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

[Foreign Language] Good morning [indiscernible]. My name is Karl Wieler, and I'm a group product manager in the Canadian banking team at CIBC. I am a status member of Carcross/Tagish First Nation, 1 of 11 self-governing first nations located in Canada's Yukon Territory. I would like to open CIBC's 2023 AGM, by acknowledging that the land from which I'm speaking today at CIBC Square in Toronto is the traditional territory of the Haundenosaunee and the Anishnabeg and the Mississaugas of the Credit First Nation. Today, the meeting place in Toronto is still home to many indigenous peoples from across Turtle Island, and we are grateful to have the opportunity to work in this community. As a grandson to residential school survivors, it is meaningful for me to offer this acknowledgment today as we recognize the many contributions of First Nations, Métis and Inuit peoples and demonstrate that as a leading financial institution in North America, we are committed to reconciliation. Reconciliation involves investing in indigenous prosperity. And as a member of our real estate secured lending team, I am privileged to support our indigenous lending portfolio that seeks to help First Nations improve economic development through the construction of new homes, purchases of existing homes and exploring lease land opportunities. I'm now pleased to turn the meeting over to the Chair of our Board, Katharine Stevenson. [Foreign Language] Thank you [indiscernible].

Thank you, Karl, for opening our meeting today. We appreciate your many contributions to our bank. I appreciate, especially you sharing your story with us as we continue to embed and build an inclusive bank for our team, clients and communities. Good afternoon. It's great to be here in person, and thank you to all of you who've shown up in our auditorium. It's truly wonderful to have chatted with a few of you, and thank you for making the effort to be here. My name is Kate Stevenson, and I'm the Chair of CIBC's Board of Directors. I'm very happy to be here today with you, and it's my pleasure to welcome you to CIBC's 2023 Annual Meeting of Shareholders. [Interpreted] Good afternoon, and welcome to CIBC's 2023 Annual Meeting of Shareholders. It's satisfactory proof that notice of this meeting was duly given and that a quorum is present. Therefore, I declare the Annual Meeting of Shareholders duly constituted, and I call the meeting to order. Also joining me on stage today are Victor Dodig, President and Chief Executive Officer; Michelle Caturay, Senior Vice President, Assistant General Counsel and Corporate Secretary, that must be the world's longest title; and Hratch Panossian, Senior Executive Vice President and Chief Financial Officer. Thank you for being here with me today. We also have our senior executive team here at the front of the auditorium on my right and our Board of Directors on my left, so terrific to have you. We are pleased to be holding our annual meeting today in person at CIBC Square in Toronto and through our live webcast as well as being joined by shareholders and guests listening by phone. Michelle, could I ask you to explain how the meeting will proceed.

Sure thing, Kate. Remarks will be made in both English and French today and simultaneous translation will be provided in the auditorium as well as over both our English and French webcast and phone lines. If you are attending in person, interpretation is available through the device that was provided at the door as you entered the room. Please turn to Channel 1 for English and Channel 2 for French. The device will not work outside this room, so please leave it on your seat at the end of the meeting. Many shareholders submitted their votes before the meeting. Thank you. A small number of shareholders have decided to vote at the meeting. If you voted in advance, and you do not wish to change your vote, no further action is required. If you are a shareholder or a proxy holder attending in the auditorium, and you have not voted yet, or you already voted, but would like to change your vote, you should have received a ballot at the registration table. To assist the scrutineers in validating and tabulating ballots after you vote, please print and sign your name in the space provided. If you are a shareholder or a proxy holder attending through the live webcast, and you wish to vote during the meeting or change your previous vote, you must click on the Vote tab at the top of your screen and a separate browser window will open. You can register to vote by entering your control number as a user name and as your password entering cibc2023, all lower case. You would have received a control number with your meeting materials, either by e-mail or mail, or you received it when you registered as a proxy holder with TSX Trust Company, our transfer agent. Voting will be open throughout the formal portion of the meeting. If you are experiencing any technical difficulties, there is a Help chat button at the bottom of your screen. If anyone in the room who is entitled to vote did not receive a ballot and would like to vote, please raise your hand and a scrutineer will bring a ballot to you. Now I did meet a couple of shareholders who indicated they needed a ballot. I don't see you raising your hand, so I think you've got your ballot. It looks like there are no hands raised. Okay. Thank you. If you wish to make a comment or ask a question, and you are in the auditorium, please approach 1 of the microphones in the room. State your name or the microphones on either side of the chairs. When you're at the mic, state your name and whether you are a shareholder or a proxy holder. Please limit your comments to 3 minutes so that other shareholders or proxy holders have an opportunity to speak if they wish. For those not in the room, if you wish to make a comment or ask a question, you should select the message icon at the top of your screen and type your question or comment in the text box at the bottom of the screen. Please indicate whether you are a shareholder or proxy holder. Once you finish typing, click the submit button. Your comment or question may be about the motion being considered or something more general. We will answer questions on a particular motion at the appropriate time in the meeting. Please hold your general questions for the comment period. I will read the questions submitted online and the appropriate person will address them. If we receive a number of questions on the same topic, we will group the questions together and provide a comprehensive response. We will respond to as many questions as possible during the meeting. If we are not able to address your question here, we will respond to you after the meeting if you provide your e-mail address or a phone number. Kate, that concludes my instructions.

Thank you, Michelle. The remarks you hear today may include forward-looking statements, and actual results could differ materially. Also, some of the matters discussed today may include references to non-GAAP financial measures. Details about forward-looking statements and non-GAAP financial measures are in our financial reports. Welcome to the 156th Annual Meeting of Shareholders of our bank. As Michelle mentioned, this meeting is being held in both French and English and will be available on CIBC's website at www.cibc.com for future reference. Michelle will act as Secretary of the meeting. Nicole Savera and Pat Lee of TSX Trust Company will act as scrutineers. Our agenda for today's meeting will begin with a presentation of the 2022 annual financial statements, followed by remarks from our CEO, the election of directors, the appointment of auditors, an advisory resolution regarding our executive compensation approach, shareholder proposals, shareholder questions and comments and preliminary vote results. I'm pleased to present the annual financial statements and auditor's report for the year ended October 31, 2022, which can be found in our annual report. CIBC's annual report, management proxy circular and first quarter report are available on our website. The floor is now open. Does anybody have any questions on the 2022 financial statements? And I see none, Michelle. Are there any questions from the webcast?

