Bank of Nova Scotia (BNS) 2017 Q2 法說會逐字稿

Good morning, and welcome to Scotiabank's Second Quarter 2017 Results Presentation.

My name is Jake Lawrence.

Presenting to you this morning is Brian Porter, Scotiabank's President and Chief Executive Officer; Sean McGuckin, our Chief Financial Officer; and Daniel Moore, the bank's newly appointed Chief Risk Officer.

Following our comments this morning, we'll be glad to take your questions.

Also in the room with us to take questions are Scotiabank's business line group heads: James O'Sullivan from Canadian Banking, Nacho Deschamps from International Banking and Dieter Jentsch from Global Banking and Markets.

Before we start the call and on behalf of those speaking today, I'd like to refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements.

And with that, I'll now turn the call over to Brian Porter.

Thank you, Jake, and good morning, everyone.

I'll start on Slide 4. We are pleased to report our second quarter results to our shareholders.

The bank delivered $2.1 billion in earnings and diluted earnings per share of $1.62 for the quarter, up 11% compared to last year.

Our return on equity was strong at 14.9% and in line with our medium-term objectives.

Turning to our business lines, I'd like to make some brief comments.

Canadian Banking delivered a good quarter of earnings, underpinned by solid asset and deposit growth and a continued focus on improving the customer experience.

We're also making good progress towards reducing structural costs and improving business mix.

International Banking delivered another quarter of record earnings, driven by solid growth across all markets.

Overall, our personal and commercial banking businesses are generating approximately 80% of Scotiabank's earnings, with strong earnings growth and an improving return on equity.

Global Banking and Markets also had a better performance in Q2, with both improved efficiency and profitability.

At the enterprise level, our structural cost initiatives are progressing ahead of plan, and on an underlying basis, the bank generated positive, operating leverage in the quarter.

In terms of risk management, overall credit quality has improved year-over-year and continues to be well managed and within the bank's risk appetite.

The bank is very well capitalized with a strong common equity Tier 1 ratio of 11.3%.

Our strong balance sheet continues to provide us with optionality to invest in our businesses organically, grow through acquisitions and return capital to our shareholders.

We said many times before it's important to get the big picture right.

Our bank is performing well, and we remain focused on managing for the longer term.

This includes: make it easier for our customers to do business with us; shifting our culture to be more performance-oriented; improving our efficiency through our structural cost transformation and becoming a digital leader in all our major markets.

This quarter, Scotiabank was recognized by Retail Banker International as the Latin American Retail Bank of the Year for 2017; and finally, optimizing our business mix to enhance profitability while maintaining our strong risk culture.

These core pillars of our strategic agenda are not changing.

Whether housing market shifts, NAFTA is modernized, regulatory changes are made or short-term matters emerge in the latest headlines, our strategic agenda is designed to meet the needs of our customers, shareholders and our employees.

I will now turn the call over to Sean, who will discuss our financial performance for the quarter.

Thanks, Brian, and good morning, everyone.

I will begin on Slide 6, which shows our key financial performance metrics for the current quarter and comparative periods.

As Brian mentioned, the bank delivered a good quarter with net income of just over $2 billion in Q2, up 11% year-over-year, adjusting for last year's restructuring charge.

Diluted earnings per share were $1.62 also up 11% compared to last year.

All 3 of our business lines delivered strong underlying performances.

Revenue on a taxable equivalent basis was up 4% year-over-year, reflecting 6% growth in net interest income and a 2% increase in noninterest income.

Net interest income was driven by higher asset growth in Canadian and International Banking as well as increased contributions from asset liability management activities.

Our core banking margin was 2.54%, up 16 basis points year-over-year.

About half of this increase was from the higher-margin International Banking, with the balance mostly from improved asset liability management contributions and asset mix, including lower levels of deposits with banks.

Noninterest income on a taxable equivalent basis was up 2%, higher banking and wealth management fees of 6% and higher trading and real estate gains were partly offset by a gain on the sale of a business last year, lower investment security gains and the negative impact of foreign currency translation.

