Good morning, ladies and gentlemen. Welcome to RBC's 2019 Third Quarter Results Conference Call. Please be advised that this call is being recorded. I would like to turn the meeting over to Nadine Ahn, Head of Investor Relations. Please go ahead, Ms. Ahn.

Thank you and good morning. Speaking today will be Dave McKay, President and Chief Executive Officer; Rod Bolger, Chief Financial Officer; and Graeme Hepworth, Chief Risk Officer. Then we'll open the call for questions. To give everyone a chance to ask a question, we ask that you limit your questions and then requeue. We also have with us in the room Neil McLaughlin, Group Head of Personal and Commercial Banking; Doug Guzman, Group Head, Wealth Management and Insurance; and Doug McGregor, Group Head, Capital Markets and Investor and Treasury Services. As noted on Slide 1, our comments may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. With that, I will turn it over to Dave.

Thanks Nadine and good morning everyone. Thank you for joining us this morning. Today we reported record quarterly earnings of $3.3 billion largely driven by strong results in our retail and wealth management businesses. Our market related businesses also performed well considering challenging market conditions during the quarter. We continue to maintain a premium ROE of 16.7% with a very strong capital ratio of 11.9% giving us flexibility to fund strong organic growth and return capital to shareholders. Also pleased to announce a $0.03 increase to our dividend bringing our quarterly dividend to $1.05 per share. Before moving to our results I want to touch on the macro environment where I think geopolitical risk and trade tensions are having an impact on both business and market sentiment worldwide. This uncertainty is manifesting itself in downward trends in global interest rates. While there are risks to the outlook, current economic conditions in our core North American geographies remain solid, unemployment near multi decade lows and a continued resilience in the Canadian manufacturing sector. Also a recent report finds that Canada admits the largest number of skilled immigrants in the OECD, a contributing factor to both economic growth and household formation. On Canadian Housing we're seeing a more balanced supply demand conditions as policyholders appear to have engineered a soft landing. We're seeing positive developments in key markets including a return to growth in Toronto and a healthy Montreal market. As the largest of the big five Canadian banks in Québec we are participating in the resilient growth of the economy leveraged by the collaboration of our employees across the province and all our business segments. Furthermore Canada has become an attractive technology hub attracting top talent and investment dollars including demand for office space. We are seeing large corporations opening their…

Thanks Dave and good morning everyone. Starting on Slide 5 we had strong third quarter earnings of $3.3 billion up 5% from last year. Diluted EPS of $2.22 was up 6% year-over-year. Before I walk you through the segment results I want to update you on our progress relative to the cost management guidance we provided last quarter. Given lower interest rates and the expectation of interest rate cuts we are prudently focused on driving efficiencies and managing costs. This quarter, expense growth slowed to 2.3% year-over-year compared to 6.6% in the first half of the year. About three quarters of our expense growth was from investments in transformation as well as front office and sales force staff so we remain well positioned to continue to increase market share. We continue to drive efficiencies which create opportunities to invest in growth. We reaffirm our guidance from last quarter and expect lower expense growth in the second half of the year. Now turning to Slide 6, our CET1 ratio improved 10 basis points to 11.9% as internal capital generation was partly offset by organic RWA growth, the unfavorable impact of pension and other post employment benefit obligations, and share buybacks. In addition to our dividend increase we bought back 1.9 million shares this quarter for a total capital return of $1.7 billion or nearly 50% of earnings. Going forward we expect that combined impact of IFRS 16 adoption, securitization, and counterparty credit risk will impact our CET1 ratio by approximately 25 to 30 basis points in Q1 2020 which we expect to fully absorb through capital generation. And we remain well capitalized to absorb the incremental domestic stability buffer increase of 25 basis points which comes into effect October 31, 2019. Now moving to our business segments on Slide 7, personal…

