Q4 2024 Laurentian Bank of Canada Earnings Call
Welcome to the Laurentian Bank for only find natural results call. Please note that this call is being recorded.
Speaker Change: I'd now like turn the meeting over to her first head Investor Relations. Please go ahead.
Speaker Change: Well good morning, and thank you for joining us today's opening remarks will be delivered by Haig Club O President and CEO and their review of the fourth quarter as well as the full year financial results will be presented by even the Asia Executive Vice President and CFO After which will then invite questions from the phone.
Speaker Change: Also joining us for the question period, it's just sounded who's executive Vice President and CFO al.
All documents pertaining to the quarter can be found on our website in the Investor Relations section.
Speaker Change: Like to remind you that during this conference call are forward looking statements may be made and it is possible that actual results may differ materially from those projected in such statements for the complete cautionary note regarding forward looking statements. Please refer to our press release are just like two of the presentation. I would also like to remind listeners that the bank is that says it's.
Speaker Change: Performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance.
In the event will be referring to adjusted results in their remarks, unless otherwise noted as reported.
Eric: I'll now turn the call over to Eric.
Eric: Well see where it goes.
Eric: If you haven't done that I think of it almost full it gets the empty missed it I need to admit it and it gets good morning, and thank you for being with us today.
Eric: Well this year has certainly presented its sets us challenges, we overcame them with resilience.
Eric: We started the year, resulting an outage navigated an uncertain economy environment marked by global slowdown and made the difficult decision to reduce our workforce.
Eric: Despite these headwinds the team at prevention bank as demonstrated incredible dedication.
I'm proud of what we've accomplished and the progress we've made through our collective efforts.
Eric: First we introduced our strategic plan with a clear focus in.
Eric: Other words, we stopped being everything to everyone. We zeroed in on the areas, where we have scale and where we believe we can succeed as a team.
Eric: This strategic shift drove our decisions and capital markets, including the successful sell of our reinvention Bank securities retail activities.
Eric: This process was completed in two phases.
The divesture of our full brokerage activities in August and the divestiture of our discount brokerage activities last week.
Eric: Second we went back to our roots, we are enhancing our processes to maximize efficiency and most importantly to ensure what we are delivering.
Just stay and value to our customers while growth will come from this foundation, our first priority is to be efficient.
Eric: Lastly over the past year, we implemented key changes to strengthen our organization, which included building a renewed leadership team and streamlining our organizational structure.
These changes were designed to transform our company culture, fostering a greater focus on customer centric values efficiency and accountability at every level.
Eric: We're now six months into the strategic plan, we outlined in May and I'd like to take a moment to recap our key objectives.
Eric: We are focused on expanding our presence in commercial banking specializations.
Eric: At the same time, we remain committed to meeting the needs of our retail customers.
Eric: In the mid term, we aim to offer a competitive suite of personal banking services that catheter, specifically to the middle working class.
Eric: To support these efforts, we're ramping up our investments in technology, while always keeping our customer focus at the core of everything we do.
Eric: The growth. We're building is supported by a strong balance sheet with solid liquidity and capital levels that position us well for future asset drop.
Eric: Our loan portfolio's performance I lights, our credit strength.
Eric: With deep specialization and rigorous underwriting practices that sets us apart.
Eric: Our PCL remained materially lower than the industry average underscoring our careful risk management.
Speaker Change: Loan growth has slowed primarily primarily due to I'm sure to kind of make it.
Eric: Environment.
Eric: As previously mentioned this decline has been driven by delays in commercial real estate projects largely influenced by the current rate environment as well as more cautious approach to using credit lines and our inventory financing business.
Eric: Ever.
Eric: We are pleased to report that inventory financing as unloaded over 350, new dealers equivalent to a 6% increase year over year, extending our reach across North America to now over 6300 dealers and positioning us for future growth.
Eric: This quarter, we announced the merger of our equipment finance and inventory finance businesses under a single brand North point commercial finance North point has been consistently recognized for its strong customer service and its world class NPS score is a clear proof point.
Eric: This merger positions North point as a leading specialty financing platform in North America with a solid brand recognition.
