Q4 2024 Royal Bank of Canada Earnings Call
🎵Outro Music🎵
This conference is being recorded.
As noted on slide 1, our comments may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties.
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.
To give everyone a chance to ask questions, we ask that you limit your questions. And then req with that, I'll turn it over to Dave.
Thank you, awesome. Good morning everyone. Thank you for joining us.
Today we reported fourth quarter, earnings of 4.2 billion dollars.
Including 265.
Million of earnings for the, from the acquisition of HSBC Canada. Just at earnings of 4.4 billion dollars were up 18% year-over-year.
Or 9% excluding adjusted earnings of 318 million from HSBC, Canada.
this quarter, we benefited
from Market appreciation and strong client activity across our largest segments.
Importantly, we generated all Bank operating leverage of 7% or 4% on an adjusted basis.
Provisions for credit loss. On impaired loans remains largely stable for over quarter at 26 basis points.
Looking back at our 2024 fiscal year.
RBC delivered earnings.
Of 16.2 billion were adjusted.
Excuse me, adjusted earnings of over 17 billion dollars.
We ended the year with a common Equity Tier 1 ratio of 13.2% resulting in 5 billion of excess, capital above a 12 and a half percent level.
we continue to expand our funding capacity and profile this year including through strong, client-driven, deposit growth,
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.
This included RBC becoming the official financial services and ticket access partner of Taylor, Swift. The errors tour in Canada. Furthermore, we are proud that RBC ranked the highest in the 2024, JD Power Canada. Retail banking satisfaction study the fourth time in 5 years,
In the US, we are seeing increasing client interest in RBC clear, our cache management business with rising inflows of the posits and a robust pipeline client. Feedback has been positive as we look to build the next phase of our holistic multi-year initiative.
And City National's 83% loan to deposit. Ratio is largely underpinned by a base of core deposits.
We maintained our prudent risk appetite ACL and loans and acceptances increased to 64 basis points. We had no days of trading losses this year and the operational risk multiplier remains flat at a ratio of 0.8,
we ended the fiscal 20 fiscal 2024, with a strong, Roe of 14.4% or an adjusted Roe of 15.5% during a year which we closed our largest ever. Excuse me, acquisition
Our premium Roe drove internal Capital generation of over 280 basis points this year.
Excluding specified items. This in turn drove, strong Book, value growth of 9%,
I will now provide my perspective on the macro environment.
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.
Further. Headwinds include a more constrained immigration policy and the threat of rising protectionism.
Partly offsetting. These risks are rising consumer income levels, solid savings rates, and 125 basis points of Bank of Canada interest rate cuts.
These factors in combination, could begin to firm up demand and moderate.
Increases in credit losses and our rate sensitive Canadian economy.
In contrast, the economic backdrop in the US has been far more resilient where consumer spending and business, expectations are rising.
While the potential of an expansive us fiscal, policy could create uncertainty around the sides 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.
In this environment, we are maintaining our medium-term objectives, including delivering an on an Roe of over 16%, which we expect will be underpinned by earnings growth and accretive capital deployment.
We consider many factors when allocating Capital discipline client-driven, rwa growth is always a priority and we expect to take advantage of increased opportunities, to support our Commercial Banking and capital markets, client, financing needs.
As it relates to returning Capital to our shareholders this morning we announced a 6% or 4% increase in our quarterly dividend.
We have been cautious in buying back stock this quarter given our higher degree of volatility around the lecture outcomes and monetary policy.
Going forward, we will look to use BuyBacks as a lever to deploy capital and we'll tactically increase the Cadence when opportunities arise.
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.
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.
We remain confident that we will achieve our expense Synergy, goal of 740 million majority captured in personal banking,
We will look to disclose the anticipated Financial benefits of Revenue synergies in the coming quarters.
The key initiatives driving our initial successes include cross-selling of RBC personal banking products to clients, acquired through the acquisition of HSBC Canada.
As well as our investments in new capabilities, such as foreign currency accounts.
The acquisition is added increased scale to all our businesses particularly Commercial Banking. We also expect revenue synergies from trade Finance in global cash management capabilities.
Moving to personal banking, where we remain focused on client acquisition, deepening client, relationships, and improving productivity.
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.
This quarter, we saw growth in all 3 of core banking term deposits and investment accounts as we continue to capture the money in motion shift, given the evolving interest rate and Market Outlook.
Our 1 RBC Client. First approach is also reflected in the multiple Awards and record net promoter scores achieved by our private bank.
turning to mortgages where we plan to maintain or discipline growth strategy, amidst, intense competition,
As part of this strategy, we have invested in technology to improve our end-to-end digital. Renewal processes ahead of upcoming mortgage renewals
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 3, Global financial institutions for artificial intelligence maturity and the evident AI index.
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.
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,
We significant.
Li invested in Frontline capabilities and coverage teams over the past few years and more. Recently further expanded our coverage and bent strength with Talent joining from the HSBC Canada acquisition.
We expect growth to remain solid across our Diversified set of sectors.
Turning to Capital markets, our business where we aspire to move even further up the league tables across key categories.
Incluses of inclusive of record, fourth quarter Revenue. Pre-provision pre-tax earnings were 5 billion dollars for the year of our guidance of 1.1 billion per quarter.
lending and other Revenue were up 14% from last year benefiting from higher lending volumes and spread
An 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.
We have a robust pipeline that continued to build as we progressed through 2024 with active dialogue across client segments.
There are also signs that private Equity activities, picking up at sponsors, look to the significant levels on uninvested funds.
We will continue to work towards increasing Banker productivity, including a focus on winning multi-product mandates as well as strategic senior hiring and key industry verticals.
