Q4 2023 Bank of Montreal Earnings Call

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Speaker 2: This conference is being recorded. This conference is being recorded.

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

Speaker 3: All participants please stand by. Your conference is ready to begin. Good morning and welcome to BMO Financial Group's Q4 2022 earnings release and conference call for December 1st, 2020.

All participants please standby your conference is ready to begin good morning, and welcome to BMO Financial group's Q4, 2023 earnings release and conference call for December 1st 2023, you're always for today is Christine view. Please go ahead.

Speaker 3: Your oath for today is Christine Veal. Please go ahead.

Speaker 4: Thank you and good morning. We will begin the call with remarks from Darrell White, BMO's CEO , followed by Taifun Tuzun, our Chief Financial Officer, and Piyush Agrawal, our Chief Risk Officer.

Thank you and good morning, we will begin the call with remarks from Darryl White Bmo's CEO, followed by Typhoon, Susan Our Chief Financial Officer, and Peter should outgrow all our chief risk Officer also present to take questions. Today are Ernie Johansen head of BMO, North American personal and business banking, they deem Hershey head of BMO capital.

Speaker 4: Also present to take questions today are Ernie Johanson, Head of BMO North American Personal and Business Banking, Nadim Virjee, Head of BMO Commercial Banking, Alan Tenenbaum and Stan Barkley are representing BMO Capital Markets, Delon Camanga from BMO Wealth Management, and Daryl Hackett, BMO US CEO .

Female commercial banking, Alan Tennenbaum, and Dan Barclay are representing BMO capital markets Delon Commando from BMO wealth management, and Darryl Hackett email U S seals.

Speaker 4: As noted on slide two, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements.

As noted on slide two forward looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties actual results could differ materially from these statements I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results management measures performance on a reported and adjusted basis and considers supposed to be.

Speaker 4: I would also remind listeners that the bank uses non- GAAP financial measures to arrive at adjusted results, management measures, performance on a reported and adjusted basis, and considers both to be useful in assessing underlying business performance.

Useful in assessing underlying business performance Geralyn typhoon will be referring to adjusted results in their remarks, unless otherwise noted I will now turn the call over to Daryl. Thank you Christina and good morning, everyone.

Speaker 4: Daryl and Taisun will be referring to adjusted results in their remarks unless otherwise noted. I will now turn the call over to Daryl. Thank you, Christina, and good morning, everyone.

Speaker 4: Our results this year reflect the fundamental strength and diversification of our business.

Our results this year reflect the fundamental strength and diversification of our businesses driven by record revenue and ongoing momentum in Canadian personal and commercial banking and the contribution of the bank of the West we delivered good performance in a challenging economic backdrop with net income of $8 7 billion in fiscal.

Speaker 4: driven by record revenue and ongoing momentum in Canadian personal and commercial banking and the contribution of the Bank of the West. We delivered good performance in a challenging economic backdrop with net income of 8.7 billion in fiscal 2023.

In 2023.

Speaker 4: Adjusted earnings per share were $2.81 for the fourth quarter and $11.73 for the year.

Adjusted earnings per share were $2.81 for the fourth quarter and $11.73 for the year.

Speaker 4: Pre-provisioned pre-tax earnings grew 5% for the year, driven by 16% growth in revenue, reflecting both organic growth across our businesses and the benefit of acquisition.

Pre provision pretax earnings grew 5% for the year, driven by 16% growth in revenue, reflecting both organic growth across our businesses and the benefit of acquisitions.

Speaker 4: Revenue was up 10% in Canadian PNC, 43% in US PNC, and 5% in each of wealth management and capital markets.

Revenue was up 10% in Canadian P&C, 43% in U S P&C and 5% in each of wealth management and capital markets.

Speaker 4: We continue to have a strong capital position with a CET-1 ratio of 12.5.

We continue.

To have a strong capital position with a CET one ratio of 12, 5%.

Speaker 4: For the year, return on equity was 12.3% and return on tangible common equity was 15.8%.

For the year return on equity was 12, 3% and return on tangible common equity was 15, 8%.

Speaker 4: And this morning we announced the dividend increase of $4 to $1.51 per share, a 6% increase over last year.

And this morning, we announced a dividend increase of four cents to.

<unk> to $1 51 per share a 6% increase over last year.

Speaker 4: This year we made significant progress against our consistent strategic priorities to continue to grow and strengthen our bank.

This year, we made significant progress against our consistent strategic priorities to continue to grow and strengthen our bank.

Speaker 4: and enhance customer service and invest in community.

And.

Enhanced customer service and invest in communities.

Speaker 4: We closed and integrated strategic acquisitions, advanced our digital first capabilities, and increased our focus on delivering interconnected one client experience.

We closed and integrated strategic acquisitions advanced our digital first capabilities and increased our focus on delivering interconnected one client experiences.

Speaker 4: with the successful conversion of Bank of the West, which I'll expand upon in a moment, BIMO is the most integrated North South Bank on the country.

With the successful conversion of bank of the West, which I'll expand upon in a moment BMO is the most integrated north South bank on the continent.

Speaker 4: For our customers joining from Bank of the West, this means an upgrade to the strength and breadth of their bank, with access to new capabilities, products and services to help them make financial progress.

For our customers joining from bank of the West. This means an upgrade to the strength and breadth of their bank with access to new capabilities products and services to help them make financial progress.

Speaker 4: When we enter a new market, we commit to making progress for our clients and communities.

When we enter a new market, we commit to making progress for our clients and communities.

Speaker 4: Our BMO Empower 2.0 plan is set to deliver more than $40 billion to support underrepresented communities and organizations across our US footprint, including loans to minority-owned small businesses, community reinvestment in real estate, affordable housing, and neighborhood revitalization.

Our BMO in power 2.0 plan is set to deliver more than $40 billion to support underrepresented communities and organizations across our U S footprint, including loans to minority owned small businesses community reinvestment in real estate affordable housing and neighborhood revitalization.

Speaker 4: We also completed the acquisition of air miles with nearly 10 million active collectors who will benefit from the stability and rejuvenation of the most recognized loyalty program in Canada.

We also completed the acquisition of air miles with nearly 10 million active collectors, who will benefit from the stability and rejuvenation of the most recognized loyalty program in Canada.

Speaker 4: Since we closed in June , we've added already 50 new partners and introduced robust new features, including an updated travel booking platform and a mobile app leading to four consecutive months of new collector growth and increased engagement.

Since we closed in June we've added already 50, new partners and introduce robust new features including an updated travel booking platform and our mobile app, leading to four consecutive months of new collector growth.

And increased engagement.

Speaker 4: Our relentless focus on putting customers first and supporting their financial goals with innovative digital experiences and expert guidance continues to be recognized, including being ranked first by JD Power in both its 2023 Canada Retail Banking and online banking customer satisfaction studies, with the highest scores among Canada's largest banks.

Yeah.

Our relentless focus on putting customers first and supporting their financial goals with innovative digital experiences and expert guidance continues to be recognized including being ranked first by J D power in both its 2023, Canada retail banking and online banking customer satisfaction.

<unk> studies with the highest scores among Canada's largest banks.

Speaker 4: This type of recognition combined with the continued strong customer loyalty reinforces the trust our customers place in us. And it's translating into results with strong customer acquisition and deeper relations.

This type of recognition combined with the continued strong customer loyalty reinforces the trust our customers place in us and it's translating into results with strong customer acquisition and deeper relationships.

Speaker 4: We've had consistent performance in our flagship Canadian PNC business. With PPPP growth of 10% this year, reflecting pure leading revenue growth in our retail bank, strong market share in our premier commercial bank, and an ongoing focus on efficiency improvement.

We've had consistent performance in our flagship Canadian P&C business with P. P. P. T growth of 10% this year, reflecting pure leading revenue growth in our retail bank strong market share in our Premier commercial bank and an ongoing focus on efficiency improvements.

Speaker 4: In addition, our one client strategy has momentum and we've set a strong foundation to grow and deepen relationships between personal, wealth, commercial and capital markets clients through our integrated approach and product offering.

In addition.

Or one client strategy has momentum and we've set a strong foundation to grow and deepen relationships between personal wealth commercial and capital markets clients through our integrated approach and product offering.

Speaker 4: The conversion of Bank of the West in September was highly

The conversion of bank of the West in September was highly successful, we welcomed 2 million new customers converted $2 7 million accounts and over 300 systems and re enrolled over 90% of active digital users within the first week.

Speaker 4: We welcomed 2 million new customers, converted 2.7 million accounts, and over 300 systems, and re-enrolled over 90% of active digital users within the first one.

Speaker 4: We completed the rebranding of over 500 branches, now serving all customers with one unified BMO brand.

We completed the rebranding of over 500 branches now serving all customers with one unified BMO brand.

Speaker 4: This was a large and complex acquisition requiring exceptional planning and integration across the BIMO and Bank of the West organizations, evidence of our ongoing excellence in execution, a key competency at BIMO.

This was a large and complex acquisition, requiring exceptional planning and integration across the BMO and bank of the west organizations evidence of our ongoing excellence in execution, our key competency at BMO.

Speaker 4: Our record of improved profitability and efficiency combined with strong organic growth and successful acquisitions set the foundation for this expansion. Now, now.

Our record of improved profitability and efficiency combined with strong organic growth and successful acquisitions set the foundation for this expansion.

Now.

We are at the starting line to realize the full benefit of our expanded scale leverage our position as a top 10 U S bank backed by the strength of Bmo's full $1 three trillion dollar balance sheet, a key differentiator relative to our U S regional competitors.

Speaker 4: to realize the full benefit of our expanded scale, leverage our position as a top 10 US bank backed by the strength of BMO's full $1.3 trillion balance sheet, a key differentiator relative to our US regional competitor.

Speaker 4: We're executing against a proven playbook and we're uniquely positioned to gain share in our new home market.

We're executing against a proven playbook and we're uniquely positioned to gain share in our new home markets.

Speaker 4: And Momentum is already building with PPPT growth in our US segment of 27% this year to $4.1 billion US doubling from five years ago.

And momentum is already building with P. P. P T growth in our U S segment of 27% this year to $4 $1 billion of U S doubling from five years ago.

Speaker 4: Bank of the West customer activity is accelerating as we expect.

Bank of the west customer activity is accelerating as we expected.

Speaker 4: For example, we've seen a 3X increase in checking accounts sold digitally on our platform, and we've completed thousands of trades and transactions between Bank of the West clients and our capital markets business.

For example, we've seen a three <unk> increase in checking accounts sold digitally on our platform and we've completed thousands of trades and transactions between bank of the west clients in our capital markets businesses.

Speaker 4: With cost and revenue synergies identified and well underway, we are poised to continue to deliver strong performance.

With cost and revenue synergies identified and well underway. We are poised to continue to deliver strong performance.

Speaker 4: 2023 saw growing challenges in the global economy, impacted by weaker financial conditions, and compounded by the escalation of geopolitical crisis.

2023 saw growing challenges in the global economy impacted by weak or weaker financial conditions and compounded by the escalation of geopolitical crises.

Speaker 4: While the rate of inflation has fallen from four-decade highs, further progress towards normalization could be impeded by persistent inflation and weaker global demand due to higher costs of border borrowing.

While the rate of inflation has fallen from four decade highs further progress towards normalization could be impeded by persistent inflation and weaker global demand due to higher cost of border borrowing.

Speaker 4: The potential for an economic downturn remains, both in Canada and the US, with higher risks north of the border.

Potential for an economic downturn remains both in Canada, and the U S with higher risks north of the border.

Speaker 4: At BMO, we have a clear plan to respond to the environmental shift, which we began to anticipate much earlier this year.

At BMO, we have a clear plan to respond to the environmental shift, which we began to anticipate much earlier. This year. We've remained vigilant in controlling what we can control as typhoon will comment on shortly we're exceeding our planned cost synergies at bank of the West and now expect run rate synergies to be over 800.

