Good morning, ladies and gentlemen. Welcome to the CIBC Quarterly Results Conference Call. Please be advised that this call is being recorded. (Operator Instructions). I would now like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead Mr. Weiss.

Thank you. Good morning and thank you for joining us. This morning, CIBC senior executives will review CIBC's Q2 2014 results that were released earlier today. The documents referenced on this call, including CIBC's Q2 news release, investor presentation and financial supplement, as well as CIBC's Q2 report to shareholders can all be found on our website at www.cibc.com. In addition, an archive of this audio webcast will be available on our website later today. This morning's agenda will include opening remarks from Gerry McCaughey, CIBC's President and Chief Executive Officer; Kevin Glass, our Chief Financial Officer will follow with the financial review; and Laura Dottori-Attanasio, our Chief Risk Officer, will close the formal remarks with the risk management update. After the presentations, there will be a question-and-answer period that will conclude by 9:00 AM. Also with us for the question-and-answer period are CIBC's business leaders, including Victor Dodig, Richard Nesbitt and David Williamson, as well as other senior officers. Before we begin, let me remind you that any individual speaking on behalf of CIBC on today's call may make forward-looking statements that are subject to a variety of risks and uncertainties. These statements may include material factors or assumptions that could cause CIBC's actual results in future periods to differ materially. For more information, please refer to the note about forward-looking statements in today's press release. With that, let me now turn the meeting over to Gerry.

Thank you, Geoff and good morning, everyone. Before I begin, let me also remind you that my comments may contain forward-looking statements. This morning, CIBC released second quarter results with adjusted net income of $887 million, up 3% from last year. Adjusted earnings per share this quarter were $2.17 compared with $2.09 in Q2 of 2013. Our reported net income was $306 million this quarter. As you’re aware, our reported results in Q2 were impacted by a goodwill impairment charge related to our Caribbean operation that we announced on May 15. The goodwill impairment charge is a non-cash item and does not affect our cash net income, our ongoing business or our capital ratios. For the period ended April 30, 2014, our Basel III common equity Tier 1 ratio was strong at 10%. This morning, we also announced a $0.02 increase to our quarterly common dividend to $1 per share. This increase leaves us within our target payout ratio between 40% and 50%. During the quarter, we also continued to exercise on our previously announced normal course issuer bid and purchased for cancellation approximately 1 million common shares. Our adjusted return on equity was 20.6% for the quarter. Turning to results from our business units, Retail and Business Banking reported adjusted net income of $563 million compared to $573 million in Q2 of 2013. The decline reflects a full quarter impact from the sale of 50% of our Aerogold credit card portfolio. Excluding the impact of the Aerogold sale, net income was up 8%. On a year-over-year basis, we saw a strong balance growth in our CIBC branded mortgages as well as continued progress in deepening our client relationships. Credit quality remains strong with provisions for loan losses down 26% compared to the same period last year. Within our retail…

Thanks Gerry. In my presentation we will refer to the slides that are posted on our website starting with slide five which is a summary of results for the quarter. The adjusted net income for the quarter was $887 million, which resulted in adjusted earnings per share of $2.17. Reflecting another quarter of successful execution of our clients focused strategy. In our Retail and Business Banking segment we continued to see good momentum with strong balance growth in CIBC brand products and an increase in the depth of relationships. Wealth Management had double digit revenue growth across all businesses and Wholesale Banking continued to generate strong earnings. During the quarter, we had the following items of note. As announced on May 15th we recorded a charge of $1.34 per share relating to CIBC FirstCaribbean comprising incremental loan losses and a non-cash goodwill impairment charge reflecting revised expectations on extent and timing of the anticipated economic recovery in the Caribbean region. We do expect conditions in the region to improve just not at the pace that we have previously forecast. We incurred expenses relating to the development of our enhanced travel rewards program and in respect of the Aeroplan transactions of Aimia and TD of $0.04 per share we booked loan losses in our exited U.S. leveraged finance portfolio of $0.03 per share the amortization of intangible assets amounted to $0.02 per share. And finally we incurred a loss from the structure of credit run-off business of $0.01. In aggregate the impact of these items on our earnings netted to a loss of $1.44 per share. The balance of my presentation will be focused on adjusted results, which exclude these items of note. We have included slides with reported results in the appendix through this presentation. Submitting to the details for…

