Q2 2024 Canadian Western Bank Earnings Call

May 31, 2024

Nathan B, a b I D and Brown B R O W N.

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Speaker Change: E R.

Thank you I'll join you know the conference is now being recorded.

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Speaker Change: Good morning, My name is Jenny and I will be your conference operator today.

Good morning, My name is Jenny and I will be your conference operator today.

Operator: Canadian Western Bank Earnings Corp.

At this time I would like to welcome everyone to see.

At this time I would like to welcome everyone to see double UBS second quarter 2000, <unk> financial results conference call and webcast.

Speaker Change: <unk> second quarter 2020 financial results conference call and webcast.

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

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

Speaker Change: Speakers remarks, there will be a question and answer session.

After the Speakers' remarks, there will be a question and answer session.

Speaker Change: Like to ask a question joined US time simply press Star then the number one on your telephone keypad.

I'd like to ask a question joined US time simply press Star then the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question. Please press Star then the number two thank you.

If you would like to withdraw your question. Please press Star then the number two thank you.

Operator: Thank you. May I have your first and last name, please?

Speaker Change: I'll now turn the call over to Chris Williams Assistant Vice President Investor Relations. Please go ahead Chris.

I'll now turn the call over to Chris Williams Assistant Vice President Investor Relations. Please go ahead Chris.

David Brown: David Brown from AYERA AIERA

Speaker Change: Good morning, and welcome to our second 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, Brad Chief Financial Officer, and currently in a para chief risk Officer also present.

Good morning, and welcome to our second quarter 'twenty 'twenty four financial results Conference call. We will begin this morning's presentation with opening remarks from Chris Fowler, President and Chief Executive Officer.

Although by Matt Ryan Chief Financial Officer, and Carolyn a para chief risk Officer also present today are Stephen Murphy group head commercial personal and wealth and Jeff right.

Speaker Change: Today are Stephen Murphy group, pegged commercial personal and wealth and Jeff right.

Speaker Change: <unk> solutions are specialty businesses after our prepared remarks, it will all be available to take your questions.

<unk> solutions are specialty businesses after our prepared remarks, they will all be available to take your questions.

Speaker Change: As noted on slide two statements may be made on this call that are forward looking in nature, which involve assumptions and have inherent risks and uncertainties actual results could differ materially from these statements.

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.

Speaker Change: Also remind listeners that the bank.

These non-GAAP financial measures to arrive at adjusted results.

<unk> management measures performance on a reported and adjusted basis and considers to be useful in assessing underlying business performance I will now turn the call over to Chris Fowler will begin its discussion on slide four.

Speaker Change: Management measures performance on a reported and adjusted basis and considers to be useful in assessing underlying business performance.

Operator: Thank you; I'll place you in just one moment.

I'll now turn the call over to Chris Fowler will begin its discussion.

Speaker Change: <unk> four.

Speaker Change: Thank you, Chris and good morning, everyone.

Operator: The conference is now being recorded.

Thank you, Chris and good morning, everyone.

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

We continue to successfully navigate through a muted economic environment.

Jenny: 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 star, then the number 1 on your telephone feedback. If you would like to withdraw your question, please press star, then the number 2. Thank you. I will now turn the call over to Chris Williams, Assistant Vice President, Investor Relations. Please go ahead, Chris.

Christopher H. Fowler: Second quarter, we delivered a 50% increase in pretax pre provision income and a 9% increase in adjusted earnings per share compared to last year.

In the second quarter, we delivered a 50% increase in pretax pre provision income and a 9% increase in adjusted earnings per share compared to last year.

Chris Williams: Good morning, and welcome to our second 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 of Commercial, Personal, and Wealth, and Jeff Wright, Group Head of Client Solutions and Specialty Business. After our prepared remarks, they will all be available to take your questions.

Chris Williams: 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 uncertainty. The actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at its

Christopher H. Fowler: Our loan portfolio grew 1% sequentially following a moderate contraction in the previous quarter.

Our loan portfolio grew 1% sequentially following a moderate contraction in the previous quarter.

Chris Williams: Management measures performance on a recorded and adjusted basis and considers both to be useful in assessing underlying business performance. I will now turn the call over to Chris Fowler, who will begin his discussion.

Christopher H. Fowler: While we saw growth momentum build through the quarter, particularly in our general commercial portfolio grew 2% sequentially. Our total loan growth was below our expectations, which dampened our second quarter net interest income growth.

While we saw growth momentum build through the quarter particular in our general commercial portfolio grew 2% sequentially. Our total loan growth was below our expectations, which dampened our second quarter net interest income growth.

Christopher H. Fowler: [inaudible] Thank you, Chris, and good morning, everyone. We continue to successfully navigate through a muted economic environment. In the second quarter, we delivered a 15% increase in pre-tax, pre-provisioned income and a 9% increase in adjusted earnings per share compared to last year. Our loan portfolio grew 1% sequentially following a moderate contraction in the previous quarter. While we saw growth momentum build through the quarter, particularly in our general commercial portfolio, which grew 2% sequentially, our total loan growth was below our expectations, which dampened our second quarter net interest income growth. In response, we continued to prudently manage our non-interest expenses and drove 6% positive operating leverage this quarter. Our total provision for credit losses for the first half of fiscal 2024 was 22 basis points.

Christopher H. Fowler: In response, we continued to prudently manage our non interest expenses and drove 6% positive operating leverage this quarter.

In response, we continued to prudently manage our non interest expenses and drove 6% positive operating leverage this quarter.

Christopher H. Fowler: Our total provision for credit losses for the first half of fiscal 2024 was 22 basis points and we expect to remain at the higher end of our provision for credit losses guidance on a full year basis.

Our total provision for credit losses for the first half of fiscal 2024 was 22 basis points and we expect to remain at the higher end of our provision for credit losses guidance on a full year basis.

Christopher H. Fowler: And we expect to remain at the higher end of our provision for credit losses guidance on the full year basis. Our confidence in our secured lending approach, prudent underwriting, and proactive loan management supports our continued expectation that total PCLs will remain within our annual expected range of 18 to 23 basis points. Overall, financial performance has been strong in response to the current environment. Earnings per share fell short of our expectations this quarter.

Christopher H. Fowler: Our confidence in our secured lending approach prudent underwriting and proactive loan management supports our continued expectation that total PCL.

Our confidence in our secured lending approach prudent underwriting and proactive loan management supports our continued expectation that total PCL and remain within our annual expected range 18 to 23 basis points.

Christopher H. Fowler: Within our annual expected range 18 to 23 basis points.

Christopher H. Fowler: Our overall financial performance has been strong in response to the current environment, but earnings per share has fallen short of our expectations this quarter.

Our overall financial performance has been strong in response to the current environment with earnings per share has fallen short of our expectations this quarter lower than expected loan growth through the first half of the year was also dampened our outlook for revenue and profitability on a full year basis.

Christopher H. Fowler: Lower than expected loan growth through the first half of the year has also dampened our outlook for revenue and profitability on a full year basis. However, we see a compelling opportunity to increase our market share and accelerate our loan growth as the economy strengthens. Our balance sheet strength reorganizes operations as it's well positioned to capitalize on this opportunity. We have a history of taking market share coming out of disrupted economic times, and our team will execute our winning playbook to drive more growth across our Canadian footprint.

Christopher H. Fowler: Than expected loan growth through the first half of the year is also dampened our outlook for revenue and profitability on a full year basis.

Christopher H. Fowler: We see a compelling opportunity to increase our market share at an accelerated loan growth as the economy strengthens.

We see a compelling opportunity to increase our market share and accelerate our loan growth as the economy strengthens.

Christopher H. Fowler: Our balance sheet strength.

Our balance sheet strength reorganize operations as is well positioned to capitalize on this opportunity.

Christopher H. Fowler: These operations as is well positioned to capitalize on this opportunity.

Christopher H. Fowler: We have a history of taking market share coming out of disrupted economic times and our team will execute our winning playbook to drive more growth across our Canadian footprint.

A history of taking market share coming out of disrupted economic times and our team will execute our winning playbook to drive more growth across our Canadian footprint.

Christopher H. Fowler: Please put the mix of our loan growth in the second quarter, which is shown on slide 5. We maintain a highly disciplined lending approach with selective origination in our combined commercial real estate portfolio. Commercial mortgages declined 9% from last, as new origination volume was more than offset by scheduled repayments and loan payouts. Real Estate Project Loans decreased 6% as a lower than usual volume of new project starts from top tier borrowers was more than offset by payouts associated with project completion.

Christopher H. Fowler: We're pleased with the mix of our loan growth in the second quarter, which is shown on slide five.

We're pleased with the mix of our loan growth in the second quarter, which is shown on slide five.

Christopher H. Fowler: We maintain a highly disciplined lending approach with selective origination inner combined commercial real estate portfolios.

We maintained a highly disciplined lending approach with selective origination and our combined commercial real estate portfolios.

Commercial mortgages declined 9% from last year is doing origination volume was more than offset by scheduled repayments.

Commercial mortgages declined 9% from last year as new origination volume was more than offset by scheduled prepayments and payoffs.

Christopher H. Fowler: Yes.

Christopher H. Fowler: Real estate project loans decreased 6% as a lower than usual following a few projects starts from top tier borrowers was more than offset by payoffs associated with project completions. We have started to see lending activity pickup in this sector and delivered 1% sequential growth this quarter.

Real estate project loans decreased 6% as a lower than usual following a few project starts from top tier borrowers was more than offset by payouts associated with project completions. We have started to see lending activity pick up in this sector and delivered 1% sequential growth this quarter.

Christopher H. Fowler: We have started to see lending activity pick up in this sector and delivered 1% sequential growth this quarter. The credit performance in both portfolios remains strong and reflects our improved risk appetite and underwriting standards that have supported our long history of strong credit performance. In the second quarter, we delivered 6% general commercial loan growth on an annual basis. This performance supports 12% average annual loan growth in this category over the last five years.

Christopher H. Fowler: Credit performance in both portfolios remains strong and reflects our prudent risk appetite and underwriting standards that have supported our long history of strong credit performance.

The credit performance in both portfolios remains strong and reflects our prudent risk appetite and underwriting standards that have supported our long history of strong credit performance in.

Christopher H. Fowler: In the second quarter, we delivered 6% general commercial loan growth on an annual basis.

In the second quarter, we delivered 6% general commercial loan growth on an annual basis.

Speaker Change: This performance supports 12% average annual loan growth in this category over the last five years.

This performance supports 12% average annual loan growth in this category over the last five years is.

Christopher H. Fowler: As our teams focus on improving growth in the latter half of the year, we expect general commercial growth will continue to be our strongest growing momentum. General commercial clients represent a significant opportunity for CWB to provide the full suite of its lending and business banking services and increase our revenues through lower cost deposits, transactional service fees, and wealth management opportunities.

Speaker Change: As our teams focus on improving growth in the latter half of the year. We expect general commercial growth will continue to be our strongest growing loan category.

Speaker Change: As our teams focus on improving growth in the latter half of the year. We expect general commercial growth will continue to bear strongest growing loan category.

Speaker Change: General commercial clients represent a significant opportunity for <unk> to provide a full suite of our lending and business banking services and increase our revenues through lower cost deposits transactional service fees and wealth and then wealth management opportunities.

General commercial clients represent a significant opportunity for <unk> to provide a full suite of our lending and business banking services and increase our revenues through lower cost deposits transactional service fees and wealth and then wealth management opportunities.

Christopher H. Fowler: These clients have been an important contributor to our five-year average growth in franchise deposits of 10%. In the second quarter, we delivered 2% annual franchise deposit growth as we continued the initial launch of our new commercial digital and cash management platform through a phased rollout to existing customers to prepare for a broader launch. We expect growth in franchise deposits to increase once we begin onboarding our pipeline of new cash management clients onto the platform later this year. On an annual basis, we expect to deliver franchise deposit growth of approximately 2%. I'll now turn the call over to Matt, who will provide greater detail on our second quarter financial performance. Thanks, Chris.

Speaker Change: These clients have been an important contributor to our five year average growth and franchise deposits of 10%.

These clients have been an important contributor to our five year average growth and franchise deposits of 10%.

Speaker Change: In the second quarter, we delivered 2% annual franchise deposit growth as we continued the initial launch of our new commercial digital and cash management platform.

In the second quarter, we delivered 2% any dual franchise deposit growth as we continued the initial launch of our new commercial digital and cash management platform through a phased rollout to existing customers to prepare for a broader launch.

<unk> rollout to existing customers to prepare for a broader launch.

Speaker Change: We expect growth franchise deposits to increase once we begin onboarding, our pipeline of new cash management clients onto the platform later this year.

We expect growth franchise deposits to increase once we begin onboarding, our pipeline of new cash management clients onto the platform later this year.

Speaker Change: On an annual basis, we expect to deliver franchise deposit growth of approximately 2%.

On an annual basis, we expect to deliver franchise deposit growth of approximately 2%.

Matt Brad: Now I will turn the call over to Matt who will provide greater detail on our second quarter financial performance. Thanks, Chris Good morning, everyone I'm, starting on slide seven and the first quarter, we had especially strong growth demand and notice deposits and as you recall that created a temporary bulge in liquidity and as we expected this quarter our liquidity levels.

Now I'll turn the call over to Matt, who will provide greater detail on our second quarter financial performance. Thanks, Chris Good morning, everyone I'm, starting on slide seven and the first quarter, we had especially strong growth of demand and notice deposits and as you recall that created a temporary bulge in liquidity and as we expected this quarter our liquidity levels.

Robin Matthew Rudd: Thanks, Chris. Good morning, everyone.

Robin Matthew Rudd: I'm starting on slide seven. In the first quarter, we had especially strong growth in demanded notice deposits. And as you recall, that created a temporary bulge in liquidity. And, as we expected this quarter, our liquidity levels have normalized.

Matt Brad: On lives franchise deposits decreased 2% sequentially as a 3% increase in term deposits more than offset by 4% decrease in demand and notice deposits.

Normalized franchise deposits decreased 2% sequentially as a 3% increase in term deposits more than offset by a 4% decrease in demand and notice deposits.

Robin Matthew Rudd: Franchise deposits decreased 2% sequentially as a 3% increase in term deposits was more than offset by a 4% decrease in demand and notice deposits. Lower demand and notice deposits primarily reflected the deployment of excess savings by existing clients. And this included the excess deposits that supported the unexpectedly strong demand and noticeably strong deposit growth last quarter. For the clients that retained excess savings, we noted a continued preference for return deposits in the current interest rate environment.

Matt Brad: Lower demand and notice deposits, primarily reflected the deployment of excess savings by existing clients and this included the excess deposits that supported the unexpectedly strong demand deposits demand and notice deposit growth last quarter.

Lower demand and notice deposits, primarily reflected the deployment of excess savings by existing clients and this included the excess deposits that supported the unexpectedly strong demand and demand and notice deposit growth last quarter for the <unk>.

Matt Brad: Clients that retained excess savings we noted a continued preference for term deposits in the current interest rate environment.

Clients that retained excess savings we noted a continued preference for term deposits in the current interest rate environment on.