Adjusting for the impact of the restructuring charge from last year, noninterest expenses increased 5%.

The bank continued to focus investments on business initiatives which drove higher digital and technology-related expenses.

Higher performance-based compensation and employee benefit expenses, in part due to a large benefit last year, also contributed to the increase.

These costs were partly offset by continued benefits realized on our previously announced structural cost reduction activities.

In Q2 '17, we realized $155 million in savings from our structural cost transformation, bringing us to a year-to-date total of $245 million or 70% of the $350 million in savings previously announced for the year.

The Q2 reported productivity ratio was 54.7% or 52.1% on a taxable equivalent basis, a slight improvement over last year.

Overall, we are delivering positive operating leverage in 2017, with approximately 1% year-to-date on a taxable equivalent basis.

Lastly, the provision for credit loss ratio improved 15 basis points year-over-year due mostly to the large energy-related provisions recorded last year.

Moving to capital on Slide 7. The bank continues to maintain a strong capital position with a common equity Tier 1 ratio of 11.3%, unchanged from the prior quarter and up 120 basis points compared to Q2 of last year.

Our strong capital position supported higher dividends paid and a larger level of share buybacks in Q2.

The CET1 ratio improvement was driven by strong net internal capital generation, which contributed to approximately 20 basis points this quarter.

This was offset by increased share buybacks and a negative impact of the pension liability revaluation.

The bank's common equity Tier 1 risk-weighted assets increased 4% during the quarter.

After adjusting for foreign currency translation, RWA was up 1%.

This was primarily in personal and business lending, partly offset by lower RWA from market risk and counterparty credit risk.

Turning to the business line results, beginning on Slide 8. Canadian Banking produced net income of $971 million, down 1% from last year.

Adjusting for the gain on disposition in Q2 last year, earnings grew 11% or further adjusting for higher gains on the sale of real estate, earnings are up 5%.

Total revenues increased 3% from last year, driven by solid asset and deposit growth.

Adjusting for the gain on disposition last year and the higher real estate gains this year, total revenues increased 5%, with good contributions from mutual fund and card revenues.

Loans and acceptances increased 4% from last year.

Residential mortgage growth was up 3% or 4% excluding the Tangerine mortgage runoff book.

Personal loans grew 4%, and business loans were up 9%.

Optimizing our balance sheet remains a key focus, including growing more profitable deposits.

Compared to last year, retail banking savings deposits grew 11% and checking accounts were up 10%.

The net interest margin at 2.38% was stable with prior periods.

Wealth management delivered a strong quarter with earnings growth of 13% year-over-year, driven by higher brokerage and mutual fund fees, higher net interest income and positive operating leverage.

AUM was up 13%, and AUA was up 8%.

Provision for credit losses in Canadian Banking were up $32 million or 16% year-over-year.

Higher provisions on the retail portfolio accounted for most of the increase, reflecting growth in non-mortgage lending.

The loan loss ratio was up 3 basis points year-over-year and up 1 basis point compared to last quarter.

Expenses increased 3% year-over-year, reflecting higher spending on digital and technology to support business growth, which are partially offset by benefits realized from cost-reduction initiatives.

Canadian Banking reported year-to-date operating leverage of just over 2%.

Adjusting for the aforementioned gains in each period, Canadian Banking had year-to-date operating leverage of 2.5%.

Turning to the next slide on International Banking.

The business line continued to demonstrate strong financial and operating momentum, with another record level of quarterly earnings.

At $595 million, earnings grew 19% compared to last year or 23% when adjusting for unfavorable foreign currency translation.

Earnings growth has been profitable, with the business generating an ROE of 14.8%.

These results reflect good retail loan and deposit growth, higher net interest margin, lower provisions for credit losses and very good operating leverage.

International Banking loan growth was up 3%, driven by solid retail loan growth of 8% partly offset by flat commercial loan growth resulting from a strong growth performance in the first half of 2016.

As we have noted in recent quarters, we are seeing good momentum in our commercial lending pipeline, and volumes increased 5% quarter-over-quarter or 4% on a constant-currency basis.

