Sharon Haward-Laird William A. Downe - Chief Executive Officer, President, Director, Chief Executive Officer of BMO Financial Group and President of BMO Financial Group Thomas E. Flynn - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Surjit S. Rajpal - Chief Risk Officer of BMO Financial Group and Executive Vice President of BMO Financial Group Franklin J. Techar - Chief Executive Officer of Personal & Commercial Banking for Canada BMO and President of Personal & Commercial Banking for Canada BMO Mark F. Furlong - Chairman, Chief Executive Officer, President, Treasurer of M&I Capital Markets Group Llc, Vice President of M&I Capital Markets Group Llc, Chief Executive Officer of M&I Marshall & Ilsley Bank, Chairman of M&I Marshall & Ilsley Bank, Director of M&I Marshall & Ilsley Bank, Director of M&I Capital Markets Group Llc and Director of Marshall & Ilsley Trust Company

Robert Sedran - CIBC World Markets Inc., Research Division Peter D. Routledge - National Bank Financial, Inc., Research Division John Reucassel - BMO Capital Markets Canada Andre-Philippe Hardy - RBC Capital Markets, LLC, Research Division Steve Theriault - BofA Merrill Lynch, Research Division Sumit Malhotra - Macquarie Capital Markets Canada Ltd., Research Division Michael Goldberg - Desjardins Securities Inc., Research Division Gabriel Dechaine - Crédit Suisse AG, Research Division J. Bradley Smith - Stonecap Securities Inc., Research Division

Please be advised that this conference call is being recorded. Good afternoon, and welcome to the BMO Financial Group Q3 2013 Earnings Release and Conference Call for August 27, 2013. Your host for today is Ms. Sharon Haward-Laird, SVP and Head of Investor Relations. Please go ahead.

Yes, thank you, operator. Good afternoon, everyone, and thanks for joining us today. Our agenda for today's investor presentation is as follows: we will begin the call with remarks from Bill Downe, BMO's CEO; followed by presentations from Tom Flynn, the bank's Chief Financial Officer; and Surjit Rajpal, our Chief Risk Officer. After their presentations, we will have a short question-and-answer period where we will take questions from prequalified analysts. Please note that due to a peer bank hosting their quarterly call at 2:30 today, we will be ending our call promptly at 2:25. [Operator Instructions] Also with us this afternoon to take questions are BMO's business unit heads: Tom Milroy from BMO Capital Markets; Gilles Ouellette from the Private Client Group; Frank Techar, Head of P&C Canada; and Mark Furlong, Head of P&C U.S. On behalf of those speaking today, I note that forward-looking statements may be made during this call. Actual results could differ materially from forecasts, projections or conclusions in these statements. Information about material factors that could cause results to differ and the material assumptions underlying these forward-looking statements can be found in our annual MD&A and our third quarter report to shareholders. And with that said, I'll now turn things over to Bill.

Thank you Sharon and welcome to all of you on the call. BMO's third quarter results confirm the strength of the bank's performance to date in 2013 and reflect the benefits of our disciplined growth strategy, which is well diversified by geography and business mix. There was good year-over-year growth in revenues and earnings as well as loans and deposits. Our Canadian retail businesses were particularly strong in the quarter with both P&C Canada and traditional wealth earnings reaching new highs. In U.S. personal and commercial banking we continue to see growth in total loans driven by momentum in core commercial and industrial lending. Our large commercial businesses are doing well on both sides of the border and good earnings performance from our capital markets business continued. These operating results are underpinned by the successful execution of well-established strategies across all of our businesses. Our strong capital and liquidity, a prudent approach to risk management and an improving North American economy, led by the U.S., give us confidence we're well positioned. Third quarter results confirm this confidence. Both reported and adjusted net income were $1.1 billion or $1.68 per share. On an adjusted basis, EPS was 13% ahead of last year, and pre-provision, pre-tax earnings were up 7%. Operating leverage was just under 1%, and ROE improved to 15.6%. We continue to make fundamental changes to business models across the organization to adapt our current and long-term view to how financial services will be purchased and consumed. Accordingly, expense growth in the quarter includes operating investment in our businesses to position them for continued growth. Credit performance in the quarter was good. Provisions for credit losses were down significantly in acquired and legacy portfolios, and Surjit will comment on credit later in the call. Our Basel III common equity Tier…

