Q1 2024 Laurentian Bank of Canada Earnings Call

Unknown Executive: Welcome to the Laurentian Bank quarterly financial results Please note that this call is being recorded. I would now like to turn the meeting over to Andrew Chornenky, Vice President, Industrial Relief. Go ahead. Bonjour à tous.

Welcome to the Laurentian Bank quarterly financial results call. Please note that this call is being recorded I would now like to turn the meeting over to Andrew <unk>, Vice President of Investor Relations. Please go ahead Andrew.

What was it.

Unknown Executive: Good morning, and thank you for joining us. Today's opening remarks will be delivered by Eric Provost, President and CEO, and a review of the first quarter financial results will be presented by Yvan Deschamps, Executive Vice President and Chief Financial Officer. After which we'll invite questions from the audience. Also joining us for the question period are Liam Mason, Chief Risk Officer, and Kelsey Gunderson, Head of Capital. All documents pertaining to the quarter can be found on our website in the Investor Center.

Good morning, and thank you for joining us.

Today's opening remarks will be delivered by Eric <unk>, President and CEO and the review of the first quarter financial results will be presented by Abbas Vishal Executive Vice President and Chief Financial Officer, After which we will invite questions from the phone.

Also joining us for the question first Liam Mason, Chief risk Officer, and Kelsey Gunderson head of capital markets.

All documents pertaining to the quarter can be found on our website in the Investor Center.

Unknown Executive: I'd like to remind you that during this conference call, forward-looking statements may be made, and it is possible that actual results may differ materially from those projected in such a way. For the complete cautionary note regarding forward-looking statements, please refer to our press release or to slide two of the presentation. I would also like to remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Eric and Yvan will be referring to adjusted results in their remarks unless otherwise noted. I'll now turn the call over to... Merci Andrew. Bonjour et bienvenue à notre conférence téléphonique sur les résultats du premier trimestre.

I'd like to remind you that during this conference call forward looking statements may be made and it is possible that actual results may differ materially from those projected in such statements.

For the complete cautionary note regarding forward looking statements. Please refer to our press release or to slide two of the presentation.

I'd also like to remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance, Eric antibody will be referring to adjusted results in their remarks, unless otherwise noted as reported I'll now turn the call over to Eric.

Yes, Andrew.

Those are all of you have noted how big of hit almost fully as it does for me it's the Miss.

Eric Provost: Good morning, and thank you for joining us today. Over the past few months, I have had the opportunity to meet with many Laurentian Bank team members, and I consistently hear the same things. They are committed to this institution, they are driven to improving our operations and simplifying our structure, and they are dedicated to serving our customers. Throughout the quarter, we have remained focused on three priorities. Customer focus, simplification, and strategic investments to improve our technology infrastructure. I would like to thank every Laurentian Bank employee for their efforts while also supporting the organization in our strategic planning exercise.

And thank you for joining us today.

Over the past few months I have had the opportunity to meet with many of the ranch and bank team members and I consistently hear the same things. They are committed to this institution. They are driven to improving our operations and simplifying our structure and they are dedicated to serving our customers.

Throughout the quarter, we have remained focused on three priorities.

And your focus simplification and strategic investments to improve our technology infrastructure.

I would like to thank every Laurentian bank employees for their efforts, while also supporting the organization and our strategic planning exercise.

Eric Provost: While Yvan will provide further details during his remarks, I wanted to offer some high-level thoughts on our overall performance. I am pleased to report that the bank strengthened its capital position in a time of continued macroeconomic uncertainty. We have managed our funding to our book of business, and given the reduction in loans due to the current environment, we executed on our planned deposit reduction activities while maintaining a strong level of liquidity, materially above the industry average. We are comfortable with our commercial portfolio and are well positioned for a rebound later this year as business conditions improve. This quarter, revenues were slightly down compared to last year, but they grew by 4% on a sequential basis. Net income and EPS were both down year over year and quarter over quarter, as expenses remained high.

Eva will provide further details during his remarks I wanted to offer some high level thoughts on our overall performance.

I am pleased to report that the bank's strengthened its capital position and a time of continued macroeconomic uncertainty.

We have managed our funding to our book of business and given the reduction in loans due to the current environment.

<unk> executed on our plan deposit reduction activities, while maintaining a strong level of liquidity materially above the industry average.

We are comfortable with our commercial portfolio and are well positioned for a rebound later this year as business conditions improve.

This quarter revenues were slightly down compared to last year and grew by 4% on a sequential basis net income and EPS were both down year over year and quarter over quarter as expenses remained I. This.

Eric Provost: This increase included costs related to the mainframe outage last year, which impacted EPS by $0.04 this quarter. We know there is more work to do to reduce our expenses, and that is why simplification is a key part of our plan going forward. While overall loan growth was negatively impacted by macroeconomic conditions, including business and consumer sentiment, our NIM was up 4 bps to 1.8%. This quarter also saw a small rebound in capital markets-related businesses with stronger trading results and fixing. The business' results also benefited from recent right-sizing actions. Our credit performance remains strong, with a small increase in PCLs compared to Q1 last year and stable versus last quarter. We remain confident in the portfolio and are adequately provisioned. However, dealers and manufacturers in our inventory financing business remain cautious. Inventory levels are not rising to the levels seen in previous years, and as a result, utilization is at 50%.

This increase included costs related to the mainframe outage last year, which impacted EPS by four cents this quarter.

We know there is more work to do to reduce our expenses and that is why simplification is a key part of our plan going forward.

While overall loan growth was negatively impacted by macroeconomic conditions, including business and consumer sentiment. Our NIM was up four bps to one 8%.

This quarter also saw a small rebound in capital markets related businesses with stronger trading results in fixed income.

The businesses results also benefited from recent right sizing actions.

Our credit performance remained strong with a small increase in tcs compared to Q1 last year and stable versus last quarter, we remain confident in the portfolio and are adequately provisioned.

Dealers and manufacturers and our inventory financing business remained cautious inventory levels are not rising to the levels seen in previous years and as a result utilization was at 50%.

Eric Provost: This is lower than the mid-50s utilization rate we would typically see at this time of year. Given macroeconomic conditions, dealers and manufacturers are working together on floor planning programs. This shows strong partnership and provides us with significant confidence as we look forward to the remainder of the year. We expect an increase in utilization starting in the fall if interest rates adjust according to projections. Turning now to commercial real estate activities, we have seen a slowdown in construction starts which remains in line with our expectations as developers continue to adjust to the current cost environment.

This is lower than the mid fifties utilization rate, we would typically see at this time of year.

Given macroeconomic conditions dealers and manufacturers are working together on floor planning programs. This shows strong partnership and provides us with significant confidence as we look forward to the remainder of the year.

We expect an increase in utilization starting in the fall if interest rates adjust according to projections.

Turning now to commercial real estate activities, we have seen a slowdown in construction starts which remains in line with our expectations as developers continue to adjust to the current cost environment. We have seen no cancellation of projects in our portfolio is in line with our credit appetite.

Eric Provost: We have seen no cancellation of projects, and our portfolio is in line with our credit appetite. The majority of our portfolio is in multi-residential housing, which continues to show resiliency as demand remains stronger than supply. As a reminder, we deal with Tier 1 and Tier 2 developers with significant experience through the cycle.

The majority of our portfolio is in multi residential housing, which continues to show resiliency as demand remained stronger than supply.

As a reminder, we deal with tier one and tier two developers with significant experience through the cycles.

Eric Provost: We're pleased with how both commercial portfolios are performing. Our specialized approach gives us confidence as we continue to face uncertainty in the macroeconomic environment. As I mentioned earlier, this quarter also saw a planned year-over-year and sequential decline in deposits. And there are a few points I'd like to make.

We're pleased with both commercial portfolios are performing our specialized approach gives us confidence as we continue to face uncertainty in the macroeconomic environment.

As I mentioned earlier. This quarter was also also saw a planned year over year and sequential decline in deposits and there are a few points I'd like to make.

Eric Provost: First, we manage deposit and loan activity on a relative basis. That's why we have executed on planned deposit reduction activity. This includes actions such as more conservative pricing in our broker deposit channel to maintain our focus on profitability, contributing to our NIM expansion. Second, strategic partnership deposits function like conventional demand deposit products. Recent quarters have witnessed these deposits behaving like typical demand deposits, with funds being redirected towards market activities and other term deposit products consistent with our expectations.

First we manage deposit and loan activity on a relative basis. That's why we have executed on plan deposits reduction activities. This included includes actions such as more conservative pricing and our broker deposit channel to maintain our focus on profit.