Thanks Kevin. I will be referring to the risk section which begins on slide 12. You can see that on a reported basis, loan losses came in at $330 million, so that’s up from $218 million in the prior quarter. There were two items of note in the quarter to highlight; the first is $123 million charge relating to CIBC FirstCaribbean. This was to reflect revised expectations on the extent and timing of the anticipated economic recovery in the region. The second is a $22 million loan loss in our exited U.S. leveraged finance portfolio. On an adjusted basis, loan losses were $185 million that’s down 15% or $33 million quarter-over-quarter. The decrease was primarily due to the sale of half of our Aeroplan cards and release in the collective allowance as a result of improving credit quality of the cards portfolio. On slide 13 you will see now formations along with gross and net impaired loans by geography. Here you can see that overall new formations along with gross impaired loans are down with decreases that are primarily attributable to residential mortgages and commercial and corporate loans whereas in the Caribbean, our gross impaired loans remained elevated as the markets where we have our largest operations continued to be challenged. If you turn to cards on slide 14, you can see that our net credit losses decreased 12% to $99 million this quarter and that’s mainly due to the sale of half of the Aeroplan portfolio in the first quarter. Bottom-line, our cards portfolio continues to perform well. Slide 15 shows our Canadian residential mortgage exposures and the insured portion of our portfolio is 70% and 93% to that insurance is provided by CMHC. The weighted average loan to value of our uninsured portfolio is 60% and I’d just point out that condos account for 11% of our total mortgages. On slide 16, you can see our condo developer exposure. And at April the 30th, our authorized loans to construction projects were 2.6 billion whereas our drawn loans were 791 million. So that's largely flat compared with the last quarter. On the last slide 17, you can see the distribution of revenue in our trading portfolios as compared with VaR. So we had positive results everyday this quarter. And that compares to 98% to the time last quarter. Our average trading VaR was $3.4 million. And with that I'll turn things back to Geoff

That concludes our prepared remarks. We'll now move to questions. Operator, can we please have the first question on the phone?

Thank you. (Operator Instructions). Our first question is from Steve Theriault from Bank of America Merrill Lynch. Steve Theriault - Bank of America/Merrill Lynch: Thank you. Good morning everyone. So question for Gerry; Gerry, raising the dividend two quarters in a row, I think that's pretty close to unprecedented. So, I was hoping, you did mention in your opening remarks but I was hoping if you could give us a little bit more color surrounding discussion with the board, the decision process here. I guess what changed Q2 versus Q1 that [didn’t] make it move consecutively?

Well first of all, as I’ve answered in the past we have a payout ratio that is 40% to 50% as a target and at our old dividend rate we would have run for this quarter at approximately 45.2% and in the new quarter with the new dividend rate we run at 46.1%. So the first thing that I would indicate is that the materiality is not significant in terms of the change in our payout ratio and that cuts to with the second part which is we are and I have talked about this in the past although in a fairly roundabout way our comfort level with living in the mid to higher end of the range at this stage in the cycle has grown and so the fact that we’re at 46 versus 45 and that if you had some quarterly movement you’d still be within our payout ratio. There is a growing comfort level with living in the higher end of the payout ratio. Steve Theriault - Bank of America/Merrill Lynch: Okay. So that, okay I think that helps. And then for David if I could, a couple quick things. Kevin mentioned increased cross-sale increased customer satisfaction scores in retail banking I was hoping you might be able to provide a little color or maybe some numbers around that? And I did want to just follow-up that the 12% growth in mortgages excluding first line renewals, does that include any third-party originated mortgages?

Good morning Steve. So, I will take one at a time. So yes, on the deepening of client relationship; so we haven’t provided the numbers behind that for a couple of reasons. One is that interpreting the numbers can be difficult and I will explain why and then there is not any comparisons in the Canadian marketplace. But let's talk about how we measure debt and what's happening on that front. So, when I say interpreting can be tricky, some would interpret it based on the individuals, some would go based on household, when they look at debt to relationship, we do it based on individual. Also, we have decided to include items that are important to indicating the desired client behavior and important to client satisfaction, but aren't products in the normal sense such as setting a bill pay or [passing] a pay role with CIBC. The key thing, so that's why if you put a number out there interpreting it could be tricky, we're using it more to drive the behaviors inside the bank and provide clients with what they need. So we kind of drive the right behaviors in and outside the shop. The key point I guess is that using that definition we're getting greater [debt] both with new clients and with existing clients and that's starting to accelerate quarter over quarter and some of our other actions I think will further accelerate that progress, it's a key strategic initiative for us. Steve Theriault - Bank of America/Merrill Lynch: And so what products are you getting greater [debt] with, if you maybe?