Robin Matthew Rudd: On an annual basis, franchise deposit growth of 2% reflects a 17% increase in term deposits partially offset by a 4% decline in demand and notice deposits. Our performance compared to the same quarter last year is shown on slide 8. Comma Shareholders Net Income Increased 9% An 8% increase in revenue was partially offset by a 2% increase in adjusted and IEs, delivering 6% positive operating leverage and a 15% increase in pre-tax pre-provision income compared to the prior year.

Matt Brad: On an annual basis franchise deposit growth of 2% reflects a 17% increase in term deposits, partially offset by a 4% decline in demand and notice deposits.

On an annual basis franchise deposit growth of 2% reflects a 17% increase in term deposits, partially offset by a 4% decline in demand and notice deposits.

Matt Brad: Our performance compared to the same quarter last year as shown on slide common shareholders' net income increased 9%, 8% increase in revenue was partially offset by a 2% increase in adjusted in Ies, delivering 6% positive operating leverage and a 15% increase in pre tax pre provision income compared to the <unk>.

Our performance compared to the same quarter last year as shown on slide eight.

Common shareholders' net income increased 9%.

8% increase in revenue was partially offset by a 2% increase in adjusted in Ies, delivering 6% positive operating leverage and a 15% increase in pre tax pre provision income compared to the prior year.

Matt Brad: Prior year total.

Matt Brad: Total provision for credit losses, as a percentage of average loans increased from the unusually low level last year.

The total provision for credit losses, as a percentage of average loans increased from the unusually low levels last year.

Robin Matthew Rudd: The total provision for credit losses as a percentage of average loans increased from the unusually low levels last year; diluted EPS increased 8% and adjusted EPS increased by 7 cents from the same quarter last year. Higher net interest income increased EPS by $0.15 primarily due to a 14 basis point increase in net interest margin and one additional interest earning. Higher Non-Interest Income contributed $0.02. Higher non-interest expenses reduced DPS by $0.03, primarily due to higher expenses associated with the opening of our new Toronto Banking Centre and the phased rollout of our new commercial digital and cash management platform.

Matt Brad: Diluted EPS increased 8% and adjusted EPS increased by seven from the same quarter last year.

Diluted EPS increased 8% and adjusted EPS increased by seven from the same quarter last year.

Speaker Change: Higher net interest income increased EPS by <unk> <unk>, primarily due to a 14 basis point increase in net interest margin in one additional interest earning day.

Higher net interest income increased EPS by <unk> 15, primarily due to a 14 basis point increase in net interest margin and one additional interest earning day.

Speaker Change: I don't noninterest income contributed <unk> <unk>.

Iron noninterest income contributed <unk> <unk>.

Higher noninterest expenses reduced EPS by <unk> <unk>, primarily due to higher expenses associated with the opening of our new Toronto banking center and the phased rollout of our new commercial digital and cash management platform, a higher provision for credit losses decreased EPS by <unk> 10.

Speaker Change: Higher noninterest expenses reduced EPS by <unk> <unk>, primarily due to higher expenses associated with the opening of our new Toronto banking center and the phased rollout of our new commercial digital and cash management platform.

Robin Matthew Rudd: Higher provision for credit losses decreased DPS by $0.10. EPS benefited three cents from the impact of a lower effective tax rate due to one-time true-ups associated with filing our tax returns this quarter. As shown on slide 9, compared to the prior quarter, common shareholders net income and diluted EPS both decreased 13%. Pre-tax Pre-provision Income decreased, and Adjusted EPS decreased 12 cents from the prior quarter. Lower net interest income reduced DPS by $0.07, and non-interest income contributed $0.04.

Speaker Change: Provision for credit losses decreased EPS by <unk> <unk>.

EPS benefited <unk> <unk> from the impact of a lower effective tax rate due to onetime true ups associated with filing our tax returns this quarter.

Speaker Change: EPS benefited <unk> <unk> from the impact of a lower effective tax rate due to onetime true ups associated with filing our tax returns this quarter.

As shown on slide nine compared to the prior quarter common shareholders' net income and diluted EPS, both decreased 13% and pre tax pre provision income decreased 7%.

As shown on slide nine compared to the prior quarter common shareholders' net income and diluted EPS, both decreased 13% and pretax pre provision income decreased 7% adjusted.

Adjusted EPS decreased 12 from the prior quarter.

Adjusted EPS decreased 12 from the prior quarter lower net interest income reduced EPS by <unk> <unk>.

Speaker Change: Net interest income reduced EPS by <unk>, <unk> and noninterest income controlling <unk>.

Noninterest income contributed <unk> <unk>.

Robin Matthew Rudd: Higher non-interest expenses reduced EPS by $0.05, and this was primarily driven by the seasonal increase in our statutory employee benefits and the timing of continued investments in our strategic priorities. Higher provision for credit losses this quarter reduced EPS by four cents. As shown on slide 10, revenue is lower on a sequential basis, and interest income decreased 4% primarily due to two fewer interest earning days and a sequential decline in average interest earning. Higher non-interest income was driven by the combined impacts of higher foreign exchange income and higher wealth management.

Speaker Change: Other noninterest expenses reduced EPS by <unk> <unk> and this was primarily driven by the seasonal increase in our statutory employee benefits and the timing of continued investments in our strategic priorities.

Higher noninterest expenses reduced EPS by <unk> <unk> and this was primarily driven by the seasonal increase in our statutory employee benefits and the timing of continued investments in our strategic priorities higher.

Speaker Change: The higher provision for credit losses, this quarter reduced EPS by <unk> <unk>.

A higher provision for credit losses, this quarter reduced EPS by <unk> <unk>.

Okay.

Speaker Change: As shown on slide 10 revenue was lower on a sequential basis net interest income decreased 4%, primarily due to two fewer interest earning days and a sequential decline in average interest earning assets.

As shown on slide 10 revenue was lower on a sequential basis net interest income decreased 4%, primarily due to two fewer interest earning days and a sequential decline in average interest earning assets.

Speaker Change: Noninterest income was driven by the combined effects of higher foreign exchange income and higher wealth management fees.

Iron noninterest income was driven by the combined impacts of higher foreign exchange income and higher wealth management fees.

Robin Matthew Rudd: Our net interest margin was consistent with the prior quarter. We benefited one basis point from an increase in fixed-term asset yields, which continue to outpace the increase in deposit costs. An improved asset mix provided a four basis point benefit to net interest margin due to the expected decrease in our average liquidity from the excess position we were carrying at the previous quarter. These benefits were offset by lower loan-related fees that reduced NIM by two basis points and a three basis point impact from the unfavorable shift in our deposit mix, which also included the impact of the $250 million subordinated to venture issuance late in the first quarter.

Speaker Change: Our net interest margin was consistent with the prior quarter, we benefitted one basis point from an increase in fixed term asset yields which continue to outpace the increase in deposit costs.

Our net interest margin was consistent with prior quarter, we benefitted one basis point from an increase in fixed term asset yields which continue to outpace the increase in deposit costs.

Speaker Change: An improved asset mix provided a four basis point benefit to net interest margin due to the expected decrease in our average liquidity for the access position, we were carrying at the previous quarter.

An improved asset mix provided a four basis point benefit to net interest margin due to the expected decrease in our average liquidity from the access position, we were carrying at the previous quarter.

These benefits were offset by lower loan related fees that reduced NIM by two basis points and a three basis point impact from the unfavorable shift in our deposit mix, which also included the impact of the $250 million subordinated debenture issuance late in the first quarter issuance was done to replace the series F subordinated debenture.

Robin Matthew Rudd: That issuance was done to replace the Series F subordinated to ventures, which we'll redeem in the third quarter. In the second half of the year, we expect interest margin to expand as we benefit from stronger loan growth that will target to optimize risk adjustment. The drivers of our sequential SET1 improvement are shown on slide 11. Our CET1 ratio increased 10 basis points to 10.1% this quarter, as retained earnings growth was partially offset by an increase in risk with assets.

Speaker Change: Which will redeem in the third quarter.

These which will redeem in the third quarter.

Speaker Change: Second half of the year, we expect net interest margin to expand as we benefit from stronger loan growth that will target to optimize risk adjusted returns.

In the second half of the year, we expect net interest margin to expand as we benefit from stronger loan growth that will target to optimize risk adjusted returns.

Speaker Change: The drivers of our sequential second line improvements are shown on slide 11, our CET one ratio increased 10 basis points to 10, 1%. This quarter as retained earnings growth was partially offset by increased cigarette.

The drivers of our sequential set one improvement are shown on slide 11, our CET one ratio increased 10 basis points to 10, 1%. This quarter as retained earnings growth was partially offset by an increase in revenue.

Speaker Change: Yes.

Assets.

Robin Matthew Rudd: The board declared a common share dividend yesterday of $0.35 per share, which is up $0.01 from the dividend declared last quarter and up $0.02 from the dividend declared last quarter. Now I'll turn the call over to Carolina. We'll speak to our credit.

Speaker Change: Our board declared a common share dividend yesterday of <unk> 35 per share, which is up <unk> from the dividend declared last quarter and up 2% from the dividend declared last year now ill turn the call over to Carolina, who will speak to our credit performance.

Our board declared a common share dividend yesterday of <unk> 35 per share, which is up one from the dividend declared last quarter and up 2% from the dividend declared last year I will now turn the call over to Carolina, who will speak to our credit performance.

Carolina Parra: Thank you, Matt, and good morning, everyone. I will begin my remarks on slide 13. As we enter the quarter, we anticipate gross impaired loans to continue to increase through the year and for our PCLs to remain in our historic range on an annual basis. The total balance of gross impaired loans continues to fluctuate as the overall loan portfolio is reviewed regularly to provide early identification of possible adverse trends while we continue to drive timely resolutions of loans that have become impaired.

Carolina: Thank you, Matt and good morning, everyone I.

Thank you, Matt and good morning, everyone.

Carolina: I will begin my remarks on slide 13.

Ill begin my remarks on slide 13.

Carolina: We entered the quarter, we anticipated gross impaired loans to continue to increase through the year for our PCL to me.

We entered the quarter, we anticipated gross impaired loans to continue to increase through the year and for our PCL to remain in our historical range on an annual basis.

Carolina: Toric range on an annual basis.

Carolina: The total balance of gross impaired loans continues to fluctuate.

The total balance of crossing pay loans continues to fluctuate as the overall loan portfolio is will meet regularly to provide early identification of possible adverse trends, while we continue to drive timely resolution of loans that have become impaired.

Carolina: Our loan portfolio.

Carolina: To provide early identification of possible adverse trends, while we continue to drive timely resolution of loans that have become impaired.

Carolina: As expected the uncertain macroeconomic environment and the sustained impact of higher interest rates continues to result in elevated borrower default rates.

As expected the uncertainty.

The macroeconomic environment and the sustained impact of higher interest rates continues to result in elevated borrower default rates.

Carolina Parra: As expected, the uncertain macroeconomic environment and the sustained impact of higher interest rates continue to result in elevated borrower default rates and impaired loans in the second quarter. Total gross impaired loans increased $40 million, or 13% higher than the prior quarter, and represents 96 basis points of gross loans, 10 basis points higher sequentially. This change is primarily driven by equipment and general commercial portfolios, and it's partially offset by an 11% reduction in impaired loans in commercial real estate.

In the second quarter.

And loans in the second quarter.

Carolina: Total gross impaired loans increased $40 million or 13% higher than the prior quarter and represents 96 basis points of gross loans 10 basis points higher sequentially.

Total gross impaired loans increased $40 million or <unk>, 13% higher than the prior quarter and represented 96 basis points of gross loans 10 basis points higher sequentially.

Carolina: This is primarily a triple.

This change is primarily driven by equipment and general commercial portfolios.

Carolina: General commercial portfolios.

Speaker Change: Partially offset by an 11% reduction panels and commercial real estate.

Partially offset by a 11% reduction in wood panels and commercial real estate.

Speaker Change: While we expect that Thomson card loans will continue to increase through the backend of our current fiscal year, our strong credit risk management framework continues to be effective in minimizing realized losses on the resolution of impaired loans.

While we expect that processing plant loans will continue to increase through the backend of our current fiscal year, our strong credit risk management framework continues to be effective in minimizing realized losses on the resolution of impaired loans.

Carolina Parra: While we expect that gross impaired loans will continue to increase to the back end of our current fiscal year, our strong credit risk management framework continues to be effective in minimizing realized losses on the resolution of impaired loans. This is demonstrated by our historic low write-offs as a percentage of low total loans, including through past periods of economic volatility. We also continue to have minimum exposure to unsecured personal lending and no exposure to personal assets.

Speaker Change: Is that months traded by our historic write offs as a percentage of total loans, including the past periods of economic volatility.

As demonstrated by our historic small write offs as a percentage of total loans.

Turning to the past periods of economic volatility.

We also continued to have minimal exposure to unsecured personal lending no exposure to personal lines.

Speaker Change: Also continued to have minimal exposure to unsecured personal lending no exposure to <unk>.

Speaker Change: Our provisioning for both impaired and performing.

Carolina Parra: Our provisioning for both impaired and performing loans continues to reflect well-established underwriting standards to secure a nation of our lending portfolio with conservative loan-to-values and proactive loan management, which are hallmarks of our historic success. As shown on slide 14, the Performing Lower Now Allowance increased 2% sequentially, primarily reflecting a marginal deterioration in our macroeconomic forecast and a larger load balance. The two basis points earned on the loan allowance were two basis points higher than last quarter and last year.

Our provisioning for both impaired and performing loans continues to reflect and well established underwriting standards to say coordination of our lending portfolio with conservative loan to values and our proactive management, which are hallmarks of any historic success.

Speaker Change: Thanks to reflect and well established underwriting standards.

Coordination of our lending portfolio. This conservative loan to values, our proactive management, which are hallmarks of our historic success.

Speaker Change: As shown on slide 14, the performing loan allowance increased 2% sequentially.

Primarily reflecting a marginal deterioration in our macroeconomic forecast.

Reflecting a marginal deterioration in macroeconomic forecast and the larger load balance the two.

On a larger loan balance to.

Speaker Change: Basis points, thus far with loan allowance was two basis points higher than last quarter last year.

Two basis point performing loan allowance was two basis points higher than that.

Last quarter last year.

Speaker Change: Provision for credit losses on impaired loans increased to 21 million compared to 17 last quarter.

Provision for credit losses on impaired loans decreased to $21 million compared to 17 million last quarter and 10 million last year.

Speaker Change: January last year.

Speaker Change: Current quarter impaired loan provision for credit losses represented 24 basis points.

The current quarter impaired loan provision for credit losses represented 24 basis points.

Carolina Parra: Provision for credit losses on impairments increased to $21 million compared to $17 million last quarter and $10 million last year. The current quarter in parallel provision for credit losses represents 24 basis points. I will now turn the call back to Chris Fowler for his closing remarks and opening remarks. Thank you, Carolina.

Speaker Change: I will now turn back the call to questions.

I will now turn back the call to Craig followed for some closing remarks and outlook.

Speaker Change: His closing remarks.

Speaker Change: Thank you Carolina, turning to slide 15.

