Canadian Western Bank

Chris Fowler - President, Chief Executive Officer Carolyn Graham - Executive Vice President, Chief Financial Officer Matt Evans - Investor Relations

Thank you, Silve. Good morning and welcome to the CWB's Financial Group 2019 Third Quarter Financial Results Conference Call.

My name is Matt Evans and I lead the Investor Relations team for CWB. Presenting to you today are Chris Fowler, CWB's President and Chief Executive Officer; and Carolyn Graham, our Executive Vice President and Chief Financial Officer.

I'd like to remind listeners and webcast participants that statements about future events made on this call are forward-looking in nature and based on certain assumptions and analysis made by management. Actual results could differ materially from expectations due to various risks and uncertainties associated with our business.

Please refer to our forward-looking statement advisory on slide 14. Before we begin, we recognize it's a busy day for the audience and I’ll note that we do have a hard stop at top of the hour.

So we look to wrap up just ahead of that. With that, I'll turn the call over to Chris.

Thank Matt. The agenda for today's call is on the second slide.

I'll begin with the third quarter fiscal 2019 performance highlights and comments on the continued execution of our strategy. Carolyn will follow with detailed on our financial results before we move to the question-and-answer session.

Moving to slide three, we delivered strong third quarter financial performance, including a new record for quarterly loan originations as we gain momentum and make significant progress on our strategic transformation. Continued execution of our balanced growth strategy delivered a very strong double digit increase in common shareholders net income compared to the third quarter last year, driven by double digit growth of both branch-raised deposits in total loans, alongside solid credit quality and effective expense control.

Our strategy has significantly expanded CWB’s addressable market over the past several years and we continue to create value through strategic diversification. We also continue to generate very strong increases in the lending categories and geographic regions where we've focused investment to step out of our capabilities, which is general commercial loans in Central and Eastern Canada.

General commercial loans provide excellent opportunities to create maximum value by delivering our full-service client experience that includes solutions for both sides of the balance sheet. Relationships with business owners in this space now comprise nearly a third of our portfolio and strong growth here demonstrates our expanded presence across the broadest segments of Canada's economy.

Growth in Central and Eastern Canada is underpinned by solid performance from our businesses with a national footprint. I’d like to highlight the contributions of CWB Maxium and CWB Franchise Finance, both acquired in 2016.

From a combined starting point of less than $0.5 billion of total assets, our highly entrepreneurial and specialized teams have generated about $2.5 billion of net growth, more than a five-fold increase over three years. CWB Maxium is approaching the $2 billion threshold and CWB Franchise Finance surpassed the $1 billion milestone this quarter.

This growth is highly strategic as our relationships here are primarily concentrated in the general commercial lending category and mainly in Ontario. Together, these two acquisitions are more than delivered on our commitment to deploy the proceeds of non-core business divestitures five years ago and transformed our addressable market to a broader geographic footprint.

CWB National Leasing and CWB Optimum Mortgage also continued to contribute to our diversification story. CWB National Leasing is a nation-wide equitant leasing leader, a three time winner of the Operations and Technology Excellence Award from the Equipment Leasing and Finance Association and one of Canada's top 100 employers.

Though a highly entrepreneurial and innovative approach to the market CWB National Leasing continues to generate strong growth and though our positive and relentless client centric culture, our teams are focused to deliver against changing expectations of small business operators across Canada. The relatively constraint growth within CWB Optimum Mortgage over the past year mainly reflects our choice to tighten our approach to the market using our AIRB capabilities and in response to B-20 and we clearly tighten more than our competitors in the Alt-A space.

With new mortgage products in the pipeline, specifically target to business owners, we're confident in the outlook to resume growth at a rate resembling the rest of our book. With ongoing contributions through each of these highly entrepreneurial channels, alongside an increased Ontario presence within our standard industrial equipment business, Central and Eastern Canada now account for nearly a third of our portfolio and generated nearly 40% of our growth this quarter.

In recognition of the meaningful business presence we've developed in Ontario and the top-talent we continue to recruit, we're excited to open our Toronto Regional Corporate office at 150 King Street West this quarter. Going forward, we are very excited to be on the cusp of serving business owners through our first full-service branch in Ontario.

