Q4 2024 Royal Bank of Canada Earnings Call
This conference is being recorded.
Asim Imran: All participants, please stand by. Your meeting is ready to begin. Good morning, ladies and gentlemen. Welcome to the RBC's 2024 Fourth Quarter Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Asim Imran. Please go ahead.
Asim Imran: Thank you and good morning everyone. Speaking today will be Dave McKay, President and Chief Executive Officer, Catherine Gibson, Chief Financial Officer, and Graham Hepworth, Chief Risk Officer.
Asim Imran: Also joining us today for your questions, Erika Nielsen, Group Head, Personal Banking, Shana Madhugajee, Group Head, Commercial Banking, Neil McLaughlin, Group Head, Wealth Management, Derek Nelner, Group Head, Capital Markets, and Jennifer Publicover, Group Head, Insurance.
Asim Imran: As noted on slide 1, our comments may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties.
Asim Imran: Actual results could differ materially. I would also remind listeners that the Bank assesses its performance on a reported and adjusted basis, and considers both to be useful in assessing underlying business performance.
Asim Imran: To give everyone a chance to ask questions, we ask that you limit your questions and then re-queue. With that, I'll turn it over to Dave.
Dave Mckay: Thank you, Asim. Good morning, everyone. Thank you for joining us.
Today we reported fourth quarter earnings of $4.2 billion.
Dave Mckay: including $265 million of earnings from the acquisition of HSBC Canada. Adjusted earnings of $4.4 billion are up 18% year-over-year.
Dave Mckay: or 9% excluding adjusted earnings of $318 million from HSBC Canada.
Dave Mckay: This quarter, we benefited from market appreciation and strong client activity across our largest segments.
Dave Mckay: Importantly, we generated all bank operating leverage of 7% or 4% on an adjusted basis.
Dave Mckay: Provisions for credit loss on impaired loans remain largely stable, quarter over quarter, at 26 basis points.
Looking back at our 2024 fiscal year.
RBC Delivered Earnings
Dave Mckay: of $16.2 billion or adjusted earnings of over $17 billion. We ended the year with a common equity Tier 1 ratio of 13.2%, resulting in $5 billion of excess capital above a 12.5% level.
Thank you for watching.
Dave Mckay: We continue to expand our funding capacity and profile this year, including through strong client-driven deposit growth.
Dave Mckay: We added over 600,000 clients in the combined Canadian banking business this year as we benefited from our leading distribution, strategic partnerships, and differentiated products.
Services, and Innovative Client Value Propositions.
Dave Mckay: This included RBC becoming the official financial services and ticket access partner of Taylor Swift, the heiress touring Canada. Furthermore, we are proud that RBC ranked the highest in the 2024 J.D. Power Canada Retail Banking Satisfaction Study, the fourth time in five years.
Dave Mckay: In the U.S., we are seeing increasing client interest in RBC Clear, our cash management business, with rising inflows of deposits and a robust pipeline. Client feedback has been positive as we look to build the next phase of our holistic multi-year initiative.
Dave Mckay: And City Nationals 83% loan to deposit ratio is largely underpinned by a base of core deposits.
Dave Mckay: We maintained our prudent risk appetite. ACLN loans and acceptances increased to 64 basis points. We had no days of trading losses this year. And the operational risk multiplier remained flat at a ratio of 0.8.
Dave Mckay: We ended the fiscal 2024 with a strong ROE of 14.4%.
Dave Mckay: or an adjusted ROE of 15.5% during a year in which we closed our largest ever acquisition.
Dave Mckay: Our premium ROE drove internal capital generation of over 280 basis points this year.
Dave Mckay: Excluding specified items, this in turn drove strong book value growth of 9%.
I will now provide my perspective on the macro environment.
Dave Mckay: In Canada, inflation has declined towards targeted levels amidst weaker consumer spending and a K-shaped economy. Subdued business conditions and rising unemployment, which is up 80 basis points from last year.
Dave Mckay: Further headwinds include a more constrained immigration policy and the threat of rising protectionism.
Dave Mckay: Partly offsetting these risks are rising consumer income levels, solid savings rates, and 125 basis points of Bank of Canada interest rate cuts.
Dave Mckay: These factors, in combination, could begin to firm up demand and moderate demand.
increases in credit losses in a rate-sensitive Canadian economy.
Dave Mckay: In contrast, the economic backdrop in the U.S. has been far more resilient, where consumer spending and business expectations are rising.
Dave Mckay: While the potential of an expansive U.S. fiscal policy could create uncertainty around the size and timing of monetary policy actions, we expect rate cuts by the Federal Reserve to support constructive client appetite and activity levels across senior markets.
Dave Mckay: In this environment, we are maintaining our medium-term objectives, including delivering on an ROE of over 16%, which we expect will be underpinned by earnings growth and accretive capital deployment.
Dave Mckay: As it relates to returning capital to our shareholders, this morning we announced a six cent or four percent increase in our quarterly dividend.
Dave Mckay: We have been cautious in buying back stock this quarter, given our higher degree of volatility around election outcomes and monetary policy.
Dave Mckay: Going forward, we will look to use buybacks as a lever to deploy capital and we will tactically increase the cadence when opportunities arise.
Dave Mckay: With this context, I will now provide an update on our multi-pronged, client-focused growth strategy, starting with our acquisition of HSBC Canada, which positions RBC as the bank of choice for newcomers and commercial clients with international needs.
Dave Mckay: HSBC Canada's adjusted earnings included realized run rate savings of over 400 million dollars or approximately 55% of the stated target on an annualized basis.
Dave Mckay: We remain confident that we will achieve our expense-synergy goal of $740 million, the majority captured in personal banking.
Dave Mckay: We will look to disclose the anticipated financial benefits of revenue synergies in the coming quarters.
Dave Mckay: The key initiatives driving our initial successes include cross-selling of RBC personal banking products to clients acquired through the acquisition of HSBC Canada
Dave Mckay: as well as our investments in new capabilities such as foreign currency accounts.
Dave Mckay: The acquisition is at an increased scale to all our businesses, particularly commercial banking. We also expect revenue synergies from trade finance and global cash management capabilities.
Dave Mckay: Moving to personal banking, where we remain focused on client acquisition, deepening client relationships, and improving productivity.
Dave Mckay: The following comments relate to Personal Banking Canada. We reported strong deposit growth of 19% or 8% excluding HSBC Canada. These deposits are a core relationship product.
Dave Mckay: Our one RBC client first approach is also reflected in the multiple awards and record net promoter scores achieved by our private bank.
Thank you.
Dave Mckay: Turning to mortgages, where we plan to maintain our disciplined growth strategy amidst intense competition.
