EQB Inc.

Thank you, James. Good morning, everyone, and welcome.

I'm joined by Tim Wilson, Senior Vice President and Chief Financial Officer of the Bank. Our positioning of Canada's Challenger Bank is being driven by a simple, but ambitious goal.

Build a better bank for our customers. Strategically and financially 2018 was a milestone year for Equitable, as we sharpened this positioning.

We advanced our award-winning technology to innovate and serve more Canadians than ever to our rapidly growing EQ Bank digital platform and our lending businesses. As a result of these assets, Equitable has become more competitive, more capable, more diversified and more future-ready bank, which is important, given new possibilities that will likely become available to us in an open banking environment.

While the purpose is to closely report our financial performance and outlook, I think it's important to use this opportunity to explain how we fit into the future of an evolving banking industry, which we’ll do, as we move through the remarks. Equitable year ended reporting to achieve a similar reign by setting out more information on our strategy in the MD&A than we typically provide.

Taking a high-level view, 2018 capped a decade of great results. The Bank’s EPS has grown an average annual compound rate of 14%, while ROE has average 17%, as a resulted of our value-creation formula and customer service focus.

In fact, shareholder who purchased $1,000 worth of stock 10 years ago would now be sitting on $7,000 today, even with out accounting for the reinvestments of dividends through the period. Our 2018 EPS was our best ever, even including fair value losses on some of our preferred share investments.

Adjusted for fair value losses on derivatives and certain preferred share investments, Q4 diluted EPS was 12% higher than a year ago, while ROE was 14.7%. The fair value losses on certain preferred shares of those issued by large Canadian banks, these are highly rated holdings that got whipsawed in the down drop of the capital market volatility in the final month of the year.

The fair value lose on derivatives related to our participation in the CMB program and the timing differences only, not true economic losses. We’ve increased our common share dividend 12 times over the past five years.

On the strength of good operating performance, we yet, again, increased our dividend by $0.02 or 7% to $0.30 per quarter yesterday. This is clearly a statement of the board on their confidence and the Bank's financial position and outlook.

Based on Q4 performance and the contribution of Bennington Financial Services will start making Q1 of 2019 outlook is for AUM growth of 8% to 10%. It should propel earnings and deliver ROE of approximately 15%.

This outlook does not include the one-time IFRS allowance, a line allowance on the acquisition of the leased portfolio. I would now like to turn to the five key strategic priorities that we set for 2018.

The first was to grow existing business through superior service. It is for both in the year and in the quarter.

Multis in the management increase 20% or $4.6 billion year-over-year, increased sequentially by 7%. Recall that coming to the year we were concerned by the impacts of our business to guideline B-20 on the prospects of the old-single family business.

And expect the portfolio growth of around 2% to 4% over the year. Instead the book was up 14%.

Clearly, the results show that our franchise has been resilient to the changes in the market. My perspective on the changes brought by B-20 is that they have made -- they have generally made the market safer for our single-family lending business.

I draw your attention to page 8 of the MD&A for a broader overview of this business and how we lend. Well, a shot to the housing market continues to generate concerns among some.

We feel comfortable over the quality of the book and the posted contribution it provides to the Bank. Our 2019 outlook for alternative single family, a drastic growth of 9% to 11%, which will equate to up to $1.2 billion of additional single family assets.

In commercial, the strategic decision to deploy more capital to it meant that 2018 growth was our best ever. The 31% annual expansion of mortgage principle was driven by a 53% increase in annual originations, including 58% year-over-year growth in Q4 production.

As you know, we set out to allocate more capital to commercial in 2018, because of our belief that a single family would slow, but allocating capital and placing it productively are two different things. The team's done a completely outstanding job, identifying opportunities across a variety of asset classes, industrial, office, multis and now CMHC construction loans, while continue to build the breadth and depth to our partner relationships.

Improved renewal rates added to the portfolio expansion. For 2019, we expect commercial asset growth of 8% to 10%.

This rate is more modest than in 2018, reflecting our desire to grow while maintaining capital ratios that our board and management team are comfortable with. Securitization and financing mortgages under management grew 22% year-over-year, reflecting originations and renewals and multi-unit residential mortgages, growth in our prime single family book and relatively low attrition.

