Q2 2025 Royal Bank of Canada Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, and welcome to the RBC is 2025 second quarter results Conference call.
Speaker Change: Please be advised that this call is being recorded.
Speaker Change: I would like to turn the meeting over to Jim <unk> Senior Vice President Investor Relations. Please go ahead Sir.
Speaker Change: Thank you and good morning, everyone speaking today will be Dave Mckay, President and Chief Executive Officer, Catherine Gibson, Chief Financial Officer, and Graeme Hepworth Chief risk Officer.
Speaker Change: Also joining us today for your questions Erika Nielsen group head personal banking showing them how to go G Group had commercial banking, Neil Mclaughlin group head wealth management <unk>.
Speaker Change: Derek Millner group head capital markets, and Jennifer public over group had insurance.
Speaker Change: On slide two our comments may contain forward looking statements, which involve assumptions and have inherent risks and uncertainties actual results could differ materially I would also remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying.
Speaker Change: Business performance to give everyone a chance to ask questions. We ask that you limit your questions and then re queue with that I'll turn it over to Dave.
Speaker Change: Thanks, Austin and good morning, everyone and thank you for joining us today.
Speaker Change: Today, we reported second quarter earnings.
Speaker Change: $4 4 billion adjusted earnings were $4 $5 billion and included.
Speaker Change: $260 million of earnings from the acquisition of HSBC Bank, Canada. This quarter, we generated strong pre provision pretax earnings of nearly $7 billion as we continued to execute our strategy as we shared at our Investor day.
Speaker Change: Adjusted pre tax pre provision growth was up 16% or $971 million from last year more than offsetting a prudent reserve build a $568 million this quarter.
Speaker Change: Revenue growth of 11% year over year was underpinned by strong average volume growth in personal banking and commercial banking.
Speaker Change: As well as higher spreads in personal banking, we also reported robust fee based revenue growth in wealth management and strong global markets revenue each.
Speaker Change: Capital markets, our results demonstrate the strength of our diversified business model and earnings power as well as the value of the insights and advice, we deliver for our clients as they navigate the uncertain macro environment.
Speaker Change: Our revenue growth is noteworthy considering the evolving market conditions. The strong performance was generated from a position of balance sheet strength, which continues to be through the cycle competitive strategic advantage for RBC.
Speaker Change: We continue to grow our core deposit franchises across our segments, including in Canadian banking, whereas the loan to deposit ratio improved to 97%, helping fund loan growth in an efficient and stable manner.
Speaker Change: We ended the quarter with a common equity tier one ratio of 13, 2% well above regulatory minimums translating into excess capital of approximately $5 billion relative to a mid 12% range.
Speaker Change: Underpinned by a robust capital and earnings power of this morning, we announced a 6% or 4% increase in our quarterly dividend.
Speaker Change: We also announced our intention subject to relevant approvals to commence our normal course issuer bid to repurchase for cancellation up to 35 million common shares.
Speaker Change: We also remained disciplined with respect to our risk management framework and risk appetite the allowance for credit loss ratio increased to 74 basis points. Following a prudent reserve build which included increasing weightings toward downside scenarios amidst heightened economic uncertainty.
Speaker Change: Our through the cycle approach to risks to managing risk takes into consideration elevated market volatility. We did not have any trading loss days. This quarter. Furthermore over the last four years, we've only seen five days, where we generated trading loss.
Speaker Change: Our strong balance sheet creates a resilient foundation that allows us to navigate uncertainty, while creating value for clients and shareholders.
Speaker Change: Turning to the macro environment changes to long standing U S and international trade policies have resulted in a volatile and uncertain operating environment, given the potential for structural disruptions to global supply chains and capital flows.
Speaker Change: These changes are taking place concurrently with other large secular forces of change.
Speaker Change: <unk> the increased role of artificial intelligence and private capital.
Speaker Change: Magnifying the complexity of the businesses are facing.
Speaker Change: We saw market volatility through much of the quarter evidenced by movements in credit spreads.
Speaker Change: VIX and bond market volatility indices.
Speaker Change: However, as the U S administration implemented a 90 day pause and reciprocal tariffs the volatility of outcomes sentiment and market has narrowed significantly.
Speaker Change: While we can't say for certain where global trade policies will settle we are cautiously optimistic about the path forward reciprocal tariffs imposed on Canada are currently at the lowest end of the global scale, reflecting strong bilateral trade in Acousma agreement.
Speaker Change: Although we are not projecting a recession in either Canada or the U S. The prevailing uncertainty as Daphne confidence sentiment and client activity in certain parts of the north American economy, including housing.
Speaker Change: North American consumers have remained resilient they are continuing to spend albeit less non discretionary items.
Speaker Change: These savings are growing.
Speaker Change: Businesses are in a holding pattern holding pattern on large capex, but have built inventory shored up supply chains moving consumption forward.
Speaker Change: It's under these complex circumstances that policymakers are looking to navigate the options to sulfur inflation unemployment and growth.
Speaker Change: We expect the bank of Canada will continue to take a more dovish stance, the sharp casino consumer sentiment and growth.
Speaker Change: Furthermore, we hope to see the increased political uncertainty in Canada drive structural improvements in our country's productivity and competitiveness, including more effectively leveraging our abundant natural resources and skilled workforce.
Speaker Change: But the federal reserve signaling a holding pattern on interest rates given opposing forces. We similarly expect a more dovish stance and U S monetary policy, albeit on a lag timeline.
Speaker Change: To reiterate what I said earlier, we believe we are in a strong position to navigate this period of uncertainty given the strength of our balance sheet, our diversified business model and a strong risk culture.
Speaker Change: With this context I will now speak to the trends, we're seeing across our businesses as we continue to focus on delivering advice insights and value to our clients.
Speaker Change: Starting with our leadership position in Canada.
Speaker Change: Personal banking, we have the leading distribution network in Canada with a full suite of award winning products and solutions.
Speaker Change: Average deposits increased 13% year over year or 8%, excluding the acquisition of HSBC, Canada led by outsized growth in our lower cost core banking and savings products.
Speaker Change: As noted at our Investor day growing core deposits remains a priority.
Speaker Change: Provides us with data to support personalization underpin our risk models and our interest rate hedging strategy, while being an important source of funding.
Speaker Change: Residential mortgage growth was largely supported by stronger client renewals higher origination volumes driven by strong mortgage switching activity, partly offset by higher paydowns.
Speaker Change: We expect housing resale activity and mortgage growth to remain contained in the near term as the uncertainty around tariffs outweighs lower debt servicing costs from lower interest rates.