Global markets reported 1.3 billion dollars in Revenue. This quarter reflecting a constructive backdrop in fixed income products,
We plan to continue investing in talent and Technology to gain market share in this business.
Moving to our wealth management segment where we look to leverage, our Diversified product shelf and Holistic Solutions, improve our technology and grow our advisor base in distribution channels.
This quarter revenue is up 20% year-over-year benefiting from higher markets, asset Gathering and client driven transactional Revenue.
Rbc's Global Asset Management assets under management increased 139 billion dollars or 26% from last year.
Gam generated Canadian retail mutual fund. Net sales of 3 billion dollars in 2024 compared to Industry flows that were in a net Redemption state.
And this volatile environment, our clients chose us as a trusted adviser and part due to our performance and expertise.
Nearly 80% of AUM, outperformed The Benchmark. On a 1. 13 and 5 year Blended basis.
This was a milestone quarter for our Global wealth advisory business, which reached 2 trillion dollars of assets under Administration for the first time.
Dene wealth management assets under Administration increased 26%, or nearly 180 billion dollars from last year.
AUA in US, wealth management. Including CNB was up 23% or 125 billion US dollars.
We recruited over a 100 advisors this year. Furthermore, loans and deposits in our us wealth. Advisory business reported strong growth, this quarter and we, as we add banking products to support client needs.
on a full year, basis City National reported net, income of us, 144 million
After adjusting for specified items and other items, impacting results earnings were 391 million us. A CNB continues to improve its earning profile.
Well, a relatively small contributor to all Bank earnings CNB remains an important element of our growth strategy in the United States.
Turning to Insurance segment which continues to generate High, Roe earnings. We remain focused on harnessing, the power of 1, RBC to deepen client relationships, and provide a comprehensive Suite, but advice and solutions to both individuals and businesses.
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.
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 and a prudent and efficient manner.
I want to thank our more than 98,000 employees who live our purpose, and create value for 18 million plus retail commercials and institutional clients every day.
This commitment to Excellence is reflected in the power of our brand I'm proud that RBC maintained its number 1 position. In the kantar brandz said most valuable Canadian brands in 2024 ranking outperforming Financial peers and key areas including consumer Trust.
And corporate reputation.
With that Katherine over to you.
Thanks, Dave, and good morning everyone. Starting on slide 11. We reported diluted earnings per share of $2.91 this quarter.
Adjusted diluted earnings per share was 3.7 up 16% from last year, benefiting from the acquisition of HSBC Canada.
each of our businesses, exhibited, strong double-digit, Revenue growth, this quarter, which underpinned, robust adjusted, all Bank operating, leverage of 4.3%
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 portfolio.
We also repurchased approximately 408,000 shares this quarter or 67 million.
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.
Moving to slide 13 all Bank. Net, interest income was up. 17% year-over-year for up. 15% excluding trading Revenue.
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.
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.
Canadian banking, Nim was up 2 basis points from last quarter, as a benefits from our tractor deposit, strategies, and changes in product. Mix, we're partly offset by ongoing competition for term deposits.
Which we expect to persist throughout the year as well as the dilutive impact of the ba Kora. Migration.
We hedge our low-cost non- maturity deposits in a laddered strategy of 3 and 5 year duration.
Going forward with 5-year swap rates up approximately 140 basis points from 5 years ago. Our core deposit portfolio is well, positioned to provide an offset to the impact of lower short-term interest rates.
In the past, we have highlighted that there are many variables that impact, Nim, including changes, in client, and competitive Behavior, and the forward curve which are difficult to predict in the current Dynamic environment.
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.
Moving to slide 14. Non-interest, expenses were up 12% from last year on both a reported and adjusted basis.
The bulk of the year-over-year core expense growth was driven by higher variable compensation to measure it with higher Revenue.
Higher volume-driven costs, investments in technology and discretionary costs. Also contributed to the growth
Looking forward given the uncertain macro environment. We will continue upholding a disciplined approach to cost management.
We expect all banks core expense growth, including run rate HSBC, Canada costs to be in the mid single-digit range for 2025 off of base of reported 2024 expenses.
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.
While we anticipate volatility, within our guidance range to be largely driven by movements and variable compensation, we ultimately expect to drive positive operating leverage throughout the course of the year.
As a reminder core expense growth, excludes the impact of FX and share based compensation, which are largely driven by macro factors.
Reflected in this guidance is the expectation of 1 to 2% operating, leverage for the combined Canadian banking business.
Turning to taxes, the non-ev effective tax rate was 19% this quarter or 19.5% on an adjusted basis.
As we look to 2025, we expect the adjusted non-tab effective tax rate, to be in the 20, to 22% range, reflecting the impact of pillar 2 income taxes which arise in jurisdictions where our operations have a have an effective tax rate below. 15%,
Turning to our Q4 segment results. Beginning on slide 15.
Personal banking reported earnings of 1.6 billion.
Focusing on Personal Banking Canada, net income, was up 17% year-over-year.
In 86 million of niat from HSBC Canada.
Personal banking Canada, net income Rose, a strong 10% year-over-year benefiting from 5% operating Leverage
Organic. Net. Interest income was up 9% from last year, reflecting higher, spreads, and robust volume growth.
Organic. Non-interest income was up 11% year-over-year underpinned by higher. Mutual fund distribution fees, including positive Branch, net sales,
Additionally, higher service fee. Revenue was driven by client acquisition and volume related growth.
Turning to slide 16 Commercial Banking. Net income of 774 million rows 16% from a year ago, including 139 million from HSBC Canada.
