Good morning, and 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 Geoff Weiss. Senior Vice President, Investor Relations. Please go ahead, Geoff.

Thank you, and good morning, everyone. We will begin this morning's presentation with opening remarks from Victor Dodig, our President and Chief Executive Officer; followed by Hratch Panossian, our Chief Financial Officer; and Frank Guse, our Chief Risk Officer. Also on the call today are our group heads, including Shawn Beber, U.S region; Harry Culham, Capital Markets and Direct Financial Services; and Jon Hountalas, Canadian Banking. They're all available to take questions following the prepared remarks. As noted on Slide two 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'll now turn the call over to Victor.

Thank you, Geoff, and good morning, everyone. On today's call, I'll provide an overview of our first quarter results as well as an update on our strategy for successfully navigating the current economic environment with a clear path forward to achieving our 2025 objectives and targets that we laid out at our Investor Day last year. Before we get to the results, let me begin with the senior leadership change we announced last month. Following a 14-year career with CIBC, Laura Dottori-Attanasio has retired from our bank, and we wish her well as she takes on new challenges. Jon Hountalas has been appointed Group Head Canadian Banking, with expanded responsibility of leading CIBC's personal and business bank in addition to commercial banking and wealth management in Canada. Jon is a proven leader. He's had a positive impact in every business he's led at CIBC. He's focused on execution, on talent and our clients, will serve us well to build on the progress we've made in our Canadian retail business. Now turning over to our first quarter results of 2023. Amidst continued central bank tightening and geopolitical tensions, we had a good start to the year, growing revenue and growing pre-provision pretax earnings to record levels. Adjusted net earnings were $1.8 billion or $1.94 per share. Our capital position remains strong with a CET1 ratio of 11.6%, comfortably above the regulatory minimum. And our return on equity improved to 15.5% for the quarter. This performance was supported by volume growth across all of our businesses and underscores the ongoing successful execution of our client-focused strategy, our diversified portfolio and contributions from our organic investments over the past few years. Our expenses declined sequentially. And as we indicated last quarter, with many of our key strategic investments completed or in flight, we…

Thanks, Victor, and thank you all for joining us this Friday morning. Our team delivered solid results for the first quarter of 2023, supported strong execution against our client-focused strategy and disciplined resource management. We maintained our revenue momentum, credit performance and balance sheet strengths while expanding margins and stabilizing expenses. Diluted earnings per share were $0.39, including items of note, most significantly an increase in legal provision related to the previously disclosed Cerberus ruling and an income tax charge stemming from the enactment of the 2022 Canadian federal budget. Excluding items of note, we generated strong sequential growth and profitability with adjusted EPS of $1.94 and ROE of 15.5%. Our balance sheet remained resilient despite the headwinds we absorbed this quarter as evidenced by a CET1 ratio of 11.6% and LCR of 134%. The balance of my presentation will refer to adjusted results, which exclude items of note, starting with Slide 8. Adjusted net income of $1.8 billion for the quarter was down 3% from the prior year, driven primarily by a credit provision against performing loans this quarter compared to a release last year. Frank will cover credit provisions in further detail later in our presentation. Record revenues of $5.9 billion and pre-provision pretax earnings of $2.7 billion were up 8% and 6%, respectively, from a year ago, benefiting from balance sheet growth across our business, higher interest rates and strong trading activity. Expenses were up 9% from the prior year, but down 1% on a sequential basis as we continue to focus on balance between investment and efficiency improvements. Slide 9 highlights the drivers of net interest income. NII of $3.2 billion was up 2% from the prior year, impacted by the movement of trading revenues from interest income to other income due to rising interest rates.…