Debility contributing to our NIM expansion.

Second strategic partnership deposits function like conventional demand deposit products recent quarters of weakness.

And if these deposits behaving like typical demand deposits with funds being redirected towards market activities and other term deposits products consistent with our expectations third personal deposits sourced through our retail channel are stable quarter over.

Eric Provost: Personal deposits sourced through our retail channel are stable quarter-over-quarter, and personal deposits overall represent 86% of our total deposits, contributing to the bank's sound liquidity position. In fact, this quarter, we enhanced our Action GIC and EquityLink products with a competitive minimum rate guarantee, which saw a good pickup. We also held a very successful BRAC private campaign where total GIC sales exceeded last year's performance in the same period, further solidifying our funding source. Operationally, we have a number of developments to share from this quarter. Beginning with our people.

Fourth quarter and first of all deposits overall represent 86% of our total deposits contributing to the banks sound liquidity position.

In fact, this quarter, we enhanced our action GIC and equity linked product with a competitive minimum rate guarantee which saw good pickup. We also held a very successful Black Friday campaign, where total GIC shelves exceeded last year's performance in the same period further.

So they're defying our funding sources.

Operationally, we have we have a number of developments to share from this quarter.

Beginning with our people.

Eric Provost: I'm pleased to announce three new appointments to my executive team. First, we have promoted Mashapo to the position of Chief Human Resources Officer. My show succeeds Sébastien Bélair, who held this position for the past three years, allowing him to better focus on his role running retail and corporate operations. Masha joined the bank in 2022 and has more than 25 years of experience in the financial services sector, in distribution, information technology, and human resources. Second, I'm pleased to announce that Benoit Bertrand has joined the Bank as our new Chief Information Officer this year. Benoit is an accomplished technology and digital transformation leader with almost 30 years of experience.

I am pleased to announce three new appointments to my executive team.

First we have promoted my shuttle to the position of Chief Human Resources Officer.

My show succeed Sebastian, but I L disposition for the past three years, allowing them to better focus on Israel running retail and corporate operations mesh.

Michelle joined the bank in 2022, and as more than 25 years of experience in the financial services sectors and distribution information technology and human resources second I'm pleased to announce that benno about as.

As joined the bank as our new Chief Information Officer This month.

Why isn't the countless technology and digital transformation leader with almost 30 years of experience.

Eric Provost: He has a history of managing large and complex IT programs, as well as architecting and delivering innovative solutions. His mandate will be to align the bank's IT strategy with our overall business strategy, ensuring that our technology initiatives directly support our organizational objectives. Third, it is the creation of our Strategy and Transformation Office, which will be led by Marie-Christine Cousteau, who has almost 20 years of experience in financial services, including self-effectiveness, change management, and business process optimization. This new office will oversee the development, implementation, and evolution of the strategic plan, identify organizational priorities, and ensure a steady pace of decisions that enable us to deliver value for our customers quickly. The office will work closely with finance to monitor the budget and maximize transformation goals. The Bank also announced three new appointments to its Board of Directors. Dr. Joanne Brunet, Mr. Jamie Hobbs, and Mr. Paul Stinnes.

He has a history of managing large and complex programs as well as architected and delivering innovative solutions is mandate will be to align the banks I teach strategy with our overall business strategy and ensuring that our technology initiatives directly support or are you getting.

<unk> objectives.

Third it is the creation of a strategic strategy and transformation office, which will be led by Mary just since you're still whereas almost 20 years of experience in financial services, including cells effectiveness change management and business process optimization. This.

The office will oversee the development.

Implementation and evolution of the strategic plan and densify organizational priorities and ensure a steady pace of decisions that enable us to deliver value for our customers quickly.

The office will work closely with finance to monitor the budget and maximize transformation goals.

The Bank also announced three new appointments to our board of directors.

So enbridge day, Mr. Jamie hubs and Mr Pulse Dennis.

Yvan Deschamps: These appointments are part of the Board's commitment to ongoing renewal to enhance overall effectiveness and ensure an appropriate balance between skills and experience and a diversity of perspectives. Their backgrounds are varied and include marketing, risk management, capital markets, and business development. Looking forward, we are fully engaged in the revamp of our strategic plan. This plan will refine our focus on the areas where we can win to increase our competitiveness while always maintaining our objective of improving the customer experience. As part of this refresh, we have launched an end-to-end review of all our products, projects, and processes to help inform our decision-making as we look to simplify our operating model. This work is ongoing, and we will make appropriate decisions about products and projects as we progress through this exercise. I would now like to turn the call over to Yvan to review our financial performance. Merci Eric et bonjour à tous.

These appointments are part of the board's commitment to ongoing renewal to enhance overall effectiveness and insurers and the appropriate balance between skills and experience and a diversity of perspectives.

Their backgrounds are varied and include marketing risk management capital markets and business development.

Looking forward, we are fully engaged on the revamp of our strategic plan.

This plan will refine our focus on the areas, where we can win to increase our competitiveness, while always maintaining our objective of improving the customer experience.

As part of this refresh we have launched and then to end review of all our products projects and processes to help inform our decision, making as we look to simplify our operating model.

This work is ongoing and we will make appropriate decisions about products and projects as we progress through this exercise.

I will now like to turn the call over to Eva to review our financial performance.

Let's see.

Yvan Deschamps: I would like to begin by turning to slide 8, which highlights the bank's financial performance for the first quarter. Total revenue was $258 million, down 1% compared to last year, and up 4% quarter over quarter. On a reported basis, net income and EPS were $37.3 million and 75 cents, respectively.

I would like to begin by turning to slide eight.

Which highlights the bank's financial performance for the first quarter.

Total revenue was $258 million down, 1% compared to last year and up 4% quarter over quarter.

On a reported basis net income and EPS were at $37.3 million and 75, respectively.

Yvan Deschamps: Adjusting items for the quarter amount to $6.9 million after tax, or $0.16 per share, and they include amortization of acquisition-related intangible assets and restructuring charges of $6.1 million, or $4.5 million after tax, resulting from the previously announced simplification of the bank's organizational structure and headcount reduction. Details on these items are shown on slide 25. This quarter, an LRCN biannual interest payment added $0.06 to our yields. The remainder of my comments will be on an adjusted basis. EPS of $0.91 was down year-over-year and quarter-over-quarter by 21% and 9%, respectively. Net income of $44.2 million was down by 19% compared to last year and 1% compared to last quarter.

Adjusting items for the quarter amounted to $6 $9 million after tax.

Our 16 cents per share, although it's known amortization of acquisition related intangible assets and restructuring charges of $6 $1 million or five $4 $5 million after tax resulting from the previously announced simplification of the bank's organisational structure and head count.

Details on these items are shown on slide 22.

This quarter and their lawyers and biannual interest payment added six cents impact on our EPS.

The remaining the remainder of my comments will be on an adjusted basis.

EPS of <unk>, 91 cents was down year over year and quarter over quarter by 21% and 9% respectively.

Net income of $44 $2 million was down by 19% compared to last year, and 1% compared to last quarter.

Yvan Deschamps: The bank's efficiency ratio increased by 360 basis points compared to last year and by 100 basis points sequentially. This uptick reflects our ongoing investment in strategic priorities and the remaining expenses related to the mainframe outage in September 2023, which totaled $0.04 this quarter on an EPS basis. Additionally, and as previously guided, there was a seasonal increase in salaried and employee benefits, ROE for the quarters, so that's six. Light 9, shows net interest income down by $1.9 million or 1% year-over-year, mainly due to lower interest income from lower loan volume.

The bank's efficiency ratio increased by 60 basis points compared to last year and by 100 basis points sequentially.

This uptick reflects our ongoing investments in our strategic priorities and the remaining expenses related to the mainframe outage in September 2023.

Although four cents this quarter on an EPS basis.

Additionally, and as previously guided there was a seasonal increase in salaries and employee benefits.

Or are we for the quarter stood at 6%.

Slide nine.

So net interest income down by $1.9 million or 1% year over year, mainly due to lower interest income from lower loan volume.

Yvan Deschamps: On a sequential basis, net interest income was up by $2.49, or 1%, mainly due to lower liquidity levels and lower funding costs, partly offset by lower loan volume. Our net interest margin was up 4 basis points sequentially to 1.8%, mainly for the same reason. Slide 10 highlights the bank's funding position. Following a period of elevated liquidity, we gradually reduce our deposit base. Considering the loan volume reductions and our previously stated objective of reducing our liquidity, on a sequential basis, total funding was down one billion dollars.

