Good morning, ladies and gentlemen. Welcome to the RBC 2017 First Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Dave Mun, Head of Investor Relations. Please go ahead.

Good morning, and thanks for joining us. Speaking today will be Dave McKay, President and Chief Executive Officer; Rod Bolger, Chief Financial Officer; and Mark Hughes, Chief Risk Officer. Following their comments, we'll open the call for questions from analysts. The call is one hour long and will end at 9:00 AM. To give everyone a chance to participate, we do ask that you keep it to one question and then re-queue. Joining us in the room for your questions are our business heads. Jennifer Tory, Group Head, Personal & Commercial Banking; Doug Guzman, Group Head, Wealth Management & Insurance; and Doug McGregor, Group Head, Capital Markets and Investor & Treasury Services. We'll post management's remarks on our website after the call. As noted on slide 2, our comments may contain forward-looking statements, which involve implying assumptions, and have inherent risks and uncertainties. Actual results could differ materially from these statements. I'll now turn the call over to Dave.

Good morning, everyone, and thanks for joining us today. RBC had a record first quarter with earnings of CAD 3 billion, up 24% from last year, driven by strong results across our businesses. These results reflect our continued focus on supporting our clients, a stable credit environment, and our ongoing cost discipline, which drove strong operating leverage across most of our segments. Our CET1 ratio grew to 11%, which provides us flexibility to redeploy or return capital to our shareholders. I'm pleased to report that we announced a CAD 0.04 increase to our dividend this morning, bringing our quarterly dividend to CAD 0.87 per share. We also continued to buy back shares in the quarter. And at the end of January, we announced a specific share repurchase program for the remaining 14 million common shares of our buyback program. Overall, RBC had a great start to the year, and I'd like to highlight some of our key strengths this quarter. In Canadian Banking, client volumes grew 6% year-over-year with particular strength in cards and commercial. We also saw momentum in customer deposits, up 8% from the prior year, reflecting our focus on growing core checking accounts, a key anchor product for us. Beyond deepening relationships with those customers, our large deposit base supports our funding position and provides leverage to higher rates in the future. Our expense growth in Canadian Banking was well controlled, driving positive operating leverage of 2.9%, and an industry-leading efficiency ratio even as we continue to increase our investments in technology and innovation. Credit quality across our portfolios also improved, benefiting from stable economic conditions in Canada and higher oil prices, which Mark will expand upon. In Wealth Management, higher client activity, asset inflows and volumes drove earnings growth of over 40% from last year. Global…

Thanks, Dave, and good morning, everyone. Starting on slide 5, our first quarter earnings of CAD 3 billion were up 24% from last year. This quarter, Moneris completed the sale of its U.S. operations, which resulted in a before and after tax gain for us of CAD 212 million. Excluding this gain, adjusted earnings were up 15% from the prior year and reflect strong earnings in Wealth Management, Capital Markets, and Investor & Treasury Services. We also had solid earnings growth in Personal & Commercial Banking. Lower PCL also contributed to our strong performance as last year's results were impacted by low oil prices. At the enterprise level, our effective tax rate was 21.5% or 22.7%, adjusting for the after-tax impact from the Moneris gain. For 2017, we expect our tax rates remain within the 22% to 24% range based on our anticipated earnings mix. Compared to last quarter, earnings were up 19% or 11% excluding the gain, reflecting strong results across most of our businesses. Turning to slide 6, our common equity tier 1 ratio was strong at 11%, up 20 basis points from the last quarter. This was mainly driven by strong internal capital generation and lower pension obligations, partly offset by the impact of share repurchases. As Dave mentioned, at the end of the quarter, we announced a specific share repurchase program. For part of this program, we have an obligation to repurchase common shares, and that obligation required us to book an accrual for the first quarter, which reduced our CET1 ratio by approximately 20 basis points. Now, let me turn to the quarterly performance of our business segments, starting on slide 7. Personal & Commercial Banking reported earnings of almost CAD 1.6 billion, up 23% from last year. Canadian Banking net income of CAD 1.5…

