All amounts are in Canadian dollars and are based on our audited Annual and unaudited Interim Consolidated Financial Statements for the year and quarter ended October 31, 2016 and related notes prepared in accordance with International Financial Reporting Standards (IFRS). Our 2016 Annual Report (which includes our audited annual Consolidated Financial Statements and accompanying Management's Discussion & Analysis), our 2016 Annual Information Form and our Supplementary Financial Information are available on our website at: http://www.rbc.com/investorrelations.

TORONTO, Nov. 30, 2016 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today reported record net income of $10,458 million for the year ended October 31, 2016, up $432 million or 4% from a year ago. Results were driven by strong results in Wealth Management, which includes City National Bank (City National), and higher earnings in Insurance, which includes the Q3/16 gain on the sale of our home and auto insurance manufacturing business. Solid results in Personal & Commercial Banking and record earnings in Investor & Treasury Services also contributed to the increase. These factors were partially offset by lower earnings in Capital Markets. Our performance also benefited from our ongoing efficiency management activities. In addition, our provision for credit losses (PCL) ratio of 0.29% was up 5 basis points (bps) primarily as a result of the low oil price environment.

As of October 31, 2016, our capital position was strong, with a Basel III Common Equity Tier 1 (CET1) of 10.8%. In 2016, we increased our quarterly dividend twice, for an annual dividend increase of 5%.

"We reported record earnings of $10.5 billion in 2016, driven by the strength of our diversified business model which is focused on our clients and their success. I'm pleased with our performance, which also reflects the successful integration of City National and our commitment to cost and risk management discipline," said Dave McKay, RBC President and CEO. "Looking ahead, while the industry faces headwinds and an accelerating pace of change, we believe we are well positioned to deliver long-term shareholder value by leveraging innovation, our values-based culture which supports strong client relationships, and prudent capital and risk management."

2016 compared to 2015

• Net income of $10,458 million (up 4% from $10,026 million)
• Diluted earnings per share (EPS) of $6.78 (up $0.05 from $6.73)
• Return on common equity (ROE)(1) of 16.3% (down from 18.6%)
• Basel III CET1 ratio of 10.8% (up from 10.6%)

2016 Business Segment Performance

• 4% earnings growth in Personal & Commercial Banking, largely reflecting solid volume growth across most businesses partially offset by lower spreads, higher fee-based revenue in Canadian Banking, and higher earnings in the Caribbean. These factors were partially offset by higher costs in support of business growth and higher PCL in Canada. In Canadian Banking, we continued to improve our efficiency ratio to 43.4%, reflecting the benefits of our prudent cost management;
• 41% earnings growth in Wealth Management, primarily reflecting the inclusion of our acquisition of City National, lower restructuring costs related to our International Wealth Management business, and benefits from our efficiency management activities;
• 27% earnings growth in Insurance. Excluding the gain on sale of our home and auto insurance manufacturing business, earnings were down 6%(2) mainly due to lower earnings from new U.K. annuity contracts and the reduction in earnings from the sale of our home and auto insurance manufacturing business;
• 10% earnings growth in Investor & Treasury Services primarily due to higher funding and liquidity earnings, and higher client deposit spreads; and
• 2% lower earnings in Capital Markets, driven by higher PCL, and lower results in our Global Markets and Corporate and Investment Banking businesses, partially offset by lower variable compensation and the favourable impact of foreign exchange translation.

Q4 2016 Performance

Earnings of $2,543 million were down $50 million or 2% from a year ago, as the prior year benefited from a lower effective tax rate reflecting favourable income tax adjustments mainly in Corporate Support and Capital Markets. This was mostly offset by strong earnings in Wealth Management, largely reflecting the inclusion of City National, and record earnings in Investor & Treasury Services. Results in Personal & Commercial Banking and Insurance were relatively flat.

Earnings were down $352 million, or 12% from last quarter. Excluding the Q3/16 after-tax gain of $235 million from the sale of our home and auto insurance manufacturing business, earnings were down $117 million or 4%(3) due to lower earnings in Capital Markets and Personal & Commercial Banking which were partially offset by strong earnings in Insurance and Investor & Treasury Services, and higher earnings in Wealth Management.

Q4 2016 Business Segment Performance

Personal & Commercial Banking net income of $1,275 million was up $5 million from a year ago. Canadian Banking net income was $1,246 million, up $19 million or 2% from a year ago, mainly reflecting solid volume growth across most businesses partially offset by lower spreads, and higher fee-based revenue. These factors were partially offset by higher PCL, higher technology spend and higher costs in support of business growth. Caribbean & U.S. Banking net income of $29 million was down $14 million or 33% from a year ago largely due to higher costs in support of business growth partially offset by higher fee-based revenue.

