Reimagining our shared future RBC client Kathy Cheng, owner of Redwood Classics Apparel Toronto, Ontario Our Purpose Helping clients thrive and communities prosper Guided by our Vision to be among the world’s We are guided by our Values: most trusted and successful financial institutions, > Client First and driven by our Purpose,weaimtobe: > The undisputed financial services leader in > Collaboration Canada > Accountability > The preferred partner to corporate, institutional > Diversity & Inclusion and high-net-worth clients and their businesses in the U.S. > Integrity > A leading financial services partner valued for our expertise in select global financial centres Table of Contents 2 2020 Highlights 14 Management’s Discussion and Analysis 4 CEO Letter 117 Enhanced Disclosure Task Force 7 Chair Letter Recommendations Index Reimagining our shared future 118 Reports and Consolidated Financial Statements 8 Helping Clients Thrive 221 Ten-Year Statistical Review 9 Our Tech and Data Strategy 222 Glossary 10 Transforming the Employee Experience 225 Shareholder Information 11 Driving Diversity & Inclusion 12 Taking Action on Sustainability 13 Supporting and Inspiring Youth Connect with us: facebook.com/rbc www.youtube.com/user/RBC On the cover: instagram.com/rbc linkedin.com/company/rbc RBC client Kathy Cheng on the production floor of her family-owned business, Redwood Classics Apparel, a textiles and manufacturing twitter.com/@RBC rbc.com/ar2020 company based in Toronto, Ontario. Who we are Royal Bank of Canada is a global financial institution with a purpose- Why invest? driven, principles-led approach to delivering leading performance. > Diversified business model Our success comes from the 86,000+ employees who leverage their with scale and market- imaginations and insights to bring our vision, values and strategy to leading client franchises life so we can help our clients thrive and communities prosper. As > Resilient earnings with a Canada’s biggest bank, and one of the largest in the world based on premium ROE and dividend market capitalization, we have a diversified business model with a stability focus on innovation and providing exceptional experiences to our > Robust capital and liquidity 17 million clients in Canada, the U.S. and 34 other countries. position How we create value has always been as important as what we > Disciplined approach to risk and expense management achieve. This was even more pronounced in 2020 as the impacts of the COVID-19 pandemic took hold and continue to reverberate > Differentiated technology investments and digital around the world. In our annual report, you’ll read about how we are capabilities navigating these unprecedented times and leveraging our scale and > Recognized leader in ESG financial strength to deliver for our clients, communities, employees, and corporate citizenship and shareholders. BY THE NUMBERS 36 86,000+ 17 million countries employees clients All figures included in the front section of the annual report are from fiscal 2020 unless otherwise specified. Royal Bank of Canada Annual Report 2020 1 Some 2020 highlights across our balanced scorecard Clients 620,000+ clients #1 market share Outstanding Global have benefitted from in investment banking in Canada(2) Private Bank RBC Client Relief programs in North America for the fifth year A+ score inarow(4) 5 million on RBC Global Asset Management’s active mobile users, up 12% year- responsible investing activities, as Customer Service over-year(1) assessed by the UN Principles for Award Winner Responsible Investment(3) and 10 out of 11 top rankings among Celent Model the big five Canadian banks in the Bank of the Year $8.8 billion 2020 Ipsos Financial Service Excellence Awards award winner, demonstrating in financing for sustainable bonds industry-leading practices that and loans, representing 64% growth drive digital success in banking over 2019 Employees #4 globally Black, Indigenous and When asked about their well-being (10) in the 2020 Refinitiv Diversity & People of Colour (BIPOC) during the COVID-19 pandemic : Inclusion Index, ranking over represented 91% of employees feel 9,000 publicly-listed companies 35% of new hires(8) well-supported by RBC 40% of promotions(6)(8) 90% of employees see their Women 23% of new executive appointments, work as meaningful represented surpassing our goal of 20% for 92% of employees indicated 51% of new hires(5) the year(7) that they have the information 52% of promotions(5)(6) that matters to them (9) 46% of executives(7) 18% young people Communities $201 million $142 million $3.9 billion provided through RBC Future Launch®, given globally through cash donations in support of our communities as reaching over 2.5 million Canadian and community investments, including one of the largest taxpayers in Canada, youth through 500+ partner programs support to mitigate the economic and as a taxpayer in other countries since 2017 impact of the COVID-19 pandemic(11) whereweoperate(12) $23.9 