Good morning. Welcome to the CIBC Quarterly Financial Results Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Kevin Glass, Senior Executive Vice President and Chief Financial Officer. Please go ahead, Kevin.

Thank you operator, and good morning everyone. Before we start, I’d like to update you on some internal changes we have made. Last December, Amy South assumed responsibility for Finance, Business Support, Reporting and Planning and Hratch Panossian assumed responsibility as Global Controller and also Head of Investor Relations. I’d just wanted to take this opportunity to welcome Hratch and thank Amy for all of her contributions in the IR Group in the past year. Many of you on this call have already had introductory conversations with Hratch and going forward there will be many more opportunities to engage with him. So with that let me turn the call over to Hratch.

Thank you Kevin. Good morning everyone, and thank you for joining us for CIBC’s results call for the first quarter of fiscal 2019. Victor Dodig, CIBC’s President and Chief Executive Officer will kick off our agenda in a moment with his opening remarks. Kevin Glass, our Chief Financial Officer will follow with a financial review and Laura Dottori-Attanasio, our Chief Risk Officer will provide a risk management update before we move on to take questions. We are joined in the room by CIBC business leaders including Harry Culham, Jon Hountalas, Christina Kramer, Larry Richman, as well as other senior officers. They will be available to answer questions following our prepared remarks. The documents referenced on this call, including CIBC’s news release, shareholder report, investor presentation and financial supplements can be found on our website at cibc.com. An archive of this audio webcast will also be available there later today. Before we begin, let me remind you of the caution regarding forward-looking statements on Slide two of our investors presentation. Our comments may contain forward-looking statements that involve applying assumptions, which have inherent risks and uncertainties. Actual results may differ materially. With that, let me now turn the meeting over to Victor.

Thank you Hratch, and good morning everyone. This quarter, we continue to make strategic progress across all our CIBC businesses. Despite headwinds from market volatility in some areas, we are pleased with our strong quarter overall performance overall and our progress towards building a modern client-focused bank across Canada and the United States. We also achieved a significant milestone in our U.S. growth strategy with the private bank acquisition becoming accretive to earnings this quarter, which was well ahead of expectations. Clients on both sides of the border are benefiting from our expanded cross-border capabilities and it is these relationships that are driving our strong performance in this business, and we expect this to continue. This quarter we also settled the Enron tax case with the CRA and are pleased to have this matter resolved. Kevin will touch on this further in his remarks. Turning to our first quarter results, adjusted net income of CAD1.4 billion for the quarter is in line with the same period last year and reflects higher year-over-year provisions driven by isolated impairments and updates to forward-looking indicators. Overall, economic fundamentals remained constructive to credit across North America and as Laura will cover later in this call, we remain comfortable with our credit quality and credit outlook. Adjusted pre-provision earnings were CAD2.1 billion, representing an 8% increase year-over-year. While businesses was market-sensitive revenue streams faced moderate headwinds, this overall result reflects strong core business performance across our client franchise. And this is particularly evident across our Commercial Banking businesses in Canada and the United States. In Personal and Small Business Banking, we drove balance growth this quarter by serving our clients needs. Notably, we continued successfully growing our proprietary Aventura travel rewards program and we’ve seen market-leading growth in deposits. We continue to focus on attracting…

Thanks, Victor. So my presentation will refer to the slides that are posted on our website, starting with Slide five. CIBC reported earnings of CAD1.2 billion and EPS of CAD2.60 for the first quarter of 2019. Adjusting for items of note detailed in the appendix to this presentation, which included the payment made to Air Canada to secure our participation in the new loyalty program, our net income was CAD1.4 billion and EPS of CAD3.01. We generated revenue of CAD4.6 billion for the quarter, which is up 3% year-over-year despite market volatility, which lowered revenue in our Capital Markets and Wealth businesses. While continuing to invest in our business, we managed expenses well, delivering positive operating leverage and an efficiency ratio of 54.4% for the quarter. And we also increased our quarterly dividend by $0.04 to $1.40 per share. If we turn to capital on Slide six, we ended the quarter with a CET1 ratio of 11.2%, down 20 basis points from the prior quarter and comfortably above our target range. Our internal capital generation this quarter was offset by the impact of regulatory changes, growth in risk-weighted assets and the Air Canada payment. Our leverage ratio was 4.2% and our liquidity coverage ratio was 131%. The balance of my presentation will be focused on adjusted results which exclude items of note. So let me now turn to the performance of our business units. Slide seven, reflects the results of Canadian Personal and Small Business Banking. Net income for the quarter was CAD632 million down 4% from last year. Revenue of CAD2.2 billion was up 1% from last year, primarily driven by favorable rates and volume growth, partially offset by competitive pricing, Prime BA spread compression and some headwinds related to IFRS 15 implementation. Net interest margin was up 7…

