Royal Bank of Canada (RY) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. [Foreign Language] Welcome to our Annual Meeting of Common Shareholders. I'm Kathleen Taylor, and I have the privilege of being Chair of the Board of Royal Bank of Canada. As Notice of the Meeting has been duly given and a quorum is present, I call the meeting to order. I'm pleased we're able to connect with so many of you today despite the extraordinary situation we are facing with COVID-19. Although we are unable to meet in person, our goal today is to ensure that you're able to participate fully in your annual meeting. I invite you, our shareholders, to ask questions and vote on each of the matters of business as if you were attending the annual meeting in person. Thank you for joining us. As always, the meeting will be conducted in English and in French, and you may submit your questions in both languages. If you are using the Lumi web platform, you can select either English or French to listen to the webcast. If you wish to change languages, click on the language button shown on the right side of the platform. [Operator Instructions] As with our in-person meetings, please keep your comments brief. I also encourage you to submit your questions as early as possible so that we may address them at the right moment during the meeting. Registered shareholders and duly appointed proxyholders who attend the meeting online may vote live throughout the meeting. You may vote at any time until the last item of business has been put to a vote, and I declare the voting closed. After my introductory remarks, we will hear from Dave McKay, our President and Chief Executive Officer, followed by the regular items of business, including the election of directors and the appointment of our auditor. Shareholders will also be asked to approve a nonbinding advisory resolution on our approach to executive compensation. We will then consider the shareholder proposals and deal with any other business, including questions received from shareholders. Please take a moment to review the caution regarding forward-looking statements provided on your screen. At this meeting, we may make forward-looking statements which involve certain assumptions and have inherent risks and uncertainties. Actual results could differ from these statements. This morning, I'm joined on the webcast by Dave McKay, President and Chief Executive Officer; and Karen McCarthy, Senior Vice President, Associate General Counsel and Secretary. I will act as Chair of the meeting, and Karen will be our Secretary. Pina Pacifico and Joe Chirico, officers of our transfer agent, Computershare Trust Company of Canada, will be our scrutineers. Also joining us remotely are our directors and members of senior management. For the past few weeks, we've been living in uncertain and extraordinary times. Our clients, our communities, our colleagues and you, our shareholders, are grappling with this uncertainty every day. Tens of millions of businesses and consumers across the country are worried about their health and safety as well as their financial futures. These are 2 historic challenges that our society is taking unprecedented action to address. On the health challenge, the tireless work of medical and public health workers across Canada and the globe are playing a vital role in caring for those directly impacted by the coronavirus and helping to slow the spread on the front lines. We thank them for their incredible service. At the same time, citizens and businesses everywhere are doing their part by encouraging and practicing physical distancing. And you will hear more from Dave McKay about how this is being implemented at RBC. For today's annual meeting, we're doing our part too by being together virtually. While it is so important to connect with our shareholders in person, the decision to go virtual this year was important and necessary. We are still committed to giving shareholders the opportunity to ask questions and address our meeting and have strived to emulate our usual meeting as much as possible. Alongside the health crisis, we're facing another equally daunting challenge in the unfolding economic crisis. You won't be surprised to hear that the banking industry is on the front lines of this challenge. RBC plays an essential and critical role in providing clients and customers access to credit, liquidity and ongoing advice to help stabilize and support the economy in the months ahead. As Canada's largest bank, and one of the biggest globally, we will continue to work alongside all levels of government and industry peers to help keep our economy resilient and strong. This is the role RBC has played for more than 150 years in good times and in bad. And it's what it means to live our purpose of helping clients thrive and communities prosper. We receive -- as the bank stewards, your Board continues to ensure that RBC has the right strategy, risk management and talent to stay the course amidst these ongoing challenges. We receive regular updates on the current situation, including on the measures taken by RBC to support its clients while ensuring the safety of our employees. We provide oversight to ensure the bank's decisions align with our strategic plans and priorities as well as our risk appetite, constructively challenging management and monitoring initiatives. We also provide guidance to the leadership team as it constantly adapts to this rapidly changing and highly complex situation. Of course, and as always, people are the cornerstone of our continued success. Our RBC colleagues across the globe have worked tirelessly to provide critical services and relief to clients like never before. And I want to recognize them for their dedication, compassion and courage. We also recognize the strong leadership of RBC's talented executive team who are steadily driving RBC's strategy forward in a time of great adversity. In that regard, last year, we were pleased to announce the appointments of Derek Neldner as Chief Executive Officer and Group Head, RBC Capital Markets; and Christoph Knoess as Chief Administrative Officer. These appointments followed the retirements of Doug McGregor and Jennifer Tory, both of whom served as valued members of our executive team for many decades. We are grateful to Jennifer and Doug for their contribution and dedication in helping RBC become one of the most trusted and successful financial institutions in the world. As a leading corporate citizen, RBC brings the full strength of our organization to complement public action with our resources, capabilities and know-how in order to support the communities where we operate, helping to create positive and lasting environmental and social impact in the process. More than ever, our strong governance practices are an essential foundation for the bank's success and long-term sustainability. They ensure the decisions we make are sound, resist the temptation of short-termism and remain in line with our vision, purpose and values. We remain committed to improving our pursuit of governance excellence, and we'll continue to engage with our key stakeholders in creating new and innovative approaches to strong stewardship that align with RBC's strategic objectives and core values and create long-term value for our shareholders. On behalf of the entire Board, we are confident in the bank's strength and strategic direction and believe RBC's purpose-led approach, now more than ever, will help clients and communities emerge from this global challenge stronger than ever. I'll now turn our session over to Dave McKay to provide his remarks to shareholders. Dave?

