Thank you, and good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer; Nadine Ahn, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Also joining us today for your questions, Neil McLaughlin, Group Head, Personal & Commercial Banking; Doug Guzman, Group Head, Wealth Management, Insurance and I&TS; and Derek Neldner, Group Head, Capital Markets. As noted on Slide 1, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. To give everyone a chance to ask questions, we do ask that you limit your questions and then requeue. With that, I'll turn it over to Dave.

Thank you, Asim, and good morning, everyone. Thank you for joining us today. Today, we reported earnings of $4.3 billion, with earnings per share up 7% from last year. Revenues were modestly lower year-over-year, largely due to moderating Capital Markets revenues, given unfavorable market conditions. This was partly offset by strong client-driven volume growth in Canadian Banking and City National, and solid Wealth Management client activity. Expense growth was only 1%. Before I share context on our earnings this quarter, I want to acknowledge the increasingly complex macro and geopolitical environment. As Russia's invasion of Ukraine continues with devastating effects, we continue to stand with the people of Ukraine and support the humanitarian relief efforts in the region as well as the Ukrainian diaspora in Canada. From a macro perspective, while I noted last quarter that we were closer to mid-cycle economic growth, the ongoing impact of Russia's invasion has added further complexity to existing challenges. From elevated inflation, a rapid tightening of monetary policy, supply chain disruptions, and shortages in energy, labor, and housing supply. Central Bank actions are having a profound impact on both bond and equity markets and, in turn, impacting capital markets activity. Central banks face increasingly difficult decisions in managing monetary policy to constrain inflation without impacting economic growth. Given low unemployment, rising wages, and elevated liquidity, we believe the key ingredients are in place to help mitigate any sustained slowdown. In this context, I will now speak to our proven business model, which generated a strong 18% ROE this quarter, underpinned by the strength of RBC's financial position, our diversified revenue streams, and balanced growth in capital deployment strategies. These helped drive significant book value per share growth of 15% from last year. Our balance sheet remains strong, giving us a solid foundation to grow at all points in the cycle. Our internal capital generation combined with a strong CET1 ratio of 13.2% enabled us to deploy capital in a balanced manner, allocated relatively equally between $20 billion of client-driven RWA growth, $1.7 billion of dividends, and nearly $2 billion of share repurchases. And this morning, we announced an $0.08 or 7% increase in our quarterly dividend. We also expect to take advantage of changing market conditions to complete our accretive normal course issuer bid in the second half of the year. With a strong foundation, we are well positioned to continue executing on our key strategic priorities, including working to close the acquisition of Brewin Dolphin, which shareholders approved earlier this week. This proposed transaction meets our criteria of acquiring high-quality franchises, which provide value-added complex advice to a growing client base in a structurally attractive market. We look forward to combining our complementary businesses and offering a breadth of wealth and banking products, advice, and services to clients while adding yet another sustainable growth vector to both our Wealth Management and UK franchises. We also deployed our capital to drive balanced growth in our diversified loan portfolio, where year-over-year growth was split equally between the retail and wholesale sectors. Our commercial real estate portfolio is a good example of how we drive balanced growth. The $12 billion year-over-year growth in the portfolio was not limited to Canadian Banking but well diversified across geographies and segments, including Capital Markets and City National. We expect our CET1 ratio will remain strong, above 12.5%, even after accounting for continued share buybacks and the proposed acquisition of Brewin Dolphin. Our capital strength continues to provide us the flexibility to deploy our capital in a balanced manner. While we did release a sizable portion of our COVID-related reserve build, Graeme will speak to the prudent increase in our reserves related to the increasingly challenging macroeconomic environment, even as we operate with low unemployment and client liquidity at elevated levels with delinquencies and PCL on impaired loans at low levels. Our results illustrate the importance of having diversified revenue streams. We expect the benefit of higher interest rates will more than offset some of the near-term headwinds in our market-sensitive businesses. The roughly $75 million benefit to Canadian Banking from the recent Bank of Canada rate hikes is reflective of the strategic investments we have made in our core deposit franchise over many years, including last year's launch of RBC Vantage. In the last 2 years alone, we have gained over 70 basis points of market share in core checking accounts. As Nadine will speak to shortly, rising short-term rates should provide a significant revenue lift across our businesses, benefiting from both increasing deposit margins in Canadian Banking and our Wealth Management and custody franchises, as well as higher asset yields at City National and our Wholesale businesses. Our results this quarter also highlight the balance within our various market-sensitive businesses. The strength of our investment management, mutual fund, and corporate lending platforms partly offset pressures in origination activities and trading revenues. Expense growth was well contained at 1% year-over-year, in part due to the natural built-in hedge of variable compensation; as market-sensitive revenues decreased, so does this large part of our cost base. I'll now expand on trends we're seeing across our core businesses. In Canadian Banking, residential mortgage growth remained strong, up 11% year-over-year for the second straight quarter, and we continue to invest in further improving the home buying experience for our clients. With housing activity slowing as interest rates rise, we expect mortgage growth to slow in the second half of the year and come in at the high single-digit range for the year. We anticipate the slowdown in mortgage growth to be offset by higher growth in commercial lending and credit cards, especially as utilization and revolve rates continue to increase off their recent lows. Credit and debit card transactions were 30% above pre-COVID levels in April, with strong momentum carrying into May. Global airlines and credit card networks are noting higher travel bookings, and we are seeing increasing visits to restaurants and hotels. In our market-leading business banking franchise, loan growth was up 10% from last year, as we saw increased confidence from business leaders. We also saw the benefit of our past investments in our business, including adding bankers and growing our RBCx platform. Recovery to pre-pandemic commercial utilization and card payment rates from current levels will not only add to Canadian Banking loan balances but also drive further margin expansion, potentially adding nearly $200 million of additional revenue over time. However, the best way to drive growth is to continue growing our 14 million client base as we have been doing through differentiated products and services, including going beyond banking through innovative solutions, including RBC Vantage, our strategic partnerships with WestJet, Petro-Canada, and Rexall. Turning to Wealth Management. We believe the diversity of our portfolio and the quality of our advice are strengths in these volatile markets. In Canada, RBC Dominion Securities has the #1 market share for high and ultra-high net worth clients. Canadian Wealth Management AUA was up nearly $35 billion or 7% year-over-year, and despite the volatile environment, we continue to attract experienced investment advisers while also seeing very limited attrition rates. RBC Global Asset Management includes the largest retail mutual fund company in Canada. Despite volatile market movements in both equity and bond markets, long-term net sales were $9 billion this quarter. In the U.S., we have multipronged growth vectors, including the sixth-largest U.S. wealth advisory firm ranked by AUA, where we continue to add to our adviser base attracted to our technology and brand. At City National, wholesale loan growth was flat relative to last year or up 14%, excluding PPP loans, benefiting from our growing teams and the build-out of our mid-market lending platform. Retail loans were up 25% year-over-year, largely due to strong growth in our jumbo mortgage strategy. And as I noted earlier, the proposed acquisition of Brewin Dolphin will further diversify our revenue stream by expanding our footprint in the UK. Although Capital Markets revenue was lower than in recent quarters, pre-provision, pretax earnings of $1 billion highlight the resilience of our diversified business in light of a challenging market environment. Our lending business had a second consecutive record quarter, underpinned by increased demand, including acquisition financing mandates as well as more favorable yields. And we gained market share in Global Investment Banking year-to-date, reflecting our continued investment in the business. As I have noted recently, we are strengthening our talent in key verticals, having hired approximately 20 Managing Directors year-to-date, and we'll look to continue to hire throughout the rest of the year. This is in addition to the 25 MDs hired last year. It's also important to highlight our balance between growth and prudent risk management. Despite volatile market conditions, we have had 0 days of trading losses over the last 2 years. While market conditions are proving to be a cyclical headwind, we still expect Capital Markets to continue to grow in 2023 as markets stabilize. In conclusion, our continued investments in our people, technology, products, and services are creating more value for our clients and driving strong volume growth and client activity across our businesses. We remain well positioned to perform through the cycle given our strong balance sheet, diversified business model, and balanced capital deployment strategy, including returning capital to our shareholders. And Nadine, it's over to you.

