Q3 2023 National Bank of Canada Earnings Call

August 30, 2023

Speaker 1: Once again, please continue to stand by. We thank you for your patience.

We continue to standby we thank you for your patience.

No one else seemed to be honest, we lapped a silty duckenfield they'd be touched soup the level pre owned at the end of Hulu I had thought of again it gives us, though and you wouldn't see one of the best guilty.

[music]. This conference is being recorded so it goes to the homes that don't have as you see.

Speaker 2: This conference is being recorded. All participants, please stand by. Your conference is ready to begin. Good afternoon ladies and gentlemen and welcome to the National Bank of Canada's third quarter results conference.

All participants please standby your conference is ready to begin good afternoon, ladies and gentlemen, and welcome to the National Bank of Canada third quarter results Conference call I would now like to turn the meeting over to MS. Linda <unk> Senior Vice President of Investor Relations. Please go ahead Mr. <unk>.

Speaker 3: I would now like to turn the meeting over to Ms. Linda Moulanger, Senior Vice President of Investor Relations. Please go ahead, Ms. Moulanger. Ms. Moulanger, thank you for being here.

Thank you operator, good afternoon, everyone and welcome to our third quarter presentation.

Speaker 4: operator. Good afternoon everyone and welcome to our third quarter presentation.

Speaker 4: Presenting this afternoon are Laurent Ferreira, President and CEO of the bank, Marie-Chantal Jenga, Chief Financial Officer, and Bill Bonnell, Chief Risk Officer.

Presenting this afternoon Arnaud I figure Huh, President and CEO of the bank.

He shot out of Shanghai, Chief Financial Officer, and Bill Bonello, Chief Risk Officer.

Speaker 4: Also joining us for the Q&A session are Lucie Blanchet, Head of Personal Banking, Michael Denham, Head of Commercial and Private Banking, Denis Girouard, Head of Work Management, It's in Zubuk, Head of Financial Markets and Responsible for Critergy, and Stéphane Chard, Responsible for International Activities.

Also joining us for the Q&A session or at least see blow shaved head of personal banking.

And head of commercial and private banking there nishu, our head of wealth management. It seems a big head of financial markets and responsible for credit G.

They found out Shah responsible for our international activities.

Before we begin I refer you to slide two of our presentation, providing national bank's caution regarding forward looking statements I would also like to remind listeners that the bank uses non-GAAP financial measures such as adjusted results to measure its performance management will be referring to adjusted results in their room.

Speaker 4: Before we begin, I refer you to slide two of our presentation, providing National Bank's caution regarding forward-looking statements. I would also like to remind listeners that the bank uses non-GAAP financial measures, such as adjusted results, to measure its performance. Management will be referring to adjusted results in their remarks, unless otherwise noted as reported. With that, let me now turn the call over to Laurent. Merci l'inde.

Unless otherwise noted as reported.

With that let me now turn the call over to Laura.

Good afternoon, and thank you everyone for joining us.

Speaker 5: This morning, National Bank reported earnings per share of $2.21 and a return on equity of 15.3%.

This morning National Bank reported earnings per share of $2.21 and.

And our return on equity.

15, 3%.

Speaker 5: The solid performance was supported by revenue and pre-tax pre-provision earnings growth in P&C, wealth, and international, partly offset by a less constructive backdrop in financial markets.

This solid performance was supported by revenue and pretax pre provision earnings growth in P&C.

And international partly offset by less constructive backdrop in financial markets.

We continue to operate in a challenging environment.

Speaker 5: Canadian economy as yet to absorb the full impact of rate hike.

Nadine economy.

Yet to absorb the full impact of rate hikes since the start of monetary policy tightening, resulting in lingering uncertainty.

Speaker 5: since the start of monetary policy tightening, resulting in lingering uncertainty.

Speaker 5: While the labor market is showing signs of easing, it remains robust.

While the labor market is showing signs of easing.

It remains robust at this point in time.

For its part the housing market is enjoying the impact of higher rates amid demographic growth and limited supply.

Speaker 5: For its part, the housing market is enduring the impact of higher rates amid demographic growth and limited supply.

Speaker 5: This development is likely to keep inflation higher for longer and limit the Bank of Canada's ability to offer short-term interest rate relief.

This development is likely to keep inflation higher for longer and limit the bank of Canada's ability to offer short term interest rate relief.

Speaker 5: Against this backdrop, our strategic positioning and defensive posture provides us with strength and resilience to face potential headwinds and take advantage of opportunities.

Against this backdrop, our strategic positioning and defensive posture provides us with strength and resilience to face potential headwinds and.

Take advantage of opportunities.

First.

Speaker 5: The bank has a diversified business mix and strong earnings power backed by a disciplined approach to risk and cost management. Second, we have a solid credit profile.

The bank has a diversified business mix and strong earnings power backed by a disciplined approach to risk and cost management.

Second.

We have a solid credit profile.

Our credit portfolios continue to perform well.

Speaker 5: And we are building up prudent reserves in line with business growth and credit normalization.

And we are building up prudent reserves in line with business growth.

Credit normalization.

Third.

Speaker 5: Third, our capital position is strong with a CET1 ratio of 13.5.

Our capital position is strong with a CET one ratio of 13, 5%.

This enables us to invest in organic growth, while returning capital to shareholders through sustainable dividend increases.

Speaker 5: This enables us to invest in organic growth while returning capital to shareholders through sustainable dividend increases.

Speaker 5: Our dividend payout ratio now stands at the low end of our 40-50% target range following the dividend increase announced last quarter.

Our dividend payout ratio now stands at the low end of our 40% to 50% target range. Following the dividend increase announced last quarter.

We will review our dividend in the fourth quarter consistent with usual practice.

Speaker 5: We will review our dividend in the fourth quarter consistent with usual practice.

To summarize.

With our capital levels are strong earnings power and discipline on cost and credit.

Speaker 5: With our capital levels, strong earnings power, and discipline on costs and credit, we are well positioned to navigate the economic uncertainty and grow the bank.

We are well positioned to navigate the economic uncertainty.

And grow the bank.

Yeah.

Turning now to the performance of our business segments.

Speaker 5: Personal and commercial banking performed well with pre-tax pre-provision earnings up 9% from last year, supported by margin expansion and solid balance sheet growth.

Personal and commercial banking performed well with pre tax pre provision earnings up 9% from last year supported by margin expansion and solid balance sheet growth.

As anticipated.

Speaker 5: As anticipated, we continue to see a slowdown in loan growth as clients adjust to higher borrowing costs.

We continue to see a slowdown in loan growth as clients adjust to higher borrowing costs.

Yeah.

Speaker 5: Earlier this month, we announced the acquisition of a commercial loan portfolio of Silicon Valley Bank's Canadian brand.

Earlier this month.

We announced the acquisition of the commercial loan portfolio, a silicon Valley banks Canadian branch.

Speaker 5: This acquisition builds upon our 25-year presence in technology across the country and reaffirms our commitment to support the Canadian innovation sector.

This acquisition builds upon our 25 year presence in technology across the country and reaffirms our commitment to support the Canadian innovation sector.

Yeah.

Speaker 5: Wealth management had another strong quarter, generating 6% year over year growth in both revenue and pre-tax pre-provision. In 2017, the renewed investment inacialOREBA brace team put the stories of the world's largest points at a speed of 22 to 11.

Wealth management had another strong quarter.

Generating 6% year over year growth in both revenue and pretax pre provision.

Sorry pretax.

Speaker 5: Pre-Privision Earnings, supported by higher interest rates and our deposit base. Assa Grove.

Pre provision earnings supported by higher interest rates and our deposit base.

Asset growth was also strong.

Speaker 5: Coming in at 10% year over year, a result of market appreciation and strong net sales.

Coming in at 10% year over year, a result of market appreciation and strong net sales.

In financial markets.

Speaker 5: Corporate and investment banking delivered a strong quarter with revenues up 17% year-over-year, led by ongoing momentum in corporate banking.

Corporate and investment banking delivered a strong quarter with revenues up 17% year over year.

Led by ongoing momentum in corporate banking.

In global markets Securities Finance had a strong quarter on the back of balance sheet demand and higher rates, which was offset by lower revenues.

Speaker 5: In global markets, security finance had a strong quarter on the back of balance sheet demand and higher rates.

Speaker 5: which was offset by lower revenues, so, change in teased

And structured products.

We also experienced lower trading activity across the franchise I made exceptionally low market volatility.

Speaker 5: We also experience lower trading activity across the franchise, amid exceptionally low market volatility.

Speaker 5: And this was compounded by a strong third quarter last year.

And this was compounded by a strong third quarter last year.

Yes.

<unk> delivered solid results in the third quarter.

Despite an uncertain macro environment and with market supply remaining low the franchise generated asset growth of 3% sequentially, primarily driven by new portfolio purchases.

Speaker 5: Despite an uncertain macro environment and with market supply reminding low, the franchise generated acid growth of 3% sequentially, primarily driven by new portfolio purchases.

Speaker 5: The portfolio remains defensively positioned with continued strong underlying performance.

The portfolio remains defensively positioned with continued strong underlying performance.

We are pleased with the average asset growth deliver so far this year in line with our double digit growth target for fiscal 2023.

Speaker 5: We are pleased with the average asset growth delivered so far this year, in line with our double-digit growth target for fiscal 2020.

Okay.

Speaker 5: ABA's balance she growth continued in Q3, with loans and deposits up 25% from last year.

A b as balance sheet growth continued in Q3 with loans and deposits up 25% from last year.

Speaker 5: The franchise continues to expand its customer base.

The franchise content continues to expand its cause its customer base.

With the total number of clients up 36% year over year.

Speaker 5: with a total number of clients up 36% year over year.

Revenue growth continues to reflect pressure on deposit margin, resulting from migration to term products.

Speaker 5: Revenue growth continues to reflect pressure on deposit margin resulting from migration to term products.

Speaker 5: in the context of higher interest rates and a competitive environment for the positive.

In the context of higher interest rates and a competitive environment for deposits.

Speaker 5: While global economic growth is moderating, the longer-term outlook for Cambodia remains very attractive.

While global economic growth is moderating the longer term outlook for Cambodia remains very attractive.

Speaker 5: Before I pass it over to Marie-Chantal, I'd like to take a moment to recognize Denis Giroir.

Before I pass it over to Matt who shopped either.

I'd like to take a moment to recognize than usual wall.

Speaker 5: for his countless contributions to the bank over his 33 year career with us.

For his countless contributions to the bank over his 33 year career with us.

In that time, he has been instrumental in growing our financial markets franchise and forging its leadership position in key sectors.

Speaker 5: In that time, he has been instrumental in growing our financial markets franchise and forging its leadership position in Kisek.

Over the last few months than he has led our wealth business on an interim basis, which speaks to his leadership.

Speaker 5: I am personally very grateful that Denis will be playing, will be staying on as a strategic advisor to the bank, so that we can continue to benefit from his deep experience.

I am personally very grateful that then you will be playing.

We will be staying on as a strategic adviser to the bank. So.

So we can continue to benefit from his deep experience.

Did he will fully transitioned to his advisory role one.

And then C pack, yet officially takes over the leadership of wealth management in.

In Q1.

Nancy is a proven leader having made her mark in a range of strategic roles at the bank since joining in 2007.

She is a seasoned financial service professional with a strategic vision and a client centric mindset.

Speaker 5: She is a seasoned financial service professional with a strategic vision and a client-centric mindset.

We look forward to welcoming her to the senior leadership team as head of our wealth franchise, a key growth driver for the bank.

Speaker 5: We look forward to welcoming her to the Senior Leadership Team as head of our Wealth franchise, a key growth driver for the bank.

I saw that over to you.

Speaker 6: Thank you, Laura, and good afternoon, everyone. My comments will start on slide 7.

Thank you Tom and good afternoon, everyone.

My comments will start on slide seven.

Speaker 6: The bank delivered solid financial results in Q3, despite a challenging macro environment.

The bank delivered solid financial results in Q3, despite a challenging macro environment.

Speaker 6: revenues increased 4% year over year. As Laham mentioned, solid revenue growth in PNC banking and wealth management was partly offset by lower revenues in financial markets.

Revenues increased 4% year over year.

That's no harm mentioned solid revenue growth in P&C banking and wealth management was partly offset by lower revenues in financial markets.

As anticipated and discussed on our last call operating leverage was negative in Q3 with expenses, increasing 7% year over year.

Speaker 6: As anticipated and discussed on our last call, operating leverage was negative in Q3, with expenses increasing 7% year-over-year.

Speaker 6: A significant proportion of our expense growth was driven by last year's FTE increase, as well as by our annual salary increase, and was partly offset by lower variable compensation.

A significant proportion of our expense growth was driven by last year's 50 increase.

As well as by our annual salary increase and was partly offset by lower variable compensation.

Over the past few quarters.

The entire management team has been focused on prudently managing head count through attrition.

Speaker 6: The entire management team has been focused on prudently managing headcount through attrition, while at the same time simplifying our operations to improve the client experience.

At the same time, simplifying our operations to improve the client experience.

Speaker 6: Notably, our FT account in Canada has been declining since Q1.

Notably our FTE count in Canada.

Been declining since Q1.

Also contributing to the increase in expenses were investments in technology to support client acquisition, and hence our client experience and improve efficiency.

Speaker 6: Also contributing to the increase in expenses were investments in technology to support client acquisition, enhance our client experience and improve efficiency.

Speaker 6: To delve a little deeper, this expansion increase is largely explained by a shift in the investment portfolio mix and higher amortization related to past projects as well as by business growth.

To delve a little deeper this expense increase is largely explained by a shift in the investment portfolio mix and higher amortization related to past projects as well as my business growth.

Cost, including occupancy marketing and travel were also higher year over year.

Speaker 6: Costs, including occupancy, marketing, and travel, were also higher year over year.

Speaker 6: With the environment expected to remain challenging in the near term, we continue to be strategic in prioritizing and managing expenses.

With the environment expected to remain challenging in the near term we.

We continue to be strategic and prioritizing and managing expenses.

By being proactive and disciplined in an inflationary environment.

Speaker 6: by being proactive and disciplined in an inflationary environment.

Speaker 6: We have been able to contain our expense growth to within the mid to high single digit range.

We have been able to contain our expense growth to within the mid to high single digit range.

Speaker 6: We remain very focused on controlling costs, and as such, while expense growth may vary from quarter to quarter, we expect the overall trend in non-interest expense growth to moderate.

We remain very focused on controlling cost and that's such while expense growth may vary from quarter to quarter. We expect the overall trend in noninterest expense growth to moderate.

Our dynamic approach to balancing business growth and investment contributes to our efficient businesses and the resiliency of the back.

Speaker 6: Our dynamic approach to balancing business growth and investment contributes to our efficient businesses and the resiliency of the back.

Now turning to slide eight.

Total net interest income excluding trading increased by 17% from last year benefiting from higher rates and strong balance sheet growth.

Speaker 6: Total net interest income, excluding trading, increased by 17% from last year, benefiting from higher rates and strong balance she grows.

For P&C banking.

Net interest income was up 13% year over year, mainly driven by deposit margin expansion and growth in loans and deposits.

Speaker 6: For a wealth management, NII increased by 19% year-over-year.

For our wealth management NII increased by 19% year over year.

Speaker 6: This was supported by higher interest rates in a strong, deposited base of $40 billion resulting from the diversification of our underlying business.

This was supported by higher interest rates and a strong deposit base of $40 billion, resulting from the diversification of our underlying businesses.

In Q3, we reclassified other income to NII.

Speaker 6: In Q3, we reclassified other income to NII.

Speaker 6: The reclassification had no impact on the bank's total revenue. Excluding this item, non-trading NII grew 14% year over year.

The reclassification had no impact on the bank's total revenue.

Excluding this item non trading NII grew 14% year over year.

Speaker 6: In Q3, all bank name, excluding trading, reached 2.18%.

In Q3, all bank NIM, excluding trading reach to 18%.

Speaker 6: The revenue reclassification represented a favorable impact to NIM of six basis points sequentially.

The revenue reclassification represented a favorable impact to NIM of six basis points sequentially.

Excluding this element non trading name was up three basis points from last quarter.

Speaker 6: the resolution first.

Speaker 6: of this increase. Two basis points was related to corporate banking, primarily driven by a payment recovery, while asset and liability management activity accounted for one basis point.

Thanks.

This increased two basis points was related to corporate banking, primarily driven by a payment recovery well asset liability management activity accounted for one basis point.

P&C name was stable from last quarters strong level.

Speaker 6: PNC name was stable from last quarter's strong level.

Speaker 6: The segment benefited from a more favorable business mix, mainly offset by lower asset spreads.

The segment benefited from a more favorable business mix, mainly offset by lower asset spread.

As always our objective is to grow the franchise and we remain disciplined in managing our balance sheet balancing wrote.

Speaker 6: As always, our objectives is to grow the franchise, and we remain disciplined in managing our balance sheet, balancing growth, margin, and credit quality.

Margin and credit quality.

Slide nine highlights our balance sheet.

Speaker 6: loans were up 9% year over year and growth was broad base.

Loans were up 9% year over year and growth was broad based.

Speaker 6: There was particular strength in corporate banking, reflecting growing working capital needs, acquisition financing, and relatively subdued origination activity within capital markets.

There was particular strength in corporate banking.

<unk> growing working capital needs.

Musician financings and relatively subdued origination activity within capital markets.

Speaker 6: strong performance in US-STIFI-refected ABA's extended client base and creditors growing portfolio.

Strong performance in U S justify reflected a b as expanded client base and credit Gs growing portfolio.

Commercial loans grew by 7% year over year.

Speaker 6: Commercial loans grew by 7% year over year, in part driven by opportunities in the residential insured segments.

In part driven by opportunities in the residential insured segment.

