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

All right. Good morning. Our next presentation comes from CIBC. With us, we have Rob Sedran, Senior Executive Vice President and Chief Financial Officer. Welcome, Rob.

Good morning.

Let's start off with market conditions in Canada. Despite concerns the impact of tariffs, a slowing economy, rising unemployment and the mortgage renewal cycle, results in both consumer and business and government sectors have held up well. Can you talk to some of the factors that you think of driving this resiliency in Canada? And how do you foresee these trends heading over the next 12 months?

Yes. I might challenge that question a little bit in terms of the results have held up well. We think we have had, both in terms of quality and quantity of earnings, quite a strong year. And so on an absolute and relative basis relative to the market. So we're quite pleased with the results that we've been putting out. But I'm not going to challenge the premise of your question, which is the idea that the operating environment has been to say the very least, uneven, and we've been putting up those strong results against that backdrop. What I would take you back to really for us and what we think is driving the performance, our performance, is just that focused execution of a strategy that we're quite comfortable with and pleased with the evolution of. So when you listen to our conference calls, every once in a while, you'll hear the phrase, the strategy is working. And we're safe -- so when we think about the strategy, the reason we say that the strategy is working is that we're seeing it come through in the numbers. And we believe that it's really related to that underlying focus on execution. So when we talk about our strategy, we talk about four main pillars. One of them being the focus on the mass affluent and on ultra high net worth and high net worth. And there, we've got Imperial Service as a channel. We've got -- we've empowered that channel with a digital goal planner with an enterprise CRM with a number of AI-powered tools that's giving an awful lot more productivity to that front line. And we're seeing it come through in the results. We're seeing it in terms of the number of conversations that we're having with clients. We're seeing the net investment flows, #1 in the big 5 banks year-to-date on long-term net mutual fund sales. We're seeing good deposit growth, good active checking accounts. And so it's -- the underlying results have been powered by that strategy. When we think about the digital component of our strategy, we're looking at -- and you can -- the Costco relationship, you can kind of put it in the mass affluent as well, but it's also -- it's a digitally engaged customer base. We're seeing good customer growth. We're seeing the opportunity to deepen relationships. We've invested in a number of tools to be able to fully understand our clients and really get a better solution set to them. And then we've got our Challenger brand simply within there as well, and that one is also generating some powerful returns. The corporate and commercial bank, the connectivity, we talk about delivering the best of our connected platform there, there's been an opportunity really as we've seen to have -- take advantage of some favorable market conditions and the favorable backdrop for us, we've seen good underwriting growth. We've seen good growth in trading revenue. So just market activity has been strong, and we've really started to see a pickup in lending as well. So we think about all of those factors that are driving the underlying execution of the strategy. It allows us to have a good top line. We're maintaining positive operating leverage by just being disciplined on expenses and having that revenue drive that as well. And the biggest factor for us has been -- the reason we say that strategy is working is we're seeing the evolution and the migration higher of our return on equity. And that return on equity is allowing us to generate more capital. It's giving us confidence in the earnings power and confidence in the earnings quality of the bank. And so as much as there's some uncertainty in the macro environment, we are sticking close to our strategy, sticking close to our clients, and it's provided opportunities because that uncertainty has increased their desire to have conversations with us, both in terms of the corporate and commercial side but also on the retail side.

All right. Great. I think that's a nice segue kind of into our next question and shift to focus towards CIBC specifically, maybe dig into your ROE. You kind of changed your ROE target at the end of last year, and you're almost there. What factors would drive you to consider re-upping it to a higher target kind of given your progress this year?