Thank you, Rod, and good morning. Turning to slide 13, total provisions for credit losses of CAD 294 million were down CAD 64 million or 18% from last quarter. Our PCL ratio of 22 basis points decreased 5 basis points quarter-over-quarter. Our strong credit performance this quarter largely reflects benefits from the continued recovery in the oil and gas sector, stable economic conditions in many of the regions we operate, and prudent risk management across our portfolios. This quarter, our total PCL ratio would have been 25 basis points excluding the better than expected recoveries in the oil and gas sector. Let me discuss the performance of each segment on slide 14. In Personal & Commercial Banking, provisions of CAD 249 million decreased by CAD 39 million from last quarter. Canadian Banking provisions of CAD 250 million decreased by CAD 26 million from last quarter mainly in our personal and commercial lending portfolios. Caribbean and U.S. Banking provisions were down CAD 13 million from last quarter, largely due to recoveries in our Caribbean portfolio. Wealth Management provisions of CAD 13 million decreased by CAD 9 million from last quarter, largely reflecting lower provisions at City National due to lower charge-offs in the technology sector. Last quarter also included a provision in one international wealth account. Capital Markets provisions of CAD 32 million decreased by CAD 19 million from last quarter, largely reflecting recoveries in the oil and gas sector. This was partially offset by one provision on a commercial real estate account in the United States. Turning to slide 15, gross impaired loans of CAD 3.6 billion were down CAD 344 million or 9% from last quarter. Our gross impaired loan ratio of 66 basis points was down 7 basis points from the prior quarter. Personal & Commercial Banking gross…

Thank you. We will now take questions from the telephone line. Our first question is from Sumit Malhotra from Scotiabank. Please go ahead.

Thanks. Good morning. I'd like to start with a clarification and then ask my question, if that's okay. The clarification is for Rod on the capital impact of the share repurchases, the 21 basis points that you call out. Am I correct to assume here that you're saying you've booked CAD 10 million of that obligation, and that even though we didn't see the actual heavier buyback activity begin until Q2, you've already included the impact of that in capital? Is that the right way to think about that?

Yeah. That's exactly right. So we would have executed a little over 1 million shares in Q1, and then we accrued 10.2 million shares that would take place in Q2, but we reflected that at the end of Q1.

Okay. So whatever activity we see in the regulatory filings, from a capital perspective, that's already taken care of, or at least CAD 10 million of it is?

Exactly.

Okay. Now my actual question is for Doug, and it's Wealth Management revenue. And looking at a couple of things here, first off, your transaction revenue had a material step-up. And I know market conditions have been better, but that is bigger than anything we've seen before. Is there something extraordinary in here that helped this number or is this simply a reflection of what's happening in the underlying business? And along with that, a comment on City National NIM, which I would've thought would have benefited from the higher rate environment, but the last two quarters seems to be going the other way in a material fashion. Thanks.

Sure. There is nothing special in the transaction revenue line. The mix of our broker channel revenues in Canada tends to be more fee-based than transactional based, whereas the U.S. is a little more transactional based. So what you're seeing there is the blend of both businesses and just very strong markets.

It's Rod, I'll take the NIM question. Basically, what you see there is the impact of the runoff of the acquired impaired loan portfolio that City National had acquired prior to our acquisition. And those were marked to very high rates, so that had an 8 basis point impact in the quarter. And now, with the Fed having increased the rate by 25 basis points in the middle of the quarter, we would expect the NIM in City National stabilized, and we'd look forward to potentially improve from here.

So the last two quarters, NIM down 20 basis points, that's all, in your view, due to that impaired portfolio, just to confirm that. And how big is that impaired portfolio relative to the loan balance that you show us?

That portfolio is around $300 million at this point and it's at good rates, as I mentioned, from purchase accounting. And so that's a – it's a small portion, and we would expect that to continue to run off at the CAD 50 million to CAD 70 million a quarter or so.

Thanks for your time.

Yeah, it's Doug again. Actually, as I think about your comparison to our peers, the other difference might be that we've got a more robust insurance offering than many of our peers, and there were some tax changes to some of those products towards the end of last year, which encouraged a number of our clients to execute on those products. So relative to the competition, we might be doing more of that business.

That's helpful. Thanks, Doug.

