Marcia Moffat - Head of IR Gordon M. Nixon - President and CEO Morten Friis - Chief Risk Officer Janice Fukakusa - CFO W. James Westlake - Group Head, Canadian Banking Charles M. Winograd - Group Head, Capital Markets Peter Armenio - Group Head, U.S. and International Banking

Jim Bantis - Credit Suisse André-Philippe Hardy - RBC Capital Markets Sumit Malhotra - Merrill Lynch Mario Mendonca - Genuity Capital Markets Darko Mihelic - CIBC World Markets Michael Goldberg - Desjardins Securities

Good afternoon ladies and gentlemen. Welcome to the RBC 2007 Third Quarter Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Ms. Marcia Moffat, Head of Investor Relations. Please go ahead, Ms. Moffat.

Thank you very much operator. Good afternoon everyone and thanks for joining us. Presenting to you today are Gord Nixon, our CEO; Morten Friis, our Chief Risk Officer and Janice Fukakusa, our Chief Financial Officer. Following our formal comments, we will open up the call for questions from analysts. We ask that you please ask one or two questions and then requeue so that everyone has an opportunity to participate. In addition, I would like to thank our shareholders who emailed questions to us. Our management team will be addressing your questions in their remarks. The call will be 1 hour long and we will be posting our formal comments on our website shortly after the call. Joining us for your questions are Peter Armenio, Head of our U. S. and International Banking segment; George Lewis, Head of our Wealth Management segment; Marty Lippert, Head of Global Technology and Operations; Barb Stymiest, our Chief Operating Officer; Jim Westlake, Head of our Canadian Banking segment and Chuck Winograd, CEO of our Capital Markets segment. Please note that our comments may contain forward-looking statements which involve applying material factors and assumptions and which have inherent risks and uncertainties. Slide 2 of today's presentation contains our caution regarding forward-looking statements which describes factors that could cause results to differ materially from what is expressed in these statements. I'll now turn the call over to Gord Nixon.

Thank you, Marcia, and good afternoon everybody. Before I turn to RBC's performance, I would like to make some opening comments on the Canadian economy and then address what is happening in the financial market. As you know, we have experienced strong economic growth in Canada in recent years. This growth has been largely driven by an extended period of low and stable rates, strong consumer spending, low unemployment and a robust business environment. Today, the fundamentals of our economy continue to remain solid as unemployment is at historically low levels and retail sales remain strong. Overall, the Canadian economy is expected to grow at 2.6% in '07 and our outlook remains positive. As we examine what is happening in today's financial markets, I do believe it is important not to lose sight of those fundamentals. Global financial markets, as you well know, have been reacting to issues in the U. S. subprime market for some time now. Until recently, they have been largely contained; however, late in the third quarter, these concerns escalated and spilled over into other markets including high quality debt markets that are not directly related to the U. S. subprime market. The result has been increased volatility, wider credit spread and a lack of liquidity in certain assets. We have enjoyed robust capital market conditions for an extended period of time and now credit markets are experiencing a correction. During a sustained period of low rates, access to capital has been relatively easy, which created a surplus of liquidity in the market. The excess liquidity led to some disconnect between debt prices and the associated risk. Investors are now reevaluating their portfolios, and as some reduce or eliminate certain positions, it is causing general flight to quality. Those who hold higher risk, more complex investment…

