40-F - RY - Equibles

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 40-F

[Check one]

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2025	Commission File Number <br>001-13928

ROYAL BANK OF CANADA

(Exact name of Registrant as specified in its charter)

Canada<br><br>(Province or other jurisdiction of<br><br>incorporation or organization)	6029<br><br>(Primary Standard Industrial<br><br>Classification Code Number)	Not Applicable<br><br>(I.R.S. Employer Identification<br><br>Number (if applicable))

200 Bay Street

Royal Bank Plaza

Toronto, Ontario

Canada M5J 2J5

Attention: Jessica Clinton

Vice President, Associate General Counsel & Corporate Secretary

(416) 414-1067

(Address and telephone number of Registrant’s principal executive offices)

Royal Bank of Canada

200 Vesey Street

New York, NY 10281

Attention: John Penn

Assistant General Counsel & Managing Director,

RBC US Head of Regulatory Law

and General Counsel, RBC Capital Markets, LLC

(212) 858-7116

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

copies of all correspondence should be sent to:

Josie Caldas<br><br>Royal Bank of Canada<br><br>200 Bay Street<br><br>Toronto, Ontario<br><br>Canada M5J 2J5<br><br>Tel: (437) <br>533-9180	Benjamin H. Weiner<br><br>Sullivan & Cromwell LLP<br><br>1700 New York Avenue, N.W.<br><br>Suite 700<br><br>Washington, D.C.<br><br>USA 20006-5215<br><br>Tel: (202) <br>956-7500

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Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	RY	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not Applicable
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable
(Title of Class)

For annual reports, indicate by check mark the information filed with this Form:

☒ Annual information form ☒ Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common Shares	1,400,635,338
First Preferred Shares<br>1
Series BF	12,000,000<br>2
Series BH	6,000,000<br>3
Series BI	6,000,000<br>3
Series BO	14,000,000
Series BR	1,250,000<br>4
Series BS	1,000,000<br>4
Series BT	750,000<br>5
Series BU	750,000<br>5
Series BV	1,000,000<br>4
Series BW	600,000<br>5
Series BX	1,000,000<br>4
Series BY	1,250,000<br>4
Series BZ	1,350,000<br>4

1 The Non-Cumulative First Preferred Shares Series BF, BH, BI, BO, BR, BS, BT, BU, BV, BW, BX, BY and BZ contain non-viability contingent capital provisions.

2 On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BF at a redemption price of $25.00 per share.

3 On October 24, 2025, we announced our intention to redeem all of our issued and outstanding Non-Cumulative First Preferred Shares Series BH and Series BI. The final dividend for the Series BH and Series BI shares will be payable on the redemption date of December 8, 2025, to shareholders of record at the close of business on November 10, 2025.

4 In connection with the issuance of LRCN Series 2, on November 2, 2020, the Registrant issued CAD $1,250 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BR (Series BR) at a price of CAD $1,000 per Series BR. In connection with the issuance of LRCN Series 3, on June 8, 2021, the Registrant issued CAD $1,000 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BS (Series BS) at a price of CAD $1,000 per Series BS. In connection with the issuance of LRCN Series 4, on April 24, 2024, the Registrant issued USD $1,000 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BV (Series BV) at a price of USD $1,000 per Series BV. In connection with the issuance of LRCN Series 5, on November 1, 2025, the Registrant issued USD $1,000 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BX (Series BX) at a price of USD $1,000 per Series BX. In connection with the issuance of LRCN Series 6, on June 11, 2025, the Registrant issued USD $1,250 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BY (Series BY) at a price of USD $1,000 per Series BY. In connection with the issuance of LRCN Series 7, on September 23, 2025, the Registrant issued USD $1,350 million of Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BZ (Series BZ) at a price of USD $1,000 per Series BZ. The Series BR, Series BS, Series BV, Series BX, Series BY and Series BZ were issued to a consolidated trust to be held as trust assets in connection with the LRCN structure.

5 The Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BT, BU and BW were respectively issued on November 5, 2021, January 25, 2024, and July 24, 2024 to certain institutional investors.

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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.	☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.	☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.	☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § <br>240.10D-1(b).	☐

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CONTROLS AND PROCEDURES

Information about disclosure controls and procedures and internal control over financial reporting can be found under “Controls and procedures” on page 124 of our Management’s Discussion and Analysis set forth in Exhibit 2, and under “Management’s Report on Internal Control over Financial Reporting” which can be found on page 138 of our Financial Review set forth in Exhibit 2, which sections are incorporated by reference.

AUDIT COMMITTEE FINANCIAL EXPERTS

The Registrant’s board of directors has determined that it has three audit committee financial experts serving on its audit committee. Cynthia Devine, Frank Vettese and Barry Perry have been determined to be such audit committee financial experts and are independent, as that term is defined by the New York Stock Exchange’s listing standards applicable to the Registrant. The U.S. Securities and Exchange Commission (the “SEC”) has indicated that the designation of Cynthia Devine, Frank Vettese and Barry Perry as audit committee financial experts does not make any of them an “expert” for any purpose, impose any duties, obligations or liability on Cynthia Devine, Frank Vettese and Barry Perry that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation or affect the duties, obligations or liability of any other member of the audit committee.

CODE OF ETHICS

The Registrant has adopted a code of ethics (the “Code of Conduct”) that applies to all employees, contract workers and members of the board of directors, including its principal executive officer, principal financial officer and principal accounting officer. In 2025, the Registrant adopted a revised Code of Conduct. Key amendments made to the Code of Conduct included updating the reporting misconduct and fair competition content and the proper use of RBC systems. The full text of the Code of Conduct is set forth in Exhibit 4 and is also available on our website at rbc.com.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information about principal accountant fees and services and a brief description of our pre-approval policies and procedures can be found under “Audit Committee” beginning on page 23 of our Annual Information Form set forth in Exhibit 1, which section is incorporated by reference. A copy of our pre-approval policies and procedures can be found in Appendix D of our Annual Information Form, which section is incorporated by reference.

OFF-BALANCE SHEET ARRANGEMENTS

Information about off-balance sheet arrangements can be found under “Off-balance sheet arrangements” beginning on page 62 of our Management’s Discussion and Analysis set forth in Exhibit 2, which section is incorporated by reference.

DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Disclosure of contractual obligations can be found under “Principal risks – Liquidity and funding risk” beginning on page 88 of our Management’s Discussion and Analysis set forth in Exhibit 2, which section is incorporated by reference.

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IDENTIFICATION OF THE AUDIT COMMITTEE

The Registrant has a separately-designated standing audit committee. Information about the audit committee can be found under “Audit Committee” beginning on page 23 of our Annual Information Form set forth in Exhibit 1, which section is incorporated by reference.

UNDERTAKING

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

SUMMARY OF SIGNIFICANT DIFFERENCES FROM NYSE CORPORATE GOVERNANCE RULES

A summary of significant ways corporate governance practices followed by the Registrant differ from corporate governance practices required to be followed by U.S. Domestic Companies under the New York Stock Exchange’s listing standards (disclosure required by section 303A.11 of the NYSE Listed Company Manual) is available on the Registrant’s corporate governance website at rbc.com/governance.

DISCLOSURE PURSUANT TO SECTION 13(r) OF THE SECURITIES EXCHANGE ACT OF 1934

In accordance with section 13(r) of the U.S. Securities Exchange Act of 1934, we are required to disclose certain Iran-related activities. We maintain a robust economic sanctions compliance program which monitors compliance with economic sanctions requirements in the jurisdictions in which we operate and we believe we have been in compliance with relevant economic sanctions legislation throughout fiscal 2024.

We currently maintain certain non-U.S. dollar denominated accounts for the Embassy of the Islamic Republic of Iran in Canada (the “Iranian Embassy”). Any funds in these accounts are frozen by Ontario court order in connection with civil litigation, which is being monitored.

In fiscal 2025 these accounts generated CAD $4,354 in gross revenue and less than CAD $3,000 in net income.

*Information contained in or otherwise accessible through the websites mentioned in this report does not form part of this report. All references to websites are inactive textual references and for your information only.

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

ROYAL BANK OF CANADA
By:	/s/ David McKay
Name:	David McKay
Title:	President and Chief Executive Officer
Date:	December 3, 2025

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INDEX TO EXHIBITS

Exhibit	Exhibit No.
Royal Bank of Canada Annual Information Form dated December 2, 2025	1
Financial Review	2
•<br><br>Management’s Discussion and Analysis
•<br><br>Caution Regarding Forward-Looking Statements
•<br><br>Management’s Responsibility for Financial Reporting
•<br><br>Management’s Report on Internal Control over Financial Reporting
•<br><br>Report of Independent Registered Public Accounting Firm
•<br><br>Consolidated Financial Statements
Consent of Independent Registered Public Accounting Firm	3
Code of Conduct	4
Return on Equity and Assets Ratios	5
Rule <br>13a-14(a)/15d-14(a)<br> Certifications	31
•<br><br>Certification of the Registrant’s Chief Executive Officer<br><br>•<br><br>Certification of the Registrant’s Chief Financial Officer
Section 1350 Certifications	32
•<br><br>Certification of the Registrant’s Chief Executive Officer<br><br>•<br><br>Certification of the Registrant’s Chief Financial Officer
Royal Bank of Canada Policy for the Recovery of Erroneously Awarded Incentive-based Compensation from Executive Officers	97
Interactive Data File (formatted as Inline XBRL)	101
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	104

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EX-1 Annual Information Form

Exhibit 1

LOGO

ROYAL BANK OF CANADA

ANNUAL

INFORMATION

FORM

December 2, 2025

CAUTION REGARDINGFORWARD-LOOKING STATEMENTS

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this 2025 Annual Information Form and in the documents incorporated by reference herein, in other filings with Canadian regulators or the United States (U.S.) Securities and Exchange Commission (SEC), in reports to shareholders, and in other communications. In addition, our representatives may communicate forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements in this document and in the documents incorporated by reference herein include, but are not limited to, statements relating to our financial performance objectives, priorities, vision and strategic goals, the economic, market, and regulatory review and outlook for Canadian, U.S., United Kingdom (U.K.), Euro area and global economies, the regulatory environment in which we operate, the Strategic priorities and Outlook sections for each of our business segments as discussed in our 2025 Annual Report for the fiscal year ended October 31, 2025 (2025 Annual Report), the risk environment including our credit risk, market risk, liquidity and funding risk as set out in our 2025 Management’s Discussion and Analysis for the fiscal year ended October 31, 2025 (2025 Management’s Discussion and Analysis) as well as the effectiveness of our risk monitoring, our climate- and sustainability-related beliefs, targets and goals and related legal and regulatory developments as set out in our 2025 Management’s Discussion and Analysis, and include statements made by our President and Chief Executive Officer and other members of management. The forward-looking statements contained in this 2025 Annual Information Form and in the documents incorporated by reference represent the views of management and are presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision, strategic goals and priorities and anticipated financial performance, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “suggest”, “seek”, “foresee”, “forecast”, “schedule”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan”, “outlook”, “timeline” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “might”, “should”, “could”, “can” or “would” or negative or grammatical variations thereof.

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct, that our financial performance, environmental & social or other objectives, vision and strategic goals will not be achieved, and that our actual results may differ materially from such predictions, forecasts, projections, expectations or conclusions.

We caution readers not to place undue reliance on our forward-looking statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of which can be difficult to predict – include, but are not limited to: business and economic conditions in the geographic regions in which we operate, Canadian housing and household indebtedness, information technology, cyber and third-party risks, geopolitical uncertainty, environmental and social (E&S) risk, digital disruption and innovation, privacy and data related risks, regulatory changes, culture and conduct risks, credit, market, liquidity and funding, insurance, operational, compliance, reputation and strategic risks, other risks discussed in the risk sections of our 2025 Annual Report, including legal and regulatory environment risk, the effects of changes in government fiscal, monetary and other policies and tax risk and transparency, risks associated with escalating trade tensions, including protectionist trade policies such as the imposition of tariffs, risks associated with the adoption of emerging technologies, such as cloud computing, artificial intelligence (AI), including generative AI (GenAI), and robotics, fraud risk and our ability to anticipate and successfully manage risks arising from all of the foregoing factors. Additional factors that could cause actual results to differ materially from the expectations in such forward-looking statements can be found in the risk sections of our 2025 Annual Report, as may be updated by subsequent quarterly reports.

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events, as well as the inherent uncertainty of forward-looking statements. Material economic assumptions underlying the forward-looking statements contained in this 2025 Annual Information Form are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook headings, as such sections may be updated by subsequent quarterly reports. Any forward-looking statements contained in this document represent the views of management only as of the date hereof, and except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf. Additional information about these and other factors can be found in the risk sections of our 2025 Management’s Discussion and Analysis contained in our 2025 Annual Report, as may be updated by subsequent quarterly reports.

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CORPORATE STRUCTURE	1
Name, Address and Incorporation	1
Intercorporate Relationships	1
GENERAL DEVELOPMENT OF THE BUSINESS	1
Three Year History	1	23-26, 187-188*
DESCRIPTION OF THE BUSINESS	3
General Summary	3	23-26, 32-59
Seasonality	3	60-61
Competition	3	32-59
Government Regulation and Supervision – Canada	4
Government Regulation and Supervision – United States	7
Risk Factors	10	65-110
Environmental and Social Policies	10	109-110
DESCRIPTION OF CAPITAL STRUCTURE	10
General Description	10	110-121, 220-223*
Prior Sales	13	110-121, 219-220,<br>220-223*
Constraints	13
Ratings	14	95
MARKET FOR SECURITIES	15
Trading Price and Volume	15
DIVIDENDS	17	117-119, 220-223*
SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER	17
DIRECTORS AND EXECUTIVE OFFICERS	18
Directors	18
Committees of the Board	19
Executive Officers	20
Ownership of Securities	21
Cease Trade Orders, Bankruptcies, Penalties or Sanctions	21
Conflicts of Interest	22
LEGAL PROCEEDINGS AND REGULATORY ACTIONS	22	230-231*
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	22
TRANSFER AGENT AND REGISTRAR	22
EXPERTS	23
AUDIT COMMITTEE	23
Audit Committee Mandate	23
Composition of Audit Committee	23
Relevant Education and Experience of Audit Committee Members	23
Pre-Approval Policies and Procedures	24
Independent Registered Public Accounting Firm Fees	24
ADDITIONAL INFORMATION	25
TRADEMARKS	26
APPENDIX A – PRINCIPAL SUBSIDIARIES	27
APPENDIX B – EXPLANATION OF RATINGS AND OUTLOOK	28
APPENDIX C – AUDIT COMMITTEE MANDATE	31
APPENDIX D – PRE-APPROVAL POLICIES ANDPROCEDURES	37

*Notes 6, 18, 19 and 24 to the 2025 Annual Consolidated Financial Statements for the fiscal year ended October 31, 2025 (2025 Annual Consolidated Financial Statements) for Royal Bank of Canada are incorporated by reference herein.

INFORMATION IS AT OCTOBER 31, 2025, UNLESS OTHERWISE NOTED.

CORPORATE STRUCTURE

Name, Address and Incorporation^1^

Royal Bank of Canada is a Schedule I bank under the Bank Act (Canada), which constitutes its charter. The Bank was created as Merchants Bank in 1864 and was incorporated under the “Act to Incorporate the Merchants’ Bank of Halifax” assented to June 22, 1869. The Bank changed its name to The Royal Bank of Canada in 1901 and to Royal Bank of Canada in 1990.

The Bank’s corporate headquarters are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada and its head office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada.

Intercorporate Relationships

Information about intercorporate relationships with principal subsidiaries, including place of incorporation and percentage of securities owned by the Bank, is provided in Appendix A.

GENERAL DEVELOPMENT OFTHE BUSINESS

Three Year History

Our business strategies and actions are guided by our vision, “To be among the world’s most trusted and successful financial institutions.” Our three strategic goals are:

•	In Canada, to be the undisputed leader in financial services;
•	In the U.S., to be the preferred partner to institutional, corporate, commercial and high-net-worth clients and their businesses; and
---	---
•	In select global financial centres, to be a leading financial services partner valued for our expertise.<br>
---	---

In 2023, GDP growth slowed across most advanced economies as headwinds from higher interest rates continued to have a lagged impact. Canadian output in early calendar 2023 was supported by strength in consumer spending and an unexpectedly strong rebound in housing market activity in the spring. The U.S. economy remained resilient with strong consumer spending despite rising interest rates, and employment continued to increase. Bond yields increased substantially as markets demanded higher term premiums and expected central banks to hold policy interest rates higher for longer.

Effective the first quarter of 2023, we simplified our reporting structure by eliminating the Investor & Treasury Services segment and moving our Investor Services business to our Wealth Management segment and our Treasury Services and Transaction Banking businesses to our Capital Markets segment. Effective the fourth quarter of 2023, we moved the Investor Services lending business from our Wealth Management segment to our Capital Markets segment.

In 2023, RBC reported net income of $14.6 billion down 8% from the prior year, reflecting lower earnings in Wealth Management, Personal & Commercial Banking and Insurance, which were partially offset by higher results in Capital Markets, and the impact of the Canada recovery dividend and other tax related adjustments in 2023. 2023 also reflected higher provisions on credit losses.

^1^ When we say “we”, “us”, “our”, or “RBC”, we mean Royal Bank of Canada and its subsidiaries, as applicable. References to “the Bank” mean Royal Bank of Canada without its subsidiaries.

In 2024, central banks began reducing interest rates from elevated levels as inflation slowed. In Canada, while GDP continued to increase, in aggregate, it declined on a per-capita basis for six consecutive quarters as of the third calendar quarter of 2024. Unemployment rates remained low across most advanced economies but increased more substantially in Canada. The U.S. economy remained resilient with strong GDP growth, robust consumer spending despite high interest rates and a low unemployment rate. Government bond yields increased after declining into the summer of 2024 as markets awaited the extent to which central banks would cut interest rates in the year ahead and equity markets increased to record highs.

During 2024, RBC made several key executive changes and appointments and effective the fourth quarter of 2024, the Personal & Commercial Banking segment became two standalone business segments: Personal Banking and Commercial Banking. With this change, RBC Direct Investing moved to the Wealth Management segment.

RBC reported net income of $16.2 billion in 2024, up 11% from the prior year, reflecting growth across each of our business segments. 2024 results also reflected the inclusion of HSBC Bank Canada results, which increased net income by $453 million, and include higher provisions on impaired loans, largely in Commercial Banking and Personal Banking.

Canadian GDP contracted in the second calendar quarter of 2025, impacted by reduced foreign demand for Canadian exports after U.S. tariffs were imposed, but increased in the third calendar quarter of 2025. The unemployment rate declined to 6.9% in October 2025 after rising to 7.1% in August and September 2025 but was up 0.3% from a year earlier. The end of the consumer carbon tax on energy products in most provinces lowered the Canadian headline inflation rate, but excluding those changes, core inflation measures trended closer to the top of the 1% to 3% inflation target range for the Bank of Canada (BoC). The BoC cut the overnight rate by 275 basis points since June 2024.

In the U.S. GDP continued to grow. Consumer spending was robust but employment growth stalled, impacted by rising trade uncertainty, reduced immigration and slower hiring in the industrial sector as tariffs increased. The unemployment rate edged higher but remained low as of the last reported rate in September 2025. Slower job growth in the U.S. prompted the Federal Reserve to restart interest rate reductions in September 2025. Unemployment rates remained very low across countries in the Euro area while the unemployment rate in the U.K. increased. Inflation in the Euro area remained low while U.K. inflation moderated, allowing the Bank of England to begin gradually lowering interest rates. Government bond yields edged lower in Canada since the summer and declined in the U.K., but were little changed in the Euro area. U.S. Equity markets remained close to record highs.

RBC reported net income of $20.4 billion in 2025, up $4.1 billion or 25% from the prior year, primarily driven by higher results across all of our business segments. Prior year results also reflected higher transaction and integration costs and the impact of management of closing capital volatility related to the acquisition of HSBC Bank Canada, both of which were treated as specified items and reported in Corporate Support. Earnings also reflected an increase due to the impact of foreign exchange translation.

We continue to monitor and prepare for regulatory developments and changes in a manner that seeks to ensure compliance with new requirements, while mitigating adverse business or financial impacts. Such impacts could result from new or amended laws or regulations and the expectations of those who enforce them. A high level summary of the key regulatory changes that have the potential to increase or decrease our costs and the complexity of our operations is included in the Legal and regulatory environment risk section of our 2025 Annual Report. For a discussion on risk factors resulting from these and other developments which may affect our business and financial results, refer to the risk sections of our 2025 Annual Report. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of our 2025 Annual Report.

Our acquisitions and dispositions that have influenced the general development of our business over the past three years are summarized in the following table:

Acquisition/Disposition	Key Characteristics
Disposition of RBC Investor Services^®^ operations (2023)	Divests RBC Investor Services operations in Europe, Jersey and the U.K to CACEIS, the asset servicing banking group of Crédit<br>Agricole S.A. and Banco Santander, S.A.
Acquisition of HSBC Bank Canada (2024)	Provides the opportunity to enhance our existing businesses in line with our strategic goals and to better position us to be the bank of<br>choice for commercial clients with international needs, newcomers to Canada and globally connected clients

Additional information can also be found under “Overview and outlook” beginning on page 23 and in Note 6 “Significant acquisition” beginning on page 187 of our 2025 Annual Consolidated Financial Statements, which sections and note are incorporated by reference herein.

DESCRIPTION OF THEBUSINESS

General Summary

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 100,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 19 million clients in Canada, the U.S. and 27 other countries.

Our business segments are Personal Banking, Commercial Banking, Wealth Management, Insurance and Capital Markets. Our business segments are supported by Corporate Support.

Additional information about our business and each segment (including segment results) can be found under “Overview and outlook” beginning on page 23 and under “Business segment results” beginning on page 32 of our 2025 Management’s Discussion and Analysis, which sections are incorporated by reference herein.

Seasonality

Information about seasonality is provided under “Quarterly results and trend analysis” beginning on page 60 of our 2025 Management’s Discussion and Analysis, which section is incorporated by reference herein.

Competition

Personal Banking competes with other Schedule 1 banks, independent trust companies, foreign banks, credit unions, caisses populaires and auto financing companies, as well as emerging entrants to the financial services industry, in Canada; other banks, emerging digital banks, trust companies and investment management companies serving retail and corporate clients, as well as public institutions, in the Caribbean; and other Canadian banking institutions that have U.S. operations, in the U.S.

Commercial Banking competes with other Schedule 1 banks, foreign banks, credit unions, specialized financing companies, as well as emerging non-traditional entrants to the financial services industry, in Canada.

Our Canadian Wealth Management business competes with domestic banks and trust companies, investment counselling firms, bank-owned full-service brokerages and boutique brokerages, mutual fund companies and global private banks. In Canada, bank-owned wealth managers continue to be the major players for the high-net-worth (HNW) and ultra-high-net-worth (UHNW) client segments. Our U.S. Wealth Management business (including City National Bank (CNB)) specializes in strategic solutions for unique industry needs, including in the fields of entertainment, sports, real estate, food and beverage, healthcare, technology, legal, nonprofit and property management, and competitors include other broker-dealers, commercial banks and other financial institutions that service HNW and UHNW individuals, entrepreneurs and their businesses. Our Global Asset Management business faces competition in Canada from banks, insurance companies and asset management organizations; in the U.S. from independent asset management firms, as well as those that are part of national and international banks and insurance companies; and internationally from asset managers that are owned by international banks, as well as national and regional asset managers in the geographies where we serve clients. Competitors to our International Wealth Management business include global wealth managers, traditional private banks and domestic wealth managers. Competitors to our Investor Services business include domestic and international custodians with Canadian-based entities and operations.

In our Canadian Insurance business, many of our competitors specialize in life and health, wealth or property and casualty products. In our International Insurance business, we compete in the global reinsurance market.

Our Capital Markets business is a market leader in Canada with a strategic presence in all lines of capital markets businesses. In North America, competitors include large global investment banks. Outside North America, we have a targeted strategic presence in the U.K. & Europe, Australia, Asia and other markets aligned with our global expertise and compete with global and regional investment banks.

Additional information about our competition can be found under “Business segment results” beginning on page 32 of our 2025 Management’s Discussion and Analysis, which section is incorporated by reference herein.

Government Regulation and Supervision – Canada

The Bank is a “Schedule I” bank under the Bank Act (Canada) (Bank Act), and, as such, is a federally regulated financial institution. It has Canadian insurance and trust and loan company subsidiaries that are also federally regulated financial institutions (FRFI Subsidiaries and, together with the Bank, FRFIs) governed by (respectively) the Insurance CompaniesAct (Canada) (Insurance Companies Act) and the Trust and Loan Companies Act (Canada) (Trust and Loan Companies Act). The activities of the FRFI Subsidiaries are also regulated under provincial and territorial laws in respect of their activities in the provinces and territories. In certain provinces, some of the Bank’s capital markets and wealth management activities are regulated under provincial securities laws (which are administered and enforced by securities regulatory authorities).

The Office of the Superintendent of Financial Institutions (OSFI), an independent agency of the Government of Canada, is responsible for administering the Bank Act, Trust and Loan Companies Act and Insurance Companies Act and reports to the Minister of Finance (the Minister) for the supervision of the FRFIs. OSFI is required, at least once a year, to examine the affairs and business of each FRFI for the purpose of determining whether the FRFI is complying with the provisions of its governing statute and it is in sound financial condition, and report to the Minister. The FRFIs are also required to make periodic filings and reports to OSFI.

The FRFIs are also subject to regulation under the Financial Consumer Agency of Canada Act (FCAC Act).^2^ The Financial Consumer Agency of Canada (Agency), among other things, enforces consumer-related provisions of the federal statutes which govern these financial institutions. The Commissioner of the Agency must report to the Minister on all matters connected with the administration of the FCAC Act and consumer provisions of other federal statutes, including the Bank Act, Trust and Loan Companies Act and Insurance Companies Act. The FRFIs are also subject to provincial and territorial laws of general application.

^2^ For the Bank’s trust subsidiaries, only their retail deposit taking activities are subject to regulation under the FCAC Act.

The Bank and the following subsidiaries are member institutions of the Canada Deposit Insurance Corporation (CDIC): Royal Trust Corporation of Canada, The Royal Trust Company, Royal Bank Mortgage Corporation and RBC Investor Services Trust. CDIC insures eligible deposits held at its member institutions. Under the Bank Act, the Bank is prohibited from engaging in or carrying on any business other than the business of banking, except as permitted under that statute. The business of banking includes providing any financial services; acting as a financial agent; providing investment counselling services and portfolio management services; issuing payment, credit or charge cards; and operating payment, credit or charge card plans.

The Bank has broad powers to invest in securities of other corporations and entities but is limited in making “substantial investments” in or in controlling certain types of entities. A “substantial investment” will arise through direct or indirect beneficial ownership of voting shares carrying more than 10 per cent of the voting rights attached to all outstanding voting shares of a corporation, shares representing more than 25 per cent of the shareholders’ equity in a corporation or interests representing more than 25 per cent of the ownership interests in any unincorporated entity. The Bank can make controlling, and in certain circumstances, non-controlling substantial investments in certain entities in accordance with the investment provisions under the Bank Act. Some substantial investments may be made only with the prior approval of the Minister or the Superintendent of Financial Institutions (the Superintendent).

Each FRFI is also required to maintain, in relation to its operations, adequate capital and liquidity, and OSFI may direct financial institutions to increase capital and/or to provide additional liquidity.

The Proceeds of Crime (Money Laundering) and Terrorist FinancingAct (the PCMLTFA) is applicable to all of our businesses in Canada. The PCMLTFA implements specific measures designed to detect and deter money laundering and the financing of terrorist activities. Further, the PCMLTFA sets out obligations related to deterring and detecting money laundering and terrorist financing from a global perspective, in order to minimize the possibility that RBC could become a party to these activities. RBC has enterprise-wide anti-money laundering policies and procedures which assist in reducing the risk of facilitating money laundering and terrorist financing activities.

Bail-in Regime

Canada has a bank recapitalization regime (the Bail-in Regime) for domestic systemically important banks, including the Bank. Under the Canada Deposit Insurance Corporation Act, in circumstances where the Superintendent is of the opinion that the Bank has ceased, or is about to cease, to be viable, he or she will report this to CDIC. CDIC may then request the Minister to recommend that the Governor in Council (GIC) make one or more resolution-related orders. The Minister will make the recommendation if he or she is of the opinion that it is in the public interest to do so. The GIC may then, by order:

•	vest in CDIC the shares and subordinated debt of the Bank specified in the order (a vesting order);<br>
•	appoint CDIC as receiver in respect of the Bank (a receivership order);
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•	if a receivership order has been made, direct the Minister to incorporate a federal institution designated in the<br>order as a bridge institution wholly-owned by CDIC and specifying the date and time as of which the Bank’s deposit liabilities are assumed (a bridge bank order); or
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•	if a vesting order or receivership order has been made, direct CDIC to carry out a conversion, by converting or<br>causing the Bank to convert, in whole or in part – by means of a transaction or series of transactions and in one or more steps – the shares and liabilities of the Bank that are subject to the<br>Bail-in Regime into common shares of the Bank or any of its affiliates (a conversion order).
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Upon the making of a conversion order, prescribed shares and liabilities under the Bail-in Regime that are subject to that conversion order will, to the extent converted, be converted into common shares of the Bank or any of its affiliates, as determined by CDIC. Subject to certain exceptions, senior debt issued on or after September 23, 2018, with an initial or amended term to maturity (including explicit or embedded options) greater than 400 days, that is unsecured or partially secured and that has been assigned a CUSIP or ISIN or similar identification number is subject to a bail-in conversion. For a description of Canadian bank resolution powers and the consequent risk factors attaching to certain liabilities of the Bank reference is made to rbc.com/investor-relations/_assets-custom/pdf/bail-in-overview.pdf.

Broker-Dealer/Advisory/Investment Fund Management Subsidiaries

The activities of certain of the Bank’s subsidiaries, such as RBC Dominion Securities Inc., RBC Direct Investing Inc., Royal Mutual Funds Inc., RBC Global Asset Management Inc., Phillips, Hager & North Investment Funds Ltd., RBC Phillips, Hager & North Investment Counsel Inc. and RBC InvestEase Inc., which act as securities dealers (including investment dealers, mutual fund dealers and exempt market dealers), advisers (portfolio managers) and/or investment fund managers are regulated in Canada under provincial and territorial securities/commodity futures/derivatives laws (which are administered and enforced by the applicable securities regulatory authorities) and, for investment dealers and mutual fund dealers, by the rules of the Canadian Investment Regulatory Organization (CIRO). The Bank’s subsidiaries that are CIRO dealer members are also members of the Canadian Investor Protection Fund, which protects, within specified limits, customers’ accounts against certain losses of customer property held by CIRO dealer members that become insolvent.

Insurance

The activities of the Bank’s regulated Canadian insurance subsidiaries, RBC Life Insurance Company (RBC Life) and RBC Insurance Company of Canada (RICC), are federally governed by the Insurance Companies Act and by provincial legislation in each province and territory in which they carry on business. In addition, the Bank Act sets out a framework for insurance activities that the Bank may or may not carry out. The Bank may administer, promote and provide advice in relation to certain authorized types of insurance and may conduct any aspect of the business of insurance, other than the underwriting of insurance, outside of Canada and in respect of risks outside Canada. However, in Canada, the Bank may not act as agent for any person in the placing of insurance. The Bank can promote an insurance company, agent or broker or non-authorized types of insurance (e.g. life and home and automobile insurance) to certain prescribed groups where the promotion takes place outside of physical bank branches. Additionally, and subject to applicable restrictions under the Bank Act, RBC Wealth Management Financial Services Inc., a wholly owned indirect subsidiary of the Bank, is licensed under applicable provincial and territorial laws to sell insurance products, including individual and group life and living benefits insurance along with money products such as annuities and segregated funds, for both related and independent insurance companies in Canada.

RBC Life is a member of Assuris, which is a not-for-profit organization that protects Canadian life insurance policyholders against loss of benefits due to the financial failure of a member company. RICC is a member of the Property and Casualty Insurance Compensation Corporation, which is the corporation protecting Canadian property and casualty policyholders against loss of benefits due to the financial failure of a member company.

RBC Insurance Agency Ltd. and RBC Commercial Insurance Agency Inc., wholly owned indirect Bank subsidiaries, are licensed insurance agencies that distribute insurance products underwritten by non-RBC entities. These products include home and auto insurance and commercial insurance that are underwritten by an unaffiliated insurance company.

Government Regulation and Supervision – United States

Banking

In the U.S., the Bank is characterized as a foreign banking organization (FBO). Generally, the operations of an FBO and its U.S. subsidiaries and offices are subject to the same comprehensive regulatory regime that governs the operations of U.S. domestic banking organizations. The Bank’s U.S. businesses are subject to supervision and oversight by various U.S. authorities, including federal and state regulators, as well as self-regulatory organizations.

Under the International Banking Act of 1978, as amended (IBA) and the Bank Holding Company Act of 1956, as amended (BHCA), all of the Bank’s U.S. banking operations are subject to supervision and regulation by the Board of Governors of the Federal Reserve System (Federal Reserve). Under the IBA, the BHCA, and related regulations of the Federal Reserve, the Bank generally may not open a branch, agency or representative office in the U.S., nor acquire five per cent or more of the voting stock of any U.S. bank or BHC, without notice to or prior approval of the Federal Reserve. The Federal Reserve is the U.S. “umbrella regulator” responsible for supervision and oversight of the Bank’s consolidated U.S. activities. The Federal Reserve consults with and obtains information from other prudential and functional U.S. regulators that exercise supervisory authority over the Bank’s various U.S. operations. Reports of financial condition and other information relevant to the Bank’s U.S. businesses are regularly filed with the Federal Reserve.

In 2000, the Bank became a U.S. FHC, as authorized by the Federal Reserve. Pursuant to the Gramm-Leach-Bliley Act of 1999, as amended, an FHC may engage in, or acquire companies engaged in, a broader range of financial and related activities than are permitted to banking organizations that do not maintain FHC status. To qualify as an FHC, the Bank, as an FBO and BHC, must meet certain capital requirements and must be deemed to be “well managed” for U.S. bank regulatory purposes. In addition, any U.S. depository institution subsidiaries of the FBO or BHC must also meet certain capital requirements and be deemed to be “well managed” and must have at least a “satisfactory” rating under the Community Reinvestment Act of 1977, as amended. An FBO must meet several conditions in order to maintain “well managed” status for U.S. bank regulatory purposes: (i) the FBO must have received a composite regulatory rating of “satisfactory” or better for its U.S. branch, agency and commercial lending company operations following its last regulatory examination, (ii) the FBO’s home country supervisor must consent to it expanding its activities in the U.S. to include activities permissible for a financial holding company (FHC), (iii) the FBO’s management must meet standards comparable to those required for a U.S. bank subsidiary of an FHC and (iv) each U.S. depository institution subsidiary of the FBO and/or bank holding company (BHC) must be deemed to be “well managed”, which is based on regulatory examination ratings.

The Federal Reserve, however, has the authority to limit an FHC’s ability to conduct activities that would otherwise be permissible if the FHC or any of its U.S. depositary institution subsidiaries does not satisfactorily meet certain capital requirements or is not deemed to be “well managed”. In such cases, the Federal Reserve may impose corrective capital and/or managerial requirements, as well as additional limitations or conditions. If the deficiencies persist, the FHC may be required to divest its U.S. depository institution subsidiaries or to cease engaging in activities other than the business of banking and certain closely related activities. If any insured depository institution subsidiary of an FHC fails to maintain at least a “satisfactory” rating under the Community Reinvestment Act of 1977, as amended, the FHC would be subject to restrictions on certain new activities and acquisitions.

On July 21, 2010, the Dodd-Frank Wall Street Reform and ConsumerProtection Act (Dodd-Frank Act) was enacted. The statute effected significant changes to U.S. financial regulations and required rulemaking by the U.S. financial regulators, with material cross-border implications. Section 165 of the Dodd-Frank Act required the Federal Reserve to establish Enhanced Prudential Standards for Foreign Banking Organizations (Regulation YY). Amongst other regulatory requirements, Regulation YY required the Bank to establish an intermediate holding company (IHC) organized under U.S. law. The IHC is required to hold, directly or indirectly, the Bank’s entire ownership interest in its U.S. insured depository institution subsidiaries and other U.S. subsidiaries (excluding so called section 2(h)(2) companies and branch subsidiaries acquired by debt previously contracted). The Bank has established a two-tier BHC structure in the U.S., consisting of RBC US Group Holdings LLC (RBCUS), its top-tier BHC, as the Bank’s IHC and the parent of RBC USA Holdco Corporation, the parent of most of the Bank’s U.S. subsidiaries. Both RBCUS and RBC USA Holdco Corporation are BHCs and FHCs. The Bank fulfills its Regulation YY regulatory requirements through RBCUS, which include capital adequacy, capital planning and stress testing, risk management and governance, liquidity and liquidity stress testing, financial regulatory reporting and other requirements that are similar to, or the same as, those applicable to U.S. domestic BHCs that are similarly categorized under the rules that tailor enhanced prudential standards for FBOs and large U.S. banking organizations. In addition, the Bank is registered as a “Swap Dealer” with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) and as a “Security-Based Swap Dealer” with the SEC.

The USA PATRIOT Act of 2001, as amended, which amended the Bank Secrecy Act (BSA) of 1970, as amended (the Act), requires U.S. banks and certain other financial institutions with U.S. operations to maintain appropriate policies, procedures and controls reasonably designed to comply with the Act, including, as applicable, anti-money laundering compliance programs, suspicious activity and currency transaction reporting and other obligations including due diligence on customers to prevent, detect and report individuals and entities involved in money laundering and the financing of terrorism. In January 2021, the Anti-Money Laundering Act of 2020 (AMLA), which also amended the Act, was enacted. The AMLA was intended to comprehensively reform and modernize U.S. anti-money laundering laws. In September 2022, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act, which was part of the AMLA. The BOI rule, which went into effect January 1, 2024, implemented sweeping beneficial owner disclosure requirements applicable to U.S. companies and foreign companies doing business in the U.S., subject to certain exceptions. The BOI rule is the first of three related rulemakings. On December 21, 2023, FinCEN issued a final rule regarding authorized access to the BOI system (access rule) which provides the circumstances when the BOI may be disclosed to federal agencies, regulators and financial institutions and how that BOI must be protected. To date, Financial Institutions have not been provided access to BOI information. On August 28, 2024, the FinCEN issued a final rule that will impose new anti-money laundering and countering terrorism financing (AML/CFT) program requirements on registered investment advisers and exempt reporting advisers (collectively, Covered IAs) by, among other things, including Covered IAs within the definition of “financial institution” under the BSA. The new AML/CFT rule takes effect on January 1, 2026. In addition, FinCEN proposed a Rule to Strengthen and Modernize Financial Institution Programs Designed to Fight Money Laundering and Terrorist Financing. Its purpose is to strengthen and modernize financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs. A final remaining rulemaking is expected to address required revisions to FinCEN’s Customer Due Diligence rule. Several other provisions of the AMLA require additional rulemakings, reports and other measures.

The Bank maintains two branches in New York that are licensed and supervised as full federal branches with fiduciary licenses by the Office of the Comptroller of the Currency (OCC), the U.S. supervisor of national banks. In general, the Bank’s branches may exercise the same rights and privileges, and are subject to the same restrictions, as would apply to a U.S. national bank at the same location(s). The Bank’s branches may accept wholesale deposits, but may not take U.S. domestic retail deposits outside of an available exemption. Deposits in the Bank’s branches are not insured by the Federal Deposit Insurance Corporation (FDIC). The Bank also maintains a limited federal branch in Jersey City, New Jersey which may exercise the same rights and privileges as the Bank’s New York federal branches except that it generally can only take deposits from non-U.S. sources.

The OCC examines and supervises the Bank’s U.S. branch offices’ activities and operations. In addition, the Bank’s U.S. branches are required to maintain a capital equivalency deposit in their state(s) of residence, which deposits are pledged to the OCC. Furthermore, the Bank’s U.S. branch offices are subject to supervisory guidance based on the examiners’ assessment of risk management, operational controls, compliance and asset quality.

The Bank also maintains a state-licensed agency in Texas and state-licensed representative offices in California, Delaware and Texas. In general, the activities conducted at the Bank’s agency include a broad range of banking powers, including lending and maintaining credit balances, but agencies are limited in their ability to accept deposits from citizens or residents of the U.S. Further limitations may be placed on such agencies’ activities based on state laws. The activities conducted at the representative offices are limited to representational and administrative functions; such representative offices do not have authority to make credit decisions and may not solicit (depending on state laws) or contract for any deposit or deposit-like liability. The agency and representative offices are examined and assessed by both the Federal Reserve and state regulators and are required to adhere to applicable federal and state regulations.

Banking activities are also conducted at CNB and RBC Bank (Georgia), National Association (RBC Bank), both of which are national banking associations chartered by the OCC. CNB and RBC Bank are members of the Federal Reserve. The OCC serves as the primary federal prudential regulator of CNB and RBC Bank. As U.S. banks, CNB and RBC Bank are allowed to take retail deposits, and they offer retail and commercial banking services, including deposit and credit services, such as consumer lending products (including credit card and mortgage loans), and business and commercial loans. CNB and RBC Bank are subject to capital requirements, dividend restrictions, limitations on investments and subsidiaries, limitations on transactions with affiliates (including the Bank and its branches), deposit reserve requirements and other requirements administered by the OCC and the Federal Reserve. Deposits at CNB and RBC Bank are FDIC-insured to the extent applicable. CNB and RBC Bank are also required to comply with applicable consumer protection laws and regulations such as those promulgated by the Consumer Financial Protection Bureau, an independent agency created under the Dodd-Frank Act. As an OCC chartered U.S. national bank, CNB also has fiduciary powers and offers trust and investment management services.

CNB also conducts trust and investment management activities through CNB’s wholly-owned subsidiary, RBC Trust Company (Delaware) Limited (RBC Trust). RBC Trust is a Delaware trust company chartered and supervised by the Delaware State Bank Commissioner and, as a BHC subsidiary, is subject to oversight by the Federal Reserve. RBC Trust is subject to dividend restrictions, limitations on investments and other applicable state banking law requirements.

Broker-Dealer Activities and Broker-Dealer Subsidiaries

The securities brokerage, trading and investment banking activities are conducted by and through the following U.S.-registered broker-dealer subsidiaries:

•	RBC Capital Markets, LLC (RBC CM LLC);
•	RBC CMA LTD.;
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•	City National Securities, Inc.; and
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•	CNR Securities, LLC.
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The SEC, state securities regulators, the Financial Industry Regulatory Authority and other self-regulatory organizations regulate these broker-dealer subsidiaries. Certain activities of RBC CM LLC and RBC CMA LTD. are also subject to regulation by the CFTC and the NFA. Pursuant to the Dodd-Frank Act, RBC CM LLC is registered as a “Swaps Firm” with the NFA. Certain activities of RBC CM LLC are subject to regulation by the Municipal Securities Rulemaking Board.

Investment Management and Other Fiduciary Activities

The Bank’s New York branches have fiduciary powers, under which these branches conduct investment management and custody activities for certain customers. In addition, other affiliates are involved in the business of investment management. In many cases, these activities require that the affiliates be registered with the SEC as investment advisers under the U.S. Investment Advisers Actof 1940, as amended (Advisers Act). The Advisers Act and related rules regulate the registration and activities of investment advisers. Although the regulatory regime for investment advisers is similar in some ways to that for broker-dealers, the standard of conduct is higher due to the advisers’ status as fiduciaries.

The following entities are the Bank’s subsidiaries that are registered as “investment advisers” with the SEC:

•	RBC CM LLC;
•	RBC Global Asset Management (U.S.) Inc. (GAM US);
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•	RBC Global Asset Management (UK) Limited (GAM UK);
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•	RBC Private Counsel (USA) Inc.;
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•	City National Rochdale, LLC (CNR); and
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•	City National Securities, Inc.
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GAM US and CNR also each sponsor and act as the adviser to U.S. mutual funds. The U.S. Investment Company Act of 1940, as amended, and related rules regulate the registration and operation of mutual funds and certain activities of the funds’ advisers and other affiliates and certain of the funds’ other service providers. Certain activities of GAM UK and GAM US are also subject to regulation by the CFTC and the NFA.

ERISA and the Internal Revenue Code

The U.S. Employee Retirement Income Security Act of 1974, as amended (ERISA), and its related rules regulate, among other things, the activities of the financial services industry with respect to pension plan clients. Similarly, the U.S. Internal Revenue Code of 1986, as amended, and the regulations implemented thereunder impose requirements with respect to such clients and also individual retirement accounts (IRAs). Brokers, dealers and investment advisers to pension plans and IRAs must conduct their business in compliance with both ERISA and applicable tax regulations.

Risk Factors

A discussion of risks affecting us and our businesses appears under the headings “Risk management”, “Principal risks” and “Overview of other risks” from pages 65-110 of our 2025 Management’s Discussion and Analysis, which discussions are incorporated by reference herein.

Environmental and Social Policies

The Bank’s sustainability reporting outlines how we approach sustainability ambitions and other sustainability matters. Information about our sustainability reporting is available on the Bank’s website at rbc.com/sustainability-reporting. Additional information about our environmental and social risk policies can be found under “Overview of other risks – Environmental and social risk” beginning on page 109 of our 2025 Management’s Discussion and Analysis, which section is incorporated by reference herein.

DESCRIPTION OF CAPITALSTRUCTURE

General Description

The Bank’s authorized share capital consists of an unlimited number of common shares without nominal or par value; an unlimited number of first preferred shares without nominal or par value, provided that the first preferred shares outstanding at any time shall have been issued for a maximum aggregate consideration of $30 billion; and an unlimited number of second preferred shares, without nominal or par value, which may be issued for a maximum aggregation consideration of $5 billion.

The Bank may also issue an unlimited amount of Limited Resource Capital Notes (LRCNs), which are compound instruments with both equity and liability features. The following summary of share capital and LRCNs is qualified in its entirety by the Bank’s by-laws and the actual terms and conditions of such shares and LRCNs.

Common Shares

The holders of the Bank’s common shares are entitled to vote at all meetings of shareholders, except meetings at which only holders of a specified class, other than common shares, or series of shares are entitled to vote. The holders of common shares are entitled to receive dividends as and when declared by the board of directors, subject to the preference of the preferred shares. After payment to the holders of the preferred shares of the amount or amounts to which they may be entitled, and after payment of all outstanding debts, the holders of the common shares will be entitled to receive any remaining property upon liquidation, dissolution or winding-up.

Preferred Shares

First preferred shares may be issued, from time to time, in one or more series with such rights, privileges, restrictions and conditions as the board of directors may determine, subject to the Bank Act and to the Bank’s by-laws. The first preferred shares are entitled to preference over any second preferred shares (discussed below) and common shares and over any other shares ranking junior to the first preferred shares with respect to the payment of dividends and in the distribution of property in the event of liquidation, dissolution or winding-up.

As at December 2, 2025, Non-Cumulative First Preferred Shares Series BH, BI, BO, BR, BS, BT, BU, BV, BW, BX, BY and BZ are outstanding. The Non-Cumulative First Preferred Shares Series BH, BI and BO are listed on the Toronto Stock Exchange. The Non-Cumulative First Preferred Shares Series BR, BS, BT, BU, BV, BW, BX, BY and BZ are not listed on an exchange. On May 24, 2025, we redeemed all of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BD. On October 24, 2025, we redeemed all of our issued and outstanding Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BQ (Series BQ Shares). As a result of the redemption of the Series BQ Shares, all of our outstanding LRCN Series 1 due November 24, 2080 were automatically redeemed on the same date. On November 24, 2025, we redeemed all of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF.

Effective January 1, 2013, in accordance with capital adequacy requirements adopted by OSFI, non-common capital instruments issued after January 1, 2013, including first preferred shares, must include terms providing for the full and permanent conversion of such securities into common shares upon the occurrence of certain trigger events relating to financial viability (the Non-Viability Contingent Capital requirements) in order to qualify as regulatory capital. All outstanding capital instruments that do not meet the Non-Viability Contingent Capital requirements are considered non-qualifying capital instruments and have been phased out. The Non-Cumulative First Preferred Shares Series BH, BI, BO, BR, BS, BT, BU, BV, BW BX, BY and BZ contain non-viability contingent capital provisions necessary to qualify as Tier 1 regulatory capital under Basel III and are therefore convertible into common shares upon the occurrence of a non-viability contingent capital trigger event.

We are prohibited by the Bank Act from declaring or paying any dividends on our preferred or common shares when we are, or would be placed as a result of the declaration, in contravention of the capital adequacy and liquidity regulations or any regulatory directives issued under the Bank Act. We may not pay dividends on our common shares or redeem, purchase or otherwise retire common shares or preferred shares at any time without the approval of the holders of outstanding first preferred shares unless all dividends to which first preferred shareholders are then entitled have been declared and paid or set apart for payment.

The Non-Cumulative First Preferred Shares Series BT, BU and BW were respectively issued on November 5, 2021, January 25, 2024 and July 24, 2024 to certain institutional investors.

The Non-Cumulative First Preferred Shares Series BR, BS, BV, BX, BY and BZ (the LRCN Preferred Shares) were respectively issued on November 2, 2020, June 8, 2021, April 24, 2024, November 1, 2024, June 11, 2025 and September 23, 2025 in connection with the Bank’s concurrent issuances of LRCNs. The LRCN Preferred Shares are held by Computershare Trust Company of Canada as trustee (the Trustee) for Leo LRCN Limited Recourse Trust^®^ (the Limited Recourse Trust). In certain circumstances, including non-payment of interest on, principal of or redemption price for the LRCNs when due, or the occurrence of an event of default or a non-viability contingent capital trigger event, the Trustee of the Limited Recourse Trust will deliver to holders of LRCNs their proportionate share of the Limited Recourse Trust’s assets, which will consist of the LRCN Preferred Shares except in limited circumstances, in full satisfaction of the Bank’s obligations under the LRCNs.

For so long as the LRCN Preferred Shares are held by the Trustee on behalf of the Limited Recourse Trust, such shares will not be entitled to receive dividends.

Second preferred shares may be issued, from time to time, in one or more series with such rights, privileges, restrictions and conditions as the board of directors may determine, subject to the Bank Act and to the Bank’s by-laws. **** There are no second preferred shares currently outstanding. Second preferred shares would rank junior to the first preferred shares. Second preferred shares would be entitled to preference over the common shares and over any other shares ranking junior to the second preferred shares with respect to the payment of dividends and in the distribution of property in the event of our liquidation, dissolution or winding-up.

Holders of the first and second preferred shares are not entitled to any voting rights as a class except as provided under the Bank Act or the Bank’s by-laws. Under the Bank Act, the Bank may not create any other class of shares ranking equal with or superior to a particular class of preferred shares, increase the authorized number of, or amend the rights, privileges, restrictions or conditions attaching to such class of preferred shares, without the approval of the holders of that class of preferred shares. ****

Any approval to be given by the holders of the first and second preferred shares may be given in writing by the holders of not less than all of the outstanding preferred shares of each class or by a resolution carried by the affirmative vote of not less than 66^2^⁄3 per cent of the votes cast at a meeting of holders of each class of preferred shares at which a quorum is represented. A quorum at any meeting of holders of each class of preferred shares is 51 per cent of the shares entitled to vote at such meeting, except that at an adjourned meeting there is no quorum requirement.

Limited Recourse Capital Notes

LRCNs are the Bank’s direct unsecured obligations constituting subordinated indebtedness for the purpose of the Bank Act and are intended to qualify as our additional Tier 1 capital within the meaning of the regulatory capital adequacy requirements to which we are subject. The LRCNs are not deposits insured under the Canada Deposit Insurance Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon the insolvency of a deposit taking institution.

In the event of a non-payment by the Bank of the principal amount of, interest on or redemption price for the LRCNs when due, the sole remedy of holders of LRCNs shall be the delivery of the LRCN Preferred Shares held by the Trustee for the Limited Recourse Trust.

If the Bank becomes insolvent or is wound-up, the LRCNs will rank (i) subordinate in right of payment to the prior payment in full of all outstanding deposit liabilities of the Bank including certain subordinated indebtedness (within the meaning of the Bank Act); and (ii) in right of payment equally with and not prior to the Bank’s indebtedness which by its terms ranks equally in right of payment with, or is subordinate to, the LRCNs (other than the Bank’s indebtedness which by its terms ranks subordinate to the LRCNs) and will be subordinate in right of payment to the claims of our depositors and other unsubordinated creditors, provided that in any such case and in case of the Bank’s non-payment of the principal amount of, interest on or redemption price for the LRCNs when due, the sole remedy of the holders of the LRCNs shall be the delivery of the LRCN Preferred Shares held by the Trustee for the Limited Recourse Trust.

Holders of LRCNs are not entitled to any voting rights, other than in certain limited circumstances.

Additional information about the Bank’s share capital can be found under “Capital management” beginning on page 110 of our 2025 Management’s Discussion and Analysis and in Note 19 “Equity” beginning on page 220 of our 2025 Annual Consolidated Financial Statements, which section and note are incorporated by reference herein.

Prior Sales

From time to time, the Bank issues principal at risk notes, securities for which the amount payable at maturity is determined by reference to the price, value or level of an underlying interest such as a stock index, an exchange traded fund or a notional portfolio of equities or other securities. In addition, the Bank periodically issues subordinated debt, preferred shares and other equity instruments which are not listed or quoted on a marketplace.

For information about the Bank’s issuances of subordinated debentures, Limited Recourse Capital Notes and other equity instruments since October 31, 2024, see the “Capital management” section beginning on page 110 of our 2025 Management’s Discussion and Analysis, Note 18 “Subordinated debentures” beginning on page 219 and Note 19 “Equity” beginning on page 220 of our 2025 Annual Consolidated Financial Statements, which section and notes are incorporated by reference herein.

Constraints

The Bank Act contains restrictions on the issue, transfer, acquisition, beneficial ownership and voting of shares of a chartered bank. The following is a summary of several key restrictions.

No person may be a major shareholder of a bank having equity of $12 billion or more (which includes the Bank). A person is a major shareholder if:

(a)	the aggregate of the shares of any class of voting shares of the Bank beneficially owned by that person, by<br>entities controlled by that person and by any person associated or acting jointly or in concert with that person is more than 20 per cent of the outstanding shares of that class of voting shares, or
(b)	the aggregate of shares of any class of non-voting shares of the Bank<br>beneficially owned by that person, by entities controlled by that person and by any person associated or acting jointly or in concert with that person is more than 30 per cent of the outstanding share of that class of non-voting shares.
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Additionally, no person may have a significant interest in any class of shares of a bank (including the Bank) unless the person first receives the approval of the Minister. For purposes of the Bank Act, a person has a significant interest in a class of shares of a bank where the aggregate of any shares of the class beneficially owned by that person, by entities controlled by that person and by any person associated or acting jointly or in concert with that person exceeds 10 per cent of all of the outstanding shares of that class of shares of such bank.

The Bank Act also prohibits a bank from purchasing or redeeming any of its shares or paying any dividends if there are reasonable grounds for believing the bank is, or the payment would cause the bank to be, in contravention of the Bank Act requirement to maintain, in relation to its operations, adequate capital and appropriate forms of liquidity and to comply with any regulations or directions of the Superintendent in relation thereto. Under the Bank Act, the Bank cannot redeem or purchase any shares for cancellation unless the prior consent of the Superintendent has been obtained.

Subject to certain exceptions, the Bank Act also prohibits the registration of a transfer or issue of any shares of a Canadian bank to any government or government agency of Canada or any province of Canada, or to any government of any foreign country, or any political subdivision, or agency of any foreign country.

Ratings

Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective basis is primarily dependent upon maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies reflect their views and methodologies. Our credit ratings are largely determined by the rating agencies’ assessment of the quality of our earnings, the adequacy of our capital and the effectiveness of our risk management programs. Ratings are subject to change, based on a number of factors including, but not limited to, our financial strength, competitive position, liquidity and other factors not completely within our control. There can be no assurance that our credit ratings and rating outlooks will not be lowered or that rating agencies will not issue adverse commentaries about us, potentially resulting in adverse consequences for our funding capacity or access to capital markets.

A lowering of our credit ratings may also affect our ability, and the cost, to enter into normal course derivative or hedging transactions and may require us to post additional collateral under certain contracts. However, we estimate, based on periodic reviews of ratings triggers embedded in our existing businesses and of our funding capacity sensitivity, that a minor downgrade would not materially influence our liability composition, funding access, collateral usage and associated costs.

As at December 2, 2025, RBC had the following ratings from the rating agencies listed below: ****

	RATING CLASS*	RATING	RANK**
Moody’s Investors Service, Inc.ǂ	Legacy Senior Long-term Debt^1^	Aa1	2 of 21
	Senior Long-term Debt^2^	A1	5 of 21
	Short-term Debt	P-1	1 of 4
	Subordinated Debt	A3	7 of 21
	NVCC Subordinated Debt	A3 (hyb)	7 of 21
	NVCC Preferred Shares	Baa2 (hyb)	9 of 21
	NVCC Limited Recourse Capital Notes	Baa2 (hyb)	9 of 21
	Outlook – Stable
S&P Global Ratingsǂ	Legacy Senior Long-term Debt^1^	AA-	4 of 22
	Senior Long-term Debt^2^	A	6 of 22
	Short-term Debt	A-1+	1 of 7
	Subordinated Debt	A	6 of 22
	NVCC Subordinated Debt	A-	7 of 22
	NVCC Preferred Shares	BBB	9 of 22
	NVCC Limited Recourse Capital Notes	BBB	9 of 22
	Outlook – Stable
Fitch Ratingsǂ	Legacy Senior Long-term Debt^1^	AA	3 of 23
	Senior Long-term Debt^2^	AA-	4 of 23
	Short-term Debt	F1+	1 of 8
	Subordinated Debt	A	6 of 23
	NVCC Subordinated Debt	A	6 of 23
	NVCC Preferred Shares	BBB+	8 of 23
	NVCC Limited Recourse Capital Notes	BBB+	8 of 23
	Outlook – Stable
Morningstar DBRSǂ	Legacy Senior Long-term Debt^1^	AA (high)	2 of 22
	Senior Long-term Debt^2^	AA	3 of 22
	Short-term Debt	R-1 (high)	1 of 10
	Subordinated Debt	AA (low)	4 of 22
	NVCC Subordinated Debt	A	6 of 22
	NVCC Preferred Shares	Pfd-2 (high)	4 of 16
	NVCC Limited Recourse Capital Notes	A (low)	7 of 22
	Outlook – Stable
*	Our rating classes may differ from the rating category nomenclatures used by the rating agencies.<br>
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**	Relative rank of each rating within the organization’s overall classification system.<br>
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^1^	Includes senior long-term debt issued prior to September 23, 2018 and senior long-term debt issued on or<br>after September 23, 2018, which is excluded from the Bail-in Regime.
---	---
^2^	Includes senior long-term debt issued on or after September 23, 2018, which is subject to conversion under<br>the Bail-in Regime.
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A definition of the categories of each rating as at December 2, 2025 has been obtained from the respective rating agency’s website and is outlined in Appendix B, and a more detailed explanation may be obtained from the applicable rating agency.

On June 3, 2025, Fitch Ratings affirmed our ratings with a stable outlook.

On May 9, 2025, Morningstar DBRS affirmed our ratings with a stable outlook.

On June 25, 2024, S&P Global Ratings affirmed our ratings with a stable outlook.

On October 9, 2025, Moody’s announced completion of a periodic review of our ratings. There were no changes to our ratings.

Credit ratings, including stability or provisional ratings (collectively, Ratings) are not recommendations to purchase, sell or hold a financial obligation inasmuch as they do not comment on market price or suitability for a particular investor. Ratings may not reflect the potential impact of all risks on the value of securities. In addition, real or anticipated changes in the rating assigned to a security will generally affect the market value of that security. Ratings are determined by the rating agencies based on criteria established from time to time by them and are subject to revision or withdrawal at any time by the rating organization. Each Rating listed in the table above should be evaluated independently of any other Rating applicable to our debt and preferred shares. As is customary, RBC pays rating agencies to assign Ratings for the parent company as well as our subsidiaries, and for certain other services.

Additional information about Ratings is provided under “Principal risks – Liquidity and funding risk – Credit ratings” on page 95 of our 2025 Management’s Discussion and Analysis, which section is incorporated by reference herein.

MARKET FOR SECURITIES

Trading Price and Volume

The Bank’s common shares are listed on the Toronto Stock Exchange (TSX) in Canada and the New York Stock Exchange (NYSE) in the U.S. The Bank’s Non-Cumulative First Preferred Shares Series BH, BI and BO are currently listed on the TSX, and the Bank’s Non-Cumulative First Preferred Shares Series BD and BF were listed on the TSX prior to being redeemed on May 24, 2025 and November 24, 2025, respectively.

The following table sets out the price range and trading volumes of the common shares on the TSX and the NYSE for the periods indicated. Prices are based on the reported amounts from Stockwatch.

	Common Shares (TSX)				Common Shares (NYSE)
Month	High ()	Low ()	Volume (Millions)		High (US)	Low (US)	Volume
November 2024				74.02				23,441,369
December 2024				64.06				16,626,737
January 2025				116.74				26,055,542
February 2025				70.84				23,690,766
March 2025				74.31				22,038,954
April 2025				156.07				37,510,132
May 2025				90.95				27,520,236
June 2025				56.16				17,803,412
July 2025				102.59				27,324,964
August 2025				65.62				23,968,203
September 2025				53.33				17,663,012
October 2025				90.47				26,550,925

All values are in US Dollars.

The following tables provide the price range and trading volumes of the first preferred shares on the TSX for the periods indicated. Prices are based on the reported amounts from Stockwatch.

	Series BD3				Series BF4				Series BH
Month	High ()	Low ()	Volume		High ()	Low ()	Volume		High ()	Low ()	Volume
November 2024				92,314				40,134				57,987
December 2024				137,515				52,431				48,652
January 2025				323,674				232,702				46,929
February 2025				347,976				152,342				40,450
March 2025				422,490				471,476				38,840
April 2025				2,302,846				133,688				96,484
May 2025				4,035,507				219,700				148,948
June 2025				--				345,198				57,437
July 2025				--				333,109				111,421
August 2025				--				1,021,194				117,471
September 2025				--				527,543				76,850
October 2025				--				1,391,094				36,642

All values are in US Dollars.

^3^On May 24, 2025, we redeemed all of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BD (Series BD).

^4^On November 24, 2025, we redeemed all of our issued and outstanding Non-Cumulative 5-Year Rate First Preferred Shares Series BF (Series BF).

	Series BI				Series BO
Month	High ()	Low ()	Volume		High ()	Low ()	Volume
November 2024				28,748				182,153
December 2024				41,371				93,502
January 2025				116,354				316,842
February 2025				38,657				352,206
March 2025				85,036				66,812
April 2025				78,096				151,829
May 2025				77,339				70,193
June 2025				113,113				105,881
July 2025				94,530				150,958
August 2025				20,031				211,827
September 2025				48,757				169,576
October 2025				55,371				88,105

All values are in US Dollars.

DIVIDENDS

The Bank has had an uninterrupted history of paying dividends on its common shares and on each of its outstanding series of first preferred shares. Information about the Bank’s dividends paid or payable per share on the common shares and each outstanding series of first preferred shares in each of the two most recently completed years appears under the heading “Selected capital management activity” in the “Capital management” section beginning on page 117 of our 2025 Management’s Discussion and Analysis, which section is incorporated by reference herein. Information about restrictions on the payment of dividends appears under the heading “Restrictions on the payment of dividends” in Note 19 “Equity” beginning on page 220 of our 2025 Annual Consolidated Financial Statements, which note is incorporated by reference herein.

The declaration amount and payment of future dividends will be subject to the discretion of the Bank’s board of directors, and will be dependent upon the Bank’s results of operations, financial condition, cash requirements and future regulatory restrictions on the payment of dividends and other factors deemed relevant by the board of directors.

Information about our dividends and our dividend payout ratio (common share dividends as a percentage of net income less preferred share dividends) is provided under the heading “Selected capital management activity” in the “Capital management” section beginning on page 117 of our 2025 Management’s Discussion and Analysis and in Note 19 “Equity” beginning on page 220 of our 2025 Annual Consolidated Financial Statements, which section and note are incorporated by reference herein.

SECURITIES SUBJECT TOCONTRACTUAL RESTRICTION ON TRANSFER

In connection with each issuance of LRCNs, the Bank also concurrently issues first preferred shares. These LRCN Preferred Shares are held in the Limited Recourse Trust. Pursuant to the Amended and Restated Declaration of Trust for the Limited Recourse Trust and the share provisions for the LRCN Preferred Shares, the Trustee of the Limited Recourse Trust will only deliver the LRCN Preferred Shares to holders of LRCNs

under certain prescribed circumstances further described herein under Description of Capital Structure – Preferred Shares” and “Description of Capital Structure – Limited Recourse Capital Notes”.

Securities Subject to Contractual Restriction on Transfer as at December 2, 2025

Designation of<br> <br>Class	Number of Securities that are Subject to a<br><br><br>Contractual Restriction on Transfer	Percentage of Class
First Preferred Shares	1,250,000 Non-Cumulative<br>First Preferred Shares Series BR<br> <br><br> <br>1,000,000<br>Non-Cumulative First Preferred Shares Series BS<br> <br><br><br><br>1,000,000 Non-Cumulative First Preferred Shares Series BV<br><br><br><br> <br>1,000,000 Non-Cumulative First Preferred Shares<br>Series BX<br> <br><br> <br>1,250,000 Non-Cumulative First<br>Preferred Shares Series BY<br> <br><br> <br>1,350,000<br>Non-Cumulative First Preferred Shares Series BZ	19.6%

DIRECTORS AND EXECUTIVEOFFICERS

Directors

The following are the Bank’s directors as at December 2, 2025:

Name and Year Elected	Province/State and<br><br><br>Country of Residence	Occupation
Mirko Bibic (2022)	Ontario, CAN	President and Chief Executive Officer, BCE Inc. and Bell Canada
Andrew A. Chisholm (2016)	Ontario, CAN	Corporate Director
Jacynthe Côté (2014)	Quebec, CAN	Chair of the Board, Royal Bank of Canada
Toos N. Daruvala (2015)	New York, U.S.	Corporate Director
Cynthia Devine (2020)	Ontario, CAN	Corporate Director
Roberta L. Jamieson (2021)	Ontario, CAN	Corporate Director
David I. McKay (2014)	Ontario, CAN	President and Chief Executive Officer, Royal Bank of Canada
Amanda Norton (2024)	North Carolina, U.S.	Corporate Director

Name and Year Elected	Province/State and<br><br><br>Country of Residence	Occupation
Barry Perry (2023)	Newfoundland and Labrador, CAN	Corporate Director
Maryann Turcke (2020)	Ontario, CAN	Corporate Director
Thierry Vandal (2015)	New York, U.S.	President, Axium Infrastructure US Inc.
Frank Vettese (2019)	Ontario, CAN	Co-Founder, SummitNorth Advisory Corp.
Jeffery Yabuki (2017)	Wisconsin, U.S.	Chairman & Chief Executive Officer,<br>InvestCloud Inc.<br> <br>Chairman, Sportradar Holding AG<br> <br>Chairman,<br>Motive Partners GP, LLC

Directors are elected annually and hold office until the next annual meeting of shareholders. Since November 1, 2020, the directors have held the principal occupations described above, except for the following:

Mr. Mirko Bibic served in a variety of leadership positions since joining BCE Inc. in 2004, including Chief Operating Officer from 2018 through 2020.

Mr. Toos N. Daruvala was Co-Chief Executive Officer, MIO Partners, Inc. from November 2016 through March 2021.

Ms. Cynthia Devine retired from her position as President and Chief Executive Officer of Maple Leaf Sports & Entertainment (MLSE) in April 2024 and was advisor to the board of MLSE until June 2024. She was Chief Financial Officer of MLSE from 2017 through 2022.

Ms. Roberta L. Jamieson was President and Chief Executive Officer of Indspire (a Canadian Indigenous charity that invests in the education of First Nations, Inuit and Métis people) from November 2004 through December 2020.

Ms. AmandaNorton was Chief Risk Officer at Wells Fargo from 2018 to 2022.

Mr. Barry Perry was President and Chief Executive Officer of Fortis Inc. from 2015 through 2020.

Ms. Maryann Turcke was Senior Advisor, Brookfield Infrastructure Partners L.P. from September 2020 through September 2022 and Senior Advisor, National Football League from September 2020 through 2021.

Mr. JefferyYabuki was Executive Chairman, Fiserv, Inc. from June through December 2020. He became Chairman and Chief Executive Officer of InvestCloud, Inc. in January 2024.

Committees of the Board

AuditCommittee: Cynthia Devine (Chair), T.N. Daruvala, B. Perry, M. Turcke and F. Vettese.

Risk Committee: A.A. Chisholm (Chair), M. Bibic, R.L. Jamieson, A. Norton, T. Vandal and J. Yabuki.

Governance Committee: M. Turcke (Chair), M. Bibic, A.A. Chisholm, C. Devine and R.L. Jamieson.

Human Resources Committee: T. Vandal (Chair), T.N. Daruvala, A. Norton, B. Perry, F. Vettese and J. Yabuki.

Executive Officers

The following are the Bank’s executive officers as at December 2, 2025:

Name	Province/State and Countryof Residence	Title
Sean Amato-Gauci	Ontario, CAN	Group Head, RBC Commercial Banking
Kelly Bradley	Ontario, CAN	Chief Human Resources Officer
Maria Douvas	New York, U.S.	Chief Legal and Administrative Officer
Katherine Gibson	Ontario, CAN	Chief Financial Officer
Graeme Hepworth	Ontario, CAN	Chief Risk Officer
David I. McKay	Ontario, CAN	President & Chief Executive Officer
Neil McLaughlin	Ontario, CAN	Group Head, RBC Wealth Management
Derek Neldner	Ontario, CAN	CEO and Group Head, RBC Capital Markets
Erica Nielsen	Ontario, CAN	Group Head, RBC Personal Banking
Jennifer Publicover	Ontario, CAN	Group Head, RBC Insurance
Bruce Ross	Ontario, CAN	Group Head, Technology and Operations

Since November 1, 2020, the executive officers have held the positions described below:

Mr. Sean Amato-Gauci was appointed to Group Executive in his role as Group Head, RBC Commercial Banking effective September 1, 2024. Prior to his current role, Mr. Amato-Gauci was Executive Vice President & Head, Business Financial Services since November 2022 and Executive Vice President of Cards, Payments & Banking since August 2017.

Ms. Kelly Bradley was appointed to Group Executive in her role as Chief Human Resources Officer effective June 1, 2022. Prior to her current role, Ms. Bradley was Senior Vice President, Talent Strategy and Solutions since June 2020.

Ms. MariaDouvas was appointed Chief Legal and Administrative Officer effective March 20, 2024. Prior to her current role, Ms. Douvas was appointed to Group Executive in her role as Chief Legal Officer effective September 2021. She was Executive Vice President and General Counsel since February 2021 and Senior Vice President, U.S. General Counsel and Global Head of Litigation since September 2018.

Ms. Katherine Gibson was appointed to Group Executive in her role as Chief Financial Officer effective September 1, 2024. Prior to her current role, Ms. Gibson was Interim Chief Financial Officer since April 2024 and Senior Vice President, Enterprise Finance & Controller since September 2016.

Mr. Graeme Hepworth was appointed to Group Executive in his role as Chief Risk Officer effective April 9, 2018.

Mr. David I. McKay was appointed President effective in February 2014 and Chief Executive Officer effective in August 2014.

Mr. Neil McLaughlin was appointed Group Head, RBC Wealth Management effective September 1, 2024. Prior to his current role, Mr. McLaughlin was appointed to Group Executive in his role as Group Head, Personal & Commercial Banking effective May 2017 (also assuming responsibility for RBC Ventures in September 2021).

Mr. Derek Neldner was appointed to Group Executive in his role as Group Head and CEO, Capital Markets effective November 1, 2019.

Ms. Erica Nielsen was appointed to Group Executive in her role as Group Head, RBC Personal Banking effective September 1, 2024. Prior to her current role, Ms. Nielsen was Executive Vice President, Personal Financing Products since September 2023, Executive Vice President, Personal Banking and Investments since November 2022, Senior Vice President, Personal Savings and Investments since October 2021 and Senior Vice President, Everyday Banking and Client Growth since January 2020.

Ms. Jennifer Publicover was appointed to Group Executive in her role as Group Head, RBC Insurance effective September 1, 2024. Prior to her current role, Ms. Publicover was Executive Vice President and Chief Executive Officer, RBC Insurance since January 2023 and Senior Vice President, Wealth Management Products and Strategy since November 2019.

Mr. Bruce Ross was appointed to Group Executive in his role as Group Head, Technology and Operations effective in January 2014.

Ownership of Securities

To our knowledge, as at October 31, 2025, the directors and executive officers, as a group, beneficially own or exercise control or direction over less than one per cent (1%) of our common and preferred shares. None of our directors or executive officers holds shares of our subsidiaries except where required for qualification as a director of a subsidiary.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the best of our knowledge, no director or executive officer,

(a)	is, as at December 2, 2025 or has been, within the 10 years before, a director, chief executive officer or<br>chief financial officer of any company (including our company), that while that person was acting in that capacity,
(i)	was the subject of a cease trade or similar order or an order that denied the relevant company access to any<br>exemption under Canadian securities legislation,^5^ for a period of more than 30 consecutive days, or
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(ii)	was subject to an event that resulted, after the director or executive officer ceased to be a director, chief<br>executive officer or chief financial officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under Canadian securities legislation,^5^ for a period of more than 30 consecutive days, or
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(b)	is, as at December 2, 2025 or has been, within the 10 years before, a director or executive officer of any<br>company (including our company), that while that person was acting in that capacity or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was<br>subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or<br>
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^5^ National Instrument 14-101 restricts the meaning of “securities legislation” to Canadian provincial and territorial legislation and “securities regulatory authority” to Canadian provincial and territorial securities regulatory authorities.

(c)	has, within the 10 years before December 2, 2025, become bankrupt, made a proposal under any legislation<br>relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer,<br>

Except for the following:

Ms. Turcke is a director of Diamond Sports Group, LLC, which filed for Chapter 11 protection in the U.S.<br>Bankruptcy Court for the Southern District of Texas on March 14, 2023.

To the best of our knowledge, none of our directors or executive officers have been subject to (a) any penalties or sanctions imposed by a court relating to Canadian securities legislation^6^ or by a Canadian securities regulatory authority^6^ or has entered into a settlement agreement with a Canadian securities regulatory authority,^6^ or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

Conflicts ofInterest

To the best of our knowledge, no director or executive officer has an existing or potential material conflict of interest with us or any of our subsidiaries.

LEGAL PROCEEDINGS ANDREGULATORY ACTIONS

In the ordinary course of our business, we are routinely involved in or parties to various ongoing, pending and threatened legal actions and proceedings.

A description of certain legal proceedings to which we are a party appears in Note 24 “Legal and regulatory matters” beginning on page 230 of our 2025 Annual Consolidated Financial Statements, which note is incorporated by reference herein.

Except as otherwise described in Note 24 “Legal and regulatory matters”, since October 31, 2024, (a) there have been no penalties or sanctions imposed against us by a court relating to Canadian securities legislation^6^ or by a Canadian securities regulatory authority^6^, (b) there have been no other penalties or sanctions imposed by a court or regulatory body against us that would likely be considered important to a reasonable investor in making an investment decision, and (c) we have not entered into any settlement agreements with a court relating to Canadian securities legislation^6^ or with a Canadian securities regulatory authority^6^.^^

INTEREST OF MANAGEMENTAND OTHERS IN MATERIAL TRANSACTIONS

To the best of our knowledge, there were no directors or executive officers or any associate or affiliate of a director or executive officer with a material interest in any transaction within the three most recently completed financial years or during the current financial year that has materially affected us or is reasonably expected to materially affect us.

TRANSFER AGENT ANDREGISTRAR

For Canada, Computershare Trust Company of Canada is the transfer agent and registrar for our common shares and our preferred shares. Their principal offices are in the cities of: Montreal, QC, Toronto, ON,

^6^National Instrument 14-101 restricts the meaning of “securities legislation” to Canadian provincial and territorial legislation and “securities regulatory authority” to Canadian provincial and territorial securities regulatory authorities.

Calgary, AB and Vancouver, BC. In the U.S., Computershare Trust Company, N.A. is the co-transfer agent located in Canton, Massachusetts and Jersey City, New Jersey. In the U.K., Computershare Services PLC is the co-transfer agent located in Bristol, England.

EXPERTS

PricewaterhouseCoopers LLP (PwC), Chartered Professional Accountants, Licensed Public Accountants, audited our Annual Consolidated Financial Statements, which comprise the consolidated balance sheets as of October 31, 2025 and October 31, 2024 and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years then ended, including the related notes and the effectiveness of our internal control over financial reporting as of October 31, 2025. PwC has advised that they are independent with respect to the Bank within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario and the rules and regulations adopted by the SEC and the Public Company Accounting Oversight Board (United States).

AUDIT COMMITTEE

Audit Committee Mandate

The mandate of the Audit Committee is attached as Appendix C to this Annual Information Form.

Composition of Audit Committee

The Audit Committee consists of Cynthia Devine (Chair), Toos N. Daruvala, Barry Perry, Maryann Turcke and Frank Vettese. The board has determined that each member of the Audit Committee is independent under our Director Independence Policy, which incorporates the independence standards under applicable Canadian and U.S. laws and regulations and none receives, directly or indirectly, any compensation from us other than ordinary course compensation for service as a member of the board of directors and its committees or of a board of directors of one or more of our subsidiaries. All members of the Audit Committee are financially literate within the meaning of National Instrument 52-110 – Audit Committees and of the Corporate Governance Standards of the NYSE. In considering the criteria for determining financial literacy, the board of directors looks at the ability of a director to read and understand a balance sheet, an income statement and a cash flow statement of a financial institution. The board has determined that each of Cynthia Devine, Barry Perry and Frank Vettese qualifies as an “audit committee financial expert” as defined by the SEC.

Relevant Education and Experience of Audit Committee Members

In addition to each member’s general business experience, the education and experience of each Audit Committee member that is relevant to the performance of their responsibilities as an Audit Committee member is as follows:

Cynthia Devine, FCPA, FCA, HBA, earned her Honours Business Administration degree from Western University. Ms. Devine became a Fellow of the Institute of Chartered Accountants of Ontario in 2011. Ms. Devine was the President and Chief Executive Officer of Maple Leaf Sports & Entertainment from 2022 to 2024. She was the Chief Financial Officer from 2017 to 2022. From 2003 to 2014, Ms. Devine served as Chief Financial Officer of Tim Hortons Inc., and from 2015 to 2017 served as Executive Vice President, Chief Financial Officer and Corporate Secretary of RioCan Real Estate Investment Trust. Ms. Devine serves as a director for Empire Company Limited/Sobeys Inc. Ms. Devine has been a member of the Audit Committee since August 2020.

Toos N. Daruvala earned his MBA from the University of Michigan and his Bachelor of Technology degree in electrical engineering from the Indian Institute of Technology. Mr. Daruvala was Co-Chief Executive Officer of MIO Partners, Inc. from 2016 to 2021, and held various senior positions at McKinsey & Company from 1983 to 2015, including Senior Partner, Risk Practice and Director, Banking and Securities Practice. He concluded his 33 year career at McKinsey & Company by serving as Senior Advisor and Director Emeritus in 2016. Mr. Daruvala has been a member of the Audit Committee since April 2022.

Barry Perry earned his Bachelor of Commerce degree (Honours) from Memorial University of Newfoundland and is a Chartered Professional Accountant. Mr. Perry was President and Chief Executive Officer of Fortis Inc. from 2015 to 2020 and served as Executive Vice President of Finance and Chief Financial Officer from 2004 to 2014. Mr. Perry is a member of the boards of Capital Power Corporation and Canada Pension Plan Investment Board. Mr. Perry has been a member of the Audit Committee since August 2023.

Maryann Turcke, B.S., M.S., M.B.A, earned her Bachelor of Science in Civil Engineering degree from Queen’s University, her Master of Science in Engineering degree from the University of Toronto and her Master of Business Administration from Queen’s University. Ms. Turcke was Chief Operating Officer of the National Football League from 2017 to 2020, President, NFL Networks from 2017 to 2021 and President of Bell Media from 2014 to 2017. Ms. Turcke has been a member of the Audit Committee since January 2020.

FrankVettese, B.B.A., FCA, earned his Bachelor of Business Administration from the Schulich School of Business at York University and is a fellow of the Chartered Professional Accountants of Ontario and a fellow of the Canadian Institute of Chartered Business Valuators. Mr. Vettese was Managing Partner and Chief Executive of Deloitte Canada from 2012 to June 2019. Mr. Vettese has been a member of the Audit Committee since July 2019.

Pre-Approval Policies and Procedures

The Audit Committee has adopted a policy that requires pre-approval by the Audit Committee of audit services, audit-related services and other services within permissible categories of non-audit services. The policy prohibits us from engaging the Bank’s independent auditor for “prohibited” categories of non-audit services. A copy of our Pre-Approval Policies and Procedures can be found in Appendix D.

Independent Registered Public Accounting Firm Fees

Following a tender process, PwC was appointed our independent auditor by the Board of Directors on January 29, 2016, which appointment was approved by the Bank’s shareholders at the Annual and Special Meeting of Common Shareholders held on April 6, 2016. Fees relating to the years ended October 31, 2025 and October 31, 2024 to PwC and its affiliates, including the nature of each category of fees, are detailed below. ****

	****	Year ended October 31, 2025<br>(Millions)				****	Year ended October 31, 2024<br>(Millions)
	Bank and Subsidiaries			Total		Bank and Subsidiaries			Total
Audit fees		55.7	3.1	****	58.8		50.6	2.8	****	53.4
Audit-related fees		10.4	-	****	10.4		9.9	-	****	9.9
Tax fees		0.2	0.4	****	0.6		0.1	0.3	****	0.4
All other fees		1.0	0.7	****	1.7		0.9	0.7	****	1.6
Total fees		67.3	4.2	****	71.5		61.5	3.8	****	65.3

All values are in US Dollars.

^(1)^The Mutual Funds category includes fees paid for professional services provided by PwC for certain mutual funds managed by subsidiaries of the Bank. In addition to other administrative costs, the subsidiaries are responsible for the auditors’ fees for professional services rendered in connection with the annual audit, statutory and regulatory filings and other services for the Mutual Funds in return for a fixed administration fee.

Audit Fees

Audit fees were paid for professional services rendered by the Bank’s independent auditor for the integrated audit of the 2025 Annual Consolidated Financial Statements of the Bank, including its audit of the effectiveness of our internal control over financial reporting, and any financial statement audits of our subsidiaries. In addition, audit fees were paid for services that generally only the Bank’s independent auditor reasonably can provide, which includes services provided in connection with statutory and regulatory filings, including those related to prospectuses and other offering documents.

Audit-Related Fees

Audit-related fees were paid for assurance and related services that are rendered by the Bank’s independent auditor and are not reported under the audit fees item above. These services consisted of:

•	employee benefit plan audits;
•	due diligence related to mergers and acquisitions;
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•	reports on control procedures at a service organization;
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•	consultations and audits in connection with acquisitions, including evaluating the accounting treatment for<br>proposed transactions;
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•	attest services not required by statute or regulation;
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•	reporting on the effectiveness of internal controls as required by contract or for business reasons;<br>
---	---
•	the audits of various trusts and limited partnerships; and
---	---
•	consultations regarding financial and reporting standards.
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Tax Fees

Tax fees were paid for tax compliance services including preparation of tax returns for certain mutual funds managed by subsidiaries of the Bank and a subscription for services to provide specific tax data and information to complete routine tax schedules and calculations for clients.

All Other Fees

These services consist of translation of documents for us and certain of our subsidiaries, regulatory compliance services, as well as accounting and other research software subscriptions and publications.

ADDITIONAL INFORMATION

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of our securities and securities authorized for issuance under equity compensation plans, where applicable, is contained in the Bank’s Management Proxy Circular for the most recent annual meeting of shareholders. Additional financial information is provided in our 2025 Annual Consolidated Financial Statements and 2025 Management’s Discussion and Analysis, which are included in our 2025 Annual Report.

Copies of this Annual Information Form, our 2025 Annual Report and Management Proxy Circular in respect of the most recent annual meeting of shareholders may be obtained from Investor Relations at 200 Bay Street, South Tower, Toronto, Ontario, M5J 2J5.

This Annual Information Form, the 2025 Annual Consolidated Financial Statements and 2025 Management’s Discussion and Analysis, as well as additional information about us may be found on our website at rbc.com, on SEDAR+, the Canadian Securities Administrators’ website, at sedarplus.com, and on the EDGAR section of the SEC’s website at sec.gov.

Information contained in or otherwise accessible through the websites mentioned in this Annual Information Form does not form a part of this Annual Information Form. All references in this Annual Information Form to websites are inactive textual references and are for your information only.

TRADEMARKS

^®^ /^™^ Trademarks of Royal Bank of Canada. ǂ All other trademarks are the property of their respective owner(s).

APPENDIX A – PRINCIPAL SUBSIDIARIES

(Millions of Canadian dollars)		As at October 31, 2025
Principal subsidiaries (1)	Principaloffice address (2)	Carrying value of votingshares owned by theBank (3)
Royal Bank Holding Inc.	Toronto, Ontario, Canada	$	103,027
RBC Direct Investing Inc.	Toronto, Ontario, Canada
RBC Insurance Holdings Inc.	Mississauga, Ontario, Canada
RBC Life Insurance Company	Mississauga, Ontario, Canada
Investment Holdings (Cayman) Limited	George Town, Grand Cayman, Cayman Islands
RBC (Cayman) Funding Ltd.	George Town, Grand Cayman, Cayman Islands
Capital Funding Alberta Limited	Calgary, Alberta, Canada
RBC Global Asset Management Inc.	Toronto, Ontario, Canada
RBC Investor Services Trust	Toronto. Ontario. Canada
RBC (Barbados) Trading Bank Corporation	St. James, Barbados
RBC US Group Holdings LLC (2)	Toronto, Ontario, Canada	****	38,425
RBC USA Holdco Corporation	New York, New York, U.S.
RBC Capital Markets. LLC	New York, New York, U.S.
City National Bank	Los Angeles, California, U.S.
RBC Dominion Securities Limited	Toronto, Ontario, Canada	****	19,306
RBC Dominion Securities Inc.	Toronto, Ontario, Canada
Royal Bank Mortgage Corporation	Toronto, Ontario, Canada	****	7,420
RBC Europe Limited	London, England	****	5,822
The Royal Trust Company	Montreal, Quebec, Canada	****	1,782
Royal Trust Corporation of Canada	Toronto, Ontario, Canada	****	785

(1) The Bank directly or indirectly controls each subsidiary.

(2) Each subsidiary is incorporated or organized under the laws of the state, province or country in which the principal office is situated, except for RBC US Group Holdings LLC and RBC USA Holdco Corporation which are incorporated under the laws of the State of Delaware, U.S., RBC Capital Markets, LLC, which is organized under the laws of the State of Minnesota, U.S., and City National Bank which is a national bank, chartered under the laws of the United States of America.

(3) The carrying value of voting shares is stated as the Bank’s equity in such investments.

APPENDIX B –EXPLANATION OF RATINGS AND OUTLOOK

Institution	Rating	Outlook
Moody’s Investors Service, Inc.	●<br><br>Obligations rated ‘Aa’ are judged to be of high quality and are subject to very low credit<br>risk.<br><br>●<br><br>Obligations rated ‘A’ are judged to be upper medium-grade and are subject to low credit<br>risk.<br><br>●<br><br>Obligations rated ‘Baa’ are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative<br>characteristics.<br><br>●<br><br>Moody’s Investors Service, Inc. appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier<br>1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic<br>rating category.<br><br>●<br><br>Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and<br>securities firms.<br><br>●<br><br>Ratings of ‘P-1’ reflect a superior ability to repay short-term obligations.	A Moody’s Investors Service, Inc. rating outlook is an opinion regarding the likely rating direction over the medium term.
S&P Global Ratings	●<br><br>An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its<br>financial commitment on the obligation is very strong.<br><br>●<br><br>An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than<br>obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitments on the obligation is still<br>strong.<br><br>●<br><br>An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are<br>more likely to weaken the obligor’s capacity to meet its financial commitments on the obligation.<br><br>●<br><br>Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within<br>the rating categories.<br><br>●<br><br>A short-term obligation rated ‘A-1’ is rated in the highest category by S&P Global Ratings.<br>The obligor’s capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial<br>commitments on these obligations is extremely strong. A short term obligation rated ‘A-1+’ has extremely strong capacity to meet its financial commitments.	An S&P Global Ratings outlook assesses the potential direction of a long-term credit rating over the intermediate term, which is<br>generally up to two years for investment grade and generally up to one year for speculative grade.

Institution	Rating	Outlook
Fitch Ratings	●<br><br>‘AA’ (Very High Credit Quality) ratings denote expectations of very low default risk. They indicate very strong capacity for payment of<br>financial commitments. This capacity is not significantly vulnerable to foreseeable events.<br><br>●<br><br>‘A’ (High Credit Quality) ratings denote expectations of low default risk. The capacity for payment of financial commitments is<br>considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher<br>ratings.<br><br>●<br><br>‘BBB’ (Good Credit Quality) ratings indicate that expectations of default risk are currently low. The capacity for payment of financial<br>commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.<br><br>●<br><br>The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating<br>categories.<br><br>●<br><br>‘F1’ (Highest Short-Term Credit Quality) ratings indicate the strongest intrinsic capacity for timely payment of financial commitments;<br>may have an added “+” to denote any exceptionally strong credit feature.	Outlooks indicate the direction a rating is likely to move over a one- to two-year period. They reflect financial or other trends that have not yet reached or been sustained the level that would cause a rating action, but which may do so if such trends continue.
Morningstar DBRS	●<br><br>An obligation rated ‘AA’ is of superior credit quality. The capacity for the payment of financial obligations is considered high. Credit<br>quality differs from AAA only to a small degree. Unlikely to be significantly vulnerable to future events.<br><br>●<br><br>An obligation rated ‘A’ is of good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser<br>credit quality than AA. May be vulnerable to future events, but qualifying negative factors are considered manageable.<br><br>●<br><br>All rating categories from AA to CCC contain the subcategories (high) and (low). The absence of either a (high) or (low) designation indicates the<br>credit rating is in the middle of the category.<br><br>●<br><br>R-1 ratings indicate the highest credit quality. The capacity for the payment of short-term financial<br>obligations as they fall due is exceptionally high. Unlikely to be adversely affected by future events. The R-1 and R-2 rating categories are further denoted by the<br>subcategories “(high)”, “(middle)”, and “(low)”.<br><br>●<br><br>Preferred shares rated Pfd-1 are generally of superior credit quality and are supported by entities with<br>strong earnings and balance sheet characteristics. Pfd-1 ratings generally correspond with issuers with a AAA or AA category reference<br>point.<br><br>●<br><br>Preferred shares rated Pfd-2 are generally of good credit quality. Protection of dividends and principal is<br>still substantial, but earnings, the balance sheet and coverage ratios are not as strong as Pfd-1 rated companies. Generally, Pfd-2 ratings correspond with issuers with<br>an A category or higher reference point.<br><br>●<br><br>Each rating category of the preferred shares may be denoted by the subcategories “high” and “low”. The absence of either a<br>“high” or “low” designation indicates the rating is in the middle of the category.	Rating Trends provide guidance in respect of Morningstar DBRS’ opinion regarding the outlook for a rating. Rating Trends have three<br>categories: “Positive”, “Stable” or “Negative”. The Rating Trend indicates the direction in which Morningstar DBRS considers the credit rating may move if present circumstances continue, or in certain cases as it<br>relates to the Corporate Finance sector, unless challenges are addressed by the issuer.

WHAT THE RATINGS ADDRESS:

Short-term and Long-term Senior Debt

Short-term and long-term senior debt credit ratings are the current opinion of the rating agency on creditworthiness of an obligor with respect to fixed-income obligations whose original maturity is of a short and medium to long-term nature, respectively. They address the possibility that a financial obligation will not be honoured as promised and reflect both the likelihood of default and any financial loss suffered in the event of default.

Subordinated Debt

Subordinated debt credit ratings are the current opinion of the rating agency on creditworthiness of an obligor with respect to a specific financial obligation and a specific class of financial obligation for a specific financial program. Ratings take into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.

Preferred Shares

Preferred shares ratings address the issuer’s capacity and willingness to pay dividends and principal, in case of limited life, on a timely basis. They address the likelihood of timely payment of dividends, notwithstanding the legal ability to pass on or defer a dividend payment.

Rating Outlook

Rating Outlook assesses the potential direction of a credit rating over the intermediate to longer term. In determining a Rating Outlook consideration is given to any changes in the economic and fundamental business conditions. An Outlook is not necessarily a precursor of a rating change.

APPENDIX C –AUDIT COMMITTEE MANDATE

ROYAL BANK OF CANADA

(the Bank)

January 30, 2025

AUDIT COMMITTEE MANDATE

A.	PURPOSE AND DUTIES OF THE COMMITTEE
1.	General Purpose
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The Committee is responsible for assisting the Bank’s board of directors (the Board) in its oversight of (i) the integrity of the Bank’s financial statements; (ii) the qualifications, performance and independence of the external auditors; (iii) the performance of the Bank’s internal audit function; (iv) internal controls; and (v) compliance with legal and regulatory requirements.

2.	Financial Statements and other Documents

The Committee will regularly review and discuss the following:

a)	prior to review and approval by the Board, the Bank’s annual statement which includes its annual<br>consolidated financial statements, its quarterly financial statements, and related management’s discussion and analysis;
b)	earnings releases on interim and annual results, the annual information form, the annual report and other<br>financial information, earnings guidance and presentations provided to analysts, rating agencies and the public;
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c)	the Bank’s annual environmental and social sustainability (collectively, sustainability) reporting;<br>
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d)	such other periodic disclosure documents as requested by regulators or that may be required by law;<br>
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e)	investments and transactions brought to the Committee’s attention that could adversely affect the<br>Bank’s well-being;
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f)	prospectuses relating to the issuance of securities of the Bank;
---	---
g)	representations provided by management to the auditors, where appropriate;
---	---
h)	reports on any litigation matters which could significantly affect the Bank;
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i)	tax matters that are material to the financial statements; and
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j)	other reports as required to be communicated by the auditors by the Canadian Public Accountability Board, the<br>Office of the Superintendent of Financial Institutions, and the U.S. Public Company Accounting Oversight Board.
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Moreover, the Committee will ensure that adequate procedures are in place for the review of the Bank’s public disclosure of financial information derived from the Bank’s financial statements, and will periodically assess the adequacy of these procedures.

3.	External Auditor

Subject to the shareholders’ powers conferred by the Bank Act, the Committee will recommend the appointment (or revocation thereof) of any registered public accounting firm (including the external auditor) engaged to prepare or issue an audit report or to perform other audit, review or attest services. The Committee will fix the remuneration and oversee the work of these accounting firms, including the resolution of disagreements with management regarding financial reporting. Such accounting firms will report directly to the Committee.

Moreover, as part of its oversight of the external auditor the Committee will:

a)	meet with the external auditor to review and discuss the annual audit plan, the results of the audit, the<br>auditor’s report with respect to the annual statement, and all other reports, returns and transactions as required by applicable laws;
b)	approve all audit engagement fees and terms, as well as the terms of any permitted non-audit services to be provided by the external auditor to the Bank, with such approvals to be given specifically or pursuant to preapproval policies and procedures adopted by the Committee in accordance with<br>applicable laws;
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c)	review any concerns that may be brought forward by the external auditor, including any difficulties they may<br>encounter in conducting their audit, as well as management’s response to such concerns;
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d)	review material correspondence between the external auditor and management relating to audit findings;<br>
---	---
e)	taking into account the opinions of management and the Bank’s internal auditor, annually assess the<br>external auditor’s qualifications and performance, including relevant experience, geographical reach, professional scepticism, quality of services and communications, and independence and objectivity;
---	---
f)	review formal written statements delineating all relationships between the external auditor and the Bank that<br>may impact its independence and objectivity;
---	---
g)	annually assess the risk of the external auditor withdrawing from the audit;
---	---
h)	discuss with the external auditor and with management the annual audited financial statements and quarterly<br>financial statements, as well as related management’s discussion and analysis;
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i)	review hiring policies concerning partners, employees and former partners and employees of the present and<br>former external auditors;
---	---
j)	review and evaluate the qualifications, performance and independence of the external auditor’s lead<br>partner and discuss the timing and process for implementing the rotation of the lead audit partner, the concurring audit partners and any other active audit engagement team partner;
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k)	on a periodic basis, perform a comprehensive review of the performance of the External Auditor over multiple<br>years to assess the audit firm, its independence and application of professional skepticism; and
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l)	at least annually, obtain and review a report by the external auditor describing: (i) the external<br>auditor’s internal quality- control procedures; (ii) the external auditor’s internal procedures to ensure independence; and (iii) any material issues raised by the most recent internal quality-control review or peer review of<br>the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditor, and any steps taken to deal with<br>any such issues.
4.	Oversight of Independent Control Functions
---	---

at least annually, obtain and review a report by the external auditor describing: (i) the external auditor’s internal quality- control procedures; (ii) the external auditor’s internal procedures to ensure independence; and (iii) any material issues raised by the most recent internal quality-control review or peer review of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditor, and any steps taken to deal with any such issues.

Oversight of Independent Control Functions

---

The Committee will oversee the finance and internal audit functions, having regard to their independence from the businesses whose activities they review. The Committee will review and approve the appointment or removal of each of the Chief Financial Officer (the CFO) and the Chief Audit Executive (the CAE), as well as their respective mandates and the mandates or charters of their respective functions. The Committee will approve each of the functions’ organizational structures, budgets and resources. Every year the Committee will assess the performance of each of the CFO and CAE and the effectiveness of their respective functions. It will also periodically review independent assessments of each of these functions. Moreover, it will annually review and approve the internal audit function’s overall risk methodology.

5.	Internal Control

The Committee will assist in the oversight of internal control by engaging in the following activities:

a)	requiring management to implement and maintain appropriate systems of internal control, including internal<br>controls over financial reporting and for the prevention and detection of fraud and error;
b)	requiring management to develop and elevate internal controls over sustainability reporting and receiving<br>regular progress updates on the maturity of internal controls supporting the Bank’s annual sustainability reporting;
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c)	evaluating and approving systems of internal control and meeting regularly with the CAE and with management to<br>assess the adequacy and effectiveness of these systems;
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d)	receiving reasonable assurances on a regular basis from management that the organization is in control;<br>
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e)	reviewing reports from the Chief Executive Officer (the CEO) and the CFO regarding any significant deficiency<br>or material weakness in the design or operation of internal controls over financial reporting and the detection of fraud involving management or other employees who have a significant role in the Bank’s internal control over financial<br>reporting;
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f)	reviewing and approving the Bank’s disclosure policy and reviewing reports on the effectiveness of the<br>Bank’s disclosure controls and procedures;
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g)	reviewing the process relating to the CEO and CFO’s certifications on the design and effectiveness of the<br>Bank’s disclosure controls and procedures and internal control over financial reporting, and the integrity of the Bank’s quarterly and annual financial statements.
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6.	Internal Auditor
---	---

The Committee will regularly meet with the CAE to review and approve the annual risk-based internal audit plan and review internal audit activities. The Committee will review and discuss with the CAE issues reported to management by the internal audit function and management’s responses and/or corrective actions. The Committee will also evaluate the status of identified control weaknesses, as well as the adequacy and degree of compliance with the Bank’s systems of internal control. Other issues that the Committee may review with the CAE include audit scope, information access, resource limitations or any other difficulties encountered by the internal audit function.

