Mario Mendonca

Mario Mendonca inquired about the difference in commercial loan growth in the U.S. between Canadian banks like RBC's City National Bank and U.S. banks, asking if RBC faces a capital disadvantage due to OSFI's Basel III rules. He also sought a finer point on the 2026 outlook for Capital Markets revenue, specifically for trading, underwriting, and securities/brokerage commissions, given the strong 2025 performance. In a follow-up, he asked for clarification on which fee income lines would be affected by federal budget changes in H2 2026 and why 2025 saw unusually high operating leverage.

Answer

Graeme Hepworth, Chief Risk Officer, stated that City National Bank adheres to OSFI's standardized approach and has no exemptions. Dave McKay, President and CEO, added that CNB's improved ROE and growth are driven by shifting to multi-product relationship assets. Derek Neldner, Group Head, Capital Markets, expressed a constructive 2026 outlook, anticipating continued high activity across trading, investment banking, and the loan book, driven by market volatility, secular trends, and strategic investments. Erica Nielsen, Group Head, Personal Banking, confirmed NSF fee reductions and ongoing discussions on other bank fees, focusing on deposit and payment services. Katherine Gibson, CFO, attributed high operating leverage to strong business performance, market appreciation, HSBC synergies, and a favorable shift in deposit mix, confirming 1-2% positive operating leverage as guidance for next year.

Mario Mendonca questioned if RBC faces a disadvantage in U.S. commercial lending due to differing Basel III capital requirements compared to U.S. banks, and if OSFI exemptions were granted. He also asked for the 2026 outlook for Capital Markets revenue, clarification on budget-impacted fees, and the drivers behind 2025's unusually high operating leverage.

Answer

Graeme Hepworth, Chief Risk Officer, confirmed City National Bank adheres to OSFI's standardized approach for capital allocation and has no OSFI exemptions. Dave McKay, President and CEO, noted that improved ROE at City National Bank is driven by shifting to multi-product relationship assets. Derek Neldner, Group Head, Capital Markets, provided a constructive outlook for 2026 Capital Markets revenue, expecting continued high activity across trading, investment banking, and the loan book. Erica Nielsen, Group Head, Personal Banking, clarified that deposit and payment services fees, specifically NSF fee reductions, are the primary budget-impacted fees. Katherine Gibson, CFO, attributed 2025's high operating leverage to strong business performance, market appreciation, HSBC synergies, and NIM improvement from deposit mix shifts.

Mario Mendonca asked for help identifying any areas where Royal Bank of Canada may have 'over-earned' in the quarter to better forecast future results. He also asked about the retail credit outlook and why it appears more optimistic than peers.

Answer

CFO Katherine Gibson guided towards the bank's full-year targets for NII and expenses, noting Q4 seasonality in Capital Markets and Insurance. Group Head of Insurance Jennifer Publicover clarified that the upcoming actuarial review impact would be in line with prior years. Chief Risk Officer Graeme Hepworth explained the credit outlook reflects the resilience of RBC's high-quality client base and disciplined underwriting, leading to more stable trends.

Mario Mendonca noted Royal Bank's cautious tone on credit, particularly the forecast for PCLs peaking in 2026, and asked if a recent U.S. court ruling against reciprocal tariffs would change this outlook.

Answer

President and CEO David McKay responded that while the ruling is positive, significant uncertainty remains around the CUSMA renegotiation and its impact on key industries, justifying their cautious stance. Chief Risk Officer Graeme Hepworth added that the timing and outcome of trade issues are still unclear, making the prudent reserve build appropriate. McKay concluded the provision is a precaution that can be reversed if conditions improve.

Questioned RBC's cautious credit outlook compared to peers and asked if a recent US court ruling against tariffs would change their view on future PCLs.

Answer

While the court ruling is a positive development, significant uncertainty remains around the broader US-Canada trade relationship (USMCA renegotiation), justifying the continued cautious stance and the prudent build of provisions, which can be released if the outlook improves.

Mario Mendonca from TD Securities highlighted RBC's cautious credit outlook compared to peers and asked if a recent US court ruling against reciprocal tariffs would alter the bank's forecast for PCLs peaking in 2026.

Answer

President & CEO David McKay and Chief Risk Officer Graeme Hepworth responded that while the ruling is positive, significant uncertainty remains around the broader USMCA renegotiation and its potential impact on key industries. They affirmed that the prudent reserve build is appropriate given the medium-term ambiguity and can be released if conditions improve.

