On behalf of my 80,000+ colleagues, I am honoured to share the story of our record 2017 and our ongoing journey to position RBC for the future.
We reported record earnings of $11.5 billion, up 10% from the prior year. This demonstrated the strength of our diversified business model, our disciplined approach to risk and cost management, and above all, our purpose of helping clients thrive and communities prosper.
We delivered a return on equity of 17% and strengthened our Common Equity Tier 1 capital ratio to 10.9%. In November 2017, we were designated as a Global Systemically Important Bank by the Financial Stability Board, reflecting the size and scale of our global operations. As we already meet the requirement of a 1% buffer, we do not expect any significant impact to our capital position.
We also returned a record $8.2 billion of capital in dividends and share buybacks, reflecting our commitment to shareholders while executing on our growth strategies. We delivered compound annual Total Shareholder Returns of 12% and 17% over three and five years, outperforming our global peer group.
The favourable macroeconomic environment contributed to our success, with strong GDP growth, high employment and interest rate increases leading to low credit losses, strong demand for credit and stronger margins.
Beyond our performance, we believe how we achieve success is as important as what we achieve; this is critical in creating a path for sustained growth over the long term. It is heartening as CEO to see how our principles-led approach and our values, including the importance of diversity and inclusion, drive our daily decision-making from the Board to the branch and everywhere in between.
We have a focused strategy that targets high-growth client segments within our priority markets of Canada, the U.S., and in select global financial centres. Across geographies, we are deepening relationships with our clients and bringing the strength, breadth and depth of RBC to meet their goals.
In Canada, where we are number one or two in all key banking segments, we are not being complacent but looking to transform our physical network and digitize our operations to meet changing customer needs. We’ve expanded our insurance offering and we see opportunities for further growth within Personal & Commercial Banking, specifically in commercial banking, investments, deposits and credit cards.
We are also exploring ways to add new sources of value for our clients. We are increasingly collaborating with strategic partners to create the ecosystems in which our customers live and work. For example, we have recently started offering employee health care expense management for commercial clients, and we have integrated invoicing, accounting and financial insights into our business banking platform so that entrepreneurs can spend more time growing their businesses.
In our leading Canadian wealth management franchise, we are adding more value to clients through our unmatched wealth planning expertise, including business succession and intergenerational wealth transfers. We are also building out our top-performing asset management capabilities.
In the U.S., the successful integration of City National is allowing us to serve more commercial and high net worth clients. In 2017, City National deepened its presence in its core markets of California and New York City while also expanding in Washington, D.C. and Minneapolis and building on synergies with other parts of the firm, including Capital Markets.
Our U.S. capital markets business continues to grow. It accounts for more than half of overall Capital Markets earnings. Globally, RBC Capital Markets has been ranked as one of the top 10 investment banks by fees for the last five years. Together, our U.S. capital markets and wealth management businesses (including City National) position us well to be the preferred partner to corporate, institutional and high net worth clients and their businesses in the U.S.
We also continue to improve our competitive position in select markets in the U.K., Europe and Asia, by focusing on key client segments served by our wealth and asset management, capital markets and investor and treasury services businesses.
We believe how we achieve success is as important as what we achieve; this is critical in creating a path for sustained growth over the long term.
Exceptional client experiences
More than ever before, we are building from the customer in, creating a Digitally Enabled Relationship Bank that is simple to deal with and that adds more value to clients.
We are learning from and working with our clients to develop the next generation of products. Our size and scale gives us an advantage in using data to better understand our clients, anticipate their future needs and offer them increasingly personalized solutions, while investing in keeping their information secure.
Our digital and innovation strategies are fundamental to creating exceptional client experiences, driving customer loyalty and acquiring new clients. In Personal & Commercial Banking, we have grown our sales force in advice roles, we have significantly grown our mobile users, and today 84% of our financial transactions are performed in self-serve channels. The work we’ve done to serve clients as we move to a digital future helped us win Highest in Customer Satisfaction Among the Big Five Retail Banks in J.D. Power’s 2017 Canadian Retail Banking Satisfaction survey for the second year in a row.
Simplify. Agile. Innovate.
As we integrate into our customers’ digital lives, we are collaborating with an ever broader range of global partners, bringing exciting new opportunities to our clients across all of our business lines.
We are working in new ways to design and build products, processes, technology and services in a faster, simpler, more adaptable and cost effective way. In an unprecedented time of change in our industry, customer expectations and preferences are shifting almost daily. I believe one of my greatest responsibilities as CEO is to ensure that the cadence and speed of change inside RBC matches that of the wider world. So, as we reimagine our future and the role that we play in our customers’ lives, we are changing the way that we work.
We’re proud to be a champion for Canadian innovation, particularly the transformational technologies of blockchain and artificial intelligence (AI). As one of the leading voices on AI in Canada, we have established the research institute Borealis AI to pursue curiosity-driven research in machine learning. This will help to not only drive our own innovation, but also secure Canada’s position as a global destination for AI research and ventures.
We know that our best ideas come when we unlock the potential of our people, allowing the full diversity of our organization to thrive. To accelerate this journey we are simplifying our structure, redefining our leadership model and tapping into the strengths and talent of our employees. By creating an environment where employees are encouraged to be bolder and use their full expertise, capabilities and experiences, we will be able to succeed in hiring and retaining top talent and provide them with meaningful work.
Community and social impact
As a purpose-driven company, we believe we are accountable for creating a positive social impact in the communities where we operate. Among countless examples across our businesses and regions in 2017, none articulated this focus more clearly than RBC Future Launch, our $500-million commitment to empower Canadian youth for the jobs of tomorrow. Over the next 10 years, we are dedicating our knowledge, skills and resources to help young people access meaningful employment. Investing in the next generation is both a business imperative and the right thing to do.
I offer a sincere thank you to the 16 million clients who continue to put their trust in RBC. I also want to thank my colleagues for their ideas and their commitment to seeing those clients succeed. As always, I appreciate the guidance and insight from our diverse board of directors. And finally, to you our shareholders, I reiterate our commitment to executing on our strategy and delivering sustainable earnings growth in line with our purpose.
President and Chief Executive Officer
Key metrics in 2017
Dividend payout ratio
Refer to the sustainable growth section for more information
Exceptional client experiences
#1 Client Satisfaction among Big Five Canadian retail banks in 2017 J.D. Power survey
94% employees who are proud to be a part of RBC(1)
Community and social impact
150,000+ employees volunteer hours(2)
$98+ million in cash donations and community investments(3)
(1) 2017 Employee Opinion Survey.
(2) Includes non-work time hours reported by employees globally and retirees in Canada through RBC's formal volunteering programs.
(3) Includes employee volunteer grants and gifts in-kind, as well as non-profit contributions to non-registered charities. Figure does not include sponsorships.