Q1 2023 Laurentian Bank of Canada Earnings Call
You're <unk>, you're a conference call will start in a few moments.
[music].
Welcome to the Laurentian Bank quarterly financial results call. Please note that this call is being recorded.
Now like to turn the meeting over to Andrew <unk>, Vice President Investor Relations. Please go ahead Anders.
Good morning, and thank you for joining us.
Today's opening remarks will be delivered by Rania Llewellyn.
N C E O and the review of the first quarter financial results will be presented by all this all executive Vice President and Chief Financial Officer.
<unk> questions from Nepal.
Also joining us further question period or several members of the bank executive leadership team, we have Nathan Chief risk Officer.
<unk> head of commercial banking today at Bell Teslik had a personal banking and Kelsey done this I.
Capital markets.
All documents pertaining to the corner it can be found on our website any investor Center.
I'd like to remind you that during this conference call forward looking statements may be made and it is possible that actual results may differ materially from those protective and such statements.
The complete Passionary note regarding forward looking statements. Please refer to our press release or slide two of the presentation.
I would also like to remind listeners that the bank assesses performance under reported and adjusted basis and considers both to be useful in assessing underlying business required.
Rania antibody there'll be referring to adjusted results in their remarks, unless otherwise noted as reported.
I would now like to turn the call over to Rania.
Thank you Andrew.
That is it.
Good morning, and thank you for joining us on what I know it is very busy morning.
This quarter kicks off the second year of our three year strategy and I am pleased to report that we have continued to make progress good progress, including the exciting public launch of a re imagined visa experience a game changer for lunch and bank and its customers.
On behalf of the management team, we would like to thank everyone on our one winning team for their efforts over the quarter.
The macroeconomic environment remains uncertain.
Central banks are trying to dampen inflation in the face of mixed economic indicators, causing significant market volatility.
Notwithstanding our results speak to the strength of our underlying business are disciplined approach to credit and capital management and the progress we are making on executing against our plan.
This quarter total revenue for the bank grew by 1% year over year to $260 million net.
Net income was $54.3 million in earnings per share where $1.15.
Net interest income was up 3% year over year, driven by commercial loan growth.
In line with our expectations that we mentioned last quarter or.
Our name was stable at 1.77% despite material rate hikes in Canada M U S. Since October .
As we have previously said, we expect our name to gradually rebound once interest rates stabilize all other things being equal.
Our efficiency ratio was 69.4% due to the temporary pressures on our name and investments and our key strategic priorities, including the launch of a re imagined visa experience as well as seasonal elements impacting salaries and benefits.
In line with our prudent and disciplined approach to managing risk Tcl's, where 16 basis points a year over year.
Increased as five basis points.
By dynamically managing our capital we maintained our CET one ratio at 9.1% offsetting the small negative impact from the phase out of the ECL transitional arrangements.
I will now turn to our strategic highlights for the quarter.
Last year, we identified three priority areas for 2023 to stimulate growth.
First deliver excellent customer service.
Second word deposits and third drive efficiencies through simplification.
I will begin with customer service.
We are focusing on delivering excellent customer service and removing pinpoints by leveraging data from our net promoter score or NPS program.
This concentrated effort will help us to gain a deeper understanding of what drives customer satisfaction and dissatisfaction, allowing us to implement targeted actions.
To that end I'm pleased to share that in addition to inventory financing or equipment financing specialization is now also rated as world class moving up from excellent with a significant improvement and it's M. P. S.
This achievement is the result of pro actively putting our customers at the center of all our organizational decisions as well as having the right expertise right products and right solutions for our customers.
We are now taking these best practices and applying them across the organization, including the rollout of M. P S and all retail channels and our contact center.
This will provide us with deeper insights into areas, we need to address giving us the ability to quickly adjust and implement actions to improve the customer experience.
I'm also excited to announce that in February we launched our newly re imagine visa experience to the public.
The progress in our personal banking segment is significant.
One year after introducing a mobile app and closing the top five digital pinpoints for our customers. We have shown that we can truly make size or advantage by thinking customer first and leveraging partnerships to deliver it to market faster.
To our strategic partnership with brim financial customers from across Canada can now sign up for one of our new visa cards online the approved within minutes and start transacting with their virtual card immediately from their digital wallets.
In addition to the quick online approval customers will benefit from one of the most flexible rewards programs on the market at best in class digital platform and tools to help budget and manage spending.
This is a significant achievement on our digital transformation journey.
Furthermore, in order to continue improving the customer experience, we launched a new mortgage financing center to handle all mortgage acquisition and refinancing solutions for a retail branches.
Using existing resources with strong backgrounds and whole financing we are now delivering more targeted solutions for our customers.
Turning now to deposits.
Coming off a record year in deposit growth. We have continued our focus on maintaining a strong balance sheet and supporting loan growth having.