Dave Mckay: As part of this strategy, we have invested in technology to improve our end-to-end digital renewal processes ahead of upcoming mortgage renewals.
Dave Mckay: Furthermore, we are leveraging investments in technology and artificial intelligence to create client value while improving productivity. For the third year in a row, RBC ranked in the top three global financial institutions for artificial intelligence maturity in the Evident AI Index.
Dave Mckay: turning to our leading commercial banking franchise where we remain focused on prudent growth and leveraging our strong Canadian cash management and transaction banking offerings.
Dave Mckay: Loans and deposits in Q4 were up 37% or 19% year-over-year respectively. Excluding HSBC Canada, loans and deposits were up 12% and 8% respectively, largely with our existing clients.
Dave Mckay: We've significantly invested in front-line capabilities and coverage teams over the past few years and more recently further expanded our coverage and bench strength with talent joining from the HSBC Canada Acquisition.
Dave Mckay: We expect growth to remain solid across our diversified set of sectors.
Dave Mckay: Turning to Capital Markets, a business where we aspire to move even further up the league tables across key categories.
Dave Mckay: Inclusive of record fourth quarter revenue, pre-provision pre-tax earnings were $5 billion for the year, above our guidance of $1.1 billion per quarter.
Dave Mckay: Lending and other revenue were up 14% from last year benefiting from higher lending volumes and spreads.
Dave Mckay: In investment banking, we gained 20 basis points of market share over the last 12 months, notably in equity origination and M&A advisory, which are key areas of focus.
Dave Mckay: We have a robust pipeline that continued to build as we progressed through 2024 with active dialogue across client segments.
For more information visit www.FEMA.gov
Dave Mckay: There are also signs that private equity activity is picking up as sponsors look to deploy their significant levels of uninvested funds.
Dave Mckay: We will continue to work towards increasing banker productivity, including a focus on winning multi-product mandates, as well as strategic senior hiring in key industry verticals.
Dave Mckay: Global markets reported 1.3 billion dollars in revenue this quarter, reflecting a constructive backdrop in fixed income products.
Dave Mckay: We plan to continue investing in talent and technology to gain market share in this business.
Thank you.
Speaker Change: Moving to our Wealth Management segment where we look to leverage our diversified product shelf and holistic solutions, improve our technology and grow our advisory base and distribution channels.
Speaker Change: This quarter, revenue is up 20% year-over-year, benefiting from higher markets, asset gathering, and client-driven transactional revenue.
Speaker Change: RBC's Global Asset Under Management increased $139 billion, or 26% from last year.
Speaker Change: GAM generated Canadian Retail Mutual Fund net sales of $3 billion in 2024 compared to industry flows that were in a net redemption state.
Speaker Change: In this volatile environment, our clients chose us as a trusted advisor, in part due to our performance and expertise.
Speaker Change: Nearly 80% of AUM outperformed the benchmark on a 1, 3, and 5 year blended basis.
Speaker Change: This was a milestone quarter for our Global Wealth Advisory Businesses, which reached $2 trillion of assets under administration for the first time since 2011.
Speaker Change: Bain Wealth Management Assets Under Administration increased 26%, or nearly $180 billion from last year.
Speaker Change: AUA in U.S. wealth management, including CNB, was up 23 percent, or $125 billion U.S.
We recruited over 100 advisors this year.
Speaker Change: Furthermore, loans and deposits in our U.S. Wealth Advisory Business reported strong growth this quarter as we add banking products to support client needs.
Speaker Change: On a full year basis, Citi National reported net income of U.S. $144 million. After adjusting for specified items and other items impacting results, earnings were $391 million U.S., as CNB continues to improve its earnings profile.
Speaker Change: While a relatively small contributor to all bank earnings, C&B remains an important element of our growth strategy in the United States.
Speaker Change: Turning to our insurance segment, which continues to generate high ROE earnings, we remain focused on harnessing the power of OneRBC to deepen client relationships and provide a comprehensive suite of advice and solutions to both individuals and businesses.
Speaker Change: The year-over-year increase in contractual service margin, which represents the future profit on our long-term products, was underpinned by growth in segregated funds and individual life and health products, creating a foundation for future revenue growth.
Speaker Change: In conclusion, we are well positioned entering fiscal 2025. Our balance sheet provides a strong foundation to keep growing our client base across our diversified lines of business in a prudent and efficient manner.
Speaker Change: I want to thank our more than 98,000 employees who live our purpose and create value for our 18 million plus retail, commercial, and institutional clients every day.
Speaker Change: This commitment to excellence is reflected in the power of our brand. I'm proud that RBC maintained its number one position in the Cantor BrandsEd Most Valuable Canadian Brands in 2024 ranking, outperforming financial peers in key areas including consumer trust and corporate reputation.
With that, Catherine, over to you.
Catherine Gibson: Thanks Dave and good morning everyone. Starting on slide 11, we reported diluted earnings per share of $2.91 this quarter.
Catherine Gibson: Adjusted diluted earnings per share was $3.07, up 16% from last year, benefiting from the acquisition of HSBC Canada.
Catherine Gibson: Each of our businesses exhibited strong double-digit revenue growth this quarter, which underpinned robust adjusted all-bank operating leverage of 4.3%.
Thank you. Thank you. Thank you.
Catherine Gibson: Turning to capital on slide 12, our CET1 ratio improved to 13.2%, up 20 basis points from last quarter, mainly reflecting internal capital generation, net of dividends. This was partly offset by business growth and net credit migration, mainly in the wholesale portfolios.
Catherine Gibson: We also repurchased approximately 408,000 shares this quarter for $67 million.
Catherine Gibson: We will continue to prioritize capital allocation towards client-driven organic growth and dividend increases in line with earnings. In addition, we will be opportunistic in our use of buybacks.
Catherine Gibson: Moving to slide 13, all bank net interest income was up 17% year-over-year, or up 15% excluding trading revenue.
Catherine Gibson: These results were largely driven by the addition of HSBC Canada, as well as higher volumes in spread in both personal banking and commercial banking.
Catherine Gibson: The All Bank Net Interest Margin, excluding trading revenue, was up 6 basis points from last quarter, largely due to a favorable funding cost adjustment and improved lending spreads in capital markets.
Favorable tailwinds in Canadian banking also contributed to the increase.
Catherine Gibson: Canadian banking NIM was up two basis points from last quarter as the benefits from our tractor deposit strategy and changes in product mix were partly offset by ongoing competition for term deposits.
Catherine Gibson: which we expect to persist throughout the year, as well as the dilutive impact of the B.A. Cora migration.
Catherine Gibson: We hedge our low-cost, non-maturity deposits in a laddered strategy of three- and five-year duration.
Catherine Gibson: Going forward with five-year swap rates up approximately 140 basis points from five years ago, our core deposit portfolio is well positioned to provide an offset to the impact of lower short-term interest rates.