million $10.7 million 1st financial institution raised by employees and retirees for raised to support youth and children’s in Canada 4,300+ charities through our annual charities globally through the first to sign a renewable energy Employee Giving Campaign in Canada virtual versions of RBC Race for the Kids Power Purchase Agreement and RBC Trade for the Kids (1) 90-day active mobile users in Canadian Banking only (8) North America; excludes summer interns, students and co-ops (2) Dealogic, YTD as at October 31, 2020 (9) Headcount under 30 globally, excluding City National and BlueBay Asset Management employees (3) See RBC GAM’s Responsible Investing Transparency Report and the PRI Assessment Methodology (10) Well-being surveys conducted from April to June 2020. The average participation rate was 55% for more details (11) Includes employee volunteer grants and gifts in kind, as well as contributions to non-profits and (4) Private Banker International Global Wealth Awards 2020 non-registered charities. Figure includes sponsorships (5) Global; excludes summer interns, students and co-ops (12) Refer to page 95 for additional information (6) Defined as upward change in position level or HR Class (7) Represents data for our businesses in Canada governed by the Employment Equity Act 2Royal Bank of Canada Annual Report 2020 Shareholders $7.82 14.2% 86 average diluted earnings per share (EPS), return on equity (ROE), percentile ranking down from $8.75 in 2019 down from 16.8% in 2019 on priority ESG indices(2) 63% 12.5% $4.2 billion of profits returned to our shareholders common equity tier 1 (CET1) ratio, remainder of our profit available through dividends(1) and repurchases up from 12.1% in 2019 to reinvest in future growth $4.29 dividends declared per share, increased by $0.22 since 2019 Earnings Earnings by business segment(4) net income (C$ billion) $12.9 $11.4 24% 45% Annualized Dividend Increase of: 5% 19% Personal & Commercial Banking One year Capital Markets Wealth Management 8% Insurance Ten year(3) 7% Investor & Treasury Services 5% 2019 2020 Financial performance metrics MEDIUM-TERM OBJECTIVES(5) 3-YEAR(6) 5-YEAR(6) Diluted EPS growth of 7%+ 1% 3% ROE of 16%+ 16.2% 16.4% Strong capital ratio (CET1)(7) 12% 11.6% Dividend payout ratio of 40%–50% 49% 48% Total shareholder return(8) 3-YEAR 5-YEAR RBC 1% 9% Global peer average (6)% 3% (1) Includes dividends paid on both common and preferred shares. Dividends were $6.1 billion on common shares and $0.3 billion on preferred shares (2) Average percentile ranking compiled from our four top-tier ESG ratings/rankings, including Sustainalytics, MSCI ESG Rating, FTSE4Good and RobecoSAM’s Corporate Sustainability Assessment (informing the DJSI) (3) Compound Annual Growth Rate (4) Excludes Corporate Support (5) A medium-term (3-5 year) objective is considered to be achieved when the performance goal is met in either a 3- or 5-year period. These objectives assume a normal business environment and our ability to achieve them in a period may be adversely affected by extraordinary developments such as the COVID-19 pandemic and the current low interest rate environment (6) Diluted EPS growth is calculated using a Compound Annual Growth Rate. ROE, CET1 and dividend payout ratio are calculated using an average (7) For further details on the CET1 ratio, refer to the Capital Management section (8) In fiscal 2020, Power Financial Corporation was removed from the global peer group. The 3- and 5-year annualized TSR are calculated based on our common share price appreciation as per the TSX closing market price plus reinvested dividends for the period October 31, 2017 to October 31, 2020 and October 31, 2015 to October 31, 2020 Royal Bank of Canada Annual Report 2020 3 Message from Dave McKay Amidst historic challenges arise opportunities to reimagine our shared future In what were truly unchartered waters, RBC continued to perform at a remarkably high level, particularly in the context of the early days of the crisis. Within weeks, we moved over 80% of our employees—across 36 countries—to work outside bank premises. To limit the health risks to clients and our employees and support slowing the spread of the virus, we temporarily closed hundreds of branches across our network, and reduced hours of operation. We moved more employees into contact centre roles to handle an increasing volume of urgent client calls. All of this was enabled by the significant investments we had long made in our infrastructure. This included securing broadband capability well before the pandemic started, investing in distributed call centre capability over the past decade, and building out market leading digital capabilities for clients. These investments have proven to be a differentiator. Like most citizens, our employees were understandably anxious 2020 was one of the most difficult years that society, global about their future, and it was critical each and every one felt economies and RBC has faced in generations.