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. We will begin this morning's presentation with opening remarks from Victor Dodig, our President and Chief Executive Officer, followed by Rob Sedran, our Chief Financial Officer; and Frank Guse, our Chief Risk Officer. Also on the call today are a number of our group heads, including Shawn Beber from the U.S. Region; Harry Culham, Capital Markets and Direct Financial Services; Jon Hountalas, Canadian Banking, and Hratch Panossian, Personal and Business 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. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considered both to be useful in assessing underlying business performance. With that I'll now turn the call over to Victor.

Thank you, Geoff. Good morning everyone and thanks for joining us today. I'll begin with a few comments about how our client-focused strategy continued to deliver for our stakeholders in the third quarter before turning it over to Rob and Frank to review our performance in greater detail. Our core results were strong again this quarter, demonstrating continued momentum and consistency in execution, while positioning our bank for further relative outperformance. In a nutshell, our strategy is working and it's working well. On an adjusted basis we reported net income of $1.9 billion and earnings per share of $1.93. Our performance is supported by record earnings underpinned by continued resilience in our credit performance. Our strong capital liquidity positions are foundational to our continued momentum in deepening relationships and attracting clients to our bank. We ended the quarter with a 13.3% CET1 ratio and a 126% LCR, both well above regulatory and internal minimums. This also gives us confidence to announce a normal course issuer bid for 2% of our outstanding shares. Adjusted return on equity improved to 14%, even with an elevated capital buffer. ROE is improving as a direct outcome of the momentum we have in our core businesses, and we will continue improving our overall return profile over time. I'd like to highlight for you some of the areas of strength across our bank in the third quarter that highlight this momentum. We'll start with our Canadian consumer franchise, where we are serving the Canadian mass market segment and meeting the needs of clients in the mass affluent segment. Over the past 12 months, we welcomed 640,000 net new personal clients to our bank across our CIBC and Simply platforms, continuing a trend of strong client acquisition and retention. During the quarter, we also launched new banking…

Thank you, Victor, and good morning, everyone. I'll begin with three takeaways from our results. First, our underlying results were strong this quarter. While there were a few puts and takes that I will describe in my comments, our performance shows continued execution against our strategy. Second, we managed to another quarter of positive operating leverage, the fourth consecutive one. Excluding the items I just referenced and revenue link costs, our operating expenses were in the mid-single-digit range, which remains our guidance moving forward. And third, our balance sheet positions us well to navigate the current dynamic environment and supports our organic growth aspirations and those of our clients. Let's now move on to a detailed overview of our performance. I'm on slide nine. Unless otherwise noted, results are being compared with Q3 of ‘23. The quarter saw an increase in net interest income, continued fee income growth, credit quality stabilization, and capital accretion, with strong performance across all of our business units. Adjusted EPS was $1.93 and adjusted ROE was 14%. Please turn to slide 10. Adjusted net income of $1.9 billion increased 28%. Pre-provision, pre-tax of $2.9 billion were up 13% and revenues of $6.6 billion were up 12%. Supported by improved spread income, as well as continued growth across our fee-based businesses. We also continue to manage expenses relative to revenues, while investing to support our strategy and posted 60 basis points of positive operating leverage. Provisions for credit losses were down significantly from a year ago, due to lower losses in the U.S. office portfolio, and so impaired loan losses came in better than our annual guidance range. Frank will discuss credit in detail in his presentation. Slide 11 highlights the key drivers of net interest income. Excluding trading, NII was up 14%, driven by expanding…

Thank you, Rob, and good morning, everyone. This quarter, our credit portfolios performed well and loan losses remain moderate, reflecting the diversified nature of our portfolio, our strategic efforts of building strong client relationships and focus on working proactively with those clients experiencing financial stress. We continue to monitor our portfolios closely and focus on reaching out early to pre-delinquent clients. In addition, we have made significant progress on downsizing the impaired balances of our U.S. office book. Our strong allowance coverage reflects our prudent risk management approach against uncertainties that continue to exist in the macroeconomic outlook. Turning to slide 23, our total provision for credit losses was $483 million in Q3, compared to $514 million last quarter, with our allowance remaining flat quarter-over-quarter. Our performing provision was $79 million this quarter, driven by both migration and changes to our economic outlook in the retail and business and government portfolios. Provisions on impaired loans was $404 million, down $43 million quarter-over-quarter. This was due to lower provisions in the U.S. commercial portfolio, partially offset by higher write-offs in retail, as well as increased provisions in Canadian commercial and capital markets. Turning to slide 24, total bank-impaired PCLs this quarter was down 5 basis points, with a few offsetting movements across the business units. In personal and business banking, our impaired PCL trended slightly higher as we guided to last quarter. We anticipate PCLs to remain elevated into Q4. Our business and government portfolios collectively performed very well, with impaired provisions down $71 million this quarters, largely driven by strong performance in U.S. commercial banking. Both Canadian commercial and capital markets portfolios experienced an increase in impaired PCLs. We do expect occasional episodic events in [Technical Difficulty] are comfortable. This does not indicate systemic or sectoral risk. The U.S. commercial…

