Good morning, and welcome to BMO Financial Group's Q3 2023 Earnings Release and Conference Call for August 29, 2023. Your host for today is Christine Viau.

Thank you. We will begin the call today with remarks from Darryl White, BMO's CEO; followed by Tayfun Tuzun, our Chief Financial Officer; and Piyush Agrawal, our Chief Risk Officer. Also present to take questions are Ernie Johannson, Head of BMO North American Personal and Business Banking; Nadim Jirji, Head of BMO Commercial Banking; Dan Barclay, Head of BMO Capital Markets; Deland Kamanga, Head of BMO Wealth Management; and Darrel Hackett, BMO U.S. CEO. As noted on Slide 2, 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 with that, I'll turn the call over to Darryl.

Thank you, Christine, and good morning, everyone. I'd like to start this morning by acknowledging the ongoing devastating wildfires impacting British Columbia and the Northwest territories. We're committed to doing our part to help make sure the families, businesses and communities get the support they need, including financial relief for options and options for those affected. Also, today, I'd like to welcome Darrel Hackett, our U.S. CEO, to his first investor call. Darrel has been with BMO since 2004, most recently as President of BMO Wealth Management U.S. His track record of dedication to our clients' success, extending leadership and commitment to eliminating barriers to inclusion will be a key contributor to the ongoing success of BMO U.S. Turning to the quarter. Our performance continues to reflect the strength, diversification and active management of our businesses in an evolving environment. This quarter, we reported earnings per share of $2.78 impacted by onetime items that we will discuss. Pre-provision pretax earnings were up 6% from last year and all bank revenue was up 22%, driven by record results in Canadian Personal and Commercial Banking, supported by double-digit deposit growth and good contribution from the Bank of the West. Credit performance is normalizing in line with our expectations with higher provisions this quarter compared with historically low levels. Our balance sheet remains strong, reflecting our long-standing track record of superior risk management. We further strengthened our capital position with a CET1 ratio of 12.3%, an increase from Q2 and the impact of the closing of the AIR MILES transaction. For the year-to-date return on equity was 12.6% and return on tangible common equity was 15.8%. As we discussed last quarter, we're taking action to adjust to market forces that are creating near-term headwinds for the industry and negative operating leverage for us…

Thank you, Darryl. Good morning and thank you for joining us. My comments will start on Slide 9. Third quarter reported EPS was $1.97, and net income was $1.5 billion. Adjusting items are shown on Slide 38 and include acquisition-related impacts for integration costs, and amortization of intangibles, which decreased net income by $370 million and $85 million, respectively, as well as a $131 million after-tax charge related to tax measures enacted by the Canadian government that amended the HST definition for Financial Services. The remainder of my comments will focus on adjusted results. Adjusted EPS was $2.78 and net income was $2 billion, down 4% from last year. Our results this quarter were impacted by severance costs and legal provisions, which reduced net income by $245 million and earnings per share by $0.34 on a combined basis. Revenue increased 22% with good organic growth in each of our operating groups and the benefit of acquisitions. Expenses increased 33%, primarily due to the impact from acquisitions. PPPT of $3.1 billion was up 6%, driven by strong growth in our Canadian P&C business, contributions from our Bank of the West acquisition and higher results in BMO Capital Markets. Total PCL was $492 million, including a $159 million provision for performing loans compared with a total provision of $136 million in the prior year. Piyush will speak to these in his remarks. Turning to Slide 10. The acquisition of Bank of the West concluded $167 million to net income, $1.1 billion to revenue and $749 million to expenses. We are pleased with the Bank of the West second quarter post-closing results as their contribution remains in line with our expectations. We are highly focused on successfully executing our systems conversion and brand unification this weekend, which will complete the full integration of…