Thank you Rod and good morning everyone. Starting on Slide 13, our total PCL loans was 429 million this quarter equivalent to 27 basis points. It was comprised of 399 million in provisions on impaired loans and 30 million in provisions on performing loans. PCL on impaired loans decreased by 36 million or 4 basis points from last quarter mainly due to lower provisions in Canadian Banking. PCL on performing loans was 30 million this quarter driven mainly by portfolio growth in retail, offset by seasonal credit quality improvements in the cards portfolio. We did not materially change our macroeconomic forecast this quarter so while there was some modest impact at the segment level overall this had a mutual impact on our allowances. On a quarter-over-quarter basis PCL on performing loans increased by 24 million from last quarter. I would now like to provide a bit more detail on three of our businesses. In Canadian Banking PCL on loans of 329 million decreased by 8 basis points from last quarter largely due to the higher provisions we experienced in Q2 in our commercial lending portfolio. In wealth management PCL on loans decreased by 3 million from last quarter reflecting relatively stable credit trends at City National. And in capital markets PCL on loans increased by 29 million from last quarter mostly due to provisions on performing loans of 3 million this quarter compared to release of provisions of 21 million last quarter reflecting the change in macroeconomic forecast noted earlier. Provision on impaired loans were largely related to one previously impaired account in industrial product sector. Additionally impaired loans in the oil and gas sector contributed to provisions this quarter. Turning to Slide 14, gross impaired loans of 3 billion decreased by 2 basis points from last quarter largely due…

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

Good morning guys. I just had first question on credit so I heard Dave your prepared remarks and then just in terms of the credit commentary, but when I look at credit and tell us if this is not the right way to think about it but, wholesale loan growth over the last two years has been 26%, gross impaired loans over that two year period have gone up 14%, but the actual allowance for these losses has gone down to 458 from 509, so just talk to us in terms of why you feel good about this wholesale credit in Canada and within sort of wholesale banking relative to U.S. and why these metrics are okay or should we -- is it a fair pushback that why are reserves not much more higher for this portfolio, I will stop at that?

I'll make a couple of macro comments and I'll ask Graeme to go through the reserving exercise and why we're comfortable. From a strategic perspective as we've talked about our loan book and our wholesale loan book is diversified across geographies globally. Our hold levels are smaller particularly in the riskier leveraged finance often senior positions in the capital structure. So we've managed this book very prudently over time with great single [line] [ph] diversification, disciplined hold levels, disciplined structure, and we've seen this book perform well. You referenced the drawn loan growth versus RWA loan growth and authorization growth which has been significantly slower in the last couple of years. So yes, while the draws have given some of the bridge facilities we put on that we've disclosed and Doug or Graeme can give you more color if you like on that. But certainly we've been I think prudently managing our risk weighted assets growth and our authorized exposure growth in the business. So yes, we remain confident in the business model and how we've managed it going into what looks like to be somewhere the near end of the cycle. As far as the appropriateness of our reserves I will ask Graeme to make a few comments.

Reserves in general, couple of points. Certainly we look at stage 3 in 2017 we certainly saw very low levels of information and recoveries in those periods. And so we certainly would say that's more of a cyclical low and I think what we have seen in 2019 is a bit of a reemergence of credit in that space and so on the impairments we saw in the first half of the year although moderated now I think will reflect some more normalization in our stage 3 allowances. Stage 1 and 2 is certainly driven by our macro economic forecasts and in the wholesale space that can be more volatile. Factors like equity markets and oil prices, interest rates all play factors into that. As I said in my speech we didn't change our macro economic forecast this quarter so we didn't make a material change in wholesale. On the capital market side we saw fairly neutral growth in the loan portfolio there. So that was an additive whereas in City National I mean commercial we did see growth there and our baseline reserves would grow with that. And so I think each quarter I would just continue to reiterate from the guidance I provided previously is that the baseline here is at reserve stage 1 and 2 reserves will grow in line with the growth of the loan portfolios and that will be adjusted for both credit quality and our macro economic forecasts. More recently as we've seen interest rates come up that has a near term benefits to the stage 1 and 2 near-term expected allowances although I wouldn't say that's a signal of healthy kind of medium term macroeconomic environment. So we're always bouncing all those factors and we're establishing our reserves and overall this quarter as I said we grew our reserves largely in line with the growth of our portfolio overall.

