Q1 2020 Earnings Call
All participants please standby youre, calling friendship somebody to begin good afternoon, ladies and gentlemen, and welcome to de National Bank of Canada first quarter 2020 results Conference call I would now like to turn the meeting over to MS. Linda <unk> Vice President of Investor Relations. Please go ahead Mr. <unk>.
Thank you operator, good afternoon, everyone and welcome to National Bank first quarter 2020 presentation.
Presenting to you this afternoon artery vessel.
Thank you.
Uh-huh, Chief Financial Officer, and deal by now Chief Risk Officer.
Following our presentation, we will open the call for questions.
Also joining us for the Q1 recession ours, they find a shop and <unk>, who has a fancy banking <unk> head of wealth management.
<unk> Indonesia.
Go ahead of financial markets, and John <unk> Senior VP finance.
Well, we begin I refer you decide to her presentation, providing national bank caution regarding forward looking statements.
With that let me know trying to called over to do we.
Incident done. Thank you for everyone for joining US earlier today, we reported excellent results with adjusted net earnings of $620 million up 12% from last year.
Our performance was driven by continued growth in all business segments disciplined cost management and strong credit quality.
Q1 to bank delivered a real Boston return on equity of 18.3%.
Our credit quality remains excellent, reflecting our prudent approach or lending and their resilience economy.
Cut backs economy continues to perform well fueled by net immigration on record levels population now grows at a rate of approximately 1% doubled that into your west consumer sentiment remains supportive or no problems.
Unemployment averaged 5.1% in 2019, the lowest rate on record.
Yeah on unemployment depopulation retro for people, aged 15 to 64 surged to a record seven 6.8% more than 2% above the national average Woman's Labor force participation rate stands at 87% the third highest among the always city countries.
Household net savings raising qubec exceeds 9% currently the highest in the generation and far above that can in average lastly, also leverage is moderate as housing remains affordable.
Before moving to the business segments, let me briefly comment on the situation relating to the coated 19 virus. While it is early our team is closely monitoring the situation and its potential impact on the global Canadian and Cambodia and economies.
Now, let me share some highlights of our business segments before performance going forward.
Our PMC segment continues to have very good momentum on both sides of the balance sheet.
In all our retail and commercial businesses, we remain very focused on achieving to ride balance between volume girls risk management and margins.
In that context, I am very comfortable with our current positioning.
Our investments continue to be driven by another one objective of offering our clients the best experience.
In personal banking were saying notable progress in our clients digital engagement, which is a key driver of client satisfaction and retention as well as efficiency.
This is a direct result of investments in our data and digital infrastructure over the last past few years.
In commercial banking, we have successfully completed the deployment of a new innovative financing platform for small business clients, resulting in much shorter approval and this person when times.
In addition, we've initiated an important transformation last year on the investment side of our personal and wealth business lines.
Our goal is to adopt a common that sentiment simplified advisory approach to deliver our clients a best in class integrated experience.
So far more than 2500 advisors I've been train and behavioral advisory coaching.
As an example of tangible results the number of clients with systematic investment as more than doubled for and I go which is our new mass market experience investment experience.
Our wealth management platform delivered another quarter of double double digit earnings growth.
For both markets and that inflows to contributing contributed to generating strong assets and revenue growth.
In the current environment will continue to benefit from the shift to fee based and manage assets, which allows our investment advisors to be more efficient and concentrated on delivering meaningful advised to their clients.
During the first quarter, our assets under administration reached the half a trillion dollars threshold for the first time, highlighting the diversification and leadership of our franchise.
We continued investments in talent and digital initiatives, we remain well positioned for future growth.
Turning to financial markets were delivered another robust quarter, both global markets and investment banking benefited from the general recovery and the market environment from a year ago.
Our differentiated business mix with a higher contribution from global markets continues to pay off.
This quarter.
Witness sustained momentum in core equity initiatives, namely securities financing structure products as well as in fixed income.
Continued investments in our financial markets franchise and favorable market conditions, our outlook remains positive for the business as a whole.
Our international segment continues to perform very well as mentioned last quarter Credigy has a robust pipeline and is expected to deliver double digit earnings growth and the current fiscal year.
In Cambodia.