Speaker 4: We've remained vigilant in controlling what we can control. As Typhoon will comment on shortly, we're exceeding our planned cost synergies at Bank of the West and now expect run rates synergies to be over $800 million US, almost 20% higher than our initial estimate of $670 million US, and largely in our run rate by Q2 of 2024.

<unk> million dollars U S almost 20% higher than our initial estimate of $670 million U S and largely in our run rate by Q2 of 2024.

On the revenue side.

Speaker 4: high impact marketing campaign is in place across our expanded footprint driving strong brand aided awareness leading to thousands of new appointments with our customers and supporting revenue synergies in line with our expectations.

High impact marketing campaign is in place across our expanded footprint driving strong brand aided awareness, leading to thousands of new appointments with our customers and supporting revenue synergies in line with our expectations.

Speaker 4: Additionally, actions we announced and started last quarter on efficiency initiatives to optimize legacy BIMO workforce real estate technology and procurement are expected to result in additional run rate savings of $400 million Canadian and be largely in our run rate by the end of 2024.

Additionally, actions, we announced and started last quarter on efficiency initiatives to optimize legacy BMO workforce real estate technology and procurement are expected to result in additional run rate savings of $400 million Canadian and be largely in our run rate by the end of 2012.

Four.

Speaker 4: We continue to focus on strengthening return on capital through our discipline dynamic capital allocation decisions, including the winding down of our indirect auto portfolio and our focus on one client experiences to deepen customer relationships.

We continue to focus on strengthening return on capital through our disciplined dynamic capital allocation decisions, including the winding down of our indirect auto portfolio and our focus on one client experiences to deepen customer relationships.

Speaker 4: Combining these actions with our long-term track record of superior risk management and the full run rate of our acquisitions should differentiate BMO from peers in fiscal 2024 and beyond, driving positive operating leverage and setting us up to compete from a position of strength, regardless of the environment.

Combining these actions with our long term track record of superior risk management and the full run rate of our acquisitions should differentiate BMO from peers in fiscal 2024, and beyond driving positive operating leverage and setting us up to compete from a position of strength regardless of the environment.

Speaker 4: Our consistent performance enables us to put our purpose into action, to boldly grow the good in business and life, and support a sustainable and inclusive future.

Our consistent performance enables us to put our purpose into action to boldly grow the good in business and life in support of sustainable and inclusive future.

Speaker 4: We continue to advance our ambition to be our clients lead partner in the transition to a net zero world through industry leading sustainable finance and energy transition solution.

We continue to advance our ambition to be our clients' lead partner in the transition to a net zero world.

Through industry, leading sustainable finance and energy transition solutions.

Speaker 4: This year, we ranked first in the sustainability linked loan market and launched one of the first sustainability linked deposit offerings in North America.

This year, we ranked first in the sustainability linked loan market and launched one of the first sustainability linked deposit offerings in North America.

Speaker 4: As I look ahead, we are focused on a consistent set of strategic priorities and are squarely focused on disciplined execution to deliver sustained performance against our medium term financial objectives, including delivering positive operating leverage.

As I look ahead, we are focused on a consistent set of strategic priorities and are squarely focused on disciplined execution to deliver sustained performance against our medium term financial objectives, including delivering positive operating leverage.

Speaker 4: This year we've added total, pardon me, this year we've added return on tangible common equity of over 18% as we believe it to be an important measure of our performance across our capital structure.

This year, we've added total pardon me. This year, we've added return on tangible common equity of over 18% as we believe it to be an important measure of our performance across our capital structure.

Speaker 4: As the bank, best position to serve more clients across the Canadian and US economies were confident in the power of our integrated North American franchise and our strategy to help clients make real financial progress.

As the bank best positioned to serve more clients across the Canadian and U S. Economies, we're confident in the power of our integrated North American franchise, and our strategy to help clients make real financial progress.

Speaker 4: BIMO will continue to leverage opportunities to drive progress across all our homework.

BMO will continue to leverage opportunities to drive progress across all our home markets.

Speaker 5: I want to thank our employees, our customers and shareholders for their commitment to BIMO, and I will now turn it over to Typhon. Thank you, Darrell. Good morning, and thank you for joining us.

I want to thank our employees, our customers and shareholders for their commitment to BMO and I will now turn it over to the typhoon.

Thank you Darryl good morning, and thank you for joining US my comments will start on slide 10.

Speaker 5: Before moving to the court as a result, I would like to update a few of the financial metrics on the acquisition of Bank of the West.

Before moving to the quarter's results I would like to update a few of the financial metrics on the acquisition of bank of the West.

Speaker 5: with the benefit of almost 10 months of operating a larger scale integrated U.S. business.

With the benefit of almost 10 months of operating a larger scale integrated U S business.

Speaker 5: And a very successful conversion now behind us. We are in a better position to assess the full strategic and financial value of the acquisition and give you a refreshed financial out.

And a very successful conversion now behind US we are in a better position to assess the full strategic and financial value of the acquisition and give you a refreshed financial outlook.

Speaker 5: First, we are pleased with the core performance of Back of the West. Despite a more difficult U.S. banking environment than we anticipated coming into the...

First we are pleased with the core performance of back of the west Despite a more difficult U S back in your environment than we anticipated coming into this year.

Speaker 5: As a result, we are confirming our 7% net EPS accretion reflecting our updated outlook for the performance of our underlying business and the contribution from Bank of the West.

As a result, we are confirming our 7% net EPS accretion, reflecting our updated outlook for the performance of our underlying business and the contribution from bank of the west.

Speaker 5: Second, as Darrell mentioned, with the benefit of directly assessing the resource allocations across the combined franchise, we now expect run rate costs synergies of over $800 million US by FISCHOL 2025, significantly higher than the previous $670 million US estimates.

Second as Darryl mentioned with the benefit of directly assessing the resource allocations across the combined franchise. We now expect run rate cost synergies of over $800 million U S by fiscal 2025 significantly higher than the previous 670.

Dollar U S estimates.

Speaker 5: The increase is driven primarily by a reassessment of technology and operations resources.

The increase is driven primarily by a reassessment of technology and operations resource needs.

Speaker 5: We expect to achieve almost all of these run rate benefits by February 2024. We have realized $220 million US of these benefits in 2023 with an additional $550 million US.

We expect to achieve almost all of these run rate benefits by February 2024.

We have realized $220 million U S of these benefits in 2023 with an additional $550 million U S.

Speaker 5: benefit to be realized in 2024.

Benefit to be realized in 2024.

Speaker 5: Integration costs are expected to be approximately $1.9 billion US, reflecting higher expenses associated with the later than originally anticipated closing dates, higher contract termination costs, and pre-conversion expenses, which were instrumental in executing one of the most successful integrations in the industry.

Integration costs are expected to be approximately $1.9 billion U S, reflecting higher expenses associated with the later than originally anticipated closing date higher contract termination costs.

And pre conversion expenses, which were instrumental in executing one of the most successful integrations in the industry.

Speaker 5: We remain confident in delivering revenue synergies of $450 to $550 million US, although timing may be one or two quarters later than initially planned, given a more muted near-term environment for US banks.

We remain confident in delivering revenue synergies of $450 million to $550 million U S. Although timing, maybe one or two quarters later than initially planned given a more muted near term environment for U S banks.

Speaker 5: Customer acquisition has remained robust, even during the pre-conversion period, and we are encouraged by early wins.

Customer acquisition has remained robust even during the conversion period and we are encouraged by early wins.

Speaker 5: Similarly, we've maintained strong Salesforce retention during this time.

Similarly, we have maintained strong sales force retention during this time.

Speaker 5: We are processing significantly more transactions through our existing digital platforms, and we see meaningful opportunities to improve both sales productivity and client penetration in each of our business groups.

We are processing significantly more transactions through our existing digital platforms, and we see meaningful opportunities to improve both sales productivity and client penetration in each of our business groups.

Speaker 5: supported by stronger connectivity between businesses to serve the full needs of our customers.

Ported by stronger connectivity between businesses to serve the full needs of our customers.

Speaker 5: We are confident in achieving an incremental $2 billion US in run rate pre-provision pre-tax earnings by the first half of 2026 resulting from the acquisition.

We are confident in achieving an incremental $2 billion U S and run rate pre provision pre tax earnings by the first half of 2026, resulting from the acquisition.

Turning to slide 12.

Speaker 5: Fourth quarter reported EPS was $2.06 and net income was $1.6 billion.

Fourth quarter reported EPS was $2 six and net income was $1 $6 billion. Adjusting items are shown on slide 40 and include acquisition related impacts for integration costs and amortization of intangibles, which decreased net income by 433 million.

Speaker 5: Adjusting items are shown on slide 40 and include acquisition related impacts for integration costs and Amortization of intangibles which decrease net income by $433 million and 88 million dollars respect

And $88 million respectively.

Speaker 5: The decrease in reported net income reflected these items and the gain on fair value management actions related to the Bank of the West acquisition in the prior.

The decrease in reported net income reflected these items and the gain on fair value management actions related to the bank of the West acquisition in the prior year.

Speaker 5: The remainder of my comment will focus on adjusted results.

The remainder of my comments will focus on adjusted results.

Speaker 5: Adjusted EPS was $2.81 down from $3.04 last year. And net income was $2.15 billion up 1%.

Adjusted EPS was $2 81 down from $3 four last year and net income was $2.15 billion up 1%.

Speaker 5: Revenue increased 19% with good organic growth and the benefit of acquisition.

Revenue increased 19% with good organic growth and the benefit of acquisitions.

Speaker 5: expenses increased 26% primarily due to the impact from acquisition.

Expenses increased 26%, primarily due to the impact from acquisitions.

Speaker 5: PPPT of $3.2 billion was off 9% driven by strong growth in our Canadian PNC and capital markets businesses and the addition of Bank of America.

P. P. P T of $3 $2 billion was off 9% driven by strong growth in our Canadian P&C and capital markets businesses.

And the addition of bank of the West.

Speaker 5: Total PCL was $446 million, including a $38 million provision for performing loans compared with a total provision of $226 million in the prior year. Peers will speak to the...

Total PCL was $446 million, including a $38 million provision for performing loans compared with a total provision of $226 million in the prior year Piyush.

Piyush will speak to these in his remarks.

Speaker 5: Moving to the balance sheet on slide 13, average loan growth was 18% year over year, driven by Bank of the West, and good growth in Canadian PNC and capital markets.

Moving to the balance sheet on slide 13 average loan growth was 18% year over year driven by back over the west and good growth in Canadian P&C and capital markets.

Speaker 5: sequentially period end loans were up 4% or 1% on a constant currency base.

Sequentially period end loans were up 4% or 1% on a constant currency basis.

Speaker 5: Business and government loans were up 2% with growth across all operating.

Business and government loans were up 2% with growth across all operating groups.

Speaker 5: Consumer loans were up 1% driven by mortgage growth in both Canadian and USPNC, partially offset by declining indirect auto balance.

Consumer loans were up 1% driven by mortgage growth in both Canadian and U S. P&C, partially offset by declining indirect auto balances.

Speaker 5: Average customer deposits increase 20% year over year due to the back of the West and higher balances in Canadian PNC and CAFILM.

Average customer deposits increased 20% year over year due to the back of the west and higher balances in Canadian P&C in capital markets.

Speaker 5: sequentially, period and deposits were up 4% or 2% on a constant currency basis with growth in Canadian and USPNC and capital markets offset by lower balances and wealth management.

When Chile, Purion deposits were up 4% or 2% on a constant currency basis with growth in Canadian and U S P&C and capital markets offset by lower balances in wealth management.

Speaker 5: Turning to slide 14, on an extraiding basis, net interest income was up 16% from the prior year, and net interest margin was up to basis points driven by Bank of the West and higher margins in Canadian PNC, largely offset by higher low yielding asset balances for liquidity purposes in corporates and continued pressure from deposit migration.

