Q2 2025 Canadian Imperial Bank Of Commerce Earnings Call

May 29, 2025

Uh huh.

Okay.

[music].

Okay.

And.

[music].

Okay.

Yes.

Okay.

Right.

Yeah.

Okay.

Yes.

[music].

Operator: This conference is being recorded. Please stand by, your meeting is ready to begin. Good morning, welcome to the CIBCQ2 Quarterly Results Conference Call. Please be advised that this call is being recorded.

This conference is being recorded so it is going to say, it's always you see that's please stand by your only thing is ready to begin.

Speaker Change: Good morning, welcome to the CIBC Q2 quarterly results conference call.

Speaker Change: <unk> appears to be advised that this call is being recorded I would now like to turn the meeting over to Geoff Fry Senior Vice President Investor Relations. Please go ahead Jeff.

Geoffrey Weiss: I would now like to turn the meeting over to Geoffrey, Senior Vice President, Investor Relations. Please go ahead, Geoff. Thank you and good morning.

Speaker Change: Thank you and good morning.

Geoffrey Weiss: We'll begin this morning's presentation with opening remarks from Victor Dodig, our President and Chief Executive Officer, followed by Harry Culham, our Chief Operating Officer, Rob Sedran, our Chief Financial Officer, and Frank Guse, our Chief Risk Officer. Also on the call today are a number of our group heads, including Shawn Beber, U.S. Region, Hratch Panossian, Personal and Business Banking Canada, and Susan Rimmer, Commercial Banking and Self-Management Canada. They are all available to take questions following the prepared remarks.

Victor: We'll begin this morning's presentation with opening remarks from Victor <unk>, Our President and Chief Executive Officer, followed by Harry Culham, Our Chief operating Officer, Rob <unk>, Our Chief Financial Officer, and Frank Who's Our Chief Risk Officer also on the call today are a number of our group heads, including Shawn Beber U S region Cross promotion.

Personal and business banking in Canada, and Susan Graver, commercial banking and wealth management, Canada, they're all available to take questions. Following the prepared remarks, we have a hard stop at 830, and we'd like to give everyone. A chance to participate. So we ask that you. Please limit your questions to one and reach you in the Q&A, we'll make ourselves available after the call for any follow.

Geoffrey Weiss: We have a hard stop at 8.30 and would like to give everyone a chance to participate, so we ask that you please limit your questions to one and re-queue in the Q&A. We'll make ourselves available after the call for any follow-ups.

Geoffrey Weiss: As noted on slide 2 of our investor presentation, our comments may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties. Actual results may differ materially.

Speaker Change: As noted on slide two of our Investor presentation. Our comments may contain forward looking statements, which involve assumptions and have inherent risks and uncertainties actual results may differ differ materially.

Geoffrey Weiss: I would also remind listeners that the Bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance.

Victor: I'd also remind listeners that we use the bank uses non-GAAP financial measures to arrive at adjusted results management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance with that I will now turn the call over to Victor.

Victor Dodig: With that, I will now turn the call over to Victor. Thanks, Geoff, and good morning, everyone. I'm pleased to report that we delivered strong results and continued our momentum in the second quarter. Our performance reaffirms that our strategy is working. Our resilience through heightened uncertainty showcases the depth of our client relationships.

Victor: Thanks, Jeff and good morning, everyone.

Victor: I'm pleased to report that we delivered strong results and continued our momentum in the second quarter.

Performance reaffirms that our strategy is working.

Victor: Our resilience through heightened uncertainties showcases the depth of our client relationships, our credit quality and the strength of our balance sheet.

Victor Dodig: Credit Quality, and the Strength of Our Balance.

Victor Dodig: Before I turn to our second quarter performance, I'd like to make a brief comment on the leadership announcements we made on March 31st. As you know, I'll be retiring as CEO of our bank at the end of our first fiscal year. It's been an incredible journey over the past 10 plus years, and I'm proud of what we've accomplished together across our CIBC. I'm also proud and excited to be passing the baton to Harry Culham, the result of a thoughtful and multi-year succession planning process. As part of the transition, Harry was named Chief Operating Officer and will assume the role of President and CEO on November the 1st.

Victor: Before I turn to our second quarter performance I'd like to make a brief comment on the leadership announcements we made in March This march 13th.

Speaker Change: I'll be retiring as CEO of our bank at the end of our first fiscal year, it's been an incredible journey over the past 10, plus years and I'm proud of what we've accomplished together across our CIBC team.

Speaker Change: I'm also proud and excited to be passing the baton to Harry Culham. The result of a thoughtful multiyear succession planning process as part of the transition how he was named Chief operating officer will assume the role of President and CEO in November the first his global experience growth oriented mindset and track record for delivering results make him the ideal person to lead <unk>.

Victor Dodig: Global Experience, Growth-Oriented Mindset, and Track Record for Delivering Results, making him the ideal person to lead CIBC into the future. I look forward to working closely with Harry and our leadership team to ensure a smooth transition over the next several months.

She into the future.

Speaker Change: I look forward to working closely with Gary and our leadership team to ensure a smooth transition over the next several months before I continue with our second quarter highlights I'd like to invite hurry to make a few comments over to you Harry.

Harry Culham: Before I continue with our second quarter highlights, I'd like to invite Harry to make a few comments. Over to you, Harry. Well, thank you, Victor. Good morning, everyone.

Harry: Well. Thank you Victor good morning, everyone. Let me start by expressing how honored I am to be taking on the role of president and CEO of CIBC.

Harry Culham: Let me start by expressing how honored I am to be taking on the role of President and CEO of CIBC. I'd just like to take a moment to recognize Victor for his dedication and positive influence on our bank. Special thanks to all of our community members for their support over the years and his continued leadership through this transition. We will continue to operate with the hallmarks his leadership has instilled over the past decade, including the relentless client focus, connected and purpose led culture, and consistent execution to deliver results for all of our stakeholders. Over the last few months, I've spent a lot of time meeting with our broader CIBC team and our clients and other stakeholders to gather perspectives.

Harry: Just like to take a moment to recognize Victor for his dedication and positive influence on our bank to support over the years and his continued leadership through this transition we will continue to operate with the hallmarks. His leadership has instilled over the past decade, including the relentless client focus.

Harry: <unk> and purpose led culture and consistent execution to deliver results for all of our stakeholders.

Harry: For the last few months I've spent a lot of time meeting with our broader CIBC team and our clients and other stakeholders together perspectives my takeaways reinforced my belief that we have something special our team members are proud of our partnerships are strong and our clients value our differentiated advice.

Harry Culham: My takeaways reinforce my belief that we have something special. Our team members are proud, our partnerships are strong, and our clients value our differentiated advice. I'm also excited about the opportunity to work alongside our exceptional leadership. Each of whom has had a hand in crafting and executing the client-focused strategy that's driving our success.

Speaker Change: I'm also excited about the opportunity to work alongside our exceptional leadership team.

Speaker Change: All of whom has had a hand in crafting and executing the client focus strategy, that's driving our success.

Harry Culham: Today, we will continue to build on our momentum and drive CIBC to new heights.

Speaker Change: Today, we will continue to lead on it are built on our momentum and drive CIBC to new heights, and with that I'll turn it back to you Victor Okay. Thanks, Jerry over to our performance. So slide four turning to our adjusted second quarter results. We delivered net income of $2 billion and earnings per share of $2.05.

Victor Dodig: And with that, I'll turn it back to you, Victor.

Victor Dodig: Okay, thanks, Harry. Over to our performance. So, slide four, turning to our adjusted second quarter results. We delivered net income of $2 billion and earnings per share of $2.05. both up 17% from the prior Pre-provision pre-tax earnings were up 19%, supported by broad-based growth across all of our operating units and another strong quarter of operating leverage. Credit remains resilient while we continue to closely monitor and stress test our portfolios for a range of scenarios. Our return on equity was 13.9%, which is up 50 basis points year over year, coupled with a healthy CET1 ratio of 13.4%.

Speaker Change: Both up 17% from the prior year.

Speaker Change: Pre provision pretax earnings were up 19% supported by broad based growth across all of our operating units and another strong quarter of operating leverage.

Speaker Change: Credit remains resilient, while we continue to closely monitor and stress test our portfolios for a range of scenarios.

Speaker Change: Our return on equity was 13, 9%, which is up 50 basis points year over year, coupled with a healthy CET one ratio of 13, 4%.

Victor Dodig: We repurchased 6 million common shares during the quarter and continue to maintain flexibility to drive organic growth. We delivered these results in a challenging environment. And while we can't predict where the ongoing discussions around trade policy will ultimately land, we have the confidence in our strategy and the balance sheet to support our clients. It is in this type of environment where our clients turn to us for guidance to help keep their ambitions on track.

Speaker Change: We repurchased 6 million common shares during the quarter and continue to gain flexibility to drive organic growth.

Speaker Change: We delivered these results in a challenging environment and while we can't predict where the ongoing discussions around trade policy Walton really land, we have the confidence in our strategy and the balance sheet to support our clients.

Speaker Change: Isn't this type of environment, where our clients turn to us for guidance to help keep their ambitions on track.

Victor Dodig: Earlier this week, our bank received the Forrester's Customer Obsessed Enterprise Award for North America, which recognizes organizations that place their clients Center of their Leadership, Strategy and Operations. This is in effect who CIBC is. With our client-centric focus, we're meaningfully advancing our four strategic priorities. First, we're growing our mass affluent and private wealth franchise. Imperial Service, more Canadians are recognizing the benefit of working with a dedicated advisor to help them reach their financial goals. And our clients are rewarding our personalized experience with higher Imperial Service Net Promoter Scores, which reached another all-time high during the quarter.

Speaker Change: Earlier this week, our bank received the Foresters customer obsessed Enterprises award for North America, which recognizes organizations that place their clients at the center of all of their leadership strategy and operations. This isn't effect, who CIBC is.

Speaker Change: Was there a client centric focus room meaningfully advancing our four strategic priorities first we are growing our mass affluent and private wealth franchise.

Speaker Change: And Imperial service more Canadians are recognizing the benefit of working with a dedicated advisor to help them reach their financial goals.

Speaker Change: And our clients are rewarding a personalized experience with higher Imperial service net promoter scores, which reached another all time high during the quarter.

Victor Dodig: Second, we are expanding our digital first personal banking capability. Many of our clients are increasingly looking for seamless digital experiences to respond to rapidly evolving market conditions. We are also tailoring our products and solutions to meet our clients' needs. This quarter we launched the CIBC Adapta MasterCard, delivering flexibility to cardholders to earn bonus points on their personal top three spend categories each month. Third, we are bringing all of CIBC to bear for our clients through our connected platform and team. In Canada, 32% of our commercial clients have a CIBC private wealth relationship. in the United States.

Speaker Change: Second we are expanding our digital first personal banking capabilities.

Speaker Change: Many of our clients are increasingly looking for seamless digital experiences to respond to rapidly evolving market conditions.

Speaker Change: Also tailoring our products and solutions to meet our clients' needs. This quarter, we launched the CIBC adopt a mastercard delivering flexibility of cardholders to earn bonus points on their personal top three spend categories each month.

Speaker Change: Third we are bringing all of CIBC to bear for our clients through our connected platform and team and.

Speaker Change: In Canada, 32% of our commercial clients have you CIBC private wealth relationships.

Speaker Change: In the United States that number is now 20%.

Victor Dodig: That number is now 20. Both metrics have increased from the prior year and demonstrate our franchising progress and demonstrate our connected culture. Our U.S. footprint continues to expand across our bank as well, including U.S. region capital markets revenue, which is up 37% from the prior year. And finally, our fourth strategic priority is to enable, to simplify, and to protect our bank. We are looking to continue to drive efficiencies, operational resilience, and improve the experience for both our clients and our employees. Our technology investments are paying off, including our CIBC AI platform, which has saved our team members an estimated 200,000 hours during a successful pilot and is now rolling out across our entire organization.

