Good morning and welcome to BMO Financial Group's Q1 2024 Earnings Release and Conference Call for February 27, 2024. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We'll begin the call 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 today to take questions are Ernie Johansson, Head of BMO North American Personal and Business Banking; Nadim Hirji, Head of BMO Commercial Banking; Alan Tannenbaum, Head of BMO Capital Markets; Deland Kamanga, Head of BMO Wealth Management; and Darrel Hackett, EMO 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 Typhoon will be referring to adjusted results in their remarks unless otherwise noted. I will now turn the call over to Daryl.

Thank you, Christine and good morning, everyone. Today, we announced net income of $1.9 billion and adjusted earnings per share of $2.56 and against a challenging economic backdrop, continued to demonstrate the strength and resilience of our diversified businesses. While the environment has constrained revenue growth in market-sensitive businesses in the near term, the strength of our personal and commercial businesses further enhanced through the integration of strategic acquisitions, delivered revenue growth of 10% and pre-provision pre-tax earnings growth of 3% from last year. We're executing against simple, clear and well-defined plan by optimizing our businesses and balance sheet, controlling costs and growing customer relationships to drive long-term sustainable growth. We significantly strengthened our capital position with a CET1 ratio of 12.8% and up 30 basis points from last quarter and up 60 basis points since closing the Bank of the West transaction. Through disciplined balance sheet optimization, we've absorbed regulatory impacts and credit normalization and are well positioned to support client growth going forward. Given the outcomes of our actions, the result -- the resulting strong position and consistent internal capital generation, we've removed the DRIP discount as of this quarter. We're delivering against the expense management commitments we announced last year, including the full achievement of the US$800 million run rate cost synergies at Bank of the West as of February 1 and 1 year after closing and 20% higher than our initial plan. We're also on track to deliver the additional $400 million of expense savings by the end of 2024 from the early actions put in place last year to enhance bank-wide operational efficiency. The benefits of these programs are now accelerating. In fact, we've reduced expenses by 4% from last quarter and remain focused on returning to positive operating leverage beginning next quarter. Credit remains…

Thank you, Darryl. Good morning and thank you for joining us. My comments will start on Slide 8. First quarter reported EPS was $1.73 and net income was $1.3 billion. Adjusting items are shown on Slide 38 and included the after-tax impact of the FDIC special assessment of $313 million, the net accounting loss on the sale of a portfolio of recreational vehicle loans related to balance sheet optimization of $136 million and acquisition-related impacts for amortization of intangibles and integration costs of $84 million and $57 million, respectively. The increase in reported net income from last year reflected the loss on fair value management actions related to the Bank of the West acquisition in the prior year. The remainder of my comments will focus on adjusted results. Adjusted EPS was $2.56, down from $3.06 last year and net income was $1.9 billion, down 12%. Revenue increased 10% and PPPT increased 3% with good growth in Canadian P&, C the benefit of acquisitions and market-related impacts in insurance from the transition to IFRS 17, partly offset by declines in Capital Markets and Corporate Services. Expenses increased 16%, primarily due to the impact from acquisitions, partly offset by the realization of cost synergies and efficiency initiatives. Total PCL was $627 million, including a $154 million provision for performing loans compared with a total provision of $217 million in the prior year. Piyush will speak to these in his remarks. Turning to Slide 9. There were some idiosyncratic items within the quarter that had outsized impacts on the total bank revenue growth. First, in Wealth Management, the transition to IFRS 17 resulted in variability from market-related impacts. While quarterly results in the prior year were restated. They are not necessarily representative of our future earnings profile as hedging strategies to mitigate the…

Thank you, Tayfun and good morning, everyone. Starting on Slide 20. The total provision for credit losses was $627 million or 38 basis points. Impaired provisions for the quarter were $473 million or 29 basis points, up 4 basis points from prior quarter, reflecting the continued impact from tighter monetary policy. Credit performance remains well within our expectations and was driven by strong risk management discipline across the bank and the benefit from our risk mitigation actions over the last few years. Canadian retail impaired losses were $204 million, up $14 million from prior quarter and U.S. retail impaired loan losses were $80 million, up $20 million. Consumer loan losses in both Canada and the U.S. reflect higher delinquencies in credit cards and other personal loans, reflecting increases in customer insolvencies which in Canada are now above pre-pandemic levels. Also of note, the discontinued indirect auto business provisions are now reported in Corporate Services and have increased in line with industry trends. Canadian commercial impaired loan provisions were $34 million, down $8 million from last quarter and U.S. commercial impaired provisions were $103 million, up $20 million, primarily due to higher losses in the transportation and retail trade sectors. Capital markets impaired losses were $11 million, flat to previous quarter. Moving to Slide 21. Performing provision for credit losses of $154 million primarily reflected portfolio credit migration and model updates, net of changes in expert credit judgment. Negative credit migration which began in the second quarter of last year is not yet over but we do expect it to slow up late during the remainder of the year. Also of note is an $87 million release of performing allowance related to the RV loan sale. This release is outside of the $154 million build and netted in the noninterest revenue…

[Operator Instructions] And the first question is from Ebrahim Poonawala, Bank of America.

