Q2 2025 Laurentian Bank of Canada Earnings Call

Welcome to the Laurentian Bank quarterly financial results call. Please note that this call is being recorded.

Operator: Welcome to the Laurentian Bank quarterly financial results call. Please note that this call is being recorded.

Raphael Ambeault: I would now like to turn the meeting over to Raphael Ambeault, head of investor relations. Please go ahead. Please go ahead, Raphael.

Speaker Change: Now I'd like to turn the meeting over to Fay allowable head of Investor Relations. Please go ahead. Please go ahead F I L.

Speaker Change: Both of those good morning, and thank you for joining US today's opening remarks will be delivered by a puzzle president and CEO and their review of the second quarter financial results will be presented by evaluation executive Vice President and CFO after which we'll invite questions from the phone.

Raphael Ambeault: Bonjour à tous, good morning, and thank you for joining us.

Raphael Ambeault: Today's opening remarks will be delivered by Eric Provost, President and CEO, and the review of the second quarter financial results will be presented by Yvan Deschamps, Executive Vice President and CFO, after which we'll invite questions from the phone. Also joining us for the question period is Christian Debroux, Executive Vice President and CRO.

Speaker Change: Also joining us for the question period is Shanda group Executive Vice President and C. R O.

Raphael Ambeault: All documents pertaining to the quarter can be found on our website in the Investor Relations section. I'd like to remind you that during this conference call, forward-looking statements may be made, and it is possible that actual results may differ materially from those projected in such statements. For the complete cautionary note regarding forward-looking statements, please refer to our press release or to slide 2 of the presentation. I would also like to 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. Eric and Yvan will be referring to adjusted results in their remarks, unless otherwise noted, as reported.

All documents pertaining to the quarter can be found on our website in the Investor Relations section I'd like to remind you that during this conference call forward looking statements may be made and it is possible that actual results may differ materially from those projected in such statements for.

Speaker Change: For the complete kosher annuity note regarding forward looking statements. Please refer to our press release or to slide two of the presentation.

Speaker Change: I would also like to remind listeners that the bank assesses its performance on a reported and adjusted basis.

Speaker Change: And considers both to be useful in assessing underlying business performance.

Speaker Change: Can you that we'll be referring to adjusted results in their remarks, unless otherwise noted as reported.

Eric Provost: I will now turn the call over to Eric.

Eric: I will now turn the call over to Eric.

Speaker Change: Well, so let us see that fairly gave nuts coffee I'll state it for Nicola he knows that I need to be made of I think good morning, and thank you for being with us today as.

Eric Provost: Bonjour à tous, merci Raphael et bienvenue à notre conférence téléphonique pour le deuxième trimestre de l'année 2020. Good morning and thank you for being with us today. As we mark the one-year anniversary of our strategic plan, I'm proud to share that Laurentian Bank has remained focused and disciplined in executing the priorities we set up. We've taken meaningful steps to transform our organization and are making steady progress towards generating efficiency. While we're still in the early stages, we are satisfied with the progress we have made and are encouraged by the sustained execution we've demonstrated so far.

Speaker Change: As we mark the one year anniversary of our strategic plan I'm proud to share that Laurentian bank as remain focused and disciplined and executing the priorities. We set up we've taking meaningful steps to transform our organization and are making steady progress towards generating efficiency.

Speaker Change: While we're still in the early stages, we are satisfied with the progress we have made and are encouraged by the sustained execution, we've demonstrated so far.

Eric Provost: Our investment in technology is a key priority in our strategic plan. Thanks to the hard work and dedication of our team throughout the year, we've made real strides towards improving efficiency, strengthening our technology infrastructure, and enhancing the customer experience. We're focused on the areas where we can truly make an impact. That's why we're continuing to grow our presence in specialized commercial sector, while also maintaining a solid base in personal Within capital markets, we're concentrating on fixed income and foreign exchange areas where we've built solid expertise. I'm incredibly proud of the progress we've made and I'm excited to keep working alongside our talented and committed colleagues.

Speaker Change: Our investment in technology is a key priority in our strategic plan.

Speaker Change: Thanks to the hard work and dedication of our team throughout the year, we've made real strides towards improving efficiency strengthening our technology infrastructure and enhancing the customer experience.

Speaker Change: We're focused on the areas, where we can truly make an impact.

Speaker Change: That's why we're continuing to grow our presence in specialized commercial sector well.

Speaker Change: While also maintaining a solid base in personal deposits within capital markets. We're concentrating on fixed income and foreign exchange areas, where we've built solid expertise I'm incredibly proud of the progress we've made and I'm excited to keep working alongside <unk>.

Speaker Change: Our talented and committed team.

Eric Provost: As we continue to build on this momentum, we remain mindful of the broader environment in which we operate. We're actively monitoring a range of factors, market trends, and policy changes, as well as broader macroeconomic shifts that could affect our customers, and as always, we're prepared to adapt as needed. While uncertainty remains and we recognize that some sectors may be more impacted than others, I want to emphasize that Laurentian Bank is in a strong financial position. We have consistently maintained excellent credit performance across economic cycles. Our portfolio continues to perform well and has proven resilient. Our conviction remains unchanged and we are well positioned to continue executing with confidence.

Speaker Change: As we continue to build on this momentum we remain mindful of the broader environment in which we operate.

Speaker Change: We're actively monitoring a range of factors market trends and policy changes as well as broader macro micro economy shifts that could affect our customers and as always we're prepared to adapt as needed.

Speaker Change: While uncertainty remains and we recognize that some sectors may be more impacted than others I want to emphasize that Laurentian bank is in a strong financial position. We have consistently maintained excellent credit performance across economic cycles our portfolio.

Speaker Change: Used to perform well and has proven resilient.

Speaker Change: Our conviction remains unchanged and we are well positioned to continue executing with confidence.

Eric Provost: Looking at our loan performance, commercial loans grew by 1% compared to the previous quarter, reflecting our continued strategic focus on growing commercial assets, which remain central to our long-term plan. Our commercial assets now make up 49% of the total and our net interest margin has remained stable at 1.85% quarter over quarter. As for inventory financing, the utilization rate increased slightly to 46% in Q2, still below historical levels. That said, we saw a continued momentum in dealer onboarding during the quarter with a growth of 2% compared to last quarter. So far this spring, our dealers have seen LT activity and we anticipate typical seasonal trend in the summer months with inventory levels lowering as consumer demand drives sales.

Speaker Change: Looking at our own performance commercial loans grew by 1% compared to the previous quarter, reflecting our continued strategic focus on growing commercial assets, which remain central to our long term plan, our commercial assets now make up 49% of the total and our net.

Speaker Change: Interest margin has remained stable at 185% quarter over quarter.

Speaker Change: As for inventory financing the utilization rate increased slightly to 46% in Q2.

Speaker Change: Still below historical levels that said, we saw a continued momentum in dealer onboarding during the quarter with a growth of 2% compared to last quarter. So far this spring our dealers have seen L. T activity and we anticipate typical seasonal trends in the summer months.

Speaker Change: With inventory levels low rig as consumer the men drive cells.

Eric Provost: In the commercial real estate portfolio, the market has been slow for the past few quarters and remains quiet. However, our unfunded pipeline continues to build momentum, growing 9% quarter over quarter and 28% year over year. We believe our partners are eager to start projects and are ready to move forward, but they are still waiting for the right timing. We're optimistic that our pipeline will convert into 2020. From our client perspective, our commercial banking net promoter score, which measures customer satisfaction, remained in the excellent category. This demonstrates that we are consistently delivering strong, value-added solutions through our specialized approach.

Speaker Change: In the commercial real estate portfolio. The market has been slow for the past few quarters and remains quiet Oliver our unfunded pipeline continues to build momentum growing 9% quarter over quarter and 28% year over year, We believe our partners are eager to.

Speaker Change: To start projects and are ready to move forward, but they are still waiting for the right timing.

Speaker Change: We are optimistic that our pipeline will convert into 2026.

Speaker Change: From a client perspective, our commercial banking net promoter score which measures.

Speaker Change: Customer satisfaction remained in the excellent category does demonstrate that we have.

Speaker Change: We are consistently delivering strong value added solutions through our specialized approach on the personal banking side, we're continuing to build on the momentum from Q1 and are seeing positive consumer sentiment supported by our renewed focus on customer service.