On a sequential basis net interest income was up by $2.4 million or 1%, mainly due to lower liquidity levels and lower funding costs, partly offset by lower loan volumes.

Our net interest margin was up four basis points sequentially to 1.8% mainly for the same reason.

Slide 10 highlights the banks funding position.

Following a period of elevated liquidity, we gradually reduce our deposit basis, considering the loan volume reductions in our previously stated objective of reducing our liquidity position.

On a sequential basis total funding was down $1 billion.

Yvan Deschamps: Strategic partnership deposits decreased by $500 million as customers allocated funds back into market activity or term products. Deposits from advisors and brokers were also down by $300 million, mostly due to the natural runoff and our intentionally less competitive market rate. Despite the reduction in liquidity, the bank maintained a healthy liquidity coverage ratio through the quarter, which remains materially above the industry average. Slide 11 presents Other Income, which was relatively unchanged compared to last year. Higher income from financial instruments was mostly offset by lower lending fees due to tempered commercial real estate activity and lower income from mutual funds. On a sequential basis, other income increased by $8.5 million, or 13%, as a result of higher income from financial instruments due to more favorable market conditions and higher service charges as two months of fees were waived during Q4 2020.

Strategic partnership deposits decreased by $500 million as customers allocated funds back into market activity or term products.

Deposits from advisers and brokers were also down by $300 million, mostly due to the natural run off in our intentionally less competitive markets right.

Despite the reduction in liquidity the bank maintained a healthy liquidity coverage ratio through the quarter, which remains materially above the industry average.

Slide 11 presents other income, which was relatively unchanged compared to last year.

Iran has come from financial instruments was mostly offset by lower lending fees due to temporary commercial real estate activity and lower income from mutual funds.

On a sequential basis other income increased by $8 $5 million or 13% as a result of hiring come from financial instruments due to more favorable market conditions and higher service charges as two months Ive fees were waived during Q4 2023.

Yvan Deschamps: This was partly offset by lower, Like 12, shows non-interest expenses up by 4% compared to last year, mainly due to higher technology costs as the bank is investing in its infrastructure, as well as higher professional and advisory service fees related to the mainframe outage that occurred last quarter. This was partly offset by reduced headcount and lower performance-based compensation. On a sequential basis, non-interest expenses were up 6%, mainly due to seasonally higher vacation accruals, employee benefits... Performance-Based Compensation, partly offset by lower advertising. The remaining expenses related to the mainframe outage in the fourth quarter totaled $0.04 on an EPS basis.

This was partly offset by lower lending fees.

Slide 12 shows non interest expenses up by 4% compared to last year, mainly due to higher technology costs as the bank is investing in it infrastructure as well as higher professional and advisory service fees related to mainframe outage that's occurred last.

Quarter.

This was partly offset by reduced head count and lower performance based compensation.

On a sequential basis non interest expenses were up 6%, mainly due to seasonally higher vacation accruals employee benefits and performance based compensation.

Actually offset by lower advertising fees.

This quarter the remaining <unk>.

<unk> expenses related to the mainframe allison's in the fourth quarter totaled four cents on an EPS basis.

Yvan Deschamps: Turning to slide 13, our CT1 ratio was up 30 basis points to 10.2 due to a reduction in risk-weighted assets. Slide 14 highlights our commercial loan portfolio, which was down about $1 billion or 6% year over year and was down $500 million on a sequential basis, mostly due to slowing real estate market activity and our inventory financing dealer base being prudent in the current macroeconomic environment. Slide 15 provides details of our inventory financing portfolio. This quarter, utilization rates were 50% and were lower than historical levels as dealers have been taking a more conservative approach to inventory. We expect utilization rates to follow the usual seasonality, which includes a reduction in the spring and summer periods before starting to increase in the fall.

Turning to slide 13, our CET one ratio was up 30 basis points to 10.2 due to a reduction in the risk weighted assets.

Slide 14 highlights our commercial loan portfolio, which was down about $1 billion or 6% year over year and was down $500 million on a sequential basis, mostly due to slowing real estate market activity and our inventory financing dealer base being <unk>.

And the current macroeconomic environment.

Slide 15 provides details of our inventory financing portfolio.

This quarter utilization rates were 50% and our lower than historical levels as dealers that have been taking a more conservative approach to inventory.

We expect utilization rates to follow the usual seasonality, which includes a reduction in the spring and summer periods before starting to increase in the fall.

Yvan Deschamps: Commercial real estate, our unfunded pipeline, has been impacted by market trends but remains healthy. We have seen some developers slow down the starts of projects given the current macroeconomic environment as they navigate through this period of high inflation and interest rates. However, demand for residential real estate continues to exceed supply.

Commercial real estate, our unfunded pipeline has been impacted by market trends, but remains healthy we have seen some developers slowed down the starts of projects given the current macroeconomic environment.

They navigate through this period of high inflation and interest rates.

However demand in the residential real estate continues to exceed supply.

Yvan Deschamps: As seen on slide 16, the majority of our portfolio is in multi-residential housing, and only around 3% of our commercial loan portfolio is in office. Our office portfolio consists of Class A or B assets and financial records to strong and experienced sponsors. As we have said over the past few quarters, the majority of the portfolio is in multi-tenanted properties with limited exposures to single-tenanted buildings. Slide 17 presents the bank's residential mortgage portfolio. Residential mortgage loans were up 5% year-over-year and 2% on a sequential basis.

As seen on slide 16, the majority of our portfolio is in multi residential housing and only around 3% of our commercial loan portfolio with an office.

Our office portfolio consist of class, a or b assets and find sort of recourse with strong and experienced sponsors.

As we have said over the past few quarters. The majority of the portfolio is in multi tenanted properties with tenants in the exposure to single tenanted buildings.

Slide 17 presents the banks the residential mortgage portfolio.

Residential mortgage loans were up 5% year over year, and 2% on a sequential basis.

Yvan Deschamps: We maintain prudent underwriting standards and are confident in the quality of our portfolio, as evidenced by the high proportion of insured mortgages at 58% and the low LTV of 51% on the uninsured portion. It is also worth noting that more than 80% of our residential mortgage portfolio is fixed rate, of which more than 80% will mature in 2025 or later. Allowances for credit losses on slide 18. Total $218.5 million, up $15 million compared to last year, mostly as a result of higher allowances in the commercial portfolio. Allowances for credit losses increased by $3.7 million sequentially, mostly as a result of higher allowances on commercial loans due to credit migration, partly offset by write-offs in the commercial and personal loan portfolio. Turning to slide 19.

We maintain prudent underwriting standards and are confident in the quality of our portfolio as evidenced by the eye proportion of insured mortgages at 58% and low LTV of 51% on the uninsured portion.

It's also worth noting that more than 80% of our residential mortgage portfolio is fixed rate of which more than 80% will mature in 2025 or later.

Allowances for credit losses on slide 18.

Told all $218 $5 million up $15 million compared to last year.

Mostly as a result of higher allowances and the commercial portfolio.

Allowances for credit losses increased by $3.7 million sequentially, mostly as a result of higher allowances on commercial loans due to credit migration, partially offset by write offs in the commercial and personal loan portfolios.

Turning to slide 19.

Yvan Deschamps: Provision for credit losses was $16.9 million, an increase of $1.5 million from a year ago. Reflecting Higher Provisions on Performing Law, ECLs were essentially in line with last quarter. As a percentage of average loan and acceptances, PCLs were unchanged at 18%.

For credit losses was $16 $9 million, an increase of $1.5 million from a year ago.

Reflecting higher provisions on performing loans.

Sales were essentially in line with last quarter.

As a percentage of average average loans and acceptances PCI was were unchanged at 18 leaps.

Yvan Deschamps: Slide 20 provides an overview of impaired loans. On a year-over-year basis, gross impaired loans increased by $73.9 million and were up $16.5 million sequentially, mostly in the commercial portfolio, which is well collateralized. We continue to manage our risk with a prudent and disciplined approach and remain adequately provisioned. As we look ahead to Q2, I would like to note a few key points focused on the next quarter. We expect our loan book to continue to be impacted by macroeconomic conditions as dealers continue to be prudent in restocking inventory and due to a lower level of activity on real estate projects.

Slide 20 provides an overview of impaired loans.

On a year over year basis, gross impaired loans increased by $73 $9 million and were up $16 $5 million sequentially.

Mostly in the commercial portfolio, which is well collateralized.

Continue to manage our risk with a prudent and disciplined approach and remain adequately provisioned.