7.	Capital and Liquidity Management

The Committee will review capital transactions and may designate and authorize the issue of (i) First Preferred Shares and (ii) securities qualifying as additional Tier 1 capital under capital adequacy guidelines issued by the Superintendent of Financial Institutions. The Committee may also review and approve securities disclosure documents in connection with issues of the Bank’s subordinated indebtedness as provided in the relevant resolution of the Board.

The Committee will review the adequacy and effectiveness of internal controls related to capital and liquidity management. It will also discuss with the external auditors any matters arising from the audit that may have an impact on regulatory or capital disclosures included in the Bank’s annual statement.

8.	Committee Reports

The Committee is responsible for preparing any report from the Committee that may be included in the Bank’s annual proxy statement.

9.	Other
a)	The Committee will discuss major issues regarding accounting principles and financial statement presentations,<br>including significant changes in the Bank’s selection or application of accounting principles and analyses prepared by management or the external auditors regarding financial reporting issues and judgments made in connection with the<br>preparation of the financial statements;
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b)	The Committee will establish procedures for managing complaints received by the Bank regarding accounting,<br>internal accounting controls or auditing matters, as well as procedures for the confidential and anonymous submission by employees of concerns regarding accounting, internal accounting controls or auditing matters. The Committee will receive reports<br>from the Vice-President, Client Complaints Appeal Office at each Committee meeting and will meet with the Vice-President, Client Complaints Appeal Office annually in relation to these procedures;
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c)	The Committee will review and discuss any reports concerning material violations submitted to it by the<br>Bank’s legal counsel pursuant to applicable law and policy;
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d)	The Committee will discuss the major financial risk exposures of the Bank and the steps management has taken to<br>monitor and control such exposures;
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e)	Subject to the laws applicable to the subsidiary, the Committee may perform for and on behalf of a subsidiary<br>the functions of an audit committee of the subsidiary.
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B.	COMMITTEE COMPOSITION AND PROCEDURES
---	---
1.	Composition of Committee
---	---

The Committee will be composed of five or more directors. No Committee member may be an officer or employee of the Bank or of an affiliate of the Bank. Each Committee member will be (i) unaffiliated, as determined in accordance with the regulations made under the Bank Act, and (ii) independent, as determined by director independence standards adopted by the Board. Committee membership will reflect a balance of experience and expertise required to fulfill the Committee’s mandate.

All Committee members will be financially literate or become financially literate within a reasonable period after appointment to the Committee. At least one member will have accounting or financial management expertise. No member may serve on the audit committees of more than two other public companies, unless the Board determines such simultaneous service would not impair the member’s ability to serve effectively on the Committee.

2.	Appointment of Committee Members

The Board will appoint or reappoint the Committee members at the annual organizational meeting of the directors. In the normal course members will serve a minimum of three years. Each member will remain a member until a successor is appointed, unless the member resigns, is removed or ceases to be a director. The Board may fill a vacancy that occurs in the Committee at any time.

3.	Committee Chair and Secretary

The Board will appoint or reappoint a Committee Chair from among the members of the Committee. If the Board fails to do so, the Committee members will make the appointment or re-appointment. In the normal course the Committee Chair will serve a minimum of three years. The Committee Chair will not be a former employee of the Bank or of an affiliate. The Secretary of the Committee need not be a director.

4.	Time and Place of Meetings

Meetings may be called by any Committee member, the external auditors, the CFO, the Board Chair, the CEO or the Chief Audit Executive. The Committee members will determine the time and place of and the procedure at meetings, provided that the Committee meets at least quarterly. The Committee members may participate in meetings in person or by telephone, electronic or other communications facilities. The Committee may request any officer or employee of the Bank or the Bank’s outside counsel or external auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

5.	Quorum

A quorum for meetings will be three members.

6.	Notice of Meetings

Notice of the time and place of each meeting will be generally given in writing or by telephone, or by electronic or other communications facilities, to each Committee member and to the external auditors at least 24 hours prior to the time fixed for such meeting; however,

a)	a member may in any manner waive notice of a meeting and attendance of a member at a meeting is a waiver of<br>notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called;
b)	a resolution in writing signed by all the members entitled to vote on that resolution at a Committee meeting,<br>other than a resolution of the Committee carrying out its duties under subsection 194(3) of the Bank Act, will be as valid as if it had been passed at a meeting of the Committee; and
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c)	capital transactions may be reviewed and/or authorized at a meeting of which at least one hour prior notice is<br>given.
7.	Delegation
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The Committee may designate a sub-committee to review any matter within the Committee’s mandate.

8.	Reporting to the Board

The Committee will report to the Board following each meeting with respect to its activities and recommendations. It will also report to the Board on the annual statement and returns that must be approved by the directors under the Bank Act.

9.	Access to Management and External Advisors

In fulfilling its responsibilities, the Committee will have unrestricted access to management, employees and the CAE, of the Bank. The Committee will select, retain, oversee, terminate and approve the fees of any external advisor that the Committee deems necessary, including any legal or accounting advisor, to assist it in fulfilling its responsibilities. The Bank will provide appropriate funding, as determined by the Committee, for any such engagement.

The Committee may also investigate any matter with full access to all books, records, facilities, management and employees of the Bank.

10.	Private Meetings

At least quarterly the Committee will meet with no members of management present and have separate private meetings with the external auditors, and each of the CAE, the CFO and the Chief Legal & Administrative Officer, to discuss any matters that the Committee or these parties believe should be discussed.

11.	Minutes

Minutes of meetings of the Committee will be maintained by the Secretary and subsequently presented to the Committee and to the Board, if required by the Board.

12.	Evaluation of Effectiveness and Review of Mandate

The Committee will annually review and assess the adequacy of its mandate and evaluate its effectiveness in fulfilling its mandate.

APPENDIX D – PRE-APPROVAL POLICIES AND PROCEDURES

Policies and Procedures

for the Monitoring, and Pre-Approval of Services

to be Performed by Public Accounting Firms

and the Review of the External Auditors

(effective April 10, 2024)

Mandate

1.	The mandate of the Audit Committee established by the Board of Directors (“Board”) confers on the<br>Audit Committee the authority and responsibility (among other things) to:
•	Pre-approve all audit and any legally permissible non-audit services to be provided by the external auditors and all audit, review and attest services provided by any other public accounting firm, with such approval to be given either specifically or pursuant to pre-approval policies and procedures adopted by the Audit Committee; and
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•	To complete an annual and five year comprehensive reviews of the external auditor’s performance and to<br>recommend to the Board the selection and termination of the external auditor subject to shareholder approval.
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Purpose

2.	These Policies and Procedures are intended to:
a)	specify the methods by which the Audit Committee may pre-approve the<br>provision of audit, review and attest services by any public accounting firm to the Bank and its subsidiaries;
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b)	specify the methods by which the Audit Committee may pre-approve the<br>provision of non-audit services to the Bank and its subsidiaries by the Bank’s external auditors and their affiliates (the “auditors”) that do not impair the independence of the auditors<br>under applicable laws and professional standards, including the rules of the Chartered Professional Accountants Canada, the Public Company Accounting Oversight Board (“PCAOB”), the Canadian Securities Administrators and the U.S.<br>Securities and Exchange Commission;
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c)	set forth procedures designed to ensure that any services to be provided by the auditors and that any audit,<br>review or attestation services to be performed by any other public accounting firm have been properly authorized and pre-approved under the authority of the Audit Committee, and that the Audit Committee is<br>promptly informed of each service;
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d)	ensure that the Audit Committee’s responsibilities are not delegated to management in violation of<br>applicable law;
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e)	specify the policies relating to the annual and comprehensive evaluation of the external auditor and selection<br>of the external auditor by the Audit Committee for recommendation to the Board.
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Required Approval of Audit and Non-Audit Services

3.	The Audit Committee shall pre-approve all engagements of the auditors<br>by:
a)	the Bank; or
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b)	any subsidiary.
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4.	The Audit Committee shall pre-approve all engagements of any public<br>accounting firm to provide audit, review or attest services to:
---	---
a)	the Bank; or
---	---
b)	any subsidiary.
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5.	The Audit Committee shall evidence its pre-approval by resolution of<br>the Audit Committee or through the exercise of delegated authority in accordance with these Policies and Procedures.
6.	“Subsidiary” has the meaning set forth in Rule 210.1-02(x)<br>of the U.S. Securities and Exchange Commission’s Regulation S-X.
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7.	For the purpose of these Policies and Procedures and any pre-approval:<br>
---	---
a)	“Audit services” include services that are a necessary part of the audit process and any activity<br>that is a necessary procedure used by the accountant in reaching opinions on the financial statements and on internal control over financial reporting as is required under applicable auditing standards (“AAS”), including technical<br>reviews to reach an audit judgment on complex accounting issues;
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b)	The term “audit services” is broader than those services strictly required to perform an audit<br>pursuant to AAS and include such services as:
---	---
i)	the issuance of comfort letters and consents in connection with offerings of securities;
---	---
ii)	the performance of domestic and foreign statutory audits;
---	---
iii)	attest services required by statute or regulation; and
---	---
iv)	assistance with and review of documents filed with the Office of the Superintendent of Financial Institutions,<br>Canadian Securities Administrators, the Securities and Exchange Commission, the Board of Governors of the Federal Reserve Board and other regulators having jurisdiction over the activities of the Bank and its subsidiaries, and responding to comments<br>from such regulators;
---	---
c)	“Audit-related” services are assurance and related services traditionally performed by the<br>Bank’s independent auditor and that are reasonably related to the performance of the audit or review of financial statements and not categorized under “audit fees” for disclosure purposes.
---	---

“Audit-related services” include:

i)	employee benefit plan audits;
ii)	due diligence related to mergers and acquisitions,
---	---
iii)	consultations and audits in connection with acquisitions, including evaluating the accounting treatment for<br>proposed transactions;
---	---
iv)	reporting on the effectiveness of internal controls as required by contract or for business reasons;<br>
---	---
v)	the audits of various trusts and limited partnerships;
---	---
vi)	attest services not required by statute or regulation; and
---	---
vii)	consultations regarding financial accounting and reporting standards.
---	---

Non-financial operational audits are not “audit-related” services.

“Review services” are services applied to unaudited financial statements and consist of the inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to financial statements for them to be in conformity with International Financial Reporting Standards or, if applicable, any other comprehensive basis of accounting.

“Attest” services are engagements where the accountant issues an examination, a review, or an agreed-upon procedures report on a subject matter, or an assertion about the subject matter that is the responsibility of another party. Examples of the subject matter of an “attest” engagement include: examinations (i.e., audits) of financial forecasts and projections; reviews of pro-forma financial information; reporting on a company’s internal control over financial reporting; and examinations of compliance with contractual arrangements or laws and regulations.

---

f)	A “subsidiary” of a specified person is an affiliate controlled by such person directly, or<br>indirectly through one or more intermediaries.

External Auditor Selection and Appointment

8.	The Audit Committee shall monitor, review and assess the quality of the external auditor on an annual basis.<br>The annual assessment will include:
a)	quality and thoroughness of the audit approach and methodology;
---	---
b)	level of professional skepticism, and critical judgments applied by the audit team;
---	---
c)	independence of the external audit firm and the engagement partner;
---	---
d)	skills and knowledge of the audit team;
---	---
e)	level of understanding of our businesses and the financial services industry;
---	---
f)	sufficiency of resources and ability to complete the audit in a timely manner;
---	---
g)	partner rotation;
---	---
h)	value for money;
---	---
i)	quality of communications;
---	---
j)	risk of likelihood of withdrawal from the audit;
---	---
k)	input from senior management of RBC;
---	---
l)	input from RBC Internal Audit;
---	---
m)	a self-assessment prepared by the auditor; and
---	---
n)	audit quality metrics and other matters as determined by the Audit Committee or the Board of Directors.<br>
---	---
9.	At least every five years the Audit Committee will conduct a comprehensive assessment of the external auditor.<br>The assessment will include:
---	---
a)	considerations included within the annual assessment;
---	---
b)	performance since the last comprehensive review, or appointment of the external auditor;
---	---
c)	quality and continuity of the engagement team;
---	---
d)	tenure of the auditor;
---	---
e)	incidence of independence threats and effectiveness of applied safeguards;
---	---
f)	track record of the auditor applying professional skepticism; and
---	---
g)	responsiveness to changes in the Bank’s businesses (i.e. significant acquisitions or changes to systems)<br>and calls for improvement from regulators, inspectors, Audit Committee or management.
---	---
10.	The Audit Committee will take the following into account in deciding whether to recommend the tendering of the<br>external audit engagement of the Bank:
---	---
a)	the results of the annual and comprehensive assessments (refer to factors described in sections 8 and 9);<br>
---	---
b)	the impact of regulatory and legislative requirements, including mandatory tendering and rotation requirements<br>on the Bank and its subsidiaries; and
---	---
c)	other factors deemed relevant by the Audit Committee or the Board.
---	---

Delegation

11.	The Audit Committee may from time to time delegate to one or more of its members who are<br>“independent” (within the meanings of applicable law and the rules or policies of a securities commission having jurisdiction, and the New York Stock Exchange) the power to pre-approve from time to<br>time:
a)	audit, audit-related, review or attest services to be provided by any public accounting firm (including the<br>auditors) that have not been otherwise approved by the Audit Committee;
---	---
b)	permissible non-audit services to be provided by the auditors that have<br>not otherwise been approved by the Audit Committee, and
---	---
c)	changes in the scope of pre-approved engagements and the maximum<br>estimated fees for engagements that have been pre-approved by the Audit Committee.
---	---

12.	The member(s) exercising such delegated authority must report at the next regularly scheduled meeting of the<br>Audit Committee any services that were pre-approved under this delegated authority since the date of the last regularly scheduled meeting.
13.	The member(s) exercising delegated authority may evidence his or her approval by signing an instrument in<br>writing that describes the engagement with reasonable specificity, or by signing an engagement letter containing such a description.
---	---
14.	In addition, member(s) exercising delegated authority may pre-approve<br>an engagement orally, if any such oral approval is promptly confirmed in writing. Such written confirmation may be given by fax or e-mail and must describe the engagement with reasonable specificity.<br>
---	---
15.	The Audit Committee may, each fiscal year, pre-approve additional fees<br>for addendums to existing audit and audit-related engagements and new audit and audit-related engagements, categorized based on the nature of the underlying services, with a maximum amount (“fee cap”) assigned for each category of<br>services (“fee buckets”). The Audit Committee delegates authority to management to approve final fees associated with such pre-approved engagements provided that such fees do not exceed the fee<br>cap. Any engagement subject to this process will be limited to those with little or no risk of independence breaches. Management shall provide a summary of cumulative fees approved under each fee bucket at the scheduled meetings of the Audit<br>Committee held following the end of each fiscal quarter end.
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Responsibilities of External Auditors

16.	To support the independence process, the external auditors shall:
a)	confirm in engagement letters that performance of the work will not impair independence;
---	---
b)	satisfy the Audit Committee that they have in place comprehensive internal policies and processes to ensure<br>adherence, world-wide, to independence requirements, including robust monitoring and communications;
---	---
c)	provide communication and confirmation to the Audit Committee on independence on a regular basis, and at least<br>annually;
---	---
d)	provide for the Audit Committee’s approval a summary of proposed services for the fiscal year and a<br>detailed breakdown of expected fees;
---	---
e)	utilize the tracking numbers assigned by management to all pre-approved<br>services in all fee billings and correspondence, provide detailed annual fee reporting and review management’s detailed quarterly fee reporting.
---	---
f)	communicate to the Audit Committee all matters required to be communicated by the Canadian Public<br>Accountability Board and U.S. Public Company Accounting Oversight Board.
---	---
g)	maintain certification by the Canadian Public Accountability Board and registration with the U.S. Public<br>Company Accounting Oversight Board; and
---	---
h)	review their partner rotation plan and advise the Audit Committee on an annual basis.
---	---

Engagements

17.	The Audit Committee will not, as a general rule, pre-approve a service<br>more than one year prior to the time at which it is anticipated that the firm of accountants will be engaged to provide the service.
18.	Engagements will not be considered to be revolving in nature and may not operate from year-to-year without re-approval.
---	---
19.	All audit, audit-related, and non-audit services to be provided by the<br>auditor, and all audit, audit-related, review or attest services to be provided by any public accounting firm, shall be provided pursuant to an engagement letter that shall:
---	---
a)	be in writing and signed by the auditors or public accounting firm;
---	---
b)	specify the particular services to be provided;
---	---
c)	specify the period in which the services will be performed;
---	---

d)	specify the maximum total fees to be paid; and
e)	in the case of engagements of the auditors, include a confirmation by the auditors that the services are not<br>within a category of services the provision of which would impair their independence under applicable law and Canadian and U.S. generally accepted auditing standards.
---	---
20.	Management shall, before signing and delivering an engagement letter on behalf of the Bank or a subsidiary and<br>before authorizing the commencement of an engagement:
---	---
a)	obtain an engagement letter in accordance with these Policies and Procedures;
---	---
b)	confirm that the services are described in the engagement letter accurately and with reasonable specificity;<br>
---	---
c)	obtain confirmation from the auditors that they have conducted an analysis that supports their conclusion that<br>performance of the services will not impair their independence;
---	---
d)	with respect to engagements for the provision of services other than audit and audit-related services, obtain<br>confirmation from legal counsel of the Bank that performance of the services will not impair independence; and
---	---
e)	verify that the performance of the services has specifically been approved by the Audit Committee or a member<br>in accordance with authority delegated by the Audit Committee.
---	---

All engagement letters entered into pursuant to these Policies and Procedures shall be made available to the Audit Committee upon request.

Tax Services

21.	The Audit Committee, and any member in the exercise of delegated power, shall consider the provision of tax<br>services by the auditors on an engagement-by-engagement basis.
22.	The Audit Committee shall not pre-approve, and any member of the Audit<br>Committee may not exercise delegated power to engage the auditors to provide, tax services to the Bank or a subsidiary:
---	---
a)	to represent the Bank or a subsidiary before a tax or other court;
---	---
b)	if the provision of the services would be prohibited, as prescribed by paragraph 26 of these Policies and<br>Procedures; or
---	---
c)	related to marketing, planning or opinion in favour of the tax treatment of (1) a transaction offered<br>under conditions of confidentiality and for which a fee has been or will be paid by the Bank; or (2) a transaction that was initially recommended directly or indirectly, by the accountant and a significant purpose of which is tax avoidance,<br>unless the proposed tax treatment is at least more likely than not to be allowable under applicable tax laws.
---	---
23.	The Audit Committee shall not pre-approve, and any member of the Audit<br>Committee may not exercise delegated power to engage the auditors to provide, tax services to a person in a financial oversight role at the Bank, or an immediate family member of such a person, except as would be permitted by the PCAOB rules.<br>
---	---

Other Non-Audit Services

24.

The Audit Committee, and any member in the exercise of delegated power, shall consider the provision of other non-audit services (non-audit services other than audit-related services and tax services, and including non-audit services relating to internal control and business recovery services) by the auditors on an engagement-by-engagement basis. Any approval of non-audit services relating to internal control must be preceded by a discussion with the auditors of the potential effects of the services on independence as required by the rules of the PCAOB.

Value-Added Services

25.

The Audit Committee recognizes and approves of the fact that the auditors from time to time provide, without charge or commitment, value added services to the Bank and its subsidiaries that do not involve an engagement of the auditors. Such value added services may include surveys, educational sessions, workshops, roundtable meetings with peers, benchmarking studies, and monitoring of contest draws as an independent observer. The Audit Committee receives and reviews periodic reports from management and the auditors providing representative examples of such services as part of its monitoring of the Bank’s overall relationship with the auditors.

Prohibited Services

26.	The Audit Committee shall not pre-approve, and any member may not<br>exercise delegated power to engage the auditors to provide, any services, including tax services or business recovery services, that (i) provide for a contingency or commission fee arrangement; or (ii) involve the auditors performing any<br>of the non-audit services set forth in paragraph (c)(4) of Rule 210.2-01 of the U.S. Securities and Exchange Commission’s Regulation<br>S-X, which include:
a.	providing bookkeeping or other services related to the accounting records or financial statements of the Bank<br>or any of its subsidiaries,
---	---
b.	providing financial information systems design and implementation to the Bank or any of its subsidiaries,<br>
---	---
c.	providing appraisal or valuation services, fairness opinions, or contribution-in-kind reports to the Bank or any of its subsidiaries,
---	---
d.	providing actuarial services to the Bank or any of its subsidiaries,
---	---
e.	providing internal audit outsourcing services to the Bank or any of its subsidiaries,
---	---
f.	functioning in the role of management for the Bank or any of its subsidiaries,
---	---
g.	providing human resources services to the Bank or any of its subsidiaries,
---	---
h.	providing broker-dealer, investment adviser, or investment banking services to the Bank or any of its<br>subsidiaries,
---	---
i.	provide legal services to the Bank or any of its subsidiaries,
---	---
j.	providing services that fall within the category of “expert” services that are prohibited by<br>applicable law to the Bank or any of its subsidiaries,
---	---
k.	auditing their own work in relation to the Bank or any of its subsidiaries,
---	---
l.	serving in an advocacy role for the Bank or any of its subsidiaries, or
---	---
m.	providing services to the Bank or any of its subsidiaries that would otherwise compromise their independence<br>under applicable regulatory guidance.
---	---

For the purposes of the Prohibited Services listed in Section 26, a “subsidiary” includes any entity for which the Bank uses the equity method of accounting and where it is material to the Bank. Therefore, the Audit Committee is not permitted to pre-approve the provision of the prohibited services listed above by the auditors to these entities.

Timely Reporting to the Audit Committee

27.	Management shall provide a written report to the Audit Committee of services performed and related fees, and if<br>necessary, proposals for approval of any increase in fees or new engagements at the scheduled meetings of the Audit Committee held following the end of each fiscal quarter end, or more frequently if required.

No Delegation to Management

28.	Nothing in these Policies and Procedures shall be interpreted as a delegation to management of the Audit<br>Committee’s responsibilities in violation of applicable law.

Effective Date

29.	These updated Policies and Procedures are effective as and from April 10, 2024.

Disclosure

30.	The Bank shall disclose these Policies and Procedures in its periodic filings, as required by applicable law.<br>

Review

31.	The Audit Committee shall review and reassess the adequacy of these Policies and Procedures on a triennial<br>basis.

EX-2 Financial Review

Exhibit 2

Management’s Discussion and Analysis

Management’s Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the fiscal year ended October 31, 2025, compared to the preceding fiscal year. This MD&A should be read in conjunction with our 2025 Annual Consolidated Financial Statements and related notes and is dated December 2, 2025. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise noted. Additional information about us, including our 2025 Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on the Canadian Securities Administrators’ website, SEDAR+, at sedarplus.com and on the EDGAR section of the United States (U.S.) Securities and Exchange Commission’s (SEC) website at sec.gov. Information contained in or otherwise accessible through the websites mentioned herein does not form part of this report. All references in this report to websites are inactive textual references and are for your information only.

Table of contents

Caution regarding forward-looking statements	22
Overview and outlook	23
Selected financial and other highlights	23
About Royal Bank of Canada	24
Vision and strategic goals	24
Economic, market and regulatory review and outlook	24
Defining and measuring success	25
Financial performance	26
Overview	26
Impact of foreign currency translation	27
Total revenue	27
Provision for credit losses	28
Non-interest expense	29
Income and other taxes	30
Client assets	30
Business segment results	32
Results by business segment	32
How we measure and report our business segments	32
Key performance and non-GAAP measures	33
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Personal Banking	35
Commercial Banking	40
Wealth Management	43
Insurance	50
Capital Markets	53
Corporate Support	59
Quarterly financial information	59
Fourth quarter performance	59
Quarterly results and trend analysis	60
Financial condition	61
Condensed balance sheets	61
Off-balance sheet arrangements	62
Risk management	65
Overview	65
Enterprise risk management	65
Top and emerging risks	69
Principal risks	72
Credit risk	72
Market risk	83
Liquidity and funding risk	88
Insurance risk	102
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Operational risk	102
Compliance risk	105
Reputation risk	106
Strategic risk	106
Overview of other risks	107
Legal and regulatory environment risk	107
Government fiscal, monetary and other policies	108
Tax risk and transparency	108
Environmental and social risk	109
Capital management	110
Accounting and control matters	121
Critical accounting policies and estimates	121
Controls and procedures	124
Related party transactions	125
Supplementary information	125
Glossary	133
Enhanced Disclosure Task Force recommendations index	136
Caution regarding forward-looking statements
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From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this 2025 Annual Report, in other filings with

Canadian regulators or the SEC, in other reports to shareholders, and in other communications. In addition, our representatives may communicate forward-looking statements orally to

analysts, investors, the media and others. Forward-looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, priorities, vision

and strategic goals, the economic, market, and regulatory review and outlook for Canadian, U.S., United Kingdom (U.K.), Euro area and global economies, the regulatory environment in which we operate, the Strategic priorities and Outlook sections for each of our business segments, the risk environment including our credit risk, market risk, liquidity and funding risk as well as the effectiveness of our risk monitoring, our climate- and sustainability-related beliefs, targets and goals and related legal and regulatory developments, and include statements made by our President and Chief Executive Officer and other members of management. The forward-looking statements contained in this document represent the views of management and are presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision, strategic goals and priorities and anticipated financial performance, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “suggest”, “seek”, “foresee”, “forecast”, “schedule”, “anticipate”, “intend”, “estimate”, “goal”, “commit”, “target”, “objective”, “plan”, “outlook”, “timeline” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “might”, “should”, “could”, “can”, “would” or negative or grammatical variations thereof.

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events, as well as the inherent uncertainty of forward-looking statements. Material economic assumptions underlying the forward-looking statements contained in this 2025 Annual Report are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook headings, as such sections may be updated by subsequent quarterly reports. Any forward-looking statements contained in this document represent the views of management only as of the date hereof, and except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.

Additional information about these and other factors can be found in the risk sections of this 2025 Annual Report, as may be updated by subsequent quarterly reports.

22 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Overview and outlook
Selected financial and other highlights<br><br>(1)	Table 1
---	---
(Millions of Canadian dollars, except per share, number of and percentage amounts)	2025			2024			2025 vs. 2024<br><br>Increase (decrease)
---	---	---	---	---	---	---	---	---	---	---
Total revenue	$	66,605		$	57,344		$	9,261		16.1%
Provision for credit losses (PCL)		4,362			3,232			1,130		n.m.
Non-interest<br> expense		36,592			34,250			2,342		6.8%
Income before income taxes		25,651			19,862			5,789		29.1%
Net income	$	20,369		$	16,240		$	4,129		25.4%
Net income – adjusted<br><br><br><br><br><br>(2), (3)	$	20,870		$	17,430		$	3,440		19.7%
Segments – net income
Personal Banking	$	7,105		$	5,921		$	1,184		20.0%
Commercial Banking		3,020			2,818			202		7.2%
Wealth Management		4,289			3,422			867		25.3%
Insurance		828			729			99		13.6%
Capital Markets		5,393			4,573			820		17.9%
Corporate Support		(266	)		(1,223	)		957		n.m.
Net income	$	20,369		$	16,240		$	4,129		25.4%
Selected information
Earnings per share (EPS) – basic	$	14.10		$	11.27		$	2.83		25.1%
– diluted		14.07			11.25			2.82		25.1%
– basic adjusted<br>(2), (3)		14.46			12.11			2.35		19.4%
– diluted adjusted<br>(2), (3)		14.43			12.09			2.34		19.4%
Return on common equity (ROE)<br>(3)		16.3%			14.4%			n.m.		190 bps
ROE – adjusted<br>(2), (3)		16.7%			15.5%			n.m.		120 bps
Average common equity <br>(4)	$	122,050		$	110,650		$	11,400		10.3%
Net interest margin (NIM) – on average earning assets, net <br>(3)		1.62%			1.54%			n.m.		8 bps
PCL on loans as a % of average net loans and acceptances		0.43%			0.35%			n.m.		8 bps
PCL on performing loans as a % of average net loans and acceptances		0.06%			0.07%			n.m.		(1) bps
PCL on impaired loans as a % of average net loans and acceptances		0.37%			0.28%			n.m.		9 bps
Gross impaired loans (GIL) as a % of loans and acceptances		0.83%			0.59%			n.m.		24 bps
Liquidity coverage ratio (LCR)<br>(3), (5)		127%			128%			n.m.		(100) bps
Net stable funding ratio (NSFR)<br>(3), (5)		112%			114%			n.m.		(200) bps
Capital, Leverage and Total loss absorbing capacity (TLAC) ratios<br><br><br><br><br><br>(3), (6)
Common Equity Tier 1 (CET1) ratio		13.5%			13.2%			n.m.		30 bps
Tier 1 capital ratio		15.1%			14.6%			n.m.		50 bps
Total capital ratio		16.8%			16.4%			n.m.		40 bps
Leverage ratio		4.4%			4.2%			n.m.		20 bps
TLAC ratio		31.5%			29.3%			n.m.		220 bps
TLAC leverage ratio		9.2%			8.4%			n.m.		80 bps
Selected balance sheet and other information<br><br><br><br><br><br>(7)
Total assets	$	2,325,006		$	2,171,582		$	153,424		7.1%
Securities, net of applicable allowance		561,788			439,918			121,870		27.7%
Loans, net of allowance for loan losses		1,042,422			981,380			61,042		6.2%
Derivative assets		177,206			150,612			26,594		17.7%
Deposits		1,515,616			1,409,531			106,085		7.5%
Common equity		127,417			118,058			9,359		7.9%
Total risk-weighted assets (RWA)<br>(3), (6)		730,225			672,282			57,943		8.6%
Assets under management (AUM)<br>(3)		1,573,800			1,342,300			231,500		17.2%
Assets under administration (AUA)<br>(3), (8)		5,599,000			4,965,500			633,500		12.8%
Common share information
Shares outstanding (000s) – average basic		1,409,072			1,411,903			(2,831	)	(0.2)%
– average diluted		1,411,589			1,413,755			(2,166	)	(0.2)%
– end of period		1,400,114			1,414,504			(14,390	)	(1.0)%
Dividends declared per common share	$	6.04		$	5.60		$	0.44		7.9%
Dividend yield<br>(3)		3.4%			3.9%			n.m.		(50) bps
Dividend payout ratio<br>(3)		43%			50%			n.m.		(700) bps
Common share price (RY on TSX)<br>(9)	$	205.47		$	168.39		$	37.08		22.0%
Market capitalization (TSX)<br>(9)		287,681			238,188			49,493		20.8%
Business information<br>(number of)
Employees (full-time equivalent) (FTE)		96,628			94,838			1,790		1.9%
Bank branches		1,263			1,292			(29	)	(2.2)%
Automated teller machines (ATMs)		4,183			4,367			(184	)	(4.2)%
Period average US$ equivalent of C$1.00 <br>(10)	$	0.712		$	0.736		$	(0.024	)	(3.3)%
Period-end<br> US$ equivalent of C$1.00	$	0.713		$	0.718		$	(0.005	)	(0.7)%
(1)	On March 28, 2024, we completed the acquisition of HSBC Bank Canada (HSBC Canada transaction). HSBC Bank Canada (HSBC Canada) results have been consolidated from the closing date, and are included in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets segments.
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(2)	These are <br>non-GAAP<br> measures or ratios. For further details, including a reconciliation, refer to the Key performance and <br>non-GAAP<br> measures section.
---	---
(3)	See Glossary for composition of these measures.
---	---
(4)	Average amounts are calculated using methods intended to approximate the average of the daily balances for the period.
---	---
(5)	The LCR and NSFR are calculated in accordance with the Office of the Superintendent of Financial Institutions’ (OSFI) Liquidity Adequacy Requirements (LAR) guideline. LCR is the average for the three months ended for each respective period. For further details, refer to the Liquidity and funding risk section.
---	---
(6)	Capital ratios and RWA are calculated using OSFI’s Capital Adequacy Requirements (CAR) guideline, the Leverage ratio is calculated using OSFI’s Leverage Requirements (LR) guideline, and both the TLAC and TLAC leverage ratios are calculated using OSFI’s TLAC guideline. Both the CAR guideline and LR guideline are based on the Basel III framework. For further details, refer to the Capital management section.
---	---
(7)	Represents <br>period-end<br> spot balances.
---	---
(8)	AUA includes $15 billion and $5 billion (2024 – $15 billion and $6 billion) of securitized residential mortgages and credit card loans, respectively.
---	---
(9)	Based on TSX closing market price at <br>period-end.
---	---
(10)	Average amounts are calculated using <br>month-end<br> spot rates for the period.
---	---
n.m.	not meaningful
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 23

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About Royal Bank of Canada

Our business segments are described below.

Personal<br>Banking	Provides a broad suite of financial products and services to retail clients in Canada, the Caribbean and the U.S. Our commitment to building and maintaining deep and meaningful relationships with our clients is underscored by the delivery of exceptional client experiences, the breadth of our product suite, our depth of expertise and the features of our digital solutions.
Commercial<br>Banking	Serves the <br>end-to-end<br> needs of Canadian businesses, including subsidiaries of multi-nationals. We deliver a full spectrum of services to the market, ranging from lending and deposits to payments, cash management and advisory services. Our comprehensive coverage teams with specialization across industries and products give us the scale to deliver holistic solutions to our clients.
Wealth<br>Management	Primarily serves affluent, high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients from our offices in key financial centres across the globe. We offer a comprehensive suite of wealth, investment, trust, banking, credit and other solutions to this client segment. We also provide a self-directed investment service in Canada, as well as asset management products globally to institutional and individual clients through our distribution channels and third-party distributors. We offer asset services and investor services to financial institutions, asset managers and asset owners in Canada.
Insurance	Offers a comprehensive suite of advice and solutions for individual and business clients including life, health, wealth solutions, property & casualty, travel, group benefits, longevity reinsurance and reinsurance solutions for creditor products. We provide tailored, <br>client-led<br> advice and solutions, harnessing the power of technology and data and leveraging the strength and scale of the RBC<br>®<br> enterprise as our competitive advantage.
Capital Markets	Provides expertise in advisory & origination, sales & trading, lending & financing and transaction banking to corporate, institutional, sponsor and government clients globally. We serve these clients from 55 offices in 16 countries across North America, the U.K. & Europe, Australia, Asia and other regions.
Vision<br>and strategic goals
---

Our business strategies and actions are guided by our vision, “To be among the world’s most trusted and successful financial institutions.”

Our three strategic goals are:

•	In Canada, to be the undisputed leader in financial services;
•	In the U.S., to be the preferred partner to institutional, corporate, commercial and HNW clients and their businesses; and
---	---
•	In select global financial centres, to be a leading financial services partner valued for our expertise.
---	---

For our progress in 2025 against our business strategies and strategic goals, refer to the Business segment results section.

Economic, market and regulatory review and outlook – data as at December 2, 2025

The predictions and forecasts in this section are based on information and assumptions from sources we consider reliable. If this information or these assumptions are not accurate, actual economic outcomes may differ materially from the outlook presented in this section.

Economic and market review and outlook

Economic growth is expected to remain positive across most advanced economies, including Canada, the Euro area, the U.K. and the U.S. The outlook remains dependent on the evolution of U.S. international trade policy. U.S. tariff rates have increased since April 2025 for most U.S. trade partners and are expected to slow U.S. economic growth. Tariffs imposed on U.S. imports from Canada remain low relative to other U.S. trade partners with most Canadian exports maintaining duty free access to the U.S. market through an exemption from tariffs for products compliant with the Canada-United States-Mexico Agreement (CUSMA). Our forecast assumes that tariffs will remain elevated but that the exemption from tariffs for most products compliant with CUSMA will be maintained. We expect the U.S. Federal Reserve (Fed) to reduce interest rates modestly in calendar 2026 as slowing economic growth and rising unemployment partially offset concerns about the upward impact of tariffs on inflation. We expect the Bank of England (BoE) will reduce interest rates once more before the end of calendar 2025 but we do not expect additional reductions from the Bank of Canada (BoC) or the European Central Bank (ECB).

24 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Canada

Canadian GDP is expected to increase 1.2% in calendar 2025 following a 2.0% increase in calendar 2024. GDP contracted in the second calendar quarter of 2025, impacted by reduced foreign demand for Canadian exports after U.S. tariffs were imposed, but increased in the third calendar quarter of 2025. GDP growth is expected to remain slow but positive in calendar 2026, supported by anticipated larger government deficit spending and lower interest rates even as trade uncertainty is expected to curtail business investment and population growth slows. We expect most Canadian exports to the U.S. will remain duty free under the exemption from tariffs for products compliant with the CUSMA; however, sector-specific tariffs, including those on lumber, steel and aluminum, copper, the non-U.S. share of Canadian auto exports to the U.S. and China’s tariffs on Canadian products including canola, still apply and will continue to slow production and exports in some affected sectors. The unemployment rate declined to 6.9% in October 2025 after rising to 7.1% in August and September 2025 but is up 0.3% from a year earlier. The unemployment rate is expected to remain elevated but gradually decline in calendar 2026 as hiring demand is expected to stabilize and anticipated increases in government deficit spending support growth in GDP. The end of the consumer carbon tax on energy products in most provinces has lowered the Canadian headline inflation rate, but excluding those changes, core inflation measures are trending closer to the top of the BoC’s 1% to 3% inflation target range. Canadian population growth is expected to continue to slow in calendar 2026, reflecting reduced federal immigration and nonpermanent resident population targets. The BoC has already cut the overnight rate by 275 basis points since June 2024 and we do not expect additional reductions.

U.S.

U.S. GDP has continued to grow but is expected to slow to a 1.8% increase in calendar 2025 following a 2.8% increase in calendar 2024. Consumer spending has been robust but employment growth has stalled, impacted by rising trade uncertainty, reduced immigration and slower hiring in the industrial sector as tariffs have increased. The U.S. federal government shutdown has prevented the release of key official economic data reports, but available data is consistent with gradually softening U.S. labour markets. Layoffs have remained low but hiring demand has continued to slow, indicated by declining job openings. The unemployment rate has edged higher but remains low at 4.4% as of the last reported rate in September 2025. We expect further modest increases in the unemployment rate into early calendar 2026. U.S. inflation growth remains above the Fed’s 2% target and has started to pick up as tariffs increase businesses’ input costs and consumer prices with a lag. Slower job growth in the U.S. prompted the Fed to restart interest rate reductions in September 2025. We expect an additional 50 basis points of reductions to the target range for the federal funds rate by the end of the second calendar quarter of 2026. A significant government budget deficit is expected to keep GDP growth positive in calendar 2026 and prevent a larger increase in the unemployment rate.

Euro area and the U.K.

Euro area GDP is expected to rise by 1.3% in calendar 2025 following a 0.8% increase in calendar 2024. Unemployment rates remain very low across countries in the Euro area. Inflation in the Euro area has also remained low. The ECB has cut the deposit rate by 200 basis points since the beginning of June 2024 and we expect no further reductions in calendar years 2025 or 2026. U.K. GDP is projected to rise by 1.5% in calendar 2025 after a 1.1% rise in calendar 2024. The unemployment rate in the U.K. has increased but is expected to stabilize in calendar 2026. U.K. inflation has moderated, allowing the BOE to begin gradually lowering interest rates. The Bank rate has been reduced by 125 basis points since July 2024 to 4.0%. We expect one more reduction by the BoE by the end of the calendar 2025 and no further reductions in calendar 2026.

Financial markets

Government bond yields have edged lower in Canada and the U.S. since the summer as concerns about the tariff impact on economies and labour markets outweighed concerns about inflation and allowed the BoC and the Fed to reduce interest rates. Government bond yields have also declined in the U.K. but are little changed in the Euro area. Equity markets remain close to record highs. Commodity prices, on average, remain below peak levels from 2022 but are still historically high. Metal prices have increased more significantly over the last three months. Oil prices have been volatile but have generally trended lower and are below levels a year ago.

Regulatory environment

For a discussion on risk factors resulting from these and other developments which may affect our business and financial results, refer to the risk sections of this 2025 Annual Report. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of this 2025 Annual Report.

Defining and measuring success

Financial performance objectives are used to measure our performance and are used as goals as we execute against our strategic priorities over the medium-term (3-5 years), which we believe reflects a longer-term view of strong and consistent financial performance.

We review and revise these financial performance objectives as economic, market and regulatory environments change.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 25

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The following table provides a summary of our 3-year and 5-year performance against our medium-term financial performance objectives:

Financial performance compared to our medium-term objectives	Table 2
Medium-term objectives<br><br>(1), (2)	3-year<br><br>(3)		5-year<br><br>(3)
---	---	---	---	---
Diluted EPS growth of 7% +		8%		13%
ROE of 16% +		15.0%		16.0%
Strong capital ratio (CET1) <br>(4)		13.8%		13.5%
Dividend payout ratio 40% – 50%		48%		46%
(1)	A medium-term <br>(3-5<br> year) objective is considered to be achieved when the performance goal is met in either a <br>3-<br> or <br>5-year<br> period. These objectives assume a normal business environment and our ability to achieve them in a period may be adversely affected by the macroeconomic backdrop and the cyclical nature of the credit cycle.
---	---
(2)	Our financial performance reflects the impact of specified items and the amortization of acquisition related intangibles.
---	---
(3)	Diluted EPS growth is calculated using a Compound Annual Growth Rate (CAGR). ROE, CET1 and dividend payout ratio are calculated using an average.
---	---
(4)	The CET1 ratio is calculated using OSFI’s CAR guideline. For further details on the CET1 ratio, refer to the Capital management section.
---	---

Our 3-year and 5-year medium-term financial performance objectives relating to diluted EPS growth, strong capital ratios and dividend payout ratio will remain unchanged in fiscal 2026. For fiscal 2026, we have revised our ROE financial objective to 17%+ to reflect improving revenue productivity and cost efficiencies driven by the execution of our strategic initiatives.

We compare our TSR to that of a global peer group approved by our Board of Directors (the Board). The global peer group for fiscal 2025 consisted of the following 9 financial institutions:

•	Canadian financial institutions:<br> Bank of Montreal, Canadian Imperial Bank of Commerce, Manulife Financial Corporation, National Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank.
•	U.S. banks:<br> JPMorgan Chase & Co. and Wells Fargo & Company.
---	---
•	International banks:<br>Westpac Banking Corporation.
---	---
Medium-term objectives – 3- and 5-year TSR vs. peer group average	Table 3
---	---
	3-year<br> TSR<br>(1)		5-year<br> TSR<br>(1)
---	---	---	---	---
Royal Bank of Canada		22%		22%
		Bottom half		Bottom half
Peer group average (excluding RBC)		26%		25%
(1)	The <br>3-<br> and <br>5-year<br> 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, 2022 to October 31, 2025 and October 31, 2020 to October 31, 2025.
---	---
Common share and dividend information	Table 4
---	---
For the year ended October 31	2025		2024		2023		2022		2021
---	---	---	---	---	---	---	---	---	---	---
Common share price (RY on TSX) – close, end of period	$	205.47	$	168.39		$ 110.76	$	126.05	$	128.82
Dividends paid per share		6.04		5.60		5.34		4.96		4.32
Increase (decrease) in share price		22.0%		52.0%		(12.1)%		(2.2)%		38.3%
Total shareholder return		26.2%		57.8%		(8.3)%		1.6%		43.8%

Beginning in fiscal 2026, the achievement of top half total shareholder returns (TSR) will no longer be a medium-term objective. TSR performance relative to peers will continue to be a part of our overall evaluation of shareholder outcomes and in our compensation programs. However, we believe the achievement of our financial performance objectives is a better indication of our execution against strategic priorities.

Financial performance
Overview
---

2025 vs. 2024

Net income of $20,369 million was up $4,129 million or 25% from last year. Diluted EPS of $14.07 was up $2.82 or 25% and ROE of 16.3% was up 190 bps. Our CET1 ratio was 13.5%, up 30 bps from last year.

Adjusted net income of $20,870 million was up $3,440 million or 20%. Adjusted diluted EPS of $14.43 was up $2.34 or 19% and adjusted ROE of 16.7% was up 120 bps.

Our earnings were up from last year, primarily driven by higher results across all of our business segments. Prior year results also reflect higher HSBC Canada transaction and integration costs and the impact of management of closing capital volatility related to the HSBC Canada transaction, both of which were treated as specified items and reported in Corporate Support. Our earnings also reflect an increase due to the impact of foreign exchange translation.

For further details on our business segment results and CET1 ratio, refer to the Business segment results and Capital management sections, respectively.

Adjusted results

Adjusted results exclude specified items and the after-tax impact of amortization of acquisition-related intangibles. Adjusted results are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

26 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Impact of foreign currency translation

The following table reflects the estimated impact of foreign currency translation on key income statement items:

		Table 5
(Millions of Canadian dollars, except per share amounts)	2025 vs. 2024
Increase (decrease):
Total revenue	$	1,022
PCL		33
Non-interest<br> expense		592
Income taxes		43
Net income		354
Impact on EPS
Basic	$	0.25
Diluted		0.25

The relevant average exchange rates that impact our business are shown in the following table:

Table 6
(Average foreign currency equivalent of C$1.00) (1)	2025		2024
---	---	---	---	---
U.S. dollar		0.712		0.736
British pound		0.545		0.575
Euro		0.641		0.677
(1)	Average amounts are calculated using <br>month-end<br> spot rates for the period.
---	---
Total revenue
---
Table 7
---
(Millions of Canadian dollars, except percentage amounts)	2025		2024
---	---	---	---	---	---
Interest and dividend income	$	103,825	$	104,951
Interest expense		70,825		76,998
Net interest income	$	33,000	$	27,953
NIM		1.62%		1.54%
Insurance service result	$	867	$	777
Insurance investment result		284		294
Trading revenue		3,125		2,327
Investment management and custodial fees		10,647		9,325
Mutual fund revenue		5,084		4,437
Securities brokerage commissions		1,905		1,660
Service charges		2,425		2,294
Underwriting and other advisory fees		2,899		2,672
Foreign exchange revenue, other than trading		1,301		1,142
Card service revenue		1,333		1,273
Credit fees		1,670		1,592
Net gains on investment securities		120		170
Income (loss) from joint ventures and associates		73		(16	)
Other		1,872		1,444
Non-interest<br> income	$	33,605	$	29,391
Total revenue	$	66,605	$	57,344

2025 vs. 2024

Total revenue increased $9,261 million or 16% from last year, largely due to higher net interest income and investment management and custodial fees. Higher trading revenue, mutual fund revenue, other revenue, securities brokerage commissions and underwriting and other advisory fees also contributed to the increase. The impact of foreign exchange translation increased revenue by $1,022 million.

Net interest income increased $5,047 million or 18%, mainly due to an increase in average deposits and loans and acceptances in Personal Banking and Commercial Banking, which includes the impact of five additional months of HSBC Canada results, and higher spreads in Personal Banking. Higher fixed income trading revenue across most regions in Capital Markets and the impact of foreign exchange translation also contributed to the increase.

NIM was up 8 bps compared to last year, reflecting contributions from most of our business segments with Personal Banking being the largest contributor, which was driven by favourable changes in product mix and the sustained impact of a higher interest rate environment.

Trading revenue increased $798 million or 34%, largely due to higher equity trading revenue in Europe and the U.S. and higher foreign exchange trading revenue across all regions.

Investment management and custodial fees increased $1,322 million or 14%, primarily due to higher fee-based client assets reflecting market appreciation and net sales.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 27

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Mutual fund revenue increased $647 million or 15%, primarily due to higher fee-based client assets reflecting market appreciation and net sales in Wealth Management, as well as higher average mutual fund balances driving higher distribution fees in Personal Banking.

Securities brokerage commissions increased $245 million or 15%, primarily driven by client activity in Wealth Management.

Underwriting and other advisory fees increased $227 million or 8%, largely due to higher debt and equity origination across most regions.

Other revenue increased $428 million or 30%, largely attributable to the impact of economic hedges, as well as the impact of management of closing capital volatility related to the HSBC Canada transaction last year, which was treated as a specified item.

Additional trading information

Table 8
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Net interest income <br>(1)	$	2,335	$	1,742
Non-interest<br> income		3,125		2,327
Total trading revenue	$	5,460	$	4,069
Total trading revenue by product
Interest rate and credit	$	2,773	$	2,371
Equities		1,492		817
Foreign exchange and commodities		1,195		881
Total trading revenue	$	5,460	$	4,069
(1)	Reflects net interest income arising from trading-related positions, including assets and liabilities that are classified or designated at fair value through profit or loss (FVTPL).
---	---

2025 vs. 2024

Total trading revenue of $5,460 million, which is comprised of trading-related revenue recorded in Net interest income and Non-interest income, increased $1,391 million or 34% from last year, largely due to higher equity trading revenue across most regions, as well as higher fixed income and foreign exchange trading revenue across all regions. The impact of foreign exchange translation also contributed to the increase.

Provision for credit losses<br><br>(1)
Table 9
---
	For the year ended
---	---	---	---	---	---	---
(Millions of Canadian dollars, except percentage amounts)	October 31<br><br>2025			October 31<br><br>2024
Personal Banking	$	359		$	399
Commercial Banking		314			260
Wealth Management		(8	)		(119	)
Capital Markets		(43	)		86
Corporate Support and other<br>(2)		–			1
PCL on performing loans		622			627
Personal Banking	$	1,757		$	1,418
Commercial Banking		1,236			714
Wealth Management		128			148
Capital Markets		613			340
Corporate Support and other		–			–
PCL on impaired loans<br><br>(2)		3,734			2,620
PCL – Loans		4,356			3,247
PCL – Other<br><br><br><br><br><br>(3)		6			(15	)
Total PCL	$	4,362		$	3,232
PCL on loans is comprised of:
Retail	$	436		$	414
Wholesale		186			213
PCL on performing loans		622			627
Retail		1,961			1,586
Wholesale		1,773			1,034
PCL on impaired loans		3,734			2,620
PCL – Loans	$	4,356		$	3,247
PCL on loans as a % of average net loans and acceptances		0.43%			0.35%
PCL on impaired loans as a % of average net loans and acceptances		0.37%			0.28%
(1)	Information on loans represents loans, acceptances and commitments.
---	---
(2)	Includes PCL recorded in Corporate Support and Insurance.
---	---
(3)	PCL – Other includes amounts related to debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, accounts receivable, and financial and purchased guarantees.
---	---

28 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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2025 vs. 2024

Total PCL increased $1,130 million or 35% from last year, primarily due to higher provisions in Commercial Banking, Personal Banking and Capital Markets.

PCL on performing loans decreased $5 million. The impact of the initial PCL on performing loans purchased in the HSBC Canada transaction in the prior year, migration to impaired in Capital Markets and lower unfavourable changes in credit quality were largely offset by unfavourable changes to our scenario weights, which include the impacts of trade disruptions (including tariffs), and lower favourable changes to our macroeconomic forecast.

PCL on impaired loans increased $1,114 million or 43%, primarily due to higher provisions in Commercial Banking, Personal Banking and Capital Markets.

Non-interest expense
Table 10
---
(Millions of Canadian dollars, except percentage amounts)	2025		2024
---	---	---	---	---
Salaries	$	9,426	$	8,878
Variable compensation		9,983		8,838
Benefits and retention compensation		2,711		2,408
Share-based compensation		1,002		959
Human resources		23,122		21,083
Equipment		2,790		2,537
Occupancy		1,679		1,805
Communications		1,497		1,369
Professional fees		2,177		2,525
Amortization of other intangibles		1,759		1,549
Other		3,568		3,382
Non-interest<br> expense	$	36,592	$	34,250
Efficiency ratio<br><br>(1)		54.9%		59.7%
Efficiency ratio – adjusted<br><br>(1), (2)		54.0%		57.1%
(1)	See Glossary for composition of these measures.
---	---
(2)	This is a <br>non-GAAP<br> ratio. For further details, including a reconciliation, refer to the Key performance and <br>non-GAAP<br> measures section.
---	---

2025 vs. 2024

Non-interest expense increased $2,342 million or 7% from last year, mainly due to higher staff costs and higher variable compensation commensurate with increased results. The impact of foreign exchange translation, ongoing technology investments and the impact of five additional months of HSBC Canada non-interest expenses also contributed to the increase. These factors were partially offset by lower HSBC Canada transaction and integration costs, which is treated as a specified item, and the realization of synergies related to the HSBC Canada transaction.

Our efficiency ratio of 54.9% decreased 480 bps. Our adjusted efficiency ratio of 54.0% decreased 310 bps.

Adjusted efficiency ratio is a non-GAAP ratio. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 29

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Income and other taxes
Table 11
---
(Millions of Canadian dollars, except percentage amounts)	2025		2024
---	---	---	---	---
Income taxes	$	5,282	$	3,622
Other taxes
Value added and sales taxes		724		680
Payroll taxes		1,183		1,060
Capital taxes		36		47
Property taxes		160		155
Insurance premium taxes		47		45
Business taxes		99		61
		2,249		2,048
Total income and other taxes	$	7,531	$	5,670
Income before income taxes	$	25,651	$	19,862
Effective income tax rate		20.6%		18.2%
Effective total tax rate<br><br>(1)		27.0%		25.9%
Adjusted results<br><br>(2), (3)
Income taxes – adjusted	$	5,436	$	3,984
Income before income taxes – adjusted		26,306		21,414
Effective income tax rate – adjusted		20.7%		18.6%
(1)	Total income and other taxes as a percentage of income before income taxes and other taxes.
---	---
(2)	These are <br>non-GAAP<br> measures. For further details, including a reconciliation, refer to the Key performance and <br>non-GAAP<br> measures section.
---	---
(3)	See Glossary for composition of these measures.
---	---

2025 vs. 2024

Income tax expense increased $1,660 million or 46% from last year, primarily due to higher income before income taxes. Adjusted income tax expense increased $1,452 million or 36%.

The effective income tax rate of 20.6% increased 240 bps, primarily due to the impact of changes in earnings mix and Pillar Two legislation, which became effective for us beginning November 1, 2024. The adjusted effective income tax rate of 20.7% increased 210 bps. For further details on Pillar Two legislation, refer to Note 21 of our 2025 Annual Consolidated Financial Statements.

Other taxes increased $201 million or 10% from last year, primarily due to higher payroll taxes driven by higher staff-related costs and higher value added and sales taxes commensurate with increased purchase activity.

Adjusted income tax expense, adjusted income before income taxes and adjusted effective income tax rate are non-GAAP measures or ratios. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Client assets

Assets under administration

AUA are assets administered by us which are beneficially owned by our clients. We provide services that are administrative in nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record keeping. Underlying investment strategies within AUA are determined by our clients and generally do not impact the administrative fees that we receive. Administrative fees can be impacted by factors such as asset valuation level changes from market movements, types of services administered, transaction volumes, geography and client relationship pricing based on volumes or multiple services.

Our Wealth Management business is the primary business segment that has AUA with approximately 94% of total AUA, mainly in the Investor Services line of business with approximately 53% of AUA, as at October 31, 2025. The Personal Banking business has approximately 5% of total AUA.

2025 vs. 2024

AUA increased $634 billion or 13% from last year, primarily due to market appreciation.

30 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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The following table summarizes AUA by geography and asset class:

AUA by geographic mix and asset class	Table 12
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Canada<br><br>(1)
Money market	$	42,400	$	32,800
Fixed income		823,800		784,600
Equity		968,800		701,800
Multi-asset and other		1,554,300		1,458,300
Total Canada		3,389,300		2,977,500
U.S.<br><br>(1)
Money market		35,300		36,600
Fixed income		144,500		144,600
Equity		387,200		335,900
Multi-asset and other		515,700		432,900
Total U.S.		1,082,700		950,000
Other International<br><br>(1)
Money market		25,400		19,200
Fixed income		152,000		130,800
Equity		507,300		425,600
Multi-asset and other		442,300		462,400
Total International		1,127,000		1,038,000
Total AUA	$	5,599,000	$	4,965,500
(1)	Geographic information is based on the location from where our clients are serviced.
---	---

Assets under management

AUM are assets managed by us which are beneficially owned by our clients. Management fees are paid by the investment funds and other clients for the investment capabilities of an investment manager and can also cover administrative services. Management fees may be calculated daily, monthly or quarterly as a percentage of the AUM, depending on the distribution channel, product and investment strategies. In general, equity strategies carry a higher fee rate than fixed income or money market strategies. Fees are also impacted by asset mix and relationship pricing for clients using multiple services. Higher risk assets generally produce higher fees, while clients using multiple services can take advantage of synergies which reduce the fees they are charged. Certain funds may have performance fee arrangements where fees are recorded when certain benchmarks or performance targets are achieved. These factors could lead to differences in fees earned by product and therefore net return by asset class may vary despite similar average AUM. Our Wealth Management segment is the primary business segment that has AUM with approximately 99% of total AUM as at October 31, 2025.

2025 vs. 2024

AUM increased $232 billion or 17% from last year, primarily due to market appreciation and net sales.

The following table presents the change in AUM for the year ended October 31, 2025:

Client assets – AUM	Table 13
	2025															2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Money market			Fixed income			Equity			Multi-asset<br><br>and other			Total			Total
AUM, beginning balance <br>(1)	$	62,800		$	281,300		$	183,900		$	814,300		$	1,342,300		$	1,067,500
Institutional inflows		233,900			57,000			12,400			9,100			312,400			318,400
Institutional outflows		(218,800	)		(51,400	)		(12,900	)		(5,000	)		(288,100	)		(295,500	)
Personal flows, net		1,800			5,000			4,200			24,700			35,700			19,800
Total net flows		16,900			10,600			3,700			28,800			60,000			42,700
Market impact		800			17,900			30,200			112,300			161,200			201,900
Acquisition/dispositions		–			–			–			–			–			20,600
Foreign exchange		500			2,600			200			7,000			10,300			9,600
Total market, acquisition/dispositions and foreign exchange impact		1,300			20,500			30,400			119,300			171,500			232,100
AUM, balance at end of year	$	81,000		$	312,400		$	218,000		$	962,400		$	1,573,800		$	1,342,300
(1)	The amounts in the respective categories have been revised from those previously presented.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 31

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Business segment results
Results by business segments
---
Table 14
---
	2025															2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars,<br>except percentage amounts)	Personal<br>Banking<br><br>(1)		Commercial<br>Banking<br><br>(1)		Wealth<br>Management<br><br>(1)		Insurance		Capital<br>Markets<br><br>(1), (2)		Corporate<br>Support<br><br>(2)			Total		Total
Net interest income	$	14,496	$	7,268	$	5,459	$	–	$	4,789	$	988		$	33,000	$	27,953
Non-interest<br> income		5,358		1,294		16,919		1,321		9,637		(924	)		33,605		29,391
Total revenue		19,854		8,562		22,378		1,321		14,426		64			66,605		57,344
PCL		2,105		1,550		120		–		587		–			4,362		3,232
Non-interest<br> expense		8,001		2,833		16,769		315		7,966		708			36,592		34,250
Income before income taxes		9,748		4,179		5,489		1,006		5,873		(644	)		25,651		19,862
Income taxes		2,643		1,159		1,200		178		480		(378	)		5,282		3,622
Net income	$	7,105	$	3,020	$	4,289	$	828	$	5,393	$	(266	)	$	20,369	$	16,240
ROE <br>(3)		24.9%		14.9%		16.6%		40.7%		13.7%		n.m.			16.3%		14.4%
Average assets	$	563,500	$	192,200	$	188,400	$	31,000	$	1,326,300	$	97,000		$	2,398,400	$	2,108,500
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, and are included in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets segments.
---	---
(2)	Net interest income, <br>non-interest<br> income, total revenue, income before income taxes and income taxes are presented in Capital Markets on a taxable equivalent basis (teb). The teb adjustment is eliminated in the Corporate Support segment. For a further discussion, refer to the How we measure and report our business segments section.
---	---
(3)	For further details, refer to the Key performance and <br>non-GAAP<br> measures section.
---	---
n.m.	not meaningful
---	---
How we measure and report our business segments
---

Our management reporting framework is intended to measure the performance of each business segment as if it were a stand-alone business and reflects the way that the business segment is managed. This approach is intended to ensure that our business segments’ results include all applicable revenue and expenses associated with the conduct of their business and depicts how management views those results.

Key methodologies

The following outlines the key methodologies and assumptions used in our management reporting framework. These are periodically reviewed by management to ensure they remain valid.

Expense and tax allocation

To ensure that our business segments’ results include expenses associated with the conduct of their business, we allocate costs incurred or services provided by Technology & Operations and Functions, which are directly undertaken or provided on the business segments’ behalf. For other costs not directly attributable to our business segments, including overhead costs and other indirect expenses, we use our management reporting framework for allocating these costs to each business segment in a manner that is intended to reflect the underlying benefits.

Capital attribution

Our management reporting framework also determines the attribution of capital to our business segments in a manner that is intended to consistently measure and align economic costs with the underlying benefits and risks associated with the activities of each business segment. The amount of capital assigned to each business segment is referred to as attributed capital. Unattributed capital and associated amounts are reported in Corporate Support. Our attributed capital methodology includes the allocation of leverage to our business segments to further align our allocation processes with evolving regulatory capital requirements. Effective the first quarter of 2025, we increased our capital attribution rates to our business segments to better align with our internal targets, which reduced the amount of unattributed capital retained in Corporate Support. For Insurance, the allocation of capital remained unchanged in fiscal 2025 and continued to be based on fully diversified economic capital. For further information, refer to the Capital management section.

Funds transfer pricing

Funds transfer pricing refers to the pricing of intra-company borrowing or lending for management reporting purposes. We employ a funds transfer pricing process to enable risk-adjusted management reporting of segment results. This process determines the costs and revenue for intra-company borrowing and lending of funds after taking into consideration our interest rate risk and liquidity risk management objectives, as well as applicable regulatory requirements.

Provisions for credit losses

PCL is recorded to recognize expected credit losses on all financial assets, except for financial assets classified or designated as FVTPL and equity securities designated as FVOCI, which are not subject to impairment assessment. For details on our accounting policy on Allowance for credit losses (ACL), refer to Note 2 of our 2025 Annual Consolidated Financial Statements.

PCL is included in the results of each business segment to fully reflect the appropriate expenses related to the conduct of each business segment.

32 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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In addition to the key methodologies described above, the following components of our management reporting framework also impact how our business segments are managed and reported:

•	Wealth Management results include disclosure in U.S. dollars, primarily for U.S. Wealth Management (including City National Bank (“City National”)) as we review and manage the results of this business largely in this currency.
•	Capital Markets results are reported on a teb basis, which grosses up total revenue from certain <br>tax-advantaged<br> sources (U.S. tax credit business and Canadian taxable corporate dividends received on or before December 31, 2023) to their effective taxable equivalent value with a corresponding offset recorded in income taxes. We record the elimination of the teb adjustments in Corporate Support. We believe these adjustments are useful and reflect how Capital Markets manages its business, since it enhances the comparability of revenue and related ratios across taxable revenue and our principal <br>tax-advantaged<br> sources of revenue. The use of teb adjustments and measures may not be comparable to similar GAAP measures or similarly adjusted amounts disclosed by other financial institutions.
---	---
•	Corporate Support results include all enterprise level activities that are undertaken for the benefit of the organization that are not allocated to our five business segments, such as certain liquidity and cash management activities, including amounts associated with unattributed capital, and consolidation adjustments, including the elimination of the teb <br>gross-up<br> amounts. In addition, we record gains (losses) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, which are reflected in revenue, and related variability in share-based compensation expense driven by changes in the fair value of liabilities relating to these plans in Corporate Support as we believe this presentation more closely aligns with how we view business performance and manage the underlying risks.
---	---
Key performance and non-GAAP measures
---

Performance measures

We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics, such as net income and ROE. Certain financial metrics, including ROE, do not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions.

Return on common equity

We use ROE, at both the consolidated and business segment levels, as a measure of return on total capital invested in our business. Management views the business segment ROE measure as a useful measure for supporting investment and resource allocation decisions because it adjusts for certain items that may affect comparability between business segments and certain competitors.

Our consolidated ROE calculation is based on net income available to common shareholders divided by total average common equity for the period. Business segment ROE calculations are based on net income available to common shareholders divided by average attributed capital for the period. For each segment, with the exception of Insurance, average attributed capital includes the capital and leverage required to underpin various risks as described in the Capital management section and amounts invested in goodwill and intangibles and other regulatory deductions. For Insurance, the allocation of capital remained unchanged in fiscal 2025 and continued to be based on fully diversified economic capital.

The attribution of capital involves the use of assumptions, judgments and methodologies that are regularly reviewed and revised by management as deemed necessary. Changes to such assumptions, judgments and methodologies can have a material effect on the business segment ROE information that we report. Other companies that disclose information on similar attributions and related return measures may use different assumptions, judgments and methodologies.

The following table provides a summary of our ROE calculations:

Calculation of ROE	Table 15
	2025															2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars,<br><br>except percentage amounts)	Personal<br>Banking<br><br>(3)		Commercial<br>Banking<br><br>(3)		Wealth<br>Management<br><br>(3)		Insurance		Capital<br>Markets<br><br>(3)		Corporate<br>Support			Total		Total
Net income available to common shareholders	$	6,985	$	2,940	$	4,187	$	820	$	5,244	$	(308	)	$	19,868	$	15,908
Total average common equity <br>(1), (2)		28,100		19,650		25,200		2,000		38,350		8,750			122,050		110,650
ROE		24.9%		14.9%		16.6%		40.7%		13.7%		n.m.			16.3%		14.4%
(1)	Total average common equity represents rounded figures.
---	---
(2)	The amounts for the segments are referred to as attributed capital.
---	---
(3)	Effective the first quarter of 2025, we increased our capital attribution rates. For further details, refer to the How we measure and report our business segments section.
---	---
n.m.	not meaningful
---	---

Non-GAAP measures

Non-GAAP measures and ratios do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions.

The following discussion describes the non-GAAP measures and ratios we use in evaluating our operating results.

Adjusted results and ratios

We believe that adjusted results are more reflective of our ongoing operating results and provide readers with a better understanding of management’s perspective on performance. Specified items discussed below can lead to variability that could obscure trends in underlying business performance and the amortization of acquisition-related intangibles can differ widely between organizations. Excluding the impact of specified items and amortization of acquisition-related intangibles may enhance comparability of our financial performance and enable readers to better assess trends in our underlying businesses.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 33

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Our results for all reported periods were adjusted for the following specified item:

•	HSBC Canada transaction and integration costs. Effective the third quarter of 2025, we no longer treated HSBC Canada transaction and integration costs as a specified item. Integration activities have been completed.

Our results for the prior year were also adjusted for the following specified item:

•	Management of closing capital volatility related to the HSBC Canada transaction.

Adjusted ratios, including adjusted EPS (basic and diluted), adjusted ROE and adjusted efficiency ratio, which are derived from adjusted results, are useful to readers because they may enhance comparability in assessing profitability on a per-share basis, how efficiently profits are generated from average common equity and how efficiently costs are managed relative to revenues. Adjusted results and ratios can also help inform and support strategic choices and capital allocation decisions.

Consolidated results, reported and adjusted

The following table provides a reconciliation of our reported results to our adjusted results and illustrates the calculation of adjusted measures presented. The adjusted results and ratios presented below are non-GAAP measures or ratios.

Table 16
(Millions of Canadian dollars, except per share, number of and percentage amounts)	2025		2024
---	---	---	---	---
Total revenue	$	66,605	$	57,344
PCL		4,362		3,232
Non-interest<br> expense		36,592		34,250
Income before income taxes		25,651		19,862
Income taxes		5,282		3,622
Net income	$	20,369	$	16,240
Net income available to common shareholders	$	19,868	$	15,908
Average number of common shares (thousands)		1,409,072		1,411,903
Basic earnings per share (in dollars)	$	14.10	$	11.27
Average number of diluted common shares (thousands)		1,411,589		1,413,755
Diluted earnings per share (in dollars)	$	14.07	$	11.25
ROE		16.3%		14.4%
Effective income tax rate		20.6%		18.2%
Total adjusting items impacting net income <br>(before-tax)	$	655	$	1,552
Specified item: HSBC Canada transaction and integration costs <br>(1), (2)		43		960
Specified item: Management of closing capital volatility related to the HSBC Canada transaction <br>(1)		–		131
Amortization of acquisition-related intangibles <br>(3)		612		461
Total income taxes for adjusting items impacting net income	$	154	$	362
Specified item: HSBC Canada transaction and integration costs <br>(1)		13		201
Specified item: Management of closing capital volatility related to the HSBC Canada transaction <br>(1)		–		36
Amortization of acquisition-related intangibles <br>(3)		141		125
Adjusted results
Income before income taxes – adjusted	$	26,306	$	21,414
Income taxes – adjusted		5,436		3,984
Net income – adjusted		20,870		17,430
Net income available to common shareholders – adjusted <br>(4)		20,369		17,098
Average number of common shares (thousands)		1,409,072		1,411,903
Basic earnings per share (in dollars) – adjusted	$	14.46	$	12.11
Average number of diluted common shares (thousands)		1,411,589		1,413,755
Diluted earnings per share (in dollars) – adjusted	$	14.43	$	12.09
ROE – adjusted		16.7%		15.5%
Effective income tax rate – adjusted		20.7%		18.6%
Adjusted efficiency ratio
Total revenue	$	66,605	$	57,344
Add specified item: Management of closing capital volatility related to the HSBC Canada transaction <br>(before-tax)<br> <br>(1)		–		131
Total revenue – adjusted<br><br>(4)	$	66,605	$	57,475
Non-interest<br> expense	$	36,592	$	34,250
Less specified item: HSBC Canada transaction and integration costs <br>(before-tax)<br> <br>(1)		43		960
Less: Amortization of acquisition-related intangibles <br>(before-tax)<br> <br>(3)		612		461
Non-interest<br> expense – adjusted<br><br>(4)	$	35,937	$	32,829
Efficiency ratio		54.9%		59.7%
Efficiency ratio – adjusted		54.0%		57.1%
(1)	These amounts have been recognized in Corporate Support.
---	---
(2)	As at October 31, 2025, the cumulative HSBC Canada transaction and integration costs <br>(before-tax)<br> incurred were $1.4 billion. Effective the third quarter of 2025, we no longer treated HSBC Canada transaction and integration costs as a specified item. Integration activities have been completed.
---	---
(3)	Represents the impact of amortization of acquisition-related intangibles (excluding amortization of software), and any goodwill impairment.
---	---
(4)	See Glossary for composition of these measures.
---	---

34 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Personal Banking

Personal Banking provides a broad suite of financial products and services to retail clients for their day-to-day banking, investing and financing needs. We are focused on building deep and meaningful relationships with our clients, underscored by the delivery of exceptional client experiences, the breadth of our product suite, our depth of expertise and the features of our digital solutions.

~15 million	#1	32,335
Number of Personal Banking – Canada clients	Ranking in market share for all key retail products<br>1	Employees (FTE)<br>2
Revenue by Business Lines	We operate through two businesses – Personal Banking – Canada and Caribbean & U.S. Banking. Personal Banking – Canada serves our home market in Canada. We have the largest branch network, the most ATMs and one of the largest mobile sales forces across Canada, along with market-leading digital capabilities. In Caribbean & U.S. Banking, we offer a broad range of financial products and services in targeted markets.<br><br><br><br>In Canada, we compete with other Schedule 1 banks, independent trust companies, foreign banks, credit unions, caisses populaires and auto financing companies, as well as emerging entrants to the financial services industry.<br><br><br><br>In the Caribbean, our competition includes banks, emerging digital banks, trust companies and investment management companies serving retail and corporate clients, as well as public institutions. In the U.S., we compete primarily with other Canadian banking institutions that have U.S. operations.

2025 Operating environment

›	Amidst a lower inflationary environment, the BoC overnight interest rate has decreased significantly through a series of interest rate cuts since June 2024. This has been accompanied by a shift in deposit mix towards demand deposits, which has contributed to our continued increase in NIM throughout fiscal 2025.
›	Residential real estate markets continued to be impacted by softening demand throughout 2025, driven by the imposition of tariffs from the U.S. administration as well as general macroeconomic uncertainty. Despite slower mortgage volume growth, mortgage originations were up from the prior year.
---	---
›	In an environment where a higher cost of living and economic uncertainty continue to weigh on consumer spending, consumers are displaying cautious spending habits. Despite these financial pressures, overall credit card purchase volumes continued to grow from the prior year.
---	---
›	We recorded growth in <br>non-term<br> deposit products, reflecting a shift in client preference away from term deposit products, as BoC interest rates have decreased. We also maintained our number one market share position in Personal Core Deposits and Guaranteed Investments Certificates (GICs).
---	---
›	Favourable equity market conditions throughout the majority of fiscal 2025 and client sales activity have driven higher average mutual fund balances.
---	---
›	The credit environment was impacted by rising unemployment rates, slowing economic growth and the impacts of trade disruptions, resulting in higher provisions on impaired and performing loans.
---	---
›	We continued to focus on investments in staff along with ongoing investments in technology, including in AI and digital transformation.
---	---
›	The Caribbean region’s economy continued to expand at a healthy pace in 2025, with the inflation rate in the region remaining low as the impacts of higher import costs fueled by tariffs are yet to have a downstream impact on consumers. Our Caribbean Banking business benefitted from strong volume growth in both loans and deposits as we continued to invest in growing the franchise.
---	---
›	The U.S. Banking business benefitted from continued loan and deposit growth and the sustained level of higher U.S. interest rates, despite uncertainty associated with U.S. trade policy and a decline in Canadian travel to the U.S.
---	---
1	Market share is calculated using the most current data available from OSFI (M4), the Securities and Investment Management Association (SIMA) and the Canadian Bankers Association (CBA), and is as at August 2025 and June 2025. This is based on the following key product categories: Personal Lending (including residential mortgages), Personal Core Deposits and GICs, Credit Cards and Long-term Mutual Funds.
---	---
2	Includes FTE for all shared services across Personal Banking and Commercial Banking, for which the related non-interest expenses are allocated to both Personal Banking and Commercial Banking.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 35

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Strategic priorities

OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Enhance client value proposition by providing exceptional value and reciprocity	Received the highest ranking in customer satisfaction for a second consecutive year in the J.D. Power 2025 Canada Retail Banking Satisfaction Study<br><br><br><br>Avion Rewards<br>®<br> was recognized for a third consecutive year as the International Loyalty Program of the Year (Americas) at the 2025 International Loyalty Awards. The award recognizes the highest level of excellence and innovation in loyalty programs on a global scale. Avion Rewards also won top honors at the 2025 Loyalty360 Awards, recognizing the program’s creative campaigns and data analytics innovations<br><br><br><br>Announced several strategic partnerships and enhancements to expand our loyalty and credit card offerings. These include a linked loyalty partnership with Canadian Tire Corporation that links eligible RBC cards and Triangle Rewards<br>‡<br> for clients to earn three times Canadian Tire money, two new <br>co-branded<br> credit cards and a linked loyalty partnership with Pattison Food Group to offer exclusive everyday savings to clients and allow them to earn more rewards on grocery purchases. We also launched enhancements that enabled WestJet<br>‡<br> RBC World Elite Mastercard and WestJet RBC Mastercard<br>‡<br> cardholders to earn WestJet points faster on everyday purchases and enjoy expanded travel benefits and insurance options. Additionally, we partnered with Visa<br>‡<br> to offer eligible RBC Visa Cardholders a chance to win access to purchase select tickets for FIFA World Cup 26<br>‡<br><br><br><br>Introduced credit at account opening under the RBC Newcomer Advantage<br>®<br> program and continued to engage HSBC Canada clients through proactive marketing initiatives<br><br><br><br>Expanded access to <br>no-cost<br> banking accounts<br>1<br> for Indigenous Peoples in Canada as well as anyone aged 24 and under, including <br>non-students	Continue to build a suite of <br>best-in-class<br> value propositions, digital experiences and ventures to accelerate client acquisition and engage Canadians earlier, more often and in more compelling ways<br><br><br><br>Focus on engaging key high-growth client segments with superior advice and empower our advisors to build new and deeper relationships to drive industry-leading volume growth<br><br><br><br>Continue to support retail clients in achieving their climate-related value propositions, including building upon our existing portfolio of products, services and advice<br><br><br><br>Continue to support the financial wellbeing of Canadians through dedicated products, services and advice
Optimize channels by servicing clients through unparalleled access and convenience	Won 10 Ipsos 2025 Financial Service Excellence Awards among the Big 5 banks, including four solo wins in “Recommend to Friends or Family (Net Promoter Score)”, “Financial Planning & Advice”, “ATM Banking Excellence” and “Online Banking Excellence”<br><br><br><br>Enabled clients to open GICs or Registered Savings products through their mobile devices. Clients can now open, purchase and <br>set-up<br> <br>pre-authorized<br> contributions for <br>Tax-free<br> Savings Accounts and Registered Retirement Savings Plans through their mobile devices<br><br><br><br>Launched an easier and faster mortgage renewal process for clients through a new streamlined, self-serve option in the RBC Mobile app. Eligible clients can now seamlessly and securely renew their RBC mortgage from wherever is most convenient for them<br><br><br><br>Increased advisor sales power by digitizing <br>low-complexity<br> tasks, leveraging alternate channels for simpler servicing and expanding our remote sales centres	Continue to deliver leading digital capabilities and functionality through our mobile app<br><br><br><br>Continue to reimagine our branch network to meet the evolving needs of our clients<br><br><br><br>Deliver anytime, anywhere solutions to our clients across all channels<br><br><br><br>Upskill our expert advisor network to deliver more personalized insights and address complex advice needs
Leverage AI and hyper-personalization to create personalized client experiences, improve efficiency and manage risk	Scaled our proprietary AI foundation model for financial services, ATOM<br>™<br> (Asynchronous Temporal Model), which enables the bank to leverage unique insights and develop innovative solutions within a responsible AI framework that meets regulatory requirements. ATOM has enhanced our credit adjudication capabilities, enabling better assessment of client needs and ability to pay. In addition, it has enhanced our ability to provide personalized recommendations, which are applied in our Avion<br>®<br> Redemption Newsletter, allowing us to streamline offerings to our members<br><br><br><br>Deployed GenAI solutions in our Advice Centre to support advisors with a number of tasks, from faster access to knowledge and insights to executing activities on their behalf, saving the advisor time to focus on clients	Further scale ATOM <br>in-market<br> to hyper-personalize client interactions across all client touchpoints, leveraging offers across RBC’s product shelf and insights on client behaviours and anticipating servicing needs to create substantially deeper relationships with existing RBC clients<br><br><br><br>Deploy agentic capabilities through our enterprise GenAI platform to enable more automation across workflows and enable AI to surface unique insights from our data assets
1	This expanded access has in part been made available through RBC’s adherence to recent enhancements to voluntary Commitment on Low-Cost and No-Cost Accounts, which came into effect on December 1, 2025.
---	---

36 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Attract, grow and retain future-ready talent	Empowered teams to deliver against our strategy by transforming our Personal Banking organizational structure to align teams against our biggest growth opportunities<br><br><br><br>Supported development of talent through targeted employee moves to new and/or expanded roles to develop <br>in-demand<br> skills and build key capabilities for the future<br><br><br><br>Continued leadership development through various enterprise and business segment programs, including leadership summits, strategy seminars and people manager enablement programs such as webinars, workshops and learning programs<br><br><br><br>Further strengthened our culture of inclusion and belonging by engaging employee participation in key global enterprise events and Employee Resource Groups	Build critical future skills through targeted development experiences for leaders and employees aligned to our bold ambitions<br><br><br><br>Inspire and enable teams to achieve ambitious outcomes and high-performance<br><br><br><br>Develop and coach leaders to champion transformation and growth and foster a client-focused culture<br><br><br><br>Empower our leaders and employees through AI to reimagine what’s possible and accelerate innovation
In the Caribbean	Progressed and accelerated key initiatives including data transformation, product innovation and streamlining regulatory compliance by digitizing our processes, expanding products and prioritizing resources to modernize and simplify our business and deliver an enhanced client and employee experience	Continue to deepen our focus in growth segments, while maintaining momentum in operational excellence by accelerating digital and process modernization and further aligning our business model to deliver differentiated value for clients and employees
In the U.S.	Continued to enable new client onboarding and cross-border banking through deeper integration with Canadian franchise product, channel and marketing strategies<br><br><br><br>Continued to develop digital capabilities and automation to enhance scalability, further integrate our products, simplify processes and improve the client experience	Further align with Canadian value proposition, product strategies and channel experiences to drive new client acquisition and anchor existing relationships<br><br><br><br>Continue the transformation of sales and service channels to improve productivity and streamline client acquisition and servicing processes

Outlook

For fiscal 2026, the macroeconomic outlook remains uncertain as markets and market participants navigate the impact of geopolitical activity, including tariffs. Canadian labour markets have softened as tariff hikes from the U.S. administration have led to job losses, particularly in the heavily trade-exposed North American industrial sector. U.S. trade policy remains a significant source of uncertainty. Most Canadian exports to the U.S. have remained duty free under an exemption from tariffs on products compliant with the CUSMA free trade agreement, which is expected to begin a formal review process in July 2026. GDP growth is expected to remain slow but positive in 2026, supported by stabilizing domestic labour demand, resilient consumer spending, planned increases in federal and provincial government spending and the lagged impact of the 2025 BoC interest rate cuts. Home resales are expected to recover gradually in 2026 as lower interest rates and, in some markets, lower prices stimulate buyer demand. The unemployment rate is expected to remain elevated but gradually decline in calendar 2026 as hiring demand stabilizes. We do not expect further reductions in the BoC’s overnight rate in calendar 2026. We expect the continued benefit of our structural hedges to reduce volatility in NIM from short-term rate movements.

In the U.S., GDP growth is also expected to remain slow but positive in 2026, with the negative impact of tariffs on growth in the U.S. industrial sector expected to be offset by high levels of government spending and Federal Reserve interest rate cuts.

In the Caribbean region, GDP growth is expected to remain modest but positive in 2026, supported by historically high global commodity prices as well as continued growth in key sources of tourism demand in the region including the Euro Area, the U.K., the U.S. and Canada.

We will continue to pursue industry-leading growth and will seek to deepen client relationships to meet the evolving needs of our clients.

For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 37

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Personal Banking<br><br>(1)	Table 17
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	2025		2024
---	---	---	---	---
Net interest income	$	14,496	$	12,438
Non-interest<br> income		5,358		4,904
Total revenue		19,854		17,342
PCL on performing assets		358		392
PCL on impaired assets		1,747		1,410
PCL		2,105		1,802
Non-interest<br> expense		8,001		7,485
Income before income taxes		9,748		8,055
Net income	$	7,105	$	5,921
Revenue by business
Personal Banking – Canada	$	18,593	$	16,206
Caribbean & U.S. Banking		1,261		1,136
Key ratios
ROE		24.9%		24.8%
NIM		2.66%		2.43%
Efficiency ratio		40.3%		43.2%
Operating leverage <br>(2)		7.6%		2.2%
Selected balance sheet information
Average total assets	$	563,500	$	528,200
Average total earning assets, net		545,900		512,300
Average loans and acceptances, net		535,600		502,700
Average deposits		437,800		404,600
Other information
AUA <br>(3), (4)	$	288,500	$	255,400
Average AUA		267,400		235,500
AUM <br>(4)		6,100		6,400
Number of employees (FTE) <br>(5)		32,335		38,642
Credit information
PCL on impaired loans as a % of average net loans and acceptances		0.33%		0.28%
Other selected information – Personal Banking – Canada
Net income	$	6,717	$	5,550
NIM		2.58%		2.35%
Efficiency ratio		38.8%		41.6%
Operating leverage		7.5%		2.3%
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
---	---
(2)	See Glossary for composition of this measure.
---	---
(3)	AUA includes securitized residential mortgages and credit card loans as at October 31, 2025 of $15 billion and $5 billion, respectively (October 31, 2024 – $15 billion and $6 billion).
---	---
(4)	Represents <br>year-end<br> spot balances.
---	---
(5)	Includes FTE for all shared services across Personal Banking and Commercial Banking, for which the related <br>non-interest<br> expenses are allocated to both Personal Banking and Commercial Banking. Effective the fourth quarter of 2025, approximately 5,500 FTE who were previously shared services and are now dedicated to Commercial Banking were transferred from Personal Banking to Commercial Banking. As a result, FTE from the prior period may not be fully comparable.
---	---

Financial performance

2025 vs. 2024

Net income increased $1,184 million or 20% from last year, primarily driven by higher net interest income reflecting higher spreads and average volume growth of 7% in Personal Banking – Canada. Higher non-interest income also contributed to the increase. These factors were partially offset by higher non-interest expenses. Net income for the current year includes the impact of five additional months of HSBC Canada results.

Total revenue increased $2,512 million or 14%, primarily due to higher net interest income reflecting higher spreads and an increase of 8% in average deposits and 6% in average loans in Personal Banking – Canada, which includes the impact of five additional months of HSBC Canada results. Higher average mutual fund balances driving higher distribution fees also contributed to the increase.

NIM was up 23 bps, mainly due to favourable changes in product mix and the sustained impact of a higher interest rate environment.

PCL increased $303 million or 17%, primarily due to higher provisions on impaired loans in our Canadian credit cards and personal portfolios. This was partially offset by lower provisions on performing loans, primarily driven by lower unfavourable changes in credit quality, partially offset by unfavourable changes to our scenario weights.

Non-interest expense increased $516 million or 7%, primarily due to higher staff-related costs, including severance, the impact of five additional months of HSBC Canada non-interest expenses and ongoing technology investments, net of realized synergies related to the HSBC Canada transaction.

Average loans and acceptances increased 7%, primarily driven by growth in residential mortgages and the impact of five additional months of HSBC Canada balances.

Average deposits increased 8%, primarily reflecting an increase in demand and term deposits. The impact of five additional months of HSBC Canada balances also contributed to the increase.

38 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Business line review
Personal Banking – Canada
---

Personal Banking – Canada offers a full range of products focused on meeting the needs of our individual Canadian clients at every stage of their lives through a wide range of financing and investment products and services. This includes home equity financing, personal lending, chequing and savings accounts, private banking, indirect lending (including auto financing), mutual funds, GICs, credit cards, and payment products and solutions.

We rank #1 in market share for all key Personal Banking products in Canada, supported by the largest retail banking network in Canada, with 1,159 branches and 3,869 ATMs.

Financial performance

Total revenue increased $2,387 million or 15% compared to last year, primarily due to higher net interest income reflecting higher spreads and an increase of 8% in average deposits and 6% in average loans, which includes the impact of five additional months of HSBC Canada results. Higher average mutual fund balances driving higher distribution fees also contributed to the increase.

Average residential mortgages increased 7%, primarily reflecting an increase in mortgage originations and the impact of five additional months of HSBC Canada balances.

Average deposits increased 8%, primarily reflecting an increase in demand and term deposits. The impact of five additional months of HSBC Canada balances also contributed to the increase.

Selected highlights<br><br>(1)	Table 18
(Millions of Canadian dollars, except number of)	2025		2024
---	---	---	---	---
Total revenue	$	18,593	$	16,206
Other information
Average residential mortgages		414,100		388,500
Average other loans and acceptances, net		82,600		78,300
Average deposits		413,600		382,300
Average credit card balances		25,200		23,400
Credit card purchase volumes		196,600		185,000
Branch mutual fund balances <br>(2)		257,400		223,600
Average branch mutual fund balances		235,600		204,000
Number as at October 31:
Branches <br>(3)		1,159		1,189
ATMs <br>(3)		3,869		4,042
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results for all reported periods.
---	---
(2)	Represents <br>year-end<br> spot balances.
---	---
(3)	Branches and ATMs are shared across Personal Banking and Commercial Banking.
---	---

Caribbean & U.S. Banking

Our Caribbean Banking business provides personal and commercial banking to a range of clients, including individuals, small businesses, general commercial entities, regional and multi-national corporations, and governments, supported by an extensive branch, ATM, online and mobile banking network.

Our U.S. Banking business serves the needs of Canadian retail and small business clients providing personalized, digitally-enabled cross-border banking solutions enabling a cross-border lifestyle in all 50 states across the U.S.

Financial performance

Total revenue increased $125 million or 11% from last year, mainly due to higher net interest income reflecting average volume growth in loans and deposits. The impact of foreign currency translation and higher card service revenue also contributed to the increase.

Average loans and acceptances increased 10% and average deposits increased 9%, primarily due to increased client activity and the impact of foreign exchange translation.

Selected highlights		Table 19
(Millions of Canadian dollars,<br><br><br>except number of and percentage amounts)	2025		2024
Total revenue	$	1,261	$	1,136
Other information
NIM		4.20%		4.26%
Average loans and acceptances, net		13,700		12,500
Average deposits		24,200		22,300
AUA <br>(1)		11,500		11,000
Average AUA		11,200		10,700
AUM <br>(1)		6,100		5,700
Average AUM		5,800		5,600
Number as at October 31:
Branches		38		38
ATMs		247		259
(1)	Represents <br>year-end<br> spot balances.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 39

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Commercial Banking

Commercial Banking serves the end-to-end needs of Canadian businesses, including subsidiaries of multi-nationals. We deliver a full spectrum of services to the market, ranging from lending and deposits to payments, cash management and advisory services. Our comprehensive coverage teams with specialization across industries and products give us the scale to deliver holistic solutions to our clients.

~ 1.4 million	#1	> 3,500
Number of Commercial Banking clients	Ranking in market share in commercial lending and deposits<br>1	Client-facing advisors and specialists
Revenue by Product	We are a market-leading, full-service commercial bank that meets the needs of Canadian businesses, including subsidiaries of multi-nationals.<br><br><br><br>In Canada, we compete with other Schedule 1 banks, foreign banks, credit unions, specialized financing companies, as well as emerging non-traditional entrants to the financial services industry.<br><br><br><br>For small businesses, we offer convenience through 1,159 branches in Canada and comprehensive digital solutions supported by experienced advisors. For commercial clients, we provide customized banking advice through our network of industry-specialized relationship managers and product specialists. Our corporate clients benefit from tailored product solutions and premium high-touch services via a broad team of specialists and market-leading capabilities.

2025 Operating environment

›	In 2025, trade uncertainty negatively impacted the economy, eroding business confidence and reducing capital investment. As a result, businesses delayed long-term strategic investments, leading to decreased business investment and weaker employment. This cautious business environment led to a slowdown in lending growth.
›	Following the BoC’s monetary policy easing since June 2024, clients shifted towards demand deposits with a preference for liquidity during this time of economic uncertainty. This led to a mix shift in our portfolio, with funds flowing from term products towards demand deposits.
---	---
›	Despite unfavourable business sentiment and increased competition, our diversified Commercial Banking business achieved volume growth across all major product lines and client segments.
---	---
›	The credit environment was impacted by rising unemployment rates, slowing economic growth and the impacts of trade disruptions, resulting in higher provisions on impaired and performing loans.
---	---
1	Market share is calculated based on deposit balances excluding term deposits from OSFI (M4) and lending balances from CBA, and is as at August 2025 and March 2025, respectively.
---	---

40 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Strategic priorities

OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Invest in digital and AI to drive productivity and efficiency	Continued to invest in digitizing our business to drive more convenience, efficiency and speed for our clients<br><br><br><br>Modernized our transaction banking platform RBC Edge<br>TM<br> to better support clients’ increasingly complex cash management needs	Continue to create a digitized and <br>AI-enabled<br> credit experience for clients, including our modernized credit platform and auto-adjudication capabilities<br><br><br><br>Further develop self-serve digital onboarding for our clients, refining the experience in virtual accounts management and liquidity management
Target segments and sectors to drive premium growth	Realigned coverage teams to better match capabilities with client needs to provide more effective support for large commercial and corporate clients<br><br><br><br>Generated market growth in Indigenous Banking, supported by the expansion of our team serving these communities, cross-enterprise collaboration and active engagement with Indigenous communities<br><br><br><br>Enhanced advisor training on climate topics through a program developed in collaboration with Green Economy Canada to help advisors support clients on their transition and resilience journeys<br><br><br><br>Extended our leadership position in the small business and core commercial banking segments through client acquisition strategies and new value propositions	Develop and execute strategies for key growth sectors<br><br><br><br>Continue to deploy new tailored servicing model for large commercial and corporate clients aimed at driving simplicity and efficiency<br><br><br><br>Continue to execute on refined coverage model and transition teams to a singular platform<br><br><br><br>Engage with clients to understand their plans for the climate transition and where RBC can assist Canadian businesses in achieving their growth and sustainability goals
Differentiate through trade and payments capabilities with international connectivity	Recognized by Global Finance Magazine as the best overall bank for cash management in Canada for the fourth consecutive year and the leading trade finance provider in Canada for the thirteenth consecutive year<br><br><br><br>Completed integration of HSBC Canada with minimal client attrition<br><br><br><br>Unified transaction banking coverage group, bringing together expertise from multiple teams within treasury and trade solutions and product support to streamline client experience and drive business growth<br><br><br><br>Built out global payments solutions, such as trade finance and foreign exchange in conjunction with Capital Markets<br><br><br><br>Established greater collaboration with City National to support the U.S. banking needs of Canadian commercial and corporate clients resulting in a significant increase in cross-border activity<br><br><br><br>Developed key capabilities within RBC Edge for cross-border cash management that are critical for our north-south transaction banking strategy	Roll out dedicated support model tailored for the needs of transaction banking clients with specialized expertise<br><br><br><br>Continue to invest in <br>best-in-class<br> North American liquidity solutions that enable clients to optimize working capital on both sides of the border<br><br><br><br>Continue to invest in cross-border capabilities including our RBC Edge platform in conjunction with RBC Clear<br>TM
Attract, grow and retain future-ready talent	Empowered teams to deliver against our strategy by transforming our Commercial Banking organizational structure to align teams against our biggest growth opportunities<br><br><br><br>Supported development of talent through targeted employee moves to new and/or expanded roles to develop <br>in-demand<br> skills and build key capabilities for the future<br><br><br><br>Continued leadership development through various enterprise and business segment programs, including leadership summits, strategy seminars and people manager enablement programs such as webinars, workshops and learning programs<br><br><br><br>Further strengthened our culture of inclusion and belonging by engaging employee participation in key global enterprise events and Employee Resource Groups	Build critical future skills through targeted development experiences for leaders and employees aligned to our bold ambitions<br><br><br><br>Inspire and enable teams to achieve ambitious outcomes and high-performance<br><br><br><br>Develop and coach leaders to champion transformation and growth and foster a client-focused culture<br><br><br><br>Empower our leaders and employees through AI to reimagine what’s possible and accelerate innovation

Outlook

For fiscal 2026, the macroeconomic outlook remains uncertain as markets and market participants navigate the impact of geopolitical activity, including tariffs. Tariffs imposed by the U.S. administration have slowed economic growth, particularly in the heavily trade-exposed North American industrial sector. The outlook for Canadian economic growth remains highly contingent on the unpredictable U.S. trade policy. However, an exemption from additional tariffs on most Canadian exports compliant with the CUSMA free trade agreement and increased government spending are expected to support modest but positive growth in the Canadian economy in calendar 2026. We do not expect further reductions in the BoC’s overnight rate following the reduction in October before the end of calendar 2025. We do not expect further reductions in calendar 2026 with government spending providing the main source of policy response to targeted sectors negatively impacted by tariffs.

With a well-diversified portfolio and market-leading solutions, we are well-positioned to support clients through all stages of the economic cycle. Improvements in business sentiment and anticipated government programs are expected to provide relief for economically sensitive sectors and support growth. However, ongoing trade uncertainty remains a headwind that could negatively impact growth. Our investments in transaction banking, client coverage and servicing allow us to meet the evolving needs of our clients and pursue industry-leading, durable growth.

For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 41

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Commercial Banking<br><br>(1)	Table 20
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	2025		2024
---	---	---	---	---
Net interest income	$	7,268	$	6,061
Non-interest<br> income		1,294		1,321
Total revenue		8,562		7,382
PCL on performing assets		314		261
PCL on impaired assets		1,236		714
PCL		1,550		975
Non-interest<br> expense		2,833		2,512
Income before income taxes		4,179		3,895
Net income	$	3,020	$	2,818
Key ratios
ROE		14.9%		18.5%
NIM		3.89%		4.06%
Efficiency ratio		33.1%		34.0%
Operating leverage		3.2%		5.2%
Selected balance sheet information
Average total assets	$	192,200	$	165,400
Average total earning assets, net		186,800		149,400
Average loans and acceptances, net		186,800		161,600
Average deposits		308,700		281,800
Other information
Number of employees (FTE) <br>(2)		7,012		1,290
Credit information
PCL on impaired loans as a % of average net loans and acceptances		0.66%		0.44%
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
---	---
(2)	Excludes FTE for all shared services across Personal Banking and Commercial Banking, for which the related <br>non-interest<br> expenses are allocated to both Personal Banking and Commercial Banking. Effective the fourth quarter of 2025, approximately 5,500 FTE who were previously shared services and are now dedicated to Commercial Banking were transferred from Personal Banking to Commercial Banking. As a result, FTE from the prior period may not be fully comparable.
---	---

Financial performance

2025 vs. 2024

Net income increased $202 million or 7% from last year, as growth in total revenue was partially offset by higher PCL and non-interest expense. Net income for the current year includes the impact of five additional months of HSBC Canada results.

Total revenue increased $1,180 million or 16%, primarily due to higher net interest income, reflecting an increase of 16% in average loans and acceptances and 10% in average deposits, which includes the impact of five additional months of HSBC Canada results. The increase in net interest income also includes the impact of the cessation of Bankers’ Acceptance-based lending, which was largely offset in credit fees within non-interest income.

PCL increased $575 million or 59%, primarily due to higher provisions on impaired loans across most sectors. Higher provisions on performing loans also contributed to the increase, primarily driven by unfavourable changes to our scenario weights, credit quality and macroeconomic forecast, partially offset by the impact of the initial PCL on performing loans purchased in the HSBC Canada transaction in the prior year.

Non-interest expense increased $321 million or 13%, primarily due to higher staff-related costs, the impact of five additional months of HSBC Canada non-interest expenses and ongoing technology investments, net of realized synergies related to the HSBC Canada transaction.

Average loans and acceptances, and average deposits increased 16% and 10%, respectively, primarily driven by growth across all client segments and the impact of five additional months of HSBC Canada balances.

42 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Wealth Management

Wealth Management primarily serves affluent, high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients from our offices in key financial centres across the globe. We offer a comprehensive suite of wealth, investment, trust, banking, credit and other solutions to this client segment. We also provide a self-directed investment service in Canada, as well as asset management products globally to institutional and individual clients through our distribution channels and third-party distributors. We offer asset services and investor services to financial institutions, asset managers and asset owners in Canada.

