Royal Bank of Canada (RY) Q1 2022 Earnings Call Transcript

Royal Bank of Canada (RY 0.78%)
Q1 2022 Earnings Call
Feb 24, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to RBC's conference call for the first quarter 2022 financial results. Please be advised that this call is being recorded. I would like to turn the meeting over to Asim Imran, head of investor relations.

Please go ahead, Mr. Imran.

Asim Imran -- Head of Investor Relations

Thank you, and good morning, everyone. Speaking today will be Dave McKay, president and chief executive officer; Nadine Ahn, chief financial officer; and Graeme Hepworth, chief risk officer. Also joining us today for your questions, Neil McLaughlin, group head, personal and commercial banking; Doug Guzman, group head, wealth management, insurance, and I&TS and Derek Neldner, group head, capital markets. As noted on Slide 1, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties.

Actual results could differ materially. I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. [Operator instructions] With that, I'll turn it over to Dave.

Dave McKay -- President and Chief Executive Officer

Thank you, and good morning, everyone. Thanks again for joining us. Today, we reported earnings of $4.1 billion, our second highest on record, underscoring the strength and scale of our franchises. Net income was up 6% from last year, and we generated positive all-bank operating leverage while continuing to invest for growth.

Pre-provision pre-tax earnings were up 10% year over year, benefiting from robust client-driven volume growth in Canadian Banking and City National, strong Wealth Management results and record Investment Banking revenue. These were partially offset by continued moderation in our trading revenue and the impact of lower spreads. Our 17.3% return on equity, combined with a strong capital ratio, enabled us to deploy capital in a balanced manner to support client-driven growth and long-term shareholder value. Our capital position supported $1.7 billion in dividends to our largely Canadian shareholder base, as well as almost 9 million of share repurchases.

In aggregate, we returned nearly $3 billion to our shareholders for a total payout ratio of 72%. We also deployed our balance sheet across our businesses to support our clients' needs and ambitions resulting in organic RWA growth of $14 billion in the current quarter. We ended this quarter with a robust CET1 ratio of 13.5%, representing $13 billion in excess capital over an 11% level. This provides significant flexibility to continue investing in talent and technology to accelerate the deployment of capital for organic growth opportunities, and I will speak more to this strategy in a moment.

Our strong capital position also enables further share repurchases, as well as providing us optionality to acquire quality franchises in growth segments that align with our current strategy and geographic footprint. Looking forward, we have a consistent and clear focus on creating client and shareholder value and a disciplined, balanced approach to capital deployment, as evidenced by our 15% year-over-year growth in book value per share this quarter and a 9% compounded annual growth rate over the last three years. Before I speak to our growth opportunities, I want to touch on the macro environment. We continue to experience market and economic volatility, driven by heightened geopolitical risk, continued supply chain disruption, acute labor capacity shortages, energy market imbalances and resulting high inflationary conditions.

However, the underlying economic drivers are still strong. As we move past the Omicron peak, we can look to record household savings, over $200 billion in Canada alone, driving consumer spending on goods and services, renewed immigration driving demand for housing, increased business investment into just-in-case inventory strategies and building new digital capabilities. Recent hawkish Central Bank commentary around the concerning level of inflation and North American economy is reaching full potential suggests imminent rate increases and an acceleration of quantitative tightening programs. While the prospect of benchmark rate increases has driven volatility in equity markets, we are well-positioned to benefit from rising interest rates, which Nadine will speak to later.

However, we have also seen the yield curve flatten significantly over the last three months. This, combined with tight labor markets and economies reaching full potential, suggest we are closer to mid cycle economic growth than early stages of an economic recovery. As it relates to Canadian housing, we continue to monitor supply demand imbalances across the country. We have long argued the supply side of the market must be made more responsive to demand.

We encourage policymakers at all levels of government across all jurisdictions to continue working together to implement policies that address the longer-term problems of limited supply, which are driving house price inflation and creating a risk to the long-term competitiveness of the Canadian economy. I'll now expand on an increasing number of client-focused opportunities to drive accretive organic growth across our core businesses. Our leading scale enables us to invest concurrently in technology, sales capacity and client value, positioning us to deploy capital to drive revenue growth while increasing productivity, which Nadine will speak to later. And we will continue to leverage the significant investments we have made across our businesses over the last number of years.

In Canadian Banking, mortgages were up 11% year over year, adding nearly $9 billion this quarter alone. We expect strong Canadian mortgage growth to continue in the high single-digit range, driven by renewed levels of immigration, pent-up demand met by increased supply and our continued investment in expanding our mortgage sales force to capture this opportunity. On the payment side, overall consumer spending in late January and early February was up 15% over pre-pandemic levels as restrictions continue to ease across Canada. We expect the continued reopening of the Canadian economy to drive increased credit card spend and in time, a steeper recovery in revolving credit card balances.

Our investments to enhance digital capabilities in these businesses resulted in over 55% of all new credit cards being sold digitally this quarter, and our mortgage retention rates are exceptionally strong at 90%. We have also invested in a set of integrated banking and investment solutions to provide even more value to our clients, including last year's launch of RBC Vantage. In addition, investments made to enhance our client value proposition continue to attract new clients. We are seeing increased engagement with our digital payment and investment products, including MyAdvisor, which now has nearly 3 million clients, up from 2 million in just one year.

In the last two years alone, we have gained over 80 basis points of market share in core checking deposits and nearly 50 basis points of market share in mortgages. And the gross number of retail clients added in the last four years have contributed nearly $1 billion of revenue to our Canadian Banking franchise. We also expect stronger growth in commercial lending from higher credit line utilizations, driven by our clients' desire to rebuild inventory levels and adjust business models in light of the persistent supply chain disruptions and labor shortages. We are expanding our commercial account management teams and reimagining our products and services to capture this changing client value chain, including growing owner, an RBC Venture, and RBCx, our platform, to help entrepreneurs scale up tech and life science and verticals.

Turning to City National. Average loans, excluding PPP loans, grew 15% from last year, with retail loans up 25%. Loan balances have increased to $56 billion, nearly 2.5 times the levels from when we acquired this high-quality growth franchise in fiscal 2016. We are in the process of further investing in City National's technology and operational infrastructure for the next phase of growth, including deploying improved commercial lending and mobile banking platforms.

Looking forward, we expect City National to continue to generate strong accretive growth through our multipronged strategy. This includes expanding private banking capabilities through mortgage-like growth and growing our mid-market commercial division. These strategies alone have added $6 billion in loans over the past two years. Furthermore, City National's leading entertainment franchise, supported by our FilmTrack acquisition, is well-positioned to benefit from the industry trend of increasing investment in original content and programming.

Turning to our broader Wealth and Asset Management franchises across North America. We're continuing to drive growth in these high ROE businesses, building on our current momentum. Canadian and U.S. Wealth Management AUA increased 18% and 14% year over year, respectively.

And RBC Global Asset Management AUM increased 9% from last year to nearly $600 billion, with over 80% of AUM outperforming the benchmark on a three-year basis. Looking forward, we will continue to expand our existing team of over 2,000 advisors in Canadian Wealth Management. Our differentiated technology advantage and investment expertise helped drive strong advisor productivity, generating revenue per advisor that is over 20% above the Canadian industry average. In the U.S.

