Good morning, and welcome to BMO Financial Group's Q4 2024 Earnings Release and Conference Call for December 5, 2024. Your host for today is Christine Viau. Please go ahead.

Thank you, and good morning. We will begin 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 Johannson, Head of BMO North American Personal & 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, BMO U.S. CEO. As our call will end at 9:30, I would ask you to limit to one question during the Q&A to give everyone a chance to participate. 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. I'll now turn the call over to Darryl.

Thank you, Christine, and good morning, everyone. A year ago, we anticipated that higher interest rates and a slowing economy would present a more challenging environment for business activity, loan demand and credit provisions. In response, we outlined a clear plan and took early action to dynamically manage our businesses, including controlling expenses, while continuing to invest and support our customers. Against that backdrop, we delivered resilient operating performance. At the same time, credit performance deteriorated more than we anticipated. Impaired loss rates exceeded our historical range, impacting our overall results, with net income for the year of $7.4 billion and earnings per share of $9.68, both down from a year ago. We continue to prudently manage our portfolio and are working closely with clients that are facing challenges. We expect quarterly provisions to moderate through 2025. Despite a challenging year, there is much to be proud of, including significant progress advancing our strategic priorities. Pre-provision pre-tax earnings grew 5% to a record $13.4 billion, with growth across all operating groups. We met our commitment to positive operating leverage in each of the last three quarters and, for the full year, at 1.6%. Our efficiency ratio improved by almost 100 basis points to 58.6%, with sustained cost discipline. Across our businesses, we accelerated growth in our core customer base. We delivered more One Client connected solutions that built loyalty and expanded client relationships, and we grew deposits by $61 billion or 9%. We successfully managed evolving regulatory expectations, including the transition to a Category III bank in the U.S. Our CET1 ratio increased meaningfully by 110 basis points from last year to 13.6%, creating ample capacity to support our clients and return excess capital to our shareholders. These are all indicators of the strength and the health of our franchise.…

Thank you, Darryl. Good morning, and thank you for joining us. My comments will start on Slide 9. Fourth quarter reported EPS was $2.94 and net income was $2.3 billion. Adjusting items are shown on Slide 39 and include a reversal of a legal provision, which increased net income by $870 million. The remainder of my comments will focus on adjusted results. Adjusted EPS was $1.90, down from $2.93 last year and net income was $1.5 billion, down 31% as good PPPT growth of 4% was offset by higher PCLs. Revenue growth, excluding Insurance, which was impacted by the transition to IFRS 17 in the prior year, was 2%, with strong performance in Canadian P&C and Wealth and Asset Management, offset by lower results in Capital Markets. Expenses declined 2%. We delivered on our commitment of positive operating leverage for the third consecutive quarter in Q4 and for the full fiscal year and improved our efficiency ratio to 58.3%. PCLs increased $1.1 billion, which Piyush will speak to in his remarks. Moving to Slide 10. Average loans grew 5% year-over-year excluding the impact of the RV loan portfolio sale and the winddown of the indirect auto book, driven by good growth in residential mortgages and business and government loans. Strong growth in customer deposits continued, with average balances up 9% from last year. Sequentially, term deposits were stable and there was good growth in everyday banking and commercial operating accounts. In the U.S., total deposits were up 6% from last year and 2% sequentially. Turning to Slide 11. On an ex trading basis, net interest income was up 3% from the prior year. NIM ex trading of 190 basis points was stable compared with last year and up 7 basis points from last quarter. In Canadian P&C, NIM decreased 3…

Thank you, Tayfun, and good morning, everyone. My comments will begin on Slide 20. For the full year, impaired provisions were 47 basis points, which were higher than we expected going into this year, particularly in the wholesale portfolio. While interest rates were a source of headwinds, there were a combination of other factors, including vintage of origination, newer relationships and larger hold sizes that combined with changes in consumer preferences contributed to higher losses. This quarter, consistent with my comments on our last call, provisions increased from the prior quarter, and while we expect provisions to remain elevated, we believe that Q4 represents a high point and will begin to moderate through 2025. The total provision for credit losses this quarter was $1.5 billion compared with the provision of $906 million last quarter. Impaired provisions were $1.1 billion or 66 basis points, up 16 basis points from the prior quarter. Personal & Business Banking provisions increased $1 million in Canada and $4 million in the U.S. With current unemployment levels in Canada still elevated, I expect retail impaired losses to modestly increase through the first half of next year. In Commercial Banking, impaired provisions increased $86 million in Canada, driven by the services and retail trade sectors and $63 million in the U.S. due to higher provisions in the office commercial real estate portfolio and services sector. Our U.S. office portfolio remains well diversified, and our experience in this sector is in line with our expectations for the cycle. Capital Market impaired provisions increased $111 million, primarily driven by additional provisions taken on prior impairments, most of which have now been fully reserved. In addition, there was a new account in the mining sector relating to an environmental issue. On Slide 21, we provide additional information on our wholesale…

Thank you. We will now take questions from the telephone lines. [Operator Instructions] And we will take the first question from Gabriel Dechaine, National Bank Financial. Please go ahead.

