Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to CWB's first quarter 2023 financial results, conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your request, please press star followed by two. Thank you. I will now turn the call over to Chris Williams, Assistant Vice President, Investor Relations. Please go ahead, Chris. Morning and welcome to our first quarter financial results conference call. We'll begin this morning's presentation with opening remarks from Chris Fowler, our President and Chief Executive Officer, followed by Matt Rudd, our Chief Financial Officer, and Carolina Parra, our Chief Risk Officer. Also present today are Stephen Murphy, our Group Head, Commercial, Personal and Wealth, and Jeff Wright, our Group Head, Client Services, Specialty Businesses. After prepared remarks, they will all be available to take questions. As noted on Slide 2, statements made on this call are forward-looking, may be forward-looking in nature, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. We'll also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted useful to be useful in assessing underlying business performance. I will now turn the call over to Chris Fowler, who will begin his discussion on slide. Thank you, Chris, good morning, everyone. This quarter, we continue to demonstrate a consistent client growth through economic cycles. Our teams deliver strategically targeted sequential loan growth of 4% in Ontario and a 2% increase in general commercial loans, which represents our largest opportunity for full service clients. Growth of the Canadian economy has experienced challenges with the persistently high levels of inflation that have resulted in the implementation of restrictive monetary policies by the Bank of Canada. Similar to previous economic cycles, we remain committed to helping business owners across Canada, which we expect will provide continued growth opportunities within our risk appetite. Today, we reported EPS of CAD 1.02 per share that was up 60% from last quarter and includes the reversal of a previously recognized impaired loan write-off that offset the impact of lower foreign exchange revenue compared to elevated levels last quarter. Our performance also reflects pressure on our net interest margin from the Bank of Canada's two increases in policy rates during the quarter that limited upside to our net interest income. As I outlined at our recent Investor Day, our strategic priorities are to drive long-term value for our people, clients, and investors. Our teams are focused to serve the unique needs of business owners and their families across Canada. We're investing to close competitive gaps in our client offering and core capabilities, coupled with a future transition to AIRB and a targeted presence in key markets that provides full service banking opportunities for more Canadian business owners today and in the future. Our full service offer is captured in general commercial loans. It aligns with a broad section of the Canadian economy that we believe is underserved by the other banks. Full service general commercial clients support our growth in lower cost relationship-based deposits and supports our funding profile to strengthen our earnings power. The recent rebrand of our CWB Wealth offers a key component to meet the needs of business owners, where we provide comprehensive, high-touch offerings for management of our clients' current and future wealth needs, including a full range of financial planning activities. Our established credit risk management framework, including the secured nature of our lending portfolio with conservative loan-to-value ratios, is a platform to select the right growth opportunities in an uncertain economic environment. As Carolina will discuss in a moment, our gross impaired loans returning to more normal levels from the very benign conditions last year. Our secured lending model and disciplined underwriting processes support our expectation that our provision for credit losses will remain within our historical range. We expect ongoing delivery of our strategy focused on business owners to support a positive revenue trajectory in the second half of fiscal 2023, and we will proactively manage our expenses to drive profitability in line with the full year targets we provided in our financial scorecard. I'll now turn the call over to Matt, who will provide greater detail on our first quarter financial performance. Thanks, Chris. Morning, everyone. If we start on Slide 6, our branch raised deposits are up 5% from last year. That's reflecting 29% growth in our fixed term deposits, partially offset by a 3% decline in demand and notice deposits. Despite growth from net new full service client additions, the reduction in branch raised demand and notice deposits primarily reflected a reduction in average client balances and the shift to term deposits, which continues. Overall, branch raised deposits represent 56% of our total funding. On a sequential basis, the change in branch raised deposits primarily reflects a 2% decrease in demand and notice deposits. While we generated growth in notice and demand deposits from new clients in the quarter, the deposit balances of existing clients continued to decline and shift into term deposits. The 1% increase in branch-raised fixed term deposits reflects the continued shift in client preference in the rising rate environment. We were disciplined on branch raised fixed term deposit pricing to maintain it below the cost of fixed term broker deposits. We believe that this dampened branch raised deposit growth overall for this quarter, where we experienced unusually aggressive competitive pricing for certain fixed term deposits. Capital market deposits decreased by 8% from last quarter due to a senior deposit note maturity. Broker source deposits increased 8% from last quarter. While our preference is to raise relationship based branch raised deposits, the broker deposit market continues to be a deep and efficient source to raise insured fixed term retail deposits. We raise only fixed term broker deposits with terms to maturity between one and five years. We turn to Slide 7. Our total loans were up 9% in the past year. It's positive growth in all of our loan categories except oil and gas production. Our focus to increase full service client relationships across our national footprint drove very strong 15% growth in the strategically targeted general commercial portfolio. On a sequential basis, total loans were up 1%. Very strong 4% loan growth in the Ontario market accounted for approximately 71% of net loan growth in the quarter, supported by our Mississauga and Markham banking centers. Solid sequential growth of 2% in the general commercial portfolio also reflected very strong growth in the Ontario market. Personal loans and mortgages increased 4% sequentially, driven by growth in both insured mortgages and uninsured mortgages, which benefited from new origination volumes with prudent loan to value ratios and strong average beacon scores and with lower payouts compared to the prior quarter. Our sequential performance is shown on Slide 8. Common shareholders' net income increased 39% sequentially as the beneficial impact of a 23 basis