Good morning. Welcome to the CIBC Quarterly Financial Results Call. Please be advised that this call is being recorded. I would like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead, Geoff.

Thank you, and good morning. We will begin this morning's presentation with opening remarks from Victor Dodig, our President and CEO; followed by Hratch Panossian, our Chief Financial Officer; and Shawn Beber, our Chief Risk Officer. . Also on the call today are a number of our group heads, including Mike Capatides, US Commercial Banking and Wealth Management, Harry Culham, Capital Markets; Laura Dottori Attanasio, Canadian Personal and Business Banking and Jon Hountalas, from our Canadian Commercial Banking and Wealth Management. They're all available to take questions following the prepared remarks. During the Q&A, with a hard stop at 8:30, we ask that you limit your questions to one. As noted on Slide 2 of our investor presentation, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results may differ materially. With that, I will now turn the meeting over to Victor.

Thank you, Geoff, and good morning, everyone. I'd like to open the call with a few comments on the macroeconomic environment, followed by a summary of our second quarter results. So there's no doubt we're all in a very fluid environment. First and foremost, our thoughts are with those who have been affected by the war in Ukraine. Beyond its human impact, the conflict is exacerbated COVID-related supply chain disruptions, and contributed to inflationary pressures around the globe. Central banks, around the globe, are responding by raising interest rates to cool inflationary pressures, which is leading concerns to an economic slowdown. Now during times like this, our unrelenting support for our clients, together with our diversified business model, our strong balance sheet and our prudent risk will drive consistent and sustainable performance for CIBC. You can see this resilience in our financial performance. Against this macroeconomic backdrop, we reported solid results this quarter, underpinned by our strategic focus on investing for profitable and enduring growth. Revenue was up 9% over last year, driven by broad-based loan and deposit growth, higher fee income and strong client-based trading activity. Adjusted earnings of $1.7 billion or $1.77 per share were down modestly from the prior year as we were starting to see a normalization in provisions for credit losses. We also reported an adjusted ROE of 15.2% and a CET1 ratio of 11.7%, well above the 10.5% minimum requirement. Having delivered solid financial performance on behalf of our shareholders in the first half of the year, today, we also announced a $0.025 increase to our common share dividend to $0.83 per share, while maintaining our target payout ratio target of between 40% and 50%. Note that the dividend also reflects the previously announced 2-for-1 stock split that took effect earlier this month. So…

Thank you, Victor, and good morning, everyone. Our CIBC team continued to deliver solid growth and profitability this quarter, fueled by the disciplined deployment of balance sheet resources and targeted investments against our client focused strategy. Diluted earnings per share was $1.62 and excluding the items of note detailed in the appendix of this presentation, adjusted EPS was $1.77. Pretax pre-provision earnings growth momentum remained strong, while pre-provision -- provisions for credit losses against performing loans trended higher due to a more pessimistic economic outlook and the initial IFRS 9 expected credit loss against the Costco credit card portfolio treated as an item of note. Shawn will cover credit provisions in further detail later in our presentation. The balance of my presentation will refer to adjusted results, which exclude items of note, starting with slide eight. Net income of $1.7 billion was comparable to the prior year, and ROE remained above our 15% target. Pre-provision pretax earnings of $2.3 billion were up 7% from the prior year and revenues of $5.4 billion were up 9%, supported by broad-based volume growth, stable margin, robust trading and fee income. Expenses were up 1% sequentially or 11% from the prior year, largely due to continued investments, inflationary headwinds and performance-based compensation across our business. Diving into revenue further. Slide nine highlights the key drivers of net interest income. Excluding trading, NII was up 13% from last year, due to robust growth in funds managed on both sides of the balance sheet. We anticipate NII growth to remain strong in the back half of the year, benefiting from continued volume growth and the interest rate outlook embedded in the forward curve. Total bank NIM was up 1 basis point sequentially. And underlying this, Canadian Personal and Commercial Banking NIM was up 2 basis points,…

