Canadian Imperial Bank of Commerce (CM) 2017 Q4 法說會逐字稿

Good morning, welcome to the CIBC quarterly financial results call. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Amy South, Senior Vice President, CFO and Head of Investor Relations. Please go ahead, Amy.

Good morning, everyone, and welcome to CIBC's 2017 Fourth Quarter Results Conference Call. My name is Amy South. And I am the Senior Vice President of Investor Relations. This morning's agenda will include opening remarks from Victor Dodig, CIBC's President and Chief Executive Officer; Kevin Glass, our Chief Financial Officer will follow with a financial review; and Laura Dottori-Attanasio our Chief Risk Officer, will provide a risk management update. With us for the question-and-answer period following the formal remarks are CIBC's business leaders, including Harry Culham, Jon Hountalas, Christina Kramer and Larry Richman as well as other senior officers. (Operator Instructions)

Before we begin, let me remind you of the caution regarding forward-looking statements on Slide 1 of our investor presentation. Our comments may contain forward-looking statements, which involve applying assumptions, which have inherent risks and uncertainties. Actual results may differ materially.

With that, let me now turn the meeting over to Victor.

Thank you, Amy. Good morning, everyone, and thanks for joining us. This morning, we released our record fourth quarter results with adjusted earnings of $1.2 billion. On a per share basis, this quarter's adjusted earnings of $2.81 marks our 13th consecutive quarter of year-over-year EPS growth. Our results reflect continued progress on our client-focused strategy and our commitment to grow shareholder value. Our Canadian SBUs reported double-digit earnings growth, reflecting our relationship-focused approach to banking and sensible management of our expenses.

With the full quarter's contribution from the former PrivateBank, U.S. Commercial Banking and Wealth Management continued to exceed our expectations. On a business as usual basis, the former PrivateBank showed one of their best quarters ever in terms of year-over-year revenue, NIM and loan growth, while credit quality remained strong. Capital Markets also delivered consistent and diversified earnings in a relatively quiet trading environment, showing the strength of our client-focused franchise. For the full year, adjusted earnings were $4.7 billion compared to $4.1 billion in the prior year. Importantly, we met our stated financial objectives in 3 key areas. Our adjusted earnings per share growth of 9% exceeded our stated target of being in excess of 5%. Our return on common shareholders' equity of 18% was above our target of being over 15%. And we have a strong capital position, with a CET1 ratio of 10.6% which is well within our target range of -- being between 10.4% and 10.7%.

During the year, we increased our quarterly dividend 3 times, providing dividend growth of 7% over 2016 and remained well within our payout range. We also continued to make good progress on our goal to achieve an efficiency ratio of 55% by 2019. We ended the year at 56.5% and that's a 170 basis point improvement over the same quarter last year. Efficiency continues to be an important focus for the CIBC team. In the year, we made steady progress in making it easier to bank with us and easier for our team to advance our strategic client agenda. These efforts have resulted in 2017 run rate cost savings of approximately $300 million, on target with expectations. The majority of the savings to date have been reinvested to accelerate our transformation and position CIBC for future growth. As we go forward, we anticipate that the run rate savings will continue to shift toward the bottom line.

2017 was an active year for our bank. We celebrated CIBC's 150th year of serving clients and strengthening our communities. We also advanced our U.S. growth strategy with the acquisition of the PrivateBank and Geneva Advisors, which are now operating under the CIBC name. With these acquisitions, we now truly have a North American franchise, a platform for which to grow and leverage the strengthening U.S. economy. Our results reflect strong and stable performance. We're confident in our ability to continue to execute on our strategy and increase shareholder value. And before I conclude this portion of our remarks, I'd like to mention that our courageous colleagues and clients impacted by the -- I'd like to mention our colleagues and clients impacted by the hurricanes in the Caribbean. They've gone through a lot, and I want them to know that we're supporting them through this difficult time.

And with that, let me turn it over to our CFO, Kevin Glass, for a financial review.

Thanks, Victor. For my presentation, we'll refer to the slides that are posted on our website starting with Slide 4 and give you a brief overview of the quarter. CIBC reported net income $1.2 billion and earnings per share of $2.59 for the fourth quarter. Adjusting for items of note, which are detailed in the appendix to this presentation, our net income was $1.3 billion and EPS was $2.81. We have record revenue of $4.3 billion for the quarter, which is up 13% year-over-year, and we delivered strong operating leverage of 3.4% and an efficiency ratio of 56.5%. The balance of my presentation will be focused on adjusted results, which exclude items of note. We've included slides with reported results in the appendix to this presentation.

Let me start with the performance of our business segments, beginning with the results for Canadian Personal and Small Business banking. Net income for the quarter was $623 million, up 11% from last year. Revenue for the quarter was $2.1 billion, up 4.5% from last year, primarily driven by strong volume growth. Net interest margin for the segment was flat sequentially as higher deposit spreads offset the impact of business mix. Our NIM may be flat or slightly lower in Q1 as a result of promotions that are simply in e-savings deposit accounts, which should improve over time as the impact of business mix becomes more muted. Noninterest expenses were $1.1 billion, up 1% from the prior year, expense discipline, along with our solid revenue growth combined to generate 8% preprovision earnings growth and 3.6% operating leverage this quarter.