Pre-provision 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.
Turning to wealth management on slide 17, Nia was 969 million with prior year results impacted by legal, provisions, and impairment losses, with respect to our interest in an Associated company.
We added over 15 billion in net. New assets across our North, American Wealth advisory, and 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.
City National generated, 91 million us and adjusted earnings. This quarter or 102 million excluding the impact of lease exit costs.
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 pass forward and drive improved profitability of the business.
Turning to our Capital markets result on slide 18 pre-provision 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.
This was partly offset by legal, provisions of 93 million taken in the quarter.
Corporate and Investment Banking. Revenue was up 9% from last year, reflecting higher debt, origination of all regions and higher volumes in lending and securitization financing.
Global markets Revenue was up 12% from last year driven by robust client activity in FX trading and debt origination as well as more favorable spreads in retail financing.
Our equities trading business continues to be impacted by legislative changes to the dividends received deductions.
Core results were driven by strong derivative trading and agency commissions volume.
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.
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
To conclude we are pleased with the strong performance across our core businesses. This year which underpinned a full year adjusted role of 15.5% on a robust zt1 base of 13.2%.
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 Grant.
Thank you, Katherine and good morning, everyone.
Starting on slide 21. I'll discuss our allowances in the context of the macroeconomic.
Environment.
Over the course of 2024, actions taken by central banks to curb inflation of largely been successful.
however the economic impacts of a higher interest rate environment have varied across the core geographies, in which we operate
As Dave mentioned earlier, in Canada, economy has been underperforming. And we expect relatively slower growth. In a weaker labor market to result in the Bank of Canada, continue to cut interest rates more aggressively to the US Federal Reserve, the US GDP growth remains strong, but labor markets have started to show signs of softening pumping with Federal Reserve to start cutting rates. The focus shipping from managing inflation to managing strength to the labor market.
We just read cuts are certainly constructive for credit outcomes. It takes time for the benefits of rate cuts to flow through the economy.
And interest rates remain elevated relative to the low rates, following the pandemic.
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 watch list exposure and draw Downs on savings and deposits for clients impacted by higher rates.
These outcomes are in line with our expectations for where we are in the credit cycle and we continue to build allowances that provide strong coverage relative to current and anticipated, PCL, and impaired loans.
For the quarter, we took a total of 208 million of provisions on performing loans across our portfolios.
Reflect the unfavorable changes to credit quality, including the downgrade of a large exposure to a previously investment grade rated company in the other services sector.
This is partially offset by a favorable change to our macroeconomic forecasts driven by lower interest rates better than expected, host prices and the continued strength of the US economy.
This marks the 10th consecutive quarter, where we added reserves on performing, loans, resulting in a total ACL of 6.4 billion.
Moving to slide 22 growth impaired, loans of 5.9 billion, were up, 182 million, or 1 basis. Point this quarter.
Higher in loan, balances and Commercial Banking. And personal banking. We're partially offset by lower growth impaired loans in capital markets and wealth management.
In Commercial Banking and personal banking. New formations remain elevated, reflecting the weaker economic conditions in Canada, compared to the US that I noted earlier.
Turning to slide 23, you can see provisions on impaired, loans of 26 basis points for relatively stable.
With higher Provisions, in our Canadian portfolios offset by lower Provisions, in capital markets.
In capital markets losses. Decrease for the third consecutive quarter for the current quarters provisioning Provisions, benefiting from recoveries on previously impaired loans.
Well, this trend is encouraging. We don't expect losses to remain this low.
In personal banking, we saw a modest increase in PCL mainly in our insecured portfolios and our sound underwriting, standards and Rising personal incomes have helped mitigate losses in this segment in our Commercial Banking portfolio. Provisions were up 505 million this quarter principally from borrowers and economically sensitive sectors. We took additional pre provisions on previously impaired loans in the automotive, and Forest product sectors and new Provisions in the consumer discretionary in industrial product, sectors.
For the re segmentation we provided some additional details on our Commercial Banking portfolio, and slide 24.
This is a well secured and highly Diversified portfolio. That represents a wide spectrum of borrowers across Canada. Ranging from small businesses to the large commercial real estate developers and public sector agencies.
Over the last year the portfolio has grown 36%. Largely driven by the HSBC Canada acquisition but also through a focused effort on the upper end of the commercial Market.
After a prolonged period of low losses, the segment is now, exiting some weakness with increased impairments that reflect the macroeconomic challenges in Canada referenced earlier.
AA, shown on the slide consumer discretionary, the office segment of commercial real estate Forest Products, and the supply chain sectors such as Automotive, Transportation Industrial Products have been the main drivers of loan losses. In 2024
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.
To conclude. We are pleased with the ongoing performance of our portfolios.
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
Our strong credit performance reflects our Diversified business model, our prudent underwriting practices and the quality of our clients.
We continue to see strong resilience in our retail Mortgage in commercial real estate portfolios with some payment relief expected from anticipated interest rate Cuts in Canada
And this year, we added a total of 627 million. Provisions on performing loans,
prepared for the risks on the horizon, whether they be the, whether they may be geopolitical risks,
Uncertain outcomes for the recent us election or surprises to our interest rate and inflation rate forecast.
In 2025 we expect the Canadian economy to to continue softening with GDP and population growth. Slowing and unemployment rates peaking in the first half of the year. The leg impact from monetary policy decisions mean that we expect unemployment rates to remain elevated through the middle of 2026.
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.
Moving Forward, credit outcomes will continue to be dependent on the magnitude of change in unemployment rates the direction of magnitude of changes in interest rates in commercial and residential real estate prices.
