Canadian Imperial Bank of Commerce (CM) Earnings Call Transcript & Summary

Good morning, everyone. John Aiken here with Barclays. Very happy to have CIBC presenting with us. We have Hratch Panossian, their Chief Financial Officer. Hratch, thank you very much for joining us. We really appreciate it.

Thank you for having us.

I just want to kick off with more of a congratulations in terms of some -- one of the strategic pushes being important for CIBC recently has been the growth on the domestic retail side, and more importantly, on the personal and residential mortgages. Can you talk about what has entailed -- what this push has entailed and what you expect to see in the future going forward? Can we continue to see a market share grab or are things going to trail off now that you're getting closer to your natural market share?

Certainly. Thank you, John, for the congrats. And I think it's been something we've been very focused on, as you said. There's been a number of things that we've done to make it happen. And so we're very pleased to see the performance. And I think the short answer is we do anticipate that to continue. It's a core product for some of our key client segments here in Canada. And so we intend to continue to be competitive in the space and offer that for our clients. And so yes, if I backtrack for a second, we have made very good progress. But as I said a second ago, we do think we're far from mission accomplished. There's a lot more that we can do. Our balanced growth continues to strengthen. You saw that last quarter on a year-over-year basis, we're almost at 13% on an average basis or 14% on a spot basis on mortgage growth. And we've got a very good pipeline still. We've seen very, very strong increases in commitments, which continued in Q3, both on a unit basis and on a balance basis. And so how have we done that? There's a number of things we've done, as I said. So one was focusing on productivity. And so we've focused on both the number of advisers that we have, but more than the number, really, the productivity of advisers. And so the -- we've invested in that channel. We've invested with the people, the training, the tools for those people and getting them focused on execution. And so that's been turning out very well for us. Laura had mentioned this a while ago, retention was the other one. And so we closely monitor that, particularly as we're getting now into the period where naturally some of those mortgages at our peak originations of a number of years ago are starting to come due to maturity. And so we've been very focused on that and are pleased to see that with everything we're doing proactively, getting in front of clients, engaging them, deepening the relationship overall with them, but also talking to them about the mortgage offer. We've actually been able to reduce the attrition rate fairly steadily since sort of '19-'20 levels, and we think we can continue to be focused on that and that will play well. However, just to touch on it, because I'm sure the question will come up at some point, we haven't been doing this by pulling the levers of price or pulling the levers of risk and outsized risk. And so we've been very disciplined on pricing. We price in the market. When we look at our spreads and originations, they've been fairly stable, actually improved quarter-over-quarter and above prior year levels on a year-to-date basis this year. And so we're pleased with that from a pricing and return perspective. And at the same time, when you look at our total debt service and gross debt service, those trends have been pretty consistent. We haven't seen any step function changes or anything like that. And so we've been holding to our underlying -- underwriting standards. And so that's not -- that's also not how we've been doing it. So all of that said, we do think -- that's why we think that this continues. We are seeing very, very good continued growth. There's been a little bit -- potentially there's opportunity for market to slow down. But in terms of our share gains I think we can continue that, as you said, John. And we're also importantly looking at this as an overall relationship. And so we're also pleased now to see that we've increased the level of clients that have everyday banking products with us that come in through mortgages. And we've said a few times now, the stats we're seeing now are about 70%-plus within the first year, have a broader relationship with CIBC. And so we think it's good for the mortgage growth, and it's good for our overall growth in the P&C business.

No, that's great. Thanks, Hratch. And as well, sticking with the personal lending theme, credit cards have been underwhelming in terms of growth, and it's not just CIBC, it's industry-wide. And of course, you have talked about the spending have upticked on cards, but yes, we're going to have to wait to see the balances on revolvers increase. But CIBC, at least from my standpoint, seems to be well poised to capture some of that given the agreements that you have in place, but more importantly, the recent announcement with the Costco partnership. I was hoping that you could expand upon that agreement, but also more broadly, what you're looking for in terms of development in cards.