Thanks, Dave, and good morning, everyone. I will start on Slide 9. As Dave noted earlier, we reported earnings per share of $2.96 this quarter, up 7% from last year. Revenues were down 3% year-over-year as strong volume growth and higher investment management and mutual fund revenue were more than offset by an expected slowdown from very strong Capital Markets results last year. Expenses were up 1% from last year with pre-provision, pre-tax earnings down 2%. Our results benefited from a net release and provision for credit losses, which Graeme will speak to shortly. Our effective tax rate was down 270 basis points from last year, mainly due to the impact of net favorable tax adjustments. The legislation associated with the proposed federal budget tax changes has yet to be drafted, and as such, it is too early to comment on details associated with those changes, which we expect to increase our tax rate next fiscal year. Before moving to segment results, I will spend some time on three key topics: our balanced capital deployment strategy, our broad-based sensitivity to higher interest rates, and our focus on expenses. Starting with capital on Slide 10. Our CET1 ratio was a strong 13.2%, down 30 basis points from last quarter. Our earnings this quarter drove a premium ROE of 18%, generating 75 basis points of capital. We continue to maintain a balanced capital deployment strategy, allocating capital fairly evenly between growth, dividends, and buybacks. Inclusive of both dividends and buybacks, our total payout ratio was over 80% this quarter. At the midyear point, we have completed half our previously announced normal course issuer bid and have returned to our traditional policy of twice a year dividend increases. Our organic business growth was largely driven by strong financing across Capital Markets, City National, and Canadian Banking as we actively engage with both new and existing clients. Looking ahead, we expect the benefit from the implementation of the Basel reforms in early 2023 to more than offset the approximate 40 basis point CET1 impact of the proposed acquisition of Brewin Dolphin, which is anticipated to close by the end of the third calendar quarter this year. Moving on to Slide 11. Net interest income was up 9% year-over-year or up 10% excluding the impact of trading results, the highest growth rate since Q3 2019. Strong client-driven volume growth in Canadian Banking and City National along with record lending revenue and capital markets more than offset the impact of lower spreads year-over-year. Canadian Banking NIM was up 4 basis points from last quarter, the highest such increase since Q2 2018, largely due to higher deposit margins on our leading low-beta core checking platform. This was partly offset by the impact of a continued decline in mortgage spreads. City National's NIM was up 14 basis points relative to last quarter. As expected, rising interest rates had a relatively higher impact on City National's asset-sensitive balance sheet with roughly half of its loans being floating rate commercial loans. Now to Slide 12. We remain well positioned to benefit from higher rates. A 100 basis point parallel shift is expected to provide a $1.1 billion benefit to net interest income in the first year, rising to approximately $1.8 billion in year 2. To provide better visibility on our sensitivity to rising interest rates, we also highlight the expected benefit of a 25 basis point rate hike. Over the next 12 months, we estimate a flattening curve scenario to result in an aggregate $200 million of additional revenue in our Canadian Banking and U.S. Wealth Management businesses. We could also see a $60 million benefit over 12 months from our deposit-rich Canadian Wealth Management and Asset Services businesses. We anticipate an increase in client demand for repo should we see a normalization of surplus liquidity in wholesale markets. This, coupled with rising rates, should serve as a catalyst for a recovery in repo spreads. And a recovery in commercial utilization and credit card revolve rates would not only be positive for growth, but also for margins as well. We expect these benefits to revenue to more than offset the impact of competitive pricing pressures and rising funding costs. Turning to expenses on Slide 13. Noninterest expenses were up 1% year-over-year. Our more controllable costs or expenses, excluding variable and share-based compensation, were up 7%. Salaries were up 7% year-over-year, representing nearly 40% of the increase in our more controllable costs. As Dave noted, we continue to invest in sales capacity to meet the needs of our clients and drive growth. Part of the increase was also driven by higher salaries offered to our employees at the end of last year. Higher professional fees and tech adjacent costs represented nearly 30% of the increase in controllable costs as we continue to invest for the future while improving our operational and regulatory infrastructure. The normalization of marketing and travel costs compared to low levels last year drove another 20% of the increase, as we continue to meet the needs of our clients as economies opened up. Going forward, we are aware of the evolving operating environment, including inflationary risks and the need to strategically invest to ensure we remain well positioned to provide even more value to our clients. Nonetheless, we remain committed to prudently managing our cost structure. We continue to expect annual controllable expenses, excluding variable and share-based compensation, to grow at the higher end of the low single-digit range for the full 2022 fiscal year. We expect the year-over-year growth in all bank controllable costs to moderate in the second half of the year, even with rising salaries and higher discretionary costs off of COVID lows. Offsetting this would be our continued focus on productivity. Also, recall, we have made significant investments across the bank for a number of years, and going forward, we expect growth and amortization costs related to the capitalization of this historic check spend to begin to flow. And we expect our full-year Canadian Banking efficiency ratio to fall under 40% in 2023 as we look to generate full-year segment operating leverage above the higher end of our historical 1% to 2% guidance. Moving to our business segment performance, beginning on Slide 14. Personal & Commercial Banking reported earnings of $2.2 billion this quarter. Canadian Banking pre-provision, pre-tax earnings were up 4% year-over-year, in line with revenue growth. Canadian Banking net interest income was up 5% year-over-year driven by strong volume growth. Noninterest income was up 3% from last year. Higher mutual fund distribution fees were offset by lower securities brokerage commissions from a normalization of direct investing client activity. Increased client activity drove higher revenue from service charges. Higher consumer spending drove higher credit card balances as well as higher credit card purchase volumes and foreign exchange revenue, as travel bookings increased. Partially offsetting this were higher rewards costs commensurate with an increase in travel redemptions. Operating leverage was negative this quarter with expense growth up 6% on higher technology and staff-related costs and higher marketing costs. Year-to-date operating leverage was 1%, and we expect it to improve in the second half of the year. Turning to Slide 15. Wealth Management reported earnings of $750 million. Pre-provision pre-tax earnings were up 8% from last year. Revenues were up 11% year-over-year, including $84 million in pretax gains from the sale of certain noncore affiliates at City National. Canadian Wealth Management, RBC Global Asset Management, and U.S. Wealth Management all reported higher fee-based client assets, primarily reflecting net sales. This was partially offset by lower transactional revenue, mainly driven by reduced client activity as investor sentiment turns cautious. RBC GAM generated long-term net asset sales of $9 billion this quarter, especially in balance and equity mandates. Outflows were largely driven by clients rethinking their fixed income strategies. Net interest income at City National was up a strong 10% year-over-year in U.S. dollars, driven by double-digit volume growth. Turning to Insurance on Slide 16. Net income of $206 million increased 10% from a year ago, primarily due to higher favorable investment-related experience. Canadian Insurance reported higher group annuity sales and business growth across most products, and International Insurance recognized business growth and longevity reinsurance. Turning to I&TS on Slide 17. Net income of $121 million remained relatively flat year-over-year as higher client deposit revenue from higher interest rates was offset by higher technology-related costs, a favorable sales tax adjustment in the prior year, and higher legal costs. Turning to Slide 18. Capital Markets reported earnings of nearly $800 million. Pre-provision, pre-tax earnings of $1 billion were down 20% from last year's strong results. Corporate and Investment Banking revenue declined 6% from last year due to weaker origination activity, as elevated volatility and macro uncertainty kept issuers on the sidelines. This more than offset higher fees from M&A advisory and loan syndication, as well as record lending revenue, as we continue to deepen engagement with clients. Global Markets revenue was down 14% year-over-year, with lower results in both FICC and equities trading. In FICC, widening credit spreads negatively impacted our larger credit trading business, which more than offset strong trading performance in commodities and FX due to volatility-driven client activity. Equities revenues were solid, although down from our record results last year, which was characterized by robust primary activity and flow in derivatives. To conclude, our diversified businesses are well positioned to grow their franchise while building on the benefits from higher interest, and we remain disciplined in balancing our investments and capital deployment to continue delivering value for our shareholders and clients. With that, I'll turn it over to Graeme.