Eric Provost: On the personal banking side, we're continuing to build on the momentum from Q1 and are seeing positive consumer sentiment supported by our renewed focus on customer service. All in all, we're staying true to our commitment, growing a commercial banking business that plays to our strengths, expanding into key areas of opportunity, and doing it while keeping customer satisfaction front and center.

Speaker Change: All in all we're staying true to our commitment to growing our commercial banking business that plays to our strengths and spending into key areas of opportunity and doing it while keeping customer satisfaction front and center.

Eric Provost: During the quarter, we continued to invest in our strategic priorities, which resulted in an adjusted efficiency ratio of 75.2%. As we mentioned in previous quarters, we anticipate these elevated expenses to continue throughout the remainder of the year. It's important to highlight that these investments are crucial for the successful execution of our strategic plan and for advancing our technology initiative. In the medium term, these efforts will position us for sustained growth and help us achieve our financial targets.

Speaker Change: During the quarter, we continued to invest in our strategic priorities, which resulted in an adjusted efficiency ratio of 75, 2%.

Speaker Change: We've meant as we mentioned in previous quarters. We anticipate these elevated expenses to continue throughout the remainder of the year. It's important to highlight that these investments are crucial for the successful execution of our strategic plan and for advancing our technology initiatives.

Speaker Change: In the medium term these efforts will position us for sustained growth and help us achieve our financial targets.

Eric Provost: Finally, we continue to maintain a strong position in both liquidity and capital, providing us with the financial stability necessary to manage current macroeconomic challenges and stay aligned with our strategic goals.

Speaker Change: Generally we continue to maintain a strong position in both liquidity and capital providing us with the financial stability necessary to manage current macroeconomic challenges and stay aligned with our strategic goals.

Yvan Deschamps: With that, I'll now pass the call over to Yvan, who will walk us through our financial performance. Merci Eric et bonjour à tous. I would like to begin by turning to slide 7, which highlights the Bank's financial performance for the second quarter of 2025. Total revenue for the quarter was $242.5 million, down 4% compared to last year, and 3% quarter over quarter. On a reported basis, net income and diluted EPS were $32.3 million and 69 cents respectively. We've recorded adjusting items for the quarter, which total $1.6 million after tax, or $0.04 per share, from restructuring and other impairment charges of $2.2 million.

Speaker Change: That I will now pass the call over to either who will walk us through our financial performance.

Speaker Change: Let's see.

Speaker Change: I would like to begin by turning to slide seven which highlights the bank's financial performance for the second quarter of 2025.

Speaker Change: Total revenue for the quarter was $242 $5 million down, 4% compared to last year and 3% quarter over quarter.

Speaker Change: On a reported basis net income and diluted EPS were $32 $3 million.69, respectively. We've recorded adjusting items for the quarter, which totaled $1 $6 million after tax or four cents per share from our restructuring and the other impairment charges of $2 $2 million.

Speaker Change: Additional details are available on slide 22, and then the second quarter report to shareholders.

Yvan Deschamps: Additional details are available on slide 22 and in the second quarter report to shareholders.

Yvan Deschamps: Remainder of my comments will be on an adjusted basis. The diluted EPS of 73 cents decreased by 19% year-over-year and 6% quarter-over-quarter. Net income of $34 million was down by 16% compared to last year and down 14% compared to last quarter. The bank's efficiency ratio increased by 140 basis points compared to last year and by 90 basis points sequentially. The increase was driven by the impact of a shorter quarter on revenues while maintaining an elevated level of expenses related to our technology investment. Our ROE for the quarter stood at 5.2%, down 90 basis points year-over-year and 10 basis points quarter-over-quarter.

Speaker Change: The remainder of my comments will be on an adjusted basis.

Speaker Change: Diluted EPS of <unk>, 73 funds decreased by 19% year over year, and 6% quarter over quarter.

Speaker Change: Net income of $34 million was down by 16% compared to last year and down 14% compared to last quarter.

Speaker Change: The bank's efficiency ratio increased by 140 basis points compared to last year and by 90 basis points sequentially.

Speaker Change: The increase was driven by the impact of a shorter quarter on revenues, while maintaining an elevated level of expenses related to our technology investments.

Speaker Change: Our our Hawaii for the quarters stood at five 2% down 90 basis points year over year, and 10 basis points quarter over quarter.

Yvan Deschamps: Slide eight. shows net interest income up by $2.6 million or 1% year-over-year, mainly from the higher commercial loan concentration.

Speaker Change: Slide eight.

Speaker Change: Net interest income up by $2 $6 million or 1% year over year.

Speaker Change: Lee from the higher commercial loan concentrations.

Yvan Deschamps: On a sequential basis, net interest income was down by $4 million, or 2%, mainly from the shorter quarter, partly offset by the growth in our commercial specialty. Our net interest margin was up 5 basis points year-over-year and stable sequentially at 1.85%.

Speaker Change: On a sequential basis net interest income was down by $4 million or 2%, mainly from the shorter quarter, partly offset by the growth in our commercial specialties.

Speaker Change: Our net interest margin was up five basis points year over year and stable sequentially at one point to 85%.

Speaker Change: Slide nine highlights the banks funding position.

Yvan Deschamps: Slide 9 Highlights the Bank's Funding Position On a sequential basis, total funding was up by $300 million. Deposits from advisors and brokers increased by $900 million to offset senior deposit notes and banker deposit notes that matured in the second quarter. The bank maintained a healthy liquidity coverage ratio through the quarter, which remained at the high end of the index.

Speaker Change: On a sequential basis total funding was up by $300 million.

Speaker Change: Deposits from advisers and brokers increased by $900 million to offset senior deposit house and banker.

Speaker Change: How is that matured in the second quarter.

Speaker Change: The bank maintained a healthy liquidity coverage ratio through the quarter, which remained at the high end of the industry.

Speaker Change: Slide 10 presents other income of $63 million, which was lower by 17% compared to last year and by 5% by 4% sequentially.

Yvan Deschamps: Slide 10 presents other income of $60.3 million, which was lowered by 17% compared to last year and by 4% sequentially.

Yvan Deschamps: The year-over-year decrease mostly came from lower fees and securities brokerage commissions following the divestiture of the retail brokerage divisions and lower lending fees due to the tampered Commercial Real Estate Act. Slide 11 shows non-interest expenses of $182.3 million, down 2% year-over-year and 1% sequentially, mainly from the shorter quarter, partly offset by continued investments in our strategic priorities.

Speaker Change: The year over year decrease mostly came from lower fees and securities brokerage commissions. Following the divestiture of the retail brokers divisions and lower lending fees due to the temporary commercial real estate activity.

Speaker Change: Slide 11 shows non interest expenses of $182 $3 million down 2% year over year, and 1% sequentially, mainly from the shorter quarter, partially offset by continued investments in our strategic priorities.

Yvan Deschamps: On slide 12, you'll see that our CT1 ratio increased by 10 basis points to 11% sequentially.

Speaker Change: On slide 12, you'll see that our CET, one ratio increased by 10 basis points to 11% sequentially.

Yvan Deschamps: We are in a solid position and well prepared to redeploy capital. Slide 13 highlights our commercial loan portfolio, which grew by about $300 million year-over-year and sequentially. It was primarily driven by continued strength in inventory financing.

Speaker Change: We are in a solid position and are well prepared to redeploy capital.

Speaker Change: Slide 13 highlights our commercial loan portfolio, which grew by about $300 million year over year and sequentially.

Speaker Change: It was primarily driven by continued strength in inventory financing.

Yvan Deschamps: However, the reported growth in our U.S. dollar denominated portfolio was partly offset by approximately $300 million due to the appreciation of the Kenyan dollar during the crisis.

Speaker Change: The reported growth in our U S. Dollar denominated portfolio was partially offset by approximately $300 million due to the appreciation of the Kenyan dollar during the quarter.

Yvan Deschamps: Slide 14 provides details of our inventory financing portfolio. This quarter, utilization rates were 46%, remaining materially below historical averages normally in the mid-50s. with dealers continuing to take a more conservative approach to inventory restocking.

Speaker Change: Slide 14 provides details of our inventory financing portfolio.

Speaker Change: This quarter utilization rates were 46%.

Speaker Change: Meaning materially below historical averages normally in the mid fifties.

Speaker Change: With dealers continuing to take a more conservative approach to inventory restocking.