No online questions, Kate.

Thank you. So now it's my sincere pleasure to invite Victor Dodig, our President and Chief Executive Officer, to address the meeting.

Well, it's nice to see you all. How is everybody doing? Excellent. Good to have you engaged. Thank you, Kate, and good afternoon, everyone. [Foreign Language] Today, I'm going to share with you the progress CIBC is making as our team lives our purpose of helping to make ambitions real and executes our client-focused strategy. So as we gather today, we do so in a changing operating environment. I think we all see what's going on in the world today. Over the past year, interest rates have increased central banks worked to tame inflation. Economic growth has slowed. And more recently, we've seen isolated challenges emerge for some banks across the globe. So against that backdrop, I want to underscore 3 important messages about our bank, your bank, CIBC. Our bank is a resilient institution. We have strong capital levels and liquidity. We're highly diversified across sectors and geography, and we have a long history of managing our business well through the full economic cycle. Our bank is vibrant, and our bank is client-focused. We excel in providing the advice and solutions that our clients need, attracting new clients and growing in areas of the economy that will be critical in the coming year. And our bank is playing our part in enabling a more sustainable future. Right across our CIBC team, we're taking action through our leadership with clients and reducing emissions intensity, and our leadership in building a more inclusive economy with opportunities for everyone. We're in an enviable position today because we've put in the work to shape a purpose that unites and guides our CIBC team. And because we've made strategic investments to position us for strong relative performance in the years ahead. We have the strength to weather and capitalize on periods of uncertainty in the market and we have the strategy to drive results over the long-term, even when headwinds exist in the market. 2022 is a clear example of this approach in action. We grew our client base, and we increased our market share across our bank. We delivered industry-leading revenue growth, and we continued to build on our strategic advantages in the market. In June of last year, right here in this room at our new global headquarters of CIBC Square, we held our Investor Day for the first time in many years to share our plans to deliver for our stakeholders in the years to come, drawing on our unique strengths and our unique capabilities. So our strategy is comprised of 3 key priorities. First, we're focused on high touch, high-growth segments of the market, including the private economy and the outflow market where relationships and technology both matter. Second, we're elevating our client experience, leveraging our leadership in digital to provide best-in-class banking services and to continue to emphasize our focus on client relationships across our bank. And third, we're investing in future differentiators, businesses that are growing today, and there will be a meaningful contributor to the bank, our bank of tomorrow. These include strategically important areas such as innovation banking and sustainable finance. Our progress in executing against our consistent strategy is increasingly clear in our results. In 2022, CIBC delivered a solid financial performance against the more challenging economic backdrop. On an adjusted basis, we generated top line revenue growth of 9%. Now that's the highest among our Canadian peer banks and above the average of 7% that was delivered across the major U.S. banks. This was driven by volume growth across our key business lines and accompanied by strategic investments in our business for the future. And these strategic investments include the acquisition of the Costco credit card portfolio in Canada, further investments in cloud technology and continued modernization of the advisory platforms our CIBC teams use to help our clients achieve their ambitions. As a result of these future-focused strategic investments that set up our bank for success in the years ahead, our expenses grew at 11% year-over-year. And as we've communicated with all the -- with these investments made, we will see a gradual decline in the rate of expense growth through fiscal 2023. We reported pre-provision pretax earnings growth of 7% in fiscal 2022. Now this speaks to the clear progress we've made -- sorry, I need some water. One second. It's always good to have a drink during the meeting. Anyway, so we reported pretax pre-provision earnings growth of 7% in fiscal 2022. And this speaks to the clear progress we've made in attracting clients to our bank and deepening relationships with our existing clients and new clients. Now our bottom line numbers for the full year was solid, they were lower than 2021. This is partly due to the changing economic environment, which led to higher provisions for credit losses, which is a trend that we've seen across the banking industry. The quality of our credit book remains strong, and we're well positioned to manage through a more fluid economic environment. On a full year basis, 2022 was a good year financially for our bank with some pressure on our profitability in the second half, but also clear momentum in driving growth. Our first quarter earnings for fiscal 2023 showed sustained momentum where we delivered revenue growth of 8% over last year. Our margins expanded in this first quarter, a trend we're continuing to see. And our CET1 ratio, our common equity Tier 1 ratio of 11.6%, is well above regulatory requirements. We are generating this momentum and high-quality, long-term growth because our strategy is an ideal fit with the advantages we have at CIBC, and, importantly, with what our clients are looking for from their bank. Every time I visit 1 of our teams, whether I'm on the road visiting banking centers or I'm on our trading floor with our team, there's a common language at our bank that focuses on our clients. Clients come first. We think about a client's entire relationship with our bank, not just a single product or a service. And we understand which one of our CIBC colleagues we need to call upon to help our clients realize their long-term ambitions. I've often said banking is a team sport. It's not an individual sport. It takes everyone at our bank being all in on our client-first strategy and underpinned by a connected culture to win. It shows through in the performance of our business units. Now let's begin with Canadian Personal and Business Banking. We've never grown faster in this segment in terms of net client growth. We added over 350,000 net new clients organically to our bank in 2022. That's on top of the acquisition of Costco's Canadian credit card portfolio, which brought another 2 million clients -- more than 2 million clients to our bank, and it also skews to a more affluent consumer base, which is why we're investing in the Costco credit card portfolio, not just for the cards, but the franchise long-term relationships with our bank and those clients. Now combined, that's the largest influx of clients to our retail business on record. We're well positioned to build relationships with these clients through offerings such as our CIBC Imperial Service, where our over 2,000 of our advisers provide dedicated advice to clients with their more complex needs. That may involve investing needs, and their borrowing needs, but most importantly, a financial plan to help them realize their ambitions. Our client experience scores are on the rise because we're focused on our clients and their ambitions. CIBC moved into third place among primary clients in the Ipsos Net Promoter Score survey, NPS survey as we call it in the industry. And we ranked 2nd in J.D. Power's annual survey. We are improving in those ranks year-over-year, and we're proud of that. And we provide an award-winning digital banking experience to our clients. Last year, Ipsos ranked CIBC #1 in Canada for online banking. It's a significant advantage to have a really good online and mobile banking platform when 94% of your client transactions take place outside of banking center or at an ATM. We're well positioned to continue to grow our retail business in the years ahead. Our Commercial Banking and Wealth Management businesses are grouped together. And this is a structure we put in place because we believe it best needs -- meets the needs of our clients in the private economy, clients that own their businesses that create wealth that need a bank to think about their entire affairs of their life outside their business and in their personal affairs. Having our Commercial Banking teams and Wealth Management teams working together allows us to meet the lifetime needs of these entrepreneurs, helping them to scale their business and then transition. We can help them with their wealth management right through retirement and in giving to the next generation and to the many foundations and charities that our clients support. In Canada, 2022 was another year of double-digit growth in loans and deposits in our commercial banking business. It was also another year of solid