Wealth Management, we remain focused on organically scaling our platform by adding experienced advisors and leveraging our investment in new products and technology. Investments we made in new securities lending products resulted in strong lending growth of nearly $3 billion over the past year. This new portfolio generated nearly $80 million of revenue in 2021 alone. Since the start of fiscal 2019, we have hired financial advisors who are expected to bring in over $60 billion of AUA.

These advisors are attracted to our client-first culture, coupled with our leading integrated technology platform. Our growing investments in people and technology has resulted in considerable momentum in our capital markets franchise, as demonstrated by a record Corporate Investment Banking revenue of $1.4 billion this quarter. We have strengthened our talent in key verticals, including adding managing directors in U.S. Investment Banking, especially in the technology and healthcare sectors, as well as our M&A group.

These investments have propelled RBC Capital Markets to ninth in the global league tables and positioned us to win increasingly attractive mandates going forward in some of the most active sectors. We are also helping our clients execute on their own sustainability strategies. We've provided $84 billion in sustainable finance in 2021, up from $73 billion in 2020, building toward our target of $500 billion by 2025. And Aiden, our AI-based electronic trading platform, has continued to gain traction, supporting our global markets clients during these volatile times.

We believe these investments have structurally enhanced the earnings power of Capital Markets franchise, and we expect to continue to drive pre-provision pre-tax earnings above $1 billion per quarter through 2022. Our Investment Banking pipeline remains healthy, given the near-term economic outlook and an increased desire from clients to accelerate their own growth strategies. In this context, we will look to continue to deploy capital into Capital Markets, including support for our underwriting commitments as our global clients continue to rely on us as an innovative and trusted partner. To sum up, we have started 2022 with continued strong momentum across our largest franchise.

Our results reflect significant investments in our people, technology and products and services to deliver differentiated value for existing clients and to continue attracting new client relationships. We have a clear focus on driving long-term shareholder value, and we'll continue to deploy capital in a balanced manner. Nadine, over to you.

Nadine Ahn -- Chief Financial Officer

Thanks, Dave, and good morning, everyone. I will start on Slide 7. We reported earnings per share of $2.84 this quarter, up 7% from last year. Revenue growth was driven by strong investment management fees and mutual fund revenue, as well as strong M&A advisory fees.

Pre-provision pre-tax earnings increased 10% year over year, also benefiting from positive all-bank operating leverage. Our effective tax rate increased 270 basis points from last year, mainly due to the net impact of tax adjustments and changes in earnings mix. Going forward, we expect our effective tax rate to normalize back toward 22% to 23% through the rest of the fiscal year. Before I discuss our segment results, I will spend some time on three key topics: capital deployment, rate sensitivity and our expense outlook.

Starting with capital on Slide 8. Our CET1 ratio was down 20 basis points sequentially to 13.5%. Our earnings added 74 basis points of capital this quarter, well in excess of 29 basis points of capital used to generate client-driven RWA growth. Net credit migration lowered RWA by $2 billion.

Balance capital deployment included 54 basis points of capital return to shareholders through dividends and share repurchases. Moving on to Slide 9. Net interest income was up 5% year over year, as strong client-driven volume growth in Canadian Banking and City National continued to offset the impact of lower net interest margins. Now to Slide 10.

While the impact of low interest rates continue to persist, we started to see a stabilization of net interest margins in our banking franchises on both sides of the border. Canadian Banking NIM was down 1 basis point sequentially as the competitive nature of the mortgage market drove asset spreads lower. We continue to see lower benefits from mortgage prepayment revenue, a trend we expect to moderate going forward. These factors were partially offset by an accounting adjustment that impacted NIM last quarter.

City National's NIM was up 6 basis points relative to last quarter, with paycheck protection program loans contributing most of the increase. We expect our PPP loan portfolio to largely run off by year-end. To provide context on our sensitivity to rising interest rates, it's important to remember that the cumulative impact of lower interest rates across 2020 and 2021 reduced our revenue by approximately $2 billion. This was partly driven by lower Canadian banking deposit spreads and lower asset yields impacting City National.

Going forward, we are well-positioned to benefit from the likely scenario of rising interest rates. We estimate that a 25 basis point increase in short-term interest rates could result in over $175 million of additional revenue over 12 months in our Canadian Banking and U.S. Wealth Management businesses. We expect this benefit to be compounded by higher volumes and a shift in mix toward higher-yielding assets over time.

At the same time, we expect the benefit from rate hikes to be impacted by the competitive asset pricing environment as economies recover. As interest rates increase, we expect deposit repricing in our low beta retail banking deposit franchises will slowly increase toward historical levels over time, reflecting trends we experienced in the previous rate hike cycle. An environment of higher interest rates and a normalization of surplus liquidity in wholesale markets would be beneficial to our $300 billion repo business where spreads have declined significantly from 2020 levels. Turning to expenses on Slide 11.

Noninterest expenses were up 1% year over year or 3%, excluding the impact of variable and stock-based compensation. Adjusting for the partial release of the legal provision in U.S. Wealth Management and excluding variable and share-based compensation across our businesses, expense growth was 5% year over year. Salaries and benefits were up 4% as we continued to invest in sales capacity and back-end operations to support increasing client activity in our many growth verticals.

We also saw an increase in marketing and travel costs compared to levels in the first half of 2021. The top of Slide 12 gives you an idea of how we think about expenses. We have group total costs across a continuum of key categories, including the foundational governance cost to run the bank. These would include regulatory and risk management costs.

A large part of our run-the-bank spend is also related to operational and technology costs, including our core systems. We continue to act on opportunities to drive efficiencies and productivity in these areas, while investing and innovating for the future. We expect our scale and growing revenue to generate inherent operating leverage over this cost base, which is relatively less variable in nature. Our new digital account opening experience for retail clients has reduced the average time to completion by nearly 70%.

This has freed up capacity for our advisors to focus on delivering value-added advice and deepening client relationships. Our app dev teams are utilizing our next-generation development platform, which is generating efficiency through automation and reuse. There's another bucket of costs, which are investments to add new revenue-generating products and capabilities, which Dave spoke to earlier. And lastly, there are investments to drive growth, they have a flexible cost structure, which represent approximately 30% of our cost base.

These are costs that largely scale up or down with revenue generated, including our commission sales force and client-facing employees in our Capital Markets and Wealth Management platform, where we pay for performance. There are also variable noncompensation costs, such as trade execution, where we will look to drive productivity improvements. Now to the bottom of the slide for our expense expectations, excluding variable and share-based compensation. We expect structural costs to be higher this year, partly due to the impact of inflation, along with the realization of previously committed costs, which is higher salaries.

We will continue to invest in technology, add to our client-facing sales force across our largest segments and scale our marketing spend to drive forward our strategic priorities. And we will continue to invest in efficiency initiatives that streamline and simplify our operations and processes. In aggregate, we expect annual expenses, excluding variable and share-based compensation, to grow at the higher end of the low single-digit range in 2022. This includes the recognition and subsequent partial release of the legal provision in U.S.

Wealth Management. And as we recognize the benefits of the forward curve, we expect our full year Canadian banking efficiency ratio to fall under 40% in 2023. Moving to our business segment performance, beginning on Slide 13. Personal & Commercial Banking reported earnings of $2 billion this quarter, up 10% from last year.