Absolutely. And cards is another key product for our clients here in Canada. And so it's an area we've been very clear about for a while that we want to be there for our clients, and we want to have a market-leading offering in terms of the breadth of our products. And so we've always believed that we had the best travel proposition in Canada, and we've improved that over the last little while. We've got both the Aeroplan proposition for those who are loyal to the Air Canada program. And we've got sort of the best-in-class and same solution there as anybody else would in market. And then at the same time, we've got our Aventura program. And so the fact that we've got both of those is unique to CIBC, and so for those that want a more flexible fly anywhere type of proposition, we had the Aventura product. And we've been improving the value proposition of that, and we believe it's the best travel rewards fly anywhere proposition in Canada of the cards available. Well, we did, and we hinted at this a little bit over the last little while. We did think on a cash back space, dividend rewards type space. We had our cards. We were improving those propositions, but we thought that we could strengthen the proposition there. And that's where in the cards portfolio sense where the Costco partnership fits in. And so that's a card that's more of that nature in terms of its value proposition. And we think it's going to be one that plays very well, particularly as in the short term, we might still see some challenges in the travel space because of the ongoing pandemic and restrictions and consumer hesitance around travel and so forth. And in addition to that, I think the Costco relationship as well we're particularly excited on from an opportunity to franchise clients. As we said in our disclosures, there's a couple of million-plus clients in that portfolio. And most of those clients, we would have our fair market share in terms of the CIBC clients in that client portfolio, which would mean that most of those clients are non-existing CIBC clients. And so it's an opportunity for us to build a relationship with them, and we've got a long-term agreement with Costco that spans payments, not just cards. And so we've got the ability to be the exclusive payments provider as the payments landscape sort of broadens and changes potentially over the next number of years. And by being the payments provider for those clients in the Costco channel also having the ability to have a broader relationship with them across banking. And so we think it's an exciting partnership where we can help each other. We think economically, it's going to be accretive to the bank substantially over this period of time, and it will help us against our goal of growing our P&C business and particularly focused on that affluent segment that tends to be where the Costco portfolio is focused.

So that's a really interesting concept in terms of the number of Costco clients who may not necessarily be CIBC clients. How -- have you in the past been successful of converting single credit card clients to a broader relationship? I'm assuming it's not as successful as the residential mortgages, but is there -- like how confident are you that you can actually get cross-sell opportunities from these new clients coming in?

Yes, certainly. So we looked at this when we were looking at the relationship, right? And maybe I'll say before I start to clarify, we looked at the opportunity and the returns of the opportunity against our cost of capital and so forth on a stand-alone basis of the card alone and then looked at it with the franchising on top of that. And the economics are good on a card-alone basis. And so through the life of the agreement and the partnership, we would earn a good return above our cost of capital on a card-only basis. When you look at it with franchising, it becomes so much more powerful. And so it was important for us to get some realistic assumptions as well on what that franchising opportunity actually is. So what we looked at is some of the proxies of our past experience. And particularly, we have -- for example, we've got our own channels for new cards. So we look at that data when we issue an Aventura card to somebody and how that relationship is built. But we also looked at our success when we acquired new Aventura clients through our airport channel, which is a bit of a similar in the sense that -- well, it's not a CIBC channel. And so we've got the GTAA partnership that we do, and we've had these sort of client acquisition efforts at the airport where somebody would just sign up for the card. And then we've been very successful as we looked at the data on how we've been able to cross-sell those clients after the fact into a broader relationship. And we do that in a number of ways, right? We put our arms around the client as soon as they get onboarded. We keep contact with them. We engage them. We give them the other offers and so forth on an ongoing basis. And so that's basically the proxy we use is to say that somebody who wasn't a CIBC client and happened to just get our card in that airport channel, what have we seen as success on that basis? And we think that's probably a fairly conservative benchmark because we do have a willing partner here with whom we would work together, and there's a lot of loyalty in that client base with Costco themselves. And so I think that gives us an opportunity to leverage that and provide good value to those clients, which is good for Costco and also at the same time give us an opportunity to grow. So that's the way we came at it, John. And when you put all of that together over the life of it, we think this is going to be accretive to total bank ROE as well. And so you could deduce from that an ROE above that 15% level, clearly, well above that, so.

