Q1 2022 Home Capital Group Inc Earnings Call

Speaker 1: But this time informed and strengthened by our earlier experiences, we entered 2021 with confidence.

Speaker 1: This is big because.

Speaker 1: Mental science have introduced vaccines that promised to make normal business operations possible. We made keep a better understanding of the wayss coit as impacted the housing market.

Speaker 2: We knew know important news for E have the opportunity to buy and keep their roles.

Speaker 2: Our people have shown themselves to be capable and resilient in the face of constantly changing working conditions.

Speaker 3: Each of our business units rose to the challenge of the all calou year.

Speaker 2: Starting with our sales and underwritingment teams.

Speaker 2: They worked hard toout the year and delivered aggressive volume worldth, while seeing within our risk appetite.

Speaker 2: That is committed: a return to three dynamic underwriting conditions in all areas by mid-July.

Speaker 2: We delivered the quality of service that our Board requirements have come to pectctrfrom us.

Speaker 2: At Investor Day, we shared information about how we value our Board partners and work with them.

Speaker 1: Our deposits and funding teams were equally active.

Speaker 1: deolits to our OI channel grew by more than 10% during the year and now make up over 31% of our overall total devts.

Speaker 2: We returned to the RMS market with a two cross border offerings sold in seven hundred and sixty-five million.

Speaker 2: We added a full lesale program to return ortages with a range of financial counterparties and participated in the bank-sponsored securitization conit.

Speaker 1: Our it team implemented the transformation of our core mortgage banning system.

Speaker 1: We launched a mobile lanking app for our open customers and upgraded the functionality of our LO platform for better engagement with our Bo partners.

Speaker 1: We are continuing to find ways to usual wide process aumission to perform progressive coaps.

Speaker 3: The benefits of ignyis, our internal multissystem upris, are not just processed efficiencies.

Speaker 2: But an improvement in the Ty work we're able to perform, including the quality of engagement with our brewerers and customers.

Speaker 2: Our HR team led us in adapting to a virtual workt from home, to a hydrid or from the office and back to virtual work from home.

Speaker 1: Pivoting in our work environment has become of the new norm.

Speaker 2: Even with these challenges. We want a number of best workplace awards, including best place for hybrid work this week. We want.

Speaker 1: We are ond of our home and of our culture.

Speaker 2: And we welcom betty dela as a new Director.

Speaker 2: Betting, years of experience in bending and payments make her a valuable asset to our Board.

Speaker 2: On our leadership fronts, we have been trict.

Speaker 1: In January of this year, we welcomed Brian Newland as Ed underwriter.

Speaker 1: Brian comes to us with over 20 -year experience in all aspects of building and growing ratheridentential mortage teams.

Speaker 1: He started his career at home trust and we're pleased to welcome back. We also welcome Mike Henry and as's our EDP of digital and strategy.

Speaker 1: As a senior executive with more than 25 years at a major bank, MI bring strategic and eat financial service experience to our team.

Speaker 3: As we look ahead, we are reasons for optimism in 2022 as well.

Speaker 2: Housing market is starting 2022. The wayight ended in 2021, with strong demand supported by low interest rates, growing consumer savings and intergenerational support.

Speaker 2: Interest rates are still low but far horrising than expected to increase through the year.

Speaker 2: We're not too concerned that this point. There was impact on credit flame from rising rates because of the cushion from the me twent structup along our own prudent underwriting criteria.

Speaker 1: It is likely the higher rate will be reduced, but not a limited demand for a? O ownership.

Speaker 2: The impact of risriving rates on affordability can also be mitigated by buyers changing the location or the size of their own purchase.

Speaker 1: We believe that the mortgage merger community is best suited that alcanadians understand the impact of these changes.

Speaker 1: Demand for home ownership is still strong and will be supported by growing immiggrration numbers.

Speaker 1: A growing core of millennials bhed their first mols and the return to employment growth.

Speaker 2: As working conditions evolve, we can see more transactions driven by changking other needs.