Having now closed our customers top five digital gaps we are well positioned to further grow deposits by deepening our relationships with existing customers and targeting new ones.
To that end I am pleased to report significant year over year growth and deposits, a 14%, which outpaced loan growth of 10%.
I would like to highlight two key drivers in particular.
First.
Over the last few years, we have been focused on growing strategic partnership deposits, which are a cost effective funding source and backed by multiyear commitments.
This quarter saw a billion dollar increase sequentially and more than $2.6 billion since last year.
Second as part of repositioning our personal bank, which includes new digital capabilities and a simpler product offering. We are now seeing a positive trend with term deposit growth of almost $400 million quarter over quarter and $700 million since last year.
Disposition positions as well as we prepare to launch our digital onboarding solution to market in the next few months.
To drive Accountability. We have also included deposit growth on our leaders scorecards across the organization, whether they are customer facing or non customer facing.
In addition by leveraging the new mortgage financing center that I. Previously mentioned, we are removing many of the day to day mortgage activities out of the branch.
This creates additional capacity for our financial advisors to focus on deposit growth and deepening our relationships with existing customers.
Our third priority to drive efficiencies through simplification.
We remain committed to reducing our efficiency ratio below 65% over the medium term by further streamlining our internal processes and operations.
As we stated in the fourth quarter. This will not be a straight line as we continue to invest in strategic priorities.
If you examples of process simplification underway include.
First the launch of an E statement campaign for retail banking customers focused on visa statements as part of our digital first approach, which is expected to save the bank $500000. This year and up to $750000 in annual run rate savings beginning next year.
Second the introduction of robotics process automation into three processes with another 17 to follow.
Once implemented across all 20 processes, we expect this to generate $2 million in annual run rate savings over time.
Third the introduction of process automation in our deposit fulfillment process, reducing turnaround time by 50%.
Culture, and ESG also remain a significant priority and I would like to share some highlights from this quarter.
First we launched our newly refresh corporate donation strategy calls, giving beyond numbers, which is focused on supporting organizations dedicated to the economic inclusion of newcomers refugees and other under represented groups.
Second we established a 35% reduction targets and our scope, one and two greenhouse gas emissions by 23.
And third to support Quebec School bus operators in their transition to electric vehicles, we participated in the financing of zero emission buses.
The bank also sign the parental leave pledge introduced by women in capital markets, which includes commitments to provide paid leave to all parents, including fathers same sex partners and parents adopting a child as well as fostering a supportive work culture that normalizes and embraces parental leave across all ranks and.
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I am pleased with our progress this quarter and I'm confident that we are on the right path with our strategic plan.
As we continue to deliver on our three priorities for the year, we expect to launch our digital onboarding experience to the market over the next few months beginning with a focus on day to day accounts.
This will allow us to continue to deepen customer relationships acquire new customers and expand our presence across Canada.
The entire bank is focused on working together as one winning team to drive growth.
I will now turn the call over to evolve.
Sue Rania and Bowser letters I would like to begin by serving to slide 13, which highlights of the bank financial performance for the first quarter.
Over revenue was $160 million, an increase of 1% compared to last year.
<unk>, the lower Confucian from financial markets releases activity, which word by foot by volatile market conditions.
Ah report those bases message come in EPS, where $51.9 million and $1.
Just think items for the quarter amounted to $2.4 million or six cents per share.
Police have to delve authorization that acquisition release of intangible assets.
Details of these items are shown on slide 20 model.
The remainder of my comments will be on the net just the basis.
That's in come in ETS wears down quarter over quarter by 6% and 12%, respectively $254.3 million and one dollar and 15 cents.
This was mainly as a result of a one volume $2.9 million employees re subsidies R. U S operations recorded last quarter.
As well as Susan Orlean vaccines reasons benefits.
This quarter also included in that RCN interest payments negatively impacting you'd give up by six cents.
<unk> <unk> up by 3% you over a year and 2% on the sequential basis maybe.
Mainly due to the bulk of it back to the colors. The redfin comes stemming from commercial loans.
That was October the bank of Canada, and the US Federal Reserve both continued to raise interest rates for a total of 25 basis points in Canada, and having 50 basis points in the U S.
A guy who'd last quarter the rate increases continue to impact name, which was stable that's 177% of this quarter.
We expect the bank's name to gradually rebound one since <unk>, all other things being equal.
Slide 15th reserve other income.
Which decrees by 5% compared to last year, mainly because of volatile conditions unfavourably impacting financial markets release of the revenues.
<unk> Securities these brokerage commissions and income from mutual funds.
On a sequential basis other income was stable.
Ah so low on slide 16, non interest expense was increased by 5% compared to last year and last quarter.
This is in line with our guidance, that's expenses would be higher user investments and strategic projects, including the launch of our <unk> visa expired and digital Onboarding.