point decrease in the total provision for credit losses and lower non-interest expenses more than offset a 2% decline in revenue. Pre-tax, pre-provision income decreased 3%. Diluted EPS increased CAD 0.27 compared to Q4. In the prior quarter, we recognized accelerated amortization of previously capitalized AIRB assets that drove a CAD 0.13 EPS impact. That was reflected as an adjusting item in the prior quarter and had no impact on adjusted EPS. Adjusted EPS increased by CAD 0.14 compared to last quarter. In the first quarter, we benefited CAD 0.13 from the reversal of a previously recognized impaired loan write off, which reflected the combined impacts of a reduction in the impaired loan provision for credit losses, which is about CAD 0.10, and increased net interest income, which was about CAD 0.03. Excluding the impact of reversing the previously recognized write off, our provision for credit losses increased EPS a further CAD 0.06 and primarily reflected an 11 basis point decrease in the performing loan provision. Lower non-interest income reduced EPS by CAD 0.07 as we recognized elevated foreign exchange gains in the prior quarter. Excluding the benefit from the reversal of the previously recognized write off, net interest income reduced EPS by CAD 0.01. Lower Non-Interest Expenses increased EPS by CAD 0.03 due to the expected seasonal decline in certain expenses, partially offset by higher people cost. As shown on Slide 9, total revenue decreased 2% on a sequential basis. The 23% decline in Non-Interest Income was primarily due to the elevated foreign exchange gains recognized in the prior quarter. The 1% increase in net interest income was driven by 1% sequential loan growth, partially offset by a 1 basis point decline in net interest margin. The drivers of our 1 basis point decline in net interest margin are shown on Slide 10. They continue to reflect that the growth in asset yields has not yet caught up to the growth in funding costs in the rising rate environment. We expect that this trend will reverse in time given the longer duration of our loan portfolio relative to our deposits. This quarter, our NIM benefited from a 3 basis point interest recovery related to a previously written off loan. Two Bank of Canada policy rate increases totaling 75 basis points occurred during the quarter. That contributed 5 basis points to our NIM from increased floating rate loan yields, net of the increased cost on floating rate deposits. Asset yields continued to increase but were partially offset by lower loan fees in the quarter and payout penalties, but had a net contribution of 17 basis points. Higher deposit costs had a negative 29 basis point impact, primarily from higher fixed term deposit costs and higher demand and notice costs reflective of the rising interest rate environment. Improvement in our asset mix contributed 4 basis points and reflected a larger proportion of higher yielding general commercial lending, and slightly lower liquidity, while changes to our funding mix reduced NIM by 1 basis point. Our capital ratios are calculated using the standardized approach and are shown on Slide 11. Our CET1 ratio of 9.1% increased 30 basis points from last quarter, primarily due to the beneficial impact of retained earnings growth, common shares issued under our ATM program, and a decrease in the accumulated other comprehensive loss related to increased fair value of our liquidity management portfolio. These impacts are partially offset by risk-weighted asset growth. The Tier One capital ratio also increased 30 basis points due to the same factors. The total capital ratio increased 70 basis points as it also reflected the impact of 50 basis points associated with the issuance of CAD 150 million of NVCC subdebt in the quarter. We issued common shares for net proceeds of CAD 44 million under our ATM program this quarter. With a CET1 ratio above 9%, we're comfortable with our current level of capital in light of the potentially volatile economic environment. As discussed at our Investor Day, we're following a path to reduce our reliance on the ATM program. Stability in market interest rates is expected to provide a benefit to our capital ratios, as it will reduce the unrealized losses on the debt securities in our liquidity portfolio that are currently negatively impacting our CET1 ratio. As Carolina will discuss in a moment, adoption of the CAR 2023 revisions is expected to have a positive impact on our CET1 ratio of approximately 10 basis points on adoption. Yesterday, our board declared a common share dividend of CAD 0.32 per share, consistent with last quarter and up CAD 0.2 or 7% from last year. I'll now turn the call over to Carolina, who will speak further to our credit performance. Thank you, Matt. Good morning, everyone. Beginning on Slide 13, our overall credit performance remains strong despite pressures from higher interest rate and inflationary environments. As Chris noted, gross impaired loans have begun to return to more normal levels from a very benign conditions last year, while write-offs remain low. Total gross impaired loans represented 75 basis points of total loans. The level of gross impaired loans fluctuates as loans become impaired and are subsequently resolved, and does not directly reflect the dollar value of expected write-offs given the tangible security held in support of our lending structures. Our strong credit risk management framework, including well-established underwriting standards, the secure nature of our lending portfolio with conservative loan-to-value ratios, and proactive approach to working with our clients through difficult periods continues to be effective to minimize realized losses on resolution of impaired loans. This is demonstrated by our history of low write-offs as a percentage of total loans, including through past periods of economic volatility. Write-offs remain low this quarter at 0.03% of average loans, compared to 0.12% last quarter. I would also note that we do not have any material exposure to unsecured personal lending, including no exposure to personal credit cards. As part of our prudent risk management framework, the overall portfolio is reviewed regularly to provide early identification of possible adverse trends. Turning to Slide 14, in the first quarter, our provision for credit losses amounted to - 9 basis points. This result reflects a 12 basis point impaired loan recovery, primarily due to the reversal of a previously recognized CAD 13 million general commercial loan written off that Matt noted just earlier. Excluding the reversal, PCL for this quarter is still low at $1 million. We continue to build our provisions on performing loans, considering the consensus of forward-looking macroeconomic outlooks with softening specifically related to declining housing prices, slowdown in GDP growth, and lower forecasts at oil prices. The provision on performing loans of 3 basis points was 11 basis points lower than last quarter. We look forward in 2023, we expect the provision for credit losses to increase gradually over the near term to finish within our historical range of 18-23 basis points on an annual basis. Slide 15 shows, the CAR 2023 guidelines and associated disclosure