Catherine Gibson: In the past, we have highlighted that there are many variables that impact NIMS, including changes in client and competitive behavior and the forward curve, which are difficult to predict in the current dynamic environment.
Catherine Gibson: Looking forward to 2025, we are providing new guidance with net interest income X trading revenue expected to grow in the mid to high single-digit range.
Catherine Gibson: Moving to slide 14, non-interest expenses were up 12% from last year on both a reported and adjusted basis.
Catherine Gibson: The bulk of the year-over-year core expense growth was driven by higher variable compensation to measure it with higher revenue.
Catherine Gibson: Higher volume driven costs, investments in technology, and discretionary costs also contributed to the growth.
Catherine Gibson: Looking forward, given the uncertain macro-environment, we will continue upholding a disciplined approach to cost management.
Catherine Gibson: We expect all bank core expense growth, including run rate HSBC Canada costs, to be in the mid-single-digit range for 2025, off a base of reported 2024 expenses.
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Catherine Gibson: Core expense growth in the first half of the year is expected to be in the high single-digit range, reflecting the inclusion of HSBC Canada results and, to a lesser extent, investments for our next phase of growth.
Catherine Gibson: While we anticipate volatility within our guidance range to be largely driven by movement and variable compensation, we ultimately expect to drive positive operating leverage throughout the course of the year.
Catherine Gibson: As a reminder, core expense growth excludes the impact of FX and share-based compensation, which are largely driven by macro factors.
Catherine Gibson: Reflected in this guidance is the expectation of 1-2% operating leverage for the combined Canadian banking businesses.
Thank you.
Speaker Change: Turning to taxes, the non-TEB-affected tax rate was 19% this quarter, or 19.5% on an adjusted basis.
Speaker Change: As we look to 2025, we expect the adjusted non-TEB effective tax rate to be in the 20 to 22% range.
Speaker Change: Turning to our Q4 segment results, beginning on slide 15. Personal banking reported earnings of $1.6 billion.
Speaker Change: Focusing on personal banking Canada, net income was up 17% year-over-year.
Speaker Change: Excluding 86 million of NIAID from HSBC Canada, Personal Banking Canada net income rose a strong 10% year-over-year, benefiting from 5% operating leverage.
Speaker Change: Organic net interest income was up 9% from last year, reflecting higher spreads and robust volume growth.
Speaker Change: Organic non-interest income was up 11% year-over-year underpinned by higher mutual fund distribution fees including positive branch net sales.
Speaker Change: Additionally, higher service fee revenue was driven by client acquisition and volume-related growth.
Thank you. Thank you.
Speaker Change: Turning to slide 16, commercial banking net income of $774 million rose 16% from a year ago, including $139 million from HSBC Canada.
Speaker Change: Pre-provisioned pre-tax earnings were up 36% or 10% year-over-year, excluding HSBC Canada, reflecting double-digit volume growth and higher spreads.
Commercial banking deficiency ratio was 34% this year.
Speaker Change: Turning to wealth management on slide 17, NIAT was $969 million, with prior year results impacted by legal provisions and impairment losses with respect to our interest in an associated company.
Speaker Change: We added over $15 billion in net new assets across our North American Wealth Advisory in global asset management businesses, as momentum builds in long-term retail mutual fund net sales, driven by both fixed income and equity mandates.
Higher revenue was partly offset by higher variable compensation.
Speaker Change: City National generated $91 million U.S. in adjusted earnings this quarter for $102 million excluding the impact of lease exit costs.
Speaker Change: This quarter's lease exit costs, coupled with the non-core losses taken over the past 12 months, are consistent with our efforts to realign City Nationals' path forward and drive improved profitability of the business.
Speaker Change: Turning to our capital markets results on slide 18. Pre-provisioned pre-tax earnings of $1 billion increased 14% from last year, benefiting from record fourth-quarter revenue in both global markets and corporate investment banking.
Speaker Change: This was partly offset by legal provisions of $93 million taken in the quarter.
Speaker Change: Corporate and investment banking revenue was up 9% from last year, reflecting higher debt origination across all regions and higher volumes in lending and securitization financing.
Speaker Change: Global markets revenue is up 12% from last year, driven by robust client activity in FX trading and debt origination, as well as more favorable spreads in repo financing.
Speaker Change: Our equities trading business continues to be impacted by legislative changes to the dividends received deduction.
Speaker Change: Core results were driven by strong derivative trading and agency commission volumes.
Speaker Change: Turning to slide 19, insurance net income of $162 million was up 67% from last year, mainly due to higher insurance service results, primarily driven by business growth across the majority of our products.
This was partially offset by less favorable claims experience.
Speaker Change: It's important to note that the results in the prior year period are not fully comparable as we were not managing our asset and liability portfolios under IFRS 17.
Speaker Change: To conclude, we are pleased with the strong performance across our core businesses this year, which underpinned a full-year adjusted ROE of 15.5% on a robust ZT1 base of 13.2%.
Speaker Change: Looking forward, we expect this strong operating momentum to carry into 2025, driving continued improvement in profitability.
With that, I'll now turn it over to Graham.
Thank you, Catherine, and good morning, everyone.
Graham Hepworth: Starting on slide 21, I'll discuss our allowances in the context of the macroeconomic environment.
Graham Hepworth: Over the course of 2024, actions taken by central banks to curb inflation have largely been successful. However, the economic impacts of a higher interest rate environment have varied across the core geographies in which we operate.
Speaker Change: As Dave mentioned earlier, in Canada, the economy has been underperforming and we expect relatively slower growth and a weaker labour market to result in the Bank of Canada continuing to cut interest rates more aggressively than the US Federal Reserve.
Speaker Change: In the U.S., GDP growth remains strong, but labor markets have started to show signs of softening, prompting the Federal Reserve to start cutting rates, with focus shifting from managing inflation to managing strength in the labor market.
Speaker Change: Legislative cuts are certainly constructive for credit outcomes. It takes time for the benefits of rate cuts to flow through the economy.
Speaker Change: And interest rates remain elevated relative to the low rates following the pandemic.
Speaker Change: Our clients continue to feel the effects of prolonged higher interest rate environment. We continue to see net credit downgrades, moderate increase in delinquency rates, and watchlist exposure, and drawdowns on savings and deposits for clients impacted by higher rates.
Speaker Change: For the quarter, we took a total of $208 million of provisions on performing loans across our portfolios.
Speaker Change: Reflecting unfavorable changes to credit quality, including the downgrade of a large exposure to a previously investment-grade rated company in the other services sector.
Speaker Change: This was partially offset by a favorable change to our macroeconomic forecast, driven by lower interest rates, better than expected house prices, and the continued strength of the U.S. economy.