I don't know, I wasn't ready to go first, but can you give me a sense of the -- Darryl, you were talking about a more bullish outlook, I guess, and I know why you're saying that. In the U.S. particularly, what are you seeing on the credit demand side of things? It's pretty early still for a turnaround, I imagine, but how do you expect loan growth to evolve over the course of the year?

Yeah, I would -- Gabe, thanks for the question. I would define us as net bullish. And I say that because there are clearly some crosswinds. We don't know where we're going to land on the pace of monetary and fiscal change. But I will say that if you're asking about the U.S. in particular, there isn't any question that since the election we've seen pretty broad-based optimism in our client base. And when I say that, I think about asset classes and capital markets, I think about our commercial clients in the U.S. overall. Noting that there are still some restrictive measures on the cost of capital as well as the threats that are out there with trade policies, but when I say net, I take all that into consideration. So, net positive. And I think the second part of your question was around loan. Look, on loan growth, Gabe, we expect the market to be more constructive than it was in 2024 for loan growth, which isn't that hard because it's been pretty muted for quite a period of time in the U.S. And within that market, we expect to fully participate. So, I don't have a number for you. We're not going to put a number in the window today on what we expect loan growth to be, but we expect it to be positive and we should fully participate in that given the strength of our platform.

Okay. And then, for Piyush, the PCL outlook, you gave us a decent, I guess, sense of what to expect, but the messaging in Q3 was that we'd have high 50s basis points or somewhere in the 60s basis points on impaired over the next few quarters and we got the high -- mid to high 60s basis points this quarter. How do you expect the impaired loss ratio to trend over the course of 2025? And, is there a point at which you'll be releasing performing provisions? I know mechanically you probably will, but if I look at your coverage ratio, I'm looking at the performing ACL, the trailing 12-month impaired, still lower than where you normally would be.

Sure, Gabe, thank you. Two parts to the question, both around performing and impaired. Let me start with the impaired portfolio and the outlook we've given you. I guided us to elevated impaired losses in the next one or two quarters. I believe Q4 was a high point. And while it remains elevated as we end the year '25 in my guidance on high 40s basis points, I'm also confident about the moderation from where we ended Q4 as we go into '25. And there's a couple of reasons for my confidence in the guidance I'm giving you today, and that starts with the amount of reviews we've done over the last three quarters and continue to do with our watch list and our formations. '24 was a challenging year on credit, but it was overshadowed by a few large files. Those large files have now been resolved fully. By the end of Q4, there are some of them that we worked through. But overall, I will tell you the team has done a granular review. I have done a review myself on our top watch list as well as our top impaireds. And it gives me confidence as we go into '25 that we should be climbing down from where we were at the end of Q4. As it relates to the performing provision, we've been prudent. It's a rigorous process. But overall right now, while you continue to see an increase from the negative migration and we will have probably growth in '25, I call that the good cholesterol of why we'll be building, until we see some leading indicators of a change in the migration, I don't expect to release. We'll obviously give you guidance quarter after quarter as we go through, but I'm pretty confident about where we stand at the end of Q4 in our overall coverages.

Got you. Thanks.

Thank you. The next question is from Doug Young, Desjardins Capital Markets. Please go ahead.

Hi, good morning. Just on the capital side, you put in NCIB in place. Just want to get a sense of your intentions. And what -- I think, Darryl, in your comments, you mentioned you want to keep the CET1 ratio above a management target. Can you talk about what that CET1 ratio target is? And can you also maybe just infer like what is the CET1 ratio target embedded in getting your ROE back to 15%?

Doug, this is Tayfun. So, as you know, with a very strong 13.6% ratio at the moment, once we get all the approvals, which we expect to receive somewhere towards the end of first quarter probably, I suspect that given the delta between 13.6% and our management target of 12.5%, I suspect that the early on, it will be a bit heavier. But then, we will pace the buybacks towards that 12.5% target depending upon loan growth, RWA growth and net income, et cetera. But that is the general approach. And built into our medium-term ROE target accomplishment is that 12.5% management target.