Thanks Gord. I will begin by reviewing U. S. subprime, leverage buy out, hedge funds and the asset-backed commercial paper market, all the areas that Gord highlighted at the outset. I'll then discuss RBC's trading performance and review our credit portfolio and overall credit quality. Starting with slide 10, we don't originate subprime loans and have minimal exposure to U. S. subprime residential mortgage-backed securities and collateralized debt obligations. At July 31, 2007, our net exposure to these securities was $1.1 billion, which represents less than 0.2% of our total assets. Less than 10% of this exposure relates to RBC Centura and is associated with its investment portfolio. Our investment grade was 59%, rated AAA. We don't hold any subprime residential mortgage-backed securities that have been downgraded or are on negative launch. Also, our exposure to CDO squared is nominal and most is hedged. Looking at leveraged buy out underwriting commitments, it's important to differentiate between recent deals that are properly priced and structured for today's market and pre-corrections deals that were structured and priced before the credit environment change. We are less than $2 billion in LBO underwriting commitments and of this, approximately $1.3 billion are pre-correction underwritings. This represents approximately 0.2% of our total asset. No single commitment exceeds $250 million and we have no covenant-lite deals. We have placed paper on all of these through the last three weeks, demonstrating continued market acceptance of all these transactions. We are confident that in aggregate, we will be able to place these at a profit. With respect to hedge funds, our exposure is modest, collateralized, they are not concentrated in specific funds or strategies. We conduct regular extensive due diligence on our hedge fund counterparties and have prudent limits in our exposure to individual names and the sector as…

Thanks Morten. As Gord said, we had a good quarter with earnings up 19% from the same period last year as shown on slide 15. These results were largely driven by solid performance across our Capital Markets, Wealth Management and Canadian Banking segments supported by generally favorable market conditions and a lower effective tax rate. Revenue was 5% higher this quarter or 9% higher once you exclude the impact of the new financial instruments accounting standard. Turning to slide 16, net interest income increased in our Canadian and U. S. Banking businesses, largely driven by higher volumes in loans and deposits. Slide 17 shows that strong Wealth Management-related activities drove non-interest income higher, though this was partially offset by lower fixed income trading revenues. On slide 18, you will see that non-interest expense rose 11% from a year ago. This was primarily due to investments we made to support our increased business levels and growth initiatives including our recent acquisitions. Slides 19 and 20 clearly illustrate the strength of our balance sheet and our exceptional year-over-year growth in client assets under management and assets under administration. Turning to slide 21, as Gord mentioned earlier, our Tier 1 capital ratio this quarter was 9.3%, which is comfortably above our 8% objective and well above the 7% regulatory target. I would like to add that our access to liquidity has not been significantly impacted by the current market conditions and we continue to have access to both short and long-term funding. While spreads have widened for all issuers, increasing our cost of funding, this also allows us to earn higher spreads in other parts of our business. Our name continues to be well received in the market and we remain among the lowest cost issuers. I'll now review the quarterly financial performance…

Thank you. We will now take questions from the telephone lines. [Operator Instructions]. The first question is from Jim Bantis of Credit Suisse. Please go ahead.

Hi, good afternoon. Just got a couple of questions. One focused on the retail bank, and I guess for Jim Westlake. Jim, can you kind of give us some color or guidance in terms of whether the interest margin compression in terms of the factors that were described in the pick up in operating expenses are a one-time hiccup this quarter or a trend that we should be considering for the next few quarters going forward?

Sure. Thanks Jim. Maybe if I could just... I think Janice went through some of the numbers. I think what I really like this quarter is what I am going to call market momentum. We have been building that all year, and that's what we have been investing in, and a lot of the product mix changes reflects some great volume growth in balances. Home equity was up over 14%, our total deposits up over 5%, our savings growth was over 9%. So, we did that with very solid pricing. So very pleased with that and the momentum that we've had all year and going forward. The NIM really is a reflection of the two factors. One, we had quite product a mix exchange based on all of the different products we have been introducing to the market and the growth on the home equity side. And there was a... we didn't mention it much, but a pretty steep rise in the interest rate curve this quarter, which had an impact as well in terms of the large mortgage business. The NIE, I think that I would say that is peaking out as we have been investing all year, and certainly my expectation would be that that will level of and then as you go into year-over-year measurements by quarter would be at a much lower level. And then finally I think the other big factor that throws into our numbers is the PCL, and frankly we were lower than Q2. We are pretty pleased with the performance of our loan book and about on plan, and just when you compare it to that incredibly low quarter we had last year, that's a $70 million swing in one quarter, which is 10% of our earnings. So those are kind of the big factors that go in. So good market momentum is kind of the reflection of the investment, and I feel good about the positioning.