Pricing dynamics put pressure on profitability of the prime single family space in 2018. While the good news is the spreads are more attractive today and we do expect the loans we originated in 2018 to be more profitable on renewal.

Our second priority in 2018 was to build EQ Bank's position as Canada's leading digital banking platform. We did this and the proof points are evident.

Our EQ customer base grew 44% on strong digital account openings. Our EQ savings deposit increase 34% and savings duration expanded with the induction of EQ Bank GICs.

Our GIC launch was supported by the most consumer-friendly purchase experience in this country. Based on convenience and innovation, EQ Bank stands above the competition.

Happily, our buyer sources agree with me. ratesupermarket.ca recently recognized the EQ Savings Plus Account as the best savings account in Canada.

In January, EQ Bank earned best mobile app in Canada honors at the world digital -- The World Finance Digital Banking Awards. We're thrilled with this award, as it came on the heels of a creative redesign of our mobile app, launched in Q4 that included the latest biometric identification technology.

Looking forward, EQ Bank will remain at the leading edge of a challenger bank thinking. It will help us to fashion our place in the open banking ecosystem as a financial hub for customers.

One that delivers best-in-class offerings for Equitable and our fintech and other partners. We're excited about the prospects of open banking coming to Canada and our expectations were raised when the Departments of Finance released this consultation paper on the topic in January.

You'll see that Equitable is being very involved in this consultation. You might be interested to read our response for the consultation on our website.

And think the URL is on your screen. In addition, we promoted our views on national media, including the Global and Mail and National Post, and Dan Dickinson, our Chief Digital Officer appeared before the Senate as part of their exploration of this initiative.

Open banking gives customers greater choice and control over their financial affairs. And Equitable's technology infrastructure and capabilities with applications programming interfaces are key enabler of open banking, will allow us to really deliver against increasing customer expectations.

Our API architecture makes it easy to collaborate with others, including leaders like Wealthsimple who are now in our partnerships circle. To further our ambitions and we're about to become the first bank in Canada to host our core banking system in the cloud.

We expect this migration to be completed in the summer of 2019. This is a transformative step that will make it easier for us to innovate and lead as Canada's Challenger Bank, but does have one-time earnings implications as Tim will discuss.

Priority three was to leverage of our capabilities and balance sheet to diversify into adjacent markets. 2018 was a watershed year for diversification, with introductions of our reverse mortgage and cash surrender value lines of businesses and the launch of services to specialized lenders.

We feel we've got the underpinnings in place to support future growth in all of these businesses and are growing more optimistic about their potential as time passes. We will apply the same discipline in developing our new trust subsidiary in 2019, which will give us new powers to serve customers and raise deposits with additional CDIC coverage, when it hits growth.

But it wasn’t reported as part of Equitable's 2018 results, Bennington Financial Services will also further our diversification efforts and will make an accretive contribution in 2019. We only had the chance to work with Larry, Troy and the Bennington team for two months.

In that time, they've carried forward a positive message to key stakeholders and found a strong level of market receptivity to the business initiative. As a reminder, Bennington brought with them an experienced team, a $440 million plus leasing portfolio, long tenure relationships with leasing brokers throughout Canada and a proven approach to adjudication.

Our focus now is on learning to work together and trying to unearth more opportunity in this market. Part of our investment thesis was Equitable's ability to reduce Bennington cost of funding and we are making faster progress on this then we had originally envisaged.

Priority four is to maintain a disciplined approach to capital management and a low risk profile. So 2018 saw a profitably deploy excess capital and the way that will benefit shareholders in future quarters mainly by growing commercial.

As a result our CET1 ratio edged lower at year end, but the 13.5% was still well ahead of regulatory minimums. By deploying -- by property deploying capital in Bennington, we expect CET1 will be reduce by that 70 basis points in Q1 before we rebuilt it organically over the course of 2019.

As to maintain a low risk profile, our credit metric continues to be great. Net impaired mortgage assets were just 16 basis points of total mortgage assets, while up from last year due partly to the adoption of IFRS 9 16 basis points remains an extraordinary low rate.

Looking ahead, Bennington’s leasing assets of high yield margin and mortgages, with higher reward comes higher risks. Consequently, the bank’s raised some provision for credit losses will increase after we begin to consolidate Bennington's results.

