Doug Young: That is. Yes.
Operator: The next question, Mike Rizvanovic, KBW Research.
Mike Rizvanovic: Just a quick question on your margin trajectory here. So down at the all bank level and then up in Canada and I think flattish in the U.S. So I’m wondering when you guide to a higher negative NII line in corporate, is that where we should see the improvement, if, in fact, you are able to get some margin accretion at the all bank level maybe second half of this year or perhaps just heading into 2025. I’m just wondering where those moving parts will end?
Tayfun Tuzun: Yes. I think this quarter, we have seen a little bit of a higher deposit price competition than we were expecting. That’s the reason why it came down 6 basis points. In terms of the NII line in Corporate Services, yes, we do expect that line to come down from the Q4 levels which will somewhat contribute to the stability of the margin because this concept of higher reinvestment yields balancing the deposit pricing competition and term migration is real and it’s coming through across — we do reflect that not only on the corporate side but also in businesses. So we’re pretty confident that the outlook for the rest of the year is very tight and stable from here.
Mike Rizvanovic: Okay. So you’re still confident that you could see margins higher all bank level, even if rates are declining possibly towards the end of the year and heading into 2025. Is that a fair assessment?
Tayfun Tuzun: Yes. Our outlook does contain an interest rate view that the Fed and Bank of Canada will start pulling the short-term rates down. I would not guide you to a significant increase in our margin. If it is, it’s a couple of basis points, I’m more guiding you towards a stable enterprise level consolidated NIM outlook.
Mike Rizvanovic: Okay, that’s super helpful. And then, just I wanted to quickly ask Darryl. I think in your prepared remarks, sorry, I think you made a reference to rates coming down which should help across different aspects of your business lines. And I’m just wondering if you could sort of qualify that. When you’re seeing lower rates, are you just talking about the short end of the curve Bank of Canada? Or are you, in fact, expecting and across the spectrum or across the yield curve duration like an across the board movement in rates downward? I’m just wondering what you’re sort of modeling in your own projections there?
Darryl White: Yes. Look, Mike, I’m happy to take you through the sort of base case with the obvious notation that this has been a difficult game for anybody on the planet to be forecasting. But our base case does suggest that in the second half of the year, probably starting around July, we will begin to see a reduction in the short-term administered rates, so both in Canada and in the U.S. As far as the amount that we expect over the course of the second half of the calendar year, if you want to think about it that way, remembering that the calendar year is not the same as the fiscal year for the Canadian banks, of course, we’re in the neighborhood of 100 basis points from the July period to the end of the calendar year, not capturing all of that in our fiscal naturally.
And look, as you look at the longer end of the curve, I think we should probably see some commensurate reduction there as well but maybe not to the same degree. So you could see some steepening as we go through. That’s our base case. And you will all have your own base cases to overlay on that but that’s the way we see it relative to the economic performance that we expect in both the Canadian and U.S. economies.
Operator: Next question from Darko Mihelic, RBC Capital Markets.
Darko Mihelic: In the Interest of time, I’ll be very quick. You mentioned that the change in taxation on dividends is about a $50 million reduction in trading revenue. I’m assuming that’s a 1-month impact, should I just be annualizing that? Or is there a better way to tell me the headwind from that maybe from an earnings perspective for 2024?
Tayfun Tuzun: Actually, it is not just a 1-month impact. It covers most of the quarter. I would suggest that if you are going to add it in your model, I would use like a $60 million type of number for — on a quarterly basis for the remainder of the year. So the $50 million [ph] doesn’t go to $100 million [ph], it just goes to $60 million [ph] on a quarterly basis.
Darko Mihelic: And that’s just revenues? Or are you talking about taxes?
Tayfun Tuzun: Revenues in Capital Markets.
Operator: Next question from Paul Holden, CIBC.
Paul Holden: A couple of follow-up questions to what I think are important discussions on the call. First, just with respect to balance sheet or asset growth. Obviously, you’ve taken a number of actions over the last 12 months to manage assets and RWA. It sounds like maybe we’ve reached an inflection point, both because you now have the capital to grow the balance sheet again. And b, to the points being raised, you’re starting to see improved demand as well. So maybe give us a sense of how the balance sheet may grow from here through ’24? And what kind of impact declining interest rates might have on that view as well?
Tayfun Tuzun: Yes. So I mean, look, as both Darryl and I said, we have proactively executed a number of these transactions to create room on our balance sheet for growth. And as — again, I’m going to turn it over to Ernie and Nadim in terms of asset growth for the future but we believe that we’ve prepared our balance sheet both from a capital and liquidity perspective for growth in the future. In terms of timing, I’m going to turn it over to you guys.
Erminia Johannson: I can start, it’s Ernie. If I think about Canada, we do see us growing probably in the low mid-single digits on mortgages and our card book, et cetera. In the U.S., I would say we’re probably in the low single digits on our loan growth, just a reflection of our growth position given our marine RV sale and our indirect auto exit. I’ll turn it over to Nadim for his comments.
Nadim Hirji: Okay. For the commercial side, I would say to expect low single-digit loan growth both sides of the border in the near term, building to a more mid-single-digit loan growth as we move into the latter half of the year which is the guidance that we had originally provided last quarter which was mid-single digit by the end of the full year.
Paul Holden: Okay. And then, Darryl, I want to come back to sort of the line of questioning Mario had on the ROE but his question was specific to the U.S. bank. I want to ask a similar question for the Canadian bank, just given all of the changes that have happened with CET1 requirements, Basel III, your increased usage of risk transfer, et cetera. Does anything change in terms of your long-term ROE expectations? Or is this still a bank that should be able to produce a mid-teen ROE when things normalize?
Darryl White: Yes. You’ll have seen, Paul and it’s a good question. You’ll have seen when we updated our medium-term target disclosure at the end of the year. We didn’t change the medium-term ROE target. So that’s a conscious decision. That’s an active decision. So when we say we’ve got an objective of 15% or higher. That remains the case. So there isn’t a question that the industrial changes have had an impact on the ability to deliver that. And it’s also the case that if you go back a couple of years, we were closer to 20% than we were at 15%. So with that as a buffer as I look out going forward and we execute against these programs, we’re holding that. And I remind everybody that’s a medium-term target.
Operator: Thank you. This is all the time we have for questions today. I would now like to turn the meeting over to Darryl White. Please go ahead.
Darryl White: Well, thank you, everyone, for your questions. We apologize for going a little long but we wanted to get your questions in, given that we started a little late. As you’ve heard this morning, we’re proactively positioning ourselves for an environment of future growth and we’re confident in the power of this integrated North American franchise that delivers consistent and differentiated performance to help our clients make real financial progress. We look forward to speaking to you all again in May. Thanks, everyone.
Operator: Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
