Please stand by. Your meeting is about to begin. Good morning, ladies and gentlemen. Welcome to the RBC webcast event. Please be advised that this call is being recorded. I would like to turn the meeting over to Asim Imran, Head of Investor Relations. Please go ahead, Mr. Imran. Thank you. Good morning, everyone. Speaking today will be Dave McKay, President and Chief Executive Officer, Neil McLaughlin, Group Head, Personal and Commercial Banking, and Nadine Ahn, Chief Financial Officer. Also joining us today for your questions, Graeme Hepworth, Chief Risk Officer, and Bruce Ross, Group Head, Technology and Operations. As noted on slide two, our comments may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also advise listeners that the bank assesses expected results and the impact of the proposed transaction based on reported and adjusted measures, management expectations and analyst consensus estimates, and considers such measures to be useful in assessing expected business performance. As we are currently in quiet period, this call will be focused on discussing today's acquisition of HSBC Canada. We will not be offering comments on our upcoming Q4 results on this call, nor will we take questions on those results. To give everyone a chance to ask questions, we ask that you limit your questions and then re-queue. With that, I'll turn it over to Dave. Thanks, Asim, and good morning, everyone. Thank you for joining us on such short notice, especially during a busy earnings week. We are extremely excited to announce an agreement to acquire HSBC Canada from HSBC Holdings plc. Over the years, you've heard me discuss our priorities when it comes to deploying capital to create long-term value for our shareholders. A primary driver for us to engage in M&A is one that accelerates our enterprise strategy, and we have found that with HSBC Canada. It's a fantastic franchise that operates in our home market in businesses that we are very good at, while also adding complementary products and a differentiated client base. It's also a strong cultural fit for both our clients and employees. The transaction is financially compelling as it also creates immediate value for the strategic deployment of excess capital, highly achievable expense savings, and a well-understood revenue cross-sell opportunity. Starting on slide five, I will now provide more details as to why I am so excited about the announced acquisition of an excellent franchise we have followed and competed hard against for the last 40 years. As a bank with over CAD 130 billion in assets, servicing nearly 800,000 clients, largely in urban areas. Its loan portfolio is split fairly evenly between commercial and corporate loans on one side and largely residential mortgages on the other. HSBC Canada is a well-run bank that's a proven track record of success, as evidenced by a 14% return on equity over the last 12 months. With this transaction, RBC will be better positioned to be the bank of choice for commercial clients with international needs, affluent clients needing wealth management capabilities, and newcomers to Canada, especially with immigration expected to increase materially over the coming years. Will also help us better serve global clients looking to invest and grow in Canada, which is key for the country's economic growth and prosperity. Beyond the financial and strategic benefits to adding HSBC Canada, what we're really excited about is the power of the combined platform. Slide six highlights how the proposed acquisition creates even more value for a wider set of clients. Our multi-award-winning platform helps drive deep relationships where 19% of our clients have all four transaction accounts, credit cards, investments, and borrowing products with RBC. This is well above the industry average of 11% and more than double the ratio at HSBC Canada. Therefore, we believe our combined product and service offerings should drive more compelling cross-sell opportunities across retail and business banking. This creates a potential upside to our estimate as we have conservatively not modeled any revenue opportunities from cross-selling in the accretion model. In particular, HSBC Canada has an established reputation of being a premier commercial bank with an advanced trade finance and global cash management value proposition. Its multi-currency product also acts as an expanded offering to RBC's newcomer and globally-minded clients. We believe these capabilities will both continue to attract new clients while also benefiting RBC's existing client base. In turn, RBC brings a powerful set of payments capabilities to HSBC Canada's 770,000 retail clients, including Avion Rewards, our proprietary loyalty program. Furthermore, RBC Vantage, our everyday Canadian banking offering, brings us together a comprehensive suite of powerful benefits for our clients, incentivizing even deeper client relationships. There's also the opportunity to deploy the full suite of RBC's leading wealth management and private banking solutions to HSBC Canada's affluent client base. Neil will speak more about these opportunities in a few minutes. The bottom line is that our combined platform will enable us to provide a more valuable offering to a wider set of clients. We also have identified significant expense synergies, making the transaction a very accretive deployment of capital. As seen on slide seven, we estimate the transaction to result in CAD 1.4 billion of fully synergized earnings in 2024. We expect these earnings to provide a stable source of recurring internal capital generation, which in turn gives us optionality in the future. We estimate the transaction to add 6% to 2024 earnings per share, delivering an internal rate of return of 14%, well above our cost of capital. RBC will pay total consideration of CAD 13.5 billion for the common equity of HSBC Canada. This implies a price to tangible book value of 2.5x at close what is a high-quality bank. The real value of the bank are the earnings realized under RBC's business model, which imply a forward price earnings multiple of 9.4x fully synergized earnings. This is below the historic Canadian bank average multiple of 10.5x forward earnings. The purchase price is structured using a locked box mechanism. All of HSBC Canada's earnings from June 30th, 2022 to close will accrue to RBC. Adjusting for this, the fully synergized multiple would be under nine times forward earnings per share. Slide eight shows our recent history when it comes to mergers and acquisitions. Our proposed transaction of HSBC Canada meets our criteria of acquiring a high-quality franchise, which