Good morning, ladies and gentlemen, and welcome to the RBC 2016 First Quarter Results Conference Call. I would now like to turn the meeting over to Ms. Amy Cairncross, VP and Head of Investor Relations. Please go ahead, Ms. Cairncross. Amy Cairncross - Vice President & Head-Investor Relations: Good morning and thank you for joining us. Presenting to you this morning are Dave McKay, President and Chief Executive Officer; Janice Fukakusa, Chief Administrative Officer and CFO; and Mark Hughes, Chief Risk Officer. Following their comments, we will open the call for questions from analysts. The call is one hour long and will end at 9 AM. 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 for your questions are Doug Guzman, Group Head, Wealth Management & Insurance; Doug McGregor, Group Head, Capital Markets and Investor & Treasury Services; Jennifer Tory, Group Head, Personal & Commercial Banking; Zabeen Hirji, Chief Human Resources Officer; and Bruce Ross, Group Head, Technology & Operations. As noted on slide two, 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. David I. McKay - President, Chief Executive Officer & Director: Thank you, Amy, and good morning, everyone. RBC had a solid first quarter in an operating environment that was challenging for both us and some of our clients. We delivered earnings of CAD 2.4 billion, flat from a strong first quarter last year. Our results reflect strong execution of our growth strategy. We continue to build our core client franchises while managing expense growth. We closed City National which…

Thank you, Janice, and good morning. Turning to slide 14, as a result of sustained low oil prices and a rise in unemployment in oil-exposed regions, provisions for credit losses on impaired loans increased from last quarter's low levels of 23 basis points to 31 basis points this quarter. For context, this time last year, the price of oil was around USD 50 a barrel, a level that we noted challenged the profitability of the sector. Throughout 2015, many of our clients in the oil and gas sector raised capital, delayed capital spending, cut dividends or sold assets to help mitigate the impact. The extended duration of low oil prices, which averaged USD 37 a barrel in Q1, has put additional pressure on some of our clients. Given the challenging environment, our credit performance this quarter was in line with our expectation. As seen on slide 15, provisions of CAD 410 million increased by CAD 135 million this quarter, mainly driven by higher provisions in Capital Markets and Personal & Commercial Banking. In Capital Markets, provisions were CAD 121 million, or 53 basis points, up CAD 84 million, or 36 basis points, from last quarter, primarily due to losses on four oil and gas accounts and one utility account. Wholesale provisions can be lumpy. In this quarter, we had one large provision on a syndicated exploration and production company which accounted for approximately two-thirds of the Capital Markets provisions. The remaining oil and gas provisions are related to two drilling and service accounts, one in Canada and one in the United States, and one exploration and production account in the United States. In Personal & Commercial Banking, provisions were CAD 284 million, or 30 basis points, up CAD 44 million, or 5 basis points, from last quarter. Provisions in Canadian…

Thank you. We will now take questions from the telephone lines. The first question is from Sumit Malhotra from Scotia Capital. Please go ahead.

Thanks. Good morning. Just want to start with Mark, please. And specifically on the wholesale portfolio, a two part here. At – it was in January, David made mention about, I think, 40 basis points being a reasonable outlook as far as the loss rate in the Capital Markets or wholesale segment was concerned in the interim. Wanted to check with you, as to whether under this scenario, you're now envisioning that still holds? And maybe related to that, we've talked a lot about the oil and gas portfolio, but we did note and you mentioned that there was a utilities provision booked in the quarter as well. How should we think about your utilities exposure, as it relates to the current oil and gas environment?

Thank you for the question. I'll answer the first one on the 40 basis points. Obviously with, as I did mention with Capital Markets situation, they tend to be lumpy. And we did have the one loan PCL, which caused that to jump to the 53 basis points. We do believe that the 40 basis points would still hold over a number of quarters. On utilities, I would stress that the loan that we have the PCL on was an individual situation that is not really an industry problem. It was a situation where a parent company outside of Canada and the United States has had difficulties and has caused some investment issues in terms of building the operation. So, I would call that as certainly unique and not an industry issue.

Just want to clarify something here. So, we're focused mostly or we have been anyway on the direct oil and gas portion of what you breakout on energy. When we think about that utilities component in some of the scenarios you've described the U.S. stress testing, where – does that come into play in a major way in terms of your forecast of losses or is it more on the P&P and services component that you're still focused?

The majority of our expectation under stress would be in exploration and drilling and the services.

All right. I have one on capital, but you know what, I'll re-queue and we'll try it later on the call.

Thank you. The next question is from Doug Young from Desjardins Capital. Please go ahead.