Great. Thank you, Nadine, and good morning, everyone. Starting on Slide 20. Our gross impaired loans of $2.1 billion were stable this quarter and are at their lowest level in 7 years. New formations of $398 million increased quarter-over-quarter as they normalize from the 10-year lows experienced last quarter, yet remained below pre-pandemic levels. The increase was mainly in capital markets, where we had a new impaired loan in each of our other services, including consumer staple sectors. Turning to PCL on impaired loans on Slide 21. During the quarter, we saw pandemic containment measures continue to ease, driving economic recovery, resulting in better-than-expected unemployment rates and GDP growth. These factors drove very strong trade outcomes in Q2 with PCL on impaired loans of $174 million or 9 basis points, which is stable compared to last quarter and remained well below pre-pandemic levels and our historic norms. In the Canadian Banking portfolio, PCL on impaired loans was down $40 million from last quarter, primarily driven by our commercial portfolio. Even though the benefits associated with government support core programs for commercial clients have largely concluded, performance has remained strong. Provisions on impaired loans to this portfolio came in at just $1 million this quarter, with mid-stage delinquencies also declining from last quarter. This strong performance is also observed more broadly with delinquency rates being lower across all of our Canadian Banking portfolios, as clients continue to benefit from a combination of elevated savings, strong labor markets, and overall economic recovery. In Capital Markets, after 4 consecutive quarters with net PCL reversals, we have seen recoveries normalize as expected, given the low level of impaired balances remaining. PCL on impaired loans was $27 million in the quarter, due primarily to provisions on the newly impaired loan in the consumer staples sector. Finally, in Wealth Management, PCL on impaired loans was less than $1 million this quarter, with relatively small provisions on loans in the consumer discretionary sector, which were offset by reversals of provisions taken last quarter in the same sector. Moving to Slide 22, I'll provide some context on our allowances. As noted earlier, uncertainty associated with the end of government support has materially subsided, and the impact of Omicron has proven to be limited. This has resulted in the release of the majority of our remaining COVID-related reserves on performing loans. However, new headwinds and concerns are emerging. The exceptionally strong economic recovery has created inflationary pressures that are proving to be greater and more sustained than previously anticipated. These pressures have been exacerbated by continued COVID-19 containment measures in China as well as the Russian invasion of Ukraine, which is having a substantive impact on commodity and energy prices. To curb the pace of inflation, central banks have increased interest rates, and we expect more increases are on the horizon. To account for a deteriorating macroeconomic outlook, we have prudently adjusted our provisions on performing loans. While our base case still calls for positive economic growth, we have increased both the severity and likelihood of our downside scenarios, which has partially offset the COVID-19-related reserve release. The net result was a $504 million release of provisions on performing loans this quarter, which drove a $502 million reduction in our allowance for credit losses on loans from $4.4 billion to $3.9 billion. Our ACL ratio of 49 basis points reflects our reserve releases over the last 6 quarters as well as a shift in portfolio mix driven by growth in our residential mortgage portfolio through the pandemic. Going forward, we will continue to monitor the evolving macroeconomic environment to ensure we are adequately provisioned. Let me now comment on the Canadian housing market and our residential mortgage portfolio. Following 2 years of exceptionally strong housing markets, we started to see markets cool and prices stabilize during the quarter on the heels of interest rate increases by the Bank of Canada. Aligned with the rapid house price appreciation, we have also seen income underpinning our mortgage originations grow at an accelerated rate, and the proportion of our mortgage relations with clients in the top quintile income bracket grow from about 1/3 to just under half. This highlights the relative quality of our mortgage client base and the strong and consistent underwriting standards we employ. It also highlights the ongoing housing affordability challenge we have in Canada. There have also been some notable origination trends in the market in relation to investor and variable rate mortgages. So we have provided some more color on these segments on Slide 23. Investor mortgages account for 13% of our Canadian Banking and residential mortgage portfolio. For this client segment, we apply more stringent underwriting standards. As such, the book has outperformed our broader mortgage portfolio, with a significantly lower impaired grade and a higher proportion of borrowers with a FICO score greater than 800. Variable rate mortgages account for 29% of our Canadian Banking residential mortgage portfolio. For these mortgages, a client's monthly payment remains unchanged as interest rates increase until the mortgage matures, providing the borrower greater time and flexibility before their payment increases. The majority of these mortgages were originated or renewed in the past year and are of high credit quality with an average FICO of 793 and average current LTV of 52%. Finally, in addition to the stress testing built into our origination process, we continuously review the resilience of our mortgage portfolio to higher interest rates. This provides us confidence that a large majority of our clients have the capacity to absorb the impact of further interest rate increases. To conclude, we continue to be pleased with the ongoing performance of our portfolio. Employment rates, housing prices, oil prices and other macroeconomic variables have come in stronger than projected this quarter. As I noted earlier, the impact of COVID-19 on our portfolio has largely subsided. These factors contributed to the lower-than-expected PCL on impaired loans this quarter. We believe the return to more normal levels of PCL on impaired loans has likely been delayed until later in 2023. However, during the quarter, we continued to see heightened market volatility driven by the increasing macroeconomic risk noted earlier. We are actively managing this increasing economic uncertainty. Our exposure to Russia is nearly non-existent, consistent with our strategy and risk appetite. We continue to maintain a defensive position in our trading business and did not experience any days with trading losses during the quarter. We continue to stress test our portfolio for inflation and interest rate risk, and we believe we are prudently provisioned and capitalized to stand plausible yet more severe macroeconomic outcomes. We expect that any elevated credit costs associated with these emerging macroeconomic headwinds are not likely to materialize until 2024. As always, we believe the quality of our client base and our prudent risk management approach position us well to manage through this increasingly complex backdrop. We remain steadfast in our commitment to supporting our clients and delivering advice, products, and insights to help them navigate the evolving macroeconomic and operating environment. With that, operator, let's open the lines for Q&A.