The sequential basis. In addition to the one time subsidy recorded last quarter.
We're also seasonal infections are reasons benefits, such as higher vacation accruals employee benefits and performance based compensation.
Lee offset by lower professional fees.
<unk> 17 outlines are diversified sources of funding.
Total deposits grew by 14% you over here.
Than by our strategic partnership deposits. These are back by multiyear commitment and are cost effective funding source or debate.
Deposit growth was greater than lone Grove on a year over year basis, and exceeded our objective of deposits and loan growth being your line.
When Shirley deposits were up 2%, including good growth and rebuild start with deposits of almost $400 million.
As you can see on slide 18, we maintain our C D. One capital ratio at 9.1%.
Or an old capital generation the quarter of set the six basis points negative effects from the phase out of D. C L transitional arrangements and.
In response to COVID-19.
Continued to dynamically manage our capital to support business growth and to remain committed to our stated objective of managing RSVP, one capital ratio at around 9% for the year.
Slash 19 highlights our commercial loan portfolio, which was up by $3 billion or 19% you over a year and $200 million quarter over quarter.
But confucians from our commercial real estate and inventory financing specializations.
Slides Wednesday provides a greater level of detail of our commercial real estate portfolio.
We deal with established tier one and tier to real estate developers in Canada with good threat Records <unk>.
A significant portion of our portfolio is in multi residential housing construction.
Whereas the demand remains resilient due to high immigration levels in care of it.
B L. T V on the term loan portfolio stood at 61%.
<unk> on the uninsured multi residential mortgage portfolios to that 54%.
Is there any of these ltv's and are good track record of the credit quality with a low level. The ripple writes us we remain confident in this portfolio.
Like 21 <unk> specializations.
Are leaving platform across Canada, and the United States with more than 5400 dealers.
The majority of our lending activity focuses on rvs Marina equipment and trailers.
The average amount of credits outstanding by dealer is approximately $800000.
As a reminder, we learned in this portfolio on a product by product basis.
This was also the operational business, where key performance indicators, such as the age of inventories and turnover rates are monitored closely.
Portfolio generates a nominal right those the.
<unk> currently healthy and in line with the historical levels.
Like 22.
<unk> the banks residential mortgage portfolio.
The essential mortgage loans were up 5% you over a year and 1% on the sequential basis.
We maintained prudent other rising sanders and our confidence in the quality of our portfolio.
As evidenced by the high proportion of insured mortgage was at 57%.
And Lo Ltvs, a 51% on the uninsured portion.
It is also worth noting that more than 80% of our residential mortgage portfolio is fixed rate of which more than 75% will mature in 2025 for later.
Allowances for credit losses on slide 23, total $203.5 million and were relatively in line with last quarter.
But I need to slide 24.
The provision for credit losses was $15.4 million, an increase of $6 million from a year ago, mainly.
Mainly as a result of writers and personal loans and the uncertain Macroeconomy gotcha.
<unk> down by $2.4 million sequentially, mainly as a result of lower provision unimpaired commercial loans.
Slide 25 provides an overview of impaired loans.
<unk> year basis, gross and private loans decreased by $43.6 million.
Even by commercial loan right, thus previously provision accounts.
Sequentially. It was a $12.9 million increase due to commercials info.
We continue to manage our risks with a prudent and disciplined approach and the remainder adequately provision.
Last quarter, we provided detailed guidance for 2023.
I would like to note a few key points given the ongoing macroeconomic uncertainty.
Continues to expect that the bank's name will gradually rebound in the second half of the year when it's interest rates Babylon all the other things be equal.
Financial markets remain extremely volatile, which is expected to continue pampering other income results.
Our efficiency ratio will remain elevated in the second quarter as a result of continued pressure on the revenues and investments in our key strategic projects.
With dynamically manage R capital and the resources to grow our business and support our customers and as a result are targeting to remain around the 9% 61 capital ratio throughout the year.
The timing and impact on the economy.
Inflation reduction measures by central banks are still difficult to predict and so our pcl's.
We maintain our purchase guidance of icing and low twenties for the year.
We expect lone Grove to remain tempered as macroeconomic conditions continue to impact business and consumer spending.
Overall loan growth for the year is expected to be in the low single digits.
I will now turn the call back to the operator.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
You'll hear a three home prompt acknowledging your request and your quest.
So we pulled into you or anything I received should you wish to decline from the polling process. Please press the star followed by the two.
If you are using a speakerphone please lift the handset before pressing any cheese one moment. Please for your first question.
Your first question comes from many with Scotiabank. Please go ahead.
Hi, good morning.
Thanks for reading anything the guidance and the margin, but I just want to understand the granularity a little more in terms of what to expect for Q2 in particular.
And based off of Q1, where as you highlighted we continue to see rate hikes.
And so that continues to extend into Q2 as well. So the fact that you were able to achieve flat margins in Q1.