We expect normal Bennington related provisions to be between $10 million and $12 million in 2019, or approximately 2% of assets. This level of loss is within our risk appetite even it's exceeding these levels of losses will take some getting used to and the ROE's on Bennington business exceed our thresholds.

Our fifth priority for 2018 was to strengthen our key capabilities. We delivered on this priority in a number of ways.

As an example, we launched an online mortgages servicing portal called myEquitable that gives our customers real-time access to their mortgages accounts, which is significantly more convenient for them and part of our strategy and improved experience for borrowers, including those who will stay with us through multiple renewal cycles. Build to enhanced our prime mortgage product suite mostly creditor life offering and maintained our status as AON platinum employer.

Now I'll turn the call over to Tim for his report.

Thank you Andrew, good morning everyone. Equitable delivered year-over-year earnings growth of 12% in Q4 and a ROE of 14.7% both on an adjusted basis.

From an operating perspective, this is a very good quarter and certainly an excellent way to cap the year. The teams analysis provided in our deck quantifies the year-over-year impact of the various drivers of our profitability.

You'll notice that asset growth was by far the most significant faster. In other words, it was our underlying franchise that drove the increase.

Q4 asset growth was higher than we had expected entering the quarter, which reflects the marketplace success of our Challenger Bank business lines. As a result of this increase in our average assets balances a three basis points increase in overall NIM, net interest income grew 19%, which is right in the middle of our expected range.

Looking at Q4 margin trends. Total NIM expanded by three basis points year-over-year to stand at 1.62%.

NIM and core lending was 11 basis points above last year due to lower liquidity event costs and the asset mixed shift towards the higher yielding commercial portfolio. NIM was higher despite reduced levels of prepayment income and impacts of elevated price competition in the single family market.

As expected, interest expenses associated with our backstop facility declined by $3 million year-over-year, due to our decision to reduce the size of the facility in the second quarter. Cost should remain at this level until the current facility is renewed and likely at a lower level than the current $850 million.

Looking ahead, we believe that in 2019 NII will increase year-over-year rates between 25% and 30% due to both assets and NIM growth. Our thinking is that NIM will benefit from the consolidation of the higher margin Bennington lease portfolio and multiple reductions in the size of the secured backstop facility.

To take each in turn, we expect Bennington’s lease portfolio to have margins around 7% on average in 2019, which should also be upside in future years as Bennington takes increasing advantage of the bank’s lower funding costs to grow share. Bennington should have an eight basis points positive impact on our overall NIM next year, due to its higher margin and our ability to realize cost of funds synergies faster than we had originally expected.

On the back staff well we haven't finalized our plan; we downsize mid-way through last year and expect to maintain a smaller facility going forward. We anticipate cost for all of 2019 to be approximately $13 million to $15 million lower than in 2018.

Overall, we expect total NIM for 2019 to range between 1.65% and 1.7% compared to 1.6% for all of 2018 and 1.62% in the most recent quarters. As a result of investing more in the bank's strategic initiatives and accounting for the impact of fair value losses, our Q4 efficiency ratio was 4.1 percentage points higher than last year.

On an adjusted basis, it was 38.4% or only 1.3 percentage points higher. Expenses grew 19% year-over-year, just above the growth rate of our assets as we had expected.

The main drivers included 13% higher FTE and a 22% increase in regulatory, legal, and professional fees which was a function of an increase in CDIC's standard premium rates, higher deposit balances, and overall business growth. Spending on technology was also higher than in Q4 last year by 7%, consistent with our objective of building our IT capabilities to support our strategy.

For 2019, we will continue investing including the migration of our core EQ Bank system to the cloud. We're not able to capitalize most of the cost of this cloud migration unlike other capital investment which will result in incremental non-recurring expenses of approximately $6 million in 2019.

We will also assume Bennington's entire cost base. Bennington's efficiency ratio is typically in the 50% to 55% range, reflecting the labor intensity of its smaller average ticket size leases that will cause our overall ratio to rise.

Beyond the two more significant increases, expenses should rise in line with the overall business. Also we anticipate that 2019 non-interest expenses will increase at year-over-year rates between 30% and 35% and their efficiency ratio will land between 40% and 42%.