Fantastic. That's great to hear. And just closing off the discussion on lending. Can you speak to the commercial loan book? We've -- at least on the outside, the commercial loans have been growing, but probably not as dramatically as I would have anticipated at this stage of the economy opening up. Can you talk about some of the headwinds in terms of utilization rate, maybe supply chain issues, maybe something that's going on? And if and when you think that logjam may clear, when we actually start to see the commercial loan growth jumping to the rate that we may have anticipated or maybe you can tell me, I was being too optimistic?

Yes. I think we're seeing a little bit of that, John, but we're already seeing the momentum. And if you look at us particularly, I think because of the areas that we've been focused on, we've seen some good growth in commercial and you saw our performance this quarter. We were 6% sequentially. And so you're really seeing acceleration in the back half of the year, and that's momentum that we continue to see. So when you break it down a little bit more in terms of the sectors, I mean we've continued to see some fairly robust activity on the real estate side with some good developers and strong projects, and that's been through the pandemic period. That was probably more robust than the more diversified commercial. And we talked quite a bit about there being some hesitance there on the diversified commercial side, and that's probably starting to turn. We continue to stay close to those commercial clients, and as we did through this period and provide them some support. And they become more optimistic, right? So when we look at entrepreneurs, yes, those supply chain challenges are there and so forth. But we're seeing them getting sort of more optimistic, understanding the potential impact of this sort of fourth wave and beyond and then starting to think about actually investing and putting capital to use, and therefore, borrowing that. And so when we look at what we're currently seeing, right, we're seeing that overall C&I is about 1/4 of the growth, and I expect that, that would continue to evolve. Real estate has been a portion of it. But also another portion is what we've talked about quite a bit recently is our innovation banking business. And so focusing particularly on those high-growth companies, both in Canada and the U.S., and providing more credit to those clients, and that's been a space that's been robust, and we also think it's going to continue to be robust. So we think the outlook is fairly strong there on the loan side. And on the deposit side, we've all expected this excess liquidity that's built up in the system and ended up with commercial clients on their balance sheets as well to somewhat temper to potentially backtrack as that liquidity gets consumed. But we're not seeing that yet. So we're still seeing some fairly good momentum on the deposit side as well. So we feel good about that business. And we think the industry overall probably is going to continue recovering there unless we take a bit of a left turn to the negative on the health side of things. And we think ourselves are well positioned because of the areas we're focused on that I covered briefly to continue outperforming there relative to [ some share ].

Hratch, I know that net interest margins have been very topical for -- actually for probably since the beginning of banking, but honestly, in the last little while because of the low-ish environment. And I know it's quite unfair to ask you where margins are headed because a lot of the factors are really out of your control, the macro, the business mix in terms of what's going true. But can you talk about how CIBC approaches margins from the treasury side of the equation? What do you try to hedge? What do you try not to hedge? And do you have an outlook in terms of will this become easier or more challenging as the low interest rate environment persists in the near term?

