Q3 2024 National Bank of Canada Earnings Call
Speaker Change: This conference is being recorded, but the conference is on the right track.
Marianne Ratté: All participants, please stand by your conferences ready to begin. Good morning and welcome to National Bank of Canada's third quarter results conference call. I would now like to turn a meeting over to Marianne Ratte, Vice President and head of Investor Relations. Please go ahead Marianne.
Marianne Ratté: Merci, and welcome everyone!
Speaker Change: We will begin the call with remarks from Laurent Ferreira, President and CEO, Matthew Santagre, CFO and Bill Bonnell, C. Fred Carpenter.
Speaker Change: Also presents for the Q&A session on DC Blosshire Head of Personal Banking and Planion Experience.
Speaker Change: Michael Zinnam has a commercial and private thinking.
Speaker Change: Nensie Pakez, Head of Welp Management, Aetian Zzut, Head of Financial Market, and Sita Nashal, Head of International.
Speaker Change: Before we begin, I would like to refer you to slide two of our presentation for information on forward-looking statements and non-get financial measures.
Speaker Change: The Thank Yous is non-gap measures, such as us as the result, to us as its performance. Management will be referring to us as the result unless of the wife's notice. I will not send a call over to you.
Speaker Change: Nessie Marianne, and thank you everyone for joining us. This morning, National Bank reported strong financial results for the third quarter, with earnings per share of $2.68 and a return on equity of 17%.
Speaker Change: These results reflect our diversified earnings mix and solid credit profile.
Speaker Change: Moreover, they underline the performance of our team and discipline executions across the bank in balancing revenue growth, costs and investments, as well as credit performance in a complex environment.
Speaker Change: Looking at the Canadian economy, monetary policy remains restricted, as evidenced by further normalization in the credit environment and a rising unemployment rate across the country.
Speaker Change: Recent rate cuts are step in the right direction in providing relief for consumers and supporting business investment.
Speaker Change: Looking at our performance here today, we are pleased with our progress in executing our growth strategy, supported by our strong capital levels with a CT1 ratio of 13.5%.
Speaker Change: First, we are generating strong organic growth and have been growing our balance sheet across our businesses.
Speaker Change: We are also returning capital to our shoulders through sustainable dividend increases, we ended Q3 with a payout ratio of 41.2%. Reflecting last quarter's dividend increase and robust earnings growth.
Speaker Change: We will review our dividend next quarter consistent with useful practice.
Speaker Change: Finally, the stars June we announced that we entered into the agreement to acquire Canadian Western Bank to accelerate our pan-Canadian growth.
Speaker Change: We will be bringing together two strong teams and highly complementary banks.
Speaker Change: The combination will strengthen our Western presence and national reach and will also provide more choices to individuals, entrepreneurs and businesses across the country.
Speaker Change: The regulatory approval process is underway and our integration role map is progressing in partnership with CWV leaders.
Speaker Change: Turning now to the Q3 performance of our segments.
Speaker Change: Personal and commercial banking delivered solid revenue growth of 7% year over year.
Speaker Change: As anticipated, personal mortgage growth picked up, increasing 2.4% year over year, driven by stronger donations in our internal channels.
Speaker Change: Our commercial loan portfolio grew 14% year over year, underlying contingent momentum in ensure residential real estate and broad-based growth across our industries.
Speaker Change: Well, management delivered a strong performance in the third quarter. Net interest income was up 14% year over year, with strong deposit inflows in our full service broker and private banking channels.
Speaker Change: benefiting from strong markets, feed-based reviews were up 12% while transaction reviews were up 21% year over year.
Speaker Change: With a strong top line and operating leverage of nearly 3%, net income grew 19% from last year.
Speaker Change: A UM also grew 20% year over year as a franchise continues to experience strong organic rough.
Speaker Change: Financial Markets generated net income of 318 million in Q3 reflecting a well-diversified business mix and the benefits of our strategic investments.
Speaker Change: Pairable Market Conditions, also contributed positively across most sectors.
Speaker Change: Revenue for global markets exceeded 415 million, again this quarter, supported by momentum in our security's finance and interest rates businesses.
Speaker Change: Corporate and investment banking revenues were up 16% the over year with a solid performance across the platform.
Speaker Change: Cretagy delivered another solid performance in Q3 with average assets up 13% your over year and strong investment volumes year to day.
Speaker Change: Net Interest Income was up 12% over last year and 2% sequentially.
Speaker Change: Gettegies portfolio continues to generate strong underlying performance while maintaining a defensive position. And the team also remains disciplined as it pursues opportunities with attractive risk reward pull-ups.
Speaker Change: Finally, ABA Bank generated net income growth of 24% year over year. ABA loans and deposits were up 17% and 21% respectively, and it's climbed base of 29% year over year.
Speaker Change: ABAs performance once again reflects its unique strengths, including its digital payments and cash management capabilities.
Speaker Change: Looking ahead, our capital deployment strategy and delivering superior returns remain key priorities for the bank.
Speaker Change: With our strong execution, diversified earnings stream and prudent approach to capital, credit and costs, we remain well positioned in the current environment and for the growth opportunities ahead.
Speaker Change: I will now turn it over to Maddie Shantan.
Maddie Shantan: Thank you to all and good morning, everyone. Like almonds will begin on slide 7. The Van Deliver's strong results in the third quarter in your dates, underpins by consistent execution, allowance approach to growth and investment, and continue cost-efficient.
Speaker Change: BCC reached $1.4 million in 2,3 with all businesses achieving some of the digital growth in your career. Organic growth was broad-based and revenue were well-minedred to five.
Speaker Change: Operating leverage what's strong at 6% in Q3 and 3% here today.
Speaker Change: Our highly efficient business segments generated an online efficiency ratio below 52% in both 2,3 and year-to-date.
Speaker Change: We remain disciplined around expensive management, which continues to yield results. Revenue growth of 17% year over year, led to higher variable compensation, particularly in financial markets and in wealth management.
Speaker Change: Excluding variable compensation, expenses rose to 6% over year, mainly reflecting Janne O'Salerian trees and investments.
Speaker Change: Find Vessments, contribute to simplifying our businesses, gaining efficiency and building for the future.
Speaker Change: At Ganyne's Quarter, we are pleased with the performance of the business segments and the back as a whole. These results underscore our resilience and diversifying business model.
Speaker Change: Now, turning the slide eight.
Dick Wancholi: Dick Wancholi, non-trading NII, was up 9% or 6% excluding the impact of the conversion of the A's to Colorado.
Speaker Change: At the Albert Level, this conversation has been well-inputed.
Speaker Change: The All-Banks non-trading name for that 2.22% and role of five places points sequentially, largely reflecting higher and higher from treasury activities.
Speaker Change: As a reminder, AMM results can be lumpy from quarter to quarter, particularly against the current banter of a high interest rates volatility.
Speaker Change: As anticipated, Namistien Sivante in was down sequentially.
Speaker Change: This reflects the conversion of B.A. to Carl Lone, as well as over-defossed margin, stemming from lower rates and lower margin reflecting the current market environment.
Speaker Change: Hey, so what we're singing today, we expect the TNC margin in Q4 to be relatively stable.
Speaker Change: We are pleased with the Healthy Volumes and Broad-based Growth that we are generating within this segment. And as always, we remain committed to growing with the right balance between margins, return and credit quality.
Speaker Change: Moving to Sight 9, we achieved significant growth on both sides of the balance sheet in U3. Lones were up 9% year over year and 2% quarter of a quarter.
Speaker Change: The process, excluding wholesale funding, were up 6% year, and 3% corridor of a quarter, and we're pleased with this momentum.
Speaker Change: In particular, personal demanded budgets increased by $1.4 billion, up 3% sequentially, while non-retail deposits increased by $5.7 billion, up 4% from mass quarters.
Speaker Change: With strong organic growth, our loan to the positive ratio, so that 97% as a Q&A.
Captain Oman: Now, turning to Captain Oman's life in.
Captain Oman: We ended 2-3 with a robust C-1 ratio at 13.5%.
Captain Oman: 3rd quarter earnings, met a dividend, contributed 40 basis points to our ratio, again, underscoring our internal capital generation capacity.
Captain Oman: From growth in credit risk are to be weighed, with primarily driven by organic growth in commercial and corporate banking, and to a lesser extent, from credit migration in non-retail portfolio.
Captain Oman: Our reductions in market risk are the U.A. driven by lower underlying market volatility in exposure and at the 15th basis points of C.P.1.
Captain Oman: and now moving to slide 11. Following the announcement regarding our intentions to require CWB, we have taken action to protect our capital position against the impact of financial interest rate fluctuations.
Captain Oman: We call that under purchase accounting. We are required to fare values, CWB, SS, and my abilities are closed. Changes in interest rates, in fact, fare value, which in turn will impact the amount of goodwill and level of capital X loosing.
Captain Oman: Based on our current sentiments, our CT1 sensitivity to interest rates is limited.
Captain Oman: If we have taken no action...
Captain Oman: The project is in fact disclosing from a variation of 100 basis points in term interest rate.
Captain Oman: would be about $100 million in Fair Valley, representing approximately seven basis points of CQA.
Captain Oman: However, we are proactively mitigating this exposure by implementing an economically neutral hedging strategy to minimize the impact of interest rate fluctuations on capital.
Speaker Change: at such the impact on C.T.1 after the instrumentation of that hatch, it's expected to be known. The hatch will be adjusted progressively until the closing day.
Speaker Change: Good conclude having delivered strong performance in Q3 and year-to-date. We are well positioned for the final quarter of 2020-4.
Speaker Change: For over, our strong balance sheet and diversified business model, for the summer solid footing, to continue to execute our strategy, as we laid a groundwork for the approval of the CWB transaction.
Speaker Change: I will now turn the call over to Nick.