provides value-added advice to premium clients in a structurally attractive market. It follows on a recently completed acquisition of Brewin Dolphin, a premium UK wealth manager offering services across the wealth spectrum, including complex solutions for high-net-worth clients. This narrative originally started with the acquisition of City National Bank, which has only added to its reputation of being a strong US commercial bank with a premium private bank serving high-net-worth clients as well. Cultural alignment is another critical element that defines the long-term success of any relationship, and we believe our two companies are an excellent fit. Slide nine highlights how HSBC Canada's purpose-driven culture matches our own commitment to our clients and communities. For us, diversity and inclusion is more than just a value, but a key strength, and one which has received meaningful awards and accolades. We also have a shared focus on sustainability. HSBC Canada has been a pioneer in launching sustainable products in Canada, and we are committed to providing CAD 500 billion in sustainable finance by 2025. We also remain committed to the distribution of the economic value we create to push for a better future for our client and communities and higher earnings from our Canadian businesses means more is distributed to those who benefit from our successes. In this regard, we distribute a significant portion of our earnings as a result of being one of Canada's highest taxpayers. Each year, we donate 1% of our pre-tax Canadian net income to help those in need within our communities. Finally, we distribute a significant portion of our earnings to our shareholders, the majority of whom are based in Canada. In conclusion, we look forward to combining our complementary businesses and offering an expanded value proposition to an attractive client base while maturely adding to our sustainable earnings stream. Now I will pass it over to Neil McLaughlin, Group Head, Personal and Commercial Banking. Neil, over to you. Thanks, Dave, and good morning, everyone. I'm excited by today's announcement, and everyone at RBC is looking forward to working with our new colleagues and ensure we maintain the high level of service which clients have come to expect. We're excited about the potential opportunities to leverage the cross-selling power of our two businesses. I'll start with the retail banking business on slide 11 and speak to two strategies, namely newcomers and affluent clients. As Dave mentioned, the acquisition of HSBC Canada better positions RBC to be the bank of choice for newcomers to Canada. Today's announcement, combined with our recently announced partnership with ICICI Bank Canada, further widens an important client acquisition funnel for us. With over 60% of HSBC Canada's over 770,000 retail clients having global connectivity, we look forward to incorporating various new banking solutions into our existing strategies in order to create a more seamless transition for newcomers. HSBC Bank's products also allow us to enhance our presence amongst global families and businesses that are coming to Canada. On the affluent segment, a significant 40% of HSBC Canada's retail loans are to affluent clients, a higher ratio than our own client base. Given the affluent nature of these clients, it's not surprising to see average mortgage principal amounts which are materially higher than our average. While mortgage balances are fairly large across the portfolio, there has been a limited pickup of certain non-banking products. We believe our broad product offerings across credit cards, wealth management, asset management, and private banking will prove to be an attractive client value proposition for these affluent customers. I'll now move on to the business banking platform on slide 12. HSBC Bank Canada's commercial client base skews to a larger segment, which is bigger than where we currently compete in Canadian banking. This acquisition further extends our client acquisition capabilities and aligns to our current strategy to grow up market. As these large commercial accounts grow even larger, we think there are opportunities for these businesses to be served by our leading RBC Capital Markets platform. Furthermore, the company's international cash management and trade finance expertise will help to accelerate our own technology roadmap while also benefiting our existing clients. With over 50% of HSBC Canada's commercial banking clients being globally connected, this transaction also positions us as the bank of choice for commercial clients that have international needs. Before I wrap up, it's important to highlight the power of relationships and being a trusted advisor to your clients. It's why 90% of HSBC Canada's relationship managers have a tenure of over five years, and it's why approximately 80% of its clients are long-tenured. We look forward to welcoming both clients and employees to the RBC family. With that, I'll turn it over to Nadine. Thanks, Neil, and good morning, everyone. I will start on slide 14 with some key details of the announced transaction. This morning, we announced an agreement to acquire the common equity of HSBC Canada in a CAD 13.5 billion transaction with 100% of the consideration paid in cash. Importantly, HSBC Canada's earnings from June 30 of this year to acquisition close will accrue to RBC, therefore having an implied impact of lowering the net consideration. We expect HSBC Canada to generate over CAD 1 billion of earnings during that period, bringing its CET1 ratio to approximately 13% at close. We expect RBC to remain well-capitalized with a pro forma CET1 ratio exceeding 11.5% at close, and we would expect HSBC Canada's additional net income to add to our capital accretion going forward. RBC will also purchase, at par, HSBC Canada's outstanding preferred shares and subordinate debt held by HSBC. As Dave mentioned, we expect fully synergized fiscal 2024 earnings of CAD 1.4 billion or nearly CAD 1.6 billion when adjusting for accounting impacts. I will quickly go through a few of our assumptions in the model we have included in the appendix on slide 19. There are a number of purchase accounting factors which would impact reported earnings over the coming years. We estimate a gross credit mark of CAD 400 million pre-tax, representing approximately 50 basis points of HSBC Canada's gross loans. We have built in a level of conservatism versus HSBC Canada's current provisioning of 40 basis points of loans. Approximately CAD 300 million of this credit mark will be allocated to performing loans and accreted into earnings over three