Earnings Call Transcript - BMO Q2 2022

Operator, Operator

Good morning, and welcome to the BMO Financial Group Q2 2022 Earnings Release and Conference Call for May 25, 2022. Your host for today is Christine Viau. Please go ahead.

Darryl White, CEO

Thank you, Christine, and good morning, everyone. We continued to deliver good financial performance this quarter, driven by broad-based customer loan growth in our North American P&C and Wealth Businesses and solid results in our market-sensitive businesses. Second quarter adjusted earnings per share improved to $3.23, with continued positive operating leverage and strong pre-provision pretax earnings growth of 6%. Year-to-date, PPPT is up 12%, driven by strong revenue growth and continued expense management that includes targeted investments for future growth. With operating leverage of 3.3% and an efficiency ratio of 54.7% year-to-date, we are delivering on our commitment for positive operating leverage for the year. This morning, we also announced a dividend increase of $0.06 to $1.39 per share, an increase of 5% over last quarter and 31% over last year. We continued to strengthen our capital, including executing the planned equity issuance and are well positioned to support both client-driven balance sheet growth and the Bank of the West acquisition. ROE remains our key area of focus, guiding our strategic investment decisions as we manage the bank and our businesses for sustained profitable growth. Year-to-date, ROE was 17.2%, up from the same period last year as we continue to drive initiatives to improve the profitability of our businesses. These consistent results demonstrate the ongoing value of our advantaged business mix, including strong contribution from our U.S. segment and the dynamic execution of our purpose-driven strategy. Our strategy is designed to deliver sustained performance through the cycle, including disciplined capital allocation decisions. Our ongoing investments in talent and technology have delivered resilient performance through the pandemic and we believe will drive sustained performance in a rising rate environment. The current backdrop presents both risks and opportunities for our customers and for the bank. In the face of some economic uncertainty, our long-standing track record of superior risk management through the cycle has proven to be resilient in protecting and growing the bank. It's underpinned by a strong risk culture and consistent risk appetite with a well-diversified commercial portfolio that is 85% secured, the vast majority of which has a sole or lead customer relationship. Now with pandemic restrictions largely lifted, the economy is growing and businesses and consumers continue to adapt. Investments in our North American growth strategy, in climate transition and in digital advancements position us to capture these opportunities as we support our customers in navigating the changing environment. As the eighth largest bank and a top 5 commercial lender in North America, we're uniquely positioned to advise our clients on both sides of the border as the trend to re-globalization accelerates. As supply chain shifts, North American businesses are investing in automating and building back inventories. With double-digit commercial loan growth in both Canada and the U.S. this quarter, we're already seeing these dynamics play out. We are further benefiting from ongoing investments to expand our commercial presence, to add talent and extend product and digital capabilities that are attracting new clients and strengthening existing relationships. Our capital markets and commercial banking teams together are accelerating efforts to successfully partner to deliver world-class capital market services to our mid-market commercial clients. Our One Client, One Bank approach is a clear differentiator for existing and prospective clients. We've also positioned ourselves for the unprecedented investments that will be needed to catalyze climate action and shift to a cleaner energy production. We're leading key financing activities, leveraging our climate institute and energy transition teams to be our clients' lead partner in achieving their energy transition goals and our collective ambition for a net-zero world. BMO Capital Markets is a Canadian leader in sustainable financings, including ranking as the top underwriter of ESG bonds and the number one sustainability structuring agent. In addition, our agreement with Export Development Canada will bring innovative sustainable finance solutions to Canadian exporting businesses and help them transition from carbon-intensive operations to those that can eliminate or significantly reduce emissions. As the market share leader in ESG ETFs in Canada, we continue to expand our innovative suite of products, including a climate-focused solution and are also seeing strong flows in our sustainable mutual funds. We're innovating for the future with an intentional digital-first strategy poised to capture the shift to advanced digital experiences. We've laid the groundwork with sustained investments in technology that are driving loyalty, efficiency and growth by delivering leading employee and customer experiences that power real financial progress. For example, we're continuing to roll out enhancements to our online banking experience in Canada, making it faster and easier to use. Recently, we ranked first in the Insider Intelligence Canada Mobile Banking Emerging Features Benchmark for 2022. The ranking reflected the strength of select emerging features offered on the BMO mobile banking app with top marks in the categories of digital money management, account management and alerts. We continue to modernize our technology through the cloud. For example, we're converting to a proprietary platform to support risk management analytics, which makes forecasting loan loss scenarios ten times faster, more integrated and cost-effective. Our people are key to our success and our winning culture. Early adoption of technology and innovation has given us the ability to attract and retain the talent that will transform banking and create efficiency for modernizing our platforms. We're actively growing in key technology hubs in Canada and the U.S., including in cities where the Bank of the West has locations. Bank of the West will further enhance our natural advantage in essential retail wealth in commercial businesses, a strong, sustainable lending team, digitally active customer base and dedicated, talented employees. Tayfun will provide more detail on our integration planning process and the revenue synergies that our combined businesses are expected to deliver. As we continue to grow the bank, we're steadfast in our purpose-driven commitments to a thriving economy, a sustainable future and an inclusive society. We're proud to have been recognized by the Ethisphere Institute as one of the world's most ethical companies for the fifth consecutive year. This quarter, we announced a $5 billion commitment to support women business owners in Canada, recognizing the impact they have on our communities and the importance of helping them access the capital they need to grow their businesses and through them, our economy. To conclude, we have a proven dynamic purpose-driven strategy for growth that is underpinned by superior risk management and robust capital, and we're well positioned to deliver sustained performance in any environment.