Speaker 6: Personal mortgages grew by 2% reflecting current housing market condition and our strategic decision to focus on our proprietary channels.

Personal mortgages grew by 2%, reflecting current housing market conditions, and our strategic decision to focus on our proprietary channels.

Sequentially loans grew by 2% and the all bank level.

Speaker 6: sequentially loans grew by 2% at the all bank level.

Speaker 6: The positives, excluding wholesale funding, grew by 13% year-over-year and 1% quarter-over-quarter, with personal deposits growing by 16% year-over-year and 1% sequentially.

Deposits, excluding wholesale funding grew by 13% year over year, and 1% quarter over quarter with personal deposits growing by 16% year over year and 1% sequentially.

Speaker 6: Personal clients continue to favor term products in a high-interest rate environment.

Personal clients continue to favor term products in a high interest rate environment.

Speaker 6: while the rate of migration has been slowing down, clients have continued to deploy some of their accumulated savings.

While the rate of migration has been slowing down clients have continued to deploy some of their accumulated savings.

Non retail deposits also grew sequentially by $1 $5 billion or more than one person.

Speaker 6: Non-retell deposits also grew, sequentially by $1.5 billion or more than 1%.

Speaker 6: This was primarily driven by commercial banking, including an increase in government and public sector deposits.

This was primarily driven by commercial banking, including an increase in government and public sector deposits.

Our deposit franchise demonstrate the strength of our diversified model and focus on growing our deposit base.

Speaker 6: Our deposit franchise demonstrates the strength of our diversified models and focuses on growing our deposit base across all business segments.

Ross all business segments.

Slide 10 presents our strong liquidity position and sound funding profile.

Speaker 6: Slide 10 presents our strong liquidity position and sound funding profile.

Speaker 6: Our core banking activities are well funded through diversified strong and stable sources while we remain disciplined around funding costs.

Our core banking activities are well funded through diversified strong and stable sources, while we remain disciplined around funding cost.

We maintained prudent liquidity metrics.

Speaker 6: We maintain prudently-quitted emitrix and consistently operate at levels that are well above regulatory minimum requirements.

Consistently operate at levels that are well above regulatory minimum requirements.

Speaker 6: At the end of Q3, our liquidity coverage ratio was 146%, and our net stable funding ratio was 118%.

At the end of Q3, our liquidity coverage ratio was 146% and our net stable funding ratio was 118%.

Now turning to capital on Slide 11.

Our CET one ratio improved by 15 basis points from last quarter to reach $13 five per cent.

Speaker 6: Our CT1 ratio improved by 15 basis points from last quarter to reach 13.5%.

Third quarter earnings net of dividends contributed 34 basis points to our ratio underscoring our strong internal capital generation capacity.

Speaker 6: Third quarter earnings, net of dividends, contributed 34 basis points to our ratio. Underscoring our strong internal capital generation capacity.

Speaker 6: On November 1, 2023, the Basel III reforms related to the fundamental review of the trading book and a revised credit valuation adjustment framework will be adopted.

On November 1st 2023.

The Basel III reforms relate it to the fundamental review of their trading book and the revised credit valuation adjustment framework will be adopted.

Speaker 6: based on what we're seeing today. And keeping in mind that the exact level of market risk and implementation is difficult to predict, we estimate that the reforms would have a combined impact of 35 to 40 basis points of capital.

Based on what we're seeing today.

And keeping in mind that the exact level of market risk and implementation is difficult to predict we estimate that the reforms would had a combined impact of 35 to 40 basis points of capital.

Speaker 6: as we transition from an internal model based approach toward the standardized market risk approach.

As we transition from an internal model based approach towards a standardized market risk approach. The unfavorable impact is primarily explained by the loss of diversification benefits between various risk factors.

Speaker 6: Unfavorable impact is primarily explained by the loss of diversification benefits between various risk facts.

Our capital position is strong and will remain strong on a pro forma basis upon their reform implementation in Q1, 'twenty 'twenty four.

Speaker 6: Our capital position is strong and will remain strong on a pro forma basis upon the reform implementation in Q1 2024.

Speaker 6: It provides us with flexibility to deploy capital across our segments and take advantage of opportunities that arise to support growth. It also allows us to return.

It provides us with flexibility to deploy capital across our segments.

And take advantage of opportunities that arise to support growth.

It also allows us to return capital to shareholders.

Speaker 6: In conclusion, the bank delivered solid two, three results with an ROE of over 15% and a strong balance.

In conclusion, the bank delivered solid Q3 results with an ROE of over 15% and a strong balance sheet.

Speaker 6: Our resilient business model and discipline approach to cost, capital and risk management have contributed to our solid track record and position us well to execute our strategy.

Our resilient business model and disciplined approach to cost capital and risk management.

Contributed to our solid track record and position us well to execute our strategy.

Speaker 6: I will now turn the call over to Bill. May I see Mary Chantal and good afternoon. I'll begin on slide.

I will now turn the call over to Bill.

She married Chantel and good afternoon all.

I'll begin on slide 13.

Speaker 5: The trends in the normalization of credit performance, which we've seen since the beginning of the year, continued in the third quarter. And reflect the current complex macroeconomic environment.

The trends in the normalization of credit performance, which we have seen since the beginning of the year continued in the third quarter and reflect the current complex macro and microeconomic environment.

Speaker 5: As I mentioned, employment conditions have softened modestly, but unemployment rates remain low compared to historical averages.

Cause no harm mentioned employment conditions have softened modestly, but unemployment rates remain low compared to historical averages.

Speaker 5: Inflation has declined from its peak, but it likely remains sticky.

Inflation has declined from its peak, but it is likely to remain sticky.

Speaker 5: future path of interest rates remains uncertain, but rates are likely to remain higher for longer than what was forecast earlier this year. And elevated geopolitics.

The future path of interest rates remains uncertain.

But rates are likely to remain higher for longer than what was forecast earlier this year.

And elevated geopolitical risks persist.

Speaker 5: Against that macro backdrop, we remain very comfortable with our defensive positioning and we're pleased with our portfolio's performance last quarter with total PCLs of 20 basis points or $111 million.

Against the macro backdrop, we remain very comfortable with our defensive positioning and were pleased with their portfolios performance last quarter with total P. CLS of 20 basis points or $111 million.

Speaker 5: Provision's on impaired loans increased to $85 million or 15 basis points.

Provisions on impaired loans increased to $85 million or 15 basis points.

Speaker 5: In retail portfolios, impaired provisions continue to rise from last year's lows, but remain below pre-pandemic levels.

In retail portfolios impaired provisions continued to rise from last years lows, but remain below pre pandemic levels.

Speaker 5: In wholesale portfolios, this quarter's increase in impaired provisions was driven by two new impairments in commercial banking, partially offset by recovery and corporate banking.

In wholesale portfolios. This quarter's increase in impaired provisions was driven by two new impairments in commercial banking, partially offset by a recovery in corporate banking.

Speaker 5: As you know, wholesale impairments and recoveries can be lumpy from quarter to quarter.

As you know wholesale impairments and recoveries can be lumpy from quarter to quarter.

In the international sector impaired provisions rose to $25 million, reflecting normal seasoning and credits these portfolios and at a b, a reflecting a moderating global economy, particularly impacting the recovery in tourism and trade related sectors.

Speaker 5: In the international sector, impaired provisions rose to $25 million, reflecting normal seasoning in credit-use portfolios, and at ABA, reflecting a moderating global economy, particularly impacting the recovery in tourism and trade-related sectors.

Speaker 5: Provisions on performing loans were $38 million or seven basis points as we continue to build allowance.

Provisions on performing loans were $38 million or seven basis points as we continued to build allowances.

Speaker 5: In our domestic portfolios, performing provisions were stable quarter over quarter and due primarily to portfolio growth.

In our domestic portfolios performing provisions were stable quarter over quarter, and due primarily to portfolio growth.

Speaker 5: in the international sector, performing provisions were driven by Portfolio growth, model collaborations, and some migration.

In the international sector, performing provisions were driven by portfolio growth model calibrations and some migration.

Please turn to slide 14.

Total allowances for credit losses increased by 5% to $1.3 billion and now represent 1.7 times to Q1 2020 level.

Speaker 5: Total allowances for credit losses increased by 5% to $1.3 billion, and now represent 1.7 times the Q1 2020 level.

Speaker 5: Performing ACLs grew to more than $1 billion, just 5% below its pandemic D.

Performing acos grew to more than $1 billion, just 5% below its pandemic peak.

On slide 29 in the appendix you will find details of our allowance coverage ratios, which remained very strong.

Speaker 5: On slide 29 in the appendix, you will find details of our allowance coverage ratios, which remain very strong. Performing allowances cover 4.5 times our last 12-month in perids. And total allowances cover 7.8 times our last 12-month net charge off.

Performing allowances cover 4.5 times, our last 12 months and parents.

Total allowances cover 7.8 times last 12 month net charge offs.

Speaker 5: In this complex macro environment, we are very comfortable with this prudent level of allowance.

In this complex macro environment, we are very comfortable with this prudent level of allowances.

Turning to slide 15, our gross impaired loan ratio increased to 41 basis points, which remains below pre pandemic levels.

Speaker 5: Turning to slide 15, our gross impaired lawn ratio increased to 41 basis points, which remains below pre-pandemic levels.

Speaker 5: Net formations rose to $153 million last quarter.

Net formations rose to $153 million last quarter.

In retail banking recent trends in delinquencies and formations persisted with delinquencies rising faster than unsecured portfolios than in Russell and more slowly in Quebec portfolios versus the rest of Canada.

Speaker 5: In retail banking, recent trends in delinquencies and formations persisted, with delinquencies rising faster and unsecure portfolios than in result, and more slowly and co-backed portfolios versus the rest of Canada.

Speaker 5: In the wholesale portfolios, formations rose in the quarter driven by two commercial formations in the manufacturing sector, partially offset by net recovery in corporate banks.

In the wholesale portfolios formations rose in the quarter driven by two commercial formations in the manufacturing sector, partially offset by a net recovery in corporate banking.

In the international sector formations increased due to seasoning and credit portfolios and higher impairments at a B E.

Speaker 5: In the international sector, formations increase due to seasoning and credit sheet portfolios and higher impairments at ABA.

Speaker 5: In the context of moderating global growth, the Cambodian economy is adjusting to recent softness and external demand, and a slower than anticipated recovery in tourism.

In the context of moderating global growth. The Cambodian economy is adjusting to recent softness in external demand and a slower than anticipated recovery in tourism.

Speaker 5: In this context, we expect formations to remain elevated. However, given the low LTV of loans.

In this context, we expect formations to remain elevated however.

Or given the low LTV if loans.

Speaker 5: And our historical experience, we think that the realized net charge-off rate should remain low.

And our historical experience, we think that the realized net charge off rates should remain low.

Speaker 5: On slide 16 and 17, we present highlights of our Canadian Resil portfolio.

On slide 16, and 17, we present highlights of our Canadian rental portfolio.

Speaker 5: The geographic and product mix remains stable with Quebec accounting for 55% and insured mortgages accounting for 29% of total result.

The geographic and product mix remained stable with Quebec, accounting for 55% and insured mortgages accounting for 29% of total Russell.

Unknown Executive: Once again, please continue to stand by. We thank you for your patience. This conference is being recorded. All participants, please stand by. Your conference is ready to begin.

Unknown Executive: Once again, please continue to stand by. We thank you for your patience.

Supported by favorable employment in savings rates Coors continues to demonstrate resiliency as they absorb the impacts of higher interest rates.

Speaker 5: supported by favorable employment and savings rates, or is continued to demonstrate resiliency as they absorb the impacts of higher interest rates.

Speaker 5: An insured result 90 day plus still and delinquencies remained low at seven basis points and credit scores remain high.

Uninsured reservoir 90 day, plus delinquencies remained low at seven basis points and credit scores remain high.

Speaker 5: As you know, payments on our variable rate mortgages have adjusted upwards with central bank rating increases. These are the customers who have had to adapt most quickly to higher rates.

As you know payments on our variable rate mortgages have adjusted upwards with central bank rate increases. So these are the customers who have had to adapt most quickly higher rates. While we have seen early delinquencies rise past pre pandemic levels for insured variable rate mortgages, they remain low for uninsured variable rate.

Unknown Executive: This conference is being recorded. All participants, please stand by. Your conference is ready to begin. Good afternoon ladies and gentlemen, and welcome to the National Bank of Canada's third quarter results conference call.

Speaker 5: While we have seen early-dilling quantities rise, past pre-pandemic levels for insured variable rate mortgages, they remain low for uninsured variable rate mortgages, as customers have prudently adjusted discretionary spending.

Unknown Executive: Good afternoon ladies and gentlemen and welcome to the National Bank of Canada's third quarter results conference call.

Linda Boulanger: I would now like to turn the meeting over to Ms. Linda Boulanger, Senior Vice President of Investor Relations.

Linda Boulanger: I would now like to turn the meeting over to Ms. Linda Boulanger, Senior Vice President of Investor Relations. Please go ahead Ms. Boulanger. Thank you operator.

As customers have prudently adjusted discretionary spending.

You'll also see in the sub pack that the remaining amortizations of our mortgages have not extended in the portion of over 30 years remains low at 1% of the portfolio.

Speaker 5: You'll also see in the sub-pack that the remaining amortizations ever mortgages have not extended in the portion of over 30 years remains low at 1% of the portfolio.

Linda Boulanger: Please go ahead Ms. Boulanger. Thank you operator.

Laurent Ferreira: Good afternoon everyone and welcome to our third quarter presentation. Presenting this afternoon, our Laurent Ferreira, President and CEO of the bank, Marie Gendarme, Chief Financial Officer, and Bill Bonnell, Chief Risk Officer. Also joining us for the Q&A session are Lucie Blanchet, Head of Personal Banking, Michael Denham, Head of Commercial and Private Banking, Denis Girouard, Head of Work Management, It's in Zubik, Head of Financial Markets and Responsible for Credity, and the Financial Responsible for International Activities.

Linda Boulanger: Good afternoon everyone and welcome to our third quarter presentation. Presenting this afternoon, our Laurent Ferreira, President and CEO of the bank, Marie Chantal-Jangra, Chief Financial Officer, and Bill Bonnell, Chief Risk Officer. Also joining us for the Q&A session are Lucie Blanchet, Head of Personal Banking, Michael Denham, Head of Commercial and Private Banking, Denis Girouard, Head of Work Management, It's in the book, Head of Financial Markets, and Responsible for Credity, and the Financial Responsible for International Activities.

Speaker 5: to conclude, we were pleased with the good credit performance again this quarter.

To conclude we were pleased with the good credit performance again this quarter looked.

Speaker 5: Looking ahead, we expect further normalization with increasing levels of delinquencies and impaired DCLs in the coming quarters.

Looking ahead, we expect further normalization with increasing levels of delinquencies and impaired PCL in the coming quarters.

Speaker 5: the speed of normalization will be heavily influenced by the path of unemployment and interest rates.

The speed of normalization will be heavily influenced by the path of unemployment and interest rates.

Speaker 5: and impact should be somewhat moderated by our defensive positioning, our resilient mix, and our prudent level of allowances.

The impact should be somewhat moderated by our defensive positioning a resilient mix and a prudent level of allowances.

Speaker 5: We maintain our full year target for impaired DCLs at 10 to 20 basis points and continue to expect to be to end up in the bottom part of that range.

We maintain our full year target for impaired Tcl's 10 to 20 basis points and continue to expect to be to end up in the bottom part of that range with that I will turn it back to the operator for the Q&A.

Laurent Ferreira: Before we begin, I refer you to slide two of our presentation, providing National Bank's caution regarding forward-looking statements. I would also like to remind listeners that the bank uses non-gap financial measures, such as adjusted results to measure its performance. Management will be referring to adjusted results in their remarks, unless otherwise noted as reported.

Linda Boulanger: Before we begin, I refer you to slide two of our presentation, providing National Bank's caution regarding forward-looking statements. I would also like to remind listeners that the bank uses non-gap financial measures such as adjusted results to measure its performance. Management will be referring to adjusted results in their remarks unless otherwise noted as reported.

Speaker 5: With that, I will turn it back to the operator for the Q&A.

Speaker 3: Thank you. We will not take questions on the telephone line. If you have a question and you are using a speaker phone, please lift your handset before making your selection. If you have a question, please press star one on your device.

Thank you.

And I'll take questions from the telephone line. If you have a question and you are using a speaker phone. Please lift your handset before making us an excellent if you have a.

Question. Please press star one on your devices keypad, you're making so on your question at any time by pressing star two.

Laurent Ferreira: With that, let me now turn the call over to Loha. Thank you everyone for joining us. This morning, National Bank reported earnings per share of $2.21 and a return on equity of 15.3%. The solid performance was supported by revenue and pre-tax pre-vision earnings growth in PNC, wealth and international, partly offset by a less constructive backdrop in financial markets. We continue to operate in a challenging environment, the Canadian economy has yet to absorb the full impact of rate hikes since the start of monetary policy tightening, resulting in lingering uncertainty.

Laurent Ferreira: With that, let me now turn the call over to Lauren. Thank you everyone for joining us. This morning, National Bank reported earnings per share of $2.21 and a return on equity of 15.3%. The solid performance was supported by revenue and pre-tax pre-pervision earnings growth in PNC, wealth, and international, partly offset by a less constructive backdrop in financial markets. We continue to operate in a challenging environment, the Canadian economy has yet to absorb the full impact of rate hikes since the start of monetary policy tightening, resulting in lingering uncertainty.

Speaker 3: You may also make a question at any time by pressing start.

Speaker 3: Please press star one at this time. If you have a question, there will be a response while participants register for questions. We thank you for your patience. Thank you.

Press Star one at this time, if you have a question.