Yvan Deschamps: Our commercial real estate pipeline continues to show positive momentum.

Speaker Change: Our commercial real estate pipeline continued to show positive momentum.

Speaker Change: Slide 15 illustrates that the majority of our commercial real estate portfolio is concentrated in multi residential housing with limited exposure to the office segment, which accounts for just 2% of our commercial loan portfolio.

Yvan Deschamps: Slide 15 illustrates that the majority of our commercial real estate portfolio is concentrated in multi-residential housing, with limited exposure to the office segment, which accounts for just 2% of our commercial loan portfolio. As noted, the bulk of our portfolio consists of multi-tenant property. The LTV on the uninsured multi-residential portfolio stood prudently at 60%.

Speaker Change: As noted the bulk of our portfolio consist of multi tenanted properties.

Speaker Change: The LTV on the uninsured multi residential portfolio stood prudently at 60%.

Speaker Change: Slide 16 presents the bank's residential mortgage portfolio.

Yvan Deschamps: Slide 16 presents the bank's residential mortgage portfolio. Presidential mortgage loans were down 4% year-over-year and down 1% sequentially. We adhere to cautious underwriting standards and are confident in the quality of our portfolio. This is reflected in our 61% proportion of insured mortgages and a low loan to value ratio of 50% on the uninsured portion. Allowances for credit losses on Slide 17 totaled $204.3 million, down $2.6 million compared to last quarter, mostly from lower allowances on impaired commercial loans.

Speaker Change: Residential mortgage loans were down 4% year over year and down 1% sequentially.

Speaker Change: We adhere to cautious underwriting standards and are confident in the quality of our portfolio.

Speaker Change: This is reflected in our 61% proportion of insured mortgages and a low loan to value ratio of 50% on the uninsured portion.

Speaker Change: Allowances for credit losses on slide 17 totaled $204 $3 million down $2 $6 million compared to last quarter, mostly from lower allowances on impaired commercial loans.

Speaker Change: Turning to slide 18, our level of allowances for credit losses has remained relatively stable since the pandemic period.

Yvan Deschamps: Turning to slide 18, our level of allowances for credit losses has remained relatively stable since the pandemic period. In the bottom left corner, you'll find the evolution of our coverage ratio expressed as the previous year's allowances for credit losses over the net write-offs incurred over the following 12 months. On that basis, we currently stand at about 15% higher than the industry average in terms of net write-offs coverage, well-positioned to face the current uncertainty.

Speaker Change: In the bottom left corner, you will find the evolution of our coverage ratio expressed as the previous years allowances for credit losses over the net write offs incurred or the following 12 months.

Speaker Change: On that basis, we currently stand at about 15% higher than the industry average in terms of net write offs coverage well positioned to face the current uncertainties.

Yvan Deschamps: Turning to slide 19, the provisions for credit losses was $16.7 million, a decrease of $1.2 million from a year ago, from lower provisions on impaired loans, partly offset by higher provisions on performing Sequentially, PCLs were up $1.5 million from higher provisions on performing loans. Partly offset by lower provisions on impaired As a percentage of average loans, PCL decreased by one basis point year-over-year and increased two basis points quarter-over-quarter to 19 basis points.

Speaker Change: Turning to slide 19, the provisions for credit losses was $16 $7 million, a decrease of $1 $2 million from a year ago from lower provisions on impaired loans, partially offset by higher provisions on performing loans.

Speaker Change: Sequentially sales were up $1.5 million from higher provisions on performing loans.

Speaker Change: Partially offset by lower provisions on impaired loans.

Speaker Change: As a percentage of average loans PCL decreased by one basis points year over year and increased two basis points quarter over quarter to 19 basis points.

Speaker Change: Slide 20 provides an overview of impaired loans.

Yvan Deschamps: Slide 20 provides an overview of impaired loans. On a year-over-year basis, gross impaired loans increased by $104.6 million due to credit migration and commercial loans, and were relatively stable sequentially.

Speaker Change: On a year over year basis, gross impaired loans increased by $104 $6 million due to credit migration in the commercial loans and were relatively stable sequentially.

Yvan Deschamps: Our disciplined approach to underwriting, along with the high quality and strong collateralization of our loan portfolio, around 93%. enables us to effectively navigate credit migration without material impacts on our ACL or PCL records. We remain committed to a prudent and disciplined approach to risk management.

Speaker Change: Our disciplined approach to underwriting along with the high quality and strong collateralization of our loan portfolio around 93%.

Speaker Change: Enables us to effectively navigate credit migration without materially impacts on our ACL or PCL results.

Speaker Change: We remain committed to a prudent and disciplined approach to risk management.

Yvan Deschamps: As we look ahead to third quarter of 2025, I would like to provide some remarks. We expect our loan book to decrease due to the seasonal reduction in inventory financing during Q2. Revenues are projected to be slightly up, mainly for a number of days, partly offset by lower inventory financing volumes. NIM is expected to be slightly down for the same reason.

Speaker Change: As we look ahead to third quarter of 2025, I would like to provide some remarks.

Speaker Change: We expect our loan book to decrease due to the seasonal reduction in inventory financing during Q3.

Speaker Change: Revenues are projected to be slightly up mainly for a number of days, partially offset by lower inventory refinancing volumes.

Speaker Change: NIM is expected to be slightly down for the same reasons.

Yvan Deschamps: Regarding the efficiency ratio, we are continuing to invest in our strategic priorities with some acceleration in the remaining... of the Fiscal Year. As previously mentioned, we expect the 4th year to be in the mid-70s.

Speaker Change: Regarding the efficiency ratio, we are continuing to invest in our strategic priorities with some acceleration in the remaining.

Speaker Change: Over the fiscal year.

Speaker Change: As previously mentioned, we expect the full year to be in the mid seventies.

Yvan Deschamps: The investments we are making in our IT infrastructure will not only improve the customer experience, but will also simplify our infrastructure and improve our processes, leading to efficiency gains in the medium term to achieve our financial targets.

Speaker Change: The investments we are making in our it infrastructure will not only improve the customer experience, but will also simplify our infrastructure and improve our processes leading to efficiency gains in the medium term to achieve our financial targets.

Yvan Deschamps: Considering the geopolitical and macroeconomic environment, it is difficult to predict the potential outcome on PCLs, but we are currently expecting to remain in the IT. Our tax rate is expected to be in the 19-20% range. Capital and liquidity levels are solid and expected to remain strong for Q3 and the remainder of 2025.

Speaker Change: Considering the geopolitical and macroeconomic environment. It is difficult to predict the potential outcome on pcl's, but we are currently expecting to remain in the high teens.

Speaker Change: Our tax rate is expected to be in the 19% to 20% range capital and liquidity levels are solid and expected to remain strong for Q3 and the remainder of 2025.

Operator: I will now turn the call back to the operator. Thank you.

Speaker Change: I'll now turn the call back to the operator.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by. If you are using a speakerphone, please lift the handset before pressing it.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone, you'll hear a prompt that Johan has been raised.

Speaker Change: The decline from the polling process. Please press star followed by the Q.

Speaker Change: If youre using a speakerphone please lift the handset before pressing any keys one.

Speaker Change: One moment. Please for your first question.

Doug Young: Your first question comes from Doug Young with Desjardins Capital Markets. Your line is now open. Hi, good morning.

Speaker Change: Your first question comes from Doug Young with Deutsche Bank Capital markets. Your line is now open.

Doug Young: Hi, Good morning, I didn't expect to be first here, but anyways.

Doug Young: I didn't expect to be first here. But anyways, um, maybe I'll start off with a big picture question. Like, is there anything unusual in these results? Anything that leaned for you or against you in this quarter that we should be thinking about?

Speaker Change: And maybe I'll start off with a big picture question like is there anything unusual in these results anything that lean for you or against you in this quarter that we should be thinking about.

Speaker Change: Yeah, Hi, Doug it's Eric.

Eric Provost: Yeah, hi, Doug.

Eric Provost: It's Eric. Actually, no, it's a no, no big story quarter for us. What I would emphasize is the positioning we we see and continue to see in our specialized sectors. Commercial is definitely our main focus. And as I mentioned in the opening remarks, like we, we have a very strong LT unfunded pipeline in our commercial real estate sector. And our inventory finance group is, is performing quite well in terms of keeping on boarding new dealers. So, so right now we feel very well positioned for future state. It's just a question of timing afterwards. But the portfolio has been resilient and performing well in this.