requirements became effective in February 2023. The change results in slightly more risk sensitivity to the capital required for our lending exposures as a standardized bank. Our lending approach places greater focus on portfolios that attract lower risk weight density under CAR 2023. We expect the adoption will increase our CET1 ratio by approximately 10 basis points. As I discussed at our Investor Day, our approach to loan growth will leverage the risk sensitivity within CAR 2023 to lower our risk-weighted asset density. The portfolio allocation opportunities under CAR 2023 will help us accommodate higher level of loan growth supported by organic capital generation over time. Before we begin the question and answer section, I will turn the call back to Chris for his closing remarks and outlook. Thank you, Carolina. Looking forward on Slide 16, our prudent approach to risk management, underpinned by our secured lending model and enhanced client offering, position us to deliver both full service client growth and enhanced profitability in 2023. Our strategically targeted general commercial loan portfolio will also support the acquisition of lower cost branch raised deposits. We expect a more stable industry environment through the back half of the current fiscal year to support expansion of our net interest margin as lending spreads normalize and our fixed-term loan products, which have a longer average duration than our fixed-term deposit products, continue to reprice at current market interest rates. We will proactively manage our expenditures to deliver an efficiency ratio and full-year financial results in line with our financial scorecard as we execute on our strategic priorities and drive more revenue growth through the year. As Matt noted, we're comfortable with our capital position based on current economic conditions. I'm also happy to announce we'll publish our annual sustainability report in mid-March to provide more details on our progress towards important ESG initiatives. In closing, I'd like to thank you for your continued interest in Canadian Western Bank, and we look forward to speaking with you at the next quarterly call on Friday, May 26th. I will now turn the call back to the operator for the Q&A portion of this call. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. If you would like to withdraw your request, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from the line of Doug Young from Desjardins. Please go ahead. Hi. Good morning. Just a few questions here. First, I think, Matt, last quarter, you talked about being able to stop using the ATM once the new CAR guidelines come in. Any change to that perspective or that view? No, Doug. Yeah, I mean, at the Investor Day, we outlined the path of how we would reduce our reliance and, you know, with the goal of effectively turning it off. You know, there were two ingredients to that. One was adopting CAR 2023 and getting a lift from that. On adoption, we're seeing the lift we expected, we'd get from our portfolio at the time. Now we can really target our growth, focus it on the lower risk-weighted asset densities there, which actually lines up pretty closely to how we lend in the normal course. That's a key tool for us, to accommodate higher levels of growth. The second thing, putting wind in our sails, as we talked about, was just the liquidity portfolio, the unrealized losses in it. We saw those come down, pretty good this quarter actually, with the curve normalizing. That's a trend we will continue to see through the course of this year. Doug, yeah, I'd say we're on track, and that remains our target. Okay. Should we start to see that tail off in Q2, or is this more Q3, Q4, where the AT kind of start to move away? Yeah, it's something that we could start to see right away here. That would be sort of our base case estimate. Now, of course, we'll always be prudent in managing our capital, and we'll have the right level of capital for the environment. But put it this way, I mean, there's a lot of catalysts for us, Doug, that would have us significantly reduce the usage and ideally turn this off as early as next quarter. But we'll be mindful and just make sure we're managing things very prudently if we do see other things that draw on our capital demand. Okay. Second, just going to Slide 10, an interesting slide nonetheless. I guess the question is, are you starting to see upward momentum in asset yield repricing outpacing deposit repricing this quarter so far? Is that something that you're starting to see, or are we still a few quarters away from that really starting to unfold? I guess the second part of the question is, I mean, on the left-hand side, that gap between the average prime rate and lenders' interest margin is really, really gapped out. You know, has it ever been that wide in the past? Just maybe provide a little historical context if you can. Yeah, for sure, Doug. The gap, I mean, still pretty wide this quarter. If you look at the difference between fixed-term asset yields and fixed-term deposit costs, I'd say that's a relatively unflattering look this quarter, and I highlighted it a bit in the opening remarks. There was the impact of lower fees that was compressing our asset yields. That was actually a decent impact, about 5 basis points or so of impact on the NIM. A big chunk of that was tail penalties, so that's sort of a good news/bad news story. It's bad news on the NIM. Usually we get CAD 2 million or CAD 3 million a quarter of tail penalties. In the normal course, this quarter was effectively zero. The positive side to that is it really boosted our growth in our residential mortgage portfolio because we saw, you know, very limited tail volume there. Sort of good news, bad news on that piece. The other, I suppose, good news then, if you think about asset yields against deposit costs, last quarter, that differential was about 17 basis points. This quarter, it shrunk to 12. If you normalized for fees, it'd be more like, you know, six or seven. It's moving in the right direction relative to the movement in prime. Next quarter is one where as long as nothing crazy happens with interest rates, this is where we see this gap continue to close. I'd likely highlight the third quarter is when we look and see this gap actually move the other way, where you start to see asset yields, sharply outpacing, the increase in deposit costs if this all plays out and the interest rate environment remains well behaved. Just, yeah, on that note, I think last quarter, and correct me if I'm wrong, because I probably am, yeah, I think you talked about NIMs in fiscal 2023 being around fiscal 2024 levels or a little bit above. What... If you can correct me and then if you... Is the view still the same? Sorry, Doug, were you saying fiscal 2023 versus 2022? I think you had said 2024. Sorry, yeah. Yeah, sorry. I mean, versus At or better versus fiscal 2022. Oh, okay. Yeah, if we look at how we started the year, I mean, we're in, call it, the low 230s. I'd say our trajectory is to be exiting this year, in the 240s. What that means in terms of year-over-year NIM, you know, I think we're in the ballpark to be flattish. I think with, just with where we've started, it's probably