Nick: May I see Mary Shantale in good morning, everyone. I'll begin on slide 13 with comments on the macro environment and our credit performance in the third quarter.
Nick: The main trends in a Canadian economy that we discussed on prior calls persisted through the third quarter. Employment conditions continued to weaken, particularly for the younger age core. GDP growth remained muted as the liked impact of higher interest rates continued to slow the economy.
Nick: and inflation further decelerated enabling the central bank to begin reducing interest rates.
Speaker Change: Against this complex macro backdrop, our credit portfolios perform very well with total provisions for credit losses of $149 million or 25 basis points, just one basis point higher than last quarter.
Speaker Change: In pair of provisions, also increased one basis points, clenched lead to 21 basis points, or $122 million.
Speaker Change: Retails in Parade PCLs for stable order over quarter at $49 million, while commercial PCLs declined significantly quarter over quarter to $17 million.
Speaker Change: In financial markets for $20 million provision was due primarily to one newly impaired loan in the mining sector.
Speaker Change: and the USS FNI segment performance continued to meet our expectations.
Speaker Change: Credigie saw normal seasoning of portfolios and, as expected, impaired provisions remained elevated at ADA.
Speaker Change: provisions on performing loans increased to $25 million or four basis points with the primary driver being portfolio growth.
Speaker Change: Looking ahead, we expect the current trends of rising unemployment and sluggish growth to continue in the company quarters, which should generate further increases in delinquencies and repair provisions.
Speaker Change: Taking into account our defensive business product and geographic mix, we remain confident in our guidance for the full year 2024 in pair of provisions of 15 to 25 basis points. And still expect to end up around the middle of that range.
Speaker Change: Turning to slide 14.
Speaker Change: We continue to prudently build our total allowances for credit losses, which reached more than $1.5 billion. Representing a strong coverage of 4.6 times, our last 12 months, that judge us.
Speaker Change: Performing ECLs increased for the 9th consecutive quarter and represents 2.7 times the last 12 months in paired PCLs.
Speaker Change: Facial metrics on our allowances are provided in the Bendix tank.
Speaker Change: Turning to slide 15.
Speaker Change: Our gross and paired loan ratio increased to 59 basis bikes.
Speaker Change: As you can see on the slide, the main driver of higher gills throughout the year has been ABA due to elevated formations combined with a longer collection cycle.
Speaker Change: I'll share a few additional insights on ADA's impaired loans.
Speaker Change: They have an average size of about $70,000.
Speaker Change: and an average LTV around 50%.
Speaker Change: When a loan becomes impaired, we take prudent stage three provisions that are in excess of our historical charge-off experience.
Speaker Change: And finally, about two thirds of the impaired loans which were resulting in Q3 experienced zero dollar loss, which supports a expectation that EBA's net charge-off rate should remain low.
Speaker Change: Formations in the third quarter declines to $226,000.
Speaker Change: in the commercial portfolio for patients for significantly lower quarter of a quarter and spread across a few sectors, including wholesale trade, transportation and real estate.
Speaker Change: In the financial markets portfolio, net formations of $17 million related to one file in the mining sector, it was personally offset by repayments and other sectors.
Speaker Change: As discussed, ABAs formations remain elevated to a slow recovery in tourism and softer external demand.
Speaker Change: By 16, we present highlights from our Canadian Result Portfolio.
Speaker Change: The geographic and product mix remains stable with Quebec accounting for 54 percent, the third market is accounting for 29 percent on total result.
Speaker Change: I arrest Connatured Boroughs, represent around 50 basis points of the toll of Result Portfolio.
Margot: 90-day delinquency, so now I'm sure Margot just in he locks remain low at 14 basis points and 10 basis points respectively.
Margot: You can find additional details on our Canadian mortgages on slide 17.
Margot: Now note that 60% of our mortgage portfolio has now been reprised at higher interest rates. In 90-day delinquencies remain below the pre-pandemic level.
Margot: He'd include the additional insights on trends in 90-day telequencies for the entire Canadian retail portfolio in the pandix 9. In the trends discussed on prior calls, we may.
Margot: In conclusion, we are pleased with the strong credit performance again this quarter which reflects our defensive positioning, resilient mix and proven provisioning.
Speaker Change: Before I turn the call back over to the operator, I'd like to share a few comments and this is my last investor call.
Speaker Change: First, I want to sincerely thank Laurent and the exceptional team of colleagues around the table. It's been a true pleasure working with you for very, very closely for more than 20 years.
Speaker Change: I also want to express a deep gratitude to all my excellent colleagues in the RISP, in the particular results of the best chance.
Speaker Change: I take great comfort for knowing that our risk management is in very good hands.
Speaker Change: and finally thanks to the investor and analyst community for your great questions and conversations over the years.
Speaker Change: with that, I'll now turn the call over to the operator for the Q&A.
Speaker Change: Thank you. We will not take questions from the telephone lines. If you have a question, please press star one on your devices keypad. You may cancel your question at any done by pressing star 2.
Speaker Change: Peace for us. Now, one at this time, if you have a question, that will be a brief, possible participant's suggestion for questions. We thank you for your patience.
Speaker Change: Her first question is on Matthew Lee from Canada continuity. Please go ahead.
Matthew Lee: Hey, good morning, nice to meet my questions here. Maybe just starting off on CWB. Can you maybe provide an update on the implementation of cost and energy? Does any learning about the integration of that? Thanks so far and I look really good.
Manifel Navabita: Hi, my two weeks, I'm Manifel Navabita, thank that question.
Unknown Executive: All participants, please stand by, your conference is ready to begin. Good morning and welcome to National Bank of Canada's Third Quarter Resolve Conference call.
Speaker Change: And so as you know, we've just recently announced this transaction.
Speaker Change: and the current process we're working on are different regulation applications. So it's also too early to give an update on synergies, but we are definitely looking forward.
Marianne Ratté: I would now like to turn the meeting over to Marianne Ratte, Vice-President and Hand of Investor Relations. Please go ahead, Marianne. Thank you, and welcome everyone.
Marianne Ratté: We will begin the call which remarks from La Jocque Perreira, President and CEO, Mrs. Jean-Pasreira, CFO, and Bill Bonnell, C. Fritz Carpester. Also present for the Q&A session are Lucie Blanchet, Head of Personal Banking and Plant Experience. Michael Denham, Head of Commercial and Private Banking, Nancy Paquet, Head of Welp Management, Etienne Dubuc, Head of Financial Market, and Stephane Achard, Head of International.
Speaker Change: to giving you some more information as we progress into this process.
Speaker Change: Okay, maybe in terms of the revenue side then. I think this is perhaps in the being area where I underestimate the opportunity, but you know, do you have any kind of prerequisite numbers or only numbers of what you might be expecting in terms of cross opportunities to put between the two banks?
Speaker Change: It's the law I'll take this question now and we didn't disclose that yet and we will as it moves along. Well if you just want to remind you, we're early, you know there's a vote next week, and we'll see you in the next video.
Marianne Ratté: Before we begin, I would like to refer you to slide two of our presentation for information on forward working statements and non-gap financial measures. The thank you is non-gap measures such as adjusted results to assess its performance. Management will be reprinted to adjust the results unless otherwise notice.
Speaker Change: We are working very closely with the competition bureau and things are progressing really well. As we move along, we'll be able to update you on timing.
Marianne Ratté: I will not send a call over to the call. Nancy Marianne, and thank you everyone for joining us.
La Jocque Perreira: This morning, National Bank reported strong financial results for the third quarter with earnings per share of $2.68 and a return on equity of 17%. These results reflect our diversified earnings mix and solid credit profile. Moreover, they underlined the performance of our team and disciplined execution across the bank in balancing revenue growth, costs, investment, as well as credit performance in a complex environment.
Speaker Change: A close?
Speaker Change: and we will be able to provide you more insights on...
Speaker Change: Synergy Spos, Coss, Funding and Revenue as well.
Speaker Change: So we understand your question, we know you're eager and we are also eager to be able to at some point share all of that with you but there will be a time in a very near future where we will be able to do that.
Speaker Change: All right, I look forward to that. Thanks.
La Jocque Perreira: Looking at the Canadian economy, monetary policy remains restricted as evidence by further normalization in the credit environment and a rising unemployment rate across the country. Recent rate cuts are a step in the right direction in providing relief for consumers and supporting business investment.
Speaker Change: Thank you. I'll follow in question if there are many grown-in from Scotchubank. Please go ahead.
Speaker Change: Hi, I wanted to ask about the dynamics impacting the decline in the PNG margin after periods.
Speaker Change: Relative Stability, so I think the conversion to Chora is part of the impact. Maybe you could quantify that and just help me understand the moving parts here taking the margin down.
La Jocque Perreira: Looking at our performance here today, we are pleased with our progress in executing our growth strategy supported by our strong capital levels with a C-T-1 ratio of 13.5%. First, we are generating strong organic growth and have been growing our balance sheet across our businesses. We are also returning capital to our shareholders through sustainable dividend increases. We ended Q3 with a payout ratio of 41.2%. We're selecting last quarter's dividend increase and robust earnings growth. We will review our dividend next quarter consistent with usual practice.
Speaker Change: Yes, thank you, it's news to you, I'll take that one. So as you said, there are several components impacting this border. One of them is the business mix, which is nearly half of it, and maybe due to the migration of the VH decorum.
Speaker Change: And then I also have the diffusive friend's quarters, which is a computer and also the spreads on the variable rates commercial diffusive. I've been in fact in behind the rate cut.
La Jocque Perreira: Finally, this past June, we announced that we entered into an agreement to acquire Canadian Western Bank to accelerate our pan-Canadian growth. We will be bringing together two strong teams and highly complementary banks. The combination will strengthen our Western presence and national reach.
Speaker Change: and the six from deposits were discontinued to be pressured, like we discussed a couple of quarters ago.