$22.4 billion	> 6,200	~ 75%
Total revenue	Client-facing advisors	GAM AUM outperforming the benchmark on a 5-year basis<br>1
Assets under Administration<br>(AUA)<br><br><br><br><br><br><br><br>	Assets under Management (AUM)<br><br><br><br><br><br><br><br>	Our lines of business include Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management (GAM), International Wealth Management and Investor Services.<br><br><br><br>• Canadian Wealth Management includes a full-service wealth advisory business serving HNW and UHNW clients, as well as a leading self-directed investment service in Canada. The full-service wealth advisory business is the largest in Canada, as measured by AUA.<br><br>• U.S. Wealth Management (including City National) encompasses our private client group (PCG), clearing and custody (C&C) businesses and City National. PCG is a full-service wealth advisory firm in the U.S., C&C provides a wide array of clearing and execution services for independent broker dealers and registered investment advisors. City National is a U.S.-based relationship bank serving the entertainment industry, mid-market businesses, HNW and UHNW individuals and other clients who value personalized banking relationships.<br><br>• GAM is the largest retail mutual fund company in Canada as measured by AUM, as well as a leading institutional asset manager.<br><br>• International Wealth Management serves affluent, HNW and UHNW clients, primarily through key financial centres in the U.K., Ireland, the Channel Islands and Asia.<br><br>• Investor Services delivers asset servicing solutions to Canadian asset managers, asset owners, insurance companies and private wealth advisors. Investor Services also provides sub-custody services to global financial institutions and brokers.
---	---	---

2025 Operating environment

›	Earnings in the current fiscal year benefitted from strong growth in client assets, primarily driven by favourable market conditions and positive net flows.
›	Our wealth advisory businesses continued to realize net positive flows of <br>fee-based<br> client assets reflecting the strength of our business driven by the quality of our advice, the breadth of our investment and holistic wealth planning solutions and clients’ trust in our brand. Within our asset management businesses, we captured increased share in Canadian retail mutual fund sales as the sector returned to positive net flows.
---	---
›	We continued to invest in our people and technology to maintain our competitive advantage and increase efficiencies in an environment characterized by market volatility, changing client preferences and stringent regulatory expectations.
---	---
›	The credit environment reflected better-than-expected U.S. economic growth, tempered by elevated U.S. interest rates, resulting in lower provisions on impaired loans.
---	---
1	The percentage of assets in funds beating the benchmark represents performance of RBC GAM Canadian retail mutual funds, excluding index funds. Past performance is no guarantee of future results. Benchmarks used are total return indices. Performance is based on gross-of-fee returns using data available from SIMA as of October 2025.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 43

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Strategic priorities

OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
In Canada, be the premier service provider for HNW and UHNW clients, and build on our leading position serving self-directed investors	Further extended our position as an industry leader in our full-service private wealth business<br><br><br><br>Continued to focus on holistic wealth planning, including advisor training on intergenerational and business wealth transfer<br><br><br><br>Continued to offer RBC Premier Banking solutions to our clients to deepen banking relationships with Wealth Management clients<br><br><br><br>Focused on the business owner client segment by running business owner planning to deepen collaboration and provide solutions to address financial needs across business segments including Personal Banking and Commercial Banking<br><br><br><br>Continued to enhance digital and data capabilities, modernize infrastructure and invest in personalized client experiences to boost client satisfaction and advisor productivity<br><br><br><br>Focused on providing unique product capabilities that are becoming increasingly important to our HNW and UHNW client base, such as private alternative investment products<br><br><br><br>Introduced commission-free ETF trading in RBC Direct Investing<br>™<br> to strengthen our value proposition with early-stage investors, and launched our Royal Distinction program that provides dedicated support and exclusive benefits to our HNW clients	Build on our existing entrepreneurial and diverse culture and reward system that retains, attracts and motivates top wealth management talent in Canada<br><br><br><br>Deliver a differentiated client experience through enriched advisor-client interactions and seamless digital experiences<br><br><br><br>Focus on strategic partnership opportunities that support clients on healthy aging, philanthropic and personal goals<br><br><br><br>Deepen client relationships by leveraging the combined strengths across other business segments (Personal Banking and Commercial Banking) with a focus on the business owner client segment<br><br><br><br>Continue to invest in digital solutions to streamline and improve efficiency and advisor productivity, including emerging AI capabilities in partnership with RBC Borealis<br>™<br><br><br><br>Continue to win early-stage investors in RBC Direct Investing through our <br>low-cost<br> acquisition funnel and launch new products and services for the audience, while simultaneously streamlining the transition of our mass affluent and HNW investors into full-service advice relationships
Full capabilities to serve U.S. clients and deliver strong performance through the cycle	Continued to invest in key areas needed to drive growth in the U.S. market, including expanding our banking and lending solutions with the introduction of RBC Premium Savings, enhancements to the digital platform with <br>AI-powered<br> insights and record high financial advisor recruitment<br><br><br><br>At City National, we focused on enhancing our risk management capabilities across the three lines of defence for sustainable, organic growth in the future. City National also continued to refine its business mix, exit non-core segments and deepen client relationships through new product capabilities	Continue to deliver an exceptional client experience for targeted HNW and UHNW segments by deepening client relationships with the expansion of our banking and lending and wealth planning solutions and continuing the recruitment of highly productive advisors<br><br><br><br>Increase investments in technology and leverage the combined strengths within U.S. Wealth Management (including City National) and Capital Markets to deepen client relationships<br><br><br><br>At City National, we will continue to focus on enhancing our risk management capabilities across the three lines of defence, as well as improving profitability, stability and scalability
In select global financial centres, become the most trusted regional private bank	Continued to deliver on growth initiatives, bringing the full strength and breadth of RBC to our clients<br><br><br><br>Focused on delivering a differentiated client experience by leveraging our global capabilities<br><br><br><br>Continued to leverage RBC Brewin Dolphin to support our position as a top five largest wealth manager in the U.K.<br><br><br><br>Achieved growth and continued momentum in Asia through the addition of experienced client-facing advisors and net new assets	Continue to focus on growing market share in target markets<br><br><br><br>Continue to leverage our global strengths to better serve clients and deepen relationships, taking advantage of our expanded product suite and distribution channels<br><br><br><br>Continue to deliver an exceptional client experience and increase business effectiveness and talent capabilities<br><br><br><br>Continue to enhance client value proposition and consolidation of position in the U.K. local market<br><br><br><br>In Asia, continue to focus on achieving scale by growing the business through the hiring of experienced client-facing advisors and leveraging our global capabilities
In asset management, be a leading, diversified asset manager focused on retail clients in Canada and wealth platforms and institutional clients globally	Maintained #1 market share in Canadian mutual fund AUM<br><br><br><br>RBC<br>®<br> iShares strategic alliance maintained #1 market share in Canadian ETFs<br><br><br><br>Completed the integration of RBC Indigo Asset Management Inc., formerly HSBC Asset Management Canada, into GAM	Continue to focus on delivering exceptional investment performance and valued insights with client experience at the centre of all that we do<br><br><br><br>Continue to expand our investment capabilities, including alternative investment solutions, to meet evolving client needs in our target distribution regions
Become Canada’s undisputed leader in investment servicing by focusing on our clients and employees, investing for today and tomorrow and leveraging OneRBC	Launched Ignite 2027, our strategy dedicated to our Canadian Investor Services business with a focus on client and employee experience, and significant investment in technology and people	Continue with Ignite 2027 focused on client-centred investments to deliver world-class solutions at scale that help clients achieve their growth and efficiency aspirations
Attract, grow and retain future-ready talent	Empowered teams to deliver against our strategy by transforming our Wealth Management organizational structure to align teams against our biggest growth opportunities<br><br><br><br>Supported development of talent through targeted employee moves to new and/or expanded roles to develop <br>in-demand<br> skills and build key capabilities for the future<br><br><br><br>Continued leadership development through various enterprise and business segment programs, including leadership summits, strategy seminars and people manager enablement programs such as webinars, workshops and learning programs<br><br><br><br>Further strengthened our culture of inclusion and belonging by engaging employee participation in key global enterprise events and Employee Resource Groups	Build critical future skills through targeted development experiences for leaders and employees aligned to our bold ambitions<br><br><br><br>Inspire and enable teams to achieve ambitious outcomes and high-performance<br><br><br><br>Develop and coach leaders to champion transformation and growth and foster a client-focused culture<br><br><br><br>Empower our leaders and employees through AI to reimagine what’s possible and accelerate innovation

44 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Outlook

For fiscal 2026, the macroeconomic outlook remains uncertain, with markets and clients navigating the impact of trade policy developments, including tariff developments and anticipated changes to trade agreements. Although the most severe tariff scenarios earlier in calendar 2025 have not materialized, sluggish growth is still expected over the coming quarters as businesses and households adapt. In the U.S., inflation is likely to be slightly higher than normal for a period due to increased import tariffs, but is not expected to reach the levels seen during the 2022 inflation shock. In contrast, Canadian inflation is expected to be relatively stable due to the significant withdrawal of retaliatory tariffs.

Despite this evolving landscape, we are well-positioned to deliver sustainable growth by leveraging our diversified business model, global capabilities and scale. As businesses and households adjust to the new trade realities, we anticipate a period of slow economic growth, which may present opportunities for strategic investment and wealth planning.

Our strategy is focused on delivering a differentiated client experience through holistic, goals-based advice, enhanced by digital and AI capabilities that improve advisor productivity and personalization. We are also deepening client relationships by addressing the growing demand for integrated banking, wealth planning and alternative investment solutions. To support these efforts, we will continue to invest in our people and technology, while further enhancing our operational resilience, risk management and compliance capabilities. Prioritizing these areas will enable us to continue to meet the heightened expectations of our clients and regulators and to deliver long-term value for our stakeholders.

For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.

Wealth Management<br><br>(1)	Table 21
(Millions of Canadian dollars, except number of, percentage amounts and as otherwise noted)			2024
---	---	---	---	---	---
Net interest income	5,459		$	4,979
Non-interest income	16,919			14,647
Total revenue	22,378			19,626
PCL on performing assets	(8	)		(119	)
PCL on impaired assets	128			148
PCL	120			29
Non-interest expense	16,769			15,312
Income before income taxes	5,489			4,285
Net income	4,289		$	3,422
Revenue by business
Canadian Wealth Management	6,959		$	5,777
U.S. Wealth Management (including City National)	9,857			8,906
U.S. Wealth Management (including City National) (US millions)	7,023			6,550
Global Asset Management	3,368			2,948
International Wealth Management	1,406			1,295
Investor Services	788			700
Key ratios
ROE	16.6%			14.4%
NIM	3.33%			3.26%
Pre-tax margin (2)	24.5%			21.8%
Selected balance sheet information
Average total assets	188,400		$	176,200
Average total earning assets, net	163,700			152,500
Average loans and acceptances, net	123,200			114,600
Average deposits	173,600			163,400
Other information
AUA (3), (4)	5,284,800		$	4,685,900
AUM (3)	1,563,900			1,332,500
Average AUA	4,920,400			4,384,200
Average AUM	1,428,500			1,218,900
PCL on impaired loans as a % of average net loans and acceptances	0.10%			0.13%
Number of employees (FTE)	26,374			25,672
Number of advisors (5)	6,229			6,116
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
Increase (decrease):
Total revenue	445
PCL	9
Non-interest expense	358
Net income	61
Percentage change in average U.S. dollar equivalent of C1.00	(3)%
Percentage change in average British pound equivalent of C1.00	(5)%
Percentage change in average Euro equivalent of C1.00	(5)%

All values are in US Dollars.

(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
(2)	Pre-tax<br> margin is defined as income before income taxes divided by total revenue.
---	---
(3)	Represents <br>year-end<br> spot balances.
---	---
(4)	In addition to Canadian Wealth Management, U.S. Wealth Management (including City National), International Wealth Management and Investor Services, AUA includes $8,000 million (2024 – $7,400 million) related to GAM.
---	---
(5)	Represents client-facing advisors across all our Wealth Management businesses.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 45

Table of Contents

Client assets – AUA	Table 22
(Millions of Canadian dollars)	2025			2024
---	---	---	---	---	---	---
AUA, beginning balance <br>(1)	$	2,004,500		$	1,621,600
Asset inflows		504,000			474,000
Asset outflows		(486,200	)		(458,800	)
Total net flows <br>(1)		17,800			15,200
Market impact		267,800			341,700
Acquisitions/dispositions		–			21,400
Foreign exchange/other		16,600			4,600
Total market, acquisition/dispositions and foreign exchange/other impact <br>(1)		284,400			367,700
AUA, balance at end of year<br><br>(1)		2,306,700			2,004,500
Investor Services, balance at end of year		2,978,100			2,681,400
Total AUA	$	5,284,800		$	4,685,900
(1)	Includes AUA from the following lines of business: Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and International Wealth Management.
---	---
AUA by geographic mix and asset class	Table 23
---	---
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Canada<br><br>(1), (2)
Money market	$	36,600	$	28,400
Fixed income		55,600		61,500
Equity		258,900		248,400
Multi-asset and other		640,200		510,300
Total Canada		991,300		848,600
U.S.<br><br>(1), (2)
Money market		35,100		36,300
Fixed income		144,500		144,600
Equity		387,200		335,900
Multi-asset and other		496,600		413,200
Total U.S.		1,063,400		930,000
Other International<br><br>(1), (2)
Money market		25,400		19,200
Fixed income		25,400		13,200
Equity		106,700		56,800
Multi-asset and other		94,500		136,700
Total International		252,000		225,900
AUA, balance at end of year<br><br>(2)		2,306,700		2,004,500
Investor Services, balance at end of year		2,978,100		2,681,400
Total AUA	$	5,284,800	$	4,685,900
(1)	Geographic information is based on the location from where our clients are served.
---	---
(2)	Includes AUA from the following lines of business: Canadian Wealth Management, U.S. Wealth Management (including City National), Global Asset Management and International Wealth Management.
---	---
Client assets – AUM	Table 24
---	---
	2025															2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Money<br>market			Fixed<br>income			Equity			Multi-asset<br><br>and other			Total			Total
AUM, beginning balance <br>(1)	$	62,700		$	278,500		$	181,600		$	809,700		$	1,332,500		$	1,058,900
Institutional inflows		233,900			56,900			12,400			8,500			311,700			317,900
Institutional outflows		(218,800	)		(51,400	)		(12,800	)		(4,600	)		(287,600	)		(295,100	)
Personal flows, net		1,800			5,000			4,200			24,700			35,700			19,800
Total net flows		16,900			10,500			3,800			28,600			59,800			42,600
Market impact		800			17,700			30,000			112,100			160,600			201,000
Acquisition/dispositions		–			–			–			–			–			20,600
Foreign exchange and other		500			2,600			900			7,000			11,000			9,400
Total market, acquisition/dispositions and foreign exchange impact		1,300			20,300			30,900			119,100			171,600			231,000
AUM, balance at end of year	$	80,900		$	309,300		$	216,300		$	957,400		$	1,563,900		$	1,332,500
(1)	The amounts in the respective categories have been revised from those previously presented.
---	---

46 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Financial performance

2025 vs. 2024

Net income increased $867 million or 25% from last year, mainly due to higher fee-based client assets reflecting market appreciation and net sales, which also drove higher variable compensation. Higher transactional revenue also contributed to the increase.

Total revenue increased $2,752 million or 14%, largely due to higher fee-based client assets reflecting market appreciation and net sales and the impact of foreign exchange translation. Higher transactional revenue driven by client activity as well as higher net interest income reflecting average volume growth in loans and deposits and higher spreads also contributed to the increase.

PCL increased $91 million, primarily due to lower releases of provisions on performing loans in U.S. Wealth Management (including City National), largely driven by unfavourable changes to our scenario weights, and lower favourable changes to our macroeconomic forecast.

Non-interest expense increased $1,457 million or 10%, largely due to higher variable compensation commensurate with increased results, higher staff costs and the impact of foreign exchange translation. These factors were partially offset by the cost of the Federal Deposit Insurance Corporation (FDIC) special assessment last year.

AUA increased $599 billion or 13%, primarily due to market appreciation.

AUM increased $231 billion or 17%, primarily due to market appreciation and net sales.

Business line review
Canadian Wealth Management
---

Canadian Wealth Management includes our full-service wealth advisory business as well as our self-directed investment service in Canada. Our full-service wealth advisory business is the largest in Canada as measured by AUA, with approximately 2,000 investment advisors providing comprehensive financial solutions with a focus on the HNW and UHNW client segments including business owners. We provide discretionary investment management and estate and trust services to our clients through over 140 investment counsellors and over 120 trust professionals across Canada.

We compete with domestic banks and trust companies, investment counselling firms, bank-owned full-service brokerages and boutique brokerages, mutual fund companies and global private banks. In Canada, bank-owned wealth managers continue to be the major players for the HNW and UHNW client segments. RBC Direct Investing represents our self-directed investment brokerage service in Canada. Our business is the second-largest brokerage in Canada, as measured by AUA, with approximately $228 billion of AUA and serves 1.3 million clients. RBC Direct Investing serves a diverse base of clients, from early-stage investors, mass affluent and HNW individuals using our scalable digital direct-to-consumer business. RBC Direct Investing provides a wide range of products for clients to grow their wealth, including multi-currency accounts and access to trading in the Canadian, U.S. and international markets.

Financial performance

Revenue increased $1,182 million or 20% from last year, largely due to higher fee-based client assets reflecting market appreciation and net sales, as well as higher net interest income reflecting average volume growth in deposits and higher spreads. Higher transactional revenue driven by client activity also contributed to the increase.

Selected highlights<br><br>(1)	Table 25
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue	$	6,959	$	5,777
Other information
Average loans and acceptances, net		7,300		6,500
Average deposits		31,100		25,000
AUA <br>(2)		998,700		855,800
AUM <br>(2)		290,600		240,500
Average AUA		979,900		791,100
Average AUM		284,400		218,600
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
---	---
(2)	Represents <br>year-end<br> spot balances.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 47

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U.S. Wealth Management (including City National)

U.S. Wealth Management (including City National) encompasses PCG and our C&C businesses and City National. PCG is a full-service wealth advisory firm in the U.S. with over 2,200 financial advisors. Our C&C business delivers clearing and execution services for small to mid-sized independent broker-dealers and registered investment advisors. City National provides a robust offering of financial solutions to entrepreneurs, professionals, affluent individuals, their businesses and families, and other clients who value personalized banking relationships. City National offers a broad range of lending, deposit, cash management, equipment financing, wealth management and other products and services. City National specializes in strategic solutions for unique industry needs, including in the fields of entertainment, sports, real estate, food and beverage, healthcare, technology, legal, nonprofit and property management. Our competitors include other broker-dealers, commercial banks and other financial institutions that service HNW and UHNW individuals, entrepreneurs and their businesses.

Financial performance

Revenue increased $951 million or 11% from last year. In U.S. dollars, revenue increased $473 million or 7%, largely due to higher fee-based client assets reflecting market appreciation and net sales.

NIM was down 17 bps, mainly driven by changes in our cash sweep deposit program that resulted in largely offsetting impacts between net interest income and non-interest income.

Selected highlights	Table 26
(Millions of Canadian dollars,<br><br>except as otherwise noted)	2025		2024
---	---	---	---	---
Total revenue	$	9,857	$	8,906
Other information<br>(Millions of U.S. dollars)
Total revenue		7,023		6,550
NIM		2.54%		2.71%
Average earning assets, net		104,500		100,600
Average loans, guarantees and letters of credit, net		78,400		75,500
Average deposits		80,700		84,100
AUA <br>(1)		758,600		668,100
AUM <br>(1)		257,500		220,200
Average AUA		747,200		629,100
Average AUM		252,800		206,300
(1)	Represents <br>year-end<br> spot balances.
---	---

Global Asset Management

GAM provides global investment management services and solutions for individual and institutional investors in Canada, the U.K., the U.S., Europe and Asia. We provide a broad range of investment management services through mutual, pooled and private funds, fee-based accounts and separately managed portfolios. We distribute our investment solutions through a broad network of bank branches, our self-directed and full-service wealth advisory businesses, independent third-party advisors and private banks and directly to individual clients. We also provide investment solutions directly to institutional clients, including pension plans, insurance companies, corporations, endowments and foundations.

We are the largest retail fund company in Canada measured by AUM, as well as a leading institutional asset manager. We face competition in Canada from banks, insurance companies and asset management organizations. The Canadian fund management industry is large and mature but remains a relatively fragmented industry.

In the U.S., our asset management business offers investment management solutions and services, primarily to institutional investors and wealth management platforms including RBC Wealth Management ® , and competes with independent asset management firms, as well as those that are part of national and international banks and insurance companies.

Internationally, through our global capabilities distributed under the RBC BlueBay Asset Management brand, we offer investment management solutions for institutions and, through private banks including RBC Wealth Management, to HNW and UHNW investors. We face competition from asset managers that are owned by international banks, as well as national and regional asset managers in the geographies where we serve clients.

Financial performance

Revenue increased $420 million or 14% from last year, largely due to higher fee-based client assets reflecting market appreciation and net sales.

48 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Selected highlights<br><br>(1)	Table 27
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue	$	3,368	$	2,948
Other information
Canadian net long-term mutual fund sales (redemptions) <br>(2)		9,609		1,935
Canadian net money market mutual fund sales (redemptions) <br>(2)		2,891		1,334
AUM <br>(3)		793,700		680,300
Average AUM		776,500		619,900
(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
---	---
(2)	As reported to the Investment Funds Institute of Canada. Includes all prospectus-based mutual funds across our Canadian GAM businesses.
---	---
(3)	Represents <br>year-end<br> spot balances.
---	---

International Wealth Management

International Wealth Management includes operations in the U.K., Ireland, the Channel Islands and Asia. We provide customized and integrated wealth management solutions to affluent, HNW, UHNW and corporate clients in key financial centres. Competitors to our International Wealth Management business include global wealth managers, traditional private banks and domestic wealth managers.

Financial performance

Revenue increased $111 million or 9% from last year, largely due to the impact of foreign exchange translation.

Selected highlights	Table 28
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue	$	1,406	$	1,295
Other information
Average loans, guarantees and letters of credit, net		4,700		4,500
Average deposits		14,700		11,500
AUA <br>(1)		236,600		211,300
AUM <br>(1)		118,700		105,000
Average AUA		214,000		201,100
Average AUM		103,600		99,800
(1)	Represents <br>year-end<br> spot balances.
---	---

Investor Services

Investor Services delivers asset servicing solutions to Canadian asset managers, asset owners, insurance companies and private wealth advisors, and provides sub-custody services for global financial institutions and brokers. Our product and service offering includes custody services covering 102 markets, fund administration, accounting for insurance, pension and institutional clients, shareholder services, pension benefit services, performance measurement and market services (including foreign exchange, securities finance and liquidity and cash management services). Competitors to our business include domestic and international custodians with Canadian-based entities and operations.

Financial performance

Revenue increased $88 million or 13% from last year, primarily due to higher net interest income reflecting higher spreads and average volume growth in deposits, as well as higher transactional revenue largely driven by client activity.

Selected highlights	Table 29
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue	$	788	$	700
Other information
Average deposits		13,200		11,600
AUA <br>(1)		2,978,100		2,681,400
Average AUA		2,932,500		2,529,400
(1)	Represents <br>year-end<br> spot balances.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 49

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Insurance

RBC Insurance ® provides insurance advice and protection to approximately 4.9 million clients. We provide tailored, client-led advice and solutions, harnessing the power of technology and data and leveraging the strength and scale of the RBC enterprise.

$1.3 billion	~ 4.9 million	2,853
Total revenue	Number of clients	Employees (FTE)
Premiums and Deposits<br><br><br><br>	RBC Insurance is the largest Canadian bank-owned life insurance company on a total revenue basis.<br>1<br><br><br><br>We offer a comprehensive suite of advice and solutions for individual and business clients, including life, health, wealth solutions, travel, group benefits and reinsurance. We provide property & casualty insurance through a distribution agreement with Aviva Canada. We also offer longevity reinsurance, as well as reinsurance solutions for creditor life, disability and critical illness.<br><br><br><br>Our products and services are distributed through multiple channels, including our proprietary sales force, digital platforms, and a network of independent brokers and partners.<br><br><br><br>In Canada, many of our competitors specialize in life and health, wealth, or property and casualty products. In our International Insurance business, we compete in the global reinsurance market.

2025 Operating environment

›	Ongoing geopolitical uncertainty created headwinds for the Canadian economy, worsening affordability pressures on Canadians, weighing on consumer confidence and challenging new business growth. <br><br><br><br>Amidst this macroeconomic backdrop, RBC Insurance delivered steady growth in total premiums and deposits, supported by the strength of our overall insurance product portfolio.
›	Within individual insurance, term insurance remained a key driver of growth, supported by product enhancements and improved pricing and underwriting. We sustained leading creditor insurance market share in a challenging environment, achieving sales growth in home and loan protection products. We also <br><br><br><br>maintained our market leadership position in disability income insurance.
---	---
›	Driven by strong market growth in investment protection and retirement income products, we expanded our wealth offerings with product and pricing enhancements to better serve our clients.
---	---
›	The trend of companies transferring pension risk management to specialists continued. Consequently, our Canadian group annuity business delivered prudent growth driven by disciplined pricing within our risk tolerance.
---	---
›	With Canadian group sponsors placing greater emphasis on the need for more flexible and accessible group benefits solutions, we strengthened our group benefits offering through digital advancements and improved product features, further elevating the client experience.
---	---
›	Despite the travel market having been affected by changing travel patterns and softer spending, we experienced steady growth in our travel business. Through embedded travel coverage we offer with RBC credit cards, we continue to offer our clients new options and expanded benefits.
---	---
1	Based on the most current total nine-month revenue for life insurance companies, as available from OSFI.
---	---

50 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Strategic priorities

OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Deliver a market-leading client experience	Awarded A+ ratings by Fundata Canada for our three Guaranteed Investment Funds, recognizing their consistent outstanding risk adjusted performance, a distinction earned by fewer than 2% of Canadian investment fund products<br><br><br><br>Ranked #1 for broker relationship management capabilities and underwriting case coordinator service in the 2025 NMG Consulting Canadian individual life insurance study, reflecting strong frontline engagement and service excellence<br><br><br><br>Repositioned our third-party sales force to expand solution set for clients	Drive profitable business growth by continuing the journey to become a <br>client-led<br> organization underpinned by superior advice and solutions<br><br><br><br>Drive deep client relationships through distribution excellence, including channel growth and by supporting our agents and partners with high quality tools and unique value propositions
Lead in digital, data and technology	Awarded three global insurance innovation awards from The Digital Banker, including Best Digital Insurance Initiative, Best Digital Transformation Program, and Outstanding Customer Relations & Brand Engagement Initiative, recognizing our leadership in digital innovation<br><br><br><br>Launched a redesigned public website, resulting in a 17% increase in overall traffic and positioning us well to quickly implement future enhancements<br><br><br><br>Drove 50%+ YoY increase in digital releases, reflecting the impact of ongoing investments in digital, data, technology and process improvements	Create innovative client experiences, leveraging data and analytics to proactively anticipate future insurance needs
Harness the power of RBC and the RBC Brand to grow our Insurance business – OneRBC approach	Maintained leadership position in creditor products as measured by total insured lending balance<br>1<br><br><br><br>Featured creditor products in RBC’s home equity finance spring campaign for the first time, introducing important protection at a critical life moment thereby deepening client engagement<br><br><br><br>Deepened our partnership with Wealth Management to deliver insurance solutions, supporting clients’ financial planning needs and driving growth in term and disability insurance solutions<br><br><br><br>Leveraged enterprise AI capabilities, infrastructure and the RBC Borealis platform to build and scale AI capabilities within RBC Insurance	Harness the power of being a bank-owned insurer by tapping into enterprise capabilities, relationships, channels, best practices and the RBC brand to maximize enterprise opportunities
Drive operational excellence through automation and streamlined processes	Achieved a 35%+ reduction in critical illness decision cycle time, elevating the overall client experience<br><br><br><br>Enabled <br>point-of-sale<br> decisioning through the deployment of an innovative underwriting rules engine, with 39% of eligible term life cases now being decisioned instantly, improving speed and client experience<br><br><br><br>Launched our first fully-automated and integrated GenAI solution, enhancing claims fraud detection and driving greater operational efficiency	Reimagine our processes through automation, advanced capabilities and resilient operations to position us for scale and to deliver an enhanced client experience
Attract, develop and retain <br>future-ready<br> talent	Empowered teams to deliver against our strategy by transforming our Insurance organizational structure to align teams against our biggest growth opportunities<br><br><br><br>Supported development of talent through targeted employee moves to new and/or expanded roles to develop <br>in-demand<br> skills and build key capabilities for the future<br><br><br><br>Continued leadership development through various enterprise and business segment programs, including leadership summits, strategy seminars and people manager enablement programs such as webinars, workshops and learning programs<br><br><br><br>Further strengthened our culture of inclusion and belonging by engaging employee participation in key global enterprise events and Employee Resource Groups	Build critical future skills through targeted development experiences for leaders and employees aligned to our bold ambitions<br><br><br><br>Inspire and enable teams to achieve ambitious outcomes and high-performance<br><br><br><br>Develop and coach leaders to champion transformation and growth and foster a client-focused culture<br><br><br><br>Empower our leaders and employees through AI to reimagine what’s possible and accelerate innovation
1	Total insured lending balance calculated from latest available supplementary financial reports
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 51

Table of Contents

Outlook

The insurance industry is expected to continue evolving in response to macro trends, particularly demographic changes and technological advancements, which are influencing client preferences and expectations. These trends have created opportunities for us to provide Canadians with a range of life, health, wealth transfer and retirement solutions, supported by industry-leading advice. Through both proprietary and third-party channels, we remain committed to investing in product innovation and operational enhancements that will enable us to deliver industry-leading solutions to advisors, institutions and consumers. By leveraging data and digital technologies, we will continue to seek to deliver exceptional customer experiences, maintain our leadership position in core segments and expand into new markets. Ultimately, RBC Insurance will continue to harness the strength and scale of RBC to help Canadians protect what matters most to them.

For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.

Insurance	Table 30
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)	2025		2024
---	---	---	---	---
Non-interest<br> income
Insurance service result	$	867	$	777
Insurance investment result		284		294
Other income		170		153
Total revenue		1,321		1,224
PCL		–		2
Non-interest<br> expense		315		285
Income before income taxes		1,006		937
Net income	$	828	$	729
Key ratios
ROE		40.7%		35.3%
Selected balance sheet information
Average total assets	$	31,000	$	26,400
Other information
Premiums and deposits <br>(1), (2)	$	7,016	$	6,136
Net insurance contract liabilities <br>(3)		23,746		21,643
Contractual service margin (CSM) <br>(4)		1,802		2,137
Number of employees (FTE)		2,853		2,788
(1)	Premiums and deposits include premiums on risk-based individual and group insurance and annuity products as well as segregated fund deposits, consistent with insurance industry practices.
---	---
(2)	Comparative amounts have been revised from those previously presented.
---	---
(3)	Includes insurance contract liabilities net of insurance contract assets.
---	---
(4)	Represents the CSM of insurance contract assets and liabilities net of reinsurance contract held assets and liabilities. For insurance contracts, the CSM represents the unearned profit (net inflows) for providing insurance coverage. For reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. The CSM is not applicable to contracts measured using the premium allocation approach.
---	---

Financial performance

2025 vs. 2024

Net income increased $99 million or 14% from last year, primarily due to higher insurance service result driven by improved claims experience in longevity reinsurance and life retrocession products. This was partially offset by the impact of unfavourable annual actuarial assumption updates driven by life retrocession products. Lower taxes reflecting changes in earnings mix also contributed to the increase.

Total revenue increased $97 million or 8%, primarily due to higher insurance service result, as noted above.

Non-interest expense increased $30 million or 11%, primarily due to higher staff-related costs, including severance.

52 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

Table of Contents

Capital Markets

RBC Capital Markets ® is a premier global investment bank providing expertise in advisory & origination, sales & trading, lending & financing and transaction banking to corporate, institutional, sponsor and government clients globally. Our professionals provide clients with the advice, products and services their businesses need from 55 offices in 16 countries. Our presence extends across North America, the U.K. & Europe, Australia, Asia and other regions.

> 22,900	#1	7,648
Number of clients	Canadian bank-owned capital markets firm by revenue<br>1	Employees (FTE)
Revenue by Geography<br><br><br><br><br><br>	We operate two main business lines: Corporate & Investment Banking and Global Markets.<br><br><br><br>In North America, we offer a full suite of products and services, including equity and debt origination and distribution, advisory services, sales & trading and transaction banking. In Canada, we are a market leader with a strategic presence in all lines of capital markets businesses. In the U.S., where our competitors include large global investment banks, we have a full industry sector coverage and investment banking product range, as well as capabilities in credit, secured lending, municipal finance, fixed income, currencies & commodities and equities.<br><br><br><br>Outside North America, we have a targeted strategic presence in the U.K. & Europe, Australia, Asia and other markets aligned to our global expertise. In the U.K. & Europe, we offer a diversified set of capabilities in key industry sectors of focus. In Australia and Asia, we compete with global and regional investment banks in targeted areas aligned to our global expertise, including fixed income distribution and currencies trading, secured financing, as well as corporate & investment banking.

2025 Operating environment

›	The fiscal 2025 macroeconomic environment was characterized by modest global growth, declining interest rates and lower inflation, alongside an increase in geopolitical uncertainty. These macro conditions supported a growing industry wallet across most of our core businesses.
›	Investment banking fee pool growth slowed in the first half of 2025 amidst macroeconomic uncertainty and market volatility; however, the fee pools increased in the second half of 2025. Against this backdrop, we continued to expand our client coverage, which contributed to revenue growth.
---	---
›	Overall financial market activity was driven by elevated market volatility in the first half of 2025, which supported robust client-driven trading flows, notably from equities, foreign exchange and interest rate trading. The second half of 2025 saw a reduction in market volatility, which supported a recovery in credit trading, partly offset by slower growth in equities trading volumes.
---	---
›	The credit environment reflected better-than-expected economic growth in the U.S., tempered by elevated U.S. interest rates, while other economies experienced slowing growth and the impacts of trade disruptions. We saw higher provisions on impaired loans driven by a few accounts in the other services and financing products sectors.
---	---
›	The Pillar Two legislation, which includes a 15% global minimum corporate tax, resulted in an increase in tax expenses.
---	---
1	Source: Based on externally disclosed capital markets revenue for Canadian peers (Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, The Toronto-Dominion Bank and National Bank of Canada) for the last twelve months as of July 31, 2025
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 53

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Strategic priorities

OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Build new and deepen client relationships	Expanded client coverage through our holistic global coverage model. A notable client example is our role as exclusive financial advisor to Advent International on the US$6.3 billion take-private of Nuvei and joint lead arranger on a US$3.2 billion related financing<br><br><br><br>Awards include Best Investment Bank in Canada <br><br><br><br>(Euromoney), Top 10 Investment Bank globally (Euromoney) and Best Bank for Research in North America (Euromoney)	Grow corporate relationships with expanded sector coverage<br><br><br><br>Leverage sponsors franchise including capturing more private capital opportunities<br><br><br><br>Increase coverage of bank, insurance and hedge fund clients
Strengthen and expand our capabilities	Expanded our U.S. Transaction Banking platform, RBC Clear, onboarding new clients and growing deposits<br><br><br><br>Awards include 2025 Model Celent Bank winner for Reinventing Cash Management by Celent Model Bank and 2025 Best Digital Banking Initiative – RBC Clear awarded by Banking Tech Awards USA<br><br><br><br>Expanded capabilities and market presence across equity derivatives, risk solutions, structured products and commodities<br><br><br><br>Created a dedicated Energy Transition centre of excellence within Investment Banking to support clients on energy transition with advice and capital. A notable client example is our role as exclusive financial advisor to Canada Growth Fund and Building Ontario Fund on $2 billion and $1 billion equity investments in the world-leading Ontario Power Generation Small Modular Reactors project<br><br><br><br>Accelerated growth in Equity Capital Markets (ECM) capabilities, with a notable client example highlighted through our role as joint lead manager, bookrunner and underwriter on Goodman Group’s AU$4 billion institutional placement	Grow Mergers & Acquisitions (M&A) and ECM capabilities, in partnership with coverage<br><br><br><br>Expand foreign exchange (FX) and commodities products and capabilities<br><br><br><br>Expand equity financing and derivatives opportunities<br><br><br><br>Scale U.S. transaction banking solutions with further domestic payment automation and launch of FX capabilities
Deliver complete solutions as OneRBC	Grew structured products solutions targeted to Wealth Management clients<br><br><br><br>Progressed the enterprise FX program across RBC platforms to coordinate capabilities and grow offerings	Deliver global transaction banking capabilities to clients, in partnership with <br><br><br><br>Commercial Banking and City National<br><br><br><br>Partner with Commercial Banking and Personal Banking to drive enterprise FX offerings<br><br><br><br>Connect Capital Markets clients with the best of RBC capabilities across Wealth Management and Global Asset Management products
Leverage digital, data and AI	Established an AI and digital centre of excellence<br><br><br><br>Scaled Aiden<br>®<br>, RBC Capital Markets’ AI solution, to all RBC Capital Markets employees	Accelerate execution of agentic AI with bespoke applications tailored to user needs<br><br><br><br>Generate differentiated insights with thought leadership, leveraging alternative data and client analytics<br><br><br><br>Modernize trading platform across rates, FX and risk solutions
Simplify, scale and modernize our foundation	Delivered across large scale platform modernization and execution capability projects<br><br><br><br>Leveraged digital and AI to streamline the end-to-end technology ecosystem and provide an improved client and employee experience<br><br><br><br>Further simplified our estate of applications while ensuring security and soundness	Automate operations to deliver improved <br>end-to-end<br> digital client journeys and drive efficiencies from scale<br><br><br><br>Simplify and streamline technology and operational infrastructures while amplifying controls and risk management<br><br><br><br>Continue momentum in productivity and efficiency program
Dynamically allocate resources for maximum impact	Continued to invest in key areas of technology, with a focus on client facing applications (e.g., RBC Clear) and operational efficiencies<br><br><br><br>Supported clients with financial resources and tailored advice	Sustain technology investment, focused on change the bank initiatives<br><br><br><br>Prioritize financial <br><br><br><br>resource allocation to the highest priority client opportunities

54 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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OUR STRATEGY	PROGRESS IN 2025	PRIORITIES IN 2026
Attract, grow and retain future-ready talent	Empowered teams to deliver against our strategy by transforming our Capital Markets organizational structure to align teams against our biggest growth opportunities<br><br><br><br>Supported development of talent through targeted employee moves to new and/or expanded roles to develop <br>in-demand<br> skills and build key capabilities for the future<br><br><br><br>Continued leadership development through various enterprise and business segment programs, including leadership summits, strategy seminars and people manager enablement programs such as webinars, workshops and learning programs<br><br><br><br>Accelerated hiring to strengthen our leadership capabilities in alignment with our global business strategy<br><br><br><br>Further strengthened our culture of inclusion and belonging by engaging employee participation in key global enterprise events and Employee Resource Groups	Build critical future skills through targeted development experiences for leaders and employees aligned to our bold ambitions<br><br><br><br>Inspire and enable teams to achieve ambitious outcomes and high-performance<br><br><br><br>Develop and coach leaders to champion transformation and growth and foster a client-focused culture<br><br><br><br>Empower our leaders and employees through AI to reimagine what’s possible and accelerate innovation

Outlook

For fiscal 2026, the macroeconomic environment remains uncertain as financial markets and market participants navigate the impact of continued geopolitical uncertainty including the impacts from tariffs and trade. The outlook is expected to continue to be volatile, with limited further interest rate cuts, low growth and uneven unemployment. We expect strong momentum in global investment banking fee pools through fiscal 2026, as well as stable global markets industry revenue, which is expected to moderate from fiscal 2025. Amidst these market dynamics, we have a diversified business model which is well-positioned to capture market share across our businesses. In Investment Banking, we will remain focused on key industry sectors as we intensify investments in talent and technology. In Global Markets, our focus remains on accelerating cross-selling activities, further deploying electronic and digital capabilities and building on our established risk management practices. In Corporate Banking, we seek to maintain a disciplined growth approach underpinned by established credit risk management practices to deepen relationships with lending clients and drive growth in our non-lending businesses. Across our businesses, our strategy remains client-centric while seeking to optimize use of our financial resources, including growth objectives for our U.S. Transaction Banking franchise. We believe our diversified business model positions us well to navigate the macroeconomic environment.

For further details on our general economic review and outlook, refer to the Economic, market and regulatory review and outlook section.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 55

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Capital Markets<br><br>(1)	Table 31
(Millions of Canadian dollars, except percentage amounts and as otherwise noted)			2024
---	---	---	---	---	---
Net interest income (2)	4,789		$	3,183
Non-interest income (2)	9,637			8,829
Total revenue (2)	14,426			12,012
PCL on performing assets	(29	)		84
PCL on impaired assets	616			340
PCL	587			424
Non-interest expense	7,966			7,016
Income before income taxes	5,873			4,572
Net income	5,393		$	4,573
Revenue by business
Corporate & Investment Banking (3)	6,877		$	6,213
Global Markets	7,538			5,879
Other (3)	11			(80	)
Key ratios
ROE	13.7%			14.2%
Selected balance sheet information
Average total assets	1,326,300		$	1,134,300
Average trading securities	206,800			183,400
Average loans and acceptances, net	163,500			148,200
Average deposits	389,900			296,400
Other information
Number of employees (FTE)	7,648			7,424
Credit information
PCL on impaired loans as a % of average net loans and acceptances	0.38%			0.23%
Estimated impact of U.S. dollar, British pound and Euro translation on key income statement items
(Millions of Canadian dollars, except percentage amounts)
Increase (decrease):
Total revenue	490
PCL	23
Non-interest expense	211
Net income	225
Percentage change in average U.S. dollar equivalent of C1.00	(3)%
Percentage change in average British pound equivalent of C1.00	(5)%
Percentage change in average Euro equivalent of C1.00	(5)%

All values are in US Dollars.

(1)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, which impacted results, balances and ratios for all reported periods.
(2)	The teb adjustment for 2025 was $151 million (2024 – $294 million). For further discussion, refer to the How we measure and report our business segments section.
---	---
(3)	Comparative amounts have been revised from those previously presented.
---	---

56 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Financial performance

2025 vs. 2024

Net income increased $820 million or 18% from last year, primarily due to higher revenue in Global Markets and Corporate & Investment Banking. The impact of foreign exchange translation also contributed to the increase. These factors were partially offset by higher compensation on increased results and higher taxes reflecting the impact of Pillar Two legislation and changes in earnings mix, net of favourable tax adjustments.

Total revenue increased $2,414 million or 20%, largely due to the impact of foreign exchange translation, higher equity trading revenue across most regions, higher fixed income and foreign exchange trading revenue across all regions and higher lending revenue across most regions. Higher revenue in treasury services and higher debt and equity origination across most regions also contributed to the increase.

PCL increased $163 million or 38%, primarily due to higher provisions on impaired loans in a few sectors, including the other services and financing products sectors, partially offset by lower provisions in the real estate and related sector. The current year also reflects releases of provisions on performing loans, as compared to provisions taken last year, mainly due to one account in the other services sector that migrated from performing to impaired in the current year and favourable changes to our macroeconomic forecast, partially offset by unfavourable changes in credit quality.

Non-interest expense increased $950 million or 14%, mainly due to higher compensation on increased results, the impact of foreign exchange translation and ongoing technology investments.

Business line review
Corporate & Investment Banking
---

Corporate & Investment Banking comprises our corporate lending, municipal finance, loan syndication, debt and equity origination, M&A advisory services and transaction banking services. For debt and equity origination, revenue is allocated between Corporate & Investment Banking and Global Markets based on the contribution of each group in accordance with an established agreement.

Financial performance

Corporate & Investment Banking revenue of $6,877 million increased $664 million or 11% from last year.

Investment banking revenue increased $282 million or 10%, primarily due to higher loan syndication activity across most regions, the impact of loan underwriting markdowns in the prior year and the impact of foreign exchange translation.

Lending and transaction banking revenue increased $382 million or 11%, largely due to average volume growth and the impact of foreign exchange translation.

Selected highlights	Table 32
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue<br><br>(1), (2)	$	6,877	$	6,213
Breakdown of total revenue<br><br>(1)
Investment banking		3,027		2,745
Lending and transaction banking <br>(2), (3)		3,850		3,468
Other information
Average assets		143,000		129,000
Average loans and acceptances, net		134,000		121,000
(1)	The teb adjustment for the year ended October 31, 2025 was $152 million (October 31, 2024 – $265 million). For further discussion, refer to the How we measure and report our business segments section.
---	---
(2)	Comparative amounts have been revised from those previously presented.
---	---
(3)	Effective the second quarter of 2025, we renamed the “Lending and other” business to “Lending and transaction banking”. The change had no impact to how the business is managed or prior period comparatives.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 57

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Global Markets

Global Markets comprises our sales and trading businesses including fixed income, foreign exchange, commodities and equities, as well as our repo and secured financing products.

Financial performance

Global Markets revenue of $7,538 million increased $1,659 million or 28% from last year.

Revenue in our Fixed income, currencies and commodities business increased $846 million or 19%, primarily due to the impact of foreign exchange translation, as well as higher fixed income and foreign exchange trading revenue across all regions.

Revenue in our Equities business increased $813 million or 53%, largely due to higher equity trading revenue across most regions.

Selected highlights	Table 33
(Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Total revenue<br><br>(1)	$	7,538	$	5,879
Breakdown of total revenue<br><br>(1)
Fixed income, currencies and commodities<br><br><br>(2)		5,200		4,354
Equities<br><br><br>(2)		2,338		1,525
Other information
Average assets		1,163,000		995,000
(1)	The teb adjustment for the year ended October 31, 2025 was $(1) million (October 31, 2024 – $29 million). For further discussion, refer to the How we measure and report our business segments section.
---	---
(2)	Effective the second quarter of 2025, we reorganized our revenue reporting hierarchy to collapse our Treasury services and funding business into our Fixed income, currencies and commodities and Equities businesses. Comparative amounts have been revised from those previously presented to conform to this new basis of presentation.
---	---

Other

Other includes residual funding and capital costs, as well as bank-owned life insurance (BOLI) derivative contracts.

Financial performance

Other revenue improved $91 million, mainly reflecting lower residual funding and capital costs.

58 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Corporate Support

Corporate Support consists of Technology & Operations, which provides the technological and operational foundation required to effectively deliver products and services to our clients, Functions, which includes our finance, human resources, risk management, internal audit and other functional groups, as well as our Corporate Treasury function. Reported results for Corporate Support mainly reflect enterprise level activities which are not allocated to business segments. For further details, refer to the How we measure and report our business segments section.

Corporate Support	Table 34
(Millions of Canadian dollars)	2025			2024
---	---	---	---	---	---	---
Net interest income (loss) <br>(1)	$	988		$	1,292
Non-interest<br> income (loss) <br>(1), (2)		(924	)		(1,534	)
Total revenue<br><br>(1), (2)		64			(242	)
Non-interest<br> expense<br><br>(2)		708			1,640
Income (loss) before income taxes<br><br>(1)		(644	)		(1,882	)
Income taxes (recoveries) <br>(1)		(378	)		(659	)
Net income (loss)	$	(266	)	$	(1,223	)
(1)	Teb adjusted.
---	---
(2)	Revenue for the year ended October 31, 2025, included gains of $405 million (October 31, 2024 – gains of $499 million) on economic hedges of our U.S. Wealth Management (including City National) share-based compensation plans, and <br>non-interest<br> expense included $391 million (October 31, 2024 – $473 million) of share-based compensation expense driven by changes in the fair value of liabilities relating to our U.S. Wealth Management (including City National) share-based compensation plans.
---	---

Due to the nature of activities and consolidation adjustments reported in this segment, we believe that a comparative period analysis is not relevant.

Total revenue and income taxes (recoveries) in Corporate Support include the deduction of the teb adjustment related to gross-up of income from the U.S. tax credit business and income from Canadian taxable corporate dividends received on or before December 31, 2023 that are recorded in Capital Markets.

The teb amount for the year ended October 31, 2025 was $151 million and was $294 million last year.

The following identifies the material items, other than the teb impacts noted previously, affecting the reported results in each year.

2025

Net loss was $266 million, primarily due to residual unallocated costs, including severance, partially offset by asset/liability management activities.

2024

Net loss was $1,223 million, primarily due to the after-tax impact of the HSBC Canada transaction and integration costs of $759 million, which was a specified item. Unallocated costs also contributed to the net loss.

For further details on specified items, refer to the Key performance and non-GAAP measures section.

Quarterly financial information
Fourth quarter performance
---

Q4 2025 vs. Q4 2024

Fourth quarter net income of $5,434 million was up $1,212 million or 29%. Diluted EPS of $3.76 was up $0.85 or 29% and ROE of 16.8% was up 250 bps. Our CET1 ratio of 13.5% was up 30 bps from a year ago. Our earnings were up primarily due to higher earnings in Capital Markets, Wealth Management, Personal Banking and Commercial Banking, partially offset by lower earnings in Insurance. Prior period results included HSBC Canada transaction and integration costs, which was treated as a specified item and reported in Corporate Support.

Total revenue increased $2,135 million or 14%. The impact of foreign exchange translation increased revenue by $162 million.

Net interest income increased $974 million or 13%, mainly due to average volume growth in Personal Banking and Commercial Banking, as well as higher spreads largely in Personal Banking. Higher fixed income trading revenue across all regions in Capital Markets also contributed to the increase.

Non-interest income increased $1,161 million or 16%, mainly due to higher fee-based client assets reflecting market appreciation and net sales in Wealth Management, changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in non-interest expense, as well as the impact of economic hedges. Higher equity trading revenue across most regions and higher M&A activity across all regions, both in Capital Markets, also contributed to the increase.

Total PCL of $1,007 million increased $167 million or 20%, primarily due to higher provisions in Commercial Banking, Capital Markets and Personal Banking. The PCL on loans ratio of 39 bps increased 4 bps. The PCL on impaired loans ratio of 38 bps increased 12 bps.

Non-interest expense increased $355 million or 4%, primarily due to higher variable compensation commensurate with increased results, higher staff costs and changes in the fair value of our U.S. share-based compensation plans, which was largely offset in non-interest income. Ongoing technology investments and the impact of foreign exchange translation also contributed to the increase. These factors were partially offset by HSBC Canada transaction and integration costs in the prior year, which was treated as a specified item.

Income tax expense increased $401 million or 40%, primarily due to higher income before income taxes. The effective income tax rate of 20.4% increased 140 bps from last year, primarily due to the impact of changes in earnings mix and Pillar Two legislation, which became effective for us beginning November 1, 2024, partially offset by the net impact of tax adjustments.

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Q4 2025 vs. Q3 2025

Net income of $5,434 million was relatively flat compared to last quarter. Higher net interest income, largely reflecting higher spreads and volume growth across most segments, was offset by higher non-interest expense, including ongoing investments in technology and higher marketing expenses associated with new client acquisition campaigns, and higher PCL on both impaired and performing loans.

Quarterly results and trend analysis

Our quarterly results are impacted by a number of trends and recurring factors, which include seasonality of certain businesses, general economic and market conditions, and fluctuations in the Canadian dollar relative to other currencies. The following table summarizes our results for the last eight quarters (the period):

Quarterly results<br><br>(1)	Table 35
	2025									2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars,<br><br>except per share and percentage amounts)		Q4<br><br>(2)		Q3 <br>(2)		Q2 <br>(2)			Q1 <br>(2)		Q4 <br>(2)			Q3 <br>(2)			Q2 <br>(2)		Q1
Personal Banking	$	5,178	$	5,060	$	4,805		$	4,811	$	4,658		$	4,490		$	4,163	$	4,031
Commercial Banking		2,221		2,152		2,062			2,127		2,077			2,036			1,656		1,613
Wealth Management		5,900		5,513		5,397			5,568		5,186			4,964			4,789		4,687
Insurance		209		368		338			406		278			285			298		363
Capital Markets <br>(3)		3,611		3,758		3,301			3,756		2,903			3,004			3,154		2,951
Corporate Support <br>(3)		90		134		(231	)		71		(28	)		(148	)		94		(160	)
Total revenue		17,209		16,985		15,672			16,739		15,074			14,631			14,154		13,485
PCL		1,007		881		1,424			1,050		840			659			920		813
Non-interest<br> expense		9,374		9,232		8,730			9,256		9,019			8,599			8,308		8,324
Income before income taxes		6,828		6,872		5,518			6,433		5,215			5,373			4,926		4,348
Income taxes		1,394		1,458		1,128			1,302		993			887			976		766
Net income	$	5,434	$	5,414	$	4,390		$	5,131	$	4,222		$	4,486		$	3,950	$	3,582
EPS – basic	$	3.77	$	3.76	$	3.03		$	3.54	$	2.92		$	3.09		$	2.75	$	2.50
– diluted		3.76		3.75		3.02			3.54		2.91			3.09			2.74		2.50
Effective income tax rate		20.4%		21.2%		20.4%			20.2%		19.0%			16.5%			19.8%		17.6%
Period average US$ equivalent of C$1.00	$	0.720	$	0.728	$	0.704		$	0.699	$	0.733		$	0.730		$	0.734	$	0.745
(1)	Fluctuations in the Canadian dollar relative to other foreign currencies have affected our consolidated results over the period.
---	---
(2)	On March 28, 2024, we completed the HSBC Canada transaction. HSBC Canada results have been consolidated from the closing date, and are included in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets segments.
---	---
(3)	Teb adjusted. For further discussion, refer to the How we measure and report our business segments section.
---	---

Seasonality

Seasonal factors may impact our results in certain quarters. The first quarter has historically been stronger for our Capital Markets businesses. The second quarter has fewer days than the other quarters, which generally results in a decrease in net interest income and certain expense items. The third and fourth quarters include the summer months, which generally results in lower client activity and may negatively impact the results of our Capital Markets trading business.

Trend analysis

Earnings over the period have been impacted by the factors noted below.

Personal Banking revenue has benefitted from volume growth in loans and deposits over the period. NIM has been favourably impacted by changes in product mix and the sustained impact of a higher interest rate environment. HSBC Canada revenue has been included since the transaction closed on March 28, 2024.

Commercial Banking revenue has benefitted from volume growth in loans and deposits over the period. HSBC Canada revenue has been included since the transaction closed on March 28, 2024.

Wealth Management revenue has generally benefitted from growth in fee-based client assets, which is influenced by market conditions.

Insurance revenue reflects investment-related and insurance experience. New business gains are deferred through CSM and new business losses are reflected through insurance service result.

Capital Markets revenue is influenced, to a large extent, by market conditions that impact client activity. Investment banking fee pools saw increasing activity through most of 2024. However, fee pool growth started to slow in the first half of 2025 amidst macroeconomic uncertainty and market volatility, before showing signs of recovery in the second half of 2025. Sales & trading activity carried strong momentum in 2024 and macroeconomic uncertainty has continued to keep client volumes robust across the sales & trading business through 2025.

PCL comprises provisions taken on performing assets and provisions taken on impaired assets. PCL on performing assets fluctuated over the period as it is impacted by changes in credit quality, macroeconomic conditions, which drive our forecasts and influence our scenario weights, and exposures. Provisions on performing assets over the period have generally been reflective of unfavourable changes in credit quality. Throughout the period, we have generally seen improvements to our macroeconomic forecast, with the exception of the second quarter of 2025, where we saw unfavourable changes, driven by the impacts of trade disruptions (including tariffs). The second quarter of 2024 included initial PCL on performing loans purchased in the HSBC Canada transaction. PCL on impaired assets has generally trended upwards over the period.

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Non-interest expense has been impacted by fluctuations in variable compensation over the period, commensurate with fluctuations in revenue and earnings. Changes in the fair value of our U.S. share-based compensation plans, which are largely offset in revenue, have also contributed to fluctuations over the period and are impacted by market conditions. While we continue to focus on efficiency management activities, expenses over the period also reflect investments in staff and technology. Expenses also included HSBC Canada transaction and integration costs before the third quarter of 2025. HSBC Canada non-interest expenses have been included since the transaction closed on March 28, 2024.

Our effective income tax rate has been impacted by varying levels of tax adjustments and changes in earnings mix. Beginning in the first quarter of 2025, our effective income tax rate reflects the impact of Pillar Two legislation, which became effective for us beginning November 1, 2024.

Financial condition
Condensed balance sheets
---
Table 36
---
As at October 31 (Millions of Canadian dollars)	2025			2024
---	---	---	---	---	---	---
Assets
Cash and due from banks	$	37,024		$	56,723
Interest-bearing deposits with banks		50,364			66,020
Securities, net of applicable allowance <br>(1)		561,788			439,918
Assets purchased under reverse repurchase agreements and securities borrowed		309,683			350,803
Loans
Retail		652,344			626,978
Wholesale		397,171			360,439
Allowance for loan losses		(7,093	)		(6,037	)
Other – Derivatives		177,206			150,612
– Other		146,519			126,126
Total assets	$	2,325,006		$	2,171,582
Liabilities
Deposits	$	1,515,616		$	1,409,531
Other – Derivatives		183,953			163,763
– Other		472,325			457,550
Subordinated debentures		13,961			13,546
Total liabilities		2,185,855			2,044,390
Equity attributable to shareholders		139,092			127,089
Non-controlling<br> interests		59			103
Total equity		139,151			127,192
Total liabilities and equity	$	2,325,006		$	2,171,582
(1)	Securities are comprised of trading and investment securities.
---	---

2025 vs. 2024

Total assets increased $153 billion or 7% from October 31, 2024, net of foreign exchange translation of $48 billion.

Cash and due from banks decreased $20 billion or 35%, primarily due to lower deposits with central banks reflecting short-term liquidity and cash management activities.

Interest-bearing deposits with banks decreased $16 billion or 24%, primarily due to lower deposits with central banks reflecting short-term liquidity and cash management activities.

Securities, net of applicable allowance, increased $122 billion or 28%, primarily due to higher government debt securities reflecting liquidity and cash management activities and favourable market opportunities.

Assets purchased under reverse repurchase agreements (reverse repos) and securities borrowed decreased $41 billion or 12%, primarily due to decreased client financing activity.

Loans (net of Allowance for loan losses) increased $61 billion or 6%, primarily due to volume growth in wholesale loans and residential mortgages.

Derivative assets increased $27 billion or 18%, net of foreign exchange translation, primarily attributable to higher fair values on equity and foreign exchange contracts, partially offset by lower fair values on interest rate contracts.

Other assets increased $20 billion or 16%, largely due to higher cash collateral, commodity trading assets and precious metals reflecting market conditions and client activity.

Total liabilities increased $141 billion or 7%, net of foreign exchange translation of $48 billion.

Deposits increased $106 billion or 8%, mainly due to higher demand deposits driven by client activity and higher business and government term deposits driven by liquidity and cash management activities as well as client activity.

Derivative liabilities increased $20 billion or 12%, net of foreign exchange translation, mainly attributable to higher fair values on equity contracts, partially offset by lower fair values on interest rate contracts.

Other liabilities increased $15 billion or 3%, mainly due to higher obligations related to securities sold short, commodity liabilities and cash collateral due to client activity and higher short-term borrowings of subsidiaries, partially offset by lower obligations related to repurchase agreements (repos).

Total equity increased $12 billion or 9%, mainly reflecting earnings, net of dividends.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 61

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Off-balance<br> sheet arrangements

In the normal course of business, we engage in a variety of financial transactions that, for accounting purposes, are not recorded on our Consolidated Balance Sheets. Off-balance sheet transactions are generally undertaken for risk, capital and funding management purposes which benefit us and our clients. These include transactions with structured entities and may also include the purchase or issuance of guarantees. These transactions give rise to, among other risks, varying degrees of market, credit, liquidity and funding risk, which are discussed in the Risk management section.

We use structured entities to securitize our financial assets as well as assist our clients in securitizing their financial assets. These entities are not operating entities, typically have no employees, and may or may not be recorded on our Consolidated Balance Sheets.

In the normal course of business, we engage in a variety of financial transactions that may qualify for derecognition. We apply the derecognition rules to determine whether we have transferred substantially all the risks and rewards or control associated with the financial assets to a third party. If the transaction meets specific criteria, it may qualify for full or partial derecognition from our Consolidated Balance Sheets.

Securitizations of our financial assets

We periodically securitize our credit card receivables and residential and commercial mortgage loans primarily to diversify our funding sources, enhance our liquidity position and for capital purposes. We also securitize residential and commercial mortgage loans as part of our sales and trading activities.

We securitize our credit card receivables, on a revolving basis, through a consolidated structured entity. We securitize single and multiple-family residential mortgages through the National Housing Act Mortgage-Backed Securities (NHA MBS) program. The majority of our securitization activities are recorded on our Consolidated Balance Sheets as we do not meet the derecognition criteria. During 2025, we derecognized $1,332 million (October 31, 2024 – $122 million) of mortgages securitized through the NHA MBS program. For further details, refer to Note 7 and Note 8 of our 2025 Annual Consolidated Financial Statements.

We also periodically securitize commercial mortgage loans by selling them in collateral pools, which meet certain diversification, leverage and debt coverage criteria, to structured entities, one of which is sponsored by us. Securitized commercial mortgage loans are derecognized from our Consolidated Balance Sheets as we have transferred substantially all of the risks and rewards of ownership of the securitized assets. During the year ended October 31, 2025, we securitized $685 million of commercial mortgages (October 31, 2024 – $nil). Our continuing involvement with the transferred assets includes servicing certain of the underlying commercial mortgages sold. As at October 31, 2025, there was $2 billion of commercial mortgages outstanding that we continue to service related to these securitization activities (October 31, 2024 – $1 billion).

Involvement with unconsolidated structured entities

In the normal course of business, we engage in a variety of financial transactions with structured entities to support our customers’ financing and investing needs, including securitization of our clients’ financial assets, creation of investment products, and other types of structured financing.

We have the ability to use credit mitigation tools such as third-party guarantees, credit default swaps, and collateral to mitigate risks assumed through securitization and re-securitization exposures. The process in place to monitor the credit quality of our securitization and re-securitization exposures involves, among other things, reviewing the performance data of the underlying assets. We affirm our ratings each quarter and formally confirm or assign a new rating at least annually. For further details on our activities to manage risks, refer to the Risk management section.

Below is a description of our activities with respect to certain significant unconsolidated structured entities. For a complete discussion of our interests in consolidated and unconsolidated structured entities, refer to Note 8 of our 2025 Annual Consolidated Financial Statements.

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Multi-seller conduits

We administer multi-seller conduits which are used primarily for the securitization of our clients’ financial assets. Our clients primarily use our multi-seller conduits to diversify their financing sources and to reduce funding costs by leveraging the value of high-quality collateral. The conduits offer us a favourable revenue stream and risk-adjusted return.

We provide services such as transaction structuring, administration, backstop liquidity facilities and credit enhancements to the multi-seller conduits. Revenue for all such services amounted to $383 million during the year (October 31, 2024 – $437 million).

Our total commitment to the conduits in the form of backstop liquidity and credit enhancement facilities is shown below. The total committed amount of these facilities exceeds the total amount of the maximum assets that may have to be purchased by the conduits under the purchase agreements. As a result, the maximum exposure to loss attributable to our backstop liquidity and credit enhancement facilities is less than the total committed amounts of these facilities.

Liquidity and credit enhancement facilities	Table 37
	2025						2024
---	---	---	---	---	---	---	---	---	---	---	---
As at October 31 (Millions of Canadian dollars)	Notional of<br>committed<br>amounts<br><br>(1)		Allocable<br>notional<br>amounts		Maximum<br>exposure<br>to loss<br><br>(2)		Notional of<br>committed<br>amounts <br>(1)		Allocable<br>notional<br>amounts		Maximum<br>exposure<br>to loss <br>(2)
Backstop liquidity facilities	$	64,359	$	60,433	$	60,642	$	56,511	$	53,011	$ 53,247
Credit enhancement facilities <br>(3)		3,926		3,926		3,926		3,500		3,500	3,500
Total	$	68,285	$	64,359	$	64,568	$	60,011	$	56,511	$ 56,747
(1)	Based on total committed financing limit.
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(2)	Not presented in the table above are derivative assets with a fair value of $23 million (October 31, 2024 – $32 million) which are a component of our total maximum exposure to loss from our interests in the multi-seller conduits. Refer to Note 8 of our 2025 Annual Consolidated Financial Statements for more details.
---	---
(3)	Includes $32 million (October 31, 2024 – $18 million) of financial standby letters of credit.
---	---

As at October 31, 2025, the notional amount of backstop liquidity facilities we provide increased $8 billion or 14% from last year, primarily due to an increase in outstanding securitized assets of the multi-seller conduits. The notional amount of credit enhancement facilities we provide increased $426 million or 12% from last year, primarily due to an increase in the amount required by the conduits.

Maximum exposure to loss by asset type	Table 38
	2025			2024
---	---	---	---	---	---	---
As at October 31 (Millions of dollars)	US	C	Total C	US	C	Total C
Outstanding securitized assets
Auto and truck loans and leases
Consumer loans
Credit cards
Dealer floor plan receivables
Equipment receivables
Fleet finance receivables
Commercial loans
Residential mortgages
Student loans
Trade receivables
Transportation finance
Total
Canadian equivalent

All values are in US Dollars.

Our overall exposure increased $8 billion or 14% compared to last year, primarily due to an increase in the outstanding securitized assets of the multi-seller conduits. All of the multi-seller conduits transactions were internally rated A- or above. All transactions funded by the unconsolidated multi-seller conduits are internally rated using a rating system as outlined in the internal ratings map in the credit risk section.

Multiple independent debt rating agencies review all of the transactions in the multi-seller conduits. Transactions financed in the U.S. multi-seller conduits are reviewed by Moody’s Investors Service (Moody’s‡), Standard & Poor’s (S&P‡) and Fitch Ratings (Fitch‡). Transactions in two of the Canadian multi-seller conduits are reviewed by DBRS Morningstar (DBRS‡) and Moody’s while one of the Canadian multi-seller conduits is also reviewed by S&P. Each applicable rating agency also reviews ongoing transaction performance on a monthly basis and may publish reports detailing portfolio and program information related to the conduits.

As at October 31, 2025, the total asset-backed commercial paper (ABCP) issued by the conduits amounted to $43 billion, an increase of $6 billion or 16% from last year, primarily due to higher client usage. The rating agencies that rate the ABCP rated 100% (October 31, 2024 – 100%) of the total amount issued within the top ratings category.

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Structured finance

We provide liquidity and/or credit facilities to certain municipal bond tender option bond trusts in which we have an interest but do not consolidate because the residual certificates issued by the tender option bond trusts are held by third parties. As at October 31, 2025, our maximum exposure to loss from these unconsolidated municipal bond tender option bond trusts was $5 billion (October 31, 2024 – $4 billion).

We provide senior warehouse financing to unaffiliated structured entities that are established by third parties to acquire loans and issue term collateralized loan obligations (CLO). Subordinated financing is provided during the warehouse phase by either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorbs losses prior to ourselves as the senior lender. A portion of the proceeds from the sale of the term CLO is used to fully repay the senior warehouse financing that we provide. As at October 31, 2025, our maximum exposure to loss associated with the outstanding senior warehouse financing facilities was $1,319 million (October 31, 2024 – $704 million). The increase in our maximum exposure to loss from last year was driven by the addition of new financing facilities partially offset by the repayment of existing financing facilities.

We provide senior financing to unaffiliated structured entities that are established by third parties to acquire loans. Subordinated financing is provided by either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorb losses prior to ourselves as the senior lender. These facilities tend to be longer in term than the CLO warehouse facilities and benefit from credit enhancement designed to cover a multiple of historical losses. As at October 31, 2025, our maximum exposure to loss associated with the outstanding senior financing facilities was $14 billion (October 31, 2024 – $8 billion). The increase in our maximum exposure to loss from last year was driven by the addition of new financing facilities partially offset by the repayment of existing financing facilities.

Non-RBC managed investment funds

We invest in hedge funds primarily to provide clients with desired exposures to reference funds. As we make investments in the reference funds, exposures to the funds are simultaneously transferred to clients through derivative transactions. Our maximum exposure to loss in the reference funds is limited to our investments in the funds. As at October 31, 2025, our maximum exposure to loss was $3 billion (October 31, 2024 – $3 billion), largely flat from last year.

We also provide liquidity facilities to certain third-party investment funds. The funds issue unsecured variable-rate preferred shares and invest in portfolios of tax-exempt bonds. As at October 31, 2025, our maximum exposure to loss on these funds was $954 million (October 31, 2024 – $948 million), largely flat from last year.

Third-party securitization vehicles

We hold interests in certain unconsolidated third-party securitization vehicles, which are structured entities. We, as well as other financial institutions, are obligated to provide funding to these entities up to our maximum commitment level and are exposed to credit losses on the underlying assets after various credit enhancements. As at October 31, 2025, our maximum exposure to loss in these entities was $26 billion (October 31, 2024 – $21 billion). The increase in our maximum exposure to loss compared to last year reflects an increase in client activity with third-party securitization vehicles. Interest and non-interest income earned in respect of these investments was $878 million (October 31, 2024 – $698 million).

Other

Other unconsolidated structured entities include managed investment funds, alternative asset entities, arrangements to pass credit risk to third parties, credit investment products and tax credit funds. Refer to Note 8 of our 2025 Annual Consolidated Financial Statements for more details regarding our other unconsolidated structured entities.

Guarantees, retail and commercial commitments

We provide our clients with guarantees and commitments that expose us to liquidity and funding risks. Our maximum potential amount of future payments in relation to our commitments and guarantee products as at October 31, 2025 amounted to $630 billion compared to $551 billion last year. The increase compared to last year was primarily driven by growth in other commitments to extend credit and sponsored member guarantees. Refer to Liquidity and funding risk section and Note 23 of our 2025 Annual Consolidated Financial Statements for details regarding our guarantees and commitments.

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Risk management

We are in the business of managing the risks inherent to the financial services industry as we aim to create maximum value for our shareholders, clients, employees and communities. The ability to manage risk is a core competency of the bank and is supported by our risk-aware culture and risk management approach. Our view of risks is dynamic and reflects the pace of change in the financial services industry and in the markets where we operate or have clients and counterparties.

Overview

Our risk management principles set an overall tone for balancing risk-reward trade-offs with the intention of ensuring the long-term viability of our organization.

These risk management principles also are integral to allowing RBC to preserve and reinforce our strong risk-aware culture and maintain a consistently ethical approach to conducting business.

Risk management principles

•	Assess the impact of risks arising from choosing and executing a strategy while effectively balancing risk and reward to enable sustainable growth.
•	Collectively share the responsibility for risk management.
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•	Undertake only risks we understand and make thoughtful and future-focused risk decisions, taking environmental and social considerations into account.
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•	Always uphold our Purpose and vision, and consistently abide by our values and Code of Conduct as well as applicable laws, regulations and regulatory expectations to maintain our reputation and the trust of our clients, colleagues and communities.
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•	Maintain a healthy and robust control environment to protect our stakeholders.
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•	Use judgment and common sense.
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•	Always be operationally prepared and financially resilient for a potential crisis.
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The dynamic nature of the financial services industry, and technological innovation, necessitate that our processes, tools and practices are continuously improving and responding to the changing landscape and emerging risks. We seek to accomplish this through an effective and evolving risk management approach. Our approach to managing risks is organized around the risk management lifecycle, including defining and enabling, identifying and assessing, managing and mitigating, aggregating and reporting, as well as the governance of the significant risks faced by the organization. The boundaries of the Board-approved risk appetite seek to ensure that risk-taking activities and exposures are aligned with the overall risk posture of the bank. We seek to ensure that our business activities and transactions provide an appropriate balance of return for the risks assumed and the costs incurred. Our organizational design and governance processes are structured with the intent of maintaining the independence of the second line of defence, performed primarily by Group Risk Management (GRM) and Regulatory Compliance, and are intended to contribute to an effective control environment across RBC.

Principal Risks

We define risk as the potential vulnerabilities in the short-, medium- or long-term that may impact our financial results, financial and operational resilience, reputation, business model or strategy. Risk can be realized through losses or an undesirable outcome with respect to volatility of earnings in relation to expected earnings, capital adequacy or liquidity. Our Principal Risks reflect the key risks that most significantly affect the achievement of our strategic objectives and include credit, market, liquidity, insurance, operational, compliance, reputation and strategic risks. The classification of our Principal Risks provides a common language and foundation for the broader risk taxonomy and enables a disciplined identification and assessment of risks. There are certain activities that we undertake that will give rise to several risks. There are also certain risks that are transverse (e.g., compliance, climate and conduct risks) that can impact or manifest in other risk types.

Enterprise risk management

Under the oversight of the Board and senior management, the Enterprise Risk Management Framework (ERMF) provides an overview of our enterprise-wide programs for managing risk, including identifying, assessing, measuring, controlling, monitoring and reporting on the significant risks that face the organization.

Risk governance

We seek to manage risk effectively and strategically, and to ensure that risk appetite, business strategies and risk-taking activities are aligned across the enterprise. We have an effective and well-established risk governance framework in place that seeks to ensure risks impacting our businesses are identified, appropriately categorized, assessed, managed and, where applicable, communicated to the Board in a timely manner. This framework is maintained in alignment with the expectations of OSFI, the Basel Committee on Banking Supervision’s (BCBS) corporate governance principles and the requirements and expectations of other regulators in the jurisdictions in which we conduct business. The Board oversees the implementation of our risk management framework, while employees at all levels of the organization are responsible for managing the day-to-day risks that arise in the context of their mandates. As illustrated below, we use the three lines of defence governance model that helps to enforce a clear segregation of duties so that risks are appropriately and adequately managed throughout the enterprise to achieve our strategic objectives.

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Risk appetite

Effective risk management helps protect us from unacceptable losses or undesirable outcomes with respect to our earnings volatility, concentration, capital adequacy or other Principal Risks while supporting and enabling our overall business strategy. It requires the clear articulation of our risk appetite, which is the amount and type of risk that we are able and willing to accept in the pursuit of our business objectives. Risk appetite reflects our self-imposed upper bound to risk-taking, set at levels inside of regulatory limits and constraints, and influences our risk management philosophy, Code of Conduct, business practices and resource allocation. It provides clear boundaries and sets an overall tone for balancing risk-reward trade-offs intended to ensure the long-term viability of the organization.<br><br>Our risk appetite is integrated into our strategic, financial and capital planning processes, as well as ongoing business decision-making processes, and is reviewed and approved annually by the Board.<br><br>Our Enterprise Risk Appetite Framework (ERAF) outlines the foundational aspects of our approach to risk appetite, articulates our quantitative and qualitative risk appetite statements and their supporting measures and associated constraints, which can be applied at the enterprise, business segment, business unit and legal entity level, and describes our requirements and expectations to embed effective risk appetite practices throughout the organization.
Risk appetite statements
---	---
Quantitative statements	Qualitative statements
•<br><br>Manage earnings volatility and exposure to future losses under normal and stressed conditions.<br><br><br><br>•<br><br>Avoid excessive concentrations of risk.<br><br><br><br>•<br><br>Ensure capital adequacy and sound management of liquidity and funding risk.<br><br><br><br>•<br><br>Ensure sound management of operational and regulatory compliance risk.<br><br><br><br>•<br><br>Maintain strong credit ratings and a risk profile in the top half of our peer group.	•<br><br>Always uphold our Purpose and vision and consistently abide by our values and Code of Conduct to maintain our reputation and the trust of our clients, colleagues and communities.<br><br><br><br>•<br><br>Undertake only risks we understand. Make thoughtful and future-focused risk decisions, taking environmental and social considerations into account.<br><br><br><br>•<br><br>Assess the impact of the risks arising from choosing and executing a strategy while effectively balancing risk and reward to enable sustainable growth.<br><br><br><br>•<br><br>Maintain a healthy and robust control environment to protect our stakeholders.<br><br><br><br>•<br><br>Always be operationally prepared and financially resilient for a potential crisis.

The allocation of our risk appetite and Board-delegated authorities across the bank is supported by the establishment of management-delegated authorities and/or risk limits. These delegated authorities or risk limits represent the maximum level of risk permitted for a line of business, entity, portfolio, individual or group and are used to govern ongoing operations. Risk posture, the anticipated shift in risk profile as a result of changes in objectives, strategies and external factors, is used to provide insights on key areas that may require management attention to better enable strategies to be executed successfully within our risk appetite.

Risk measurement

Quantifying risk is a key component of our enterprise-wide risk and capital management processes. Risk measurement and planning processes are integrated across the enterprise, especially with regard to forward-looking projections and analyses, including but not limited to, stress testing, recovery and resolution planning and credit provisioning.

Certain risks, such as credit, market, liquidity and insurance risks, can be more easily quantified than others such as operational, strategic, compliance or related reputational risks. For the risks that are more difficult to quantify, greater emphasis is placed on qualitative risk factors and assessment of activities to gauge the overall level of risk. In addition, judgmental risk measures and techniques such as stress testing, and scenario and sensitivity analyses can be used to assess and measure risks, and we are continually evolving our risk measures and techniques to manage our risks. Our primary methods for measuring risk include:

•	Quantifying expected loss: losses that are statistically expected to occur as a result of conducting business in a given time period;
•	Quantifying unexpected loss: an estimate of the deviation of actual earnings from expected earnings, over a specified time horizon;
---	---
•	Stress testing evaluates, from a forward-looking perspective, the potential effects of a set of specified changes in risk factors, corresponding to exceptional but plausible adverse economic and financial market events. RBC’s stress testing programs are performed at different levels of the organization (enterprise-wide, subsidiary-level and risk-level) to allow relevant risk profiles and concentrations to be reflected in scenario design, analysis and decision-making; and
---	---
•	Back-testing: the realized values are compared to the parameter estimates that are currently used in an effort to ensure the parameters remain appropriate for regulatory and economic capital calculations.
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Stress testing

Stress testing is an important component of our risk management framework. Stress testing results are used for:

•	Assessing the viability of long-term business plans and strategies;
•	Monitoring our risk profile relative to our risk appetite in terms of earnings and capital at risk;
---	---
•	Setting risk limits;
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•	Identifying key risks to, and potential shifts in, our capital and liquidity levels, as well as our financial position;
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•	Enhancing our understanding of available mitigating actions in response to potential adverse events; and
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•	Assessing the adequacy of our capital and liquidity levels.
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The enterprise-wide stress tests evaluate key balance sheet, income statement, leverage, capital and liquidity impacts arising from risk exposures and changes in earnings across a range of scenarios and severities over a multi-year horizon. Generally, the stress testing scenarios evaluate global recessions, equity market changes, elevated debt levels, changes in interest rates, real estate price corrections, and shocks to credit spreads and commodity markets, among other factors. During our fiscal 2025 stress testing exercises, we addressed several top and emerging risks including but not limited to the increase in trade and tariff uncertainties, geopolitical tensions, changing interest rates, currency shocks, cyber threats and climate risks with a focus on the impacts of these risks on revenue, losses, net income, liquidity and capital projections.

Separately, ongoing stress testing and scenario analyses within specific risk types are performed, such as market risk (including Interest Rate Risk in the Banking Book (IRRBB)), liquidity risk, retail and wholesale credit risk, operational risk and insurance risk, which supplement and support our enterprise-wide analyses. Results from these risk-specific programs are used in a variety of decision-making processes including risk limit setting, portfolio composition evaluation, risk appetite articulation and business strategy implementation.

In addition to ongoing enterprise-wide and risk-specific stress testing, we use ad hoc and reverse stress testing to deepen our knowledge of the risks we face. Ad hoc stress tests are one-off analyses used to investigate developing market conditions or to stress a particular portfolio in greater depth. Reverse stress tests aim to reverse-engineer scenarios that might lead to a particular severe outcome, such as bank non-viability, and are used in resolution & recovery planning and to improve our understanding of risk/return boundaries.

In addition to internal stress tests, we participate in regulatory stress testing exercises, on a periodic basis, across several jurisdictions.

Risk control

Our enterprise-wide risk management approach is supported by a comprehensive set of risk controls that are defined in our ERMF. The ERMF serves as the foundation for our approach to risk management and promotes RBC’s risk management principles, approach and governance. It further sets the expectations for the development and communication of policies, the establishment of risk appetite, delegated risk approval authorities and risk limits. Enterprise-wide control programs are an important risk control mechanism that seek to establish sufficient risk diversification and risk/return optimization.

The ERMF, the ERAF and the Enterprise Culture and Conduct Risks Framework (ECCRF) together with risk-specific frameworks supported by risk-specific policies act as RBC’s governance structure and manage RBC’s Principal Risks and related risks across the organization.

Risk appetite, risk approval authorities and risk limits

The enterprise risk appetite is supported by risk approval authorities delegated by the Board to the President & Chief Executive Officer (CEO), the CRO and/or the CFO of RBC, providing thresholds for escalation to the Risk Committee of the Board for awareness and/or approval. To facilitate day-to-day business operations, the CRO (or delegate) may delegate risk approval authorities or establish risk limits to other risk areas of the Bank including, but not limited to subsidiaries and branches. These represent the maximum level of risk permitted for an entity, branch, line of business, portfolio, individual or other groups.

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Risk review and approval processes

Initial and subsequent risk review and approval processes for products, services, initiatives and projects provide an important enterprise-wide risk management mechanism. They are established based on the nature, size and complexity of the risk, and include a formal review and approval by an individual, group or committee that is independent from the originator. The review and approval requirements of risks related to projects and initiatives or new products and services are set out in enterprise-level risk policy documents.

Risk monitoring and reporting

Enterprise and business segment level risk monitoring and internal reporting are critical components of our enterprise risk management program and support the ability of senior management and the Board to effectively perform their risk management and oversight responsibilities. The ongoing monitoring of our risk profile, and the organization’s risk exposure against our risk appetite, enables proactive risk management and oversight. It seeks to ensure that our businesses operate within established and approved risk appetite; detect areas where business activity or growth may be constrained in the future; identify situations where risk-taking may be overly conservative or aggressive; enable senior management to assess the impact of stress and unanticipated events; and inform the development and implementation of risk mitigation strategies to operate within risk appetite. At each meeting of the Risk Committee of the Board, the CRO provides a risk update that has been reviewed by senior management, and which includes, among others, top and emerging risks, industry trends or other notable items. On a quarterly basis, we provide our Enterprise Risk Report to senior management and the Risk Committee of the Board which includes, among others, top and emerging risks, risk profile relative to our risk appetite, portfolio quality metrics and a range of risks we face along with an analysis of the related issues, key trends and, when required, management actions. On an annual basis, we provide a benchmarking review to the Board which compares our performance to peers across a variety of risk metrics and includes a composite risk scorecard which provides an objective measure of our ranking relative to the peer group. In addition to our regular risk monitoring, other risk-specific presentations are provided to, and discussed with, senior management and the Board on top and emerging risks or changes in our risk profile. In addition, we publish external reports on risk matters to comply with regulatory requirements.

Internal risk controls management

The monitoring, assessing and testing of internal controls is an important part of our risk management approach to evaluate how effective the controls are in reducing the risks they are designed to mitigate. Our risk control governance structure is outlined in the Enterprise Operational Risk Management Framework and supporting policies which establish a consistent, principles-based approach to the identification of risk and the development and management of internal controls to mitigate risks. They also define minimum roles and responsibilities across the three lines of defence that are applicable across all of RBC’s Principal Risks and sub-risks.

Issue management is a risk management capability that facilitates the identification, rationalization and management of an unacceptable risk exposure due to an internal control absence or failure in either design or operation. Our enterprise issue management program has a standardized set of parameters for issue management, including a universal definition of issues, sources, scope, taxonomies and severity of ratings of issues. Our approach to the issue management program is tailored to individual issue sources across the three lines of defence and to specific needs of each business segment and functional unit, including local governance processes, roles and responsibilities and regulatory expectations.

Escalation of risks and events

We actively monitor and manage risks inherent to our activities and consequently maintain processes and controls to manage those activities. However, risk events may arise due to control failures or circumstances beyond our established processes and/or controls, leading to elevated or unmitigated risks. Timely escalation of risks or events allows for appropriate awareness and action (where required) by senior management, relevant committees and the Board, thereby mitigating or minimizing potential impacts. All three lines of defence have processes in place that are intended to enable effective communication and escalation of risks and events.

Top and emerging risks

An important component of our risk management approach is to seek to ensure that top and emerging risks, as they evolve, are identified, managed and incorporated into our existing risk management assessment, measurement, monitoring and escalation processes and are addressed in our risk frameworks and policies. These practices are intended to ensure a forward-looking risk assessment is maintained by management in the course of business development and as part of the execution of ongoing risk oversight responsibilities. Top and emerging risks are discussed by senior management and the Board on a regular basis.

We have developed supplementary internal guidance to support enterprise-wide identification and assessment of all material risks, including those that are not readily apparent. Top and emerging risks encompass those that could materially impact our financial results, financial and operational resilience, reputation, business model or strategy, as well as those that may materially impact us as the risks evolve. The following represents our top and emerging risks:

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Top & emerging risks	Description
Business and economic<br>conditions<br><br><br><br>	Our financial results are affected to varying degrees by the general business and economic conditions in the geographic regions in which we operate. These conditions may include factors such as: economic growth or contraction trends, consumer saving and spending habits; consumer and corporate borrowing and repayment patterns; unemployment rates; the differing economic trajectories among nations across the globe; global tensions and geopolitical uncertainty and conflicts; the level of business investment and overall business sentiment; trade policy developments; the emergence of a new pandemic outbreak or other health crisis; the level of government spending, including developments relating to tariffs and trade agreements, as well as fiscal and monetary policy; the level of activity and volatility of the financial markets; disruptions to energy and other commodity markets; competitiveness; supply chain challenges and labour shortages; the evolution of inflationary pressures; and possible stagflation or deflation. Moreover, interest rate changes and actions taken by central banks to manage inflation, deflation or the broader economy have implications for us. Our financial results are sensitive to changes in interest rates, as described in the Government fiscal, monetary and other policies section.<br><br><br><br>For example, certain sectors, economies and markets have been adversely impacted by uncertainty generated by geopolitical shocks, such as protectionist trade policy developments, which continue to evolve. In addition, governments may face increasing fiscal challenges due to high debt-loads, ongoing deficits, higher spending pressures, and changing demographic and immigration trends. These fiscal challenges may limit future crisis response tools for governments and lead to higher taxes, spending cuts and adverse economic, market, credit and/or liquidity impacts. Moreover, monetary policy uncertainty, due to central bank challenges through a period of potential trade- or supply-related inflationary pressures, could increase economic, credit and market risks.<br><br><br><br>A slowdown in economic growth or an economic downturn could adversely impact employment rates and household incomes, consumer spending, housing prices, corporate earnings and business investment, all of which could adversely affect our business, including, but not limited to, the demand for our loan and other products, and result in lower earnings and higher credit losses.<br><br><br><br>There are also emerging risks related to technological developments and wealth and income inequality, as well as the broader implications of changing demographics and immigration, which could impact the labour market, productivity, the housing market, inflation, demand and consumer trends, and potentially have widespread societal and government policy implications.
Canadian housing and<br>household indebtedness<br><br><br><br>	Canadian housing and household indebtedness risks remain heightened given the current uncertain economic environment and affordability challenges. Risks around the ability of Canadian households to meet debt obligations could escalate if interest rates rise materially, if there is a resurgence in inflation or if the job market deteriorates significantly amidst economic and other geopolitical uncertainty, potentially resulting in, among other things, higher credit losses or reduced housing market activity. Moreover, elevated interest rates, slowing economic growth or an economic downturn could further adversely impact housing market activity and housing prices, which could push <br>loan-to-value<br> (LTV) ratios higher and further increase credit losses in impacted regions.<br><br><br><br>While interest rates have started to decline, Canadian real estate activity generally remains soft, with some markets showing signs of recovery. Challenging affordability conditions and an increase in condominium supply and construction costs may have an adverse impact on future real estate investment and demand. The combination of multiple challenges, including but not limited to elevated home prices, high debt levels, an increasingly high cost of living, a rising unemployment rate and government policy uncertainty (e.g., immigration policy), may make key Canadian housing markets particularly vulnerable to a potential economic shock or financial instability.
Information technology,<br>cyber and third-party risks<br><br><br><br>	Information technology (IT) risk, cyber risk and third-party risk remain top risks, not only for the financial services sector, but for other industries worldwide. Geopolitical tensions have increased the risk of nation state actors attacking critical infrastructure, including banks and critical third parties. We continue to be subject to the heightened inherent risk of cyberattacks, data breaches, cyber extortion and similar compromises, due to: (i) the size, scale and global nature of our operations; (ii) our heavy reliance on the internet to conduct <br>day-to-day<br> business activities; (iii) our intricate technological infrastructure; and (iv) our reliance on third-party service providers. Our potential exposure to these risks increases as we continue to partner with third-party service providers and adopt new business models and technologies (e.g., cloud computing, <br>software-as-a-service<br> (SAAS), GenAI and machine learning). Threat actors gravitate towards vulnerabilities in an ecosystem, and the weakest link in the supply chain can be a supplier or third-party service provider that may not have sufficiently robust controls. Other key drivers of third-party risk include global economic pressures related to inflation, and concentration of suppliers and fourth parties (i.e., suppliers of our third-party providers) within the broader supply chain. Third-party providers critical to our operations are actively monitored for impacts on their ability to deliver services to us, including impacts resulting from fourth parties.<br><br><br><br>Ransomware threats continue to grow in sophistication and ransomware is being used to launch major supply chain attacks. Resulting implications could include business interruptions, client service disruptions, financial loss, theft of intellectual property and confidential information, litigation, enhanced regulatory attention and penalties, as well as reputational damage. Furthermore, the adoption of emerging technologies, such as cloud computing; AI, including GenAI; and robotics, call for continued focus and investment to manage risks effectively. For more details on how we are managing these risks, refer to the Operational risk section.

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Top & emerging risks	Description
Geopolitical uncertainty<br><br><br><br>	Elevated geopolitical risks and tensions, particularly from global fragmentation, U.S. policy uncertainty, and recent and future trade-related developments, could continue to impact economies, markets and our financial and <br>non-financial<br> risks.<br><br><br><br>Tensions remain elevated between China and the U.S. and its allies over issues, including trade, technology, human rights, Taiwan, Hong Kong and Macau. Moreover, these trade tensions produce additional vulnerabilities to the Canadian economy given the country’s trading relationships with the U.S. and China, Canada’s two largest trading partners. Tensions between China and its neighbours over territorial claims, and the prospect of even closer relations between China, Russia, Iran and North Korea, add further global and economic uncertainty. Additionally, continued weakening in the Chinese economy could negatively impact global economic growth.<br><br><br><br>The Russia-Ukraine conflict has continued to produce turmoil in the geopolitical landscape, with ongoing impacts to the global economy and markets. Despite recent diplomatic efforts, the duration and path of the conflict remains uncertain and could continue to exacerbate global tensions, energy and other commodity shortages, supply chain disruptions, inflationary pressures, weakening sentiment and growth prospects, market volatility, cyberattacks and the proliferation of sanctions and trade measures. In particular, European countries continue to face uncertainty given their potential exposure to the conflict and to U.S. foreign policy changes, including through the countries’ military and trade relationships with impacted regions.<br><br><br><br>Geopolitical tensions in the Middle East and other regions could also add to economic and market uncertainties. For example, ongoing tensions related to Iran’s nuclear program or those between Israel and Iran and its proxies could broaden or escalate. This could destabilize global security, markets and economic growth, along with key commodity markets. In addition, an uncertain geopolitical or economic environment could lead to increases in polarization, social unrest or terrorism, each of which could have direct or indirect impacts to the bank.<br><br><br><br>More broadly, the future of global trade remains uncertain, as countries look to decrease reliance on the global supply chain and nations with differing values. Increased global polarization; protectionist measures, including protectionist trade policies, the imposition of tariffs and the re-negotiation of trade agreements; and economic nationalism could reshape global alliances and financial systems as the supply of critical goods of economic and national importance (e.g., energy, critical minerals, semiconductors) remains one of the top priorities of governments. Furthermore, a volatile geopolitical environment could generate an increase in espionage and foreign interference activities that indirectly or directly impact the financial services sector. We will continue to monitor these developments and others and will assess the implications they have on us.
Environmental and social (E&S) risk<br><br><br><br>	We, like other organizations, are subject to regulatory requirements and stakeholder expectations to address E&S risks.<br><br><br><br>E&S risks are unique and transverse in nature and may impact our Principal Risks in different ways and to varying degrees, including but not limited to strategic, operational, credit and compliance risks.<br><br><br><br>For details on how we are managing E&S risk, refer to the Overview of other risks – Environmental and social risk section and the Legal and regulatory environment risk section.
Digital disruption<br>and innovation<br><br><br><br>	As the demand for digital banking services grows, the need to meet the rapidly evolving needs of clients and compete with traditional and <br>non-traditional<br> competitors has increased our strategic and reputation risks. Additional risks continue to emerge as demographic trends, evolving client expectations, the increased power to analyze data and the emergence of disruptors are creating competitive pressures across a number of sectors. Moreover, established technology companies, new competitors, digital assets and other products and regulatory changes continue to foster new business models that could challenge traditional banks and financial products. The regulatory landscape of digital assets, in particular as it relates to stablecoins, has evolved materially in the past year across multiple jurisdictions. RBC is closely monitoring and assessing emerging risks associated with wider adoption of stablecoins by the market and the related regulatory requirements. Finally, while the adoption of new technologies, such as AI (including GenAI) and machine learning, presents opportunities for us, it is resulting or could result in new and complex strategic, operational, regulatory, compliance and related reputational risks that would need to be managed effectively. RBC has established risk and governance processes to provide oversight and support in the implementation of AI use cases throughout the organization.
Privacy and data<br>related risks<br><br><br><br>	The protection and responsible use of Personal Information (PI) are critical to maintaining our clients’ trust. PI is information entrusted to RBC that identifies an individual or can be reasonably used to identify an individual and can relate to current, former and prospective clients, employees and contractors. In addition, the management and governance of our data also remains a top risk given the high value attributed to our data for the insights it can generate for clients and communities. Resulting implications from failing to manage data and privacy risks could include financial loss, theft of intellectual property and/or confidential information, litigation, enhanced regulatory attention and penalties, reputational damage and damaged client and employee trust. With the proliferation of AI, privacy regulators globally have begun issuing guidance around ensuring appropriate use of AI when processing personal information, in addition to guardrails around transparency and ensuring the rights of the individual are respected in the context of AI systems. Adherence to these guidelines and guardrails and trusted integration into existing privacy programs continues to be a focal area for RBC. For details on how we are managing these risks, refer to the Operational risk section.

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Top & emerging risks	Description
Regulatory changes<br> <br><br> <br>	The ongoing introduction of new or revised regulations requires enhanced focus across the organization on meeting additional or modified regulatory requirements and expectations across the multiple jurisdictions in which we operate. Regulatory reforms that have been implemented or are being implemented across multiple jurisdictions, such as in areas of digital and operational resilience, data and technology reforms, including AI, cyber security, capital, anti-money laundering and consumer protection continue to impact our operations and strategies. For more details, refer to the Overview of other risks – Legal and regulatory environment risk section.
Culture and conduct risks<br> <br><br> <br>	Our Purpose, vision, values and risk management principles define RBC’s culture. We demonstrate our culture through our conduct – the behaviours, decisions and actions or inactions of the organization and our employees. Culture and conduct risks are considered top risks for the financial services industry due to the impact that our choices, behaviours and overall risk governance can have on outcomes for our clients, shareholders and other stakeholders. We embed client considerations into our decision-making processes and continue to focus on the fair treatment of clients which also aligns with regulatory direction. We seek to be responsive to evolving employee needs while expecting employees to always act with integrity.<br> <br><br> <br>Regulators continue to focus on conduct risks, and heightened expectations generally from regulators could lead to investigations, remediation requirements, higher compliance costs and enforcement actions and fines, and potential criminal prosecutions or imposition of sanctions, which may involve prohibitions or restrictions on some of our activities. While we take steps to continue to strengthen our conduct practices and prevent and detect risk outcomes that are not in keeping with our responsibilities to our stakeholders, such outcomes may not always be prevented or detected. Additionally, RBC continues to focus efforts on enhancing and fostering a strong risk culture. A strong risk culture reinforces risk-aware mindsets, competencies and behaviours by promoting responsible risk-taking decisions across the bank. For more details, refer to the Culture and conduct risk section.
The shaded text along with the tables specifically marked with an asterisk (*) in the following sections of the MD&A represent our disclosures on credit, market and liquidity and funding risks in accordance with IFRS 7<br>, Financial Instruments: Disclosures<br>, and include discussion on how we measure our risks and the objectives, policies and methodologies for managing these risks. Therefore, these shaded text and marked tables represent an integral part of our 2025 Annual Consolidated Financial Statements.
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Principal Risks
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Credit risk
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Credit risk is the risk of loss associated with an obligor’s potential inability or unwillingness to fulfill its contractual obligations on a timely basis and may arise directly from the risk of default of a primary obligor (e.g., issuer, debtor, counterparty, borrower or policyholder), indirectly from a secondary obligor (e.g., guarantor or reinsurer), and/or through off-balance sheet exposures, contingent credit risk, associated credit risk and/or transactional risk exposures. Credit risk includes counterparty credit risk arising from both trading and non-trading activities. Exposure to credit risk occurs any time funds are extended, committed or invested through an actual or implied contractual agreement.

The responsibility for managing credit risk is shared broadly across the organization following the three lines of defence governance model. The allocation of the Board approved credit risk appetite is supported by the establishment of risk approval authorities and risk limits, delegated by the Board to the President & CEO and CRO. Credit transactions in excess of these authorities must be approved by the Risk Committee of the Board. To facilitate day-to-day business activities, the CRO has been empowered to further delegate credit risk approval authorities to individuals within GRM, the business segments and functional units, as deemed necessary.

We balance our risk and return by setting the following objectives for the management of credit risk:

•	Ensuring credit quality is not compromised for growth;
•	Managing credit risks in transactions, relationships and portfolios;
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•	Avoiding excessive concentrations in correlated credit risks;
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•	Using our credit risk rating and scoring systems or other approved credit risk assessment or rating methodologies, policies and tools;
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•	Pricing appropriately for the credit risk taken;
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•	Detecting and preventing inappropriate credit risk through effective systems and controls;
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•	Applying consistent credit risk exposure measurements;
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•	Ongoing credit risk monitoring and administration;
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•	Transferring credit risk to third parties where appropriate through approved credit risk mitigation techniques (e.g., sale, hedging, insurance, securitization); and
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•	Avoiding activities that are inconsistent with our values, Code of Conduct or policies.
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The Enterprise Credit Risk Management Framework (ECRMF) provides an overview of our approach to the mana gemen t of c redit r isk including principles, methodologies, systems, roles and responsibilities, reports and controls. Additional supporting policies exist that are designed to provide further clarification of roles and responsibilities, acceptable practices, limits and key controls within the enterprise.

Credit risk measurement

We quantify credit risk at both the individual obligor and portfolio levels to manage expected credit losses and minimize unexpected losses to limit earnings volatility and ensure we are adequately capitalized.