Hi. Good morning. Just further on the oil and gas portfolio. And just saw that the undrawn facility increased I think from CAD 13.7 billion from CAD 11.7 billion. So, I'm just trying to get a sense of the quantity of increase that was more FX related and about the increase, where that's related to; what type of clients and so forth? Thank you.

The undrawn increase was solely related to foreign exchange.

So, it's 100% foreign exchange, okay. And so, since I was fairly quick, maybe I can just kind of double back on another question here. In Canadian Banking, obviously, the NIM compression, down 3 basis points, and there was a number of drivers of that given in the prepared remarks. Just wondering when you look at through fiscal 2016 if – what sense do you have in terms of other contractual – what do you think the impact for the full year will be in NIMs considering nothing else changes in the environment that we're in right now? Or is this a NIM where we should see stabilization? Thank you. Jennifer Tory - Group Head-Personal & Commercial Banking, Royal Bank of Canada: Thanks, Doug. It's Jennifer. Obviously, the current environment is challenging our margins given the low interest rates and the competitive pressures. We also have a fully loaded funding model, so the cost of hedging, et cetera, are all reflected in our NIM, and this year-over-year decrease is actually in-line with the 1 basis point to 2 basis points per quarter that we expect to given the current environment. And going forward, we expect to continue to guide to a compression of 1 basis point to 2 basis points per quarter, but we will remain disciplined about managing our margins. David I. McKay - President, Chief Executive Officer & Director: Doug, this is Dave too, (36:30) and as we talked about in the last call, asset mix has an impact given the ratio between fixed rate consumer lending and variable rate consumer lending. We're still – continue to see kind of very high by historic terms, margins on the variable rate book, which has a lower component in our overall portfolio than many of our other peers.

Great. Thank you very much.

Thank you. The next question is from Steve Theriault from Bank of America Merrill Lynch. Please go ahead.

Thanks. Had a quick question on City National, but if I could just ask Mark a follow-up question. I was going to ask, if you think the 31 basis points this quarter is a reasonable run rate or if – we might see some reversion to the downside. Obviously, that number can bounce around a lot and I'm sure it will depend on if there are any sort of lumpy charges but, it seemed from your prepared remarks, Mark, that you think that – my interpretation anyway was that, that 30 bps to 35 bps is probably what we should expect in the near term and there is going to be some noise through the oil and gas portfolio unless oil arises meaningfully from here. So, maybe just your thoughts on that, please?

Yes, I think if oil continues at the level it is, the 30 bps to 35 bps is what I would think is our more normalized PCL for going forward.

Okay. Thanks. And just on City National, you go on to some detail around the rising gross impaireds from the impact to City National. Can you give just a little detail on the FDIC covered loans that I saw mentioned, just in terms of their nature and the size and is it from a portfolio or an acquisition that's – or a book of business that's running off or something that's being built on?

Yeah. It's a book of business that's being run off. It was coming out of the financial crisis. A number of financial institutions in the United States purchased FDIC covered loans as essentially investment opportunities. These were impaired loans that are, say, FDIC covered. This is a portfolio that's winding down quite satisfactorily. It's been I think a very good investment for City National, but it is – it was a once-in-time opportunity and – but they still had some left as we acquired them.

Got you. And it was a loan sale not a bank acquisition per se?

It was a purchase of a loan portfolio.

Got you. Thanks very much.

Thank you. The next question is from Gabriel Dechaine from Canaccord Genuity. Please go ahead.

Hi. Good morning. I have a two-pronged one for Mark, just quick numbers. When you do your stress test, what's the impact of credit downgrades on your RWAs and therefore on your core Tier 1 ratio? And then just want to talk about the range of PCL that you quote for your stress scenario, 40 basis points to 50 basis points. If I look at your capital disclosures, page 42 of the supplement, I see average historical actual loss rate of 43 basis points. That's within that range, but that's an historical average going back to 2003, which included some very good years and two or three really bad ones that were – I don't want to downplay the financial crisis, but it was brief in retrospect. I'm just wondering, how come that number is within your stress range? It kind of doesn't make sense to me. And we're apples-to-oranges here a bit, but I'm looking for a connection.

Okay. If I answer the first question, in the stress scenarios, I think you're asking what would be the impact on RWA, is that what you were asking?

Yes. And – or if you just want to summarize in core Tier 1 terms?

So, I think that the thing I need to stress is the exposures in oil and gas still is only 1.6% of our total loan portfolio. So, while we are – we would expect some increases in RWA, and I think it would be in the region of CAD 1 billion to CAD 3 billion that in the overall scheme of our capital management, that is still a relatively small number.