And just on that very quickly Graeme.

I am sorry, I have to ask you to requeue because we've got half an hour and probably lots of questions so, can you just follow-up. Thank you.

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

Hi, just a question on that stage 1 and 2 reserving, that's a new for all of us. Just understanding the fact that macro factors positively impacted Canadian Banking this quarter and acknowledging that GDP actually came in better than expected in Canada but we have all of these uncertainties that have really bubbled up over the last few months, trade uncertainty is driving a lot of negative sentiment, I'm wondering does that ever come into play in terms of determining those stage 1 and 2 provisions or is that not -- are these not issues that feed into that calculation?

No, absolutely. The macroeconomic forecast and those kind of uncertainties absolutely play into our reserves. I think as we have outlined we consider five different scenarios in our reserving process that look at positive economic environment to much more severe negative economic environments. And we've made those accordingly and you can reference to trade uncertainty. The trade uncertainty is not a news story. In my mind here it is something that we've been reflecting in our forecasts and our reserves for since we initiated IFRS 9 effectively. And yes, the news headlines changed there week to week on that front but concern starting last year around USMCA and now more recently as we focus more on the kind of China U.S. trade tensions. All these stories have been factoring into our considerations on our forecasts and how we kind of weigh those scenarios and ultimately establish our reserves. So that absolutely does play a significant role on how we consider loan loss reserves.

Thank you.

Thank you. The next question is from John Aiken from Barclays. Please go ahead.

Good morning. I was hoping you might dive into the rationale for having Investor and Treasury Services now rolled up into Doug Guzman, are we looking for incremental synergies between now his combined operations or is it more just more of an administrative change that you felt was appropriate?

I think we look at certainly opportunities to put a different lens and a different set of eyes on the business which is always helpful as a different perspective. So yes, we're looking for Doug to build on the work that Doug McGregor has done and the team has done and take this business and look at strategic context of it and try to as we've talked about improve on the performance based on a number of challenging market conditions. We've got secular change around the impact on our asset management clients, we've got changing rate environment, we've got changing client preferences around FX and others. There's a number of secular wins coming across this business that I thought given they're coming into a big role it was opportunity for us to ask Doug Guzman to step up and take on the challenging business right now.

Great, thanks for the color. I will requeue.

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

Thanks very much. Rod I'm interested in your comments around margins. You said that you could see 4 to 5 basis points of NIM downside over the next year. Can you flesh that out a bit more in terms of how many rate cuts that envisions if any, I assume it does, does it assume a steeper curve if we do get cuts at the short-end? And I'd love if -- I don't know how doable this is but I'd love to get some color, you talked about City National ticking lower -- is ticking lower is that sort of an immaterial tick lower and I think most importantly if given your rate expectations and outlook on the all in margin would be super helpful to the extent that is possible?

Okay, great. Thanks Steve I'll take those in order and on the Canadian Banking margin I hedged a little it because that's when we can potentially drop as much as 4 to 5 basis points and part of that is the violent swings we're seeing in the interest rate forward markets. In Canada I mentioned how much the U.S. is down versus our last quarter Canada and just on the five years down 50 basis points on the five year versus three months ago when we were on this call. And so that's going to change between now and the end of next year and certainly what the forward curves are saying right now is 2.147 rate cuts by the end of our next fiscal year and a Canadian rate of 120. Whether that's going to come to pass we'll see. So we factor all that in, there's pricing, but we do have a large portion of our Canadian Banking book is five year fixed rate mortgages so we tend to be slower when rates are going up in terms of NIM expansion. And then slower on the way down when rates are caught and that provides a nice hedge for us from a revenue perspective. And you also typically see as rates come down you see deposit growth sometimes it accelerate as we saw this quarter and we would expect that to continue and give us more favorable funding as well. So there's a lot of puts and takes and then competitive pricing can accelerate or decelerate depending on what volumes are and what not. And lately volumes have been strong and we've seen very strong volumes on a year-to-date basis and in Q3. So that's why you know the impact is somewhat muted in Canada for our Canadian…

Okay, thanks a lot. I will requeue.