The return on equity target that we have was intended to be a sort of through-the-cycle target. So let's step back for a second in terms of why did we change it when we changed it. And the important thing to remember is that when we set the capital -- when we set the ROE target at our 2022 Investor Day, it was based on a certain capital outlook and a certain regulatory framework that's since changed, right? And so we're... [Technical Difficulty] So that's all good. The alarm system, at least it's been resolved. So we changed the ROE target because we're carrying a higher capital load. But if anything, we believe we actually increased our ROE target for the underlying profitability of the business because we're carrying an extra 150 basis points of capital for regulatory reasons. We lowered our ROE target by 100 basis points. So that delta of 50 basis points suggests to us that there's a positive underlying trajectory in our return on equity. And it was always intended to be a bit of a through-the-cycle ROE target, which means sometimes you're going to be above it, sometimes you're going to be below it. Having said all of that, we have seen good progress on ROE, as you pointed out, 14.6% year-to-date return on equity. We do think the strategy, as it's been outlined, will continue to deliver better fee income, deeper client relationships, more of what we call money in. So think about deposits and investments, things that are more ROE favorable. And that, that strategy as it evolves, we do expect it to continue to drive better profitability. The unknown is the capital requirement underneath it. So the way we tend to think of it more is we're looking for a premium ROE. And we think over time, the strategy should deliver a top two ROE in Canada as we continue to just deepen these relationships. So the focus really is on optimizing our capital -- optimizing our balance sheet, optimizing our capital position, deepening relationships with clients, maintaining the positive operating leverage and all of these things -- and normalizing credit over time as well should lead to an improved ROE outlook.

Great. Now turning to credit. Canadian real estate secured lending remains a large portion of the loan portfolio. As mortgage renewals increase and the pace of rate cuts from the Bank of Canada has slowed, though it may increase, do you have any concerns with this portfolio?

Yes. I understand why mortgages are -- can be a focus point for the market. It is a large asset class for us. It's our largest asset class. At the same time, you would have heard on our recent Q3 call, it's roughly -- mortgages represent roughly 10% of our Personal and Business Banking segment's revenue, which suggested that the enterprise level is somewhere in the area of 4% of our overall bank. So it's a product that we focus on for clients that have deeper relationships with us. It's a product that we offer as opposed to the product that we offer. And so we have been really working to manage that volume versus margin trade-off, and we think we've been doing it positively. And you've been seeing it flow through our net interest margin. From a credit perspective, there's been a gradual increase in delinquency rates. And so I think we're at a 36 basis point delinquency rate. We're not terribly concerned about the credit quality of the book. And in fact, we're quite comfortable with the credit quality of the book. Our net write-off rate is less than 1 basis point. And that's largely because when you think about our -- the loan to values in this. But first of all, we underwrite to the client, not necessarily to the security, but then the loan to value of the overall book, the overall uninsured mortgage book is just -- it's a little bit over 50%. For the impaired book, it's a little bit over 60%. So there's a lot of room there to absorb some of the impairment and not have to worry too much about losses. It gives us the opportunity to work with our clients, and it gives us the opportunity to wait for the market to recover from a volume perspective rather than having to get aggressive in terms of managing that book. So we -- while the delinquency rates have been migrating a little bit higher, we don't see any material losses coming from the book. We're quite comfortable with the exposure, and we're quite comfortable with the role that mortgages play in our book.

Outside of real estate secured lending, credit metrics in cards and personal lending remained healthy in 3Q. I mean given the recent trends in unemployment, are you seeing anything in Canadian consumer lending that would cause you to be concerned? What measures are you taking to mitigate potential increases in delinquencies?

Yes. The overall book has been generally drifting higher in terms of impaired loss rates. And it's been consistently doing that along with just the unemployment rate. So you're right to call out the unemployment rate. You're right to call out the increase in unemployment rate. It does feel to us like -- absent some major deterioration in the macroeconomic outlook, it does feel to us like we're in a plateauing phase of those loan losses. I -- just given the fact that they didn't spike higher, I think calling it a peak it's a difficult terminology to use because the peak suggests it will come down rapidly after going up rapidly. And it hasn't done that. It's been a much more controlled increase. And we would expect that we're -- like I said, we're somewhere in a plateauing phase here as things level off, absent a material deterioration in the economy. The thing that we're doing to manage credit losses is really just, again, I hate to keep coming back to just staying close to our strategy. But that -- the best mitigant against credit losses is knowing your clients and knowing who you're lending to. And so the deeper the relationship, the more likely you are to have a better credit outcome. So we're quite -- we're satisfied with the performance of the credit book, certainly against that uneven backdrop that we talked about at the start of our chat here today. We're comfortable with the performance of the book, and we remain comfortable that, that mid-30s in terms of impaired loss rate and basis points that we provided as guidance, we've actually been at the low end of the mid-30s, call it, 32 or 33 basis points year-to-date. We remain comfortable with that mid-30s guidance is the right place for us. And hopefully, at some point, as the economic performance begins to trough and turn positive, that we can start to migrate back to a more normalized loss rate, which we think is lower than where we are today.

