RBC

ROYAL BANK OF CANADA

RBC International Expansion Proposal

TABLE OF CONTENTS

1 2

OUR HISTORY

OUR COMPANY

3

OUR CSR

4

EXPANSION PROPOSAL

02

01

OUR HISTORY FOUNDING RBC The Royal Bank of Canada was founded in 1864 on the Halifax waterfront, RBC's primary product was providing credit as a private and uncharted bank to tradesmen who were importing/exporting through the Halifax port every day.

It was founded by a small group of known maritime trade merchants in the area, three of them being prominently known in the community; Thomas Kinnear, Edward Kenny, and William Cunard.

01 REMEMBERING OUR ROOTS There were many people who founded now one of the biggest banking entities in the industry back in 1864 when the Royal Bank of Canada was called “Merchant’s Bank.”

RBC has progressed since it’s early days, as it is now the most valuable public company in Canada measured on market capitalization.

None of the founders own this business anymore, as most of the shareholders/partial owners of RBC are mutual funds and institutions.

The current Chief Executive Officer of RBC is David McKay. The Chairman of RBC is Kathleen Taylor.

RBC, or The Royal Bank of Canada is now a publicly traded corporation on international stock exchanges.

On the left, the logos since the founding of RBC are showcased.

Pre 1901 1901 - 1962 1962 - 1974 1974 - 2001

2011 - Present

OUR COMPANY

02

Our Business Model RBC operates as a corporation for its form of ownership. RBC’s main headquarters is in Toronto, Ontario, Canada, specifically Royal Blank Plaza in Toronto’s banking district on Bay Street. The Royal Bank of Canada has 5 main divisions where they offer their products, all of which fall under the Royal Bank of Canada Corporation.

01 RBC Personal and Commercial Banking: Personal and Commercial Banking, RBC offers a variety, yet basic set of banking products that many banks offer such as loans, accounts, credit cards. Loans would include mortgages, line of credit, auto loans, etc. Accounts would include saving accounts, chequing accounts for debit cards, and investment accounts. Finally, credit cards would give you a credit purchasing power with an RBC banking card.

02 RBC Wealth Management: RBC Wealth Management, products they offer include investment management, wealth planning, banking and borrowing, trust and estate services. The RBC Wealth Management branch more so deals with planning for entrepreneurs, business owners, and high net worth individuals.

03 RBC Capital Markets:

Third, there is the RBC Capital Markets for international investment banking services. They offer many of these banking products to corporations, institutional investors, asset managers and governments across the globe.

04 RBC Insurance:

RBC insurance which offers insurance products under the Royal Bank of Canada.

05 RBC Investor and Treasury Services:

RBC Investor and Treasury Services, which provide custody services and fund administration internationally.

COUNTRIES OF OPERATION

02

Top 3 Countries of Operation

London, England, UK

New York, United States of America

Toronto, Canada

Sydney, Australia

OUR CSR

03

Investing in an Inclusive & Sustainable Future Investing in an inclusive and sustainable economy would fall under the CSR principle of protecting the environment. RBC has donated over 10 million dollars to charities and universities through RBC Tech for Nature in the last fiscal year, it joined the Net-Zero Banking Alliance, they are also providing 500 billion dollars in sustainable finance by 2025, and many more policies that makes sure RBC is acting environmentally responsible.

Diversity & Inclusion RBC promoting/investing in a diverse and inclusive company would fall under the work environment principal. Almost 100% of their employees have completed the anti-racism training since May 2021, there is an increase in executive representation when it comes to women and people of color and RBC launched the Black Entrepreneur Startup Program.

04

EXPANSION PROPOSAL International Expansion Currently, The Royal Bank of Canada operates in 27 different countries, yet their main areas of operations include Canada and the United States of America.

If Royal Bank of Canada were to expand, I would recommend that the company would expand to South Korea.

South Korea has one of the biggest untapped financial markets in the world, yet one of the most profitable.

04 Reasons to Invest in South Korea Insurance Market Third largest insurance market and the third largest banking market in Asia.

Banking is not only popular in Korea, but it is needed as many countries in Asia are still developing, showing that there is a big market for potential clients.

Research shows that 70% of the banking sector in South Korea is owned by foreign investors, and South Korea’s largest bank is worth less than 10% of RBC’s total market capitalization, meaning RBC has more products, expertise and a better track record of financial management compared to some of the biggest entities in South Korea showing that there is a space for RBC.

Asset Management Growth Research shows that South Korea’s asset management market is bound to grow faster than ever due to a capital shift from physical assets to financial assets especially in the last few years.

The reason for this is due to the Bank of Korea keeping interest rates low from the last few years, and many people are allocating a higher percentage towards riskier assets to make better returns.

South Korea maintains the third largest insurance market, bancassurance’s are growing their life insurance sector, and this is expected to have high growth over the next 5 years.

High ROE's In 2020, the ROE ratio in South Korea’s banking industry was 10.48%, pre-pandemic is was at almost 12% showing that there is a good profitability in this industry.

Current ROE in Canada for RBC is 16% showing this is an industry which can grow with the vast products of RBC. There is over 150 million mobile banking customers, showing there is a big market for potential clients interested in RBC’s variety of products.