Speaker Change: Both metrics have increased from the prior year and demonstrate our franchising progress and demonstrate our connected culture.

Speaker Change: Our U S footprint continues to expand across our bank as well, including U S region capital markets revenue, which was up 37% from the prior year.

Speaker Change: And finally, our fourth strategic priority is to enable to simplify and to protect our bank.

Speaker Change: We're looking to continue to drive efficiencies operational resilience and improve the experience for both our clients and our employees.

Speaker Change: Our technology investments are paying off including our CIBC AI platform, which has saved our team members an estimated 200000 hours. During a successful pilot is not and is now rolling out across our entire organization.

Victor Dodig: We're building our AI capabilities on a strong foundation of governance and transparency.

Speaker Change: We're building our AI capabilities on a strong foundation of governance and transparency.

Victor Dodig: Earlier this year, CIBC became the first major Canadian bank to sign the Government of Canada's Voluntary Code of Conduct for Generative Artificial Intelligence. So in closing, our second quarter performance demonstrated continued momentum and continued consistency. Amid a volatile back We delivered robust top-line growth and strong operating leverage while ensuring that our defensive attributes remain best-in-class, including prudent credit reserves and a robust balance . As the economic environment continues to evolve, we'll do what we've always done, we'll stay close to our clients and communicate transparently with our shareholders.

Speaker Change: Earlier this year CIBC became the first major Canadian bank to sign the government of Canada's voluntary code of conduct for generous artificial intelligence.

Speaker Change: So in closing our second quarter performance demonstrated continued momentum.

Speaker Change: And continued consistency.

Speaker Change: Amid a volatile backdrop, we delivered robust topline growth and strong operating leverage while ensuring that our defensive attributes remain best in class, including prudent credit reserves and a robust balance sheet.

Speaker Change: As the economic environment continues to evolve to evolve we'll do what we've always done we will stay close to our clients and communicate transparently with our shareholders our strategy and diversified platform put us in a position to outperform in a wide range among outcomes and with that I'll turn it over to my colleague Rob said rents for review.

Victor Dodig: Transcripts provided by Transcription Outsourcing, LLC. Thank you, Victor. And good morning, everyone.

Rob Said: Our financial results over to you Rob.

Rob Said: Thank you Victor and good morning, everyone.

Rob Sedran: Let me start with three takeaways from our results. First, revenue growth was strong, with each business unit performing well, reflecting the consistent execution of our client-focused strategy across our business units. Second, even with more than 4% operating leverage this quarter, we continue to invest to develop competitive differentiators that drive sustainable long-term stakeholder value.

Rob Said: Let me start with three takeaways from our results first revenue growth was strong with each business unit performing well, reflecting the consistent execution of our client focused strategy across our bank.

Rob Said: Second even with more than 4% operating leverage this quarter, we continued to invest to develop competitive differentiators that drive sustainable long term stakeholder value.

Rob Sedran: Third, we repurchased 6 million shares during the quarter and both capital and liquidity remain strong, which positions us to support our clients and execute our strategy against an uncertain operating environment.

Speaker Change: Third we repurchased 6 million shares during the quarter in both capital and liquidity remains strong which positions us to support our clients and execute our strategy against an uncertain operating environment. Please.

Rob Sedran: Please turn to flight. Earnings per share were $2.04 for the second quarter of 2025, or $2.05 on an adjusted basis, and adjusted ROE was 13.9%. As I noted, our balance sheet remains strong, with ratios that are well above normal course operating targets.

Speaker Change: Please turn to slide eight.

Speaker Change: Earnings per share were $2.04 for the second quarter of 2025 or $2.05 on an adjusted basis and adjusted ROE was 13, 9%.

Speaker Change: As I noted our balance sheet remains strong with ratios that are well above normal course operating targets, let's move on to a detailed review of our performance I'm on slide nine.

Rob Sedran: Let's move on to a detailed review of our performance. I'm on slide 9. Adjusted net income of $2 billion increased 17%, supported by strong performance across all businesses. Reprovisioned pre-tax earnings were up 19% and revenues were up 14%, driven by strong trading activity, expanding margins, volume growth, and higher fee increases. We also continue to manage expenses relative to revenues, delivering 430 basis points of operating costs. Total provisions for credit losses were up 18% from a year ago, largely driven by higher performing provisions, reflecting the uncertainty in the macroeconomic outlook. incurred losses remain within our previous guidance range.

Speaker Change: Adjusted net income of $2 billion increased 17% supported by strong performance across all business units.

Speaker Change: Pre provision pretax earnings were up 19% and revenues were up 14% driven by strong trading activity expanding margins volume growth and higher fee income.

Speaker Change: We also continued to manage expenses relative to revenues delivering 430 basis points of operating leverage.

Speaker Change: Total provisions for credit losses were up 18% from a year ago, largely driven by higher performing provisions, reflecting the uncertainty in the macroeconomic outlook.

Speaker Change: Impaired losses remain within our previous guidance range Frankel discuss credit in detail in his presentation.

Rob Sedran: Frank will discuss credit in detail in his presentation. Slide 10 Highlights Key Drivers of Net Interest in Excluding trading, NII was up 16 percent, driven by continued balance sheet growth and expanding margins. All bank margin X trading was up 16 basis points from the prior year and down one basis point sequentially. Canadian PNC NIMH of 273 points was up one base We continue to expect our All Bank and PNC margins to be stable to gradually higher based on the current forward curve.

Speaker Change: Slide 10 highlights the key drivers of net interest income.

Speaker Change: Excluding trading NII was up 16% driven by continued balance sheet growth and expanding margins.

Speaker Change: All bank margin ex trading was up 16 basis points from the prior year and down one basis point sequentially.

Speaker Change: Canadian P&C NIM of 273 points was up one basis point.

Speaker Change: We continue to expect our all bank in P&C margins to be stable to gradually higher based on the current forward curve and.

Rob Sedran: In the U.S. segment, NIM of 372 basis points was down 6 basis points from the prior quarter, driven by normalization of our loan margins, partly offset by ongoing strength in deposits. We expect margins in the U.S. to normalize to the $3.65 to $3.70 basis point range, subject to the evolution of our business model.

Speaker Change: In the U S segment NIM of 372 basis points was down six basis points from the prior quarter driven by normalization of our loan margins, partly offset by ongoing strength in deposits.

Speaker Change: We expect margins in the U S to normalize so the $3 65 to 370 basis point range subject to the evolution of our business mix.

Rob Sedran: Turning to slide 11, non-interest income of $3.2 billion was up 12% from the prior year amid growth in trading, as well as higher market-sensitive revenues that drove a 21% increase in market-related Transaction related fees were down 15% mainly due to the revenue neutral impact of benchmark reform, lower card and FX. Slide 12 highlights our ongoing balanced approach to expense management. Excluding performance-based compensation linked to the strong revenues, expenses grew 6% as investments and the impact of FX were partly offset by the benefits of prior initiatives to improve efficiency and deliver a better experience for our clients and our teams. We continue to invest to harden and protect our bank, modernizing our infrastructure and simplifying our process.

Speaker Change: Turning to slide 11, noninterest income of $3 2 billion was up 12% from the prior year amid grilles in trading as well as higher market sensitive revenues that drove a 21% increase and market related fees.

Speaker Change: Transaction related fees were down 15%, mainly due to the revenue neutral impact of benchmark reform lower card and FX fees.

Speaker Change: Slide 12 highlights our ongoing balanced approach to expense management.

Speaker Change: Excluding performance based compensation linked to the strong revenues expenses grew 6% as investments and the impact of FX were partly offset by the benefits of prior initiatives to improve efficiency and deliver a better experience for our clients and our team.

Speaker Change: We continue to invest to harden and protect our bank modernizing our infrastructure and simplifying our processes, we expect to deliver positive operating leverage on a full year basis and to manage expense growth to the mid single digits for the balance of fiscal 2025.

Rob Sedran: We expect to deliver positive operating leverage on a full-year basis and to manage expense growth to the mid-single digits for the balance of fiscal 2021.

Rob Sedran: Slide 13 highlights the strength of our balance. Our CT1 ratio ended the quarter at 13.4% and was down 10 basis points sequentially. Solid Organic Capital Generation was more than offset by the ongoing share buyback program, from which we have now repurchased 14.5 million shares. During the quarter, we returned $1.4 billion in capital to our shareholders, including roughly $500 million of share repurchase. Our liquidity position remains strong, with an average LCR of 131.

Speaker Change: Slide 13 highlights the strength of our balance sheet. Our CET one ratio ended the quarter at 13, 4% and was down 10 basis points sequentially.

Speaker Change: Solid organic capital generation was more than offset by the ongoing share buyback program from which we have now repurchased 14 5 million shares.

Speaker Change: During the quarter, we returned $1 4 billion in capital to our shareholders, including roughly 500 million of share repurchases.

Speaker Change: Our liquidity position remains strong with an average LCR of 131%.

Rob Sedran: Starting on slide 14, with personal and business banking, we highlight our strategic business unit results. Adjusted Net Income increased 4% due to higher revenue growth, partially offset by higher expenses and a higher total provision for credit loss. Supported by core business momentum, pre-provision, pre-tax earnings were up 11% as our client-focused strategy continues to deliver results. Revenues were up 8% helped by volume growth on both sides of the balance sheet and a 23 basis point increase in the net interest margin. Our strategic investments, including in our exclusive partnerships, are driving client acquisition in our targeted segments, adding over half a million net new personal clients over the last 12 months.

Speaker Change: Starting on slide 14, with personal and business banking, we highlight our strategic business unit results.

Speaker Change: Adjusted net income increased 4% due to higher revenue growth, partially offset by higher expenses and a higher total provision for credit losses.

Speaker Change: Supported by core business momentum pre provision pretax earnings were up 11% as our client focused strategy continues to deliver results.

Speaker Change: Revenues were up 8% helped by volume growth on both sides of the balance sheet and a 23 basis point increase in the net interest margin.

Speaker Change: Our strategic investments, including in our exclusive partnerships are driving client acquisition in our targeted segments, adding over half a million net new personal clients over the last 12 months.

Rob Sedran: We also continue to drive growth by deepening relationships with existing clients through personalized advice and offerings. Expenses were up 5% due to investments in strategic initiatives and in our team. Many of these investments are streamlining our operations and enhancing both client and team member experiences, driving record net promoter and team engagement scores.

Speaker Change: We also continued to drive growth by deepening relationships with existing clients through personalized advice and offers.

Speaker Change: Expenses were up 5% due to investments in strategic initiatives and in our team. Many of these investments are streamlining our operations and enhancing both client member client and team member experiences driving record net promoter and team engagement scores.

Speaker Change: [laughter].

Rob Sedran: On slide 15, we show Canadian Commercial Banking and Wealth Management, where net income and pre-provision pre-tax earnings were up 13% and 14% from a year ago respectively. Revenues were up 13% from last year. Wealth management growth was driven by higher average fee-based assets on both increased client activity and market appreciation, despite the market slowdown in Q3. Commercial Banking Revenues were up 12%, driven by robust volume. We continue to focus on referrals within our business, as well as strengthening our partnerships and connectivity across our banks. Spends increased 11% from a year ago, mainly from higher compensation linked to the strong wealth management revenue.

Speaker Change: On Slide 15, we show a Canadian commercial banking and wealth management, where net income and pre provision pretax earnings were up 13% and 14% from a year ago respectively.

Speaker Change: Revenues were up 13% from last year wealth management growth was driven by higher average fee based assets on both increased client activity and market appreciation. Despite the market slowdown in Q2.

Speaker Change: Commercial banking revenues were up 12% driven by robust volume growth, we continue to focus on referrals within our business as well as strengthening our partnerships and connectivity across our bank.

Speaker Change: Expenses increased 11% from a year ago, mainly from higher compensation linked to the strong wealth management revenues.