Speaker 3: Our funding teans expanded our funding capabilities and have just issued our latest MIS offering, benefiting from growing investor interest in this attractive instrument.

Speaker 3: On our capital strategy. We are on track.

Speaker 2: boing, the completion of our siv in December . We're announcing today to the TSX has approved our apicure for normal course issu date.

Speaker 1: This will make strategic share repurchases throughout the year as we work towards our stated target C Q1 capital ratio according ficiting percent.

Speaker 2: We have a track record of success in this method of delivering value to our shareholders.

Speaker 4: In mid 2017, the company that over eight million shares outstanding as of December to refirst 2021. We have fled back more than 37 million, or over 45% of shares outstanding.

Speaker 2: Together with our strong operating performance, buybacks have been a key component of our shareholder value proposition.

Speaker 2: 2021 was a year in which Canadians continue to show how much they nonmoable ownership.

Speaker 2: And here home, we're dedicating to helping them achieve it. Despite the changes in working conditions brought along by the half of the variance, we were consistent in our focus of serving our business partners, responding to the needs of our customers and meeting our financial obfectives and supporting our employees.

Speaker 2: In 2022. We are starting a year with a strong market.

Speaker 4: A strong capital base and enenging the group of employees.

Speaker 2: And a strong leadership team. We are ready to convey meaningful benefits to all our faaholders, while delivering value to our shareholders.

Speaker 2: I'll now invite bradt to discuss our financial results.

Speaker 1: Thank you, you three and good morning everyone.

Speaker 1: Starting on Slide 7, this morning we reported net income of fifty-two point seven million and diluted earnings of a dollar four per share for the fourth quarter of 2021.

Speaker 1: Adjusting for items related to our IGNITE program. Net income for the quarter was 53.7 million, or a dollar six per share.

Speaker 1: This will be the final quarter that we will be adjusting a reported results in relation to our night program as it drawves to a close in 2020. -two and.

Speaker 1: Full year 2021, earnings were 244.7 million or four 78 per share.

Speaker 1: Our reported earnings per share increased by 43% over 2020, continuing our trend of delivering strong growth in earnings per share through our volatile period for the economy and the housing market.

Speaker 1: Book value per share, as shown on Slide by 13% year-over-year to $36 at 55 percents and a return on equity was 12% during the quarter and fifventteen 0% for the full-year.

Speaker 1: Once again, we generated double-digit return on equity, despite carrying significant capital above our target range for most of the year.

Speaker 1: Following the conclusion of our substantial issue bid at the end of 2021, we ended the year with 18% in cy- one capital, moving closer to our target range of 14% to 15%.

Speaker 1: Slide nine shows the factors contributing to our growth and earnings per share for the full year. Our net interest margin was 3% for the year, compared with 2% in 2020.

Speaker 1: The year-over-year increase in NIM is mainly due to lower flimbing cost and added 26 cent to our earnings growth, somewhat offset by a decrease in noninterest income.

Speaker 1: Reduction in noninterest expense: add Ed a further 19 cents.

Speaker 1: Overall pretax preprovision net income increased by 10% over 2020.

Speaker 1: Looking at provisions: a change from a provisions expense 2020 to a recovery of credit provisions addeda 94 cent to earnings per share.

Speaker 1: A 3% reduction in the number of average shares outstanding during the year contributed 13 cents.

Speaker 1: Our expectation, based on our current outlook for interest rates, asset mix and competition with other lenders, is that there will be a decrease in our net interest margin in 2022, and the impact on nonnet interest income will be offset by higher loan balances.

Speaker 1: Looking at our lending operations on Slide 10. originations in our single-family residential portfolio grew by 52% in the fourth quarter, 44% the year.

Speaker 1: Commercial originations on Slide nine increased in the fourth quarter but decreased during the year. Commercial originations got off to a slow start in Q1 and q,2 partly due to pandemic underwriting conditions and planned reductions in some loan categories, but increased in every successive quarterwe are feeling possiblei about the opportunities in commercial lending in 2020 -two.

