Good morning, and welcome to the BMO Financial Group's Q3 2021 Earnings Release and Conference Call for August 24, 2021. Your host for today is Mrs. Christine Viau, Head of Investor Relations. Mrs. Viau, please go ahead.

Thank you, and good morning. Welcome to BMO's third quarter 2021 results presentation. We will begin the call with remarks from Darryl White, BMO's CEO, followed by Tayfun Tuzun, our Chief Financial Officer; and Pat Cronin, our Chief Risk Officer. Also present to take questions today are Ernie Johannson from Canadian P&C; Dave Casper from U.S. P&C; Dan Barclay from BMO Capital Markets; and Joanna Rotenberg from BMO Wealth Management. As noted on slide two, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results, management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darryl and Tayfun will be referring to adjusted results in their remarks unless otherwise noted as reported. And now, I'll turn the call over to Darryl.

Thank you, Christine, and good morning, everyone. Operating momentum across our diversified businesses and the execution of our purpose-driven strategy continue to drive strong and consistent financial performance. Today, we announced net income of $2.3 billion, and earnings per share of $3.44, up from $3.13 last quarter. The key drivers of our very strong performance reflect the execution of our purpose-driven strategy and are consistent over time: number one, an advantaged and diversified business mix well-positioned for growth through a focus on customer loyalty and consistent investment in digital capabilities, product innovation, and customer-facing employees delivering leading financial advice; number two, targeted actions to improve efficiency and returns and drive long-term profitability; number three, differentiated risk management and capital allocation, driving consistent credit performance and increasing flexibility for capital deployment; and number four, at steadfast commitment to support the financial wellbeing of our customers and communities through the economic recovery and beyond. Our consistent financial performance allows us to continue to build on our long-standing commitment to support a sustainable future, a thriving economy, and an inclusive society, and we're acting with purpose and urgency. This quarter, we announced a 10-year $12 billion financing commitment towards breaking down barriers to affordable housing in Canada, and supporting the aspiration that all Canadians have a home they can afford that meets their needs. In support of mental health, we've extended our Lifeworks Wellness Assistance Program to Canadian Business Banking clients across Canada at no additional cost. We're focused on removing barriers to economic inclusion with a new dedicated segment in the U.S. providing access to safe and affordable financial products and services for communities historically underserved by financial institutions, including the Bank On certified BMO Harris Smart Account. We're also continuing to advance our significant body of work to address the impact…

Thank you, Darryl. Good morning and thank you for joining us. I will start my comments on Slide 11, third quarter reported EPS was $3.41 and net income was $2.3 billion. Adjusted EPS was $3.44 and adjusted net income was $2.3 billion up from $1.3 billion last year, driven by a strong revenue growth, improved efficiency and lower provisions. Sequentially, earnings increased 9%. Third quarter adjusted return on equity was very strong at 17.6%, up from 9.6% in the prior year, and the efficiency ratio improved to 55.7%. Our strong performance has enabled us to continue to invest for future growth this quarter, while maintaining positive operating leverage. Adjusting items this quarter include expenses of $18 million after-tax from the impact over divestitures offset by a partial reversal of restructuring charges recorded in the fourth quarter of 2019 related to severance of $18 million after-tax. Adjusting items are shown on slide 34. Net revenue was $6.6 billion, up 10% from last year with good growth across each of our operating groups. Expenses increased 8% from last year, mainly reflecting higher performance based compensation. Efficiency improved to 55.7% and operating leverage was positive 2.1%. This quarter, we had a total recovery of credit losses of $70 million, which included a $71 million provision for credit losses on impaired loans and a $141 million recovery in the provision for performing loans Pat will speak to these in his remarks. Moving through balance sheet on slide 12, average loans were down 3% year-over-year and flat excluding the impact of the weaker U.S. dollar. Business and government loans declined due to lower utilization rates and the continued wind down of the non-Canadian energy portfolio, while consumer loans increased due to strong mortgage growth in Canadian P&C. As a more recent indicator of accelerating loan…

