Good morning, ladies and gentlemen. Welcome to the RBC 2014 Third Quarter Results Webcast Call. I would now like to turn the meeting over to Ms. Amy Cairncross. Please go ahead Ms. Cairncross.

Good morning and thank you for joining us. Presenting to you this morning are Dave McKay, President and Chief Executive Officer; Mark Hughes, Chief Risk Officer; and Janice Fukakusa, Chief Administrative Officer and CFO. Following their comments, we will open the call for questions from analysts. This call will be approximately 1 hour long and will end at 9:00 a.m. To give everyone a chance to participate, please keep it to one question and then re-queue. We will be posting management’s remarks on our website shortly after the call. Joining us on the call are George Lewis, Group Head, Wealth Management and Insurance; Doug McGregor, Group Head, Capital Markets and Investor & Treasury Services; Jennifer Tory, Group Head Personal And Commercial Banking; Zabeen Hirji, Chief Human Resources Officer; and Bruce Ross, Group Head, Technology and Operations. As noted on Slide 2, our comments may contain forward-looking statements, which involve applying assumptions and have inherent risks and uncertainties. Actual results could differ materially from these statements. I will now turn the call over to Dave McKay.

Thanks Amy, and good morning everyone. RBC had a record third quarter with earnings of over $2.3 billion, which after you exclude the loss related to the closing of RBC Jamaica this quarter and a tax item in the prior year, were up 10% from last year and 10% from last quarter. We reported record earnings in Canadian Banking, Capital Markets, Wealth Management and Insurance, and had solid quarter in investment and treasury services. Our results reflect strong revenue growth, solid credit quality and positive operating leverage across most businesses. We maintained our strong capital position with a common equity tier one ratio of 9.5% and I am pleased to report that this morning we announced a $0.04 or 6% increase to our dividend, bringing our quarterly dividend to $0.75 a share. On a year-to-date basis, RBC has generated over $6.6 billion, with a return on equity above 19%, and we remain on track to meet or exceed our performance objectives. These results truly demonstrate the strength and agility of RBC’s market leading franchise as a diversified business model can capture growth by adapting to the changing needs of our clients and also adapt to different market conditions. Our results also reflect our focus on clients and our proven ability to manage costs and capital effectively. As another testament to the strength of our businesses, RBC was recently awarded Global Retail Bank of the Year by Retail Banker International, and I am very proud of this tremendous achievement. Let me now make a few comments our businesses. Our Canadian banking business had a record quarter reflecting solid volume growth of 4% over last year, a relatively stable credit environment and strong growth in fee-based revenue, in fact, it was our eight consecutive period of double-digit growth in mutual fund revenues.…

Thanks Dave. Good morning everyone. Turning to Slide 7, our overall credit quality remained strong this quarter. Our credit trends are near historic lows, reflecting a supportive economic backdrop in Canada and our strong risk management practices. The North American economic environment continues to rebound from a weather-related slowdown in the first quarter, and while there is still some economic challenges in Europe, conditions have improved somewhat compared to last year. Provisions for credit losses on impaired loans this quarter were $283 million or 26 basis points up $39 million or three basis points from last quarter. The increase is mainly driven by higher provisions in Caribbean and Canadian banking partially offset by lower provisions in capital markets. Let’s look at our credit performance in a little bit more detail. Provisions in Canadian banking were $230 million or 26 basis points up $26 million or one basis point from last quarter driven by higher provisions in the commercial loan book and our personal loans portfolio. Within our commercial portfolio we had a few small provisions that were uncorrelated and while we would expect to see some variability from quarter-to-quarter, we remain comfortable with the portfolio’s overall credit quality. In Caribbean banking, provisions on impaired loans were $54 million, up $27 million from the previous quarter. Higher provisions in our commercial and retail portfolios reflect in the ongoing challenging economic environment in the region. With respect to capital market, this quarter we had provisions of $1 million, compared to $13 million in the prior quarter and the loan book continues to perform well. Turning to Slide 8, which focuses specifically on our Canadian banking retail portfolio, our credit card provisions remained near historical lows at 246 basis points, down 23 basis points sequentially, largely due to seasonal trends that impacted the…