Thank you, Tayfun, and good morning, everyone. Our risk performance continues to reflect strong risk management discipline across the bank against a backdrop of significant monetary tightening and other macroeconomic headwinds. Starting on Slide 22. The total provision for credit losses was $492 million or 30 basis points. Impaired provisions for the quarter were $333 million or 21 basis points up 5 basis points from prior quarter, consistent with the expected normalization in loss rates. Moving to Slide 23. Performing provision for credit losses of $159 million for this quarter primarily reflected portfolio credit migration, which is a natural outcome of the higher interest rate environment. Over the last five quarters, we have added consistency to our allowance to reflect risks in the economy. Our $3.4 billion of performing loan allowance provides good coverage of over 3.4x on trading four-quarter impaired losses. Turning to the impaired loan credit performance in the operating groups. Canadian Retail impaired loan losses were $174 million or 33 basis points, up 1 basis point from last quarter. For residential real estate secured lending, we continue to view the risk from higher rates and modest given our high credit quality borrower base and low LTVs. Delinquency rates and losses remain low and based on data over the last couple of quarters, customers renewing are able to absorb the impact of the higher interest rates. In U.S. retail, impaired loan losses were $55 million or 41 basis points, up 9 basis points from second quarter, primarily due to unsecured credit losses. Turning to our Corporate and Commercial businesses. Canadian commercial impaired loan provisions were $35 million or 13 basis points, up 9 basis points from very low loss levels in Q2. U.S. commercial impaired losses were $64 million or 16 basis points, up 10 basis points from…

[Operator Instructions] Our first question is from Ebrahim Poonawala from Bank of America. Please go ahead.

I guess maybe Tayfun, first question, just unpacking what you said on the net interest margin. If I heard you correctly, CAD NIM could see tightening, U.S. expect more stabilization, that's opposite of what I would have thought. I would have expected the U.S. pressure to continue on deposit pricing, some promotions that you might run for systems integration with Bank of the West. And in Canada, the back book re-pricing should serve as a tailwind to the NIM going forward. So clearly, I'm missing something, if you can elaborate on what the dynamics are, both on the asset and the deposit side driving that NIM outlook.

Sure. I will make some comments. And then also turn it over to Ernie and Nadim for what they're seeing in the U.S. and Canada. So I'll start at the enterprise level, Ebrahim. We actually feel very good about how we are positioned today. Our NIM expanded a couple of basis points. We are guiding for more stability in the foreseeable future. And I like where the rates are today, clearly, we are benefiting from higher longer rates. And we are, I think, pretty well positioned to deal with whatever the monetary authorities do in Canada and the U.S. So at an enterprise level, I think our NIM positioning looks very good in the current environment. Coming down to Canada and the U.S. In Canada, this quarter, we have seen deposit spread wide and some loan spread widening. And I think our business managed their spreads very well during the quarter. But at the same time, we are aware of rising pricing competition, both on deposits well as loans, especially as the quarter came to an end. And we're cognizant of how that may impact our NIM going into the next couple of quarters, thus the comment about some tightening in Canada. In the U.S. -- in Canada, obviously, we also have benefited from good deposit growth relative to loan growth during the quarter. That's always very helpful. In the U.S. the pricing competition continues clearly. There's no let down yet, and we're not necessarily anticipating a significant change, I think, in general migration towards term deposits will continue. We are though switching to a more growth mode, both in our personal deposits as well as commercial deposits, which will be helpful, which will support some of that stabilization. We are also expecting better loan spreads in the U.S., which also is helpful. And then overall, the corporate interest rate risk management related support that is provided by the rollover impact of our non-maturity deposits is helping the U.S. P&C business. So I think both of these expectations are in line with what we are seeing in the market as well as our overall risk management approach. With that, any comments, Ernie and Nadim.

Sure. I would just say it characterized that loan volumes are down, of course, both sides of the border, but there is a divergence. So in Canada, we're still seeing loan volume demand and more opportunities for deposit growth, but the competitor sets are different as well. So the Canadian banks are still fighting for market share. They're still fighting on structures. And so we're not seeing as much pricing discipline in Canada. On the other hand, the U.S. with specialty regional banks tightening up on capital and liquidity, we are seeing structures now tightening. We are seeing banks taking lower holds, and that is leading to stabilization in our margins. And spreads within the loan book so that's why we're seeing a bit of a divergence.

And then on the deposit side, let me just make some about U.S. first and Canada. So in the U.S., we're seeing some actual good performance relative to peers on our retail book. That's a function of both the legacy BMO side as you like to say as well as the Bank of the West platform. We're seeing some good success in terms of stabilizing the retail deposit in the Bank of the West market and offering out promotions, et cetera and capabilities that are being well received by our colleagues there and our customer base. So as we think about that, coupled with that digital deposit taking, I'm really confident in our U.S. growth strategy around deposits continue to be at peer or above peers in the marketplace. And then if I switch gears and go to Canada, we are in top tier market share growth consistently in deposits in the retail side of the Canadian business. That's driven by our leading acquisition. We have record new customer acquisition in Canada. That strong digital sales capability, branch conversations that are focused on full relationships. We are seeing that shift a bit to turn. But as Tayfun mentioned, it's slowing down and it's plateauing. And so we'll continue to see that happen over the next little while. But overall, really confident in our ability to continue to drive growth in the deposit side going forward.