net flows relative to the industry in our Wealth Management business. For instance, our CIBC Wood Gundy franchise had a record year of net inflows, which were up 27% in fiscal 2022 compared to the prior year. In the United States, our Commercial Banking and Wealth Management platform continued to expand into new markets and into new verticals to meet increasing and growing client needs. We're opening up new locations such as a flagship location in Florida, and our team is on the ground in fast-growing markets such as Dallas, which I had the opportunity to visit recently, to attract clients for the long term. Now to put our success in perspective, when we acquired The Private Bank in 2016, our total earnings from the U.S. region represented 2% of our bank's net income. At the end of fiscal 2022, it represented 20% of our net income, and that's after the entire bank has grown as well. We've achieved this through a consistent intentional focus on relationship building and market segments that we know well and investing in our technology platform. As part of these efforts, we've built a strong innovation banking business, a differentiator for the future that positions us as a leader in banking the technology leaders of the future. We see technology reshaping our world each and every day. And as a bank, we want to be the lifeblood for their growth as well. And in our Capital Markets [ business ] unit, we've been successful by building a highly connected business, one that's differentiated from our peers. We maintain a strong platform in traditional capital markets areas with a leadership position in trading and a strong client-focused franchise across investment and corporate banking. CIBC is the leader in financing the renewables industry, ranking in the top 10 lenders to this sector across North America, and it's an area of continued growth and focus where we already have an established an early leadership lead. We're seeing momentum in strategic differentiators for our bank, like Direct Financial Services. Now this is a fintech within our bank that meets the needs of our clients to build solutions in banking, payments and investing. In that business alone, revenue was up 18% over the last year, and we continue to see growth prospects here through innovation. We believe that banks play a unique and vital role in enabling a more secure, equitable and sustainable future. And that's the commitment that we share right across our CIBC team. It's part of our DNA. It's part of our culture. At our bank, we do this by working with clients to understand their sustainability ambitions and to help make those sustainability ambitions real. We're accelerating climate action. Last year, we mobilized almost $36 billion in sustainable finance activities, and we're on track to mobilize $300 billion by 2030. Now some examples include a lending facility for the largest solar farm in Canada with over 1.3 million solar panels and a syndicated credit facility for the First Nations Finance Authority. As part of our ambition to achieve net-zero green gas emissions from our operational and financing activities by 2050, we've established interim targets for the reduction in emissions intensity from our oil and gas and our power generation portfolios by 2030. Hitting those targets by 2030 gives us greater confidence that we can hit them by -- the full target by 2050. And we're working closely with our clients in these sectors because you need to achieve these targets. Our clients are doing a lot of heavy lifting to transition to a net-zero future. We're also enabling access to opportunities for all, both inside and outside our bank. We instituted a $20 minimum hourly wage this year in local currency in Canada and the U.S. and made a commitment to that goes to $25 by 2025. In addition, we focused on opportunities for those in underrepresented communities. In 2022, we increased representation from people of color and Board approved executive roles to 24%, progress on a longer journey towards ensuring that our bank fully represents the communities and the population that we serve. And our bank does it in an inclusive way where we all work together to deliver on our clients' needs. We launched a new Social Impact Alliance between the CIBC Foundation and Microsoft, which aims to close the digital skills gap by investing in education and technology employment opportunities for communities currently underrepresented in the field. We also introduced new banking products and programs for underserved communities, including a program launched last year, designed specifically for black-owned businesses as well as a $2 million contribution to the Black Opportunity Fund. Finally, as part of our commitment to building integrity, and trust in a digital era, we continue to focus on innovation, technology, talent and the underlying processes and systems in place to improve how we operate and how we interact with all of our stakeholders. All of this demonstrates our deep commitment to using our resources and our position in society and in business to create positive change. We're determined to be leaders here, not only in the medium term, but for the long term. We've done this for over 150 years, and we plan on doing it for the next 150 years. We've built a solid foundation that positions us well to manage through an evolving economic environment. Now our economists expect economic growth to slow for the rest of the year. And as the economy cools under the full impact of increases into interest rates, that will have outcomes. Our current forecast for GDP growth is 1.2% in Canada and 1.3% in the United States for this fiscal year, this calendar year, rather. Supply -- we see supply chain issues are fading, which is reducing inflationary pressures and helping businesses rebuild inventories and better meet demand on a more predictable level. This more modest rate of growth will still present opportunities for us to grow because we've got a targeted focus on our clients to help them grow, and we're confident in that. I'm proud of the fact that CIBC has a proven track record of being there for our clients, including through the pandemic and some of the urgent challenges individuals and companies faced in recent years. Banks have to be there with you through thick and thin. That's our view on the economy in the near term. But it's also important to consider how to ensure Canada captures its share of global economic growth over the long-term. In my view, we can do this in 3 ways: help attract financial capital to our country, investing in human capital through education and immigration, and building on our nation's social capital through leadership and inclusion and action on climate change, so no one is left behind. On immigration, specifically, we must ensure that Canada retains its reputation as a welcoming nation of opportunity so that we can compete successfully for the newcomers who we need to help grow our economy. This includes newcomers in sectors of the future [indiscernible] tech, but it also means people who can use their skills to build infrastructure and support our growing population. This means labors. It means skilled trades. It means medical professionals and all those who want to continue to build Canada into a strong and great nation into the future. And once newcomers are here, we need to find ways to enable them to use those skills for the benefit of our nation. That means lowering barriers to entry in many sectors and recognizing skills and accreditations more readily when they've completed some of that overseas. We are in the best and the brightest here and we want them to stay here. We also need to solve for housing availability and affordability. This is an ecosystem. It's not just about immigration, it's how we pull all of that together. Finding a path to a more affordable housing supply will serve to make Canada a more welcoming nation of opportunity for newcomers and also give younger Canadians also striving to have that home have a path to that home where they can grow and prosper with their lives as well. And these are big issues, but they're also big opportunities. That's the way we should be looking at them. And the CIBC, we're in the business of opportunities. We're in the business of solutions. And we're going to continue to advocate for them to ensure a more sustainable future, both as a bank, we're working with our clients, working with non-profit organizations and policymakers to ensure that our economy remains vibrant. So in closing, I want to thank our CIBC team of almost 50,000 globally who are living our purpose every day. [Foreign Language] As an investor in our bank, you should know that our CIBC team, your bank is always thinking about ways to help make ambitions real. That purpose drives us in good times, and it galvanizes us in more challenging times. Together, we built a bank with deep client relationships and a clear client-focused strategy to outperform over the long run. [Foreign Language] Your confidence in us is well placed, and we thank you for your trust and our team and our bank. We thank you for joining us in person and our webcast. [Foreign Language]. Kate, I'll turn the meeting back to you. Thank you.

