Q1 2024 Canadian Western Bank Earnings Call

Yes.

Operator: Good morning. My name is Ludi, and I will be your conference operator today. At this time, I would like to welcome everyone to CWB's first quarter 2024 financial results conference call and webcast. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Judy and I'll be your conference operator today at this time I would like to welcome everyone to T. W. V first quarter 2024 financial results conference call and webcast.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number two.

After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press the star followed by the number to you. Thank you I will now turn to calibrate your crashed brilliance assistant Vice Pres.

Chris Williams: Thank you. I will now turn the call over to Chris Williams, Assistant Vice President of Investor Relations. Please go ahead, Chris.

At end of Investor Relations. Please go ahead Chris.

Chris Williams: Good morning and welcome to our first quarter 2024 financial results conference call. We'll begin this morning's presentation with opening remarks from Chris Fowler, President and Chief Executive Officer, followed by Matt Rudd, Chief Financial Officer, and Carolina Parra, Chief Risk Officer. Also present today are Stephen Murphy, Group Head Commercial, Personal, and Wealth, and Jeff Wright, Group Head Client Solutions and Specialty Business.

Good morning, and welcome to our first quarter 2024 financial results Conference call will begin this morning's presentation with opening remarks from Chris Fowler, President and Chief Executive Officer, followed by Matt, Ryan Chief Financial Officer, and Caribbean, Alright, Chris Chief Risk Officer.

Also present today evening, Rafi repay commercial personal and well Jeff right.

Client solutions and specialty businesses.

Christopher H. Fowler: After our prepared remarks, they will all be available to take your questions. As noted on slide two, statements may be made on this call that are forward-looking in nature, which involves functions that have inherent risks and uncertainty. However, actual results could differ materially from those stated. 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 under, I will now turn the call over to Chris Fowler, who will begin his discussion on slide four. Thank you, Chris, and good morning, everyone.

After our prepared remarks, we will all be available to take your questions.

As noted on slide two statements may be made on this call that are forward looking in nature, 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 result.

<unk>.

Measures performance on a reported and adjusted basis and considers both to be useful.

Useful in assessing underlying business performance I will now turn the call over to Chris Fowler will begin this discussion on slide four.

Thank you, Chris and good morning, everyone.

Christopher H. Fowler: CWB's focused performance continued in the first quarter with positive operating leverage driven by disciplined expense management while targeting new lending opportunities and meeting our risk-adjusted return expectation. As expected, growth in the Canadian economy remained muted. As elevated interest rates continue to slow consumer spending and reduce inflation, in this environment where teams focus on executing our strategy and winning full service clients within our disciplined risk-adjusted pricing criteria, while providing exceptional service to our clients, people take the time to understand our clients and their business, and we work as a united team to provide holistic solutions and advice for them. This differentiates us from the competition and, along with our strong balance sheet, has us well positioned to capitalize on the growth opportunities in front of us with an economy that we expect to gradually strengthen in the second half of the year.

Gwb's August performance continued in the first quarter with positive operating leverage driven by disciplined expense management, while targeting new lending opportunities that met our risk adjusted return expectations.

As expected growth in the Canadian economy remained muted.

As elevated interest rates continued to slow.

<unk> spending and reduce inflation in this environment. Our teams focus remains on executing our strategy and winning full service clients within our disciplined risk adjusted pricing criteria well.

Providing exceptional service to our clients.

Our people take the time to understand our clients and their businesses and we work as the United team to provide holistic solutions and advice for them.

This differentiates us from the competition and along with our strong balance sheet has us well positioned to capitalize on the growth opportunities in front of us within the economy that we expect to gradually strengthen.

In the back half of the year.

Christopher H. Fowler: As shown on slide five, our loan growth has been strategically targeted in the general commercial portfolio. Clients in this category include a broad section of the Canadian economy that is underserved by other banks, and they represent a significant opportunity for CWB to provide a full suite of lending and business banking services, deepening our relationship with the client and our returns for our investors.

As shown on slide five our loan growth has been strategically targeted general commercial portfolio.

Clients in this in this category include a broad section of the Canadian economy, that's underserved by the other banks and they represent a significant opportunity for CW Beach provides a full suite of lending business banking services deepening our relationship with the client and our returns for our investors in the last year we.

Christopher H. Fowler: In the last year, we delivered 8% general commercial loans. We've taken a highly disciplined approach to lending in the current environment, focused on appropriate finance returns relative to the underlying risk in a higher interest rate environment. This has lowered origination volumes across our commercial real estate portfolio.

Delivered 8% general commercial loan growth.

We've taken a highly disciplined approach to lending in the current environment focused on appropriate financial returns relative to the underlying risk in a higher interest rate environment.

Lowered origination volumes across our commercial real estate portfolios.

Christopher H. Fowler: The credit performance of these portfolios has been strong, and our overall balance of commercial and realistic exposures has been reduced by scheduled repayments and payouts at project completion. Our prudent risk appetite and underwriting standards reflect a consistent and long history of strong credit performance. We remain comfortable with our current exposures while weakening, while the economy has returned us to historic provisioning levels. We've driven strong growth in Ontario with support from Mississauga and Markham Banking, especially in the strategically targeted general commercial portfolio, which we've grown by 11% over the last five years. The opening of our new banking center in Toronto's financial district in January is creating greater awareness of CWB in the GTA, and we look I'll now turn the call over to Matt, who will provide greater detail on our first quarter financial performance. Thanks, Chris. Good morning, everyone.

The credit performance of these portfolios has been strong and our overall balance of commercial real estate exposure has been reduced by scheduled repayments and payouts and project completions.

Our prudent risk appetite and underwriting standards reflects our consistent and long history of strong credit performance.

We remain comfortable with our current exposures while weakening.

Economy, the weakening economy has returned us to historic producing levels.

We've driven strong growth in Ontario, with support Mississauga, and Mark on banking centers, especially in our strategically targeted general commercial portfolio, which was growing by 11% over the last year.

Grand opening of our New banking center in Toronto Financial District in January is creating greater awareness of CWC in the GTA and we look forward to continued growth momentum with the opening of our Kitchener branch later this year.

I'll now turn the call over to Matt, who will provide greater detail on our first quarter financial performance. Thanks, Chris Good morning, everyone I'm starting on slide seven.

Robin Matthew Rudd: I'm starting on slide 7, delivered stronger growth in franchise deposits than we expected this quarter, and that was especially in demand and notice deposits, which increased 2% sequentially, and that reflected growth from both new and existing clients. It also delivered growth in term deposits of 4% compared to last quarter, which reflected a continued preference for term deposits in the current interest rate environment.

Delivered stronger growth in franchise deposits than we expected this quarter and that was especially in demand and notice deposits, which increased 2% sequentially, reflecting growth from both new and existing clients.

We also delivered growth in term deposits of 4% compared to last quarter, reflecting the continued preference for term deposits in the current interest rate environment.

Robin Matthew Rudd: Stronger-than-expected franchise deposit growth has resulted in a temporary bulge in our liquidity levels. We expect liquidity to normalize over the next quarter as we'll deploy to new lending opportunities that meet our risk-adjusted return expectations. Compared to the prior year, franchise deposits increased 3% as a 12% increase in fixed-term franchise deposits was partially offset by a 2% decline in demand and notice deposits. Lower demand and notice deposits primarily reflected a reduction in account balances as clients utilized excess savings over the past year and also converted them into term deposits.

The stronger than expected franchise deposit growth has resulted in a temporary bolstering our liquidity levels and we expect liquidity to normalize over the next quarter as we'll deploy it to new lending opportunities that meet our risk adjusted return expectations.

Impaired to the prior year franchise deposits increased 3% as a 12% increase in fixed term franchise deposits was partially offset by a 2% decline in demand and noticed or demand and notice deposits primarily reflected a reduction in account balances as clients utilized excess savings over the past year and also converted into term deposits.

Robin Matthew Rudd: We commence the initial launch of our new commercial digital cash management platform and plan to roll it out to customers in a phased approach starting next quarter. We expect the rollout to dampen franchise deposit growth in the near term as we focus on transitioning existing commercial clients onto the new platform before mobilizing our Salesforce platform to onboard new clients. Expect positive momentum and franchise deposit growth in the back half of the year and continue to expect to deliver mid single digit percentage growth on an annual basis. The performance compared to the same quarter last year, shown on slide 8. In Q1 of last year, we recognized a large impaired loan recovery that provided a boost to net interest income and drove the unusual outcome of our provision for credit losses being in a recovery rather than an expense. With our provision for credit losses returning to normal within our normal range this year, our common shareholders' net income decreased by 7%, and diluted EPS decreased by $0.08 compared to last year. Our focused operating performance delivered pre-tax pre-provision income growth of 14% compared to last year, although adjusted EPS decreased by $0.09 from the same quarter last year.

We commenced the initial launch of our new commercial digital cat and cash management platform.

And to roll it out to customers in a phased approach starting next quarter.

The rollout of gap in franchise deposit growth in the near term as we focus on transitioning existing commercial clients onto the new platform.

We're mobilizing our salesforce to onboard new clients.

Positive momentum in franchise deposit growth in the back half of the year and continue to expect to deliver mid single digit percentage growth on an annual basis.

Our performance compared to the same quarter last year as shown on slide eight in Q1 of last year, we recognized a large impaired loan recovery that provided a boost to net interest income and drove the unusual outcome of our provision for credit losses been in a recovery rather than an expense position.

With our provision for credit losses, returning to normal within our normal range. This year, our common shareholders' net income decreased by 7% and diluted EPS decreased by <unk> compared to last year.

Our focused operating performance delivered pretax pre provision income growth of 14% compared to last year.

Adjusted EPS decreased by nine from the same quarter last year.

Robin Matthew Rudd: In the prior year, we benefited by $0.13 from the reversal of a previously recognized impaired loan write-off, which reflected the combined impacts of a reduction in the impaired loan provision for credit losses of $0.10 and increased net interest income of $0.03. Excluding these impacts, higher net interest income increased EPS by $0.16, primarily reflecting the benefit of an 8-basis point increase in net interest margin. Our provision for credit losses decreased EPS by 11 cents as our provision for credit losses has now returned to being within our normal historical range from the unusually low levels in the prior year. As shown on slide nine, our common shareholders' net income increased 14%, and diluted UPS increased 11 cents compared to Q4. Pre-tax, pre-provision income increased by 3% on a sequential basis.

In the prior year, we benefited <unk> 13 from the reversal of a previously recognized impaired loan write off which reflected the combined impact of a reduction in the impaired loan provision for credit losses of 10 cents.

<unk> increased net interest income of <unk>.

Excluding these impacts higher net interest income increased EPS by <unk> 16.

Primarily reflecting the benefit of an eight basis point increase in net interest margin.

