Leo Salom: Lemar, this is Leo. Thanks for the question. You are right, we had a really strong mortgage quarter, so total balances grew 17% on a year-on-year basis. And I think this question came up last quarter as well. Two fundamental strategies driving the volume growth. One, we reintroduced an in-store direct origination model, which has been extremely well received and has allowed us to be able to counteract some of the contraction trend that we have seen in the marketplace. And second, we have been successful in our correspondent mortgage business, attracting high-quality mass affluent high net worth mortgage relationships. That, coupled with a sharp decline in pay downs meant that we saw good balance growth. And we do think that will moderate a little bit as we go into €˜23.
But for the most part, we think that the near-term quarters will remain strong. In terms of overall margins, the margins have been relatively stable. So, we are not seeing a price competition that’s outsized at this point. So, we like the volumes that we are putting on. And so we will continue to do that. I would say one final thing. We have also been less active in terms of selling our mortgage portfolio. That’s that we are seeing spreads we like. We like the portfolio risk associated with it, and that’s giving us the ability to be able to build out our mortgage book a little bit more. So, you put all those factors together, and I think it’s been certainly positive in terms of our mortgage portfolio growth.
Lemar Persaud: Thanks. I will leave it there.
Operator: Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Your line is open.
Sohrab Movahedi: Thank you. Just one quick clarification first. Kelvin, do you think the total bank tax rate will go back to that 21%, 22% effective kind of throughout €˜23?
Kelvin Tran: Let’s put it this way. This quarter is lower than normal.
Sohrab Movahedi: And would the last seven quarter or eight quarters be consistent with what you would expect normal to be?
Kelvin Tran: Yes.
Sohrab Movahedi: Thank you. And then just to clarify, Bharat or Kelvin, I guess, the 7% to 10% EPS growth in 2023, the target maybe being exceeded €“ met or exceeded in 2023. Can you just provide any guide posts as how much of that growth you would attribute to existing versus acquired business?
Bharat Masrani: Hard to split it that precisely because timing of acquisitions are €“ there is no certainty as to when exactly they close. But overall, when you think of the bank, you have got interest rates, which we have talked a lot about on this call as to what it does to TD’s P&L, and you got the acquisitions. So, those, I would say are plus points going into €˜23. And of course, the very good organic growth that the bank has posted over many years, and I expect it will continue to do so next year. On the other hand, we are in a complex operating environment. Geopolitical tensions are out there. And of course, there is the potential for an economic slowdown. So, the way I said it in my remarks, Sohrab is on balance, we feel we will meet or exceed the guidance €“ the medium-term guidance that we have provided, but it could shift based on the points that I have just made.
If any one of those turns out to be dramatically different than what we know today, then of course, the numbers will change. And that’s how we have been thinking about it.
Sohrab Movahedi: No, I appreciate that. I just wanted to kind of distinguish between what would have been indigenous TD growth, so to speak, absent the acquisitions. Thank you.
Bharat Masrani: Thank you.
Operator: Thank you. The next question is from Joo Ho Kim from Credit Suisse. Please go ahead. Your line is open.
Joo Ho Kim: Hi. Thank you and thanks for taking my question. Just wanted to stick with U.S. Retail. And I am looking at the expenses up 11% year-on-year on an adjusted basis. And I am also looking at the total employees in that segment, and that’s up about 8% over that time. And so I am just wondering if you can speak to how much of the increase in expenses this quarter was due to inflation in that segment? And also how you think about the pace of hiring from the business and whether we could see that FTE number kind of continue to climb up from here? Thank you.
Leo Salom: Thank you very much for the question, Joo. Maybe just to give you a little bit of context, expenses, up 11%. Essentially two factors, one is inflationary pressures. Both in terms of wage and other core expenses, but a very significant portion of it investment spending. And let me just describe some of the areas that we have been very deliberate about in terms of investing. One, we added to our retail and wealth advisory ranks. Part of that was making up for some lost ground. The pandemic did result in higher attrition rates. And so we did hire to be able to bring back staffing levels to sort of a pre-pandemic level. But we also €“ consistent with what I shared earlier in the year, we have been very focused in building out our wealth advisory ranks.
And so that was another area of investment. We also €“ in our commercial banking teams, we have been investing in our mid-market and our specialty verticals and so very focused on building greater national scale in that area. And then finally, we did something that would have influenced our FTE numbers, not necessarily our expenses is that we did repatriate our cards servicing platform, which amounted to just under 400 overall employees. And we did that because we wanted to upscale the actual services that we were rendering to our cards clients. So, those are some of the big categories. In addition to that, from a technology standpoint, we have been very focused on investing in digital and also investing in our cards next-generation platform.
So, those are some of the areas that we have been investing in. We are quite comfortable that those will allow us to continue to maintain a strong revenue growth going forward. Just I would imagine your follow-up question is going to be how do we look €“ think about expenses going forward, I would expect us to moderate the rate of expense growth over the subsequent quarters. And so we are deliberately mindful of our operating leverage focus.