Speaker Change: Ongoing intense competition, we will maintain the disciplined mortgage growth strategy, we articulated over the past year.
Speaker Change: And our credit card business spending remained relatively resilient despite low consumer sentiment going forward, we expect spending to soften and revolver balances to increase year over year should the current environment persists.
Speaker Change: Turning to commercial banking, where we have leading market share across all segments.
Speaker Change: Average deposit growth remained strong up 15% year over year or 10% excluding deposits acquired through the acquisition of HSBC, Canada.
Speaker Change: This growth continues to be supported by investments in our people and capabilities, including digital client Onboarding and transaction banking.
Speaker Change: Average net loans and acceptances were up 22% year over year or up 9%, excluding loans acquired through HSBC, Canada.
Speaker Change: Adjusting for these acquired loans larger commercial and corporate loans and small businesses.
Speaker Change: Loans grew at a similar rate utilization rates have remained largely unchanged.
Speaker Change: While the lending pipeline and client activity remains solid across many parts of our diversified portfolio. We continue to see signs of cautious business sentiment in certain areas as clients assess global tariffs could impact their strategies and investment plans.
Speaker Change: Loan demand was notably softer for companies in the automotive consumer discretionary and transportation sectors.
Speaker Change: Going forward, we continue to expect commercial banking loan growth in the high single digit range for next year.
Speaker Change: But moderate to mid high mid to high single digit growth range in the back half.
Speaker Change: Turning to HSBC, Canada, Youre, continuing to bring new capabilities to market as we've now completed the migration of the largest and most complex commercial clients acquired through the acquisition of HSBC.
Speaker Change: Pursuant to the trends I transition services agreement.
Speaker Change: As we exit Q2, the execution of cost synergy initiatives is largely complete and we are increasingly confident of.
Speaker Change: Achieving our targeted annualized cost synergies by next quarter.
Speaker Change: Now to segments in which we are expanding our reach in global fee pools.
Speaker Change: Starting with capital markets, which reported strong pre provision pretax earnings of $1 $4 billion.
Speaker Change: Or a record $3 $1 billion in the first half of the year, reflecting its diversified business model.
Speaker Change: Global markets had a strong quarter driven by increased client activity amidst market volatility, which largely benefited our equities and broader macro trading businesses. This was partly offset by the impact of a challenging market backdrop on credit trading.
Speaker Change: The strong performance, both cash equities and equity derivatives was particularly notable as they are a key area of focus for market share gains over the medium term.
Speaker Change: Like commercial banking utilization in our corporate banking loan book remained relatively steady we continue to pursue our strategy to moderately grow lending activity with average loan balances up mid single digits year to date.
Speaker Change: In contrast investment banking activity was muted this quarter given the volatility in markets going forward. The policy uncertainty could continue to impact activity as clients wait on the sidelines for clarity while the second half of the year is seasonally lower or slower than the first half client dialogue is robust and we are well positioned to.
Speaker Change: Deliver steelmaking momentum improves.
Speaker Change: Moving to wealth management, where we reported assets under administration growth of 11% in Canada and 9% in the U S.
Speaker Change: Our clients remain engaged and we had solid net sales and transactional activity in our Canadian platforms, including an RBC direct investing.
Speaker Change: RBC global asset management assets under management increased by 11% to $694 billion.
Speaker Change: Net sales were robust across asset classes with client flow shifting from fixed income and equity mandates earlier in the quarter to a more balanced funds in April.
Speaker Change: Lighting, our clients' confidence in a wide range of investment strategies across geographies.
Speaker Change: As a leading asset manager RBC Gam consistently delivered strong performance through our leading distribution network. This point was underscored with RBC Gam, yet again being named the top gun investment team of the year in Canada for 2025.
Speaker Change: To close this quarter builds on the strong start we've had to fiscal 2025 amidst an evolving operating environment, while macro related uncertainty remains we are confident in our ability to pursue the ambitions of medium term targets outlined at our Investor day in March.
Speaker Change: This includes our one RBC approach to extending our leadership in Canada growing in global fee pools, and leveraging our strong balance sheet data scale and AI investments to create more value for clients.
Speaker Change: The key strategic initiatives designed to accelerate our ambitions are expected to continue to deliver leading risk adjusted returns and long term value for our shareholders through a wide range of economic cycles.
Kathryn: Kathryn overdue.
Kathryn: Thanks, Dave and good morning, everyone. This quarter, we reported diluted earnings per share of $3.
Speaker Change: Adjusted diluted earnings per share of $3 12.
Speaker Change: It is up 7% from last year, driven by strong revenue momentum across our businesses and prudent cost management the acquisition of HSBC, Canada and foreign exchange translation impact also benefited results.
Speaker Change: Turning to capital on Slide 10, we demonstrated our through the cycle capital strength and resilience despite the market disruption.
Speaker Change: Our CET one ratio came in at 13, 2% flat sequentially solid internal capital generation net of dividends was partly offset by net credit migration, primarily in our wholesale portfolio.
Speaker Change: We also continue deploying organic capital across our businesses towards trading related activity as well as wholesale and personal lending.
Speaker Change: A key part of our capital deployment strategy is returning capital to our shareholders. This quarter, we repurchased 3 million shares for $488 million, an increase from the $2 3 million shares repurchased over the last two quarters.
Speaker Change: Continues to be practical with the cadence of share repurchases well operating with a strong CET one ratio.
Speaker Change: Next quarter, we expect a modest negative impact to our CET one ratio as a result of changes to our retail capital parameters.
Speaker Change: Moving to slide 11, I'll Bank net interest income was up 22% year over year or up 14%, excluding trading revenue and HSBC, Canada.
Speaker Change: All bank net interest margin, excluding trading revenue was down two basis points from last quarter, partly due to the impact of higher investment securities balances and capital markets.
Speaker Change: Your rates on our funding and securities portfolio incorporate support also impacted all bank NIM as the benefit of certain hedging transactions. This quarter was recorded in non interest income with a related offset reported net interest income.
Speaker Change: These factors were mostly offset by a favorable product mix in personal banking.
Speaker Change: Canadian banking NIM was up five basis points from last quarter benefiting from a favorable product mix higher mortgage spreads and continued benefits related to our tractor strategy, which provides protection in a declining rate environment.
Speaker Change: Benefits from changes in product mix were driven by strong growth in checking and savings account.
Speaker Change: Seasonally higher credit card revolve rate.
Speaker Change: Later, which we expect to reverse next quarter.
