Q1 2024 Report to Shareholders

Royal Bank of Canada

First Quarter 2024

Royal Bank of Canada first quarter 2024 results

All amounts are in Canadian dollars and are based on financial statements presented in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Effective November 1, 2023, we adopted IFRS 17 Insurance Contracts (IFRS 17). Comparative amounts have been restated from those previously presented. Our Q1 2024 Report to Shareholders and Supplementary Financial Information are available at http://www.rbc.com/investorrelations and on https://www.sedarplus.com/.

Net income	Diluted EPS1	Total PCL1	ROE1, 2	CET1 Ratio1
$813 Million	14.9%
$3.6 Billion	$2.50	13.1%
PCL on loans ratio1	Above regulatory
Up 14% YoY	Up 12% YoY	up 3 bps1 QoQ	Up 50 bps YoY	requirements
Adjusted	Adjusted	Total ACL1	Adjusted ROE3	LCR1
net income3	Diluted EPS3	$5.7 Billion	132%
14.9%
$4.1 Billion	$2.85	ACL on loans ratio1	Up from 131%
Down 5% YoY	Down 6% YoY	up 3 bps QoQ	Down 230 bps YoY	last quarter

TORONTO, February 28, 2024 - Royal Bank of Canada4 (RY on TSX and NYSE) today reported net income of $3.6 billion for the quarter ended January 31, 2024, up $449 million or 14% from the prior year, which included the $1,050 million impact of the Canada Recovery Dividend (CRD) and other tax related adjustments. Diluted EPS was $2.50, up 12% over the same period. Adjusted net income3 and adjusted diluted EPS3 of $4.1 billion and $2.85 were down 5% and 6%, respectively, from the prior year.

Our consolidated results reflect an increase in total PCL of $281 million from a year ago, mainly reflecting higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in Wealth Management. The PCL on loans ratio of 37 bps increased 12 bps from the prior year. The PCL on impaired loans ratio was 31 bps, up 14 bps from the prior year as provisions continue to trend upwards reflecting the impact of higher interest rates and rising unemployment.

Results also reflected the impact of specified items relating to the planned acquisition of HSBC Bank Canada (HSBC Canada), including transaction and integration costs ($265 million before-tax and $218 million after-tax), and management of closing capital volatility ($286 million before-tax and $207 million after-tax). The cost of the Federal Deposit Insurance Corporation (FDIC) special assessment of $159 million before-tax ($115 million after-tax) also impacted results.

Pre-provision,pre-tax earnings5 of $5.2 billion were down $607 million or 11% from last year, mainly due to higher expenses, and lower revenue in Capital Markets, largely reflecting lower trading revenue compared to a strong prior year. These factors were partially offset by higher insurance investment results from favourable investment performance as we repositioned our portfolio for transition to IFRS 17. Results benefitted from higher net interest income driven by solid volume growth, as well as higher fee-based client assets reflecting market appreciation and net sales in Wealth Management.

Compared to last quarter, net income was down 9%, partly reflecting a higher effective tax rate, as results in the prior quarter included the favourable impact of the specified item relating to certain deferred tax adjustments, and higher PCL on impaired loans. Lower results in Corporate Support and Personal & Commercial Banking were partially offset by higher results in Wealth Management, Capital Markets and Insurance. Adjusted net income3 was up 8% over the same period. Pre- provision, pre-tax earnings5 were up 12% as higher revenue more than offset expense growth.

Our capital position remains robust, with a CET1 ratio of 14.9%, supporting solid volume growth and $1.9 billion in common share dividends.

"As our first quarter results show, RBC has the right strategy in place to grow today while also generating long-term value for shareholders. Underpinned by our balance sheet strength, prudent approach to risk management and diversified business model, we delivered solid, client-driven volume growth and a continued focus on expense control. As we look towards the completion of our planned HSBC Canada acquisition, we remain focused on being a trusted advisor to clients through the delivery of new and differentiated banking experiences."