Great. Thanks Jim. Next question is for Chuck, and Chuck I know the team has been working hard on building a global wholesale bank and differentiating yourselves versus the peers here in Canada. Can you talk about the marking additions let's say over the next quarter if they extend this way, what kind of impact or knock-on effect it may have on your business developed out of London and as well as your Asian operation?

Well, I think that clearly there are mix impacts, and from the short term I mean market conditions are more difficult and while there are areas of the business that are actually quite good, overall, it's not going to be the type of period that we have enjoyed over the last couple of years. But basically, looking forward, there really is no change to any plans we have got, and it's based on the fact that we expect that after a period of stabilizing whenever we begin to stabilize. I am sort of hoping and knocking wood that that's happened. Basically, we expect the business to continue to be a very strong business and there are particular areas where we see more opportunity and I guess there are a couple that we see less opportunity. But overall, we are still very optimistic about what we have got and we expect to be able to turn it into something much better than it is.

Chuck, what are the couple of areas that you see that you still got larger opportunities on?

Well I think that the infrastructure business continues to be very strong. The fixed income business is still a business that's very healthy and will have opportunities where we think that a lot of the trading businesses, when you are a liquidity provider and there is no value to liquidity are not as valuable. I think that there... it's clear there is higher value of the liquidity than there has been. And just from the standpoint of our proprietary businesses, most of which are located outside of Toronto. Effectively, the real problem in those businesses has been the over supply of capital. You might have noticed in the last couple of weeks a lot of the capital disappearing, and that I think lays the groundwork for one of the most important thing that's going on out in the world, which is a repricing and risk. And the repricing and risk is just another phrase for higher spreads and higher spreads gives us a lot of leverage, operating leverage and financial leverage in terms of the way we operate.

Chuck, just my last question. You have got the most grey here in the group there and you remember '87 and --?

That's a complement for me.

Well, figuratively speaking.

He's got the least hair though.

When you look at what's going on in the markets right now, how much worst is this than 1998 and is it the potential to get to 1987 like condition?

Well, actually, I mean, and I am not commenting on how we have done, because we have actually done I think quite well through this piece. But basically, it's I think more complex, deeper and broader than 1987 was. It's just that 1987 was really in one product, which was equities and equity is a marquee product. This has been clearly much more difficult, complex and has already lasted longer in much respects to the 1998 loss. But it has been in much different product mixes. It's been more in what I would call subprime extending into higher quality mortgages as it has gone on. It's been a credit issue as credit from the standpoint of the credit curve moving up and quite major increases as a result of the hung bridge loans. And so that would be the second aspect. And then the other aspect, which has been very substantial has been what I would call the equity stock correlation or equity correlation which are matching either relationships between stocks or between indexes and their components, which has been a very substantial part and really has been a part of the delevering that's been going on. Those three things have really occurred without much move in either interest rates on an overall basis or markets... equity markets on an overall basis. So it's very different from anything that I have seen before.

I might just add Jim... it's Gord speaking... that from a strategic perspective, we have always been, and you've heard me say this many times, focused on a target of somewhere between 20% and 30% with sort of 25% being the target for our wholesale businesses. And I think if you look at the quarter, it comes in at about exactly 25%. And I think there is no question, the world is deleveraging and it will be a different environment. And I think that we remain very committed to continuing to maintain that, and as I think Chuck alluded to, notwithstanding some short-term turmoil, I think the loss of opportunities and probably more so for strong, well rated financial institutions and particularly those, i.e., banks versus investment banks where credit pricing becomes a competitive advantage as opposed to just pure liquidity or other parts to it.

I would add there, there are a couple of businesses that clearly are... smaller ones that are going to have be reselling, none that really are major or significant profit contributors. And we sit here and we are obviously working hard like everybody else to get through the period of time. But we sit here and say what are the prospects for a bank our size with commitments to do well in the marketplace and can we do relatively better than we could have before this happened. And that answer is a clear yes. Our prospects are better on a relative basis and we can clearly do better than we could have before this all started.

Thanks very much for the commentary gentlemen. I'll reque.