I guess I had a question just around balance sheet positioning, maybe Tayfun. One, talk to us around the U.S. P&C business. I look at the loan-to-deposit ratio everything that I hear from the U.S. banks has significant focus on liquidity, lower loan-to-deposit ratios. Could you give us a perspective on how you are thinking about liquidity within U.S. P&C where that loan-to-deposit ratio should gravitate. And then the second question is the -- from a capital and RWA optimization standpoint, how much more there to go? I mean, I understand banks are constantly optimizing for RWA. But from an investor standpoint, RWA optimization leads to hit to earnings and revenue. So just trying to understand the risk of earnings or revenue tied to these actions?

Thank you for both questions. Let me actually start with the second one first. I understand why the question first references in impact of these transactions but we actually look at it differently. We look at this as not necessarily taking away from our revenues but creating the potential for more revenue growth and for expanded relationship growth in all of our businesses, whether it applies to commercial or consumer because these create -- first of all, these are ROE accretive transactions. So in that sense, we are creating more room on our balance sheet, not to sacrifice growth but actually to grow stronger and faster, both in the U.S. and in Canada. So that's important. I think I highlighted last year that during the fiscal year, the impact of these transactions would be about $400 million last year. This year, it will probably be a bit higher because we have more transactions. But the growth impact on our company of these transactions and the optimization of capital is very significant. On the U.S. side, with respect to the balance sheet positioning, we feel actually very good both on the personal side as well as the commercial side with deposit growth. We have -- obviously, Bank of the West gives us an extra ump in terms of connecting with more customers and growing the deposit base, while also our fairly efficient treasury management platform gives our commercial business expanded opportunities in growing deposits. In an area where we have a bit more muted loan growth compared to our historical levels, we expect this will continue to build liquidity. We've always emphasized over the past year or so that we are positioned very well with respect to our competitors, both from a capital perspective as well as from a liquidity perspective which gives us, I think, opportunities for market share growth. Ernie and Nadim, I will invite you guys to comment on both questions.

Sure. This is Nadim. Talking about the capacity creation from the risk transfer transactions and a commercial standpoint is extremely important for us. Darryl and Tayfun both mentioned the subdued loan demand environment which does exist. Businesses are still cautious wait and watch mode before making new capital investments, we're optimizing their balance sheet, reducing revolver utilization, especially in the working capital-heavy businesses. But what I will say is that customer sentiment has improved this quarter versus last quarter and I expect that trend to continue. And despite the environmental headwinds, mitigating this is our diversified portfolio and momentum in new client acquisition, including in our integrated treasury and payments platform in both countries. If you look at Canada, although we showed flat quarter-over-quarter loan growth in the month of January, point-to-point, we had strong momentum and that momentum has continued into Q2. In the U.S. we showed quarter-over-quarter loan growth just under 2% which is at the higher end of our peer growth. And in both countries, our pipelines on loans and deposits has increased. So overall, the capacity creation is extremely welcomed on the commercial side and I believe, positions us extremely well. And as we've done through past cycles, we are now in a strong position to accelerate as the environment rebounds and take share. And this time, it's off of an even bigger platform.

Got it. Just one very quick follow-up, Tayfun, I think you mentioned revenue in Corporate segment negative $200 million to $225 million or $250 million [ph]; that's a pretty meaningful change from last year. If you don't mind, what do you think the net income or net loss contribution from Corp segment will be for the rest of the year?