Beef Boswell participants register for questions. We thank you for your patience.

My first question is from many Goldman from Scotiabank. Please go ahead.

Speaker 7: Hi, good afternoon. Marich and Tal, I wanted to ask a question about expenses and specifically whether you expect your current approach to expense management to lead to positive operating leverage next year. You've had three quarters in a row of negative operating leverage. I'm just curious about the outlook there.

Hi, Good afternoon, Bruce and Tom I wanted to ask a question about expenses and specifically whether you expect your current approach to expense management to lead to positive operating leverage next year, you've had three quarters in a row of negative operating leverage so I'm just curious about the outlook there.

Speaker 6: Hi, Minnie. Thanks for the question. And you're right. There was definitely some pressure in the past couple of the orders. And can you hear me?

Hi, many thanks for the question and you're right there was.

Definitely some pressure in the past couple of quarters.

Laurent Ferreira: While the labor market is showing signs of easing, it remains robust at this point in time. For its part, the housing market is enduring the impact of higher rates amid demographic growth and limited supply. This development is likely to keep inflation higher for longer and limit the bank of Canada's ability to offer short-term interest rate relief. Against this backdrop, our strategic positioning and defensive posture provides us with strength and resilience to face potential headwinds and take advantage of opportunities.

Can you can you hear me well money.

Speaker 8: I can, yes. Okay. So factors that influence that negative operating leverage for sure inflation. And as I said in my remarks, we've managed expenses very disciplinely and dynamically over the past few quarters in order to mitigate those factors.

Yes, okay.

So factors.

That influenced that of that nature.

Operating leverage for sure inflation and as I said in my remarks, we've managed expenses very disciplined.

And dynamically over the past few quarters in order to to mitigate those factors are simultaneously, we continue to grow and diversify our revenue and our revenue base for sure.

Speaker 6: simultaneously we continue to grow and diversify our revenue our revenue base for sure.

Speaker 6: So a more favorable operating environment where inflation moderates and capital market activities resume will definitely contribute to better operating leverage. So consistently assessing our overall structure, we do remain positive on leverage for Q4 being positive in terms of operating leverage.

So I'm more favorable operating environment, where inflation moderates and capital market activities resume will definitely contribute to better operating leverage so.

Laurent Ferreira: The bank has a diversified business mix and strong earnings power backed by a disciplined approach to risk and cost management. Second, we have a solid credit profile. Our credit portfolios continue to perform well and we are building up prudent reserves in line with business growth and credit normalization. Third, our capital position is strong with a C-T-1 ratio of 13.5%. This enables us to invest in organic growth while returning capital to shareholders through sustainable dividend increases.

Laurent Ferreira: The bank has a diversified business mix and strong earnings power back by a disciplined approach to risk and cost management. Second, we have a solid credit profile. Our credit portfolios continue to perform well and we are building up prudent reserves in line with business growth and credit normalization. Third, our capital position is strong with a C-T-1 ratio of 13.5%. This enables us to invest in organic growth while returning capital to shareholders through sustainable dividend increases. Our dividend payout ratio now stands at the low end of our 40-50% target range following the dividend increase announced last quarter. We will review our dividend in the fourth quarter consistent with usual practice.

Consistently assessing our overall cost structure.

We do remain positive and leverage for Q4 being them being positive in terms of Oh.

<unk> leverage.

Speaker 7: Got it. The follow-up is just in terms of how open you are, maybe the question for Laurent in terms of taking restructuring charges, if the environment, especially the revenue environment, continues to remain challenged. Is that something on the table? How do you view restructuring?

Got it and just the follow up is just in terms of how open you are maybe it's a question for Ron in terms of taking restructuring charges.

The environment, especially the revenue environment.

Continues to remain challenged is that something on the table and how do you view, how do you view restructuring charges from a broader perspective yeah.

Speaker 9: Yeah, I mean, I can continue with that question. So we continuously assess our overall cost structure, including intangibles, real estate and talent. So at this point in time, we remain very focused on protecting our current talent base and are not contemplating any largely off.

Laurent Ferreira: Our dividend payout ratio now stands at the low and of our 40 to 50% target range following the dividend increase announced last quarter. We will review our dividend in the fourth quarter consistent with usual practice. To summarize, with our capital levels strong earnings power and discipline on cost and credit, we are well positioned to navigate the economic uncertainty and grow the bank.

And continuing with that question so we continuously.

That's our overall cost structure, including intangibles are real estate and tower and so at this point in time, we remain very focused on protecting our current talent base and are not contemplating any large layoffs.

Laurent Ferreira: To summarize, with our capital levels strong earnings power and discipline on cost and credit, we are well positioned to navigate the economic uncertainty and grow the bank.

Speaker 6: on a potential write-off no decision has yet been made and any charge would be treated as a specified item and excluded from our adjusted results. Okay, thank you very much.

I'm on a potential write off no decision has yet been made and and then the charge would be treated as a specified item and excluded from our adjusted results.

Laurent Ferreira: Turning now to the performance of our business segments. Personal and commercial banking perform well with pre-tax, pre-previsioned earnings up 9% from last year, supported by margin expansion and solid balance sheet growth. As anticipated, we continued to see a slowdown in growth as clients adjust to higher borrowing costs.

Laurent Ferreira: Turning now to the performance of our business segments. Personal and commercial banking performed well with pre-tax pre-provision earnings up 9% from last year, supported by margin expansion and solid balance sheet growth. As anticipated, we continued to see a slowdown in loan growth as clients adjust to higher borrowing costs.

Okay. Thank you very much youre welcome.

Our following question is from Doug Young from Desjardins Capital markets. Please go ahead.

Speaker 3: Following question is from Doug Young from the Shardin Capital Market.

Yeah.

Speaker 10: Hi, good afternoon. Maybe for Laura, I mentioned at the beginning of your...

Hi, good afternoon.

Maybe for Lora, you mentioned at the beginning of yours.

Speaker 10: that discussion or your opening remarks about just capital and how it's very well defensively positioned given the headwinds, but also to take advantage of opportunities to grow the franchise and whatnot. And hopefully you can elaborate on, with the priorities are for your excess capital. Would you consider being more aggressive with an NTIB acquisitions? Just hoping you can elaborate a little bit more.

A discussion of our York any remarks about capital and you're very well defensively positioned given the headwinds, but also to take advantage of opportunities to grow the franchise and whatnot and hopefully.

Laurent Ferreira: Earlier this month, we announced the acquisition of a commercial loan portfolio of Silicon Valley Bank's Canadian branch. This acquisition builds upon our 25-year presence in technology across the country and reaffirms our commitment to support the Canadian innovation sector. Well, management had another strong quarter, generating 6% year-over-year growth in both revenue and pre-tax pre-prevision earnings, supported by higher interest rates and our deposit base. Asset growth was also strong, coming in at 10% year-over-year, a result of market appreciation and strong net sales.

Laurent Ferreira: Earlier this month, we announced the acquisition of a commercial loan portfolio of Silicon Valley Bank's Canadian branch. This acquisition builds upon our 25-year presence in technology across the country and reaffirms our commitment to support the Canadian innovation sector. Well, management had another strong quarter, generating 6% year-over-year growth in both revenue and pre-tax pre-provision earnings, supported by higher interest rates and our deposit base. As a growth was also strong, coming in at 10% year-over-year, a result of market appreciation and strong net sales.

He can elaborate on what the priorities are for your excess capital would you consider being more aggressive.

With an N CIB acquisitions, just hoping you can elaborate a little bit more on that.

So Doug. Thank you for your question and you heard the comments from Microsoft that regarding F. Our T V.

Speaker 5: So, Doug, thank you for your question. And you heard the comments from Mavi Chantal regarding FRTV. So, you know, even after that we sit in a very good place in terms of overall capital.

So even after that we sit in a very good place in terms of overall capital.

Speaker 5: and feel very comfortable to operate at these levels. In terms of capital deployment, it's the same story. We like our strategy, we like our strategic focus on growing our Canadian franchise, so that doesn't change.

And feel very comfortable to operate at these levels.

In terms of capital deployment you know, it's the same story, we like our strategy, we like our are our our strategic focus on growing our Canadian franchise.

Laurent Ferreira: In financial markets, corporate and investment banking delivered a strong quarter with revenues up 17% year-over-year, led by ongoing momentum in corporate banking. In global markets, securities finance had a strong quarter on the back of balance sheet demand and higher rates, which was offset by lower revenues, instructor products. We also experienced lower trading activity across the franchise amid exceptionally low market volatility, and this was compounded by a strong third quarter last year.

Laurent Ferreira: In financial markets, corporate and investment banking delivered a strong quarter with revenues up 17% year-over-year, led by ongoing momentum in corporate banking. In global markets, securities finance had a strong quarter on the back of balance sheet demand and higher rates, which was offset by lower revenues instructor products. We also experienced lower trading activity across the franchise amid exceptionally low market volatility, and this was compounded by a strong third quarter last year.

So that doesn't change.

And you.

You know.

Speaker 5: It is, the macro environment remains uncertain. So, our capital levels are higher than peers at this point on average, but I think it's, we're comfortable operating at that level, it's given the uncertainty.

It is the.

CRO environment remains uncertain. So our you know our our capital levels are higher than peers. At this point in time on average, but I think it's a it's I know we were comfortable operating at that level given the uncertainty.

Speaker 5: providing us also with flexibility to deploy and uh... and and to jump on opportunities uh... but uh... you know one example is the the we could see i think over the next year

Providing us also with flexibility to deploy it.

And and to jump on opportunities, but you know, but one example is credit your credit Gee are we could see I think over the next year.

More opportunities to.

Speaker 5: more opportunities to deploy capital there.

Laurent Ferreira: Credit G delivered solid results in the third quarter. Despite an uncertain macro environment and with market supply reminding low, the franchise generated acid growth of 3% sequentially, primarily driven by new portfolio purchases. The portfolio remains defensively positioned with continued strong underlying performance. We are pleased with the average asset growth deliver so far this year, in line with our double digit growth target for fiscal 2023. ABA's balance she growth continued in Q3, with loans and deposits up 25% from last year.

Laurent Ferreira: Credit G delivered solid results in the third quarter. Despite an uncertain macro-environment, and with market supply reminding low, the franchise generated asset growth of 3% sequentially, primarily driven by new portfolio purchases. The portfolio remains defensively positioned with continued strong underlying performance. We are pleased with the average asset growth deliver so far this year in line with our double-digit growth target for fiscal 2023. The franchise continues to expand its customer base with a total number of clients up 36% year over year. Revenue growth continues to reflect pressure on the positive margin resulting from migration to term products in the context of higher interest rates and a competitive environment for the positives.

To deploy capital there.

So I don't know if that helps you with that.

Yes, no. It does just trying to kind of frame. It and then you know historically just my second question just historically in wealth management, you guys have done a great job of putting up double digit earnings growth.

Speaker 10: Yeah, no, it does just kind of frame it. And then historically, just my second question, just historically and wealth management, you guys have done a great job of putting up double digit earnings growth.

Speaker 10: through second bin, that's been something that's been...

The second thing that's been something that's been.

Speaker 10: Note where the, it seems to, that that's slowed a little bit. And I guess the equity market movements and all of that. I'm just trying to kind of wrap my mind around are there structural reasons why, you know, we shouldn't be anticipating double digit or any growth out of wealth management like the, you know, no fee trading, the discount broker, although I thought higher interest rates would be quite, quite a tailwind for your business. So I'm just trying to get a sense of how we should be thinking about earnings growth out of wealth today versus just smaller, dip you in and get further in.

Noteworthy it seems to us that that slowed a little bit and I get the equity market movements and all of that I'm, just trying to kind of wrap my mind around are there structural reasons why you know we shouldn't be anticipating double digit earnings growth out of wealth management like the North Sea training the discount broker, although I thought higher interest rates would be quite quite that.

A tailwind for your business. So I'm, just trying to get a sense of.

Laurent Ferreira: The franchise continues to expand its customer base with a total number of clients up 36% year-over-year. Revenue growth continues to reflect pressure on the positive margin, resulting from migration to term products in the context of higher interest rates and a competitive environment for the positives. While global economic growth is moderating, the longer-term outlook for Cambodia remains very attracted.

How we should be thinking about earnings growth out of wealth are today versus call. It 510 years ago.

Speaker 10: Yeah, thank you, Doc. It's the neat. I will take that one. Yeah, you mentioned it, you know, the last year or so, we saw, you know, a good expansion in our revenue because of NII. As you can see, and as we can read in the market right now, our rate kind of stabilized. If there's anything, they may head a little bit upward down the road. Then if it happens, we'll see more revenue coming from there.

Thank you Doug as Denise I don't think that's one Oh, Yeah, you mentioned it.

The last year or so we saw a good expansion in our revenue because of NII.

As you can see and as we kind of reading the markets right now are right kind of stabilize if there's anything they may had a little bit.

Laurent Ferreira: While global economic growth is moderating, the longer-term outlook for Cambodia remains very attracted.

Up or down the road then.

If it does happen, we will see more revenue coming from there, but on the other businesses. It's all related to the market. Then you know we're well diversified platform that we do have Ken sustained change in the market than you saw it in the in the past year or so then we're still constructive about the business are we going to grow at the same.

Speaker 10: But the other businesses are related to the market. And our well-diversified platform that we do have can sustain change in the market. And you saw it in the past year or so. Then we're still constructive about the business. Are we gonna grow at the same rate?

Laurent Ferreira: Before I pass it over to Madhya Shantada, I'd like to take a moment to recognize Denis Girouard for his countless contributions to the bank over his 33-year career with us. In that time, he has been instrumental in growing our financial markets franchise and forging its leadership position in key sectors. Over the last few months, Denis has led our wealth business on an interim basis which first speaks to his leadership. I am personally very grateful that Denis will be staying on as a strategic advisor to the bank so that we can continue to benefit from his deep experience.

Laurent Ferreira: Before I pass it over to Ma Rishantal, I'd like to take a moment to recognize Denis Girouard for his countless contributions to the bank over his 33-year career with us. In that time, he has been instrumental in growing our financial markets franchise and forging its leadership position in key sectors. Over the last few months, Denis has led our wealth business on an interim basis, which first speaks to his leadership. I am personally very grateful that Denis will be staying on as a strategic advisor to the bank, so that we can continue to benefit from his deep experience.

Right.

Speaker 10: All depends on the markets for sure, but I would say that we're very well positioned to see Business growth continue if the market is cooperative right now. We're looking forward for next year and You know for more to come in the foot quarter, but so far so good and we like what we're seeing and we like really our Business makes that that we do have right now

All depends on the market for sure, but I would say that we're very well positioned to see our business growth continue if the market is called Brexit right now we're looking forward for next year.

And you know probably more to come in the fourth quarter, but so far so good and we like what we're seeing and we like really our ER business makes stuff that we do have right now.

I appreciate it thank you.

Speaker 3: Thank you for your question. You some Paul Holden from CI.

Thank you.

Question is from Paul Holden from CIBC. Please go ahead.

Laurent Ferreira: Denis will fully transition to his advisory role once Nancy Paquet officially takes over the leadership of wealth management in Q1. Nancy is a proven leader having made her mark in a range of strategic roles at the bank since joining in 2007. She is a seasoned financial service professional with a strategic vision and a client-centric mindset.

Laurent Ferreira: Denis will fully transition to his advisory role once Nancy Paket officially takes over the leadership of wealth management in Q1. Nancy is a proven leader having made her mark in a range of strategic roles at the bank since joining in 2007. She is a seasoned financial service professional with a strategic vision and a client-centric mindset. We look forward to welcoming her to the senior leadership team as head of our wealth franchise, a key growth driver for the bank. Thank you, Loran. Thank you, Loran, and good afternoon, everyone.

Speaker 11: Thank you, good afternoon. First off, thanks for the guidance on the STRP impact helpful. I'm just wondering with that, and then sort of the softer quarter on trading.

Thank you good afternoon.

First of all thanks, Thanks for the guidance on the F T or P. A impact are helpful. I'm, just wondering with that and then sort of a softer quarter on trading.

Speaker 11: Is there any permanent change in the amount of capital you're willing to allocate to the trading business? IE is there gonna be a lower run rate going for because of these higher capital requirements? Or otherwise?

Is there any permanent change in the amount of capital you're willing to allocate to the trading business I E is there going to be at a lower run rate going forward because of these higher capital requirements or otherwise.

Laurent Ferreira: We look forward to welcoming her to the senior leadership team as head of our wealth franchise, a key growth driver for the bank.

Speaker 11: Yeah, thanks Paul, it's it's in. So I think Levant said it well in his opening remarks with your experience as a very quiet quarter, especially with regards to the Canadian markets and the activity level of institutional clients.

Yeah. Thanks, Paul It sits in them. So I think we'll have a set of dwell in his opening remarks with what we experience is a very quiet quarter.

Madhya Shantada: May Shantada, over to you. Thank you, Laurent, and good afternoon, everyone.

Madhya Shantada: My comments will start on slide 7. The bank delivered solid financial results in Q3 despite a challenging macro-environment. Revenues increased 4% year-over-year. As Laurent mentioned, solid revenue growth in TNC banking and wealth management was partly offset by lower revenues in financial markets. As anticipated and discussed on our last call, operating leverage was negative in Q3 with expenses increasing 7% year-over-year. A significant proportion of our expense growth was driven by last year's FTE increase, as well as by our annual salary increase, and was partly offset by lower variable compensation.

Marie Chantal-Jangra: My comments will start on slide 7. The bank delivered solid financial results in Q3, despite a challenging macro-environment. Revenue increased 4% year-over-year. As Loran mentioned, solid revenue growth in TNC banking and wealth management was partly offset by lower revenues in financial markets.

Especially with regards to the Canadian markets and the activity level of institutional clients. So while U S markets went up sharply because of the performance of tech stocks.