We employ a variety of risk measurement methodologies to measure and quantify credit risk for our wholesale and retail credit portfolios. The wholesale portfolio comprises businesses, sovereigns, public sector entities, banks and other financial institutions, as well as certain HNW individuals. The retail portfolio comprises residential mortgages, personal loans, credit cards and small business loans. Our credit risk rating systems are designed to assess and quantify the risk inherent in credit activities in an accurate and consistent manner. The resulting ratings and scores are then used for both client and transaction-level risk decision-making and as key inputs for our risk pricing, measurement and capital calculations.

Measurement of economic and regulatory capital

Economic capital, which is our internal quantification of risks in terms of capital needed to ensure solvency, is also used for limit setting. It is also used for internal capital adequacy and allocation of capital to the Insurance segment. Our methodology for allocating capital to our business segments, other than Insurance, is based on regulatory requirements. For further details, refer to the Capital management section.

In measuring credit risk to determine regulatory capital, two principal approaches are available: the Internal Ratings Based (IRB) Approach and the Standardized Approach as per OSFI’s CAR guideline. The IRB Approach allows both a full model-based approach referred to as the Advanced Internal Ratings Based (A-IRB) Approach and a more supervisory-based approach known as the Foundation Internal Ratings Based (F-IRB) Approach.

The Standardized Approach applies primarily to Wealth Management, including our City National wholesale portfolio, our Caribbean banking operations and certain non-mortgage retail portfolios acquired through the HSBC Canada transaction, and is based on risk weights prescribed by OSFI that are used to calculate RWA for credit risk exposure.

The A-IRB Approach, which applies to most of our retail and wholesale credit risk exposures (excluding F-IRB exposures discussed below), utilizes three key parameters which form the basis of our credit risk measures for both regulatory and economic capital:

•	Probability of default (PD): An estimated percentage that represents the likelihood of default within a given time period of an obligor for a specific rating grade or for a particular pool of exposure.
•	Exposure at default (EAD): An amount expected to be owed by an obligor at the time of default.
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•	Loss given default (LGD): An estimated percentage of EAD that is not expected to be recovered during the collections and recovery process following a default.
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These parameters are determined based primarily on historical experience from internal credit risk rating systems subject to supervisory standards and floors.

PD is estimated based on a long-run average of default rates for a specific rating grade or for a particular pool of exposure. The PD assigned to a default grade(s) or pools, consistent with the definition of default, is 100%.

EAD is estimated based on the current exposure to the obligor and the possible future changes in that exposure driven by factors such as the current utilization of approved limit. As with LGD, rates are estimated to reflect an economic downturn, with added conservatism to reflect data and statistical uncertainties identified in the modelling process.

Each credit facility is assigned an estimated LGD rate that is largely driven by factors that impact the extent of losses anticipated in the event the obligor defaults. These factors mainly include seniority of debt, collateral and the industry sector in which the obligor operates. Estimated LGD rates draw primarily on internal loss experiences. Where we have limited internal loss data, we also refer to appropriate external data to supplement the estimation process. LGD rates are estimated to reflect conditions that might be expected to prevail in a period of an economic downturn, with additional conservatism added to reflect data limitations and statistical uncertainties identified in the estimation process.

Estimates of PD, EAD and LGD are reviewed on an annual basis and updates are then validated by an independent validation team within the bank. In addition, quarterly monitoring and back-testing is performed by the estimation team. These ratings and risk measurements are used to determine our expected losses as well as economic and regulatory capital, setting of risk limits, portfolio management and product pricing.

The F-IRB Approach is a prescribed regulatory approach that must be used to determine RWA related to our exposures to all banks and large corporates defined as having total consolidated revenues in excess of $750 million annually. The F-IRB Approach uses the same PD parameter as the A-IRB Approach but requires the use of supervisory-prescribed EAD and LGD parameters.

Financial and regulatory measurement distinctions

Expected loss models are used for both regulatory capital (Basel) and accounting (IFRS) purposes. Under both models, expected losses are calculated as the product of PD, EAD and LGD. However, there are certain key differences under current Basel and IFRS reporting frameworks which could lead to significantly different expected loss estimates, including:

•	Basel PDs are based on <br>long-run<br> averages over an entire economic cycle. IFRS PDs are based on current conditions, adjusted for estimates of future conditions that will impact PD under probability-weighted macroeconomic scenarios.
•	Basel PDs consider the probability of default over the next 12 months. IFRS PDs consider the probability of default over the next 12 months only for instruments in stage 1. Expected credit losses for instruments in stage 2 are calculated using lifetime PDs.
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•	Basel LGDs are based on severe but plausible downturn economic conditions. IFRS LGDs are based on current conditions, adjusted for estimates of future conditions that will impact LGD under probability-weighted macroeconomic scenarios.
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For further details, refer to the Critical accounting policies and estimates section.

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Gross credit risk exposure

Gross credit risk is categorized as i) lending-related and other credit risk or ii) trading-related credit risk, and is calculated based on the Basel III framework. Under this method, EAD for all lending-related and other credit transactions and trading-related repo-style transactions is calculated before taking into account any collateral and is inclusive of an estimate of potential future changes to that credit exposure. EAD for derivatives is calculated inclusive of collateral in accordance with regulatory guidelines.

Lending-related and other credit risk includes:

•	Loans and acceptances outstanding, undrawn commitments, and other exposures, including contingent liabilities such as letters of credit and guarantees, debt securities carried at FVOCI or amortized cost and deposits with financial institutions. Undrawn commitments represent an estimate of the contractual amount that may be drawn upon at the time of default of an obligor.

Trading-related credit risk includes:

•	Repo-style transactions, which include repurchase and reverse repurchase agreements and securities lending and borrowing transactions. For repo-style transactions, gross exposure represents the amount at which securities were initially financed, before taking collateral into account.
•	Derivative amounts which represent the credit equivalent amount, as defined by OSFI as the replacement cost plus an <br>add-on<br> amount for potential future credit exposure, scaled by a regulatory factor. For further details on replacement cost and credit equivalent amounts, refer to Note 9 of our 2025 Annual Consolidated Financial Statements.
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Credit risk assessment

Wholesale credit risk

The wholesale credit risk rating system is designed to measure the credit risk inherent in our wholesale credit activities.

Each obligor is assigned a borrower risk rating (BRR), reflecting an assessment of the credit quality of the obligor. Each BRR has a PD calibrated against it. The BRR differentiates the riskiness of an obligor and represents our evaluation of the obligor’s ability and willingness to meet its contractual obligations on time over a three-year time horizon. The determination and assignment of BRRs is based on the evaluation of the obligor’s business and financial risks through fundamental credit analysis, as well as data-driven modelling. The determination of the PD associated with each BRR relies primarily on internal default history since 2006. PD estimates are designed to be a long-run average of our experience across the economic cycle in accordance with regulatory guidelines.

Our rating system is designed to stratify obligors into 22 grades. The following table aligns the relative rankings of our 22-grade internal risk ratings with the external ratings used by S&P and Moody’s.

Internal ratings map*	Table 39
Ratings	PD Bands
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	Business and Bank	Sovereign	BRR	S&P	Moody’s	Description
1	0.0000% – 0.0500%	0.0000% – 0.0150%	1+	AAA	Aaa	Investment Grade
2	0.0000% – 0.0500%	0.0151% – 0.0250%	1H	AA+	Aa1
3	0.0000% – 0.0500%	0.0251% – 0.0350%	1M	AA	Aa2
4	0.0000% – 0.0500%	0.0351% – 0.0450%	1L	AA-	Aa3
5	0.0000% – 0.0550%	0.0451% – 0.0550%	2+H	A+	A1
6	0.0551% – 0.0650%		2+M	A	A2
7	0.0651% – 0.0750%		2+L	A-	A3
8	0.0751% – 0.0850%		2H	BBB+	Baa1
9	0.0851% – 0.1030%		2M	BBB	Baa2
10	0.1031% – 0.1775%		2L	BBB-	Baa3
11	0.1776% – 0.3470%		2-H	BB+	Ba1	Non-investment<br> Grade
12	0.3471% – 0.6460%		2-M	BB	Ba2
13	0.6461% – 1.0620%		2-L	BB-	Ba3
14	1.0621% – 1.5520%		3+H	B+	B1
15	1.5521% – 2.2165%		3+M	B	B2
16	2.2166% – 4.5070%		3+L	B-	B3
17	4.5071% – 7.1660%		3H	CCC+	Caa1
18	7.1661% – 13.1760%		3M	CCC	Caa2
19	13.1761% – 24.9670%		3L	CCC-	Caa3
20	24.9671% – 99.9990%		4	CC	Ca
21	100%		5	D	C	Impaired
22	100%		6	D	C
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
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Counterparty credit risk

Counterparty credit risk is the risk that a party with whom we have entered into a financial or non-financial contract will fail to fulfill its contractual agreement and default on its obligation. It incorporates not only the contract’s current value, but also considers how that value can move as market conditions change. Counterparty credit risk usually arises from trading-related derivatives and repo-style transactions. Derivative transactions include forwards, futures, swaps and options, and can have underlying references that are either financial (e.g., interest rate, foreign exchange, credit or equity) or non-financial (e.g., commodities). For further details on our derivative instruments and credit risk mitigation, refer to Note 9 of our 2025 Annual Consolidated Financial Statements.

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Trading counterparty credit activities are undertaken in a manner consistent with the relevant requirements under enterprise Credit, Market and Model risk management frameworks and with approval in accordance with the appropriate delegated authorities.

The primary risk mitigation techniques for trading counterparty credit risk are close-out netting and collateralization. Close-out netting considers the net value of contractual obligations between counterparties in a default situation, thereby reducing overall credit exposure. Collateralization is when a counterparty pledges certain assets as collateral, which serves to mitigate credit exposure and losses in case of a default by the counterparty. The policies that we maintain in relation to the recognition of risk mitigation from these techniques incorporate such considerations as:

•	The use of standardized agreements such as the International Swaps and Derivatives Association Master Agreement and Credit Support Annex;
•	Generally restricting eligible collateral to high-quality liquid assets, primarily cash and highly-rated government securities, subject to appropriate haircuts; and
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•	The use of initial margin and variation margin arrangements in accordance with regulatory requirements and internal risk standards.
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Similarly, for securities finance and repurchase trading activity we mitigate counterparty credit risk via the use of standardized securities finance agreements, and by taking collateral generally in the form of eligible liquid securities.

We also mitigate counterparty credit risk through the use of central counterparties (CCPs). These highly-regulated entities intermediate trades between participating bilateral counterparties and mitigate credit risk through the use of initial and variation margin and the ability to net offsetting trades amongst participants. The specific structure and capitalization, including contingent capital arrangements, of individual CCPs are analyzed as part of assigning an internal counterparty credit risk rating and determining appropriate counterparty credit risk limits.

Wrong-way risk

Wrong-way risk is the risk that exposure to a counterparty is adversely correlated with the credit quality of that counterparty. There are two types of wrong-way risk:

•

Specific wrong-way risk, which exists when our exposure to a particular counterparty is positively correlated with the PD of the counterparty due to the nature of our transactions with them (e.g., loans collateralized by shares or debt issued by the counterparty or a related party). Specific wrong-way risk trades are permitted only on an exception basis and when explicitly pre-approved by GRM. Factors considered in reviewing such trades include the counterparty’s credit quality and collateral practices, the underlying exposure of the transaction and the existence of credit mitigation.

•

General wrong-way risk, which exists when our exposure to a particular counterparty is positively correlated with the PD of the counterparty due to general macroeconomic or market factors. General wrong-way risk can arise in various circumstances, depending on the transaction, collateral type, and the nature of the counterparty. We monitor general wrong-way risk using a variety of metrics including but not limited to correlation analysis between relevant macroeconomic or market factors and counterparty credit risk exposure.

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Retail credit risk

Credit scoring is the primary risk rating system for assessing obligor and transaction risk for retail exposures. Scoring models use internal and external data to assess and score borrowers, predict future performance and manage limits for existing loans and collection activities. Credit scores are one of the factors employed in the acquisition of new clients and management of existing clients. The credit score of the borrower is used to assess credit risk for each independent acquisition or account management action, leading to an automated decision or guidance for an adjudicator. Credit scoring improves credit decision quality, adjudication timeframes and consistency in the credit decision process and facilitates risk-based pricing. We seek to continuously improve our credit scoring and analytic capabilities by exploring client behavioural data and advanced analytical techniques to make sound credit decisions.

To arrive at a retail risk rating, borrower scores are categorized and associated with PDs for further grouping into risk rating categories. The following table maps PD bands to various summarized risk levels for retail exposures:

Internal ratings map*	Table 40
PD bands	Description
0.050% – 3.965%	Low risk
3.966% – 7.428%	Medium risk
7.429% – 99.99%	High risk
100%	Impaired/Default
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
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Credit risk mitigation

We seek to reduce our exposure to credit risk through a variety of means, including the structuring of transactions and the use of collateral.

Structuring of transactions

Specific credit policies and procedures set out the requirements for structuring transactions. Risk mitigants include the use of guarantees, collateral, seniority, LTV requirements and covenants. Product-specific guidelines set out appropriate product structuring as well as client and guarantor criteria.

Collateral

When we advance credit, we often require obligors to pledge collateral as security. Risk mitigation provided by collateral depends on the amount, type and quality of collateral taken. Specific requirements relating to valuation and administration of collateral are set out in our credit risk management policies.

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The types of collateral we use to secure credit or trading facilities within the bank vary. For example, our securities financing and collateralized over-the-counter (OTC) derivatives activities are primarily secured by cash and highly-rated, liquid government and agency securities. Wholesale lending to corporate clients is often secured by pledges of the assets of the borrower, including accounts receivable, inventory, equipment and commercial real estate. In Personal Banking, Commercial Banking and Wealth Management, collateral typically consists of a pledge over a real estate property, or a portfolio of debt securities and equities trading on a recognized exchange.

To manage our exposure effectively, we follow a comprehensive approach that combines property valuation, active portfolio management and oversight.

•	We employ a risk-based approach to property valuation. Property valuation methods include automated valuation models, which rely on market data such as comparable sales or regional price trends, and appraisals.
•	We continue to actively manage our mortgage portfolio and perform stress testing, based on a combination of increasing unemployment, rising interest rates and a downturn in real estate markets.
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•	We seek to be in compliance with regulatory requirements that govern residential mortgage underwriting practices, including LTV parameters and property valuation requirements.
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There were no significant changes regarding our risk management policies on collateral or to the quality of the collateral held during the period.

Credit risk approval

The Board, GE, GRC and other senior management committees work together to ensure the ECRMF and supporting policies, processes and procedures exist to manage credit risk and approve related credit risk limits. Reports are provided to the Board, the GRC, and senior executives to keep them informed of our risk profile, including significant credit risk issues, shifts in exposures and trending information, to ensure appropriate and timely actions can be taken where necessary. Our enterprise-wide credit risk policies set out the minimum requirements for the prudent management of credit risk in a variety of borrower, transactional and portfolio management contexts.

Transaction approval

Credit transactions are governed by our Enterprise Policy on Risk Limits and Risk Approval Authorities that captures the authorities and risk limits delegated to management as well as the Enterprise Policy on Credit Requirements and Rules, which outlines the minimum requirements for managing credit risk at the individual client relationship, transaction and portfolio levels. The Enterprise Policy on Credit Requirements and Rules is further supported by business and/or product-specific policies and guidelines as appropriate. Where a transaction exceeds senior management’s authorities, the approval of the Risk Committee of the Board is required.

Product approval

RBC’s proposals for credit products and services follow our Enterprise Client, Product and Suitability Risk Policy and are comprehens ive ly reviewed and approved under a product risk assessment process and are subject to product and suitability risk approval authorities which increase as the level of risk increases. New and amended products must be reviewed relative to all risk drivers, including credit risk. All existing products must be reviewed on a regular basis following a risk-based assessment approach.

Credit risk limits

The allocation of risk appetite and Board delegated authorities are supported by the establishment of risk limits which take both regulatory constraints and internal risk management judgment into account. Risk limits are established at the following levels: single name; regional, country and industrial sector (notional and economic capital); regulatory large exposure; product and portfolio; and underwriting and distribution. These limits apply across all businesses, portfolios, transactions and products.

We actively manage credit exposures and limits to ensure alignment with our risk appetite, to maintain our target business mix and to ensure that there is no undue concentration risk.

Concentration risk is defined as the risk arising from an overexposure in particular industry sectors, countries, or credit products within the portfolio, reflecting the potential for credit deterioration and default to be relatively highly correlated. Credit concentration limits are reviewed on a regular basis after considering business, economic, financial and regulatory environments.

Credit risk administration

Loan forbearance

In our overall management of borrower relationships, economic, legal or other reasons may necessitate forbearance to certain clients with respect to the original terms and conditions of their loans. We have specialized groups and formalized policies that direct the management of high risk, delinquent or defaulted borrowers. We strive to identify borrowers in financial difficulty early and modify their loan terms to minimize losses and assist clients in need. A forbearance agreement may be entered into with the borrower where we will forbear from enforcing on security in exchange for concessions made by the borrower and/or additional security provided by the borrower. Examples of concessions to borrowers may include rate reductions, payment deferrals, term extensions, covenant relief, extensions of matured facilities, amendments or restructuring of agreements, or relaxation of covenants, as applicable. The goal of a forbearance is to enhance our position in exchange for providing the borrower additional time to meet the terms and obligations of the loan agreement. For such loans, the appropriate remediation techniques are based on the specific borrower’s situation, our policy and the client’s willingness and capacity to meet the new or modified loan terms.

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Credit risk exposure by portfolio, sector and geography

The following table presents our credit risk exposures under the Basel regulatory defined classes and reflects EAD. The classification of our sectors aligns with our view of credit risk by industry.

Credit risk exposure by portfolio, sector and geography	Table 4<br>1
	As at
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	October 31<br> <br>2025															October 31<br> <br>2024
	Credit risk<br>(1), (2)								Counterparty credit risk<br>(5)							Credit risk (1), (2)								Counterparty credit risk (5)
	On-balance<br> <br>sheet amount			Off-balance sheet<br><br>amount<br>(3)					Repo-style<br> <br>transactions					Total<br> <br>exposure		On-balance<br> <br>sheet amount			Off-balance<br> sheet<br>amount (3)					Repo-style<br> <br>transactions				Total<br> <br>exposure
(Millions of Canadian dollars)			Undrawn			Other<br>(4)				Derivatives			Undrawn					Other (4)			Derivatives
Retail
Residential secured <br>(6)	$	514,623		$	132,502		$	–	$	–	$	–		$	647,125	$	498,014		$	124,743		$	–	$	–	$	–	$	622,757
Qualifying revolving <br>(7)		36,407			104,369			–		–		–			140,776		33,571			95,776			–		–		–		129,347
Other retail		57,003			22,522			164		–		–			79,689		53,257			21,530			162		–		–		74,949
Total retail	$	608,033		$	259,393		$	164	$	–	$	–		$	867,590	$	584,842		$	242,049		$	162	$	–	$	–	$	827,053
Wholesale
Agriculture	$	14,181		$	3,344		$	86	$	–	$	263		$	17,874	$	13,257		$	3,241		$	77	$	–	$	210	$	16,785
Automotive		14,188			9,602			677		–		1,053			25,520		14,424			9,605			639		–		1,454		26,122
Banking		96,268			3,674			1,797		97,585		32,577			231,901		87,601			3,187			2,967		91,791		32,949		218,495
Consumer discretionary		28,435			11,544			893		–		1,779			42,651		24,516			11,719			918		–		1,242		38,395
Consumer staples		11,355			10,393			957		–		2,299			25,004		10,094			8,631			795		–		1,907		21,427
Oil and gas		6,377			8,671			1,520		–		2,312			18,880		6,365			8,688			2,002		–		2,052		19,107
Financial services		62,170			29,087			4,508		78,257		33,739			207,761		51,313			23,405			4,103		73,020		29,958		181,799
Financing products		3,938			1,180			2,134		1,339		1,713			10,304		3,945			1,235			2,388		604		1,684		9,856
Forest products		2,499			1,524			373		–		76			4,472		2,225			1,589			387		–		84		4,285
Governments		330,943			8,762			2,251		18,150		10,031			370,137		283,893			7,891			2,149		13,334		7,933		315,200
Industrial products		15,966			12,871			1,121		–		922			30,880		15,526			12,463			940		–		1,052		29,981
Information technology		6,308			9,360			230		–		845			16,743		6,353			7,892			251		42		976		15,514
Investments		32,124			7,769			794		19		344			41,050		30,015			7,151			786		103		99		38,154
Mining and metals		2,795			4,004			1,848		–		520			9,167		2,821			3,950			1,684		–		427		8,882
Public works and infrastructure		2,786			2,499			1,513		–		341			7,139		2,871			2,329			1,383		–		300		6,883
Real estate and related		123,801			24,890			2,289		169		1,478			152,627		115,332			26,197			2,209		83		1,115		144,936
Other services		37,857			17,367			3,293		–		1,621			60,138		35,980			15,870			3,461		–		1,236		56,547
Telecommunication and media		9,123			6,837			151		–		2,674			18,785		7,814			7,210			159		–		2,874		18,057
Transportation		9,594			7,608			2,042		–		2,450			21,694		10,517			7,235			1,533		–		2,470		21,755
Utilities		14,281			23,822			6,302		–		5,845			50,250		14,652			21,110			5,993		–		5,451		47,206
Other sectors		7,632			1,526			1,467		276		31,090			41,991		11,119			2,578			1,887		227		24,520		40,331
Total wholesale	$	832,621		$	206,334		$	36,246	$	195,795	$	133,972		$	1,404,968	$	750,633		$	193,176		$	36,711	$	179,204	$	119,993	$	1,279,717
Total exposure<br><br>(1)	$	1,440,654		$	465,727		$	36,410	$	195,795	$	133,972		$	2,272,558	$	1,335,475		$	435,225		$	36,873	$	179,204	$	119,993	$	2,106,770
By geography<br><br>(8)
Canada	$	883,575		$	335,487		$	15,107	$	76,722	$	61,861		$	1,372,752	$	845,343		$	320,434		$	15,533	$	72,852	$	51,427	$	1,305,589
U.S.		421,280			96,502			16,939		60,424		25,020			620,165		360,803			84,633			15,277		56,415		22,201		539,329
Europe		58,568			24,150			2,141		40,398		31,158			156,415		55,936			21,879			3,432		31,987		31,555		144,789
Other International		77,231			9,588			2,223		18,251		15,933			123,226		73,393			8,279			2,631		17,950		14,810		117,063
Total exposure<br><br>(1)	$	1,440,654		$	465,727		$	36,410	$	195,795	$	133,972		$	2,272,558	$	1,335,475		$	435,225		$	36,873	$	179,204	$	119,993	$	2,106,770
(1)	Excludes securitization, banking book equities and other assets not subject to the standardized or IRB approach.
---	---
(2)	EAD for standardized exposures are reported net of allowance for impaired assets and EAD for IRB exposures are reported gross of all ACL and partial write-offs as per regulatory definitions.
---	---
(3)	EAD for undrawn credit commitments and other <br>off-balance<br> sheet amounts are reported after the application of credit conversion factors.
---	---
(4)	Includes other <br>off-balance<br> sheet exposures such as letters of credit and guarantees.
---	---
(5)	Counterparty credit risk EAD reflects exposure amounts after netting. Collateral is included in EAD for repo-style transactions to the extent allowed by regulatory guidelines. Exchange traded derivatives are included in Other sectors.
---	---
(6)	Includes residential mortgages and home equity lines of credit.
---	---
(7)	Includes credit cards, unsecured lines of credit and overdraft protection products.
---	---
(8)	Geographic profile is based on country of residence of the borrower.
---	---

2025 vs. 2024

Total credit risk exposure increased $166 billion or 8% from last year, primarily due to an increase in securities, higher counterparty credit risk exposures and volume growth in loans and undrawn commitments.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 77

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Net International wholesale exposure by region, asset type and client type<br><br>(1), (2)	Table 42
	As at
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	October 31<br><br>2025																October 31<br><br>2024
	Asset type								Client type
(Millions of Canadian dollars)	Loans<br>Outstanding		Securities<br>(3)		Repo-style<br><br>transactions		Derivatives		Financials		Sovereign		Corporate		Total		Total
Europe (excluding U.K.)	$	18,894	$	25,402	$	8,612	$	3,307	$	31,708	$	7,757	$	16,750	$	56,215	$	52,307
U.K.		14,302		22,914		5,789		2,363		18,939		14,219		12,210		45,368		36,311
Caribbean		6,712		10,877		3,230		1,970		9,747		4,763		8,279		22,789		22,612
Asia-Pacific		7,502		31,708		5,295		1,646		20,670		20,543		4,938		46,151		43,874
Other <br>(4)		3,095		1,605		3,273		141		2,844		1,915		3,355		8,114		8,022
Net International exposure<br><br>(5)	$	50,505	$	92,506	$	26,199	$	9,427	$	83,908	$	49,197	$	45,532	$	178,637	$	163,126
(1)	Geographic profile is based on country of risk, which reflects our assessment of the geographic risk associated with a given exposure. Typically, this is the residence of the borrower.
---	---
(2)	Exposures are calculated on a fair value basis and net of collateral, which includes $467 billion against repo-style transactions (October 31, 2024 – $459 billion) and $20 billion against derivatives (October 31, 2024 – $16 billion).
---	---
(3)	Securities include $26 billion of trading securities (October 31, 2024 – $14 billion), $24 billion of deposits (October 31, 2024 – $29 billion), and $43 billion of investment securities (October 31, 2024 – $44 billion).
---	---
(4)	Includes exposures in the Middle East, Africa and Latin America.
---	---
(5)	Excludes $7,643 million (October 31, 2024 – $6,950 million) of exposures to supranational agencies.
---	---

78 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Residential mortgages and home equity lines of credit (insured vs. uninsured)

(1)

Residential mortgages and home equity lines of credit are secured by residential properties. The following table presents a breakdown by geographic region.

Residential mortgages and home equity lines of credit	Table 43
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars,<br><br>except percentage amounts)	Residential mortgages										Home equity<br>lines of credit<br><br>(2)
	Insured<br><br>(3)				Uninsured				Total		Total
Region<br><br>(4)
Canada
Atlantic provinces	$	9,143	42	%	$	12,883	58	%	$	22,026	$	1,745
Quebec		11,504	24			35,859	76			47,363		3,537
Ontario		30,857	13			198,588	87			229,445		18,623
Alberta		17,888	40			26,517	60			44,405		4,646
Saskatchewan and Manitoba		8,299	39			12,813	61			21,112		1,728
B.C. and territories		12,041	13			77,954	87			89,995		8,384
Total Canada <br>(5)		89,732	20			364,614	80			454,346		38,663
U.S.		–	–			35,673	100			35,673		2,227
Other International		–	–			3,394	100			3,394		1,387
Total International		–	–			39,067	100			39,067		3,614
Total	$	89,732	18	%	$	403,681	82	%	$	493,413	$	42,277
	As at October 31, 2024
(Millions of Canadian dollars,<br>except percentage amounts)	Residential mortgages										Home equity<br>lines of credit <br>(2)
	Insured <br>(3)				Uninsured				Total		Total
Region<br><br>(4)
Canada
Atlantic provinces	$	8,692	43	%	$	11,688	57	%	$	20,380	$	1,704
Quebec		11,781	25			35,129	75			46,910		3,346
Ontario		32,011	14			189,638	86			221,649		18,173
Alberta		18,804	43			24,459	57			43,263		4,448
Saskatchewan and Manitoba		8,549	41			12,258	59			20,807		1,718
B.C. and territories		12,607	14			75,575	86			88,182		8,061
Total Canada <br>(5)		92,444	21			348,747	79			441,191		37,450
U.S.		–	–			33,092	100			33,092		2,144
Other International		–	–			3,261	100			3,261		1,421
Total International		–	–			36,353	100			36,353		3,565
Total	$	92,444	19	%	$	385,100	81	%	$	477,544	$	41,015
(1)	Disclosure is provided in accordance with the requirements of OSFI’s Guideline <br>B-20<br> (Residential Mortgage Underwriting Practices and Procedures).
---	---
(2)	Includes $42,260 million and $17 million of uninsured and insured home equity lines of credit, respectively (October 31, 2024 – $40,998 million and $17 million, respectively), reported within the personal loan category. The amounts in the U.S. and Other International include term loans collateralized by residential properties.
---	---
(3)	Insured residential mortgages are mortgages whereby our exposure to default is mitigated by insurance through the Canadian Mortgage and Housing Corporation or other private mortgage default insurers.
---	---
(4)	Region is based upon the address of the property mortgaged. The Atlantic provinces comprise Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick; B.C. and territories comprise British Columbia, Nunavut, Northwest Territories and Yukon.
---	---
(5)	Total consolidated residential mortgages in Canada of $454 billion (October 31, 2024 – $441 billion) includes $12 billion (October 31, 2024 – $12 billion) of mortgages with commercial clients in Commercial Banking, of which $9 billion (October 31, 2024 – $9 billion) are insured mortgages, and $17 billion (October 31, 2024 – $18 billion) of residential mortgages in Capital Markets, of which $17 billion (October 31, 2024 – $18 billion) are held for securitization purposes. All of the residential mortgages held for securitization purposes are insured (October 31, 2024 – all insured).
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 79

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Residential mortgages portfolio by amortization period

(1)

The following table provides a summary of the percentage of residential mortgages that fall within the remaining amortization periods based upon current customer payment amounts, which incorporate payments larger than the minimum contractual amount and/or higher frequency of payments.

Residential mortgages portfolio by amortization period	Table 44
	As at
---	---	---	---	---	---	---	---	---	---	---	---	---
	October 31<br><br>2025						October 31<br><br>2024
	Canada<br><br>(2)		U.S. and other<br>International		Total		Canada <br>(2)		U.S. and other<br>International		Total
Amortization period
≤<br> 25 years		76%		38%		73%		62%		31%		60%
> 25 years <br>≤<br> 30 years		24		62		27		28		69		30
> 30 years <br>≤<br> 35 years		–		–		–		10		–		10
Total		100%		100%		100%		100%		100%		100%
(1)	Disclosure is provided in accordance with the requirements of OSFI’s Guideline <br>B-20<br> (Residential Mortgage Underwriting Practices and Procedures).
---	---
(2)	Our policy is to originate mortgages with amortization periods of 30 years or less. Amortization periods greater than 30 years reflect the impact of increases in interest rates on our variable rate mortgage portfolios. For these loans, the amortization period resets to the original amortization schedule upon renewal. We do not originate mortgage products with a structure that would result in negative amortization, as payments on variable rate mortgages automatically increase to ensure accrued interest is covered.
---	---

Average loan-to-value (LTV) ratios

(1)

The following table provides a summary of our average LTV ratios for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan ® products by geographic region, as well as the respective LTV ratios for our total Personal Banking – Canada residential mortgage portfolio outstanding.

Average LTV ratios	Table 45
	For the year ended
---	---	---	---	---	---	---	---	---
	October 31<br><br>2025				October 31<br><br>2024
	Uninsured				Uninsured
	Residential<br>mortgages<br><br>(2)		RBC Homeline<br>Plan products<br><br>(3)		Residential<br>mortgages <br>(2)		RBC Homeline<br>Plan products <br>(3)
Average of newly originated and acquired for the period, by region<br><br>(4)
Atlantic provinces		70%		70%		68%		68%
Quebec		70		70		64		67
Ontario		70		65		63		60
Alberta		72		70		66		67
Saskatchewan and Manitoba		72		73		69		70
B.C. and territories		67		63		51		60
U.S.		72		n.m.		72		n.m.
Other International		71		n.m.		70		n.m.
Average of newly originated and acquired for the period<br><br>(5), (6), (7)		70%		67%		60%		61%
Total Personal Banking – Canada residential mortgages portfolio<br><br>(8)		60%		49%		56%		47%
(1)	Disclosure is provided in accordance with the requirements of OSFI’s Guideline <br>B-20<br> (Residential Mortgage Underwriting Practices and Procedures).
---	---
(2)	Residential mortgages exclude residential mortgages within the RBC Homeline Plan products.
---	---
(3)	RBC Homeline Plan products comprise both residential mortgages and home equity lines of credit.
---	---
(4)	Region is based upon the address of the property mortgaged. The Atlantic provinces comprise Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick; B.C. and territories comprise British Columbia, Nunavut, Northwest Territories and Yukon.
---	---
(5)	The average LTV ratios for newly originated and acquired uninsured residential mortgages and RBC Homeline Plan products are calculated on a weighted basis by mortgage amounts at origination.
---	---
(6)	For newly originated mortgages and RBC Homeline Plan products, LTV is calculated based on the total facility amount for the residential mortgage and RBC Homeline Plan product divided by the value of the related residential property.
---	---
(7)	The year ended October 31, 2024 includes the impact of the HSBC Canada portfolio acquired in the second quarter of 2024. Excluding the acquired HSBC Canada portfolio, the average of newly originated and acquired residential mortgages and RBC Homeline Plan products for the year ended October 31, 2024 was 70% and 65%, respectively.
---	---
(8)	Weighted by mortgage balances and adjusted for property values based on the Teranet – National Bank <br>House Price Index<br>‡.
---	---
n.m.	not meaningful
---	---

80 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Credit quality performance

The following credit quality performance tables and analysis provide information on loans, which represents loans, acceptances and commitments, and other financial assets.

Gross impaired loans (GIL)	Table 46
	As at and for the year ended
---	---	---	---	---	---	---
(Millions of Canadian dollars, except percentage amounts)	October 31<br><br>2025			October 31<br><br>2024
Personal Banking <br>(1)	$	2,091		$	1,652
Commercial Banking <br>(1)		3,362			2,372
Wealth Management		609			508
Capital Markets		2,620			1,335
Total GIL	$	8,682		$	5,867
Impaired loans, beginning balance	$	5,867		$	3,704
Classified as impaired during the period (new impaired) <br>(1)		9,687			6,272
Net repayments <br>(1)		(1,381	)		(848	)
Amounts written off		(3,326	)		(2,521	)
Other <br>(2)		(2,165	)		(740	)
Impaired loans, balance at end of period	$	8,682		$	5,867
GIL as a % of related loans and acceptances
Total GIL as a % of related loans and acceptances		0.83%			0.59%
Personal Banking <br>(1)		0.38%			0.31%
Personal Banking – Canada		0.34%			0.26%
Commercial Banking <br>(1)		1.74%			1.29%
Wealth Management		0.47%			0.42%
Capital Markets		1.52%			0.88%
(1)	Certain GIL movements for Personal Banking – Canada and Commercial Banking are generally allocated to new impaired, as Net repayments and certain Other movements are not reasonably determinable.
---	---
(2)	Includes return to performing status during the period, recoveries of loans and advances previously written off, sold, amounts related to foreclosed properties held as investment properties and interests in joint ventures for certain <br>co-lending<br> arrangements, foreign exchange translation and other movements.
---	---

2025 vs. 2024

Total GIL increased $2,815 million or 48% from last year, primarily due to higher impaired loans in Capital Markets, Commercial Banking and Personal Banking.

GIL in Personal Banking increased $439 million or 27%, primarily due to higher impaired loans in our Canadian residential mortgages portfolio.

GIL in Commercial Banking increased $990 million or 42%, mainly due to higher impaired loans across most sectors, including the real estate and related and agriculture sectors.

GIL in Wealth Management increased $101 million or 20%, mainly due to higher impaired loans in a few sectors, including the telecommunication and media sector, and in our retail portfolios.

GIL in Capital Markets increased $1,285 million or 96%, primarily due to one account in the other services sector.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 81

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Allowance for credit losses	Table 47
	As at
---	---	---	---	---
(Millions of Canadian dollars)	October 31<br><br>2025		October 31<br><br>2024
Personal Banking	$	3,739	$	3,273
Commercial Banking		2,300		1,626
Wealth Management		496		466
Capital Markets		923		986
Corporate Support and other		1		1
ACL on loans		7,459		6,352
ACL on other financial assets<br><br>(1)		11		12
Total ACL	$	7,470	$	6,364
ACL on loans is comprised of:
Retail	$	3,454	$	3,011
Wholesale		2,019		1,825
ACL on performing loans	$	5,473	$	4,836
ACL on impaired loans		1,986		1,516
(1)	ACL on other financial assets mainly represents allowances on debt securities measured at FVOCI and amortized cost, accounts receivable and financial guarantees.
---	---

2025 vs. 2024

Total ACL increased $1,106 million or 17% from last year, largely due to higher ACL on performing loans, primarily driven by unfavourable changes in credit quality and scenario weights, which include the impacts of trade disruptions. Higher ACL on impaired loans, primarily in Commercial Banking and Personal Banking, also contributed to the increase.

For further details, refer to Note 5 of our 2025 Annual Consolidated Financial Statements.

82 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Market risk

Market risk is defined to be the impact of market prices upon our financial condition. This includes potential gains or losses due to changes in market-determined variables such as interest rates, credit spreads, equity prices, commodity prices, foreign exchange rates and implied volatilities.

The measures of financial condition impacted by market risk include the following:

1.	Positions whose revaluation gains and losses are reported in revenue, which includes:
a)	Changes in the fair value of instruments classified or designated as FVTPL, and
---	---
b)	Hedge ineffectiveness.
---	---
2.	CET1 capital, which includes:
---	---
a)	All of the above, plus
---	---
b)	Changes in the fair value of FVOCI securities where revaluation gains and losses are reported as OCI,
---	---
c)	Changes in the Canadian dollar value of investments in foreign subsidiaries, net of hedges, due to foreign exchange translation, and
---	---
d)	Changes in the fair value of employee benefit plan deficits.
---	---
3.	CET1 ratio, which includes:
---	---
a)	All of the above, plus
---	---
b)	Changes in RWA resulting from changes in traded market risk factors, and
---	---
c)	Changes in the Canadian dollar value of RWA due to foreign exchange translation.
---	---
4.	The economic value of the Bank, which includes:
---	---
a)	Points 1 and 2 above, plus
---	---
b)	Changes in the economic value of other <br>non-trading<br> positions, net interest income and fee based income, as a result of changes in market risk factors.
---	---

Market risk controls – FVTPL positions, including trading portfolios 1

As an element of the ERAF, the Board approves our overall market risk appetite. The Market and Counterparty Credit Risk function within GRM is responsible for creating and managing the controls and governance procedures that are designed to ensure that risk taken is consistent with risk appetite constraints set by the Board. These controls include limits on probabilistic measures of potential loss such as Value-at-Risk and stress tests as defined below:

Value-at-Risk (VaR) is a statistical measure of potential loss for a financial portfolio computed at a given level of confidence and over a defined holding period. We measure VaR at the 99th percentile confidence level for price movements over a one-day holding period using historic simulation of the last two years of equally weighted historic market data. These calculations are updated daily with current risk positions, with the exception of certain less material positions that are not actively traded which are updated on at least a monthly basis.

Trading VaR captures potential loss for our trading portfolio that excludes the impacts of non-trading FVTPL positions such as loan underwriting commitments. Total VaR captures potential loss for all positions classified as FVTPL.

VaR is a statistical estimate based on historical market data and should be interpreted with knowledge of its limitations, which include the following:

•	VaR will not be predictive of future losses if the realized market movements differ significantly from the historical periods used to compute it.
•	VaR projects potential losses over a <br>one-day<br> holding period and does not project potential losses for risk positions held over longer time periods.
---	---
•	VaR is measured using positions at close of business and does not include the impact of trading and hedging activity over the course of a day.
---	---

We validate our VaR measures through a variety of means – including subjecting the models to vetting and validation by a group of independent model developers and by back-testing the VaR against daily marked-to-market revenue to identify and examine events in which actual outcomes in trading revenue exceed the VaR projections.

Stress tests – Our market risk stress testing program is used to identify and control risk due to large changes in market prices and rates. We conduct stress testing daily on positions that are marked-to-market. The stress tests simulate both historical and hypothetical events which are severe and long-term in duration. Historical scenarios are taken from actual market events and range in duration up to 90 days. Examples include the COVID-19 Pandemic of 2020, Global Financial Crisis of 2008 and the Taper Tantrum of 2013. Hypothetical scenarios are designed to be forward-looking at potential future market stresses and are designed to be severe but plausible. We are constantly evaluating and refining these scenarios as market conditions change. Stress results are calculated assuming an instantaneous revaluation of our positions with no management action.

1	Trading portfolios are comprised of trading instruments in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline. Trading involves market-making, positioning and arbitrage activities conducted primarily within our Global Markets business in the Capital Markets segment.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 8 3

Table of Contents

These measures are computed on all positions that are FVTPL for financial reporting purposes, with the exception of those in a designated hedging relationship and those in RBC Insurance.

Market risk measures – FVTPL positions

Market risk measures*	Table 48
	October 31, 2025										October 31, 2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
				For the year ended										For the year ended
(Millions of Canadian dollars)	As at			Average			High		Low		As at			Average			High		Low
Equity	$	17		$	16		$	30	$	11	$	23		$	14		$	26	$	6
Foreign exchange		5			4			13		2		6			5			10		2
Commodities		8			7			11		3		11			6			11		4
Interest rate <br>(1)		33			23			33		17		23			30			44		19
Credit specific <br>(2)		5			7			10		5		8			8			9		7
Diversification <br>(3)		(38	)		(32	)		n.m.		n.m.		(37	)		(34	)		n.m.		n.m.
Trading VaR	$	30		$	25		$	35	$	18	$	34		$	29		$	41	$	20
Total VaR	$	40		$	36		$	56	$	22	$	34		$	70		$	138	$	26
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
---	---
(1)	General credit spread risk and funding spread risk associated with uncollateralized derivatives are included under interest rate VaR.
---	---
(2)	Credit specific risk captures issuer-specific credit spread volatility.
---	---
(3)	Trading VaR is less than the sum of the individual risk factor VaR results due to risk factor diversification.
---	---
n.m.	not meaningful
---	---

2025 vs. 2024

Average Trading VaR of $25 million decreased $4 million from last year, primarily driven by exposure changes in our fixed income portfolio, partially offset by exposure changes in our equity portfolio.

Average total VaR of $36 million decreased $34 million, primarily driven by the impact of management of closing capital volatility related to the HSBC Canada transaction last year.

The following chart displays a bar graph of our daily trading revenue and a line graph of our daily market risk Trading VaR. We incurred no net trading losses in 2025.

(1)	Trading revenue (teb) in the chart above excludes the impact of loan underwriting commitments.

8 4 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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The following chart displays the distribution of daily trading revenue in 2025 and 2024 with no net trading losses in both years. The largest reported trading revenue was $50 million with an average daily revenue of $21 million.

(1)	Trading revenue (teb) amounts in the chart above exclude the impact of loan underwriting commitments and structured entities.

Market risk measures for assets and liabilities of RBC Insurance

We offer a range of insurance products to clients and hold investments to meet future obligations to policyholders. The investments which support actuarial liabilities are predominantly fixed income assets measured at FVTPL. Consequently, changes in the fair values of these assets are largely offset by changes in the discount rates used in the measurement of insurance and reinsurance contract assets and liabilities, and the impacts of both are reflected in Insurance investment result in the Consolidated Statements of Income. As at October 31, 2025, we held assets in support of $22 billion of insurance contract liabilities net of insurance contract assets and reinsurance contracts held balances (October 31, 2024 – $20 billion).

Market risk controls – Interest Rate Risk in the Banking Book (IRRBB) positions 2

IRRBB arises primarily from traditional customer-originated banking products such as deposits and loans, and includes related hedges and interest rate risk from securities held for liquidity and cash management purposes. Factors contributing to IRRBB include mismatches between asset and liability repricing dates, relative changes in asset and liability rates in response to market rate scenarios, and other product features affecting the expected timing of cash flows, such as options to pre-pay loans or redeem term deposits prior to contractual maturity. IRRBB sensitivities are regularly measured and reported, and subject to limits and controls with independent oversight from GRM.

The Board approves the risk appetite for IRRBB, and the Asset Liability Committee (ALCO) and GRM provide ongoing governance through IRRBB risk policies, limits, operating standards and other controls. IRRBB reports are reviewed regularly by GRM, ALCO, the GRC, the Risk Committee of the Board and the Board.

IRRBB measurement

To monitor and control IRRBB, we assess two primary metrics, Net Interest Income (NII) risk and Economic Value of Equity (EVE) risk, under a range of market shocks, scenarios and time horizons. Market scenarios include currency-specific parallel and non-parallel yield curve changes, interest rate volatility shocks and interest rate scenarios prescribed by regulators.

In measuring NII risk, detailed banking book balance sheets and income statements are dynamically simulated to estimate the impact of market stress scenarios on projected NII. Assets, liabilities and off-balance sheet positions are simulated over various time horizons. The simulations incorporate maturities, renewals and new originations along with prepayment and redemption behaviour. Product pricing and volumes are forecasted based on past experience to determine response expectations under a given market shock scenario. EVE risk captures the market value sensitivity to changes in rates. In measuring EVE risk, deterministic (single-scenario) and stochastic (multiple-scenario) valuation techniques are applied to spot position data. NII and EVE risks are measured for a range of market risk stress scenarios which include extreme but plausible changes in market rates and volatilities. IRRBB measures assume continuation of existing hedge strategies.

Management of NII and EVE risk is complementary and supports our efforts to generate a sustainable high-quality NII stream. NII and EVE risks for specific units are measured daily, weekly or monthly depending on materiality, complexity and hedge strategy.

A number of assumptions affecting cash flows, product re-pricing and the administration of rates underlie the models used to measure NII and EVE risk. The key assumptions pertain to the projected funding date of mortgage rate commitments, fixed-rate loan prepayment behaviour, term deposit redemption behaviour, and the term and rate profile of non-maturity deposits. All assumptions are derived empirically based on historical client behaviour and product pricing with consideration of possible forward-looking changes. All models and assumptions used to measure IRRBB are subject to independent oversight by GRM.

Market risk measures – IRRBB Sensitivities

The following table shows the potential before-tax impact of an immediate and sustained 100 bps increase or decrease in interest rates on projected EVE and 12-month NII, assuming no subsequent hedging. Interest rate risk measures are based on current on and off-balance sheet positions which can change over time in response to business activity and management actions.

2	IRRBB positions include the impact of derivatives in hedge accounting relationships, FVOCI securities used for interest rate risk management and economic hedges.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 8 5

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Market risk – IRRBB measures*	Table <br>49
	October 31<br><br>2025																		October 31<br><br>2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	EVE risk									NII risk<br>(1)
(Millions of Canadian dollars)	Canadian<br>dollar<br><br>impact<br>(2)			U.S. dollar<br>and other<br>impact<br>(2)			Total			Canadian<br>dollar<br><br>impact<br>(2)			U.S. dollar<br>and other<br>impact<br>(2)			Total			EVE risk			NII risk (1)
Before-tax<br> impact of:
100 bps increase in rates	$	(2,228	)	$	(420	)	$	(2,648	)	$	105		$	92		$	197		$	(2,076	)	$	400
100 bps decrease in rates		2,037			(105	)		1,932			(210	)		(163	)		(373	)		1,663			(502	)
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
---	---
(1)	Represents the <br>12-month<br> NII exposure to an instantaneous and sustained shift in interest rates.
---	---
(2)	Effective the third quarter of 2025, EVE and NII risk for currencies other than the Canadian and U.S. dollar are presented within the U.S. dollar and other impact category. Previously, the impact of other currencies was presented in the Canadian dollar impact category.
---	---

As at October 31, 2025, an immediate and sustained -100 bps shock would have had a negative impact to our NII of $373 million, down from $502 million last year, and an immediate and sustained +100 bps shock would have had a negative impact to our EVE of $2,648 million, up from $2,076 million last year. The change in NII sensitivity reflects a change in product mix and the change in EVE sensitivity can be attributed to net growth in fixed rate assets including growth in book capital. During 2025, NII and EVE risks remained within approved limits.

Market risk measures for other material non-trading portfolios

Investment securities carried at FVOCI

Investment securities carried at FVOCI are primarily debt securities. We hold debt securities primarily as investments, as well as to manage liquidity risk and hedge interest rate risk in our banking book balance sheet. While debt securities held by RBC Insurance are managed separately, all other debt securities carried at FVOCI are included in our IRRBB measures.

For further details on the investment securities carried at FVOCI, refer to Notes 2 and 4 of our 2025 Annual Consolidated Financial Statements.

Non-trading foreign exchange rate risk

Foreign exchange rate risk is the potential adverse impact on earnings and economic value due to changes in foreign currency rates. Our revenue, expenses and income denominated in currencies other than the Canadian dollar are subject to fluctuations as a result of changes in the value of the average Canadian dollar relative to the average value of those currencies. Our most significant exposure is to the U.S. dollar, due to our operations in the U.S. and other activities conducted in U.S. dollars. Our other significant exposure is to the British pound due to our activities conducted internationally in this currency. A strengthening or weakening of the Canadian dollar compared to the U.S. dollar and British pound could reduce or increase, as applicable, the translated value of our foreign currency denominated revenue, expenses and earnings and could have a significant effect on the results of our operations. We are also exposed to foreign exchange rate risk arising from our investments in foreign operations. For unhedged equity investments, when the Canadian dollar appreciates against other currencies, the unrealized translation losses on net foreign investments decreases our shareholders’ equity through the other components of equity and decreases the translated value of the RWA of the foreign currency-denominated asset. The reverse is true when the Canadian dollar depreciates against other currencies. Consequently, we consider these impacts in selecting an appropriate level of our investments in foreign operations to be hedged.

Derivatives related to non-trading activity

Derivatives are also used to hedge market risk exposure unrelated to our trading activity. Hedge accounting is elected where applicable. These derivatives are included in our IRRBB measures and other internal non-trading market risk measures. We use interest rate swaps to manage our IRRBB, funding and investment activities. Interest rate swaps are also used to hedge changes in the fair value of certain fixed-rate instruments. We also use foreign exchange derivatives to manage our exposure to equity investments in subsidiaries that are denominated in foreign currencies, particularly the U.S. dollar and British Pound.

For further details on the application of hedge accounting and the use of derivatives for hedging activities, refer to Notes 2 and 9 of our 2025 Annual Consolidated Financial Statements.

8 6 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Linkage of market risk to selected balance sheet items

The following tables provide the linkages between selected balance sheet items with positions included in our trading market risk and non-trading market risk disclosures, which illustrates how we manage market risk for our assets and liabilities through different risk measures:

Linkage of market risk to selected balance sheet items	Table 5<br>0
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---
				Market risk measure
(Millions of Canadian dollars)	Balance sheet<br>amount			Traded risk<br><br>(1)		Non-traded<br><br>risk<br><br>(2)			Non-traded<br> risk <br>primary risk sensitivity
Assets subject to market risk
Cash and due from banks	$	37,024		$	–	$	37,024		Interest rate
Interest-bearing deposits with banks		50,364			6		50,358		Interest rate
Securities
Trading		219,067			188,249		30,818		Interest rate, credit spread
Investment, net of applicable allowance		342,721			–		342,721		Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed		309,683			251,147		58,536		Interest rate
Loans
Retail		652,344			2		652,342		Interest rate
Wholesale		397,171			3,271		393,900		Interest rate
Allowance for loan losses		(7,093	)		–		(7,093	)	Interest rate
Other
Derivatives		177,206			171,721		5,485		Interest rate, foreign exchange
Other assets		138,647			62,521		76,126		Interest rate
Assets not subject to market risk<br><br>(3)		7,872
Total assets	$	2,325,006		$	676,917	$	1,640,217
Liabilities subject to market risk
Deposits	$	1,515,616		$	74,278	$	1,441,338		Interest rate
Other
Obligations related to securities sold short		49,891			49,428		463
Obligations related to assets sold under repurchase agreements and securities loaned		289,516			252,956		36,560		Interest rate
Derivatives		183,953			180,047		3,906		Interest rate, foreign exchange
Other liabilities		108,398			49,489		58,909		Interest rate
Subordinated debentures		13,961			–		13,961		Interest rate
Liabilities not subject to market risk<br><br>(4)		24,520
Total liabilities	$	2,185,855		$	606,198	$	1,555,137
Total equity		139,151
Total liabilities and equity	$	2,325,006
(1)	Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading portfolios. Market risk measures of VaR and stress tests are used as risk controls for traded risk.
---	---
(2)	Non-traded<br> risk includes positions used in the management of IRRBB and other non-trading portfolios. Other material non-trading portfolios include positions from RBC Insurance and investment securities, net of applicable allowance, not included in IRRBB.
---	---
(3)	Assets not subject to market risk primarily include insurance-related assets.
---	---
(4)	Liabilities not subject to market risk primarily include insurance contract liabilities.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 8 7

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	As at October 31, 2024
				Market risk measure
(Millions of Canadian dollars)	Balance sheet<br>amount			Traded risk <br>(1)		Non-traded<br><br>risk <br>(2)			Non-traded<br> risk <br>primary risk sensitivity
Assets subject to market risk
Cash and due from banks	$	56,723		$	–	$	56,723			Interest rate
Interest-bearing deposits with banks		66,020			3		66,017			Interest rate
Securities
Trading		183,300			161,031		22,269			Interest rate, credit spread
Investment, net of applicable allowance		256,618			–		256,618			Interest rate, credit spread, equity
Assets purchased under reverse repurchase agreements and securities borrowed		350,803			299,032		51,771			Interest rate
Loans
Retail		626,978			–		626,978			Interest rate
Wholesale		360,439			3,152		357,287			Interest rate
Allowance for loan losses		(6,037	)		–		(6,037	)		Interest rate
Other
Derivatives		150,612			147,017		3,595			Interest rate, foreign exchange
Other assets		115,133			47,936		67,197			Interest rate
Assets not subject to market risk<br><br>(3)		10,993
Total assets	$	2,171,582		$	658,171	$	1,502,418
Liabilities subject to market risk
Deposits	$	1,409,531		$	63,706	$	1,345,825			Interest rate
Other
Obligations related to securities sold short		35,286			34,985		301
Obligations related to assets sold under repurchase agreements and securities loaned		305,321			280,386		24,935			Interest rate
Derivatives		163,763			157,587		6,176			Interest rate, foreign exchange
Other liabilities		94,666			39,802		54,864			Interest rate
Subordinated debentures		13,546			–		13,546			Interest rate
Liabilities not subject to market risk<br><br>(4)		22,277
Total liabilities	$	2,044,390		$	576,466	$	1,445,647
Total equity		127,192
Total liabilities and equity	$	2,171,582
(1)	Traded risk includes positions that are classified or designated as FVTPL and positions whose revaluation gains and losses are reported in revenue within our trading portfolios. Market risk measures of VaR and stress tests are used as risk controls for traded risk.
---	---
(2)	Non-traded<br> risk includes positions used in the management of IRRBB and other non-trading portfolios. Other material non-trading portfolios include positions from RBC Insurance and investment securities, net of applicable allowance, not included in IRRBB.
---	---
(3)	Assets not subject to market risk primarily include insurance-related assets.
---	---
(4)	Liabilities not subject to market risk primarily include insurance contract liabilities.
---	---
Liquidity and funding risk
---

Liquidity and funding risk (liquidity risk) is the risk that we may be unable to generate sufficient cash or its equivalents in a timely and cost-effective manner to meet our commitments. Liquidity risk arises from mismatches in the timing and value of on-balance sheet and off-balance sheet cash flows.

Governance of liquidity risk

Our liquidity risk management activities are conducted in accordance with internal frameworks and policies, including the Enterprise Risk Management Framework (ERMF), the Enterprise Risk Appetite Framework (ERAF), the Enterprise Liquidity Risk Management Framework (LRMF), the Enterprise Liquidity Risk Policy and the Enterprise Pledging Policy. Collectively, our frameworks and policies establish liquidity and funding management requirements appropriate for the execution of our strategy and ensuring liquidity risk remains within our risk appetite.

Liquidity risk objectives, policies and risk appetite are reviewed regularly, and updated to reflect changes in industry practice and relevant regulatory guidance. Enterprise policies are supported by subsidiary, operational, desk and product-level policies and standards that specify risk control elements, such as parameters, methodologies, limits and authorities governing the measurement and management of liquidity. Management practices, parameters, models and methodologies are also subject to regular review, and are updated to reflect market conditions and business mix. Stress testing is employed to assess the robustness of the control framework and inform liquidity contingency plans.

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Responsibilities for liquidity risk oversight and management

The Board, the Risk Committee of the Board, the Group Risk committee (GRC), the Asset Liability Committee (ALCO) and the Policy Review Committee (PRC) are accountable for the identification, assessment, control, monitoring and oversight of liquidity risk. The GRC, PRC and/or the ALCO review liquidity reporting and policies prior to review by the Board or its committees.

•	The Board, the Risk Committee of the Board, the GRC and the ALCO regularly review information on our consolidated liquidity position;
•	The PRC approves the Liquidity Risk Policy, which establishes minimum risk control elements in accordance with the Board-approved risk appetite and the LRMF, and the Pledging Policy, which outlines the requirements and authorities for the management of our pledging activities;
---	---
•	The ALCO annually approves the Enterprise Liquidity Contingency Plan (ELCP) and provides strategic direction and oversight to Corporate Treasury, other functions, and business segments on the management of liquidity and funding.
---	---

In addition to our committee oversight framework, liquidity risk management activities are subject to the three lines of defence governance model. Corporate Treasury, the first line of defence for the management of liquidity risk, is subject to independent second line challenge and oversight by GRM. RBC Internal Audit is the third line of defence. The three lines of defence are independent of the business whose activities generate liquidity risks.

Liquidity risk mitigation strategies and techniques

Our liquidity management policies and practices are designed to ensure the soundness of our liquidity position. Our liquidity profile is structured to ensure that we have sufficient liquidity to satisfy current and prospective commitments in both normal and stressed conditions. For this purpose, we employ the following liquidity risk mitigation strategies and techniques:

•	Maintaining a sufficient buffer of cash, central bank reserves and unencumbered marketable securities, supported by a demonstrated capacity to monetize these securities during stress;
•	Access to a broad range of funding sources, including a stable base of core client deposits and a diversified wholesale funding mix;
---	---
•	Access to central bank funding facilities in Canada and the U.S., and select other jurisdictions in which we operate;
---	---
•	Timely and granular risk measurement and reporting to control and monitor liquidity sources and uses, and inform liquidity risk management decisions;
---	---
•	A comprehensive program for liquidity stress testing and crisis management;
---	---
•	Governance of pledging activity through limits and designated liquid asset buffers to address potential increased pledging activity;
---	---
•	Achieving an appropriate balance between the level of exposure allowed under our risk appetite and the cost of risk mitigation;
---	---
•	Transparent liquidity transfer pricing and cost allocation mechanisms to align risk management with business strategies; and
---	---
•	A <br>three-lines-of-defence<br> governance model providing effective oversight and challenge of liquidity risk strategies, metrics, assumptions and controls.
---	---

Our dedicated liquid asset portfolios are managed and controlled in accordance with internal policies and are subject to minimum asset quality and other relevant requirements (e.g., term to maturity, diversification and eligibility for central bank advances). These securities, along with other unencumbered liquid assets held for trading or other activities, contribute to our liquidity reserve, as reflected in the liquidity disclosures below.

Risk tolerance

Our liquidity risk appetite is reviewed at a minimum annually by ALCO, GRC and the Risk Committee of the Board before it is recommended for approval to the Board. Risk appetite, a key element of our enterprise risk management framework, is defined as the amount and type of risk that RBC is able and willing to take in pursuit of its business objectives.

Risk measurement and internal liquidity reporting

We maintain robust liquidity risk measurement capabilities to support timely and frequent reporting of information for the management of our liquidity position and oversight of risk. This reporting, which includes internal and regulatory metrics, is used to monitor adherence with our risk appetite and limits, and position relative to regulatory minimums. Regulatory metrics used to manage and control liquidity risk include OSFI’s Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Net Cumulative Cash Flow (NCCF). The specificity with which we measure and manage liquidity allows us to make ongoing informed assessments of the demands and mobility of liquidity, considering currency requirements, access to foreign exchange markets and commitments, and expectations under local regulations.

Internal assessments of liquidity risk include application of scenario-specific assumptions against our assets and liabilities, and various off-balance sheet commitments and obligations to project cash flows over varying time horizons and degrees of stress. For example, certain government bonds could be quickly and easily converted to cash without significant loss of value. In contrast, lower-rated securities may not be deemed appropriate sources of liquidity in times of stress, or may incur higher potential monetization costs. While relationship-based deposits contractually can be withdrawn immediately, in practice, these balances can be relatively stable sources of funding depending on several factors, such as the nature of the client and their intended use. Assumptions and methodologies informing our assessment of liquidity risk are periodically reviewed and validated to ensure alignment with our operating environment, expected economic and market conditions, rating agency preferences, regulatory requirements and generally accepted industry practices.

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To manage liquidity risk within our liquidity risk appetite, we set limits on various metrics over a range of time horizons, jurisdictions and currencies. We also consider various levels of stress conditions in our development of appropriate contingency, recovery and resolution plans. Our liquidity risk measurement and control activities cover multiple areas:

Structural (longer-term) liquidity risk

We use both internal and regulatory metrics to manage and control the structural alignment between long-term illiquid assets, the availability of core relationship deposits and longer-term funding. Conversely, we aim to align the use of shorter-term wholesale funding with assets of equivalent liquidity-generating potential.

Tactical (shorter-term) liquidity risk

To address potential immediate cash flow risks during periods of stress, we use short-term net cash flow limits to control risk at the unit, subsidiary and currency levels, as applicable. Net cash flow positions are determined by applying internally-derived risk assumptions and parameters to known and anticipated cash flows for all material unencumbered assets, liabilities and off-balance sheet activities. Additional product-level controls and limits are employed to manage concentration risk and perceived market capacity limitations for more sensitive liquidity sources and uses. We also control tactical liquidity by adhering to relevant regulatory standards, such as LCR.

Stress testing

Our comprehensive stress testing program informs internal assessments of the sufficiency of liquid assets and whether they are adequately pre-positioned and accessible to meet stressed liquidity needs. Our stress tests, which include elements of scenario and sensitivity analyses, measure our prospective exposure to systemic and RBC-specific events over periods of time. Different degrees of severity are considered for each type of crisis with some scenarios reflecting multiple downgrades to our credit ratings.

Contingency liquidity risk management and funding plans

Contingency liquidity risk planning assesses the impact of sudden stress on our liquidity risk position and identifies a range of potential mitigating actions and plans. Corporate Treasury maintains the Enterprise Liquidity Contingency Plan (ELCP) and regional liquidity contingency plans (LCPs) that identify potential sources of stress and guide our responses to liquidity crises. Potential sources of stress are calibrated based on relevant historical experience and resulting contingent funding needs, including those from draws on committed credit and liquidity lines, demands for increased collateral and deposit run-offs. The ELCP also identifies alternative liquidity sources and considerations for their use.

Additionally, under the leadership of Corporate Treasury, enterprise and regional Liquidity Crisis Teams (LCTs) each meet regularly to assess our liquidity status, review and approve the LCPs and during times of stress, provide linkages to the front line and other functions to support effective and coordinated crisis management and oversight. Enterprise and local LCTs include members from key business segments, GRM, Finance, Operations and Communications. The liquidity status assessment and monitoring process informs management, the Board and regulatory agencies of our assessment of internal and external events and their potential implications on liquidity risk.

Liquidity reserve and asset encumbrance

The following tables provide summaries of our liquidity reserve and asset encumbrance. To varying degrees, unencumbered assets represent a ready source of funding. Unencumbered assets are the difference between total and encumbered assets from both on- and off-balance sheet sources. Encumbered assets include: (i) bank-owned liquid assets that are either pledged as collateral (e.g., repo financing and derivative pledging) or not freely available due to regulatory or internal policy requirements (e.g., earmarked to satisfy mandatory reserve or regional capital adequacy requirements and to maintain continuous access to payment and settlement systems); (ii) securities received as collateral from securities financing and derivative transactions which have either been re-hypothecated where permissible (e.g., to obtain financing through repos or to cover securities sold short) or have no liquidity value since re-hypothecation is prohibited; and (iii) illiquid assets that have been securitized and sold into the market or that have been pledged as collateral in support of structured term funding vehicles. Encumbered assets are not considered a source of liquidity.

0 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Liquidity reserve

Our liquidity reserve consists only of available unencumbered liquid assets. Although unused wholesale funding capacity could be another potential source of liquidity, it is excluded in the determination of the liquidity reserve.

Liquidity reserve	Table 51
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Bank-owned<br>liquid assets		Securities<br>received as<br>collateral from<br>securities<br>financing and<br>derivative<br>transactions		Total liquid<br>assets		Encumbered<br>liquid assets		Unencumbered<br>liquid assets
Cash and deposits with banks	$	87,388	$	–	$	87,388	$	3,195	$	84,193
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks <br>(1)		436,725		352,312		789,037		434,060		354,977
Other securities		179,279		156,840		336,119		207,703		128,416
Other liquid assets <br>(2)		50,082		–		50,082		40,974		9,108
Total liquid assets	$	753,474	$	509,152	$	1,262,626	$	685,932	$	576,694
	As at October 31, 2024
(Millions of Canadian dollars)	Bank-owned<br><br>liquid assets		Securities<br>received as<br>collateral<br>from securities<br>financing and<br>derivative<br>transactions		Total liquid<br>assets		Encumbered<br> <br>liquid assets		Unencumbered<br> <br>liquid assets
Cash and deposits with banks	$	122,743	$	–	$	122,743	$	3,269	$	119,474
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks <br>(1)		323,826		385,479		709,305		426,552		282,753
Other securities		165,875		126,205		292,080		163,635		128,445
Other liquid assets <br>(2)		37,601		–		37,601		31,583		6,018
Total liquid assets	$	650,045	$	511,684	$	1,161,729	$	625,039	$	536,690
	As at
(Millions of Canadian dollars)	October 31<br> <br>2025		October 31<br> <br>2024
Royal Bank of Canada	$	279,012	$	243,915
Foreign branches		77,977		69,723
Subsidiaries		219,705		223,052
Total unencumbered liquid assets	$	576,694	$	536,690
(1)	Includes liquid securities issued by provincial governments and U.S. government-sponsored entities working under U.S. Federal government’s conservatorship (e.g., Federal National Mortgage Association and Federal Home Loan Mortgage Corporation).
---	---
(2)	Encumbered liquid assets amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.
---	---

The liquidity reserve is typically most affected by routine flows of retail and commercial client banking activities, where liquid asset portfolios reflect changes in deposit and loan balances, as well as business strategies and client flows related to the activities in Capital Markets. Corporate Treasury also affects liquidity reserves through the management of funding issuances, which could result in timing differences between when debt is issued and funds are deployed into business activities.

2025 vs. 2024

Total unencumbered liquid assets increased $40 billion or 7% from last year, primarily due to an increase in securities reflecting growth in deposits and funding, partially offset by a decrease in cash and deposits with banks.

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 9

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Asset encumbrance

The table below provides a summary of our on- and off-balance sheet amounts for cash, securities and other assets, distinguishing between those that are encumbered, and those available for sale or use as collateral in secured funding transactions. Other assets, such as mortgages and credit card receivables, can also be monetized, albeit over longer timeframes than those required for marketable securities. As at October 31, 2025, our unencumbered assets available as collateral comprised 24% of total assets (October 31, 2024 – 25%).

Asset encumbrance	Table 52
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Total Assets						Encumbered				Unencumbered
(Millions of Canadian dollars)	Bank-owned<br><br>assets		Securities<br>received as<br>collateral from<br>securities<br>financing and<br>derivative<br>transactions		Total		Pledged as<br>collateral		Other<br>(1)		Available as<br>collateral<br>(2)		Other<br>(3)
Cash and deposits with banks	$	87,388	$	–	$	87,388	$	–	$	3,195	$	84,193	$	–
Securities <br>(4)		575,466		573,672		1,149,138		670,404		33,437		441,458		3,839
Loans, net of allowance for loan losses
Mortgage securities		54,607		–		54,607		26,714		–		27,893		–
Mortgage loans		438,012		–		438,012		64,928		–		41,010		332,074
Other loans		549,803		–		549,803		5,244		–		26,496		518,063
Derivatives		177,206		–		177,206		–		–		–		177,206
Others <br>(5)		146,519		–		146,519		40,974		–		9,108		96,437
Total	$	2,029,001	$	573,672	$	2,602,673	$	808,264	$	36,632	$	630,158	$	1,127,619
	As at October 31, 2024
	Total Assets						Encumbered				Unencumbered
(Millions of Canadian dollars)	Bank-owned<br><br>assets		Securities<br>received as<br>collateral from<br>securities<br>financing and<br>derivative<br>transactions		Total		Pledged as<br>collateral		Other (1)		Available as<br>collateral (2)		Other (3)
Cash and deposits with banks	$	122,743	$	–	$	122,743	$	–	$	3,269	$	119,474	$	–
Securities <br>(4)		450,719		571,869		1,022,588		614,654		31,156		373,206		3,572
Loans, net of allowance for loan losses <br>(6)
Mortgage securities		57,450		–		57,450		27,927		–		29,523		–
Mortgage loans		419,522		–		419,522		71,307		–		40,851		307,364
Other loans		504,408		–		504,408		6,343		–		25,250		472,815
Derivatives		150,612		–		150,612		–		–		–		150,612
Others <br>(5)		126,126		–		126,126		31,583		–		6,018		88,525
Total	$	1,831,580	$	571,869	$	2,403,449	$	751,814	$	34,425	$	594,322	$	1,022,888
(1)	Includes assets restricted from use to generate secured funding due to legal or other constraints.
---	---
(2)	Represents assets that are immediately available for use as collateral, including NHA MBS, our unencumbered mortgage loans that qualify as eligible collateral at FHLB, as well as loans that qualify as eligible collateral for discount window facility available to us and lodged at the FRBNY.
---	---
(3)	Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but would not be considered immediately available.
---	---
(4)	Includes bank-owned liquid assets and securities received as collateral from <br>off-balance<br> sheet securities financing, derivative transactions and margin lending. Includes $33 billion (October 31, 2024 – $31 billion) of collateral received through reverse repurchase transactions that cannot be rehypothecated in its current legal form.
---	---
(5)	The Pledged as collateral amount represents cash collateral and margin deposit amounts pledged related to OTC and exchange-traded derivative transactions.
---	---
(6)	Effective the first quarter of 2025, mortgage securities, mortgage loans and other loans are presented net of allowance for loan losses. Comparative amounts have been revised from those previously presented to conform to this presentation.
---	---

2025 vs. 2024

Total unencumbered assets available as collateral increased $36 billion or 6% from last year, primarily due to an increase in securities reflecting growth in deposits and funding, partially offset by a decrease in cash and deposits with banks.

Funding

Funding strategy Maintaining a diversified funding base is a key strategy for managing our liquidity risk profile. Core funding, comprising capital, longer-term wholesale liabilities and a diversified pool of personal as well as the stable portion of our commercial and institutional deposits, is the foundation of our structural liquidity position. Wholesale funding activities are well-diversified by geography, investor segment, instrument, currency, structure and maturity. We maintain an ongoing presence in different funding markets, which allows us to continuously monitor market developments and trends, identify opportunities and risks and take appropriate and timely actions. We continuously evaluate opportunities to expand into new markets and untapped investor segments since diversification expands our wholesale funding flexibility, minimizes funding concentration and dependency and generally reduces financing costs. We regularly assess our funding concentration and have implemented limits on certain funding sources to support diversification of our funding base.

9 2 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Deposit and funding profile

As at October 31, 2025, relationship-based deposits, which are the primary source of funding for retail and commercial lending, were $1,009 billion or 54% of our total funding (October 31, 2024 – $977 billion or 55%). The remaining portion is comprised of short- and long-term wholesale funding.

Funding for highly liquid assets consists primarily of short-term wholesale funding that reflects the monetization period of those assets. Long-term wholesale funding is used mostly to fund less liquid wholesale assets and to support liquid asset buffers.

Senior long-term debt issued by the bank on or after September 23, 2018, that has an original term greater than 400 days and is marketable, subject to certain exceptions, is subject to the Canadian Bank Recapitalization (Bail-in) regime. Under the Bail-in regime, in circumstances when the Superintendent of Financial Institutions has determined that a bank may no longer be viable, the Governor in Council may, upon a recommendation of the Minister of Finance that he or she is of the opinion that it is in the public interest to do so, grant an order directing the Canada Deposit Insurance Corporation (CDIC) to convert all or a portion of certain shares and liabilities of that bank into common shares. As at October 31, 2025, the notional value of issued and outstanding long-term debt subject to conversion under the Bail-in regime was $127 billion (October 31, 2024 – $111 billion).

For further details on our wholesale funding, refer to the Composition of wholesale funding tables below.

Long-term debt issuance

During 2025, we continued to experience favourable unsecured wholesale funding access and pricing. We issued, either directly or through our subsidiaries, unsecured long-term funding of $51 billion in various currencies and markets.

We use residential mortgage and credit card securitization programs as a source of funding and for liquidity and asset/liability management purposes. Our total secured long-term funding includes outstanding MBS sold, covered bonds that are collateralized with residential mortgages and securities backed by credit card receivables.

For further details, refer to the Off-balance sheet arrangements section.

Long-term funding sources*<br><br>(1)	Table 5<br>3
	As at
---	---	---	---	---
(Millions of Canadian dollars)	October 31<br> <br>2025		October 31<br> <br>2024
Unsecured long-term funding	$	169,621	$	150,682
Secured long-term funding		76,550		83,353
Subordinated debentures		13,941		13,714
	$	260,112	$	247,749
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
---	---
(1)	Based on original term to maturity greater than 1 year.
---	---

The following table summarizes our registered programs and their authorized limits by geography.

Programs by geography	Table 5<br>4
Canada	U.S.	Europe/Asia
---	---	---
•<br> <br>Canadian Shelf Program – $25 billion	•<br> <br>U.S. Shelf Program – US$75 billion	•<br> <br>European Debt Issuance Program – US$75 billion
		•<br> <br>Global Covered Bond Program – <br>€<br>75 billion

We also raise long-term funding using Canadian Senior Notes, Kangaroo Bonds (issued in the Australian domestic market by foreign firms) and Yankee Certificates of Deposit (issued in the U.S. domestic market by foreign firms).

As presented in the following charts, our current long-term debt profile is well-diversified by both currency and product.

(1) Includes unsecured and secured long-term funding and subordinated debentures with an original term to maturity greater than 1 year	(1) Includes unsecured and secured long-term funding and subordinated debentures with an original term to maturity greater than 1 year<br> <br>(2) Mortgage-backed securities and Canada Mortgage Bonds

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 9 3

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The following table shows the composition of our wholesale funding based on remaining term to maturity:

Composition of wholesale funding<br><br>(1)	Table 5<br>5
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Less than<br>1 month		1 to 3<br>months		3 to 6<br>months		6 to 12<br>months		Less than<br>1 year<br><br>sub-total		1 year to<br>2 years		2 years and<br>greater		Total
Deposits from banks <br>(2)	$	3,255	$	311	$	243	$	1,014	$	4,823	$	–	$	–	$	4,823
Certificates of deposit and commercial paper <br>(3)		15,877		20,614		38,985		38,595		114,071		–		–		114,071
Asset-backed commercial paper <br>(4)		4,989		5,324		8,027		1,680		20,020		–		–		20,020
Senior unsecured medium-term notes <br>(5)		2,412		4,858		8,257		22,164		37,691		29,161		63,988		130,840
Senior unsecured structured notes <br>(6)		5,050		1,841		2,581		2,986		12,458		3,243		13,430		29,131
Mortgage securitization		–		509		200		1,202		1,911		2,479		12,249		16,639
Covered bonds/asset-backed securities <br>(7)		–		3,257		3,233		13,136		19,626		20,277		20,010		59,913
Subordinated liabilities		–		2,103		–		–		2,103		–		11,838		13,941
Other <br>(8)		11		60		2,876		90		3,037		256		23,181		26,474
Total	$	31,594	$	38,877	$	64,402	$	80,867	$	215,740	$	55,416	$	144,696	$	415,852
Of which:
– Secured	$	4,989	$	9,106	$	14,264	$	16,018	$	44,377	$	22,756	$	36,883	$	104,016
– Unsecured		26,605		29,771		50,138		64,849		171,363		32,660		107,813		311,836
	As at October 31, 2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Less than<br>1 month		1 to 3<br>months		3 to 6<br>months		6 to 12<br>months		Less than<br>1 year<br><br>sub-total		1 year to<br> <br>2 years		2 years and<br>greater		Total
Deposits from banks <br>(2)	$	7,248	$	118	$	120	$	1,025	$	8,511	$	–	$	–	$	8,511
Certificates of deposit and commercial paper <br>(3)		8,377		10,413		16,882		37,702		73,374		139		–		73,513
Asset-backed commercial paper <br>(4)		4,140		3,951		7,167		2,286		17,544		–		–		17,544
Senior unsecured medium-term notes <br>(5)		5,436		7,786		7,253		12,750		33,225		20,453		57,351		111,029
Senior unsecured structured notes <br>(6), (9)		1,354		1,698		3,638		3,404		10,094		4,414		13,125		27,633
Mortgage securitization		41		509		1,296		946		2,792		2,143		11,949		16,884
Covered bonds/asset-backed securities <br>(7)		–		2,243		1,514		7,451		11,208		19,017		36,245		66,470
Subordinated liabilities		–		–		–		–		–		2,088		11,626		13,714
Other <br>(8), (10)		–		116		108		64		288		160		20,671		21,119
Total	$	26,596	$	26,834	$	37,978	$	65,628	$	157,036	$	48,414	$	150,967	$	356,417
Of which:
– Secured <br>(10)	$	4,180	$	6,788	$	9,977	$	10,683	$	31,628	$	21,160	$	53,266	$	106,054
– Unsecured <br>(9), (10)		22,416		20,046		28,001		54,945		125,408		27,254		97,701		250,363
(1)	Excludes repos.
---	---
(2)	Excludes deposits associated with services we provide to banks (e.g., custody, cash management).
---	---
(3)	Includes bearer deposit notes (unsecured).
---	---
(4)	Only includes consolidated liabilities, including our collateralized commercial paper program.
---	---
(5)	Includes deposit notes and floating rate notes (unsecured).
---	---
(6)	Includes notes where the payout is tied to movements in foreign exchange, commodities and equities.
---	---
(7)	Includes covered bonds collateralized with residential mortgages and securities backed by credit card receivables.
---	---
(8)	Includes tender option bonds (secured) of $4,581 million (October 31, 2024 – $5,157 million), other long-term structured deposits (unsecured) of $18,851 million (October 31, 2024 – $15,770 million), FHLB advances (secured) of $2,804 million (October 31, 2024 – $nil) and wholesale guaranteed interest certificates of $238 million (October 31, 2024 – $192 million).
---	---
(9)	Effective the first quarter of 2025, we updated the scope of senior unsecured structured notes to better reflect the distribution channel used to issue these notes. Comparative amounts have been revised from those previously presented to conform to this presentation.
---	---
(10)	Comparative amounts have been revised from those previously presented.
---	---

9 4 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Credit ratings

Our ability to access unsecured funding markets and to engage in certain collateralized business activities on a cost-effective basis are largely dependent on maintaining competitive credit ratings. Credit ratings and outlooks provided by rating agencies reflect their views and methodologies. Ratings are subject to change, based on a number of factors including, but not limited to, our financial strength, competitive position, liquidity and other factors not completely within our control.

The following table presents our major credit ratings:

Credit ratings<br><br>(1)	Table 56
	As at December 2, 2025
---	---	---	---	---	---
	Short-term debt	Legacy senior long-term debt<br><br>(2)	Senior long-term debt<br><br>(3)	Outlook
Moody’s <br>(4)	P-1	Aa1	A1		stable
Standard & Poor’s <br>(5)	A-1+	AA-	A		stable
Fitch Ratings <br>(6)	F1+	AA	AA-		stable
DBRS <br>(7)	R-1 (high)	AA (high)	AA		stable
(1)	Credit ratings are not recommendations to purchase, sell or hold a financial obligation in as much as they do not comment on market price or suitability for a particular investor. Ratings are determined by the rating agencies based on criteria established from time to time by them, and are subject to revision or withdrawal at any time by the rating organization.
---	---
(2)	Includes senior long-term debt issued prior to September 23, 2018 and senior long-term debt issued on or after September 23, 2018 which is excluded from the <br>Bail-in<br> regime.
---	---
(3)	Includes senior long-term debt issued on or after September 23, 2018 which is subject to conversion under the <br>Bail-in<br> regime.
---	---
(4)	On October 9, 2025, Moody’s announced completion of a periodic review of our ratings. There were no changes to our ratings.
---	---
(5)	On June 25, 2024, Standard & Poor’s affirmed our ratings with a stable outlook.
---	---
(6)	On June 3, 2025, Fitch Ratings affirmed our ratings with a stable outlook.
---	---
(7)	On May 9, 2025, DBRS affirmed our ratings with a stable outlook.
---	---

Additional contractual obligations for rating downgrades

We are required to deliver collateral to certain counterparties in the event of a downgrade from our current credit rating. The following table shows the additional collateral obligations required at the reporting date in the event of a one-,

two- or three-notch downgrade. These additional collateral obligations are incremental requirements for each successive downgrade and do not represent the cumulative impact of multiple downgrades. The amounts reported change periodically due to several factors, including the transfer of trading activity to centrally cleared financial market infrastructures and exchanges, the expiration of transactions with downgrade triggers, the imposition of internal limitations on new agreements to exclude downgrade triggers, as well as normal course mark-to-market. There is no outstanding senior debt issued in the market that contains rating triggers that would lead to early prepayment of principal.

Additional contractual obligations for rating downgrades	Table 57
	As at
---	---	---	---	---	---	---	---	---	---	---	---	---
	October 31<br><br>2025						October 31<br><br>2024
(Millions of Canadian dollars)	One-notch<br><br>downgrade		Two-notch<br><br>downgrade		Three-notch<br><br>downgrade		One-notch<br><br>downgrade		Two-notch<br><br>downgrade		Three-notch<br><br>downgrade
Contractual derivatives funding or margin requirements	$	275	$	137	$	209	$	232	$	100	$	199
Other contractual funding or margin requirements <br>(1)		41		55		188		41		63		16
(1)	Includes GICs issued by our municipal markets business out of New York.
---	---

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Liquidity Coverage Ratio (LCR)

The LCR is a Basel III metric that measures the sufficiency of high-quality liquid assets (HQLA) available to meet liquidity needs over a 30-day period in an acute stress scenario. The BCBS and OSFI regulatory minimum coverage level for LCR is 100%.

OSFI requires Canadian banks to disclose the LCR using the standard Basel disclosure template and calculated using the average of daily LCR positions during the quarter.

Liquidity coverage ratio common disclosure template<br><br>(1)	Table 58
	For the three months ended
---	---	---	---	---
	October 31<br><br><br>2025
(Millions of Canadian dollars, except percentage amounts)	Total unweighted<br>value (average)<br>(2)		Total weighted<br>value (average)
High-quality liquid assets
Total high-quality liquid assets (HQLA)			$	458,576
Cash outflows
Retail deposits and deposits from small business customers, of which:	$	414,423	$	38,905
Stable deposits<br><br>(3)		135,160		4,055
Less stable deposits		279,263		34,850
Unsecured wholesale funding, of which:		527,534		246,338
Operational deposits (all counterparties) and deposits in networks of cooperative banks<br><br>(4)		185,037		43,435
Non-operational<br> deposits		317,728		178,134
Unsecured debt		24,769		24,769
Secured wholesale funding				51,152
Additional requirements, of which:		445,456		94,078
Outflows related to derivative exposures and other collateral requirements		89,493		24,955
Outflows related to loss of funding on debt products		12,465		12,465
Credit and liquidity facilities		343,498		56,658
Other contractual funding obligations<br><br>(5)		22,841		22,841
Other contingent funding obligations<br><br>(6)		918,796		15,617
Total cash outflows			$	468,931
Cash inflows
Secured lending (e.g., reverse repos)	$	405,984	$	72,484
Inflows from fully performing exposures		23,609		10,168
Other cash inflows		24,760		24,760
Total cash inflows			$	107,412
			Total adjusted<br>value
Total HQLA			$	458,576
Total net cash outflows				361,519
Liquidity coverage ratio				127%
	July 31<br><br>2025
(Millions of Canadian dollars, except percentage amounts)			Total adjusted<br>value
Total HQLA			$	462,083
Total net cash outflows				358,716
Liquidity coverage ratio				129%
(1)	The LCR is calculated in accordance with OSFI’s LAR guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS. The LCR for the quarter ended October 31, 2025 is calculated as an average of 63 daily positions.
---	---
(2)	With the exception of other contingent funding obligations, unweighted inflow and outflow amounts are items maturing or callable in 30 days or less. Other contingent funding obligations also include debt securities with remaining maturity greater than 30 days.
---	---
(3)	As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank has an established relationship with the client making the withdrawal unlikely.
---	---
(4)	Operational deposits from customers other than retail and small and <br>medium-sized<br> enterprises, are deposits which clients need to keep with the bank in order to facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
---	---
(5)	Other contractual funding obligations primarily include outflows from unsettled securities trades and outflows from obligations related to securities sold short.
---	---
(6)	Other contingent funding obligations include outflows related to other <br>off-balance<br> sheet facilities that carry low LCR runoff factors (0% – 5%).
---	---

96 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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We manage our LCR position within a target range that reflects our liquidity risk tolerance, business mix, asset composition and funding capabilities. The range is subject to periodic review, considering changes to internal requirements and external developments.

We maintain HQLA in major currencies with dependable market depth and breadth. Our liquidity management practices are designed to ensure that the levels of HQLA are actively managed to meet target LCR objectives. Our Level 1 assets, as calculated according to OSFI LAR and the BCBS LCR requirements, represent 87% of total HQLA. These assets consist of cash, placements with central banks and highly rated securities issued or guaranteed by governments, central banks and supranational entities.

LCR captures cash flows from on- and off-balance sheet activities that are either expected or could potentially occur within 30 days in an acute stress scenario. Cash outflows result from the application of withdrawal and non-renewal factors to demand and term deposits, differentiated by client type (wholesale, retail and small- and medium-sized enterprises). Cash outflows also arise from business activities that create contingent funding and collateral requirements, such as repo funding, derivatives, short sales of securities and the extension of credit and liquidity commitments to clients. Cash inflows arise primarily from maturing secured loans, interbank loans and non-HQLA securities.

LCR does not reflect any market funding capacity that we believe would be available in a stress situation. All maturing wholesale debt is assigned 100% outflow in the LCR calculation.

Q4 2025 vs. Q3 2025

The average LCR for the quarter ended October 31, 2025 was 127%, which translates into a surplus of approximately $97 billion, compared to 129% and a surplus of approximately $103 billion in the prior quarter. Average LCR decreased from the prior quarter, primarily due to loan growth and changes in securities mix. These factors were partially offset by growth in deposits and funding.

Net Stable Funding Ratio (NSFR)

NSFR is a Basel III metric that measures the sufficiency of available stable funding relative to the amount of required stable funding. The BCBS and OSFI regulatory minimum coverage level for NSFR is 100%.

Available stable funding is defined as the portion of capital and liabilities expected to be reliable over the one-year time horizon considered by the NSFR. Required stable funding is a function of the liquidity characteristics and residual maturities of various bank assets and off-balance sheet exposures.

OSFI requires Canadian D-SIBs to disclose the NSFR using the standard Basel disclosure template. Amounts presented in this disclosure template are determined in accordance with the requirements of OSFI’s LAR guideline and are not necessarily aligned with the classification requirements prescribed under IFRS.

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Net Stable Funding Ratio common disclosure template<br><br>(1)	Table 59
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---
	Unweighted value by residual maturity<br>(2)								Weighted value
(Millions of Canadian dollars, except percentage amounts)	No maturity		< 6 months		6 months to<br>< 1 year		≥<br><br><br><br>1 year
Available Stable Funding (ASF) Item
Capital:	$	140,356	$	–	$	–	$	12,006	$	152,362
Regulatory Capital		140,356		–		–		12,006		152,362
Other Capital Instruments		–		–		–		–		–
Retail deposits and deposits from small business customers:		350,015		127,044		57,491		68,303		550,273
Stable deposits<br><br>(3)		106,148		54,260		28,305		29,640		208,918
Less stable deposits		243,867		72,784		29,186		38,663		341,355
Wholesale funding:		403,214		437,990		98,516		170,704		437,157
Operational deposits<br><br>(4)		194,308		–		–		–		97,154
Other wholesale funding		208,906		437,990		98,516		170,704		340,003
Liabilities with matching interdependent assets<br><br>(5)		–		1,644		2,191		21,993		–
Other liabilities:		61,160		306,298						22,909
NSFR derivative liabilities				58,238
All other liabilities and equity not included in the above categories		61,160		224,884		532		22,644		22,909
Total ASF									$	1,162,701
Required Stable Funding (RSF) Item
Total NSFR high-quality liquid assets (HQLA)									$	46,235
Deposits held at other financial institutions for operational purposes		–		2,041		–		–		1,020
Performing loans and securities:		315,100		298,690		153,486		543,646		826,048
Performing loans to financial institutions secured by Level 1 HQLA		71		89,523		19,004		13		14,739
Performing loans to financial institutions secured by <br>non-Level<br> 1 HQLA and unsecured performing loans to financial institutions		10,158		102,048		23,946		30,734		63,748
Performing loans to <br>non-financial<br> corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which:		205,779		56,029		39,956		178,150		372,669
With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk		–		–		–		11,122		7,229
Performing residential mortgages, of which:		41,373		47,988		67,366		309,202		301,295
With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk		36,581		47,937		67,312		302,107		291,138
Securities that are not in default and do not qualify as HQLA, including exchange-traded equities		57,719		3,102		3,214		25,547		73,597
Assets with matching interdependent liabilities<br><br>(5)		–		1,644		2,191		21,993		–
Other assets:		9,202		446,594						124,399
Physical traded commodities, including gold		9,108								7,742
Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs				31,704						26,948
NSFR derivative assets				58,310						72
NSFR derivative liabilities before deduction of variation margin posted				105,160						5,258
All other assets not included in the above categories		94		176,044		216		75,160		84,379
Off-balance<br> sheet items				1,008,453						38,292
Total RSF									$	1,035,994
Net Stable Funding Ratio (%)										112%
	As at July 31, 2025
---	---	---	---
(Millions of Canadian dollars, except percentage amounts)		Weighted<br><br>value
Total ASF		$	1,135,007
Total RSF			997,710
Net Stable Funding Ratio (%)			114%
(1)	The NSFR is calculated in accordance with OSFI’s Liquidity Adequacy Requirements (LAR) guideline, which, in turn, reflects liquidity-related requirements issued by the BCBS.
---	---
(2)	Totals for the following rows encompass the residual maturity categories of less than 6 months, 6 months to less than 1 year, and greater than or equal to 1 year in accordance with the requirements of the common disclosure template prescribed by OSFI: Other liabilities, NSFR derivative liabilities, Other assets, Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs, NSFR derivative assets, NSFR derivative liabilities before deduction of variation margin posted, and <br>Off-balance<br> sheet items.
---	---
(3)	As defined by the BCBS, stable deposits from retail and small business customers are deposits that are insured and are either held in transactional accounts or the bank has an established relationship with the client making the withdrawal unlikely.
---	---
(4)	Operational deposits from customers other than retail and small and <br>medium-sized<br> enterprises, are deposits which clients need to keep with the bank in order to facilitate their access and ability to use payment and settlement systems primarily for clearing, custody and cash management activities.
---	---
(5)	Interdependent assets and liabilities represent National Housing Act Mortgage-Backed Securities (NHA MBS) liabilities, including liabilities arising from transactions involving the Canada Mortgage Bond program and their corresponding encumbered mortgages.
---	---

98 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Available stable funding is comprised primarily of a diversified pool of personal and commercial deposits, capital and long-term wholesale liabilities. Required stable funding is driven mainly by the bank’s mortgage and loan portfolio, secured loans to financial institutions and to a lesser extent by other less liquid assets. NSFR does not reflect any unused market funding capacity that we believe would be available.

Volume and composition of available stable funding is actively managed to optimize our structural funding position and meet NSFR objectives. Our NSFR is managed in accordance with our comprehensive LRMF.

Q4 2025 vs. Q3 2025

The NSFR as at October 31, 2025 was 112%, which translates into a surplus of approximately $127 billion, compared to 114% and a surplus of approximately $137 billion in the prior quarter. NSFR decreased from the previous quarter, primarily due to higher required stable funding on securities and securities financing transactions and loan growth. These factors were partially offset by growth in deposits and funding.

Contractual maturities of financial assets, financial liabilities and off-balance sheet items

The following tables provide remaining contractual maturity profiles of all our assets, liabilities and off-balance sheet items at their carrying value (e.g., amortized cost or fair value) and maturity profiles of assets and liabilities of insurance contracts and reinsurance contracts held at their carrying value based on the estimated timing of when the settlement of the amounts are expected to occur at the balance sheet date. Off-balance sheet items are allocated based on the expiry date of the contract.

Details of contractual maturities and commitments to extend funds are a source of information for the management of liquidity risk. Among other purposes, these details form a basis for modelling a behavioural balance sheet with effective maturities to calculate liquidity risk measures. For further details, refer to the Risk measurement and internal liquidity reporting section.

Contractual maturities of financial assets, financial liabilities and <br>off-balance<br> sheet items	Table 60
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	Less than<br>1 month		1 to 3<br>months		3 to 6<br>months		6 to 9<br>months		9 to 12<br>months		1 year<br>to 2 years		2 years<br>to 5 years		5 years<br>and<br>greater		With no<br>specific<br>maturity		Total
Assets
Cash and deposits with banks	$	84,814	$	17	$	–	$	–	$	6	$	–	$	–	$	–	$	2,551	$	87,388
Securities
Trading (1)		100,479		905		1,362		1,395		849		220		455		14,329		99,073		219,067
Investment, net of applicable allowance		4,740		8,258		17,570		12,021		20,806		82,377		85,610		109,883		1,456		342,721
Assets purchased under reverse repurchase agreements and securities borrowed (2)		138,208		57,226		45,999		20,873		22,499		51		–		–		24,827		309,683
Loans, net of applicable allowance		22,203		34,947		49,746		66,956		55,741		297,199		302,691		83,739		129,200		1,042,422
Other
Derivatives		13,116		26,962		15,562		10,433		7,553		19,937		36,149		47,494		–		177,206
Other financial assets		52,621		5,568		2,636		769		766		452		148		4,582		5,327		72,869
Total financial assets		416,181		133,883		132,875		112,447		108,220		400,236		425,053		260,027		262,434		2,251,356
Other <br>non-financial<br> assets		4,137		2,055		2,568		364		1,436		2,661		4,479		6,413		49,537		73,650
Total assets	$	420,318	$	135,938	$	135,443	$	112,811	$	109,656	$	402,897	$	429,532	$	266,440	$	311,971	$	2,325,006
Liabilities and equity
Deposits (3)
Unsecured borrowing	$	106,190	$	80,883	$	105,974	$	83,764	$	71,428	$	61,413	$	91,338	$	54,701	$	750,271	$	1,405,962
Secured borrowing		5,217		7,526		9,546		2,938		2,949		6,814		12,108		9,099		–		56,197
Covered bonds		–		3,259		3,214		5,088		6,416		19,323		11,929		4,228		–		53,457
Other
Obligations related to securities sold short		43,223		1,234		834		2,593		1,357		650		–		–		–		49,891
Obligations related to assets sold under repurchase agreements and securities loaned (2)		166,329		71,225		16,610		6,446		4,214		1,672		–		–		23,020		289,516
Derivatives		13,292		28,955		17,532		11,248		8,664		20,821		36,809		46,632		–		183,953
Other financial liabilities		46,292		3,296		5,329		1,406		1,449		929		2,105		21,337		2,418		84,561
Subordinated debentures		–		2,091		–		–		–		–		–		11,870		–		13,961
Total financial liabilities		380,543		198,469		159,039		113,483		96,477		111,622		154,289		147,867		775,709		2,137,498
Other <br>non-financial<br> liabilities		1,426		6,513		435		239		223		2,261		1,860		23,506		11,894		48,357
Equity		–		–		–		–		–		–		–		–		139,151		139,151
Total liabilities and equity	$	381,969	$	204,982	$	159,474	$	113,722	$	96,700	$	113,883	$	156,149	$	171,373	$	926,754	$	2,325,006
Off-balance<br> sheet items
Financial guarantees	$	1,125	$	2,829	$	4,578	$	4,545	$	4,543	$	2,562	$	6,055	$	2,662	$	29	$	28,928
Commitments to extend credit		5,744		10,299		17,664		18,365		22,554		70,723		239,678		30,846		4,050		419,923
Other credit-related commitments		82,651		1,751		2,287		3,360		2,673		880		715		125		86,828		181,270
Other commitments		6		10		17		17		18		63		162		213		687		1,193
Total <br>off-balance<br> sheet items	$	89,526	$	14,889	$	24,546	$	26,287	$	29,788	$	74,228	$	246,610	$	33,846	$	91,594	$	631,314
(1)	With the exception of debt securities within the Insurance segment, trading debt securities classified as FVTPL have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.
---	---
(2)	Open reverse repo and repo contracts, which have no set maturity date and are typically short-term, have been included in the with no specific maturity category.
---	---
(3)	A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 99

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	As at October 31, 2024
(Millions of Canadian dollars)	Less than<br>1 month		1 to 3<br>months		3 to 6<br>months		6 to 9<br>months		9 to 12<br>months		1 year<br>to 2 years		2 years<br>to 5 years		5 years<br>and<br><br>greater		With no<br>specific<br>maturity		Total
Assets
Cash and deposits with banks	$	120,584	$	6	$	–	$	–	$	–	$	–	$	–	$	–	$	2,153	$	122,743
Securities
Trading (1)		80,203		148		380		22		34		229		707		11,903		89,674		183,300
Investment, net of applicable allowance		5,974		7,588		6,782		12,445		9,746		51,674		67,730		93,451		1,228		256,618
Assets purchased under reverse repurchase agreements and securities borrowed (2)		170,052		65,837		57,921		15,720		20,727		181		–		–		20,365		350,803
Loans, net of applicable allowance (3)		24,706		32,131		45,916		52,362		50,303		287,726		288,213		79,641		120,382		981,380
Other
Derivatives		13,657		19,365		9,293		6,548		5,797		17,376		31,389		47,187		–		150,612
Other financial assets		42,601		4,575		2,168		423		671		175		743		1,829		4,229		57,414
Total financial assets		457,777		129,650		122,460		87,520		87,278		357,361		388,782		234,011		238,031		2,102,870
Other <br>non-financial<br> assets		11,393		2,158		1,450		259		233		1,941		3,122		9,501		38,655		68,712
Total assets	$	469,170	$	131,808	$	123,910	$	87,779	$	87,511	$	359,302	$	391,904	$	243,512	$	276,686	$	2,171,582
Liabilities and equity
Deposits (4)
Unsecured borrowing	$	122,083	$	72,933	$	83,574	$	84,252	$	77,207	$	55,196	$	85,458	$	44,264	$	668,975	$	1,293,942
Secured borrowing		4,437		6,000		9,513		3,939		1,956		7,447		14,969		9,050		–		57,311
Covered bonds		–		2,245		1,498		4,019		2,230		17,134		27,207		3,945		–		58,278
Other
Obligations related to securities sold short		35,286		–		–		–		–		–		–		–		–		35,286
Obligations related to assets sold under repurchase agreements and securities loaned (2)		221,377		38,828		14,726		7,586		2		466		–		–		22,336		305,321
Derivatives		13,153		23,372		12,176		11,160		8,025		18,305		32,865		44,707		–		163,763
Other financial liabilities		40,944		3,334		2,917		2,060		2,024		1,073		2,404		16,788		1,293		72,837
Subordinated debentures		–		–		–		–		–		2,025		–		11,521		–		13,546
Total financial liabilities		437,280		146,712		124,404		113,016		91,444		101,646		162,903		130,275		692,604		2,000,284
Other <br>non-financial<br> liabilities		1,501		5,769		452		231		198		1,664		1,821		21,425		11,045		44,106
Equity		–		–		–		–		–		–		–		–		127,192		127,192
Total liabilities and equity	$	438,781	$	152,481	$	124,856	$	113,247	$	91,642	$	103,310	$	164,724	$	151,700	$	830,841	$	2,171,582
Off-balance<br> sheet items
Financial guarantees	$	917	$	2,929	$	4,485	$	3,818	$	4,368	$	1,563	$	7,140	$	1,977	$	25	$	27,222
Commitments to extend credit		7,317		9,060		15,891		17,305		20,109		63,200		217,555		25,580		2,950		378,967
Other credit-related commitments		51,645		1,600		2,360		2,927		2,534		460		1,299		113		81,379		144,317
Other commitments		7		12		19		20		19		70		179		260		926		1,512
Total <br>off-balance<br> sheet items	$	59,886	$	13,601	$	22,755	$	24,070	$	27,030	$	65,293	$	226,173	$	27,930	$	85,280	$	552,018
(1)	With the exception of debt securities within the Insurance segment, trading debt securities classified as FVTPL have been included in the less than 1 month category as there is no expectation to hold these assets to their contractual maturity.
---	---
(2)	Open reverse repo and repo contracts, which have no set maturity date and are typically short-term, have been included in the with no specific maturity category.
---	---
(3)	Comparative amounts have been revised from those previously presented.
---	---
(4)	A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile section.
---	---

100 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Contractual maturities of financial liabilities and off-balance sheet items – undiscounted basis

The following tables provide remaining contractual maturity analysis of our financial liabilities and off-balance sheet items. Disclosed amounts are the contractual undiscounted amounts due at payment dates of all financial liabilities (e.g., par value or amount payable upon maturity). The amounts do not reconcile directly with those in our consolidated balance sheets as the table incorporates only undiscounted amounts due at payment dates and do not recognize premiums, discounts, expectations of early redemptions or mark-to-market adjustments recognized in the instruments’ carrying values as at the balance sheet date. Financial liabilities are based upon the earliest period in which they are required to be paid. For off-balance sheet items, the undiscounted amounts potentially payable under financial guarantees and commitments to extend credit are classified based on the earliest date they can be called.