Mario Mendonca from TD Securities asked for details on the $1.5 billion credit impairment, questioning the trigger and the hold size, and also inquired why U.S. net interest margin declined despite positive peer commentary.

Answer

Chief Risk Officer Graeme Hepworth explained the large impairment was a utility client facing regulatory challenges, with the impairment triggered by a formal restructuring. Group Head of Capital Markets Derek Neldner added the exposure size was atypically large due to a temporary transactional facility. Regarding margins, CFO Katherine Gibson cited City National's asset sensitivity to Fed rate changes, while CEO David McKay noted its higher-beta affluent client base.

Mario Mendonca asked for clarification on U.S. sweep account pricing and the accounting for foreclosed loans. His primary question concerned RBC's appetite for a large, transformative U.S. acquisition, given the history of such deals destroying shareholder value for Canadian banks.

Answer

Doug Guzman, Group Head of Wealth Management and Insurance, explained that RBC had already raised rates on U.S. sweep accounts for clients, positioning them competitively and negating the need for material changes. CEO David McKay addressed the M&A question by stating the bar for any large U.S. deal is 'incredibly high' due to market complexity and regulatory uncertainty. He emphasized a focus on organic growth and smaller, strategic tuck-ins, signaling no plans for a major U.S. consumer banking acquisition.

Mario Mendonca inquired about Scotiabank's domestic deposit strategy, specifically the runoff of term deposits and the growth in retail deposits, asking for details on the quarter's experience and the outlook. He then asked for an understanding of the domestic mortgage origination dynamics in the quarter, noting a significant increase in the GTA, and sought information on the extent of mortgage growth originating from the broker channel versus Scotia's advisors or branches.

Answer

Aris Bogdaneris (Group Head of Canadian Banking) explained that since Investor Day, the Canadian bank has added CAD 22 billion in deposits and CAD 15 billion in mutual funds, becoming a 'money-in bank.' He noted successful capture of funds from term deposit runoff into day-to-day savings and investment funds, driven by primacy strategies, pricing, and personalization. Retail day-to-day deposits were up 7% and savings up 14%. Jacqui Allard (Group Head of Global Wealth Management) highlighted strong sales growth momentum between Wealth and Canadian banking, with CAD 4.8 billion in net sales in the quarter (a 16-quarter high). For mortgages, Jacqui Allard mentioned softening in GTA/GVA condo markets but a 13% increase in applications due to lower home prices and rates. She stated a portfolio renewal rate over 90% and good front-book margins. Originations were roughly 60% from the broker channel, 30-35% from the Home Financing Advisor (HFA) channel, and the rest from branches, with total originations in the Toronto region growing from $3.5 billion to $4.5 billion year-on-year.

Mario Mendonca asked about Scotiabank's Canadian deposit strategy, focusing on the runoff of term deposits and growth in retail deposits, and inquired about domestic mortgage origination dynamics, including activity in the GTA and channel distribution.

Answer

Group Head of Canadian Banking Aris Bogdaneris detailed significant deposit and mutual fund growth, driven by client primacy and effective capture of funds from term deposit runoff into day-to-day savings and investments. Group Head of Global Wealth Management Jacqui Allard highlighted record net sales from retail and wealth collaboration. Aris Bogdaneris also explained mortgage origination trends, noting a pickup in demand in the GTA and channel distribution (60% broker, 30-35% HFA).

Mario Mendonca questioned the disconnect between the bank's view of stable credit conditions and aggregate data showing stress for Canadian consumers. He also asked about the timeline for resuming loan growth in the wholesale and international banking segments after a prolonged period of shrinking.

Answer

Chief Risk Officer Philip Thomas acknowledged the macro data but noted that in Scotiabank's portfolio, consumer caution is manifesting as reduced spending and debt appetite rather than defaults, justifying the large performing allowance build. On loan growth, Francisco Aristeguieta (International Banking) and Travis Machen (GBM) explained that 2025 remains a transitional year focused on optimizing the client mix. They anticipate a return to loan growth in 2026 as the bank shifts from a lending-only to a broader relationship-based model.

Mario Mendonca questioned the disconnect between the bank's stable credit results and broader economic data showing Canadian consumer stress. He also asked about the timeline for resuming loan growth in the wholesale and international banking segments.

