We have accelerating that in Q4 with our approvals in place to do that, and we’ll continue to look at that. Don’t forget, we still have to manage one of the most complex transitions with HSBC next year and we’re carrying extra NIE to do that. So that’s kind of the macro story that, yes, it’s part of a larger cost reduction program is designed to materially impact our cost trajectory. So don’t just look at the FTE component of that. On City National, everything went against us this quarter in City National from credit loss on a real estate item that Graeme referenced to, the significant impact of deposit betas on the business and FHLB borrowings to rising costs to meet all kinds of expectations. So that business will benefit from asset repricing fairly significantly over the coming quarter year.
So that will turn — this business is well below our expectations for this year. And it’s been a drastic kind of turn since the financial challenges in the U.S. banking system in March where liquidity ran off and all regional banks are facing very similar NIM decreases challenges on expenses and others. So we do have a program to that. On the expense side, we are moving forward with that. And you’ll see us evolve positively the performance of City National.
Mario Mendonca: One quick thing then on the Basel III end game, you kind of described it as almost a negative for the bank that these higher capital requirements could impact the bank. But my impression was that it could affect U.S. banks, but that our Canadian banks as intermediate, I guess, their intermediate holding companies might be almost advantaged by that. What’s your take? Is Basel III end game a negative to our — to the Canadian banks in the U.S.?
Nadine Ahn: Thank you, Mario. I’ll respond to that. You’re correct. It is not going to be an impact for RBC more broadly as the results back that we obviously managed under [indiscernible] from a regulatory capital standpoint. I think it may be a question more around how you fund in the U.S. as it relates to our legal entity there in order to make sure that our capital ratios, et cetera., but it’s quite a long implementation time line and I think there’s a lot of discussions that are still going to be had as it relates ensuring that from a U.S. standpoint, they don’t feel that they are anyway and duly penalized versus the rest of the world. So I think it’s going to be a bit of a long implementation. But for Canada, for RBC in particular, would not impact us from where we’re regulated from that perspective.
Operator: Thank you. Our following question is from Lemar Persaud from Cormark Securities. Please go ahead.
Lemar Persaud: Yeah. Thanks. I appreciate the additional slides on NIE growth. Just thinking about that 1% to 2% FTE reduction for next quarter, how should we think about that impact in human resource costs because this quarter, FTE dropped 1% sequential, but these human resource costs, which includes your salaries and variable costs grew 4% sequentially. So is there — I think the messaging was that there’s a lag impact because of higher severance costs? Do I have that right? And when can we see the benefits of that?
Nadine Ahn: So correct, Lemar. I think in terms of the headcount reduction that you saw in this quarter to Dave’s comment, it was primarily managed through attrition. So that will start to play out one quarter’s impact, is not going to be as significant. You’ll start to see that play out more on Q4. Related to the 1% to 2%, we will have severance that would overwhelm any benefit as it relates to an actual reduction in salaries in the fourth quarter. So the run rate benefit will that start to persist in Q1 of 2024.
Lemar Persaud: Okay. So we’re going to see more of an impact as we move forward into next year. I think that’s the…
Nadine Ahn: Correct.
Lemar Persaud: And then just following on that, more broadly, I think you guys are clear to suggesting Q3 would be a transitional quarter in your actions to reduce expense growth. But how should we think about Q4? Because is there anything you guys are doing to limit the seasonal bump we typically think of in Q4?
Nadine Ahn: Yes. I mean there are things that obviously are going to come in play from a timing standpoint in Q4 that we will not be able to avoid. However, we are very focused on our spend and particularly our discretionary spend, which sometimes you do see tick up in the fourth quarter. There are some types of fees, example, as well as some marketing that may come through. But we are focused on reducing our overall growth trajectory in the fourth quarter based on the actions we’ve taken to date. And you will expect to see that come down to more the mid-single digits in a growth trajectory.
Lemar Persaud: Thank you.
Operator: Thank you. Once again, we ask that you limit yourself to one question and then come back on the queue. The following question is from Nigel D’Souza from Veritas Investment Research. Please go ahead.
Nigel D’Souza: Thanks, guys. Good morning. I wanted to circle back on City National and maybe get some more insights on the deposit trends. When I look at the loan-to-deposit ratio, that’s moved up substantially over the last two years. Deposits are pretty much back to where they were in 2021 but your loans have increased. Trying to get a sense of the runway here for that mix to shift? Could you give us a sense of how much non-interest-bearing deposits are remaining in terms of the mix at City National? And is there a need to continue to offer higher interest rates on interest-bearing deposits to maintain the liquidity at City National, given that the loan to deposit ratio has moved higher?
Nadine Ahn: Thank you for the question. So in terms of the deposit levels overall, we have seen stability to a slight increase in our deposits which is pleasant to see that we’re still managing to hold. You’re right. So what we’re seeing is the mix shift mix. I mean, when we’re looking at it from a non-interest bearing, that has come down from Q1 of 45% to 37%. So that’s basically giving you where that — all that increase in beta is causing the compression in our NIM overall. We have been taking actions to rebalance some of the mix with the right to our deposits. You bring in more of our sweep deposit balance, which comes at a lower cost than what you’ve seen some of the increase as it relates the CDS. And as you’ve seen that some of the loan growth has slowed down. So we expect that to continue and be able to manage our funding levels overall with not having to go into higher FHLB funding going forward.
Nigel D’Souza: Okay. But fair to say that you kind of have to give up some margin there to maintain? [Multiple Speakers]
Nadine Ahn: I would say that we’ve given up margin already in the trajectory, but we’re looking to improve that going forward as we’ve been bringing in some of the more lower cost — relative lower cost deposits in the sweep balances, although they are high beta, but they’re lower cost relative to some of the increases we’ve seen through 2023.
Nigel D’Souza: Okay. That’s it for me. Thank you.
Operator: Thank you. Following question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.
Sohrab Movahedi: Hey. Thanks for squeezing me. Last one from me. Nadine, I’ve just looked at the last four quarters anyway, the effective tax rate on the adjusted at the total bank level, I don’t think has ever been below 20%. How would you like us to model this over the next few quarters?