Our Mississauga branch will open in 2020 and is ideally situated to anchor service for a broad range of business owners in the Greater Toronto area. Together with accelerated investment in digital capabilities, the Mississauga branch will enable our teams to deliver CWBs uniquely proactive full-service client experience to business owners in key Ontario markets, through both human and digital channels.

Ongoing investment in our full-service capabilities continues to represent a central pillar of our balanced growth strategy to diversify funding growth and on slide five our successes is demonstrated. Very strong double digit growth of demand in notice branch raised deposits over the past year included contributions from our full-service banking branches, CWB Trust Services notice account line of business and rapidly accelerating contributions from Motive Financial.

Motive deposits are more than double so far this year, reflecting strategic pricing initiatives and focused investment in Motive’s capabilities to deliver a winning client experience. Both in terms of total deposits and funding value, Motive now represents our fourth largest source of branch raised funding behind only CWB Trust Services and our main branches in Edmonton and Vancouver, resulting from the strong branch raised deposit growth, local broker stores deposit was well below the growth rate of our total loan portfolio.

It's clear that we continued to gain momentum and make significant progress on a strategic transformation, while delivering strong financial results. Further development of our differentiated full-service client experience will include highly scalable digital capabilities and increasingly focused team based personal service model.

These efforts will continue through 2020. Together with end-to-end process improvement, this integrated transformation represents a clear path to higher growth, increased profitability and maximum value creation for upcoming transformation into the advance approach for capital and risk management.

I'm proud of the progress we've made and excited for the changes to come. We continue to strengthen our presence in Ontario while building on our proven strength in BC and navigating a challenging operating environment over the past five years in Alberta.

Notwithstanding the potential for another slight contraction of GDP growth in Alberta this year, business owners are starting to benefit from lower taxes and less red tape. Approval of the Trans Mountain Pipeline is positive for BC, Alberta and for Canada overall.

We are confident it will provide significant opportunities for our core clients and support renewed investment in our country. We are especially excited by the recent notice proceed directed to contractors lined-up for pipeline construction.

We continue to closely follow developments in the domestic and global economies and the application and monetary policy. While trade related headwinds persist, Canadian Housing Market, the risks has moderated compared to earlier periods.

Looking forward, we are committed to mitigate the revenue impact of potentially lower interest rates and disciplined controlled expense growth. We also remain confident in the strength of our disciplined underwriting and proactive loan management practices and expect our prudent approach that we've augmented with our enhanced capabilities to support strong financial performance through the coming phase of the cycle.

As the operating environment continues to evolve, we remain confident that our balanced growth strategy will maximize long term value creation for our clients, our teams and our investors. Our proven business model is focused to support growth and prosperity for business owners who deliver 50% of Canada's GDP and employ 90% of Canada's workforce.

Investment and capabilities to broaden our client relationships is clearly yielding results and we see tremendous growth potential. To accelerate growth and boost awareness of our unique brand within targeted markets, we were also excited to launch our new ‘Obsessed with your Success’ brand promise and ‘We come to you’ ad campaign.

We'll continue to take the key steps necessary to set CWB apart as a disruptive force in Canadian Financial Services and a clear alternative for successful business owners across the country. With that, I'll turn the discussion over to Carolyn.

Thank you and good morning. As Chris mentioned, we delivered a strong third quarter.

Common shareholders' net income and pre-tax, pre-provision income were up 14% and 6% respectively from the third quarter last year. Total revenue was up 7%, including a 7% increase in net interest income.

Non-interest income was up 2% from last year, mainly reflecting growth of credit related fees, retail services fees and trust services income. Net interest expenses were up 7%, primarily due to an 8% increase in salaries and benefits, driven by hiring activity to support overall business growth, execution of our strategic priorities and annual salary increments.

Premises and equipment expenses increased 11%, primarily reflecting ongoing investment in technology infrastructure and premises to positions CWB for future growth. Other expenses were up 4%, partially reflecting higher advertising expense associated with our new brand and marketing campaign.

The higher growth rate of common shareholders net income compared to pre-tax pre-provision income reflects completion at the end of February this year of the CWB Maxium contingent consideration three year earn out period, along with a lower provision for credit losses and a lower effective tax rate from the reduction in Alberta Corporate Income Tax. Quarterly diluted and adjusted cash earnings per common share of $0.81 and $0.82 were up 16% and 9% respectively from last year.