Speaker Change: but as a portfolio role over that step as fiction, you know, in a list over time.
Speaker Change: and only absent friends in the current environment, the commercial loan spreads out safe from pressure and as you know, I have great decreases, it gets back quicker to the businesses compared to the recent times. So that's basically the difference part of it.
La Jocque Perreira: We will also provide more choices to individuals, entrepreneurs and businesses across the country. The regulatory approval process is underway and our integration roadmap is progressing in partnership with CWV leadership.
Speaker Change: and then the bigger question is just understand how we go from pressure there to margin expansion to the top of the house.
La Jocque Perreira: Turning now to the Q3 performance of our segments. Personal and commercial banking delivered solid revenue growth of 7% year-over-year. As anticipated, personal mortgage growth picked up, increasing 2.4% year-over-year, driven by strong originations in our internal channels.
Speaker Change: and you can just tell me understand how you're able to offset that pressure in that segment and then actually.
Speaker Change: C. Margin Expansion, beyond that, a little confused in terms of how that actually all fits together going from P.M.C to the, which is your biggest business to the overall bank.
La Jocque Perreira: Our commercial loan portfolio grew 14% year-over-year, underlying continued momentum in insured residential real estate and broad-based growth across our industries.
Speaker Change: Yes, Mimi, it's a mess out here. So, you're absolutely right. The two main drivers.
Speaker Change: of the Expension of the All Night's Name, Exceeding Training, Discord for mainly driven by the ALM activities in the Treasury segment, considering the current backdrop of high interest rate volatility.
La Jocque Perreira: Well management delivered a strong performance in the third quarter. Net interest income was up 14% year-over-year, with strong deposit inflows in our full-service brokerage and private banking channels. Benefiting from strong markets, fee-based revenues were up 12% while transaction revenues were up 21% year-over-year.
Speaker Change: So as we know, ALM can be volatile, thank-quarter to quarter, and we've been efficient on the all-backed NIM from those activities this quarter, and it was partly offset by the PNC margin.
La Jocque Perreira: With a strong top line and operating leverage of nearly 3%, net income grew 19% from last year. AUM also grew 20% year-over-year as the franchise continues to experience strong organic growth.
Speaker Change: Okay, I got it.
Speaker Change: The other question I have was just in terms of market risk, a pretty size of a decline in your market risk, RWA. So I know there's some notes here explaining it, but just if you're going to a little bit more detail in terms of...
La Jocque Perreira: Financial markets generated net income of 318 million in Q3, reflecting a well-diversified business and the benefits of our strategic investments. Poverable market conditions also contributed positively across most sectors. Revenues for global markets exceeded 450 million again this quarter, supported by momentum in our securities finance and interest rates businesses. Corporate and investment banking revenues were up 16% year-over-year with a solid performance across the platform. Credity delivered another solid performance in Q3 with average assets up 13% year-over-year and strong investment volumes year-to-date.
Speaker Change: What's actually going on here and is that it's just sort of normal volatility or there's something more, it looks like...
Speaker Change: Something more than your typical movement in that line I think.
Marianne Ratt: Hi, many, it's at the end, so it's pretty much what Marianne Ratt has said in her script, there's not much more to this, it's pretty much half.
Marianne Ratt: Laura Volatilityz, a quarter-end, a generally built in effects, rates and equities, and lower sensitivities in our books that are marked market. So that's really a story there.
Speaker Change: I mean, this measure has been coming down over the past few quarters, I mean the introduction of the FRTB, you know.
La Jocque Perreira: Net interest income was up 12% over last year and 2% sequentially. Credity's portfolio continues to generate strong underlying performance while maintaining a defensive position. And the team also remains disciplined as it pursues opportunities with attractive risk reward profiles.
Speaker Change: I think it may be preventive looking farther back, but it looks like there's a downward trend here in terms of market risk, RWA is that correct and is there.
Speaker Change: If there's something that we could say, you know, expect this line to continue to expect this line to continue to to trend lower if we look at this.
La Jocque Perreira: Finally, ABA Bank generated net income growth of 24% year-over-year. ABA loans and deposits were up 17% and 21% respectively and its client base of 29% year-over-year.
Speaker Change: That's a good question, many, and no, I would not expect that line to continue to decline as our business.
Speaker Change: Edvin Flos, and the markets I expect will be more volatile in the next few quarters, you've had a lot of geopolitical things going on, you have a lot of, um...
La Jocque Perreira: ABA's performance once again reflects its unique strengths, including its digital payments and cash management capabilities.
Speaker Change: Well, the easing cycle is starting with central banks over the world, so I would actually...
La Jocque Perreira: Looking ahead, our capital deployment strategy and delivering superior returns remain key priorities for the bank. With our strong execution, diversified earnings stream and prudent approach to capital, credit and cost, we remain well positioned in the current environment and for the growth opportunities ahead.
Speaker Change: All things being equal, expect that to creep back up.
Speaker Change: Thank you.
Speaker Change: Thank you. I'll follow in question if some Paul Holden from CIBC. Please go ahead.
Paul Holden: Alright, thank you, good morning. A couple of questions for Bill. I want to talk a little bit more about what you're seeing in customer behavior in Canada.
Mali Shant: I will now turn it over to Mali Shant.
Mali Shant: Thank you so much and good morning everyone. My comments will begin on slide 7. The bank delivers strong results in the third quarter and year-to-date, underpinned by consistent execution, which was broad-based and revenues were well-libricized. Operating leverage was strong at 6% in Q3 and 3% year-to-date. Our highly efficient business segments generated in all bank efficiency ratio below 52% in both Q3 and year-to-date. We remain disciplined around expense management, which continues to yield results.
Speaker Change: Just because the Delinquency Trends while they're getting somewhat worse, there's still better than I would have expected So, one of you is because some contacts may be starting with sort of variable those on variable rate, mortgages, how their behavior is, how the delinquency rates are there and if there's any kind of
Speaker Change: Reed Thruz, you would use to determine how those on sixth rate mortgages might be impacted as they have to renew.
Speaker Change: Yeah, I fall. Thanks for the question. I think it's a 10-dix.
Tan Nobbis: Tan Nobbis.
Speaker Change: I mean, that is a Pentech's nine where we show that, quite clearly, and you see in the left column, we show pre-tendemic levels for the night aid linkancies and and break it down by the different classes. So, um...
Speaker Change: The behavior that has been, I think, stronger than we would have thought two years ago, or if you had to set up interest rates, go up 400 basis points plus an economy slows down, what would it be? Certainly we see resilience in the behavior of our retail Canadian clients.
Mali Shant: Revenue growth of 17% year-to-date, less to higher variable compensation, particularly in financial markets and in well-management. Excluding variable compensation, expenses rose to 6% year-to-year, mainly respecting general salary increase and investments. Our investments contribute to simplifying our businesses, gaining efficiency and building for the future. Again this quarter, we are pleased with the requirements of the business segments and the bank as a whole. These results underscore our resilience and diversify business models.
Speaker Change: and I will be on surprise by the...
Speaker Change: Like the geographic aspect of that and that are overweight and put back with more resilient consumers is certainly continuing to show through and the
Speaker Change: Dylan Quincy, you can see how I'm in the Benedictine.
Speaker Change: Um, variable rates, we have called out specifically for the last few quarters because as you know, our variable rate, the aim is go out every time the rate changes and you can see certainly that variable rate, mortgage to liquid disease have increased.
Mali Shant: Now turning to slide 8. Sequentially, non-trading NII was up 9% or 6% excluding the impact of the conversion of VAs to power along. At the alt-line level, this conversion has minimal impact. The alt-line is non-trading NIMS so that 2.22% enrolls 5 basis points sequentially, largely reflecting higher NII from treasury activities.
Speaker Change: I think I've called out on a few slides where it's increased the most is in the...
Speaker Change: Insurance, Barable Rate, Bores, because those are, as you know, customers that at less down payment, typically first time on buyers, so the payment shock of the increased rate.
Speaker Change: is a bigger part of their household budget, and the uninsured, variable rate mortgage, 27 basis penses.
Mali Shant: As a reminder, ALM results can be lumpy from quarter to quarter, particularly against the current backdrop of high interest rates volatility. As anticipated, NIMS TNC banking was down sequentially. This reflects, in part, the conversion of VAs to power along. As well as lower deposit margins, stemming from lower rates and lower low margins, reflecting the current market environment.
Speaker Change: is still pretty close to pre-pantemic levels, and I think that demonstrates that it's not only...
Margaret Schweneman: and Margaret Schweneman, which has gone out, but income and liquidity has been quite strong as well.
Lucy: Lucy, any other comments on, do you want to add on consumer beater? Yeah, I may add to that one minute, it's good to be kidding at a very, very well-ranked model holder. They've always had a better risk profile than the course for the new one.
Mali Shant: Based on what we are seeing today, we expect the PNC margin in Q4 to be relatively stable. We are pleased with the healthy volumes and broad-based growth that we are generating within this segment. And as always, we remain committed to growing with the right balance between margins, returns, and credit qualities.
Speaker Change: and when we look specifically at this, it is supposed to create a kind of ink when you see, you will meet the populations with the lowest for the time getting the ink and ink. So very good, they are a big pro-finder.
Speaker Change: Thanks for your question, Paul. I guess it's the second half, almost to my perspective, the more important part is, kind of like, can we take anything away from that better experience and expect it than you would have had two years ago and translate that to how maybe.
Mali Shant: Moving to slide 9, we achieve significant growth on both sides of the balance sheet in Q3. Lones were up 9% over year and 2% quarter of a quarter. The profits, excluding wholesale funding, were up 6% over year and 3% quarter of a quarter, and we are pleased with this moment.
Speaker Change: those six to eight borrowers might be able to deal with higher borrowing costs over the next one or two years.