Canadian Banking net interest income was up 3% year over year as strong volume growth was partially offset by lower spreads. Growth in business volumes was strong on both sides of the balance sheet. While credit card balances increased, this was largely due to higher transactor balances as revolve rates remain near pandemic lows. Higher credit card spend also contributed to higher noninterest income as did higher mutual fund distribution fees.

Canadian Banking generated operating leverage of 2.8% with expenses up 3% year over year. Turning to Slide 14. Wealth Management reported earnings of $795 million, up 24% from last year. The segment generated positive operating leverage even after adjusting for the partial release of last quarter's legal provision.

Canadian Wealth Management, U.S. Wealth Management and RBC Global Asset Management revenue growth benefited from higher fee-based client assets, reflecting favorable equity markets and net sales. RBC GAM generated positive net sales of over $5 billion this quarter. However, Canadian retail sales were lower than the prior year, partly due to redemptions out of fixed income funds, especially in December, which saw heightened market volatility.

U.S. Wealth Management revenue also benefited from continued double-digit volume growth at City National, partially offset by lower spreads. Turning to Insurance on Slide 15. Net income of $197 million, decreased 2% from record first quarter results a year ago.

Lower earnings were largely due to claims experience and the impact of lower new longevity reinsurance contracts. These factors were partially offset by business growth and higher favorable investment-related experience. On to Slide 16. I&TS net income of $118 million, decreased 4% from a year ago, mainly reflecting higher technology-related costs.

The current quarter also saw higher revenue from funding and liquidity, client deposits and asset services businesses. Turning to Slide 17. Capital Markets reported earnings of over $1 billion, down 3% from last year, including the impact of a higher effective tax rate. Pre-provision pre-tax earnings surpassed $1 billion again this quarter, helping drive our strong book value growth.

Corporate and Investment Banking reported record revenues of $1.4 billion, underpinned by record loan syndication and M&A fees, higher equity origination fees, record lending revenue and higher debt origination fees also contributed to stronger revenue. In contrast, Global Markets revenue continued to moderate from elevated levels last year as narrower spreads impacted both FICC and repo revenue, which were down 12% and 5%, respectively. Equities revenues were robust, but down 2% from strong results last year. To conclude, we are well-positioned to continue growing client-driven volumes and benefit from higher interest rates.

Looking forward, we remain focused on disciplined cost management and balancing our capital deployment to continue delivering value for our shareholders and clients. With that, I'll turn it over to Graeme.

Graeme Hepworth -- Chief Risk Officer

Thank you, Nadine, and good morning, everyone. Starting on Slide 19. Allowance for credit losses on loans of $4.4 billion, remained largely unchanged from last quarter, as write-offs and release of reserves on performing loans were nearly offset by higher provisions on impaired loans. This marks our fifth consecutive quarter with reserve releases on performing loans, reflecting continued improvement in our macroeconomic outlook and in the credit quality of our portfolio.

Over the magnitude of the releases this quarter were tempered by the economic uncertainty related to the headwinds I noted last quarter, namely the Omicron wave of the COVID-19 pandemic, inflationary pressure and the pace and scale of anticipated interest rate increases. As Dave noted earlier, while the impact of the Omicron wave has now largely subsided, impacts of inflation and rising rates are expected to persist. Reserve releases of $80 million this quarter bring our total release to $1.4 billion since the start of 2021. When combined with considerable portfolio growth of 17% over the last two years, our ACL ratio is now approaching pre-pandemic levels of 58 basis points.

Turning to Slide 20. Our gross impaired loans of $2.1 billion, were down $167 million or 3 basis points during the quarter. Impaired loan balances once again decreased across all our major businesses. New formations of $263 million, were at their lowest level in almost 10 years, reflecting the significant liquidity accumulated over the pandemic, the ongoing economic recovery and the continued benefits to clients from government support programs.

Turning to Slide 21. PCL on impaired loans of $180 million or 9 basis points, was up 2 basis points quarter over quarter, but remains well below pre-pandemic levels and below our long-term averages. In our Canadian Banking Retail portfolio, PCL on impaired loans was up $13 million quarter over quarter, with modest increases across most products. We also saw delinquencies begin to rise during the quarter.

These increases can be attributed to a few factors, including seasonality, the winding down of certain government support programs and the client behavior beginning to revert to more historic norms. Overall, delinquency levels remain below pre-pandemic levels. Our Canadian Banking Commercial portfolio, PCL on impaired loans was up $27 million quarter over quarter, which is largely driven by provisions on two larger accounts. Despite the increase this quarter, we continue to see positive credit migration and a reduction in watch list exposure in this portfolio.

In Capital Markets, we had a $12 million net recovery on impaired loans in the quarter, which is the fourth consecutive quarter with net recoveries in Capital Markets, as this portfolio continues to benefit from a constructive operating environment and strong market liquidity. Finally, in Wealth Management, PCL on impaired loans decreased $11 million quarter over quarter, largely due to the reversal of a provision taken in the information technology sector last quarter at City National. I'll now turn briefly to market risk on Slide 22. During the quarter, we saw market volatility increase as Central Bank started to reverse course on monetary policy, the Omicron wave of the pandemic at its peak, geopolitical tensions rose in Ukraine and Russia and inflationary pressure came to the forefront.

Notwithstanding the increased market volatility, there were no days with net trading losses in the quarter, as we effectively manage our market risk profile. Looking ahead, while the impact of the Omicron wave has largely subsided, market volatility is likely to persist, driven by ongoing uncertainty around monetary policy, geopolitical tensions and inflationary pressure. We continue to take a prudent approach to market and counterparty credit risk supported by a consistent risk appetite and a strong control environment. To conclude, we continue to be pleased with the ongoing performance of our portfolios and the resiliency of our operations through the pandemic.

As we noted last quarter, the increase in PCL this quarter was anticipated as losses start to return to pre-pandemic levels. We still expect our PCL ratio on impaired loans to trend back toward historic norms for the course of 2022 and into 2023. As always, the quality of our client base and our prudent risk management approach positions us well to manage through any uncertainty. Importantly, we remain steadfast in our commitment to supporting our clients and delivering advice, products and insight to help them navigate the evolving macroeconomic and operating environment.

So with that, operator, let's open the lines for Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] And the first question is from John Aiken from Barclays. Please go ahead. 

John Aiken -- Barclays Capital -- Analyst

Good morning. Nadine, thank you for the discussion and the outlook on expenses on Slide 12. A quick question for you. When we look at the more variable expenses, the sales advice for revenue generation, is there -- and I know that encompasses a whole host of different factors.

But within that bucket, is there the possibility to generate positive operating leverage within those expenses? Or is this more of a function of 1-1 in terms of expenses versus revenues? 

Nadine Ahn -- Chief Financial Officer

Thanks, John. That is the objective. When we look at when we -- particularly our sales force, I mentioned some comments around how we increase their productivity and efficiency in terms of the tools that we've deployed to them in the way that they work. The other component of that, I would say, is part of that is also the support groups that also travel with the frontline staff.

And so there also, we're looking to drive optimization through a number of programs, such that we're -- for every dollar of cost, we generate that much more dollar of revenue.