Tayfun Tuzun, CFO

Thank you, Darryl. Good morning, and thank you for joining us. My comments will start on Slide 10. Second quarter reported EPS was $7.13 and net income was $4.8 billion. Adjusting items this quarter are similar to last quarter and include revenue of $3.6 billion pretax from fair value management activities related to the acquisition of Bank of the West to mitigate the impact of higher interest rates on the expected goodwill and capital at closing. The details of adjusting items are shown on Slide 36. The remainder of my comments will focus on adjusted results. On an adjusted basis, EPS was $3.23 and net income was $2.2 billion, up from $2.1 billion last year, driven by strong pre-provision pretax earnings of $2.9 billion, up 6%, reflecting good year-over-year revenue growth across our diversified businesses and disciplined dynamic expense management. Efficiency improved to 55.6% and return on equity was 15.7%. Total PCL was $50 million, and Pat will speak to these in his remarks. Moving to the balance sheet on Slide 11. Average loans were up 9% year-over-year and 3% quarter-over-quarter. Business and government loans increased 10% year-over-year or 13% excluding the impact of declining balances in our non-Canadian Energy portfolio and deconsolidation of our customer securitization vehicle, reflecting strong commercial loan growth in Canada and the U.S. Consumer balances were up 9% from the prior year, reflecting strong growth in our Canadian P&C and wealth businesses. Average customer deposits were up 7% year-over-year with growth across all operating groups. Looking ahead, we expect continued strong loan growth in our P&C businesses in the high single digits on a year-over-year basis reflecting strong diversified pipelines. Turning to Slide 12. Net interest income was up 9% from last year and up 12% on an ex-trading basis with growth across all operating groups. Adjusted net interest margin ex-trading was up 5 basis points from the prior quarter, reflecting the impact of rising rates, declining excess liquidity levels and lower low-yielding assets in capital markets. On a sequential basis, margin was down 2 basis points in Canadian P&C and up 1 basis point in U.S. P&C, reflecting higher deposit margins, offset by lower loan margins and loans growing faster than deposits. In the second half of the year, NIM in both our P&C businesses and at the all bank level is expected to widen given the rising rate environment. Moving to our interest rate sensitivity on Slide 13. Overall, our interest rate risk management approach has worked very well, protecting our NIM in the low rate environment. Now, we remain well positioned for the rising rate environment. A 100 basis point rate shock is expected to benefit net interest income by $635 million over the next 12 months. Although still early in the rate hike cycle to date, our deposit pricing and stability has tracked in line with or better than our model assumptions. If deposit betas are 10% lower than what we have assumed, then the benefit under a 100 basis point rate increase would be higher by approximately $50 million. Turning to Slide 14. Noninterest revenue net of CCPB was down 3% from the prior year and down 9% on an ex-trading basis, primarily due to the impact of divestitures and lower underwriting and advisory fees given market conditions. Sequentially, net noninterest revenue was down 11% or 9% ex-trading primarily due to lower underwriting and advisory fees, lending fees, and securities gains. Moving to Slide 15. Expenses were up 2% from the prior year. We delivered positive operating leverage of 1.8% this quarter, as we continue to reinvest savings from divestitures into targeted areas to drive revenue growth, including sales force expansion and technology. Sequentially, expenses were down 5%, primarily due to lower employee-related costs, driven by stock-based compensation for employees eligible to retire that are expensed in the first quarter of each year and the seasonality of benefits as well as the impact of three fewer days in the current quarter. As we look ahead, the moderation in our year-over-year expense growth is expected to continue into the second half of the year, including the impact of rising compensation expenses. After delivering positive operating leverage for eight quarters in a row, we continue to expect positive operating leverage for the year. Moving to Slide 16. Our capital position continued to strengthen with a common equity Tier 1 ratio of 16%, up 190 basis points from the prior quarter. As shown on the