Thank you, Hratch and good morning. Our credit performance was strong this quarter and our portfolios are performing well. We have continued to support our clients while proactively managing our underwriting activity in response to the evolving environment and we remain comfortable with our risk levels and coverages. As Victor mentioned, in the second quarter of 2022, we also closed our acquisition of the Costco credit card portfolio, which is reflected in our Q2 results. It's a very high-quality portfolio and credit quality and performance has been in line or slightly better than our expectations. Slide 21 details our provision for credit losses on both a reported and an adjusted basis. Our reported PCL was $303 million in Q2 compared with a provision of $75 million last quarter. Excluding the performing allowance related to the Costco credit card acquisition, which is treated as an item of note, our adjusted PCL was $209 million in Q2. Provision on impaired loans was $196 million in Q2. Impaired provisions were up in Canadian Personal and Business Banking due to the impact of rising interest rates on our modeled Stage 3 allowance and higher write-offs as clients have begun reverting to pre-pandemic spending patterns. This is aligned with our expectation and net credit losses continue to perform better than pre-pandemic. Provisions in business and government loans were up this quarter due to slightly higher impairments and fewer reversals. The adjusted provision for our performing portfolio was $13 million this quarter, reflecting some deterioration in our forward-looking indicators from last quarter. We're pleased with the continued strong performance of our portfolios. Turning to slide 22, our allowance coverage ratio was down a net three basis points quarter-over-quarter, mainly attributable to our portfolio growth and impaired allowance release, partially offset by the build in allowances associated…

Thank you. We’ll now take questions from the phone lines. And the first question is from Ebrahim Poonawala from Bank of America. Please go ahead.

Good morning. I guess, maybe just sticking with expenses, Hratch. If we could talk through the breakdown that you provide on slide 12 in terms of the makeup of the expense growth this quarter, as we look into the back half, remind us how we should think about either operating leverage or year-over-year expense growth? And also talk to us about it’s flexibility to pull back on expense spend, particularly as we look out into next year, on the one hand, inflationary pressures are going to probably push expenses higher. Just give us a sense of like how we think about expenses in the back half of the year? And as we think about 2023, I realize you are not going to give any guidance, but just thought process around investment spend versus areas to pull back if you need to?

Thank you, Ebrahim, for the question. I'm happy to provide some color, and we'll certainly get a lot more into our 2023 plans in Investor Day in a couple of weeks here. But as context, I'll remind everyone how we've about our investments and increases in our expenses and our targets from a financial performance perspective, which have not changed. We continue to target over time, pre-provision earnings growth and positive operating leverage. And we continue to believe that we have the ability through our strategy and our capital allocation approaches to make adjustments in order to respond to the environment and deliver that. And so as I look at this year, we had promised 5% to 10% pre-provision earnings growth and positive operating leverage. We talked last quarter about the fact that there are some puts and takes, but we felt overall pretty good about being able to deliver that. In fact, on the pre-provision side, to some extent we feel we will deliver more than what we had expected to deliver. And so we're staying the course in terms of our approach. But we are aware of a lot of the things that you're talking about. We look at the environment. And on this chart here, I'll highlight we've got the inflation impact and the normalization of the environment impact in that half-ish of that 5% operating cost increase. There's been probably about 1% more pressure there than we had expected. But against that, we have had successes in our efficiencies, which have been, in some cases, outperforming our expectations. We have looked at our strategic investments and pace them to some extent. And so we've already been reacting, and we have the ability to react through the rest of the year. Now I will point out in…

And Ebrahim, just to build on Hratch remarks, this is all consistent with what we've telegraphed to our investors. We are investing to grow, grow client franchise with enduring value. And you see that in terms of our market-leading revenue growth, our market-leading pre-provision growth, our strategic and focused way of growing market share profitably by deepening client relationships are improving client experience scores. So all of these investments, and I look at them as investments are delivering growth above market and above our peer group. And I think that's the most important thing to note here is the linkage between what we've telegraphed, what we've done, what we've delivered, and what we will continue to deliver going forward.

Noted. Thank you.

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

Thank you. Good morning. Maybe Hratch, maybe just a technical question on OSFI, I think it's slide 8. There's another large gain on the FI it was like 286 similar to last quarter. Just maybe some context around that and maybe some guidance on that is going to kind of persist going forward, or should that moderate towards historical standards?

