Mike Rizvanovic

Mike Rizvanovic asked for more color on the above-trend card fees in Canadian P&C NIR, specifically whether it was a one-off or a new run rate. He also sought Piyush Agrawal's thoughts on Canada's housing market trends, potential concerns if weakness persists, and its broader impact on the Canadian economy.

Answer

Mat Mehrotra, Group Head of Canadian Personal and Business Banking, clarified that the elevated card fees were largely a one-off due to revised redemption assumptions, though overall NIR momentum remains solid. Piyush Agrawal, Chief Risk Officer, acknowledged softness in the Canadian housing market but expressed confidence in the portfolio's resilience due to strong LTVs and FICOs, not expecting higher losses despite consumer stress.

Mike Rizvanovic asked for more granularity on the 'above-trend card fees due to revised future redemption assumptions' in Canadian Personal and Commercial Banking, specifically whether it's a one-off or a new run rate. He also inquired about BMO's concerns regarding the Canadian housing market, given recent trends of rising inventories and weak sales volumes, and whether a continued weak housing market could lead to a more meaningful hit to the broader Canadian economy, beyond just the mortgage book.

Answer

Mat Mehrotra (Group Head of Canadian Personal and Business Banking, BMO) clarified that the elevated card fees were due to an adjustment in accrual rates relative to customer behavior, representing a gain this quarter, with only a marginal benefit expected in future quarters, not a new run rate. Piyush Agrawal (Chief Risk Officer, BMO) acknowledged the softness in the Canadian housing market (offtake, new sales, inventory) but expressed hope for a spring resurgence. He stated that while higher delinquencies are seen in the Canadian consumer, he doesn't foresee this translating into broadly higher losses for BMO or the market, citing strong LTVs, FICOs, and good behavior from renewing customers.

Mike Rizvanovic of Scotiabank asked for clarity on the outlook for Non-Interest Revenue (NIR) following a sequential decline and inquired about mortgage growth and potential spread pressure in the broker channel.

Answer

CFO Tayfun Tuzun expects NIR to be stronger in the second half, noting the Q2 decline was amplified by fewer days in the quarter, which alone accounted for over $200 million in total revenue impact. Ernie Johannson, Head of North American P&B Banking, stated that while the mortgage market has slowed, the broker channel is performing as expected and that competitive pressure exists across all channels, not just the broker market.

Mike Rizvanovic inquired about RBC's Canadian deposit mix, specifically if the non-interest bearing to total deposit split (14-15% vs. a peak of 20%) could reflate in a declining rate environment, and the potential NIM benefit. He also asked if CUSMA uncertainty is hindering RBC's near-term M&A appetite in the U.S., particularly for City National.

Answer

Erica Nielsen, Group Head, Personal Banking, explained client rotations from interest-bearing to GICs, and now from GICs to markets (mutual funds, direct investing), while demand deposits remain strong. Katherine Gibson, CFO, added that the shift from term to non-term deposits is expected to provide positive NIM momentum in 2026. Dave McKay, President and CEO, clarified that CUSMA would not be the main driver for U.S. M&A. He stated that timing and competition for quality targets are bigger considerations, and while inorganic deployment remains an option, buying back shares and accelerating organic growth are current priorities.

Mike Rizvanovic asked about RBC's Canadian deposit mix, specifically if the non-interest bearing to total deposit ratio, currently 14-15% (down from a 20% peak), could reflate with falling rates, and the potential NIM benefit. He also questioned if CUSMA uncertainty was hindering RBC's U.S. M&A appetite, particularly for City National Bank.

Answer

Erica Nielsen, Group Head, Personal Banking, explained that deposit shifts from GICs to market-based products and strong demand deposits are occurring. She expects the shift to non-term deposits to positively impact NIM in 2026. Dave McKay, President and CEO, clarified that CUSMA uncertainty does not impact U.S. M&A strategy. He stated that M&A timing and competition for high-performing businesses are bigger considerations, with buybacks and organic growth remaining priorities.