Bank had another very strong quarter with net income up 71% and loans and deposits up 50% year over year.
As mentioned on our last call we are maintaining our current moratorium on significant additional investments in emerging markets.
As we are entering a new year or capital deployment strategy remains unchanged. Our number one priority is to maintain strong capital levels second we continue to invest in our businesses to fuel organic growth in our core markets with the objective of generating positive operating leverage for fiscal 2020.
Returning capital to shareholders remains a priority for the bank as mentioned on our last call. We put on hold on our buybacks during the first quarter two absorbed regulatory adjustments.
Were pleased with our current capital level, which is strong with our CTO one level at 11.7%.
As usual, we provide will provide an update on our dividend policy next quarter.
Bob I am pleased with our first quarter results.
Environment of macroeconomic and geopolitical uncertainties, all our businesses continue to have good momentum Ares capital is strong and would continue to manage our cost effectively.
Our credit position remains excellent I guess, a solid macro backdrop in Quebec in Canada.
That I will now turn to call over to say.
Thank you, we and good afternoon, everyone. The bank delivered a solid performance in the first quarter driven by good business momentum disciplined cost management and strong credit quality my comments today will focus on efficiency and capital beginning on page seven.
We started the year with continued momentum on the efficiency from delivering is solid operating leverage of 2.8% in our first quarter.
Our PNC segment delivered positive operating leverage in Q1, partially driven by muted expense growth, resulting mainly from lower amortization. Following the write down of absolutely technology recorded in the third quarter of 2019 as well as from savings related to distribution optimization.
With PNC segment that continues to invest in its activity.
We expect expense growth.
To normalize around 3% for fiscal 2020 and operating leverage to be positive.
Our wealth management segment continues to perform well on the efficiency front with the positive operating leverage and an excellent efficiency ratio for the quarter.
Our financial markets segment delivered mutual operating leverage has a strong topline growth was offset by higher variable compensation and higher transaction expenses.
Both potential market segment, and newest specialty finance and international segment posted excellent efficiency ratios into low 40.
Over the years, we have showed consistency in our ability to manage our weakest effectively and achieve meaningful efficiency improvement improvements.
At the same time, we have made major investments in talent client experience and technology.
As we are progressing through our transformation journey, maintaining to write buttons between investing to generate future growth, while managing our weakest prudently remains a key priority for the bank.
I read transformation continues to bear fruit and we remain confident in our ability to deliver positive operating leverage for fiscal 2020.
Now turning to the Kevin will review on page eight.
Our CD one ratio stood at 11.7% at quarter end strong earnings growth contributed 39 basis points two hours GT, one, whereas risk weighted assets added impact of 27 basis points, reflecting good volumes across all segments.
The combined impact of accounting and the regulatory changes occurred during the quarter reduce CD, one by 17 basis points inline with expectations.
Our total kept a ratio stood at 16% at the end of quarter and our liquidity coverage ratio at 144%.
To conclude we are pleased with our capital and liquidity positions, which we view as prudent at this stage of the cycle.
This I'm turning to call over to Bill for the risk review messages line and good afternoon, everyone I'll begin on slide 10.
The performance of our credit portfolios remain strong last quarter, having benefited both from a supported the economic backdrop as well as from our overweight, Quebec and underweight unsecured consumer lending profile.
Total provisions for credit losses were $89 million or 23 basis points unchanged from last quarter, and one basis point lower than the same quarter last year.
Pcls on impaired loans totaled $82 million or 21 basis points in Q1 in line on a quarter over quarter and year over year basis.
Lower impaired pcls at Credigy were offset by higher impaired pcls in financial markets.
Credigy is performance continued to match our expectations as declining provisions tracked the amortization in the unsecured consumer portfolio.
Total pcls on performing loans were $8 million in the quarter.
Excluding the international sector Pcls on performing loans were $12 million or three basis points, primarily due to portfolio growth and revisions of forward looking factors.
In Q1, we adjusted several factors in our pessimistic scenario to take into account potential negative economic impacts of the krona virus.
As adjusts adjustments led to higher performing pcls, primarily in non retail loan portfolios.
Looking forward, we'll continue to be vigilant in monitoring changes in the macroeconomic environment.