Speaker 11: So while US markets went up sharply because of, well, the performance of tech stocks, and P being up 9%, and as that being up 19%, Canadian indices were unchanged for the quarter. And Canadian equities volumes were down about 25% year-over-year. So what you saw is our market making activities were slow, even though we maintain our very high market share.

Some P being up 9% NASDAQ being up 19% Canadian indices were unchanged for the quarter.

And Canadian equities volumes were down about 25% year over year. So what do you size of our market, making activities were slow even though we maintain our very high market share.

Marie Chantal-Jangra: As anticipated and discussed on our last call, operating leverage was negative in Q3 with expenses increasing 7% year-over-year. A significant proportion of our expense growth was driven by last year's FTE increase, as well as by our annual salary increase, and was partly offset by lower variable compensation. Over the past few quarters, the entire management team has been focused on prudently managing headcount through attrition while at the same time simplifying our operations to improve the client experience. Notably, our FTE count in Canada has been declining since Q1.

Speaker 11: On the equity structure, note sales were also soft, mostly due to that lackluster performance of Canadian socks. On the bright side, corporate clients continued to be active and edging exposures and interest rates, although activity on the FX side was slower. FX was also very quiet and the CAD dollar was caught in a very tight range throughout the quarter.

On the equity structure note sales were also soft mostly due to that lackluster performance of Canadian sucks.

On the bright side corporate clients continue to be active in exiting edging exposures and interest rates, although activity on the FX side was slower.

Madhya Shantada: Over the past few quarters, the entire management team has been focused on prudently managing headcount through attrition, while at the same time simplifying our operations to improve the client experience. Notably, our FTE count in Canada has been declining since Q1. Also, contributing to the increase in expenses were investments in technology to support client acquisition and hands are client experience and improve efficiency. To delve a little deeper, this expense increase is largely explained by a shift in the investment portfolio mix and higher amortization related to past projects as well as by business growth.

FX was also a very quiet.

The cat dollar, Wisconsin, a very tight range throughout the quarter.

So.

Speaker 11: So as a result, our trading businesses, which we position conservatively, face a double effect of lower volume and decreasing volatilities throughout the quarter.

So as a result, our trading businesses, which we position conservatively faced a double effect of lower volume.

And decreasing volatility throughout the quarter.

Speaker 11: If you look at our rates franchise, Q3 last year was a record quarter in a very tough credit environment.

If you look at our rates franchise.

Marie Chantal-Jangra: Also in technology to support client acquisition and hands are client experience and improve efficiency. To delve a little deeper, this expense increase is largely explained by a shift in the investment portfolio mix and higher amortization related to past projects as well as by business growth. Costs including occupancy, marketing and travel were also higher year over year. With the environment expected to remain challenging in a near term, we continue to be strategic in prioritizing and managing expenses.

Q3 last year was a record quarter and a very tough credit environment.

Speaker 11: This year, you had very low institutional activity, and this is a franchise that focuses on being a premier liquidity provider in Canada, so we're number one in government trading. We have a dominant presence in Canadian rates futures. The focus is not to warehouse big positions and be exposed to credit spreads.

This year you.

Had very low institutional activity and this is a franchise that focuses on being the premier liquidity provider in Canada for it number one.

And government trading we have a dominant presence in Canadian rates futures.

The focus is not to warehouses speak positions and be exposed to credit spreads.

Madhya Shantada: Costs, including occupancy, marketing and travel, were also higher year over year. With the environment expected to remain challenging in the near term, we continue to be strategic in prioritizing and managing expenses. By being proactive and disciplined in an inflationary environment, we have been able to contain our expense growth to within the mid to high single-digit range. We remain very focused on controlling costs, and as such, while expense growth may vary from quarter to quarter, we expect the overall trend in non-interest expense growth to moderate. Our dynamic approach to balancing business growth and investments contributes to our efficient businesses and the resiliency of the bank.

Speaker 11: So it's a quarter, again, characterized by low volatility and narrowing credit spreads. Well, that won't be an environment where we were the top performer.

So it's a quarter again characterized by low volatility and narrowing credit spreads well that won't be an environment, where we were the top performer. So and this is something we're comfortable with when market conditions become unusually benign.

Speaker 11: So, and this is something we're comfortable with when market conditions become unusually benign with low volatility and narrowing credit spreads, we're not going to be the top performer.

Marie Chantal-Jangra: By being proactive and disciplined in an inflationary environment, we have been able to contain our expense growth to within the mid to high single digit range. We remain very focused on controlling costs and as such, while expense growth may vary from quarter to quarter, we expect the overall trend in non-interest expense growth to moderate.

With low volatility and narrowing credit spreads were not going to be a top performer.

Speaker 11: And we did very well in Q3 last year and what was it? Like I said, a much tougher environment.

And we did very well in Q3 last year and what was it like I said, a much tougher environment. So.

Speaker 11: So in the last month, we've been seeing a normalization of market volatility and we've seen a pickup in client activity. So no, I don't take our global markets performance in Q3 is a new and normal. I think things are looking good. Got it. OK.

In the last months, we have been seen a normalization of market volatility and we've seen that pick up in client activity. So no I don't think our global market's performance in Q3 isn't even normal I think Curt and things are looking good.

Marie Chantal-Jangra: Our dynamic approach to balancing business growth and investment contributes to our efficient businesses and the resiliency of the bank.

Got it Okay, and then second.

Second question from me is for for.

Speaker 12: Second question for me is for Bill, and it's related to the step function change in commercial PCLs and gross impaired loans. Is there anything there that you're seeing that might suggest ongoing higher losses? Like are there any kind of new established trends or is there more kind of what you hinted at with your prepared remarks in terms of, there's gonna be volatility from quarter quarter in that book of business.

For Bill and it's related to the.

Marie Chantal-Jangra: Now turning the slide 8. Total net interest income, excluding trading, increased by 17% from last year, benefiting from higher rates and strong balance growth. For PNC banking, net interest income was up 13% year over year, mainly driven by deposit margin expansion and growth in loans and deposits. For wealth management, NII increased by 19% year over year. This was supported by higher interest rates in a strong deposit base of $40 billion resulting from the diversification of our underlying businesses.

For a step function change and commercial P. CLS and gross impaired loans is there anything there that you're seeing that might suggest ongoing higher losses like are there any kind of new established trends or is it more kind of why you hinted at what's your prepared remarks in terms of Theres just going to evolve.

Madhya Shantada: Total net interest income, excluding trading, increased by 17% from last year, benefiting from higher rates and strong balance growth. For P&C banking, net interest income was up 13% year over year, mainly driven by deposit margin expansion and growth in loans and deposits. For wealth management, NII increased by 19% year over year. This was supported by higher interest rates in a strong deposit base of $40 billion, resulting from the diversification of our underlying businesses.

<unk> from quarter to quarter and in that book of business.

Speaker 13: Yeah, Hi Paul, thanks for the question. I covered it in the repair remarks. It's really overall, the Canadian business. It's the continuing trend of normalization. So this quarter in commercial, it was a lumpy quarter in that two files became impaired, the same quarter. Just like last year, it was a lumpy file in recoveries, but that's just noise for the overall trend. And as I said in the remarks,

Yeah, Hi, Paul Thanks for the question.

I covered it in the in the prepared remarks, it's really overall the Canadian business its a continuing trend of normalization.

So this quarter in commercial it was a lumpy quarter end and that's about two files became impaired the same quarter just like last year. It was a lumpy filed and recoveries, but that's just noise for the overall trend and as as a as I said in the remarks, we do see the trend continuing to normal.

Madhya Shantada: In Q3, we reclassified other income to NII. The reclassification had no impact on the bank's total revenue. Excluding this item, non-trading NII grew 14% year over year. In Q3, all bank name, excluding trading, reached 2.18%. The revenue reclassification represented a favorable impact to NIM of six basis points sequentially. Excluding this element, non-trading NIM was up 3 basis points from last quarter. Of this increase, 2 basis points was related to corporate banking, primarily driven by payment recovery, while asset and liability management activity accounted for one basis point. PNC Nim was stable from last quarter's strong level. The segment benefited from a more favorable business mix, mainly offset by lower asset spread.

Marie Chantal-Jangra: In Q3, we reclassified other income to NII. The reclassification had no impact on the bank's total revenue. Excluding this item, non-trading NII grew 14% year over year. In Q3, all bank name excluding trading reached 2.18%. The revenue reclassification represented a favorable impact to NIM of six basis points sequentially. Excluding this element, non-trading name was a three basis points from last quarter of this increase. Two basis points was related to corporate banking, primarily driven by payment recovery, while asset and liability management activity accounted for one basis point. PNC Nim was stable from last quarter's strong level. The segment benefited from a more favorable business mix mainly offset by lower asset spread.

Speaker 13: we do see the trend continuing to normalize. So we do see going into 2024 retail and commercial going back to more normal levels coming out of the very, very low levels last quarter. And one way of looking at it is as well as even with a lumpy quarter in commercial, our impaired loans were 15 basis points, which historically is low.

Lives. So we do see going into 2020 for retail and and commercial going back to more normal levels.

Coming out of the very very low levels last quarter and one way of looking at it is as well as even with a lumpy quarter in commercial our impaired loans were 15 basis points, which historically is low.

On the gross impaired loans, which I think you asked about as well I think on the slide our gross impaired loans you can see the growth coming from E. B, a which we called out in the in the prepared remarks as well.

Speaker 13: On the gross impaired loans, which I think you asked about as well, I think on this slide, gross impaired loans, you can see the growth coming from ABA, which we called out in the prepared remarks as well. And with ABA, you'll remember last year, we talked a lot about the increasing impaired's peaking in fourth quarter, but coming from the COVID moratorium.

And with.

With a b a you'll remember last year, we talked a lot about the increasing impaired.

Peaking in fourth quarter, but coming from the Covid moratoriums. So that story is behind US and are those that portfolio of clients that have moratoriums is performing exactly like we are like we expected.

Speaker 13: So that story is behind us and that portfolio of clients that had more authoriums is performing exactly like we expected. However, we did speak in the prepare remarks about seeing some moderation in growth. So we have seen an increase in impaired coming in sectors that are most impacted by the moderating global growth.

Madhya Shantada: As always, our objective is to grow the franchise and we remain disciplined in managing our balance sheet, balancing growth, margin and credit quality.

Marie Chantal-Jangra: As always, our objective is to grow the franchise and we remain disciplined in managing our balance sheet, balancing growth, margin, and credit quality.

However, we did speak in your prepared remarks about seeing some moderation in growth. So we have seen an increase in impaired coming in sectors that are most impacted by the moderating global growth and we would expect the levels to remain elevated.

Madhya Shantada: Slide 9 highlights our balance sheet. Loans were up 9% year over year and growth was broad-based. There was particular strength in corporate banking, reflecting growing working capital needs, acquisition financing and relatively subdued origination activity within capital markets. Strong performance in USSFI reflected ABA's extended client-based and credited growing portfolio. Commercial loans grew by 7% year over year, in part driven by opportunities in the residential insured segment. Personal mortgages grew by 2% reflecting current housing market condition and our strategic decision to focus on our proprietary channels.

Marie Chantal-Jangra: Slide 9 highlights our balance sheet. Loans were up 9% year over year and growth was broad-based. There was particular strength in corporate banking, reflecting growing working capital needs, acquisition financing, and relatively subdued origination activity within capital markets. Strong performance in USSFI reflected ABA's extended client-based and credited growing portfolio. Commercial loans grew by 7% year over year, in part driven by opportunities in the residential insured segment. Personal mortgages grew by 2% reflecting current housing market condition and our strategic decision to focus on our proprietary channels.

Speaker 13: and we would expect the levels to remain elevated. However, the risk content, the lost content in those gross and paired loans, we still feel is pretty low. You know, we've spoken before about being wanting to be prudent as we haven't been through a full cycle with the ABA and that translates into being very prudent and having built allowances since the beginning of IF-RS9 and maintaining good allowances.

However, the risk content the lost content in those gross impaired loans, we still feel is pretty pretty low you know.

We've spoken before about being wanting to be prudent as we haven't been through a full cycle with EPA and that translates into being very prudent and having built allowances since the beginning of fire for us 9%, maintaining a good allowances, but historically given the low ltvs.

Speaker 13: but historically given the low-well TVs, the net charge-offs in the end are relatively, relatively low. And we'd expect that charge-operate to stay low below what are impaired provisioning.

The net charge offs in the end.

Our relatively relatively low and we would expect that charge off rate to stay stay low below what our inherent provisioning is.

Speaker 12: That is your call. It does. It does. Thank you for that. And I'll leave it there. Thanks.

So I'm not sure if it.

It does it does thank you for that and I'll leave it there. Thanks.

Speaker 3: Thank you. Our following question is from Nigel de Sousa from Varyta's Investment.

Our following question is from Nigel D'souza from favorite does investments. Please go ahead.

Marie Chantal-Jangra: Sequentially loans grew by 2% at the all bank level. The deposits, excluding wholesale funding, grew by 13% year over year and 1% quarter over quarter, with personal deposits growing by 16% year over year and 1% sequentially. Personal clients continued to favor term products in a high interest rates environment. While the rate of migration has been slowing down, clients have continued to deploy some of their accumulated savings. Non-retail deposits also grew sequentially by 1.5 billion dollars or more than 1%. This was primarily driven by commercial banking, including an increase in government and public sector deposits.

Madhya Shantada: Sequentially loans grew by 2% at the all bank level. The positives excluding wholesale funding grew by 13% year over year and 1% quarter over quarter, with personal deposits growing by 16% year over year and 1% sequentially. Personal clients continued to favor term products in a high interest rate environment. While the rate of migration has been slowing down, clients have continued to deploy some of their accumulated savings. Non-retail deposits also grew sequentially by 1.5 billion dollars or more than 1%. This was primarily driven by commercial banking, including an increase in government and public sector deposits. Our deposit franchise demonstrates the strength of our diversified model and focuses on growing our deposit base across all business segments.

Speaker 14: Thank you. Good afternoon. Of course, I just wanted to follow up on the reclassification that in fact is interesting. Any additional color there on what that was specifically related to and what growth reclassification in this order because I'm sent to primary classification. And I guess why was that previously recognized another income file?

Thank you good afternoon of course I just wanted to follow up on the reclassification that impacted net interest income any additional color there on.

What that was specifically related to in watsco.

This quarter.

Reclassification.

And I guess why was that previously recognized.

Okay.

Hi, Nigel it's nice to have that and so there was the reclassification that I referred to in my remarks is related to a change that was made in the normal context of reviews of our processes. So through these process reviews, we aim to refine and then sure.

Speaker 6: Hi, Nigel, it's Marish Tantan. So the reclassification that I refer to in my remarks is related to a change that was made in the normal context of reviews of our processes. So through these process reviews, we aim to refine and ensure optimal representative niffs of our resolve.

Optimal we present it didn't if some of our results.

Speaker 6: And as I said, what's important to keep in mind is it is a reclassification that has no impact on our total results. And you're right. It is viewed as permanent in the sense that it will remain on the NII line in the going forward as well.

And then as I said and what's important to keep in mind that as is it is and reclassification that has no impact on our total results and you're right. It is viewed as permanent in the sense that it will remain on the NII net NII line.

Marie Chantal-Jangra: Our deposit franchise demonstrates the strength of our diversified model and focus on growing our deposit base across all business segments.

Marie Chantal-Jangra: Slide 10 presents our strong liquidity position and sound funding profile. Our core banking activities are well funded through diversified strong and stable sources, while we remain disciplined around funding costs. We maintain prudently liquidity metrics and consistently operate at levels that are well above regulatory minimum requirements. At the end of Q3, our liquidity coverage ratio was 146% and our net stable funding ratio was 118%.

Madhya Shantada: Slide 10 presents our strong liquidity position and sound funding profile. Our core banking activities are well funded through diversified strong and stable sources, while we remain disciplined around funding costs. We maintain prudent liquidity metrics and consistently operate at levels that are well above regulatory minimum requirements. At the end of Q3, our liquidity coverage ratio was 146%, and our net stable funding ratio was 118%.

In the in and going forward as well.

Okay, and then on some deposit growth any any specific number you can throw out there in terms of what's the rate of growth you're seeing.

Speaker 14: Okay, and then on terms of positive growth, any specific number you could find there in terms of what the rate of growth you're seeing in relation to total deposits, just to get a sense of the pace of growth there.

Total deposits just to get a sense of the pace.

Of growth there.

Yeah. So as we've again, we've mentioned in the remarks and what we're seeing is migration has been slowing down in terms of deposit from demand to term. So that's definitely something that we've been seeing in the past quarter or so in terms of in terms of <unk>.

Speaker 6: Yes, so as we've, again, we've mentioned in the remarks, what we're seeing is migration has been slowing down in terms of deposits from demand to term. So that's definitely something that we've been seeing in the past quarter or so in terms of growth. And we're seeing as well clients utilizing some of their accumulated savings.

Marie Chantal-Jangra: Now turning to capital on slide 11. Our CT1 ratio improved by 15 basis points from last quarter to reach 13.5%. Third quarter earnings, net of dividends, contributed 34 basis points to our ratio, underscoring our strong internal capital generation capacity.

Madhya Shantada: Now turning to capital on slide 11. Our CT1 ratio improved by 15 basis points from last quarter to reach 13.5%. Third quarter earnings, net of dividends, contributed 34 basis points to our ratio, underscoring our strong internal capital generation capacity.

And we're seeing as well clients are utilizing some of their accumulated savings.

Speaker 6: That being said, we're still seeing savings that are higher than pre-pandemic level. So I think those were some of the highlights I would give us. I would give you an idol. Is that a... Give you a little bit...

That being said, we're still seeing savings that are higher than pre pandemic level. So I think those were some of the highlights I would I would give us I would give you a nigel is that.