Provision for credit losses decreased EPS by <unk> 11 as.

Our provision for credit losses has now returned to being within our normal historical range from the unusually low levels in the prior year.

As shown on slide nine our common shareholders' net income increased 14% and diluted EPS increased <unk> 11 compared to Q4.

Pre tax pre provision income increased 3% on a sequential basis.

Robin Matthew Rudd: We incurred reorganization costs primarily in the prior quarter that reduced EPS by $0.12 compared to the current quarter. Our reorganization activities are now complete, and these costs have been removed from our adjusted performance metrics and bulk period. Adjusted EPS decreased by one cent from the prior quarter.

We incurred reorganization costs, primarily in the prior quarter that reduced EPS by <unk> 12, compared to the current quarter.

Our reorganization activities are now complete and these costs have been removed from our adjusted performance metrics in both periods.

Adjusted EPS decreased by <unk> from the prior quarter or.

For adjusted Noninterest expenses contributed <unk> <unk> EPS, primarily due to lower people costs and lower spend due to the timing of ongoing strategic activities.

Robin Matthew Rudd: Lower adjusted non-interest expenses contributed $0.05 to DPS, primarily due to lower people costs and lower spend due to the timing of ongoing strategic activity. Higher net interest income increased DPS by $0.02, and a decrease in non-interest income reduced DPS by $0.04. The provision for credit losses this quarter reduced EPS by six cents, reflecting a return to within our normal historical range, as expected. As shown on slide 10, total revenue decreased 1% on a sequential basis, while interest income increased by one percent primarily driven by an increase in average interest bearing assets. The 13% decrease in non-interest income was primarily due to lower foreign exchange revenue due to a weakening U.S. dollar this quarter compared to a strengthening U.S. dollar in the prior quarter.

Net interest income increased EPS by <unk> <unk>.

And a decrease in noninterest income reduced EPS by <unk> <unk>.

The provision for credit losses, this quarter reduced EPS by <unk> <unk>, reflecting a return to within our normal historical range as expected.

Shown on slide 10, total revenue decreased 1% on a sequential basis net interest income increased one 1% primarily driven by an increase in average interest bearing assets.

13% decrease in noninterest income was primarily due to lower foreign exchange revenue due to a weakening U S. Dollar this quarter compared to a strengthening U S dollar in the prior quarter.

Turning to slide 11, our NIM was consistent with the prior quarter.

Profitability of our assets grew as expected as the growth in asset yields strongly outpaced the increase in funding costs, which drove 70 basis points of NIM back.

Stronger than expected franchise deposit growth caused a bulge in liquidity not reduced NIM by five basis points and our funding mix reduced NIM by two basis points from last quarter.

Robin Matthew Rudd: Turning to slide 11, our NIM was consistent with the prior course. Profitability of our assets grew as expected as the growth in asset yields strongly outpaced the increase in funding costs, which drove seven basis points of NIM benefits. Stronger-than-expected franchise deposit growth caused a bulge in liquidity, and that reduced NEM by 5 basis points, and our funding mix reduced NEM by 2 basis points from last quarter. We continue to anticipate a relatively stable policy interest rate in fiscal 2024 with the potential for interest rate reductions in the latter part of the year.

We continue to anticipate a relatively stable policy interest rate in fiscal 2024 with the potential for interest rate reductions in the latter part of the year. We continue to expect our net interest margin to gradually increase over the remainder of the year and reflects the benefits of normalized liquidity levels growth in fixed term asset yields continuing to outpace growth.

And funding cost.

And loan growth thats targeted to optimize risk adjusted returns.

Our capital ratios and the drivers of our CET one improvement are shown on slide 12, our.

Our CET one ratio increased 30 basis points to 10% this quarter, primarily reflecting retained earnings growth a reduction in accumulated other comprehensive losses associated with an increase in the fair value of our debt securities and a decrease in risk weighted assets.

No common shares were issued under the ATM program again, this quarter and we do not expect any further issuances under our ATM program.

Robin Matthew Rudd: We continue to expect our net interest margin to gradually increase over the remainder of the year and reflect the benefits of normalized liquidity levels, growth in fixed-term asset yields continuing to outpace growth in funding costs, and loan growth that's targeted to optimize risk-adjusted return. Our capital ratios and the drivers of our CT1 improvement are shown on slide 12. The CET1 ratio increased 30 basis points to 10% this quarter, primarily reflecting retained earnings growth, a reduction in accumulated other comprehensive losses associated with an increase in the fair value of our debt securities, and a decrease in risk-weighted assets. No common shares were issued under the ATM program again this quarter, and we do not expect any further issuances under our ATM program.

<unk> declared a common share dividend yesterday of <unk> 34 per share, which is consistent with the dividend declared last quarter and up <unk> <unk> from the dividend declared last year.

I'll now turn the call over to Carolina, who will speak further on our credit performance.

Thank you, Matt and good morning, everyone.

Slide 15, gross impaired loans increased 43 million or 16% from prior year and represented 86 basis points of gross loans 11 basis points higher than prior year.

As you know gross impaired loans can fluctuate and this quarter they increased 19% sequentially after declining 6% sequentially last quarter.

Police investing very lumpy this quarter was in line with our expectations given the economic backdrop.

Lacks the impact of higher interest rates pressuring the cash flow of our general commercial borrowers.

Hi resolutions.

In that commercial real estate loans were relatively stable compared to the previous quarter.

Our strong credit risk management framework, including well established underwriting standards, the secured nature of our lending portfolio with conservative loan to value ratios and a proactive approach to work with our clients.

Robin Matthew Rudd: Our board declared a common share dividend yesterday of $0.34 per share, which is consistent with the dividend declared last quarter and up $0.02 from the dividend declared last year. I'll now turn the call over to Carolina, who will speak further on our credit performance. Thank you, Matt, and good morning, everyone.

<unk> continues to be an effective in minimizing realized losses on the rest of the Shandong and panels.

This is demonstrated by a slow.

Low write offs as a percentage of total loans.

In some past due east of economic volatility.

Carolina Parra: Turning to slide 15, total gross impaired loans increased 43 million or 16% from the prior year and represented 86 basis points across loans, 11 basis points higher than the prior year. As you know, gross impaired loans can fluctuate, and this quarter they increased 19% sequentially after declining 6% sequentially last quarter. The increase in grossing per month this quarter was in line with our expectations given the economic backdrop and reflects the impact of higher interest rates pressuring the cash flow of our general commercial borrowers, partially upset by resolution. In Perth, commercial real estate loans were relatively stable compared to the previous quarter.

We also continue to have more exposure to unsecured personal lending or credit cards.

We expect the total bonds of Charleston parents hopes to continue to fluctuate as you know.

They all know what five years, you'll get regularly with credit decisions undertaken on a case by case basis to provide early identification of possible adverse trends.

As shown on slide 16, the performing loan allowance was relatively consistent with the prior quarters as increased outside best reflected in our economic outlook.

Set by a decline in total loans.

And the nonperforming loan formation was three basis points lower than last quarter.

Our provision for credit losses on impaired loans increased to 17 million or.

Or 19 basis points compared to a charge of 7 million last quarter.

March we cover eight last year.

Looking forward the sustained impact of higher interest rates is expected to continue to result in elevated borrowing default rates I think parent loans over the remainder of the year.

Carolina Parra: Our strong credit risk management framework, including well-established underwriting standards, the secure nature of our lending portfolio with conservative loan-to-value ratios, and a proactive approach to working with our clients through difficult periods, continues to be an aspect in minimizing realized losses on the resolution of impaired loans. This is demonstrated by a history of low vitals as a percentage of total loans, including through past periods of economic volatility. We also continue to have minimal exposure to unsecured personal money or credit cards.

With our experience in prior periods of economic volatility I prudent lending approach supports our expectations that our provision for credit losses will remain within our historical range of 18 to 23 basis points on an annual basis.

I will turn the call back to Chris Volk for his closing remarks and outlook.

Thank you Kelly and now turning to slide 16, we have maintained our focus to open the year with solid results supported by large positive operating leverage our balance sheet is strong and the differentiated client experience that our team provides supports the continued delivery of solid results.

Carolina Parra: We expect the total balance of girls' impaired loans to continue to fluctuate as the overall loan portfolio is reviewed regularly, with credit decisions undertaken on a case-by-case basis to provide early identification of possible adversities. As shown on slide 16, the performing loan allowance was relatively consistent with the prior quarters, as increased downside risk reflected in our economic outlook was offset by a decline in total loans. An ill-performing loan provision was three basis points lower than last quarter. Our provision for credit losses on impaired loans increased to $17 million, or 19 basis points, compared to a charge of $7 million last quarter and a large recovery last year.

Our teams remain focused on executing our strategy and when the full service clients within our risk adjusted pricing criteria and we anticipate our momentum will build as year progresses.

While we continue to execute our strategic priorities as planned we will carefully monitor and manage our expenditures and deliver a differentiated experience to Canadian business owners.

Our financial outlook for 2024 is unchanged and we are well positioned to create value for our investors in the year ahead.

With that operator, let's open the lines for Q&A.

Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad.

Carolina Parra: Looking forward, the sustained impact of higher interest rates is expected to continue to result in elevated borrower default rates and impaired loans over the remainder of the year. Consistent with our experience in prior periods of economic volatility, our prudent lending approach supports our expectations that our provision for credit losses will remain within our historical normal range of 18 to 23 basis points on an annual basis. I will turn the call back to Chris Fowler for his closing remarks and updates. Thank you, Carolina.

He comes from managing your request should you wish to decline from the polling process. Please press the star followed by the number two if youre using a speakerphone. Please pick up lift the handset before pressing any Keith one moment. Please for your first question.

Your first question comes from the line of Doug Young from Desjardins Capital markets. Your line is open.

Hi, Good morning, maybe we can just start on credit and I guess two questions like the increase in new impaired loan formations in I guess, they can be volatile and maybe not lead Q2 actual losses, but can you provide detail.

Christopher H. Fowler: Turning to slide 16, we've maintained our focus to open the year with solid results supported by large, positive opportunities. The balance sheet is strong, and the differentiated client experience that our team provides supports the continued delivery of solid results. Our teams remain focused on executing our strategy and winning full service clients within our risk-adjusted pricing criteria, and we anticipate our momentum will build as the year progresses. While we continue to execute our strategic priorities as planned, we will carefully monitor and manage our expenditures and deliver a differentiated experience to Canadian business owners. Our financial outlook for 2024 is unchanged, and we're well positioned to create value for our investors in the year ahead. With that, Operator, let's open the lines for Q&A.

And which buckets.

And which buckets, where youre seeing that impairments are those impairments come through.

Absolutely. So good morning, yes, so the new formations were mostly general commercial portfolio.