One of the major drivers of CIBC's performance over the last year or so has been kind of a material expansion in the net interest margin, both Canadian personal and commercial as well as U.S. commercial wealth. Maybe can you talk about like help us understand some of the drivers to this expansion? Do you think you still have room to go in this environment?

Yes. So I would break down -- in talking about our margin, I would break it down into three main groups, right? One is our positioning. Our hedging and positioning of the balance sheet. It's a so-called tractoring strategy and I'll chat a little bit about that. The second is business mix, which is really being affected by both customer choice, but also the purposeful execution of our strategy and a purposeful choice in terms of how we -- what products we're focused on and what part of the market we're focused on. And then the third bucket is just competitive pricing, the competitive dynamic and a little bit of our own pricing behavior as well. So let's -- just to break it down into those three. The tractoring strategy -- think about -- it's an oversimplification to think about the 5-year, but it's not a bad rule of thumb to think about the 5-year swap rate as pretty much the rate that you would use to understand when the roll on and roll off of our hedges is going to be a positive versus -- or how long that tailwind can last. And so when we look at that, we see in the '26 it will remain positive and it becomes a bit of a fading tailwind in '27 based on current interest rates. It doesn't really become a headwind beyond that, it becomes more or less of a neutral. So we think there's still an opportunity for that. We've suggested it's a couple of basis points a quarter on prior conference calls. Again, still a reasonable basis from which to start. The interesting part is the second bucket is that business mix, which, again, partly it's client choice around the mortgages aren't growing as rapidly in the sector. The credit card growth is a little bit higher for us. We're acquiring some good credit card customers through our Costco partnership, but also just our own credit cards. And it's also a focus on some of that money in behavior, growing our checking accounts, focusing on deposits as opposed to some of the other product areas. So that's been a conscious decision by us to manage that margin and you've been seeing a significant increase in that profitability. You see it most directly in our personal and business bank but it's happening on both the commercial and corporate as well as the business -- the personal side. And then the last part, particularly this quarter for us was some promotional pricing rolling off. The competitive environment is -- it's intense, but it's rational. And so product margins are holding in reasonably well. And so some of the product, just the year-on-year or the maturing roll on, roll off even of the product margins has been a little bit favorable. So you put those three things together, and it was a strong margin performance in Q3. And there's nothing that felt terribly unusual in that. And so we sort of use it as a base from which to grow from here. We still think the direction of travel is a positive one on the net interest margin. But it's those three buckets, you never know exactly how business mix is going to roll in and roll off. You never know exactly how the product evolution is going to go. We're comfortable with the tractoring strategy delivering from here, the other things maybe pluses or minuses. But we're -- our view is that the margin that we delivered in 3Q is sustainable, and we should see some growth from there.

Great. In 3Q, commercial loan growth in Canada was relatively healthy. Which areas do you see the best opportunity? Are you seeing the growth opportunity in commercial real estate as well? How would you assess the risk associated with your commercial loan exposure to the current economic environment?