Well, it's by definition you are seeking across the board. So we are getting greater [debt] across the board. So with I could talk a bit about our new on boarding of clients for example, that's the MPSO, multi-products build origination platform that we just are in the process of rolling out, we've been investing on that for some time now, it's now in a number of branches. So, that's a way that system has set up with it based on client data, put forward what's the most likely array of products with that client, with that profile would want. And whether it’s savings, deposits, overdraft, credit card, which credit card, insurance protection; the upshot is that in using that software we are seeing a [substance of] much better than what we had hope for lift in debt. So not so much a particular product just putting forward the array and people say, well yes overdraft would be a protection would be good, take me through the choice in credit cards. And yes, and that software also allows its client based adjudication so it allows for the movement of a client’s limit across other products allocating it to overdraft or allocating it across different credit card products. So I would say Steve we’re not driving a product in a less increased credit cards or less increased checking accounts what we are really trying to do is just broaden out the relationship with clients depending on their needs and reusing our data warehouse to better surface what are the needs of those clients based on their profile. Steve Theriault - Bank of America/Merrill Lynch: Okay. Thanks for that. Just on the third party question.

Yes. So let’s talk a bit about what’s going on in mortgages. So we are growing quite a bit faster than the market. So let’s touch on a couple of points. First one you asked about Steve we are not aggregating mortgages, we are not buying mortgages off the third parties. So everything you are seeing in our growth the 16% growth year-over-year or the 12% excluding first line is just from our organic in house activities. First line we’ll talk about that as well, retention’s still at 50%, actually slightly over, spreads are very strong right now at the kind of branch level, but first line continues to perform, the whole exercise is going quite well. So then if you say, let us put FirstLine to the side, and I've already said mortgage aggregators aren’t part of what we're doing, then why the growth. So it's not just in credit and it's not through pricing, but what it is, is add any mobile advisers, we've talk about the Break Away program where we've done across Canada sales training. Third and it’s important one is process improvements; faster adjudication, faster turnaround times and then finally another point would be Home Power Plan where we’ve introduced that integrated mortgage and HELOC product a year or two ago. So it's those kinds of factors that are allowing us to show the growth we’re exhibiting. Steve Theriault - Bank of America/Merrill Lynch: Great. Thanks very much for that.

Thanks Steve.

Thank you. The following question is from Gabriel Dechaine from Canaccord Genuity. Please go ahead.

Good morning. I've got a strategic one and a number one for you, first on the strategic. Just the wealth business, good growth once again now with 14% of your adjusted earnings; you’d targeted 15% that was before the Aeroplan thing. Just wondering if you can give an updated target or if you can tell me that organic growth will get you to where you want to be more so than acquisitions because you’ve upped your acquisition target a while back. So either Gerry or Victor please?

Good morning Gabriel, it’s Victor here. Thanks for your question. Couple of things; we actually outlined to the market couple of quarters back that our goal was 15% plus. So we are kind of making headway to that. Now it’s over at 9% with 13% of adjusted earnings today on a year-to-date basis. We've stated quite clearly that we want to grow two-fold in terms of getting to that target. One third of that growth is going to come from organic growth in Canada and we’ve got very good momentum there working in very close partnership with the retail and business bank. As Dave has been trying to have his team deepen our client relationships, we see very good flows in the long-term mutual fund side and we see very good flows on the online brokerage side as we cross-sell in to our client base with high market leading performance as well, I might add. So we see continue growth organically at home across all of our businesses that will contribute to one third of that delta. Two thirds of the growth we see over the medium term coming from the deployment of capital and we see that particularly in the United States and especially in asset management sector and the private wealth sector which includes private banking. Both our investments in American Century and Atlantic Trust are performing well those are foundational investments and those would be the two segment that we would focus on going forward.

Okay. And then on the numbers, just hoping you can quantify this. So card fees were down 40 million year-over-year, can you tell me how much of that was from Aeroplan and then how much was due to the like counter revenue I guess from sign up bonuses? And then also the low fee accounts -- no fee accounts for low income, is that going to have an impact on the industry or CIBC particular, noticeable one?