years, which we assume to be the average remaining term of the loan. We've taken a further CAD 1.4 billion pre-tax interest rate mark on assets. On the liability side, we've assumed a positive interest rate mark of CAD 750 million pre-tax. If we include these accounting adjustments, we expect fully synergized fiscal 2024 earnings to be higher at CAD 1.6 billion. Moving to slide 15. I will now speak to expected expense synergies, which are an important part of the rationale behind this transaction. We are assuming CAD 740 million of expense synergies, which represent 55% of HSBC Canada's expected 2024 expense base. We expect 20% to be realized in year one and over 95% to be realized by year two. Recall, we anticipate the transaction to close by late 2023, subject to customary closing conditions. The level of synergies reflects a number of factors, with the main one being the in-market nature of the acquisition. As part of our rigorous due diligence and budgeting process, we have mapped out where we expect to realize the majority of these meaningful synergies. We expect to leverage the investments in our technology and operations infrastructure to a great extent as there is a significant overlap in systems and applications, which we'll look to migrate onto our platform. Bruce is here in the room to answer any questions. Lastly, on expenses, we expect CAD 1 billion of acquisition and integration costs, with 25% realized at close and the remainder in 2024. Finally, on to slide 16 to discuss credit quality. HSBC Canada has a well-established risk management program and a disciplined credit culture. It has a well-diversified loan portfolio across wholesale and retail lending. As part of our robust due diligence, their loan book's asset quality has been assessed as within our risk appetite. I will quickly speak to two portfolios that garner a lot of investor interest, namely residential mortgages and commercial real estate. Graeme can answer any detailed questions you may have. HSBC Canada's residential lending portfolio is of a very high quality, with portfolio metrics quite similar to our own prime mortgage book. Their commercial real estate exposure shows good diversification across geographies and asset classes. Importantly, their concentration inquiry is in line with RBC's overall concentration, we do not see HSBC Canada as adding to our relative exposure. In closing, our excitement over this transaction reflects its benefits to both clients and shareholders. It is financially very compelling and enhances RBC's capital generation power while also greatly enhancing the client value proposition. With that, operator, let's open the lines for Q&A. Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your device's keypad. To cancel the question, please press star two. Please press star one at this time if you have a question. There will be a brief pause while participants register. Thank you for your patience. The first question is from Meny Grauman from Scotiabank. Please go ahead. Hi, good morning. First question just on customer retention, what you're assuming. Wondering what kind of risk you see around that. You know, some people are speculating that, you know, HSBC Canada's customers, they might have been HSBC Canada customers for a reason, maybe not wanting to deal with a, with a Big Six bank. Wanted to get your perspective on that? Sure Meny, it's Neil McLaughlin. I'll take the question. We spent a lot of time going through HSBC's business, and think we have a really good appreciation for what the value propositions are, and taking a look at, you know, what the value proposition we have. You heard in the prepared remarks just about the strength of the international, connectivity. Those are all capabilities we will be onboarding and adding to our capability set. We have a full belief that, you know, the relationship manager tenure that I mentioned is important to maintaining those relationships. Those are the types of levers we'll be looking at, to maintain that. We also take all the capability that we've got, in our franchise. We have a broader set of capabilities than HSBC has. We've mentioned credit cards, private banking, wealth management. We also have to think about on the consumer side, you also have to think about just the idea of convenience. We'll be able to offer these clients more convenience than they've had in the past, whether that's physical branch network, a better mobile app experience and better digital tools. When we roll that all up in the consumer side, I think we feel quite confident and then on the commercial side, again, relationship managers are key. The product breadth, again, in a different, obviously different capacity. Our cash management, you heard Dave talk about, we have a very broad cash management system we've been investing in. We will add some of these international money moving capabilities as well as trade finance that HSBC will bring us. Between the people and the value propositions, that's really what underpins it. Thanks for that, Neil. Just to follow up on that CAD 1.4 billion projected NIAT in 2024, including synergies, what's the retention that's being assumed there? Is it virtually 100%? What we have in there, Meny, is we've not included as part of any of the cross-sell that Neil had spoken about. We've been very conservative in our revenue assumptions, both within our outlook as it relates to the capital markets businesses, as well as the interest rate margin expectations. Included in that number, we've taken a haircut on revenue, but we've also not included any of the cross-sell related to what Neil had spoken about. Got it. Is there any quantification of that cross-sell that you could provide us? Any sort of order of magnitude that you're thinking about? No, we've not modeled that out. Not at this time, just that we believe it to be conservative based on all the strengths you just heard of our core deposit accounts lineup, our credit card lineup, our mutual fund lineup, our investment in our cash management. What we really like about this transaction is it allows us to leverage all the investment in technology and capabilities that we've made and bring a larger client base onto all this investment. It's just, it's a wonderful opportunity for clients and for our shareholders to leverage all that investment we've been talking about for the last five-10 years. Thanks. Thank you. The next question is from Gabriel Deschênes from National Bank Financial. Please go ahead. Hi, good morning. Couple quick ones here. Is there going to be a drip discount anticipated in your capital plan? Just for the