Thank you. [Operator Instructions] Our first question is from Ebrahim Poonawala from Bank of America. Please go ahead.

Good morning. Maybe going back, Victor, to your opening remarks around sentiment improving pipeline strong in Canada. Give us a sense of -- have we moved past the concerns around higher rates impacting the Canadian consumer, how to market, and economic activity? And are things looking -- are we on the other side of that? We'd love your perspective as you talk to your bankers, clients, around how likely it is that we do see the GDP rebound next year? And maybe Frank, we'd love your perspective on how that informs reserving in your outcome credit? Thank you.

Good morning, Ibrahim. Thank you for your question. I would say that we're in the transition to getting to a better place. You know, we've only had one rate cut. So I think that sentiment will continue to prove both on the consumer side, as well as on the business side, as we continue to see more and more rate relief, which we are expecting both in Canada and the United States. I think the -- our commercial clients are feeling more buoyant, I think our retail clients, our consumer clients are feeling a little more tentative when it comes to borrowing, but with two or here rate cuts and you know five-year fixed mortgage is getting to a better rate a price point maybe slightly below 4% I think you'll see that sentiment become more solidified and we would see that as encouraging for the business going forward. Frank?

Yes, and Ebrahim thanks for the question. From a credit perspective, we continue to maintain a prudent outlook on credit performance overall. I think unemployment continues to be a headwind for a little while. It's very hard to say when exactly that will peak and get better. We don't expect it to go up dramatically, and that's what you see in our outlook and in our provisioning. But we continue to expect this to be a headwind. And then over time, interest rates will have a positive impact and will mitigate some of that pressure. But that will be lagging a little bit as well. So as I said, a more cautious or still prudent outlook on credit, but we also don't expect any material increases or substantive increases in those portfolios.

And just one follow-up on capital. So you announced the buyback or authorization. But Victor, I mean, I'm sure you spend a lot of time in terms of capital allocations. Just give us a sense of the opportunity set ahead of you in terms of going off the group in Canada? There have been a bunch of deals announced. Is there any dislocations that create that opportunity? As well as in the U.S., some of the pressure on the regional banks, are you doing more through private to gain market share? And at some point, would you look at inorganic opportunities as well? Thanks.

Sure, Ebrahim. So just to clarify, there were two cuts, not one cut as Geoff Weiss reminded me. Thank you, Geoff. Look on capital, our focus has been on building capital organically and delivering a premium ROE. And we're pleased with the results that we've been delivering so far. We're not going to rest on our laurels, as I mentioned in my remarks. We're going to continue executing against a strategy we've laid out, which we believe will generate capital and we believe will generate a premium ROE. So as we think about capital deployment and capital allocation, we as a team spend a great deal of time focusing first and foremost on organic growth in our business and how we can help our clients realize their growth ambitions by using our balance sheet prudently and working with them. So that remains focus number one. I think as you've seen in my remarks, in the Canadian commercial landscape and the private economy of Canada, you're starting to see sentiment improve, but we need more rate cuts, more clarity, a U.S. election that gets behind us for people to see their confidence bolstered. I mean in the capital markets business you're starting to see constructive view. In our U.S. business what you're seeing is a shift and I'm happy to have Shawn talk about this, the shift from commercial real estate to C&I and growing with our clients. We're seeing that sentiment shift as well. Second priority is dividend growth. We will grow our dividends as we grow our earnings. We're going to announce those once a year, as we've said to you earlier this year. Third is share buyback. So we've actually activated the share buyback. We believe that there's an opportunity for us to both grow our earnings and deploy our capital prudently by returning capital to our shareholders. And the last piece is around opportunistic tuck-in M&A. We are leading an organic growth strategy first and foremost. It is going to deliver that premium ROE. It is going to create capital for shareholders. And we believe it will deliver strong share price performance over time.

