Victor Dodig: Just really quick, because I know there are a lot of questions and we’re on tight time. So we’ve architected CIBC to deal with the economic environment that might come in 2024. If things go slow, we’ll manage accordingly. If things turn better, and there’s a very good chance that we have this ‘soft landing’, we will capitalize on that as well. Thanks, Ebrahim.
Operator: Thank you. The following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.
Gabriel Dechaine: Good morning. Just a question on capital here and you converted the US loan book to IRB, that’s going to add 20 basis points next quarter. That’s great. I’m just wondering how does that affect the proximity of your risk-weighted assets to triggering the output floor because the IRB deflates the RWA. So I think that might bring you closer to that for.
Gabriel Dechaine: Yeah, thanks for the question, Gabe. I’ll take that. And so, first let me clarify that the 20 basis points approximate number that we disclosed is proforma net of everything. So that is, we have more than that and benefit from the transition to IRB, it’s netted off by some fairly modest negatives from the combination of FRTB implementation and CVA changes as well as the negative amortization mortgages as well as taking into account any floor impact. And we don’t see, at this point, even post IRB, floor being an impact in the foreseeable future. And so net, we would have that 20 basis points this quarter, and I don’t anticipate any other impacts because of that in the short term.
Gabriel Dechaine: Okay, so not a 2024 issue?
Hratch Panossian: Not a material issue ‘24 or ‘25 even. I’m not going to comment beyond that.
Gabriel Dechaine: Okay. All right, thanks a lot.
Operator: Thank you. Our following question is from Meny Grauman from the Scotiabank. Please go ahead.
Meny Grauman: Hi, good morning. Frank, I found the Slide 29 very helpful. Just a question in terms of the LTVs that you’re showing. What are you assuming in terms of home prices to calculate those? Is there any sort of change in home prices that’s being reflected?
Frank Guse: Yeah, so those are our current LTV calculations. We’re based on externally published indices. We adjust house prices to our best prediction of current LTVs. So that would include the more recent moderation we have seen in house prices. It does not include any forward-looking further moderation or recovery in the house prices. It’s our current LTV calculations that are shown on the slide.
Meny Grauman: Got it. And then just in terms of some of the dynamics impacting the performing PCL line, especially in Canada, just wondering the role of expert credit judgment this quarter in determining that number and is there anything notable from a modeling perspective as well, that input into that?
Frank Guse: Yeah, a lot smaller number this quarter. As we discussed last quarter, we adjusted our forward-looking indicators and our expectations to a more conservative scenario last quarter. This quarter, I wouldn’t call out anything specific. It’s a smaller number or number of smaller items impacting that number. It’s our model results. It’s our expert credit judgment and it’s going through our processes that we go through every quarter to land in the right spot for our allowances. So nothing to call out specifically, I would say.
Meny Grauman: Okay, great. Thank you.
Operator: Thank you. A following question is from Darko Mihelic from RBC Capital Markets. Please go ahead.
Darko Mihelic: Hi. Thank you very much. I’ll be brief, Frank. I probably had a lot of follow-ups later, but — and I do appreciate the extra disclosure. I have a question on the negatively amortizing variable mortgages. Coming down from $50 billion to $43 billion, you’re showing some success there in getting people out of negatively amortizing. But what I’m interested in is the opposite effect, which is, of the $50 billion, how many of you contacted? And clearly we could see 14% reduction but how many people are electing not to increase their payments or reduce? And what would be the main reason for them not to move into a positively amortizing situation? Thanks.
Frank Guse: Yeah. Thank you. Thank you, Darko, for the question. So we have had a proactive outreach program to our clients for quite some while. We started that early. We have now reached out or contacted most of our clients in their portfolio, and we do see strong results, and we’ve seen those results quarter-over-quarter. In this quarter alone, 13,000 clients took action to remove themselves from negative amortizing status, for the most part by increasing their monthly payments on a voluntary basis to remove their accounts off of negative amortization. Why are clients not electing? There’s a couple of reasons for that. Some are just saying, well, I’m aware of the status, I do not have to take action right now, I expect interest rates to come down and I just want to wait for that.
There may be other reasons for that. But in general, we are very pleased with the outcomes that we are seeing so far. We continue to expect seeing those outcomes, and we continue to expect that number to coming down as we keep up our outreach efforts and having conversations with our clients.
Darko Mihelic: Okay, thank you.
Operator: Thank you. Our following question is from Lemar Persaud from Cormark Securities. Please go ahead.
Lemar Persaud: Hi, thanks for taking my question. Questions for Frank. Can you talk about what gives you the confidence in your PCL outlook despite the continued increase in delinquencies in Canadian consumer? Like, does that assume normalization delinquencies to the Q1 ‘20 rate you’re showing here, so the 34 basis points? Or are you assuming something above that 34 basis points you’re showing on your Slide 27? Thanks.
Frank Guse: Yeah, well, I would say, as I said before, there’s a couple of moving parts. So we do expect some further normalization, and it’s probably a little bit more product-specific. We talked a little bit about mortgages in our prepared remarks, where we expect normalization, but we are very confident with the quality of those books and that those renewals will remain very manageable for us. Cards performance continues to be very good. There is in part our co-brand portfolio that is supporting strong credit quality but there is underlying investments in risk management that we did in the cards book that is helping drive a real change in credit quality as well. And then in personal lending, again, that is a little bit a mix of different things, but we are seeing strong credit quality there, but there’s also certain pockets like our unsecured lines book where we see normalization and we should expect to see normalization.