Mike Rizvanovic asked about the drivers behind the recent outperformance in discretionary and travel spending on credit cards, given the context of tariff risks and a softening labor market.

Answer

Group Head of Personal Banking Erica Nielsen attributed the strength to the resilience and confidence of the core RBC client. She also highlighted the bank's success in using AI and advanced modeling to achieve deeper penetration within its existing client base, which is driving growth in both card balances and purchase volumes.

Mike Rizvanovic questioned the deterioration in the mortgage book's gross impaired loan (GIL) ratio, asking if it was related to the HSBC acquisition and if RBC's high-quality client narrative still holds. He also requested an estimate of the mortgage business's revenue contribution.

Answer

Chief Risk Officer Graeme Hepworth confirmed the GIL trend is not HSBC-related, attributing it to market-specific payment pressures while affirming the portfolio's overall high quality. Group Head of Personal Banking, Erica Nielsen, stated that mortgage profitability is improving but has not returned to historical levels, and she offered to discuss the specific revenue contribution offline.

Inquired about the cause of the deteriorating gross impaired loan (GIL) ratio in the mortgage book and asked for the approximate revenue contribution of the mortgage business to the Personal Banking segment.

Answer

The mortgage GIL deterioration is not related to the high-quality HSBC portfolio but is driven by payment stress in specific markets like the GTA. The bank's overall client quality remains strong. The specific revenue contribution of the mortgage business was deferred to an offline conversation.

Mike Rizvanovic of Scotiabank asked about the deterioration in the mortgage book's GIL ratio, questioning if it was related to the HSBC acquisition, and also requested the approximate revenue contribution from the mortgage business.

Answer

Chief Risk Officer Graeme Hepworth stated the GIL increase was not HSBC-related but driven by market challenges in areas like the GTA. Erica Nielsen, Group Head of Personal Banking, noted that mortgage profitability is improving from recent lows but has not returned to historical levels, offering to discuss specific figures offline.

Mike Rizvanovic of Scotiabank asked for an update on the all-bank net interest margin (NIM) excluding trading and the outlook for the bank's hedging program. He also questioned the current revenue contribution from the mortgage business, referencing prior guidance of around 17% of segment revenue.

Answer

Robert Sedran, Senior EVP & CFO, maintained the 'flat to gradually higher' NIM guidance, attributing the Q2 flatness to business mix but confirming the positive underlying trend. Hratch Panossian, Group Head of Personal & Business Banking, stated that mortgages are now a significantly smaller revenue contributor than the historical 17% figure, as the bank prioritizes deeper, multi-product client relationships.

Mike Rizvanovic asked for an update on the all-bank net interest margin (NIM) momentum, excluding trading, and the outlook for the bank's hedging strategy. He also inquired about the mortgage business's revenue contribution, asking if prior guidance of around 17% of segment revenue was still a valid proxy.

Answer

Robert Sedran, CFO, maintained the 'flat to gradually higher' guidance for all-bank NIM, attributing the recent flat performance to business mix but expecting the hedging strategy to continue delivering benefits. Hratch Panossian, Head of Personal and Business Banking Canada, stated that the mortgage business is now a 'significantly smaller' contributor to revenue than the 17% figure from a couple of years ago, as the bank prioritizes deeper, multi-product client relationships.

Inquired about the capacity for new point-of-sale (POS) partnerships in Canada, the near-term pipeline for such deals, and the potential risks that could prevent the Stearns acquisition from being approved.

Answer

The executive stated there is still capacity for new POS partnerships in Canada, but the larger opportunity lies in the U.S. where many partners are lined up. The company is currently working on some U.S. partnerships even before the license is approved. Confidence in the Stearns acquisition closing is extremely high (99.9%), as the product offers a unique benefit to the U.S. economy and there are no known impediments.