Thank you, Victor. On behalf of the Board, I'd like to thank you and the entire CIBC team for your leadership and contributions to CIBC's stakeholders, your solid financial performance and dedication to creating a more inclusive and sustainable future. I'd now like to move to the formal business of the meeting. For shareholders and proxy holders voting in the room, please mark your ballot for each item. The ballots will be collected after you voted on all items. For shareholders and proxy holders who have registered to access our online voting platform, polls are open and will remain open until we complete the formal business of the meeting. I will pause briefly following each item of business to allow sufficient time for those voting online. If you've already voted, no further action is required unless you wish to change your vote. We will now open the meeting for the nomination of directors for the coming year. But first, I'd like to acknowledge Nick Le Pan and Jane Peverett, who just finished their last Board meeting of their long service at the bank, and they've just been incredible in both their contributions. In fact, each of them took leadership roles. They've each chaired more than 1 different committee of the Board. So we will truly miss the 2 of them. On behalf of our shareholders, the Board and CIBC's employees, I want to thank all of our directors. This year, the number of directors elected is 13. They are Ammar Aljoundi, Charles Brindamour, Nanci Caldwell, Michelle Collins, Luc Desjardins, Christine Larsen, Mary Lou Maher, William Morneau, Martine Turcotte and Barry Zubrow, and Victor Dodig and I complete the list.

Kevin Kelly.

Kevin Kelly. Kevin Kelly, that completes the list -- and Bill and -- sorry Kevin, I had you a little bit nervous there. And Bill Morneau joined the Board most recently during the course of the year, so already making a great contribution. So I'd like to now ask all the nominees, including Kevin Kelly to stand up to be recognized. Thank you. I now call on Gopi Akkineni, Director Internal Audit for a motion.

Thank you, Madam Chair. It is my pleasure to nominate for election each of the 13 persons named in the 2023 management proxy circular as a Director of CIBC until the close of the next Annual Meeting of Shareholders, or until their successors are elected or appointed, whichever is earlier.

Thank you. And I now call on Kadira Carter, Senior Account Manager, Special Loans, to second the motion.

Thank you, Madam, Chair. I second the motion.

Thank you, Gopi and Kadira. The floor is open for comments or questions on the election of directors. Are there any comments or questions from the webcast, Michelle?

No comments or questions.

Great. I declare nominations closed. All the individuals nominated are standing for election. If you are a shareholder or proxy holder in the room, please mark your vote for Item 1 on your ballot regarding the election of directors and hang on to it. The ballot will be collected after you voted on all items. If you're a shareholder or proxy holder and have used your control number to log into the webcast, you may record your vote on the election of directors now unless you've already done so. Please remember that if you voted in events of the meeting, and you do not wish to change your vote, no further action is required. I will pause for a moment to allow time for casting of these votes. [Voting]

Great. The next item for business is the appointment of auditors. I will call on Natalia Parker, Manager Client Service for motion.

Thank you, Madam Chair. I move that Ernst & Young LLP be appointed as the auditors of CIBC until the close of the next Annual Meeting of Shareholders.

Thank you. And I call upon Katharine Hicks, Senior Relationship Manager, Commercial Banking to second the motion.

Thank you, Madam Chair. I second the motion.

Great. Thank you, Natalia and Katharine. The floor is now open for comments or questions on the appointment of auditors. Seeing none. Michelle, are there any questions from the webcast?

We have no questions, Kate.

Please mark your vote for item 2 to record your vote on the appointment of auditors. Please remember that if you voted in advance of the meeting and you don't wish to change your vote, no further action is required. The next item of business is an advisory resolution regarding our executive compensation approach. The Board considers this vote to be an important part of our shareholder engagement process, and we review the results of the vote when we're considering our future executive compensation decisions. I'd like to call now on Shin Jacob, Director, Business Insights for a motion.

Thank you, Madam, Chair. I move that shareholders accept the approach to executive compensation disclosed in CIBC's management proxy circular for the 2023 Annual Meeting of Shareholders.

And I call on Hank Ma, Director Talent Development, to second the motion.

Thank you, Madam, Chair. I second the motion.

Thank you, Sheehan, and Hank. The floor is now open for comments or questions regarding our executive compensation approach. I see Mr. Gagnon at mic #2.

Madam, Chair. I'm Willie Gagnon, and I represent MEDAC. I'm sorry, I'm hearing an echo. [Foreign Language] [Interpreted] We habitually opposed the compensation policy overall. On the simple basis that a compensation ratio of between 20 and 30 should be sufficient. And of course, that is not the case. Moreover, we would say that the compensation of the person that has the best compensation in the bank has dropped by something in the order of 10%. Is that simply because of financial performance for the bank overall, or due to something else? You understand that we're happy to see that the CEO's compensation has dropped, but at that rate, we will not achieve the 20, 30 ratio, we are looking for 20 to 30x the average compensation. So I'm just asking that question.