Got it. Thanks, Victor.

Thank you. Our following question is from Matthew Lee from Canaccord Genuity. Please go ahead.

Hi, good morning, guys. Thanks for taking my questions. Maybe first on the Canadian banking loan growth side. Deposit growth is 5%, loan growth is just 1%. Is that a function of being more selective with customers or are there may be some other person takes to consider there?

Good morning, Matthew. Thanks for the question, it’s Hratch, I'll take it and I'll speak mostly to the personal side and happy to have Jon speak to the commercial side of Canadian banking. Look on the personal side, I will just remind everybody, we have a very clear strategy. Victor spoke about this for the whole bank. It is the same in our personal bank. We have a focused strategy. We've always talked about building a relationship oriented bank. We're building the relationship oriented bank of the future. And that means selecting certain clients, who need a deeper relationship and value a deeper relationship with the bank, winning with those clients, having the best solutions, leading with differentiated advice, leveraging our data and analytics and leveraging our imperial platform and our digital capabilities to build deeper relationships with those clients. And we're digitizing the business to drive efficiency in the front lines and the back end. That's our strategy. And we've talked about what that strategy will deliver. We believe that strategy would deliver aligned with Victor’s comments, growth that's above market. We've talked about high-single-digits revenue growth in our business and we've been delivering that. Operating leverage over time, again, we have been delivering that. And improving mix and ROE, which are going to help the bank's profitability overall improve. And so that’s the strategy we have been following rather than trying to grow loans or deposits. So what does that mean today? I think what you're seeing on our balance sheet and on our income statement is a direct result of that. Yes, long growth has been slow. Overall consumer growth has been low-single-digits on the loan side. When you look at Canada, we've been a bit lower than that. We've been about stable on mortgages on a year-over-year basis. We've been about 1% on loans overall, as you said. But we're winning where it matters. We're winning money in. We reference the [Indiscernible] numbers in terms of long-term net sales. On deposits, when you dig into that 5% deposit number, you'll see, particularly in the last few quarters, we're starting to win in demand deposits, where margins are higher, where relationship value is higher, and we're being more selective on the GIC funds, where it's been competitive, margins are a bit smaller, and frankly, they're not that relationship oriented in terms of the business with clients. And so we're going to continue doing that. We've got an amazing team. We've got great data and technology supporting that. We're going to keep rolling tools out to understand our clients’ needs better and to enable our team to serve those. And we think with that, we'll continue winning with revenue and ROE. And I'm less concerned about the numbers on volumes, but as Victor said, we think volumes will accelerate as confidence comes back as we get into next year. So I'll pass it on to Jon on commercial.

Thanks, Hratch. And thank you, Matthew. We've spoken a little bit about this on prior calls. Our view of commercial lending over the last year was more cautious. So as a result, our loan growth was slower than market, and that was a conscious choice. At the same time, our loan losses are flatter down versus history, while industry loan losses have gone up. So net-net, we think that's a good trade-off. Going forward, we see interest rates come down, we've seen inflation more under control, our entrepreneurs' confidence level is increasing, so we have a more constructive view of the market. What I think you'll see going forward is loan growth that is higher than what we've had in the past. A quarter-over-quarter growth is an indication of that. So as you think about next year, higher loan growth, more driven by non-real estate business, in the real estate business, it continues to remain quiet.

Yes, yes, that's great. I'll pass the line [Indiscernible].

Thank you. Following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Hi, a quick one and then a more detailed one. The tax adjustment that was backed out of earnings or adjusted earnings, can you explain that one? Is that like some sort of true up of previously recognized TEB revenues?

Hey, Gabe, good morning, it's Rob. So yes, it is exactly that. So in the first couple of quarters we had an adjusting item in the opposite direction related to the change in the dividends received deduction legislation. It hadn't yet been substantially enacted and so for the first couple of quarters we continue to recognize that through our numbers. In Q3 it was substantively enacted. And so what you see on a year-to-date basis is a zero, but this quarter it's the reversal of the benefit we saw in Q1 and Q2.

Okay, perfect. Actually, Rob, I got you here. You know, I get the message from CIBC that you're balancing revenue and expense growth and that makes sense? If I look at the segments I got a few here, you know, commercial banking, U.S. banking, cap markets, expenses growth is all, you know, mid-teens against revenue the revenue growth that’s, you know, high-single-digits we'll call it? And you know, if not for a good treasury quarter it seems like it would have been nearly impossible to achieve the consolidated balance. So you know the balance that we saw at the all bank level between revenue and expense growth I guess another way of asking those are statements, but my question is how much of these segment expenses are cash versus accrual? Like you had some opportunistic gains in treasury and were able to step up some investment spending accruals, something like that? Or if there is another perspective you want to share on all of yours?