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

Hi, good morning. Just -- I guess I was a little surprised by just the level of deposit growth you have shown in Canada, just given your market share and so I know you gave what the growth was in GICs, I'm hoping you can just unpack what demand and notice deposit was and just maybe unpack a little bit about what drove that and I know you've given some targets around ventures and 5 million active users converted to Royal Bank clients over a period of time, it sounds like you're going to give us an update to that target but maybe you can kind of weave in how successful you've been in terms of capturing those clients as well? Thank you.

Yeah, thanks for the question, it is Neil. I guess there was a number of factors; one, we've talked in the past about clients looking for security and yield and that really driving swap out of some long-term fund volumes into the GIC. So that's part of it. On the savings accounts is the mass retail savings customer, those are about mid single-digit both registered and non-registered. And then to your point on new client acquisition that we've referenced in the past, we have seen good year-over-year gains over the last couple of years in terms of our ability to acquire that core deposit customer and those balances are about the same range sort of that mid single-digit. So that's really on the personal side. On the business side, similar type of trend, we're seeing strong double-digit on the GIC portfolio basically for the same reason and then fairly equal growth as we look at interest bearing and non-interest bearing. A lot of good things going on in the portfolio right now for the small business customer which is really sort of the profile for the non-interest bearing deposit balances within our business account franchise. And then you have Rod had mentioned some of our commercial clients are just keeping some of that capital out there ready, trying to steer through some of this uncertainty. So I think that would be kind of just a walk-through of the different categories.

Anything on the Venture side that you can, in terms of how you're tracking in terms of converting clients over into deposit accounts?

Yeah, so in terms of ventures I mean obviously we're in the early innings on the strategy. We're feeling that we've got some good green shoots in terms of the connectivity with clients across the ventures portfolio. The ultimate end goal is to convert these into the best case would be core deposit account holders. One of the early success has been in the small business space however in our venture called Owner and we have seen thousands of customers as they register that new business through a quite a streamlined digital process that take up our deposit account for business customers. So that's probably our best example. And as we mentioned in my speech we will give you a more fulsome update in Q4 around the waterfall and our new acquisitions, on how the ventures are performing. But we're pretty excited about the strategy.

Great, thank you.

Thank you. The next question is from Sumit Malhotra from Scotiabank. Please go ahead.

Thank you, good morning. I want to start with Investor and Treasury Services please. So we've certainly seen the earnings contribution, the revenue contribution move lower for the past number of quarters. When I look back at some of the reasons that you folks have highlighted spreads on some of your high quality liquid assets, securities dispositions, deposit margins declining all of this in some form or another does speak to the impact of lower rates which as you pointed out a couple times on this call has only gotten worse in the last little while. So when you think about this run rate that we're at right now or this quarter's earnings of 120 million is there any reason to believe that given some of these factors this number isn't going to face continued pressure in the near-term, should that be the expectation here or are there a few factors that you think are more transitory?

No, I think when you look at the performance of the business this quarter about two thirds of the under-performance is around the factors that you just mentioned. It's around what we call the Treasury Services side of the business which is investing deposits and our HQLA and as a result of lower rates, flat yield curve etc, it's become more challenging. So I expect that's going to continue in the near-term although I guess we've had a little bit of relief from that over the last several days. I think the other side of the business, the Investor Services side of the business, some of the challenges have been around just customers internalizing FX flow or using less of our securities lending businesses and actually grinding on core fees. That part of the business we're managing, those challenges we are managing by repositioning to a different client base, more private equity in Europe, and we're going to reposition our cost base as well. So we're working on that real time. So I would say on the core our Investor Services side of the business, I'm less concerned about that. On the Treasury Services we have some headwinds that we're just working through.

And the Treasury piece Rod's given some context on this call for what the new rate environment means for Canadian Banking and City National but Doug taking your comments into account I'm hearing that the Treasury piece is going to reflect this rate environment perhaps further so based on where loan bonds have moved?

Not so much loan bonds as short rates. I mean this portfolio has duration of less than two years. And so things can change a little more quickly ending on where rates go, we are repositioning the book, and we will try to manage through.