Rob Sedran: Across commercial banking and wealth management, we have been modernizing our processes and technology while maintaining our commitment to client relationships, advice, and credit discipline.

Speaker Change: Across commercial banking and wealth management, we've been modernizing our processes and technology, while maintaining our commitment to client relationships advice and credit discipline.

Rob Sedran: Additional details on Canadian PNC are in the. Turning to U.S. Commercial Banking and Wealth Management on slide 16. Net income of US $125 million was up $46 million, or 58% from the prior year, mainly from lower loan loss provisions and a 10% increase in pre-provision pre-tax Revenues were up 10% from last week. Deposit growth of 15% and loan growth of 4% resulted in higher net interest income, while most fee categories increased as we continue to deepen our client relationship. Expenses were also up 10% with the increase largely related to employee compensation.

Speaker Change: Additional details on Canadian PNC are in the appendix.

Speaker Change: Turning to U S commercial banking and wealth management on slide 16.

Speaker Change: Net income of U S $125 million was up $46 million or 58% from the prior year, mainly from lower loan loss provisions and a 10% increase in pre provision pretax earnings.

Speaker Change: Revenues were up 10% from last year deposit growth of 15% and loan growth of 4% resulted in higher net interest income while most of the categories increased as we continued to deepen our client relationships.

Speaker Change: Expenses were also up 10% with the increase largely related to employee compensation.

Rob Sedran: We remain committed to our three key strategic priorities in this. Expanding Private Wealth Management with a Focus on High-Touch Relationships and Building Scale. Growing commercial banking by delivering industry expertise and unique solutions, and investing in technology and infrastructure to scale our platform, drive connectivity, and improve resilience.

Speaker Change: We remain committed to our three key strategic priorities in this segment expanding private wealth management with a focus on high touch relationships and building scale.

Speaker Change: Growing commercial banking by delivering industry expertise and unique solutions and investing in technology and infrastructure to scale, our platform drive connectivity and improve resilience.

Rob Sedran: Turning to slide 17 in our capital market. Net income was up 34% year-over-year. Revenues of $1.5 billion were up 32% driven by strong results across the capital markets platform. We had strong performance in all global markets businesses which saw increased client activity on the back of higher volatility. Solid Corporate and Investment Banking Revenues Benefited from Higher Volumes and Margins in Corporate Banking and Higher Debt Underwriting Activity in Investment Banking. We are leveraging our investments to deliver a differentiated, cross-border, and highly connected platform. Capital Market Segment is a well-diversified business with a growing presence in the United States that contributed 37% of segment revenue.

Speaker Change: Turning to slide 17, and our capital market segment.

Speaker Change: Net income was up 34% year over year.

Speaker Change: Revenues of $1 5 billion were up 32% driven by strong results across the capital markets platform. We had strong performance in all global markets businesses, which saw increased client activity on the back of higher volatility.

Speaker Change: Solid corporate and investment banking revenues benefited from higher volumes and margins in corporate banking and higher debt underwriting activity in investment banking.

Speaker Change: We are leveraging our investments to deliver a differentiated cross border and highly connected platform our capital market segment as a well diversified business with a growing presence in the United States that contributed 37% of segment revenue this quarter.

Rob Sedran: Spencers, we're up 23. Largely due to higher performance-based and employee-related compensation, continued investments in growth initiatives, and higher volume-driven expenses.

Speaker Change: Expenses were up 23% largely due to higher performance based and employee related compensation and continued investments in growth initiatives and higher volume driven expenses.

Speaker Change: Yeah.

Rob Sedran: Slide 18 reflects the results of the corporate and other business. Net loss of $15 million compares with the net loss of $9 million in the prior year and is inside the range we project for this segment of a loss of between $0 and $10 million.

Speaker Change: Slide 18 reflects the results of the corporate and other business excuse me and other business unit.

Speaker Change: Net loss of 15 million compares with a net loss of $9 million in the prior year and is inside the range. We project for this segment of a loss of between zero and $50 million.

Rob Sedran: In closing, we delivered another quarter of Strong Resilience. While there continues to be an increased level of volatility in the operating environment, owing particularly to trade-related uncertainty, our results have been built upon a resilient and consistent strategy. The strength of our balance sheet, our diversified business mix, our disciplined resource allocation, and our team. As always, we focus on the things we can control to deliver profitable growth.

Speaker Change: In closing we delivered another quarter of strong results. While there continues to be an increased level of volatility in the operating environment, particularly the trade related uncertainty Ah results had been built upon a resilient and consistent strategy the strength of our balance sheet, our diversified business mix, our disciplined resource allocation and our team.

Speaker Change: As always we focus on the things, we can control to deliver profitable growth with that I'll turn it over to Frank Thank.

Frank Guse: With that, I'll turn it over to. Thank you, Rob, and good morning, everyone. Our credit performance in Q2 was strong and continues to trend at the lower end of our guidance, despite the ongoing uncertainty in the global economy. While the macro environment continues to evolve, we are actively monitoring our portfolios and maintaining close relationships with our clients to effectively navigate through the uncertainty. Continue to build on our already strong allowance this quarter with coverage, their positions as well to manage potential risks or challenges. Turning to slide 22, our total provision for credit losses was $605 million in Q2 compared to $573 million last quarter.

Frank: Thank you, Rob and good morning, everyone.

Frank: Oh credit performance in Q2 was strong and continues to trend at the lower end of our guidance. Despite the ongoing uncertainty in the global economy.

Frank: The macro environment continues to evolve we are actively monitoring all portfolios and maintaining close relationships with our clients to effectively navigate through the uncertainties.

Frank: We continue to build on our already strong allowance this quarter with coverage that positions us well to manage potential risks or challenges ahead.

Frank: Turning to slide 22, our total provision for credit losses, what fixed seven 5 million in Q2 compared to 573 million last quarter.

Frank Guse: Our allowance coverage increased quarter over quarter by one basis point to 77 basis points. In year-to-date, our allowance is up by $341 million, or $8 billion. Our performing provision was $142 million this quarter, driven by an unfavorable change in our overall economic outlook, including an increase in uncertainties related to the trade environment. partially offset by a release driven by portfolio Our provision on impaired loans was $463 million, up $17 million quarter over quarter. This was due to higher provisions in the Canadian Personal and Business Banking and Canadian Commercial Banking portfolios, partially offset by lower provisions in capital markets, U.S.

Frank: Our allowance coverage increased quarter over quarter by one basis point to 77 basis points and year to date, our allowances up by 341 million or 8%.

Frank: Performing provision was 142 million this quarter driven by an unfavorable change in our overall economic outlook, including an increase in uncertainties related to the trade environment, partially offset by a release driven by portfolio movements.

Frank: Our provisions on impaired loans was 463 million up 17 million quarter over quarter.

Frank: This was due to higher provisions in Canadian personal and business banking in Canadian commercial banking portfolios, partially offset by lower provisions in capital markets U S commercial and CIBC Caribbean.

Frank Guse: Commercial and CIBC Careers. Turning to slide 23, overall, Q2 portfolio performance remained in line with our expectations. with our impaired provisions ratio increasing slightly this quarter to 33.

Frank: Turning to slide 23, overall Q2 pro forma portfolio performance remains in line with our expectations with our impaired provisions ratio increasing slightly this quarter to 33 basis points.

Frank: With our prior guidance personal and business banking impaired PCL trend adopt mainly do you try to write offs and allowance inquiries for impaired balances.

Frank Guse: Transcripts provided by Transcription Outsourcing, LLC. Canadian Commercial, we saw an increase in impaired provisions driven by a small number of new impairments across unrelated... You continue to see no systemic risk in any specific. Capital Markets Portfolio continues to perform well with solid results in Q2. U.S. Commercial, we saw improved performance again this quarter, mainly attributable to lower provisions in the commercial real estate. Slide 24 summarizes our Gross Impaired Loans information. Gross Impaired Loan Ratio was flat at 57 basis points with a modest increase in retail offset by a decrease in our business and government. For mortgages experienced a slight increase this quarter, the current loan-to-value ratios for impaired balances remain low at approximately 60%.

Frank: Canadian commercial we saw an increase in impaired provisions driven by a small number of new impairments across unrelated sectors.

Frank: We continue to see no systemic risk in any specific sector or.

Frank: Capital markets portfolio continues to perform well with solid results in Q2.

Frank: And U S. Commercial we saw improved performance again this quarter, mainly attributable to lower provisions in the commercial real estate sector.

Frank: Slide 24 summarizes our gross impaired loans inflammation.

Frank: Gross impaired loan ratio was flat at 57 basis points with a modest increase in retail offset by a decrease in our business and government loans.

Frank: Mortgages experienced a slight increase this quarter.

Frank: Current loan to value ratios for impaired balances remained low at approximately 60% and we do not expect any material increase in write off.

Frank Guse: We do not expect any material increase in net rise. In addition, new formations in the portfolio trended lower in Q2, attributable to both retail and business and government. Slide 25 summarizes the net write-off and 90-plus-day delinquency rates of our Canadian consumer portfolio. Credit Card and Personal Lending write-offs trended higher quarter over quarter, which continue to be impacted by elevated unemployment rates along with some seasonality this quarter. Unknown Speaker, Unknown Interpreter, Unknown Speaker, Unknown Speaker, Unknown Speaker, We do not expect meaningful losses given the strong average loan-to-value. We remain comfortable with the overall strength of our Canadian consumer portfolio.

Frank: In addition, new formations in the portfolio trended lower in Q2 attributable to both retail and business and government lending.

Frank: Slide 25 summarizes the net write offs and 90 plus day delinquency rates of our Canadian consumer portfolios.

Frank: Credit card and personal lending write offs trended higher quarter over quarter, which continued to be impacted by elevated unemployment rates along with some seasonality this quarter.

Frank: And our mortgage portfolio there was a slight increase in 90 plus day delinquencies.

Frank: We do not expect meaningful losses, given the strong average loan to value in the book.

Frank: We remain comfortable with the overall strength of our Canadian consumer portfolios.

Frank: In closing despite the economic challenges our impaired losses continue to be at the low end of our guidance supported by the strong performance of our credit portfolios.

Frank Guse: Closing. Despite the economic challenges, our impaired losses continue to be at the low end of our guidance, supported by the strong performance of our credit portfolio. We will continue to monitor the development surrounding trade policy and other macroeconomic changes while prioritizing our efforts to assist clients in navigating through the ongoing headwind. At least with our strong performance in the first half of the year, and remain comfortable with our full year guidance on impaired laws.

Frank: We will continue to monitor the developments surrounding trade policy and other macroeconomic changes while prioritizing our efforts to assist clients in navigating through the ongoing headwinds we have.

Frank: With our strong performance in the first half of the year and remain comfortable with our full year guidance unimpaired losses, I will now ask the operator to open the line for questions. Thank you. Please press star one at this time, if you have a question.

Operator: I will now ask the operator to open the line for questions. Thank you.

Matthew Lee: Please press star 1 at this time if you have a question. Our first question is from Matthew Lee. Can I call John H. Lee? Please go ahead.

Speaker Change: Our first question is from Matthew Lee can I call generic D. P is go ahead.

Matthew Lee: Morning, thanks for taking my questions. The performing PCL you put through in the quarter on a basis points basis looks a little lighter than the peer group. And I wanted to dig in a bit on your assumptions, 1% Canadian GDP growth, 7% unemployment. I think data coming out recently suggests that that forecast might be a bit optimistic. Do you think that your expert credit judgment overlay kind of prepares CIBC for a more challenging environment? Or could we see those assumptions change? Yeah, Matthew, thank you for your question. I think you're highlighting a couple of elements that go into our performing allowance on top of the QIF lie forecast that you see in the disclosures.

Matthew Lee: Good morning, and thanks for taking my questions.

Speaker Change: Performing PCL you put any color on a basis points basis, that's a little laden peer group.