Thank you Kevin, and good morning. Turning to Slide 13, our provision for credit loss rate on impaired was 30 basis points, up from 27 basis points last quarter. Provisions for impaired loans increased from CAD259 million to CAD295 million this quarter. This was mainly attributable to provisions on new impairments totaling CAD83 million in our Canadian Commercial Banking and Canadian Markets divisions. I would point out that these impairments are across unrelated sectors and regions reflective of our diversified portfolios and are representative of how impairments and provisions will arise from time to time in these types of lending businesses. These increases were partially offset by lower provisions in our U.S. Commercial Banking segment and CIBC First Caribbean. Provision for performing loans this quarter was CAD43 million. This was largely driven by changes to our forward-looking indicators that were mainly affected by lower forecasts for oil prices, equity market returns and house prices. The next slide provides an overview of our gross impaired loans, which were up from 30 basis points last quarter to 38 basis points this quarter. The increase was mainly driven by the new impairments in Canadian Commercial Banking and Capital Markets that I referenced earlier. Slide 15 provides the net write-off rates of our Canadian consumer portfolios, which overall remained relatively flat on a quarter-over-quarter and year-over-year basis. Slide 16 provides the 90 plus day delinquency rates of our Canadian consumer portfolios, whereas on a total basis, we experienced a modest increase to delinquency rates both quarter-over-quarter and year-over-year. Our credit card portfolio performed very well with a notable year-over-year improvement. The slight increase to the overall delinquency rate was primarily driven by our real estate secured lending portfolio, as clients adjusted to recent variable interest rate increases. I would point out that we are not seeing any trends of concern as our retail businesses continue to perform within our risk appetite. Slide 17 shows the distribution of revenue in our trading portfolios as compared with VaR. Despite the increased volatility in the markets during the quarter, we had all positive trading days reflective of our strong market risk management strategies that translated into average trading VaR of CAD5.3 million, up slightly from CAD5.1 million last quarter. I’ll close by saying that notwithstanding this quarter’s provisions on impaired in the Canadian Commercial Banking and Capital Markets businesses, we continue to have strong credit quality across all of our lending portfolios. Our overall risk performance remains consistent with our expectations and within our risk appetite. And with that, I’d like to turn the call over to the operator to open the line for questions.

[Operator Instruction] The first question is from John Aiken with Barclays. Please go ahead.

Good morning. CIBC had a very impressive performance, was on a relative basis and Capital Markets. And I was wondering, I know how difficult it is to actually try to forecast numbers on a go-forward basis. But how confident are you that this relative advantage will be sustainable in your peer group or was there any anomalies either in trading or advisory that helped boost the revenues this quarter?

Hi, good morning John. It’s Harry Culham here. We’re really pleased with the results in quarter one, notwithstanding some of the higher loan losses on both impaired and performing. There was slower client activity obviously, given heightened volatility and as Victor mentioned, the equity and debt capital markets and also in our voluntary business, but we’re very pleased with the diversification of our revenue across products, industry and geography and we’re pretty confident, this is going to continue forward. Just look at the quarter-on-quarter trading revenue up 10% and the preprovisions, earnings up 15%. So we gave you guidance a while ago in the Investor Day. We’re pretty confident with those numbers.

Well thanks, Harry. And just a follow-on in terms of the U.S. platform. Obviously as Victor, as Kevin pointed out, strong growth on a year-over-year basis. Was there any particular product or line that was driving that or is it fairly broad-based?