Thank you, Katie, and good morning. None of us would have ever imagined hosting an Annual General Meeting like this, but our world has changed in unpredictable ways since the COVID-19 outbreak. We appreciate everyone adapting to this year's format. The past couple of months have been incredibly challenging. Lives have been lost, workers displaced and big parts of our economy have ground to a halt. A daily stream of facts and figures help us make some sense of the crisis. The stories I keep coming back to are about our lives and livelihoods. Many have come to me directly through calls and e-mails. The older couple who did all the right things to save for their retirement, but now wonders if it will see them through. The young family who desperately searched for a way to get back home before the border closed. And the young graduate whose first job is now on hold indefinitely because the employer is struggling to stay afloat. A crisis like this reveals a lot about what we're made of. It's as true for a country as it is for a company. The coming months will be a test for both, and RBC is primed for this moment. I'm going to talk more about what we're doing to help our clients, our colleagues and our communities to get through this tough time. But from now, perspective is so important. Life will get better. Our collective actions will reduce the strains placed on our health care system, save lives and protect our economy and the routines of daily life will return. The schoolyard bell will never sound so welcoming. In the meantime, there are many things we're grateful for, like our health care workers, and all those on the front lines who are combating the virus with courage and compassion. On behalf of RBC, I want to thank all of them. Additionally, so many of our clients are facing significant financial challenges. My gratitude goes out to every RBCer who is helping them gain control of their own situation and working so hard in so many ways on our bank's response. You are a phenomenal team. And because of you, millions of people can keep counting on our bank to be there for them. That's, in fact, why we're here today at our Annual General Meeting. We've achieved many great things since our doors first opened in 1869. But none more vital to our success than creating value for those we serve. Our journey to continuously create more value has powered a steady stream of earnings. In 2019, we generated $13 billion of earnings. We also delivered a premium return on equity of just under 17%. Not only did we grow profitably, we grew prudently, thanks to our disciplined approach to cost, risk management and the diversification of our business. Our strong capital position and liquidity position enables us to remain resilient and keep growing. Much of our success comes down to this. We combine the best people with great technology to create real transformational value for all our customers. I think about this blend of capabilities as our bionic future. In this particularly challenging time, our offering is proving especially valuable. For instance, against this backdrop of market volatility, 1.7 million investors have relied on MyAdvisor, our online platform, to receive data, insights and counsel in real time. And as the pandemic impacts both supply and demand, our advisers are in a position to assist business owners with real-time insights about their customers, markets and performance through RBC Insight Edge. Among the many ways RBC stood out this last year, we were named one of the best workplaces in Canada and ranked #3 on Refinitiv's global top 25 most diverse and inclusive companies index. All the more impressive given that 7,000 publicly listed companies were reviewed. Importantly, in 2019, we maintained our commitment to you, our shareholders. 55% of bank profits were returned to our shareholders through dividends and buybacks. We had a great start to 2020 with $3.5 billion in Q1 earnings, up 11% from the prior year. We saw strength across all our businesses with strong volume and market share growth. And we continued to deliver value to you, our shareholders, with an increase to our dividend, bringing it up to $1.08 per share per quarter. As you might expect, the broader macro outlook for the rest of the year has been significantly impacted by COVID-19. Many nations, including Canada, were already in the latter innings of an economic expansion. Our challenge has been compounded by the collapse of oil prices. Indeed, we know the impact of the crisis will drive our economy into a recession. Exactly how deep and long this downturn might be, it's hard to see at this stage. But our national priority must be to help companies remain solvent and people employed. We need to move with urgency in days and weeks, not months. This will keep our economy primed and help speed up the recovery once the health crisis is in check. Ottawa and its provincial counterparts have acknowledged the profound hardships facing society, and they're responding with substantial measures to offset the magnitude of our fiscal challenges. Of course, we also need to think about the next stage of the recovery. Global trade migration is not likely to go back to the old model. International movement won't press a resume button anytime soon. Shoppers, diners and tourists may choose to stay away from each other for a while. These are significant challenges to grasp for a world that has largely benefited from globalization. We shouldn't give up on it. But for a country like Canada, we need to think about how to be more self-reliant in the areas that matter most to our competitiveness and prosperity. This includes creating more resilient Canadian supply chains, using technology to work and connect differently with stakeholders and transforming the way we learn and train so our companies and communities are better equipped for a new paradigm of disruption. In the meantime, let's get the relief programs activated and working for Canadians. I'm confident we will. An extraordinary amount of coordination between policymakers, regulators and financial institutions in the U.S. and Canada has already been on display. There is a strong resolve to cross the finish line together. So let me tell you how RBC is doing its part. Key programs introduced by the federal government are up and running. We are already flowing funds to help Canadians that are economically impacted by the outbreak into small- and mid-sized businesses seeking interest-free loans. RBC's efforts to provide immediate financial relief are also well underway. To date, we've processed over 250,000 payment deferrals, and that's for Canadians in need of immediate cash flow, including up to 6 months deferral for mortgages and other loans. RBC is also working closely with thousands of entrepreneurs and business owners, providing a range of options to serve them best. This includes increases to operating lines of credit limits and waiving of credit card minimum payments. We will also reduce credit card interest charges by 50% for personal and small business clients receiving minimum payment deferrals. We've assisted close to 18,000 clients since the travel advisories started. Our wealth advisers have reached out to hundreds of thousands of clients to help them understand the market volatility and the best ways through it. And we're working closely with many of our capital markets clients to support their financing needs and advising them on how to navigate the highly volatile