Compared to last quarter, Personal & Commercial Banking net income was down $47 million or 4%. Canadian Banking net income was down $38 million or 3%, mainly driven by higher initiatives and technology spend, and seasonally higher marketing costs. These factors were partially offset by volume growth across most businesses and fee-based revenue growth primarily attributable to higher mutual fund distribution fees. Caribbean & U.S. Banking net income was down $9 million.

Wealth Management net income of $396 million was up $141 million or 55% from a year ago, largely reflecting the inclusion of City National, which contributed $89 million to net income, lower restructuring costs and higher earnings due to growth in average fee-based client assets. Excluding amortization of intangibles and integration costs of $29 million ($49 million before-tax) and $9 million ($16 million before-tax) respectively, City National contributed $127 million(4) to net income.

Compared to last quarter, net income was up $8 million or 2%, primarily driven by higher earnings from growth in average fee-based client assets and a higher contribution from City National.

Insurance net income of $228 million was up $3 million or 1% from a year ago, mainly reflecting higher earnings from new U.K. annuity contracts. These factors were partially offset by lower results due to the sale of our home and auto insurance manufacturing business, as noted above, and the impact of foreign exchange translation.

Compared to last quarter, net income was down $136 million or 37%. Excluding the Q3/16 gain from the sale of our home and auto insurance manufacturing business, as noted above, net income increased $99 million(3), mainly due to favourable actuarial adjustments reflecting management actions and assumption changes, and growth in International insurance, including earnings from new U.K. annuity contracts.

Investor & Treasury Services net income of $174 million was up $86 million from a year ago, largely due to higher funding and liquidity earnings reflecting tightening credit spreads and favourable interest rate movements, and higher client deposit spreads. These factors were partially offset by higher staff costs, a higher effective tax rate and increased investment in technology initiatives.

Compared to last quarter, net income was up $17 million or 11%, primarily due to higher funding and liquidity earnings reflecting tightening credit spreads and favourable interest rate movements.

Capital Markets net income of $482 million was down $73 million or 13% from a year ago, as the prior year benefited from a lower effective tax rate reflecting income tax adjustments related to the prior periods. In the current quarter, higher results in our Corporate and Investment Banking and Global Markets businesses were partially offset by higher variable compensation on improved results.

Compared to last quarter, net income was down $153 million or 24%, mainly due to lower trading revenue and lower equity origination activity. These factors were partially offset by increased loan syndication revenue largely in the U.S.

Corporate Support net loss was $12 million largely reflecting net unfavourable tax adjustments, partially offset by asset/liability management activities. Net income last quarter was $29 million, largely reflecting asset/liability management activities.

Capital – As at October 31, 2016, Basel III CET1 ratio was 10.8%, up 30 bps compared to last quarter largely due to internal capital generation.

Credit Quality – Total PCL of $358 million was up $83 million or 30% from a year ago, largely due to Canadian Banking, Wealth Management reflecting the inclusion of City National, and Capital Markets. PCL was up $40 million or 13% compared to last quarter, largely due to higher PCL in Capital Markets, Personal & Commercial Banking and Wealth Management. Our PCL ratio of 0.27% increased 4 bps from a year ago and 3 bps compared to last quarter.

Total gross impaired loans (GIL) of $3,903 million were up $1,618 million from a year ago largely due to higher impaired oil and gas loans in Capital Markets and the inclusion of City National. GIL was up $187 million from last quarter due to higher impaired loans in Capital Markets. Our GIL ratio of 0.73% increased 26 bps from a year ago and 3 bps compared to last quarter.

Q4 2016 vs. Q4 2015
Net income of $1,275 million increased $5 million compared to a year ago, primarily due to solid volume growth across most of our businesses partially offset by lower spreads in Canada, and higher fee-based revenue. These factors were largely offset by higher PCL, higher technology spend and higher costs in support of business growth. 

Total revenue increased $135 million or 4%, reflecting volume growth of 6% across most businesses in Canada partially offset by lower spreads, and higher fee-based revenue.

Net interest margin decreased 1 bp primarily due to the low interest rate environment.

PCL increased $48 million, with the PCL ratio increasing 4 bps, largely reflecting higher provisions in our Canadian personal and commercial lending portfolios and higher write-offs in our Canadian credit cards portfolio.