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

Hi, good morning. I just wanted to follow up on that margin question, Rod. I mean, so if I think about 12 basis points last quarter and now, 8 basis points this quarter, is the difference between those two things – and I appreciate there's a lot of moving parts, but is the main difference between those two things the fact that the Fed moved during the quarter?

Well, likely. I mean it was a – it's been – so the Fed would have a partial offset, we've also had very strong growth in deposits, which will benefit more as the Fed continues to increase. So that has also provided a little bit of contraction. But the largest share, the lion share has been that acquired impaired loan portfolio. And although it's impaired, many of these loans are – have been with us for five – with City National for five years to seven years. So they are performing loans, the rate that we're recognizing on them is good. And as they wind down, it's going to take some margin compression. But as I said, I would think the impact of that will be largely, if not more than offset by the Fed increases for the remainder of the year.

And I guess that's my real question, is when you think about the interest rate sensitivity that you've got at City National, how confident are you that as the Fed moves, we're going to see some margin expansion and we're going to see the revenue lift that I think everyone is hoping to see?

We're confident in that. And we had our Investor Day and we cited CAD 50 million benefit across the U.S. Wealth Management business from each 25 basis point Fed increase, and we continue to see that in the forecast when that comes in. So you would expect margins to begin improving. And if the Fed increases rates in one of the next few meetings, you'll see that benefit phase in over the rest of the year.

Okay. Thank you.

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

Hey, good morning. Just want to ask, Rod, you alluded to some efficiency initiatives in the Canadian retail business that'll drive you to the higher end of your operating leverage target. Can you describe some of those? And also, because I get asked all the time, just confirm that Royal is still not planning on taking a big restructuring charge, because this quarter is a pretty strong statement of your ability to deliver efficiency without doing such a thing.

Hi, Gabriel, it's Jennifer. I'll start on the initiatives...

Sure.

...and we continue to invest in technology, both for back office efficiencies and for client experience. And as Rod already highlighted, even with that, our expense growth was limited to 1% compared to last year, and that was largely from benefiting from reduced FTE and our continued focus on the initiatives, as I outlined. We are very pleased with our operating leverage and efficiency ratio adjusted for Moneris, and we continue to feel that they're – with these initiatives and our increased spend on digital and technology, including adding FTE in our digital teams, it's largely being offset by the reduction in servicing capacity, both in our network and advice centers, which is being allowed by some of these technology investments as we automate our back-office processes, introduce new technology into our contact centers, et cetera. So we're comfortable continuing to guide to the high end of our 1% to 2% operating leverage range. Dave?

Gabriel, it's Dave. Maybe I'll jump in on your latter part of your question. So we talked about a CAD 90 million kind of run rate charge that we take year in, year out to manage our cost base. And we, in Q4, disclosed that we'd up that a bit to CAD 130 million. So some of that was loaded into Q4. Having said that, you see us drive very strong operating leverage. The 2% we're targeting, upper end of that range, is consistent with how we've run the bank historically and reposition the bank. We do not plan to take a large severance charge. And we're driving very strong results and we've got leading efficiency ratios, the way we've managed the bank, and we'll continue to do that and we're very, very happy with the results.

Okay. And just a quick one on the Capital Markets. I noticed, Doug, the wholesale loan balance was down both year-over-year and sequential, and the message I was getting from you at the end of the last year is that you'd optimized. You looked at your client list; who was paying you, who wasn't, and using too much balance sheet in relation to the other revenues they generated. And this year was you're going to push for growth again, and we're not seeing that yet in the numbers. Is this just a reflection of your corporate clients tapping the debt capital markets or should we expect more growth in that balance later in the year?

It's a number of things. So, I think one is there's some FX impact there, and which has lowered the loan balances. But you're correct, I mean it's down about CAD 6 billion or CAD 7 billion, and it was from that optimization effort last year. We're trying to get the return on that loan book into a place that we're happy with, and I think we've made a lot of progress. So, yeah, I would say that you're going to see single digit growth in that book going forward, depending on market conditions and funding costs.

Hi, everyone. Just to be fair to everyone, just a reminder to try and limit your questions to one and then re-queue. We'll likely have time at the end of the session to have more questions as well. Thanks.