Speaker 1: As of the end of the year, single-family residential loans on balance sheet had increased by 8% to 16.2 billion through robust origination volume and retention efforts.

Speaker 3: Kind.

Speaker 1: Commercial on-balance sheet loans declined to one point eight billion, with the largest year-over-year reduction in exposure to retail stores.

Speaker 1: Deposits gathered are our O channel by more than 10% during 2021 and make up more than 31% of our total deposit funding.

Speaker 1: Significantly deposits gathered through deposit brokers decreased year-over-year as we were able to diversify our funding sources.

Speaker 1: Open savings accounts were just under 24% of total O deposit at the end of the year.

Speaker 1: We expect the percentage of demand deposits, as higher interest rates make term instruments more attractive and, as a reopening of retail, entertainment and travel options, give customers more outlets to spend the cash balances they built up during pandemic restrictions.

Speaker 1: We are getting good customer response to our digital banking app and look forward to further continuous agile enhancements to this app.

Speaker 1: During the year only made significant progress in our objective of diversifying our funding base.

Speaker 1: We executed whole loan sales of our insured mortgages with several financial counterparties, participated in a bank-sponsored securure ization conduit and completed two successful cross-border offerings of residential mortgage-backed securities.

Speaker 1: In 2022. our funding initiatives are gaining momentum. We have doubled the size of securitization conduit to five million, and that will be an effective source of funding for our classic mortgages.

Speaker 1: We have just priced the first RMBS offering of 2022, the atranche for 425 million that was priced at 3% and is expected to close on February twenty-third.

Speaker 1: We continue to see strong credit performance in Q4, even while the omoground variance added uncertainty to the outlook for economic recovery.

Speaker 1: The base case inputs to our economic models show an improvement employment through the year and modest depreciation in houssing prices.

Speaker 1: After reporting reversals of credit provisions for the first three quarters of the year we had provisions for credit losses in ove $1 million in the fourth quarter, or two basis points of gross loans on an annualized basis.

Speaker 1: There was a modest reversal and provisions on impaired loans identified this stage three and a provision of one point three million in our loans designated as Stage one and Stage two in both our single-family residential and our commercial loan portfolios.

Speaker 1: Going forward. We expect credit provisions on both our retail and commercial performance portfolios to be similar to prepandemic levels.

Speaker 1: Net write off for the year were zpointero $6 million or less than one basis point of gross loans.

Speaker 1: Looking at the full year, we booked the reversal and credit pervision on Stage three loans, toilll ten point three million dollars and a provision reversal of $23.4 million on performing loans for a total of 33.7 million.

Speaker 1: This was due to the impact of an improvement in the forward-looking economic models used to estimate credit losses, loan repayments and a lower balance of loans in Stage three.

Speaker 1: Slide 16 showed details of our allowance coverage. Total allowance for credit losses was 36.5 million at the end of 2021.

Speaker 1: Which is a decrease of 48% from the ttal of 70.8 million one year earlier.

Speaker 1: Approximately 80% of the allowances attributable to Stage one at Stage two loans.

Speaker 1: Allowance coverage of nonperforming loans increased the 22 pointy-eight percent as a December thirty-first.

Speaker 1: Turning to Slide 17, we have provided details of our nonperforming loans by business line. Our credit quality continues to be strong, reflecting a steady improvement from previous quarters.

Speaker 1: Net nonperforming loans at the end of the year have declined substantially in both dollars and percentage terms and now represent only 13 basis points of our total loans outstanding.

Speaker 1: This is a creditor, sales and underwriting teams and to the risk culture of the company as a whole.

Speaker 1: We concluded a three million substantial issue, a bid, at the end of the year.

Speaker 1: For the full year home repurch in nine thousand shares at an average price of $41 and 13 cents per share through the siv and ncv. We ended with the CE one capital ratio of 18%, which is still above our stated target range.

Speaker 1: The renewed normal Curt issue bit that you referred to will allow us to repurchase up to approximately three point seven million shares as part of our program to reach our target capital range.

Speaker 1: The dividend that we announced today is another way of delivering value to shareholders.