As we look ahead to Q2 I would like to note a few key points focused on the next quarter.

We expect our loan book to continue to be impacted by macroeconomic conditions.

<unk> continued to be prudent in a restocking inventory and due to lower level of activity on our real estate projects.

Unknown Executive: Adding the impact of the lower number of days, we expect a low single-digit NII reduction for NIM is expected to remain relatively stable. We are committed to reducing our efficiency ratio, and we'll share more details with you later this year as part of our revamped strategic plan. For the second quarter, we expect a slight increase in our efficiency ratio due to the pressure on revenues I just mentioned and as we incur expenses to support the review of our strategic plan. Given the macroeconomic environment, PCLs are expected to be in the high teens or low twenties. Capital and liquidity levels are solid and expected to remain strong for. I will now turn the call back to the operator. Thank you.

I think the impact of the lower number of days, we expect a low single digit NII reductions for Q2.

The name is expected to remain relatively stable.

We are committed to reducing our efficiency ratio and we'll share more details with you later this year as part of our revamped strategic plan.

For the second quarter, we expect a slight increase of our efficiency ratio due to the pressure on revenues I, just mentioned and as we incur expenses to support the review of our strategic plan.

Given the macroeconomic environment P cells are expected to be in the itunes for low twenties.

Capital and liquidity levels are solid and expected to remain strong for Q2.

I will now turn the call back to the operator.

Thank you, ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.

Unknown Executive: Ladies and gentlemen, if you would like to ask a question... Press Star followed by a 1 on your touch tone phone. If you're using a speakerphone, you will need to lift the handset first before pressing any, and if you would like to withdraw from the question, you will need to press Star followed by a. Please go ahead and press Star 1 now if you do have any questions.

If you're using a speakerphone you will need to lift the handset first before pressing any keys and if he would like to withdraw from the question queue, you will need to press star followed by two.

Please go ahead and press Star one now if you do have any questions.

Eric Provost: And your first question will be from Meny Grauman at Scotiabank; please go ahead. Hi, good morning. Just a question on the strategic review. Any more you can provide us with in terms of a timeline for when we should expect to hear a more fulsome plan from you? Good morning, Manny. It's Eric.

And your first question will be from many Goldman at Scotia Bank. Please go ahead.

Hi, good morning.

Just a question on.

This strategic review any more you can provide us with in terms of a.

Timeline for when we should expect to hear a more fulsome climbed from him.

Yeah, Good morning, Manny it's Eric.

Eric Provost: In terms of timeline, we indicated that we're aiming for spring, and I would clarify later spring. So the team is working real hard to make this happen, and more to come. Okay. I appreciate you highlighted that.

There was a Tyler timeline, we are indicators that are that we are aiming spring and now I would.

Clarify later spring so our team is working real hard to us to make this happen and and and more to come there.

Okay.

I appreciate you highlighted well it was highlighted.

Eric Provost: Well, it was highlighted at the end here that there would be more on expenses at that time, but I'm just wondering sort of more conceptually, it feels like given the step down in expenses that's required, it seems hard to believe that this can be accomplished without further restructuring charges. So I'm wondering if you could comment on that, like, how organic can this expense management process be?

At the end here.

There would be more on.

On expenses at that time, but I'm, just wondering sort of mark conceptually it feels like given the.

Step down in expenses, that's required like it seems hard to believe that this can be accomplished without further restructuring charges. So I'm wondering if you could comment on that like how.

Organic can this expense management protests be you talked a lot about simplification.

Eric Provost: You talked a lot about simplification, but it sounded like the things you're looking to do will require restructuring charges. They sound more dramatic.

It sounded like the things you're looking to do will require restructuring charges. They sound more dramatic so I just wanted to get your thoughts on that.

Eric Provost: So I just wanted to get your thoughts. We, as you noticed, like we already started last quarter with a reduction of 2% of the workforce and part of our analysis and then trying to actually simplify this organization. I would say, yes, there will be a need for further restructuring charges. Now the depth of it still needs to be worked on and addressed when we come back with the strategic plan. Okay, and then maybe just related, I mean, I think the good news is obviously, your capital position is quite strong and stepped up again this quarter, CT1 at 10.2%. You took a less defensive posture in terms of liquidity. I'm wondering how that translates into your outlook for capital and your view of excess capital and where your CT1 is in Canada, and I'm going to go back to the question that I was asked during the Q&A session, which is the question that was asked by the person who asked the question and, How much flexibility do you have there? Are you looking at the capital ratio differently now that it is at 10.2%. I'm ending a great question there.

Well Manny are we.

As you notice we already started last quarter with a reduction of 2% of workforce.

And as part of our analysis and then trying.

Cheap to simplify this organization.

I'd say, yes.

There there will be need for further.

Restructuring charges now to the depth of it still need to be.

Worked and addressed our when we come back with the strategic plan.

Okay, and then maybe just related I mean, I think the good news is obviously your capital position is quite strong and in stepped up again this quarter C. Do you want to 10, 2%.

You took a defensive posture in terms of liquidity I'm wondering how that translates into your outlook for capital in and your view of excess capital and where your CET one.

Our ratios should be anytime to there in terms of.

How much flexibility you have there or are you looking at your.

Capital ratio different differently now that it is at 10, 2%.

Uh huh.

Question, there and we've indicated in the last quarter, we'd be managing.

Eric Provost: And we've indicated in the last quarter that we'd be managing 10 and above. And right now, where we stand at 10.2, we feel pretty good versus the overall macroeconomic situation. And we're still monitoring the evolution, both of inflation and the behavior of interest rates going forward. So we feel good where we are right now. Thank you. The next question will be from Sohrab Movahedi at BMO Capital Markets. Please go ahead.

10, and above and then right now where we stand at that 10.2, we we feel pretty good versus the overall.

Macroeconomic situation I knew where we're still monitoring the evolution, a bolt of inflation and in behavior of interest rate going forward. So we feel good where we where we are right now.

Thank you.

Thank you.

Our next question will be from Sohrab <unk> at BMO capital markets. Please go ahead.

Yvan Deschamps: Okay, I'm just going to follow up on Meny quickly for a second. I assume part of the reason why the capital ratio is drifting higher is because loan growth is lower, RWA consumption is a little bit lower, and you anticipate that it's going to rebound. Is that the right way to think about it? Sohrab. This is Yvan.

Okay, I'm just going to follow up on many quickly for a second I assume part of the reason why the capital ratio is drifting higher is because loan growth is lower.

W. A consumption is a little bit lower than you anticipate that's going to eat up is that the right way to think about.

Yeah. So Rob this is the glass so I'll take this one so you're correct. So the increase.

Yvan Deschamps: So I'll take this one. You're correct. So the increase in capital essentially came from a reduction of the RWA. And the reduction of the RWA is because utilization rates are exact. So as you see, there's been a reduction in commercial, which is a big consumer of capital from an RWA perspective. So that's essentially coming from that. I mean, I think Yvan, I'll just read it. I think I'll reiterate Manny's point here.

The increase of the capital essentially came from a reduction of the <unk>.

And the reduction of TRW age because utilization rates are nowhere.

Exactly.

As you see there has been a reduction of commercial commercial is a big consumer of capital from <unk> W. A perspective, so that's essentially coming from that impact yes.

Okay.

I think Ivan I'll I'll, just read I think I'll reiterate manny's point here, I mean or or Erik sorry, when we meet.

Eric Provost: I mean, or, or Eric, sorry, we need. Like, over the last five quarters, I mean, the earnings, even if you adjust for some one-timer items, you know, are ranging anywhere from 40 to 50 million. That's a wide swing or a wide range. And we need this strategic review to have an understanding of what sort of an organization Laurentian Bank is going to be so we can see what sort of an earnings potential it's going to have. Going forward, so I guess the sooner you could give us some of that. It's not a question, it's a statement, but I just, you know, I feel like it's hard to make an investment case, not knowing exactly what we are. Thank you. Thank you for that, Sohrab.

Thank you all for the last five quarters I mean, the earnings even if you adjust for some one item one timers.

Ranging anywhere from 40 to 50.

That's a wide swing or a wide range and we need this strategic review to have an understanding of that what showed up in the organization Laurentian Bank. He is going to be so that what sort of an earnings potential is going to have.

Going forward, so I guess the sooner you could give us some of that.

The Bachelor.

It's not a question it's a statement, but I just you know I feel like it's hard to make an investment case not knowing exactly what we are.

Thank you.

Thank you for that surrounds us and like I said, we are.