We maintain our target range for total Pcls in Twentytwenty and expect to end up close to the middle of the 20 to 30 basis point range.
Turning to slide 11.
Our gross impaired loans declined to $677 million last quarter energy I'll ratio improved by one basis point to 43 basis points.
Net formations were lower in our PNC segments.
The increase in formations in the financial market segment related to one account in Western Canada in the electricity generation sector and was partially offset by lower formations that credigy.
On slide 12, you'll find a review of our retail mortgage and hillock portfolio.
Insured mortgages account for about 39% followed by Helocs at 33% uninsured mortgages at 28%.
Orders in the province of Quebec account for the majority of the portfolio and exposure in the GE and GBA remains modest.
In summary, we were very pleased with the good performance of our credit portfolios in the last quarter are overweight, Quebec, and underweight unsecured consumer lending continue to position us well for strong performance in the current economic context and on that I'll turn it back to the operator for the Q1 day.
Thank you.
We'll now take questions from the telephone lines.
The question then you are using his speakerphone. Please ask your handsets before making US connection heavy question. Please press star one on your telephone keypad.
Time, you wish to cancel your question. Please press the pound side.
Please press star one at this time, if you have a question that was there will be falling from all participants, but just a quick question.
Thank you for your patience.
I'll first question is from many Goldman from Cormark Securities. Please go ahead.
Hi, Good afternoon, just a question on EPA, specifically I'm wondering.
If you're seeing any signs of economic weakness so far in Q2, if you change your I'll look at all obviously the krona virus is one factor but also.
The a partial suspension of the duty free access for Cambodia, I'm wondering how you view those risks.
Kevin for Aviate, specifically.
Thanks, many of the this is Louis so on Cambodia, the first thing the European.
Community action that was not a surprise that was already factored into our budgets and forecast for 2020, what obviously was a surprise.
Was the the virus.
As you may have seen.
Ladies just would advise as expected growth for Cambodia from 6.5%.
Growth and 20 to 20 down to 5.5%, mostly on the impact of on the tourist industry, which is.
Currently being felt.
So far I think we don't have a huge amount of precedent historical precedent.
Without operation So far in January and February we haven't seen any negative impact on the franchise by granted I think it's too early to see whether with the impact would be.
So I think we'll have more to say on that on on the next call.
My sense the way I think we look at it as a team right now is that if the virus is a.
Reduces.
Reduces growth globally for.
One or two quarters.
I think the momentum of that business and the fact that we've been.
Separately on the credit side, I think should still allow us to generate good double digit growth and earnings and that business.
If we move to a more.
More.
More pessimistic scenario of the virus, causing a full fledged global recession that I think that.
We probably a little less confident on that prediction, but then at that stage with I would probably assume that pcls in Cambodia would be not our number one priority our concern.
Understood and just a follow up have you made any changes to the way you're monitoring operations on the ground, there, especially from a risk perspective.
Not nothing significant no I think I.
I think we.
We continue I think there's been as you know.
Very few.
Documented cases, so in terms of operations on the ground right now and and monitoring.
We havent, we haven't changed and I think specifically.
Thank you.
Thank you.
Following question is from Steve stereo from a capital. Please go ahead.
Thanks very much.
Hi can start with a question on Credigy, we're starting to see the last couple of quarters and this quarter, particularly assets ramping up wanted to ask should we expect to see.
The type of seasoning and rise in PCL, maybe next year and maybe in 2021 back to the levels. We saw at the tail end last time, so just want to get some color there not not fully appreciate and maybe the mix of what you are putting on the books this year.
Yes, Hi, Steve. Thanks for question is Bill I'll start off or maybe just level rollout. So as you know the PCL impact is very dependent on what type of assets.
Digi is seeing opportunities and generally the and the consumer unsecured portfolio, which generates most of those pcls.
The weight of their portfolio is significantly lower than it was.
When we reached the peak was over 30% of things now it's down to around 20, 23%. So.
They're depends on whether we see a further opportunities and the consumer unsecured, but I don't expect twentytwenty to be.
Anywhere near where we were in.
2018 to 19.
Let's summarize possibly in 2021 of the assets you are putting on now season or or not necessarily yes. So I think fee in the in the performing Pcls you will be driven by the growth in the portfolio.