Look, I mean I think I gave you the revenue guidance, Ebrahim. Expenses are on the low end. As I've said before, we will give you some guidance for net income. But overall, I think the guidance on revenues should be a good level to forecast the net income piece as well. There's, of course, is corporate revenues are difficult to analyze from outside. I tried to clarify it with these idiosyncratic items. I'll be happy to give more details on that as well. Purchase accounting accretion does have an impact overall. But on a year-over-year basis, on revenues, the larger portion came from our earnings on equity in the first quarter of last year, that was almost 2/3 of the year-over-year change. And then, there were some higher liquidity costs compared to last year's first quarter. On a quarter-over-quarter basis, on net interest income in corporates, it was a combination of purchase accounting accretion, change and then higher liquidity cost on net noninterest revenues. The impact came from the market volatility impact on fair market values on a portion of our hedge portfolio which always is sort of related to volatility during a quarter. But over time, that converges back to 0. Some quarters are positive, some quarters are negative. This quarter just happens to be a negative one. So our guidance on revenues is better for the rest of the year, barring any changes in market volatility.

The next question is from Meny Grauman, Scotiabank.

Maybe following up on Ebrahim's question. Darryl, I'm curious, if you look forward, would you say you'd be more cautious pulling the trigger on risk transfer transactions going forward, considering where your capital ratio is and considering the more challenged revenue environment? Maybe it's an obvious answer but I thought I'd pose it curious to your thoughts on that.

Yes. The short answer is we feel like we're in a pretty good spot. You look at our CET1 ratio at 12.8%. It would be inconsistent if we said that we're removing the DRIP discount. And at the same time, we felt capital constrained. We don't feel capital constrained. We're very pleased with the execution of risk transfer transactions. It's put us in part in the position that we're in. It's helped us create the capacity for when the environment becomes more constructive. So as you know, we always look at these tools to optimize balance sheet performance. It's not just for risk mitigation but it's for the creation of future opportunities as Tayfun summarized just now. But as I look out today, we feel pretty comfortable in the organic capital generation on our balance sheet.

And then maybe just a question for Piyush in terms of your guidance on the impaired loan PCL. Just wondering if you could provide a little more guidance in terms of timing? When do you expect to see -- what quarter you expect to see this peak? And if you could talk about your outlook for small business, especially from the impairments perspective, I think it's pretty clear what's happening on the consumer side in terms of the unsecured book of business. But what are you seeing on the small business side? And where is that expected to go?

Sure. So two parts; let me just first provide the broader impaired guidance. I think I've been guiding to low 30s. And so while we've seen the steady pickup as expected in the credit environment, I think that's going to continue. There will be variability intra-quarter over the years. I would generally guide to say we expect a higher amount in the first 2 quarters. And if the rate cycle plays out as expected, it should start trading off by the end of the year. But again, the macro assumption there is how the rate cycle plays off. As you know, we are beginning -- we are seeing continued resiliency by the Canadian consumer when it comes to the mortgages. So that's been a very good book for us. But then on the unsecured side, the insolvencies that are showing up through the Canadian consumer is what's reflective of the impaired losses. And the challenge is that even if the rate cycle changes, it will take a couple of quarters for the transmission to flow through. I think the better piece, I would say is even though we don't expect Q2 rates to come down, it's very important for business, government sentiment that if we are closer to rate cycle changes in Q3 and 4, I think you'll start seeing upgrades. So the impaired loan losses, I'm sticking to our guidance of the low 30s. And so I'm very pleased with where we landed at 29 basis points and I expect that's going to continue with some variability, like I said, in that range. On your small business question, it's a very small part of our overall book; there is stress in Canada. Again, if you look at business banking insolvencies coming out of COVID, there has been a huge pickup but we continue to manage. There are certain sectors that are more stressed but our risk underwriting criteria captures that. And so that's not a big mover of the dial in the overall impaired losses as we go forward.

The next question, Mario Mendonca, TD Securities.

Tayfun, I appreciate your comments on corporate. Can I ask you to look at it in a slightly different way, more on from a consolidated perspective on Page 15 of your supplement. When you talk about revenue associated with the hedging activity being weaker in the quarter or a drag this quarter, are you specifically referring to that other revenue line the $44 million adjusted this quarter. Is that what you're referring to?

It is in noninterest income, Mario. This item is not in net interest income. It's in noninterest income.

Sorry, that's what I meant. I mean noninterest income revenue like the -- I hate to say it but like the other line is what I'm...

Correct. Yes.

And so that number can move around a fair bit. Can you talk about the dynamics that caused it to be a fair bit weaker like much lower than previous quarters?

Yes. So that will be impacted by the overall interest rate volatility in the markets. And as you know, the November through January period was relatively volatile. But there will be quarters when that number will be positive. This one was a negative quarter. Over the life of the portfolio, it will converge by definition to 0. So that's the reason why we called an idiosyncratic item this quarter. It will not repeat in the same manner. And it's difficult for us to give you some guidance because we don't have a way to necessarily appropriately predict market volatility.