Revaluation of our deferred income tax balances from the change in Alberta Corporate Income Tax rate amounted to less than $0.02 of earnings for common share. On the year-to-date basis, common shareholders net income and pre-tax, per-provision income were up 8% and 7% respectively.

Earnings growth reflects an 8% increase in total revenue, including 9% growth of net interest income and a 4% decrease in non-interest income. Within non-interest income growth of credit related fees, net gains on securities and retail services fees was more than offset by the impact of approximately $3 million of gains realized from the CWT strategic transactions recorded within other non-interest income in the first quarter last year, along with lower wealth management fees.

Diluted and adjusted cash earnings per common share of $2.27 and $2.37 were up 10% and 6% respectively. With three quarters of 2019 in the book, we continue to expect full year earnings growth and return on common shareholders equity to fall slightly below our medium term target.

Compared to last year 7% higher net interest income reflects the benefit of double digit 10% loan growth, partially offset by a four basis point decrease in net interest margin. The change in net interest margin mainly resulted from higher funding costs, reflecting a higher interest rate environment, competitive factors and longer duration fixed term deposits in both the branch and broker channel.

On a year-to-date basis net interest income was up 9%, again reflecting 10% loan growth along with the two basis point increase in net interest margin. The increase in net interest margin reflects higher asset yields and lower average balances of cash and securities, which more than offset higher funding costs.

Looking forward, we continue to expect to deliver growth of net interest income in the high single digit range for fiscal 2019, driven primarily by strong loan growth. We expect net interest margin in the fourth quarter to be relatively stable sequentially, reflecting no changes in the Bank of Canada Interest Rate, along with continued strong branch raised deposit growth.

Our third quarter efficiency ratio, of 46.5% compares to 46.0% last year and 46.8% in the previous quarter. Operating leverage was negative 1.1%, improved from negative 1.4% last year and negative 3.1% last quarter.

On a year-to-date basis the efficiency ratio of 45.9% compares to 45.4% last year. Operating leverage is negative 1.3% compared to positive 2.5% last year.

And I’ll note that operating leverage in fiscal 2018 benefited from the cumulative effects of success of Bank of Canada increases, as well as higher acquisition related revenue from the business lending assets we acquired on January 31, 2018. Changes in the efficiency ratio and operating leverage this quarter reflects non-interest expense growth from continued investment to advance our strategic execution.

Our strategy is focused to deliver industry leading growth over the medium term and there is typically a lag between the timing of necessary investment and return, and quarterly volatility in operating leverage is expected. That's said, we continue to expect the annual efficiency ratio to fluctuate around the average of the past three years at approximately 46% over the near term.

We remain committed to prudently manage expenses based on expected revenue growth, and expect to deliver slightly negative operating leverage on a full year basis in 2019. Turning to slide 10, sound overall credit quality continues to reflect our secured lending business model, disciplined underwriting practices and proactive loan management.

We continue to carefully monitor the entire loan portfolio for signs of weakness, and have not identified any current or emerging systemic issues. Under IFRS 9 the third quarter provision for credit losses as a percentage of average loans was 19 basis points, with 22 basis points related to impaired long and a reduction of 3 basis points related to performing loan, due a lower proportion of the portfolio classified in Stage 2 from a relatively stable macroeconomic environment.

In the second quarter this year, the provision for credit losses of 23 basis points consisted of 22 basis points related to impaired loans and 1 basis point for performing loans. Under IAS 39 provisions for credit losses represented 21 basis points in the third quarter last year, the 22 basis points for impaired loans and a 1 basis point reduction for performing loans.

On a year-to-date basis, the provision for credit losses of 22 basis points related entirely to impaired loans and this compares to 20 basis points, also entirely related to impaired loans last year under IAS 39. Gross impaired loans at quarter end totaled $143 million, representing 51 basis points of gross loans compared to 135 million or 53 basis points last year and 168 million or 62 basis points in the prior quarter.

With continued proactive management of our impaired accounts, resolutions exceeded new formations this quarter. As we have said before, the level of gross impaired loans fluctuate as new impairments are identified and existing impaired loans are either resolved or written off and does not directly reflect the dollar value of expected write-off given tangible security held in supportive lending exposures.