So in terms of card fees, I mean it’s mainly due to -- 15 of it is Aero and the balance is due to seasonality and a few less days in the quarter, Gabriel. So those are the main drivers of the card fees.

Okay.

If I can add in that you talked about the no fee and also both the welcome point, the welcome point, the sales of Aventura were obviously quite a bit beyond our planned levels and successful loading. In the quarter as a result of that the welcome points were both 20 million higher than planned, a bit more than that than the prior years. That's the counter revenue item that should be factored into personal banking revenue performance. The other point you raised, the no cost or low cost, industry wide phenomenon. I think what we're looking to do is to CIBC over the next while just have a look at our fleet if you will of deposit and checking accounts. And we'll be looking to reposition those over the next while to make sure that we’re meeting client needs the best way possible, especially as we move into more emerging channels of the way people are doing business. So, I guess that's a long way of saying. I don't see any significant adverse impact to us from that in that way. And in fact we might be looking for an opportunity to enhance growth on [deposit] by the way, being thoughtful about our profile.

Thank you.

Thank you, Gabriel.

Thank you. The following question is from Robert Sedran from CIBC. Please go ahead.

Hi, good morning. So, Kevin just first off a question on the RWAs being down, so just to confirm that there is nothing to Aerogold right? That was in the Q1 numbers where risk-weighted assets actually went up, this is the other issues that you noticed?

Yes, that's correct Rob. I mean RWAs were down; some of it were just refinements in OTC derivatives. We also had some reductions in our AFS portfolios and FX actually helped us this quarter. So, it had nothing to do with cards this quarter. That was offset to certain extent by business growth but those are the main drivers that brought it down.

Okay. And just like -- maybe it’s a question for Gerry. I know when we look at the Caribbean, there is probably not a long list of buyers if the bank were to decide, it didn’t want to be in their longer term. But can you talk about the commitment to the Caribbean. And perhaps as you think longer term, I know the bank is saying that the recovery profile is just is there just delayed but can you talk about whether the ceiling might be lower than you might have thought of previously and what kind of implications that has to return on capital and return on equity in the Caribbean.

Rob, I am going to turn it over to Richard Nesbitt down to your question. And if you have any follow ups that you want me to take after he’s answered, I’d be happy to do that. Richard?

Yes. Hi, Rob. So, we have been in the region long time. The business has historically been a good investment for us. And FCIB itself is a solid standalone business. So in line with CIBC’s strategy, we are going to keep focusing on building our client relationships there and generating consistent sustainable earnings in the future. On your second question about whether we think the sort of achievable getting back at historical levels of earning, what you are seeing here is we continue to believe we can get there. Unfortunately it’s going to take us longer because the economic environment has not started to improve like we felt it would. And so that process is going to take longer.

Do you think you might have to invest more to get to that level of earnings Richard, or are you comfortable with the size and size of the operation and the investments you have there now?

Well, it’s a good operation; it’s a good investment. We don’t have to -- we would not invest anymore in order to achieve those historical levels of earnings once we work our way through the impact of the credit crisis on our non-performing loans. So we have to work our way through that. Once we do that, we will return to the more normal levels of earnings.

Okay. Thank you.

Thank you. The following question is from Peter Routledge from National Bank Financial. Please go ahead.

Hi. Just a question on your effective tax rate, just bottom-line on page two the sub-pack. [Drafting] for couple of years now is very low this quarter. So I guess two questions. Why was it so low this quarter and generally why is it trending down?

So Peter, it’s Kevin. I think there are couple of factors this quarter that grow the tax rate lower. I think first of all business mix and we had a couple of specific transactions net reduce the rate by about 1.5%, 2%. And then on a [non-TIB] basis tax rate was further helped by higher dividend income and our equity derivatives business. So that's a business that we've been growing. Our position we've been the topic patriot on the TSX, we've got strong client demand in this business and other time that has been growing. So that also would of a time result and slightly lower tax rate. But I'd say for the last while tax rate has been in the kind of mid to high-16s. I think what you would see is our rate getting up to on a [non-TIB] basis 17% to 19%, which is sort of where we see it ending up.

Okay. And is there any reason to thing that the tax efficiency, the equity derivative business might (inaudible)?

No, I don't think so. I think it is an important part of our business, it is something that is an industry-wide business. And so there is nothing that would indicate in the short-term that it would (inaudible)?