Okay. And then, in the ROE waterfall to get back to 15%, you talked about capital optimization. I assume buybacks is a big part of that. What else is embedded in capital optimization? Is there further divestitures of businesses? Can you maybe break out what else would be embedded in there?

Yes. The buybacks are part of that approach -- or part of that quantification. In addition to buybacks, there's clearly continued optimization of allocation of capital to businesses, the underlying client relationships. We truly intend to ensure that our existing relationships are meeting our profitability targets and our return targets. At the client level, there's a significant effort in all of our businesses going through the portfolios. We are also combing through all the portfolios and making sure that at the portfolio level, we are achieving our targets. At the moment, I can't tell you that there are any sizable exits that would require us to meet our medium-term capital targets, but if we do find them, we'll let you know and we'll just be including them also in our capital optimization targets.

Just a follow-up, in terms of that business side, the optimization of capital within the businesses, is there any one particular business that you would point to that's more heavy on that side?

We're looking at all of them. There is no single focus. All four businesses are going through their relationships and their portfolios.

Appreciate it. Thank you.

Thank you. The next question is from Matthew Lee, Canaccord Genuity. Please go ahead.

Good morning, guys. Thanks for taking my question. So, on the slide you added on the return to 15% ROE. A big chunk of that is categorized as U.S. segment improvement. And I know you touched a little bit about loan growth, but maybe what are some of the other items that are included in U.S. sector improvement? Because that piece of the chart seems like a big -- kind of a big chunk.

Hey, Matthew, it's Darryl. Maybe I'll take that, and it's possible that our colleagues running the business might want to jump in with some examples. But if you read the chart and pay attention to the size of the blocks, it's the biggest block that's deliberate, just to point that out. That block does include the expected improvement in PCLs as the PCLs relate to the U.S. segment, just to be clear. And then, the next block that you see is the PCLs that are outside of the U.S. segment. But there's a lot more than PCL improvement that goes into that segment. And a lot more includes driving positive operating leverage through all of our businesses in the U.S. that includes taking a real hard look at our now positioning as a top ten bank and looking at how we compete in regional markets. And it includes likely the allocation of resources to places where we have a right to win, where we compete in multiple business lines and where we can take share and grow profitably and cycle capital in the U.S. within the U.S. to compete more effectively across businesses. We've got some actions that are sort of already in flight on these themes. And I'm just looking across the table here at Ernie and Nadim, if you want to jump in on any of these.

Yeah. Thanks, Darryl. I'll just follow-up on the comment around the revenue growth for the retail side. Darryl alluded to the movement and the acceleration that we're seeing in the California and the Western markets. So, part of this ROE rebuild is really to capitalize on that strong growth market. We have a proven retail playbook we use in a North American manner. That's paying out and proving to be accelerating even faster than we actually anticipated on some factors, in particular digital engagement, digital sales, our sales team's productivity, having more holistic conversations with customers, doing some really strong referrals to our Wealth business, which supports our NIR growth as well. And so, that's part of the formula that we have. But the other piece is, we're seeing our ability to build new products and capabilities in digital as a result of the scale we now have with about 1,000 branches. You can imagine building something that has a fixed cost and then applying it to that kind of a size of market allows us to drive further revenue faster. So, those are some of the plays that we have in hand. And as I said, we're seeing strong performance now and are closing the gap between what I would say is the performance of our Midwestern market and our Western markets, which is exactly what the thesis was in our acquisition. Nadim, I'll turn it over to you.

Okay. Thanks, Ernie. What else is also included in the U.S. segment is what Tayfun talked about, particularly for the U.S. segment is capital and funding optimization to redeploy capital from low-returning segments and clients to higher-returning segments while maximizing risk adjusted returns. So that's also something you have to take into account in that box. And another one is the Bank of the West revenue synergies. This is still something that is to come and it is coming. We're seeing great momentum, seeing good pipeline growth, good new client acquisition, month over month increasing. And so that is also a part of what you're seeing there in that box.

So, more to come on this, Matthew, and hopefully, those were some good examples in the meantime.

Yeah, that's helpful. Thanks.

Okay.

Thank you. Next question is from John Aiken from Jefferies. Please go ahead.