And then maybe I can ask one on City National or requeue.

Queue please.

Thank you.

Thank you. The next question is from Robert Sedran from CIBC. Please go ahead.

Thanks, excuse me, good morning. Dave in your prepared remarks you made a few comments about acquisitions that I guess are really to support organic growth, some of the smaller things you've been doing. But the last time you talked about M&A at the bank level it was more about how valuations were frothy and perhaps not very interesting. I'm curious of valuations having come off and your CET1 ratio now all the way up to 11.9. If the idea behind bank M&A maybe something that's more interesting today or if you still think there's plenty of organic runway and you'd rather focus on buybacks and organic growth?

Yeah, it is certainly the latter. As we expected valuations have come off. Not only valuations have come off but I think with a large merger that we have based on expectation between BB&C and SunTrust expectations of premiums have also come off. So relative valuations are better. Having said that expectations and uncertainty around the future interest rate environment and economic growth have increased in line with that. Or as you have seen a strong organic growth that we have in Canadian Banking, in City National in the U.S., and U.S. wealth management that's executing on their credit strategy -- secured credit strategy executing on their advisory platform strategy is driving AUA and AUM. We are really happy with the organic growth and our market expansion. So it still is first and foremost we have invested for growth in United States and we're expecting to see that growth and produce growth with elevated NIE base that we have. So I think that is first and foremost and we're still going to be very cautious. I think relative valuations will continue to come off in the U.S. and therefore we are thinking about the right strategic opportunity. I've talked about some of the challenges at the U.S. mid-size banks based around funding growth and around technology platforms. You must think those issues through and solve those issues at the same time. So there's a number of moving parts that are continuing to drive us to focus on organic growth with the return of capital to shareholders and driving a premium ROE and premium TSR from that strategy first and foremost.

And so something in that 50% total shareholder return payout ratio is kind of what we should expect?

No, I think returning capital via share buybacks obviously with their CET1 ratio is important and given that we're towards the end of the cycle we're being very conservative about our payout ratio around 45% and I wouldn't expect you in the short-term to see that creep up given the cycle that we are in. So no, I think largely through share buybacks would be our primary choice point.

Okay, thank you.

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

Hey, thanks. A bit of a detailed question. I'm just looking into maybe for Graeme, I don't know but when you provide the subsectors for industry breakdowns of your wholesale book that three categories kind of stand out to me that I've been driving the year-over-year growth, actually quite a bit of the growth going back to probably the last three years. They are what you refer to as financial services, financing products, and investments. You know financing products are doubled from last year, financial services are now second largest to real estate investments up 5 billion or 6 billion. Can you just talk a little bit about what sort of business would this be, which one of your business segments would it be in support of, maybe a little bit around the geography, the type of RWA that it attracts and ultimately the types of returns that these types of businesses are generating, I mean I think that three of them collectively are up about $50 billion year-over-year and now account for about 20% to 21% of the wholesale loan book and I think of them as really at least based on the qualitative description these are leveraged industries. So are you lending to the shadow market, is that how I should be thinking about it?

Exactly, this is Graeme. I will maybe start on that but I will turn it to somebody, maybe there is Douglas and he can provide a bit more thoughts on that. If you look at something like financial services so this would be a lot of our activity that we do with funds for example. So, that could be anything from a private equity fund to mutual funds to other kind of fund providers like that. The balance of that, I mean a lot of that growth over the last few years has been in the what we call capital call loans and that's in terms of business attribution. We see that across actually three of our businesses CNB, City National has a core fund client base that support capital markets and likewise and IMTS who obviously their fund servicing platform has strong relationships with funds. And capital call loans is a product that all those businesses have been actively using over the last few years and growing. It's kind of the quality of that asset base, the client base is very high quality. It is an investment grade credit quality. It is a well structured product for us so it's a product that we're quite comfortable with the credit quality there and the growth has been nice from a risk perspective. The financing products would typically be related to our securitization business and so that would be more of a capital markets construct. And investments likewise would also be a capital markets construct typically. And so that's kind of where those businesses tie in. You could assume that capital call loans is probably the private most notably driving growth within those but from a risk perspective it has been a product that people are quite comfortable with. I am going to turn it over to Doug to comment on some of the business strategy from that perspective there.