John Aiken -- Barclays Capital -- Analyst

That's great. And as a follow-on, David mentioned that you continue to grow the residential mortgage sales force. What frictional costs are associated with potential downsizing? So if and when we see a slowdown in the housing marketplace, what -- how much of a lag would that be on the efficiency ratio because of the buildup of the sales force?

Nadine Ahn -- Chief Financial Officer

I'll turn it over to Neil, maybe.

Neil McLaughlin -- Group Head, Personal & Commercial Banking

Yeah. Thanks for the question. I mean I don't think we really are looking at a scenario where we would -- we haven't really contemplated that to be truthful. These are variable commission-based sales people.

So for the most part, I think we'll be looking for them to go out and continue to compete for volume. And at the margin, if we needed to slim down that sales force, the friction costs would be negligible. I mean, it's not something that would really factor into our outlook on [Inaudible].

John Aiken -- Barclays Capital -- Analyst

Understood. Thank you.

Operator

Thank you. The next question is from Ebrahim Poonawala from Bank of America. Please go ahead. 

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Good morning. I guess I just wanted to go back, Dave, to your prepared remarks in terms of everything that you talked about, mortgage growth, commercial lending, consumer spend, sounds very bullish. Clearly, a lot of crosscurrents that the market is paying attention to including inflation, geopolitical risk. Just give us a sense of when you look at the outlook, you mentioned we are maybe mid-cycle, not early cycle in terms of the economic cycle.

Where are risks Q2? Do you see more downside risk as we are moving forward to the growth outlook? Or do you think the market has caught up with some of these things that might be transitory in the underlying trends around immigration, things reopening back are much more stronger? Would love any insights there.

Dave McKay -- President and Chief Executive Officer

It's an important question because there are a lot of mixed signals out there. When we look at the stage of the economic cycle, you'd say commercial utilization and even monetary policy would be early cycle. But capacity left in the economy would be late cycle and the balance of where the consumer is or the economy is solid mid-cycle, which could mean and we expect there's a good solid couple of years of growth here or more, we would hope so. So the risk factors are all the ones we see, geopolitical risk, inflation risk.

And one of the top risk factors is the lack of labor capacity in the workforce and does the liquidity that's sitting on consumer balance sheets lead to inflation or does it lead to growth. Those are the types of things we're going to watch and see how they play out. Net-net, immigration, consumer spending returning to normal, goods and services consumption, all of those are very positive for kind of a mid-cycle growth outlook. So I think, to your question, we have to watch kind of economic capacity here and what the inflationary pressures are to Graeme's point is one of the real risks to our economy.

Is it real GDP growth, or are we just going to use that $200 billion or $300 billion of liquidity, $2.5 trillion by the way in the United States? Does that just create more inflationary pressure. I hope that answers your question.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Yeah, that's helpful. And I think just as a follow-up. I think you mentioned when talking about capital deployment, looking to acquire or potentially looking to acquire quality franchises and growth segments. Unpack that for us in terms of what are things that would be attractive to Royal? You've not been very acquisitive.

You've talked about asset generation capabilities in the past. Would love any color, especially in a period where we are seeing some asset price dislocation correction in the public markets.

Dave McKay -- President and Chief Executive Officer

We're very focused on the type of growth and quality franchise we're looking for it. And as with City National, there was no auction around City National. It was based on a relationship I built with the Goldsmith family and Russell Goldsmith over a number of years to the point where we saw a future together. And we're doing very similar things right now.

The high-quality, high-growth assets don't come up for auction for obvious reasons. So we are obviously looking to expand our network. The timing is hard to predict, but we always want to be the first call. And there are a number of really attractive assets that exist when and how they make their strategic decisions, we'll see.

So I think from that perspective, we are continuing to maintain. We're looking for commercial and wealth, ultra-high net worth franchises in the United States and Europe. And we have active dialogues, but it doesn't mean things are going to happen. So I think from that perspective, it's that continued focus, the City National model works.

Look at the organic growth, we don't need to make an acquisition to continue to accelerate the growth and outperform. So when you get the right franchise, you can grow it and run on it for a long period of time. And when we made the City National acquisition, we said we don't need to make other acquisitions. This franchise has enormous organic growth potential.

So we are looking for similar platforms to build on like that. And as I said many times, capital does not have a half-life. It only dissipates if you misspend it. So we are being smart about it.

You've seen the growth numbers. And we are returning some of that capital to you as you saw in our share buybacks.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Greatly. Thanks, Dave.

Operator

Thank you. The next question is from Paul Holden from CIBC. Please go ahead. 

Paul Holden -- CIBC -- Analyst

Thank you. Good morning. So I feel compelled, I just have to ask this question because the magnitude of what's happening in Europe. Are there any kind of first order impacts we should be thinking about in terms of the Russian sanctions and RBC?

Dave McKay -- President and Chief Executive Officer

And maybe I'll let Graeme start, and then I'll jump in with my perspective. Graeme, over to you.

Graeme Hepworth -- Chief Risk Officer

Yeah. Sure. I mean I think the first point I make is that we do not have any direct or meaningful exposure to Russia or the Ukraine. I mean that's the byproduct of the fact that we don't operate in those countries, and we don't have a risk appetite that kind of allows us to operate with clients or markets that are high risk like that.

And so I think what we're focused on is more the indirect impacts that could flow through and certainly high levels of commodity prices, those are interesting ones that have kind of multiple effects that we need to think through. On one hand, Canada is a net exporter of natural resources, and that's a positive for our economy. On the other hand, those are things are going to continue to fuel and exacerbate kind of current risk concerns like inflation. And so those would be the areas of concern that we would be focused on in this environment.

But again, I think our risk appetite or operating model will serve us well and position us well against these kind of emerging concerns that are happening right now in Eastern Europe.

Dave McKay -- President and Chief Executive Officer

The only thing I would add is, as you look at how markets react, the obvious volatility coming from investor uncertainty -- global uncertainty. But the effect on the yield curve, you've seen a little bit of tightening at the long end of the curve. There's always a flight to quality when you have such geopolitical volatility. You've seen that today, I think, with the tightening in the U.S.

curve of about 10 points at the long end of the curve. And does it invert temporarily? What we've seen historically, as you all see, is that geopolitical risks tends to smooth out over time, but can be quite volatile in the short term. So I still expect the strength of the economy, the inflationary pressures that we talked about, economic capacity being used that I would still expect some form of rate increase to continue to move forward and monetary policy to continue to tighten. These underlying four drivers are very strong.

Paul Holden -- CIBC -- Analyst

OK. That's great. That actually leads me perfectly in to my real question, which is for Nadine and sort of the NIM sensitivity or NII sensitivity you provide. Obviously, there's a number of assumptions that go into that and kind of talked about some of the variables in your prepared remarks.

What I'm particularly curious on, are there certain factors that may lead to more NII benefit from rate tightening than what you put into your disclosed sensitivities? And if there are, can you give us a sense of what those factors might be and sort of a general order of magnitude?

Nadine Ahn -- Chief Financial Officer

Sure. So I think what typically we would have referenced in the slides is the impact on our retail franchise, both Canadian Banking and in the U.S. Wealth Management business and pointed out, as I called in my remarks, focusing on what it looks like is the more of the curve flattening, so the rising in the short end of the rate. As it relates to other businesses, you obviously have Wealth Management Canada will benefit as well from the spread margin expansion on their deposit base.