It’s fairly broad-based. We continue to invest for growth. We’re seeding revenue opportunities and growth across the platform including our connectivity as Victor mentioned with our CIBC Bank USA. We’re seeing good penetration there. We’re seeing good results over the last many quarters actually. We have a long-term North American strategy, which we’re executing on and we’re pretty confident it’s going according to plan.

Great, thanks for the color. Over to you.

Thanks.

Thank you. The next question is from at Meny Grauman with Cormark Securities. Please go ahead.

Hi, good morning. Question on the buyback, you didn’t buyback any shares during the quarter even though towards the end of the year, bank shares yours included were under quite a bit of pressure. So I’m wondering why you took that decision and what the outlook is going forward on that particular issue?

I think if you look at the existing quarter. I mean it was a lot of volatility at the end of the, at the end of year, you’re right Meny. But we don’t trade on a daily basis, particularly not with our stock. So you know it would be a general strategy. We indicated last quarter actually that we would be more cautious this quarter, given some of the regulatory headwinds, given the Air Canada payments that we were making. So we didn’t actually anticipate doing significant or any real purchases this quarter. But in terms of the forecast, let me hand that over to Victor.

So Meny, we’ve always been very, very clear in our capital deployment strategy, invest organically over indexing Commercial Banking and Wealth Management, make sure that we’re growing our dividends, which we announced again this quarter, well within our payout range, use buybacks is another lever and have capital available for inorganic growth. That’s been a clear strategy all the way along, it will be clear going forward. Those are the four levers we will use them. We will use them as we see fit to drive shareholder value.

And then, just want to ask in terms of the M&A picture in the U.S., we’ve seen a lot of deal activity there. I’m wondering whether that changes the way you view your U.S. business and specifically how do you get comfort that you have enough scale in the U.S. or do you have enough scale in the U.S. as it is now?

I think the first order of business for us was to make sure that the acquisition of the private bank was executed well, that our people stayed, our clients stayed, the integration effort proceeded according to plan, which are and we’re receiving check marks on all of those. We’re really, really pleased that we’re growing organically in the markets that we serve and that we’re continuing to expand into new markets, which is also the case that we’re growing the Commercial business, the Wealth business and the Capital Markets business. So our focus continues to be on strengthening the initial investment that we’ve made. There’s a heightened level of activity and chatter in the U.S. market driven partly by that SunTrust BB&T acquisition. Our focus remains on strengthening the investments that we’ve made through organic investment. And then we recognize the valuations are becoming more attractive. But we proceed cautiously because the most important thing for us is to make sure that any inorganic capital that’s deployed, is going to strengthen the growth profile of existing business, particularly in commercial banking.

Thanks for that.

Thank you. The next question is from Steve Theriault with Eight Capital. Please go ahead.

Thanks very much. Maybe starting for Christina, last quarter there was discussion around mortgage or real estate secured lending growth and getting back to market levels of growth this year. We can see in the appendix that you had a slight negative real estate secured lending growth. Can you refresh us on your outlook, how you expect that growth to pace through the year when the comps get a little bit easier? Could we see market growth for the year or is it more that you get to market levels of growth by the end of the year? Thanks.

Thank you Steve for the question. Let me first talk about what we saw in Q1. Our volume growth was below market and that’s a function of the market and our strategy. So we’ve been transparent about our strategy and our expectations of moderating growth in this space. We’re not as concerned about the volume gap in Q1 as margins were unusually tight in the quarter and considerably lower than the margins that we saw during our period of higher growth in mortgages. So we are pleased with our overall market share and we expect improvements in this space. Our outlook is low single-digit growth. We do see good employment numbers. We do see housing activity pickup. We see some price improvement albeit small. So we do see that the mortgage season is starting to come to life. But likely won’t be at the same rate as what we saw in the prior year so, we do expect in the second half to see some improvement in this space.

Okay, thanks for that. And for Laura. It looks like a CAD40 million charge that I think we’re going to expect is from PG&E. Can you tell us if you believe that that fully sorts out the risk or could we see some more noise from the utilities PCL line going forward?