As you can see on Slide 6, the volume growth generated in our Canadian personal and small business segment this past year was strong and balanced across our core businesses. On the money-in side of our balance sheet, we have delivered growth above our peers in both personal deposits and mutual funds. While we have trailed the industry in small business deposit growth, we are making investments in our platform, that we believe, will drive improved performance in 2018. In money out, we led the market 11.7% real estate secured personal lending growth and have delivered strong and consistent lending growth in small business, where balances are up 11.3% year-over-year. We've also gained market share in the unsecured personal lending and card space. You also see that we have added Slide 21 in the appendix, showing how we are building deeper relationships with our mortgage clients. Christina Kramer can take questions on that.

Slide 7 shows the results of our Canadian commercial and wealth segment. Net income for the quarter was $288 million, up 13% from last year, reflecting revenue growth from higher deposit and loan volumes and growth in AUA and AUM. Higher revenue in commercial banking was driven largely by a 12% increase in commercial deposit balances and an 8% increase in lending balances. In Wealth Management, AUA grew 9% as a result of market appreciation and strong net sales of long-term mutual funds. Noninterest expenses were up 8%, primarily due to higher performance-based and employee-related compensation. Strong top line growth and controlled expenses contributed to positive operating leverage of 1.1%.

Slide 8 shows the results of our U.S. commercial and wealth segment, which includes the results of the former PrivateBank, which is now operating under the CIBC name as well as Atlantic Trust and the real estate finance business. Earnings for the quarter for the segment was $119 million compared with $24 million last year, which results benefiting from a full quarter contribution from the former PrivateBank. Revenue was $391 million compared to the $106 million a year ago, reflecting the high-quality U.S. banking and private wealth capabilities we added during the year. Commercial banking revenue represented approximately 2/3 of revenue for the segment. Atlantic Trust and real estate finance had stable performance this quarter. Provision for credit losses was $13 million and overall credit quality remained strong in the segment. AUA was $74 billion as at the end of the quarter, increasing $30 billion from a year ago, reflecting our added U.S. private wealth capabilities, including Geneva Advisors, which closed during the quarter, adding $12 billion to AUA.

So on Slide 9, we show the contribution of the former PrivateBank in U.S. dollars. In order to provide a sense of the progress we are making on a business as usual basis, we have compared results this quarter with PrivateBank's results a year ago, using their published financials for the 3 months ended September 2016. We have treated purchase price adjustment for portfolio of fair value discount accretion and the establishment of collective allowance on new loan originations and renewals as items of note this quarter to more accurately reflect core earnings. Adjusted net income was $65 million compared with $49 million for PrivateBank in the third quarter of 2016. Revenue was $226 million, increasing $42 million or 23% from Q3 '16, reflecting the benefit of both portfolio growth and higher NIMs. Adjusted NIM was 3.4%, up 22 basis points compared with Q3 '16. Total loans grew $2 billion or 14% from calendar Q3 2016, reflecting the experience, banking team's continued momentum in driving client developments. Loans consisted of $1.7 billion of commercial and industrial loans and a net $300 million in commercial real estate and construction. Total deposits increased $1 billion or 7% from calendar Q3 2016.

During the quarter, we generated over $700 million in deposits related to CIBC referrals. Deposit balances also reflect strategic decisions taken to exit certain deposits that provide a limited value with respect to our consolidated liquidity requirements. Noninterest expenses were $119 million, an increase of $27 million or 29%. Most of this increase related to retention awards, that are designed to retain key personnel through the integration process. Retention awards declined over the next 18 months.

Turning to Capital Markets on Slide 10. Net income of $222 million was down $40 million from a year ago, reflecting lower revenue in global markets and higher expenses, partially offset by higher revenue in corporate and investment banking. Revenue this quarter was $622 million, down $7 million or 1% from a year ago, reflecting lower trading revenue, largely offset by higher revenue from debt underwriting, investment portfolio gains and higher corporate banking revenue. Trading revenue was down as a result of lower client activity due to limited market volatility as well as the impact of legislation affecting our equity derivatives trading business. We continue to grow our business as we focus on building innovative and steady revenue streams, and also on providing Capital Markets products and services to wealth and commercial clients in Canada and the U.S. As a result of the investments we are making to grow and expand our core franchise, noninterest expenses were up 6% from a year ago.

Slide 11 reflects the results of the Corporate and Other segment, where net income for the quarter was $11 million compared with a net loss of $59 million in the prior year. The increase is largely due to improved treasury results as well as higher revenue and lower specific loan losses in CIBC FirstCaribbean.