Speaker Change: Hey, I wanted to dig in a bit on your assumptions are 1% Canadian GDP call it 7% unemployment.

Speaker Change: I think data coming out recently suggest that that forecast might be a bit optimistic.

Speaker Change: Do you think that your expert credit doesn't overlay type of Kashi I can see if a more challenging environment or could we see more of the homebuilders are those assumptions change.

Speaker Change: Yeah, Matthew Thank you for your question I think you're highlighting a couple of elements that go into our performing allowance on top of the queue I fly forecasts that you'd see in the disclosures. One is the scenario weighting so how much of wages being put on the base case with a sit down side, where it says be upside.

Frank Guse: One is the scenario weighting, so how much a weight is being put on the base case versus the downside versus the upside case. And then in addition, of course, in times like this, with a lot of uncertainty, expert credit judgment does play a meaningful role. So I wouldn't necessarily expect any changes to those FLIs translating one-to-one into changes in our allowances, because we did reflect some of that uncertainty through our activities. Okay, that's helpful.

Speaker Change: And then in addition of course in times like this with a lot of uncertainty expert credit judgment does play a meaningful role with them. So I wouldn't necessarily expect any changes to those half alive translating wanted to wanting to changes in our allowances because we did reflect some of that uncertainty throw eggs.

Speaker Change: For credit judgment.

Speaker Change: Okay. That's helpful. And then maybe if I could sneak one more in on the C&I side I think CIBC was the only thing that really showed progress there.

Unknown Executive: And then maybe if I could sneak one more in, on the CNIB side, I think CNIB was the only bank that really showed progress there. I might have missed it.

Speaker Change: And I missed it but was there any single large deal in the quarter that shows that in.

Unknown Executive: But was there any single large deal in the corner that drove that?

Unknown Executive: And, you know, should we be thinking about CNIB's investment banking team as positioned any differently than any of the Canadian peer group in general?

Speaker Change: So if you're thinking about CIB fees investment banking team is finishing any differently than any indicating our peer group in general.

Harry Culham: Hi, good morning, it's Harry. I'll take that question. The first thing I'd say is, we are seeing very strong growth across all of the different businesses that we that we have under the capital markets umbrella. It really is part of that long term strategy, but we're building a North American platform. So we're seeing it north the border, south the border in a very diversified manner. I think this, this is a good example of our franchise in action, as we see elevated activity on the back of volatile or uncertain markets, or times where our clients really rely on our advice and execution.

Speaker Change: Hi, Good morning, it's Terry I'll take that question. The first thing I'd say is we are seeing very strong growth across all of the different businesses that we do we have on the capital markets umbrella. He really is part of that long term strategy, but we're building a north American platform. So we're seeing it north of the border south of the border and a very diverse.

Speaker Change: <unk> matter I think this this is a good example of our franchise are in action as we see elevated activity on the back of volatile or uncertain markets.

Speaker Change: Times, where our clients really rely on our advice and execution and so you're seeing the results of that those that deep client focus that we've had for for many years and a consistent strategy. So I don't think we're where we are different is we're not trying to be all things to all people.

Harry Culham: And so you're seeing the results of that deep client focus that we've had for many years and a consistent strategy. So I don't think we're... Where we are different is we're not trying to be all things to all people. We're very focused on building deep relationships with our clients, and they rely on us in these times. We target the 7% to 10% target that we put out at Investor Day several years ago. We've been achieving at the high end of that, of course, for the recent past. All right, that's helpful.

Speaker Change: We're very focused on building deep relationships with their clients and they rely on us in these times.

Speaker Change: We target the the the 7% to 10% target that we put out at Investor day, several years ago, we've been achieving the high end of that of course for the for the for the recent past.

Speaker Change: Alright, that's helpful. I'll pass along thanks, guys.

Unknown Executive: I'll pass the line. Thanks, guys. Thank you.

John Mckenzie: Thank you. The following question is from John Mckenzie from Jefferies. Please go ahead.

John Aiken: The following question is from John Aiken from Jefferies. Please go ahead. Good morning, Rob, as you're pretty well aware, from your former life on the sell side, that strong results usually beg questions, and I'm focusing in in terms of the success you've had on your operating leverage. Basically, what I'd like to hear from you is where we stand in terms of the momentum that they built up in previous cost cutting regime. And you know, what the outlook is moving forward. I know you gave us the mid single digit expense growth for the second half of the year.

Speaker Change: Good morning, Rob is you're pretty well aware from your former life on the sell side. The strong results you usually bake our questions and focusing it in terms of the success you've had on your operating leverage.

Speaker Change: Basically what I'd like to hear from you is where we stand in terms of the momentum that's being built out from previous cost cutting regime.

John Mckenzie: And you know what the outlook is moving forward I know you gave us the mid single digit to expense growth for the second half of the year, but I would like to hear where you think that you are in terms of what inning are you in in terms of the previous cost cutting initiatives and then how replicable is that on a go forward basis based on the investments you've been making to date.

Rob Sedran: But I would like to hear where you think that you are in terms of what inning are you in in terms of the previous cost cutting initiatives? And then how replicable is that on a go forward basis based on the investments you've been making? Thanks, John. Good morning. You know, I guess I would phrase it a little bit differently in terms of how we think about operating leverage and how we think about efficiency. It's kind of an always on approach. We aim for some big rocks, some from an efficiency perspective, but even more importantly, we try to get the entire organization looking through to find small rocks in terms of efficiency opportunities as well.

Speaker Change: Thanks, John and good morning, I'm, you know I, I guess I would phrase it a little bit differently in terms of how we think about operating leverage and how we think about efficiency. It's kind of an always on approach. We aim for some big rocks them from an efficiency perspective, but even more importantly, we try to get the entire organization looking through to find small rocks.

Speaker Change: In terms of efficiency opportunities as well so we don't feel like we're on a program that has an expiration date or that is always going to be you know tailing off. This is just built into the way we play in and the planning posture. We tend to take as you know we don't plan for double digit revenue growth and therefore, a double digit expense growth. We tried to moderate both so that if the revenue.

Rob Sedran: So we don't feel like we're on a program that has an expiration date or that is going to be, you know, tailing off. This is just built into the way we plan and the planning posture we tend to take is, you know, we don't plan for double digit revenue growth and therefore double digit expense growth. We try to moderate both so that if the revenue environment turns out to be better, we can let some rope in and let some expense growth and some of the investments accelerate. The efficiencies that we have, that we're recognizing, we expect to continue to recognize them.

John Mckenzie: It turns out to be better we can let some rope in and let some expense growth in some of the investments accelerate so yeah.

John Mckenzie: The efficiencies that we have that we're recognizing we expect to continue to recognize them. You know we planned for annual operating leverage that doesn't mean, we're you know and we targeted quarterly it doesn't mean, we're going to deliver a quarterly but we're comfortable with the annual operating leverage posture that we have and like I said theres not an exploration date to the programs that we're on.

Rob Sedran: You know, we plan for annual operating leverage. That doesn't mean we're, you know, and we target it quarterly, it doesn't mean we're going to deliver it quarterly, but we're comfortable with the annual operating leverage posture that we have. And like I said, there's not an expiration date to the programs that we're on.

Victor Dodig: Unknown Speaker If I can just build on Rob's comment, which was exceptional, given that you played both sides of the market in terms of the sell side now being our CFO. The results that we have is a reflection of what we've been doing over the past decade. We've been transforming the base. Foundational Technology of our Bank. We've been transforming the user experience at the front end of our bank. And I think the next Thanks, guys. I'll reach you. Thank you.

Speaker Change: But I guess it looks like if I can just build on Rob's comment, which was exceptional given that you've played both sides of the of the market in terms of the sell side not being our CFO.

Speaker Change: The results that we have is a reflection of what we've been doing over the past decade, we've been transforming the base foundational technology of our bank.

Speaker Change: We've been transforming the user experience at the front end of our bank and I think the next.

Speaker Change: Iteration of our efficiency is going to come from embracing data embracing artificial intelligence embracing how that can actually transform and quite frankly make life more pleasant for employees and for our clients and that I think you'll see in every single business that I think it'll be reflected in our financial results as well so it says <unk>.

Speaker Change: Have a plan that we've had a plan that we have going forward and I'm very confident about how we can repurpose our legacy costs and reinvest it for future growth in our business.

Speaker Change: Thanks, guys I'll requeue.

Speaker Change: Thank you the following.

Ebrahim Poonawala: The following question is from Ebrahim Poonawala, Bank of America. Please go ahead. Good morning. I guess maybe. Frank, following up with you, I guess you reiterated comfort in your impaired PCL guidance. You'll have taken reserve bills for the last couple of quarters. Just talk to us in terms of what you are seeing in terms of the ground reality, Canadian consumer, Canadian businesses. How much stress is on them? And how that informs the visibility that you have on credit? Like, what gives you confidence that three months from now, things may not look much worse on impaired PCL outlook than what you think, how you're thinking about it today?

Speaker Change: Question is from you Brian when I went out of Bank of America. Please go ahead.

Brian: Hey, good morning, I guess, maybe I'm, saying.

Speaker Change: Thank following up with you.

Speaker Change: I guess you reactivated comfort in your embedded P. C. Any guidance you'll have taken that those bids for the last couple of quarters.

Speaker Change: Just talk to us in terms of what Youre seeing in terms of they've got all the reality.

Speaker Change: Radian consumer Canadian businesses.

Speaker Change: How much is on them and how that informs the visibility that you have on credit like what gives you confidence that.

Speaker Change: Three months from now things may not look much worse on impaired PCL outlook.

Speaker Change: I think Oh, how are you thinking about it today. Thanks.

Frank Guse: Thanks. Yeah, and thank you for the question, Ebrahim. I mean, everything I said is built on a very thorough assessment of the portfolio. And even if you look into our disclosures, one leading indicator a little bit could be our delinquency rates. And while we did see a little bit of an increase in net write-offs on the PVB side, we did see delinquency rates to come down in Q2. And there is always a little bit of seasonality in the Q2 numbers. So overall, we feel very confident and comfortable with the credit quality. And as I said, a lot of analysis and a lot of different angles of how we are looking at is going into, of course, our guidance and our commentary.

Speaker Change: Yeah, and thank you for the question Ebrahim I mean, everything I said, if it's built on a very thorough assessment of the portfolio and even if you look into our disclosures, one one leading indicator or a little bit it could be our delinquency rates and while we did see a little bit.

Speaker Change: Often the increase in net write offs.

Speaker Change: I'm on the P. B B side, we did see delinquency rates to come down in Q2, and there was always a little bit of seasonality into Q2 numbers and so overall, we feel very confident and comfortable with the credit quality and as Ive had a lot of analysis and a lot of different angles of how we're looking at it.

Speaker Change: Going into of course, our guidance.

Speaker Change: And in our commentary but.

Frank Guse: But I would take a look at the delinquency rates that we disclosed and them coming down. That should give us some comfort of what we are seeing.

Speaker Change: But I would take a look at the delinquency rates that we do have growth in them coming down and that should give us some comfort of what we are seeing in the portfolio.

Unknown Executive: Got it.

Speaker Change: And I guess again.

Victor Dodig: And I guess again, tied to that, maybe, Victor, for you, you've been very vocal in terms of policies the administration should take to kind of get Canada, Canadian economy going. Just give us a view of your optimism around that. And should you expect proof points on that over the next 3, 6, 12 months? How should we think about that as we think about how the banks could grow over the next year? Thanks.

Speaker Change: Tied to that maybe Oh.

Speaker Change: Victor for you you've been very vocal in terms of policies. The administration's there should be to kind of get Canada Canadian economy, going just give us a view of your optimism around that and do you expect proof points on that over the next three 612 months, how should we think about that as we think about how all of the banks could grow over the next year.

Speaker Change: Thanks, I'm predicting the economy. It's one thing predicting politics is another although I will say that I do think that in the region that we primarily operate in there's a bias to economic growth.