We expect continued commercial volume growth resulting in much stronger year-over-year growth in the second half of 2017.

Turning to the Pacific Alliance.

Loan growth was up 7% year-over-year, driven by strong retail loan growth of 13% while commercial loan growth was up 2%.

As GDP forecast for our Pacific Alliance countries are trending higher into 2018, we expect improving asset growth.

International Banking is also driving higher deposit growth, up 10% due to strong growth in demand, savings and term deposits.

The net interest margin increased 31 basis points year-over-year to 5%.

About half of these increase was driven by Central Bank rate changes, with the balance on business mix.

The margin will likely see some moderation from the current quarter's very strong performance in the second half of 2017, though we expect it to be slightly higher than the second half of last year.

Credit quality remains strong in International Banking, with the PCL ratio increase quarter-over-quarter driven by some specific commercial accounts.

On a year-over-year basis, the PCL rate improved by 17 basis points.

Expense growth was 3% versus last year due to increased business volumes and inflation as well as the negative impact of foreign currency translation.

This was partially offset by benefits realized from cost-reduction initiatives.

The productivity ratio of 53.3% in Q2 improved by approximately 150 basis points compared to prior year, reflecting the strong year-to-date positive operating leverage of 3.6% achieved through recent initiatives to reduce structural costs.

In fact, looking at our productivity ratio of 54.3% year-to-date, International Banking has already achieved its 3- to 5-year target announced back in our January 2016 Investor Day in Mexico City of improving to a 54% productivity ratio.

We continue to focus on improving efficiency in our international business and are mindful of the need for ongoing investment in our business, but we are expecting further productivity improvements over the coming years.

Moving to Slide 10, Global Banking and Markets.

Net income of $517 million was up 60% compared to last year.

The earnings growth was driven by higher contribution from equities, fixed income and U.S. lending businesses as well as much lower PCLs and good expense management.

The increased income from equities related primarily to higher levels of client activity in equity trading, and this contributed approximately 40% to the year-over-year earnings growth.

Trading revenues on a TEB basis increased by 28% year-over-year.

Revenues also benefited from higher deposit volumes and advisory fees, partly offset by lower lending volumes.

On a quarter-over-quarter basis, the net interest margin was up 12 basis points, primarily due to higher loan spreads and improved funding costs.

Provision for credit losses of $2 million was down $116 million versus last year, and the loan loss ratio improved by 56 basis points to only 1 basis point.

The improvement was driven by lower provisions in the energy sector.

Quarter-over-quarter , loan losses were down $6 million.

Expenses were up 2% compared to last year due mainly to higher performance-based compensation as well as higher technology and regulatory initiatives.

This was partly offset by lower share-based compensation costs.

I will now turn to the Other segment on Slide 11, which incorporates the results of Group Treasury, smaller operating units and certain corporate adjustments.

The results include the net impact of asset and liability management activities.

The Other segment reported a net loss of $86 million this quarter compared to a net income of $1 million in the prior year after adjusting for the restructuring charge in Q2 2016.

The decrease was driven mostly by lower gains on investment securities and lower gains on the sale of real estate.

As well, there was a negative impact of foreign currency translation and higher noninterest expenses due mostly to a large postretirement benefits credit last year, and these were partly offset by the impact of an increase in the collective allowance on performing loans in Q2 of last year.

This completes my review of our financial results.

I will now turn it over to Daniel, who will discuss risk management.

Thank you, Sean, and good morning.

I'll begin on Slide 13.

We remain comfortable with the underlying fundamentals of the bank's risk portfolios.

Results this quarter are within expectations, and the loan loss ratio was 49 basis points, a decrease of 15 basis points year-over-year.

As Sean said, our energy portfolio remains well managed and have net provisions of only $2 million in Q2.

The cumulative energy loan loss ratio since 2015 of 2.1% is well below our guidance of less than 3% until the end of 2017.

We remain committed to our guidance and are actively managing all of our exposures.

Overall, our retail credit performance in Canada and international is performing as expected.

In Canada, we are seeing higher provisions from the retail portfolio year-over-year.