Yeah, in terms of the capital call loans I mean some of the customers that were funding and really funding commitments from private equity investors or sponsors and recent example where we've been putting more on would be Blackstone in Europe as an example. And as Graeme pointed out the funding is low leverage and high quality and so we're fine there. In terms of the rest of the loan book growth in the investment bank our real estate book continues to grow and similarly we have a very diversified portfolio across Canada, the U.S., and Europe and it's largely to larger investors like Brookfield and Blackstone and other large financial sponsors. And that book is in quite good shape. I don't know what else to add Graeme.

Yeah, I don’t think we need to bring up all that. It is just about the confuse. I think sometimes there's some confusion that the financial services piece and the capital call loans that we make to the private equity sponsor that Doug is referring to is somehow leveraged lending. That's not what this is, this is providing loans to the actual funds themselves not to the levered companies that they may be purchasing. And as I said these are loans that are secured by the capital calls that they have on their LP's and these are high quality investors that these funds have and we really look through that and that security to secure our position here. So I just wanted to clarify that because I think we have a few questions coming on that before.

And geographically this would be broad based or would it be mostly, the most of the growth would be coming outside of Canada?

Mostly I would say the U.S. would be far and away the largest source of growth in the portfolio there and a more modest portion we have got out of Europe, very limited.

Thank you.

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

Good morning. Real quickly just on sort of similar to other question but more on U.S. commercial real estate, is there something you're seeing on the horizon that would cause that to decline substantially from quarter-to-quarter because I think it's down like 8% or is that mostly currency?

Yeah, that book has been declining on the actual secured property mortgages. We have been taking some loans off against some REITs where we made loans into revolvers years ago and we haven't seen that kind of key performance that we expected to see. So we have been demarcating a bit around some of the REIT book. But on the real estate mortgage book or large customers we continue to grow out. I mean the whole capital markets loan book growth we are managing into a sort of low to mid single-digit number. And some of that growth is occurring in real estate in the U.S.

So, you are not sending any -- there's no message here on credit in U.S. commercial real estate.

No, I'm not particularly fond of small enclosure shopping centers but away from that we're just fine and the performance of that book is really good.

Okay, just a real quick question Dave if I could go to you for a moment and I know there's a lot of moving parts here. And the environment has change in the last three months substantially. Are you able to provide an outlook for total bank earnings growth as you normally do it in Q4, I'm asking in Q3 because there is suddenly so many changes, are you prepared to talk to that?

There are a lot of moving pieces that we have talked about in our prepared speeches that have come up in the Q&A this morning. We start with significant momentum in the business and I don't think that should be lost. And anyway the market share gains across our core retail tranches with a significant -- volume growth is significant, the revenue growth is significant, and these tend to be momentum businesses. Our core economy despite all the questions around the volatility and trade agreements and BREXIT still remains strong and -- strong. So we have good momentum but we have headwinds coming into that momentum as all banks face. We have seen a couple of businesses particularly in Investor Services and Treasury Services that are underperforming that we're going to try to turn around but we're carrying good momentum into these headwinds. Having said that it's going to -- we always talk about medium term objectives and meeting medium term objectives. For us we will talk a little bit more in Q4 how we see that balance coming out. But things are slowing as you can see across a couple of dimensions but combining the organic growth with the ability to return capital to shareholders we're pushing around our medium term objectives. And that's -- I think that is kind of where we sit right now. We feel good about performance of our core businesses and with extremely good pipeline in capital markets as we talked about. We're building solid client franchises, long-term clients. I think that's our objective and we feel good about our momentum.

That's helpful, thanks.

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

Good morning, just a clarification on City National. Excluding the accretable yield it looks like margins were down 13 basis points quarter-over-quarter and I just want to clarify what you mean by the margin will be range bound from that level I assume? And then on I&TS just to circle back to the business. How -- you gave a good explanation of what two factors that are going on that, how big is the negative carry if you will in the Treasury business relative to the just the customer slowdown in the Investor Services business and how big is that liquidity portfolio, last I thought it was…?