I would say one of the other big areas that I did call out in my remarks relates to Capital Markets and the repo business. So we have about $300 billion balance and saw margins compressed there in about 10 basis points. So that business, obviously, as rates start to move up in the short end would benefit from that margin expansion as well, coupled with the fact that we did see some balances come off with the elevated liquidity levels. Those are primarily, I would say, two of the primary drivers from a pure interest rate perspective.

Paul Holden -- CIBC -- Analyst

That's great. That's it from me. Thank you.

Operator

Thank you. The next question is from Meny Grauman from Scotiabank. Please go ahead. 

Meny Grauman -- Scotiabank -- Analyst

Hi. Good morning. You've been very clear in terms of your guidance on expenses. I think -- what's interesting to me is there still does seem to be a disconnect a little bit between maybe the commentary that some -- especially larger U.S.

banks are talking about with respect to their expenses and the way you are presenting the outlook. So I'm wondering if you could kind of delve into that in terms of structural or fundamental reasons why your expense structure is different than, let's say, some large banks in the U.S.? So basically trying to get an idea of how is your outlook on expenses more optimistic? And that's really the fundamental nature of the question.

Nadine Ahn -- Chief Financial Officer

Thanks, Meny. I would say there's two primary components related to that. First off, we've been investing for a significant portion of time both in our technology or infrastructure. As you would have also noticed in our front office sales support staff, really that client acquisition arm of it.

So we have been investing in technology for a long time and scaling across our Canadian businesses. You'll also notice that despite depreciation, that will start [Inaudible] in over time. So that doesn't necessarily result in an increasing cost base, the extent that you've been spending equally through the years. I would say that the other thing that we talked about was around our efficiency and our sustainability of looking at our productivity options that we have to deploy not only technology tools but how we can be more efficient in our -- in that cost base, I referenced to the far end of the chart there, which can tend to be a bit more fixed over time.

So it's twofold there. We look at how we can be more efficient, where we work, how we work, digitization of processes, automation and in addition, how we can become more productive in our sales force staff. So how we can expand upon the every cost dollar we put out there and the revenue multiple that we generate off of that. So I think part of it, Meny, is really we've been investing over consistently over a period of time.

I think others may be catching up to where we've been having to increase their spend levels. But in addition, we do focus consistently across the organization on the efficiency and productivity arm of it to be able to continue with that investment growth.

Meny Grauman -- Scotiabank -- Analyst

That's helpful. Thank you.

Operator

Thank you. The next question is from Doug Young from Desjardin Capital Markets. Please go ahead. 

Doug Young -- Desjardins Capital Markets -- Analyst

Good morning. Just wanted to go back to the capital discussion. I think you've been clear about where you see the growth opportunities. But I guess the crux of my question is I'm curious if you can put your substantial excess capital to work organically such that you would be driving down your CET1 ratio? And what are those best opportunities? And so we saw risk-weighted asset growth reduced the ratio by 29 basis points this quarter.

Could we see RWA growth push that ratio down 50, 60, 70 basis points is really kind of where I'm going.

Nadine Ahn -- Chief Financial Officer

Yeah. I mean I think that you've hit on the primary objective there in terms of our organic growth, and we have the significant ability to deploy that capital in high ROE businesses and looking at good returns, you see it both within capital markets and high ROE this quarter continued around able to deploy it in the higher-margin underwriting businesses, the loan book, as well as City National with that double-digit growth. So we are looking at how we scaled up our businesses, particularly with the advancement of our frontline sales force and the ability to deploy that balance sheet. So that is definitely an opportunity.

Obviously, we saw last year some of the model changes with respect to RWA. So that brought it down, and we have Basel III coming on the horizon next year, which has the opportunity to improve again our RWA position. So there's obviously puts and takes on that, but we definitely look to continue to deploy it from an organic perspective.

Doug Young -- Desjardins Capital Markets -- Analyst

I guess where I'm going with this is this -- because everyone talks about M&A and we can all speculate on that and then buybacks at the margin, but the real opportunity would be to put 100 basis points of RWA to work or to put it work like organically? And I know the credit card balance is coming back, commercial card balances, but like what I'm trying to get at is what are the best opportunities do you foresee? And what's the most capital-intensive opportunities?

Dave McKay -- President and Chief Executive Officer

I think we are putting a lot of RWA to work. The beauty of the model is that we're generating so much capital from profitability -- and our scale and our efficiency that it drives a self-funding model to your point. So I think the beauty is we can accelerate growth, we are accelerating growth, and we're funding a lot of it from profitability. So you're seeing us, as I said, returning capital to shareholders, and we still have a significant strategic optionality to put capital to work in an inorganic fashion when the right opportunity comes to the table.

So we're in a great place. You saw a strong -- strong growth, driven by previous investments that we've made. We continue to invest. We are generating organic capital.

We have strategic optionality. We are in a very good place to continue to drive premium total shareholder return.

Doug Young -- Desjardins Capital Markets -- Analyst

Great. Appreciate the color. Thanks.

Operator

Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. 

Sohrab Movahedi -- BMO Capital Markets -- Analyst

I have two questions. Maybe I'll start with where I think Doug left off. Nadine or Dave, you've mentioned capital markets several times, I think, as a good source of, I guess, capital deployment. Is that -- would that be more so in the traditional banking businesses, credit underwriting and the like? Or could there also be some capital chewed up in market risk?

Dave McKay -- President and Chief Executive Officer

Why don't we have Derek answer that? 

Derek Neldner -- Group Head, Capital Markets

Sure. Thanks, Sohrab. I appreciate the question. I think we see opportunities right now across both the Banking business and the Global Markets business.

As Nadine said, we are very focused on trying to make sure we're only deploying capital where we see good returns. But as you've seen with the Capital Markets business over the last couple of years, partially due to the environment, but partially due to some of the strategic initiatives and changes we've undertaken, we have notably moved up our ROE. And so that is giving us opportunities right across the platform. Clearly, there are opportunities to deploy capital organically through the loan book, and that has the ancillary benefit of also supporting the non-lending or ancillary revenue opportunities through investment banking or otherwise.

There's some modest capital deployment through our loan syndications and underwriting business, although we remain very mindful of the risk environment, and so we're being quite prudent and disciplined about that. And then in different pockets of our markets business as we're looking to grow out different areas of the trading platform in both the U.S. and Europe, I think we will see additional opportunities to deploy capital in trading as well. So it is quite diversified right now, but probably led more by the loan book and the investment banking side.

Sohrab Movahedi -- BMO Capital Markets -- Analyst

And Derek, just to clarify with no real change even at the margin and risk appetite?

Derek Neldner -- Group Head, Capital Markets

Correct.

Sohrab Movahedi -- BMO Capital Markets -- Analyst

Thank you. And then my second question is for Neil. I think you talked -- you've provided some statistics. I think Dave did actually around market share gains, both in I think checking deposit stuff and mortgages and the revenue pickup.

Is there any way, Neil, you could attribute how much of that is because of the kind of consistent emphasis on the RBC Venture's initiatives?

Neil McLaughlin -- Group Head, Personal & Commercial Banking

Yeah. Thanks for the question. I wouldn't point to Ventures as a market share driver there. I would point to the drivers, maybe just start with mortgages.