slide, the increase largely reflects the impact of the common share issuance and management of fair value changes related to the Bank of the West acquisition as well as strong internal capital generation. The cumulative impact of the fair value management actions of 90 basis points is expected to be offset by higher goodwill on closing relative to our assumptions at announcement. Source currency risk-weighted assets were higher, reflecting growth in our lending businesses and the impact of the Basel III capital floor adjustment in the quarter. Before moving to the operating groups, a quick update on the Bank of the West acquisition shown on Slide 17. We look forward to closing the transaction by calendar year-end and our teams are making good progress in preparing for a successful integration. While we shared our cost synergy targets at the announcement in December, since then, we have been working to identify revenue synergy opportunities across our businesses. The opportunities identified reflect leveraging BMO strength in a larger, very attractive footprint including our digital-first and relationship-based approach and an expanded product and service offering for our combined client base. Based on our initial expectations, we expect to be able to achieve pre-provision pretax synergy opportunities in the range of $450 million to $550 million over the next 3 to 5 years, with approximately 60% of that driven by our commercial and capital markets and 40% by our personal and wealth businesses. We are on track against the assumptions announced in December, including capital generation and expense synergies. Moving to the operating groups and starting on Slide 18. Canadian P&C delivered net income of $941 million reflecting pre-provision pretax earnings growth of 11%. Revenue was up 11% from the prior year. Higher net interest income reflected good balance growth and stable margins while noninterest revenue increased across most categories, reflecting higher customer activity. Expenses were up 11%, reflecting investments in the sales force and in technology with year-over-year growth expected to moderate in the second half of the year. Average loans were up 10% from last year, driven by continued strength in residential mortgage lending and 13% commercial loan growth. Deposits were up 7% year-over-year and flat sequentially. Moving to U.S. P&C on Slide 19. My comments here will speak to the U.S. dollar performance. Net income was $465 million, up 7% from the prior year, with 5% growth in pre-provision pretax earnings. Revenue was up 5% from last year, reflecting good growth in net interest income. Expenses were also up 5%, primarily due to higher employee costs and technology investments. On the balance sheet, excluding PPP loans, average loans were up 13% from the prior year, including strong commercial loan growth of 14%. Average deposits increased 4% year-over-year and declined modestly from the last quarter. Moving to Slide 20. Wealth Management net income was $315 million, down from $329 million last year. Traditional wealth net income was $248 million, with good underlying revenue growth of 5%, excluding the impact of divestitures, reflecting higher net interest income from strong deposit and loan growth and higher average client assets, partially offset by lower online brokerage transaction revenue compared to last year. Insurance net income was $67 million, reflecting more favorable market movements this quarter. Expenses were down 9% due to the impact of divestitures, partially offset by investments in the business. Turning to Slide 21. BMO Capital Markets net income was $453 million compared to $565 million in the prior year. Revenues increased from last year with investment in corporate banking revenue up 3%, primarily due to higher corporate banking-related revenue, partially offset by lower underwriting and advisory revenue. Global Markets revenue increased 1%. Revenues both in Global Markets and I&CB declined from the record levels in the first quarter, reflective of the market environment. Expenses were up 11%, mainly due to investments in the business, including higher technology and talent costs. Turning now to Slide 22 for Corporate Services. Corporate Services net loss was $111 million compared to a net loss of $120 million in the prior year. To conclude, we continue to deliver good operating performance across our diversified businesses and expect the dynamic management of the business in a changing economic environment will continue to serve our shareholders well and deliver long-term growth.