Speaker Change: Yeah, I think, all the way at Spring that is the, you know, with retail credit performance, unemployment is a great, significant factor, not just interest rates, so, um,
Mali Shant: In particular, personal demand deposits increased by $1.4 billion, up 3% sequentially, while non-retail deposits increased by $5.7 billion, up 4% from last quarter. With strong organic growth, our loan to deposit ratio to the 97% as a queue 3.
Speaker Change: I would say if you think about it in terms of the impact of the pain and shock when the fixed rate borders renew.
Speaker Change: Will they determine why interest rates are at that point, and certainly with the Bank of Canada already reducing interest rates twice and expectations for further decreases if.
Mali Shant: Now, turning to capital on-site ends. We ended queue 3 with a robust C-T-1 ratio at 13.5%. Third quarter earning, net of dividends, contributed 40 basis points to our ratio, again, underscoring our internal capital-generation capacity. Strong growth in credit risk are to be weighed, with primarily driven by organic growth in commercial and corporate banking, and to a lesser extent from credit. Credit migration in non-retail portfolio. Our reduction in market risk RWA driven by lower underlying market volatility in exposure at quarter ends added 15 basis points of C-T-1.
Speaker Change: If the trend continues, the Navy department shock won't be as significant, however, I would remind you that the
Speaker Change: That's the end.
Speaker Change: The housing market given the under supply nature and still strong immigration trend has led to pretty resilient home prices and so many of the more is even if the aim and shock is significant.
Speaker Change: They still have a lot of options with significant equity in their arms. And so there's a lot of development there, and I think it's probably too early. Hard to predict exactly what will happen in 2026-27 renewables.
Mali Shant: And now moving to slide 11. Following the announcement regarding our intentions to require CWV, we have taken action to protect our capital position against the impact of potential interest rates fluctuations. We call that under purchase accounting, we are required to fair value CWVs assets and myabilities at close, changes in interest rates, impact fair value, which in turn will impact the amount of goodwill and level of capital like closing. Based on our current estimates, our C-T-1 sensitivity to interest rates is limited.
Mali Shant: If we have taken no action, the projected impact that closing from a variation of 100 basis points in term interest rates would be about $100 million in fair value, representing approximately seven basis points of C-T-1. However, we are proactively mitigating this exposure by implementing an economically neutral hedging strategy to minimize the impact of interest rate fluctuations on capital.
Speaker Change: through some balance, not just to the situation, but the law is not just a higher mortgage payments.
Speaker Change: Okay, and then second question I have for you both is related to the...
Speaker Change: A.C. else I could look at slide 14, you show the conservatism there.
Speaker Change: and again I think with actual losses trending maybe at a...
Speaker Change: Lower rate of increase and expected.
Speaker Change: at what point or what would be the catalyst for national two, two sort of turn, turn the dial on the building and allowances, what could lead to allowances actually starting to come down.
Speaker Change: So, Paul, I think the, you know, are, as we call out to this quarter.
Paul Holden: We have had good organic long growth across the businesses and that generates increases in the generates reporting.
Mali Shant: As such, the impact on C-T-1 after the implementation of that hedge is expected to be met. The hedge will be adjusted progressively until the closing date.
Paul Holden: Performing provisions in the building there are a lot of things.
Speaker Change: So we have not changed our weight and we have not looked at our macrosinarios, it's been a pretty consistent or base case, it's still for unemployment to trend out.
Speaker Change: William's 2025 for the peak of around 7% and that hasn't changed.
Mali Shant: To conclude, having delivered strong performance in Q3 and year-to-date, we are well positioned for the final quarter of 2024. Moreover, our strong balance sheet and diversified business model put us on a solid footing to continue to execute our strategy as we lay the groundwork for the approval of the CWB transaction.
Speaker Change: Every quarter, we get together with our economists and the team and we review all of those factors and the decisions on.
Speaker Change: on Wades and such, and we'll do that again in the fourth quarter, and every quarter ends of 2025, so it's hard to predict.
Speaker Change: when there may be a change, but it's going to be based on what the macro context are and our expectations for the future each quarter as it comes.
Mali Shant: I will now turn the call over to them. May I see Mary Chantal and good morning, everyone.
Bill Bonnell: I'll begin on slide 13 with comments on the macro environment and our credit performance in the third quarter. The main trends in a Canadian economy that we discussed on prior calls persisted through the third quarter. Employment Conditions continued to weaken, particularly for the younger age core. GDP growth remained muted as the liked impact of higher interest rates continued to slow the economy. And inflation further decelerated enabling the central bank to begin reducing interest rates.
Speaker Change: Alright, thanks for the answers of Bill today and in the past great discussions with you and all the best in retirement. Thank you very much for all.
Jella: Thank you. Follow the question, if I'm a Jella, she from UBS. Please go ahead.
Speaker Change: Good morning, thanks for taking the question. I was wondering if you could touch on loan growth in PNC and what you're seeing on the personal side as well as the commercial size, which is posting really strong growth.
Bill Bonnell: Against this complex macro backdrop, our credit portfolios perform very well with total provisions for credit losses of $149 million or 25 basis points, just one basis point higher than last quarter. In paired provisions also increased one basis points sequentially to 21 basis points or $122 million. Retailed in paired PCL's for stable order over quarter at $49 million, while commercial PCL's declined significantly quarter to $17 million. In financial markets, a $20 million provision was due primarily to one newly impaired loan in the mining sector.
Speaker Change: Can you just talk about the backdrop and where you see the best growth opportunities and how we should think about the past going forward?
Lucy: Yes, thank you, it's Lucy. I'll start in Michaelville with Adam with the commercial. We continue. She wrote in the local polio, I would say similar to the base that we see right now.
Speaker Change: We continue to perform very well on the mortgage front in our international channel, which is in line also with the reactive market performance But at this time I'm happy to see the discipline that we have also on the margin sign
Speaker Change: We had a good growth in the art alone work.
Speaker Change: and as we look forward to the market's opportunities, again, in terms of margin, maybe contrast a bit. So we expect maybe to see some more of our growth in that portfolio, but still, you know, with our reform of business.
Bill Bonnell: In the USS FNI segment, performance continued to meet our expectations. Credigies saw normal seasoning of portfolios and, as expected, impaired provisions remained elevated at ADA. Provisions on performing loans increased to $25 million or 4 basis points, with a primary driver being portfolio growth.
Speaker Change: and the credit cards and of course for you I will continue to...
Speaker Change: Remain now
Speaker Change: I would say I continue to see consumers that are prudent and adjusting so the revolving balances are not growing as fast as we thought we would. The payment rates continue to be elevated and the purchase volume is in the high single basis.
Bill Bonnell: Looking ahead, we expect the current trends of rising unemployment and sluggish growth to continue in the coming quarters, which should generate further increases in delinquencies and impaired provisions. Taking into account our defensive business product and geographic mix, we remain confident in our guidance for the full year 2024 and paired provisions of 15 to 25 basis points, and still expect to end up around the middle of that range. Turning to slide 14, we continue to prudently build our total allowances for credit losses, which reached more than $1.5 billion, representing a strong coverage of 4.6 times or last 12 months, that charge us. Performing ECLs increased for the ninth consecutive quarter and represent 2.7 times the last 12 months in paired PCLs. Additional metrics on our allowances are provided in the Bendix TANF.
Speaker Change: and the thing you know, manager there. So it should continue to grow in a credit card, but not maybe I spend spending it up into it. But at the same time, it's positive on the great time.
Speaker Change #100: I'm a commercialist at the Russian Health Center coming. It is a blood-based growth, really quite all parts of the business, but the two areas to call out are one, are real estate and shared lending, and that's been a strategic priority of our rest for a while.
Speaker Change #100: and second is our growth outside of Quebec, which again has been a special party for a while, and those are the two areas that are growing in a faster ranked domestic portfolio.
Speaker Change #101: Okay, very helpful. And then perhaps thing on that theme of growth, can you talk about the acid that's 11% year over year. Can you just talk about the piece of growth as the move forward and also touch on the risk profile and profitability of the acid you're putting on the books?
Bill Bonnell: Turning to slide 15, our gross impaired loan ratio increased to 59 basis points. As you can see on the slide, the main driver of higher gills throughout the year has been ABA due to elevated formations combined with a longer collection cycle.
Speaker Change #102: Yeah, sure, so...
Speaker Change #103: Thank you, it's in. Thank you for your question.
Bill Bonnell: I'll share a few additional insights on ABAs and paired loans. They have an average size of about $70,000 and an average LTV around 50%. When the loan becomes impaired, we take prudent state's three provisions that are in excess of our historical charge-off experience. And finally, about two thirds of the impaired loans, which were resolved in Q3, experienced $0 loss, which supports our expectation that ABA's net charge-off rate should remain low. Formations in the third quarter declined to $226.9. In the commercial portfolio, formations were significantly lower quarter over quarter and spread across a few sectors, including coastal trade, transportation, and railing.
Speaker Change #104: So, I have credit G delivered the pre-solid quarter in 2003.
Speaker Change #105: and EURLU, the assets are in all up 12%
Speaker Change #106: It is a very high-quality diversified portfolio, margins are fabled and really we see the performance of the book is really strong, we're not faying in.
Speaker Change #106: and I need the curioration in the secured side of the book, which is 94% of the book, and the the unsecured part has been amortizing as expected. Overall.
Speaker Change #106: The assets have grown a bit less than previous quarter, it continues to be a highly competitive market.
Bill Bonnell: State. In the financial markets portfolio, net formations of $17 million related to one file in the mining sector, it was personally offset by repayments and other sectors. As discussed, ABA's formations remain elevated to a slow recovery in tourism and software external demand. Approximately 12% ensured mortgages accounting for 29% on total result. Myarisk undentured borers represent around 50 basis points of the total result portfolio. 90 day delinquencies on uninsured mortgages in Helox remain low at 14 basis points and 10 basis points respectively.