The increase is mainly driven by growth in relatively higher spread loans, reflecting both asset mix and portfolio seasoning, and we are being adequately compensated for this risk.

Provisions in the Canadian Banking have peaked, and we are already seeing improvement in delinquency rates across product categories.

We expect PCL rates to stabilize in the second half 2017.

Now given the focus on housing and consumer debt levels, I wanted to make some specific comments here.

Our Canadian residential mortgage portfolio of $197 billion is high quality, with 54% of the portfolio insured.

Of the uninsured, our portfolio has an LTV of 51%, providing substantial equity buffer in the event of a housing correction, something which we are not forecasting.

Moreover, our new originations in the quarter averaged an LTV of 63%, with Ontario and B.C. at 52%.

By distribution channel, our new originations from the branch network average an LTV of nearly 60%, reflecting a higher level of renewal business on existing mortgages while the remaining broker and sales force channels originate closer to the portfolio average.

Now we perform detailed stress testing on our housing and unsecured lending portfolios, which are heavily dependent on unemployment levels and interest rate spikes to drive higher losses.

Our scenarios consider housing credit declines up to 50% in the key markets of Toronto and Vancouver, with unemployment rates increasing by levels similar to prior recessionary periods.

Housing-related losses are negligible, and while unsecured does experience higher losses, they're still very manageable for the bank.

Moving on to International Banking, we continue to see good credit quality trends.

The credit performance year-over-year saw lower commercial provisions in Colombia and Puerto Rico, as last year included provisions on a few specific accounts.

Quarter-over-quarter, provisions increased in retail banking due to asset growth and lower acquisition-related benefits and foreign exchange impact, which also applies to commercial banking.

The bank continues to invest in our collection capabilities.

We've hired more people to add capacity.

Moreover, we are leveraging data analytics to better identify areas of our book with higher risk for loss.

Our efforts have seen dollars collected increase 10% from last quarter, and we are tracking towards a record level in May.

Now turning to our credit metrics.

Gross impaired loans were up 3% quarter-over-quarter.

The increase was mainly due to the impact of foreign currency translation in the Pacific Alliance countries in International Banking as well as on a specific account in Global Banking and Markets, offset in part by a decrease in Canadian Banking.

Our net impaired loans as a percentage of our portfolio was unchanged at 49 basis points quarter-over-quarter.

Net formations amounted to $807 million, up from $723 million in the prior quarter.

The increase was driven by higher loan formations in international commercial and GBM.

Looking at our market risk.

It continues to remain low in Q2.

Our average 1-day all-bank VaR was $11.1 million, down $0.9 million from the prior quarter, and there were no daily trading losses in the quarter.

Turning to Slide 14.

You can see the recent trend in loss rates for each of our businesses.

As previously stated, our loan loss ratio this quarter is 49 basis points.

Canadian Banking's PCL ratio was up 3 basis points year-over-year, driven by retail exposures as the bank continues to improve its business mix.

In the second half of 2017, we expect our retail loan loss rate to remain generally stable.

In International Banking, the loan loss ratio increased 12 basis points quarter-over-quarter due to some specific commercial accounts.

We remain comfortable with our exposure and expect commercial PCLs from the second half of 2017 to return towards Q1 levels.

You will have noted that the loan loss ratio improved 17 basis points compared to a year ago.

Global Banking and Markets improved its PCL ratio to a strong 56 basis points year-over-year due to lower energy-related provisions.

Overall, we believe our credit portfolios remain in good condition.

With that, I'll turn the call back over to Brian.

Thank you, Daniel.

Before we open the call for questions, I'd like to highlight some of the key takeaways from our presentation and comment on the outlook for Scotiabank.

We delivered strong results in the first half of the year and expect this momentum to continue in the second half of 2017.

In Canada, we continue to focus on improving the customer experience by enhancing our digital capabilities, optimizing our business mix and reducing structural cost.

Internationally, our operations delivered another quarter of record earnings and generated strong operating leverage.

We continue to see great short- and long-term potential across our Pacific Alliance countries.

Global Banking and Markets had a strong quarter, with good performance in our trading and corporate lending businesses and improved credit quality.