Okay. And then just a follow-up on the Caribbean. It sounds like most of the loan loss issues are in FirstCaribbean, you also have an exposure to Butterfield Bank I’m not sure where you are with that right now so maybe you could just update us on that exposure and then whether or not you have any credit quality concerns there?

Hi Peter it’s Victor Dodig here. I am on the Board of Butterfield Bank. So just in terms of the Butterfield business it’s delivering consistent and sustainable earnings, had very attractive financial profile. The management team has taken it from where it was after the financial crisis to deliver a very steady and consistent earnings stream so we’re very pleased with that investment.

And I mean do you have a material exposure other than the equity investment?

I am sorry.

Do you have a material exposure to Butterfield other than the equity investment?

No we don’t.

Okay. Thanks very much.

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

Hi good morning. My question is on capital, a number of competitors have talked about appropriate target ranges for the CT1 and some variation among them. I am wondering what your view is on this? Thanks.

We still believe that over the next few years that the regulatory picture will become clearer and that’s my way of saying that I think that there is more to come and so therefore fixing a target at this point I think is premature. However, in general it is my belief that when you think of targets in order to meet future regulatory requirements you should be thinking higher not lower.

Thank you.

Thank you. The following question is from Sumit Malhotra from Scotia Capital. Please go ahead.

Good morning. First question is for David Williamson and it has to do with expenses in the retail segment. I think obviously we understood there was going to be a topline impact with the Aeroplan divestiture. But it doesn't look like there was much of an offset when we look at expenses. And that’s even taking into account the adjusted numbers that you provide, which I think are only down 5 million sequentially. I was hoping you could give me a little bit of color on the outlook on the expense line here and where you think the efficiency ratio normalizes?

Certainly Sumit, good morning. Yes, so the Aeroplan impact, the sale of those the assets, we need to get into the mix of it, the impact is at the bottom line as anticipated. But the mix is that the most of the impact is on lower revenue and lower loan losses not much on expenses as you pointed out. So, when you're looking at say mix ratio, you don't get credit for the lower loan losses. So, Aeroplan effects the mix ratio more than it effects the bottom line. So, I think aggregate impact what was expected, people need to recognize us more a loan loss revenue thing than in expense factor. The other point when you look at revenue relative to expenses is again this quarter very successful launch of Aventura and then bad news associated with that is lot of the counter revenue on the welcome points front. But going up a level, big picture, we've indicated that we're investing in a business to deliver on our two objectives of accelerating profitable revenue growth and enhancing the client experience. And the key thing as we are seeing real traction in our revenue numbers as a result. This is the ninth consecutive quarter of accelerating revenue growth in personal banking. Net interest margins for continuing operations continue to expand. Market share growth, even if you put aside the benefit of FirstLine, we have got number one growth in market share on mortgages; mutual funds, as Victor pointed out, number one growth in mutual funds; and personal lending an area where we have historically lagged, we have now -- our growth in market share is now number three. So things that we have been investing in for a period of time, some of the larger investments and our just now starting to come into play, some multi product sales originations platform, I mentioned in my earlier comments is now in pilot in a number of branches and will roll out across the rest of the network by the end of the year. That’s an investment that’s in our numbers; we have been making it for a period of time. And it’s just now coming out and early results are really positive. We are seeing significant lift in deeper relationships that resulted in this new way of welcoming clients in the CIBC. So hopefully that gives you a sentiment of the overall context.

I certainly hear you on the revenue and [PCL] impacts. I think the question becomes, obviously you are giving the one time item treatment or items of no treatment to some of the expenses related to the Aventura build out. But is it appropriate way to look at it that perhaps the infrastructure related with credit cards has remained in place despite the Aeroplan sale, so that as the Aventura product continues to gain traction, we are not necessarily going to see additional expenses associated with that? I don’t know if I am explaining it that well but I hope you have an idea what I am saying.

Yes, I do have an idea I believe of what you are saying. You are saying that there is not much action on the expense line and most of the revenues...

The revenues, yes.

Yes, revenue on loan losses. And loan losses in almost a different [bucket] when you look at next and operating leverage that type of thing. So as you success in Aventura, we're also looking at our Tim Hortons relationship and as that builds up, we'll also have a positive impact going forward. But I think big picture, you're looking at the right way that it’s with the changes to our credit card profile, the actions more so on revenue and loan losses.