Turning to capital on Slide 12. Our CET ratio was 10.6% as of October 31, up 20 basis points from the prior quarter. Solid organic capital generation and share issuance through our dividend reinvestment and employee share-based plans were partially offset by the impact of the Basel I Floor adjustment and closing the Geneva Advisors acquisition. Our leverage ratio was 4% as of October 31, up 10 basis points from Q3. To wrap up, let me turn to Slide 13, which summarizes our full year results. After adjusting for the items of note, which are detailed in the appendix to this presentation, our net income was a record $4.7 billion, EPS was $11.11, up 9% from 2016 and well above our goal of 5% average annual growth. We delivered a strong return on equity of over 18%, and we finished the year with above the CET1 ratio of 10.6%. Heading into 2018, we are well positioned to continue growing our business and meeting the needs of the evolving regulatory and capital environment.

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

Thanks, Kevin, and good morning, everyone. Slide 15 begins with our loan loss performance. On an adjusted basis, loan losses were $212 million, relatively in line with last quarter as we experienced better performance in our Canadian retail and U.S. real estate finance portfolios, which was partly offset by higher losses in our Canadian Commercial Banking business. Adjusted loan losses for the full year were $812 million or 24 basis points. This is down almost 10% from $902 million last year and was largely driven by lower losses within the oil and gas sector.

On Slide 16, we are providing an overview of our gross impaired loans. You can see that our impairment ratios remain low and stable. Gross impaired loans were $1.3 billion or 36 basis points as a percentage of gross loans and acceptances, which is down $34 million or 1 basis point.

Slide 17 provides a more granular view of our net write-off rates by segment. Our consumer portfolios continue to show stable to decreasing loss rates on a year-over-year basis as the economy remained strong. Our business and government portfolio also show decreased rates, primarily as a result of improvements within the oil and gas sector. As for FCIB, the higher write-off rate was largely driven by the consumer portfolio. This was for loans that were previously impaired and fully provided, such that the PCL was not affected. For CIBC, overall, our ratio was 24 basis points, unchanged from last quarter and down on a year-over-year basis.

Slide 18 speaks to our residential mortgage and HELOC balances in Canada, along with a breakout of the greater Vancouver and Toronto areas. Our late-stage delinquency rates across all of these portfolios continued to remain low and stable, with the Vancouver and Toronto areas continuing to perform significantly better than our Canadian average. I'd also like to provide an update on our portfolio as it relates to the now final B-20 guidelines that take effect January 1, 2018. As you know, the most consequential change is the requirement that the qualifying rate for uninsured mortgages be the greater of the contractual rate plus 200 basis points in the Bank of Canada 5-year benchmark rate. This change may result in a reduction of 10% to 12% of our annual new origination volume, which is relatively in line with the 10% guidance that we provided last quarter.

On Slide 19, we've highlighted our Canadian credit card and unsecured personal lending portfolio. On a year-over-year basis, the late-stage delinquency rates of both Canadian card and unsecured personal lending portfolios were down slightly. Overall, we're very pleased with our credit performance and the quality of our credit portfolios.

And with that, I'll turn it back to Amy.

Thanks, Laura. That concludes our prepared remarks. We'll now move over to question and answers.

(Operator Instructions) Our first question is from Gabriel Dechaine with National Bank Financial.

It's my birthday, so I might ask 2. PrivateBancorp, better showing this quarter. Just want to dig into that trend on the mix ratio, last quarter for the month anyway was 60%, this quarter 53%, and you're talking about lower, I guess, retention award expenses over the next 18 months. Can you provide a bit more granularity there and how you end up in the efficiency ratio to shape up for the next year?

So Gabriel, it's Kevin. Let me take that question. So the efficiency ratio this quarter was 52.7%. If you take the retention awards that do decline over the next 18 months and back those out, I'd say would have probably been more in the mid-40s. So if we look at our performance moving forward, we'd see it being in perhaps mid- to high 40s on a run-rate basis, which obviously helps us in terms of our target of getting 55% by 2019.

Okay. Great. That's helpful. And on the origination side, Laura, I appreciate the color you provided there. Your peers have talked about more of a 5% decline in originations because of B-20, wondering why yours would be much bigger than that. And then, you do provide an originations number every quarter. The only bank that does that. $12 billion. Can you tell me what's in there because I assume includes new originations plus refi that -- I don't think it's new stock in the market necessarily?

I'm not having as great a day as you. So that would be right on the origination as it relates to why we give guidance, that's a bit higher than others. I can't really speak to others. It may well be lower. It was a mathematical calculation. It doesn't take into account changed consumer behavior as well. And that could make a big difference in that. Housing prices came off, for example. Someone could apply for less amount of a mortgage, or they could find money elsewhere, where they could get someone to put money in with them. And so it doesn't take any of that into account. So the number could end up being lower. We just ran it off of how our accounts, our new originations would have, if you will, worked, had we applied the rule. And with that, maybe I'll hand it over to Christina to add.