Is is that sort of or we know the low watermark in terms of margins as as you see it or could we still expect to see some variability before.
Before that guidance kicks in in terms of being in a world where we are are stable in terms of the bank of Canada target.
Yeah. Thank you many for the question I think your question in fact outlying many elements to the answer I'm Gonna give us. So first it's been still pretty volatile from a rate perspective bank of <unk>.
The increase since October by 125 basis points in the Western 50 basis points. So for sure the speed and magnitude of the race does in fact the equation because we said we do expect that it will gradually recover as the <unk>, we're being prudent with Q too there's still a lot of pressure on the economy.
<unk>, so I'm not sure exactly where the central banks will move so we remain cautious Q2 with were pretty positive that it will gradually recover mostly in the second half.
Got it and then I was curious to see R. W. A growth essentially flat sequentially and just wanted to understand what.
What led to that resolved lone groceries is flowing but still remains the positive you want a sequential basis. So just wondering if you could help me understand what's driving that flood R. W. A growth sequentially.
Yeah for sure. Many so the first thing is I would say, we're happy right now with a capital level that we have something to keep in mind is 2022 was pretty exceptional in terms of growth.
And we use that to redeploy capital that we have accumulated during the pandemic I think we outlined that pretty well in the past.
But considering the uncertainty out there. We currently projects you know a GDP.
<unk> is going to be close to Neil or something that's going to be very limited and in that context. We do project remain the low single digits or this quarter is a is a reflection of the same thing we've been managing a forest capital and loan volumes.
But it's a reflection of what's happening in the economy.
In terms of the thriller so B R. W. With this quarter as you mentioned was pretty much flat from the last one.
Understood I'll leave it then thank you.
Your next question comes from PA hold them with CIBC. Please go ahead.
So first question is related to the deposit growth coming from those strategic partners and appreciate the.
Gave us in terms of the cure cue and year over year growth and just wondering if you could give us a better understanding on potential future growth from those same partners is there.
Any way too <unk>.
Quantify sort of what potential might look like.
Yeah. It's.
Thank you for the question. So the first thing is as you probably know this or maintenance as soon as we did isolating the supplementary information those deposits now so you can see the level of those going for us we've been increasing goes by 400% since 2020, including 2 billion in 2022 and.
A billion dollars in the last quarter, So I would not assume that the bill isn't that we've just seen is going to be the threat because it's been pretty exceptional in terms of building the relationship with those guys. We need to continue expanding and create new relationships. So the speed of the grill is definitely going to be related to that I think we have an except.
<unk> rolls over at 11, 15 months, so I would not necessarily use that trend, but to compensate that we have to know that we got pretty great grilled from retail term deposits this quarter.
So we have been turning that around Grace I've heard some Kenyan of our team and we are also in the next few months are gonna start the digital onboarding. So that will allow us to grow outside Quebec by opening accounts and we're looking forward to getting new checking accounts and great chord deposits from that.
Customers. So I would say, there's probably a transition that's one point that it's compensated by the internal relative to the core deposits, which is overall pretty pretty positive and give us a diversification and good deposit base.
Mmm.
The growth you've experienced there I think it'd be helpful I understand.
[noise] what extent that's impacted.
The net interest margin and maybe to make it a little bit more granular I think you'd previously set an expectation of declining margins in Q1, but.
But you were able to get flat like what big how how how how significant a role <unk>.
Deposits play in that better outcomes for this current quarter.
Yeah, and so if I can go back I would say that we mentioned the lettuce and the last quarter that we had pressure from a few things right due to the laundry pricing, but definitely the deposits I've been obsessing some of that because the the we mentioned partnership deposits is cost effective and also the term deposits and what.
You can load does this quarter is that the growth we have in those two categories allows us to reduce the a broker with deposits gic's by about $700 million. So there's definitely a named back there I don't Wanna go too granular, but I would say definitely is a bit of positive impact potentially be a beep or to protect.
And then this border.
Okay.
And last question for me is just with respect to.
Credit experience and always ICB <unk> results and then it looks pretty benign, but there is.
<unk> and gross impaired loans, a new formation. So I'm wondering if there's anything.
There to call out in terms of perhaps.
Emerging trends.
That might result in higher losses through the through the remainder of the year.
Thank you for your question Paul as you rightly point up our grocery <unk> did pick up slightly up.
$13 million compared to last quarter.
Given the macroeconomic conditions, we are seeing some early signs of migration to see that in the disclosure we've had and that's to be expected in in these economic circumstances.
That said overall the portfolio is performing very well our strong underwriting standards and are consistent Ah disciplined reserving process or serving as well and I would remind you that over 90% of our portfolio is collateralized we stress test.
Our exposures there are pressures, but none.
None of those the preferred.
Performing really quite well.
Okay. That's all for me thank you.