The overall loan portfolio was reviewed regularly with credit decisions undertaken on a case-by-case basis to provide early identification of possible adverse trends. Our business model remains focused on secured midmarket commercial lending and we have no material exposure to unsecured personal borrowing including credit cards.

At July 31 our total allowance for credit losses in stages one, two and three was $111 million, which compares to $118 million last quarter, with the balance - the allowance for Stage 1 and Stage 2 performing loans essentially unchanged from last quarter. At this level, the allowance for performing loans represents more than 2.5 years of average annual losses over the past five years and that includes the elevated oil and gas losses in 2016.

Slide 12 provides our strong capital ratios at July 31 of 9.0% common equity Tier 1, 10.6% Tier 1 and 12.8% total capital. Our Basel III leverage ratio of 8.3% remains very strong.

With these capital levels, we are well positioned to create value for shareholders through a range of capital deployment options consistent with our Balanced Growth strategy, ongoing support and development of each of our businesses will remain a key priority and we will continue to evaluate potential strategic acquisitions. We repurchased approximately 63,000 shares under the normal course issuer bid in the third quarter at an average price of $27.91 and a total of 1.8 million shares so far this year at an average price of $27.08 and this compares to our July 31 book value of $28.82 per share.

Approximately 1.7 million shares remain available for repurchased under the normal course issuer bid. While our primary focus remains to drive continued growth and support strong capital ratios, the NCIB is a prudent tool to create value for shareholders when circumstance warrant, as they have at various times in the past year.

Yesterday, our Board declared a common share dividend of $0.28 per share, up $0.01 or $0.04 from past quarter and up $0.02 or 8% from the common share dividend we declared one year ago. A steady execution on all fronts also includes progress towards our planned transition to the advanced approach for calculating and managing regulatory capital.

We continue to expect this has been our final application and received regulatory approval to transition to the AIRB methodology in fiscal 2020. We’ve undertaken an interim and conservative approach to achieve this transformational milestone, which will create meaningful and lasting value for shareholders.

In closing, we're pleased with our strong performance this year. We're very proud of our teams as we continue to deliver on our strategy, transform our capabilities and create value for business owners across the country.

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

Thank you. That concludes our formal presentation for today's call, and I'll ask Silve to begin the question-and-answer period.

Good morning. Carolyn your comments on net interest margin and specifically the fact that your current expectation is at NIM will be flash into Q4.

Curious how the shift in the rate backdrop in the last few months is impacting asset yields? I would have thought that the loan repricing or new business that you are underwriting is being done at lower spreads and that would have a negative impact on NIM, but at least based on your comments, it sounds like that is not the case.

You know Sumit, we continue to set thresholds and return targets for all of our portfolio and the loan growth is coming in exactly the areas that we're looking for and meeting our return hurdles. So you know it’s been I think a combination of both, where we are seeing the loan growth and a strong branch-raised deposit growth that is funding it.

So as of now no material shift in – and I'm leaving the funding side out of it for a second, because I know you – Chris spent some sometime on the success you're having there, but specifically on loan yields no major impact yet from the rate shift?

We haven’t seen that significant change in loan pricing.

Alright, and then secondly, I'll just leave it at that this discussion for today. So the provision in the quarter had a release of just under $2 million in the Stage 1 and Stage 2 portfolio since this is the first time we've seen at least in 2019 a release from you folks.

Is that – can I tie that into the movement we saw in gross compared loans? The category you mentioned there was a major repayment or reversal.

Am I right to tie those two together and if you could give us a little bit more detail on what was the driver of the movement in that reversal, it would be appreciated?

Yeah, I wouldn't tie the two together. So I wouldn't tie what happens to the Stage 3 impaired loans necessarily.

That would work over time, but not - I wouldn't say that that's what attributed the Q3 movement. It really was the combination of both the expected macroeconomic factors which were relatively stable, our internal default rates, the past due presence of where our clients fall in the portfolio and so on a conditional probability of default basis we had more clients move from Stage 2 back into Stage 1.

So that takes them from lifetime expected losses to 12 month expected losses and that's primarily what created the difference in the quarter.

And how about the GIL reversal itself?

We had a very strong quarter of resolutions of impaired loans. We are always very focused on credit quality and as the kind of the life-cycle impaired loans, you've got a whole process on collection and we just had a very good quarter of resolving and finalizing loans.