Marie Chantal-Jangra: On November 1st, 2023, the Basel Free Reforms related to the Fundamental Review of the Trading Book and the revised Credit Valeration Adjustment Framework will be adopted. Based on what we're seeing today and keeping in mind that the exact level of market risk at implementation is difficult to predict, we estimate that the reforms would have a combined impact of 35 to 40 basis points of capital. As we transition from an internal model based approach towards the standardized market risk approach, the unfavorable impact is primarily explained by the loss of diversification benefits between various risk factors.

Madhya Shantada: On November 1, 2023, the Basel Free Reforms related to the Fundamental Review of the Trading Book, and the revised credit valuation adjustment framework will be adopted. Based on what we're seeing today, and keeping in mind that the exact level of market risk at implementation is difficult to predict, we estimate that the reforms would have a combined impact of 35 to 40 basis points of capital. As we transition from an internal model based approach towards the standardized market risk approach, the unfavorable impact is primarily explained by the loss of diversification benefits between various risk factors.

A little bit of color.

Speaker 14: Yeah, it's also to make this the problem to continue to shift in the term by understanding correctly, but so much sense of the level that's for me and the research is the wrong way. Any insights there?

Yeah, it sounds like some excess default user ship.

Sure I understand correctly.

We'll have sensible levels.

Any insights there.

Speaker 6: And your question, Nigel, we're losing you a bit. Is it the run rate?

And to me.

Your question Nigel we were and we're losing you have it is that the run rate.

Speaker 14: No, just the remaining level of possesses deposits is you could size it in terms of how much more could potentially close the terms. You have a sense that either the amount that could close the term in future quarters or when you think that a shift will stop in the term deposit.

No just that.

Meaningful remaining level of those excess deposits if you could size. It then.

In terms of how much more because essentially flows the terms do you have a sense of.

Either.

No thats good.

Determine future quarters or when do you think that Oh.

There's some default.

Speaker 6: It's Lucy, maybe I can take this one specifically on retail deposit. We still see...

It's let's see maybe I can take this one specifically on retail deposits, we still see.

Madhya Shantada: Our capital position is strong and will remain strong on a pro forma basis upon the reform implementation in Q1 2024. It provides us with flexibility to deploy capital across our segments, and take advantage of opportunities that arise to support growth. It also allows us to return capital to shareholders.

Marie Chantal-Jangra: Our capital position is strong and will remain strong on a pro forma basis upon the reform implementation in Q1 2024. It provides us with flexibility to deploy capital across our segments and take advantage of opportunities that arise to support growth. It also allows us to return capital to shareholders.

Speaker 6: Lots of existing liquidity compared to pre-pandemic levels. So we're talking more than a billion in liquidity there. And we see that liquidity being put to work with customer paying higher debt. And we see that movement continue with because like...

Lots of existing liquidity compared to pre pandemic levels. So we're talking more than 1 billion in liquidity, there and we see that liquidity being put towards with customer pay.

<unk> hired deaths and we see that assortment continuous because like.

Speaker 6: For example, the lines of credit, the utilization rate remains low, with even lower from quarter to quarter. Cretz Cardpost for you is growing, but the revolving balance is...

For example, the lines of credit the utilization rates remains low at even lower from quarter to quarter Chris.

Madhya Shantada: In conclusion, the bank delivered solid Q3 results with an ROE of over 15% and a strong balance sheet. Our resilient business model and discipline approach to cost, capital, and risk management have contributed to our solid track record and position as well to execute our strategy.

Marie Chantal-Jangra: In conclusion, the bank delivered solid Q3 results with an ROE of over 15% and a strong balance sheet. Our resilient business model and discipline approach to cost capital and risk management have contributed to our solid track record and position as well to execute our strategy.

Credit card portfolio is growing but the revolving balances are lagging. So we've seen good news station have been getting T and we see and resilient consumer and the migration to a fixed term deposit is made me with her a high excess saving customers went to let's say 100000 anymore and on that front.

Speaker 6: are lagging, so we see good usage of liquidity and we see resilient consumers. And the migration to a six-term deposit is mainly with our high access saving customers with let's say 100,000 anymore. And on that front, they ask for the liquidity to work for a while now, so we see the migration slowing down, but I think it will remain a bit.

They asked for delinquent tend to work for a while now so we've seen a migration slowing down but I think it will remain a bit.

Bill Bonnell: I will now turn the call over to Bill. May I see Mary Chantal in good afternoon.

Okay and last question yeah.

Bill Bonnell: I'll begin on slide 13. The trends in the normalization of credit performance, which we've seen since the beginning of the year, continued in the third quarter and reflect the current complex macro and macroeconomic environment. As I mentioned, employment conditions have softened modestly but unemployment rates remain low compared to historical averages. Inflation has declined from its peak but is likely to remain sticky. The future path of interest rates remains uncertain but rates are likely to remain higher for longer than what was forecast earlier this year and elevated geopolitical risk persist.

Speaker 14: Yeah, that did. And last question for me, just real quickly, I noticed that there was an increase in gross impaired loans in the residential mortgages category within the other geography. Just just one bit of clarification. Is that is that relate to ABA Bank?

But the last question for me just real quickly I noticed that it was an increase in gross impaired loans and residential mortgages category.

Bill Bonnell: The trends in the normalization of credit performance, which we've seen since the beginning of the year, continued in the third quarter, and reflect the current complex macroeconomic environment. As I mentioned, employment conditions have softened modestly, but unemployment rates remain low compared to historical averages. Inflation has declined from its peak, but is likely to remain sticky. The future path of interest rates remains uncertain, but rates are likely to remain higher for longer than what was forecast earlier this year, and elevated geopolitical risk persist.

The other geography.

The clarification is that is that related to SBA bankers.

There's some other exposure hi, Nigel it's a billion yes, exactly that is related to E. P. A bank if you remember the classic small classic customer.

Speaker 13: Hi Nigel, it's a bill and yes, exactly that. It's related to APA bank. If you remember the classic small, classic customer average borrowing of around 60,000 of building where the residence is on the top floor to and the business in the bottom one. So in the sub back, it gets classified with in the residential mortgages and that's what you're seeing.

Average borrowing is around 60000, a building where the residences on the top floor or two in the business and the bottom line and so in the sub pack. It gets classified with residential mortgages and that's what you're saying.

Bill Bonnell: Against that macro backdrop, we remain very comfortable with our defensive positioning and we're pleased with our portfolio's performance last quarter with total PCLs of 20 basis points or $111 million. Provisions on impaired loans increased to $85 million or 15 basis points. In retail portfolios, impaired provisions continued to rise from last year's lows but remain below pre-pandemic levels. In wholesale portfolios, this quarter's increase in impaired provisions was driven by two new impairments in commercial banking partially offset by recovery and corporate banking.

Bill Bonnell: Against that macro backdrop, we remain very comfortable with our defensive positioning, and we're pleased with our portfolio's performance last quarter with total PCLs of 20 basis points, or $111 million. Provisions on impaired loans increased to $85 million or 15 basis points. In retail portfolios, impaired provisions continued to rise from last year's lows, but remain below pre-pandemic levels. In wholesale portfolios, this quarter's increase in impaired provisions was driven by two new impairments in commercial banking, partially offset by recovery and corporate banking.

Speaker 14: That's all for such a few minutes. Thank you. Thank you. I'll follow in question if I'm a Jew ho-

Okay. That's helpful. Thank you.

Thank you.

Our following question is from a Jew Hoe Kim from Credit Suisse. Please go ahead.

Alright, Thank you and good afternoon, just a couple of quick ones here.

Speaker 14: I thank you in the afternoon, just a couple of quick ones here. On all bank margins, your LCR ratio went down 9% points. Quarter of a quarter, are you able to quantify how much that benefit of your all bank margins if at all this quarter?

On all bank margins your LCR ratio went down nine nine percentage points quarter over quarter or are you able to quantify how much that benefited you all think margins if at all this quarter.

Hi, it's just not that so in terms of the impact of than the LCR movement. There they're actually it's my general there are no impacts on the all bank NIM from the movement.

Speaker 15: Hi, it's Marie Chantasse. So in terms of the impact of the LCR movement, they're actually it's marginal. There are no impacts on the L-bank name from the movement.

Bill Bonnell: As you know, wholesale impairments and recoveries can be lumpy from quarter to quarter. In the international sector, impaired provisions rose to $25 million, reflecting normal seasoning in strategies portfolios, and at EBA, reflecting a moderating global economy, particularly impacting the recovery in tourism and trade related sectors. Previsions on performing loans were $38 million or 7 basis points, as we continue to build allowances. In our domestic portfolios, performing provisions were stable quarter-over-quarter and due primarily to portfolio growth. In the international sector, performing provisions were driven by portfolio growth, model calibrations, and some migration.

Bill Bonnell: As you know, wholesale impairments and recoveries can be lumpy from quarter to quarter. In the international sector, impaired provisions rose to $25 million, reflecting normal seasoning, in-credigee's portfolios, and at EBA, reflecting a moderating global economy, particularly impacting the recovery in tourism and trade-related sectors. Previsiones on performing loans were $38 million or seven basis points, as we continue to build allowances. In our domestic portfolios, performing provisions were stable quarter-over-quarter, and do primarily to portfolio growth. In the international sector, performing provisions were driven by portfolio growth, model calibrations, and some migration.

Got it okay, and I apologize if I missed this but could you speak to how you see her.

Speaker 14: But okay, and an apology if I missed this, but could you speak to how you see your margins at the old-time level evolving in the next to the last?

Margins at the all bank level evolving in the next little while.

Yeah. So if I can maybe just go back a little to the remarks that we've shared with you in terms of the all bank NIM and that reach to 18% this quarter and really what you have to keep in mind is the P&C NIM was stable quarter over quarter.

Speaker 15: Yeah, so if I can maybe just go back a little to the remarks that we've shared with you in terms of the all-backed name um that reached 218 percent this quarter um really what you have to keep in mind is that PNC name was stable quarter of or quarter We've talked about the reclassification so I won't go any further regarding that and there was a two book two points coming from a um Corporate banking loan recovery

We've talked about the reclassification. So I won't go any further regarding that and there was a two two points coming from me and corporate banking loan recovery. So in the context of the current environment, then would be interest rate expected to stay at the level that we are we do not expect further margin expansion.

Speaker 15: So in the context of the current environment, then would the interest rate expected to stay at the level that we are, we do not expect further margin expansion in Q4 and most slightly down.

Bill Bonnell: Please turn to slide 14. Total allowances for credit losses increased by 5% to $1.3 billion, and now represent 1.7 times the Q1 2020 level. Performing ACLs grew to more than $1 billion, just 5% below its pandemic peak. On slide 29 in the appendix, you will find details of our allowance coverage ratios, which remain very strong. Performing allowances cover 4.5 times or last 12 months in parrots, and total allowances cover 7.8 times or last 12 month net charge-offs. In this complex macro-environment, we are very comfortable with this prudent level of allowances.

Pension in Q4, and most likely slightly down.

Okay.

Speaker 14: That's all for thank you and last one for me.

Okay. That's helpful. Thank you and last one for me.

Speaker 14: When I look at that double digit asset growth at the Strategy and ABA, I'm trying to score that with the revenue growth, which doesn't seem to have caught up with the growth in the balance sheet. So I'm curious if that's to do with the change in the business mix, or if that margin pressure at ABA has persisted into the quarter, or if it's something else that's driving that revenue growth through kind of lag the balance.

When I look at that double digit asset growth at credit G and a b E.

Bill Bonnell: On slide 29 in the appendix, you will find details of our allowance coverage ratios, which remain very strong. Performing allowances cover 4.5 times or last 12 months in parrots, and total allowances cover 7.8 times or last 12 month net charge-offs. In this complex macro-environment, we are very comfortable with this prudent level of allowances. Turning to slide 15, our gross impaired loan ratio increased to 41 basis points, which remains below pre-pandemic levels.

Trying to square that with the revenue growth.

Which doesn't seem to have caught up with the with the growth in the balance sheet. So I'm curious if that's to do with the change in the business mix or if that margin pressure at a b a S persisted into the quarter or if there's something else that's driving.

That revenue growth to kind of lag that balance sheet growth.

Speaker 5: So perhaps the jupe or half-thack and started stiff fans. So on the ABA side.

So perhaps that you, perhaps I can start at the fed and so on the EBITDA side and referring back to Nigel <unk> question that perhaps the the one area, where we still see term deposits.

Bill Bonnell: Turning to slide 15, our gross impaired loan ratio increased to 41 basis points, which remains below pre-pandemic levels. Net formations rose to $153 million last quarter. In retail banking, recent trends in delinquencies and formations persisted, with delinquencies rising faster in unsecured portfolios than in result, and more slowly in Quebec portfolios versus the rest of Canada. In the wholesale portfolios, formations rose in the quarter driven by two commercial formations in the manufacturing sector, partially offset by net recovery in corporate banking.

Speaker 5: And referring back to Nigel's question, perhaps the one area where we still see, term deposits growing, it's that ABA. So the business mix is changing a bit. We view it as a good thing as the economy, went from a cash economy to an account economy. Now we've seen people move into, taking advantage of higher interest rates and moving into short term.

Bill Bonnell: Net formations rose to $153 million last quarter. In retail banking, recent trends in delinquencies and formations persisted, with delinquencies rising faster in unsecured portfolios than in result, and more slowly in Quebec portfolios versus the rest of Canada. In the wholesale portfolios, formations rose in the quarter driven by two commercial formations in the manufacturing sector, partially offset by net recovery in corporate banking. In the international sector, formations increased due to seasoning and strategy portfolios and higher impairments at ABA.

Growing it's a it's IDB so the business mix is changing a bit we view it as a good thing as the economy went from a cash economy too to a current account economy now we've seen people move into taking advantage of higher interest rates are moving into short term deposits. They are quite sure.

Speaker 5: deposits, they're quite short term, but they're still term deposits. So that has put pressure on the margin. It's likely to be maintained over the next few quarters, but it remains to be seen together with the prevailing rate environment.

Term, but theres still term deposits. So that has put pressure on the on the on the margin is slightly to be maintained over the next few quarters, but it remains to be seen together with the prevailing at the rate environment.

Bill Bonnell: In the international sector, formations increased due to seasoning and strategy portfolios and higher impairments at ABA. In the context of moderating global growth, the Cambodian economy is adjusting to recent softness and external demand, and a slower than anticipated recovery in tourism. In this context, we expect formations to remain elevated. However, given the low LTV of loans and our historical experience, we think that the realized net charge-off rate should remain low.

Speaker 11: And on the

And on the churn on the creditor side.

Bill Bonnell: In the context of moderating global growth, the Cambodian economy is adjusting to recent softness and external demand, and a slower than anticipated recovery and tourism. In this context, we expect formations to remain elevated. However, given the low LTV of loans and our historical experience, we think that the realized net charge off rates should remain low.

Speaker 11: We're really pleased with the asset growth disorder. Things were slow at the start of the quarter with a lot of, you know, and I talked about it last quarter, a lot of liquidity that had been injected by government intervention, but we ended up growing assets by 3%. We made some great portfolio acquisitions during the

We're really pleased with the asset growth this quarter. Our teams were slow at the start of the quarter with a lot of them.

You know and I talked about it last quarter a lot of liquidity that had been injected by a government intervention, but we ended up growing assets by 3%, we made some great portfolio acquisitions.

Bill Bonnell: On slide 16 and 17, we present highlights of our Canadian Resil portfolio. The geographic and product mix remains stable, with Quebec accounting for 55%, and insured mortgages accounting for 29% of total result. Supported by favorable employment and savings rates, borrowers continue to demonstrate resiliency as they absorb the impacts of higher interest rates. An insured result 90-day plus delinquencies remained low at seven basis points, and credit scores remain high. As you know, payments on our variable rate mortgages have adjusted upwards with central bank rating increases.

Bill Bonnell: On slide 16 and 17, we present highlights of our Canadian Resil portfolio. The geographic and product mix remains stable, with Quebec accounting for 55%, and insured mortgages accounting for 29% of total result. Supported by favorable employment and savings rates, borers continue to demonstrate resiliency as they absorb the impacts of higher interest rates. An insured Resil 90-day plus delinquencies remain low at seven basis points, and credit scores remain high. As you know, payments on our variable rate mortgages have adjusted upwards with central bank rating increases.

During the quarter.

Speaker 11: and nothing come, it was up 7% overall, and keep in mind that there were some items last year that that

And.

Net income.

It was up 7% overall and keep in mind that there were some items last year that that 10.

Speaker 5: affect the comparison. But overall, the pace of growth will remain dependent on emerging opportunities.

Affect the comparison, but overall the pace of growth will remain dependent on the emerging opportunities and crazy credits you will continue to be disciplined while being ready to deploy when the when they see a portion of these that meet their risk reward objectives.

Speaker 11: And CreditG will continue to be disciplined while being ready to deploy when they see opportunities that meet their risk reward objectives.

Got it. Thank you that's it for me.

Thank you.

Once again, please press star one at this time for any questions or comments.

Speaker 3: Once again, please press the one at this time for any questions.

Bill Bonnell: These are the customers who have had to adapt most quickly to higher rates. While we have seen early delinquencies rise past pre-pandemic levels for insured variable rate mortgages, they remain low for uninsured variable rate mortgages, as customers have prudently adjusted discretionary spending. You'll also see in the sub-pack that the remaining amortizations ever mortgages have not extended in the portion of over 30 years remains low at 1% of the portfolio.

Bill Bonnell: These are the customers who have had to adapt most quickly to higher rates. Well, we have seen early delinquencies rise past pre-pandemic levels for insured variable rate mortgages. They remain low for uninsured variable rate mortgages, as customers have prudently adjusted discretionary spending. You'll also see in the sub back that the remaining amortizations of our mortgages have not extended in the portion of over 30 years remains low at 1% of the portfolio.