Contractual maturities of financial liabilities and <br>off-balance<br> sheet items – undiscounted basis*	Table 61
	As at October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars)	On<br> demand		Within<br> 1 year		1 year<br> to 2 years		2 years<br> to 5 years		5 years<br> and greater		Total
Financial liabilities
Deposits <br>(1)	$	673,197	$	572,391	$	87,107	$	114,183	$	72,916	$	1,519,794
Other
Obligations related to securities sold short		–		49,241		650		–		–		49,891
Obligations related to assets sold under repurchase agreements and securities loaned		23,020		264,838		1,672		–		–		289,530
Other liabilities		1,842		57,701		1,010		2,503		21,082		84,138
Lease liabilities		–		694		799		1,947		1,877		5,317
Subordinated debentures		–		2,091		–		–		11,880		13,971
		698,059		946,956		91,238		118,633		107,755		1,962,641
Off-balance<br> sheet items
Financial guarantees <br>(2)	$	26,806	$	1,772	$	240	$	110	$	–	$	28,928
Other commitments <br>(3)		–		68		63		162		213		506
Commitments to extend credit <br>(2)		4,206		134,908		61,746		207,249		11,814		419,923
		31,012		136,748		62,049		207,521		12,027		449,357
Total financial liabilities and <br>off-balance<br> sheet items	$	729,071	$	1,083,704	$	153,287	$	326,154	$	119,782	$	2,411,998
	As at October 31, 2024
(Millions of Canadian dollars)	On<br> demand		Within<br> 1 year		1 year<br> to 2 years		2 years<br> to 5 years		5 years<br> and greater		Total
Financial liabilities
Deposits <br>(1)	$	585,524	$	560,583	$	79,909	$	127,421	$	58,193	$	1,411,630
Other
Obligations related to securities sold short		–		35,326		–		–		–		35,326
Obligations related to assets sold under repurchase agreements and securities loaned		22,336		282,478		466		–		–		305,280
Other liabilities		563		51,216		382		742		15,011		67,914
Lease liabilities		–		709		631		1,566		1,767		4,673
Subordinated debentures		–		–		2,026		–		11,530		13,556
		608,423		930,312		83,414		129,729		86,501		1,838,379
Off-balance<br> sheet items
Financial guarantees <br>(2)	$	25,553	$	1,485	$	10	$	174	$	–	$	27,222
Other commitments <br>(3)		–		77		70		179		260		586
Commitments to extend credit <br>(2)		3,081		121,652		54,443		190,073		9,718		378,967
		28,634		123,214		54,523		190,426		9,978		406,775
Total financial liabilities and <br>off-balance<br> sheet items	$	637,057	$	1,053,526	$	137,937	$	320,155	$	96,479	$	2,245,154
*	This table represents an integral part of our 2025 Annual Consolidated Financial Statements.
---	---
(1)	A major portion of relationship-based deposits are repayable on demand or at short notice on a contractual basis while, in practice, these customer balances form a core base for our operations and liquidity needs, as explained in the preceding Deposit and funding profile.
---	---
(2)	We believe that it is highly unlikely that all or substantially all of these guarantees and commitments will be drawn or settled within one year, and contracts may expire without being drawn or settled. The management of the liquidity risk associated with potential extensions of funds is outlined in the preceding Risk measurement and internal liquidity reporting section.
---	---
(3)	Includes commitments related to short-term and <br>low-dollar<br> value leases, leases not yet commenced, and lease payments related to <br>non-recoverable<br> tax.
---	---

Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 1

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Insurance risk

Insurance risk refers to the potential financial loss that may arise where the amount, timing and/or frequency of benefit and/or premium payments under insurance and reinsurance contracts are different than expected. Insurance risk is distinct from those risks covered by other parts of our risk management framework (e.g., credit, market and operational risk) where those risks are ancillary to, or accompany, the risk transfer. Our main insurance sub-risks are: morbidity, mortality, longevity, policyholder behaviour (lapse) and travel risk. In addition, we are subject to expense risk, which is the exposure to the variability in future expenses that are expected to be incurred in servicing insurance contracts.

Our Insurance Risk Management Framework provides an overview of our processes and tools for identifying, assessing, managing, mitigating and reporting on the insurance risks that face the organization. These are also supported by our robust three lines of defence governance structure, which is consistent with our ERMF.

Operational risk

Operational risk is the risk of loss or harm resulting from people, inadequate or failed internal processes, controls and systems or from external events. Operational risk is inherent in all our activities and third-party activities and failure to manage operational risk can result in direct or indirect financial loss, reputational impact or regulatory scrutiny and proceedings in the various jurisdictions where we operate.

Our management of operational risk follows the three lines of defence governance model, encompassing the organizational roles and responsibilities for a coordinated enterprise-wide approach. For further details on the structure and organization of our operational risk management and control function, refer to the Risk management – Enterprise risk management section.

Operational risk framework

We have an Enterprise Operational Risk Framework which sets out the processes to identify, assess, monitor, measure, report and communicate on operational risk. The processes are established through the following:

•	Risk identification and assessment tools, including the collection and analysis of risk event data, help risk owners understand and proactively manage operational risk exposures. Risk assessments are intended to ensure alignment between risk exposures and efforts to manage them. Management uses outputs of these tools to make informed risk decisions.
•	Risk monitoring tools alert management to changes in the operational risk profile. When paired with escalation and monitoring triggers, risk monitoring tools can identify risk trends, warn management of risk levels that approach or exceed defined limits, as well as prompt actions and mitigation plans to be undertaken.
---	---
•	Risk capital measurement is designed to provide credible estimation of potential risk exposure, including surfacing risk vulnerabilities, and informs strategic and capital planning decisions, which are ultimately intended to ensure that the bank is sufficiently resilient to withstand operational risk losses both in normal times and under stress situations.
---	---
•	Risk reporting and communication processes seek to ensure that relevant operational risk information is made available to management in a timely manner to support risk-informed business decisions.
---	---

Conclusions from our operational risk programs enable learning based on what has occurred, insights into whether it could happen elsewhere in the organization, and what controls we need to amend or implement. These conclusions support the articulation of our operational risk appetite and are used to inform the overall level of operational risk exposure which thereby defines our operational risk profile. This profile includes significant operational risk exposures, potential new and emerging exposures and trends, and overall conclusions on the control environment and risk outlook.

We consider the potential risks and rewards of our decisions to strike a balance between accepting potential losses versus incurring costs of mitigation, the expression of which is in the form of our operational risk appetite. Our operational risk appetite is established at the Board level and cascaded throughout each of our business segments. We proactively identify and investigate corporate insurance opportunities to mitigate and reduce potential future impacts of operational risk.

Management reports have been implemented at various levels to support proactive management of operational risk and transparency of risk exposures. These reports are provided to senior management on a regular basis and provide detail on the main drivers of the risk status and trend for each of our business segments and the bank overall. In addition, changes to the operational risk profile that are not aligned to our business strategy or operational risk appetite are identified and discussed at the Operational Risk Committee (comprised of executives across the business and risk management) and presented to the Group Risk Committee (GRC) and the Risk Committee of the Board.

Our operations expose us to many different operational risks, which may adversely affect our businesses and financial results. The following list is not exhaustive, as other factors could also adversely affect our results.

10 2 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Operational risk	Management strategy
Information technology and cybersecurity risk<br><br><br><br>	Information technology risk is the risk associated with the use, ownership, operation and adoption of information systems that can result in business interruptions, client service disruptions and loss of confidential information causing financial loss, reputational damage and regulatory fines and penalties. We maintain a risk driven program to address the risks following our operational risk framework supported by a global team of technology risk management experts.<br><br><br><br>Cybersecurity risk is the risk to the business associated with cyberattacks initiated to disrupt or disable our operations or to expose or damage data. We have a dedicated team of technology and cybersecurity professionals that manage a comprehensive program that seeks to protect the organization against breaches and other incidents by ensuring appropriate security and operational controls are in place. We continue to strengthen our cyber-control framework and to improve our resilience and cybersecurity capabilities including through <br>24-hour<br> monitoring, cyber intelligence analysis of internal and external threats and alerting of potentially suspicious security events and incidents. Throughout the year, we continued to invest in our cybersecurity program. In addition, scenario-based testing, assessments and simulations were conducted to test our resiliency strategy.
Information management and privacy risk<br><br><br><br>	Information management risk is the risk of failing to manage information appropriately through its lifecycle due to inadequate processes, controls and technology resulting in legal and regulatory consequences, reputational damage and/or financial loss. We continue to invest in the Enterprise Chief Data Office (CDO) and functional and regional data management and data governance units to promote awareness of and effectively manage information management risk. Managing information management risk is fundamental to become a data-driven organization that uses data effectively and efficiently to improve client experience and decision-making.<br><br><br><br>Privacy risk is defined as the risk of improper creation or collection, use, disclosure, retention or destruction of PI, including the failure to safeguard PI against unauthorized access. PI is information entrusted to RBC that identifies an individual or can be reasonably used to identity an individual. PI can relate to current, former and prospective clients, employees and contractors. The collection, use and sharing of data, as well as the management and governance of data, are increasingly important as we continue to invest in digital solutions and innovation, as well as expanding our business activities, which is also reflected through regulatory developments relating to data privacy. GRM partners with cross-functional teams to develop and implement enterprise-wide standards and practices that describe how data is obtained, used, protected, managed and governed.
Financial crimes risk<br><br><br><br>	Financial crimes risk is the risk that our products, services and delivery channels are misused to facilitate the laundering of proceeds of crime, financing of terrorist activity, bribery, corruption and other activities that may violate applicable economic sanctions. We maintain an enterprise-wide program designed to deter, detect and report suspected money laundering and terrorist financing or suspicious activities across our organization, while seeking to ensure compliance with the laws and regulations of the various jurisdictions in which we operate. Our Enterprise Financial Crimes program is dedicated to the continuous development and maintenance of robust policies, guidelines, training, risk-assessment tools and models to enable our employees to manage evolving money laundering and terrorist financing risks, economic sanctions and regulatory expectations. The Enterprise Financial Crimes program is regularly evaluated in an effort to ensure it remains current and aligned with industry standards, best practices and all applicable laws, regulations and guidance. Risks of <br>non-compliance<br> can include enforcement actions (which may involve substantial fines or limitations on our business activities), criminal prosecutions and reputational damage.
Third-party risk<br><br><br><br>	Third-party risk is a risk that arises if and when there is a failure to effectively manage third parties which may expose us to service disruptions, regulatory action, financial loss, litigation or reputational damage. We have a risk-based, enterprise-wide program designed to provide oversight for third-party relationships, ensure compliance with global regulatory expectations and enable effective responses to events that can cause service disruptions, financial loss or various other risks that could impact us. Our approach to third-party risk mitigation is outlined in policies and standards that establish the requirements for identifying and managing risks throughout the engagement with a third-party (including risks resultant from supplier concentration and through fourth parties across the supply chain). Third-party providers critical to our operations are actively monitored for their ability to deliver services to us, including impacts resultant from suppliers of our third-party providers (i.e., fourth parties).
Business continuity risk<br><br><br><br>	Business continuity risk is the risk of being unable to maintain, continue or restore essential business operations during and/or after an event that prevents us from conducting business in the normal course. Exposure to disruptive operational events interrupts the continuity of our business operations and could negatively impact our financial results, reputation, client outcomes and/or result in harm to our employees. These operational events could result from the impact of severe weather, outbreak of a pandemic or other health crisis, failed processes, technology failures or cyber threats. Our risk-based enterprise-wide business continuity management program considers multiple scenarios to address the consequences of a disruption and its effects on the availability of our people, processes, facilities, technology and third-party arrangements. Our approach to, and requirements for, business continuity management are outlined in policies and standards embedded across the organization and the related risks are regularly measured, monitored, reported and integrated into our operational risk management and control framework.

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Operational risk

Management strategy

Fraud risk

Fraud risk is the risk of intentional unauthorized activities designed to obtain benefits from RBC or assets under our care, or from using RBC products. Fraud may be perpetrated by external parties (external fraud) or by individuals inside the organization (internal fraud). It typically results in financial loss, reputational damage or other harm to victims and involves intent to deceive for improper or illegal gain. Examples include theft of cash or assets and unauthorized transactions. To manage fraud risk effectively, we employ a comprehensive, multi-layered approach that includes prevention, detection and response strategies. This approach is supported by policies and procedures that clearly outline the responsibilities and expectations for all employees. Additionally, we implement robust technical controls, such as advanced fraud detection software, and internal business controls, including regular audits and compliance checks. These measures are designed to work together to provide a strong defense against fraud, to protect both the organization and our clients.

Model risk

Models are applications of theoretical, empirical, judgmental assumptions and/or statistical techniques, including AI and machine learning methods, which process input data to generate results and present a useful and meaningful output to inform business units and control functions across RBC. Models support valuation of financial products and positions; identification, measurement and management of risk; stress testing and capital adequacy; business decision-making; financial and regulatory reporting; operational efficiencies; and public disclosure. Model risk is the risk of adverse financial, operational or reputational consequences arising from the misspecification or misuse of models at any stage throughout a model’s lifecycle.

Model risk governance and oversight

The model risk governance and oversight structure spans all stages of the model’s life cycle, and is founded on principles of shared responsibility across the three lines of defence. The Enterprise Model Risk Policy sets out the requirements for managing model risk across RBC, and compliance with the policy is monitored and reported on regularly to senior management and periodically to the Risk Committee of the Board.

The model risk management lifecycle

Model risk is managed across all key stages of a model’s life cycle, with emphasis on: (i) maintaining a complete inventory of models used across RBC; (ii) developing and comprehensively documenting all models; (iii) independently challenging the efficacy of models through validation; (iv) model implementation, use and ongoing performance monitoring; and (v) periodic re-validation of models to confirm they remain fit for purpose.

Model validation is a critical stage of a model’s life cycle, in which models are independently and comprehensively evaluated for intended uses. This lifecycle activity is carried out by our enterprise model risk management function, a team of modelling professionals organizationally independent from the model owners, developers and users. The independent validation of a model seeks to ensure conceptual soundness and fitness for use, and to highlight model limitations and uncertainties, which should reduce the risks associated with model use.

Following approval, models are subject to ongoing performance monitoring and periodic re-validation. As needed, models are retired or replaced with more suitable models, which are also subject to the model risk management lifecycle.

Culture and conduct risk

Our culture is defined by our Purpose, vision, values and risk management principles with behaviours upheld through our Code of Conduct. Our values set the foundation of our culture and are rooted in our respect for and our commitments to our clients, communities and other stakeholders, and each other. Culture risk refers to the misalignment between our stated desired culture and our actual culture as exemplified through leader actions, employee behaviours or organizational systems that may prevent us from achieving our objectives.

Conduct is the manifestation of culture through the behaviours, judgment, decisions, actions and inactions of the organization, our employees and third-party service providers operating on our behalf. Conduct risk is the risk that outcomes are not in keeping with our responsibilities to our stakeholders, including clients, employees, financial markets and regulators, suppliers, communities, our reputation and shareholders. This risk is managed through embedding conduct considerations into business decision-making processes, enhancing existing business practices and control processes, and monitoring to avoid and address poor outcomes for stakeholders. The desired outcomes from effective culture and conduct practices align with our Purpose and values and support our risk appetite statements.

Risk culture is a subset of our overall culture that influences how, individually and collectively, we take and manage risks. Our risk culture helps us identify and understand risks, openly discuss risks and act on the organization’s current and perceived future risks. Our risk culture practices are grounded in our risk management and human resource practices and protocols. When combined with the elements of effective leadership and values, these practices provide a base from which the resulting risk culture and conduct outcomes can be assessed and monitored, and practices can be sustained and/or further enhanced.

Our Board-approved Enterprise Culture and Conduct Risks Framework provides organizational direction and describes our approach to related topics applicable to all risk categories such as fair outcomes for clients and other stakeholders, and our culture, including accountability and risk culture, conduct risk, sales conduct, client practices and misconduct.

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On a regular basis, management communicates behavioural expectations to our employees with an emphasis on culture, conduct and values. Our leadership model also supports and encourages effective challenge between the businesses and control functions. These behavioural expectations are supported by tools and resources which are designed to help employees live our values, report misconduct and raise concerns, including those that might have ethical implications. We are committed to fostering an environment where employees feel safe to speak up without retaliation. Employees have the ability to report matters through a global anonymous Conduct Hotline. In addition, our Code of Conduct outlines an employee’s responsibility to be truthful, respect others and comply with laws, regulations and our policies. Anyone who breaches or fails to report an actual or possible breach of the Code of Conduct is subject to corrective or disciplinary action. This can range from reprimands and impacts on performance ratings and compensation, to termination of employment relationships with the organization. As well, Internal Audit conducts select behavioural science reviews to better understand and enhance employee attitudes and behaviours as they relate to risk management.

Operational risk capital

Requirements for operational risk capital are determined in accordance with OSFI’s CAR guidelines using the Basel III Standardized Approach (SA) for operational risk. The SA methodology is a formula-based calculation where a Business Indicator Component (BIC) is multiplied by an Internal Loss Multiplier (ILM) to determine operational risk capital. The BIC is a financial statement-based proxy for operational risk that reflects a three-year average of specified components of net income multiplied by a set of supervisory provided coefficients. The ILM is a scaling factor that is based on our 10-year historical operational loss average relative to the BIC. Operational risk losses are recorded in our operational risk management system, and robust processes exist to support high quality internal loss data. For further details on operational risk capital, refer to the Capital management section.

Operational risk loss events

As at October 31, 2025, our operational risk losses remain within our risk appetite. For further details on our contingencies, including litigation, refer to Notes 23 and 24 of our 2025 Annual Consolidated Financial Statements.

Compliance risk

Compliance risk is the risk of potential non-conformance with laws, rules, regulations and prescribed practices in any jurisdiction in which we operate. Issues regarding compliance with laws and regulations can arise in a number of areas in large complex financial institutions, such as RBC, and are often the result of inadequate or failed internal processes, controls, people or systems. We currently are, and may be at any given time, subject to legal and regulatory proceedings and subject to governmental and regulatory examinations, investigations and other inquiries.

Laws and regulations are in place to protect the financial and other interests of our clients, shareholders and the public. As a large-scale global financial institution, we are subject to numerous laws and extensive and evolving regulation by governmental agencies, supervisory authorities and self-regulatory organizations in Canada, the U.S., the U.K., Europe and other jurisdictions in which we operate. Such regulation continues to become increasingly extensive and complex. In addition, regulatory scrutiny and expectations in Canada, the U.S., the U.K., Europe and other jurisdictions for large financial institutions with respect to, among other things, governance, risk management practices and controls, and conduct, as well as the enforcement of regulatory compliance matters, has intensified. Failure to comply with these regulatory requirements and expectations or to resolve any identified deficiencies could result in increased regulatory oversight and restrictions. Resolution of such matters can also result in the payment of substantial penalties, agreements with respect to future operation of our business, actions with respect to relevant personnel, admission of wrongdoing, and guilty pleas with respect to criminal charges, which in turn may result in us being prohibited from conducting certain types of business absent regulatory relief, receipt of which cannot be assured.

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Regulatory compliance risk includes the regulatory risks associated with financial crimes (which include, but are not limited to, money laundering, terrorist financing, bribery, corruption and violations of economic sanctions), privacy, market conduct, consumer protection and business conduct, as well as prudential and other generally applicable non-financial requirements. Specific compliance policies, procedures and supporting frameworks have been developed to seek to manage regulatory compliance risk.

Our Regulatory Compliance Management Framework outlines how we manage and mitigate the regulatory compliance risks associated with failing to comply with, or adapt to, current and changing laws, regulations and expectations in the jurisdictions in which we operate.

Operating in a complex regulatory environment and intense regulatory enforcement environment, we are and have been subject to a variety of legal proceedings, including civil claims and lawsuits, criminal charges, regulatory scrutiny, examinations and proceedings, investigations, audits and requests for information by various governmental regulatory agencies and law enforcement authorities in various jurisdictions, and we anticipate that our ongoing business activities will give rise to such matters in the future. The global scope of our operations also means that a single issue may give rise to overlapping regulatory investigations, regulatory proceedings, or civil litigation claims and/or criminal prosecutions in different jurisdictions. RBC can be subject to such proceedings due to alleged violations of law or, if determined by regulators, allegedly inadequate policies, procedures, controls or remediation of deficiencies. Changes to laws, including tax laws, regulations or regulatory policies, as well as the changes in how they are interpreted, implemented or enforced, could adversely affect us, for example, by lowering barriers to entry in the businesses in which we operate, increasing our costs of compliance, or limiting our activities and ability to execute our strategic plans. In addition, the severity of the remedies sought in legal and regulatory proceedings to which RBC is subject have increased. Further, there is no assurance that we always will be, or be deemed to be, in compliance with laws, regulations or regulatory policies or expectations. Accordingly, it is possible that we could receive a judicial or regulatory enforcement judgment or decision that results in significant fines, damages, penalties, and other costs or injunctions, criminal convictions, or loss of licenses or registrations that would damage our reputation and negatively impact our earnings and ability to conduct some of our businesses. We may also be subject to litigation arising in the ordinary course of our business and the adverse resolution of any litigation could have a significant adverse effect on our results or could give rise to significant related reputational damage, which in turn could impact our future business prospects.

Reputation risk

Reputation risk is the risk of an adverse impact on stakeholders’ perception of RBC due to i) perceived or actual misalignment between stakeholder perceptions of RBC and the actions or inactions of the bank, its employees or individuals or groups affiliated with RBC, ii) negative or shifting public sentiment on existing, evolving or emerging industry or global issues, or iii) negative outcomes relating to any risk inherent to the financial services industry, including ineffective management of these risks, or situations beyond our control such as external events or systemic risks. A strong and trustworthy reputation will generally strengthen our market position, reduce our cost of capital, increase shareholder value, attract and retain top talent and help us weather a crisis. Conversely, damage to our reputation can result in reduced share price and market capitalization, loss of strategic flexibility, inability to enter or expand into markets, loss of client loyalty and business, or regulatory fines and penalties. The sources of reputation risk are widespread. Reputation risk is a transverse risk which can manifest as an outcome of other risk types including but not limited to credit, regulatory, legal, operational and E&S risks. We can also experience reputation risk from a failure to maintain an effective control environment, exhibit good conduct and maintain appropriate cultural practices.

Managing our reputation risk is an integral part of our organizational culture and our overall enterprise risk management approach, as well as a priority for employees and our Board. Our Board-approved Enterprise Reputation Risk Management Framework provides an overview of our approach to identify, assess, manage, monitor and report on reputation risk. This framework outlines governance authorities, roles and responsibilities, and controls and mechanisms to manage our reputation risk, including our culture of integrity, compliance with our Code of Conduct and operating within our risk appetite.

Our governance of reputation risk aims to be holistic and provides an integrated view of potential reputation issues across the organization. This governance structure is designed to support the understanding of ownership and accountability for reputation risk across the enterprise, both proactive and reactive reputation risk decisions are escalated to senior management for review and evaluation, and reporting on reputation risk is comprehensive and integrated.

Strategic risk

Strategic risk is the risk to earnings, capital or liquidity arising from adverse business decisions, improper implementation of strategic initiatives or inadequate responses to changes in the external operating environment by the bank or a particular business unit. To safeguard against unacceptable losses or unintended outcomes, we integrate risk management practices into our strategic, financial and capital planning processes. This integration facilitates informed dialogue during strategic decision making and serves as a foundational element of our planning cycle.

Accountability for the selection and execution of business strategies resides with the heads of each business segment. The governance of strategic risk is the responsibility of these leaders and their operating committees, in conjunction with the Enterprise Strategy & Transformation group, the GE and the Board. The Enterprise Strategy & Transformation group supports the management of strategic risk through the strategic planning process, articulated within our Enterprise Strategic Planning Policy. This is designed to ensure alignment across strategic, financial, capital and risk planning domains.

Our annual business portfolio review and project approval request processes serve as key mechanisms for identifying and mitigating strategic risk. These processes aim to ensure that proposed initiatives, lines of business and overarching enterprise strategies remain consistent with our defined risk appetite and posture. GRM oversees strategic risk by conducting independent oversight and review and challenge of these processes, establishing enterprise risk frameworks, and independently monitoring and reporting risk levels relative to risk appetite measures, consistent with the three lines of defence governance model.

For details on the key strategic priorities for our business segments, refer to the Business segment results section.

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Overview of other risks

In addition to the risks described in the risk sections, there are other risk factors, described below, which may affect our businesses and financial results. The following discussion is not exhaustive as other factors could also adversely affect our results.

Legal and regulatory environment risk

Legal and regulatory environment risk is the risk that new or modified laws and regulations, and the interpretation or application of laws and regulations, will negatively impact the way in which we operate, both in Canada and in the other jurisdictions in which we conduct business. The full impact of some of these changes on our business will not be known until final rules are implemented and market practices have developed in response. We continue to respond to these and other developments and are working to minimize any potential adverse business or economic impact. The following provides a high-level summary of some of the key regulatory changes that have potential to increase or decrease our costs, impact our profitability and increase the complexity of our operations.

Global uncertainty

In October 2025, the International Monetary Fund (IMF) projected global growth of 3.2% for 2025, up 0.2% from its July forecast, reflecting an improvement due to easing of trade tensions, which were tempered as a result of trade deals and resets. The IMF projected global growth for calendar 2026 to be 3.1%. The overall global economic outlook remains fragile and tilted to the downside, driven by:

•	Failure to reach trade agreements and reliance on ad-hoc bilateral deals, which could lead to a shift away from global economic integration, negatively impact productivity and further hurt growth prospects, especially for emerging markets and developing economies;
•	Substantive projected fiscal deficits across major economies, which could lead to upward pressure on long-term interest rates, financial market instability and/or deceleration in growth, along with their associated impact on consumer and business confidence;
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•	Diverging monetary policies in response to inflationary pressures, which could drive asset repricing, impact foreign exchange rates and capital flows and heighten financial market volatility;
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•	Shifting global policy priorities, including ongoing uncertainty around U.S. trade, foreign relations, defense and immigration policies, which could disrupt global alliances and heighten economic, market and other risks, and intensifying political pressures on policy institutions and policymaking, which could weaken policy credibility, reduce investor confidence and heighten macroeconomic vulnerabilities;
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•	Elevated asset valuations, including in technology and AI-linked sectors which could drive abrupt market corrections, dampen investment, tighten financial conditions and weaken business and consumer confidence;
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•	An aging demographic in advanced economies, as well as changing immigration policies, which could have an associated long-term impact on labour supply, economic productivity and government fiscal capacity;
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•	Ongoing conflicts including those between Russia and Ukraine, in the Middle East and Asia, and rising tensions between China and Taiwan, together with increased polarization and social unrest; and
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•	Extreme weather-related events.
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Our diversified business model, as well as our product and geographic diversification, continue to help mitigate the risks posed by global uncertainty.

Sustainability-related legal and regulatory activity

Applicable sustainability-related laws, regulations, policies, frameworks, methodologies and guidance continue to evolve in inconsistent ways across the regions in which we operate. As such, new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements, and may subject us to different and potentially conflicting policies and requirements in the various jurisdictions in which we operate. We continue to monitor the development of applicable laws, regulations, policies, frameworks, methodologies and guidance in this area, including but not limited to the evolution of sustainability disclosure requirements and climate risk management requirements for financial institutions.

In Canada, OSFI’s Guideline B-15

Climate Risk Management

, issued in March 2023, sets expectations for managing and disclosing climate-related risks. Subsequent updates in 2024 and 2025 aligned disclosure expectations with IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB) and extended certain implementation timelines to fiscal 2028 and 2029. We expect to meet upcoming disclosure phases and continue to monitor further developments.

In the U.S., scrutiny of financial institutions relating to environmental and/or social matters, including climate, continues to be heightened at both the federal and state levels, including through statutes, regulations and litigation. As environmental and social issues remain heavily politicized, statutes or regulations in certain states may be interpreted to prohibit governmental entities, such as public pension funds and issuers of municipal bonds, from doing business with certain financial institutions, and political pressure may be placed upon governmental entities to not do business with certain financial institutions, based on the financial institutions’ perceived positions on certain environmental and/or social matters. We continue to monitor developments in this area and assess their impacts on our businesses.

In Europe, the European Union’s Corporate Sustainability Reporting Directive (CSRD) requires reporting under the European Sustainability Reporting Standards (ESRS). The ESRS, which were adopted by the European Commission in July 2023, set out the requirements for companies to report on sustainability-related impacts, opportunities and risks. We anticipate that we will be subject to reporting obligations under the CSRD from fiscal 2029 at the consolidated level, and are currently assessing the impact of these requirements.

We continue to monitor the development of applicable anti-greenwashing laws and regulations as well as climate-related litigation and regulatory enforcement actions related to greenwashing, including amendments to the Competition Act (Canada) which came into force on June 20, 2024, and which introduced new anti-greenwashing provisions. These provisions are in addition to the pre-existing provisions of the Competition Act (Canada) that prohibit the making of claims that are materially false or misleading. “Greenwashing” generally refers to the practice of conveying false or misleading information about an organization’s products or services or operations to suggest that the organization is doing more to protect the environment than it is.

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Model risk management

On September 11, 2025, OSFI released its final Guideline E-23 – Model Risk Management, which sets out expectations for managing risks associated with traditional models as well as emerging technologies such as artificial intelligence and machine learning.

This guideline will be effective May 1, 2027. We have assessed the requirements and do not anticipate any issues in complying with the requirements by the effective date.

For further details on regulatory capital and related requirements, refer to the Risk management and Capital management sections of this 2025 Annual Report.

Government fiscal, monetary and other policies

Our financial results are also sensitive to changes in interest rates. The Federal Reserve is expected to cut interest rates further in calendar 2026 after reducing interest rates less than other global central banks since 2024, while additional interest rate cuts from the Bank of Canada are not expected. Lower interest rates generally lead to spread compression across many of our businesses, resulting in an unfavourable impact on NIM, but can also promote economic stimulation and drive higher volumes for our business than otherwise would have occurred. Higher interest rates may be a potential benefit to our NIM but may adversely impact household balance sheets by causing credit deterioration, hence negatively impacting our financial results. If elevated interest rates are coupled with persistent inflation, this could increase market volatility, reduce asset values and adversely impact household and corporate balance sheets. This could lead to credit deterioration and impact our financial results, particularly in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets businesses.

Our businesses and earnings are affected by monetary policies that are adopted by the BoC, the Fed in the U.S., the ECB in the European Union (EU), the BoE in the U.K. and monetary authorities in other jurisdictions in which we operate. In addition, our businesses and earnings may be affected by the fiscal, trade-related and other policies of the governments of Canada, the U.S., the U.K., Europe and such other jurisdictions. Those policies may include protectionist trade policies and the imposition of tariffs, as well as increased deficit spending intended to support economic growth. Such policies can have positive or adverse affects on our clients and counterparties in Canada, the U.S. and internationally, which may decrease or increase the risk of default by such clients and counterparties.

Tax risk and transparency

Tax risk refers to the risk of loss related to unexpected tax liabilities. The tax laws and systems that are applicable to us are complex and wide-ranging. As a result, we seek to ensure that any decisions or actions related to tax always reflect our assessment of the long-term costs and risks involved, including their impact on our reputation and our relationship with clients, shareholders and regulators.

Our approach to taxation is grounded in principles which are reflected in our Code of Conduct, governed by our Enterprise Tax Risk Management Policy and incorporates the fundamentals of our risk drivers. Oversight of our tax policy and the management of tax risk is the responsibility of the GE, the CFO and the Senior Vice President, Taxation. We discuss our tax strategy with the Audit Committee annually and provide updates on our tax position on a regular basis.

Our tax strategy is designed to provide transparency and support our business strategy, and is aligned with our corporate vision and values. We seek to maximize shareholder value by structuring our businesses in a tax-efficient manner while considering reputation risk by being in compliance with all laws and regulations. Our policy requires that we:

•	Act with integrity and in a straightforward, open and honest manner in all tax matters;
•	Ensure tax strategy is aligned with our business strategy supporting only bona fide transactions with a business purpose and economic substance;
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•	Ensure all intercompany transactions are conducted in accordance with applicable transfer pricing requirements;
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•	Ensure our full compliance and full disclosure to tax authorities of our statutory obligations; and
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•	Endeavour to work with the tax authorities to build positive long-term relationships and where disputes occur, address them constructively.
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With respect to assessing the needs of our clients, we consider a number of factors including the purpose of the transactions. We seek to ensure that we only support bona fide client transactions with a business purpose and economic substance. Should we become aware of client transactions that are aimed at evading their tax obligations, we will not proceed with the transactions.

We operate in 29 countries worldwide. Our activities in these countries are subject to both Canadian and international tax legislation and other regulations, and are fully disclosed to the relevant tax authorities. The Taxation group and GRM both regularly review the activities of all entities in an effort to ensure compliance with tax requirements and other regulations.

Given that we operate globally, complex tax legislation and accounting principles have resulted in differing legal interpretations by the respective tax authorities we deal with and ourselves, and we are at risk of tax authorities disagreeing with prior positions we have taken for tax purposes. When this occurs, we are committed to an open and transparent dialogue with the tax authorities to facilitate a quick assessment and prompt resolution of the issues where possible. Failure to adequately manage tax risk and resolve issues with tax authorities in a satisfactory manner could adversely impact our results, potentially to a material extent in a particular period, and/or significantly impact our reputation.

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Tax contribution

In 2025, total income and other tax expense, including income taxes in the Consolidated Statements of Comprehensive Income and Changes in Equity, to various levels of governments globally totalled $7 billion (2024 – $5 billion). In Canada, total income and other tax expense for the year ended October 31, 2025 to various levels of government totalled $5 billion (2024 – $4 billion).

For further details on income and other tax expense, refer to the Financial performance section.

Environmental and social risk

Environmental and social (E&S) risk is the risk of negative impacts in the short-, medium- or long-term on our financial results, financial and operational resilience, reputation, business model or strategy resulting from E&S risk factors which can arise from RBC, a client or a third-party. Because different stakeholders and communities may have divergent views on E&S issues, any actual or perceived action or inaction by us in the management of an E&S issue may be perceived negatively by at least some stakeholders and, as a result, may increase our E&S risk.

E&S risk factors include, but are not limited to, climate change, site contamination, waste management, land and resource use, biodiversity, water quality and availability, environmental regulation, human rights (including, but not limited to, Indigenous Peoples’ rights) and community engagement.

E&S risks are unique and transverse in nature and may impact our Principal Risks in different ways and to varying degrees, including but not limited to strategic, operational, credit and compliance risks. See the Climate-related risk section below for additional information specific to climate-related risk.

Governance

The Board and its Committees provide oversight of the bank’s strategic approach to sustainability matters, including climate change, with specific subject-matter expertise, groups and functions responsible for relevant programs, products, policies and performance rooted within business segments and functions across the bank. Committees of the Board have oversight of E&S risks that are specific to their respective responsibilities, including the Governance Committee, which provides oversight and coordination over sustainability matters, and the Risk Committee, which oversees significant and emerging risks to the bank, including E&S risks. For further details on risk governance, refer to the Enterprise risk management – Risk governance section.

Roles and responsibilities related to E&S risk management are governed by the ERMF and the three lines of defence governance model. Business segments and functional areas are responsible for incorporating E&S risk management requirements within their own operations, while GRM is responsible for defining E&S risk management requirements, including establishing policies, and performing effective oversight in relation to E&S risk.

Risk management

We seek to integrate E&S risk considerations into our risk management approach. We manage E&S risk by leveraging existing policies and processes which govern our Principal Risks. Our Enterprise Policy on Environmental and Social Risk (E&S Risk Policy) 1 supports these policies and processes by outlining our principles for E&S risk management and setting out standards for how E&S risks arising from our activities are identified, assessed, measured, managed, mitigated, monitored and reported.

We continue to evolve our approach to E&S risk by leveraging existing risk management capabilities, and building new capabilities where required, including for purposes of incorporating regulatory guidance, industry best practices and improved data analytics to identify, assess, measure, manage, monitor and report on potential E&S impacts on clients, portfolios and our operations. We recognize that the integration and maturity of our E&S risk management capabilities will continue to evolve, and that achieving a mature level of E&S risk management will be iterative and take time.

The E&S Risk Policy is not inclusive of the activities of, and assets under management by, RBC Global Asset Management ® (RBC GAM). RBC GAM has developed its own policy with respect to these matters. RBC GAM includes, but is not limited to, the following wholly owned indirect subsidiaries of the Bank: RBC Global Asset Management Inc. (including Phillips, Hager & North Investment Management), RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited.

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Climate-related risk

We define climate-related risk as the potential negative impacts of climate change on our financial results, financial and operational resilience, reputation, business model or strategy. Climate-related risk is categorized into transition risk and physical risk. Transition risk is defined as the risks related to the process of adjustment towards a low-carbon economy. These risks can emerge from current or future government policies, legislation, and regulation to limit carbon emissions as well as technological advancements, and changes in market and customer sentiment towards a low-carbon economy. Physical risk is defined to include the risks from the increasing severity and frequency of climate-related extremes and events (i.e., acute physical risks), longer-term gradual shifts of the climate (i.e., chronic physical risks) and indirect effects of climate change, such as public health implications (e.g., morbidity and mortality impacts).

We continue to make progress in our climate-related risk management capabilities by integrating climate-related risk considerations into our existing risk management practices. Climate scenario analysis helps to inform future strategic planning, evolve risk management strategies, and meet regulatory and stakeholder expectations. To help ensure that the bank is adequately capitalized against unexpected events resulting from climate change, we assess the impact of climate-related risks across multiple Principal Risks in our existing Enterprise-Wide Stress Testing program.

Human rights and codes of conduct

We continue to integrate our commitment to respect human rights into operational policies and procedures across the organization, and we disclose the operationalization of this commitment in our various human rights related disclosures, such as our Approach to Human Rights – which includes our Human Rights Position Statement and outlines our commitment to respect human rights as set out in the United Nations Guiding Principles on Business and Human Rights. In addition, RBC’s Statement Regarding Modern Slavery describes the policies and processes that are in place across our enterprise to help prevent and reduce the risk that modern slavery is used in our operations and supply chain.

Our Code of Conduct establishes standards of desired behaviour for how we work together in a respectful, transparent and fair environment. In addition, our Supplier Code of Conduct sets our expectations of suppliers to, among other things, abide by relevant employment, labour, non-discrimination and human rights legislation and standards, and to respect human rights.

Voluntary commitments

We have made sustainability-related commitments that form part of our broader approach to managing E&S risks and opportunities.

We may be exposed to legal, regulatory or reputational impacts for making or not fully meeting our sustainability-related commitments, goals and targets either as a result of our own actions or due to external factors, which could cause our actual results to differ materially from our expectations expressed in such objectives. More specifically, our ability to achieve our sustainability-related commitments, goals and targets will depend on the collective efforts and actions across a wide range of stakeholders outside of our control, and there can be no assurance that they will be achieved 2 .

In addition, our sustainability-related commitments, goals and targets are aspirational and may need to be changed, or recalibrated in response to these external factors or as data improves and as climate science, transition pathways and market practices regarding standards, methodologies, metrics and measurements evolve, which may result in us withdrawing from or modifying our membership in certain frameworks, principles and initiatives.

Legal and regulatory developments

Applicable environmental and social-related laws, regulations, policies, frameworks, methodologies and guidance continue to evolve. As such, new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements, and may subject us to different and potentially conflicting requirements in the various jurisdictions in which we operate. As regulatory requirements evolve, we will continue to monitor such developments and update our risk management practices and disclosures as necessary. See the Legal and regulatory environment risk section for further details.

Capital management

We actively manage our capital to maintain strong capital ratios and high ratings while providing strong returns to our shareholders. In addition to the regulatory requirements, we consider the expectations of credit rating agencies, depositors and shareholders, as well as our business plans, stress tests, peer comparisons and our internal capital ratio targets. Our goal is to optimize our capital usage and structure, and to provide support for our business segments and clients. We also aim to generate optimal returns for our shareholders, while protecting depositors and creditors.

Capital management framework

Our capital management framework establishes policies and processes for defining, measuring, raising and investing all forms of capital in a coordinated and consistent manner. It sets our overall approach to capital management, including guiding principles and roles and responsibilities relating to capital adequacy and transactions, dividends, solo capital, and management of RWA, leverage ratio exposures, TLAC capital and TLAC leverage ratios. We manage and monitor capital from several perspectives, including regulatory capital, solo capital and TLAC.

For example, external factors that could cause our actual results to differ materially from such expectations include the availability, reliability, quality and verifiability of climate data; the adoption of new and the evolution of existing climate-related standards, protocols and methodologies; the failure of clients, customers or other third parties to implement or complete their transactions or their climate-related projects, programs and initiatives, or to do so when expected; the compliance of various third parties with our policies and procedures and their commitment to us; the actions, policies and engagement of various stakeholders; technological advancements; the evolution of markets and consumer behaviour, including the evolution and liquidity of the carbon markets; the status of adoption and implementation of decarbonization efforts and climate policies around the world; the challenges of balancing emission reduction targets with an orderly, just and inclusive transition; geopolitical factors that impact global energy needs; the legal and regulatory environment; and compliance considerations.

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Our capital planning process is dynamic and involves various teams including Finance, Corporate Treasury, GRM, Economics and our businesses, and covers internal capital ratio targets, potential capital transactions as well as projected dividend payouts and share repurchases. This process considers our business operating plans, enterprise-wide stress testing and Internal Capital Adequacy Assessment Process (ICAAP), regulatory capital changes and supervisory requirements, accounting changes, internal capital requirements, rating agency metrics and solo capital.

Our capital plan is established on an annual basis and is aligned with the management actions included in the annual business operating plan, which includes forecast growth in assets and earnings, taking into account our business strategies, the projected market and economic environment, and peer positioning. This includes incorporating potential capital transactions based on our projected internal capital generation, business forecasts, market conditions and other developments, such as accounting and regulatory changes that may impact capital requirements. All of the components in the capital plan are monitored throughout the year and are revised as deemed appropriate.

Our enterprise-wide stress testing and annual ICAAP processes provide key inputs for capital planning, including setting internal capital ratio targets. The stress scenarios are evaluated across the organization, and results are integrated to develop an enterprise-wide view of financial impacts and capital requirements, which in turn facilitate the planning of mitigating actions to absorb adverse events. ICAAP assesses capital adequacy and requirements covering all material risks, with a cushion for plausible contingencies. In accordance with OSFI guidelines, major components of our ICAAP process include comprehensive risk assessment, stress testing, capital assessment and planning, Board and senior management oversight, monitoring and reporting and internal control review.

Our internal capital targets are established to maintain robust capital positions in excess of OSFI’s Basel III regulatory targets. The results of our enterprise-wide stress testing and ICAAP processes are incorporated into the OSFI Capital Buffers, Domestic Systemically Important Banks (D-SIB)/Globally Systemically Important Banks (G-SIB) surcharge, and Domestic Stability Buffer (DSB), with a view to ensure that the bank has adequate capital to underpin risks and absorb losses under all plausible stress scenarios given our risk profile and appetite. In addition, we include a discretionary cushion on top of OSFI’s regulatory targets to reflect our risk appetite, our forecasts of potential negative downturns and to maintain our capital strength for forthcoming regulatory and accounting changes, peer comparatives, rating agencies sensitivities, potential future acquisitions and regulatory solo capital requirements.

The Board is responsible for the ultimate oversight of capital management, including the annual review and approval of the capital plan. ALCO and GE share responsibility for capital management and receive regular reports detailing our compliance with approved limits and guidelines. The Audit and Risk Committees jointly approve the ICAAP.

Basel III

Our consolidated regulatory capital requirements are determined by OSFI’s Capital Adequacy Requirements (CAR) guidelines, which are based on the minimum Basel III capital ratio requirements adopted by the BCBS.

Under Basel III, banks select from two main approaches, the Standardized Approach (SA) or the IRB Approach, to calculate their minimum regulatory capital required to support credit, market and operational risks. We apply the IRB approach to credit risk to determine minimum regulatory capital requirements for the majority of our portfolios. Certain credit risk portfolios are subject to the SA, primarily in Wealth Management, including our City National wholesale portfolio, our Caribbean Banking operations and certain non-mortgage retail portfolios. For consolidated regulatory reporting of market risk capital and operational risk capital, we use the revised SA based on OSFI requirements.

All federally regulated banks with a Basel III leverage ratio total exposure exceeding € 200 billion at their financial year-end are required, at a minimum, to publicly disclose in the first quarter following their year-end, the thirteen indicators used in the annual G-SIB assessment methodology, with the goal of enhancing the transparency of the relative scale of banks’ potential global systemic importance and data quality. The FSB publishes an updated list of G-SIBs annually. On November 27, 2025, we were re-designated as a G-SIB by the FSB. This designation requires us to maintain a higher loss absorbency requirement (common equity as a percentage of RWA) of 1% consistent with the D-SIB requirement. In addition to the Basel III targets, OSFI established a Domestic Stability Buffer (DSB) applicable to all Canadian D-SIBs to further ensure the financial stability of the Canadian financial system. The current OSFI requirement for the DSB is set at 3.5% of total RWA as reaffirmed by OSFI on June 26, 2025.

Under OSFI’s TLAC guideline, D-SIBs are required to maintain a risk-based TLAC ratio, which builds on the risk-based capital ratios described in the CAR guideline, and a TLAC leverage ratio, which builds on the leverage ratio described in OSFI’s LR guideline. The TLAC requirement is intended to address the sufficiency of a D-SIB’s loss absorbing capacity in supporting its recapitalization in the event of its failure. TLAC is defined as the aggregate of Tier 1 capital, Tier 2 capital and external TLAC instruments, which allow conversion in whole or in part into common shares under the CDIC Act and meet all of the eligibility criteria under the TLAC guideline.

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The following table provides a summary of OSFI’s current regulatory target ratios under Basel III and Pillar 2 requirements. We are in compliance with all current capital, leverage and TLAC requirements imposed by OSFI:

Basel III – OSFI regulatory targets	Table 62
Basel III<br><br>capital,<br><br>leverage and TLAC<br><br>ratios	OSFI regulatory target requirements<br>for large banks under Basel III										Domestic<br>Stability<br>Buffer<br><br>(3)		Minimum<br><br>including<br><br>Capital<br>Buffers,<br><br>D-SIB/G-SIB<br><br>surcharge and<br><br>Domestic<br><br>Stability<br><br>Buffer as at<br><br>October 31,<br>2025<br><br>(4)		RBC capital,<br>leverage<br>and TLAC<br>ratios<br>as at<br>October 31,<br>2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Minimum		Capital<br><br>Buffers		Minimum<br><br>including<br><br>Capital<br><br>Buffers		D-SIB/G-SIB<br><br>surcharge<br><br>(1)		Minimum<br>including<br>Capital<br>Buffers and<br><br>D-SIB/G-SIB<br><br>surcharge<br><br>(1), (2)
Common Equity Tier 1		4.5%		2.6%		7.1%		1.0%		8.1%		3.5%		11.6%		13.5%
Tier 1 capital		6.0%		2.6%		8.6%		1.0%		9.6%		3.5%		13.1%		15.1%
Total capital		8.0%		2.6%		10.6%		1.0%		11.6%		3.5%		15.1%		16.8%
Leverage ratio		3.0%		n.a.		3.0%		0.5%		3.5%		n.a.		3.5%		4.4%
TLAC ratio		21.6%		n.a.		21.6%		n.a.		21.6%		3.5%		25.1%		31.5%
TLAC leverage ratio		7.25%		n.a.		7.25%		n.a.		7.25%		n.a.		7.25%		9.2%
(1)	A capital surcharge, equal to the higher of our <br>D-SIB<br> surcharge and the BCBS’s <br>G-SIB<br> surcharge, is applicable to risk-weighted capital. For leverage ratio, only 50% of our <br>D-SIB<br> surcharge for capital is the required surcharge.
---	---
(2)	The capital buffers include the capital conservation buffer of 2.5% and the countercyclical capital buffer (CCyB) as prescribed by OSFI. The CCyB, calculated in accordance with OSFI’s CAR guidelines, was 0.06% as at October 31, 2025 (October 31, 2024 – 0.08%).
---	---
(3)	The DSB can range from 0% to 4% of total RWA and is currently set at 3.5%.
---	---
(4)	Minimum target requirements reflect CCyB requirements as at October 31, 2025 which are subject to change based on exposures held at the reporting date.
---	---
n.a.	not applicable
---	---

Regulatory capital, TLAC available, RWA, capital and TLAC ratios

Under Basel III, capital consists of CET1, Additional Tier 1, Tier 2 capital and external TLAC instruments.

CET1 capital comprises the highest quality of capital. Regulatory adjustments under Basel III include full deductions of certain items and additional capital components that are subject to threshold deductions as prescribed in the CAR guidelines.

Tier 1 capital comprises predominantly CET1 and Additional Tier 1 items including non-cumulative preferred shares and limited recourse capital notes (LRCNs) that meet certain criteria. Tier 2 capital includes subordinated debentures that meet certain criteria, certain loan loss allowances and non-controlling interests in subsidiaries’ Tier 2 instruments. Total capital is defined as the sum of Tier 1 and Tier 2 capital. Preferred shares, LRCNs, and subordinated debentures issued after January 1, 2013 require Non-viability contingent capital (NVCC) features to be included in regulatory capital. NVCC requirements ensure that non-common regulatory capital instruments bear losses before banks seek government funding.

TLAC available is defined as the sum of Total capital and external TLAC instruments. External TLAC instruments comprise predominantly senior bail-in debt, which includes eligible senior unsecured debt with an original term to maturity of greater than 400 days and remaining term to maturity of greater than 365 days.

Capital ratios are calculated by dividing CET1, Tier 1, Total capital and TLAC available by total RWA.

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The following chart provides a summary of the major components of CET1, Additional Tier 1, Tier 2 capital and external TLAC instruments.

(1)

First level: The amount by which each of the items exceeds a 10% threshold of CET1 capital (after all deductions but before threshold deductions) will be deducted from CET1 capital. Second level: The aggregate amount of the three items not deducted from the first level above and in excess of 15% of CET1 capital after regulatory adjustments will be deducted from capital, and the remaining balance not deducted will be risk-weighted at 250%.

(2)

Non-significant investments are subject to certain CAR criteria that drive the amount eligible for deduction.

---

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The following tables provide details on our regulatory capital, TLAC available, RWA, and on ratios for capital, leverage and TLAC. Our capital position remains strong and our capital, leverage and TLAC ratios remain well above OSFI regulatory targets:

Regulatory capital, TLAC available, RWA and capital, leverage and TLAC ratios	Table 63
	As at
---	---	---	---	---
(Millions of Canadian dollars, except percentage amounts)	October 31<br><br>2025		October 31<br><br>2024
Capital<br><br>(1)
CET1 capital	$	98,748	$	88,936
Tier 1 capital		110,393		97,952
Total capital		122,399		110,487
Risk-weighted assets (RWA) used in calculation of capital ratios<br><br>(1)
Credit risk	$	590,306	$	548,809
Market risk		41,506		33,930
Operational risk		98,413		89,543
Total RWA	$	730,225	$	672,282
Capital ratios and Leverage ratio<br><br>(1)
CET1 ratio		13.5%		13.2%
Tier 1 capital ratio		15.1%		14.6%
Total capital ratio		16.8%		16.4%
Leverage ratio		4.4%		4.2%
Leverage ratio exposure	$	2,491,090	$	2,344,228
TLAC available and ratios<br><br>(2)
TLAC available	$	230,385	$	196,659
TLAC ratio		31.5%		29.3%
TLAC leverage ratio		9.2%		8.4%
(1)	Capital, RWA, and capital ratios are calculated using OSFI’s CAR guideline and the Leverage ratio is calculated using OSFI’s LR guideline. Both the CAR guideline and LR guideline are based on the Basel III framework.
---	---
(2)	TLAC available and TLAC ratios are calculated using OSFI’s TLAC guideline. The TLAC standard is applied at the resolution entity level which for us is deemed to be Royal Bank of Canada and its subsidiaries. A resolution entity and its subsidiaries are collectively called a resolution group. The TLAC ratio and TLAC leverage ratio are calculated using TLAC available as a percentage of total RWA and leverage exposure, respectively.
---	---
Regulatory capital and TLAC available	Table 64
---	---
	As at
---	---	---	---	---	---	---
(Millions of Canadian dollars)	October 31<br><br>2025			October 31<br><br>2024
CET1 capital: instruments and reserves and regulatory adjustments
Directly issued qualifying common share capital (and equivalent for <br>non-joint<br> stock companies) plus related stock surplus	$	21,085		$	21,243
Retained earnings		96,606			88,317
Contractual service margins regulatory adjustment		1,279			1,526
Accumulated other comprehensive income (and other reserves)		9,726			8,498
Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)		14			11
Regulatory adjustments applied to CET1 under Basel III		(29,962	)		(30,659	)
Common Equity Tier 1 capital (CET1)	$	98,748		$	88,936
Additional Tier 1 capital: instruments and regulatory adjustments
Directly issued qualifying Additional Tier 1 instruments plus related stock surplus	$	11,643		$	9,014
Additional Tier 1 instruments issued by subsidiaries and held by third parties (amount allowed in group AT1)		2			2
Additional Tier 1 capital (AT1)	$	11,645		$	9,016
Tier 1 capital (T1 = CET1 + AT1)	$	110,393		$	97,952
Tier 2 capital: instruments and provisions and regulatory adjustments
Directly issued qualifying Tier 2 instruments plus related stock surplus	$	11,404		$	11,412
Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in group Tier 2)		4			3
Collective allowance		598			1,120
Tier 2 capital (T2)	$	12,006		$	12,535
Total capital (T1 + T2)	$	122,399		$	110,487
External TLAC: instruments and regulatory adjustments
External TLAC instruments	$	108,492		$	85,008
Amortized portion of T2 instruments where remaining maturity > 1 year		–			1,670
Regulatory adjustments applied to TLAC under Basel III		(506	)		(506	)
TLAC available (Total capital + External TLAC)	$	230,385		$	196,659

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2025 vs. 2024

(1)	Represents rounded figures.
(2)	Represents net internal capital generation of $11.4 billion or 169 bps consisting of Net income available to shareholders less common and preferred share dividends and distributions on other equity instruments.
---	---
(3)	Excludes the impact of foreign exchange translation (included in Other), net credit migration, U.S. rating downgrade and risk parameter changes.
---	---

Our CET1 ratio was 13.5%, up 30 bps from last year, primarily reflecting net internal capital generation and favourable impact of fair value OCI adjustments, partially offset by higher RWA and share repurchases.

Our Tier 1 capital ratio of 15.1% was up 50 bps, reflecting net issuance of Additional Tier 1 instruments as well as the factors noted under the CET1 ratio.

Our Total capital ratio of 16.8% was up 40 bps, primarily reflecting the factors noted above under the Tier 1 capital ratio.

Our Leverage ratio of 4.4% was up 20 bps, primarily due to net internal capital generation and net issuance of Additional Tier 1 instruments, partially offset by growth in leverage exposures and share repurchases.

Total leverage exposures increased by $147 billion, driven by growth in securities, loans and undrawn commitments, partially offset by lower repo-style transactions and due from banks.

Our TLAC ratio of 31.5% was up 220 bps, mainly reflecting a favourable impact from a net increase in eligible external TLAC instruments, net internal capital generation and net issuance of Additional Tier 1 instruments. These factors were partially offset by higher RWA.

Our TLAC leverage ratio of 9.2% was up 80 bps, reflecting a favourable impact from a net increase in eligible external TLAC instruments.

External TLAC instruments include long-term debt subject to conversion under the Bail-in regime. For further details, refer to Deposit and funding profile in the Liquidity and funding risk section.

Basel III RWA

OSFI requires banks to meet minimum risk-based capital requirements for exposures to credit risk, operational risk, and where they have significant trading activity, market risk. RWA is calculated for each of these risk types and added together to determine total RWA. In addition, a minimum capital floor requirement must be maintained as prescribed under OSFI’s CAR guidelines which is currently set to 67.5% of RWA as calculated under current Basel III standardized credit risk, market and operational risk approaches as defined in the CAR guidelines. If the capital requirement is less than the required threshold, a floor adjustment to RWA must be applied to the reported RWA as prescribed by OSFI’s CAR guidelines.

On February 12, 2025, OSFI announced an indefinite delay to increases in the capital floor factor prescribed in its CAR guideline and maintained the current 67.5% of RWA (as calculated using only the SA for credit, market and operational risk). OSFI committed to providing at least two years notice to affected banks prior to resuming increases in the capital floor.

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Total capital risk-weighted assets	Table 65
	2025																				2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
			Average<br>of risk-<br>weights<br>(2)			Risk-weighted assets <br>All-in<br> Basis
As at October 31 (Millions of Canadian dollars,<br>except percentage amounts)	Exposure<br>(1)				Standardized<br>approach			Advanced<br>approach<br><br>(A-IRB)			Foundation<br>approach<br><br>(F-IRB)			Other			Total			Total
Credit risk
Lending-related and other
Residential mortgages	$	647,159		9%		$	4,282		$	54,138		$	–		$	–		$	58,420		$	51,928
Other retail (personal, credit cards and small business treated as retail)		220,490		32%			5,401			64,729			–			–			70,130			62,679
Business (corporate, commercial, <br>medium-sized<br> enterprises and <br>non-bank<br> financial institutions)		585,507		50%			64,610			129,972			96,927			–			291,509			282,595
Sovereign (government)		422,984		4%			2,151			15,046			–			–			17,197			14,116
Bank		59,287		43%			12,659			–			12,640			–			25,299			19,231
Total lending-related and other	$	1,935,427		24%		$	89,103		$	263,885		$	109,567		$	–		$	462,555		$	430,549
Trading-related
Repo-style transactions	$	1,424,011		1%		$	156		$	369		$	8,720		$	80		$	9,325		$	8,528
Derivatives – including CVA		162,136		24%			636			2,269			15,279			20,784			38,968			36,704
Total trading-related	$	1,586,147		3%		$	792		$	2,638		$	23,999		$	20,864		$	48,293		$	45,232
Total lending-related and other and trading-related	$	3,521,574		15%		$	89,895		$	266,523		$	133,566		$	20,864		$	510,848		$	475,781
Bank book equities		7,481		198%			14,828			–			–			–			14,828			12,079
Securitization exposures		93,423		17%			9,594			6,704			–			–			16,298			15,181
Other assets		37,770		128%			n.a.			n.a.			n.a.			48,332			48,332			45,768
Total credit risk	$	3,660,248		16%		$	114,317		$	273,227		$	133,566		$	69,196		$	590,306		$	548,809
Market risk
Interest rate						$	4,673											$	4,673		$	1,956
Equity							3,964												3,964			3,656
Foreign exchange							2,698												2,698			2,787
Commodities							1,136												1,136			1,787
Credit							10,671												10,671			8,374
Default risk charge							13,162												13,162			10,898
Other <br>(3)							5,202												5,202			4,472
Total market risk						$	41,506											$	41,506		$	33,930
Operational risk						$	98,413											$	98,413		$	89,543
Total risk-weighted assets	$	3,660,248				$	254,236		$	273,227		$	133,566		$	69,196		$	730,225		$	672,282
(1)	Total exposure represents exposure at default (EAD) which is the expected gross exposure upon the default of an obligor. This amount excludes any allowance against impaired loans or partial write-offs and does not reflect the impact of credit risk mitigation.
---	---
(2)	Represents the average of counterparty risk weights within a particular category.
---	---
(3)	Represents the market risk RWA for the residual risk <br>add-on<br> charge under the standardized approach and the capital surcharge for movements between the trading book and banking book.
---	---
n.a.	not applicable
---	---

2025 vs. 2024

Total RWA was up $58 billion from last year, mainly due to business growth, net credit migration, the impact of a U.S. rating downgrade and foreign exchange translation. Business growth primarily reflects higher retail and corporate lending, as well as operational risk from higher revenues and trading-related activities. In our CET1 ratio, the impact of foreign exchange translation on RWA is largely mitigated with economic hedges.

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Selected capital management activity

Selected capital management activity	Table 66
	For the year ended October 31, 2025
---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars, except number of shares)	Issuance or<br>redemption date		Number of<br>shares<br>(000s)			Amount
Tier 1 capital
Common shares activity
Issued in connection with share-based compensation plans <br>(1)				796		$	77
Purchased for cancellation <br>(2)				(15,241	)		(227	)
Issuance of LRCNs<br>Series 5 <br>(2), (3), (4)		November 1, 2024		1,000			1,396
Redemption of preferred shares, Series BD <br>(2), (3)		May 24, 2025		(24,000	)		(600	)
Issuance of LRCNs<br>Series 6 <br>(2), (3), (4)		June 11, 2025		1,250			1,708
Issuance of LRCNs<br>Series 7 <br>(2), (3), (4)		September 23, 2025		1,350			1,869
Redemption of LRCNs<br>Series 1 <br>(2), (3), (4)		October 24, 2025		(1,750	)		(1,750	)
Tier 2 capital
Redemption of December 23, 2029 subordinated<br>debentures <br>(3), (5)		December 23, 2024				$	(1,500	)
Issuance of February 4, 2035 subordinated debentures <br>(3), (5)		January 29, 2025					1,500
Redemption of June 30, 2030 subordinated debentures <br>(3), (5)		June 30, 2025					(1,250	)
Issuance of July 3, 2035 subordinated debentures <br>(3), (5)		July 3, 2025					1,250
Issuance of July 17, 2035 subordinated debentures <br>(3), (5)		July 17, 2025					241
(1)	Amounts include cash received for stock options exercised during the period and fair value adjustments to stock options.
---	---
(2)	For further details, refer to Note 19 of our 2025 Annual Consolidated Financial Statements.
---	---
(3)	Non-Viability<br> Contingent Capital (NVCC) instruments.
---	---
(4)	For the LRCNs, the number of shares represents the number of notes issued.
---	---
(5)	For further details, refer to Note 18 of our 2025 Annual Consolidated Financial Statements.
---	---

On June 10, 2024, we announced a normal course issuer bid (NCIB) to purchase up to 30 million of our common shares. This NCIB was completed on June 11, 2025, with 8,957 thousand common shares repurchased and cancelled at a total cost of approximately $1,510 million.

On June 10, 2025, we announced an NCIB to purchase up to 35 million of our common shares, commencing on June 12, 2025 and continuing until June 11, 2026, or such earlier date as we complete the repurchase of all shares permitted under the bid. Since the inception of this NCIB, the total number of common shares repurchased and cancelled was approximately 7,171 thousand, at a cost of approximately $1,398 million.

In 2025, the total number of common shares repurchased and cancelled under our NCIB programs was approximately 15 million. The total cost of the shares repurchased was $2,768 million.

We determine the amount and timing of purchases under the NCIB, subject to prior consultation with OSFI. Purchases may be made through the TSX, the NYSE and other designated exchanges and alternative Canadian trading systems. The price paid for repurchased shares is the prevailing market price at the time of acquisition.

On November 1, 2024, we issued US$1,000 million of LRCN Series 5 at a price of US$1,000 per note. The LRCN Series 5 bear interest at a fixed rate of 6.35% per annum until November 24, 2034. Thereafter, the interest rate on the LRCN Series 5 will reset every five years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.257% until their maturity on November 24, 2084.

On December 23, 2024, we redeemed all $1,500 million of our outstanding NVCC 2.88% subordinated debentures due December 23, 2029 for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.

On January 29, 2025, we issued $1,500 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of 4.279% per annum until February 4, 2030, and at the Daily Compounded Canadian Overnight Repo Rate Average (CORRA) plus 1.45% thereafter until their maturity on February 4, 2035.

On May 24, 2025, we redeemed all 24 million of our issued and outstanding Non-Cumulative

5-Year Rate Reset First Preferred Shares Series BD at a price of $25 per share.

On June 11, 2025, we issued US$1,250 million of LRCN Series 6 at a price of US$1,000 per note. The LRCN Series 6 bear interest at a fixed rate of 6.75% per annum until August 24, 2030. Thereafter, the interest rate on the LRCN Series 6 will reset every five years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.815% until their maturity on August 24, 2085.

On June 30, 2025, we redeemed all $1,250 million of our outstanding NVCC 2.088% subordinated debentures due June 30, 2030 for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.

On July 3, 2025, we issued $1,250 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of 4.214% per annum until July 3, 2030, and at the Daily Compounded CORRA plus 1.51% thereafter until their maturity on July 3, 2035.

On July 17, 2025, we issued ¥26,000 million of NVCC subordinated debentures. The notes bear interest at a fixed rate of 1.963% per annum until July 17, 2030, and at the 5-Year Tokyo Overnight Average Rate mid-swap rate plus 1.02% thereafter until their maturity on July 17, 2035.

On September 23, 2025, we issued US$1,350 million of LRCN Series 7 at a price of US$1,000 per note. The LRCN Series 7 bear interest at a fixed rate of 6.50% per annum until November 24, 2035. Thereafter, the interest rate on the LRCN Series 7 will reset every five years at a rate per annum equal to the prevailing 5-Year U.S. Treasury Rate plus 2.462% until their maturity on November 24, 2085.

On October 24, 2025, we redeemed all $1,750 million of our issued and outstanding Non-Cumulative

5-Year Fixed Rate Reset First Preferred Shares Series BQ (Series BQ) at a price of $1,000 per share. As a result of the redemption of the Series BQ, we automatically redeemed all $1,750 million of our outstanding NVCC 4.50% LRCN Series 1 on the same date, for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.

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On October 24, 2025, we announced our intention to redeem all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BH and all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BI, at a price of $25 per share, which will occur on December 8, 2025.

On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative

5-Year Rate Reset First Preferred Shares Series BF at a price of $25 per share.

Dividends

Our common share dividend policy reflects our earnings outlook, payout ratio objective and the need to maintain adequate levels of capital to support business plans. In 2025, our dividend payout ratio was 43%. Common share dividends paid during the year were $9 billion.

Selected share data<br><br>(1)	Table 67
	2025								2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars, except number of shares<br>and as otherwise noted)	Number of<br>shares<br> (000s)			Amount			Dividends<br>declared<br>per share		Number of<br>shares (000s)			Amount			Dividends<br>declared<br>per share
Common shares issued		1,400,635		$	20,863		$	6.04		1,415,080		$	21,013		$	5.60
Treasury shares – common shares <br>(2)		(521	)		(110	)				(576	)		(61	)
Common shares outstanding		1,400,114		$	20,753					1,414,504		$	20,952
Stock options and awards
Outstanding		7,490								7,375
Exercisable		3,522								3,212
Available for grant		16,381								2,291
First preferred shares issued
Non-cumulative<br> Series BD <br>(3), (4), (5)		–			–			0.80		24,000			600			0.80
Non-cumulative<br> Series BF <br>(3), (4), (6)		12,000			300			0.75		12,000			300			0.75
Non-cumulative<br> Series BH <br>(4), (7)		6,000			150			1.23		6,000			150			1.23
Non-cumulative<br> Series BI <br>(4), (7)		6,000			150			1.23		6,000			150			1.23
Non-cumulative<br> Series BO <br>(3), (4)		14,000			350			1.47		14,000			350			1.40
Non-cumulative<br> Series BT <br>(3), (4), (6)		750			750			4.20%		750			750			4.20%
Non-cumulative<br> Series BU <br>(3), (4), (6)		750			750			7.408%		750			750			7.408%
Non-cumulative<br> Series BW <br>(3), (4), (6)		600			600			6.698%		600			600			6.698%
Other equity instruments issued
LRCNs Series 1 <br>(3), (4), (8), (9), (10)		–			–			4.50%		1,750			1,750			4.50%
LRCNs Series 2 <br>(3), (4), (8), (9), (11)		1,250			1,250			4.00%		1,250			1,250			4.00%
LRCNs Series 3 <br>(3), (4), (8), (9), (11)		1,000			1,000			3.65%		1,000			1,000			3.65%
LRCNs Series 4 <br>(3), (4), (8), (9), (11)		1,000			1,370			7.50%		1,000			1,370			7.50%
LRCNs Series 5 <br>(3), (4), (8), (9), (11)		1,000			1,396			6.35%		–			–			–
LRCNs Series 6 <br>(3), (4), (8), (9), (11)		1,250			1,708			6.75%		–			–			–
LRCNs Series 7 <br>(3), (4), (8), (9), (11)		1,350			1,869			6.50%		–			–			–
Preferred shares and other equity instruments issued		46,950		$	11,643					69,100		$	9,020
Treasury instruments – preferred shares and other equity instruments <br>(2)		35			32					13			11
Preferred shares and other equity instruments outstanding		46,985		$	11,675					69,113		$	9,031
Dividends on common shares				$	8,502							$	7,916
Dividends on preferred shares and distributions on other equity instruments <br>(12)					494								322
(1)	For further details, refer to Note 19 of our 2025 Annual Consolidated Financial Statements.
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(2)	Positive amounts represent a short position and negative amounts represent a long position.
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(3)	Dividend rate will reset every five years.
---	---
(4)	NVCC instruments.
---	---
(5)	On May 24, 2025, we redeemed all 24 million of our issued and outstanding <br>Non-Cumulative<br> <br>5-Year<br> Rate Reset First Preferred Shares Series BD at a price of $25 per share.
---	---
(6)	On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF at a price of $25 per share.
---	---
(7)	On October 24, 2025, we announced our intention to redeem all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BH and all 6 million of our issued and outstanding Non-Cumulative Fixed Rate First Preferred Shares Series BI, at a price of $25 per share.
---	---
(8)	The dividends declared per share represent the per annum dividend rate applicable to the shares issued as at the reporting date.
---	---
(9)	For LRCN Series, the number of shares represent the number of notes issued and the dividends declared per share represent the annual interest rate percentage applicable to the notes issued as at the reporting date.
---	---
(10)	In connection with the redemption of LRCN Series 1, on October 24, 2025, we redeemed all $1,750 million of our issued and outstanding Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BQ.
---	---
(11)	In connection with the issuance of LRCN Series 2, on November 2, 2020, we issued $1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BR (Series BR); in connection with the issuance of LRCN Series 3, on June 8, 2021, we issued $1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BS (Series BS); in connection with the issuance of LRCN Series 4 on April 24, 2024, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BV (Series BV); in connection with the issuance of LRCN Series 5 on November 1, 2024, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BX (Series BX); in connection with the issuance of LRCN Series 6 on June 11, 2025, we issued US$1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BY (Series BY) ); and in connection with the issuance of LRCN Series 7 on September 23, 2025, we issued US$1,350 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BZ (Series BZ). The Series BR and BS preferred shares were issued at a price of $1,000 per share and the Series BV, BX, BY and BZ preferred shares were issued at a price of US$1,000 per share. The Series BR, BS, BV, BX, BY and BZ preferred shares were issued to a consolidated trust to be held as trust assets in connection with the LRCN series. For further details, refer to Note 19 of our 2025 Annual Consolidated Financial Statements.
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(12)	Excludes distributions to <br>non-controlling<br> interests.
---	---

As at November 28, 2025, the number of outstanding common shares was 1,400,211,987, net of treasury shares held of 278,225, and the number of stock options and awards was 7,458,856.

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NVCC provisions require the conversion of the capital instrument into a variable number of common shares in the event that OSFI deems a bank to be non-viable or a federal or provincial government in Canada publicly announces that a bank has accepted or agreed to accept a capital injection. If a NVCC trigger event were to occur, our NVCC capital instruments as at October 31, 2025, which were the preferred shares Series BF, BH, BI, BO, BT, BU, BW, LRCN Series 2, LRCN Series 3, LRCN Series 4, LRCN Series 5, LRCN Series 6, LRCN Series 7 and subordinated debentures due on January 27, 2026, January 28, 2033, November 3, 2031, May 3, 2032, February 1, 2033, April 3, 2034, August 8, 2034, February 4, 2035, July 3, 2035 and July 17, 2035, would be converted into common shares pursuant to an automatic conversion formula with a conversion price based on the greater of: (i) a contractual floor price of $5.00 (subject to adjustment in certain circumstances), and (ii) the current market price of our common shares at the time of the trigger event (10-day volume weighted average). Based on a floor price of $5.00 and including an estimate for accrued dividends and interest, these NVCC capital instruments would convert into a maximum of approximately 7 billion common shares, in aggregate, which would represent a dilution impact of 82.4% based on the number of common shares outstanding as at October 31, 2025.

Attributed capital

Our methodology for allocating capital to our business segments is based on the Basel III regulatory capital requirements, with the exception of Insurance. Our attributed capital methodology incorporates leverage requirements to allocate capital to our business segments. Effective the first quarter of 2025, we increased our capital attribution rates to our business segments. Our Insurance platform continued to allocate capital based on fully diversified economic capital in fiscal 2025. Effective the first quarter of 2026, we plan to update our methodology for allocating capital to Insurance to more closely align with legal entity capital requirements. Risk-based capital attribution provides a uniform base for performance measurement among business segments, which compares to our overall corporate return objective and facilitates management decisions in resource allocation in conjunction with other factors.

The calculation and attribution of capital involves a number of assumptions and judgments by management which are monitored to ensure that the regulatory capital framework remains comprehensive and consistent. The models are benchmarked to leading industry practices via participation in surveys, reviews of methodologies and ongoing interaction with external risk management industry professionals.

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For additional information on the risks highlighted below, refer to the Risk management section.

(1)	RWA and Leverage ratio exposure amount represents <br>period-end<br> spot balances. Attributed Capital represents average balances.
(2)	Other includes <br>(a) non-Insurance<br> segments: equity required to underpin Basel III regulatory capital deductions other than Goodwill and other intangibles and (b) Insurance segment: equity required to underpin risks associated with the business.
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(3)	Insurance RWA represents our investments in the insurance subsidiaries capitalized at the regulatory prescribed rate as required under the OSFI CAR guideline.
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Other considerations affecting capital

Capital treatment for equity investments in other entities is determined by a combination of accounting and regulatory guidelines based on the size or nature of the investment. Three broad approaches apply as follows:

•	Consolidation: entities which we control are consolidated on our Consolidated Balance Sheets.
•	Deduction: certain holdings are deducted from our regulatory capital. These include all unconsolidated “substantial investments”, as defined by the<br>Bank Act<br>(Canada) in the capital of financial institutions, as well as all investments in insurance subsidiaries and certain equity investments in funds.
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•	Risk-weighting: equity investments that are not deducted from capital are risk-weighted at a prescribed rate for determination of capital charges.
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Regulatory capital approach for securitization exposures

Our securitization regulatory capital approach reflects Chapter 6 of OSFI’s CAR guidelines. For our securitization exposures, we use an internal assessment approach (IAA) for exposures related to our ABCP business, and as per regulatory guidelines for other securitization exposures we use a combination of approaches including an external ratings-based approach, an IRB approach and a standardized approach.

While our IAA rating methodologies are based in large part on criteria that are published by External Credit Assessment Institutions (ECAIs) such as S&P and therefore are similar to the methodologies used by these institutions, they are not identical. Our ratings process includes a comparison of the available credit enhancement in a securitization structure to a stressed level of projected losses. The stress level used is determined by the desired risk profile of the transaction. As a result, we stress the cash flows of a given transaction at a higher level in order to achieve a higher rating. Conversely, transactions that only pass lower stress levels achieve lower ratings.

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Many of the other securitization exposures (non-ABCP) carry external ratings and we use the external ratings-based approach, otherwise will follow the SA, for determining the proper capital allocation for these positions. We periodically compare our own ratings to ECAIs ratings to ensure that the ratings provided by ECAIs are reasonable.

GRM is responsible for providing risk assessments for capital purposes in respect of all our banking book exposures. GRM is independent of the business originating the securitization exposures and performs its own analysis, sometimes in conjunction with but always independent of the applicable business. GRM has developed asset class specific criteria guidelines which provide the rating methodologies for each asset class. The guidelines are reviewed periodically and are subject to the ratings replication process mandated by Pillar I of the Basel rules.

Regulatory developments

Revisions to the CAR guidelines

On September 11, 2025, OSFI released a revised CAR guideline. The revised guideline introduces a new requirement for applying PD and LGD floors for U.S. government sponsored entities, maintaining current income producing real estate identification rules and providing an 18-month delay for combined loan products parameter changes sought by OSFI. Credit valuation adjustment (CVA) and standardized approach for measuring counterparty credit risk adjustments exempt client-cleared derivatives and allow exclusions for certain collateral. Market risk updates reduce default risk charge risk weights for certain sovereign exposures and eligible multilateral development banks to 0%, with further guideline reviews of IRB coverage requirements, risk weights and exemptions pending. The CAR guideline was effective for us on November 1, 2025, and the impact is not expected to be material.

Accounting and control matters
Critical accounting policies and estimates
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Application of critical accounting policies, judgments, estimates and assumptions

Our material accounting policies are described in Note 2 of our 2025 Annual Consolidated Financial Statements. Certain of these policies and related estimates are recognized as critical because they require us to make particularly subjective or complex judgments about matters that are inherently uncertain and significantly different amounts could be reported under different conditions or using different assumptions. Our critical accounting judgments, estimates and assumptions relate to the fair value of financial instruments, allowance for credit losses (ACL), goodwill and other intangible assets, employee benefits, consolidation of structured entities, derecognition of financial assets, application of the effective interest method, provisions, insurance and reinsurance contracts, and income taxes. Our critical accounting policies and estimates have been reviewed and approved by our Audit Committee, in consultation with management, as part of their review and approval of our material accounting policies, judgments, estimates and assumptions.

Fair value of financial instruments

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We determine fair value by incorporating factors that market participants would consider in setting a price, including commonly accepted valuation approaches.

We give priority to third-party pricing services and valuation techniques with the highest and most consistent accuracy. The level of accuracy is determined over time by comparing third-party price values to traders’ or system values, other pricing service values and, when available, actual trade data. Other valuation techniques are used when a price or quote is not available. Some valuation processes use models to determine fair value. We have a systematic and consistent approach to control the use of models.

In determining fair value, a hierarchy is used which prioritizes the inputs to valuation techniques. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Determination of fair value based on this hierarchy requires the use of observable market data whenever available. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model inputs that are either observable, or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 inputs include one or more inputs that are unobservable and significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available at the measurement date. The availability of inputs for valuation may affect the selection of valuation techniques. The classification of a financial instrument in the fair value hierarchy for disclosure purposes is based upon the lowest level of input that is significant to the measurement of fair value.

Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing other relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation and interpolation techniques. For more complex or illiquid instruments, significant judgment is required in the determination of the model used, the selection of model inputs, and in some cases, the application of valuation adjustments to the model value or quoted price for inactively traded financial instruments. The selection of model inputs may be subjective and the inputs may be unobservable. Unobservable inputs are inherently uncertain as there is little or no market data available from which to determine the level at which the transaction would occur under normal business circumstances. Appropriate parameter uncertainty and market risk valuation adjustments for such inputs and other model risk valuation adjustments are assessed in all such instances.

Valuation adjustments may be subjective as they require significant judgment in the input selection, such as implied PD and recovery rate, and are intended to arrive at a fair value that is determined based on assumptions that market participants would use in pricing the financial instrument. The ultimate realized price for a transaction may differ from its recorded fair value estimated using management judgment.

For further information on the fair value of financial instruments, refer to Notes 2 and 3 of our 2025 Annual Consolidated Financial Statements.

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Allowance for credit losses

An ACL is established for all financial assets, except for financial assets classified or designated as FVTPL and equity securities designated as FVOCI, which are not subject to impairment assessment. Assets subject to impairment assessment include loans, debt securities, interest-bearing deposits with banks, accounts and accrued interest receivable, and finance and operating lease receivables. Off-balance sheet items subject to impairment assessment include financial guarantees and undrawn loan commitments.

We measure the ACL on each balance sheet date according to a three-stage expected credit loss impairment model:

•	Performing financial assets
•	Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses expected to result from defaults occurring over the 12 months following the reporting date.
---	---
•	Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset.
---	---
•	Impaired financial assets
---	---
•	Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount.
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The ACL is a discounted probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant time horizon. For loan commitments, credit loss estimates consider the portion of the commitment that is expected to be drawn over the relevant time period. For financial guarantees, credit loss estimates are based on the expected payments required under the guarantee contract. For finance lease receivables, credit loss estimates are based on cash flows consistent with the cash flows used in measuring the lease receivable.

The ACL represents an unbiased estimate of expected credit losses on our financial assets as at the balance sheet date. Judgment is required in making assumptions and estimations when calculating the ACL, including movements between the three stages, the inclusion of forward-looking information and the application of expert credit judgment. The underlying assumptions and estimates may result in changes to the provisions from period to period that significantly affect our results of operations.

For further information on ACL, refer to Notes 2, 4 and 5 of our 2025 Annual Consolidated Financial Statements.

Goodwill and other intangible assets

We allocate goodwill to groups of cash-generating units (CGU). Goodwill is not amortized and is tested for impairment on an annual basis, or more frequently if there are objective indications of impairment. We test for impairment by comparing the recoverable amount of a CGU with its carrying amount.

We estimate the value in use and fair value less costs of disposal of our CGUs primarily using a discounted cash flow method which incorporates each CGU’s internal forecasts of revenues and expenses. Significant management judgment is applied in the determination of expected future cash flows (uncertainty in timing and amount), discount rates (based on CGU-specific risks) and terminal growth rates. CGU-specific risks include country risk, business/operational risk, geographic risk (including political risk, devaluation risk and government regulation), currency risk and price risk (including product pricing risk and inflation). If the future cash flows and other assumptions in future periods deviate significantly from the current amounts used in our impairment testing, the value of our goodwill could become impaired.

We assess for indicators of impairment of our other intangible assets at each reporting period. If there is an indication that an asset may be impaired, an impairment test is performed by comparing the carrying amount of the intangible asset to its recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the CGU to which the asset belongs. Significant judgment is applied in estimating the useful lives and recoverable amounts of our intangible assets and assessing whether certain events or circumstances constitute objective evidence of impairment.

For further details, refer to Notes 2 and 11 of our 2025 Annual Consolidated Financial Statements.

Employee benefits

We sponsor a number of benefit programs for eligible employees, including registered pension plans, supplemental pension plans, health, dental, disability and life insurance plans.

The calculation of defined benefit expenses and obligations depends on various assumptions such as discount rates, healthcare cost trend rates, projected salary increases, retirement age, and mortality and termination rates. Discount rates are determined using a yield curve based on spot rates from high quality corporate bonds. All other assumptions are determined by us and are reviewed by the actuaries. Actual experience that differs from the actuarial assumptions will affect the amounts of benefit obligations and remeasurements that we recognize. The weighted average assumptions used and the sensitivity of key assumptions are presented in Note 16 of our 2025 Annual Consolidated Financial Statements.

Consolidation of structured entities

Subsidiaries are those entities, including structured entities, over which we have control. We control an entity when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the investee. We have power over an entity when we have existing rights that give us the current ability to direct the activities that most significantly affect the entity’s returns (relevant activities). Power may be determined on the basis of voting rights or, in the case of structured entities, other contractual arrangements.

We are not deemed to control an entity when we exercise power over an entity as the agent of a third party or parties. In determining whether we are acting as an agent, we consider the overall relationship between us, the investee and other parties to the arrangement with respect to the following factors: (i) the scope of our decision-making power; (ii) the rights held by other parties; (iii) the remuneration to which we are entitled; and (iv) our exposure to variability of returns.

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The determination of control is based on the current facts and circumstances and is continuously assessed. In some circumstances, different factors and conditions may indicate that various parties control an entity depending on whether those factors and conditions are assessed in isolation or in totality. Significant judgment is applied in determining whether we control an entity, specifically, assessing whether we have substantive decision-making rights over the relevant activities and whether we are exercising our power as a principal or an agent.

We consolidate all subsidiaries from the date we obtain control, and cease consolidation when an entity is no longer controlled by us. Our consolidation conclusions affect the classification and amount of assets, liabilities, revenues and expenses reported in our Consolidated Financial Statements.

For further details, refer to Note 8 of our 2025 Annual Consolidated Financial Statements.

Derecognition of financial assets

We periodically enter into transactions in which we transfer financial assets such as loans or MBS to structured entities or trusts that issue securities to investors. We derecognize the assets when our contractual rights to the cash flows from the assets have expired; when we retain the rights to receive the cash flows of the assets but assume an obligation to pay those cash flows to a third party subject to certain pass-through requirements; or when we transfer our contractual rights to receive the cash flows and substantially all of the risks and rewards of the assets have been transferred. When we retain substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized from our Consolidated Balance Sheets and are accounted for as secured financing transactions. When we neither retain nor transfer substantially all risks and rewards of ownership of the assets, we derecognize the assets if control over the assets is relinquished. If we retain control over the transferred assets, we continue to recognize the transferred assets to the extent of our continuing involvement. Management judgment is applied in determining whether we have transferred or retained substantially all risk and rewards of ownership of the transferred financial asset.

The majority of assets transferred under repurchase agreements, securities lending agreements, to our mortgage fund and in our Canadian residential mortgage securitization transactions do not qualify for derecognition. As a result, we continue to record the associated transferred assets on our Consolidated Balance Sheets and no gains or losses are recognized for those securitization activities. Otherwise, a gain or loss is recognized on securitization by comparing the carrying amount of the transferred asset with its fair value at the date of the transfer. For further information on derecognition of financial assets, refer to Notes 2 and 7 of our 2025 Annual Consolidated Financial Statements.

Application of the effective interest method

Interest income and interest expense are generally recognized for all interest-bearing financial instruments using the effective interest method. The effective interest rate is the rate that discounts estimated future cash flows over the expected life of the financial asset or liability to the net carrying amount upon initial recognition. Significant judgment is applied in determining the effective interest rate due to uncertainty in the timing and amounts of future cash flows.

Provisions

Provisions are liabilities of uncertain timing or amount and are recognized when we have a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured as the best estimate of the consideration required to settle the present obligation at the reporting date. Significant judgment is required in determining whether a present obligation exists and in estimating the probability, timing and amount of any outflows. We record provisions related to litigation, asset retirement obligations and other items.

The forward-looking nature of these estimates requires us to use a significant amount of judgment in projecting the timing and amount of future cash flows. We record our provisions on the basis of all available information at the end of the reporting period and make adjustments on a quarterly basis to reflect current expectations. Should actual results differ from our expectations, we may incur expenses in excess of the provisions recognized.

Insurance and reinsurance contracts

For insurance and reinsurance contracts measured using the general measurement method or variable fee approach, the carrying amount of a group of contracts is measured as the sum of the fulfilment cash flows and CSM. The fulfilment cash flows consist of the present value of future cash flows and a risk adjustment for non-financial risk, discounted using the current rates as at the reporting date determined using the discount rate methodologies below. The estimates of future cash flows consider probability-weighted scenarios and include all future cash flows that are within the contract boundary. The risk adjustment for non-financial risk is estimated using the margin approach and represents the compensation that we require for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the insurance contract is fulfilled. The measurement of the group of contracts requires the use of judgment in setting methodologies and assumptions for morbidity, mortality, longevity, policy lapses and other policyholder behaviour, discount rates, policy dividends, and directly attributable expenses, including acquisition expenses allocated using a systematic and rational method. Changes to the underlying assumptions and estimates may have a significant effect on Non-interest income – Insurance service result and Insurance investment result.

Discount rates used reflect the time value of money and are based on the characteristics of the insurance and reinsurance contracts. Cash flows that vary based on the returns on underlying items are discounted at rates reflecting that variability. For cash flows that do not vary based on the returns on underlying items, we predominantly apply the top-down approach in determining discount rates. Under this approach, the discount rates for the observable periods are determined using yield curves implied from a reference portfolio of assets adjusted to eliminate factors (market and credit risk of the financial assets) that are not relevant to the insurance contracts. For unobservable periods, the discount rates are interpolated using the last observable point and the ultimate discount rate that is composed of a risk-free rate and illiquidity premium. For a selected portfolio, the bottom-up approach is applied in determining the discount rate, which uses a risk-free rate plus an illiquidity premium to reflect the characteristics of the contracts. Management judgment is required in estimating the market and credit risk factors and illiquidity premiums in determining the discount rates.

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Refer to Note 2 of our 2025 Annual Consolidated Financial Statements for further information.

Income taxes

We are subject to income tax laws in various jurisdictions where we operate, and the complex tax laws are potentially subject to different interpretations by us and the relevant taxation authority. Management judgment is applied in interpreting the relevant tax laws, in assessing the probability of acceptance of our tax positions by the relevant tax authorities and in estimating the expected timing and amount of the provision for current and deferred income taxes. A deferred tax asset or liability is determined for each temporary difference based on the tax rates that are expected to be in effect in the period that the asset is realized or the liability is settled, except for earnings related to our subsidiaries, branches, associates and interests in joint ventures where the temporary differences will not reverse in the foreseeable future and we have the ability to control the timing of reversal.

On a quarterly basis, we review whether it is probable that the benefits associated with our deferred tax assets will be realized, using both positive and negative evidence. Refer to Note 21 of our 2025 Annual Consolidated Financial Statements for further information.

Future changes in accounting policy and disclosure

Amendments to the Classification and Measurement of Financial Instruments

In May 2024, the IASB issued Amendments to the Classification and Measurement of Financial Instruments which amends IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures (the Amendments). The Amendments clarify the recognition and derecognition of financial instruments and introduce an accounting policy option for financial liabilities settled through electronic payment systems. The Amendments also clarify classification guidance for financial assets with contingent features not directly related to changes in basic lending risks and introduce additional related disclosure requirements for financial instruments with such contingent features. The Amendments will be effective for us on November 1, 2026 and will be applied retrospectively with no restatement of comparative periods required. To manage the implementation of the Amendments, we established a program to assess the impact on systems, processes and financial reporting. We continue to assess the impact of adopting the Amendments on our Consolidated Financial Statements.

IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18)

In April 2024, the IASB issued IFRS 18, which sets out requirements for the presentation and disclosure of information in the financial statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements and accompanies limited amendments to other standards which will be effective upon the adoption of the new standard. The standard introduces new defined subtotals to be presented in the Consolidated Statements of Income, disclosure of management-defined performance measures and requirements for aggregation and disaggregation of information. This standard will be effective for us on November 1, 2027 and will be applied retrospectively with restatement of comparative periods. To manage the transition to IFRS 18, we established a program to assess the impact on systems, processes and financial reporting required for adoption. We continue to assess the impact of adopting this standard on our Consolidated Financial Statements.

Controls and procedures

Disclosure controls and procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and include controls and procedures that are designed to ensure that information is accumulated and communicated to management, including the President and Chief Executive Officer, and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

As of October 31, 2025, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, the effectiveness of our disclosure controls and procedures as defined under rules adopted by the Canadian securities regulatory authorities and the U.S. SEC. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 31, 2025.

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. See Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm.

There were no changes in our internal control over financial reporting during the year ended October 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

124 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Related party transactions

In the ordinary course of business, we provide normal banking services and operational services, and enter into other transactions with associated and other related corporations, including our joint venture entities, on terms similar to those offered to non-related parties. We grant loans to directors, officers and other employees at rates normally accorded to preferred clients. In addition, we offer deferred share and other plans to non-employee directors, executives and certain other key employees. For further information, refer to Notes 12 and 25 of our 2025 Annual Consolidated Financial Statements.