- Dave McKay, President and Chief Executive Officer of Royal Bank of Canada

1. See Glossary section of this Q1 2024 Report to Shareholders for composition of this measure.
2. Retuon equity (ROE). This measure does not have a standardized meaning under generally accepted accounting principles (GAAP). For further information, refer to the Key performance and non-GAAP measures section of this Q1 2024 Report to Shareholders.
3. These are non-GAAP measures. For further information, including a reconciliation, refer to the Key performance and non-GAAP measures section of this Q1 2024 Report to Shareholders.
4. When we say "we", "us", "our", "the bank" or "RBC", we mean Royal Bank of Canada and its subsidiaries, as applicable.
5. Pre-provision,pre-tax (PPPT) earnings is calculated as income (January 31, 2024: $3,582 million; October 31, 2023: $3,939 million; January 31, 2023: $3,133
   million) before income taxes (January 31, 2024: $766 million; October 31, 2023: $(33) million; January 31, 2023: $2,103 million) and PCL (January 31, 2024: $813
   million; October 31, 2023: $720 million; January 31, 2023: $532 million). This is a non-GAAP measure. PPPT earnings do not have a standardized meaning under GAAP and may not be comparable to similar measures disclosed by other financial institutions. We use PPPT earnings to assess our ability to generate sustained earnings growth outside of credit losses, which are impacted by the cyclical nature of a credit cycle. We believe that certain non-GAAP measures are more reflective of our ongoing operating results and provide readers with a better understanding of management's perspective on our performance.

2 Royal Bank of Canada First Quarter 2024

business segments

Management's Discussion and Analysis

Management's Discussion and Analysis (MD&A) is provided to enable a reader to assess our results of operations and financial condition for the three month period ended or as at January 31, 2024, compared to the corresponding period in the prior fiscal year and the three month period ended October 31, 2023. This MD&A should be read in conjunction with our unaudited Interim Condensed Consolidated Financial Statements for the quarter ended January 31, 2024 (Condensed Financial Statements) and related notes and our 2023 Annual Report. This MD&A is dated February 27, 2024. All amounts are in Canadian dollars, unless otherwise specified, and are based on financial statements presented in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise noted.

Additional information about us, including our 2023 Annual Information Form, is available free of charge on our website at rbc.com/investorrelations, on the Canadian Securities Administrators' website, SEDAR+, at sedarplus.com and on the EDGAR section of the United States (U.S.) Securities and Exchange Commission's (SEC) website at sec.gov.

Information contained in or otherwise accessible through the websites mentioned herein does not form part of this report. All references in this report to websites are inactive textual references and are for your information only.

Caution regarding forward-looking statements

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this Q1 2024 Report to Shareholders, in other filings with Canadian regulators or the SEC, in other reports to shareholders, and in other communications. In addition, our representatives may communicate forward-looking statements orally to analysts, investors, the media and others. Forward- looking statements in this document include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, the economic, market, and regulatory review and outlook for Canadian, U.S., U.K., European and global economies, the regulatory environment in which we operate, the implementation of IFRS 17 Insurance Contracts, the expected closing of the transaction involving HSBC Canada, including plans for the combination of our operations with HSBC Canada, the financial, operational and capital impacts of the transaction, transaction and integration costs, the expected closing of the transaction involving the U.K. branch of RBC Investor Services Trust, the risk environment including our credit risk, market risk, liquidity and funding risk, as well as the effectiveness of our risk monitoring, and includes statements made by our President and Chief Executive Officer and other members of management. The forward- looking statements contained in this document represent the views of management and are presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision, strategic goals and priorities and anticipated financial performance, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as "believe", "expect", "suggest", "seek", "foresee", "forecast", "schedule", "anticipate", "intend", "estimate", "goal", "commit", "target", "objective", "plan", "outlook", "timeline" and "project" and similar expressions of future or conditional verbs such as "will", "may", "might", "should", "could", "can", "would" or negative or grammatical variations thereof.

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct that our financial performance, environmental & social or other objectives, vision and strategic goals will not be achieved and that our actual results may differ materially from such predictions, forecasts, projections, expectations or conclusions.

We caution readers not to place undue reliance on our forward-looking statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors - many of which are beyond our control and the effects of which can be difficult to predict - include, but are not limited to: credit, market, liquidity and funding, insurance, operational, regulatory compliance (which could lead to us being subject to various legal and regulatory proceedings, the potential outcome of which could include regulatory restrictions, penalties and fines), strategic, reputation, legal and regulatory environment, competitive, model, systemic risks and other risks discussed in the risk sections of our 2023 Annual Report and the Risk management section of this Q1 2024 Report to Shareholders, including business and economic conditions in the geographic regions in which we operate, Canadian housing and household indebtedness, information technology, cyber and third-party risks, geopolitical uncertainty, environmental and social risk (including climate change), digital disruption and innovation, privacy and data related risks, regulatory changes, culture and conduct risks, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, and our ability to anticipate and successfully manage risks arising from all of the foregoing factors. Additional factors that could cause actual results to differ materially from the expectations in such forward-looking statements can be found in the risk sections of our 2023 Annual Report and the Risk management section of this Q1 2024 Report to Shareholders, as may be updated by subsequent quarterly reports.