Sorry, it was a bit muffled in the beginning, so we didn't hear the beginning part of your question.

Just in the supplemental, I think it's slide 8, there was a large gain of 286 million on the financial instruments. I'm just wondering, what that was. Did you get a large gain last quarter as well and is certainly a lot higher than historical standards?

Yeah, nothing – nothing that I would highlight with that respect, that would be something on an ongoing basis.

Okay. And maybe just on mortgages. You talked about margin pressure. Is that due to competition mostly?

Yeah. And we are seeing – and Laura can jump in here from a business perspective. But we did – I referenced some of the pressure on margins and there was some of that pressure on the mortgages as we said on the PBB side.

Yeah. Hi, Scott, yes, we did see a lot of, I'm going to say, inflow margin compression and the whole industry has seen that. I'd say the market's been incredibly competitive. And our economic environment did see our funding costs, I'd say, rise faster than client rates. So our expectation when it comes to mortgage inflow spreads is that, we expect them to slowly improve when we enter the back half of the year. And that's as we see sort of the increased pricing works its way through the system. I think you've seen – we've taken market leadership position in raising prices over the last few months when it comes to mortgage pricing. So we're working hard to restore, I'd say, more sustainable margins. So as we get through the back half of this year, we should see some of that margin compression start to come off in the mortgage book.

And maybe if I -- sorry, if I jump in on your question, I think you had the wrong slide reference. I think you're referring to slide 6, and you're referring to the fair value P&L. That's just related to the trading revenue, and so the strong trading revenues coming through the other income typically coming in that line. So you saw last quarter, strong trading revenues reflected there in this quarter, the strong trading revenues.

Okay. Thanks a lot. Thanks Hratch.

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

Hi, good morning. Just a question on cards. First, just in terms of numbers, the card fee line down sequentially. Is that just seasonality, or is there something else there driving that?

Good morning, Meny.

Hi, good morning.

I'll take that. So on cards, we're actually seeing, I'd say, continued improvements in purchase volume. So when I exclude Costco, we're actually up almost 30% year-over-year. And I think we're up about 30% from 2019 levels. So we have seen, I'm going to say, full recovery, if you will, in the categories that are travel, hotel entertainment. So everything is good. If you're looking at quarter-over-quarter where you see, if you will, things coming down a bit, that's really just seasonality. But when we go back over the years and look at quarter-over-quarter seasonal decreases, this has actually been one of our better quarters. So we're feeling pretty good about our card performance. What I would say, though, is that our interest-bearing balances, those did remain flat on a year-over-year basis. And again, they were also down a bit quarter-over-quarter. That's all seasonality. And I do think, as I've mentioned in previous calls, it's going to take some time before those increased purchase volumes translate into revolving balance growth. But it is coming and when it does, I would say that we are very well-positioned for growth, just given, again, the strong value propositions of the cards that we have out there. We've been leading the market on new account sales in cards, excluding Costco. And as of March, we now have the Costco card portfolio and the new account growth on that, it's still early days has been well, well, well above expectations. So I think things are looking good for us on a go-forward basis.

Thanks for that. And your comment is a good segue. The second part of my question was just about thinking about the card spending versus borrow and what that tells you about the health of the consumer. Obviously, everyone is worried about recession downside risks. But when you look at that, I’m just wondering if there's any -- do you see any signs of stress there, or actually, when I look at it, it tells me the opposite story. So just wondering on the perspective there in terms of the health of the consumer as you see it through the lens of your card book?

Yeah. We're feeling really good about the, I'd say, the health of the consumer. We are seeing -- again, we saw it through the pandemic. We continue to see, I would say, very prudent client behavior. When we look at our -- whether it's cards or our other unsecured lines and we look at utilization rates, if you will, things are actually much better than they were pre-pandemic. And so utilization rates are down. I want to say about 20% when we look at our unsecured lines or even HELOC. So if we go back to pre-pandemic 2019 compared to today, and so we see people seeing less. And in our cards business, our revolve rates. From 2019, they're down, call it, 7% to 10%. So, we're seeing very prudent behavior when it comes to how people are managing their debt and how they're making payments on their credit cards. So very, very pleased with the performance that we're seeing from our clients.