Yes, I would say there is a few items this quarter that’s what I reference as the puts and takes, Gabe that were both positive and negative. We did have a couple of expense items that we show on slide 13, the expense slide, an aggregate of $65 million. One was in the personal and business bank, one was in capital markets. And those would be the two that I would call out that sort of at least I would twin them against some of the unusual revenue from treasury this quarter. On an overall basis, we -- like the 60 basis points of positive operating leverage, we're happy to have that streak continue. But we are trying to manage the bank with better visibility as best we can get it to deliver that operating leverage. So the other bigger piece is just the revenues were strong. And when the revenues are strong, and particularly from where the revenues are coming, you do end up with some of the performance-based compensation and variable expenses coming along for the ride.

Yes, okay. Now I just wanted to get a sense of how you can be so nimble, not from a skeptical standpoint, but just appreciate that dynamic more on a go-forward basis. Thanks.

Thank you. Our following question is from Meny Grauman from Scotiabank. Please go ahead.

Just a few questions on credit. One, in terms of clarification, the sequential growth on the credit card side. I'm not sure how much of that is seasonality. I assume some of that is as travel ramps up. But I just wanted to check if there's something there beyond seasonality and a broader question just in terms of following on what you bringing up, just in terms of the health of your credit card customer? And are you seeing any trends there? Any signs of stress in that product in particular?

Yes. Thank you, Meny. So yes, no, I would say it is seasonality, and there's nothing else really to call out. It's -- I would say, still a modest increase that we are seeing there. And then overall, from a health perspective on the credit card book, we do feel very confident with the credit quality of our book. We do see increases, and we do think that is a reflection of where we are in the economic environment. But if you look into a little bit more detail, utilization rates, revolve rates, payment rates. All of those are very strong and compare favorably to where we were pre-pandemic. So again, speaking to a good credit quality and good resilience in the book against the macroeconomic backdrop.

Thanks for that. And then, Frank, just a question about how we should view the renewal wave. Obviously, it was a bigger concern before we saw rate cuts happening. But how worried should we be about the renewal wave? And can you say that it's an issue that's in the past? Or is it more nuanced to that in your view?

Yes. So we are still watching that closely, of course. And it's still in our presentation in the appendix. We did update our disclosures. And what we did was we reflected that interest rates have come down. So we now provide a 5% and a 6% scenario. And we continue to believe that renewal rates do provide some discomfort to clients. And yes, they are higher. But overall, they are very manageable. And if you see, I think it's on slide 41. In terms of net income or in terms of income for our clients that we see at originations, the average increases peak at around 2%. And in that 5% scenario and that would be in '26. So overall, as I said, we are watching it closely, and we are not calling it over, but we also believe it continues to be quite manageable.

Thanks, Frank.

Thank you. Our following question is from Doug Young from Desjardin Capital Markets. Please go ahead.

Hi, good morning and thanks for taking my question. Victor, you mentioned a bunch of times just premium ROE. And I guess the question is, what needs to happen to get back to the 16% plus ROE target? And if you can kind of itemize some of those items and whether it's credit, expenses, capital? And then how long do you think it takes to get back there?

So it's a good question, Doug. Good morning to you. When we had our Investor Day, we outlined a strategy that was targeting an ROE of 16%-plus at the time when the regulatory CET1 requirement was 11.5%. Since that time, it has gone up. If you actually look at it on a like-for-like basis, that number would be 14.5%. Now we're not abandoning our goal of getting to a more premium ROE. We saw an improvement this quarter to 14% and the question is, how do you get there? One way and the primary way to get there is to build deeper, more meaningful client relationships, which, by definition, have a premium ROE, particularly when you have a balance of money in and money out. So not as credit intensive. And our affluent strategy if you actually did all the math, that is the most premium ROE segment when you look at that business and that business done well. The second piece is just the connectivity across our SBUs. Our Personal Bank working with our Capital Markets business on FX, our commercial bank, working with our wealth management business on making sure that we can manage the wealth of our clients and our entrepreneurs. All of those things are ROE-enhancing. The second thing is operating our CET1 in the 12.5% plus range. That's really our goal. Today, we're at 13.3%. We've announced the buyback. We think that over time, that will be ROE enhancing. And then finally, we've made some real significant investments in technology over the last number of years. I think you've all been with us through that journey. And our goal now is to scale those investments to ensure that the investments that we've made continue to deliver real returns for our shareholders. And with that, I think you work your way towards a better and better ROE number, a more premium ROE number over time and doing it in a way that's consistent without volatility and meeting your expectations quarter in, quarter out, fiscal year in, fiscal year out.