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events, as well as the inherent uncertainty of forward-looking statements. Material economic assumptions underlying the forward-looking statements contained in this Q1 2024 Report to Shareholders are set out in the Economic, market and regulatory review and outlook section and for each business segment under the Strategic priorities and Outlook sections in our 2023 Annual Report, as updated by the Economic, market and regulatory review and outlook section of this Q1 2024 Report to Shareholders. Such sections may be updated by subsequent quarterly reports. Assumptions about the duration and complexity of technological builds, estimates for closing costs, and estimates of costs required for post-close synergy impacts were considered in the estimation of transaction and integration costs. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.

Additional information about these and other factors can be found in the risk sections of our 2023 Annual Report and the Risk management section of this Q1 2024 Report to Shareholders, as may be updated by subsequent quarterly reports.

Overview and outlook

About Royal Bank of Canada

Royal Bank of Canada is a global financial institution with a purpose-driven,principles-led approach to delivering leading performance. Our success comes from the 94,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada's biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Leamore at rbc.com.

4 Royal Bank of Canada First Quarter 2024

Selected financial and other highlights

1. Amounts have been restated from those previously presented as part of the adoption of IFRS 17, effective November 1, 2023. For further details on the impacts of the adoption of IFRS 17 including the description of accounting policies selected, refer to Note 2 of our Condensed Financial Statements.
2. These are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section. Amounts have been revised from those previously presented to conform to our basis of presentation for this non-GAAP measure.
3. Effective the fourth quarter of 2023, we moved the Investor Services lending business from our Wealth Management segment to our Capital Markets segment. Therefore, comparative results for the three months ended January 31, 2023 have been revised from those previously presented.
4. Average amounts are calculated using methods intended to approximate the average of the daily balances for the period. This includes average common equity used in the calculation of ROE. For further details, refer to the Key performance and non-GAAP measures section.
5. See Glossary for composition of this measure.
6. The LCR and NSFR are calculated in accordance with the Office of the Superintendent of Financial Institutions' (OSFI) Liquidity Adequacy Requirements (LAR) guideline. LCR is the average for the three months ended for each respective period. For further details, refer to the Liquidity and funding risk section.
7. Capital ratios and RWA are calculated using OSFI's Capital Adequacy Requirements (CAR) guideline, the Leverage ratio is calculated using OSFI's Leverage Requirements (LR) guideline, and both the TLAC and TLAC leverage ratios are calculated using OSFI's TLAC guideline. The periods ended January 31, 2024 and October 31, 2023 reflect our adoption of the revised CAR and LR guidelines that came into effect in Q2 2023, as further updated on October 20, 2023 as part of OSFI's implementation of the Basel III reforms. The period ended January 31, 2024 also reflects our adoption of the revised market risk and credit valuation adjustment (CVA) frameworks that came into effect on November 1, 2023. For further details, refer to the Capital management section.
8. As prior period restatements are not required by OSFI, there was no impact from the adoption of IFRS 17 on regulatory capital, RWA, capital ratios, leverage ratio, TLAC available and TLAC ratios for periods prior to November 1, 2023.
9. Represents period-end spot balances.
10. AUA includes $14 billion and $6 billion (October 31, 2023 - $13 billion and $7 billion; January 31, 2023 - $15 billion and $6 billion) of securitized residential mortgages and credit card loans, respectively.
11. Comparative amounts for January 31, 2023 have been revised from those previously presented.
12. Based on TSX closing market price at period-end.
13. Average amounts are calculated using month-end spot rates for the period.

pose risks to the global economic outlook, driven by: growing geopolitical tensions, including those between Russia and Ukraine, the conflict in the Middle East, and between China and the West; deepening economic concerns in China that could impact global growth; the persistence of inflation and elevated interest rates and the associated impact on economic growth; extreme weather-related events; and the potential re-emergence of financial sector instability as banks face regulatory reform in the U.S. Our diversified business model, as well as our product and geographic diversification, continue to help mitigate the risks posed by global uncertainty.