And very well positioned strategically for growth going forward. What we've built and what's happened here with our card portfolio is a market-leading portfolio, Meny. You look at the travel card portfolio, the non-travel card portfolio and CIBC has the best card portfolio in the marketplace. The 2 million plus newly onboarded clients from Costco, most of them don't bank with us and a large majority are affluent and a significant minority are small business owners. Both of those will contribute to increase growth going forward. And that's why the message about investing for the future is an important narrative for us that differentiates us from the rest of the marketplace. We're one of the few banks in North America that are investing and growing at the top end of the market. And a lot of that is due to these investments in the card portfolio, our US business, Innovation Banking, the list goes on. And that's why we're confident going forward that we're going to be able to continue to deliver market-leading growth.

Okay. Thank you, very much.

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

Hi. Good morning. My question is for Shawn. I mean the change in provisions there caused by the additions to performing, excluding the Costco stuff. I mean, it looks driven mainly by adjustments to your economic indicator, forward-looking indicators. I'm seeing more conservative versus last quarter, Canadian GDP, US GDP forecast and the Canadian housing price index. Is it -- is there any -- one of these factors that's much more influential than the others, just to kind of get a sense of GDP in Canada and the US more important than the housing price forecast?

Great question. Gabriel, thanks for the question. The -- you're right, the FLI would have driven the performing build, excluding the Costco acquisition this quarter. We're very pleased with the performance from an impaired loss perspective on the portfolio. Given the deterioration in the FLI quarter-on-quarter, it sort of resulted in a flat or small build. But the more significant in the context of this quarter, the more significant item is the debt service ratio change, which is reflective of the higher interest rate environment and some of those knock-on impacts. And so, that's really one of the more influential ones this quarter. The GDP deterioration in the growth forecast impacted some of the business units as well. But I'd say, DSR was one of the more sensitive ones this quarter.

Where -- it's not -- is that just one you don't list in these --

Yes. It's in Note 6.

Okay.

Yes.

I'll take a look. Thank you.

Okay.

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

Good morning. Shawn, can you help me understand. And I think you described it, but I think I could do with a better understanding of the increase in impaired PCLs in the Canadian personal and business, I didn't see any deterioration in delinquencies or formations. Is that increase predominantly Costco, or is there something else going on there?

No, it's remember that the impaired losses also have a modeled component to them and so when the FLI and, again, the debt service coverage for both personal and for mortgages, when that change occurred in the forecast. That has a knock-on impact both from a performing perspective, but also from an impaired loss perspective for those portfolios. So that's what you're seeing, more than half of the build in that the PBB results was a reflection of the modeled FLIs.

And Costco, would be a modest portion then?

Yeah.

No, I don't expect you to comment on other banks, but DMC is the only one where I saw this play out. In no case did I see this play out for any other bank? Is it just all the banks have their own sort of models and sensitivities, and we shouldn't expect it to match quarter-to-quarter?

Yeah. I can't really comment on the other banks. We've built our models. We obviously follow IFRS 9 based on our interpretation and understanding of it, when we've imputed our FLI, we have generated the results that you've seen. So you could see variability quarter-on-quarter. We've also had significant growth in the portfolio. So that also impacts the performing provision. We've had some release. You'll have seen in capital markets, there was a release that related specifically to oil and gas, given the improved outlook for – well, the improved results and outlook. But from quarter-to-quarter, as we've talked about, as the macroeconomic environment as it deteriorates, we may see a build. And if it improves, then we could see releases but quarter-on-quarter, we had a modest deterioration and so that came through our results.

Okay. Then a broad question then, probably for Victor or Hratch. All our banks have use their capital to grow in different ways. Some are doing a few acquisitions. It's clear that CIBC's approach has been to grow RWA organically. But it would appear to me that with the capital ratio checking back a little now, and your guidance that it should maybe remain stable going forward. Would I be correct in suggesting that the bank will manage the RWA a little bit more or manage that growth a little more closely? By that, I mean, we may not see RWA growth at the same pace we've seen in the past.