a case where we're maybe back, you know, a little bit, you know, maybe 1 basis point, here or there. It's a pretty volatile environment, and there's lots of things that could drive that, to the upside relative to how I'm looking at it here today. I think we're in the ballpark, Doug. Okay. Sorry, just one last quick one. On the NIX ratio guidance, you say below 50% in fiscal 2023. I mean, you put up 52.7% Q1. I mean, the rest of the year has to be well below 50%. Just, am I reading that right? How do you get there for the rest of the year? If I think about the rest of the year and the NIX, Q2 actually is likely fairly flat to Q1. It's one where if we're thinking margin is pretty flat, I think that's a reasonable expectation. Then you're looking at pretty similar NIX ratio. Where we see the catalyst and where we were driving the year below 50%, was really in third and fourth quarter, where we get the benefit from kind of two factors, net interest margin expansion, just structurally and how we're seeing the book churn through. The second piece of it would be looking at our expenses. Q1 is usually a low watermark for expenses from the year. Usually Q1's light, and then you build from there. I look at Q1 and, you know, it might tick up a little bit in NIEs in Q2, just as we ramp up a couple of projects, but nothing too significant. That likely becomes a pretty good run rate for the rest of the year. I think one, just to make sure we dial in our mix to where we committed to on a full year basis. We usually in the fourth quarter see a pretty good step up in things like marketing, training, travel, et cetera. That's one where we'll likely hold the line on those expenses unless we see a revenue trajectory that exceeds our expectations. Great. Thank you. Thank you. Your next question comes from the line of Gabriel Dechaine from National Bank Financial. Please go ahead. Good, good morning. Yeah, we're still morning. I just wanna ask about your NIM outlook. I know, you know, you talked about it at length at the Investor Day and talked about among other factors, the pace of loan repricing, and how that's gonna catch up the deposit pricing. In your MD&A, you talked about the intensity of competition on new commercial growth. I'm wondering if I know that's always a factor, but I'm wondering if competitive factors have intensified to the point that you feel maybe a little less confident in that that outlook for, you know, the second half NIM rebound. I'd say, Gabe, thinking competition on both sides of the balance sheet, so loans and deposits. I'd say through last summer and through the fall, it was probably as intense as I've seen it personally. We've actually started to see that lessen. Okay. unusual pricing that we experienced through third and fourth quarter of last year is now. You know, it's kind of persisted into parts of Q1, really as the quarter came to a close and coming into second quarter here, pricing is now looking a lot more reasonable than it has in a while. We're feeling a lot better actually. Okay. -on competitive pricing on both sides of the balance sheet. That's good to hear. The increase in gross impaired loans. I know that's a number that's gonna jump out to people, dollar terms and, you know, percentage terms. Plus it was, you know, commercial real estate to a large degree. I connect the dots here to your impaired PCL figure, if I back out that recovery, is CAD 1 million bucks. That's telling me that, yes, you have these impairments, but you don't expect to lose any money on them. Is that A, accurate of a description? B, can you give a bit more of the, you know, salient characteristics behind these loans that, you know, can give us confidence that you won't lose money on them, if that's the case? Carolina Parra will start that answer. Sure. Hi, Gabe. You're right. We had an increase in impaired loans due to the current macroeconomic environment where as we see interest rate and inflation are putting pressure on the borrowers. We were expecting coming from a very low level of impaired loans. However, as you know, given the diversification of our portfolios across sectors and geographies, we don't see any systemic issues. As you point out as well, the secured nature just did not translate into any provisions, and we do not expect, of course, to translate into same level of write-offs. We're starting from a very strong position in our portfolio to face these impacts. When we look at the diversification, as I said, there's no systemic risk that just causes any concerns from that perspective. I'm just hoping if you could tell me. Usually, there's a couple numbers you throw at, like it's, three or four loans, and I don't know if there's any, you know, LTV, you can attach to that'd be helpful. Sure. When we look at the portfolio, as I said, there's a couple of loans in various sectors. Yeah. nothing that causes concern, as I said, from a specific sector itself. No concentration. When we look at our LTVs, we're at high, like a very good coverage from an LTV perspective. When we look at, you mentioned our commercial real estate portfolio, we have no concerns on that aspect from an LTV. Yeah. The only thing I'd add is- Yeah. Is on that is, like I think you've seen from us, when loans go impaired, we're very prudent when we put provisions against them. It's not one where it comes impaired, and then we, you know, later on put provisions against it. Yeah. We're pretty conservative, when these things go impaired. You know, us putting nothing against it, I think is something that reflects our confidence in the underlying structures and security. I understand. You've got a track record where we see these things happen and the loans, you know, are perfectly secured, no loss. It's just sometimes helpful to have a bit more g ranularity to remind people of the level of security you've got. Anyway, I'll move on and enjoy the rest of your day. Thank you. Thank you. Your next question comes from the line of Meny Grauman from Scotiabank. Please go ahead. Hi, good morning. Just wanted to talk about loan growth. You're continuing to guide to high single digits growth. You know, what we've heard from peers is definitely that they expect to see a slowdown in commercial loan growth. We're seeing that in the data to some extent. I'm just wondering, you know, what gives you confidence in your projection for 2023? I know, you know, historically, you've definitely been able to keep that loan growth more stable. Just trying to understand how you're able to do that and sort of what you see in terms of an outlook for an environment that does appear to be slowing in terms of loan demands. Stephen Murphy will provide a response there. Sure. You know, as you mentioned, you know, we've been fairly consistent in our growth. As we look at to Matt's earlier point about what we would see as a bit of a normalization of the competitive environment and the spreads to risks that we see, you know, as you can see, and we've talked about before, we've been selective in the growth that we've taken on to make sure that we are getting the risk returns that we want. If you look at a portfolio like commercial mortgages in the quarter on a year-over-year basis, you know, we're