Speaker 1: We have said consistently that we would introduce the common share dividend when it madekes sense.

Speaker 1: Having made material progress or target capital ratio, the Board and management belie that the company and its shareholders would benefit from a regular quarterly dividend.

Speaker 1: The initial dividend is set at fifteenth cents per share, payable on March thirty-first 2022 to shareholders of record as of March FI, fteen, TH 20, 22.

Speaker 1: This payout is sustainable, with potential for growth over time.

Speaker 1: The Board reviewes the capital strategy on an ongoing basis and we'll look at all opportunities to achieve a CET one within our stated target range by the end of the year.

Speaker 1: And now I will ask the operator to pull for questionsat this time. I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad will pause for just a moment to compile the QA roster.

Speaker 5: And your first question comes from the line of vechin recordard from bmmo capital markets. Your line is open. Thank you and good morning.

Speaker 6: More of the the, So the 2022 outlook is guiding towards declining net interest margins.

Speaker 4: First fac? ure' expecting net interest margin increases relative to Q4 or annual 2021 levels.

Speaker 4: And the second is: is the focus on capturing higher origination volumes aim aimed at gaining market share? In other words, what do you estimate your current market share to be relative to your target levelle?

Speaker 7: Bok sorry, you greant.

Speaker 3: G Q3, low interpersons on by that is on the market share. It's not to gain market aterurity, is just has a rates increase. The Canada' increase. Deposits react very quickly. Mortgage rates react a little slower. Are competitive reasons. There's a lot of people were trying to get mortgag, someone not to take the and that, as that happens, you get a deposit rates goinging up and mortgages lacking somewhat. That's what causes that. It's not much to be get market great. We typically end behigh est rates in the all theate area and competitive in the gay area. So people would expect to community that. So if industry go up, clearly we after set the mortages quickly. They go slowly. It's much more manageable. The reverse happens in another environments. When weates're down in mortgages are the left to the down and the. Why spread for for all lenders or?

Speaker 8: The specific answer to your question is off of the Q4 NIM that we reported and what's been happening is what we've seen in our market is that the rise in the overall deposit costs which is based typically off the government. Curves has increased and we haven't seen behavior of rate increases there been in a very significant volume of origination. So to stay competitive and relevant we can only raise rate so much we have we consider to have been leading. The way in rate increases this quarter and the factth that we see is.

Speaker 1: Certainly the announcement bank canandidit expects to raise raates. We saw rates go up on the current 10 basis points. So what's offsetting the decrease in NIM is really record originations in our classic business. So we're seeing substantial loan growth and, based on our estimates and what we know for the year, projecting for the year even if NIM decreases will achieve the same level of net interest income.

Speaker 4: Great Thank -q And so I guess, as a follow-up, when would you expect of a mortgage rates to start increasing and match the increase in in deposit costs?

Speaker 8: I think that's a process. It's going to take time. What I can say is have we have raise rates and we'll continue to raise rates to match increase in deposits. What happened was it was probably around two point a half mons to three -month lag and matching those increases. So we're playing a bit a catch-up and I think that's something that we've consistently said in relation to allday. Where it takes some time for rates to move- and it does appear- is the competition in the market is also looking to gain market share but, based on what we know, we are the priceise leaders in terms of moving up mortgage rates and we have to adapt to those circumstances and to continue to being relevant to our customers and mortgage brokersokay, on the funding side.

Speaker 4: We talked about Oaken and RMBS issuances in the past. As we look into 2022, could you remind us of your priorities as it relates to driving prstit funding improvement?

Speaker 9: Well we will continue we showed great progress in diversifying our funding sources. We're going to continue to not have and I did mention in our call that we have just priced in R fpss. We expect to be programmatic to continue to be programmatic. Issue is subject to market conditions. We issued the rdss in a particularly volatile market and what we hope is that some of the uncertainties related to factors outside of our patrol that are happening in the broader world. Will what we all hope is none of those issues manifests themselves and that there will be a more stable market. So again we we're looking at further dbcp conduvers and other rpss issuance to the extent that we could explore the market for deposit notad. We work towards that we're really trying to access all sources of funding and again.