Thank you. The next question is from André Hardy of RBC Capital Markets. Please go ahead. André-Philippe Hardy - RBC Capital Markets: Thanks. Chuck when we look at the slide 11 which shows trading revenues and VaR, obviously, the second half of July was rough. It looks like credit spreads have widened further since then. We have had more weakness in subprime indices. So is it a fair comment to say that so far this quarter looks worse than the second half of July or were there actions taken in your trading book or otherwise to mitigate the impact of what looks like it's continuing to be a worsening environment?

I just hesitate to make any comments that talk about how our earnings are growing. That's the problem. But basically, it's been difficult time in the market, and I think we've done quite well considering it. André-Philippe Hardy - RBC Capital Markets: Maybe if Peter Armenio, I have got a question on the U. S. international. We had 21% increase in revenues, about a 6% increase in income. So can you talk about what drove the cost increases to be larger than the revenue increases and whether some of that may fall off going forward?

Sure André. Most of those cost increases came from our acquisition in the banking side of things, and the other part of it was also Dexia which continues to grow its business. And with that comes some of the costs to continue to make sure that we do the right thing on the service side. The combination of Dexia's performance and the acquisitions we have been making at Centura have contributed to the higher cost overall. The good news is that we have taken care of virtually everything that had to do with one-time items in this quarter. But this is probably the last quarter we had that. So what you should start to see hopefully overtime is both acquisitions in the banking sector starting to contribute more positively. André-Philippe Hardy - RBC Capital Markets: So you are saying in Q3 there were integration expenses on the banking side?

That's right. André-Philippe Hardy - RBC Capital Markets: And within Dexia, were these some investments that were made to take you to the next level scale wise or were those investments we should expect to continue as the revenue growth?

I am not sure I get your question, but I mean I think both of them... but for Dexia for sure, it was all with regards to investments to grow the business, continue to growth the business. André-Philippe Hardy - RBC Capital Markets: Okay. Thanks.

Thank you. The next question is from Sumit Malhotra of Merrill Lynch. Please go ahead.

Hi, good afternoon. First one for Janice or Jim Westlake, just to comment on the sales and service growth, I think a 6% year-over-year you mentioned. It looks like in your Canada staffing numbers, the bulk of that came this quarter. First off, is that correct? Secondly, do you think the bulk of the staffing for the growth initiatives is done? And thirdly, the growth rate we saw this quarter, the 8%, and you talk about that starting to trend down. You have been somewhere around 3 to 4% over the last year or so. Is that a level we can look for RBC Canadian Banking to return to in the near term?

Sumit, I'll start and then Jim will chime in. The first question that you asked was about our staffing level in Canada, and what I said was that we added about 1500 people to the frontline staff. If you look at our overall Canadian staffing levels, you are also looking at staffing levels in some of our service delivery units that also have gone up. We have increased staffing on the service side through our global technology and operational platform to increase our client service and client satisfaction. But with respect to the sales staff, that Jim has added in his network, it's about 1500 people, which as Jim said is peaking out this quarter.

Yes, and if I could just... I can't give you terribly specific numbers, but the... we've done all of the hiring absent a few more new branches that we are opening. So we've gone through the bulk of staffing up and building out some of the sales forces that we wanted to. So as that hits a peak, then I think you would see it sort of step down overtime as you start comparing the year-over-year quarters as we won't be adding at the same level.

I might just add that because I think maybe we are a little out of sync with some others in that we were very early on, if you go back to sort of client first or three or four, to through a very rigorous process of reduction. And as we said at the time, we were going to reinvest a lot of those proceeds in the front end of our businesses. And if you look at what we have done over the last... really over the last couple of years, but it certainly shows up is we have continued to invest and spend at a time when I think others have been perhaps spending less if I can describe it that way. And I think that's what Jim referred to as being reflected in if you look at market share growth, market share performance. And I think a lot of that, that plan spend is sort of peaking at this point in time.