Thanks.

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

Thanks. Mark, on page 17, you've given some incremental disclosure on the residential mortgage portfolio. You've noted that certain mortgages greater than an LTV score and less than a FICO score. Why are those demarcation points relevant? Why is 650 for an LTV of 75% something to highlight?

I think it was merely to try to demonstrate that as you start to go down into either lower credit scores or higher LTVs that are uninsured, that we have a very small and modest amount of that exposure.

And is that to say that, that's where you would have the highest risk but you have the least amount of exposure?

Yes. Our exposure, as I've said in my comments, we believe our portfolio is very strong on a portfolio basis, very high credit scores, very good LTVs, and that particular metric suggests that where there would be greater risk, it is very modest.

And just to follow up on the point, one last kick at it here. In case of stresses, would you expect the losses in the resi mortgage portfolio to be concentrated in that portion of the portfolio that is high LTV, low FICO?

That, I think, the way we do our stress testing is we do it on a portfolio basis. We do multiple different stress tests where we would look at different situations. So we would look at different regions, we would look at different global impacts, and it really depends upon the type of the stress that we would be considering at the time.

So it could be irrespective of these metrics?

I'm sorry, what did you say?

It would be irrespective of the LTV and the FICO score metric is what you're saying?

No, I don't think I'm saying that. I'm saying that it could depend on – I would not agree that it would necessarily be in this particular portfolio. What I'm saying is it depends on the scenario that would actually be playing out.

Okay. Thank you. That's very helpful.

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

Hi. Good morning. Just want to ask a question about the series of charts you show at the bottom of slide 22, and you show a decline in net branch count of 1% in Canada. And I'm just wondering, as you look over the next few years, what do you expect the pace to be going forward. And just as a related question, if you look at the other two charts in terms of active digital users, and especially mobile users, very significant growth there. And I guess the question comes out, why wouldn't you expect more of a reduction in branches based on the kind of growth you're seeing in those other channels? And I appreciate you emphasized that branches are a key component, but still seems a little bit out of whack, the pace of net branch closures from those other few charts.

Hi, Meny. It's Jennifer. Couple of different things in there. First of all, we don't want to get ahead of our clients. And while they're continuing to move some of their basic transactions to digital, so over 70% now has been moved to digital channels, they still value the relationships they have with people, particularly when it comes to advice in more complex financial products. So what we want to do is leverage the best of digital and our branch network, including, as Dave outlined, how we use data to reach our clients, and then have them come and be able to find somebody to give them advice around their financial needs. So there are many reasons we want to continue to support people in branch networks across the country. And while we have had six branches consolidated in this quarter, we also opened three in markets where we were underrepresented, and year-over-year, we're down 10. So what I would say about that is that we've worked very closely with our regions over the last couple of years to identify the positioning of our branch network. We'll continue to look at it on an ongoing basis, and we will have fewer branches in the future. We just don't want to get too far ahead with our clients, as I said. We also have the largest mobile sales force in the country, and we're continuing to add additional capacity to be able to service clients when and where they need, whether or not they need to go to a physical location to do that or whether they can go to other places to do business with the clients. Your comment about the active mobile users and digital; the more features that we put on to our digital channels, the more we would expect to have our clients actually take that up because we're educating them that these are simpler ways for them to do their banking. And that's actually, further to the earlier question around cost reduction, that's also another way that we can be more efficient in our branch network as opposed to closing branches always being the solution. We can also just reduce the number of people that we have doing servicing transactions.

So, would you say that 1% pace that we saw, you'd expect that to continue over the next few years? Is that something you can comment on?

I would say, and depending on client behaviors and how we're positioned across the country, we can continue to make adjustments as we see fit.

Thank you.

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

Good morning. I want to look at wholesale banking or just Capital Markets generally. When the U.S. banks reported their Q4 2016 results, pretty much all of them offered some pretty optimistic comments about 2017. They gave a variety of reasons for it. And I'm not asking for Q2 guidance, but an outlook from you would be helpful as well.