Thank you Carolina.

Christopher H. Fowler: Carolina. Bring me to slide 15. As I noted in my opening remarks, we see a compelling opportunity to increase our market share and accelerate our loan growth as the economy strengthens. We'll leverage our balance sheet strength and reorganize operations to ensure we're well positioned to capitalize on this opportunity. Our loan growth has been slower to materialize this year than we originally anticipated and has dampened our full-year revenue expectations. Accordingly, we have reduced our outlook for annual adjusted earnings per common share to be in the range of $3.50 to $3.60 but continue to expect to deliver positive operating leverage on a four-year basis.

Turning to slide 15.

Speaker Change: As I noted in my opening remarks, we see a compelling opportunity to increase our market share and accelerate our loan growth as the economy strengthens.

I noted in my opening remarks, we see a compelling opportunity to increase our market share and accelerate our loan growth as the economy strengthens.

Speaker Change: We'll leverage our balance sheet strength and reorganize operations to ensure we are well positioned to capitalize on this opportunity.

Leverage our balance sheet strength and reorganize operations to ensure we are well positioned to capitalize on this opportunity.

Loan growth has been slower to materialize this year than we originally anticipated.

Our loan growth has been slower to materialize this year than we originally anticipated and its dampened our full year revenue expectations. Accordingly, we have reduced our outlook for annual adjusted earnings per common share to be in the range of $3 50 to $3 60.

Speaker Change: Our full year revenue expectations. Accordingly, we have reduced our outlook for annual adjusted earnings per common share to be in the range of $3 50 to $3 60.

Speaker Change: <unk> expect to deliver positive operating leverage on a full year basis.

Continue to expect to deliver positive operating leverage on a full year basis.

Christopher H. Fowler: We have a history of taking market share leading out of disrupted economic times, and our team will execute our winning playbook to drive more growth across our Canadian. With that, Jenny, let's open the lines for Q&A.

Speaker Change: We have a history of taking market share, leading disrupted economic times and our team execute on winning playbook to drive more growth across our Canadian footprint.

We have a history of taking market share leading out of disrupted economic times and our team will execute our winning playbook to drive more growth across our Canadian footprint.

Speaker Change: With that Jenny, let's open the lines for Q&A.

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

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on the Touchstone column, you will hear three telecom technology jewelry cleft questions will be taken in the order received did you wish to cancel.

Jenny: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on the touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. If you wish to cancel your request, please press the star followed by 2. If you are using a speakerphone, please lift your handset before passing any. Once again, that is star one, should you wish to ask a question. Your first question is from Gabriel Dechaine from National Bank. Please ask your question.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on the Touchtone phone you will hear three telecom technology jewelry cleft west.

Questions will be taken in the order received did you wish to cancel your request. Please press the star followed lineup.

Speaker Change: Your request please press the star followed might've Jill.

If you are using a speaker phone please lift the handset before passing any case once again that is star one should you wish to ask a question.

Speaker Change: We are using a speaker Cowen please lift the handset before pressing Eddie.

Speaker Change: Once again that is star one should you wish to ask a question.

Speaker Change: Your first question is from Gabriel to Shane from National Bank. Please ask your question.

Your first question is from Gabriel <unk> from National Bank. Please ask your question.

Gabriel Dechaine: Hi there, good morning. First on credit, the big pickup in equipment finance impairment, is that the trucking sector or something else?

Speaker Change: Hi, there good morning.

Hi, there good morning.

Speaker Change: First on credit.

First on credit.

Speaker Change: The big pickup in the equipment finance impairment is that.

The big pickup in the equipment finance impairment is that.

Gabriel: The trucking sector or something.

The trucking sector.

Sure.

Speaker Change: No.

Yes.

Unknown Executive: Good morning, Gabe. Yes, it is in the tracking section that the transportation sector is where we're seeing a larger increase in impairments in that portfolio.

Speaker Change: Good morning, Gabe, yes. It is.

Good morning, Gabe, Yes. It is in track infection that transportation sectors, where were seeing the larger increasing working in parallel to that.

Speaker Change: Track infection.

Speaker Change: Our expectation sectors, where were seeing the larger increasing.

Speaker Change: That's our portfolio.

Portfolio.

Unknown Executive: And is that a specific account such that you're comfortable at the end of it in that particular category and you're provisioned for it sufficiently so it's not, it is more of like a blip type thing we're seeing?

Speaker Change: And then is that a.

And then is that.

Speaker Change: Specific account such that you're comfortable with.

A specific account such that you're comfortable with the you know the.

Speaker Change: That's the end of it in a particular category and your provision for it sufficiently so there's more of a like a blip.

End of it in a particular category and your provision for it sufficiently so it was more of like a blip.

Speaker Change: The thing we're seeing.

The thing we're seeing.

Unknown Executive: No, so our equipment financing has lower ticket items. It's not just one account, actually.

Speaker Change: No so our equipment financing.

No sorry equipment financing.

Speaker Change: Lower ticket items, its not one account actually.

Lower ticket items its not a one.

One account actually.

Speaker Change: Various.

Across our various.

Speaker Change: <unk> Street, we're seeing that trend.

There is forcing the industry what are you seeing that trend starting to improve.

Speaker Change: Adding to improve.

Speaker Change: We're all.

Overall.

Speaker Change: Transportation is one of the industry's most.

Transportation is one of the industries that gets costly protect when there's any deterioration in the macroeconomic environment any distress.

Speaker Change: Perfect.

Any deterioration in the macroeconomic environment any distress are the first ones to pls.

<unk> wants to feel it.

Speaker Change: Based on this and as we've seen the same.

And we've done this in the past we've seen the same kind of trend in the cycle.

Speaker Change: Kind of trying to recycle.

Speaker Change: There are also some of the ones that.

There are also some of the ones that.

Okay.

Speaker Change: Faster as well as things start to recover so.

Faster as well as things start to recover so.

Speaker Change: We're seeing a little bit of improvement in delinquencies.

Speaker Change: We are seeing a little bit of improvement in delinquencies.

Speaker Change: In the most recent.

And then in the most recent.

Speaker Change: The weeks and months.

The weeks and months.

Unknown Executive: It's across various borrowers in the industry. We're seeing that trend starting to improve. I think overall, transportation is one of the industries that gets hit hardest. But it is part of the whole industry that is being impacted by the distress.

Speaker Change: But it.

But it is part of that the whole industry that it's impacted by the distress.

It is part of the whole industry is impacted by the distress.

Unknown Executive: Got it. And do you think that category, or others, that, as you said, you expect impairments to continue rising to the end of the year? Is that a similar driver or something else?

Got it and do you think is that the category or the others, but.

And do you think is that the category or the others that.

Speaker Change: Because you said you expect impairments to continue rising to the end of the year.

Because you said you expect impairments to continue rising because the end of the year.

Speaker Change: Similar driver or something else.

A similar driver or something else.

Unknown Executive: That's what we're seeing as well through the second half of the year, to see some impairments increase. As you know, we see the borrowers go through the cycles.

Speaker Change: That's why we're seeing as well through the second half of the Yadkin just see some.

That's why we're seeing as well through the second half update yet to see some.

Speaker Change: Impairments increases that we have.

Impairments increases that we've seen the borrowings for the.

Speaker Change: The borrowings through.

Speaker Change: Through the cycles.

<unk>.

Gabriel Dechaine: Okay, got it. Then on the top line loan growth type of stuff, I heard the explanation for the NIM trajectory this quarter, and that included some reduction in your liquidity levels. Is that, are you at a point now where, let's say loan growth suddenly comes back, that would be great to see? Would you need to raise liquidity quite, you know, fast? Or do you have sufficient to accommodate the loan growth? Because I'm just going back to Q1, where you raised liquidity levels in anticipation of loan growth that hasn't materialized. So I'm just wondering, you know, how much of that excess liquidity you've kind of reduced, and how much capacity that leaves you at this point.

Speaker Change: Okay got it and then on the.

Okay got it and then on the the top line loan growth type of stuff I heard the explanation for the NIM trajectory this quarter.

Speaker Change: Top line loan growth type of stuff.

Speaker Change: I heard the explanation for the NIM trajectory this quarter.

Speaker Change: Alluded some reduction to your liquidity levels.

That included some reduction of your liquidity levels.

Speaker Change: Yes.

Uh huh.

Speaker Change: Is that are you at a point now, let's say loan growth suddenly comes back that'd be great.

Is that are you at a point now, let's say loan growth suddenly comes back that'd be great coffee.

Speaker Change: Would you need to raise liquidity quite.

Would you need to raise liquidity quite fast.

Speaker Change: You go fast or do you have sufficient to accommodate the loan growth because I'm just going back to Q1, where you raised liquidity levels in anticipation of loan growth it hasnt materialized.

Fast or do you have sufficient to accommodate the loan growth because I'm just going back to Q1, where you raised liquidity levels in anticipation of loan growth it hasnt materialized.

Speaker Change: So I'm just wondering how much of that excess liquidity you've kind of.

So I'm just wondering how much of that excess liquidity you've kind of.

Speaker Change: We reduced and then how.

Reduced.

Speaker Change: How much capacity.

How much capacity.

Speaker Change: That leaves you at this point.

That leaves you at this point.

Speaker Change: Yes.

Unknown Executive: Yeah, Gabriel, we want to be well matched in terms of carrying liquidity. Not quite in real time; we need to build it a little bit in advance.

Yes Gabriel.

Speaker Change: We want as well.

We wanted to well.

Speaker Change: Well matched in terms of carrying liquidity.

Well matched in terms of carrying liquidity.

Speaker Change: Not quite in real time, we need to build it a little bit in advance, but we're certainly not trying to build it and hold it for an entire quarter in advance that would not be.

Not quite in real time, we need to build it a little bit in advance, but we're certainly not trying to build it and hold it for an entire quarter in advance that that would not be.

Unknown Executive: But we're certainly not trying to build it and hold it for an entire quarter in advance. That would not be conducive to optimizing profitability. If we go back to last quarter, though, I just want to circle back.

Speaker Change: Conducive to optimizing profitability.

Conducive to optimizing profitability.

Speaker Change: If we go back to last quarter, though I just want to circle back.

If we go back to last quarter, though I just want to circle back.

Unknown Executive: The excess liquidity we had was related to stronger-than-expected branch-raised deposit growth, particularly in notice and demand, so we got more deposits than we were expecting. We expected a relatively slow loan growth quarter so that deposit growth was more of the driver. Our preference going into this quarter would have been to take that liquidity and shift it from securities into incremental loans. That would have been the most accretive to profitability and net interest margin expansion.

Speaker Change: The excess liquidity we had.

The excess liquidity we had.

Speaker Change: It was related to stronger than expected branch raised deposit growth, particularly in notice in demand. So we got more deposits than we were expecting.

It was related to stronger than expected branch raised deposit growth, particularly in notice in demand. So we got more deposits than we were expecting.

Speaker Change: We expected a relatively slow loan growth quarter, so that that deposit growth was more of the driver.

We expected a relatively slow loan growth quarter. So got the deposit growth was more of the driver.

Speaker Change: Our preference going into this quarter would have been to take that liquidity and shifted from securities into incremental loans that would have been the most accretive to profitability and net interest margin expansion.

Our preference going into this quarter would have been to take that liquidity and shifted from securities into incremental loans that would have been the most accretive to profitability and net interest margin expansion.

Speaker Change: Loan growth was lower than what we expected this quarter, so rather than continue to hold this liquidity, which is damaging to the profitability of NIM.

Unknown Executive: The loan growth was lower than what we expected this quarter, so rather than continue to hold this liquidity, which is damaging to profitability and NIM, we managed our deposit balances down. That was a combination of broker deposits, just letting that book run down a bit without being as aggressive on replacement. There were pockets within our branch-raised channels that we simply chose not to be aggressive in this quarter because we weren't seeing the loan growth.

Loan growth was lower than what we expected this quarter, so rather than continue to hold this liquidity, which is damaging to the profitability of NIM.

Speaker Change: We managed our deposit balances down.

We managed our deposit balances down.

Speaker Change: That was a combination of broker deposits, just letting that book run down a bit without being as aggressive on replacement and then there are pockets within our branch raised channels that we just simply chose not to be aggressive this quarter, because we werent seeing the loan growth.

That was a combination of broker deposits, just letting that book run down a bit without being as aggressive on replacement and then there are pockets within our branch raised channels that we just simply chose not to be aggressive this quarter, because we werent seeing the loan growth.

Unknown Executive: In terms of where we're positioned exiting the quarter, the amount of liquidity we have this quarter, it's right-sized for the amount of loan growth we see in front of us in the near term. And then, of course, through the quarter, we'll raise funding commensurate with the loan growth we're actually seeing. But it's a case where we're not coming into this quarter skinny; we're prudently provided for from a liquidity perspective, and we'll just manage through the quarter.

Speaker Change: In terms of where we're positioned exiting the quarter the amount of liquidity. We have this quarter is right sized for the amount of loan growth, we see in front of us in the near term and then of course during the quarter, we will raise funding commensurate with the loan growth, we're actually seeing that.

In terms of where we're positioned exiting the quarter the amount of liquidity. We have this quarter is right sized for the amount of loan growth, we see in front of us in the near term and then of course through the quarter, we'll raise funding commensurate with the loan growth, we're actually seeing that.

Speaker Change: It's a case, where we're not coming into this quarter skinny were pretty good.

It's a case, where we're not coming into this quarter skinny or prudently.

Provided from a liquidity perspective, and we'll just manage through the quarter.

From a liquidity perspective, and we'll just manage through the quarter.

Gabriel Dechaine: Okay, great. And then I guess the last one.

Speaker Change: Okay, Great and then I guess the last one.

Okay, Great and then I guess the last one.

Gabriel Dechaine: You mentioned loan growth not materializing as quickly or as strongly as you anticipated at the start of the year. I think we can all appreciate why high rates are there, economic uncertainty. My question is, if next week the Bank of Canada cuts, we think about it from a credit standpoint, but from a stimulus standpoint, what kind of lag effect would there be? Would it be an immediate bump to your loan growth demand, or do you have borrowers that are just kind of waiting for that to happen, and then they'll start tapping credit lines or whatever? I'm just trying to get a sense for how sensitive loan growth is to rate cuts specifically, so I kind of manage my expectations here.

Speaker Change: You mentioned loan growth not materializing as quickly as.

You mentioned loan growth not materializing as quickly as her as strongly as you anticipate a third of the year I think we all can appreciate why high rates of economic uncertainty.

Speaker Change: As strongly as you anticipate have started the year I think we all can appreciate why high rates of economic uncertainty.

Speaker Change: My question is.

My question is if the next week the bank of Canada the cuts.

Speaker Change: Next week, the bank of Canada cuts.

Speaker Change: We think about it from a credit standpoint, but from a stimulus standpoint, what kind of lag effect is would there be would it be an immediate bump.

Speaker Change: We think about it from a credit standpoint, but from a stimulus standpoint, what kind of lag effect is would there be would it be an immediate bump to your loan growth demand are the borrowers that are just kind of waiting for that to happen and then they'll start tapping credit lines or whatever I'm, just trying to get a sense for how sensitive the loan growth is too.