Thank you, Tayfun, and good morning, everyone. We were pleased with our risk performance this quarter. We saw continued positive momentum across many of our key risk metrics and a fourth consecutive quarter of improvement in our credit risk profile, reflecting the steady economic improvement we've seen throughout this fiscal year and the strong risk management disciplines across the bank. Starting on slide 24, the total provision for credit losses was a release of $70 million or negative six basis points down from $60 million or five basis points last quarter. Impaired provisions for the quarter were $71 million or six basis points down from $155 million or 13 basis points in the second quarter and well below pre-COVID levels. Similar to last quarter, the strong impaired loan performance is due to very low formations. We are very pleased with these results, but do expect impaired provisions to return to more normal levels overtime. We recognized a release on the provision for performing loans of $141 million this quarter, which was mainly the result of an improving economic outlook and positive credit migration. Given the relatively strong consensus economic outlook and our specific forecast for impaired losses in the year ahead, we remain comfortable that our $2.7 billion of performing loan allowances provides more than adequate provisioning against loan losses in the coming year. Turning to the impaired loan credit performance in the operating groups, we saw unusually low loss provisions across most business segments. In Canadian P&C, consumer impaired loan losses were $86 million, down four basis points from the prior quarter, and in U.S. P&C the consumer business had a net recovery on impaired loans of $2 million. This strong credit performance across our consumer businesses was driven by low delinquency rates and insolvencies as well as strong…

Thank you. We will now take questions from the telephone lines. [Operator Instructions] The first question is from Ebrahim Poonawala, please go ahead, from Bank of America. Your line is open.

Good morning.

Good morning, Ebrahim.

I guess, Tayfun, if you could just start with the net interest margin. I get the consolidated margin still went up sequentially, but talk to us in terms of your expectation both in Canada and the U.S. P&C, if we don't get a major lift in interest rates, where the margins are headed for both these segments, and if you have the contribution from the PPP fees to U.S. NII for the third quarter? Thank you.

Sure. Thanks for the question, Ebrahim. First, let me say that I think the treasury team has done a great job over the past four to six quarters in navigating these challenging times, and our margin actually continues to show a very healthy picture with the expansion of 2 basis points this quarter in ex-trading margins. As I look at the -- in the environment, clearly, there are some puts and takes. The yield curve has flattened, the level of rates is low. But despite that, we've been able to manage the interest rate sensitivities very appropriately. I think the impact of excess liquidity has been neutral so far this year. So, as we look forward into the next three, four, five quarters as loan growth picks up and we start consuming the excess liquidity, that should be a tailwind that should help us against the continued headwinds related with the yield curve. But, in general, I don't expect any cliffs, I think we will continue to manage our NIM with a target of stability. There may be some quarterly fluctuation. PPP is one of those we benefited, as you remember, 2 basis points from PPP in the second quarter, probably another 2 basis points or so in the third quarter. And as PPP loans have accelerated their exit through the forgiveness process, you may see a little bit of a dip in the fourth quarter in the U.S., but they will pick up again in the first-half of next year because now you're getting into the second wave of PPP loans that were originated in 2021. So, gives and takes, in general, we expect relative stability with some continued headwinds as normal in this environment. I will turn it over to Dave and Ernie to make comments about NIM in their business with respect to deposits and loan spreads.

It's Dave. I couldn't add much to what you said, Tayfun. You're right, we'll have a little bit of a headwind in the U.S. P&C in the fourth quarter, pick it up back in next year. And I agree with everything you said.

Yes, it's Ernie. I have nothing to add. Just again, the focus is on how we're growing loans, and that loan growth over deposit will have that impact on our NIM. So, nothing further to add, thanks.

If I could just follow-up on that, and maybe this is for Dave. Tayfun, you mentioned the 3% period-end loan growth ex-PPP. Dave, if you could just give us some color around intra-quarter as like we saw -- we heard from a lot of U.S. banks talking about loan balances inflecting in June/July. Is that consistent with what you saw, and is that momentum building? Or have you seen a slowdown because of the uptick in Delta and some of the additional supply chain disruptions we've seen in the last few weeks?

So, I think -- your comment is mostly for the U.S., but I would say in most cases, they apply to Canada as well. So we were 3% up point-over-point ex-PPP. And that was generally throughout the quarter. And that's despite all the things you mentioned. Despite really significant supply chain issues and labor issues, we're still up 3% point-over-point both in Canada and the U.S., that's despite, frankly, what I thought would have been better by now, which is still 10 points difference in our utilization between the pre-COVID and today. And that comes in all of our working capital businesses, whether it's asset-based lending or our floor plan financing, there are trucks, the trailers, so all that is till on the comp. And we were still up 3% point-over-point. So, through all the headwinds, this team has done really well. And I'll tell you what it really is beyond anything we've talked about before. Client acquisition throughout the pandemic has been very strong in Canada and the U.S. Our teams have been in front of customers, whether it's face to face, which is starting in some cases certainly, but on Teams all the time. And client acquisition has been remarkably consistent and strong with really good pipeline. So, I'd say we're at the front end of that, and feeling really good about it.