The first question is from Ebrahim Poonawala from Bank of America.

I guess, Dave, just wanted to get your thought process around capital allocation. I think the macro environment is extremely uncertain. I think you used words such as central banks having a profound impact, the Ukraine war adding increased complexity, but on the other hand, of all your peers, you have most excess capital. I think Nadine mentioned that the Basel IV changes will probably more than offset the Brewin impact to capital. So would love to hear as you think about on a go-forward basis, ex organic growth, how do you think about capital allocation? Do you lean in and become opportunistic in terms of maybe looking at more M&A deals? Or do you hold back and leave some dry powder because things could get worse 6 to 12 months down the road?

Thanks, Ebrahim, that's a great question. We've already significantly benefited from being patient as valuations change. We're attempting to provide a balanced perspective on the current economy, which is mid-cycle but showing many late-cycle signs. As central banks struggle with inflation, they need to impact demand significantly, making it challenging to predict how interest rates and inflation will affect demand, especially with a shortage of services to meet that demand. From this viewpoint, markets are uncertain about the economy's direction—whether we will see a slight recession. Our message is that it's a possibility, but it's truly a 50-50 chance. That said, the underlying strengths of liquidity, full employment, and other factors can help absorb some of this uncertainty. However, central banks will apply significant pressure on demand, and we predict a GDP growth of around 2% in Canada for next year. Considering this trajectory while being opportunistic, patience has proven beneficial; thus, one must decide whether to engage in other opportunities now or wait to see how things unfold. We maintain a balanced approach, as reflected in our discussions about risk-weighted assets growth, share buybacks, and dividends. We focus on creating premium shareholder value through these balanced strategies. Additionally, given our substantial organic capital build due to upcoming regulatory changes, we have a significant amount of excess capital to take advantage of opportunities. Therefore, we believe that patience will be rewarded.

And as a follow-up to that, Dave, I think you were very clear last quarter when you talked about Wealth Management interest in U.S., Europe and then obviously, you announced the Brewin acquisition. If you had to sort of pin down to 1 or 2 things that would be of interest, is it still more stuff to do in Europe? Is it something on payments, digital? Any perspective would be helpful.

Yes. We are very excited about the Brewin Dolphin opportunity and pleased that shareholders approved it with a high approval rate on Monday. This positions us as a comprehensive wealth management provider in the UK, which is an attractive market. Our primary focus will be to capitalize on the significant synergies from this acquisition, while also exploring the potential for further consolidations in a fragmented market. We are committed to delivering value for clients, particularly those with complex needs, including high net worth and ultra-high net worth individuals. Consequently, we will look for opportunities in North America and Europe to diversify our revenue and balance sheet. Additionally, we have a well-diversified portfolio in the commercial real estate sector, benefiting from our high net worth clients with real estate requirements. This diversification strengthens our balance sheet over time, which is a significant advantage for us, as we continue to grow our business not only in terms of revenue but also in balance sheet resilience and risk management. The sector remains attractive, requiring minimal capital for growth after acquisitions. We are also considering small acquisitions in the technology fintech space and exploring medium-sized deals to boost client acquisition and value creation across our commercial, consumer, and wealth businesses. So, yes to both. Great question.