Turning to slide 14 on an ex trading basis net interest income was up 16% from the prior year and net interest margin was up two basis points driven buyback over the west and higher margins in Canadian P&C, largely offset by higher low yielding asset balances for liquidity purposes and corporate.

And continued pressure from deposit migration.

Speaker 5: Net interest margin was down two basis points from last quarter, driven by higher margins in US PNC, more than offset by lower net interest income in corporate service.

Net interest margin was down two basis points from last quarter, driven by higher margins in the U S P&C more than offset by lower net interest income and corporate services.

Speaker 5: In Canadian PNC, NIMM was unchanged from last quarter, as favorable balance sheet mix was offset by lower deposit margins due to the continued migration to term deposit.

In Canadian P&C NIM was unchanged from last quarter as favorable balance sheet mix was offset by lower deposit margins due to the continued migration to term deposits.

Speaker 5: In USPNC, NIM was up seven basis points of which approximately four basis points was due to a one-time net interest income benefit offset in corporate services.

And U S. P&C NIM was up seven basis points of which approximately four basis points was due to a one time net interest income benefit offset in corporate services.

Speaker 5: With the remaining increase, reflecting favorable balance sheet mix, partially offset by continued strong deposit pricing competition.

With the remaining increase reflecting favorable balance sheet mix, partially offset by continued strong deposit pricing compared to competition.

Speaker 5: On a full year basis, our overall net interest margin was up 8 basis points from 2022, driven by the impact of Bank of the West, and the benefit of higher longer term yields, partially offset by pressures from higher deposit costs and low yielding asset balances for liquidity purposes.

On a full year basis, our overall net interest margin was up eight basis points from 2022, driven by the impact of bank of the west and the benefit of higher longer term yields partially offset by pressures from higher deposit costs and low yielding asset balances for liquidity purposes.

Moving to slide 15 base.

Speaker 5: Based on the decision that we made early in the year to curb incremental expense.

Based on the decision that we made early in the year to curb incremental expenses our year over year underlying expense growth has continued to come down throughout the year.

Speaker 5: Our year-over-year underlying expense growth has continued to come down throughout the year.

Speaker 5: We also have announced additional expense management actions last quarter that will further improve our operational efficiency.

We also have announced additional expense management actions last quarter that will further improve our operational efficiency.

Speaker 5: This quarter included a $51 million charge related to the consolidation of BIMO real estate that will reduce expenses in future periods.

This quarter included a $51 million charge related to the consolidation of BMO real estate that will reduce expenses in future periods.

Speaker 5: As a reminder, we expect to achieve run rate, expense savings of $400 million from all these actions by early 2025 in addition to the Bank of the West costs.

As a reminder, we expect to achieve run rate expense savings of $400 million from all of these actions by early 2025. In addition to the bank of the west cost synergies.

Speaker 5: The full-year expense growth of 24%, primarily reflected the impact of acquisition.

The full year expense growth of 24%, primarily reflecting the impact of acquisitions.

Speaker 5: and higher business development costs, as well as the flow through from last year's investments in Salesforce and technology.

And higher business development costs as well as the flow through from last year's investments in sales force and technology.

Speaker 5: on a normalized constant currency basis underlying expenses increased 4%, excluding the impact of acquisitions, revenue-based compensation, and upfront charges to accelerate operational efficiency.

On a normalized constant currency basis.

Underlying expenses increased 4%, excluding the impact of acquisitions revenue based compensation.

Upfront charges to accelerate operational efficiencies.

Speaker 5: As we look ahead to 2024, we are confident in our ability to deliver positive operating leverage starting the second quarter, after we reach the first-tier anniversary of the closing of the Bank of the West acquisition, as well as for the full fiscal year.

As we look ahead to 2024, we are confident in our ability to deliver positive operating leverage starting the second quarter. After we reached the first year anniversary of the closing up the bank of the West acquisition as well as for the full fiscal year.

Speaker 5: This excludes the impact of the estimated FDIC assessment charge of approximately $300 million US, which we expect to recognize in the first quarter as an adjusting item.

This excludes the impact of the estimated FDIC assessment charge of approximately $300 million U S, which we expect to recognize in the first quarter as an adjusting item.

Speaker 5: Turning to slide 16, our capital position continues to strengthen with common equity ratio of 12.5% of 20 basis points from the prior quarter.

Turning to slide 16, our capital position continues to strengthen with common equity ratio of 12, 5% up 20 basis points from the prior quarter.

Speaker 5: Internal capital generation and shares issued under the dividend reinvestment plan were partially off-fed by acquisition integration costs in the current quarter.

Internal capital generation and shares issued under the dividend reinvestment plan were partially offset by acquisition integration costs in the current quarter.

Speaker 5: We expect a combined impact of regulatory changes in the first quarter of 2024, and the FDIC charge to be approximately 25 bases.

We expect the combined impact of regulatory changes in the first quarter of 2024.

And the FDIC charge to be approximately 25 basis points.

Speaker 5: Moving to the operating groups and starting on slide 17.

Moving to the operating groups and starting on slide 17.

Speaker 5: Canadian PNC delivered record net income of $966 million up 5% year over year.

<unk> ADN P&C delivered record net income of $966 million.

Up 5% year over year.

Speaker 5: PPPT of $1.6 billion increased 13%, partially offset by higher provisions for credit loss.

P. P. P T of $1 $6 billion increased 13%, partially offset by higher provisions for credit losses.

Speaker 5: Revenue of $2.9 billion was up 13% driven by 10% growth in net interest income, reflecting both strong balance growth and higher margin.

Revenue of $2 $9 billion was up 13% driven by 10% growth in net interest income, reflecting both strong balanced growth and higher margins.

Speaker 5: Non-interest revenue increased 20% primarily due to higher card fees as well as the acquisition of air mass.

Noninterest revenue increased 20%, primarily due to higher card fees as well as the acquisition of air miles.

Speaker 5: Expenses were up 12% reflecting the inclusion of air miles and higher employee related expense.

Expenses were up 12%, reflecting the inclusion of air miles and higher employee related expenses.

Speaker 5: loans were up 6% year over year, with growth across both mortgages and commercial loans, and increased 2% from the prior quarter.

Loans were up 6% year over year with growth across both mortgages and commercial loans and increased 2% from the prior year quarter.

Speaker 5: Deposits were up 12% year over year and 3% sequentially across both retail and commercial business.

Deposits were up 12% year over year, and 3% sequentially across both retail and commercial businesses.

Speaker 5: We have strong momentum on both sides of the balance sheet and while we expect some continued moderation in balance growth, we are well positioned for continued market share gains in our business.

We have strong momentum on both sides of the balance sheet and while we expect some continued moderation in balance growth. We are well positioned for continued market share gains in our businesses.

Speaker 5: Moving to USBNC on slide 18. My comments here will speak to the US dollar performer.

Moving to U S P&C on slide 18.

Comments here will speak to the U S dollar performance.

Speaker 5: net income was $543 million up 11% and PPPT was up 18% mainly due to the contribution from back of the West.

Net income was $543 million up 11% and P. P. P. T was up 18% mainly due to the contribution from bank of the west.

Speaker 5: Dequentially, revenue was relatively stable with an increase in net interest income mostly offset by a decrease in non-interest revenue.

Sequentially revenue was relatively stable with an increase in net interest income, mostly offset by a decrease in noninterest revenue.

Speaker 5: Expenses decline 3% quarter over quarter, reflecting lower severance and technology costs.

Expenses declined 3% quarter over quarter, reflecting lower severance and technology costs.

Speaker 5: loans were up 48% from the prior year, driven by Bank of the West, and were flat quarter over quarter on an average basis, and up 2% on a period end basis, reflecting increases in both mortgages and business and government law.

Loans were up 48% from the prior year driven by back of the West and were flat quarter over quarter on an average basis and up 2% on a period end basis, reflecting increases in both mortgages and business and government loans.

Speaker 5: Deposits increased 43% year over year, and were flat sequentially on an average basis, and up 1% on a period end base.

Deposits increased 43% year over year and were flat sequentially on an average basis and up 1% on a period end basis.

Speaker 5: While the banking environment remains muted, we are well positioned to capture growth opportunities across our expanded footprint and outperform the market as conditions improve.

While the banking environment remains muted, we are well positioned to capture growth opportunities across our expanded footprint and outperformed the market as conditions improve.

Speaker 5: Moving to slide 19. Be more wealth management net income was $263 million down from $298 million last year.

Moving to slide 19, BMO wealth management net income was $263 million down from $298 million last year.

Speaker 5: Well-fin-asset management net income of $213 million decreased 3% from the prior use.

Wealth and asset management net income of $213 million decreased three 3% from the prior year.

Speaker 5: contributions from back of the West and growth and new client assets were more than offset by lower net interest income due to migration to term deposits and higher.

Contributions from bank of the West and growth in new client assets were more than offset by lower net interest income due to migration to term deposits and higher expenses.

Speaker 5: Insurance net income was $50 million down from $77 million in the prior year driven by unfavorable market movements compared with the prior year.

Insurance net income was $50 million down from $77 million in the prior year.

Driven by unfavorable market movements compared with the prior year.

Speaker 5: expenses were up 12% mainly due to the impact of Bank of the West and higher employee related and technology costs.

Expenses were up 12%, mainly due to the impact of bank of the west and higher employee related and technology costs.

Speaker 5: Moving to slide 20, BMO Capital Markets had a strong quarter with net income of $492 million of 36% year over year and PPPT of $620 million of 39%.

Moving to slide 20.

BMO capital markets had a strong quarter with net income of $492 million up 36% year over year and P. P. P T of $620 million up 39%.

Speaker 5: Revenue in global markets was up 12% with strong equity trading activity and investment in corporate banking was up 29% on higher M&A and underwriting

Revenue in global markets was up 12% with strong equities trading activity and investment in corporate banking was up 29% on higher M&A and underwriting activity.

Speaker 5: Expenses were up 9% driven by higher performance-based compensation, technology and transaction-based cost.

<unk> were up 9%.

By higher performance based compensation technology and transaction based costs.

Speaker 5: Turning now to slide 21. Corporate services net loss was $311 million compared with $159 million in the prior quarter and $104 million in the prior year.

Turning now to slide 21, corporate services net loss was $311 million compared with <unk> hundred $59 million in the prior quarter and $104 million in the prior year.

Speaker 5: Results reflect higher expenses, including the charge related to BIMO real estate in the current quarter, as well as lower rep.

Results reflect higher expenses, including the charge related to BMO real estate in the current quarter as well as lower revenues.

Speaker 5: Looking ahead to 2024, we are encouraged by moderating inflationary pressures, lowering the need to increase policy rates in the US and Canada.

Looking ahead to 2024, we are encouraged by moderating inflationary pressures lowering the need to increase policy rates in the U S and Canada.

Speaker 5: With a slower economic growth outlook, we expect long growth in Canada to continue to moderate and U.S. long growth, which has lagged Canada in 2023 to gradually improve during these.

With a slower economic growth outlook, we expect loan growth in Canada to continue to moderate and U S loan growth, which has lacked Canada in 2023 to gradually improve during the year.

Speaker 5: We expect to combine loan growth to be in the low-to-mid single digit range, along with similar growth rates and poor deposits.

We expect the combined loan growth to be in the low to mid single digit range, along with similar growth rates and core deposits. Our NIM is forecasted to be relatively stable as the benefit of reinvestments at higher rates offsets continued deposit margin pressure.

Speaker 5: Our NIM is forecasted to be relatively stable as the benefit of reinvestments at higher rates offsets continued deposit margin pressure.

Speaker 5: On the expense side, we remain confident that we will achieve positive operating leverage with low single-digit growth reflecting the additional quarters related to the back of the West and Aramayazakh.

On the expense side, we remain confident that we will achieve positive operating leverage with low single digit growth, reflecting the additional quarters related to the back of the west and <unk> acquisitions.