Thanks, Bill, and good afternoon. We'll now move to Slide 8. Q3 results were good with adjusted net income of approximately $1.1 billion, up 12%. These results represent particularly good contributions from P&C Canada and PCG. Bill has already gone through the high-level results shown on the page, so I will move into the details. Before doing so, I do note that items removed for adjusted net income this quarter were similar in character to prior quarters and totaled just $1 million in the quarter. Slide 30 provides the details on this. Moving to Slide 9. Q3 adjusted net revenue was $3.9 billion, up 6% year-over-year and 4% from Q2. Adjusted net interest income was down 1% year-over-year with good volume growth offset by lower margins. Adjusted net interest income was up 4% from Q2 due to more days in the current quarter and good volume growth. Adjusted noninterest revenue was up 14% year-over-year with good growth across most in our [ph] categories. We had a significant increase in insurance revenues and good increases in trading, mutual fund revenues and securities commissions and fees. Adjusted noninterest revenue was up 3% from last quarter, reflecting good performance in P&C Canada and PCG. Most in our [ph] categories increased including insurance, mutual funds and credit cards. Noninterest trading revenues were lower despite higher overall trading revenues. The stronger U.S. dollar increased adjusted revenue by less than 1%. Turning to Slide 10. Q3 adjusted expenses of $2.5 billion were up 5% year-over-year, largely reflecting higher employee cost due to investment in frontline roles, higher revenue base cost, as well as higher severance and technology cost. Adjusted expenses were up 2% from Q2 largely due to 3 more days in the current quarter and higher employee-related costs. The stronger U.S. dollar has increased adjusted…

Thank you, Tom, and good afternoon, everyone. I'm pleased with our performance from a risk perspective this quarter. An improving U.S. economic environment and greater loan sales activity contributed to our U.S. credit results. Our Canadian portfolio also registered improved credit performance. We are going to start with Slide 19. Specific provisions, excluding the purchased portfolio, were $153 million or 24 basis points and 28 basis points year-to-date. This is a reduction of $64 million compared to last quarter, with the majority of the decrease due to lower new provisions and higher recoveries and reversals in our P&C businesses in both Canada and the U.S. Provisions for the purchased performing portfolio were $44 million, down $21 million quarter-over-quarter. The decrease was due to improved economic environment, as well as some loan sales. The recovery on the purchased credit impaired portfolio was $140 million, an increase of $33 million, reflecting higher loan sales this quarter. Our value maximization strategy has resulted in a year-to-date recovery of $306 million on top of the $509 million recovery last year. Reduction of our purchased credit impaired portfolio has been a key component of our U.S. strategy. And as we leverage our workout capabilities, the strong results continue to be recorded in our corporate services group. The portfolio is now down to 29% of its original size. Our total provisions for credit losses this quarter reflects a $20 million change in the collective allowance, which includes our assessment of potential loan losses related to the Alberta floods. Moving to the next slide. Impaired formations were largely flat quarter-over-quarter. Formations in the purchased performing portfolio decreased to $211 million this quarter, the fifth consecutive quarterly decrease. Gross impaired loans have been steadily declining since the end of 2012. GILs decreased by 7% this quarter as a result of higher loan sales in the U.S. and the resolution of the large -- of a number of larger impaired loans in the Canadian commercial portfolio. GIL as a percentage of gross loans and acceptances, including purchased portfolios, are now down to less than 1%. To conclude, as I mentioned earlier, I'm pleased with the credit results for this quarter and remain optimistic about our future credit performance, given improving conditions in the U.S. and the stable Canadian environment. I will now turn it over to the operator for the question-and-answer portion of today's presentation.