Okay. Thanks for that detail. One more for me is actually for Peter Armenio. Peter, we heard that there is no origination of subprime mortgages being done in the U. S. we also heard that Centura Securities portfolio may have some MBS that are subprime-backed. The third thing I wanted to know about Centura is the actual loan composition, the portfolio composition right now of the loan book. How much is... what is the commercial personal split these days and how comfortable are you with the commercial real estate exposure specifically for Centura given that it looks like there was a noticeable uptick in gross impairments this quarter? Thanks.

I am going to let Morten start and, if there is anything I could add, I will.

This is Morten Friis. And we can follow up offline if you like if you need further detail. But in general terms, in terms of the general loan composition, I would to emphasize on the consumer side, it is a very small portion of unsecured, it's high quality either conventional first mortgages, the secured consumer loans on the consumer side, the business and commercial loans are of high quality. The portfolio quality in that segment is holding up extremely well. The area where you... there was a reference to an increase in impaired loans is in our U. S. builder finance segment, and that's the largest contributor to the growth and impaired in the U. S. and international banking platform. So we are seeing, that is a national footprint. I would emphasis we have no charge offs in that business this quarter and we actually on a detailed, all review, don't see any near-term reason for an increase in provisions or charge-offs of that portfolio. But clearly with the run off in impaired, we are expecting the potential for some modest additional deterioration there. But given the size of that portfolio, it is not something that's going to have a large impact on U. S. or RBC as a whole.

I would just add two more things to that on the builder finance. One is, as you may know, the portfolio is really focused on more mid-priced type of housing. So it avoids the risk of high-end housing or high rise condos and those kind of things. And the second point I would make is that most of the loans are short term and they turn over every 18 months.

Okay, thanks guys.

Thank you. The next question is from Mario Mendonca of Genuity Capital Markets. Please go ahead.

Good afternoon. Question for Chuck. I can appreciate that it's difficult to give us an indication of how things are shaping up in the fourth quarter on the capital market side, specifically in the U. S. But perhaps you could help us by describing the nature of the structured financial business in the U. S. or fixed income trading in the U. S. When I say describe the nature, is it facilitation? Is it proprietary trading? Is it CDO structuring? Is it a leveraged business? Is it a relative value business? That sort of thing. Is there anything you can offer us?

In terms of the U. S. fixed income business, we have a number of aspects of U. S. fixed income businesses. I guess the core business, the business that we have really adjusted from what was a regional model that Dain Rauscher into more of a capital markets model. And that has been very much a work in process over the last two or three years and not, I might say, a particularly profitable part of our operation as we have been getting it going. We have a municipal business in the U. S. with fixed income, and again, these are primarily dealing with clients. We do... we have capital at work, but it's not relative to what we do on a global basis. It's not a large part of our business. We have a securitization business in the U. S. that would be part of a fixed income business. We have a very small high yield business. It really is a diversified business that is not particularly large and not particularly capital intensive and has not been something that we've really focused that hard on in this last month. The structured businesses we have are primarily run out of London, of which, we... and we have structured equity that's actually run out of Toronto and we operate in other geographies. But basically, those businesses... structured credit has been where most of the impact has been. I would say that that's never... that for us has been a business that we have labored building and has never really made us money. In fact, it just hasn't... it never has and clearly that's been the area where most of the issues have come in the last month for the market and we have had some, but basically nothing that isn't very manageable. And in fact structured rates and equities and I... would have done very well through this peak. I mean we have done very well with them.

Maybe can I try this in a different way? In 2006, started around Q2 2006, the company's fixed income trading and trading revenue generally hit... just hit a new plateau and it stayed there for four or maybe five quarters. What might be helpful then is to understand what was driving that particular new plateau in trading and fixed income trading particularly.

You look at profit Mario and there are probably 7 big components and the amazing thing about it is that if you look at it and you would say different quarters, different parts of the equation have really driven... I mean if you call a plateau, I'd call it a plateau. But basically, there is no one influence that you could look at and say this has been a particular problem. I would say that over that period of time probably structured credit per se has been one of the areas that's held back... held us back from reaching higher plateaus.

