MESSAGE FROMDAVE MCKAY

Dave McKayPresident and Chief Executive Officer

Dear fellow shareholders,

Let me begin this letter by saying that I’mhonoured to serve as your President andChief Executive Officer. I started my careerat RBC more than 25 years ago as a summerstudent. As I worked in differentbusinesses, functions and locations overthe years, I was always impressed by thecalibre of people who work here. Today, I’mprivileged to lead this tremendous teamwith a shared commitment to building onRBC’s proud history of more than 150 years.

Six years after the financial crisis it feelslike the global economy has begun to turn acorner. The Canadian and U.S. economiescontinued to improve throughout the year.While the central banks of both countriesmaintained historically low interest rates,we saw lower unemployment, higherconsumer spending and improved housingmarket activity – all signals of healthyeconomic activity. The U.S. Federal Reserveended its asset purchase program inOctober, further proof that the U.S.economy is back on track. While growth inEurope was slow, the U.K. continued to be agood news story in the region. Across thebanking industry, regulation continued tobe a key theme.

Delivering record financial results in2014 for our shareholders

Against this backdrop, I’m pleased to reportthat 2014 was a record year for RBC. Wecontinued to extend our leadership positionin Canada and build our businesses inselect global markets. We earned $9 billion,

up 8 per cent from last year, reflectingrecord results in all of our businesssegments.

With these results, we achieved all of ourfinancial objectives. We earned $6.00 pershare (diluted EPS) with a return on equityof 19 per cent, and we ended the year witha strong Common Equity Tier 1 capitalratio of 9.9 per cent.

These financial objectives measureprogress toward our medium-termobjective of maximizing Total ShareholderReturns (TSR). We delivered compoundannual TSR of 23 per cent and 12 per centover the three- and five-year periods.During 2014, our one-year TSR was 19 percent. We raised our dividend twice during2014 for a combined increase of 12 percent while repurchasing shares, and werenewed our share buyback program for2015.

Building on our strengths to grow ourbusinesses

Looking ahead, we understand the driversof growth will be different from those inthe past decade, and I feel confident RBCcan adapt to changes and capitalize onnew opportunities including the shift indemographics, the emergence of newtechnologies and the changing needs andpreferences of our clients.

We know the pace of consumer borrowingin Canada will continue to moderatefollowing many years of strong creditgrowth, and that the shift to savings andinvesting will accelerate. In fact,investments are forecast to grow three

I am enormously proud ofwhat we’ve achievedtogether and incrediblyexcited for theopportunities that lieahead

times faster than credit over the nextdecade. RBC is extremely well positioned toserve our clients as we are the largestmutual fund provider in our home market,selling almost twice as many mutual fundsas our nearest bank competitor. We alsohave the largest full-service wealthmanagement business with leading marketshare for high-net-worth individuals inCanada, and we have the most mobile andbranch-based investment and financialplanners to serve our clients. We are alsoamong the fastest-growing insuranceorganizations in Canada.

As the market leader in business financialservices in Canada, we see opportunityfrom the growing demand for credit frombusinesses, especially as improvements inthe U.S. economy help foster greaterconfidence to spur investing. Additionally,with over 45 per cent of businessesexpected to change ownership in the nextfive to 10 years, we are well placed to helpbusiness owners plan for succession andwith the transition itself – by finding abuyer, financing the transaction andmanaging their new wealth.

6 Royal Bank of Canada: Annual Report 2014

ANNOUNCED 37% TOTALINCREASE TO QUARTERLYDIVIDENDS OVER 3 YEARS

There is no question our home market is acompetitive banking environment andpressure from continued low interest rateswill remain a headwind for our businessnext year. Within this context, we arecommitted to improving on our industryleading efficiency ratio and deepeningclient relationships through cross-sell, aproven capability for RBC. Overall, I believewe can continue to extend our lead inCanada to deliver profitable growth.

Globally, we have the right strategies tobuild leadership in select businesses andmarkets where our strengths can help uswin.

We have a strong presence in the U.S., anadvantage given the expected growth in theAmerican economy. In our Capital Marketsbusiness, the U.S. now accounts for morethan 50 per cent of revenue, reflectingstrong client acquisition over the pastnumber of years, and we are focused onbuilding deeper relationships with thoseclients. Our U.S. Wealth Managementbusiness is the seventh-largest full-servicebrokerage by assets and we are broadeningour product offering. Over the last few yearswe’ve also added global fixed income andequity capabilities to our assetmanagement business in that market,which continues to grow.