Your next question comes from <unk>.
National Bank.
Please go ahead.
Alright, good morning, My first questions on your capital guidance the.
Keeping me courtyard, one ratio stable from here.
Have you quantify the impact of the updates to our car guidelines that are coming next quarter.
You know that your guidance.
Corporate slept that the potential abbreviation.
Yeah. Thanks for the question I think it's good that would clarify where we set in terms of the diesel three revised report so last quarterly as I mentioned that we would see a slight reduction in terms of capital with this with the additional work that we've done in the you know the quarterly as as variations. We now expect it's going to be nothing.
<unk> it's okay.
But it should be non material then yes. It is definitely in the guidance of staying around 9% plus or minus throughout 2023, including infect cute.
Got it and then on the deposit disclosure change their showing strategic partners I'll, just I guess the answer must be yes here, but you're seeing the strategic partner deposit balances go up and broker deposits Bell.
That would tell me that those are cheaper deposits. If so could you kind of give me a sense of of the cost savings Sir.
The answer is definitely yes, but I don't want to go to graduate or any signs of the margins just for Comfortative in competition in general, giving me yet, but it's definitely I would say interesting benefit to have those versus the brokerage yet.
With a promotion big those cars quarter because of the the <unk> the.
So much for me.
Could you repeat that.
Alright.
Were there any promotion area right promotional right sorry.
Got Ya.
Dollars a deposit some pretty big.
Not in regards to the strategic deposit.
Okay perfect. So that's where we saw the growth in the G I T.
Explaining with the new digital Onboarding will now be able to get to your new customer with another products like the he's a product that we lost in Quebec for instance, in physical 22, that's not available to the back of the country. So still a lot of upside possible and just to come back up.
Deposits just to make sure. We understand this is multiyear commitment that we're putting into place partners. So it's not it's not deposits that'd go up and down depending on promotions that we do with them it's ready.
Longer term agreements and commitments that we have in place where we manage their client money. So it's really with a much more stable than other kinds of deposits for goods.
Okay last question here is on the inventory finance business can you remind me of those seasonal trends, where you expect a Q1 was maybe a bit more of.
Seasonal tailwind goodness.
Growth was positive, but they don't flatter than some other quarters, we've seen recently and if you could talk more broadly about you know what.
What's going on with the end user demand and if that could actually boost balances because of end user demand for discretionary vehicles was going down the <unk>.
Of course, the dealers to carry how your inventory of the benefit to ultimately.
Okay. Thank you it's Eric Yeah, do you have the right sense like in terms of.
To refinancing we saw normalization throughout the last two quarters versus what was pre pandemic level. So this is where we are right now in terms of the activity with the <unk>.
Dealers are telling us and what we're seeing is there is still good floor activities out there. So consumers are more cautious about spending.
For sure.
But we feel it's more like towards pre pandemic level to be expected in this season.
So yeah, probably helping us to carry more inventory.
Nine utilization than during the pandemic, which was the lowest historical we've experience so.
So it was or what does that mean in terms of what kind of grow pleasure to expect.
Yeah.
Inventory levels are going up.
Gabriel was looking into this season, we should see a decrease actually of DNS. It's two words right now we're at 59% utilization.
Summer season.
The prepaid limit levels, we would see 45%.
Around that in terms of disposition Super sure the decrease in terms of the <unk>.
Alright, great. Thanks for answering my questions.
Your next question comes from <unk> with the shopping please go ahead.
Hi, Good morning, first just I think dynamically managing capsule with mentioned a few times and in the discussions just wanted to understand what that means what you're doing to maintain this at one ratio around 9% is that it.
Just the normal puts and takes or is there some additional activity that you're taking.
I think we licensing it's dynamic because we do it on a constant basis right. So it every quarter, we do manage capital we've been managing capital to remain about 9.1% now for it is three quarters in line. So that includes a lot of various elements. So there was nothing in particular are dug it's just a <unk>.
Okay, making sure that we constantly managing.
Yep Nope I just wanted to confirm Okay, then income from financial instruments and other income was up I think 69 per cent I apologize. If you ask her answered what that was but if not can you dive into it was a substantial increase.
Yeah, I mean really you know obviously the the.
Capital markets recovered Q1, certainly over the volatility we saw last year. So.
That's not a particularly large number four organization, but we try to run you know for the treaty perspective between somewhere between 67 million Bucks a quarter.
We do that again this quarter and so.
I think it's just more reflective of the recovery of the market that you saw.
One versus versus last year.
So that's all trading related is that right.
Large private screening yeah.
Okay, and then back to the you know you could talk to the low single digit loan growth for this this year can you break that down between the different components like your inventory finance versus commercial mortgages versus consumer unsecured lending or or whatever.
A little more granularity I mean, <unk>, obviously, my child's not this quarter and I get your your answer around being cautious and and from an economic perspective, but just trying to get a little bit more details of where you think more of the the slow down is coming from.