Mario, good morning, that's a good question. I'd highlight a couple of things. One, you're absolutely right that our focus is on organic growth. And that's why you'll see that reflected in every single business unit that we run. You see growth and it's client-focused growth. If you lift the hood on that growth, there are deep, meaningful client relationships from personal banking right through to capital markets. At 11.7%, we feel very good about where we're at. We have the cushion to deal with any market volatility. They may come to all the banks in the banking sector. And it allows us the room to continue to grow. You may have seen the peak in terms of high growth rates, but we will continue to pace to be at the top end of the market, win client relationships, win profitable market share going forward. You'll see some Basel-related changes next year that will add to capital, and that will give us continued excess capital to continue to grow and deploy that capital through the various avenues that we've articulated in the past. So we feel good about our strategy of organic growth, we feel good about our level of capital, and we feel good about our level to continue to grow at the top end of the market, do it profitably and do it sensibly. And Hratch, I don't know if you'd like to add anything to that.

As Victor covered, this was a deliberate strategy, Mario. So maybe the only thing I'll add, right, as a reminder, as we were coming out of the pandemic with peak levels of capital and liquidity, we had telegraphed that we made a conscious decision to deploy that capital for growth organically. We've also communicated the reason we did that, and we will talk a lot more about that in Investor Days. Look, we've done good M&A in the past, and we believe we can continue to do good M&A, but organic growth returns are always superior, particularly in the short term. And as long as we have good opportunities to grow organically, we feel that is a better use of capital than any other avenue we have, including returning capital to shareholders. We are focused on generating tangible value and growing tangible value for our shareholders. And that is the best lever we have. And so, we've leaned on it. And so we've deliberately been bringing down our excess capital position through organic deployment to your point, that continued this quarter, right, take out some of the market volatility, which will be back and forward, take out Costco, which is a onetime you'll see that we drew down on capital even on an organic basis, and that was deliberate and planned. At the levels we are now, as Victor said, we feel comfortable there's still a buffer. But from this point on, I would expect a more balanced where, as I said in my remarks, generation will be offset by the deployment and the return of capital. So, we'll be generally around these levels, plus or minus is what we expect on capital. but that still allows us with that level of capital deployment, given the investments we've made so far and some of the investments we made now will allow us to grow more capital-light growth on the back of those. Costco is a good example. We have RWAs against that portfolio. But now there's a lot of franchising opportunities that will be more capital light. And so that's what allows us to now continue to grow, have the revenue and pre-provision earnings momentum, but keep capital more flat from here.

That’s clear. Thank you.

The next question is from Lemar Persaud from Cormark Securities. Please go ahead.

Thanks. My question is for Shawn. Maybe just coming back to the response to Gabriel's question on the debt service ratios, impacting the performing bill this quarter. Should we expect additional builds, if interest rates continue to move higher, just because as you're aware, consensus estimates for Banking Canada interest rates, they still contemplate a number of further rate hikes throughout the course of 2022 and 2023. So, I'll leave it there.

Good morning Lemar. So, the FLI contemplate a rising rate environment. So they're forward-looking. So, we've built into the forecast is that rising rate environment. I'd say we've captured our current view of it, maybe an extra 25 basis point move in the outer quarters. But we've reflected our view of what that rising rate environment is going to be. So unless that outlook changes materially, then we wouldn't expect to see additional builds just as a function of that.

Okay. That’s it. Thanks guys.

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

Shawn, you are – I guess you're on the spot today, I'm just going to come back to you. I just want to – I hear you on the IFRS and the forward-leading indicators and the models and all of those tools that I guess management teams use. But as the Chief Risk Officer, when you stand back and you think about qualitatively the outlook, the quality of the portfolio and the growth that the bank has been delivering, do you feel adequately reserved?