Steve. When we look at that. I mean, my view is that we’re appropriately provisioned at this time. We’ll see us as this plays out but I really do feel comfortable with the amount that we’ve taken as a provision.

And have you – we heard from one of your peers that they’d sold down some risk. Have you changed your your positioning within the context of that name or not?

We have. So we actually did sell a piece of that loan into the market just yesterday and so throughout the quarter we’ll continue to, and as long as we have this, we’ll continue to monitor it closely. And we’ll take the actions that we think are best for our organization.

Okay, thanks for that.

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

Good morning. I also want to with that mortgage growth, so you’re saying that the decline in originations and the flat mortgage growth is really a function of market conditions. You don’t like the pricing, so you back off because – is that something you’re willing to do more than you were a few years ago because when Victor was talking about how you want the business to look over index commercial, over index Wealth, Canadian consumer, it’s kind of excluded from that.

So thank you for the question Gabriel. When we take a look at our relative growth rate relative to peers, I talked a bit about our strategy and our expectations of moderating growth. Our relative performance also was impacted by our strength in the GTA and GVA markets, where we had pursued opportunities to serve client, demand and growth over the last few years, and it was an opportunity for ourselves to grow our business. In those markets, we’ve seen a pullback in the real estate activity and the markets have seen double-digit sales – unit sales decline in the last quarter. And so given our strength and our focus in these areas that has had a more pronounced impact on our growth rate. We definitely want to continue to see growth in our overall mortgage portfolio and we’ll continue to do that growth in line with our strategy for deeper client relationships, and we’ll continue to be active in this space.

Okay. And just a maybe a weird one here, about the card fees were down year-over-year, and it’s not, it’s not unique to CIBC – I saw that trend with a few other banks. Was there anything unusual going on and the card promotional activities this quarter that would have caused expenses or whatever to go up? I mean, I am a card guy, so I didn’t notice that much.

Gabriel, it’s Kevin. Yeah, in my remarks, I mentioned IFRS 15 and so the card fee issue is IFRS 15. So that reduction in cards is actually an offset on the expense line. So that’s the volatility that you’re seeing in the card fee line.

Okay. And just of last quick one for Laura. Stage one and stage two, you gave the reasons for the additions of those reserves. We see that trend maybe because it seems like a few banks are making regular additions of the – I don’t know – take a more conservative outlook and there are assumptions?

Well, it could. As you know what drives our provisioning for our performing loans really has to do with the changes that we make to scenarios into our economic outlook. So what really depends sort of quarter-to-quarter, how our economic outlook changes. This quarter, we kept our base case scenario, but we did change, we had a few of our indicators and the ones that the most, as I mentioned on the call, were really in oil equity returns and house prices.

Well, maybe I’ll follow-up offline. Thank you.

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

Thanks. Good morning. Laura, just to pick up on a couple of those provision topics because I just want to make sure I understand what’s going on there. First off, just for the utility sector. If the numbers are right here, it looks like you’re impairments were up about CAD180 million in that space and then you provisioned roughly CAD40 million of it. So that 25% coverage, you think that’s the bulk of what the bank will need to do for that particular sector, if that is just the one account?

In Capital Markets, that is the one account in utilities. A bit difficult when you go through the disclosure, in that we did have some contingent liability in the form of a letter of credit. So it doesn’t quite – look you have to go to different areas, I guess, to pull that together. So our provisioning wasn’t that high. That said we do feel that we’re well provisioned based upon the analysis that we’ve done of the situation and the outlook for this loan, if you will, when we look forward.

And maybe this is related to what gave us getting up but the addition this quarter to the non-impaired book the stage one and two, obviously bigger than you’ve done so far under IFRS 9 and I know it’s still relatively early days. But when you make these adjustments to your assumptions or your scenario analysis, does that result in provisions in the stage one and stage two portfolios continuing at an elevated pace? And I think really what I’m getting out here is with the – on a ratio basis you’re up to 35 basis points this quarter. Do you view that as more normalized now or were there – were these two factors pushing that level up to a point that you don’t think is the sustainable level in 2019?