Speaker Change: Bump to your loan growth demand are the borrowers that are just kind of waiting for that to happen and then they'll start tapping credit lines or whatever I'm, just trying to get a sense for how sensitive the loan growth has two rate cuts.

Two rate cuts.

Speaker Change: Specifically.

Specifically Ah so you kind of manage my own my expectations here.

So you kind of manage my my expectations here.

Speaker Change: Yes, I think theres always a bit of a lag either way up or down I think as we think about our clients. They have been very prudent over the last couple of years with rising rates and have really looked at what theyre doing in terms of deploying their own equity in terms of Capex spent capital expenditures, but I mean, clearly an environment, where you have to start of declining rates.

Unknown Executive: I think there's always a bit of a lag either way, up or down. I think, you know, as we think about our clients, they have been very prudent over the last couple of years with rising rates. And I've really looked at what they're doing in terms of deploying their own equity in terms of capital expenditures. But I mean, clearly, an environment where you had a start of declining rates would be positive. And we would see that across our portfolio. So we do see that as a positive opportunity for us as we look to the, well, to, you know, to whatever starts to hopefully occur next week.

I think theres always a bit of a lag either way up or down I think as we think about our clients. They have been very prudent over the last couple of years with rising rates and have really looked at what they're doing in terms of deploying their own equity in terms of Capex spent capital expenditures, but I mean, clearly an environment, where you have to start of declining rates.

Speaker Change: Be positive and we would see that across our loan portfolio. So we do see that as a positive opportunity for us as we look to the.

Would be positive and we would see that across our loan portfolio. So we do see that as a positive opportunity for us as we look to the.

Speaker Change: Well.

Well two.

Speaker Change: To whatever starts to hopefully occur next week.

To whatever starts to hopefully occur next week.

Gabriel Dechaine: Unknown Speaker 25 basis point rate cut: enough to move the needle or not?

That is like a 25 basis point.

Speaker Change: Like 25 basis point rate.

Speaker Change: The rate cut enough to move the needle or or or.

The rate cut enough to move the needle or what.

Speaker Change: Worldwide.

Frank: I think it affects the perception of the future and that the reception is typically positive Frank when you start to see in the environment that that becomes more conducive and you see things like the housing market you see things like real estate project lending.

Unknown Executive: I think it affects the kind of perception of the future. And that perception is typically positive, right? When you start to see an environment that is then more conducive, and you see things like the housing market, you see things like real estate project lending, you know, you have different ways that you look for renewals, as long as they come up in terms of what that means for debt serviceability. So I think it's just a very positive impact on the economy. Okay, have a good weekend.

I think it affects the perception of the future and that the reception is typically positive Frank when do you start to see an environment that then becomes more conducive and you see things like the housing market you see things like real estate project lending you have different ways that you look for renewals of loans as they come up.

Frank: Different ways that your luxury for renewals of loans as they come up in terms of what that means for debt serviceability. So I think it's just a very positive.

So what that means for debt serviceability. So I think it's just a very positive.

Frank: Impact on the economy.

Impact on the economy.

Frank: Okay.

Okay.

Speaker Change: Good weekend.

Good weekend.

Ken: Thanks, Ken.

Thanks, Ken.

Yes.

Ken: Okay.

Speaker Change: Thank you.

Thank you.

Speaker Change: Your next question is from Doug Young from <unk> capital markets. Please ask your question.

Your next question is from Doug Young from <unk> capital markets. Please ask your question.

Speaker Change: Yeah.

Yeah.

Doug Young: Hi, Good morning, maybe starting like Big picture looking at your guidance cash EPS $3 50 to $3 <unk> in.

Unknown Attendee: Hi, good morning. Maybe starting with the big picture looking at your guidance, you know, cash EPS of 350 to 360 and in fiscal 24. If my math serves me correctly, you know, it implies an average of 89 cents. Orders, and I'm just trying to get a sense of what gives you the confidence of getting there from 81 cents. And maybe you can talk a bit about the moving pieces that kind of take you sequentially up to that level. And then, you know, can you talk about, I'm sure you've thought through this too, what are the risks that, you know?

Hi, Good morning, maybe starting like Big picture looking at your guidance cash EPS of $3 50 to $3 60 in in fiscal 'twenty four.

Speaker Change: In fiscal 'twenty four.

Speaker Change: There's me correct.

My Math says me correct. It implies an average of 80 993 in each of the next few quarters.

Speaker Change: Lies in average at 80 993.

Speaker Change: The next few quarters.

Speaker Change: Just trying to get a sense what gives you the confidence of getting there from 81, and maybe you can talk a bit about the moving pieces that kind of takes you sequentially up to that level and then can you talk about I'm sure you've thought through this to you is what what what are the risks that.

Just trying to get a sense what gives you the confidence of getting there from 81, and maybe you can talk a bit about the moving pieces that kind of take you sequentially up to that level and then can you talk about I'm sure you've thought through this too is what what what are the risks that.

They put against you and not let you get to that level.

Speaker Change: They put against you and not let you get to that level.

Speaker Change: Yes, so far just going.

Unknown Executive: [inaudible] Yeah, so for just going from Q2 to Q3, we get the benefit of more interest earning days in the third quarter. We were, and we're coming off a quarter in the second, where our average loans actually took down a bit from the first quarter. So we'd expect our average loans to increase in the third quarter. So the combination of the expanding loans, the more interest earning days, and the loan growth that we're expecting to put up, and this is why, you know, part of the reason why we're signaling a bit of an uptick from where we are.

Yeah, so for just going from.

Speaker Change: From Q2 to Q3, we got the benefit of more interest earning days in the third quarter.

From Q2 to Q3, we get the benefit of more interest earning days in the third quarter.

Speaker Change: Good.

<unk>.

Speaker Change: And we're coming off a quarter in the second where our average loans, they actually ticked down a bit from the first quarter.

We were and we're coming off a quarter in the second where our average loans, they actually ticked down a bit from the first quarter.

Speaker Change: We expect our average loans to increase in third quarter. So the combination of.

So we would expect our average loans to increase in third quarter. So the combination of.

Speaker Change: The expanding loans, the more interest, earning days and the loan growth that we're expecting to put up and this is why in part of the reason why we're signaling a bit of an uptick from where we're at.

The expanding loans, the more interest, earning days and the loan growth that we're expecting to put up and this is why in part of the reason why we are signaling a bit of an uptick from where we're at.

Speaker Change: We're looking at spreads in the market and in all portfolios, except for commercial mortgages, which still look a little tight everything else is looking pretty good and supportive to NIM. If we grow like we're targeting to grow over the next quarter. We also think that fuels net interest margin expansion. So.

Unknown Executive: We're looking at spreads in the market. And in all portfolios, except for commercial mortgages, which still look a little tight, everything else is looking pretty good and supportive to NIM if we grow like we're targeting to grow over the next quarter. We also think that fuels net interest margin expansion.

We're looking at spreads in the market and in all portfolios, except for commercial mortgages, which still look a little tight everything else is looking pretty good and supportive to NIM. If we grow like we are targeting to grow over the next quarter. We also think that fuels, our net interest margin expansion.

Unknown Executive: So from a revenue perspective, you know, we're looking positive from second quarter to third quarter, obviously, and those are the drivers. I would expect to see an uptick in expenses dampening some of that revenue benefit, like we're still going to be positive on pre-tax, pre-provision income. But I don't think we'll be in the teens growth that we've been putting up the last couple of quarters.

Speaker Change: So from a revenue perspective.

So from a revenue perspective.

Speaker Change: We're looking looking positive from second quarter to third quarter, obviously and those are the drivers.

We're looking looking positive from second quarter to third quarter, obviously and those are the drivers.

Speaker Change: I would expect to see an uptick in expenses GAAP earnings some of that revenue benefit like we're still going to be positive on pre tax pre provision income.

I would expect to see an uptick in expenses dampening some of that revenue benefit like we're still going to be positive on pre tax pre provision income.

Speaker Change: Don't think we'll be in the teens growth that we've been putting up the last couple of quarters, I think thats unsustainable through the back of the year, but still positive growth.

Think we will be in the teens growth that we've been putting up the last couple of quarters I think thats unsustainable through the back of the year, but still positive growth just more and more modest growth in pre tax pre provision income.

Unknown Executive: I think that's unsustainable through the back of the year, but still positive growth, just more and more modest growth of pre-tax, pre-provision income. And then on top of that, I mean, it's been the same story for the first couple of quarters, but we're laughing against a third quarter last year where our provision for credit losses was below the low end of our historical range. So that will put a bit of pressure on earnings if we get into the high end of our range, which is what we're expecting through next quarter. So those are the puts and takes for the third quarter.

Speaker Change: More and more modest growth of pretax pre provision income.

Speaker Change: And then offsetting that I mean, it's been the same story for the first couple of quarters, but we're lapping against at third quarter last year were.

And then offsetting that I mean, it's it's been the same story for the first couple of quarters, but we're lapping against at third quarter last year, where.

Speaker Change: Our provision for credit losses was below the low end of our historical range. So.

Our provision for credit losses was below the low end of our historical range. So.

Speaker Change: That will put a bit of pressure on earnings if we get into the high end of our range, which is what we're expecting through next quarter. So I mean, those are the puts and takes in third quarter the ramp into fourth quarter is actually pretty similar.

That will put a bit of pressure on earnings if we get into the the high end of our range, which is what we're expecting through next quarter. So and those are the puts and takes in third quarter the ramp into fourth quarter is actually pretty similar.

Unknown Executive: The ramp into the fourth quarter is actually pretty similar, strong loan growth, continued margin expansion, but again, that tough comp on credit where I think in the fourth quarter, you'll probably have a spreadsheet in front of you that tells you the exact number, but we would have been 10 or 11 basis points of PCM in the fourth quarter last year. So that's a bit of a tough comp from an earnings perspective. But we'll be able to offset a lot of that grind.

Speaker Change: Strong loan growth continued margin expansion.

Strong loan growth continued margin expansion.

But again that tough comp on credit, where I think in fourth quarter.

But again not that tough comp on credit, where I think in fourth quarter.

Speaker Change: Youll probably on the spreadsheet in front of you that tells you the exact number but we would have been 10 or 11 basis points of peace.

Youll probably on the spreadsheet in front of you that tells you the exact number but we would have been 10 or 11 basis points of piece of it.

Speaker Change: Fourth quarter last year, so that's a bit of a tough comp from an earnings perspective.

Fourth quarter last year, so that's a bit of a tough comp from an earnings perspective.

Speaker Change: But we will be able to to offset a lot of that grind with I think fourth quarter will have fairly robust and strong pre tax pre provision income growth. So that's the setup.

But we won't be able to to offset a lot of that grind with I think fourth quarter will have a fairly robust and strong pretax pre provision income growth. So that's the setup is really to exit the year on building momentum and set us up really well going into next fiscal.

Unknown Executive: I think the fourth quarter will have fairly robust and strong pre-tax, pre-provision income growth. So that's the setup, and it's really to exit the year on building momentum and set us up really well going into next fiscal. And then maybe I can just kind of dig into a few items here, like net.

Really to exit the year on building momentum and set us up really well going into next fiscal.

Speaker Change: And then maybe if I can just kind of dig into a few items here like net.

And then maybe if I can just kind of dig into a few items here like net.

Unknown Attendee: You know, if I look at slide 10, the asset versus liability repricing by one basis point, if I think of last quarter, it was seven. And so you're seeing the acceleration that surprised me. So, maybe I'm missing something.

Speaker Change: If I look at slide 10, the asset versus liability repricing, one basis point I think of last quarter. It was seven and so you're seeing the acceleration that it surprised me. So maybe I'm missing something can you talk is that is this is this the acceleration going to continue.

If I look at slide 10, the asset versus liability repricing, one basis point I think of last quarter. It was seven and so you've seen the acceleration that it surprised me so but maybe I'm missing something can you talk to like is that is this is this the acceleration going to continue or is there something abnormal.

Unknown Executive: Can you talk like that? Is this the acceleration going to continue? Or is there something abnormal around the asset versus liability repricing this quarter? Is this just the transcripts provided by Transcription Outsourcing, LLC. [inaudible] Yeah, I too, would have expected more, more expansion of our asset yields relative to deposit costs this quarter when we were talking. You know, a quarter ago, I would have seen a larger number than that. And there are really two reasons.

Speaker Change: Or is there something abnormal around the asset versus liability repricing. This quarter is this just the.

All around the asset versus liability repricing. This quarter is just the <unk>.

Speaker Change: <unk> cost kind of trends that youre seeing and are you doing anything different in your approach.

<unk> costs kind of trends that youre seeing and are you doing anything different in your approach.

Speaker Change: Around loan origination that would impact your nims differently.

Around loan origination that would impact your nims differently.

Speaker Change: Versus the past.

Versus the past.

Speaker Change: Yes.

Yeah.

Speaker Change: You guys would've expected more more expansion of our asset yields relative to deposit costs. This quarter. When we were talking a quarter ago I would have seen a lot.

You guys would've expected more more expansion of our asset yields relative to deposit costs. This quarter. When we were talking a quarter ago I would've seen a larger number than that and really two reasons.

Unknown Executive: One, stronger loan growth at the sort of spreads we had seen even through the quarter would have expanded asset yields even further. So it's just a case of seeing good spreads in the market, but just not originating enough of those assets. Transcription by Trans-Expert at Fiverr.com Okay, and then so that it doesn't seem like this quarter's one basis point is really what you're expecting.

Speaker Change: <unk> not really than that and really two reasons.

Speaker Change: One stronger loan growth at the sort of spreads we are seeing even through the quarter would have expanded asset yields even further so it's just a case of seeing good spreads in the market, but just not originating enough of those assets.

One stronger loan growth at the sort of spreads we are seeing even through the quarter would have expanded asset yields even further so it's just a case of seeing good spreads in the market, but just not originating enough of those assets.

Speaker Change: Compared to what we would have otherwise planned for the other piece of it is you are correct. It was a bit of an uptick in deposit costs. I mean, we went out there getting aggressive because we just simply werent seeing the growth on the loans.

Compared to what we would have otherwise planned for the other piece of it is you are correct like it was a bit of an uptick in deposit cost I mean, we went out there getting aggressive because we just simply werent seeing the growth on the loans, but even in the deposits. We were training into the book you would have seen through the quarter.

Speaker Change: Even in the deposits we were trading into the book you would have seen through the quarter.

Speaker Change: Bond yields overall market interest rates had kicked off actually considerably quarter over quarter. It would've been in the magnitude depending on where you were in the curve one to two years 30 to 40 basis points.

Bond yields overall market interest rates had kicked off actually considerably quarter over quarter. It would've been in the magnitude depending on where you were in the curve one to two years 30 to 40 basis points.

Speaker Change: I wouldn't have expected that when we were talking a quarter ago that this interest rate environment continues to surprise and we continue to pivot to react to it.

I wouldn't have expected that when we were talking a quarter ago that this interest rate environment continues to surprise and we continue to pivot to react to it.

Speaker Change: So those are the two big drivers.

So those are the two big drivers.