Thanks Mark and good morning. As Dave mentioned we had record results this quarter with earnings of over $2.3 billion, up $93 million or 4% from prior year and up $177 million or 8% from the prior quarter. Overall, we had a clean quarter with only one item of note, which was the previously announced loss of $40 million related to the sale of RBC Jamaica, which closed in June. Excluding that item and the $90 million favorable tax adjustment we recorded last year, net income was over $2.4 billion, up 10% from last year and 10% from last quarter. Our results were driven by record earnings across a number of our businesses. Turning to capital on Slide 12, our common equity tier 1 ratio was 9.5% down 20 basis points from last quarter as higher risk weighted assets more than offset strong internal capital generation. The increase in risk weighted assets was driven primarily by an update to the risk parameters in our corporate and business lending portfolio, resulting from the model review that I noted last quarter. The increase also reflects business growth. The parameter update this quarter were largely reflected in revised, loss given default rate, and they were predominantly in the commercial portfolio in Canadian banking and to a lesser extent in the loan book and capital markets. Excluding these updates, the segment mix of our risk weighted asset is largely unchanged from the last quarter. Let me now turn to the quarterly performance of our business segment starting on Slide 13. Our personal and commercial banking segment earned over $1.1 billion, down $29 million or 2% from last year on a reported basis. Canadian banks of over $1.1 billion up $34 million or 3% from last year, reflecting volume growth of 4% and strong growth…

(Operator Instructions) Our first question is from Steve Theriault. Mr. Theriault your line is now open. Please state your company and proceed with your question.

Thanks. Bank of America Merrill Lynch. Janice just a quick follow-up, I had a question for Dave on the buyback, but you mentioned tax, you didn’t get the positive impact from your usual tax review this Q3, just wondering if that’s the timing of something else.

What’s the tax impact, tax related to is that every year we are audited by CRA and in the last two years actually those audits were completed in Q3. CRA has extended an audit period and so we don’t have the benefit of having it [inaudible] and that’s why we didn’t make the adjustment. So it is a bit of timing, but we can’t really predict when they will be done.

Can you predict the direction, do you expect it to be on the positive number?

Well I can’t really predict the direction because it’s generally just the volume of audit work and a lot of the work CRA is doing.

Okay, thanks. So Dave it’s been a few consecutive quarters, where you been quite on the buyback versus expectations and I think at the outset of the program, it would be somewhat active. So I guess the question is would you link it back to the risk parameter review? Is it a changing in your or the regulatory’s thinking on capital returns? Do you need to be at closer to 10% core tier o1? Just interested on your thoughts going forward on buybacks.

I think maybe I’ll answer the question broadly. When we look at our ability to deploy marginal capital our first priority is to deploy that organically and we still see good opportunity to deploy our capital organically. Our second strategy as you know is to return capital to shareholders, and as you’ve seen this quarter we’ve increased dividend by $0.04 and we are very happy with that. So that certainly fits within our overall strategy of returning capital to shareholders. Share buyback obviously remains an important part of returning capital to shareholders, and we’ll obviously consider that going forward. But those are certainly the top two strategies, and the third one is to selectively make acquisitions that enhance our existing customer franchises. So when we look at all three of those I think we’ve demonstrated strongly in certainly the first two and that we are acting on that particularly with the dividend increase you saw today.

Do you need to get capital higher in order to activate the buyback or not necessarily?

It’s hard to comment; we are managing our capital very closely. As you see, we got a regulatory requirement and as we look at organic growth and capital returned to shareholders, we take all that into consideration. So I think it’s something that obviously the management looks at very closely.

Our next question is from John Aiken. Mr. Aiken your line is now open. Please state your company and proceed with your question.

Good morning, I am with Barclays. I guess a reward for such an exceptionally strong capital market this quarter is, there is going to be questions around the sustainability of this going forward. But in conjunction with that Dave I was hoping if you might be able to provide some insight as to the discussions that the Board is having around the contribution of capital markets to the overall bank, particularly in light of the article that came out yesterday from the Wall Street Journal.