Speaker 5: In summary, in 2023, we delivered solid financial results while we successfully closed and converted the largest bank acquisition in Canadian history.

In summary in 2023, we delivered solid financial results, while we successfully closed and converted the largest bank acquisition in Canadian history.

Speaker 5: We remain proactive in addressing challenges that largely relate it to the cyclical nature of our business and expect the actions that we have taken this year and our continued relative strength in Canada to support strong performance in 2024 with the added benefit of a larger scale operation in the US, which is a significant differentiation for Beam.

We remain proactive in addressing challenges that largely related to the cyclical nature of our business.

And expect the actions that we have taken this year and our continued relative strength in Canada to support strong performance in 2024 with the added benefit of a larger scale of operation in the U S, which is a significant differentiation or bema.

Speaker 6: I will now turn it over to Piyush. Thank you, Typhoon and good morning everyone. We had good risk performance this fiscal year, despite a challenging year marked by economic and geopolitical headwinds, supported by the strong risk management discipline across the banks.

I will now turn it over to Piyush. Thank you typhoon and good morning, everyone.

We had good risk performance this fiscal year, despite the challenging year marked by economic and geopolitical headwinds supported by the strong risk management discipline across the bank.

Speaker 6: Starting on slide 23 for the fiscal year, the total provision for credit losses was $2.2 billion for 35 basis points, including the initial provision for Bank of the West in the second quarter.

Starting on slide 23 for the fiscal year. The total provision for credit losses was $2 2 billion, a 35 basis points, including the initial provision for bank of the west in the second quarter.

Speaker 6: Adjusting for this one-time charge, total provisions for credit losses were $1.5 billion or 24 basis coins.

Adjusting for this onetime charge door to the provisions for credit losses were $1 5 billion.

Our 24 basis points.

Speaker 6: During the year, we added close to $1 billion to the performing allowance, which included the $705 million in initial allowance for Bank of the West, and a performing build driven by portfolio credit migration and reflecting a forward view of the changing risk environment.

During the year, we added close to $1 billion to the performing allowance, which included the $705 million initial allowance for bank of the West end up performing better driven by portfolio credit migration and reflecting a forward view of the changing risk environment.

Speaker 6: Impaired provisions for the year were $1.2 billion or 19 basis points compared with 10 basis points in 2022 Consistent with the expected trend to more normal loss rates Turning now to the

Embed provisions for the year of a $1 2 billion or 19 basis points compared to the 10 basis points in 2022, consistent with the expected trend to more normal loss rates.

Turning now to the current quarter on slide 24.

Speaker 6: Total provision for credit losses was $446 million or 27 basis points compared with the provision of $492 million last quarter.

Total provision for credit losses was $446 million or 27 basis points compared with the provision of $492 million last quarter.

Speaker 6: In bad provisions for the quota, were $408 million or 25 basis points, up four basis points from the prior quota, reflecting the lag transmission of monetary policy tightening into the economy.

Mbank provisions for the quarter were $408 million or 25 basis points up four basis points from the prior quarter, reflecting the lag transmission of monetary policy tightening into the economy.

Speaker 6: Moving to slide 25, the provision for credit losses on performing loans was $38 million, primarily reflecting portfolio credit migration, largely offset by an improvement in the forward view of our macroeconomic outlook, as well as the lower probability of a hard landing scenario.

Moving to slide 25, the provision for credit losses on performing loans was $38 million, primarily reflecting portfolio credit migration is largely offset by an improvement in the forward view of our macroeconomic outlook as well as a lower probability of a hard landing scenario.

Speaker 6: Given the credit profile of a current portfolio and a forecast for impaired losses, we are comfortable that a performing loan allowance is, provides adequate provisioning against loan losses with about three times coverage on tracing four quarters impaired losses.

Given the credit profile of our current portfolio and our forecast for embedded losses, we are comfortable that our performing loan allowances provides adequate provisioning against loan losses.

About three times coverage on trailing four quarters impaired losses.

Turning to slide 26.

Speaker 6: Impaired formations were 1.8 billion dollars and gross impaired loans increased to 4 billion dollars with the largest increase Coming from the business services, manufacturing and commercial weather state sectors.

And bank formations were $1 8 billion and gross impaired loans increased to $4 billion with the largest increase coming from the business services manufacturing and commercial real estate sectors.

Speaker 6: While gross impaired loans increase from very low levels in recent quarters, the GIL ratio of 59 basis points has returned as expected to pre-pandemic levels.

But the gross impaired loans increased from very low levels in recent quarters. The Gis ratio of 59 basis points has wreaked on as expected to pre pandemic levels.

Speaker 6: Despite the increase in formations in business and government lending in this quarter, we did not see large losses coming from them. About 12% rate of losses in formations, reflecting either a collateralized position or the strong underlying credit structure.

Despite the increase in formations and business and government lending in this quarter, we did not see large losses coming from them about 12% rate of losses and formations.

Acting either collateralized position are the strong underlying credit structures.

Speaker 6: Given investor interest, we have included additional information on the Canadian mortgage portfolio on flight 28.

Given investor interest we have included additional information on the Canadian mortgage portfolio on slide 28.

Speaker 6: Portfolio credit quality remains strong with low-dilinquency rates of 15 basis points.

Portfolio credit quality remains strong with low delinquency rates of 15 basis points average FICO scores of 789, an average LTV of 55% all of which provide significant risk mitigation with that said we.

Speaker 6: Average FICO scores of 789 and average LTV of 55%

Speaker 6: All of which provide significant risk mitigation.

Speaker 6: With that said, we do expect that higher interest rates will impact borrowers when they refinance or renew.

We do expect that higher interest rates would impact borrowers when they refinance or renew we continue to actively manage and stress test this portfolio and given that the majority of our customers have multi product relationships.

Speaker 6: We continue to actively manage and stretch as the portfolio and given that the majority of our customers have multi-product relationships, our analytical insights indicate customers have the capacity to absorb higher payments.

Is it because of the insights indicate customers have the capacity to absorb higher payments.

Speaker 6: In fact, about $16.3 billion of mortgages renewed in 2023 at higher interest rates, and these customers are demonstrating strong payment performance despite payment increases of just over 20% on average.

In fact about $16 $3 billion of mortgages renewed in 2023 at higher interest rates and these customers are demonstrating strong payment performance. Despite payment increases of just over 20% on average.

Speaker 6: A larger portion of our portfolio renews in 2026 by which time we expect interest rates will have moderated and customers will have had time to prepare.

A larger portion of our portfolio of venues in 2026 by which time, we expect interest rates will have moderated and customers, where they've had time to prepare.

Speaker 6: We are proactively reaching out to customers, particularly a wearable rate customer.

We are proactively reaching out to customers, particularly our variable rate customers.

Speaker 6: We've had a positive customer response to the outreach, resulting in a reduction in mortgages in negative amortization from prior quota.

Had a positive customer response to the outreach, resulting in a reduction in mortgages in negative amortization from prior quarter.

Speaker 6: As we look to the upcoming fiscal year, we have experienced the credit normalization that we were expecting.

As we look to the upcoming fiscal year, we have experienced a credit normalization that we weren't expecting.

Speaker 6: given our current outlook for higher for longer rates and the lagged impact from these interest rate increases, we expect impaired loss rates to crank somewhat higher from Q4 levels in the range of low 30 basis points.

Given our current outlook, but higher for longer rates and the lagged impact from these interest rate increases, we expect embedded loss rates to trend somewhat higher from Q4 levels in the range of 30 basis points.

Speaker 6: Still below a long-term average and then improve as a race to come down and the economy begins to strengthen further.

It's still below our long term average and then improve as the rates start to come down and the economy begins to strengthen further.

Speaker 6: Given our strong risk management capabilities, the quality of our portfolio, and prudent allowance coverage, we remain well positioned to manage current and emerging risks.

Given our strong risk management capabilities, the quality of our portfolio and prudent allowance coverage, we remain well positioned to manage current and emerging risks with that I will now turn the call back to the operator for the Q&A portion of this quarter.

Speaker 6: With that, I will now turn the call back to the operator for the Q&A portion of this call.

Speaker 3: Thank you. We will now take questions from the telephone line.

Thank you we will now take questions from the telephone lines. Please press star one at this time, if you have a question.

Speaker 3: 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.

That wouldn't be a brief pause while participants register for questions. We thank you for your patience.

Speaker 3: Our first question is from many ramen from Scotiabank. Please go ahead.

First question is from many Rodman from Scotiabank. Please go ahead.

Speaker 7: Hi, good morning. Piers, I just wanted to follow up with something that you concluded with in terms of talking about the guidance on, I believe impaired PCL ratios. You highlighted that you still think that you will be able to be below historic averages.

Hi, Good morning, Piyush I just wanted to follow up with something that you concluded with in terms of talking about.

The guidance on I believe impaired PCL ratios and you highlighted that you still think that you will be able to be below historic averages.

Speaker 7: I'm just wondering what gives you confidence in that ability to be below the historic average even next year, or this year actually.

I'm just wondering what gives you confidence in that.

The ability to be below the historic average even next year or this year actually.

Speaker 6: So, thanks, my name is so. Gross impaired loans obviously were up this quarter up from historically low levels of impairment from the last few which is coming out of the benign cycle and the pandemic.

Sure. Thanks, Manny so.

Gross impaired loans, obviously, you put up this quarter up from historically low levels of impairment from the last few just coming out of the benign cycle. Then the pandemic I think what we've done is we've gone ahead and looked at all of our portfolios and seeing whether its particular stress and already accounted for those.

Speaker 6: I think what we've done is we've gone ahead and looked at all of our portfolios.

Speaker 6: and seen whether it's particular stress and already accounted for those in the embed book. So as a look at that pace of impairment while there might be an increase formation and that's why you see this increase formation.

Indian Bad book, So as I look at that base of impairment why did they might be an increase formations and that's why you see this AR increase formation, we think that the amount of impairment coming from doors as evidenced this quarter and our history over the last 30 years, we think that we are well.

Speaker 6: We think that the amount of impairment coming from those as evidence this quarter and our history over the last 30 years.

Speaker 6: We think that we are well adequately provisioned.

The provision to be in that range of the authorities again, there is an implicit assumption that the economy is improving as youre seeing in interest rates will continue.

Speaker 6: to be in that range of low 30s. Again, there is an implicit assumption that the economy is improving as you're seeing and interest rates will continue at the end of 24.

At the end of 'twenty four to take.

Speaker 6: take, you know, start the starting cuts and interest rates by the end of 24. So the economy's been holding up very well. You're seeing positive revisions to economic forecast. And I think these will play out to our benefit as we go into 20.

So have you started seeing cuts in interest rates by the end of 'twenty four so the economy has been holding up very well you're seeing a positive revisions to economic forecasts and I think these will play out to our benefit as we go into 'twenty four.

Speaker 7: And just to fall up in terms of sort of a higher, for longer rates scenario, I mean, you talked about the new disclosure, which is helpful in terms of...

And just to follow up in terms of sort of are higher for longer rate scenario. I mean, you talked about any of the new disclosure, which is helpful. In terms of the capacity of of customers of.

Speaker 7: the capacity of customers, of borrowers to absorb higher payments.

Borrowers to to.

Absorb higher payments, but I'm curious how you think about the knock on effects of that so they can absorb higher payments, but certainly there must be a sort of a cost there. So the economy and maybe some other parts of the credit book, especially on the unsecured side. So I'm just curious how you think about the knock on effects of Av.

Speaker 7: I'm curious how you think about the knock-on effects of that, so they can absorb higher payments, but certainly there must be sort of a cost there to the economy and maybe to other parts of the credit book, especially on the unsecured side. So I'm just curious how you think about the knock-on effects of higher for longer, if the mortgage book can hold on, but what are the implications beyond that?

Higher for longer if the mortgage book can hold on.

What are the implications beyond that.