Two final comments from me, first on Bennington. We expect to take one-time IFRS 9 related provision on the acquisition of approximately $7 million in Q1.

As we explained on our December call, IFRS 9 treats acquired financial assets just as it would assets originated directly by us. As such we're required to record an allowance equal to 12 months of expected losses on Bennington's performing leases immediately after they come on the bank balance sheet which was January 1st.

This provision will affect Q1 results only and will not recur. You recall we had expected this provision to be as high as $9 million, but upon further analysis, we brought this estimate down slightly.

Excluding this item, we still expect the acquisition to be accretive in the range of $0.35 to $0.45 per share. And finally because of a continued diversification of our business, we plan to adopt a new reporting format in Q1 little on two-line, retail and commercial.

The reporting format that we have used in the past was centered on core lending and securitization financing, no longer reflects how we view and how we manage the business. Retail will include alternative and prime single-family, reverse mortgages, and CSV.

Commercial will incorporate large and small commercial mortgages, multi, Bennington, and specialty finance. This new structure aligns with our customers segment and coupled with the new supplementary tables we're developing to make it easier for you to forecast segment performance.

Now, back to Andrew.

Thanks Tim. We're very excited about our prospects for profitable organic growth.

We very much fashion ourselves as the People's Champion, striving to create a better customer expense in all areas of banking that we choose to serve on the -- our Canada's Challenger bank approach. We made some bold choices to find new ways to provide great banking services across Canada.

The keystone of our businesses is customer service covered and the capabilities of our team are changing and evolving so that we can wow our customers. We have to collaborate with our broker partners to make deals of work.

We're up to our commitments accelerate production cycle times to promote new versions for our mobile app and deliver our philosophy of continuous improvement through our digital operations and call centers. Our five strategic priorities for 2019 were carefully constructed to align with our objective of building a better bank for Canadians customers and shareholders alike and delivering high rates of profitable growth.

In closing, 2018 wasn't just another year of record earnings recordable, we've been building and cementing our position as Canada's challenger bank for a few years. And it certainly feels to me that we uniquely place to thrive in the years ahead with the way the banks positioned in the market.

Our shareholders should know that we have an absolutely committed team of fantastic employees that is the lifeblood of this bank. I look with all and some of the things they are achieving.

We may be a small bank, but we certainly have a big heart and I would like to sincerely thank all of my colleagues at Equitable for their energy and efforts in 2018 and the fast start that has already been achieved in 2019. This concludes our prepared remarks.

And now I would like to invite your questions. James, can you please open the lines to analysts who have questions?

Okay. Thanks.

Just a pair of questions then on the outlook that you've established for the year ahead. In the asset growth rate expectations that you've outlined for the alternative single-family portfolio.

Looks like there's some embedded assumptions regarding market share and there is a little comment suggesting that you are expecting market share gains this year relative to last. I'm just wondering if you could help us understand what factors might contribute to that, it looks like pricing is pretty well aligned with the industry.

So what other factors may contribute to the market share gains there?

Hi, Nik. It's Tim.

I can handle that one. I think overall we expect to maintain a strong market position in 2019 roughly consistent with where we've been over the past few quarters.

What actually contributes to the net gain year-over-year is our performance in Q1 of last year. If you recall, we were a little off on our service standards in that quarter and we suffered on market share.

So when you look at the year-over-year comparison, it's against a less challenging Q1 comp.

Okay. That's help clarifying.

And then just on the -- I just wanted to touch in the prime single-family segment. Obviously, release large uptick in volumes in the fourth quarter.

I guess just a two-part question. A, was that just a function of the more attractive spread environment that we saw for those assets?

And then looking out into 2019, a higher or a lower proportion is expected to be sourced through third-party channels? So I'm just wondering what proportion in 2018 would have been sourced through those third-party channels?

I'll let Tim deal with the 2018 questions retrospectively. I think when you're looking at the third-party purchases, we do it when we've got attractive probably to execute in terms of pricing just order package I think last week.

Because we -- with respect to make sense for the partners we're buying from and where the market is. We would also seem a good uptick in our own production.