Pat Cronin, CRO

Thank you, Tayfun, and good morning, everyone. We were very pleased with our risk performance again this quarter and saw continued improvement across many of our key portfolio metrics. This strong performance reflects the combination of disciplined risk origination from prior periods and strong risk management disciplines through time. Starting on Slide 27. The total provision for credit losses was $50 million or 4 basis points, up from a recovery of $99 million or negative 8 basis points last quarter. Impaired provisions for the quarter were $120 million or 10 basis points. While this was up from very low impaired provisions of $86 million or 7 basis points in Q1, impaired provisions remain well below pre-COVID levels. Similar to last quarter, the strong impaired loan performance is due to low formations and low delinquency rates. We recorded a release on a provision for performing loans of $70 million this quarter. We recognized the potential for economic headwinds by increasing the weighting of our adverse scenario as well as reducing parts of our economic outlook in our base case scenario. This was offset by positive credit migration again this quarter as well as a reduction in the judgment we have been applying specific to COVID-related uncertainty. Given the strong credit profile of our current portfolio and our forecast for impaired losses, we remain comfortable that our $2.29 billion of performing loan allowances provides adequate provisioning against loan losses in the coming year. Turning to the impaired loan credit performance in the operating groups, we saw low loss provisions across all business segments again this quarter. In Canadian Personal and Business Banking, impaired loan losses were $79 million, flat relative to Q1. The U.S. Personal and Business Banking business had impaired loan losses of $1 million, down from $4 million in the prior quarter. Consistent with prior quarters, strong credit performance across our P&BB businesses was driven by low delinquency and insolvency rates. In our commercial and corporate businesses, we also saw strong credit performance. In Canadian commercial, we reported impaired loan provisions of $7 million, down from $21 million last quarter. Our U.S. commercial business had impaired loan provisions of $34 million, up from a net recovery on impaired loans of $1 million last quarter. Our Capital Markets business also had strong impaired loan credit performance this quarter with impaired loan losses of $1 million. On Slide 29, impaired formations were low again this quarter at $333 million, leading to a gross impaired loan balance of $2.1 billion or 41 basis points. Both formation and gross impaired loan rates continue to be well below pre-COVID levels. Despite some challenging market conditions, trading risk performance was good again this quarter, with one lost day as you can see on Slide 31. Despite continued volatile markets, our trading risk performance so far in Q3 has been consistent with Q2. In terms of the outlook, while the pandemic is not over, the economic impacts continue to diminish, which, along with our strong credit performance makes us confident that we can manage through current or emerging headwinds. With that said, our base case economic forecast is for continued economic growth. Should that transpire, there remains modest room for continued releases of the performing loan provision. As I have previously guided, we do expect our impaired PCL rate to drift slowly back up to a level more consistent with our pre-pandemic experience, which was consistently high teens to low 20s in terms of basis points. While it's difficult to predict the timing of when that level will be reached, given that the current portfolio credit metrics remain quite strong, I would expect that normalization to start towards the end of this year or into fiscal 2023. During the past 2 years, we have continued to strengthen our risk management capabilities, including automated and data-driven risk mitigation and management processes. In the face of macroeconomic and geopolitical risks, these capabilities, together with a strong current risk profile, strong liquidity and capital levels, a well-diversified portfolio and an adequate allowance, we're confident that we can continue to both manage future risk and support future growth.