Thank you, Hratch, and good morning, everyone. Credit performance this quarter continues to be well in line with our expectations. With the increases in allowances since Q2 of 2022, we remain well covered for any uncertainties in the upcoming quarters. Slide 20 details our provision for credit losses. Our total provision for credit loss was $295 million in Q1 compared with $436 million last quarter. The provision on impaired loans was $259 million, up $40 million quarter-over-quarter. We experienced higher impaired provisions in both retail and business and government loans this quarter. In retail, write-offs trended higher as expected, reflective of delinquencies returning towards pre-COVID levels. In business and government loans, high impaired provisions were attributable to both Canadian and U.S. Commercial Banking across a broad range of sectors with no specific concentration. The provision on performing loans was $36 million in Q1 and we are comfortable with our allowance coverage as we have had prior increases since Q2 of last year as the economic outlook deteriorated. Turning to Slide 21. We remain prudent in our allowances given the economic backdrop. Total allowance coverage ratio is consistent with prior quarters at 63 basis points and remains above pre pandemic levels. Slide 22 focuses on our lending portfolio mix. Consistent with previous quarters, our portfolio reflects strong credit quality. Our total loan balances were $531 billion, of which 55% is real estate secured lending. Our variable rate mortgage portfolio accounts for a little over one-third of our mortgage portfolio and shows strong credit quality and performance. The average loan-to-value for our uninsured mortgage portfolio was at 52%, up from 48% a year ago as we have seen a continued house price drop in most markets. We continue to expect further moderation of house prices and as a result, year-over-year increases of…

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

Good morning. I guess maybe Hratch, if you could start with Slide 9 in terms of the NII outlook. Just talk to us in terms of three of the core NII, driven by what your expectations are on NIM? And what's going to be driving that NII growth in a world where balance sheet is slowing? And then maybe how much of a drag is the trading NII be going forward if rate hikes are more or less done in Canada and the U.S.? Thank you.

Good morning, Ebrahim. Thanks for the question. Happy to take that. Overall, what you've seen in our trajectory of NII, as we've highlighted on the slide here in a number of quarters is that we've got strong momentum, and we expect that momentum to continue. We've got a strong balance sheet. We've got margins that are positioned to continue expanding with where interest rates are now. And on the back of that, we've produced NII growth, excluding trading of 13% over the last year. Going forward, we've been very clear on our guidance. We've got strong margin trajectory from here. What you saw this quarter is consistent with what we said, a few basis points positive in terms of core NIM expansion. A couple of basis points that I would call more quarter-over-quarter noise from last quarter's negatives coming back and so forth. But I think the core NIM, ex-trading, from that 164 level is positioned to continue increasing a few basis points a quarter, particularly accelerating, I would say, the back half of the year, maybe more stable here in the shorter term. But between that and continued balance sheet growth as we continue deploying capital with our clients to grow our businesses, we think that will continue driving strong NII growth. Now in terms of your other question, I think it was on the trading side and what that can do. Again, that can create some overall noise to NII between trading and non-trading as you can see over the last few quarters here. That may continue if rates rise. But overall, I would look at trading results in aggregate. And I would advise you to look at NII, excluding trading as we do.

Got it. And I guess maybe one question for Jon. Jon, congratulations on the new role. Maybe give us a sentiment check around commercial customers. Clearly, a lot of macro uncertainty. Credit seems to be normalizing, but holding up well. So where do you see growth coming through over the next few quarters on both commercial and consumer? Thank you.

Thank you, Ebrahim. Let me start with commercial. There are several factors at play when you look at commercial loans. Some are macro and some are probably specific to us. Let me start on the macro front. Last year was a blowout year in terms of loan growth across the industry. I think the average was 17%. We were probably at 19%. The average over 10 years is something like 10%. So why so high? Economy was strong, receivable is high, inventory is high, billing with supply chain, a lot of that is winding down. So, you see some sectors actually declining, all for good reasons, by the way. To real estate, it's been a big area of growth. Real estate is quiet. That will subdue growth a bit. Finally, entrepreneurial confidence is down versus six months ago. Supply chain, better. Inflation, better. Labor, the same. Interest rates, worse. If you put that all together, I think entrepreneurs are a little more tentative. They're looking at where interest rates are going? What's the impact on the economy going to be? I think that's the macro factor. The micro factors are maybe specific to CIBC. Like in this type of environment, we're going to be a little more conservative. To be clear, we're going to support our clients. We know them well. We've been through our due diligence. We know how they operate. For new clients, we're going to be a bit more careful. You put that all together, I see loan growth in the mid-single-digit range, and I think we'll be in the mix on that. That's the commercial side. I don't think the consumer side is that much different. I think you'll see a tentative consumer. I think you see product growth already slowing. I think you'll see growth in the, where I think loans in the commercial side will be mid-single digit. In the consumer side, it might be low mid-single digits. But the general sentiment, roughly the same.

Got it. Thank you, for that.

