Release Date: August 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successfully completed the divestiture of LBS retail full-service brokerage to iA Private Wealth and announced the sale of LBS discount brokerage to CI Investment Services.
- Created a new position focused on customer experience in personal banking to improve and enhance customer interactions.
- Commercial banking saw strong seasonality impact in inventory financing, with a 7% increase in new onboarded dealers year over year.
- Provision for credit losses decreased by 2 basis points quarter over quarter, now standing at 18 basis points.
- Common equity Tier one ratio increased to 10.9% from 10.4% last quarter, reflecting a reduction in loan volume.
Negative Points
- Total revenue was down 2% compared to last year, despite a 2% increase quarter over quarter.
- Net income and diluted EPS decreased by 28% year over year and 2% quarter over quarter.
- Net interest income was down by $11.4 million or 6% year over year, mainly due to lower loan volume.
- Expenses remain elevated due to investments in technology and other strategic priorities, impacting the efficiency ratio.
- Gross impaired loans increased by $175.5 million year over year due to credit migration in commercial loans.
Q & A Highlights
Q: Just wanted to ask about the timing of the rebound in loan growth that you see for '25. Is this more of a late '25 story you're envisioning in terms of seeing loan growth come back here?
A: Yeah, it is pretty much what we expect. Depending on both Canada and US rates, the pace and scale of the reduction will impact our key growth engines. We expect commercial real estate projects to launch later in '25 and inventory financing to pick up as interest rates ease.
Q: What portfolios do you expect to be more sensitive to rates?
A: The demand for housing across Canada remains strong, but developers are waiting for better returns. Consumer confidence in the US has been strong, and easing interest rates could lead to restocking in inventory financing.
Q: What's the risk if some of these impairments result in higher than modeled or expected loss given default?
A: We focus on having high collateral behind our loans, with 93% of our book collateralized. We are not expecting to be surprised by recovery rates on impaired loans.
Q: Can you tell me about the income from financial instruments?
A: Capital markets have been constructive, leading to good trading activities and strong performance in fixed income and equities. This quarter was a record for this line item.
Q: Can you elaborate on the provisions for performing loans this quarter and the reversal there?
A: It's mainly migration from performing to non-performing PCL bucket, with a volume impact of around $3 million for the quarter. We expect PCLs to remain in the high 10s to low 20s.
Q: Why haven't you discounted the DRIP given your healthy CET1 ratio?
A: We prefer not to stop and start the program frequently. We expect pent-up demand to come back and need to support our strategic plan. The DRIP impact on capital is relatively small.
Q: Are you seeing customer attrition in terms of core branch customers?
A: Retail deposits have been stable, and we have grown them over the last few years. The decline in loan volumes is more market-driven, particularly in mortgages.
Q: Can you clarify the higher regulatory expenses mentioned in your non-interest expense?
A: Higher professional fees and regulatory expenses are related to strategic projects and compliance with various regulatory changes, including federal budget elements and Quebec language laws.
Q: How sensitive is your construction and land portfolio to minor moves in rates?
A: Low-rise multi-residential projects are starting to gain momentum, but new condo projects will require deeper rate cuts. The sensitivity varies by product and region.
Q: Are there possibilities of further impairment charges or restructuring charges?
A: We may incur additional restructurings if we see good returns and opportunities for improvement. However, most of the current charges relate to headcount reductions and the sale of certain businesses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