Victor Dodig: Predicting the economy is one thing, predicting politics is another. Although I will say that I do think that in the region that we primarily operate in, there's a bias to economic growth. In Canada, specifically, I think that the government that's come in place is looking to do that through interprovincial trade barriers being dropped, through incentives on the housing front. by getting Canada's natural resources to market. I do think that there's two areas that I would encourage them to focus on to drive further growth. Aside from those three policies and actually getting to a better place with our trading partner the United States and Mexico and reigniting KUSMA 2.0, one is can we put policies in place to actually develop a base of more risk capital in the country to make sure that we can deliver growth in a diversified set of industries beyond the family business, which are natural technology, into healthcare, into a diversified manufacturing base.

Speaker Change: In Canada, specifically I think that the government that's come in place is looking to do that through intra provincial trade barriers being dropped through incentives on the housing front.

Speaker Change: By getting Canada's natural resources to market I do think that there's two areas that are I would encourage them to focus on to drive further growth aside from those three policies and actually getting to a better place with our trading partner, United States and Mexico, and you know reigniting you are Acousma 2.0.

Speaker Change: One is can we can we put policies in place to actually.

Speaker Change: Develop a base of more risk capital in the country to make sure that we can deliver.

Speaker Change: To deliver growth in a diversified set of industries.

Speaker Change: The family business, which are natural resources agriculture beyond housing and into technology into health care into a diversified manufacturing base I think there's plenty of capital in the country I think there's some incentives need to be developed for not only our pension plans, but also affluent Canadian investors to help makes sense.

Victor Dodig: I think there's plenty of capital in the country. I think there's some incentives need to be developed for not only our pension plans, but also affluent Canadian investors to help make sure that economic base is diversified. The second thing I'd ask them to think about is doing something for young people. Young people may be thinking about how you can raise the tax exemption threshold for young people so they can actually generate more income, if it's tied to a savings and putting money into TFSAs, RSPs, and first-time homebuyer plans and helping them achieve the dream of homeownership through their hard work and effort over time.

Speaker Change: Sure that our economic basis diversified the second thing I ask them to think about us doing something for young people.

Speaker Change: Maybe thinking about how you can raise the tax exemption threshold for young people. So they can actually generate.

Speaker Change: More income.

Speaker Change: If it's tied to a savings and putting money into Tfsa's Rfps and first time homebuyer planes in helping them achieve the dream of homeownership.

Speaker Change: Through their hard work and effort over time.

Victor Dodig: And I believe that over time, we will have some sort of detente on the trade front. The strongest economic region in the world today is the North American region. I think governments are increasingly recognizing that. It will look different than it did late last year going forward, but I still think that there will be an integrated approach to economic growth across three countries.

Speaker Change: And I I I believe that over time.

Speaker Change: We will have some sort of detente on the trade front the strongest economic region in the world today is the North American region. I think governments are increasingly recognizing that it will look different than it did a late last year going forward, but I still think that there'll be an integrated approach to economic growth across three countries.

Speaker Change: Trees.

Gabriel Dechaine: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Following question is from Gabriel just Shine National Bank Chairman shall Pease go ahead.

Gabriel Dechaine: The following question is from Gabriel Dechaine, National Bank Financial. Please go ahead. Hey, good morning. So Victor, I guess you've got next year on the Q3 call. So I'll save my best wishes for then. Just a question for Frank on credits, if I recall correctly, your guidance was for a full year impaired loss rate of mid-30s and it would grade down over the course of the year, correct me if I'm wrong there. Regardless, I just wanted to get a sense for, if you can prognosticate on peak PCLs, I know that's a term that comes up every now and then, and it seems to have been a moving target the last few years.

Speaker Change: Oh, Hey, good morning, So Victor I guess, you've got next year.

Speaker Change: On the Q3 call. So I'll keep my best wishes for them.

Speaker Change: <unk>.

Speaker Change: Just a question for Frank on the credits.

Speaker Change: If I recall correctly your guidance was for the full year, our impaired loss rate of mid thirties.

Speaker Change: Right down over the course of the year correct me if I'm wrong there.

Speaker Change: Regardless I just wanted to get a sense for if he can prognosticate.

Speaker Change: P P C L.

Speaker Change: It comes up every now and then and it seems to have been a moving target. The last few years and I'm wondering if.

Gabriel Dechaine: And I'm wondering if... You know, if we look at the 2026, we could have a similar year to this year where, you know, the impaired loan losses stay elevated. Because, you know, businesses aren't hiring today, they're letting people go and, you know, there's just a bit of a lag effect of what's going on today that could filter into next year.

Speaker Change: You know if we'd looked at the 'twenty 'twenty six we could have a similar year to this year where are you on the.

Speaker Change: Impaired loan losses stay elevated because businesses aren't hiring today, though I think people go and they all do.

Speaker Change: A bit of a lagged effect of what's going on today that could filter into next year.

Frank Guse: Yeah, and Gabriel, thank you for the question. Again, I would I would reiterate our guidance, which was in the mid 30s for the full year, it's probably a little bit too early to, to talk about what 2026 brings. And what the rest of the year brings, I mean, Speaking about and reiterating our guidance, even being at the lower end, we could expect some moderate increases in Q3 potentially. But then we expect it to moderate for the last quarter of the year in our plans. But a lot of that will be driven by the ongoing macroeconomic development, some of the trade uncertainties that we are seeing.

Speaker Change: Oh, Yeah and Gabriel. Thank you for the question again, I would I would reiterate our guidance, which was in the mid thirties for the full year, it's probably a little bit too early to to talk about what 'twenty 'twenty fixed brings and.

Speaker Change: And what the rest of the year brings I mean speaking about in reiterating our guidance even being at the lower end, we could expect some.

Speaker Change: Moderate increases.

Speaker Change: In in Q3 potentially.

Speaker Change: But then we expect it to moderate for the for the latter half or the last quarter of the year in you know our plans, but a lot of that will be driven by the ongoing macroeconomic development in some of the trade uncertainties that we are seeing unemployment will continue to be a headwind some of the interest.

Frank Guse: Unemployment will continue to be a headwind. Some of the interest rate decisions will be a tailwind. So we will see a lot of that play out in the next couple of quarters, and over time I think we will see some clarity on the macroeconomic and trade policy front. And that will certainly help getting us more close, comfortable with the 26th. Okay, so mid 30s, I may have misspoke there. And maybe more. Look at it a different way. These are still good numbers, you're you're coming in below your guidance. And I know we're seeing in a few other banks, where impaired loans are coming down, not going up, which was the expectation.

Speaker Change: Great decisions.

Speaker Change: The wind.

Speaker Change: So we will see a lot of that play out in the next couple of quarters and over time I think we will see some clarity on on the macroeconomic and trade policy fund.

Speaker Change: And that will certainly help getting off more clothes are comfortable with a with a 25th forecast as well.

Speaker Change: So mid thirties, I may have misspoke there.

Speaker Change: And then maybe more of it.

Speaker Change: Looked at it a different way. These are still good the numbers are coming in below your guidance and what we're seeing in a few other banks are were impaired loans are coming down not going up for which was the expectation is at par. So full but there may have been a cohort of borrowers that.

Frank Guse: Is it possible that there may have been a cohort of borrowers that that was kind of put to the side during the pandemic and then never came back. So what we're seeing really is a higher grade overall just by a higher quality borrower overall because of that phenomenon. I don't know if that's a valid theory.

Speaker Change: But was kind of.

Speaker Change: But to the site during the pandemic and then never came back so what we're seeing really is a hired a great overall, despite a higher quality borrower overall because of that phenomenon.

Speaker Change: That's the theory.

Frank Guse: Well, well, I think what is important to keep in mind is a little bit anchoring us back to our strategy. We are focused on building client relationships, we are focusing on on getting to the mass affluent client. And I think that's what you're seeing. That's where you're seeing in our business and government portfolio, which is performing exceptionally well. As we said, in the past, those portfolios can be episodic. So you could see something happening there at some point. But but there's nothing systemic going on. We don't see any sectors or areas of particular concern. And you also see it in our retail portfolios, which also are performing very, very well.

Speaker Change: Well I think what is important to keep in mind is a little bit of anchoring us back to our strategy. We are focused on building client relationships, we are focusing on on getting to the mass affluent clients.

Speaker Change: And I think that's what you are seeing that's where you are seeing in our business and government portfolio, which is performing exceptionally well.

Speaker Change: As we said in the past those portfolios can be episodic. So you could see something happening there at some point Budd, but there's nothing systemic going on we don't see any sectors.

Speaker Change: Or areas of particular concern and you also see it in our retail portfolios, which I'm also are performing very very well. So as you said there was a very strong results and we feel very comfortable with those results.

Unknown Executive: So as you said, those are very strong results. And we feel very Thank you. Thank you.

Speaker Change: Yeah.

Mike Dunn: Thank you. The following question is from Mike Dunn of Scotiabank. Please go ahead.

Mike Riftanovich: The following question is from Mike Riftanovich, Scotiabank. Please go ahead. Good morning. Just a quick numbers question for Rob. I know there's been a lot of good momentum on NIM at the all-bank level, and the way I'm looking at it, just to clarify, I'm taking out the trading-related NII from the numerator and trading-related securities from the denominator. I'm not sure if you guys look at it the same way, but I think it had been outperforming quite a bit the last few quarters and looks like it was flattish this quarter.

Mike Dunn: Hey, Good morning, just a quick numbers question for Rob or I know, there's been a lot of good momentum on NIM at the all bank level and the way I'm looking at just to clarify I'm, taking out the trading related NII from the numerator and trading related securities from the denominator I'm not sure. If you guys look at it the same way.

Speaker Change: I think it had been outperforming quite a bit the last few quarters and it looks like it was flattish this quarter I'm wondering if there's any change and sorry, if I missed this in your prepared remarks, but any any any updates on your view on how the hedging is playing out as well.

Rob Sedran: I'm wondering if there's any change, and sorry if I missed this in your prepared remarks, but any updates on your view on how the hedging is playing out, and what's your expectations at the all-bank level going forward? Hey, Mike. It's Rob. Good morning. I've been providing guidance over the last few quarters on this line that said flat to gradually higher, and it's only been going higher over the last several quarters. The reason that I always say the flat part when we give the guidance is that from time to time, business mix can play a role as well, and that's kind of what we saw this quarter.

Mike Dunn: What's your expectations all the all bank level going forward.

Rob Said: Hey, Mike It's Rob Good morning, So you know we.

Speaker Change: I've been providing guidance over the last few quarters on this line that said flat to gradually higher and it's only been going higher over the last several quarters plus the last several quarters. The reason that I always say the flat part when do we give the guidance is that from time to time business mix can play a role as well and that's kind of what we saw this quarter and even the non trading securities were up a little bit.

Rob Sedran: Even the non-trading securities were up a little bit, so it's positive to NII, but not necessarily positive to margin, and just the evolution of our business mix this quarter, you saw the US down slightly, CC, Canadian commercial wealth down slightly. It held back the overall. The guidance going forward or the view going forward continues to be that given the forward curve, we still expect the benefit of that tractoring strategy, which is, again, intended to deliver what it's delivering, a stable NIM over time. It is delivering that performance, so we continue to expect that flat to gradually higher sequentially from here, which, given where the forward curves are, should continue for a good while.

Rob Said: So it's positive for NII, but not necessarily positive to margin and just the evolution of our business mix. This quarter you saw the U S down slightly you see see Canadian commercial and wealth down slightly it held back the overall the guidance going forward or the view going forward continues to be that given the forward curve, we still expect the benefit of that track during strategy, which.

Rob Said: Again intended to deliver what its delivering a stable NIM over time.

Speaker Change: It is delivering that that performance. So we continue to expect that flat to gradually higher sequentially from here, which I'm you know given where the forward curves are should continue for a bit.