Of the $43 million, $39 million were actually gone paid out and $8 million were upgraded. So very, very strong results in credit quality management over Q3.

Alright, that’s helpful. Thank you for your time.

Great, thanks Sumit.

Thanks Sumit.

Good morning. Just can you run by me again the margin factor this quarter, the [inaudible] reduction help and then the deposit pricing didn’t.

I mean I got a follow-up but I just wanted to make sure I got that right.

Yeah, let me just…

Check your notes.

Yeah, so it really does [Technical Difficulty] it wasn't made up of anything material. A basis point here, a basis point there, so not really anything that draws solely to the 3 basis points.

You know if I think about it…

I don’t want to make – Well actually, what I want to know is, because we did see some big growth in your deposit base, at the branch 13%, both in term and in branch and demand and others, sorry. A two fold question, how does that inform your margin outlook having that excess or the past growth and that cheaper source of funding.

And two, was there perhaps some promotional pricing that drove those increases in the quarter and leading up to the quarter; and if so do you kind of you know turn that off at some point and then we see a margin pick up at some point.

So, I'll comment, if its two different questions, so how does that inform our future outlook. You know our outlooks have always included and continue to include strong growth in branch-raised deposits, but having two solid quarters of 3% brand-raised deposit growth sequentially helps give us more confidence in the amounts that we are considering for branch-raised deposits going forward.

We are really pleased with how our strategies are bearing fruit in that regard. As far as promotional pricing goes, we do not offer limited term pricing promotions that are in place for several months and then reduced to a lower level.

So we offer what we believe are fair and competitive pricing and we tend to hold them there.

Okay. Unless maybe if you hadn’t had that type of growth and again, we’ve had it for a couple quarters, would you have a more bearish view of the margin perhaps?

You know, it’s always you look at the most recent future and think about what that means for – or the most recent past and think about what that means for the future. You know I think we have been talking for several years on the strategy that we were implementing to help support general commercial clients who would bring us both assets and liabilities, both sides of the balance sheet.

So we are really pleased that we are seeing continued growth in those areas.

Its right on strategy Gabe and that’s the real focus we have and what we also see this quarter is reduction in broker deposits. I mean we really have focused on how we can grow that full client relationship.

Now, last question is on the optimum mortgage book, 3% growth. So it's been trending downward, you still expect this to be upper single digit growth for the full year.

I’m just trying to think of – if you can help me out with the beyond 2020 outlook, sorry 2019 actually. Where do you see mortgage growth evolving in the next year?

Some of your peers have been reporting a bit of a rebound here?

Yes, so I’m going to start and then I’ll turn it over to Chris. So from an overall gross and personal loans and deposits Optimum is one portion of that.

We expect to see high single digit growth in that for fiscal 2019 and that is what we are seeing year-to-date. Optimum growth as a component of that has been slower though and I’ll let Chris speak to Optimum a little bit.

Yes, so Optimum, we talked about it about a year and half ago as we – it was one of the first portfolios that we moved into the ARB modeling for risk-rating and what we did at that time was target to have a higher quality bores [ph] or a lower risk rate in that book. So we’ve been zeroing in on that plus adopting the B-20 rule for the sort of underwriting guidelines and with that it actually has reduced our underwriting, but we are very confident in the quality of that book.

In terms of overall residential mortgages, we've tremendously increased our capabilities with the core technology investments we made that now gives us more access to eight mortgages and the ability to securitized them. So we see the whole mortgage area as an opportunity for growth.

As we look into the next number of quarters, we will be delivering a new business for self-residential mortgage in the Alt-A side. So we see that allowing us to capture more market share as well.

So we are very confident in the go forward approach for residential mortgages both Alt-A and A.

Thank you. Have a good, long weekend.

Thanks Gabe, you too.

Thanks Gabe.

Thanks very much. So Carolyn you talked about the efficiency ratio in terms of your outlook being stable.

Chris I thought I caught that you were going down the line of lower rates potentially being offset by better expense performance. So I guess I just wondered, you know we are still three months away from Q4 call obviously, but should I take that to maybe mean you're starting to telegraph a deceleration in the next year, especially if you get some rate cuts and you think you might have some offsets there.

You're right, it's still early, but as we work on our projections, you know we continue to have as our large transformational projects come to conclusion and go live, we will start to have the depreciation costs associated with them. So, you know we are always looking at the combination of growth in net interest income, other fee income, compared to expense growth.