Speaker Change #106: Visibility and New Opportunities can be a bit difficult because it's an environment where you have a lot of other players who are at pretty aggressive.
Speaker Change #106: So, because we are very strict about our risk reward discipline, that may mean that in some quarters, like this one, you'll see amortization of our existing book is new thing.
Speaker Change #106: Overall, I said, but we did make about 500 million of purchases this quarter. Does that help answer your question?
Speaker Change #107: Yes, very helpful. Thank you.
Speaker Change #108: Thank you. I'll follow in question your some nice job this is on from very tough investment research. Please go ahead.
Bill Bonnell: You can find additional details on our Canadian mortgages on slide 17. Now note that 60% of our mortgage portfolio has now been reprised at higher interest rates and 90 day delinquencies remain below the pre-pandemic level. It included additional insights on trends in 90 day delinquencies for the entire Canadian retail portfolio and appendix 9. In the trends discussed on prior calls remain.
Speaker Change #109: Thank you for your morning and we're going to ask a broader question on your credit register file.
Speaker Change #110: I understand why I quite a lot has been to run lower for your beefelter solios in Quebec.
Laura Housel: and Laura Housel, Levard's Lord that serves in cost less for all the real estate markets, so that makes sense. So I'm wondering if you could elaborate on what...
Speaker Change #112: Generates or keeps a lower ceiling on quite a lot in your non-ethel or commercial portfolios. Is that specific to underwriting practices, a national bank or your business makes? So, is it more reflective of broader characteristics of commercial lending and Quebec?
Bill Bonnell: In conclusion, we are pleased with the strong credit performance again this quarter which reflects our defensive positioning, resilient mix and proven provisioning.
Bill Bonnell: Before I turn the call back over to the operator, I'd like to share a few comments since this is my last investor call. First, I want to sincerely thank Laval and the exceptional team of colleagues around the table. It's been a true pleasure working with you for very, very closely for more than 20 years.
Speaker Change #112: Hi Nigel, thanks for the question.
Speaker Change #113: and I just think about it in terms of the co-act economy is very diverse in terms of sectors.
Speaker Change #114: It is one which typically has got lower peaks and troughs than other geographies.
Bill Bonnell: I also want to express a deep gratitude to all my excellent colleagues in the risk team in the particular Jean Sebastian. I take great comfort for knowing that our risk management is in very good hands.
Speaker Change #114: and it's one that retails one that benefits from institutions being in place that supports entrepreneurs and support, you can make growth that are more significantly than other jurisdictions.
Bill Bonnell: And finally, thanks to the investor and analyst community for your great questions and conversations over the years.
Unknown Executive: With that, I'll turn the call over to the operator for the Q&A. Thank you. We will not take questions from the telephone lines.
Speaker Change #114: So, that's one part of it. The other part would be some sector selection on our side. I think we have...
Unknown Executive: If you have a question, please press star one on your devices keypad.
Unknown Executive: You may cancel your question at any gun by pressing star two. Please press star one at this time. If you have a question, that one will be a response while participants register for questions.
Speaker Change #114: We have been less or relatively underweight in consumer discretionary exposed sectors. If you remember back to the beginning of the pandemic where we called them.
Unknown Executive: We thank you for your patience.
Speaker Change #114: COVID impacted sectors, primarily as consumer discretionary and a relative weight basis. We've been underweight, say, or less exposed to those sectors. So there's various reasons I think.
Matthew Lee: Our first question is from Matthew Lee from Canada continuity. Please go ahead.
Matthew Lee: Good morning. I have a question here. Can you provide an update on the implementation of cost energies and just any learnings around the integration about banks so far in the early days? Hi, Matthew. It's a medical data fee to think that question. So as you know, we've just recently announced this transaction and in the current process, we're working on our different regulation application. So it's also purely to give an update on synergies, but we are definitely looking forward to giving you some more information as we progress into this process.
Speaker Change #114: but you know on a macro basis.
Speaker Change #114: is a performance booster, and by the economy, we're in an environment where...
Speaker Change #114: and lighting the impact that constraints are still flowing through the economy, so...
Speaker Change #114: You know, our base base talks for continued.
Speaker Change #115: Increasing the electromagnetism.
Speaker Change #115: and Migrations across the country, and I wouldn't take what back that may be lower peaks and troughs than that of your stations. That helped.
Speaker Change #116: I think the follow-on to that is, you know, swimming.
Speaker Change #117: See that would be acquisition clauses, there's an equipment financing piece that you can roll out in your home problems to compact. Is that at all change? You're sector exposure or do you think that's going to change the kind of risk profile even incrementally of your commercial portfolio?
Matthew Lee: Okay, maybe in terms of the revenue side, then. I think this would perhaps maybe an area where I underestimate the opportunity, but, you know, do you have any kind of pre-equident numbers or early numbers of what you might be expecting in terms of cost opportunities to, opportunity to thanks? It's a little, I'll pick this question now. No, and we didn't disclose that yet, and we will as it moves along. Well, I just want to remind you, we're early.
Speaker Change #117: Yeah, it's too early to say Nigel. I can say when I think about our overall portfolio.
Speaker Change #118: and Geographic Doomsday.
Michael Zinnam: The first vacation is good. We have been happy to grow organically and it's been part of our strategy. I think it's Michael's already talked about the last period and before the integration we have been growing, our commercial portfolio, faster than in Rebecca and we're quite happy about that.
Matthew Lee: You know, there's a vote next week. CWV shareholders will be voting. We are working very closely with, off the, with the competition bureau, and things are progressing really well. As we move along, we'll be able to update you on timing of close, and we will be able to provide you more insights on synergies, both cost funding and revenue as well. So, look, we understand your question. We know you're eager, and we are also eager to be able to, at some point, share all that with you, but there will be a time in a very near future where we will be able to do that.
Matthew Lee: All right, I look forward to that. Thanks.
Unknown Executive: Thank you.
Speaker Change #120: and I need specific factors of CWB.
Speaker Change #121: Good answer. Last question, just touching on your mortgage portfolio, specifically investor mortgage component. We are seeing some stress bills there for investment properties, just negative cash flows.
Speaker Change #122: Any evidence that you could provide on the top edition of that portfolio between Ontario and Quebec, and by the characteristics of, yes, financial strain, different in Quebec versus left on Ontario, the popular research nursing.
Speaker Change #123: I think generally the same trends would apply simply because home prices are less in Quebec and the shock of interest rates are less and would stress the cash flows a little less, but it's to relatively small proportion of report folio, certainly any performance in that.
Paul Holden: I'll follow in question if I'm many Roman from Scotia Bank. Please go ahead. I wanted to ask about the dynamics impacting the decline in the P&C margin after a period of relative stability. So, I think the reference to the conversion to Cora is part of the impact. Maybe you could quantify that and just help me understand sort of the moving parts here, taking the margin down. Yes, thank you. It's new to you.
Speaker Change #124: Small segment with the data that is hidden in our disclosures and the overall mortgage portfolio. With nothing specific to call out Nigel.
Nigel: Ok, that's it for me. Thank you.
Marianne Donka: Thank you. I'm following questions from Marianne Donka from TDCQDs. Please go ahead. Good morning. Agenne, last quarter you've provided a pre-fold some discussion around your outlook for capital markets going into.
Paul Holden: I'll take that one. So, as you said, there are several components impacting this quarter. One of them is the business mix, which is nearly half of it, and maybe due to the migration of the VH to Cora. And then also the deposit spread is quarter, which is a component also the spread on the variable rates commercial deposits have been impacted by the rate cuts. And the six from deposit spreads continue to be pressured like we discussed a couple of quarters ago.
Speaker Change #127: 2Q3, I think you broke it up between global markets and corporate investment banking.
Speaker Change #128: It had the added benefit of being right, because the numbers were pretty strong with quarters, so it'd be helpful if we had a similar run down. Are you as optimistic about Q4 as you work Q3? Just be careful, early optimistic, I'll look back then.
Speaker Change #129: Yeah, thanks for the question, Marianne, and yeah, you're right, we feel good where we are, you're today.
Paul Holden: But as opposed to your role over that that as fiction, you know, the initial resign and on the assets friends in the current environment, the commercial loan spreads have faced some pressure. And as you know, as great decreases, it gets back quicker to the business compared to the return time. So that's basically the different parts of it. And then the bigger question is just understand how we go from pressure there to margin expansion sequentially at the top of the house.
Speaker Change #130: especially how our balance, the performance has been between global markets and between corporate investment banking. That said, usually...
Speaker Change #131: The second half in our businesses is a bit slower than the first half, so I don't think you'll be seeing record Q3s for us every year or like the highest quarter being Q3 every year, so that could be a bit unusual.
Paul Holden: I think it's just how many understand how you're able to offset that pressure in that segment and then actually see margin expansion beyond that. A little confused in terms of how that actually all fits together going from PNC to to the which is your biggest business to the overall bank. Yes, many is messed up out here. So you're absolutely right. The two main drivers of the expansion of the all night name, excluding trading.
Speaker Change #131: That said, we are seeing some continuing strengths, so first of all, in the equity and late markets, I think we're in a great position.
Speaker Change #131: to continue to deliver good results.
Speaker Change #131: I'm thinking of the repel issuance business.
Speaker Change #131: Especially if markets keep trending higher as a significant portion of our book could be called and rolled into new structures and that's for both inequities and rates.
Paul Holden: Discorder were mainly driven by the ALM activities in the Treasury segment, considering the current backdrop of high interest rate volatility. So as you know, ALM can be volatile and quarter to quarter and we've benefited on the all back name from those activities this quarter. And it was partly offset by the PNC margin.
Speaker Change #131: and since Aquini...