Speaker Change: This marks the 10th consecutive quarter where we added reserves on performing loans, resulting in a total ACL of $6.4 billion.
Speaker Change: Moving to slide 22, gross impaired loans of $5.9 billion were up $182 million, or one basis point this quarter.
Speaker Change: Higher impaired loan balances in commercial banking and personal banking were partially offset by lower gross impaired loans in capital markets and wealth management.
Speaker Change: In commercial banking and personal banking, new formations remain elevated, reflecting the weaker economic conditions in Canada compared to the U.S. that I noted earlier.
Speaker Change: Turning to slide 23, you can see provisions on impaired loans of 26 basis points were relatively stable, with higher provisions in our Canadian portfolios offset by lower provisions in capital markets.
Speaker Change: In capital markets, losses decreased for the third consecutive quarter, with the current quarter's provisions benefiting from recoveries on previously impaired loans.
Speaker Change: Well, this trend is encouraging. We don't expect losses to remain this low.
Speaker Change: In personal banking, we saw a modest increase in PCL, mainly in our unsecured portfolios. Our sound underwriting standards and rising personal incomes have helped mitigate losses in this segment.
Speaker Change: In our commercial banking portfolio, provisions were up $55 million this quarter, principally from borrowers in economically sensitive sectors.
Speaker Change: We took additional provisions on previously impaired loans in the automotive and forest product sectors, and new provisions in the consumer discretionary and industrial product sectors.
Speaker Change: I'm going to be a little bit more nervous than I thought.
Speaker Change: Given the re-segmentation, we provided some additional details on our commercial banking portfolio on slide 24.
Speaker Change: This is a well-secured and highly diversified portfolio that represents a wide spectrum of borrowers across Canada, ranging from small businesses to large commercial real estate developers and public sector agencies.
Speaker Change: Over the last year, the portfolio has grown 36%, largely driven by the HSBC Canada acquisition.
Speaker Change: but also through a focused effort on the upper end of the commercial market.
Speaker Change: After a prolonged period of low losses, the segment is now exhibiting some weakness, with increased impairments that reflect the macroeconomic challenges in Canada referenced earlier.
Speaker Change: As shown on the slide, consumer discretionary, the office segment of commercial real estate, forest products, and the supply chain sectors such as automotive, transportation, and industrial products have been the main drivers of loan losses in 2024.
Speaker Change: Overall, the portfolio continues to operate in line with our risk appetite. The addition of HSBC Canada has added to the quality and diversification of the portfolio that will further support strong through-the-cycle performance.
Speaker Change: To conclude, we are pleased with the ongoing performance of our portfolios.
Speaker Change: For the year, our PCL and impaired loans ratio of 28 basis points remained below our historical loss rate and slightly outperformed the guidance I provided last fall of 30 to 35 basis points.
Speaker Change: Our strong credit performance reflects our diversified business model, our prudent underwriting practices, and the quality of our clients.
Speaker Change: We continue to see strong resilience in our retail mortgage and commercial real estate portfolios with some payment relief expected from anticipated interest rate cuts in Canada.
Speaker Change: And this year, we added a total of $627 million of provisions on performing loans, leaving us well prepared for the risks on the horizon, whether they may be geopolitical risks, uncertain outcomes for the recent U.S. election, or surprises to our interest rate and inflation rate forecasts.
Speaker Change: In 2025, we expect the Canadian economy to continue softening, with GDP and population growth slowing and unemployment rates peaking in the first half of the year.
Speaker Change: The lagging impact from monetary policy decisions mean that we expect unemployment rates to remain elevated through the middle of 2026.
Speaker Change: Therefore, in basis points, we are forecasting 2025 credit losses to be in the mid-30s, with peak loss rates coming in the second half of the year.
Speaker Change: Moving forward, credit outcomes will continue to be dependent on the magnitude of change in unemployment rates, the direction and magnitude of changes in interest rates, and commercial and residential real estate prices.
Speaker Change: As always, we continue to proactively manage risk through the cycle, and we remain well capitalized to withstand plausible, yet more severe macroeconomic outcomes.
And with that, Operator, let's open the lines for Q&A.
Speaker Change: Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while participants register for their questions. Thank you for your patience.
Thank you very much.
Speaker Change: We will take the first question from Ibrahim Poonawalla, Bank of America. Please go ahead.
Good morning.
Thank you.
Speaker Change: I guess maybe just to start with Dave, I think you talked about the ROE and you're late out on slide six.
Speaker Change: Now this in a context where oil has one of the best ROEs.
Speaker Change: among global banks period, but how should we think about that 16% plus ROE in the context of where the capital requirements are today? Is that 16% plus aspirational or as a shareholder do I expect Royal to be delivering a 16% ROE year in and year out on a consistent basis as we look forward?
Thanks, Ibram, for that question, because this is obviously...
important piece of our
Investor Thesis, and we are
Speaker Change: committed to delivering that and we are confident of delivering that and I would say it's not aspirational at all It's it's very tactical right now We've got a number of initiatives that we've laid out that we think we can get there without further capital deployment Whether that's HSBC or improving profitability at City National quite significantly as we've talked about
Speaker Change: So when we look through the headwinds we have, but also all the initiatives that we have in the pipeline, that we feel we can balance that to long-term.
Speaker Change: and the tactical plans to get there as well. So very much we wouldn't state it as confidently as we did unless we thought we were gonna deliver it.
Speaker Change: Go ahead. And the other side of that, Dave, is capital is at 13.2% C81.
Speaker Change: The stocks are two times price to book. Not sure what your efforts is to buy back stock. Just give us a sense like organically, can you deploy this capital? And if not, in the past you've talked about wealth M&A, North America, global. Like what does that opportunity set look like as we think about capital deployment over the next year?
Speaker Change: drive a 16 plus percent ROE. So it's part of an overall set of initiatives, but our first priority
Speaker Change: And we see, you know, really good opportunity with building pipelines in commercial and building pipelines in capital markets to deploy that organically into RWA growth and loan growth. So I think first and foremost, we can deploy it at a very good ROE and hurdle ROE into those.
Speaker Change: Growth areas so I think that would be our choice first and foremost but buying back shares and returning capital you'll see us continue to manage a cadence of doing that as well. We have you know significant capital building above twelve and a half percent as we you know.
Speaker Change: We measured that for it, five plus billion dollars of capital.
Speaker Change: We're good stewards of capital, and we will steward that capital with the goal of a 16 plus percent ROE in premium EPS growth, and we'll find the right mix, and the strength of our franchise allows us many different ways to achieve that, organically, through share buybacks, returning capital, dividends, and if it makes sense.
Speaker Change: So certainly, all those tools remain, and the strong capital generation ability gives us that strategic optionality.