Speaker Change: In addition to our client acquisition strategy declining interest rates and uncertainty in the markets are driving clients to hold cash non maturity deposit is shorter duration term deposits mature.
Speaker Change: Well, we expect to continue benefiting from the tailwind in the near future. We don't anticipate this level of margin expansion to continue.
Speaker Change: Looking forward, we are maintaining our 2025 all bank net interest income growth guidance of high single digit to low double digit net interest income excluding trading.
Speaker Change: Moving to slide 12 reported non interest expenses were up 5% from last year.
Speaker Change: Core expense growth was up 8% year over year.
Speaker Change: As a reminder, core expense growth includes run rate costs related to the acquisition of HSBC, Canada, which contributed 1% expense growth.
Speaker Change: With the impact of foreign exchange translation and share based compensation, which are largely driven by macro variables.
Speaker Change: The main drivers of growth were higher staff related costs, including higher than average suffering targeted amendments to our defined benefit pension and higher variable compensation commensurate with strong results in wealth management.
Speaker Change: Going forward, we continue to expect all bank core expense growth, which is off a base of a reported 2020 for expenses to be at the upper end of our mid single digit guidance range for 2025.
Speaker Change: We remain prudent in managing our cost base and then an uncertain macroeconomic backdrop and have proactively identified leavers to do so.
Speaker Change: Higher than expected core expense growth outside our guidance range for this year will likely reflect higher than expected variable compensation commensurate with higher revenues in our market sensitive businesses.
Speaker Change: Consequently, we continue to expect positive operating leverage for the year.
Speaker Change: On taxes, the adjusted non-GAAP effective tax rate was 26% this quarter.
Speaker Change: From 19, 8% last year.
Speaker Change: The increase reflects the impact of changes in earnings mix and pillar two tax legislation, partly offset by the net impact of tax adjustments.
Speaker Change: Turning to our Q2 segment results beginning on slide 13 personal banking reported earnings of 1.6 billion focusing on personal banking, Canada net income was up 15% year over year, excluding HSBC, Canada personal banking candidates net income rose eight.
Speaker Change: 8% year over year as strong operating leverage of approximately 6% was partly offset by higher provisions for credit loss.
Speaker Change: Personal banking efficiency ratio improved to 41% this quarter underpinned by strong revenue growth higher year over year revenues, excluding HSBC, Canada benefited from a 14% increase in net interest income and an 8% increase in non interest income.
Speaker Change: We are maintaining the sub 40% efficiency ratio target noted at our Investor day.
Speaker Change: Ever as a reminder, benefits from the purchase accounting accretion of fair value adjustments from the HSBC, Canada transaction.
Speaker Change: Expected to largely run off like Q2 2026.
Speaker Change: Turning to slide 14, commercial banking net income of $597 million rose, 3% from a year ago.
Speaker Change: <unk> impacted this quarter by an increase in stage, one and two provisions.
Speaker Change: On a pre provision pre tax basis earnings were up 25% or 11%, excluding HSBC Canada.
Speaker Change: Driven by solid average volume growth offset by lower credit fees and higher expenses, mainly reflecting higher staff related costs.
Speaker Change: Excluding HSBC, Canada average deposits and loan growth were strong at 10% and 9% year over year, respectively.
Speaker Change: Turning to wealth management on slide 15, net income of 929 million.
Speaker Change: 7% from a year ago, driven by strong growth in fee based client assets across our businesses benefiting from market appreciation and net new assets.
Speaker Change: We added $6 5 billion in net new assets across our Canadian wealth advisory business, reflecting the benefits of the holistic strategy as we highlighted at our Investor day.
Speaker Change: Global asset management net sales were slightly negative this quarter as a result of net outflows from institutional clients largely due to one client mandate.
Speaker Change: These outflows, however were partly offset by a fifth consecutive quarter in positive retail fund inflows as we continue to grow our leading market share in Canada.
Speaker Change: Higher segment revenue was partly offset by higher variable compensation measure it with increased results and higher staff related costs.
Speaker Change: City National generated 88 million U S. In adjusted earnings up 21% from last year. We are encouraged by the momentum we are seeing and remain focused on enhancing city national's profitability.
Speaker Change: Turning to our capital markets results on Slide 16, net income of $1 2 billion decreased 5% from last year, reflecting a 1% decline and pre provision pretax earnings off of a strong second quarter last year and a higher effective tax rate this year.
Speaker Change: Global markets revenue was up 23% year over year is a volatile market backdrop drove high client higher client activity, particularly in our equity and FX trading businesses across all regions.
Speaker Change: Corporate investment banking revenue was down 7% from last year.
Speaker Change: That's in banking revenue was down 22%, reflecting lower M&A activity across all regions. The second quarter of last year was very strong due to the timing of several large M&A deals that closed in the quarter.
Speaker Change: Lending in transaction banking revenue was up 8% underpinned by higher lending revenue primarily in Europe.
Speaker Change: Turning to slide 17 insurance net income of $211 million was up 19% from last year, mainly due to higher insurance service results from improved claims experience results also benefited from higher insurance investment results and lower capital funding costs and favorable investment related experience.
Speaker Change: Lastly results for corporate support in the quarter included higher than normal severance costs, representing approximately half of the total severance incurred this quarter.
Speaker Change: As we look forward, we continue to expect corporate support to generate a net loss of $100 million to $150 million per quarter.
Speaker Change: Before closing I want to note a couple of disclosure updates in our analyst slide we are providing new disclosures related to the performance of our U S region, which we highlighted as a key geography at our Investor day.
Speaker Change: Secondly, well, we commit to providing updates on synergies related to the acquisition of HSBC, Canada. This is the last quarter, we'll provide detailed financials of the acquired business becomes fully integrated into comparable period.
Speaker Change: Lastly, we will look to provide annual updates at our Investor day targets every fourth quarter.
Speaker Change: To conclude despite the market and macroeconomic uncertainty we delivered strong results. This quarter, we are maintaining the annualized guidance provided last quarter, our net interest income and core expense growth, while continuing to drive towards the medium term targets, we outlined at our Investor day our.
Speaker Change: Our performance reflects the resilience of our diversified earnings stream and financial strength, all of which position us to navigate the quarters ahead with that I'll now turn it over to Graeme.
Graeme Hepworth: Thank you Catherine and good morning, everyone.
Speaker Change: Although discussed or allowances in the context of the current macroeconomic environment and ongoing trade uncertainty.
Speaker Change: After a stronger than expected start to your Canadian and U S economic indicators softened over the second quarter with momentum stalled by global trade uncertainty.