And is there one area you listed for them? And I appreciate all the detail here. Is there one area that you think is more accretive to that ROE? And I mean is this a five-year journey? And I get it that it's a hard question to answer in terms of timing given all the different moving pieces. But when you think back and you look at the strategy that you have laid out internally, like is this a five-year time frame? Or is this similar?

Look, it's a medium-term time frame, clearly. Every one of our business leaders at CIBC is focused on delivering a premium ROE. You can go through every single business unit. I think what we need to do overall as a bank is continue to simplify our business, simplify our processes, get some of the grit out of our cost base. So that we can actually use that and bring that down to the bottom line for our shareholders. So the business leaders are focused on ROE. You can ask any one of them, and they'll tell you that that's what their goal is, is to generate capital and to generate returns in excess of their cost of capital and then managing the business for connectivity, but managing the business for less friction. I think, over time, we'll deliver those results. And quite frankly, we're starting to see that in our next as well and our goal on delivering positive operating leverage pretty consistently.

I appreciate the color. Thank you.

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

Good morning. Shawn, I'll start with you in the U.S. I appreciate that the elevated expense growth is in support of a longer-term strategy. And I get you're up to there. Would be helpful to understand is how long this runway is? Like how many years left of this, let's say, elevated spending, negative operating leverage before missions accomplished and you can start to grow again in the U.S., I mean, grow pretax pre-provision profit, because I see that net income was up this quarter.

Good morning, Mario, thanks for the question. So our expense growth, as you said, is part of a long-term strategy. It's continued investment in our growth initiatives, as well as in our infrastructure to drive client experience, balance, enhancing our systems and technology aligned with both our business aspirations and regulatory expectations. And this quarter, it's about 50-50 between growth and performance-related expenses and the other half being more related to our infrastructure build and sort of normal course growth this quarter, in particular, had a -- I'd say, a heavier project delivery timetable. And so you see that in our results right now. We expect that to moderate. I think quarter-on-quarter, we're expecting more like a flat expense number Q4 over Q3. But it is a longer-term journey. I think we've got certainly a number of quarters in front of us where we will continue on that pace of investment. But our objective over time, and I would echo Victor's comment over a medium-term horizon to get to that place where we are ultimately generating positive operating leverage. And it will require some level of constructive markets. Obviously, credit demand industry-wide has been lower. We are growing faster in C&I, which is a strategic focus of ours. At the same time, we're still pivoting on the commercial real estate side. It's still a very important business for us. But given the steps that we've taken in the portfolio, particularly around institutional and office, that's been a bit of a headwind to overall loan growth in the U.S. That will take a few quarters to play out, but we expect to resume growth going forward in the loan book and then continue to invest in our wealth management platform, making that a bigger part of the overall business. All of that should drive better revenue growth over time and drive towards that operating leverage target.

Yes. Maybe slightly different. I think this might be best for Rob. Several banks have reported this quarter that their treasury activities were helpful to the NII and from what I said, that statement, although helpful is somewhat opaque to me. I'm not really sure what that means. What would be helpful then if you could address this in two ways. First, describe maybe even with an example, what that is? And then secondly, the conditions that were in place in the quarter that led several banks to benefit from treasury activities? Those are the two things I'd like to understand.

Good morning, Mario, it's Rob. So I obviously can't speak to the other banks, but I can say in terms of ours, it's a number of things that add up to the roughly $90-odd million that I called out in my prepared remarks. So for starters, rates did come down during the period. And we're talking about a balance sheet that has $1 trillion on each side of it. And our treasury is active daily in terms of positioning and hedging that balance sheet effectively. And so from an execution perspective, they saw some opportunities, and there was a benefit as rates were falling. And they took advantage of that. There's also -- in any given quarter, you're going to get a series of market-related sort of esoteric items that matter only to treasurers, things like hedge ineffectiveness and accounting and all these kind of things that were also moved in the right duration for us this quarter. And in our case, specifically, we also had the revaluation of a funding vehicle or a parameter update on a funding vehicle that added another $30-odd million to our revenues. So it was a series of things that we're going in the right direction from a treasury perspective. And so it's difficult to call out any one individual thing as the reason. But I will say when rates are moving and we are positioning ourselves in that environment. Opportunities can present themselves, and we took advantage of it. So it's very much in keeping with the strategy of the treasury to try to keep the noise down as best as possible and keep it over the longer term, which is why I don't know that I would want to run rate the numbers that you saw this quarter, but the opportunities were there.

