Credit Loss Projections
Q: How will unemployment and rates affect future PCLs?
A: Management expects Stage 3 credit losses to build, peaking in the latter half of 2024 into early 2025, driven by the trajectory of unemployment rising to 6.6% by mid-2024. Higher rates and unemployment will increase pressures on both retail and wholesale portfolios, but the impact will vary by segment.

City National Bank Profitability
Q: When will CNB return to normalized profitability?
A: CNB is expected to complete its platform build-out this year and return to a more normalized ROE in 2025. Management is focusing on cost reduction and repositioning the balance sheet towards more multiproduct clients to enhance profitability.

HSBC Canada Acquisition Synergies
Q: Are you confident in achieving HSBC Canada's cost synergies?
A: Management remains confident in achieving $740 million of cost synergies. The first synergies will be technology-related, with timing adjusted due to regulatory approval delays affecting the closing date.

Funding Cost Pressures
Q: When will funding cost pressures abate?
A: Funding cost pressures persist due to a shift in deposit mix towards higher-cost GICs, up $10 billion quarter-over-quarter. Spreads on GICs have compressed due to competition. Management expects pressures to continue until excess liquidity moves into investments or rates decline.

Commercial Loan Growth Amid Consumer Slowdown
Q: Why is commercial lending growing despite consumer slowdown?
A: Commercial growth is driven by a strategic focus on larger, better-rated clients, with over 80% of growth from existing clients. The bank has restructured its front office to align senior bankers with these clients, resulting in diversified growth across multiple sectors.

Lessons from CNB Growth
Q: What lessons were learned from CNB's rapid growth?
A: Management acknowledges that growth outpaced operational capabilities, emphasizing growth over profitability. The focus now is on enhancing profitability of the existing balance sheet and building a solid operational foundation for sustainable growth.

RWA Output Floor Impact
Q: How will you manage the RWA output floor in 2025?
A: The bank is closely monitoring the RWA output floor, having done over $30 billion of optimization since 2023. Focus is on data cleanup and optimization to create capacity, recognizing it will become binding and needs ongoing management.

Revenue Outlook
Q: What is the revenue outlook for the next 4–6 quarters?
A: Management is positive, expecting growth from non-interest income, particularly in capital markets and fee-based businesses. Strong commercial growth and leverage from the deposit franchise are anticipated to offset any NII pressure from rates.

U.K. Wealth Management Regulatory Impact
Q: Will U.K. regulatory issues affect your wealth business?
A: Management is comfortable, noting that their business model aligns with regulatory focus on fair customer treatment. Acquisitions like Brewin Dolphin are advice-focused, and adjustments to fee scales are minimal.

Impaired Loan Loss Rates
Q: What are the implied loss rates on impaired loans?
A: The implied loss rate on impaired commercial real estate loans is 28%, indicating strong recoveries even in a distressed environment. The bank continues to realize healthy amounts despite challenging conditions.

Consumer PCL Lag Effect
Q: Why would PCLs decline shortly after rates drop?
A: PCLs are influenced by multiple factors beyond rates, including unemployment. The lag effect of rates and other variables explains the timing of PCL increases and decreases.

Deposit Mix and Liquidity
Q: How will you replace GIC deposits when rates fall?
A: The bank focuses on growing its deposit franchise, including demand deposits from the HSBC acquisition. Anticipated growth in client base and wholesale funding at competitive rates will help manage liquidity needs.

Cross-sell Sustainability in Commercial
Q: How long will cross-selling to existing clients last?
A: Management believes the strategy has staying power, as it focuses on growing with the best clients and leveraging opportunities from the HSBC acquisition. The approach is long-term and persistent.

Fraud Impact on Impairments
Q: Is fraud driving impaired performance?
A: Fraud is not a significant factor in impaired loans or PCLs, as PCLs reflect clear credit losses, not fraud.

HSBC Canada's Credit Quality
Q: How is HSBC Canada's portfolio performing?
A: Due diligence shows HSBC Canada's clients are generally high net worth with higher FICO scores. Commercial clients are larger and better-rated, and no new concerns have been identified.