Our structural cost transformation is tracking very well.

We have realized just over 70% of our expected $350 million in savings for 2017 and are progressing towards a productivity ratio of 50% or better by 2021.

As mentioned in my opening comments, we are focused on the big picture for our customers, shareholders and employees.

I'm proud of what we have accomplished in the first half of the year and the progress we are making in implementing our strategic agenda.

Heading into the second half of 2017, we continue to execute on our strategy to build an even better bank.

And with that, I'll turn it over to Sean for the Q&A.

Okay.

Thanks, Brian.

That concludes our prepared remarks.

We will now be pleased to take your questions.

(Operator Instructions) Operator, can we have the first question on the phone, please.

And we'll take our first question from Robert Sedran with CIBC Capital Markets .

Just looking at Slide 22, the International Banking commercial loan growth.

I'm curious if there's any seasonality in this number.

I noticed a similar jump in Q2 of last year, and I know the -- there's some confidence that the momentum is going to continue.

But I'm -- if you can give us a little more granularity in terms of where and how that's expected to play out in the second half, that'd be appreciated.

This is Nacho.

Well, really, we're seeing business confidence strengthen in the Pacific Alliance countries.

As I mentioned last quarter, our pipeline was getting stronger, and we had a very strong growth of 4% in commercial assets this quarter.

We expect this momentum to continue.

Actually, GDP outlook for the 4 Pacific Alliance countries for 2018 is higher than this year.

Nacho, can you speak specifically to Mexico and whether there's business confidence there and whether you're seeing activity improve there?

Surely.

Well, I think Mexico in particular had a very strong quarter with a lot of not only asset growth but all the qualities there in all the P&L.

I've been traveling to the Pacific Alliance countries.

In the past month, I was in Mexico.

As you've seen, I think, very good management of monetary policy, markets have corrected.

And really, if you just look at indicators like car loans, retail sales in stores, all these indicators have -- are showing good trends.

Business confidence is also strong.

And quite frankly, although there is a lot of media attention on potential changes of U.S. trade policy, the reality day to day in the companies in credit demand is really strong, positive in our bank in Mexico.

And we'll take our next question from Nick Stogdill with Crédit Suisse.

First, just a clarification.

Is $0.04 a good estimate for the real estate gains in Canadian Banking?

And just to clarify, is that related to Canadian bank branches sales or sale-leasebacks?

Yes.

The year-over-year contribution was about $0.04 for Canadian Banking, and it relates primarily to the sale of our retail -- a portion of our retail branches.

And then, just my question on the international margin.

I think you said you're expecting it to stay above the first half of 2016, so that looks like about 4.65%.

So below 5%, above 4.65%, is that a fair range?

And we've seen a number of rate cuts in countries outside of Mexico, so Chile, Peru and Colombia are now cutting.

Does that contemplate the cuts that have taken place to date or some further ones as well?

Yes.

The -- just to clarify, the comment was the second half of '17 margin will be a little bit less than the 5% we [reported] this quarter, but we expect it to be higher than the second half of 2016, producing ongoing margin expansion in the second half of the year.

In terms of the rate cuts, as we have mentioned before, in Colombia, we actually benefit from when rates decline because of the cap mechanism they have on the assets.

And in Peru and Chile, we're not that interest-sensitive, so we don't get a lot of pickup or decline in margins in Peru and Chile with rate changes.

It's mostly Mexico and Colombia.

We'll take our next question from Steve Theriault with Eight Capital.

A question for James.

James, on credit cards, that had been a very strong component of the story for a while, but the growth 1% year-over-year, flat quarter-on-quarter.

Just wondering, can you talk a bit about has the card penetration story plateaued a bit here?

We had seen some modest upward margin pressure on the back of better mix and higher cards.

Will we see any of that in the second half?

I think this may be the second consecutive quarter this has fallen off a little, so would be interested to hear a bit on that.

Yes.

So we've had -- I think this is the third consecutive quarter where we've had what I would describe as relatively stable card balances.

And I think you should anticipate stable to modestly rising card balances looking out a couple of quarters as well.