Thank you.

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

Good morning. Frank, just a couple of quick clarifications on the commercial real estate exposure. And I apologize I had to jump on and off. So if you already answered this, just tell me look at the transcript. On slide 42, you mentioned the watch list, and we expect to see some new inflow. Is that additional loans on to the watch list or a transition from a watch list onto gross impaired?

Well, it's -- I think it is a little bit of both. We have seen very low, very strong performance. We have seen gross impaired loan ratios as you see on the slide, actually going down, and we are quite pleased with those results. But what we are calling out here is in general, as we said in previous quarters, we have put the worst behind us, but we do not think that the stress we have seen in the U.S. office market as a market overall, is over yet. As I said in my prepared remarks, that you may have missed, we are not expecting any of the large losses we have seen previously to reoccur. But what we are saying here is there could be some that will still come.

Thanks, Frank. And as you guys have discussed as you're managing the portfolio, there were some dispositions this quarter. Can you give us a sense of whether or not there were any gains or losses associated with that -- with those dispositions?

Yes. So generally, there was -- I think we used it a couple of times gives and takes on those. But we did see our strong result in the U.S. was helped by that. We do see -- we did see some reversals on some of those dispositions. Overall, not a very large number, but it certainly contributed to the very strong results we've seen in the U.S. this quarter.

Great, thanks Frank, I appreciate it.

Thanks John.

Thank you. Following question is from Nigel D'Souza from Veritas Investment Research. Please go ahead.

Thank you. Good morning. I had some follow-ups here on credit. When I look on slide 38 and delinquency rates across uninsured mortgages, I'm noticing there's a bit of an uptick there in the GTA category. I'm wondering if you could point to any specific trends or segment that's driving that fixed versus variable owner-occupied versus non-occupied or any specific vintages that are driving higher delinquencies?

Yes. So in general, what I would call out is that we do feel quite comfortable with the credit quality of our mortgage book. As I said in my prepared remarks, we do not expect material losses from these portfolios. I think it's on the slide, but from a segment perspective, investor mortgages tend to perform favorably, compared to owner-occupied mortgages, what we are seeing in the books. I think if you're looking into and if you're segmenting it, it's probably a little bit higher delinquency rate on variable rate mortgages. It's a lower delinquency rate on fixed rate mortgages. But even in that, I would say nothing concerning going on there. What we have seen is just a very, very slow market. And that, of course, supports a little bit of or drives a little bit of the delinquency rates. Hratch talked about our disciplined approach from a volume growth perspective. And even that is contributing a little bit to our delinquency rates, because our denominator is not growing as much. And as such, as I said, we are concerned and we do believe our credit quality is quite strong. If I give you a couple of metrics, our liquid assets or liquid assets, our clients hold to cover payments is an average of 7 times to 10 times. The monthly payments, depending on, again, what segments you look at. Less than 1% of our uninsured clients, we would classify as high risk, meaning they have high LTVs and low BEACON scores. And overall, even in those delinquent mortgages, the average LTV is less than 60%. So we're very well covered from an exposure perspective, even if you assume some moderate house price declines could still happen from here.

Thanks, Frank and on the broader retail portfolio, are you seeing any differences in trends between homeowners and renters? And what I'm getting at here is -- our strong balance sheets for homeowners, particularly on the asset side with real estate prices being stable, is that what's helping mitigate delinquencies or credit losses in your portfolio? Or is there no noticeable difference between the two buckets of retail borrowers?

Well, I would say, there is some differences. And generally, homeowners perform better and would carry less unsecured debt and would perform stronger on the unsecured debt. I wouldn't say it's a dramatic difference, but there is a difference there. And typically, our unsecured losses would not be with clients that are homeowners or carrier mortgage with us.

Great. And last question here on FLIs on page 45. The unemployment rate right now is a bit higher than your base case assumption, and it's expected to trend a bit higher? So is there potential for upward pressure on your performing provisions next quarter based on where unemployment currently is?