Non-interest expense increased $63 million or 4%, mainly due to higher technology spend and higher costs in support of business growth. These factors were partially offset by the continuing benefits from our efficiency management activities. 

Q4 2016 vs. Q3 2016
Net income decreased $47 million or 4% from the prior quarter, mainly driven by higher initiatives and technology spend, and seasonally higher marketing costs in support of business growth in Canadian Banking. These factors were partially offset by volume growth and higher fee-based revenue growth in Canadian Banking mainly attributable to strong mutual fund distribution fees reflecting higher average client fee-based assets due to strong net sales and capital appreciation.

Q4 2016 vs. Q4 2015
Net income increased $19 million or 2% compared to a year ago, primarily due to solid volume growth across most of our businesses partially offset by lower spreads, and higher fee-based revenue. These factors were partially offset by higher PCL, higher technology spend and higher costs in support of business growth.

Total revenue increased $123 million or 4%, mainly reflecting volume growth of 6% across most businesses partially offset by lower spreads, and higher fee-based revenue. Fee-based revenue growth is primarily due to higher transaction volumes driving card service revenue, and strong mutual fund distribution fees attributable to higher average client fee-based assets reflecting capital appreciation and strong net sales.

Net interest margin decreased 2 bps primarily due to the low interest rate environment.

PCL increased $48 million, with the PCL ratio increasing 4 bps, largely reflecting higher provisions in our personal and commercial lending portfolios and higher write-offs in our credit card portfolio.

Non-interest expense increased $49 million or 3%, mostly due to higher technology spend and increased costs in support of business growth, including marketing spend. These factors were partially offset by the continuing benefits from our efficiency management activities.

Q4 2016 vs. Q3 2016
Net income decreased $38 million or 3% from the prior quarter, mainly driven by higher initiatives and technology spend, and seasonally higher marketing costs in support of business growth. These factors were partially offset by volume growth across most businesses and fee-based revenue growth primarily attributable to higher mutual fund distribution fees reflecting higher average client fee-based assets due to strong net sales and capital appreciation.

Q4 2016 vs. Q4 2015
Net income increased $141 million or 55% from a year ago, largely reflecting the inclusion of City National, which contributed $89 million to net income. Lower restructuring costs, higher earnings due to growth in average fee-based client assets, increased net interest income, and higher transactional volumes reflecting favourable market conditions also contributed to the increase.

Total revenue increased $634 million or 38%, mainly due to the inclusion of City National, which contributed $543 million (US$411 million) to revenue. Growth in average fee-based client assets reflecting stronger markets, higher transactional volumes and net interest income also contributed to the increase. These factors were partly offset by the impact from foreign exchange translation.

PCL increased $21 million mainly related to provisions recorded in City National.

Non-interest expense increased $419 million or 32%, mainly due to the inclusion of City National, which increased expenses by $440 million, including $49 million related to the amortization of intangibles and $16 million related to integration costs, and higher variable compensation. These factors were partially offset by the impact from foreign exchange translation. In addition, the prior year also included restructuring costs largely related to our International Wealth Management business, including the sale of  Royal Bank of Canada (Suisse) SA.

Q4 2016 vs. Q3 2016
Net income increased $8 million or 2% from the prior quarter, primarily due to higher earnings from growth in average fee-based client assets and a higher contribution from City National. These factors were partially offset by a higher effective tax rate.

On July 1, 2016, we completed the sale of RBC General Insurance Company to Aviva Canada Inc. (Aviva) as previously announced on January 21, 2016. The transaction involved the sale of our home and auto insurance manufacturing business and included a 15-year strategic distribution agreement between RBC Insurance and Aviva. As a result of the transaction, we recorded a gain of $287 million ($235 million after-tax) in the third quarter of 2016.

Q4 2016 vs. Q4 2015
Net income increased $3 million or 1% from a year ago, mainly reflecting higher earnings from new U.K. annuity contracts and growth in International insurance. These factors were partially offset by lower results due to the sale of our home and auto insurance manufacturing business, as noted above, and the impact from foreign exchange translation.

Total revenue increased $106 million or 15%, mainly due the change in fair value of investments backing our policyholder liabilities, largely offset in PBCAE, and business growth in International insurance. These factors were partly offset by lower premiums reflecting the impact of the sale of our home and auto insurance manufacturing business and the impact from foreign exchange translation.