Good morning. Darryl, BMO strategically went overweight on commercial. And with the experience of 2024 as well as what Piyush was talking about in terms of the watch list increasing, what are the expectations that you have for commercial growth through 2025? I guess, where I'm going is, has the experience that you saw last year, is that tempering your appetite for commercial loans moving forward?

Yeah, John, thanks for the question. I'll just go back to a comment I made earlier, which is when we look at our commercial franchise, we continue to invest in that franchise. It is a leading franchise in Canada and in the United States. And when we think about, I think where you're going is growth going forward in light of the experience in '24. So, it's a good question. We would look to participate with the market. If the market is constructive next year, which we expect it to be, we would expect to be on market. If you look at the last year as an example where it was muted, there was very little growth in the loan market in the U.S., for example, minus 1%, 0%. We're in that range. We're not very far above it. And I would expect that as we go forward and look at '25 to your question, you should see us move with the market. We're not trying to press ahead and grow at rates that far exceed the market nor do we expect to give up any market share.

Thanks, Darryl. I appreciate that.

Thank you. Next question is from Paul Holden, CIBC. Please go ahead.

Thank you. Good morning. You gave some pretty good guidance on the Capital Markets PTPP. Just wondering if you can dig into the details a little bit more, I guess particularly we're hearing better pipeline and investment banking. Wondering specifically for BMO sort of in that mid-market PE space, what are you seeing there in terms of pipeline and indicated demand from clients maybe that also funnels into commercial loan growth as well?

Sure. Hi, Paul. This is Alan Tannenbaum here. Thanks for the question. As Darryl indicated earlier, we've really seen a pickup in momentum across all of our businesses in the last 30 days to 45 days. We saw some of this over the course of the past year, but it's really accelerated here and we're seeing it very broad based. Our trading businesses are very active. Our financing businesses are robust. What really has picked up, which you've touched on is both the M&A processes and activity levels from sponsors, right? That, if you look back over the last couple of years and we're all aware of the impact of higher rates on financial sponsor activity, which has dampened both M&A and equity issuance from that universe, We're definitely starting to see activity picking up both pitches, processes starting and filing. So that is part of what gives us the optimism for the PPPT guidance for next year. So, feel very good about the momentum.

And I can speak maybe -- this is Nadim. I'll speak a little bit about the commercial. It's very similar to what Alan said, we are seeing pipelines grow. In Canada last year, we had reasonable loan growth and momentum building over the course of the year and that momentum is continuing into the Q1 and Q2 of fiscal '25 with good pipeline growth. In the U. S, as Darryl mentioned, it was muted industry for loan growth. Customer sentiment post-election is positive. There's expectation of a pro-business environment and tax regime and lowering of interest rates. This is all positive, and that will work its way through the system. So I fully expect loan growth. I think it'll be slower in the first half and probably faster in the second half of the year.

Okay. I'll leave it there. That's very helpful. Thank you.

Thank you. Next question is from Ebrahim Poonawala, Bank of America. Please go ahead.

Good morning. I guess maybe just Piyush following up on credit, so I heard your comments on PCL. Just address two more things, if you can. When we think about the formations, whatever, $2.2 billion this quarter, is that feel like based on the work you've done, we are at peak formations? Like, again, assuming there's nothing that goes wrong with the macro, should we see that $2.2 billion begin to come down starting next quarter? And also talk about how we should think about losses. When you look at the net write-offs jumped quite a bit this quarter. Just trying to get a sense of the loss content of these loans that are actually getting into impaired loans.

Sure, Ebrahim. So, when we look at both formations and the watch list in what's going on, it really is a proactive risk measurement sense to engage, what I would call our team of experts and special assets to work with our clients sooner. And the way I've assessed the formations into impaired provisions, to give you an example, this quarter, we only took for an impaired provision on a handful of names. And what that tells you is going back to our 30-year history of risk performance, we actually have a strong amount of collateral, guarantees or covenants in these structures that did not warrant a provision going in. So, it's very hard sometimes to give you a perspective of formations to provisions in any quarter. There will be variability. That variability is going to continue. That's what you've seen in the last year. And I've said this on calls earlier. I want to continue repeating that in terms of the variability expectation that our wholesale portfolio skew that we have presents. On the question of write-offs, the write-offs really is, I would say, good hygiene. You've taken the impairment provision, but when you have events, maybe a bankruptcy, a liquidation or in some cases, a sale of a loan, and in a conservative or a prudent way, I would say, when we think the recovery is not in the short to medium term, even though we don't give up on that file, we take the write-off. So, it doesn't have a P&L implication, but it's just the right thing to do to take the impaired provision portfolio and take the write-off. And so that's what we reflected probably in a higher number in Q4.