And for clarity, there's no other line income statement sort of revenue line that benefited...

No.

No. So that's just purely the effect there. Okay. The next sort of similar type of question relates to the insurance investment result. I would have expected that line to be relatively steady unless there were credit charges or fair value charges in the quarter. So with that investment result looking so weak or negative $9 million. Can you talk about what drove that?

I assume you are comparing this quarter to last quarter...

Over the last few quarters.

Yes. So this is purely related to the transition in our business from IFRS 4 to IFRS 17. And as the year went on in fiscal year '23, we started hedging our interest rate sensitivity in the second half of the year to prepare for the expected sensitivity levels under IFRS 17 and which has caused an uptick in revenues in the third and fourth quarters of last year. So now that we are firmly in the year having made the transition, our outlook for that line is going to be fairly static going forward. So you will not see a similar volatility and this quarter's level is more indicative for future revenues in our insurance line.

So you'd expect to be close to zero insurance investment income?

Yes. I mean, I think overall revenues in insurance was around $80 million or something like that. So that should be our guidance. That is our guidance for the next few quarters.

Understood. Now Darryl, maybe you quickly, I understand that when transactions are done particularly in the U.S., it has the effect of hurting the ROE in the near term and then as synergies are materialize and you're successful in your transaction, ROE in that business should improve. First of all, is that your view on how the U.S. ROE should migrate? And what is an acceptable ROE in that U.S. business over time?

Yes. So it's a good question, Mario. So the answer to your first question is yes. And we're currently, I would say, in the inflection point of the journey on your question. So if you go back and look at the benefits that have come and then the benefits that still are expected to come. Look, the conversion was, by all measures, world-class. The marketing campaigns are in flight. The cost synergies we've talked about. We've exceeded the initial target. And by the way, I just want to clarify on that when we say we're run rating at $800 million of synergies. That's as of February 1. That was not as of the average of the first quarter. So there's more in that tank for all of you as the rest of the year goes on than there was in the first quarter. The capital, as you know, has been built since the acquisition and we've held on to the deposits quite nicely in an environment where deposits have fled the system. So do we expect the ROE to accrete from there? You bet we do because we haven't yet realized the benefit of the revenue synergies that we've also talked about. And so another way to think about it is that we put out in the window for you all a $2 billion PPPT target for the bank, then known as Bank of the West asset that we bought and we're standing by that because we see all of the various metrics that lead up to that as enablers coming in quite nicely as we speak.

A double-digit ROE in the U.S. then seems entirely reasonable over time.

Yes, we've been there before and we'll be there again when we execute on this.

The next question is from Gabriel Dechaine, National Bank Financial.

First question for Piyush. You talked about your expectation for impaired PCL, the trajectory. I'm maybe putting words in your mouth here, hopefully I'm not but you're sounding like a little bit of an uptick here in Q2 but improving in the second half as rate cuts materialize, correct me if I'm wrong there. I'm wondering about what about the performing provision. If rate cuts keep getting pushed back for whatever reason, is there any upward pressure on your performing provision? Like what's built in there? If you can dumb it down to that level, that would be great, so that we know what to expect?

Sure, Gabriel. So on the impaired PCL, look, in any quarter, I wouldn't take 1 quarter's number as the number, it's going to be variable quarter-to-quarter as things happen. So this credit cycle has come off for a long time and it's come with a cheaper slope. So it's picked up very quickly which is why you've seen the rapid buildup in impact PCLs. And I think in Q2, my expectation is, as this trend continues, it will be a tad bit up. I can't exactly point to what basis points. We also have, as you know, risk mitigation actions in place, so we benefit from those. And so depending on the name that's impaired versus what's in our risk management, risk mitigation, we will get some benefit. So yes, a tad bit up but I think then down and I look at it over the year and over the year, like I said, I feel very confident about. At the moment, if something changes, obviously, we'll keep you posted. I think the performing PCL is a little bit of a longer story. Let me take a few seconds to just unpeel or explain the build in the context of what we did this quarter. So the first piece of the $154 million build is, of course, the credit migration that causes the upward build. The second piece is really around a few modest updates. And the model updates are as we completed the integration of Bank of the West models, we got a richness of data that allowed us or guided us in the expected losses of our own existing portfolios under different economic scenarios. We've been considering many of these variables through export credit judgment. This time, we let go of the expert credit judgment because now it's…

Okay, great. I might need to follow up on that but Tayfun in the interest of time. Can you give me the numbers that they're associated with your credit mark. What's been recognized to date as far as, I guess, recoveries? And what the remaining balance is and the time line you expect to see the most impact from that unwind?