Supplementary information
Selected annual information	Table 68
---	---
(Millions of Canadian dollars, except per share amounts)	2025		2024		2023
---	---	---	---	---	---	---
Total revenue	$	66,605	$	57,344	$	51,464
Net income attributable to:
Shareholders		20,362		16,230		14,605
Non-controlling<br> interest		7		10		7
	$	20,369	$	16,240	$	14,612
Basic earnings per share	$	14.10	$	11.27	$	10.33
Diluted earnings per share		14.07		11.25		10.32
Dividends declared per common shares		6.04		5.60		5.34
Total assets	$	2,325,006	$	2,171,582	$	2,006,531
Deposits		1,515,616		1,409,531		1,231,687

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Net interest income on average assets and liabilities	Table 69
	Average balances				Interest				Average rate
---	---	---	---	---	---	---	---	---	---	---	---	---
(Millions of Canadian dollars, except for percentage amounts)	2025		2024		2025		2024		2025		2024
Assets
Deposits with other banks
Canada	$	19,134	$	13,170	$	905	$	1,468		4.73%		11.15%
U.S.		88,197		74,409		3,782		3,906		4.29		5.25
Other International		8,568		7,527		674		748		7.87		9.94
		115,899		95,106		5,361		6,122		4.63		6.44
Securities
Trading		203,740		176,632		8,126		7,927		3.99		4.49
Investment, net of applicable allowance		303,673		226,256		11,929		9,741		3.93		4.31
		507,413		402,888		20,055		17,668		3.95		4.39
Asset purchased under reverse repurchase agreements and securities borrowed		407,516		396,552		22,367		27,121		5.49		6.84
Loans<br> <br>(1)
Canada
Retail		575,950		541,468		29,989		29,663		5.21		5.48
Wholesale		197,115		165,911		13,697		12,295		6.95		7.41
		773,065		707,379		43,686		41,958		5.65		5.93
U.S.		174,680		159,046		7,971		8,362		4.56		5.26
Other International		61,370		51,263		4,385		3,720		7.15		7.26
		1,009,115		917,688		56,042		54,040		5.55		5.89
Total interest-earning assets		2,039,943		1,812,234		103,825		104,951		5.09		5.79
Non-interest-bearing deposits with other banks		56,823		60,220		–		–		–		–
Other assets		301,656		236,003		–		–		–		–
Total assets	$	2,398,422	$	2,108,457	$	103,825	$	104,951		4.33%		4.98%
Liabilities and shareholders’ equity
Deposits<br> <br>(2)
Canada	$	995,471	$	892,275	$	33,883	$	36,999		3.40%		4.15%
U.S.		180,477		155,928		6,326		6,377		3.51		4.09
Other International		116,666		83,069		4,608		3,880		3.95		4.67
		1,292,614		1,131,272		44,817		47,256		3.47		4.18
Obligations related to securities sold short		47,454		35,826		2,988		2,766		6.30		7.72
Obligations related to assets sold under repurchase agreements and securities loaned		400,611		374,099		21,820		25,479		5.45		6.81
Subordinated debentures		13,540		12,641		637		775		4.70		6.13
Other interest-bearing liabilities		25,853		25,166		563		722		2.18		2.87
Total interest-bearing liabilities		1,780,072		1,579,004		70,825		76,998		3.98		4.88
Non-interest-bearing deposits		203,498		185,758		–		–		–		–
Other liabilities		281,918		224,480		–		–		–		–
Total liabilities	$	2,265,488	$	1,989,242	$	70,825	$	76,998		3.13%		3.87%
Equity	$	132,934	$	119,215		n.a.		n.a.		n.a.		n.a.
Total liabilities and shareholders’ equity	$	2,398,422	$	2,108,457	$	70,825	$	76,998		2.95%		3.65%
Net interest income and margin	$	2,398,422	$	2,108,457	$	33,000	$	27,953		1.38%		1.33%
Net interest income and margin (average earning assets, net)<br><br>(3)
Canada	$	1,209,193	$	1,088,773	$	26,416	$	22,281		2.18%		2.05%
U.S.		584,814		526,059		5,092		4,268		0.87		0.81
Other International		245,936		197,401		1,492		1,404		0.61		0.71
Total	$	2,039,943	$	1,812,233	$	33,000	$	27,953		1.62%		1.54%
(1)	Interest income includes loan fees of $1,212 million (2024 – $1,165 million; 2023 – $1,149 million).
---	---
(2)	Deposits include personal chequing and savings deposits with average balances of $277 billion (2024 – $254 billion; 2023 – $250 billion), interest expense of $2,610 million (2024 – $3,580 million; 2023 – $2,840 million) and average rates of 0.94% (2024 – 1.41%; 2023 – 1.14%). Deposits also include term deposits with average balances of $790 billion (2024 – $701 billion; 2023 – $624 billion), interest expense of $31,680 million (2024 – $31,520 million; 2023 – $24,260 million) and average rates of 4.00% (2024 – 4.50%; 2023 – 3.89%).
---	---
(3)	Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities.
---	---
n.a.	not applicable
---	---

126 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Change in net interest income	Table 70
	2025 vs. 2024								2024 vs. 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Increase (decrease) due to<br>changes in								Increase (decrease) due to<br>changes in
(Millions of Canadian dollars)	Average<br>volume<br> (1)		Average<br>rate<br> (1)			Net change			Average<br>volume (1)			Average<br>rate (1)			Net change
Assets
Deposits with other banks
Canada <br>(2)	$	665	$	(1,228	)	$	(563	)	$	(55	)	$	(175	)	$	(230	)
U.S. <br>(2)		724		(847	)		(123	)		(641	)		583			(58	)
Other international <br>(2)		103		(177	)		(74	)		(609	)		166			(443	)
Securities
Trading		1,217		(1,018	)		199			1,056			(594	)		462
Investment, net of applicable allowance		3,333		(1,145	)		2,188			1,802			892			2,694
Asset purchased under reverse repurchase agreements and securities borrowed		750		(5,504	)		(4,754	)		770			4,187			4,957
Loans
Canada <br>(2)
Retail <br>(2)		1,889		(1,563	)		326			1,853			3,948			5,801
Wholesale <br>(2)		2,312		(910	)		1,402			3,392			25			3,417
U.S. <br>(2)		822		(1,213	)		(391	)		26			1,445			1,471
Other international <br>(2)		733		(68	)		665			36			(148	)		(112	)
Total interest income	$	12,548	$	(13,673	)	$	(1,125	)	$	7,630		$	10,329		$	17,959
Liabilities
Deposits
Canada <br>(2)		4,279		(7,394	)		(3,115	)		4,374			4,997			9,371
U.S. <br>(2)		1,004		(1,055	)		(51	)		73			921			994
Other international <br>(2)		1,569		(841	)		728			(415	)		626			211
Obligations related to securities sold short		898		(676	)		222			(43	)		(124	)		(167	)
Obligations related to assets sold under repurchase agreements and securities loaned		1,806		(5,465	)		(3,659	)		1,265			3,781			5,046
Subordinated debentures		55		(193	)		(138	)		97			12			109
Other interest-bearing liabilities		20		(179	)		(159	)		(381	)		(48	)		(429	)
Total interest expense	$	9,631	$	(15,803	)	$	(6,172	)	$	4,970		$	10,165		$	15,135
Net interest income	$	2,917	$	2,130		$	5,047		$	2,660		$	164		$	2,824
(1)	Volume/rate variance is allocated on the percentage relationships of changes in balances and changes in rates to the total net change in net interest income.
---	---
(2)	Geographic classification for selected assets and liabilities is based on the domicile of the booking point of the subject assets and liabilities.
---	---
Loans and acceptances by geography	Table 71
---	---
As at October 31 (Millions of Canadian dollars)	2025			2024
---	---	---	---	---	---	---
Canada<br><br>(1)
Residential mortgages	$	454,346		$	441,191
Personal		90,842			86,977
Credit cards		25,836			24,619
Small business		16,797			15,531
Retail		587,821			568,318
Wholesale		194,504			189,413
	$	782,325		$	757,731
U.S.<br><br>(1)
Retail		57,309			51,893
Wholesale		143,441			119,231
		200,750			171,124
Other International<br><br>(1)
Retail		7,214			6,767
Wholesale		59,245			51,830
		66,459			58,597
Total loans and acceptances	$	1,049,534		$	987,452
Total allowance for credit losses		(7,093	)		(6,037	)
Total loans and acceptances, net of allowance for credit losses	$	1,042,441		$	981,415
(1)	Geographic information is based on residence of borrower.
---	---

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Loans and acceptances by portfolio and sector	Table 72
As at October 31 (Millions of Canadian dollars)	2025			2024
---	---	---	---	---	---	---
Residential mortgages	$	493,413		$	477,544
Personal		115,345			108,338
Credit cards		26,789			25,565
Small business		16,797			15,531
Retail	$	652,344		$	626,978
Agriculture		13,958			13,065
Automotive		14,155			14,386
Banking		9,397			8,829
Consumer discretionary		27,132			23,670
Consumer staples		11,193			9,885
Oil and gas		6,352			6,362
Financial services		47,894			40,997
Financing products		27,826			18,161
Forest products		2,452			2,200
Governments		5,716			5,816
Industrial products		15,743			15,347
Information technology		5,875			5,788
Investments		23,842			21,454
Mining and metals		2,715			2,757
Public works and infrastructure		3,246			3,325
Real estate and related		111,132			102,885
Other services		34,096			31,758
Telecommunication and media		9,065			7,745
Transportation		10,440			10,450
Utilities		14,219			14,484
Other sectors		742			1,110
Wholesale	$	397,190		$	360,474
Total loans and acceptances	$	1,049,534		$	987,452
Total allowance for credit losses		(7,093	)		(6,037	)
Total loans and acceptances, net of allowance for credit losses	$	1,042,441		$	981,415

128 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Gross impaired loans by portfolio and geography	Table 73
As at October 31 (Millions of Canadian dollars, except for percentage amounts)	2025			2024
---	---	---	---	---	---	---
Residential mortgages	$	1,681		$	1,233
Personal		437			408
Small business		411			321
Retail		2,529			1,962
Agriculture	$	283		$	127
Automotive		157			263
Banking		30			54
Consumer discretionary		555			401
Consumer staples		115			138
Oil and gas		28			9
Financial services		213			120
Financing products		324			228
Forest products		82			147
Governments		31			12
Industrial products		271			235
Information technology		106			74
Investments		63			82
Mining and metals		21			3
Public works and infrastructure		38			11
Real estate and related		1,759			1,404
Other services		1,588			263
Telecommunication and media		117			105
Transportation		303			172
Utilities		23			30
Other sectors		46			27
Wholesale<br><br>(1)		6,153			3,905
Total GIL<br><br>(2)	$	8,682		$	5,867
Canada<br><br>(3)
Residential mortgages	$	1,435		$	1,007
Personal		383			354
Small business		411			321
Retail		2,229			1,682
Agriculture		282			126
Automotive		155			238
Banking		30			54
Consumer discretionary		423			298
Consumer staples		42			67
Oil and gas		28			9
Financial services		19			24
Financing products		193			228
Forest products		82			147
Governments		31			10
Industrial products		231			137
Information technology		53			38
Investments		26			21
Mining and metals		21			3
Public works and infrastructure		32			6
Real estate and related		1,101			750
Other services		191			140
Telecommunication and media		19			15
Transportation		282			139
Utilities		23			–
Other sectors		1			1
Wholesale		3,265			2,451
Total	$	5,494		$	4,133
U.S.<br><br>(3)
Retail	$	172		$	125
Wholesale		1,096			1,165
Total	$	1,268		$	1,290
Other International<br><br>(3)
Retail	$	128		$	155
Wholesale		1,792			289
Total	$	1,920		$	444
Total GIL	$	8,682		$	5,867
Allowance on impaired loans		(1,986	)		(1,516	)
Net impaired loans	$	6,696		$	4,351
GIL as a % of loans and acceptances
Residential mortgages		0.34%			0.26%
Personal		0.38%			0.38%
Small business		2.45%			2.07%
Retail		0.39%			0.31%
Wholesale		1.55%			1.08%
Total		0.83%			0.59%
Allowance on impaired loans as a % of GIL		22.88%			25.85%
(1)	Includes $195 million of purchased or originated credit-impaired loans (October 31, 2024 – $109 million).
---	---
(2)	Past due loans greater than 90 days not included in impaired loans were $330 million in 2025 (2024 – $267 million). For further details, refer to Note 5 of our 2025 Annual Consolidated Financial Statements.
---	---
(3)	Geographic information is based on residence of borrower.
---	---

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Provision for credit losses by portfolio and geography	Table 74
For the year ended October 31 (Millions of Canadian dollars, except for percentage amounts)	2025			2024
---	---	---	---	---	---	---
Residential mortgages	$	141		$	86
Personal		821			680
Credit cards		828			670
Small business		171			150
Retail		1,961			1,586
Agriculture	$	43		$	24
Automotive		121			115
Banking		4			33
Consumer discretionary		299			97
Consumer staples		62			59
Oil and gas		6			(51	)
Financial services		47			19
Financing products		110			40
Forest products		60			48
Governments		(7	)		2
Industrial products		74			68
Information technology		35			21
Investments		23			3
Mining and metals		14			(1	)
Public works and infrastructure		8			(6	)
Real estate and related		230			403
Other services		427			40
Telecommunication and media		80			42
Transportation		117			63
Utilities		1			3
Other sectors		19			12
Wholesale		1,773			1,034
Total PCL on impaired loans	$	3,734		$	2,620
Canada<br><br>(1)
Residential mortgages	$	152		$	96
Personal		805			672
Credit cards		803			653
Small business		171			150
Retail		1,931			1,571
Agriculture		41			24
Automotive		121			114
Banking		4			36
Consumer discretionary		259			86
Consumer staples		13			33
Oil and gas		7			(4	)
Financial services		5			11
Financing products		21			40
Forest products		60			48
Governments		(6	)		2
Industrial products		82			61
Information technology		17			18
Investments		21			1
Mining and metals		14			(1	)
Public works and infrastructure		8			(6	)
Real estate and related		177			116
Other services		112			32
Telecommunication and media		8			8
Transportation		110			44
Utilities		4			–
Other sectors		8			–
Wholesale		1,086			663
Total	$	3,017		$	2,234
U.S.<br><br>(1)
Retail	$	52		$	33
Wholesale		225			366
Total	$	277		$	399
Other International<br> <br>(1)
Retail	$	(22	)	$	(19	)
Wholesale		462			6
Total	$	440		$	(13	)
Total PCL on impaired loans	$	3,734		$	2,620
Total PCL on performing loans		622			627
Total PCL on other financial assets		6			(15	)
Total PCL	$	4,362		$	3,232
PCL on loans as a % of average net loans and acceptances		0.43%			0.35%
PCL on impaired loans as a % of average net loans and acceptances<br> <br>(1)		0.37%			0.28%
(1)	Geographic information is based on residence of borrower.
---	---

130 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Allowance on loans by portfolio and geography<br><br>(1)	Table 75
As at and for the year ended October 31 (Millions of Canadian dollars, except percentage amounts)	2025		2024
---	---	---	---	---
Allowance against impaired loans
Canada<br><br>(2)
Residential mortgages	$	255	$	163
Personal		205		185
Small business		138		105
Retail	$	598	$	453
Agriculture	$	29	$	26
Automotive		141		104
Banking		18		34
Consumer discretionary		154		54
Consumer staples		40		40
Oil and gas		7		1
Financial services		14		11
Financing products		56		39
Forest products		16		45
Governments		–		1
Industrial products		77		57
Information technology		15		15
Investments		24		7
Mining and metals		14		1
Public works and infrastructure		12		5
Real estate and related		172		127
Other services		92		26
Telecommunication and media		7		6
Transportation		30		44
Utilities		4		–
Other sectors		15		–
Wholesale	$	937	$	643
Total	$	1,535	$	1,096
U.S.<br> <br>(2)
Retail	$	23	$	19
Wholesale		160		237
Total	$	183	$	256
Other International<br><br>(2)
Retail	$	65	$	76
Wholesale		203		88
Total	$	268	$	164
Total allowance on impaired loans	$	1,986	$	1,516
Allowance on performing loans
Residential mortgages	$	480	$	341
Personal		1,406		1,272
Credit cards		1,356		1,232
Small business		212		166
Retail	$	3,454	$	3,011
Wholesale	$	2,019	$	1,825
Total allowance on performing loans	$	5,473	$	4,836
Total allowance on loans	$	7,459	$	6,352
Key ratios
Allowance on loans as a % of loans and acceptances		0.71%		0.64%
Net write-offs as a % of average net loans and acceptances		0.28%		0.22%
(1)	Includes loans, acceptances and commitments.
---	---
(2)	Geographic information is based on residence of borrower.
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Management’s Discussion and Analysis Royal Bank of Canada: Annual Report 2025 131

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Credit quality information by Canadian province<br><br>(1)	Table 76
As at and for the year ended October 31 (Millions of Canadian dollars)	2025		2024
---	---	---	---	---
Loans and acceptances
Atlantic provinces <br>(2)	$	37,937	$	35,501
Quebec		88,665		86,426
Ontario		378,521		369,949
Alberta		87,758		82,860
Other Prairie provinces <br>(3)		40,467		38,766
B.C. and territories <br>(4)		148,977		144,229
Total loans and acceptances in Canada	$	782,325	$	757,731
Gross impaired loans
Atlantic provinces <br>(2)	$	135	$	148
Quebec		691		366
Ontario		2,753		2,219
Alberta		706		666
Other Prairie provinces <br>(3)		282		181
B.C. and territories <br>(4)		927		553
Total GIL in Canada	$	5,494	$	4,133
PCL on impaired loans
Atlantic provinces <br>(2)	$	47	$	46
Quebec		270		168
Ontario		2,040		1,510
Alberta		274		217
Other Prairie provinces <br>(3)		121		80
B.C. and territories <br>(4)		265		213
Total PCL on impaired loans in Canada	$	3,017	$	2,234
(1)	Geographic information is based on residence of borrower.
---	---
(2)	Comprises Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick.
---	---
(3)	Comprises Manitoba and Saskatchewan.
---	---
(4)	Comprises British Columbia, Nunavut, Northwest Territories and Yukon.
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132 Royal Bank of Canada: Annual Report 2025 Management’s Discussion and Analysis

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Glossary

Adjusted results

For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

•	Adjusted effective income tax rate<br> – calculated as effective income tax rate excluding the impact of specified items and amortization of acquisition-related intangibles.
•	Adjusted income before income taxes<br> – calculated as income before income taxes excluding the impact of specified items and amortization of acquisition-related intangibles.
---	---
•	Adjusted income taxes<br> – calculated as income taxes excluding the impact of specified items and amortization of acquisition-related intangibles.
---	---
•	Adjusted net income<br> – calculated as net income excluding the impact of specified items and amortization of acquisition-related intangibles.
---	---
•	Adjusted net income available to common shareholders<br> – calculated as net income available to common shareholders excluding the impact of specified items and amortization of acquisition-related intangibles.
---	---
•	Adjusted <br>non-interest<br> expense<br> – calculated as <br>non-interest<br> expense excluding the impact of specified items and amortization of acquisition-related intangibles.
---	---
•	Adjusted total revenue<br> – calculated as total revenue excluding the impact of specified items.
---	---

Acceptances

A bill of exchange or negotiable instrument drawn by the borrower for payment at maturity and accepted by a bank. The acceptance constitutes a guarantee of payment by the bank and can be traded in the money market. The bank earns a “stamping fee” for providing this guarantee.

Allowance for credit losses (ACL)

The amount deemed adequate by management to absorb expected credit losses as at the balance sheet date. The allowance is established for all financial assets subject to impairment assessment, including certain loans, debt securities, financial guarantees, and undrawn loan commitments. The allowance is changed by the amount of provision for credit losses recorded, which is charged to income, and decreased by the amount of write-offs net of recoveries in the period.

ACL on loans ratio

ACL on loans ratio is calculated as ACL on loans as a percentage of total loans and acceptances.

Asset-backed securities (ABS)

Securities created through the securitization of a pool of assets, for example auto loans or credit card loans.

Assets under administration (AUA)

Assets administered by us, which are beneficially owned by clients, unless otherwise noted. Services provided in respect of assets under administration are of an administrative nature, including safekeeping, collecting investment income, settling purchase and sale transactions, and record keeping.

Assets under management (AUM)

Assets managed by us, which are beneficially owned by clients, unless otherwise noted. Services provided in respect of assets under management include the selection of investments and the provision of investment advice. We have assets under management that are also administered by us and included in assets under administration.

Attributed capital

Attributed capital to our business segments is based on the Basel III regulatory capital and leverage requirements other than for our insurance segment for which we attribute capital based only on economic capital.

Auction rate securities (ARS)

Debt securities whose interest rates are regularly reset through an auction process.

Average earning assets, net

Average earning assets include interest-bearing deposits with other banks, securities, net of applicable allowance, assets purchased under reverse repurchase agreements and securities borrowed, loans, net of allowance, cash collateral and margin deposits. Insurance assets, and all other assets not specified are excluded. The averages are based on the daily balances for the period.

Basis point (bp)

One one-hundredth of a percentage point (.01%).

Collateral

Assets pledged as security for a loan or other obligation. Collateral can take many forms, such as cash, highly rated securities, property, inventory, equipment and receivables.

Collateralized debt obligation (CDO)

Securities with multiple tranches that are issued by structured entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand.

Commitments to extend credit

Unutilized amount of credit facilities available to clients either in the form of loans, acceptances and other on-balance sheet financing, or through off-balance sheet products such as guarantees and letters of credit.

Common Equity Tier 1 (CET1) capital

A regulatory Basel III capital measure comprised mainly of common shareholders’ equity less regulatory deductions and adjustments for goodwill and intangibles, defined benefit pension fund assets, shortfall in allowances and other specified items. The CET1 capital is calculated in accordance with OSFI’s CAR guideline. For more details, refer to the Capital management section.

Common Equity Tier 1 capital ratio

A risk-based capital measure calculated as CET1 capital divided by risk-weighted assets. The CET1 ratio is calculated in accordance with OSFI’s CAR guideline.

Contractual service margin (CSM)

Covered bonds

Full recourse on-balance sheet obligations issued by banks and credit institutions that are fully collateralized by assets over which investors enjoy a priority claim in the event of an issuer’s insolvency.

Credit default swaps (CDS)

A derivative contract that provides the purchaser with a one-time payment should the referenced entity/entities default (or a similar triggering event occur).

Derivative

A contract with the following characteristics: (a) its value changes in response to the change in an underlying (e.g., price of a financial instrument, index or financial rate); (b) it requires no initial net investment or an initial net investment that is smaller than for contracts with similar responses to changes in market factors; and (c) it is settled at a future date. Examples of derivatives include swaps, options, forward rate agreements and futures.

Dividend payout ratio

Common dividends as a percentage of net income available to common shareholders.

Dividend yield

Dividends per common share divided by the average of the high and low share price in the relevant period.

Earnings per share (EPS), basic

Calculated as net income available to common shareholders divided by the average number of shares outstanding. Adjusted EPS, basic is calculated in the same manner, using adjusted net income available to common shareholders.

Earnings per share (EPS), diluted

Calculated as net income available to common shareholders divided by the average number of shares outstanding adjusted for the dilutive effects of stock options and other convertible securities. Adjusted EPS, diluted is calculated in the same manner, using adjusted net income available to common shareholders.

Efficiency ratio

Non-interest expense as a percentage of total revenue. Adjusted efficiency ratio is calculated in the same manner, using adjusted non-interest expense and adjusted total revenue.

Expected credit losses

The difference between the contractual cash flows due to us in accordance with the relevant contractual terms and the cash flows that we expect to receive, discounted to the balance sheet date.

Fair value

Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Funding valuation adjustment

Funding valuation adjustments are calculated to incorporate cost and benefit of funding in the valuation of uncollateralized and under-collateralized OTC derivatives. Future expected cash flows of these derivatives are discounted to reflect the cost and benefit of funding the derivatives by using a funding curve, implied volatilities and correlations as inputs.

Guarantees and standby letters of credit

These primarily represent irrevocable assurances that a bank will make payments in the event that its client cannot meet its financial obligations to third parties. Certain other guarantees, such as bid and performance bonds, represent non-financial undertakings.

Hedge

A risk management technique used to mitigate exposure from market, interest rate or foreign currency exchange risk arising from normal banking operations. The elimination or reduction of such exposure is accomplished by establishing offsetting positions. For example, assets denominated in foreign currencies can be offset with liabilities in the same currencies or through the use of foreign exchange hedging instruments such as futures, options or foreign exchange contracts.

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Hedge funds

A type of investment fund, marketed to accredited high net worth investors, that is subject to limited regulation and restrictions on its investments compared to retail mutual funds, and that often utilize aggressive strategies such as selling short, leverage, program trading, swaps, arbitrage and derivatives.

High-quality liquid assets (HQLA)

HQLA are cash or assets that can be converted into cash quickly through sales (or by being pledged as collateral) with no significant loss of value.

Impaired loans

Loans are classified as impaired when there has been a deterioration of credit quality to the extent that management no longer has reasonable assurance of timely collection of the full amount of principal and interest in accordance with the contractual terms of the loan agreement. Credit card balances are not classified as impaired as they are directly written off after payments are 180 days past due.

Insurance contracts

Insurance investment result

Calculated as Net investment income from the Insurance segment, Insurance finance income (expense) from insurance contracts and Reinsurance finance income (expense) from reinsurance contracts held. Net investment income primarily comprises interest and dividend income and net gains (losses) on financial instruments and derivatives relating to the Insurance segment. Insurance and reinsurance finance income (expense) represents the net effect of and changes in the time value of money and financial risks on insurance contracts and reinsurance contracts held, respectively.

Insurance service result

Calculated as Insurance revenue less Insurance service expense from insurance contracts and Net income (expense) from reinsurance contracts held. Insurance revenue represents the revenue recognized in the period as we provide insurance services for the groups of insurance contracts. Insurance service expense represents the costs incurred in providing insurance services in the period, which includes incurred claims and other directly attributable expenses, allocation of acquisition costs, changes relating to past or current services and changes in loss components of onerous groups of contracts. Net income (expense) from reinsurance contracts held represents the amounts recovered from the reinsurers less the allocation of premiums paid on reinsurance contracts held.

International Financial Reporting Standards (IFRS)

IFRS are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Board.

Leverage ratio

A Basel III regulatory measure, the ratio divides Tier 1 capital by the leverage exposure measure. The leverage ratio is a non-risk based measure and is calculated in accordance with OSFI’s LR guideline.

Leverage ratio exposure

The leverage ratio exposure is calculated in accordance with OSFI’s LR guideline and is defined as the sum of total assets plus off-balance sheet items after certain adjustments.

Liquidity Coverage Ratio (LCR)

The LCR is a Basel III standard that aims to ensure that an institution has an adequate stock of unencumbered HQLA that consists of cash or assets that can be converted into cash at little or no loss of value in private markets, to meet its liquidity needs for a 30 calendar day liquidity stress scenario. The LCR is calculated in accordance with OSFI’s LAR guideline.

Loan-to-value (LTV) ratio

Calculated based on the total facility amount for the residential mortgage and RBC Homeline Plan product divided by the value of the related residential property.

Master netting agreement

An agreement between us and a counterparty designed to reduce the credit risk of multiple derivative transactions through the creation of a legal right of offset of exposure in the event of a default.

Net interest income

The difference between what is earned on assets such as loans and securities and what is paid on liabilities such as deposits and subordinated debentures.

Net interest margin (NIM) on average earning assets, net

Calculated as net interest income divided by average earning assets, net.

Net Stable Funding Ratio (NSFR)

The NSFR is a Basel III standard that requires institutions to maintain a stable funding profile defined as available amount of stable funding (ASF) in relation to the composition of their assets and off-balance sheet activities defined as required amount of stable funding (RSF). The ratio should be at least equal to 100% on an ongoing basis. The NSFR is calculated in accordance with OSFI’s LAR guideline.

Normal course issuer bid (NCIB)

A program for the repurchase of our own shares for cancellation through a stock exchange that is subject to the various rules of the relevant stock exchange and securities commission.

Notional amount

The contract amount used as a reference point to calculate payments for derivatives.

Off-balance sheet financial instruments

A variety of arrangements offered to clients, which include credit derivatives, written put options, backstop liquidity facilities, stable value products, financial standby letters of credit, performance guarantees, credit enhancements, mortgage loans sold with recourse, commitments to extend credit, securities lending, documentary and commercial letters of credit, sponsor member guarantees, securities lending indemnifications and indemnifications.

Office of the Superintendent of Financial Institutions Canada (OSFI)

The primary regulator of federally chartered financial institutions and federally administered pension plans in Canada. OSFI’s mission is to safeguard policyholders, depositors and pension plan members from undue loss.

Operating leverage

The difference between our revenue growth rate and non-interest expense growth rate.

Options

A contract or a provision of a contract that gives one party (the option holder) the right, but not the obligation, to perform a specified transaction with another party (the option issuer or option writer) according to specified terms.

Provision for credit losses (PCL)

The amount charged to income necessary to bring the allowance for credit losses to a level determined appropriate by management. This includes provisions on performing and impaired financial assets.

PCL on loans ratio

PCL on loans ratio is calculated using PCL on loans as a percentage of average net loans and acceptances.

PCL on impaired loans ratio

PCL on impaired loans ratio is calculated as PCL on impaired loans as a percentage of average net loans and acceptances.

PCL on performing loans ratio

PCL on performing loans ratio is calculated as PCL on performing loans as a percentage of average net loans and acceptances.

RBC Homeline Plan products

This is comprised of residential mortgages and secured personal loans whereby the borrower pledges real estate as collateral.

Reinsurance contracts held

Contracts under which we transfer significant insurance risk to a reinsurer that compensates us for claims relating to underlying insurance contracts issued by us and are accounted for separately from the underlying insurance contracts to which they relate.

Repurchase agreements

These involve the sale of securities for cash and the simultaneous repurchase of the securities for value at a later date. These transactions normally do not constitute economic sales and therefore are treated as collateralized financing transactions.

Return on common equity (ROE)

Net income available to common shareholders, expressed as a percentage of average common equity. ROE is based on actual balances of average common equity before rounding. Adjusted ROE is calculated in the same manner, using adjusted net income available to common shareholders.

Reverse repurchase agreements

These involve the purchase of securities for cash and the simultaneous sale of the securities for value at a later date. These transactions normally do not constitute economic sales and therefore are treated as collateralized financing transactions.

Risk-weighted assets (RWA)

Assets adjusted by a regulatory risk-weight factor to reflect the riskiness of on- and off-balance sheet exposures. Certain assets are not risk-weighted, but deducted from capital. The calculation is defined by OSFI’s CAR guideline. For more details, refer to the Capital management section.

Securities lending

Transactions in which the owner of securities agrees to lend it under the terms of a prearranged contract to a borrower for a fee. Collateral for the loan consists of either high quality securities or cash and collateral value must be at least equal to the market value of the loaned securities. Borrowers pay a negotiated fee for loans collateralized by securities, whereas for cash collateral lenders pay borrowers interest at a negotiated rate and reinvest the cash collateral to earn a return. An intermediary such as a bank often acts as agent lender for the owner of the security in return for a share of the revenue earned by the owner from lending securities. Most often, agent lenders indemnify the owner against the risk of the borrower’s failure to redeliver the loaned securities – counterparty credit risk if a borrower defaults and market risk if the value of the non-cash collateral declines. The agent lender does not indemnify against the investment risk of re-investing cash collateral which is borne by the owner.

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Securities sold short

A transaction in which the seller sells securities and then borrows the securities in order to deliver them to the purchaser upon settlement. At a later date, the seller buys identical securities in the market to replace the borrowed securities.

Securitization

The process by which various financial assets are packaged into newly issued securities backed by these assets.

Standardized Approach (SA) for credit risk

Risk weights prescribed by OSFI are used to calculate RWA for the credit risk exposures. Credit assessments by OSFI-recognized external credit rating agencies of Standard & Poor’s Financial Services LLP; Moody’s Investor Service, Inc.; Fitch Ratings, Inc.; Kroll Bond Rating Agency, Inc. (KBRA ‡ ); and DBRS Limited are used to risk-weight our Sovereign, Corporate and Bank exposures based on the CAR guideline issued by OSFI.

Structured entities

A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding who controls the entity, such as when the activities that significantly affect the entity’s returns are directed by means of contractual arrangements. Structured entities often have restricted activities, narrow and well defined objectives, insufficient equity to finance their activities, and financing in the form of multiple contractually-linked instruments.

Taxable equivalent basis (teb)

Income from certain specified tax advantaged sources (U.S. tax credit business as well as eligible Canadian taxable corporate dividends received on or before December 31, 2023) is increased to a level that would make it comparable to income from taxable sources. There is an offsetting adjustment in the tax provision, thereby generating the same after-tax net income.

Tier 1 capital and Tier 1 capital ratio

Tier 1 capital comprises predominantly of CET1 capital, with additional Tier 1 items such as preferred shares, limited recourse capital notes and non-controlling interests in subsidiaries Tier 1 instruments. The Tier 1 capital ratio is calculated in accordance with OSFI’s CAR guideline by dividing Tier 1 capital by risk-weighted assets.

Tier 2 capital

Tier 2 capital consists mainly of subordinated debentures that meet certain criteria, certain loan loss allowances and non-controlling interests in subsidiaries’ Tier 2 instruments.

Total loss absorbing capacity (TLAC)

The aggregate of Tier 1 capital, Tier 2 capital and external TLAC instruments which allow conversion in whole or in part into common shares under the Canada Deposit Insurance Corporation Act and meet all of the eligibility criteria under OSFI’s TLAC guideline.

TLAC ratio

The risk-based TLAC ratio is defined as TLAC divided by total risk-weighted assets. The TLAC ratio is calculated in accordance with OSFI’s TLAC guideline.

TLAC leverage ratio

The TLAC leverage ratio is defined as TLAC divided by the leverage ratio exposure. The TLAC leverage ratio is calculated in accordance with OSFI’s TLAC guideline.

Total capital and total capital ratio

Total capital is defined as the total of Tier 1 and Tier 2 capital. The total capital ratio is calculated in accordance with OSFI’s CAR guideline by dividing total capital by risk-weighted assets.

Tranche

A security class created whereby the risks and returns associated with a pool of assets are packaged into several classes of securities offering different risk and return profiles from those of the underlying asset pool. Tranches are typically rated by ratings agencies, and reflect both the credit quality of underlying collateral as well as the level of protection based on the tranches’ relative subordination.

Unattributed capital

Unattributed capital represents common equity in excess of common equity attributed to our business segments and is reported in the Corporate Support segment.

Value-at-Risk (VaR)

A generally accepted risk-measurement concept that uses statistical models based on historical information to estimate within a given level of confidence the maximum loss in market value we would experience in our financial portfolio from an adverse one-day movement in market rates and prices.

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Enhanced Disclosure Task Force recommendations index

We aim to present transparent, high-quality risk disclosures by providing disclosures in this 2025 Annual Report and Supplementary Financial Information package (SFI), and Pillar 3 Report, in accordance with recommendations from the FSB’s Enhanced Disclosure Task Force (EDTF). Information within the SFI and Pillar 3 Report is not and should not be considered incorporated by reference into this 2025 Annual Report.

The following index summarizes our disclosure by EDTF recommendation:

			Location of disclosure
Type of Risk	Recommendation	Disclosure	Annual Report page	SFI page
General	1	Table of contents for EDTF risk disclosure	136	1
	2	Define risk terminology and measures	65-69, 133-135	–
	3	Top and emerging risks	69-72	–
	4	New regulatory ratios	110-116	–
Risk governance, risk management and business model	5	Risk management organization	65-69	–
	6	Risk culture	65-69	–
	7	Risk in the context of our business activities	120	–
	8	Stress testing	68, 83	–
Capital adequacy and risk-weighted assets (RWA)	9	Minimum Basel III capital ratios and Domestic systemically important bank surcharge	110-116	–
	10	Composition of capital and reconciliation of the accounting balance sheet to the regulatory balance sheet	–	*
	11	Flow statement of the movements in regulatory capital	–	19
	12	Capital strategic planning	110-116	–
	13	RWA by business segments	–	20
	14	Analysis of capital requirement, and related measurement model information	72-76	*
	15	RWA credit risk and related risk measurements	–	*
	16	Movement of RWA by risk type	–	20
	17	Basel back-testing	67, 72-74	31
Liquidity	18	Quantitative and qualitative analysis of our liquidity reserve	90-91, 96-97	–
Funding	19	Encumbered and unencumbered assets by balance sheet category, and contractual obligations for rating downgrades	92, 95	–
	20	Maturity analysis of consolidated total assets, liabilities and <br>off-balance<br> sheet commitments analyzed by remaining contractual maturity at the balance sheet date	99-100	–
	21	Sources of funding and funding strategy	92-94	–
Market risk	22	Relationship between the market risk measures for trading and <br>non-trading<br> portfolios and the balance sheet	87-88	–
	23	Decomposition of market risk factors	83-88	–
	24	Market risk validation and back-testing	83	–
	25	Primary risk management techniques beyond reported risk measures and parameters	83-86	–
Credit risk	26	Bank’s credit risk profile	72-82, 180-187	21-31*
		Quantitative summary of aggregate credit risk exposures that reconciles to the balance sheet	127-132	*
	27	Policies for identifying impaired loans	74-76, 122, 153-155	–
	28	Reconciliation of the opening and closing balances of impaired loans and impairment allowances during the year	–	23, 28
	29	Quantification of gross notional exposure for OTC derivatives or exchange-traded derivatives	77	32
	30	Credit risk mitigation, including collateral held for all sources of credit risk	75-76	*
Other	31	Other risk types	102-110	–
	32	Publicly known risk events	107-108, 230-231	–
*	These disclosure requirements are satisfied or partially satisfied by disclosures provided in our Pillar 3 Report for the quarter ended October 31, 2025 and for the year ended October 31, 2024.
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136 Royal Bank of Canada: Annual Report 2025 Index for Enhanced Disclosure Task Force recommendations

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REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS
Reports
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138	Management’s Responsibility for Financial Reporting
138	Management’s Report on Internal Control over Financial Reporting
142	Report of Independent Registered Public Accounting Firm (PCAOB ID 271)
Consolidated Financial Statements
144	Consolidated Balance Sheets
145	Consolidated Statements of Income
146	Consolidated Statements of Comprehensive Income
147	Consolidated Statements of Changes in Equity
148	Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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149	Note 1	General information
149	Note 2	Summary of significant accounting policies, estimates and judgments
163	Note 3	Fair value of financial instruments
176	Note 4	Securities
180	Note 5	Loans and allowance for credit losses
187	Note 6	Significant acquisition
188	Note 7	Derecognition of financial assets
189	Note 8	Structured entities
193	Note 9	Derivative financial instruments and hedging activities
205	Note 10	Premises and equipment
206	Note 11	Goodwill and other intangible assets
208	Note 12	Joint ventures and associated companies
208	Note 13	Other assets
209	Note 14	Deposits
210	Note 15	Insurance and reinsurance
214	Note 16	Employee benefits – Pension and other post-employment benefits
219	Note 17	Other liabilities
219	Note 18	Subordinated debentures
220	Note 19	Equity
223	Note 20	Share-based compensation
225	Note 21	Income taxes
227	Note 22	Earnings per share
228	Note 23	Guarantees, commitments, pledged assets and contingencies
230	Note 24	Legal and regulatory matters
231	Note 25	Related party transactions
232	Note 26	Results by business segment
235	Note 27	Nature and extent of risks arising from financial instruments
236	Note 28	Capital management
237	Note 29	Offsetting financial assets and financial liabilities
238	Note 30	Recovery and settlement of on-balance sheet assets and liabilities
239	Note 31	Parent company information
241	Note 32	Principal subsidiaries

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 137

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Management’s Responsibility for Financial Reporting

The accompanying consolidated financial statements of Royal Bank of Canada were prepared by management, which is responsible for the integrity and fairness of the information presented, including the many amounts that must of necessity be based on estimates and judgments. These consolidated financial statements were prepared in accordance with the Bank Act (Canada) and International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial information appearing throughout our Management’s Discussion and Analysis is consistent with these consolidated financial statements.

Our internal controls are designed to provide reasonable assurance that transactions are authorized, assets are safeguarded and proper records are maintained. These controls include quality standards in hiring and training of employees, policies and procedures manuals, a corporate code of conduct and accountability for performance within appropriate and well-defined areas of responsibility.

The system of internal controls is further supported by a compliance function, which is designed to ensure that we and our employees comply with securities legislation and conflict of interest rules, and by an internal audit staff, which conducts periodic audits of all aspects of our operations.

The Board of Directors oversees management’s responsibilities for financial reporting through an Audit Committee, which is composed entirely of independent directors. This Committee reviews our consolidated financial statements and recommends them to the Board for approval. Other key responsibilities of the Audit Committee include reviewing our existing internal control procedures and planned revisions to those procedures, and advising the directors on auditing matters and financial reporting issues. Our Chief Compliance Officer and Chief Internal Auditor have full and unrestricted access to the Audit Committee.

The Office of the Superintendent of Financial Institutions Canada (OSFI) examines and inquires into our business and affairs as deemed necessary to determine whether the provisions of the Bank Act are being complied with, and that we are in sound financial condition. In carrying out its mandate, OSFI strives to protect the rights and interests of our depositors and creditors.

PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm appointed by our shareholders upon the recommendation of the Audit Committee and Board, has performed an independent audit of the consolidated financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) as stated in their Independent Auditor’s Report and Report of Independent Registered Public Accounting Firm, respectively. The auditors have full and unrestricted access to the Audit Committee to discuss their audit and related findings.

David I. McKay

President and Chief Executive Officer

Katherine Gibson

Chief Financial Officer

Toronto, December 2, 2025

Management’s Report on Internal Control over Financial Reporting

Management of Royal Bank of Canada is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the President and Chief Executive Officer and Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. It includes those policies and procedures that:

•	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions related to and dispositions of our assets;
•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are made only in accordance with authorizations of our management and directors; and
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•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
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Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as of October 31, 2025, based on the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that, as of October 31, 2025, internal control over financial reporting was effective based on the criteria established in the Internal Control – Integrated Framework (2013).

The effectiveness of our internal control over financial reporting as of October 31, 2025, has been audited by PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, as stated in their Report of Independent Registered Public Accounting Firm, which appears herein.

David I. McKay

President and Chief Executive Officer

Katherine Gibson

Chief Financial Officer

Toronto, December 2, 2025

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Royal Bank of Canada

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Royal Bank of Canada and its subsidiaries (together, the Bank) as of October 31, 2025 and 2024, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Bank’s internal control over financial reporting as of October 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Bank as of October 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of October 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Bank’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Bank’s consolidated financial statements and on the Bank’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Bank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. An entity’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses on Loans Categorized as Stage 1 and Stage 2 (Stage 1 and Stage 2 ACL)

As described in Notes 2 and 5 to the consolidated financial statements, the Bank’s allowance for credit losses on loans was $7,459 million as of October 31, 2025 and represents management’s estimate of expected credit losses on loans as of the balance sheet date, of which a significant portion relates to loans categorized as Stage 1 and Stage 2. Performing loans are categorized as Stage 1 from initial recognition to the date on which the loan has experienced a significant increase in credit risk relative to its initial recognition. Performing loans transfer into Stage 2 following a significant increase in credit risk relative to the initial recognition. Loans are categorized as Stage 3 when considered to be credit-impaired. As disclosed by management, the

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measurement of expected credit losses on loans is a complex calculation that involves a significant number of interrelated inputs and assumptions such as borrower risk ratings, forward-looking macroeconomic conditions, scenario design and the weight assigned to each scenario. The probability of default, loss given default and exposure at default inputs are modelled based on the macroeconomic variables that are most closely correlated with credit losses. Management’s estimation of expected credit losses on loans categorized as Stage 1 and Stage 2 considers five distinct future macroeconomic scenarios, each of which includes a forecast of relevant macroeconomic variables, designed to capture a wide range of possible outcomes and which are probability-weighted according to management’s expectation of the relative likelihood of the range of outcomes that each scenario represents at the reporting date. Significant management judgment is required in making assumptions and estimations when calculating the Stage 1 and Stage 2 ACL.

The principal considerations for our determination that performing procedures relating to the Stage 1 and Stage 2 ACL is a critical audit matter are (i) the significant judgment required by management when estimating the Stage 1 and Stage 2 ACL; (ii) a high degree of auditor judgment and subjectivity in performing procedures related to management’s assumptions for (a) designing future macroeconomic scenarios, (b) forecasting certain macroeconomic variables, (c) probability-weighting scenarios, and (d) assigning borrower risk ratings; (iii) the significant audit effort necessary to evaluate audit evidence as the estimation of the Stage 1 and Stage 2 ACL is a complex calculation that involves a large volume of data, interrelated inputs and assumptions, some of which are model-based; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the estimation of the Stage 1 and Stage 2 ACL, including controls over (i) the probability of default, loss given default and exposure at default models; (ii) the design of future macroeconomic scenarios, the forecasting of certain macroeconomic variables, and the probability-weighting of these scenarios; (iii) the assignment of borrower risk ratings; and (iv) the completeness and accuracy of certain data inputs underlying the Stage 1 and Stage 2 ACL calculation. These procedures also included, among others, testing management’s process for estimating the Stage 1 and Stage 2 ACL. This consisted of (i) testing the completeness and accuracy of certain underlying data used in the estimation of the Stage 1 and Stage 2 ACL; and (ii) with the assistance of professionals with specialized skill and knowledge, evaluating (a) the appropriateness of the probability of default, loss given default and exposure at default models used in the estimation of the Stage 1 and Stage 2 ACL, and (b) the reasonableness of significant inputs and assumptions used in the estimation of the Stage 1 and Stage 2 ACL related to (1) the design of future macroeconomic scenarios, (2) certain forecasted macroeconomic variables, (3) the probability-weights assigned to these scenarios, and (4) the assignment of borrower risk ratings for samples of loans.

Uncertain Tax Positions

As described in Note 2 to the consolidated financial statements, the Bank is subject to income tax laws in various jurisdictions where it operates and the complex tax laws are potentially subject to different interpretations by management and the relevant taxation authorities. As disclosed by management, significant judgment is required in the interpretation of the relevant tax laws, and in assessing the probability of acceptance of the Bank’s tax positions to determine tax provisions, which includes management’s estimate of uncertain tax positions that are under audit or appeal by the relevant taxation authorities. Management performs a review on a quarterly basis to incorporate its assessment based on information available, but additional liability and income tax expense could result based on the acceptance of the Bank’s tax positions by the relevant taxation authorities. In some cases, as described in Note 21 to the consolidated financial statements, the Bank has received reassessments denying the tax deductibility of dividends from certain transactions including those with Tax Indifferent Investors.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are (i) the significant judgment required by management, including a high degree of estimation uncertainty, when (a) interpreting the relevant tax laws, and (b) assessing the probability of acceptance of the Bank’s tax positions, which includes management’s estimate of uncertain tax positions that are under audit or appeal by the relevant taxation authorities; (ii) a high degree of auditor judgment and subjectivity in evaluating the uncertain tax positions; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the evaluation of uncertain tax positions and the impact on tax provisions. These procedures also included, among others, testing management’s process for (i) assessing the probability of acceptance of the Bank’s tax positions; and (ii) estimating provisions relating to uncertain tax positions, if applicable, which reflects management’s estimate of uncertain tax positions that are under audit or appeal by the relevant taxation authorities. This consisted of (i) reviewing correspondence with relevant taxation authorities; (ii) evaluating the appropriateness of the methods used; (iii) testing the completeness and accuracy of underlying data used in the estimate; (iv) making inquiries of the Bank’s internal and external legal counsel; and (v) evaluating, with the assistance of professionals with specialized skill and knowledge, the application of relevant tax laws, the reasonableness of management’s assessment of whether it is probable that the relevant taxation authorities will accept the Bank’s tax positions, and evidence used by management.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada

December 2, 2025

We have served as the Bank’s auditor since 2016.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 14 3

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Consolidated Balance Sheets
	As at
---	---	---	---	---	---	---
(Millions of Canadian dollars)	October 31<br> <br>2025			October 31<br> <br>2024
Assets
Cash and due from banks	$	37,024		$	56,723
Interest-bearing deposits with banks		50,364			66,020
Securities<br><br>(Note 4)
Trading		219,067			183,300
Investment, net of applicable allowance		342,721			256,618
		561,788			439,918
Assets purchased under reverse repurchase agreements and securities borrowed		309,683			350,803
Loans<br> <br>(Note 5)
Retail		652,344			626,978
Wholesale		397,171			360,439
		1,049,515			987,417
Allowance for loan losses <br>(Note 5)		(7,093	)		(6,037	)
		1,042,422			981,380
Other
Derivatives <br>(Note 9)		177,206			150,612
Premises and equipment <br>(Note 10)		6,819			6,852
Goodwill <br>(Note 11)		19,405			19,286
Other intangibles <br>(Note 11)		7,402			7,798
Other assets <br>(Note 13)		112,893			92,190
		323,725			276,738
Total assets	$	2,325,006		$	2,171,582
Liabilities and equity
Deposits<br> <br>(Note 14)
Personal	$	529,740		$	522,139
Business and government		946,314			839,670
Bank		39,562			47,722
		1,515,616			1,409,531
Other
Obligations related to securities sold short		49,891			35,286
Obligations related to assets sold under repurchase agreements and securities loaned		289,516			305,321
Derivatives <br>(Note 9)		183,953			163,763
Insurance contract liabilities <br>(Note 15)		24,327			22,231
Other liabilities <br>(Note 17)		108,591			94,712
		656,278			621,313
Subordinated debentures<br> <br>(Note 18)		13,961			13,546
Total liabilities		2,185,855			2,044,390
Equity attributable to shareholders
Preferred shares and other equity instruments <br>(Note 19)		11,675			9,031
Common shares <br>(Note 19)		20,753			20,952
Retained earnings		96,938			88,608
Other components of equity		9,726			8,498
		139,092			127,089
Non-controlling interests		59			103
Total equity		139,151			127,192
Total liabilities and equity	$	2,325,006		$	2,171,582

The accompanying notes are an integral part of these Consolidated Financial Statements.

David I. McKay	Cynthia Devine
President and Chief Executive Officer	Director

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Consolidated Statements of Income
	For the year ended
---	---	---	---	---	---
(Millions of Canadian dollars, except per share amounts)	October 31<br> <br>2025		October 31<br> <br>2024
Interest and dividend income<br> <br>(Note 3)
Loans	$	56,042	$	54,040
Securities		20,055		17,668
Assets purchased under reverse repurchase agreements and securities borrowed		22,367		27,121
Deposits and other		5,361		6,122
	103,825		104,951
Interest expense<br> <br>(Note 3)
Deposits and other		44,817		47,256
Other liabilities		25,371		28,967
Subordinated debentures		637		775
		70,825		76,998
Net interest income		33,000		27,953
Non-interest income
Insurance service result <br>(Note 15)		867		777
Insurance investment result <br>(Note 15)		284		294
Trading revenue		3,125		2,327
Investment management and custodial fees		10,647		9,325
Mutual fund revenue		5,084		4,437
Securities brokerage commissions		1,905		1,660
Service charges		2,425		2,294
Underwriting and other advisory fees		2,899		2,672
Foreign exchange revenue, other than trading		1,301		1,142
Card service revenue		1,333		1,273
Credit fees		1,670		1,592
Net gains on investment securities		120		170
Income (loss) from joint ventures and associates <br>(Note 12)		73		(16	)
Other		1,872		1,444
		33,605		29,391
Total revenue		66,605		57,344
Provision for credit losses<br> <br>(Notes 4 and 5)		4,362		3,232
Non-interest expense
Human resources <br>(Notes 16 and 20)		23,122		21,083
Equipment		2,790		2,537
Occupancy		1,679		1,805
Communications		1,497		1,369
Professional fees		2,177		2,525
Amortization of other intangibles <br>(Note 11)		1,759		1,549
Other		3,568		3,382
		36,592		34,250
Income before income taxes		25,651		19,862
Income taxes <br>(Note 21)		5,282		3,622
Net income	$	20,369	$	16,240
Net income attributable to:
Shareholders	$	20,362	$	16,230
Non-controlling interests		7		10
	$	20,369	$	16,240
Basic earnings per share<br><br>(in dollars) (Note 22)	$	14.10	$	11.27
Diluted earnings per share<br><br>(in dollars) (Note 22)		14.07		11.25
Dividends per common share<br> <br>(in dollars)		6.04		5.60

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 14 5

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Consolidated Statements of Comprehensive Income
	For the year ended
---	---	---	---	---	---	---
(Millions of Canadian dollars)	October 31<br> <br>2025			October 31<br> <br>2024
Net income	$	20,369		$	16,240
Other comprehensive income (loss), net of taxes<br><br>(Note 21)
Items that will be reclassified subsequently to income:
Net change in unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities and loans at fair value through other comprehensive income		758			1,104
Provision for credit losses recognized in income		(5	)		(1	)
Reclassification of net losses (gains) on debt securities and loans at fair value through other comprehensive income to income		(121	)		(140	)
		632			963
Foreign currency translation adjustments
Unrealized foreign currency translation gains (losses)		826			1,029
Net foreign currency translation gains (losses) from hedging activities		(315	)		(514	)
Reclassification of losses (gains) on foreign currency translation to income		(25	)		–
Reclassification of losses (gains) on net investment hedging activities to income		–			1
		486			516
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges		780			338
Reclassification of losses (gains) on derivatives designated as cash flow hedges to income		(669	)		(827	)
		111			(489	)
Items that will not be reclassified subsequently to income:
Remeasurement gains (losses) on employee benefit plans <br>(Note 16)		329			531
Net gains (losses) from fair value changes due to credit risk on financial liabilities designated at fair value through profit or loss		(894	)		(1,041	)
Net gains (losses) on equity securities designated at fair value through other comprehensive income		109			117
		(456	)		(393	)
Total other comprehensive income (loss), net of taxes		773			597
Total comprehensive income (loss)	$	21,142		$	16,837
Total comprehensive income attributable to:
Shareholders	$	21,134		$	16,827
Non-controlling interests		8			10
	$	21,142		$	16,837

The accompanying notes are an integral part of these Consolidated Financial Statements.

14 6 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Consolidated Statements of Changes in Equity
	For the year ended October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
																Other components of equity
(Millions of Canadian dollars)	Preferred<br>shares and<br>other equity<br>instruments			Common<br>shares			Treasury –<br> <br>preferred<br>shares and<br>other equity<br>instruments			Treasury –<br> <br>common<br> <br>shares			Retained<br>earnings			FVOCI<br>securities<br>and loans			Foreign<br>currency<br>translation		Cash flow<br>hedges			Total other<br>components<br>of equity		Equity<br>attributable to<br>shareholders			Non-controlling<br><br>interests			Total<br>equity
Balance at beginning of period	$	9,020		$	21,013		$	11		$	(61	)	$	88,608		$	(897	)	$	7,128	$	2,267		$	8,498	$	127,089		$	103		$	127,192
Changes in equity
Issues of share capital and other equity instruments		4,973			77			–			–			(28	)		–			–		–			–		5,022			–			5,022
Common shares purchased for cancellation		–			(227	)		–			–			(2,541	)		–			–		–			–		(2,768	)		–			(2,768	)
Redemption of preferred shares and other equity instruments		(2,350	)		–			–			–			–			–			–		–			–		(2,350	)		–			(2,350	)
Sales of treasury shares and other equity instruments		–			–			4,937			5,762			–			–			–		–			–		10,699			–			10,699
Purchases of treasury shares and other equity instruments		–			–			(4,916	)		(5,811	)		–			–			–		–			–		(10,727	)		–			(10,727	)
Share-based compensation awards		–			–			–			–			29			–			–		–			–		29			–			29
Dividends on common shares		–			–			–			–			(8,502	)		–			–		–			–		(8,502	)		–			(8,502	)
Dividends on preferred shares and distributions on other equity instruments		–			–			–			–			(494	)		–			–		–			–		(494	)		(52	)		(546	)
Other		–			–			–			–			(40	)		–			–		–			–		(40	)		–			(40	)
Net income		–			–			–			–			20,362			–			–		–			–		20,362			7			20,369
Total other comprehensive income (loss), net of taxes		–			–			–			–			(456	)		632			485		111			1,228		772			1			773
Balance at end of period	$	11,643		$	20,863		$	32		$	(110	)	$	96,938		$	(265	)	$	7,613	$	2,378		$	9,726	$	139,092		$	59		$	139,151
	For the year ended October 31, 2024
																Other components of equity
(Millions of Canadian dollars)	Preferred<br> shares and<br> other equity<br> instruments			Common<br> shares			Treasury –<br> <br>preferred<br> shares and<br> other equity<br> instruments			Treasury –<br> <br>common<br> <br>shares			Retained<br> earnings			FVOCI<br> <br>securities<br> <br>and loans			Foreign<br> currency<br> translation		Cash flow<br> hedges			Total other<br> components<br> <br>of equity		Equity<br> attributable to<br> shareholders			Non-controlling<br> <br>interests			Total<br> equity
Balance at beginning of period	$	7,323		$	19,398		$	(9	)	$	(231	)	$	81,059		$	(1,860	)	$	6,612	$	2,756		$	7,508	$	115,048		$	99		$	115,147
Changes in equity
Issues of share capital and other equity instruments		2,720			1,628			–			–			(18	)		–			–		–			–		4,330			–			4,330
Common shares purchased for cancellation		–			(13	)		–			–			(127	)		–			–		–			–		(140	)		–			(140	)
Redemption of preferred shares and other equity instruments		(1,023	)		–			–			–			2			–			–		–			–		(1,021	)		–			(1,021	)
Sales of treasury shares and other equity instruments		–			–			1,245			5,472			–			–			–		–			–		6,717			–			6,717
Purchases of treasury shares and other equity instruments		–			–			(1,225	)		(5,302	)		–			–			–		–			–		(6,527	)		–			(6,527	)
Share-based compensation awards		–			–			–			–			69			–			–		–			–		69			–			69
Dividends on common shares		–			–			–			–			(7,916	)		–			–		–			–		(7,916	)		–			(7,916	)
Dividends on preferred shares and distributions on other equity instruments		–			–			–			–			(322	)		–			–		–			–		(322	)		(6	)		(328	)
Other		–			–			–			–			24			–			–		–			–		24			–			24
Net income		–			–			–			–			16,230			–			–		–			–		16,230			10			16,240
Total other comprehensive income (loss), net of taxes		–			–			–			–			(393	)		963			516		(489	)		990		597			–			597
Balance at end of period	$	9,020		$	21,013		$	11		$	(61	)	$	88,608		$	(897	)	$	7,128	$	2,267		$	8,498	$	127,089		$	103		$	127,192

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 14 7

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Consolidated Statements of Cash Flows
	For the year ended
---	---	---	---	---	---	---
(Millions of Canadian dollars)	October 31<br> <br>2025			October 31<br> <br>2024
Cash flows from operating activities
Net income	$	20,369		$	16,240
Adjustments for non-cash items and others
Provision for credit losses		4,362			3,232
Depreciation		1,286			1,364
Deferred income taxes		(216	)		(1,529	)
Amortization and impairment of other intangibles		1,793			1,617
(Income) <br>l<br>oss from joint ventures and associates		(73	)		16
Losses (<br>g<br>ains) on investment securities		(132	)		(170	)
Losses (<br>g<br>ains) on disposition of business		–			29
Adjustments for net changes in operating assets and liabilities
Insurance contract liabilities		2,096			3,205
Net change in accrued interest receivable and payable		(1,880	)		1,674
Current income taxes		(936	)		945
Derivative assets		(26,594	)		(4,797	)
Derivative liabilities		20,190			17,593
Trading securities		(35,767	)		8,886
Loans		(62,098	)		(55,007	)
Assets purchased under reverse repurchase agreements and securities borrowed		41,120			(10,168	)
Obligations related to assets sold under repurchase agreements and securities loaned		(15,805	)		(35,581	)
Obligations related to securities sold short		14,605			727
Deposits		106,085			91,596
Brokers and dealers receivable and payable		(107	)		(304	)
Other		(13,078	)		(16,429	)
Net cash from (used in) operating activities		55,220			23,139
Cash flows from investing activities
Change in interest-bearing deposits with banks		15,656			5,066
Proceeds from sales and maturities of investment securities		232,439			182,335
Purchases of investment securities		(314,421	)		(193,307	)
Net acquisitions of premises and equipment and other intangibles		(2,243	)		(2,280	)
Net proceeds from (cash transferred for) dispositions		–			15
Cash used in acquisitions, net of cash acquired		–			(12,716	)
Net cash from (used in) investing activities		(68,569	)		(20,887	)
Cash flows from financing activities
Issuance of subordinated debentures		2,991			3,250
Repayment of subordinated debentures		(2,750	)		(1,500	)
Issue of common shares, net of issuance costs		72			159
Common shares purchased for cancellation		(2,768	)		(140	)
Issue of preferred shares and other equity instruments, net of issuance costs		4,945			2,702
Redemption of preferred shares and other equity instruments		(2,350	)		(1,021	)
Sales of treasury shares and other equity instruments		10,699			6,717
Purchases of treasury shares and other equity instruments		(10,727	)		(6,527	)
Dividends paid on shares and distributions paid on other equity instruments		(8,800	)		(6,637	)
Dividends/distributions paid to non-controlling interests		(39	)		(6	)
Change in short-term borrowings of subsidiaries		2,804			(4,507	)
Repayment of lease liabilities		(788	)		(636	)
Net cash from (used in) financing activities		(6,711	)		(8,146	)
Effect of exchange rate changes on cash and due from banks		361			628
Net change in cash and due from banks		(19,699	)		(5,266	)
Cash and due from banks at beginning of period <br>(1)		56,723			61,989
Cash and due from banks at end of period<br><br>(1)	$	37,024		$	56,723
Cash flows from operating activities include:
Amount of interest paid	$	70,976		$	73,639
Amount of interest received		100,508			102,127
Amount of dividends received		3,982			3,502
Amount of income taxes paid		6,087			3,410
(1)	We are required to maintain balances due to regulatory requirements or contractual restrictions from central banks, other regulatory authorities, and other counterparties. The total balances were $<br>3<br> billion as at October 31, 2025 (October 31, 2024 – $2 billion; October 31, 2023 – $3 billion).
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The accompanying notes are an integral part of these Consolidated Financial Statements.

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Note 1 General information

Royal Bank of Canada and its subsidiaries (the Bank) provide diversified financial services including Personal Banking, Commercial Banking, Wealth Management, Insurance and Capital Markets products and services on a global basis. Refer to Note 26 for further details on our business segments.

The parent bank, Royal Bank of Canada, is a Schedule I Bank under the Bank Act (Canada) incorporated and domiciled in Canada. Our corporate headquarters are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada and our head office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada. Our common shares are listed on the Toronto Stock Exchange and New York Stock Exchange with the ticker symbol RY.

These Consolidated Financial Statements are prepared in compliance with International F inancia l Reporting Sta ndards (IFRS) as issued by the International Accounting Standards Board (IASB). Unless otherwise stated, monetary amounts are stated in Canadian dollars. Tabular information is stated in millions of dollars, except as noted. These Consolidated Financial Statements also comply with Subsection 308 of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions Canada (OSFI), our Consolidated Financial Statements are to be prepared in accordance with IFRS. The accounting policies outlined in Note 2 have been consistently applied to all periods presented.

On December 2, 2025, the Board of Directors authorized the Consolidated Financial Statements for issue.

Note 2 Summary of material accounting policies, estimates and judgments

The material accounting policies used in the preparation of these Consolidated Financial Statements, including the accounting requirements prescribed by OSFI, are summarized below. These accounting policies conform, in all material respects, to IFRS. The same accounting policies have been applied to all periods presented.

General

Use of estimates and assumptions

In preparing our Consolidated Financial Statements, management is required to make subjective estimates and assumptions that affect the reported amount of assets, liabilities, net income and related disclosures. Estimates made by management are based on historical experience and other assumptions that are believed to be reasonable. Key sources of estimation uncertainty include: determination of fair value of financial instruments, allowance for credit losses, insurance and reinsurance contracts, pensions and other post-employment benefits, income taxes, goodwill and other intangible assets, and provisions. Accordingly, actual results may differ from these and other estimates thereby impacting our future Consolidated Financial Statements. Refer to the relevant accounting policies in this Note for details on our use of estimates and assumptions.

Significant judgments

In preparation of these Consolidated Financial Statements, management is required to make significant judgments that affect the carrying amounts of certain assets and liabilities, and the reported amounts of revenues and expenses recorded during the period. Significant judgments have been made in the following areas and discussed as noted in the Consolidated Financial Statements:

Consolidation of structured entities	Note 2<br> <br>Note 8	Goodwill and other intangibles	Note 2<br> <br>Note 11
Fair value of financial instruments	Note 2<br> <br>Note 3	Application of the effective interest method	Note 2
Allowance for credit losses	Note 2<br> <br>Note 4<br> <br>Note 5	Derecognition of financial assets	Note 2<br> <br>Note 7
Insurance and reinsurance contracts	Note 2<br> <br>Note 15	Income taxes	Note 2<br> <br>Note 21
Employee benefits	Note 2<br> <br>Note 16	Provisions	Note 2<br> <br>Note 23<br> <br>Note 24

Basis of consolidation

Our Consolidated Financial Statements include the assets and liabilities and results of operations of the parent company, Royal Bank of Canada, and its subsidiaries including certain structured entities, after elimination of intercompany transactions, balances, revenues and expenses.

Consolidation

We are not deemed to control an entity when we exercise power over an entity as the agent of a third-party or parties. In determining whether we are acting as an agent, we consider the overall relationship between us, the investee and other parties to the arrangement with respect to the following factors: (i) the scope of our decision-making power; (ii) the rights held by other parties; (iii) the remuneration to which we are entitled; and (iv) our exposure to variability of returns.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

We consolidate all subsidiaries from the date we obtain control and cease consolidation when an entity is no longer controlled by us. Our consolidation conclusions affect the classification and amount of assets, liabilities, revenues and expenses reported in our Consolidated Financial Statements.

Non-controlling interests in subsidiaries that we consolidate are shown on our Consolidated Balance Sheets as a separate component of equity which is distinct from equity attributable to our shareholders. The net income attributable to non-controlling interests is separately disclosed in our Consolidated Statements of Income.

Investments in joint ventures and associates

Our investments in associated corporations and limited partnerships over which we have significant influence are accounted for using the equity method. The equity method is also applied to our interests in joint ventures over which we have joint control. Under the equity method of accounting, investments are initially recorded at cost, and the carrying amount is increased or decreased to recognize our share of the investee’s net profit or loss, including our proportionate share of the investee’s Other comprehensive income (OCI), subsequent to the date of acquisition.

Financial Instruments

Classification of financial assets

Financial assets are measured at initial recognition at fair value, and are classified and subsequently measured at fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost based on our business model for managing the financial instruments and the contractual cash flow characteristics of the instrument.

Debt instruments are measured at amortized cost if both of the following conditions are met and the asset is not designated as FVTPL: (a) the asset is held within a business model that is Held-to-Collect (HTC) as described below, and (b) the contractual terms of the instrument give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI).

Debt instruments are measured at FVOCI if both of the following conditions are met and the asset is not designated as FVTPL: (a) the asset is held within a business model that is Held-to-Collect-and-Sell (HTC&S) as described below, and (b) the contractual terms of the instrument give rise, on specified dates, to cash flows that are SPPI.

All other debt instruments are measured at FVTPL.

Equity instruments are measured at FVTPL, unless the asset is not held for trading purposes and we make an irrevocable election to designate the asset as FVOCI. This election is made on an instrument-by-instrument basis.

Business model assessment

We determine our business models at the level that best reflects how we manage portfolios of financial assets to achieve our business objectives. Judgment is used in determining our business models, which is supported by relevant, objective evidence including:

•	How the economic activities of our businesses generate benefits, for example through trading revenue, enhancing yields or hedging funding or other costs and how such economic activities are evaluated and reported to key management personnel;
•	The significant risks affecting the performance of our businesses, for example, market risk, credit risk, or other risks as described in the Risk Management section of the MD&A, and the activities undertaken to manage those risks;
---	---
•	Historical and future expectations of sales of the loans or securities portfolios managed as part of a business model; and
---	---
•	The compensation structures for managers of our businesses, to the extent that these are directly linked to the economic performance of the business model.
---	---

Our business models fall into three categories, which are indicative of the key strategies used to generate returns:

•	HTC: The objective of this business model is to hold loans and securities to collect contractual principal and interest cash flows. Sales are incidental to this objective and are expected to be insignificant or infrequent.
•	HTC&S: Both collecting contractual cash flows and sales are integral to achieving the objective of the business model.
---	---
•	Other fair value business models: These business models are neither HTC nor HTC&S, and primarily represent business models where assets are <br>held-for-trading<br> or managed on a fair value basis.
---	---

SPPI assessment

Instruments held within a HTC or HTC&S business model are assessed to evaluate if their contractual cash flows are comprised of solely payments of principal and interest. SPPI payments are those which would typically be expected from basic lending arrangements. Principal amounts include par repayments from lending and financing arrangements, and interest primarily relates to basic lending returns, including compensation for credit risk and the time value of money associated with the principal amount outstanding over a period of time. Interest can also include other basic lending risks and costs (for example, liquidity risk, servicing or administrative costs) associated with holding the financial asset for a period of time, and a profit margin.

Where the contractual terms introduce exposure to risk or variability of cash flows that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at FVTPL.

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Securities

Trading securities include all securities that are classified as FVTPL by nature and securities designated as FVTPL. Obligations to deliver trading securities sold but not yet purchased are recorded as liabilities and carried at fair value. Realized and unrealized gains and losses on these securities are generally recorded in Non-interest income – Trading revenue or Non-interest income – Other except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. Dividends and interest income accruing on Trading securities are recorded in Interest and dividend income except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. Interest and dividends accrued on securities sold short are recorded in Interest expense.

Investment securities include all securities classified as FVOCI and amortized cost. All investment securities are initially recorded at fair value and subsequently measured according to the respective classification.

Investment securities carried at amortized cost are measured using the effective interest method, and are presented net of any allowance for credit losses, calculated in accordance with our policy for Allowance for credit losses, as described below. Interest income, including the amortization of premiums and discounts on securities measured at amortized cost are recorded in Interest and dividend income. Impairment gains or losses recognized on amortized cost securities are recorded in Provision for credit losses (PCL). When a debt instrument measured at amortized cost is sold, the difference between the sale proceeds and the amortized cost of the security at the time of the sale is recorded as Net gains on investment securities in Non-interest income.

Debt securities carried at FVOCI are measured at fair value with unrealized gains and losses arising from changes in fair value included in Other components of equity. Impairment gains and losses are included in PCL and correspondingly reduce the accumulated changes in fair value included in Other components of equity. When a debt instrument measured at FVOCI is sold, the cumulative gain or loss is reclassified from Other components of equity to Non-interest income – Net gains on investment securities, or Non-interest income – Insurance investment result if relating to the Insurance segment.

Equity securities carried at FVOCI are measured at fair value. Unrealized gains and losses arising from changes in fair value are recorded in Other components of equity and not subsequently reclassified to profit or loss when realized. Dividends from FVOCI equity securities are recognized in Interest and dividend income except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result.

We account for all of our securities using settlement date accounting and changes in fair value between the trade date and settlement date are reflected in income for securities measured at FVTPL, and changes in the fair value of securities measured at FVOCI between the trade and settlement dates are recorded in OCI except for changes in foreign exchange rates on debt securities, which are recorded in Non-interest income.

Fair value option

A financial instrument with a reliably measurable fair value can be designated as FVTPL (the fair value option) on its initial recognition even if the financial instrument was not acquired or incurred principally for the purpose of selling or repurchasing. The fair value option can be used for financial assets if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities, or recognizing related gains and losses on a different basis (an accounting mismatch). The fair value option can be elected for financial liabilities if: (i) the election eliminates an accounting mismatch; (ii) the financial liability is part of a portfolio that is managed on a fair value basis, in accordance with a documented risk management or investment strategy; or (iii) there is an embedded derivative in the financial or non-financial host contract and the derivative is not closely related to the host contract. These instruments cannot be reclassified out of the FVTPL category while they are held or issued.

Financial assets designated as FVTPL are recorded at fair value and any unrealized gain or loss arising due to changes in fair value is included in Non-interest income – Trading revenue or Non-interest income – Other, depending on our business purpose for holding the financial asset.

Financial liabilities designated as FVTPL are recorded at fair value and fair value changes attributable to changes in our own credit risk are recorded in OCI. Own credit risk amounts recognized in OCI will not be reclassified subsequently to net income. The remaining fair value changes not attributable to changes in our own credit risk are recorded in Non-interest income – Trading revenue or Non-interest income – Other, depending on our business purpose for holding the financial liability, except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. Upon initial recognition, if we determine that presenting the effects of own credit risk changes in OCI would create or enlarge an accounting mismatch in net income, the full fair value change in our debt designated as FVTPL is recognized in net income. To make that determination, we assess whether we expect that the effects of changes in the liability’s credit risk will be offset in profit or loss by a change in the fair value of another financial instrument measured at FVTPL. Such an expectation is based on an economic relationship between the characteristics of the liability and the characteristics of the other financial instrument. The determination is made at initial recognition and is not reassessed. To determine the fair value adjustments on our debt instruments designated as FVTPL, we calculate the present value of the instruments based on the contractual cash flows over the term of the arrangement by using our effective funding rate at the beginning and end of the period.

Determination of fair value

The Board of Directors provides oversight on valuation of financial instruments, primarily through the Audit Committee and Risk Committee. The Audit Committee reviews the presentation and disclosure of financial instruments that are measured at fair value, while the Risk Committee assesses the adequacy of governance structures and control processes for the valuation of these instruments.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

We have established policies, procedures and controls for valuation methodologies and techniques to ensure that fair value is reasonably estimated. Major valuation processes and controls include, but are not limited to, profit and loss decomposition, independent price verification (IPV) and model validation standards. These control processes are managed by either Finance or Group Risk Management and are independent of the relevant businesses and their trading functions. Profit and loss decomposition is a process to explain the fair value changes of certain positions and is performed daily for trading portfolios. All fair value instruments are subject to IPV, a process whereby trading function valuations are verified against external market prices and other relevant market data. Market data sources include traded prices, brokers and price vendors. We give priority to those third-party pricing services and prices having the highest and most consistent accuracy. The level of accuracy is determined over time by comparing third-party price values to traders’ or system values, other pricing service values and, when available, actual trade data. Quoted prices for identical instruments from pricing services or brokers are generally not adjusted unless there are issues such as stale prices. If multiple quotes for identical instruments are received, fair value is based on an average of the prices received or the quote from the most reliable vendor, after the outlier prices that fall outside of the pricing range are removed. Other valuation techniques are used when a price or quote is not available. Some valuation processes use models to determine fair value. We have a systematic and consistent approach to control the use of models. Valuation models are approved for use within our model risk management framework. The framework addresses, among other things, model development standards, validation processes and procedures and approval authorities. Model validation ensures that a model is suitable for its intended use and sets parameters for its use. All models are revalidated regularly by qualified personnel who are independent of the model design and development. Annually, our model risk profile is reported to the Board of Directors.

IFRS 13 Fair Value Measurement permits an exception, through an accounting policy choice, to measure the fair value of a portfolio of financial instruments on a net open risk position basis when certain criteria are met. We have elected to use this policy choice to determine the fair value of certain portfolios of financial instruments, primarily derivatives, based on a net exposure to market or credit risk.

We record valuation adjustments to appropriately reflect counterparty credit quality of our derivative portfolio, differences between the actual counterparty collateral discount curve and standard overnight index swap (OIS) discounting for collateralized derivatives, funding valuation adjustments (FVA) for uncollateralized and under-collateralized over-the-counter (OTC) derivatives, unrealized gains or losses at inception of the transaction, bid-offer spreads, unobservable parameters and model limitations. These adjustments may be subjective as they require significant judgment in the input selection, such as implied probability of default (PD) and recovery rate, and are intended to arrive at a fair value that is determined based on assumptions that market participants would use in pricing the financial instrument. The ultimate realized price for a transaction may differ from its fair recorded value previously estimated using management judgment.

Valuation adjustments are recorded for the credit risk of our derivative portfolios in order to arrive at their fair values. Credit valuation adjustments (CVA) take into account our counterparties’ creditworthiness, the current and potential future mark-to-market of transactions and the effects of credit mitigants such as master netting and collateral agreements. CVA amounts are derived from estimates of exposure at default (EAD), PD, recovery rates on a counterparty basis and market and credit factor correlations. EAD is the value of expected derivative assets and liabilities at the time of default, estimated through modelling using underlying risk factors. PD is implied from the market prices for credit protection and the credit ratings of the counterparty. When market data is unavailable, it is estimated by incorporating assumptions and adjustments that market participants would use for determining fair value using these inputs. Correlation is the statistical measure of how credit and market factors may move in relation to one another. Correlation is estimated using historical data. CVA is calculated daily and changes are recorded in Non-interest income – Trading revenue.

FVA is also calculated to incorporate the cost and benefit of funding in the valuation of uncollateralized and under-collateralized OTC derivatives. Future expected cash flows of these derivatives are discounted to reflect the cost and benefit of funding the derivatives by using a funding curve, implied volatilities and correlations as inputs.

Where required, a valuation adjustment is made to reflect the unrealized gain or loss at inception of a financial instrument contract where the fair value of that financial instrument is not obtained from a quoted market price or cannot be evidenced by other observable market transactions based on a valuation technique incorporating observable market data.

A bid-offer valuation adjustment is required when a financial instrument is valued at the mid-market price, instead of the bid or offer price for asset or liability positions, respectively. The valuation adjustment takes into account the spread from the mid-market price to either the bid or offer price.

Some valuation models require parameter calibration from such factors as market observable option prices. The calibration of parameters may be sensitive to factors such as the choice of instruments or optimization methodology. A valuation adjustment is also estimated to mitigate the uncertainties of parameter calibration and model limitations.

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from which to determine the level at which the transaction would occur under normal business circumstances. Appropriate parameter uncertainty and market risk valuation adjustments for such inputs and other model risk valuation adjustments are assessed in all such instances.

Loans

Loans are debt instruments recognized initially at fair value and are subsequently measured in accordance with the Classification of financial assets policy provided above. The majority of our loans are carried at amortized cost using the effective interest method, which represents the gross carrying amount less allowance for credit losses.

Interest on loans is recognized using the effective interest method and recorded in Interest income except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment. The estimated future cash flows used in this calculation include those determined by the contractual term of the asset and all fees that are considered to be integral to the effective interest rate. Also included in this amount are transaction costs and all other premiums or discounts. Fees that relate to activities such as originating, restructuring or renegotiating loans are deferred and recognized as Interest income over the expected term of such loans using the effective interest method. Where there is a reasonable expectation that a loan will be originated, commitment and standby fees are also recognized as interest income over the expected term of the resulting loans using the effective interest method. Otherwise, such fees are recorded as other liabilities and amortized into Non-interest income over the commitment or standby period. Future prepayment fees on mortgage loans are not included as part of the effective interest rate at origination. If prepayment fees are received on a renewal of a mortgage loan before maturity, the fee is included as part of the effective interest rate, and if not renewed, the prepayment fee is recognized in interest income at the prepayment date.

For loans carried at amortized cost or FVOCI, impairment losses are recognized at each balance sheet date in accordance with the three-stage impairment model outlined below.

Allowance for credit losses

An allowance for credit losses (ACL) is established for all financial assets, except for financial assets classified or designated as FVTPL and equity securities designated as FVOCI, which are not subject to impairment assessment. Assets subject to impairment assessment include loans, debt securities, interest-bearing deposits with banks, accounts and accrued interest receivable, and finance and operating lease receivables. ACL on loans measured at amortized cost is presented in Allowance for loan losses. ACL on debt securities measured at FVOCI is presented in Other components of equity. Other financial assets carried at amortized cost are presented net of ACL on our Consolidated Balance Sheets.

Off-balance sheet items subject to impairment assessment include financial guarantees and undrawn loan commitments. ACL on off-balance sheet items is separately calculated and included in Other Liabilities – Provisions.

We measure the ACL on each balance sheet date according to a three-stage expected credit loss impairment model:

•	Performing financial assets
•	Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognized equal to the credit losses expected to result from defaults occurring over the 12 months following the reporting date.
---	---
•	Stage 2 – Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss allowance is recognized equal to the credit losses expected over the remaining lifetime of the asset.
---	---
•	Impaired financial assets
---	---
•	Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance is recognized equal to credit losses expected over the remaining lifetime of the asset. Interest income is calculated based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount.
---	---

Increases or decreases in the required ACL attributable to model changes and new originations, sales or maturities, and changes in risk, parameters and exposures due to changes in loss expectations or stage transfers are recorded in PCL. Write-offs and recoveries of amounts previously written off are recorded against ACL.

Measurement of expected credit losses

Expected credit losses are based on a range of possible outcomes and consider all available reasonable and supportable information, including internal and external ratings, historical credit loss experience and expectations about future cash flows. The measurement of expected credit losses is based primarily on the product of the instrument’s PD, loss given default (LGD), and EAD discounted to the reporting date. The main difference between Stage 1 and Stage 2 expected credit losses for performing financial assets is the respective calculation horizon. Stage 1 estimates project PD, LGD and EAD over a maximum period of 12 months while Stage 2 estimates project PD, LGD and EAD over the remaining lifetime of the instrument.

An expected credit loss estimate is produced for each individual exposure. Relevant parameters are modelled on a collective basis using portfolio segmentation that allows for appropriate incorporation of forward-looking information. To reflect other characteristics that are not already considered through modelling, expert credit judgment is exercised in determining the final expected credit losses.

For a small percentage of our portfolios which lack detailed historical information and/or loss experience, we apply simplified measurement approaches that may differ from what is described above. These approaches have been designed to maximize the available information that is reliable and supportable for each portfolio and may be collective in nature.

Expected credit losses are discounted to the reporting period date using the effective interest rate.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

Expected life

For instruments in Stage 2 or Stage 3, loss allowances reflect expected credit losses over the expected remaining lifetime of the instrument. For most instruments, the expected life is limited to the remaining contractual life.

An exemption is provided for certain instruments with the following characteristics: (a) the instrument includes both a loan and undrawn commitment component; (b) we have the contractual ability to demand repayment and cancel the undrawn commitment; and (c) our exposure to credit losses is not limited to the contractual notice period. For products in scope of this exemption, the expected life may exceed the remaining contractual life and is the period over which our exposure to credit losses is not mitigated by our normal credit risk management actions. This period varies by product and risk category and is estimated based on our historical experience with similar exposures and consideration of credit risk management actions taken as part of our regular credit review cycle. Products in scope of this exemption include credit cards, overdraft balances and certain revolving lines of credit. Judgment is required in determining the instruments in scope for this exemption and estimating the appropriate remaining life based on our historical experience and credit risk mitigation practices.

Assessment of significant increase in credit risk

The assessment of significant increase in credit risk requires significant judgment. Movements between Stage 1 and Stage 2 are based on whether an instrument’s credit risk as at the reporting date has increased significantly relative to the date it was initially recognized. For the purposes of this assessment, credit risk is based on an instrument’s lifetime PD, not the losses we expect to incur. The assessment is generally performed at the instrument level.

Our assessment of significant increases in credit risk is performed at least quarterly based on three factors. If any of the following factors indicates that a significant increase in credit risk has occurred, the instrument is moved from Stage 1 to Stage 2:

(1)	We have established thresholds for significant increases in credit risk based on both a percentage and absolute change in lifetime PD relative to initial recognition. For our wholesale portfolio, a decrease in the borrower’s risk rating is also required to determine that credit risk has increased significantly.
(2)	Additional qualitative reviews may be performed, as necessary, to assess the staging results, which may lead to adjustments to better reflect the positions whose credit risk has increased significantly. These reviews are completed at both the individual borrower levels and the portfolio level and may result in an instrument, a portfolio or a portion of a portfolio moving from Stage 1 to Stage 2.
---	---
(3)	Instruments which are 30 days past due are generally considered to have experienced a significant increase in credit risk, even if our other metrics do not indicate that a significant increase in credit risk has occurred.
---	---

The thresholds for movement between Stage 1 and Stage 2 are symmetrical. After a financial asset has transferred to Stage 2, if its credit risk is no longer considered to have significantly increased relative to its initial recognition, the financial asset will move back to Stage 1.

For certain instruments with low credit risk as at the reporting date, it is presumed that credit risk has not increased significantly relative to initial recognition. Credit risk is considered to be low if the instrument has a low risk of default, and the borrower has the ability to fulfill their contractual obligations both in the near term and in the longer term, including periods of adverse changes in the economic or business environment. Certain interest-bearing deposits with banks, assets purchased under reverse repurchase agreements, insurance policy loans, and liquidity facilities extended to our multi-seller conduits have been identified as having low credit risk.

Use of forward-looking information

The measurement of expected credit losses for each stage and the assessment of significant increase in credit risk considers information about past events and current conditions as well as reasonable and supportable projections of future events and economic conditions. The estimation and application of forward-looking information requires significant judgment.

The PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. Each macroeconomic scenario used in our expected credit loss calculation includes a projection of all relevant macroeconomic variables used in our models for a five-year period, subsequently reverting to long-run averages. Macroeconomic variables used in our expected credit loss models include, but are not limited to, unemployment rates, gross domestic product growth rates, equity return indices, commodity prices and Canadian housing prices. Depending on their usage in the models, macroeconomic variables may be projected at a country, province/state or more granular level.

Our estimation of expected credit losses in Stage 1 and Stage 2 is a discounted probability-weighted estimate that considers a minimum of three future macroeconomic scenarios. Our base case scenario is based on macroeconomic forecasts published by our internal economics group. The published forecasts are developed from models based on historical macroeconomic data, derived from public sources and financial markets. Upside and downside scenarios vary relative to our base case scenario based on reasonably possible alternative macroeconomic conditions. Additional and more severe downside scenarios are designed to capture a broader range of potential credit losses in certain sectors. Scenario design, including the identification of additional downside scenarios, occurs at least on an annual basis and more frequently if conditions warrant.

Scenarios are designed to capture a wide range of possible outcomes and weighted according to our best estimate of the relative likelihood of the range of outcomes that each scenario represents. Scenario weights take into account historical frequency, current trends, and forward-looking conditions and are updated on a quarterly basis. All scenarios considered are applied to all portfolios subject to expected credit losses with the same probabilities.

Our assessment of significant increases in credit risk is based on changes in probability-weighted forward-looking lifetime PDs as at the reporting date, using the same macroeconomic scenarios as the calculation of expected credit losses.

Definition of default

The definition of default used in the measurement of expected credit losses is consistent with the definition of default used for our internal credit risk management purposes. Our definition of default may differ across products and consider both quantitative and qualitative factors, such as the terms of financial covenants and days past due. For retail and wholesale borrowers, except as detailed below, default occurs when the borrower is more than 90 days past due on any material obligation to us, and/or we consider the borrower unlikely to make their payments in full without recourse action on our part, such as taking formal possession of any collateral held. For certain credit card balances, default occurs when payments are 180 days

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past due. For these balances, the use of a period in excess of 90 days past due is reasonable and supported by observable data on write-off and recovery rates experienced on historical credit card portfolios. The definition of default used is applied consistently from period to period and to all financial instruments, unless it can be demonstrated that circumstances have changed such that another definition of default is more appropriate.

Credit-impaired financial assets (Stage 3)

Financial assets are assessed for credit-impairment at each balance sheet date and more frequently when circumstances warrant further assessment. Evidence of credit-impairment may include indications that the borrower is experiencing significant financial difficulty, probability of bankruptcy or other financial reorganization, as well as a measurable decrease in the estimated future cash flows evidenced by the adverse changes in the payments status of the borrower or economic conditions that correlate with defaults.

An asset that is in Stage 3 will move back to Stage 2 when, as at the reporting date, it is no longer considered to be credit-impaired. The asset will transfer back to Stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly from initial recognition, which could occur during the same reporting period as the transfer from Stage 3 to Stage 2.

When a financial asset has been identified as credit-impaired, expected credit losses are measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the instrument’s original effective interest rate. For impaired financial assets with drawn and undrawn components, expected credit losses also reflect any credit losses related to the portion of the loan commitment that is expected to be drawn down over the remaining life of the instrument.

When a financial asset is credit-impaired, interest ceases to be recognized on the regular accrual basis, which accrues income based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original effective interest rate to the amortized cost of the asset, which is the gross carrying amount less the related ACL.

ACL for credit-impaired loans in Stage 3 are established at the borrower level, where losses related to impaired loans are identified on individually significant loans, or collectively assessed and determined through the use of portfolio-based rates, without reference to particular loans.

Individually assessed loans (Stage 3)

When individually significant loans are identified as impaired, we reduce the carrying value of the loans to their estimated realizable value by recording an individually assessed ACL to cover identified credit losses. The individually assessed ACL reflects the expected amount of principal and interest calculated under the terms of the original loan agreement that will not be recovered, and the impact of time delays in collecting principal and/or interest (time value of money). The estimated realizable value for each individually significant loan is the present value of expected future cash flows discounted using the original effective interest rate for each loan. When the amounts and timing of future cash flows cannot be estimated with reasonable reliability, the estimated realizable amount may be determined using observable market prices for comparable loans, the fair value of collateral underlying the loans, and other reasonable and supported methods based on management judgment.

Individually-assessed allowances are established in consideration of a range of possible outcomes, which may include macroeconomic or non-macroeconomic scenarios, to the extent relevant to the circumstances of the specific borrower being assessed. Assumptions used in estimating expected future cash flows reflect current and expected future economic conditions and are generally consistent with those used in Stage 1 and Stage 2 measurement.

Significant judgment is required in assessing evidence of credit-impairment and estimation of the amount and timing of future cash flows when determining expected credit losses. Changes in the amount expected to be recovered would have a direct impact on PCL and may result in a change in the ACL.

Collectively assessed loans (Stage 3)

Loans that are collectively assessed are grouped on the basis of similar risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors.

The collectively-assessed ACL reflects: (i) the expected amount of principal and interest calculated under the terms of the original loan agreement that will not be recovered, and (ii) the impact of time delays in collecting principal and/or interest (time value of money).

The expected principal and interest collection is estimated on a portfolio basis and references historical loss experience of comparable portfolios with similar credit risk characteristics, adjusted for the current environment and expected future conditions. A portfolio specific coverage ratio is applied against the impaired loan balance in determining the collectively-assessed ACL. The time value of money component is calculated by using the discount factors applied to groups of loans sharing common characteristics. The discount factors represent the expected recovery pattern of the comparable group of loans, and reflect the historical experience of these groups adjusted for current and expected future economic conditions and/or industry factors. Significant judgment is required in assessing evidence of credit-impairment and estimation of the amount and timing of future cash flows when determining expected credit losses. Changes in the amount expected to be recovered would have a direct impact on PCL and may result in a change in the ACL.

Write-off of loans

Loans and the related ACL are written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, they are generally written off after receipt of any proceeds from the realization of collateral. In circumstances where the net realizable value of any collateral has been determined and there is no reasonable expectation of further recovery, write off may be earlier. For credit cards, the balances and related ACL are generally written off when payment is 180 days past due. Personal loans are generally written off at 150 days past due.

Modifications

The original terms of a financial asset may be renegotiated or otherwise modified, resulting in changes to the contractual terms of the financial asset that affect the contractual cash flows. The treatment of such modifications is primarily based on the process undertaken to execute the renegotiation and the nature and extent of the expected changes. In the normal course of business, modifications which are performed for credit reasons, primarily related to troubled debt restructurings, are generally treated as modifications of the original financial asset. Modifications which are performed for other than credit reasons are generally considered to be an expiry of the original cash flows; accordingly, such renegotiations are treated as a derecognition of the original financial asset and recognition of a new financial asset.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

If a modification of terms does not result in derecognition of the financial asset, the carrying amount of the financial asset is recalculated as the present value of the renegotiated or modified contractual cash flows, discounted at the original effective interest rate and a gain or loss is recognized. The financial asset continues to be subject to the same assessments for significant increase in credit risk relative to initial recognition and credit-impairment, as described above. A modified financial asset will transfer out of Stage 3 if the conditions that led to it being identified as credit-impaired are no longer present and relate objectively to an event occurring after the original credit-impairment was recognized. A modified financial asset will transfer out of Stage 2 when it no longer satisfies the relative thresholds set to identify significant increases in credit risk, which are based on changes in its lifetime PD, days past due and other qualitative considerations. The financial asset continues to be monitored for significant increases in credit risk and credit-impairment.

If a modification of terms results in derecognition of the original financial asset and recognition of the new financial asset, the new financial asset will generally be recorded in Stage 1, unless it is determined to be credit-impaired at the time of the renegotiation. For the purposes of assessing for significant increases in credit risk, the date of initial recognition for the new financial asset is the date of the modification.

Derivatives

When derivatives are embedded in other financial instruments or host contracts, such combinations are known as hybrid instruments. If the host contract is a financial asset within the scope of IFRS 9 Financial Instruments (IFRS 9), the classification and measurement criteria are applied to the entire hybrid instrument as described in the Classification of financial assets section of Note 2. If the host contract is a financial liability or an asset that is not within the scope of IFRS 9, embedded derivatives are separately recognized if the economic characteristics and risks of the embedded derivative are not clearly and closely related to the host contract, unless an election has been made to elect the fair value option, as described above. The host contract is accounted for in accordance with the relevant standards. Embedded derivatives are presented on a combined basis with the host contracts.

All derivative instruments are recorded on our Consolidated Balance Sheets at fair value, inclusive of valuation adjustments. When derivatives are used in trading activities, the realized and unrealized gains and losses on these derivatives are recognized in Non-interest income – Trading revenue. When derivatives are used to manage our own exposures, we determine for each derivative whether hedge accounting can be applied, as discussed in the Hedge accounting section below. For derivatives used to manage our own exposures where we do not apply hedge accounting, the realized and unrealized gains and losses are primarily recognized in Non-interest income – Other.

Derecognition of financial assets

Financial assets are derecognized from our Consolidated Balance Sheets when our contractual rights to the cash flows from the assets have expired, when we retain the rights to receive the cash flows of the assets but assume an obligation to pay those cash flows to a third-party subject to certain pass-through requirements or when we transfer our contractual rights to receive the cash flows and substantially all of the risks and rewards of the assets have been transferred. When we retain substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized from our Consolidated Balance Sheets and are accounted for as secured financing transactions. When we neither retain nor transfer substantially all risks and rewards of ownership of the assets, we derecognize the assets if control over the assets is relinquished. If we retain control over the transferred assets, we continue to recognize the transferred assets to the extent of our continuing involvement.

Management judgment is applied in determining whether the contractual rights to the cash flows from the transferred assets have expired or whether we retain the rights to receive cash flows on the assets but assume an obligation to pay for those cash flows. We derecognize transferred financial assets if we transfer substantially all the risks and rewards of the ownership in the assets. When assessing whether we have transferred substantially all of the risk and rewards of the transferred assets, management considers our exposure before and after the transfer with the variability in the amount and timing of the net cash flows of the transferred assets. In transfers in which we retain the servicing rights, management has applied judgment in assessing the benefits of servicing against market expectations. When the benefits of servicing are greater than fair value, a servicing asset is recognized in Other assets in our Consolidated Balance Sheets. When the benefits of servicing are less than fair value, a servicing liability is recognized in Other liabilities in our Consolidated Balance Sheets.

Derecognition of financial liabilities

We derecognize a financial liability from our Consolidated Balance Sheets when our obligation specified in the contract expires, or is discharged or cancelled. We recognize the difference between the carrying amount of a financial liability transferred and the consideration paid in our Consolidated Statements of Income.

Interest

Interest is recognized in Interest income and Interest expense in the Consolidated Statements of Income for all interest-bearing financial instruments except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. The effective interest rate is the rate that discounts estimated future cash flows over the expected life of the financial asset or liability to the net carrying amount upon initial recognition. Significant judgment is applied in determining the effective interest rate due to uncertainty in the timing and amounts of future cash flows.

Dividend income

Dividend income is recognized when the right to receive payment is established and is recorded in Interest and dividend income except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result. This is the ex-dividend date for listed equity securities, and usually the date when shareholders have approved the dividend for unlisted equity securities.

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Transaction costs

Transaction costs are expensed as incurred for financial instruments classified or designated as FVTPL. For other financial instruments, transaction costs are capitalized on initial recognition. For financial assets and financial liabilities measured at amortized cost and debt financial assets measured at FVOCI, capitalized transaction costs are amortized through net income over the estimated life of the instrument using the effective interest method.

Offsetting financial assets and financial liabilities

Financial assets and financial liabilities are offset on the Consolidated Balance Sheets when there exists both a legally enforceable right to offset the recognized amounts and an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Assets purchased under reverse repurchase agreements and sold under repurchase agreements

We purchase securities under agreements to resell (reverse repurchase agreements) and take possession of these securities. We monitor the market value of the securities purchased and additional collateral is obtained when appropriate. We have the right to liquidate the collateral held in the event of counterparty default. Reverse repurchase agreements are treated as collateralized lending transactions. We also sell securities und er ag ree ments to re pur chase (repurchase agreements), which are treated as collateralized borrowing transactions. The securities received under reverse repurchase agreements and securities delivered under repurchase agreements are not recognized on, or derecognized from, our Consolidated Balance Sheets, respectively, un le ss the risks and rewards of ownership are obtained or relinquished.

Reverse repurchase agreements and repurchase agreements are carried on our Consolidated Balance Sheets at the amounts at which the securities were initially acquired or sold, except when they are classified or designated as FVTPL and are recorded at fair value. Interest earned on reverse repurchase agreements is included in Interest income, and interest incurred on repurchase agreements is included in Interest expense in our Consolidated Statements of Income while changes in fair value for reverse repurchase agreements and repurchase agreements classified or designated as FVTPL are included in Trading revenue or Other in Non-interest income except for amounts relating to the Insurance segment, which are recorded in Non-interest income – Insurance investment result.

Hedge accounting

We have elected to continue to apply the hedge accounting principles under IAS 39 instead of those under IFRS 9.

We use derivatives and non-derivatives in our hedging strategies to manage our exposure to interest rate, currency, credit and other market risks. Our hedging strategies include the use of fair value hedges, cash flow hedges and net investment hedges. Derivatives used in hedging relationships are recorded in Other Assets – Derivatives or Other Liabilities – Derivatives on our Consolidated Balance Sheets. Foreign currency-denominated liabilities used in net investment hedging relationships are recorded in Deposits – Business and Government and Subordinated debentures on our Consolidated Balance Sheets. We assess, both at the inception of the hedge and on an ongoing basis, whether the hedging instruments are ‘highly effective’ in offsetting changes in the fair value or cash flows of the hedged items. A hedge is regarded as highly effective only if the following criteria are met: (i) at inception of the hedge and throughout its life, the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk, and (ii) actual results of the hedge are within a pre-determined range. We perform effectiveness testing to demonstrate that the relationship has been and is expected to be effective over the remaining term of the hedge. In the case of hedging a forecast transaction, the transaction must have a high probability of occurring and must present an exposure to variations in cash flows that could ultimately affect the reported net profit or loss. Hedge accounting is discontinued when it is determined that the hedging instrument is no longer effective as a hedge, the hedging instrument or hedged item is terminated or sold, or the forecast transaction is no longer deemed highly probable. Refer to Note 9 for the fair value of derivatives and non-derivative instruments categorized by their hedging relationships, as well as derivatives that are not designated in hedging relationships.

Fair value hedges

In a fair value hedging relationship, the carrying value of the hedged item is adjusted for changes in fair value attributable to the hedged risk and recognized in Non-interest income – Other. Changes in fair value of the hedged item, to the extent that the hedging relationship is effective, are offset by changes in the fair value of the hedging derivative, which are also recognized in Non-interest income – Other. When hedge accounting is discontinued, the carrying value of the hedged item is no longer adjusted and the cumulative fair value adjustments to the carrying value of the hedged items are amortized to Non-interest income – Other over the expected remaining life of the hedged items.

We predominantly use interest rate swaps to hedge our exposure to changes in a fixed interest rate instrument’s fair value caused by changes in interest rates.

Cash flow hedges

In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging derivative, net of taxes, is recognized in OCI and reclassified to profit or loss as the associated hedged forecast transaction occurs, while the ineffective portion is recognized in Non-interest income – Other. When hedge accounting is discontinued, the cumulative amounts previously recognized in OCI are reclassified to Net interest income during the periods when the variability in the cash flows of the hedged item affects Net interest income. Unrealized gains and losses on derivatives are reclassified immediately to Non-interest income – Other when the hedged item is sold or terminated early, or when the forecast transaction is no longer expected to occur.

We predominantly use interest rate swaps to hedge the variability in cash flows related to a variable-rate asset or liability.

Net investment hedges

In hedging our foreign currency exposure to a net investment in a foreign operation, the effective portion of foreign exchange gains and losses on the hedging instruments, net of applicable taxes, is recognized in OCI and the ineffective portion is recognized in Non-interest income – Other. The amounts, or a portion thereof, previously recognized in Other components of equity are recognized in Net income on the disposal, or partial disposal, of the foreign operation.

We use foreign exchange contracts and foreign currency-denominated liabilities to manage our foreign currency exposures to net investments in foreign operations having a functional currency other than the Canadian dollar.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

Guarantees

Financial guarantee contracts are contracts that contingently require us to make specified payments (in cash, other assets, our own shares or provision of services) to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Liabilities are recognized on our Consolidated Balance Sheets at the inception of a guarantee for the fair value of the obligation undertaken in issuing the guarantee. Financial guarantees are subsequently remeasured at the higher of (i) the amount of expected credit losses and (ii) the amount initially recognized less, when appropriate, the cumulative amount of income recognized.

If the financial guarantee contract meets the definition of a derivative, it is measured at fair value at each balance sheet date and reported under Derivatives on our Consolidated Balance Sheets.

Insurance and reinsurance contracts

Contracts under which we accept significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder are insurance contracts, which includes reinsurance contracts issued. Contracts under which we transfer significant insurance risk to a reinsurer that compensates us for claims relating to underlying insurance contracts issued by us are reinsurance contracts held, and are accounted for separately from the underlying insurance contracts to which they relate. Embedded derivatives, investment components and promises to provide non-insurance services are separated from the insurance or reinsurance contract provided specific criteria are met. Insurance and reinsurance contracts are aggregated into portfolios that are subject to similar risks and are managed together, and then divided into groups based on the period of issuance and expected profitability. Groups are separately recognized and measured using one of three measurement models depending on the characteristics of the contracts:

•	For insurance contracts with direct participating features (applicable primarily to our segregated fund insurance contracts), the variable fee approach (VFA) is applied.
•	For insurance contracts and reinsurance contracts held with a short duration of one year or less (applicable primarily to our creditor reinsurance contracts issued, group life and health insurance contracts and travel insurance contracts), the premium allocation approach (PAA) is applied.
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•	The general measurement method (GMM) is applied to all remaining contracts.
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Under the GMM and VFA, the carrying amount of a group of insurance or reinsurance contracts is measured as the sum of the fulfilment cash flows and the contractual service margin (CSM). The carrying amount is also the sum of the liability for remaining coverage and the liability for incurred claims. The liability for remaining coverage comprises the fulfilment cash flows that relate to services that will be provided under the contracts in future periods and any remaining CSM at that date. The liability for incurred claims includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have been incurred but not yet reported. The fulfilment cash flows consist of the present value of future cash flows and a risk adjustment for non-financial risk, discounted using the current rates as at the reporting date determined using the discount rate methodology disclosed in Note 15. The estimates of future cash flows consider probability-weighted scenarios and include all future cash flows that are within the contract boundary. The risk adjustment for non-financial risk represents the compensation that we require for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the insurance contract is fulfilled and is estimated using the margin approach disclosed in Note 15. The measurement of the groups of contracts requires the use of judgment in setting methodologies and assumptions for morbidity, mortality, longevity, policy lapses and other policyholder behaviour, policy dividends and directly attributable expenses, including acquisition costs allocated using a systematic and rational method. Changes to the underlying assumptions and estimates may have a significant effect on Non-interest income – Insurance service result and Insurance investment result. Subsequent changes in fulfilment cash flows related to future services adjust the CSM, unless the group is onerous in which case such changes are recognized in Non-interest income – Insurance service result along with changes related to past or current services.