I would... because I think it is an important question in that if you look at our fixed income business, most of our fixed income business is pretty straightforward non-structured fixed income business. And that period was a very strong period for the fixed income market generally. I mean I think if you look at perhaps a change in the last little while with interest rates coming down. But it's... it was just a very strong period for traditional cash fixed income product. So it's not... it doesn't have a lot to do with structured credit or complex fixed income because, as Chuck said, that's never been an area where we've really made money; it was really more just with respect to our straightforward fixed income trading activity, of which we have got a very wide and broad business.

And that's the business that's slowed a little bit in the last... in the second half of July?

Yes, that's certainly been a business that has been an issue.

Okay. And my second question, sorry for a long one... my second question really relates to the asset-backed commercial paper market. And I can appreciate that Canada has been hanging in or the bank sponsored has been hanging a lot better. But is there anything you can do to help us understand even if it is bank sponsored, what sorts of assets are we talking about backing that commercial paper?

In the bank business?

The bank sponsored, because I appreciate that Royal has very little or... I think the word nominal and non-bank?

It's Morten Friss, maybe I can just in terms of talking about the RBC sponsored conduits themselves. And the predominant asset mix there is for the most part very plain, vanilla easy to understand, traditional asset classes, credit card receivables, order receivables, trade receivable with a very modest amount of more structured products in one of the conduits. But it is when you look by dollar amount, these are easy to understand assets, traditional long history, well over collateralized, extremely safe assets that from a CP market standpoint are the easiest to understand.

Got it. And then in the... I think Gord, you said that 70% of the liquidity facilities are in the U. S.... relate to U. S. And I think you wanted to really emphasize that because the Canadian is where the issues have been. But does that give you a lot of comfort that the liquidity backstops are really 70% related to the U. S. where this all sort of got started in the first place?

Well, no, I think... I mean at 70%, I was just trying to give the breakdown between Canada and the U. S. because we have a, as you know in the Canadian market, where the issues have been on a relative basis, we would have a fairly small program. Having said that, there has been no liquidity... draw downs from the bank liquidity in Canada either. I think the U. S. market is a much bigger, deeper market. I think the size of the U. S. securitization... Morten, correct me if I am wrong, but I think it is about 1.8 trillion, is that... I mean it's trillion. And as Morten said, most of our conduits in the U. S. are very straightforward asset classes that have global-style liquidity lines and are financing. So I mean that's... a lot has to happen before that market has again touched wood, has those kind of issues. But the other point I would make is from a liquidity management provision, we are quite comfortable with our liquidity plan and contingency regardless of what would happen with respect to asset-backed securities. And just using Canada as an example, if there were liquidity issues in Canada, it's a very manageable number in terms of financing, continue to be very good return, high quality assets.

And it's a blip on the Tier 1 if it's taken [ph] in any way. I guess that's the idea.

Yes.

Thank you.

Thank you. The next question is from Darko Mihelic of CIBC World Markets. Please go ahead.

Hi, good afternoon Mike. My first question is for Morten, can you --

Can you speak up please, Darko?

Sorry, can you hear me now?

Yes.

I apologize for that. My first question is for Morten. With respect to the commentary you gave us on U. S. subprime mortgages, you mentioned hedging. Am I to understand that the $1.1 billion is the unhedged portion or is that a total sort of exposure that would include hedged positions? Can you help me with that, and what kind of hedging for that matter? Is it insurance or is it an index hedged?

The reference in my comments to hedging was related to the very nominal amount of CDO squared exposure that we had, and that is hedged, and its hedged through... some credit market.

So am I to believe that there could be other positions that are insured, that are not included in the $1.1 billion? Would that be a correct statement or an incorrect statement?

I am not sure I understand your comment. I would say incorrect, but --

Well, I think that there are times when we would use macro hedges in various types, and even specific hedges to offset some of the positions we have. But that would not be a position we would have in place all of the time.

I would emphasis in any event the CDO squared exposure is nominal.

Very small.