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

Hi. Good morning. Jon, you were just talking about conservatism or increased conservatism as you make underwriting decisions on the commercial side going forward. Just wondering if you could provide more detail what -- if you could talk about it geographically also by sector, where you're seeing more reason for caution?

Meny, just for clarity, right, on existing clients, we have the same formula we've had for 13 years. No, there's no pendulum. We keep doing the same thing. We know our clients. We're going to help them grow. We're going to support them. There's no sectors that we're looking at and saying, we don't want to get involved. What we're saying is, when we look at new clients, with the uncertainty out there, we're just being a bit more careful. And again, not all clients are created -- not all new clients, not all prospects are created equal. Less fussed about sector, more fussed about how long we know the clients. If we've been following them for three or four years and they've been in our pipeline and we have an opportunity, we're going to jump. If they are new clients that we don't know that well, and that exists in Commercial Banking, you meet clients over the last -- some people are in your pipeline for five years, and some people are in your pipeline for six months. The five-year folks will be chasing them hard. The sex month folks, we might be going a bit lower.

And Jon, specifically on the CRE side of the business, and there's a lot of questions about office. We're definitely seeing return to work stall-out. So, is there any change there in terms of your view or your posturing from an underwriting perspective when it comes to the CRE book, in particular, and office exposure?

So, as you know, we've got -- we've had a long-standing CRE business. I think I talked about it on Investor Day, 20 years, very low losses. So, the book's in good shape. I've talked many times about we don't really add new clients. We've been dealing with the same clients for a long period of time. They're just quiet. The industry is smart. They self-regulate. They know things are tough. They've made a lot of money over the last few years. Nobody is doing crazy deals. So, I think generally, you'll see softness, just no big volumes. On office specifically, we've got about $4 billion, 10% of our book. Sublease rates are up, for sure. Most of our office is owned by institutional clients. We're not changing our posture on office. We probably haven't grown that asset class in, at least, a year, probably two. So, no big changes, no stress, no deferred payments. We're seeing no stress yet, but it's something we're looking at, of course. It's -- as you said, it's an evolving asset class.

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

Good morning. Maybe I'll stick with you, Jon, just on the private wealth side. Saw that you specified 6.2% in net flows over the last 12 months. Maybe a perspective on what the AUA in that segment, just to kind of get a number on that? And in a very tough year is up 6.2% -- above historical averages?

What was the question exactly? I'm sorry, I had trouble following.

I just on the private wealth side, Canadian, the 6.2% of net flows over the last 12 months, and it seems like a pretty good number in the tough tape and just wondering how that stacks up versus historically and kind of the outlook on what you're doing in that segment to get that incremental?

Thank you for the question. Net flows have been good. I guess the tale of two -- two halves -- two businesses. The mutual fund business overall has been slow across the industry. Net redemptions. after a record year in '21, '22 was negative. This year, so far, for the whole industry, negative. We're in the mix. Where we're having real success is in our private bank and in our Wood Gundy franchise. It's just normal sales discipline, referrals, staying close to our clients, financial planning. Like we've got the products, we've made the investment, and we're seeing success in Gundy and in a private bank, and I think in the mix on the broader mutual fund sales like the industry starting to turn even on the mutual funds sales so probably feeling some optimism which I haven’t felt in a while.

And Scott, just to build on Jon’s comments, again this kind of ties back to our strategic investment agenda. We've been investing significantly in our private bank, and that's been driving really strong flows. We've been investing in our private wealth on the investment side. As Jon mentioned, CIBC Wood Gundy, those flows are coming from existing clients, they're coming from new clients, and they're coming from more competitive recruiting as people see the investments that we're making in our platform on Wealth Management being something that they want to be part of. And that's why you're seeing those flows and you should see those flows continue going forward.

Okay. And then maybe just lastly on DFS. I guess, overall very solid revenue on a year-over-year basis. But just -- maybe just focusing on Innovation Banking, probably some headwinds on the EC [ph] side over the last 12 months. Maybe you can comment on that performance relative to solid year-over-year growth and perhaps an outlook into fiscal 2023?