I assume you're talking about the purchase accounting accretion numbers. Yes, I think we have not necessarily given out actual numbers, Gabriel. But I think the year-over-year change in purchase accounting accretion which may give you some aspects of the impact on revenues is probably $250 million to $300 million.

Lower this year.

Correct. Compared to last year, full year over full year.

Yes. Q1 versus Q1 -- or I'm not sure, I follow you, actually.

It's a -- so if you add up purchase accounting accretion for the full year '23 and compare it for the full year of '24, you'll probably see about a $300 million type of decrease in purchase accounting accretion.

Okay, here you go. I was overthinking it. And talk to you end of March, Tayfun.

Next question is from Doug Young, Desjardin Capital Markets.

I'll make it just quick. Tayfun, just that purchase accounting change year-over-year, how much of that is just a normal roll off? How much of that was because of risk transfer transactions or sale of portfolios like the RV book?

A portion of that, clearly, what sped up some of the accretion in the earlier parts of the acquisition does relate to the RV transaction because we captured some of that accretion in our net gain calculation. So that's the part of the reason why going forward, accretion numbers have come down. And there is there's a natural degradation because as we continue to capture more of it. And in these types of acquisitions, you tend to capture more at the beginning parts of the cycle and then it just gets reduced as you go down the line. But it did have -- the RV transaction did have a discrete impact.

Okay. And then, Darryl, in your prepared remarks, you talked about the expense savings from Bank of the West and the other $400 million from other actions. And you talked about accelerating and you talked about the $800 million being as a sub first and more to come. You seem excited that there's more to come. Are you indicating that you think you can get more than what you've talked about? And then I guess the flip side of this or to continue on with that discussion around expenses, how confident are you around achieving the positive operating leverage? So I'm just curious about all the different moving pieces on the expense and the revenue side that gives you that confidence.

Yes. No, I wasn't -- Doug, I want to be clear. I wasn't signalling that we think there's necessarily more to come. What I was commenting on is the point that we're at in the trajectory on the delivery and reminding you all that of the $800 million, we're clocking in at that post February 1, not entirely pre-February 1. And then of the $400 million -- and by the way, we mix currencies on you on this. So I'll remind you the $800 million is U.S. and then the $400 million is. And on the $400 million, I think Typhoon explained that we're $325 million through it and then we've got the other $75 million to go. So as -- what I was trying to do for you for your model, Doug, is to emphasize that as you go through Q2 and then particularly into Q3 and Q4, the totality of the expense delivery programs increase for us relative to what we're delivering for you right now. Is that helpful?

That is. Yes.

The next question, Mike Rizvanovic, KBW Research.

Just a quick question on your margin trajectory here. So down at the all bank level and then up in Canada and I think flattish in the U.S. So I'm wondering when you guide to a higher negative NII line in corporate, is that where we should see the improvement, if, in fact, you are able to get some margin accretion at the all bank level maybe second half of this year or perhaps just heading into 2025. I'm just wondering where those moving parts will end?

Yes. I think this quarter, we have seen a little bit of a higher deposit price competition than we were expecting. That's the reason why it came down 6 basis points. In terms of the NII line in Corporate Services, yes, we do expect that line to come down from the Q4 levels which will somewhat contribute to the stability of the margin because this concept of higher reinvestment yields balancing the deposit pricing competition and term migration is real and it's coming through across -- we do reflect that not only on the corporate side but also in businesses. So we're pretty confident that the outlook for the rest of the year is very tight and stable from here.

Okay. So you're still confident that you could see margins higher all bank level, even if rates are declining possibly towards the end of the year and heading into 2025. Is that a fair assessment?

Yes. Our outlook does contain an interest rate view that the Fed and Bank of Canada will start pulling the short-term rates down. I would not guide you to a significant increase in our margin. If it is, it's a couple of basis points, I'm more guiding you towards a stable enterprise level consolidated NIM outlook.

Okay, that's super helpful. And then, just I wanted to quickly ask Darryl. I think in your prepared remarks, sorry, I think you made a reference to rates coming down which should help across different aspects of your business lines. And I'm just wondering if you could sort of qualify that. When you're seeing lower rates, are you just talking about the short end of the curve Bank of Canada? Or are you, in fact, expecting and across the spectrum or across the yield curve duration like an across the board movement in rates downward? I'm just wondering what you're sort of modeling in your own projections there?