making sure that we're doing the deals that make sense from a risk structure and pricing perspective. As we look now in our pipeline and for the rest of the years, as a start to the year, we still feel like we're in reach for the guidance that we've put out for growth for the year, and we're feeling good about it. Thanks for that. The other question I had was just on the non-interest income side, the other line, flat for the quarter, definitely looking unusually low. Just wondering what's driving that. Is there anything unusual there? Just leave it there for that. What you usually see in that line if you don't see significant volatility in the CAD and US dollar, is, you know, a million-ish of, call it transactional fee revenue from currency trades we're executing on behalf of clients. We're taking a bit of a transaction fee off that. Where you see volatility, and you certainly saw this last quarter, is we do have a small net US dollar asset on our balance sheet. Last quarter, you saw the big gain from the remeasurement there, with a pretty significant strengthening of the US dollar. This quarter, you saw pretty rapid decline in the strength of US dollar, sort of back to par, CAD 0.75 or so. Offsetting what you would normally see in terms of fees in that bucket, you saw an FX loss on the remeasurement of our US dollar balance sheet, just with the decline in the US dollar. If we look ahead, should we expect just more of a normalization there? Is that reasonable, or is there something that? Yeah. If you stay at, call it a CAD 0.75, you'd see a million-ish or so of fees coming in there with some volatility around that number. If you see, you know, US dollar strengthen, you might get more revenue into that line, or if you see US dollar weaken, you'll obviously see less. Thanks, Man. Thank you. Your next question comes from the line of Sohrab Movahedi from BMO Capital Markets. Please go ahead. Hey. Matt, thanks for the, for the color and commentary around how the NIM you expect it to kind of progress through the balance of the year. You know, do you have any thoughts currently as to what following year would look like? Do you expect that momentum that you are talking about, you know, the dynamic between asset yields and deposits costs kinda almost giving you that lift in the second half, is it a one and done, or could there be some sustained benefits continuing into 2024 all else equal? Q2, Q3 is where we start turning the corner, and then you start to see asset yields outpacing deposit costs. That's a trend that I would say continues beyond, say, two quarters this year. You'll see that play into fiscal 2024 as well. That will have some lag. I'd suggest that our net interest margin continues on a bit of an upward trajectory starting, say, in Q3, and that persists through, you know, a good chunk of fiscal 2024 as well. you know, obviously, you'll see us put out a little more detailed guidance as we get further into this year, kind of closer to the end. I think that's a reasonable assumption, just looking at the inherent characteristic of our portfolio. Right. I suppose you would say that as we get further into the credit cycle, you would expect loan losses to kind of continue to also normalize towards that, your historical range so that, you know, some of that benefit, I suppose, would get kind of spent, if you will, on PCLs, but that it's still a net pickup. Another reasonable assumption. I'd agree with that. It's. You know, honestly, we had expected to see a bit of a normalization already in terms of impaired loan PCL, just the performance of our book and how our security's held up has just been exemplary and been above our expectation. We're mindful that at some point this will normalize and our teams are watching it very closely. Okay. Just kind of sticking with that beyond the next couple of quarters type perspective, you know, obviously a growing bank, you have to make investments. You know, when you, when you think about the expense growth, and we don't know where you're gonna end this year, obviously, but is there. You know, the pattern has been to obviously continue to make investments, and it's not unheard of for you to have double-digit expense growth. Is there a risk we'll have or is there a chance maybe it's not a risk? I don't know. Is there a chance we'll be back to double-digit expense growth in 2024? The thinking- I'm just trying to understand how committed you are to this positive operating leverage beyond this year, I guess. The intention would be when. Again, we haven't done the budget or anything like that for fiscal 2024, I suppose the commitment would be manage efficiency ratio below 50%, and our target for 2024. If we're thinking about the right recipe that drives us to the 12% ROE we've committed to, 2024 would be a year just mechanically and mathematically, we'd be targeting another year of positive operating leverage on the year and continuing to work our efficiency ratio downwards. You know, if I thought about the conditions that would have us have NIEs and double-digit growth year on year, it would have to be one where we saw a pretty significant expansion of revenue. Like, we'd have the revenue to support that. It wouldn't necessarily be spending the NIEs because we had the money to spend, and the revenue trajectory. Obviously, it would have to be based on strategic projects that make sense to us in terms of the reward relative to the spend. Okay. Just one last housekeeping kind of question. You know, if I think about this quarter, the preceding 7 quarters, your overall effective tax rate has been around 25%. Do you think that's a reasonable number as you look over the next four-six quarters? No. We, we adopted the 1.5% bank surtax this quarter. I'd say the impact this quarter was a bit muted because on the one hand, you had our current income attract the higher tax rate. We also remeasured. We have a net deferred tax asset that gets remeasured at the higher rates, and so we actually had a bit of an offsetting pickup this quarter that muted some of that noise. You know, if I was thinking go forward tax rate, historically, you can see that our effective rate of tax is pretty consistent with our statutory rate of tax. We don't really have any structuring or other unusual things that causes a dislocation there. If we then think through the impact of adopting this 1.5% bank surtax, you know, $100 million of our taxable income would be exempt from it. We have certain subsidiaries that actually aren't in scope of the tax because they don't meet the definition of a bank or an insurance company. All in all, if that allocation of income stayed about the same as usual, 150 basis points of bank surtax translates into about 80 basis points of impact to our statutory rate. You'd be thinking something around 25.7, 25.8-ish, you know, if everything else kind of remained equal. That is incredibly helpful. Thank you very much. Yeah, no problem. Thank you. Your next question comes from the line of Paul Holden from CIBC. Please go ahead. Thank you. Good morning. First question is just going back to the NIM discussion and wondering how much benefit you're incorporating from your branch raise deposit growth into that NIM expectation? You