Eric: We believe that by combining our equipment and inventory financing businesses, we can accelerate growth as we simplify our go to market strategy and adds value proposition to address the needs of the full ecosystem from the manufacturer to the dealers and two D.
Eric: End users, we are confident in our ability to execute on our strategic plan.
Eric: Our proven track record in commercial banking is being extended across the organization.
Eric: The executive team along with our employees is fully committed to delivering on these objectives and we're confident that we will achieve our medium term financial targets looking ahead to 2025, our focus is on executing on our key priorities.
Eric: We will continue investing to ensure we build a solid foundation for long term success. This includes mother Nizing, our systems to streamline operations and reduce manual processes and drive fixed should see gains all while strengthening our resilience and enhancing the customer.
Eric: Periods.
Eric: These efforts with investments in the short term will not only deliver cost savings, but will position us for long term profitability.
Eric: We have a solid liquidity and capital positions. However, we are not satisfied with our current financial results, we are making the right decisions to create a stronger and more profitable organization.
Eric: In 2025, we expect our four growth drivers to trend as follow.
Eric: The commercial loan mix is expected to increase following loan growth in the latter part of 2025, leading to a positive impact on net interest margin as for deposits. They will remain manage in mind with loans.
Eric: I would now like to turn the call over to Yvonne to review our financial performance.
Speaker Change: Let's see at Kate Bosworth dose.
Yvonne: I would like to begin by turning to slide eight which highlights the bank's financial performance for 2024.
Yvonne: Total revenue for the year was 1.0 was $2 billion down 1% compared to last year.
Yvonne: On a reported basis net loss and diluted EPS were minus $5 $5 million and minus 47 cents respectively.
On an adjusted basis, we generated net income of $168 $7 million in fiscal 2024 or $3.57 per share.
Yvonne: Adjusting items after taxes into.
Yvonne: P&C banking impairment charge of $125 $6 million.
Yvonne: Structuring and other impairment charges of $53.3 million.
Yvonne: Amortization of acquisition related intangible assets of $7 $3 million and profit on sale of assets under administration of $12.1 million.
Yvonne: Additional details are available on slide 23, and then the 2024 annual report to shareholders.
Yvonne: The remainder of my comments will be on an adjusted basis and focused on the fourth the fourth quarter.
Yvonne: Total revenue as seen on slide nine was $236.8 million down 4% year over year, and 8% sequentially, mainly from lower loan volumes and lower fees on securities brokerage commissions, partially related to the divestiture of their retail full service investment broker.
Yvonne: For a division of Laurentian Bank Securities last August.
Yvonne: Diluted EPS of <unk>, 89 cents was down 11% year over year and up 1% quarter over quarter.
Yvonne: Net income of $49 million was down by 8% compared to last year, and 5% compared to last quarter.
The bank's efficiency ratio increased by 300 basis points compared to last year and by 170 basis points sequentially.
Yvonne: The increase year over year reflects our ongoing investments in strategic priorities and the impact of lower loan volumes.
R.
Yvonne: Our <unk> for the quarter stood at six 2% in line with the previous quarter.
Yvonne: Slide 10 shows nothing interesting come down by $9 million or 5% year over year, mainly due to lower commercial loan volumes.
Yvonne: Quenching basis, net interest income was down by $6 $9 million or 4% for the same reasons.
Yvonne: Our net interest margin was up one basis point year over year and down two basis points sequentially at 177% impacted by lower average commercial loan volumes.
Yvonne: Slide 11.
Yvonne: Highlights of the bank's funding position.
Yvonne: We are managing our funding in line with our loan book.
Yvonne: On a sequential basis total funding was stable.
Yvonne: Partnership deposits decreased by $200 million as customers continued to allocate funds back into market activity, which was offset by an increase in our cost efficient longterm deaths related to securitization activity.
Yvonne: The bank maintained a healthy liquidity coverage ratio for the quarter, which remains a D. I end of the industry.
Yvonne: Slide 12 presents other income of $62.9 million, which was lower by 3% compared to last year, and 17% compared to last quarter due to lower fees and securities brokerage commissions. Following the divestiture of the retail full service investment broker Division.
Yvonne: Lower income from financial instruments, and lower lending fees due to temporary commercial real estate activities.