Yes, absolutely, John. And so you're right, there's a lot of things that head into margins, and we manage our structural interest rate risk position fairly consistently. And so we do across all currencies, and our main operations in Canada and the U.S., we manage to a structural interest rate target. And so call that a duration of equity target. That's in the several-year mark. And then we do also proactively look at opportunities where we think there are some dislocations to try to get ahead of things and potentially be a bit more proactive. But generally, it's a fairly stable stance that we take on rates. And so what happens because of that, when you see some of the pressures that we've seen on the yield curve, as we have our short-term exposure that essentially the assets that are more and more short term and reset pretty quickly. And we went through that last year. So if you look at the pain we felt in NII and in NIMs when we saw back in sort of Q2, Q3, and the beginning of the pandemic, we saw the yield curve declines, and we did see quite a bit of that repricing happen back then. And then after that, we have the longer end of the balance sheet that reprices over several years, which is that structural position. And that's the case both in the U.S. and Canada. And there what really matters is not where the rates are on absolute basis, but really where rates are, in particular, the swap curve is at any point in time relative to what's rolling off, which would be several years ago. When we look at that dynamic, we've gotten to a place where it's still a little bit negative. And so as we've said on the Q3 and prior calls, we expect some small, but moderating pressure on NIMs because of those factors. And we're really at the point that if we start seeing some material moves upwards and when we had seen a bit of a spike in the yields curve sort of a quarter or so ago here before we backtracked again, you really start getting to the point where that almost becomes neutral. And if you go even further than that and the steepness of the curve, you can start seeing it becoming a positive. So that's roughly where we are now. So I don't think the rates repricing is actually a big factor going forward. The other factors in NIM, which I spoke about a bit in the last few calls, are the product mix and the balance sheet mix. And so that's one, I think, that's going to be the biggest factor, frankly, going forward. And then there's individual product margins. Individual product margins, I spoke about mortgages earlier. I don't think that's going to be a challenge for us going forward either on the deposit side or the lending side. We're seeing strong product margins across U.S. and Canadian P&C. So we feel pretty good there about margins. And so it really comes down to that mix going forward. And we -- there's some things we can do to manage mix. Predominantly what we try to do is gain share across all of the key parts of our business. And so part of what that gets exposed to is then what happens in market. And so I think I see 2 big things there. One, in the Canadian P&C business, particularly is cards and unsecured lending that we've seen decline, which is a higher-margin product. And so as we see that starting to turn, and we talked about having seen some transaction volume pick up and expecting over time those balances to turn, the decline in balances there has been one of the biggest factors, frankly, in the PBB NIM decline on a year-over-year basis. So as that picks up, that contributes to NII and to NIMs. So we're anticipating that to happen at some point if we continue going in the same trajectory. The second thing is the deposits. And the deposits come in, add to NII, don't add to the denominator in terms of earning assets necessarily. So in that sense, they contribute to NIM. And if we see some of this elevated deposit level in market, we trace and start seeing assets start growing faster than deposits, that dynamic alone can put a bit of pressure on NIMs. But I will clarify, right, if it's -- if deposits aren't declining, it's just that asset side of the balance sheet outgrowing the deposit side is not necessarily negative to NII. It might be negative to NIM because it's less of a contributor. But if deposits do decline across the industry, then you could see some pressure negative to NIM. But we feel pretty good about deposits overall, and that comment applies across both Canada and the U.S. again. We're continuing to see good momentum, and we feel good about our share. We've been able to remain steady or gain share across those deposit products, and we think we can continue doing that as well, less that we can control in terms of the liquidity in the system and how that might cycle through as we come through the recovery.

And Hratch, I just want to finish off on the deposit side because I find this discussion fascinating, and I think the subtleties may be lost to certain players in the marketplace. But what is your personal view of the stickiness of deposits this go around in terms of there's expectations that as soon as the economy really does start firing on all cylinders, the deposits are just going to disappear? But there's other camps that are saying, no, it's actually a different dynamic that's go around. So I don't want to hold you to it, but what are your personal thoughts on that? Because I know we're almost all guessing under this scenario.