Speaker 6: So we are beginning to see that in fact Indian secured book which is why you see the link in these go up But I think it's also important that Customers are also adjusting to the new reality and that's evident across behavior patterns

Germany. So we are beginning to see that in fact in the unsecured book, which is why you're seeing delinquencies go up but I think it's also important that customers are also adjusting to the new reality and that's evident across behavior patterns credit card spend has come down by about four per.

Speaker 6: Credit card spend has come down by about 4% faster in the discretionary spend areas.

And fostered in the discretionary spend areas.

Speaker 6: And but yet, balances are still high. So we've talked about higher balances of about 30% coming out of the pandemic. Those balances are getting used up, but haven't gone down to zero. They're still about 12% higher than pre-pandemic.

And.

But yet balance as I said high so we've talked about higher balances of about 30% coming out of the pandemic. Those balances are getting used up but haven't gone down to zero, that's still about 12% higher than pre pandemic.

Speaker 6: You saw the statistics on savings. It's just very rich at about 5% savings rate. And there's also an increase amount going into investments. So there are buffer mechanisms as customers are adjusting.

Called the statistic on savings so it's a very rich at about 5% savings rate and there's also an increase amount going into investments so that our buffer mechanisms as customers are adjusting.

Speaker 6: And this higher increased rate of dizzling quencies really is around what we expect for pre-pandemic as well as what we would want for our risk appetite. So we are getting compensated for the underwriting we are doing on the revenue line to compensate for some of the increases. So it's evident there are weaknesses but that weaknesses is compared to what you've seen as benign quarters of the last seven or eight coming out of the pandemic. Thank you.

And this higher increase rate of delinquencies really is around what we expect for pre pandemic as bad as what we would want for a risk appetite. So we are getting compensated for the underwriting we're doing on the revenue line to compensate for some of the increases.

So it's evident that our weaknesses, but had weaknesses as compared to what you've seen is benign quarters of the last seven or eight coming out of the bank dynamic.

Thank you.

Speaker 3: Thank you. Following questions from him, I'm Puna Wala from Bank of America. Please go ahead.

Thank you. Our following question is from him I'm, putting out water from Bank of America. Please go ahead.

Good morning.

Speaker 8: Maybe I guess thinking on credit, just be used listening to you around the trajectory of the economy over the next year. It sounds like you're baking in some version of a soft landing. I think it's get a bit worse and start getting better by the end of the year.

Maybe I guess sticking on credit just listening to you around the trajectory of the economy over the next year. It sounds like you're baking in some version of a soft landing with things.

Get a bit worse and start getting better by the end of the year.

And so.

Speaker 8: If you give sensitivity around like what happens, the level of visibility around that guidance, when you look at sort of cash flows within your commercial customer base, both in Canada and the US, like what gives you confidence and insights into that if you can, and maybe if Nadeem can chime in on the health of the commercial customer base.

So.

Did you give sensitivity around like what happens the level of visibility around.

That guidance when you look at sort of cash goes with the new commercial customer base, both in Canada, and the U S. Like what gives you confidence and any insights into that if you can and maybe if nadeem can chime in on the health of the commercial customer base.

Speaker 8: And maybe a tie to that, you talked about that you've reserved for areas of commost.

And maybe tied to that you talked about that you've reserved for areas of Sis.

Speaker 8: In my view, we should see areas of stress widened beyond like office area or lower income, FICO consumer into other categories as businesses go bankrupt, etc. One, do you share that view? And if so, what are the other areas of stress that you're watching right now?

In my view, we should see areas of success why it didnt beyond like office, CRT or lower income FICO consumer into other categories as businesses go bankrupt et cetera, one do you share that view and if so what are the other areas of tests that you are watching right now.

Speaker 6: Sure, so there's a couple of questions, Ibrahim, let me try and take one of those at a time.

Sure. So there's a couple of questions if Brian let me try and take one of those at a time.

Okay.

Speaker 6: your first one is just around provisioning and how what we think about going forward. So look, we've built about a billion dollars of provision in performing allowance for the year. And as you know, IFRS 9, it can be counterintuitive, but it's counter cyclical. So over the year,

Your first one is just around provisioning and what we think about going forward, so that would be better to about $1 billion of.

A provision and performing allowance.

For the year.

And as you know <unk> nine it.

It can be counterintuitive, but it's counter cyclical so over the we thought about what the forward forecast, what's going to be including a higher weighting of a hard landing or a severe recession, which as you've seen over the last few quarters.

Speaker 6: thought about what the forward forecast was going to be, including a higher waiting of a hard landing or a severe recession, which as you've seen over the last few quarters, the world is adapted, and macroeconomic consensus has gotten better.

The World has adapted and macroeconomic consensus has gotten better.

Speaker 6: If you're running it's better at least it's less negative and so both of those are helpful. And so as we go into 24...

If you don't think it's better that that's negative and so both of those are helpful and so as we go into 'twenty four we believed.

Speaker 6: We've built those provisions to give us a coverage of about 54 basis points, which at this point of time is 50% higher than pre-pandemic.

Those provisions to give us a coverage of about 54 basis points, which at this point of time is 50% higher.

Then pre pandemic.

And a second metric just to put that in perspective is.

Speaker 6: from a trading four quarter losses, even at 25 basis points that I just talked about, we are at about three times coverage that would tell you it's very prudent or conservative depending on how you take it. So we've thought about that going into 24. The last one I'll make then I'll pass it on to Nadeem is.

From a trailing four quarter losses.

Even at 25 basis points that I just talked about we are at about three times coverage that would tell you it's very prudent conservative.

Conservative depending on how you would take it so we've thought about that going into 'twenty for the last one I would make that I'll pass it on to Nadeem is by now we have reviewed every customer once or twice, but the impact of that interest rates on the behavior of background and so you're seeing that in the risk rating migration, you're seeing that in the flow through our <unk>.

Speaker 6: By now, we have reviewed every customer once or twice for the impact of their interest rates on the behavior pattern. And so you're seeing that in the risk rating migration, you're seeing that in the flow to our impaired loans.

<unk> zones, and we've factored all of those in even through our deep dives in fact previous quarter. When we took the big bad it was around sectors of stress like commercial real estate.

Speaker 6: And we factor all of those in even through our deep dives. In fact, previous quarter when we took the big build, it was around sectors of stress like commercial real estate.

Speaker 6: that the models did not pick up, that's already factored in, and you can see that in a performance in Q4. So, that you might don't know what you would add on commercial ending, what you're saying. Okay.

That the models did not pick up that's already factored in and you can see that in our performance in Q4. So that you won't know what you would add on commercial lending what you were saying okay. Thank you.

Speaker 9: What I would say is very similar to what we talked about in last quarter. We are seeing stress of course in the portfolio. US, the stress was earlier than Canada. We are seeing Canada having more stress than we did a couple of quarters ago. But everything is absolutely in line with what we had expected. And when we talked to customers, they're looking at their PNL, they're managing their expenses.

What I would say, it's very similar to what we talked about in the last quarter and we are seeing stress a portion of the portfolio.

The us distress was earlier than Canada, we are seeing Canada, having more stress than we get couple of quarters ago, but everything is absolutely in line with what we had expected and then when you talk to customers, they're looking at their P&L, they're managing their expenses.

Speaker 9: They are looking at labor rates, which have stabilized in some cases have come down shipping rates have come down logistics is down So they're seeing some margin relief there. So overall when I look at the portfolio, we feel very comfortable that our customer base is solid

They are looking at labor rates, which have stabilized in some cases have come down shipping rates have come down and logistics is down so theyre seeing some margin relief there. So overall when I look at the portfolio, we feel very comfortable that our customer base is solid.

Speaker 9: We do think there's going to be some more formations, which we have forecasted already, but the momentum is good. So in the US, we had said recall last quarter that we expect quarter-over-quarter loan growth to stabilize or loan loss or for loan reduction to stabilize and then positive into 2024.

We do think theres going to be some more formations, which we have forecasted already but the momentum is good so in the U S. We had set recall last quarter that we expect quarter over quarter loan growth to stabilize or loan loss of arthritis loan reductions to stabilize and then positive into 2024, we were 1% down quarter over quarter and.

Speaker 9: We were 1% down quarter over quarter in the U.S., but if you look at Azat balances from June to October , we were actually up 1%, which is exactly what we had expected and wanted, and with solid momentum going into 2024 in the pipelines. Canada, as we had expected, did come...

The U S. But if you look at as that balances from June to October we were actually up 1%, which is exactly what we had expected or wanted and with solid momentum going into 2024, and the pipeline's, Canada as we had expected did come down.

Speaker 9: in long-growth numbers, but again, it's as we had said in the last call and looking into 2024 we're seeing M&A activities starting to come back, pipelines are starting to improve, and so we continue to believe that we'll have mid-single-digit growth both in Canada and the US, and if I was a betting person, probably slightly higher.

And loan growth numbers, but again, it's as we had said in the last call and looking into 2024, we're seeing M&A activity is starting to come back.

Plans are starting to improve and so we continue to believe that we will have mid single digit growth both in Canada, and the U S and if I was a betting person probably slightly higher growth in the U S.

Speaker 8: understood and maybe follow up. Maybe for Typhoon or Darrell just strategically when we think about the balance sheet, are we in optimization mode? Like we've done some small business exits for portfolio exits recently. So maybe talk about if they're more to do and this thought processor on optimizing capital and the balance sheet and where we are playing offense in terms of taking market share given the pullback especially with the US regional banks. Thank you.

Understood and maybe a follow up maybe for typhoon or data will just strategically when you think about the balance sheet, obviously avi in optimization mode like you've done some small business exits of portfolio exits decently. So maybe talk about is there more to do and just thought process around optimizing capital and the balance sheet and where.

We are playing offense in terms of taking market share given the pullback, especially with the U S lesion lengths. Thank you.

Speaker 5: Yeah, in terms of capital allocation, Abraham, we're always on an on-mode, right? So we have to constantly review our balance sheet and make sure that...

Yes in terms of capital allocation you, Brian we're always on and on my right. So we have to constantly review our balance sheet and make sure that allocation.

Speaker 5: allocation of capital to businesses is taking place for the best interest of our shareholders. So we'll continue to do that. We've done a very good job, I think, over the past couple of years in ensuring that we are allocating capital to its best use.

Allocation of capital to businesses is taking place for the best interest of our shareholders. So we will continue to do that.

We've done a very good job I think over the past couple of years and ensuring that we are allocating capital to its best use in terms of market share gains obviously that is a strong point for us.

Speaker 5: In terms of market share gains, obviously, that is a strong point for us.

Speaker 5: And with the additional pack of the West and expanded footprint.

And with the addition of bank of the West and expanded footprint and a larger customer base, we do see significant opportunities and the other point that I would make is we closed the quarter at 12, 5% a very strong capital position, we have a pretty modest impact in Q1.

Speaker 5: and a larger customer base, we do see significant opportunities. And the other point that I would make is we close the quarter at 12.5% a very strong capital position. We have a pretty modest...

Speaker 5: Impact in Q1 of the cumulative impact of the regulatory changes as well as the $300 million FDIC

The cumulative impact of the regulatory changes as well as the $300 million.

FDIC charge, so we feel good about our.

Speaker 5: So we feel good about our capacity for growth.

Our capacity for growth and we will continue to look for opportunities to allocate capital to its best use on our balance sheet. Yeah, Ebrahim. It's Darryl I'll just pile on I can't help myself on the last part of your question on whether this puts us in a position to be a share taker.

Speaker 4: And we will continue to look for opportunities to allocate capital to its best use on our balance sheet. Yeah, Ibrahim and Daryl, I'll just pile on. I can't help myself on the last part of your question on whether this puts us in a position to be a share taker. You know, if you go back to before we grew the bank in the U.S., that was always our objective, particularly.

If you go back to before we grew the bank in the U S that was always our objective, particularly.

Speaker 4: in some of our wholesale businesses and we did that pretty successfully relative to a competitive set that we judged to be pretty good but in some cases a little bit weaker.