For a discussion on risk factors resulting from these and other developments which may affect our business and financial results, refer to the risk sections of our 2023 Annual Report. For further details on our framework and activities to manage risks, refer to the risk and Capital management sections of this Q1 2024 Report to Shareholders.

Key corporate events

HSBC Bank Canada

On November 29, 2022, we entered into an agreement to acquire 100% of the common shares of HSBC Bank Canada (HSBC Canada), for an all-cash purchase price of $13.5 billion. HSBC Canada is a premier Canadian personal and commercial bank focused on globally connected clients. We will also purchase all of the existing preferred shares and subordinated debt of HSBC Canada held directly or indirectly by HSBC Holdings plc at par value.

The agreement includes a locked box mechanism under which HSBC Canada's earnings from June 30, 2022 to the closing date accrue to RBC and will be reflected in the acquired net assets on closing. Relatedly, we will pay an additional amount that accrues from August 30, 2023 to the closing date, which is calculated based on the all-cash purchase price for the common shares of HSBC Canada and the Canadian Overnight Repo Rate Average.

On December 21, 2023 we received approval from the federal Minister of Finance to proceed with the planned acquisition of HSBC Canada, which is expected to close on March 28, 2024, subject to the satisfaction of customary closing conditions.

The fair value measurements of HSBC Canada's fixed rate financial assets and liabilities are sensitive to changes in market interest rates. Increases in interest rates will reduce the net fair value of the financial assets and liabilities to be acquired, which would increase the goodwill recognized on closing and reduce our capital ratios. To manage this, we had previously de-designated certain interest rate swaps in cash flow hedging relationships such that future mark-to-market gains (losses) will be recorded in net income, instead of Other comprehensive income (OCI), and thus mitigate the closing capital ratio volatility.

For the three months ended January 31, 2024, we recognized $338 million of mark-to-market losses in Non-interest income - Other on the swaps and $52 million in Net interest income related to the reclassification of amounts previously accumulated in OCI, both of which are treated as specified items and reflected in our Corporate Support segment.

Adjusted results excluding specified items are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Financial performance

Overview

Q1 2024 vs. Q1 2023

Net income of $3,582 million was up $449 million or 14% from a year ago. Diluted EPS of $2.50 was up $0.27 or 12% and ROE of 13.1% was up from 12.6% last year. Our CET1 ratio of 14.9% was up 220 bps from a year ago.

Adjusted net income of $4,066 million was down $196 million or 5% from a year ago. Adjusted diluted EPS of $2.85 was down $0.19 or 6% and adjusted ROE of 14.9% was down from 17.2% last year.

Our earnings were up from last year, as the prior year results reflected the impact of the Canada Recovery Dividend (CRD) and other tax related adjustments, which was treated as a specified item and reported in Corporate Support. The earnings in the current period also reflect specified items relating to the planned acquisition of HSBC Canada in Corporate Support. Our results also reflect higher earnings in Insurance. This was partially offset by lower earnings in Wealth Management, Capital Markets, and Personal & Commercial Banking.

Q1 2024 vs. Q4 2023

Net income of $3,582 million was down $357 million or 9% from last quarter. Diluted EPS of $2.50 was down $0.26 or 9% and ROE of 13.1% was down from 14.9% in the prior quarter. Our CET1 ratio of 14.9% was up 40 bps from last quarter.

Adjusted net income of $4,066 million was up $293 million or 8% from last quarter. Adjusted diluted EPS of $2.85 was up $0.20 or 8% and adjusted ROE of 14.9% was up 70 bps from 14.2% last quarter.

Our earnings were down from last quarter, primarily driven by the specified items relating to the planned acquisition of HSBC Canada, which are reported in Corporate Support. Results for Corporate Support in the prior quarter reflected the favourable impact of the specified item relating to certain deferred tax adjustments. Our results also reflect lower earnings in Personal & Commercial Banking. This was partially offset by higher earnings in Wealth Management, Capital Markets, and Insurance.

For further details on our business segment results and CET1 ratio, refer to the Business segment results and Capital management sections, respectively.