modeling there, the accruing of HSBC earnings from, you know, H2 of this year and most of next year or all of next year, that won't hit your income statement over the next, you know, five quarters or whatever. That'll be a lump sum adjustment, I assume, on close? Yes, Gabe. Yeah. Sorry, go ahead. Yeah. then- Go ahead. I saw you put, you know, in your slide 19 there, the EBIT figure and the revenues net of PCL. I was hoping you could give us a sense of, you know, what your credit assumption is because, you know, HSBC earnings this year and last have obviously been flattered by, you know, low loan losses. I'm wondering what kind of, you know, normalization you're factoring into your numbers there? Okay. Sure. Thanks, Gabe. Sorry to sort of jump in on your question there. Oh, no worries. In terms of capital conversations, I'll refer to your remarks in terms of where we forecasted we would be at close, which is at above the 11.5%. I'll refer any further conversations around capital outlook, Gabe, if you don't mind, until our call tomorrow. Okay. As it relates to the earnings, that will accrue to us upon close. That stays within consolidated within HSBC until we actually close the transaction. Around your question around PCL. We are expecting more normalization, around to the mid 20 basis points. If Graeme wants to add anything further on that, but that's where we're forecasting in terms of what we've assumed in the model. Yeah, Gabe, maybe I could just explain what we did there on the PCL side. I mean, as part of the diligence here, we had really They pull loan tapes, if you will, and data that went with that. We were able to take their data and, you know, they're an ARB banks, we're able to understand their PDs and LGDs and map that to our PDs and LGDs and our ratings. Through that, we're really able to come up with really good estimates of what kind of ACL we would put in place as this portfolio comes over. We're able to use that data to really succinctly kind of forecast, robustly forecast kind of what we think the PCL would be, both in the near term as we look at kind of more difficult kind of recessionary environment, but what we also would see that be in the longer term. Built into our model, I think is a really robust assumption that lines up really well with how we model our own PCL. Okay. Just a quick one. The 92% of, I guess, single product customers at HSBC, how many are Royal clients today? Neil will take that, but no, that's not the factor of single service clients. Yeah. Yeah. They actually have. Oh. They actually. Yeah, thanks for the question, Gabe. It's Neil. We provided a couple data points there. One was the percentage of clients that have all four categories. Okay. All four. Yeah, all four categories of transactions, investments, borrowing, and card, is 9%. You look where we index. You know, to be fair, we are the industry leader. That sort of creates that where do you think there's opportunity to bring that product suite and then really consolidate, share of wallet around those product sets. Thank you, and congratulations. Thanks, Gabriel. Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead. Good morning. Most of my questions have been asked and answered, but maybe Neil, back to you because I think you mentioned something in particular, and I'm just hoping you can flush it out. I guess my question is, does HSBC bring to the table anything that you don't currently have? I think you talked a bit about trade finance and whatnot. I'm hoping just to get a better sense of what opportunity if that is the case, then what opportunity that brings. Yeah. Thanks for the question. Maybe, I'll start on consumer and then finish on the commercial side. On the consumer side, one of the value propositions they have is multi-currency accounts. This is a value proposition of being able to save in euros, Hong Kong dollars, and sterling, and that's something we will onboard onto our platform. They also have a capability to change on international exchanges in their discount brokerage, and a capability we don't currently provide. There's two things on the consumer side. On the commercial side, you mentioned it's trade finance, and it's supply chain finance. These are capabilities that, you know, we do letters of credit, we do guarantees. They just have a more robust, deeper product set just given the nature of their business, and they have the client flows to go along with that. Those will be some of the capabilities. There's specifics would be things like virtual accounts for larger corporates, for notional pooling to optimize their liquidity positions. Those again, are things we will build into and integrate the stacks. Okay. I'll leave it there. Thank you very much. Thank you. The next question is from Ebrahim Poonawala from Bank of America. Please go ahead. Good morning. Yeah, most of my questions were answered. Quick follow-up, Nadine. I know you referenced 2024 earnings, when we think about the actual expense savings kicking in, all of that should play out in 2025 when we think about the entire synergy of the CAD 1.4 billion showing up to the bottom line. Is that correct? Yeah. We commented that was 2024 assuming fully synergized. Which will actually hit in 2025? Correct. Based on a run rate. Correct. Based on, yeah, based on a run rate basis. Okay, thanks for that. I guess maybe just one quick one, Dave. I mean, obviously, you love Canadian market share, so big deal makes sense from that regard. As we look forward, is RBC done for now as far as M&A is concerned between Brewin Dolphin and this, or are we still open for business for like strategic opportunities that might show up? I think this is part of an ongoing journey to build our organization. Nadine will walk you through tomorrow, our capital accretion and capital strategy, therefore, we'll focus on this deal in the short term for sure. To get through approval and to, you know, execute on the transition is very important to deliver on the value. Over time, this transaction allows us to generate significant capital and earnings as well, over 20 basis points alone from this transaction. Therefore, it positions us well to continue to execute against the strategy we've articulated to you in the market. Got it. Talk to you tomorrow. Thank you. Yeah. Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Thank you. Good morning. First question is regarding interest rate sensitivity. Does HSBC change the rate sensitivity for your Canadian banking business at all? No, I mean, it's of a certain size in terms of the total book, but we will also bring it in as part of our asset liability management practices and manage the book holistically with the rest of it. It would be seamless from an integration standpoint that way. Okay. Got it. Second question, one that's come up a lot since the potential acquisition first hit the newswire, and that's kind of, I guess, concerns regarding Royal as the biggest Canadian bank buying another Canadian bank and, you know, competition type issues. How should we think that type of risk in terms of closing this deal. How do you get over that hurdle? I'll take that one. Thanks for the question. First, I'll say while it would be inappropriate to speculate on the Competition Bureau's review We are not aware of any areas where the Competition Bureau is likely to have concerns and are not aware of any reason why a competition clearance will not be received. In the big scheme of things, as you mentioned, this is still a relatively small bank by market share of 2% or less. Therefore, as we go through and look at whether it's by product, by geography, we don't have any reason to believe right now or that there should be concerns. We look forward to working closely and cooperate with the Competition Bureau as they review the transaction. Just to remind you, this requires three different levels of approval, OSFI and from a regulatory perspective, Competition Bureau and the Ministry of Finance. Got it. Okay. That's it for me. Thank you. Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Thanks. Congratulations on the transaction. Neil, you may have answered this, but I may have missed it. I know you... I think a lot of the assumptions around the transaction, I think you've characterized as conservative. Did you assume any attrition? Yeah, it's Neil. Appreciate it, Sohrab. We, Nadine did speak to it. In terms of, you know, when we look at the portfolio, what we've basically modeled is, you know, what are the net balances that we take over? We've taken in the net revenue. We have in our modeling, you know, made what we believe is the best estimate of what that one-time attrition lift would be. We did make comments earlier just about the strength of the overall relationship management, the value propositions. We need to keep in mind that HSBC is leaving the market. These clients, you know, will need to have somebody else to continue on with those services. We think we're the best positioned to, you know, improve what they've had and bring that into, you know, what we do and extend the value that we bring our customers to there. Those are some of the qualitative sides of what underpins what you saw in the illustrative example. Okay, I understand that. Thank you. Dave, just maybe a slightly kind of higher level question. You know, I wouldn't have thought, given the excellent momentum the bank has, the traction and, you know, the presence that, you know, having more mortgages or, you know, having to pay a goodwill premium to continue to strengthen, I guess, that center of gravity in Canada would have been of strategic priority. You know, all the investments in digital and, all the better mousetrap discussions around, you know, growing market share in Canada. I'm just, you know, taking a bit of, I guess, a devil's advocate on this one. Why, why pay $8 billion or so of goodwill for 130 branches? Well, I think you look at the compelling financial transaction. As I said before, it's a unique kind of once in a generational opportunity to leverage all the investments we've already made in building, a world-class retail and commercial bank in Canada, whether it's our online banking capability or mobile banking capability or cash management capability or transaction banking capability or Avion Rewards. All that investment you can lever by adding, the customer base of HSBC Canada and cross-selling, those benefits. When you look at the returns of doing that, it's a compelling story to allocate capital to leverage the strength of your franchise. Every organization should be looking to lever what they're really good at and capitalize on that for shareholder value, and this is the case. I think we have to be careful how we label HSBC Canada. It's first and foremost a very strong commercial bank. If you look at the split in earnings between commercial and consumer, it orientates heavily towards the commercial bank. We're acquiring trade-oriented, export-oriented, you know, global connected commercial clients first and foremost, and we're acquiring global private banking and Canadian retail clients. I think while the balance sheet is split 50/50, the earnings do skew towards a commercial orientation, and that's a big part of the Canadian growth story. The third thing, and I think you can't ignore, is we're gonna bring in 500,000 immigrants, a huge source of growth in any bank in this country. When you look at the long-term partnership we signed with ICICI Bank and also the partnership that we're signing with HSBC Global, is to refer clients who are gonna do business in Canada or move to Canada to live here. That exclusivity and capability is what we're adding to our franchise over time. It's access and early looks and connectivity to the next generation of immigrants that will come to this country. That's what we're bringing in first and foremost, commercial banking capability, globally connected clients, trade finance, and multicurrency accounts and preferential access to the next generation of clients who we feel best fitted to serve and create value for. I think that's the strategic rationale, not the fact that we're just adding a book of mortgages. This is not an asset strategy. This is a client strategy at the end of the day and a client growth story. Dave, I mean, this, presumably, the bank would have been able to accomplish this organically. I mean, this just speeds things up, or, you know, this takes you to a different level? We do have strong organic growth capabilities as you've seen us build over time. It took HSBC Canada 40 years to build this franchise and this P&L. It takes a while to acquire clients and curate a multiproduct relationship and build profitability around this. Again, when you've invested so heavily in the capabilities that we have, adding a client franchise like this to it, the capabilities you already have that are valuable and create more value for that client franchise is an attractive strategic transaction to do. It'll take a long time to acquire this many deep-rooted clients. Therefore- We look at the returns, and the returns are incredibly financially compelling, and therefore it makes a lot of sense to do this. Okay. No, I agree on the financial side. I was just more quizzing you on the strategic side. Thank you very much. Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Good morning, Dave. Some questions that have already been asked, I wanna try a different take on them. You talked about the Competition Bureau already and how you don't see any reason why there's an issue there. How about just from the concept of the too big to fail, like the concentration issue. Do you view this as not really having... Like, do you think it'll raise any questions on that front? No, because you're taking a bank that has less than 2% market share and adding it to our current position. It doesn't change any of the market structure. We operate in a hugely competitive Canadian banking system with credit unions, with strong banks and well-capitalized banks and competitive banks, with non-bank financial institutions. I mean, it is a very competitive marketplace. Therefore, when you look at, and we'll go through this, when you look at the size of the bank being added to Royal, it does not change the market structure of the team industry whatsoever. From that perspective, I think that leads us to view it. We are not aware of any areas where the Bureau is likely to have concerns with this type of transaction. Okay, sort of a different type of question then. I don't think it's any secret to anyone that Royal has aspirations to grow in the U.S., organically and inorganically. Can you say with confidence that the bank can execute on two transactions simultaneously, one in the U.S. and one in Canada? Would you really have to put this one to bed before you could be serious about expanding in the U.S.? You know, if you look at the ability of the organization to execute a technology transition or an acquisition, yes, hypothetically, we could handle two. They're different teams. Often it depends if you're gonna go through a full technology integration or not. You've got different systems with different technology teams, with different operational teams, with different management teams. You could. It would strain resources in some centralized areas, but from a operational perspective, hypothetically, yes, you could. Thank you. Thank you. The next question is from Lemar Persaud from Cormark Securities. Please go ahead. Thanks. It sounds like you guys really did your homework on the synergy side, but at 55% of the total cost base for a relatively established bank, I feel like I still have to ask. Can you just talk about what gives you the confidence you can cut 65% of the expense base of HSBC Canada? You know, is it just really a massive amount of underlying systems integrations here? Or are there other factors associated with head reductions, branch closures, anything else that you'd point to? Neil, we'll start with that. Yeah, thanks for the question. I mean, you heard Graeme go through the level of detail in getting to the outlook on ACL and what the credit performance is. I'd say we went through sort of a similar level of detail in just breaking down in the due diligence process, the cost base, what is all the activities, and mapping that to what we see as a future state combined business. I'd say, you know, the headline is we're quite confident on the synergies we've laid out in front of you. Two of them I'd say are very straightforward. Things like our branch overlap and office real estate. We've gone market by market, understood, you know, what is the client convenience we wanna make sure we maintain, and we have a mapping of what that looks like. Again, those clients will have more convenience in the future state than they have now. We will have all the technology will be in-house, so a big portion of this you'll see is technology. Things like intercompany expenses come straight through. a brand and marketing is no longer needed to support HSBC Canada. Those are pretty straightforward. In terms of, you'd asked a question about FTE. There are, obviously places we will not require the same number of FTE to service the combined client base, but we have looked at that, and we feel very strongly that with the number of open jobs we have, across our business and looking at where those FTE are, we will be able to welcome those employees in, look at our natural attrition, our natural job requisitions, and onboard that and are quite, I think, optimistic about the additional sales power. Right now, HSBC has about 2,000 client-facing advisors, and that provides us with not only more client connectivity to the current clients, but the ability to turn that productivity into onboarding new clients. That's really how we're thinking about the synergies. Great. Thanks. That's it for me. Thank you. The next question is from Joo Ho Kim from Credit Suisse. Please go ahead. Hi. Thanks. Good morning, and thanks for taking my questions. Just wanted to start off on core deposits. I'm wondering if you can comment on the breakdown of the deposit base that you're acquiring with HSBC. I think there's a breakdown in the? That's a great question. Nadine, do you want to- Yeah. Yeah. We've included. You wanna take that? We've talked a lot about. We've included some of that information for you just on the back on slide 20, as it relates to the deposit type. It's a very strong deposit base. It came in their Q3 numbers at CAD 82 billion, and it maps out pretty evenly amongst core deposits, low beta deposits, low interest-bearing deposits. Then what you've seen is about 1/3 of it is related to their term GICs. Similar to what you've seen, I would say across other banks, as interest rates have gone up, you've seen some of a shift of savings into the term GIC market, which makes a very attractive term funding basis for us at a lower cost base than would be on a wholesale basis. Okay. Thanks. The acquisition doesn't really change your core deposit base profile. I just ask given the importance of margins? No, it's similar to what we've seen within our own deposit base and very similarly structured in a very strong deposit base as it relates to demand, low cost and low beta and similar trends as I mentioned as we've seen on the term market. Okay. Thank you. Just last one for me. Wondering, I wanted to go back to expense synergies in sort of a different way. Wondering if you can talk about any potential hurdles in achieving your expense synergy targets, whether that's regulatory or not. I think there were a couple mentions of FTEs and potential branch or distribution optimization. Just wondering if you see any other hurdles, other than those? Thanks. No, I think I'd I mean, I'll just pick up on the comments I had left off on. You know, the headline is we've gone through the cost base with a good amount of detail during the due diligence phase. I think we have a very strong understanding of what the cost base is. You heard Nadine mention, you know, our target to get to that full run rate of cost benefits, 95% of those benefits within the first two years. I'd say the confidence was quite high. Thank you. Yeah. Bruce, do you wanna talk a little bit about the technology integration? 