And we were not seeing any impact on the specific initiatives there was well diversified.

Not really.

Staring with any specific market, but overall the general commercial with pressures from the interest rate increases.

So is it in any particular geography or.

Yeah.

No.

Don't have any significant geography, we saw a little bit of an increase in Alberta, and you saw that in what's a very I'm sure.

Christopher H. Fowler: Thank you. And ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear the tone for lodging your request. Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speakerphone, please flip the handset before pressing any keys.

Well, we're already getting crowded case.

That's not really a.

Cause any impact or any concern from the Alberta market item.

Yeah.

Okay, and then just on the I just wanted to confirm the provision for credit loss.

Range of 18 to 23 basis points is that on an impaired or total and has that changed.

I was on a total basis.

Operator: One moment, please, for your first question. Your first question comes from the line of Doug Young from Jordan's Capital Markets. Your line is open. Hi, good morning.

So again, primarily weighted more to the impaired loan grounded and performing and we have not changed our outlook on either.

Okay, I, just want to confirm that okay, and Matt, but I guess I have your nims as the topic does your.

Doug Young: Maybe we can just start on credit. And I guess two questions: the increase in new impaired loan formations, and I understand they can be volatile and maybe not lead to actual losses. But can you provide detail on which buckets where you're seeing that impairment or those impairments come through? Good morning.

And I.

Just wanted to get an idea of the evolution of nims in that and again, it's one metric, but it's one that people are absolutely focused on is this more you see a gradual improvement coming through is it more backend weighted can you talk about what youre seeing so far in the second quarter.

Carolina Parra: Yes, so the new formations were mostly in a general commercial portfolio, and we're not seeing any impact on specific industries. It was well diversified, and we're not really concerned with any specific bucket, but overall, the general commercial lending with the pressure from the interest rate increases. Was it in any particular geography or not?

And you did have a decline sequentially in capital market deposits by decent amount I assume those are higher cost deposits, but there wasn't really didnt seem like there was a big impact on NIM this quarter or is that more of a second quarter.

Item that would come through.

Yeah actually so NIM.

Carolina Parra: No, we don't have any significant geography. We saw a little bit of an increase in Alberta, as you saw, but it was a very functional borrower, very idiosyncratic case that did not really cause any impact or any concern from the Alberta market either. Cannon.

The primary driver there would be the spreads we're getting on our assets and we actually saw pretty good.

Kick off, whereas this quarter and not so what we saw in loan profitability. What we saw in our securities portfolio, just rolling over and issue New securities at the higher rates everything there was as expected.

Robin Matthew Rudd: I just want to confirm the provision for credit loss range of 18 to 23 basis points; is that on an impaired or total basis, and has that changed? I was on a total basis, again, primarily weighted more to the empirical rather than performing, and we have not changed our outlook on either. Okay, and Matt, well, I guess I have you. NIMS is the topic du jour, and I just want to get an idea of the evolution of NIMS.

Overall cost of deposits a bit lower than what we were expecting actually so that seven seven basis points I highlighted of just asset yields relative to funding costs that that would've exceeded forecast I would've had last quarter.

A couple of reasons for that I think we were very selective on the deposits. We originated youre right. We did have a decline in capital market deposits, but we did do an issuance.

Robin Matthew Rudd: And again, it's one metric, but it's one that people are absolutely focused on. Is this more, do you see a gradual improvement coming through? Is it more backend weighted?

It was a smaller issuance to offset a larger maturity and the reason why we did it it was at a time where it was.

Robin Matthew Rudd: Can you talk about what you're seeing so far in the second quarter? And you did have a decline sequentially in capital market deposits by a decent amount. I assume those are higher cost deposits, but it didn't really seem like there was a big impact on NIMS this quarter. Or is that more of a second quarter? item that would, Yeah, actually, so NIM, the primary driver there would be the spreads we're getting on our assets. And we actually saw a pretty good kick upwards this quarter in that.

Basically at parity in fact, maybe even a little bit cheaper than broker deposits are at the time. It was just a very opportunistic trade and I think youll see us be very disciplined on deposits and managing that cost.

So so happy with the work, we're seeing in asset spreads, where where I'd say, we had the pressure on NIM. This quarter that brought us back to neutral I mean that was the liquidity story.

Robin Matthew Rudd: So what we saw in loan profitability, what we saw in our securities portfolio, just rolling over and issuing new securities at the higher rates, everything there was as expected. Overall, the cost of deposits was a bit lower than what we were expecting, actually. So that seven basis points I highlighted of just asset yields relative to funding costs would have exceeded the forecast I would have had last quarter. There are a couple reasons for that. I think we were very selective in the deposits we originated.

It was a good news bad news. The good news is that we had more franchise deposit growth than what we expected and where we were surprised there which would be a reversion of the trend. We've been seeing is that demand and notice deposits grew and it grew from existing clients. In addition to new that's.

Not something we were expecting.

On new liquidity coming in and you'll look at our financial disclosure from year end and see you know when we bring in liquidity and we invested in securities temporarily before it gets into loan growth.

Robin Matthew Rudd: You're right, we did have a decline in capital market deposits, but we did issue an issuance. It was a smaller issuance to offset a larger maturity. And the reason why we did it was at a time when it was basically at parity, in fact, maybe even a little bit cheaper than broker deposits. At the time, it was just a very opportunistic trade.

<unk> yield quite a bit less than loans, we don't take on any credit risk in that securities portfolio base.

Basically federal and provincial bonds.

Robin Matthew Rudd: And I think you'll see us be very disciplined on deposits and managing that cost. So happy with the torque we're seeing in asset spreads, where I'd say we had the pressure on NIM this quarter that brought us back to neutral. I mean, that was a liquidity story. It was a good news, bad news.

So when we reinvest that into loan growth, it's a pretty significant amount of yield increase and that gives us talk to the NIM.

So that's why we're very constructive on net interest margin into the second quarter I'd expect growth there.

Robin Matthew Rudd: The good news is that we had more franchise deposit growth than we expected. And where we were surprised there, which would be a reversion of the trend we've been seeing, demand and notice deposits grew. And it grew from existing clients.

Likely more growth in the second quarter than than what we'd see maybe in Q3 and Q4.

But we would expect to see continued growth through the year, but I look at Q2 and I'm quite constructive.

And are you seeing that so far and I don't know if you want to comment on that but <unk> got good visibility I would say daily weekly on on that particular metric is.

Robin Matthew Rudd: In addition to new, that's not something we were expecting. On new liquidity coming in, you'll look at our financial disclosure from year end and see, you know, we bring in liquidity and we invest it in securities temporarily before it gets into loan growth. Securities yield quite a bit less than loans. We don't take on any credit risk in that securities portfolio.

Is that fair to say.

Now the I guess the catalyst of do we see.

More more significant NIM expansion or is it in the neighborhood of something smaller like in a couple of basis points. The the big driver of that is going to be the strength of our loan growth and bringing down that liquidity level and redeploying it to two loans.

Robin Matthew Rudd: It's basically federal and provincial bonds. So when we reinvest that into loan growth, it's a pretty significant amount of yield increase. And that gives us torque to the NEM.

With loans.

Pipeline looks good and strong in second quarter. So if we execute well and deliver the growth that we believe is in front of us and achievable then.

Robin Matthew Rudd: So that's why we're very constructive on net interest margin into the second quarter. I'd expect growth there. Likely more growth in the second quarter than what we'd see maybe in Q3 and Q4. But we'd expect to see continued growth through the year. But I look at Q2, and I'm quite constructive. And are you seeing that so far? And I don't know if you want to comment on that.

And then will be a positive story in Q2.

And I guess, that's where I was going next is like what are you seeing in terms of loan growth.

Is it similar to what Youre seeing what you saw and what you had in Q1.

And how is that deposit to loan growth ratio kind of unfolding so far in Q2.

Robin Matthew Rudd: But it's like you got good visibility; I would say daily, weekly on that particular event. Is that fair to say? Now the I guess the catalyst of whether we see, you know, more significant NIM expansion, or is it, you know, in the neighborhood of something smaller, like a couple of basis points, the big driver of that is going to be the strength of our loan growth and bringing down that liquidity level and redeploying it to loans. You know, with loans, my plan looks good and strong in the second quarter. So if we execute well and deliver the growth that we believe is in front of us and achievable, then NIM will be a positive story in Q2. I guess that's where I was going next, like, what are you seeing in terms of loan growth? Is it similar to what you're seeing, what you saw, and what you had in Q1?

Even you want to touch on <unk> growth and what Youre seeing I'll circle back to loan deposit ratio sure.

We're pretty much saying, what we expected to see so we had talked about that it was going to be a gradual build through the year.

And what we see through the activity to date and in the pipeline.

That's what we're seeing so we knew was going to build throughout the year and that the growth was.

In the second quarter.

Consistent with what we're seeing so as we look at.

Probably a little bit slower start to the year than we were expecting on the lending side, but we expect to be in line with the guidance that we previously issued.

And then on loan to deposit ratio I mean, this quarter, we saw a notch downwards again that we wouldn't have expected and we weren't necessarily structurally planning for so I wouldn't expect the ratio of your compute this quarter to be a running range, we'd expect for next quarter.

Stephen H. E. Murphy: And how is that deposit to loan growth ratio kind of unfolding so far in Q2? Do you want to touch on growth and what you're seeing? I'll circle back to the positive ratio. Sure.

Stephen H. E. Murphy: We're pretty much seeing what we expected to see. So we had talked about that it was going to be a gradual build throughout the year. And what we see through the activity to date and in the pipeline, you know, that's what we're seeing. So we knew it was going to build throughout the year and that growth was going to start in the second quarter. And that's consistent with what we're seeing. So, as we look back, it was probably a little bit slower start to the year than we were expecting on the lending side, but we expect to be in line with the guidance that we have previously issued. And then on the loan to deposit ratio, I mean, this quarter, we saw a notch downwards that we wouldn't have expected and that we weren't necessarily structurally planning for. So I wouldn't expect the ratio you compute this quarter to be a running range; we'd expect for next quarter, stronger loan growth and lower deposit growth than this quarter would be our base case expectation. I appreciate the comments.

Stronger loan growth.

And lower deposit growth in this quarter would be our base case expectation.

I appreciate the color. Thank you.

Your next question comes from the line of Lamar Prasad from core Mark Your line is open.

Yes, Thanks, I want to start off with an answer on the previous set of questions. There just on credit matter Carolina, maybe you could clarify maybe I heard this wrong, but the PCL guidance.

That 18 to 23 basis point guidance did you say that's total are impaired I guess your slides 15 suggests that's impaired but then your slide 16, it seems like it could be total so just wanted to make sure.

Yes, just for absolute clarity it's total.

But I guess the majority of it we expect to be impaired.