Yes. We're quite happy with the performance of our commercial bank over the last -- well, over the last many, many years. But certainly, in this period of uncertainty, it's given us a great chance to get closer to clients, and it's also given us a chance to get close to a number of prospects that we've been talking to and getting to know for many years. And we've seen the opportunity in this uncertain environment to be able to take a little bit of share as well. So the growth has been pretty much across the board on the C&I side. We've got some specialty lines, including innovation banking and some others that have been doing well and some of the sponsor finance that's been doing well. But it has been broad-based growth in our commercial bank. The CRE side, not as much. Commercial real estate volumes have been a little bit more subdued. In particular, we tend to focus on some of the larger developers and some of the higher tier developers and they have not been as active in the last little while, and the commercial real estate market in Canada has been a little quieter. So we haven't had as much growth on the CRE side. There's been a little bit, just not as much growth on the CRE side. So it's been a little bit more biased toward the commercial and industrial. I will say the performance of the book, when you look at our trailing 4 quarter loss rates around just over 10 basis points, 11 or 12 basis points on impaired losses. Part of that is just we've been staying close to clients. We didn't extend ourselves in periods like '22 and '23 when the growth was a little higher. We were trailing the market a little bit. We were decided to build capital rather than deploying too much capital into that market, and we're seeing the benefit of that now. So we're comfortable with our credit exposure. We still think the market is starting to come out of a bit of a hibernation, if you will, earlier this year, particularly in commercial lending, a number of sectors were a little quieter just given the trade uncertainty and the macro uncertainty that we've had. That's starting to lift a little bit. I don't -- I think it's premature to suggest that we can sound the all clear on that front, but it's definitely the tone is a little bit better. And so we're still expecting to see some decent growth from here but we've had a strong year in commercial banking as -- and we expect that performance to continue.

Okay. Great. The Wealth Management segment also showed continued momentum in assets under management and administration. You expect to continue to take share in this business? And would you consider acquisitions or strategic partnerships to further expand the business?

Yes. The Wealth Management side has really been a story of strong distribution and deeper client relationships. It's been a key focus of the strategy to get more and more into particularly that Imperial Service channel and have those advice conversations and have our clients take that longer-term view on the markets, and it's been working particularly through the digital goal planner that we have empowered that channel with to have those conversations. If you're going to do a financial plan with someone, you kind of have to -- if you really want a valuable financial plan, you're giving them your whole financial picture as opposed to just what the assets might be at CIBC. So it's allowed us also to internalize a number of assets. And so that growth has been strong, and we're confident that the -- we're on the right track and that growth can continue. Part of the challenge, of course, is the market backdrop, and it's been a favorable one. And again, in some ways, against that uneven environment, having the markets continue to rise and be constructive, you never know when that could break or that could change. But on a relative basis, we're comfortable that the strategy is going to continue. On an absolute basis, there is some level of market activity that it's dependent on. So we don't assume we're always going to be hitting new record highs on the various exchanges that's going to continue to deliver. So we have ambitious sales targets for the businesses. The actual growth in terms of assets is going to depend partly on the markets. When it comes to M&A, this is the one area where we are interested in -- we always refer to tuck-in acquisitions. We're not looking to make big splashes, but the tuck-in acquisition for us to continue to grow a business on both sides of the border, candidly, we look in the U.S., we have a strong platform, roughly $100 billion in assets under administration and management. The RIA channel is one that we want to continue to grow, and it's one that we will be active in at the small end, we're not looking to make any big splashes. On the Canadian side, there's not as much that is available. It's obviously a much more consolidated marketplace but we remain interested in growing our wealth management on both sides.

Okay. Then maybe also moving on to the capital markets business. Despite increased economic uncertainty, revenues in the capital markets business, both investment banking, trading have been strong in the last few quarters. Do you expect this trend to continue in the near future?

Yes. I think it's because of the uncertain environment, right? It's been an interesting year for the capital markets generally. I think Q1 -- every quarter has had its own story as we look at that macro environment. In Q1, there was a bit of pent-up activity. Our fiscal Q1, as a reminder, goes from November through to January. And so there was a bit of a pent-up activity pre-election. I think things have slowed down post the election. We had the -- just a lot of that activity come into the market for what is normally a seasonally strong quarter for us, it was even stronger. Q2 was more of the tariff uncertainty, and it brought an awful lot of activity into the marketplace. Trading revenue was quite strong, even if underwriting and advisory was perhaps a bit more subdued just given a more challenging environment there. . And then Q3, it's -- I think we've gone to -- it feels like we've gotten to the point where there's just that pent-up activity that was in the pipeline just starts to come through the pipe. And so you saw strong underwriting. You saw strong advisory business and the trading revenue was perhaps not as strong as it was earlier in the year. So it's a nice balance. For us, there's a cyclical component and a structural component to the growth. The structural component to our growth is that we are continuing to expand our platform, particularly in the United States as we grow it organically. Like we're adding people, we're adding capability. And so our year-on-year growth rate in U.S. capital markets was about 30 -- like low 30s percent. It now represents about 1/3 of our Capital Markets revenue is coming from the United States. So there's a structural growth rate story within there, then there's the cyclical growth rate that has advanced that performance still faster. So we talk -- and our capital markets leaders talk about a 7% to 10% annual growth rate. The intention is sort of a match what we think the overall bank can do. Clearly, it's been higher than that year-to-date. And I think it's just been a very constructive marketplace. But I wouldn't want to lose sight of the structural gains that we're making just by some of the expansion plans we have.