In some of our wholesale businesses and we did that pretty successfully relative to our competitive set that we judged to be pretty good but in some cases, a little bit weaker than us now you roll forward with the integration of our business the balance sheet that we have in the U S $435 billion. The presence in 32 states the digital bank across the entire nation.

Speaker 4: Now you roll forward with the integration of our business.

Speaker 4: the balance sheet that we have in the US, $435 billion, the presence in 32 states, the digital bank across the entire nation. And...

<unk>.

Speaker 4: You know, there's really no other way to say this. We didn't do this transaction to not take share. We're good at it before and we'll be even better at it. Afterwards, we're a top 10 bank and the objective is to continue to take share, particularly as markets become more constructive, which has been our power alley in the past as well.

And.

Theres really no other way to say it is we didn't do this transaction to not take share. We're good at it before and we'll be even better at it afterwards, we're a top 10 bank in the objective is to continue to take share, particularly.

As markets become more constructive which has been our power alley in the past as well and we've got the balance sheet to do it because at 12.

Speaker 4: And we've got the balance sheet to do it because at 12 and a half, you know, the competitors that we, you know, them very well, the competitors that we will be looking to take share from don't have that capital ratio.

Competitors that that.

We know them very well the.

The competitors that we will be looking to take share from don't don't don't have that capital ratio.

That's helpful. Thank you.

Speaker 3: Thank you. A following question is some Gabriel Gershine from National Bank Financial. Please go ahead.

Thank you.

<unk> question is from Gabriel <unk> from National Bank Financial Please go ahead.

Speaker 10: Hey, uh, good morning. I'd like to follow on with that line of questioning sort of up and, and Ibrahim touched upon the portfolio exits, I believe. Um, none of this has been confirmed by the bank. I don't think, but uh, sounds like you're getting out of auto lending and indirect auto lending in Canada, the US.

Hi, good morning, I'd like to follow on with that line of questioning sort of.

Ebrahim touched upon the portfolio exits I believe.

None of this has been confirmed by the bank I don't think but sounds like you're getting out of auto lending and indirect auto lending in Canada U S and maybe the RV and marine lending business in the U S. Just wondering what do you have to say about blue scuttlebutt.

Speaker 10: Maybe the RV Marine lending business in the US. Just wondering what do you have to say about the Scuttlebot? And then if there's some legitimacy to those, that stuff.

And then.

If there is some.

Legitimacy to the stuff.

Speaker 10: Is there a financial impact that we should be, you know, flagging earnings in particular?

Is there a financial impact, but we should be.

Flagging earnings in particular.

Speaker 5: Yeah, so we don't comment on, on Skullbugs and rumors. Gabe, as you can appreciate the, you know, and I'll turn it over shortly to Ernie, heard with her comments about the indirect auto loan business. We like the RV business. We have a large scale operation in the US with the number three market share that Bank of the West brought to us. It's a good business.

So we don't comment on.

Skull bogs and rumors Gabe as you can appreciate.

And I'll turn it over shortly to Ernie hurt with her comments about the indirect auto loan business.

We like the RV business, we have a large scale operation in the U S. With a number three market share that bank of the west brought to us it's a good business.

Speaker 5: and we have very good relationships with our dealers.

And we have very good relationships with our dealers, we are not getting out of that business no matter what.

Speaker 5: uh... we are not getting out of that business no matter what the public may say so i'll leave it there and then i'll turn it over to our need for

They say so I'll leave it there and then I'll turn it over to Ernie for the indirect auto piece yeah. Thanks on the indirect auto piece, we're winding down that that portfolio you can imagine the impact over the next few years will be marginal in each year and you can typically see an indirect auto book roll in about three years or so so that'll be the.

Speaker 11: The indirect auto piece. Yeah, thanks. On the indirect auto piece, we're winding down that portfolio, please imagine, the impact over the next few years will be marginal in each year. And you can typically see an indirect auto book role in about three years or so. So that'll be the end of it. I really want to reiterate Typhoon's point around our Marine RV business in the US is a 30 year business that has a number three market share. It was attractive to us as we went into the Bank of the West arrangement and we're committed to the ongoing originations of that program and are seeing good success as we speak right now.

And of that I really want to reiterate a typhoon that point around our marine RV business in the U S is a 30 year business that as you know.

Number three market share it was attractive to us as we went into the bank of the west that arrangement and that we're committed to the ongoing <unk>.

<unk> of that program manner and are seeing good success as we speak right now alright.

Speaker 10: All right, thanks for that clarity there. I was a bit surprised with that particular one because you sounded like you liked it so.

Alright, thanks for the clarity there always are but spreads without particular ones because it sounded like you'd liked it too.

Speaker 10: And then on the capital front, the consolidated picture, clearly you're in a good position. But if I look at the call report, your U.S. subsidiary data, and I exclude the AOC opt-out, it looks a little bit lower relative to where you probably want to be. I'm just wondering if...

Clearing that up helps.

And then on the capital front, the consolidated picture clearly you're in a good position.

But if I look at the call report, even though your U S subsidiary data.

Uh huh.

Exclude the Aoc off though it looks a little bit.

Lower.

Relative to where you probably wanna be I'm just wondering if.

Speaker 10: you're entertaining doing something along the lines of what one of your peers did, as far as recapitalizing the US business. I know that picture doesn't give the full one of the US operation, so maybe there's a missing link there, but what are your thoughts on that position?

Youre entertaining doing something along the lines what one of your peers did as.

As far as recapitalizing the U S business.

Picture doesn't give the full one of the U S. Operation. So maybe there was a missing link there but you.

What are your thoughts on that.

Positioning.

Speaker 5: So the answer to your question is, unqualified no. We actually feel pretty good about our capital position in the US. I think we are at 11.5 at the bank level and a little bit below that at the old company level. And it's a number that actually is going to continue to create at a fast base. And even with the AOCI, I think we feel pretty good about it. We are not planning to do anything in the US that is similar to what some of our peer group banks had to do.

So the answer to your question is an unqualified no.

We actually feel pretty good about our capital position in the U S. I think we are at 11 and a half at the bank level and a little bit below that.

Holding company level and it's a number that actually is going to continue to accrete at a fast pace.

With the OCI I think we feel pretty good about it when you are not planning to do anything in the U S that is similar to what some of our peer.

Peer group banks have had to do.

Speaker 10: Okay, just a quick one here. I just want to confirm you're reiterating the accretion guidance on Bank of the West, the 7% accretive of the 2024. And if you can just state that and then maybe the comment on the revenue outlook for the business, you talked about having 300 million or so of revenue accretion not in that 7%? okay. But, thank you.

Just a quick one here.

They'll just wanted to confirm you're reiterating the accretion guidance on bank of the West was 7% accretive the 'twenty 'twenty four.

And you know if you can.

Just let's take that and then maybe the comment on the revenue outlook for the business you talked about having three.

300 million or so of revenue accretion.

Not not 7%, but the you know the.

Speaker 4: you know, the timing of that execution would be an interesting response. Yeah, Gabe, maybe I could help you with that. So the answer is yes, we are reconfirming the 7% accretion target that we talked to you about earlier this year. Secondly, I think a way to frame the second part of your question is around

The timing about the execution would be.

Interesting response gave maybe I could help me with that so the answer is yes, we are reconfirming, the 7% accretion target that we talked to you about earlier this year.

Secondly, I think a way to frame the second part of your question is around.

Speaker 4: the two billion dollars of PPPT that we had also held up to you.

The $2 billion of <unk> that we had also held up to you.

Speaker 4: all over the course of our discussion of this acquisition. There we're also sticking with that number. Now you might ask if your synergy number is higher, why isn't the $2 billion also higher? And there I would say confidence level has gone up. I think you know it's been our practice.

All over the course of our discussion of this acquisition.

There were also sticking with that number now you might ask if your synergy number is higher why isn't the $2 billion also higher.

And there I would say confidence level has gone up I think it's been our practice.

Speaker 4: to estimate conservatively and then update the street when objects become closer in the windshield. So at this point I would say the two billion dollars that we put out to all of you include.

To to estimate conservatively and then update the street when objects become closer in the windshield.

So at this point I would say are the $2 billion that we put out to all of you includes.

Speaker 4: Number one, the baseline contribution from their core business. Number two, the cost energies, which have gone up in our confidence level is, you know, virtually 100% on those. And then on the revenue synergies, if we get more confident, as time goes on, we'll update you there as well. But this just goes to show you that we've got quite a bit of a room to hit that $2 billion number that we've talked about in the past by the first half of 2026.

Number one the baseline contribution from their core business number two the cost synergies, which have gone up and our confidence level is virtually 100% on those.

And then on the revenue synergies if we get more confident as time goes on we'll update you there as well, but this just goes to show you that we've got.

We've got quite a bit of a room to hit that $2 billion number that we've talked about in the past by the first half of 2026, okay.

Speaker 4: Okay, great. Well, December 1st, Merry Christmas if we don't talk to you before you're in. Well, while we're celebrating, I understand belated birthday wishes are in order as well, so happy birthday to you. Thank you, sir.

Okay great.

December 1st Merry Christmas, if we don't talk to before Europe, well, we're celebrating I understand belated birthday.

Well, so happy birthday to you. Thank you Sir.

Yeah.

Speaker 3: Thank you. Following questions from Doug Young from the Jordan Capital Markets, please go ahead.

Thank you.

<unk> question is from Doug Young from Desjardin capital markets. Please go ahead.

Speaker 12: I'm not going to wish him happy birthday again, so.

I'm not gonna wish him happy birthday again so.

Speaker 5: Maybe the first question, 25 basis point impact in Q1 from a combination of items. Just wanna confirm what's in the 25 basis points. That's the FDIC, that's the FRKB, that's the CBA, and that's including the negative amortized mortgage impact. All of that is included in there, is that correct? Yes, and the last one that I will add to that is the IFRS 17 transition as well. So everything is in-coded. The FDIC is in-coded.

Maybe the first question 25 basis points impact in Q1 from <unk>.

The combination of of items just wanted to confirm what's in a 25 basis points. That's the FDIC. That's a car T. B C D E and that's including the negative amortize mortgage impact all of that is included in there is that correct, yes and yes.

Last one that I would add to that is the ifr 17 transition as well. So everything is included in that number.

Speaker 12: Okay, so then if I think of 12-5 discord, or you take a 25 basis point, and assume organic 25, you're around 12-4-12-5, call it. Is that the range at which you're comfortable running at, or I don't think you've talked about a kind of an operating target range for your set one ratio, can you spell out what you're comfortable with?

Okay. So then if I think at 12 five this quarter you take out 25 basis points and assume organic 25 year round 12 point 12 five call. It is that is that the range in which youre comfortable running at or I don't think you've talked about a kind of an operating target range for your set one ratio, but can you just can you spell out what youre comfortable with.

Speaker 5: Yeah, I think we the comments that we made in the past is that we would be looking for a 50-plus space-point type of cushion to regulatory guidance. So in that sense, I suppose next week, we will get some more clarification from OSVS to what they are thinking about in terms of the remaining 50 basis points of buffer left. But our overall management approach to it is

Yeah, I think we the comment that we made in the past is that we would be looking for a 50 plus basis point type of cushion to regulatory guidance. So in that sense I. Suppose next week, we will get some more clarification from us as to what they are thinking.

And about in terms of the remaining 50 basis points.

Buffer left.

But our overall management approach to it has.

Speaker 5: to operate with, you know, in that 50-plus range, depending upon what the Rigothor guide.

To operate with.

That 50 plus range, depending upon what the regulatory guidance may end up being.

Speaker 12: I just lastly, on the gross impaired loan formations, and I get to call the explanations, so that if I come through them, hopefully maybe you can kind of do a bit of a quicker deeper dive.