Ebrahim Poonawala, Analyst

Tayfun, you mentioned margin expansion in both P&C and the consolidated bank. Could you provide more details on that? Specifically, can you discuss U.S. deposits and whether there's any portion of the growth over the past couple of years that you expect might lead to deposit outflows? Additionally, how do you anticipate deposit behavior, particularly considering the significant rate hikes we expect in the U.S. during the second and third quarters? Please share your thoughts on how quickly you believe deposits will reprice and your views on the risk of deposit outflows as a result.

Tayfun Tuzun, CFO

Thank you for the question, Ebrahim. So I'll start with the latter part of your question, and I'll come back to the NIM question. In terms of deposits, outflows as well as deposit pricing, we are pretty much on target on model with our expectations. In this environment, we have been expecting, first, the deposit growth has slowed down. And then starting in the U.S., we were expecting to see outflows. As both rates are increasing, we're still seeing opportunities that our clients have to place the money elsewhere in their commercial businesses as well as in Personal Banking. So you can see the numbers on a quarter-over-quarter basis deposit growth either slowed down, flat or some declines in the U.S., very much in line with what we expected. I suspect that as the central banks continue to aggressively increase interest rates, deposit betas are going to move up. It's difficult to necessarily move the dial all the way to the end and say whether they will end up higher than the last rate cycle, but it is likely that they will end up higher than the rate cycle based on what we see today. But in terms of our numbers, what guided us when we said we see NIM expansion into the second half of the year, and I will extend that also into 2023, all of it is in line with what we have modeled. I do expect NIM to meaningfully expand from here in Q3 and in Q4. We may see something close to what we have seen this quarter in our ex-trading NIM, which was 5 basis points in the next couple of quarters. Based on the rate increases that we're expecting, I think we will continue to see the expansion into 2023, which when you put it all together with our guidance of high single-digit loan growth this year, potentially moving into even next year, that bodes very well for net interest income growth. We had 9% growth year-over-year this quarter. You should see that number to remain very strong for the rest of the year as well as 2023.

Meny Grauman, Analyst

Just a question on Bank of the West. Bank mergers in the U.S. are facing more scrutiny. I think you have the hearing scheduled for July. I'm just wondering, is it reasonable to expect a delay here for the deal close, and why or why not?

Darryl White, CEO

Meny, this is Darryl. We do not anticipate any delays. Everything we expected to happen this year since announcing the transaction on December 20 is unfolding as anticipated, including our capital raise and submissions to various regulators. The meeting you mentioned in July is a standard public meeting that we had expected. As of today, there's really nothing new to share; we don't have any updates beyond what we've already communicated. Everything is progressing as we had hoped, and we still believe, as we stated at the time of the announcement, that the deal will close by the end of the calendar year.

Scott Chan, Analyst

Sticking to the Bank of the West update, Tayfun, you mentioned PTPP of $450 million to $550 million over the next 3 to 5 years, with a split between commercial and personal. I assume that is primarily incremental revenue and is it cumulative, considering you’ve already discussed the anticipated cost synergies from the transaction?