As always, we continue to proactively manage risks through the cycle and remain. Well, capitalized withstand plausible to get more severe. Macroeconomic outcomes.
With that operator. Let's open the lines for Q&A.
Thank you. We'll now take questions from the telephone lines. If you have a question, please press star 1, you may consult 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 participant register for their questions. Thank you for your patience.
We will take the first question from ebrahim poonawala Bank of America. Please go ahead.
Good morning.
Yes, maybe just to start with Dave. I think you talked about, uh, the Roe and you're laid out on on, on slide 6.
uh, now this in the context where oil has 1 of the best row is among Global Banks, period, but
how should we think about that 16% plus a 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.
Yeah, thanks ebrahim for that question because this is obviously, the important piece of our investor thesis and we are 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 appointment, whether that's HSBC or improving profitability.
City National quite significantly as we've talked about. 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 bounce that to long-term and medium-term delivery of 16 plus percent, are we? It's the scale we have as well to the to deploy across our client scale brand scale, balance sheet, scale, all that allows us. So we are confident, it's a big part of our plan. We've tactical straight, tactical plans to get there as well. Um, so very much. We wouldn't state it as confidently as we did unless we thought we were going to deliver it.
Gordon and the other side of that, Dave is capital is at 13.2%. Cd1 stocks are 2 times Price to Book. Not sure what your appetite is to buy back stock. Please, 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?
No, I do view uh, returning Capital to shareholders as an important part of the overall investment thesis and part of this of the Tactical tool, set to maintain and drive, a 16 plus percent ROI. So it's part of an overall set of initials, but our first priority and we see, you know, really good opportunity with building pipelines and Commercial and building pipelines and capital markets to deploy that organically into rwa growth and Loan growth. So, I think, first and foremost, we can deploy it at a at a very good Roe, and a hurdle Roe into those. Uh,
Growth areas. So I think that would be our, 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 12 and a half percent as we, you know, cam
We measure that for you at 5 plus billion dollars of capital, we're good stewards of capital and we will Steward that Capital with the goal of a 16 plus percent. Are we in premium EPS growth and we'll we'll find the right mix and the strength of our franchise allows us many different ways to achieve that organically share BuyBacks returning Capital dividends and if it makes sense
Uh, we are always on the lookout for a strategic, uh, non-organic inorganic opportunity to create value in our us welfare franchise or us Commercial Banking franchise over time. We'll do that. Um so certainly all those tools remain and that the strong Capital generation ability gives us that strategic optionality.
That's helpful. Thank you.
Thank you.
Questions from John Nathan Geoffrey? Please go ahead.
Good morning. Um, Graeme I I understand your uh commentary on the macro uh completely on side with that. But 1 of the 1 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 with when, when we take a look at what's been going on in terms of the, uh, um, the the mortgage that are passed due, uh, has seen a steady incline over the last couple quarters where we've seen a bit of a more mixed uh, approach with some of the other, um, consumer lending products? Can you give us a sense in terms of, uh, what you're seeing in terms of the residential Marc march Market, what's causing the increase in impairments and hopefully
Some sort of Outlook in terms of what you expect your 2025 on Residential Mortgage, in terms of credit quality.
Yeah, sure John, thanks, thanks for that question. Um, you know, I think for exactly that reason we we provided a slide there, an update that kind of speaks to, you know, the period we're heading into right now, which is, you know, 2025 and into 2026 is really this peak renewal period. Um, and I think that's really the fundamental driver here as we see more of our now fixed rate clients. You know, we saw earlier the wave of variable rate clients, being hit by the, the higher rates in that kind of impact was a bit more instantaneous. Um, we're now seeing that that we really begin where fixed rate clients, that many of those certainly that, uh, you know, that that put the original mortgages in place, back at the low rates of the cycle, are now going through that, that refinancing and being impacted by higher rates. And so that is going to drive, you know, delinquencies. And we expect that to kind of trend up in in the coming. Um, quarters and, and this overall this year, having said that with rates now, starting to come down a little bit, I think we've certainly feel better about that risk and the tail risk there than than maybe a year ago and we were at that Peak levels. Um but overall I think our clients are very well positioned.
To kind of manage through.
Um, 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 to material write-offs. Um, the reason why our PCL was so low this quarter um, is that we already assessed our, what we call our coverage ratio, which is really the provisioning we put in place. Um, for newly impaired mortgage loans 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, um, refinancing period. Um, but what we're seeing is that's what we highlight that slide. I mean, most of these clients have, you know, a lot of good equity in their home and so they have a lot of options. And so the workouts have proved quite strong. And so we, we readjusted our recovery ratios there. I think we're still taking a, a proven approach and and we'll continue to work and support with our, our clients on that. So overall, I think we'll expect impairments to pick up there will be some PCL that comes with that but we certainly don't see that to be. Let's say as big a driver into 2025, as as the unsecured products, which is again, I think what we've been calling out for some time
So Graeme, the uh, the reversal of stage 3 Provisions that we saw on the quarter on Residential Mortgages is obviously not expected to continue moving forward. We should see some level of more normal, uh, pcl's for 2025. Yeah. Right. This quarter, there was a kind of a 1-time hit as we reset our coverage ratio so that released some of the provisions that we had previously put in place. So we don't think we need that level on the back book like we did. And then going forward, that that new rate will be applied to a new pair level. So, um, I think if you back that out, you're probably back into something that's a bit more reflective of where, we'll be in the near term.
Fantastic. Thanks Graeme. I'll reach you.
Thank you. Next question, is from Doug Young.
We discussion because
My Mind Math. It's it's really difficult to get the cash. Are we to breach 16% Plus?