Thank you for your questions -- Correctly just to explain that the CEO's compensation was based on performance. We really do align all of our executive compensation to performance of the bank. And as Victor pointed out, 2022, our results were down somewhat, mainly due to the environment that we were operating in. And so as such, his overall compensation did decline with those results. It was above his target compensation but declined overall vis-a-vis 2021. Thank you very much. Are there any other questions in the auditorium? Any questions from the webcast?

We have no questions from the webcast.

Great. Please record your vote for item #3 on your ballots. Once again, if you voted in events of the meeting, you don't have to change your vote and no further action is required. You will be asked to vote on 3 shareholder proposals now. The Mouvement d'éducation et de défense des actionnaires MÉDAC has submitted 4 shareholder proposals. And after discussions with CIBC has decided to put 1 of its proposals to a vote at today's meeting. Investment Management and invest now each submitted 1 shareholder proposal for a vote. So all in all, we have 3 shareholder proposals today. And first up, we're pleased to have Kelly Hirsch, Head of ESG analysis, Vancity joining us to present Vancity's proposal. Kelly, welcome, and please go ahead.

Wonderful. Thank you. Good afternoon. Thank you for this opportunity to speak to the merits of our proposal. And on behalf of Vancity Investment Management, I'd like to thank CIBC for their willingness to engage with us and the dialogues surrounding this proposal. We believe the CEO to median worker pay ratio is an important metric to disclose for several reasons I'd like to highlight today. Economic and equality has been a persistent issue in our society. And one of the contributing factors is the growing disparity between executive and employee pay. In the U.S., CEO compensation has skyrocketed by a staggering 1,460% since 1978, while the average workers' pay has only increased by a mere 18.1%. In Canada, average pay for the top 100 best paid CEOs hit an all-time record in 2021, increasing 31% from the previous year. Workers only saw a 2% increase over that same time period on average. The negative impact of widening compensation gaps on company performance cannot be overstated. Not only do such gaps increase labor costs due to higher employee turnover, but they also have a direct impact on employee morale. These costs can be particularly significant for human capital-intensive companies like CIBC. By prioritizing fair and equitable compensation practices, CIBC can ensure that its employees are motivated, engaged and committed to the company's success. The impacts of economic inequality extend far beyond individual companies and can have significant implications for the broader economy. Research has shown that high levels of inequality can lead to lower productivity, reduced GDP growth, longer and more severe recessions and increased social unrest. These risks are particularly relevant to financial institutions like CIBC, which depend on a thriving economy to drive business growth. The CEO to median worker pay ratio is a powerful metric that provides a quantifiable way to monitor this risk. As a leading financial institution in the Canadian economy, CIBC has an opportunity to set a precedent for other companies to follow by starting to disclose this information. It is critical to recognize that the ratio from single year is not the focus. For the ratio to be useful, investors, employees and management need to see the trend over time. This allows CIBC to ensure that the wage gap is not widening. If it is, as has been the tendency for the past few decades, this tool will be critical to identify that and to make corrections to ensure employee sentiment stays positive, preventing turnover costs and decrease productivity. The CEO to median worker pay ratio disclosure is not just a trend, but a well-established practice in the U.S. and U.K. that benefits both companies and their shareholders. GRI standards provide clear guidelines for calculating and disclosing this information, making it a feasible and worthwhile initiative for CIBC. Therefore, we propose that the Board of Directors undertake a comprehensive review of executive compensation levels in relation to the entire workforce, and at reasonable cost and admitting proprietary information, publicly disclosed the CEO compensation to median worker pay ratio on an annual basis. I move this proposal. Thank you.

Thank you, Kelly. The floor is open for comments and questions on shareholder proposal #1. Mr. Gagnon?

[Interpreted] Madam Chair. Willie Gagnon for MEDAC. We made a similar proposal over a number of years at every bank's Annual Meeting every year, these were turned down. We see that other shareholders activists are making a similar proposal. Desjardin has published its compensation ratio for some years now. This is a useful indicator over time. Desjardin has about as many employees as CIBC. The information needed to calculate the ratio are available. Immediately, it would cost you almost nothing to perform that calculation for the benefit, not only of all shareholders, but also of all stakeholders, including the community in which most of your business takes place. So we would invite shareholders to support this proposal.

[Foreign Language] Mr. Gagnon, the CEO to median worker pay ratio is something that certainly, our Board looks at. We have an HR Committee of the Board. And it is one of the factors, but our concern is that there's no complete standard out there that we worry that it could be an apples-to-orange comparison depending on the composition of our workforce, the geography, the business mix, et cetera. So it's something that we do track, but we are uncomfortable with disclosing at this time. But we will continue to monitor. And if there is a time when we have a completely acceptable, standardized methodology, we'd be happy to do so. So thank you for your comments. Are there any other comments or questions from the floor?

Hello. My name is Daniel Ingles, and I'm a shareholder, a long-term shareholder of CIBC. This discussion about providing the ratio, it seems to me it's been resolved in the United States. Global companies in the United States have figured out how to calculate this ratio. It can easily be transported to Canadian companies. And CIBC is talking here. We heard Mr. Dodig speak about how CIBC is taking a leadership position in many areas. Why it is not going to take a leadership position and being prepared to disclose the ratio? We also heard that the ratio is disclosed and is disclosed to the Board of Directors. So it doesn't take any additional work to provide that information to shareholders of CIBC. So I would really encourage CIBC to take the leadership position and provide that information and be a leader to the Canadian banking industry and show that it's interested in communicating that information to the shareholders, to the employees and to the public at large.

Great. Thank you, Mr. Ingles. We really appreciate your perspective. So thank you. Any other comments or questions? Anything from the webcast, Michelle?

No online questions, Kate.

Okay. Your Board and management are recommending shareholders vote against this proposal for the reasons set out in the management proxy circular. Please record your vote on shareholder proposal #1. Please remember that if you voted in advance of the meeting, and you do not wish to change your vote, there is no further action required. [Interpreted] Yes, we are happy today to have with us Mr. Willie Gagnon, again, who is Director of the Mouvement d'éducation et de défense des actionnaires to present MEDAC's proposals. Mr. Gagnon, I would invite you to present your proposals.