Unknown Executive: Yeah, that's very helpful.

Speaker Change: Okay. That's very helpful. And then a quick one for Raj just on the on the mortgage business.

Hratch Panossian: And then a quick one for Hratch, just on the on the mortgage business. Yeah, obviously, a flat result this quarter sequentially, it's not that different from the peers, I'm guessing it might have helped your margin a little bit in the quarter. But just in terms of the revenue contribution, I'm just gonna I just want to see if you're comfortable providing a similar type of guidance that you have in the past. I think it's been a couple of years since it was provided, but I believe it was somewhere around 17% of your segment's revenue. This goes back a couple of years again.

Speaker Change: Obviously, a flat result, this quarter sequentially, it's not that different from the peers I'm guessing it might have helped your margin a little bit in the quarter, but just in terms of the revenue contribution I'm just gonna.

Speaker Change:

Speaker Change: Just I just wanted to see if youre comfortable providing a similar type of guidance that you have in the past I think it's been a couple of years since it was provided but I believe it was somewhere around.

Speaker Change: 17% of your segments revenue. This goes back a couple of years again.

Hratch Panossian: Is that still within the realm of what the mortgage business contributes, not just the spread, but the fees earned around volumes and originations? Is that still a number we could use as a rough proxy on how much mortgages actually contribute to your top line in the segment? Anyway, thanks for the question.

Speaker Change: Is that still within the realm of what the mortgage business contributes not just the spread but the fees earned around volumes and in originations is that still a number we could use as a rough proxy.

Speaker Change: Proxy on how much mortgages actually contribute to your top line instead.

Speaker Change: Got it.

Speaker Change: Yeah.

Speaker Change: Good morning, Mike Thanks for the question and.

Hratch Panossian: And maybe I'll start by taking a bit of a step back, as we've talked about in the past, and it links a bit to Frank's comments, and the comments made by Rob. We have a strategy that's focused on our clients, and a strategy of building the best relationship focused bank in the country for retail consumers and small businesses. And that's what we're following, we don't have a specific product based strategy. And so for us, mortgages are just one of those key products that our consumers need. And we're always going to be there for them. That said, as we're focusing on leading with best-in-class experiences in everyday banking, leadership and advice across our franchise, and some of the economics, frankly, of the mortgage business, the mortgage business is becoming a smaller and smaller part of the contributors to revenues.

Speaker Change: Maybe I'll start by taking a bit of a step back and as we've talked about in the past and it links to Frank's comments and the comments made by Rob.

Speaker Change: We have a strategy that's focused on our clients and our strategy of building the best relationship focused bank in the country for retail consumers and small businesses and that's what we're following we don't have that.

Speaker Change: Specific product based strategy and so for US mortgages that are just one of those key products that our consumers need.

Speaker Change: He is going to be there for them.

Speaker Change: That said as we're focusing on leading with best in class experiences in everyday banking leadership and advice across our franchise.

Speaker Change: And some of the economics frankly of the mortgage business. The mortgage business is becoming a smaller and smaller part of the contributors to revenues and we're focusing more on those deep relationships and as I've said in a few of the calls recently.

Hratch Panossian: And we're focusing more on those deep relationships. And as I've said in a few of the calls recently, on mortgages, our approach is very simple. Where we have key relationships with clients, we want to have their mortgage. We want to have a fulsome relationship with clients. It creates a virtuous cycle of us knowing the client better, being able to offer better advice, improving the economics of the relationship for both the client and us. And it leads to some of the better risk results that Frank actually touched on. And that's what we've been doing on mortgages.

Speaker Change: On mortgages. Our approach is very simple, where we have key relationships with clients. We want to have their mortgage we wanted to have a fulsome relationship with clients. It creates a virtuous cycle of us knowing the client better being able to offer better advice, improving the economics of that relationship for both the client and us and it leads to some of the better risk results that Frank actually.

Speaker Change: And that's what we've been doing on mortgages.

Hratch Panossian: If we don't have a relationship with a client, we're always taking an eye to could we have a fulfilling relationship for the client and a profitable relationship for us over time with that client, in which case, again, we'll compete for that business on the mortgage. Outside of that, we're only looking at the economics of the mortgage. And by taking that strategy over time, what has happened is the margins over the last year in the mortgage business have improved by about 25%. The number of mortgages that have other products for us, with us, are at an all-time high.

Speaker Change: If we don't have a relationship with a client we're always taking and I too could we have a fulfilling relationship with a client and a profitable relationship for us overtime with that client in which case again will compete for that business on the mortgage outside of that we're ultimately looking at the economics of the mortgage them by taking that strategy over time.

Speaker Change: It has happened is the margins over the last year and the mortgage business have improved by about 25%.

Speaker Change: The number of mortgages that have other products for us are with US are an all time high so the number of single product mortgage clients is coming down.

Hratch Panossian: So the number of single-product mortgage clients is coming down. And when you look at the economics of the mortgage business, while they are still strong, it is a much smaller contributor for us today than it is. So going forward, I would see more of the same. I would see us focused on the products that are allowing us to grow high single-digit revenue despite a slower market. That's demand deposits where we're growing double digits. That's cards where we're growing high single digits. That's investments where we've been leading the ethics tables. And that's how we're going to keep driving our strategy.

Speaker Change: And when you look at the economics of the mortgage business. While they are still strong. It is a much smaller contributor for us today, so going forward I would see more of the same I would see us focus on the products that are allowing us to grow high single digit revenue. Despite a slower market. That's demand deposits were growing double digits, that's cards, where we're growing high single digits.

Speaker Change: Investments, where we've been leading the ethics tables, and that's how we're going to keep driving our strategy I would say you could focus less on margins going forward, but it still is a key product that clients need it will be there for them.

Hratch Panossian: I would say you could focus less on mortgages going forward, but it still is a key product. And if clients need it, we'll be there for them.

Hratch Panossian: Thanks for the insight. And again, I just wanted to just maybe ask a different way. So is it so you mentioned diminishing contribution? Is it significantly different than what it would have been a couple years ago? And the reason I'm asking, just thinking through a downturn on the mortgage side, obviously, tariffs seem to be playing a role and people may be holding back, maybe there's some pent up demand that comes in at some point later in the year. But ultimately, it does look like a potential revenue headwind. And can we use that prior guidance as at least a guidepost on what it contributes to your your top line?

Speaker Change: Hey, Thanks for the essay and again is it just wanted to just maybe ask it a different way. So is it. So you mentioned diminishing contribution is it significantly different than what it would've been a couple of years ago and the reason I'm asking I'm just thinking through a downturn on the.

Speaker Change: The mortgage side, obviously tariffs seem to be playing a role and then people may be holding back maybe there's some pent up demand that comes in at some point later in the year, but ultimately it does look like a potential revenue headwind in and see can we use that prior guidance as is at least a guidepost on what it contributes to your your top line.

Hratch Panossian: If maybe at a diminished level? So as I said earlier, it is a lower contributor. So your 17% number today, it would be significantly higher than where we are. Some of that has been margins. Remember, margins on mortgages in the portfolio have come down significantly. So today, it's a higher percentage of our earnings than it was a year ago. And that's because margins on the portfolio are expanding. But margins and volume both play obviously a role in revenue. So today, I would say it's a significantly smaller portion of our revenues. And like I said, margins may go up.

Speaker Change: If maybe at a diminished level.

Speaker Change: So as I said earlier it is a lower contributors. So your 17% number today it would be a significantly higher than where we are some of that has been margins remember margins on mortgages in the portfolio have come down significantly. So today, it's a higher percentage of our earnings than it was a year ago and that's because margins on the portfolio are at.

Speaker Change: Expanding but margins and volume both play obviously of L. A and revenue so today.

Speaker Change: I would say, it's a significantly smaller portion of our revenues and like I said margins may go up but in terms of our focus I would not expect it till they come in materially larger portion over time.

Unknown Executive: But in terms of our focus, I would not expect it to become a materially larger portion of Okay, that's super helpful.

Speaker Change: That's super helpful. Thanks for the color.

Unknown Executive: Thanks for the call.

Sohrab Movahedi: Thank you.

Tom Surat: Thank you. Following question is Tom Surat Alrighty BMO capital markets. Please go ahead.

Sohrab Movahedi: The following question is from Sohrab Movahedi, BMO Capital Markets. Please go ahead. Thank you.

Tom Surat: Thank you Brad if I can just stay with you Nick.

Frank Guse: Hratch, if I can just stay with you, can you just talk a little bit more broadly about the margin dynamics between deposit margins and I guess asset yields? I think you covered mortgages here, but just more broadly, what are you seeing and what are you expecting? Yeah, thanks for the question, Sohrab. And we've covered this before. I think there's a number of things that are helping margins in our business. And part of it is environment, but part of it is also our strategy. And so I'll start with our strategy. And I won't repeat what I just said in the other question.

Speaker Change: Can you just talk a little bit more broadly about the margin dynamics between deposit margins and and I guess asset yield said I think he covered mortgages, but just more broadly what are you seeing and what are you expecting.

Tom Surat: Yeah. Thanks, Thanks for the question I'm, sorry, and we we've covered this before I think there's a number of things that are helping margins in our business and part of it is environment. That's part of it is also our strategy and so I'll start with our strategy and I won't repeat what I, just said and the other question, but our strategy is one that leads to we believe a more profitable business and a higher.

Frank Guse: But our strategy is one that leads to, we believe, a more profitable business and a higher margin business. And I think you've been seeing that come to bear recently. Even though the balance sheet has been growing on both sides of balance sheets slower, we're growing more and we're gaining share in the areas that we're focused on. So demand deposits, we grew double digits over the last year. But on the GIC front, there was a 9% decline in balances on a year over year basis. That mixed shift is margin accretive. Part of that is client behavior, clients coming out of GICs that are paying five plus percent and looking for alternatives when those deals are no longer available on GICs.

Tom Surat: Margin business and I think you've been seeing that come to bear recently, even though the balance sheet has been growing on both sides of balance sheet slower we're growing more and we're gaining share in the areas that we're focused on so demand deposits. We grew double digits over the last year, but on the GIC fund that was a 9% decline in balances on a year over year basis.

Tom Surat: Mix shift is margin accretive part of that is client behavior clients coming out of GIC as they're paying five plus percent.

Tom Surat: And looking for alternatives when those deals are no longer available on GI season. This is where our advice comes in when a client has any type of financial need we take a step back with the client we look at the planning that we've done with them. When you look at all of their assets. They look at their financial goals and ambitions into the future and we come up with the right solution for that client.

Frank Guse: And this is where our advice comes in. When a client has any type of a financial need, we take a step back with the client, we look at the planning that we've done with them, we look at all of their assets, they look at the financial goals and ambitions into the future, and we come up with the right solution for that client. And our team has been doing that. I'm very proud of the way they've managed through some of the changes in market. So what that's actually transpired in over the last year, most of those deposits coming out of GICs going into demand or going into our mutual fund sales, which is what's driving the strength there.

Tom Surat: Our team has been doing that I'm very proud of the way they've managed through some of the changes in market to what that's actually transpired and over the last year most of those deposits coming out of Jack's he's going into demand or going into our mutual fund sales, which is what's driving the strength there.

Frank Guse: We talk a lot about our imperial service, but I also have to highlight the success of our personal banking team outside of imperial service. Yes, imperial service is about twice the volume we get out of the rest of the business, but both parts of our business have been contributing to that growth in demand deposits and growth in investment sales. On the asset side of the business, again, we're focused on margin management and delivering for our clients and on products like mortgages, we've been selective. I think that allowed us to increase margins in the mortgage business itself.

Tom Surat: We talked a lot about our imperial service, but I also have to highlight the success of our personal banking teams outside of Imperial service, Yes. Imperial service is about twice the volume we get out of the rest of the business, but both parts of our business have been contributing to that growth in demand deposits and growth in investment sales.

