Kelvin Tran: Because [Technical Difficulty] quarter-to-quarter, yes.
Doug Young: Yes. Okay. And then just lastly, it looks like Schwab exercised an option to buy down. I think it was 3.3 million. Maybe I’m reading this wrong, but there’s a termination fee of $151 million. I think that flowed through NII. Was that — and if I’ve got any of that wrong, just correct me — was that part of the U.S. NIM? Was that backed out of core EPS? And then, like, how does that impact the economics between TD and Schwab, if at all?
Kelvin Tran: Yes. So, the — so two questions — two answers to that question. Number one, that is backed out of the U.S. retail core NIM, because we have net interest margin ex-sweep. And then in terms of the impact, that payment is to compensate TD for the cost of unwinding some hedging relationship and lost revenue. So, there’s costs related to that that gets offset.
Doug Young: Okay. And how does that impact — does it impact the economics of that sweep relationship going forward?
Kelvin Tran: The way it impacts it is that you do now have lower balances that you earn in the future. And the price and value of some of that economics is paid to us upfront.
Operator: The next question is from Ebrahim Poonawala with Bank of America. Please go ahead.
Ebrahim Poonawala: I guess just a question around the Canadian margin outlook, Kelvin, means — it would appear that your back book should be repricing higher, which should create a drift higher in the net interest margin. I guess it’s being offset by asset growth. So, two questions. One, strategically, what we are hearing is, maybe TD’s being hypercompetitive on mortgage pricing, and that’s impacting just mortgage pricing across the board. So, one, if you can address that and talk to the profitability of these new customers that are coming on board today versus in the past. And just based on how you’re funding this growth, et cetera. Would love to hear the thought process around as you keep putting on more growth, maybe it comes at a lower margin? But how are you thinking about the profitability impact?
Michael Rhodes: Ebrahim, let me — this is Michael. Let me take that and — obviously, as you know, lots of factors go into margin. But let me just kind of jump into the kind of component pieces if I can. And I know in the past, you’ve asked about RESL and what’s going with RESL pricing and that’s obviously a very large component of our loan book for the Canadian Personal Bank. And then, I’d also — let’s talk about GIC, if I can. First of all, RESL. Let me start off with a bit of context. And I may be stating the obvious here, but the market is competitive. Consumers are pushing on rates as they face a higher and a different rate environment they have in the past few years. There’s also less volume in the market. And so, this is increased competition levels of that doubt.
But let me be clear, we have walked away from business this quarter based upon pricing offered by some competitors. And so, there is margin pressure, and a lot of market factors come into play. One of the market factors is when the yield curve is moving around a lot, we have to adjust kind of in the moment. As you know, the shape and height of the yield curve really is our cost of goods sold. We had several — more than several pricing adjustments this quarter that actually reflected the kind of real-time changes in the pricing of the cost of money. And we have to pass that through to our customers to maintain our margins. So, when it comes to pricing, and specifically on RESL, I’m going a while here, but I know you asked me this question during the Investor Day.
And I gave you the response that success in our volume growth is really tied to strong execution. We’ve made a number of investments that are enabling that. And so if you don’t mind, I’ll kind of walk you through those investments because they are leading to better volumes. First of all, you heard me talk about lead management in the past. And again, at Investor Day, I talked about this. And this is just fundamentally taking shoppers and converting them into buyers. And we’ve actually seen double-digit increases on a year-over-year basis in our conversion of shoppers to buyers through our lead management program. We’re seeing, first of all, more leads, better contact rates and better pull-through. So, that’s actually turning more of our franchise customers into mortgage customers, and we love seeing that.
Second is we had a marketing campaign this spring, which was very successful and actually drove market-leading consideration. So again, success is turning consideration into long-term franchise customers. Third is if you look at our sales force productivity — and we measure this — and our sales force productivity is improving. And so then again, that’s translating into more business. And then we also do have a broad distribution play. In a slower market, we think this helps, as we have much more reach versus others in many segments. And pile on top of all this, on the retention side, we’ve got some great analytic capabilities that really helped us retain some higher-risk attrition customers. And so, on the RESL side, a long story here. But yes, the market is competitive, but I’d also offer that we’ve been investing in our business and are seeing very strong outcomes that are contributing to our positive growth.
On the GIC side — and also on the profitability, yes, the business we’re originating is profitable. We like the economics of the business that we’re generating. On the GIC side, our strategy has been and continues to be focused on core franchise deposit customers and offering very competitively priced products to deepen our customer relationships. Again, there’s been a lot of movement in the yield curve, and we’ve had to react to that. But offers on the term business, on a quarter-over-quarter basis, our margin is actually increasing. And so again, we like the profitability of the business that we’re generating. And so yes, we’re — overall, we’re responding to market factors, but I’m quite pleased with the margins that we’re generating and the profitability that’s coming from it.
Ebrahim Poonawala: Thanks, Michael. That was very comprehensive. Just one separate question. I think someone asked a question, when you think about the Basel end game in the United States, maybe Riaz is on the call. It appears that most U.S. banks and broker-dealers will be under sort of RWA optimization mode, create opportunity in terms of the desire for hedge funds, investors to look for counterparties. Just talk to us in terms of, is that an opportunity where using TD Cowen and just the wholesale banking push, you will look to deploy more balance sheet within the markets business as some of the U.S. competitors retrench?
Riaz Ahmed: Yes. Ebrahim, thank you. I hope you’re well. The short answer to that question is, yes, absolutely. As we’ve been working through the integration and determining our target stage strategies to bring the broker-dealers together as well as combined coverage teams and how we’re going to address the institutional clientele like right from the very beginning of this transaction, from the date we announced it to the date we closed it, the amount of — and to now, the enthusiasm from our clients, both corporate and institutional, has just been incredibly amazing. And as they continue to seek the strength of our balance sheet and our enhanced capabilities to drive revenue and to drive their aspirations and their growth. So, we’re very excited about the prospects of combining the two companies and to enhance our productivity and our capabilities in the service of our clients. And I think it — I feel very bullish about the outlook for the combined dealers.
Operator: The next question is from Gabriel Dechaine with National Bank Financial. Please go ahead.