[Interpreted] Thank you, Madam Chair. My name is still Willie Gagnon, and I'm still representing MEDAC. I don't know if you would like me to present only the 1 proposal that is being put to a vote or the 4 proposals that we originally submitted.

[indiscernible] and then we'll come back to those withdrawn thank you.

[Interpreted] Very good. So we have submitted 4 proposals, only 1 is being put to the vote. Since we have come to an agreement with the bank on all other subjects. The proposal that is being put to the vote will be put to a vote to the annual meetings of all the major Canadian banks, and therefore, we have not been able to agree with any bank. One of the reasons why we are making this proposal this year is that we obtained a high degree of support last year with 22.7% of votes cast, approximately $2.8 billion shares. You can understand that MEDAC is not the only shareholder interested in a say on climate or advisory vote on climate change. It is proposed that the bank adopt an annual advisory vote on its climate and environmental action plan and objectives. The arguments that have been raised against this proposal contradict the arguments in favor of the say-on-pay that already exist. So we would employ you to adopt this practice, which has already been adopted by Canadian National, by Canadian Pacific. It's a common practice in the United States, even Laurentian Bank has promised to implement this practice in the coming years. So we would invite you to follow suit and to accept the adoption of this practice in the future. You say in your response, we continue to follow developments in respect of say on climate. Therefore, we would invite you to continue doing so in a focused way and to adopt this exemplary practice.

[Interpreted] Thank you, Mr. Gagnon. We do certainly agree that climate is 1 of the biggest issues of our time. And certainly on my time on the Board, I've seen a massive increase of our Board's focus, our -- all of our teams focus on this on both the risks and the opportunities and really have seen a journey of increasingly embedding this into our strategy. So it's part and parcel of our strategy. Sustainability is really tied into the overall strategy, which the Board oversees and management executes upon. And so for that reason, we don't think it's necessarily useful to have a separate avenue. We really invite discussion, engagement with you and others on climate. We have a lot of disclosure, including our climate report, which is just recently owned our sustainability report. So I think there's a lot of information out there as to what the bank is doing. But Mr. Gagnon, we absolutely will continue to follow developments. Thank you very much. Any other questions? Michelle?

Kate, nothing on the webcast.

[Interpreted] CIBC's Board of Directors and management are recommending shareholders vote against this proposal for the reasons set out in the management proxy circular. So please record your vote on shareholder proposal #2. Please remember that if you voted in advance of the meeting, and you do not wish to change your vote, there is no further action required. Pleased to have Gina Pappano of InvestNow joined us to present InvestNow's proposal. Ms. Pappano, please move your proposal.

Thank you. Thank you for the opportunity to present today. I am asking CIBC for an explicit commitment to continue to invest in and finance the Canadian oil and gas sector and for a clear signal that the bank will step away from policies like net zero that hurt the sector. I am a shareholder. I have worked in capital markets. I am a daughter of factory worker immigrants. I'm a mother who cares about her children's future. And unless you change your tune, you will hurt all our children's futures. The oil and gas sector is central to Canada's economy and prosperity. Investing in the sector is investing in an industry that fuels everything we do. It means investing in the livelihoods, not just of the hundreds of thousands who work in the sector, but the millions, that is all of us, who depend on it for heating and eating and driving to work and really for all aspects of life. Divesting from oil and gas means severely damaging our economy. It means the growing demand around the world will be met by other less responsible, less environmentally friendly suppliers. It means emissions will actually go up and environmental performance will go down. It means we will see more hardship for everyday Canadians as our economy will be hobbled, businesses and industry will shut down, people will lose their jobs and energy poverty will grow, all while watching the demand for oil and gas being supplied by countries other than Canada. Why would a bank and its shareholders want to commit to that? On net-zero, the bank should step back. The federal government net-zero target is not a legal obligation. Adherence to anti-oil and gas investment policies like net-zero suggests that the banks think that oil and gas extraction, development and use are not essential. This couldn't be more wrong. Nothing happens without oil and gas. It is time for the banks to stick to their knitting by investing in and financing oil and gas. This sector is essential for the functioning of the economy, for jobs, for innovation and for global emissions reductions. I'm urging you to vote for proposal #3. CIBC should invest in Canadian oil and gas for the good of the economy, the environment, shareholders and all Canadians. I move this proposal. Thank you.

Thank you. The floor is now open for comments or questions on this proposal. Michelle, are there any from the webcast?

Mr. Gagnon.

Mr. Gagnon.

Madam Chair, Willie Gagnon from MEDAC. We urge shareholders to vote against this proposal, as, in fact, the bank is doing. Replacing fossil fuels and polluting energy by clean energy will require capital. And that capital is now being used to extract fossil fuels. Let us not fear job losses in such an exercise. We would invite the bank to participate in this transition, to participate in efforts to develop clean energies to replace fossil fuels. So we would invite all shareholders to vote in favor of this proposal. We subscribe to the recommendation of the bank.

CIBC supports our clients in the transition to a low-carbon economy. So thank you. Any other comments? Michelle?

Nothing online, Kate.

Thank you, Michelle. Your Board and management are recommending shareholders vote against this proposal for the reasons set out in the management proxy circular. Please record your vote on shareholder proposal #3. Please remember that if you voted in advance of the meeting and you don't wish to change your vote, there is no further action required. That completes the matters to be voted on. I'll pause for a moment so that the shareholders and proxy holders can finish voting. For those in the auditorium, please pass your ballots to the center aisle for collection by the scrutineers. Please ensure your name is clearly printed on the ballot together with your signature. Could we have the ballots collected, please? [Interpreted] I would now invite Mr. Gagnon again with pleasure to comment MEDAC's withdrawn proposals. There are 3 withdrawn proposals now.