Got it. And I guess maybe one for you, Darryl. You talked about optimism on the U.S. outlook. I think there's a lot of optimism I hear even on bank M&A in the U.S. As you've been acquisitive over the years in the U.S., give us a sense of given where the franchise is today with Bank of the West, the synergies on the comp, like should we expect BMO to be a participant if deal activity in the U.S. bank M&A world picks up over the next three to six months, or is 2025 more about just focusing on synergies tied to Bank of the West and think about M&A after?

Yeah. Ebrahim, thanks for the question. I know you're coming back. I'll give you a similar answer that I've given in the past, which is we always consider M&A as an avenue for growth. If you look at our U.S. trajectory over the last many, many, many years, 60% of our growth has been organic and 40% of it has been through episodic acquisitions. So, the antenna is up, but I will say in this moment, the priority as I look into '25, to your question, is making sure that we've got the flywheel turning well and properly on the ROE optimization exercise that we've talked to you about. We've got capital to deploy organically for our clients first. Should something come along that makes sense that fits all of the criteria that we think about, we would look at it, but that won't be our first choice right now. Our first choice is to drive back to the ROE performance that we've seen from our U.S. businesses historically and reset the platform such that potentially if something subsequently comes along, we'll be in really good shape to be able to act. But at this point, I'm trying to be really clear with you on what our priorities are.

Very clear. Thank you so much.

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

Hi. Good morning. This question is maybe for Darryl or Piyush. Now that you have more confidence around the peak in credit, I was hoping we could maybe revisit just your thoughts or lessons or takeaways from this credit episode? It definitely surprised the Street. So just wondering, what you draw from this in terms of in terms of lessons going forward?

Meny, thank you for the question. Three quarters, of course, provides a lot of learning. And from a risk management perspective, we've always gone back and seen what things can be put back into our risk practices across given the strong risk culture we have. We've talked about the interest rates and how that was an impact to probably many clients, but really, in our hindsight, we've picked up in our broad growth, I think there were some segments of clients that we onboarded in that vintage around '21. And with larger holds, that did not play to our advantage that were the cause of the big losses in '24. I think from there onwards and the guidance we've given to the teams working with Nadim and Alan and the other business heads, we've got an improved process or an enhanced process in many of the areas, whether it is client selection or due diligence, whether it is our risk underwriting criteria, the hold, and also how much we risk mitigate at inception rather than keep on our books. So, those are regular, I would say, par for the course. I'm glad that the teams we work together, both first and second line. And I think that's what you should expect from us, especially with the hindsight of the quarters that have gone by.

Thanks for that. And maybe as a follow-up, just I think initially, when we saw this credit issue tick up, there was a fear that it might negatively impact growth expectations going forward in the U.S., in particular. From your commentary, it doesn't sound like that. Obviously, the environment in the U.S. has changed for the better. So, I just wanted to confirm that in terms of how this experience will or will not impact the growth outlook going forward for you...

Yeah, Meny, it's Darryl. I mean, you've heard my comments. You've heard Piyush's. As you know, we've got a substantial commercial franchise in the U.S. and a capital markets franchise in the U.S. So, I'd invite Nadim or Alan to jump in on the question of tension between managing risk and growing with the market at the same time.

Yeah, sure. Thanks for the question, Meny. This is Nadim. I would just start by saying in Canada, as you see our loan growth, we've been participating well in the market. We're market relevant and the pipelines continue to grow, and we will move forward with that in '25. In the U.S., as Darryl had talked about earlier, the entire industry saw the muted loan growth. We were minus 2% for the quarter. The range was between minus 1% and 3%. For the year, we were flat. Everybody else was pretty much down about 1% or 2%. So, we're right in the range. So, with the customer sentiment improving, we do think the loan demand will come back and our risk appetite is there to grow. It's not a balance sheet-led strategy though. We are here to grow ROE and risk-adjusted returns and optimize our balance sheet and capital, which is what we'll do, but we'll do that deliberately and we will grow the balance sheet as we do.

Thank you.

Okay.

Thank you. Next question is from Darko Mihelic, RBC Capital Markets. Please go ahead.