Perfect. So, it's Jon, and I'll start with innovation banking, and then I'll send it over to my colleague, Harry on DFS. So, we were -- we highlighted the innovation banking business on Investor Day. We put out bold targets. I talked about exceeding every target we've put out. I'm convinced we'll exceed the targets we put out on Investor Day. All that said, the industry is quieter, for sure. We were probably doing 50% loan growth in the first three or four years of the franchise. That's not happening today. We're watching the book carefully. It's doing very well. You have to remember, we brought over a group of pros from Wellington. They've been doing this for 20 years. They've been with us since fiscal '17. We've teamed up with our own CIBC team. There's institutional knowledge around this business. It's performing well. Over the five years that we've had it, I think losses are under $10 million. It's just we watch. We're being careful. Inflows into the business, capital going into the sector has slowed down. So, we're all over it. But so far, no signs of stress. Harry?

I'll just follow on from Jon there. Thank you for that question. As we discussed at Investor Day, our DFS, or Direct Financial Services business, is really a future differentiator for our bank, much like our innovation banking franchise. Just by reminder, it comprises Simply, which is our low-cost digital banking platform; our Investor's Edge, which is our digital-driven low-cost direct investing platform; and our, what we call, alternate solutions, which is our innovative personal and B2B FX platform. And it was created in 2020 just by a reminder to really capture the accelerating to market demand for direct banking solutions, leveraging our technology and capital markets and expertise, which is really -- has a proven operating model for agile delivery. We have seen our investments in technology and data, really enabling these results that are in front of you today. We were a leader in FX payments. We're onboarding new clients as we execute on our capabilities. And we're using the data analytics to really make pricing decisions to expand on our margins as rates increase in Simply and Investors Edge. So, we're pleased with these results, and we think we continue to drive that 15% growth as we laid out at Investor Day.

Thank you, very much.

The next question is from Doug Young from Desjardin Capital Markets. Please go ahead.

Good morning. Just first question, I guess, Hratch, for you. I guess credit RWA was down sequentially. Counterparty RWA was down sequentially. Were you actively selling books? Or can you kind of dig into what drove this? And can you also talk a bit about the outlook for RWA as we move through fiscal '23?

Yes. Thanks for the question, Doug. So, the short answer is no. We haven't been offloading any risk from our portfolio. We haven't done anything unusual. It's all a normal course. And it's really the core earnings generation from our business that helped this quarter as well as the share issuance. And we had some help from market factors, particularly counterparty credit, as you described in AFS. But let me give you a little bit more on that. So, if you look at the quarter, and as we've highlighted in our slides, we did generate 30 basis points of capital in terms of our growth. And the way we look at organic RWA consumption, it really was the organic core part, which you can see in the Pillar 3 pack in the back. You will see there was about $4.4 billion. If you strip out FX, you strip out counterparty, you strip out any changes in credit, et cetera, there was a little bit of negative migration this quarter. There's $4.4 billion of total book growth in terms of core credit. And so net-net, you can sort of look at 14 basis points of capital generation net of the credit growth. The market movements were something in that 10 to 14 basis point range help as well. So, counterparty credit was down $2.7 billion, to your point. That's just -- yes, you'll see the mark-to-market on the asset side of derivatives also down. So, mark-to-markets came down on derivative positions. That means we have a smaller receivable and we have less counterparty credit risk, plus, yes, that’s helped us a little bit. So that was another 14 and then our issuance was 10. So, if you take those three things together, that's basically what offset the headwinds, and we had…

No, I definitely appreciate the color. Second, I guess on NIMs, Canadian NIMs were down quarter-over-quarter, but the all bank NIM ex-trading was up, and I'm hoping you can kind of unpack a little bit about what drove that. And I think maybe this kind of goes to the corporate. I think you talked a bit about nonrecurring items in corporate and in treasury. If the two tie together, maybe can a bit about what those unusual or nonrecurring items were and quantify them? Thank you.

Yes, absolutely happy to elaborate on what I said in response to Ebrahim's question. So, this quarter, there was -- a lot of the expansion was core NIM expansion in our businesses. And what we're seeing is what we've telegraphed all along. Our balance sheet reprices with higher interest rates. You have repricing happening on the asset side, net of repricing on the deposit side, where some of that is passed on to clients. And that net dynamic adds a few basis points a quarter to our NIMs. There's other things going on. Mortgage margins being lower, it's pressuring NIMs a little bit. We've got deposit mix, things going from noninterest-bearing to interest-bearing or term products. Those kinds of things net off a little bit, but we've assumed all of that in our forecast. And so, starting from this quarter, 166 as I said, look at that as more 164. There was a couple of basis points of net positive. And this is the noise that can happen in corporate and other, particularly in treasury-related activities quarter-over-quarter. Last quarter, we had talked about a couple of basis points negative from those items. We had said some of it is things that revert over time into P&L. Some of what we saw this quarter was that reversion. The 164 when you look at the remainder, it really is the expansion in our core businesses. So, you're right, if you look at Canadian TPB on its own, it was down, and that's largely a history of mortgage margins. When you look at Canadian P&C in aggregate, as we show on the slide, when you include the commercial business, you include the Simply business, that business was up in NIM. And so that contributed 1 basis point to total bank NIM expansion ex-trading.…