The initiative has gone very, very well.

We said we would double the portfolio and double the profitability, and we've done that.

The Chase acquisition has been very, very successful and is performing very much as expected.

But I think until we define the next leg of growth in cards, which we will at some point, I think you should expect the stable to modestly growing balances in cards.

And in the interim, we'll have a very sharp focus on commercial, on small business and on deposits, all of which should continue to enhance our business mix and narrow the gap in margin.

Okay.

And where has that penetration level got to?

I think you spoke to it a year or 2 ago at the Investor Day in terms of percentage of core Scotiabank customers with the card.

Can you share that?

Yes.

I think we started at around 30%, and it would be kind of low to mid-30s currently.

And we'll take our next question from Gabriel Dechaine with National Bank Financial.

So I'd just, I guess, paraphase James before asking my real question.

You're shifting to commercial and small business and deposits growth to get the risk-adjusted margin moving higher again because it's been kind of flat to moving down as the cards growth has slowed.

Is that the right interpretation?

I think that's fair, but the other thing I want to be clear on is, at the end of last quarter, a couple of things struck us.

One is that we had very strong capital levels.

Two is we had asset growth that, frankly, was lagging some of our domestic peers, and this was at the same time that we had, I think, an improving macroeconomic outlook in Canada.

So one of the things we've decided to do is sensibly, and I want to emphasize that word, sensibly expand the balance sheet consistent with our risk appetite, and we're really doing that kind of right across all of our asset classes.

But to the extent there's a special focus, I think you should expect that special focus on those asset classes and on deposits that continue to narrow the gap in margin.

That remains very much an ongoing medium-term objective.

But for the time being, we're trying to get it right.

We're a little bit of a pause on cards.

We got to get the revenue right, and we'll push hard on commercial, small business and deposits.

So my main question here is we saw Puerto Rico territory file for bankruptcy this -- in early May.

I just want to -- and international had a really strong quarter, don't get me wrong.

I just want to know if there's any credit surprises we might see over the next little while.

I get Puerto Rico questions from time to time.

Can we go through your exposures in Puerto Rico, which ones might be exposed, I guess, to this bankruptcy, like maybe not the state itself but some of their sponsored entities or utilities that they backstop?

How [is your exposure] overall Puerto Rico?

Sure.

Gabriel, this is Daniel Moore.

In response to that question, looking at government-related exposure, which I think is the question that you're getting towards, we've taken a good look at that portfolio.

The filing gives us the opportunity to do that.

We consider ourselves to be very well secured both through direct security on the portfolio as well as through reserves against credit losses.

So our direct government exposure of $270 million is reduced to $150 million after security and reserves.

We view that as really manageable.

And that's it?

There's no utilities or other...

That would include utility exposure.

Our next question will come from Meny Grauman with Cormark Securities.

Given all the issues surrounding some of the smaller lenders, I'm wondering if you can comment -- are you seeing anything unusual or interesting at Tangerine, specifically on the deposit side, anything -- increased flows that are coming to you from issues at competitors?

Nothing that would relate, Meny, directly to the situation you described.

But I would say Tangerine is performing well.

We're quite pleased with it.

As you may be aware, we recently shifted their strategy modestly.

We're going to have them focus very squarely on value-conscious Canadians.

So that's not a geography and it's not a demographic, but it's a behavioral preference.

And we're going to use data to reach them.

One of the things that we learned from J.D. Power is that 50% of Canadians would consider switching for value reasons, and Tangerine's value proposition, in fact, is -- as we speak, it's a key part of their industry-leading customer experience and their J.D. Power scores.

So we've got them fair -- squarely focused on a strategy and they are succeeding at it, but we're not seeing any direct impact from the situation you described.

And we'll take our next question from Ebrahim Poonawala with Bank of America.

I was wondering if you can just comment in terms of capital ratios.

They have remained relatively stable for the last few quarters around 11.3%.

I see that you're getting pretty strong organic growth in International Banking.

Just in terms of -- Brian or Sean, if you can talk about capital deployment opportunities, organic versus M&A.