Speaker Change: He must trade policies and boats with market volatility or creating uncertain conditions increasingly your odds of a recession in North America.
Speaker Change: Although tariffs imposed on tenant that were not as severe as broad based as initially expected global and sector specific impacts are clearly economic risks, including reduced trade higher input costs and supply chain disruptions.
Speaker Change: The final form of terrorists is still unknown. It is too soon to know how they will work through the economy.
Speaker Change: Against this backdrop, we continue to lead on a robust credit provisioning process to inform our allowances.
Speaker Change: As a reminder, we are not managing to one scenario where forecast within our I personally framework, we employ five separate scenarios base case, and optimistic cereal and three downside scenarios of varying severity.
Speaker Change: This allows us to better handle forecasting uncertainty and incorporate a larger range of potential risks.
Speaker Change: Compared to last quarter, our base case reflects a greater slowdown in the north American economy from tariffs already known and imposed which we expect will be in place for at least six months before easing.
Speaker Change: We expect Canada, and the U S with narrowly avoided recession as higher inflation and unemployment are expected to be offset by interest rate reductions in both countries.
Speaker Change: Buddy relief to borrowers and stimulating investments.
Speaker Change: Given the trade related uncertainty, we implemented a new trade disruption downside zero this quarter, which replaces our previous oil and gas downside scenario.
Speaker Change: This new scenario reflects the potential for a severe north American recession, driven by the escalating global trade war and rising geopolitical risk.
Speaker Change: Translate into a rapid rise in unemployment or inflation disruptions in supply chain and a sharp decrease in asset prices.
Speaker Change: The trade disruption scenario in other downside scenarios help us evaluate risk that we have not yet observed.
Speaker Change: Given the high degree with geopolitical and economic uncertainty, we have reduced the weighting of their base case reallocated towards trade disruptions there.
Speaker Change: We would expect to decrease the way they go to honor downside scenarios I wasn't aware there is greater clarity of tariff related outcomes and those are captured in our base case scenario.
Speaker Change: And the retail portfolio clients continued to demonstrate resilience with credit performance improving interest rate cuts and wage growth have made it easier to service debt.
Speaker Change: Mortgage renewal pricing and refinancing risks I played out better than we anticipated closing prices for those who generally held up well.
Speaker Change: We are seeing more ballast conditions of the Canadian housing market with improving home portability due to lower interest rates and rising inventory levels. We are monitoring risks, including the risk of further slowdown in the Congress islands in certain regions harder hit like economic weakness.
Speaker Change: We remain well provisioned nonperforming loans in the home equity portfolio, we built higher allowances in segments of the housing market, where we see higher risk.
Speaker Change: We also continue to monitor or a condo developer portfolio as new condo sales cool for context, our exposure to high rise condo developers represents only about 1% of total loans and acceptances.
Speaker Change: This portfolio was a very strong credit profile that reflects our focus on top tier developers supported by prudent underwriting standards, such as minimum pre sales Blackberry buyer deposits minimum border equity Cedric recourse securing sufficient liquidity to support a project.
Speaker Change: Turning to slide 19, we took a total of $568 million or 23 basis points of provisions on performing loans. This quarter, an increase of $500 million from the prior quarter.
Speaker Change: Mainly reflecting unfavorable changes toward macroeconomic tourists scenario weights or macroeconomic forecasts and credit quality.
Speaker Change: The significant increase in provisions on performing loans is meant to capture a broad range of potential outcomes due to the heightened uncertainty I spoke to earlier.
Speaker Change: As a reference point the ratio of ACL to total loans and acceptances at 74 basis points will reach the COVID-19 piece of 89 basis points in 2020.
Speaker Change: This marks the 12th consecutive quarter, where we added reserves in performing loans, resulting in a total ACL at seven 5 billion.
Speaker Change: Moving to slide 20, gross impaired loans of $8 9 billion were up $1 1 billion or 10 basis points from last quarter, primarily driven by commercial banking and capital markets.
Speaker Change: So a couple of markets, we saw new formations in the U S commercial real estate office portfolio, reflecting continued softness in the U S office market conditions.
Speaker Change: In commercial banking, while new formations increased 512 million quarter over quarter.
Speaker Change: This increase was driven by administrative factors that essentially had been resolved.
Speaker Change: The largest long ago impairments this quarter was related to the insolvency of a large retailer in Canada, where we had related commercial real estate exposure.
Speaker Change: Turning to slide 21, PCL on impaired loans of 35 basis points was down four basis points for 133 million quarter over quarter with lower provisions across most segments.
Speaker Change: Personal banking provisions were down 17 million driven by lower provisioning the provisions and other personal lending and residential mortgages.
Speaker Change: And so our clients continue to show resilience, but her employment is expected to lead to higher losses and also unsecured portfolios.
Speaker Change: And our commercial banking portfolio provisions were down 22 million, reflecting a moderation of Tcl hopefully HSBC, Canada commercial portfolio as we had anticipated.
Speaker Change: Overall, the commercial portfolio continues to be impacted by softer economic conditions and consumer spending in Canada, we expect PCL on the commercial side with remain elevated in the coming quarters, considering the added uncertainty from tariffs.
Speaker Change: Capital markets provisions were down 100 million, whereas we had a large particular one account to the other services sector in Q1.
Speaker Change: Offset by a few new impairments in the U S office real estate this quarter.
Speaker Change: Within our broader commercial real estate portfolio headwinds still exist because he didn't play out over an extended period.
Speaker Change: As we have seen impairments can be uneven and less predictable on a quarterly basis wherever realized losses have been welcomed him on the back of our strong client base in underwriting standards.
Speaker Change: To conclude despite the uncertainty in the macroeconomic and policy environment. We are pleased with the overall diversification and performance of our portfolios.
Speaker Change: Sustained treat uncertainty could create recessionary conditions ratable. It comes we're well within the stressed in downside scenarios. We currently consider giving us confidence in our financial resilience through the cycle.
Speaker Change: You're navigating the uncertainty from a position of strength with P. C. All expected to be manageable under multiple scenarios.
Speaker Change: Lower PCL on impaired loans this quarter was positive and within our expectations. We are prudently building reserves to account for the uncertainty ahead.
Speaker Change: Today, we are seeing some slight pull forward of losses because of trade related uncertainty, which if sustained they pushed full year losses to the higher end of our previous guidance.
Speaker Change: However, we expect the impact of tariffs play out mostly in 2026 potentially pushing out peaks Creek III credit losses into fiscal 2026.