Not surprised by that question. First let me say how exceptional the results are and how happy we are with the capital market franchise, and you know the core business growth. And while there were some one-time trading items and some very, very strong markets for us, our overall franchise and our client centric franchise has grown nicely. the business is doing very well. As we think about our strategic guidelines, as I like to think of it at 25% that we really believe that’s in to an overall diversified business model. We do look at the strength of or other businesses and Wealth Management, you saw a record result, you saw record results in Canadian Banking. You look at our opportunities to grow on all our businesses, and we remain confident that we can continue to grow capital market and still remain within our longer term strategic guide lines. So I think while we went slightly over this quarter, it was an exceptional quarter which is slightly over our long-term strategic guidelines, I think all things being considered we look forward and remain confident of being able to balance our diversified model.

So if I can paraphrase, so the 25% is not really a hard line and this isn’t going to cause any drastic changes in strategy in the near-term just because you’ve crossed that line.

We crossed the 25% periodically over the past year, so it’s something that we’ve done before. But over the long term we look forward and we say, can we keep this in balance and we feel we can. So I think it’s not a cap and I think some people refer to it as a cap, cap for me connotates drastic action as you said. I think the business ebbs and flows, has seasonality to it, has strong quarters, has sometimes challenges in front of it. So I think as we look at the ebbs and flows of the business we feel confident we can maintain the balance of our business model.

Our next question is from Sumit Malhotra. Mr. Malhotra your line is now open. Please state your company and proceed with your question.

First point was just a clarification with Janice. So you had as far as your WA is concerned, you have the retail portfolio review during Q2 and then let’s call it the business lending review during Q3. I know these things can be ongoing over time, but just wanted to get an update on where you think the RWA methodology for Royal is and whether there is any other review that you’re contemplating at this time.

Good question, Sumit, and I think we did have - we’ve just finished off two fairly intensive reviews where we looked at all of our assumptions. We review all of our assumptions on an ongoing basis, and at least annually. So it’s part of ordinary course, some of the adjustment that’s you’ve seen over the past few quarters are ordinary course adjustments. Some of them reflected more detailed assumptions reviews. Going forward, while we recognize that we constantly review the metrics we are fairly comfortable with where we are with respect to RWA, but as you know, as we continue to grow our balance sheet we’ll continue to grow our RWA.

Yeah, that I fully acknowledge. When I think about the CET1 right now being below the year-end 2013 level, three quarter of the way into what’s been a very strong year. From your seat right now, is there anything what I would call more than normal course in the business that you would contemplate on the RWA line or are we now to the point where the refinements are not likely to be the driver in the interim.

From our perspective, we think that as far as this fiscal year goes the refinement that we’ve made are basically the major ones that we were working towards doing. With respect to our capital accumulation and deployment, we should be back to more business as usual in terms of our earnings growth funding our dividends and also getting some capital accretion, and so that’s why Dave talked about our strategy around deployment being funding organic growth and then looking at rewarding the shareholder and then looking at longer term growth in earnings as a three prongs of our strategy.

My actual question was for George Lewis in wealth, and looking at a couple of things on revenue, it looked like transaction revenue was down in the quarter and the international and US segment was down as well. Just wanted to ask you, when you think about operating leveraging this business, outside of aggregate market conditions is anything that the bank is thinking through all the expense side that could lead us to better operating leveraging without necessarily having yet another uptick on the revenue side or the market side.

I think overall we were very pleased with the quarter record earnings, with the same quarter we had double-digit growth in AUM and AUA and I guess the flipside of your question on transaction revenue in US which I’ll come to in a moment is the growth of our fee-based revenue, which for the first time reached over $1 billion this quarter. So that now represents two-thirds of our segment revenue up from around 50% in 2007. So both the quantity and the quality referring nature of our earnings continues to improve. With respect to these there is definite seasonality in the business in terms of the September quarter being a slower one particularly in our US business. So that I think accounts for the quarter-over-quarter change in terms of transactional. In terms of expenses, we do have a strong focus on NIE, at the same time, we are investing for growth, particularly in a global asset management business, which is a highest margin business and we are making investments, particularly in international wealth business to strengthen our control environment. So I think we are pleased with our progression in both revenue and expense and generating positive operating leveraging of 2.3% this quarter and we expect that to continue.

Our next question is from Doug Young from Desjardins Capital Market. Please go ahead.