So a CAD 1.3 billion – sorry, it would be...

CAD 1 billion to CAD 3 billion of incremental RWA.

CAD 1 billion to CAD 3 billion? Okay.

So, I'm also having a little bit of trouble understanding your question with respect to the 40 basis points or 50 basis points. So let me try, and then...

Yeah.

...don't quite get it, get back to me. What we do is, is we do a macro stress across all of the portfolios, and that stress has shown that our PCL would increase in that Canadian recession type scenario to 40 basis points to 50 basis points. What we then say is that an increase that would be within what we call our risk appetite and how we define our risk appetite is that we look at our historical through-the-cycle loan losses and determine, is this going to be outside of that historical through-the-cycle experience? If it's beyond that, then that would suggest a stress test that's beyond our risk appetite. If it's in our results, in this macro stress that I'm quoting are actually within that historical through-the-cycle. Does that answer your question?

Yeah. It does. So, the results of your stress test lead to a PCL ratio that is essentially your historical average, not like, as we think of it, a stress test – or a stress scenario where PCLs really, really spike. That's kind of what it sounds like.

I think what I'm trying to say is, is that I guess it's a positive in a sense of, what we're trying to say is that, even when we construct a Canadian recession scenario, we do not see PCL going beyond our historical through-the-cycle PCL.

Okay. But that's kind of the point here is that, how is that possible if – and I'm being very simplistic here, and not as detailed as what you guys are doing, but all the stuff that goes in these stress tests, unemployment spikes, oil for USD 25 for a number of years, and interest rates doing whatever, and all that does is result in your historical loss rate. Is that – that's what you're saying?

Yes.

Okay. Thank you.

Thank you. The next question is from John Aiken from Barclays. Please go ahead.

Good morning, Mark. Apparently you're very popular this morning. Wanted to circle back on the consumer side of the loan portfolio. The increase in charge offs on the credit card portfolio not terribly surprising, but the uplift on the personal lines was a little bit higher than I would have expected it at this stage in the game. Can you tell us what type of products are driving this? Was this almost completely on the unsecured lines, or were some of this secured by auto or other products?

That would include some auto, some unsecured revolving credit lines, as well there is also some student loans in that grouping.

And that is principally out of the provinces that are impacted by the energy prices?

That's correct.

Are you, as a bank, doing anything at this stage going forward to try to mitigate the growing losses that are emanating out of the consumer book?

Certainly, and Jennifer may want to also join in here, but in Alberta, certainly we do have – we're looking at our policies, our programs, and essentially I think the easiest way of saying it is, where we had exceptions to grant credit, those exceptions are not being given. We're sticking to our disciplined policies, and I think that's proving to be a good way to at least manage the portfolio at the moment. Jennifer Tory - Group Head-Personal & Commercial Banking, Royal Bank of Canada: What I'll add to that, John, is that obviously, we're continuing to work with our clients through these difficult times, but we're constantly updating our credit strategies, and those credit strategies are used for both origination and for monitoring our portfolio. So, we've added some additional dimensions in the oil-exposed provinces, to be able to mitigate some of the rising concerns. And also, we've got very well-developed strategies to support our clients through the difficult times, where we give them advice on restructuring their credit.

Great. Thanks for the color.

Thank you. The next question is from Meny Grauman from Cormark Securities. Please go ahead.

Hi. Good morning. Just thought maybe I'd just follow-up on Gabe's question, just maybe from a different angle. You talk about PCL sort of staying in historic range. Just from someone kind of looking in maybe more cynically, how can we talk about sort of historical range when we're looking at the kind of oil shock that we're seeing? It seems like we're not in normal times. So, I'm just wondering what – kind of, what's your perspective on that, in terms of, how do we define normal?

Again, maybe what I would try to – maybe say here is, what we're looking at is, how do our stress tests reflect from where we were? If you look at 2015, our PCL was in the 24-basis-point level, which was a very benign credit environment. When we do our name-by-name wholesale stress test, we believe that that would push our PCL back up to what we would call more normalized 30-basis-point to 35-basis-point range. If we then do the macro stress test, which is essentially trying to assume that there is a contagion effect across all of our portfolios into a Canadian recession, that would push our PCL up into the 40-basis-point to 50-basis-point range. So while I think, you're sort of struggling that 40 bps and 50 bps doesn't seem to be that high in a stress scenario, it is actually working off a base of 24 bps. So, it is a fairly stressful situation, relative to the experience we've been having over the last 12 months or so.

Okay.

Does that help?