Speaker Change: Moving forward, the likelihood timing and director of allowances and PPC all what can be continue to be dependent on the extent and duration of terrorists or tell three measures availability of physical support measures made a few changes on employment rates the direction related to changes in interest rates and commercial real estate prices.
Speaker Change: As always we continue to proactively manage risk through the cycle and we remain well capitalized to withstand a broad range of macroeconomic and geopolitical outcomes.
Speaker Change: With that operator, let's open the lines for Q&A.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: We will now take questions from the telephone lines. If you have a question. Please press star one on the devices keypad you may.
Speaker Change: Canceled his question at any time by pressing star two.
Speaker Change: So please press star one at this time, if you have a question there will be a brief pause while the participants register.
Speaker Change: We thank you for your patience.
Speaker Change: Okay.
Speaker Change: The first question is from Gabriel the Cheyenne from National Bank Financial. Please go ahead. Your line is open.
Gabriel: Hey, good morning.
Speaker Change: Sure.
Speaker Change: Didn't expect to be first I mean I.
Speaker Change: I'd like to ask about your you.
Speaker Change: The increase in gross impaired loans, you did mentioned that a big chunk of that was tied to large Canadian retailer.
Speaker Change: Thanks for that.
Speaker Change: Do you how much discretion are you using to classified loans as the parents because one perspective is that maybe this is the you know royal.
Speaker Change: Specific issue, we've seen a couple of quarters of prior gels.
Speaker Change:
Speaker Change: But maybe the bank is just being a bit more active in how they classify something as impaired there could still be paying you, but you're you know assessing.
Speaker Change: Assessing the risk in deciding how to classify those as the parents are your more conservative in a sense then.
Speaker Change: Maybe another bank might be.
Gabriel: Gabriel It's Greg I'll take that thanks for your question.
Gabriel: Some broader context on the G. I L. Build this quarter, we just were over a $1 billion increase quarter on quarter as I noted in my speech about 40% of that was related to some administrative concerns and those have all been resolved and subsequently so the overall build isn't quite maybe as large as the headline relates to chip.
Gabriel: To your question on kind of discretion.
Gabriel: Can't speak to what others doing their processes I would say, we have very well defined processes and rules and how we whereas when and how we determine when something is impaired.
Gabriel: Those rules when we impair something isn't strictly driven on where the company stops paying or not it would be on our forward views of that company as well and so right now some of the companies we have put into impaired loan status over the last two quarters are still paying interest to us.
Speaker Change: Sure and picked out and just build that into our reserves as we receive that interest. So there is some discretion in that regard, but I would say we're very consistent in our of course. This is he certainly haven't changed our approach in that in recent quarters.
Speaker Change: Also notably we're gonna be impaired.
Speaker Change: Again, the wholesale it just can be a bit more episodic quarter to quarter, so not quite as consistent in the way retail is I don't think I'd go back to the latter half of last year, where we had I would say very little impaired PCL and in our wholesale business as we know that the time that that was probably not representative the cycle either and so I think again, you just got to look quarter to quarter and maybe how this trends over longer periods before.
Speaker Change: I don't think that we saw this quarter was something unique or kind of really indicative of where we see things trending.
Speaker Change: Okay and can you clarify that that administrative comment so 40% of the billion increases.
Gabriel: Administrative and neither or technical so and they've been resolved so.
Gabriel: That's gonna go in the other direction next quarter is that how it.
Gabriel: And as this relates directly and indirectly to us just kind of finalizing some of the final pieces of integrating HSBC into our processes and and so as we worked through the final kind of credit elements of that there was some cues, particularly related to two are some terminals that are rough renewal, but just didn't get renewed on a renewable Taiwan was tripped into impaired.
Gabriel: None of those were credit issues those have all been supposed to be renewed and resolved them. So yes. Those will go the other direction next quarter.
Gabriel: Got it thanks for that clarification.
Gabriel: Okay.
Gabriel: Thank you.
Gabriel: The next question is from Brian put a wala from Bank of America. Please go ahead. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: I wanted to follow up actually Graham with your own credit.
Gabriel: So I'm sorry, if I missed this I'm not sure if you talked about what your expectations were on impaired PCL for the back half of the year and just talk to us.
Gabriel: As you think about peak be fields being pushed into 2026.
Gabriel: Are there new areas of tests within the book so.
Gabriel: Or are there areas of it inside of the commercial book that you are seeing says maybe due to that is on a prolonged kind of a slow economy.
Gabriel: Emerging which informing that feel I'm, just trying to think about.
Gabriel: As we think about.
Gabriel: All these macro does all of this is it just conservative management of building reserves or do you have a sense of a line of sight on how this plays out and assess areas maybe already beginning to emerge.
Gabriel: There are future losses could control thanks.
Gabriel: Yeah. Thanks, everyone.
Gabriel: Just to maybe provide us a few different pieces on that.
Gabriel: In our slide there on the on the ACL build.
Gabriel: Truly we try and break down the drivers of what's still being that D. C. All right and so.
Gabriel: The three really big component parts. There one is credit migration. So that you know that is a direct reflection of what we're seeing with our clients they're there.
Gabriel: Risk profiles, if you will their financial profiles and that this quarter was about 20% of that built in that's kind of the line it looks like quite a little bit lower than what we've been seeing in prior quarters. So.
Gabriel: I wouldn't say at this point, we're seeing newly emerging kind of credit pockets of concern at least directly through our client base.
Gabriel: 80% of the build is really more on kind of our go forward view and just the uncertainty around that go forward view right. So you know our base case was was a weaker this quarter I'm hugely.
Gabriel: Usually weaker but certainly we've increased our views on the unemployment going forward, we pulled back a little bit of her views on H P. I N G D P and so that's contributing to it and that's just reflecting the current uncertainty in the market right now that there is some real director of economic impacts of that but.
Gabriel: But we're you know.
Gabriel: The third part was just really increasing the way. It's we we introduced this new scenario just really trying to target.
Gabriel: Certainly we're seeing that play itself didn't really increase our reserves because we already had some fairly pessimistic scenarios in there, but it was really attributing more weight to the I didn't and the more wages. Just again just trying to I think address this uncertain environment and get ahead of that to some degree.
Gabriel: Okay.
Gabriel: Understood.
Speaker Change: And maybe I guess, just one for you Catherine alone.
Speaker Change: Sensitivity as you think about on a go forward basis. I. Appreciate you are sort of guiding to NII.
Speaker Change: Well, perhaps if you can tell us what will drive it.
Speaker Change: Into the low double digits high single digits.
Speaker Change: Balance sheet growth loan growth needs to pick up to get us there.