Yvonne: Slide 13 shows adjusted net interest expenses of $177 $7 million stable compared to last year and down 6% sequentially. Following the divestiture previously mentioned and due to efficiency gains driven by the reduced at Cowen.
Yvonne: Lower seasonal payroll taxes, as well as lower performance based compensation.
Yvonne: On slide 14, you'll see that our CET one ratio remained stable at 10, 9%.
Yvonne: Maintaining a solid position and we are well positioned to redeploy capital in latter part of 2025.
Yvonne: Growth is expected to resume when the environment uncertainty reduces and rates reductions continue to materialize.
Yvonne: Slide 15 highlights our commercial loan portfolio, which was down to $1 $2 billion or 7% year over year and up $100 million or 1% on a sequential basis.
Yvonne: Slide 16 provides details of our inventory financing portfolio.
Yvonne: This quarter utilization rates were 42%.
Meaning below historical averages.
With dealer continuing to take a more conservative approach to inventory restocking.
Yvonne: Our commercial real estate pipeline remains healthy as we continue to see developers.
Waiting for further rate reductions to start projects, but we experienced some positive signs in the multi residential segment.
Yvonne: Slide 17 illustrates that most of our commercial real estate portfolio is focused on multi residential housing with our exposure to the office segmental things steady at 3% of our commercial loan portfolio.
Yvonne: As noted in previous quarters, the bulk of our portfolio consist of multi tenant properties with minimal exposure to single tenant buildings.
Yvonne: Slide 18 presents the bank's residential mortgage portfolio.
Yvonne: So mortgages loans were down 1% year over year and slightly up by 1% on a sequential basis.
Yvonne: We adhere to cautious underwriting standards, and our content and the quality of our portfolio.
Yvonne: This is reflected in our 60%.
Yvonne: Proportion of insured mortgages and the low loan to value ratio of 49% on the uninsured portion.
Yvonne: Allowances for credit losses on slide 19 totaled $204 million down $24 million compared to last quarter, mainly due to lower allowances on impaired commercial loans.
Yvonne: Turning to slide 20.
Yvonne: Provisions for credit losses was $7.4 million, a decrease of $6 $3 million from a year ago impacted by higher releases of provisions on performing loans.
Yvonne: Sequentially <unk> were down $5 $8 million, mainly from lower provisions on impaired loans.
Yvonne: As a percentage of average loans and acceptances PCL decreased by six basis points year over year and quarter over quarter to 12 basis points.
Yvonne: Slide 21 provides an overview of impaired loans on a year.
Yvonne: Year over year basis, gross impaired loans increased by $158 million due to credit migration and commercial loans and were essentially stable sequentially.
Yvonne: Our disciplined approach to underwriting along with the quality and strong collateralization of our portfolio around 93%.
Yvonne: April's us to effectively met navigate microeconomic fluctuations and related credit migration without any impact on our <unk>.
Yvonne: C L N PCL results.
We remain committed to a prudent and disciplined approach to risk management.
Yvonne: As we look ahead to 2025 I would like to note a few key points.
Yvonne: We expect our loan book to be relatively stable with growth in commercial loans, mostly in the latter part of the year positioning us positioning us well for it and I I growth in 2026.
Yvonne: NIM will gradually benefit from the increased commercial loan in the loan mix.
Yvonne: For the first quarter other income is expected to remain relatively stable.
And it is a good proxy for the remainder of the year.
Yvonne: Regarding the efficiency ratio for the first quarter, we expect it to be relatively in line with Q4, driven by the seasonal increase in payroll taxes at the start of the year and the reset of performance based compensation.
As for 2025, a key highlight will be our increased investments in cloud computing technology with a higher proportion of operating expenses compared to traditional capitalized expenses for on premises technology.
Yvonne: Cloud computing technology will provide significant medium to long term benefits due to reduce future depreciation.
And save costs, but it will create short term pressure as we progress through 2025, leading to an efficiency ratio relatively in line with our fourth with our first quarter guidance.
Yvonne: The investments, we're making in our it infrastructure will not only improve the customer experience and improve our digital offering.