Yeah in fact, I just wanted to get to ground Rattler dog, but if you look at this quarter of the growth was in fact pretty much nailed overall for the loved ones. It was really close to being the same as last quarter as we've discussed previously with our there'll be way. So we've seen a smaller increase in commercial and I explained previously.
That's G D P and everything happening is they bring that throat. So we do project that hampered growth in commercial and we all know that's mortgages is Trinity of Mark Yep that is impacted by interest rates as well. So I would say, it's a bit more general I don't think there was anything specific where we have a big swing on one side.
Or the other way within the portfolio or just being prudent overall with the portfolios and managing towards single digits.
Alright, Thank you very much.
Your next question comes from <unk> with BMO. Please go ahead.
Thank you I just wanted to go back to the deposits discussion and a reference back I think it was doing the best today that.
Ah Corinne may have mentioned some custom.
Customer lawsuits that will all be screen weighing on on also deposit.
Aside from the strategic kind of relationships is doing updates as to whether or not you being able to recapture those.
<unk>.
Yeah.
Up until about a year or so ago.
No. Thank you Sir after the question. So what I can say is that our next new year to date account grilled is actually higher than expected and the majority of the customers that are opening a new account or new clients.
As you'll be call about half of our customers only have one product with that so really the new onboarding capabilities will allow us to access new geographies and increase time acquisition.
I mean, I think the number you had mentioned before.
Mm Ballparking. It was maybe six 700000 that type of thing.
And leaving have you added that much back or where are you relative to that six 700000 that that plan now.
We have that total base of 450000 customers. So we're definitely not in those numbers, we don't necessarily disclosed all those numbers, but what I can say is that would definitely on track with our our transformation.
Okay, and I think <unk> you may have mentioned this crystal clarity.
I think he said, we should have more democratic expectations put financial markets and.
With last year to to have been a high watermark in particular for financial markets that we should be aware up for this quarter is more like what you would expect to kind of continue to get out of it just made me put a little bit more.
Yeah.
Yeah, I'll spell it and I'll, let the Kelsey had some comments, but if you look at the thread Q2 was different in Q1 and Q2 last year was definitely are and then we got into volatile market add you to the rate increases Q3, two four and I would say it's still this quarter.
Terms of going for let's see.
C as in Chicago.
Yeah, I mean I think.
That you are a couple of markets ribbons or a combination of treating and advisory revenue you haven't really seen the recovery and advisory revenues with the stability in the markets in particular.
Discussed earlier are treating results of it have been strong alrighty consistent I would say is probably a better way to describe it and I think it's important to point out too because that number has been consistent over many quarters.
And we've had you know constructive markets and less constructed market as well, so I'm, particularly pleased with how that.
<unk> face a.
Variety of market environment looking forward, obviously, they're still uncertain yield their first part of this quarter has not started strong in the markets as we all know your.
And the market will stabilise.
We haven't changed our strategy here you know, we're lining our capital markets business with the rest of the organization, we're not intending to run the trading risks going forward with trying to align with the <unk>.
Revenue stream, so to the extent that the market themselves stabilize I think you'll see that you.
Can see Rodriguez.
Okay, and one last one.
In my notes.
Alright dimension of the I T low twenties P C L ratio.
Credit off your sleeping a bit of a lagging indicator that is taking into account the no call it single digit.
Long growth so gross that gets slowed down further that basis points would be higher.
Cool.
Thank you for the questions are yes, it's consistent with that we're very happy with the portfolio right now as I said, we're very highly collateralized and as you know we got out ahead of the macroeconomic slowdown with our with our reserves. So we're well positioned right now and.
We expect.
Hi, <unk> I teams low low twenties.
Thank you.
Your next question comes from Lamar <unk> with Commack Securities. Please go ahead.
Thanks, I Wanna I Wanna come back to the the efficiency ratio like <unk> I think I heard it's going to be elevated at Q2 first street is that correct.
I think you mentioned, there's gonna be some pressure on revenues at some elevated projects <unk> so what.
What kind of drive the lifted revenues in the back half of the year is that the expectation for names to move higher.
And then what's the elevated projects spending the first half near related to.
Thank you too.
Yeah. This is one of the more I'll I'll take that as well. So I'll give you some guidance and we can discuss what in fact, the various elements you offline. So.
Guidance is definitly as we mentioned last quarter that we would have an efficiency rarely racial that we'd be elevated for the first half of the year. So that's exactly what we saw in Q1 as we guided that's what we expect for Q2 as well and why we're expecting that three Q2, it definitely relates to the fact that we.
Have pressure and it were still having pressure by having a lower limb and having what I would call as a relatively lower capital markets in general So all of that to say that if and going forward. We get an increase of gradual rebound of the name of the second half and potentially better capital markets.