[Operator Instructions] Our first question is from Robert Sedran from CIBC.

Surjit, can you just give us an update on the evolution of these purchased credit impaired numbers, please? Appreciating that there's a lot of caveats, but your guess is certainly better than mine. I think last quarter you suggested that H2 could look like H1, but after Q3, I think H2 already looks like H1.

I have always been a little reluctant to be very definitive about what happens to the purchased credit impaired portfolio given that it's a combination of the workout process that we go through and loan sales. And in quarters in which we have some loan sales, you do see better numbers. So I would suggest that for -- look, if you want to look forward, you've got to bear in mind that the portfolio is only down to 29% of its size. So it's much smaller factor. Having said that, I would expect the next quarter to be good because we are trying to take advantage of the improving market. And through resolutions and loan sales, I would see the results to be good, but not at the level at which you've seen for the last 2 quarters.

Okay. And just as a follow-up on a similar theme in Canada, we keep hearing about the Canadian consumer being a problem and then you've taken provisioning levels down and your peers are doing the same or at least have been doing the same. How much of this is good performance today and how much of this is you feeling optimistic about the next 12 to 18 months when it comes to consumer? I mean, considering that the loan book is more heavily secured than it was in past cycles, should the trough be lower than past cycles? Have we got this wrong in the market?

On the consumer side, I think you've got to differentiate between the 2 markets. In Canada, we did actually -- the allowance that we had increased in our consumer area because of the Alberta floods and so I think the consumer area in Canada is performing quite well for now, and I would expect that to continue for now -- continue. I don't know how to answer your question on the trough. If the market were to change, obviously, when the market does change and if it's driven by high consumer debt levels, things could be very different. So I'm cautious. But all I can tell you is that, in terms of our provisioning from a collective allowance standpoint, we feel comfortable that the number that we have there more than adequately protect us and are appropriate for the level of risk that we see going forward.

Our following question is from Peter Routledge from National Bank Financial.

Frank, very strong quarter. I noticed expenses -- and I'm sure you want to talk about revenue, too. But I noticed the expenses were kind of in line. They've been pretty good, really, the last couple of years now. How much of the -- how much expense control is left related to the restructuring? Is there more? Do you get more of a lift from restructuring in the quarters ahead or we pretty much see all of that now? And then what's your outlook on your efficiency ratio for 2014?

Sorry, Peter, were you -- you were talking about the Canadian business?

Yes, P&C Canada. I'm sorry.

Okay. Well, first of all, since you've given me the opportunity, I am going to barge in and just make a couple of comments about the quarter because I may not have an opportunity to do it. This was a really good, strong, clean quarter for P&C Canada. And the best thing about it was the fact that the improvement was broad-based across a number of different elements. And I won't repeat -- Tom and Bill mentioned the very strong loan growth that we've seen, very strong mutual fund growth that we've seen. These are really big numbers for us, especially in this competitive environment. And we think we can continue the growth just the way we've seen over the last couple of quarters. In addition to that, the margin compression has moderated a bit, and that's on the back of stronger deposit growth, which you all know we've been working on very hard. And the numbers came through nicely this quarter. And so my expectation about margin going forward is similar to what I said a few quarters ago, which is, moderating moving forward, 1 to 2 basis points as we go into fiscal 2014. And we also saw noninterest revenue very broadly strong across many product categories: our deposit products, our card products, the mutual fund products. So the lift we've seen in the results for this quarter are broad-based across many elements of the business which gives me confidence that moving forward, the strength in many areas, there's no reason why we can't continue. So with strong growth, moderating margin declines, better noninterest revenue growth, I'm expecting our revenue growth to continue to improve over the coming quarters. Relative to expenses, we are building a stronger bank, and we're building one that's going to win and last. And we are continuing to invest modestly in the business, particularly on 2 fronts. One is improving our channels: both our branches and our online and mobile capabilities, but also improving some of our core processes. And right now, in-flight, we've got work going on, on our commercial lending platform and our credit card platform. And so we do have a little, as you characterized it, restructuring going on in the business. And specifically, our expenses were up $27 million sequentially, and that increase occurred in a couple of areas, days as you might imagine. We had some volume-driven cost and this investment in the business. So going forward, I'd expect to see a little bit of seasonal growth in Q4. But I'm really not expecting year-over-year expense growth to be higher than we saw this quarter. I'm expecting it to be lower as we go into 2014. I think our investment in the business can be offset with some of the productivity initiatives we've got ongoing, and I wouldn't expect it to be this high as we move forward.