Got it. Thank you.

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. Your line is open.

Thank you. Maybe going back to Tayfun on the interest rate sensitivity, on slide 15, can you remind us why you have more leverage on an increase in short-term rates on the U.S. side relative to Canada? And is there anything on the Canadian side where you can reposition to get better exposure on that?

Yes, it's really related to -- that's a great question. It's really related to deposit composition in the U.S., and the betas in the U.S. tend to be a little bit higher, so that's driving the difference between Canada and the U.S. And we will continue -- we actually have, given the fact that we are now expecting better loan growth into '22, both in Canada and the U.S. As we exit the excess liquidity, we are very focused on growing the transactional deposit balances in Canada to support that loan growth, which could potentially slightly change the sensitivity maybe a little bit more closer to the U.S. rate. But nonetheless, in the U.S., you always have the impact of higher competition for deposits that, I think, will preserve somewhat of a difference between the two countries.

Okay, great. Thank you very much.

Thank you. The next question is from Meny Grauman from Scotia Capital. Please go ahead. Your line is open.

Hi, good morning. Darryl, operating leverage of 7.3% year-to-date, and I guess the question is, can you have too much of a good thing? Meaning, we know all banks are focused on fintech threats. Technology needs continue to only grow. And as you look at that operating leverage, what gives you confidence that you're not missing an opportunity to accelerate investment in the business and still put up a good operating leverage, but definitely scope to have even great operating leverage below that 7.3% year-to-date level.

Yes, Meny, thanks for the question. As you know, we began our journey on operating leverage a couple of years ago. So, it's not a result of anything we did in any particular quarter this year. But it's the acceleration of a lot of actions that we've been taking for some time, you're right, 7.3% year-to-date over 2% for the quarter, we're proud of those numbers. And you're hearing us here recommit to positive operating leverage as we go forward. I would remind you that I've said before, within the quarters that have gone by, we've got lots of expense items that go up and we've got lots of them that go down, what you see, of course, is the net. And that's a function of how we're repositioning the next spend within the bank. And we're making real investments in those places that are going up. If you look at the quarter in question, we had expenses that are a little higher than they have been in the previous quarters. Some of that, in fact, a good deal of it is performance based comp. But also, we accelerated some investments in marketing, in frontline sales force, in technology, so that we could hit 2022 running as it were. And with all that, despite all that, we still delivered the 2% operating leverage. So, I think we're on the right track. We don't feel many like there are places around opportunities that are good opportunities that are starved, we're feeding those opportunities where we think they can deliver long-term value and at the same time, we're able to deliver the shareholders operating leverage. So, we think there's more to come from what you've seen so far.

Thanks. And just a clarification in terms of reiterating the outlook for positive operating leverage, but can that change on a quarter-to-quarter basis meaning as you look to Q4, could we have negative operating leverage quarter given how strong the year-to-date has been?

Yes, so look, as you know, we don't give specific guidance on any particular quarter, but I'm reiterating the view that will have positive operating leverage on the horizon going forward. Could we have any particular quarter whether it's Q4 or otherwise where it's not positive, I suppose. But we won't commit to anything other than positive over the course of the coming quarters at this point in time.

Fair enough. Thank you.

Thank you. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Your line is open.

Good morning. Sticking with Darryl there, your bank based on my numbers consensus, the lowest, if not one of the lowest, if not the lowest dividend payout ratio in the group. I'm wondering what we should expect if and when of you removed the restrictions currently in place. Are we going to go to modest or moderate dividend increases like more same steady pace? Or could we see some larger catch up type increases if and when, of course, those caveats around that statement?