That's a contribution that we should help the efficiency ratio for the second part of the year, we have to keep in mind for Q1 that there has been changes in terms of expenses versus Q4, we had the one time salary subsidy in two four that's not a recurring and we have Susan the higher elements that's.
We outline like vacation accruals, that's a difference of 5 million Bucks versus Q4, and we have a few other elements like payroll taxes related to the payment of the bonuses and <unk>. That's what's gonna drive. It again in Q2 is that we're still investing in our strategic projects with the visa project.
The digital on Gorging projects, but we're also working on the efficiency improvement or his time with things like R. P. As in information. So we're going to keep the level of expenses you know relatively elevated because we invest thing at the business, but the recovery of the revenue that we expect for the second of March.
To help with desperation.
Okay. Thanks, and then my next question I think maybe Doug was asking this but I need to hop off there. So.
Nope, you've answered this already but.
10, chili smell like long ago to match the policy when you mentioned that.
Your dynamically managing capital R.
Allow long ago to outpace deposit growth and where I'm going with this is I'm really trying to understand the low single digit logo alma can if you're on drugs is intentionally being depressed from what we we could be seeing because you're a large cat pier seem to be suggesting a slightly more positive outlook for the year.
I'm happy to take back some some elements if you missed them Lamar no issue. There. So first 2022 was pretty exceptional in terms of grilled fries, we add big growth in the real estate, but also specially in inventory financing.
Present plan utilization in the inventory financing was deep red because of Covid, but it came back so the normalization now at 69% at the at the end of two one is back to where it was pre pandemic. So definitely we've seen the normalization of the grounds.
Or a normalization of the volume with the big growth. We had in 2022. So we're now back to the normal level. So we're in fact is definitely about what's going on in the economy with a G. D. P grow that's going to be close to Neil projected by the market.
Just being cautious up at this point and we believe that if the G. D. P. As there are alone is probably going to be somewhere in the same ballpark as well. So those are the key elements that would explain why we're projecting little singles.
I appreciate the color thanks, guys.
Your next question comes from with Credit Suisse. Please go ahead.
Hi, Thanks, and good morning, So just wanted to go back to that discussion and expenses. So it sounds like some list margins in the second half an expense sort of pressure in the first half.
I'm curious how you see expense growth to be for the for the entire year I think it was up around five per cent this quarter.
Given the timing of the investments.
That we've seen and will have I guess green Forest wondering how you see that expensive course, playing off four remained Oh dear.
Yeah. Good good questions, all usually I do prefer talking about the efficiency ratio because that's really all we manage ourselves depending on the revenue level will manage the expenses as well, but currently we have 69.4% a just a number for Q1, we do expect to have another.
Right the numbers those same ballpark roughly.
Roughly for Q2, and we will see an improvement showed the revenue as I previously mentioned improve for the second part.
[noise]. Okay. Thanks, then and just a quick number one last one for me and I'm just looking at your balance sheet here.
And I see decrease in cold cash and other interest bearing deposits.
I'm curious if sequential basis I'm just curious if that in fact, it the net interest margins results this quarter and and if it <unk> if you could help sort of quantify that.
I would say, there's there's a lot of elements that in fact, the name to be transparent. So definitely we do man this liquidity fees on that balance sheet as we need to be prudent in the current environment, but based on the needs of the bank. So as we need more a bit more a bit less well mine's accordingly, but there's I wouldn't.
Get any conclusion from their variation this quarter.
Okay. Thank you.
Your next question comes from Mike.
<unk> with a K P definitely yes. Please go ahead.
Good morning, maybe a quick one for one you can you can you just give me a sense of are you at the point now where you're adding customers in the retail business on a net basis, because I I think sometimes things can get skewed on what did we look at deposits are low and just the you know the balance is increase but I'm just trying to understand from a like number of customers person.
<unk> I don't know what what do you Wanna talk high level on on the absolute number or maybe maybe the ones that are considered to be core or key relationships, but are you at the point now where you're adding customers on a net basis.
Yeah. So thanks for that question as we always sat on the personal bank at the multiyear strategy Uhm, we're simplifying our product offering we're simplifying our end to end predecessors were improving our customer experience and so we started with the mortgage business and our our goal last year, which was to stabilize kind of the the consumer.
Attrition there and we did just that now obviously market conditions have changed as well and so now with the launch of the visa are are repositioning it some of our deposit products and we're really excited about our upcoming digital onboarding. The goal is ultimately two pronged number one as we always said you know 50 per cent.
[noise] of our clients I only have one product for that so there's a great opportunity for us to deepen those customer relationships and cross sell products and services for them as we continue to launch and number two is to absolutely grow from our customer net new customer acquisition perspective, and that's definitely we're starting to see some some green shoots with our new visa.