Speaker Change: Actually no.

Speaker Change: No no big story.

Speaker Change: Quarter for Us what I would emphasize is that positioning we we see and continue to see in our specialized sectors.

Speaker Change: Commercial is definitely our main focus and as I mentioned in the opening remarks like we we have a very strong LT.

Speaker Change: <unk> pipeline and our commercial real estate sector, and our inventory Finance group is.

Speaker Change: Performing quite well in terms of keeping on boarding new dealers. So so right now we feel very well positioned for future state is just a question of timing afterwards, but the portfolio has been resilient and performing well in this.

Eric Provost: Uncertain Microeconomic Period.

Speaker Change: Uncertain macro economy period.

Doug Young: And then just on the inventory finance side, can you talk about the evolution or how many new dealers you added this quarter? You know, you've embarked on expanding it beyond just RVs and boats into other categories. Can you talk a bit about that as well and how you're seeing this?

Speaker Change: Okay, and then just on the inventory finance side.

Speaker Change: And can you talk about the evolution or how many new dealers you added this quarter.

Speaker Change: You've embarked on expanding it beyond just rvs.

Speaker Change: And boats into two other categories can you talk a bit about that as well I know, how you're seeing that and just it sounds like from your music from your conference.

Doug Young: And just it sounds like from your comments that, you know, you're actually seeing fairly competent or constructive on the output for inventory financing in light of or regardless of the economic backdrop, which I would assume people are buying less RVs and boats, but maybe you can flush that out.

Speaker Change: Your comments that.

Speaker Change: Youre actually seems fairly.

Speaker Change: Competent or constructive on the outflow for inventory financing and in light of our.

Speaker Change: Regardless of the economic backdrop, which I would assume people are buying less rvs and boats.

Speaker Change: Maybe you can flesh that out.

Speaker Change: Yeah, Great question I would refer you to page 14, and in the Investor presentation, but.

Eric Provost: Yeah, Doug, great question. I'd refer you to page 14 and in the investor presentation, but we said we would aim at diversifying. And this is what we're doing in terms of inventory financing. Through the quarter, as I mentioned, we've increased about 2%. So I'm going to make round number here about 100 more dealers quarter over quarter. From last year, we grew now close to 6,500 dealers. That's a close to 6% growth year over year. And most of that growth comes from new sectors, new industry where we deployed, again, specialized focus people on ag, construction, IT sectors, power sports.

Speaker Change: We said we would aim at diversifying and this is what we're doing in terms of inventory financing.

Speaker Change: For the quarter as I mentioned, we.

Speaker Change: Increase about 2%, so I'm going to make a round number you're about 100 more dealers quarter over quarter.

Speaker Change: From last year, we grew now close to 6500 dealers.

Speaker Change: That's a close to 6%.

Speaker Change: Growth year over year, so and most of that growth comes from new sectors, new industry, where we deployed.

Speaker Change: Again specialized focus people on AG construction.

Speaker Change: Sectors power sports and this is lending into new programs.

Eric Provost: And this is lending into new programs. And this is what I believe is positioning us better for future estate. After that, it's a question of restocking and making sure that those dealers are confident that consumers will be out there purchasing. But we feel good about that business. The risk profile is quite strong versus returns, and we'll continue to push this in the future.

Speaker Change: And this is what I believe is positioning us.

Speaker Change: Better for future state after that it's a question of restocking and making sure that.

Speaker Change: Those dealers are our confidence that consumers will be out there purchasing but we feel good about that business. The risk profile is quite strong versus returns and we'll continue to push to push this in the future.

Speaker Change: Okay, just some of our other quick one maybe just on it looked like there was a pickup in commercial write offs.

Doug Young: Okay, just two more other quick ones. Maybe just on, it looked like there was a pickup in commercial write-offs. Do I have that right?

Speaker Change: Do you have that right and is there is there anything in particular, but that where youre seeing some pressure in terms of write offs on the commercial side.

Doug Young: And is there anything in particular where you're seeing some pressure in terms of write-offs on the commercial side? Thank you.

Christian: Thank you Christian speaking.

Christian Broux: Christian speaking. You know, our performance of our portfolios is, you know, within historical trends right now. If I have to say if I have any concerns right now, would be the trucking industry that affects everybody.

Christian: Our our performance of our portfolios as well.

Speaker Change: Within historical trends right now.

Speaker Change: If I have to say if I have any concerns right now would be the trucking.

Speaker Change: King industry that affects everybody.

Christian Broux: But our exposure is small and we're adequately provisioned at this time, taking into account, you know, the endemic risk of the sector. So overall, we feel good about our position.

Speaker Change: But our exposure is small and we're adequately provisioned at this time taking into account.

Speaker Change: Indirect endemic risk of our of the sector. So.

Speaker Change: Overall, we feel good about our position.

Doug Young: Okay, and then just lastly, on the expense ratio, I think you were guiding to maybe a pickup in expenses, it looked like the expenses came through maybe better than I expected.

Speaker Change: Okay, and then just lastly on the expense ratio I think you're guiding to maybe a pickup in expenses. It looks like the expenses came through maybe better than I expected and I don't know if its better than you expected, but yes.

Yvan Deschamps: And I don't know if it's better than you expected. But, you know, an adjusted expense ratio in that 75% range, is that what you're thinking we should be thinking about for the remainder of this year? Yeah, thank you, Doug.

Speaker Change: And adjusted expense ratio in that 75% range is that what youre thinking we should be thinking about for the remainder of this year.

Eva: Yes. Thank you Doug this is Eva.

Yvan Deschamps: This is Yvan. So the 75 is what we're guiding or mid 70s for the whole year. So at this point, we're in the 74s or so. So you can see maybe a small uptick next quarter, but relatively small compared to where we are.

Eva: So the 75 is what were guiding or mid <unk> for the whole year.

Eva: At this point, we're in the 70 fours or so so you can see maybe a small uptick next quarter, but relatively small compared to where we are so it's a good level assessment for the end of the year.

Doug Young: So it's a good level assessment for the Appreciate the call. Thank you.

Speaker Change: Appreciate the color. Thank you.

Speaker Change: Okay.

Sohrab Movahedi: Your next question comes from Sohrab Movahedi with BMO Capital Markets. Your line is now open. Okay, thanks.

Sohrab: Your next question comes from Sohrab <unk> with BMO capital markets. Your line is now open.

Speaker Change: Okay. Thanks.

Sohrab: Okay.

Sohrab Movahedi: I don't know who wants to take it. You know, the capital ratio is comfortable. It keeps on grinding higher, which is not a bad thing in this environment. But I'm just curious if you could just remind us. of what are, you know, medium term where you would expect your capital levels to be. and and where you think The extra capital that probably is sitting with you today is going to get deployed. Is it going to be invested in? I don't know, building provisions, or is it going to be deployed because of all this excellent new dealership relationships that you've signed up or utilization rates are going to pick up?

Sohrab: I don't know who wants to take it.

Speaker Change: Capital.

Speaker Change: Ratio is.

Speaker Change: Is comfortable it keeps on granting higher which is not a bad thing in this environment.

Speaker Change: Im just curious if you could just remind us.

Speaker Change: What are.

Speaker Change: Medium term, where you would expect your capital levels to be.

Speaker Change: <unk>.

Speaker Change: And where you think.

Speaker Change: The extra capital that probably is sitting with you today is going to get deployed is it going to be invested in.

Speaker Change: I don't know building provisions, obviously is going to be deployed because of all of this excellent.

Speaker Change: <unk> you.

Speaker Change: The dealership.

Speaker Change: Relationships that you've signed.

Speaker Change: Signed up where utilization rates are going to pick up or is it going to be invested in.

Sohrab Movahedi: Or is it going to be invested in, you know, return to shareholders, whether it's through buybacks or maybe dividend increases?

Speaker Change: Return to shareholders, whether it's through buybacks or maybe dividend decreases.

Speaker Change: Thank you Sarah for the question. This is defined our thoughts and Erik may have some comments so.

Yvan Deschamps: Thank you, Sohrab, for the question.