Hi, thank you. good morning. I'll be really quick. Piyush, with respect to the learnings and everything you sort of laid out for us in terms of trying to help us assess sort of what went wrong, can you maybe help size this for us? So, for example, if it's the 2021 vintage, there were a higher hold levels at that time, but what's the impairment of that portfolio? What's the size of that portfolio? And how should we think about the comfort level going forward? And I say this from a position of knowing that last year, you were comfortable going forward with credit quality. So, can you maybe size for us that vintage side -- the hold size that went wrong and how that's working through the system today and why that gives you comfort?

Darko, thank you for that question. We ended the year at 47 basis points. A large part of that, as you know, was geared towards our wholesale portfolio. What I would just say is within the wholesale portfolio, about half of the losses was geared towards this '21 vintage with a larger size. And my confidence today is because of the amount of work the teams have done parsing through that portfolio size, the expected loss on the general portfolio is in line with our long-term experience. The expected loss, which I have called unexpected in some of the larger files, is what drove a higher loss vintage in this. As I come into the call today, like I have every time, given the amount of work we've done, my goal is to give you the best estimate of where we are in the environment with the portfolio we have and the clients we have. And hence, having resolved a large number of those vintages with the losses we've taken in Q4, I'm giving you guidance around the moderation. Now remember, the high 40s is yet elevated from a long-term average, but it is moderating down as we continue to parse through that book and get it to year-end '25. Of course, as things change and when they change, I'll come back and give you my best guidance.

Okay. And the 2022 vintage, why is there no concern with that vintage of loans?

I mean, it's -- there is some, but again, those names have been factored in. They're not the same size of the '21. And so, there's nothing thematic around '22 that I can start to pronounce '22 as a problem. The bigger loans, the higher amount of losses came from '21, and that's why I've called those out for you.

Okay. Thank you very much.

Thank you. Next question is from Lemar Persaud, Cormark. Please go ahead.

Yeah, thanks. For Piyush, I think last quarter, you suggested it felt like I think Q4 and Q1 losses could be the peak. And then, we move back towards the long-term historical average as we move through 2025. I think that number was the mid-30s. Correct me if I'm wrong on that one. I'm just trying to figure out how you're thinking about the trajectory in getting to that high 40s guidance. Does it feel like towards the end of 2025, moving back to that historical average is possible, exiting 2025?

Thank you, Lemar. One of the hardest pieces of the guidance really is to predict timing of the quarter of when these losses happen. I have more confidence in the year than I have in any given quarter, and you've seen that in our Q4, where some large files can really skew the difference and take you up a couple of basis points. So, while we see us moving towards a long-term average -- towards the end of '25, early '26, a lot is dependent on the environment and the timing of when these losses will take place. We are seeing, for example, certain recoveries in certain files. At the same time, we are working through some large files. So, there's a mix of those, which will keep the quarters variable. So, I'm not going to give you quarterly guidance of when this will happen, but I think the way the portfolio is shaping up and our own practices we put in place, we should get to our long-term averages towards the end of '25 and '26.

Okay. I appreciate that. And then, just on these -- the questions involving the vintages of 2021, 2022 vintages and so on. Was there a change in management or something under the hood that you guys made a determination that something needed to be changed in terms of these holds? Like, was there any -- anything -- any change like or epiphany that you guys had that said to you -- that made it clear that you had to change how you are managing the business post 2021?

It's Darryl. I'll take that, Lemar. Was there a change in management? No. When we look back to that vintage, but there was clearly for a period of time, a change in practice. And you've heard Piyush a couple of times refer to larger hold sizes, for example, with new-to-BMO clients. And in as he said, in hindsight, the client selection as a result of that wasn't exactly ideal. As far as change is concerned, I can tell you that changes now occurred. As we look at the way we underwrite to similar circumstances today, if I were to do like-for-like, the outcomes that we will produce out of today's vintage and last year's vintage and probably the year before that as well, will be different from the vintage that we're focusing on in the conversation today. I hope that's helpful.

It is. Thanks.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to you, Mr. Darryl White.

Okay. Thank you. I'll be quick folks because we know you've got another call to get to. But I do want to leave you with three key messages today. Firstly, as you heard today, we do believe that our credit is contained and, while losses are currently elevated, we do expect the moderation that we've talked about today through 2025. Secondly, our confidence in the business outlook. While there are some crosswinds, we're confident in the U.S. and otherwise. And that's underpinned by the decisions we've made with respect to dividend increase and normal course issuer bid today. And thirdly, we've got a clear path to rebuilding our ROE to the 15% that I've talked about over the medium terms. So, with that, I wish everybody a happy holiday season, and I look forward to speaking with all of you again in the new year. Thank you.

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