Yvonne: It will also simplify our infrastructure and improve our processes leading to efficiency gains in the medium terms to achieve financial targets.
Yvonne: Considering the macroeconomic environment and our bank mix B cells are expected to be in the teens for 2025.
Yvonne: Our tax rate is expected to increase in the 19% to 20% range starting in the first quarter of 2025, taking into account the new pillar two international tax reform.
Yvonne: Capital and liquidity levels are solid and are expected to remain strong for Q1 and the remainder of 2025.
Yvonne: As a reminder, and a large interest payment is due next quarter and without any impact of <unk> on our EPS.
Speaker Change: I will now turn the call back to the operator.
Speaker Change: Okay.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: You have a question. Please press star followed by the one on your Touchtone phone.
You will hear properly your hands have been raised should you wish to decline from the polling process. Please press star followed by the Q if youre using a speakerphone. Please list that has kept me for pressing any key.
Speaker Change: Your first question comes from Manny Korchman with Scotiabank. Your line is now open.
Hi, good morning, you've done a few questions one on the efficiency ratio guidance that you provided you are saying Q1 will be in line with Q4, and then we will remain relatively stable.
Speaker Change: Level from there throughout the year I just wanted to make sure I understand the pattern for the year our inefficiency.
Speaker Change: Yeah, Manny that's that's pretty much what I mentioned, we should expect the efficiency ratio to remain around the same for 2025.
Speaker Change: As we continue to invest in our strategic priorities and as we rebuild the loan book and as mentioned the loan book in the commercial we expect it to be in the latter part of 2025.
Speaker Change: Okay.
Speaker Change: My second question. So you are saying latter part of 'twenty five.
Speaker Change: You should get.
Speaker Change: Growth in the commercial loan book, but overall for the year, you expect loan growth to be to be essentially flat even with that uptick.
Speaker Change: In commercial that Youre guiding to is that correct yes.
Speaker Change: Yes, overall relatively stable for the year with an uptick in Q4, there is definitely the seasonal aspect of inventory refinancing where youre going to see a small increase in Q1.
Speaker Change: And then the decrease in Q3 as we see every year.
Speaker Change: But at this point the the restocking at the inventory for dealers that have been pretty conservative with the current environment, it's been running at 42% for Q4.
Speaker Change: We expect it to remain below historical averages, which showed the run around the 50%, but we're going to see a gradual normalization towards the latter part of the year.
Speaker Change: Understood and then I was hoping you could expand on your comment on capital deployment.
Speaker Change: Is that.
Speaker Change: Are you signaling that M&A might be on the table.
Speaker Change: <unk>.
Speaker Change: So I just wanted to better understand that.
Speaker Change: Yeah. In fact, you should read it I'll just start where I just ended.
Speaker Change: The refinancing is currently running at 42% historical levels would be up 50% commercial real estate, we're starting to see good signs in the multi residential we would expect it's going to take some quarters, but you should take it in our comments that we're pretty confident that our loan book in terms of.
Speaker Change: Commercial is going to come back.
Speaker Change: Towards mostly the latter part of 2025, so we're very comfortable with the capital level that we have right now we're well positioned to support the growth that we expect to see back from our customers.
Speaker Change: So the comment on capital.
Speaker Change: Really more about sustaining that the loan growth that youre forecasting not not anything else.
Speaker Change: Exactly so we wanted to make sure that it's not.
Speaker Change: Normalized in terms of utilization for an event of refinancing in the rest of the volume comes back we can support and adequately support our customers going forward.
Speaker Change: Understood. Thank you.
Speaker Change: Your next question comes from Sohrab <unk>.
Speaker Change: With BMO capital markets. Your line is now open.
Sohrab: Hey, Thank you very much for taking my question just to pick up where you left off.
Sohrab: When there is this rebound hopefully in utilization rates in there.
Sohrab: And loans can you talk us.
Sohrab: Through how it will be funded.
Sohrab: On the other side of the balance sheet and.
Sohrab: And I.
I saw I saw an article that perhaps Laurentian bank is looking to partner.
Sohrab: With them.
Sohrab: Some.
Sohrab: I don't know, let's call it credit firms private credit firms for about $1 billion up North point.
So I just wanted to I just want to make sure I understand how that.