The next question is from Meny Grauman from Scotiabank.

Just following up on that in terms of how low you'd be prepared to take your CET1 ratio? Again, Dave, given your comments on the complex macro environment, has anything changed for you there in terms of sort of operationally how low you would be prepared to go? Curious your thoughts on that.

Obviously, we have regulatory minimums and buffers above that, and given our strong capital generation ability and depending on the type of acquisition, you could take it down to kind of the regulatory threshold plus a buffer and service buffer. Therefore, we have significant capital to work with on any type of potential acquisition. Nadine, would you like to add anything?

Yes. I think you covered it, Dave. I mean, I think we said at over $13 billion, right, at the levels of what Dave recommended. So realistically, I think many than the comments I referenced in the speech that we are looking at some positive impacts associated with Basel III. I think that, to your point around prudency around what's happening in the macroeconomic environment, we still have sufficient capital to make decisions around strategic opportunities as well.

And just to put a finer point on it, would 11%, like a 50 basis point buffer be acceptable even in this kind of environment?

Maybe a little higher, but not a lot. But not significant, you're in the right zone. Yes.

Got it. And then just in terms of those new impaired loans in the Cap Markets business, is there anything interesting about those? Are those impairments in any way related to supply chain inflation? Any of the complex issues we're talking about or more idiosyncratic, if you're able to disentangle?

Yes, it's Graeme. I have a few comments. We typically don't discuss individual client accounts. However, I can say that over the past year in Capital Markets, we've experienced virtually no new impaired loan formation. Therefore, having one or two in this context doesn't seem significant, and I wouldn't consider anything particularly alarming with regard to those two accounts. Additionally, if you examine the overall early credit indicators, they all continue to show positive trends. I wouldn't interpret this situation as contradictory to that.

The next question is from Gabriel Dechaine from National Bank Financial.

I would like to ask about the net release and the significant provision release. From your note, it appears that your base case assumptions for GDP and unemployment have become more conservative compared to last quarter or the end of last year. Additionally, loans classified as Stage 2, the higher-risk performing category, have increased by 14% quarter-over-quarter. I noticed the $504 million performing ACL release, which is the second-largest number since the release cycle began in 2021. Can you help clarify the components of this situation? It seems there is deterioration on one hand, but from a provisioning perspective, that is not the case.

Yes, Gabriel, it's Graeme. I'll address that. We're currently observing many positive economic indicators, which are resulting in strong credit performance, particularly in Stage 3 results. We have robust cash balances and notably low utilization rates, with upgrades surpassing downgrades and delinquencies remaining low. The near-term credit environment is very strong. However, to understand what is driving this, I would break it down into two parts. We set aside substantial reserves in 2020 due to the extreme circumstances of the economic shutdown, and we've gradually released those reserves through 2021 and into 2022. Nonetheless, we haven't returned to the pre-pandemic reserve levels of 2019 and early 2020, as we've retained significant reserves due to ongoing uncertainties. This uncertainty is linked to two main factors. First, we were concerned about the aftermath of ending government support; when that concluded in the fall, we wanted to assess the subsequent signals and outcomes. Fortunately, we haven't witnessed the negative repercussions we feared as government support wrapped up. Additionally, earlier this year during Omicron, we faced further uncertainty regarding whether society would adapt or continue to experience cycles of shutdowns and reopenings. Thankfully, the economy has remained resilient and open. When considering these two factors, we felt it was no longer justifiable to maintain the ongoing reserves we had related to the pandemic. Nonetheless, we are aware of new and emerging challenges, such as supply chain issues, inflationary pressures, and tight labor markets. We factored these considerations into our reserves by monitoring our base case scenario, increasing the severity of our downside scenarios, and placing greater weight on those. While our baseline scenario still reflects positive economic growth, we've taken those downside risks into account, which has ultimately resulted in the $500 million release we enacted for Stage 1 and 2.

Okay, that's very clear. I have a technical question. I've heard Dave mention labor shortages and inflation as significant challenges for the economy. How do these issues factor into your forecasts? When I examine the forward-looking indicators, it seems like they mainly influence your GDP forecast. I'm curious about where I can see these risks reflected in your outlook.

Yes. So inflation, so that's one of a number of macroeconomic variables that we factor into our kind of our loan loss considerations. Really, we're transiting that through to kind of the direct impacts that we would see, say, on interest rates, the rising rate environment, and that's kind of a direct variable. The certainty that creates around widening credit spreads, which is another factor; higher yield, which is another factor; GDP itself is a factor. So it indirectly, if you will, translates into all those variables, which do drive kind of our models and our other analytics that we bring to bear as we decide on our loan loss allowances.

The next question from Paul Holden, CIBC.

I want to go back to the discussion around capital allocation, but a little bit of a different angle to it. Just with respect to organic capital allocation in light of your more balanced view on economic risks, like is your risk appetite changed at all regarding underwriting new loans, whether that's on a broad basis or there specific areas you're pulling back risk?

Maybe I'll start with a high-level view of how we approach it strategically, and I don't know, Graeme, if you want to jump in after that. Certainly, we take a through-cycle approach, right? We look at long-term client relationships. You can't time markets. You can't pull out of client deals once the clients on the books are there for a while. Therefore, our risk strategy is consistent through a cycle based on kind of our overall client and business strategy. So we don't tweak nor do we materially change how we approach that. Obviously, when you're looking at market deterioration and other things, you may miss more deals because of that, and you're certainly seeing that now in a number of lending sectors where competition and I call end-of-cycle practice is not everywhere across the credit spectrum, but certainly, in some significant pockets of the credit spectrum, you're seeing end-of-cycle pricing behavior, end-of-cycle terms and condition behavior. That could cause you to miss deals with a consistent lending structure, which is obviously happening today. But Graeme, did you want to elaborate on that?