And just a follow-up for Bill. It'd be unfair of me to ask the dividend question without first saying, you bought back 4 million shares. I guess the question isn't so much why the board elected not to raise the dividend. Was it more of a trade-off decision? You liked the price of your shares throughout the quarter, so you elect to buy back maybe a bit more shares and you hold off on dividend for a later date or is there other considerations?

Well, thanks for not asking an unfair question, Peter. I don't think there's a change in direction. I would be consistent with my previous comments that, we believe that returning capital to shareholder is a good thing to do, particularly when you have very strong capital ratios. And that increasing the dividend over time, consistent with earnings increases, is the pattern that we want to stick with. And that's dividend increases, 1 or 2 times a year. I think your point about the way in which capital is returned to the shareholders, it does -- it is the case that we bought back 4 million shares. And if you just look at the value of the repurchase plus the dividend, about 60% returned to the shareholders and about 40% retained as retained earnings to support the growth of the businesses. And I think you're right, we do believe that the share price is attractive and that, that a good mix between share backs and dividend increases will be well-received by all shareholders.

The following question is from John Reucassel from BMO Capital Markets.

Just some clarifications just from Surjit. Surjit, you said the purchased credit impaired loan [ph] portfolio, it's down 29% or it's down 71% from original?

It's down 71% to 29%.

Got it, okay. And then the collective allowance was on the Canadian portfolio -- and sorry if I missed it, is this Alberta flooding or where is the collective allowance?

The collective allowance increased. A large portion of it was because of the Alberta floods. So the increase that you saw was actually more towards that than any other single factor. So I singled it out for comment.

Okay. And then a question for Mark. Just on the U.S., it looks like margins came down a little more than you would have thought. I think that's what Tom mentioned in the comments. So could you talk a little bit about the product or the portfolio that was in -- what the market looks like now and kind of an update where we are?

Sure. So this is not a typical quarter for our net interest margin. We had one portfolio in our commercial business that repriced. It's a 20-year business with a strong credit class of commercial customers, and we think we're being competitive on price and just being strategic with the portfolio. So that's kind of one piece of it. But if you look at the margin, it's -- over the course of the year, we've also grown some lower-spread assets like indirect auto, and we took some opportunity in the quarter to add some assets at relatively decent spreads with strong credit characteristics that were -- just happened to be available, and that's really just as a result of the strong liquidity position that allowed us to do it. And then we're also -- as we add new lending assets, particularly in commercial, they have lower spreads than the current portfolio, but we think they're good relationships that we'll build for a long period of time, and we have full relationships because we continue to grow DDA well with them. And then in some cases, just the normal renewals, the credit risk profile of that -- of a customer has improved, particularly as the economy's improved and so some of those renewals would be at lower spreads than historical portfolio. So you kind of take it all together, and that's where we're at. I think going forward, we'd say that the -- for the next couple of quarters until we see some lift in the short end of the yield curve that we probably still have 5 basis points or so per quarter of spread contraction or margin contraction. And then maybe another 2 or 3 if we decide to deploy a little bit of excess liquidity, and we find the assets we like. And depending on what it is, they would clearly have to be, if they're going to be a little bit of lower spread, clearly have to be superior credit quality, and that's certainly what we've done so far. And I think maybe the end of that question you had was, is it competitive out there? Yes, I think it's still pretty competitive out there. There's certainly some asset-hungry banks and -- but we don't lead with price. And the net portfolio, I mentioned that we repriced, we didn't lose a single customer. And I think that was what, from our perspective, was most in terms of building relationships. Did I get everything you asked?