Yes, that's -- it's a good one. And maybe we're doing a little bit more than guessing, but I think anybody would be fooling themselves to say they have a crystal ball on this and know exactly where it's going to go, right? I mean this pandemic's been -- there's been a lot of things about it in this downturn, I'll call it, that have been different than we all anticipated, right? The fact that performing is one thing, but the fact that we're in the situation where actual impairments and credit losses was on a decline through this period of time, the fact that you've got people and businesses with more cash on their personal or business balance sheets. And that is persisting as something -- at the beginning of the pandemic, we certainly didn't expect, right? And so we've had to adjust our expectations in that respect. The thinking that we do is -- so what happens to that liquidity? And the liquidity can -- unless it's extracted by some sort of reversal of QE measures and so forth, unless it's extracted back out of the system, it probably works itself out through time and through a fairly long period of time. And then some of you would have seen the latest Bank of Canada and so forth, publications do consider this to be a multiyear process as that liquidity gets used. But also when you talk about it being kind of getting used, you follow the cash through. I think when we look at things in Canada, we feel pretty good about the fact that you might see this starting to move around in terms of different forms of cash, but still some way coming back to the bank, right? So I'll give you an example. If consumers actually spend it, are you going to spend it on local businesses, commercial or corporate clients, that's where the cash goes? If those businesses then use the cash, they could invest it themselves with certain suppliers and projects. And if they're investing in the country, again, that cash flow just goes to somewhere else. If the cash goes -- if investments are made outside of the country, again, you go through the foreign exchange markets and so forth, we still have an ability to participate in holding that cash and moving that cash around. Then you look at if the cash gets invested. If it gets invested in the markets, obviously, that benefits our wealth business. But at the same time, if we got invested into particular equity or debt instrument, somebody either sold that or issued it. And so again, cash ends up somewhere back in the system. And given we have a fair representation and we are competitive in terms of competing for deposit share across commercial clients, corporate clients, retail clients and institutional clients, frankly, in Canada and to some extent in the U.S. with the exception of retail, we feel pretty good about being able to maintain that strong deposit position as this works its way through. But exactly when it will move from which bucket to what bucket and how, if at all, will it get extracted more quickly than that from the market, I don't have a better crystal ball than you do, John.

Well, Hratch, I think you actually did a beautiful description of why the Canadian banking system is so robust and so attractive marketplace. But I guess the one thing that could upset the applecart in that is credit quality in terms of if suddenly that money disappears because of bad loan. And granted, no one is concerned about that at this stage in the game. But as we look out, there's been conversations, not just with you, but with your peers in terms of a steady move back to more normal credit rates. How quickly do you think that can occur? I'm of the viewpoint that outside of any uptick in credit losses from the government supports being eliminated that were really very long-tail, low-credit risk environment. Is this something that you guys are envisioning? Or is this something that basically are enough to launch, and we should see this in the next couple of quarters?

Yes. I think, John, when we look at it, we think the environment continues to be robust, but we will normalize at some point is our expectation. And probably through -- is it next quarter or the next few quarters, I don't know, right? But as we get through 2022, we do think that we'll get to a more normalized credit rate. And part of it is, I think, if you look at why credit has improved, some of it has to do with the excess liquidity because of the stimulus that was provided and so forth that people have. And so to some extent, they start moving through that. The other has been the restrictions that haven't allowed people necessarily, right, on the retail side at least, to have the discretionary spending that they may have otherwise done and so forth. And some of those factors, hopefully, if we stay on the trajectory we are and we get vaccinations remaining somewhat effective as they are now and the number of vaccinations goes out and the younger population as well and so forth, then we get really free of any potential for any more restrictions coming down the line. And I still -- I don't think we're still clear 100% from potential outdoor restrictions come this fall and winter across both Canada and the U.S., and we're seeing some of that, right? Some of the folks I talked to in the U.S. are already starting to reverse their back-to-the-office type of activity and so forth. So some of those things, I think, could linger this, the situation, and then we've got a lot to talk about, about stimulus and assistance still, right, both sides of the border. We've got an election here in Canada, and that seems to be part of the platform as well for a number of folks. So as long as that stimulus is there as well and provides needs, I think you could see this environment persist a little bit longer. But as we get through '22, we think we get to a more normal level in terms of impairments. We're very cautious, and we're watching what happens at that point where sort of all stimulus is removed and all assistance is removed, whether that's the businesses or individuals. And is there any bleaks that we see there right through that discontinuity as the world goes to normal and everybody and every business has to now stand fully on their own? And so once we're through that as well -- and we feel okay about that generally at this point, but once we're through that, I think we're back to a more normal level on impaireds. And then what happens on performing is it depends on the pace at which that outlook changes for us and then looking at the forecasted losses versus our allowance and figuring out how we normalize that over time. And then once we come -- the last comment I'll make, right, once we come out of all of this, we don't see the core credit characteristics and credit profile of any of our businesses having changed dramatically from before the crisis, right? So in terms of the PCL rates by asset class, after all this is said and done, we don't see it being that different than what it was coming into it. There might be some changes here and there. The other thing, though, to keep in mind is the change in mix. And so our mix has changed somewhat through this time. And so what our total PCLs are might be a bit different, but that has to do with the change in the portfolio.