We've talked for, I think, quite a long time, just about investments we've made, just picking up on Nadine's point, really thinking about that franchise front to back about finding processes, investing in digital, investments in our sales force, how we flow leads to those mortgage professionals. So it's really been, I think, a consistent steady strategy that's really paying off in the mortgage business. A little bit different in the core deposits business, whereas last year, we really came away and said we hadn't refreshed the value proposition for our core deposits business, and we felt we needed to make some investments there. That was, I think, a great example of a technology investment that we're seeing pay off.

Nadine touched on the sort of the tools and the ability to reduce the amount of time it takes to open to one of those checking accounts, but we also put some of that technology investment into the core underlying value proposition, which really had us double down on our belief in reciprocity and tying it back to a core relationship strategy where, when our clients bring more of their business to us, we reciprocate with a fee reduction structure back to them and the ability to put our rewards points to use on their debit product. So we'd say that -- those types of investments and particularly that shift in the value proposition that you're seeing in the marketplace for advertising would be the driver on the deposits business.

Sohrab Movahedi -- BMO Capital Markets -- Analyst

Thank you.

Operator

Thank you. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. 

Gabriel Dechaine -- National Bank Financial -- Analyst

Good morning. At what point does inflation become a problem? I know we've talked about it as a headwind. But is there a very simple way of thinking through that over the course of five, six, seven months over a year, whatever it is, Canadian inflation of 5% to 6% and U.S. inflation in the 7% range, does that becomes something that compels you to look at your credit models and start adding to provisions? And then from your business outlook standpoint, consumption, they're paying more for gas, people are paying more for gas and other stuff as opposed to TVs and cars like, when does that affect your revenue growth outlook? Thanks.

Graeme Hepworth -- Chief Risk Officer

Sure. Thanks, Gabriel. Maybe I'll start there, certainly on the credit side. Certainly, inflation is a factor by itself, but I think we would combine that with kind of a rising rate environment kind of as a set of risks that we certainly are mindful of in our credit books.

And certainly, it's something front and center with us on that. I would start -- we obviously have a backdrop where clients are in a very strong position with very strong liquidity and cash balances, as Dave noted earlier. I think combined the fact that we've had very strong underwriting, a very persistent underwriting standards for a long time that are mindful of an operating environment of higher rates and higher inflation. And so I don't think we kind of look at this as a surprise and something that shouldn't be considered, but we always talk about being prudent and consistent through the cycle.

And these are kind of cyclical events that we do and we build into our underwriting standards. I think different portfolios will be impacted at different times. I think there's probably more latency in credit in terms of inflation's impact and rates impact than maybe we would see in the revenue and expense lines. And that's kind of largely really the fact that we build good resiliency into our portfolios.

Many of our portfolio -- look at our mortgage portfolio, we were just talking about, there's a long duration in that. And so clients both have a lot of capacity there, and there's a time frame there before you would see clients turning over and having to refinance into a higher rate -- higher cost environment. So I don't think it's kind of reading back to my original comment, that's why I don't think we see our views on our credit forecast there haven't changed largely since Q4. But those are headwinds that we are considering, and I think will accrue over time into higher credit costs.

But those will be offset by positives elsewhere on the revenue side, as we previously talked about.

Gabriel Dechaine -- National Bank Financial -- Analyst

So there's a point at which you might have to [Inaudible] signaling out Royal and in effect every bank, but is there a point at which you would have to maybe make an adjustment?

Graeme Hepworth -- Chief Risk Officer

Are you referencing a credit adjustment?

Gabriel Dechaine -- National Bank Financial -- Analyst

Well, yeah, yeah.

Graeme Hepworth -- Chief Risk Officer

Again, I'm not sure when you say credit adjustment. Again, we -- when clients come to the door, we are constantly reassessing and assessing their credit quality, their capacity. We build in capacity for rate rises and cost rises in their -- in the origination process. And again, if you look at our portfolios, there's a lot of equity built up with clients that give us a lot of capacity to work with them on that.

So our credit strides, as I said, are really designed to work through the cycle, and that won't change. We constantly reflect these factors though, into our reserving models. So certainly, as we talked about, we've had some uncertainty that's coming off with they say things like Omicron and government support. And these are some new headwinds that are coming into play.

And so we'll constantly reassess all of those each quarter and reflect that into our reserving models. But I wouldn't say right now that that's a headwind that we would indicate and say that that -- we expect an increase there coming any time soon.

Dave McKay -- President and Chief Executive Officer

To your question, I think the only risk you have to watch out for is if inflationary pressures erode cash flow because salaries and benefits aren't keeping up with it, and therefore, it challenges your sort of visibility ratio. So what we're seeing now is disposable income and salaries are keeping up and tracking the inflationary pressure. But that's what you have to watch out for. And we're in this unique position where we have over $200 billion of cash sitting on consumers' balance sheets to mitigate a lot of that in most of the economy.

But how that gets spent and how that drives inflation versus growth, we all have to watch. So I think that's what you're trying to get at, and that's what we're watching for, too.

Gabriel Dechaine -- National Bank Financial -- Analyst

OK. Well, thank you.

Operator

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. 

Mario Mendonca -- TD Securities -- Analyst

Good morning. Can I take you to Page 26 of your presentation, and specifically, the all bank asset yields. I'm looking at the loan yield and how it's dropped by 27 basis points over the last 12 months. Over that time period, the five-year -- Bank of Canada five years up about 100 points [Inaudible] increase in the five years has been rather abrupt and recent.

I would have thought that we might start to see a little bit of a move in loan yields. It might just be mix that I'm seeing here, it might be just a matter of timing. But could you speak to when that increase in the five years that we're seeing will translate into higher loan yields?

Nadine Ahn -- Chief Financial Officer

Sure, Mario. Thank you. I mean I think you're right, a bit of it is going to be mixed overall that you're [Inaudible] mix overall, though we're talking about some of it we had expressed as part from the comments around the mortgage book and how the competitive pricing there that is, but as five-year rates have started to roll into higher rates, we have seen those rates go up.

Mario Mendonca -- TD Securities -- Analyst

So you're saying we are starting to see that. Do you have a sense for when we might actually -- this exhibit on Page 26, will actually see the inflection in loan yields in terms of timing?

Nadine Ahn -- Chief Financial Officer

Yeah, we have to disclose it a bit for you, Mario, because, again as I said, it is the full book across Capital Markets and City National. So if rates start to rise you would expect it, but it's difficult to probably get back to you and bring you a bit more of a decomp position on it.

Dave McKay -- President and Chief Executive Officer

City National probably plays a role given how much it's impacted at the short end of the curve than the long end. There is a significant compression that we've talked about in the City National and it would disturb that number versus have nothing to do with the Canadian long yield, that may be part of it. So we'll have to decompose that to one driver. We'll look at roll on, roll off on the mortgages in Canada will be another driver, and we can do a waterfall for you.

Nadine Ahn -- Chief Financial Officer

[Inaudible] five-year rate.

Mario Mendonca -- TD Securities -- Analyst

Yeah. I was looking at the Canadian five-year, but obviously, the U.S. five-year is up as well, maybe not as much as the Canadian.