So we are continuing to think really carefully about what is our – how do we deploy our strategy and manage within the revenue projections that we have. You know we are also – we talked about it in the quarter, reworking.

Given the results of our technology, we are reworking how we delivered that great client experience to our branch network combining our focused committed teams, efficient processes and leveraged by our technology investment. So as we work through the rest of 2019 and 2020 that work continues actively in the business and so that will drive out eventually a more – the run rates that are more sort of a go forward run rate right.

That's helpful and as I think about close, like as you wrap 2019, you changed your outlook statement to negative on operating leverage just for this year. But Q3 was better than Q2.

Would you expect Q4 to be better? Like are you on a positive trajectory there and you would think Q4 is better than Q3 and you're on a bit of an improved trend here or not necessarily.

So we were anticipating that the second half of the year would improve compared to the first half and that is what we've delivered and a strong branch-raised deposit growth that we’ve seen helped support that assumption looking into Q4. So yeah, we think we're on a positive movement, but again, you know as we mentioned in the past, for us as we think about executing on our strategy, positive operating leverage is positive, but not materially large, right.

So we are positive in that, probably 1% would be very good results for us.

Okay great. And then lastly for me, just a follow-up on the demand and notice you are at, I think about 32% demand and notice deposits relative to your deposit book.

Are there – you’ve had a couple of good success quarters here now in terms of driving growth. Would you be prepared yet to share any targets or aspirational targets or otherwise in terms of where you’d like to see that debt.

Like do you think you could get up to 40% over the next couple of years? You know it's hard to tell given, the virtual branch effort is still in the early stages, but you are obviously showing some good trajectory there.

So anything on that front would be helpful?

I think it -- we don’t have a target that we've explicitly thought about communicating. There is also a factor in this that is client driven.

So if our branch-raised clients prefer GIC rates versus holding it in one of our other savings accounts then we could trend a different way. So we tend to focus on the branch rates overall, think about the components within, but not a target that we’ve put out.

We see lots of opportunities. As we look into fiscal’ 20 we've got a – the digital front end of the bank is going to have significant investment, which then will help us an onboarding as well.

So we see great opportunities as we look at for example Motive that had over 100% growth in this year. We will be able to improve that with better onboarding digital capabilities that are coming and investing in more fully in fiscal ‘20.

And is it a closed topic, Motive is relative to the total anywhere.

No, we don’t separate it out. It’s just been very strong growth for us.

Fair enough. Thanks very much.

Thank you.

Good morning. Just going back to NIMs and the branch-raised deposit and I apologize if you covered this and I missed it, but what impact did that growth in branch-raised deposits have this quarter and I know branch-raised deposits are viewed as being more favorable.

I guess it depends on the rates that you are offering, so what's in – and maybe within the same vein can you talk a bit about what's the funding cost advantage from a rate perspective between wholesale and the demand and now the deposits that you are raising.

As far as the impact on NIM this quarter, could be a basis point, no more than a basis point, you know one of those small factors that contributes. On the comparative funding costs, I'm going to have to – we’ll have to come back to you on that, I don't have that at my fingertips.

The positive with the relationship based branch-raised deposits is not only the direct rate we pay to the clients, but they also have – they have a higher funding value from a liquidity perspective. So we may potentially carry less liquidity against those.

And also it sticks to your client too. Our goal is to satisfy both sides of the balance sheet and the transformation we've had underway is to materially improve that offer to our clients and it's what we are seeing as the benefits of that with our businesses performing very well.

And I know you’ve given what your outlook for NIMs would be without a bank account or rate cut. Can you remind us, let say the bank account were to cut 25 basis points, and you look at over the next year as you do your planning, what is the potential impact you foresee on the NIM for fiscal ‘20.

You know we continue to work on our 2020 forecast. We do think about the fact that we have a better mix in the balance sheet than we did the last time that rates fell and the key issue for us as we think about the impact on NIM will be around our branch raised deposits and the portion that what we call administered rates.

So where they are not directly tied to prime or CDR, but where we make the decision of the rate to offer on those. So that will be a fact of thinking about the rate environment and thinking about the competitive impact there.

Okay, and then just back to the – Chris, and I apologize. I think I missed the numbers.

