00:00What's your impression so far of this, Davos? It feels very different than previous ones.
00:03It's more intense. There's more leaders here than I think there's ever been.
00:06Over 850 CEOs, 400 ministers, 65 heads of state.
00:12So there's been a lot of dialogue already in the first kind of 48 hours.
00:16A lot of joint business, government leader dialogue around investment.
00:20To your point, looking at making deals, looking at co-investment.
00:23Every country looking at diversifying trade, bringing business leaders with them
00:27to talk about co-investment, or whether it's manufacturing investment.
00:31Defence spend in Europe and Canada is going up.
00:33A lot of discussions about how do we spend $80 billion in Canada on defence.
00:38What partners are we looking at?
00:40How do we use that defence spending lever to attract manufacturing investment
00:45in automotive energy investment?
00:49So there's a lot of grand bargain discussions going on with business leaders.
00:54And I haven't seen that before.
00:56So it's different. It feels different.
00:57It's transactional, so you said, but it's exciting at the same time.
01:00There's opportunity here.
01:01Well, you're talking about the excitement, and yet you are Royal Bank of Canada.
01:05You are expanding in the United States.
01:07And right now, there is a breakdown in the relationship between these two countries.
01:12How problematic is that for you at a time where you have been expanding in the United States,
01:16and you do see flows, at least in travel, going the other direction a little bit?
01:21You know, I think we're in this temporary world where we're trying to figure out
01:25how we're going to trade going forward.
01:27But I come back to the core of USMCA.
01:31Canada really helps America with affordability.
01:34We make things in Canadian dollars.
01:35We sell it to the U.S.
01:36The U.S. buys it at a 30% discount, whether it's automotive parts, whether it's steel,
01:41aluminum, food.
01:43And a lot of our canola goes to the United States.
01:44And therefore, we help keep prices down in the U.S.
01:46And if the U.S. were to bring all of that back, it's inflationary.
01:50You have a shortage of labor in the United States.
01:52So as you look at the core of USMCA, it's good for America.
01:55And I think that gives me comfort that we will come to an arrangement going forward,
02:00recognizing this is good for America.
02:02It's good for Canada, obviously.
02:03But it's good for America.
02:04And that's important to the president.
02:06There will be change.
02:07I don't think it will be the same agreement going forward.
02:09But the core of it, I think, is so important to both sides.
02:12And that gives me comfort that we will continue to trade.
02:16Canada, and you heard our prime minister's message.
02:18I'm sure we'll talk about that.
02:20It has to diversify trade.
02:22I think we've relied on trade to the U.S., substantially a big part of our economy.
02:26And I think the conversations that are happening before Davos, after Davos, in Davos,
02:31are very much about here's what we're good at.
02:34Can we find a grand bargain deal?
02:35Can we expand trade across multiple countries,
02:39whether it's Europe, a lot of discussion with South Asia and Asia,
02:42and a lot of discussion with the Middle East and investing in Canada?
02:45And what's different about Davos this year, honestly, Lisa, it's risk on Canada.
02:49Let's talk about the prime minister's speech.
02:51The sharpest tone I've ever heard from Mark Carney about Donald Trump without mentioning Trump's name.
02:56He's talking about a new world order saying these middle countries,
02:59if you're not at the table, prepare to get eaten.
03:01Does that make it harder when you're talking about things like watching the USMCA trade deal?
03:06Do you think that the relationship is going to become more challenging between Canada and the United States?
03:14I think relationships are about value exchange.
03:17And if there's good value exchange and you both see a benefit to that, then you're going to find the right place.
03:22So just as I said, there's great value exchange.
03:24$400 billion go back and forth across the border every year because there's value.
03:29We're the number one trade relationship with 36 states.
03:34Most of those are red states at the end of the day.
03:36So when we think about the importance of that relationship beyond the federal level into the state level, it's really important.
03:44So I think you come back and you say, it's good for America.
03:48It's good for Canada.
03:49That's a basis for an exchange of value going forward.
03:52Having said that, I think the prime minister is very clear that we haven't done our role in defending ourselves.
03:58We haven't invested enough of our GDP in defense.
04:01And you've seen that commitment to spend that money.
04:03We have to do that.
04:04We have to increasingly defend ourselves.
