We’ve shown the strong track record of keeping that stable overall. We’ve expanded non-trading NIM by more than 10 basis points since the end of 2022 as we’ve gone on this journey. That’s been supported by all the businesses, strong CAD P&C, which is up more than 20 basis points over that time. Stable NIM in the US if you look at it over that entire time period despite the dislocations that we saw last March in that market, and in both P&C and Canada and in the US, you had the unprecedented shift to term deposits from demand, unprecedented increase in deposit costs, a lot more dislocation in the US, and through all of that those business margins have been stable and improving. And that’s what has allowed us to drive NII. We grew NII on a non-trading basis, 10% in 2023.
We’ve got 6% year-over-year this quarter and we think there is continued momentum. In terms of what happens going forward is this stability helps us, but rates have plateaued, and so over time we’ve said, we benefit a few basis points a quarter from the repricing of the balance sheet. That’s helped us offset some of those headwinds. We will continue to have those benefits going forward. And based on everything we see including some further pressure on pricing and mix of deposits and so forth, we expect on the core, stable to upwards trending margins, which will stabilize over time. And I think we’ll be more stable coming down if rates do drop as expected, because of the way we manage things. So, no, I wouldn’t change anything.
Lemar Persaud: Appreciate the time.
Operator: Thank you. This next question is from Nigel D’Souza from Veritas Investment Research. Please go ahead.
Nigel D’Souza: Thank you. Good morning. I wanted to touch on US commercial real estate again, we’re seeing smaller banks in the US, look asset sales in the pre-portfolio to help us with the capital release. And there seems to be a disconnect between the market based and the carrying value where the discounts on the market base are too, I guess, greater for gap to transact on these asset sales. So is that your experience when you’re exploring your institutional sale? And how do you think that gap will eventually be bridge? Because it doesn’t sound like you expect another round of impairments or provisions to bridge that gap between market pricing and carry value?
Victor Dodig: Well, thank you for the question. I think, I mean, we have reacted to that gap by addressing our provisions to reflect what we believe a reasonable market value is. And we have been through a couple of successful dispositions in the market where we actually realized what we expected to realize and what we were provisioned for. So I think we will continue that strategy. And as I said, we believe our current allowances that we have are prudently reflecting that, and we will continue the strategy of working through those assets. And then again as I said before, I mean the overall capital impact through those provisions — sorry the overall P&L impact through that provision should be more muted on a go-forward basis.
Nigel D’Souza: Okay. That’s helpful. Thank you.
Operator: Thank you. The next question is from Ebrahim Poonawala from Bank of America. Please go ahead.
Ebrahim Poonawala: Hey, good morning. I guess I just wanted to follow-up maybe to Mario’s question about — not about what could go wrong, but what could go right? And Victor, when we look at the ROE, 13.8% this quarter, your target, I believe, was 16% plus — just walk through in terms of where the franchise today is under earning the most in order to bridge that gap? Is it excess capital, PCLs, efficiency. Would love to hear your thoughts?
Victor Dodig: Good morning, Ebrahim, that all kind of goes to our strategy. It goes to our Investor Day of June of 2022, where we laid out business by business and for the overall enterprise that we plan on achieving through the cycle. And it’s been a journey through that cycle. It always is through a cycle, but we’re delivering. We’re delivering on our ROE targets at 13.8%. We’re still far way away from the 16%. But if you look at our strategy again, high net worth affluent strategy is capital light, it’s ROE enhancing, attracting clients for the future where we’re — we have a leadership position in newcomers and students through our CIBC branded and simply platforms, a large majority of those become affluent. They tend to become affluent over time.
So this — that growth into the future. The connectivity strategy, Ebrahim, that we have, also drives an enhanced ROE because as we do work with our balance sheet to help our clients realize their ambitions, we make sure that they’re actually doing business in other parts of our bank. And what you will see from CIBC in the quarters ahead is a continued focus on that kind of connectivity theme because that connectivity theme is also ROE enhancing. It’s capital enhancing. And the last thing I’d say is just the fourth pillar of our strategy, which is the — which are the investments that we’ve made. If you look back over the last number of years, as we were working through a more positive operating leverage and improving our earnings profile, it was the result of us investing for the future.
We’ve made a lot of those investments. We continue to do so. We’re not holding back but we’re now trying to scale those investments for returns, all of which should be capital enhancing. I think when you add all of that up in terms of the quality of the revenue growth, our ability to control expenses, the credit quality and the overwhelming majority of our book, as Frank has articulated, you’ll see that ROE improve over time. You’ll see us continue to build capital over time, and you’ll see a better return. And I can tell you that the leadership team of our bank is focused on ROE and it’s focused on high-quality earnings per share growth.
Ebrahim Poonawala: And just on that building capital with CET1 at 13% give us a thought process, does that build from here and your appetite if there are dislocations in the U.S. in terms of capitalizing on M&A in the US. Thank you.
Victor Dodig: I’m going to share the podium here with my colleague, Hratch. So Hratch, over to you.