We're seeing it with a new repositioning of our time deposits, which we did a campaign I was obviously just focused on to that because that's where we're limited from it physical footprint and that was successful and so again the digital transformation is absolutely going to be critical for us to continue to acquire new customers, which is ultimately uncle.
Okay. Thanks for the color of it does sound like you have a lot of avenues, where you could go with that but just as as far as currently is it fair to think that you're still <unk>, losing customers up until Q1.
Trying to get just a very high level is this something that.
It sounds like it's still a work in progress but.
Are you still a net loser or net reduction on customer your customer base in the quarter.
I would I would say as we've always said our goal last year was to stabilize and we stabilized and so now we're starting to see an apple.
Okay perfect that that's super helpful. Thank you for the color.
Your next question comes from Nigel <unk>.
With 10 investment research. Please go ahead.
Great. Thanks. Thank you good morning, I just had a quick.
Follow up questions on first and your margin I believe last quarter, you mentioned repricing likes having an impact and I think it was about 10 basis points that you that you highlighted could you put an update on that have you recaptured that'd be pricing, while I get this still something that's.
Has to be captured in subsequent quarters and it sounds like you you mean takeaways that you need rate's stable lie it's policy perspective, before Martin start expanding did I understand that correctly.
Yeah, we can do to keep <unk> from what I discussed previously that this quarters since October or last orders since October we've seen 125 basis points growth in Canada, and hundred 50 basis points growth in the U S.
The big raise increase and speedy rate increase that we have seen has now extended to whether I would call that third quarter. After Q3 Q for now Q1, what is a bit of the same story, so they're still that three pricing lines and we're more guarding towards the second half of the year in terms of gradual rebound.
Great and a second quick follow up was on cut our losses and impairments this quarter.
For commercial lending could you I apologize if you already answered this but could you kind of drill down into which categories within your commercial loan portfolio drove.
P C L as in impairments this quarter.
Alright, well. Thank you for for the question, they're they're you know our portfolio overall remains very strong there are no specific segments that I highlighted this time.
There are challenges in the marketplace loan growth is slowing the.
<unk> situation is more uncertain.
Portfolio remains strong wildflower lights, and I'm not seeing any particular segments in commercials that are concerning this time.
Okay. That's it for me thank you.
Your next question comes from Marcel Mcclain with City Securities. Please go ahead.
Okay. Thank you I just want to talk to your your medium term financial targets.
Big for the a P. S are we efficiency operating leverage one gathered from the.
What is the <unk>.
Salt from Q1, and and some other guy injure headwinds you're you're naming here.
Nope and 0.43 is supposed to be your your your <unk>.
With a sense that maybe not all of these are gonna be achievable this year, but possibly by 2024 it could be back at the television.
Just want to get your thoughts on overall high level. How this all kind of adds up here too with respect to these poor targets.
Yeah. Thank you for the question I would wait for us they are a medium term target. So we're still working towards the same objective and the same results. We have the same plan in order to just keep going and delivering on every milestone that we haven't done.
So for sure 2023 is a situation that is more uncertain in terms of my credit card enemy than what we had probably projected 18 months ago like everybody in the market second thing I would keep in mind is despite we had called it wrote 18 months ago, a grilled that we had last year was pretty.
<unk>. So that is definitely moved US you know for it in terms of accomplishing that growth that we expect us to be making so we're still leading towards the same direction.
Okay perfect. Thanks for that and then just to get very specific on on the the name and why you're incorporating in in the guidance and your expectations spin.
Specifically do you have any any cuts forecast in by the end of this year in your protections are.
Does that not the case.
Oh the answer is no at this point the word being prudent with the rate increases in projecting no rate cuts.
Okay.
If we were to see <unk>, what sort of impact could we expect from that.
Gosh, you look at the financial statements. It says, it's a few million Bucks 400 basis points.
But at this point the three defensive allowed to factors depends of all of the the the slope of the curve is gonna move it will defend the all aggressive or the banks and the GIC Marquette it depends a velocity vitamins. So at this point I don't think it's 25 business point is pretty material for any bank.
What's his material is that we see stabilization after three quarters of very high risks right.
Okay.
Got it thank you very much.
Ladies and gentlemen, thank you that's all the time, we have for questions I would now like to turn the meeting over to Ranya.
Thank you for your questions today, we continue to make good progress against our strategic plan and are focused on our three priorities for the year.
We'll continue delivering excellent customer service three new products and services like our re imagine visa experience.
We're excited about the upcoming launch of our digital Onboarding solution, which will drive further deposit growth and support our continued expansion across Canada.
We remain committed to reducing our efficiency ratio and will continue to simplify processes and automate while also making investments in strategic priorities with a.
Fruit and approach to credit and will continue to dynamically manage our capital to support Bell.
I look forward to speaking to everyone again in a few months. Thank you.
Ladies and gentlemen, does conclude your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
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