Yvan Deschamps: This is Yvan, and I'll start and Eric may have some comments. So, we didn't change our guidance in terms of capital. We're at 11%. We said we wanted to manage above 10%. So, currently, we have a good cushion that we can use to redeploy capital, as you mentioned. Definitely, at this point, you know, we've been saying for some quarters that inventory financing is running low in terms of utilizations. So, we expect that we're going to see some normalization to 2026. It's obviously dependent on the economy, but at this point, we see, you know, still good tractions for the assets.

Speaker Change: We didn't change our guidance in terms of capital. We're at 11%. We said we wanted to manage above 10. So currently we have a good cushion that we can use to redeploy capital as you mentioned definitely at this point you know we've been saying for some quarters that inventory financing is running low in terms of utilization.

Speaker Change: So we expect that we're going to see some normalization too.

Speaker Change: 2026.

Speaker Change: It's obviously dependent on the economy, but at this point, we see still good traction for for the assets in terms of commercial real estate. We've seen also a pickup in the unfunded deals that we have so we see good traction on that side, we see some delay in terms of project starts.

Yvan Deschamps: In terms of commercial real estate, we've seen also a pickup in the unfunded deals that we have. So, we see good tractions on that side. We see some delay in terms of project starts due to what's happening out there. But again, we expect to see some good momentum starting in 2026. So, at this point, we just play prudent with the level that we have. We have a good level that we can use to redeploy to profitable growth in our specialties.

Speaker Change: Due to what's happening out there, but again, we expect to see some good momentum starting in 2026. So at this point, we just play prudent with the level that we have we.

Speaker Change: We have a good level that we can use to really deploy to profitable growth in our specialties and so if I may add.

Eric Provost: And Sohrab, if I may add, it's Eric. Commercial is a business, more capital intensive as you know, to give more clarity on the unfunded commercial real estate we're sitting on right now, it's $3.4 billion compared to $2.7 billion last year. So I think just that is a good sign of momentum on our commercial real estate group. And in terms of inventory financing, we are at lower levels of utilization, Qtree will provide for some further decrease because of the selling season and the seasonality of the book, but we are positioned with $10 billion plus of approved lines in inventory financing to actually benefit from a restocking and more stable state in the macroeconomic levels and we want to be ready for that.

Speaker Change: Eric.

Eric: Commercial is as a business more capital intensive as you know.

Eric: To give more.

Speaker Change: Clarity on the unfunded commercial real estate.

Speaker Change: Were sitting on right now is $3 4 billion compared to $2 7 billion last year or so.

Speaker Change: I think just that.

Speaker Change: A good sign of momentum.

Speaker Change: Our commercial real estate group and in terms of inventory financing.

Speaker Change: At lower levels of utilization Q3 will provide for some further decrease because of this selling season and the seasonality of the book, but we are positioned with $10 billion plus of approved lines in in inventory <unk>.

Speaker Change: Nancy to actually benefit from.

Speaker Change: A restocking in more stable state and macroeconomic levels and we want to be ready for that and really it's a question of timing on our side, but.

Eric Provost: And really it's a question of timing on our side, but these are good returns segments that we know we can add value and we want to be ready to that timing.

Speaker Change: These are good returns segments that we know we can add value and we want to be ready to to that timing. So that's the reason.

Eric Provost: So that's the reason.

Speaker Change: Okay I appreciate that just so therefore for clarity Yvonne.

Sohrab Movahedi: Okay, I appreciate it.

Sohrab Movahedi: Just so therefore, for clarity, Yvonne. what what you're saying is These elevated capital levels will get closer to maybe target levels primarily with balance sheet growth. Is that the right conclusion? Yeah, exactly.

Speaker Change: What youre, saying is.

Speaker Change: These elevated capital levels will get closer to maybe.

Speaker Change: Target levels, primarily with balance sheet growth here.

Speaker Change: Is that the right conclusion.

Speaker Change: Yes, exactly and if I can give you a quantum but I would assume for at the end of the year, it's going to remain elevated right. The 11th is not a surprise and it's going to stick for the end of the year, but as we see the growth coming back that Eric discussed I'll give you. An example, the 10% that we're talking inventory financing is roughly $1 billion 1 billion Bucks It's <unk>.

Sohrab Movahedi: And if I can give you a quantum, but I would assume for the end of the year, it's going to remain elevated, right? The 11th is not a surprise and it's going to stick for the end of the year. But as we see the growth coming back that Eric discussed, I'll give you an example. The 10% that we're talking inventory financing is roughly a billion bucks. A billion bucks is 40 beeps of capital. So that gives you an assessment of why we're keeping the cushion that we have right now. And I can do the same map for commercial real estate as well.

Speaker Change: <unk> of capital. So that gives you an assessment of why we're keeping the cushion that we have right now and I can't do the same math for commercial real estate as well so definitely the organic growth through segments, where we have good margins and good return is what we intend.

Sohrab Movahedi: So definitely the organic growth through segments where we have values, good margins and good return is what we intend.

Sohrab Movahedi: And if I can push my luck here, that billion dollars, 40 basis points of capital, what sort of a return would that generate? We don't provide detailed returns by asset, as you know, but what I can tell you, it's a good return and it's going to generate value to the show.

Speaker Change: And if I can push my luck here that billion.

Speaker Change: 40 basis points of capital.

Speaker Change: <unk> returned would that generate for us.

Speaker Change: We don't provide the detailed returns by asset as you know, but what I can tell you. It's a good return and it's gone and generate value for the shareholders.

Speaker Change: Okay, well I thought I'd try thank you.

Sohrab Movahedi: Yeah, well, I thought I'd try.

Sohrab Movahedi: Thank you.

Sarah: Thank you Sarah.

Sarah: Yeah.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one on your next question comes from Paul Holden with CIBC capital markets. Your line is now open.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one.

Paul Holden: Your next question comes from Paul Holden with CIBC Capital Markets. Your line is now open. Yes, thank you. Good morning.

Speaker Change: Yes. Thank you good morning.

Paul Holden: Question regarding that 10 billion of accrued lines, just get a better sense of how successful you have been in growing it. Thank you. Inventory Finance over the last year. Do you know what that number would have been a year ago?

Speaker Change: Question regarding that and billion of accrued lines, just get a better sense of how successful you have been growing.

Speaker Change: Inventory finance over the last year do you know what that number would have been a year ago.

Eric Provost: In terms of lines, Sohrab, I'm not quite sure I have that readily, Paul, sorry for that, readily in hand. So we were, yeah, close to $9.1 billion last year. So in terms of, and again, since we onboarded this platform, it demonstrated year after year organic growth potential now on a diversified base. You all know we're looking out for partnerships to help even accelerate further that trend. We believe this is a very... Great opportunity for us because of the operational capabilities we have and the broad industries that we can actually address through this specialized business. So I feel good about the business, I feel good about the risk profile we're in, and I believe in its future potential.

Speaker Change: In terms of lines.

Speaker Change: Not quite sure of that.

Speaker Change: Lee Paul sorry for that.

Speaker Change: Lee and.

Speaker Change: So we were close to $9 1 billion last year.

Speaker Change: So in terms of and again since since since we on boarded this platform.

Speaker Change: It demonstrated year after year organic growth.

Speaker Change: Potential now on diversified base.

Speaker Change: You all know we're looking out for partnerships to help even accelerate further that trend. We believe this is a.

Speaker Change: Very.

Speaker Change: Great opportunity for us because of the operational capabilities, we have and.

Speaker Change: The broad.

Speaker Change: The industries that we can actually address through this.

Speaker Change: Specialized business so.

Speaker Change: I feel good about the business I feel good about the risk profile, we are in and I believe in its future potential again, it's a question.

Eric Provost: Again, it's a question of timing and the dealers have been cautious this year in terms of restocking, but in a normalized environment we should be running at the mid-50s utilization which you can appreciate. volume at Sure.

Speaker Change: A question of timing and the dealers have been cautious this year in terms of restocking.

Speaker Change: But.

Speaker Change: In a normalized environment, we should be running at.

Speaker Change: The mid fifties utilization, which you can appreciate.

Speaker Change: Sure.

Speaker Change: The volume which represents.

Speaker Change: Sure.

Eric Provost: Sorry, you might have mentioned this earlier, but I missed the where's the utilization rate currently? So we're running NAQ2 at 46%. So we should we should be historically it's been running above the 50% mark at this stage of the year and now that we're entering the seasonal period of where we see increased sales from our dealerships it is expected that this volume will reduce throughout Q3 but again the restocking period occurs in the fall for the next season so we're cautiously optimistic that the dealer base will be in a Good position if things stabilize and that they will restock.

