TORONTO - Royal Bank of Canada earnings for the second quarter ended April 30, 2009 were impacted by a previously announced goodwill impairment charge of $1 billion. As a result, RBC reported a net loss of $50 million while cash net income was $993 million, up 4% from $955 million last year.(1) The goodwill impairment charge is a non-cash item and does not affect our ongoing operations or our capital ratios. Our results were also impacted by the market environment-related losses and general provision noted below. Canadian Banking generated volume growth across all businesses and Capital Markets produced strong earnings by capitalizing on market conditions.

"The environment remains challenging, but our company is strong and we are taking advantage of opportunities in the marketplace. This quarter, we generated cash net income of almost $1 billion," said Gordon M. Nixon, RBC President and CEO. "Clients are choosing to do more business with us, reflecting our brand, our financial strength and our expertise. Across our enterprise, our people are providing advice to help our clients create what is important to them today as they plan for their future."

Second quarter 2009 compared to second quarter 2008

- Net loss of $50 million (down from net income of $928 million)

- Cash net income of $993 million (up from $955 million)(1)

- Diluted loss per share of $.07 (down from earnings per share (EPS) of $.70) - Cash diluted EPS of $.66 (down from $.72)(1)

- Return on common equity (ROE) of (1.4%) (down from 15.7%)

- Cash ROE of 12.3% (down from 16.0%)(1)

- Tier 1 capital ratio of 11.4%

First six months of 2009 compared to first six months of 2008

- Net income of $1,003 million (down from $2,173 million)

- Cash net income of $2,097 million (down from $2,222 million)(1)

- Diluted EPS of $.65 (down from $1.64) - Cash diluted EPS of $1.43 (down from $1.68)(1)

- ROE of 6.2% (down from 18.6%)

- Cash ROE of 13.3% (down from 18.8%)(1)

Items impacting second quarter 2009 results

- Goodwill impairment charge reduced net income by $1 billion (US$838 million) and EPS by $.71 - previously disclosed April 16, 2009

- Market environment-related losses reduced net income by $296 million and EPS by $.21

- General provision reduced net income by $146 million and EPS by $.10

(1) We compute "cash" measures by excluding the goodwill impairment charge and the after-tax impact of amortization of other intangibles. Cash measures are non-GAAP measures. See page 2 of this release for more information including a reconciliation.

Canadian Banking net income was $581 million, down 4% or $23 million from last year reflecting higher PCL, continued spread compression and lower mutual fund distribution fees. We generated volume growth across all businesses, expanded our branch network and continued to deliver positive operating leverage. Compared to last quarter, earnings were down 17% reflecting higher PCL and the negative impact of seasonal factors, including fewer days this quarter.

Wealth Management net income was $126 million, down 31% or $56 million over last year due to the impact of capital markets declines on fee-based revenue, and transaction volumes. Net income was down 2% or $2 million from last quarter from spread compression and lower fee-based revenue.

Insurance net income was $113 million, up 9% or $9 million over last year and flat from last quarter. The increase from last year was due to lower funding charges, business growth and our ongoing focus on cost management. This was partially offset by unfavourable actuarial adjustments compared to the prior year.

International Banking net loss of $1,126 million compares to net income of $38 million last year and net loss of $144 million last quarter. The net loss in the current quarter was primarily due to the non-cash goodwill impairment charge noted above, reflecting the prolonged challenging economic conditions, particularly in the U.S. Higher PCL, largely in U.S. banking, also contributed to the loss.

Capital Markets net income was $420 million, up $407 million from a year ago driven by higher revenue from our sales and trading businesses, particularly U.K. and U.S. fixed income, money markets, and U.S. based equity businesses. Also contributing to the increase were lower market environment-related losses and gains on credit valuation adjustments on certain derivative contracts. Compared to last quarter, net income was up $195 million largely from lower market environment-related losses and gains on valuation adjustments noted above.

Credit quality - The current quarter included a specific PCL of $751 million and a general provision of $223 million. The general provision reflects higher provisions predominately in U.S. banking and, to a lesser extent, our Canadian retail lending portfolio on loans that have not yet been specifically identified as impaired.

In International Banking, specific PCL increased $198 million from a year ago and $89 million over last quarter. This relates primarily to U.S. banking and is due to continued credit deterioration in our wholesale and retail portfolios consistent with the sustained recessionary conditions. In Canadian Banking, specific PCL increased $127 million from a year ago and $81 million over last quarter. This reflects higher impaired business loans, as well as increased loss rates in our unsecured portfolio including credit cards and personal loans. Our residential real estate portfolio continued to perform well.

In Capital Markets, specific PCL increased $87 million from a year ago and decreased $15 million from last quarter. The increase over last year relates to a few impaired loans in our U.S. corporate lending portfolio. The current quarter included a further provision on loans to certain RBC-administered conduits. We also had realized gains this quarter on securities collateral that was recovered in the first quarter of 2009 from a specific prime brokerage client in our Canadian corporate portfolio.