Okay. Second question, last question is for Gerry. I wanted to go back to wealth management. You've been helpful in putting a few statements in the public domain about the potential acquisition appetite of the bank and wealth. I think about six months ago, you mentioned the bank could be willing to spend north of $1 billion and you've also let us know that it's not particularly inexpensive in that space right now. I was wondering if there was any update to these comments. Is there a high-end to that range that you'd be willing to spend from an acquisition perspective, where does geography come into play, and is there a level of the capital ratio that you'd be willing to come down to for a period of time, if you found an acquisition you like?

Well, first of all, I'll answer the last part first. In general you should expect that if we acquire, we would probably issue shares, as I said and that's consistent with my prior remarks. I wouldn't be inclined on the margin, how many shares you actually issue would always be a question and that would be governed by where your ratio would be post transaction and how long it would take to close and all that sort of thing. But in general, when one thinks about the target side that we’re talking about which I said was in the $1 billion plus area. Even from today’s capital levels, we would be inclined to still issue shares. So that’s the first thing. I think you should think that way rather than thinking in terms of what capital ratio we would be willing to come down to. So that’s part one. Part two is the size does matter, but I think I’d like to talk about what matters the most to us and that is strategic fit. And strategic fit is our number one governor of our current screening that we do in the marketplace. As we look through our pipeline of opportunities, in general what Victor and the team have found was that the limiting factor was strategic fit. These properties as I’ve said in the past are historically expensive and have gotten more expensive. That is not -- although that you’ve got to watch that, that’s not the number one screen. The number one screen is strategic fit. So, if you were to reverse that a little bit, if we found something with the right strategic fit for CIBC, our price appetite would go up, number one. Number two, to a certain degree we would then be inclined to allow…

Very thorough, Gerry. Thanks for your time.

Thank you.

Thank you. The following question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Thank you. Good morning, maybe just to start with a very simple numbers question for Kevin. I'm looking at page six of your supplemental and I just wanted to understand the revenue impact of Atlantic Trust is that going through the investment management custodial fees or is some of it going through mutual fund fees and some of it -- presumably some will go through net interest income as well but if you can give me an idea of where they are landing that would be helpful?

Darko, I think if you spread out a bit, let me take (inaudible) get back to the details [on that front].

Okay thanks. And then maybe just a couple of other questions then, with respect to the loan loss. I am looking at slide 12 of your presentation Laura during your discussions you mentioned the release. Am I looking at that correctly is just that $12 million? The release for the credit card, the collective allowances, is that the 12 million.

Yes.

So more appropriate run rate would just be like perhaps $12 million higher from here on in, would that be a simple statement that you think you can agree with?

Well I don’t know that I would be providing any forward-looking guidance.

Okay. And then lastly I guess turning to page six of the presentation, I just want to understand a couple of comments that you made during the presentation, you mentioned that the other category in revenues there I am looking at the 35 million dropping because of Aeroplan did I hear that correctly, was the Aeroplan revenues in that line item?

Yes that’s correct what we did just so that view could have comparability moving forward Darko was to put the Aeroplan relating to their sold portfolio. So it just relates to sold portfolio, that went through the other line so I can’t see what’s left in other line now is materially just the first time mortgage business that remains.

Okay that’s helpful. And then just lastly again so that I understand this better. The business banking the $368 million that decline despite the fact that you have asset growth and deposit growth was pretty much all spread based. Is that the reason for the decline mostly?

Hi, Darko, I'll take that. Primarily spread based. So we've couple of factors. In the area of deposits, we've adjusted the value of some of our business banking deposits and that's going through funds transfer pricing. So that's affecting spreads, affecting asset leased. And industry factor is you've been hearing about additional competition that's we're feeling a bit of that too in our spreads. And a couple of CIBC centric factors affecting growth in business banking, one is we have been pulling back in commercial mortgages, we have talked about that, a fair amount of that because of spreads we still are. And I think I've mentioned in past, we transferred some of the bigger clients out of our booking into corporate lending as a bit of an impact on our year-over-year growth obviously much less so on incorporate given the size of that book. So volume growth decent in business banking, we're adding some relationship manager right now we're investing in small business, but the spread impact is for the reasons I have just outlined.

So just to be clear though David, I mean when I think of that, I mean what you're mentioning in this slide is there excluding the Aero, sold Aero goal portfolio your net interest margin would actually be up 1 basis point. So I mean that must mean that there is significant spread compression happening in commercial, am I reading that right?