Speaker Change: You may have mentioned this earlier, but I missed whereas the utilization rate.

Speaker Change: Currently so we're running at end of Q2 at 46%.

Speaker Change: Uh huh.

Speaker Change: Also.

Speaker Change: We should we should be historically, it's been running at.

Speaker Change: Above the 50% Mark at this stage of the year and now that we're entering.

Speaker Change: The seasonal period of where we see increased.

Speaker Change: Increased sales from our dealerships.

Speaker Change: It is expected that this volume will reduce.

Speaker Change: About Q3.

Speaker Change: But again the restocking period occurs in the fall for the next season so.

Speaker Change: We're cautiously optimistic that the dealer base will be.

Speaker Change: Good physician, if things stabilize and that they will restart.

Paul Holden: historical levels, which just that should give us a good momentum in terms of asset growth for Okay. So, I mean, the accrued lines are available credit under inventory finance and the utilization rates versus historical is very helpful in terms of understanding the future growth potential there.

Speaker Change: Historical levels, which just that should give us.

Speaker Change: Good momentum in terms of asset growth for 2006.

Speaker Change: Okay. So I mean, the crude the crude lines are available are available credit under inventory finance and the utilization rates versus historical is very.

Speaker Change: Helpful in terms of understanding the future growth potential there any similar statistics, you can give us on equipment finance or commercial.

Eric Provost: Any similar statistics you can give us on equipment finance or your commercial mortgage lending book like has that has the opportunity there set growing at a similar sort of 10% base or is it something a little bit more modest? Yeah, it just don't behave the same way. Paul, in terms of it's not utilization lines that we set up like for equipment finance, as an example, like over the past four quarters, we saw a 20% growth in equipment financing in our diversified groups. So again, like we, we believe that this is a good business line for us, it's, it's well diversified.

Speaker Change: Mortgage lending book.

Speaker Change: Has that has the opportunity there.

Speaker Change: Growing at a similar sort of 10% pace or is it something a little bit more modest.

Speaker Change: Just don't behave the same way.

Paul: Paul in terms of it's not utilization lines that we set up for that for equipment finance as an example, like over the past four quarters four quarters, we saw.

Paul: 20% growth in equipment financing in our diversified groups. So again like we believe that this is a.

Paul: Good business line for us.

Paul: It's well diversified also in terms of different.

Eric Provost: Also, in terms of different categories of industries, and we have the same approach, very disciplined in terms of underwriting principles, specialization all across our functions and not solely at the origination stage. And that gives us comfort in the resiliency of the portfolio, but also in the future potential in terms of our North American position.

Paul: Categories of industries, and we have the same approach very disciplined in terms of underwriting principles specialization all across our functions and not solely at the origination stage and that gives us comfort in the resiliency of the portfolio, but also in the future potential.

Paul: In terms of our North American positioning.

Paul: Okay, Okay got it.

Paul Holden: One final question for me, just want to get a better sense of where you are at in terms of these technology investments. Obviously, as per the Investor Day, the real intention is to realize expensive efficiencies ultimately, right? And I think your objective is less than 60% and you're guiding to 75% this year.

Paul: One final question from me just wanted to better sense of where you are at in terms of these technology investments obviously.

Paul: As per the Investor day, the real intention is to realize expense sufficient efficiencies ultimately alright, and then I think your objective is less than 60% and you're guiding to $75. This year. So just wondering how far along you are on the path one roughly.

Eric Provost: So just wondering how far along you are on the path when roughly, we should expect that efficiency ratio to start improving. Yeah, that's a great question, Paul. I'm very happy with the progress we've made so far, a year into the plan. And as you mentioned, like the goal is to create efficiencies. And for us, it's true simplification of our technology stack, improving our processes, reducing manual intervention from our various groups in operations. So we made good progress, but there's still the path towards moving to cloud-based solution. And this is what is putting some pressure on our expense levels right now.

Speaker Change: We should expect that efficiency ratio to start.

Speaker Change: Proving.

Paul: Yes, that's a great question, Paul I'm very happy with the progress we've made so far a year into the plan and as you mentioned the goal is to create efficiencies and for US It's true simplification of our technology stack, improving our processes reducing manual.

Paul: Intervention from our various groups and operations.

Paul: So we made good progress, but there is still the path towards moving to cloud based solution and this is what is putting some pressure on our on our expense levels right now.

Paul: To answer your question.

Eric Provost: To answer your question more specifically, I think we should start building that momentum on our efficiency ratio into 2026. And again, it's a mix. We are improving our diversified mix of lending throughout more commercial IR type margins. We are working on simplification and making sure that we're conscious of our operating costs. And of course, a big thing about the foundational technology investments we're making is that it will allow us to actually decommission some of our systems that will also create some efficiency. So many prongs, but definitely good momentum so far.

Speaker Change: Specifically I think we should start building that momentum on our efficiency ratio.

Speaker Change: <unk> 2026, and again its a mix.

Speaker Change: We are improving our.

Speaker Change: Diversified mix of lending more.

Speaker Change: More commercial IR type margins.

Speaker Change: Our working on simplification and making sure that we're conscious of our operating costs and of course, a big thing about the foundational technology investments, we're making is that it will allow us to actually decommission some of our systems that will also create some.

Speaker Change: <unk>, so so many problems but definitely.

Speaker Change: Good momentum so far okay. Okay. So just so I understand sorry on putting the revenue sort of argument aside which I got on efficiency, but just thinking about from a pure cost perspective, the real the real catalyst here.

Paul Holden: Okay. So just so I understand, I'm putting the revenue sort of argument aside, which I get on efficiency, but just thinking about it from a pure cost perspective, the real catalyst here, the most material one is going to be the migration of cloud. And once you're kind of, that's underway and complete, then you really start realizing the cost efficiencies. Is that what I just heard? Yeah, that's right. Yeah. Okay, great.

Speaker Change: Most material one is going to be the migration to cloud and once youre kind of.

Speaker Change: That's underway and complete then you really start realizing the cost efficiencies.

Speaker Change: I just heard yes, thats right, yes, yes, okay, great. That's it from me. Thank you. Thank you Paul.

Paul Holden: That's it from me then. Thank you.

Speaker Change: Your next question comes from Stephen Boland with Raymond James Your line is now open.

Stephen Boland: Your next question comes from Stephen Boland with Roman James. Your line is now open. Morning, just one question for me. I'm a bit of a broken record on this. A couple quarters ago, you mentioned about forward flow, you know, in the US diversifying your funding sources. I'm wondering what progress or if any has been made on that.

Stephen Boland: Good morning, just one question from me.

Speaker Change: I'm a bit of a broken record on this a couple quarters ago, you mentioned about forward flow.

Speaker Change: In the U S. Diversifying your funding sources I'm wondering what progress if any has been made on that.

Eric Provost: Yeah, that's a great question, Stephen. In terms of forward flow, like, right now, we're not in, we're very well positioned in terms of diversified sources of funding.

Speaker Change: Yes, that's a great question Steven.

Speaker Change: In terms of.

Speaker Change: Forward flow right now we're not in.

Speaker Change: We're very well positioned in terms of diversified sources of funding.

Eric Provost: So we're making progress, we are discussing with various partners, and we want to make sure we land the right agreement for future estate. So more to come on that, but I feel good where we are. And right now, the bank is in a solid liquidity and capital position. So there's no urgency.

Speaker Change: So we're making progress.

Speaker Change: We are discussing with various partners and we want to make sure we land the right.

Speaker Change: The right agreement for future state so more to come on that but I feel good where we are.

Speaker Change: And right now the bank is in a solid liquidity and capital position. So there is no urgency.

Eric Provost: For us, it is all a question of lending the right, the right partner and the right agreement in place. So more to come.

Speaker Change: For us it is all a question of lending the right.

Speaker Change: Right partner and the right agreement in place so more to come.

Eric Provost: Okay, actually, I'll do a follow up. Just, you know, in your intro remarks, you mentioned positive sentiment in personal banking. I'm wondering, you know, how formal is that? Is that is that, you know, the feedback you're getting from the branches when you mentioned improved customer service? Maybe you could just touch on that a bit, please.

Speaker Change: Actually I'll I'll do a follow up just on your intro remarks.