That's completely fair. Hratch, on the last quarter's call, you had a discussion on expenses, and I believe that your aspiration is just to maintain single-digit expense growth. And then anything over and above that will be contingent with revenues, presumably trying to make sure that we've got positive operating leverage. Can you talk about some of the ways that you're managing your costs while still trying invest in other areas that are inflationary like technology, et cetera? And in context, I'd love to hear about what CIBC's approach is the return to office? And longer term, what the evolution of a branch or a branch footprint is looking like, not just next quarter, but we're looking out 3, 5, 10 years?

Certainly. Yes, it's -- I think your comment is valid for fiscal '21 in terms of our objective on expenses, right? So we've said for '21 we were aiming for low-single digits plus any variable pieces, and we're going to land in the mid-single digits for fiscal '21 because particularly capital markets and brokerage and wealth management that are more variable and expenses have done very well. And those are driving those expenses up. For '22 and beyond, what I said at Q3 is, we're going to think about it in exactly the same way, which is trying to set what that right level of expense growth is relative to the top line. And the reason we had said it that, that low-single-digit level this year is because, as we said, towards the end of last year, beginning of this year, we were looking at the environment and did not expect it to be as robust as it's been. I'm not sure anybody did in terms of continued strength in capital markets and the markets. So because of that, we were expecting more of a low- to mid-single digits revenue environment. And so in that environment, we thought the right thing to do to contain operating leverage to flattish, which we said we were going to try to do and create some pre-provision earnings growth, we had to settle for mid-single -- low-single-digit expenses. And so we're going to look at it same way next year, but we were still working through exactly how we feel about what the world will look like and what the top line will be. And so if the top line is different than that, if it's not a low-single-digit top line, we wouldn't necessarily settle for low-single-digit in terms of expenses. But what we try to do on the expense side is, we've talked about the 3 different categories, and I'll leave the variable aside for a second because it does go along with revenue. On the rest of it, we're always trying to balance making investments in both investments for the short-term benefits as well as investments that have a bit of a J-curve and will pay off in later years. But also offsetting that with some efficiencies so that, that net expense growth of those 2 is at the right level, while we can continue to invest. And we want to invest as much as we can. That's why we kind of try to take some guidance from the top line to say how much expense growth can we support so that we can invest as much as we can. So what are we doing on the efficiency side, to your point, we have gone through the restructuring work that we did sort of now a couple of years ago, and we saw the full benefits of that to come through this year. We're always looking at the people's side and looking at opportunities. We haven't talked about any further restructuring at this point, but that's something we look at on an individual basis, and we're more looking at that on a BAU basis at this point in time. Second would be looking at opportunities to invest in automation. So part of when I talk about investments, there's quite a bit in there in automating some processes and things operationally within the businesses or back-end operations or functions like finance, where we do things manually. And I think that over time gives us opportunity for -- to get more leverage out of the technology investments, frankly. We are investing with respect to as well the cost of our infrastructure. And so we've talked a bit about moving to cloud and so forth in the past and your maintenance costs and upgrade costs for technology going forward, both on the hardware and software side, can benefit over time from things like that. And so we've been pushing on those angles. And we also push on investments that have to improve efficiency, but they do that by driving the revenue side up further as an example, right? So it's really across all of those areas, John. And what we're doing right now is figuring out exactly what that amounts to in terms of the buckets of efficiencies we can create into next year, net of everything else that's out there that we're going to have to face, plus our investments and then balancing that up against the top line. And so our objectives remain the same. Like I said, we want to have good pre-provision earnings growth, again, next year. We want to generate a good operating leverage, and good doesn't necessarily mean positive or negative, but we want to look at short-term operating leverages being acceptable and getting us to that pre-provision earnings growth that we want. And then over the long term, our objectives are unchanged, right? We look for through a cycle, and over the medium to long term, we look for positive operating leverage overall in the business. And we think that if we manage our investments right and grow the top line, we'll continue to get that over the long term.

