as a result of our U.S. expansion, continuing to control costs and recording reasonable asset quality. [Slide 11.] And our earnings have been very stable relative to other major Canadian and U.S. banks, as you can see on this slide. [Slide 12.] Part of our success stems from our disciplined approach to risk management. Since the end of 1999, we’ve recorded the lowest increase in non-accrual loans among our Canadian peers and our non-accrual loans ratio is also the lowest. This improvement partially reflects the fact that, since 1998, we have reduced our corporate loans outstanding by approximately 35%. [Slide 13.] And the non-accrual loan ratio isn’t much above the 1998 level. [Slide 14.] Our conservative risk management has also resulted in a provision for credit losses ratio that was the lowest among the Canadian banks in 2002 and also relatively consistent over the past three years, despite the difficult credit environment facing our industry. [Slide 15.] We are maintaining a focus on cost management and, last year, reduced operating expenses (excluding U.S. acquisitions) by 5%. Since 1999, when we embarked on a serious cost-reduction effort, we have lowered the core efficiency ratio of RBC Banking by 670 basis points, bringing it down to 59% last year. We are targeting a ratio in the low 50’s in three years time. We intend to realize cost savings through technology initiatives such as straight through processing while at the same time continuing to leverage economies of scale through centralized environments for managing our sourcing and spending. We’ve developed a scaleable model that allows us to make additional investments in our sales resources with savings garnered through streamlining of our back office and service delivery processes. Over the past three years, nearly half of RBC Banking’s cost base was directed to customer and sales activities and we expect to increase that number. This should enhance our customer service, customer satisfaction and top-line revenue growth. [Slide 16.] We have also been successful at growing our top-line - achieving a compound annual growth rate in revenues of over 11% between 1997 and 2002. [Slide 17.] And in the past five years our capital ratios have increased substantially. [Slide 18.] Our strong financial performance has resulted in solid internal capital generation – $1.8 billion in 2002 after paying out over $1 billion in common share dividends and almost $100 million in preferred share dividends. We repurchased $764 million of common shares last year and committed to acquisitions totaling approximately $900 million. In deciding how to deploy our capital, we balance our need for strong capital ratios and high credit ratings against our desires to grow the business through acquisitions and investment in our existing businesses, and to enhance returns through share repurchases and higher dividends. In 2003, we expect to continue to deploy our internally generated capital through a combination of share repurchases, dividends, capital investment and targeted acquisitions. [Slide 19.] Our shareholders have also benefited from our strong financial performance through a 33% increase in common share dividends over the past 2 years. We have a long history of uninterrupted and growing dividends that we expect to continue. [Slide 20.] In 2002, we met almost all of our objectives despite ongoing concerns about global economic growth, financial market uncertainty and geopolitical tensions. While adjusting our businesses to perform well in the short term, we also continued to expand our capabilities and take action to position ourselves for sustained long-term growth and consistent performance. We remain highly committed to our priority of strong fundamentals and are very focused on managing the balance between long-term growth and short-term returns. [Slide 21.] In terms of our 2003 financial objectives, we have increased our EPS growth target to 10-15% from 5-10% and reduced our revenue growth target to a more realistic 5-8% from 7-10% last year, when we had benefited from a full year of revenues at RBC Centura, which was acquired seven months into 2001. These changes reflect our expectation that the capital markets will pick up slightly in 2003 and cost management efforts will allow expenses to grow at a lower rate than revenues. [Slide 22.] We have also modified some of our medium-term goals. We have raised our dividend payout goal to 35-45% from 30-40%, underscoring our commitment to rewarding our shareholders. Our payout ratio was 37% in 2002 and we raised our common share dividends by 10 per cent during the year. We have also increased our Tier 1 capital ratio goal to 8-8.5% from 8% to make our capital ratios more comparable to those of other well-capitalized North American banks. Finally, we have raised our specific provision for credit losses ratio goal to .35-.45% from .30-.40% to reflect the uncertain economic environment, the growth of our Canadian and U.S. consumer loan book, which has loss ratios above the earlier goal range, and the expected growth of our small business and commercial loan portfolios. [Slide 23.] Turning now to our international expansion priority, we’ve put together a diversified platform in the U.S. with a focus on retail businesses. Our investment emphasis has been in Personal & Commercial Banking and Wealth Management – businesses we know well and in which, over time, we believe we will become recognized in the U.S. as being best in class. RBC Centura forms the base from which we are building our personal and commercial banking business. The focus of our growth efforts will likely be a combination of targeted acquisitions and branch openings in the Southeast U.S.

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