And sort of do you expect capitalization to remain around these levels for the foreseeable future?

Ebrahim, it's Brian speaking.

As we discussed on the call a number of times, we like optionality as a bank.

We've got lots of different alternatives to invest our capital organically, and we've been doing that.

And from time to time, we'll look at acquisitions and -- that are on strategy and, we think, fit in nicely with our business and that we can integrate well.

And there will be opportunities to do that over the course of the next year, I suspect.

On the acquisition front, I can't think of one asset that has transacted in the marketplace within our footprint that we wanted to buy that we missed.

So again, we like having the capital position we do.

The bank is operating extremely well.

It provides us optionality.

And when we see something that's on strategy, we'll take a hard look at it.

Understood.

And just a follow-up on that.

Do you expect more opportunities to come in, in Canada or in international markets if you had to take a guess in terms of M&A?

It's always tough to guess.

Obviously, M&A is a lumpy business by definition, but I would suspect we'll see more opportunities in the international footprint over the course of next year.

Our next question comes from Mario Mendonca with TD Securities.

For Sean or Brian, over the last few years, when banks have announced NCIBs, there really hasn't been a strong intention, at least as far as I could tell, to actually execute, but that's changed recently.

We've seen a lot more activity there.

Without giving away too much on your strategy, what would you suggest?

Is this more of an opportunistic or just having the optionality to buy back stock?

Or is there more of a serious intention to do so?

As you've heard me say before -- or Sean say before, we like to have it in the toolkit.

Over the last 3 years, I think this best describes it, Mario, is that we repurchased 31 million shares.

25 million of that was for option exercise.

And we've done it at an average price of $65.50, so we've been somewhat tactical in terms of how we've bought shares back.

But we'll continue to have it in the toolkit, and it will be tactical.

So no difference in emphasis from prior years then?

That's correct.

And then, just real quickly, on the branch closures and the benefits therefrom, what is your outlook there?

Is that process essentially complete now?

Mario, we -- as we speak, we would still have about, I don't know, 220 branches.

Half of those would be urban or suburban.

The other half would be rural.

I mean, we view this really as a generational opportunity to achieve pretty remarkable cap rates, so I think we're going to continue.

So we could see some gains materialize going forward in 2017 from the sales?

Yes, you could.

And we'll take our next question from Sohrab Movahedi with BMO Capital.

Brian, it's been an interesting few years.

You now have business growth everywhere, even Dieter has kind of righted the ship on GBM.

You look like you're overachieving on cost containment.

Credit risk, obviously not a problem.

What is it that you worry about next?

Look, I'm not -- I'd turn that phrase around, Sohrab, and I'd say, look, I think the bank is extremely well positioned.

We like where we are.

We've got capital to deploy here, and we look at acquisitions as they come or potential acquisitions as they're on strategy.

But the bank's growing nicely organically.

The structural cost initiative is working well.

The leadership changes that we've made are -- people are settling in their new roles.

And I think the bank is very well positioned, so we're very optimistic about the future of the bank, how we're positioned and look forward to the balance at 2017 and 2018.

You think -- do you think deploying capital in something other than your own company right now is something worth doing?

Or do you think you're a better investment?

Yes.

We'll look at things, and there will be opportunities in Canada and outside Canada.

We've talked about being at scale in certain markets.

That's important to us to drive further efficiencies.

It's important to our customers.

We've work hard at making our operating results in Mexico, Peru, Chile what they are today.

We've got some work to do in Colombia, and we're ready to tackle that.

But we're -- there will be opportunities, both in Canada and internationally, that we'll look at.

This bank has -- I used the word optionality a lot.

This bank and its shareholders have benefited from optionality in the past and will continue to do so in the future.

So we're not going to stretch.

We'll be very disciplined.

And anything we look at, it's got to be on strategy, it's got to be accretive and it's got to meet certain return on capital hurdles, et cetera.

And also, it's about people, it's about ease of integration, it's about systems, it's about all those things when you're looking at acquisitions.

All right.

I think that's the last question on the call.

Thank you all for participating.

We look forward to talking to you next quarter.

Thank you.