Yes, that's great.

The following question is from Andre Hardy from RBC Capital Markets.

The question is probably for Tom Flynn. One of the drivers of margin pressure has obviously been low, medium-term interest rates and those have risen in recent months. So when you look at the outlook for margins, how many more quarters do you foresee interest rates having a negative impact on margins at the current interest rate level, and by how much has the time horizon of margin pressure shrunk as a result of the recent increase in interest rates?

Frank and Mark have talked about their outlooks broadly. So Frank talked about heading into next year 1 to 2 basis points a quarter of pressure likely. Mark, around 5, maybe with a little bit more for deploying some excess liquidity. So those are the overall group numbers. Underneath that, the part that relates to lower rates is fading. And so in Canada, we are pretty much -- given how we've been positioned -- through the negative spread compression coming from low rates. As we move into next year, that should be pretty much behind us. And in the U.S., the tail is longer given the different rate environment and also how we're positioned. And a low rate impact is likely to last until we're pretty much through all of next year. But that's baked into the number that Mark mentioned earlier.

The following question is from Steve Theriault from Bank of America Merrill Lynch.

First, just a follow-up on John's question, back to Mark. Can you size how much -- you talked about one big portfolio in commercial that was long standing. I think that was up for renewal. How much -- can you isolate how much that actually impacted the NIM this quarter? Is it material in and of itself?

I think when you look like in the $54 billion or $55 billion loan portfolio, that in and of itself isn't material, but it was enough to have an effect in the quarter. And it happened early, so we've got pretty much all of it in the quarter, which is why we have some confidence that we're not going to see that kind of an impact in the fourth quarter and the first quarter related to that. So it's pretty much past us and if it is -- if it's not, it's a fraction of a basis point kind of a thing so.

Okay. And so I just want to ask a quick question on capital probably for Tom Flynn. Your market risk has been pretty stable, but I noted market risk jumped looks like almost 50% in the quarter. Clearly, there's something unusual going on there. Does that have anything to do with the model and methodology changes that you mentioned earlier or is that something else going on there?

It is connected to the reference that we made to the model changes. So there are 2 things driving the market risk change in the quarter. Most of the change relates to translating our activities into risk-weighted assets in a more conservative way and that drove the majority of the increase. And then in addition, the VaR was up somewhat in the quarter, and that drove about 20% of the increase.

The VaR drove about 20% of the total increase?

No, the -- of the increase in market risk RWA, around 20% of that is attributable to an increase in VaR during the quarter.

Let me follow-up. If I might, one more quick one maybe for Tom or Surjit. We're getting better clarity on leverage rules, and some banks are providing -- more so outside of Canada, some banks are providing better clarity here, and it's challenging for us on the outside looking in. Can you tell us where you think you are on leverage based on the most recent known set of parameters? Are we at the point where you can give us a reasonably -- a reasonable number?

Not based on the parameter. The parameters haven't been set. The parameters are based on the fact that you expect the total debt to get paid off over 5- to 7-year period, and the senior debt to be -- sorry the senior debt to be paid off in 5 to 7 years, and there's another trigger for overall debt as well. We -- on the basis of the new Fed definition, I can't give you something precise yet because the definition in itself aren't precise. But we do track leverage finance numbers and leverage loan numbers based on what we believe to be are parameters that are more granular from our standpoint, where the leverage is higher than for the industry in the nominal course. And a large number of the financial sponsored transactions that we have do get captured under that particular portfolio. So we do have it. The number is not large. It is -- and I'm going to go by memory over here, would be around $3.5 billion, $4 billion in that range.

