Mario Mendonca: Can we go to Slide 15 where you show the decline in your wealth deposits? That 15% sequential decline in deposits is noticeable. So, it’s a big number. Help me understand how you fund that kind of deposit attrition? Is it through selling securities and maybe about where these deposits are going, presumably, they’re not leaving the bank entirely. Help me think that through.
Nadine Ahn: It’s Nadine. I’ll take that one, Mario. So in terms of the — a lot of it is related to the deposit mix in City National. And so we have seen attrition on overall on the shift from non-interest-bearing into interest-bearing. So we’ve managed that through some of our broker CDs. The loan book trajectory has come off a bit. As you’ll notice, though, when you look at it from our balance sheet when it comes to City National, we do have — but we’ve increased from about 73% to about 88% our loan-to-deposit ratio. So what’s happening there as it relates to the deposits coming off, you’re seeing more of a shift into other forms of higher cost funding. So whether it be there’s been in our FHLB that we noted primarily to increase our liquidity position overall.
So, it’s not a case that we’re actually having to reduce our asset base. It’s more that we’re actually increasing it from a higher cost of funding and that’s why you’ve noticed that you’ve seen the NIM drop on a quarter-over-quarter basis.
Mario Mendonca: That’s that ’22 or whatever, maybe not ’22. That’s a meaningful drop in CNB’s margin is reflective of this deterioration in deposits that I referred to. Those you’d connect those two presumably.
Nadine Ahn: Correct. And on a year-over-year, we also would have removed Investor Services. On that as well given the — given moving that a deposit balance sheet base to available for sale, that would have been on a year-over-year basis.
Mario Mendonca: Okay. Then my follow-up — my last question then relates to the LCR. That’s, again, a meaningful increase of 5 points sequentially. Is there any way to size what that does to the all bank margin in a given quarter? When you take your LCR 5 points, are you able to provide some kind of estimate on what that means for the margin?
Nadine Ahn: Yes. So overall, you’re looking at moving from about $88 billion surplus to about $102 billion, and that’s roughly at about a cost of — you could think of Mario, around 55 basis points roughly. So from an all-bank margin perspective, it wouldn’t be as material, maybe 1 basis point in the order.
Doug Guzman: Just back on the deposits, Mario, if you look in the footnote on that page, over half of that move is that IS change that Nadine mentioned.
Mario Mendonca: Investor Services?
Gabriel Dechaine: Yes.
Nadine Ahn: On a quarter-over-quarter basis, the City National deposits were flat, if you think about it from the mix shift from an FHLB funding increase.
Operator: Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.
Doug Young: Good morning. Maybe for Derek, Capital Markets seems to have bucked the trend here. Hoping you can maybe talk a bit about the drivers. I think there was some impact from market reversals, if you can quantify that. And I know it’s tough to kind of pull up the crystal ball, but I’ll throw it out there. You have a $1 billion pretax pre-provision earnings target quarterly that you kind of set. How do you feel relative to that, given the business pipeline and then maybe you can mention just you’re building out a cash management strategy here. How does that impact that outlook as well?
