Matthew Lee

Matthew Lee inquired about the specific drivers behind CIBC's Net Interest Margin (NIM) improvements, requesting a breakdown based on product mix, deposit mix, and the 'tractoring' strategy, and assessing the sustainability of these factors beyond 2026.

Answer

Rob Sedran (CFO, CIBC) stated that the 'tractoring' strategy is a persistent tailwind expected to continue through 2026, albeit moderating. Hratch Panossian (Senior EVP and Group Head of Personal and Business Banking, CIBC Canada) elaborated that strong execution, pricing discipline, and strategy were key, with rate help being a smaller part. He highlighted double-digit growth in profitable demand deposits, a 6% increase in the cards business, and expanding margins in mortgages by focusing on franchised clients and overall relationship pricing. He expects the interest rate tailwind to slow post-2027 but anticipates continued margin and ROE accretion from strategy execution.

Matthew Lee from Canaccord Genuity asked for a detailed breakdown of CIBC's Net Interest Margin (NIM) improvements, focusing on the contributions from product mix, deposit mix, and the 'tractoring' strategy, and the sustainability of these factors beyond fiscal 2026.

Answer

Rob Sedran, CFO, confirmed that the 'tractoring' strategy remains a persistent tailwind through 2026, albeit moderating. Hratch Panossian, Senior EVP and Group Head of Personal and Business Banking, CIBC Canada, highlighted strong execution, pricing discipline, and strategy as key drivers, noting that interest rates were a smaller factor. He detailed growth in profitable demand deposits, a 6% increase in the cards business, and expanded margins in mortgages by pricing for overall client relationships, all contributing to margin accretion.

Matthew Lee from Canaccord Genuity Group highlighted the contrast between strong commercial loan growth in Canada and weaker growth in the U.S., asking for an explanation of the drivers behind this divergence.

Answer

Susan Rimmer, Group Head of Commercial Banking and Wealth Management, attributed strong Canadian growth to a successful relationship-banking strategy and new client acquisition. Shawn Beber, Group Head of the US Region, explained that U.S. results were impacted by a strategic de-emphasis of institutional commercial real estate, which offset solid 7% growth in the C&I portfolio. He noted client caution but expects to meet annual growth guidance.

Matthew Lee questioned Scotiabank's approach to expanding its U.S. presence for the North American corridor strategy, given that M&A is not a priority for the year. He asked if the strategy could be executed through partnerships or its KeyCorp stake, or if a U.S. acquisition remains a long-term goal. He also sought confirmation on whether the strategy necessitates a traditional P&C or commercial bank presence in the U.S.

Answer

Scott Thomson (President and CEO) clarified that the corridor strategy primarily focuses on wealth and Global Banking and Markets (GBM), noting a need for U.S. offshore booking capabilities for wealth clients. Travis MacHen (Global Banking and Markets) described an organic build of an 'America's connected bank' through Global Transaction Banking (GTB), corporate investment banking, and markets, aiming to connect clients across North and South America. Francisco Aristeguieta (International Banking) detailed the GTB rollout, emphasizing its focus on Canada, the U.S., and Mexico, with continuous enhancement of capabilities and a consolidated sales effort. Scott Thomson reiterated that the current focus is on organic opportunities, implying that a traditional P&C or commercial bank acquisition in the U.S. is not a current necessity.

Matthew Lee asked about Scotiabank's strategy for expanding its U.S. presence to support the North American corridor, particularly given that M&A is not a current priority, and how this growth would be achieved through organic means or partnerships.

Answer

President and CEO Scott Thomson confirmed the corridor strategy's focus on wealth and Global Banking and Markets (GBM), including organic U.S. offshore booking capabilities. Group Head of Global Banking and Markets Travis MacHen and Group Head of International Banking Francisco Aristeguieta detailed the organic build of an "America's connected bank" through global transaction banking (GTB) and enhanced cash management, leveraging unique cross-border connectivity.

Matthew Lee of Canaccord Genuity asked for concrete signs CAE is watching for to indicate a turn in civil simulator orders, specifically whether utilization or new full-flight simulator orders would show up first. He also sought clarification on whether the civil growth guidance reduction was mainly due to lower deliveries, and if so, why margins wouldn't be better year-over-year given deliveries are typically lower-margin.

Answer

Matthew Bromberg, President and CEO of CAE, emphasized that long-term fundamentals for air traffic growth and OEM backlogs are strong, and CAE will benefit from the inevitable recovery. He noted that pilot hiring recovery could lead to training demand in about six months, while simulator orders have a 12-18 month lead time. Constantino Malatesta, Interim CFO, clarified that the civil performance adjustment is due to both lower deliveries and utilization rates, with a ramp-up of margins expected in 2027 and beyond as activity picks up.

Matthew Lee inquired about the concrete signs CAE is watching for to indicate a turn in civil simulator orders, specifically whether utilization or new full-flight simulator orders would show up first, and sought clarification on the civil growth guidance reduction's impact on margins.

Answer

Matthew Bromberg, President and CEO of CAE, emphasized long-term fundamentals for civil aviation, noting that pilot hiring precedes training (6 months) and simulator orders (12-18 months). He expects recovery in the next fiscal year. Constantino Malatesta, Interim CFO, clarified that the civil performance adjustment is due to both lower simulator deliveries and lower training center utilization, with margins expected to ramp up in fiscal 2027 and beyond as activity picks up.

Asked about the criteria for placing a company on the credit watch list and for guidance on the medium-term target for the U.S. efficiency ratio.

Answer

A company is placed on the watch list based on internal risk rating changes due to factors like higher leverage or weaker cash flow, leading to more frequent evaluation. For the U.S. efficiency ratio, the medium-term goal is to bring it down to the low 50s, contingent on a better revenue environment and realizing scale benefits, as part of a broader enterprise target of 55%.