Speaker Change: That's helpful. Thank you. Thank you. Next question is from John Aitken, Jeffreys. Please go ahead.
John Aitken: Good morning. Graham, I understand your commentary on the macro, completely on side with that, but one of the things that's standing out this quarter is the ongoing uptick in terms of residential mortgage impairments. I was hoping we could get underneath the hood on that a little bit, particularly when we take a look at what's been going on in terms of the mortgages that are passed due, has seen a steady incline over the last couple of quarters where we've seen a bit of a more mixed
John Aitken: Approach with some of the other consumer lending products. Can you give us a sense in terms of what you're seeing in terms of the residential mortgage market? What's causing the increase in impairments and hopefully some sort of outlook in terms of what you expect for 2025 on residential mortgage in terms of credit quality?
Speaker Change: Thanks for that question. I think for exactly that reason, we provided a slide there, an update that kind of speaks to the period we're heading into right now, which is 2025 and into 2026 is really this peak renewal period.
Speaker Change: And I think that's really the fundamental driver here, as we see more of our now fixed-rate clients. We saw earlier the wave of variable-rate clients being hit by the higher rates, and that kind of impact was a bit more instantaneous.
Speaker Change: We're now seeing that that we really begin where fixed-rate clients that many of those certainly that
Speaker Change: you know that put the original mortgage they'd placed back at the low rates of the cycle are now going through that refinancing and being impacted by higher rates. And so that is going to drive delinquencies and we expect that to kind of trend up in the coming quarters and overall this year.
Speaker Change: Having said that, with rates now starting to come down a little bit, I think we certainly feel better about that risk and the tail risk there than...
Speaker Change: than maybe a year ago when we were at peak levels.
Speaker Change: But overall, I think our clients are very well-positioned to kind of manage through that. And so, despite the fact that we're seeing impairments tick up, you know, we're not really seeing that translate through right now to material write-offs. The reason why our PCL was so low this quarter is that we reassessed what we call our coverage ratio, which is really the provisioning we put in place for newly impaired mortgage loans.
Speaker Change: And we kind of reassess that annually, and last year we were, I'd say, taking a very prudent approach expecting a softer housing market going into this refinancing period. But what we're seeing, and that's why we highlight that slide, I mean, most of these clients have a lot of good equity in their home, and so they have a lot of options.
Speaker Change: And so the workouts have proved quite strong. And so we readjusted our coverage ratios there. I think we're still taking a...
and Chris Cramer.
Graham Hepworth: So, Graham, the reversal of Stage 3 provisions that we saw in the quarter on residential mortgages is obviously not expected to continue moving forward. We should see some...
Graham Hepworth: on the level of more mammal PCLs for 2025? Yeah, right. This quarter there was kind of a one-time hit as we reset our coverage ratio, so that released some of the provisions that we previously put in place, so we don't think we...
Thank you very much.
Fantastic. Thanks, Graham. I'll reach you.
Speaker Change: Thank you. Next question is from Doug Young from Desjardins Capital Markets. Please go ahead.
Speaker Change: Hi, good morning. Just wanted to go back to the ROE discussion because by my math it's really difficult to get the cash ROE to breach 16% plus.
Speaker Change: without bringing the set one ratio down to 12.5% or lower, but it sounds like you would disagree with this. I guess I'd like to hear more about what are two to three drivers that would help push you towards that target if you are going to sit at a 13% set one ratio, just trying to get a little bit more.
et al.
Speaker Change: Yes, you know, fair question and as we go through all our levers, you know, certainly as we think about
Speaker Change: The remaining cost takeouts from HSCC and the opportunity to improve profitability there towards our targeted levels.
Speaker Change: We've only taken out four out of 750 million dollars of costs. We haven't even talked about revenue synergies and a lot of that...
Speaker Change: you know, a simpler risk regime, a simpler operation regime, an oversight mechanism, that's fair. That's easier to manage over time and more flexible. So as we significantly streamline City National and look to improve...
horizontally across the business.
Speaker Change: and leverage RBC to a greater degree. You know, there's real opportunities for us that are on the cost base without even deploying. Then there is growth opportunities in City Nationals that we're waiting to get to.
Speaker Change: certainly build a better operational infrastructure. We're well on our way to doing that.
And we've, you know, we're in a, we're in
Speaker Change: and flows as you started to see in Q4 from deposits and GICs into our wealth franchise and therefore we've seen expansion of NIMS without the use of capital to do that and therefore that secular trend is very accretive when we're great at capturing those flows and we highlighted that in...
Speaker Change: in our comments, in the prepared comments. So those are three areas.
Thank you.
Speaker Change: And if we execute on that, we have enormous flexibility and enormous ways of getting to 16 plus percent. And their flies are competent.
Thank you. Thank you. Thank you.
Okay, and then...
Speaker Change: Just going back to the second question, just I think last quarter you talked about potentially providing revenue synergies from HSBC Canada in a few months. I know you didn't mention that you were going to provide it, that maybe you'd provide it.
Speaker Change: in the foreseeable future. But can you provide any details today? Because it seems like that's obviously an important part of even the ROE expansion, as you just mentioned, like any further details that you can provide on that front?
Speaker Change: We are preparing a more fulsome disclosure for you with targets and timelines, but from a qualitative perspective, maybe I'll go to Sean and Erica to talk about the qualitative aspects. But we are very close to giving you targets and timelines, but not today.
Dave Mckay: Great. Thanks, Dave. And I appreciate the question. A couple of things I would say as it relates to our HSBC synergies in the personal bank.
Speaker Change: I think we continue to feel confident in the underlying levers of growth. And so, what are the key things we're looking at? One, I'm looking and tracking how we're performing on clients and our client retention rates. And I think we feel...
Speaker Change: very confident. They're performing better than we expected and when we dissect that down and look at our mass affluent and affluent clients in that base that drive the majority of the profitability, retention rates are exceptionally strong for us.
Speaker Change: The second thing we look at is the productivity of our sales advisors to drive growth in the franchise of those clients.
Speaker Change: You know, post the cutover weekend, we saw our advisors' continuous strength.
in the office of day, day, day.
Speaker Change: the balances and volume in the business, and I think we continue to feel good about retention, we would see that there is some commingling of the HSBC balances into our RBC balances. So what does that mean? A client walks into a branch to renew a GIC or renew a mortgage. If that branch is an existing RBC branch, then those volumes get commingled into the RBC volumes. And so when we look at the client level, we look at our retention of clients and the balances that we are keeping, we feel confident that our revenue synergies are well on track.
Sean.