And at the end of 2019 and again this quarter the impact was from the amortization of the of the consumer unsecured. So I would expect that to taper and I would expect to see some performing pcls growing higher during the oh by the end of year.
Okay and maybe.
Sorry.
Sorry, just to just later so I just want to so I think thats on the credit side.
What Bill just mentioned is okay, and the and just want to to reiterate that what we said last quarter that we expect double digit growth for revenues and Endo and net income for 2020. So we we.
We reiterate what we said the last quarter.
Okay and just the other.
Item for me was Oh, I want to assist on that utility and the manufacturing PCL. We see this quarter did they spend some time in stage two or were those.
Today's skip directly to stage stage three.
No. They spent the utility in the in the financial markets had been in the watch list and been stage two for quite awhile.
And and that's why you'll see that the there was a migration from stage two provisions to stage three provisions for that that's why even though we made some changes in our and our scenario to take into account.
The the corporate 19 virus.
Financial markets still had a reduction in the performing loss provisions primarily because of the migration.
So that it had been in the states do for awhile.
Thanks for that.
Thank you.
My question is from Doug Young from Desjardins Capital markets. Please go ahead.
Hi, good afternoon, just on the PNC banking the guidance for 3%.
Next growth through the year, you, obviously put up 1% in Q1.
Just trying to get a sense of FFO.
You're obviously going to ramp up expenses over the remainder of the year can you talk a bit about what that's related to you and then if the revenue growth environment is tough out there.
Do you have believers that kind of pull back on that if need be.
Yes, I see signs and maybe just Lincoln complements, though on the expense this quarter the lower expenses when you do too.
Moving some the write off and also efficiency into this to this and network. It is expected to normalize to have the throughout the year.
To end up between two and 3%.
Got it prudently.
On the on the revenue growth I would say that the revenue growth.
Also in line with the expectation that we have on margin.
It is.
Thanks as website decrease in margin.
This year, so we will.
End up with a positive operating leverage like his insights.
And then just I guess, maybe a little bit further and I think the in the prepared remarks and I forgot to mention this.
Putting capital to work to drive positive operating leverage is their thoughts of a need to have another restructuring charge within your organization.
Or do you feel comfortable with with where you stand from a cost structure perspective.
Well, it's probably a during my remarks, but no. There's no restructuring charge you know budgeted for this year, it's nothing to plan underwear not even discussing it within the bank.
Thank you very much.
Thank you.
Following question is from Sumit Malhotra from Scotia Bank. Please go ahead.
Good afternoon, I, just want to start by picking up on revenue within the personal and commercial bank and maybe following on were Doug was going there.
Luis said many times in the years of cover this bank that Qubec is a no boom bust.
Province, or marketplace, it's certainly been a boom for a few years now yet when we look at either loan growth and the consumer book, the commercial portfolio and the year over year in revenue. Despite the fact your margins actually only down one basis point those numbers or towards the lower end of the group and in some cases at the very low.
So and.
Why why do you think it is a your revenues trend to that way during such a strong period economically for the province and.
Candidly do you think you've.
Been somewhat to risk averse and in some of the areas, where there's an opportunity to drive more more topline growth.
So I'll start.
And so.
I think some and I think we've been pretty consistent on our on our narratives that.
Yeah, we were very happy with with the performance of the Qubec economy.
But at the same time, we want to make sure that and we've been conscious that we've been.
We feel were late in the business cycle and ER and that's why we want to continue to whatever business, we put on the balance sheet.
We want to make sure that it's a good terms and conditions or risk perspective, and also had decent margins. So.
You know we've been here for a long time, we're very comfortable with our position in the province.
We are very sensitive to market share over the mid and long term, we owe less sensitive to market share over a short period of time.
And I think for US I think it would just make sure that we managed to volume growth at the right thing and.
We'll see listen if there is no recession with the next three years. You know you may be proven right that we were a little bit too conservative too early.
What I think as a team that service, we willing to live with.
So any any else.
Yeah. This is the fan some it so I'll just add as well you know, we often talk about house prices being lower in Qubec. The same apply is basically the business markets real property, whether it'd be a lender premises for entrepreneurs are lower value. So the individual transactions whether in AG for and manufacturing are always lower so that all.