For insurance contracts, the CSM represents the unearned profit (net inflows) for providing insurance coverage. For reinsurance contracts held, the CSM represents the net cost or net gain of purchasing reinsurance. The CSM for insurance and reinsurance contacts are released into income based on coverage units, which represent the quantity of service (insurance coverage as well as investment-return and investment-related services) provided by a group of contracts and are determined by considering the quantity of benefits provided under each contract and the expected coverage duration. Under the GMM, the CSM is adjusted for interest accretion using the discount rates that were locked-in at initial recognition of the groups or the discount rates that were locked-in at the transition date for groups where the fair value approach was applied. Under the VFA, the CSM is adjusted for changes in the amount of our share of the fair value of the underlying items, while the changes to the fair value of the underlying items, reflecting changes in the obligation to pay the policyholder, are recognized in Non-interest income – Insurance investment result.

Under the PAA, the liability for remaining coverage for each group is measured as the premiums received less insurance revenue recognized for services provided, while the liability for incurred claims is measured as the fulfillment cash flows for incurred claims.

Losses from the recognition of onerous groups of insurance contracts, regardless of the measurement model applied, are recognized in Non-interest income – Insurance service result immediately. Any losses recognized relating to future service can be reversed in subsequent periods if the group of contracts is no longer onerous.

The insurance and reinsurance contract balances are remeasured at the end of each reporting period. We have elected to update the accounting estimates made in the previous interim period when remeasuring the insurance and reinsurance contracts in subsequent interim and annual reporting periods.

An insurance or reinsurance contract is derecognized when it is extinguished or modified such that the modification results in a change in the measurement model, a substantially different contract boundary or a change in the scope of the applicable standard for measuring a component of the contract.

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Insurance service result comprises Insurance revenue less Insurance service expense and Net income (expense) from reinsurance contracts held.

•	Insurance revenue is recognized as we provide insurance contract services under the groups of insurance contracts. For contracts measured using the PAA, the insurance revenue is generally recognized based on allocating expected premium receipts over the passage of time. For contracts measured using the GMM and VFA, insurance revenue represents the amount of consideration we expect to be entitled to in exchange for services in the period, which includes expected claims and expenses directly attributable to fulfilling insurance contracts (excluding any investment components), release of the risk adjustment for the period, CSM amortization to reflect services provided in the period, an allocation of premiums that relates to recovering insurance acquisition expenses and experience adjustments for premium receipts relating to current or past services.
•	Insurance service expense arising from insurance contracts includes incurred claims and other directly attributable expenses in the current period (excluding investment components), amortization and impairment losses relating to insurance acquisition cash flows where applicable, changes relating to past or current services and changes in loss components of onerous groups of contracts.
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•	Net income (expense) from reinsurance contracts held represents the amounts recovered from the reinsurers less the allocation of premiums paid on reinsurance contracts held.
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Insurance investment result comprises Net investment income, Net insurance finance income (expense) and Net reinsurance finance income (expense) from reinsurance contracts held.

•	Net investment income primarily comprises interest and dividend income and net gains (losses) on financial instruments, including segregated fund assets, and derivatives relating to the Insurance segment. Financial assets supporting the Insurance segment are primarily measured at FVTPL and FVOCI.
•	Insurance and reinsurance finance income (expense) represents the net effect of and changes in the time value of money (including the time value of money relating to risk adjustment on <br>non-financial<br> risks) and financial risks on insurance contracts and reinsurance contracts held, respectively.
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Employee benefits – Pensions and other post-employment benefits

Our defined benefit pension expense, which is included in Non-interest expense – Human resources, consists of the cost of employee pension benefits for the current year’s service, net interest on the net defined benefit liability (asset), past service cost and gains or losses on settlement. Remeasurements of the net defined benefit obligation, which comprise actuarial gains and losses and return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in OCI in the period in which they occur. Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions. Amounts recognized in OCI will not be reclassified subsequently to net income. Past service cost is the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment and is charged immediately to income.

For each defined benefit pension plan, we recognize the present value of our defined benefit obligations less the fair value of the plan assets as a defined benefit liability reported in Other liabilities on our Consolidated Balance Sheets. For plans where there is a net defined benefit asset, the amount is reported as an asset in Other assets on our Consolidated Balance sheets.

The calculation of defined benefit expenses and obligations requires significant judgment as the recognition is dependent on discount rates and various actuarial assumptions such as healthcare cost trend rates, projected salary increases, retirement age and mortality and termination rates. Due to the long-term nature of these plans, such estimates and assumptions are subject to inherent risks and uncertainties. For our pension and other post-employment benefit plans, the discount rate is determined by reference to market yields on high quality corporate bonds. Since the discount rate is based on currently available yields, and involves management’s assessment of market liquidity, it is only a proxy for future yields. Actuarial assumptions, set in accordance with current practices in the respective countries of our plans, may differ from actual experience as country specific statistics are only estimates of future employee behaviour. These assumptions are determined by management and are reviewed by actuaries at least annually. Changes to any of the above assumptions may affect the amounts of benefits obligations, expenses and remeasurements that we recognize.

Our contributions to defined contribution pension plans are expensed when employees have rendered services in exchange for such contributions. Defined contribution pension expense is included in Non-interest expense – Human resources.

Share-based compensation

We offer share-based compensation plans to certain key employees and to our non-employee directors.

To account for stock options granted to employees, compensation expense is recognized over the applicable vesting period with a corresponding increase in equity. Fair value is determined by using option valuation models, which take into account the exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. When the options are exercised, the exercise price proceeds together with the amount initially recorded in equity are credited to common shares. Our other share-based compensation plans include performance deferred share plans and deferred share unit plans for key employees (the Plans). The obligations for the Plans are accrued over their vesting periods. The Plans are generally settled in cash.

For cash-settled awards, our accrued obligations are adjusted to their fair value at each balance sheet date. For share-settled awards, our expected obligations recognized in equity are based on the fair value of our common shares at the date of grant. Changes in our obligations, net of related hedges, are recorded as Non-interest expense – Human resources in our Consolidated Statements of Income with a corresponding increase in Other liabilities for cash-settled awards and in Retained earnings for share-settled awards. Compensation expense is recognized in the year the awards are earned by plan participants based on the vesting schedule of the relevant plans, net of estimated forfeitures.

The compensation cost attributable to options and awards granted to employees who are eligible to retire or will become eligible to retire during the vesting period, is recognized immediately if the employee is eligible to retire on the grant date or over the period between the grant date and the date the employee becomes eligible to retire.

Our contributions to the employee savings and share ownership plans are expensed as incurred.

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

Income taxes

Income tax comprises current tax and deferred tax and is recognized in our Consolidated Statements of Income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current income tax payable on profits is recognized as an expense based on the applicable tax laws in each jurisdiction in the period in which profits arise, calculated using tax rates enacted or substantively enacted by the balance sheet date. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for accounting and tax purposes. A deferred income tax asset or liability is determined for each temporary difference, except for earnings related to our subsidiaries, branches, associates and interests in joint ventures where the temporary differences will not reverse in the foreseeable future and we have the ability to control the timing of reversal. Deferred tax assets and liabilities are determined based on the tax rates that are expected to be in effect in the period that the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Current tax assets and liabilities are offset when they are levied by the same taxation authority on either the same taxable entity or different taxable entities within the same tax reporting group (which intends to settle on a net basis), and when there is a legal right to offset. Deferred tax assets and liabilities are offset when the same conditions are satisfied. Our Consolidated Statements of Income include items that are non-taxable or non-deductible for income tax purposes and, accordingly, this causes the income tax provision to be different from what it would be if based on statutory rates.

Deferred income taxes accumulated as a result of temporary differences and tax loss carryforwards are included in Other assets and Other liabilities. On a quarterly basis, we review our deferred income tax assets to determine whether it is probable that the benefits associated with these assets will be realized; this review involves evaluating both positive and negative evidence.

We are subject to income tax laws in various jurisdictions where we operate, and the complex tax laws are potentially subject to different interpretations by us and the relevant taxation authorities. Significant judgment is required in the interpretation of the relevant tax laws and in assessing the probability of acceptance of our tax positions to determine our tax provision, which includes our best estimate of uncertain tax positions that are under audit or appeal by the relevant tax authorities. We perform a review on a quarterly basis to incorporate our best assessment based on information available, but additional liability and income tax expense could result based on the acceptance of our tax positions by the relevant tax authorities.

The determination of our deferred tax asset or liability also requires significant management judgment as the recognition is dependent on our projection of future taxable profits and tax rates that are expected to be in effect in the period the asset is realized or the liability is settled. Any changes in our projection will result in changes in deferred tax assets or liabilities on our Consolidated Balance Sheets, and also deferred tax expense on our Consolidated Statements of Income. We have applied the exception in IAS 12 Income Taxes from recognizing and disclosing Pillar Two deferred tax assets and liabilities. Refer to Note 21 for disclosure of Pillar Two tax information.

Business combinations, goodwill and other intangibles

All business combinations are accounted for using the acquisition method. Non-controlling interests, if any, are recognized at their proportionate share of the fair value of identifiable assets and liabilities, unless otherwise indicated. Identifiable intangible assets are recognized separately from goodwill and included in Other intangibles. Goodwill represents the excess of the price paid for the business acquired over the fair value of the net identifiable assets acquired on the date of acquisition.

Goodwill

Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill is monitored for internal management purposes. Impairment testing is performed annually as at August 1, or more frequently if there are objective indicators of impairment, by comparing the recoverable amount of a cash-generating unit (CGU) with its carrying amount. The recoverable amount of a CGU is the higher of its value in use (VIU) and its fair value less costs of disposal (FVLCD). The fair value of a CGU is estimated using valuation techniques such as a discounted cash flow method, adjusted to reflect the considerations of a prospective third-party buyer. External evidence such as binding sale agreements or recent transactions for similar businesses within the same industry is considered to the extent that it is available.

Significant judgment is involved in estimating the model inputs used to determine the recoverable amount of our CGUs, in particular future cash flows, discount rates and terminal growth rates, due to the uncertainty in the timing and amount of cash flows and the forward-looking nature of these inputs. Future cash flows are based on financial plans agreed by management which are estimated based on forecast results, business initiatives, planned capital investments and returns to shareholders. Discount rates are based on the bank-wide cost of capital, adjusted for CGU-specific risks and currency exposure as reflected by differences in expected inflation. Bank-wide cost of capital is based on the Capital Asset Pricing Model, the Dividend Growth Model and peer analysis. CGU-specific risks include country risk, business/operational risk, geographic risk (including political risk, devaluation risk and government regulation), currency risk and price risk (including product pricing risk and inflation). Terminal growth rates are based on the long-term steady state growth expectations in the countries within which the CGU operates. If the future cash flows and other assumptions in future periods deviate significantly from the current amounts used in our impairment testing, the value of our goodwill could become impaired, with any such impairment loss recognized in Non-interest expense.

The carrying amount of a CGU includes the carrying amount of assets, liabilities and goodwill allocated to the CGU. If the recoverable amount is less than the carrying value, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other non-financial assets of the CGU proportionately based on the carrying amount of each asset. Any impairment loss is charged to income in the period in which the impairment is identified. Goodwill is stated at cost less accumulated impairment losses. Subsequent reversals of goodwill impairment are prohibited.

Upon disposal of a portion of a CGU, the carrying amount of goodwill related to the portion of the CGU sold is included in the determination of gains or losses on disposal. The carrying amount is determined based on the relative fair value of the disposed portion to the total CGU.

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Other intangibles

Intangible assets represent identifiable non-monetary assets and are acquired either separately or through a business combination, or generated internally. Intangible assets acquired through a business combination are recognized separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably. The cost of a separately acquired intangible asset includes its purchase price and directly attributable costs of preparing the asset for its intended use. In respect of internally generated intangible assets, cost includes all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Research and development costs that are not eligible for capitalization are expensed. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and accumulated impairment losses, if any. Intangible assets with a finite-life are amortized on a straight-line basis over their estimated useful lives as follows: computer software – 3 to 10 years; and customer list and relationships – 7 to 20 years. Intangible assets with indefinite useful lives represent mutual fund management contracts.

Intangible assets are assessed for indicators of impairment at each reporting period. If there is an indication that an intangible asset may be impaired, an impairment test is performed by comparing the carrying amount of the intangible asset to its recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is less than its carrying amount, the carrying amount of the intangible asset is written down to its recoverable amount as an impairment loss.

An impairment loss recognized previously is reversed if there is a change in the estimates used to determine the recoverable amount of the asset (or CGU) since the last impairment loss was recognized. If an impairment loss is subsequently reversed, the carrying amount of the asset (or CGU) is revised to the lower of its recoverable amount and the carrying amount that would have been determined (net of amortization) had there been no prior impairment.

Due to the subjective nature of these estimates, significant judgment is required in determining the useful lives and recoverable amounts of our intangible assets, and assessing whether certain events or circumstances constitute objective evidence of impairment. Estimates of the recoverable amounts of our intangible assets rely on certain key inputs, including future cash flows and discount rates. Future cash flows are based on sales projections and allocated costs which are estimated based on forecast results and business initiatives. Discount rates are based on the bank-wide cost of capital, adjusted for asset-specific risks. Changes in these assumptions may impact the amount of impairment loss recognized in Non-interest expense.

Other

Translation of foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates prevailing at the balance sheet date. Foreign exchange gains and losses resulting from the translation and settlement of these items are recognized in Non-interest income in the Consolidated Statements of Income.

Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars at historical rates.

Assets and liabilities of our foreign operations with functional currencies other than Canadian dollars are translated into Canadian dollars at rates prevailing at the balance sheet date, and income and expenses of these foreign operations are translated at average rates of exchange for the reporting period.

Unrealized gains or losses arising as a result of the translation of our foreign operations along with the effective portion of related hedges are reported in Other components of equity. Upon disposal or partial disposal of a foreign operation, an appropriate portion of the accumulated net translation gains or losses is included in Non-interest income.

Premises and equipment

Premises and equipment includes land, buildings, leasehold improvements, computer equipment, furniture, fixtures and other equipment, and are stated at cost less accumulated depreciation, except for land which is not depreciated, and accumulated impairment losses. Cost comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use, and the initial estimate of any disposal costs. Depreciation is recorded principally on a straight–line basis over the estimated useful lives of the assets, which are 25 to 50 years for buildings, 3 to 10 years for computer equipment, and 5 to 10 years for furniture, fixtures and other equipment. The amortization period for leasehold improvements is the lesser of the useful life of the leasehold improvements or the lease term plus the first renewal period, if reasonably assured of renewal. Depreciation methods, useful lives, and residual values are reassessed at each reporting period and adjusted as appropriate. Gains and losses on disposal are recorded in Non–interest income.

Premises and equipment are assessed for indicators of impairment at each reporting period. If there is an indication that an asset may be impaired, an impairment test is performed by comparing the asset’s carrying amou nt t o its recoverable amount.

After the recognition of impairment, the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying amount. If an impairment is later reversed, the carrying amount of the asset is revised to the lower of the asset’s recoverable amount and the carrying amount that would have been determined (net of depreciation) had there been no prior impairment loss. The depreciation charge in future periods is adjusted to reflect the revised carrying amount.

Right-of-use assets are also included in premises and equipment.

Leasing

At inception of a contract, we assess whether a contract is or contains a lease. A contract is, or contains, a lease if the contract conveys the right to obtain substantially all of the economic benefits from, and direct the use of, an identified asset for a period of time in return for consideration.

When we are the lessee in a lease arrangement, we initially record a right-of-use asset and corresponding lease liability, except for short-term leases and leases of low-value assets. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are unspecialized, common, technologically unsophisticated, widely available and widely used non-infrastructure assets. For short-term leases and leases of low-value assets, we record the lease payments as an operating expense on a straight-line basis over the lease term.

Where we are reasonably certain to exercise extension and termination options, they are included in the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at our incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method, recorded in Interest expense.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 1 6

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Note 2 Summary of material accounting policies, estimates and judgments<br><br>(continued)

The right-of-use asset is initially measured based on the initial amount of the lease liability, adjusted for lease payments made on or before the commencement date, initial direct costs incurred, and an estimate of costs to dismantle, remove, or restore the asset, less any lease incentives received. Costs related to dismantling and removing leasehold improvements are capitalized as part of the leasehold improvement asset (rather than the right-of-use asset of the lease) when the leasehold improvements are separately capitalized.

The right-of-use asset is depreciated to the earlier of the lease term and the useful life, unless ownership will transfer to RBC or we are reasonably certain to exercise a purchase option, in which case the useful life of the right-of-use asset is used. We determine whether a right-of-use asset is impaired and account for any identified impairment loss as described in the premises and equipment accounting policies above.

Provisions

We are required to estimate the results of ongoing legal proceedings, and expenses to be incurred to dispose of capital assets. The forward-looking nature of these estimates requires us to use a significant amount of judgment in projecting the timing and amount of future cash flows. We record our provisions on the basis of all available information at the end of the reporting period and make adjustments on a quarterly basis to reflect current expectations. It may not be possible to predict the resolution of these matters or the timing of their ultimate resolution. Should actual results differ from our expectations, we may incur expenses in excess of the provisions recognized. Where appropriate, we apply judgment in limiting the extent of our provisions-related disclosures as not to prejudice our positions in matters of dispute.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third-party, such as an insurer, a separate asset is recognized if it is virtually certain that reimbursement will be received.

Commissions and fees

Commissions and fees primarily relate to Investment management and custodial fees, Mutual fund revenue, Securities brokerage commissions, Services charges, Underwriting and other advisory fees, Card service revenue and Credit fees, and are recognized based on the applicable service contracts with clients.

Investment management and custodial fees and Mutual fund revenue are generally calculated as a percentage of daily, monthly or period-end net asset values (NAV) based on the terms of the contract with clients and are received monthly, quarterly, semiannually or annually, depending on the terms of the contract. Investment management and custodial fees are generally derived from assets under management (AUM) when our clients solicit the investment capabilities of an investment manager or from assets under administration (AUA) where the investment strategy is directed by the client or a designated third-party manager. Mutual fund revenue is generally derived from the daily NAV of the mutual funds. Investment management and custodial fees and Mutual fund revenue are recognized over time when the service is provided to the client, provided that it is highly probable that a significant reversal in the amount of revenue recognized will not occur.

Commissions earned on Securities brokerage services and Service charges that are related to the provision of specific transaction-type services are recognized when the service is fulfilled. Where services are provided over time, revenue is recognized as the services are provided.

Underwriting and other advisory fees primarily relate to underwriting of new issuances of debt or equity and various advisory services. Underwriting fees are generally expressed as a percentage of the funds raised through issuance and are recognized when the service has been completed. Advisory fees vary depending on the scope and type of engagement and can be fixed in nature or contingent on a future event. Advisory fees are recognized over the period in which the service is provided and are recognized only to the extent that it is highly probable that a significant reversal in the amount of revenue will not occur.

Card service revenue primarily includes interchange revenue and annual card fees. Interchange revenue is calculated as a fixed percentage of the transaction amount and recognized when the card transaction is settled. Annual card fees are fixed fees and are recognized over a 12-month period.

Credit fees are primarily earned for arranging syndicated loans and making credit available on undrawn facilities. The timing of the recognition of credit fees varies based on the nature of the services provided.

When service fees and other costs are incurred in relation to commissions and fees earned, we record these costs on a gross basis in either Non-interest expense – Other or Non-interest expense – Human resources based on our assessment of whether we have primary responsibility to fulfill the contract with the client and have discretion in establishing the price for the commissions and fees earned, which may require judgment.

Earnings per share

Earnings per share is computed by dividing Net income available to common shareholders by the weighted average number of common shares outstanding for the period. Net income available to common shareholders is determined after deducting dividend entitlements of preferred shareholders and distributions on other equity instruments, any gains (losses) on redemption of preferred shares and other equity instruments net of related income taxes and the net income attributable to non-controlling interests.

Diluted earnings per share reflects the potential dilution that could occur if additional common shares are assumed to be issued under securities or contracts that entitle their holders to obtain common shares in the future, to the extent such entitlement is not subject to unresolved contingencies. For contracts that may be settled in cash or in common shares at our option, diluted earnings per share is calculated based on the assumption that such contracts will be settled in shares. Income and expenses associated with these types of contracts are excluded from the Net income available to common shareholders, and the additional number of shares that would be issued is included in the diluted earnings per share calculation. For stock options whose exercise price is less than the average market price of our common shares, using the treasury stock method, they are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the

16 2 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in the calculation of diluted earnings per share.

Share capital and other equity instruments

We classify a financial instrument that we issue as a financial asset, financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Our common shares held by us are classified as treasury shares in equity and accounted for at weighted average cost. Upon the sale of treasury shares, the difference between the sale proceeds and the cost of the shares is recognized in Retained earnings. Financial instruments issued by us are classified as equity instruments when there is no contractual obligation to transfer cash or other financial assets. Incremental costs directly attributable to the issue of equity instruments are included in equity as a deduction from the proceeds, net of tax. Financial instruments that will be settled by a variable number of our common shares upon their conversion by the holders as well as the related accrued distributions are classified as liabilities on our Consolidated Balance Sheets. Dividends and yield distributions on these instruments are classified as Interest expense in our Consolidated Statements of Income. For compound instruments comprised of both liability and equity components, the liability component is initially measured at fair value with any residual amount assigned to the equity component.

Future changes in accounting policy and disclosure

Amendments to the Classification and Measurement of Financial Instruments

IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18)

Note 3 Fair value of financial instruments

Carrying value and fair value of financial instruments

The following tables provide a comparison of the carrying and fair values for each classification of financial instruments. Embedded derivatives are presented on a combined basis with the host contracts in the Consolidated Balance Sheets. For measurement purposes, they are carried at fair value when conditions requiring separation are met.

	As at October 31, 2025
	Carrying value and fair value								Carrying value		Fair value
(Millions of Canadian dollars)	Financial<br>instruments<br>classified as<br>FVTPL		Financial<br>instruments<br>designated as<br>FVTPL		Financial<br>instruments<br>classified as<br>FVOCI		Financial<br>instruments<br>designated as<br>FVOCI		Financial<br>instruments<br>measured at<br>amortized cost		Financial<br>instruments<br>measured at<br>amortized cost		Total<br>carrying<br>amount		Total<br>fair value
Financial assets
Interest-bearing deposits with banks	$	–	$	40,455	$	–	$	–	$	9,909	$	9,909	$	50,364	$	50,364
Securities
Trading		212,878		6,189		–		–		–		–		219,067		219,067
Investment, net of applicable allowance		–		–		240,299		1,496		100,926		98,728		342,721		340,523
		212,878		6,189		240,299		1,496		100,926		98,728		561,788		559,590
Assets purchased under reverse repurchase agreements and securities borrowed		226,213		–		–		–		83,470		83,470		309,683		309,683
Loans, net of applicable allowance
Retail		1,128		–		442		–		646,832		648,413		648,402		649,983
Wholesale		9,724		–		690		–		383,606		382,551		394,020		392,965
		10,852		–		1,132		–		1,030,438		1,030,964		1,042,422		1,042,948
Other
Derivatives		177,206		–		–		–		–		–		177,206		177,206
Other assets <br>(1)		14,382		–		–		–		58,487		58,487		72,869		72,869
Financial liabilities
Deposits
Personal	$	942	$	41,302					$	487,496	$	488,644	$	529,740	$	530,888
Business and government <br>(2)		313		168,690						777,311		779,130		946,314		948,133
Bank <br>(3)		–		2,908						36,654		36,657		39,562		39,565
		1,255		212,900						1,301,461		1,304,431		1,515,616		1,518,586
Other
Obligations related to securities sold short		49,891		–						–		–		49,891		49,891
Obligations related to assets sold under repurchase agreements and securities loaned		–		242,916						46,600		46,600		289,516		289,516
Derivatives		183,953		–						–		–		183,953		183,953
Other liabilities <br>(4)		–		21,688						58,287		58,293		79,975		79,981
Subordinated debentures		–		232						13,729		13,887		13,961		14,119

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 16 3

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Note 3 Fair value of financial instruments<br><br>(continued)
	As at October 31, 2024
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Carrying value and fair value									Carrying value		Fair value
(Millions of Canadian dollars)	Financial<br> instruments<br> classified as<br> FVTPL			Financial<br> instruments<br> designated as<br> FVTPL		Financial<br> instruments<br> classified as<br> FVOCI		Financial<br> instruments<br> designated as<br> FVOCI		Financial<br> instruments<br> measured at<br> amortized cost		Financial<br> instruments<br> measured at<br> amortized cost		Total<br> carrying<br> amount		Total<br> fair value
Financial assets
Interest-bearing deposits with banks	$	–		$	53,996	$	–	$	–	$	12,024	$	12,024	$	66,020	$	66,020
Securities
Trading		182,346			954		–		–		–		–		183,300		183,300
Investment, net of applicable allowance		–			–		155,118		1,242		100,258		96,336		256,618		252,696
		182,346			954		155,118		1,242		100,258		96,336		439,918		435,996
Assets purchased under reverse repurchase agreements and securities borrowed		284,311			–		–		–		66,492		66,492		350,803		350,803
Loans, net of applicable allowance
Retail		915			–		580		–		622,098		619,320		623,593		620,815
Wholesale		6,177			2,030		1,003		–		348,577		345,561		357,787		354,771
		7,092			2,030		1,583		–		970,675		964,881		981,380		975,586
Other
Derivatives		150,612			–		–		–		–		–		150,612		150,612
Other assets <br>(1)		11,770			–		–		–		50,093		50,093		61,863		61,863
Financial liabilities
Deposits
Personal	$	508		$	33,799					$	487,832	$	490,170	$	522,139	$	524,477
Business and government <br>(2)		191			156,238						683,241		684,748		839,670		841,177
Bank <br>(3)		–			10,530						37,192		37,183		47,722		47,713
		699			200,567						1,208,265		1,212,101		1,409,531		1,413,367
Other
Obligations related to securities sold short		35,286			–						–		–		35,286		35,286
Obligations related to assets sold under repurchase agreements and securities loaned		–			270,663						34,658		34,658		305,321		305,321
Derivatives		163,763			–						–		–		163,763		163,763
Other liabilities <br>(4)		(1,407	)		–						69,597		69,850		68,190		68,443
Subordinated debentures		–			–						13,546		13,602		13,546		13,602
(1)	Includes financial instruments recognized in Other assets.
---	---
(2)	Business and government deposits include deposits from regulated deposit-taking institutions other than banks.
---	---
(3)	Bank deposits refer to deposits from regulated banks and central banks.
---	---
(4)	Includes financial instruments recognized in Other liabilities.
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Financial assets designated as fair value through profit or loss

For our financial assets designated as FVTPL, we measure the change in fair value attributable to changes in credit risk as the difference between the total change in the fair value of the instrument during the period and the change in fair value calculated using the appropriate risk-free yield curves. For the year ended October 31, 2025, the change in fair value during the period attributable to changes in credit risk for positions still held was a loss of $1 million and the cumulative change in fair value attributable to changes in credit risk for positions still held was a loss of $5 million. For the year ended October 31, 2024, the change in fair value during the period attributable to changes in credit risk for positions still held was a gain of $45 million and the cumulative change in fair value attributable to changes in credit risk for positions still held was a loss of $9 million. As at October 31, 2025, the extent to which credit derivatives or similar instruments mitigate the maximum exposure to credit risk was $1,035 million (October 31, 2024 – $954 million).

Financial liabilities designated as fair value through profit or loss

For our financial liabilities designated as FVTPL, we take into account changes in our own credit spread and the expected duration of the instrument to measure the change in fair value attributable to changes in credit risk.

	As at or for the year ended October 31, 2025<br><br>(1)
	Contractual<br>maturity<br>amount<br><br>(2)		Carrying value		Difference<br>between<br>carrying value<br>and contractual<br>maturity amount			Changes in fair value attributable<br>to changes in credit risk included<br>in OCI for positions still held
(Millions of Canadian dollars)				During the period					Cumulative<br><br>(3)
Term deposits
Personal	$	40,965	$	41,302	$	337		$	72	$	229
Business and government <br>(4)		174,268		168,690		(5,578	)		744		926
Bank <br>(5)		2,903		2,908		5			–		–
		218,136		212,900		(5,236	)		816		1,155
Other
Obligations related to assets sold under repurchase agreements and securities loaned		242,931		242,916		(15	)		–		–
Other liabilities		26,925		21,688		(5,237	)		401		401
Subordinated debentures		236		232		(4	)		–		–
	$	488,228	$	477,736	$	(10,492	)	$	1,217	$	1,556

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	As at or for the year ended October 31, 2024 (1)
	Contractual<br> maturity<br> <br>amount<br><br>(2)		Carrying value		Difference<br> between<br> carrying value<br> and contractual<br> <br>maturity amount			Changes in fair value attributable<br> to changes in credit risk included<br> in OCI for positions still held
(Millions of Canadian dollars)				During the period					Cumulative (3)
Term deposits
Personal	$	33,552	$	33,799	$	247		$	221	$	163
Business and government <br>(4)		162,648		156,238		(6,410	)		1,204		177
Bank <br>(5)		10,520		10,530		10			–		–
		206,720		200,567		(6,153	)		1,425		340
Other
Obligations related to assets sold under repurchase agreements and securities loaned		270,625		270,663		38			–		–
Other liabilities		–		–		–			–		–
Subordinated debentures		–		–		–			–		–
	$	477,345	$	471,230	$	(6,115	)	$	1,425	$	340
(1)	$5 million in changes in fair value attributable to changes in credit risk were recognized in income for the year ended October 31, 2025, and $17 million in cumulative changes in credit risk were included in income for positions still held <br>life-to-date<br> (October 31, 2024 – $1 million and $9 million, respectively).
---	---
(2)	Reflects the contractual undiscounted amounts due at payment dates for these financial instruments. These amounts do not reconcile directly with their associated carrying values as these amounts incorporate only undiscounted amounts due at payment dates and do not recognize premiums, discounts, expectations of early redemptions or mark-to-market adjustments that are recognized in the instruments’ carrying values as at the balance sheet date.
---	---
(3)	The cumulative change is measured from the initial designation of the liabilities as FVTPL. For the year ended October 31, 2025, $19 million of fair value gains previously included in OCI relate to financial liabilities derecognized during the year (October 31, 2024 – $15 million of fair value gains).
---	---
(4)	Business and government term deposits include amounts from regulated deposit-taking institutions other than regulated banks.
---	---
(5)	Bank term deposits refer to amounts from regulated banks and central banks.
---	---

Net gains (losses) from financial instruments classified and designated as fair value through profit or loss

Financial instruments classified as FVTPL, which includes mainly trading securities, derivatives, trading liabilities, and financial assets and liabilities designated as FVTPL are measured at fair value with realized and unrealized gains and losses recognized in Non-interest income.

	For the year ended
(Millions of Canadian dollars)	October 31<br> 2025			October 31<br> 2024
Net gains (losses)<br><br>(1)
Classified as fair value through profit or loss <br>(2)	$	6,689		$	8,996
Designated as fair value through profit or loss <br>(3)		(2,547	)		(5,847	)
	$	4,142		$	3,149
By product line<br><br>(1)
Interest rate and credit <br>(4)	$	2,556		$	2,580
Equities		764			389
Foreign exchange and commodities		822			180
	$	4,142		$	3,149
(1)	Excludes net gains from financial instruments classified as FVTPL of <br>$<br>395 million (October 31, 2024 – net gains of $2,251 million for financial instruments classified or designated as FVTPL) presented in Insurance investment result in the Consolidated Statements of Income.
---	---
(2)	Excludes derivatives designated in a hedging relationship. Refer to Note 9 for net gains (losses) on these derivatives.
---	---
(3)	For the year ended October 31, 2025, $2,555 million of net fair value losses on financial liabilities designated as FVTPL, other than those attributable to changes in our own credit risk, were included in <br>Non-interest<br> income (October 31, 2024 – losses of $5,838 million).
---	---
(4)	Includes gains (losses) recognized on cross currency interest rate swaps.
---	---

Net interest income from financial instruments

Interest and dividend income arising from financial assets and financial liabilities and the associated costs of funding are reported in Net interest income.

	For the year ended
(Millions of Canadian dollars)	October 31<br> 2025		October 31<br> 2024
Interest and dividend income<br><br>(1), (2)
Financial instruments measured at fair value through profit or loss	$	30,502	$	35,550
Financial instruments measured at fair value through other comprehensive income		8,778		7,109
Financial instruments measured at amortized cost		64,545		62,292
		103,825		104,951
Interest expense<br><br>(1)
Financial instruments measured at fair value through profit or loss	$	30,642	$	34,150
Financial instruments measured at amortized cost		40,183		42,848
		70,825		76,998
Net interest income	$	33,000	$	27,953
(1)	Excludes interest and dividend income for the year end October 31, 2025 of $1,244 million (October 31, 2024 – $958 million) and interest expense of $226 million (October 31, 2024 – $120 million) presented in Insurance investment result in the Consolidated Statements of Income.
---	---
(2)	Includes dividend income for the year ended October 31, 2025 of $3,803 million (October 31, 2024 – $3,319 million), which is presented in Interest and dividend income in the Consolidated Statements of Income.
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Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 16 5

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Note 3 Fair value of financial instruments<br><br><br><br>(continued)

Fee income arising from financial instruments

For the year ended October 31, 2025, we earned $6,803 mi llio n in fees f ro m bankin g serv ices (October 31, 2024 – $6,347 million). For the year ended October 31, 2025, we also earned $19,850

million in fees from investment management, trust, custodial, underwriting, brokerage and other similar fiduciary services to retail and institutional clients (October 31, 2024 – $17,467 million). These fees are included in Non-interest income.

Fair value of assets and liabilities measured at fair value on a recurring basis and classified using the fair value hierarchy

	As at
	October 31, 2025														October 31, 2024
	Fair value<br> measurements using								Netting adjustments		Fair value				Fair value<br> measurements using										Netting adjustments		Fair value
(Millions of Canadian dollars)		Level 1		Level 2			Level 3							Level 1			Level 2				Level 3
Financial assets
Interest-bearing deposits with banks	$	–	$	40,455		$	–				$	40,455			$	–		$	53,996			$	–				$	53,996
Securities
Trading
Debt issued or guaranteed by:
Canadian government
Federal		17,707		2,864			–					20,571				11,611			2,173				–					13,784
Provincial and municipal		–		16,891			–					16,891				–			16,588				–					16,588
U.S. federal, state, municipal and agencies <br>(1)		435		40,322			–					40,757				1,852			29,136				–					30,988
Other OECD government<br>(2)		7,152		7,265			–					14,417				2,481			2,153				–					4,634
Mortgage-backed securities		–		74			–					74				–			3				–					3
Asset-backed securities		–		1,295			–					1,295				–			1,434				–					1,434
Corporate debt and other debt		–		25,957			32					25,989				–			26,195				–					26,195
Equities		93,397		2,813			2,863					99,073				84,814			2,316				2,544					89,674
		118,691		97,481			2,895					219,067				100,758			79,998				2,544					183,300
Investment
Debt issued or guaranteed by:
Canadian government
Federal		30,110		9,756			–					39,866				4,623			8,546				–					13,169
Provincial and municipal		–		11,318			–					11,318				–			7,554				–					7,554
U.S. federal, state, municipal and agencies <br>(1)		196		130,495			–					130,691				42			80,224				–					80,266
Other OECD government <br>(2)		1,600		10,333			–					11,933				2,370			7,786				–					10,156
Mortgage-backed securities		–		2,645			29					2,674				–			2,603				31					2,634
Asset-backed securities		–		10,139			–					10,139				–			9,357				–					9,357
Corporate debt and other debt		–		33,544			134					33,678				–			31,839				143					31,982
Equities		547		367			582					1,496				432			304				506					1,242
		32,453		208,597			745					241,795				7,467			148,213				680					156,360
Assets purchased under reverse repurchase agreements and securities borrowed		–		226,213			–					226,213				–			284,311				–					284,311
Loans		–		10,710			1,274					11,984				–			8,924				1,781					10,705
Other
Derivatives
Interest rate contracts		–		25,871			293					26,164				–			27,719				354					28,073
Foreign exchange contracts		–		100,604			102					100,706				–			98,480				3					98,483
Credit derivatives		–		350			2					352				–			273				–					273
Other contracts		11,478		41,543			110					53,131				2,553			23,830				21					26,404
Valuation adjustments		–		(1,035	)		(45	)				(1,080	)			–			(1,067	)			14					(1,053	)
Total gross derivatives		11,478		167,333			462					179,273				2,553			149,235				392					152,180
Netting adjustments										)		(2,067	)													)		(1,568	)
Total derivatives												177,206																150,612
Other assets		6,108		8,270			4					14,382				5,291			6,472				7					11,770
	$	168,730	$	759,059		$	5,380			)	$	931,102			$	116,069		$	731,149			$	5,404			)	$	851,054
Financial liabilities
Deposits
Personal	$	–	$	41,943		$	301				$	42,244			$	–		$	33,829			$	478				$	34,307
Business and government		–		169,003			–					169,003				–			156,429				–					156,429
Bank		–		2,908			–					2,908				–			10,530				–					10,530
Other
Obligations related to securities sold short		18,678		31,213			–					49,891				15,172			20,114				–					35,286
Obligations related to assets sold under repurchase agreements and securities loaned		–		242,916			–					242,916				–			270,663				–					270,663
Derivatives
Interest rate contracts		–		20,679			901					21,580				–			24,852				847					25,699
Foreign exchange contracts		–		95,045			46					95,091				–			93,164				54					93,218
Credit derivatives		–		262			–					262				–			218				–					218
Other contracts		12,657		56,287			366					69,310				3,212			42,961				324					46,497
Valuation adjustments		–		(257	)		34					(223	)			–			(297	)			(4	)				(301	)
Total gross derivatives		12,657		172,016			1,347					186,020				3,212			160,898				1,221					165,331
Netting adjustments										)		(2,067	)													)		(1,568	)
Total derivatives												183,953																163,763
Other liabilities		–		21,688			–					21,688				287			(1,694	)			–					(1,407	)
Subordinated debentures		–		232			–					232				–			–				–					–
	$	31,335	$	681,919		$	1,648			)	$	712,835			$	18,671		$	650,769			$	1,699			)	$	669,571

All values are in US Dollars.

(1)	United States (U.S.).
(2)	Organisation for Economic <br>Co-operation<br> and Development (OECD).
---	---

16 6 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

Table of Contents

Fair values of our significant assets and liabilities measured on a recurring basis are determined and classified in the fair value hierarchy table using the following valuation techniques and inputs.

Interest-bearing deposits with banks

The majority of our Interest-bearing deposits with banks are designated as FVTPL. These FVTPL deposits are composed of short-dated deposits placed with banks, and are included in Interest-bearing deposits with banks in the fair value hierarchy table. The fair values of these instruments are determined using the discounted cash flow method. The inputs to the valuation models include interest rate swap curves and credit spreads, where applicable. They are classified as Level 2 instruments in the hierarchy as the inputs are observable.

Government bonds (Canadian, U.S. and other OECD governments)

Government bonds are included in Canadian government debt, U.S. federal, state, municipal and agencies debt, Other OECD government debt and Obligations related to securities sold short in the fair value hierarchy table. The fair values of government issued or guaranteed debt securities in active markets are determined by reference to recent transaction prices, broker quotes, or third-party vendor prices and are classified as Level 1 in the hierarchy. The fair values of securities that are not traded in active markets are based on either security prices, or valuation techniques using implied yields and risk spreads derived from prices of actively traded and similar government securities. Securities with observable prices or rate inputs as compared to transaction prices, dealer quotes or vendor prices are classified as Level 2 in the hierarchy. Securities where inputs are unobservable are classified as Level 3 in the hierarchy.

Corporate and U.S. municipal bonds

The fair values of corporate and U.S. municipal bonds, which are included in Corporate debt and other debt, U.S. federal, state, municipal and agencies debt and Obligations related to securities sold short in the fair value hierarchy table, are determined using either recently executed transaction prices, broker quotes, pricing services, or in certain instances, the discounted cash flow method using rate inputs such as benchmark yields (Canadian Overnight Repo Rate Average (CORRA), Secured Overnight Financing Rate (SOFR) and other similar reference rates) and risk spreads of comparable securities. Securities with observable prices or rate inputs are classified as Level 2 in the hierarchy. Securities where inputs are unobservable are classified as Level 3 in the hierarchy.

Asset-backed securities (ABS) and Mortgage-backed securities (MBS)

ABS and MBS are included in Asset-backed securities, Mortgage-backed securities, Canadian government debt, U.S. federal, state, municipal and agencies debt, and Obligations related to securities sold short in the fair value hierarchy table. Inputs for valuation of ABS and MBS are, when available, traded prices, dealer or lead manager quotes, broker quotes and vendor prices of the identical securities. When prices of the identical securities are not readily available, we use industry standard models with inputs such as discount margins, yields, default, prepayment and LGD that are implied from transaction prices, dealer quotes or vendor prices of comparable instruments. Where security prices and inputs are observable, ABS and MBS are classified as Level 2 in the hierarchy. Otherwise, they are classified as Level 3 in the hierarchy.

Equities

Equities consist of listed and unlisted common shares, private equities, mutual funds and hedge funds with certain redemption restrictions and are included in equities and obligations for securities sold short. The fair values of common shares are based on quoted prices in active markets, where available, and are classified as Level 1 in the hierarchy. Where quoted prices in active markets are not readily available, fair value is determined based on quoted market prices for similar securities or through valuation techniques, such as multiples of earnings and the discounted cash flow method with forecasted cash flows and discount rate as inputs. Private equities are classified as Level 3 in the hierarchy as their inputs are not observable. Hedge funds are valued using Net Asset Values (NAV). If we can redeem a hedge fund at NAV prior to the next quarter end, the fund is classified as Level 2 in the hierarchy. Otherwise, it is classified as Level 3 in the hierarchy.

Loans

Loans include base metal loans, corporate loans and asset-backed financing loans. Fair values are determined based on market prices, if available, or discounted cash flow method using the following inputs: market interest rates, base metal commodity prices, market based spreads of assets with similar credit ratings and terms to maturity, LGD, expected default frequency implied from credit derivative prices, if available, and relevant pricing information such as contractual rate, origination and maturity dates, redemption price, coupon payment frequency and day count convention. Loans with market prices or observable inputs are classified as Level 2 in the hierarchy and loans with unobservable inputs that have significant impacts on the fair values are classified as Level 3 in the hierarchy.

Derivatives

The fair values of exchange-traded derivatives, such as interest rate and equity options and futures, are based on quoted market prices and are typically classified as Level 1 in the hierarchy. OTC derivatives primarily consist of interest rate contracts, foreign exchange contracts, commodity derivatives, equity derivatives and credit derivatives. The exchange-traded or OTC interest rate, foreign exchange and commodity and equity derivatives are included in Interest rate contracts, Foreign exchange contracts and Other contracts, respectively, in the fair value hierarchy table. The fair values of OTC derivatives are determined using valuation models when quoted market prices or third-party consensus pricing information are not available. The valuation models, such as discounted cash flow method or Black-Scholes option model, incorporate observable or unobservable inputs for interest and foreign exchange rates, equity and commodity prices (including indices), credit spreads, corresponding market volatility levels, and other market-based pricing factors. Other adjustments to fair value include bid-offer, CVA, FVA, OIS, parameter and model uncertainties, and unrealized gain or loss at inception of a transaction. A derivative instrument is classified as Level 2 in the hierarchy if observable market inputs are available or the unobservable inputs are not significant to the fair value. Otherwise, it is classified as Level 3 in the hierarchy.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 16 7

Table of Contents

Note 3 Fair value of financial instruments<br><br><br><br>(continued)

Securities borrowed or purchased under resale agreements and securities loaned or sold under repurchase agreements

In the fair value hierarchy table, these instruments are included in A sse ts p urch ased under reverse repurchase agreements and securities borrowed, and Obligations related to assets sold under repurchase agreements and securities loaned. The fair values of these contracts are determined using valuation techniques such as the discounted cash flow method using interest rate c urve s as inputs. They are classified as Level 2 instruments in the hierarchy as the inputs are observable.

Deposits

A majority of our deposits are measured at amortized cost but certain deposits are designated as FVTPL. These FVTPL deposits include deposits taken from clients, issuances of certificates of deposits and promissory notes, and interest rate and equity linked notes. The fair values of these instruments are determined using the discounted cash flow method and derivative option valuation models. The inputs to the valuation models include benchmark yield curves, credit spreads, interest rates, equity and interest rate volatility, dividends and correlation, where applicable. They are classified as Level 2 or 3 instruments in the hierarchy, depending on the significance of the unobservable credit spreads, volatility, dividend and correlation rates.

Other liabilities

Other liabilities primarily consist of financial liabilities related to commodities such as gas and precious metals, which are designated as FVTPL. The fair values of these liabilities are calculated by the discounted cash flow method using applicable inputs such as market interest rates, our funding spreads, commodity forward prices and spot prices. These commodity-related financial liabilities are classified as Level 2 instruments in the hierarchy as the inputs are observable.

Quantitative information about fair value measurements using significant unobservable inputs (Level 3 Instruments)

The following table presents fair values of our significant Level 3 financial instruments, valuation techniques used to determine their fair values, ranges and weighted averages of unobservable inputs.

As at October 31, 2025 (Millions of Canadian dollars, except for prices, percentages and ratios)
		Fair value						Range of input values<br>(1), (2)
Products	Reporting line in the fair value<br>hierarchy table	Assets		Liabilities		Valuation<br>techniques	Significant<br>unobservable<br>inputs (3)	Low		High		Weighted<br>average /<br>Inputs<br>distribution
Corporate debt and related derivatives	Corporate debt and other debt	$	–			Price-based	Prices	$	61.56	$	225.00	$	88.89
	Loans		1,274			Discounted cash flows	Credit spread		1.27%		11.23%		6.25%
	Derivative liabilities			$	–		Credit enhancement		11.36%		15.15%		12.63%
Government debt and municipal bonds	Corporate debt and other debt		166			Discounted cash flows	Yields		3.93%		9.00%		6.44%
Private equities, hedge fund investments and related equity derivatives	Equities		3,445			Market comparable	EV/EBITDA multiples		4.39X		16.40X		7.14X
	Derivative liabilities				–	Discounted cash flows	EV/Rev multiples		0.91X		6.36X		2.45X
						Price-based	P/E multiples		6.27X		25.20X		10.34X
							Liquidity discounts (4)		10.00%		40.00%		10.29%
							Discount rate		8.50%		8.50%		8.50%
							NAV / prices (5)		n.a.		n.a.		n.a.
Interest rate derivatives and interest-rate-linked structured notes (6), (7)	Derivative assets		293			Discounted cash flows	Interest rates		2.60%		4.63%		Even
	Derivative liabilities				901	Option pricing model	CPI swap rates		1.98%		2.08%		Even
							IR-IR<br> correlations		46.50%		94.30%		Even
							FX-IR<br> correlations		(48.50)%		81.90%		Even
							FX-FX<br> correlations		(80.10)%		77.70%		Even
Equity derivatives and <br>equity-linked<br> structured notes (6), (7)	Derivative assets		110			Discounted cash flows	Dividend yields		0.00%		8.55%		Lower
	Deposits				301	Option pricing model	EQ correlations		6.30%		95.85%		Middle
	Derivative liabilities				324		EQ-FX<br> correlations		(77.11)%		50.38%		Middle
							EQ volatilities		6.00%		146.87%		Lower
Other (8)	Derivative assets		59
	Other assets		4
	Mortgage-backed securities		29
	Derivative liabilities				122
Total		$	5,380	$	1,648

16 8 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

Table of Contents

As at October 31, 2024 (Millions of Canadian dollars, except for prices, percentages and ratios)
		Fair value						Range of input values (1), (2)
Products	Reporting line in the fair value<br>hierarchy table	Assets		Liabilities		Valuation<br>techniques	Significant<br>unobservable<br>inputs (3)	Low		High		Weighted<br>average /<br>Inputs<br>distribution
Corporate debt and related derivatives	Corporate debt and other debt	$	–			Price-based	Prices	$	64.67	$	116.25	$	92.07
	Loans		1,781			Discounted cash flows	Credit spread		1.45%		10.90%		6.17%
	Derivative liabilities			$	2		Credit enhancement		11.70%		15.60%		13.00%
Government debt and municipal bonds	Corporate debt and other debt		143			Discounted cash flows	Yields		6.54%		9.55%		7.54%
Private equities, hedge fund investments and related equity derivatives	Equities		3,050			Market comparable	EV/EBITDA multiples		3.20X		17.20X		7.94X
	Derivative liabilities				–	Discounted cash flows	EV/Rev multiples		0.70X		5.72X		2.59X
						Price-based	P/E multiples		7.30X		22.60X		11.27X
							Liquidity discounts (4)		10.00%		40.00%		10.40%
							Discount rate		8.50%		8.50%		8.50%
							NAV / prices (5)		n.a.		n.a.		n.a.
Interest rate derivatives and interest-rate-linked structured notes (6), (7)	Derivative assets		355			Discounted cash flows	Interest rates		1.89%		4.59%		Even
	Derivative liabilities				900	Option pricing model	CPI swap rates		1.84%		1.96%		Even
							IR-IR<br> correlations		48.00%		86.00%		Even
							FX-IR<br> correlations		(76.00)%		66.00%		Even
							FX-FX<br> correlations		(74.00)%		61.00%		Even
Equity derivatives and <br>equity-linked<br> structured notes (6), (7)	Derivative assets		21			Discounted cash flows	Dividend yields		0.00%		10.60%		Lower
	Deposits				478	Option pricing model	EQ correlations		6.30%		95.85%		Middle
	Derivative liabilities				283		EQ-FX<br> correlations		(77.11)%		50.38%		Middle
							EQ volatilities		6.00%		146.87%		Lower
Other (8)	Derivative assets		16
	Other assets		7
	Mortgage-backed securities		31
	Derivative liabilities				36
Total		$	5,404	$	1,699
(1)	The low and high input values represent the actual highest and lowest level inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the different underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date. Where provided, the weighted average of the input values is calculated based on the relative fair values of the instruments within the product category. The weighted averages for derivatives are not presented in the table as they would not provide a comparable metric; instead, distribution of significant unobservable inputs within the range for each product category is indicated in the table.
---	---
(2)	Price-based inputs are significant for certain debt securities and are based on external benchmarks, comparable proxy instruments or <br>pre-quarter-end<br> trade data. For these instruments, the price input is expressed in dollars for each $100 par value. For example, with an input price of $105, an instrument is valued at a premium over its par value.
---	---
(3)	Enterprise Value (EV); Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA); Price / Earnings (P/E); Revenue (Rev); Consumer Price Index (CPI); Interest Rate (IR); Foreign Exchange (FX); Equity (EQ)
---	---
(4)	Fair value of securities with liquidity discount inputs totalled $624 million (October 31, 2024 – $541 million).
---	---
(5)	NAV of a hedge fund is total fair value of assets less liabilities divided by the number of fund units. Private equities are valued based on NAV or valuation techniques. The range for NAV per unit or price per share has not been disclosed for the hedge funds or private equities due to the dispersion of prices given the diverse nature of the investments.
---	---
(6)	The level of aggregation and diversity within each derivative instrument category may result in certain ranges of inputs being wide and inputs being unevenly distributed across the range. In the table, we indicated whether the majority of the inputs are concentrated toward the upper, middle, or lower end of the range, or evenly distributed throughout the range.
---	---
(7)	The structured notes contain embedded equity or interest rate derivatives with unobservable inputs that are similar to those of the equity or interest rate derivatives.
---	---
(8)	Other primarily includes certain insignificant instruments such as auction rate securities, commodity derivatives, foreign exchange derivatives, contingent considerations, bank-owned life insurance and retractable shares.
---	---
n.a.	not applicable
---	---

Sensitivity to unobservable inputs and interrelationships between unobservable inputs

Yield, credit spreads/discount margins

A financial instrument’s yield is the interest rate used to discount future cash flows in a valuation model. An increase in the yield, in isolation, would result in a decrease in a fair value measurement and vice versa. A credit spread/discount margin is the difference between a debt instrument’s yield and a benchmark instrument’s yield. Benchmark instruments have high credit quality ratings, similar maturities and are often government bonds. The credit spread/discount margin therefore represents the discount rate used to determine the present value of future cash flows of an asset to reflect the market return required for uncertainty in the estimated cash flows. The credit spread/discount margin for an instrument forms part of the yield used in a discounted cash flow method.

Funding spread

Funding spreads are credit spreads specific to funding or deposit rates. A decrease in funding spreads, on its own, will increase the fair value of our liabilities, and vice versa.

Default rates

A default rate is the rate at which borrowers fail to make scheduled loan payments. A decrease in the default rate will typically increase the fair value of the loan, and vice versa. This effect will be significantly more pronounced for a non-government guaranteed loan than a government guaranteed loan.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 16 9

Table of Contents

Note 3 Fair value of financial instruments<br><br><br><br>(continued)

Prepayment rates

A prepayment rate is the rate at which a loan will be repaid in advance of its expected amortization schedule. Prepayments change the future cash flows of a loan. An increase in the prepayment rate in isolation will result in an increase in fair value when the loan interest rate is lower than the current reinvestment rate, and a decrease in the prepayment rate in isolation will result in a decrease in fair value when the loan interest rate is lower than the current reinvestment rate. Prepayment rates are generally negatively correlated with interest rates.

Recovery and LGD

A recovery rate is an estimation of the amount that can be collected in a loan default scenario. The recovery rate is the recovered amount divided by the loan balance due, expressed as a percentage. The inverse concept of recovery is LGD. LGD is an estimation of the loan amount not collected when a loan defaults. The LGD is the loss amount divided by the loan balance due, expressed as a percentage. Generally, an increase in the recovery rate or a decrease in the LGD will increase the loan fair value, and vice versa.

Volatility rates

Volatility measures the potential variability of future prices and is often measured as the standard deviation of price movements. Volatility is an input to option pricing models used to value derivatives and issued structured notes. Volatility is used in valuing equity, interest rate, commodity and foreign exchange options. A higher volatility rate means that the underlying price or rate movements are more likely to occur. Higher volatility rates may increase or decrease an option’s fair value depending on the option’s terms. The determination of volatility rates is dependent on various factors, including but not limited to, the underlying’s market price, the strike price and maturity.

Dividend yields

A dividend yield is the underlying equity’s expected dividends expressed as an annual percentage of its price. Dividend yield is used as an input for forward equity price and option models. Higher dividend yields will decrease the forward price, and vice versa. A higher dividend yield will increase or decrease an option’s value, depending on the option’s terms.

Correlation rates

Correlation is the linear relationship between the movements in two different variables. Correlation is an input to the valuation of derivative contracts and issued structured notes when an instrument’s payout is determined by correlated variables. When variables are positively correlated, an increase in one variable will result in an increase in the other variable. When variables are negatively correlated, an increase in one variable will result in a decrease in the other variable. The referenced variables can be within a single asset class or market (equity, interest rate, commodities, credit and foreign exchange) or between variables in different asset classes (equity to foreign exchange, or interest rate to foreign exchange). Changes in correlation will either increase or decrease a financial instrument’s fair value depending on the terms of the instrument.

Interest rates

An interest rate is the percentage amount charged on a principal or notional amount. Increasing interest rates will decrease the discounted cash flow value of a financial instrument, and vice versa.

Consumer Price Index swap rates

A CPI swap rate is expressed as a percentage of an increase in the average price of a basket of consumer goods and services, such as transportation, food and medical care. An increase in the CPI swap rate will cause inflation swap payments to be larger, and vice versa.

EV/EBITDA multiples, P/E multiples, EV/Rev multiples, and liquidity discounts

Private equity valuation inputs include EV/EBITDA multiples, P/E multiples and EV/Rev multiples. These are used to calculate either enterprise value or share value of a company based on a multiple of earnings or revenue estimates. Higher multiples equate to higher fair values for all multiple types, and vice versa. A liquidity discount may be applied when few or no transactions exist to support the valuations.

Credit Enhancement

Credit enhancement is an input to the valuation of securitized transactions and is the amount of loan loss protection for a senior tranche. Credit enhancement is expressed as a percentage of the transaction sizes. An increase in credit enhancement will cause the credit spread to decrease and the tranche fair value to increase, and vice versa.

Interrelationships between unobservable inputs

Unobservable inputs, including the above discount margin, default rate, prepayment rate, and recovery and LGD, may not be independent of each other. For example, the discount margin can be affected by a change in default rate, prepayment rate, or recovery and LGD. Discount margins will generally decrease when default rates decline or when recovery rates increase.

1 70 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Changes in fair value measurement for instruments measured on a recurring basis and categorized in Level 3

	For the year ended October 31, 2025
(Millions of Canadian dollars)	Fair value<br> at beginning<br> of period			Gains<br> (losses)<br> included in<br> earnings			Gains<br> (losses)<br> included<br> in OCI<br>(1)			Purchases<br> (issuances)			Settlement<br> (sales) and<br> other<br> (2)			Transfers<br> into<br> Level 3			Transfers<br> out of<br> Level 3			Fair value<br> at end of<br> period			Gains<br> (losses) included<br> in earnings for<br> positions still held
Assets
Securities
Trading
Debt issued or guaranteed by:
Corporate debt and other debt	$	–		$	–		$	–		$	3		$	(3	)	$	83		$	(51	)	$	32		$	–
Equities		2,544			(188	)		9			732			(233	)		7			(8	)		2,863			(87	)
		2,544			(188	)		9			735			(236	)		90			(59	)		2,895			(87	)
Investment
Mortgage-backed securities		31			2			(2	)		–			(2	)		–			–			29			2
Corporate debt and other debt		143			6			9			–			(24	)		–			–			134			6
Equities		506			21			48			32			(25	)		–			–			582			21
		680			29			55			32			(51	)		–			–			745			29
Loans		1,781			66			–			248			(817	)		10			(14	)		1,274			(3	)
Other
Net derivative balances <br>(3)
Interest rate contracts		(493	)		(103	)		3			24			(29	)		(11	)		1			(608	)		(116	)
Foreign exchange contracts		(51	)		(4	)		2			4			(1	)		100			6			56			3
Credit derivatives		–			–			–			2			–			–			–			2			–
Other contracts		(303	)		5			(1	)		(127	)		19			(360	)		511			(256	)		(35	)
Valuation adjustments		18			–			–			(33	)		(64	)		–			–			(79	)		–
Other assets		7			–			–			–			(3	)		–			–			4			–
	$	4,183		$	(195	)	$	68		$	885		$	(1,182	)	$	(171	)	$	445		$	4,033		$	(209	)
Liabilities
Deposits	$	(478	)	$	(79	)	$	(2	)	$	(674	)	$	156		$	(274	)	$	1,050		$	(301	)	$	16
	$	(478	)	$	(79	)	$	(2	)	$	(674	)	$	156		$	(274	)	$	1,050		$	(301	)	$	16
	For the year ended October 31, 2024
(Millions of Canadian dollars)	Fair value<br> at beginning<br> of period			Gains<br> (losses)<br> included in<br> earnings			Gains<br> (losses)<br> included<br> in OCI (1)			Purchases<br> (issuances)			Settlement<br> (sales) and<br> other (2)			Transfers<br> into<br> Level 3			Transfers<br> out of<br> Level 3			Fair value<br> at end of<br> period			Gains<br> (losses) included<br> in earnings for<br> positions still held
Assets
Securities
Trading
Corporate debt and other debt	$	–		$	–		$	–		$	–		$	–		$	–		$	–		$	–		$	–
Equities		2,266			(195	)		5			577			(88	)		1			(22	)		2,544			(128	)
		2,266			(195	)		5			577			(88	)		1			(22	)		2,544			(128	)
Investment
Mortgage-backed securities		29			–			2			–			–			–			–			31			n.s.
Corporate debt and other debt		149			–			11			–			(17	)		–			–			143			n.s.
Equities		466			–			35			6			(3	)		2			–			506			n.s.
		644			–			48			6			(20	)		2			–			680			n.s.
Loans		1,859			(25	)		37			513			(445	)		70			(228	)		1,781			63
Other
Net derivative balances <br>(3)
Interest rate contracts		(662	)		46			1			(47	)		145			30			(6	)		(493	)		51
Foreign exchange contracts		(49	)		(15	)		7			14			3			3			(14	)		(51	)		(9	)
Credit derivatives		–			–			–			–			–			–			–			–			–
Other contracts		(438	)		(139	)		2			(106	)		8			(330	)		700			(303	)		31
Valuation adjustments		3			–			–			(4	)		19			–			–			18			–
Other assets		11			–			–			–			(4	)		–			–			7			–
	$	3,634		$	(328	)	$	100		$	953		$	(382	)	$	(224	)	$	430		$	4,183		$	8
Liabilities
Deposits	$	(383	)	$	(119	)	$	–		$	(583	)	$	165		$	(120	)	$	562		$	(478	)	$	(40	)
	$	(383	)	$	(119	)	$	–		$	(583	)	$	165		$	(120	)	$	562		$	(478	)	$	(40	)
(1)	These amounts include the foreign currency translation gains or losses arising on consolidation of foreign subsidiaries relating to the Level 3 instruments, where applicable. The unrealized gains on Investment securities recognized in OCI were $35 million for the year ended October 31, 2025 (October 31, 2024 – gains of $38 million) excluding the translation gains or losses arising on consolidation.
---	---
(2)	Other includes amortization of premiums or discounts recognized in net income.
---	---
(3)	Net derivatives as at October 31, 2025 included derivative assets of $462 million (October 31, 2024 – $<br>392<br> million) and derivative liabilities of $<br>1,347<br> million (October 31, 2024 – $<br>1,221<br> million).
---	---
n.s.	not significant
---	---

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 1 7

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Note 3 Fair value of financial instruments<br><br><br><br>(continued)

Transfers between fair value hierarchy levels for instruments carried at fair value on a recurring basis

Transfers between Level 1 and Level 2, and transfers into and out of Level 3 are assumed to occur at the end of the period. For an asset or a liability that transfers into Level 3 during the period, the entire change in fair value for the period is excluded from the Gains (losses) included in earnings for positions still held column of the above reconciliation, whereas for transfers out of Level 3 during the period, the entire change in fair value for the period is included in the same column of the above reconciliation.

Transfers between Level 1 and 2 are dependent on whether fair value is obtained on the basis of quoted market prices in active markets (Level 1).

During the year ended October 31, 2025, transfers out of Level 1 to Level 2 included Trading U.S. federal, state, municipal and agencies debt of $1,309 million. During the year ended October 31, 2024, transfers out of Level 1 to Level 2 included Investment U.S. federal, state, municipal and agencies debt of $1,038 million and Trading U.S. federal, state, municipal and agencies debt of $822 million.

During the years ended October 31, 2025 and October 31, 2024, there were no significant transfers out of Level 2 to Level 1.

Transfers between Level 2 and Level 3 are primarily due to either a change in the market observability for an input, or a change in an unobservable input’s significance to a financial instrument’s fair value.

During the year ended October 31, 2025, transfers out of Level 2 to Level 3 included Other contracts and Deposits due to changes in the significance of unobservable inputs and changes in the market observability of inputs. During the year ended October 31, 2024, transfers out of Level 2 to Level 3 included Other contracts and Deposits due to changes in the significance of unobservable inputs and changes in the market observability of inputs.

During the year ended October 31, 2025, transfers out of Level 3 to Level 2 included Deposits and Other contracts due to changes in the significance of unobservable inputs and changes in the market observability of inputs. During the year ended October 31, 2024, transfers out of Level 3 to Level 2 included Other contracts, Deposits and Loans due to changes in the significance of unobservable inputs and changes in the market observability of inputs.

Positive and negative fair value movements of Level 3 financial instruments from using reasonably possible alternative assumptions

A financial instrument is classified as Level 3 in the fair value hierarchy if one or more of its unobservable inputs may significantly affect the measurement of its fair value. In preparing the financial statements, appropriate levels for these unobservable input parameters are chosen so that they are consistent with prevailing market evidence or management judgment. Due to the unobservable nature of the prices or rates, there may be uncertainty about the valuation of these Level 3 financial instruments.

The following table summarizes the impacts to fair values of Level 3 financial instruments using reasonably possible alternative assumptions. This sensitivity disclosure is intended to illustrate the potential impact of the relative uncertainty in the fair value of Level 3 financial instruments. In reporting the sensitivities below, we offset balances in instances where: (i) the move in valuation factors cause an offsetting positive and negative fair value movement, (ii) both offsetting instruments are in Level 3, and (iii) exposures are managed and reported on a net basis. With respect to overall sensitivity, it is unlikely in practice that all reasonably possible alternative assumptions would simultaneously be realized.

	As at
	October 31, 2025								October 31, 2024
(Millions of Canadian dollars)	Level 3<br> fair value			Positive fair value<br> movement from<br> using reasonably<br> possible<br> alternatives		Negative fair value<br> movement from<br> using reasonably<br> possible<br> alternatives			Level 3<br> fair value			Positive fair value<br> movement from<br> using reasonably<br> possible<br> alternatives		Negative fair value<br> movement from<br> using reasonably<br> possible<br> alternatives
Securities
Trading
Corporate debt and other debt	$	32		$	4	$	(4	)	$	–		$	–	$	–
Equities		2,863			24		(23	)		2,544			50		(46	)
Investment
Mortgage-backed securities		29			4		(4	)		31			4		(4	)
Corporate debt and other debt		134			8		(7	)		143			9		(8	)
Equities		582			53		(52	)		506			45		(44	)
Loans		1,274			13		(13	)		1,781			19		(20	)
Derivatives		462			11		(10	)		392			5		(4	)
Other assets		4			–		–			7			–		–
	$	5,380		$	117	$	(113	)	$	5,404		$	132	$	(126	)
Deposits	$	(301	)	$	3	$	(3	)	$	(478	)	$	15	$	(15	)
Derivatives		(1,347	)		55		(68	)		(1,221	)		54		(57	)
	$	(1,648	)	$	58	$	(71	)	$	(1,699	)	$	69	$	(72	)

Sensitivity results

As at October 31, 2025, the effects of applying other reasonably possible alternative assumptions to the Level 3 asset positions would be an increase of $117 million and a reduction of $113 million in fair value, of which $65 million and $63 million would be recorded in Other components of equity, respectively. The effects of applying these assumptions to the Level 3 liability positions would result in a decrease of $58 million and an increase of $71 million in fair value.

17 2 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Level 3 valuation inputs and approaches to developing reasonably possible alternative assumptions

The following is a summary of the unobservable inputs used in the valuation of the Level 3 instruments and our approaches to developing reasonably possible alternative assumptions used to determine sensitivity.

Financial assets or<br> liabilities	Sensitivity methodology
Asset-backed securities, corporate debt, government debt, municipal bonds and loans	Sensitivities are determined based on adjusting, plus or minus one standard deviation, the <br>bid-offer<br> spreads or input prices if a sufficient number of prices are received, adjusting input parameters such as credit spreads or using high and low vendor prices as reasonably possible alternative assumptions.
Private equities, hedge fund investments and related equity derivatives	Sensitivity of direct private equity investments is determined by (i) adjusting the discount rate by 2% when the discounted cash flow method is used to determine fair value, (ii) adjusting the price multiples based on the range of multiples of comparable companies when price-multiples-based models are used, or (iii) using an alternative valuation approach. The private equity fund, hedge fund and related equity derivative NAVs are provided by the fund managers, and as a result, there are no other reasonably possible alternative assumptions for these investments.
Interest rate derivatives	Sensitivities of interest rate and cross currency swaps are derived using plus or minus one standard deviation of the inputs, and an amount representing model and parameter uncertainty, where applicable.
Equity derivatives	Sensitivity of the Level 3 position is determined by shifting the unobservable model inputs by plus or minus one standard deviation of the pricing service market data including volatility, dividends or correlations, as applicable.
Bank funding and deposits	Sensitivities of deposits are calculated by shifting the funding curve by plus or minus certain basis points.
Structured notes	Sensitivities for interest-rate-linked and equity-linked structured notes are derived by adjusting inputs by plus or minus one standard deviation, and for other deposits, by estimating a reasonable move in the funding curve by plus or minus certain basis points.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 173

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Note 3 Fair value of financial instruments<br><br>(continued)

Fair value for financial instruments that are carried at amortized cost and classified using the fair value hierarchy

	As at October 31, 2025
	Fair value<br> <br>approximates<br> <br>carrying value<br><br>(1)			Fair value may not approximate carrying value
			Fair value measurements using												Total<br> <br>fair value
(Millions of Canadian dollars)			Level 1			Level 2			Level 3			Total
Interest-bearing deposits with banks	$	9,909		$	–		$	–		$	–		$	–		$	9,909
Amortized cost securities <br>(2)		–			115			98,613			–			98,728			98,728
Assets purchased under reverse repurchase agreements and securities borrowed		72,713			–			10,757			–			10,757			83,470
Loans
Retail		83,459			–			558,699			6,255			564,954			648,413
Wholesale		8,135			–			365,890			8,526			374,416			382,551
		91,594			–			924,589			14,781			939,370			1,030,964
Other assets		57,685			–			552			250			802			58,487
		231,901			115			1,034,511			15,031			1,049,657			1,281,558
Deposits
Personal		289,651			–			198,695			298			198,993			488,644
Business and government		504,918			–			273,643			569			274,212			779,130
Bank		23,643			–			13,000			14			13,014			36,657
		818,212			–			485,338			881			486,219			1,304,431
Obligations related to assets sold under repurchase agreements and securities loaned		46,109			–			491			–			491			46,600
Other liabilities		53,331			–			4,714			248			4,962			58,293
Subordinated debentures		–			–			13,887			–			13,887			13,887
	$	917,652		$	–		$	504,430		$	1,129		$	505,559		$	1,423,211
	As at October 31, 2024
	Fair value<br> <br>approximates<br> <br>carrying value<br>(1)			Fair value may not approximate carrying value
			Fair value measurements using												Total<br> <br>fair value
(Millions of Canadian dollars)			Level 1			Level 2			Level 3			Total
Interest-bearing deposits with banks	$	12,024		$	–		$	–		$	–		$	–		$	12,024
Amortized cost securities<br>(2)		–			68			96,268			–			96,336			96,336
Assets purchased under reverse repurchase agreements and securities borrowed		54,331			–			12,161			–			12,161			66,492
Loans
Retail		79,960			–			533,708			5,652			539,360			619,320
Wholesale		16,022			–			321,684			7,855			329,539			345,561
		95,982			–			855,392			13,507			868,899			964,881
Other assets		49,414			–			412			267			679			50,093
		211,751			68			964,233			13,774			978,075			1,189,826
Deposits
Personal		273,228			–			216,675			267			216,942			490,170
Business and government		443,077			–			241,204			467			241,671			684,748
Bank		23,942			–			13,241			–			13,241			37,183
		740,247			–			471,120			734			471,854			1,212,101
Obligations related to assets sold under repurchase agreements and securities loaned		34,658			–			–			–			–			34,658
Other liabilities		51,561			–			1,983			16,306			18,289			69,850
Subordinated debentures		–			–			13,602			–			13,602			13,602
	$	826,466		$	–		$	486,705		$	17,040		$	503,745		$	1,330,211
(1)	Certain financial instruments have not been assigned to a level as the carrying amount approximates their fair values.
---	---
(2)	Included in Securities – Investment, net of applicable allowance on the Consolidated Balance Sheets.
---	---

174 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Fair values of financial assets and liabilities carried at amortized cost and di sclos ed in the table above are determined using the following valuation techniques and inputs.

Amortized cost securities

Fair values of government bonds, corporate bonds, and ABS are based on quoted prices if available for identical securities. When prices of the identical securities are not readily available, we use industry standard models with inputs such as discount margins, yields, default, prepayment and LGD that are implied from transaction prices, dealer quotes or vendor prices of comparable instruments.

Assets purchased under reverse repurchase agreements and securities borrowed, and Obligations related to assets sold under repurchase agreements and securities loaned

Valuation methods used for the long-term instruments are described in the Fair value of assets and liabilities measured on a recurring basis and classified using the fair value hierarchy section of this note. The carrying values of short-term instruments generally approximate their fair values.

Loans – Retail

Retail loans include residential mortgages, personal and small business loans and credit cards. For r eside ntial mortgages, and personal and small business loans, we segregate the portfolio based on certain attributes such as product type, contractual interest rate, term to maturity and credit scores, if applicable. Fair values of these loans are determined by the discounted cash flow method using applicable inputs such as prevailing interest rates, contractual and posted client rates, client discounts, credit spreads, default rates, prepayment rates, LGD and loan-to-value (LTV) ratios. Fair values of credit card receivables are also calculated based on a discounted cash flow method with portfolio yields, write-offs and monthly payment rates as inputs. The carrying values of short-term and variable rate loans generally approximate their fair values.

Loans – Wholesale

Where market prices are available, wholesale loans are valued based on market prices. Otherwise, fair value is determined by the discounted cash flow method using the following inputs: market interest rates and market based spreads of assets with similar credit ratings and terms to maturity, LGD, expected default frequency implied from credit default swap prices, if available, and relevant pricing information such as contractual rate, origination and maturity dates, redemption price, coupon payment frequency and date convention.

Deposits

Deposits are comprised of demand, notice, and term deposits which include senior deposit notes we have issued to provide us with long-term funding. Fair values of term deposits are determined by one of several valuation techniques: (i) for term deposits and similar instruments, we segregate the portfolio based on term to maturity. Fair values of these instruments are determined by the discounted cash flow method using inputs such as client rates for new sales of the corresponding terms; and (ii) for senior deposit notes, we use actual traded prices, vendor prices or the discounted cash flow method using a market interest rate curve and our funding spreads as inputs. The carrying values of demand, notice, and short-term term deposits generally approximate their fair values.

Other assets and Other liabilities

Other assets and Other liabilities include financial instruments relating to certain commodities. Fair values of these instruments are calculated by the discounted cash flow method using applicable inputs such as market interest rates, counterparties’ credit spreads, our funding spreads, commodity forward prices and spot prices.

Subordinated debentures

Fair values of Subordinated debentures are based on market prices, dealer quotes or vendor prices when available. Where prices cannot be observed, fair value is determined using the discounted cash flow method, with applicable inputs such as market interest rates and credit spreads.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 175

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Note 4 Securities

Carrying value of securities

	As at October 31, 2025
	Term to maturity<br><br>(1)
(Millions of Canadian dollars)	Within<br> 3 months		3 months<br> to 1 year		1 year to 5<br> years		5 years to<br> 10 years		Over<br> 10 years		With no<br> specific<br> maturity		Total
Trading<br><br>(2)
Debt issued or guaranteed by:
Canadian government	$	5,832	$	7,418	$	7,068	$	5,529	$	11,615	$	–	$	37,462
U.S. federal, state, municipal and agencies		2,883		1,906		20,494		4,981		10,493		–		40,757
Other OECD government		3,976		4,445		3,064		1,207		1,725		–		14,417
Mortgage-backed securities		–		–		–		1		73		–		74
Asset-backed securities		138		118		348		415		276		–		1,295
Corporate debt and other debt<br>(3)		1,909		3,606		6,736		4,906		8,832		–		25,989
Equities												99,073		99,073
		14,738		17,493		37,710		17,039		33,014		99,073		219,067
Fair value through other comprehensive income<br><br>(2)
Debt issued or guaranteed by:
Canadian government
Federal
Amortized cost		368		15,974		23,215		270		–		–		39,827
Fair value		368		15,978		23,250		270		–		–		39,866
Yield <br>(4)		2.1%		3.4%		2.9%		2.5%		–		–		3.1%
Provincial and municipal
Amortized cost		–		1,892		8,225		666		585		–		11,368
Fair value		–		1,893		8,222		670		533		–		11,318
Yield <br>(4)		–		3.4%		3.3%		3.1%		4.6%		–		3.4%
U.S. federal, state, municipal and agencies
Amortized cost		1,723		7,455		56,949		51,353		13,905		–		131,385
Fair value		1,695		7,455		57,164		51,532		12,845		–		130,691
Yield<br>(4)		4.5%		3.0%		3.9%		3.7%		3.6%		–		3.8%
Other OECD government
Amortized cost		358		2,847		8,722		48		–		–		11,975
Fair value		357		2,835		8,693		48		–		–		11,933
Yield <br>(4)		2.5%		2.5%		3.7%		3.7%		–		–		3.4%
Mortgage-backed securities
Amortized cost		–		–		70		87		2,517		–		2,674
Fair value		–		–		70		85		2,519		–		2,674
Yield <br>(4)		–		–		5.4%		5.6%		5.6%		–		5.6%
Asset-backed securities
Amortized cost		–		–		5		3,356		6,765		–		10,126
Fair value		–		–		5		3,357		6,777		–		10,139
Yield<br>(4)		–		–		5.3%		5.3%		5.5%		–		5.4%
Corporate debt and other debt
Amortized cost		5,337		8,239		18,761		985		280		–		33,602
Fair value		5,338		8,245		18,827		1,000		268		–		33,678
Yield<br>(4)		2.2%		2.4%		3.7%		4.4%		5.3%		–		3.2%
Equities
Cost												832		832
Fair value <br>(5)												1,496		1,496
Cost/Amortized cost		7,786		36,407		115,947		56,765		24,052		832		241,789
Fair value		7,758		36,406		116,231		56,962		22,942		1,496		241,795
Amortized cost<br><br>(2)
Debt issued or guaranteed by:
Canadian government		1,302		3,188		19,544		5,355		36		–		29,425
Yield<br>(4)		1.4%		1.9%		3.1%		2.6%		3.8%		–		2.8%
U.S. federal, state, municipal and agencies		2,095		4,607		18,716		4,778		19,366		–		49,562
Yield<br>(4)		3.1%		3.9%		3.0%		3.4%		2.9%		–		3.1%
Other OECD government		795		2,096		4,367		137		–		–		7,395
Yield <br>(4)		2.6%		2.7%		3.8%		4.1%		–		–		3.4%
Asset-backed securities		–		–		21		–		126		–		147
Yield <br>(4)		–		–		4.7%		–		5.4%		–		5.3%
Corporate debt and other debt		1,019		4,099		9,102		162		15		–		14,397
Yield<br>(4)		3.2%		3.1%		3.6%		3.7%		4.8%		–		3.4%
Amortized cost, net of allowance		5,211		13,990		51,750		10,432		19,543		–		100,926
Fair value		5,210		14,011		52,093		10,051		17,363		–		98,728
Total carrying value of securities	$	27,707	$	67,889	$	205,691	$	84,433	$	75,499	$	100,569	$	561,788

17 6 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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	As at October 31, 2024
	Term to maturity <br>(1)
(Millions of Canadian dollars)	Within<br> 3 months		3 months<br> to 1 year		1 year to 5<br> years		5 years to<br> 10 years		Over<br> 10 years		With no<br> specific<br> maturity		Total
Trading<br><br>(2)
Debt issued or guaranteed by:
Canadian government	$	2,026	$	8,712	$	6,054	$	3,509	$	10,071	$	–	$	30,372
U.S. federal, state, municipal and agencies		2,599		1,423		13,648		4,336		8,982		–		30,988
Other OECD government		710		246		1,578		972		1,128		–		4,634
Mortgage-backed securities		–		–		–		–		3		–		3
Asset-backed securities		289		213		387		406		139		–		1,434
Corporate debt and other debt <br>(3)		2,030		3,178		8,170		4,200		8,617		–		26,195
Equities												89,674		89,674
		7,654		13,772		29,837		13,423		28,940		89,674		183,300
Fair value through other comprehensive income<br><br>(2)
Debt issued or guaranteed by:
Canadian government
Federal
Amortized cost		2,068		2,810		7,893		394		–		–		13,165
Fair value		2,068		2,803		7,904		394		–		–		13,169
Yield <br>(4)		3.2%		2.4%		2.9%		2.9%		–		–		2.9%
Provincial and municipal
Amortized cost		154		2,768		3,827		334		480		–		7,563
Fair value		154		2,767		3,833		333		467		–		7,554
Yield<br>(4)		3.6%		2.2%		3.3%		2.7%		4.3%		–		3.0%
U.S. federal, state, municipal and agencies
Amortized cost		1,154		1,198		30,773		33,906		14,601		–		81,632
Fair value		1,182		1,196		30,797		33,831		13,260		–		80,266
Yield<br>(4)		5.6%		2.1%		3.1%		3.9%		3.3%		–		3.5%
Other OECD government
Amortized cost		300		1,510		8,389		–		–		–		10,199
Fair value		300		1,511		8,345		–		–		–		10,156
Yield <br>(4)		1.2%		3.6%		3.5%		–		–		–		3.4%
Mortgage-backed securities
Amortized cost		–		–		–		58		2,588		–		2,646
Fair value		–		–		–		56		2,578		–		2,634
Yield<br>(4)		–		–		–		6.1%		5.9%		–		5.9%
Asset-backed securities
Amortized cost		–		–		–		4,258		5,085		–		9,343
Fair value		–		–		–		4,263		5,094		–		9,357
Yield <br>(4)		–		–		–		6.2%		6.4%		–		6.3%
Corporate debt and other debt
Amortized cost		7,028		2,703		20,830		991		380		–		31,932
Fair value		7,027		2,707		20,858		1,010		380		–		31,982
Yield<br>(4)		3.2%		3.8%		4.0%		5.0%		5.3%		–		3.9%
Equities
Cost												728		728
Fair value<br>(5)												1,242		1,242
Cost/Amortized cost		10,704		10,989		71,712		39,941		23,134		728		157,208
Fair value		10,731		10,984		71,737		39,887		21,779		1,242		156,360
Amortized cost<br><br>(2)
Debt issued or guaranteed by:
Canadian government		216		7,516		17,571		6,160		–		–		31,463
Yield<br>(4)		2.4%		1.7%		3.0%		2.0%		–		–		2.4%
U.S. federal, state, municipal and agencies		2,029		5,659		13,197		4,882		20,221		–		45,988
Yield <br>(4)		2.5%		3.6%		3.4%		3.2%		2.6%		–		3.0%
Other OECD government		61		1,133		5,169		202		–		–		6,565
Yield <br>(4)		0.9%		2.3%		3.2%		3.3%		–		–		3.0%
Asset-backed securities		–		–		2		32		–		–		34
Yield<br>(4)		–		–		0.3%		5.6%		–		–		5.2%
Corporate debt and other debt		526		3,677		11,724		259		22		–		16,208
Yield <br>(4)		2.9%		3.1%		3.6%		3.5%		5.3%		–		3.5%
Amortized cost, net of allowance		2,832		17,985		47,663		11,535		20,243		–		100,258
Fair value		2,826		17,855		47,481		10,701		17,473		–		96,336
Total carrying value of securities	$	21,217	$	42,741	$	149,237	$	64,845	$	70,962	$	90,916	$	439,918
(1)	Actual maturities may differ from contractual maturities shown above as borrowers may have the right to extend or prepay obligations with or without penalties.
---	---
(2)	Trading securities and FVOCI securities are recorded at fair value. Amortized cost securities, included in Investment securities, are recorded at amortized cost and presented net of allowance for credit losses.
---	---
(3)	Primarily composed of corporate debt, supra-national debt and <br>com<br>mercial paper.
---	---
(4)	The weighted average yield is derived using the contractual interest rate and the carrying value at the end of the year for the respective securities.
---	---
(5)	Certain equity securities that are not <br>held-for-trading<br> purposes are designated as FVOCI.
---	---

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 17 7

Table of Contents

Note 4 Securities<br><br>(continued)

Unrealized gains and losses on securities at FVOCI

(1), (2)

	As at
	October 31, 2025									October 31, 2024
(Millions of Canadian dollars)	Cost/<br>Amortized<br>cost		Gross<br>unrealized<br>gains		Gross<br>unrealized<br>losses			Fair value		Cost/<br>Amortized<br>cost		Gross<br>unrealized<br>gains		Gross<br>unrealized<br>losses			Fair value
Debt issued or guaranteed by:
Canadian government
Federal	$	39,827	$	46	$	(7	)	$	39,866	$	13,165	$	31	$	(27	)	$	13,169
Provincial and municipal		11,368		39		(89	)		11,318		7,563		27		(36	)		7,554
U.S. federal, state, municipal and agencies		131,385		622		(1,316	)		130,691		81,632		333		(1,699	)		80,266
Other OECD government		11,975		14		(56	)		11,933		10,199		6		(49	)		10,156
Mortgage-backed securities		2,674		7		(7	)		2,674		2,646		3		(15	)		2,634
Asset-backed securities		10,126		15		(2	)		10,139		9,343		17		(3	)		9,357
Corporate debt and other debt		33,602		122		(46	)		33,678		31,932		101		(51	)		31,982
Equities		832		669		(5	)		1,496		728		519		(5	)		1,242
	$	241,789	$	1,534	$	(1,528	)	$	241,795	$	157,208	$	1,037	$	(1,885	)	$	156,360
(1)	Excludes $100,926 <br>million<br>of <br>held-to-collect<br> securities as at October 31, 2025 that are carried at amortized cost, net of allowance for credit losses (October 31, 2024 – $100,258 million).
---	---
(2)	Gross unrealized gains and losses includes $(40) <br>million<br>of allowance for credit losses on debt securities at FVOCI as at October 31, 2025 (October 31, 2024 – $(35<br><br>) million) recognized in income and Other components of equity.
---	---

Allowance for credit losses on investment securities

The following tables reconcile the opening and closing allowance for debt securities at FVOCI and amortized cost by stage. Reconciling items include the following:

•	Transfers between stages, which are presumed to occur before any corresponding remeasurement of the allowance.
•	Purchases, which reflect the allowance related to assets newly recognized during the period, including those assets that were derecognized following a modification of terms.
---	---
•	Sales and maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.
---	---
•	Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time.
---	---

Allowance for credit losses – securities at FVOCI

(1)

	For the year ended
	October 31, 2025											October 31, 2024
	Performing					Impaired						Performing					Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2		Stage 3<br>(2)			Total			Stage 1			Stage 2		Stage 3 (2)			Total
Balance at beginning of period	$	6		$	–	$	(41	)	$	(35	)	$	4		$	–	$	(37	)	$	(33	)
Provision for credit losses
Transfers to stage 1		–			–		–			–			–			–		–			–
Transfers to stage 2		–			–		–			–			–			–		–			–
Transfers to stage 3		–			–		–			–			–			–		–			–
Purchases		7			–		–			7			10			–		–			10
Sales and maturities		(4	)		–		–			(4	)		(4	)		–		–			(4	)
Changes in risk, parameters and exposures		(4	)		–		(10	)		(14	)		(4	)		–		(8	)		(12	)
Exchange rate and other		–			–		6			6			–			–		4			4
Balance at end of period	$	5		$	–	$	(45	)	$	(40	)	$	6		$	–	$	(41	)	$	(35	)
(1)	Expected credit losses on debt securities at FVOCI are not separately recognized on the Consolidated Balance Sheets as the related securities are recorded at fair value. The cumulative amount of credit losses recognized in income is presented in Other components of equity.
---	---
(2)	Reflects changes in the allowance for purchased credit-impaired securities.
---	---

17 8 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

Table of Contents

Allowance for credit losses – securities at amortized cost

	For the year ended
	October 31, 2025											October 31, 2024
	Performing						Impaired					Performing						Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total			Stage 1			Stage 2			Stage 3		Total
Balance at beginning of period	$	6		$	8		$	–	$	14		$	8		$	15		$	–	$	23
Provision for credit losses
Transfers to stage 1		–			–			–		–			–			–			–		–
Transfers to stage 2		–			–			–		–			–			–			–		–
Transfers to stage 3		–			–			–		–			–			–			–		–
Purchases		7			–			–		7			7			–			–		7
Sales and maturities		–			–			–		–			(2	)		–			–		(2	)
Changes in risk, parameters and exposures		(6	)		(2	)		–		(8	)		(8	)		(6	)		–		(14	)
Exchange rate and other		1			–			–		1			1			(1	)		–		–
Balance at end of period	$	8		$	6		$	–	$	14		$	6		$	8		$	–	$	14

Credit risk exposure by internal risk rating

The following table presents the fair value of debt securities at FVOCI and gross carrying amount of securities at amortized cost. Risk ratings are based on internal ratings used in the measurement of expected credit losses, as at the reporting date, as outlined in the internal ratings maps in the Credit risk section of Management’s Discussion and Analysis.

	As at
	October 31, 2025								October 31, 2024
	Performing				Impaired				Performing				Impaired
(Millions of Canadian dollars)	Stage 1		Stage 2		Stage 3<br>(1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Investment securities
Securities at FVOCI
Investment grade	$	239,375	$	–	$	–	$	239,375	$	154,100	$	–	$	–	$	154,100
Non-investment<br> grade		786		4		–		790		875		–		–		875
Impaired		–		–		134		134		–		–		143		143
		240,161		4		134		240,299		154,975		–		143		155,118
Items not subject to impairment<br>(2)								1,496								1,242
							$	241,795							$	156,360
Securities at amortized cost
Investment grade	$	99,673	$	–	$	–	$	99,673	$	99,224	$	–	$	–	$	99,224
Non-investment<br> grade		1,098		169		–		1,267		856		192		–		1,048
		100,771		169		–		100,940		100,080		192		–		100,272
Allowance for credit losses		8		6		–		14		6		8		–		14
	$	100,763	$	163	$	–	$	100,926	$	100,074	$	184	$	–	$	100,258
(1)	Reflects $134 million of purchased credit-impaired securities (October 31, 2024 – $143 million).
---	---
(2)	Investment securities at FVOCI not subject to impairment represent equity securities designated as FVOCI.
---	---

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 17 9

Table of Contents

Note 5 Loans and allowance for credit losses

Loans by geography and p ortf olio net o f a llow an ce

	As at October 31, 2025
(Millions of Canadian dollars)	Canada		United<br> States		Other<br> International		Total		Allowance for<br> loan losses<br><br>(1)			Total net<br> of allowance
Retail <br>(2)
Residential mortgages	$	454,346	$	35,673	$	3,394	$	493,413	$	(794	)	$	492,619
Personal		90,842		20,984		3,519		115,345		(1,541	)		113,804
Credit cards <br>(3)		25,836		652		301		26,789		(1,273	)		25,516
Small business <br>(4)		16,797		–		–		16,797		(334	)		16,463
Wholesale <br>(2), (5)		194,487		143,439		59,245		397,171		(3,151	)		394,020
Total loans	$	782,308	$	200,748	$	66,459	$	1,049,515	$	(7,093	)	$	1,042,422
Undrawn loan commitments – Retail		311,332		9,434		4,913		325,679		(197	)
Undrawn loan commitments – Wholesale		183,589		309,469		101,511		594,569		(168	)
	As at October 31, 2024
(Millions of Canadian dollars)	Canada		United<br> States		Other<br> International		Total		Allowance for<br> loan losses <br>(1)			Total net<br> of allowance
Retail <br>(2)
Residential mortgages	$	441,191	$	33,092	$	3,261	$	477,544	$	(572	)	$	476,972
Personal		86,977		18,148		3,213		108,338		(1,389	)		106,949
Credit cards <br>(3)		24,619		653		293		25,565		(1,164	)		24,401
Small business <br>(4)		15,531		–		–		15,531		(258	)		15,273
Wholesale <br>(2), (5)		189,378		119,231		51,830		360,439		(2,654	)		357,785
Total loans	$	757,696	$	171,124	$	58,597	$	987,417	$	(6,037	)	$	981,380
Undrawn loan commitments – Retail		300,071		5,099		4,100		309,270		(172	)
Undrawn loan commitments – Wholesale		180,687		264,309		88,787		533,783		(139	)
(1)	Excludes allowance for loans measured at FVOCI of $1 million (October 31, 2024 – $4 million).
---	---
(2)	Geographic information is based on residence of the borrower.
---	---
(3)	The credit cards business is managed as a single portfolio and includes both consumer and business cards.
---	---
(4)	Includes small business exposure managed on a pooled basis.
---	---
(5)	Includes small business exposure managed on an individual client basis.
---	---

Loans maturity and rate sensitivity

	As at October 31, 2025
	Maturity term<br><br>(1)									Rate sensitivity
(Millions of Canadian dollars)	Under<br>1 year<br><br>(2)		1 to 5<br>years		Over 5<br>years		Total			Floating		Fixed<br>Rate		Non-rate-<br><br>sensitive		Total
Retail	$	395,387	$	215,783	$	41,174	$	652,344		$	253,592	$	389,868	$	8,884	$	652,344
Wholesale		338,854		43,992		14,325		397,171			84,295		309,440		3,436		397,171
Total loans	$	734,241	$	259,775	$	55,499	$	1,049,515		$	337,887	$	699,308	$	12,320	$	1,049,515
Allowance for loan losses								(7,093	)								(7,093	)
Total loans net of allowance for loan losses	$	734,241	$	259,775	$	48,406	$	1,042,422		$	337,887	$	699,308	$	5,227	$	1,042,422
	As at October 31, 2024
	Maturity term <br>(1)									Rate sensitivity
(Millions of Canadian dollars)	Under<br> 1 year <br>(2)		1 to 5<br> years		Over 5<br> years		Total			Floating		Fixed<br> Rate		Non-rate-<br><br> sensitive		Total
Retail	$	342,552	$	240,995	$	43,431	$	626,978		$	211,027	$	407,455	$	8,496	$	626,978
Wholesale		302,024		44,977		13,438		360,439			80,385		277,599		2,455		360,439
Total loans	$	644,576	$	285,972	$	56,869	$	987,417		$	291,412	$	685,054	$	10,951	$	987,417
Allowance for loan losses								(6,037	)								(6,037	)
Total loans net of allowance for loan losses	$	644,576	$	285,972	$	50,832	$	981,380		$	291,412	$	685,054	$	4,914	$	981,380
(1)	Generally, based on the earlier of contractual repricing or maturity date.
---	---
(2)	Includes variable rate loans that<br>can<br>be repriced at the clients’ discretion without penalty.
---	---

1 8

0 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

Table of Contents

Allowance for credit losses

	For the year ended
	October 31, 2025												October 31, 2024
(Millions of Canadian dollars)	Balance at<br>beginning<br>of period		Provision<br>for credit<br>losses		Net<br><br>write-offs<br>(1)			Exchange<br>rate and<br>other			Balance<br>at end<br>of period		Balance at<br>beginning<br>of period		Provision<br>for credit<br>losses			Net<br><br>write-offs (1)			Exchange<br>rate and<br>other			Balance<br>at end<br>of period
Retail
Residential mortgages	$	572	$	280	$	(9	)	$	(49	)	$	794	$	481	$	114		$	(10	)	$	(13	)	$	572
Personal		1,482		956		(779	)		(20	)		1,639		1,228		877			(616	)		(7	)		1,482
Credit cards		1,233		952		(829	)		–			1,356		1,069		831			(669	)		2			1,233
Small business		272		209		(104	)		(26	)		351		194		178			(84	)		(16	)		272
Wholesale		2,793		1,959		(1,163	)		(270	)		3,319		2,326		1,297			(700	)		(130	)		2,793
Customers’ liability under acceptances		–		–		–			–			–		50		(50	)		–			–			–
	$	6,352	$	4,356	$	(2,884	)	$	(365	)	$	7,459	$	5,348	$	3,247		$	(2,079	)	$	(164	)	$	6,352
Presented as:
Allowance for loan losses	$	6,037									$	7,093	$	5,004										$	6,037
Other liabilities – Provisions		311										365		288											311
Other assets – Other		–										–		50											–
Other components of equity		4										1		6											4
(1)	Loans <br>written-off<br> are generally subject to continued collection efforts for a period of time following <br>write-off.<br> The contractual amount outstanding on loans <br>written-off<br> during the year ended October 31, 2025 that are no longer subject to enforcement activity was $285 <br>million<br>(October 31, 2024 – $359 million).
---	---

The following table reconciles the opening and closing allowance f or ea ch major product of loans and commitments as determined by our modelled, scenario-weighted allowance and the application of expert credit judgment as applicable. Reconciling items include the following:

•	Model changes, as applicable, which generally comprise the impact of signifi<br>ca<br>nt changes to the quantitative models used to estimate expected credit losses and any staging impacts that may arise.
•	Transfers between stages, which are presumed to occur before any corresponding remeasurements of the allowance.
---	---
•	Originations, which reflect the allowance related to assets newly recognized during the <br>perio<br>d, including those assets that were derecognized following a modification of terms.
---	---
•	Maturities, which reflect the allowance related to assets derecognized during the period without a credit loss being incurred, including those assets that were derecognized following a modification of terms.
---	---
•	Changes in risk, parameters and exposures, which comprise the impact of changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions; partial repayments and additional draws on existing facilities; changes in the measurement following a transfer between stages; and unwinding of the time value discount due to the passage of time in Stage 1 and Stage 2.
---	---

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 1 8

Table of Contents

Note 5 Loans and allowance for credit losses<br><br>(continued)

Allowance for credit losses – Retail and wholesale loans

	For the year ended
	October 31, 2025												October 31, 2024
	Performing						Impaired						Performing						Impaired
(Millions of Canadian dollars)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Residential mortgages
Balance at beginning of period	$	215		$	126		$	231		$	572		$	223		$	90		$	168		$	481
Provision for credit losses
Transfers to stage 1		157			(153	)		(4	)		–			99			(97	)		(2	)		–
Transfers to stage 2		(41	)		49			(8	)		–			(23	)		36			(13	)		–
Transfers to stage 3		(7	)		(45	)		52			–			(5	)		(42	)		47			–
Originations		100			–			–			100			94			–			–			94
Maturities		(25	)		(29	)		–			(54	)		(19	)		(17	)		–			(36	)
Changes in risk, parameters and exposures		(123	)		256			101			234			(155	)		157			54			56
Write-offs		–			–			(20	)		(20	)		–			–			(23	)		(23	)
Recoveries		–			–			11			11			–			–			13			13
Exchange rate and other		–			–			(49	)		(49	)		1			(1	)		(13	)		(13	)
Balance at end of period	$	276		$	204		$	314		$	794		$	215		$	126		$	231		$	572
Personal
Balance at beginning of period	$	305		$	966		$	211		$	1,482		$	280		$	793		$	155		$	1,228
Provision for credit losses
Transfers to stage 1		594			(593	)		(1	)		–			537			(537	)		–			–
Transfers to stage 2		(96	)		100			(4	)		–			(75	)		78			(3	)		–
Transfers to stage 3		(4	)		(163	)		167			–			(3	)		(130	)		133			–
Originations		105			–			–			105			116			–			–			116
Maturities		(53	)		(233	)		(1	)		(287	)		(51	)		(186	)		–			(237	)
Changes in risk, parameters and exposures		(562	)		1,040			660			1,138			(499	)		947			550			998
Write-offs		–			–			(935	)		(935	)		–			–			(745	)		(745	)
Recoveries		–			–			156			156			–			–			129			129
Exchange rate and other		2			(2	)		(20	)		(20	)		–			1			(8	)		(7	)
Balance at end of period	$	291		$	1,115		$	233		$	1,639		$	305		$	966		$	211		$	1,482
Credit cards
Balance at beginning of period	$	207		$	1,026		$	–		$	1,233		$	203		$	866		$	–		$	1,069
Provision for credit losses
Transfers to stage 1		662			(662	)		–			–			559			(559	)		–			–
Transfers to stage 2		(112	)		112			–			–			(111	)		111			–			–
Transfers to stage 3		(2	)		(595	)		597			–			(2	)		(483	)		485			–
Originations		14			–			–			14			25			–			–			25
Maturities		(4	)		(56	)		–			(60	)		(5	)		(48	)		–			(53	)
Changes in risk, parameters and exposures		(546	)		1,313			231			998			(465	)		1,139			185			859
Write-offs		–			–			(1,010	)		(1,010	)		–			–			(892	)		(892	)
Recoveries		–			–			181			181			–			–			223			223
Exchange rate and other		(2	)		1			1			–			3			–			(1	)		2
Balance at end of period	$	217		$	1,139		$	–		$	1,356		$	207		$	1,026		$	–		$	1,233
Small business
Balance at beginning of period	$	80		$	86		$	106		$	272		$	70		$	66		$	58		$	194
Provision for credit losses
Transfers to stage 1		54			(54	)		–			–			35			(35	)		–			–
Transfers to stage 2		(23	)		23			–			–			(20	)		20			–			–
Transfers to stage 3		(1	)		(14	)		15			–			(1	)		(10	)		11			–
Originations		39			–			–			39			43			–			–			43
Maturities		(19	)		(24	)		–			(43	)		(17	)		(21	)		–			(38	)
Changes in risk, parameters and exposures		(41	)		98			156			213			(31	)		65			139			173
Write-offs		–			–			(124	)		(124	)		–			–			(98	)		(98	)
Recoveries		–			–			20			20			–			–			14			14
Exchange rate and other		6			2			(34	)		(26	)		1			1			(18	)		(16	)
Balance at end of period	$	95		$	117		$	139		$	351		$	80		$	86		$	106		$	272
Wholesale
Balance at beginning of period	$	787		$	1,038		$	968		$	2,793		$	774		$	785		$	767		$	2,326
Provision for credit losses
Transfers to stage 1		277			(275	)		(2	)		–			284			(282	)		(2	)		–
Transfers to stage 2		(124	)		133			(9	)		–			(152	)		159			(7	)		–
Transfers to stage 3		(15	)		(273	)		288			–			(9	)		(77	)		86			–
Originations		755			–			–			755			737			–			–			737
Maturities		(543	)		(418	)		–			(961	)		(438	)		(379	)		–			(817	)
Changes in risk, parameters and exposures		(243	)		912			1,496			2,165			(407	)		827			957			1,377
Write-offs		–			–			(1,237	)		(1,237	)		–			–			(763	)		(763	)
Recoveries		–			–			74			74			–			–			63			63
Exchange rate and other		2			6			(278	)		(270	)		(2	)		5			(133	)		(130	)
Balance at end of period	$	896		$	1,123		$	1,300		$	3,319		$	787		$	1,038		$	968		$	2,793

18 2 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Key inputs and assumptions

The measurement of expected credit losses is a complex calculation that involves a significant number of interrelated inputs and assumptions and the allowance is not sensitive to any one single factor. The key drivers of changes in expected credit losses include the following:

•	Changes in the credit quality of the borrower or instrument, primarily reflected in changes in internal risk ratings;
•	Changes in forward-looking macroeconomic conditions, specifically the macroeconomic variables to which our models are calibrated, which are those most closely correlated with credit losses in the relevant portfolio;
---	---
•	Changes in scenario design and the weight assigned to each scenario; and
---	---
•	Transfers between stages, which can be triggered by changes to any of the above inputs.
---	---

To reflect relevant risk factors not captured in our modelled results, we applied expert credit judgment in determining the measurement of our weighted allowance for credit losses. The measurement of expected credit losses, including scenario design and weightings, determining significant increases in credit risk since origination and application of expert credit judgment, is overseen by a senior management committee that includes representation from Finance, Group Risk Management and Economics.