Sean: Thanks for the question Doug. On the commercial side, relatively consistent messages. I'd say first and foremost,
Sean: Another piece of context with respect to the commercial portfolio is that we're also in the final stages of completing a TSA that we had in place for the larger and more complex integrations, and so that's been the focus of our team, kind of stabilization, retention, and completing that TSA migration.
Sean: Directionally on the revenue synergies, we're looking at three primary drivers in addition to, you know, better than planned retention. We're starting to see very robust pipelines build, so that team has been focusing on their existing client base.
Sean: And that client base now, and the team, is really leveraging the benefit and the strength of the RBC franchise, particularly our balance sheet, really supportive of the client growth. And so those pipelines are really starting to pick up.
Sean: Given the portfolio does skew to larger commercial and corporate clients, you know, this is a longer sale cycle. So we're starting to see some of that pipeline materialize in the balance sheet in the late stages of Q4 of this year. And so we're excited about that going forward as well.
The second area would be cross-sell to existing RBC clients.
Sean: As you know, we've made pretty considerable investments in new products that were important to HSBC clients like global cash management capabilities, liquidity solutions, trade products, etc. You know, we're going to start to cross sell those to our existing client base next year. And the third is when you combine the kind of the value propositions of both organizations.
We see strong opportunities for client acquisition.
Sean: In fact, to date we've acquired about 3,500 new small business accounts well above our expectations where those clients have been less impacted by the TSA.
Speaker Change: Appreciate the color. Thank you. Thank you. The next question is from Manning Roman, Scotiabank. Please go ahead.
Speaker Change: Hi, good morning. I'm trying to assess the outlook for next year, specifically for your Canadian PMC business and putting all the pieces together.
Speaker Change: As you're talking, the impression that I'm getting is pretty negative, and I just wanted to check if I'm missing anything, especially on the more constructive side. I mean, you're talking about rising unemployment, population growth slowing, potential for tariffs.
Speaker Change: competitive dynamics, and you've talked about that for a while. They're tough, maybe getting tougher. So, trying to understand is, think about next year, more big picture.
Speaker Change: It sounds pretty negative, so I wanted to give you a chance to respond to see if there's anything there on the plus side that I'm missing.
Speaker Change: Well, that certainly was not our intent today, so I think the tone you're hearing maybe on the credit side is we are Cautious but optimistic, right? So we're trying we don't see anything idiosyncratic with RBC We're just trying to make you know a systemic call that's
Speaker Change: We're just a little uncertain as to how we're going to land this thing, whether it's in the first half, or second half of the year, or early into 26.
Speaker Change: But it's nothing that we're seeing idiosyncratic with RBC. I think it's based on the conversations, the questions we just answered, that we're really bullish on the business. We're seeing growth that we just talked about, that we can invest in the commercial capital markets.
We had 26, you know...
percent growth in Canada and wealth and
Speaker Change: You know, some of that was obviously market growth, but we're seeing, you know, the flows are just starting to build again. So we feel really good about the wealth side as well. And, you know, the consumer bank benefits from that, that flow as well in there. So maybe you're hearing a bit of a cautious forecast, but we're not changing our forecast. We're still 30 to 35 basis points.
Speaker Change: From this year, we're just going to kind of wait things out, but we're investing for growth is the message that we're trying to deliver. So maybe we didn't.
Speaker Change: Do as well in getting that but I don't think you should take that away at all that we feel negative about the economy or the business
Speaker Change: Okay, I just wanted to to check and then maybe just as a follow-up day just in terms of tariffs obviously a big question mark It has macro implications, but does that
Speaker Change: Question mark change how you manage the bank in any way in terms of capital allocation in terms of underwriting Does it have any implications right now?
Speaker Change: No. No, I think, you know, it's important not to overreact. I think it's the most important message that, you know, this was a strong message that we have to improve certain aspects of our operations in Canada around our borders.
Speaker Change: And there are other ways of solving that without hurting both economies, the Canadian economy and the U.S. economy. And I expect our political leaders to find a better path to do that. And therefore, the key is not to overreact right now. And therefore, no, we're not making any major changes on...
Speaker Change: on our business plans or credit strategy because we expect this to get resolved in an appropriate way.
Thank you.
Speaker Change: Thank you. The next question is from Saurabh Movaidi from BMO Capital Markets. Please go ahead.
Okay, thank you. I wanted to go to maybe Derek.
Speaker Change: Derek, the risk capital with your business is grinding higher and I think Dave in his opening remarks talked about
Thank you. Thank you. Thank you.
Speaker Change: I think lending related type opportunities for your bank or for your segment of the business. Can you just talk a little bit about
Speaker Change: where you think, how much capital you think you need for the type of target they have on your back and whether or not that is going to be overall accretive to the ROE of the bank or neutral.
Speaker Change: Sure, thanks Saurabh. Let me just break that down into two parts. I think one, just your question around the increase in our risk capital, I would just flag part of the increase in the capital you're seeing this year was the change in capital attribution we implemented, reflecting a balance of RWA and leverage that did put more capital into the business.
Speaker Change: From a risk perspective, though, we actually feel our risk appetite is unchanged, and if anything, if you look at our RWA to leverage risk density over the last number of years that we've been executing on the strategy, it's actually come down. So we're very pleased that we've been able to drive
Speaker Change: The growth in earnings and the improvement in ROE in capital markets without in any way Compromising or stretching on the risk side and that continues to be how we are approaching the business
over
Speaker Change: A cycle, we've indicated, you know, we're targeting sort of four to five percent growth in the balance sheet businesses. And when we look back, we're very pleased with how that strategy has unfolded because it's allowed us to not only meet our growth targets, but it has allowed us to notably improve the ROE in capital markets, which continues to be an important focus, given, you know, the comments Dave's been through on the 16 percent plus.
objective for the bank.
Speaker Change: below that 4-5% rate. As a result, and as we see client activity picking up, we do see capacity for us.
Speaker Change: to probably grow a little more than that 4-5% as we look forward to next year. But we're going to be very focused on 1. not compromising our risk to do that and 2. making sure we continue to be on track to support a very robust ROE for the business.
Speaker Change: to grind higher from here. Do you have any guidance as to what sort of an RWA growth relative to asset growth we should be kind of factoring into our thinking?
Thank you. Thank you. Thank you.
You know, our Stage 1 and 2 and our overall...
Speaker Change: in a very similar manner. You know, I think what you saw this quarter actually was very much tied to the kind of same driver there. And so I think as we start to kind of find that peak and credit quality starts to either
Thank you everyone.
Okay, thank you very much. Congratulations on a great year.
Thank you very much.
Thank you.
Speaker Change: Next question is from Paul Oldham from CIBC. Please go ahead. Thank you. Good morning. So I've heard the message on building pipelines for commercial and in capital markets. I'm wondering what you're seeing on Canadian residential mortgages.