Speaker Change: And then.
Speaker Change: As we think about future for the bank of Canada need cuts, how do you sort of think about the big impact on NII out.
Speaker Change: Relative to what the bank of Canada, all the fed does.
Speaker Change: And then they see the disclosure on slide 26, but would love some color on that thank you.
Speaker Change: Good morning, Ebrahim, thanks for the kind of the other question.
Speaker Change: So in relation to I guess your outlook on the NII ex excluding trading because I'll just take you through our underline assumptions on how we arrived at that guidance and as I go through that you'll get a sense of what could move us in that range. So if I start off with volume our volume, we're holding to the guidance.
Speaker Change: We just closed a few back in Q4, so in a mortgage basis, we are still targeting low single digit and as Dave would've mentioned in his remarks is where we're cautious on the outlook on that front, but we're still seeing progressing up low single digits as it relates to commercial for the full year.
Speaker Change: So pulled volumes at high single digit how about for the second half again, given the cautiousness that we are seeing from some clients were expecting that to be more towards the mid to high in the second half of the year and then on our corporate banking continuing to see moderate growth in expecting that to hold as we go through the second half of the year. So overall in them.
Speaker Change: Williams Who's your expectations, where it could shift is really around the the client behavior for the second half the year and around the cautiousness and how we see that play out as we move to NIM that was obviously another key part of our guidance.
Speaker Change: A couple of items there so on the tractor front continue to see that positive moving through what could.
Speaker Change: Continue to underpin that is a strong growth in deposits that we're seeing which is obviously key to our overall deposit acquisition strategy and so what we're seeing with that higher growth as with any more into tractors not an immediate impact but its positive overall.
Speaker Change: As I said in my remarks, we had the seasonal movements. So that will impact you need to go for it and then I guess a couple of unknowns that I've spoken about before really ties into the mix shifts as well as competitive behaviors on the mix shifts we've been seeing that as a positive tailwind as you've ever seen GIC start to come down.
Speaker Change: We're seeing the non term maturities continue to grow and clients are holding their funds area. So that's accretive to NAV. So as we go throughout the rest of the year. If we continue to see that trend that would be accretive.
Speaker Change: And then on the competition front, we continue to see pressures on the GIC front, a little bit on the mortgages it starting to pull back but depending on how that plays out through the second half of year. That's another item that can do that's in our guidance on the net interest income excluding trading.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is open good morning, Graham you sound a little bit more cautious on credit then I'm hearing from other banks like your point about P sales, peaking in 2026.
Speaker Change: A little different.
Speaker Change: We're hearing slightly different sentiment from the other banks.
Speaker Change: This morning, you probably would've seen that the U S Court of international trade is that sort of struck down the reciprocal tariffs at 10% baseline terrorists.
Speaker Change: I know this is hot off the press, but does that does that change your outlook. If in fact this whole tariff scare. It was just one giant head fake.
Speaker Change:
Speaker Change: With that.
Speaker Change: Build greater confidence for you on Pcl's ROI.
Speaker Change: Mario It's fair questions, Dave and I'll I'll start on the macro side and hand, it to Graham and obviously when we set our scenarios a number of things you set of scenarios. We go well over a month ago. You know the world is evolving because it continues to be volatile and that's part of our challenge and part of the reason we've rebuilt formations as is the <unk>.
Speaker Change: Certainty in the world around Us we still have to go through Acousma renegotiation with the U S and we still don't know the impact on the auto industry. We don't know the impact on the dairy industry and agriculture soldiers and forestry. So yes, while the short term reciprocal tariffs appear to be.
Speaker Change: Illegal it doesn't mean that we have an overall extended agreement with the United States on future trade and therefore very much involved in that and we have to kind of manage that going forward. So I think our uncertainties still applies in the medium term that we still have to progress through a number of other elements. So I think it's fair.
Speaker Change: Some of the shorter term volatility and reciprocal tariffs and the cost of that all of this is creating uncertainty right. It's creating uncertainty in allocating capital is from mortgages right through to M&A and therefore wireless cloud overhangs. The Canadian economy is having a real impact and we think.
Speaker Change: The momentum dividend potentially economy going forward. So I still don't think we're shaking the overall uncertainty level, just because of that ruling last night.
Speaker Change: It helps it helps set the stage for kind of renegotiation of U S. M. C. A that we expect will happen over the coming six months.
Speaker Change: Graham.
Speaker Change: I think they've come along well certainly you know what's transpired in May where there would be some positive signals in me that didn't exist in April but I would also say a bunch of those positive singles or if it gets any worse towards the conclusion on kind of where this is going to land, where it's going to land or quite quite frankly, when it's going to land either so I think yes, we'd have a degree of caution with that Mario.
Speaker Change: And we'll certainly evaluate kind of what we learn in the coming months and adjust accordingly, if we feel a lot stronger that this is going to land in sooner and better than we were thinking right. Now then that will lead us to kind of adjust their weights and reserves accordingly.
Speaker Change: Were intended to be dynamic, but I think at this point in time, it was prudent to be building against that uncertainty.
Speaker Change: I think just back to Dave here I think it's just important that this this is the stage one and two provision we haven't spent it it's in our pocket right now happily if we're wrong then we haven't released it.
Speaker Change: Good day. So it's just there's there's no downside and being cautious given this uncertainty as to how we feel.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The next question is from Paul Holden from CIBC. Please go ahead. Your line is open.
Paul Holden: Thank you. Good morning, two quick questions. Hopefully is a quick first one maybe maybe maybe for Derek and sort of Dovetailing off what Mary I was just asked.
Speaker Change: Given your pipeline for say M&A, ECM et cetera, and maybe you know some improvement and certainty around tariffs like Oh, how how quickly do you think the activity can bounce back if the market gets more comfortable with the with the tariff.
Speaker Change: Good luck.
Paul: Sure. Thanks for the question Paul.
Paul: I would really break into two things are sort of how quickly. It does activity bounce back and then how quickly does activity you know actually lead to consummate transactions and revenue in the business because there obviously is a time lag depending on the nature of of the transaction I think if you look at where we were sitting in April at the peak of uncertainty around.
Paul: Tariffs and the economic outlook, we saw.
Speaker Change: A very short short, but very pronounced slowdown in activity as Dave alluded to there was a lot of uncertainty and clients really hit pause whether that be on financing activity or you know longer term strategic capital allocation decisions, including M&A.
Speaker Change: As we have seen a more signs of optimism including.
Speaker Change: Including obviously some of the announcements last night and this morning, we certainly are seeing a pickup in activity as we've come through a recent weeks.