Okay, and then performing would that kind of follow a balanced growth is that is that kind of the way we should.

Think about that.

All else being equal, yes, yes borrowings.

Shifting economic forecast.

Stephen H. E. Murphy: Thank you. Your next question comes from the line of Lemar Persaud from Carmark. Your line is open.

Okay, and then one of the things that some of the banks have been suggesting to you that this earning season on credit.

Is that you could possibly see T C L kind of bump up in the first half of the year and then some relief in the second half of the year. So is it possible just given the step up in and parents that we saw this quarter it sounds like.

Lemar Persaud: Yeah, thanks. I want to start off with an answer to the previous set of questions there just on credit. Matt or Carolina, maybe you could clarify, maybe I heard this wrong, but the PCL guidance, that 18 to 23 basis point, guys, did you say that's total or impaired? I guess your slide 15 suggests that's impaired. But then your slide 16 seems like it could be total. So just want to make sure.

You could probably move up in the near term and then maybe that could drive pcl's, even above that 18 to 23, and then relief in the back half of the year. So maybe Carolina talk about the path of how you get to that 18 to 22 that'd be helpful.

So we.

Back to continue to see that trend.

Carolina Parra: Yeah, just for absolute clarity, it's total. But I guess the majority of it we expect to be in. Okay, and then performing with that kind of follow-balance growth. Is that the way we think about that, all else being equal? Yes.

We're seeing as we continue to work with our clients.

The PCL of course timing of logging from when we did they pay for them.

They reflect the impact of the interest rates and inflation. So are we.

We do think the first half of the year would be when we start to see a little bit of an increase.

Carolina Parra: Yeah. Barring, Group Shifting Economic Forecast. Okay.

We're getting resolutions at the same time as we were putting in if you see also I think the net effect will be definitely lower.

Carolina Parra: And one of the things that some of the banks have been suggesting to you this earnings season on credit is that you could possibly see PCLs kind of bump up in the first half of the year and then some relief in the second half of the year. So is it possible, just given the step up in, you know, in pairs that we saw this quarter, it sounds like, you know, they could probably move up in the near term. And then, you know, maybe that could drive PCLs even above that 18 to 23 and then give some relief in the back half of the year. So maybe Carolina, talk about the path of how you get to that age of 18 to 23.

And we do not expect to just go well outside of that range. What we see I know we're all at the end of the year. We we are very confident we will be within the thresholds that we mentioned.

Okay. So it's not that we should expect like something like 25, and then move down like nothing like that.

Okay, we don't expect that.

Okay, Okay, no that's fair.

And then I guess.

I've covered the stock for a couple of years and.

I know you guys typically have better insights into your your Oh, the loans our loan growth outlook like what gives you the confidence in the ramp up of that loan growth starting in Q2.

Carolina Parra: So we expect to continue to see a trend, as we're seeing as we continue to work with our clients. The PCLs, of course, are lagging from when we get the imparis and as they reflect the impact of interest rates and inflation. So we do think the first half of the year will be where we start to see a little bit of an increase. But we're getting resolutions at the same time as we're putting in the PCLs. So I think the net effect will definitely be lower.

And for the balance half its balance of the year like how you guys meet that mid single digit percent of trail.

Yes, well, we have pretty good line of sight into our loan pipeline and we also when you look at the numbers.

We have pretty good forecasting if if you look at the net effect of growth in the quarter, you've got to look at the commercial real estate side and some of the repositioning we've had in that portfolio as we've been selective on that side and so we can predict.

Carolina Parra: And we do not expect to just go well outside of that range that we're seeing. And overall, at the end of the year, we are very confident we will be within the thresholds that we're mentioning. Okay, so it's not that we should expect something like 25 and then move down like nothing like that. We don't expect that.

As things were new or projects are in the pipeline on the construction side.

Where those because that's been a drag on the net growth and then we can see all of the new activity. That's in there and that we're booking for funding got looking out. So we've got pretty good line of sight on that.

I'm kind of in a particular month, you might have things move around a bit depending on what's happening in the market, but we can see the trend.

Carolina Parra: Okay, okay, no, that's fair. And then I guess, you know, I've covered this stock for a couple of years. And I know you guys typically have better insights into your, your, loan growth outlook. Like, what gives you the confidence in the ramp-up of that loan growth starting in Q2? and for the balance half balance of the year, like how you guys meet that mid single-digit percentage growth. Yep, well, we have a pretty good line of sight into our long pipeline.

Trend line and we feel good about our expectations playing out the way that we thought for the year and the way we've previously talked about it.

Okay and are some of your commercial borrowers I'm thinking more on the commercial side are they.

Just kind of waiting to see how this rates.

How are rates evolve is that is that why there was some hesitation right now or is it just more so when these projects come online such as.

Timing rather than concern around the path of rates.

Stephen H. E. Murphy: And, and we also when you look at the numbers, you know, we have pretty good forecasting. If you look at the net effect of growth in the quarter, you've got to look at the commercial real estate side and some of the repositioning we've had in that portfolio as we've been selective on that side. And so we can predict, you know, as things are new, or projects are in the pipeline on the construction side, you know, where those are because that's been a drag on net growth. And then we can see all of the new activity that's in there and that we're booking for funding.

Particularly if you look at construction lending, that's absolutely happening and generally I'd say overall, there's probably a little bit of a slower start to the year because of that point.

We also still see.

Activity happening.

We see that.

We can see as we look forward to the rest of the year is playing out the way that we thought but I think that's a fair point.

Okay. Thanks, and then the final one for me just on expenses.

I'm, Okay, when I see the bank slow expense growth to even the low to mid single digit range, but when it tips into negative territory. They start to ask myself. The question is the bank under investing in growth and basically trading off the future to put up good earnings today.

Stephen H. E. Murphy: So we've got pretty good line of sight on that, you know, it can kind of in a particular month, you might have things move around a bit depending on what's happening in the market, but we can see the trend line, and we feel good about our expectations playing out the way that we thought for the year and the way we've previously talked about it. Okay, and some of your commercial borrowers, I'm thinking more on the commercial side, are they, you know, just kind of waiting to see how this rates, how rates evolve? Is that, is that why there's some hesitation right now? Or is it just more so when these projects come online? Timing rather than, you know, concern for the past.

I suspect you're going to tell me, that's not what's going on here at CW be so.

Just tell me why that's not the right the right way to look at this very low expense growth.

Yeah.

So couple of couple of things.

When we talked about expense trajectory last quarter end and the reorganization, we did I mean, it really wise to give us a lot of optionality.

First the reduction of the expense run rate, but it absolutely was meant to be predominantly a reinvestment.

Cost, but the timing of when we make those investments is within our control and and something we wanted to time with when we wanted to to start really driving the revenue growth and make sure that we made good on our commitment to positive operating leverage.

Stephen H. E. Murphy: Yeah, particularly if you look at construction lending, like that's absolutely happening. And generally, I'd say overall, there's probably a little bit of a slower start to the year because of that point. But we also still see, you know, activity happening. And we can see, as we look forward to the rest of the year, things playing out the way that we thought. But that's a fair point. Thanks.

So it just structurally that's how we thought about the ear. It you know we talked about mid.

Mid single digit growth of expenses and I'd say that outlook remains consistent and.

Robin Matthew Rudd: And then the final one for me, just on expenses. I'm okay when I see the bank's low expenses relative to even the low to mid single digits. But when it tips into negative territory, I start to ask myself the question, is the bank under investing in growth and basically trading off the future to put up good earnings today? I suspect you're going to tell me that's not what's going on here at CWB.

The weird thing about first quarter typically for us, perhaps with others to it it's a lower level of expenses, usually relative to the rest of the year.

<unk> you don't have CPP I on your employees just activity levels, usually a bit lower.

Robin Matthew Rudd: So just tell me why that's not the right way to look at this very low number. So a couple of things. When we talked about the expense trajectory last quarter and the reorganization we did, I mean, it really was to give us a lot of optionality. It was the first reduction in the expense run rate, but it was absolutely meant to be predominantly a reinvestment of those costs. But the timing of when we make those investments is within our control and something we wanted to time with when we wanted to start really driving revenue growth and make sure that we made good on our commitment to positive operating leverage. So just structurally, that's how we thought about the year, you know, we talked about mid single-digit growth in expenses, and I'd say that outlook remains consistent, and the other weird thing about the first quarter, typically for us, perhaps with others too, it's a lower level of expenses, usually relative to the rest of the year. A lot of you don't have CPPEI on your employees, just activity levels that are usually a bit lower.

And when you look back at our historical trend from Q1 to Q2 in terms of structural expense growth.

You can always see a bit of an uptick.

Last year was a bit of an anomaly. So if you look at Q1 and I use last year, we would've had double digit NII growth.

In the second quarter that is when we started talking about it and ops expense containment actions because of the growth outlook started to soften. So we took early action there are trajectory pretty rapidly went from double digit expense growth to mid single digit. So that's what we're lapping in Q2, so it's a bit of an easier comp.

Comp here in Q1, as well to deliver the reduction so I would not expect us to continue to reduce and I use as tempting as it is if you would put into my accountants hat on it's not realistic and not how we want to run the business and we'll be back I'd say on that mid single digit expense trajectory next quarter.

Thanks, guys.

Your next question comes from the line of Gabriel Dee, Shane from National Bank Financial Your line is open.

Robin Matthew Rudd: And when you look back at our historical trend from Q1 to Q2, in terms of structural expense growth, you can always see a bit of an uptick. Last year was a bit of an anomaly. So if you look at Q1 NIEs last year, we would have had double-digit NIE growth. In the second quarter, that is when we started talking about and enacting expense containment actions because the growth outlook started to soften. So we took early action there, and our trajectory pretty rapidly went from double-digit expense growth to mid-single-digit. So that's what we're lapping in on Q2.

Yeah.

Thank you and good morning.

What are we going to sit here our capital I'll start with that one you're a silver lining to.

Flat or negative loan growth as your core tier one ratio goes up and you're at 10% now I know you're not a big.

Buy back story or whatever you want to call it but given your excess capital position and given you know.

The loan growth picture, which you sound optimistic, but it's probably going to be weaker than you know the typical years, we target.

Robin Matthew Rudd: So it's a bit of an easier comp here in Q1 as well to deliver the reduction. So I would not expect us to continue to reduce NIEs. As tempting as it is, if you put on my accountant's hat on, it's not realistic and not how we want to run the business. And we'll be back, I'd say, on that mid single-digit expense trajectory next quarter. Thanks, guys. Your next question comes from the line of Gabriel Dechaine from National Bank Financial. Your line is open. Thank you. And good morning.

Why wouldn't you.

Consider buying back some stock here, especially trading below book value.

Yeah again, if I put on my financial habits awfully tempting the economics so not.