Very helpful. Thank you, very much.

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

Good morning. I do want to stick to this NIM outlook thing and you're talking about the acceleration in the back half. I just want to know what you have in your outlook there as far as macro environment? And what if -- do you still have rate hikes, flat rates? Like what -- my actual question is what happens if the rates are cut to that guidance? I think that's more positive.

Yes. Thanks for the question, Gabe. I'll take that. And so, what we've assumed this is always the same for us, right? We don't try to predict the market. So, we take the market's view of the markets. So, as I referenced in my remarks, this assumes the current forward curves, and the current forward curves don't anticipate cuts for the rest of this fiscal year. So, we're generally assuming Canada is largely done. Maybe there is another one there. And then in the U.S., there's a little bit more to go but not anticipating any cuts. We're assuming some, like I said, migration of deposits. We're assuming the mortgages in Canada -- what we're seeing is good positive momentum and the new commitments in terms of margins more towards normal, not quite back to normal, but we're assuming, again, conservatively, we don't quite get back to normal, but it's better than what it was maybe last year. So, all of those factors go into that forecast. And so, if there's a cut, you see our disclosures around interest rate sensitivity, that does over time add up. But if you talk about a -- we have 100 basis points is around $300 million to the negative. If you talk about one cut over the short term, it's pretty immaterial. It might be sort of low single-digit basis points over time, and then it will spool up after that.

But those hedges don't work the other way? I thought that was the…

They do help. They do help. That's why you don't feel as much of it right up front, right? Remember, part of our exposure is to short-term rates. And so when you see the actual cut and the front end of the curve declines, you feel some of that right away. And then where the hedges come in is the fact that you don't feel 100% of that. And so generally, right around 60% of our exposure right upside, downside has been too long rates. And so that takes several years to price in, but you'll feel some portion of it right away.

Okay. I don't typically ask trading questions because, I mean, it's -- people don't usually like to give up the secret sauce, but this is a massive trading number, especially in rates. Just wondering what happened this quarter that was particularly beneficial? And it's a -- asset line item that fluctuates a lot. So could we see a similar number sustained or not? And then kind of tying into the capital question, VAR was up, but market risk weighted assets were down. Is there the composition of your trading yield of that result? Or why didn't the risk-weighted assets go up in that category?

Good morning. It's Harry here again. I'll take that. Yes. So indeed, it was a very strong quarter really across the platform. I talked about DFS a moment ago. So what's happening here is we're focusing on executing on the strategy we've laid out for a number of years, and the investments in our platform are really allowing us to deliver results in the most difficult of times for our clients or the most challenging times. And I would say that this is a very well-diversified client franchise. You're seeing delivering of outsized returns. We are maintaining and growing our market share with our core Canadian clients from a trading perspective and really from a corporate investment banking perspective. And we're growing our U.S. platform, as we've talked about in the areas of relative and competitive advantage, and Victor alluded to some of that earlier, targeting growth in north of 10% there. All that comes together with our connectivity with the rest of our bank as we deliver capital market solutions to all of our clients. The results were very strong. The trading environment was, I would say, exceptional. We continue to execute on that strategy. So the quarter was particularly strong. We expect the results to be in line going forward with what we outlined at Investor Day, which is a growth of around 7% to 10% a year across the capital markets platform. We're pretty confident in those numbers is that helpful. In terms of the VAR and the usage, Hratch talked a little bit earlier about counterparty credit risk and so on. What I would say is we deploy risk to our clients. And so we don't have stand-alone proprietary operations. The VAR is devoted to our client activity, and that continues. Our clients are very active at this point in time.

No, I get the VAR going up, activity goes up. It just back in analyst school, I learned that, that usually causes RWAs to go up, but that's fine. Thanks.