04:07And it's not just our economic security.
04:09It's our physical security.
04:10We have to play a bigger role in that.
04:11We have to defend the Arctic and we have to invest in the Arctic.
04:13And it's a big part of the commitment we've made to NATO and we've made to the United States that you'll see a greater investment from Canada.
04:19We have to have dual-use investments, not just military, but commercial and economic investments in the Arctic.
04:26And Canada should play a role in doing that.
04:28So you're seeing that was a big part of his speech yesterday.
04:31And we have to create scale.
04:33We're in a world of scale.
04:35Businesses need scale.
04:36Countries need scale.
04:37And I think the Prime Minister's message was we have to continue to diversify, but diversify in a way that you continue to build scale on what you need.
04:44So I think that's what I took away from it.
04:45When he says diversify, does it mean maybe a new strategic partnership with China?
04:49Is that what you take from the Prime Minister?
04:52You know, the Prime Minister was just in China a week ago.
04:54And it was a very important delegation that he led to China to kind of reset the relationship after, you know, a better part of a decade where the relationship had separated.
05:04And part of it was to renew economic ties and to agree on areas where we definitely agree and to say these are areas where we might not agree, but let's focus on where we agree and where we can build a future together.
05:14And I think that was a very positive step.
05:16You saw China make a commitment to resume buying our canola oil, and that's a very important market for canola oil.
05:23The United States and China are big markets.
05:25We ceded a small part of our automotive market, 3% to Chinese imports.
05:31That's an affordability issue.
05:32China will bring in affordable electric vehicles.
05:35So I think that's good for Canadians at the end of the day.
05:37So I think there's more to build on, and I think it's part of diversifying across multiple countries.
05:43OK, so we've gone all this time without talking about what you actually have done.
05:46You just had a year that's phenomenal.
05:47You had record revenues for any Canadian bank ever, and you have grown tremendously.
05:53You beat all of your targets.
05:54I'm just wondering, when you're talking about diversifying businesses, does it go to your business as well?
05:58Are you expanding in places like China?
06:00Are you still planning to expand in the United States?
06:05Our second home market is the United States.
06:06We've grown wonderfully in the United States.
06:09We just launched a whole new treasury management platform in the United States, RBC Clear, that's had a great reception.
06:15Technology leap.
06:16We brought in $25 billion of new money from U.S. senior corporates, Fortune 500.
06:21So the United States is our second home market, and we continue to invest there.
06:25We lend significantly to U.S. corporates.
06:27We lend in the mid-corporate space, in the commercial space.
06:30And we have the fifth largest high-net-worth platform in the United States.
06:33So the U.S. is very important to us, serving Americans, helping Americans grow.
06:37And I told the administration already yesterday that we've invested significantly in the U.S. economy, and we're part of the solution.
06:44And we feel very welcome in the United States.
06:46So it's a big part of our strategy.
06:48To your point, our strategy has not included China up until now for all the reasons where we didn't have significant diplomatic ties.
06:55We didn't see the basis for that investment, and now we have to review that.
07:00I can't say how we would go back in.
07:03But if the trade continues to diversify and Canadian corporates invest in China, then we will have to be part of that.
07:09What I'm focused on now is the Middle East.
07:12Significant investment commitments from the Middle East to Canada.
07:15I think one of the themes of Davos is Middle East is a great place to invest.
07:19Abu Dhabi, Dubai, UAE on that side, Riyadh, and Saudi Arabia.
07:25Significant commitments on both sides.
07:27And you'll see a greater presence from RBC in the Middle East as well.
07:30So yes, to your point, it's a great question.
07:33You're seeing RBC become a more globally connected bank because Canada is going to become a more globally connected country.
07:38And the U.S. is already an incredibly globally connected country.
07:4020 seconds.
07:41Yeah.
07:42One word answer.
07:42Is this year going to be better than last year in terms of deals?
07:46We've entered the yield very strongly on the senior market side.
07:49I'm feeling there's very good momentum.
07:51I don't want to see it derailed.
07:53So I'm very positive about the year and the future.
07:55I feel good.
07:56Yes.
07:56That is a wonderful way of not giving a yes or no answer.
08:00RBC CEO Dave McKay, always a pleasure to have you.
08:03Thank you for being with us.
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