Well, I guess, if I go back and maybe this is an easier way, at least for myself to take that question. And then let me know if I answered it. So when we go back to the first quarter of 2018 was really when we implemented the IFRS 9, and as, we went off, we would have gone off of what our economic outlook was at the time and so we adjust our economic outlook or the variables every quarter. And so we would have seen our experienced a large release you might recall, when we first implemented in the first quarter and that really had to do with the fact that the biggest driver there was on unemployment where our expectations changed quarter-over-quarter. Then as we go from last quarter to this quarter, there were other variables. I’m not sure if that answers your question. But this is really sort of quarter-over-quarter as we update our economic variables, our model will come up with how the impairments on performing will move and of course with that it’s not just all [indiscernible], there’s the credit migration that comes into those numbers including growth and transfers that might come in and out of those numbers. But again, a lot of it will have to do with how the economy moves as we go. I don’t know if that answers your question.

I think, I got you. The fact that you made these adjustments this quarter results and an increase relative to Q4 doesn’t necessarily mean you’re at a new – we’re going to see this type of build in the performing book next quarter. I think that’s what you’re telling me.

That’s right. And I was trying to stay away from the term build, because this is really model driven. And again, the forward-looking indicators, it’s as they change each quarter and as we change our scenario weights from percentage base to the upside to the downside. What I can say, I mean if it gives you comfort, I actually, when I look at things and we’ve talked about this sort of in past calls, when we look at how our total ECL’s are doing relative to our sort of trailing 12 months of net credit losses. We continue to have sufficient allowances that cover our actual loan losses. So I’m actually quite pleased with how well our model is performing.

Thank you for that color. Two very quick numbers questions, probably for Kevin to wrap up. Kevin, just on the tax rate. So you gave us that the good news about the settlement with the CRA and just want to make sure I understand you’ve got the tax rate this quarter on basis around 22.3. Is there a new run rate or new level that you would suggest is reasonable post this settlement? And then, just sticking with the U.S., how much of wholesale earnings right now if you’re disclosing that are coming out of the U.S.? Those are my two numbers questions to wrap up.

So let me start with the tax rate. Our tax rate has helped a little this quarter because of the net amount between the Enron settlement which had two components, Canada and the U.S., so there was a slight pickup there with a slight charge in terms of the deferred tax write-off. So that would have helped us a bit but I wouldn’t be looking for significantly different run rate and may maybe helped a little this quarter but by and large, I think the run rate that you’ve got right now is probably appropriate. And sorry as far as the second question is concerned we don’t disclose that level of detail, but obviously there’s good growth as Harry indicated.

Yes, I think that was one of your objectives at the Investor Day was to have the wholesale component of Capital Markets become a bigger piece of the pie. So I think that would be one that’s interesting to track going forward. Look forward to that. Thanks. Thanks for your time.

Thank you. The next question is from Doug Young with Desjardins. Please go ahead.

Hi, good morning. I’ve got a few just quick ones. Laura, just back to the PCL on performing loans, I mean it was five basis points this quarter. And one of your competitors said it’s going to be around three basis points per quarter, but this quarter, it was double that. Just from simple loan growth and growth in your book, what is a normal PCL on performing loans on a quarterly basis, is it three point or five points? Is there any way you can give a sense of what that would be if your business just continue to grow?

Well, that’s a tough one. We do look at what we think it might be from if I could call it a stage one perspective because that one would cover growth. But as you can appreciate, a lot of it has to do with how we change our forward-looking indicators every quarter. So unless one were prepared to make a large management overlay, that one is not one that you can easily predict, which is why we always talk about how there’s a lot of volatility to that number, because it will change quarter-over-quarter. So we don’t typically try to predict sort of what’s going to happen in that particular case. I apologize that might not answer the question that you’re – that you’re looking for.

What I’m trying to get to. I guess it’s just like if you didn’t change any of your assumptions, like what would the PCL on performing loans be?

