Tayfun Tuzun: It is a one quarter phenomenon, and that’s the reason why we noted the severance this quarter. We expect continued focus on expense savings as our commitment to positive operating remains firm, but the severance charge is this quarter.
Lemar Persaud: Okay. Perfect. And then could you remind us what the conditions are for — to adjust for legal provisions, I guess, you guys call that higher legal expenses and a lot of the reasons for elevated expenses. But just looking at your adjustments, we have seen legal provisions that are adjusted for. So I guess, how do you draw the line in the sand for what you adjust for and what you leave in your core expense numbers?
Tayfun Tuzun: We tend not to adjust for legal provisions. In our normal business, we always have legal proceedings, and we believe that if there is a reason for us to take reserves that they should be included in our financials on a non-adjusted basis as part of the operating performance.
Darryl White: You might ask then, Lemar, why did we call it out this quarter. I think it really is your question because you’re right. Normally, we don’t adjust and the reason we’ve called it out this quarter is because it’s unusually high. We don’t expect that level in the normal course. So, we wanted you all to know — we wanted you all to know that.
Lemar Persaud: Okay. And that’s linked to the severance. Is that what it’s related to?
Darryl White: No, it’s not linked to the severance. It’s separate from the severance.
Tayfun Tuzun: And it does include the off-channel communication settlements, that is very public, obviously.
Operator: Thank you. Our following question is from Nigel D’Souza from Veritas Investment Research. Please go ahead.
Nigel D’Souza: I just want to drill down a little bit more on the trends you’re seeing on the deposit side in your U.S. business. Any color on where you’re saying for non-interest-bearing deposits? How much of that remains in terms of deposit mix? What you’re seeing non-interest deposits and there’s a difference in flows for deposits for the Bank of the West franchise versus the BMO U.S. franchise?
Ernie Johannson: Yes, I’ll take that one. So what we’re seeing in terms of the U.S., we’re still seeing the pre-pandemic or through the pandemic surge deposits still existing to some degree in the franchise. They’re solely running off. We would anticipate that, that to take place probably in the first half of next year to be fully out. They’re still elevated our checking and our savings account. We are seeing, again, that migration to term, which is expected as we continue to be in a market where the rates are attractive to our customer base. As well on the Bank of the West side, as I mentioned, we’re seeing stability in terms of our ability to retain deposits and are now seeing growth. That’s a function of our introduction of better pricing optimization of the portfolio itself and expect that to move forward.
And then on our digital deposit taking, we’re seeing strong outcomes as well in terms of what we’re seeing being driven through the digital channels across the 50 states. So, overall, I’d say those trends. We believe that there’s lots of opportunity in the franchise itself of Bank of the West, given the market itself is very attractive. And so as we go through our campaign season, et cetera, we’ll anticipate to be able to grow at market in those particular markets, I’m not sure Nadim, if you have any other thoughts.
Nadim Hirji: So it would be very similar, but I would say if you’re asking trends, the shift mix that we’ve seen going from noninterest to interest-bearing has slowed down and is stabilizing. So I don’t think it’s going to shift back anytime soon, but I do think that it has stabilized in terms of the shift.
Darryl White: Yes, just last point on this, I think, Nigel, you’re also asking that whether there’s adjust position between the Bank of the West franchise and the legacy BMO franchise, I would say we’re pretty much at the point where that’s converging — converging, I should say, pardon me, because you’ll see that as we go through Q4, we have our conversion weekend literally coming ahead of us. And the franchise value starts to integrate and blend together almost completely. So, the benefit that we bring with the scale and the capabilities and the technology is infiltrated into the Bank of the West system. And so as time has gone on, we’ve seen a convergence of the performance on deposits, and that’s what we would expect to see on a blended basis going forward.
Nigel D’Souza: Great. And just a quick follow-up for Piyush on the credit loss outlook, I think you’ve signaled for PCL to be somewhere in the low 20 basis point range. That actually puts you above and that’s unimpaired, but that’s above the run rate for PCLs in 2019. So just wondering if you could comment on, are you seeing interest rates weigh on commercial side or retail side? And do you expect those provisions to remain elevated and any pathway for when that could fall below 20 basis points?
Piyush Agrawal: Sure. Yes. So I think on the impaired piece, I think that’s the one you’re referring to. The guidance we’re giving is consistent low 20s to mid-20s. Of course, interest rate is a big part of the environment. It’s a very natural evolution for our borrowing customers to adjust their performance to a 500 basis point increase in a very short period of time, that’s what you’re seeing coming through. So I would say, if you take that for the next quarter and you sort of average it out for the entire year, we are well below 20% on an average basis. But again, within the realm of normalization that I think all of you and all of us have been expecting for the industry. So, I don’t have anything else to sort of add over there.
I think the Bank of the West portfolio performs very well converging as we’ve used the term with the BMO U.S. portfolio. And the trends are similar weaker and unsecured a little bit but strong secured portfolio and then risk rating changes on the wholesale portfolio. So overall, the position of strength from where we are starting and a very strong risk appetite.
Operator: Thank you. Our last question is from Joo Ho Kim from Credit Suisse. Please go ahead.
Joo Ho Kim: Expenses, there are a lot of [Technical Difficulty] but do you see those as [Technical Difficulty]
Operator: Sorry to interrupt you. You’re coming in a bit choppy, if you could…
Joo Ho Kim: Yes, sorry. I’ll start from the beginning. I just had a question just on the expenses there. Can you guys hear me okay?