Yes. I think the kind of hit that key phrase, which is that through the cycle approach. We've designed our risk appetite so that we can be that very consistent and persistent support for our client base and know that we can operate effectively through the cycle. So when times are good, we're not out there stepping hard on the gas pedal. We are constantly reviewing and stress testing our portfolio to ensure that we are resilient for when we get into more difficult periods and continue to lend into that and support our clients on that, and I think that's critically important. As Dave mentioned earlier, I think the other piece that quickly feeds into that is the diversification we have and not just the value that is from the top line, but the importance that plays in our ability to be that consistent support provider, if you will, through the cycle.

All right. Okay. And then second question is with respect to management of liquidity and potential shift in deposit trends. So you obviously saw good deposit growth quarter-over-quarter, little bit of a pullback in the U.S., I guess, because of higher deposit betas. Maybe you can address that a bit. But how are you thinking about the risk of QT given inflationary pressures on retail customers, et cetera, and management of deposits and liquidity?

That's an excellent question, Paul. I think it's something that everyone looks. I mean as was announced with the Bank of Canada, they would start allowing some of their bonds to mature at about 20% per year. When we look at it from our deposit base, I mean we would expect that with quantitative tightening trying to withdraw some of the liquidity from the system and have a modest dampening effect on deposits. But I think given our franchise overall, we're not really expecting that to have a material impact because we do expect that it will occur over time. What you have seen is a slight slowdown in our deposit growth, if you will, but still growth in another event. As it relates to overall liquidity, I mean, we do keep that in mind when we saw the big ramp-up in our deposit base have gone through the period and evaluating how that may transition into either paying down that surplus liquidity has definitely been an asset in the economy overall. But we take that into consideration when evaluating how we deploy those deposits. But we don't think that it will have a material impact, as I mentioned, is expected to grow over a period of time. I would also say that, that deposit base has been a strategic complement to our advantage overall and funding advantage given the fact that not only has the low beta, and I'll reference the U.S. in a moment, but in Canada, in particular, how that's accelerating our NII growth, but also a funding advantage overall to support our strong asset growth, both in Canada and the U.S. In the U.S., it's a bit of a different dynamic. I would think that you saw that part of our deposit slowdown in the quarter before. We did anticipate that given the fact that there is a higher deposit beta in the U.S., but we still do expect that only to ramp up very slowly over time with the Fed rate hikes getting up to 200 basis points roughly before we start to see that deposit beta around the 39% start to move up.

The next question is from Doug Young from Desjardins Capital Markets.

I think, Nadine, in your prepared remarks, you mentioned that Canadian Banking operating leverage was negative this quarter, just under 1% year-to-date. However, you also indicated a goal to drive operating leverage to between 1% and 2%, which aligns with your historical target for fiscal '23. Additionally, the mix ratio is below 40% in fiscal '23, although that isn't new information. I'm curious about what steps will take you from our current position to where you believe you will be next year.

Maybe I'll start and then I'll hand it over to Neil. This quarter, we saw an increase in our margin, up 40 basis points compared to last quarter, and we expect this trend to continue with the rising interest rates. Much of this benefit is due to our strong deposit base and low beta, which is driving our growth from both the rising interest rates and continued strong volume growth. Additionally, regarding our expense management, although we faced a challenging comparison to a low period in Q2 last year, we've been increasing our spending on sales and marketing as we come off those low levels, while still managing our expenses. We've improved productivity from our frontline staff and made investments in digital and technology that support our back office, which is why we anticipate an expansion in operating leverage. Now, I'll pass it to Neil for his comments.

Yes. To add a bit more detail to what Nadine has already shared, we anticipate a net interest margin increase of 4 to 5 basis points per quarter over the next few quarters. This trajectory significantly depends on deposits, and we've discussed our gains in market share for core deposits with relatively low betas. Additionally, we've addressed the revolve rates in our credit card portfolio, which, as Dave mentioned earlier, are influencing the net interest margin. I haven't emphasized much on other income, so looking year-over-year for Q2 in that area, mutual funds have faced challenges due to the downturn in equity markets, and we previously mentioned a normalization in direct investing. Last year, our credit card service revenue benefited from a lower redemption experience since travel options were limited. With travel now available, we've seen higher redemption experiences, and we've also incurred upfront costs related to new card acquisition bonus points, totaling about $45 million for the quarter, resulting in relatively flat card services revenue for Q2. Moving forward, we expect this to normalize alongside purchase volume growth rates, which exceeded 20% for the quarter. Moreover, we have nearly 10% volume growth across the entire business and are very pleased with our success in onboarding new clients on those platforms.

Perfect. Graeme, I believe you mentioned that credit challenges are not expected to emerge in fiscal '24. I'm trying to understand what you mean by that. Do you anticipate reaching a peak in provision for credit losses, or what is the thought process behind this?

That's a great question, and I appreciate the follow-up. To clarify, there are two key points. First, we are seeing a normalization of credit costs. We've experienced strong credit outcomes, and the actual results over the past few quarters have been better than we expected, largely due to very low unemployment rates. We anticipate this trend will continue longer than we initially thought, which suggests that we will see a return to more typical levels of Stage 3 losses likely deeper into 2023. Second, when I mention 2024, I'm referring to some emerging challenges we are observing, such as the effects of rising interest rates and the potential for a higher inflation environment. These factors will undoubtedly influence future credit costs. However, I believe the timing of their impacts will be more delayed. Certain portfolios, like unsecured credits or small businesses, may feel these effects sooner, but for many areas where the loan or debt profiles have longer terms, we won't see the effects on delinquencies and impairments until those profiles begin to mature. Whether it's our residential mortgage portfolio, commercial real estate portfolio, or various parts of our capital markets wholesale portfolio, the impacts from these emerging challenges are likely to be more gradual.

The next question is from Lemar Persaud from Cormark Securities.

Maybe we can go back to Graeme here. I think you addressed some of this in earlier responses regarding credit. Following this quarter's release, your ACL coverage ratio is now below where the bank was at the end of Q4 '19 compared to the pre-pandemic levels. It seems to me that there's significantly more economic uncertainty now than there was at the end of 2019. Can you help me understand why you're comfortable with the 49 basis points coverage on Slide 22, compared to the 53 basis points you had at the end of 2019? Perhaps there is some uptiering in the portfolio, changes in business mix, or maybe you're just more comfortable operating under IFRS 9 now after experiencing a period of stress. Any insights would be appreciated.