can look at this a couple ways. I mean, if we look backwards through first quarter, I mean, our branch raised deposit growth was negative. The growth we had was weighted more in terms of fixed term rather than notice and demand. Caused about a 1 basis point decline on net interest margin from the unfavorable mix on the liability side. It's something that can move the NIM maybe a basis point or 2, but not something I'd look at and say, you know, there's 5 basis points at risk or anything like that. It's more a bit of around the edges to drive NIM. That's helpful. I guess second question is, you know, sticking with the theme of the branch raised deposits, and I hear a comment on the competitive dynamics becoming more favorable. I'm a little bit surprised by that because seems like we're still in an environment where everyone wants to gather deposits, the beaten. You know, we've seen a bit of a deposit runoff in some cases, certainly seeing a change in mix to higher cost deposits. I thought I would have thought the intensity, competitive intensity to gather deposits would still be high, but you're saying it's different. Why, why do you think that is? Well, it's a relative statement and one relative to things being just unusually high, like beyond. If there was a level beyond high, and you maybe call that extreme, that's above what we were seeing in fourth quarter and into a big chunk of first quarter. I mean, to give you some context, we were seeing some fixed-term deposit opportunities where clients were being quoted a rate that was well in excess of the GIC rate we'd get from the broker market, even accounting for the commission you'd pay on it, which we looked at and didn't make economic sense to us, but perhaps it did to others. We saw a good volume of that in first quarter, and it likely constrained our net deposit growth because we passed on it. We're interested in building our NIM and doing profitable growth. That's something we've seen taper off. I wouldn't characterize deposit pricing today as uncompetitive, but just less unusually aggressive and competitive than it was, say, the past couple of quarters is sort of how the second quarter is started. I'll throw it to Jeff Wright and see if he has anything to add on top of what I've already said. Yeah. Thanks, Matt. I agree with that. You know, the core of our deposit growth strategy is around building our full service client base and the deposits that come with that. The nature of those relationships is because we work so closely with the clients, the deposit pricing tends to be a less competitive environment. Our focus continues to be on that being the bulk of our deposit growth. Around the edges, we are opportunistic around other things to fund our growth, and as Matt said, in certain cases, those have gotten expensive, and we've looked to other sources like the broker market instead, because they've been cheaper in the past few quarters. Final question on this topic, so I think it's an important one. In the past, you've talked about your pipeline of opportunity, giving you a pretty good window into expected loan growth and deposit growth near term. Maybe you can talk a little bit about where your pipeline stands today and why that might give you confidence in being able to achieve your deposit growth expectations. Deposit growth or loan growth? Deposit growth. Deposit growth or loan growth? You're asking deposit growth? Yes. Well, I'm more focused on deposit growth, but assuming the deposits come with the loans, right? With new customers... Yeah you're talking about. Yeah. The deposit pipeline is a little less clear sometimes than loan pipeline because they tend to be a shorter cycle on the discussions with our clients. What gives us confidence there is just the consistency of the trend of growing our full service clients and the deposits that come with that. You take that combined with, as Matt said, a little bit of an easing in some of the competitive pricing, and we feel good about the quarters ahead. Okay. Final question for me is on expenses, obviously, you've kind of given your guidance where you expect it to go, and maybe a bit of a different angle there. All of the banks and many businesses are facing wage pressures, and we know a significant increase in your compensation expense year-over-year. How would you view the risk or how should we view the risk that maybe that line item continues to be more of a pressure on expense growth than it has been in the past? Yeah. I mean, we've seen some wage pressure through the last year. We had made some, what I'd call modest and prudent adjustments. We believe we're through that and now getting into something that feels a bit more normal. We're thinking about just normal salary increments. Compensation. You know, the one thing we did have this quarter and another one of these good news, bad news situations, depending on how you look at it, we had a pretty significant increase in the share price quarter-over-quarter. That's very good news. The downside to that on NIM is our variable compensation linked to the share price. We remeasured at the higher share price in the quarter. That did drive a bit of NIE. I mean, you might see that continue, and that would be great news if we continue to increase the share price, but that would cause our NIEs to tick up a bit. Otherwise, nothing in there that I'd say from a, call it, wage inflation perspective that I'd circle as a key risk. I think we've managed that quite well, actually. All right. That's great. I'll leave it there. Thank you for your time. Thank you. Your next question comes from the line of Lemar Persaud from Cormark. Please go ahead. Thanks. I wanna just, you know, stick with the line of questioning on expenses here. I wanna come back to an answer I think you provided to Doug in suggesting that Q1 is typically the low water mark for expenses. You know, we've seen that in past years. Just looking back at 2021 and 2022, there's a big step up after Q1. I'm wondering, is it still fair to suggest that expense growth, and I'm talking about a year-over-year basis, starting next quarter should slow, or could it actually remain elevated on a year-over-year basis? Also, can you talk about any areas where you could maybe pull back expense growth and say loan growth slows more than expected or the margin expansion doesn't play out? Yeah. A couple ways I'd unpack this. If you look back to last year as an example, like the Q1 to Q2 ramp up, a big theme there. Well, there were kind of a couple. One would be a ramp up in the digital program, and that's kind of stayed pretty consistent and steady, and really remained consistent through Q4 into Q1 this year. I'd expect that to, you know, be relatively consistent into Q2. Last year, you saw a big step up Q1 to Q2 from that project. If we're thinking year-over-year, growth in NIEs, Q1 of last year was also a very tough comp in that we weren't really fully back to normal in terms of things like in-person training, in-person events, travel, business development, things like that. It's, it's a bit of a tough year-on-year comparable. Thinking through to Q2, I mean, that's the quarter where we started easing our way back to a working environment