Our last question is from Sohrab <unk> from BMO capital markets. Please go ahead.

Speaker 3: Last question is from Sorab, Movaheri from BMO Capital Market.

Okay. Thank you very much again I wanted to just come back to you on the trading results.

Speaker 16: Okay, thank you very much. And I wanted to just come back to you on the trading results.

If I if I look at the performance of the bank and the trading numbers pre COVID-19. So I'm looking at 2017 18 19.

Speaker 16: If I look at the performance of the bank and the trading numbers pre-COVID, so I'm looking at 2017, 18, 19.

Bill Bonnell: To conclude, we were pleased with the good credit performance against this quarter. Looking ahead, we expect further normalization with increasing levels of delinquencies and impaired BCLs in the coming quarters. The speed of normalization will be heavily influenced by the path of unemployment and interest rates, and impact should be somewhat moderated by our defensive positioning, our resilient mix, and our prudent level of allowances. We maintain our full-year target for impaired BCLs at 10 to 20 basis points, and continue to expect to be to end up in the bottom part of that range.

Bill Bonnell: To conclude, we were pleased with the good credit performance against this quarter. Looking ahead, we expect further normalization with increasing levels of delinquencies and impaired BCLs in the coming quarters. The speed of normalization will be heavily influenced by the path of unemployment and interest rates. And impact should be somewhat moderated by our defensive positioning, our resilient mix, and our prudent level of allowances. We maintain our full year target for impaired BCLs at 10 to 20 basis points and continue to expect to be to end up in the bottom part of that range.

Speaker 16: you know, quarterly average maybe around the level.

Quarterly average may be around the levels.

Speaker 16: Disquarters trading revenue would have been maybe a little bit higher, but What I'm trying to kind of get a sense

At this quarter's trading revenue would have been maybe a little bit higher but.

What I'm trying to kind of get a sense for is.

Speaker 16: you know, it's elevated or the very kind of strong trading revenue numbers over the last couple of years

The elevated or the very kind of.

Strong trading revenue numbers over the last couple of years.

Speaker 16: Could those end up being operations? Is there an indication that maybe the kind of operating environment that we're going to be in will mean trading numbers will be closer to historical levels?

Could could does end up being operations is there is there an indication that maybe the kind of operating.

That was gonna be it well.

It will mean trading numbers will be closer to historical levels.

Unknown Executive: With that, I will turn it back to the operator for the Q&A. Thank you.

Speaker 16: And a number like this will actually be a good number.

And a number like this will actually be a good number.

Unknown Executive: We will now take questions on the telephone line. If you have a question and you are using a speaker phone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. You may can send your question at any time by pressing star 2. Please press star 1 at this time. If you have a question, there will be a brief pause. While participants register for questions, we thank you for your patience.

Unknown Executive: We will now take questions on the telephone line. If you have a question and you are using a speaker phone, please lift your handset before making your selection. If you have a question, please press star one on your device's keypad. You may can send your question at any time by pressing star two. Please press star one at this time. If you have a question, there will be a brief pause while participants register for questions. We thank you for your patience.

Speaker 11: Thanks for the question, Sohrab. And no, I think that our run rate in global markets is higher than that. When you take a step back, I mean, the goal has always been to deliver a performance during all market cycles. And you look at our performance in 2020 and 2022.

Thanks for the question, sorry, I've been Oh, no I I think that our run rates in global markets is higher than that.

When you take a look.

A step back I mean, the goal has always been to deliver it.

Performance during all my market cycles, and you looked at our performance in 2020 in 2022.

Certainly we did very well during elevated volatility, but even in 2021, which was.

Speaker 11: Certainly, we did very well during elevated volatility, but even in 2021, which was a market characterized by up markets and a lot of retail trading and decreasing volatility, we also did well. I think what we've done is build a franchise that performs well during ups and downs in the market cycles. And the goal is always first and foremost to serve clients.

Meny Grauman: Our first question is from Mini-Growman from Scotia Bank. Please go ahead. Hi, Gafrin.

A market characterized by up markets and in a lot of retail trading and decreasing volatility. We also did well.

Marie Chantal-Jangra: Mary Shantall, I wanted to ask a question about expenses, and specifically whether you expect your current approach to expense management to lead to positive operating leverage next year. You've had three quarters in a row of negative operating leverage. I'm just curious about the outlook there. Hi, Mini. Thanks for the question. You're right. There was definitely some pressure in the past couple of quarters. Can you hear me well, Mini? I can, yes.

Meny Grauman: Mauritian Tallah, I wanted to ask a question about expenses and specifically whether you expect your current approach to expense management to lead to positive operating leverage next year. You've had three quarters in row of negative operating leverage. I'm just curious about the outlook there. Hi, Mini. Thanks for the question. You're right. There was definitely some pressure in the past couple of orders. Can you hear me well, Mini? I can, yes. Okay.

I think what we've done is build a franchise that performs well during ups and downs in the market cycles and the goal is always first and foremost to serve clients.

Ah well, which means being in the markets when it gets rocky and to be able to provide liquidity and be a trusted advisor throughout the different market cycle.

Speaker 11: well, which means being in the markets when it gets rocky and to be able to provide liquidity and be a trusted advisor through how the different markets like.

Marie Chantal-Jangra: Okay, so factors that influence that negative operating leverage for sure inflation. And as I said in my remarks, we've managed expenses very disciplinely and dynamically over the past few quarters in order to mitigate those factors simultaneously. We continue to grow and diversify our revenue based for sure. So a more favorable operating environment where inflation moderates and capital market activities resume will definitely contribute to better operating leverage. So consistently assessing our overall past structure, we do remain positive on leverage for Q4 being positive in terms of operating leverage. Got it.

Meny Grauman: So factors that influence that positive, that negative operating leverage for sure inflation. And as I said in my remarks, we've managed expenses very disciplinely and dynamically over the past few years. In order to mitigate those factors simultaneously, we continue to grow and diversify our revenue, our revenue base for sure. So a more favorable operating environment where inflation moderates and capital market activities resume will definitely contribute to better operating leverage. So consistently assessing our overall past structure, we do remain positive on leverage for Q4 being positive in terms of operating leverage. Got it.

Speaker 11: And if that means being more defensive than peers and performing less well in a very quiet market like what we just had, we're comfortable with that. But we believe across the cycle, our run rate is higher than what we did at Q3. But do you believe?

And if that means being more defensive than peers and performing less well in a very quiet market like what we just had a we're comfortable with that but we believe.

This cycle.

Our our run rate is higher than what we did at Q3.

But do you believe volatility piece picking up.

Speaker 11: in the foreseeable future. Yes, I do believe, and even though implyides have not really gone up, you're now seeing more client activity, you're now seeing more market swings. August was very different from June and July , and we're very encouraged by what we're seeing.

In the foreseeable future, yes, I do believe and even though our employees have not really gone up you're now seeing more client activity, you're now seeing more market swings August was very different from June and July and we're very encouraged by the way.

What we're seeing.

Speaker 16: Okay, maybe just a little bit related. Is there...

Okay.

And maybe just a little bit related.

And is there is there.

Speaker 16: How relevant is the eventual outcome?

How how relevant is the eventual outcome.

Laurent Ferreira: The follow-up is just in terms of how open you are, maybe the question for Laurent in terms of taking restructuring charges if the environment, especially the revenue environment, continues to remain challenged. Is that something on the table? And how do you view restructuring charges from a broader perspective?

Laurent Ferreira: The follow-up is just in terms of how open you are, maybe the question for Laurent in terms of taking restructuring charges, if the environment, especially the revenue environment, continues to remain challenged. Is that something on the table? And how do you view restructuring charges from a broader perspective? Yeah, I can continue with that question. So we continuously assess our overall past structure, including intangible real estate and talent. So at this point in time, we remain very focused on protecting our current talent base and are not contemplating any largely off. On a potential write-off, no decision has yet been made and any charge would be treated as a specified item and excluded from our adjusted results. Okay, thank you very much. Thank you.

Speaker 16: of the federal budget and the treatment of dividend income.

The federal budget and the treatment of dividend income.

Speaker 16: and the implications from a taxable equivalent basis. To the...

And the implications from a taxable equivalent basis to the outlook for trading.

Speaker 5: I think it's, it's probably too early to give precise number and estimate.

Well I think it's a it's probably too early.

To give a precise number and estimates around that I think the rules are still being.

Laurent Ferreira: Yeah, I can continue with that question. So we continuously assess our overall past structure, including intangible real estate and talent. So at this point in time, we remain very focused on protecting our current talent base and are not contemplating any largely off. On a potential write-off, no decision has yet been made and any charge would be treated as a specified item and excluded from our adjusted results. Okay, thank you very much. Welcome. Thank you.

Speaker 5: around that i think the rules are still being uh... and the applications of the potential rules are still being discussed so uh... very early to to do that and and it would mean a change for us and for every equity franchise in Canada but you know what historically

And the applications of the potential new rules are still being discussed.

So.

It's very early to do that.

And it would mean a change for us and for every equity franchise in Canada, but you know what historically.

Any change in capital and regulatory liquidity rule that extended to impact market conditions and client demands and these changes bring business support trinity's and we tend to do well in capitalizing on these new business opportunities.

Speaker 11: Any change in capital regulatory liquidity rule as standard to impact market conditions and client demands and these changes bring business opportunities and we tend to do well in capitalizing on these new business opportunities.

Speaker 13: So maybe I could jump in, you know, whether it's changes in capital rules and FrTB or changes with CRA, it doesn't change our strategy in capital markets or capital allocation to our financial market franchise. So we're very comfortable with what we've built and, you know, you can see the performance over time. And we're going to keep supporting it.

Sorry.

Maybe I can jump in.

Whether it's changes in capital rules and F. R T V or changes with CRE.

It doesn't change our strategy and capital markets, our capital allocation to our financial market franchise.

Doug Young: We have your discussion or your opening remarks about just capital and how it's your very well defensively positioned given the headwind, but also to take advantage of opportunities to grow the franchise and whatnot. And hopefully you can elaborate on with the priorities are for your excess capital. Would you consider being more aggressive with an NTID acquisition? Just hoping you can elaborate a little bit more on that.

Doug Young: I have a discussion or your opening remarks about just capital and how it's very well defensively positioned given the headwinds but also to take advantage of opportunities to grow the franchise and whatnot. And hopefully you can elaborate on with the priorities are for your excess capital. Would you consider being more aggressive with an NTID acquisition? Just hoping you can elaborate a little bit more on that. So Doug, thank you for your question.

So we're very comfortable with what we've built and you know what.

The performance overtime.

And we're gonna keep supporting it.

Speaker 16: Okay, if I can just maybe sneak one in for Lucy. I'm curious, Lucy, if you could just tell us.

Okay, and if I can just maybe sneak one in Florida.

<unk>.

I'm curious to see if you could just tell us.

Speaker 16: specifically in Quebec in the past quarter. Did you see?

Specifically in Quebec.

Laurent Ferreira: So Doug, thank you for your question. And you heard the comments from Mavi Shantel regarding FRTV. So, you know, even after that we sit in a very good place in terms of overall capital and feel very comfortable to operate at these levels. In terms of capital deployment, you know, it's the same story. We like our strategy. We like our strategic focus on growing our Canadian franchise, so that doesn't change. And, you know, it is the macro environment remains uncertain.

In the past quarter.

Did you see opportunities.

Doug Young: And you heard the comments from Mavi Shantel regarding FR TV. So, you know, even after that we sit in a very good place in terms of overall capital and feel very comfortable to operate at these levels. In terms of capital deployment, you know, it's the same story. We like our strategy. We like our strategic focus on growing our Canadian franchise. So that doesn't change and, you know, it is the macro environment remains uncertain.

Speaker 16: for your business to grow, and maybe because of disruptions within the market. Yes.

For your business to grow.

And maybe because of disruptions within the market.

Yes, thank you for that question.

Speaker 6: Definitely, what we see in Quebec, we see us gaining market shares. We see that we continuously onboard new customers and we onboard them at a pace that is

Definitely what we see and came back and we see us gaining market share and we see that's the continuous need onboard new customers and we onboard them at a pace that is higher than the demography growth. So definitely seeing we're gaining market share there and it's it's really.

Speaker 6: higher than the demography growth. So, definitely we're gaining market share there. And it's really the foundation for us to continue to grow our deposit, acquire, engage, and making sure that the customer satisfaction remains high. And it was been performing very well and we see more and more engagement from also the customers we onboard with lower attrition.

The foundation for us to continue to grow our deposit.

Higher engaged and making sure that would be cause the customer satisfaction remains high and there was been performing very well and we see more and more engagement from most of the customers we embarked with lower attrition. So that's for us isn't the greatest unfortunate team because we like to have customers trying to.

Doug Young: So, you know, our capital levels are higher than peers at this point in time on average, but I think it's a, you know, we're comfortable operating at that level given the uncertainty providing us also with flexibility to deploy and to jump on opportunities. But, you know, one example is strategy. We could see, I think over the next year, more opportunities to deploy capital there. So I don't know if that helps you. Yeah, no, it does.

Laurent Ferreira: So, you know, our capital levels are higher than peers at this point in time on average, but I think it's a, you know, we're comfortable operating at that level given the uncertainty providing us also with flexibility to deploy and to jump on opportunities. But, you know, one example is strategy, we could see, I think, over the next year, more opportunities to deploy capital there. So I don't know if that helps you. Yeah, no, it does just kind of kind of frame it.

Speaker 6: So that for us is the greatest opportunity because we like to have customer strategies and not really focus on product strategies. The rest is just the consequence of our customer acquisition.

And that's really focused on product strategies. The rest is just the consequence of our customer acquisition.

Speaker 6: So definitely lots of room for us to continue to grow and we are doing it.

So definitely a lots of room for us to continue to grow and we are doing it.

Okay. Thank you very much.

Yeah.

Thank you.

Doug Young: Just trying to kind of frame it and then, you know, historically, my second question, just historically and wealth management. You guys have done a great job of putting up double digit earnings growth and through second thin, that's been something that's been noteworthy. It seems to that that's slowed a little bit. And I guess the equity market movements and all of that. I'm just trying to kind of wrap my mind around are there are structural reasons why, you know, we shouldn't be anticipating double digit earnings growth out of wealth management.

Doug Young: And then, you know, historically, my second question, just historically and wealth management, you guys have done a great job putting up double digit earnings growth and through thick and thin. That's been something that's been noteworthy. It seems to that that's slowed a little bit. And I guess the equity market movements and all of that. I'm just trying to kind of wrap my mind around are there are structural reasons why, you know, we shouldn't be anticipating double digit or any growth out of wealth management, like the, you know, no fee trading, the discount broker, although I thought higher interest rates would be quite quite a tailwind for your business. So I'm just trying to get a sense of how we should be thinking about earnings growth out of wealth today versus qualified 10 years ago.

Following question is from Darko <unk> from RBC capital markets. Please go ahead.

Speaker 3: Following questions from Darko Mielec from RBC Camptone Markets, please go ahead.

Yeah.

Speaker 10: Hi, thank you. I just wanted to speak in a real quick question here. Maybe a follow up.

Hi, Thank you I just wanted to sneak in a real quick question here, maybe a follow up.

Speaker 10: Is your treasury doing anything different now that we've had another two rate hikes in Canada? Given where we are, is your positioning gonna change?

Is your treasury doing anything different now that we've had another two rate hikes in Canada.

Given where we are.

Or is your positioning going to change materially from here.

Darko, it's so high it's not it's not that thanks for the question.

Speaker 15: Adarco, it's a hi, it's Marichantel, thanks for the question. So a little bit like Lehan said earlier, I think we are strategy is consistent in terms of managing Treasury. So, and you probably saw in our, in our disclosure, the sensitivity on the NII, if rates were to change. And there was a,

Doug Young: Like the, you know, no fee trading the discount broker, although I thought higher interest rates would be quite quite a tailwind for your business. So I'm just trying to get a sense of how we should be thinking about earnings growth out of wealth today versus qualified 10 years ago. Yeah, thank you, Doc. It's the neat.

And so a little bit like Lothar said earlier I think we our strategy and is consistent in terms of managing our treasury.

So and you you probably saw in our and our disclosure.

Doug Young: Yeah, thank you, Doc. It's the neat. I will take that one. Yeah, you mentioned it, you know, the last year or so, we saw, you know, a good expansion in our revenue because of NII. As you can see, and as we can read in the market right now, rate kind of stabilized, if there's anything they may had you a little bit upward down the road, then if it happened, we'll see more of you coming from there.

The sensitivity on the NII, it's if rates were to change and U E. There was this.

Laurent Ferreira: I will take that one. Yeah, you mentioned it. You know, the last year or so, we saw, you know, a good expansion in our revenue because of NII.

Speaker 15: slight reduction in the NII sensitivity for a lower 100 basis point going forward. So we're seeing a little bit less sensitivity going forward. So I think those would be the comments that I would give you.

Slight reduction in the net NII sensitivity for a lower 100 basis points going forward, So where we're seeing a little bit less sensitivity going forward. So I think those would that would be the comments that I would give you.

Laurent Ferreira: As you can see and as we can read in the market right now are rate kind of stabilized. If there's anything, they may have you a little bit upward down the road. Then if it happens, we'll see more of you coming from there. But the other businesses are related to the market and, you know, our well diversified platform that we do have. Can sustain chain in the market and you saw it in the in the past year or so.

Yes. Thank you I was actually looking at that now as you spoke and the question then moves into.

Speaker 10: Yes, thank you. I was actually looking at that now as you spoke. And the question then moves into when I look at the benefit or gain, let's suppose from treasury in any given quarter.