And then on the leverage ratio, which has also been topical, the rules are not fully developed, and there's still work being done around calibration. So we don't think it's appropriate to disclose a number. But based on everything we know about the rules as they're currently contemplated and our position, we don't expect the leverage ratio to be a constraint for us.

The following question is from Sumit Malhotra from Macquarie Capital Markets.

First question is for Frank Techar and specifically thinking about loan growth in your segment. You might actually be the wrong bank to ask because your loan growth has been pretty consistent and pretty strong over the last number of quarters, specifically in the residential mortgage book. But going back to the question on the uptick in rates even from the low point in your posted mortgage rates, I think you've moved up roughly 80 basis points. When I see resi mortgage balances up about 4.5% this quarter, do you attribute some of that to customers perhaps acting ahead of a perceived further move in mortgage rates? And how do you think that increase in rates is going to impact the level of loan growth going forward?

Yes, I think -- Sumit, I think a couple of things. One is, seasonality definitely plays a role. So I know our growth over the last 2 quarters has been strong. Part of that's because of the time of year. I do think there's been a little bit of bring forward with respect to the perception that rates are going up. So there might have been a little bit of a flush of activity as a result of that. It's very hard to put your finger on, though. It's more anecdotal than anything. And my expectation is that overall market growth, moving forward, is likely to slow a bit. And I think in particular if rates do move up a bit more, we're going to see a little bit more slowing. From my perspective, we've been able to grow faster than the market as it is now, and our objective is to grow faster under that scenario as well. But I would say, there's a bit of a bias for a slowdown, no doubt in particular staring at the possibility of rates going up.

Well, let me just balance that because that's an interesting statement given your loan growth has been pretty much the best in the sector. Even with this uptick in rates, your commentary on net interest margin outlook hasn't really changed, and frankly, I know you've been somewhat -- you want to be cautious on the guidance there or the target there. But I think last quarter, you told us you're expecting things to moderate to 1 to 2 basis points in decline and even with the significant uptick we've seen in posted rates, that hasn't changed. So if loan growth starts to slow, is it reasonable to expect at some point you're going to see the offset happen in the form of margin maybe being even better than you talked about?

Yes, I think that would happen. If in particular, if our deposit growth continued as strong as it would be and that relationship between loan growth and deposit growth changes, we see slower growth in our mortgage book. We'd see even more improvement in our net interest margin.

My last question is for Bill Downe on going back to the leverage ratio. If I start with what we heard over the last number of years on the Basel III common equity Tier 1, Basel told us they wanted 7% -- or more correctly, they told the banks they wanted 7%. OSFI came in with an 8% mark, and the banks have told us they want to manage with a buffer on top of that. I know there's different ratios or different calculations that are out there but the leverage ratio I've heard or have read about from Basel is 3%. Is it reasonable to expect, Bill, that there's going to be a buffer from OSFI on top of the 3% and then a buffer from the banks on top of that? Can you give us a bit of help with that calculation?

Well, I think your question, Sumit, you've almost answered yourself, in that anytime there's a threshold established, it's prudent to put some distance between you and the threshold so that you maintain flexibility. I think Tom's answer with respect to BMO, and I think that's the most important thing is -- and use the same thought process as you used up to your question, when we thought about what the appropriate level of common equity CET1 would be, we incorporated a lot of different inputs, public pronouncements, but we moved very quickly, particularly through the period immediately after making a significant acquisition to the level that we thought would give us maximum flexibility. And we're happy to be ahead of the curve. Didn't need to go as fast as we did, but we think it was worthwhile to have done. And then I think Tom's answer really is the correct one that with respect to our own position, we're comfortable that our view of the world is a good one, and that it is similarly prudent.