Adjusted results

Adjusted results exclude specified items and the after-tax impact of amortization of acquisition-related intangibles. Adjusted results are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Impact of foreign currency translation

The following table reflects the estimated impact of foreign currency translation on key income statement items:

For the three months ended

The relevant average exchange rates that impact our business are shown in the following table:

1. Average amounts are calculated using month-end spot rates for the period.

Total revenue

1. Amounts have been restated from those previously presented as part of the adoption of IFRS 17, effective November 1, 2023. Refer to Note 2 of our Condensed Financial Statements for further details on these changes.
2. The 2023 restated results may not be fully comparable to the current period as we were not managing our asset and liability portfolios under IFRS 17.
3. Reflects net interest income arising from trading-related positions, including assets and liabilities that are classified or designated at fair value through profit or loss (FVTPL).

Q1 2024 vs. Q1 2023

Total revenue increased $128 million or 1% from a year ago, mainly due to higher insurance investment result, net interest income, and investment management and custodial fees. Higher underwriting and other advisory fees also contributed to the increase. These factors were partially offset by lower trading revenue, foreign exchange revenue, other than trading and other revenue.

Net interest income increased $130 million or 2%, largely due to average volume growth in Canadian Banking and higher fixed income trading revenue in Capital Markets. These factors were partially offset by lower revenue in our treasury services business in Capital Markets.

NIM was down 6 bps compared to last year, mainly due to lower trading results in Capital Markets, including the impact of a strong prior year comparative, and lower margins in Canadian Banking. These factors were partially offset by the benefit of higher interest rates across most of our businesses and a favourable impact associated with the partial sale of RBC Investor Services® operations.

Insurance investment result increased $214 million, primarily due to favourable investment performance as we repositioned our portfolio for transition to IFRS 17. The current period also benefitted from favourable market conditions.

Trading revenue decreased $265 million or 25%, mainly due to lower fixed income and equity trading revenue across most regions.

Investment management and custodial fees increased $129 million or 6%, mainly attributable to higher fee-based client assets reflecting market appreciation and net sales.

Underwriting and other advisory fees increased $94 million or 18%, largely due to higher debt origination primarily in the U.S. Foreign exchange revenue, other than trading decreased $171 million or 39%, largely driven by foreign currency translation

gains in the prior year associated with certain foreign currency denominated funding, which was offset by the impact of economic hedges in Other revenue. The impact of the partial sale of RBC Investor Services operations also contributed to the decrease.

Other revenue decreased $100 million or 34%, mainly attributable to the impact of management of closing capital volatility related to the planned acquisition of HSBC Canada, which was treated as a specified item. This was partially offset by the impact of economic hedges, which was largely offset in Foreign exchange revenue, other than trading, and changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense.

Q1 2024 vs. Q4 2023

Total revenue increased $800 million or 6% from last quarter, largely due to higher trading revenue and share of profit in joint ventures and associates reflecting the impact of a specified item in the prior quarter. Higher investment management and custodial fees and insurance investment result also contributed to the increase. These factors were partially offset by lower net interest income. The impact of foreign exchange translation decreased total revenue by $96 million.

Net interest income decreased $210 million or 3%, mainly reflecting the impact of a favourable accounting adjustment in the prior quarter in Corporate Support, which was offset in Other revenue. This was partially offset by higher fixed income trading revenue in Capital Markets, as well as average volume growth and higher spreads in Canadian Banking.

Insurance investment result increased $77 million, largely from favourable investment performance as we repositioned our portfolio for the transition to IFRS 17. The current period also benefitted from favourable market conditions. Lower capital funding costs also contributed to the increase.

Trading revenue increased $396 million or 97%, primarily due to higher fixed income trading revenue primarily in Europe and the U.S., and higher equity trading revenue across most regions.

Investment management and custodial fees increased $79 million or 4%, primarily attributable to higher fee-based client assets largely reflecting market appreciation.

Share of profit in joint ventures and associates increased $235 million, as the prior quarter reflected the impact of impairment losses on our interest in an associated company, which was treated as a specified item.

Other revenue decreased $7 million or 4%, mainly attributable to the impact of management of closing capital volatility related to the planned acquisition of HSBC Canada in the current quarter, which was treated as a specified item. The prior quarter also reflected a favourable impact from tax-related items and gains from our non-trading portfolios. These factors were largely offset by changes in the fair value of the hedges related to our U.S. share-based compensation plans, which was largely offset in Non-interest expense, and the impact of economic hedges in Corporate Support, which was offset in Net interest income.

Royal Bank of Canada First Quarter 2024 9

Provision for credit losses (1)

1. Information on loans represents loans, acceptances and commitments.
2. Includes PCL recorded in Corporate Support and Insurance.
3. PCL - Other includes amounts related to debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, accounts receivable, and financial and purchased guarantees.