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

I want to maybe start off with Frank. Just given the normalization of impaired PCLs this quarter, can you talk to your outlook for the year? I think the message is that we should still think about normalization to historical averages, but any thoughts would be helpful.

Thank you for the question, Lemar. And as I said in my prepared remarks, we are very pleased with the performance and resilience of our credit books, performing well within our expectations. And then as you pointed out, we did previously communicate that we do not expect low levels that were experienced over the last one or two years to sustain in the more uncertain and challenging macroeconomic environment. And I would reiterate our outlook of normalization towards pre-COVID levels and expecting our impaired PCL ratios to trending towards that mid-20 to 30 basis point range that we previously communicated. I think for fiscal '23, we can expect to be at the lower end of that range. But overall, that guidance and outlook still remains intact.

Okay. I appreciate it. And then just flipping over to Hratch. You mentioned you're building up toward the 12% CET1 ratio by the end of 2023. Is that similarly just continued normalization to historical averages? Or does it allow for something more? And specifically, just referring to the CET1 ratio impact of normalization?

Yes. Thanks for the question, Lemar. And we've been pretty conservative in terms of our outlook to 12%. And so when I talked about that, adding 5 to 10 basis points roughly range on average on a quarterly basis, that assumes that there is some normalization of the environment, right? We did have some negative credit migration this quarter. We're actually assuming more than what we had this quarter. We're also assuming that counterparty credit risk amount that came in, that's based on natural gas prices, FX prices, interest rates and so forth. And so we're assuming some of that will revert back out, won't stay at these levels. And so, the way I would think about it is, as of now, we have the ability to generate 7 to 10 basis points in terms of core earnings, net of organic RWA growth to support profitable growth in our clients. And those negative items, they roughly add up in our forecast to what the issuances are through our DRIP program and other programs. And so, think of it as roughly in the order of 10 basis points of negative headwinds we're expecting from the environment normalization or getting more pessimistic even. And then that gets offset by the DRIP, which still allows us to continue having 7 to 10 basis points. And so we'll leave the DRIP on for now. And once the environment is more certain, once some of the negative outlook out there gets better, then at that point, we'll revisit it. But I think it gives us the ability to absorb those headwinds for now.

Appreciate the time. Thanks.

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

Okay. Thank you. Most of the questions have been asked and answered. Just for -- quickly Hratch for clarification. In your comments when you were talking about the expectation for expense growth balance of year, you've made lots of reference to prior period investments and reaping the benefits of that. I don't think I heard you mention inflation at all. Can you just talk about what sort of inflation is factored into that sort of expense growth? And could that be a source of positive or negative surprise?

Yes. Thank you, Sohrab. I did mention inflation in the prior year in '22 as having been a driver. So if you look at our expense growth last year, right, half of it was roughly our investments. The other half was our sort of other core operating expenses and a good portion of that was the impact of inflation. What we've assumed going forward is pretty in line with what you're seeing, some normalization through 2023. And so you are seeing inflation starting to come down. We've been a bit more scientific than just looking at headline numbers. We've looked at our expenses. We know what's already been adjusted for inflation and what may be adjusted coming forward. And so, based on what I see right now, I don't think that's a material plus or minus. And so overall, we're still confident with that in mind, we will stabilize expenses around these levels. We are continuing to invest on a sequential basis as revenues grow and expenses stay stable. That's a positive result, and that's what will allow us to get to our positive operating leverage over time.

Okay. And then maybe I'll just come back to Jon now. Jon, I think it's been less than a month, maybe that you've got the official Canadian Banking kind of segment seat. Any early impressions worth kind of sharing with us right now with just a certified, albeit less than a month?

Thank you for the question, Sohrab. Yes, I do have some first impressions. First on strategy. We outlined it on Investor Day, early days for me, but I don't see major changes. We're focused on execution. And when we think about execution, it's kind of in three key themes. First, segments. You will see us push much harder in Imperial Service. I think that's a big differentiator. To win in mass affluent, we have to leverage Imperial Service. So more on that down the road. Two, we need to get better at small business. We've made big investments over the last two years, both people and in technology. And again, to win in mass affluent, you need to be able to deal very well with small businesses and the entrepreneurs. So more to do there. On the strategic investments, I think both Hratch and Victor have spoken to it. We've made some important investments over the last couple of years. There's financial planning, there's investments in CRM, we bought a co-brand -- we invested in our co-brand card but we're going to harvest those investments. Every one of those business cases had strong financial metrics against them. It's our job to deliver those metrics and I think we can. And finally, we're going to -- how to operationalize this is always kind of tricky. There's more heavy lifting to do. There's more investments to make, but we're going to pace ourselves. We're going to focus on margins. We're going to focus on expenses. And I think what you'll see in the pretty short term is improvements on both fronts. So to conclude, first 30 days, if it's not obvious in my voice, I'm pretty excited.