Yeah. Look, we've got quite a good market environment, don't we? And we've got – for us, if you have decent oil prices and decent performance from the energy sector, that's quite important because that's the biggest business in our wholesale bank. You have strong credit markets for leveraged finance and high yield, those are significant businesses for us in the U.S., and you have strong equity market. So when you have that kind of backdrop and you're getting elevated M&A activity, it's a pretty good environment, frankly. And in that kind of an environment, you need to do well. So, yeah, I would say it looks pretty good looking forward. Will we have some volatility? I think every year, we typically run into a bit of a volatile period, we'll see when and if that happens. But for the time being, things are quite good.

Is it possible that your more measured approach on wholesale lending could stifle some of that upside for Royal?

Well, no. I think we have capital available for customers. We just want to make sure that we're using it in places where we like the risk and we like the return. And so, our people in the field, we have hundreds of bankers, well, hundreds of bankers in the U.S., but several hundred bankers globally that are seeing clients and they're telling clients we can do business, so I think we'll be fine.

Thanks.

Thank you. Our following question is from Ebrahim Poonawala from Bank of America Merrill Lynch. Please go ahead.

Good morning. I just had a question in terms of capital and capital deployment. You mention, Dave, in your opening comments that the 11% CET1 gives you flexibility to adapt to regulations and, at the same time, deploy capital. I guess, firstly, in terms of – as we think about incoming regulatory changes, how do you think that 11% – are you where you want to be or do you still expect to build that capital before some of these rules get finalized? And tied to that, how are you thinking about – you've talked about doing additional U.S. M&A as we look forward. Any color around what could sort of fit – City National is a pretty unique franchise. So just trying to get a sense of what kind of transaction would make sense that could be integrated with your existing retail footprint in the U.S.

Thank you for your question. I think we've been pretty consistent in saying that we're targeting the mid 10.5% range as our target range. So therefore, we're carrying capital that gives us flexibility to do all the above: to return capital to shareholders, to grow our book organically across Capital Markets, City National; and in Canada, it gives us enormous flexibility for growth; and in the future, to make acquisitions if they make sense. I would say our large focus in the United States right now is executing organic growth within the City National and organic growth within the Capital Markets franchise. If you look at the growth rates in City National, 29% deposit growth, 16% loan growth, which requires capital, obviously. We continue to see growth opportunities to deploy capital organically, attracting teams from competitors to accelerate that growth, investing in NIE platform for jumbo mortgages, for commercial account growth, for private banking growth in City National. As we talked about, we've added well over 300 colleagues in the City National franchise, positioning ourselves for future growth. So I think we've seeded organic growth. We'll start to see that continue that momentum, and therefore, we have enormous flexibility to deploy that capital. The regulatory environment is uncertain. Uncertain U.S. position on regulatory issues, uncertain finalization of the Basel 3.5, Basel 4, whatever you want to call them. Initiatives around trading book, capital treatment offering treatment credit floors, all that remains up in the air. And therefore, having 11% ratio, being able to buy back shares the way we have, being able to increase our dividend, being able to grow our book organically and have the flexibility to consider an acquisition that made sense and with the right price, and we got a good economic return for our shareholders is a great place to be, a year into having made our largest acquisition ever. So we're feeling very good about things. It's just fantastic to have that flexibility in capital.

Just a quick follow-up on that. So safe to assume that given the organic opportunities that you see, we could go to 2017 – well, into over the next 12 months without you having to do a deal in the U.S.?

Yes. So, I mean, you look at the prices of U.S. banks and the runoff there, and our ability to generate synergies and return on capital, it remains challenging, I would say, at best. So, we're obviously very conscious of shareholder return as we look at tuck-in acquisitions for City National. We would have greater cost synergies, obviously, and if adding to the City National franchise, we would look at growth synergies. But it has to make sense from a shareholder perspective, and evaluations are elevated, to say the least. And therefore, we are focused on organic growth.

That's helpful. Thank you.