Thank you, Laura. With respect to B-20 and the comments that Laura made. As with any regulatory change, we feel that -- and we've seen clients adjust, and we saw it in the Vancouver market. There was originally, a bit of a dip and then we saw activity increase. So even with B-20 changes slowing growth, we expect demand for our real estate secured credit to remain quite healthy in 2018. And we expect some kind of adjustments amongst the consumer base. For example, they may adapt to the new rules by finding new sources of equity, extending amortization period or adjusting their purchase criteria. So we expected to be healthy over the year but moderating.

Do you assume any extension of amortization behavior? Is that also something you don't account for I guess?

There is some of that potential that -- it will be all in conversations with our clients. We'll support them in adjusting to the new regulations.

Just to be clear, Gabriel. In our number, though, we didn't take any of that into account. That's why you might see a bigger number coming from us than others.

And maybe you can follow-up offline there on that $12 billion, what it includes?

Our next question is from Mario Mendonca with TD Securities.

Couple things that stood out for me. First, in the U.S. business. The PCLs ratio running at about 2 basis points right now. Clearly, that's a reflection of the purchase accounting. Can you talk about what that would look like on a more sustainable run-rate basis?

Mario, it's Kevin. That number right now actually is eliminated all of the purchase adjustments. So the PCL numbers that you see this quarter is the actual run rate number on a stand-alone basis.

So you'd expect to only lose 2 basis points in your U.S. business like the average U.S. Bank right now is losing about PCL's ratio, something in the neighborhood of 55 basis points. So what makes the mix of business so different for PVTB?

Yes. I'll hand it over to Larry to talk about it. But just given the nature of the business, I think, you're going to see some fluctuations and some volatility from a quarter-over-quarter basis. Their loan performance has been strong for a while now, had a couple of accounts this quarter, and I think it could fluctuate. But generally speaking, I'd say the credit has been good. So let me hand it over to Larry.

It's Larry. The credit portfolio is strong, and we feel very good about the quality. We're very selective and disciplined about what we are bringing in, that's new. And it's probably one of the most benign credit environments that we've seen in a long period of time. But the view is, which is I think, consistent with most U.S. banks is pretty good right now.

So just to be clear before I move on. You guys would characterize 2 basis points of loss in the U.S. Bank -- U.S. Commercial Bank as normal, just sort of clear on what you're talking here, is it normal for you guys?

It's Laura. Maybe this is a good place for me to step in. No. And I think as you know, when you get into both commercial and corporate lending, your loss rates can be quite lumpy, depending upon how losses come through the system. And we have been in a particularly good period, not just in the U.S., but in Canada. And so I would say that these are really good numbers. And I would expect them to go back up somewhat as we go into the next year. Maybe not as high as the numbers you've given. That would be, if you will, I would say, traditionally, when you have loan losses in the commercial bank, you would expect losses around that rate. But in the last few years, we have seen much lower loss rates. So you're right with what you mentioned. They won't be as low as 2 basis points on a go-forward basis. You can expect them to go up. I hope that helps to clarify.

Yes. What I was asking for originally is what's normal for this business? I guess, that's the part I'm still not sure on. But I'm happy to move on to something else.

Well, I think what you have -- what you stated is what would be normal for most businesses. We have done better, if you will, than average. We would expect to do a little bit better than that on a go-forward basis. So not as high.

Okay. Victor, on your opening comments, you referred to 13 consecutive quarters of year-over-year EPS growth. Your guidance is for something like 5% plus going forward. Is there any reason why 2018 couldn't be sort of within that number, that 5% or so that you're referring to or is 2018 just a special year because of the higher share count and the dilution associated with PVTB?

Mario, there's nothing special about 2018 other than, us always taking a more conservative approach as we go into a year. We try and stay close to our clients. We try and manage our expenses sensibly, and we hope that there's economic tailwinds to benefit us. And if the rate environment normalizes as predicted by central banks and analysts, and if we see that continued business performance that we're seeing, we could kind of get to that range.

Our next question is from Meny Grauman with Cormark Securities.

Question on the U.S. margin, when you break it out for PrivateBank, looking on a year-over-year basis, $340 million from $318 million in Q3 '16. I'm wondering I mean, rates have been going up, but is there anything else that's driving the margin there. It seems like it's more than just rates having an impact.

So no the -- I mean, what you got to remember is that's a year-over-year comparison, Meny, and they've been 3 fed rate hikes in that period. So what that really reflects is the rate hike.

It's Larry. Let me just add to that. And I think 97% of the loans within the old PrivateBank portfolio are variable price and 71% indexed of 1 month LIBOR. So clearly, as rates rise, it has an impact. Deposit costs have also increased, but I'll call it, have lagged and have not been rising at that same rate. So expectation is NIM will benefit as rates rise -- if rates rise.

So would you say that you'd expect to see kind of a linear trend here like if we get a December rate hike and then probably 2 more plus in 2018, would see a similar step up in...

I guess, I've been at this long enough to know that nothing is linear. And I think that the approach is we benefit more disproportionate because of the variable nature of our rates to a rising rate environment. The question of deposit costs and other competitive features clearly impacted. So I don't think I could say linear, but I could say we benefit.