'Cause a big part of the cost saves are migrating onto our well-invested in platform, our strong platform. Do you wanna make any- Sure. I think. Big part of our execution. Yeah, just a few points to state there. I think first of all, the, as Dave talked about the scale advantage that we've created over the last number of years with our technology investments is something that now is the time that that set of investments really comes to shine. When you think about, you know, our mobile platform, all of our digital client-facing platforms, including MyAdvisor, these platforms all are readily scalable to take on additional clients. I think as we work with HSBC, there was real excitement, you know, within their group about the ability to start moving the clients onto some of those technology platforms. Second point I'd say is HSBC runs a technology model where they're very centralized globally with very little local technology footprint. When you look at what we need to wind down as we put, you know, this capability onto our own platform, there's really very little of that. 90% of that is really held at a global basis. We've had a good, you know, opportunity over the last number of weeks to work with their team, you know, in how they do these types of migrations, 'cause this is not the first one that they've done globally. Leveraging that, you know, their capability and the real scale we have with our over 16,000 people gives us a lot of confidence in this migration. The last point I'd say is just to Dave's point on, you know, can we walk and chew gum at the same time? Yeah. This is, you know, really leveraging, you know, a core part of our team. It's not a team that's, you know, we're having other things on the go, as you know, with Brewin Dolphin, et cetera. This is, you know, a unique and dedicated team. We feel really good about this as we go. Thanks, Bruce. We have a couple more questions, I think, in the queue. We'll try to get them in the next five, 10 minutes. Thank you. The next question is from Mike Rizvanovic from KBW Research. Please go ahead. All right. Thanks. Good morning. A question for Neil. I just wanted to go back to the revenue synergies. It does seem like something that could be a pretty big driver here longer term. What I'm wondering about is when I look at the retail lending book, so it's on the retail side in particular, you've got about 96% of the portfolio in retail. It certainly looks like a more of a monoline type of relationship with clients. I would imagine those clients have this monoline type relationship with HSBC Canada, but they're fully serviced by your big six peers. I'm just I guess I'm struggling to understand how you'd win that business if it's a situation where these clients are already, you know, catered to in a very similar way within Canada on the retail side. Yeah, I appreciate the question. Maybe just start with a little bit of view of the mortgage book. You know, high quality mortgage book, really impressed with the credit, higher FICOs than even we have in our book. The quality is there. I think important to point out that 91% of mortgage clients have a core deposit account with HSBC. They're making payments on those mortgages from their core checking account. They don't have a full breadth of a product line the way we described. We don't see penetration on things like unsecured lines of credit or credit cards. They don't have as robust a digital experience or an app the way we do. These are not. I would not characterize these as single service model line mortgage customers at all. The way we look at it is, you know, what are some of the mechanisms to continue to grow that. We talked about our Vantage value proposition and Avion Rewards. These are two mechanisms that incent the client to consolidate their business with us and exactly the type of opportunity that you've seen grow our penetration of those transaction investment borrowing and card ratios. That's what we intend to bring those same value propositions to this customer base and expect to see start to trend in the similar direction. I think, Mike, it's important, Dave, to recognize that there's a reason why we're at 19% and Indris at 11 because we're cross-selling market-leading value propositions, whether it's the Lipper Fund Awards that we get on mutual funds, Neil's point, the RBC Vantage is giving points on debit, and the value proposition is so much stronger there in the, in the consumer value creation. The, you know, the best credit card lineup in the country. When we've proven with the investment in those value propositions for clients, it has traction. When we acquire a client, it is from one of those other banks already into the existing franchise, and we're successful in cross-selling them. We have a proven track record over decades of executing against this with best-in-class consumer client value. Okay. That's very helpful. Maybe just one quick follow-up on the link with Asia. What I've been hearing from some individuals is that maybe the link isn't that strong for HSBC Canada with respect to Asia. I understand why that might be important for new Canadians coming in from that region, just knowing the HSBC name. Like how much does that actually matter in the grand scheme of things on the commercial side? You don't really have much going on in Asia. Does that really move the needle on, you know, making this deal work longer term? Yeah. You heard Dave talk a little bit about the comparison to the agreement we signed and announced with ICICI Canada. This is about, you know, tapping into that new immigration targets that have moved from 250,000- 500,000 new Canadians. You know, they do have a very strong globally connected client base. They have carved out that position in the Canadian in Canadian landscape. We believe between these two relationships and the product value propositions that we had talked to earlier, that we can very much, you know, take that over. In terms of those flow and referral agreements, it just puts you in a more privileged place to have that first introduction and a seamless onboarding experience. Those are really, I think, you know, the triggers to say, why can you outperform in that category. You know, I think, Mike, to your question, it's not the primary driver in accretion model, as you've seen. We're trying to highlight why we think there's upside to this transaction from all of the cross-sell opportunity, the new client opportunities. We're just trying to, you know, bring some light to that bucket. I think it's a fair question. The accretion model stands on its own before that, and this is ancillary value that we're trying to highlight strategically for our franchise. Got it. Thanks for the insights. Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. Yeah, thanks a lot. There's lot of talk about the retail side and cross-selling. I was wondering about HSBC Canada's market-sensitive businesses. You kind of touched on discount brokerage. I know they've got private wealth, asset management, a bit of capital markets. Is that, you know, for RBC more of a revenue or relative revenue synergy gain, or is there more kind of on the cost side within those segments? Yeah, thanks for the question. In terms of what we commented on around the projections in the model, we have looked at the capital markets revenue. You're correct, there is some overlap from our perspective. In terms of some of the mandates around DCM or ECM, you would expect that that may reduce going forward. They do have a strong FX business, so that could be accretive as it relates to our business. In addition, if you think about some of the connectivity across their broader corporate clients, as Neil referenced around trade finance, there's opportunities for us in that regard. We have recognized that there is some overlap on the go-forward, which is my earlier comments around some of the conservatism. Okay. Thank you very much. Thank you. The next question is from Nigel D'Souza from Veritas Investment Research. Please go ahead. Thank you. I had a follow-up question on your on the residential mortgage portfolio for HSBC Canada. Could you tell us the breakdown there between fixed and variable mortgages? And, just to clarify for the variable mortgages, product structure there, fixed payment or adjustable payment variable? Sorry, I missed the last part there, Nigel. Can you just repeat that? The product structure of the variable mortgages at HSBC Bank Canada, is that fixed payment similar to your product structure for variable, or is that adjustable payment where it moves with the prime rates? Yeah, I can start. Let me just put a little bit, a little more color on their mortgage book. In terms of fixed and variable, they have a little bit more of a skew to variable than we do in our current book. They have a very strong average FICO. Their LTVs are a little bit lower than ours. Those are some of the proof points we'd point to in terms of, you know, what's the overall structure. We have looked at the overall renewal timing on their portfolio. It's quite similar to ours, I would say. Maybe on the variable, there's a little bit more coming due, but not significantly. A lot of the comments you heard Graeme and I speak to in last quarter in terms of how do we think about the Renewal risk in terms of the client rate that was being paid, and rolling off and what they're rolling on to and the increase in the average payments, I mean, those would be similar, you know, types of deltas we would expect with this book. Yeah. I think that the last part of your question there was just on the nature of their variable rate product and how that works, and it's similar to ours. It's a fixed payment until the interest consumes the whole payment, then it increases with any further interest rate increases beyond that. Scott Chan, is there any color on what. Nigel D'Souza, I think we're gonna move on to the next question, please. Thank you so much. We only have a couple minutes left, so I'm gonna try to get through one, maybe two questions in the queue. Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead. Yeah. Hopefully, this will be a quick one. This is for Nadine. Have you hedged the mark to protect your CET1 ratio? You know, you talked about the accretion from the marks. Can you talk about that, how that will contribute to percentage-wise to that accretion that you've laid out? Dave, did I hear you right that you have a partnership with HSBC for a referral, this is part of this agreement, or did I not hear that, or do you have that part? Do you have a partnership? Thanks. Just quickly on your first two questions. We will be evaluating and looking at how to manage that, as you recognized, given interest rate profile in terms of how we look to that through close. We did comment that the CAD 1.4 billion that we announced as part of the earnings fully synergized in 2024 would be CAD 1.6 when you look at it from the accounting impact. That's also laid out for you on the slide, I think 19. I'll let you turn over to Dave for the rest of them. Yeah. we've had a lot of dialogue over the last number of weeks, as you can imagine. we're well advanced in the overall strategic opportunity to move this forward with HSBC Global. while there's, you know, some detail to work out, we are of the same strategic mindset, and it's important to both firms. Okay. There's no official agreement like you have with ICICI Bank yet, but that's something you're considering or? Right. It's not, it's not outside of the normal sales and purchase agreement yet. Okay. We could flesh out some of the detail outside the SPA, but there's certainly a component of it there, as you can imagine. Okay. Thank you. Thank you. The next question- Last question. Yeah. The last question is from Gabriel Dechaine, National Bank Financial. Please go ahead. Oh, Mr. Dechaine has removed himself from the queue. Okay. Operator, I'll wrap up. Thank you for taking the time this morning. I know it's been a busy morning. We're just incredibly excited about this opportunity to bring two, you know, strong, culturally aligned banks together. We're very excited about the customer value that we're gonna create. Excited about leveraging the enormous capabilities both sides have to better serve our customers, the value we're gonna create for our communities, the value we're gonna create for all Canadians including, you know, higher tax base and higher dividends to Canadian pensioners and pension funds and investors. HSBC Canada is just a fantastic franchise, high quality franchise, one that you'll get to know as investors over time through our eyes as well. Thank you so much for your questions today. We're very excited about the future and a very compelling financial transaction. With that, operator, I'll close it off. Thank you. Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.