In the U.K. and Europe, we are building ourpresence, adding expertise across wealthmanagement, asset management andcapital markets, and benefitting from RBC’sbrand and reputation. Given the challengingeconomic environment, we are taking aprudent approach to building our

capabilities as we know the recovery willtake some time. I am encouraged by ourprogress in these markets and expect it tocontinue. In Capital Markets, we areincreasingly winning corporate andinvestment banking mandates. We areamong the fastest growing assetmanagers with strong momentum outsideof Canada. With its reputation for serviceexcellence, our Investor & TreasuryServices business is also well positionedfor expansion in the global investmentindustry.

Across all of our businesses advance-ments in technology are changing clientexpectations, transforming businessmodels and redefining the competitivelandscape. Meanwhile, the regulatoryenvironment for banks will continue toevolve. Our financial strength gives us theflexibility to effectively manage regulatorychanges while investing in ourbusinesses. We have digitized andsimplified processes to lower costs anddeliver a faster, better client experience,and are investing in our technology andinnovation to shape the future with newproducts and services. For example, thisyear we launched a new system thatautomates many of the steps inprocessing a new mortgage to deliverfaster service, and we are a leader inemerging payment solutions.

Looking ahead, we will maintain ourbalanced and disciplined approach tocapital deployment. Our first priority willremain investing in our existingbusinesses to generate strong returns.

Second, we remain committed to returningcapital to shareholders through dividendincreases and share buybacks. And lastly,we will consider targeted acquisitions thatfit our strategy and risk appetite, anddeliver strong returns for our shareholdersover the long term.

Bringing the best of RBC to our clients

United by our vision of always earning theright to be our clients’ first choice, we putcustomers at the centre of everything thatwe do.

Whether it’s helping them buy their firsthome, start their own business, travelworry-free, pay for their children’seducation or prepare for a comfortableretirement, we enable more than 16 millionclients in achieving their goals. At the endof 2014, we funded $231 billion inmortgages and lines of credit forhomeowners in Canada and $5 billion insmall business loans for Canadianentrepreneurs. We grew the assetsentrusted to us by investors around theworld by 13 per cent this year.

We loaned nearly $110 billion to mediumand large companies around the world tohelp them build their businesses, andensured our institutional clients could makeinformed decisions by providing top-rankedresearch and investment solutions in keyinternational markets.

Royal Bank of Canada: Annual Report 2014 7

NAMED BANK OFTHE YEAR FOR CANADA1

Creating opportunities for ouremployees

Our employees’ passion for helpingclients succeed is second to none. Theyrepresent our brand with pride. I’mparticularly proud of how much ouremployees care about doing what’s right.Our people, culture and brand are a truedifferentiator wherever we do business.

We enable success by fostering anenvironment of respect and inclusionwhere everyone can contribute andachieve their potential. The diversity ofour workforce brings differentperspectives and abilities and plays acentral role in serving our clients anddriving productivity, innovation andgrowth.

Making a positive difference incommunities

One of the things that defines RBC is thepositive social, economic and environ-mental impact we make in communities.In 2014, we invested more than$100 million in community efforts, sharedour expertise and provided nearly2,500 RBC Employee Volunteer grants.We’re on track to improve the well-beingof at least one million kids and youththrough our multi-year, $100-million RBCKids Pledge. A key element of thatcommitment is the RBC Run/Race for theKids, which took place in seven citiesaround the world, and this year more than8,000 employees, their families andfriends ran with us in support of local

children’s charities. Our employees arealso tremendous supporters of the RBCBlue Water Project, our commitment toprotecting fresh water for generations tocome.

Thank you

Thank you to our clients who choose toplace their trust in us, and to ouremployees who work so hard to help themsucceed.

I’d like to acknowledge and thank GordonNixon, who retired as CEO this year, for hisleadership of a truly world-classorganization, and for leaving the companywith the strength and depth to build forthe future. And finally, I’d like to expressmy gratitude to the Board of Directors fortheir continued insight and counsel.

And to you, our shareholders, we arecommitted to delivering high-qualitygrowth, industry-leading returns and long-term value. I am enormously proud ofwhat RBC has achieved and incrediblyexcited for the opportunities that lieahead.

David McKayPresident and Chief Executive Officer

We serve more than25% of activeCanadian digitalbanking clients2

We have more than30% share of allmutual fundssold by banks inCanada – other bankshave less than 20%3

Awarded Best FundGroup Overall4

Named Most TrustedInvestment Bank inthe World5

1. The Banker.2. Finalta Digital and Multichannel

Banking Benchmark 2014 Study –Big 5 Canadian banks.

3. Investment Funds Institute of Canada,September 2014.

4. 2014 Lipper Canada Fund Awards.5. The Economist.

8 Royal Bank of Canada: Annual Report 2014