Our next question is from John Aiken with Barclays.

Kevin, in your commentary, when you were talking about PrivateBank and the deposit growth, you'd mentioned that the growth rate had been negatively impacted by some of the strategic decisions that you made. Can you give -- let us know what that number would have been ex that decision?

I'd say John that we exited about $0.5 billion of deposits, so you can adjust for it on that basis.

And I guess, my follow-on from that then is for Larry. We did see strong growth granted from -- with a bit of an assistance CIBC. Do you think that most of this trajectory can be continued, and particularly, in line having lending growth and deposit growth keep pace with each other?

Yes. It's probably a good time for me to take a moment. The answer is I felt really good about the opportunities. As Victor said, it is one of the best quarters we've ever had and the pipeline is strong, and we have really good client momentum. So I feel good about the consistency. The teams are experienced. We're seeing good business opportunities. And I'm very impressed with the cross-border and the business booked that we've received from deposits from our private wealth business. So I guess, if I have to characterize, it is probably even higher than my high expectations coming in. So it's a great start. I'm optimistic about the future. And I feel good about the continuous of this business momentum.

Our next question is from Sumit Malhotra with Scotia Capital.

First off for Kevin. And thinking about the tax rate in your U.S. segment. For the combined operations in the U.S., the tax rate this quarter at about 25%. I had been of the view that bringing PrivateBancorp aboard and given that it was a full mid-30s tax rate payer in the U.S. would have resulted in taxes in this segment and maybe for the all bank level as well moving higher. That wasn't really the case. I mean, your U.S. level is around 25, so it didn't seem to change too much from where you were running previous to that. Why is that? Was there some tax optimization that the bank was able to do or maybe I should let you explain because I would have thought that private would have placed the tax rate higher?

Sumit, I think, that's right. A lot of it depends on our corporate structure, and we do have -- obviously, we do focus on tax optimization. You do a big acquisition like this, it does offer you some opportunities. And what I'd say is, that rate is sort of consistent with the overall bank rate -- bank tax rate, and it's also in line with those of our peer group. So you just structure accordingly, so it would be that optimization that would -- that's helped us.

So yes, the fact that as a stand-alone entity, its tax rate was materially higher. You've been able to make some adjustments on your end even prior to whatever happens with tax reform in the U.S., so that would be an additional benefit to the rate that you have now?

Yes, I mean, I think in terms of tax reform, frankly, it's too early to speculate. There's so many moving pieces for sure. The rates dropping would help us. But there are a lot of issues in terms of limits on interest deductibility, a lot of moving pieces. So I think, it's -- in the fullness of time, it should be beneficial. But it's too early to speculate on what that's going to give us.

But further -- let's will wrap that part up here. Leaving further changes aside, the tax rate that you had in the U.S. segment this quarter, you feel is a representative run rate level, nothing overly good this quarter?

No, I think, it's a representative number.

Okay. And then secondly, I'll wrap up, stay with you. I thought your operating leverage on an all-bank basis was really strong this quarter, at least, the way I look at it more than 3%. And one of the areas that stood out to me was just in and around compensation. The total human resources line, I think, you folks call it your employee comp and benefits line, I know they're going to be year-end true-ups or true-downs depending on the situation. But that's another one, where you had a big uptake in revenue with private coming onboard, your all-bank compensation costs were actually lower. Is this, again, a reflection of business mix or was there some specific changes that may be resulted in the overall efficiency looking particularly good as far as comp is concerned this quarter?

No, I think it's just more of a function of business mix. At the end of the year, as we finalize results, compensation would be adjusted appropriately. We have particularly strong results in our personal and small business area, which is on a percentage basis, it's somewhat lower compensation. But there's nothing special there that -- to take note of, Sumit. It's more just end of the year, everything gets aligned appropriately.

Okay. I mean, we'll -- I'm sure, we'll talk more about this in the Investor Day, your 55% next target in 2019. I mean, it certainly seemed like you made good progress on that front this quarter. I know there's puts and takes in any given quarter. But that's really one that there seems to be good progress on this time around. So you're saying that some of those year-end adjustments played a role?

Yes, I mean, I think in terms of getting to 55%, you do need to take an annual -- there's volatility in any given quarter. And so I think, if you look at our performance this year, we're confident in terms of getting to that 55% run rate in 2019. And you're right, we will talk more about it at Investor Day. But on balance, I think, we're going in the right direction.

Our next question is from Steve Theriault with Eight Capital.

I have a question for Harry. But just, Kevin, if I could follow-up on Gabriel's question earlier. Just to be clear on the U.S. efficiency ratio, are you saying then should we understand that the mid-40s level, now it's going to take 18 months or so to get there as retention runs down or does that happen quicker? And I guess, are retention costs front loaded or do they unwind kind of smoothly?

No. They unwind relatively smoothly. So if we're at 52-ish right now, you'll see a steady decline to the mid-40s over the next 18 months would be a way to look at it.