that more closely resembled something, you know, if there is such thing as normal anymore, but we were bringing people back more, more fully. Quarter one, we were, call it 12%, year-on-year growth of NIEs. In Q2, I'd expect that rate of growth to moderate significantly. Instead of being double digits, you know, I would be thinking about something sort of in the mid to maybe just eking into the high, single digits, but probably closer to mid, I think would be an okay expectation. Okay. That's helpful. Areas that you could pull back on expense growth, you know, maybe in the second half of the year if revenues doesn't play out as expected? Yeah. Yeah, I hit on this a bit earlier. You know, there's certain expenses that ramp up in fourth quarter, are discretionary expenses, so think marketing, training, travel, employee relations, things like that. I mean, those are levers we can pull if the revenue's not there to support it. The other thing we can look at doing is we have certain projects that, you know, the timing's a bit more variable, a bit more discretionary. You know, good strategic projects that have good merits. Again, you know, in meeting our commitment on the year and delivering the earnings, it might be one where we look at the timing of those projects and push them out a quarter or two, if needed. That would be kind of the other lever to pull. you know, there's optionality, recognizing that there could be some potential volatility in front of us. We're mindful of that. Would you say it's fair to suggest that you could adjust these, let's call them more discretionary or project spend expenses fairly quickly, if needed? Is that a fair assumption? Yeah. That's the way we've set this year up, and set up our budgets to give us some optionality and flexibility, with the ability to do that with speed if we need to. Okay, great. Just moving on, some questions already earlier on, you know, the outlook you guys have provided for loan growth. Certainly you guys have had a strong track record in terms of outperforming the market commercial loan growth. My question is a little bit different here. Can you maybe talk to me about the dialogue from some of your commercial buyers or borrowers rather? Is there any hesitation that's a little bit more elevated than normal impact of rising interest rates and perhaps a more dimmer outlook for the Canadian economy generally? You know, also, is there any differences geographically speaking? Like, you're hearing different messages from your borrowers in BC and Alberta versus Ontario. That'd be helpful. Thank you. Steve? Sure. I would say obviously, the economic outlook and the interest rate environment are significant factors that impact borrowers in terms of their planning, their forecasting, and, you know, even in their sensitivity analysis of their outlook. We still see, you know, post-pandemic, a lot of economic activity and catch-up and pent-up demand, we still see healthy activity out there. From that perspective, you know, there certainly are storm clouds, and I think we see business owners being cautious. At the same time, we still see a lot of activity, out there in the marketplace. From that perspective, you know, I would say we see... When we look at our outlook, you know, we still see that, our projected loan growth, we think that's, we're going to be at those numbers based on the projected activity that we see. Any differences amongst your different geographies? Yeah, I don't think I would say that I would point to any particular geography other than, you know, I would say Alberta is pretty healthy right now. It's pretty liquid. As you saw recently in the budget for Alberta, it's on a relative basis, looking back, we're pretty strong. Everywhere else, I wouldn't highlight any particular market or geography as standing out in one way or another. Okay. Appreciate the time. Thanks. Thank you. Your next question comes from the line of Mike Rizvanovic from KBW Research. Please go ahead. Hi. Good morning. I just wanted to ask a bit more on the fee-based revenue, maybe starting with wealth management. Your AUM has grown. You haven't really seen the same commensurate increase in your revenue line. Are you at a point where you're considering maybe additional, whether it's acquisitions or are you going to get to the point where maybe you get some more torque because you're more efficient given the AUM size getting to a certain level? What's your sort of outlook for that business in terms of the revenue line? Yeah. Maybe I'll start just mechanically, talking about the fee trend and then throw to Stephen to talk a bit more about the outlook. Yeah, our AUM was up, call it 6% or so sequentially. Our fee is up 3%. There's a bit of a lag factor there. Some of our fees are kind of on a trailing basis. Actually see some of this benefit from the higher assets land in second quarter instead of first. That puts a bit of wind in our sails going into second quarter. Yeah, Stephen, if you want to touch on kind of the look forward. Yeah. I think when we look at the wealth business, I'd make two points. One is, you can imagine that through the pandemic and since we made our acquisition, we've been doing a lot of foundational transformation elements. We've now done a rebranding through our wealth business. We've done a lot of other integration work around the platform. This has been a transformation kind of integration phase. From here, we look at that, we're actually leaning into connecting the banking and wealth teams more. We've been kind of setting the foundation, and now we're switching over to really leaning into our embedded opportunity with our client base. I think you could see that, you know, that's not an overnight thing, but you would see in terms of our outlook that we are making that move. You know, I think we would look to if there's opportunities for us to fill in or add to our distribution capabilities within our footprint, where it helps us accelerate our growth and taking advantage of that opportunity, we would look to those opportunities and see if anything helps us on that front. Okay. That's helpful color. It sounds like a lot of that transitional stuff is basically done, and you do have some torque there. It's just gonna take some time, I'm guessing. Yeah. Yeah. I 'cause I would say, you know, we're now this is the year that we've now kind of put the shoulder against, getting that referral activity between the businesses. As you know, like, those conversations and the momentum takes a bit of time for that to come to fruition and show up in the numbers. Thanks for that. Maybe, Matt, just on a couple of the other lines. Trust services, that's been growing, kind of, you know, fits and starts, but it is growing. The retail services line hasn't really been growing. It's actually a bit lower than it was even three years ago. As you look to these more fulsome relationships with clients, are these the two lines that are going to be impacted? Where would we see that incremental benefit on the top line? The one I'd circle related to growing full service relationships, I mean, that'd be the retail services. That's where you're taking your transactional day-to-day processing fees are all hitting that