Eric Provost: And like I said, we are working hard to come to market in the right manner so that we have all the analysis in play, and the big thing will be about making sure that this organization has a... A very, very strong focus on its customer base, understanding where we can win, simplifying our structure and product shelf, on maintaining our investments in our foundational technology to run the bank, but also to make sure that we generate additional revenue for the various platforms. The next question will be from Gabriel Dechaine, at the National Bank. Good morning.

We are working hard to come to market them.

And in the right manner. So that we have all the analysis and play in and the big the Big thing will be about making sure that this organization has.

So very very strong focus on this customer base understanding where we can win simplifying our structure and product shelf.

While maintaining our investments in our foundational technology to run the bank, but also to make sure that we generate additional revenue for the a.

Various platforms.

Thank you next question will be from Goodbody.

At the National Bank. Please go ahead.

Unknown Executive: I just want to talk quickly about the other income. One, it looks like the service fees and, well, particularly, service fees that you had maybe cut or refunded last quarter because of the IT issues look like they've stabilized, so we're through the worst of it, I suppose, or they're gone completely. Yeah, exactly, Gabriel.

Good morning, just don't want to talk quickly about.

Other income a one it looks like the service fees and well, particularly you know service fees that you would maybe cut or refunded last quarter because of the I T issues looked like that's stabilized so we're through the worst of it.

Those are that's gone completely.

Yeah exactly do you have any other so there was two months waived in Q4 for about two nine box and that's the difference in the improvement this quarter. So it's relatively stable excluding.

Unknown Executive: So there were two months waived in Q4 for about $2 million bucks, and that's a difference and improvement this quarter. So it's relatively stable, excluding the waiver of the fees that we've seen. Okay, and then the what is it investment income or investment instruments, whatever it's called the big $12 million figure, what was behind that spike? Hey, Gabriel, it's Kelsey Gunnarsson here, Capital Markets. You know, I think we typically, you know, kind of guide to between six and $9 million in that line and, you know, clearly had a good result this quarter.

The wave of the fees that we've seen in Q4, Okay and then the what does the investment income or our investment instruments whenever it's called the big the $12 million figure what was the behind that spike.

Oh, Hey, Gabriel it's Kelsey Gunderson here of capital markets.

You know I think we typically get.

And a guy to between $6 million to $9 million in that line and you know clearly had a good result, this quarter I think that's reflective of obviously a much more constructive markets for US you know triggers we're in a good position for it and we're able to participate in what we're better markets. So you know I wouldn't I wouldn't read that into any kind of change in strategy I always sort of read that into a.

Kelsey Gunderson: I think that's reflective of, you know, obviously, much more constructive markets for us, you know, traders were in a good position for it, and we're able to participate in, you know, what were better markets. So, you know, I wouldn't, I wouldn't read that into any kind of change in strategy, I would sort of read that into a good quarter on the trading desk, okay liquidity has been you know you're reducing liquidity we don't have a LCR ratio we can look at to kind of track that and I know we talked about this last quarter there's internal measures that that you have access to but I just I get what I can see is the loan at the deposit rate deposits ratio you know it's nearly 150% now is that are you comfortable with that that level and could we see even going higher and there's a bit of a you know expectation that loans to deposit ratios go down not up and you know in the current market context and probably into the future as well, Thanks, Gabriel. So the way we manage the funding of the bank is we look at the deposits plus securitizations, which are long-term, very cost-efficient funding as well.

Good quarter on the trading desk.

Okay liquidity AR has been.

You're reducing liquidity, we don't have our LCR ratio, we can look at to kind of track that and I know we've talked about this last quarter or the internal measure that are that you have access to but oh.

What I can see is the loan to deposits deposits ratio are nearly 150% now is that are you comfortable with that level and could we see even going higher.

Bit of a you know expectation that loan to deposit ratios go down not up and are you now.

In the current market context, and probably into the future as well.

Yeah. Thanks, Yeah. So the way we manage the funding of the bank as we look at the deposits plus Securitizations, which are long term very cost efficient funding as well. So if you take those two compared to the lungs are we tried to main thing that they're relatively in line. If you look at that based on this quarter. We're at one.

Yvan Deschamps: So if you take those two compared to the loans, we try to keep them relatively in line. If you look at that based on this quarter, we're at 1.03. So that's the way we manage it. It's not only a question of deposits versus loans; it's really a question of securitization plus deposits versus loans. And we're currently, I would say, in the positive, uh... territory because we intend to manage that around Okay. And then, well, speaking of deposits, and this is another NIM question, I guess, you did talk about lower funding costs. And, you know, when I see loans going down, it's not like I'm, you know, clapping and cheering, but the silver lining to it is that you can be more selective in your funding and, you know, let some of the higher cost, you know, sources kind of shrink.

0.3, so that's the way we manage it it's not only a question of deposits versus loans. It's really a question that securitization plus deposits versus the lungs and the work currently I would say in the positive.

Territory, because we intend to manage that in round one.

Okay.

And then well speaking of our deposits are in and this is another minimum question. I guess, you did talk about lower funding costs and you know the.

The two loans going down and it's not like I'm, you know clapping and cheering, but the silver lining to it is that you can be more selective.

And your funding and let some of the higher cost sources kind of shrink just wondering oh when I look at your your funding chart, when I forget, which slide it is but which one of those would you point to as being the most beneficial to NIM this quarter and then.

Yvan Deschamps: Just wondering, when I look at your funding chart, I forget which slide it is on, but which one of those would you point to as being the most beneficial to NIM this quarter? And then... Just to drill down a bit into the strategic partnerships, I know this predates the current management team's responsibility, or however you want to put that, but it was..., part of the funding structure that was announced with a bit of fanfare previously, and now it's off, you know, about one and a half billion dollars. I'm wondering what the, you know, the shift is there, if any, in that strategy. Thanks Gabriel; I'll take that one too.

Just to drill down a bit into the strategic partnerships I know predates the current management team's responsibility or however, you want to put that but you know it.

It was <unk>.

The funding structure that was announced with a bit of fanfare previously and now it's off you know.

One $5 billion I'm wondering what the you know the shifted there if any in that in that strategy.

Yeah, I'll take that one too so on the NIM side as you mentioned the claim.

Yvan Deschamps: So on the NIM side, as you mentioned, the improvement of four basis points came from the reduction of liquidity we had this quarter that we actioned, and we had guided you last quarter. But it also comes from, you know, probably I would say still some a little bit of a catch up of the stabilization of rates that we had to incur. And that's what's been happening.

Improvement of 40 basis points came from the reduction of liquidity. We had this quarter that we action than we had guided you last quarter, but it also comes from you know probably I would say still some a little bit of catch up of the stabilization of rates that we had to incur.

In carrier and that's what's been happening I would say most of it has now.

Yvan Deschamps: I would say most of it is now in the bag. But, as you mentioned, we've been prudent in terms of loan outstanding. So definitely, it's good on the margins while you're prudent in terms of development as well. So that explains, I would say, most of that.

In the bag, but as you mentioned, we've been prudent in terms of loan Outstandings on defense Lee. It's good on the margins, while youre pulling that in terms of development as well.

So that explains I would say most of that then definitely the fact that we've been less aggressive on the deposits that plays on the margins of the products for sure.

Yvan Deschamps: And definitely the fact that we've been less aggressive on the deposits, which plays on the margins of the products for sure. If I discuss strategic deposits or partnership deposits, those we have to keep in mind are demand deposits. So they are technically idle money technically that is waiting for better markets. And that's what we've experienced.

If I discuss about the strategic deposits or a partnership deposits. Those we have to keep in mind our demand deposits. So they are.

Idle money technically that are waiting for better markets and that's what we've experienced recently.

Yvan Deschamps: Okay, definitely the same trend of that money going back to market investments. And, you know, our return on GICs or other kinds of investments. So this is expected, then you should expect that this line is going to continue to go down unless, you know, there's a big swing in the market.

Okay.

I see the same trend of that money going back to markets and investments.

And you know I return gic's or other kinds of investments. So this is expected then you should expect that this line is going to continue to go down.

Unless you know there was a big swing in the market, but if as we see the market was getting better. This line just like other demand deposits and the rest of the industry got it that makes sense and and you say demand deposits, but there are are there not zero cost I would assume they are probably like high interest savings account.

Yvan Deschamps: But if, as we see the market getting better, this line just behaves like other demand deposits, and, Got it. That makes sense. And you say demand deposits, but they're not zero cost. I would assume they're probably like a high-interest savings account type.