First question just from the capital markets side; I guess is really two pronged. You had exceptional loan growth, wondering if you can give a little bit more detail where that loan growth is coming from segment who or what not, and then can you give, I know you said 100 million of [outside] trading gains. Is that something that falls to the bottom line and how should we think about that in terms of the earnings impact in the quarter.

Starting with loan growth, the loan growth is stronger than actually we anticipated it would be at the start of the year. If you look at the slide, a lot of the loan growth has been coming from our real estate business. We identified an opportunity couple of years ago, with some major clients to finance some activity in Europe, and we’ve been doing that and the results are very good from that. So I would say overall away from those activities the loan growth is really focused in the US in the opportunity to [lend] the corporations in the US is still quite good, the margins are certainly acceptable and the business that comes with the loan growth has been very good. So most of the loan growth in the US, the European loan growth is more focused on the area I described. I would say going forward, we are seeing some slowing and that’s fine, we are certainly not going to push it, but we certainly have people that spoke with us so far this year. In terms of the trade, one was a legacy asset in fact that we’ve had on our book for several years, we’d written it down substantially. We’ve secured on an asset that actually was performing quite well, we restructured it and sold it, and so there was a pre-tax gain there. And the other was a client right here in Canada that affected the security, finance and equity side of the business. In Janice’s remarks she mentioned it was about 100 million pre-tax. We identified those because we look at them and say, it’s reasonable to say it’s non-recurring.

And then just I’m not sure if you can give any color or what not on the initial side you talk a bit about the actuarial, the positive impact from actuarial adjustments, and I am going to assume that’s on your life insurance book of business. And just wondering if you can give any color as were there assumption changes that were pushed through and what that was, in can you give any quantification of what the impact was from that.

Sure, it’s George Lewis, thanks very much for the question. I think in terms of the actuarial adjustment this quarter as Janice mentioned in her remarks it related to our ongoing efficiency management program. So it didn’t relate to an annual process that we do typically in the fourth quarter, which will recur this quarter, when we do a complete scrub of our actuarial assumptions, morbidity, mortality, claims, [allowed] better, so that is yes, to come it was a very strong quarter for RBC Insurance. I think I mentioned last quarter that our earnings in Q2 was at the lower end of the typical range for the business, that this quarter was certainly from the underlying business itself driven by improving claims experience, particularly on the [adjustability] side, we also had better claims and experience in home and auto, strong creditor premium growth to Dave McKay’s comment drove us to the upper end of that range of a typical quarter and then the actuarial adjustment that is above that.

And you haven’t given any quantification of what that adjustment was?

No.

Our next question is from Gabriel Dechaine from Canaccord Genuity. Please go ahead.

Just a quick one and I apologize if I missed this one. But do you have a target capital ratio is it 9.5%, 10.5%, 10% for the core tier one ratio. And then I got a follow-up on the cards business.

Hi Gabriel its Janice, I think that if you look at where we are maintaining our ratios with think that we are maintaining a pretty strong capital ratio in the mid 9, so we ended up at 9.5% and we’re pretty comfortable with being in that vicinity.

And then on the credit card, I know that you have pretty good average balance growth 4% quarter-over-quarter. That’s encouraging in this environment. Just wondering if you believe to maintain that level of growth or maintaining market precision or grow it, preferably you needn’t do any tweaks to the Avion portfolio , whether it’s more accelerator or enhanced benefits or something of that nature. And then also on the interchange regulation, where do we stand with that and are we going to hear anything soon on potential regulation.

Gabriel it’s Janice and I think the first part of that question. We continue to benefit from all the recent activities in the credit card space and our new account growth continues to be significantly up in fact 19% year-over-year and we are also seeing great utilization of our cards. We’re very happy with our Avion card and the position it has, the clients love it and continue to give it very high ratings for customer satisfaction because one, they are easy to redeem and they don’t expire. So we are well positioned in the credit card space. Dave you want take that.

Gabriel it’s Dave here. It was also noted in the federal budget that the government would be moving forward. So we do expect to see some changes as far as interchange in Canada, but it will be premature. I think to speculate or comment on what those are going to be. I would say that there is a significant amount of dialogue among all industry participants through the government of Canada. I think the goal is really to promote a long-term ecosystem that supports the Canadian economy, but at the same time really fosters leading-edge payment capabilities and service to Canadians. So there’s a lot of stakeholders to balance, there’s a lot of issues to balance, there is dialogue, and we’ll see what comes out of the Ministry of Finance and the federal government.