Okay, and just lastly on on the gross impaired loan formations and I get all the explanations that does come through I'm, hoping maybe you can kind of do a bit of a quicker deeper dive in you. Obviously had the formations you didn't have a big PCL build you're talking about terms and conditions and collateral gives me confidence can you give it a sense or a numeric sense. So.

Speaker 12: You obviously had deformations, you didn't have a big PCL bill, you talked about terms and conditions and collateral, giving you confidence. Can you give it a sense or numeric sense of, you know, or an example of that?

<unk> are an example of.

Speaker 12: term or the collateral that's backing this. We can see low into values from mortgages. We don't have good sense of that to the commercial side. I don't know if there's anything you can give concrete to give a little more confidence.

That that term or or the collateral backing this like we can see loan to values for mortgages like we don't have good sense about the commercial side I don't know if there's anything you can give concrete to give them a little more confidence around that yes.

Speaker 6: Yeah, sure. So I think, you know, it broadly goes back to a risk culture and early problem recognition.

Yeah sure. So I think it's broadly goes back to our risk culture and he brought them recognition and so when you recognize a problem or do you get a work out in our Samuel especially of team.

Speaker 6: And so when you recognize the problem, or do you get a workout and a SAMU special team working with our bankers, helping rehabilitate clients. So the impact put for the formation itself is it's a data point, but I think your question is a good one, which is then how does that, how do you think about what's next?

Working with our bankers, helping rehabilitate clients. So the embedded book for the formation itself is it's a data point, but I think your question's a good one which is and how does that how do you think about what's next.

Speaker 6: Because of the collateral or the structural, give you an example, when you have bankruptcies that are growing both in the US and Canada.

Because of the collateral or the structure now to give you. An example, when you have bankruptcies that are growing both in the U S and Canada.

Speaker 6: You automatically, the client, you mug the client and the exposure into a formation or into impairment, then you look at your facility or our credit exposure. And in many of these cases, we have a fantastic team that does acid back lending. So when you think of a large retail client that goes into bankruptcy, but we've got a very scientific way of looking at lending across a borrowing base.

You automatically the client you marked decline in the exposure into our formation into impairment.

Then you look at your facility or our credit exposure and in many of these cases, we have a fantastic team that does the asset backed lending.

Think of a large retail.

And that goes into bankruptcy like we've got a very scientific way of looking at lending across our borrowing base <unk>.

Speaker 6: Even though it's in bankruptcy, your loss is a zero. So it might be a large number in the formation.

Even though it's in bankruptcy.

Zero, so it might be a large number in the formation.

Speaker 6: It's close to zero when it comes to the impairment, which is why the confidence in the same thing goes across.

It's close to zero when it comes to the impairment, which is why the confidence from the same thing goes across.

Speaker 6: many of us secured portfolios. We've seen that even in a commercial real estate book, in some cases where a name goes in, but you don't need any provisions only because there's plenty of value in that. So I hope that helps and why the confidence around the formations versus impaired loss.

Many of our secured portfolios, we've seen that even in our commercial real estate book in some cases wed name goes in but you don't need any provisions only because there's plenty of value in that so I hope that helps and why the confidence around the.

Formations versus embedded losses.

Speaker 12: Yeah, no, it does. I probably want to dig a little deeper than another time, but I appreciate color. Thank you.

No it does.

I'd, probably want to dig a little deeper at another time, but I appreciate the color. Thank you.

Thank you.

Speaker 3: The following question is from Dr. Komiolak from RBC Capital Markets. Please go ahead.

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

Yeah.

Speaker 9: Hi, thank you, good morning. Just a couple of questions for some clarification, please. Puse with respect to the mortgage payment shock.

Hi, Thank you good morning, just a couple of questions for some clarification. Please.

With respect to the mortgage payment.

Payment shock.

Speaker 9: in your slide deck here on slide 28. What is the renewal rate that you're assuming for these payments in 2020?

In your slide deck here on on slide 28.

What is the renewal rate that you're assuming for for these payments in 2023.

Speaker 6: So the one on which you see here on the side 28, that's just the absolute amount that's maturing in that ear. We've told you that the renewal rate for 23, which was about 6%, showed an increase of about 21% in payment.

So the one that you see here on slide 28, that's just.

The absolute amount of debt maturing in that year.

We've told you that.

Our renewal rate for 'twenty, three which was about 6%.

Showed an increase of about 21% in payments.

Speaker 6: We haven't given that detail on this slide. I'll tell you if I look forward and we have all sorts of sensitivity.

We haven't given that detail on the site I'd tell you if I look forward and we have all sorts of sensitivities if rates didn't come down to state Con Chen.

Speaker 6: If rates didn't come down to state constant, that 21% is in the same 20 to 25% next year, and probably the other higher in the year 25, the bulk of, as you see, the maturity is coming due in 26.

That 21% is in the same 20% to 25% next year and.

And probably a little higher in the twenties.

25, the bulk of it you see the maturities coming due in 'twenty six.

Speaker 6: And then, I would back that I'll just give you more perspective. We've looked at no income change of our borrowers and this higher payment, and that equates to about a 5% increase of their total income at the time of origination. So, we can provide you more details, Darko, but at the end, what you see here is just the contractual maturity. And we've done a lot of work around what it would look like at different payment rates.

And then I'm going to back that out just to give you more perspective, we've looked at no income change of our borrowers.

This higher payment and that equates to about a 5% increase of the total income at the time of origination. So we can provide you more details darko, but at the end what you see here is just the contractual maturity and we have gotten done a lot of work around.

It would look like at different payment rates.

I didn't even do you add something.

Speaker 11: Yeah, I was curious, your question is the percentage of customers who are renewing, because that's really high, as in 90% of our book, we renew with us. So if that's part of your question, and so really, the statement is that we're seeing customers renew right now, they're facing an increase, they're able to handle that increase quite nicely. A couple factors, as you know, quite well, they were stressed at a higher interest rate when they originated. We've seen an ability for consumers to adjust and be able to afford the increased payment, which is what you're also seeing on this slide, which is there, the regular plant payments went up 21% for consumers who are renewing this year, between the fixed and variable mortgages, and they are handled.

Yeah I was curious to your question is the percentage of customers, who are renewing because that's really high as 90% of our bulk renew with us.

That's part of your question is that really the statement is that what we're seeing customers renew right now they are facing an increase they are able to handle that increased quite nicely.

A couple of factors as you know quite well they were stressed at a higher interest rate when they were originated when you've seen.

Ability for consumers to adjust and be able to afford the increased payment which is like you're also seeing on this slide which is the regular plant payments went up 21% for consumers who are renewing this year.

The fixed and variable mortgages and they are handling it.

Speaker 9: Yeah, thank you very much. I think my my really question was that last bullet point if you're suggesting that.

Yes. Thank you very much I think Mike, but my real question was that last bullet point, if youre, suggesting that.

Speaker 9: You know, there's a 22% increase in the payment for the variable rate mortgage. Well, what rate are they renewing at? There must be an assumption built in there, right? For, for.

There's a.

2% increase in the payment for the variable rate mortgage what rate are they renewing at there must be an assumption built in there right for <unk>.

Speaker 11: Right. So the one thing that last bullet point are exactly customer today in 20. They're renewing at today's rate exactly right.

Sure.

Right, but the one thing that last bullet point are exactly customers today in 2000.

They're renewing at todays rate exactly right.

Speaker 9: Okay. Okay. And if, and if they did that in 2024, you were suggesting we would see similar sort of impact. Okay. Fair enough. Correct. Correct. Okay, and then the 2nd question along this same sort of line of questioning.

Okay, Okay, and if they did that in 2024 and you are suggesting we would see similar sort of impact okay fair enough.

Uh huh.

Okay and then the second question along this same sort of line of questioning is.

Speaker 9: If the average is 22, what do the tails look like? So there must have been some customers.

The average is 22 what are the tails look like so there must have been some customers.

Speaker 9: significantly higher increase and clearly it would have been some with a very small increase. Is there any sort of distribution you can provide?

A significantly higher increase and clearly it would have been some with a very small increase is there any sort of distribution you can provide.

Speaker 11: Yeah, we do see people having to face a 30% increase this year. That'll get higher as we move into 26 because we're assuming if you assume no rate because

Yeah.

We do see people having to face a 30% increase this year that will get higher as we move into 'twenty six.

We're seeing that if you assume no rate decrease there will be customers, who would potentially these 18 35 or 40% at that tail, a tailwind again, but again going back and you think about where they were stressed at in their current income that you can look at their cash flow in a variety of ways. We felt pretty confident that there is an appetite or not.

Speaker 11: There would be customers who would potentially be facing 35 or 40% at that tail end again. But again, going back and you think about where they were stressed at and their current income as we look at their cash flow in a variety of ways, we feel pretty confident that there is an appetite and an ability to be able to consume that increase or to handle that increase.

Ability to be able to consume that increase or to handle that increase.

Speaker 6: and darker the same customers from our outreach program.

And then Doug are the same customers from our outreach programs.

Speaker 6: have come back and are actually already prepping voluntarily down quite a bit. So there are some who know it's a higher number. They're waiting for the rate decrease to happen. But we've got very positive outreach and customer reaction around the voluntary prepayments back to lower the neck out.

Have come back and are actually already pre paying wasn't totally down quite a bit. So there are some who know it's a higher number they are waiting for the rate decrease to happen.

But we've got very positive outreach and customer reaction.

Around the voluntary pre payments back to though is in that guidance.

Speaker 9: Okay, this is all very helpful and I really appreciate the disclosure. I guess the last lingering question that we're all having around this is...

Okay. This is all very helpful. I really appreciate the disclosure I guess the the last lingering question that we're all having around this is yes.

Speaker 9: Yes, I can see the increase on average for the customers in 2023. Did they renew?

I can see the increase on average for the customers in 2023.

Did they renew at a shorter term.

Speaker 9: and how much time before you suspect there will be some cracks for people that are paying these higher

And how much time before you suspect there will be some cracks for people that are paying these higher payments.

Speaker 11: I think what we're seeing right now is renewing and renewing, obviously, into fixed rate product and also into shorter durations, because the anticipation of rate decreases, which is very prudent on the part of Canadians who are renewing. I just want to clarify as well, that if you think about that 40% increase, those are going to be smaller numbers at that tail end of it, when you think about the increase that consumers are going to be facing on price.

I think what we're seeing right now is renewing and renewing obviously into into fixed rate product and also into shorter duration, because the anticipation of rate decreases which is very prudent on the part of Canadians who are renewing it.

I just wanted to clarify as well if you think about that 40% increase those are going to be X smaller numbers at that tail end of it when you think about the increase that consumers are going to be facing on price.

On the payments.

Speaker 9: Okay, and underwriting today, just to finish off this discussion, but you're still growing your mortgage book, presumably you're doing originations. What does it look like today versus four or five years ago? Are you looking at better?

Okay and underwriting today, just to just to finish off this discussion, but you're still growing your mortgage book, presumably youre doing originations.

What does it look like today.

Versus four or five years ago.

Are you looking at better.

Speaker 9: GDS, TDS ratios, is there anything you could point to that suggests that people that you're underwriting today at a higher rate than you would have four or five years ago are in fact, are they putting down more down payment at the LTV lower? What can you tell us about the originations that you're putting on today?

GDS Tds ratios.

Is there anything you could point to.

That suggests that people that you're underwriting today at a higher rate.

And then you would have four or five years ago or in fact are they putting down more down payment as the LTV Laura what can you tell us about the originations that you're putting on today.

Speaker 11: I'll answer now respond a couple of ways. So what we're seeing obviously is at a stress rate on top of the high rate that exists today ensures that your your your customer it has more robust cash flow and ability to pay

I'll turn now respond a couple way so what we're seeing obviously is a stress right on top of the high rate that exists today insurers that youre.

Our customer has more robust cash flow and ability to pay our underwriting remains as prudent as it has been in the past in the sense that we look at loan to value. We look at affordability. When you look at their stressed our rates that they can afford and with an increase in payment. So I think they are underwriting remains consistent I think that market is.