PBCAE increased $105 million or 36%, largely reflecting the change in fair value of investments backing our policyholder liabilities, largely offset in revenue, and growth mainly in International insurance. These factors were partially offset by lower costs due to the sale of our home and auto insurance manufacturing business, as noted above, and the impact from foreign exchange translation.

Non-interest expense decreased $3 million or 2%, primarily due to lower costs as a result of the sale of our home and auto insurance manufacturing business, as noted above, and efficiency management activities, which were partially offset by higher costs to support business growth.

Q4 2016 vs. Q3 2016
Net income decreased $136 million or 37% from the prior quarter. Excluding the after-tax gain of $235 million from the sale of our home and auto insurance manufacturing business, as noted above, net income increased $99 million or 77%(1), mainly due to favourable actuarial adjustments reflecting management actions and assumption changes and growth in International insurance, including earnings from new U.K. annuity contracts.

Q4 2016 vs. Q4 2015
Net income increased $86 million or 98% from a year ago, largely due to higher funding and liquidity earnings reflecting tightening credit spreads and favourable interest rate movements, and higher client deposit spreads. These factors were partially offset by higher staff costs, a higher effective tax rate, and increased investment in technology initiatives.

Total revenue increased $156 million or 35%, mainly related to higher funding and liquidity revenue reflecting tightening credit spreads and favourable interest rate movements, and increased revenue on higher client deposit spreads.

Non-interest expense increased $34 million or 10%, largely reflecting higher staff costs and increased investment in technology initiatives.

Q4 2016 vs. Q3 2016
Net income increased $17 million or 11% from last quarter, mainly due to higher funding and liquidity earnings reflecting tightening credit spreads and favourable interest rate movements.

Q4 2016 vs. Q4 2015
Net income decreased $73 million or 13% from a year ago, as the prior year benefited from a lower effective tax rate reflecting income tax adjustments related to the prior periods. In the current quarter, higher results in our Corporate and Investment Banking and Global Markets businesses were partially offset by higher variable compensation on improved results.

Total revenue increased $156 million or 9%, mainly due to higher fixed income trading revenue primarily in the U.S., as well as strong debt and equity origination activity and increased loan syndication revenue largely in the U.S. These factors were partially offset by lower equity trading revenue across most regions and lower lending revenue largely in the U.S.

PCL increased $15 million or 42%, mainly due to higher provisions, net of recoveries, in the energy sector.

Non-interest expense increased $79 million or 7%, mainly driven by higher variable compensation on improved results, partially offset by the impact from foreign exchange translation and lower litigation provisions.

Q4 2016 vs. Q3 2016
Net income decreased $153 million or 24% from the prior quarter mainly due to lower fixed income and equity trading revenue largely in Europe and the U.S., and higher capital taxes. Lower equity origination activity in Canada and lower foreign exchange trading revenue across all regions further contributed to the decrease. These factors were partly offset by increased loan syndication revenue largely in the U.S.

Due to the nature of activities and consolidated adjustments reported in this segment, we believe that a comparative period analysis is not relevant. The following identifies material items affecting the reported results in each period.

Total revenue and income taxes (recoveries) in each period in Corporate Support include the deduction of the teb adjustments related to the gross-up of income from Canadian taxable corporate dividends and U.S. tax credit investment business recorded in Capital Markets. The amount deducted from revenue was offset by an equivalent increase in income taxes (recoveries). The teb amount for the three months ended October 31, 2016 was $115 million compared to $267 million in the prior quarter and $213 million in the prior year period. For further discussion, refer to the How we measure and report our business segments section of our 2016 Annual Report.

In addition to the teb impacts noted above, the following identifies the other material items affecting the reported results in each period.

Q4 2016
Net loss was $12 million largely reflecting net unfavourable tax adjustments, partially offset by asset/liability management activities.

Q3 2016
Net income was $29 million mainly reflecting asset/liability management activities.

Q4 2015
Net income was $200 million primarily reflecting favourable tax adjustments and asset/liability management activities. The fourth quarter of 2015 also included transaction costs of $29 million ($23 million after-tax) related to our acquisition of City National.

KEY PERFORMANCE AND NON-GAAP MEASURES

Additional information about these and other key performance and non-GAAP measures can be found under the Key performance and Non-GAAP Measures section of our 2016 Annual Report.

Return on Equity
We measure and evaluate the performance of our consolidated operations and each business segment using a number of financial metrics such as net income and return on equity (ROE). ROE does not have a standardized meaning under GAAP. We use ROE as a measure of return on the capital invested in our business. The following table provides a summary of our ROE calculations: