We'll start our next session with Laurentian Bank, and I'm pleased to have Éric here, the new CEO of Laurentian Bank on the stage. Éric, welcome to the conference. Thank you, Darko. Now, in this instance, I wanna start the conversation a little bit differently. Because in this situation, in Laurentian in particular, we just recently had some changes. So, you know, Éric, you've been at Laurentian Bank for well over a decade, and you were recently appointed as the President and CEO, in October. And, obviously the first time here at my conference, so, again, welcome. But, you know, maybe you can spend a little bit of time here for investors and shareholders, a little bit on your background. You know, just to start us off here because, well, like I say, you're new. Yeah, yeah. Thank you for having me this afternoon. Yes, this is my first RBC conference. Very pleased to be here. As you said, just over 11 years actually for Laurentian Bank. Last three years as head of commercial banking. Within that group and that time span, we've been very successful for the whole organization, like delivering strong growth, 16% CAGR, grew those assets from $ 12.7 billion-$ 18 billion in that time span, and also generate great NPSs. Great customer surveys feedback from excellent to world-class, actually, in some of our specialty groups. Looking forward, I believe that we can take those learnings and best practices and actually extend those to the whole organization. As for me, I'm a pretty passionate guy, very result-driven. I'm a team player. I love our people, and I love this bank. Okay. So, diving into it, I mean, you know, thinking of a way to ask this question. I mean, essentially, you came into the role in, let's call it, a non-standard fashion, right after a mainframe outage caused some disruption. So maybe you could spend a little bit of time in touching on that incident and if there's any sort of lingering issues that have arisen from that outage, and how should we think about it going forward? Yeah. Unusual is the right word for stepping into the role. So, definitely, just to recap in terms of what happened. So on September 23rd, team was working on a mainframe upgrade, was unsuccessful, led to a multi-day outage, where our retail customers in Québec, as well as some small business customers, were impacted, not being able to use our electronic services and our online banking platform. Although they were able, though, to transact within point of sale, so with debit and credit cards, and also had access to ATM to withdraw money. When I was appointed, I said this, this was definitely unacceptable situation for our organization, for our customers. The first priority was to get this event behind us, stabilize the situation, make sure that the outage was dealt with, which it is, and it is behind us, and to make sure that we increase our communication level with our customer. Make sure that they understand what was happening, how we were mitigating the impacts for them, and what solution we were putting forward. So, I believe we learned a lot through this exercise, that we're in a stronger position now than we were at that time. I firmly believe that we made investments in the past, and we need to continue to invest in our foundational technology going forward. So, one of the things that we noticed is, okay, so in your results, you know, there was some fees that you had waived, and it does look like the deposit base was stable. But, you know, we've gone through Christmas now, and people are out using their cards and spending and so on. So, can you give us an update? Like, what is, you know, is, you know... What are the customer reaction today? Is there anything new to speak to that? And, is there any other kind of fee waiving that we should think about or other actions to not only appease the customer base but to start growing deposits? Maybe you can talk to a little bit of the more immediate aftermath. Yeah. For our customers, first of all, just like to take this opportunity of being here to thank them for their resiliency and their patience through this event. The actions that were needed to be taken were taken. So we waived September and October fees, and that was disclosed in our Q4 results. And really, like, in terms of how we think forward about deposits, deposits are key. Like, they're core to the bank. We believe in a strong deposit base, and we need to aim and continue at that, trying to grow that deposit. But as we highlighted in terms of the strategic alignment between our loans growth, as well as our deposit and securitization growth, like, we need to make sure that both goes in sync. And throughout this summer and fall period, like, we've been managing liquidity very prudently, maintaining a very high level of LCR and right now we feel pretty strong about our liquidity position, which could position us in the upcoming quarters in terms of considering maybe reducing a little bit our deposit base. Again, remaining prudent in the overall, but to enhance profitability, this is something we might be considering. Okay. And then sort of switching gears, I think one of the things that I've noticed in covering the bank for a long, long time, is there's always sort of been a pressure and a view towards moving your efficiency ratio sort of lower. And I thought, as an analyst from the outside, I thought the problem was maybe partially taken care of when the union was sort of dissolved. But the bank has sort of continued to struggle to improve efficiency. So maybe, you know, and I recognize that you haven't detailed your plan yet to anyone, but you know, what, why the struggle towards a better efficiency ratio? Can you share something with us today that would help us better understand how you might be tackling the efficiency problem? Yeah. And we started already. So last quarter, like, not last quarter, actually, in December, we already announced a reduction of about 2% of our workforce. So that will impact and as our charges that are coming to Q1. But why we weren't as successful as we should have been, I think it's a mix. It's a mix of things in terms of we had to make significant investments in the past few years to bridge some gaps we had in terms of our technology footprint and tools. So we did that, and by the time this brings back some revenue and has real impact on the organization, takes some time. But I think that overall, in terms of the macroeconomic situation, I think we weren't fast enough reacting to how it had impacted our revenue streams, and we didn't reduce costs fast enough. Like, this bank has been talking about simplification and reducing our efficiency ratio, and we didn't quite do it. So the team and I have the mandate right now to really work on a revamping plan coming back in the spring, making sure that we simplify this bank and we stop being everything to everyone. We need to focus, and we've been very successful in areas where we put our focus into adding value to our customer base, and I strongly believe if we do so all across, we can be successful. Okay. I look forward to the more detailed plan, soon, soon enough, I guess. Spring. Spring. Okay. So now maybe coming back to sort of the macro question that I've been asking every Canadian banker is, you know, there's been a pretty big change in forward view on interest rates. The implied curve telling us central banks in Canada, U.S., is gonna cut. Pretty important category for Laurentian Bank is the net interest margin and net interest income. Give us a thought on how you think this will, can evolve in 2024. Yeah. For us, I think size and speed is a big element in there in terms of movements. Like, what we saw in the past years in terms of very high and rapid increase in interest rates didn't allow us to actually reprice at the same pace of our cost of funds. I think that moving forward, what we see in the upcoming year is a more moderate reduction in terms of interest rates sequentially. And for us, in terms of our funding structure, what it really means is that we may have opportunity to delay some of the repricing on our loan books. But from a margin perspective, what we guided for is a pretty stable margin versus what we disclosed in Q4. If rates do come down faster and dramatically, you think, like, what's- It could have a small benefit to the margin if it comes on a faster pace and- Oh, interesting. Okay. ... and on bigger scale. Yeah. Okay, great. Thank you. And the other side of the coin is loan growth. So, if rates do come down aggressively and fast, what would be your outlook for... And we can talk on a couple of different places. We can talk about commercial and inventory financing, where I think, you know, on the inventory financing side, we may have some expectations that it gets a lot slower. But over to you, how do you view the loan growth situation with a falling rate environment, potentially fast falling rates? Yeah, and there, there's different buckets, as you highlighted there, Darko. So, on the mortgage side, we see muted growth there, pretty stable versus last year. We would expect on a personal loan side, there's still some softening just because the high interest rate versus our main products, which is leveraged loans, are less attractive at the time being, so some softening there. In terms of the commercial book, as you know, we have big specialties. So two of them are commercial real estate, where we focus on construction projects, mainly residential, so multi-res, as well as condo. And throughout 2023, we felt a slowdown in that area. Even though demand is still out there, just because of the shortage in housing, we feel that it's gonna be still muted in terms of growth in 2024. So before an interest rate decrease has a real impact into launching new projects, we're gonna have a portion of the year already done, so that by the time we approve those projects and they start building, some delays there. In terms of inventory financing, what we saw and we communicated in Q4 is that our dealer base have taking a more conservative approach into restocking their inventory for the upcoming 2024 season. So the products we finance, consumer goods, our dealers have been more prudent, not being sure what to expect in 2024. So line utilization for that business would usually range around mid-50s, and in the last quarters, the line utilization were at 48%. But it's a good approach. Like, we appreciate the market to be disciplined. Like, we don't want dealers to be ending up having too much inventory that they cannot move during the up season. So for now, that business as well, like we see muted to small, maybe a ramp-up, but not as a normal year would provide. And how much is that predicated on growing the number of dealers? Like, is there a push to attract new dealers to the platform, or are you content sort of where you are? No, actually, we see great opportunities in that business model because we can leverage the operational capabilities of inventory financing. As we indicated in the past, we can grow this into other industries. Like right now, we have a big focus in marine, RV, manufactured housing, and trailers. But for sure, the team has been growing those dealer base between 10% and 15% organically per year. Now, we started expanding into ag, into construction, into IT, and it's pretty much the same recipe all across. Like, you start with the OEM, you go out there, you sign a repurchase program with them. They get you their dealership distribution list. After that, you do calls to onboard those dealers. You take securities on dealers, PGs from the owners, and after that, you have curtailment whenever these assets go out of the repurchase cycle. So we feel good about the opportunity. It's definitely a business that we like, and we've been very successful of growing in the past. And is it nationwide, or should we think about certain contiguous states, or how should we think about where you're going with that? Actually, the strength of, sorry for that, that's my English, the offering is that we can cover the full North American scale, which gives us a competitive advantage, and not a lot of players can actually provide for that in the inventory sector. So all across Canada and the US, like we cover right now, 5,800 dealers, and there's still good opportunity to grow there, not only within the industries, but again, diversifying across other industries. Just final question on this, and I promise to move on, but... You know, this is an interesting, different thing from Laurentian, so we always wanna sort of dive into a little more detail on what some banks are doing differently. So if, if you are, in fact, moving into other industries, are you growing your sales force, or can you give us sort of any indications? And you mentioned 15% growth. Is 15% growth reasonable, or is it 20, 30% in number of dealers, not necessarily in balance as well? Yeah. Yeah, yeah. I recognize. So- It's number of dealers. Yes, when you go into another industry, it's all about hiring the right people and going after the right OEMs at the level. But you don't need to deploy a very big workforce or sales force to do that. And once you onboard those OEMs, you can after that leverage the inside salespeople that you have already into the operational structure and maximize that structure. So after that, you add heads towards the capacity and the type of assets you think you can bring in. But in terms of potential growth, it is definitely a path forward for us. There's no funding constraint for you in- Well, funding constraint comes with capital management. Yeah. So we just have to be prudent in the current environment and make sure that we have the right strategy into deploying that capital the profitable way and to make sure we make the right returns. Okay, so I promised I wouldn't ask any more on that, so I'll move on to credit. So, maybe on provisions for credit losses, you know, You know, you provided pretty good. We We understand where Laurentian's PCL has been. You've had very strong reserves as well. How do we think about credit in 2024 for your bank? And are there any areas that maybe you'd point to of potential weakness or strength, that we should be thinking about here in 2024? Well, as you said, we have a very high level of comfort about our reserving process. The portfolio has been quite resilient so far, and it's pretty hard to predict in this current environment where PCLs will be. We indicated we'd be managing high teens, low twenties throughout 2024. We still have this in mind, and in terms of areas, like we kept the same underwriting discipline approach towards our different business line, and we intend to do so. Like I think that having a stable approach when you're out there providing for loans and financing is the right way to do so and allows you to go through cycles in a less bumpy ride. I think we're well-positioned where we are now. Okay, I'm gonna check the questions from the audience before I get to my capital questions. So let me see what we've got. So the first question is: What are the key ingredients for Laurentian Bank to break through a 10% ROE level of profitability? It's a great question. And I think I touched on it, and it's gonna be part of the revised strategic plan we're putting together. But definitely customer centricity, efficiency, and simplification, and making sure that we make the right fundamental technology investment in the future will allow us to revisit some of the structure we have in place. Like on the retail front, I believe that we operate and the way we're structured is more in a way of a big bank versus a bank of our size. And this is what we need to get to in terms of streamlining some of our distribution channel and making sure that we address some cost layers that are a burden for the ROE at the end of the day. This needs to be part of the plan. And so, you know, so talk about capital. Capital ratio, 9.9, up 80 basis points, Q o Q. You're looking to operate around 9, I think. So, how do you intend to, you know... And is there a difference between you and your predecessors on how you think about managing capital, at Laurentian Bank? Well, we, we still need to remain prudent, and we guided towards. We're comfortable at the level we're at. We're aiming to manage towards a 10% capital ratio. And again, after that, there's decisions to make sure that, that the capital we deploy, we deploy in the right areas that will generate the returns so that we can hit that, that ROE target. So, so in our mind, we're at the right place, and it's interesting to see, like, all, all the, the big banks now have disclosed their, their CET1 ratio