Speaker Change: have heard a few others comment that they're seeing higher application rates and are expecting better volumes in 2025, so just maybe you can provide an outlook there.
Speaker Change: Thanks, Paul, for the question. It's Erica. I think as we look to the next year, we would see some more activity in the residential mortgage market. As we came through the last part of this cycle, a lot of buyers have been sitting on the sidelines just given the affordability impact.
Speaker Change: We expect to see more of those thinking about home purchases, so that should...
Speaker Change: increase activity inside the market a little bit over next year. The other side for us as an organization and, and Graeme and, and Dave mentioned it would just be that we, we would expect to see a lot of renewal activity and inside that there's obviously an opportunity for us to gather switch business from our competitors and likewise shore up our own business. So we would expect, you know,
Thank you.
Speaker Change: Thanks for that. I'm going to speak on a second one as well. As we think about tariff risk, and I guess more broadly sort of geopolitical risk,
Speaker Change: Is there in any way something that makes HSBC business more susceptible to U.S.-China relations just because of the history of that business or is it now mostly a domestic business, just kind of maybe want to understand a little bit better the customer profile of that and if there is any still some strong linkages back to that part of the world?
For more information, visit www.fema.gov
Yeah, maybe I'll start and Sean or...
Speaker Change: Eric, I can jump in. Certainly there was an east-west connectivity and it continues to be an east-west connectivity, but the majority of the clients are, you know, operate out of Canada and have strong domestic businesses. They may have contacts, they may move money back and forth between the two. Therefore, none of our plans, whether it's obviously cost take-up, but none of our growth and
Speaker Change: connectivity or anything beyond that we have today. So no, we thought about that certainly when we made the acquisition.
But these clients are embedded in Canada.
and our strong Canadian clients, both on the commercial...
and ConsumerSide, and they're very large, significant clients with...
Speaker Change: The Global Operations, not just back to Hong Kong, with strong connectivity to the United States, strong connectivity to Southeast Asia, as well in India, and that's the beauty of the franchise, it's diversification. But with that, Sean or Erica, did you want to add anything? Sure. The only thing I would add is, I just emphasize that they all have a Canadian nexus, to your point. When we've talked about the international component of the client base,
Speaker Change: and or subsidiaries of corporations that have in Canada but these are some of the you know the clients that you would recognize and name brands from globally with a strong component of that in the US and the euro markets as well.
Okay, thanks for that.
That's it for me.
Thank you.
Speaker Change: Next question is from Gabrielle Deschain, National Bank Financial. Please go ahead.
Gabrielle Deschain: Okay, good morning. Asset yields were down less than funding costs fell this quarter. Is that a trend continuing? Is that trend continuing part of your NII outlook for mid to high single digit growth in 2025? And then as far as credit, that guidance, I'm just wanting to confirm you have unemployment peaking in the first half and then PCL is peaking in the second half, unless I'm mistaken. Are you factoring in any impact from a possible trade war with the U.S.? I know there's a lot of debate on how it may take shape or not take shape, but it's certainly a risk out there if certain industries are...
are hit from, you know,
Not being able to sell to their biggest customer.
Speaker Change: Good morning David. Catherine, I'll start with your first question around the NIM outlook and what we did this year as you would have heard in my comments is that we've changed our guidance to focus on an insurance income excluding
Speaker Change: There are so many moving parts that are quite difficult to forecast for the moment relating to NIM.
Speaker Change: But if it's helpful, I would say looking at the underlying components that support our NII X-Trading Guidance.
Speaker Change: We're really looking to, you know, expected volume growth going forward as called out in Dave's comments.
Speaker Change: We're also expecting to see the tractor benefits continue to offset the lower interest rates environment that's forecasted for the year ahead.
Speaker Change: But on the client side, with the lower rates, you would have seen as well in the comments that the term deposit growth, the positive flows for GAM. And so as rates continue to drop, we're likely
Speaker Change: Expecting to see that we'll have those flows come out of term deposits.
Speaker Change: For RBC, though, we expect it, though, to be flat to revenue that maybe is down on net interest income, but we'll see that roll into our other incomes being flat overall.
Speaker Change: So stepping back, those are kind of the key components that we're looking at that underpins that guidance of mid to high single digits.
That's very helpful.
Speaker Change: I'm Gabe, it's Graeme. I'll just take your second question there. I guess it's a two-parter. The first part, yes, your assumptions were correct there that we see unemployment kind of peaking in the first half and then, you know, that along with the other factors here playing through to peak PCL. It's more in the center in the second half of the year. Certainly a lot of uncertainty around that and on the exact timing, but that's the general trajectory that you outlined.
Speaker Change: And then to your question on trade war, I mean, again, as Dave pointed out, I mean, we're, this is still early days on this.
Speaker Change: There's certainly no conclusions. We're obviously monitoring for that. But the ultimate outcome versus some of the statements that have been made, we expect that that will kind of transform significantly as our leaders negotiate and conclude on this.
Speaker Change: Having said that, I would just remind you that, you know, uncertainty is something we constantly think about and face, and that's why we do run multiple scenarios in our provisionings, and some of those adverse scenarios absolutely kind of capture the kind of consequences that could play out if tariffs come into play. And so, again, I think we feel quite comfortable that...
Speaker Change: We're well provisioned for kind of the uncertainty we're facing, but we'll continue to monitor and track that and reflect that in our forecast going forward. Great. Thanks.
Speaker Change: Thank you. The next question is from Mario Mandanka. Please go ahead. From TD Securities. Catherine, you provided some pretty good guidance at a detailed level. I want to take one big step back and ask, does the 7% plus medium-term EPS growth guidance, does that apply to 25 or is there something special about 25 that you would steer us away from 7%?
Catherine Gibson: I would say, you know, the guidance that we provided you gave you clear direction on the an interest income excluding trading, we've provided guidance on NIE, so stepping back, what I would guide you to is that we're still focusing on positive off-leve as we're moving forward. We're also expecting to have, I guess, an item that we didn't give guidance to is on the other income. But in Dave's comments, we're expecting positive capital markets and wealth management as we look going forward.
Catherine Gibson: And then on the, I guess, the tax and the PCL, we've covered that off. So adding that all up together, I would say that, you know, as we said, we're committed to our MTOs.
Catherine Gibson: of that EPS, so nothing to change. I guess a long-winded answer, but nothing to change, Muriel, for what we've put out there.
Speaker Change: The reason I ask is with PCLs moving higher and the tax rate obviously moving a little higher, it does seem like it would be a challenging year to hit the 7% plus.
Speaker Change: both of those items and hit our MTOs. Helpful. Maybe for Dave, I'm not sure you can really address this, but I'm going to try anyway. It would appear loan growth has been soft now in Canada for some time. We're probably heading toward a further slowdown, as you say, as unemployment peaks.