Yeah, that definitely helps. Just wondering, I'm not sure if you mentioned, but what kind of real GDP growth are you assuming in your more extreme stress case scenario ex-Alberta? Is that something you've – you can mention or you've talked about?

We have multiple stress tests, so I'm struggling to remember. We do actually have – somewhere we actually have decreases in GDP, 3% to 4%, and unemployment going up 4% to 5%, and house prices coming down 20% to 25%. So, those are the three – oil price is obviously a big variable in this particular situation, but we do see GDP go down in a stressed scenario, we see house prices down, and we see unemployment up.

Thank you very much.

Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Thanks. Quick question for Janice. Janice, it was very helpful, the color around generals and specifics. Trying to kind of get a feel for, is there any flexibility on the part of the management to think beyond the 12-month timeframe that seems to be the norm – the (49:05) identifiable losses and – specific to the generals allowance. Janice R. Fukakusa - Chief Financial & Administrative Officer: That's a great question, Sohrab. And I think that when we look at accounting like general allowances and that, it's all about what the accounting guidance is. And I think that that's a difference case. When Mark talks about looking at borrowers on a case-by-case basis and looking at how we're you evaluating losses in that , that's a different perspective, that is the working perspective. From an accounting perspective, we can't really deviate from the accounting without having brought discussions around why we're different. So that's why I think the IFRS have addressed this whole issue by looking maybe more towards expected losses which, from our perspective, it's probably reasonable given the cycle and it would be a little bit closer to what's happening in the U.S. provisioning. But at that point in time, there's no point in switching around what we're doing given that the IFRS accounting changes happening in the next couple of years.

Okay. That is tremendously helpful, and I'm happy to take this offline, but with IFRS new accounting rules, does that essentially mitigate the need to have general allowances? Janice R. Fukakusa - Chief Financial & Administrative Officer: There is nothing called general allowance in IFRS..

Collectives or unidentified or... Janice R. Fukakusa - Chief Financial & Administrative Officer: Exactly. So it would – and I think what you will see, with the move towards expected loss is less of a reason to have an unassigned allowance, but the collective losses on portfolios may have a little bit more volatility and there may be more front ending of portfolio losses with an experience coming in and revising the assumptions, but it's hard to say.

Thank you very much. Janice R. Fukakusa - Chief Financial & Administrative Officer: Okay.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.

If I could first go back to something Dave McKay said. You said that the – and this is something you've talked about in prior calls as well that Royal's more heavier weighting to fixed rate mortgages, puts it at a bit of a disadvantage with the wider prime/BA spread. I think that's something you've talked about. Now, that prime/BA spread has really narrowed recently. So, is it your view that, that disadvantage narrows over time? David I. McKay - President, Chief Executive Officer & Director: Yeah. I think if you expect a reversion to the mean of 166 bps over time, we're in unprecedented territory for four or five quarters now, I think while it has narrowed, it's still slightly up year-over-year. So, if it holds where it is now, it's around 180 bps, 185 bps, you'll see Q3-Q4 will be actual (52:00) decrease from 195 bps, I think it reached that peak. So, right now it's still stable year-over-year to a slightly up but certainly given we're 75% fixed, and our margins are fixed there that we don't get the same lift on our variable rate mortgage book and the impact on our P&L that you did if you had to reverse the 75%-25% variable fixed. So, when you're talking about CAD 250 billion book, it's quite a significant margin shift.

Yeah. My only observation is that it did seem to be narrowing somewhat but I guess time will tell. David I. McKay - President, Chief Executive Officer & Director: It had sequentially, absolutely, but still if you look year-over-year, I think January 15 was around 182 bps I think, roughly 183 bps, right?

Okay. Can we go to the ROE discussion and -- because I feel like I'm missing something here. You talk about – perhaps Janice, Dave again. You talk about maintaining the 18% plus ROE and when I think about that in the context of potentially being a G-SIFI, the 9.9% Basel III Common Equity Tier 1 ratio, potentially higher risk weights on mortgages, although in a more sort of modest way standardization. There's just so many reasons why capital requirements would be going higher. So, what am I missing? When you talk about 18%, are you talking about managing the capital lower? Are you talking about managing earnings materially higher? Or am I just looking at this over a period of time that's different from yours? Are you thinking 5, 10 years out when you think 18%? Can you help me think through that, Janice. David I. McKay - President, Chief Executive Officer & Director: I'll start and maybe Janice will jump in. So, we certainly spend a lot of time talking about our targets and we look at – these are medium-term objectives. So, they're not in-year objectives and we've certainly made a large strategic acquisition which has reduced us from our target range back down. And we sit down with the management team, we say, as we look at where the growth is going to come from in the future and how we're going to grow our business, are we going to grow back to that ratio. And we sit here today saying there is a number of positives. And you're right; there are headwinds around uncertain regulatory environments, around market trading risk and around potential Basel IV capital for us, all uncertain, where we are in the future. But having said that, we're in record low margins…

So time, rates, and management actions around capital? Janice R. Fukakusa - Chief Financial & Administrative Officer: Right.