Got it. And just very quickly, Tayfun, on capital. Remind us the impact from FRTB floor factor increases in 1Q '24 to CET1 and separately, if the U.S. Basel and game NPL were to pass as is. It seems like the burden on IHC -- foreign bank IHC is going to be quite meaningful, both in capital markets and otherwise how impactful is that to the most U.S. operations?

Sure. Thanks for the question, Ebrahim. In terms of the impact of FRTB, we think that the impact will be very, very modest into Q1. The work still continues, and we have some additional details that we need to finalize, but we are not expecting big impact into Q1. Darryl, would you like to comment on the U.S. side, the regulatory developments in the U.S. side?

Yes. I'm just going to clarify for people we're going to have to get used to this. When Tayfun said, Darryl, he's referring to Darrel Hackett first call here. And so, it's a great question, Ebrahim, for him to take as far as the overall environment is concerned in the U.S.

Yes. Thank you for the hand off here, and hello, everybody. In terms of Basel III in game, first, it's really important to remember that we've operated in the U.S. as a significant entity for nearly 40 years. And we've effectively begun our journey to being a Category 3 U.S. bank nearly two years ago when we announced the acquisition of Bank of the West. Earlier this year, with the approval and close of Bank of the West, we became a U.S. entity with more than $400 billion in assets, making us a top 10 U.S. bank. So given this, we are uniquely well positioned among our peers and we've already been maintaining strong capital ratios in our U.S. regulated entities. So, while the Basel III in-game proposals are still in early stages, we feel really prepared, very well prepared for what's to come, and we expect the current proposals to only have a modest impact on our current journey.

Thank you. The following question is from Meny Grauman from Scotiabank. Please go ahead.

I think in terms of your commentary on expenses coming from Bank of the West. But I'm curious -- I apologize if I missed it, but just talk about the outlook for revenues specifically in the context of a tougher U.S. operating environment. I think it's clear that what's emerging. So I'm wondering, if there's any impact there on your ability to deliver on the revenue synergies that you've guided to?

Good question. Look, I mean, we acknowledge the environment. It impacts all banks that are operating in the U.S. But overall, our expectations remain intact, and although the timing may change a little bit, we are still -- we are still of the opinion that our financial expectations remain well grounded. We have an important weekend coming up with conversion, as I said we are also doing more work on potentially identifying additional expense saving opportunities. We plan to update you with all these metrics once we get to the end of Q4. But broadly, our expectation is that we are still in the same range in terms of our expectations. That sort of is not necessarily denying the current environment, but I think our expectations and optimism remains the same.

It's Darryl, Meny, just to complement that, I agree with all that. I think the thesis is holding completely. In fact, as days go by, we're getting increasingly encouraged by the thesis on the customer side, and you asked about revenue synergies while Tayfun is right, we will give you all an update at the end of the conversion quarter, which is the one that's coming. In the meantime, we can tell you that the acceleration on new accounts, new customers, the crossover between the commercial business and the capital markets business. We talked to you about that last quarter, continues to increase at a healthy rate. And we've even observed early days even before our pretty substantial marketing push, which will begin in about 10 days from now, a real activation at the branch level with the digital platforms as well. I don't know, Ernie, would you complement that with some specificity.

Yes, definitely. As Darryl pointed out, we have not launched the capabilities of tools, financial planning, et cetera, in the market, yet nor our big brand campaign or major offers that we're going to introduce over the next couple of weeks. Having said that, those -- the performance of our branch network, just being allowed to be able to have different offers and campaigns, we're already seeing a lift overall about 20% overall in terms of performance. And that's a function of them reaching out to customers and having great conversations. So the colleagues are ready and the customers are extremely open to these conversations and receptive to what we have to offer. And we haven't brought the full product as we mentioned earlier, to them. As well, our digital capabilities are performing. We've taken the Bank of the West digital capabilities out of the market and put BMOs in, and they're actually performing at parity, which says even without the brand advertising, we were able to deliver the same sort of list. So these are all promising indicators of the future ahead after we get through the next weekend.

[Operator Instructions] Following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Yes, I want to continue on that line of questioning. And just -- I'll use my words you can tell me if I have it right or not. But the sense I'm getting is maybe there's some revenue shortfall versus expectations related to the Bank of the West acquisition because the margins, maybe the loan book and deposit book are both smaller, but you still sound pretty confident in your accretion targets, and I'm reading through the -- into the expense management commentary that you might find some of the cost savings to keep you on track. Is that a fair interpretation or...