Speaker Change: I wouldn't have expected more.

I wouldn't have expected more.

Speaker Change: But for me and when I was talking about net interest margin last quarter I'd reiterate the same theme this quarter. The expansion of NIM will be led by the acceleration of loan growth.

But for me and when I was talking about net interest margin last quarter and reiterate the same theme. This quarter. The expansion of NIM will be led by the acceleration of loan growth.

Because we really like the spreads we're seeing in the market right now and expect those to hold.

Speaker Change: Okay, and then so that so it doesn't seem like this quarter of one basis points is really what youre expecting can you talk a bit about what youre seeing so far this quarter and I know, we're only part way yen, but.

Okay, and then so that so it doesn't seem like this quarter of one basis points is really what youre expecting can you talk a bit about what youre seeing so far this quarter and I know, we're only part way in but.

Unknown Executive: Can you talk a bit about what you're seeing so far this quarter? And I know we're only part way in, but I know you've got good visibility I think on that part of the NIM, structure is like, what are you seeing so far? Yeah, our spreads are performing, as we would have expected in terms of what the markets have available on new lending opportunities. So that continues to be very constructive.

I know you've got good visibility I think on that part of the NIM structures like what are you seeing so far.

Speaker Change: Yes.

Yep.

Speaker Change: Spreads are performing as we would have expected in terms of what the markets has available on new lending opportunities. So.

Spreads are performing as we would have expected in terms of what the markets are has available on new lending opportunities. So.

Speaker Change: That continues to be very constructive.

That bank continues to be very constructive.

Unknown Executive: And so again, the loan growth expectations for the quarter at those spreads, I would expect a bigger number in terms of the differential between asset yield and deposit cost for next quarter, and that would be embedded in our outlook.

Speaker Change: And so again the loan growth expectations for the quarter at those spreads.

And so again the loan growth expectations for the quarter at those spreads.

Speaker Change: I would expect a bigger number in terms of the differential between asset yields and deposit costs.

I would expect a bigger number in terms of the differential between asset yields and deposit cost for next quarter.

Speaker Change: Next quarter.

Speaker Change: That would be embedded in our outlook.

That would be embedded in our outlook.

Speaker Change: Okay, and then lastly, you talked about negative operating leverage in the third quarter is this just turning on the new cash management project the expenses starting to flow through.

Unknown Attendee: And then lastly, you talked about negative operating leverage in the third quarter. Is this just the new cash management project, the expenses starting to float through? What's driving that?

Okay, and then lastly, you talked about negative operating leverage in the third quarter is this just turning on a new cash management project the expenses starting to flow through.

Unknown Executive: And you know, there is a risk that we may not be able to achieve positive operating levels in fiscal 24. So for us, we are continuing to target positive operating leverage. I just want to make that explicitly clear that we're not reentering some sort of investment mode where we're willing to live with negative operating leverage on a sustained basis. We're willing to tolerate it into the third quarter, but we'd be looking to work it back into neutral to moderately positive in the fourth quarter to exit the year. The reason why we'll tolerate it for the third quarter is, you're right, there are a couple of things.

Speaker Change: What's driving that and is there a risk that.

What's driving that and is there a risk that.

Speaker Change: You may not be able to achieve positive operating leverage in fiscal 'twenty four.

You may not be able to achieve positive operating leverage in fiscal 'twenty four.

Speaker Change: So for US we are continuing to structurally to target positive operating leverage I just want to make that explicitly clear that we're not reentering some sort of an investment mode, where we're willing to live with negative operating leverage on a sustained basis, we're willing to tolerate it ended the third quarter, but.

So for US we are continuing to structurally to target positive operating leverage I just want to make that explicitly clear that we're not reentering some sort of an investment mode, where we're willing to live with negative operating leverage on a sustained basis, we're willing to tolerate it ended the third quarter, but.

Speaker Change: We'd be looking to to work it back in Q2 to neutral to moderately positive in the fourth quarter and exited the year.

We'd be looking to to work it back in Q2 to neutral to moderately positive in the fourth quarter to exit the year.

Speaker Change: The reason why we will tolerate it for the third quarter is youre right Theres.

The reason why we will tolerate it for the third quarter is youre right Theres a couple of things one of them is the cash management platform and rolling that out.

Speaker Change: A couple of things one of them is the cash management platform and rolling that out.

Unknown Executive: One of them is the cash management platform and rolling that out. There are costs associated with that. There are headcount investments associated with getting ready and geared up to really start rolling that out. The other piece is that we have a branch in Kitchener that just opened its doors. We'll do a formal grant opening on it in the fall, but that is up and running as of basically today.

Speaker Change: There is cost associated with that there are head count investments associated with getting ready and geared up to really start rolling that out the.

There is cost associated with that there are head count investments associated with getting ready and geared up to really start rolling that out the.

Speaker Change: The other piece, we have a branch in Kitchener.

The other piece, we have a branch in Kitchener.

Speaker Change: Just just opened the doors on it we'll do a formal grand opening on it in the fall, but that is up and running as of basically today.

Just just opened the doors on it we'll do a formal grand opening on it in the fall, but that is up and running as of basically today.

Unknown Executive: So that will contribute a bit of the cost increase. And then the other piece of it, in terms of why the quarter over quarter increase in expenses, the levels of headcount we were running through the first quarter, and I'd say we ran it again deliberately lower than what we would have otherwise expected in the second quarter. You know, it wasn't our intent to continue to run the bank at this level of headcount following our reorganization.

Speaker Change: So that will contribute a bit of the cost increase.

So that will contribute a bit of the cost increase.

And then the other piece of it in terms of why the quarter over quarter increase.

Speaker Change: Inexpensive b.

Inexpensive b.

Levels of head count, we were running through first quarter and I'd say, we ran it again.

Speaker Change: Deliberately lower.

Deliberately lower then.

Speaker Change: We would have otherwise expected in second quarter.

We would have otherwise expected in second quarter.

Speaker Change: This wasn't our intent to continue to run the bank at this level of head count following our reorganization it was always going to be.

This wasn't our intent to continue to run the bank at this level of head count following our reorganization it was always meant to be.

Unknown Executive: It was always meant to be a true reorganization and a reallocation, not headcount for headcount, dollar for dollar. But a good proportion of it was a reengineering of our headcount to gear ourselves up and be positioned for the stronger growth we saw coming out of this cycle. We hadn't really done much of that in the second quarter, and so that will continue through the third quarter, just to make sure we're set up for the opportunity in front of us. So it's a bit of a temporary blip, not a sustained trend. We're not changing our stance or expectation for a structural positive. I appreciate the color. Thank you.

Speaker Change: A true reorganization and a reallocation not head count for head count dollar for dollar, but a good proportion of it was a reengineering of our head count to gear ourselves up and be positioned for stronger growth, we saw coming out of the cyclical.

A true reorganization and a reallocation not head count for head count dollar for dollar, but a good proportion of it was a reengineering of our head count to gear ourselves up and be positioned for the stronger growth. We saw coming out of this cycle, we haven't really done much of that through the second quarter and so that will continue.

Speaker Change: Haven't really done much of that through the second quarter and so that will continue through the third quarter just to make sure. We're set up for the opportunity in front of us. So it's a bit of a temporary blip.

Through the third quarter just to make sure we're set up for the opportunity in front of us So it's a bit of a temporary blip.

Speaker Change: Not a sustained trend, we're not changing our stats our expectation for a structural positive operating leverage.

Not a sustained trend, we're not changing our stats our expectation for a structural positive operating leverage.

Okay.

Speaker Change: Appreciate the color. Thank you.

Appreciate the color. Thank you.

Speaker Change: Thank you.

Stephen H. E. Murphy: Thank you. Your next question is from Stephen Boland from Raymond James. Please ask your question.

Thank you.

Speaker Change: Our next question is from Steven Bill Lynch from Raymond James Please ask your question.

Your next question is from Steven Bill Lynch from Raymond James Please ask your question.

Speaker Change: Oh, thanks, sorry.

Stephen H. E. Murphy: Oh, thanks. Sorry. Uh, sorry. I've got a bunch of questions. I'm just going, sorry, going through the list.

Oh, thanks, sorry.

Speaker Change: Oh, sorry.

Speaker Change: Sorry.

Speaker Change: So just a bunch of my questions I'll just go ahead sorry.

Stephen H. E. Murphy: I guess just in terms of the PCLs being, you know, when I think back to last quarter, you kind of, I'm not sure, did you guide for the whole year in that historic range? Like, was there a bit of a surprise here that the PCLs did come up above your historic range? I think that was a little bit of a surprise. Was there something unusual or an unusual file or two that created that? You know, I know it's a blip, but certainly a little bit higher than expected.

So just a bunch of my questions I'll just go ahead sorry.

The list.

List.

Speaker Change: Okay.

Yes.

Speaker Change: I guess just in terms of the <unk>.

I guess just in terms of the PCL.

Speaker Change: When you when I think back last quarter.

When you when I think back last quarter.

Speaker Change: Yeah.

I'm not sure did you guide for the whole year or is that the historic range like was there a bit of a surprise here that the PCL as did come up above your historic range I think that was a little bit of a surprise.

Speaker Change: I'm not sure did you guide for the whole year that historic range like was there a bit of a surprise here that the <unk> sales did come up above your historic range I think that was a little bit of a surprise.

Speaker Change: Was there something unusual or no unusual file or to that.

Was there something unusual or no unusual file or to that.

Speaker Change: Created that I know, it's a blip, but certainly a little bit higher than we expected.

Created that I know, it's a blip, but certainly a little bit higher than expected.

Unknown Executive: Hi, y'all. So, um...

Hum also.

Speaker Change: Also.

Speaker Change: Stephen I'm sorry, Paul.

Stephen I'm, sorry apologies.

Unknown Executive: So yeah, we guided last quarter that we would remain within our historic range of 18 to 23 basis points for the full year. And so while this quarter we're slightly involved in, I think from a whole year perspective, we continue to guide towards that. This year, this quarter, we had a little bit of an increase on the impairment side, and we continue to build our performing UCL, but it is aligned with our expectations, and for the full year, we feel confident we will land within that range on the higher end.

Stephen H. E. Murphy: So yes, we guided last quarter that we will remain within our target range of 18 to 22 basis points for the full year.

So yeah, we guided last quarter that we will remain within our target range of 18 to 23 basis points for the full year.

So while this quarter was slightly above it.

So well this quarter was slightly above it.

Stephen H. E. Murphy: Yes.

On a full year perspective too.

Speaker Change: Me too.

To guide towards that.

Speaker Change: Scott.

Speaker Change: This this quarter.

This year this quarter.

Speaker Change: We had kind of an increase.

Kind of an increase on the on the impairment side and we continue to build a high performing.

Speaker Change: Sunday, our main pebble side, and we continue to build high performing.

But.

But it.

It is it is aligned with what our expectations for the full year, we feel confident we will we will land within that range on the higher end.

Stephen H. E. Murphy: Okay, and then I guess my second question, and this may be for Chris, you know, the slide that you have in there about growth. You know, you're really, you know, general commercial, commercial mortgage, real estate project loans that, you know, you expect to take market share. So I would assume that if the environment improves, that everybody's looking for the same kind of timeframe that everyone, your competitors are going to be looking to take market share as well. So what gives you confidence that, you know, you can win that business when things do improve?

Speaker Change: Okay, and then I guess my second question.

Okay, and then I guess my second question and this I don't know if there is maybe for Chris.

Speaker Change: I don't know if this is maybe for Chris.

Speaker Change #100: The slide that you have in there about growth.

The slide that you have in there about growth.

Speaker Change #100: Really.

Sure.

Really.

Speaker Change #101: General commercial commercial mortgage real estate project loans.

General commercial commercial mortgage real estate project loans.

Speaker Change #102: Got you.

That you expect to take market share. So I would assume that if the environment improves that everybody is looking at the same kind of timeframe.

Do you expect to take market share. So I would assume that if the environment improves that everybody is looking at it.

Speaker Change #103: The same kind of timeframe.

Speaker Change #104: Every one of your competitors are going to be looking to take market share as well. So what gives you confidence that you can win that business.

One of your competitors are going to be looking to take market share as well. So what gives you confidence that.

You can win that business.

Speaker Change #105: When things do improve.

Things do improve.

Speaker Change #106: While we've historically grown this bank in a.

Christopher H. Fowler: Well, we've historically grown this bank in a single low double-digit market. And, you know, our opportunity for that is really deploying our teams against those opportunities that come forward to us. We've got an, you know, expanded footprint with our expansion into Ontario, and we've got solid markets in BC and Alberta. So we see as the market improves that our ability to, you know, pick up great clients is very positive. I'll pass this over to Stephen if he wants to add more to that.

Well, we've historically grown this bank in a.

Speaker Change #107: High single low double digit market and our opportunity for that is really deploying our our teams against those.

High single low double digit market and our opportunity for that is really deploying our our teams against those.

Speaker Change #108: The opportunities that come forward to us we've got a.

Opportunities that come forward to us we've got a.

Speaker Change #108: Okay.

Expanded footprint with our expansion of Ontario, We've got a solid.

Speaker Change #108: <unk> expanded footprint with our expansion of Ontario, We've got a solid.

Steven Lynch: Markets in BC, and Alberta, So we see as the market improves our ability to pick up great clients is very positive I'll pass over to Steven if you want to add more to that.

Markets in BC, and Alberta, So we see as the market improves our ability to pick up great clients is very positive I'll pass over to Steven influence to add more to that.

Stephen H. E. Murphy: Yes, Stephen, I would also say that we've positioned ourselves really well for growth. And, as you know, we've been very deliberate and selective in recent quarters about which clients we've been choosing. And so we are trying to cherry pick the strongest clients off our competitors. And this is a pretty unique cycle compared to, you know, many, many years. And so you want to make sure you're pulling off those strong borrowers with the right economics for us.

Stephen H. E. Murphy: Yes, Stephen I would also say, we will position ourselves really well for growth and as you know we've been very deliberate and selective.

Yes, Stephen I would also like we will position ourselves really well for growth and as you know we've been very deliberate and selective in recent quarters about waste clients.

Speaker Change #110: In recent quarters about waste clients.

Steven Lynch: Using and so we are trying to cherry pick the strongest clients off our competitors and this is a pretty unique cycle compared to many many years and so you want to make sure you're.

Choosing and so we are trying to cherry pick the strongest clients off our competitors and this is a pretty unique cycle compared to many many years and so you wanted to make sure you're on.

Speaker Change #111: Pulling off to a strong borrowers with the right economics for us.

Speaker Change #112: Pulling off to a strong borrowers with the right economics for us.

Stephen H. E. Murphy: And, you know, we think we've positioned ourselves really well and have the line of sight now to really go after those clients. And we know our business model and what we have to offer those clients is a winning recipe. So we think we're well positioned.

Speaker Change #111: We think.

We think we've positioned ourselves really well and have line of sight now to really.

Speaker Change #111: <unk> ourselves really well and have line of sight now to really.

Speaker Change #111: Go after those clients and we know our business model.

Go after those clients and we know our business model.

Speaker Change #111: We have to offer those clients is a winning recipe. So we think we're well positioned.