market environment. In our efforts to combat the spread of COVID-19, RBC has made some pretty substantial changes to the way we work. Today, for instance, well over 70,000 people are working from home, up from 4,000 just a month ago. I'm very proud of how quickly we've adapted to these new measures as a company. But some adjustments have been disruptive to our daily routines, adding stress to our lives. We are equipping our people with tools, techniques and resources to stay connected and manage through this time, including a strong focus on mental health. RBC provides all of us with a sense of belonging, and that shouldn't change even if the way we work has. Our bank also understands these are anxious times for everybody, including our own employees. That's why our leadership team committed to no layoffs this year as a result of COVID-19. And we've made sure our on-site workers are operating in safe spaces and being compensated appropriately for their incredible efforts. Our communities are facing significant challenges as well. And many of the organizations who serve our most vulnerable are struggling to raise funds and deliver their services. RBC has made a commitment to support programs serving at-risk populations, addressing food and security and access to mental well-being support as well as other vital services. To date, the RBC family has donated over $4 million to community response efforts in North America and globally. Youth have also been disproportionately impacted by the economic fallout of COVID-19. Many rely on summer jobs to help pay for their schooling, but now wonder if they will have one in the coming months. For our part, RBC looks forward to welcoming our close to 1,400 summer students and providing them a meaningful work experience. And we are working with post-secondary institutions to provide full credit for co-op hours even as workplace routines are disrupted from COVID-19. We also know starting a career in a recession can be especially difficult to do with long-term implications to earning potential. It's all the more challenging when the workplace of tomorrow demands new and evolving skill sets. That's why our Future Launch program remains a critical focus for us. This 10-year $500 million commitment helps youth develop the capabilities and connections to thrive and prosper. We're adapting programs and learning opportunities so that we can continue to support youth in Canada in remote and virtual environments. To date, we've reached more than 1.9 million young Canadians through it, with an overwhelming majority of participants feeling more confident about their future. At RBC, we also feel confident about the road ahead. In immediate term, our bank is well positioned to manage through the downturn. We have the stability and strength of one of the best-rated financial institutions in the world. Our diversified business mix is a key advantage as is our strong capital and liquidity ratios. But what we're really focused on is exiting this crisis stronger and to be in a position to serve our clients in new and better ways. We will seize this opportunity to redefine the role we play in our clients' lives, and we're going to do it in the following 4 ways. RBC will provide the advice and insights, solutions and services that help our clients feel confident about the choices they make. We'll empower our clients to shape their own banking experience, in part by simplifying and digitizing experiences to make banking more convenient. RBC will further elevate our value proposition by adding new features and benefits to our offerings. We will also partner with other market-leading brands to give our clients more of what they want. And finally, we will leverage data analytics and digital platforms to deliver truly compelling offerings. Our strategy is straightforward, but it's difficult to duplicate. That's because RBC possesses a number of unique advantages in creating value. It begins with a powerful purpose. It is all about helping clients thrive and communities prosper. Another advantage is the RBC brand. It creates bonds, instills trust, inspires our people to use the power of their imagination and insight to relentlessly improve human experiences. Competitive advantages are derived from our scale. You need scale to build out new capabilities that, for us, go beyond banking. Of course, our success is only made possible by our talented team of employees. Their engagement in our business and brands surpasses the benchmark of high-performing companies we measure ourselves against. In 2019, that translated into rising client satisfaction levels across all our businesses. But as mentioned, there's another part of our purpose, which we're equally focused on fulfilling, helping communities prosper. Our society still faces the pressing challenge of climate change. To address this challenge, we need stable economy, and a stable economy requires a stable price of energy. We've long viewed these 2 premises as a precondition towards reducing carbon emissions in a meaningful way. That's because you simply cannot expect people to accept and take on change when economic conditions change for the worse. Right now, these premises are under threat from the economic fallout of COVID-19. And so the efforts underway to help our country recover faster takes on even greater meaning in our journey towards a healthier planet. We made a set of commitments to do just that, and you can find them in RBC's Climate Blueprint. They include a focus on helping our clients, including our energy clients and communities, make the transition to a lower carbon economy. Last year at this meeting, we announced a new business target of $100 billion in sustainable financing by 2025. We're on track to meet this goal, having contributed approximately $26 billion to sustainable finance in 2019 alone. Innovation is also a critical component of our Climate Blueprint. Through our Tech and Nature (sic) [ Tech for Nature ] initiative, we're helping to accelerate and scale solutions to the most pressing environmental challenges. And we're using our own voice to actively engage in public policy conversations. I began my remarks describing some hardship stories. So let me leave you with one more that underscores all the key points I've made today about RBC. One of our clients in Southwestern Ontario runs a flower greenhouse. And like many businesses, the past few weeks have been tough. It's supposed to be peak season for the client, but our account manager, Matt Mahler, learned that a number of orders have been canceled leaving our client with an unusual amount of idle inventory. So one day, he arranged to purchase 50 flower arrangements and distribute them to some of our branches that were open in the area. It was a small gesture, but it went a long way in saying, "We are all in this together." And that's the kind of bank we aspire to be every day. Understanding our client situation, looking after their best interests, finding new and better ways to serve them, it's all about creating value, something you can count on us to do today and well into the future. I want to thank our Board for their counsel, our employees for their commitment and to our clients who continue to place their trust in us. Finally, to our shareholders, we appreciate your ongoing support, and we're committed to continue delivering for you over the long term. Thank you, [Foreign Language] and I'll pass the meeting back to Katie Taylor.