Without bringing the set 1 ratio down to 12 and a half percent or lower, but it sounds like you would disagree with this, but I guess.
I'd like to hear more about what like what are 2 to 3 drivers that would would help push each towards that Target. If you are going to sit at a 13% set 1 ratio, just trying to get a little bit more,
Detail.
Yes, you know fair question and uh as we go through all our levers you know certainly as we we think about the remaining cost takeouts from HSBC and in the opportunity to improve profitability there, towards our targeted levels, we've only taken up 4 out of 750 million dollars of cost. We haven't even talked about revenue synergies, and a lot of that.
Might not require, you know, Capital to to deploy to do it if it's on the well side and across all into wealth. If you look at the CNB and the opportunities to be a much more efficient, there are a lot of the charges we're taking in CNB are just simplify the business and improve operations, which requires, 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 uh, horizontally across the business and leverage RBC to a greater degree, you know, there's there's real opportunities for us there on the cost base without even deploying. Then there's there is growth opportunities in City National that we're, we're waiting to get to, we have to, um, 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, we've peaked in our expenses there, and their expenses will start to come down, uh, in 2025, and well, into 26, as we do that. So those are 2, you know, very large areas. We've got, you know, the, the net, uh, movement and flows as you started to see in Q4, from deposits, and gic's 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 creative, when we're great at capturing those flows and we highlighted that in, in our
Our comments.
In a prepared, comment. So those are 3 areas.
That and we have, you know, great Capital accretion that we're going to continue to drive. Um and therefore we will have Capital to deploy into share BuyBacks as well as as a as a fourth tool and when you look at all that you know our plans don't require us to go down to 12 and a half if we can do that it's a mix of tools and if we execute on that we we have enormous flexibility and enormous ways of getting to 16 plus percent and that their flies are common.
okay, and then
just going back to the second question. Just I think last quarter you talked about potentially providing revenue synergies from HSBC Canada and and and a few months, I know you didn't mention that you, you were going to provide it that maybe you'd provide it in, in the foreseeable future. But can you provide any details today? Uh, because it seems like that's obviously an important part of uh, even the year we expansion as you just mentioned, like any further details that you can provide on on that print.
We are preparing a more wholesome, uh, disclosure for you, with 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, we are very close to giving you targets and timelines. But not today,
Great. Thanks Dave. And I appreciate the question a couple of things. I would say as it relates to our HSBC synergies and the personal bank, I think we continue to feel confident, uh, in the underlying levers of growth. And so, what are the key things? We're looking at 1, I'm looking and tracking how we're performing on clients and our client retention rates. And I think we feel 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, to drive the majority of the profitability, um, retention rates are exceptionally strong for us. Um, the second thing we look at is the productivity of our sales, advisors, to drive growth in, in, in the franchise of those clients. And, um, you know, post the, uh, uh, cutover weekend. We, we saw our advisors continued strength in coming up to the productivity levels that we expect. So, now we look at those new, um, advisors sales folks who have joined us as being equally as productive as our as our RBC
advisors, which give us, uh, you know, confidence that underlying, uh, strengths will be there when we think about revenue synergies and then we look at how are we retaining? Uh, the balance is in volume in the business and, and I think we continue to feel good about, uh, retention. We would see that there is some co-mingling of the hfc, 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 brand?
Is an existing RBC branch than those volumes get co-mingled 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 that we are keeping. We feel confident that our Revenue synergies are well on track.
Sean, sure, thanks. And thanks for the question Doug. Um, on the commercial side, relatively consistent messages, I'd say first and foremost, our priority has been on advisor, uh, and client retention. And so far. Uh, we are are retention is above our expectations, which is very positive. Um, May 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. Um, and so that's been the focus of our team kind of stabilization um, retention and completing that uh TSA migration.
Directionally on the revenue synergies. We're looking at 3, uh, primary drivers. In addition to, you know, better than uh, planned retention. We're starting to see very robust pipelines, build. So that team has been focusing on their existing client base and that client base. Now, and the team is really leveraging the benefit and the strength of the RBC franchise, particularly our balance sheet, uh, really supportive of the client growth. And so those pipelines are really starting to pick up.
Given the portfolio does SKU to larger commercial and corporate clients. You know, this is a longer sales cycle, so we're starting to see some of that pipeline materialized 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. Um, as you know, we've made, you know, pretty considerable investments in, uh, 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. Uh, and the third is, when you combine the kind of the value propositions of both organizations, we see strong opportunities for a client acquisition.
Uh in fact uh to date, we've acquired about 3500 new small business accounts. Well above our expectations uh where those clients have been less impacted by the TSA
Appreciate the color. Thank you. Thank you. The next question is from meny Roman Scotia Bank. Please go ahead.
Hi, good morning. I'm trying to assess the outlook for next year's specifically for your Canadian PNC business and putting all the pieces together. As you're talking, the impression that I'm getting is, is, is pretty negative and I just wanted to check it if I'm missing anything especially on, on the more constructive side. I mean, you're talking about Rising unemployment population growth, slowing potential for tariffs competitive Dynamics, and you've talked about that for a while they're they're tough, maybe getting tougher. So, trying to understand, is think about next year,
More big picture.
It sounds pretty negative. Uh so I wanted to give you a chance to to to respond to see if there's if there's anything there on on the plus side that I'm missing.