Doug Young: But the other businesses are related to the market and, you know, our well diversified platform that we do have can sustain chain in the market and you saw it in the past year or so. Then we're still constructive about the business or we're going to grow at the same rate, all depends on the market for sure. But I would say that we're very well positioned to see business growth continue if the market is cooperative right now.

When I look at the benefit or gain let's suppose from treasury.

In any given quarter.

Laurent Ferreira: Then we're still constructive about the business or we're going to grow at the same rate. All depends on the market for sure, but I would say that we're very well positioned to see business growth continue if the market is cooperative right now.

Speaker 10: Could that materially change in a falling interest rate environment?

Did that materially change in a falling interest rate environment.

I don't think it could materially change it could change because we're always assessing our our our decisions in terms of them managing centrally asset and liability, but I wouldn't say that it could materially change no.

Speaker 15: I don't think it could material change. It could change because we're always assessing our decisions in terms of managing centrally asset and liability. But I wouldn't say that it could materially change, no.

Laurent Ferreira: We're looking forward for next year and, you know, for more to come in the foot quarter, but so far so good and we like what we're seeing and we like really our business makes that that we do have right. Thank you.

Doug Young: We're looking forward for next year and, you know, for more to come in the foot quarter, but so far so good and we like what we're seeing. And we like really our business makes that we do have right.

Unknown Executive: Thank you.

Speaker 10: Okay, last follow up for me and I apologize for this arcane line of questioning, but

Okay last follow up for me and I apologize for this arcane line of questioning but.

The.

Paul Holden: Thank you for the question you sent Paul Holden from CIBC. Please go ahead. Thank you.

Paul Holden: Thank you for your question. You some Paul Holden from CIBC.

I guess the way I think of it or the way I'm looking at this is when I look at the results.

Speaker 10: I guess the way I think of it or the way I'm looking at this is when I look at the result.

Paul Holden: Please go ahead. Thank you.

Etienne Dubuc: Good afternoon. First off, thanks. Thanks for the guidance on the STRP impact helpful. I'm just wondering with that and then sort of the softer quarter on trading. Is there any permanent change in the amount of capital you're willing to allocate to the trading business? IE, is there going to be a lower run rate going for because of these higher capital requirements? Or otherwise? Yeah, thanks Paul. It's Etienne. So I think Levant said it well in his opening remarks with your experience is a very quiet quarter, especially with regards to the Canadian markets and the activity level of institutional clients.

Etienne Dubuc: Good afternoon. First off, thanks. Thanks for the guidance on the STRP impact helpful. I'm just wondering with that. And then sort of the softer quarter on trading. Is there any permanent change in the amount of capital you're willing to allocate to the trading business? IE, is there going to be a lower run rate going for because of these higher capital requirements? Or otherwise? Thanks Paul.

Speaker 10: And I look at the trading results in the quarter and given where interest rates are and funding where it is.

When I look at the trading results in the quarter.

Given where interest rates are and funding where it is.

Speaker 10: I just want to make sure that I understand that when I look at the funding cost, that is sort of, um...

I just wanted to make sure that I understand that.

When I look at the funding cost.

That is.

Sort of.

Allocated to trading results.

Speaker 10: in the quarter. Is there any reason to think that that would change?

In the quarter is there any reason to think that that would change.

Speaker 10: going forward. What are the big drivers there? And how should I think about that A, if rates they stable and B, if rates come down?

Going forward.

What are the big drivers there and how should I think about that a if rates stay stable and b if rates come down.

Etienne Dubuc: It's Etienne. So I think Levant said it well in his opening remarks with with your experience is a very quiet quarter, especially with regards to the Canadian markets and the activity level of institutional clients. So while U.S, markets went up sharply because of the performance of tech stocks and P being up 9% and as that being up 9% 19% Canadian indices were unchanged for the quarter. And Canadian equities volumes were down about 25% year earlier.

Etienne Dubuc: So what you saw is our market making activities were slow, even though we we maintain our very high market share. On the equity structure note sales were also soft mostly due to that lackluster performance of Canadian stocks. On the bright side corporate clients continue to be active and etching exposures and interest rates, although activity on the FX side was slower. FX was also very quiet and the cat dollar was caught in a very tight range throughout the quarter.

Hi, Darko, which sits in.

Speaker 5: Hi, Darko, it's Hattien. I don't think you should anticipate any change in our strategy or the way that we allocate cost or look at funding and trading results.

I don't think you should anticipate any change in our strategy or the way that we allocate a cost or a look at our <unk>.

One thing and trading results.

Etienne Dubuc: So while US markets went up sharply because of the performance of tech stocks and P being up 9% and as that being up 9% 19% Canadian indices were unchanged for the quarter. And Canadian equities volumes were down about 25% year earlier. So what you saw is our market making activities were slow, even though we maintain our very high market share on the equity structure note sales were also soft mostly due to that lackluster performance of Canadian stocks.

Okay. Thank you very much for that I appreciate that.

Okay.

Speaker 3: Thank you. That was all asked questions. So I would not like to turn them meeting back over to Mr.

Thank you Michael.

That was our last question. So I know I would now like to turn the meeting back over to Mr. Fan Huh.

Speaker 13: Thank you for it. And before we disconnect, I'd like to take a minute to thank Linda Boulanger for leading our investor relations team with great success over the past seven years. She is taking on a new role as head of Sustainable Finance and Financial Markets. Linda, thank you for your contribution. It has been invaluable.

Operator, and before we disconnect I'd like to take a minute to thank Linda Boulanger for leading our Investor relations team with great success over the past seven years. She is taking on a new role as head of our sustainable finance and financial markets. Linda. Thank you for your contribution.

Etienne Dubuc: On the bright side corporate clients continue to be active and aging, edging exposures and interest rates, although activity on the FX side was slower. FX was also very quiet. And the cat dollar was caught in a very tight range throughout the quarter. So, so as a result, our trading businesses which we we position conservatively face the double effect of lower volume and decreasing volatility throughout the quarter. If you look at our rates franchise, Q3 last year was a record quarter in a very tough credit environment.

It has been invaluable.

Speaker 13: And I would like to also welcome Margan Rati as our new head of investor relations and congratulate both of you on your new roles. That was it for me.

And I would like to also welcome Matt again, as our new head of Investor Relations and congratulate both of you on your new roles.

Or was it for me thank you everyone.

Etienne Dubuc: So so as a result our trading businesses which we we position conservatively face the double effect of lower volume and decreasing volatility throughout the quarter. If you look at our rates franchise, Q3 last year was a record quarter in a very tough credit environment. This year you had very low institutional activity and this is a franchise that focuses on being a premier liquidity provider in Canada. So we're number one in government trading.

Thank you.

Speaker 3: I'm going to make the conference as now ended. Please disconnect your line at this time. And we thank you.

The conference has now ended please disconnect your line.

Okay.

And we thank you for your participation.

Thank you.

Etienne Dubuc: We have a dominant presence in Canadian rates futures. The focus is not to warehouse big positions and be exposed credit spreads. So it's a quarter again characterized by low volatility and narrowing credit spreads. Well that won't be an environment where we were the top performer. So and this is something we're comfortable with when market conditions become unusually benign with low volatility and narrowing credit spreads. We're not going to be the top performer and we did very well in Q3 last year and what was it like I said a much tougher environment.

Speaker 3: The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

The conference has now ended.

Please disconnect your lines at this time and we thank you for your participation.

Etienne Dubuc: This year you had very low institutional activity and this is a franchise that focuses on being a premier liquidity provider in Canada. So we're number one in government trading. We have a dominant presence in Canadian rates futures. The focus is not to warehouse big positions and be exposed credit spreads. So it's a quarter again characterized by low volatility and narrowing credit spreads. Well, that won't be an environment where we were the top performer.

Etienne Dubuc: So and this is something we're comfortable with when market conditions become unusually benign with low volatility and narrowing credit spreads, we're not going to be the top performer. And we did very well in Q3 last year and what was it like I said a much tougher environment. So in the last month we we've been seeing a normalization of market volatility. And we've seen a pickup in client activity. So no, I don't take our global markets performance in Q3 is a new normal. I think things are looking good.

Etienne Dubuc: So in the last month we we've been seeing a normalization of market volatility and we've seen that pick up and client activity. So no I don't take our global markets performance in Q3 is a new normal. I think things are looking good.

Bill Bonnell: Okay, and then second question for me is for Bill, and it's related to the step function change in commercial PCLs and gross impaired loans.

Bill Bonnell: Okay, and then second question for me is for Bill, and it's related to the step function change in commercial PCLs and gross impaired loans. Is there anything there that you're seeing that might suggest on going higher losses? Like are there any kind of new established trends, or is there more kind of what you hinted at with your prepared for marks in terms of there's going to be volatility from quarter quarter in that book of business?

Bill Bonnell: Is there anything there that you're seeing that might suggest on going higher losses? Like are there any kind of new established trends? Or is there more kind of what you hinted at? With your prepared remarks in terms of there's going to be volatility from quarter quarter and that book of business. Yeah, hi, Paul. Thanks for the question. I covered it in the in the repair remarks. It's really overall the Canadian business.

Bill Bonnell: Yeah, hi Paul, thanks for the question. I covered it in the in the repaired remarks. It's really overall the Canadian business. It's the continuing trend of normalization. So this quarter in commercial, it was a lumpy quarter in about two files became impaired the same quarter. Just like last year it was a lumpy file in recoveries, but that's just noise for the overall trend. And as as as I said in the remarks, we do see the trend continuing to normalize.

Bill Bonnell: It's the continuing trend of normalization. So this quarter in commercial, it was a lumpy quarter in about two files became impaired the same quarter. Just like last year was a lumpy file in recoveries, but that's just noise for the overall trend. And as as I said in the remarks, we do see the trend continuing to normalize. So we do see going into 2024 retail and and commercial going back to more normal levels coming out of the very, very low levels last quarter.

Bill Bonnell: So we do see going into 2024 retail and and commercial going back to more normal levels coming out of the very, very low levels last quarter. And one way of looking at it as as well as even with a lumpy quarter in commercial, our impaired loans were 15 basis points, which historically is low on the gross impaired loans, which I think you asked about as well. I think on the slide, gross impaired loans, you can see the growth coming from ABA, which we called out in the in the prepared remarks as well.

Bill Bonnell: And one way of looking at it is as well as even with a lumpy quarter in commercial, par and paired loans were 15 basis points, which historically is low on the gross impaired loans, which I think you asked about as well. I think on this slide, gross impaired loans, you can see the growth coming from ABA, which we called out in the in the prepared remarks as well. And with ABA, you'll remember last year, we talked a lot about the increasing impaired's peaking in fourth quarter, but coming from the COVID moratoriums.

Bill Bonnell: So that story is behind us and those that portfolio of clients that had moratoriums is performing exactly like we expected. However, we did speak in the prepared remarks about seeing some moderation and growth. So we have seen an increase in impaired coming in sectors that are most impacted by the moderating global growth. And we would expect the levels to remain elevated. However, the risk content, the lost content in those gross impaired loans, we still feel is pretty low.

Bill Bonnell: And with ABA, you'll remember last year, we talked a lot about the increasing impaired peaking in fourth quarter, but coming from the COVID moratoriums. So that story is behind us and those that portfolio of clients that had moratoriums is performing exactly like we expected. However, we did speak in the prepared remarks about seeing some moderation and growth. So we have seen an increase in impaired coming in sectors that are most impacted by the moderating global growth.

Bill Bonnell: And we would expect the levels to remain elevated. However, the risk content, the lost content in those gross impaired loans, we still feel is pretty pretty low. We've spoken before about wanting to be prudent as we haven't been through a full cycle with ABA and that translates into being very prudent and having built allowances since the beginning of IFRS 9 and maintaining good allowances. But historically, given the low LTVs, the net charge-offs in the end are relatively, relatively low and we'd expect that charge operate to stay low below what our impaired provisioning is. It does. Thank you for that.

Unknown Executive: And I'll leave it there. Thanks.

Bill Bonnell: You know, we've spoken before about being wanting to be prudent as we haven't been through a full cycle with ABA and that translates into being very prudent and having built allowances since the beginning of IFRS 9 and maintaining good allowances. But historically, given the low LTVs, the net charge-offs in the end are relatively, relatively low. And we'd expect that charge operate to stay low below what our impaired provisioning is. Thank you for that.

Unknown Executive: Thank you.

Unknown Executive: I'll follow in question.

Unknown Executive: Now I'll leave it there. Thanks. Thank you. I'll follow in question.

Nigel D'Souza: It's on Nigel D'Souza from Veritas Investments. Please go ahead. Thank you.

Marie Chantal: Good afternoon. Of course, I just wanted to follow up on the reclassification that in fact is interesting. Any additional color there on what that was specifically related to and what growth, the reclassification in this quarter, because I'm trying to reclassification. And I guess why was that previously recognized in other income files?

Marie Chantal-Jangra: Good afternoon. Of course, I just wanted to follow up on the reclassification that in fact is interesting. Any additional color there on what that was specifically related to and what growth, the reclassification in this quarter, because I'm trying to reclassification. And I guess why was that previously recognized in other income files?

Lucie Blanchet: Hi Nigel, it's Marie Chancas. So the reclassification that I refer to in my remarks is related to a change that was made in the normal context of reviews of our processes. So through these process reviews, we aim to refine and ensure optimal representativeness of our results. And as I said, what's important to keep in mind is it is a reclassification that has no impact on our total results. And you're right, it is viewed as permanent in the sense that it will remain on the NII line in the going forward as well.

Nigel D'Souza: Hi, Nigel, it's Marie Chancas. So the reclassification that I refer to in my remarks is related to a change that was made in the normal context of reviews of our processes. So through these process reviews, we aim to refine and ensure optimal representativeness of our results. And as I said, what's important to keep in mind is it is a reclassification that has no impact on our total results. And you're right, it is viewed as permanent in the sense that it will remain on the NII line in the going forward as well.

Nigel D'Souza: And then on terms of positive growth, any specific number you could find there in terms of what the rate of growth you're seeing in relation to total deposits, just to get a sense of the pace of growth there. Yes, so as we've, again, we've mentioned in the remarks what we're seeing is migration has been slowing down in terms of deposits from demand to term. So that's definitely something that we've been seeing in the past quarter or so in terms of in terms of growth.

Lucie Blanchet: And then on terms of positive growth, any specific number you could find there in terms of what the rate of growth you're seeing in relation to total deposits just to get a sense of the pace of growth there. Yes, so as we've again, we've mentioned in the remarks, what we're seeing is migration has been slowing down in terms of deposits from demand to term. So that's definitely something that we've been seeing in the past quarter or so in terms of in terms of growth.

Nigel D'Souza: And we're seeing as well clients utilizing some of their accumulated savings. That being said, we're still seeing savings that are higher than pre-pandemic level. So I think those were some of the highlights I would give us. I would give you Nigel. Is that a little bit of color? Yes, I also have some excess deposits that we can need to shift and determine by understanding correctly, but I don't have sense of the level that you're meeting in terms of the wrong way.

Lucie Blanchet: And we're seeing as well clients utilizing some of their accumulated savings. That being said, we're still seeing savings that are higher than pre-pandemic level. So I think those were some of the highlights I would give us. I would give you Nigel. Is that a little bit of solar? Yes, I also have some excess deposits that we can need to shift and determine by understanding correctly, but I don't have sense of the level that you're meeting in terms of the wrong way, any insights there.

Nigel D'Souza: Any insights there? Your question, Nigel, we're losing you a bit. Is it the run rate? No, just the remaining level of those excess deposits if you could size it in terms of how much more could potentially close the terms. You have a sense that either the amount that could close the term in future quarters or when you think that a shift will stop in terms of deposits.

Lucie Blanchet: Your question, Nigel, we're losing you a bit. Is it the run rate? No, just the remaining level of those excess deposits is you could size it in terms of how much more could potentially close the terms. You have a sense of either the amount that could close the term in future quarters or when you think that a shift will stop in terms of possible.

Lucie Blanchet: It's Lucy. Maybe I can take this one specifically on retail deposit. We still see lots of excess liquidity compared to pre-pandemic levels. So we're talking more than a billion in liquidity there. And we see that liquidity being put towards with customer paying higher debt. And we see that movement continues because like, for example, the lines of credit, the utilization rate remains low with even lower from quarter to quarter. Cardphones for you was growing, but the revolving balances are lagging.

Lucie Blanchet: It's Lucy. Maybe I can take this one specifically on retail deposits. We still see lots of excess liquidity compared to pre-pandemic levels. So we're talking more than a billion in liquidity there. And we see that liquidity being put towards with customer paying higher debt. And we see that movement continues because like, for example, the lines of credit, the utilization rate remains low with even lower from quarter to quarter. Cardphones for you was growing, but the revolving balances are lagging.

Lucie Blanchet: So we see good usage of liquidity and we see a resilient consumer. And the migration to a system deposit is mainly with our high excess saving customers with less than 100,000 and more. And on that front, they asked for the liquidity to work for a while now. So we see the migration slowing down, but I think it will remain a bit.

Lucie Blanchet: So we see good usage of liquidity and we see a resilient consumer and a migration to a system deposit is mainly with a high excess saving customers with less than 100,000 and more. And on that front, they asked for the liquidity to work for a while now. So we see the migration slowing down, but I think it will remain a bit.

Unknown Executive: Okay, last question.

Unknown Executive: Yeah, that did.

Unknown Executive: Okay, last question. Yeah, that did.

Nigel D'Souza: And last question for me, it's real quickly. I noticed that it was an increase in gross and paramount in the residential mortgages category within the other geography. Just one of the simplification. Is that really the ABA bank? Is that kind of similar to some other exposure?

Nigel D'Souza: And last question for me, it's real quickly. I noticed that it was an increase in growth in parolones and the residential mortgages category within the other geography.