Thank you for the question. You've highlighted an important factor, which is the mix. When adjusting for the mix, we would be approximately 8% to 10% above our figures from 2019. This is a significant aspect. Most of the growth in our balance sheet over the past two years has stemmed from the residential mortgage portfolio, which has a lower coverage ratio. Conversely, in the cards business, which has a higher coverage ratio, we have lower balances, and those we do have are primarily from transactors rather than revolvers, indicating a lower risk profile. The mix plays a crucial role here. Additionally, if we look back to 2019, we were already building our reserves because we sensed we were nearing the end of the cycle, adopting a more cautious stance with our reserves back in late 2019. The situation in 2020 introduced a different level of concern, but now we are navigating an uncertain environment, which we incorporate into our framework. A $200 million-plus increase in our loan loss reserves due to these factors is significant by any standard, excluding COVID-19. We are taking appropriate actions to ensure we are adequately prepared for these new challenges.

Okay, that's helpful. I want to return to Slide 5, where you discuss the utilization in Canadian Commercial Banking. How much of the sequential increase from 84.9 in Q1 '22 to 87.9 was due to utilization? I believe there are other contributing factors, such as paydowns and new customers of the bank. I’m just curious if we could isolate the impact of utilization.

Yes, it's Neil. Regarding the utilization question, we believe it has reached a low point and is starting to improve. However, it hasn't even returned to the midpoint between its low and our pre-pandemic levels. Some of the factors contributing to this include demand loans and operators within the diversified portfolio. Compared to other lenders, we are a leader in the automotive floor plan finance sector, which has just begun to recover last month. Throughout the pandemic, we experienced negative growth in our portfolio. There is still potential for growth in this area, and we consider it an opportunity since we have a higher risk-rated customer base, which gives us confidence in extending lines of credit to operators. Additionally, there is a growing business confidence encouraging the use of these operating lines.

So the next question will be from Sohrab Movahedi from BMO Capital Markets.

Graeme, I wanted to just come back to you. I mean I think you've done an excellent job of explaining the challenges of providing provisions under IFRS 9. I guess, what I would like to understand is, is the net result that provisioning now just becomes a lot more reactionary than forward-looking? I guess, number one. And number two, what would have been then 1 or 2 key drivers that would have contributed to the bank's decision to put so much reserves aside during COVID that have now, I guess, reversed? I'm hoping for more than just, well, the economy is reopening. I'd just like to understand what did you anticipate was going to happen, and to what order of magnitude? How has that not transpired?

So your comment over on reactionary versus forward-looking. I mean, inherently, IFRS 9 is intended to be forward-looking, and it is fundamentally based on our forward projections of a whole series of macroeconomic variables. That is pre-pandemic, that was largely what drove it. When we kind of found ourselves in the pandemic, a very extraordinary situation where the broad economy had shut down, that is where we kind of introduced, if you will, other lenses, other kind of analytics we brought to bear to kind of consider the real consequences of that. I think as you saw through 2021 as the broad economy did recover, and again, these are the forward-looking indicators, we did bring it down through that period. Certainly, we brought it down at a rate slower than you would have seen in other jurisdictions, despite kind of the strong forecast on that recovery at the time. That's because there are really 2 factors that go into IFRS 9. There's kind of, what is your baseline expectations, but what is the uncertainty around that? That is the piece that we continue to hold back on with IFRS 9 and ratio of the pandemic was the kind of level of uncertainty. The government support was a huge factor in that and really trying to get our heads wrapped around to what degree that was just pushing back negative credit outcomes versus truly mitigating them. That was what I mentioned earlier, we really wanted to see the signals and the outcomes of that. That is a big factor of why we are kind of taking the further steps now to say, we don't have that same uncertainty with the pandemic that we had in place 3 and 6 and 9 months ago. The other one was, again, the subsequent waves. Sitting here in Q1, we were obviously kind of facing Omicron as a huge new wave coming at us, and we needed to see that the tools we now have in place with vaccinations and treatments were going to allow the economy to remain open, or we were going to be back on this roller coaster. I think we've seen that the economy has remained open and resilient through Omicron. You take those 2 proof points together, and that really kind of reflects that we thought we couldn't justify the ongoing overlays we've had in place regarding the pandemic. However, we are very mindful of the new and emerging headwinds that are out there. The supply chain issues, the inflationary pressures, the constrained labor markets. So we did factor those into our reserves. As you said, we did that by way of monitoring our base case scenario. We put more severity into our downside scenarios, and we attached greater weight to those. We still have a positive economic growth as our baseline scenario, but we certainly weighted those downside scenarios and made them more severe, reflecting those headwinds. Those are the 2 offsetting factors that ultimately led to the $500 million release that we undertook on stage 1 and 2.

I could argue back that Canadian consumer leverage is at an all-time high, interest rates are increasing, and corporate borrowers are facing higher funding costs. Additionally, energy costs for our corporate buyers are rising, and labor costs are escalating due to compliance with ESG. Are we not going to see corporate profit margins decline if your borrowers struggle? Perhaps you believe this won't happen until 2024, so you plan to address it later. How do you take all of this into account? Or do you disagree with that assessment?

I don't disagree with the assessment. Those are exactly the kind of ingredients that go into the reason we increased our reserves over $200 million. As I said, we've got this, if you will, latency coming off of the pandemic that we've said that uncertainty just isn't there in the same way, but we have a whole new set of uncertainties coming into play. There are different magnitudes in our view, and that's why on one hand, we're leasing 700. On the other hand, we're taking in over 200 on that. Yes, you are outlining a set of risks and outcomes that we are worried about, and we're attaching kind of greater weight to, if you will, about our baseline, if you will, to have kind of a recessionary environment. But certainly, that's a higher risk. I would say, all the things you're talking about, though, do factor into our fundamental credit processes. These are the kind of matters that get compounded into our ratings processes, if you will. Those are the core drivers that go into our estimates of forward credit losses.

Next question from Mario Mendonca from TD Securities.

We can go through these relatively quickly. Any impacts of IFRS 17 on the insurance results? If the answer is, it's not material, that's good enough for me.