What we have to offer those clients is a winning recipe. So we think we're well positioned.

Stephen H. E. Murphy: Okay, that's great. And maybe I'll just sneak one more in.

Speaker Change #113: Okay. That's great maybe I'll just sneak one more in I know that RBC HSBC has just closed but.

Okay. That's great maybe I'll just sneak one more in I know that you know RBC HSBC is just close but I think in past conversations talked about like there's an opportunity that some of the HSBC clients may feel dislocated maybe don't want to go to a large Canadian bank like that are you seeing any.

Speaker Change #114: And I think in past conversations talked about that there is an opportunity.

Speaker Change #115: Some of the HSBC clients may feel dislocated, maybe don't want to go to a large Canadian bank like that are you seeing any.

Speaker Change #115: Iron ore leads coming out of that.

Idaho leads coming out of that.

Out of HSBC the legacy business.

Stephen H. E. Murphy: I know that, you know, RBC, HSBC is just closed. But I think, in past conversations, we've talked about that there's an opportunity that some of the HSBC clients may feel dislocated, maybe not want to go to a large, you know, Canadian bank like that. Are you seeing any, you know, I don't know, leads coming out of that, you know, out of HSBC's legacy business

Speaker Change #116: Yes, I think.

Yeah I think.

Speaker Change #115: There was a wait and see period, there where everyone.

There was a wait and see period, there where everyone.

Speaker Change #115: We didn't see a lot of actual movement and there was a lot of talking but not so much movement and I think.

We didn't see a lot of actual movement and there was a lot of talking but not so much movement and I think.

Speaker Change #115: We're starting to see.

We're starting to see.

Unknown Executive: Yeah, I think there was a wait and see period where everyone was, and we didn't see a lot of actual movement. And there was a lot of talking, but not so much movement. And I think we're starting to see We're at the timing, you know, with things happening with competitors in the market, but also kind of getting to the point of the cycle where, you know, conversations are translating into people making actual decisions on who their banking partner they want for the long term is going to be. Okay, thanks very much.

We're at <unk>.

We're at the timing.

Speaker Change #115: <unk>.

Speaker Change #115: With that things happening less competitors in the market, but also kind of getting to the point of the cycle, where conversations are translating people, making actual decisions on that with our banking partner they want for the long term, it's going to be.

The things happening with competitors in the market, but also kind of getting to the point of the cycle, where conversations are translating people, making actual decisions on that with our banking partner they want for the long term, it's going to be.

Speaker Change #117: Okay. Thanks, very much guys.

Stephen H. E. Murphy: Okay, thanks very much, guys.

Okay. Thanks, very much guys.

Ian: Thanks Ian.

Thanks, David.

Speaker Change #117: Yes.

Yeah.

Speaker Change #117: Thank you. Your next question is from Paul Holden from CIBC. Please ask your question.

Paul David Holden: Thank you. Your next question is from Paul Holden from CIBC. Please ask your question.

Thank you. Your next question is from Paul Holden from CIBC. Please ask your question.

Paul David Holden: Thank you. Good morning.

Paul David Holden: Thank you good morning.

Thank you and good morning, everyone.

Paul David Holden: Want to go back to the loan growth and sort of the.

To go back to the loan growth and sort of the shortfall in Q2 and expectation for better than Q3, because I would observe that.

Paul David Holden: The shortfall in Q2 and expectation for better than Q3, because I would observe that.

Paul David Holden: I want to go back to the loan growth and sort of the shortfall in Q2 and the expectation for better in Q3 because I would observe that some of the larger banks put up pretty good commercial loan growth in Canada last quarter. So I want to make sure none of this has to do with intensified competition. So maybe you can give some perspective there. I mean, you have pointed to good pricing and margins, so that's not indicative of competition, but I want to make sure we're not missing anything here in terms of the competitive dynamics.

Paul David Holden: Some of the larger banks put up pretty good commercial loan growth in Canada last quarter. So.

Speaker Change #120: Some of the larger banks put up pretty good commercial loan growth in Canada last quarter. So I.

Speaker Change #121: I want to make sure none of this has to do with intensified competition.

I want to make sure none of this has to do with intensified competition.

Speaker Change #122: Maybe you can give some perspective, there I mean, you have pointed to.

Maybe you can give some perspective, there I mean, you have pointed to.

Speaker Change #122: Good pricing and margin, so thats not indicative of competition, but want to make sure theres not missing anything here in terms of the competitive dynamics.

Good pricing and margin, so thats not indicative of competition, but want to make sure theres not missing anything here in terms of the competitive dynamics.

Speaker Change #123: Yes, I think for US we had signaled to a trajectory of increasing growth through the year and that's actually what we're seeing.

Unknown Executive: Yeah, I think, you know, for us, like we had signaled a trajectory of increasing growth through the year. And that's actually what we're seeing.

Yes, I think for us like we had signal to a trajectory of increasing growth through the year and that's actually what we're seeing.

Speaker Change #123: It was a bit slower developing than what we anticipated, but when you look at where we finished the quarter from.

Speaker Change #124: It was a bit slower developing than what we anticipated, but when you look at where we finished the quarter from where.

Unknown Executive: It was a bit slower in developing than we anticipated. But when you look at where we finished the quarter from where we were earlier in the quarter, as we see the curve, it was just a little later developing than we thought. And as Matt talked about, what we see is, you know, confidence in the momentum of the kinds of borrowers we want to bring on at the right price for risk. And so, you know, we're comfortable with where things are going. And now we're on the trajectory of the curve, but it was just a little slower in developing than we anticipated.

Matt Brad: Where we were earlier in the quarter like we see the curve. It was just a little later developing than we thought and as Matt talked about like what we see is.

Where we were earlier in the quarter like we see the curve. It was just a little later developing than we thought and as Matt talked about like what we see is.

Matt Brad: Confidence in the momentum of the kinds of borrowers we want to bring on it at the right time.

Confidence in the momentum of the kinds of borrowers we want to bring on it at the right.

Matt Brad: Pricing to risk and so we're comfortable.

Pricing to risk and so we're comfortable with the with where things are going and now we're on the trajectory of the curve, but it was just a little slower developing than we anticipated.

Speaker Change #125: Bowl with.

Matt Brad: Where things are going it now we're on the trajectory of the curve, but it was just a little slower developing than we anticipated.

Paul David Holden: Okay, Stephen, so I think the answer you're giving is, you see the pipeline, you see the activity, it's just, maybe the deals aren't closing as quickly as you had expected. Is that what you're telling us? I think that's fair. I think for the kind of business that we have...

Okay.

So I think the answer Youre, giving is you see the pipeline you see the activity is just the start.

So I think the answer Youre, giving is you see the pipeline you see the activity its just start.

Speaker Change #126: The deals are closing as quickly as you had expected is that what youre telling us.

Speaker Change #127: The deals are closing as quickly as you had expected is that what youre telling us.

Speaker Change #128: I think Thats fair I think for the.

I think that's fair I think for the kind of business that we wanted to do and as we're moving through it.

Speaker Change #128: It kind of business that we wanted to do.

Unknown Executive: to do. And as we were moving through it, you know, now we're seeing more, more activity, and it's closing, and a lot was getting delayed. And, and now we actually see the trajectory of the momentum, and when we see how it looks week to week, and there's an opportunity we can lean into, so we feel good about it.

Speaker Change #128: As we're moving through it.

Speaker Change #129: Now, we're seeing more more activity and its closing and a lot was getting delayed and that would be actually see the trajectory of the momentum that we see from week to week.

Now, we're seeing more and more activity and its closing and a lot was getting delayed in and that would be actually see the trajectory of the momentum and when we see that from week to week.

Speaker Change #129: How it looks and so.

How it looks and so.

Speaker Change #129: There is an opportunity we can lean into so we feel good about it.

There is an opportunity we can lean into so we feel good about it.

Speaker Change #130: Okay. Okay.

Paul David Holden: Okay, and then in terms of deposit growth, because you also reduced expectations there for the year, is it the same dynamic where it's just, you know, maybe there are exactly the same customers where you thought maybe they would close in Q2 and now they are closing in Q3? Is it the same dynamic, or is there something else going on on the deposit side that's resulted in lower than expected growth?

Speaker Change: Okay.

Speaker Change #131: And then in terms of the deposit growth because you also reduced expectations. There for the year is it the same dynamic where it's just maybe just exactly the same customers where you thought maybe they would close in Q2 and now closing in Q3.

And then in terms of the deposit growth because you also reduced expectations. There for the year is it the same dynamic where it's just you know maybe it is exactly the same customers, where you thought maybe they would close in Q2 and now closing in Q3.

Speaker Change #131: Is it the same day manic or is there something else going on in the deposit side Thats resulted in lower than expected growth.

Is it the same nomadic or is there something else going on in the deposit side Thats resulted in lower than expected growth.

Jeff Right: Yes, Hi, it's Jeff I can speak to that.

Jeff Wright: Yeah, hi, it's Jeff. I can speak to that. It's a little bit of the same thing.

Yes, Hi, it's Jeff I can speak to that it's a little bit of the same certainly as new clients come on it's a full balance sheet that comes with them.

Jeff Right: It's a little bit of it certainly as new clients come on it's a full balance sheet that comes with them.

Jeff Right: But the other element here is we've talked about the introduction of our new cash management platform over the summer and so while we're really excited about what it's going to do for us in terms of opening up an opportunity for full service client growth and deposit growth.

But the other element here is you know we've talked about the introduction of our new cash management platform over the summer and so while we're really excited about what it's going to do for us in terms of opening up an opportunity for full service client growth and deposit growth right now, it's actually a little bit of a headwind because.

Jeff Right: Right now, it's actually a little bit of a headwind because our focus is on making sure we get the client experience right.

Speaker Change #134: Our focus is on making sure we get the client experience right and so when we have a client right now that wants to bring their business over to the bank, we're hesitant to bring them onto our new platform. When we know we need to migrate them again in a few months and so we actually have a bit of a almost a waiting list as.

Jeff Wright: And certainly, as new clients come on board, it's a full balance sheet that comes with them. But the other element here is, you know, we've talked about the introduction of our new cash management platform over the summer. And so while we're really excited about what it's going to do for us in terms of opening up an opportunity for full service client growth and deposit growth, right now, it's actually a little bit of a headwind because our focus is on making sure we get the client experience right.

Jeff Wright: And so, you know, when we have a client right now that wants to bring their business over to the bank, we're hesitant to bring them onto our new platform when we know we need to migrate them again in a few months. And so we actually have a bit of a waiting list, as we've been recommending to clients that they wait until that new platform is ready in a few months and then move their business then.

Speaker Change #133: And so when we have a client right now that wants to bring their business over to the bank, we're hesitant to bring them onto our new platform. When we know we need to migrate them again in a few months and so we actually have a bit of a almost a waiting list.

Speaker Change #133: As we've been recommending to clients that they wait until that new platforms ready in a few months had moved their business then.

As we've been recommending to clients that they wait until that new platforms ready in a few months and move their business then.

Paul David Holden: Okay. The last question for me on the discussion on impairments. You referred to particular pressure on the trucking portfolio. I think what was interesting there is you made a comment that that tends to be a more cyclical part of the portfolio, which we understand and tends to feel the economic pain first. That just leads me to a natural question. I go like, well, who comes next? If trucking is early in the cycle, are there potential other businesses that could be feeling some more pain in the next couple of quarters?

Speaker Change #133: Okay.

Okay.

Speaker Change #135: Last question for me on the discussion on impairments.

Last question for me on the discussion on impairments.

Speaker Change #136: Two particular pressure in the trucking portfolio.

For two particular pressure in the trucking portfolio.

Speaker Change #137: What was interesting there as you made a comment that that tends to be a more cyclical part of the portfolio, which we understand and tends to feel the economic pain first.

Think what was interesting there as you made a comment that that tends to be a more cyclical part of the portfolio, which we understand and tends to feel the economic pain first.

Speaker Change #138: It just leads me to a natural question I go like well what comes next.

That just leads me to a natural question I go like well who comes next.

<unk>.

If you know.

Speaker Change #139: It's early in the cycle right tuck ins early in the cycle.

It's early in the cycle right of tuck ins early in the cycle.

Speaker Change #140: Is there is there potential other books could be feeling some more pain in next couple of quarters.

Is there is there potential other books could be feeling some more pain in next couple of quarters.

Speaker Change #141: So we have seen yet.

Carolina Parra: So while we're not seeing any specific other portfolios going through any significant distress, when we look at overall portfolios, our commercial real estate and residential real estate are performing quite strong, and we feel very comfortable. And on our general commercial, like you know, we have strong borrowers, and we have good security as well. And what happens is just inherent in the nature of the portfolio; sometimes we have large loans with very specific issues happening that could trigger that increasing impairment. But overall, there's not any concentration or any specific portfolio where we're seeing deterioration as we're seeing right now relating to transportation.

So we don't see any specific on that.

Speaker Change #141: I think the.

Speaker Change #141: Portfolio is going to they need significant distress.

<unk> going to do any significant distress.

Speaker Change #141: When we look at.

Look at our overall.

Speaker Change #141: Overall portfolios.

<unk> portfolios.

Speaker Change #142: Commercial real state restaurant somebody else paid are performing quite strongly and we feel very comfortable on that.

Commercial real estate risk and somebody else paid out before being quite strong and we feel very comfortable on our general commercial.

Speaker Change #142: General commercial.

Speaker Change #143: We have we have some borrowers we have good security as well.

We have some borrowers we have security as well and what happens is just inherent in the nature of the portfolio sometime.

Speaker Change #144: What happened.

Speaker Change #144: And the nature of the portfolio.

Speaker Change #144: Large loans with very specific you should have.

Sometimes they have large loans with very specific issues have move that that could trigger that increasing impairments, but overall there is not any concentration in any specific portfolio, where we see deterioration.

Speaker Change #144: That could increase.

Speaker Change #144: Increasing impairments, but overall there is not any concentration in any specific portfolio, where we see.

Speaker Change #144: Deterioration that we're seeing right now related to transportation.

The deterioration that we've seen right now related to transportation.

Paul David Holden: Okay, so you feel the factors that have impacted the transportation sector won't impact the rest of the book in the same way? Correct. Correct. Okay. Okay. Thank you.

Speaker Change #145: Okay. So you feel the factors that have impacted the the transportation sector.

So do you feel the factors that have impacted the the transportation sector.

Speaker Change #145: Won't impact the rest of the book in the same way.

Well impact the rest of the book in the same way.

Speaker Change #146: Correct correct. Okay. Okay. Thank you.

Correct.

Okay. Okay. Thank you.

Speaker Change #146: Well.

Hello.

Yes.

Speaker Change #146: Thank you.

Sohrab Movahedi: Thank you. Your next question is from Sohrab Movahedi from BMO Capital Marcus. Please ask your question.

Thank you. Your next question is from Robin Lowe <unk> from BMO capital markets. Please ask your question.

Speaker Change #147: Next question is from Sourav move ahead <unk> from BMO capital markets. Please ask your question.

Speaker Change #147: Okay. Thank you.

Okay. Thank you.