All right. Great. And then moving from revenues to kind of expenses. In terms of operating leverage, what levers do you have to continue generating positive operating leverage? Or are you looking to make additional investments? And where do you stand compared to competitors on technology investments?

Yes. The operating leverage is just an operating philosophy for us and the way to protect your operating leverage, and we've delivered it now for 8 consecutive quarters. And every time I say that, I always say we don't promise it quarterly. We do target it as best we can. But our expectation is that we deliver on an annual basis. From quarter-to-quarter, sometimes you can end up in a slower revenue quarter, a bit of a hotter expense quarter. We're managing it well, but we don't promise it from quarter-to-quarter. The best way to secure operating leverage is the plan for a weaker revenue environment that constrains the expenses and feed it into the system if revenues are coming better, are coming in stronger. And that's more or less what we've been doing for the last couple of years. We plan for a lower expense growth rate. But we have things that are on the cutting room floor or on the loading dock, however -- whatever metaphor you want to use, that can then be brought in things that we want to do from a growth perspective, whether investing in cash management systems, whether we're investing more in people, whether we're growing more rapidly on the front lines. If revenues are performing, we can let a little bit of rope into the market into our -- into the bank from an expense perspective. And it's a far easier way to manage operating leverage than it is to suggest that we're going to have a great revenue year. So let's spend a whole bunch of money. The only thing you know for sure is you're going to spend that money. So that philosophy has allowed us to really protect the operating leverage and to find a good operating momentum when it comes to. So it's just an important operating discipline that we see. And again, not promising it every quarter, but it is something that we do target annually, and it's a very important measure for us. When we think about our technology investments, we've been investing at pace for quite some time. And so for everything from -- one of the pillars of the strategy I didn't talk about as much at the start, as we call it, enable simplify and protect. And it's everything from the digitizing to end-to-end process reengineering to our AML and cyber and all the other risks that you have to spend money on. All those programs are more or less at run rate expense growth -- expense rates because we have been investing significantly in the past. And we expect to continue to make those investments in the future. And what the difference now with the new AI tools, the new technology tools that are just coming online is there's opportunity to take out structural costs that might have -- would have been a little bit harder to get at previously. And so we're now looking at ways to take that cost out a little bit more -- to get a little bit more cost out. But for us, when we talk about investing, thematically, we link it to the efficiency agenda, right? Like we're looking to liberate expense dollars that we can reinvest into growth initiatives rather than having some part of the bank in charge of efficiency, another part of the bank in charge of investing. And so we're investing the dollars that we're harvesting. And so the operating leverage that we've been delivering, we have a good solid year from an operating leverage perspective, that 1.5% to 2% is, we think, an appropriate level to target that allows us to invest what we need to invest, allows us to still get the torque into the bottom line of that good expense control and still keep attention on the efficiency gains that are needed to fund all of this, right? So it's not as much as operating leverage and expense control are a very important theme. It's not dependent on a strong revenue environment to deliver. It can't be dependent only on a strong revenue environment to deliver because you're not always going to have that strong revenue environment. So it's embedded in the philosophy of how we run our plan and how we run our bank.

And speaking further on expenses, CIBC highlighted increased digital adoption and productivity gains through its AI platform. How do you plan to leverage this trend to improve operational efficiency and customer experience? And what new digital capabilities do you expect to roll out in the coming quarters?