Speaker Change #131: Inplied volatility, closed the quarters at their very little level, I think we're seeing upside there, if we have volatility episodes in the coming months, and that could very well happen.
Paul Holden: Okay, I got it.
Speaker Change #131: Due to everything that's going on in the market and the geopolitical tensions and the rate cutting cycle underway. And we're seeing whenever it gets volatile that we come to do well both in our structure of business.
Paul Holden: The other question I have was just in terms of a market risk, a pretty sizable decline in your market risk RWA. So I know there's some notes here explaining it, but just if you're going to a little bit more detail in terms of what's actually going on here and is that it's just sort of normal volatility or is there something more, it looks like something more than your typical movement in that line I think.
Speaker Change #131: and in our market making business where we invest a lot in technology, we feel we have the best in class.
Speaker Change #131: Technology, so we focus on speed, agility, and when markets get volatile, we continue to perform very well. So that's...
Speaker Change #131: These are potential tailwinds.
Speaker Change #132: A big tailwind for you three was the equity funding markets, those have partly normalized.
Paul Holden: Hi, many it's Etienne, so it's pretty much what Mehmedishant has said in the script, there's not much more to this. It's pretty much half lower volatility that quarter end, generally, both in effects, rates and equities and lower sensitivities in our books that are marked to market. So that's really a slowly there. Then if I look, I mean, this measure has been coming down over the past few quarters. I mean, the introduction of the FRTB, you know, I think it may be prevention's looking farther back, but it looks like there's a downward trend here in terms of market risk RWA.
Speaker Change #132: after the volatility of the end of July early August due to the end of the scare there. Although we continue to see good client activity.
Speaker Change #132: and some opportunities in the equity Delta one area. This area could normalize a little bit.
Speaker Change #132: and we're seeing strong activity on the advisory side. We expect corporate issuers to take advantage of the constructive markets while they have the opportunity to do so. We're certainly seeing the government borrowers feel very active in the markets.
Paul Holden: Is that correct? And is there, is there something that we could say, you know, expect this line to continue to expect this line to continue to trend lower if we look at this. That's a good question, many.
Paul Holden: And no, I would not expect that line to continue to decline as our business. And the markets I expect will be more volatile in the next few quarters. You have a lot of geopolitical things going on. You have a lot of, well, the easing cycle is starting with with central banks over the world. So I would actually all things being equal, expect that to creep back up.
Speaker Change #133: and we're looking for emanate to reaffelorate the detector being a bit slower the last couple of quarters and that would simply be a return to a historical average. So, all in all
Unknown Executive: Thank you.
Speaker Change #134: More tailwinds that handwinds, that would be my summary mirror, and then maybe we won't quick follow up then.
Speaker Change #135: I identify as the one or two.
Speaker Change #136: Most meaningful differences between nationals and our markets' business and that of the other banks, again, that what would you draw my attention to as the one or two most meaningful differences?
Paul Holden: Our following question is from Paul Holden from CIBC. Please go ahead. All right. Thank you. Good morning. A couple of questions for Bill. Want to talk a little bit more about what you're seeing and customer behavior in Canada. Just because the delinquency trends while they're getting somewhat worse, they're still better than I was expected. So one of the things that some contacts may be starting with sort of variable, those on variable rate mortgages, how their behavior is, how the delinquency rates are there.
Speaker Change #137: Well, difficult for me to comment on what the others are doing, that's it, what are we.
Speaker Change #137: We are a domestic focused.
Speaker Change #137: Operation, we focus on structuring liquidity providing. We focus on being leaders in our niches. We focus on leading with deep expertise.
Speaker Change #137: and we are really about...
Speaker Change #137: Maine Painting, a risk management approach that is all-weather that is able to perform in good times at bad times that puts us into, so that can meet a bit more defensive positioning, but that puts us into a great position.
Paul Holden: And if there's any kind of read through, you would use to determine how those on fixed rate mortgages might be impacted as they have to renew. Yeah, I fall. Thanks for the question. I think it's appendix 10. No, it's. I mean, appendix 9 where we show that quite clearly. And you see in the lot column, we show pre-pandemic levels for the naive aid linkancies and break it down by the different classes.
Speaker Change #137: to be a consistent partner in liquidity providers, even when the times get bad, and I think clients understand that. So a mix of cyclical and counter cyclical businesses is a lot of what we're about.
Speaker Change #137: and then the goal is to continue to increase the balance between everything we do between corporate investment banking, between grades, between equities.
Paul Holden: So the behavior has been, I think, stronger than we would have thought two years ago, or if you had said, if interest rates go up 400 basis points plus an economy slows down, what would it be? I think certainly you see resilience in the behavior of of our retail Canadian clients. However, we aren't surprised by the like the geographic aspect of that and that our overweight and Quebec with more resilient consumers is certainly continuing to show through in the delinquency link to see trends.
Speaker Change #137: We want to grow.
Speaker Change #137: While maintaining our return on equities, we don't want to sacrifice that for growth.
Speaker Change #137: and the goal more and more will be to make...
Speaker Change #137: The incremental balance sheet with the boy, work harder for us, so more and so a more advisory, more hedging solutions for our clients. I think that these are really the key points of our strategy, Marianne. Thank you.
Marianne: Thank you.
Speaker Change #139: A following question is from the more personart from comaracicurities. Please go ahead.
Paul Holden: In the appendix 9, variable rates, we have called out specifically for the last few quarters because as you know, our variable rate, payments go up every, every time the rate changes. And you can see certainly that variable rate mortgage delinquencies have increased. However, as I think I've called out on a few slides, where has increased the most is in the insured variable rate. I'm bored because those are as you know, customers that had less down payment typically first time home buyers, so the payment shock of the increased rate is bigger part of their household budget.
Speaker Change #140: I want to come back. Maybe I'll start off with a very quick one here. If the impact of the changes and interest rates is so minor on the CWB deal, why bother with the hedges at all, and then how should we think about the cost of these hedges? Is that an important consideration or not?
Speaker Change #140: Hi, I'm Mar, it's Ben Chaltaz here, um...
Speaker Change #141: So, really, as we share with you on the remarks, you're right, it's a really small impact, however, because it's a cost of strategy and we want to protect the benefits of...
Paul Holden: And the uninsured variable rate mortgage at 27 basis points, which is still pretty close to pre-pantemic levels, and I think that demonstrates that it's not only the very mortgage payment, which has gone up, but income and liquidity has been quite strong as well. Lucy, any other comments on, do you want to add on consumer behavior? Yeah, I mean, that's when we looked at specifically as a variable rate mortgage holder, they've always had a better risk profile than the portfolio, and when we looked specifically at the case about their credit card in Inquanity, they remain the population with the lowest credit card in Inquanity, so a very good big profile there.
Speaker Change #142: How quickly or not industries go down. It's good having it back for us. So, in terms of our line, we're proving the approach into capital.
Speaker Change #142: We, we prefer, we saw more advantages of protecting the capital level at closing for TWB and there were just advantages of just taking the risk of not knowing exactly how interest rates would fluctuate.
Speaker Change #142: So, process, quality and protecting RCT-1 ratio.
Speaker Change #143: I guess, perfect. And then my more full question. I want to come back to the discussion that many was having here on these Treasury gains and margins. You think it suggests that these results, the ALN results can be volatile and I can appreciate that. That's really nothing new.
Paul Holden: Good answer your question, Paul. I guess the second half of my perspective, the more important part is kind of like, can we take anything away from that, you know, better experience and expected than you would have had two years ago, and translate that to how maybe those sixth rate borrowers might be able to deal with higher borrowing costs over the next one or two years? Yeah, I think, Paul, the way I frame that is the, you know, with retail credit performance, unemployment is rates are significant factor, not just interest rates.
Speaker Change #144: What I'm hoping you can help me sing through is...
Speaker Change #145: Is this volatility driven by market factors or more so that banks pacific interest rate positioning? Because what I'm trying to understand is...
Speaker Change #145: If the more important factor is volatility of interest rate, and it may be it's easier to forecast. But if it's the banks of interest rate positioning, then it's just something that, you know, as an external analyst, it's very tough to kind of back in. Do anything any thoughts on that would be very helpful.
Paul Holden: So I would say the, if you think about it in terms of the impact of the payment shock when the fixed rate borrowers renew what they determine by what interest rates are at that point. And certainly with the Bank of Canada already reducing interest rates twice and expectations for further decreases if the trend continues. And maybe the payment shock won't be as significant. However, I would remind you that the housing market given the under supply nature and still strong immigration trend does has led to pretty resilient home prices.
Lemark: Lemark, it's really a little bit of boat.
Lemark: You can't just say expect that there will be absolutely no impact on the environment. However, there is some of the factors that are related to our positioning as well. So it's really a little bit of both.
Paul Holden: And so many of the borrowers, even if the payment shock is is significant, they still have a lot of options with significant equity in their homes. And so there's a lot to balance there and I think it's probably too, too early hard to predict exactly what will happen in 20, 26, 27 renewals. But there's some balance, not just balanced to the situation where the borrowers not just higher mortgage payments.
Lemark: And then would you say the more important factor here is the level or the volatility, the level of interest rates or is it the shape of the curve like the steepening or flattening of the curve?
Speaker Change #147: I would say that the level for this corner was mostly the impact.
Speaker Change #148: And so then again it can change very from quarter to quarter but for this quarter yes this is what it was.
Speaker Change #149: Ok, thanks for having me.
Speaker Change #150: Thank you. Once again, please press star one at a time if you have any questions or comments.
Speaker Change #151: of following question is some sort of move ahead, from BMO Camdo Market, please go ahead.
Speaker Change #152: Okay, thank you. Maybe I can just start off with at the end. Can I just follow through with some of Marianne's questions and generally speaking, I mean, this quarter, or this year, sorry.