Dave McKay -- President and Chief Executive Officer

Our balance sheet is completely orange. It's short end of the curve in the United States where we don't have many long-term assets [Inaudible] of the short end. So that's what's driving this yield.

Mario Mendonca -- TD Securities -- Analyst

We'll need to see actual Central Bank rate increases before we might see that margin tick up.

Nadine Ahn -- Chief Financial Officer

Right.

Dave McKay -- President and Chief Executive Officer

And that's the way we gave you the sensitivity with the short end of the curve move because it has a big impact on the U.S. and Canada for us, and the longer end of the curve is quite flat.

Mario Mendonca -- TD Securities -- Analyst

Slightly different type of question. I also care a lot about what you're doing on the liquidity front, the average -- looking at repos, cash resources, securities, ex-trading. Obviously, that increase -- those balances increased very significantly when the pandemic hit because every bank was building liquidity then. It started to taper off until very recently.

Now we're seeing a really big increase again in repos, for example, on securities. Could you talk about repo specifically and the dynamic -- the sort of market dynamic that would cause such a significant increase in repos from last quarter to this quarter?

Nadine Ahn -- Chief Financial Officer

Derek.

Derek Neldner -- Group Head, Capital Markets

Sure, Mario. It's Derek. What you're seeing there is a couple of things. Quarter over quarter, a big part of that is just what I'll refer to as sort of seasonality or timing of the year.

And so because of the timing of our fiscal year-end and our quarters versus many of our global peers that are operating on a calendar fiscal year-end, many of them will often pull back on liquidity they're providing in the market as they head into the December 31 period, because that's intra-quarter for us, that often creates good opportunities for us to step in with liquidity around the calendar year-end period and support our clients through really just a multi-week period around year-end. And so there's a seasonality element to our repo business where often we can increase our balances to support clients through that time period and then bring those back down. So that is definitely part of what you saw in terms of the quarter over quarter. Longer term, and Nadine referred to this earlier with all the liquidity that's been put into the market by Central Banks over the last couple of years, the demand for financing through things like repo has come down, and that has brought down our volumes, but it's also had a notable spread impact.

I think we would expect as liquidity starts being pulled out of the market, we will see an increased client demand for financing, which would be helpful for us. But also we would, over time, expect that to translate into higher spreads in that business. And we -- I'd say we're very early days and starting to see that. This was the first quarter where we saw a modest uptick in spreads.

So it does take time, but we would expect as rates go higher and liquidity comes out of the system, that will help to normalize spreads in that business.

Mario Mendonca -- TD Securities -- Analyst

Thank you.

Operator

Thank you. The next question is from Lemar Persaud from Cormark. Please go ahead. 

Lemar Persaud -- Cormark Securities -- Analyst

Thanks. My question is probably for Nadine. So I think I heard you suggest that inflation is captured in the structural part of the expense expectations slide -- expense expectations waterfall on Slide 12. So maybe clarify that, then would it be fair to suggest that the structural costs were more significantly impacted by, say, higher inflation? Could some of that 4% growth in investment and volume spend being deferred? Or is there just not that much flexibility there? I'm just really trying to assess the possibility that costs could come in above your guidance range here.

So any thoughts would be helpful.

Nadine Ahn -- Chief Financial Officer

Sure. Thank you. So the 2% structural does have a component and the parts of it related to inflations would be where we had increased salaries at the start of the year, recognizing the fact that we were under some inflationary pressure. But that's about a third of that.

About two-thirds of that is more scalable related to business volumes. So for example, trade x, sub-custody, etc., and also seeing a bit of the pickup in travel. The 4% you referenced of the investment, a large component of that is actually investment in talent. So we've already incorporated as part of that, a little bit of inflation as well, Lemar, just in terms of expectations around certain of those groups that we're investing in from a frontline perspective, as well as some of the rest of it would be in tools.

I would say if inflation was to significantly spike or push through a couple of things just to note there. So we have put through some of it already into our full across-the-board salary base. The other piece of it is some of our cost base actually is not going to be immediately impacted by inflation. We do have a number of costs that will be fixed in nature.

For example, our occupancy is already predetermined cost. Secondly, although the depreciation was related to our app dev spend or some of that investment in technology is actually from historical spend as it pulls through from an NIE standpoint. We do have opportunity to scale on that, but also on the efficiency and productivity side that we referenced there is an area that we're heavily focused on to be able to continue to invest. And if inflation persists further, into the future, it's an area that we can continue to look at to continue our investment and play with that lever as well.

Lemar Persaud -- Cormark Securities -- Analyst

Great. Thank you.

Operator

Thank you. The next question is from Mike Rizvanovic from Stifel. Please go ahead. 

Mike Rizvanovic -- Stifel Financial Corp. -- Analyst

Hey, good morning. A question probably for Neil. So I do see the market share gains that you had, just looking over a longer-term horizon. But you have lost share in the residential mortgage balances I'm referring to among the big six, each of the past three quarters.

And I know in the past, you've had some discussion points around spreads in the market and competitive dynamics and maybe some aggressive pricing from peers. So I'm wondering what your near-term outlook might be on when you expect those market share losses to abate?

Neil McLaughlin -- Group Head, Personal & Commercial Banking

Yeah, appreciate the question. We made some comments last year just about making a decision to take a little bit more margin when we were kind of at the height of the market in terms of volume just to make sure we didn't lose any volume in the pipeline. We've converted all of those. I was kind of like, I'd say, midyear last year.

Since then, we've been competing, I think very hard and feel very comfortable of what we're taking out of the market. I think one of the things you need to get underneath is the difference between of the market share and the CBA market share data. There's different inputs into each of them. So one of the differences being just wholesale funding and purchasing mortgage is something we don't do.

And at least one of our competitors, we've been a part of what's driving some of the trends I think you're referring to just gets back to our strategy, which is we believe in owning the channel. We have a proprietary sales strategy. We own the relationship, and it all kind of ties back to owning the client to be able to cross-sell. So I don't think we have anything in our sights about us losing market share on the mortgage business.

Mike Rizvanovic -- Stifel Financial Corp. -- Analyst

I appreciate the color. And then maybe just a follow-up on Dave's guidance earlier on mortgage growth remaining in that high single-digit range. For the rest of this year, I believe, was what the comment was referring to. So I'm just looking at some of the trends that we've seen lately, including -- you've got like the recent originations, about 60% of them have been variable.

And just thinking back to the rate hikes that we saw in 2017, it sort of pushed the mortgage growth all the way down to that low single digit. I think it troughed at around 3%. So I'm wondering if we do get what the bond market is pricing in right now, something in the range of six rate hikes, would your 2023 outlook be looking something like low to mid-single-digit range at best in terms of growth?

Neil McLaughlin -- Group Head, Personal & Commercial Banking

Yeah, it's Neil again. I'll take the question. So I guess to give you a bit of an extended outlook. Dave made the comment that mortgage outlook toward the end of the year would be high single digits.

As we see rates come up, naturally cooling the market, slowing down some activity, we'd see that get into mid-single digits to end 2023.

Mike Rizvanovic -- Stifel Financial Corp. -- Analyst

OK. That's helpful. Thanks for the color.

Operator

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. 

