Neil McLaughlin : Yes, thanks, Mario. If you look at — Nadine has provided a lot of commentary in terms of the core deposits. It’s been a big focus for us. If you look at — as rates have moved up and our high interest savings account, that’s where we actually pull a lever to make pricing decisions. We roll that all together, and that’s where we get to that. We’re a little bit lower than the 40%, but we would say 40% is the right number to think about it.
Mario Mendonca : And then another important slide, I think, is Slide 27, that was helpful as well. It’s clear from looking at this slide that Royal’s repo and securities lending business, you can see an abrupt improvement in that yield as rates have increased and also a pretty big improvement in the securities yield as rates have increased. So it seems clear to me that part of Royal’s advantage is having these excess deposits, which are invested in securities or this big repo and securities lending book. What I’d be correct in saying that those yields will be the first to flat line after rates stop rising because they are so abrupt in their adjustment?
Nadine Ahn : I think we’re still off, Mario, I would say, on the repo book. In particular, we’re still off margin differential between what you’re seeing there on the reverse repo side and the funding associated with it. And the margin expansion that you start to see there really is if you have a differential from a liquidity standpoint between what you’re funding in the short end and what you’re able to invest in, in a bit further out the curve in terms of the short like 3 months or so. So that’s really going to benefit from two things. One is that having a bit of an upward sloping yield curve and also a reduction in liquidity. So what you’ve seen is there’s been a bit of an opportunity to put on some balance sheet, Mario, but part of it’s volume, and part of it’s margin as well. So margins have been improving. But we are sitting at a bit lower in terms of volumes as well from our match book just given the surplus liquidity still sitting in the market.
Mario Mendonca : Okay. So pulling this all together, would I be correct in suggesting that Royal’s all-bank margin is probably going to peak out either in Q1 or Q2, and from there, it either flat-lines or bounces around a little bit based on what the rate environment is like? Is that — would you think that’s a fair way to characterize it?
Nadine Ahn : No. I think structurally, there’s a couple of comments that I made earlier. One is just around the continued benefit we will see from the margin expansion, as I mentioned in our retail deposit — sorry, our deposit base for Canadian Banking. So that will continue to benefit, as we mentioned, that the rising rates will still continue to price in and we will start to see that benefit continue. In addition, as we think through our continued growth in certain of our more higher-margin products as well as we commented around credit cards, et cetera, that will also contribute. So I wouldn’t say that you would expect our margins to have been flat-lined at this point. We definitely will still continue to see the expansion.
Operator: Thank you. The next question is from Scott Chan from Canaccord Genuity.
Scott Chan : Nadine, appreciate the trajectory on the Canadian P&C side on the margin. I’m just curious on the City National Bank side. You commented that margin should moderate in the coming quarters due to higher funding costs. Does that suggest that margins could peak in the second half of the year? And kind of looking at the back half in 2024 based on the forward curve in the U.S. side, that margins might actually decline from that point as it’s very asset sensitive on the commercial floating side?
Nadine Ahn : So we are still expecting to see margin expansion through the year in City National. I would say that it’s probably going to be a bit even through the year, but a little bit actually weighted towards a bit more towards the second half. But however, we are seeing that the funding costs are increasing mostly from — we have a combination of funding within City National. One of the step changes that happened is we improved our liquidity position in City National, so we would have increased our funding requirement. You may have seen that through our call reports on FHLB, which would have had a drag on our overall NIM, and that would have taken full effect in Q1 of next year. In addition, we are funded through a low beta deposit base within City National, which has started to come off a bit as clients are looking for alternative investment opportunities for that cash.
But in addition, we’re also funded by the sweep balances that of U.S. Wealth Management, which are a bit more rate sensitive and they are higher beta deposit base. So that is going to start to put some pressure on the NIM. But what we expect to see similar to what we commented for Canadian Banking, we have been more actively managing that interest rate sensitivity for that business. You commented it is very asset sensitive given the floating rate loan book, but we’ve been trying to mitigate that so that we will not see a sharper decline to the extent that rates start to come off in past 2023.
Operator: The next question is from Gabriel Dechaine from National Bank Financial.
Gabriel Dechaine : I’m going to think about the NIM stuff. Firstly, Nadine, if you can flesh out a bit more on the comment you made earlier? We’re also seeing other than the higher betas, we’re seeing the increase in consumption of GIC products. You said that’s not necessarily a bad thing because I guess the dynamic between GIC spreads and credit spreads is still favorable. Can you expand a bit on that? And then in your Canadian Banking guidance, are you including any assumption of revolver balances increasing in the card business? Is that’s a big, big driver potentially? And Neil too, if you want to chip in, sorry.
Nadine Ahn: If you would like to start?