Yes. So the first step for us, particularly when it came to AI was to put through a series of governance framework around it. Any time you have new technology, it's important to step back. And before you roll out too many things too widely, to put some rules around how we're going to use it, particularly how we're going to use some sensitive data. And so that -- we spend time just rolling out a governance framework. We're quite happy with the way it's working. We've got an internal generative AI engine now that we use and have rolled out to the entire organization. And we will talk -- and I think it came up on our recent conference call. We've talked about hundreds of thousands of hours saved. The challenge early on we're trying to encourage use, right? And we're trying to encourage the different way of thinking and more of an efficiency mentality in people and let's use the tools to figure out how best to change your own individual job because at the end of the day, the people that can most figure out how to make themselves more efficient are the people that are doing it. So we're empowering them with the tools, and we're encouraging their use. So when we talk about hundreds of thousands of hours saved, you're not going to find that in our subpack somewhere, right? Like it's difficult to draw a straight line from those hundreds of thousands of hours to an expense growth rate. As that matures, though -- and it's also -- if I saved 4 or 5 hours of somebody's time, that's not -- that doesn't really liberate them to do anything other than more of the work they're doing. So it becomes a productivity tool. As these tools mature, though, we should start to see more of that structural cost come out. And it should mean that we scale up better and that we were able to invest and scale up better. So from a digital rollout perspective, we're looking at a lot of -- really, for now, a big focus on the efficiency side and taking jobs that would previously be done by individuals, we're trying to automate and just become more and more on the operations side, on the technology side. Our programmers are using the tool to help them program like they're just becoming much more productive, and we're getting more done. So ideally, you're seeing rather than a widening operating leverage, what you'll see is just a better overall growth rate in the bank and a more sustainable level of operating leverage.

Now moving on to capital, even after 5.5 million share repurchases in 3Q, CET1 ratio remains relatively strong at 13.4%. How do you plan to deploy excess capital in the coming quarters? And are you looking to accelerate the buyback?

Yes. So that 5.5 million shares that we repurchased in the third quarter finished the buyback. And so we re-upped for another 2% as of the most recent quarter, and we will be in market again using it. Now that 2% -- the 2% that we've repurchased over the last year, we announced the buyback, we were at 13.3%. We finished the buyback, we were at 13.4%. So as much as we have been returning capital, the other side of the equation is that we've been growing capital. And so it's not so much that there's not been as much credit growth because we've actually seen reasonably good credit growth. What you're seeing is the benefit of that rising ROE and that increased capital generation that we've been seeing suggests that there's -- as much as we've been giving capital back or returning capital back to shareholders, we've kept a relatively stable CET1 ratio. We've proven in the past and we think our strategy can see us deploying capital from an organic perspective. When you think about what our priorities are clearly organic capital deployment and growing the franchise across all four of our business units, right? When we look at our four operating segments, we think all four of those have growth -- are growth segments and have growth opportunity in front of them and can absorb excess common equity over time in a bit more -- in a more robust economic environment. So choice #1 always is on the organic growth side. The dividend is something that we look at annually, and we had a nice sized dividend increase last year. We'll be looking at it again in Q4. And I think the expectation of dividend growth continues to be one that we have of ourselves and that the market should have of us as our earnings are growing as well. The buyback is sort of that third pillar, and it's active. We expect it to remain active. But for us, really, when we think about the buyback, it's really a concept of balance. We don't want to be overly aggressive on the buyback only to then turn it off later on because we thought opportunities to deploy. The idea of balancing between organic deployment and the buyback and maintaining some flexibility for the execution of our strategy, is what makes a lot of sense to us. And the last pillar is acquisitions, and we're not looking for transformative acquisitions. We use the phrase tuck-in a lot. And so we always want to make sure we're tempering expectations for how much we can deploy or want to deploy through acquisition. But we feel like our strategy as an organic opportunity in front of it that does not require major acquisitions to continue to advance. And so it makes us a bit pickier in terms of the targets that we work with in terms of the opportunities that we pursue. And when we -- the ROE focus that we have necessarily constrains a little bit of that acquisition appetite because the acquisition math can be quite challenging. And so we look at tuck-ins as something that will be ROE accretive in a relatively short time, and we'll continue to advance the bank strategically. So that financial component is there. So those four pillars are how we think about capital. We're comfortable with the 13.4% we're sitting on. Normally, we would say we would target something around 100 basis points above the regulatory minimum, which is 11.5% today. So that would suggest 12.5% as an operating level for us. We'd be perfectly comfortable being there. But when we think about capital, we think about it in terms of two gates, right? One is the regulatory minimum, which clearly that would suggest 12.5% is a perfectly fine operating level. The other one, and I think it's a reasonable one to consider is just the relative positioning relative to the rest of the sector in Canada. And as much as we'd be comfortable operating at 12.5%, what we really want is to have the front lines, to have our businesses being able to freely pursue the strategy because we do -- we are confident that it can work if we continue to just give them the raw material they need to pursue the strategy. And so we don't want to be too far off of the peer performance simply because it creates noise in the execution of our strategy, and it can disrupt the operating momentum that we think we have. So while yes, we're sitting at 13.4%, we do feel we're sitting with excess common equity. We're not in any big rush to give it back. We think it will -- a combination of deployment and the buyback, we'll draw that down over time.