Yes, so thanks for the question, Gabe. I think what you should look for is, I said at our Annual Meeting, we've taken our dividend record pretty seriously for the better part of 200 years. So, we're going to continue that, first and foremost, the payout ratio that we respected and targeted pre-COVID is one that I think will target as we get to that day that you're talking about when we have restrictions lifted. So, the priority really for us in terms of the excess capital, is we will look to get in our payout ratio back to where it was probably fairly quickly, if I had to guess then we'll look at other means of returning capital for through dividend increases over the course of the ensuing quarters. And then of course, even with that, as you will have calculated, there'll be lots left over for other things as well, including buybacks. That's kind of the order priority for us.

That's it for me. Thanks, Darryl.

Thank you, Gabe.

Thank you. The next question is from John Aiken from Barclays. Please go ahead, your line is open.

Good morning. Just looking at the reported AUM growth sequentially in the quarter, there was a comment in the report shareholders talking about the Bank of Canada Provincial Bond Purchase Program, any of that having being a bit of a headwind, can you give us a sense of what the size of that was in terms of the AUM and what the revenue contribution was?

Hi, there. This is Joanna. I would say overall, de-minimis, well it impacted our AUM, that Provincial Bond Purchase Program and winding down has very minimal impact on our financials.

Thanks for confirming that, Joanna.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is open.

Good morning. Darryl, can we go back to the expense question for a moment. A few years ago, well actually not few years in 2020, there was a fairly big gap between TD sorry -- BMO's efficiency ratio and that of the average of the Big 6. Now that gap has been essentially eliminated now, and the reason why that's interesting to me is BMO's efficiency ratio has been higher -- had been higher than the group's for as long as I remember, like a decade or more. And then in the last couple of years, or last 18 months or so, that gap has vanished. Now, I suspect, a lot of it relates to the actions that management has taken and a lot relates to the environment. So, what I'm getting at here is, as you look forward, do you now expect BMO to be sort of in line with the group efficiency ratio, have those structural reasons for the difference in BMO's efficiency ratio that we've discussed in the past, have those gone away, BMO is it appropriate to think of BMO is an average efficiency ratio bank and not one that would be 500 or 600 basis points higher, as we've seen in the past?

Yes, okay. Thanks, Mario. Firstly, thank you for acknowledging the progress, we take it very seriously. I don't say that facetiously. It's very important to us, we committed to it in the timeline that you talked about, and we believe we're delivering on it, in fact, ahead of target. Your question is a good one. How do we think about it? And where do we go from here? Look, we have made progress on this particular metric, more than the average of our peers, maybe more than any of our peers, you can calculate that. But I do, I will say, I don't think we're done yet because if you look at where we are, we would still have some catch-up to do relative to the average of our peers. And we still think there's opportunity to do that, how more of what we've been doing, we had a hard look, as you know, at every expense line item in the place and realized that there were places we could do things better, we could do things with partners better than we were doing them ourselves. And we took a pretty hard look at the portfolio as well. So, you saw some of the portfolio shifts over the last couple of years. Those weren't driven by social issues. They weren't driven by an appetite for a particular geography necessarily, they were driven by returns. And they were driven by our views on our ability to drive efficiency and some of the returns from those decisions, and I would highlight in particular, the exit of the GAM businesses outside of Canada. The returns as far as efficiency gains are concerned, we published the performance on those before, and they are not in our numbers yet. So, they come next year as well. So, I think we've got more room to go from where we are. And what's our destination, ultimately, we told all of you that we would get to 58% in 2021, we did that a year earlier. Here we are around 56% year-to-date. And I don't see why we can't take another point or two off that as we drive into the next couple of years.

I'll say that it's unlikely that we'll see that big gap emerge again, this is real, this is more permanent than it's a permanent improvement then.

Having a gap, Mario to our peer group on efficiency and ROE, I would point out as well, now that we're through 17% on the ROE, it's not part of our business plan.

Got it. Let me go to another related or sort of unrelated question that relates to the Treasury business. And I'm focused specifically on securities gains, the numbers have been very high over the last few quarters, just to remind you, it's been over $100 million in this quarter, nearly $200 million in securities gains. Looking back a few quarters, that's a pretty big number, could we talk about what's driving the material securities gains? Is it just the change in interest rates or what asset classes and what segments are we seeing these big securities gains on both?