Yvan Deschamps: Yeah, exactly. And the difference, and we could simply just reclassify that as normal demand deposits, happy to do that if we want. But the key element here is that we sign, you know, some multi-year agreements with some customers, and we're managing, on their behalf, the demand deposits of the idle money of their customers. Okay, last one.

Yeah, exactly and then the difference and we could simply just really love that that's normal demand deposits happy to do that if we want but the key the key element here is that we signed you know some multi year agreements with some customers and we're managing on their behalf there the demand the boss of the idle money of the aircraft.

Okay last one and sorry, if I missed this in your comment I, probably did miss it but just to get a bit more.

Eric Provost: And sorry, if I missed this in your comment, I probably did miss it. But just to get a bit more clarity on the equipment, inventory finance, balance trend, and the outlook. A, you know, what was the seasonality impact this quarter? And B, end user demand is probably going down. So that means, you know, less, you know, less growth or negative growth for that category? How would you put it? Yeah, Gabriel, and Eric, I'm gonna answer this.

Clarity on the.

The equipment, the inventory finance, our balance trend and in the outlook.

You know what was the seasonality impact this quarter and B E.

And user demand probably going down so that means you know less less growth or negative growth for that category, how would you put it.

Yeah, Eric I'm going to answer this it's a good question and we definitely saw a.

Eric Provost: It's a good question, and we definitely saw our dealer base being more cautious in the restocking season. So you mentioned seasonality. Usually, at this point in the year, we are more in the mid-50s in terms of line utilization.

Our dealer base being more cautious in the restocking season, So you mentioned seasonality.

At this point in the year.

We are we are more mid fifties in terms of line utilization.

Eric Provost: When we closed a quarter, we were showing 50%. So lines are utilized below normal trends in this particular time of the year because dealers see a market where there's still some uncertainties both in terms of the interest rate and the inflation rate. I actually was at the Boat Show last few weeks ago in Miami, and you can see and feel like the dealers are seeing customers; consumers are out there for the products, but the products will be slower to turn.

When we closed the quarter, we were showing a 50%. So so lines are utilized below.

Normal trends in.

A particular time of the year because dealers see.

See in markets, where there are still some uncertainties both in terms of the interest rate and the inflation rate actually was at the boat show last a few weeks ago in Miami and you can see you can see and feel like to the dealers are seeing plus customers.

Tumors are out there for the products, but the products will be slower to turn and we like the approach of the dealer base being more cautious in terms of Oh of restocking. So so we would hope if interest rates go down later on this year to see an increase of that utilization.

Unknown Executive: And we like the approach of the dealer base being more cautious in terms of restocking. So we would hope if interest rates go down later this year to see an increase in that utilization of credit lines later this. Okay, perfect. Thank you, and enjoy the weekend, although it's Thursday.

Of credit lines later this fall.

Okay perfect. Thank you and enjoy the weekend, although it's Thursday.

Got it.

Liam Mason: The next question will be from Nigel D'Souza at Veritas, please go ahead. Thank you. Good morning. Apologies if you already covered this, but do you have a breakout of categories within your commercial portfolio that drove the higher provisioning for commercial loans this quarter? Good morning, Joe. It's Liam Mason, CRO.

Next question will be from Nigel D'souza.

Please go ahead.

Thank you good morning apologies if you already covered this but do you have a breakout of the categories within your commercial portfolio that drove.

The higher provisioning for commercial loans this quarter.

Good morning, Nigel It's Liam Mason CRM.

It was a broad general migration across the portfolio, obviously as Eric articulated we're seeing a slower environment in commercial real estate and we are seeing pressures in that space, but for our portfolio broad general migration across the commercial portfolio.

Liam Mason: It was a broad general migration across the portfolio. Obviously, as Eric articulated, we're seeing a slower environment in commercial real estate, and we are seeing pressures in that direction. For our portfolio, broad general migration across... We've been disciplined around our reserving at NIGEL across all those categories, and that's reflected in our PCI. Any comments on the contribution from inventory financing to provisions this quarter? It's part of the portfolio, and we're pleased that our dealers are being prudent with regard to the restocking, as Eric remarked. But there is a degree of migration, as you'd expect at this point in the economic cycle.

And we've been disciplined around our reserving Nigel across all those categories and Thats reflected in our PCL this quarter.

Any comments on the contribution from inventory financing for provisions this quarter.

It would be just part of the portfolio and we're pleased that our dealers are being prudent.

With regard to the restocking is Eric remarked, but a degree of migration as you would expect at this point in the economic cycle.

Yvan Deschamps: Okay, and if I could switch gears, I just want to make sure I understand the deposit dynamics and the liquidity comments as well. So my understanding would be that if there's a decline in deposits that are reduced, your stressed cash outflows. So that should improve your liquidity coverage ratio. Or are you implying that you're also taking down your high-quality liquid assets? in conjunction with lower deposit levels. I'm just trying to understand the interplay between deposits and your LCR. Thank you totally.

Okay, and if I could switch gears, just want to make sure I understand the deposit dynamics and liquidity.

Comments as well so my understanding would be that if there's a decline in deposits that would reduce.

You expressed a cash outflows so that should improve your liquidity coverage ratio or are you implying that you're also taking down your high quality liquid assets.

In conjunction with lower deposit levels, just trying to understand the interplay between the office then your LCR.

So I can't totally first the LCR includes deposits includes the funding that their own funding of the bank and differentially as you mentioned the <unk>.

Yvan Deschamps: First, the LCR includes deposits, funding, the general funding of the bank, and definitely, as you mentioned, the other liquidity baskets that we have. So it's a general trend. I think I just tried to make it easy by talking about deposits, which is probably the simplest element in the equation.

Then the other liquidity baskets that we have so it's a general trend I think I just tried to make it as easy by talking about deposits, which is probably the central element to the equation. So when do we take all that into account we are still managing at pretty high level of LCR, which we are materially above.

Yvan Deschamps: So when we take all that into account, we are still managing a pretty high level of LCR. We are materially above, you know, the industry average or the big six. So we are elevated.

The industry average or the big six so we were elevated we had built a war chest in terms of liquidity are seeing the macro economy change as well as based on the recent events that happened. So we're still very well positioned and very safe from a liquidity perspective, when I mention the.

Yvan Deschamps: We had built a war chest in terms of liquidity, seeing the macroeconomy change, as well as on the recent events that happened. So we're still very well positioned and very safe from a liquidity perspective. When I mentioned the deposits decrease this quarter, I just reaffirmed that we manage securitization and deposits depending on how the loans are going. The difference this quarter is that, as stated, we had an objective to reduce it. We've been less aggressive on the deposits, on the rates of the deposits, and that's exactly what it created. The biggest impact of that, you can see, is broker GIC that was reduced by $300 million because we've been less aggressive on it. Okay, and just one point of clarification. Put simply, if your deposit balance is continuing to decline, is it not going to increase your LCR ratio? Or is it going to remain stable? And is there any cost to keeping an elevated LCR ratio?

<unk> deposits decrease this quarter I, just reaffirm that we managed securitization in deposits depending on the about the loans are going the difference this quarter as I stated, we had an objective to reduce it we've been less aggressive on the deposits.

On the rates of the deposits and that's exactly what it created.

The biggest impact of that as you can see is brokered GIC the three by $300 million, because we've been less aggressive on rates.

Okay, and just one point of clarification.

Put simply if you deposit balances continue to decline in cycling to increase your LCR ratio.

Or is it going to remain stable and necessarily cost to keeping that elevated LCR.

Yvan Deschamps: Because it doesn't seem you need it in order to meet the deposit outcome. As you increase the deposits, your LCR increases. As you decrease the deposits, your LCR decreases. But it's not only a question of deposits or liquidity; LCR is also a question of the flows that you need for the next three months as well. So it does depend on the volumes, it does depend on the commitments we have. So there are many aspects impacting the LCR, and you have to put all that in the pudding and just remain cautious, and that's what we've been doing in terms of the LCR. Okay, that's all. So that's it for me. Once again, as a reminder, if you do have any questions... Please press the star followed by 1.

Sure because it doesn't seem you need it.

In order to meet this deposit outflows.

As you increase was deposits your LCR increase as you decrease the deposits your LCR at the crease, but it's not only a question of deposits. Our liquidity LCR is also a question of the flows that you need for the next three months as well. So it does depend on the volumes it does depend of the <unk>.

<unk>, we have so there's many aspects impacting the LCR and you have to put all of that is in the pudding and just remain cautious and that's what we've been doing in terms of the LCR.

Okay. That's helpful. That's it for me thank you.