04 Acquiring Our Way Into South Korea's Financial Market Establishing Our International Business Structure The Royal Bank of Canada should acquire a company that has already been established in South Korea as a sustainable and profitable business structure upon RBC’s expansion into South Korea.

If a company were to be acquired, the Royal Bank of Canada should consider KB Financial Group.

Fundamentals of the KB Financial Group Although it was newly established right after 2008 Financial Crisis, the KB Financial Group stands to be the largest bank in South Korea with over 400 billion dollars of assets under their management, and a current market cap of 18.5 billion.

Kookmin Bank (KB) has maintained a profit margin while many big banks have taken a hit on profits, in 3 of the last 4 quarters, KB maintained a 40% profit margin consecutively and it is a well-established, trusted and respected banking organization in South Korea.

RBC offers many lines of products, including loans and insurances, using the network that the KB group has established in South Korea, and the product line of the RBC, we will be able to succeed in an growing market.

TRADE RELATIONS

03 04

Canada maintains one main trade agreement with South Korea, the Canada-Korea Free Trade Agreement, better known as CKFTA. The CKFTA was effective as of January 2015 including Canada and South Korea.

The CKFTA helps to establish a trading gateway between Canada and South Korea because of this agreement, South Korea is Canada’s third largest trading partner in Asia.

The CKFTA marks a historic achievement between Canada and Asia trading relations. It establishes a free trade agreement including trade in G&S, investment, government procurement, non-tariff barriers, environment, and labour cooperation, making this the perfect place for the Royal Bank of Canada to expand to.

04 International Challenges Challenges Faced with South Korean Markets RBC’S main operation will be in the management of financial assets, meaning there won’t be physical things needed to be transported from Canada to South Korea, eliminating one of the biggest challenges when it comes to South Korean – Canadian trade.

Two main trade barriers, or challenges that Canadian companies have faced in the last few years when conducting business with South Korea is: 1. Less transparent regulations compared to Canada 2. Resistance to foreign/international business models.

Adapting to South Korean Business Practices Business Cards: Should be handed over in a polite and respectful manner with two hands and receive one in return. In South Korea, the exchange of business cards are essential as they include a lot of initial important information such as position, title, name, rank, contact info, etc.

Greetings: To show respect to those who are senior, in South Korea, instead of handshakes the more junior person with bow down to a 30 to 45 degree angle, in return the more senior person will acknowledge it by bowing back but at a lower angle.

The highest status individual is greeted first, followed by the most senior.

Addressing People: When addressing Korean people as a foreigner to their countries, it is best to use their family name which comes first and addressing them by Mr. or Mrs., or their tittle in settings where they have great respect or a high position.

USEFUL PRACTICES

04

Tips to Know When Conducting Business in South Korea

Following Korean Business Practices show a respect for their culture, tradition and is considered a gesture that helps to welcome you into their country and their business.

Showing respect when it comes to seniors, using tittles, respectful and polite word usage/tone, all of these things help to show seniors a higher level of respect. In South Korea seniors are highly respected/well treated.

Being on time shows that you care about the other person's time and your own as well and being on time is a symbol of respect, it helps to show Korean businesses you care about their professional relationship. It is considered to be very rude to be late in Korean culture.

SOURCES: 1. https://discover.rbcroyalbank.com/celebrating-150-years-a-lookback-at-where-rbc-camefrom/#:~:text=1864%3A%20Merchants'%20Bank%20%E2%80%94%2 0RBC's,Edward%20Kenny%20and%20William%20Cunard 2. https://www.thecanadianencyclopedia.ca/en/article/royal-bank-ofcanada#:~:text=Royal%20Bank%20of%20Canada%20began,in%20th eir%20daily%20business%20activities.

3. https://en.wikipedia.org/wiki/Royal_Bank_of_Canada 4. https://www.rbc.com/our-company/our-businesses.html 5. https://www.rbccm.com/en/offices 6. https://www.rbc.com/community-social-impact/ 7. https://www.rbc.com/community-socialimpact/environment/index.html 8. https://www.rbc.com/diversity-inclusion/index.html 9. https://bcck.or.kr/bcck/sectors/finance/ 10. https://www.statista.com/topics/9432/financial-sector-in-southkorea/#dossierContents__outerWrapper 11. https://m.kbfg.com/Eng/ir/presentaion/list.jsp 12. https://m.kbfg.com/Eng/index.jsp 13. https://www.international.gc.ca/trade-commerce/trade-agreementsaccords-commerciaux/agr-acc/korea-coree/index.aspx?lang=eng 14. https://news.gov.bc.ca/factsheets/canada-korea-free-tradeagreement 15. https://asialinkbusiness.com.au/republic-of-korea/conductingbusiness-in-korea/korean-business-culture-and-etiquette? doNothing=1 16. https://santandertrade.com/en/portal/establish-overseas/southkorea/business-practices

END

Author: Vasu Bhardwaj.

Date: November 5th, 2022.

Email VB@rbc.com for direct inquires regarding the Expansion Proposal.

200 Bay St. Main Floor, Toronto, ON M5J 2J5 +(416) 974-3940 www.rbcroyalbank.com