line. That's the one I'd circle and say has really good growth potential as we flesh out the full service client offering and the number of full service clients. Trust services would be sort of a different line of business altogether, different type of customer. Good growth outlook for that, not one that we'd look at and say is part of that kind of core mid-market commercial client. I don't know that we'd see a lot of overlap into that bucket. Okay. Just the retail services, that's helpful color. The CAD 2.5 million, CAD 2.6 million this quarter, if you could just think ahead couple years, do you have a target in mind? Could this revenue line be somewhere in the CAD 5 million-CAD 6 million range on a quarterly run rate basis if in fact you're able to, you know, develop these relationships and do a lot more for your existing client base? I'm just trying to scale the opportunity here in terms of the potential upside. Yeah. I mean, it's definitely not one where you look at and say it's going from 2.5 to 20, as an example. You know, it's one where you could have significant growth, and we like the opportunity to expand it. Yeah, I mean, just to size it, you know, even doubling it would be a very, very strong result, but one that likely isn't, you know, ridiculous if you thought about it on a long-term basis. Right. Got it. Thank you. Thanks for the color. Appreciate it. Thank you. Your next question comes from the line of Nigel D'Souza from Veritas Investment Research. Please go ahead. Thank you. Good morning. I had a clarification question first on your PCL guidance and policies. I missed the portion of the earlier remarks, but there was guidance for total PCL ratio between 18 and 25 basis points. Is that for the full year of fiscal 2023, or is that just for the remaining quarters in 2023? I mean, that was our previous outlook, was 18-23 basis points is kind of be our normal historical range, we had thought about that on a full year basis. Last quarter, we're thinking we'd be on the high end of that. Obviously, with the recovery this quarter, you know, if we recover 13 basis points of impaired loan PCL in the quarter from the write-off recovery, you know, that's 3 or 4 basis points on an annual basis. We've kind of moved from thinking we'd be in the high end of that range to now the low end of that range. And I think if credit remains very well performed, we could even end up below the low end of that range. We're just being very prudent here about just the volatility potentially in front of us. Low end of the range would be 18 basis points. I mean, the reason I brought that up is, like you mentioned, you have a good start of the year. Even to get to the low end of the range, that would imply close to 30 basis points of PCL for the remaining quarters, which, you know, historically, that's quite elevated. You only hit 32 during the pandemic. Would it be fair to say you're more likely to be in the mid-teens? Because you've pointed to you don't see any systemic risk or any idiosyncratic risk in your loan portfolio. Just trying to get a sense of what that could run at. Also it would be helpful if you had maybe any comments on what the potential ceiling is for PCL ratios in a, let's say, harder landing scenario? Yeah. I mean, we've thought about PCL in a range of outcomes and just the strength of the book, even with the volatility. You know, we felt really good about the top end of our normal range. Just the book's held up very well and really taken a lot of steps to improve the quality of the book. Even further kind of over the last couple of years, just being very prudent and focused about where we lend and who we lend to. You know, it's resulted in a moderate rate of growth relative to what we've seen others put up over the last year, but we're feeling very comfortable about what we have on the portfolio. High into that range is what we looked at and said, just at least thinking through the next, say, 12 months, that felt like kind of upper end on an annual basis. You could have one-offs that on a quarter could push you outside of that range. If you thought kind of long-term as a trend, high end to us felt about right. You know, thinking about the rest of the year, I guess we've had this view that, you know, the reason why impaired loan PCL and impairments in general have been suppressed is all the stimulus support and liquidity in the system. Thinking that when that comes out, you're going to see a kind of a sharp correction. You know, as we further and further we get into this cycle and don't see it, perhaps we're wrong, but, you know, just thinking about the rest of the year and even ending up at low end of that range, you're right, it would require us to be outside of that range for a couple of quarters to mathematically get there. I think that's quite right, a conservative view, and, you know, there's obviously opportunities where we could outperform that if things stay fairly well behaved. Great. Just a point on that, on the liquidity, you know, dynamic. You know, for the households, there's still substantial excess liquidity on the household balance sheet. Any comments on, you know, what's been the utilization of stimulus liquidity and how much is remaining on the commercial side and where you're seeing? Seen it come down a pretty significant amount. I mean, you've seen it kind of affecting our notice and demand deposits so far. There's really been two factors. It's been a shift into term has been a factor. The other compounding factor has just been, I'd say rundown of existing deposit balances. Not losing the client, just, you know, seeing these deposit balances come down and be put to work in client businesses. We've, we've seen that trend really the past several quarters. Expect to continue to see it. There's maybe a bit more room to come, but, you know, it feels like we're starting to turn the corner on that and seeing it come down a bit. Something that I think will remain a factor here in the near term. Great. The last question, if I could just quickly sneak it in. On margins, you mentioned the duration mismatch when you're asking some liabilities. Trying to get a sense of what is the weighted average duration of the loan portfolio? Just trying to understand how quickly you could reprice the yields on the asset side, and what the cadence of that would be over the next, let's say, year or two? Yeah. I mean, we definitely have longer tenured assets, relative to deposits. We went through this at the investor day and talked about that and the dynamics on NIM and why we were confident that that ultimately led to NIM expansion, just delayed, albeit with, just how aggressively rates moved up, just the loan book did have an opportunity to quickly churn through and reprice that. I guess the direct answer to your question in terms of average duration, call it, of loans compared to deposits. Loan portfolio, it kind of hovers in the kind of two and a bit years, sort of between two and three years is where it kind of hovers. The liability portfolio, sort of between one and two years is where that typically flows. Okay. That's it for me. Thank you. Thank you. That will be for our last question. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.