So I do think we can expect over own production to continue to move forward and spreads have start to make it more interesting than historically been the case.

Yes. And looking back at Q4 Nik.

The vast majority of the prime single-family originations were opportunistic purchases from third parties. It would be roughly in the neighborhood of $1 billion.

It does make it a little bit difficult for both you and us to predict frankly depending on the needs of the first partners we have where they want to layoff loans.

Okay. That's helpful.

Thanks very much.

Hi, good morning. My first question is just the OSFI deposits credit proposals that came out in the past few weeks, if they do wind up being implemented as propose can you comment on what impact if any, it might have on EPS?

I’ll let Tim deal with sort of the numeric piece of that. I would make some general comments.

It’s been unfortunate how this all came down. And I think in terms of leaking from – what’s typically a tight process between OSFI' and the industry which I regard with -- as a high-value components of the Canadian ecosystem to make sure that when these regulations come out, they make sense, they achieve the policy objective at the same time, have meaningful industry inputs.

But I think as a industry we need to adopt by the jobs of respecting their confidentiality. And I think the good news is and Tim will give more color is not something that we are concerned about.

Right, Geoff we are already taken approach of maintaining very conservative liquidity position. So while we’re still working through some of the detailed calculations of the latest proposals.

We don't expect it to have a significant impact on the size of our liquidity portfolio. The simple reason being that, regulatory metrics are one source of information that informs our liquidity position, we also have various internal metrics and stress tests that we run and those more often end up being the binding constraints on the amount of liquidity we hold.

So the regulatory metrics may move up a bit. It's still our internal metrics that are likely to dictate our portfolio position therefore it's not likely to change much from where it is today.

Got it. Thank you for that.

And just my second question is when I take a look at our business, over the past year and year and a bit you’ve branched out into reverse mortgages, CMHC lines of credits. I'm doing some specialty lender loans in there with the Bennington now we granted almost you know for much, all of them are very small and starting from scratch in many cases.

But can you talk about how you're managing the risk of expanding into these areas and trying to grow these areas going forward? Just given these aren't really areas I would say you necessarily had expertise historically?

It's something, I think a lot about Geoff in terms of residing more than we can chew and I think will be a area where we are bedding down the initiatives we have already made. We do see the CSV reverse mortgages businesses that's why we think they're pretty straightforward risk business, the management wants you get it head out originally.

And we see there is been very interesting component in terms of moving to the decumulation, thing relevant to the decumulation market in which we mean people at postretirement that are looking to use their assets to fund their lifestyle through retirement time. And we think some others existing partners are working in that area.

We say there's the assets have fairly small to-date, but we do think they are potentially very large business going forward and they will grow slowly this year. I think – and to your point really you can expect this is a year of bedding down the initiatives we've already taken rather one where you can expect us to see us taking many more sort of initiatives into ancillary markets if you like, we feel like advancing cost pretty for this year with this and our risk team is all over it.

We are very aware from the board level down but these new initiatives need to be looked carefully. So will be doing that.

And so, I want to make sure it’s essentially kind of grow this slowly methodically to make sure you get comfortable with the risk. So do you have to hire people externally you may have had some expertise in some of these different product types?

We certainly have brought in some outside expertise in some of these areas. Yes.

The benefit of that and we’ve had outside consultants to help us understand the risk metrics around this. Reverse mortgages in particular are roughly complicated actuarial problem and we think we found us guy in the world to help us with that piece.

So yes, we are – we are making sure that any knowledge gaps a-filled with outside resources.

Okay. Great.

Thank you.

Good morning.

Good morning Marco.

I just want to follow-up on Geoff's question with respect to the newly proposed off your liquidity requirements. So if pass as currently proposed, can you speak to some of the offsets you may have to basically offset the cost of higher liquidity?

And specifically I am interested you currently have the backstop facility in place now, would higher liquidity on the balance sheet change your view on continuing to carry that facility?

I certainly don't think this policy will change our view on that. We will certainly factor it as we think about the expansion of that facility.

I don't think it's going really though weigh heavily into that decision. And as Tim said, we don't think this is going to become the binding constraint for us and definitional issues that we have to kind of work through, but we're pretty comfortable that the constraint that will emerge from whatever the final language is, is probably below the liquidity we’d plan to carry in any event.