Yes. And as always, as you can appreciate, a little bit of timing in those numbers. You're also looking at an average over the next 12-months. So there is a little bit of an expectation that unemployment has not yet peaked and will trend higher from here. I wouldn't speculate yet on next quarter performing allowances, because that would be way too early. But unemployment is certainly one area that we are watching closely, because it has been and continues to be a headwind in the overall economy.

Okay, that’s it from me and appreciate it.

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

Hi, thank you. I wanted to go back to Shawn Beber for a moment on the U.S. business. And I just wanted to -- when I look at the suggestion that you're sort of reshaping the portfolio mix, can you maybe provide a little more color around that? And how -- I'm just thinking about loan growth parameters for the model and the NIM associated with that how long -- I think, I heard you say it's a few quarters before you're repositioned. So maybe you can just give us some -- a bit more color on how far you need to run off commercial real estate? And what the puts and takes are to the NIM and revenue growth in the next few quarters based on this repositioning?

Thanks for the question, Darko. So in terms of where we are on the journey, we've had, I think, a positive impact on the portfolio through the steps that we have taken over the last several quarters. I think, as I mentioned, that's going to continue to play out. We -- depending on what happens with the rate environment with rate cuts, we might actually see some even further payoff activity or accelerated payoff activity in the CRE portfolio. At the same time, we're seeing encouraging signs on the C&I side. We have seen that loan recovery start a couple of quarters ago. That continued this quarter. And based on the level of activity and discussions that we're seeing, the pipeline is improving. We're encouraged by what we're seeing in terms of being able to deliver on the C&I growth. So the headwind that CRE has been into overall loan growth, I think will dissipate over time. As I say, it can still take a couple of quarters. It's a bit early to be giving guidance next quarter. But I would say overall loan growth, we had growth this quarter. I'd say I expect a level of continuation of that recovery in loan demand, assuming that we get the constructive or more constructive environment over the next couple of quarters on the rate side and the overall macro backdrop based on our outlook. In terms of NIMs, we're still calling for pretty stable NIMs. We're not anticipating this having a material impact on that. And that also has to do with the deposit franchise and what we're doing there in terms of being proactive and responsive to the rate environment as we have been. So that's up and down. And so again, assuming rate cut environment comes through, then we're anticipating being quite responsive to that, balancing the competitive environment and ultimately resulting in a stable NIM outcome. So loan growth, probably still modest over the next little bit and stable NIM.

Okay. That's very helpful. Thank you, Shawn. And just if you could remind me -- when I look at your balance sheet, it's $36 billion or so, call it, of loans. Can you just remind me like the -- how much of that is actually like syndicated? And is that should be an area where you can press on the gas and hit the brakes more you like? Has that changed at all? Is that part of this build or this -- when you say infrastructure build and so on, is that what you're changing, how you originate the loans? Or is how you originate in the proportion of syndicated loans that you originate more or less the same?

Yes, pretty stable in terms of what we're originating. I mean we are either the lead agent or sole bank on the vast majority of our loans, like more than three-quarters of our loans. So that hasn't changed. The infrastructure build is really two-fold. It's driving better client experience, elevating. We just had a wires migration. We consolidated our wealth platform onto a single much more modernized platform. We completed that a couple of quarters ago. We continue to invest in that as we bring on new capabilities in support of our wealth business, which strategically is one that we are quite focused on and looking to grow as a proportion of the overall of the overall bank. So -- and the other part of the infrastructure build is the regulatory environment continues to evolve. We are looking to make sure that we are keeping pace with that. And so that investment continues. But in terms of the origination activity, I'd say fairly stable in terms of our approach to market.

Okay. Great. That's very helpful. I have a few follow-ups, but they're very technical. I'll call Geoff afterwards. Thank you.

Thank you. Our following question is from Sorab Movahedi from BMO Capital Markets. Please go ahead.

Okay. Thank you. And I'm going to stay also with Shawn. Shawn, I look at your sub-pack, the results this quarter in U.S. dollar is $158 million. A couple of years ago, this quarter, $152 million. You're doing it on similar provision levels, $28 million a couple of years ago versus $33 million this quarter. And you're doing it with a couple of quarters of improving loan dynamics from a volume growth perspective, but you're also doing it with quite a number more FTE? My question, I guess, just to kind of dovetail from Darko and Marios is, are we now approaching a stable kind of earnings contribution level here from the segment? And is this a good base to work off of to go up, number one. And number two, have we seen a plateauing of this FTE build? Or do you anticipate that this kind of infrastructure -- continued infrastructure investment will require further FTE build? And then number three, is this FTE build going to have revenue benefits at some stage in the future?