Answer

Phil Thomas (CRO) and Aris Bogdaneris (Head of Canadian Banking) noted that while macro data shows stress, their customers are exhibiting caution through reduced spending rather than increased defaults. Francisco Aristeguieta (Head of International Banking) and Travis Machen (Head of GBM) explained that loan balances are down due to a deliberate strategic shift towards higher-return, relationship-based banking and lower client utilization, with loan growth expected to resume in 2026. Scott Thomson (CEO) highlighted the success of this strategy, pointing to higher fee growth on lower capital deployment.

Mario Mendonca inquired about the impact of tariff threats on loan growth during the quarter and asked about the expected timing for potential tariffs to translate into actual impaired loans.

Answer

CEO L. Thomson noted that clients are generally 'holding their powder dry,' causing a pause in activity. Aris Bogdaneris from Canadian Banking confirmed this for commercial loans but saw pent-up demand emerging in mortgages. Chief Risk Officer Philip Thomas stated that the impact on impaired loans would not be immediate, projecting it would be a lagging effect felt more in 2026 and beyond.

Mario Mendonca asked about the proportion of the business and government loan book on the watch list and whether a 'no landing' scenario for unsecured Canadian consumer credit losses is now possible.

Answer

Chief Risk Officer Philip Thomas confirmed the watch list for the corporate book is very small, well below 5%, with some softness noted in commercial agriculture and transportation. Regarding consumer credit, he noted encouraging signs like improving credit card repayments and stabilizing auto loan stress. Aris Bogdaneris, Head of Canadian Banking, added that unemployment trends are the most critical factor for the unsecured portfolio's performance.

Mario Mendonca questioned the U.S. business refresh, asking if the goal is to drive higher sales in the existing product mix or to return to a broader product suite similar to Manulife's past, while maintaining risk appetite. He also asked if the sub-45% efficiency ratio target might be sacrificed in the near term to pursue the refresh strategy in Canada and the U.S.

Answer

Phil Witherington, President and CEO of Manulife Financial Corporation, clarified there is no intention to return to higher market risk products in the U.S. The strategy focuses on broadening solutions within risk appetite and expanding customer segments for existing profitable behavioral insurance products. He confirmed the sub-45% efficiency target is not being withdrawn, citing AI investments as a means to mitigate expense growth.

Mario Mendonca questioned the U.S. business refresh, asking if the goal is to drive higher sales in the existing product mix or to broaden the product suite, potentially returning to a wider range of offerings seen historically, while considering risk appetite. He also asked if the sub 45% efficiency ratio target might be sacrificed in the near term to pursue investments related to the refresh strategy in Canada and the U.S.

Answer

Phil Witherington, President and CEO, clarified there's no intention to return to higher market risk products like variable annuities in the U.S. The strategy focuses on broadening the scope of solutions within Manulife's risk appetite and expanding customer segments (affluent, emerging high net worth) for existing profitable behavioral insurance products. He confirmed the sub 45% efficiency ratio target is not being withdrawn, expecting it to be maintained due to offsetting benefits from AI investments mitigating expense growth.

Mario Mendonca from TD Securities asked if the U.S. segment's financial results are now at a steady state post-reinsurance deals, inquired about its long-term growth outlook, and probed the CEO's confidence in achieving the 2027 ROE target.

Answer

Brooks Tingle, President & CEO of John Hancock, pointed to Q1 2025 as a better baseline for the U.S. segment and expressed bullishness on its growth. President & CEO Philip Witherington affirmed strong confidence in the 18%+ ROE target, stating the year-to-date ROE of 15.3% would be around 17% after adjusting for several unusual items, putting the company on a credible path to its goal.

Mario Mendonca from TD Securities asked about the potential second-order impacts of a sustained slowdown in Asia sales and questioned incoming CEO Phil Witherington's philosophy on share buybacks during market volatility.

Answer

Incoming CEO Philip Witherington and Chief Actuary Steven Finch explained that impacts on expense assumptions would only materialize over a very long period of sustained sales decline, which is not expected. On buybacks, Witherington affirmed his commitment to the current program, citing the strong capital position, and stated that future decisions would be based on circumstances, with organic investment remaining the top priority for capital.

Mario Mendonca sought clarity on the 2025 growth outlook for Asia, asking if the mid-teens forecast fully accounts for a higher tax rate from GMT and other factors. He also asked if any changes to CSM or investment income allocation methods are expected.

Answer

Incoming CEO Philip Witherington reaffirmed the sustainable mid-teens core earnings growth outlook for Asia, noting this normalizes for GMT impacts as the charge was already accounted for at the corporate level in 2024. He also stated that he is not aware of any anticipated changes to allocation methodologies for 2025.