Yes, what I can. I mean if this helps. So a lot of the impairments that took place this quarter felt like unique events, which I’d like to think won’t transpire again. We’re not seeing any systemic or any trends of concern in our book, continue to have strong credit quality. So, I mean if the economic environment remains stable, although it is moderating somewhat, and if we continue to have low unemployment rates for Canada as a whole, and again, I guess we had Hratch who made his statements that, we don’t give forward-looking guidance. But really barring any unforeseen events or I’d say more pronounced changes to our economic outlook, I’d expect to see our provisions come in at or below the 30 basis points for the full-year. And that would be for all of our PCLs, but again I’d just say, barring any unforeseen events and changes to or pronounced changes to the economic outlook as that can sway things as you know.

Sure, that’s fair. And then just back to the PG&E. The only exposure you have, is it 100% to corporate loans or is there and any other type of exposure that you’ve got to that credit?

Well, as you know, we don’t – we’re not supposed to talk about individual name. So that one account in the utility space was comprised of different credit exposures, if you will, to the name.

And what would those different exposures be or –?

So that’s where we put – so exposure at the whole call level, operating company level, different types of lines of credit. I think the important takeaway here is that we took a provision. We moved this to impaired. We took a provision on it, we feel that we are adequately provisioned enough. I mentioned earlier, we did sell a small piece of the loan and the amount for which we sold the loan would indicate to me that we were well provisioned and so I’m comfortable with what we’ve done in this particular case.

And so there is no other guarantees or anything else that’s embedded in your exposure, it’s just simply loans to different kind of the part of the capital stack?

Yes, well I mentioned again just earlier, we did have LC’s. So that’s why when you go through and disclosure, it’s a bit tougher to pull everything together. But again, that’s just a different type of exposure to the company.

Thank you very much.

Thank you. Your next question is from Scott Chan with Canaccord Genuity. Please go ahead.

Good morning, thanks. Kevin, I want to go back to your comments in Canadian Commercial Banking and Wealth, you talked about the strong revenue growth in Commercial double-digit volume growth, but I missed the margin commentary, if you can kind of clarify that for me, please.

Sure, yes. When you look at the way we report our results is, we break out Canadian Personal Banking and then we have a separate segment for the Commercial and Wealth business. One of our peers put those together in terms of just Canadian Personal and Commercial. My comment was, I mean we had a slight drop in terms of we had a few basis point decrease as far as our Personal was concerned. We had an uptick in the Commercial side. But if you look at it on a consolidated basis, NIMs were flat on a quarter-over-quarter basis.

Okay, that’s helpful. And then maybe just going to the U.S., obviously the commercial loan volume growth continues to be very robust. But looking at the commercial real estate loan side, it seems like it’s slowing 4% year-over-year. Just curious but now look on that segment of platform for fiscal 2019.

Yes, good morning. It’s Larry. We actually feel very good about the opportunities we’re seeing across the various product lines and businesses. There is certainly more growth opportunities that we’re seeing on the C&I side of the business and that’s a very diversified both by types of clients and geographies. On the real estate side, we’re seeing really good deal flow and as we continue to remix that book and given the levels of exposure, we are very comfortable saying that call it of 4%, 5% growth.

Okay, thanks very much.

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

Good afternoon. Kevin, could just clarify something on Enron. So going forward, there wouldn’t be any P&L or capital impact, I guess the point you’re making here is to the extent that some perceived this is an overhang. It’s no longer an overhang. Is that a fair way to put it?

Yes, I got – that is a fair way to put it. I mean there’s still some loose ends to tie up. It’s not completely done, because we may have some adjustments in terms of the final resolution, but it’s unlikely to be material and certainly don’t see – for sure don’t see any material downside to that number. And so from an overhang perspective Mario, for sure it’s behind us.

Okay. So moving onto commercial real estate and I’m looking at this from a total bank perspective. And just, and it’s a question I brought up before and it’s something that would help – good to understand this as the quarter-over-quarter growth of 5% and I’m looking at page 23 of your supplement. Last quarter, same thing, 6% quarter-over-quarter. Where is this growth coming from sort of geographically and is there any kind of color you can give us on why this would grow at this pace?