Speaker Change #148: Were you surprised by the <unk> sales this quarter.

Carolina were you surprised by the P sales this quarter.

Well, thanks surprise ever PCL.

Unknown Executive: Was I surprised by the PCLs? No, I was not surprised. I think we keep a very close eye on how it evolves during the quarter. We are working well with our clients, and when we look at some of the PCLs, we're also seeing very good resolutions on that side, and so those resolutions really are coming in to offset some of the PCL increase. So no, it was not a surprise. We continue to really see it evolving as we were expecting through the cycle.

What types of prime ever PCL.

Speaker Change #149: I was still surprised I think we keep a very close look at how it evolves.

Was thought surprised I think we keep a very close look at how it evolves.

Speaker Change #149: In the quarter.

The quarter.

Speaker Change #150: We're working well with our clients and when we look at some of the GTS. We're seeing also bears the risk solutions on that side and so those resolutions really.

We're working well with our clients and and when we look at some of the GTS. We're seeing also bears the risk solutions on that side and so those resolutions really I'm coming to it.

Speaker Change #151: <unk> lost.

Speaker Change #151: Some of the PCI, we said no it was not a surprise we continue.

Offset some of the other piece that we said no. It was not emphasize we continue.

Speaker Change #151: We only see it evolving as we were expecting through the cycle.

We only see it evolving as we were expecting through the cycle.

Speaker Change #152: Okay, and I think based on the answer you gave to the last question.

Okay, and I think based on the answer you gave to the last question.

Speaker Change #152: If you have that.

If you have that.

Speaker Change #152: Segregation I suppose in anything other than your transportation and equipment finance that would be a surprise.

Segregation I suppose in anything other than your transportation and equipment finance that would be a surprise.

I would say not a surprise like we do expect some deterioration in the portfolio.

I would say not a surprise like we do expect some deterioration in the portfolio not is it like a cross significant kind of a specific industry.

Speaker Change #152: Like across significant kind of a specific industry.

As we go through the cycle there.

Speaker Change #152: As we go through the cycle, there or is that percent distressed.

Does that present high distressed.

Speaker Change #152: Any commentary and we will continue to work with them, but why we do not expect to start those all will see that this will translate into losses, but we do expect.

Becoming parents and we will continue to work with them, but why we do not expect to start that those all multipurpose will translate into losses, but we do expect.

Speaker Change #152: Well crystal impairments in the cycle.

Increase in impairments in the second half of.

I'll be here.

Speaker Change #152: Here.

But what are the chances are you may be negatively surprised relative to the guidance given for the full year.

Speaker Change #153: What are the chances are you may be negatively surprised relative to the guidance given finished for the full year.

Speaker Change #153: We are confident on what we see.

We are confident on what we see unless there is something significant.

Speaker Change #153: Barring something.

Speaker Change #153: But I think overall, what we feel our loan to values in our security.

But I think overall, what we feel our loan to values on our security, it's holding up pretty strong so that would definitely help us maintain and be comfortable with that guidance.

Speaker Change #153: <unk> are pretty strong so.

Speaker Change #153: That would definitely help us.

Comfortable with that guidance.

Speaker Change #153: Okay.

Speaker Change: Okay.

Speaker Change #153: I remember I can't remember exactly which quarter I think.

And Matt I remember I can't remember exactly which quarter I think a few quarters ago anyway, maybe it was a couple of years ago now.

Speaker Change #153: A few quarters ago anyway, maybe it was a couple of years ago now.

Speaker Change #153: We had a similar situation were in.

We had a similar situation where in anticipation of loan growth I think you had to kind of build up some liquidity and.

Speaker Change #153: Patient of loan growth I think you had to kind of build up some liquidity and.

Speaker Change #153: And I think Stephen had too.

Speaker Change #154: And I think Stephen had too.

Speaker Change #155: He said sorry, some things that we're supposed to transpire didn't transpire.

He said sorry, some things that we're supposed to transpire it didn't and they transpire.

Speaker Change #153: Transpire.

Speaker Change #156: The later date.

At a later date I am I remembering that correctly.

Speaker Change #156: I remember that correctly.

Speaker Change #157: Yes, you are.

Yeah, you are different circumstance, though I'd say the difference this time as we identified this trend fairly early and we're able to work down liquidity. So we protected NAND in the quarter, you're referencing our NIM went backwards.

Speaker Change #158: Our different circumstance, the let's say the difference this time as we identified this trend fairly early and we're able to work down liquidity. So we protected net in the quarter, you're referencing our NIM went backwards as a result and.

As a result and.

Speaker Change #159: This quarter I'd say, we were on it and managed our way well throughout two to protect earnings as best we could with the lower than expected loan growth.

This quarter I'd say, we were on it and managed our way well throughout two to protect earnings as best we could with the lower than expected loan growth.

So if I could just maybe ask a bit of a cynical an unfair question is Stephen good at.

Speaker Change #160: So if I could just maybe ask a bit of a cynical an unfair question Stephen good at building.

Stephen: Building pipelines and giving you the guidance you need to build up liquidity on what have you or is he a bit more if that rose colored glasses type of guy.

Building pipelines and giving you the guidance you need to build up liquidity on what have you or is he a bit more of a rose colored glasses type of guy.

No <unk> I'm getting the detail when I need it to be able to manage liquidity appropriately and you saw us take like I can't do a turn on a dime.

Speaker Change #162: To me I am getting the detail when I need it to be able to manage liquidity appropriately and you saw us take like I can't do a turn on a dime.

Speaker Change #162: But you can see directionally, what we did to manage liquidity Dow Mike running off deposits you can see we did not spend than what we expected to spend on NII. This quarter I signaled mid single digits. We were low single digits. So we were able to react and pivot so.

Mike: But you can see directionally, what we did to manage liquidity Dow Mike running off deposits you can see we did not spend than what we expected to spend on <unk>. This quarter I signaled mid single digits. We were low single digits. So we were able to react and pivot so.

Does anyone make a perfect prediction.

Speaker Change #162: Does anyone make a perfect prediction no.

But are we making revisions early identification of changing trends and giving me the ability to pivot and react Stephen and team are doing a good job with that.

Speaker Change #162: But are we making revisions early identification of a changing trends and giving you the ability to pivot and react Stephen and team are doing a good job of that.

Speaker Change #164: I mean, a lot is riding on loan growth rebounding in the second half we are at.

I mean, a lot is riding on loan growth rebounding in the second half we are a.

Speaker Change #165: 10 months into Q3 can you quantify where the pipeline is right now please.

A month into Q3 can you quantify where the pipeline is right now please.

Speaker Change #165: Yes.

So to be clear that gets mad at me, if I do a bunch of loan lending at crappy prices that don't make money. That's correct. So you know.

Speaker Change #166: To be clear that gets mad at me, if I do a bunch of lending at Kraft prices that don't make money that's correct. So.

This is about.

Speaker Change #166: Making sure that we were making the right.

Making sure that we're making the right.

Speaker Change #166: Decisions about which borrowers we bring on particularly when you're in the netgear prior to the cycle.

Decisions about which borrowers we bring on particularly when you're in a net year part of the cycle and that's why you know your balancing things, where we've let a lot of borrowers go well in advance of.

Speaker Change #167: And Thats why Youre balancing things, where we've let a lot of borrowers go well in advance of that.

You know the.

Speaker Change #167: These kind of cyclical.

He's kind of cyclical.

Speaker Change #167: Events.

Speaker Change: Events.

Speaker Change #168: Because as the questions for Caroline it's like well, we're getting ahead of those risks and so thats something some cases, you Craig Carol and headwind.

Because as the questions for Caroline you know, it's like well, we're getting ahead of those risks and so that's some in some cases you create your own headwind.

So what we have seen is we are anticipating.

So you know what we have seen as you know we are anticipating a.

Speaker Change #169: Pipeline, but you cant control, where the clients want to borrow the money and what's the timing that they want.

Pipeline, but you cant control, where the clients want.

Are all of the money and what's the timing that they want.

Speaker Change #169: And theres been a lot.

And there's been a lot of.

Speaker Change #169: Kind of caution and wait and see but we're seeing the activity and so as we went late in the quarter into this quarter, we see the activity and are comfortable with the trajectory.

And as caution in wait and see but we're seeing the activity and so as we went late in the quarter into this quarter, we see the activity and are comfortable with the trajectory.

Speaker Change #170: And the momentum that sustainability of that trajectory now.

And the momentum and sustainability of that trajectory now.

Speaker Change #171: Okay, just two more questions quickly match.

Okay, just two more questions quickly match.

Speaker Change #172: Is the dollar value of intangibles you have on the balance sheet associated with the <unk> conversion project.

What is the dollar value of intangibles you have on the balance sheet associated with the AI ERP conversion project.

It would be so if you look back we did.

Speaker Change #172: It would have been in the fourth quarter of 2022.

It would have been in the fourth quarter of 2022.

Speaker Change #172: We did an accelerated depreciation of the previously developed models.

We did an accelerated depreciation of the previously developed models.

Speaker Change #173: Worked them through Covid.

You know work them through Covid.

<unk> got good experience in data through that required a redevelopment of our models, which we've done.

Good experience and data through that and it required a redevelopment of our models, which we've done.

Speaker Change #173: Fourth quarter that year, you would've seen us depreciate.

In the fourth quarter that year, you would've seen us depreciate. It was it was in or around and you'll be able to go back and find the exact number but in the neighborhood of 17 or $18 million or so.

Speaker Change #173: It was in or around Youll be able to go back and find the exact number but in the neighborhood of 17 or $18 million or so.

Steven Lynch: It's about very close to a dollar for dollar replacement in terms of what we have on the balance sheet today and in use in the business currently that Steven and team are using to evaluate adjudicate credit monitor risk trends do risk adjusted pricing et cetera.

It's about you know very close to a dollar for dollar replacement in terms of what we have on the balance sheet today and in use in the business currently that Steven and team are using to evaluate adjudicate credit monitor risk trends do risk adjusted pricing et cetera.

Steven Lynch: We're using them in and happy with what we're seeing.

We're using them in and happy with what we're seeing.

Speaker Change #174: Okay and one last question Caroline that these are provisions that you're taking can you talk a little bit about the.

Okay and one last question currently in that these are provisions that you're taking can you talk a little bit about.

A year of origin nation for them, which vintages are these.

Speaker Change #177: And are they associated with the periods you were issuing equity below book value to grow the loan book. Thank you.

And are they associated with the periods you were issuing equity below book value to grow the loan book. Thank you.

Speaker Change #174: No.

Hum.

Caroline: Some of them are long standing clients.

Some of them are long standing clients.

We've been working with them for a long time, we continue to operate with that Theres not a specific trend on.

We've been working with them for a long time, we continue to operate with that Theres not a specific trend on that.

Caroline: <unk>.

On the vintages, when we look at the portfolio.

Caroline: Thank you James when we look at the portfolio.

Speaker Change #177: For transportation is spread across different years of origination.

For transportation is spread across different years of origination.

Speaker Change #177: And that's.

And Ah that's a portfolio that we manage very very closely small ticket items, we have a good collection process in place where we work.

James: That's a portfolio that we manage very very closely small ticket items, we have a good collection process in place where we work.

James: Work with our clients and make sure we adjust and we see.

Work with our clients and make sure we we adjust and we seize our our our recoveries are as we as we move forward in the cycle. So no specific vein.

James: Our.

Speaker Change #179: Recovery as we as we move forward in the cycle So no specific.

Speaker Change #179: Vintage off of where we've seen deterioration.

Vantage off of where we've seen deterioration.

It's you know very various protocols.

Speaker Change #179: Very.

Speaker Change #180: Larry various product cause.

Speaker Change #181: Notwithstanding Heinz and then just.

Notwithstanding Heinz and then just just takes always start coming in in the later years as well.

Speaker Change #182: Thanks, Alright.

Speaker Change #182: Coming in in the later years.

Speaker Change #183: Thank you.

Thank you. Your next question is from many Grumman from Deutsche Bank. Please ask your question.

Meny Grauman: Next question is from many Grumman from Deutsche Bank. Please ask your question.

Speaker Change #185: Hi, good morning.

Hi, good morning.

Meny Grauman: Carolina.

Carolina.

Carolina: I'm wondering whether you view Q2 as the high point for your PCL ratio.

I'm wondering whether you view Q2 as the high point for your PCL ratio.

Carolina: This cycle is would that be a fair.

Its cycles would that be a fair.

Speaker Change #186: Assessment of your view.

Assessment of your view.

Speaker Change #186: So.

So afford the PCL ratio of that quarter I, yes, that's probably the hiring that we're seeing we expect that full year to be within our guidance, which which means we would kind of steady.

Carolina: Before the PCL ratio outside quarter, yes, that's probably the hiring that we saw we expect that full year to be within our guidance, which which means we would kind of.

Carolina: Stay stable or low into the next two quarters.

Stays stable or lower into the next two quarters.

As we go through.

We go through.

Carolina: Okay.

Okay.

Speaker Change #187: I just wanted to clarify in terms of the core.

I just wanted to clarify in terms of the quarterly.

Speaker Change #187: Orderly.

Speaker Change #188: Sort of movement that you are looking for within that guidance.

Sort of movement that youre looking for within that guidance.

Speaker Change #188: The other question I had was just on I noticed professional fees and services definitely moved up a lot.

The other question I had was just on I noticed you know professional fees and services definitely moved up a lot.

Speaker Change #188: Sequentially and year over year, So I'm just wondering.

Sequentially and year over year, So I'm just wondering.

Speaker Change #188: What's driving that is that.

What's driving that is that something related to well I'll just leave it open ended and wanted to understand kind of that or is it isn't it.

Speaker Change #188: Something related to well I'll just leave it open ended wanted to understand that.

Speaker Change #188: Intensity of work effort on.

City of work effort on <unk>.

Speaker Change #188: Finalizing and deploy in the digital cash management platforms, a driver of that.

Finalizing and deploy in the digital cash management platforms are a driver of that.

Speaker Change #189: That would be the biggest component.

That would be the biggest component.

Speaker Change #189: Okay.

Okay.

Speaker Change #190: And then last one for me is just in terms of your outlook for loan growth.

And then.

Speaker Change #190: Last one for me is just in terms of your outlook for loan growth.

Speaker Change #192: It sounds like when you were talking that are.

It sounds like when you were talking that a big component.

Speaker Change #192: A big component of the guidance is.

The guidance is.

Speaker Change #193: Based on gaining market share.

Based on gaining market share.

Speaker Change #194: So maybe there is a macro component here, but it sounds like.

So maybe there's a macro component here, but it sounds like market.

Speaker Change #194: Market share gains as part of the plan. So I'm just wondering if you.

Market share gains as part of the plan. So I'm just wondering if.

Speaker Change #194: I understand that right and.

Scott: Do I understand that right and.

Speaker Change #194: And then within that question so.

And then within that question so.

Speaker Change #194: What are you doing to get that market share or is that now in the.

What are you doing to get that market share or is that now in the past you've talked about being more selective given the environment are you seeing a.

Speaker Change #194: Past, you've talked about being more selective given the environment are you seeing changing.