Okay. I think I understand what you are getting at. The only reason why I asked this question is we've got different disclosure from one of your peers, which suggests that there was an unhedged portion of their book and that was what they focused on and then an unhedged portion, which presumably would have been remnants from underwriting that they had insured... that they have insurance on. And with respect to the... to your position, if that's in the trading book, am I to understand that that's been mark-to-market every --

That in the trading book.

Mark to model. Okay. And I guess my last question just refers back to the question with respect to asset-backed commercial paper. In the 70% that's in the U. S., I wasn't quite sure that I understood the assets backing those programs are just as solid as they are here in Canada, is that correct?

The description of the asset classes is the U. S. and Canadian conduits at a general level is identical. It's the same types of assets, same plain vanilla, easy to understand, easy to finance asset.

Okay, great. That's very helpful. And maybe just one last question for Chuck. I guess I can appreciate the comments that widening of credit spreads would present opportunities. But I guess my question is is that really what's happening right now in your business? Are you really running around looking for new business and generating new business and seeing opportunities or are you really busy sort of trying to contain risks and making sure there aren't any problems in the business?

Yes, I mean, be clear. We are right now playing defense unless there are extraordinary situations trying to make sure that get ourselves through this situation in the health we expected. I was referring to the long term... longer term, by not the long term being... the long term all will be debt but basically, looking out, when we get this thing under a more stabilized position. And I think the most important point, and I would just emphasize it is that spreads have come in primarily because there has been an oversupply of capital, and a lot... capital is disappearing and that's where I see the opportunity for people with a lot of capital.

But there is new business that's going on all the time, and the spreads on that new business is much better. I mean if you look at the corporate lending market, the deals that are being done are being done at very healthy spreads relative to where they were three or four weeks ago.

Okay, great. Thank you very much.

Thank you. The next question is from Michael Goldberg from Desjardins Securities. Please go ahead.

Thank you. Looking at the table on... the tax table on page 10 of the shareholders report, your tax rate was down 4% from the third quarter last year with the biggest factor identified being the higher level of dividends. But if I put the number on a tax equivalent basis, the tax rate's still down 2.8%. And that's I guess then attributable to the other two items: income from low tax jurisdictions and favorable tax settlement. So my question is how much was the tax settlement and was there any tax ARB [ph] this quarter and if so, how much?

Michael, you are quite right that the balance of... when you did your rate reconciliation, the balance of the difference is related to tax settlements. And our tax settlements are fairly lumpy and from time to time we get them, depending on when the revenue authorities in the various jurisdictions complete their work. I think that from our perspective, we are looking at our tax rate in the low to mid 20s and that's where we are looking at it over the course of the year. So there is some lumpiness in the expense from quarter-to-quarter.

So how much was the tax settlement actually?

We are not disclosing the actual settlement, but what I said is your reconciliation is in line with what has happened to our provision for Q3.

Okay. And was there any tax served?

I don't understand what you mean by tax served.

Okay. We can speak about it afterwards. I have another question, and first let me say thank you for the improved insurance disclosure where I see the insurance is up at $103 million, net income this quarter from $52 million last quarter. And last quarter, you attributed unfavorable disability experience to the results and now in this quarter disability experience was favorable. What were the experience amounts on the two quarters and what's the swing from quarter-to-quarter?

Hi, it's Jim Westlake, Michael. I don't know if I'd give you the exact swing quarter-to-quarter on disability results. Certainly, the results this quarter had a lot of other factors other than just the disability results. I guess if you look at the nine months year-to-date, the result this quarter almost represent a third, so maybe just all the volatility is evening [ph] out.

Does the swing, though, in disability experience account for a lot of the swing in earnings from insurance this quarter?

Well, when you compare it certainly to Q2, so the quarter-over-quarter and also interesting, the year-over-year, last year our worst quarter for disability experience was Q3; this year it was Q2. So in using those two comparisons, it would be rather large. And while disability business is more volatile, I would expect that swings of $10 million, $15 million either way would represent kind of the bracket if you said what would kind of a normal volatility range be.

Right. So were these normal swings this recently?