Very good point actually.

Our preference in deploying capital if we get to the point, where it's time to start deploying.

And we have good book through the economic cycle, our preference and we've been consistent on this it's to grow the franchise.

Organic and we've got lots of opportunity in front of us and coming out of cycles. You can look back historically you have seen we do quite well.

When it's time to put the foot on the gas and grow we generally outperformed and those sorts of environments. So having the dry powder to to support that we like that optionality.

Gabriel Dechaine: What are we going to say here? Capital, I'll start with that one. You're the silver lining to the buyback story, whatever you want to call it. But given your excess capital position and given, you know, the loan growth picture, which you sound optimistic about, it's probably going to be weaker than, you know, the typical years you target. Why wouldn't you consider buying back some stock here, especially trading below book value? Yeah, again, if I put on my financial hat, it's awfully tempting the economics of that. Very compelling, actually.

Inorganic and auction too and I mean, obviously, we continue to look at things, but that would be our second preference.

And then yes, you're right Gabe like if we don't have compelling.

Good risk adjusted return opportunities on those first two.

And then we're looking at.

Other ways to engineer returns for our shareholders, but our preference is obviously growing support the franchise first.

Oh I got it that's just I know the ATM was bit of a.

Robin Matthew Rudd: But our preference for deploying capital, if we get to the point where it's time to start deploying, and we have a good look through the economic cycle, our preference, and we've been consistent on this, is to grow the franchise organically, and we've got lots of opportunity in front of us, and coming out of cycles, you can look back historically and see we do quite well. When it's time to put the foot on the gas and grow, we generally outperform in those sorts of environments. So having the dry powder to support that, we like that optionality. In organics, it is an option too.

Sore spot for some investors a while ago, it's no longer the case, but you.

Where you're sitting today it might be a good opportunity to go in the other direction.

That's just my.

But.

Yeah next question would be on loan growth.

I want to delve into that a little bit more.

Do sound more optimistic.

What was holding back loan growth because I've seen this from the bank before where you know you Ya.

Robin Matthew Rudd: And I mean, obviously, we continue to look at things, but that would be our second preference. And then yeah, you're right, Gabe, like if we don't have compelling, good risk-adjusted return opportunities on those first two, then we're looking at other ways to engineer returns for our shareholders, but our preferences, obviously, are to grow and support the franchise. It's just I know the ATM was a bit of a sore spot for some investors a while ago. It's no longer the case, but where you are sitting today might be a good opportunity to go in the other direction. That's just my few cents. But yeah, the next question would be on loan growth. And I do want to delve into that a little bit more. You do sound more optimistic. What was holding back loan growth?

We're up on excess liquidity and then there's just a timing issue that the loans didn't actually.

Get advanced and it might be just a.

The next day into the new quarter.

Things that are back.

Normal spreads if you will.

What was the you know.

<unk>.

Factor holding back loan growth just from a timing standpoint or was there something else going on.

And underlying that question to how much is how much of heights depressing loan growth I got to imagine there's some borrowers that are.

Just sitting on the sidelines expecting like many of us that rates are going to be lower by the end of the year.

Yeah, So I'll start and then throw to Steven.

Yes, the maybe the difference this quarter compared to other previous times, where we found our cellphone excess liquidity in loans weren't necessarily the largest component of of that I mean, we went into this quarter, we werent expecting.

Stephen H. E. Murphy: I've seen this from the bank before where, you know, you load up on, you know, excess liquidity, and then there's just a timing issue that the loan didn't actually get advanced, and you know, might be just the next day into the new quarter, and you know, things are back to, you know, normal spreads, if you will. What was the factor holding back loan growth just from a timing standpoint? Or was there something else going on?

Robust loan growth for a number of reasons economic backdrop just.

What we're seeing in commercial real estate and and our focus there.

It was a branch raised deposit story, where we just had more growth there than what we were expecting so that's the one the one difference I wanted to highlight I think that's important.

But then just four for loan growth and more commentary there Terry there I'll throw to Steven.

Stephen H. E. Murphy: And underlying that question too, how much are rates depressing loan growth? I got to imagine there are some borrowers that are just sitting on the sidelines, expecting, like many of us, that rates are going to be lower by the end of the year. So I'll start and then turn it over to Stephen.

I think typically the first quarter is a slower quarter for us anyway, but I think as Matt said, there's a lot.

Of other factors going on.

Impacting that but we had expected it to be.

Yeah.

Our curve of growth through the year kind of getting us to our full year guidance and we're seeing what.

Robin Matthew Rudd: I guess the difference this quarter compared to other previous times when we found ourselves with excess liquidity is that loans weren't necessarily the largest component of that. I mean, we went into this quarter, we weren't expecting robust loan growth for a number of reasons, the economic backdrop, just what we're seeing in commercial real estate and our focus there. It was a branch raised deposit story where we just had more growth there than we were expecting. So that's the one difference I wanted to highlight.

What we see in our pipeline is consistent with that kind of building.

Growth throughout the year.

Okay.

Then do you feel that I just wanted to revisit that when you said the big driver of the impaired was one specific don't you can't tell us the industry I know there was a transportation sector.

You know trend if you will across.

I hit a few banks.

Is it related to that at all or does something else entirely.

No I'm just I just wanted to make sure.

Robin Matthew Rudd: I think that's important. But then just for loan growth and more commentary there, I'll throw in, Yeah, I think typically the first quarter is a slower quarter for us anyway. But I think, as Matt said, there's a lot of other factors going on impacting that, but we had expected it to be kind of a curve of growth through the year kind of getting us to our full-year guidance. And, you know, what we see in our pipeline is consistent with that kind of building growth throughout the year. Okay, then ECL, I just want to revisit that one, you said what, like the big driver, the impaired was one specific account; you can't tell us the industry. I know there was a transportation sector trend, if you will, across, you know, that hit a few banks. Is it related to that at all? Or just something else entirely? No, I just want to make sure that it was not one specific account.

It was not one specific thing.

It wasn't suggesting crowding things that just general things happening specific industry I think it's it's quite diversified.

And so it's not just one account that costs like the big increase I think it's just.

Hi diversified across various industries.

Okay, and then lastly, yes, sorry go ahead.

You know commercial I'm sorry.

Okay.

Lastly on expenses.

I don't know what I think all of us they're going to be kind of thinking the same thing here and I say ask the people asking the questions today.

Have negative growth in the first quarter year over year, you were targeting mid single digits over the course of the year that's a.

Fairly broad term a range.

But the thinking kind of goes into the direction, while there's going to be a bit of a ramp up over the next three quarters that.

It gets you to the mid single digit sort of them make up for the drop we saw in Q1 is that so it could be upper end of mid single digits or something like that.

Yes. It is.

We see the growth in revenue that we expense them then we'll okay.

Carolina Parra: I already said it was the asyncratic things, but just general things happening in specific industries. I think it's, it's quite diversified. And so it's not just one account that caused the big increase. I think it's just, you know, quite diversified across various industries. Okay, then lastly, yeah, sorry, go ahead. General Commercials.

If we do not and something knocks the revenue off that track then you would see us.

B a bit tighter with expenses so that that's the way we wanted to manage the areas. I mean, we made a commitment to positive operating leverage we've left ourselves a lot of levers to pull to make good on that commitment.

Okay great.

Good weekend everyone.

Yeah.

Carolina Parra: Okay, then lastly, on expenses, I think all of us are going to be kind of thinking the same thing here. And I say to the people asking the question today, you have negative growth in the first quarter, year over year, you're targeting mid single digits over the course of the year, that's, you know, a fairly broad term or range. But, you know, the thinking kind of goes in the direction of, well, there's going to be a bit of a ramp up over the next three quarters that, you know, gets you to the mid single digits, sort of making up for the drop we saw in Q1. Is that so we could be at the upper end of the mid single digits or something like that?

Thank you and your next question comes from the line of Suraj move ahead day from BMO capital markets. Your line is open.

Okay. Thanks for taking my questions, maybe I can just start on that.

Commentary.

I assume it's a management team when you say, we're committed to a cliff.

You were thinking about it on a full year basis, not necessarily quarter in quarter out is that is that.

Accurate to what I'm, saying.

Correct.

You definitely can have a bit of ebbs and flows in a quarter like the 7% we put up this quarter.

I would not look at that as sustainable obviously for reasons, we discussed today.

I mean, that's our goal going into a quarter as we want to structurally going into or have really a high degree of confidence that restructured for positive leverage.

Robin Matthew Rudd: Yeah, if we see the growth in revenue that we expect, then we'll be okay. If we do not, and something knocks the revenue off the track, then you would see us a bit tighter with expenses. So that's the way we wanted to manage the year. I mean, we made a commitment to positive operating leverage. We've left ourselves a lot of levers to pull to make good on that. Okay, great. Have a good weekend, everyone!

And then whether you end up neutral to moderately positive or significantly positive depending on how the quarter plays out.

But on a full year basis Youre right I mean, that's the.

Structurally the way, we set up the year and I guess for abundant clarity he was not to deliver 7% operating leverage by just good solid.

We have operating leverage with a lot of different ways, we can deliver it.

Sohrab Movahedi: Thank you. And your next question comes from the line of Sohrab Movahedi from BMO Capital Markets. Your line is open. Okay, thank you for taking my questions. Maybe I can just start on that off-the-left commentary.

Yes, no I understand I mean, I think I think operating leverage is probably more of a full year targets anyway, because of the seasonality in expenses and revenue.

Revenue recognition and the like.

He wanted on the loan growth.

I just wanted to better understand it.

Sohrab Movahedi: I assume as a management team, when you say we're committed to Operate Levy, you're thinking about it on a, I don't know, full year basis, not necessarily quarter in, quarter out. Is that accurate when, Correct?

Is the is the environment such that.

Growth is available, but not fitting your risk appetite or is that a governor on the kind of growth rates, where we're looking at or was it you know.

Robin Matthew Rudd: You know, you definitely can have a bit of ebbs and flows in a quarter, like the 7% we put up this quarter. But I would not look at that as sustainable, obviously, for reasons we discussed today. But I mean, that's our goal going into a quarter is to structurally go into it with a really high degree of confidence that we're structured for positive leverage. And then whether you end up neutral to moderately positive, or significantly positive, depends on how the quarter plays out. But on a full year basis, you're right.

There was just nothing available period.

Well I'll start that things sort of the.

I would say that what we've done is looked at in the different buckets, you've got C. R. <unk>.

<unk> mortgage portfolio, which is still very competitive with the other half is and what we've chosen to do there is be very specific on which loans, we choose to renew or look to underwrite based on risk adjusted returns. So that that book Dan has declined slightly as the real estate project lending success, there is that loans pay out and we have.

We did see payoffs occurred there what we're not seeing as big.