Thank you very much, Dave. At this time, I'd like to introduce Samuel May, the representative of PricewaterhouseCoopers, our auditor, for the 2019 fiscal year, who is also joining us remotely for this meeting. Copies of the auditor's report and the financial statements are included in our 2019 annual report and have been mailed to shareholders. Karen, are there any questions for participants on the financial statements?

No, we have not received any questions or comments.

Thank you. We'll now proceed with the business of the meeting. You've received the Notice of Meeting and proxy circular which outline the matters to be considered today. I'll now ask Karen to review the voting procedures. Karen?

Good morning. Today, registered shareholders and duly appointed proxyholders will be voting online. The poll will remain open throughout the meeting until the last business item has been put to a vote and the Chair of the meeting declares voting closed. The meeting resolutions are being displayed on the website. To vote, tap one of the voting options available. Your vote will be automatically submitted to Computershare, our scrutineers, after you click on your choice. Votes may be changed up to the time voting is closed. If you do not press for, withheld, against or abstain as applicable when voting is open, your vote will not be recorded and you'll be regarded as having abstained from voting. Preliminary results will be announced later today, and final results will be posted on our website. A simple majority is required to approve matters voted on at this meeting.

Thank you, Karen. To facilitate proceedings since the meeting is conducted in a virtual-only format this year, I've asked Karen, who is also a shareholder, to move all motions. I will call on her at the appropriate time. We'll now proceed with the meeting's first item of business, which is the election of directors. Your Board places strong emphasis upon the selection of director candidates by assessing the Board's existing strengths against the evolving needs of RBC. An important element of our process is ensuring that a diversity of viewpoints, backgrounds and experiences are present at the Board. This year, the number of director nominees has been set by the Board at 14. Biographies of each of the nominees begin on Page 11 of the circular. Two of the nominees are standing for election for the first time this year. Maryann Turcke, who is the Chief Operating Officer of the National Football League. Before joining the NFL in 2017 as President, Maryann held progressively more senior leadership roles over 12 years at Bell Canada, most recently as President, Bell Media. Maryann has been a member of the Audit and Human Resources Committees since her appointment to the Board in January 2020. Frank Vettese was Managing Partner and Chief Executive of Deloitte Canada for 7 years and Chair of the Americas Executive. Prior to that, he led one of Deloitte's 4 global business lines as Managing Partner of Financial Advisory. Frank also served as Deloitte Canada's Chief Inclusion Officer. He has been a member of the Audit and Human Resources Committees since his appointment to the Board in July 2019. He became Chair of the Audit Committee on January 1, 2020. We welcome the extensive experience that Maryann and Frank bring to RBC, and we are very pleased to welcome them to the Board. I'll now ask Karen to nominate the individuals proposed for election as directors.

I am pleased to nominate each of the following persons to be elected as a director of the bank to hold office until the close of the next Annual Meeting of Common Shareholders or until their successors are elected or appointed. Andrew Chisholm, Jacynthe Côté, Toos Daruvala, David Denison, Alice Laberge, Michael McCain, David McKay, Heather Munroe-Blum, Kathleen Taylor, Maryann Turcke, Bridget van Kralingen, Thierry Vandal, Frank Vettese and Jeffery Yabuki.

Thank you. Karen, are there any questions from participants on the nominations?

No, we have not received any questions or comments.

Thank you. I declare the nominations closed, and we'll now proceed with the vote. [Voting]

The next item on the agenda is the appointment of our auditor. I'll ask Karen McCarthy to make a motion for the appointment of the auditor.

I move that PricewaterhouseCoopers be appointed the auditor of the bank until the close of the next Annual Meeting of Common Shareholders.

Thank you. Karen, are there any questions from participants on the appointment of the auditor?

No, we have received no questions.

Thank you. We will now proceed with the vote. [Voting]

The next item of business on the agenda is the shareholder advisory vote on our approach to executive compensation. The text of this advisory resolution is set out on Page 6 of the circular. We hope that you've had a chance to review our compensation discussion and analysis in this year's circular, which explains in detail how our compensation programs are designed to pay-for-performance and are aligned with effective risk management practices and the long-term interests of our shareholders. We take a progressive approach to continuously improving our compensation programs, integrating best practices and responding to input from our shareholders and our independent compensation adviser. In considering our approach to compensation in the future, the Board will take into account the results of today's vote, together with other feedback received from shareholders. I'll now ask Karen McCarthy to make a motion to approve this resolution.

I move on an advisory basis and not to diminish the role and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the circular, delivered in advance of the Annual Meeting of Common Shareholders.

Thank you. Now I was informed that we've received a comment from Mouvement d'éducation et de défense des actionnaires, or MÉDAC, with regard to this matter, and I'm going to ask [ Lionel Zabeau ] to read that comment. [ M. Zabeau ]?

