Royal Bank of Canada (NYSE:RY) Q1 2023 Earnings Call Transcript

And that really was put on, I think, strong exhibit today and the money flow, money in and out, it came at lower margins, but that’s the right thing to do for a client. It may have surprised you a little bit, but that’s how the client is reacting to a higher interest rate environment, and it’s the right thing to do. And therefore, that helps create higher ROEs, high retention, higher cross-sell, creates a funding strategy for us as we’ve termed out some of that money with term GICs, creates a good liquidity profile That levers into a very strong balance sheet with 12 7, higher liquidity than you’ve seen funding strength. So again, from that perspective, I think this is overall enhancing the high ROE franchises in Wealth and Canadian Banking, U.S. Wealth that we have.

The second thematic is certainly on cost. And as I mentioned, we hired — and Neil mentioned, we hired aggressively into the year-end. We’re kind of walking the talk that we’re expecting a softer landing. We’re looking for future growth, and we had a lot of client-facing employees. We’ve also invested heavily in technology to adapt to a rapidly changing world, whether it’s AI, whether it’s back office, front office, across the board when you have #1 franchises, we’ve been investing. Having said that, there is an opportunity to pull back. There is an opportunity to focus. And you have my commitment and my management team’s commitment that we can do better on cost side, and we can do better on driving operating leverage. Having said that, you see Neil’s business at a 39% efficiency ratio with a significant gap to the competition.

So we’re already at kind of market and industry-leading numbers. But I mean, having said that, we can do better, and we will do better. So I think from that perspective, we feel good about the trajectory going forward. You heard Nadine comment on margin expansion still going forward and leveraging our very strong core banking capability in the United States, in Canada. So I think those are the thematics on top of strong growth, very strong performance in capital Markets. Good performance in our U.S. and Canadian Wealth franchise, albeit in a volatile market, and I think we’ve produced a strong quarter. So thank you for your questions. They’re all on the right themes. We appreciate your insights and look forward to seeing you next quarter. Thanks, operator.

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