Well you're right about being up 1 basis point, but you need to things both the relative size of the businesses too. So the relative size of the businesses have an impact. So, in personal banking we continued to expand margins, so you are absolutely right about the Darko. In business banking we’re seeing compressions there. It’s just a smaller business unit and therefore in aggregate, it gets us to an all-in up one basis point net-interest margin.

Okay. Fair enough. Thanks very much.

Thanks.

Thank you. The following question is from Mario Mendonca from TD Securities. Please go ahead.

Good morning. A question either for Kevin or for Peter, I love it. These AFS available-for-sale securities were down fairly materially this quarter and I’m just trying to back into where on the funding side I would have seen the offset and does seem like wholesale funding like mortgage securitizations is where the offset is. It would be helpful to understand is -- and I appreciate the questions are difficult when you’re looking at a balance sheet that large but what is the bank trying to achieve by shrinking the securities both weighted and then shrinking the wholesale funding or is this sort of just a temporary fluctuation that we’ll see quarter-to-quarter?

Let me open with that and if any more detailed questions (inaudible) I guess we may want to take offline and we can follow-up with Peter. I do think the fluctuations some of our term funding has come off, some of the IMPP funding did mature and so you will see some fluctuations on a quarter-over-quarter basis. But right now it’s more in line with sort of the national treasury activities in our immediate needs.

So taking down the available-for-sale securities as much as the bank did is that something we should see going forward? Is there an expectation that the available-for-sale securities portfolio will just be materially lower at some point?

No, I mean I think that that again that balance fluctuates, it depends on our treasury needs at the time and what our business needs are and just the way things work out this quarter, we happen to have a fairly significant reduction.

Okay. And just going back to this acquisition discussion and if I could just Gerry made a good point about strategic fit and how important that was. Does the bank have any firm financial criteria or is the strategic fit criteria just so overwhelming that the near term financial criteria really just aren't that important?

Well, I have to say that near-term financial criteria would always be relevant, whether or not that would be the dominant factor, the dominant factor is strategic fit. Now to rephrase your question, is there a knock out level of dilution that would preclude the transaction? That's where size comes in. And my remark earlier on of even -- I would be incline to go bigger, if we got something that was strategic fit, but if bigger starts to overwhelm the bank results for the next 32 quarters in a row, all we're going to be talking about is a particular transaction that is just not good for the institution, even if it is a good strategic fit. And so all of it does matter in terms of size. And remembers, we are very inclined and we're encouraging you to think of this in terms of that we would issue equity which is another -- that's a pretty binding constraint, because you can't do any of this versus cash earnings on capital you use. The full dilutive impact would be apparent. And so I think I am disinclined to go too far in limiting the upside of what we would do but and to give you a quantum, but the reality is, is that there is a lot of qualitative issues that would restrict you from breaking out by an order of magnitude from our guidance that we have given you.

And if I could just go one step further then, so you have made it very clear now that equities in the cards if a deal were like a 1 billion plus. Playing with numbers is really simple, if you were to do a deal for 1 billion and the goodwill were 1 billion because say the book value is negligible which is often the case in the wealth management deals, the bank’s common equity Tier 1 ratio would drop by about 70 basis points but it would still put you in a pretty good position. Why is the common equity so important for a deal of $1 billion like a 9.2% Basel III common equity Tier 1 ratio certainly not without -- there is precedent for that across the industry; why the equity?

Well, first of all, as I said earlier on, I think that the requirements over the next few years are going to increase and they could come actually from a variety of different directions, the leverage ratios are also a factor. And while there is some capacity to fill leverage ratio requirements through non-common, reality of it is, is common is an important part of the equation when you are dealing with leverage ratios. And again my expectation is leverage ratios are -- the requirements are going to be higher rather than lower. And so, I think that one is better to not presume -- anything is possible, but one is better not to presume that we would haircut our capital in order to do a transaction. In the end, might we drop our capital ratio a little bit? Yes, but I would presume that $1 billion level, we would be issuing equity. And there is a good part of that, which is that it just makes the scrutiny and dilutive impact of any transaction far more apparent upfront. And personally I like that discipline because it's a binding constraint. There is a certain amount that everyone can live with. And if it's fairly dilutive and expensive transaction at $1 billion, the impact on the overall CIBC earnings and organization is different than if it is for instance $3 billion. And when you get to those larger numbers, reality is also that one has to start to say that the actual advisability of that size of equity issuance is declining dramatically. So I think that you've got a fairly good feel for the qualitative elements that we're talking about. For CIBC to do a transaction that was highly dilutive at $1 billion level is quite different than CIBC doing a dilutive transaction at a $2 billion level or a $3 billion level. And I think that the constraints are, the nature of the dilution, the enablers are, the nature of the strategic fit also the practicalities of issuance and are we comfortable with the certain size of issuance. And historically, the numbers I’ve thrown out would be at the very higher end of what we have issued in terms of common. So, I think you’ve got a lot to go on there in terms of the inputs that we have when we’re making a decision. And as I said I don’t want to give you an absolute number but I’ve given you a quite a bit of insight into our thinking. Is that adequate?