Christopher H. Fowler: I mean, that's structurally the way we set up the year. And, I guess, for abundant clarity, it was not to deliver 7% operating leverage but just good, solid, positive operating leverage with a lot of different ways we could deliver it. Yeah, no, I understand. I mean, I think operating leverage is probably more of a four-year target anyway, because of their seasonality and expenses, and Revenue Recognition and the like. On loan growth. I just wanted to better understand, is the environment such that growth is available but not fitting your risk appetite, or is that a governor on the kind of growth rates we're looking at, or was it? You know, there was just nothing available, period.

Rushed to the table with new projects, but we are seeing some so we do see that.

As the interest rate environment as the value we did housing supply as.

Is being tested.

Testing in terms of different markets. So more product, we expect to come on line there and then on the Universal side, that's our opportunity really for capturing market share and we do look to cherry pick clients from the large banks as being ones that really meet our risk appetite meet our industries that we're looking to focus on.

And so that again is an open up an opportunity for us as we look to the future and equipment finance typically has a bit of a seasonal slowdown in the in the Q1 and picks up in Q3. So.

Christopher H. Fowler: Well, I'll start that. Thanks, Sohrab. I would say that, in the different buckets, we have, say, our commercial mortgage portfolio, which is still very competitive with other FIs. And what we've chosen to do there is be very specific on which loans we choose to renew or look to underwrite based on risk-assessed returns. So that book, then, has declined slightly.

If you think about loan growth as we are focused.

The big driver of our business and we make sure that we think about a very disciplined approach to underwriting and focused on those markets that we know very well.

Okay, I mean, maybe maybe if I come at it a little bit differently.

Can anyone talk a little bit about what the competitive.

Dynamics are like and and.

Christopher H. Fowler: The real estate project lending success there is that loans pay out. And we have, we did see payouts occur there. What we're not seeing is a big enough focus to focus on. And so that, again, is an open, open opportunity for us as we look to the future. And equipment finance typically has a bit of a seasonal slowdown in Q1 and picks up in Q2-3. So, you know, as we think about loan growth, it's, you know, we are focused on that, that's the big driver of our business. And we make sure that we think about a very disciplined approach to underwriting and that we focus on those markets that we know very well. Okay, I mean, maybe maybe if I came at it a little bit differently, can anyone talk a little bit about what the competitive dynamics are like and, you know, when the growth happens, you pick the sector, general commercial, commercial real estate, whatever, windows types of opportunities are, President, are you finding them? as competitive as ever, or even more competitive.

When the growth.

The sector general commercial commercial real estate whatever.

Windows types of.

Opportunities are.

President do you are you finding it.

As competitive as ever even more competitive and.

Just wanted to kind of I just wanted to get a feel for when we think about the net interest margin outlook.

Re factoring in.

Asset yields that are likely to come down and that's what I'm, just trying to kind of get yourself a sense for.

Yeah.

Yeah, I would say.

You know the market is a little bit slower.

And so that would create more competitiveness, particularly in the stronger risks and so.

And of course, we were looking to be selective, but I'd say in our model. Our people that are choosing us are generally choosing us as an alternative to the other banks for how we bring our service and advice to them and so in cases like that it's not necessarily a bidding war kind of situations.

So we see it.

Depending on how much activity is happening out there you can see competitive dynamics, but I don't think in our model at our size and with our as we project growth out kind of looking to take business away.

Stephen H. E. Murphy: You know, I just want to kind of get a feel for when we think about the net interest margin outlook and are refactoring in, you know, asset yields that are likely to come down. That's what I'm just trying to kind of get a sense for. Yeah, I would say the market is a little bit slower. And so that would create more competitiveness, particularly in the stronger risks. And so, and of course, we're looking to be selective. But I'd say, in our model, people that are choosing us are generally choosing us as an alternative to other banks for how we bring our service and advice to them. And so in cases like that, you know, it's not necessarily a bidding war kind of situation.

From a from our competitors.

We're not as quite as sensitive to that and the kinds of business that we're taking on.

Okay, and so I mean, Chris in the years that I've.

Paid attention to pure stock in your business.

I can't think of any time, you would have compromised on your underwriting standards for growth.

Is there any reason.

Why is that may be different.

This time around.

While we have no intention of compromising our underwriting standards for growth I mean, we like the markets. We operate in and we generated great expertise in the different verticals and our view is just to continue to execute in our very structured approach for underwriting loan management and stress testing.

Stephen H. E. Murphy: So we see, depending on how much activity is happening out there, you can see competitive dynamics. But I don't think in our model, at our size and as we project growth out, kind of looking to take business away from our competitors, you know, we're not quite as sensitive to that and the kinds of business that we're taking on. Okay. And so, Chris, in the years that I've... paid attention to your stock and your business. I can't think of any time you would have compromised on your underwriting standards for growth. Is there any reason?

And continued secured underlying underwriting such that like any other previous cycle.

Gross impaired some may look large, but net impaired will be de minimis.

100% that is our focus yes.

Thank you very much that's all my questions.

Your next question comes from the line of Paul Holden from CIBC. Your line is open.

Christopher H. Fowler: Why that may be different this time. Well, we have no intention of compromising on our underwriting standards for growth. I mean, we like the markets we operate in. And, you know, we've generated great expertise in the different verticals. And our view is just to continue to execute in our very structured approach for underwriting, loan management, and stress tests, and continued secured underwriting such that, like any other previous cycle, gross impairs may look large, but net impairs will be diminished. 100% That is our focus. Yes. Thank you very much. That's all my questions. Your next question comes from the line of Paul Holden from CIBC. Your line is open.

Thank you good morning, when I ask a couple more questions on the on the parents owned I guess to give people more comfort around the risks. There. So first question is can you give us a sense of.

Provisions and asset recovery.

Expectations around the loans that went impaired this quarter.

So so yeah from from a provision perspective, so what information we have we have certain goals that in which we had provisions are coming from.

However, we manage in general terms very strong loan to values. So when we look at every asset that mutations that cause.

Questions are not significantly at the same time.

There were quite a few.

And quite well recoveries that we work with our clients have a table that also support.

Paul David Holden: Thank you. Good morning. I want to ask a couple more questions on the impaired loan to give people more comfort around the risk there. So the first question is, can you give us a sense of the provisions and asset recovery expectations around the loans that went impaired? So, so yeah, from a provision perspective, so in the new formation we've had, we had certain goals that we had provisions come in for. However, we manage, in general terms, very strong loan to value. So when we look at our asset valuations, you know, the provisions are not significantly different.

The work that we're doing and the punishment management and collateral management on behalf of our entire portfolio.

Okay. So I think that's an important point with respect to an offset specific to this quarter youre seeing some recoveries on previously impaired loans that helped offset the need to increase provisions for the in the Q1 impaired loans correct.

That's correct, yes, okay. Okay. That's helpful and then.

Continuous line of questioning you mentioned that impaired loans are expected to be volatile from quarter to quarter.

I understand that maybe you can help give us sort of a near term feel on what you think gills might to next quarter or two again just to avoid any negative surprises like we saw this quarter and you did mention that you expected and pair it to go higher this quarter. So.

Carolina Parra: At the same time, there were quite a few important recoveries as we worked with our clients on repayments but also, you know, support the work that we're doing and the management and collateral management we have of our impaired portfolio. Okay, so I think that's an important point with respect to an offset specific to this quarter. You're seeing some recoveries on previously impaired loans that helped offset the need to increase provisions for the Q1 impaired loans, correct? Okay, okay. That's helpful. And then, a continuous line of questioning.

What do you expect again next quarter next couple of quarters is there visibility any visibility there.

Well I think given the economic backdrop, we do expect it to continue to increase I don't think we have reached the peak and of course, you can see it flattening from when they impact take place. So we.

We expected because the books.

Carolina Parra: I mean, you mentioned that impaired loans are expected to be volatile from quarter to quarter. I understand that maybe you can help give us a sort of a near-term feel on what you think GILs might do next quarter to, again, avoid any negative surprises like we saw this quarter. And you did mention that you expected IMPAIRED to go higher this quarter. So what do you expect again next quarter, the next couple of quarters? Is there any visibility there?

Quarter opportunity to continue to increase before we start seeing some of that guilty out you can't.

Okay, and given that's within your expectations I'm, assuming you've already provisioned or partly provisioned for that expectation.

So as you've seen over the last seven quarters, we decreased our performing loan allowance just thinking like understanding wiped out we expect the portfolio to perform well so even though this quarter a different problem loan allowance did not increase significantly over the last six quarters, we had built up quite a bit of it.

Carolina Parra: Well, I think given the economic backup, we do expect inheritance to continue to increase. I don't think we have reached the peak, and, of course, because it's lagging from when the impacts take place.

I think we have good coverage as well as those loans, becoming parents did you just transition to corporations as well yeah. The only unusual thing we saw relative to what our models would have otherwise predicted was really through last year in <unk>.

Carolina Parra: So we expect the next quarter or two to continue to increase before we start seeing some of the tilt down again. And given that's within your expectations, I'm assuming you've already provisioned or partly provisioned for that expectation. Right, so as you've seen, over the last seven quarters, we've increased our performing loan allowance, just taking, like, understanding what we expect the portfolio to perform. And so even though this quarter the performing loan allowance did not increase significantly in the last six quarters, we have built quite a bit of it, and we think we have good coverage as those loans become impaired, to transition that into impaired provisions as well.

<unk> loans remaining so benign and credit losses remaining so benign like relative to economic conditions and what we would've expected like now is the unusual piece.

Now, it's it's looking a lot more aligned with what our models might have predicted for this sort of environment.

So nothing but you will have seen us.

Okay.

Understood. That's helpful. Very helpful. Thank you for that last question, Matt I'm going to let you jump in and I'll continue with you going back to sort of gauge line of questioning on share buybacks versus organic growth I think we can all do the math based on current ROE and price to book sort of.

Robin Matthew Rudd: Yeah, the only unusual thing we saw relative to what our models would have otherwise predicted was really through last year, impaired loans remaining so benign and credit losses remaining so benign, like relative to economic conditions and what we would have expected, like that was the unusual piece. Whereas now it's looking a lot more aligned with what our models might have predicted for this sort of environment. So now I think what you're seeing is... understood. That's also very helpful. Thank you for that. And last question, Matt. I'm going to jump in. I'll continue with you. Going back to sort of Gabe's line of questioning on share buybacks versus organic growth, I think we can all do the math based on current ROE and price to book, sort of what the economics look like on a buyback.

What the what the economics look like on the buyback maybe you can help us with the economics on organic growth and obviously it implies something higher than your current Roe.

What are your sort of your ROE expectations as you layer on.

Organic growth. Thank you.

Yeah. So if you're if you're thinking you know what sort of.