Okay. That's very helpful. So for Harry, so I'm finding Q4 trading a bit hard to gauge since it was a weak activity level for everyone, but I think, there's still some impact that we're seeing Q4 from the total return swap run-off. So is the TRS runoff now done? And when we think of next year, I guess, what's more indicative of what you think of normalizes, is it the $217 million from this quarter or is it closer to $300 million from last quarter, just with all the moving parts, it's hard to have too good of a gauge.

Yes, Steve, it's Harry here. So you saw the results for the year up nicely from '16, so we're pleased with that. We're pleased with the mitigating effects of the TRS runoff. There are some lingering effects in the 2018, but we still continue to see opportunities to redeploy the assets and focus on growth. The run rate this quarter was a good base to grow range from my perspective. And so you kind of hit the range there what we've seen for the last while.

Our next question is from Darko Mihelic with RBC Capital Markets.

My question is with respect to the Canadian business. And in particular, I wanted to maybe look at Slide 21, which you've provided here, which helps us understand the headcount and the Mortgage Advisor productivity and the changes there with respect to, looking at the FirstLine mortgage portfolio versus where it sits today and the less than 15% single-product relationship. Those are interesting statistics. And I guess, where I'm going with this is as you've increased your advisers and you've increased your mortgage originations, it seems as though you also increased or "deepened" the relationship with clients. What happens from here going forward for your business? Is there much more you can mine, in other words, there may be only 15% single product relationships, but maybe there's a whole whack of just 2 and it goes to 5. Can you give us some concept or some sort of measurement to what we can think of here. Because when I look at the slide, I see that mortgage productivity should more or less be flat going forward. You have slightly fewer advisers, so you should see a deceleration in mortgage growth, but how do you -- is it possible for you to backfill revenues with more cross-sell? And lastly, every time I read stuff about your business in Canada, and even now when I read through the annual report quickly or at least part of it, I noticed that you also continued to mention that there's actually less revenue from FirstLine. There's a lot in that question, I guess, ultimately where I'm going with it is, if we see mortgage deceleration, how much can fee income replace some of that slower revenue?

Well, thank you, Darko. It's Christina speaking. So why don't I give you a back drop on our overall results and then I'll speak to your specific questions around mortgages. We delivered very strong results this quarter and it wraps up with a strong year for our business. So financially, we achieved all of our key targets revenue growth, operating leverage, quality of loan growth and strong earnings growth. And behind these financial results, we also delivered strong and diversified business growth as Kevin mentioned in the slide, we showed up. We picked up market share broadly across almost all products, both in deposits and investing as well as in lending. So while the growth of our mortgage portfolio was a key contributor, it isn't the only factor to our strong results. Specifically, in mortgage growth, in recent months, our mortgage growth has moderated as industry growth has slowed. Our growth is also converging towards peer levels as we stated it would with us having reached, and as you can see on the slide, our steady states on MA team, our Mortgage Advisor team, both in terms of size and productivity. But as we've seen the mortgage market start to moderate, we've also seen a pickup in deposits and investments and other areas of our business. So overall, it gives us good year-over-year market share growth across the business, across client segments and across the overall client base. So then if -- what your question is really around guidance, around revenue growth in the upcoming year, given all that, the strong and diversified financial results and assuming supporting market conditions continuing to hold and also assuming some slowing in the housing market, we are well positioned to sustain our performance in 2018. So in terms of revenue, we expect to deliver revenue growth in line with what we achieved for fiscal '17.

And is that assuming some sort of NIM expansion or flat NIMs?

In terms of NIMs, as Kevin mentioned, NIMs will remain relatively steady in the beginning of the year in Q1. It will see a slight decline as a result of deposit promotions, but will steady over the balance of the year.

Okay. So we should be seeing then some sort of improvement in fee income. Will that be a fair statement?

You'll see an improvement in fee income, yes.

Our next question is from Nick Stogdill with Crédit Suisse.

For Christina, sticking with Canadian personal, very strong cost control this quarter. It was close to just 1% versus 4% throughout the first 9 months of the year. I know Kevin, called it that it can be kind of lumpy. But if you could just give us some color on the drivers and sustainability of lower growth in 2018? And the Mortgage Advisor headcount was down this year. Does that have a factored all the lower expense growth in Q4 as your mortgages moderate?

Yes. So specifically, on the Mortgage Advisor, no. It isn't a big contributor to expense growth moderation. But let me talk about the quarter. We had 1% growth over the quarter. Some of that had to do with timing, and some spends and pacing, but also with a focused discipline on expense management. We're coming of a period of several years of strong investment spend and expense levels to moderate over the medium term as we leverage the investments we have already made. So we expect our expense growth next year to be less than what it was in fiscal '17 and around the 2% to 3% range. And then if that possibly leads you to operating leverage, with individual quarters of, Kevin mentioned, exhibiting some volatility, we do expect to deliver positive operating leverage in '18, in line with what we achieved in fiscal '17.