Mario Mendonca of TD Securities asked several questions, including whether U.S. lapse assumption updates would impact earnings or CSM, why book value saw a large positive impact from market movements under IFRS 17, and if recent volatility in Japan affected customer behavior.

Answer

Chief Actuary Steven Finch clarified that U.S. lapse changes primarily hit CSM unless a cohort is depleted. CFO Colin Simpson and retiring CIO Scott Hartz explained that book value volatility comes from credit spread duration risk, which is not fully hedged. Philip Witherington, Head of Asia, noted no significant change in Japan customer behavior yet but expects sales to moderate from recent highs.

Mario Mendonca looked beyond 2025 for medical stop loss, asking if, with conservative reserves and correct pricing, 2026 experience gains/losses would relate solely to dental and the 2026 cohort. He then questioned if the primary driver would be net premiums, and if the business base could materially shrink in 2026 due to customer attrition or self-insurance.

Answer

David Healy, President of Sun Life U.S., confirmed that the assumption for 2026 is fair. He and Kevin Strain, President and CEO, explained that the base of premiums drives earnings, and while costs have risen rapidly due to structural changes, the business is repricable. They expressed confidence in their platform, distribution, and customer relationships, asserting that Sun Life is competitively advantaged due to its scale and pricing discipline, expecting to grow the business over time rather than see it shrink.

Mario Mendonca asked about the 2026 outlook for medical stop loss, assuming conservative reserving, whether experience gains/losses would solely relate to dental and the 2026 cohort, and if net premiums or a potential decline in the business base due to pricing increases would be major drivers. He also questioned if the business base could materially shrink in 2026.

Answer

David Healy, President of Sun Life U.S., confirmed that for 2026, experience would relate solely to dental and the 2026 cohort, with net premiums driving earnings. Kevin Strain, President and CEO, reiterated confidence in pricing for costs and underwriting experience, expecting to price effectively for 2026. David Healy expressed confidence in the platform, distribution, and customer relationships, expecting business growth over time. Kevin Strain added that Sun Life's scale and pricing discipline provide an advantage, as the entire industry faces similar cost increases.

Mario Mendonca from TD Securities questioned MFS's ability to cut expenses abruptly during a market downturn and asked about the valuation methodology used for the DentaQuest goodwill impairment test.

Answer

CEO of MFS Ted Maloney explained that the majority of MFS's expenses are variable with assets, providing a natural buffer, and they would not make cuts that harm long-term results. CEO Kevin Strain reinforced this long-term view. EVP & CFO Tim Deacon stated the goodwill test is a long-term, multi-year assessment based on the present value of cash flows, which incorporates the expected recovery in the dental business over time.

Mario Mendonca from TD Securities questioned MFS's ability to cut expenses in a market downturn and asked about the methodology used to value the DentaQuest goodwill, given its current profitability challenges.

Answer

CEO of MFS Investment Management Ted Maloney explained that MFS's expense base is largely variable, providing a natural buffer in downturns, a point reinforced by President & CEO Kevin Strain who emphasized MFS's strategic importance. EVP & CFO Tim Deacon clarified that the goodwill test is a long-term discounted cash flow analysis that looks beyond near-term headwinds to an expected recovery.

Mario Mendonca questioned Sun Life's exposure to potential U.S. Medicaid cuts, the reasons for the Q4 stop-loss surprise given more optimistic Q3 commentary, and the potential cost of reducing tax-exempt income volatility.

Answer

Daniel Fishbein (executive) stated that Sun Life's ~$2 billion Medicaid exposure is entirely in dental, primarily for children, which is less likely to be cut. He explained the Q4 surprise was claim severity, not utilization, which was the focus in Q3. CFO Timothy Deacon and CEO Kevin Strain confirmed that mitigating tax volatility would result in a modestly higher effective tax rate but would not derail medium-term objectives.

Mario Mendonca challenged the explanation for the sharp increase in the U.S. Dental loss ratio, suggesting more factors were at play than just the Medicaid redetermination. He followed up by questioning the long-term value of the DentaQuest acquisition, comparing the $2.5 billion price to the modest $100 million earnings aspiration for 2025.