Tayfun Tuzun, CFO

Yes, this is net revenue synergies. There will be some associated expenses, but this is a net figure we are projecting, and we anticipate it to be a run rate increase after 3 to 5 years. This isn't necessarily a cumulative number over the full 5-year period. Towards the end of that timeframe, we expect to generate net revenues between $450 million and $550 million. Additionally, due to legal restrictions, we don't have complete access to their clients' information and data. Our teams have conducted extensive comparisons of our products with theirs and analyzed their markets. This gives us a good perspective on the expected growth in our performance. However, I must mention that I am optimistic that once we gain full access to their client base, this number could have even more potential for an upside.

Darryl White, CEO

Meny, I’ll share my perspective, and Tayfun may want to add to it. We mentioned earlier that we projected an 11% or higher performance for the first quarter after closing based on our models at that time. After considering the developments over the past five months and reevaluating our models, we still support that outlook. In fact, we might even exceed that, partly due to the capital actions, including a higher-than-expected equity issuance. Looking at our situation at closing and afterward, we remain confident in that 11% target, and it could possibly be even better, perhaps around 11.5% in the first quarter. Tayfun, do you have anything to add?

Gabriel Dechaine, Analyst

Yes, Darryl, I want to follow up on your comment. It seems like you might be expecting an 11% to 11.5% ratio for the first quarter after the close. That's surprising given the current situation, which is quite different from what we had in December. With everything I understand about your estimates for internal capital generation, are you planning to implement strategies such as securitization or portfolio sales, or do you still expect to achieve or exceed the 11% in the normal course?

Tayfun Tuzun, CFO

Yes. Thanks for the question, Gabe. So just to set up the environment, obviously, as I said, this was the eighth quarter in a row that we delivered positive operating leverage, and we are committing to that. I mean it may not be every quarter, but that's our commitment over reasonable periods of time. We did have a 2% quarter-over-quarter increase. My comment about the second half continuing a more moderate expense growth into the second half of this year relates to the fact that when we started ramping up our investments in technology and sales force, that happened more in the second half of last year. So therefore, we knew that the first half of this year was going to be a bit more challenging. Now going into the third and fourth quarters, you should see similar numbers that you saw from us this quarter, that 2% type of number, a relatively more modest expense growth. In that number, I should say that last week, we did announce a salary adjustment for our employees between level 2 and level 7 of 3%. We are seeing more inflation on the salary side, and we made that adjustment last week. My outlook does include the impact of that increase, which is an incremental amount to our discussion back in February. As you reminded us, we did guide to about 1.5% year-over-year expense increase, excluding performance-based compensation. With this increase, we're now going to take our expense outlook year-over-year, excluding the impact of performance-based compensation, to about 2.5% because that sort of is the incremental amount. We are seeing more movements in salaries, but at the same time, we maintain our commitment to positive operating leverage. We’re spending a lot of time internally assessing the magnitude and the returns to our investment and we’ll ensure that as we watch the revenue environment, we dynamically manage our expenses accordingly and still achieve that positive operating leverage.

Doug Young, Analyst

In the U.S. banking sector, there appears to be a sequential slowdown in commercial loan growth, and while that might fluctuate, I'm interested in what you are observing and what the pipeline indicates for loan growth in the upcoming year. Additionally, could you provide insights on utilization rates, including their current status and your expectations for future changes?

Dave Casper, CRO U.S. Banking

Sure. This is Dave. In our commercial business in the U.S., we experienced nearly 3% loan growth quarter-over-quarter on the commercial side, which is very positive, and close to 14% year-over-year if you exclude the PPP. It's consistently strong across both regions and sectors, especially with the inventory build increasing our utilization, despite very low utilization in our truck and auto financing businesses. Overall, utilization continues to rise as clients increase their inventory and have a positive outlook for the latter half of the year. I wouldn’t say it’s slowing down; instead, it’s on the rise. Over the last eight quarters, we’ve only had one quarter with lower loan growth, including the PPP. We have consistently added new customers, expanded geographically, and grown in various sectors throughout this time. I consider this very positive. Please let me know if I did not fully address your question or if you have any follow-ups.