Okay. And just a second question on the mortgage book, either for maybe you or Laura. If we look at the amortizations on the book, you talked about them maybe extending a bit, and we have seen that trend up in terms of the 30- to 35-year amortization bucket, it's moved from 1% at the start of the year to 5% of where we are today. So we have seen, I guess, more customers moving to a longer amortization. Does that simply reflect more customers looking to take longer amortizations at origination and I guess, make monthly payments more affordable or is it higher rates, what's been driving that so far this year?

We just -- we work with our clients to ensure that they're in the right product and amortize over the right term period for them. There's no major shift in that other than, we think, we're seeing a little bit of decline over time.

So with B-20 coming, you think it will go up a little bit more, sorry, or proportion in that bucket?

I think Laura is going to take that one.

Yes. All right. I suspect that you'd likely see that again. If you can extend, as you know, the amortization, it's equivalent to dropping an interest rate. And so if you're having a hard time qualifying with the higher interest rate, if you extend the amortization, it could help you qualify. So I would expect we would see some of that migration in the industry.

Our next question is from Sohrab Movahedi with BMO Capital Markets.

Just the quickie. You had provided some commentary about a year or so go around stress losses, specifically, in Canadian banking. Well, can you give us some updated metrics?

Sure Sohrab, they remain pretty much the same, if you will. When we talk about stress losses, there hasn't been a material difference from what I would have said last year to today. There'd be some change, of course, just given our asset mix would have changed over the year with the growth. And so numbers would have moved somewhat. But not -- nothing material. And don't know if that answers the question for you?

So more or less. I mean, the favorable credit environment kind of continuing and the notional growth, if you will, in the balances, broadly speaking in Canada has not had any significant bearing on your assessment of tail risk, if you will, for the bank?

No, it has. I mean, the same -- if you will, the same tail risks that we had last year, I think, we continued to have this year as we all lived. The economy has done quite well in the last year. It's still doing well. And so nothing has really changed from a stress analysis perspective.

Okay. And just a quick clarification, maybe Kevin. I mean, I know it looks like you released about a little bit from the collectives, maybe to the tune of about $0.03 a share, which you adjusted for. But in the past, when you've done these things, you haven't adjusted for. Is there a change in philosophy here?

Actually, in the past, we -- it depends on the magnitude. So if you remember when we had a big charge during the oil and gas period, we did actually adjust for it. The smaller amounts, we just have -- we have not adjusted for, but this was up around $20 million, which is really what our cut-off is Sohrab, so we thought it was appropriate to adjust for it.

Our next question is from Scott Chan with Canaccord Genuity.

Questions on PrivateBank, Larry. I just want to dig into the loan growth number. Obviously, very strong on the first full quarter at 14%. Is double-digit growth on that platform achievable in 2018?

We thought really good about the quarter and have felt really good about the opportunities or continue to feel really good about the opportunities. We have built the bank over the last 10 years and have a very consistent team, active calling, strong pipeline and feel good that we can continue on a strong pace. And that pace has been 12 -- 10%, 12%, 14% over the last 3, 4, 5 years at least. And so we feel really good. And where we feel good is not only the opportunities that we're seeing in the U.S. and the continuation of the strong team effort, but now that we're part of a strong bank, the opportunities we're seeing now are even greater than they were before.

And if I look at your U.S. peers commercial growth, U.S. commercial regional growth has slowed down. Is it safe to say that the commercial real estate platform is driving the growth similarly to what happened in 2016 for PrivateBank?

Yes. I think in Kevin's comments, he referenced that the answer is no. What we've really seen is the -- it's been a strong growth in C&I, actually, as a disproportionate to the growth in CRE. And so we like the diversification. We certainly like the mix. CRE is growing. But the majority of the growth is coming from our C&I book. And it's coming from not partially growth in the market, but it's really coming from our growth in market share. And that's a continuation of active calling by our experienced team that's been doing it not just since the deal, but since over the last 10 years.

Our next question is from Doug Young with Desjardins Capital.

Just want to continue along that line on PrivateBancorp. Kevin, you mentioned, I think, I private -- the private deposits that came over, and sorry, I missed the number. If you can just let me know what that is? But more importantly, Larry, just about the opportunities from being part of the CIBC, can you talk a bit about what you've done so far to integrate, maybe with the Capital Markets or the cross-border and some of the opportunities that you've seen so far? And if you can talk a little bit about what you see down the road over the next 2 years in terms of opportunities to grow in deposits and loans?

So Doug, let me just -- it's about $700 million that came over. And that was evenly split really between commercial clients here in Canada are referring business, corporate clients in the states referring business and Atlantic Trust clients referring business. So a really good balanced result in terms of driving that $700 million.