Tom Surat: On the asset side of the business again, we're focused on margin management and delivering for our clients and on products like mortgages. We've been selective I think that allowed us to increase margins in the mortgage business itself and then the mix is also playing a role with cards and other areas growing faster than mortgages over time and so that's why it all comes together.

Frank Guse: And then the mix is also playing a role with cards and other areas growing faster than mortgages over time. And so that's what all comes together to lead to margin increase over 20 basis points over the last year, three basis points quarter over quarter. And I think that's going to continue. So we expect to see a few basis points a quarter, roughly plus or minus going forward. Some of that is coming from rates, which will be best for the foreseeable future. But some of that is our strategy. And that will be good with us on a continued basis.

Tom Surat: To lead to margin increase over 20 basis points over last year, and three basis points quarter over quarter and I think that's going to continue we expect to see a few basis points a quarter, roughly plus or minus going forward. Some of that is coming from rates, which will be best for the foreseeable future, but some of that is our strategy and that will be built with us on it.

Tom Surat: <unk> basis.

Unknown Executive: Thank you.

Tom Surat: Thank you.

Speaker Change: Thank you. The following question is from Mario Mendonca TD Securities. Please go ahead.

Mario Mendonca: The following question is from Mario Mendonca, TD Securities. Please go ahead. Good morning.

Mario Mendonca: Good morning, this might be best Rob, maybe perhaps as well because you just addressed a moment ago. This this tailwind of.

Rob Sedran: This might be best for Rob, maybe Hratch as well, because you just addressed it a moment ago. This, this tailwind of The Tractor's Tailwind, which exists for any asset-sensitive bank we're seeing across the group. It appears from if rates were to stay where they are, that that tailwind becomes a headwind by mid next year, and possibly a meaningful headwind by late next year. Is that something you can address or is that just to find a point to make on this call? Yeah, hey, Mario, it's Rob. I'll give it a shot. And if we want to dig in deeper, we can certainly take it offline.

Mario Mendonca: The tractors tailwind, which exists for any asset sensitive bank, we're sitting across the group.

Tom Surat: It appears.

Tom Surat: If rates were to stay where they are that that tailwind becomes a headwind by mid next year and possibly a meaningful headwind by late next year.

Tom Surat: Is that something you can address or is that just to find the point to make on this call. Yeah, Hey, Mario It's Rob I'll give it a shot and if we wanted to dig in deeper we can certainly take it offline, but the way we look at the forward curves.

Rob Sedran: The way we look at the forward curves, we see and what's been happening of late actually is a bit of a steepening of that five and 10 year part of the curve. We see this going through 26 and into 27. Before those lines start to converge, it doesn't really become a headwind as much as it starts to level off. Now that, you know, Hratch talked a lot about product margins and so business mix and the rest obviously plays a role when we're talking about margin. But in terms of that tractoring benefit, it seems to start to level off somewhere into 27.

Tom Surat: We see and what's been happening of late actually is a bit of a steepening of that five and 10 year part of the curve and.

Tom Surat: We see this going through 'twenty and into 'twenty seven before those lines start to converge it doesn't really become a headwind as much as it starts to level off now that you know <unk> talked a lot about product margins and so a business mix and the rest obviously plays a role and we're talking about margin, but in terms of that tractor and benefit it seems to start to level off somewhere in the 27 and again, that's just based on.

Rob Sedran: And again, that's just based on the forward curves. I'm not really giving you too much CIBC commentary there, but we'd be consistent with that in terms of what we see for our margin. Unknown Speaker Would you want me to look at the U.S. curves or Canadian? Because on the Canadian, it would look like it doesn't quite make it to 2027. I can see the comment on the U.S. What would you point me to? Unknown Speaker Yeah, the Canadian, I'm talking mainly about the Canadian curves, but we can see it on both. But like I said, we can certainly take it offline if we want to.

Tom Surat: The forward curves.

Tom Surat: I'm, not really giving you too much CIBC commentary, there, but we'd be consistent with that in terms of what we see for our margin as well.

Tom Surat: Would you are you would you want me to look at the U S curves are Canadian because on the Canadian It would look like it doesn't quite make it to 2025, but I can see the comment on the on the U S. What would you want me to get other Canadian I'm talking mainly about the Canadian curves, but once you get on both but we like I said, we can certainly take it I'll start and if we wanted to compare notes.

Frank Guse: Slightly different question. Frank, over to you. So along the same lines as Gabriel was asking, I think a lot of us on this call spend time looking for correlations. One in particular is what economic growth and unemployment means to loan growth and PCLs. Focus in on PCLs for a moment. It would appear that those longstanding correlations could break down here. And I want your view on this. What might cause those longstanding relationships between, call it unemployment or economic growth, and what that means to credit losses? Why might those correlations break down this time? Is it something to do with excess deposits, changing spending behavior, government support, sort of akin to what we saw during COVID?

Speaker Change: Slightly different question Frank over to you. So along the same lines as Gabriel was asking I think a lot of us on this call spend time looking for correlations. One in particular is what economic growth and unemployment means to loan growth and P. C. L spokesman on Pcl's for a moment.

Speaker Change: It would appear that those long standing correlations could break down here and I want your view on this what might cause those long standing relationships between call it unemployment or economic growth and what that means to credit losses why might do.

Speaker Change: Those correlations break down this time is it something to do with excess deposits changing spending behavior government support sort of a kin to what we saw during Covid do you have a view on this Frank could these correlations break down or are they breaking down.

Frank Guse: Do you have a view on this, Frank? Could these correlations break down or are they breaking down? I wouldn't say we are seeing them break down as of yet. I mean, unemployment is up, as are our impaired losses. And we continue to expect impaired losses being driven by the unemployment rate. I think a lot of the elements you mentioned, changes to employment insurance, other forms of economic stimulus, some of the excess deposits that we continue to see with our clients, are slightly changing the correlations. I wouldn't necessarily say they are breaking down the correlations. Unemployment will continue to be a big driver for our loan loss expectations on the retail side, for sure.

Speaker Change: Well I Wouldnt say, we are seeing them breakdown as off as of yet I mean unemployment is off if our impaired losses, and we continue to expect impaired losses being driven by by the unemployment rate I think a lot of the elements you mentioned changes to employment insurance.

Speaker Change: Other forms of economic stimulus some of the excess deposits that we continue to see with our clients.

Speaker Change: Our slightly changing the correlations I wouldn't necessarily say they are breaking down the correlations unemployment will continue to be a big driver for for for our loan loss expectations in AR on the retail side for sure and we continue to see that and I think there is a couple of dampening more or slightly lowering.

Frank Guse: And we continue to see that. And I think there is a couple of dampening or slightly lowering the correlations factors. And as you said, it is excess deposits, it is some of the economic stimulus, it is some of the changes we are seeing to grow. So I guess the bottom line is use the correlations, but do it with some care and some judgment because they're not they're not perfect. I agree. Thank you.

Speaker Change: The correlations factors if in fact, it is fast deposits at some of the economic stimulus that someone could change if we have seen two programs.

Speaker Change: Yes.

Tom Surat: Bottom line is used the correlations, but do it with some care and some judgment because they're not they're not perfect.

Speaker Change: I agree thank you.

Tom Surat: Thank you.

Lemar Persaud: The following question is from Lemar Persaud, CarMax Securities. Please go ahead. Yeah, thanks, maybe for Rob or Victor, can you give us some kind of refresh thoughts on your on the deployment of capital? Like what's the targeted set one ratio in this uncertain macroeconomic environment, your appetite to continue along the buyback path and views on I guess, potential tuck in M&A? Sure. So thanks for the question, Lemar. Let me start and then I'll pass it on to Rob for the further subtleties.

Speaker Change: Following question is from Lamar peso Commack Securities. Please go ahead.

Speaker Change: Yeah. Thanks, maybe for Robert Victor can you give us some kind of refreshed thoughts on your on the deployment of capital like let's say targeted set one ratio in this uncertain macroeconomic environment. Your appetite to continue along the the buyback path and our views on I guess a potential tuck in M&A.

Speaker Change: Sure. So thanks for the question Omar Let me start and then I'll pass it onto Rob for the further subtleties, we've always had the four pronged approach to capital.

Victor Dodig: We've always had the four-pronged approach to capital. We've been working to have a robust capital level so that we can activate all four levers when needed. The first primary one is obviously dividend and dividend growth, which we do once a year, in line with our earnings expectations. The second is to grow organically. You know, our business is to help our clients grow. That's that's what we really want to do day in and day out. You've seen some more muted loan growth as we go through the trade policy uncertainty, which I think once gets settled, you'll see that pick up.

Speaker Change: We've been working to have a robust capital levels. So that we can activate all four levers are.

Speaker Change: When needed. The first primary one is obviously dividend and dividend growth, which we do once a year.

Speaker Change: In line with our earnings expectations.

Speaker Change: Second is to grow organically.

Speaker Change: Our our business is to help our clients grow that's that's what we really wanted to do day in and day out.

Speaker Change: <unk> seen some more muted loan growth as we go through the.

Speaker Change: Trade policy uncertainty, which I think once it gets settled you'll see that pick up.

Rob Sedran: The third is buybacks, we were active, we plan to continue to be active to wrap up our buyback and using that as an active lever going forward. And then obviously Chuck in M&A which we've suggested would be in. Capital Light Businesses that would enhance our ROE over time.

Speaker Change: The third is buybacks we were active we plan to continue to be active to wrap up our buyback and if ER and using that as a as an active lever going forward and then obviously tuck in M&A, which we've suggested would be in.

Speaker Change: Capital light businesses that would enhance our are we over time, so rob anything you'd like to add to that.

Rob Sedran: Sohrab, anything you'd like to add to that? Yeah, just maybe just quickly, Victor. Thank you. When we announced the buyback last year, the CT1 ratio was sitting at 13.3. We bought back around 15 million shares on that buyback now and we're sitting at 13.4. So we use that buyback as just a method to manage our share count, manage our capital position. Stable, steady, predictable, consistent, all those words that we love around here is how we like to run the bank, how we like to run the strategy, and it's how we like to run the buyback as well.

Speaker Change: Just maybe just quickly Victor thank you the when we announced the buyback last year. The CET one ratio was sitting at 13.3, we bought back around 15 million shares on that buyback now and we're sitting at 13.4. So we use that buyback is as <unk>.

Speaker Change: Just the method to manage our share count manage our capital position stable steady predictable consistent all those words that we love around here is how we like to run the bank, how we'd like to run the strategy and that's how we like to run the buyback as well so the capital deployment, we're trying to be as predictable as we can and you should expect that consistency to continue from us.

Rob Sedran: So the capital deployment, we're trying to be as predictable as we can, and you should expect that consistency to continue. And all of it's tied to an ambition of getting ROE over 15% over the medium term, and we're making progress on that.

Speaker Change: And all of its tied to an ambition of getting ROI over 15% over the medium term and we're making progress on that.

Rob Sedran: And what's like the targeted set one ratio that you'd allow the bank to go down to? Well, we you know, we've said in the past, we've got a couple of gates when we think about our target set one ratio, we want to stay 75 to 100 points clear of the regulatory minimum, which today would put that in the 12 and a half range, depending on the level of uncertainty, sometimes a little bit higher. The second gate, though, is also where the competitive dynamic is. And, you know, we don't want to be too much of a negative outlier relative to our competitors, it just, it creates too much noise around that consistent execution of our strategy.

Speaker Change: And what's the targeted set one ratio that you would allow the bank to go down to Iran.

Speaker Change: Well, we you know we've said in the past you've got a couple of games. When we think about our targets set one ratio we want to stay 75 to 100 points clear of the regulatory minimum which today would put that in the 12 and a half range depends.

Speaker Change: Depending on the level of uncertainty, sometimes a little bit higher the second gate, though is also where the competitive dynamic is and you know we don't want to be too much of a negative outlier relative to our competitors. It just it creates too much noise around that because that consistent execution of our strategy, but you know with the with where the regulatory minimums are today, we're comfortable that we've got a sick.