Well, I would say that this quarter was a very solid quarter on it. And if you recall that we typically thought disability incidents, and last year... last quarter in Q2, the reason for the big difference was on recoveries, which was a little more unusual that we... there was almost little more operational. So if you are talking normal incidents and the reserves that you put up and take down with the incidence rates, that $10 million or $15 million would look on the size of the book we have like normal volatility.

Okay. And I have one more question. Why is the minority interest adjusted for VIEs up so much this quarter? It's $37 million versus $16 million last quarter and $12 million last year?

Michael, why don't we take the answer to that later because I'll call you after, or Marciawill call you because it has do with the way we are consolidating them and some of the volatility in some of the VIEs. And as you know, it's in and out and it has no impact on our net earnings. So we'll give you a call after this.

Okay. And one final question for Chuck. You mentioned that a structured credit has never really made any money for the bank, and a couple of years ago, TD made the decision strategically to exit a lot of structured products. Is that something that Royal is considering also?

No. I think that one of the issues with respect to a structured platform is that you need a multi-product structured platform in our view to make it work. Credit is going to be an important part of the platform going forward in terms of certainly not the... certainly going forward, it's going to be very important. There is no question, though, with what's happened in the market so that this structuring is going to be used by clients in a different fashion than it has been used before. And we are going to be looking at some rethink of the structured credit business.

Thank you very much.

Hopefully with upside from a very low level.

Yes, that goes without saying.

Operator, we are now going to take our last question and apologies to people still in the queue. Please feel free to follow up with me after the call.

Thank you. The last question is from O'Hare Ledare [ph] of Verithouse Investment Research. Please go ahead.

Good afternoon. I just wanted to get some further clarification or assistance on this multi-seller conduit issue, specifically related for the 70%, roughly $30 billion business. Because I've heard some comments on the call that are saying the assets in these U. S. conduits are very plain vanilla, car loans, etcetera. I'm looking at the note disclosure in note 11, page 45 of today's shareholder report. Specifically, the sentence "certain of the multi-seller conduits also financed assets in the form of either securities or instruments that closely resemble securities such as client-linked notes". The disclosure goes on to say, in these situations, the multi-seller conduit is often one of many investors in the securities or security-like instruments". So that doesn't sound to me like car loans. Could you just comment on that? That sounds a lot more than the credit arbitrage structures that some of the Canadian non-bank conduits were employing.

It's Morten Friis. Let me respond to that. So what I said in response to the early question on that's it's predominantly those asset classes. One of our conduits has the ability to take on a wider range of assets, which, from an ability standpoint, includes the kind of description on our note disclosure. We have a very small amount in total of anything other than the plain vanilla in this one conduit. So in total, my comments are entirely accurate. The note disclosure refers to the ability and the fact that we do have some small positions in one conduit that are slightly more structured assets.

Okay. And is that in terms of the structured financial assets that are in that conduit, is it... is there exposure to U. S. subprime because this would be off your balance sheet and wouldn't be included in the other disclosure that you provided today?

We'll follow up. I am relatively confident that there is no non... there is no subprime in that conduit. In any event, the structured asset is a very small number for the conduit and for the overall, but we'll follow up to get clarification on the precise point.

Sure. Just in terms of small, because the U. S. conduits is about $30 billion. Is that small as in a couple of hundred million or a couple of billion?

Small as in... small in the context of one conduit, which means that's it's... I mean I find it hard to be clearer than nominal small, think tiny.

Okay, thank you.

Thank you. This concludes the question and answer session. I would now like to turn the meeting back over to Mr. Nixon.

Okay. And I would just like to thank everyone for their participation. As Marcia said, if there are any questions, there will be lots of people around to deal with them. If there is any feedback with respect to the... from the analysts in particular with respect to the form of the conference call that we have tried to be responsive in terms of clarification on issues and speakers etcetera, so we'd certainly be interested in that and we appreciate everybody's participation and we'll talk again in next quarter. Thank you very much.

Thank you. This concludes today's conference call. Please disconnect your lines and thank you for your participation.