Return relative to the risk do we need to see to to put their foot down and really accelerate growth like we're looking for things that are accretive to our ROE relative to current levels.

Paul David Holden: Maybe you can help us with the economics of organic growth. And obviously, it implies something higher than your current ROE. What are your ROE expectations as you layer on organic growth?

So if you are seeing us.

Accelerated growth and really started consuming capital and throwing capital against growth.

We want to do that on the basis of expanding our ROE.

Robin Matthew Rudd: Yeah, so if you're thinking, you know, what sort of return relative to the risk do we need to see to put the foot down and really accelerate growth, like we're looking for things that are creative to ROE relative to current levels. So if you're seeing us accelerate growth and really start consuming capital and throwing capital against growth, we want to do that on the basis of expanding our ROE. And we laid out, you know, a path that obviously had a different backdrop.

And we laid out.

I'll pass that obviously, there was a different backdrop.

At our Investor day, we laid out all sorts of ways that we can contribute to higher Roe.

Loan growth in.

The REIT portfolios with the right.

Capital against it.

And spreads returning back to more normal levels. So it's a key ingredient in that recipe.

And we think theres more torque and doing that than.

Buybacks on pound for pound dollar for dollar capital basis.

Robin Matthew Rudd: But on our investor day, we laid out all sorts of ways that we could contribute to higher ROE. Loan growth in the right portfolios with the right capital against it, and spreads returning back to more normal levels was a key ingredient in that recipe. And we think there's more torque in doing that than buybacks on a pound for pound, dollar for dollar capital base. All right. Thank you. That's it for me.

Great. Thank you that's it for me thanks for your time.

Your next question comes from the line of Dark am Alec from RBC capital markets. Your line is open.

Hi, Thank you good morning.

I hate to be that guy.

I'm going to ask a bunch of detail.

It sort of individual questions, Matt and I Hope you don't mind, but before I get there.

Paul David Holden: Thanks for your time. Your next question comes from the line of Darko Mihelic from RBC Capital Markets. Your line is open.

Just following up on the question Carolina with respect to your response in terms of sort of near term visibility you mentioned economic backdrop, you spoke about models, but I'm more curious I'm more curious about what does the watch list telling you.

Darko Mihelic: Hi, thank you. Good morning. I hate to be that guy.

Darko Mihelic: I'm gonna, I'm gonna ask a bunch of detail, sort of individual questions, Matt, I hope you don't mind. But before I get there, just following up on the question, Carolina, with respect to your response. In terms of sort of near-term visibility, you mentioned the economic backdrop, you spoke about models, but I'm more curious about what your watch list is telling you? And did anything sort of get impaired this quarter that wasn't on your watch list last quarter?

And did anything sort of get impaired this quarter that wasn't on your watch list last quarter.

So.

We expect our watch list has been increasing and that with managing its actually to maintain it flat suddenly come along on a lot of other solutions coming out as well and both going back into the business with with a good restructurings.

Carolina Parra: So, as expected, our watch list has been increasing, and we've been managing it, actually, to maintain it flat. So new people coming in, but a lot of our solutions coming out as well, both going back into, you know, the business with good restructurings. And so, anything that came into impairment outside of the watch list, there's very little; we're trying to keep a very tight look at our portfolio with a lot of conversation with the business line to just make sure those are moved into the watch list and into our SAMU, a special asset management unit, to be managed properly. And so, that transition and that communication are really strong in the back. And that's what helped us really to move ahead and be able to manage the accounts promptly. And that helps us, of course, with our solutions.

And so anything that can.

Ted outside the watch list.

Barry, let I'll likely trying to keep that very high outflow I'm looking to our portfolio with a lot of conversation with the business line to just make sure. Those have moved into watch list into are saddled with a special asset management units are.

To be managed properly and so that transition and that that communication, it's really strong in the back end and that's what helped US really to move ahead and be able to MST accounts properly and that helps us of course, the first solution centric company.

Okay. Okay. That's helpful and so but I did hear in there that you'd get your watch list is growing is that is that a fair characterization.

Carolina Parra: Okay, okay, that's helpful. And so, but I did hear in there that you that your watch list is growing. Is that is that a fair characterization?

So we got new accounts coming in but we also have.

Like a good chunk of that comes coming out so relatively flat I would say.

Carolina Parra: So we've got new accounts coming in, but we also have, like, a good chunk of accounts coming out, so relatively flat, I would say, but, of course, new formations seem to be happening. Okay, okay, thank you. And then, just with respect to recoveries, are there any surprises there? With respect to, I don't know, the value of assets, backing loans, a process, is there anything happening on that end that would lead to maybe a thought that the loss on impaired might might change going forward? So, so far, we've seen a really good trend with recovery. It's very similar to what we had in the past.

But of course information seem to watch are having.

Okay. Okay. Thank you and then just with respect to recoveries are there any surprises there with respect to I don't know the value of assets backing loans a process is there anything happening on that end that.

That would lead to maybe a thought that the loss on impaired might might change going forward.

So.

So far we've seen really good trend on recoveries very similar to what we've had in the past when we look at some of the valuations are well some values might be coming down it's not insignificant impact on what we're seeing and that you have pretty.

Carolina Parra: When we look at some of the valuations, while some values might be coming down, it's not having a significant impact on what we're seeing. And we have pretty strong low developments when we originate, and as we manage with them, we're not seeing that really reflected in shortfalls when we look at security coverage. So, you know, overall, the story is still positive, and we continue to manage it like that. I think prompt movement into dealing with our clients is what really helps us get the best out of the recovery. Okay, thank you. That's, that's very helpful.

Strong loved about what he's.

And as we also manage with them, we're not seeing that I mean, it was flagged taking shortfalls when we look at our citrate coverage. So.

Overall, the story is still positive.

And and we continue to continue to manage it like that as I think about movement into dealing with life Sciences, what really help us get.

You get the best recoveries.

Okay. Thank you that's very helpful. Thank you. So just now getting into my little detailed question sorry for Matt for these but.

Darko Mihelic: So just now getting to my little detailed questions, sorry for Matt for these, but I want to dive into it a little bit. When I look at, you mentioned that, you know, the quarter had elevated, or sorry, a drop in FX, the prior quarter had an elevated sort of FX. So when I look at your supplemental, and I look specifically at, page five, or the five on the bottom of the page, I guess, six in the PDF file. Is there any other line there?

I wanted to dive into it a little bit when I look at you mentioned.

That you know that.

Quarter.

Had.

Elevated or sorry, a drop in FX prior quarter had and elevate and elevated sort of FX and so when I look at your.

Your supplemental.

And I look at I'm looking specifically at our page five or five on the bottom of the page six in the PDF file is that any other lying there.

Robin Matthew Rudd: Is that what I'm seeing, is that where the FX is rolling through? Yeah, exactly. It's in the other category of non-interest income.

Is that what I'm seeing the assay is that where the FX is rolling through.

Yes, exactly at some of the other.

<unk> had a gory of noninterest income.

Robin Matthew Rudd: And what you should see in that each quarter, like if you had no change in the US dollar exchange rate, you should see somewhere between half a million to a million dollars of other fees in there. It's the foreign exchange on our balance sheet. We have a net asset position in the US dollar balance sheet, not a big one. But that's why you've seen that shift from last quarter to this quarter; it went from strengthening the US dollar to weakening the US dollar. And that's what drove the swing.

You should see him that each quarter like if you had no change in U S. Dollar exchange rate you should see somewhere between half a million to a million dollars of other fees in there.

It's it's the foreign exchange on our we have a net asset position in the U S dollar balance sheet not a big one.

But that's why you've seen that that shift from last quarter typically support or you went from strengthening U S dollar to weakening U S dollar and that's what drove the swing.

Robin Matthew Rudd: And so all that bouncing around that I see in that line item from quarter to quarter is all FX. Would that be a fair characterization? It is predominantly FX. Hmm, okay. And so then following along that line, we mentioned the balance sheet. If I go up one page, so look at page four now. The interest rate sensitive gap reversed in the quarter.

And so all of that bouncing around that I see in that line item from quarter to quarter is all FX would that be a fair characterization.

It is predominantly FX.

Okay.

And so then following.

Along that line when you mentioned the balance sheet, if I go up one page.

So looking at it now page four.

The interest rate sensitive gap reversed in the quarter can you what is that.

Robin Matthew Rudd: Can you... What does that practically mean? And how should we think about that with respect to your interest rate position? Yeah, I wouldn't look too far into that. It's nothing structural we were trying to do. We weren't trying to make a big bet on interest rates decreasing. Really, we had an increase we weren't expecting and notice and demand deposits. Those are predominantly time-length, so they are directly 100% interest rate sensitive. And that's what caused that positioning to change.

Practically mean and how can we think about that.

With respect to your interest rate positioning.

Yeah, I wouldn't look too far into that it's nothing structural we were trying to do we weren't trying to to make a big batch on.

Interest rates decreasing.

Recently, we had a six <unk> increase.

Increase we werent expecting and noticed in demand deposits.

As a predominantly.

I'm linked so directly like a 100% interest rate sensitive.

And that's what caused that positioning to change I'd expect that to revert back looking a bit more like normal as early as next quarter.

Robin Matthew Rudd: I'd expect that to revert back to looking a bit more like normal as early as next quarter. Okay, okay. And then, sticking with that discussion on deposits, I'm gonna ask you a weird question. In your slide deck, it seems as though you're now referring to them as franchise deposits, and in the past, I think you called them print. Is there actually a difference?

Okay, Okay, and then so sticking with that discussion on deposits.

You're asking a weird question.

In your.

Slide deck.

It seems as though you are now referring to them as franchise deposits in the past I think he called them is there actually a difference so as you may be expanded.

Robin Matthew Rudd: So maybe you've expanded conceptually? The type of deposit that you're targeting, so you're now calling them franchises, or is the new wording just, I don't know, cooler sounding or something? Like, can you give me an idea?

Conceptually.

The type of deposits that you are targeting so you're now calling the franchise or is it the new wording just I dunno cooler sounding or something can you give me an idea.

Robin Matthew Rudd: That'd be the first time in my professional career I've been accused of making something sound cooler. No change in what's in it. It was a complete wording change only. Two reasons for it.

That'd be the first time in my professional career I've been accused of making something some cooler.

Oh, no change and what's in it it was kept complete wording change only.

Two reasons for it one.

Robin Matthew Rudd: One, we don't call them branches anymore; they're banking centers. And two, with the launch of the digital cash management platform, we'll have clients that may not necessarily be clients of a banking center or have a banking center accumulate the deposit; it may come through that platform in a geography outside of our banking center footprint. So it was just time to broaden out the definition, but it was a pure wording change. And that's why.

We don't call them branches any more of their banking centers.