Speaker Change #153: The National Market is at three quarters of over 300 million dollars earnings contribution of quarter.
Paul Holden: And then second question, I have pretty both related to the ACLs. Like as I look at slide 14, you show the conservatism there.
Speaker Change #154: What does it take for that?
Speaker Change #155: To scope below 300 next year for cultureg you think, or what does it take for you to maintain that you need more art to be way, or do need more luck.
Paul Holden: And again, I think with actual losses trending maybe at a lower rate of increase and expected at what point or what would be the catalyst for national to to sort of turn, turn the dial on the building and allowances, what could lead to allowances actually starting to come down. So I think the, you know, our, as we called out to this quarter. We have had good organic long growth across the businesses, and that generates performing provisions in the building new allowances.
Speaker Change #156: One, two, three.
Speaker Change #157: Well, we need our clients to remain active.
Speaker Change #157: We don't need more arguably, what we need is this client's being active.
Speaker Change #157: remember Laura, we had not our best quarter last year in Q3.
Speaker Change #157: and I went to detail that really was all about.
Speaker Change #157: The market has been in do anything in Canada to stop stayed flat throughout the quarter and clients were
Paul Holden: So we have not changed our ways and we have not looked at our macro scenarios. It's been pretty consistent. Our base case is still for unemployment to trend up early in 2025 for to peak at around 7% and that hasn't changed. Every quarter we get together with our economists and the team and we review all of those factors and the decisions on the on weights and such and we'll do that again in the fourth quarter and every quarter ends in 2025. So it's hard to predict when there may be a change but it is going to be based on what the macro context are and our expectations for the future each quarter as it comes.
Ferreira: Ferreira, inactive, has a result compared to historical averages.
Ferreira: When it comes down to it, that's what this franchise is about, is about covering our clients, being super client centric.
Ferreira: through our solutions of intermediations, structuring risk management, advisory, corporate lending. And as long as our clients remain active and we have the environment.
Ferreira: For that, we will continue to do okay.
Speaker Change #159: Okay, that's very helpful and in there.
Speaker Change #159: at Quickie for Bill, Bill, Congrats on the retirement.
Speaker Change #160: We've asked you to play many roles over the years. I'm going to ask you to play a bit of an economist role here. If you talked about 60% I think of your mortgage book has reprised.
Paul Holden: Thanks for the answers Bill today and in the past great discussions with you and all the best in retirement. Thank you very much, Paul. Thank you.
Jill Shea: Following question is from Jill Shea from UBS. Please go ahead. Good morning. Thanks for taking the question. I was wondering if you could touch on long growth in PNC and what you're seeing on the personal side as well as the commercial side which is posting really strong growth. Can you just talk about the growth backdrop and where you see the best growth opportunities and how we should think about the pace going forward?
Speaker Change #161: What I'm trying to kind of get a sense of is what's the consumer behavior of those 60 percent that have reprised? And do you, is there any reason to believe it's additive to that?
Speaker Change #162: Let's call it a economic activity that you'll grow in the correct market, presumably because it's too good back.
Speaker Change #163: The link to the economic growth is to rack the less money that households have to spend on goods and services and have an impact on lower growth in the economy.
Jill Shea: Yes. Thank you. It's Nancy. I asked about it and Michael will add on with the commercial. We continue to see growth in the local folio. I would say similar to that base that we see right now. We continue to perform very well on the mortgage front in our internal channel which is in line also with the business and the credit card for folio I would say continue to remain. I would say I continue to see consumers that are prudent and adjusting so the revolving balances are not going as fast as we thought they would.
Speaker Change #164: and I would say it's difficult to see the direct link between our specific national bank clients and the...
Speaker Change #164: Gross in the Canadian economy, but in an aggregate in the economy as
Speaker Change #164: As fixed-rate mortgages are reprised across all banks, the level of rates will have an impact on the amount of discretionary spending that the consumers have. And that has been one of the reasons why we've worked out to continue to slug each growth.
Speaker Change #165: If there's a positive surprise in terms of interest rates to finding faster than expected, not too fast, because that might be a negative surprise, but if there is more, more cash in me.
Jill Shea: The payment rate continues to be elevated and the purchase volume is in the high single visit but nothing you know will measure there so it should continue to grow the credit card but not maybe as fast as we thought it would. But at the same time it's positive on the credit card.
Speaker Change #166: We host all the budgets, and one can expect that would be a tailwind for each other.
Speaker Change #167: and is that help to answer your question or? Yeah, that's very helpful and within your customer base.
Speaker Change #168: Are you seeing those ones that have reprised? Do you see a change in consumer behavior?
Lucy: Yes, that would be, you know, positive or negative or is it neutral? Yeah, and I'm going to share this one with Lucy. She talked a little bit about it already in terms of credit cards, and we are seeing Bruton see a David Rates being high, but you'll see do you want to continue?
Jill Shea: I'm going to commercialize. As Ruchantel said in your comments it is a broad-based growth. It requires all parts of the business but the two areas to call out are one are real estate insured lending and that's been a strategic portfolio for us for a while and second is our growth outside Quebec which again has been a strategic portfolio for a while and those are the two areas that are growing in a faster rate for the Okay, very helpful.
Lucy: and so what's in general we really see a consumer.
Justin: and Justin and continue that Justin and the positive direction of question on economy growth, the positive on this quarter is that it's the first quarter where we've ever had some trend in, you know, positive influence in the mandate of those accounts.
Jill Shea: And then perhaps stay on that theme of growth. Could you touch on credit G with the assets of 11% year-over-year? Can you just talk about the piece of growth as we move forward and also touch on the risk profile and profitability of the assets that you're putting on the books?
Justin: So, that is because we have adjusted for the past year, they have delivered, we see that there is a line that means no one needs to stay, no.
Etienne Dubuc: Yeah, sure. So thank you, Etienne. Thank you for your question. So, credit G delivered the pre-solid quarter. Here in Q3, and you're aware the assets are not up 12%. It is a very high quality, diversified portfolio. Margins are stable, and really we see the performance of the book is really strong. We're not seeing any deterioration in the secured side of the book, which is 94% of the book. And the unsecured part has been amortizing as expected.
Speaker Change #170: and Virtus. William, specifically in Q3, which is usually a high season for Virtus. volume, is no or it's sparkly that it's been in the past, so I see a pollutant consumer there, and on the bottom of that, we start to see the limit, but that got increasing.
Speaker Change #170: So that's the other color, Marianne, could give you it if that's our call.
Marianne: That's it, very helpful. Thank you very much for taking my questions.
Speaker Change #171: Thank you. So we have no further questions for just a redness time. I would not like to turn a meeting back over to Mr Ferreira.
Etienne Dubuc: Overall, the assets have grown a bit less than previous quarter. It continues to be a highly competitive market, and visibility into new opportunities can be a bit difficult because it's an environment where you have a lot of other players who are pretty aggressive. So because we are very strict about our risk reward discipline, that may mean that in some quarters, like this one, you'll see amortization of our existing book is muting overall asset growth, but we didn't make about 500 million of purchases this quarter. Does that help answer your question? Yes, very helpful. Thank you.
Speaker Change #172: Thank you, operator and before we disconnect bill on behalf of the entire bank. Thank you for your leadership for the past 12 years.
Speaker Change #172: Keith, and the growth of our bank, and so we thank you.
Bill Bonnell: Thanks a lot. Thank you everyone for joining us today.
Speaker Change #174: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.
Speaker Change #174: [inaudible]
Speaker Change #174: [inaudible]
Unknown Executive: A following question is on my job. This is a very tough investment research. Please go ahead. Thank you.
Nigel: Good morning. I wanted to ask a broader question on your credit rich profile. I understand why credit losses tend to run lower for your retail portfolios in Quebec, lower household leverage, lower debt servicing costs, less property. We want to save markets. So that makes sense. I'm wondering if you could elaborate on what generates or keeps a lower ceiling on credit losses in your non retail or commercial portfolios. Is that specific to underwriting practices, a national bank or your business mix or is it more reflective of broader characteristics of commercial lending in Quebec?
Speaker Change #174: [inaudible]
Nigel: Hi, Nigel. Thanks. Thanks for the question. I just think about it in terms of the Quebec economy is very diverse in terms of sectors. It is one which typically has got lower peaks and troughs than other other geographies. And it's one that the non retail is one that benefits from institutions being in place that supports entrepreneurs and supporting economic growth that probably more significantly than other jurisdictions. So that's one part of it.
Nigel: The other part would be some sector selection on our side. I think we have We have been relatively underweight in consumer discretionary exposed sectors. If you remember back to the beginning of the pandemic, where we told them COVID impacted sectors, primarily the consumer discretionary and on a relative weight basis, we've been underweight, say, or less exposed to those sectors. So there's various reasons, I think. But on a macro basis, it's a performance is driven by the economy.
Nigel: We're an environment where the liked impact of interest rates are still flowing through the economy. So our base case calls for continued increase in indignancies and migrations across the country, and I wouldn't say Quebec, but if that may be lower peaks in trust, I know the jurisdictions. Is that help? Yes, that helps. And I think the follow-up of that is, you know, assuming CWB acquisition closes, there's an equipment financing piece that you can roll out in your home province to Quebec.
Nigel: Does that at all change their sector exposure, or do you think that's going to change the kind of risk profile, even incrementally, of your commercial portfolio? Yeah, it's too early, really to say Nigel. I can say when I think about our overall portfolio geographic diversification is good, we have been happy to grow organically, and it's been part of our strategy. I think it's Michael's already talked about the last periods. And before the integration, we have been growing up west or commercial portfolio faster than in Quebec, and we're quite happy about that. But too early to say in any specific sectors of CWB.