Paul: You tend to see that in different phases. So the first is you see that pick up in your flow of financing activity, whether that'd be DCM ECM high yield issuance term loan issuance.
Paul: It already had may there has been a reasonably healthy.
Paul: Improvement in that regard both in terms of activity, but also just client dialogue any of that kind of flow activity. Also then you know results in transactions being completed quite quickly.
Paul: The second part then is you know longer term more strategic M&A activity. We we certainly are seeing an improvement in sentiment and more dialogue and lots of client dialog going on but where there's still there's uncertainty as how quickly does that actually translate into announced transactions and then what's the.
Paul: Period of time through closing our I think in the month of May across all of our geographies we've seen.
Paul: Some some very nice transaction activity and some deals being announced but theres a lot where you know boards and executive management teams are still evaluating what what the world is going to look like over the next 12 to 24 months. So there will be a delay in some of that coming to fruition and then obviously, depending on the sector or the nature of the transaction.
Paul: No closing can be anywhere from three months to 18 months, depending on regulatory approvals or otherwise.
Paul: But overall certainly you know the outlook is notably improved from where we were six weeks ago.
Speaker Change: That's very helpful. Thank you and then I'll just sneak in a second quick one if you don't mind for Sean just you know very strong growth in our commercial banking and where from Katherine sort of the outlook somewhat slowing in the second half, but just maybe a reminder, on where you are.
Speaker Change: Where you're growing and commercial so it looks like you're picking up some share based on what we've seen from a from your peer banks and then two quite a big difference in the.
Paul: Net interest margin Q over Q and commercial banking versus the personal bank. So maybe just want to better understand.
Paul: Why the NIM is is going lower and our commercial banking given the strong loan growth. Thank you.
Paul: Maybe I'll start with thanks for the question, Paul maybe I'll start with the second one it's primarily driven by the VA migrations and the the shift between.
Paul: NIM and other income.
Paul: So it's a it's mostly.
Paul: Mostly offset on sort of the other side of the of the other contributor to revenue.
Paul: The and on a year over year basis that starts to have less of an impact as we as that completes in the next quarter.
Paul: With respect to growth on the portfolio. Your first question. You know this is the continued execution of a sort of a multi year strategy to invest.
Paul: Invest in coverage and underwriting expertise and structured banking expertise to drive growth.
Paul: In the larger segments of the portfolio.
Paul: Sort of our senior commercial and corporate client client group segments and Ah that's been executed really well.
Paul: It is also returning off of a base of underperformance in the early part of this decade and so on a five year basis, our growth rate is actually very close to the industry average.
Paul: That's about 1%, 1% greater.
Paul: In terms of recency of growth.
Speaker Change: As Dave mentioned T O through all of the uncertainty there, we're definitely seeing sequential growth slope on.
Speaker Change: On a rolling four quarter basis for example.
Speaker Change: Our quarterly sequential growth was averaging about two 5%.
Speaker Change: In Q1 that was one 8% in this quarter relative to Q1, it was one 6% and as Catherine highlighted we our outlook is sort of in the mid.
Speaker Change: Mid single digits to the low end of high single digits on a full year.
Speaker Change: Six two basis, this year, which would imply about a one to one 5% sequential growth on a quarter over quarter basis for the next two quarters.
Speaker Change: Alright, that's it for me thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Next question is from Sohrab <unk> from BMO capital markets. Please go ahead. Your line is open.
Speaker Change: Okay. Thank you Graham roughly half the staff performing bill looks to have been kind of charged to the commercial bank can you talk a little bit about.
Speaker Change: The industry sectors there.
Speaker Change: Is that where a targeted by their bill.
Speaker Change: Yeah, Thanks for them.
Speaker Change: Yeah, I mean, so commercial again this is all about kind of the go forward macro and how we see things.
Speaker Change: Well, you know going forward I would say the sometimes it's going to continue to put pressure on some of the same sectors that have been under pressure to date I'm sorry.
Speaker Change: Is it very much are that supply chain sector of the industrial the manufacturing and transportation sectors. So that's really I would say the core components of where we see that that that's being hit there we do.
Speaker Change: We have done bottoms up analysis here to really kind of try and assess which sector is overall, we think we're gonna be hit most directly bioterrorists a I mean, that's again a challenging exercise because those tariffs seems to change day to day week to week within their magnitude and where they're gonna be applied. So we go through the book really looking at those sectors that have kind of the biggest import export kind of dependency.
Speaker Change: And then within that kind of refined which of those we think of it.
Speaker Change: We're showing the ability to absorb costs were not in and so that's kind of a your analysis, we do that kind of supports that.
Speaker Change: It was a significant chunk is that really kind of points back to some of the same sectors that have been quite a challenge to date.
Speaker Change: Okay, and just with Sean just staying with the commercial I mean, you're already obviously, reflecting the reserve build.
Speaker Change: Lower than that.
Speaker Change: Capital markets are really this quarter, you have an 18% type fad target out there how long do you think before you hit that 18%.
Speaker Change: Yeah, as we articulated in our Investor day presentations at a three year target.
Speaker Change: So to your point, there's a number of contributing factors, that's driven at lower than than that recently, obviously the reserve build this quarter as Catherine highlighted last quarter the allocation of the Catholic capital methodology into the businesses was about 70 basis points.
Speaker Change: And then B about 90 basis points of the reduction is also the goodwill allocation from the HSBC acquisition and so are our our projections are to rebuild to 18% in three years.
Speaker Change: So I think it.
Speaker Change: It would be very hard fiduciary anyway right.
Speaker Change: Yes, that's what I didn't know thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Mike really none of it from Scotiabank. Please go ahead. Your line is open.
Mike: Hey, good morning, a question for Graham and this is more of a qualitative question, but when I when I look at your G. I L ratio on the mortgage book.
Mike: Get it that it's it's relatively low among your peers, but it's actually deteriorated the most over the past year and I'm sort of wondering if that's largely related to the HSBC client base coming in I do think there's a perception in the market that loyal customer base, including on the retail side tends to.
Speaker Change: A better quality lower risk, probably better FICO score or are you still sticking with that narrative. If you do agree with it and is this largely HSBC related.
Speaker Change: Yeah. Thanks, Mike.
Speaker Change: Yeah, No I do not think that's HSBC related the client base, we absorbed from HSBC.
Speaker Change: Very high quality and that actually skews higher than the rest of our consumer reports and mortgage books, although that is not what's driving that narrative.