Speaker Change: You mentioned positive sentiment in personal banking I'm wondering hum.

Speaker Change: How formal is that is that is that.

Speaker Change: The feedback youre getting from the branches. When you mentioned improved customer service, maybe you could just touch on that a bit please yes.

Eric Provost: Yeah, well, it's, it's, it's mostly how we reorganize our approach towards customer service and customer experience. So, so with the means we have, we actually revisited our models, which is showing in terms of customer surveys, customer satisfaction, that we are able to pulse, but we don't have any new tools to deploy. So, so our, our, our path towards having a more adapted digital offering is still underway. But definitely out there, we're seeing positive momentum, momentum and how the customers are feeling inside Laurentian. Okay, thanks very much.

Speaker Change: Well, it's mostly al we reorganized our approach towards customer service and customer experience. So so with the means we have we actually.

Speaker Change: Revisited our models, which is showing in terms of customer surveys customer satisfaction.

Speaker Change: But we are.

Speaker Change: They are able to pulse, but we don't have any new tools to deploy so so are our path towards having more adapted digital offering is still underway, but definitely out there we're seeing positive momentum in all of the customers are feeling inside <unk>.

Speaker Change: <unk> Bank.

Speaker Change: Okay. Thanks very much.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one youre.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1.

Darko Mihelic: Your next question comes from Darko Mihelic with RBC Capital Markets. Your line is now open. Thank you. Good morning, everybody.

Darko <unk>: Your next question comes from Darko <unk> with RBC capital markets. Your line is now open.

Speaker Change: Okay.

Speaker Change: Thank you good morning, everybody just a first question.

Darko Mihelic: Just the first question for anyone who wants to handle this. What are we seeing on the Resolution Collection side of the business. Is there anything there that you could highlight for us? Is there anything different today than versus a year ago?

Speaker Change: For anyone who wants to handle this so what are we seeing on the.

Speaker Change: Resolution collection side of the business is there anything there that.

Speaker Change: If you could highlight for US is there anything different today than versus a year ago.

Christian Broux: Hi Darko, Christian here. I would say, you know, from a delinquency standpoint, we're within historical levels and we're not seeing negative trends. And on the commercial side, I think things take a little bit longer time, maybe now in the current environment, but I spent a lot of time on our gills, on our commercial gills, and the files are progressing and nothing leads me to believe that we're not adequately provisioned. And in fact, you can take a look at our gill activities and you'll see that year to date, we have some of the highest returns to performing and repayment.

Darko Christian: Hi, Darko Christian here.

Speaker Change: I would say.

Speaker Change: From a delinquency standpoint were within historical levels, and we're not seeing negative trends.

Darko Christian:

Darko Christian: And.

Darko Christian: On the commercial side, I think things take a little bit longer time may be now in the current.

Darko Christian: Environment, but I spent a lot of time.

Darko Christian: On our gills on our commercial gills in the files are progressing and nothing that leads me to believe that were not adequately provisioned and in fact.

Darko Christian: You can take a look at our gill activities.

Darko Christian: And you'll see that year to date, we have some of the highest returns to performing in repayment.

Darko Christian: And.

Christian Broux: And we're really managing net write-offs in there. So I feel good about it.

Darko Christian: We're really managing net write offs in there so I feel good about it.

Speaker Change: Okay that would suggest to me that your.

Darko Mihelic: Okay, that would suggest to me that you're you know, you're you're having a decent go of sort of restructuring loans and working with, I'm a little more interested in the value of collateral and court processes for the more difficult files.

Speaker Change: We are having a decent go sort of restructuring loans and working with.

Darko Christian: Little more interested in the value of collateral.

Darko Christian: And in court processes for the more difficult files are you seeing anything different there.

Christian Broux: Are you seeing anything different there? You know, the values soften a bit in a down cycle, but given our low loan-to-values and our conservative approach, you know, this is not affecting us. Okay, thank you for that.

Darko Christian: The values soften a bit in a down cycle, but given our low loan to values and our conservative approach.

Darko Christian: This is not affecting us.

Darko Christian: Okay.

Darko Christian: Thank you for that and.

Darko Mihelic: And every every so often, once in a blue moon, I get to think longer term about banks. And so, as I sit here, and I think about, you know, what I've been seeing in terms of trends for Laurentian, and I think about my forward model, I'm tempted to put in a higher net interest margin at some point on Lone Mix alone. There's another part of me that says, well, you know, funding is kind of important.

Darko Christian: Every so often once in a blue Moon I got to think longer term about banks.

Darko Christian: And so as I sit here and I think about what I've been seeing in terms of trends for Laurentian and I think about my forward model.

Darko Christian: I'm tempted to put in a higher net interest margin at some point on loan mix alone.

Darko Christian: Bye.

Darko Christian: There is another part of me that says well you know funding is kind of important you touched on the digital offering.

Darko Mihelic: You touched on the digital offering. Um, you know, where are, where are you on that? Are you going to make a big splash soon? with a deposit product? Will that maybe set you back a little bit at the beginning, but longer term be beneficial? Any kind of thoughts on that? Because I want to think about my model and 26 and 27. And before I get before I try and push margins higher, on loan mix alone, I kind of want to have at least an understanding of Your view on longer term funding.

Darko Christian: Where are where are you want that are you going to make a big splash soon.

Darko Christian: With a deposit product.

Darko Christian: Well that may be set you back a little bit at the beginning but longer term be beneficial any kind of thoughts on that because I wanted to think about my model in 'twenty six 'twenty seven.

Darko Christian: And before I get before I try and push margins higher on loan mix alone I kind of want to have at least an understanding of.

Darko Christian: Your view on longer term funding.

Eric Provost: Yeah, Darko, I'll start and maybe Yvan can compliment on the mix in terms of the margin, maybe shorter term.

Speaker Change: Yes, Darko I'll start and maybe if I can complement on the mix in terms of the margin may be shorter term, but.

Eric Provost: But listen, as for a big splash event in the shortcoming, like this is not to be expected. Like on our side, we're still focusing on the foundational and making the right migration towards cloud-based. So for us, it is a longer term type play in terms of having the right self-serve tools. And that's only one tool, like we need to encompass the overall needs of our different business segment, and it needs to make the right returns for us. And if you refer back to our plan last year, in the overall mix, like our goal was to increase our retail, deposit.

Speaker Change: As for <unk>.

Speaker Change: Big Splash event in the shortcoming like this is this is not to be expected like our north side, we're still focusing on the foundational and making the right migration towards cloud based so so for us it is.

Darko Christian: Longer term type play in terms of having the right self serve tools and that's only one tool like we need we need to income pass the overall needs of our different business segment and it needs to make the right returns for us and if you refer back to our plan last year.

Darko Christian: In the overall mix.

Darko Christian: Our goal was to increase our retail deposit.

Eric Provost: Funding by 5%-ish. So mid-single digit was part of the plan horizon.

Darko Christian: Funding by 5% ish or mid mid single digit was part of the.

Darko Christian: The plan of ryzen.

Eric Provost: We're still aiming for that, but in terms of having a big influence from a funding perspective on our margin mix, I would be more focused on the lending side where we will change the mix of lending that will allow for better quality of margins on that side of the balance.

Darko Christian: We're still aiming for that but like in terms of having a big influence from a funding perspective on our margin mix.

Darko Christian: I would be more.

Darko Christian: I would be more focus on the lending side, where we will change the mix of lending that will.

Darko Christian: It allows for better quality of margins on that side of the balance sheet.

Yvan Deschamps: I'll add a word on the short term and maybe just reinforce what Eric is saying. So on the short term for next quarter, you should see a small, slight decrease on terms of margins due to the impact of the reduction of volume from inventory financing, but I'll just reinforce what Eric said. As you see the commercial mix, you know, improving for the bank, it's going to help the NIM. And one element I mentioned over the last few quarters that is turning to be true is, you know, there's one less medium-sized bank on the broker GICs as well.

Speaker Change: The word on the short term and maybe just reinforce what they are saying so on the short term from next quarter, you should see a small slight decrease on in terms of margins due to the impact of the reduction of volume from inventory financing, but I'll just reinforce what Eric said as you see the.

Speaker Change: Commercial mix improving for the bank, it's going to help the NIM and one element that I mentioned over the last few quarters that is turning to be true is there was one less medium sized bank on the brokered GIC as well not that it changes materially the costs, but I would say it's more.