Some areas Jon can tell us. Some of the growth – so let me try with the commercial real estate. Over the last two years or and three years, the diversified book has grown faster than our commercial real estate book. I talked last quarter about some of our clients are bigger and more active clients. We’re doing deals in Q4 that continued into Q1. So the larger investment grade companies, unrelated to residential real estate. We’re doing deals, commercial, industrial. So I’d say in the last two quarters, our commercial real estate growth has been faster than our commercial growth, our diversified growth, but I see that kind of evening out over time.

And, you’re talking Canada then.

Yes.

Okay. And then one quick thing on expenses . I’ve been surprised is probably the right word to use to see the expense growth at some banks relative to others. Other banks continue to grow their expenses pretty aggressively than CIBC in there. I can think of it, maybe one or two others that are not. Maybe Victor, could you just give me your outlook on this like do you – is there any concern here that the modest expense growth will have some negative implications down the road from a client acquisition perspective in particular?

At some point time. We’d love our investors to look at prudent expense growth as being a good thing. So what we’ve really been focused on and it’s a good question Mario, because there are differences out in the marketplace and we recognize that. But all I can speak to is our own strategy. And as we’ve talked about in our investor days couple of years ago, last year, and then the next one that will have, our goal is to continue to improve the mix ratio of our bank by re-purposing expenses, so taking expenses out of the old economy and putting them into the new economy. When I look at the new economy and how we’re performing, I look at our Personal and Small Business Bank, our digital platform is market-leading. We continue to see transaction migration. We continue to refurbish our branch networks. In our Commercial Bank, we’ve invested in our cash management platform, which is why you see such significant deposit growth happening in the cash management side of the business where you didn’t see that before. We are continuing to invest. You’ll see some innovations on the Wealth Management side over the course of the next year. In Capital Markets, the growth has all been driven by technology investment. So that connectivity to the rest of our business and the quality of the Capital Markets earnings are driven by relationships, connectivity, and technology investment. And then when I look at defense, we continue to invest in the defense of the bank and making sure that we’re resilient. So I think the overall story is, we have a re-purposing agenda in terms of expenses, we’re trying to take out the old, we’re trying to put it into the new and we are seeing those benefits manifest themselves in terms of performance going forward.

The conceivable we’ll see another restructuring charge to push this strategy forward?

I think, what we try and do is, we try and run things as steady as possible. We’ve indicated that in the past. I don’t foresee any of that. If those things kind of come to a culmination, they’ll be minor in size. I think right now, it’s just steady as she goes. We’ve indicated that we want to get to a 52% mix ratio. We will get there.

Thank you.

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

Thanks. I just wanted to actually pickup where Mario left off. Christine, the headcount attributed to your business is down about 1,200 or thereabouts and steadily down. Is that – and you’ve been able to keep your expenses ex some of these one-timers pretty steady and flat actually, not much growth. How sustainable is that?

Thank you, Sohrab. Sorry, we had a mic issue here. So over the quarter, we would have seen some FTE reductions in Personal and Small Business Banking and they are transferred to our Corporate and Other area. So it is not a reduction of FTE over the quarter. It is organizational change. Those expenses are allocated back to Personal and Small Business Banking and they have no impact on our financial results. In terms of our expenses and our outlook for expense growth, we had previously given guidance that on a normalized basis, we would expect our expense growth to be in the range of 3% and that’s what we expect going forward. Over this quarter, I would say that the small expense growth isn’t a good indication of our investment levels in the business. As Victor mentioned, we are repurposing some expenses and we have the benefit of some initiatives that have helped reduce some costs in the quarter. There are also some timing related impacts where we see a slightly lower spend in Q1, which will be normalized going forward and then there is the impact of IFRS 15, which resulted in some expenses being reclassified as contra-revenue. So again, on a normalized basis, we would have been closer to our guidance of 3% and that’s what we expect going forward.

Okay. So just to be clear, the headcount reduction has had really no bearing on the expense line in your segment?

In the quarter, it was really an organizational change, and did not have bearing – any bearing on expense reduction.

But what about on a year-over-year basis?