So, Rod quickly on NIM and then we will give the I&TS answer and we will try to take another couple of questions.

I mean just quickly NIM, I mean we ended 2017 in the high 296, ended 2018 at 341, head as high as 356 as you rightly adjusted for those -- for the FPSC loans were down to 335 now. So I think I said range bound last quarter when rates were 95 basis points higher, this quarter I would -- I tried to highlight that we expected it to shift down. And then I would just suggest that if you believe that the forward curve for the Fed is going back down to the levels that we saw in 2017 we could see it slip below 3% at the end of next year. If that comes to happen as Dave highlighted the U.S. GDP has been strong and so do you believe that the Fed is going to cut four or five more times between now and next October. You know it's hard to say exactly where that NIM is going but the trajectory is lower and it does move much more aggressively than our Canadian Banking NIM. On I&TS I will turn it to Doug real quick.

That HQLA portfolio is about $50 billion invested in the U.S. and Europe and Canada. What else.

Is it negative carry.

No, it is not. It is not a negative carry but we're not seeing much spread between our cost of funds and the return on the HQLA which is a challenge.

We will take another couple of questions if we can before 9.

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

Good morning, just going back to Canadian, can you see the overall portfolio growth is pretty solid but if I look at two personal HELOC -- other personal which I assume is mostly auto has been pretty flattish for loss and perhaps maybe you can give us an update on little kind of what you think on those portfolios and the outlook going forward?

Yeah, thanks it is Neil. Yeah we've talked about HELOC there has been a trend of customers rolling out of the HELOC, looking to fix in lock into the mortgage segment, that continues. In terms of the other personal, it's a combination of what we originate through our branches in lines of credit and unsecured installment loans and then our auto segment about two thirds are direct through our branches and about one third in auto. We've actually seen a return to positive growth in the branch originated credit through some work we've done in our sales force and underlying credit strategies. Auto would be -- we've made some changes to the strategies there, just making sure we liked all the credit segments we're picking up. We had a bit of a push to get some growth and we're seeing that flatten out coming off of about 2% last quarter down to about 1%. So those would be the two segments.

Perfect, very helpful. Thank you very much.

We will take one more question.

Thank you. And the next question is from Mike Rizvanovic from Credit Suisse. Please go ahead.

Hey, good morning. I had a question for Doug MacGregor on the U.S. cap markets business. Clearly a challenging quarter but I'm just looking at the longer term trajectory in revenue in U.S. dollars, it hasn't really moved much the past couple years and I realize you made some changes in the business with respect to where you're allocating capital. So just maybe a two part question, first are there more changes on the way in terms of where you're competing? And second do you have a timeline in mind for when you might start to see the revenue growing again or is this something you may be thinking about the cost side to grow the bottom line?

I mean the revenue pool globally at least according to deal logic is down 16%. Leverage lending is down double that which is a decent business for us. I think in the context of the other global investment banks we've actually performed pretty nicely here. And as Dave said actually the backlog in the investment bank which has really been the challenge is the investment banking fees for this year both really globally. I mean in Europe, the U.S., and Canada it's been slow and the backlog actually is really quite good. So in terms of just large deals that are going to transact over the next two quarters we're in much better shape than we were coming into this quarter or coming into the calendar year. So I would say depending on how the trading environment goes I think we'll be probably doing better going forward.

Hey, thanks for the color.

I would like to thank everyone for attending today's call and for your questions. It seems this is a record quarter for RBC at 3.3 billion driven by really strong client volumes, revenue from our retail businesses, Canadian Banking, Caribbean Wealth Management, Canada Wealth Management, U.S. Insurance we had a couple of challenging outcomes in Investor and Treasury Services but overall we feel good about the momentum. The client driven momentum and feel ready to challenge some of the headwinds that are coming at us. Thank you for your questions and look forward to speaking again in Q4. Thank you.

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