Have you ever quantified the contribution of interchange to your revenue and earnings?

It’s certainly a large component of being in the large purchase business, but as interchange changes, there is many variables that an issuer can use to manage any type of reduction if there was a reduction in their change. You can use your cost base, you can look at your credit profile, and you can look at the value of the your points program. I mean all of those ultimately affect customers in one shape or form or another, but the issuers have a lot of tools and availability to manage any type of change to the system.

Our next question is from Meny Grauman. Mr. Grauman your line is now open, please state your company and proceed with your question.

Just a broader question about domestic loan growth, your mortgage growth of 4% year-over-year much in line with the previous quarter, and I am wondering what the outlook is for mortgage growth in particular, but domestic loan growth in general. Has there been any change in your view on that, and more importantly do you think the current pace is sustainable or could we see another slowdown coming.

Thanks for the question. We feel good about our mortgage business, our volumes were up just over 4% from a strong Q3 last year and in fact we think everyone knows that we got off to a slower start in the spring housing window because of the weather, but we saw strong June and July, and actually our [pet] funds for the fourth quarter also looks strong. As far as consumer loan growth, obviously you can see it from results notwithstanding the good growth that consumer loan growth has slowed, and our expectations are for consumer lending to moderate to mid-single digit 3% to 4% growth rate, and that’s why in Dave’s comment, he commented on us really looking for positions to meet our customer needs, including shifting a lot of our capabilities as well to make sure we capture this significant investment and to possess the opportunity.

Our next question is from Derek de Vries. Mr. De Vries your line is now open. Please state your company and proceed with your question.

It’s Derek de Vries from UBS. There’s been a lot of regulatory change in consultations going on at the moment, and I guess in that context, I wanted to ask you a little bit about your Co-Co issuance. And so I’m curious why you went with this type of instrument, was that in response to an expectation for change in the regulatory environment, and I’d also be curious on the breakdown of the buyers between retail and institutional and domestic and international, if you got that?

Hi Derek its Janice. By Co-Co issuance do you mean our non-viable contingent capital I’m assuming?

Correct. Yes.

And so on the [prep] we did prep their issues, they basically were requirements you know for us to issue preferred shares that we put in the non-viable contingent capital figure. Those two instruments by the way are recovery tools. So, at the option of our regulator if they believe that any sort of a banking stability can be solved by enhancing the capital they can figure with respect to distribution because there were pretty healthy yields on that prep. I think that’s where we ended up was about 70% to 75% retail and the balance institutional, and that’s a little bit unusual based on what this put we’ve had on our previous (inaudible) instrument. For subset same thing non-viable contingent capital with its figure and that was a requirement in order to have that fall of capital treatment. So, that too is a recovery instrument. When you look at the overall context of the White Paper that’s come out on the bail-in is, the difference between those instruments and bail-in are of course bail-in is a resolution instrument. So with respect to the subject, of course it’s a little bit of a more complex instrument and it is all institutional.

Right. So if I’m understanding what you are saying correctly, this is going to be the norm going forward for the Canadian banks is that right?

Yes, that’s right.

Understood.

Our next question is from Mario Mendonca from TD Securities. Please go ahead.

If you could go back and just change for a moment, where EMEA reported a Q2 ’14 results last week, the CEO specifically referred to changes and said that industry participants could voluntarily implement reductions and/or cap interchange rates. What I’m getting at here is how does that square with you? Is that a plausible outcome that we could rather than seeing a hard and fast regulatory change instead see the banks voluntarily reduce our cap interchange rates.

I think the answer to a question. Mario is, bank don’t control the setting of interchange, that’s controlled by the network exclusively, these are MasterCards. The bank recipients of the a revenue stream from that interchange, but we have absolutely no control whatsoever for the setting of those rates. So I don’t see how we would be able to do that. That’s purely in Visa and MasterCard’s control, so anything negotiated between, say, Visa and MasterCard and the federal government would apply to us, but we don’t have control over it.

Do you contemplate any or is it conceivable that you could see changes in honor all cards or is that something and also you don’t think is inside and not part of your control.