Bill Bonnell: Just one of the simplification is that is that really the ABA bank was that kind of similar to some other exposure? Hi Nigel, it's Bill and yes, exactly that. It's related to ABA bank. If you remember, the plastic, small, this plastic customer, average borrowing of around 60,000, a building where the residences on the top floor to and the business in the bottom one. So in the sub back, it gets classified with in the residential mortgages. And that's what you're seeing.

Bill Bonnell: Hi Nigel. It's a billion. Yes, exactly that. It's related to ABA bank. I think if you remember the classic, small, this classic customer average borrowing of around 60,000 building where the residence is on the top floor to and the business in the bottom one. So in the sub back, it gets classified with in the residential mortgages. And that's what you're seeing.

Unknown Executive: Okay, that's all for session. Thank you.

Drew Hokem: The following question is from Drew Hokem from Criticism. Please go ahead.

Drew Hokem: The following question is from Drew Hokem from criticism. Please go ahead. Hi, thank you. Good afternoon. Just a couple of quick ones here. On all bank margins, your LCR ratio went down 9%, 9 percentage points. Quarter of a quarter. Are you able to quantify how much that benefit is your all bank margins, if at all this quarter? Hi, it's Maria Santas. So in terms of the impact of the LCR movement, they're actually it's marginal. There are no impacts on the all bank name from the movement.

Marie Chantal: Hi, thank you and good afternoon. Just a couple of quick ones here. On all bank margins, your LCR ratio went down 9%, 9 percentage points, quarter of a quarter. Are you able to quantify how much that benefit is your all bank margins, if at all this quarter? Hi, it's Maria Santas. So in terms of the impact of the LCR movement, they're actually it's marginal. There are no impacts on the all bank name from the movement.

Marie Chantal: Okay, and an apology if I missed this, could you speak to how you see your margins at the all bank level evolving in the next little while? Yeah, so if I can maybe just go back a little to the remarks that we've shared with you in terms of the all bank name that reached 218% this quarter. Really what you have to keep in mind is that PNC name was stable, quarter of a quarter.

Marie Chantal-Jangra: Okay, and an apology if I missed this, could you speak to how you see your margins at the all bank level, evolving in the next little while? Yeah, so if I can maybe just go back a little to the remarks that we've shared with you in terms of the all bank name that reached 218% this quarter. Really what you have to keep in mind is that PNC name was stable, quarter of a quarter.

Marie Chantal-Jangra: We've talked about the reclassification. So I won't go any further regarding that. And there was a two points coming from a corporate banking loan recovery. So in the context of the current environment and with the interest rate expected to stay at the level that we are, we do not expect further margin expansion in Q4 and most likely slightly down. Okay, that's helpful. Thank you.

Marie Chantal: We've talked about the reclassification, so I won't go any further regarding that. And there was a two points coming from a corporate banking loan recovery. So in the context of the current environment and with the interest rate expected to stay at the level that we are, we do not expect further margin expansion in Q4 and most likely slightly down. Okay, that's helpful.

Unknown Executive: Thank you.

Unknown Executive: And last one for me. When I look at that double digit asset growth at the strategy and ABA, and I'm trying to score that with the revenue growth, which doesn't seem to have caught up with the growth in the balance sheet. So I'm curious if that's to do with the change in the business mix or if that margin pressure at ABA has persisted into the quarter, or if it's something else that's driving that revenue growth through kind of lag that balance should grow.

Laurent Ferreira: And last one for me. When I look at that double digit asset growth at the strategy and ABA, I'm trying to score that with the revenue growth, which doesn't seem to have caught up with the growth in the balance sheet. So I'm curious if that's to do with the change in the business mix or if that margin pressure at ABA has persisted into the quarter or if it's something else that's driving that revenue growth through kind of lag that balance should grow.

Laurent Ferreira: So perhaps the jupe perhaps I can start it to fans. So on the ABA side and referring back to Nigel's question, perhaps the one area where we still see in terms of the positive growing is that ABA. So the business mix is changing a bit. We view it as a good thing as the economy went from a cash economy to a current account economy. Now we see people moving to, you know, taking advantage of higher interest rates and moving into short term deposits.

Unknown Executive: So perhaps the jupe perhaps I can start at the fan. So on the ABA side, and referring back to Nigel's question, perhaps the one area where we still see in terms of the positive growing, it's that ABA. So the business mix is changing a bit. We view it as a good thing as the economy went from a cash economy to a current account economy. Now we see people moving to taking advantage of higher interest rates and moving into short term deposits.

Unknown Executive: They're quite short term, but they're still term deposits. So that has put pressure on the margin. It's likely to be maintained over the next few quarters, but it remains to be seen together with the prevailing rate environment. And on the, it fits in on the critical side.

Laurent Ferreira: They're quite short term, but they're still term deposits. So that has put pressure on the margin. It's likely to be maintained over the next few quarters, but, you know, it remains to be seen together with the prevailing rate environment. And it fits in on the critical side.

Unknown Executive: We're really pleased with the asset growth disorder. Things were slow at the start of the quarter with a lot of, you know, and I talked about it last quarter. A lot of liquidity that had been injected by government intervention, but we ended up growing assets by 3%. We made some great portfolio acquisitions during the quarter. And, and the net income was up 7% overall. And keep in mind that there were some items last year that affect the comparison.

Laurent Ferreira: We're really pleased with the asset growth this quarter. Things were slow at the start of the quarter, with a lot of, you know, and I talked about the last quarter, a lot of liquidity that had been injected by government intervention, but we ended up growing assets by 3%, we made some great portfolio acquisitions during the quarter. And the net income was up 7% overall, and keep in mind that there were some items last year that affect the comparison. But overall, the pace of growth will remain dependent on emerging opportunities. And credit, the credit you will continue to be disciplined while being ready to deploy when they see opportunities that meet their risk reward objectives.

Unknown Executive: But overall, the pace of growth will remain dependent on emerging opportunities. And credit, the credit you will continue to be disciplined while being ready to deploy when, when they see opportunities that meet their risk reward objectives. Thank you for me. Thank you.

Unknown Executive: Thank you, that's it for me. Thank you.

Unknown Executive: Once again, please press someone at this time for any questions or comments.

Sohrab Movahedi: Our last question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Okay, thank you very much. Again, I wanted to just come back to you on the trading results. If I, if I look at the performance of the bank and the trading numbers pre-covid. So I'm looking at 2017, 18, 19, you know, quarterly average, maybe around the levels at this quarters trading revenue would have been maybe a little bit higher.

Sohrab Movahedi: Our last question is from Sorab Movaheri from BMO Capital Markets. Please go ahead. Okay, thank you very much. And I wanted to just come back to you on the trading results. If I look at the performance of the bank and the trading numbers pre-COVID, so I'm looking at 2017, 18, 19, you know, quarterly average, maybe around the levels that this quarters trading revenue would have been, maybe a little bit higher. But what I'm trying to kind of get a sense for is, you know, the elevated or the very kind of strong trading revenue numbers over the last couple of years.

Sohrab Movahedi: Could those end up being operations? Is there is there an indication that maybe the kind of operating environment that we're going to be in will mean trading numbers will be closer to historical levels. And a number like this will actually be a good number. Thanks for the questions, Sorab.

Sohrab Movahedi: But what I'm trying to kind of get a sense for is, you know, the elevated or the very kind of strong trading revenue numbers over the last couple of years. Could, could those end up being operations? Is there, is there an indication that maybe the kind of operating environment that we're going to be in will mean trading numbers will be closer to historical levels and a number like this will actually be a good number.

Laurent Ferreira: Thanks for the questions, Sohrab. And no, I think that our run rate in global markets is higher than that. When you take a look, take a step back. I mean, the goal has always been to deliver a performance during all market, market cycles. And you look at our performance in 2020 and 2020 to certainly we did very well during elevated volatility. But even in 2021, which was a market characterized by up markets and a lot of retail trading and decreasing volatility, we also did well.

Etienne Dubuc: And no, I think that our run rate in global markets is higher than that. When you take a look, take a step back. I mean, the goal has always been to deliver performance during all market, market cycles. And you look at our performance in 2020 and 2020 to certainly we did very well during elevated volatility. But even in 2021, which was a market characterized by up markets and a lot of retail trading and decreasing volatility, we also did well.

Etienne Dubuc: I think what we've done is build a franchise that performs well during up and down in the market cycles. And the goal is always first and foremost to serve clients. Well, which means being in the markets when it gets rocky and to be able to provide liquidity and be a trusted advisor through how the different market cycles. And if that means being more defensive than peers and performing less well in a very quiet market like what we just had, we're comfortable with that, but we believe across the cycle, our run rate is higher than what we did at 23.

Laurent Ferreira: I think what we've done is build a franchise that performs well during up and down in the market cycles. And the goal is always first and foremost to serve clients. Well, which means being in the markets, when it gets rocky and to be able to provide liquidity and be a trusted advisor through how the different market cycles. And if that means being more defensive than peers and performing less well in a very quiet market like what we just had, we're comfortable with that, but we believe across the cycle, our run rate is higher than what we did at 23.

Laurent Ferreira: But do you believe volatility is picking up in the foreseeable future? Yes, I do believe and even though implies I've not really gone up, you're now seeing more client activity, you're now seeing more market swings, August was very different from June and July, and we're very encouraged by what we're seeing. Okay, maybe just a little bit related, is there is there how relevant is the eventual outcome of the federal budget and the treatment of dividend income and the implications from a taxable equivalent basis to the outlook for trading.

Etienne Dubuc: But do you believe volatility is picking up in the foreseeable future? Yes, I do believe and even though implies I've not really gone up, you're now seeing more client activity, you're now seeing more market swings, August was very different from June and July, and we're very encouraged by what we're seeing.

Laurent Ferreira: Okay, maybe just a little bit related and is there is there how relevant is the eventual outcome of the federal budget and the treatment of dividend income and the implications from a taxable equivalent basis to the outlook for trading. Well, I think it's it's probably too early to give precise number and estimates around that. I think the rules are still being and the applications of the potential rules are still being discussed.

Laurent Ferreira: Well, I think it's it's probably too early to give precise number and estimates around that. I think the rules are still being and the applications of the potential rules are still being discussed. So very early to do that and and it wouldn't mean a change for us and for every equity franchise in Canada, but you know what historically any change in capital regulatory liquidity rule has standard to impact market conditions and client demands and these changes bring business opportunities and we tend to do well in capitalizing on these new business opportunities.

Laurent Ferreira: So very early to do that and and it wouldn't mean a change for us and for every equity franchise in Canada, but you know what historically any change in capital regulatory liquidity rule has standard to impact market conditions and client demands and these changes bring business opportunities and we tend to do well in capitalizing on these new business opportunities.

Laurent Ferreira: Sorry, maybe I could jump in, you know, whether it's changes in capital rules and frtb or changes with CRA, it doesn't change our strategy in capital markets or capital allocation to our financial market franchise. So we're very comfortable with what we've built and, you know, you can see the performance over time and we're going to keep supporting it.

Laurent Ferreira: Sorry, maybe I could jump in, you know, whether it's changes in capital rules and FrTB or changes with CRA, it doesn't change our strategy in capital markets or capital allocation to our financial market franchise. So we're very comfortable with what we've built and you know, you can see the performance over time and we're going to keep supporting it.

Lucie Blanchet: Okay, if I can just maybe sneak one in for you see I'm curious you see if you could just tell us specifically in Quebec in the past quarter did you see opportunities for your business to grow maybe because of disruptions within the market. Yes, thank you for the question. Definitely what we see in Quebec we see us gaining market shares. We see that we continuously onboard new customers and we onboard them at a pace that is higher than the demography growth.

Lucie Blanchet: Okay, if I can just maybe sneak one in for Lucy, I'm curious you see if you could just tell us specifically in Quebec in the past quarter. Did you see opportunities for your business to grow maybe because of disruptions within the market? Yes, thank you for the question. Definitely what we see in Quebec, we see us gaining market shares. We see that we continuously onboard new customers and we onboard them at a base that is higher than the demography growth.

Lucie Blanchet: So definitely we're gaining market share there and it's really the foundation for us to continue to grow our deposit, acquire, engage and making sure that the customer satisfaction remains high. And there was been performing very well and we see more and more engagement from also the customers we onboard with lower attrition. So that's for us is the greatest opportunity because we like to have customer strategies and not really focused on product strategies the rest is just the consequence of our customer acquisition. So definitely lots of room for us to continue to grow and we are doing it. Okay, thank you very much. Those are my questions. Thank you.

Lucie Blanchet: So definitely we're gaining market share there and it's really the foundation for us to continue to grow our deposit, acquire, engage and making sure that the customer satisfaction remains high. And there was been performing very well and we see more and more engagement from also the customers we onboard with lower attrition. So that's for us is the greatest opportunity because we like to have customer strategies and not really focused on product strategies, the rest is just the consequence of our customer acquisition. So definitely lots of room for us to continue to grow and we are doing it. Okay, thank you very much, those are my questions. Thank you.

Darko Mihelic: The following question is from Darko Mihelic, from RBC Comptal Markets. Please go ahead. Hi, thank you. I just wanted to speak in a real quick question here, maybe a follow-up. Is your treasury doing anything different now that we've had another two rate hikes in Canada? Given where we are, is your positioning going to change materially from here? At Darko, it's hi. It's Marie Chantal. Thanks for the question. So a little bit like Lehan said earlier, I think our strategy is consistent in terms of managing treasury.

Darko Mihelic: The following question is from Darko Mihelic, from RBC Capitol Markets, please go ahead. Hi, thank you. I just wanted to speak in a real quick question here, maybe a follow-up. Is your treasury doing anything different now that we've had another two rate hikes in Canada? Given where we are, is your position going to change materially from here? Darko, it's hi, it's Marie Chantal, thanks for the question. So a little bit like Lehan said earlier, I think we are strategy is consistent in terms of managing treasury.

Darko Mihelic: And you probably saw in our disclosure, the sensitivity on the NII, if rates were to change. And I think it's going to be a little bit better. And there was a slight reduction in the NII sensitivity for a lower 100 basis points going forward. So we're seeing a little bit less sensitivity going forward. So I think those would be the comments that I would give you. Yes, thank you. I was actually looking at that now as you spoke and the question then moves into when I look at the benefit or gain, let's suppose from treasury in any given quarter.

Darko Mihelic: And you probably saw in our disclosure the sensitivity on the NII, if rates were to change and there was a slight reduction in the NII sensitivity for a lower hundred basis points going forward. So we're seeing a little bit less sensitivity going forward.

Marie Chantal-Jangra: So I think those would be the comments that I would give you. Yes, thank you. I was actually looking at that now as you spoke. And the question then moves into, when I look at the benefit or gain, let's suppose from treasury in any given quarter, could that materially change in a falling interest rate environment? I don't think it could materially change. It could change because we're always assessing our or our decisions in terms of managing centrally asset and liability. But I wouldn't say that it could materially change. No.

Darko Mihelic: Could that materially change any falling interest rate environment? I don't think it could materially change. It could change because we're always assessing our decisions in terms of managing centrally asset and liability. But I wouldn't say that it could materially change. No. Okay, last follow up for me and I apologize for this arcane line of questioning, but the. I guess the way I think of it or the way I'm looking at this is when I look at the results and they look at the trading results in the quarter and given where interest rates are and funding where it is.

Marie Chantal-Jangra: Okay, last follow up for me and I apologize for this arcane line of questioning. But the, I guess the way I think of it or the way I'm looking at this is when I look at the results and I look at the trading results in the quarter and given where interest rates are and funding where it is. I just want to make sure that I understand that when I look at the funding cost that is sort of allocated to trading results in the quarter, is there any reason to think that that would change going forward?

Marie Chantal-Jangra: What are the big drivers there? And how should I think about that, A, if rates they stable and B, if rates come down? Hi, Darko, we sit in. I don't think you should anticipate any change in our strategy or the way that we allocate cost or look at funding and trading results. Okay, thank you very much for that. Appreciate that. Thank you.

Darko Mihelic: I just want to make sure that I understand that when I look at the funding cost that is sort of allocated to trading results in the quarter, is there any reason to think that that would change going forward? Third, what are the big drivers there? And how should I think about that? A, if rates they stable and B, if rates come down? Hi, Darko. We sit in. I don't think you should anticipate any change in our strategy or the way that we allocate cost or look at funding and trading results. Okay, thank you very much for that. I appreciate that. Thank you.

Unknown Executive: That was all asked questions.

Laurent Ferreira: That was all asked questions, so I know I would not like to turn the meeting back over to Mr. Fejera. Thank you for it.

Laurent Ferreira: So I know I would not like to turn the meeting back over to Mr. Fejera. Thank you for it.

Laurent Ferreira: And before we disconnect, I'd like to take a minute to thank Linda Boulanger for leading our investor relations team with great success over the past seven years. She is taking on a new role as head of sustainable finance and financial markets. Linda, thank you for your contribution. It has been invaluable. Great.

Laurent Ferreira: And I would like to also welcome Marianne Ratte as our new head of investor relations and congratulate both of you on your new roles. That was it for me.

Unknown Executive: And I would like to also welcome Marianne Ratte as our new head of investor relations and congratulate both of you on your new roles.

Unknown Executive: That was it for me. Thank you everyone. Thank you.

Unknown Executive: Thank you everyone. Thank you. The conference has now ended. Please disconnect your line at this time. And we thank you for your participation. Thank you. The conference has now ended.

Unknown Executive: The conference has now ended. Please disconnect your line at this time. And we thank you for your participation. Thank you.

Unknown Executive: The conference conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.

Unknown Executive: Please disconnect your lines at this time. And we thank you for your participation.

Q3 2023 National Bank of Canada Earnings Call

Request a DemoDemo

NA.

National Bank of Canada

Earnings