Thank you very much.

The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Thank you for taking my question. I know it's getting a little late here on the call. My question is also for Jon Hountalas, but it refers to the mortgage business. I was hoping maybe you could help me understand some of the dynamics that are happening on the ground. And I'm specifically looking at your Slide 35. Now when I look at this slide, the first thing that comes to mind is, I think maybe in the past, you may not be showing us this information in the same way. I think this slide is purely originations. Correct me if I'm wrong. So just a few questions come to mind, and I'm hoping to better understand what I see here. First, with respect to origination at $9 billion, that's down 47% year-over-year. Typically, we see this progress to higher originations in the next couple of quarters. So I'm curious if you think that might actually happen this year? The second observation is when I look at the loan-to-value distribution at the bottom part of this graph, I think, correct me if I'm wrong, this pertains to the originations that happened in quarter. And if that's the case, what I see is people that put down the smallest amount of down payment are growing variable rate mortgage despite the fact that the variable rate is higher than the fixed rate. So I'm curious if that is something that's being advised to the customer? If that's new, if that would be like relative to history, something that's new that's going on? And lastly, Jon, is that experience do you think based on what you see kind of market-wide? Or might this be a little CIBC specific? Thanks.

Okay. Darko. It's Frank here. I'll probably take the first few of your comments or questions. So you're right, Page 35 shows at originations, and that number is down year-over-year. It's probably reflective of a slower mortgage market right now compared to a very, very strong market that we saw last year. And that, of course, had an impact on our new originations. And similarly, as you pointed out, FICO score distributions and loan-to-values as well reflect current originations in the quarter. I think it's Page 27, where we show the same statistics for our entire portfolio. So that's how you could compare those two. And then there's a slight higher percentage of people in those 75% buckets that take variable rate mortgages. I don't think it's necessarily advised. It's a client's choice that we are working with clients. We've also seen, and Jon can add anything here, but we've also seen the share of variable rate mortgages dropping with the interest rate environment evolving. So that number would have come down from previous quarters quite a bit.

Yes, 70% of -- it's Jon, 70% of clients today are taking fixed rate terms, 30% are taking variable. That's a bit of a difference from last year. And again, as Frank said, advice depends client by client based on their individual circumstances.

And do you think, Jon, is there any different than industry?

What was the question? Is growth going to be different, that's the question?

No -- well, yes. I am looking for an outlook as well on originations. But do you think that -- when we think about variable rate versus fixed, do you think you're any different than peers?

No.

No, okay.

And in terms of -- again, I think you'll see mortgages, Darko in the low single-digit range throughout the year. It has slowed down.

Okay. Thanks very much. That’s very helpful.

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

Good morning. I'll try to be quick. Harry, could go back to you for a moment. Obviously, a big number in the trading side as other folks have offered. I went looking around for quarters that even came close to $206 million in estate trading. And I don't think it's coincidence, but it just happens to be those quarters when credit spreads came down. I mean, a classic example would be Q3 '20 when credit spreads came in. So it would appear to me that what we're seeing at least in part is some mark-to-market on the fixed income book. First of all, do I have that right?

Good morning, Mario. No, I don't think you have that right. This is not about the inventory we hold. This is about doing client activity, client transactions. So very well diversified in the credit space, in the rate space, in the commodity space and the FX platform, which, as you know, we've invested in very heavily over the years. So I would say it is an outsized quarter indeed. Extreme client activity in volatile times, and we're able to actually, I think, be there for our clients in really volatile markets, given the technology and the systems we have in place and of course, our talent, back to front.

So Harry, just a coincidence then that every quarter where credit spreads came in, the fixed income trading was really strong? Or is it really that declining credit spreads lead to increased trading activity? Because it seems like more than just a coincidence to me.