Well, first of all, I don't think that we're stepping back from our overall revenue synergy expectations. I don't think that we're necessarily changing that. Ernie mentioned some of the more promising signs of how we are getting there. Again, as I said, once we finalize our saving assumption targets, which we expect to be higher than what we shared with you before. We will also update the accretion numbers. But as I said, overall, we believe we are still intact with -- largely intact with our expectations that we shared with you earlier in the year.

Okay. So one question, one follow-up. I think that works. I just push the comment you made, the customers renewing at higher rates in the mortgage book. They're absorbing it or adapting well. Can you quantify that? I mean, I don't know what I know what the adjectives mean, but what does that mean from your perspective?

Sure. So I think the Canadian residential secured book remains high quality because, again, the customer base has an average FICO of 790. When you've got about 10% renewals a year and if I go back to the last four quarter data, we've had significant success in those renewals. They are at about a 10% to 20% increase as they come up for renewal, and all of them have successfully renewed and the performance has been stellar. In addition, I'll give you the fact that -- for those that are even not due today, you've got programs underway to reach out to customers. We reach out about 40% of the customers, and we are getting very good positive feedback. So voluntarily, customers have come up and either top tough payments if they're a negative M or increase their payments as they're going forward. So even though the back book, the big maturities are 25, 26, the early success you see from anecdotal the data of four quarters and our expectations because of the strength of the Canadian customer in the secured portfolio gives us a very high level of confidence.

Our following question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Just maybe to drill down on the U.S. commercial loan book. Obviously down sequentially. It seems and you can correct me if I'm wrong, but maybe it's down a little bit more than what we would have seen some of your peers. I'm just trying to understand a little bit more, and I understand the economic side of it, is there any particular part of the book that's contracting more or where you're seeing less retention, just hoping to get a little bit more color and then maybe just kind of weaving that in to the NIM discussion? Is the loan balance movement have a positive negative impact on your NIM and your NIM outlook?

So in terms of segments, I would say that when you look at segments that are more reliant on M&A activity, we're seeing more softer loan growth in those areas versus our general diversified businesses, private equity, of course, has slowed down. Real estate has, of course, slowed down quite drastically. So those would be the segments that would have the biggest effects. But what we're looking at right now is demand starting to increase. We're seeing pipelines increasing as we move into Q4. So I expect that we'll see better growth in the U.S. franchise as we go into fiscal '24. But we can't deny the macroeconomic background that we're under. So when we look at deploying our capital, we are laser-focused on not just volume growth, but rather how do we optimize return for our shareholders. How do we go after sole bank relationships or left lead where we get the treasury and payment services revenue, the cash management fee revenue and how do we also get share of wallet and make sure that we're getting the trading products and one client referrals to our wealth and Capital Markets colleagues. So we're not going after volume, we're going after quality because these relationships, both existing and new, that add the most significant shareholder value. And when the commercial banking demand does come back, we are on both sides of the board are extremely well positioned to meet or probably beat what the market will be at that time, especially when we see the M&A activity increasing. And when you think about M&A activity, if I look at our mid-market M&A group pipeline right now, it's probably the biggest pipeline that I've seen in two to maybe three years. So, we're starting to see the turn coming. But as always, when it comes to Q4, we'll update you on growth numbers at that time.

Yes. I just -- I'm going to complement that, Doug, it's Darryl speaking. When I look at the quarter-over-quarter sequential commercial growth that you referred to in the U.S., on the surface, you might come to the conclusion that it's a little bit below market, but I must buy it, and I'll tell you why. Some of that is -- and by the way, when I say a little bit, like a very little bit, some of that is explained by mix, which Nadim was just into. And some of it is actually explained by the fact that we have July in our quarter in the U.S. banks don't. And I think when you adjust for those two things see that we're pretty much right on market is my hypothesis. And more importantly, the point Nadim made just now when the sun comes out on the industry and it will one day, we've shown time and time again that when does we can perform better than market in commercial banking with the fourth largest book on the continent, and we expect that we'll be able to do that again. And the great news about that is that we will also simultaneously have the flow-through of the efficiency program that we announced today as well as the full flow-through of the efficiency of the Bank of the West synergies, and we put all of those things together for us. That's what to me gets me excited because it's a pretty differentiated outcome for our bank.