All right. I just want to quickly touch on maybe the management transition. CIBC made significant strategic progress on the current CEO of Victor Dodig's leadership. How is the current transition to Harry Culham going? And should we expect to see any strategic changes, priorities or capital allocation?

Yes, we're quite pleased with the way the transition is going. It's been, I can say, internally a relatively -- not relatively, it's been a seamless handover as it's gradually happening. Victor's last day as CEO is October 31, and Harry takes over the next day. And the team and the strategy are largely intact. There's always going to be some small changes that happen at these inflection points. But by and large, the direction the bank is taking, we're quite confident. And Harry has been around on the Executive Committee now for a decade. And so he's as invested in the strategy as any of us. So I would say, as we look forward, the focus is going to be on increased -- the next level of focus on client engagement, the next level of focus on operating efficiency and modernizing the banks, the next level of focus on just the human capital and the culture of our bank and really pursuing a number of growth initiatives that we've already got in flight, that's -- that -- all of that is happening against the backdrop of the environment that we're talking about. And so always, you're going to have some changes in execution in terms of how you go about things. But what Victor has done and Victor's era has done, it's given us the -- it's restored our platform and restored our purpose and destiny candidly, on that client focus and that client journey that I think will be something that we can now build on and grow on. And that's the biggest part of Victor's legacy, I think, is that we're positioned to build on what we've done over the last 10 years -- 10 or 11 years and really take it to the next level. We're quite confident that there's as much as we've had a good run, we're quite confident in the future of CIBC.

To close off, I just want to give you the final word, CIBC has delivered a run of solid results driven by steady execution. How confident are you about achieving your key financial targets, including 7% to 10% earnings growth, 15%-plus ROE as you head into fiscal 2026?

Yes. It's a little early to get out into the 2026 guidance land, but I will say that we are confident the quantity and quality of earnings has been strong. We think the sustainability of our performance and the pursuit of our -- the pursuit of the underlying strategy will continue to deliver positive returns for shareholders. We do target that 7% to 10% range. We'll be above that this year, but we do target that 7% to 10% range over the medium term. We do target that 15% plus ROE. Both of those are very important to us. And the third component of that and really a key part of achieving those targets is the expense control and the efficiency initiative that will allow us to generate the positive operating leverage to get there. So the -- we're -- from year-to-year, the macro environment can be positive and negative and things can bounce around. But what's not going to change is our focus on execution and our focus on delivering what we proudly refer to as boring. We think that this consistent and predictable ongoing execution and delivery of our results, it's done well for our shareholders over the last while, and that's what we're looking to continue as we look forward. We're quite optimistic about our opportunities and about our strategy as we continue to execute it.

Great. We have a quick minute left, if anyone open the floor if anyone has any questions. All right. Please join me in thanking Rob for his presentation today.

Thanks, everyone.