Paul Holden, Analyst

So first question is regarding inflationary borrowing cost pressures on commercial clients. And we've seen a number of public companies come out with disappointing margin numbers. Just wondering if you're seeing any early indications of profit pressures on your customers, and then secondly, sort of how are you monitoring for that going forward?

Pat Cronin, CRO

It's Pat. I'll start and then maybe others can jump in. I would say the short answer to your question is no, we're not really seeing that yet. In fact, we're seeing – in fact the opposite. We're seeing this quarter, again, we saw a positive credit migration across the wholesale portfolio and broad-based in virtually every sector. That's been a continuation of positive migration that we've seen over the course of the past 6 quarters in the wholesale business. The early signs in credit migration, in terms of credit, in terms of impaired formation, you would have seen impaired formations extremely low again this quarter, and in fact, way below pre-COVID levels. And so that's another sign that would suggest that we're not seeing those kinds of things happening. Now with that said, obviously, we're guiding towards a normalization in rates. I think some of the wage pressure, debt service cost pressure and energy cost pressure is one of the reasons why we think that normalization will occur. But there's always a lag to that, and that's why we're forecasting it to happen towards the end of this year and into next year is probably when you'll start to see some of those effects. But we don't see a material step function in terms of impact. We just see that as a catalyst to get us back to something that feels a bit more normal versus the really abnormally good conditions we're experiencing right now.

Mario Mendonca, Analyst

Tayfun, just maybe a quick detail question. Those syndication gains that were a little lower in the U.S. business this quarter, where is that reported in your fee income? Like is that just in the line referred to as other revenue?

Tayfun Tuzun, CFO

Lending. It's in lending fees, Mario, yes. So this is net revenue synergies. While there will be some associated expenses, this is a net figure that we are projecting and expect it to represent a run rate increase after 3 to 5 years. It does not necessarily represent a cumulative total over that 5-year time frame. By the end of that period, we expect to generate net revenues between $450 million and $550 million. Additionally, as you can understand, due to legal restrictions, we do not have complete access to their clients' information and data. Our teams have conducted significant analysis of our products in relation to theirs, along with their markets. Therefore, we have a solid perspective on the anticipated improvement in our performance. However, I remain optimistic that once we gain full access to their client base, this projection could have even greater potential for growth.

Pat Cronin, CRO

Yes. Thanks for the question, Mike. Actually, I don't actually agree that their credit history is significantly different from ours. When I look at their provisioning rate over the course of time, it's actually reasonably consistent with when we look at their credit profile as well, both in consumer and wholesale, we see it as very consistent with ours and a lot of overlap in terms of the sector exposures and even the weightings of sectors, we see pro forma, the weightings that we're going to have in sectors will be reasonably consistent with what we've got actually right now. We don't anticipate making material changes. The only place that they have a slightly different exposure to us is in the RV and marine segment. That segment performed differently during the financial crisis, so maybe that's what you're referring to. But we like that business as well. We think it's a nice complement to the consumer portfolio. And I think I have to reiterate, too, that in both the consumer and the wholesale segment, their starting position is the same as ours, which is a really, really strong credit profile, particularly in consumer. We're not concerned at this point in time with the merger of their risk profile and ours. We see it as very similar, quite complementary and don't anticipate making any material changes. It certainly would not affect my guidance in terms of forward PCL.

Darryl White, CEO

Well, thank you, operator, and thank you all for your questions. I'll conclude very quickly with a few key themes. Number one, we continue to deliver good financial performance in the second quarter. Number two, we're strategically investing to deliver growth and efficiency over time. Number three, our superior risk management remains a differentiator and we believe it will continue to be. Number four, we have an advantaged business mix that's positioned to take advantage of the global trends that I talked about at the beginning of the conference call. Thank you all for participating in today's call, and we look forward to speaking to you again in August.

Operator, Operator

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