Fantastic. Hratch, in terms of capital, we're in a very, I'll call it, unusual situation for the Canadian banks, where capital levels are very strong. I will personally argue that there's excess -- significant excess in the system, yet because of regulatory constraints, you're constrained on returning capital to shareholders. So given the fact that right now we can't raise the dividend, we can't do share repurchases, and capital continues to grow as we go through your funding organic growth. But for CIBC, where do inorganic transactions fit within the priority level or desire at this stage in the game?

Yes, certainly, John. We're consistent, I think, on this with where we have been, right, but I'll give a bit more color. So we're very comfortable with where our capital is at this point in time, right, at sort of at the 12.3 level and relatively stable. We think from this point on, as I mentioned on the Q3 call, we continue to have good opportunities to deploy capital organically. We have lots of room to deploy. And we're going to continue pushing organically as our first priority to grow the business. And why is that the case is, we're always coming at it from what we think is the best use of capital for our shareholders. And we're lucky in our business to have the marginal returns on capital on all of our businesses, frankly, when you look at it on an all-in basis is well above our cost of capital. And so we believe that that's a pretty clear choice if we have the opportunity to grow that on a risk-adjusted basis and earn a premium to cost of capital for our shareholders, that's better than giving that capital back. So we're going to keep pushing on that. And we think that will be at an accelerated pace, hopefully, if the recovery continues to go in the same direction here. The second is return on capital, which you mentioned. And we think where we're sitting right now in terms of our capital levels and looking at the forecast, we got ample capacity to also return capital when that lever is available in addition to doing the organic growth that I spoke about. And -- so we will look at that, and we will look at both levers. Our target on the dividend is unchanged, and Victor covered this on the Q3 call. So we do intend to be in the middle of the range. And when you look at where we're trending now, that would suggest that there is some room there on the dividend side. And then when we get past those 2 things, I think then we start looking at the remaining capital, and we'll assess is there other opportunities that we see in the short to medium term to deploy that capital beneficially for our shareholders or if not, starting to look at the lever like the buyback to do the rest of it and return the capital. And we can always ask for it for a good use when we need it down the road. So that's the way we look at it. And so what does that mean for M&A, specifically to your question, is we think the bar is fairly high for M&A -- for large M&A at this point in time. We've been saying that we're not really looking at it that actively other than where it directly helps our strategy and has good financial value. And I think the recent Costco relationship is a perfect example of that is that it's not M&A in the classical sense, but it's acquiring a portfolio. It's right in our strategic priority of improving sort of -- and scaling up and growing our Canadian P&C business, and that's going to help in terms of that. So we think that was a very good use of capital there. And so things like that, if they come up, we're always interested in. Any larger type of M&A at this point in time, particularly ones that financially would not have a good return in the short to medium term is not something that we would look at. We think we have ample opportunity from the organic side and continuing to potentially return some capital if there's some leftover for shareholders.

Well, Hratch, it's very fulsome. And unfortunately, we're bumping up against our allotted time, so I'm going to have to call it there. But thank you very much for joining us. I really enjoyed the conversation.

Well, thank you as well. I appreciate the questions and for everybody out there as well, thank you for your continued interest in our bank, and feel free to reach out to us if there's anything else we can follow up on.

Great. Thanks very much.

Thanks. Take care all.