Mario, I'll take that. This is Tayfun. So, despite the fact that in our disclosures, those are characterized as securities gains, there is clearly more than just the investment portfolio and these gains especially the last three, four quarters, have really not been related to our investment portfolio. And they are very much related to valuation increases in investments that we make in our businesses in this type of an environment, that line item will always even pre-COVID, it showed positive results. They are very much parts of our business with our clients and pieces of broader relationships both in the commercial business as well as in the capital markets business. And this quarter, that line item does not have any significant securities gains as defined by the investment portfolio at all. These are all business related investments. And I will turn it over to Dave and Dan for further comments related to their business with their clients.

Thanks, Tayfun. It's Dave. Yes, so the business that would have attracted some of the investment gains, and it's been consistent in the P&C Canada for a long time. These are small investments we make with our clients, largely supporting growth. We've been doing this for a long time. This year, it's been good gains. Some are real realizations, but many of them are just mark-to-market. But it's been a business we've had it's -- this has been a pretty good year, but we've had these on and off for many years. Dan?

Yes, in consistent with what Dave said, our portfolio is very similar. Most of this is in the investments we've made alongside our clients, as they've had mark-to-market gains. It's nothing in terms of an individual security or an individual business; it's actually across the portfolio.

So the mark-to-market gains are what because rates have declined. Is that logic, or is there something else to it?

No increase in the valuation of the investment.

Yes, I would say it's more tied to equity than the interest rate.

Got it. Thank you.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Your line is open.

Thank you. Good morning. I just want to follow-up with respect to your outlook for commercial loan growth. So, appreciate you're expecting it to accelerate to roughly mid single-digits. Just wondering how the excess deposits and liquidity situation sort of factors into that equation? Is it a matter of, if these excess deposits burn-off, then maybe we can get to a higher rate or really just trying to understand what extent it is dampening loan growth potential?

Yes, it's Dave. Well, it definitely is having an impact. Certainly in capital expenditures, as a lot of our clients are growing their CapEx where they have cash, they're using those. So, that would have an impact. And that will continue. But I think overriding that is there really is a strong demand. We talked about the utilization that hasn't even come back yet. But business demand has gone up, it will be -- I expect the loan growth. As I said, I think I said at the beginning of this year, while we were in the midst of COVID, that I thought you year-over-year we would have or at the end of the fourth quarter, we'd have mid single-digit growth. I think that's actually going to be better and probably go out longer in the next year. So, I think it's really strong. It will be impacted by clients drawing down on their cash. But many of our clients are already starting to borrow more.

Okay. And second question is on the capital markets business. I think everyone's kind of trying to figure out what normal might look like not just for BMO, but obviously for the banks more broadly, you've been putting up very strong results for the last year plus. So, any help was kind of what you would view as sort of a normalized run rate given the investments you've made in the business in the last couple years would be helpful.

Yes, it's Dan here. So, I think first off, it's been very satisfying to see the investments that we've made, and the repositioning that we've done pay off. And I think that's driving a very large chunk of their out performance. In particular, if you think about the investments, we made in the U.S. over the last 10 years, and bringing those to provision. We're really seeing those now operate at scale, and deliver the results that we expected. When we look forward, we're continuing to make investments where we can get to client acquisition, product expansion, the ability to grab more market share, particularly in the U.S., some places in Canada, all with a goal of creating more sustainable revenues and more diversity across our line. Obviously, we have exposure to market behaviours. And I wouldn't say we can predict that with intense accuracy over the long-term. But what I can say is that we're going to continue to deliver positive operating results, positive operating leverage as we look forward, and continue to drive sustainable performance in the business.

Okay. So, there's no revenue or PPPT sort of forecasts that you'd want to share with us in terms of what you've used a normalized run rate?

I think at this stage, we're watching that. We obviously have pieces of the business, we've made investments and we're making gains and then we have others where we have exposure to market normalizing. At this stage, I wouldn't push forward PPPT target per se. We have got to a new normal and a new baseline as we look forward, and we're going to continue to benefit from -- if you think about volatility marketplace that's an asset for us. It also serves as a diversity to the rest of the bank, so we're really strong, the rest of the bank is working through it and when the rest of the bank starts to really grow, we'll moderate a little bit.

Got it. Okay, thank you.

Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead. Your line is open.

Hi, thank you. Good morning. I'm looking at your Supplemental Page 11, the very first line item, I'm interested in a couple of things here first and foremost, how much of that $264 million is coming from the 995 BMO investor lines sort of a direct brokerage. Second question related to that is, what's your early read on the situation, now that you've had a competitor go to zero, what would be your intention? And then the third and last question with respect to that line item is, I keep seeing these commercials saying that the low fees are making a difference. What about also the full service part of your business, which is relatively big, are you seeing any pressures there to also lower fees? Thank you.