Speaker Change #196: Changing environment that allows you to be I'll call. It less selective going forward and that's what's likely to drive market share gains for you.

Changing environment that allows you to be I'll call. It less selective going forward and that's what's likely to drive market share gains for you.

Speaker Change #197: Yes, I would just say, it's not necessarily less selective but I think we're at the point of the cycle, where our line of sight is better.

Yeah, I would just say, it's not necessarily less selective but I think we're at the point in the cycle, where our line of sight is better so.

Speaker Change #197: So this has been quite a disruptive and unique economic period and so.

This has been quite a disruptive and unique economic period and so.

Speaker Change #197: To have line of sight to who are the real winners in the really strong companies is a little bit different than maybe what it would have been historically and so now we feel we've got that line of sight. So we can be quite focused on.

You know to have a line of sight to who are the real winners in the really strong companies is a little bit different than than maybe what it would have been historically and so now we feel we've got that line of sight. So we can be quite focused on.

Speaker Change #198: Borrowers are the ones, we want to take them and like our strategy is always about taking market share.

Which borrowers are the ones, we want to take them and like our strategy is always about taking market share.

That's where our growth is going to be and it is.

That's where our growth is going to be and it is we're not just riding the economy and taking whatever deals there were being quite targeted about taking.

Speaker Change #198: Not just riding the economy and taking whatever deals there were being quite targeted about taking.

Speaker Change #199: The optimal kind of clients that will.

The optimal kind of clients that.

Speaker Change #199: We'll drive our strategy and profitability away from those banks and it's all about the model and the offering that we bring in terms of our advice and experience that's why they choose carefully.

We'll drive our strategy and profitability away from those banks and it's all about the model and the offering that we bring in terms of our advice and experience of a why they choose.

Speaker Change #199: Rather bank with us, but as Jeff mentioned, it's an interesting period for us now to where at some cases were actually.

Rather.

With us, but as Jeff mentioned, it's an interesting period for us now to where at some cases were actually.

Speaker Change #199: Building a relationship but also kind of a bit of a headwind is saying, okay hold on with like bringing your full banking over until we were.

Building a relationship but also kind of got a bit of a headwind of saying, okay hold on with like bringing your full banking over until we've but we're fully ready with the new platform.

Speaker Change #199: We are fully ready with the new platform.

Speaker Change #200: Understood. Thank you.

Understood. Thank you.

Yeah.

Thank you. Your next question is from Josh telling me Alex from RBC capital markets. Please ask your question.

Speaker Change #201: Thank you. Your next question is from Josh call Mihalic RBC capital markets. Please ask your question.

Speaker Change #201: Hi, Thank you good morning, and Matt I'm going to ask a couple of questions and I really apologize if you've already kind of going over this a little bit some end of bank reporting.

Speaker Change #111: Hi, Thank you good morning, and Matt I'm going to ask a couple of questions and I really apologize if you've already kind of gone over this a little bit some at the end of bank reporting.

Speaker Change #202: I guess, sometimes in the fog of war I Miss things, So I'm just going to ask a couple of questions here.

Sometimes in the fog of war I Miss things, So I'm, just going to ask a couple of questions here.

Speaker Change #202: And apologies if you've already gone over this but one of the things that stands out to me.

And apologies if you've already gone over this but one of the things that stands out to me.

Speaker Change #202: Is the outlook on the net interest margin.

Is the outlook on the net interest margin and when I look at Slide 15, you talk about the.

Speaker Change #202: And when I look at Slide 15, you talk about.

Speaker Change #202: Loan growth, but im.

Loan growth, but I.

Speaker Change #202: Im sort of building an expectation here of 100 basis points of reduction in the bank of Canada rate before the end of the year. So can you weave that in because when I look at your sensitivity.

I'm sort of building an expectation here of 100 basis points of reduction in the bank of Canada rate before the end of the year. So can you weave that in because when I look at your sensitivity.

No.

Speaker Change #202: Sometimes I don't like to look at sensitivity at some sort of.

Sometimes I don't like to look at sensitivity at some sort of.

Speaker Change #202: Across the curve parallel shift and so on so I'm very interested and curious into what you've built into your net interest margin.

Across the curve parallel shift and so on so I'm very interested and curious into what you've built into your net interest margin.

Speaker Change #202: Sort of expansion expectation with respect to the short end of the curve coming down pretty aggressively.

Sort of expansion expectation with respect to the short end of the curve coming down pretty aggressively.

Speaker Change #202: Yeah.

Yeah, and I don't like looking at the sensitivity disclosure either because it's done on a static balance sheet basis, and you're doing the parallel shock in both of those things are unrealistic when trying to look at forward expectations, but it gives you a sense of how we're positioned and.

Speaker Change #203: I don't like looking at the sensitivity disclosure either because it's done on a static balance sheet basis, and youre doing the parallel shock in both of those things are unrealistic when trying to look at forward expectations, but it gives you a sense of how we're positioned and.

Speaker Change #204: Yes, like you see a 100 bps parallel shift downwards.

Yes, like you see 100 bps parallel shift downwards, I mean annualized you know that's about a.

Speaker Change #204: Annualized that's about it.

Speaker Change #204: One basis point of NIM pick up so I think that supports what ive been saying all along is that we're positioned on a fairly neutral basis.

One basis point of NIM pick up so I think that supports what ive been saying all along is that we're positioned on a fairly neutral basis.

Two just structurally in the book to two shifts.

Two just structurally in the book to two shifts in parallel.

Speaker Change #204: Parallel across the curve.

Parallel across the curve.

Speaker Change #204: But if you go from a static balance sheet perspective to a growing balance sheet perspective, you've become a lot less interest rate sensitive and a lot more spread sensitive and for us It is a.

But if you go from a static balance sheet perspective to a growing balance sheet perspective, you've become a lot less interest rate sensitive and a lot more spread sensitive and for us It is a pretty.

Speaker Change #204: Pretty significant benefit we're seeing from the spreads of the new loans that we're originating and expect to continue to originate.

Pretty significant benefit we're seeing from the spreads of the new loans that we're originating and expect to continue to originate.

Speaker Change #204: On a go forward basis relative to the spreads of the loans that are rolling off are repricing.

On a go forward basis relative to the spreads of the loans that are rolling off are repricing.

Speaker Change #204: So that's what's supporting our constructive view on net interest margin I mean, it is really something that will be led by the loan growth as opposed to.

So that's what's supporting our our constructive view on net interest margin I mean, it is really something that will be led by the loan growth as opposed to.

Speaker Change #204: Behind the scenes trying to take a lean into.

Behind the scenes trying to take a lean into.

Speaker Change #204: Expectations of rate cuts to try to get more juice out of banana.

Expectations of rate cuts to try to get more juice out of banana.

Speaker Change #205: That's not how we're managing interest rate risk in the banking book that we're really trying to smooth the address.

That's not how we're managing interest rate risk in the banking book that we're really trying to smooth the address and.

Speaker Change #205: And how we manage interest rate risk.

And how we manage interest rate risk.

Speaker Change #206: Okay. That's helpful and thanks for entertaining that question. My next question is pretty straightforward.

Okay. That's helpful and thanks for entertaining that question. My next question is pretty straightforward day in the in sort of as you think about the $3 50 to $3 60.

Sort of as you think about that $3 50 to $3 60 for 2024.

For 2024, what what what tax rate are you using for the back half of the year.

Speaker Change #207: What tax rate are you using for the back half of the year.

Speaker Change #208: Yes, a normal tax rate, we had an abnormally low tax rate, which I covered in my opening remarks, just true ups of filing the returns on an ongoing basis, we should have an effective rate of tax very similar to our statutory rate of tax which would be in the high 25, just eating into 26%.

Yeah, our normal tax rate, we had an abnormally low tax rate, which I covered in my opening remarks, just true ups of filing the returns on an ongoing basis, we should have an effective rate of tax very similar to our statutory rate of tax which would be in the <unk>.

Hi, twenty-five just eating into 26% so in in or around 26%, maybe high 20 fives.

Speaker Change #208: So in inner around 26%, maybe high 20 fives.

Speaker Change #209: Okay. That's very helpful. Thank you very much.

Okay. That's very helpful. Thank you very much.

Speaker Change #210: Thank you. Your next question is from Nigel D'souza from <unk> investment research. Please ask your question.

Thank you. Your next question is from Nigel D'souza from <unk> investment research. Please ask your question.

Speaker Change #211: Good morning. Thank you for taking my question I wanted to follow up on the.

Good morning. Thank you for taking my question I wanted to follow up on the decline youre seeing in those excess savings deposit balances.

The decline Youre seeing in those excess savings in deposit balances.

Speaker Change #211: Okay.

Got it.

Speaker Change #212: We are seeing similar I guess speed or decline further.

We are seeing similar I guess speed of decline other banks and I'm wondering if that reflects differences in.

Speaker Change #212: And I'm wondering if that reflects.

Speaker Change #213: Retail and commercial clients, where homeowners appear to be holding on to their cash buffers, a little bit better.

Retail and commercial clients, where homeowners appear to be holding on to their cash buffers, a little bit better.

Speaker Change #214: So any more color on what exactly is driving that decline.

So any more color on what exactly is driving that decline and and deposits.

Speaker Change #214: In deposits.

Speaker Change #214: For your commercial clients and is it a sign of.

For your commercial clients and is it a sign of.

Speaker Change #217: Strain on their cash flows or other types of.

Strain on their cash flows or other types of.

Speaker Change #216: I guess challenges that they're facing.

I guess challenges that they're facing.

Speaker Change #216: Okay.

Okay.

Speaker Change #216: Let me take a shot at that Nigel I think specific to Q2.

Let me take a shot at that Nigel It you know I think specific to Q2.

Speaker Change #216: And the run up we saw at the end of Q1, a bunch of that was seasonal and so what you see is with the tfsa at RSP season.

And the run up we saw at the end of Q1, a bunch of that was seasonal and so what you see is with the tfsa an RSP season.

Speaker Change #217: After a lot of deposits come in and they sit in cash and then particularly in this interest rate environment people are looking at other opportunities that are often flows off balance sheet.

After a lot of deposits come in and they sit in cash and then particularly this interest rate environment people are looking at other opportunities that are often flows off balance sheet.

Speaker Change #217: And so that's largely what we saw in Q2 was.

And so that's largely what we saw in Q2 was a some more temporary deposits that'd be put to work.

Speaker Change #218: Some more temporary deposits.

Speaker Change #218: And put to work.

Okay. It sounds like it's not credit related just.

Speaker Change #219: Some seasonal trends.

Speaker Change #133: Some seasonal trends.

Speaker Change #218: Good.

Yeah.

Speaker Change #220: Yes, so if I if I could.

Yes, so if I if I could I.

Speaker Change #220: I guess, what everyone's getting out here and maybe this would be helpful.

I guess, what everyone's getting out here and maybe this would be helpful.

Speaker Change #221: Turning to outlook for loan growth and credit Chris could you just speak to how those could perform other scenarios, either where rates stayed higher for longer or theres more macroeconomic weakness than you expect this trying to understand what the growth opportunities are.

Okay, I'll look for loan growth and credit Chris could you just speak to how those could perform other scenarios, either where rates stayed higher for longer or theres more macroeconomic weakness than you expected just trying to understand what the growth opportunities are if we have the scenario other than business as usual.

Speaker Change #222: Have the scenario other than business as usual.

And rate cuts in the second half of the year.

Speaker Change #223: So I'll maybe start on the loan growth side.

So I'll maybe start on the loan growth side.

Speaker Change #223: I think.

I think you know.

Speaker Change #224: As Chris mentioned earlier, it would help from a I think confidence and activity in the market perspective, if you see a signal.

As Chris mentioned earlier, it would help from a I think confidence and activity in the market perspective, if you see a signal.

Speaker Change #225: Rates going down because we see that sentiment out in the marketplace.

Rates going down because we see that sentiment out in the marketplace.

Speaker Change #226: However, like I talked about earlier I think we feel like we're well positioned with a line of sight to opportunities now that <unk>.

However, like I talked about earlier I think we feel like we're well positioned with a line of sight to opportunities now that even if the that didn't happen that we can drive the growth at the level that we've guided without that tailwind.

Speaker Change #226: Even if that didn't happen that we can drive the growth at the level that we've guided without that tailwind.

Speaker Change #227: I'll turn it over maybe to Catalina talk about if you want to add on the credit side.

I'll turn it over maybe to Catalina talk about if you want to have on the credit side.

Idaho.

Speaker Change #227: Okay.

With current or whatever are we expecting chips from a credit and impairment PCR Mr. Pangilinan IDB and.

Speaker Change #227: Yeah.

Catalina: Thanks in terms from a colonel in Panama Tcl Mr. Jonathan.

Speaker Change #229: Any additional clarification on anthem.

Additional clarification on anything.

Well, if you have any comments on how different scenarios I mean, I know this is in corporate and diverse nine but.

Well, if you have any comments on how different scenarios I mean, I know, there's some corporate of diverse nine but.

Your outlook, how much of that is dependent on rate cuts and if we don't get that or we have maybe in.

Speaker Change #230: Your outlook, how much of that is dependent on rate cuts and if we don't get that or we have maybe raised cuts in conjunction with macroeconomic weakness how does that change your outlook or does it change outlook for credit losses.

Speaker Change #231: In conjunction with macroeconomic weakness how does that change your outlook or does it change outlook for credit losses.

Speaker Change #232: So of course in the longer.

So of course the longer.

Speaker Change #233: The rates they hire the warranties transfer, we'll see some of our borrowers, but I think from a.

Stay high and I'm going to transfer that we'll see some of our borrowers by either I think from a or selection of are we seeing a portfolio.

Speaker Change #234: Or selection of are we seeing a portfolio.

Speaker Change #235: And then.

There is a significant change in the macro outlook.

Speaker Change #236: Mr Cancels in the macro outlook.

Speaker Change #236: Consideration we didn't see.

Curation, we didn't see.

Speaker Change #237: In wood cost.

It would cause a material impact on what we're seeing right now in terms of our impairment and overall credit performance of the book.

Speaker Change #237: Immaterial impact.

Speaker Change #237: We're seeing right now in terms of our impairment.

Speaker Change #237: Overall credit performance of the book.

Speaker Change #238: Okay. That's it for me thank you.

Okay. That's it for me thank you.

Yeah.

Speaker Change #239: Thank you with no further questions I will now turn the call over to Chris Fowler Forest.

Thank you with no further questions I will now turn the call over to Chris Fowler Forest.

Yeah.

Jenny: Thank you Jenny.

Thank you Jenny.

Speaker Change #241: And thank all of you for joining us today and to our shareholders for their continued commitment and support and look forward to reporting our third quarter financial results in August. Thank you very much.

And thank all of you for joining us today and to our shareholders for their continued commitment and support and look forward to reporting our third quarter financial results in August. Thank you very much.

Speaker Change #242: Thank you ladies and gentleman. The conference has now ended thank you all for joining you may all disconnect your lines.

Thank you ladies and gentleman. The conference has now ended thank you all for joining you may all disconnect your lines.

Speaker Change #241: Yeah.

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