Good morning Sohrab. It's a great question. I'd say yes, the portfolio continues to perform well. When we look across the various businesses, when we look across the growth that we've achieved across our retail and our business and government portfolios, we're very comfortable with the underwriting that we've had in place. I think it positions us well. As you know, the way the models work, if there's a deterioration, we said -- we have the results from last quarter. We reflect the change in the economic outlook and then reflect that in our performing provisions. And so this quarter, as I said, you wound up with a flattish performing provision, but feel very good about our portfolio and the road ahead. We don't see near-term stresses. We've seen some -- we've talked about this in prior quarters. We expect to see some normalization of those loss rates over time as things get to some level of sort of pre-pandemic activity, expect that sort of over the coming several quarters. But frankly, there's the uncertainty out there, I think, is reflected in the performing provision. We feel good about our allowance coverage, which remains strong.

And just as a kind of addendum to that to you, I think you mentioned the GDP growth forecast as one of the forward-leading indicators, the higher rates. And I think the debt service ratio, is it fair to say that there was a countervailing balance here because of unemployment rate and that -- is that yet another area that I guess could become a negative here, or are you -- how should I think about how you have factored unemployment rate outlook, I suppose, into in your thinking like that.

Yes. So, again -- yes, in Note 6, we disclose our forecast for the unemployment rate. There have been small changes there, but we will continue to factor that into the analysis going forward as one of the -- it's certainly one of the FLIs, as I was saying earlier, the debt service coverage was a particular impactful one this quarter on the performing.

Thank you. The next question is from Nigel D'Souza from Veritas Investments. Please go ahead.

Thank you. Good morning guys. I had a follow-up again on your allowances for performing loans. And I wanted to tackle it a different way. When I look at your disclosure on Stage 2 loans, based on my math for personal and credit card loans, you have about 20% of both portfolios sitting in Stage 2, and that's relative to Stage 2 loans running at about 10% prior to the pandemic. So I'm trying to get a sense of what's the ratio now for about 20% of that portfolio being in Stage 2? And what's preventing the migration of those loans into -- back into Stage 1?

So as you recall, we had builds over the course of 2020. We started from a coverage perspective on our performing balances at 35 basis points. We're now at 45 basis points after having released provisions over the course of time. To the extent -- as the environment continues to improve, then we would expect to see some of that migration happened. But as I said, with the FLIs moving the way they have, we're watching that migration closely. It's still reflective of our -- the overall performing build.

So I'm trying to get an understanding here because Stage 2 loans represent a significant increase in credit risk. So should we interpret that as your expert credit judgment that 20% of your personal cum credit card portfolio is exhibiting a significant increase in credit risk, what's vulnerable to a significant increase in credit risk?

Well, it did. We did recognize that over the course of 2020. And to the extent that we continue to look at those portfolios, and in some areas continue to exercise that same judgment. We're watching for that -- those indications of continued positive migration. And you could see that coming through in subsequent quarters. And so it's really a reflection of the build over the course of 2020.

And I assume that's the same rationale for your mortgage book with 6% in Stage 2 versus closer to 3% pre-pandemic?

Correct.

Okay, great. That’s it from me. Thank you.

Thank you. The next question is from Doug Young from Desjardin Capital Markets.

Hi. Can you hear me?

Yeah. We can hear you, Doug.

Okay. Perfect. Just on the commercial loan growth. Obviously, very strong in Canada and the US, an area that I think you obviously and the team has been quite focused on. I'm just more curious, what are you hearing from businesses? Because it does seem counter to what the feeling of there -- and I've had this question for many people, about what you feel when you read the paper every day? And more importantly, so well, that's one part of it. And then what level of growth should we expect this to normalize, or is this a level of growth that you think you can continue to drive over the coming year?

Good morning and thank you for the question. It's Jon Hountalas. I'll start and then pass it over to my colleague, Mike. So last quarter, when we -- I was asked the question about confidence in the environment, I classified business confidence is very strong. And today, three months later, it's still strong. It's a nudge down for sure, but people are still feeling good. Demand for product is there, price increases continue to get passed on. Labor remains a challenge. Supply chain is hit and miss. Some people tell me it's getting better, some people worse. But overall, people remain confident. So in terms of Canada and growth, I mean this quarter was particularly strong. I think we were 6% quarter-over-quarter in loan growth. I don't think you'll see that. I think you'll see us go back to our normal healthy historical rates low double digits. And I think we'll outperform the market. Mike, I'll pass it to you.