These impacts over and above the balance between risk and and balanced growth. It's also a reality of the qubec dynamic, which explains the lower asset growth.
So if I if I hear you. It's in his commentary on your risk appetite and if expenses are going to increase over the coming three quarters.
You've got a nice start on operating leverage you're going to be positive for the full year, but it's not you're willing to give some of that back if the opportunities you see for lending is not where you think the risk appetite was that's.
That's the Synopsys I hear from you Yeah, I think summit and correct me, if I'm wrong, but I think we've been pretty consistent on that right. So.
Particularly in areas like you know.
Commercial real estate, yes, we have an appetite for commercial real estate, we don't have a.
You know limited appetite for commercial real estate.
So so if you if you put some cap on commercial real estate growth by necessity we.
We may for short period of time or for the year or to underperform. Other people that don't put a cap on commercial real estate loan growth.
Thank you for that I'm going to stay with you for my second and last question and maybe to go on with the theme of consistency Theres Nobody in this in this group that's been more consistent when it comes to the wholesale business than the national has and again today in a quarter, where there is some some pretty big numbers.
Guys seem like you do a.
Nice steady performance or irrespective of what's going on to that end, we heard bill's comments and the risk commentary it was all centered around credit risk.
I'd be curious to hear you know a lot at lot of stuff, we see on the tape. This week in terms of worst weeks and so eight in terms of equities bond yields at record lows.
You and I were talking on these calls annoyed it doesn't feel like that this week to me as it did back then but.
Just would like to hear you.
Your your thoughts on how the bank and the dealer more specifically thinks about risks in your trading portfolio and more accurately manages those risks in periods like we've had this week.
As far as market risk and potential trading losses is concerned.
No I wanted to take that one or you want me to answer sure I had I think you've heard US also in the past when it comes a trading we generally.
Have you.
You know a risk profile that sort of defensive rate credit and equity and its above that balance that Louise talking about.
In terms of growth and good risk management.
And so it does reflect in our results you're right in that stable growth and also.
Whenever there is this.
A risk on.
Which we've seen at the end of last year.
We participate but we're also no careful in that as well. So that's why I think you're seeing a little bit more stable revenues overall I don't know if that answers the question.
Yes, and but.
We have all have enough scars around the table we know the.
When it comes down to trading trading income, there's always a room for surprises, but I think strategically to key thing is for us is to stay to businesses, where we feel we have an expertise in value added.
And and India, and explaining to you know again this quarter the difference between our results and that of our competitors.
Probably had a bigger rebound because differences the size of their U.S. franchises versus ours. So there's not one risk management is strategic risk management, and we don't feel we have a comparative advantage in U.S. credit than U.S. capital markets business, and we stick to the business we know.
And more to the point last thing you. So you've told us over the years of the bank tends to be long volatility when it comes to.
Trading operations, I think we and other banks or discuss their there can be good volatility in bout of volatility depending on.
Positioning and how trading trends is there anything and I'm not asking you to give me the BNL for for this week, but is there anything in periods of dislocation like this that.
Stands out to you negatively from the banks positioning at risk perspective.
No I think is so far good volatility that volatility would be.
Volatility that at some point will start would start impacting the M&A pipeline.
Extra.
But that's what we would watch out for.
Thank you.
Thank you once again, please press star one at this time for any questions or comments.
Following question is from Nigel D'souza <unk> from Veritas investment research. Please go ahead.
Thank you good afternoon.
If I could turn to Pcls for a moment in your personal and commercial banking segment. So that increase a that occurred in the quarter. It looks like one that was first driven by higher provisions on.
Performing loans for personal banking loans.
So one what's driving that high profit provisions on non personal banking loans given.
Trends, we're seeing in the Qubec economy, and the second factor appears to be a higher provisions on credit card.
Receivables and what's the factor driving that higher because they have anything to do with the rule change at all or the other factors at play there.
Thanks, Nigel off I'll start off and that.
If you look at that slide 27, and they sat Fi actually the stage. One is days to provision increase for PNC is really coming from commercial.
Rather than than personal or credit cards, I think quarter over quarter.