[Interpreted] MÉDAC usually intervenes each year in the advisory vote on executive compensation. For years now, the Royal Bank of Canada has refused to grant our request and disclose the ratio it uses in the vertical analysis of its executive compensation policy and its calculation method. This year, the bank even rejected our proposal for technical and legal reasons that we believe have nothing to do with the merits of the issue and are against the spirit of the law. This is a conventional proposal that has been submitted to the bank in the past. And not only is it a simple and low-cost measure, it is mandatory in the United States. We have our own method for calculating the compensation ratio which consists of comparing the compensation of the bank's highest-paid individual with the average compensation of employee drawn from the number of full-time equivalent employees and the total payroll. The compensation ratio calculated for this year reveals that the compensation received by the bank's CEO, $13,693,903 million, represents approximately 78x the average compensation of employees. This is too high. Not only would it be appropriate for the bank to take this ratio into consideration in its calculation of the executive compensation, this ratio should also be disclosed on a yearly basis along with its calculation method, if only to promote the harmonization of these elements among public corporations. Naturally, we invite all shareholders to vote against the bank's compensation policy.

Thank you, [ M. Zabeau ]. Karen, are there any other questions or comments from participants on our advisory approach to executive compensation?

We have not received any questions or comments.

Thank you. We will now proceed with the vote. [Voting]

The last item of business on the agenda are the shareholder proposals. Shareholders have had an opportunity to read these proposals and the Board's responses which are set out in the circular starting on Page 100. The 2 proposals that are being put to a vote today were submitted by MÉDAC. MÉDAC representatives are unable to be present in person due to the virtual meeting format. Therefore, we have agreed to have each proposal moved on their behalf so that each of them can be voted on by shareholders. I will ask [ Lionel Zabeau ] to read the statements provided by MÉDAC in support of their proposals. [ M. Zabeau ]?

[Interpreted] This year, MÉDAC submitted the same 3 shareholders' proposal to the top 7 banks. All these banks have taken the collective stance of refusing to discuss them. And yet these 3 proposals touch on important subjects that concern them all, and it would be impossible to resolve them -- these issues individually. These 3 proposals dealt with the compensation ratio, the digital security of personal information and the bank's target for the number of women on the Board of Directors. To our disappointment, the banks have all refused to engage in a group discussion on these shareholders' proposals. This being said, the following 2 proposals which will be submitted to a vote today can be found in the bank's circular starting on Page 100 of the English version of the 2020 circular. Proposal #1, competitiveness and privacy. It is proposed that the Board of Directors inform the shareholders of the investments the bank intends to make over the next 5 years to update its computer systems so as to increase its competitiveness while enhancing privacy protection. There have been some very serious digital security breaches in the country's financial community in 2019. It is crucial that they specifically be taken into consideration and that the lessons be learned and be incorporated into the bank's digital security policies. Perhaps, the meeting Chair or even the bank's management would like to go over some of the details with us today, we hope they will. Naturally, we invite all shareholders to vote in favor of this proposal. Proposal #2, diversity target. It is proposed that the bank adopt a target higher than 40% for the composition of its Board of Directors for the next 5 years. As can be seen from the table accompanying our proposal in the circular, all of the banks have adopted targets for the number of women sitting on their Boards of Directors. These targets are set at either 30% or 1/3. All of the banks have exceeded their own targets. We would like these targets to be raised to 40% for each gender. Banks play an important role in the country's financial ecosystem. They must set an example. Naturally, we invite all shareholders to vote in favor of this proposal.

Thank you, [ M. Zabeau ]. I'll now ask Karen McCarthy to move each of these proposals on behalf of MÉDAC.

Madame Chair, on behalf of MÉDAC, I propose proposal # -- I move proposal #1, competitiveness and privacy; and proposal #2, diversity target, as they are set out in appendix A of the circular.

Thank you. Karen, are there any questions from other participants on these proposals?

No, we have not received any questions or comments.

Thank you. We will now proceed with the vote on the 2 shareholder proposals. If you have not yet voted on any of the other business items on the agenda, please do so now as well. [Voting]

As we have now dealt with all business items on the agenda, I declare voting on all matters closed. Let's now move to the question period. If you haven't done so yet, please submit your questions online or by telephone. I'd like to remind you that questions should be of interest to all shareholders and not of a personal nature. If your question is related to a personal matter, an RBC representative will contact you after the meeting. Our CEO, Dave McKay, will answer questions that are related to the management of the bank.

I've been informed that our first question comes from MÉDAC, and I'll ask [ Lionel Zabeau ] to read that question. [ M. Zabeau ]?

[Interpreted] For over 20 years, we have made it a habit, indeed it is our most basic right as shareholders to speak at meetings in support of the shareholder proposals that we submit to the bank each year as well as at various other times of the meeting. Because speaking is not an option this year, here are our comments. We are perfectly aware that the world today is grappling with a highly exceptional situation, the global 2019 coronavirus, COVID-19, pandemic. Under the circumstances, we fully understand the reasons, notably government orders, for which this year's shareholder meeting is being held virtually. We also fully understand that the reasons why the measures put in place for the holding of this meeting are, for the most part, limiting and that the decisions to take these measures were made very quickly. That said, we concur with the opinions of the Canadian Securities Administrators, ISS and Glass Lewis, on the subject. Virtual meetings should scrupulously preserve all of the shareholder rights that are guaranteed by custom, doctrine and case law and as well as by the act and its regulations, both in spirit and letter, starting with the right to speak. The great many Annual Shareholder Meetings that are exceptionally being held virtually this year should by no means set the standard in such matters. Needless to say, it is what can be done in person at a meeting that should prevail when determining what should be made possible in a virtual meeting, not purely technical considerations or the question of cost. The measures in place are essentially justified by the exceptional nature of the current health crisis. Under normal circumstances, the situation would be entirely different. And today's event would never be used as a precedent to justify future practices. We will be vigilant in that regard in the interest of all shareholders and society as a whole. Question, how would the organization of our virtual meeting be different if the bank had prepared it in the normal course of business without there being a health crisis or emergency?