Thank you, Jon. So it's more of the same in our commercial book and with our clients in the US, as Jon just described. Our clients remain confident. They're a bit more cautious as they're dealing with, as you mentioned, supply chain issues, employee shortages and inflation, but they're focused on growth, they're borrowing to rebuild our inventories, and that's reflected in our revolver utilization getting back up to more historical levels. And on the real estate side, they're building to meet housing demands in the US. So for our commercial clients, we can describe the sentiment as good, as confident. And what they're telling us, mostly, if you had to sum it up, is that demand and revenue is not an issue for them. They're experiencing margin compression. That's a bit of concern, but they're still looking at growth. Like Jon, in the US, we see this very healthy growth that we had in the US, which on a spot basis, got to 18% year-over-year. We see that moderating. But we still expect to see growth in the double-digit range moving forward.

And just a quick follow-up and maybe for Canada and the US. Is there a particular sector where you're doing particularly well or sectors that you're taking more market share?

It's Jon. In Canada, about 40% of our growth has come from real estate, 15% has come from innovation Banking. We'll talk a little bit about that on Investor Day. That's been a focus for us, and I think we're doing very well there. And the rest is very broad-based by industry and by geography. Mike?

A little bit different in the US and a bit of a reversal from prior quarters. Our C&I portfolio and businesses and customers led the way on growth the past couple of quarters in this past quarter in particular. We were also seeing a fair number of payoffs in the real estate area. But it's reflective of our growth and our strategy in the US, where our network of offices around the country, where we've brought in new teams, new bankers, new products, they're all coming online. And a lot of that's on the C&I side, and we expect that to continue going forward. It’s part of the investment in organic growth that both Victor and Hratch mentioned earlier. Put simply, it's working.

Thank you.

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

We know you'll get rewarded sort of complying with the rules here. Harry, Capital Markets, I mean, I think loan growth there we keep on looking at it elsewhere. But Europe, I think 30% plus in loans in the Capital Markets segment, trading revenue at a record level. What are you doing differently there? And how sustainable is this?

Thanks very much for the question. Good morning. So, it's more of the same. I'll be honest. We have a well-diversified franchise. In terms of the loan growth, it is very well diversified across our corporate franchise, across our institutional client franchise, which would include insurance companies, asset managers, pension plans, private capital on both sides of the border. As I think I mentioned last quarter, we expect to see lending growth taper off throughout the year. And in fact, quarter-over-quarter growth on average balances was 8%, down from 10% last quarter. But more importantly, we're seeing growth across the platform. We're seeing very, very good results with our trading businesses, quite often in the less capital-intensive businesses such as foreign exchange. We saw 26% increase year-over-year in our trading revenues. The team is working extremely well to deliver capital markets products across our franchise, including our commercial wealth and retail clients, so we've seen revenue growth in the US of around 30% year-over-year and double-digit growth servicing nontraditional clients I just mentioned. So, really, it's all coming together, delivering for our franchise across our bank. The Capital Markets product suite. So, we're quite optimistic on the outlook. The pipeline is quite strong. The environment is the environment, but we're standing with our clients. It is a cycle-tested business. So, I'm optimistic that given the strength of the pipeline that we can continue to deliver on that $600 million plus earnings growth.

And Sohrab, just to build on Harry's comments, our capital markets business is another point of distinction from our bank relative to our peer group. Not only is our strength in Canada, notable. Our growth in the US is notable, but one in every $ 4 in revenue in the capital markets business comes connected to our overall bank in retail, wealth management and commercial banking and other retail banking partnerships that we have outside our country through our direct financial services business. Again, something that we'll highlight more deeply at Investor Day.

Thank you.

Thank you. There are no further questions on the phone lines at this time. I'll turn the call back over to Victor.

Thank you very much, operator, and thank you for your great questions. I wanted to just close off by taking this opportunity to thank our 45,000 CIBC team members who play a critical role in bringing purpose to life for ourselves and for our clients each and every day. And to our shareholders and to all our sell-side analysts, thank you for your continued support and for your good questions. And we will speak with you in a couple of weeks at our Investor Day, where you'll learn more about our bank, and you get to spend more face time with our leadership team. Look forward to seeing you then. Have a good day.

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