Speaker Change: You know I think be partly what's driving that is a mixed question and in the markets that are that you know.
Speaker Change: Our most challenged by kind of the higher payment environment be this would be the G. T. A's of the world that are really driving our impairments. These days. So I think again overall the quality of our client base continues to be very strong. The performance. There continues to be very strong and we feel very good about that book and the structure there and the ultimate write offs. If you pull that through have been very low because of that.
Speaker Change: But we are seeking permits as more clients are facing more challenges in this higher rate environment.
Speaker Change: Okay. That's helpful. And then just one quick one for probably for Erika.
Speaker Change: Just in terms of the mortgage business are in your segment or are you are you able to provide at least maybe like a high level of what the revenue contribution is so if you.
Speaker Change: To the extent that you might have that handy. So if you look at the spread and the fees related to originations and in any any activity in the rental book or or just the mortgage book per se.
Speaker Change: Can you ballpark that like is it is it 10% of revenue is it closer to 20 in your segment.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: So I think what we do in the like if I think about where we've been over the last 12 months and not mortgage book, what we're seeing is.
Speaker Change: No.
Speaker Change: The balance that we talked about Oh, and how we think about the volume that we're putting on the books and the margins that we're putting that.
Speaker Change: Business on out and I would say on a year over year basis, we are seeing our ability to continue to have the mortgage business start to come back from.
Speaker Change: From low levels of profitability, but when we saw our spreads really degrade ah to levels that probably from an ROE perspective, we need to be back up to a higher degree of ROE in the business and so I think on a on a year over year basis, we continue to see green shoots in that business contributing more than the profitability of.
Speaker Change: Of the aggregate earnings of the personal bank, but we're certainly not at the levels of profitability that we would have seen him you know.
Speaker Change: 24 months ago 36 months ago in terms of the contribution of that mortgage book back to the earnings at the personal banking. So we still are balancing our growth expectations and how were pursuing growth in a market with the returns in that business and taking a calculated march to them getting back to higher.
Speaker Change: Earnings from the aggregate mortgage business.
Speaker Change: It's just again, it's just I'm not sure if you're comfortable providing a ballpark number or we can take it offline, but it is 10% a reasonable number it would with the mortgage business contribute roughly 10% of the segment revenue or is it something a bit higher or lower than that yeah. So let's see.
Speaker Change: Yeah I'll take that.
Speaker Change: Question offline.
Speaker Change: Uh huh.
Speaker Change: Okay Alright.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The last question is from Lamar Purcell from <unk> Securities. Please go ahead. Your line is open.
Speaker Change: Yes, Thanks, My question's for Graham, Oh, I guess going back to last quarter.
Speaker Change: The bank felt the downside scenario appropriately accounted for trade uncertainty can you walk me through what drove your decision to introduce another scenario because I would've thought that you know with a sufficiently conservative downside scenario before the ability to shift waste between scenarios and layer in E. C. J there would've been a.
Speaker Change: Very compelling reason to introduce a whole new scenario. So I guess walk me through like why you decided you needed to go through the trouble of introducing a new scenario rather than using some of the levers I mentioned.
Speaker Change: Because those seem to be much simpler than that introducing a new scenario does it feel like you know, perhaps a trade war has a real risk of persisting far longer into the future than perhaps the banks are messaging this quarter.
Speaker Change: Yeah.
Speaker Change: I'd say at least where we were after Q1, you remember like I mean things have just started to play out literally in the early days of February after.
Speaker Change: After we close every quarter and so we well we had been doing analysis and using this scenario kind of in the background as we kind of persisted through Q2 and things really amped up I mean really at the beginning of April with Liberation day like this this kind of went through a whole different level of concern and uncertainty well we had a pessimistic scenario that was kind of broad in nature and are similar.
Speaker Change: Severity, we really wanted to kind of a book something that really address the current kind of concerns and what what bad might look like and so the risks we're facing here no. It's what it didn't by itself seems the overall numbers. It certainly does change where we're allocating reserves and really highlights the pockets of risk that we'd be more concerned about.
Speaker Change: I would just again it allows us to directly leveraged our framework as opposed to just kind of using overlays a management judgment and kind of a you know.
Speaker Change: I would say a little bit more subjective.
Speaker Change: Subjective waves. If you will so I think we just we like the framework, we have and we like to use that framework rather than just override it with her judgment.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Okay. So I think that's our last question and I will Oh, I'll wrap things up and we appreciate your comments and it was we went through the quarter, we prepared for the call today.
Speaker Change: Knew that your focus would be on our reserve built in the G. I L. In the portfolio and now let me just take us back to the top though we did show very strong pretax pre provision growth very strong client levels activity levels, particularly in personal and commercial banking and on the deposit side we.
Speaker Change: Delivered really good revenue growth, we had very strong operating leverage and as you heard on the credit side.
Speaker Change: We went through these scenarios in our stage, one and two reserve build we knew there was some.
Speaker Change: Conservatism, we didn't know what would be that different than our peers at the end of the day, but we do these things obviously in isolation, we knew that would cause us at the top of the house to to Miss expectations, but we still took them at the end of the day because that's what are the scenarios advisers, but they are two service scenario, where 80% of that reserve builds.
Speaker Change: Is macroeconomic estimates.
Speaker Change: The future and everyone can have a different view, but we took that it's not like we spent that money that goes into an ACO and if we're wrong. We'll release. It. So we knew that conservatism you know may caused the types of questions. You asked today and the other you know fair questions you've asked us on our gross impaired loan build you heard.
Speaker Change: Graham say, 40% of that build was administrative right in a mature credits that had to get renewed so you offset that and you go to 60% builds and we didn't even talk about how we're confident in our in our allowances for for that G. L build because of collateral and structure and the types of.
Speaker Change: Of.
Speaker Change: Clients that we know we have so are we.
Speaker Change: It's kind of your conversations.
Speaker Change: To come back to that but but don't forget the very strong overall performance. We saw execution HSBC, we saw execution on city national and all of that led to you know very strong overall revenue and pretax pre provision profit results and strong net income results and I'll remind you again, we increased our dividend by six.
Speaker Change: Stronger confidence and we're continuing to do buybacks, because we know where the intrinsic value of the firm is and will continue to buy back shares even at these elevated evaluations all that signifies notwithstanding we took some prudent reserves that you're reacting to our confidence in the future. So thanks very much for your questions and we look forward to seeing an exporter.
Speaker Change: Yeah.
Speaker Change: Thank you the conference has now ended.
Speaker Change: Please disconnect your lines at this time.
Speaker Change: And we thank you for your participation.