Scott Chan -- Canaccord Genuity -- Analyst

Good morning. A lot has been asked on the Canadian P&C, but I wanted to kind of focus on the City National side. And the one thing that struck me was the retail book grew 25% year over year, and you kind of called out mortgage growth leading similar to Canada. So I was just wondering -- maybe an update on the strategy there? Anything differentiated? And is it fair to assume that the U.S.

growth this year would be higher or could be higher on the Canadian side? Thanks.

Dave McKay -- President and Chief Executive Officer

So it's Dave. I'll make some comments. We're very happy with the City National growth, both on the Commercial C&I side, as well as you pointed out on the consumer side. It's a result of our strategy.

I've been talking about for years, hiring private bankers in our key markets, expanding our capability to jumbo mortgages, cross-selling those jumbo mortgages into core deposit and investment accounts. So you're seeing just the acceleration of the investments and the strategy starting to play out for us, and it's our fastest-growing line of business now. Followed strongly by very strong entertainment growth. Our inter-containment clients are busy.

There's an enormous amount of content investment, as I pointed out in my speech, into global content production. We have a fantastic core capability in entertainment banking from production through to talent management. So I think from that, FilmTrack was an important acquisition in the IP side for us to play a bigger role in the entertainment industry. And our core C&I real estate and commercial, we're seeing great progress on our mid-corporate.

I think we're at almost $2 billion of growth there already. So that strategy, again, seeded by investment of building out teams in core markets, bringing new clients in. This franchise has a proven ability over decades to execute organically at an exceptional high-quality growth level. And we're seeing as we move into new territories, whether it be jumbo mortgage or mid-corporate commercial that customer-centric franchise that brings new clients has proven that it can extend geographically, and it can extend into new customer segments, and we're very, very happy with the progress. 

Scott Chan -- Canaccord Genuity -- Analyst

Thank you, Dave.

Dave McKay -- President and Chief Executive Officer

One more question and then we'll cut it off.

Operator

Thank you. So the last question will be from Sohrab Movahedi from BMO Capital Markets. Please go ahead. 

Sohrab Movahedi -- BMO Capital Markets -- Analyst

OK. Great. Thank you. I just wanted to actually go to Doug Guzman, which, Doug you've got the expanded responsibilities now that include, I think, overall.

Well, as you think about the opportunities there, should we be thinking you will be focused more on the top line or efficiency improvements? And maybe you can talk a little bit across the geographies as well?

Doug Guzman -- Group Head, Wealth Management, Insurance, and I&TS

Sure. Thanks. Yeah. First of all, I don't think you should expect a radically new strategies across these businesses at all.

The Wealth Businesses, so U.S. Wealth and Brokerage business and our Canadian Wealth Management business, also a brokerage model, have had the parts of their operations that made sense to be centralized have been throughout. So our operations function, we run on the same rails on the operations side, the products and strategy function. At the margin, maybe there's a little more room for more communication, but I don't think you're going to see much really different there.

Dave's talked to City National. Top line growth is really important there, growing the infrastructure into the size of the revenue base is also important and expenses are important. So I don't think I'd pick between revenue and expense, but we're optimistic. Both those businesses in the U.S.

have shown really strong growth, big investments in technology in the U.S. Wealth Management and Brokerage. Very attractive destination for FAs, financial advisors, in the U.S., we've had good growth on that side and expense controls throughout on the Canadian businesses. You continue to see us outselling the competition.

Our market share in Global Asset Management and the Retail Mutual Fund business remains 50% above No. 2, and it's actually gapping out because our sales exceed our underlying market share. Similarly, in Wealth Management Canada where we've had great success attracting advisors and a very low direct expense growth. So I think kind of both.

The caveat, of course, is markets. We can't control markets, but we feel like we're positioned for any eventuality. Historically, in market disruptions in our home market, we've benefited because we've been able to remain consistent, and we've got a higher level of advice content in our delivery. There remains considerable cash on retail customer individual balance sheet and that cash needs to move to longer-term investments for their life planning, and we're working on that as well.

So we feel pretty good about all the bits I just covered.

Sohrab Movahedi -- BMO Capital Markets -- Analyst

And Doug, just for crystal clarity, you don't think you need any capital for inorganic engines on this. This is all organic you're talking about?

Doug Guzman -- Group Head, Wealth Management, Insurance, and I&TS

We don't need capital for inorganic. The growth emphasis in domestic wealth management on the distribution side has been hiring people. So that's expense, investment in people and building capabilities. And that's the reason we're continuing to gain market share.

We're able to deliver more to our customers on a relationship than we have in the past, and that protects fees over time. We don't need more scale in Canada. Similarly in other markets, while we're open to it, we don't need to do anything on the acquisition side.

Sohrab Movahedi -- BMO Capital Markets -- Analyst

Thank you for taking my follow-up question.

Operator

Thank you. This will conclude the question-and-answer session. I'd like to turn the meeting back over to Mr. Dave McKay.

Dave McKay -- President and Chief Executive Officer

I'd like to thank everyone for a lot of great questions. And as I sum up our quarter, again, we're very happy with the way we started the year. And the themes that we wanted to really leave you with today was just the impact of the investments and the consistent investment strategy across all our businesses is producing high ROE, high-quality growth across all our franchises. And your questions touched on all of that growth today, whether it's private banking and 25 -- and in CNB 25% jumbo mortgage growth with high net worth customers.

The strong CNB entertainment, real estate and now mid-market growth fueled by an expansion and hiring strategy there. U.S. Wealth Management building completely new technology platforms. That investment has led to an $8 billion secured lending portfolio with $80 million of revenue.

Canadian Banking launching Vantage, and continuing to expand our value proposition driving really strong customer acquisition and in profitability in core banking and market share gains. Capital Markets, our long-term strategy is executing against expanded industry coverage, bringing new MDs and focusing on high-growth, high-opportunity sectors like healthcare and technology, driving really strong noninterest revenue growth. It is the consistency and the approach and the focus on the strategy is delivering results, and that's the message that we really want to hear. And as many of your questions pointed to, we have a line of sight and flexibility to manage the uncertainty around the inflationary environment.

We have levers. You've touched on those levers with your questions, and very much we feel like we have an exciting year ahead of us. So thank you very much for your questions. Look forward to seeing you in Q2.

Be well.

Operator

[Operator signoff]

Duration: 75 minutes

Call participants:

Asim Imran -- Head of Investor Relations

Dave McKay -- President and Chief Executive Officer

Nadine Ahn -- Chief Financial Officer

Graeme Hepworth -- Chief Risk Officer

John Aiken -- Barclays Capital -- Analyst

Neil McLaughlin -- Group Head, Personal & Commercial Banking

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Paul Holden -- CIBC -- Analyst

Meny Grauman -- Scotiabank -- Analyst

Doug Young -- Desjardins Capital Markets -- Analyst

Sohrab Movahedi -- BMO Capital Markets -- Analyst

Derek Neldner -- Group Head, Capital Markets

Gabriel Dechaine -- National Bank Financial -- Analyst

Mario Mendonca -- TD Securities -- Analyst

Lemar Persaud -- Cormark Securities -- Analyst

Mike Rizvanovic -- Stifel Financial Corp. -- Analyst

Scott Chan -- Canaccord Genuity -- Analyst

Doug Guzman -- Group Head, Wealth Management, Insurance, and I&TS

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