Yes, it is. Thank you.

Okay. Thank you.

Thank you. The following question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Thank you. Gerry, can I just -- just to follow-up on that and does the 10%, does it worry of or the that may be even [depressions] preparing for a tougher regulatory environment, does that have any bearings on your buyback activity as well then relative to that 10% common equity Tier 1 ratio?

Well, there are number of things that would affect our buyback activity including ongoing business opportunity and ongoing business growth. And one of the things that we’ve said in the past is that our order of thoughts around using our capital have generally been that first and foremost the investment in the business is in our ongoing businesses is where we’d like to use our capital. So, that’s part one. You don’t want to maintain strong capital ratios and then have a buyback in place that is restricting business activity. So that’s part one of that. Part two is that we do want to have a fair bit of flexibility to accommodate whatever future regulatory requirements there are. And part three is that we are also relatively quiet benign period at the moment, or so what appears in terms of the economy and ongoing stresses on the banking system. As we’ve seen in the past those things can reverse. And I think that when you take on a transaction and it's something that is a focus of the organization, I don't think you also want to have the focus of the organization on having to build back up capital particularly if you get into a little bit of rough sledding in the overall economy and market. This is just a question of controlling as many of the variables as we can when we engage in activities that would raise in a small way uncertainty and acquisitions do, do that. Uncertainty goes up. And so, I'm trying to put some, again without binding ourselves with an absolute quantum, I'm trying to put some -- you should see my remarks as being highly restrictive as to the actual size of transaction that I’d be willing to recommend. Did that answer your question?

Well, I mean that I think it's very helpful in giving a lot of color around size of the acquisitions. But I don't know if I'm totally clear as to what it means as far as buyback activity?

Buyback activity, again as I said, it will depend on ongoing business levels, our decisions about how we want to return capital to shareholders, and on the margin it might also -- if you thought you had transactions that were imminent or a higher probability, you might be keeping some capital. It wouldn't make sense to have a buyback growing for tilt and then engage in a transaction the next day where you have to issue shares. So, you’ve got to think about that a little bit. That's not a dominant influence. The dominant influence is that strong capital levels are highly advisable now, because of regulatory environment, the economic environment i.e. it’s good now but our history over the last 20 years has been we are now getting into longer end of recoveries. Let’s keep in mind that everybody keeps waiting for a more robust expansion. And while we are -- our economists are somewhat optimistic about that, we are now in the 6th year after the last crisis. History would tell us that at some point there is a possibility that on a more or less global basis that things might start to roll over. And I am not predicting that but I am saying that history says that you should be prepared for that. So ongoing regulatory requirements, probability just if you take the time weighted probability historically of that the current scenarios of benign economies that do not continue, the fact that I don’t it’s incumbent upon us to spend our -- to utilize every bit of capital, the minute it comes in, particularly when there are contingencies that we may want to deal with such as an acquisition or business growth and in fact that the gap of our capital today is while we are ahead of all of our peers, when you look at the Canadian banks, the Canadian banks are all maintaining very high capital ratios. I mean there is 9.8 out there this is a 9.7 out there, or maybe mixing quarters up in terms of our competitors and we are at 10. So I don’t think that we are at an extraordinary level of capital relative to our peers either. And therefore I think that there is a possibility that to a certain degree, although we may not share our views, their views are somewhat aligned with ours. Also remind you that we have been running our buyback at I think a higher levels than the vast majority of our competitors.

Okay. Thank you very much.

Thank you. That is all the time we have for questions today. I would like to return the meeting to Mr. Weiss.

Thank you, operator. That concludes our call this morning. If there are any follow-up questions, please contact our Investor Relations department. Thanks again for joining us this morning and have a great day.

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