I think it does go to deporting some of those strategies that has been on for a number of years, so our EQ Bank strategy working our large -- is to be able to have stronger relationships with our customers across more than one product in that area that that's important component of how think about stability of deposits which makes -- all kind of sense to us. So, you'll see our strategies starting to offer more than just a simple -- one simple service to our customers and trying to ensure that they are using the full capability of the products to have a stronger relationship.

All right. And just as follow-on to that.

There was some commentary about possibly reducing the size of the facility on -- in the MD&A. Does your NIM guidance of 1.65% to 1.7% for 2019, does that envision a reduction in the facility?

Or would that be incremental?

Now, it doesn't seem a reduction in the facility mid-year after the existing facility matures.

Okay.

We guided for our overall cost savings of $18 million to $20 million year-over-year.

Okay. So there would be a slight bump in NIM, call it in Q3, slightly?

Yeah, very slight. Yeah.

Okay. And my next question is just another numbers question on the expenses.

Tim, you mentioned there is an incremental $6 million of non-recurring expenses related to the implementation of your core banking system in the cloud.

Yeah.

Is that included in your, call it, your expense guidance? Or will that be treated as an item of note?

That is included in our expense guidance. I don't think we determined the treatment yet.

But I wouldn’t think it's is likely going to be an item of note.

Okay. So that's part of -- so that would be included in call it your ...?

It’s included in the guidance that we provided, yeah.

So -- and getting to your 15% to 17% EPS growth for 2019, that would include the $6 million of expenses?

That's correct.

Okay.

As insight there is maybe some -- more interesting -- certainly was an issue that was new to us in terms of accounting approach. In the old world where you were gotten both service and set up, infrastructure and service you will capitalize all of that and then amortize it over the life of the service.

In this case, effectively we're spending money upfront to get access to the cloud and get it working and expense it overly -- over mutually effectively whereas and yet we will get the benefit of it for a number of years. So, I think if you -- in my view if you're looking at it sort of compared to old style accounting for old style systems you are really penalizing yourself upfront and amortizing the competitive more traditional approach.

Imagine you will see a number of the banks starting to do this over the next few years.

Okay. And just one last question on just credit and if just your view on credit -- firm's credit experience through the cycle.

There was an interesting chart in your MD&A that showed the Beacon Scores of your mortgage portfolio. They went from 643 to in excess of 700.

Just wondering what does that mean for the credit experience through the cycle going forward? And I imagine peak loss rate should in theory be lower, not only a result of your shift and mix alternatives, but as well as that just simply the high grading of your portfolio?

I think that’s right. We try to quantify that I'm not sure if it’s – sorry, we can get offline with you on the cycle impact.

But probably the default under everything else being equal should be about 35% less than those kinds of beacons and it was under the old scenario is on that and that is -- it’s directional, to be clear, but meaningful reduction in the profit and loss.

All right, great. Thanks.

That’s it for me.

Hi, good morning. Maybe just talk, big picture, how you're feeling about the market conditions when you look at single family and commercial, because it seems to me that you are adding some incremental risk to your business with you growth in construction lending, equipment financing, but then on the other side of things, you've done a lower back staff facility planned for this year and your capital ratio is trending below where you've typically targeted.

So how are you feeling about the growth that you're targeting, but adding incremental risk to the business?

I don't really see us as adding incremental risk. I mean, I think the finance business will have higher losses on an ongoing basis, but probably may not be quite cyclical frankly that’s the experience with our business in the credit profiles it works like that.

We’re generally and then we tried to set the out and run our single-family businesses, feeling having been through a year of correction with the B20 and what that means for the market as a whole is a market that we been safer. We will as – two point on capital, we will be rebuilding capital up to the -- we finished the year right on the sweet spot, 13.5% centralized for us, and we just need to rebuild that little bit, but it’s something we can do very quickly to retained earning.

So we're feeling pretty good that we’re in the nice spot. The risk, the balance – banks have to take risk and we’re taking risk.

But we think we’re doing as prudent bankers would do, pretty comfortable.

Okay. That's all.