Speaker 1: Part of our whole alil program is to make sure that it's affected, creating value. So we need to see some increasees spreads, our accelerator where it is to really get back into that program. But we do see a lot of potential. Thank you for comments. Your next question comes from the line of je blowing from National Bank financial. Your line is open. That's first question. I wanted to just get into the thought process behind the sizing, the dividend and and how should we think about that dividend going forward. Is this something that you would seek to increase quarterly semannually, annually? Maybe you a little bit more color around the strategy for the dividend.

Speaker 1: yessure Jim, our strategy is to keep it consistent for the year. However, that that may change subject to circumstances, and those circumstances will probably be more bias to an increase, but we we fully expect to keep it constant for this year, based on the decisions that were made by the Board at its most recent meeting, and there is also aexpectation that we will be increasing that on an annual basis. So that's our current plan on reviewing the level of common share dividend and it's going to be based on what we think is happening in terms of book growth, market conditions and all the other factors that you would expect Board to consider and making a decision related to a recurring dividend.

Speaker 10: Okay great, but and then on the factors that went into size, the dividend: it looks to me like it at the low double digit percentage basis on a payout ratio versus EPS. So what led you to, what led you start with that level of the payout ratio or any other considerations that were factored into the decision?

Speaker 1: Well we still think that our shares are undervalued. So we're going to Boy them back in our devoting capital to those sorts of repurchases and but we did think it was be appropriate time to start a recurring dividends. So that's why we picked a relatively low payout ratio. Historically the company paay between 20% to 25% when it was not hind. I think there are a couple ncbs and SIBs but primarily of most of the return of capital was done through dividends. So.

Speaker 1: Thinking years ahead, that's probably a place that we would get took of great- Yes that's, that's fair enoughthe IGNITE program or IGNITE cost expenses. It seems like it's extending a couple of quarters. I believe the previous guidance that I would wrap up in Q2 and 22 now seems like it's going to go through all of two thousand and 22. can you give us little bit more details? As So, why extending? What other initiatiative might have been added to the program or what's causing delays? A little more detail on that placease.

Speaker 1: Yes sure janme we think we have we still think it's going to be done midway through the year. So if we ave the impression that it was going to be a full year but like saying it would ended in 2022. I'll correct that now we think it's going togoing to be large and complete in the first half of the year and our.

Speaker 1: And what we're saying. We're not going to be reporting adjusted earnings any more. Is that the more meaningful aspects of it? To give a look at the underlying business, which was a purpose for reporting the adjusted earnings Aren T really relevant in looking at it.

Speaker 3: A great. So from the first question that sound like the guidance or the expectation for 2022. is that net interest income on a dollar basis should be pretty flat in 2022 versus 2021. We given some of N decline guidance overall. Is that a fair characterization for net interest income and then mass follow-up just in terms of the movements within thati think that's right came based on what we know today. There's a lot of things that can change over time, but that's our current thinking, and the components of that are really.

Speaker 8: Working through getting back to the mean in terms of spread over deposits. That has been compressed and, as I said earlier, we are- we have been leading with price increases so far this quarter and we'll continue to work towards getting back to the historical levels of spread on classic originations.

Speaker 11: Okay okay, and then so, in terms of, in terms of how you're going to market, can you elaborate on the pricing strategy or what goes in? What factors into how're pricing the mortgages? Are you targeting that specific targeting specific aree come? What is? What are the inputs and drivers of determining the outwelptimment rate?

Speaker 2: In high instittory. Yes, ultimately we're driving towards the ROE targets which you know, subsection is NIM, which is subsection is the spread obviously, between the debs and mortgages. This is a very normal when interest rates are going up. Is that the detget? We quically govergoing coun bonds, set instantly thedebotits, we said almost right away, and then as the mortgag, that like, as we said, we are leaders in streress, we want to get back to normal. The slower interest rates love, the faster we can get into the mean between mortgage and debits. But as the you know, you go up today and then to morrow the Bo again and you ve got another increase. So we will, I sumee we're going to probably lead the way of trying to get the spreads to morrow normal. Look at here, it's just how fast that happens. So yes, ultimately driven by, ultimately driven by, then there's a whole bunch of metrics behind what it should be and how fast would we gars out there?