Sohrab: It's in with the loan growth that you're talking about and whether or not.
Speaker Change: You are trying to rethink the business model or do you need to actually.
Speaker Change: Alpine funding some of this rebound in loan growth.
Speaker Change: Thank you Sarah for your question I'll start and Eric's going to had some comments on the Bloomberg article.
Speaker Change: In terms of funding of the rebound of the inventory financing I'll, just say generally that business is funded from our Indian operations.
Speaker Change: It's just the general funding mix and the various sources that we have so we're going to it's going to remain exactly the same there is no anticipation of changing the way. The business is funded so you should really you shouldn't read anything in the comments I said or anticipate any changes right of that so maybe I can let eric comment on the blue.
Yes.
Eric: Thank you for the question and good morning.
Speaker Change: Definitely in line with what we said in the strategic plan so Rob in terms of building those partnerships.
Speaker Change: We strongly believe in the way we're positioned in lowest point.
Speaker Change: Were also strong believer that there is there is a lot of potential to maximize that operation. So so for us the reach out just to make sure that.
Speaker Change: First of all we maximized funding mix opportunities, but also we go we go deeper in terms of <unk>.
Speaker Change: Potential new industries or expanding the credit box. So so what we're looking for is partners that will come.
Speaker Change: Come along understand our business model and help us accelerate growth actually in the R&R point commercial finance business.
Eric: That's helpful. Eric can I, just clarify I suppose what you're saying.
Eric: Just want make sure I'm understanding this correctly you are not looking for someone to take on some of the existing loans youre trying to bring in a park.
Eric: Looking at potential for partnerships as.
Eric: As far as go ahead growth is concerned is that the right way to think about it.
Eric: And then this is what the article mentioned to actually preapproved, some some future funding opportunities and it can be and many of us Matt or like we couldnt white label some of that operational capability. We have out there. So so it's really a future. So have been set to actually offload any of the assets were very.
Eric: Comfortable with the assets, we as we like the risk profile of the business. So so for US it is to generate even more opportunities in the future for this platform and if I can be extremely clear. So there's no confusion, we're not looking for liquidity at all right the liquidity and the LCR level is at.
Eric: And of the industry, we're ready to get more volume from this coming back capital as their liquidity is there it's really the potential of the business, where we can had partners to go above and beyond what we are currently doing.
Speaker Change: So that's I think that's crystal clear. Thank you and just one final point on that is that the.
Speaker Change: The Bloomberg article made reference to a $1 billion fund it.
Eric: Is that Eric.
Is that.
Eric: The potential.
North points potential over a number of years or over what sort of timeframe should north point. If you were able to find a partner, although what sort of timeframe would you be able to deploy $1 billion.
There is a mix in your questions in terms of the medium term of the strategic plan. We stated then we say that we believe that platform could actually double in size.
Eric: The strategic plan range that's one.
The other one like if I mentioned like we're running at historical low utilization of our credit lines right now at 42%.
Eric: So just there in terms of like normalizing that utilization back to let's say the 50% range average that we should actually see.
Speaker Change: Is there an opportunity to again experienced rapid growth at one point once.
Speaker Change: The.
Speaker Change: Overall market normalize. So so we're just positioning ourselves to make sure that we have all the tools available to us to maximize again that that great platform of ours.
Speaker Change: Okay. That's an interesting development. Thank you very much.
Speaker Change: <unk>.
Speaker Change: Your next question comes from Anthony <unk> with National Bank. Your line is now open.
Speaker Change: Yes.
Speaker Change: Hi.
Speaker Change: Sorry.
Speaker Change: Yeah can you just give me some.
Speaker Change: Some numbers please.
Speaker Change: With regard to the broker business. So it can kind of make notes on on the impact there the revenue and expense impact of foregone revenues and expenses.
Speaker Change: In the quarter I guess.
Speaker Change: Take into account that you are talking about the full service brokerage.
Speaker Change: So.
Definitely I gave it he is so first thing.
Speaker Change: The price that we got from the sale of those activities is $14 million and that's what you see we adjusted for this because it's not nonrecurring element.
In terms of revenue and costs, we have just a little bit under $5 million of other income that went with that business.