And then on the CET1 ratio, your guidance say that’s going to fall below 13% I think following the Bennington acquisition. What – with your guidance that you put with earnings and asset growth and whatnot, where do you see the CET1 ratio turning towards by the end of the year?

Yeah. We see it back at 13.5% level by the end of the year.

It's going to be a little bit a – it’s going to be lowest at the end of March, and then it will rebuild really fast from there.

Okay. That’s good for me.

Thank you.

Thank you.

Yeah, thanks good morning.

Good morning, Jaeme.

First question is related to some similar high level commentary in the MD&A regarding AIRB and the significant impact that could have and potential benefits. Can you -- are you able to expand upon that comment and maybe provide some of the factors that led you to include that statements in the MD&A this time around?

I guess, I think it's important that you know there’s lot of energy being imply within the bank to AIRB and we are making good progress on it. And the -- if our capital was being measured in the same way as the D-SIPs under AIRB that would be a meaningful drop in risk weights, comfortable enough with our models to know that would be proved for sure.

The question is how quickly we can – how does our project move forward to get us comfortable with accepting the approach we're taking and how quickly would they and under what circumstances they will allow us to have confidence in our models as we build our own confidence in the models. But over 5 or 10-year time horizon this is something that could be meaningfully important to the banks and I think it's something that we should understand certainly something that I think is simple.

Okay. And just a quick follow-up on that is, is it time and improvability of your models that is the biggest constraint from RC perspective would you say?

And where would you think you are in terms of that timeline? It sounded that from MD&A there was kind of like the end of 2020 where you might be able to at least gets some visibility on implementation, is based around that sort of feeling of timing?

I think we expect to be in parallel by 2020. The capital ratios approaches by then and the confidence of the models, there is heavily lifting to do to make sure they do integrities with the system before we get there, but we’re well on our way with that.

So yes, I think we were having this conversation 12 months from now, we’ll have a little more confidence to be able to sort of communicate what we think the difference in risk weights are and where our timeline is on that. But as a reminder there is a significant potential piece of risk weights relieve, but that’s really why we're doing this.

This is to allow us to tackle different asset classes that don’t really fit particularly easily in the risk weight -- in the standardized approach. But today if you have an apartment building where we help the finding construction, we want to be competitive on take out because of risk weights against that building too high and so end up going to another bank, commercial institution using the approach.

Potentially on this approach we could go to work customer say now building stable cash flow, cash flowing risk weights stopping and we can be competitive in pricing. So that would also be on the cost of acquisition of that asset of that mortgage should be pretty low because we're in a relationship with the customer.

But that's the real kind of win over much longer time period and derisking.

Okay, thank you. Next question is around the leverage ratio dropping to 5% in this quarter.

In past years, you had strategies to self securitize that are not solely as some transactions to derecognizing the securitization transactions that something that is on the agenda at this point given what leverage is sitting? And are there any strategies or factors you have to consider now looking at that ratio?

I think we're very comfortable where the leverage ratio is James. And we think we have added adequate room for growth.

Obviously impacted this quarter by the prime single-family market is that priests sourced. But again we don't expect that type of volume in most quarters going forward.

So that’s that we can organically generated enough capital to keep our leverage ratio where we needed.

In those transactions would build this profitability in the short-term but -- form out math that the NPV overall of the life of the loan would taper off, not doing this transaction that we need to. In the transaction to be in that we can.

I mean we need to.

Okay. And my last question is just around Bennington I just want to get a sense to the NIM guidance around 7% for Bennington.

When the transaction was first announced, I think I kind of got you about 7% of a little bit higher than that as that NIM as an estimate based on return on invested capital. I'm just wondering what kind of change transpired over since this acquisition drive a little bit lower NIM?

We’re still working through the Bennington financials and we may be a little bit conservative with a 7% number. I do think there might be some upside there.

But we didn't want to bake it into our expectation there at the moment Jaeme.

There's no factors have emerged since we would've made that regional comments. So it's probably more communication issue on our part.

We were very comfortable with acquisition and the numbers that are being generated.

Okay, great. Thank you.

That concludes our prepared remarks. So thanks James.

To conclude, we look forward to delivering our next quarterly report in May and hosting our Annual Meeting on May 15 with the bank had office in Toronto. And thank you all for listening this morning.