And on your NIM question, Doug. In quarters when deposit growth exceeds loan growth, we see a positive impact of that on our NIM. This past quarter in Q3, our loan growth exceeded deposit growth. So therefore, that had a negative impact on our NIM. Next quarter, we are predicting a stable loan environment and potentially a better deposit environment which should be marginally helpful for our NIM in Q4.

Thank you. Our following question is from Paul Holden from CIBC. Please go ahead.

A quick question on capital management. Just wondering the thought process behind the DRIP discount and when that might come off given you are seeing a build in the CET where you should be seeing a build in the CET1, I think, on an organic basis, given the slow loan growth environment. And then obviously, with the operating efficiency improvements expected that will also help organic capital generation. And then you've provided some pretty neutral/positive outlook for FRTB and Basel III impacts.

Yes. It's a good question. We will be finalizing our FRTB analysis over to this quarter, which will give us more clarity. As I said, we are pretty confident that it will have a modest impact on our capital. Look, I mean, when we started the year, we said that the assessment on DRIP is a quarterly process that management and the Board will go through together. We are maintaining our 12-plus percent CET1 ratio targets across the bank. And depending upon what we see in the environment with respect to RWA growth and the regulatory decisions that are still coming in, in the U.S., obviously, we've seen it, which as Darryl said, does not impact us much. The more clarity we have on the environment, both macro as well as regulatory, the closer we will get to a decision on DRIP.

Got it. And then I guess my follow-up on that point would be kind of can you give us a sense of what your operating target range is for the CET1. We've heard some other banks sort of talk about maybe getting up to 12.5 plus. Are you sort of thinking the same thing over time?

I think a reasonable range is between 12% and 12.5% and in the current environment. As I said before, the target level of capital is impacted by multiple factors including the environment and the regulatory regime and the peers. So, we will be very sensitive to all of those three. I think that the range is still 12%to 12.5% under the current OSP regime and potentially closer to that 12.5 point.

Our following question is from Lemar Persaud from Cormark Securities. Please go ahead.

Maybe for Tayfun. Should we think about the severance charges as being a one quarter phenomenon? Or are there further charges coming down the pipeline?

It is a one quarter phenomenon, and that's the reason why we noted the severance this quarter. We expect continued focus on expense savings as our commitment to positive operating remains firm, but the severance charge is this quarter.

Okay. Perfect. And then could you remind us what the conditions are for -- to adjust for legal provisions, I guess, you guys call that higher legal expenses and a lot of the reasons for elevated expenses. But just looking at your adjustments, we have seen legal provisions that are adjusted for. So I guess, how do you draw the line in the sand for what you adjust for and what you leave in your core expense numbers?

We tend not to adjust for legal provisions. In our normal business, we always have legal proceedings, and we believe that if there is a reason for us to take reserves that they should be included in our financials on a non-adjusted basis as part of the operating performance.

You might ask then, Lemar, why did we call it out this quarter. I think it really is your question because you're right. Normally, we don't adjust and the reason we've called it out this quarter is because it's unusually high. We don't expect that level in the normal course. So, we wanted you all to know -- we wanted you all to know that.

Okay. And that's linked to the severance. Is that what it's related to?

No, it's not linked to the severance. It's separate from the severance.

And it does include the off-channel communication settlements, that is very public, obviously.

Thank you. Our following question is from Nigel D'Souza from Veritas Investment Research. Please go ahead.

I just want to drill down a little bit more on the trends you're seeing on the deposit side in your U.S. business. Any color on where you're saying for non-interest-bearing deposits? How much of that remains in terms of deposit mix? What you're seeing non-interest deposits and there's a difference in flows for deposits for the Bank of the West franchise versus the BMO U.S. franchise?

Yes, I'll take that one. So what we're seeing in terms of the U.S., we're still seeing the pre-pandemic or through the pandemic surge deposits still existing to some degree in the franchise. They're solely running off. We would anticipate that, that to take place probably in the first half of next year to be fully out. They're still elevated our checking and our savings account. We are seeing, again, that migration to term, which is expected as we continue to be in a market where the rates are attractive to our customer base. As well on the Bank of the West side, as I mentioned, we're seeing stability in terms of our ability to retain deposits and are now seeing growth. That's a function of our introduction of better pricing optimization of the portfolio itself and expect that to move forward. And then on our digital deposit taking, we're seeing strong outcomes as well in terms of what we're seeing being driven through the digital channels across the 50 states. So, overall, I'd say those trends. We believe that there's lots of opportunity in the franchise itself of Bank of the West, given the market itself is very attractive. And so as we go through our campaign season, et cetera, we'll anticipate to be able to grow at market in those particular markets, I'm not sure Nadim, if you have any other thoughts.