Yes, not material to what we know today, no.

Okay. Another thing. In your other revenue, the other line, the $85 million, obviously down a lot from last quarter. Last time we saw this was back in Q2 '20 when there were mark-to-market losses on certain investments and some hedging activity, but it bounced back pretty sharply the very next quarter. Can you just take me through what caused that decline this quarter? And is it appropriate to assume it bounces back next quarter?

Right. I just want to confirm, you're referring to the other, other...

Yes. Yes.

Yes. So that relates to a couple of things, primarily what we refer to as our wealth accumulation plan, which is tied to our stock plan. This involves the volatility linked to our share price.

And were there mark-to-market losses in there as well?

Yes, that's correct. That's what you're observing, and there is another factor with NIE, which was partially balanced by the gains from Wealth Management that I mentioned regarding our sale in City National for some noncore affiliates. However, it mainly concerns the wealth accumulation plan. We included a breakdown of that in the information pack for you, Mario.

So very much like what happened in Q2 '20. These things tend to bounce back relatively quickly. Is that right?

It's based on how the market value of our share price, so...

Okay. And then the final thing is on credit fees. It's not unique to Royal, but syndication activity down declined sharply in Q2. Maybe just an outlook on the syndication market in the U.S. that continues to trend down from Q2 levels or has it sort of snap back?

Mario, it's Derek. Maybe I'll take that one. I think, obviously, in the last couple of months, we've gone through quite an adjustment in credit markets, fairly pronounced through March and April. That did continue through the early part of May. We are starting to see a little bit of stabilization just in the last few days, and so that did impact volumes of new loan syndications activity in the second quarter. I think we're seeing still a very robust M&A pipeline, and so that is leading to very reasonable activity. But obviously, with the ongoing market uncertainty, both clients are a little bit more cautious, and we're obviously trying to take a prudent approach to risk on new loan syndication activity against that backdrop until we get greater clarity. Still active, but you're certainly seeing a little bit of a slowdown that was in Q2 persist relative to what we saw against a very robust 2021 and the first quarter of this year.

The next question is from Mike Rizvanovic from Stifel GMP.

Just a quick one for Graeme. Just wondering if you can provide any insights on the excess deposits that are currently on your book for retail. You did mention the mortgage portfolio trending towards the higher income borrower. Are you seeing something similar in that excess deposit base? The reason I ask you, I'm trying to get a sense of how meaningful excess deposits are on PCLs. I mean if it's held by people that normally would not go through an insolvency anyway, maybe it's not as much of an impact. So any thoughts you can provide there would be helpful.

Yes, it's Neil. Mike, I'll start it off and then see if Graeme wants to add anything. I mean in terms of the consumer deposit book, I mean we're still seeing double-digit growth year-over-year, 15% growth in terms of the checking account. Still very strong, and we're still seeing growth, albeit slowing growth on the savings side. I think that kind of speaks to just where the consumer is in terms of deposits. Maybe just put a little more color on some of the comments that Graeme made. We are seeing in the mortgage book that just given home prices and our underwriting standards, we're seeing just the overall income and the net worth of a mortgage buyer increase over time. A bit of a systemic issue is that first-time homebuyer is becoming less and less a part of our portfolio. There may be non-D-SIB lenders that are picking up some of that business that isn't able to be done under the guidelines, but I think it is a bit of a sad commentary in terms of young people being able to get into some of these markets. It does underpin that overall net worth and just the income Graeme's points about the confidence in the mortgage portfolio.

Yes, I wanted to specifically address your question, Mike. When we examine deposit and savings balances by risk class, we observe that they remain elevated across all risk classes. This increase is not limited to just the highest-rated and highest-income clients. While these levels relative to pre-pandemic may have begun to stabilize, we have not seen a decrease. This reinforces the idea that there is still a significant amount of liquidity available to consumers.

Okay. Appreciate the color. Then just quickly with Nadine. Should we still expect the corporate segment to continue to sort of be at that roughly breakeven level on a go-forward basis? I know you had the big tax gain that I think showed up in corporate this quarter. I'm guessing that's one-time-ish as we sort of get back to that previous run rate.

Yes. I mean corporate support, we note there the comment that Mario made has the volatility associated with the wealth accumulation plan in there; that is both in other revenue and in other expenses. We tend to distribute out of our corporate support. We don't keep elements in there. So the one thing that you did see there, you referenced was our income tax provision change. But I think to your point, we do keep it at what you normally have from a run rate, so you can expect that going forward.

So the last question will be from Scott Chan from Canaccord Genuity.

I'll just keep it to one. Dave, just going back to the dividend, the 7% dividend increase. Is RBC trying to signal something with that above-average dividend increase, maybe near-term confidence, EPS growth, especially since I heard Nadine say that the Board would look at the dividend every other quarter going forward?

Yes. Our approach has typically involved reviewing dividends and rate adjustments twice a year, and we will maintain that internal process. This does highlight our confidence for various reasons you’ve already heard. You can observe strong volumes and significant outperformance in deposits. I emphasize that deposits and funding are crucial, especially looking ahead. We’ve concentrated on core deposits and gathering deposits both in the north and south of the border, which is very important. You can see margins starting to improve, and after a decade, those deposits will finally begin to generate returns. You’ve heard about the increase in net interest margin, the rise in revenue, and the operating leverage that will result from continued asset growth. From this viewpoint, all elements of our confidence are evident, which is why we decided to increase by $0.08, and we will reassess this semi-annually. So thanks for your comments and questions, great questions. Just to sum up, we had, as Nadine mentioned, a tough year-over-year comp on our particular capital markets business and some of our expenses. We saw a great quarter-over-quarter volume growth. You saw the margin return and the NIM start to return the way we predicted. You heard from both Nadine and Neil that we expect good secular quarter-over-quarter margin improvement as we continue through to benefit from the rate increases, at least very strong margin improvement coming from City National as well and revenue growth, probably closer to 30 basis points over the next quarter and again, the following quarter. That's having an impact. All the investments we've made in growing those deposits but also growing our diversified lending capability and managing through a cycle. We're very confident in our ability to drive operating leverage, improved operating leverage and create shareholder value. Thank you very much for all your questions, and we look forward to talking again next quarter. Thank you, operator.

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