The following question is from Michael Goldberg from Desjardins Securities.

You said that you don't expect the leverage will be a constraint. But if Basel III leverage were to become a binding constraint, and you wanted to optimize your capital, what would be your priorities in terms of assets that you'd want to curtail? And what impact would you see of that? And overall, more broadly speaking, what impact do you see of a tight leverage requirement on bond and money markets?

It's Tom. I'll take a first crack at that. From our perspective, I will repeat that based on what we know now, we don't believe the leverage ratio will be a constraint. And so this is not something that we are significantly focused on at the moment. We're obviously watching what's going on internationally. But from what we've seen to date, we don't believe this will be a constraint for us. For a bank that had to adjust to a new constraint, I think the basic economics would be looking at your lowest-yielding assets and particularly those that don't have a customer connection and doing the math to see if you are ahead of the game or not after looking at the yield on those assets against the cost of the capital you would need to hold if you wanted to keep them on your books. There has been, I think, some talk in the market, and this might be what you're referring to, for banks, potentially, to be less active in the repo markets as a result of a binding leverage constraint. And repo assets are among the lowest spread assets on the balance sheet. So it does make sense that if banks were looking to pare back, they would look hard at those portfolios. So we see that as an area that people might look. But I'd say in the North American markets, it's far too early to conclude that there's potential for a meaningful decrease in the market liquidity as a result of balance sheet adjustments coming from banks.

And what impact do you expect in terms of backup lines on commercial paper if -- with the inclusion of those lines in the -- I'm talking about the commitment fees with the inclusion of those lines in the determination of leverage. Do you expect that, that would push up commitment fees?

Well, I guess to the extent that the cost of doing business in that product category increased, I think there would likely be an impact to the pricing in the market, and so there's the potential for that going forward. People do look at those lines as part of overall corporate relationships. So the product doesn't exist in isolation and is viewed as part of an overall client relationship. But in general, where the cost of business goes up for this industry and other industries, I think there's some attempt made to mitigate that through changes in the way business is done and changes in the pricing approaches that you take to the market.

And again, just to follow up, if -- and I know this is hypothetical, but if the impact is in the repo market then what impact does that have on the bond and money markets? And do you think that -- I'll ask -- do you think that this has been well thought through?

I think that is a very interesting question, but a tough question to deal with in the time that we have, just given the remaining time in the call. So if we could, maybe happy to follow up offline and continue the discussion, which is an interesting one.

The following question is from Gabriel Dechaine from Crédit Suisse. Gabriel Dechaine - Crédit Suisse AG, Research Division: First question is on the capital management, given your strong core Tier 1 ratio, given what I estimate to be a B III leverage ratio of about 4%, I think you've got one of the most flexible capital positions out there. Is there any reason why when your current NCIB expires, you wouldn't be able to go to -- or wouldn't want to ask OSFI to bump up the size of your buyback from say 2% to 4% of your shares outstanding? Next question's for Frank. Two-pronged, I guess. Could you confirm there wasn't a big spike in prepayment income that might have benefited your NIM this quarter in Canadian P&C? And also if you can outline any -- do you have any big strategies in place to take advantage of some anticipated disruption in the credit card market in Canada in 2014 and the expenses associated with that would be helpful as well.

Gabriel, before Frank answers the second question, I'll just go back to my response on the dividend and the return of capital to shareholders. You can work with the mix, but I think thinking about the rate at which we're returning capital, all other things being equal, is one that we're very comfortable with, the combination of the dividend and the buyback. Gabriel Dechaine - Crédit Suisse AG, Research Division: Do you think in theory that OSFI would have any objections to a more aggressive buyback plan I guess?

You should ask them, I think. Gabriel Dechaine - Crédit Suisse AG, Research Division: They're not returning my calls.

Well, we continue to, so return your call. Okay. And I'll turn it over to Frank.