Hi, Joe.

Once again as a reminder, if you do have any questions. Please press star followed by one on your Touchtone phone.

Unknown Executive: And your next question will be from Darko Mihelic at RBC. Please go ahead. Hi, thank you. And I just have a couple of simple, straightforward questions, I think. So bear with me. The first question is, This quarter had fees from the mainframe outage. There were professional fees and other expenses. Provide some color around that, and is that part of your view into the next quarter and beyond? Essentially, what I'm trying to gather here is whether or not more consultants or more work needs to be done simply on that, and if that's part of the pressure on expenses going forward, or is the expense pressure really tied to other things. Yeah, thanks for the question, Darko. I will allow me to clarify that item. So, as you know, the outage happened in the last few days of September and the first few days of October.

Your next question will be from Darko <unk> of RBC. Please go ahead.

Hi, Thank you yeah, I just have a couple of simple.

Simple straightforward questions I think so bear with me. The first question is.

This quarter had.

<unk> for the mainframe outage, there was professional fees and.

In other expenses.

<unk>.

Provide some color around that and is that.

Part of your.

View into next quarter and beyond.

Essentially what I'm trying to gather here is.

Whether or not more consultants or more work needs to be done simply on that.

That's part of the pressure.

On expenses going forward or is the expense pressure.

Really tied to other things.

Yeah. Thanks for the question Darko will allow me to clarify that item. So as you know the outage happened in the last few days of September 1st few days of October. So the remediation work you know as Ben.

Yvan Deschamps: So the remediation work, you know, has been done pretty much in October and early November. So what we see right now is the remaining expenses related to that outage remediation. So this will not flow or continue in Cuba.

Pretty much in October and early November so what we see right now is the remaining expenses related to debt outage remediation.

So this will not slow our continue in Q2 and Q2 level of expenses is expected to remain roughly in the same ballpark.

Yvan Deschamps: In Q2, the level of expenses is expected to remain roughly in the same ballpark because of other elements, including some spending related to the strategic plan that was ongoing. But definitely, what we incurred to remediate the outage was something that we did in October and November that impacted expenses, impacted Q4 by $3 million, impacted Q1 by $2 million, but should not impact Q2. Okay, but I understood that, and maybe I, I have to go back to my notes and check, but I thought... previously, it was the waiving of fees. But this is different. Am I, or am I thinking of this incorrectly?

Cause of other elements, including some spending related to the strategic plan that were ongoing but definitely what we incur to remediate. The outage was something that we've done in October and November that impacted expenses impacted Q4 by 3 million Bucks impacted Q1 by 2 million Bucks, but should not named.

That Q2 anymore.

Okay, but I understood that.

And maybe I.

I have to go back to my notes and check but I thought.

Previously.

It was the waiving of fees.

But this is different or am I thinking of this correctly.

I'll I'll I'll take it then open to my colleagues if they want a complete but last quarter. We had two months of waived fees for $2 million, but in addition to that we had about $3 million of expenses to remediate and correct.

Yvan Deschamps: I'll take it and open it to my colleagues if they want to complete, but last quarter, we had two months of waived fees for $2 million. But in addition to that, we had about $3 million of expenses to remediate and correct, you know, what we had to correct last quarter. So in total, what I mean, if you take both quarters together, we had $2 million of fees waived, and that was only in Q4, not impacting Q1. We had $5 million of spending, including professional fees and expenses.

What we have to correct last quarter. So in total what I mean, if you take both quarters together, we had $2 million of fees waived and that was only in Q4 not impacting Q1, we had $5 million of spending within professional fees and expenses $3 million of that was in Q4.

Yvan Deschamps: $3 million of that was in Q4, and $2 million of that was in Q1. So technically, a total of $7 million, and that's now passed. Okay, okay, that's thank you very much for that clarity. I apologize. I just didn't have my notes at my fingertips.

<unk> and $2 million of that was in Q1, so technically totaled seven nine box and that's now passed.

Okay. Okay. Thank you very much for that clarity.

And I apologize I, just I didn't have my notes at my fingertips and and so on.

Eric Provost: And so now, after the fact, Has there been any work on, you know, the customer experience Given the outage and further remedial steps that are that are necessary? Yeah, Darko, Eric. Good morning. I'm just, well, pleased to announce this morning that we have a new CIO joining us, Benoit Bertrand. And in terms of customer experience on our side, it's a continuous improvement. So we're continuing to make some foundational investment in our technology to improve. But after that, it's gonna be a matter of simplifying how we actually address customer needs. And this will all be blended together within our strategic review or strategic plan. So more to come in the spring. Okay, okay. And then lastly, I just wanted to also get back to the guidance for the PCL, specifically for next quarter's high teens. Low 20s.

Now after the fact.

Has there been any work on.

The customer.

Experience.

Given the outage.

And further remedial.

Steps that are that are necessary.

Yes, I'll Echo Eric.

Good morning, just well pleased to announce this morning that we have a new CIO joining and.

Uh huh.

And then in terms of customer experience on our side like it's a continuous improvement. So we're continuing to make some some foundational investments in our technology to improve.

But after that it is going to be a matter of simplifying how we actually address customer needs in and this will be all blend together within our strategic review of our strategic plan. So so more to come in in the spring there.

Okay. Okay.

And then lastly, I just wanted to also get back to.

The guidance for the PCL, specifically for next quarter high teens.

Low twenty's is it.

Liam Mason: Is it? Is it something that we see on the watch list, or is this kind of related more to a performing reserve bill than Q2, just any color on that would be helpful. I'm not sure, D'Arco, Liam Mason on that.

Is it something that we see in the watch list or or or is this.

Kind of related more to our performing reserve.

Build in Q2, just any color on that would be helpful.

Sure Darko its slim Liam mentioned on that.

Liam Mason: Let me just maybe take you back a little bit and talk about the history we've had with regard to ACLs. If you recall, post-COVID, we've been systematically building our reserves based on the forward expectation of our performing portfolio. We have continued to systematically build against performing to position ourselves for macroeconomic conditions. So I would say it's both in the performing as well as within the watch list portfolio. And we're very disciplined in terms of how we set individual reserves on the watch list and the workouts. The broad industry has seen some pressures within real estate, as we've articulated and as other players have, but we're very disciplined in our reserves, both with regard to formation and specific watch list files. Okay, thanks very much for that. The next question will be from Doug Young at Deschamps.... Hi, good morning.

Just maybe maybe take you back a little bit and talking about the history. We have done with regard to Acs. If you recall post COVID-19, we've been systematically building our reserves based on the forward expectation on our performing portfolio.

We have continued to systematically build against performing.

To position ourselves for the macroeconomic conditions. So I would say, it's both in the performing as well as within the watch list portfolio.

And we're very disciplined in terms of how we set individual reserves on the watch list.

And and workouts.

The broad industry has seen some pressures within real estate as we've articulated as other players have.

We're very disciplined within our reserves, both with regard to performing and specific watchlist files.

Yes.

Okay. Thanks, very much for that.

Thank you next question will be from Doug Young at the Jaffray. Please go ahead.

Hi, Good morning, just hopefully a few quicker clarification just back to the dealer inventory finance I mean, you see utilization of 50% probably goes down the next few quarters before coming back up in the fall.

Eric Provost: Just, hopefully, a few quicker clarifications. Just back to the dealer inventory financing. You say utilization is 50% and probably goes down the next few quarters before coming back up in the fall. I guess what I'm trying to understand is where does that 50% go in Q2, Q3. And then sequentially, what does that do to your loan book in terms of total dollar loans? I'm just trying to understand how much more contraction in the next few quarters we might see. Yeah, Doug, and Eric are there.

Guess, what I'm trying to understand is where does that 50% go in Q2 Q3, and then sequentially what does that do to your loan book in terms of total dollar loans I am just trying to understand how much more contraction in the next few quarters, we can see.

Yeah, Doug Yeah, Eric there just in terms of utilization.

Eric Provost: Just in terms of utilization, what we expect this summer is that consumers will still be prudent in their approach to the market. So, as you know, the various products that we serve in various industries are quite seasonal, so we should expect... small reductions still in utilization, but to what extent will really depend on the macroeconomic in terms of inflation and the behaviors of the policy in terms of interest rates. So, we have a prudent consumer out there. So, we would expect a small reduction, but to which extent it's too early in the season right now to guide toward.

But we expect this summer is.

Consumer will still be prudent in their approach in the market. So as you know the various products that we serve in various industries are are quite seasonal. So so we should expect a small reduction.