Hi, this is Joanna. Thanks for your question. Starting from the beginning, overall we're really satisfied with our wealth results. Overall, I think they represent very strong diversified operating performance, and that includes across our businesses and across our categories. The comment is specifically about the online brokerage revenues, again, very, very happy with our brokerage results. They continue to deliver strong flanked growth. We've seen about two-and-a-half times pre-pandemic rates of client growth. And we want to see that, and we're seeing it by the way across both our self-directed businesses as well as our digital advice business, which is an important and growing part of our business, where we are of course always monitoring and changing our offering and make sure we deliver the best experience for our clients and value to them. And for us that includes actions that we've taken, which includes the zero trading commissions on our most popular ETF, which has been very well-received. I would say from a line item perspective, just getting into the trading commission revenues, we don't specifically disclose trading commission revenues, but it's not a material part of our revenues I would say, online brokerage fees represents today in terms of wealth net revenues, but 2% or a little bit less, that's less than 1% of bank revenues. So, not a material line item to us, but we're going to continue to evolve and enhance our platform. And one of the areas that we are focused on is growing our digital advice business. It's an important and growing category overall. And today between adviceDirect as well as SmartFolio, we represented a third of that category and we intend to grow that area. As it relates to the full service brokerage, we've seen strong growth there, strong growth both in terms of the full service brokerage business, yields have naturally together with the rest of the category, moved around a little bit, but have generally held I say in particular in recent quarters, as equity markets have strengthened, we've seen great growth in that business, and that would include both on a standalone basis as well as in connection to the broader, BMO offering, and that would include partnerships including commercial as well as working together across our banking portfolio. So, continue to see strong client demand there for full service brakeage and the advice we're delivering, and expect that to continue.

Maybe just a quick follow-up to that is, is it important or maybe ask it a different way if another competitor were to go to zero, would that be the move that sort of pushes you towards absolutely following or is there some other consideration?

I would say we're always going to be evaluating our offering, and that includes obviously evaluating what are customers looking for? How do they value different parts of our platform? And of course the competitive activity and external activity will influence that. I wouldn't say those are hard and pastoral, and we continue to grow our business and we'll continue to expand our offering, this is a business we want to support.

Great, thank you.

Thank you. The next question is from Lemar Persaud from Cormark Securities. Please go ahead. Your line is open.

Yes, thanks. So, I just want to follow-up on the answer to Mario's question on the business investment gains. It sounds like you're suggesting some normalization in that -- in that moving forward, did I interpret that correctly, or can they remain elevated for the next couple of years, and anything you guys can give us in terms of outlook for that, and to help us along with our modeling would be very helpful?

Sure, I'll take this, this is Tayfun. So, when you look at this year, for example, we had $102 million in Q1, $111 million in Q2, $198 million in Q3, there is going to be some volatility, because sometimes you receive the financials related to these entities in certain periods, which are going to cause an up tick. But overall, I think in this environment, you should continue to expect these numbers to remain healthy, will they always be near $200 million? We will not predict that or I might, I wouldn't suggest that you model it. But on average this year, we clearly have been above $100 million. Unfortunately, it's a little bit difficult to predict exactly on a quarterly basis, how these numbers will move around.

Okay, thanks. So, then my next question is on the domestic retail business, I think one of the things that we're seeing with COVID is how important cards growth is to overall profitability, not just for being across the group. And given that the growth is perhaps a bit tougher to come by than I had expected in a post-pandemic recovery. Maybe you could comment on the competitive landscape for cards first, and then second, with the rise of Buy Now Pay Later and increased competition, can you talk about the outlook for cards post-pandemic, both in terms of balances and also in profitability?