That is again are network regulation, it’s been a critically important part of building an overall effective and efficient payment system over the last 50 years. Our customer has to have the confidence that when they go a point-of-sale online physically that their cards will be accepted. So it’s been the foundation to building a global payments network. There has been discussion between all parties, whether that rule should exist going forward. The issuers and the network plays a very important part of our franchise. But I think all the rules are under negotiation at the same time. So I would hope to see that at core part for our customers’ sake, that confidence in using your payment vehicle is a foundation of it, and we would encourage that stay in place.

But you are saying that’s on the table as well then.

It’s been discussed, but I think I would expect all participants understand the need for consumer confidence in presenting a payment card that’s accepted. So I think we’re playing with the foundational elements and that has received a lot of discussion. There are many different ways we can go, but I wouldn’t rule it out, but I would be very disappointed if we did go down that road.

And the growth in the wholesale loan book, clearly we’ve seen real estate as you highlighted. Can you talk about financial sponsors and whether that they played a role in growing that loan book as well.

Yeah, sure. I think we’ve disclosed separately, the leveraged loan segment of the loan book, and it’s about 8% of the loan book. So the sponsor business is just about half of that book. So well significant not a large component of the loan book, and that’s because in the sponsor business basically, we are typically underwriting to contribute to term loans and high yields, for instance, we take out of the capital market. The sponsor business has been pretty vigorous over the last several months, we are participating and we are participating at roughly our market share in other businesses. So we’d be neither [keen] in private equity financing which is where we are in most of our other businesses.

Our next question is from Sohrab Movahedi from RBC Capital Markets. Please go ahead.

It’s actually BMO Capital Market. I hope that was in the (inaudible) slip. Just a follow one Mario’s point a little bit. I mean outside of the exceptional trading revenue in capital markets you had obviously very good results in your NII and the income tax scheme as well. What’s the outlook on that, is that sustainable?

We are a lot of that fee revenue is in the US and the US is roughly half of our overall revenues now, and it’s almost doubled our revenues. So you can see where we have had nice year-over-year and quarter-over-quarter in Canada and we certainly want to continue that track to some, I see a lot of the growth in the US and it is right across the board. It is equity new issue, we’ve really been emphasizing that we to lead that lead that [review] in the US; we are making a lot of headway there. We are about fifth or sixth in the convertible new issue league tables, we are outperforming there, high yield’s the same thing, loans indication. It’s really spread right across the products and its really about raising capital for customer. So as long as you have good credible markets, the markets we’ve been in, you can distribute loan and you can distribute high yields quite easily frankly, and so as long as credit markets are good and there is an opportunity there, so we are trying to grow those you businesses. If you get into less receptive markets, then it will be more difficult.

And it looks like this quarter the spread was richer than the prior quarter’s. Was there something unique this quarter?

Spread in the wholesale loan book?

Yes.

I don’t think so, I mean, I pointed to some growth in the real estate segment there was sufficient opportunity there that we’ve been taking with some strong clients and so we have been earning some good spreads in that business, but I think it’s fairly just --.

If I can just have just one additional one, maybe for Dave, I mean Dave these are obviously very good results and the hurdle has been checked. The question really is, though, if in Canadian banking 3% to 4% loan growth is what you’re gearing up for, and you’re really relying on organic growth to a large extent, to accommodate the growth that’s [filling] out the market. So where is it organic growth going to come from?

Well, you’ve seen while the mortgage business is slowed, as expected, given the regulatory and consumer change in preferences, I would highlight the agility of our business model. As growth in consumer demographics shifts it deposits an investment, we have a top franchises in those areas, number one and number two franchises, and we are able to capture that growth irrespective of where it occurs the Canadian economy. So I remain very confident about the agility of our business model, and its ability to capture a disproportionate share of growth irrespective of where it occurs in the customer segment or in the business. But I think that is a really important part and you’ve seen that with our investment growth numbers, you’ve seen that with our core deposit growth numbers, and we remain very confident in those franchises. So I think as you look at the Canadian economy and expect an improvement, whether its bank account to forecast or an internal economic forecast, we are expecting modest improvement in economic growth next year and that will hopefully drive some more organic growth in deployment of marginal capital. So I think we are confident of capturing growth and expect to see a little bit better environment going forward.