Speaker Change: And we have just above $4 million of costs or so that's related to that business as well that impacted the quarter. So it didn't really impact the efficiency ratio in fact, the efficiency of what we transfer to what just slightly above the 75% and we're continuing to reduce the costs related to it.
Speaker Change: We.
So that business because it was too small we were not competitive and we were pretty much not making much profit in there.
Speaker Change: No I understand that.
Speaker Change: Now as far as this north point business I've got a couple of questions here.
Speaker Change: One on the buyback.
Partner strategy Youre looking at and then the I guess the broadening of the lending.
Speaker Change: Include more consumer.
Speaker Change: And and consumer lending well on the partnership stuff.
Speaker Change: Uh huh.
Speaker Change: Is it really you you want to have more originations with both a balance sheet impact. So you where you want to.
Go more in the originate to distribute direction.
Speaker Change: The base kind of business and and.
Speaker Change: Rod in your.
Speaker Change: No.
Speaker Change: The types of loans Youre targeting and that's that's.
Speaker Change: Just behind it.
Speaker Change: Yeah, Yeah, Yeah, I would say all of the above like like the partnerships we are exploring.
Speaker Change: Could be two to generate other income and not not keeping it on our balance sheet.
Speaker Change: Being able to actually tackle larger type exposure, but split the risks with.
Speaker Change: Partners.
Speaker Change: And to approach other industries that we might not be in and.
Speaker Change: Those partners could be interested so so for us it's like we have the operational capacity, we know our strength there to actually maximize this so it's just a question of.
Speaker Change: Of exploiting that.
Speaker Change: That form of ours.
Speaker Change: And it's predominantly in the U S I guess.
Speaker Change: Well anyway.
Speaker Change: Now the mix of this platform is 90% in the U S, 10% in Canada, and we expect this to remain pretty much aligned in terms of proportion yes.
Speaker Change: And Oh excuse me with an hour before why why go down. This route is it really just to be more capital light.
Speaker Change:
Speaker Change: Or is there another motivation there no I don't think funding as an issue you clarified that but I'm just wondering strategically whats the.
Speaker Change: Primary motivation.
Speaker Change: I'll take that one and I gave a lot of this is ivana. So the key motivation in the areas that were highly optimistic and we like that business. A lot. There is a huge potential there's a limit to what we can do by ourselves. We can do a lot we have high liquidity. Good capital, we can redeploy but we believe the potential of the market. These even.
Speaker Change: Been stronger and as we build it with partners. There was also an advantage of building it with more than one player gives us access to more activities. So it's really the potential that we see in there and it's why we're having conversations.
Speaker Change: Conversations with partners that was part of our strategic plan in May and that's that's a portion of what we move.
Speaker Change: Okay, and then switching over to the other direction I guess at the same time as Youre doing Miss Your correct me if I'm wrong. Please.
Speaker Change: Sure you know.
Evolving the overall north point strategy in the sense that they're.
They're not just targeting the.
Speaker Change: The floor plan financing you're going for.
Speaker Change: You Wanna be it the blending terminal offering alone to the.
Person buying the bulk or the RV or whatever is out.
Speaker Change: But.
Robert: Thanks Robert.
Robert: No.
Robert: What we mean by that is.
Robert: If you saw lately, we announced in November.
Robert: Or is it end of October that we are actually combining our equipment finance group under the North Pointe brands. So our division that was previously called L. B C capital that was focus on commercial leasing and lending.
Robert: Will allow us to complete the ecosystem in terms of going from the manufacturers to the dealer distribution network and to the end users, but on the commercial side of things, which we already do it's just that now we are in.
Robert: Embedding all of this into the North Pointe brand, which for us will allow.
Robert: The simpler go to market a better alignment with how we approach customers. There. So we believe also this will generate.
Robert: Future opportunities for US Okay. So youre, one phase of the franchise lending to the OEM to the dealer to the consumer.
Robert: On the commercial front, we don't intend to do.
Robert: Consumer lending.
Mike: Mike fleets and stuff like that.
Robert: Well, yes.
Robert: Everything Thats right.
Yes, I'd products, but again on the Kmart side of things got it okay alright.