Gabriel, no, no large prepayment levels in this quarter. As I said earlier, it was just a really clean quarter, both on the net interest earnings and the noninterest revenue side. And relative to the credit card market, we, along with everyone else, I think are expecting some disruption in the market over the next little while. We view this as an opportunity. We're going to aggressively defend our own customer base, and we're going to compete aggressively for those customers that are questioning their current products. So we do plan on spending heavily on marketing our credit card products next year, and I'm happy that some of our competitors have been so open about how much they intend to spend. But I'm not going to be.

The following question is from Brad Smith from Stonecap Securities.

I had a question. I'm just trying to sort of reconcile a couple of things here. First of all, we continue to refer to the strengthening U.S. economy, and I believe that some of the deposit deterioration that I've seen in the call reports has been attributed to the runoff of some low margin deposit, CD accounts in the U.S. So what I'm trying to reconcile is, how the growth rates in loans, deposits and the progression in net interest margins could be as low as it is in the U.S. relative to the Canadian experience when that's where the economy is strengthening and the low margin deposit business is rolling off. Like I'll give you some examples. The loans and acceptances are up 10% in Canada, 2.5% in the U.S. Deposits are up 8% in Canada, 1% in the U.S. segment anyway, on a constant-dollar basis. So can you shed some light on that? And I guess I think really my question is, do you think you need to do another acquisition to kickstart the growth down there or is there some sort of turnover or event that you see in the near term that's going to do that?

Okay. So this is Mark Furlong, at least let me start and give you some thoughts. So the U.S. consumer has de-levered. We've seen it in credit card. It's down from over $1 trillion, it's down to $850 million (sic) [$850 billion] in the U.S. You go back, it's probably 4 or 5 years of consistent de-leveraging across the entire U.S. consumer. We see that a little bit as well too in our mortgage, in our home equity book, and that's just really as a result of low rates that allowed mortgage loans to be refinanced or allowed mortgage loans and the home equity loan to get refinanced into one loan. Now the counter to that, particularly in the markets we're in, is that there had been little price appreciation that was occurring across a lot of our footprint, particularly Chicago and some of the core Midwest markets. And so now we have Chicago coming on with its eighth straight year-over-year increase in house prices, and so continues to show some good local movement. But still locally in Chicago, we're 28% below the peak of pricing in September of '06. So there is a great amount of momentum that's building up there. You can see it in increases in median home price. You can see it in increases in home sales. And you can see a consumer that is beginning to have a little more capacity to grow. In our personal book, particularly on the deposit side, we have taken the opportunity to bring down the price of CDs as close to market as we can. In some cases, that has caused some account consolidation and has caused some to run off, which is fine because we've brought that down quite a bit. We've also taken some opportunities in our…

Great. Just one last question. In terms of loans and deposits, is your market share growing, Mark?

Well, our core customer market share is growing. What we did was, in the merger, we have taken the opportunity to eliminate a lot of wholesale brokered accounts that were unrelated to our core customer. So using Milwaukee as an example. We grew the base $3.5 billion -- I'm sorry, we grew the base $1.5 billion last year, but you can't see it because we eliminated $3.5 billion of brokered CDs. So it looks like a $2 billion drop. In fact, it's a $1.5 billion core customer increase in deposits. So do we feel good about it? Yes, that's the core relationship again, so we feel like we're doing it. Chicago, we have continued to grow that deposit base very robustly, and I know that's not uncommon in headquarter cities to see that kind of growth, but we continue to grow it, and it's directly tied to the strong C&I growth in the building commercial real estate growth.

That concludes the question-and-answer session. I would like to return the meeting to the Ms. Haward-Laird.

Thank you. Thank you for joining us today, and I'm sorry if we didn't get to any of the questions on the call, but we'd be happy to answer your questions in Investor Relations afterwards. Have a good afternoon, everyone.

Thank you. That concludes today's conference call. Please disconnect your lines at this time, and we thank you for your participation.