Speaker 11: Our underwriting remains as prudent as it has been in the past. In the sense that we look at loan to value, we look at affordability, we look at their stress rates that they can afford with an increase in payment. So I would say our underwriting remains consistent. I think the market and interest rates has improved.

Interest rates have improved the quality of the customer simply because you have to be stressed at higher interest rate.

Speaker 11: The quality of the customer simply because you have to be stressed at a higher interest rate. And are you happy?

And are you happy with the spreads are getting on mortgages. These days.

Speaker 11: Yeah, let me take two seconds on that. We are approached to mortgages and all our retail market share growth that you've experienced over the past few years is a function of our strategy around holistic conversations with customers and holistic relationships and growing new customers with those full relationships. So when I look at this business, I look at that.

Yeah, Let me take two seconds on that we our approach to mortgages and all our retail market share growth that we've experienced over the past few years is a function of our strategy around holistic conversations with customers and holistic relationships and growing new customers with the full relationship. So when I look at this business I look at that.

Speaker 11: How many customers do we have with primary relationships, which is leading right now in the industry, and also how much we're consolidating our relationships with existing customers? So it's not a mortgage strategy per se. It's a retail relationship strategy we're driving.

How many customers do we have with primary relationships, which is leading right now in the industry and also how much we're consolidating our relationships with existing customers. So it's not a mortgage strategy per se, it's a retail relationship strategy for driving.

Speaker 3: I think we're going to try to fit in a couple more questions if I could just ask the next people in the queue. They limit it to one question. We'll try to take a few more here. Thanks for seeing. Thank you.

I think we can try to fit in a couple more questions. If I if I could just ask the next set of people in the queue to limit it to one question I'll try to take a few more here.

Okay. Thanks for saying okay. Thank.

Thank you.

Speaker 3: following questions is some Paul Olden from CIBC. Please go ahead.

<unk> question is from Paul Holden from CIBC. Please go ahead.

Speaker 13: Thank you. So limiting it to one question, the one I want to ask is on Bank of the West, and I want to make this clear. I think I know what the answer is, but you've increased cost synergies 20%, but EPS accretion is expected to be the same. Is that a function purely of the change in the macro environment, or has there been any change in customer retention?

Thank you so limiting it to one question one I want to ask is on bank of the west and I want to make this clear and I think I know what the answer is but you have increased cost synergies, 20%, but EPS accretion is expected to be the same.

Is that a function purely of the change in the macro environment or has there been any change in customer retention.

Speaker 5: There is actually no change in customer retention. We are actually very happy with both the client retention, you know, as well as employee retention. So this is really due more to the environmental factors that we have seen over the past.

There is actually no change in customer retention and we are actually very happy with both the client retention as well as our employee retention. So this is really due more to the environmental factors that we have seen over the past year.

Speaker 13: And since I was a quick one, maybe I can speak one more in. When does the drift discount come off?

Okay and so this is a quick one maybe I can sneak one more in when does the drip discount come off.

Speaker 5: Well, look, I mean, as I said, we will find out soon, you know, what the OSPI's intention is. We have this first quarter. We need to get through the impact and make all these changes, and we will assess that during the quarter and we'll come back to you and give you our perspectives.

Well look I mean, as I said, we will find out soon you know what <unk> intention is.

We have this first quarter, we need to get through the.

The impact and make all these changes and we will assess that during the quarter and we'll come back to you and give you our perspective.

Thank you.

Speaker 3: Thank you. The following question is from Mario Mandonca from TD Securities. Please go ahead.

Thank you. Our following question is from Mario Mendonca from TD Securities. Please go ahead.

Speaker 9: tiffin i think in your opinion comments you referred to one point nine billion dollars of integration cost could you just that afford looking number or is that already been incurred no that is

I think in your opening comments, you referred to $1 $9 billion of integration costs could you just is that a forward looking number or has that already been incurred no that is.

Speaker 5: very largely behind us. So we have a little bit left, but, you know, a significant portion of that is always.

Very largely behind us so we have a little bit left but you know a significant portion of that is already behind US. Okay. And then real quickly on the variable rate mortgages to 62% could you talk about what that number was last quarter.

Speaker 9: Okay, then real quickly on the very great mortgages, the 62%, could you talk about what that number was last quarter?

Speaker 9: But the 60% negative advertising, what it was last quarter and why that number is so high, your peers seem to be covering around 50, even less than 50.

The 60% negative amortizing what it was last quarter and why that number is so high your peers seem to be hovering around 50, even less than 50.

Speaker 6: Yeah, so I think our number, we've got paid down about by $3 billion. So it is a little bit higher, as long as rates remain where they are. If they come down, it will continue to come down over time.

Yes, so I think.

Our number we've got paid down about by $3 billion sort of a little bit higher as long as rates remain where they are or they come down or does it continue to come down overtime.

Speaker 11: why so high? Yeah, let's Ernie, let me explain the why so high. So you'll remember our acquisition growth occurred in a market where variable rate mortgages were the consumer preference. And so you'll see us having a higher proportion as a result of our growth rate took place in those years where that product was taken over a fixed rate product. So it's essentially a consumer preference that during our time of acquisition.

Why so high is there any let me explain that why so high silver remember our acquisition growth occurred in a market where variable rate mortgages, where the consumer preference and so you'll see us having a higher proportion as a result of our growth our growth rate took place in those years, where that product was taken over.

Fixed rate product, so, it's essentially a consumer preference and shahar time of acquisition.

Speaker 9: Okay, then, finally, like, I'm not sure if this is because I'm tired and the running season's gone on too long, but like I kind of hear this message that Beemle could very well need more capital if the domestic stability buffer is raised. Am I reading too much into your comments? No, yes.

And then finally like I'm not sure. If this is because I'm tired in the earning season has gone on too long, but.

Like I kind of hear this message that BMO could very well need more capital if the domestic stability buffer was raised am I reading too much into your comments not yes.

Speaker 9: I am. Nobody known yet. We don't need more capital. Okay. Okay. Just felt that way. Listening to some of your comments. Thanks again.

I am not really no we don't need more capital okay. Okay, I, just felt that way listening to some of your comments. Thanks again.

Speaker 3: I'll follow in question is Mike with Van of it from KBW Research.

Thank you our following question is from Mike Donovan.

K B W. Research. Please go ahead.

Speaker 14: Okay, go ahead. Hi, good morning. Just wanted to go back to the mortgage renewals and what I'm wondering about is when I look at the expectations for the bank of Canada overnight rate, it looks like four cuts in 2024, four cuts in 2025, and that would bring us down to a 3% overnight rate. And I'm assuming and correcting time wrong, but you'd be looking at a normal upward sloping yield curve.

Hi, Good morning, just wanted to go back to the mortgage renewables and what I'm wondering about is when I look at your expectation for the bank of Canada overnight rate it looks like for cuts in 2024 for cuts in 2025 and that would bring us down to a 3% overnight rate.

I'm, assuming and correct me, if I'm wrong, but you'd be looking at a normal upward sloping yield curve.

Speaker 14: And if that is your expectation, then, you know, it doesn't seem like the five-year fixed rate would be much different than the 6% it is at today, because right now the five-year Bank of Canada bond rate is at about 365. And then you've got to add that spread on top of that. So it doesn't seem like the expectations on the rate side are really conducive of providing relief on this mortgage renewal issue. And then.

And if that is your expectation then.

It doesn't seem like the five year fixed rate would be much different than the 6%. It is at today because right now the five year Bank of Canada Bond rate is at about 365, and then you've got to add that spread on top of that so it doesn't seem like the expectations on the rate side are really conducive providing relief on this one.

These little issue and then.

Speaker 14: In that vein, when I look at some of the originations done back in 2021, early 2022, the payment differential just simple math will tell you that it's somewhere around 70% to 80% for some of your borrowers. And this is not just for DIMO but industry-wide. So any thoughts on that, any color you can provide will be super helpful.

In that vein when I look at some of the originations done back in 2021 early 2022 like the payment differential just simple math will tell you that it's somewhere around 70% to 80% for some of your borrowers and this is not just for BMO, but industry wide. So any thoughts on that any color you can provide would be super helpful.

Speaker 11: Yeah, it's Ernie. I'll just remark on your last last comment. Our, our modeling would not suggest that and we look at what the rate is that they they took.

Okay.

Yeah. It's her analysis for you Mark on your last last comment our modeling would not suggest that and we look at what the rate is that they took when they when they are applied to the rate that they will be renewing at and don't see it going into that zone.

Speaker 11: when they applied to the rate that they will be renewing at and don't see it going into that zone. So that's one point. The second point I would say is our expectation is that even if the rates stay the same, that we'll be looking at customers facing upward up to about a 40% increase in terms of at the max or 45 at the max in that zone when they renew.

So that's one point the second point I would say is our expectation is that even if the rates stay the same that we'll be looking at customers facing upward up to about a 40% increase.

In terms of at the Max or 45 at the Max and in that zone, when they renew so a little different from where your assumptions are.

Speaker 11: So a little different from where your assumptions are. But again, I'll come back to the fact that these customers were underwritten with a very strong performance. I mean monitor them today for their increase in cash flow and what they have remaining their capacity to pay. So feel very confident that these customers are able to absorb the increased shock. Should there not be?

But again I'll come back to the fact that these customers were underwritten with a very strong performance and we monitor them today for their increase in rent in.

Cash flow and what they have remaining their capacity to pay so I feel very confident that these customers are able to absorb that the increased shock should there not be a rate decrease.

Speaker 14: Okay, so I'm not sure if there's maybe an embedded expectation of amortization extensions there and the hardship rule, but the 40% would be higher if I just look at just the straight math of originating at sub 2%, renewing at 6% or even in the mid fives would be in some cases more than 40. So maybe we can take it offline, but I'd love to be more details on that.

So I'm not sure if there's maybe an embedded expectation of amortization extensions there into hardship rule, but the 40% would be higher if I just look at the just the straight math of originating at sub 2% renewing at 6% or even in the mid fives would be in some cases more than 40. So maybe we can take it off.

But I'd love to get more details on that.

Yes, let me see if they can do that.

Thank you.

Speaker 3: Thank you. This is all the time we have for questions. I would not like to turn a meeting back over to the who.

Thank you. This is all the time, we have for questions I would now like to turn the meeting back over to that of late.

Speaker 4: Thank you operator and thank you all for your questions this morning. Before we conclude, I would like to take a moment to recognize Dan Barkley, who's in the room with us after a 30 year career. Dan will be retiring next month.

Thank you operator, and thank you all for your questions. This morning, before we conclude I would like to take a moment to recognize Dan Barclay who's in the room with us after a 30 year career, Dan will be retiring next month <unk> long track record of client service ethical leadership innovation and strategic counsel.

Speaker 4: Dan's long track record of client service, ethical leadership, innovation, and strategic council have been key to the progress we're making across the bank for our clients. Dan, on behalf of all...

Have been key to the progress, we're making across the bank for our clients down on behalf of all of US congratulations on a remarkable career Allentown inbound is succeeding Dan and has hit the ground running his appointment represents a very strong handoff from our high performing.

Speaker 4: Congratulations on a remarkable career. Alan Tanimbum is succeeding Dan and has hit the ground running. His appointment represents a very strong handoff from a high performing.

Speaker 4: business into a high performing business. We are at the bank proactively position.

Business into a high performing business, we are at the bank proactively positioned.

Speaker 4: for future growth and confident in the power of our integrated North American franchise with consistent and differentiated performance that will help our clients make real financial progress. Thanks everyone, I want to wish everyone a happy holiday season and we look forward to speaking to you again in the New Year.

For future growth and confident in the power of our integrated North American franchise with consistent and differentiated performance that will help our clients make real financial progress. Thanks, everyone I want to wish everyone. A happy holiday season, and we look forward to speaking to you again in the new year.

Yes.

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

Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.