Speaker 3: Right and the are we are. Are you pricing to? Are we target of 15%? 6% view it would do that. Are we target more? True more, but you're looking to achieve in any dealswell our, our goal game is midteenens, are we? So that will move around, but 15 is is a goal of our and we achieve it this year and we certainly work towards achieving it in 2022. But there's a whole bunch of work that we have to do to get there this year, including managing this spread on classic originations and is in run of it. It is. It is competitive, So we need to be relevant. We CAn't we get simply way, want ourselves to move the market, but we're definitely trying onest and the last one for meeting.

Speaker 1: In terms of our expectations, but that that is the case.

Speaker 4: Okay great, and just on terms of deposits, if I could maybe get some insights on the pricing dynamics and the rising rate environment. I think you mentioned that rising rates are attractive from a market dynamics standpoint for your term deposit funding But in terms of pricing compared to lower rate term deposits on the market business spread between your term rates and competitive term rates. Narrow and rising rate environment is a maintained. Could you just kind of set some color on how thepricing dynamics might lyou out?

Speaker 8: When do we look at our pricing? We do have competitive pressure, certainly on the broker deposits, but in relationship and others. When we evaluate how we're doing, we look how we Re doing based off the spread of a government curveokay. Okay, that's helpful. And if I get tyvo quickly to capital. When I look at your current capital level. If you.

Speaker 4: Assuming you and your action, that NCI that still doesn't get you to your 14% to 15% C one target range and then even with the dividend payout you're still going to have some internal capital generations, do you have any comment on what bridges, I guess, the final remaining excess capital from where we might end up to your target range over next year?

Speaker 8: You're right. There is a gap to get there. Part of it's going to be filled with what we think, or what we're thinking is growth in our balance sheet and risksued assets. So that's going to reserve some of it and when we get closer to the end of the year we will evaluate whether it makes sense to retain capital, de fund future growth or look at higher rate dividends in the next year. What we're really trying to do is.

Speaker 1: Work forward the range in the best way that's going to create value for shareholders and looking at it now, we'll know as we progress throughout the year what the best alternative would be. For example, one could be another choice to be another potential issu ofidiness and that's the potential to get there relatively quickly with one transaction.

Speaker 2: Okay and last quick question: any comments on the decision of deciding to pursue ncv versus an SI? And look at your current share prices below new average siv purchase price you recently completed. So is there rationale ity F V I D be more attractive in current environment? How you think about that?

Speaker 8: Well I think we have a good opportunity to utilize the mcid, and the ability to have a more discretionary aspect to when we're repurchasing shares and not having to pay the premium on an ID led us to maximize an mcid over immediately putting together a other idcre. That helpful about the.

Speaker 5: Your next question comes from the line of Graham writing from T D securities. Your line is openi. Good morning. Just I'm preciate the color on. You know the the offset no longer N but higher longer. You think net interest income hopefully will be flat in 2022. just wondering what sort of growth are're targeting from 2022 would be: take the basically capable capable, offget your outlook.

Speaker 1: Were're capable of close to 20%. 20%, long ER yes, evaluway.

Speaker 12: Okay So it's a pretty material increase from the 5% this year. But what drives that uptick?

Speaker 1: Of originations: continuing high growth, originations in our clafit portfolio, residential portfolio and commercial portfolio.

Speaker 1: And retention, and the.

Speaker 13: Obviously you ve talked about some spread compression on the classic side but what am the commercial side do you you any exread compession of therer and.

Speaker 12: Hold be now. ok, I'm not Sing business. There has been a little, but not to the extentse. On the residential side. That's more because commercial price deal my deal, whereas single family bright and whole bunch of deals right.