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

Hi. Good morning. Just to follow on that question, Dave. It sounds like you want to keep the – and this is my words, it sounds like you want to keep the CET1 ratio in and around 11% to give you the flexibility. And I guess, along the same – and maybe you can correct me if I'm wrong on that, but along the same vein, I guess, when I look at your credit risk weighted assets, I mean they were down about 2% sequentially, but your loan book has grown. And I'm just wondering if there's been actions you've taken to preposition ahead of the Basel changes, and if you can kind of talk a bit about what that might be, and if you have any updates of when you think you might learn a little bit more about that Basel 3.8, Basel 3.9 or Basel 4.0 or whatever you call it, that would be helpful as well. Thanks.

No, we don't have a target. As I said, we feel that we're well capitalized in the 10.5% range. We're carrying capital above that, it gives us enormous flexibility. We had a very strong capital generation, as you saw from the sale of our Moneris franchise, from – obviously, our profits from optimizing our balance sheet position, all of those capital management activities gave us enormous flexibility; a little bit from our pension plan, I believe. So we generated significant capital in the quarter and enabled us to return it to shareholders in a very effective way, whether it's dividend increase or the large share buyback program. So therefore, that flexibility is great to have. That capital may creep up if we don't purchase shares and we have the same organic contribution. So it may decrease if we see opportunities to return capital to shareholders. We remain (46:45) enormous flexibility to do that. We have accelerated growth in RWAs from our business. We have the flexibility to fund that through organic growth in our existing capital position. So you'll see that number fluctuate up and down over the coming year as we look for the best opportunities to look at creating shareholder value. And it's great to have that flexibility. As far as Basel 4, maybe I'll turn it to Mark who is even closer to it than I am. Mark, do you...

Yeah. So...

...have any perspective on...

Other than just to really reflect the continued uncertainty that the question is going to, certainly, the market and the reports that are around are suggesting there might be some further meetings going on in March. There still continues to be some disagreement apparently between the various sides on the output floor related to credit risk. Whether they can resolve that is – remains to be seen. I would say we do believe there'll be some further meetings coming, but up until that point, we are waiting to hear.

I think with the added uncertainty around the new administration's position around policy, regulatory policy in the financial industry in the United States, you do have to question when the Americans be ready to entertain those negotiations, and therefore, I would expect that they could be delayed further until there's clarity in key roles in the U.S. and clarity on policy.

That's helpful. Thank you.

Thank you. Our next question is from Nick Stogdill from Credit Suisse. Please go ahead. Nick Stogdill - Credit Suisse Securities (Canada), Inc: Hi. Good morning. My question's on the Investor & Treasury Services business. Earnings is another new high for a second consecutive quarter here. So I was just wondering if you could talk about the sustainability of these results. I know there's a number of market-related benefits. But if we saw credit spreads widen or just got more stability in rates and currency, should we expect earnings to come back to maybe the level we saw in early 2016 or any color would be helpful?

Yeah, I would characterize those earnings as really quite good. And as you point out, and I think in Rod and Dave's remarks, a lot of that had to do with FX and FX futures, and volatility around the election at year-end. So if you get a more benign environment, you may see less revenues in that part of the business. We also have been investing significantly in the investor services business, and we're starting to see the results, both in terms of revenues and new clients, client retention and actually some reduced expenses. So part of it's operational and hopefully sustainable, and part of it was unique. Nick Stogdill - Credit Suisse Securities (Canada), Inc: Thank you.

Thank you. Our following question is from Steve Theriault from Eight Capital. Please go ahead.

Thanks very much. Just turning back to the banking side, the retail banking side or, I guess, the Commercial Banking side, some of your peers have been growing more strongly in commercial. I note on your market share figures on slide 21, you're clearly still in the number one position, but you've lost significant share in both business loans and business deposits the last 12 months. And I know you've talked about ramping your appetite on commercial, but maybe you could update us on how that strategy is progressing. And would you expect to make up that share sooner rather than later, or is this going to be a longer game that will play out over kind of quarters and years rather than anytime over the next little bit?