Thank you, [ M. Zabeau ]. In response to MÉDAC's question, and as I have noted in my previous comments, our primary objective this year has been to ensure that our shareholders are able to ask questions and vote on each of the matters of business at this meeting as if they were attending it in person. I believe that any other virtual meeting would have generally been similar. Our team has worked very hard to arrange this special virtual meeting, and I'm pleased with what we have accomplished in the short time frame provided. Karen, have we received any other questions?

Yes. Our next question comes from Ms. Linda Siu. The government federal, provincial and municipal are helping a great deal, and I think that the bank should also do their part. The federal government has suggested that the banks give a 6-month moratorium to people who cannot pay their mortgages at the moment for obvious reasons. To me, that sounds like a reasonable request. No one is saying that the mortgage should be forgiven, just a 6-month mortgage break. The 6 months could be added to the length of the existing mortgage. I must say I was so disappointed when I heard that one bank refused the moratorium for one client by saying that according to the rules the client in question hadn't had the mortgage long enough to qualify. That rule might make sense in normal times, but we are not in normal times. The bank originally approved them for a mortgage, and the moratorium was due to extraordinary circumstances, completely beyond the control of these clients. Another bank has stated that they would not grant the moratorium to clients who aren't in good standing. For these people, the moratorium may be their last chance to improve their standing. I believe these people should be granted a moratorium. If their situation doesn't improve, the bank can always foreclose as a last measure. As a shareholder, I'm perfectly happy if the bank only makes $43 gazillion this year instead of $45 gazillion. I may be a shareholder, but I'm also a Canadian. We're RBC. We should be able to extend a 6-month moratorium to our mortgage clients. Doing less would not allow us to call ourselves Canadian. Would it not be possible for RBC to grant moratoriums to all clients regardless of how long they've had the mortgage and regardless of their standing at the moment?

Thank you for your question, Ms. Siu. RBC has a proud history of standing by our clients through challenging times, and we're committed as ever to ensuring that they have access to the trusted advice and critical financial services they need. Now as you saw from my remarks or heard from my remarks, that we're offering clients deferred mortgage payments and relief on their credit cards products. As of April 1, we responded to more than 250,000 requests for payment deferrals. And we're very proud of our team who has really stepped up to meet that high demand. We've built easy access on our websites for customers to go in and select payment deferrals. And any client who's impacted by COVID-19 qualifies for these deferrals and they're widely available for different borrowing types. We do not have any restrictions on the type of property. I'd just like to also say I am really grateful to our frontline employees who are working very hard to respond with a high degree of care and compassion to an unprecedented number of requests for support. We know this is a very difficult time for many, and we appreciate your patience as we respond as quickly as possible and do everything we can to support our clients.

Our next question comes from Emma Pullman of British Columbia Government and Service Employees Union, or BCGEU. As an investor, BCGEU is concerned by reports that RBC is facilitating fundraising for data analytics company, Palantir Technologies. BCGEU's concerns lie with Palantir's record regarding human rights. You may know that Palantir is the subject of a human rights risk briefing by the Investor Alliance for Human Rights, an organization whose members represent USD 3.5 trillion in assets under management in 16 countries. The Investor Alliance report outlines how Palantir's contract with U.S. Immigration and Customs Enforcement, or ICE, exposes Palantir to human rights risk. Through its data analytics technologies, Palantir enables ICE to carry out human rights abuses against immigrant communities through workplace raids, detention and deportation efforts across the U.S. and at its borders. Despite tremendous backlash from Palantir's own employees as well as students, investors, immigrant rights groups and the public, Palantir has refused to end its contracts with ICE. Therefore, we are concerned that RBC's decision to do business with Palantir poses material and reputational risk to RBC. We would like to support you in thoroughly reviewing and avoiding these risks. Question one, Palantir is one of a number of companies having relationships with ICE that facilitates actions which the international community views as human rights violations. Will RBC be assessing this industry under its environment and social risk policies and conducting enhanced human rights due diligence were required due to the potentially significant reputational risk posed by such relationships with ICE? Question two, will you agree to ongoing engagement with BCGEU and other investors to discuss these concerns further?

Thank you for your question, Ms. Pullman. So I'll keep my comments more general in terms of our approach. As you know, we generally do not discuss individual companies in public at our AGM or otherwise. I will say that we're strongly committed as an organization to maintaining the highest standards of ethical conduct and respect for human rights through our dealings with our employees, with our contract workers, clients and all stakeholders in general. This is mirrored in our code of conduct which reflects the spirit of Universal Declaration of Human Rights. I will also say that we have a robust risk management framework that identifies, assesses and manages potential risks related to client relationships or projects for that matter, including those related to the environment and human rights. And if we pursue or maintain business relationships, we do ensure appropriate steps are taken to mitigate those risks. These policies and processes that help inform our risk appetite, they're not static. We regularly review them, assess them, update them to ensure they remain relevant, responsive and incorporate international best practices. And finally, maybe I'll say, this is an important topic. And as mentioned in our circular, we are committed to further enhancing our stakeholder engagement on human rights matters.