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
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 in the 26th. Um, but it's nothing that we're seeing idiosyncratic, with RBC, I think you based on the conversations that we questions, we just answered that, we're, we're, we're really bullish on the business. We're we're seeing growth that we just talked about that, we can invest in the commercial Capital markets and consumer side. Uh, so we're going to use our, our Capital to invest in rwa and growth loan growth. So I think that's really positive. We're not holding back, uh, we see great opportunities. We're really excited about our wealth franchise and the ability to capture money in motion, and increase, margin and increase profitability.
We had 26, you know, percent growth in in Canada, and wealth, and, and AUA and 23% growth in the United States. And we're continuing to, you know, some of that was obviously market growth. But we're seeing, you know, the flows are just starting to to build again. So we feel really good about the wealth side as well. And then, you know, uh, the consumer Bank benefits from that that flow as well in there. So I maybe you're hearing a bit of a, a cautious forecast, but we're not changing our forecast. We're still 30 to 35 basis points.
um 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.
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.
Okay, I just wanted to to check and then maybe just as a follow up, they just in terms of tariffs, obviously a big question mark, it has macro implications, but does that?
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?
No. No. I think you know, it's important not to overreact I think is 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.
And there are other ways of solving that without her hurting both. Economies the Canadian economy in the US economy, and I expect our 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 on our business plans or or credit strategy because we expect this to get resolved in an appropriate way.
Thank you.
Thank you. The next question is from sarab. Me from BMO Capital markets. Please go ahead.
Okay, thank you. I wanted to go to uh, maybe Derek um,
Derek the risk Capital with your business uh is grinding higher. And um I think Dave in his opening remarks talked about,
I think, lending related type, uh, opportunities for for your bank, or for your segment of the business. Can you just talk a little bit about, uh,
Where you think how much Capital you think you need for the type of uh Target they have on your back and uh and whether or not that is going to be overall accretive to the Roe of the bank or neutral.
Uh, sure, thanks Dora. Uh let me just break that down into 2 parts. I think, 1 just your question around the increase in our risk Capital. Uh I would just flag part. Part of the increase in the capital. You're seeing this year, was the change in capital attribution. We implemented uh reflecting about balance of rwa and leverage that did put more Capital into the business. From a risk perspective, though. We actually feel our our risk appetite is unchanged and if anything if you look at our uh, 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 the growth in earnings and the Improvement in Roe in capital markets without uh in any way uh compromising or stretching on the wrist side and that continues to be how we are approaching the business.
Uh, in terms of your question on, uh, sort of how much Capital do we need, obviously the strategy and cap markets that we've been focused on has really been driving accelerated growth in our non-lending or fee based businesses but still supporting clients with, uh, obviously the capital they need to execute on their strategies and we've, uh, over a cycle, we've indicated, you know, we're targeting.
Sort of 4 to 5% growth in the balance sheet businesses. And when we look back, we're very pleased with how that strategy is unfolded because it's allowed us to not only uh meet our growth targets but it has allowed us to notably improve the Roe and capital markets, which continues to be an important Focus. Given, you know, the common state has been through on the 16% plus, uh, objective for the bank. Uh, last year we saw a little more muted credit growth, uh, just given market dynamics. And so we grew our balances, excluding the HSBC component that came into Capital markets, uh, below that 4 to 5% rate as, as, as a result. And, as we see client activity, picking up, we do see capacity for us.
Uh to probably grow a little more than that 4 to 5% as we look forward to next year. Uh, 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.
And and I just if I can just speak 1 more in for Graham and Katherine as the as I guess, it's Graham's outlook on PCL, does that should? Should we be expecting the rwa to asset type density for the bank?
To grind higher from here.
If 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.
Um maybe just from a general credit quality perspective there, I mean there will be there will be some degree of pressure as as we continue to see credit migration. I mean that will affect
You know.
Stage 1 and 2 on and and our overall um rwa in a very similar manner. Um, you know, I think what you saw this quarter actually was very much tied to the kind of same same driver there. And so I think as we start to kind of find that Peak and and credit quality starts to either improve or at least flatten out, then you'll you'll you'll see that a bait on that impact. Um, but I don't think we're really forecasting, a huge impact or change in the overall kind of density Factor there. I think the core CL client strategies and credit strategies continue to be consistent and so that won't really on the origination side shift. That's 1 way or another materially.
Okay, thank you very much. Congratulations. On a great uh, year.
Thank you. Next question. Is from Paul Olden from CIBC. Please. Go ahead.
Thank you, good morning. Uh, so I've heard them out in the message on building Pipelines.
For commercial and in capital markets, wondering what you're seeing on Canadian Residential Mortgages have heard a few others comment that they're seeing higher application rates and expecting better volumes in 25. So I just maybe you can provide an an Outlook there.
Yes, thanks. Paul for the question, it's Erica. Um, I think as we look to the next year, we would see, uh, some more activity in the Residential Mortgage Market. Uh, 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, uh, to them of thinking about a new house purchase. And so as we see prices come down for the consumer, uh, we expect to see uh more of those thinking about uh, home purchases. So that should uh, increase activity inside the market. Uh, a little bit over next year. The other side for for us as an organization and and Graham. 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, uh, you know, uh,
You know, strength or growing, uh mortgage uh, volume over this past year as we go into 2025.
For that. I'm going to speak on a second 1 as well just as we think about tariff risk. And I guess more, broadly, sort of geopolitical risk is is, is there in any way, um, something that makes HSBC business more susceptible to us 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 uh customer profile of that. And if there is any still some strong
Linkages, back to that part of the world.
Yeah, maybe I'll start in Sean or Erica can jump in but certainly there was an East-West connectivity and it continues to be an East wet connectivity. But the majority of the clients are, you know, operate at Canada and a strong domestic businesses. They may have contacts, they may move money back and forth between the 2. Therefore, none of our plans, whether it's obviously cost, take up, but none of our growth and revenue plans are contingent upon, you know, significant increased, uh,
Connect.
