Royal Bank of Canada’s (RBC) discretionary and tech-related expenses jumped 22% year over year to $190 million during the first quarter as the bank focused on improving its technology and infrastructure “in support of business growth and product innovation,” according to its earnings presentation Wednesday. 

WHY IT MATTERS: The $1.4 trillion bank is upgrading its tech stack to better serve customers, particularly in areas of AI, said RBC President and Chief Executive Dave McKay during the call. 

“Expense growth over the last 12 months has reflected strategic investments in client-facing roles and technology to enhance our value proposition and infrastructure, including artificial intelligence capabilities,” he said.

THE BIG PICTURE: The Toronto-based RBC recently announced its plan to purchase competitor HSBC’s Canadian banking arm in November 2022 in a $9.9 billion cash deal to add to its client base. The acquisition is expected to close in late 2023, according to HSBC’s website.

The bank attributed 4% of its double-digit increase in non-interest expenses to the acquisition of HSBC Canada Bank along with the $1.7 billion purchase of wealth management firm Brewin Dolphin, also announced during the fourth quarter of 2022. 

BY THE NUMBERS: RBC reported for fiscal Q1 2023: 

• Non-interest expenses rose 17% YoY to $5.5 billion; 
• Net income fell 22% YoY to $2.3 billion; and 
• Total revenue grew 15% YoY to $11 billion. 

NOTEWORTHY: RBC’s digital footprint continued to grow alongside its increased tech investment during Q1, as the number of active digital users rose 6% YoY to 8.5 million, and active mobile users jumped 10% YoY to 6.2 million. 

The bank’s digital adoption rate also increased 2% YoY to 59%, and the bank reported a 17% YoY spike in mobile sessions to 133 million. 

THE BOTTOM LINE: Despite increased tech investment and increased in digital use, the bank might pull back spending due to inflationary pressures and the chance of a recession, McKay said. 

“We’ve invested heavily in technology to adapt to a rapidly changing world. Whether it’s AI, whether it’s back office, front office, across the board when you have No. 1 franchises, we’ve been investing,” he said.  

“While we’re seeing the benefits of our strategic investments in talent and technology, the entire leadership team is committed to moderating expense growth from these elevated levels and driving efficiencies across the bank.” 

Editor’s note: All amounts have been converted to USD. 

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