Q1 2024 vs. Q1 2023

Total PCL increased $281 million or 53% from a year ago, mainly reflecting higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in Wealth Management. The PCL on loans ratio increased 12 bps.

PCL on performing loans decreased $40 million or 23%, mainly due to releases in the current quarter in U.S. Wealth Management (including City National), largely driven by favourable changes to our macroeconomic forecast partially offset by unfavourable changes in credit quality, as compared to provisions taken last year.

PCL on impaired loans increased $328 million, primarily due to higher provisions in our Canadian Banking portfolios and Capital Markets, mainly in the real estate and related sector.

Q1 2024 vs. Q4 2023

Total PCL increased $93 million or 13% from last quarter, mainly due to higher provisions in Personal & Commercial Banking and Capital Markets, partially offset by lower provisions in Wealth Management. The PCL on loans ratio increased 3 bps.

PCL on performing loans decreased $61 million or 31%, mainly due to releases in the current quarter as compared to

provisions in the prior quarter in U.S. Wealth Management (including City National) and lower provisions in Capital Markets, both of which were largely due to favourable changes to our macroeconomic forecast, partially offset by unfavourable changes in credit outlook. These factors were partially offset by higher provisions in our Canadian Banking portfolios, mainly due to favourable changes to our macroeconomic forecast in the prior quarter as compared to unfavourable changes this quarter, partially offset by lower unfavourable changes in credit quality.

PCL on impaired loans increased $146 million or 27%, primarily due to higher provisions in our Canadian Banking portfolios.

10 Royal Bank of Canada First Quarter 2024

Non-interest expense

1. Amounts have been restated from those previously presented as part of the adoption of IFRS 17, effective November 1, 2023. Refer to Note 2 of our Condensed Financial Statements for further details on these changes.
2. Efficiency ratio is calculated as Non-interest expense divided by Total revenue.
3. This is a non-GAAP ratio. For further details, refer to the Key performance and non-GAAP measures section.
4. Effective Q2 2023, we revised the composition of this non-GAAP ratio. Comparative adjusted amounts have been revised to conform with this presentation.

Q1 2024 vs. Q1 2023

Non-interest expense increased $735 million or 10% from a year ago, primarily due to transaction and integration costs relating to the planned acquisition of HSBC Canada, which is treated as a specified item, and the cost of the FDIC special assessment of $159 million ($115 million after-tax). Higher staff costs, the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue, as well as higher professional fees also contributed to the increase. These factors were partially offset by reduced expenses following the partial sale of RBC Investor Services operations.

Our efficiency ratio of 61.7% increased 490 bps from 56.8% last year. Our adjusted efficiency ratio of 57.9% increased

180 bps from 56.1% last year.

Q1 2024 vs. Q4 2023

Non-interest expense increased $265 million or 3% from last quarter, mainly due to the change in the fair value of our U.S. share-based compensation plans, which was largely offset in Other revenue. The cost of the FDIC special assessment of $159 million ($115 million after-tax) and higher variable compensation costs also contributed to the increase. These factors were partially offset by the impact of legal provisions in U.S. Wealth Management (including City National) in the prior quarter and lower professional fees.

Our efficiency ratio of 61.7% decreased 180 bps from 63.5% last quarter. Our adjusted efficiency ratio of 57.9% decreased

220 bps from 60.1% last quarter.

Adjusted efficiency ratio is a non-GAAP ratio. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.

Income taxes

1. Amounts have been restated from those previously presented as part of the adoption of IFRS 17, effective November 1, 2023. Refer to Note 2 of our Condensed Financial Statements for further details on these changes.
2. These are non-GAAP measures. For further details, including a reconciliation, refer to the Key performance and non-GAAP measures section.
3. Effective Q2 2023, we revised the composition of these non-GAAP measures. Comparative adjusted amounts have been revised to conform with this presentation.

Q1 2024 vs. Q1 2023

Income tax expense decreased $1,337 million or 64% from a year ago, primarily due to the impact of the CRD and other tax related adjustments, which was a specified item in the prior year. Lower income before income taxes also contributed to the decrease. Adjusted income tax expense decreased $158 million or 15% from a year ago.

The effective income tax rate of 17.6% decreased 2,260 bps, primarily due to the impact of the CRD and other tax related adjustments noted above. The adjusted effective income tax rate of 18.3% decreased 180 bps.