And two with the launch of the digital cash management platform will have clients that may not necessarily be clients of a banking center or hobby banking center accumulate the deposit it may come through that platform in a geography outside of our banking center footprint. So it was just time to broaden out the depth and.

But it was a pure wording change and that's why okay. Great. Thank you and then last question again, what are these pesky ones.

Robin Matthew Rudd: Okay, great. Thank you. And then last question, again, one of these pesky ones, just looking back at your supplemental. And again, sticking with page. Well, I'm going to flip it back and forth on page four. When I look at the wealth management, assets under administration, assets under advisement, you know, they're showing good growth. But then when I look at the actual underlying revenues, it's not tied, like it's not growing at the same pace.

Looking back at your supplemental.

And again sticking with page one.

Well I'm going to flip it back and forth page four one.

When I look at the wealth management.

Assets under admin assets under advisement.

They are showing good growth, but then when I look at the actual underlying revenues is not tied it's not growing at the same pace is there any I mean I realize it's not a huge part of the income statement I'm just curious as to what's going on there.

Darko Mihelic: Is there any, I mean, I realize it's not a huge part of the income statement, I'm just curious as to what's going on. Yeah, sometimes there is a bit of a lag there. So you'll have the asset growth one month and then the fees come the next month. And a big chunk of the asset growth was market driven. And on that, you know, where you have clients with larger positions, it does attract a lower fee intensity than someone with a smaller balance too. So it's a bit of a mixed story as well.

Yeah, sometimes a bit of a lag there so you'll have the assay growth one month and then the fees come the next month.

And a big chunk of the asset growth was market driven.

And on that you know when you have clients with larger positions. It does attract a lower fee intensity than someone with a smaller balance too. So it's a bit of a mixed story as well.

But it puts us with a bit of wind in our sales looking at next quarter on on growth and not feeling for sure.

Darko Mihelic: But you know, it puts us with a bit of wind in our sails looking to next quarter's growth in that fee line, for sure. Okay, great. Thanks for entertaining my questions. Have a great weekend.

Okay, great. Thanks for entertaining my questions have a great weekend.

That's helpful.

And your next question comes from the line of many Grumman from Scotiabank. Your line is open.

Meny Grauman: That's all. And your next question comes from the line of Meny Grauman from Scotiabank. Your line is open.

Hi, Good morning, just wanted to go back to credit, which is a popular topic. This morning. The the guidance range you are providing.

Meny Grauman: Hi, good morning. Just want to go back to credit, which is a popular topic this morning, the guidance range you're providing of 18 to 23 basis points. So that's a historic normal range.

18 to 23 basis points. So that's a historic normal range. So really the question is what gives you confidence that were.

We're in this normalized range and and not a not something more negative I would say you know given the speed of the ramp up in the impairments are quarter over quarter.

Carolina Parra: So really, the question is, what gives you confidence that we're in this normalized range and not something more negative, I would say, given the speed of the ramp-up in the impairments quarter over quarter. What are you seeing beyond maybe, you know, obviously we have rate cut expectations still a bit built in to some extent, but anything in your business that you're seeing that you could highlight that gives you confidence that really what we're seeing here is normalization and not something more negative, potentially? The approach that we've always taken in underwriting... Unknown Speaker.

What are you seeing beyond maybe you know obviously, we have rate cut expectations still bit built into some extent, but anything in your business that you're seeing that you can highlight that gives you confidence that really what we're seeing here is normalization and not something more negative potentially.

That's really the approach that we've always taken that underwriting.

And structure it did.

Sure.

That's kind of something.

In essence, we understood.

And really.

Unknown Speaker: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. And really, we think about, or it was unusually low. Let's see if he makes the number. In the macro environment for our clients, we do see a return to what we see on BBC News, Unknown Speaker. So it's really just. Unknown Speaker, Unknown Speaker, Thank you.

Think about.

Or it was unusually low.

Okay.

So it makes the numbers.

As announced in the reality of it is so as we look at our.

The macro environment on our clients.

Return to what we.

Three basis points would drive.

Alright and potentially.

So it's really just.

Two of the underwriting structures.

The mix of assets.

Unknown Speaker: I'm just going. Alright, thank you. It's just a thought, or I'll just put it with you.

I mean, he's going.

Okay.

Okay.

It's it's the better off.

Or put differently.

Christopher H. Fowler: This is a very short presentation, but it also shows the good security coverage we have. And coming from a very, very low base of both impaired and PCL, so I think we're very comfortable with that range as an outlook. I mean, it's more a function, really, of your underwriting and how you make your loans and the type of loans you make rather than really a commentary about the macro environment. And so maybe there, what I'm wondering is, as you speak to your clients and what you're seeing more broadly, like, is that consistent with, you know, a recession, you know? What are you hearing on the ground in terms of just how significant the pressure is on the clients, even if it maybe doesn't necessarily lead to losses in your book?

But also if they go to security and college, we have.

And coming from a very very low base of both impaired PCL. So I think we were very comfortable with that range.

Good luck.

It looks like it's it's I mean, it's more a function really of your you're underwriting and how you make your loans in and the type of loans, you make rather than really a commentary about the macro environment and so maybe they're what I'm wondering is as you speak to your clients and what you're seeing more broadly like is that consistent with.

Hum.

A recession what are you hearing on the on the ground in terms of just how significant the the pressure is on our clients even if it maybe doesn't necessarily lead to losses in your book If you could comment on that would give us some perspective from what youre seeing.

Christopher H. Fowler: If you could comment on that, give us some perspective on what you're seeing. You know, I think the macro environment is always a factor, of course, right, in terms of generation of sales, maintenance of costs, and then, of course, are impacted by the higher interest rate environment we're in. So when we look at our accounts that we have seen more challenges with, we're not seeing anything systemic. So it's not like there is a focus in one particular area.

I think the.

The macro environment.

It was a factor of course right in terms of a generation of sales maintenance costs and then of course of course are impacted by the higher interest rate environment. We're in so when we look at our our accounts that we have seen more challenges with we're not seeing anything systemic so it's not like in focus in one particular.

Christopher H. Fowler: It's just a number of different, you know, issues that have arisen. So to what Carolina said, it's very idiosyncratic to individual business models and individual clients. And we will continue to work on that. But, as I say, we know we have come into these credits with a very disciplined underwriting structure that we have in place, you know, with secured lending. So we, you know, we look to find ways to resolve them; we've got a very strong team that works on that.

Area, it's just a number of different.

Issues that have arisen so to what Charlie said, it's very idiosyncratic to individual business models and individual clients and we will continue to work on that but we as I said, we didn't we have come into these credits we had the very disciplined underwriting structure that we have in place with secured lending so we.

We look to find ways to resolve we've got a very strong team that works on that our goal is to be very active in that resolution structure and and is currently and also said we do we are seeing a lot of resolutions occurring both as loans that have come into the watch list, but also on the impaired loan side. So it's an ongoing.

Christopher H. Fowler: Our goal is to be, you know, very active in that resolution structure. And, as Carolina also said, we are seeing a lot of resolutions occur, both as loans that have come into the watch list but also on the impaired loan side. So it's an ongoing, highly managed process that we undertake to make sure that we manage this very effectively.

Highly managed process that we undertake to make sure that we manage that very effectively.

Unknown Speaker: Unknown Speaker, Thank you. Thank you. Thank you. And your next question comes from the line of Nigel D'Souza from Veritas Investment Research. Your line is open. Good morning. Thank you for taking my question. Two quick ones for you.

Yeah.

Okay. Thank you and your next question comes from the line of Nigel Desousa from Veritas investment Research. Your line is open.

Good morning, Thank you for taking my question.

Two quick ones for you first you comment on an expectation for liquidity.

Nigel D'Souza: First, your comment on expectation of liquidity normalization next quarter. I just want to confirm. Does that imply that you're expecting the buildup that you saw in deposits this quarter to reverse next quarter? Or is it purely an asset side function where you expect loan growth to increase?

Normalization next quarter I just wanted to confirm.

Does that imply that youre expecting that buildup that you saw in deposits this quarter to reverse next quarter or is it purely.

And asset side.

Function, where you expect loan growth to increase in export.

Robin Matthew Rudd: Yeah, it's loan growth driven. That's how we want to use that liquidity. That's our intent. That's what it's there for. But I think, you know, on franchise deposit growth, for all the reasons we mentioned, we do see that moderating next quarter as well. So it's really the combination of those two things.

Yes, it's a loan growth driven and that's how we want to use that liquidity that that's our intent.

But it's there for it but I think.

One franchise deposit growth for all the reasons, we mentioned, we do see that moderating next quarter as well. So it's really the combination of those two things and I.

Nigel D'Souza: And I think the other thing, if we're going into a quarter with an excess liquidity position, there's, I mean, outside of our branches, as well as our lending opportunities, we have other external sources of funding that we'll manage appropriately as well. So you may see us, for instance, take down broker deposits quarter over quarter as well, again, as a way to reduce deposits, if we do see another quarter of unexpected strength and deposit growth from our franchise. Okay, so that makes sense. And the last question I had was on the SIBA repayment deadline which we saw coming into force this year. So does it have any impact on the credit experience of your portfolio? Do you expect it to have any impact on credit experience?

I think the other thing if we're going into a quarter with an excess liquidity position, there's I mean outside of our branches.

As well as our lending opportunities.

Other external sources of funding that will will manage appropriately as well. So you may see us for instance, take down broker deposits quarter over quarter as well to again.

As a way to reduce deposits if we do see another quarter of unexpected strength in deposit growth from our franchise.

Okay that makes sense and the last question I had was on the CFO of repayments that will be soft as outlined.

Come to force this year so.

Have any impact on credit experience for your portfolio do you expect it to have any Pakistani experience or.

Unknown Speaker: Or are SIBA repayments really not an, No, Nigel, we haven't had any impact from CR with payments on the portfolio. Okay. That's it. Thank you, Thank you, and ladies and gentlemen, our Q&A session has now ended. I will now turn the call back to Chris Fowler, President and Chief Executive Officer, for closing comments. Thank you, Lee. Thank you all for joining us today and to our shareholders for the continued commitment and support. We look forward to reporting our second quarter financial results in May.

Our CFO repayments really not an issue here.

Yeah.

Oh no no Joe we haven't had any impacts on SEDAR repayments in our portfolio.

Okay.

That's it thank you.

Thank you and ladies and gentlemen, like any session has now ended I will now turn the call back to Chris Fowler, President and Chief Executive Officer for closing comments.

Thank you Lee. Thank you all for joining us today and to our shareholders for their continued commitment and support and look forward to reporting our second quarter financial results and May have a great day. Thank you.

Yeah.

Thank you and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Christopher H. Fowler: Have a great day. Thank you. Thank you. And, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

[music].