Yvan Deschamps: Not that it changes materially the costs, but I would say it's a more deep market for the medium-sized banks right now. I think it believes and benefits.

Speaker Change: Deep market for the medium sized banks right now and I think at the Liza and benefits everybody.

Speaker Change: Okay. That's helpful and maybe Eric just back to you then as a follow up on this topic.

Darko Mihelic: Okay, that's helpful.

Darko Mihelic: And maybe Eric, just back to you then, as a follow up on this topic.

Darko Mihelic: It was my impression at Investor Day that we would have seen the product by now. So the question is. What has changed? is it something in the marketplace? Is it something technologically? Is there something that's changed? I would have really expected the product by now, and I think, as I recall, it was really focused for like a blue-collar self-serve kind of client in Quebec. And is it a market dynamic that's changed or is it something Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: And it was my impression at Investor Day that we would have seen the product by now and so the question is.

Speaker Change: What has changed.

Speaker Change: Is it something in the marketplace is it something technologically.

Speaker Change: There something thats changed because.

Speaker Change: I would have really expected the product line.

Speaker Change: And I think as I recall, it was really focused for like a blue color.

Speaker Change: <unk> client in Quebec.

Speaker Change: And.

Speaker Change: Is it is it a market dynamic thats changed or is it something.

Speaker Change: Let's change technologically.

Speaker Change: At your bank.

Eric Provost: No, actually, Darko, what we did lay out in the plan is that we wouldn't be building all ourselves. We need to land the right partner, and then most importantly, we need to land a solution that will allow to differentiate and have a real impact out there. But the mix between deploying a product and having the right return on investment doing so, for us, makes us approach the overall with cautious. And right now, we still need to make sure that all the foundation is in place to be able to lend that partnership the right way. And at the end of the day, to provide the right solution for enhanced customer experience, and also allow for a differentiator factor on our side.

Darko Christian: No actually Darko, we did lay out in the plan is that we wouldn't be building all ourself, we need to learn the right partner and then most importantly, we need to lend a solution that will allow us to differentiate and have real impact out there, but the mix between deploying a product.

Darko Christian: I think the right return on investment in doing so.

Darko Christian: For us makes us approach the overall.

Speaker Change: With cautious and right now we still need to make sure that all the foundation is in place to be able to lend that partnership the right way.

Speaker Change: And at the end of the day to provide the right solution for enhanced customer experience and also allow for a differentiator factor on our site. So we're still exploring still discussing but I haven't landed.

Eric Provost: So we're still exploring, still discussing, but haven't landed a final spot there. And again, when we laid out the plan, it was all about foundational investments, and we're still in that.

Speaker Change: Our final spud, there and again when we laid out the plan it was all about foundational investments.

Speaker Change: Still in that phase.

Speaker Change: Okay understood. Thank you.

Darko Mihelic: Okay, understood. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Your next question comes from one moment please.

Gabriel Dechaine: Your next question comes from, one moment. from Gabriel Dechaine with National Bank. Your line is now open. Hey, good morning. Apologies if this question has been asked before I had to hop on a bit late. You hear a lot of banks talking about balance sheet optimization. I mean, it's a recurring theme. And I know Laurentian over in the past has done a few, you know, Not in the past. Now your balance sheet optimization involves proving your funding mix and all that. I'm just thinking more on the asset side. Are there any, you know, maybe material parts of the business or loan book that you could, you know, exit?

Speaker Change: From Gavin.

Gabriel Dechaine: <unk> with National Bank. Your line is now open.

Speaker Change: Hey, good morning.

Speaker Change: I apologize if this.

Speaker Change: This question's been asked before.

Speaker Change: Hop on a bit late.

Speaker Change: <unk>.

Speaker Change: You hear a lot of banks talking about balance sheet optimization.

Speaker Change: I mean, it's a recurring theme and I know.

Speaker Change: And over the past.

Speaker Change: Yes.

Speaker Change: In the past now your balance sheet optimization involves <unk>.

Gabriel Dechaine: Moving your funding mix and all that I'm, just thinking more on the asset side are there any.

Speaker Change: No material.

Speaker Change: Parts of the business or our loan book.

Speaker Change: You could.

Speaker Change: Right.

Yvan Deschamps: Thank you for your question, Gabriel. This is Yvan. So, at this point, the message that we had in the Strat plan and that didn't change is that we have specialties in commercial, so those are where we're focusing, and that's what we intend to grow in the bank mix. So, at this point, there is no intent of divesting of assets, as you're suggesting in your questions. It's, on the other side, growing organically, you know, because we have good momentum and we have good potential in unfunded lines in the markets where we are good at, recognize, and have very high satisfaction for our customers.

Thank you very question given the LDC.

Speaker Change: This point the message that we have in our in the Strat plan and that didn't change is that we have specialties in commercial so those are where we're focusing and that's what we intend to grow in the bank mix. So at this point there is no intent of divesting of assets as youre, suggesting in your question. It's.

Speaker Change: On the other side growing organically.

Speaker Change: We have good momentum and we have good potential and unfunded lines and in the markets, where we are good that's recognized and have very high satisfaction for our employees our customers and.

Yvan Deschamps: Yeah, no, no, I get that. But commercial is a broad description. Sometimes there's verticals within it that, you know, upon further review, say, well, our funding could and capital could be better used to support growth in the commercial, the equipment, financing business, for instance, anything. Well, it doesn't sound like it. So I guess the questions, irrelevant? Yeah, yeah, we had a third. On our side is it's making sure that the deals we we on board, respect our risk return, as well as our so so, so we will see an evolution in the mix. But again, it's it's a transfer of a burst between the retail side of the book as a going towards more commercial assets at the end.

Speaker Change: No no I get that but commercial is a broad description, sometimes its verticals within that.

Speaker Change: Upon further review say, well, our funding and capital could be better used to support growth in the commercial equipment.

Speaker Change: Our financing business for instance.

Speaker Change: Well it doesn't sound like it so I guess there.

Speaker Change: Chris.

Speaker Change: Irrelevant.

Speaker Change: Yes, yes, we are it's Eric.

Speaker Change: On our side is making sure that the deals we onboard risk.

Speaker Change: Our respect our risk return.

Speaker Change: As well as our.

Speaker Change: So so we will see an evolution in the mix, but again, it's a transfer between the retail side.

Speaker Change: <unk>.

Speaker Change: Book going towards more commercial.

Yvan Deschamps: So you're going to you're going to feel that shift, but exiting as a whole. If you want to look at the small prints, Gabriel, one big shift is despite the fact that the mortgages number on the balance sheet has not changed, you know, the portion of insured mortgages went from 40% to about 60%. So that freed up capital that we intend to use in commercial. So within the portfolio of products we're doing, we're doing shifts of capital, not necessarily in terms of exchange. Well, okay. Well, enjoy the weekend. Thank you.

Speaker Change: Assets at the end, so youre going to youre going to feel that shift but exiting.

Gabriel: As a whole that's and if you want to look at the small prints Gabriel one big shift is.

Speaker Change: Despite the fact that the mortgages number on the balance sheet that has not changed.

Speaker Change: Uh-huh portion of insured mortgages went from 40% to about 60, so that freed up capital that we intend to use in commercial so within the portfolio of products. We're doing we're doing shifts of capital not necessarily in terms of exits of portfolios.

Speaker Change: Okay.

Speaker Change: Enjoy the weekend.

Speaker Change: Thank you. Thank you.

Speaker Change: Yeah.

Operator: This concludes the Q&A session.

Speaker Change: This concludes the Q&A session I will now hand, the meeting over to Ian.

Eric Provost: I will now hand the meeting over to Eric Provost for closing remarks. Thank you. I want to take a moment to sincerely thank our dedicated employees, loyal customers, shareholders, and all of our stakeholders for your continued support as we transform and grow Laurentian Bank. Your commitment is essential to our progress and we look forward to achieving even more together. Thank you.

Ian: <unk> for closing remarks.

Eric Provost: Thank you.

Ian: To take a moment to sincerely thank our dedicated employees.

Ian: And customers shareholders and all of our stakeholders for your continued support as we transform and grow Laurentian Bank. Your commitment is essential to our progress and we look forward to achieving even more together. Thank you.

Speaker Change: Okay.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for joining and ask that you. Please disconnect your lines. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and ask that you please disconnect your lines. Thank you.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.