On a year-over-year, there were some improvement in terms of contribution of some reductions to our expense base. But our priority is ensuring that we continue to invest in our people, continue to invest in our business. We added an appendix to the presentation that shows you some of the outcomes of that in terms of digital adoption which Victor made reference to, and we’ll continue to re-purpose our expenses and that’s what you’re actually seeing in our Personal and Small Business Banking through a number of initiatives including our transformation of our banking centers.

Okay. And just maybe a couple of quarter – maybe was a few quarters ago, I can’t remember, you had provided some additional kind of transparency as to the cross-sell success or targets and what you expect on the path of. Any updates as to how you’re cross selling some of that mortgages that you had originated a few years ago?

Yes, the – our growth strategy with mortgages over the past few years, I can speak to that. We’re pleased with the market share that we’d grown and the quality of the portfolio. 87% of our residential mortgage clients have multiple CIBC products with us and that’s been consistent over the past couple of years. And when we take a look at our current results and our overall portfolio, we see the business – the core business is performing very well. We continue to see strong client acquisition, even though we are changing the mix of our business, declining attrition, deeper relationships, strong digital adoption as mentioned and also improvements in client experience or net promoter score. So we are on track with our overall client relationship strategy.

Which maybe you’ll kind of give us on that updated slide, one of these coming quarters. And then just one last one for U.S. Larry, when you think about your loan composition, I mean, I think CRE, Commercial Real Estate is probably somewhere around 40% to 45% range of the loan balances there. Do you see that mix changing much?

Couple of thoughts. First, we’re seeing really good levels of activity across the organization and we are maintaining a strong sense as well of our selectivity and discipline around, how we look at the portfolio and how we look at deals and support our clients. I would tell you that the current view, the current quarter, our C&I clearly has grown more than CRE. We’re seeing in the CRE market is where a shortened intermediate term lender that there’s a lot of liquidity in the market that’s given our clients the ability to build, create value and then to refinance, and that’s good and fine. So I think the short answer is, we’re seeing good mix, good diversification across geographies, clients and also industries. But I would think you’d see greater growth in C&I than CRE.

So the mix of CRE coming down at least as your business is concerned, probably over the next...

We’ll probably grow more C&I and less, less growth but still growth in CRE.

Thank you very much.

Thank you. I would now like to turn the meeting back over to Victor.

Thank you. Excellent. I wanted to just close with a couple of remarks before we wrap up the call. Strategically, this is an important quarter for us as we focus on building a relationship oriented bank for modern world. We demonstrated the strength of our CIBC franchise through solid core business performance, the merits of our diversified and interconnected franchise and I can’t over emphasize that enough and the success of our U.S. strategy. Our U.S. business now contributes about 15% to our earnings, compared to just 7% prior to the private bank acquisition. We have a best-in-class Commercial Banking business. Our Private Wealth business is over $50 billion in assets under management and our private banking business is connecting the two. Our CIBC franchise is well positioned to serve the private economy centered around mid-market companies and we’ll continue investing to build on this position of strength. Organic efforts will continue to be our core focus. So, we will consider inorganic opportunities in a disciplined manner where they make both strategic and financial sense. We are very pleased with the strategic progress across all our businesses, and in particular with the performance of our Commercial Banking businesses on both sides of the border and the benefits that we’re seeing from the connectivity to our Capital Markets business. This approach is working well and providing real value for both our clients and our shareholders. We’re also pleased with the balance growth and overall performance of our retail bank. We continue to see opportunities to deepen our relationships with clients in this business, delivering sustainable growth on both sides of the balance sheet. Going forward, we will continue to invest for growth as we build a strong client-focused platform across North America. These investments will enable us to transform our bank and maintain the capital and balance sheet strength to support our clients and our growth going forward. Underpinning all of our efforts, is a clear focus on our clients in a long-term view of our business. In closing, on behalf of CIBC’s Executive Committee and our Board, I’d like to thank all of our shareholders for their continued support and interest in our bank and all of CIBC’s 44,000 team members for their dedication to serving our clients each and every day. Have a good day and thank you for being here today.

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