Our next question comes from MÉDAC. How do you explain the decrease in executive compensation this year?

Thank you for your question. As shareholders will have seen, details on executive compensation are outlined in the circular, beginning on Page 48. Consistent with prior years, your Board viewed executive compensation through the lens of our philosophy and principles, which are all about long-term shareholder alignment, sound risk management principle alignment, rewarding performance, enabling us to attract, retain and engage our talent and of course, rewarding behaviors that align with our values and drive exceptional client experiences. For 2019, we were very pleased with the bank's performance against client, risk and strategic objectives. And as noted in the circular, rewards were above target in most of those categories. On the other hand, the short-term incentive program, which is based on financial net income objectives for 2019, was below target. And as a result, generally, executive comp was down on that measure.

Our next question comes from Neel Maheshwari. How will RBC weather the short- and medium-term cash flows as RBC navigates to give relief to clients, ensure no RBC job loss? How will the recovery horizon look? Will RBC eventually have to take tough action to reduce expenses?

Thank you for your question. Obviously, a very timely question. We started -- as I mentioned in my comments, is how will we -- there's many parts to your question. How will we weather the short- and medium-term challenges to the economy and to all businesses, including our business? And it starts with having a very, very strong balance sheet and a liquid balance sheet. So with 12% CET1 ratio, we are in a great position to extend our balance sheet to help clients. We're in a great position to withstand the challenges coming at us from an uncertain economic recovery period. We have a very liquid balance sheet. And that liquidity, we started with an LCR ratio above 120, and that liquidity has been strengthened by a number of programs. I alluded to them in general in my comments, but fantastic work by the Bank of Canada and the Federal Reserve in the United States to increase access to liquidity for all players in the financial system, has really helped ensure access to liquidity to our clients. So starting with a strong balance sheet and a highly liquid balance sheet, I think, is part of the key benefit -- key position that we started with this. As far as exiting, I also referenced it in an op-ed in The Globe and Mail and in my comments today -- my speech is that we need a recovery plan. We need to plan how we're going to -- what industries are going to come back, how we're going to practice social distancing, how the economic recovery starts. So I think that is very important. We're working on that. We're working on that with government. And I think that focus is important because you just can't assume that all this great work that we're doing to bridge ourselves, we have to make sure we bridge ourselves to a primed economy, which means ensuring that our companies are solvent and survive. From the smallest small business to the largest corporate, we have to keep them primed for recovery and an orderly recovery. I think that's really important. We have to keep their employees engaged with those companies so that they're not looking for employees or they're missing skills to prime for a recovery. So I think all of those preconditions are so important, which is why you saw the federal government have a wage subsidy announcement. I think it's a very important construct in priming our economy for recovery. And to the final part of your question about RBC, we have an ability to absorb and manage our costs. We've been doing that over the last number of years. We think it's really important to protect the roles of our employees in the uncertainty going forward. Our employees are helping clients every day. As I said, we've helped over 250,000 mortgage deferrals and credit card deferrals. So I think having our employees engaged at all levels is really important to help keep our economy primed for the recovery I just spoke about. This is a bridge. This is a period of transition to an uncertain future, but certainly a future. And I think it's really important that we have RBC positioned to exit this stronger and ready to support North American and European economy, where we're focused. So thank you for your question.

Our next question comes from [ Richard Filion ]. How does management see the evolution of the dividend for the next quarter?

Thank you, [ Mr. Filion ], for your question. As far as dividends go and dividend policy, we do not see any changes to our current dividend policy at this time. Again, we've built our bank to have sustainable earnings. We've built our balance sheet to have strength to withstand volatility and withstand uncertain times. As I mentioned, we started with 12% CET1 ratio. We have a great diversification of businesses. And therefore, at this time, as we face an uncertain future, we face it with enormous strength in liquidity and confidence in our model, the world changes. As you know, with OSFI reducing our D-SIB buffer by 125 basis points, all banks in Canada were restricted in increasing dividends or buying back shares. But as far as paying of a dividend, at this time there is no change to our dividend policy.

Our next question comes from [ Richard Sambrook ]. Congratulations on an excellent 2019 and impressive initiatives to cope with the pandemic disruptions. How are all the coronavirus challenges affecting RBC's Future Launch program now and into the foreseeable future, especially with changes at local branches and more recommendations to work from home? You surely modeled a pandemic scenario in your tests of capital adequacy. How are your modeled results comparing to the current situation?

So I think I heard 2 questions there, one on Future Launch and one on just general preparedness. As far as Future Launch goes, and again, in my comments this morning and in my comments in public, we think helping our youth prepare for the future, but helping our youth prepare in the context of COVID-19 is incredibly important. They are so important to exiting and to the growth of our economy. Therefore, that's why we've announced and we've advised our 1,400 summer students that they all have jobs, and we expect them to start maybe digitally, but we expect them to start on their usual start date, which is the first week of May. It'll be an adventure for all of us as we try to train them and get them ready to do their jobs, but we think it's really important to engage them and how to design the future. And I really do believe that we're going to exit this with a different economy, we're going to see the world in a different way, and we're going to have different opportunities, and I really do think our youth are a key part in helping us see how do we leverage technology and how do we kind of reimagine the future that is going to be changed by this terrible pandemic that we're going through. So thank you for your question.