Answer

Daniel Fishbein, President of Sun Life U.S., detailed how the 19% membership disenrollment led to a significant mix shift, as remaining members had higher utilization, and providers sought to fill capacity. Kevin Strain, President & CEO, added that while the impact was deeper than modeled, the long-term thesis for the acquisition remains unchanged. He expressed confidence that the business will return to expected profitability levels as repricing actions take effect.

Mario Mendonca of TD Securities asked if there was any reason to change the mid-30s basis points guidance for impaired PCLs given credit stabilization, and separately, if the significant margin expansion of the past two years was exceptional and should moderate going forward.

Answer

Frank Guse, Chief Risk Officer, indicated that he expects the current credit trend to continue, potentially at the lower end of the guidance range. On the second point, Robert Sedran, CFO, agreed the recent margin expansion was significant but stated that while future increases will be more 'gradual,' the positive direction of travel for margins is expected to continue.

Mario Mendonca from TD Securities challenged the duration of the net interest margin tailwind, suggesting it could become a headwind by mid-next year. He also asked if the historical correlations between economic indicators like unemployment and credit losses might be breaking down.

Answer

Robert Sedran, Senior EVP & CFO, countered that based on forward curves, the NIM benefit should extend through 2026 before leveling off, not becoming a headwind next year. Frank Guse, Senior EVP & Chief Risk Officer, stated that while factors like excess deposits may dampen correlations, they are not breaking down, and unemployment remains a key driver of loan losses.

Questioned the duration of the net interest margin (NIM) tailwind from interest rates and asked if historical correlations between economic indicators and credit losses are breaking down in the current cycle.

Answer

The executive stated the NIM tailwind is expected to last into 2027 before leveling off, not becoming a headwind next year. Regarding credit correlations, the view is that they are not breaking down but are being dampened by factors like excess savings and government support, requiring careful judgment.

Mario Mendonca challenged the duration of the net interest margin tailwind from CIBC's hedging strategy, suggesting it could become a headwind by mid-next year. He also asked if the historical correlation between economic indicators like unemployment and PCLs might be breaking down in the current cycle.

Answer

Robert Sedran, CFO, countered that based on forward curves, the NIM benefit is expected to continue through 2026 and into 2027 before leveling off, not becoming a headwind. Frank Guse, CRO, stated that while unemployment remains a key driver for loan losses, factors like excess consumer deposits and government stimulus are 'slightly changing' or 'dampening' the traditional correlation, though not breaking it down entirely.

Mario Mendonca of TD Securities questioned the duration of the net interest margin tailwind from CIBC's hedging strategy, suggesting it could become a headwind sooner than expected. He also asked if historical correlations between economic indicators and PCLs might be breaking down in the current cycle.

Answer

CFO Robert Sedran stated that based on forward curves, the hedging benefit should continue through 2026 before leveling off, not becoming a headwind next year. Chief Risk Officer Frank Guse acknowledged that factors like excess deposits are 'slightly changing' the relationship between unemployment and credit losses, but he does not see the historical correlations as broken.

Mario Mendonca from TD Securities asked for clarification on management's reference to a "normalization" of credit, questioning what a normal PCL ratio would be for the transformed CIBC. He also inquired about the nature of the quarter's legal provision.

Answer

President and CEO Victor Dodig stated that CIBC is a "different bank" today and that while the current guidance is for mid-30s bps PCLs due to uncertainty, a medium-term normalization could see that level fall to 25-30 bps. CFO Robert Sedran clarified that the legal provision is for a closed issue, covers the full amount, and is not a down payment on a larger future expense.

Mario Mendonca asked about the U.S. business, questioning the duration of elevated expense growth and the timeline to achieving positive operating leverage. He also requested a detailed explanation of the 'treasury activities' that benefited NII.

Answer

Shawn Beber, head of the U.S. Region, described the spending as a multi-quarter journey to build infrastructure and support growth, with a medium-term goal of positive operating leverage. CFO Robert Sedran explained the $90 million treasury gain was from a series of items, including favorable balance sheet positioning as rates fell, hedge accounting effects, and a parameter update on a funding vehicle.

Mario Mendonca from TD Securities questioned the emphasis on 'uncertainty,' asking for specifics given several stabilizing factors. He also asked if the current U.S. loan optimization is a reaction to past PCLs or an ROE strategy, and when to expect a return to market-level growth.

Answer

CEO Darryl White clarified that while uncertainty has decreased, risks related to geopolitics and trade remain. He confirmed the U.S. loan strategy is 'very much' an ROE optimization journey, not a reaction to past credit issues. He anticipates resuming market-level growth in the coming quarters, possibly as early as Q4 2025.