That's what gives you the confidence to talk about 18% still? Janice R. Fukakusa - Chief Financial & Administrative Officer: Yes.

Okay. Janice R. Fukakusa - Chief Financial & Administrative Officer: Yeah.

Thanks.

Thank you. The next question is from Robert Sedran from CIBC. Please go ahead.

Hi. Good morning. Sorry, if I missed it; just a quick clarification. That large loan loss in the Capital Markets segment, that was a U.S. credit?

No; it was outside both Canada and the United States.

Oh, okay. And then just returning to Jennifer. Jennifer, you talked about the margin pressure continuing. Thoughts on operating leverage in that environment? I know Janice mentioned still targeting 1% to 2%, but is that a likely or a possible outcome in an environment where revenues are sluggish or should we assume sort of flat operating leverage for the balance of the year? Jennifer Tory - Group Head-Personal & Commercial Banking, Royal Bank of Canada: No. We're still targeting 1% to 2% given the cost management initiatives that we have underway. And lot of those are first through reducing cost to digitization and optimizing our processes, but also we're looking to achieve economies of scale by putting things through – in home of best fit and some organizational and operational structures that we're using to be able to make things happen a little more quickly. We've reduced our head count in Canadian Banking by 500 year-over-year, most of which was through attrition and we still see a way to continuing to maximize the use of efficiencies to be able to continue to get at that (57:25) in some of our larger environment.

Was there anything unusual or seasonal about this quarter in terms of the expense base? Jennifer Tory - Group Head-Personal & Commercial Banking, Royal Bank of Canada: This quarter, there was actually just staff costs, which at this time of year are in the first quarter given timing of salary and benefit increases and also are eligible to retire, and some higher occupancy costs, but overall – other than that, just normal.

Okay. Thank you.

Thank you. The next question is from Peter Routledge from the National Bank Financial. Please go ahead.

Thanks. A question for Mark. Thank you for the data on the enterprise-wide stress test, I think the clarity of it kind of sparks 100 different questions in my mind, so that's your word for doing a good job. But the most important question I have is what do you assume of that house prices in that scenario?

In the macro stress test, I think it was 25% down.

So, that would be nationwide peak to trough?

Yes.

Okay. And then would that be uniform across the country or you say (58:33) Vancouver and Toronto might be worse than your...

At the moment, in that stress test, it was uniform across the country. We do other stress tests that look at different regions and variations, but in the one that I've been quoting relative to what could oil do, that's been across the country.

Right. Thanks. A question I think Gabe sort of touched on it that perplexes me anyway. I appreciate the 40-basis-point to 50-basis-point guidance range, but if I look back, even with Royal we see the PCL ratio going well above that for isolated short periods of time. So, I mean, how do we reconcile that 40 basis points to 50 basis points guidance with a historic record where occasionally we did see that ratio blow well above 50 basis points. I mean, how should we think about that?

Well, I mean all we're trying to do with the stress test is to give you information as to what we could see could happen if the variables that we put into the stress test occur. Obviously, if any of those variables are different, then the numbers and the output would also be different.

Right.

So it could be less, it could be higher. But we are using our best management judgment on what could happen if oil prices cause a greater contagion across the country into a Canadian recession. But all of those variables is really what brings you to a result.

Yeah. Are there one or two variables that are particularly or that would particularly drive it higher, the assumptions that you take might be more volatile?

Well, out of them and if you look again at our portfolios, the biggest portfolio that we have is residential mortgages. So, if our assumptions around house prices and consumer ability to service those debt is worse than what we put in our scenarios, that would have a material impact.

Right.

Our corporate lending is based on a more individual type industry basis. We're assuming a recession that would be across all of the industries.

Right.

But generally is in how it occurs, it tends to be more individual industries are affected and others.

Right.

So, it could be either one of those.

Right. Thanks. It's very helpful. Appreciate it.

Thank you. This concludes the question-and-answer session for today. I would now like to turn the meeting back to Mr. Dave McKay. David I. McKay - President, Chief Executive Officer & Director: Thanks, everybody, for joining this morning and your questions. We certainly understand your interest in the oil and gas and the portfolio, and appreciate your questions and look forward to talking to you again next quarter. Thanks very much.

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.