You said there was reductions in impaired amounts of $43 million and then there was – the amount you gave that was returned to perform in an amount that was I think written off and if I forget what the two numbers were.

30 of them were paid out and then the difference was upgraded. So the launch returned to performing status.

And I apologize because I am able to do the math, but it looks like your write offs were larger than normal and so within that whole equation, you know was it higher than normal, was there any surprises in the write-offs that occurred?

So as I mentioned in my opening remarks, you know as you work through impaired loans, you kind of - they come to a conclusion at certain points and then you have a bunch of resolutions. We had that this quarter, so we had significant resolutions occur in the quarter, which then included higher write-offs and that's really the outcome of the sort of the loan management process.

So as we look at our book, we're very comfortable where we sit today. We are very – you know I think the credit quality is very strong.

If you look at in the news release we've got about $49.5 million of gross impaired loans in our top 10 and its over 303 accounts. So it’s – you know so we’ve got a – you know I think a very stable and very strong credit quality book today and not seeing any systemic issues in it.

That doesn't sound – it sounds like it was more volume related than any particular surprise when you settled up.

Yeah, no surprises, yeah.

Okay, and then just lastly, a more hypothetical question. I mean your CET1 ratio was flat; you know you had some risk weighted asset growth under the standardized methodology.

If you had a similar quarter and you are under AIRB with this level of growth and deposit growth and what not, would you be buildings CET1 and what would be an organic CET1 build under AIRB on a normal basis? Thanks.

We would be building organically from the levels of growth that we've had this quarter. Exactly what that would be, that's a good question.

Yeah, I don't have that at my…

Yeah, the big win there is, the big win for AIRB is really the categorization of our portfolio and being commercially focused as you know at 80%. The opportunity for us to have you know just much better capital allocation is definitely what we are driving for here and our current world where anything in the 10% or above growth rate does consume capital, and we will find that being alleviated under AIRB.

I’ll just be curious to see how you compare to some of the bigger banks, but we can take that off-line.

Yes absolutely.

That’s fine. Great!

Thank you very much.

Thanks Doug.

Hi, good morning. If I take a step back, I look across the past few months, we've had great expectations plunging, trade worries spiking and the probability of recession increasing across North America and the world.

If I look at your results, it doesn't seem to translate into - it doesn't seem to reflect that at all. You have 10% loan growth, the drop in the PCL ratio.

I'm just wondering how you reconcile those big picture worries with your performance and what you're seeing on the ground. It doesn't seem like there's a connection there at all.

So as we think about that, I mean that is the opportunity we have in front of us with the market share that we currently have. So we've got a low market share and what we brought and are bringing to, you know to the market of that sort of mid-market commercial, the areas we focused on, business owners, is you know the opportunity to be disruptive to take this mid-market growth bank that we had in Western Canada and import it to Ontario.

So we've done a lot of great transformation that’s allowed us to capture more market share and that's our focus. We're investing in our capabilities to continue to win more clients, you know really at that front end.

We’ve had great performance by our Ontario businesses and talked about it in our opening remarks. You know so we see lots of potential moving forward.

And when you speak to your large number of commercial clients, do you see those trade worries for example coming through in their decision making, do you sense any sort of change in the mood out there in terms of business owners?

I think everybody is worried. I mean there's no doubt about that.

You know I think there's a lot of noise, both sort of that macro-economic, geo-political trade. All these issues are very, very top of mind, but you know there's always going to be economic cycles, there’s always going to be ups and downs, but we're also going to have many clients that navigate their way through all economic climates and you know our focus is to zero in on those opportunities, make sure we've got the right mix of products and really talented staff that gets in front of them to provide the right financial solutions.

So we're focused on that.

Thank you.

Thanks Meny.

Thanks Meny.

Hey thank you. I just wanted to maybe ask an earlier question a little bit differently.

As you think about that your organization under the AIRB capital regime, and you think about some of your financial targets out there and specifically your return on equity. Do you think you're going to keep it at that 12% to 15% or do you think your target will move up as far as the return on equity is concerned?

We will absolutely revisit all of the targets as we, with AIRB approval. You know it changes the landscape, it changes the opportunities for us and so yeah, we’ll revisit all of the targets.

But given the capital allocation benefits and alike that I think you've talked about, is there any reason to believe why you wouldn't be targeting higher ROEs.