Our next question is from Peter Routledge from National Bank Financial. Please go ahead.

Just to come back to the next question, if I look at Canadian banking, which is 50% of the earnings, pre-provision income group at 3.8%, that’s before the interchange headwinds that are probably going to hit for the next little while, and I look at capital markets, got a 15 year track record of growing earnings at a pretty repeatable level and avoiding the asymmetric losses that have hurt so many of your peers. So you have clear risk return superiority relative to peers in that business, and that business is a great growth outlook. So how can you not allocate more capital and be more aggressive in growing capital market, even those dynamics.

I think as we look back, the balance that we’ve achieved in our diversified business model is good as very well, and all those strengths in capital markets, we fully acknowledge and we are proud of that consistent growth, it’s a very well-managed business, and a business that has attractive opportunities. But as we balance all stakeholders needs, sticking to that diversified business model, it’s important and it’s been a quarter of success in the past and our strategic guidelines remain a guideline over the medium to longer term. So I think we opportunities in all our businesses. We saw record results at the same time in our wealth management business, and we’ve got definitive demographic shift in our economy in North America and in Europe and in a number of markets. So all our businesses have attractive growth opportunities, and that we feel will keep, will allow all businesses to grow and keep the existing ratio of our diversified model roughly the same.

Just on the Canadian banking, and there is exogenous factors you performing well in this segment, and I’m not critiquing the performance that’s more, there are exogenous factors that are going to slow earnings growth, and a risk to me for Royal seems to be 50% of your earnings are coming from a business that faces some pretty material headwinds. The thing I’m alarmist in that concern or not?

On the retail side you’re saying?

Yes, Canadian banking.

Well, I think you are being alarmist. One, and I responded to Mario’s question, the previous question, we were having an interchange specifically, we have a number of levers, it interchanges, reduced it by legislative action or regulation. We have a number of levers through positive credit profile that are managing our reward program that deal with that. It will impact consumers in Canada, across-the-board, but we have the options to manage that. If you look at the types of tailwinds we would have in a retail and our wealth management business, particularly from a higher rate environment, as you’ve seen disclosed in the industry in North America are quite material, so combine that with the outlook for better, for economic growth and I would say you’re being quite alarmist that there certainly are some very positive opportunities in potential tailwinds. So I think they certainly offset any type headwind that we might receive from a cheering credit environment, recycled for any type of regulatory change.

Our next question is from Robert Sedran from CIBC. Go ahead.

Doug I am not sure if your comments about some of the unusual items during the quarter covers my question, but I note a pretty significant uptick in European revenue as well, and against the backdrop of some mix let’s call it, between the UK and the continent in terms of the economic backdrop, can you comment a bit on the European outlook and whether that unusual item affected Europe this quarter.

One of them did, one of them was on our books in our European subs, and so slightly less than a half of the hundred occurred in the UK. I would say away from that one of the things that we have been focused on is improving the European business. So we’ve done more hiring in Europe than any other geography over the last year, and our operating committee came to the conclusion that this is an opportune time to improve our platform in Europe, and many of our businesses, especially in the trading side are under new leaderships in Europe its [direct], we are very pleased with the result that we are getting under that new leadership. We are hiring and upgrading people and, we are going to improve that business, and you are starting to see some results of the efforts in the best normal banking.

Have you grown more comfortable putting capital into Europe?

Well, we’ve got a small loan book in Europe. I mean we would have about 160 borrowing customers that’s actually in Europe where the corporate business is really focused in the UK, Germany and France and its mostly, I’d say largely investment grade which really supports [quick] origination, new issue originates from the big business. We are going to continue to lend, but we are going to really focus on those economies, and so we have some loans elsewhere, but I would say its really focused on all the three places.

We have no further questions at this time. I’d like to return the meeting back to Mr. Dave McKay.

Thank you. Operator, and thank you everyone for joining us this morning. This was a great quarter for RBC, and a testament to the strength of our diversified business model and a strong capital position. We look forward to presenting to you again next quarter. Thank you everyone and have a good weekend.

Thank you the conference call has now ended. Please disconnect your lines at this time, and we thank all who participated.