Activity or anything beyond that we have today. So no, we thought about that certainly when we made the acquisition, but these clients are are embedding Canada and our strong Canadian clients. Both in the commercial and, um, consumer side and are very large significant clients with the global operations. Not just back to Hong Kong, but, you know, strong connectivity to the United States. Strong connectivity to Southeast Asia, as well in India. And that's the beauty of the franchise is diversification. But with that, you know, Sean or Erica. Did you want to add anything? Sure. The only thing I would add is, uh, I I just emphasize that they all have a Canadian Nexus to your point. Um, the we what we've talked about the international component of the client base, those are tend to be clients a Canadian parents with International operations, International subsidiaries International Supply chains and or subsidiaries of uh corporations that have in Canada. Uh, but these are some of the, you know, the the clients that you would recognize and name brands from uh,
Globally uh with a strong, uh, component of that in the US and the Euro markets as well.
Okay, thanks for that.
That's it for me.
Thank you.
Next question is from Gabriel dashin National Bank Financial, please go ahead.
Okay, good morning. Uh,
S were down.
Uh, is that a trend, uh, continuing is that trying to continuing part of your, uh, knee outlook for for mid to high single-digit growth in 25. And then as far as credit, uh, that guidance. I'm, uh, just wanting to confirm, you're, you have an employment peaking in the first half and then, uh, you know, pcl's peaking in the second half, uh, unless I'm mistaken, uh, are you factoring in any impact from a possible trade war with the US? 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, uh, certain industries are are HID from, um, you know,
not being able to sell their biggest customer.
Morning, Dave, it's Katherine. I'll start with your your first question around. This is the the Nim Outlook. And what we did this year, as you would have heard in my comments is that we've we've changed our guidance to focus on an insurance income excluding. Yep. Because there, there are so many, uh, moving parts that are quite difficult to forecast, for the moment, uh, relating to Nim. Uh, but if it's helpful, I would say, you looking at the underlying components, uh, that support our knee X trading guidance. We're really looking to
You know, expected volume growth going forward as called out in, uh, Dave's comments. Uh, we're also expecting to see the tractor benefits continue to, uh, offset, the lower interest rates, uh, environment is forecasted for the year ahead. Um, we, I guess part of the, the unknown though that is also captured in there is around client and uh competitor Behavior. So as I as I noted in my my remarks, we are seeing ongoing competitive pressures on mortgage pricing as well as on the term deposits.
but,
On the client side, with the lower rates, how you would have seen as well in the comments that the term deposit growth of positive flows for scam. And so, as rates continue to draw up, we're likely expecting expecting to see that. We'll have those flows come out of term deposits.
For RBC, though, we expected though, to be flat to revenue. That maybe is down on that interest income, but we'll see that rolling to our other income. So being flat overall. So stepping back gave, 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.
I'm Gabe, it's great. I'm
Your your second question there, I guess there's a 2-part. Um, the first part. Um, yes, your assumptions were correct there. That we see an employment kind of peaking in in the first half and then, you know, that along with the other factors here playing through to a peak PCL. That's it's more in the center in the second half of the year. Um, certainly a lot of uncertainty around that on the exact timing, but that's the general trajectory that you align. And then to your question on trade War. I mean, again, as as, as Dave pointed out, I mean, we're this is totally days on this. There's, there's certainly no conclusions. We're, we're obviously monitoring, uh, for that, but the ultimate outcome versus kind of some of the statements that have been made. We expect that, that will kind of transformed significantly as our leaders, uh, negotiate and conclude on this,
Having said that I would just remind you. That, you know, uncertainty is something we constantly think about in case. And that's why we do run multiple scenarios in our provisioning. And some of those adverse scenarios, absolutely kind of capture the kind of consequences that could play out, if, if, if tariffs come into play. And so, again, I think we feel quite comfortable that we're well provisioned for the kind of the uncertainty we're facing. Um, but we'll continue to Monitor and track that, and, and reflect that in our, our forecast going forward. Great, thanks.
Thank you. The next question is from Mario manga, please. Go ahead from TD security Catherine. You provided some pretty good.
Out of detailed level. I want to take 1 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 so 7%?
Um uh Muriel, thank you for the question. And um,
I would say, you know, the guidance that we provided you gave you, um, clear Direction on the an interesting come excluding trading, we've provided guidance on nie. So, um, maybe stepping back. I, what I would guide you to is that we're still focusing on positive Ops as where as we're moving forward. Um, we're also expecting to have, uh, on. 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. And then
Um on the I guess the tax in the PCL we've covered that off. So adding that all up together, I would say that's you know as we said we're committed to our our mto's of
Of that EPS so nothing to change. I guess a long-winded answer but nothing to change. Mario for what we've put out there. Yeah, the reason I ask is with pcl's 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 and
But I I think what I'm interpreting from your answer is that you're not moving off the 7% Point? Yes, no, no, no, yes, very just very clear. We are not nearly moving off of the mto's. I know we signaled that higher taxes and PCL, but we we fully intend to earn through. Um,
Both of those items and hit our MTO helpful, um, maybe for Dave and this, I, I, I'm not sure you can really address this, but I'm going to try anyway. Um, 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,
But I'd like you to think about is, are the conditions in place for a reduction in the DSP? It's been elevated. Now for the 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
Ease in that respect to allow for a little. A little more room for Lending from Canada's largest banks. Is that plausible? Can you do it? Can you address that?