This whole focus on AIRB, this transformation of the way that we run our bank going from a branch centric organization to an enterprise based bank, you know we have made tremendous transformation. AIRB is such an opportunity for us and as we think about our performance targets, they will all be reevaluated, absolutely and that will come with once we get to approval, looking to focus on you know we definitely have options on how we think about our performance targets.

It just changes our competitive opportunities and our ability to deliver much more effectively with, you know with a better set of tools.

Okay, thank you.

Thank you.

Good morning. Chris just on your geographic split, I just noticed that Quebec is growing really, really solidly off a low base, up 35% year-over-year.

Is that national leasing or is there some other factors that’s driving that growth there?

So Quebec is a combination of national leasing and some corporate lending that we have in syndicated loans in that province. So it’s not – so the on the ground business in there is national leasing and the balance of it is corporate lending.

Okay, okay, and then Carolyn just going back to the NIM, I know you talked about stability in Q4 and I know it’s tough, but if you're going to take what you did this quarter, if we look at it into fiscal 2020, you know assuming two banks you’re giving the rate cuts, is it safe to assume that you’ll probably have some slight margin compression next year.

I think it would be a safe assumption that our margin tends to move along with the Bank of Canada rates.

Okay, that’s fair enough. Thank you.

Good morning. Thank you for taking my question.

So I had two questions for you. The first is, just another follow-up on the performing loan loss side.

So I understand the benefits from the migration of loans from Stage 2 to Stage 1. I want to touch on more so on the stable economic outlook and the reason I bring that up is we are seeing some recent weakness in Western Canada, oil and gas sectors seeing higher credit risk, and there's plenty of pressures in Alberta and real-estate market in British Colombia is under a bit of pressure as well.

So is that stability driven by an offset of more robust economic conditions in Eastern Canada and is that how we should think about it? And does your outlook of that change, so is it possible in the near term that your forward looking indicators under IFRS 9, would that – it has to be revisited or move lower or is it possible that the waiting you had for your adverse case scenario, did that change or move higher given the current economic headwinds?

So, all those things are possible. So we look at – we consider in our economic outlook, we consider the composition of our loan portfolio, so as you noted things that affect one of our provincial economies differently than it does the others, absolutely plays into it and we revisit our forecast and our economic forecast every quarter.

Okay, so do you still expect stability in that forecast, in the fourth quarter?

Well, you know, the expectation and we're not through the fourth quarter yet, so I can't really – you know it depends on how the market expectations move.

Okay and the last question I have is just a follow-up on the ARB transition. Carolyn you mention a wide range of capital deployment options and I was wondering if you think about the prioritization between growing risk weighted assets or returning capital to shareholders, if you know hypothetically speaking if economic conditions would cause you to priorities returning cash to shareholders instead of going your balance sheet, would there be any challenges to that in terms of regulatory hurdles or obstacles or how do you think we should think about that dynamic?

You know I think they are both options. Everything is on the table for us and we will think carefully about how quickly we decide to deploy any capital that becomes available and what we think are the best options at the time, right.

We are continually committed to driving long term value for shareholders, but in all things we pursue our long term strategy in the face of what's going on in the environment at the time.

I appreciate the color. Thank you.

Thanks Nigel.

Good morning. I'm not sure - I mean I know there is not – any clarity on the resolution, but if you actually guide a little bit of clearly on the liability issues under the new government for oil and gas loans, would you actually consider increasing your growth targets if those actually came through?

In terms of oil and gas lending?

Yes.

You know I think there will be a clarity on that in terms of us being able to control our destiny through exercising our security rates, we would be much more positive on that area. You know there's still many great companies in that market.

You know I don't think it's going away soon, but you know from our perspective we're just picking our spots and today our participation in that market has being in the syndicated level, so sort of larger credits with strong balance sheets and good production profiles. But where the issues occurred was in the smaller producing area and so we'll continue to monitor it, because it is and has been historically good business for us and you know at this point we are being very careful.

Great, thanks. I appreciate your response.

Thanks John.

Thanks John.

Thank you, Silve. Thank you all very much for your continued interest in CWB Financial Group.

We look forward to reporting our fourth quarter and full year fiscal 2019 financial results on December 5. With that, we wish you all a good day!