Speaker Change: Let's clarify it.
As you already know.
Speaker Change: FCA towards together here.
Speaker Change: Your next question comes from Doug Young with <unk> capital markets. Your line is now open.
Doug Young: Hi, good morning, maybe to kind of expand on this I guess it sounds like you are going with the merger.
Doug Young: And north point Youre going into the U S. You have going into the U S. With your equipment financing background. He built in Canada, what exactly silos or areas are you going after in the U S and expanding into if you can kind of talk about that and then and have you been in some of these areas.
Doug Young: In the U S I'm, sorry in Canada.
Speaker Change: Yes. Thank you Doug for the question actually we already from an equipment finance perspective, as a small book of portfolio in the U S. Most of it is transportation construction.
Speaker Change: If you recall in the past.
Speaker Change: Also.
Speaker Change: Showcase the fact that our inventory financing business for US was actually diversifying. So we started that a few years ago in terms of going into construction.
Speaker Change: <unk> technology in the U S. So we're already touching those industries, Doug and then just.
Speaker Change: A compliment in terms of simplifying our approach and making sure that we provide all the right tools in terms of.
Speaker Change: In terms of offering for for those industries on a north American scale.
Speaker Change: And you've talked about efficiencies I think getting efficiencies from it sounds like this is more of a growth opportunity than it is a cost savings opportunity for merging these two entities or maybe it's a bit of both can you talk about the efficiency side.
Speaker Change: It's really grow Doug like those businesses are running quite efficient.
Speaker Change: Two to what we like in terms of levels. So so it's really to create growth.
Speaker Change: Our efficiency should be and should be read more in terms of will it be more efficient in the face of the customers.
Speaker Change: Out there so so no real cost efficiencies to be expected there.
Speaker Change: And on the efficiency side can you talk about what your adjusted efficiency ratio is for commercial versus personal and just trying to get a sense as the business mix shifts like I know your target is to get that the ratio of below 68 that you outlined at last year's Investor Day, I'm, just trying to get a sense of the two businesses.
Speaker Change: And does that anything anything changed in terms of that you still think you can get below 60% I know you are not doing it in fiscal 'twenty five I'm, just trying to get a sense yet.
Speaker Change: So yes, we don't disclose the specifics what I would refer you to is again, the strategic than where we did outline without putting numbers the big gap between how efficient commercial is running and has been running throughout the years as well as the trend.
Speaker Change: Debt.
Speaker Change: That is not going the right way I would say in terms of our retail.
Speaker Change: A portion of the bank.
Speaker Change: And yes, I reaffirm that we are committed to meeting that 60% and less efficiency ratio and our midterm.
Speaker Change: <unk> financial.
Speaker Change: Disclosures for this strategic plan and this is why the investments, we're making are aiming to actually reduce our manual processes and retail create those efficiencies and make sure that the overall mix will will.
Speaker Change: We'll be towards our financial goals.
Speaker Change: And just lastly, I know this is medium term targets and I know you're investing this year.
Speaker Change: Is there a path to move towards that 60% in fiscal 'twenty six or is this much longer right.
Speaker Change: I would guide to two are longer.
Speaker Change: And 2026, I believe we're going to start seeing.
Speaker Change: Some momentum some some improvements of the actions that we already started taking them that we will continue to make in 2025, but.
Speaker Change: I would guide to some improvements inefficiency in 2006 and and in the latter part of the plan definitely meeting those mid term commitments.
Speaker Change: I appreciate your time thank you.
Speaker Change: Thank you Doug.
Speaker Change: Thank you that's all the time, we ask your questions I would now like to turn the meeting over to Eric.
Eric: Alright. Thank you our goal is clear and simplify the bank grow commercial banking and achieve our medium term financial targets.
Eric: These include getting our efficiency ratio to 60% or below generating positive adjusted operating leverage growing Roe to at least 10% in realizing an adjusted diluted EPS CAGR of 10% or more.
Eric: I would like to extend my sincere thanks to our employees customers shareholders and all stakeholders for your continued support as we reshape the bank.
Eric: You a wonderful holiday season, and I look forward to connecting again in the new year. Thank you.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in our thank you. Please disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.