[Interpreted] Madam Chair, I have never been so far so often on the microphone. Thank you very much. I will try and be brief. We had sent 3 additional proposals to the bank, 1 dealing with disclosure of languages spoken by directors. At Page 9, we can see that 31% of directors are fluent in French. We would have wished that information to be broken down for each director. The example on which this proposal is based is the practice at SNC-Lavalin, in which the information was provided per director. All the banks and all the public companies to which we sent this proposal have said, yes, we will disclose languages spoken by directors, and we're happy that you're doing so as well. We had made the proposal related to artificial intelligence. And in your response, you state that you're aware of the importance of making public progress in your strategy, the bank intends to publish additional disclosure in respect of your approach to the ethics of artificial intelligence. The reason that you had received this proposal was that nowhere was artificial intelligence explicitly referred to in your disclosure. So we agreed that this proposal not be put to a vote. And finally, we had made a proposal related to your climate transition efforts. We are happy to read in your answer, especially the time line to which you have committed and all the initiatives to which you have adhered. We are happy to read a detailed record on this issue in a single place in the circular, and we hope it will be possible to do so in future. So if you were ever open to publishing such a statement as a freestanding document in future, we would be even more pleased for this. Thank you very much for all the time you've granted us. We are well aware it was a lot. Thank you.

[Interpreted] Thank you, Mr. Gagnon. Thank you for your continuing engagement with our bank in governance matters. I invite shareholders and proxy holders with a question or comment about CIBC and its business to submit your questions. For those shareholders and proxy holders in the room, please approach 1 of the microphones, state your name and indicate whether you are a shareholder or a proxy holder. If you're attending through the webcast, you can submit your questions by selecting the messaging icon at the top of your screen. Type your message within the text box. Please state your name and indicate whether you are a shareholder or a proxy holder.

Once you finish typing your question, click the submit button. And now I'll take the first question from microphone #2. Welcome.

My name is Paul Durnan from Burlington. I'm looking at a computer screen. And my understanding is that CIBC has the largest percent of their assets in mortgages of the big banks. That's maybe true a couple of years ago, maybe still. And the percent of mortgages that are insured for CIBC is 21%. All of the other banks are higher than that, Royal is 38%. Now we've had 7 rate increases in a very short period of time. And I'm a little bit concerned about the risk in the mortgage portfolio. And this Globe and Mail article of March 3, 1/5 of CIBC mortgage holders can't cover interest portion of the loan. Now fair is fair. There was a retraction on that. And in the Globe, it said -- in fact, they said, "we're sorry, in fact, 1/5 of CIBC mortgage borrowers have seen their loan balance grow because of higher interest rates." There's something called a variable rate mortgage where the amount you pay is fixed. And if rates go up, you're paying a lesser amount, not all of the interest, just some of it. Actually, just recently, I found out that you could pay less than all the interest with each payment. I thought minimum would be the full amount of interest, but I was wrong. So I suggest that, going forward, it's very nice that the Bank of Canada would like inflation rate to come back down to 2% and rates to follow. I don't think that's going to come with this labor shortage. Almost 400,000 unfilled jobs in Ontario and 1 million in Canada. And as part of a Globe article, the Royal Bank of Canada does not allow negative amortizations, but does allow the extension of the payback period, you're actually increasing the amount you owe on your mortgage, if you're only paying a piece of the interest that's due -- that's...

And if I may, I hear your concern about our...

I'm afraid of risk that is coming in the mortgage portfolio, what percent of assets are in mortgages at CIBC.

Victor, I'll turn to you to begin.

Look, thank you, Kate. Thank you very much. And Mr. Durnan, thank you for your question. It's something that's on the mind of many Canadians. And let me assure you of a couple of things. One is we follow a standard that all of the Canadian chartered banks follow. It's a B20 standard in underwriting these mortgages. So those standards are sound. They're based on income. They're based on loan-to-value ratios. And if you look at our entire portfolio of business, the loan to value on the uninsured mortgages is about 50% to 53%. And that would, in fact, account for some of the house price declines you've seen most recently. What Canadians don't focus on that read some of these headlines is that a lot of value has been created in these homes, a lot of equity. People's hopes and dreams are built in these homes. It is the 1 vehicle that Canadians have that's probably the most tax-efficient vehicle. And we help realize those hopes and dreams. What you pointed out in terms of our insured versus uninsured proportion is the fact that we focus on some of the more urban markets like the Greater Toronto area and the Greater Vancouver area, where home prices are over $1 million, and they don't -- they're not eligible for insurance. So the most important thing is our underwriting standards, the loan to value, the fact that clients have actually created equity value in their homes. And then we work with all of our clients, particularly those as you pointed out, in the variable space, which account for about 37%, 38% of our mortgages. The unique feature of our own mortgages is their monthly payments stay flat as interest rates rise. And yes, more of that payment goes toward interest and some of it gets capitalized over time. We've reached out to those clients. 1 in 6 have actually taken action in terms of what they'd like to do, many that are renewing and now renewing into 2- and 3-year mortgages. And we take comfort in the fact that: a, not only is equity value created, but clients also in those mortgages, on average, have more on deposit than they had several years ago. So while you're right to be concerned, and as bankers we're always managing risk, we look at those risks, we follow the regulations, and we feel comfortable in the risks that we've taken from both our clients' perspective as well as from our shareholder perspective. I don't know, Hratch, if you'd like to add anything to that. You see the numbers each and every day as our CFO.

Thank you, Victor, and thank you, Mr. Durnan for the question. We manage our balance sheet very prudently at CIBC. And Victor mentioned a few of the things. I'll touch on some of the stats that you referenced as well. So our mortgage book in Canada, our Canadian residential real estate exposure will be roughly around 1/4 of our balance sheet. Our balance sheet is almost $1 trillion, and of that, about 1/4 would be in Canadian real estate. It would be around half of our loan book, if you look at only the loan part of our assets, as Victor described. Within the spectrum of credit exposures that we have at the bank, we consider the Canadian real estate exposure as one of the least risky, most stable. Historically, you've seen that in terms of our loss rates, in terms of our ability to withstand those loss rates given our capital position, but we manage that very, very closely despite the fact that it is one of the best credit risks that we can take as a bank. It's proven that over time. And as Victor said, it's a core product for our clients and something that is fundamental to enabling our clients to achieve their ambitions within their home life. Now in terms of the insurance levels, it has declined. Those are limitations, as Victor said. the amount of insurance that you can take on even a portfolio level in recent years has been limited by the provision of insurance. And so that industry-wide has been something that has been coming down. But even with that, we feel very good about our current exposure. The product itself, agree with what Victor said, many banks, not all banks, as you pointed out, but many banks and most banks would offer the product the way we do, variable rate mortgages, the payment doesn't change. That allows clients time and flexibility to adjust their finances, and in order to be able to continue to stay in their home even if their finances have to shift. And what we're focused on, and we've talked about this in our quarterly calls recently, is the amount of mortgages fixed or variable that are coming due in the next little while, in the next year and 24 months, we have about $30 billion of mortgages combined between fixed and variable coming due in the next 12 months. We have a bit over -- over double that over the next 2 years. And we're looking at those clients, their circumstances and getting proactively in front of them starting now to help them with whatever they need in terms of advice and financing solutions in order to make sure that they can renew those mortgages, they can continue to thrive in their homes, and we can continue to enjoy the financial performance that we have as a bank.