Nigel: Okay, and then last question, just touching on your mortgage portfolio, specifically investor mortgage component, we are seeing some stress bill there for investment properties, just negative cash flows. I mean, in fact, you could provide on the composition of that portfolio between Ontario and Quebec and other characteristics that get financial strain different in Quebec versus what Ontario met the top owners are experiencing. I think generally the same trends would apply simply because home prices are less in Quebec and the shock of interest rates are less than would stress the cash flows a little less, but it's relatively small proportion of our portfolio, certainly any performance in that small segment would be able to see them in our disclosures and the overall mortgage portfolio. And nothing specific to call out my job.
Nigel: Okay, that's it for me. Thank you.
Mario Mendonca: A following question is from Mario Mendonka from TD Securities. Please go ahead.
Mario Mendonca: Good morning. At Jan last quarter, you provided a pretty full sum discussion around your outlook for capital markets going into Q3. I think you broken up between global markets and corporate investment banking. It had the added benefit of being right because the numbers were pretty strong this quarter.
Mario Mendonca: So it would be helpful if we had a similar rundown. Are you as optimistic about Q4s? Thank you for your question, Mario. And yeah, you're right. We feel good where we are, you're today, especially how balanced the performance has been between global markets and between corporate investment banking. That's usually the second half in our businesses is a bit slower than the first half. So I don't think you'll be seeing record Q3s for us every year, or like the highest quarter being Q3 every year. So that could be a bit unusual.
Mario Mendonca: That said, we are seeing some continuing strengths. So first of all, in the equity and the late markets, I think we're in a great position to continue to deliver good results. I'm thinking of the retail issuance business, especially if markets keep trending higher as a significant portion of our book could be called and rolled into new structures and that's through both inequities and in rates. And since equity implied volatility close the quarters at a very low level, I think we're seeing upside there is we have volatility episodes in the coming months and that could very well happen due to everything that's going on in the market and the geopolitical tensions and the rate cutting cycle underway.
Mario Mendonca: And we're seeing whenever it gets volatile that we tend to do well both in our structure business and in our market making business where we invest a lot in technology. We feel we have the best in class technology. So we focus on speed, agility. And when markets get volatile, we continue to perform very well.
Mario Mendonca: So that's these are potential tailwinds. A big tailwind for Q3 was the equity funding markets. Those have partly normalized after the volatility of end of July early August due to the the end scare there. Although we continue to see good client activity and some opportunities in the equity delta one area, this area could normalize a little bit. And on the rate side, while the focus will be on economic data and order and not the soft landing will be achieved, we're still seeing strong institutional activity.
Mario Mendonca: And we're seeing strong activity on the advisory side. We expect core traders to take advantage of the constructive markets while they have the opportunity to do so. We're certainly seeing the government borrowers feel very active in the market. And we're looking for emanate to reaffelerate the data after being a bit slower the last couple of quarters. And that would simply be a return to historical averages. So all in all more tailwinds than headwinds, that would be my summary measure.
Mario Mendonca: And then maybe we'll quick follow up then.
Mario Mendonca: What would you identify as the one or two most meaningful difference? What do you draw my attention to at the one or two most meaningful differences? Well, it's difficult for me to comment on what the others are doing. That said, what are we, we are a domestic focused operation. We focus on structuring liquidity, providing, we focus on being leaders. We focus on what we're doing. In our niches, we focus on leading with deep expertise.
Mario Mendonca: And we are really about maintaining a risk management approach that is all weather, that is able to perform in good times at bad times, that puts us into, so that can be a bit more defensive positioning, but that puts us into a great position to be a consistent partner in liquidity providers, even when the times. And I think clients understand that so a mix of cyclical and counter cyclical businesses is a lot of what we're about.
Mario Mendonca: And then the goal is to continue to increase the balance between everything we do, between corporate investment banking, between grades, between equities. We want to grow while maintaining our return on equities. We don't want to sacrifice that for growth. And the goal more and more will be to make the incremental balance sheet with deployed work harder for us. So more and so are we more advisory, more hedging solutions for our clients.
Mario Mendonca: I think that these are really the key points of our strategy, Meru.
Mario Mendonca: Thank you.
Sohrab Movahedi: A following question is from the more person, from community, please go ahead. Yes, those are taking my questions.
Sohrab Movahedi: I want to come back. Maybe I'll start off with a very quick one here. If the impact of the changes and interest rates is so minor on the CDWB deal, why bother with the edges at all. And then how should we think about the cost of these edges? Is that an important consideration or not? I don't remember. It's about a shout out here. So really, as we share with you on the remarks, you're right.
Sohrab Movahedi: It's a really falling back. However, because it's a cost of strategy and we want to protect, depending on how quickly or not interest rates go down is good. So in terms of our, along with our proven approach to capital, we, we prefer, we saw more advantages of protecting the capital level closing for CWB. Then there were disadvantages of just taking the risk of not knowing exactly how interest rates would fluctuate. So cost of strategy and protecting our city one ratio.
Sohrab Movahedi: Oh, that's perfect. And then my more full some question. I want to come back to the discussion that many was having here on these treasury gains and margins. You think it suggests that these results, the ALM results can be volatile. I can appreciate that. That's really nothing new. What I'm hoping you can help me think through is, is this volatility driven by market factors or more so the bank's specific interest rate positioning?
Sohrab Movahedi: Because what I'm trying to understand is, if the more important factor is volatility of interest rates and maybe it's easier to forecast, but if it's the bank's interest rate positioning then it's just something that, you know, as an external analyst, it's very tough to kind of back into anything. Any thoughts on that would be very helpful. Lemar, it's really a little bit of both. You can't just say, expect that there will be absolutely no impact on the environment.
Sohrab Movahedi: However, there is some of the factors that are related to our positioning as well, so it's really a little bit of both. And then would you say the more important factor here is the level or the volatility in the level of interest rates or is it the shape of the curve like the steepening or flattening of the curve? I would say that the level for this quarter was mostly the impact, but then again, it can vary from quarter to quarter, but for this quarter, yes, this is what it was. Okay, thanks.
Unknown Executive: I appreciate it. Thank you. Once again, please press star one at this time. If you have any questions or comments.
Sohrab Movahedi: A following question is from Sorabbovahedi from BMO Capital Markets. Please go ahead. Okay, thank you.
Sohrab Movahedi: Maybe I can just start off with at the end. At the end, can I just follow through with some of Mario's questions and generally speaking, I mean this quarter. Or this year, sorry, the national market has had three quarters of over $300 million earnings contribution a quarter. What does it take for that to go below 300 next year per quarter, do you think? Or what does it take for you to maintain that?
Sohrab Movahedi: Do you need more RWA or do you need more luck? Well, we need our clients to remain active. We don't need more RWA, what we need is this clients being active. Remember, Sorab, we had not our best quarter last year in two, three. And I went into detail there that that really was all about the markets didn't do anything in Canada, stocks stayed flat throughout the quarter. And clients were very, very inactive as a result compared to historical averages.
Sohrab Movahedi: When it comes down to it, that's what this franchise is about. This is about covering our clients being super client centric through our solutions of intermediations, structuring, risk management, advisory, corporate lending. And as long as our clients remain active and I think we have the environment for that, we will continue to do okay. Okay, that's very helpful.
Sohrab Movahedi: And a quick key for Bill, Bill, congrats on the retirement. We've asked you to play many roles over the years. I'm going to ask you to play a bit of an economist role here. If you talked about 60% I think of your mortgage book has reprised. What I'm trying to kind of get a sense of is what's the consumer behavior? Of those 60% that have reprised. And do you, is there any reason to believe it's additive to the, let's call it economic activity or growth in the direct market, presumably because it took a back.
Sohrab Movahedi: Yeah, thanks, thanks, Sarah. What I, the link to the, to the economic growth is direct. The less money that households have to spend on goods and services than have an impact on lower growth and economy. So I would, I would say it's difficult to see the direct link between our specific national bank clients and the growth in the Canadian economy, but in an aggregate in the economy as, as fixed rate mortgages are reprised to cross all banks, the level of rates will, will have an impact on the amount of discretionary spending that the consumers have.
Sohrab Movahedi: And that has been one of the reasons why we're forecasting continued sluggish growth. If, if there's a positive surprise in terms of interest rates declining faster than expected, not too fast because that might be a negative surprise, but if there is more, more cash in the household budgets and one can expect that will be, would be a tailwind for economic growth. Does that help answer your question? Yeah, no, that's, that's very helpful.
Sohrab Movahedi: And within your customer base, are, what are you, are you seeing any of those ones that have reprised? Have, do you see a change in consumer behavior? Yes, that would be positive or negative or is it neutral? Yeah, and I'm going to share this one with Lucy. She talked a little bit about it already in terms of credit cards and we are seeing urgency, payment rates being high, but Lucy, do you want to continue?
Sohrab Movahedi: In general, we really see a consumer addressing and continue that addressing. And the positive, go back to the question on the economy, grow the positive on this quarter, is that it's the first quarter where we reverse the trend in, you know, positive to the flow in demanded buzzes against. So, definitely because we have adjusted for the past year, they have been averaged. We see that theory, the lines remain low and they stay low.
Sohrab Movahedi: And purchase volume, specifically in Q3, which is usually a high season for purchase volume is lower. It's working and it's been in the past. So, I see a Putin consumer there. And on the positive of that, we started to see the demanded buzzes that got increased. So that's the other color maybe I could give you if that's helpful. That's very helpful. Thank you very much for taking my questions. Thank you.
Unknown Executive: So we have no further questions for just a red this time.
Laurent Ferreira: I would not like to turn the meeting back over to Mr. Ferreira. Thank you operator.
Laurent Ferreira: And before we disconnect bill on behalf of the entire bank.
Laurent Ferreira: Thank you for your leadership for the last 12 years. You were key and the growth of our bank and so we thank you. Thanks a lot.
Unknown Executive: Thank you everyone for joining us today. Thank you.
Unknown Executive: The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.