Yes, I think it's the latter. I think our clients are more active in general in that environment. I would say though that, as you've seen, even in extremely volatile markets that are not completely disrupted, we do outperform. And you've seen that over the years. You've seen the stability of earnings be front and center for us as we try to deliver a consistent, sustainable earnings growth in the Capital Markets platform, really delivering all of Capital Markets to our clients. So I would say it's the latter. Our clients are very active. Larger transactions that are really about delivering the global markets products to our corporate and institutional client base that are covered by the corporate and investor client franchise. So I don't think I answered your question specifically because I think it really is symptomatic of the markets, and they're very active and we're there for our clients.

Got it. Let me move on to deposits for a moment. We are seeing deposit attrition, like deposits actually coming off the balance sheet, not in Canada, certainly not for CIBC. Deposits look fine. But it's no secret that is happening in an accelerated way in the U.S. Can anyone offer an outlook on why Canada is different? Is it simply that we just didn't -- we didn't -- there wasn't as much of a spike in deposits during the pandemic? What's your outlook there?

Well, it's always difficult to ascertain why specifically, Canada is different in this instance, Mario. I think it has to do with a number of different things. I think when you look at the stimulus that was provided in Canada through the emergency wage subsidy, the CEBA program, the SERV program, the student program, pound for pound, the stimulus was large. That's number one. Number two is Canadians, we tended to open up slower than the United States did. So there was a tendency to spend less. And three, there's a conservatism factor in there that's playing out. That's, I think, in a nutshell, why you see on a relative basis, a slower burn off. I think those deposits will burn off over time. We're prepared for that. We're managing around that. The question that Hratch raised earlier is more going to go from non-interest sensitive to term. We've planned for that as well. I think the most important thing strategically for us as a bank is, are we growing deposits in those areas across our franchise? We're growing them in the Canadian personal bank. We're growing them in the Canadian commercial bank. We're growing them in the innovation bank. We're growing them in the U.S. bank. We're growing them in our corporate bank. And that's just a function of how we're serving our clients. We are a diversified relationship-oriented bank, and it's coming through in terms of all of our numbers including deposits going forward.

And then finally, Victor, you offered that the bank did experienced -- or -- well, that could experience some deposit burn off, as you say. Can you offer an outlook on either for CIBC or if the bank has thought about it in Canada generally? How -- what would you peg are excess deposits right now in the banking system to be? Are we in the sort of $400 billion range? What do you think?

It's $150 billion to $200 billion in total.

That's what you think for the -- like for the banking system in total, $150 billion, $200 billion right now?

Yes. And some of that -- most of that is stimulus, but some of it is money moving from markets, from equities and from bonds in fixed-term deposits, right? And just consumers are behaving rationally. When you're getting 4% on 1-year money, they say, we'll park that until the certainty comes back. I think part of what's going to happen going forward is some of it will go back into the markets as situations normalize and some of it is just going to be the burn-off of excess deposits from stimulus over time.

That’s helpful. Thank you.

And this is all the time we have for questions. I'd like to turn the call back over to Victor.

Well, you've been extremely generous with your time, everyone. So I want to thank you for that. And thank you, operator. So just to recap, we delivered solid first quarter results in the face of an increasingly challenging and dynamic environment. Despite continued geopolitical tensions and inflationary pressures, which we see each and every day, our core CIBC franchise demonstrated the benefits of diversification, demonstrated the benefits of our unrelenting focus on our clients. And we hope that you got the points that it's demonstrating the investments that we've made in the past in organic growth and that we believe that we can harvest going forward. You see that across all of our businesses, whether it's the Innovation Bank, our affluent strategy, our Capital Markets and DFS strategy and our U.S. strategy. We've exhibited our resilience in difficult times in the recent past, and we're confident in our ability to navigate the current economic environment. Our relentless focus on our clients will continue to deliver successful outcomes, and we're going to help them make their ambitions a reality and create value for our shareholders over the long term. Finally, we remain well capitalized and well provisioned with a strong balance sheet. In conclusion, I want to thank all of our CIBC team members globally for bringing our purpose to life every day. It's thanks to our collective dedication that we have built a relationship-oriented bank that's positioned to continue to bring the best of our bank to our stakeholders, all of our stakeholders. And to our shareholders, thank you for your continued interest and support. We look forward to sharing our results next quarter. Bye now.

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