Rob Sedran: But you know, if the with where the regulatory minimums are today, we're comfortable that we've got a significant amount of excess capital. Thank you.

Speaker Change: And if it can amount of excess capital.

Speaker Change: Thank you.

Speaker Change: Thank you. Following question is from Doug Young did you all think at them I guess he gets to go here.

Doug Young: The following question is from Doug Young, Desjardins Capital Markets. Please go ahead. Hi, good morning. Victor, back to the comment you just made on Target ROE 15% plus this quarter, and adjusted ROE was 13.9. And kind of where I'm going with this is, is there anything in this quarter that leans in your favor? Or is this kind of a reasonable way to think about the starting point? And is everything set for essentially, do you achieve that target in a normal credit environment? Or do you need to pull some levers on expenses or whatnot, improve different business lines to kind of drive it?

Speaker Change: Hi, Good morning, I take you back to the comment you just made on target.

Speaker Change: 15% plus in this quarter and adjusted ROE was 13000.

Speaker Change: And kind of where I'm going with this is is there anything in this quarter that being in your favor it or just kind of a reasonable way to think of the starting point.

Speaker Change: And is there anything set for essentially be achieve that term get in a normal credit environment or do you need to call somebody burns on expenses or whatnot improve different business lines to kind of drive that and can you hit that target or are we you know with call. It at 13% set one ratio.

Victor Dodig: And can you hit that target ROE, you know, with call it a 13% set one ratio over the medium term? I think we can. I think the way to look at the dynamic in ROE is what's happening year over year. And we're seeing year-over-year improvements. And Doug, it's all tied back to our strategy. If you have deeper relations with your client. with our clients, whether it's personal and business banking, Canadian commercial banking and wealth, US commercial banking and wealth, our capital markets business, everyone is working to have those deeper relationships, which by definition, delivers a higher ROE.

Speaker Change: Over the medium term.

Speaker Change: I think we can I think the way to look at the dynamic in a row is whats happening year over a year.

Speaker Change: And what we're seeing year over year improvements in Doug, It's all tied back to our strategy.

Speaker Change: If you have deeper relationships with your clients with our clients, whether it's personal and business banking Canadian commercial banking and wealth U S commercial banking and wealth our capital markets business.

Speaker Change: Everyone is working to have those deeper relationships, which by definition delivers a higher aro <unk>, we believe that there's plenty of room to grow within each of those businesses and plenty of room to continue to deepen those relationships.

Victor Dodig: We believe that there's plenty of room to grow within each of those businesses, and plenty of room to continue to deepen those relationships. The second piece is just our focus on efficiencies over time. I mean, if you look at our NICS ratio today, we'd be closer to the top of the league tables amongst our peer group. And we've been working really hard to be thoughtful about how we manage investments in our bank, how we remove legacy costs, and how we can invest in the future. That done right will be accretive to ROE.

Speaker Change: The second piece is just our focus on efficiencies over time I mean, if you look at our nix ratio today, we'd be closer to the top of the league tables amongst our peer group and we've been working really hard.

Speaker Change: To be thoughtful about how we manage investments and our bank, how we remove legacy costs and how we can invest in the future that done right.

Speaker Change: Will be accretive to our ROE.

Victor Dodig: And the third point is... We will, you know, use any excess capital for growth and or the purchase of shares and Rob said we're operating within that 12 and a half kind of range. That in and of itself would improve our ROE over time. So we're on that path. We've said that in Investor Day, we've reaffirmed those targets under Harry's leadership. I know that will continue with the team to make sure that we can deliver a premium ROE in the market, deliver our earnings expectations and earn that premium multiple that we think we're working toward from our shareholders.

Speaker Change: And the third point is.

Speaker Change: We will you know.

Rob Said: Use any excess capital for growth and or the purchase of shares and Rob said were operating within that 12, and a half kind of range.

Speaker Change: That in and of itself would improve our ROE over time so.

Speaker Change: We're on that path, we've said that in Investor day, we have a free reaffirm those targets under Gary's leadership I know that will continue with the team to make sure that we can deliver a premium Roe in the market.

Speaker Change: On our earnings expectations and earn that premium multiple that we think we're working toward from our shareholders.

Doug Young: Appreciate it.

Speaker Change: I appreciate it just one quick number question, Rob you talked about higher severance and the expense section can you quantify that or is there anything else you know unusual on the expense side.

Rob Sedran: Just one quick number question, Rob. You talked about higher severance in the expense section. Can you quantify that? And is there anything else, you know, unusual in the expense side? That'll get you back that out if I recall. No, there were there were no adjusting items this quarter, Doug, correct? We haven't quantified the number. We kind of look at severance as one of those run rate items that is just it's embedded in our in our operating operating philosophy. We are taking the opportunity to you know, right size the employee network and make some changes, but particularly when the revenues are revenues are in a strong place like they are.

Speaker Change: So that'll take you back that out if I recall no. There were no adjusting items this quarter, Doug correct. We haven't quantified the number we we kind of look at severance is one of those run rate items that it's just it's embedded in our in our operating operating philosophy, we are taking the opportunity to you know.

Speaker Change: Size, the employee network and make some changes, but particularly when the revenues are revenues.

Speaker Change: Revenues are in a strong place like they are so we haven't called it out and I think we're probably going to keep it that way.

Shalad Garg: So we haven't called it out and I'm probably going to keep it that way. Appreciate the time. Thank you.

Speaker Change: Appreciate the time thank you.

Speaker Change: Thank you.

Speaker Change: The following question is from shall have got very tough investment research. Please go ahead.

Frank Guse: The following question is from Shalad Garg, Veritas Investment Research, please go ahead. I thank you. Can you walk us through the risk mitigation activities undertaken in the cards portfolio? And is that in any way linked to the decline in card fees year over year? Well, I can walk you through the risk mitigations. And generally, I would say we constantly work on on risk strategies, we constantly work on risk mitigations, we have taken actions like we do in a lot of parts of our books fairly early when we expected unemployment to rise. So I would say over a year ago, and that would include technical changes to how you treat pre-delinquent clients, investments into our collections efforts, and so on.

Speaker Change: I think you are can you walk us through the risk mitigation activities undertaken in the cards portfolio.

Speaker Change: Is that in any way linked to the decline in card fees year over year.

Speaker Change: Well I can walk you through the risk mitigation and in generally I would say Ah we constantly work on risk strategy. If we constantly work on risk mitigation. We have taken actions like we do in a lot of parts of our book fairly early when we expected unemployment to rise and so I would say oh.

Speaker Change: A year ago and that would include tactical changes to how you treat pre delinquent clients investments into our collections efforts and so on and then maybe over to Roger or Rob, but but in a nutshell. It if not related to changes in our fees, but over here.

Hratch Panossian: And then maybe over to Raj or Rob, but in a nutshell, it is not related to changes in our fees. But over to you, Raj. Thank you, Frank. Maybe I'll address it quickly. So our CAHRS portfolio continues to have strong momentum. Sometimes it is impacted by elements of transaction volumes and so forth. And so nothing to call out that would be risk mitigation related. As of this quarter, the other thing I would say is that CAHRS fee line item that you see includes revenues and contra revenues that are expenses against the generation of CAHRS points, etc.

Speaker Change: Thank you Frank maybe I'll address it quickly so our cards portfolio continues to have strong momentum sometimes that is impacted by our elements of our transaction volumes and so forth and so nothing to call out that would be a risk mitigation related as of this quarter. The other thing I would say is that card fee line item that you see includes revenues in.

Speaker Change: Contra revenues that our expenses against that generation of cards points et cetera, and there can be noise in there. So this quarter most of that I would point out some noise relative to last quarter and relative to last year or so if you look through the last few quarters, that's probably a good average to take as a run rate that we expect that to grow over time from there.

Hratch Panossian: And there can be noise in there. So this quarter, mostly I would point out some noise relative to last quarter and relative to last year. So if you look through the last few quarters, that's probably a good average to take as a run rate, but we expect that to grow over time. Okay, appreciate the color.

Speaker Change: Yeah.

Speaker Change: Okay, but you shouldn't they're gonna thank you.

Sohrab Movahedi: Thank you.

Speaker Change: Thank you. Our last question is I'm, sorry, I'm a variety BMO capital markets. Please go ahead.

Sohrab Movahedi: Our last question is from Sohrab Movahedi, BMO Capital Markets. Please go ahead. Okay, hopefully, Frank, you can address this quickly. You've gotten your allowance. To about 77 basis points allowance for credit losses. And you've been in that mid 70 percent, 70 basis point range for the quarters that least show on your slide. Is this the right level? Or do you think this will have to get adjusted? Yes, Sohrab, very quickly. It is the right level. It's a prudent coverage for everything we know so far. I mean, we will have to assess, as you know, every quarter, based on all the information that is available.

Speaker Change: Okay, hopefully Frank you can address this quickly you've gotten your allowance there.

Speaker Change: To about 77 basis points.

Speaker Change: Allowance for credit losses, and you've been in that mid 70% 70 basis point range for the quarters at least you show on your slide he was just the right level or do you think this.

Speaker Change: This will have to get adjusted up or down.

Speaker Change: Yes, we're up very quickly I. It is the right level, it's a prudent coverage for everything we know so far I mean, we will have to pass as you know every quarter based on all the information that is available but it is a good level to be at where we are and everything we know right now.

Frank Guse: But it is a good level to be at where we are and everything we know right now. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you I would now like to tell them anything over to Victor.

Victor Dodig: I would now like to turn the meeting over to Victor. Oh, thank you, operator. And thank you all for joining us this morning. I know you all have a call to get to in about two minutes. So I want to quickly reiterate what you heard from our team this morning. Number one, we've got a diversified business model that's driving strong top line results and positive operating So we've got a diversified business model that's driving strong top line results and positive operating Number two, we have a strong balance sheet with a resilient credit quality. And finally, and equally importantly, number three, we have a strategy that's working and supported by a dedicated leadership team, a dedicated frontline, a dedicated back office, an entire CIBC team that's dedicated with a strong execution track record to continue to deliver.

Speaker Change: Oh, Thank you operator, and thank you all for joining US this morning, and I know you all have a call to get through in about two minutes. So I wanted to quickly reiterate what you heard from our team. This morning number one you've got a diversified business model, that's driving strong strong topline results and positive operating leverage number two we have a strong balance sheet with a resilient.

Speaker Change: Credit quality.

Speaker Change: And finally <unk>.

Speaker Change: Equally importantly number three we.

Speaker Change: We have a strategy that's working and supported by a dedicated leadership team a dedicated frontline a dedicated back office and entire CIBC team, that's dedicated with a strong execution track record to continue to deliver.

Victor Dodig: And while market conditions will continue to evolve each day, we're going to stick to our game plan, we're going to stay close to our clients, and we're going to lead for all our stakeholders. So with that, I'd like to thank our CIBC team for putting our clients at the center of everything we do each day.

Speaker Change: A lot of market market conditions will continue to evolve each day, we're going to stick to our game plan, we're going to stay close to our clients I'm going to leave for all our stakeholders, so with that I'd like to thank our CIBC team for putting our clients at the center of everything we do each day I want to wish you a great summer and we'll talk to you at the end of August in many conversations in between thank you.

Victor Dodig: I want to wish you a great summer, and we'll talk to you at the end of August and many conversations in between. Thank you.

Speaker Change: Thank you the conference is Milena. Please disconnect your lines of this time and we thank you for your participation.

Operator: The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

Operator: This conference is no longer being recorded. Cette conférence n'est plus enregistrée.

Speaker Change: This conference is no longer being recorded so it's cool so listen at least off of history.

Q2 2025 Canadian Imperial Bank Of Commerce Earnings Call

Request a DemoDemo

Canadian Imperial Bank Of Commerce

Earnings