And Dave, the second part of that question was you've surely modeled the pandemic scenario in your tests of capital adequacy. How are you modeled results comparing to the current situation?

We are doing a number of scenarios and exercises, as you can imagine. We're thinking about this in the context of the global industry. As you can imagine, the assumptions are difficult to make right now. So we have a wide range of assumptions and outcomes. I think it's important in preparing for an uncertain future, but it's just as important to prepare on how you're going to help clients exit this, how you're going to prep for that. So I can't comment right now. It's a work in process because recovery period and how we're going to cover is uncertain. But I can tell you that work is well underway. Start again, with the strength of our balance sheet and the liquidity in the system really helps us prepare for an uncertain future, but that work is well underway.

Dave, we have another question from Roger Straathof. Dave, I wish to express heartfelt thanks for all RBC is doing, and especially our frontline people. Question, are there any things we are doing now for our clients we would take into our routines in the future? Thank you.

I certainly expect client behavior to change through this process. We've had many clients access digital banking. We've seen so many of our leaders and our employees across the network see new ways of doing things, new ways of operating the bank. We've all been challenged. When you take 4,000 employees who work from home and increase it to 70,000-plus, I think 75,000 on peak days, you can't help but see the world differently. And I think this is the opportunity that all companies face, including RBC, is to see the different paradigm and the different lens that we put on our business and see how our clients are interacting differently and how they'll interact in the future. I mean I just read the newspaper this morning, as everybody did, and I saw 4 examples of how the world's going to be different for 4 different industries. One was about lawyers and wills and documents, and we certainly face that with mortgage documents and investment documents and doing more work in a digital world and not making our clients travel to sign documents. You saw it in the grocery industry and how supply chains are changing. So as we sit there and we work with our clients and we look at our own business, there's significant opportunity and significant learnings that I think are going to be applied to our economy, and I see that equally as well for RBC.

Our next question comes from [ Dawn de Licandro ]. Is the dividend safe to the end of the year? And if needed to preserve capital, could it be suspended?

I'll start by saying we recognize how important the dividend is to our shareholders. We have -- like most Canadian financial institutions, roughly 50% of our shareholder base are retail investors from Canada, or roughly 75% of investors are from Canada. And therefore, we fully understand how important the dividend is to our investors. As I reiterated before, at this time, there will be no changes to our dividend policy. As this -- the length and duration, as the severity of this pandemic becomes more apparent and as our customers try to weather this, obviously, dividend policy is reviewed in good times and in bad times by the Board on an ongoing basis, but I can't comment on whether it's safe. I can say at this time, our dividend policy is same as it has been.

We have another question from [ Al Best ]. Mr. McKay, when votes on the matter of the approach to executive compensation are reported, Board and management votes are included in the total. It would be interesting to hear what the percentage support would be if Board and management votes were excluded from the total. This is the appearance of conflict of interest when management vote on their own earnings.

Thank you, [ Mr. Best ]. It's Kathleen Taylor. I'll take that question. This matter was raised, I think, in previous meetings as well. And as was the case then and is now, management and Board percentages are very, very, very small. Management, I think, less than 1%, and so doesn't really factor into the impact of the vote on advisory compensation in any way. Thank you.

There are no more questions.

Thank you, Karen. As there's no more questions from shareholders, we'll move on now to the scrutineers' report. I've been informed that the scrutineers have now completed their preliminary tabulation of the votes cast in respect of each of the items on the agenda. I now ask Karen McCarthy to speak to the preliminary voting results. Karen, over to you.

The scrutineers have reported that 52% of eligible shares have been voted at this meeting. According to the scrutineers' report, I am pleased to report that all 14 director nominees named in the circular have been elected with over 94% of the votes in favor. PricewaterhouseCoopers was reappointed as our auditor with 99% of the votes in favor. The advisory resolution on the approach to executive compensation was passed with 95% of the votes in favor. And the shareholder proposals were not approved. Proposal #1 received 97% of the votes against and Proposal #2 received 92% of the votes against. Final detailed results will be posted on the bank's website and on SEDAR.

Thank you, Karen. Ladies and gentlemen, that completes our meeting today. Before we close, on behalf of the Board and our shareholders, I would like to once again express sincere appreciation to RBC employees. In these extraordinary times, your dedication and commitment to serving our clients makes us very proud, and continues to differentiate RBC as an organization. We are very grateful to you for all you do. I would also like to thank Dave McKay and his senior leadership team for their values-led leadership, their focus on youth and their commitment to helping our clients thrive and our communities prosper, particularly as Canada and the world weather the storm of COVID-19. Your ongoing leadership will create an enduring legacy and build long-term value for all our stakeholders. I understand before we finish that we've also received on the web and the phone today questions from a number of shareholders that are related to personal matters. As I mentioned earlier, we will make sure to contact each of you individually after the AGM. And finally, to our shareholders, thank you all for being with us today. Until we meet again, we wish good health to you, your families and your communities. The meeting is now concluded. [Foreign Language] Thank you for joining us. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]