Thanks, appreciate the question. A couple of comments just overall, as I frame up cards in the perspective of the P&C Canada business which had very strong performance and momentum, this quarter and consistent with what we've been delivering over the past little, while cards has been part of that story, part of that growth story, and it will continue to be part of that story going forward, we've seen good performance, this quarter coming out of our cards business, we're seeing consumer spend return, as you can imagine, and we're seeing it pretty broad based with the exception of travel category. So, just to give you a perspective, spend this year is about 20% over last year, and I always frame it against '19 because we want to kind of get a better look at it. And it's 8%, higher than Q3 of '19. So, we're seeing the card business return. That's a function of for us, obviously, the breadth and offering of our product suite, and also the fact that we're seeing some good performance coming out of our recent launch of our Visa eclipse products. So, the combination of good programs for our customers and offerings, broad based in the rewards, for example, CashBack has been doing extremely well for us or eclipse Cards have been that's a recognition of where Canadian consumers are looking to find value in their credit card. As I think about the competitive landscape, I always measure that against our performance. And we've had consistent growth year-over-year, quarter-over-quarter on our cards franchise, again a recognition of the strength of the portfolio and the marketing and the actions that we've been taking, Buy Now Pay Later is an interesting opportunity both on the cards franchise as well as our lending. And obviously when we keep a good track of, we haven't seen it really pick-up in terms of share gains yet, but obviously over time, that will manifest and we'll be participating in some way, shape or form in that market as we go forward. So, I would say overall, we're going to continue to see cards, credit cards being an important component of the payment ecosystem in Canada, one that we participate well in and given our dual network capability now and our breadth and suite of products we're well positioned for growth, even through the pandemic and more importantly, coming out of the pandemic. So, overall pretty confident on our future in cards.

Okay, you said -- sorry, go ahead.

So, I think we're just going have to hold that off for now and just go to one last question before we wrap the call.

Okay, thanks.

Thank you. Last question will be from Nigel d'Souza from Veritas. Please go ahead. Your line is open.

Thank you. Good morning. I actually had a follow-up on your security gains as well in the quarter. And I was wondering if those gains were at all related to debt for equity swaps on workouts that were undertaken during the pandemic, is it the revaluation of the equity portion of those equities swaps that warrant a hit undertaken over the last 12 to 18 months? Or is this something completely unrelated, that's driving those gains?

Dan here, maybe I'll take that from the capital markets piece, there was a very small amount in that. The majority was in our equity investments. I think there's a future where some of those debt-to-equity swaps will see bigger gains in the future.

Okay. And if I could just quickly just finish on the potential impact of the Delta variant, and that could impact your outlook for growth or credit on the credit side. Has there been any change on your adverse scenario inputs or any potential management overplay that you might apply, depending on how Delta variant plays out and on the growth side, you mentioned supply chain issues with the Delta variant impacting Asia? Do you see any of that supply chain issue persisting and perhaps impacting your commercial growth outlook?

Thanks for the question, Nigel, it's Pat. I'll take the credit part of it, we made no changes to the weighting of our adverse scenario, nor the severity, you might recall, in Q2, we did actually increased the severity of our adverse case. And we left that unchanged for this quarter. If you look at our total performing provision releases so far, we've released about 21% of what we added during fiscal '20. So, we think that's a pretty good balance between the momentum that we're seeing in the economy and the really strong credit performance we're seeing, and obviously, the uncertainty around Delta or other variants that might emerge. So, we think we're in a fairly cautious position, should the adverse scenario play out? But if our base case scenario plays out, we obviously think we've got lots of releases still to come.

And just quickly, it's Dave, on the growth side, I would say that certainly has an impact, but when our comments, we've taken that into consideration, while we've had significant inventory, slowdowns in some markets, that's factored in, and I still think that we've got good growth coming in.

Got it, appreciate the color. Thank you.

Thank you. That concludes the question-and-answer portion of the call. I'll now turn the call back to Darryl White.

Okay, thank you all for your questions -- [technical difficulty] Sorry, operator [technical difficulty]…

Yes.

How is it now? It sounds good, sounds good. So, I'm going to take this on, I want to conclude with four key summary themes that have been consistent for us for the past several quarters. First, our results for the first three quarters are strong. ROE, EPS growth, and operating leverage are all above our mid-term targets. Second, we delivered on our expense and efficiency commitments, and we have strategies in place to do more. Third, credit quality remains a differentiator, and we believe that will continue to be even as our balance sheet begins to grow again, as it is. And number four, with our business mix, which we think is advantage, it's primed for ensuring that the economic recovery and the strong momentum we have in our businesses are going to be connected to our highly confident view that our purpose driven strategy will deliver consistent financial performance. And while we do that, we will do our part in enabling an inclusive recovery for our customers and our communities. Thank you all for participating in today's call and we look forward to speaking to you again in December.