This performing loan provisions or or lower a bit and in personal banking credit cards, partially because of the strength of me, Quebec, Quebec economy equipment consumer the commercial banking one.
The increase.
The majority of that comes from the change we made in are forward looking macroeconomic factors as I mentioned that the at the end of last quarter. We it's still fairly early to try to assess what the final impacts will be.
The Corona virus, but we felt it prudent to make some adjustments in our pessimistic case.
And we tweaked a little more negative three factors, which we thought would have a higher chance of being impacted being commodity prices stock markets and corporate credit spreads and naturally that impacted the non retail.
Part of the portfolio. So that's what you're seeing the commercial banking and that's a that's really what do you see overall for PNC and their loan losses impaired loan loss is pretty stable quarter over quarter and PNC. It was the performing in the commercial book that have the increase.
Yes, so there's a fair to say that as of right now you know expecting any uptick in performing pcls on the.
Personal side.
Well listen we will follow the macroeconomic events, we think that the Corona virus. If it if the impacts continue it'll felt you felt first through performing and in the non retail.
Sector that portfolio.
Okay. Appreciate the color. Thank you.
Thank you well following question is from Scott Chen from Canaccord Genuity. Please go ahead.
Hi, Good afternoon, I just wanted to go back to the the PMC segment and just on the revenue.
Look at personal on a year over year basis loans were up 4% revenue is up for and then when I look at commercial it was up six but revenue is only up 3% year over year.
Maybe just trying to.
I understand maybe the variance from the commercial side, if you could provide some color.
Certainly this is the fine so.
The reality is if you look at revenues from our loans business were actually up in excess of 6%, but the overall revenues were only up 3% as we've let go of marginal returns are marginal margin deposits.
And that impacted the overall revenues of the business than those were largely on the governmental side and we report our governmental institutional deposits as part of the commercial that's the main reason you see this lag.
And that pretty much has been clean you still see it bounced back up to its regular nora levels in the future.
Okay, and just lastly on the on the international side, if I kind of track to employees. It's it's been increasing sequentially every quarter every quarter this quarter.
It was up 11% over 700, when do we see an inflection point and I'm. Assuming this is at EPA when do we see an inflection point where that kind of.
Dave lies is and.
And kind of Directionally I think it helps us make it makes us look at the earnings trajectory on that platform as well too which continues to be robust.
Scott. The this is Larry I think we're still opening branches I think the.
Lot of the staffing you're right it is.
Almost all the staffing increases related to JV and.
Some of that is obviously, a corporate and control functions as most of it is the the additional staff and branch.
So we still expecting to open some branches in 2020.
And then were with the team right now we we're working on plans for 2021. So I think at some point, we will communicate what the plants will be for branch opening in 2021.
But it's pretty much related to that and once we slow down the opening of branches that clearly I think the you should be a slowdown in hiring staff in Cambodia.
Got it thank you.
Thank you.
Following question is on the Sohrab Movahedi from BMO capital markets. Please go ahead.
Thank you I just wanted to pick up where I think more or less sumit left off.
New either bank.
Realize.
More heavily than others on trading revenue.
I think 16% hefty overall revenue comes from whether its equity or fixed income and commodities and alike.
Probably equity trading revenue is.
Seven 8% tested topline for the bank.
What what short of a number do you think we should be thinking.
Thinking from a volatility perspective around that number if we look at.
This quarter that number of quarters.
From quarter to quarter to survive I think thats a tough question.
No I think that's not quite the way we look at the business I think we.
We tend to look at.
That within the bank my level.
At a having.
Great and greater diversification in terms of our revenue sources that that is why strategically.
We created a fourth reporting segment to last last three years with international and even within even within capital markets I think the hope is that.
We have diversified sources of revenues.
On the different businesses, we have that ideally will not always be perfectly correlated.
And that that mix at some point.
Well, we'll bring some good return on capital, but at some point also.
I'll have.
Acceptable volatility and that's that's what I think we've tried to.
To produce and last God knows 15, 20 years. So I don't we have a particular target in mind of how much.
Equity trading will represent in terms of the.
The business I think we try to.
I understand what we think are the correlation patterns and risk patterns between the different businesses and ideally ideally have a mix of business. That's not you know that in most most scenarios will tend to produce a decent return on capital.