Sorab, thanks for the question. So look, we are driving towards, I think it's a good starting point from which we expect to grow. The infrastructure investments, we will be absorbing that cost as we go part of that is on the infrastructure side. But as I said, about half of the growth in expenses that we've seen this quarter, and that would have been similar last quarter has been around growth initiatives. And so we expect those to start paying off over the next -- the coming quarters. And so from here, we would expect growth. The investment that we're making in FTE on both infrastructure and our growth initiatives, we expect to continue, but we don't expect the same pace of expense growth going forward. So I think it's a good starting point. And from their continued growth both on the infrastructure side and on the front office side as we grow out the components of our business in the U.S.

Thank you. Our last question is from Lemar Persaud from Cormark Securities. Please go ahead.

Yes, thanks. I want to turn to credit for Frank. Obviously, there's been a repositioning of the bank's U.S. office commercial real estate portfolio. But even then, I'd expect some reversion to a mine and U.S. commercial PCLs. So how should we think about losses in that business on a more normalized basis? Like where I'm going at with this is I fully appreciate the mid-30s impaired PCL guidance. But if I was to plug in a more normal level of losses in that business, you'd be well above the mid-30s guidance. So bottom line, like could we be looking at impaired PCLs meaningfully above that mid-30s guidance near-term? Or are there some takes across other businesses that you see?

Yes. So we put that guidance of mid-30s for the bank out because we feel very comfortable with that guidance. And that guidance does include some episodic events that we could see once in a while in the U.S. business or in other businesses. as well. You're absolutely right. We do not expect the very strong performance we saw in the U.S. this quarter from a credit perspective to the new normal. And the new normal run rate would be, I would say, a little bit higher. I mean pre-pandemic, we saw in the mid-double-digit loss rates in the U.S. portfolio and that's probably a longer-term time line or run rate. And then in the shorter term, it can be a little bit higher. So I'm not giving you a precise answer here because I don't think we give SBU guidance in particular, quarter-over-quarter. But it will be lower than what we've seen in the past few quarters. It may be a little bit higher than what we've seen this quarter. And overall, it will fit very well within our mid-30s guidance for the full bank.

Okay. And then maybe turning over to Rob, just when looking at expense growth at CIBC, you're going to be running into some pretty tough comp quarters, because there was a real slowdown of expense growth towards the end of 2023. The bank went essentially from the upper single-digits to low-single-digits. Wondering if you could walk us through your thoughts on expense growth in the context of tougher comp quarters and then also operating leverage if some of these treasury gains don't materialize as you look forward?

Thanks, Lemar. Good morning. So the reason we show the expenses the way we do on slide 13 is that that's actually how we manage the expenses, right? We focus on our operating expenses, and we're thematically linking our investment portfolio with generating the efficiencies to help fund it. And that helps keep operating leverage in view. And while we may not get it every quarter, we're certainly happy with the four quarter winning streak we're on, and we do start the year expecting to get operating leverage based on our plans. This year, revenues have been stronger and so total expense growth has actually been higher. So I appreciate your comment on some of the comps, but we've been seeing expense growth trend higher as revenues have come in better than originally planned. So when we look forward, we still think that construct of mid-single-digit expense growth, excuse me, is a reasonable assumption going forward, and we plan for the operating leverage and we plan to work these things against each other, so that if revenues don't come in the way we are hoping they come in, we have some levers to pull to maintain that operating leverage. Again, we're not going to get it every quarter, but it's certainly our goal to get it annually.

Appreciate the time.

Thank you. That concludes the question-and-answer session. I would now like to turn the meeting back over to Victor.

Thank you, operator, and thank you, everyone, for your questions. As you heard this morning, we delivered another strong quarter, while positioning our bank for further success. Our performance builds on the consistency that we've demonstrated over the past several years and we remain committed as a leadership team to producing reliable results for all of our stakeholders across all of our businesses. Our bank has a dedicated, experienced leadership team in place, a differentiated strategy and a healthy balance sheet. This time, I also want to acknowledge those affected by the extreme weather events in Canada and the United States. The CIBC team has been proactively working with our affected clients to provide financial relief, advice and support. I'm very proud of our teammates that bring our purpose to life each day to strengthen the communities where we work and serve them. In closing, I'd like to extend a thank you to our dedicated CIBC team around the world, have a good day and enjoy the rest of the summer.

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