Fantastic. Thank you both.

Okay. There's nobody else at the microphone. Just a quick supplementary. How does the CMHC mortgage work? You pay a premium? And if you can't make payments, I'm not sure how they work. They're going to make payments for you for a while? Is that right? How does the CMHC mortgage work?

Correct. And so for the insured mortgages that are insured by the CMHC, then if there is a default situation, then that is covered in terms of the bank's credit exposure to that. In terms of the products themselves when they make it into the Canada mortgage bond program, in that case, you get a timely payment guarantee in which case, the bank gets the payments fulfilled as well. But outside of that, it really is just a credit exposure. So it would depend on when and if there's a credit event, and if the bank realizes a loss, that loss would get covered.

But it can only be payments can only be made by CMHC for a limited period of time. Is that right?

I think very briefly, and I think then we will move on.

No. So in terms of any insured mortgages, those mortgages, any credit losses on that by the bank are covered in full.

Very good. Thank you so much. Any other questions or comments in the room. Michelle, how about from the webcast?

We have a question from the webcast. Can you elaborate on CIBC Caribbean loan loss amounts or sale of the various arms, particularly CIBC Domenica.

Okay. Thank you for that question.

I'm happy to take that. So with respect to our divestitures in the Caribbean, we've disclosed this over the last while, as we've been working on those transactions in aggregate nothing that is really material to the financials of the bank. In terms of credit performance in the region as with everywhere globally going through the pandemic, we did have an increase in our allowance levels, so performing provisions were taken at the time. And in fact, we have seen some of that released over the recent because performance has been better than we anticipated going into the pandemic. And so, overall, no concerns with the credit performance in the Caribbean business at this point in time. And in terms of our divestitures and any particular items, really immaterial to the bank overall. It's just an optimization of the local business that we've undertaken.

And I would just add that those changes have been done with a lot of sensitivity to the employees and the communities in which we operate down there. I know, Victor, you were there recently meeting with our clients and teams there. Perfect. Anything else? Any other questions from the webcast?

No other questions.

Okay. Thank you, then. And I'd just like to thank our shareholders and proxy holders for your questions and comments. Your participation in this meeting is very appreciated. If there are no more questions or comments, we're now going to move to the vote results. I've been advised that the scrutineers have their preliminary vote ready -- preliminary report ready. I will stop just a moment and allow -- do we have another question or comment at mic 2?

Yes. My name is John Flanagan. I'm a shareholder. First comment I'd like to make is whoever scheduled this meeting that is not on the same day and same time as the Royal Bank. I appreciate it because this is the first time I've had a chance to attend the shareholders' meeting. With respect to shareholder Proposal 3, I'm a 39-year member of the site of automotive engineers. And as we transition to the electrification of vehicles, it is actually the research and development that the oil and gas industry is doing to bring on hydrogen production, which is the future of electric vehicles being a fuel cell electric wheels. Plug-in electric vehicles are only interim solution. So as far as continuing on funding the transition for the oil and gas industry in the hydrogen production, I would caution you to reconsider that. It's -- I've monitored this discussion over the last 8 years. And I own stock in 2 oil companies, and I know that they're doing that transition to hydrogen production. So I actually changed my vote for shareholder Proposal 3. So just some insight.

Yes. Okay. Well, we really do appreciate your insight there. We are committed to both supporting our oil and gas clients through the transition and overall to our membership in the net-zero banking alliance. So there's a balance there that we want to embrace innovation and change, and we don't want to leave anybody behind either. So I appreciate your perspective. Anything further, comments or questions. Hearing and seeing none this time, now I will go to the scrutineers who have their preliminary report ready. Michelle, would you please read the report?

I will Kate. The scrutineers report that 43.2% of eligible shares have been voted at this meeting. The shareholders voted by proxy or online ballot have voted as follows: on the election of directors, a substantial majority of the votes cast at the meeting were voted in favor of each of the 13 nominees named in the management proxy circular. Appointment of auditors, for 88.08%, withheld 11.92%. Advisory resolution regarding our executive compensation approach, 95.82% for, 4.18% against. Shareholder proposal #1, CEO to median worker pay ratio, 10.37% for, 89.63% against. Shareholder Proposal 2, advisory vote on environmental policy, 16.81% for, 83.19% against. Shareholder proposal #3, oil and gas sector investment, 0.87% for, 99.13% against. Kate, that concludes the report.

Thank you. Based on the vote results, I declare that each of the 13 nominees in the 2023 management proxy circular is elected as a director of CIBC until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed. Ernst & Young LLP is appointed as auditors of CIBC. The advisory resolution regarding our executive compensation approach is approved. And shareholder proposals 1, 2 and 3 are not approved. We thank you for your votes today. The final vote results will be available after the meeting. Just before I close, I would like to acknowledge Michelle Caturay, who will soon be retiring from CIBC. On behalf of our Board, we extend our appreciation for her valued leadership and commitment to governance and excellence in governance.

Thank you. Thank you very much.

We will miss Michelle. I can't imagine an AGM without you Michelle.

Thank you, Kate.

And to our shareholders, we appreciate your interest in our bank. And on behalf of the Board, I'd like to thank you very much for taking the time to join us today. I now declare the meeting terminated.