Um, you know, the constant interesting question. I mean, the construct
where they might consider that or or a couple of things 1, you know, and we would advocate for this is you know, to ensure that there is a Level Playing Field globally. And there is a lot of discussion about where the us is going to go with Basel for, or not go with Basel for at all. And, therefore, there's a construct to think about how we apply capital in Canada, and where we go and
Um, you know, we were early adopters of Basel for in Canada, with the floors and whatnot. So, I think from that perspective, uh, I think appropriately that everything's being re-evaluated in the context of
of where the global commitment is to do that, particularly what's coming out of the us as we compete
In both marketplaces, as far as the timing of when dsps go up and down, I'll leave that to superintendent, uh, to do that. I really don't have a strong view right now. What's your proper timing? You know, we're more focused on our our ACL and Stage 1 and 2 and when that could be released, but I I haven't put a lot of thought on Italy into should the DSP buffer, go down. I put a lot of thought into the global competitiveness of the CSP buffer and where we are in overall Capital. Ratios is is very important to me. So that's the best I can do right now. And I, but I haven't put a lot of thought into it, so I'll caution my remarks there. Thank you.
Perfect, thank you.
The next question is from Matthew. Lee from kakkar jennetty, please go ahead.
Hey, thanks for taking my question. Uh maybe 1 for Derek here, cnib activity, seems like it's kind of still in the early stages especially compared to the US.
uh, 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 25 and how quickly we could start to see activities start to pick up.
Sure, thanks Matthew. Um, you know, obviously after uh a slower Investment Banking fee environment in 2022 and 2023, we did start to see some very good signs of of recovery this year. We've seen that in Industry fee pools and and obviously in the results that we've been able to deliver, I think on the back of, uh, you know, the outlook for 2025, uh, 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. Uh, we certainly feel quite optimistic about the outlook for 2025, uh, continuing to show, you know, that pace of recovery. Uh, we've seen that in terms of overall Market activity levels. Uh, we feel very good about our pipeline heading into the air. And so, uh, you know, absent, any surprises on the horizon, we anticipate a fairly healthy environment as we move into 2025.
And then obviously, you know, we're very focused on, uh, 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, uh, that hopefully Rising people environment.
Thank you.
Our last question is from Lemar Pulte. Call Max Securities. Please go ahead.
Yeah, thanks for taking my question. I I appreciate the new disclosure on slide 37 with uh mortgage renewals and I want to come at it from a different perspective than than than the credit credit uh question. If we think about these payment increases in the, I guess High Teens to low 20s for 2025 and 2026. What does that mean for the earnings outlook on the personal banking? Our wealth businesses? Like, should we expect some slowdown there? As these borrowers refi to higher rates, perhaps, some of that flow of deposits in gic's off. The sidelines, won't go into wealth management and then said that debt. Servicing, is that something that could be meaningful in your view because that's an awfully large amount of mortgages renewing. Thanks.
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 renewals Dave 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 uh well placed across our Network branches and
An advice Center to manage that 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, uh, competitively, where we have shown, uh, continued strength in our mortgage business, to do that over the last number of years. And so, uh, we see this as an opportunity for us to continue to grow from a business perspective. Uh, and so I think that gives, you know, on that side of the balance sheet, uh, strengthen the side of the personal bank and then as it relates, uh, to volumes in the deposit side, I, 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 taste way stay focused on um, the deposit franchise. And, uh, so feel and expect that, we'll continue to uh, show strength in the marketplace as it relates to that side of the balance sheet as well. I, I'll just build on that. Um, question in terms of, what does it mean for wealth management? I mean,
We've seen.
You've heard in some of the previous comments, just the acceleration of with Equity markets, um, trending up and, and rates coming off. You know, we're seeing assets. Continue to grow and Dave spoke to the the trend of net sales and, uh, we're quite pleased. The acceleration. We saw particularly at the back end of 2024. If we add to that, I mean there's an awful lot of the, you know, our ultra high net worth clients where we're seeing disproportionate amount of asset growth. They're not carrying the mortgages that um that Erica would be talking about and we see that both in Canada and the US. And so when we look at at that increase investor confidence in just our ability to continue to recruit investment advisors I mean I think all that really builds into the confidence.
Um, heading into next year for the welfare system.
Right. So thank you for the questions, everyone. Let's see. We're going to bring this to a close and maybe just a few 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. I think you can see hsbc's well on track to deliver on the bottom line impact of 1.4 billion dollars. And with with, you know, upside from the revenue that we'll get from Cross, sell that will disclose more fully in the beginning of the year. Uh, so hsbc's big part of the overall theme but it's important team is that we did not lose momentum. We gained momentum and all our core businesses. The wealth growth was was outstanding the capital markets building pipelines had, you know, very strong performance issues.
Sharon 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, certainly, as we look to do bit better in the, The Mortgage business. If, if you know, 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, we're cautiously optimistic and we think that's the prudent way to do things and we haven't changed our forecast. We're you know, and we we could be wrong. It could accelerate it could be um,
On the schedule, we said whatever it is, we will you know adjust to that and that will that will play out as as it does. And certainly you think about our commitment to being good stewards of capital. We've got an enormous strategic optionality.
We know 16 plus percent is, a very important investment thesis. We have a, a very strong tactical plan with a number of levers. We can do more of this less of this in the short and medium and long term. And therefore, we're confident, we can deliver on our EPs and Roe commitments, and drive, you know, premium TSR performance as we did over the last year.
Plus so thank you very much for your questions. I wish you all a great holiday season. We look forward to seeing you uh at the RBC Capital markets conference uh in January, have a great break and thank you for all your attention.
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