So it would be very similar, but I would say if you're asking trends, the shift mix that we've seen going from noninterest to interest-bearing has slowed down and is stabilizing. So I don't think it's going to shift back anytime soon, but I do think that it has stabilized in terms of the shift.

Yes, just last point on this, I think, Nigel, you're also asking that whether there's adjust position between the Bank of the West franchise and the legacy BMO franchise, I would say we're pretty much at the point where that's converging -- converging, I should say, pardon me, because you'll see that as we go through Q4, we have our conversion weekend literally coming ahead of us. And the franchise value starts to integrate and blend together almost completely. So, the benefit that we bring with the scale and the capabilities and the technology is infiltrated into the Bank of the West system. And so as time has gone on, we've seen a convergence of the performance on deposits, and that's what we would expect to see on a blended basis going forward.

Great. And just a quick follow-up for Piyush on the credit loss outlook, I think you've signaled for PCL to be somewhere in the low 20 basis point range. That actually puts you above and that's unimpaired, but that's above the run rate for PCLs in 2019. So just wondering if you could comment on, are you seeing interest rates weigh on commercial side or retail side? And do you expect those provisions to remain elevated and any pathway for when that could fall below 20 basis points?

Sure. Yes. So I think on the impaired piece, I think that's the one you're referring to. The guidance we're giving is consistent low 20s to mid-20s. Of course, interest rate is a big part of the environment. It's a very natural evolution for our borrowing customers to adjust their performance to a 500 basis point increase in a very short period of time, that's what you're seeing coming through. So I would say, if you take that for the next quarter and you sort of average it out for the entire year, we are well below 20% on an average basis. But again, within the realm of normalization that I think all of you and all of us have been expecting for the industry. So, I don't have anything else to sort of add over there. I think the Bank of the West portfolio performs very well converging as we've used the term with the BMO U.S. portfolio. And the trends are similar weaker and unsecured a little bit but strong secured portfolio and then risk rating changes on the wholesale portfolio. So overall, the position of strength from where we are starting and a very strong risk appetite.

Thank you. Our last question is from Joo Ho Kim from Credit Suisse. Please go ahead.

Expenses, there are a lot of [Technical Difficulty] but do you see those as [Technical Difficulty]

Sorry to interrupt you. You're coming in a bit choppy, if you could...

Yes, sorry. I'll start from the beginning. I just had a question just on the expenses there. Can you guys hear me okay?

Yes, that's better.

On expenses, there are a lot of moving pieces. I'm just trying to get a sense of how you see your efficiency ratio evolving in 2024? And I'm trying to get a better idea of if there's a pathway to get back to the mid-50s in efficiency ratio that year or if that's more of a story beyond 2024?

Yes. Look, I mean, I think we are -- just as we signaled earlier in this year, we significantly curtailed expense growth at the beginning of this year and predicted that our year-over-year expense growth would start coming down and our quarter-to-quarter expense growth would start reflecting that. And that happened this quarter that has happened over the past couple of quarters. As we look forward now, we are truly still committing to positive operating leverage both with the contribution that's coming from Bank of the West as well as from our own operations. So, we will update our expectations for '24 when we get to the end of Q4. But the primary driver of our actions clearly is that firm commitment to positive operating leverage. The efficiency ratio is going to be an outcome. Of that, we would expect improvement in our efficiency ratio. And we hope that we will be able to update you with that when we get to the end of next quarter.

Operator, I've got my eye on the clock here, and I'm cognizant that our guests have another call to get to. So I'll bring us to a close with that as I understand is the last question in the queue. So I want to thank everybody for their questions and leave you with the following thought, guided by the purpose-driven strategy that I've talked about and the winning culture that I've talked about. I think you can take away that we are proactively addressing the period of volatility that we're in to deliver consistent and sustained performance. We're doing that by dynamically managing our business to continue strengthening the already robust foundation and invest in our businesses for growth. And with the full integration of the Bank of the West ahead of us, the strength and the size and the stability of our balance sheet and our superior risk and liquidity capital management are built really to outperform in any environment. And with that, I want to thank everybody for participating, and we look forward, of course, to speaking to all of you through the fall and again formally in December. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.