Thanks for the question, Steve. It's, I think, a very competitive market as it relates to commercial banking, characterized by, as I've said before, aggressive pricing and lending terms. We continue to be the market leader in most categories on the lending side other than in the upper end of the range, which, as is obvious, if people are growing at a faster clip in that upper end of the range, it does impact market share. So we have increased our market coverage in targeted sectors and regions across the country to focus on that upper end, as I've discussed before. We've seen some increased momentum, we've had a number of successes that we might not have seen in a while, in the last number of months. We've also been enhancing a number of our credit policies well within our risk appetite, but ones where, perhaps, with an eye on the market, we had to make some adjustments to reflect the current market conditions, but certainly, while continuing to maintain our credit quality standard. So, again, I would say we're seeing momentum in that regard in certain sectors where we might not have been playing as well as we might have. And we have made significant investments in adding commercial account managers in the mid-market. We have a plan to add up to 150 commercial account managers through this year and next, and we're also continuing to invest in capability to make sure that we're more in front of the client, we win the business. And so I think that we've got a few other interesting initiatives around technology. One is a collaboration with League, which provides clients with a new innovative capability to build employee loyalty that gives business clients an alternative to traditional health benefits programs. So we're trying to grow our business not just in the obvious ways, but also by providing value and adding services that we know that our commercial clients need. So specifically, to answer your question, are you going to see some short-term? We hope so. But we're certainly feeling momentum. We've had several quarters of increased lending volume growth. And on the deposit side, strong double-digit growth and continued wide margin of market share lead in that line. So we're really pleased with our position there.

Thanks for that. And just at the top of your answer, you mentioned competition. Are you finding it's getting more competitive as the consumer picture maybe looks less robust or has it been more just consistently very competitive?

I think over the last couple of years, as consumer lending has slowed, it's definitely been more competitive in the commercial space.

Okay. Thank you.

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

Dave, it sounds like the outlook on credit at the margin improved. Certainly, Doug is sounding more optimistic about the outlook for Capital Markets. You obviously have excess capital relative to your comfort. Do you wish you hadn't adjusted the ROE target?

No. I think the ROE target reflects where we see ourselves in the medium term and not the longer-term. And you saw significant increase in our ROEs up to an adjusted basis of 16.7%, so still below our previous 18% target. Obviously, the more capital we're carrying, that suppresses your ROEs. We're seeing great business growth. We do want to perform at the top end of the ROE prospective, and that is our goal, to maintain premium ROEs in the industry. And we feel the quality of our franchise and diversification of our franchise allows us to uniquely do that. So our objective is to significantly beat the 16%, but I think it reflects our view of where margins are, where revenue growth's going to be, and where earnings are going to balance between domestic earnings and international earnings. As you know, our premium ROEs are driven primarily out of our Canadian franchises, Capital Markets, retail bank, Wealth Management. As you operate outside the country, whether it's in Capital Markets or Wealth franchises or Commercial franchises, ROEs are not at the same level as Canadian ROEs. And that's true in most industries where you (55:40) domestically versus internationally. And as that balance shifts, I think it's part of the story. So ROEs will build, we expect, as we grow into our City National earnings. We executed – as rates go up, ROEs could build. But I think it reflects a premium ROE in the market that we're operating, and then that's kind of where we're with the medium-term.

Okay. Thank you.

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

Hi. Just on the Canadian Banking side on expenses. Obviously, a lot of discussion about operating leverage and further improvements. The efficiency ratio, obviously, at 42.5%, it's low relative to your peers. Where do you think you can take that 42.5% given the changes that are happening at the business? In the next few years, should we be surprised if it hits 40%? Just trying to get a sense of that. Thank you.

We – as I said in my earlier answer, given what we know that we have – where we have our opportunities to continue to become more efficient, particularly, I would say, through areas like our back office processing, our contact centers, et cetera, in terms of the ability to add technology to that mix, we believe that there is an opportunity to continue to drive that down. And our – while investing, and I think that's an important thing to note, is that we have ramped up over the past several years, our investment in technology quite significantly. We are also – as we displaced pure servicing capacity out in our network, we've actually been investing in sales capacity to make sure that we're still well-positioned to serve and grow clients. And so all-in-all, we're quite comfortable, particularly given our scale that as we introduce these technologies to drive efficiency, that we still have more room to drive it down into below where we are today.

Thank you.

Thank you. We have no further questions registered at this time. Back to you, Mr. McKay.

I want to thank everyone for their participation in our Q1 2017 call. We look forward to seeing you at the end of Q2. Thanks for your questions.

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