Speaker Change: What I'd like you to think about is, are the conditions in place for a reduction in the DSB? It's been elevated now, the domestic stability buffer, it's been elevated for some time now and it hasn't really moved. Do you think that the conditions are in place to...
Speaker Change: ease in that respect to allow for a little more room for lending from Canada's largest banks. Is that plausible? Can you do it? Can you address that?
Speaker Change: Um, you know, the constant, interesting question. I mean, the construct.
where they might consider that are a couple of things.
Speaker Change: We would advocate for this to ensure that there is a level playing field globally. And there is a lot of discussion about where the U.S. is going to go with Basel IV or not go with Basel IV at all. And therefore, there is a construct to think about how we apply capital in Canada and where we go.
Speaker Change: of where the global commitment is to do that, particularly what's coming out of the U.S. as we compete.
Speaker Change: in both marketplaces as far as the timing of when DSPs go up and down. I'll leave that to superintendent to do that. I really don't have a strong view right now what's the appropriate timing. You know we're more focused on our our ACL in stage one and two and when that
Speaker Change: could be released. But I haven't put a lot of thought, honestly, into should the DSB buffer go down. I put a lot of thought into the global competitiveness of the DSB buffer and where we are in overall capital ratios is very important to me. So that's the best I can do right now, but I haven't put a lot of thought into it. So I'll caution my remarks there.
Thank you.
Thank you.
Speaker Change: The next question is from Mathieu Lee from Canaccord Genitech. Please go ahead.
Mathieu Lee: Hey, thanks for taking my question. Maybe one for Derek here. CNIB activity seems like it's kind of still in the early stages especially compared to the U.S.
Mathieu Lee: Can you just talk about what you're hearing right now in terms of feedback from clients or general trends that maybe get you more excited about the business in 2025 and how quickly we can start to see activities start to pick up?
Speaker Change: Obviously, after a slower investment banking fee environment in 2022 and 2023, we did start to see some very good signs of recovery this year. We've seen that in industry fee pools and obviously in the results that we've been able to deliver. I think...
Speaker Change: On the back of the outlook for 2025, a very constructive market environment, some of the secular tailwinds that Dave alluded to, both in terms of corporate strategic activity, but also dry powder with our sponsor clients.
We certainly feel quite optimistic about the outlook for 2025.
continuing to show, you know, that pace of recovery.
Speaker Change: We've seen that in terms of overall market activity levels, we feel very good about our pipeline heading into the year and so, you know, absent any surprises on the horizon, we anticipate a fairly healthy environment as we move into 2025.
Speaker Change: And then obviously, you know, we're very focused on more RBC-specific initiatives on the hiring front as we build out our sector teams and our various product teams to continue to capture share against that hopefully rising fee pool environment.
Speaker Change: Thank you. Our last question is from Lamar Purcell, Cormac Securities. Please go ahead.
Thank you. Thank you. Thank you.
Speaker Change: Yeah, thanks for taking my question. I appreciate the new disclosure on slide 37 with mortgage renewals But I want to come at it from a different perspective and then the credit question
Speaker Change: If we think about these payment increases in the, I guess, high teens to low 20s for 2025 and 2026,
Speaker Change: What does that mean for the earnings outlook on the personal banking or wealth businesses? Like, should we expect some slowdown there as these borrowers refi into higher rates? Perhaps some of that flow of deposits and GICs off the sidelines won't go into wealth management and instead to debt servicing. Is that something that could be meaningful in your view? Because that's an awfully large amount of mortgages renewing. Thanks.
Speaker Change: Great, thanks for the question. I mean, as we look at the mortgage renewals, obviously it is a, as you indicated, a large strip, but I think we feel very confident that we have the measures in place as a personal bank to manage that degree of renewal.
Speaker Change: David alluded to in his earlier comments related to some of the digitization that we've done as well as making sure that we have advisors well placed across our network branches and advice center to manage that.
Speaker Change: And so, from the renewal side, we would expect to continue to perform strongly, but I would also say that this is a disproportionate opportunity for us to then win business competitively, where we have shown continued strength in our mortgage business to do that over the last number of years. And so, we see this as an opportunity for us to continue to grow from a business perspective.
Speaker Change: And so I think that gives, you know, on that side of the balance sheet, strength on the side of the personal bank. And then as it relates to volumes in the deposit side, I think that we are continuing, we have in this past cycle gathered deposits at a rate that's been higher than our competitors and we continue to stay focused on those.
Speaker Change: The Deposit Franchise, and so feel and expect that we'll continue to show strength in the marketplace as it relates to that side of the balance sheet as well.
Speaker Change: I'll just build on that question in terms of what does it mean for wealth management.
Speaker Change: You've heard in some of the previous comments just the acceleration of, with equity markets trending up and rates coming off.
and David McKay, Asim Imran.
Speaker Change: at that increased investor confidence and just our ability to continue to recruit investment advisors. I mean, I think all that really built into the confidence heading into next year for the wealth business.
Thank you.
Speaker Change: Great, so thank you for the questions everyone. I think we're going to bring this to a close and maybe just a few...
Speaker Change: summary comments. So we're very proud of the quarter and proud of the year, a year in which we made our largest acquisition and went through a very complex transition.
Speaker Change: I think you can see HSBC is well on track to deliver on the bottom line impact of 1.4 billion dollars and with upside from the revenue.
The wealth growth was outstanding, the capital markets.
Building Pipelines had a very strong performance this year.
Speaker Change: and the businesses exited the year in Q4 with momentum. The client volume played, and there's a couple of businesses that can improve.
as well on that, which we talked about.
Speaker Change: as we look to do better and the mortgage business if the market allows that as far as a profitability perspective. So very strong client volumes, prudent risk management. You heard of maybe a bit of a cautious outlook, it's just a macro call. It's hard to make a macro call right now with so many variables, but we're cautiously optimistic and we think that's the prudent way to do things. And we haven't changed our forecast.
Speaker Change: We could be wrong, it could accelerate, it could be on the schedule, we said whatever it is we will adjust to that and that will play out as it does. And certainly you think about our commitment to being good stewards of capital, we've got enormous strategic optionality.
Speaker Change: We know 16 plus percent is a very important investment thesis. We have a very strong tactical plan with a number of levers. We can do more of this, less of this.
Speaker Change: in the short and medium and long term. And therefore, we're confident we can deliver on our EPS and ROE commitments and drive premium TSR performance, as we did over the last year.
Speaker Change: Thank you very much for your questions. I wish you all a great holiday season. We look forward to seeing you at the RBC Capital Markets Conference in January. Have a great break and thank you for all your attention.
Thank you.
Speaker Change: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.
The End