Internal risk ratings

Internal risk ratings are assigned according to the risk management framework outlined under the headings Wholesale credit risk and Retail credit risk of the Credit risk section of Management’s Discussion and Analysis. Changes in internal risk ratings are primarily reflected in the PD parameters, which are estimated based on our historical loss experience at the relevant risk segment or risk rating level, adjusted for forward-looking information.

Scenario design and weightings

Our estimation of expected credit losses in Stage 1 and Stage 2 considers five distinct future macroeconomic scenarios. Scenarios are designed to capture a wide range of possible outcomes and are weighted according to our expectation of the relative likelihood of the range of outcomes that each scenario represents at the reporting date. We weight each scenario to take into account historical frequency, current trends, and forward-looking conditions which will change over time. Scenario weightings take into consideration the extent to which the base case scenario includes both favourable and unfavourable economic expectations, and upside and downside risks to the base scenario materializing in the future. The base case scenario is based on forecasts of the expected rate, value, or yield for each relevant macroeconomic variable. The upside and downside scenarios are set by adjusting our base projections to construct reasonably possible scenarios and weightings that are more optimistic and pessimistic, respectively, than the base case. Two additional downside scenarios capture the non-linear nature of potential credit losses across our portfolios. When the economy is at or near equilibrium, the severity of the downside scenario generally reflects an adverse event typical for a business cycle and both the non-linear downside scenarios reflect an outcome that is materially more adverse than the downside scenario.

The impact of each of our five scenarios varies across our portfolios given the portfolios have different sensitivities to movements in each macroeconomic variable.

The impact of weighting these multiple scenarios increased our ACL on performing loans, relative to our base scenario, by $1,268 million as at October 31, 2025 (October 31, 2024 – $945 million).

Forward looking macroeconomic variables

The PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. Each macroeconomic scenario used in our expected credit loss calculation includes a projection of all relevant macroeconomic variables used in our models for a five-year horizon, reverting to long-run averages generally within the 2 to 5 year period. Depending on their usage in the models, macroeconomic variables are projected at a country, province/state or more granular level. These include one or more of the variables described below, which differ by portfolio and region.

Our allowance for credit losses reflects our ec o nomic outlook as at October 31, 2025. S ubse quent changes to this forecast and related estimates will be reflected in our allowance for credit losses in future periods.

Our base scenario reflects the Canadian unemployment rate peaking in calendar Q4 2025, followed by gradual declines beginning in early calendar 2026 and for the U.S. unemployment rate to rise, peaking in calendar Q1 2026, followed by a return to equilibrium by calendar Q4 2026. The central bank policy rate in Canada is expected to remain unchanged until the end of calendar 2026 and cuts are expected in the U.S. until the middle of calendar 2026.

Our downside scenarios include two additional and more severe downside scenarios designed for trade disruptions and the real estate sector. During Q2 2025, in response to U.S. international trade policy, we designed a trade disruption scenario to replace our energy sector scenario. Our downside scenarios reflect the possibility of moderate and escalating macroeconomic shocks beginning in calendar Q1 2026 relative to our base scenario. In these scenarios, conditions are expected to deteriorate from calendar Q4 2025 levels for up to 18 months, followed by a recovery for the remainder of the period. These scenarios assume monetary policy responses that return the economy to a long-run, sustainable growth rate within the forecast period.

Our upside scenario reflects slightly stronger economic growth than the base scenario, without prompting a further offsetting monetary policy response as compared to our base scenario, followed by a return to a long-run sustainable growth rate within the forecast period.

We increased weight to our downside scenarios relative to October 31, 2024 to reflect the heightened economic uncertainty related to U.S. international trade policy as compared to our base scenario.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 18 3

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Note 5 Loans and allowance for credit losses<br><br>(continued)

The following provides additional detail about our calendar quarter forecasts for certain key macroeconomic variables used in the models to estimate ACL:

•	Unemployment rates<br> – In our base forecast, we expect the Canadian unemployment rate to peak at 7.1% in calendar Q4 2025, then returning to its long run equilibrium by calendar Q1 2028. The U.S. unemployment rate is expected to rise to 4.5% in calendar Q4 2025, peaking at 4.6% in calendar Q1 2026, then returning to its long run equilibrium level by calendar Q4 2026.
•	Gross Domestic Product (GDP)<br> – In our base forecast, we expect both Canadian and U.S. GDP to continuously grow in calendar Q4 2025 and thereafter. GDP in calendar Q4 2026 is expected to be 1.8% above Q4 2025 levels in Canada, and 1.5% above Q4 2025 levels in the U.S.
---	---
•	Canadian housing price<br><br>index<br> – In our base forecast, we expect housing prices to increase by 0.3% over the next 12 months from calendar Q4 2025, with a compound annual growth rate of 3.4% for the following 2 to 5 years. The range of annual housing price growth (contraction) in our alternative real estate downside and upside scenarios is (29.2)% to 10.9% over the next 12 months and 4.2% to 9.6% for the following 2 to 5 years. As at October 31, 2024, our base forecast included housing price growth of 0.7% from calendar Q4 2024 for the next 12 months and housing price growth of 3.0% for the following 2 to 5 years.
---	---

18 4 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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The primary variables driving credit losses in our retail portfolios are Canadian unemployment rates, the Canadian housing price index and Canadian GDP. The Canadian overnight interest rate also impacts our retail portfolios. Our wholesale portfolios are affected by all of the variables discussed above; however, the specific variables differ by sector. Other variables also impact our wholesale portfolios including, but not limited to, Canadian and U.S. 10 year BBB corporate bond credit spreads, Canadian and U.S. 10 year government bond yields, U.S. 10 year BBB corporate bond yield, Canadian consumer confidence index, Canadian and U.S. commercial real estate price indices, U.S. housing price index, and natural gas prices (Henry Hub).

Increases in the following macroeconomic variables will generally correlate with higher expected credit losses: Canadian and U.S. unemployment rates, Canadian overnight interest rates, Canadian and U.S. 10 year BBB corporate bond credit spreads, Canadian and U.S. 10 year government bond yields, and U.S. 10 year BBB corporate bond yield.

Increases in the following macroeconomic variables will g ene rally correlate with lower expected credi t loss es: Canadian and U.S. housing price indices, Canadian and U.S. GDP, Canadian consumer confidence index, Canadian and U.S. commercial real estate price indices and natural gas prices.

Transfers between stages

Transfers between Stage 1 and Stage 2 are based on the assessment of significant increases in credit risk relative to initial recognition, as described in Note 2. The impact of moving from 12 months expected credit losses to lifetime expected credit losses, or vice versa, varies by product and is dependent on the expected remaining life at the date of the transfer. Stage transfers may result in significant fluctuations in expected credit losses.

The following table illustrates the impact of staging on our ACL by comparing our allowance if all performing loans were in Stage 1 to the actual ACL recorded on these assets.

	As at
	October 31, 2025
(Millions of Canadian dollars)	ACL – All performing<br> loans in Stage 1
Performing loans<br>(1)		3,775	1,698	5,473	3,313	1,523	$ 4,836

All values are in US Dollars.

(1)	Represents loans and commitments in Stage 1 and Stage 2.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 18 5

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Note 5 Loans and allowance for credit losses<br><br>(continued)

Credit risk exposure by internal risk rating

The following table presents the gross carrying amount of loans measured at amortized cost, and the full contractual amount of undrawn loan commitments subject to the impairment requirements of IFRS 9. Risk ratings are based on internal ratings used in the measurement of expected credit losses as at the reporting date, as outlined in the internal ratings maps for Wholesale and Retail facilities in the Credit risk section of Management’s Discussion and Analysis.

	As at
	October 31, 2025								October 31, 2024
(Millions of Canadian dollars)	Stage 1		Stage 2		Stage 3<br>(1), (2)		Total		Stage 1		Stage 2		Stage 3 (1), (2)		Total
Retail
Loans outstanding – Residential mortgages
Low risk	$	386,060	$	16,495	$	–	$	402,555	$	388,742	$	1,354	$	–	$	390,096
Medium risk		20,622		2,571		–		23,193		18,419		4,479		–		22,898
High risk		2,131		6,532		–		8,663		1,761		6,593		–		8,354
Not rated <br>(3)		54,253		1,940		–		56,193		52,569		1,479		–		54,048
Impaired		–		–		1,681		1,681		–		–		1,233		1,233
		463,066		27,538		1,681		492,285		461,491		13,905		1,233		476,629
Items not subject to impairment <br>(4)								1,128								915
Total							$	493,413							$	477,544
Loans outstanding – Personal
Low risk	$	87,536	$	2,712	$	–	$	90,248	$	82,904	$	1,680	$	–	$	84,584
Medium risk		4,035		3,768		–		7,803		5,525		3,063		–		8,588
High risk		601		2,583		–		3,184		592		2,365		–		2,957
Not rated <br>(3)		12,493		1,180		–		13,673		11,303		498		–		11,801
Impaired		–		–		437		437		–		–		408		408
Total	$	104,665	$	10,243	$	437	$	115,345	$	100,324	$	7,606	$	408	$	108,338
Loans outstanding – Credit cards
Low risk	$	18,279	$	161	$	–	$	18,440	$	17,363	$	177	$	–	$	17,540
Medium risk		2,123		2,291		–		4,414		1,999		2,436		–		4,435
High risk		70		2,423		–		2,493		75		2,289		–		2,364
Not rated <br>(3)		1,133		309		–		1,442		1,173		53		–		1,226
Total	$	21,605	$	5,184	$	–	$	26,789	$	20,610	$	4,955	$	–	$	25,565
Loans outstanding – Small business
Low risk	$	10,628	$	595	$	–	$	11,223	$	9,428	$	773	$	–	$	10,201
Medium risk		2,550		924		–		3,474		2,740		962		–		3,702
High risk		259		1,422		–		1,681		214		1,086		–		1,300
Not rated <br>(3)		8		–		–		8		7		–		–		7
Impaired		–		–		411		411		–		–		321		321
Total	$	13,445	$	2,941	$	411	$	16,797	$	12,389	$	2,821	$	321	$	15,531
Undrawn loan commitments – Retail
Low risk	$	293,300	$	3,700	$	–	$	297,000	$	284,036	$	592	$	–	$	284,628
Medium risk		12,451		427		–		12,878		12,110		381		–		12,491
High risk		805		758		–		1,563		746		602		–		1,348
Not rated <br>(3)		13,964		274		–		14,238		10,715		88		–		10,803
Total	$	320,520	$	5,159	$	–	$	325,679	$	307,607	$	1,663	$	–	$	309,270
Wholesale – Loans outstanding
Investment grade	$	130,322	$	2,117	$	–	$	132,439	$	116,549	$	1,471	$	–	$	118,020
Non-investment<br> grade		207,239		26,399		–		233,638		189,889		26,826		–		216,715
Not rated <br>(3)		14,714		503		–		15,217		12,871		721		–		13,592
Impaired		–		–		6,153		6,153		–		–		3,905		3,905
		352,275		29,019		6,153		387,447		319,309		29,018		3,905		352,232
Items not subject to impairment <br>(4)								9,724								8,207
Total							$	397,171							$	360,439
Undrawn loan commitments –<br> Wholesale
Investment grade	$	393,167	$	1,593	$	–	$	394,760	$	345,236	$	516	$	–	$	345,752
Non-investment<br> grade		182,223		16,158		–		198,381		170,212		14,512		–		184,724
Not rated <br>(3)		1,407		21		–		1,428		3,290		17		–		3,307
Total	$	576,797	$	17,772	$	–	$	594,569	$	518,738	$	15,045	$	–	$	533,783
(1)	As at October 31, 2025, 91% of credit-impaired loans were either fully or partially collateralized (October 31, 2024 – 88%). For details on the types of collateral held against credit-impaired assets and our policies on collateral, refer to the Credit risk mitigation section of Management’s Discussion and Analysis.
---	---
(2)	Includes $195 million of purchased or originated credit-impaired loans (October 31, 2024 – $109 million).
---	---
(3)	In certain cases where an internal risk rating is not assigned, we use other approved credit risk assessments or rating methodologies, policies and tools to manage our credit risk.
---	---
(4)	Items not subject to impairment are loans held at FVTPL.
---	---

18 6 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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Loans past due but not impaired

(1), (2)

	As at
	October 31, 2025						October 31, 2024
(Millions of Canadian dollars)	30 to 89 days		90 days<br>and greater		Total		30 to 89 days		90 days<br>and greater		Total
Retail	$	2,634	$	323	$	2,957	$	2,542	$	263	$	2,805
Wholesale		1,143		7		1,150		1,454		4		1,458
	$	3,777	$	330	$	4,107	$	3,996	$	267	$	4,263
(1)	Excludes loans less than 30 days past due as they are not generally representative of the borrowers’ ability to meet their payment obligations.
---	---
(2)	Amounts presented may include loans past due as a result of administrative processes, such as mortgage loans on which payments are restrained pending payout due to sale or refinancing. Past due loans arising from administrative processes are not representative of the borrowers’ ability to meet their payment obligations.
---	---
Note 6 Significant acquisition
---

HSBC Bank Canada

On March 28, 2024, we completed the acquisition of HSBC Bank Canada (HSBC Canada). The acquisition of HSBC Canada (the HSBC Canada transaction) gave us the opportunity to enhance our existing businesses in line with our strategic goals and to better position us to be the bank of choice for commercial clients with international needs, newcomers to Canada and globally connected clients. HSBC Canada results have been consolidated from the closing date and included in our Personal Banking, Commercial Banking, Wealth Management and Capital Markets segments.

Total consideration of $15.5 billion in cash included $13.5 billion for 100% of the common shares of HSBC Canada, $2.1 billion for the preferred shares and subordinated debt held directly or indirectly by HSBC Holdings plc, $(0.5) billion for the settlement of pre-existing relationships with HSBC Canada and $0.4 billion for an additional amount that accrued from August 30, 2023 to the closing date. This additional amount was calculated based on the $13.5 billion all-cash purchase price for the common shares of HSBC Canada and the Canadian Over nigh t Repo Rate Average. Relatedly, under a locked box mechanism, HSBC Canada’s earnings from June 30, 2022 to the closing date accrued to RBC and were reflected in the acquired net assets on closing.

Our purchase price allocation assigned $108.1 billion to assets and $99.1 billion to liabilities on the acquisition date. Goodwill of $6.5 billion reflected the expected expense synergies from our Personal Banking, Commercial Banking, Wealth Management and Capital Markets operations, expected growth of the platforms, and the ability to cross-sell products between segments. Goodwill is not deductible for tax purposes.

The following table presents the estimated fair value of the assets acquired and liabilities assumed as at the acquisition date.

(Millions of Canadian dollars, except percentage amounts)
Percentage of shares acquired		100%
Purchase consideration	$	15,488
Fair value of identifiable assets acquired
Cash and due from banks	$	2,772
Securities
Trading		1,110
Investment		21,305
Loans <br>(1)
Retail <br>(2)		35,351
Wholesale		39,282
Derivatives		3,365
Intangible assets <br>(3)		2,342
Other <br>(4)		2,570
Total fair value of identifiable assets acquired	$	108,097
Fair value of identifiable liabilities assumed
Deposits
Personal	$	42,037
Business and government <br>(2)		44,211
Obligations related to assets sold under repurchase agreements and securities loaned		5,664
Derivatives		3,541
Other <br>(5)		3,692
Total fair value of identifiable liabilities assumed	$	99,145
Fair value of identifiable net assets acquired	$	8,952
Goodwill		6,536
Total purchase consideration	$	15,488
(1)	The fair value of loans reflects estimates of incurred and expected future credit losses as at the acquisition date and interest rate premiums or discounts relative to prevailing market rates. As at March 28, 2024, the gross contractual value of the loans was $75,752 million. The estimate of contractual cash flows not expected to be collected was $575 million, of which $135 million related to purchased credit-impaired loans.
---	---
(2)	Loans – Retail includes $1.7 billion of Canadian residential mortgages sold with recourse to a mutual fund that do not qualify for derecognition, and Deposits – Business and government includes $1.7 billion of the related secured borrowing liability.
---	---
(3)	Intangible assets include $1,972 million of core deposit intangibles and $111 million of customer relationships, which are amortized on a straight-line basis over estimated useful lives of 7 years, and $259 million of mutual fund management contracts with indefinite useful lives.
---	---
(4)	Includes Assets purchased under reverse repurchase agreements and securities borrowed and Other assets.
---	---
(5)	Includes Obligations related to securities sold short and Other liabilities.
---	---

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 18 7

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Note 6 Significant acquisition<br><br>(continued)

For the period from March 28, 2024 to October 31, 2024, the HSBC Canada transaction contributed revenue of $1,716 million and net income of $453 million to RBC’s consolidated results. The net income of $453 million included initial PCL on purchased performing financial assets of $200 million ($145 million after-tax).

Assuming we acquired HSBC Canada on November 1, 2023, using the same fair value estimates and not reflecting any potential synergies, we estimated that RBC’s consolidated revenue and net income for the year ended October 31, 2024 would have been $58.6 billion and $16.6 billion, respectively.

RBC’s consolidated results included transaction and integration costs of $960 million for the year ended October 31, 2024, recognized in Non-interest expense.

Note 7 Derecognition of financial assets

We enter into transactions in which we transfer financial assets such as loans or securities to structured entities or other third parties. The majority of assets transferred under repurchase agreements, securities lending agreements, and in our Canadian residential mortgage securitization transactions do not qualify for derecognition as we continue to be exposed to substantially all of the risks and rewards of the transferred assets, such as prepayment, credit, price, interest rate and foreign exchange risks.

Transferred financial assets not derecognized

Securitization of Canadian residential mortgage loans

We periodically securitize insured single and multi-family Canadian residential mortgage loans through the creation of MBS pools under the National Housing Act MBS (NHA MBS) program. All loans securitized under the NHA MBS program are required to be insured by the Canadian Mortgage and Housing Corporation (CMHC) or a third-party insurer. We require the borrower to pay for mortgage insurance when the loan amount is greater than 80% of the original appraised value of the property (LTV ratio). For residential mortgage loans securitized under this program with LTV ratios less than 80%, we are required to insure the mortgages at our own expense. Under the NHA MBS program, we are responsible for making all payments due on our issued MBS, regardless of whether we collect the necessary funds from the mortgagor or the insurer. When a borrower defaults on a mortgage, we submit a claim to the insurer if the amount recovered from the collection or foreclosure process is lower than the sum of the principal balance, accrued interest and collection costs on the outstanding loan. The insurance claim process is managed by the insurance provider in accordance with the insurer’s policies and covers the entire unpaid loan balance plus generally up to 12 months of interest, selling costs and other eligible expenses.

We sell the NHA MBS pools primarily to Canada Housing Trust (CHT), a government-sponsored structured entity under the Canada Mortgage Bond (CMB) program. The entity periodically issues CMBs, which are guaranteed by the government, and sells them to third-party investors. Proceeds of the CMB issuances are used by the entity to purchase the NHA MBS pools from eligible NHA MBS issuers who participate in the issuance of a particular CMB series. Our continuing involvement includes servicing the underlying residential mortgage loans we have securitized, either ourselves or through a third-party servicer. We also act as counterparty in interest rate swap agreements where we pay the entity the interest due to CMB investors and receive the interest on the underlying MBS and reinvested assets. As part of the swaps, we are also required to maintain a principal reinvestment account for principal payments received on the underlying mortgage loans to meet the repayment obligation upon maturity of the CMB. We reinvest the collected principal payments in permitted investments as outlined in the swap agreements.

We have determined that certain of the NHA MBS program loans transferred to CHT do not qualify for derecognition as we have not transferred substantially all of the risks and rewards of ownership. As a result, these transferred MBS continue to be classified as residential mortgage loans and recognized on our Consolidated Balance Sheets. The cash received for these transferred MBS is treated as a secured borrowing and a corresponding liability is recorded in Deposits – Business and government on our Consolidated Balance Sheets.

We have determined that certain of the NHA MBS program loan transfers qualify for derecognition as we have transferred substantially all of the risks and rewards of ownership. During the year ended October 31, 2025, we transferred $ 1,332 million ( October 31, 2024 – $ 122 million) of NHA MBS program loans that qualified for derecognition.

Canadian residential mortgages sold with recourse

The RBC Indigo Mortgage Fund was closed effective April 17, 2025. Prior to its closure, we periodically transferred conventional uninsured mortgages into this fund in accordance with its investment parameters. We have determined that these mortgages, which were sold with recourse, did not qualify for derecognition. As a result, these transferred mortgages were classified as residential mortgage loans and recognized on our Consolidated Balance Sheets. The cash received for these transferred mortgages was treated as a secured borrowing and a corresponding liability was recorded in Deposits – Business and government on our Consolidated Balance Sheets. We also provided a liquidity arrangement whereby we would either repurchase or facilitate the sale of mortgages to third parties if deemed necessary to satisfy liquidity requirements of the fund.

Securities sold under repurchase agreements and securities loaned

We also enter into transactions such as repurchase agreements and securities lending agreements where we transfer assets under agreements to repurchase them at a future date and retain substantially all of the risks and rewards associa ted with the assets. These transferred assets remain on our Consolidated Balance Sheets and are accounted for as collateralized borrowing transactions.

18 8 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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The following table provides information on the carrying amount and fair value of the transferred assets that did not qualify for derecognition, and their associated liabilities.

	As at
	October 31, 2025										October 31, 2024
(Millions of Canadian dollars)	Canadian<br>residential<br>mortgage<br>loans<br><br>(1), (2)			Securities<br>sold under<br>repurchase<br>agreements<br><br>(3)		Securities<br>loaned<br><br>(3)		Total			Canadian<br>residential<br>mortgage<br>loans <br>(1), (2)		Securities<br>sold under<br>repurchase<br>agreements <br>(3)		Securities<br>loaned <br>(3)		Total
Carrying amount of transferred assets that do not qualify for derecognition	$	28,604		$	276,163	$	13,353	$	318,120		$	33,101	$	291,543	$	13,778	$	338,422
Carrying amount of associated liabilities		27,900			276,163		13,353		317,416			31,522		291,543		13,778		336,843
Fair value of transferred assets	$	28,137		$	276,163	$	13,353	$	317,653		$	31,760	$	291,543	$	13,778	$	337,081
Fair value of associated liabilities		28,275			276,163		13,353		317,791			31,445		291,543		13,778		336,766
Fair value of net position	$	(138	)	$	–	$	–	$	(138	)	$	315	$	–	$	–	$	315
(1)	Includes Canadian residential mortgage loans transferred primarily to Canada Housing Trust at the initial securitization and other permitted investments used for funding requirements after the initial securitization, as well as Canadian residential mortgages transferred into the RBC Indigo Mortgage Fund.
---	---
(2)	CMB investors have legal recourse only to the transferred assets, and do not have recourse to our general assets.
---	---
(3)	Does not include over-collateralization of assets pledged.
---	---
Note 8 Structured entities
---

In the normal course of business, we engage in a varie ty o f financial transactions with structured entities to support our financing and investing needs as well as those of our clients. A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are generally created to achieve a narrow and well defined objective with restrictions around their ongoing activities. We consolidate a structured entity when we control the entity in accordance with our accounting policy as described in Note 2. In other cases, we may sponsor or have an interest in such an entity but may not consolidate it.

Consolidated structured entities

We consolidate the following structured entities, whose assets and liabilities are recorded on our Consolidated Balance Sheets. Third-party investors in these structured entities generally have recourse only to the assets of the related entity and do not have recourse to our general assets unless we breach our contractual obligations to those entities. In the ordinary course of business, the assets of each consolidated structured entity can generally only be used to settle the obligations of that entity.

Multi-seller conduits

We generally do not maintain ownership in the multi-seller conduits that we administer and generally do not have rights to, or control of, their assets. However, we issue asset-backed commercial paper (ABCP) through a multi-seller conduit that does not have an expected loss investor with substantive power to direct the significant operating activities of the conduit. This conduit is consolidated because we have exposure to variability of returns from performance in the multi-seller arrangements through providing transaction-specific and program-wide liquidity, credit and loan facilities to the conduit and have decision-making power over the relevant activities. As of October 31, 2025, $2,340 million of financial assets held by the conduit were included in Loans (October 31, 2024 – $1,718 million) and $ 1,613 million of ABCP issued by the conduit was included in Deposits (October 31, 2024 – $1,600 million) on our Consolidated Balance Sheets.

Credit card securitization vehicle

We securitize a portion of our credit card receivables through a structured entity on a revolving basis. The entity purchases co-ownership interests in a pool of credit card receivables and issues senior and subordinated term notes collateralized by that co-ownership interest in the underlying pool of credit card receivables. Investors who purchase the term notes have recourse only to that co-ownership interest in the underlying pool of credit card receivables.

We continue to service the credit card receivables and perform an administrative role for the entity. We also retain risk in the underlying pool of credit card receivables through our retained interest in the transferred assets, the cash reserve balance we fund from time to time, and also through certain senior or subordinated notes which we may retain. Additionally, we may own some senior or subordinated notes as investments or for market-making activities and we act as counterparty to interest rate and cross currency swap agreements which hedge the entity’s interest rate and currency risk exposures.

We consolidate the structured entity because we have decision-making power over the timing and size of future issuances and other relevant activities which were predetermined by us at inception. We also obtain significant funding benefits and are exposed to variability from the performance of the underlying credit card receivables through our retained interest. As at October 31, 2025, $5 billion of notes issued by our credit card securitization vehicle were included in Deposits on our Consolidated Balance Sheets (October 31, 2024 – $6 billion).

Collateralized commercial paper vehicle

We established a funding vehicle that provides loans to us and finances those loans by issuing commercial paper to third-party investors. The structured entity’s commercial paper carries an equivalent credit rating to RBC because we are obligated to advance funds to the entity in the event there are insufficient funds from other sources to settle maturing commercial paper. We pledge collateral to secure the loans and are exposed to the market and credit risks of the pledged securities.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 18 9

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Note 8 Structured entities<br><br>(continued)

We consolidate the structured entity because we have decision-making power over the relevant activities, are the sole borrower from the structure, and are exposed to a majority of the residual ownership risks through the credit support provided. As at October 31, 2025, $20 billion of commercial paper issued by the vehicle was included in Deposits on our Consolidated Balance Sheets (October 31, 2024 – $18 billion).

Covered bonds

We periodically transfer mortgages to RBC Covered Bond Guarantor Limited Partnership (the Guarantor LP) to support funding activities and asset coverage requirements under our covered bonds program. The Guarantor LP was created to guarantee interest and principal payments under the covered bond program. The covered bonds guaranteed by the Guarantor LP are direct, unsecured and unconditional obligations of RBC; therefore, investors have a claim against the Bank which will continue if the covered bonds are not paid by the Bank and the mortgage assets in the Guarantor LP are insufficient to satisfy the obligations owing on the covered bonds. We act as general partner, limited partner, swap counterparty, lender and liquidity provider to the Guarantor LP, servicer for the underlying mortgages as well as the registered issuer of the covered bonds.

We consolidate the Guarantor LP as we have the decision-making power over the relevant activities through our role as general partner and are exposed to variability from the performance of the underlying mortgages. As at October 31, 2025, the total amount of mortgages transferred and outstanding was $86 billion (October 31, 2024 – $107 billion) and $53 billion of covered bonds were recorded as Deposits on our Consolidated Balance Sheets (October 31, 2024 – $58 billion).

Structured finance

We sell taxable and tax-exempt municipal bonds into Tender Option Bond (TOB) trusts, which consist of a bond that is credit enhanced by us and purchased by a TOB trust. The TOB trust finances the purchase from us by issuing interest-bearing certificates to short-term investors and a residual certificate that is purchased by us. We are the remarketing agent for the interest-bearing certificates and provide a liquidity facility to the short-term investors which requires us to purchase any certificates tendered but not successfully remarketed. We credit enhance the bond purchased by the TOB trust with a letter of credit under which we are required to extend funding if there are any losses on the underlying bonds. We earn interest on the residual certificate and receive market-based fees for acting as remarketing agent and providing the liquidity facility and letter of credit.

We consolidate the TOB trust when we are the holder of the residual certificate as we have decision-making power over the relevant activities, including the selection of the underlying municipal bonds and the ability to terminate the trust , and are exposed to variability from the performance of the underlying municipal bonds. As at October 31, 2025, $5 billion of municipal bonds were included in Securities related to consolidated TOB trust s (October 31, 2024 – $5 billion) and a corresponding $5 billion of interest-bearing certificates were included in Deposits on our Consolidated Balance Sheets (October 31, 2024 – $5 billion).

We establish structured entities to acquire loans for the purposes of issuing term collateralized loan obligation (CLO) transactions and act as collateral manager. During the warehouse phase, we provide subordinated financing and, for certain term CLO transactions, act as the arranger and placement agent, and may provide senior warehouse financing. Proceeds from the sale of the term CLO are used to repay our warehouse financing. During the term CLO phase, we continue to provide subordinated financing, which serves as the first loss tranche that absorbs losses prior to the senior tranches, and may also directly invest in the other tranches.

We consolidate these CLO structures as we have decision-making power over the relevant activities of the entity, which include the initial selection and subsequent management of the underlying debt portfolio, and when our interests, including direct investment plus collateral management fees, indicate that we are acting as a principal. As at October 31, 2025, $317 million of Cash and due from banks and $1,770 million of Loans related to consolidated CLO structures (October 31, 2024 – $194 million and $2,030 million, respectively) and $1,900 million of Deposits representing the subordinated and senior tranches held by third parties (October 31, 2024 – $1,143 million) were recorded on our Consolidated Balance Sheets.

RBC managed investment funds

We are sponsors and investment managers of mutual and pooled funds, which give us the ability to direct the investment decisions of the funds. We consolidate those mutual and pooled funds in which our interests, which include direct investment in seed capital plus management or performance fees, indicate that we are acting as a principal. As at October 31, 2025, $1,004 million of assets in the consolidated funds, primarily relating to Trading securities (October 31, 2024 – $799 million) and $362 million of Other liabilities representing the fund units held by third parties (October 31, 2024 – $377 million) were recorded on our Consolidated Balance Sheets.

Unconsolidated structured entities

We have interests in certain structured entities that we do not consolidate but have recorded assets and liabilities on our Consolidated Balance Sheets related to our transactions and involvement with these entities.

1 9

0 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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The following table presents the assets and liabilities recorded on our Consolidated Balance Sheets and our maximum exposure to loss related to our interests in unconsolidated structured entities. It also presents the size of each category of unconsolidated structured entity, as measured by the total assets of the entities in which we have an interest. The total assets as presented for each category do not necessarily represent the assets we have either rights or recourse to.

	As at October 31, 2025
(Millions of Canadian dollars)	Multi-seller<br>conduits<br><br>(1)		Structured<br>finance		Non-RBC<br><br>managed<br>investment<br>funds		Third-party<br>securitization<br>vehicles		Other		Total
On-balance<br> sheet assets
Securities	$	3	$	–	$	2,753	$	–	$	1,187	$	3,943
Loans		209		12,386		–		16,673		2,161		31,429
Derivatives		23		–		–		–		217		240
Other assets		–		–		–		–		747		747
	$	235	$	12,386	$	2,753	$	16,673	$	4,312	$	36,359
On-balance<br> sheet liabilities
Deposits	$	–	$	–	$	–	$	–	$	5	$	5
Derivatives		281		–		3		–		22		306
Other liabilities		–		–		–		–		–		–
	$	281	$	–	$	3	$	–	$	27	$	311
Maximum exposure to loss <br>(2)	$	64,591	$	19,672	$	3,710	$	26,094	$	7,796	$	121,863
Total assets of unconsolidated structured entities	$	63,306	$	54,840	$	515,340	$	161,430	$	961,750	$	1,756,666
	As at October 31, 2024
(Millions of Canadian dollars)	Multi-seller<br> conduits <br>(1)		Structured<br> finance		Non-RBC<br><br> managed<br> investment<br> funds		Third-party<br> securitization<br> vehicles		Other		Total
On-balance<br> sheet assets
Securities	$	1	$	–	$	2,541	$	–	$	1,384	$	3,926
Loans		236		6,688		–		12,788		1,805		21,517
Derivatives		32		–		–		–		98		130
Other assets		–		–		–		–		455		455
	$	269	$	6,688	$	2,541	$	12,788	$	3,742	$	26,028
On-balance<br> sheet liabilities
Deposits	$	–	$	–	$	–	$	–	$	167	$	167
Derivatives		115		–		3		–		4		122
Other liabilities		–		–		–		–		7		7
	$	115	$	–	$	3	$	–	$	178	$	296
Maximum exposure to loss <br>(2)	$	56,779	$	12,963	$	3,487	$	21,195	$	6,248	$	100,672
Total assets of unconsolidated structured entities	$	55,639	$	45,315	$	459,976	$	119,766	$	798,228	$	1,478,924
(1)	Total assets of unconsolidated structured entities represent the maximum assets that may have to be purchased by the conduits under purchase commitments outstanding. Of the purchase commitments outstanding, the conduits have purchased financial assets totalling $43 <br>b<br>illion as at October 31, 2025 (October 31, 2024 – $37 billion).
---	---
(2)	The maximum exposure to loss resulting from our interests in these entities consists mostly of investments, loans, fair value of derivatives, liquidity and credit enhancement facilities. The maximum exposure to loss of the multi-seller conduits is higher than the <br>on-balance<br> sheet assets primarily because of the notional amounts of the backstop liquidity and credit enhancement facilities. Refer to Note 23 for further details.
---	---

Below is a description of our involvement with each significant category of unconsolidated structured entity.

Multi-seller conduits

We administer multi-seller ABCP conduit programs. Multi-seller conduits primarily purchase financial assets from clients and finance those purchases by issuing ABCP.

In certain multi-seller conduit arrangements, we do not maintain any ownership of the multi-seller conduits that we administer and have no rights to, or control of, its assets. As the administrative agent, we earn a residual fee for providing services such as coordinating funding activities, transaction structuring, documentation, execution and monitoring. The ABCP issued by each multi-seller conduit is in the conduit’s own name with recourse to the financial assets owned by the multi-seller conduit, and is non-recourse to us except through our participation in liquidity and/or credit enhancement facilities.

We provide transaction-specific and program-wide liquidity facilities to the multi-seller conduits. In addition, we provide program-wide credit enhancement to the multi-seller conduits which obligate us to purchase assets or advance funds in the event the multi-seller conduit does not otherwise have funds from other sources, such as from the liquidity facilities, to settle maturing ABCP. In some cases, we or another third-party may provide transaction-specific credit enhancement which can take various forms. We receive market-based fees for providing these liquidity and credit facilities.

For certain transactions, we act as counterparty to various hedging contracts to facilitate our clients’ securitization of fixed rate and/or foreign currency denominated assets through the conduits. These may take the form of forward contracts, interest rate swaps or cross currency swaps. These derivatives expose us to foreign exchange and interest rate risks that are centrally managed by our foreign exchange trading and swap desks, respectively, and credit risk on the underlying assets that is mitigated by the credit enhancement described below.

Consolidated Financial Statements Royal Bank of Canada: Annual Report 2025 1 91

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Note 8 Structured entities<br><br>(continued)

Each transaction is structured with transaction-specific first loss protection provided by the third-party seller. This enhancement can take various forms, including but not limited to overcollateralization, excess spread, subordinated classes of financial assets, guarantees or letters of credit. The amount of this enhancement varies but is generally designed to cover a multiple of historical losses.

An unrelated third-party (expected loss investor) absorbs losses, up to a maximum contractual amount, that may occur in the future on the assets in the multi-seller conduits before the multi-seller conduits’ debt holders and us. In return for assuming this multi-seller conduit first-loss position, each multi-seller conduit pays the expected loss investor a return commensurate with its risk position. The expected loss investor has substantive power to direct the majority of the activities which significantly impact the conduit’s economic performance, including initial selection and approval of the asset purchase commitments and liquidity facilities, approval of renewal and amendment of these transactions and facilities, sale or transfer of assets, ongoing monitoring of asset performance, mitigation of losses, and management of the ABCP liabilities.

We do not consolidate these multi-seller conduits as we do not control the conduits as noted above.

Structured finance

We participate in certain municipal bond TOB structures that we do not consolidate. These structures are similar to those consolidated municipal bond TOB structures described above; however, the residual certificates are held by third parties. We provide liquidity facilities for the benefit of floating-rate certificate holders which may be drawn if certificates are tendered but not able to be remarketed. For a portion of these trusts, we also provide a letter of credit for the underlying bonds held in the trust. We do not have decision-making power over the relevant activities of the structures; therefore, we do not consolidate these structures.

We provide senior warehouse financing to unaffiliated structured entities that are established by third parties to acquire loans for the purposes of issuing a term CLO transaction. Subordinated financing is provided during the warehouse phase by either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorbs losses prior to ourselves as the senior lender. We act as the arranger and placement agent for the term CLO transaction. Proceeds from the sale of the term CLO are used to repay our senior warehouse financing, at which point we have no further involvement with the transaction. We do not consolidate these CLO structures as we do not have decision-making power over the relevant activities of the entity, which include the initial selection and subsequent management of the underlying debt portfolio.

We provide senior financing to unaffiliated structured entities that are established by third parties to acquire loans. Subordinated financing is provided by either the collateral manager or third-party investors. Subordinated financing serves as the first loss tranche which absorbs losses prior to ourselves as the senior lender. These facilities tend to be longer in term than the CLO warehouse facilities and benefit from credit enhancement generally designed to cover a multiple of historical losses. We may also invest in the senior-most tranches issued by third-party structured entities. We do not consolidate these structures as we do not have decision-making power over the relevant activities of the entity, which include the initial selection and subsequent management of the underlying debt portfolio.

Non-RBC managed investment funds

We enter into fee-based equity derivative transactions with third parties including mutual funds, unit investment trusts and other investment funds. These transactions provide their investors with the desired exposure to reference funds, and we economically hedge our exposure to these derivatives by investing in those reference funds. We also act as custodian for several funds. We do not consolidate those reference funds that are managed by third parties as we do not have power to direct their investing activities.

We provide liquidity facilities to certain third-party investment funds. The funds issue unsecured variable-rate preferred shares and invest in portfolios of tax-exempt municipal bonds. Undrawn liquidity commitments expose us to the liquidity risk of the preferred shares and drawn commitments expose us to the credit risk of the underlying municipal bonds. We do not consolidate these third-party managed funds as we do not have power to direct their investing activities.

Third-party securitization vehicles

We hold interests in securitization vehicles that provide funding to certain third parties on whose behalf the entities were created. The activities of these entities are limited to the purchase and sale of specified financial assets from the sponsor. We, as well as other financial institutions, are obligated to provide funding up to our maximum commitment level and are exposed to credit losses on the underlying assets after various credit enhancements. Enhancements can take various forms, including but not limited to overcollateralization, excess spread, subordinated classes of financial assets, guarantees or letters of credit. The amount of this enhancement varies but is generally designed to cover a multiple of historical losses. We do not consolidate these entities as we do not have decision-making power over the relevant activities, including the entities’ investing and financing activities.

Other

We are sponsors and investment managers of mutual funds, pooled funds and alternative asset entities, which gives us the ability to direct the investment decisions of these entities. We do not consolidate these entities if we only exercise our decision-making power as an agent on behalf of other unit holders.

We use structured entities to generally transform credit derivatives into cash instruments, to distribute credit risk and to create customized credit products to meet investors’ specific requirements. We enter into derivative contracts, including credit derivatives, to purchase protection from these entities (credit protection) and convert various risk factors such as yield, currency or credit risk of underlying assets to meet the needs of the investors. We act as sole arranger and swap provider for certain entities and, in some cases, fulfill other administrative functions for the entities. We do not consolidate these credit investment product entities as we do not have decision-making power over the relevant activities, which include selection of the collateral and reference portfolio, and are not exposed to a majority of the benefits or risks of the entities.

19 2 Royal Bank of Canada: Annual Report 2025 Consolidated Financial Statements

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We created certain funds to pass through tax credits received from underlying low-income housing, historic rehabilitation real estate projects to third parties, new market tax credits or renewable energy tax credits to third parties (tax credit funds). We are sponsors of the tax credit funds as a result of our responsibility to manage the funds, arrange the financing, and perform the administrative duties of these tax credit funds. We do not consolidate the tax credit funds as the third-party investors in these funds have the decision-making power to select the underlying investments and are exposed to the majority of the residual ownership and tax risks of the funds.

We also purchase passive interests in renewable energy tax credit entities created and controlled by third parties. We do not consolidate these third-party funds as we do not have decision-making power over the relevant activities and our investments are managed as part of larger portfolios which are held for trading purposes.

Other interests in unconsolidated structured entities

In the normal course of business, we buy and sell passive interests in certain third-party structured entities, including mutual funds, exchange traded funds, and government-sponsored ABS vehicles. Our investments in these entities are managed as part of larger portfolios which are held for trading, liquidity or hedging purposes. We did not create or sponsor these entities and do not have any decision-making power over their ongoing activities. Our maximum exposure to loss is limited to our on-balance sheet investments in these entities, which are not included in the table above. As at October 31, 2025 and 2024, our investments in these entities were included in Trading and Investment securities on our Consolidated Balance Sheets. Refer to Note 3 and Note 4 for further details on our Trading and Investment securities.

	As at October 31, 2025
	Term to maturity
(Millions of Canadian dollars)	Within<br> <br>1 year		1 through<br>5 years		Over<br> <br>5 years		Total		Trading		Other than<br>Trading
Over-the-counter contracts
Interest rate contracts
Forward rate agreements	$	1,920,284	$	1,292,557	$	11,515	$	3,224,356	$	3,224,356	$	–
Swaps		7,198,664		9,391,086		6,401,414		22,991,164		21,509,530		1,481,634
Options purchased		553,914		431,667		189,250		1,174,831		1,174,715		116
Options written		493,070		445,756		207,892		1,146,718		1,146,491		227
Foreign exchange contracts
Forward contracts		3,184,117		151,308		9,319		3,344,744		3,192,939		151,805
Cross currency swaps		22,869		121,493		101,765		246,127		238,380		7,747
Cross currency interest rate swaps		1,575,261		2,557,260		1,395,392		5,527,913		5,452,212		75,701
Options purchased		656,329		118,521		1,734		776,584		776,175		409
Options written		667,756		107,799		1,163		776,718		776,716		2
Credit derivatives <br>(2)		11,069		267,007		145,178		423,254		422,213		1,041
Other contracts <br>(3)		572,876		213,935		26,947		813,758		796,157		17,601
Exchange-traded contracts
Interest rate contracts
Futures – long positions		263,750		155,590		2,614		421,954		421,954		–
Futures – short positions		660,032		159,865		2,739		822,636		822,333		303
Options purchased		47,629		5,684		–		53,313		53,313		–
Options written		65,477		10,429		–		75,906		75,906		–
Foreign exchange contracts
Futures – long positions		15		–		–		15		15		–
Other contracts		714,199		190,536		28,799		933,534		933,534		–
	$	18,607,311	$	15,620,493	$	8,525,721	$	42,753,525	$	41,016,939	$	1,736,586
	As at October 31, 2024
	Term to maturity
(Millions of Canadian dollars)	Within<br> 1 year		1 through<br> 5 years		Over<br> 5 years		Total		Trading		Other than<br> Trading
Over-the-counter contracts
Interest rate contracts
Forward rate agreements	$	1,097,367	$	672,436	$	7,017	$	1,776,820	$	1,776,820	$	–
Swaps		6,181,369		8,714,891		5,597,447		20,493,707		19,291,405		1,202,302
Options purchased		206,649		407,730		155,843		770,222		770,181		41
Options written		217,379		384,448		179,408		781,235		781,113		122
Foreign exchange contracts
Forward contracts		2,939,019		136,442		7,465		3,082,926		2,966,914		116,012
Cross currency swaps		23,204		108,912		75,843		207,959		199,481		8,478
Cross currency interest rate swaps		1,298,173		2,544,878		1,380,858		5,223,909		5,168,677		55,232
Options purchased		475,980		75,804		2,015		553,799		553,799		–
Options written		488,878		66,828		983		556,689		556,689		–
Credit derivatives <br>(2)		4,055		135,505		118,732		258,292		257,333		959
Other contracts <br>(3)		389,424		149,475		10,122		549,021		538,604		10,417
Exchange-traded contracts
Interest rate contracts
Futures – long positions		93,985		45,015		56		139,056		139,056		–
Futures – short positions		114,425		64,759		301		179,485		179,244		241
Options purchased		7,075		991		–		8,066		8,066		–
Options written		2,262		14		–		2,276		2,276		–
Foreign exchange contracts
Futures – long positions		1		–		–		1		1		–
Other contracts		367,023		68,132		2,574		437,729		437,729		–
	$	13,906,268	$	13,576,260	$	7,538,664	$	35,021,192	$	33,627,388	$	1,393,804
(1)	The derivative notional amounts are determined using the standardized approach for measuring counterparty credit risk (SA-CCR) in accordance with the Capital Adequacy Requirements (CAR).
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(2)	Credit derivatives with a notional value of $<br>1<br> billion (October 31, 2024 – $1 billion) are economic hedges. Trading credit derivatives comprise protection purchased of $<br>218<br> billion (October 31, 2024 – $135 billion) and protection sold of $<br>204<br> billion (October 31, 2024 – $122 billion).
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(3)	Other contracts exclude loan underwriting commitments of $<br>8<br> billion (October 31, 2024 – $3 billion), which are not classified as derivatives under CAR guidelines.
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	As at October 31, 2025
	Risk rating<br><br>(1)										Counterparty type<br><br>(2)
(Millions of Canadian dollars)	AAA, AA		A		BBB		BB or lower		Total		Banks		OECD<br> governments		Other		Total
Gross positive fair values	$	28,649	$	85,952	$	28,251	$	37,501	$	180,353	$	75,797	$	44,072	$	60,484	$	180,353
Impact of master netting agreements and applicable margins		15,681		76,267		21,738		32,629		146,315		74,434		43,386		28,495		146,315
Replacement cost (after netting agreements)	$	12,968	$	9,685	$	6,513	$	4,872	$	34,038	$	1,363	$	686	$	31,989	$	34,038
	As at October 31, 2024
	Risk rating <br>(1)										Counterparty type <br>(2)
(Millions of Canadian dollars)	AAA, AA		A		BBB		BB or lower		Total		Banks		OECD<br> governments		Other		Total
Gross positive fair values	$	31,561	$	77,933	$	25,206	$	18,533	$	153,233	$	75,119	$	24,655	$	53,459	$	153,233
Impact of master netting agreements and applicable margins		18,644		67,995		19,046		14,797		120,482		73,763		24,289		22,430		120,482
Replacement cost (after netting agreements)	$	12,917	$	9,938	$	6,160	$	3,736	$	32,751	$	1,356	$	366	$	31,029	$	32,751
(1)	Our internal risk ratings of AAA, AA, A and BBB represent investment grade ratings and ratings of BB or lower represent non-investment grade ratings, as outlined in the internal ratings maps in the Credit risk section of Management’s Discussion and Analysis.
---	---
(2)	Counterparty type is defined in accordance with CAR guidelines.
---	---

•	Mismatches in the terms of hedged items and hedging instruments, for example the frequency and timing of when interest rates are reset and frequency of payment.
•	Difference in the discounting factors between the hedged item and the hedging instrument, taking into consideration the different reset frequency of the hedged item and hedging instrument.
---	---
•	Hedging derivatives with a non-zero fair value at inception date of the hedging relationship, resulting in mismatch in terms with the hedged item.
---	---

	As at
	October 31, 2025									October 31, 2024
	Designated as hedging instruments<br> in hedging relationships						Not designated<br> <br>in a hedging<br> <br>relationship			Designated as hedging instruments<br> in hedging relationships								Not designated<br> <br>in a hedging<br> <br>relationship
(Millions of Canadian dollars)	Fair<br> value		Cash<br> flow		Net<br> <br>investment				Fair<br> value			Cash<br> flow			Net<br> <br>investment
Assets
Derivative instruments	$	22	$	538	$	21	$	176,625		$	18		$	298		$	4	$	150,292
Liabilities
Derivative instruments		5		73		120		183,755			59			27			433		163,244
Non-derivative instruments		–		–		45,106		n.a.			–			–			37,833		n.a.
(1)	The fair value reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties.
---	---
n.a.	not applicable
---	---

	As at October 31, 2025
	Notional amounts								Carrying amount<br><br>(1)
(Millions of Canadian dollars, except average rates)	Within<br> <br>1 year		1 through<br> <br>5 years		Over<br> <br>5 years		Total		Assets		Liabilities
Interest rate risk
Interest rate contracts
Hedge of fixed rate assets	$	30,131	$	112,640	$	52,846	$	195,617	$	17	$	5
Hedge of fixed rate liabilities		31,934		67,365		13,277		112,576		5		–
Weighted average fixed interest rate
Hedge of fixed rate assets		2.9%		3.4%		3.6%		3.4%
Hedge of fixed rate liabilities		2.3%		3.3%		2.9%		3.0%
	As at October 31, 2024
	Notional amounts								Carrying amount <br>(1)
(Millions of Canadian dollars, except average rates)	Within<br> <br>1 year		1 through<br> <br>5 years		Over<br> <br>5 years		Total		Assets		Liabilities
Interest rate risk
Interest rate contracts
Hedge of fixed rate assets	$	11,396	$	68,563	$	38,343	$	118,302	$	10	$	55
Hedge of fixed rate liabilities		32,496		71,668		17,267		121,431		8		4
Weighted average fixed interest rate
Hedge of fixed rate assets		3.8%		3.8%		3.5%		3.7%
Hedge of fixed rate liabilities		2.9%		2.8%		3.1%		2.8%
(1)	The carrying amount reflects the impact of characterizing the daily variation margin as settlement of the related derivative fair values as permitted by certain central counterparties.
---	---


								Carrying amount
(Millions of Canadian dollars, except average rates)		1 through<br> 5 years		Over<br> <br>5 years		Total		Assets		Liabilities
Foreign exchange risk
Foreign currency liabilities	12,069	$	29,973	$	3,290	$	45,332		n.a.	$	45,106
Weighted average CAD- exchange rate	1.31		1.38		1.34		1.36
Weighted average CAD- exchange rate	n.a.		n.a.		n.a.		n.a.
Weighted average CAD- exchange rate	n.a.		1.78		n.a.		1.78
Forward contracts	11,388	$	–	$	–	$	11,388	$	21	$	120
Weighted average CAD- exchange rate	1.39		n.a.		n.a.		1.39
Weighted average CAD- exchange rate	1.62		n.a.		n.a.		1.62
Weighted average CAD- exchange rate	1.86		n.a.		n.a.		1.86

								Carrying amount
(Millions of Canadian dollars, except average rates)		1 through<br> 5 years		Over<br> <br>5 years		Total		Assets		Liabilities
Foreign exchange risk
Foreign currency liabilities	4,540	$	27,649	$	6,505	$	38,694		n.a.	$	37,833
Weighted average CAD- exchange rate	1.33		1.34		1.34		1.34
Weighted average CAD- exchange rate	n.a.		n.a.		n.a.		n.a.
Weighted average CAD- exchange rate	1.71		1.76		n.a.		1.73
Forward contracts	19,926	$	–	$	–	$	19,926	$	4	$	433
Weighted average CAD- exchange rate	1.36		n.a.		n.a.		1.36
Weighted average CAD- exchange rate	1.50		n.a.		n.a.		1.50
Weighted average CAD- exchange rate	1.79		n.a.		n.a.		1.79

	As at and for the year ended October 31, 2025
	Carrying amount				Accumulated amount of fair<br>value adjustments on the<br>hedged item included in the<br>carrying amount
(Millions of Canadian dollars)	Assets		Liabilities		Assets			Liabilities			Consolidated Balance Sheet items:	Changes in fair<br><br>values used for<br><br>calculating hedge<br><br>ineffectiveness
Interest rate risk
Fixed rate assets <br>(1)	$	192,744	$	–	$	1,027		$	–		Securities<br> – Investment, net of<br><br>applicable allowance; Loans – Retail;<br><br>Loans – Wholesale	$	1,698
Fixed rate liabilities <br>(1)		–		109,255		–			(499	)	Deposits – Personal;<br><br>Deposits<br> – Business and government;<br><br>Subordinated debentures;<br><br>Deposits – Bank		(1,812	)
	As at and for the year ended October 31, 2024
	Carrying amount				Accumulated amount of fair<br><br>value adjustments on the<br><br>hedged item included in the<br>carrying amount
(Millions of Canadian dollars)	Assets		Liabilities		Assets			Liabilities			Consolidated Balance Sheet items:	Changes in fair<br>values used for<br>calculating hedge<br>ineffectiveness
Interest rate risk
Fixed rate assets <br>(1)	$	114,354	$	–	$	(666	)	$	–		Securities<br> – Investment, net of<br><br>applicable allowance; Loans – Retail;<br><br>Loans – Wholesale	$	2,702
Fixed rate liabilities <br>(1)		–		118,116		–			(2,312	)	Deposits<br> – Personal; Deposits – Business and government; Subordinated debentures; Deposits – Bank		(3,963	)
(1)	As at October 31, 2025, the accumulated amount of fair value hedge adjustments remaining on our Consolidated Balance Sheets for hedged items that have ceased to be adjusted for hedging gains and losses is a loss of $78 million for fixed rate assets and a gain of $9 million for fixed rate liabilities (October 31, 2024 – loss of $238 million and gain of $118 million, respectively).
---	---

	As at and for the year ended October 31, 2025
		Changes in fair<br><br>values used for<br>calculating hedge<br>ineffectiveness				Cash flow hedge/foreign<br><br>currency translation reserve
(Millions of Canadian dollars)	Consolidated Balance Sheet items:				Continuing<br><br>hedges				Discontinued<br><br>hedges
Cash flow hedges
Interest rate risk
Variable rate assets	Securities<br> – Investment, net of<br><br>applicable allowance; Loans – Retail;<br><br>Loans – Wholesale;	$	(1,561	)		$	2,934			$	(481	)
	Interest bearing deposits with banks;<br><br>Assets purchased under reverse
	repurchase agreements and securities borrowed
Variable rate liabilities	Deposits<br> – Business and government;		976				(1,643	)			2,520
	Deposits – Personal;<br><br>Obligations related to assets sold under repurchase agreements and securities loaned
Foreign exchange risk
Fixed rate assets	Securities<br> – Investment, net of<br><br>applicable allowance		56				13				–
Fixed rate liabilities	Deposits – Business and government		(305	)			(51	)			–
Net investment hedges
Foreign exchange risk
Foreign subsidiaries	n.a.		433				(8,514	)			(306	)
	As at and for the year ended October 31, 2024
		Changes in fair<br><br>values used for<br>calculating hedge<br>ineffectiveness				Cash flow hedge/foreign<br><br>currency translation reserve
(Millions of Canadian dollars)	Consolidated Balance Sheet items:				Continuing<br>hedges				Discontinued<br>hedges
Cash flow hedges
Interest rate risk
Variable rate assets	Securities<br> – Investment, net of	$	(4,415	)		$	2,645			$	(2,216	)
	applicable allowance; Loans – Retail;<br><br>Loans – Wholesale;<br><br>Interest bearing deposits with banks;
	Assets purchased under reverse<br><br>repurchase agreements and securities borrowed
Variable rate liabilities	Deposits<br> – Business and government;		4,437				(1,801	)			4,557
	Deposits – Personal;
	Obligations related to assets sold under
	repurchase agreements and securities loaned
Foreign exchange risk
Fixed rate assets	Securities<br> – Investment, net of<br><br>applicable allowance		7				13				–
Fixed rate liabilities	Deposits – Business and government		(106	)			(52	)			–
Net investment hedges
Foreign exchange risk
Foreign subsidiaries	n.a.		710				(8,005	)			(382	)
n.a.	not applicable
---	---

	For the year ended October 31, 2025
(Millions of Canadian dollars)	Change in fair value<br><br>of hedging<br><br>instrument			Hedge<br> ineffectiveness<br> recognized in<br> income<br><br>(1)			Changes in the value of<br> the hedging instrument<br> recognized in OCI			Amount reclassified<br><br>from hedge reserves<br> to income
Fair value hedges
Interest rate risk
Interest rate contracts – fixed rate assets	$	(1,773	)	$	(75	)		n.a.			n.a.
Interest rate contracts – fixed rate liabilities		1,808			(4	)		n.a.			n.a.
Cash flow hedges
Interest rate risk
Interest rate contracts – variable rate assets		1,543			(13	)	$	1,604		$	(344	)
Interest rate contracts – variable rate liabilities		(941	)		17			(974	)		828
Foreign exchange risk
Cross currency swap – fixed rate assets		(56	)		–			(50	)		(50	)
Cross currency swap – fixed rate liabilities		305			–			246			246
Net investment hedges
Foreign exchange risk
Foreign currency liabilities		(92	)		–			(92	)		–
Forward contracts		(341	)		–			(341	)		–
	For the year ended October 31, 2024
(Millions of Canadian dollars)	Change in fair value<br><br>of hedging<br><br>instrument			Hedge<br><br>ineffectiveness<br><br>recognized in<br><br>income <br>(1)			Changes in the value of<br><br>the hedging instrument<br><br>recognized in OCI			Amount reclassified<br><br>from hedge reserves<br> to income
Fair value hedges
Interest rate risk
Interest rate contracts – fixed rate assets	$	(2,761	)	$	(59	)		n.a.			n.a.
Interest rate contracts – fixed rate liabilities		3,961			(2	)		n.a.			n.a.
Cash flow hedges
Interest rate risk
Interest rate contracts – variable rate assets		4,416			15		$	2,559		$	(3,195	)
Interest rate contracts – variable rate liabilities		(4,325	)		(19	)		(2,600	)		3,872
Foreign exchange risk
Cross currency swap – fixed rate assets		(6	)		–			1			(12	)
Cross currency swap – fixed rate liabilities		107			2			70			122
Net investment hedges
Foreign exchange risk
Foreign currency liabilities		(455	)		–			(455	)		–
Forward contracts		(255	)		–			(254	)		(1	)
(1)	Hedge ineffectiveness recognized in income included losses of $105 million that are excluded from the assessment of hedge effectiveness and are offset by economic hedges (October 31, 2024 – losses of $50 million).
---	---
n.a.	not applicable
---	---

	For the year ended October 31, 2025						For the year ended October 31, 2024
(Millions of Canadian dollars)	Cash flow hedge<br> reserve			Foreign currency<br> translation reserve			Cash flow hedge<br> <br>reserve			Foreign currency<br> <br>translation reserve
Balance at the beginning of the year	$	2,267		$	7,128		$	2,756		$	6,612
Cash flow hedges
Effective portion of changes in fair value:
Interest rate risk		630						(40	)
Foreign exchange risk		196						71
Equity price risk		243						413
Net amount reclassified to profit or loss:
Ongoing hedges:
Interest rate risk		(81	)					134
Foreign exchange risk		(196	)					(110	)
Equity price risk		(245	)					(350	)
De-designated hedges:
Interest rate risk		(403	)					(811	)
Hedges of net investment in foreign operations
Foreign exchange denominated debt					(92	)					(455	)
Forward foreign exchange contracts					(341	)					(254	)
Foreign currency translation differences for foreign operations					826						1,018
Reclassification of losses (gains) on foreign currency translation to income					(25	)					–
Reclassification of losses (gains) on net investment hedging activities to income					–						1
Tax on movements on reserves during the period		(33	)		117			204			206
Balance at the end of the year	$	2,378		$	7,613		$	2,267		$	7,128

Note 10 Premises and equipment
	For the year ended October 31, 2025
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Owned by the Bank<br><br>(1)																		Right-of-use lease assets
(Millions of Canadian dollars)	Land			Buildings			Computer<br> equipment			Furniture,<br> fixtures<br> and other<br> equipment			Leasehold<br> improvements			Work in<br> process			Buildings			Equipment			Total<br><br>(2)
Cost
Balance at beginning of period	$	244		$	1,325		$	1,411		$	900		$	3,169		$	129		$	6,432		$	319		$	13,929
Additions		–			11			45			11			48			641			518			159			1,433
Acquisition through business combination		–			–			–			–			–			–			–			–			–
Transfers from work in process		–			26			317			61			166			(570	)		–			–			–
Disposals		–			(16	)		(290	)		(74	)		(288	)		–			(61	)		(36	)		(765	)
Foreign exchange translation		–			5			7			3			15			1			42			–			73
Other		(90	)		(56	)		2			(38	)		(37	)		–			52			–			(167	)
Balance at end of period	$	154		$	1,295		$	1,492		$	863		$	3,073		$	201		$	6,983		$	442		$	14,503
Accumulated depreciation
Balance at beginning of period	$	–		$	694		$	834		$	554		$	2,072		$	–		$	2,685		$	238		$	7,077
Depreciation		–			53			260			81			231			–			581			80			1,286
Disposals		–			(19	)		(289	)		(68	)		(287	)		–			(19	)		(32	)		(714	)
Foreign exchange translation		–			2			5			2			7			–			14			–			30
Other		–			9			12			(31	)		15			–			–			–			5
Balance at end of period	$	–		$	739		$	822		$	538		$	2,038		$	–		$	3,261		$	286		$	7,684
Net carrying amount at end of period	$	154		$	556		$	670		$	325		$	1,035		$	201		$	3,722		$	156		$	6,819
	For the year ended October 31, 2024
	Owned by the Bank <br>(1)																		Right-of-use lease assets
(Millions of Canadian dollars)	Land			Buildings			Computer<br> equipment			Furniture,<br> fixtures<br> and other<br> equipment			Leasehold<br> improvements			Work in<br> process			Buildings			Equipment			Total<br>(2)
Cost
Balance at beginning of period	$	140		$	1,251		$	1,283		$	835		$	3,007		$	108		$	5,893		$	317		$	12,834
Additions		103			77			21			11			50			522			526			2			1,312
Acquisition through business combination		–			–			–			13			59			–			226			–			298
Transfers from work in process		–			5			240			132			102			(479	)		–			–			–
Disposals		–			(6	)		(140	)		(82	)		(29	)		–			(165	)		–			(422	)
Foreign exchange translation		1			2			10			3			19			–			61			–			96
Other		–			(4	)		(3	)		(12	)		(39	)		(22	)		(109	)		–			(189	)
Balance at end of period	$	244		$	1,325		$	1,411		$	900		$	3,169		$	129		$	6,432		$	319		$	13,929
Accumulated depreciation
Balance at beginning of period	$	–		$	646		$	723		$	550		$	1,863		$	–		$	2,149		$	154		$	6,085
Depreciation		–			59			249			73			279			–			620			84			1,364
Disposals		–			(6	)		(140	)		(82	)		(25	)		–			(54	)		–			(307	)
Foreign exchange translation		–			1			8			2			7			–			21			–			39
Other		–			(6	)		(6	)		11			(52	)		–			(51	)		–			(104	)
Balance at end of period	$	–		$	694		$	834		$	554		$	2,072		$	–		$	2,685		$	238		$	7,077
Net carrying amount at end of period	$	244		$	631		$	577		$	346		$	1,097		$	129		$	3,747		$	81		$	6,852

	For the year ended October 31, 2025
(Millions of<br> Canadian dollars)	Personal<br> Banking –<br> Canada			Caribbean<br> Banking		Commercial<br> Banking			Canadian<br> Wealth<br> Management		Global Asset<br> Management		U.S. Wealth<br> Management<br> (including<br> City National)		International<br> Wealth<br> Management		Investor<br> Services		Insurance		Capital<br> Markets		Total
Balance at beginning of period	$	4,994		$	1,798	$	3,815		$	877	$	2,164	$	3,091	$	1,198	$	29	$	112	$	1,208	$	19,286
Acquisitions		–			–		–			–		–		–		–		–		–		–		–
Currency translations and other		(25	)		21		(25	)		6		79		22		34		–		–		7		119
Balance at end of period	$	4,969		$	1,819	$	3,790		$	883	$	2,243	$	3,113	$	1,232	$	29	$	112	$	1,215	$	19,405
	For the year ended October 31, 2024
(Millions of<br> Canadian dollars)	Personal<br> Banking –<br> Canada			Caribbean<br> Banking		Commercial<br> <br>Banking			Canadian<br> Wealth<br> Management		Global Asset<br> Management		U.S. Wealth<br> Management<br> (including<br> City National)		International<br> Wealth<br> Management		Investor<br> Services		Insurance		Capital<br> Markets		Total
Balance at beginning of period	$	1,851		$	1,791	$	793		$	593	$	2,016	$	3,080	$	1,124	$	29	$	112	$	1,205	$	12,594
Acquisitions		3,159			–		3,022			283		72		–		–		–		–		–		6,536
Currency translations and other		(16	)		7		–			1		76		11		74		–		–		3		156
Balance at end of period	$	4,994		$	1,798	$	3,815		$	877	$	2,164	$	3,091	$	1,198	$	29	$	112	$	1,208	$	19,286

	As at
	August 1, 2025				August 1, 2024
	Discount<br> rate<br><br>(1)		Terminal<br> growth<br> rate		Discount<br> rate <br>(1)		Terminal<br> growth<br> rate
Group of cash generating units
Personal Banking – Canada		10.8%		3.0%		11.7%		3.0%
Caribbean Banking		12.9		3.5		13.7		3.5
Commercial Banking		11.5		3.0		11.7		3.0
Canadian Wealth Management		11.8		3.0		12.5		3.0
Global Asset Management		11.8		3.0		12.4		3.0
U.S. Wealth Management (including City National)		12.4		3.0		12.6		3.0
International Wealth Management		12.1		3.0		12.3		3.0
Investor Services		11.9		3.0		12.5		3.0
Insurance		11.5		3.0		12.5		3.0
Capital Markets		13.0		3.0		12.7		3.0
(1)	Pre-tax discount rates are determined implicitly based on post-tax discount rates.
---	---

	For the year ended October 31, 2025
(Millions of Canadian dollars)	Internally<br> generated<br> software			Other<br> software			Core<br> <br>deposit<br> <br>intangibles			Customer<br> list and<br> relationships<br><br><br><br>(1)			In process<br> software			Total
Gross carrying amount
Balance at beginning of period	$	5,574		$	1,074		$	3,637		$	2,941		$	1,357		$	14,583
Additions		175			12			–			–			1,165			1,352
Acquisition through business combination		–			–			–			–			–			–
Transfers		844			83			–			–			(927	)		–
Dispositions		(585	)		(43	)		–			–			(2	)		(630	)
Impairment losses		(37	)		(1	)		–			–			(10	)		(48	)
Currency translations		19			11			11			52			8			101
Other changes		111			(42	)		–			(13	)		(89	)		(33	)
Balance at end of period	$	6,101		$	1,094		$	3,648		$	2,980		$	1,502		$	15,325
Accumulated amortization
Balance at beginning of period	$	(3,387	)	$	(729	)	$	(1,663	)	$	(1,006	)	$	–		$	(6,785	)
Amortization charge for the year		(1,068	)		(79	)		(448	)		(164	)		–			(1,759	)
Dispositions		591			42			–			–			–			633
Impairment losses		13			1			–			–			–			14
Currency translations		(13	)		(8	)		(10	)		(11	)		–			(42	)
Other changes		23			(28	)		–			21			–			16
Balance at end of period	$	(3,841	)	$	(801	)	$	(2,121	)	$	(1,160	)	$	–		$	(7,923	)
Net balance at end of period	$	2,260		$	293		$	1,527		$	1,820		$	1,502		$	7,402
	For the year ended October<br>31<br>, 2024
(Millions of Canadian dollars)	Internally<br> generated<br> software			Other<br> software			Core<br> <br>deposit<br> <br>intangibles			Customer<br> list and<br> relationships <br>(1)			In process<br> software			Total
Gross carrying amount
Balance at beginning of period	$	5,595		$	1,097		$	1,658		$	2,456		$	1,527		$	12,333
Additions		31			4			–			9			1,090			1,134
Acquisition through business combination		–			–			1,972			370			–			2,342
Transfers		1,204			42			–			–			(1,246	)		–
Dispositions		(1,204	)		(67	)		–			(9	)		(1	)		(1,281	)
Impairment losses		(37	)		(18	)		–			–			(30	)		(85	)
Currency translations		32			17			7			115			3			174
Other changes		(47	)		(1	)		–			–			14			(34	)
Balance at end of period	$	5,574		$	1,074		$	3,637		$	2,941		$	1,357		$	14,583
Accumulated amortization
Balance at beginning of period	$	(3,596	)	$	(658	)	$	(1,330	)	$	(846	)	$	–		$	(6,430	)
Amortization charge for the year		(986	)		(102	)		(325	)		(136	)		–			(1,549	)
Dispositions		1,204			66			–			7			–			1,277
Impairment losses		12			5			–			–			–			17
Currency translations		(21	)		(7	)		(8	)		(31	)		–			(67	)
Other changes		–			(33	)		–			–			–			(33	)
Balance at end of period	$	(3,387	)	$	(729	)	$	(1,663	)	$	(1,006	)	$	–		$	(6,785	)
Net balance at end of period	$	2,187		$	345		$	1,974		$	1,935		$	1,357		$	7,798
(1)	Includes $259 million (October 31, 2024 – $259 million) of mutual fund management contracts with indefinite useful lives in the Global Asset Management CGU acquired in the HSBC Canada transaction.
---	---

•	Mortality, longevity and morbidity<br> – Mortality estimates for life insurance contracts are based on standard industry insured mortality tables, adjusted where appropriate to reflect our own experience. Longevity estimates for annuity insurance contracts are developed based on industry longevity experience for pensioners, adjusted where appropriate to reflect our own experience. Morbidity assumptions are made with respect to the rates of claim incidence and claim termination for health insurance contracts and are based on a combination of industry and our own experience.
•	Policyholder behaviour<br> – Under certain policies, the policyholder has a contractual right to change benefits and premiums, as well as convert policies to permanent forms of insurance. All policyholders have the right to terminate their policies through lapse. Lapses represent the termination of policies due to non-payment of premiums. Lapse assumptions are primarily based on our recent experience adjusted for emerging industry experience where applicable.
---	---
•	Expense<br> – Directly attributable future expense and directly attributable acquisition expense assumptions are derived from internal cost studies and established allocation methodologies, with inflation as a financial assumption reflected in the estimate of future expenses.
---	---

	For the year ended
	Pension plans						Other post-employment<br><br>benefit plans
(Millions of Canadian dollars)	October 31<br><br>2025			October 31<br><br>2024			October 31<br><br>2025		October 31<br><br>2024
Current service costs	$	210		$	188		$	34	$	34
Past service costs		49			–			–		(6	)
Net interest expense (income)		(164	)		(150	)		76		81
Remeasurements of other long-term benefits		–			–			10		3
Administrative expense		22			18			–		–
Defined benefit pension expense	$	117		$	56		$	120	$	112
Defined contribution pension expense		562			426			–		–
	$	679		$	482		$	120	$	112

	For the year ended
	Defined benefit pension<br> plans						Other post-employment<br> benefit plans
(Millions of Canadian dollars)	October 31<br> <br>2025			October 31<br> <br>2024			October 31<br> <br>2025			October 31<br> <br>2024
Actuarial (gains) losses:
Changes in demographic assumptions	$	7		$	(167	)	$	14		$	(50	)
Changes in financial assumptions		142			1,337			6			122
Experience adjustments		28			2			(2	)		5
Return on plan assets (excluding interest based on discount rate)		(631	)		(1,991	)		–			–
Change in asset ceiling (excluding interest income)		(17	)		(4	)		–			–
	$	(471	)	$	(823	)	$	18		$	77

•	the nature of the underlying benefit obligations, including the duration and term profile of the liabilities;
•	the member demographics, including expectations for normal retirements, terminations, and deaths;
---	---
•	the financial position of the pension plans;
---	---
•	the diversification benefits obtained by the inclusion of multiple asset classes; and
---	---
•	expected asset returns, including asset and liability correlations, along with liquidity requirements of the plan.
---	---

(Millions of Canadian dollars, except participants and years)	As at October 31, 2025
	Canada		International		Total
Number of plan participants		68,421		5,851		74,272
Actual benefit payments 2025	$	680	$	36	$	716
Benefits expected to be paid 2026		740		37		777
Benefits expected to be paid 2027		767		36		803
Benefits expected to be paid 2028		789		35		824
Benefits expected to be paid 2029		807		37		844
Benefits expected to be paid 2030		827		39		866
Benefits expected to be paid 2031-2035		4,348		200		4,548
Weighted average duration of defined benefit payments		13.0 years		13.2 years		13.0 years

	As at
	October 31, 2025								October 31, 2024
	Life expectancy at 65 for a member currently at								Life expectancy at 65 for a member currently at
	Age 65				Age 45				Age 65				Age 45
(In years)	Male		Female		Male		Female		Male		Female		Male		Female
Country
Canada		23.3		24.4		24.3		25.4		23.2		24.4		24.2		25.3
United Kingdom		22.3		24.5		23.6		25.8		22.1		24.4		23.4		25.7

	Increase (decrease)<br> in obligation
(Millions of Canadian dollars)	Defined benefit<br> pension plans			Other post-<br> employment<br> benefit plans
Discount rate
Impact of 100 bps increase in discount rate	$	(1,597	)	$	(182	)
Impact of 100 bps decrease in discount rate		1,967			224
Rate of increase in future compensation
Impact of 50 bps increase in rate of increase in future compensation		24			–
Impact of 50 bps decrease in rate of increase in future compensation		(25	)		–
Mortality rate
Impact of an increase in longevity by <br>one additional year		380			23
Healthcare cost trend rate
Impact of 100 bps increase in healthcare cost trend rate		n.a.			51
Impact of 100 bps decrease in healthcare cost trend rate		n.a.			(43	)
n.a.	not applicable
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(Millions of Canadian dollars, except percentage and foreign currency)				Denominated in<br> <br>foreign currency<br> (millions)		As at
Maturity	Earliest par value<br> redemption date				October 31<br> <br>2025			October 31<br> <br>2024
January 27, 2026 <br>(1)		4.65%		US$	1,500	$	2,091		$	2,026
December 23, 2029 <br>(1)<br>, <br>(2)	December 23, 2024	2.88%					–			1,495
June 30, 2030 <br>(1), (3)	June 30, 2025	2.088%					–			1,219
November 3, 2031 <br>(1<br><br>)	November 3, 2026	2.14%	(4)				1,628			1,708
May 3, 2032 <br>(1)	May 3, 2027	2.94%	(5)				984			955
January 28, 2033 <br>(1)	January 28, 2028	1.67%	(6)				967			935
February 1, 2033 <br>(1)	February 1, 2028	5.01%	(7)				1,520			1,461
April 3, 2034 <br>(1)	April 3, 2029	5.096%	(8)				2,038			2,020
August 8, 2034 <br>(1)	August 8, 2029	4.829%	(9)				1,273			1,263
February 4, 2035 <br>(1)	February 4, 2030	4.279%	(10)				1,512			–
July 3, 2035 <br>(1)	July 3, 2030	4.214%	(11)				1,250			–
July 17, 2035 <br>(1)	July 17, 2030	1.963%	(12)	¥	26,000		232			–
October 1, 2083	Any interest payment date		(13)				224			224
November 1, 2083	Any interest payment date		(14)				9			9
June 29, 2085	Any interest payment date		(15)	US$	174		243			241
						$	13,971		$	13,556
Deferred financing costs							(10	)		(10	)
						$	13,961		$	13,546
(1)	The notes include <br>non-viability<br> contingent capital (NVCC) provisions, necessary for the notes to qualify as Tier 2 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank <br>non-viable<br> or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is convertible into common shares pursuant to an automatic conversion formula with a multiplier of 1.5 and a conversion price based on the greater of: (i) a floor price of $5.00 (subject to adjustment in certain circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of shares issued is determined by multiplying the par value of the note (including accrued and unpaid interest on such note) by the multiplier and then dividing the total by the conversion price.
---	---
(2)	On December 23, 2024, we redeemed all $1,500 million of our outstanding 2.88% subordinated debentures due December 23, 2029 for 100% of their principal amount plus interest accrued to, but excluding, the redemption date.
---	---
(3)	On June 30, 2025, we redeemed all $1,250 million of our outstanding 2.088% subordinated debentures due June 30, 2030 for 100% of their principal amount plus interest accrued to, but excluding, the redemption date.
---	---
(4)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.93% above the Daily Compounded CORRA.
---	---
(5)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.08% above the Daily Compounded CORRA.
---	---
(6)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 0.87% above the Daily Compounded CORRA.
---	---
(7)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 2.12% above the Daily Compounded CORRA.
---	---
(8)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.56% above the Daily Compounded CORRA.
---	---
(9)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.55% above the Daily Compounded CORRA.
---	---
(10)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.45% above the Daily Compounded CORRA.
---	---
(11)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.51% above the Daily Compounded CORRA.
---	---
(12)	Interest at stated interest rate until earliest par value redemption date, and thereafter at a rate of 1.02% above the 5-Year Tokyo Overnight Average Rate mid-swap rate.
---	---
(13)	Interest at a rate of 0.50% plus the average of <br>mid-market<br> quotations for Government of Canada Treasury Bills maturing in or about 30 days from the date of quotation.
---	---
(14)	Interest at a rate of 0.75% plus the average of <br>mid-market<br> quotations for Government of Canada Treasury Bills maturing in or about 30 days from the date of quotation.
---	---
(15)	Interest at a rate of 0.44911% plus compounded SOFR. In the event of a reduction of the annual dividend we declare on our common shares, the interest payable on the debentures is reduced pro rata to the dividend reduction and the interest reduction is payable with the proceeds from the sale of newly issued common shares.
---	---

	As at
(Millions of Canadian dollars)	October 31<br><br>2025
Within 1 year	$	2,091
1 to 5 years		–
5 to 10 years		11,404
Thereafter		476
	$	13,971
Note 19 Equity
---

	As at and for the year ended
	October 31, 2025								October 31, 2024
(Millions of Canadian dollars, except the number<br> of shares and as otherwise noted)	Number of<br> shares<br> (thousands)			Amount			Dividends<br> declared<br> per share		Number of<br> shares<br> (thousands)			Amount			Dividends<br> declared<br> per share
Common shares issued
Balance at beginning of period		1,415,080		$	21,013					1,402,373		$	19,398
Issued in connection with share-based compensation plans <br>(1)		796			77					1,746			168
Issued in connection with dividend reinvestment plan		–			–					11,850			1,460
Purchased for cancellation <br>(2)		(15,241	)		(227	)				(889	)		(13	)
Balance at end of period		1,400,635		$	20,863		$	6.04		1,415,080		$	21,013		$	5.60
Treasury – common shares
Balance at beginning of period <br>(3)		(576	)	$	(61	)				(1,862	)	$	(231	)
Purchases		(41,204	)		(5,811	)				(43,995	)		(5,302	)
Sales		41,259			5,762					45,281			5,472
Balance at end of period <br>(3)		(521	)	$	(110	)				(576	)	$	(61	)
Common shares outstanding		1,400,114		$	20,753					1,414,504		$	20,952
Preferred shares and other equity instruments issued
First preferred<br><br>(4)
Non-cumulative,<br> fixed rate
Series BH		6,000		$	150		$	1.23		6,000		$	150		$	1.23
Series BI		6,000			150			1.23		6,000			150			1.23
Non-cumulative,<br> <br>5-Year<br> Rate Reset
Series BD <br>(5)		–			–			0.80		24,000			600			0.80
Series BF <br>(6)		12,000			300			0.75		12,000			300			0.75
Series BO		14,000			350			1.47		14,000			350			1.40
Series BT <br>(7)		750			750			4.20%		750			750			4.20%
Series BU <br>(7)		750			750			7.408%		750			750			7.408%
Series BW <br>(7)		600			600			6.698%		600			600			6.698%
Other equity instruments
Limited recourse capital notes (LRCNs)
Series 1 <br>(8)		–			–			4.50%		1,750			1,750			4.50%
Series 2 <br>(9), (10)		1,250			1,250			4.00%		1,250			1,250			4.00%
Series 3 <br>(9), (10)		1,000			1,000			3.65%		1,000			1,000			3.65%
Series 4 <br>(9), (10)		1,000			1,370			7.50%		1,000			1,370			7.50%
Series 5 <br>(9), (10)		1,000			1,396			6.35%		–			–			–
Series 6 <br>(9), (10)		1,250			1,708			6.75%		–			–			–
Series 7 <br>(9), (10)		1,350			1,869			6.50%		–			–			–
		46,950		$	11,643					69,100		$	9,020
Treasury – preferred shares and other equity instruments
Balance at beginning of period <br>(3)		13		$	11					(9	)	$	(9	)
Purchases		(4,431	)		(4,916	)				(1,921	)		(1,225	)
Sales		4,453			4,937					1,943			1,245
Balance at end of period <br>(3)		35		$	32					13		$	11
Preferred shares and other equity instruments outstanding		46,985		$	11,675					69,113		$	9,031
(1)	Includes fair value adjustments to stock options of $5 million (October 31, 2024 – $10 million).
---	---
(2)	Our previous NCIB to purchase up to 30 million of our common shares ended June 11, 2025. On June 10, 2025, we announced a new NCIB to purchase up to 35 million of our common shares, commencing on June 12, 2025, and continuing until June 11, 2026, or such earlier date as we complete the repurchase of all shares permitted under the bid. During the year ended October 31, 2025, under the NCIB programs we purchased for cancellation common shares at a total fair value of $2,768 million (average cost of $181.59 per share), with a book value of $227 million (book value of $14.88 per share). During the year ended October 31, 2024, under the previous NCIB we purchased for cancellation common shares at a total fair value of $140 million (average cost of $157.74 per share), with a book value of $13 million (book value of $14.83 per share).
---	---
(3)	Positive amounts represent a short position and negative amounts represent a long position.
---	---
(4)	First Preferred Shares were issued at $25 per share with the exception of <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BT (Series BT), <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BU (Series BU) and <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BW (Series BW) which were issued at $1,000 per share.
---	---
(5)	On May 24, 2025, we redeemed all 24 million of our issued and outstanding <br>Non-Cumulative<br> <br>5-Year<br> Rate Reset First Preferred Shares Series BD at a redemption price of $25.00 per share.
---	---
(6)	On November 24, 2025, we redeemed all 12 million of our issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BF at a redemption price of $25.00 per share<br>.
---	---
(7)	The dividends declared per share represent the per annum dividend rate applicable to the shares issued as at the reporting date.
---	---
(8)	On October 24, 2025, we redeemed all 1.75 million of our issued and outstanding Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BQ at a redemption price of $1,000 per share. As a result of the redemption of the Series BQ Shares, we automatically redeemed all $1.75 billion outstanding Series 1 LRCN on the same date for 100% of their principal amount plus accrued interest to, but excluding, the redemption date.
---	---
(9)	LRCN Series 2 and 3 were issued at a $1,000 per note. LRCN Series 4, 5, 6 and 7 were issued at US$1,000 per note. The number of shares represent the number of notes issued and the dividends declared per share represent the annual interest rate percentage applicable to the notes issued as at the reporting date.
---	---
(10)	In connection with the issuance of LRCN Series 2, we issued $1,250 million of <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BR (Series BR); in connection with the issuance of LRCN Series 3, we issued $1,000 million of <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BS (Series BS); in connection with the issuance of LRCN Series 4, we issued US$1,000 million of <br>Non-Cumulative<br> <br>5-Year<br> Fixed Rate Reset First Preferred Shares Series BV (Series BV); in connection with the issuance of LRCN Series 5, we issued US$1,000 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BX (Series BX); in connection with the issuance of LRCN Series 6, we issued US$1,250 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BY (Series BY); in connection with the issuance of LRCN Series 7, we issued US$1,350 million of Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares Series BZ (Series BZ). The Series BR and BS preferred shares were issued at a price of $1,000 per share and the Series BV, BX, BY and BZ preferred shares were issued at a price of US$1,000 per share. These preferred shares were issued to a consolidated trust to be held as trust assets in connection with each respective LRCN Series.
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As at October 31, 2025	Current<br> annual yield			Current<br> dividend<br> per share<br>(1)				Redemption<br> price<br>(2), (3)
Preferred shares
First preferred
Non-cumulative,<br> fixed rate
Series BH <br>(4)		4.90%		$	0.30625	November 24, 2020	June 5, 2015	$	25.00
Series BI <br>(4)		4.90%			0.30625	November 24, 2020	July 22, 2015		25.00
Non-cumulative,<br> <br>5-Year<br> Rate Reset <br>(5)
Series BF <br>(4)		3.00%	2.62%		0.1875	November 24, 2020	March 13, 2015		25.00
Series BO <br>(4)		5.885%	2.38%		0.3678125	February 24, 2024	November 2, 2018		25.00
Series BT <br>(4)		4.20%	2.71%		21.00	January 24, 2027	November 5, 2021		1,000.00
Series BU <br>(4)		7.408%	3.90%		37.04	January 25, 2029	January 25, 2024		1,000.00
Series BW <br>(4)		6.698%	3.40%		33.49	October 24, 2029	July 24, 2024		1,000.00
Other equity instruments
Limited recourse capital<br> notes<br> <br>(6)
Series 2 <br>(7)		4.00%	3.617%		n.a.	January 24, 2026	November 2, 2020		1,000.00
Series 3 <br>(8)		3.65%	2.665%		n.a.	October 24, 2026	June 8, 2021		1,000.00
Series 4 <br>(9)		7.50%	2.887%		n.a.	May 2, 2029	April 24, 2024	US$	1,000.00
Series 5 <br>(10)		6.35%	2.257%		n.a.	November 24, 2034	November 1, 2024	US$	1,000.00
Series 6 <br>(11)		6.75%	2.815%		n.a.	August 24, 2030	June 11, 2025	US$	1,000.00
Series 7 <br>(12)		6.50%	2.462%		n.a.	November 24, 2035	September 23, 2025	US$	1,000.00
(1)	With the exception of Series BT, BU and BW, <br>non-cumulative<br> preferential dividends of each Series are payable quarterly, as and when declared by the Board of Directors, on or about the 24th day of February, May, August and November. In the case of Series BT, BU and BW, <br>non-cumulative<br> preferential dividends are payable semi-annually, as and when declared by the Board of Directors.
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(2)	Subject to the consent of OSFI and the requirements of the <br>Bank Act<br>(Canada), we may, on or after the dates specified above, redeem First Preferred Shares. In the case of Series BF and BO, these may be redeemed for cash at a price per share of $25 if redeemed on the earliest redemption date and on the same date every fifth year thereafter. In the case of Series BH and BI, these may be redeemed for cash at a price per share of $26 if redeemed during the 12 months commencing on the earliest redemption date and decreasing by $0.25 each <br>12-month<br> period thereafter to a price per share of $25 if redeemed four years from the earliest redemption date or thereafter. In the case of Series BT and BW, these may be redeemed for cash at a price of $1,000 if redeemed during the earliest redemption period of January 24, 2027 to February 24, 2027 and October 24, 2029 to November 24, 2029, respectively, and during the same redemption period every fifth year thereafter. In the case of Series BU, these may be redeemed for cash at a price of $1,000 if redeemed during the earliest redemption period from January 25, 2029 to February 24, 2029 and during the period from January 24 to and including February 24 every fifth year thereafter.
---	---
(3)	Subject to the consent of OSFI and the requirements of the <br>Bank Act<br> (Canada), we may purchase the First Preferred Shares of each Series for cancellation at the lowest price or prices at which, in the opinion of the Board of Directors, such shares are obtainable.
---	---
(4)	The preferred shares include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank <br>non-viable<br> or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each preferred share is convertible into common shares pursuant to an automatic conversion formula with a multiplier of 1 and with a conversion price based on the greater of: (i) a floor price of $5 (subject to adjustment in certain circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of shares issued is determined by dividing the preferred share value by the conversion price.
---	---
(5)	The dividend rate will reset on the earliest redemption date or on the last day of the redemption period, as applicable, and every fifth year thereafter at a rate equal to the <br>5-Year<br> Government of Canada bond yield plus the premium indicated. The holders of Series BF and BO shares have the option to convert their shares into <br>non-cumulative<br> floating rate First Preferred Shares subject to certain conditions on the earliest redemption date and every fifth year thereafter at a rate equal to the three-month Government of Canada Treasury Bill rate plus the premium indicated.
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(6)	The current annual yield on each LRCN Series represents the annual interest rate applicable to the notes issued as at the reporting date. The payments of interest and principal in cash on the LRCN Series are made at our discretion, and <br>non-payment<br> of interest and principal in cash does not constitute an event of default. In the event of <br>(i) non-payment<br> of interest on any interest payment date, <br>(ii) non-payment<br> of the redemption price in case of a redemption of a LRCN Series, <br>(iii) non-payment<br> of principal at the maturity of a LRCN Series, or (iv) an event of default on a LRCN Series, holders of such LRCN Series will have recourse only to the assets (Trust Assets) held by a third-party trustee in a consolidated trust in respect of such LRCN Series and each such noteholder will be entitled to receive its pro rata share of the Trust Assets. In such an event, the delivery of the Trust Assets for each LRCN Series will represent the full and complete extinguishment of our obligations under the related LRCN Series. The LRCNs include NVCC provisions, necessary for the shares to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of the instrument into a variable number of common shares in the event that OSFI deems the Bank <br>non-viable<br> or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection. In such an event, each note is automatically redeemed and the redemption price will be satisfied by the delivery of Trust Assets, which will consist of common shares pursuant to an automatic conversion of the series of preferred shares that were issued concurrently with the related LRCN Series. Each series of preferred shares include an automatic conversion formula with a conversion price based on the greater of: (i) a floor price of $<br>5<br> (subject to adjustment in certain circumstances), and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the Toronto Stock Exchange. The number of common shares issued in respect of each series of preferred shares will be determined by dividing the preferred share value ($1,000 plus declared and unpaid dividends) by the conversion price. The number of common shares delivered to each noteholder will be based on such noteholder’s pro rata interest in the Trust Assets. Subject to the consent of OSFI, we may purchase LRCNs for cancellation at such price or prices and upon such terms and conditions as we in our absolute discretion may determine, subject to any applicable law restricting the purchase of notes.
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(7)	LRCN Series 2 bear interest at a fixed rate of 4.0% per annum until February 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the <br>5-Year<br> Government of Canada Yield plus 3.617% until maturity on February 24, 2081. The interest is paid semi-annually on or about the 24th day of February and August. LRCN Series 2 is redeemable during the period from January 24 to and including February 24, commencing in 2026 and every fifth year thereafter to the extent we redeem Series BR pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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(8)	LRCN Series 3 bear interest at a fixed rate of 3.65% per annum until November 24, 2026, and thereafter at a rate per annum, reset every fifth year, equal to the <br>5-Year<br> Government of Canada Yield plus 2.665% until maturity on November 24, 2081. The interest is paid semi-annually on or about the 24th day of May and November. LRCN Series 3 is redeemable during the period from October 24 to and including November 24, commencing in 2026 and every fifth year thereafter to the extent we redeem Series BS pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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(9)	LRCN Series 4 bear interest at a fixed rate of 7.5% per annum until May 2, 2029, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S. Treasury Rate plus 2.887% until maturity on May 2, 2084. The interest is paid quarterly on or about the 2nd day of February, May, August and November. LRCN Series 4 is redeemable on May 2, 2029 and on each 2nd day of February, May, August and November thereafter to the extent we redeem Series BV pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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(10)	LRCN Series 5 bear interest at a fixed rate of 6.35% per annum until November 24, 2034, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S. Treasury Rate plus 2.257% until maturity on November 24, 2084. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN Series 5 is redeemable on November 24, 2034 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BX pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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(11)	LRCN Series 6 bear interest at a fixed rate of 6.75% per annum until August 24, 2030, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S. Treasury Rate plus 2.815% until maturity on August 24, 2085. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN Series 6 is redeemable on August 24, 2030 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BY pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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(12)	LRCN Series 7 bear interest at a fixed rate of 6.50% per annum until November 24, 2035, and thereafter at a rate per annum, reset every fifth year, equal to the 5-Year U.S. Treasury Rate plus 2.462% until maturity on November 24, 2085. The interest is paid quarterly on or about the 24th day of February, May, August and November. LRCN Series 7 is redeemable on November 24, 2035 and on each 24th day of February, May, August and November thereafter to the extent we redeem Series BZ pursuant to their terms and subject to the consent of OSFI and requirements of the <br>Bank Act<br> (Canada).
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n.a.	not applicable
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	For the year ended
	October 31, 2025					October 31, 2024
(Canadian dollars per share except option amounts)	Number of<br> options<br> (thousands)			Weighted<br> average<br> exercise price<br> <br>(1)		Number of<br> options<br> (thousands)			Weighted<br> average<br> exercise price <br>(1)
Outstanding at beginning of period		7,375		$	113.00		7,767		$	106.01
Granted		916			177.97		1,666			125.37
Exercised <br>(2), (3)		(796	)		90.31		(1,720	)		91.03
Forfeited		(5	)		114.04		(338	)		124.64
Outstanding at end of period		7,490		$	123.37		7,375		$	113.00
Exercisable at end of period		3,522		$	105.02		3,212		$	97.02
(1)	The weighted average exercise prices reflect the conversion of foreign currency-denominated options at the exchange rates as of October 31, 2025 and October 31, 2024. For foreign currency-denominated options exercised during the year, the weighted average exercise prices are translated using exchange rates as at the settlement date.
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(2)	Cash received for options exercised during the year was $72 million (October 31, 2024 – $157 million) and the weighted average share price at the date of exercise was $179.45 (October 31, 2024 – $144.69).
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(3)	New shares were issued for all stock options exercised in 2025 and 2024.
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						Options exercisable
(Canadian dollars per share except option amounts and years)		Weighted<br> average<br> exercise price<br><br>(1)		Weighted<br> average<br> remaining<br> contractual<br> life (years)		Number<br> exercisable<br> (thousands)		Weighted<br> average<br> exercise price<br><br>(1)
74.39 – 96.55	1,031	$	93.27		2.04		1,031	$	93.27
102.33 – 104.70	1,067		103.95		3.46		1,067		103.95
106.00 – 106.00	930		106.00		5.12		930		106.00
125.37 – 129.99	2,579		127.21		7.32		494		129.99
131.64 – 177.97	1,883		154.17		8.10		–		–
	7,490	$	123.37		5.97		3,522	$	105.02

	For the year ended
(Canadian dollars per share except percentages and years)	October 31<br> <br>2025		October 31<br> <br>2024
Share price at grant date	$	177.97	$	128.62
Risk-free interest rate		3.00%		3.29%
Expected dividend yield		3.85%		4.20%
Expected share price volatility		17%		16%
Expected life of option		6 Years		6 Years

	For the year ended
	October 31, 2025				October 31, 2024
(Units and per unit amounts)	Units<br> granted<br> (thousands)		Weighted<br> average<br> fair value<br> per unit		Units<br> granted<br> (thousands)		Weighted<br> average<br> fair value<br> per unit
Deferred share unit plans		438	$	176.00		550	$	134.64
Capital Markets compensation plan unit awards		3,147		203.17		3,053		167.79
Performance deferred share award plans		2,202		178.57		2,848		123.83
Deferred compensation plans		85		172.35		86		132.99
Other share-based plans		886		177.42		1,108		129.38
		6,758	$	189.63		7,645	$	143.07

	As at
	October 31, 2025				October 31, 2024
(Millions of Canadian dollars except units)	Units<br> (thousands)		Carrying<br> amount		Units<br> (thousands)		Carrying<br> amount
Deferred share unit plans		6,324	$	1,299		6,243	$	1,051
Capital Markets compensation plan unit awards		8,762		1,788		9,593		1,603
Performance deferred share award plans		6,170		1,267		6,068		1,022
Deferred compensation plans <br>(1)		1,972		405		2,109		355
Other share-based plans		2,258		434		2,394		363
		25,486	$	5,193		26,407	$	4,394
(1)	Excludes obligations not determined based on the quoted market price of our common shares.
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