Yes. Look, Mike, I'm happy to take you through the sort of base case with the obvious notation that this has been a difficult game for anybody on the planet to be forecasting. But our base case does suggest that in the second half of the year, probably starting around July, we will begin to see a reduction in the short-term administered rates, so both in Canada and in the U.S. As far as the amount that we expect over the course of the second half of the calendar year, if you want to think about it that way, remembering that the calendar year is not the same as the fiscal year for the Canadian banks, of course, we're in the neighborhood of 100 basis points from the July period to the end of the calendar year, not capturing all of that in our fiscal naturally. And look, as you look at the longer end of the curve, I think we should probably see some commensurate reduction there as well but maybe not to the same degree. So you could see some steepening as we go through. That's our base case. And you will all have your own base cases to overlay on that but that's the way we see it relative to the economic performance that we expect in both the Canadian and U.S. economies.

Next question from Darko Mihelic, RBC Capital Markets.

In the Interest of time, I'll be very quick. You mentioned that the change in taxation on dividends is about a $50 million reduction in trading revenue. I'm assuming that's a 1-month impact, should I just be annualizing that? Or is there a better way to tell me the headwind from that maybe from an earnings perspective for 2024?

Actually, it is not just a 1-month impact. It covers most of the quarter. I would suggest that if you are going to add it in your model, I would use like a $60 million type of number for -- on a quarterly basis for the remainder of the year. So the $50 million [ph] doesn't go to $100 million [ph], it just goes to $60 million [ph] on a quarterly basis.

And that's just revenues? Or are you talking about taxes?

Revenues in Capital Markets.

Next question from Paul Holden, CIBC.

A couple of follow-up questions to what I think are important discussions on the call. First, just with respect to balance sheet or asset growth. Obviously, you've taken a number of actions over the last 12 months to manage assets and RWA. It sounds like maybe we've reached an inflection point, both because you now have the capital to grow the balance sheet again. And b, to the points being raised, you're starting to see improved demand as well. So maybe give us a sense of how the balance sheet may grow from here through '24? And what kind of impact declining interest rates might have on that view as well?

Yes. So I mean, look, as both Darryl and I said, we have proactively executed a number of these transactions to create room on our balance sheet for growth. And as -- again, I'm going to turn it over to Ernie and Nadim in terms of asset growth for the future but we believe that we've prepared our balance sheet both from a capital and liquidity perspective for growth in the future. In terms of timing, I'm going to turn it over to you guys.

I can start, it's Ernie. If I think about Canada, we do see us growing probably in the low mid-single digits on mortgages and our card book, et cetera. In the U.S., I would say we're probably in the low single digits on our loan growth, just a reflection of our growth position given our marine RV sale and our indirect auto exit. I'll turn it over to Nadim for his comments.

Okay. For the commercial side, I would say to expect low single-digit loan growth both sides of the border in the near term, building to a more mid-single-digit loan growth as we move into the latter half of the year which is the guidance that we had originally provided last quarter which was mid-single digit by the end of the full year.

Okay. And then, Darryl, I want to come back to sort of the line of questioning Mario had on the ROE but his question was specific to the U.S. bank. I want to ask a similar question for the Canadian bank, just given all of the changes that have happened with CET1 requirements, Basel III, your increased usage of risk transfer, et cetera. Does anything change in terms of your long-term ROE expectations? Or is this still a bank that should be able to produce a mid-teen ROE when things normalize?

Yes. You'll have seen, Paul and it's a good question. You'll have seen when we updated our medium-term target disclosure at the end of the year. We didn't change the medium-term ROE target. So that's a conscious decision. That's an active decision. So when we say we've got an objective of 15% or higher. That remains the case. So there isn't a question that the industrial changes have had an impact on the ability to deliver that. And it's also the case that if you go back a couple of years, we were closer to 20% than we were at 15%. So with that as a buffer as I look out going forward and we execute against these programs, we're holding that. And I remind everybody that's a medium-term target.

Thank you. This is all the time we have for questions today. I would now like to turn the meeting over to Darryl White. Please go ahead.

Well, thank you, everyone, for your questions. We apologize for going a little long but we wanted to get your questions in, given that we started a little late. As you've heard this morning, we're proactively positioning ourselves for an environment of future growth and we're confident in the power of this integrated North American franchise that delivers consistent and differentiated performance to help our clients make real financial progress. We look forward to speaking to you all again in May. Thanks, everyone.

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