and Standardized Approach, and happy to be in the, the top banks, considering our positioning right now at at 9.9. So I think we're in a good spot in terms of capital management. But it does seem like a high level of capital, right? I mean, the large banks are looking at 50 basis points, maybe 100 over top of the requirement. So is there ever a view of yours that you can maybe—And again, it goes to the ROE question. You know, you get the capital ratio down, your ROE can... So is there ever, like, for now, I recognize you wanna be at 10, but is there longer-term potential to be running at a lower ratio? Well, this needs to be part of the overall plan. Like, we need to find efficiency, we need to find ways to create capital internally, and we need to make sure that we address the fact that, right now, our stock is pretty undervalued versus- Right ... the overall- That's where I'm going with. Yeah. Okay, let me see if there's another question here from the audience before we pass it over to you. Oh, interesting. Would you ever consider selling Northpoint in the U.S. to free up resources and commit more focus on the Canadian business? Is that something that you would consider? Well, it's not something we considered. So, Northpoint is a big, very good driver for growth and for profitability at the bank. And we believe in the opportunity of expanding that footprint. Now, how we do it, can we partner up? Can we expand white label? Like, there's many ways we can actually maximize the operational capabilities of that platform and keep its strong contribution to the bank as a whole. So, we'll see going forward. So, you wouldn't consider an outright sale, but inviting in a partner is a potential? Is that how I should read the answer or...? Well, what I'm, I mean, Darko, is that part of the plan, we need to revisit all the areas of the bank and make sure that we maximize our capital deployment, but also the profitability. So Northpoint is a key factor into our organization, and we see that as a very good potential growth. And to build ecosystem around the offering we already have with that dealer base is something that could be appealing to us. So we'll see. Yeah, and I just wonder, like, I mean, have you ever... I mean, what's your opinion on, or view on, the market share that you have at Northpoint? I mean, are you, are you scratching the surface of the potential, or is it... Have you had any good market insights on the, on the market? It depends on the industries. Right. Like, like right now, like, we are top three in marine, top five in RV. So, so again, depending on where we play, we play an important role. But, but I think the key there is diversification. And out of the 5,800 dealers I talked about, average ticket for a dealer is below $ 1 million. So we have out there, good facilities with very large players, but the average size ticket is pretty low, so the risk is very diverse. And we can replicate that, like I said, in many other industries. So, so, so I believe in that platform, and I believe in the potential it can provide to the bank overall. Okay, great. I think we have one more chance here, 'cause we got one more minute, we can sneak in another question. Okay, so your dividend payout ratio increased throughout most of 2023. Should we expect this to continue, or is there room to pull back on dividends for a capital buffer? It's a great question, and then, as you saw in last quarter, we hold on our dividend increase because we guided towards a distribution ratio between the 40% and 50%. At Q4, we were at 47%, and expect to be still high in that distribution range. So, I think it needs to be factored into the plan overall, like what we need to do, what we need to invest in, and then, what are the capital needs for that. So, again, we'll need to come back in the spring with a clearer view of what the banks look like in the future. Okay. All right, with that, we're bumping up to the end of time for our session together. So I always turn it back to the CEO and ask for your, your key messages for shareholders and investors for 2024. Well, first of all, Darko, thank you for having me this afternoon, and thank you for attending. What I'd like to take you away with is that for 175 years now, Laurentian Bank has had a steady commitment on providing our clients with the most valuable products and also the highest level of customer service. And I strongly believe that that hasn't changed. Like, it hasn't changed. Like, we're out there to service our customers. And while 2023 was a challenging year for us, I think that what we've learned from that year will allow us to better serve the needs of our customer and position us in a better way for the future ahead. So like we said, we're gonna come back in the spring with a revised strategic plan that I hope I will be able to articulate how we're gonna make this bank more competitive, and make sure that with the team we build towards the benefit of all our stakeholders. Then we have an outstanding team. Like, these people have demonstrated a very high dedication, integrity, and engagement to our organization, and I'm very proud to be part of that team. So, I'm honored to have the opportunity to lead this team into the future, and I know that with the right customer focus, and some plays on efficiency and simplification, and making the right investment into our fundamental technology, we'll be an even stronger bank in the years to come. So thank you for attending. Thank you for being here. Okay. Thank you very much. Appreciate that. Thanks.