Speaker 14: I got it understood. And then my last question. There is a slight increase in your commercial impairments, and color beh was behind that.

Speaker 7: No it's just a there are.

Speaker 12: Individual loans of's. So if anything loves in any of those you're going to show a change, we consider those we very well provided. In looking at the trend over the year, we've shown a substantial reduction in those provisions, So it's not unexpected that we would see some of the variability or volatility thereyes, it's FA, that's Thank.

Speaker 14: And we have a follow-up question from the line of JAM going from National Bank financial. Your line is open.

Speaker 3: Yes Thank you. So I' not going back to do thank you, just wanted to dig into the guess. The two make tensectors of the the then forecast. So we did be completed the R MBS latest R M BS transaction. Can you compare the, the spread on that transaction? So mortgage rates versus the cost of that AR M BS deal versus the previous field and and is not going to be accretive to to the spread of securitized assets or dilutive. It may be slightly diluted but again over time we'll see where our overall rates move because this, the R MBS, is an amortizing facility So dependent on a there it may out out the attractive long term fund first.

Speaker 13: T if there was a forecast or it was a capacity question. So maybe just a little bit of clarity is that? Is that what you're baking in for providing that guidance? That's why MI ity is that you will have 20% loan growth overall, and how do you think about breaking that down between single family residential mortgages and non res commercial mortgages or other products? I think right now we're comfortable with saying that overall level of growth and that level of that interest come.

Speaker 14: Okay.

Speaker 1: Great I think differentthank you. Your next question comes from the line out of Nigel desuva from veritus investment research. Your line is open.

Speaker 2: Thanks for taking my my follow. If I wanted to touch on another dynamic in a rising rate envirenvironment and I was wondering if you could expand on how sensitive retention rates are in in rising in a rising rate environment. I mean I know the interplay between the prime space in the near prime space for your mortgage book So maybe if you color that you know in the context of between 100 basis points or underhundred basis points increase how many the more differences that make to retention when we think those are way maor ion a little bit different. It's a little bit stick here in the rate rate environment. People have to Re all under higher rate elsewhere. So you Re mentioned people who are moving from all are moreking better on the renewals and we're getting better better offering UL lines and a.

Speaker 3: So generally general, generally. So I assume the high retention rate assuption is baked into your your loan growth outlook as well's that there? Yeah ok, that's it for me, Thank you. Next question comes from the line of Stephen Bowen from braymon James airline is also just a quick question. Just in terms of borrowing behavior, have you seen any change in demand for different lengths of mortgages, other with the anticipation of rates, moving up of things, moved out, mort demand for fixed, anything like that? In terms of borrow behavior Yeah, later we seende ically all a line when you're mortgage a in the year.

Speaker 3: We do so we can expanded as as the dynamics are shifting on where people are buying homes, they're actually redefining where major urban centers are. So we're just little. We looking at that and study it exhaustly, the mar putting to understand the market and then, when we get comfortable, we expand. Look today, we are limending- and more than we would last year and certainly more than we would have 2020- andback to our full risk appetite adjustments of LCV, which is generally a FE percent of outay.

Speaker 15: ok So again, you're not not concerned with the, the derising average prices here, especially in the G T a like that. You're still comfortable with your, your levels. We are comfortable because in our risk appetite the first thing that we qualify the borrower what they want to borrow, irrespective of helping the, has to check before we look at the ultim in the prices and so on, So we get comfortable that that person can carry that mortgage first. So that gives us So on, and I have to be comfortable- of certainty of the income in the term of the mortgage, So that being the first check that has to pass. Then we look at the loans to value and what they be. apprisal list.

Speaker 15: Okay Thank you again. If you would like to ask a question, press star then the number one on your telephone key pad.

Speaker 14: And there are no further questions at this time. Mr usustree assada, I turn the call back over to you for some closing remarks. Thank you, Rob. I you to see we're moving forward with a lot of momentum in all our business areas. We'll continue to execute our strategy to grow business, longerreturn capital to our shareholders, to our NCI and commentaryies. Thank you all, T and we look forward to speaking with you again soon.