It's Larry. Let me continue and I can give you a good sense of it. And I am very optimistic about not only what we've achieved to date, but what the opportunities are. The teams of cross-border are working very well together. And it's been done in a very organized way, with cross-border teams on both sides, but it's also very strategic identification of where we can fulfill client needs. And what the growth this quarter reflects is a number of different things, both Canadian clients depositing significant dollars in the U.S. at the bank, some of which have deep wealth have established, not only deposits, but deep treasury management capabilities. It also includes U.S. corporate clients that now have a deposit capability within the U.S. because of the bank that we're generating deposits. It also includes Wealth Management clients that now have a private banking capability that allows us to do it. And interestingly, one of the things that I'm also very proud of is the number of our U.S. clients are starting to use the Canadian Bank opportunities to both finance and bank on their Canadian subsidiaries and acquisitions that they're doing there. So we're really seeing it in all fronts. Execution has been good, teamwork has been terrific. And again, as you know, I've had experience with this in the past. The active working relationship is creating some really nice momentum. So we feel really good about that. And then the other part of it that's very exciting is we now have a credit rating. And by having a credit rating in the U.S., that similarly is creating a very nice opportunity for us to seek business that we couldn't have saw before we were part of the team.

So Larry, is there any way to quantify this? I mean, in terms of -- so far how many clients have actually done business cross-border or quantify it in terms of deposit growth or loan growth? Just trying to sink my teeth further into, it always sounds great, but from a quantification perspective, is there anything we can kind of think about?

It develops over time. And I'm not in a position to want to quantify it now. We'll talk more about this at the Investor Day. But I guess, I can tell you that, where the opportunities lie is the number of the significant Canadian clients now have a means to bank effectively and well within -- for their U.S. operation. Our U.S. companies now have an opportunity to bank in Canada for their opportunities. And we have a significant opportunity as well in that we have a number of very significant wealth clients that couldn't bank with the bank because we didn't have a commercial bank -- we didn't have a banking platform, which we now do. And so again, it's all based upon client needs. And it's identifying, calling, but the teams are working really well together. So I see really good momentum. And for the first period of time that we've been together to see this kind of activity, both in terms of large accounts, but also in terms of numbers of accounts and prospects. It's really good.

Our next question is from Mario Mendonca with TD Securities.

Just a quick follow-up. Is there going to be -- is there a way you might suggest we track the success in moving -- essentially, like Darko's question, the success in moving this mortgage growth into other products? Is there some way, perhaps, Kevin, that you'll help us think through this going forward?

So I think -- and we have spoken about this and then perhaps we'll spend a bit more time at Investor Day. What we could do is just use product use count. One of the challenges there as we've discussed is there's no standardized way to do that. But -- and we have given some thought to exactly how we can do that, also, just potentially working on a percentage growth in terms of the different client relationships. So Mario, we are thinking what the best way is to do that and then perhaps we'll cover that in a bit more depth at -- on Investor Day.

Okay. And then just one final question. On Corporate, there is this Page 11 of your presentation. The line there, the swing from minus $78 million to positive $33 million. Would it be fair to call that essentially entirely related to the higher treasury revenue?

Sorry that is Slide...

11.

11. No. The biggest driver there frankly, is the TEB adjustment. So if you remember in the past, what we used to do is you'd have the TEB growth up in Capital Markets and then the TEB offset would go through, yes. So it's a combination of the TEB offset and improved treasury results.

So maybe gel us into how important was the treasury activity in the quarter in terms of...

So I would say, yes. I mean, it was a big deal in the quarter on a year-over-year basis. There would have been 40-odd -- $40 million, $50 million on a year-over-year basis. And that just represents better liquidity costs, some -- we did have a couple of benefits this quarter in terms of some of our hedge rebalancing. That line is also a bit volatile. So that would have been the impact of treasury.

This is all the time that we have for questions. I would now like to turn the meeting back over to Victor.

Thank you, operator. It seemed like everybody was celebrating their birthday today since you all asked at least one -- 2 questions. So thank you for that. Almost ran out of cake. Anyway, CIBC is entering through the fiscal 2016 with a very strong capital position, set of strategic initiatives that we believe will deliver organic growth and a platform in the U.S. to better serve our clients, both our Canadian clients banking and the U.S., and importantly, the clients that were banking today would like to bank in the United States. We're transforming CIBC into a relationship-focused bank, that's built for an increasingly digital world. We understand the impact of technology, but we place great emphasis on the benefit of long-term client relationships. And that's what you're seeing in terms of the growth of our business, high quality and deeper relationships. And our goal is to deliver diversified growth on the both sides of the balance sheet by becoming that primary financial institutional for more of our clients and attracting more new clients to CIBC. As you know, we'll be providing a detailed update on core elements of our strategy at our Investor Day on December 13. We're looking forward to sharing our plans with you and taking all your questions. For those who can't attend in person, the event is going to be available via webcast and the details are outlined in the news release that went out today and posted on cibc.com. So to wrap up, I'd like to thank our shareholders and our investors and our analysts for their continued support, trust and interest in our bank. On behalf of CIBC's executive committee and our board, I'd especially like to thank CIBC's 45,000 team members for their ongoing dedication to serving our 11 million clients. I'm very proud of the work our team is doing to put our clients at the center of all that we do. To deliver value to our shareholders and to give back to our communities. Thank you, everyone, for being on the call, and best wishes for the holiday season.

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