Sure I mean, the business mix is different versus others.
And then we've talked and we've said that.
Yes the.
This is a client flow business.
So it is a niche that we've.
Worked on year over year, and we've we've invested in people and technology and we're quite comfortable with it so I think demonstrating.
In terms of results and resiliency, it's been there so.
Not a target.
But definitely a a place where we're comfortable we're comfortable with the risk.
And.
We've definitely a build up some expertise.
In that space, maybe if I can just follow up I am I mean again at the total bank level.
When you say you are comfortable you're comfortable with it.
Growing as a percentage of the overall revenues.
Well I say.
Over time as you know I think we've been pretty stable.
Over the last four or five years I think the.
We've been we've been comfortable with the percentage of revenue coming from the old.
Hi.
Wholesale side of the business and.
And I think that had positive impact on our performance and on our multiple so I think.
In terms of guidance I think we're looking to grow well sell so rob at about the same speed as a whole franchise, which is 5% to 10% per year.
I think we can.
And last few years on that.
So and just one last question, maybe I don't know if it's for lower all four for Bill.
I'm looking at the supplementary financial information, where you have.
The derivative financial institution instruments kind of broken down.
The credit equivalent number on equity and commodity contracts has doubled year over year.
I'm not sure sure does that does that basically mean that credit risk associated with the equity business has doubled year over year.
I don't believe so that may actually be a question for John does.
Okay.
And we made a lot I will take a crack I'll take a crack most of these contracts are collateralized.
So no there's there's not a significant increase in terms of credit risk I mean, there party risk, but it is daily collateralized.
And maybe a <unk>.
I remember, we spoke last quarter about the FCC are.
No change in it.
From from year over year, I think there was it was difficult to compare but we can you can look at every now and you get called back offline.
Thank you.
Thank you.
Well following question is from Mario Mendonca from TD Securities. Please go ahead afternoon, Louie could you help me think through.
Cambodia, and what I'm going with yours.
As the has the banks risk appetite changed at all in terms of loan growth I mean, I know you're going a lot of branches and that's what's driving it is very strong loan growth but.
Revisited your risk appetite.
Vis-a-vis Cambodia in the context of this virus.
A short term to answer a marios no we have not done that.
And the reason is that.
So far and I appreciate it's very early and the portfolio is still you know aging and we have yet to see.
You know how well it will age is certainly so far agent quite well, but.
But we've been.
And the reason we did not feel the need to do that is that our lending model and I'll business model has been the same ever since we've invested in maybe a and it took control, namely last five years.
And we target, 95% or loans still targeting exactly so it's small family owned businesses, where we have the real estate as collateral.
And so we stayed very very within that niche and it was still we are very very comfortable with that.
No. It's not that were in credit card or unsecured and auto loans things that are very.
In theory, very volatile and very correlated to the business cycle, we feel that we have.
Good.
Protection given the fact that we have a real estate collateral on these loans. So we have not changed anything with the team. So far as I said, we still assessing exactly what the impact will be on the economy.
And then from there if there are changes, we'll let people know, but short term Noam area, we have not made any changes.
So if if maybe in a if its gross as usual, let's let's just all sort of cross our fingers. Your hope this call that issue becomes a distant memory soon enough.
If that continues to grow.
And and Credigy clearly you've guided that that we're going to look at double digit loan growth there and finally, if you're spending and domestic PNC.
Levels off at about 3% then it seems logical to suggested that that business unit.
The Cambodia and Credigy business unit.
Could exceed 15% of total bank earnings by the end of this year say like this call. A Q4 2020 is that a number first of all does it make sense to you when are you concerned with that.
To answer is yes Mary.
David There's a possibility now I'm looking around the table here and I think everybody.
Wants to in terms of revenue growth.
No wonder maintained their their percentages.
In terms of business lines, but.
What that scenario DHS describe as a possibility.
Okay.
Thank you.
We have no further questions switches. So at this time I would now like to turn the meeting back well they too so.
Thank you everyone and we'll talk to you for the results of the second quarter. Thank you very much good day.
Thank you.
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Okay opinion, because it had been.
She was feeling.
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