Reduction is still in the utilization, but to what extent will really depend on.

On the macroeconomic in terms of inflation and the behaviors of our of the policy in terms of interest rates. So so we have a prudent consumer out there.

So.

We would expect small reduction, but to which extent it's too early in the season right now to.

Guide towards that.

Eric Provost: And in terms of the impact, in terms of the dollar amount on the loan book, are you also adding deals, like are there offsets here? So utilization on your existing goes down? Are you adding new portfolios or new dealers in here? That would potentially be a bit of an offset? Or is this a status quo, like you're not doing that type of expansion right now?

And in terms of the impact in terms of dollar amount of Milan, but are you also adding deals like is there offsets here. So the utilization on your existing goes down are you, adding new portfolios are new dealers in here.

That would potentially be a bit of an offset or is this a status quo like youre not doing.

That type of expansion right now.

Eric Provost: Yeah, Doug, it's an excellent question. Actually, we've been indicating that we are in the pursuit of diversifying the overall portfolio in terms of industry mix. So the team has made efforts to grow in the ag, construction, and technology sectors, which are less seasonal and can also provide great diversification. And I'm glad to say that the team, with its efforts, was able to grow its dealer base, just over 400 dealers, about 8% year over year. So yes, we continue to see organic growth in our dealer base, and that will definitely create more momentum for organic growth, a diversified dealer base, for the future. Okay, and then maybe just back to credit. Apologize again if I missed this, but on the performing loan bill, that was all credit migration. In the commercial book, were there any model updates? Was there anything else that was underneath the hood there?

Yeah, Doug it's an excellent question actually we've been.

We have been indicating that we are in in pursue of diversifying the overall portfolio in terms of industry mix. So the team has made efforts to grow in the AG construction technology, which are less seasonal in and can also provide great diversification and I'm glad to say that the team.

With his efforts was able to grow dealer base.

Just over 400 dealers about 8% year over year. So so yes, we continue to see organic growth in our dealer base and that will definitely create more momentum in organic growth diversified dealer.

For the future.

Oh, Okay, and then just maybe just back to credit apologize again, if I missed this but on the performing loan bill that was all credit migration.

In the commercial book was there model updates when there or anything else that's underneath the hood there.

Liam Mason: Thank you, Doug. It's Liam again. No, no model updates. I know some of our competitors did mention that. We are very disciplined in terms of how we set our macroeconomic conditions for the forecast. We benchmark those to the industry and also to the Bank of Canada. So what's really driving it is migration and a forward view on macroeconomic conditions. Okay. And then just on expenses, lastly, did I hear it right? You know, essentially excluding restructuring charges and so adjusting the adjusted expense base.

Hi.

Thank you Doug It's Liam again, no no model updates I know some of our competitors did mentioned that we are very disciplined in terms of how we set our macroeconomic conditions and forecast we benchmark those to the industry and also to the bank of Canada. So what's really driving it is migration.

And the forward view on the macroeconomic conditions.

Okay.

And then just on expenses lastly, did I hear it right.

Essentially excluding restructuring charges and so adjusted <unk> adjusted expense base. The anticipation is that it will be relatively flat.

Unknown Executive: The anticipation is that it will be relatively flat in Q versus Q1. Did I get that messaging correct? I hope that you did.

In Q versus Q1 did I get that messaging correct.

Yes, you did Doug.

Unknown Executive: Okay. Okay, thank you. Thank you.

Okay.

Okay. Thank you.

Eric Provost: The next question will be from Stephen Boland at Raymond Forehead. Oh, thanks. Just the first question, actually, Eric, was just on: you had talked before about moving into different verticals in inventory finance, and you've added these dealers in those different verticals. I'm wondering if you've gotten the same type of protection or covenants that you have in the traditional silo that you've been in, you know, in terms of guarantees, in terms of, you know, actual credit protection. Just wondering if there's any changes in that. Yes, Stephen, it's a great question there. And the approach is always the same in our operating model. So we always start with the OEM, trying to secure, and we have 95, 96% of OEM repurchase in place, whatever the industry we're chasing.

Thank you.

Next question will be from Stephen Boland at the Raymond James. Please go ahead.

Oh. Thanks, just the first question actually Eric was that just on you had talked before moving into different verticals in the inventory finance and you've added these dealers.

And those different verticals I'm wondering if you've gotten the same type of protection or covenants that you have in that the traditional.

Silo that you've been in.

And in terms of guarantees in terms of actual credit protection I'm, just wondering if theres any changes in that yes, Stephen it's a great question there and the approach is always the same.

And our operating model, so we always start with the OEM.

Trying to secure and we have 90, 596% of OEM repurchase in place whatever the industry we're chasing.

Eric Provost: And after that, it goes down to financing the asset at the wholesale price, getting a PG and dealer, guarantees, for the overall line utilization, and all linked, of course, to that repurchase by the OEM. So yes, we maintain the same discipline and approach whatever type of industry we're chasing. Hasn't there been any pushback from the OEMs or at the dealer level in terms of some of these covenants? Or is it just that that's the way it is if they want access to your financing?

And after that it goes down to financing the asset deal sell through is getting.

D G and dealer.

Guarantees.

For the overall line utilization.

And all linked of course to that repurchase to the OEM. So so yes, we maintain the same discipline.

Approach.

Whatever type of industry, where we're.

We're chasing.

And there hasn't been any any pushback from the Oems or are at the dealer level in terms of some of these covenants or is it just us.

That's the way it is if they want access to your financing well for US. This is this is the disciplined approach we gave ourself and then and we remain true to it than that.

Eric Provost: Well, well, for us, this is the discipline approach we gave ourselves, and then we remain true to it. That's what we believe allows good companies to go through cycles. So we are, We're quite consistent in our approach, so that's how we do it.

That's what that's what we believe allows a good companies to go through cycles. So we are.

We are quite consistent in our approach so.

Yeah.

Eric Provost: Okay, and my second question, I apologize if this is obvious. I'm not sure Yvan, you mentioned this, but just in terms of you've given some guidance. I think last quarter you talked about the loan book being stable throughout 2024, meaning year over year. First, was that correct? And has that changed now? Like, you know, obviously a big reduction in Q1, but is it still expected to be stable throughout at the end of 2024 over 2023? Stephen, I don't recall having said that it would be stable 24 versus 23.

Okay and my second question I apologize if this is obvious but I'm not sure you mentioned this just in terms of you've given some guidance.

I think last quarter, you talked about the loan book being stable throughout 2024, meaning year over year.

First of all is that correct and has that changed now.

Obviously, a big reduction in Q1, but is.

Is it still expected to be stable throughout at the end of 2024 over 2023.

Stephen I don't I don't recall, having said that it would be stable 24 versus 23, I think I, usually guide to a quarter at a time when do we expect for the next quarter is probably a slight reduction of the loan book due to the fact that you know we remain prudent and our customers remain impacted by the.

Yvan Deschamps: I think I usually guide to a quarter at a time. What we expect for the next quarter is probably a slight reduction in the loan book due to the fact that, you know, we remain prudent and our customers remain impacted by the current economic environment. And we mentioned, you know, on the inventory side, they're being prudent, stocking inventory, and on the commercial real estate side, our promoters are delaying some projects, waiting or expecting a reduction in rates.

Current economy and environment and we manage them.

<unk> side, they are being prudent with restocking inventory and underground the commercial real estate side, we see promoters are delaying some projects waiting or expecting a reduction of rates. So that that is expected to impact slightly the next quarter not in a material way, but just a slight reduction.

Yvan Deschamps: So that is expected to impact the next quarter slightly, not in a material way but just, Okay, thanks for clarifying that for me. Thank you. That's all the time we have for questions.

Okay. Thanks for clarifying that for me. Thanks.

Thank you.

Thank you that's all the time, we have for questions I would now like to turn the meeting over to Eric.

Eric Provost: I would now like to turn the meeting over to Eric. Thank you for joining us on the call today. As we head into Q2, our focus remains on our three strategic priorities, customer focus, simplification, and strategic investments to improve our technology infrastructure. We continue to work to revamp our strategic plan and look forward to having more to say later this year, including further details about our upcoming investor event. Thank you. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time, we do ask that you please... The Ultimate Parody Site! www.globalonenessproject.org

Thank you for joining the call today.

We added into Q2, our focus remains on our three strategic priority.

Customer focus simplification and strategic investments to improve our technology infrastructure.

We continue to work to revamp our strategic plan and look forward to having more to say later this year, including further details about our up to upcoming investor events. Thank you.

Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

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