Mario Mendonca asked for BMO's view on a potential U.S. retaliatory tax on Canadian corporations and sought a clearer definition of 'manageable' PCLs in the context of earnings growth.

Answer

CFO Tayfun Tuzun stated that due to high uncertainty, the bank is monitoring the tax situation but has not yet formed a view on its potential impact. CRO Piyush Agrawal confirmed that 'manageable' implies the bank can continue to grow earnings, with a potential PCL impact of a few basis points, barring a full-blown tariff war.

Mario Mendonca of TD Securities asked for BMO's view on a potential U.S. bill imposing higher taxes on Canadian corporations and sought to clarify what 'manageable' PCLs means for earnings growth.

Answer

CFO Tayfun Tuzun responded that uncertainties regarding the U.S. tax bill are too high to form a house view at this time. CRO Piyush Agrawal clarified that 'manageable' means the bank can continue to grow earnings, as client pipelines and capital are healthy, and that any PCL increase would be limited to a few basis points, not a return to 2024 levels, barring a full-blown tariff war.

Mario Mendonca asked if the U.S. ROE improvement plan implies a doubling of U.S. earnings with no new capital. He also questioned the sustainability of the quarter's high trading revenue, seeking to isolate the seasonal component.

Answer

CFO Tayfun Tuzun confirmed the math for a significant U.S. earnings increase was directionally correct, driven by discrete items like PCL normalization and revenue synergies. Alan Tannenbaum, Head of BMO Capital Markets, addressed trading revenue, acknowledging a consistent Q1 seasonal trade but stressing that the quarter's strength was broad-based, especially in metals trading. He cautioned that the $1.1B level is not a new run-rate and was driven by high volatility not expected to persist.

Mario Mendonca highlighted BMO's higher PCLs relative to peers and asked for an identification of specific underwriting failures, and whether this would necessitate a period of slower growth.

Answer

Head of Commercial Banking Nadim Hirji and CEO Darryl White denied any systemic underwriting failures or changes to risk appetite. They attributed the variance to BMO's specific business mix, which skews more toward U.S. and wholesale banking. Darryl White stated that this mix also drives stronger long-term growth and that there is no plan to slow growth in the corporate and commercial businesses.

Challenged management to identify specific underwriting failures or mistakes that led to BMO's PCLs rising more than peers, and asked if this would lead to a period of subpar growth.

Answer

Management stated there were no radical changes to risk appetite or underwriting discipline. They attribute the performance to a different business mix (more wholesale, more U.S.) and the cyclical nature of certain segments like transportation. They do not see systemic issues and do not plan to slow down growth, noting that the areas where they have grown fastest are not where the losses are occurring.

Mario Mendonca of TD Securities asked about the specific drivers of strong inflows at Empower Personal Wealth and questioned why Great-West Life appeared not to be participating more actively in the robust U.K. pension buyout market.

Answer

Empower CEO Ed Murphy and CEO Paul Mahon attributed the Personal Wealth success to the synergy with the workplace business, a compelling user experience combining technology with 1,000 human advisers, and continued investment in the platform. David Harney, President and COO of Europe, clarified that the company is indeed active in the U.K. bulk annuity market, with its success reflected in the 13% year-over-year CSM growth and 17% full-year sales growth, despite quarterly volatility.

Inquired about the drivers of the significant increase in U.S. net fee and spread income and its sustainability as a run rate. Also asked for clarification on elevated non-attributable expenses in Canada and questioned how the company could be certain that shock lapses from the Prudential acquisition were complete.

Answer

The U.S. income increase was driven by a $30M one-time Prudential payment, fully realized expense synergies, and strong markets; the adjusted figure is a reasonable run rate. Canadian expenses were elevated by approximately $15M in non-recurring items. The company is confident shock lapses are complete because all acquired clients have now made their decision to either stay on the Empower platform or move elsewhere, a process with long notice periods and a final retention rate that exceeded targets.

Focused on Empower, asking about the meaning of 'deconversions' and the $6.6B outflow, the potential for continued near-term outflows, the impact of market volatility on the business, and the long-term growth outlook.

Answer

'Deconversions' are expected client losses post-acquisition, and Empower is outperforming its retention targets. Near-term net flows will remain volatile due to remaining Prudential deconversions and the timing of large plan sales, but the long-term outlook for double-digit earnings growth remains firm, despite near-term volatility from markets and interest rates.